<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 13
MARKET RISK MANAGEMENT 14
CREDIT RISK MANAGEMENT 20
DERIVATIVE FINANCIAL INSTRUMENTS 23
CAPITAL MANAGEMENT 25
CONSOLIDATED FINANCIAL STATEMENTS 28
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 32
SELECTED STATISTICAL INFORMATION 35
FORM 10-Q 43
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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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June March December September June
(Dollars in millions, except per share data) 1995 1995 1994 1994 1994
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<S> <C> <C> <C> <C> <C>
SELECTED FINANCIAL DATA FOR THE QUARTER
Net interest income.............................................. $ 355.6 $ 373.6 $ 333.2 $ 334.4 $ 332.8
Tax-equivalent adjustment........................................ 9.8 6.1 7.0 6.4 5.9
------- ------- ------- ------- -------
Net interest income--tax-equivalent basis........................ 365.4 379.7 340.2 340.8 338.7
Provision for credit losses...................................... 70.0 65.0 76.0 55.0 43.0
Noninterest income............................................... 487.7 470.1 488.8 455.1 428.8
Noninterest expense.............................................. 487.7 478.1 482.1 491.4 460.6
Net income....................................................... 187.4 195.1 173.4 153.8 168.7
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EARNINGS PER SHARE
Net income - Primary............................................. $ 1.95 $ 2.03 $ 1.76 $ 1.54 $ 1.71
Net income - Fully diluted....................................... 1.90 1.98 1.72 1.51 1.67
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AT QUARTER-END
Assets........................................................... $75,328 $72,378 $65,900 $65,747 $64,089
Loans............................................................ 26,517 27,018 25,947 23,817 23,680
Deposits......................................................... 33,764 32,191 31,666 29,670 28,577
Long-term debt................................................... 2,271 2,272 2,271 2,272 2,269
Common stockholders' equity...................................... 4,160 4,057 3,922 3,930 3,763
Stockholders' equity............................................. 4,771 4,668 4,533 4,541 4,524
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AVERAGE BALANCES
Assets........................................................... $76,076 $69,852 $68,539 $66,050 $60,490
Loans............................................................ 26,145 26,034 24,335 23,484 22,940
Earning assets................................................... 60,772 59,220 56,328 54,226 50,464
Deposits......................................................... 33,962 31,488 29,933 29,409 29,009
Common stockholders' equity...................................... 4,102 3,978 3,931 3,815 3,663
Stockholders' equity............................................. 4,713 4,589 4,542 4,426 4,424
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FINANCIAL RATIOS
Return on stockholders' equity................................... 16.0% 17.2% 15.1% 13.8% 15.3%
Return on common stockholders' equity............................ 17.4 18.9 16.5 15.0 16.5
Return on assets................................................. 0.99 1.13 1.00 0.92 1.12
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CAPITAL DATA (1)
Common-equity-to-assets.......................................... 6.1% 6.2% 6.6% 6.6% 6.5%
Regulatory leverage ratio (2).................................... 7.0 7.7 7.5 7.8 8.0
Risk-based capital (2)
Tier 1 ratio................................................... 8.8 8.6 8.8 9.2 8.9
Total capital ratio............................................ 13.1 13.0 13.4 13.9 13.8
Tier 1 capital................................................. $ 4,567 $ 4,460 $ 4,325 $ 4,319 $ 4,148
Total capital.................................................. 6,783 6,736 6,566 6,561 6,424
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COMMON SHARE AND STOCKHOLDER DATA FOR THE QUARTER ENDED
Market price..................................................... $59 7/8 $50 1/8 $47 3/4 $45 7/8 $48 1/8
Book value....................................................... 46.37 45.16 43.65 42.79 43.40
Dividends declared per common share.............................. 0.55 0.55 0.55 0.50 0.50
Common dividends................................................. 50 49 50 46 43
Preferred dividends (3).......................................... 10 10 10 10 18
Dividend payout ratio............................................ 28.2% 27.1% 31.3% 32.5% 29.2%
Average number of common and common-equivalent
shares (in millions)........................................... 91.2 91.0 92.9 93.4 88.0
Average number of shares, assuming full dilution (in millions)... 95.1 94.8 96.7 97.1 91.8
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</TABLE>
(1) Net of investment in First Chicago Capital Markets, Inc.
(2) June 1994 excludes $150 million of Preferred Stock, Series D, that was
redeemed on July 1, 1994.
(3) Second quarter of 1994 includes a $4.5 million premium related to the
redemption of Preferred Stock, Series D.
1
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BUSINESS SEGMENTS
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Business Segments
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Three Months Ended June 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
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<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net income.......................... $ 91 $ 79 $ 64 $ 72 $ 33 $ 18 $ 188 $ 169
Return on common equity............. 31% 36% 10% 13% N/M N/M 17% 17%
Average assets (presecuritized)
(in billions)..................... $18.6 $15.0 $63.2 $49.2 $1.2 $1.4 $83.0 $65.6
Average common equity (in
billions)........................ 1.2 0.8 2.4 1.9 0.5 1.0 4.1 3.7
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</TABLE>
<TABLE>
<CAPTION>
Six Months Ended June 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
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<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net income....................... $ 183 $ 168 $ 145 $ 95 $ 55 $100 $ 383 $ 363
Return on common equity.......... 32% 40% 12% 8% N/M N/M 18% 18%
Average assets (presecuritized)
(in billions).................. $18.1 $15.2 $60.2 $49.4 $1.1 $1.4 $79.4 $66.0
Average common equity (in
billions)..................... 1.1 0.8 2.3 1.9 0.6 0.9 4.0 3.6
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</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 36.
2
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CONSUMER BANKING*
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Three Months Ended June 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.. $ 255 $ 223 $101 $ 88
Provision for credit losses............... 136 114 6 7
Noninterest income........................ 123 107 53 47
Noninterest expense....................... 123 100 122 117
Net income................................ $ 75 $ 71 $ 16 $ 8
Return on common equity................... 42% 53% 13% 8%
Efficiency ratio (2)...................... 32% 30% 79% 87%
Average assets (in billions).............. $12.4 $10.1 $6.2 $4.9
Average loans (in billions)............... 12.4 10.1 5.2 4.3
Average common equity (in billions)....... 0.7 0.5 0.5 0.3
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</TABLE>
<TABLE>
<CAPTION>
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Six Months Ended June 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.. $ 498 $ 456 $204 $166
Provision for credit losses............... 251 208 9 11
Noninterest income........................ 234 203 102 94
Noninterest expense....................... 240 197 242 231
Net income................................ $ 149 $ 156 $ 34 $ 12
Return on common equity................... 44% 61% 14% 6%
Efficiency ratio (2)...................... 33% 30% 79% 89%
Average assets (in billions).............. $12.0 $10.0 $6.1 $5.2
Average loans (in billions)............... 12.1 10.0 5.1 4.3
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 $18 million for the second quarter and $33 million for the
first six 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
first half of 1995, Consumer Banking contributed $183 million in earnings, or
about half of the Corporation's total. Earnings from this segment were up 9
percent from the first six months of 1994.
CREDIT CARD
This business segment continued to be the largest single contributor to the
Corporation's earnings. Net income was $75 million for the second quarter and
$149 million year-to-date. Return on equity for the first six months of 1995
exceeded 44 percent.
Total average managed credit card receivables (including the Chicago card
accounts) for the second quarter increased 21 percent from 1994. Revenue growth
was more modest primarily due to pricing compression. Provision for credit
losses increased in line with the receivables growth. The significant rise in
expenses reflects the costs of major solicitation initiatives in 1995.
3
<PAGE>
COMMUNITY BANKING
For the first half of 1995, Community Banking's earnings more than doubled,
reaching $34 million for a 14 percent return on common equity. This compares
with $12 million and 6 percent, respectively, a year ago.
Improved spread income was the main reason for the increased profitability. The
addition of consumer business from Lake Shore Bancorp., Inc. at midyear 1994 was
a key factor in this favorable comparison. Better operating efficiency was also
an important contributor to earnings growth.
