<PAGE>
FIRST CHICAGO CORPORATION AND SUBSIDIARIES
FINANCIAL SUPPLEMENT AND FORM 10-Q
CONTENTS
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FIVE-QUARTER SUMMARY OF SELECTED FINANCIAL INFORMATION 1
BUSINESS SEGMENTS 2
EARNINGS ANALYSIS 7
LIQUIDITY RISK MANAGEMENT 12
MARKET RISK MANAGEMENT 13
CREDIT RISK MANAGEMENT 18
DERIVATIVE FINANCIAL INSTRUMENTS 22
CAPITAL MANAGEMENT 24
CONSOLIDATED FINANCIAL STATEMENTS 27
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 31
SELECTED STATISTICAL INFORMATION 34
FORM 10-Q 42
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<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
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September June March December September
(Dollars in millions, except per share data) 1995 1995 1995 1994 1994
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SELECTED FINANCIAL DATA FOR THE QUARTER
Net interest income.............................................. $ 361.0 $355.6 $ 373.6 $ 333.2 $ 334.4
Tax-equivalent adjustment........................................ 14.2 9.8 6.1 7.0 6.4
------- ------ ------- ------- -------
Net interest income--tax-equivalent basis........................ 375.2 365.4 379.7 340.2 340.8
Provision for credit losses...................................... 100.0 70.0 65.0 76.0 55.0
Noninterest income............................................... 559.0 487.7 470.1 488.8 455.1
Noninterest expense.............................................. 502.5 487.7 478.1 482.1 491.4
Net income....................................................... 207.2 187.4 195.1 173.4 153.8
- -----------------------------------------------------------------------------------------------------------------------------
EARNINGS PER SHARE
Net income - Primary............................................. $ 2.18 $1.95 $ 2.03 $ 1.76 $ 1.54
Net income - Fully diluted....................................... 2.12 1.90 1.98 1.72 1.51
- -----------------------------------------------------------------------------------------------------------------------------
AT QUARTER-END
Assets........................................................... $75,747 $75,328 $72,378 $65,900 $65,747
Loans............................................................ 27,663 26,517 27,018 25,947 23,817
Deposits......................................................... 33,235 33,764 32,191 31,666 29,670
Long-term debt................................................... 2,274 2,271 2,272 2,271 2,272
Common stockholders' equity...................................... 4,213 4,160 4,057 3,922 3,930
Stockholders' equity............................................. 4,704 4,771 4,668 4,533 4,541
- -----------------------------------------------------------------------------------------------------------------------------
AVERAGE BALANCES
Assets........................................................... $76,160 $76,076 $69,852 $68,539 $66,050
Loans............................................................ 26,607 26,145 26,034 24,335 23,484
Earning assets................................................... 63,136 60,772 59,220 56,328 54,226
Deposits......................................................... 34,658 33,962 31,488 29,933 29,409
Common stockholders' equity...................................... 4,179 4,102 3,978 3,931 3,815
Stockholders' equity............................................. 4,749 4,713 4,589 4,542 4,426
- -----------------------------------------------------------------------------------------------------------------------------
FINANCIAL RATIOS
Return on stockholders' equity................................... 17.3% 16.0% 17.2% 15.1% 13.8%
Return on common stockholders' equity............................ 18.8 17.4 18.9 16.5 15.0
Return on assets................................................. 1.08 0.99 1.13 1.00 0.92
- -----------------------------------------------------------------------------------------------------------------------------
CAPITAL DATA (1)
Common-equity-to-assets ratio.................................... 6.1% 6.1% 6.2% 6.6% 6.6%
Regulatory leverage ratio........................................ 6.9 7.0 7.7 7.5 7.8
Risk-based capital
Tier 1 ratio................................................... 8.4 8.8 8.6 8.8 9.2
Total capital ratio............................................ 12.5 13.1 13.0 13.4 13.9
Tier 1 capital................................................. $ 4,502 $ 4,567 $ 4,460 $ 4,325 $ 4,319
Total capital.................................................. 6,685 6,783 6,736 6,566 6,561
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COMMON SHARE AND STOCKHOLDER DATA FOR THE QUARTER ENDED
Market price (at quarter-end).................................... $68 5/8 $59 7/8 $50 1/8 $47 3/4 $ 45 7/8
Book value (at quarter-end)...................................... 47.71 46.37 45.16 43.65 42.79
Dividends declared per common share.............................. 0.60 0.55 0.55 0.55 0.50
Common dividends................................................. 53 50 49 50 46
Preferred dividends.............................................. 9 10 10 10 10
Dividend payout ratio............................................ 27.5% 28.2% 27.1% 31.3% 32.5%
Average number of common and common-equivalent shares
(in millions).................................................. 90.6 91.2 91.0 92.9 93.4
Average number of shares, assuming full dilution (in millions)... 94.5 95.1 94.8 96.7 97.1
- -----------------------------------------------------------------------------------------------------------------------------
(1) Net of investment in First Chicago Capital Markets, Inc.
</TABLE>
1
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<TABLE>
BUSINESS SEGMENTS
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Business Segments
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<CAPTION>
Three Months Ended September 30
Consumer Corporate Other First Chicago
Banking Banking Activities(1) Corporation
------------- --------------- ------------- -------------
(Dollars in millions,
except where noted) 1995 1994 1995 1994 1995 1994 1995 1994
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net income.......................... $ 91 $ 81 $ 84 $ 64 $ 32 $ 9 $ 207 $ 154
Return on common equity............. 29% 33% 13% 11% N/M N/M 19% 15%
Average assets (presecuritized)
(in billions)..................... $19.8 $16.5 $63.0 $54.2 $ 1.2 $ 1.3 $ 84.0 $72.0
Average common equity (in
billions)......................... 1.2 1.0 2.5 2.1 0.5 0.7 4.2 3.8
- ------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended September 30
Consumer Corporate Other First Chicago
Banking Banking Activities(1) Corporation
------------- -------------- ------------- -------------
(Dollars in millions,
except where noted) 1995 1994 1995 1994 1995 1994 1995 1994
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net income....................... $ 270 $ 248 $ 219 $ 158 $ 101 $ 110 $ 590 $ 516
Return on common equity.......... 31% 37% 11% 9% N/M N/M 18% 17%
Average assets (presecuritized)
(in billions).................. $18.5 $15.6 $61.3 $51.0 $ 1.1 $ 1.4 $80.9 $68.0
Average common equity (in
billions)..................... 1.1 0.8 2.4 2.0 0.6 0.9 4.1 3.7
- ------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes results from the accelerated asset disposition portfolio, the
venture capital group, certain investment management activities and other
special corporate items.
N/M - Not meaningful.
Financial results are aligned by customer segment--Consumer and Corporate--and
by major businesses within these categories. The results are derived from the
internal profitability reporting system and reflect the allocation of all
institutional and overhead items. This system uses a detailed funds transfer
methodology and a common equity allocation based on risk elements. To
facilitate analysis of trends, Consumer Banking results are presented before
securitization of credit card receivables ("presecuritized"). See the
discussions of net interest income beginning on page 8 and a reconciliation of
reported to presecuritized results on page 35.
2
<PAGE>
<TABLE>
<CAPTION>
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Consumer Banking*
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Three Months Ended September 30
Credit Card Community Banking
(Dollars in millions, ----------------- -----------------
except where noted) 1995 1994 (1) 1995 1994
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<S> <C> <C> <C> <C>
Net interest income-tax-equivalent basis.. $ 283 $ 229 $ 95 $ 99
Provision for credit losses............... 182 110 7 11
Noninterest income........................ 141 116 58 47
Noninterest expense....................... 124 106 117 131
Net income................................ 73 80 18 1
Return on common equity................... 35% 57% 17% 1%
Efficiency ratio (2)...................... 29% 31% 76% 90%
Average assets (in billions).............. $13.4 $10.6 $6.4 $5.9
Average loans (in billions)............... 13.5 10.6 5.3 4.9
Average common equity (in billions)....... 0.8 0.6 0.4 0.4
- --------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
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Nine Months Ended September 30
Credit Card Community Banking
(Dollars in millions, ----------------- -----------------
except where noted) 1995 1994 (1) 1995 1994
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net interest income-tax-equivalent basis.. $780 $ 686 $293 $265
Provision for credit losses............... 432 318 16 22
Noninterest income........................ 375 319 160 141
Noninterest expense....................... 364 304 359 363
Net income................................ 222 235 48 13
Return on common equity................... 39% 60% 15% 4%
Efficiency ratio (2)...................... 32% 37% 79% 89%
Average assets (in billions).............. $12.4 $10.2 $6.1 $5.4
Average loans (in billions)............... 12.6 10.2 5.2 4.5
Average common equity (in billions)....... 0.7 0.5 0.4 0.3
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</TABLE>
* Contribution from $0.8 billion in Chicago area credit card receivables is
split equally between Credit Card and Community Banking.
(1) Starting in 1995, Mileage Plus payments reduce associated revenues. For
comparison purposes, 1994 credit card revenue and expense totals have been
adjusted by $19 million for the third quarter and $52 million for the first
nine months to reflect this change.
(2) Noninterest expense as a percentage of total revenue (net interest income
and noninterest income).
CONSUMER BANKING
First Chicago serves local consumers and small businesses through more than 80
retail banking branches. Nationally, it reaches consumers through First Card,
which is one of the largest issuers of bank credit cards in the U.S. For the
nine months of 1995, Consumer Banking contributed $270 million in earnings, or
about half of the Corporation's total. Earnings from this segment were up 9
percent from the first nine months of 1994.
CREDIT CARD
This business segment continued to be the largest single contributor to the
Corporation's earnings. Net income was $73 million for the third quarter and
$222 million year-to-date. Higher credit costs in 1995 are a key factor in the
year-to-year earnings decline. Return on equity for the nine months of 1995
exceeded 38 percent.
Total average managed credit card receivables (including the Chicago card
accounts) for the third quarter grew to $13.9 billion, up 26 percent from 1994.
Revenue growth for the quarter reflected this volume increase. The provision for
credit losses increased significantly in the third quarter due to volume growth
and higher incidences of bankruptcies. The rise in expenses reflects the costs
of major solicitation initiatives in 1995.
3
<PAGE>
COMMUNITY BANKING
Community Banking had an outstanding third quarter, achieving a 17 percent
return on equity. For the nine months of 1995, Community Banking's earnings
more than tripled, reaching $48 million, for a 15 percent return on common
equity. This compares with $13 million and 4 percent, respectively, a year ago.
Third quarter and year-to-date expenses include $3.6 million in FDIC rebates. A
$7 million restructuring charge was incurred in Community Banking in the third
quarter of 1994.
The improvement in profitability stemmed from all key areas: higher spread and
fee income, strong asset growth, lower credit costs and better operating
efficiency. The addition of consumer business from Lake Shore Bancorp., Inc. at
midyear 1994 was also an important factor in the year-to-date improvement.
<TABLE>
<CAPTION>
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Corporate Banking
- -----------------------------------------------------------------------------------------
Three Months Ended September 30
Corporate and Middle Market
Institutional Banking Banking (ANC)
(Dollars in millions, --------------------- ---------------
except where noted) 1995 1994 1995 1994
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net interest income-tax-equivalent basis .... $ 110 $ 97 $ 71 $ 68
Provision for credit losses ................. (2) (10) 7 10
Noninterest income .......................... 198 148 16 20
Noninterest expense ......................... 206 180 48 50
Net income .................................. 63 47 21 17
Return on common equity ..................... 11% 10% 18% 15%
Efficiency ratio (1) ........................ 67% 73% 55% 56%
Average assets (in billions) ................ $56.7 $48.1 $6.3 $6.1
Average loans (in billions) ................. 10.5 9.4 5.1 4.5
Average common equity (in billions) ......... 2.1 1.7 0.4 0.4
- -----------------------------------------------------------------------------------------
<CAPTION>
- -----------------------------------------------------------------------------------------
Nine Months Ended September 30
Corporate and Middle Market
Institutional Banking Banking (ANC)
(Dollars in millions, --------------------- ---------------
except where noted) 1995 1994 1995 1994
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net interest income-tax-equivalent basis .... $ 329 $ 292 $214 $183
Provision for credit losses ................. 2 (32) 19 23
Noninterest income .......................... 506 381 51 62
Noninterest expense ......................... 588 528 145 139
Net income .................................. 155 106 64 52
Return on common equity ..................... 10% 7% 19% 19%
Efficiency ratio (1) ........................ 70% 79% 54% 56%
Average assets (in billions) ................ $55.2 $45.2 $6.1 $5.8
Average loans (in billions) ................. 10.4 9.4 5.0 4.1
Average common equity (in billions) ......... 2.0 1.6 0.4 0.4
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</TABLE>
(1) Noninterest expense as a percentage of total revenue (net interest income
and noninterest income).
4
<PAGE>
CORPORATE BANKING
The Corporation is the leading provider of banking services to large
corporations, governments, institutions and investors in Chicago and the
Midwest. It is also among the top U.S. banking companies serving national and
international customers. The large corporate banking business is conducted in
Corporate and Institutional Banking.
The Corporation, through its American National Corporation subsidiary, is the
leader in Chicagoland's middle market banking business.
Corporate Banking businesses earned $84 million in the third quarter of 1995 and
$219 million for nine months ended.
CORPORATE AND INSTITUTIONAL BANKING
Return on equity for Corporate and Institutional Banking was 11 percent for the
third quarter and 10 percent for the first nine months of 1995. Profits for the
third quarter were $63 million, up 34 percent from a year ago due to strong
customer revenues and near-record trading. For the nine months, net income
increased significantly--from $106 million to $155 million--as trading
activities rebounded from a weak performance in 1994.