<TABLE>
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CORPORATE BANKING
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Three Months Ended June 30
Corporate and Middle Market
Institutional Banking Banking (ANC)
(Dollars in millions, --------------------- ------------------
except where noted) 1995 1994 1995 1994
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<S> <C> <C> <C> <C>
Net interest income-tax-equivalent basis.. $ 90 $ 99 $ 73 $ 59
Provision for credit losses............... - (21) 7 7
Noninterest income........................ 170 140 17 22
Noninterest expense....................... 193 172 49 46
Net income................................ $ 43 $ 54 $ 21 $ 18
Return on common equity................... 8% 12% 16% 21%
Efficiency ratio (1)...................... 74% 72% 54% 56%
Average assets (in billions).............. $57.1 $43.7 $ 6.1 $ 5.5
Average loans (in billions)............... 10.4 9.6 5.0 4.0
Average common equity (in billions)....... 1.9 1.6 0.5 0.3
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Six Months Ended June 30
Corporate and Middle Market
Institutional Banking Banking (ANC)
(Dollars in millions, --------------------- ------------------
except where noted) 1995 1994 1995 1994
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Net interest income-tax-equivalent basis.. $ 232 $ 196 $ 146 $ 116
Provision for credit losses............... 4 (22) 12 13
Noninterest income........................ 306 233 35 43
Noninterest expense....................... 381 348 96 92
Net income................................ $ 100 $ 61 $ 45 $ 34
Return on common equity................... 10% 6% 18% 20%
Efficiency ratio (1)...................... 71% 81% 53% 58%
Average assets (in billions).............. $54.1 $43.9 $ 6.1 $ 5.5
Average loans (in billions)............... 10.4 9.4 4.9 4.0
Average common equity (in billions)....... 1.8 1.6 0.5 0.3
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</TABLE>
(1) Noninterest expense as a percentage of total revenue (net interest income
and noninterest income).
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 $64 million in the second quarter of 1995
and $145 million in the first half.
4
<PAGE>
CORPORATE AND INSTITUTIONAL BANKING
Profitability in Corporate and Institutional Banking for the second quarter
declined from a year ago when results were bolstered by $32 million in interest
income and recoveries related to Brazilian debt. For the six months, net income
increased significantly--from $61 million to $100 million--as trading activities
rebounded from a weak performance in 1994.
<TABLE>
<CAPTION>
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TOTAL REVENUE Three Months Ended Six Months Ended
June 30 June 30
(In millions) 1995 1994 1995 1994
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<S> <C> <C> <C> <C>
Trading........................... $ 38 $ 42 $113 $ 44
Servicing......................... 111 92 214 186
Lending........................... 46 59 94 102
Financing......................... 46 31 83 69
Other............................. 19 15 34 28
---- ---- ---- ----
Total.......................... $260 $239 $538 $429
==== ==== ==== ====
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TRADING REVENUE Three Months Ended Six Months Ended
June 30 June 30
(In millions) 1995 1994 1995 1994
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Foreign exchange and derivatives.. $(6) $12 $ 24 $ 16
Fixed income and derivatives...... 13 20 33 34
Emerging markets.................. 7 (1) 6 (51)
Funding and arbitrage............. 11 8 20 19
Other trading..................... 13 3 30 26
--- --- ---- ----
Total.......................... $38 $42 $113 $ 44
=== === ==== ====
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</TABLE>
Revenue from trading activities (trading profits and related net interest
income) was $38 million in the second quarter of 1995 and $113 million for the
first half. This substantial improvement from the first six months of 1994 was
concentrated in the emerging markets segment, which posted modest gains compared
with a loss of $51 million a year earlier.
Servicing revenue posted healthy increases in both the quarter and year-to-date
periods, largely from cash management operations. Revenue from financing
activities reflected $21 million in equity gains for the first six months of
1995, compared with $15 million in 1994's first half.
Average loans and leases in Corporate and Institutional Banking for the first
half of 1995 increased more than 10 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 $45
million for the first six months of 1995, and return on equity was 18 percent.
Net income for 1994 year-to-date was $34 million. This 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 the second half of 1994.
5
<PAGE>
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 $34 million in the second
quarter and $77 million for the first half of 1995, compared with $121 million
in 1994's first half. For the first six months of 1995, net income from venture
capital was $42 million for a return on equity of 30 percent.
Net gains from the management of assets held for accelerated disposition totaled
$25 million in the second quarter of 1995, and $33 million for the first six
months. First-quarter 1994 results included a gain of $35 million from the sale
of an interest in an investment management business.
No significant corporate expenses were included in other activities in 1995.
Special charges of $43 million were incurred in the first half of 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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Average Full-Time-Equivalent 2nd Qtr. 1st Qtr. 4th Qtr. 3rd Qtr. 2nd Qtr.
Staff 1995 1995 1994 1994 1994
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<S> <C> <C> <C> <C> <C>
Corporate and Institutional............ 6,216 6,276 6,342 6,402 6,340
Community Banking...................... 4,040 4,071 4,283 4,694 4,609
Credit Card............................ 3,329 3,212 3,007 2,922 2,821
Middle Market.......................... 2,109 2,084 2,156 2,143 2,069
Corporate Support/Other (1)............ 1,644 1,661 1,482 1,566 1,527
------ ------ ------ ------ ------
First Chicago Corporation............ 17,338 17,304 17,270 17,727 17,366
====== ====== ====== ====== ======
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</TABLE>
(1) Increased staffing in the first quarter of 1995 represents the shifting of
certain support services from Community Banking and the transfer of the
investment management business from Middle Market Banking.
6
<PAGE>
EARNINGS ANALYSIS
SUMMARY
The Corporation reported net income of $187.4 million, or $1.90 per share, for
the second quarter of 1995, up from $168.7 million, or $1.67 per share, in the
second quarter of 1994. Excluding the results from the Corporation's venture
capital operations, net income was $170.5 million, or $1.74 per share, compared
with $172.3 million, or $1.73 per share, a year ago.
<TABLE>
<CAPTION>
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Three Months Ended Six Months Ended
(Dollars in millions, June 30 June 30
except per share data) 1995 1994 1995 1994
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<S> <C> <C> <C> <C>
Net interest income--tax-equivalent basis...... $365.4 $338.7 $745.1 $674.2
Provision for credit losses.................... 70.0 43.0 135.0 93.0
Noninterest income............................. 487.7 428.8 957.8 930.7
Noninterest expense............................ 487.7 460.6 965.8 945.1
Net income..................................... 187.4 168.7 382.5 362.5
Common Share Data
PRIMARY
Net income................................... $ 1.95 $ 1.71 $ 3.98 $ 3.76
Average common and common-equivalent shares
(in millions)............................... 91.2 88.0 91.1 87.9
FULLY DILUTED
Net income................................... $ 1.90 $ 1.67 $ 3.88 $ 3.67
Average shares, assuming full dilution
(in millions)............................... 95.1 91.8 95.0 91.7
Return on assets............................... 0.99% 1.12% 1.06% 1.20%
Return on common stockholders' equity.......... 17.4 16.5 18.1 18.3
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</TABLE>
Net income for the 1995 second quarter was up 11 percent from a year ago.
Quarterly performance highlights included:
Average managed credit card receivables increased 21 percent to $12.7 billion,
generating increased spread and fee revenues.
Average loans in the Corporation's middle market business increased 23 percent
to $5.0 billion; part of this increase can be attributed to the acquisition of
Lake Shore Bancorp., Inc., completed in July 1994.
Market-driven revenues, which include combined trading profits and equity
securities gains, were $75 million, up 83 percent from a year ago.
The provision for credit losses was $70 million, up from $43 million a year ago.
Growth in credit card receivables accounted for part of the increase. In
addition, the year ago provision was favorably affected by Brazilian debt
recoveries.
Return on common stockholders' equity was 17 percent, marking the eleventh
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 650,000 shares of its common stock
during the second quarter of 1995. In July 1995, the Board of Directors
authorized an increase in the current common stock buyback program from 7
million to 12 million shares. The purpose of this program is to repurchase
shares to meet obligations under the Corporation's employee benefit plans and to
manage the overall capital position of the Corporation. As of June 30, 1995,
5.9 million shares had been repurchased under the program.
The Corporation's quarterly common stock dividend, next payable on October 1,
1995, was increased 9 percent in July 1995, to 60 cents per share from 55 cents
per share.
On July 11, 1995, the Corporation and NBD Bancorp, Inc. signed a definitive
agreement providing for a merger of equals. For more information on this
agreement, see Note 8 on page 34.
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>
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Three Months Ended Six Months Ended
June 30 June 30
(Dollars in millions) 1995 1994 1995 1994
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net interest income--tax-equivalent basis.. $ 365.4 $ 338.7 $ 745.1 $ 674.2
Average earning assets..................... $60,772 $50,464 $59,996 $49,976
Net interest margin........................ 2.41% 2.69% 2.50% 2.72%
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</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 $6.9
billion in the second quarter of 1995, compared with $5.1 billion in the second
quarter of 1994. The effect of credit card securitization transactions on the
Corporation's financial statements is summarized on page 36. 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 Six Months Ended
June 30 June 30
(Dollars in millions) 1995 1994 1995 1994
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Adjusted net interest income--
tax equivalent basis............ $ 528.6 $ 463.7 $1,042.3 $ 918.9
Adjusted average earnings assets.. $56,985 $47,382 $ 55,376 $47,193
Adjusted net interest margin...... 3.72% 3.93% 3.80% 3.93%
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</TABLE>
On an adjusted basis, net interest margin for the second quarter of 1995 was
3.72 percent. This compares with 3.93 percent in the year ago quarter, which
included a 12-basis-point positive effect from the Brazilian debt restructuring.
The decline in adjusted net interest margin was due primarily to reduced credit
card spreads resulting from competitive pricing pressures. An increase in the
average volume of lower-margin trading and arbitrage assets also contributed to
the lower net interest margin.
PROVISION FOR CREDIT LOSSES
The provision for credit losses was $70 million, which included $62 million for
the consumer portfolios and $8 million for commercial credits. In the year ago
quarter, the provision was $43 million, which included $57 million for the
consumer portfolios and a negative provision of $14 million for commercial
credits. This negative provision reflected the effect of $18 million in
Brazilian debt recoveries.
9
<PAGE>
The change in the allowance for credit losses is presented in the following
table.
<TABLE>
<CAPTION>
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Three Months Ended Six Months Ended
June 30 June 30
(Dollars in millions) 1995 1994 1995 1994
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Allowance for credit losses
--beginning of period...................... $ 754 $ 710 $ 723 $ 683
Provision for credit losses.................. 70 43 135 93
Net charge-offs.............................. (45) (34) (89) (67)
Other, transfers related to securitized
receivables................................. (90) (38) (80) (28)
----- ------ ----- -----
Net change in allowance for credit losses.... (65) (29) (34) (2)
----- ------ ----- -----
Allowance for credit losses
-- end of period........................... $ 689 $ 681 $ 689 $ 681
===== ====== ===== =====
-- as a percentage of loans outstanding.... 2.6% 2.9% 2.6% 2.9%
-- as a percentage of nonperforming loans.. 538% 454% 538% 454%
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</TABLE>
Details of the Corporation's credit risk management and performance during the
six months ended June 30, 1995, are presented in the Credit Risk Management
section, beginning on page 20.
10
<PAGE>
NONINTEREST INCOME
The following table provides a breakdown of the components of noninterest income
for the second quarter and the first six months of 1995 as compared to a year
ago.
<TABLE>
<CAPTION>
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Three Months Ended Six Months Ended
June 30 June 30
(In millions) 1995 1994 1995 1994
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Combined trading account profits.......... $ 15.8 $ 36.7 $ 66.2 $ 12.0
Equity securities gains................... 59.6 3.9 114.5 138.1
Investment securities gains............... - 0.6 - 1.1
------ ------ ------ ------
Market-driven revenue................... 75.4 41.2 180.7 151.2
Credit card fee revenue................... 213.6 193.9 404.8 376.2
Service charges and commissions........... 115.5 104.2 223.4 205.5
Fiduciary and investment management fees.. 49.3 49.3 100.9 101.7
Net gains from accelerated disposition
portfolio activities.................... 24.8 21.5 32.5 31.5
Other..................................... 9.1 18.7 15.5 64.6
------ ------ ------ ------
Total................................... $487.7 $428.8 $957.8 $930.7
====== ====== ====== ======
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</TABLE>
Market-driven revenues for the second quarter of 1995 increased to $75.4 million
from $41.2 million for the same period in 1994.
Combined trading activities generated profits of $15.8 million, compared with
$36.7 million a year ago. The decrease was due in part to lower customer demand
in both the foreign exchange and derivative trading businesses. For more
information, see the line-of-business discussion related to trading results, on
page 5.
Equity securities gains totaled $59.6 million, compared with $3.9 million a year
ago. The following table presents a breakdown of securities gains from venture
capital, corporate finance and debt restructuring activities.
<TABLE>
<CAPTION>
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Three Months Ended Six Months Ended
June 30 June 30
(In millions) 1995 1994 1995 1994
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Venture capital........................... $33.9 $2.4 $ 77.1 $121.0
Corporate finance......................... 25.6 1.5 37.3 16.6
Debt restructuring........................ 0.1 - 0.1 0.5
----- ---- ------ ------
Total equity securities gains........... $59.6 $3.9 $114.5 $138.1
===== ==== ====== ======
- ------------------------------------------------------------------------------------
</TABLE>
Approximately 65 percent of the venture capital securities gains in the first
six months of 1994 were related to the Corporation's investment in NEXTEL
Communications, Inc. For additional information on the Corporation's venture
capital activities, see page 19.
The Corporation renewed its agreement with United Airlines during the first
quarter of 1995, extending their partnership in First Card's successful Mileage
Plus credit card program. 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.
11
<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 second
quarter of 1995 was up 24 percent from the year ago period. This increase
reflects both continued growth in credit card receivables and increased
transaction volume.
Service charges and commissions in the second quarter of 1995 rose 11 percent
from the year-earlier period to $115.5 million due primarily to growth in both
deposit and syndication management fees.
Gains from transactions related to assets in the accelerated disposition
portfolio totaled $24.8 million in the second quarter of 1995, compared with
$21.5 million a year ago.
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 $487.7 million for the second quarter of 1995, compared
with $460.6 million a year ago. Adjusted for the change in recognition of
Mileage Plus payments discussed on page 11, operating expense was up 10 percent
from a year ago.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
Three Months Ended Six Months Ended
June 30 June 30
(In millions) 1995 1994 1995 1994
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Salaries and benefits................ $229.4 $212.9 $461.2 $420.3
Occupancy expense of premises, net... 37.9 35.7 74.3 70.5
Equipment rentals, depreciation and
maintenance......................... 32.4 32.3 63.8 85.6
Amortization of intangible assets.... 15.3 17.0 30.6 35.2
Deposit insurance expense............ 10.7 10.8 21.3 21.5
Other................................ 162.0 151.9 314.6 312.0
------ ------ ------ ------
Total.......................... $487.7 $460.6 $965.8 $945.1
====== ====== ====== ======
- ---------------------------------------------------------------------------------
</TABLE>
In the second quarter of 1995, total salaries and benefits increased 8 percent
from a year ago. The increase was due to normal salary increases and higher
staff levels in selected business areas as well as increased incentive
compensation expense accruals.
Equipment costs in the second quarter of 1995 were essentially unchanged from a
year ago. 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 first quarter of 1994, most purchases of
personal computer equipment were expensed. Purchases of such equipment prior to
that time were capitalized and depreciated.
Adjusted for the change in the classification of Mileage Plus payments, much of
the increase in other operating expense was related to the Corporation's
continued investment in the credit card business.