<TABLE>
<CAPTION>
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Total Revenue Three Months Ended Nine Months Ended
September 30 September 30
(In millions) 1995 1994 1995 1994
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Trading ........................... $ 98 $ 56 $206 $100
Servicing ......................... 96 94 308 281
Lending ........................... 43 44 138 145
Financing ......................... 51 34 134 102
Other ............................. 20 17 49 45
---- ---- ---- ----
Total ......................... $308 $245 $835 $673
==== ==== ==== ====
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<CAPTION>
- ----------------------------------------------------------------------------
Trading Revenue Three Months Ended Nine Months Ended
September 30 September 30
(In millions) 1995 1994 1995 1994
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Foreign exchange and derivatives .. $ 39 $ 8 $ 63 $ 24
Fixed income and derivatives ...... 42 27 68 62
Emerging markets .................. (1) 4 4 (47)
Funding and arbitrage ............. 10 10 32 29
Other trading ..................... 8 7 39 32
---- ---- ---- ----
Total ......................... $ 98 $ 56 $206 $100
==== ==== ==== ====
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</TABLE>
Revenue from trading activities (trading profits and related net interest
income) was $98 million in the third quarter of 1995 and $206 million for the
nine months ended September 30. The substantial improvement from 1994 was
concentrated in the foreign exchange and derivatives segment. The emerging
markets segment posted a modest gain for the nine months compared with a loss of
$47 million in 1994. In the third quarter of 1995, the Corporation announced
its exit from trading in emerging markets securities.
Servicing revenue posted healthy increases in year-to-date periods, largely from
cash management operations. Revenue from financing activities reflected $38
million in equity gains for the first nine months of 1995, compared with $18
million for the year-earlier period.
5
<PAGE>
Average loans and leases in Corporate and Institutional Banking for the nine
months of 1995 increased more than 11 percent from a year earlier to $10.4
billion. Year-to-date expense growth was due in part to higher incentive
compensation resulting from the improved trading performance.
MIDDLE MARKET BANKING (AMERICAN NATIONAL CORPORATION)
On a line-of-business basis, American National Corporation's net income was $21
million for the third quarter of 1995. For the first nine months of 1995,
earnings were $64 million and return on equity was 19 percent. Net income for
the nine months of 1994 was $52 million. The year-over-year increase reflects
favorable interest rate spreads and higher average loan volume (up $900 million)
due, in part, to the addition of assets from Lake Shore Bancorp., Inc. in mid-
1994.
The 1995 results also reflect the transfer of American National's investment
management subsidiary to The First National Bank of Chicago on December 31,
1994. The decline in noninterest income is a result of this move.
OTHER ACTIVITIES
The venture capital portfolio contributed gains of $47 million in the third
quarter and $124 million for the first nine months of 1995, compared with $17
million and $138 million for the same periods in 1994. For the first nine
months of 1995, net income from venture capital was $70 million for a return on
equity of 35 percent.
Net gains from the management of assets held for accelerated disposition were
$37 million for the first nine months. First-quarter 1994 results included a
gain of $35 million from the sale of an interest in an investment management
business.
Special charges of $43 million were incurred in the nine months ended 1994,
including equipment costs of $24 million related to the reduction in estimated
useful life of certain personal computer equipment and other expenses of $19
million related to litigation and other corporate activities.
STAFFING LEVELS
Staff levels for each business segment as well as corporate support functions
were as follows. In the business segment financials, the expenses related to
support areas are reflected in the appropriate consumer or corporate business.
<TABLE>
<CAPTION>
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3rd Qtr. 2nd Qtr. 1st Qtr. 4th Qtr. 3rd Qtr.
Average Full-Time-Equivalent Staff 1995 1995 1995 1994 1994
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Corporate and Institutional ....... 6,212 6,216 6,276 6,342 6,402
Community Banking ................. 4,054 4,040 4,071 4,283 4,694
Credit Card ....................... 3,467 3,329 3,212 3,007 2,922
Middle Market ..................... 2,110 2,109 2,084 2,156 2,143
Corporate Support/Other ........... 1,684 1,644 1,661 1,482 1,566
------ ------ ------ ------ ------
First Chicago Corporation ..... 17,527 17,338 17,304 17,270 17,727
====== ====== ====== ====== ======
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</TABLE>
6
<PAGE>
EARNINGS ANALYSIS
SUMMARY
The Corporation reported net income of $207.2 million, or $2.12 per share, for
the third quarter of 1995, up from $153.8 million, or $1.51 per share, in the
third quarter of 1994. Excluding the results from the Corporation's venture
capital operations, net income was $178.0 million, or $1.83 per share, compared
with $150.4 million, or $1.49 per share, a year ago.
<TABLE>
<CAPTION>
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Three Months Ended Nine Months Ended
(Dollars in millions, September 30 September 30
except per share data) 1995 1994 1995 1994
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net interest income--tax-equivalent basis.. $375.2 $340.8 $1,120.3 $1,015.0
Provision for credit losses................ 100.0 55.0 235.0 148.0
Noninterest income......................... 559.0 455.1 1,516.8 1,385.8
Noninterest expense........................ 502.5 491.4 1,468.3 1,436.5
Net income................................. 207.2 153.8 589.7 516.3
Common Share Data
PRIMARY
Net income............................... $ 2.18 $ 1.54 $ 6.16 $ 5.29
Average common and common-equivalent
shares (in millions).................... 90.6 93.4 90.9 89.7
FULLY DILUTED
Net income............................... $ 2.12 $ 1.51 $ 6.00 $ 5.17
Average shares, assuming full dilution
(in millions)........................... 94.5 97.1 94.8 93.5
Return on assets........................... 1.08% 0.92% 1.07% 1.10%
Return on common stockholders' equity...... 18.8 15.0 18.3 17.1
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</TABLE>
Increased net interest income and market-driven revenues were major contributors
to third-quarter 1995 results.
Asset growth in the credit card business continued as managed receivables grew
31 percent from one year ago, to $14.9 billion. A record 2.5 million new credit
card accounts have been added through the first nine months of 1995.
Market-driven revenues, which include combined trading profits and equity
securities gains, were $145 million. Combined trading profits of $79 million
were the highest in the past eight quarters, and compared with $42 million one
year ago. Equity securities gains in the quarter were $66 million, of which $47
million was related to the venture capital portfolio.
The provision for credit losses was $100 million, up from $55 million a year
ago. Rapid growth in credit card receivables was primarily responsible for the
increase. Provisions are made as receivables are added, based on prior charge-
off experience in the credit card portfolio.
Return on common stockholders' equity was 19 percent, marking the twelfth
consecutive quarter in which the Corporation has achieved at least a 15 percent
return. Capital ratios at quarter-end remain considerably above the regulatory
"well-capitalized" guidelines.
7
<PAGE>
The Corporation repurchased approximately 1,574,500 shares of its common stock
during the third quarter of 1995. The purpose of the common stock buyback
program is to meet obligations under the Corporation's employee benefit plans
and to manage the overall capital position of the Corporation. As of September
30, 1995, 7.4 million shares had been repurchased under the program.
On August 31, 1995, the Corporation redeemed its $121 million issue of Preferred
Stock, Series A, at the stated value of $50 per share plus accrued and unpaid
dividends. This redemption will reduce annual preferred stock dividend
requirements by $8.4 million.
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 Nine Months Ended
September 30 September 30
(Dollars in millions) 1995 1994 1995 1994
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net interest income--
tax-equivalent basis.... $ 375.2 $ 340.8 $1,120.3 $1,015.0
Average earning assets.... $63,136 $54,226 $ 61,042 $ 51,393
Net interest margin....... 2.36% 2.49% 2.45% 2.64%
- ---------------------------------------------------------------------
</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 $7.8
billion in the third quarter of 1995, compared with $5.9 billion in the third
quarter of 1994. The effect of credit card securitization transactions on the
Corporation's financial statements is summarized on page 35. 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.
8
<PAGE>
The following table reflects the elements of net interest margin adjusted for
credit card securitizations and the activities of FCCM.
<TABLE>
<CAPTION>
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Three Months Ended Nine Months Ended
September 30 September 30
(Dollars in millions) 1995 1994 1995 1994
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Adjusted net interest income--
tax equivalent basis............ $ 554.8 $ 485.5 $1,597.2 $1,404.4
Adjusted average earnings assets.. $60,367 $50,046 $ 57,040 $ 48,144
Adjusted net interest margin...... 3.65% 3.85% 3.74% 3.90%
- ------------------------------------------------------------------------------
</TABLE>
On an adjusted basis, net interest margin for the third quarter of 1995 was 3.65
percent. This compares with 3.85 percent in the year-ago quarter.
The lower adjusted net interest margin was due primarily to an increase in thin-
margin trading assets and deposit placements. Despite the overall decrease in
net interest margin, net interest income increased due primarily to the
contribution from the credit card portfolio, where higher volumes more than
offset the impact of reduced spreads resulting from competitive pricing
pressures.
PROVISION FOR CREDIT LOSSES
The provision for credit losses was $100 million, which included $94 million for
the consumer portfolios and $6 million for commercial credits. In the year ago
quarter, the provision was $55 million, which included $50 million for the
consumer portfolios and $5 million for commercial provision. Growth in credit
card receivables was the primary reason for the increase in the consumer
provision for credit losses.
The change in the allowance for credit losses is presented in the following
table.
<TABLE>
<CAPTION>
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Three Months Ended Nine Months Ended
September 30 September 30
(Dollars in millions) 1995 1994 1995 1994
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Allowance for credit losses
--beginning of period...................... $ 689 $ 681 $ 723 $ 683
Provision for credit losses.................. 100 55 235 148
Net charge-offs.............................. (46) (38) (135) (105)
Other:-transfers upon securitization of
receivables.......................... - (31) (80) (59)
-mergers and acquisitions.............. - 16 - 16
----- ----- ----- -----
Net change in allowance for credit losses.... 54 2 20 -
----- ----- ----- -----
Allowance for credit losses
-- end of period........................... $ 743 $ 683 $ 743 $ 683
===== ===== ===== =====
-- as a percentage of loans outstanding.... 2.7% 2.9% 2.7% 2.9%
-- as a percentage of nonperforming loans.. 550% 444% 550% 444%
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</TABLE>
9
<PAGE>
Details of the Corporation's credit risk management and performance during the
nine months ended September 30, 1995, are presented in the Credit Risk
Management section, beginning on page 18.
NONINTEREST INCOME
The following table provides a breakdown of the components of noninterest income
for the third quarter and the first nine months of 1995 as compared to a year
ago.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
September 30 September 30
(In millions) 1995 1994 1995 1994
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Combined trading account profits.......... $ 78.6 $ 41.6 $ 144.8 $ 53.6
Equity securities gains................... 66.7 20.0 181.2 158.1
Investment securities gains (losses)...... - (2.2) - (1.1)
------ ------ -------- --------
Market-driven revenue................... 145.3 59.4 326.0 210.6
Credit card fee revenue................... 235.9 221.1 640.7 597.3
Service charges and commissions........... 113.9 112.8 337.3 318.3
Fiduciary and investment management fees.. 49.7 48.6 150.6 150.3
Net gains from accelerated disposition
portfolio activities.................... 4.1 6.2 36.6 37.7
Other..................................... 10.1 7.0 25.6 71.6
------ ------ -------- --------
Total................................... $559.0 $455.1 $1,516.8 $1,385.8
====== ====== ======== ========
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</TABLE>
Market-driven revenues for the third quarter of 1995 increased to $145.3 million
from $59.4 million for the same period in 1994.
Combined trading activities in the third quarter of 1995 were higher than in the
previous eight quarters. These activities generated profits of $78.6 million,
compared with $41.6 million a year ago. The increase reflected excellent
results from opportunities in the active foreign exchange and derivative
markets. For more information, see the line-of-business discussion related to
trading results, on page 5.
Equity securities gains totaled $66.7 million, compared with $20.0 million a
year ago. The following table presents a breakdown of securities gains from
venture capital, corporate finance and debt restructuring activities.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
September 30 September 30
(In millions) 1995 1994 1995 1994
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Venture capital........................... $47.5 $16.9 $124.7 $137.9
Corporate finance......................... 19.2 3.1 56.4 19.7
Debt restructuring........................ - - 0.1 0.5
----- ----- ------ ------
Total equity securities gains........... $66.7 $20.0 $181.2 $158.1
===== ===== ====== ======
- ------------------------------------------------------------------------------------------------------
</TABLE>
For additional information on the Corporation's venture capital activities, see
page 17.
The Corporation renewed its agreement with United Airlines during the first
quarter of 1995, extending the successful Mileage Plus credit card program into
the next century. The new agreement was established as a revenue-sharing
arrangement. As a result, beginning in 1995, payments to United Airlines reduce
credit card fee revenue rather than increase operating expenses.
10
<PAGE>
Adjusted for the effects of credit card securitization and the change in the
recognition of Mileage Plus payments, credit card fee revenue for the third
quarter of 1995 was up 33 percent from the year-ago period. This increase
reflects both continued growth in credit card receivables and increased
transaction volume.
Gains from transactions related to assets in the accelerated disposition
portfolio totaled $4.1 million in the third quarter of 1995, compared with $6.2
million a year ago. For the first nine months of 1995, these gains were $36.6
million, compared with $37.7 million for the same period in 1994.
Other revenue in the first quarter of 1994 included a $34.5 million gain related
to the sale of the Corporation's remaining interest in Brinson Holdings, Inc. to
Brinson's management.
NONINTEREST EXPENSE
Operating expenses were $502.5 million for the third quarter of 1995, compared
with $491.4 million a year ago. Adjusted for the change in recognition of
Mileage Plus payments discussed on page 10, operating expense was up 6 percent
from a year ago.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
September 30 September 30
(In millions) 1995 1994 1995 1994
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Salaries and benefits................ $249.4 $225.1 $ 710.6 $ 645.4
Occupancy expense of premises, net... 41.4 32.0 115.7 102.5
Equipment rentals, depreciation and
maintenance......................... 29.2 35.1 93.0 120.7
Amortization of intangible assets.... 13.1 16.4 43.7 51.6
Deposit insurance expense............ 2.8 10.8 24.1 32.3
Other................................ 166.6 172.0 481.2 484.0
------ ------ -------- --------
Total.......................... $502.5 $491.4 $1,468.3 $1,436.5
====== ====== ======== ========
- ---------------------------------------------------------------------------------
</TABLE>
In the third quarter of 1995, total salaries and benefits increased 11 percent
from a year ago. The increase was due primarily to increased incentive
compensation accruals related largely to improved trading profits.