12
<PAGE>
<TABLE>
<CAPTION>
APPLICABLE INCOME TAXES
- -------------------------------------------------------------------
Three Months Ended Six Months Ended
June 30 June 30
(Dollars in millions) 1995 1994 1995 1994
- -------------------------------------------------------------------
<S> <C> <C> <C> <C>
Income before income taxes.. $285.6 $258.0 $586.2 $556.0
Applicable income taxes..... 98.2 89.3 203.7 193.5
Effective tax rate.......... 34.4% 34.6% 34.7% 34.8%
- -------------------------------------------------------------------
</TABLE>
The effective tax rate in the second quarter of 1995 included benefits from the
favorable effect of tax-exempt income and the effect of a decrease in the
effective state income tax rate. The effective tax rate in the second quarter
of 1994 reflected the effect of a favorable tax ruling. Tax expense for the
first six 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 six months of 1994 included a one-time tax benefit for the first
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 31, 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 the most 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 second 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 35 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 June 30, 1995, compared with $6.1 billion at year-
end 1994 and $5.6 billion at June 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.
13
<PAGE>
The following table shows the Corporation's mix of funding sources.
DEPOSITS AND OTHER PURCHASED FUNDS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
June 30 March 31 Dec. 31 Sept. 30 June 30
(In millions) 1995 1995 1994 1994 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Domestic offices
Demand......................... $ 6,941 $ 6,791 $ 7,647 $ 7,217 $ 7,009
Savings........................ 7,442 7,564 7,448 7,426 7,401
Time
Under $100,000............... 2,528 2,529 2,548 2,480 2,260
$100,000 and over............ 3,153 3,265 2,601 2,122 2,061
Foreign offices
Banks in foreign countries..... 3,495 3,819 4,836 4,009 3,482
Foreign governments and
official institutions........ 1,489 1,387 1,469 1,498 1,355
Other time and savings......... 8,521 6,731 4,847 4,384 4,700
Other demand................... 195 105 270 534 309
------- ------- ------- ------- -------
Total deposits.......... 33,764 32,191 31,666 29,670 28,577
- --------------------------------------------------------------------------------
Federal funds purchased and
securities under repurchase
agreements..................... 15,710 14,595 13,026 12,303 12,208
Commercial paper................. 494 690 147 307 103
Other funds borrowed............. 7,312 7,445 7,518 8,752 7,948
Long-term debt................... 2,271 2,272 2,271 2,272 2,269
------- ------- ------- ------- -------
Total other purchased funds.. 25,787 25,002 22,962 23,634 22,528
------- ------- ------- ------- -------
Total........................ $59,551 $57,193 $54,628 $53,304 $51,105
======= ======= ======= ======= =======
- --------------------------------------------------------------------------------
</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 its 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.
14
<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 second quarter of 1995 as well as for the
preceding four quarters, and the actual trading revenue for each quarter (in
millions).
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
Daily Value at Risk June 30 March 31 Dec. 31 Sept. 30 June 30
1995 1995 1994 1994 1994
- --------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Average.............. $ 34 $ 31 $ 42 $ 44 $ 41
Maximum.............. 45 44 47 53 46
Minimum.............. 27 24 38 36 34
- --------------------------------------------------------------------
- --------------------------------------------------------------------
June 30 March 31 Dec. 31 Sept. 30 June 30
Quarter Ended 1995 1995 1994 1994 1994
- --------------------------------------------------------------------
Trading revenue* $ 38 $ 75 $ 30 $ 56 $ 42
- --------------------------------------------------------------------
</TABLE>
*Includes trading profits and related net interest income.
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 risk.
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 change in rates of
100 basis points would affect annual pretax earnings by approximately $11
million.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
Quarter Ended June 30 March 31 Dec. 31 Sept. 30 June 30
(Dollars in millions) 1995 1995 1994 1994 1994
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Adjusted net interest income-
tax-equivalent basis........... $528.6 $513.7 $486.5 $485.5 $463.7
- -----------------------------------------------------------------------------------
Adjusted net interest margin.... 3.72% 3.87% 3.74% 3.85% 3.93%
- -----------------------------------------------------------------------------------
</TABLE>
15
<PAGE>
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).
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 June
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.
16
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
INTEREST RATE SENSITIVITY
- ------------------------------------------------------------------------------------------------
June 30, 1995 0-90 91-180 181-365 1-5 Beyond
(Dollars in millions) days days days years 5 years Total
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------
Loans................................ $22,825 $ 1,467 $ 1,258 $2,046 $ 5,136 $32,732
Investment securities................ 385 359 114 1,723 271 2,852
Other earning assets................. 22,911 108 66 7 274 23,366
Nonearning assets.................... 6,239 7 -- 148 427 6,821
------- ------- -------- ------ ------- -------
Total domestic assets............. $52,360 $ 1,941 $ 1,438 $3,924 $ 6,108 $65,771
- ------------------------------------------------------------------------------------------------
Deposits............................. $13,409 $ 1,899 $ 1,178 $1,205 $ 4,102 $21,793
Other interest-bearing liabilities... 27,460 405 1,216 3,260 1,516 33,857
Noninterest-bearing liabilities...... 4,284 5 -- 177 884 5,350
Equity............................... 311 -- -- 100 4,360 4,771
------- ------- -------- ------ ------- -------
Total domestic liabilities
and equity...................... $45,464 $ 2,309 $ 2,394 $4,742 $10,862 $65,771
- ------------------------------------------------------------------------------------------------
Balance sheet sensitivity gap........ $ 6,896 $ (368) $ (956) $ (818) $(4,754) --
- ------------------------------------------------------------------------------------------------
Cumulative gap as % of
domestic assets.................... 10.5% 9.9% 8.5% 7.2% -- --
- ------------------------------------------------------------------------------------------------
Effect of off-balance-sheet ALM
derivative transactions:
Specific transactions.............. $(3,268) $ 140 $ 1,035 $ 895 $ 1,198 --
Specific asset or liability pools.. (3,261) 263 855 2,061 82 --
- ------------------------------------------------------------------------------------------------
Interest rate sensitivity gap........ $ 367 $ 35 $ 934 $2,138 $(3,474) --
- ------------------------------------------------------------------------------------------------
Cumulative gap....................... $ 367 $ 402 $ 1,336 $3,474 -- --
- ------------------------------------------------------------------------------------------------
Cumulative gap as % of
domestic assets.................... 0.6% 0.6% 2.0% 5.3% -- --
- ------------------------------------------------------------------------------------------------
</TABLE>
Access to the derivatives market is an important element in the Corporation's
ability to maintain its gap position within policy guidelines. As of June 30,
1995, the Corporation had a total of $7.5 billion in ALM interest rate swaps,
including $2.5 billion of ALM interest rate swaps against specific transactions
and $5.0 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.
17
<PAGE>
<TABLE>
<CAPTION>
ASSET AND LIABILITY MANAGEMENT SWAPS
- ---------------------------------------------------------------------------------------------------------
June 30, 1995
Receive Fixed Pay Fixed Basis
(Notional amounts in millions) Pay Floating Receive Floating Swaps Total
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Swaps associated with: Specific Pool Specific Pool Pool
-------- ------ -------- ---- ----
Loans........................... $ - $1,067 $29 $ - $ - $1,096
Securitized credit card
receivables.................... - 1,025 - - - 1,025
Deposits........................ 465 2,700 - - - 3,165
Other funds borrowed............ 791 - - - 150 941
Long-term debt.................. 1,238 - - - - 1,238
------ ------ --- --- ---- ------
Total......................... $2,494 $4,792 $29 $ - $150 $7,465
====== ====== === === ==== ======
- ---------------------------------------------------------------------------------------------------------
</TABLE>
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 June 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........ $1,115 $2,558 $1,764 $ 432 $ 109 $1,308 $7,286
Weighted average:
Receive rate........ 5.57% 6.95% 6.43% 6.59% 8.13% 7.25% 6.66%
Pay rate............ 6.24% 6.29% 6.33% 6.35% 6.75% 6.42% 6.32%
Pay fixed swaps
Notional amount........ $ - $ 19 $ - $ - $ - $ 10 $ 29
Weighted average:
Receive rate........ - 6.27% - - - 6.15% 6.23%
Pay rate............ - 7.21% - - - 5.06% 6.47%
Basis swaps
Notional amount........ $ 100 $ 50 $ - $ - $ - $ - $ 150
Weighted average:
Receive rate........ 6.06% 6.41% - - - - 6.18%
Pay rate............ 6.28% 5.96% - - - - 6.17%
- ---------------------------------------------------------------------------------------------------------
Total notional amount...... $1,215 $2,627 $1,764 $ 432 $ 109 $1,318 $7,465
- ---------------------------------------------------------------------------------------------------------
</TABLE>
18
<PAGE>
VENTURE CAPITAL ACTIVITIES
The Corporation's portfolio of venture capital investments is composed of
publicly traded equity securities held directly, publicly traded equity
securities held indirectly, and investments in private companies. Net income
attributable to the venture capital business--revenues less the portfolio's
funding costs and other expenses--was $16.9 million, or $0.16 per share, for the
1995 second quarter, compared with a net loss of $3.6 million, or $0.06 per
share, a year ago.