Equipment costs in the third quarter of 1995 declined 17 percent from a year ago
due to reduced expenditures for personal computer purchases. For the nine
months, equipment costs were $27.7 million or 23 percent below 1994 levels. A
special charge of $24.5 million was recorded in the first quarter of 1994
reflecting the reduced estimated useful life of certain personal computer
equipment. Beginning in the 1994 first quarter, most purchases of personal
computer equipment were expensed.
In the third quarter of 1995, the Corporation received an $11 million rebate
from the FDIC, which was a result of the Bank Insurance Fund becoming fully
recapitalized at the end of May 1995. The ongoing insurance rate for bank
deposits was effectively reduced from 23 to 4 basis points. Net of a customer
service charge adjustment, the pretax impact on third-quarter 1995 results was
approximately $9 million.
Adjusted for the change in the classification of Mileage Plus payments, much of
the increase in market solicitation costs was related to the Corporation's
heightened investment in the credit card business. Other operating expense in
the third quarter of 1994 included a $7 million restructuring charge related
primarily to staff reductions in the Corporation's community banking business.
11
<PAGE>
<TABLE>
<CAPTION>
APPLICABLE INCOME TAXES
- ----------------------------------------------------------------------
Three Months Ended Nine Months Ended
September 30 September 30
(Dollars in millions) 1995 1994 1995 1994
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Income before income taxes.. $317.5 $243.1 $903.7 $799.1
Applicable income taxes..... 110.3 89.3 314.0 282.8
Effective tax rate.......... 34.7% 36.7% 34.7% 35.4%
- ----------------------------------------------------------------------
</TABLE>
The effective tax rate in the third quarter of 1995 included favorable benefits
from tax-exempt income, general business tax credits and a decrease in the
effective state income tax rate. The effective tax rate in the third quarter of
1994 reflected the impact of a favorable tax ruling. Tax expense for the first
nine months of 1995 also included general business tax credits and tax-exempt
income from a one-time corporate banking transaction. Tax expense for the first
nine months of 1994 included a one-time tax benefit for the second quarter
implementation of the final I.R.S. bad debt recapture regulations.
LIQUIDITY RISK MANAGEMENT
Liquidity is the ability to meet all present and future financial obligations in
a timely manner. The Corporation has established policies and procedures
designed to cover balance sheet assets and liabilities as well as off-balance-
sheet items that are potential sources and uses of liquidity.
The Statement of Cash Flows, on page 30, presents data on cash and cash
equivalents provided and used by the Corporation in its operating, investing and
financing activities.
ASSET LIQUIDITY
The Corporation believes that asset liquidity is an effective way to manage
overall liquidity. One measure of 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. The Corporation continued to maintain
an average liquid asset ratio well in excess of its 12 percent minimum guideline
in the third quarter of 1995.
The Corporation's investment securities portfolio includes U.S. government,
municipal and other debt securities as well as equity investments. The debt
securities portfolio is used primarily to meet collateral requirements for
certain customer deposits. The equity securities portfolio, while representing a
secondary source of liquidity, generally is not readily saleable due to the form
or size of the underlying equity interest. See page 34 for a detailed breakdown
of the investment securities portfolio.
The Corporation continues to use credit card securitization as an effective tool
for increasing liquidity and diversifying funding sources. Securitized credit
cards totaled $8.0 billion at September 30, 1995, compared with $6.1 billion at
year-end 1994 and $6.4 billion at September 30, 1994.
LIABILITY LIQUIDITY
The Corporation has developed direct access to both the retail and wholesale
markets as a means of achieving a diversified source of funding. This
diversification of funding sources among instruments, maturities and depositors
is intended to balance the expense of gathering funds with the maintenance of
flexibility in funding options.
12
<PAGE>
<TABLE>
<CAPTION>
The following table shows the Corporation's mix of funding sources.
- ----------------------------------------------------------------------------------------
DEPOSITS AND OTHER PURCHASED FUNDS Sept. 30 June 30 March 31 Dec. 31 Sept. 30
(In millions) 1995 1995 1995 1994 1994
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Domestic offices
Demand............................. $ 6,585 $ 6,941 $ 6,791 $ 7,647 $ 7,217
Savings............................ 7,413 7,442 7,564 7,448 7,426
Time
Under $100,000................... 2,499 2,528 2,529 2,548 2,480
$100,000 and over................ 3,258 3,153 3,265 2,601 2,122
Foreign offices...................... 13,480 13,700 12,042 11,422 10,425
------- ------- ------- ------- -------
Total deposits.............. 33,235 33,764 32,191 31,666 29,670
- ----------------------------------------------------------------------------------------
Federal funds purchased and
securities under repurchase
agreements......................... 16,409 15,710 14,595 13,026 12,303
Commercial paper..................... 456 494 690 147 307
Other funds borrowed................. 8,541 7,312 7,445 7,518 8,752
Long-term debt....................... 2,274 2,271 2,272 2,271 2,272
------- ------- ------- ------- -------
Total other purchased funds...... 27,680 25,787 25,002 22,962 23,634
------- ------- ------- ------- -------
Total............................ $60,915 $59,551 $57,193 $54,628 $53,304
======= ======= ======= ======= =======
- ----------------------------------------------------------------------------------------
</TABLE>
MARKET RISK MANAGEMENT
Market risk arises from changes in interest rates, exchange rates, commodity
prices and equity prices. The Corporation maintains risk management policies
that monitor and limit exposure to market risk. Through trading activities, it
strives to take advantage of profit opportunities available in interest and
exchange rate movements. In asset and liability management activities, the
Corporation attempts to minimize structural interest rate risk. The measurement
of market risk associated with financial instruments is meaningful only when all
related and offsetting on- and off-balance-sheet transactions are aggregated,
and the resulting net positions are identified.
TRADING ACTIVITIES
The Corporation maintains active trading positions in a variety of markets and
instruments, including U.S. government, municipal and money market securities.
It also maintains positions in derivative products associated with these markets
and instruments, such as interest rate and currency swaps, and commodity and
equity index options.
The Corporation has adopted policies designed to strictly monitor trading
positions at all times. The overall market risk that any business unit can
assume is approved by a committee of the Board of Directors through a risk point
limit. Risk points represent the Corporation's estimate of the amount of
potential overnight loss in a capital markets product. Products that have more
inherent price volatility incur more risk points. A business unit will use up
more of its risk point limit if it trades in the more volatile products. The
risk point system, therefore, is the means by which the Corporation manages its
value at risk.
13
<PAGE>
The Corporation monitors value at risk in each of its significant trading
portfolios on a daily basis. The following tables show average, maximum and
minimum daily value at risk for the third quarter of 1995 as well as for the
preceding four quarters, and the actual trading revenue for each quarter.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
Daily Value at Risk Sept. 30 June 30 March 31 Dec. 31 Sept. 30
(In millions) 1995 1995 1995 1994 1994
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Average..................................................... $ 36 $ 34 $ 31 $ 42 $ 44
Maximum..................................................... 42 45 44 47 53
Minimum..................................................... 27 27 24 38 36
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
Quarter Ended Sept. 30 June 30 March 31 Dec. 31 Sept. 30
(In millions) 1995 1995 1995 1994 1994
- ------------------------------------------------------------------------------------------------------------
Trading revenue*............................................ $ 98 $ 35 $ 73 $ 30 $ 56
- ------------------------------------------------------------------------------------------------------------
*Includes trading profits and related net interest income.
</TABLE>
Value at risk is estimated using statistical models calibrated at a three-
standard-deviation confidence interval, which means that the actual daily result
should exceed the value at risk one day out of each two hundred. The value at
risk shown represents portfolio aggregates and overstates the Corporation's
value at risk because it only partially considers offsets and correlations
across different trading portfolios. The Corporation is continuing its progress
toward a consolidated view of market risks arising from trading assets.
STRUCTURAL INTEREST RATE RISK MANAGEMENT
The Corporation actively manages its asset and liability positions with the goal
of minimizing the impact on earnings of interest rate market volatility.
Conservative management of its asset and liability positions has allowed the
Corporation to maintain a relatively consistent adjusted net interest margin
despite a sharp rise in short-term interest rates. As a result of this neutral
interest rate risk profile, it is estimated that an immediate increase in rates
of 100 basis points would affect annual pretax earnings by approximately $14
million.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
Quarter Ended Sept. 30 June 30 March 31 Dec. 31 Sept. 30
(Dollars in millions) 1995 1995 1995 1994 1994
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Adjusted net interest income--
tax-equivalent basis........... $554.8 $528.6 $513.7 $486.5 $485.5
Adjusted net interest margin.... 3.65% 3.72% 3.87% 3.74% 3.85%
- ------------------------------------------------------------------------------------
</TABLE>
Net interest income can fluctuate with movements in the interest rate market due
to an imbalance in the repricing or maturity of the Corporation's assets and
liabilities. Whenever possible, assets are matched with liabilities of similar
repricing characteristics. However, the loans and deposits generated through
the Corporation's ordinary business activity do not naturally create offsetting
positions with respect to repricing or maturity. For assets having indefinite
maturities or repricing sensitivities, liability pools based on such assets'
estimated maturities and repricing characteristics may be used to match the
interest rate risk. Finally, asset and liability positions that are not
appropriately offset with either specific on-balance-sheet transactions or with
liability pools are offset through off-balance-sheet derivative positions (asset
and liability management [ALM] derivatives).
14
<PAGE>
Traditional gap analysis is one of a variety of measurement tools used to
monitor and control the Corporation's interest rate risk position. Gap analysis
measures the difference between the volume of assets and liabilities maturing or
repricing in a given future time period. Certain assumptions are made for those
assets or liabilities whose expected prepayment or withdrawal behavior may not
be reflected by their maturity dates. Credit card securitizations, which
subject credit card servicing fee revenue to interest rate risk, also are
included in the gap analysis measure. In addition to static gap analysis, the
Corporation identifies the more dynamic interest rate risk exposures of its
businesses through duration-of-equity measures and stress testing of earnings
simulation.
The following table shows the "managerial" interest rate gap analysis as of
September 30, 1995, used to identify the Corporation's exposure from domestic
asset and liability positions. Interest rate risks in trading and overseas
earning asset and liability positions are excluded from the gap analysis and
managed principally as trading risks. A positive cumulative one-year gap
position indicates more assets than liabilities are expected to reprice over the
next 12-month period. Such a position implies that, assuming no management
action, the Corporation's net interest income would be positively affected by
rising interest rates and negatively affected by falling rates. However, as
mentioned above, the Corporation actively manages its asset and liability
positions with the goal of minimizing the impact on earnings of interest rate
market volatility.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
INTEREST RATE SENSITIVITY
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
September 30, 1995 0-90 91-180 181-365 1-5 Beyond
(Dollars in millions) days days days years 5 years Total
- ------------------------------------------------------------------------------------------------
Loans................................ $23,216 $ 2,504 $ 996 $2,632 $ 4,652 $34,000
Investment securities................ 581 132 170 1,399 268 2,550
Other earning assets................. 20,581 85 - - - 20,666
Nonearning assets.................... 7,856 - - 151 517 8,524
------- ------- -------- ------ ------- -------
Total domestic assets............. $52,234 $ 2,721 $ 1,166 $4,182 $ 5,437 $65,740
- ------------------------------------------------------------------------------------------------
Deposits............................. $13,198 $ 2,006 $ 851 $1 079 $ 4,111 $21,245
Other interest-bearing liabilities... 27,137 1,446 1,506 3,043 1,456 34,588
Noninterest-bearing liabilities...... 4,501 8 8 91 596 5,204
Equity............................... 190 - - 100 4,413 4,703
------- ------- -------- ------ ------- -------
Total domestic liabilities
and equity...................... $45,026 $ 3,460 $ 2,365 $4,313 $10,576 $65,740
- ------------------------------------------------------------------------------------------------
Balance sheet sensitivity gap........ $ 7,208 $ (739) $ (1,199) $ (131) $(5,139) -
- ------------------------------------------------------------------------------------------------
Cumulative gap as % of
domestic assets.................... 11.0% 9.8% 8.0% 7.8% - -
- ------------------------------------------------------------------------------------------------
Effect of off-balance-sheet ALM
derivative transactions:
Specific transactions.............. $(3,212) $ 304 $ 913 $ 791 $ 1,204 -
Specific asset or liability pools.. (2,983) (36) 826 2,112 81 -
- ------------------------------------------------------------------------------------------------
Interest rate sensitivity gap........ $ 1,013 $ (471) $ 540 $2,772 $(3,854) -
- ------------------------------------------------------------------------------------------------
Cumulative gap....................... $ 1,013 $ 542 $ 1,082 $3,854 - -
- ------------------------------------------------------------------------------------------------
Cumulative gap as % of
domestic assets.................... 1.5% 0.8% 1.6% 5.9% - -
- ------------------------------------------------------------------------------------------------
</TABLE>
15
<PAGE>
Access to the derivatives market is an important element in the Corporation's
ability to maintain its gap position within policy guidelines. As of September
30, 1995, the Corporation had a total of $7.9 billion in ALM interest rate
swaps, including $3.0 billion of ALM interest rate swaps against specific
transactions and $4.9 billion against specific pools of assets or liabilities.
Swaps used to adjust the interest rate sensitivity of specific transactions will
not need to be replaced as they mature since the corresponding asset or
liability will mature along with the swap. However, swaps against the asset
and liability pools will have an impact on the Corporation's risk position as
they mature and, assuming no change to the underlying pool's characteristics,
will need to be reissued to maintain the same neutral interest rate risk
profile. These swaps could create a modest sensitivity of earnings due to
changes in interest rates. Growth in the volume of stable retail liabilities
and declines in the volume of longer-term fixed rate assets over the last few
years have made it necessary to increase the use of swaps associated with
specific pools of assets or liabilities to balance the Corporation's repricing
risk. The following table summarizes the interest rate swaps used by the
Corporation for asset and liability management purposes.