<TABLE>
<CAPTION>
Venture Capital Portfolio
- ------------------------------------------------------------------------------
June 30, 1995 Investments Investments
(In millions) Held Directly Held Indirectly Total
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Publicly traded equity investments
Gross value...................... $435 $395 $ 830
Discount......................... (18) (97) (115)
---- ---- ------
Fair value.................... $417 $298 715
==== ====
Investments in private companies.... 782
------
Total............................... $1,497
======
- ------------------------------------------------------------------------------
</TABLE>
Fair value accounting is used for this portfolio, which has significantly
increased the volatility of the Corporation's reported earnings. However, the
Corporation has instituted a program intended to reduce volatility relative to
expected returns through the use of equity derivatives, including options, and
the sale of investments. As an example, during the first quarter of 1994, the
Corporation issued Debt Exchangeable for Common Stock (DECS) related to 7.475
million shares of its holdings in NEXTEL Communications, Inc. The DECS
transaction limits the Corporation's downside risk on this investment to the
$271 million DECS proceeds and, at the same time, allows the Corporation to
share in potential market appreciation. As of June 30, 1995, 72 percent of the
Corporation's $715 million in publicly traded investments was hedged under this
program. Management intends to continue to use these and other techniques to
hedge the price risk inherent in this portfolio.
The following table provides fair value and sale information on the portfolio
for the first six months of 1995.
<TABLE>
<CAPTION>
Venture Capital Portfolio Activity
- --------------------------------------------------------------------------
Publicly
Traded Private
(In millions) Companies Companies Total
- --------------------------------------------------------------------------
<S> <C> <C> <C>
Fair value--December 31, 1994............. $ 848 $731 $1,579
Additional investments.................... 46 72 118
Appreciation recorded as equity
securities gains (1)..................... 96 19 115
Sales proceeds (1)........................ (109) (66) (175)
Other (2)................................. (166) 26 (140)
----- ---- ------
Fair value--June 30, 1995 (3)............. $ 715 $782 $1,497
===== ==== ======
Unrealized appreciation at June 30, 1995.. $ 529 $ 13 $ 542
===== ==== ======
- --------------------------------------------------------------------------
</TABLE>
(1) Net of transaction costs.
(2) Includes principal repayments, fund distributions and sales, and certain
reclassifications.
(3) Publicly traded amount includes net unrealized gains of $163 million related
to hedging instruments used to reduce the earnings volatility of the venture
capital portfolio.
In addition to the $1.5 billion of investments in the venture capital portfolio,
unfunded commitments totaled $122 million at June 30, 1995.
19
<PAGE>
CREDIT RISK MANAGEMENT
<TABLE>
<CAPTION>
Summary
- -------------------------------------------------------------------------------------
Selected Statistical Information
June 30 March 31 Dec. 31 Sept. 30 June 30
(Dollars in millions) 1995 1995 1994 1994 1994
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
At period-end:
Loans outstanding............... $26,517 $27,018 $25,947 $23,817 $23,680
Nonperforming loans............. 128 122 130 154 150
Other real estate, net.......... 8 8 28 23 31
Nonperforming assets............ 136 130 158 177 181
Allowance for credit losses..... 689 754 723 683 681
Nonperforming assets/loans
outstanding and other
real estate, net............... 0.5% 0.5% 0.6% 0.7% 0.8%
Allowance for credit losses/
nonperforming loans............ 538 618 556 444 454
For the quarter ended:
Average loans outstanding....... $26,145 $26,034 $24,335 $23,484 $22,940
Net charge-offs................. 45 44 46 38 34
Net charge-offs/average loans... 0.7% 0.7% 0.7% 0.6% 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 June 30 March 31 Dec. 31 Sept. 30 June 30
(In millions) 1995 1995 1994 1994 1994
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Commercial Risk
Domestic office
Commercial.............. $ 8,506 $ 8,814 $ 7,806 $ 7,488 $ 7,148
Commercial real estate.. 2,449 2,560 2,496 2,391 2,390
Other................... 4,120 3,624 3,896 3,572 3,657
------- ------- ------- ------- -------
Total domestic........ 15,075 14,998 14,198 13,451 13,195
Foreign office............ 2,138 1,866 1,832 2,020 2,153
------- ------- ------- ------- -------
Total commercial.. 17,213 16,864 16,030 15,471 15,348
------- ------- ------- ------- -------
Consumer Risk
Credit cards.............. 5,505 6,463 6,337 5,000 5,356
Secured by real estate
Mortgage................ 1,711 1,662 1,581 1,552 1,425
Home equity............. 815 815 832 836 803
Other..................... 1,273 1,214 1,167 958 748
------- ------- ------- ------- -------
Total consumer.... 9,304 10,154 9,917 8,346 8,332
------- ------- ------- ------- -------
Total............. $26,517 $27,018 $25,947 $23,817 $23,680
======= ======= ======= ======= =======
- ---------------------------------------------------------------------------
</TABLE>
20
<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 Six Months Ended
June 30, 1995 June 30, 1995
----------------------------- -----------------------------
(Dollars in millions) Commercial Consumer Total Commercial Consumer Total
- --------------------------------------------------------------------------------- -----------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance--beginning of period...................... $529 $225 $754 $516 $207 $723
Provision for credit losses....................... 8 62 70 15 120 135
Net (charge-offs)/recoveries...................... -- (45) (45) 6 (95) (89)
Other:
- - Transfers related to securitized receivables.... -- (90) (90) -- (80) (80)
---- ---- ---- ---- ---- ----
Balance--end of period............................ $537 $152 $689 $537 $152 $689
==== ==== ==== ==== ==== ====
Allowance as a percentage of loans outstanding.... 3.1% 1.6% 2.6% 3.1% 1.6% 2.6%
Allowance as a percentage of nonperforming loans.. 420% -- 538% 420% -- 538%
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
A reserve is maintained for securitized credit card receivables that is not
included in the allowance for credit losses. This reserve totaled $319 million
at June 30, 1995, compared with $255 million at year-end 1994 and $234 million a
year ago.
21
<PAGE>
NONPERFORMING ASSETS
The following table shows the trend in nonperforming assets, including the
breakdown by significant portfolio segment.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
Nonperforming Assets June 30 March 31 Dec. 31 Sept. 30 June 30
(Dollars in millions) 1995 1995 1994 1994 1994
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Nonaccrual loans...................... $ 124 $ 118 $ 126 $ 150 $ 146
Accrual renegotiated loans............ 4 4 4 4 4
----- ----- ----- ----- -----
Total nonperforming loans........ $ 128 $ 122 $ 130 $ 154 $ 150
===== ===== ===== ===== =====
Nonperforming Loans
Commercial real estate.............. $ 55 $ 84 $ 68 $ 79 $ 72
Troubled-country debtor............. 1 1 1 1 1
Other............................... 72 37 61 74 77
----- ----- ----- ----- -----
Total nonperforming loans........ 128 122 130 154 150
----- ----- ----- ----- -----
Other real estate, net................ 8 8 28 23 31
----- ----- ----- ----- -----
Total nonperforming assets....... $ 136 $ 130 $ 158 $ 177 $ 181
===== ===== ===== ===== =====
Nonperforming assets as a percentage
of loans outstanding and other
real estate, net.................... 0.5% 0.5% 0.6% 0.7% 0.8%
- -----------------------------------------------------------------------------------------
</TABLE>
Loans 90 days or more past due and still accruing interest amounted to $63
million at June 30, 1995, compared with $89 million at December 31, 1994, and
$54 million at June 30, 1994.