ASSET AND LIABILITY MANAGEMENT SWAPS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
September 30, 1995
Receive Fixed Pay Fixed Basis
(Notional amounts in millions) Pay Floating Receive Floating Swaps Total
- --------------------------------------------------------------------------------------
Swaps associated with: Specific Pool Specific Pool Pool
-------- ------ -------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Loans........................... $ - $1,066 $29 $ - $ - $1,095
Securitized credit card
receivables.................... - 1,025 - - - 1,025
Deposits........................ 442 2,675 - - - 3,117
Other funds borrowed............ 1,295 - - - 150 1,445
Long-term debt.................. 1,238 - - - - 1,238
------ ------ --- ---- ---- ------
Total......................... $2,975 $4,766 $29 $ - $150 $7,920
====== ====== === ==== ==== ======
- ---------------------------------------------------------------------------------------
</TABLE>
16
<PAGE>
For most of its asset and liability management swaps, the Corporation receives a
fixed rate and pays a floating rate of interest. Substantially all interest
rate swaps used by the Corporation for asset and liability management purposes
are standard interest rate swap contracts. The following table summarizes the
contractual maturities and weighted average pay and receive rates for the asset
and liability management swap position at September 30, 1995. The variable
interest rates, which generally are the three-month and six-month LIBOR rates in
effect on the date of repricing, have been assumed to remain constant. However,
the variable interest rates will change with changes in interest rates and would
affect the related weighted average information presented below.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
(Dollars in millions) 1995 1996 1997 1998 1999 Thereafter Total
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Receive fixed swaps
Notional amount.... $ 779 $3,188 $1,765 $ 583 $ 111 $1,315 $7,741
Weighted average:
Receive rate.... 5.38% 6.76% 6.41% 6.49% 8.02% 7.24% 6.62%
Pay rate........ 6.06% 5.58% 6.20% 6.15% 6.72% 6.10% 5.92%
Pay fixed swaps
Notional amount.... $ - $ 19 $ - $ - $ - $ 10 $ 29
Weighted average:
Receive rate.... - 6.00% - - - 5.96% 5.99%
Pay rate........ - 7.21% - - - 5.06% 6.47%
Basis swaps
Notional amount.... $ 100 $ 50 $ - $ - $ - $ - $ 150
Weighted average:
Receive rate.... 6.04% 6.24% - - - - 6.11%
Pay rate........ 6.22% 5.96% - - - - 6.13%
- ---------------------------------------------------------------------------------------
Total notional amount... $ 879 $3,257 $1,765 $ 583 $ 111 $1,325 $7,920
- ---------------------------------------------------------------------------------------
</TABLE>
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. Net income
attributable to the venture capital business--revenues less the portfolio's
funding costs and other expenses--was $29.2 million, or $0.29 per share, for the
1995 third quarter, compared with net income of $3.4 million, or $0.02 per
share, a year ago.
Fair value accounting is used for this portfolio, which significantly increases
the potential for volatility in the Corporation's reported earnings. However,
the Corporation successfully instituted a program intended to reduce volatility
relative to expected returns through the use of equity derivatives, including
options, and the sale of investments.
Throughout 1995, the venture capital portfolio has been reduced substantially
through sales of investments and other transactions, in keeping with the
Corporation's intent to lower its exposure to equity risk in this portfolio.
Sales proceeds for the first nine months of 1995 were $632 million, with
proceeds of $457 million recorded in the third quarter. As a result, venture
capital equity investments have been reduced to $854 million at September 30,
1995. Unrealized appreciation related to these investments at September 30, 1995
totaled $187 million. Of the $236 million of publicly traded investments at
September 30, 1995, $176 million was hedged under this program.
17
<PAGE>
CREDIT RISK MANAGEMENT
<TABLE>
<CAPTION>
Summary
- --------------------------------------------------------------------------------------
Selected Statistical Information
Sept. 30 June 30 March 31 Dec. 31 Sept. 30
(Dollars in millions) 1995 1995 1995 1994 1994
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
At period-end:
Loans outstanding............... $27,663 $26,517 $27,018 $25,947 $23,817
Nonperforming loans............. 135 128 122 130 154
Other real estate, net.......... 5 8 8 28 23
Nonperforming assets............ 140 136 130 158 177
Allowance for credit losses..... 743 689 754 723 683
Nonperforming assets/loans
outstanding and other
real estate, net............... 0.5% 0.5% 0.5% 0.6% 0.7%
Allowance for credit losses/
nonperforming loans............ 550 538 618 556 444
For the quarter ended:
Average loans outstanding....... $26,607 $26,145 $26,034 $24,335 $23,484
Net charge-offs................. 46 45 44 46 38
Net charge-offs/average loans... 0.7% 0.7% 0.7% 0.7% 0.6%
- --------------------------------------------------------------------------------------
</TABLE>
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 Sept. 30 June 30 March 31 Dec. 31 Sept. 30
(In millions) 1995 1995 1995 1994 1994
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Commercial Risk
Domestic office
Commercial.............. $ 8,309 $ 8,506 $ 8,814 $ 7,806 $ 7,488
Commercial real estate.. 2,648 2,449 2,560 2,496 2,391
Other................... 3,955 4,120 3,624 3,896 3,572
------- ------- ------- ------- -------
Total domestic........ 14,912 15,075 14,998 14,198 13,451
Foreign office............ 1,892 2,138 1,866 1,832 2,020
------- ------- ------- ------- -------
Total commercial.. 16,804 17,213 16,864 16,030 15,471
------- ------- ------- ------- -------
Consumer Risk
Credit cards.............. 6,875 5,505 6,463 6,337 5,000
Secured by real estate
Mortgage................ 1,852 1,711 1,662 1,581 1,552
Home equity............. 795 815 815 832 836
Other..................... 1,337 1,273 1,214 1,167 958
------- ------- ------- ------- -------
Total consumer.... 10,859 9,304 10,154 9,917 8,346
------- ------- ------- ------- -------
Total............. $27,663 $26,517 $27,018 $25,947 $23,817
======= ======= ======= ======= =======
- ----------------------------------------------------------------------------
</TABLE>
18
<PAGE>
ALLOWANCE FOR CREDIT LOSSES
The allowance for credit losses is maintained at a level that in management's
judgment is adequate to provide for estimated probable credit losses resulting
from on-balance-sheet credit exposure for financial instruments such as loans
and derivatives, and off-balance-sheet credit exposure for credit-related and
derivative financial instruments. The amount of the allowance is based on
management's formal review and analysis of potential credit losses, as well as
prevailing economic conditions.
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 are 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 an allocation of the
allowance for credit losses for both categories of credit exposure.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Allowance for Credit Losses
Three Months Ended Nine Months Ended
September 30,1995 September 30, 1995
----------------------------- -----------------------------
(Dollars in millions) Commercial Consumer Total Commercial Consumer Total
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance--beginning of period..... $537 $152 $689 $516 $ 207 $ 723
Provision for credit losses...... 6 94 100 21 214 235
Net (charge-offs)/recoveries..... - (46) (46) 6 (141) (135)
Other:
- - Transfers upon securitization
of receivables................ - - - - (80) (80)
---- ---- ---- ---- ----- -----
Balance--end of period........... $543 $200 $743 $543 $ 200 $ 743
==== ==== ==== ==== ===== =====
Allowance as a percentage
of loans outstanding........... 3.2% 1.8% 2.7% 3.2% 1.8% 2.7%
Allowance as a percentage
of nonperforming loans......... 402% - 550% 402% - 550%
- ------------------------------------------------------------------------------------------------
</TABLE>
The Corporation maintains a reserve for securitized credit card receivables that
is not included in the allowance for credit losses. This reserve totaled $313
million at September 30, 1995, compared with $255 million at year-end 1994 and
$268 million a year ago.
19
<PAGE>
NONPERFORMING ASSETS
The following table shows the trend in nonperforming assets, including the
breakdown by significant portfolio segment.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
Nonperforming Assets Sept. 30 June 30 March 31 Dec. 31 Sept. 30
(Dollars in millions) 1995 1995 1995 1994 1994
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Nonaccrual loans...................... $ 133 $ 124 $ 118 $ 126 $ 150
Accrual renegotiated loans............ 2 4 4 4 4
----- ----- ----- ----- -----
Total nonperforming loans........ $ 135 $ 128 $ 122 $ 130 $ 154
===== ===== ===== ===== =====
Nonperforming Loans
Commercial real estate.............. $ 49 $ 55 $ 84 $ 68 $ 79
Other............................... 86 73 38 62 75
----- ----- ----- ----- -----
Total nonperforming loans........ 135 128 122 130 154
----- ----- ----- ----- -----
Other real estate, net................ 5 8 8 28 23
----- ----- ----- ----- -----
Total nonperforming assets....... $ 140 $ 136 $ 130 $ 158 $ 177
===== ===== ===== ===== =====
Nonperforming assets as a percentage
of loans outstanding and other
real estate, net.................... 0.5% 0.5% 0.5% 0.6% 0.7%
- ------------------------------------------------------------------------------------------
</TABLE>
Loans 90 days or more past due and still accruing interest amounted to $96
million at September 30, 1995, compared with $89 million at December 31, 1994,
and $71 million at September 30, 1994.
20
<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. Consumer loans
totaled $10.9 billion at September 30, 1995, up 30 percent from $8.3 billion a
year ago. Including securitized credit card receivables, these loans totaled
$18.8 billion at September 30, 1995, up 28 percent from a year ago.
Total managed credit card receivables (i.e. those held in the portfolio and
those sold to investors through securitization) were $14.9 billion at September
30, 1995, up 31 percent from a year earlier.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
Consumer Loans
Sept. 30 June 30 March 31 Dec. 31 Sept. 30
(In millions) 1995 1995 1995 1994 1994
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Credit card loans........................ $ 6,875 $ 5,505 $ 6,463 $ 6,337 $ 5,000
Securitized credit card receivables...... 7,986 7,986 5,867 6,117 6,367
------- ------- ------- ------- -------
Total managed credit card receivables.. 14,861 13,491 12,330 12,454 11,367
Other consumer loans..................... 3,984 3,799 3,691 3,580 3,346
------- ------- ------- ------- -------
Total............................... $18,845 $17,290 $16,021 $16,034 $14,713
======= ======= ======= ======= =======
- -----------------------------------------------------------------------------------------
</TABLE>
Average managed credit card receivables for the third quarter of 1995 grew 26
percent from the year-earlier quarter and 20 percent from the fourth quarter of
1994.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
Average Credit Card Receivables
For the Quarter Ended
Sept. 30 June 30 March 31 Dec. 31 Sept. 30
(Dollars in millions) 1995 1995 1995 1994 1994
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Credit card loans........................ $ 6,064 $ 5,812 $ 6,098 $ 5,304 $ 5,067
Securitized credit card receivables...... 7,808 6,896 6,027 6,273 5,925
------- ------- ------- ------- -------
Total managed credit card receivables.. $13,872 $12,708 $12,125 $11,577 $10,992
======= ======= ======= ======= =======
Total net charge-offs
(including securitizations)............ $ 141 $ 128 $ 118 $ 107 $ 96
======= ======= ======= ======= =======
Net charge-offs/average total
receivables............................ 4.0% 4.0% 3.9% 3.7% 3.5%
======= ======= ======= ======= =======
- ---------------------------------------------------------------------------------------------
</TABLE>
The net charge-off rate for the total average managed credit card portfolio was
4.0 percent in the third quarter of 1995, compared with 3.5 percent a year ago.
Increasing levels of consumer debt and rising personal bankruptcies are
affecting credit performance throughout the industry and are putting upward
pressure on charge-off rates.
21
<PAGE>
COMMERCIAL RISK MANAGEMENT
Commercial loans totaled $16.8 billion at September 30, 1995, up 4.8 percent
from December 31, 1994, and 8.6 percent from September 30, 1994.
During the third quarter, charge-offs net of recoveries were zero in the
commercial portfolio. The provision for credit losses related to the commercial
portfolio was $6 million, and the quarter-end reserve of $543 million
represented 3.2 percent of total commercial loans and 402 percent of
nonperforming commercial loans.
DERIVATIVE FINANCIAL INSTRUMENTS
The Corporation enters into a variety of derivative financial instruments in its
trading, asset and liability management, and venture capital activities. These
instruments include interest rate, currency, commodity and equity swaps,
forwards, futures, options, caps, floors, forward rate agreements, and other
conditional or exchange contracts, and include both exchange-traded and over-
the-counter contracts.
A discussion of the Corporation's income from derivatives used in trading and
venture capital activities is presented on pages 5 and 17, respectively.
The Corporation uses interest rate derivative financial instruments to reduce
structural interest rate risk and the volatility of net interest margin. The
consistency of the Corporation's net interest margin reflects the effective use
of these derivatives. Without their use, net interest income would have been
lower by $5.2 million in the third quarter of 1995, and higher by $8.1 million
in the first nine months of 1995; net interest income in the third quarter and
first nine months of 1994 would have declined by $13.7 million and $79.9
million, respectively.
The sale of fixed- and floating-rate credit card receivables as securities to
investors subjects the Corporation's servicing revenue to interest rate risk.
The Corporation uses interest rate derivatives to reduce the volatility of the
servicing income on credit card securitizations. Without the use of these
instruments, credit card fee revenue would have been decreased by $0.6 million
in the third quarter of 1995, and by $5.1 million in the first nine months of
1995. Credit card fee revenue in the third quarter and first nine months of
1994 would also have been reduced, by $9.1 million and $34.1 million,
respectively. The terms of these derivatives match the terms of the credit card
securitizations.
Deferred gains and losses on the early termination of interest rate swaps used
to manage interest rate risk totaled a net deferred gain of $23.2 million as of
September 30, 1995. A significant portion of these deferred gains was related
to securitized credit card receivables. This amount is scheduled to be
amortized into income in the following periods: $5.4 million in the remainder of
1995, $18.3 million in 1996, $1.2 million in 1997, $(0.3) million in 1998, and
$(1.4) million thereafter.