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 $9.3 billion at June 30, 1995, up 12 percent from $8.3 billion a year
ago. Including securitized credit card receivables, these loans totaled $17.3
billion at June 30, 1995, up 24 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 $13.5 billion at June 30,
1995, up 23 percent from a year earlier.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
Consumer Loans
June 30 March 31 Dec. 31 Sept. 30 June 30
(In millions) 1995 1995 1994 1994 1994
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Credit card loans........................ $ 5,505 $ 6,463 $ 6,337 $ 5,000 $ 5,356
Securitized credit card receivables...... 7,986 5,867 6,117 6,367 5,617
------- ------- ------- ------- -------
Total managed credit card receivables.. 13,491 12,330 12,454 11,367 10,973
Other consumer loans..................... 3,799 3,691 3,580 3,346 2,976
------- ------- ------- ------- -------
Total............................... $17,290 $16,021 $16,034 $14,713 $13,949
======= ======= ======= ======= =======
- ----------------------------------------------------------------------------------------
</TABLE>
Average managed credit card receivables for the second quarter of 1995 grew 21
percent from the year-earlier quarter and 10 percent from the fourth quarter of
1994.
22
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
Average Credit Card Receivables
For the Quarter Ended
June 30 March 31 Dec. 31 Sept. 30 June 30
(Dollars in millions) 1995 1995 1994 1994 1994
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Credit card loans........................ $ 5,812 $ 6,098 $ 5,304 $ 5,067 $ 5,435
Securitized credit card receivables...... 6,896 6,027 6,273 5,925 5,106
------- ------- ------- ------- -------
Total managed credit card receivables.. $12,708 $12,125 $11,577 $10,992 $10,541
======= ======= ======= ======= =======
Total net charge-offs
(including securitizations)............ $ 128 $ 118 $ 107 $ 96 $ 100
======= ======= ======= ======= =======
Net charge-offs/average total
receivables............................ 4.0% 3.9% 3.7% 3.5% 3.8%
======= ======= ======= ======= =======
- --------------------------------------------------------------------------------------------
</TABLE>
The net charge-off rate for the total average managed credit card portfolio was
4.0 percent in the second quarter of 1995, compared with 3.8 percent a year ago.
The increase was due, in part, to certain strategies used by the Corporation to
increase the cardholder base. Current levels of unemployment and personal
bankruptcy filings make reductions in the charge-off rate unlikely in the near
term.
COMMERCIAL RISK MANAGEMENT
Commercial loans totaled $17.2 billion at June 30, 1995, up 7.4 percent from
December 31, 1994, and 12 percent from June 30, 1994.
During the second quarter, charge-offs net of recoveries were zero in the
commercial portfolio. The provision for credit losses related to the commercial
portfolio was $8 million, and the quarter-end reserve of $537 million
represented 3.1 percent of total commercial loans and 420 percent of
nonperforming 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 19, 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
higher by $7.6 million in the second quarter of 1995, and by $13.3 million in
the first six months of 1995; net interest income in the second quarter and
first six months of 1994 would have declined by $29.4 million and $66.2 million,
respectively.
23
<PAGE>
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 reduced by $1.6 million in
the second quarter of 1995, and by $4.5 million in the first six months of 1995.
Credit card fee revenue in the second quarter and first six months of 1994 would
also have been reduced by $11.4 million and $25.0 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 $28.7 million as of
June 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: $10.9 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.
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>
- ----------------------------------------------------------------------
June 30, 1995 (In billions)
- ----------------------------------------------------------------------
<S> <C>
Gross credit exposure resulting from derivative financial
instruments................................................... $19.1
Less additional exposure based on estimate of maximum adverse
position exposure............................................ 5.5
-----
Gross fair value exposure...................................... $13.6
=====
- ----------------------------------------------------------------------
Gross fair value exposure...................................... $13.6
Less netting adjustments due to master netting agreements...... 4.6
Less unrecognized net gain due to non-trading activities....... 0.1
-----
Balance sheet exposure......................................... $ 8.9
=====
- ----------------------------------------------------------------------
</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. At March 31, 1995, the gross credit exposure was
$19.7 billion and the gross fair value exposure was $13.4 billion. The increase
in exposure during the first quarter of 1995 was primarily a result of increases
in unrealized gains on derivative financial instruments due to more volatile
currency markets. In the first six months of 1995, net charge-offs associated
with derivative financial instruments were $617,000.
24
<PAGE>
<TABLE>
<CAPTION>
CAPITAL MANAGEMENT
Selected Capital Ratios
- -----------------------------------------------------------------------------------------------------------------
June 30 March 31 Dec. 31 Sept. 30 June 30 Corporate
Quarter Ended 1995 1995 1994 1994 1994 Guideline
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Common equity/total assets (1)........ 6.1% 6.2% 6.6% 6.6% 6.5% N/A
Tangible common equity ratio (1)...... 5.8 5.8 6.2 6.2 6.1 N/A
Stockholders' equity/total assets..... 6.3 6.4 6.9 6.9 7.1 N/A
Risk-based capital ratios (1)(2)
Tier 1............................. 8.8 8.6 8.8 9.2 8.9 7-8%
Total.............................. 13.1 13.0 13.4 13.9 13.8 11-12
Leverage ratio (1)(2)................. 7.0 7.7 7.5 7.8 8.0 N/A
Double leverage ratio................. 115.8 115.4 116.5 114.0 110.0 115-125
Dividend payout ratio................. 28 27 29 32 29 30-35
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Net of investment in First Chicago Capital Markets, Inc.
(2) June 30, 1994, excludes $150 million of Preferred Stock, Series D, that
was redeemed on July 1, 1994.
N/A - Not Applicable.
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 second 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
$300 million during the first six 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
11 quarters, the return on average common stockholders' equity has been equal to
or greater than 15 percent.
25
<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 second quarter of 1995, the Corporation
repurchased approximately 650,000 shares of common stock at an average price of
$56.83 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 June 30, 1995, 5.9 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 announced that on August 31, 1995, its $121
million issue of Preferred Stock, Series A, would be redeemed at its stated
value of $50 per share. At a minimum, this action will reduce future annual
dividend requirements by $8.4 million.
In July 1995, the Corporation announced a 9 percent increase in the quarterly
common stock dividend to 60 cents per share from 55 cents per share, first
payable on October 1, 1995, to stockholders of record on September 8, 1995.
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 25, 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.
26
<PAGE>
The following tables show the components of the Corporation's regulatory risk-
based capital and risk-weighted assets.
<TABLE>
<CAPTION>
Regulatory Capital
- ------------------------------------------------------------------------------------
June 30 Dec. 31 June 30
(In millions) 1995 1994 1994
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Tier 1 capital
Common stockholders' equity.............. $4,160 $3,922 $3,763
Preferred stock (1)...................... 611 611 611(1)
Less 50% of investment in First
Chicago Capital Markets, Inc........... (124) (128) (129)
Less disallowed intangibles and
other adjustments...................... (80) (80) (97)
------ ------ ------
Tier 1 capital......................... $4,567 $4,325 $4,148
Tier 2 capital
Allowance for credit losses (2).......... 646 616 585
Qualifying long-term debt................ 1,694 1,753 1,820
Less 50% of investment in First
Chicago Capital Markets, Inc.......... (124) (128) (129)
------ ------ ------
Tier 2 capital......................... 2,216 2,241 2,276
------ ------ ------
Total capital................ $6,783 $6,566 $6,424
====== ====== ======
- ------------------------------------------------------------------------------------
</TABLE>
(1) Excludes $150 million of Preferred Stock, Series D redeemed on July 1, 1994.
(2) Limited to 1.25% of risk-weighted assets.