22
<PAGE>
The Corporation's credit exposure resulting from derivative financial
instruments is represented by their fair value amounts, increased by an estimate
of maximum adverse position exposure. The incremental amount of credit exposure
for potential adverse movement is calculated by using a statistical model that
estimates changes over time in exchange rates, interest rates and other relevant
factors. Credit exposure amounts fluctuate as a function of maturity, interest
rates, foreign exchange rates, commodity prices and equity prices. Gross credit
exposure may be overstated because it does not consider collateral and other
security or the offsetting of losses with the same counterparties based on
legally enforceable termination and netting rights. A reconciliation between
gross credit exposure and balance sheet exposure is presented in the following
table.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
September 30, 1995 (In billions)
- ----------------------------------------------------------------------
<S> <C>
Gross credit exposure resulting from derivative financial
instruments................................................... $21.0
Less additional exposure based on estimate of maximum adverse
position exposure............................................ 7.2
-----
Gross fair value exposure...................................... $13.8
=====
- ----------------------------------------------------------------------
Gross fair value exposure...................................... $13.8
Less netting adjustments due to master netting agreements...... 5.8
Less unrecognized net gain due to non-trading activities....... 0.1
-----
Balance sheet exposure......................................... $ 7.9
=====
- ----------------------------------------------------------------------
</TABLE>
At December 31, 1994, the gross credit exposure and the gross fair value
exposure resulting from derivative financial instruments were $12.3 billion and
$6.9 billion, respectively. The increase in gross credit exposure during 1995
was primarily a result of increases in unrealized gains on derivative financial
instruments due to more volatile currency markets. In 1995, net charge-offs
associated with derivative financial instruments totaled $0.2 million.
23
<PAGE>
CAPITAL MANAGEMENT
Selected Capital Ratios
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
Sept. 30 June 30 March 31 Dec. 31 Sept. 30 Corporate
Quarter Ended 1995 1995 1995 1994 1994 Guideline
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Common equity/total assets (1)..... 6.1% 6.1% 6.2% 6.6% 6.6% N/A
Tangible common equity ratio (1)... 5.9 5.8 5.8 6.2 6.2 N/A
Stockholders' equity/total assets.. 6.2 6.3 6.4 6.9 6.9 N/A
Risk-based capital ratios (1)
Tier 1.......................... 8.4 8.8 8.6 8.8 9.2 7-8%
Total........................... 12.5 13.1 13.0 13.4 13.9 11-12
Leverage ratio (1)................. 6.9 7.0 7.7 7.5 7.8 N/A
Double leverage ratio.............. 119.4 115.8 115.4 116.5 114.0 115-125
Dividend payout ratio.............. 28 28 27 29 32 30-35
- ---------------------------------------------------------------------------------------------------
(1) Net of investment in First Chicago Capital Markets, Inc.
N/A - Not Applicable.
</TABLE>
Capital represents the stockholders' investment on which the Corporation strives
to generate attractive returns. It supports business growth and provides
protection to depositors and creditors. Banking is a risk-taking activity, and
management believes that capital is the foundation of a cohesive risk management
framework in which the Corporation's risks and returns come together. Capital
adequacy objectives have been developed for the Corporation and its principal
banking subsidiaries to meet these needs and also to maintain a well-capitalized
regulatory position.
ECONOMIC CAPITAL
In the normal course of business, the Corporation takes on several types of
risk: credit, liquidity, structural interest rate, market and operating/
fiduciary. An economic capital framework has been constructed to allocate
capital to business segments, products and customers based on the amount and
type of risk inherent in the activity. Once economic capital is allotted,
returns can be computed to determine if the activity earns an adequate return on
risks taken. This process forms a key decision-making tool for managing risk-
taking activities as well as ensuring that capital is profitably employed.
The Corporation has established a capital level that it believes is necessary to
provide flexibility while maintaining an adequate base for its risk profile and
in relation to its peers. This target, or intermediary capital, is expressed in
terms of Tier 1 capital and ranges from 7 percent to 8 percent.
The Corporation's average common equity during the third quarter of 1995 and the
previous four quarters exceeded its economic capital -- that needed for current
business risks -- and was more than sufficient to meet its intermediary capital
goals. This amount in excess of intermediary capital averaged about $286
million during the first nine months of 1995 and is available for investments
and acquisitions in the Corporation's core businesses. If attractive long-term
opportunities are not available over time, any excess capital will be returned
to stockholders, typically via stock repurchase programs and/or dividend
increases.
Inherent in capital management is the ability of the Corporation to generate
acceptable returns on stockholders' capital. Even with excess capital, the
Corporation has been able to earn attractive returns on equity. Over the last
12 quarters, the return on average common stockholders' equity has been equal to
or greater than 15 percent.
24
<PAGE>
STOCK REPURCHASE PROGRAM AND OTHER CAPITAL ACTIVITIES
The repurchase of shares is another technique used to manage capital and enhance
stockholder value. During the third quarter of 1995, the Corporation
repurchased approximately 1,574,500 shares of common stock at an average price
of $62.62 per share. In July 1995, the Board of Directors authorized an
increase in the current common stock buyback program from 7 million to 12
million shares. This program is designed to meet projected requirements of the
Corporation's employee benefit plans and to manage the Corporation's overall
capital position. As of September 30, 1995, 7.4 million shares had been
repurchased under the program.
On July 1, 1994, the Corporation redeemed its $150 million issue of Preferred
Stock, Series D, at a $4.5 million, or 3 percent, premium. This action reduced
future annual dividend requirements by $15 million.
In July 1995, the Corporation increased the quarterly common stock dividend to
60 cents per share from 55 cents per share, first payable on October 1, 1995.
On August 31, 1995, the Corporation redeemed its $121 million issue of Preferred
Stock, Series A, at the stated value of $50 per share plus accrued and unpaid
dividends. This redemption will reduce annual dividend requirements by $8.4
million.
REGULATORY CAPITAL
The Corporation endeavors to maintain regulatory capital ratios, including those
of its principal banking subsidiaries, in excess of the well-capitalized
guidelines. To assure meeting this goal, and the intermediary capital target
discussed earlier in the Economic Capital section, the Corporation has
established target ranges of 7 percent to 8 percent for Tier 1 capital and 11
percent to 12 percent for total risk-based capital. As shown in the table on
page 24, the Corporation's risk-based capital ratios for Tier 1 and total
capital exceeded the regulatory well-capitalized guidelines of 6 percent and 10
percent, respectively.
25
<PAGE>
The following tables show the components of the Corporation's regulatory risk-
based capital and risk-weighted assets.
<TABLE>
<CAPTION>
Regulatory Capital
- -------------------------------------------------------------------
Sept. 30 Dec. 31 Sept. 30
(In millions) 1995 1994 1994
- -------------------------------------------------------------------
<S> <C> <C> <C>
Tier 1 capital
Common stockholders' equity......... $4,213 $3,922 $3,930
Preferred stock..................... 491 611 611
Less 50% of investment in First
Chicago Capital Markets, Inc...... (123) (128) (129)
Less disallowed intangibles and
other adjustments................. (79) (80) (93)
------ ------ ------
Tier 1 capital.................... $4,502 $4,325 $4,319
Tier 2 capital
Allowance for credit losses (1)..... 671 616 589
Qualifying long-term debt........... 1,635 1,753 1,782
Less 50% of investment in First
Chicago Capital Markets, Inc..... (123) (128) (129)
------ ------ ------
Tier 2 capital.................... 2,183 2,241 2,242
------ ------ ------
Total capital........... $6,685 $6,566 $6,561
====== ====== ======
- -------------------------------------------------------------------
(1) Limited to 1.25% of risk-weighted assets.
Regulatory Risk-Weighted Assets*
- -------------------------------------------------------------------
Sept. 30 Dec. 31 Sept. 30
(In billions) 1995 1994 1994
- -------------------------------------------------------------------
Balance-sheet risk-weighted assets.. $ 35.2 $ 33.0 $ 30.7
Off-balance-sheet risk-weighted
assets............................. 18.4 16.2 16.4
------ ------ ------
Total risk-weighted assets.......... $ 53.6 $ 49.2 $ 47.1
====== ====== ======
- -------------------------------------------------------------------
* Based on Federal Reserve Board definitions.
</TABLE>
The Corporation's banking subsidiaries -- The First National Bank of Chicago
(FNBC), FCC National Bank (FCCNB), and American National Bank and Trust Company
of Chicago (ANB) -- exceeded the regulatory well-capitalized guidelines as shown
in the following table.
<TABLE>
<CAPTION>
Banking Subsidiaries--Regulatory Capital Ratios
- -------------------------------------------------------------------------------------------------------
September 30, 1995 December 31, 1994 September 30, 1994
------------------- -------------------- --------------------
FNBC FCCNB ANB FNBC FCCNB ANB FNBC FCCNB ANB
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Risk-based capital ratios
Tier 1 capital.......... 7.9% 12.6% 9.6% 8.1% 12.1% 9.5% 8.2% 15.1% 9.3%
Total capital........... 11.7 15.1 12.0 12.5 15.0 12.0 12.6 18.0 11.9
Leverage Ratio............. 5.9 14.1 9.6 6.3 14.4 9.1 6.4 14.7 9.0
- -------------------------------------------------------------------------------------------------------
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
FIRST CHICAGO CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
- -----------------------------------------------------------------------------------------------------------------------------------
September 30 December 31 September 30
- -----------------------------------------------------------------------------------------------------------------------------------
(Dollars in millions) 1995 1994 1994
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Cash and due from banks--noninterest-bearing.......................................... $ 3,808 $ 4,265 $ 4,096
Due from banks--interest-bearing...................................................... 9,633 8,066 7,827
Federal funds sold and securities under resale agreements............................. 14,034 13,302 13,804
Trading account assets................................................................ 7,911 4,967 5,327
Derivative product assets............................................................. 7,928 4,389 6,016
Investment securities (fair values--$2,217, $2,589, and $2,515, respectively)......... 2,209 2,592 2,514
Loans (net of unearned income--$287, $297, and $270, respectively).................... 27,663 25,947 23,817
Allowance for credit losses........................................................... (743) (723) (683)
Premises and equipment................................................................ 785 665 659
Customers' acceptance liability....................................................... 602 526 632
Other assets.......................................................................... 1,917 1,904 1,738
------- ------- -------
Total assets................................................................ $75,747 $65,900 $65,747
======= ======= =======
- -----------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Deposits
Demand.............................................................................. $ 6,585 7,647 $ 7,217
Savings............................................................................. 7,413 7,448 7,426
Time................................................................................ 5,757 5,149 4,602
Foreign offices..................................................................... 13,480 11,422 10,425
------- ------- -------
Total deposits.............................................................. 33,235 31,666 29,670
Federal funds purchased and securities under repurchase agreements.................... 16,409 13,026 12,303
Other funds borrowed.................................................................. 8,997 7,665 9,059
Long-term debt........................................................................ 2,274 2,271 2,272
Acceptances outstanding............................................................... 602 526 632
Derivative product liabilities........................................................ 7,562 4,097 5,539
Other liabilities..................................................................... 1,964 2,116 1,731
------- ------- -------
Total liabilities........................................................... 71,043 61,367 61,206
- -----------------------------------------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Preferred stock....................................................................... 491 611 611
Common stock--$5 par value............................................................ 467 466 465
Number of shares authorized--150,000,000
Number of shares issued--93,479,339; 93,148,134; and 93,064,700, respectively
Number of shares outstanding--88,308,227; 89,859,798; and 91,850,482, respectively
Surplus............................................................................... 1,714 1,712 1,741
Retained earnings..................................................................... 2,313 1,905 1,788
Other adjustments..................................................................... 1 (4) (4)
------- ------- -------
Total....................................................................... 4,986 4,690 4,601
Less treasury stock at cost--5,171,112; 3,288,336; and 1,214,218 shares, respectively. 282 157 60
------- ------- -------
Stockholders' equity........................................................ 4,704 4,533 4,541
------- ------- -------
Total liabilities and stockholders' equity.................................. $75,747 $65,900 $65,747
======= ======= =======
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
FIRST CHICAGO CORPORATION AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENT
- --------------------------------------------------------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
September 30 September 30
- --------------------------------------------------------------------------------------------------------------------------------
(In millions, except per share data) 1995 1994 1995 1994
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans................................................. $ 594.5 $476.9 $1,792.8 $1,384.8
Interest on bank balances.................................................. 151.2 97.8 432.9 255.3
Interest on federal funds sold and securities under resale agreements...... 229.1 175.3 708.6 400.0
Interest on trading account assets......................................... 138.1 76.0 328.9 191.8
Interest on investment securities (including dividends).................... 23.2 18.2 67.1 48.7
-------- ------ -------- --------
Total............................................................ 1,136.1 844.2 3,330.3 2,280.6
- --------------------------------------------------------------------------------------------------------------------------------
INTEREST EXPENSE
Interest on deposits....................................................... 353.6 203.9 989.3 540.7
Interest on federal funds purchased and securities under repurchase
agreements............................................................... 244.7 149.6 712.7 341.4
Interest on other funds borrowed........................................... 131.9 112.8 401.3 275.0
Interest on long-term debt................................................. 44.9 43.5 136.8 125.7
-------- ------ -------- --------
Total............................................................ 775.1 509.8 2,240.1 1,282.8
- --------------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME........................................................ 361.0 334.4 1,090.2 997.8
Provision for credit losses................................................ 100.0 55.0 235.0 148.0
-------- ------ -------- --------
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES...................... 261.0 279.4 855.2 849.8
- --------------------------------------------------------------------------------------------------------------------------------
NONINTEREST INCOME
Combined trading profits................................................... 78.6 41.6 144.8 53.6
Equity securities gains.................................................... 66.7 20.0 181.2 158.1
Investment securities gains (losses)....................................... - (2.2) - (1.1)
-------- ------ -------- --------
Market-driven revenue.................................................... 145.3 59.4 326.0 210.6
Credit card fee revenue.................................................... 235.9 221.1 640.7 597.3
Service charges and commissions............................................ 113.9 112.8 337.3 318.3
Fiduciary and investment management fees................................... 49.7 48.6 150.6 150.3
Other income............................................................... 14.2 13.2 62.2 109.3
-------- ------ -------- --------
Total............................................................ 559.0 455.1 1,516.8 1,385.8
- --------------------------------------------------------------------------------------------------------------------------------
NONINTEREST EXPENSE
Salaries and employee benefits............................................. 249.4 225.1 710.6 645.4
Occupancy expense of premises, net......................................... 41.4 32.0 115.7 102.5
Equipment rentals, depreciation and maintenance............................ 29.2 35.1 93.0 120.7
Other expense.............................................................. 182.5 199.2 549.0 567.9
-------- ------ -------- --------
Total............................................................ 502.5 491.4 1,468.3 1,436.5
- --------------------------------------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES................................................. 317.5 243.1 903.7 799.1
Applicable income taxes.................................................... 110.3 89.3 314.0 282.8
-------- ------ -------- --------
Net Income................................................................. $ 207.2 $153.8 $ 589.7 $ 516.3
======== ====== ======== ========
NET INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS' EQUITY..................... $ 197.8 $143.8 $ 560.3 $ 474.2
======== ====== ======== ========
- --------------------------------------------------------------------------------------------------------------------------------
EARNINGS PER SHARE
NET INCOME-PRIMARY....................................................... $2.18 $1.54 $6.16 $5.29
NET INCOME-FULLY DILUTED................................................. $2.12 $1.51 $6.00 $5.17
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
FIRST CHICAGO CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES TO STOCKHOLDERS' EQUITY
- -----------------------------------------------------------------------------------------------------------
Nine Months Ended September 30 1995 1994
(In millions, except per share data)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Stockholders' Equity
Balance, beginning of period........................................................ $4,533 $4,264
Net income......................................................................... 590 516
Acquisition of Lake Shore Bancorp.................................................. - 123
Issuance of common stock........................................................... 15 8
Issuance of treasury stock......................................................... 37 23
Treasury stock purchases........................................................... (174) (76)
Redemption of preferred stock...................................................... (120) (150)
Other.............................................................................. 5 (2)
------ ------
4,886 4,706
Cash dividends declared on preferred stock......................................... (30) (42)
Cash dividends declared on common stock............................................ (152) (123)
------ ------
1995 1994
- ------------------------------------------------------------------------------------
Rate per common share for period $1.70 $1.40
- ------------------------------------------------------------------------------------
Balance, end of period.............................................................. $4,704 $4,541
====== ======
- -----------------------------------------------------------------------------------------------------------
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
FIRST CHICAGO CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
- -----------------------------------------------------------------------------------------------------------
Nine Months Ended September 30 (In millions) 1995 1994
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash Flows from Operating Activities
Net income.......................................................................... $ 590 $ 516
Adjustments to reconcile net income to net cash (used in) operating activities
Depreciation and amortization...................................................... 122 131
Provision for credit losses........................................................ 235 148
Equity securities gains............................................................ (181) (158)
Net (increase) in net derivative product balances.................................. (63) (245)
Net (increase) in trading account assets........................................... (2,859) (776)
Net (increase) in accrued income receivable........................................ (80) (15)
Net decrease in other assets....................................................... 87 111
Interest income from Brazilian debt restructuring.................................. (1) (16)
Other noncash adjustments.......................................................... (75) (19)
--------- ---------
Total adjustments.................................................................. (2,815) (839)
Net cash (used in) operating activities............................................. (2,225) (323)
- -----------------------------------------------------------------------------------------------------------
Cash Flows from Investing Activities
Net (increase) in federal funds sold and securities under resale agreements......... (732) (5,009)
Purchase of investment securities--available for sale............................... (1,484) (769)
Purchase of debt investment securities--held to maturity............................ (97) (240)
Purchase of venture capital investments............................................. (319) (100)
Proceeds from maturities of debt securities--available for sale..................... 1,224 695
Proceeds from maturities of debt securities--held to maturity....................... 115 200
Proceeds from sales of debt securities--available for sale.......................... 167 82
Proceeds from sales of equity securities--available for sale........................ 1 48
Proceeds from sales of venture capital investments.................................. 906 257
Net (increase) in credit card receivables........................................... (2,984) (1,359)
Credit card receivables securitized................................................. 2,286 2,000
Net (increase) in loans of bank subsidiaries........................................ (1,185) (798)
Loans made to customers and purchased from others by nonbank subsidiaries........... (271) (436)
Principal collected on and proceeds from sale of loans by nonbank subsidiaries...... 273 470
Loan recoveries..................................................................... 46 63
Purchases of premises and equipment................................................. (205) (127)
Proceeds from sales of premises and equipment....................................... 38 24
Net cash and cash equivalents due to acquisitions................................... - 44
--------- ---------
Net cash (used in) investing activities............................................. (2,221) (4,955)
- -----------------------------------------------------------------------------------------------------------
Cash Flows from Financing Activities
Net (decrease) in demand and savings deposits....................................... (1,100) (1,386)
Net increase (decrease) in time deposits............................................ 608 (1,016)
Net increase in deposits in foreign offices......................................... 2,014 2,993
Net increase in federal funds purchased and securities under repurchase agreements.. 3,383 3,998
Proceeds from other funds borrowed.................................................. 189,115 184,536
Repayment of other funds borrowed................................................... (187,835) (181,392)
Proceeds from issuance of long-term debt............................................ 3 203
Repayment of long-term debt......................................................... (2) (7)
Net (decrease) in other liabilities................................................. (242) (197)
Dividends paid...................................................................... (179) (155)
Proceeds from issuance of common stock.............................................. 17 8
Payment for purchase of treasury stock.............................................. (174) (76)
Redemption of preferred stock....................................................... (121) (150)
Proceeds from reissuance of treasury stock.......................................... 19 12
--------- ---------
Net cash provided by financing activities........................................... 5,506 7,371
- -----------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash and cash equivalents........................ 50 (123)
- -----------------------------------------------------------------------------------------------------------
Net increase in cash and cash equivalents........................................... 1,110 1,970
Cash and cash equivalents at beginning of period.................................... 12,331 9,953
--------- ---------
Cash and cash equivalents at end of period.......................................... $ 13,441 $ 11,923
========= =========
- -----------------------------------------------------------------------------------------------------------
</TABLE>
See Note 6 on page 33.
30
<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. Primary earnings per share 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.
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 following table.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Nine Months Ended
(In millions) September 30
1995 1994
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
PRIMARY
Net income.............................................................................................. $589.7 $516.3
Preferred stock dividends (1)........................................................................... 29.4 42.1
------ ------
Net income attributable to common stockholders' equity.................................................. $560.3 $474.2
====== ======
Average number of common and common-equivalent shares................................................... 90.9 89.7
==== ====
FULLY DILUTED
Net income.............................................................................................. $589.7 $516.3
Preferred stock dividends, excluding convertible Series B (1)........................................... 20.8 33.5
------ ------
Fully diluted net income................................................................................ $568.9 $482.8
====== ======
Average number of shares, assuming full dilution........................................................ 94.8 93.5
==== ====
- -----------------------------------------------------------------------------------------------------------------------------
(1) 1994 results include $4.5 million of additional preferred dividends representing a 3 percent premium over the $150 million
stated value of the Corporation's Preferred Stock, Series D, that was redeemed on July 1, 1994.
</TABLE>
Note 3
- ------
At September 30, 1995, credit card receivables aggregated $6.9 billion. These
receivables are available for sale at face value through credit card
securitization programs.
31
<PAGE>
Note 4
- ------
The accelerated asset disposition portfolio was established in September 1992.
Nonperforming assets in this portfolio totaled $23 million at September 30,
1995, compared with $37 million at year-end 1994 and $33 million a year ago.
Note 5
- ------
Effective January 1, 1995, the Corporation adopted Statement of Financial
Accounting Standards (SFAS) No. 114, "Accounting by Creditors for Impairment of
a Loan," and SFAS No. 118, "Accounting by Creditors for Impairment of a Loan --
Income Recognition and Disclosures." SFAS No. 114 addresses the accounting for
a loan when it is probable that all principal and interest amounts due will not
be collected in accordance with its contractual terms. The Corporation generally
identifies nonperforming loans as "impaired loans." Certain loans, such as loans
carried at the lower-of-cost or market or small-balance homogeneous loans (e.g.,
credit card, installment credit), are exempt from SFAS No. 114 provisions.
On a quarterly basis, the Corporation identifies impaired loans and the extent
to which such loans are impaired. Impairment is recognized to the extent the
recorded investment of an impaired loan or pool of loans exceeds the calculated
present value. For non-collateral dependent loans, the calculated present value
is measured using a discounted cash flow approach. Loans having a significant
recorded investment are measured on an individual basis while loans not having a
significant recorded investment are grouped and measured on a pool basis.
Collateral-dependent loans, primarily real estate, are separately measured for
impairment by determining the fair value of the collateral less estimated costs
to sell. Loans that are 90 days past due as to principal or interest and are
not well secured and in the process of collection are considered nonaccrual. In
some instances, such loans are not considered impaired if there is no
anticipated loss of principal or interest. Such loans totaled $10 million at
September 30, 1995.
The allocated reserve associated with impaired loans is considered in
management's determination of the Corporation's allowance for credit losses. The
adoption of this accounting standard did not have a significant effect on the
Corporation's net income or its allowance for credit losses.
At September 30, 1995, the recorded investment in loans considered impaired
under SFAS No. 114 was $123 million, which required a related allowance for
credit losses of $26 million. An allowance was allocated to all impaired loans.
The Corporation retained its prior method of recognizing interest and applying
cash payments received with respect to impaired loans. The average recorded
investment in impaired loans was approximately $123 million for the quarter
ended September 30, 1995, and $120 million year to date. The Corporation
recognized interest income associated with impaired loans of $2 million during
the third quarter and $6 million year to date.
In accordance with SFAS No. 114, a loan is classified as an in-substance
foreclosure when the Corporation has effectively taken possession of the
collateral. Loans of $15 million, which no longer qualify as in-substance
foreclosures, were reclassified from other assets to loans as of January 1,
1995. Prior reporting periods were not restated since the amounts involved were
not material.
32
<PAGE>
Note 6
- ------
For purposes of the Statement of Cash Flows, cash and cash equivalents consist
of cash and due from banks--noninterest-bearing and interest-bearing.
A venture capital investment of $96 million was transferred to trading account
assets in the third quarter of 1995.
Loans of $4.2 million and $12.0 million were transferred to other real estate in
the first nine months of 1995 and 1994, respectively.
Loans of $15 million were reclassified from other assets to loans as of January
1, 1995, as a result of the Corporation's adoption of SFAS No. 114. See Note 5
above for further information.
Note 7
- ------
The ratio of income to fixed charges for the nine months ended September 30,
1995, excluding interest on deposits was 1.7x, and including interest on
deposits was 1.4x. 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 8
- ------
The Corporation and NBD Bancorp, Inc. (NBD) entered into an Agreement and Plan
of Merger, dated July 11, 1995, as amended, pursuant to which the Corporation
will merge with and into NBD. The respective shareholders of the Corporation
and NBD approved the merger at special meetings held by each company on October
20, 1995.
The combined company will be called First Chicago NBD Corporation (FCNBD).
Subject to receiving all required regulatory approvals, management of the
Corporation expects the merger to be completed on November 30, 1995.
Under terms of the transaction, the Corporation's shareholders will receive 1.81
shares of common stock of FCNBD in exchange for each share of the Corporation's
common stock. Each share of NBD common stock will represent one share in FCNBD.
In addition, each holder of the Corporation's preferred stock and depositary
shares will be entitled to receive preferred stock or depositary shares, as
applicable, with substantially similar terms, of FCNBD.
Shares of common stock of FCNBD will be listed on the New York Stock Exchange,
the Chicago Stock Exchange and the Pacific Stock Exchange and trade under the
symbol FCN.
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.
33
<PAGE>
<TABLE>
<CAPTION>
FIRST CHICAGO CORPORATION AND SUBSIDIARIES
SELECTED STATISTICAL INFORMATION
- ------------------------------------------------------------------------------------------------------------------
INVESTMENT SECURITIES
- ------------------------------------------------------------------------------------------------------------------
Investment Securities Available-for-Sale
--------------------------------------------------------------------------
Amortized Gross Unrealized Gross Unrealized Fair Value
September 30, 1995 (In millions) Cost Gains Losses (Book Value)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. government and federal agencies.. $469 $- $1 $468
States and political subdivisions..... - - - -
Other bonds, notes and debentures..... 8 - - 8
Equity securities (1)(2).............. 244 2 - 246
---- -- -- ----
Total............................. $721 $2 $1 $722
==== == == ====
--------------------------------------------------------------------------
Investment Securities Held-to-Maturity
--------------------------------------------------------------------------
Amortized Cost Gross Unrealized Gross Unrealized
(Book Value) Gains Losses Fair Value
--------------------------------------------------------------------------
U.S. government and federal agencies.. $350 $2 $1 $351
States and political subdivisions..... 156 6 - 162
Other bonds, notes and debentures..... 29 1 - 30
---- -- -- ----
Total............................. $535 $ 9 $1 $543
==== == == ====
--------------------------------------------------------------------------
Investment Securities Venture Capital
--------------------------------------------------------------------------
Amortized Gross Unrealized Gross Unrealized Fair Value
Cost Gains Losses (Book Value)
--------------------------------------------------------------------------
Venture capital (1)................... $878 $149 $75 $952
==== ==== === ====
- ------------------------------------------------------------------------------------------------------------------
(1) The fair values of 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.