<TABLE>
<CAPTION>
Regulatory Risk-Weighted Assets*
- ------------------------------------------------------------------------------------
June 30 Dec. 31 June 30
(In billions) 1995 1994 1994
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance-sheet risk-weighted assets....... $33.6 $33.0 $30.2
Off-balance-sheet risk-weighted
assets.................................. 18.1 16.2 16.5
----- ----- -----
Total risk-weighted assets............... $51.7 $49.2 $46.7
===== ===== =====
- ------------------------------------------------------------------------------------
</TABLE>
* Based on Federal Reserve Board definitions.
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
- ---------------------------------------------------------------------------------------------------------------------
June 30, 1995 December 31, 1994 June 30, 1994
------------------------ ------------------------ ------------------------
FNBC FCCNB ANB FNBC FCCNB ANB FNBC FCCNB ANB
- ---------------------------------------------------------------------------------------------------------------------
Risk-based capital ratios
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Tier 1 capital............ 7.9% 15.4% 9.6% 8.1% 12.1% 9.5% 7.8% 13.2% 10.3%
Total capital............. 11.9 18.1 12.1 12.5 15.0 12.0 11.8 15.9 13.1
Leverage Ratio............... 5.7 14.6 9.7 6.3 14.4 9.1 6.7 12.8 9.5
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
FIRST CHICAGO CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
- -------------------------------------------------------------------------------------------------------------------------
June 30 December 31 June 30
- -------------------------------------------------------------------------------------------------------------------------
(Dollars in millions) 1995 1994 1994
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Cash and due from banks--noninterest-bearing........................................ $ 3,646 $ 4,265 $ 3,373
Due from banks--interest-bearing................................................... 9,484 8,066 7,759
Federal funds sold and securities under resale agreements........................... 14,274 13,302 13,674
Trading account assets.............................................................. 7,706 4,967 5,037
Derivative product assets........................................................... 8,909 4,389 6,086
Investment securities (fair values--$2,590, $2,589, and $2,255, respectively)....... 2,583 2,592 2,254
Loans (net of unearned income--$297, $297, and $263, respectively).................. 26,517 25,947 23,680
Allowance for credit losses......................................................... (689) (723) (681)
Premises and equipment.............................................................. 697 665 639
Accrued income receivable........................................................... 534 485 444
Customers' acceptance liability..................................................... 534 526 486
Other assets........................................................................ 1,133 1,419 1,338
------- ------- -------
Total assets..................................................................... $75,328 $65,900 $64,089
======= ======= =======
- -------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Deposits
Demand............................................................................ $ 6,941 $ 7,647 $ 7,009
Savings........................................................................... 7,442 7,448 7,401
Time.............................................................................. 5,681 5,149 4,321
Foreign offices................................................................... 13,700 11,422 9,846
------- ------- -------
Total deposits................................................................... 33,764 31,666 28,577
Federal funds purchased and securities under repurchase agreements.................. 15,710 13,026 12,208
Other funds borrowed................................................................ 7,806 7,665 8,051
Long-term debt...................................................................... 2,271 2,271 2,269
Acceptances outstanding............................................................. 534 526 486
Derivative product liabilities...................................................... 8,581 4,097 6,094
Other liabilities................................................................... 1,891 2,116 1,880
------- ------- -------
Total liabilities................................................................ 70,557 61,367 59,565
- -------------------------------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Preferred stock..................................................................... 611 611 761
Common stock--$5 par value.......................................................... 467 466 434
Number of shares authorized--150,000,000
Number of shares issued--93,430,319; 93,148,134; and 86,824,888, respectively
Number of shares outstanding--89,719,497; 89,859,798; and 86,697,805, respectively
Surplus............................................................................. 1,712 1,712 1,721
Retained earnings................................................................... 2,169 1,905 1,616
Other adjustments................................................................... -- (4) (2)
------- ------- -------
Total............................................................................ 4,959 4,690 4,530
Less treasury stock at cost--3,710,822; 3,288,336; and 127,083 shares, respectively. 188 157 6
------- ------- -------
Stockholders' equity............................................................. 4,771 4,533 4,524
------- ------- -------
Total liabilities and stockholders' equity....................................... $75,328 $65,900 $64,089
======= ======= =======
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
FIRST CHICAGO CORPORATION AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENT
- ----------------------------------------------------------------------------------------------------------------------------------
Three Months Ended Six Months Ended
June 30 June 30
- ----------------------------------------------------------------------------------------------------------------------------------
(In millions, except per share data) 1995 1994 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans.......................................................... $ 593.4 $470.3 $1,198.3 $ 907.9
Interest on bank balances........................................................... 150.1 82.5 281.7 157.5
Interest on federal funds sold and securities under resale agreements............... 238.7 133.7 479.5 224.7
Interest on trading account assets.................................................. 102.1 56.7 190.8 115.8
Interest on investment securities (including dividends)............................. 22.9 14.6 43.9 30.5
-------- ------ -------- --------
Total..................................................................... 1,107.2 757.8 2,194.2 1,436.4
- ----------------------------------------------------------------------------------------------------------------------------------
INTEREST EXPENSE
Interest on deposits................................................................ 341.7 182.9 635.7 336.8
Interest on federal funds purchased and securities under repurchase agreements...... 231.9 110.0 468.0 191.8
Interest on other funds borrowed.................................................... 132.0 90.8 269.4 162.2
Interest on long-term debt.......................................................... 46.0 41.3 91.9 82.2
-------- ------ -------- --------
Total..................................................................... 751.6 425.0 1,465.0 773.0
- ----------------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME................................................................. 355.6 332.8 729.2 663.4
Provision for credit losses......................................................... 70.0 43.0 135.0 93.0
-------- ------ -------- --------
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES............................... 285.6 289.8 594.2 570.4
- ----------------------------------------------------------------------------------------------------------------------------------
NONINTEREST INCOME
Combined trading profits............................................................ 15.8 36.7 66.2 12.0
Equity securities gains............................................................. 59.6 3.9 114.5 138.1
Investment securities gains......................................................... - 0.6 - 1.1
-------- ------ -------- --------
Market-driven revenue............................................................. 75.4 41.2 180.7 151.2
Credit card fee revenue............................................................. 213.6 193.9 404.8 376.2
Service charges and commissions..................................................... 115.5 104.2 223.4 205.5
Fiduciary and investment management fees............................................ 49.3 49.3 100.9 101.7
Other income........................................................................ 33.9 40.2 48.0 96.1
-------- ------ -------- --------
Total..................................................................... 487.7 428.8 957.8 930.7
- ----------------------------------------------------------------------------------------------------------------------------------
NONINTEREST EXPENSE
Salaries and employee benefits...................................................... 229.4 212.9 461.2 420.3
Occupancy expense of premises, net.................................................. 37.9 35.7 74.3 70.5
Equipment rentals, depreciation and maintenance..................................... 32.4 32.3 63.8 85.6
Other expense....................................................................... 188.0 179.7 366.5 368.7
-------- ------ -------- --------
Total..................................................................... 487.7 460.6 965.8 945.1
- ----------------------------------------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES.......................................................... 285.6 258.0 586.2 556.0
Applicable income taxes............................................................. 98.2 89.3 203.7 193.5
-------- ------ -------- --------
NET INCOME.......................................................................... $ 187.4 $168.7 $ 382.5 $ 362.5
======== ====== ======== ========
NET INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS' EQUITY.............................. $ 177.4 $150.4 $ 362.5 $ 330.4
======== ====== ======== ========
- ----------------------------------------------------------------------------------------------------------------------------------
EARNINGS PER SHARE
NET INCOME-PRIMARY................................................................ $ 1.95 $ 1.71 $ 3.98 $ 3.76
NET INCOME-FULLY DILUTED.......................................................... $ 1.90 $ 1.67 $ 3.88 $ 3.67
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
FIRST CHICAGO CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES TO STOCKHOLDERS' EQUITY
- ----------------------------------------------------------------------------------------------------------------
Six Months Ended June 30 (In millions) 1995 1994
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Stockholders' Equity
Balance, beginning of period................................................................ $4,533 $4,264
Net income................................................................................. 383 363
Issuance of common stock................................................................... 13 5
Issuance of treasury stock................................................................. 29 19
Treasury stock purchases................................................................... (73) (16)