</TABLE>
34
<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 September 30, 1995 Three Months Ended September 30, 1994
------------------------------------- -------------------------------------
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.. $ 375 $ 183 $ 558 $ 341 $ 148 $ 489
Provision for credit
losses................ 100 94 194 55 65 120
Noninterest income...... 559 (89) 470 455 (83) 372
Noninterest expense..... 502 - 502 491 - 491
Net income.............. 207 - 207 154 - 154
Assets--quarter-end..... $75,747 $7,986 $83,733 $65,747 $6,367 $72,114
--average.......... 76,160 7,808 83,968 66,050 5,925 71,975
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
Nine Months Ended September 30, 1995 Nine Months Ended September 30, 1994
------------------------------------ ------------------------------------
Credit Card Credit Card
(In millions) Reported Securitizations Adjusted Reported Securitizations Adjusted
- ---------------------------------------------------------------------------------------------------------
Net interest income--
tax-equivalent basis.. $ 1,120 $ 487 $ 1,607 $ 1,015 $ 398 $ 1,413
Provision for credit
losses................ 235 234 469 148 183 331
Noninterest income...... 1,517 (253) 1,264 1,386 (215) 1,171
Noninterest expense..... 1,468 - 1,468 1,437 - 1,437
Net income.............. 590 - 590 516 - 516
Assets--quarter-end..... $75,747 $7,986 $83,733 $65,747 $6,367 $72,114
--average.......... 74,029 6,911 80,940 62,672 5,293 67,965
- ---------------------------------------------------------------------------------------------------------
</TABLE>
35
<PAGE>
FIRST CHICAGO CORPORATION AND SUBSIDIARIES
SELECTED STATISTICAL INFORMATION
<TABLE>
<CAPTION>
ANALYSIS OF ALLOWANCE FOR CREDIT LOSSES
- ------------------------------------------------------------------------------------------------------------------
(In millions) September 30 June 30 March 31 December 31 September 30
1995 1995 1995 1994 1994
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, beginning of quarter.................... $689 $754 $723 $683 $681
- ------------------------------------------------------------------------------------------------------------------
Provision for credit losses...................... 100 70 65 76 55
- ------------------------------------------------------------------------------------------------------------------
Charge-offs
Commercial
Domestic
Commercial.................................... 3 2 2 6 7
Real estate................................... 1 3 5 4 4
Other......................................... - - - 1 2
Foreign, including TCD......................... - - 1 2 -
Consumer
Credit card................................... 48 50 55 41 39
Other......................................... 6 4 3 3 4
---- ---- ---- ---- ----
Total charge-offs............................ 58 59 66 57 56
- ------------------------------------------------------------------------------------------------------------------
Recoveries
Commercial
Domestic
Commercial.................................... 3 3 9 3 3
Real estate................................... 1 - 2 - -
Other......................................... - 2 1 1 -
Foreign, including TCD......................... - - 2 - 7
Consumer
Credit card................................... 7 8 7 6 7
Other......................................... 1 1 1 1 1
---- ---- ---- ---- ----
Total recoveries............................. 12 14 22 11 18
- ------------------------------------------------------------------------------------------------------------------
Net charge-offs/(recoveries)..................... 46 45 44 46 38
- ------------------------------------------------------------------------------------------------------------------
Other............................................ - (90) 10 10 (15)
- ------------------------------------------------------------------------------------------------------------------
Balance, end of quarter.......................... $743 $689 $754 $723 $683
==== ==== ==== ==== ====
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
36
<PAGE>
<TABLE>
<CAPTION>
FIRST CHICAGO CORPORATION AND SUBSIDIARIES
SELECTED STATISTICAL INFORMATION
- ----------------------------------------------------------------------------------------------------------------------------------
Average Balances/Net Interest Margin/Rates
- ----------------------------------------------------------------------------------------------------------------------------------
(Three Months Ended) September 30, 1995 June 30, 1995
- ----------------------------------------------------------------------------------------------------------------------------------
(Income and rates on tax-equivalent basis) Average Average Average Average
(Dollars in millions) Balance Interest Rate Balance Interest Rate
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Assets
Due from banks--interest-bearing (1)............. $ 9,802 $ 151.2 6.12% $ 9,449 $ 150.1 6.37%
Federal funds sold and securities under resale 15,695 229.1 5.79 15,899 238.7 6.02
agreements......................................
Trading account assets........................... 8,386 138.6 6.56 6,434 102.8 6.41
Investment securities
U.S. government and federal agency............. 826 12.2 5.86 1,043 16.1 6.19
States and political subdivisions.............. 157 3.5 8.84 170 3.8 8.97
Other.......................................... 1,663 16.8 4.01 1,632 7.9 1.94
- ----------------------------------------------------------------------------------------------------------------------------------
Total investment securities.................... 2,646 32.5 4.87 2,845 27.8 3.92
Loans (2)(3)
Domestic offices............................... 24,790 566.6 9.37 24,368 562.3 9.54
Foreign offices................................ 1,817 32.3 7.06 1,777 35.3 7.97
- ----------------------------------------------------------------------------------------------------------------------------------
Total loans...................................... 26,607 598.9 9.20 26,145 597.6 9.43
- ----------------------------------------------------------------------------------------------------------------------------------
Total earning assets (4)..................... 63,136 1,150.3 7.23 60,772 1,117.0 7.37
Cash and due from banks--noninterest-bearing..... 3,552 4,383
Allowance for credit losses...................... (692) (720)
Other assets..................................... 10,164 11,641
- ----------------------------------------------------------------------------------------------------------------------------------
Total assets..................................... $76,160 $76,076
======= =======
- ----------------------------------------------------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
Deposits--interest-bearing
Savings........................................ $ 8,336 $ 64.4 3.07% $ 8,777 $ 66.9 3.06%
Time........................................... 5,575 88.7 6.31 5,744 91.3 6.38
Foreign offices (5)............................ 14,063 200.5 5.66 12,604 183.5 5.84
- ----------------------------------------------------------------------------------------------------------------------------------
Total deposits--interest-bearing............. 27,974 353.6 5.01 27,125 341.7 5.05
Federal funds purchased and securities under
repurchase agreements........................... 16,549 244.7 5.87 15,420 231.9 6.03
Other funds borrowed............................. 8,746 131.9 5.98 8,962 132.0 5.91
Long-term debt................................... 2,273 44.9 7.84 2,271 46.0 8.12
- ----------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities............. 55,542 775.1 5.54 53,778 751.6 5.61
Demand deposits.................................. 6,684 6,837
Other liabilities................................ 9,185 10,748
Preferred stock.................................. 570 611
Common stockholders' equity...................... 4,179 4,102
- ----------------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity... $76,160 $76,076
======= =======
Interest income/earning assets................... $1,150.3 7.23% $1,117.0 7.37%
Interest expense/earning assets.................. 775.1 4.87 751.6 4.96
- ----------------------------------------------------------------------------------------------------------------------------------
Net interest margin.............................. $ 375.2 2.36% $ 365.4 2.41%
======== ===== ======== ====
</TABLE>
- -----------------
(1) Principally balances in overseas offices.
(2) Rates are calculated on average lease-financing receivables balances
reduced by deferred liability for taxes.
(3) Nonperforming loans are included in average balances used to determine
rates.
(4) Includes a tax-equivalent adjustment based on a 35% federal income tax
rate. The tax-equivalent adjustment for the three months ended September
30, 1995, was $14.2 million, compared with $9.8 million, $6.1 million, $7.0
million and $6.4 million for the three months ended June 30, 1995, March
31, 1995, December 31, 1994, and September 30, 1994, respectively.
(5) Includes International Banking Facilities deposit balances in domestic
offices and balances of Edge Act and overseas
offices.
37
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
March 31, 1995 December 31, 1994 September 30, 1994
- ---------------------------------------------------------------------------------------------------
Average Average Average Average Average Average
Balance Interest Rate Balance Interest Rate Balance Interest Rate
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 8,602 $ 131.6 6.20% $ 7,823 $106.4 5.40% $ 8,029 $ 97.8 4.83%
16,778 240.8 5.82 16,457 215.2 5.19 15,102 175.3 4.61
5,226 89.3 6.93 5,084 86.5 6.75 5,044 76.6 6.03
758 10.2 5.46 795 10.2 5.09 801 9.5 4.71
174 3.9 9.09 186 4.1 8.75 189 4.3 9.03
1,648 8.7 2.14 1,648 7.8 1.88 1,577 6.5 1.64
- ---------------------------------------------------------------------------------------------------
2,580 22.8 3.58 2,629 22.1 3.34 2,567 20.3 3.14
24,276 577.2 9.94 22,669 485.1 8.77 21,776 459.2 8.65
1,758 31.4 7.24 1,666 31.1 7.40 1,708 21.4 4.97
- ---------------------------------------------------------------------------------------------------
26,034 608.6 9.75 24,335 516.2 8.67 23,484 480.6 8.37
- ---------------------------------------------------------------------------------------------------
59,220 1,093.1 7.49 56,328 946.4 6.67 54,226 850.6 6.22
3,992 4,170 4,073
(731) (692) (695)
7,371 8,733 8,446
- ---------------------------------------------------------------------------------------------------
$69,852 $68,539 $66,050
======= ======= =======
- ---------------------------------------------------------------------------------------------------
$ 7,874 $ 57.3 2.95% $ 7,794 $ 52.6 2.68% $ 8,174 $ 49.8 2.42%
5,607 82.0 5.93 4,847 57.1 4.67 4,721 46.9 3.94
11,051 154.7 5.68 10,188 129.1 5.03 9,509 107.2 4.47
- ---------------------------------------------------------------------------------------------------
24,532 294.0 4.86 22,829 238.8 4.15 22,404 203.9 3.61
16,383 236.1 5.84 14,252 184.8 5.14 13,085 149.6 4.54
8,564 137.4 6.51 9,605 138.2 5.71 8,962 112.8 4.99
2,273 45.9 8.19 2,271 44.4 7.76 2,271 43.5 7.60
- ---------------------------------------------------------------------------------------------------
51,752 713.4 5.59 48,957 606.2 4.91 46,722 509.8 4.33
6,956 7,104 7,005
6,555 7,936 7,897
611 611 611
3,978 3,931 3,815
- ---------------------------------------------------------------------------------------------------
$69,852 $68,539 $66,050
======= ======= =======
$1,093.1 7.49% $946.4 6.67% $850.6 6.22%
713.4 4.89 606.2 4.27 509.8 3.73
- ---------------------------------------------------------------------------------------------------
$ 379.7 2.60% $340.2 2.40% $340.8 2.49%
======== ==== ====== ==== ====== ====
</TABLE>
38
<PAGE>
<TABLE>
<CAPTION>
FIRST CHICAGO CORPORATION AND SUBSIDIARIES
SELECTED STATISTICAL INFORMATION
- ----------------------------------------------------------------------------------------------------------------------
Average Balances/Net Interest Margin/Rates
- ----------------------------------------------------------------------------------------------------------------------
(Nine Months Ended September 30) 1995 1994
- ----------------------------------------------------------------------------------------------------------------------
(Income and rates on tax-equivalent basis) Average Average Average Average
(Dollars in millions) Balance Interest Rate Balance Interest Rate
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Assets
Due from banks--interest-bearing (1)....................... $ 9,284 $ 432.9 6.23% $ 7,853 $ 255.3 4.35%
Federal funds sold and securities under resale agreements.. 16,124 708.6 5.88 13,378 400.0 4.00
Trading account assets..................................... 6,682 330.7 6.62 4,686 193.0 5.51
Investment securities
U.S. government and federal agency....................... 875 38.4 5.87 704 22.5 4.27
States and political subdivisions........................ 167 11.3 9.05 160 10.8 9.02
Other.................................................... 1,648 33.4 2.71 1,641 21.9 1.78
- ----------------------------------------------------------------------------------------------------------------------
Total investment securities.............................. 2,690 83.1 4.13 2,505 55.2 2.95
Loans (2)(3)
Domestic offices......................................... 24,478 1,706.1 9.61 21,195 1,302.4 8.50
Foreign offices.......................................... 1,784 99.0 7.42 1,776 91.9 6.92
- ----------------------------------------------------------------------------------------------------------------------
Total loans................................................ 26,262 1,805.1 9.46 22,971 1,394.3 8.37
- ----------------------------------------------------------------------------------------------------------------------
Total earning assets (4)............................... 61,042 3,360.4 7.36 51,393 2,297.8 5.98
Cash and due from banks--noninterest-bearing............... 3,976 4,184
Allowance for credit losses................................ (715) (699)
Other assets............................................... 9,726 7,794
- ----------------------------------------------------------------------------------------------------------------------
Total assets............................................... $74,029 $62,672
======= =======
- ----------------------------------------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
Deposits--interest-bearing
Savings.................................................. $ 8,329 $ 188.6 3.03% $ 8,097 $ 136.0 2.25%
Time..................................................... 5,642 262.0 6.21 4,635 110.7 3.19
Foreign offices (5)...................................... 12,573 538.7 5.73 9,468 294.0 4.15
- ----------------------------------------------------------------------------------------------------------------------
Total deposits--interest-bearing....................... 26,544 989.3 4.98 22,200 540.7 3.26
Federal funds purchased and securities under repurchase
agreements............................................... 16,118 712.7 5.91 11,636 341.4 3.92
Other funds borrowed....................................... 8,757 401.3 6.13 8,127 275.0 4.52
Long-term debt............................................. 2,272 136.8 8.05 2,250 125.7 7.47
- ----------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities....................... 53,691 2,240.1 5.58 44,213 1,282.8 3.88
Demand deposits............................................ 6,826 7,061
Other liabilities.......................................... 8,829 6,988
Preferred stock............................................ 597 711
Common stockholders' equity................................ 4,086 3,699
- ----------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity............. $74,029 $62,672
======= =======
Interest income/earning assets............................. $3,360.4 7.36% $2,297.8 5.98%
Interest expense/earning assets............................ 2,240.1 4.91 1,282.8 3.34
- ----------------------------------------------------------------------------------------------------------------------
Net interest margin........................................ $1,120.3 2.45% $1,015.0 2.64%
======== ==== ======== ====
</TABLE>
- -------------------------------
(1) Principally balances in overseas offices.
(2) Rates are calculated on average lease-financing receivables balances
reduced by deferred liability for taxes.
(3) Nonperforming loans are included in average balances used to determine
rates.
(4) Includes tax-equivalent adjustments of $30.1 and $17.2 million based on a
35% federal income tax rate for the nine months ended September 30, 1995
and 1994, respectively.
(5) Includes International Banking Facilities deposit balances in domestic
offices and balances of Edge Act and overseas offices.
39
<PAGE>
FIRST CHICAGO CORPORATION AND SUBSIDIARIES
FIVE-QUARTER CONSOLIDATED INCOME STATEMENT
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Sept. 30 June 30 March 31 Dec. 31 Sept. 30
(Dollars in millions, except per share data) 1995 1995 1995 1994 1994
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans............................................. $ 594.5 $ 593.4 $ 604.9 $512.4 $476.9
Interest on bank balances.............................................. 151.2 150.1 131.6 106.4 97.8
Interest on federal funds sold and securities under resale agreements.. 229.1 238.7 240.8 215.2 175.3
Interest on trading account assets..................................... 138.1 102.1 88.7 85.9 76.0
Interest on investment securities (including dividends)................ 23.2 22.9 21.0 19.5 18.2
-------- -------- -------- ------ ------
Total........................................................ 1,136.1 1,107.2 1,087.0 939.4 844.2
- ----------------------------------------------------------------------------------------------------------------------------
INTEREST EXPENSE
Interest on deposits................................................... 353.6 341.7 294.0 238.8 203.9
Interest on federal funds purchased and securities under repurchase
agreements............................................................ 244.7 231.9 236.1 184.8 149.6
Interest on other funds borrowed....................................... 131.9 132.0 137.4 138.2 112.8
Interest on long-term debt............................................. 44.9 46.0 45.9 44.4 43.5
-------- -------- -------- ------ ------
Total........................................................ 775.1 751.6 713.4 606.2 509.8
- ----------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME.................................................... 361.0 355.6 373.6 333.2 334.4
Provision for credit losses............................................ 100.0 70.0 65.0 76.0 55.0
-------- -------- -------- ------ ------
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES.................. 261.0 285.6 308.6 257.2 279.4
- ----------------------------------------------------------------------------------------------------------------------------
NONINTEREST INCOME
Combined trading profits............................................... 78.6 15.8 50.4 12.1 41.6
Equity securities gains................................................ 66.7 59.6 54.9 70.5 20.0
Investment securities gains (losses)................................... - - - 2.3 (2.2)
-------- -------- -------- ------ ------
Market-driven revenue............................................. 145.3 75.4 105.3 84.9 59.4
Credit card fee revenue................................................ 235.9 213.6 191.2 234.8 221.1
Service charges and commissions........................................ 113.9 115.5 107.9 103.6 112.8
Fiduciary and investment management fees............................... 49.7 49.3 51.6 48.9 48.6
Other income........................................................... 14.2 33.9 14.1 16.6 13.2
-------- -------- -------- ------ ------
Total........................................................ 559.0 487.7 470.1 488.8 455.1
- ----------------------------------------------------------------------------------------------------------------------------
NONINTEREST EXPENSE
Salaries and employee benefits......................................... 249.4 229.4 231.8 223.5 225.1
Occupancy expense of premises, net..................................... 41.4 37.9 36.4 34.8 32.0
Equipment rentals, depreciation and maintenance........................ 29.2 32.4 31.4 36.7 35.1
Other expense.......................................................... 182.5 188.0 178.5 187.1 199.2
-------- -------- -------- ------ ------
Total........................................................ 502.5 487.7 478.1 482.1 491.4
- ----------------------------------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES............................................. 317.5 285.6 300.6 263.9 243.1
Applicable income taxes.............................................. 110.3 98.2 105.5 90.5 89.3
-------- -------- -------- ------ ------
NET INCOME............................................................. $ 207.2 $ 187.4 $ 195.1 $173.4 $153.8
======== ======== ======== ====== ======
NET INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS' EQUITY................. $ 197.8 $ 177.4 $ 185.1 $163.3 $143.8
======== ======== ======== ====== ======
- ----------------------------------------------------------------------------------------------------------------------------
EARNINGS PER SHARE
NET INCOME - PRIMARY................................................. $2.18 $1.95 $2.03 $1.76 $1.54
NET INCOME - FULLY DILUTED........................................... $2.12 $1.90 $1.98 $1.72 $1.51
- ----------------------------------------------------------------------------------------------------------------------------
Average number of common and common-equivalent shares (in millions).... 90.6 91.2 91.0 92.9 93.4
Average number of shares, assuming full dilution (in millions)......... 94.5 95.1 94.8 96.7 97.1
Average full-time-equivalent staff..................................... 17,527 17,338 17,304 17,270 17,727
</TABLE>
40
<PAGE>
FIRST CHICAGO CORPORATION AND SUBSIDIARIES
SELECTED STATISTICAL INFORMATION
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
1995 1994
- ----------------------------------------------------------------------------------------------------------------------------------
(Dollars in millions, except per share data) September 30 June 30 March 31 December 31 September 30
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET INTEREST INCOME DATA
Actual
Net interest income--tax-equivalent basis............ $ 375.2 $ 365.4 $ 379.7 $ 340.2 $ 340.8
Average earning assets............................... 63,136 60,772 59,220 56,328 54,226
Net interest margin.................................. 2.36% 2.41% 2.60% 2.40% 2.49%
Adjusted (1)
Net interest income--tax-equivalent basis............ $ 554.8 $ 528.6 $ 513.7 $ 486.5 $ 485.5
Average earning assets............................... 60,367 56,985 53,766 51,562 50,046
Net interest margin.................................. 3.65% 3.72% 3.87% 3.74% 3.85%
- ----------------------------------------------------------------------------------------------------------------------------------
AT QUARTER-END
BALANCE SHEET DATA
Assets................................................. $75,747 $75,328 $72,378 $65,900 $65,747
Loans.................................................. 27,663 26,517 27,018 25,947 23,817
Deposits............................................... 33,235 33,764 32,191 31,666 29,670
Long-term debt......................................... 2,274 2,271 2,272 2,271 2,272
Common stockholders' equity............................ 4,213 4,160 4,057 3,922 3,930
Stockholders' equity................................... 4,704 4,771 4,668 4,533 4,541
- ----------------------------------------------------------------------------------------------------------------------------------
CAPITAL DATA (2)
Common equity/assets ratio............................. 6.1% 6.1% 6.2% 6.6% 6.6%
Regulatory leverage ratio.............................. 6.9 7.0 7.7 7.5 7.8
Risk-based capital
Tier 1 capital ratio................................. 8.4 8.8 8.6 8.8 9.2
Total capital ratio.................................. 12.5 13.1 13.0 13.4 13.9
Tier 1 capital....................................... $ 4,502 $ 4,567 $ 4,460 $ 4,325 $ 4,319
Total capital........................................ 6,685 6,783 6,736 6,566 6,561
- ----------------------------------------------------------------------------------------------------------------------------------
FINANCIAL RATIOS
FOR THE QUARTER ENDED
Net income as a percentage of:
Average stockholders' equity......................... 17.3% 15.9% 17.2% 15.1% 13.8%
Average common stockholders' equity.................. 18.8 17.3 18.9 16.5 15.0
Average total assets................................. 1.08 0.99 1.13 1.00 0.92
Average earning assets............................... 1.30 1.24 1.34 1.22 1.13
Stockholders' equity as a percentage of:
Total assets......................................... 6.2 6.3 6.4 6.9 6.9
Total loans.......................................... 17.0 18.0 17.3 17.5 19.1
Total deposits....................................... 14.2 14.1 14.5 14.3 15.3
Average stockholders' equity as a percentage of:
Average assets....................................... 6.2 6.2 6.6 6.6 6.7
Average loans........................................ 17.8 18.0 17.6 18.7 18.8
Average deposits..................................... 13.7 13.9 14.6 15.2 15.1
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
COMMON STOCK DATA
FOR THE QUARTER ENDED
Market price
High................................................. $68 5/8 $ 61 7/8 $51 3/8 $50 1/4 $52 1/4
Low.................................................. 58 49 15/16 45 42 5/8 45 1/2
At quarter-end....................................... 68 5/8 59 7/8 50 1/8 47 3/4 45 7/8
Price earnings ratio................................... 8.7 8.2 7.1 6.8 6.5
Book value............................................. $47.71 $46.37 $45.16 $43.65 $42.79
Market price/book value................................ 144% 129% 111% 109% 107%
Dividends declared on common stock..................... $0.60 $0.55 $0.55 $0.55 $0.50
- ----------------------------------------------------------------------------------------------------------------------------------
(1) Adjusted to exclude impact of securitization of credit card receivables and the activities of FCCM, the Corporation's
capital markets subsidiary.
(2) Net of investment in FCCM.
</TABLE>
41
<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 September 30, 1995
------------------
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 October 31, 1995.
Class Number of Shares Outstanding
- ------------------------- ----------------------------
Common Stock $5 par value 87,837,309
42
<PAGE>
FORM 10-Q CROSS-REFERENCE INDEX
PART I - FINANCIAL INFORMATION
------------------------------
<TABLE>
<CAPTION>
ITEM 1. Financial Statements
- -----------------------------
Page
----
<S> <C>
Consolidated Balance Sheet --
September 30, 1995 and 1994, and December 31, 1994 27
Consolidated Income Statement --
Three and Nine Months Ended September 30, 1995 and 1994 28
Consolidated Statement of Changes in Stockholders' Equity --
Nine Months Ended September 30, 1995 and 1994 29
Consolidated Statement of Cash Flows --
Nine Months Ended September 30, 1995 and 1994 30
Notes to Consolidated Financial Statements 31-33
Selected Statistical Information 1,
18-20,
34-41
ITEM 2. Management's Discussion and Analysis of Financial
- ----------------------------------------------------------
Condition and Results of Operations 1-26
-----------------------------------
</TABLE>
PART II - OTHER INFORMATION
---------------------------
<TABLE>
<CAPTION>
<S> <C>
ITEM 1. Legal Proceedings 44
- --------------------------
ITEM 2. Changes in Securities 44
- ------------------------------
ITEM 3. Defaults Upon Senior Securities 44
- ----------------------------------------
ITEM 4. Submission of Matters to a Vote of Security Holders 44
- -------------------------------------------------------------
ITEM 5. Other Information 44
- --------------------------
ITEM 6. Exhibits and Reports on Form 8-K 44
- -----------------------------------------
Signatures 45
</TABLE>
43
<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
- ------------------------------------------------------------
First Chicago Corporation held a Special Meeting of Stockholders on
October 20, 1995. A total of 75,589,308 shares were represented in
person or by proxy at the special meeting, or approximately 83.5
percent of the total shares outstanding and entitled to vote.
Stockholders approved and adopted the Agreement and Plan of Merger (the
"Merger Agreement"), dated as of July 11, 1995, as amended, by and
between First Chicago Corporation and NBD Bancorp, Inc. (NBD), a
Delaware corporation, and the consummation of the transactions
contemplated thereby, pursuant to which the Registrant will be merged
with and into NBD upon the terms and subject to the conditions set
forth in the Merger Agreement. Of the total number of outstanding
shares entitled to vote, 73,743,693 (81.468 percent) were voted for;
1,684,403 (1.861 percent) were voted against; and 161,212 (0.178
percent) abstained. There were no broker non-votes.
ITEM 5. Other Information
- --------------------------
None
ITEM 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Exhibit 2 Agreement and Plan of Merger, dated as of July 11, 1995,
between NBD and the Registrant, as amended (incorporated
by reference to Exhibit A to the Joint Proxy Statement-
Prospectus of NBD and the Registrant filed as part of
NBD's Registration Statement No. 33-62713 on Form S-4
Exhibit 12 Statements re computation of ratios
Exhibit 27 Financial Data Schedules
(b) The Registrant filed the following Current Reports on Form 8-K during
the quarter ended September 30, 1995.
Date Item Reported
------- -------------
7/14/95 The Registrant's announcement of common stock dividend
increase and redemption of its Series A Preferred Stock.
7/17/95 The Registrant's earnings for the quarter ended June 30, 1995.
7/19/95 The Registrant's announcement of its planned merger with NBD.
7/21/95 Pro forma financial statements and exhibits related to the
Registrant's planned merger with NBD.
8/15/95 Pro forma financial statements, as of June 30, 1995, related
to the Registrant's planned merger with NBD.
44
<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 November 10, 1995 Richard L. Thomas
----------------------- ------------------------------
Richard L. Thomas
Chairman of the Board
Date November 10, 1995 William J. Roberts
----------------------- ------------------------------
William J. Roberts
Principal Accounting Officer
45
<PAGE>
EXHIBIT INDEX
-------------
Exhibit Number Description of Exhibit Page
- -------------- ---------------------- ----
2 - Agreement and Plan of Merger N/A
12 - Statement re computation of ratios 47
27 - Financial Data Schedules 48
46
<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 7 of Notes to Consolidated Financial Statements on page 33 of the Form
10-Q.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 3,808
<INT-BEARING-DEPOSITS> 9,633
<FED-FUNDS-SOLD> 14,034
<TRADING-ASSETS> 7,911
<INVESTMENTS-HELD-FOR-SALE> 722<F1>
<INVESTMENTS-CARRYING> 536<F1>
<INVESTMENTS-MARKET> 543<F1>
<LOANS> 27,663
<ALLOWANCE> (743)
<TOTAL-ASSETS> 75,747
<DEPOSITS> 33,235
<SHORT-TERM> 25,406
<LIABILITIES-OTHER> 1,964
<LONG-TERM> 2,274
<COMMON> 467
0
491
<OTHER-SE> 3,746<F2>
<TOTAL-LIABILITIES-AND-EQUITY> 75,747
<INTEREST-LOAN> 1,793
<INTEREST-INVEST> 67
<INTEREST-OTHER> 1,141
<INTEREST-TOTAL> 3,330
<INTEREST-DEPOSIT> 989
<INTEREST-EXPENSE> 2,240
<INTEREST-INCOME-NET> 1,090
<LOAN-LOSSES> 235
<SECURITIES-GAINS> 0<F3>
<EXPENSE-OTHER> 1,468<F4>
<INCOME-PRETAX> 904
<INCOME-PRE-EXTRAORDINARY> 590
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 590
<EPS-PRIMARY> 6.16
<EPS-DILUTED> 6.00
<YIELD-ACTUAL> 2.45
<LOANS-NON> 133
<LOANS-PAST> 96
<LOANS-TROUBLED> 2
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 723
<CHARGE-OFFS> 183
<RECOVERIES> 48
<ALLOWANCE-CLOSE> 743
<ALLOWANCE-DOMESTIC> 0<F5>
<ALLOWANCE-FOREIGN> 0<F5>
<ALLOWANCE-UNALLOCATED> 0<F5>
<FN>
<F1> In addition to the investment securities disclosed in this Financial Data
Schedule, the Corporation has investment securities in its venture capital
business. These securities had a carrying value of $878 million as of
September 30, 1995.
<F2> Treasury stock of $282 million is included as a reduction of other
stockholders' equity.
<F3> Investment securities gains/losses do not include the Corporation's equity
securities gains which totalled $181 million.
<F4> Other expenses include: Salaries and Employee benefit expense of $710
million, Occupancy expense of $116 million, Equipment rentals, depreciation
and maintenance expense of $93 million, and other expenses which totalled
$549 million.
<F5> Allowance-Domestic, Allowance-Foreign, and Allowance-Unallocated are only
disclosed on an annual basis in the Corporation's Form 10-K and are
therefore not included in this Financial Data Schedule.
</FN>
</TABLE>