Other...................................................................................... 5 (2)
------ -------
4,890 4,633
Cash dividends declared on preferred stock................................................. (20) (32)
Cash dividends declared on common stock.................................................... (99) (77)
------ ---------
1995 1994
- --------------------------------------------------------------------------------------------
Rate per common share for period $1.10 $0.90
- --------------------------------------------------------------------------------------------
Balance, end of period...................................................................... $4,771 $4,524
====== ======
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
FIRST CHICAGO CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
- -------------------------------------------------------------------------------------------------------------------
Six Months Ended June 30 (In millions) 1995 1994
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income.................................................................................. $ 383 $ 363
Adjustments to reconcile net income to net cash provided by (used in) operating activities
Depreciation and amortization.............................................................. 82 89
Provision for credit losses................................................................ 135 93
Equity securities gains.................................................................... (115) (138)
Net (increase) decrease in net derivative product balances................................. (34) 244
Net (increase) in trading account assets................................................... (2,739) (501)
Net (increase) in accrued income receivable................................................ (49) (37)
Net decrease in other assets............................................................... 221 226
Interest income from Brazilian debt restructuring.......................................... (1) (14)
Other noncash adjustments.................................................................. (40) (125)
--------- ---------
Total adjustments.......................................................................... (2,540) (163)
Net cash provided by (used in) operating activities......................................... (2,157) 200
- -------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Net (increase) in federal funds sold and securities under resale agreements................. (972) (4,891)
Purchase of investment securities--available for sale....................................... (1,228) (548)
Purchase of debt investment securities--held to maturity.................................... (97) (100)
Purchase of venture capital investments..................................................... (118) (55)
Proceeds from maturities of debt securities--available for sale............................. 990 630
Proceeds from maturities of debt securities--held to maturity............................... 98 30
Proceeds from sales of debt securities--available for sale.................................. 167 27
Proceeds from sales of equity securities--available for sale................................ 1 1
Proceeds from sales of venture capital investments.......................................... 326 231
Net (increase) in credit card receivables................................................... (1,556) (677)
Credit card receivables securitized......................................................... 2,286 1,000
Net (increase) in loans of bank subsidiaries................................................ (1,402) (1,134)
Loans made to customers and purchased from others by nonbank subsidiaries................... (178) (430)
Principal collected on and proceeds from sale of loans by nonbank subsidiaries.............. 161 446
Loan recoveries............................................................................. 35 44
Purchases of premises and equipment......................................................... (86) (94)
Proceeds from sales of premises and equipment............................................... 27 23
Net cash and cash equivalents due to acquisitions........................................... - (4)
--------- ---------
Net cash (used in) investing activities..................................................... (1,546) (5,501)
- -------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net (decrease) in demand and savings deposits............................................... (717) (1,340)
Net increase (decrease) in time deposits.................................................... 532 (616)
Net increase in deposits in foreign offices................................................. 2,150 2,086
Net increase in federal funds purchased and securities under repurchase agreements.......... 2,684 3,953
Proceeds from other funds borrowed.......................................................... 116,665 116,917
Repayment of other funds borrowed........................................................... (116,528) (114,852)
Proceeds from issuance of long-term debt.................................................... 2 202
Repayment of long-term debt................................................................. (2) (7)
Net (decrease) in other liabilities......................................................... (267) (31)
Dividends paid.............................................................................. (120) (97)
Proceeds from issuance of common stock...................................................... 14 5
Payment for purchase of treasury stock...................................................... (73) (16)
Proceeds from reissuance of treasury stock.................................................. 15 8
--------- ---------
Net cash provided by financing activities................................................... 4,355 6,212
- -------------------------------------------------------------------------------------------------------------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS................................ 147 268
- -------------------------------------------------------------------------------------------------------------------
NET INCREASE IN CASH AND CASH EQUIVALENTS................................................... 799 1,179
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............................................ 12,331 9,953
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................................................. $ 13,130 $ 11,132
========= =========
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
See Note 6 on page 33.
31
<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>
- -------------------------------------------------------------------------------
Six Months Ended
(In millions) June 30
1995 1994
- -------------------------------------------------------------------------------
PRIMARY
<S> <C> <C>
Net income................................................. $382.5 $362.5
Preferred stock dividends (1).............................. 20.0 32.1
------ ------
Net income attributable to common
stockholders' equity..................................... $362.5 $330.4
====== ======
Average number of common and
common-equivalent shares................................. 91.1 87.9
====== ======
FULLY DILUTED
Net income................................................. $382.5 $362.5
Preferred stock dividends, excluding
convertible Series B (1)................................. 14.3 26.3
------ ------
Fully diluted net income................................... $368.2 $336.2
====== ======
Average number of shares,
assuming full dilution................................... 95.0 91.7
====== ======
- -------------------------------------------------------------------------------
</TABLE>
(1) 1994 results include $4.5 million of additional preferred dividends
representing a 3 percent premium over the $150 million par value of the
Corporation's Preferred Stock, Series D, that was redeemed on July 1, 1994.
Note 3
- ------
At June 30, 1995, credit card receivables aggregated $5.5 billion. These
receivables are available for sale at face value through credit card
securitization programs.
32
<PAGE>
Note 4
- ------
The accelerated asset disposition portfolio was established in September 1992.
Nonperforming assets in this portfolio totaled $27 million at June 30, 1995,
compared with $37 million at year-end 1994 and $42 million a year ago.
Note 5
- ------
Effective January 1, 1995, the Corporation adopted Financial Accounting
Standards Board (FASB) Statement (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.
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 June 30, 1995, the recorded investment in loans considered impaired under
SFAS No. 114 was $112 million, which required a related allowance for credit
losses of $22 million.
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 for the quarter ended June 30, 1995, was
approximately $118 million and $114 million year to date. The Corporation
recognized interest income associated with impaired loans of $3 million during
the second quarter and $4 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.
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.
Loans of $3.3 million and $11.0 million were transferred to other real estate in
the first six 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.
33
<PAGE>
Note 7
- ------
The ratio of income to fixed charges for the six months ended June 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, pursuant to which the Corporation will merge
with and into NBD. The name of the combined companies will be First Chicago NBD
Corporation (FCNBD).
It is anticipated that the merger will be accounted for as a pooling-of-
interests and that it will be consummated by early 1996, pending approvals of
stockholders of the Corporation and NBD, regulatory approvals, and other
customary conditions of closing.
Pursuant to the merger agreement, at the effective time of the merger, common
stockholders of First Chicago will receive 1.81 shares of common stock of FCNBD
in exchange for each outstanding share of First Chicago common stock. Each share
of common stock of NBD will remain outstanding after the merger and represent
one share of FCNBD.
At the effective time of the merger, each share of First Chicago's outstanding
series of preferred stock will be exchanged for one share of FCNBD preferred
stock with terms substantially identical to those of the existing First Chicago
preferred stock.
In connection with the execution of the merger agreement, First Chicago granted
NBD an option to purchase, under certain circumstances, up to 19.9 percent of
First Chicago's outstanding shares of common stock. NBD also granted First
Chicago an option to purchase, under certain circumstances, up to 19.9 percent
of NBD's outstanding shares of common stock.
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.
34
<PAGE>
<TABLE>
<CAPTION>
FIRST CHICAGO CORPORATION AND SUBSIDIARIES
SELECTED STATISTICAL INFORMATION
- --------------------------------------------------------------------------------------------------------------
INVESTMENT SECURITIES
Investment securities included in the consolidated balance sheet as of June 30, 1995, were as follows.
- --------------------------------------------------------------------------------------------------------------
Book Cost Unrealized Unrealized Fair
(In millions) Value Basis Gains Losses Value
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
U.S. government and federal agency
Held to maturity...................... $ 360 $ 360 $ 3 $ 2 $ 361
Available for sale.................... 469 470 - 1 469
------ ------ ---- --- ------
Total................................... 829 830 3 3 830
States and political subdivisions
Held to maturity...................... 163 163 6 - 169
Available for sale.................... - - - - -
------ ------ ---- --- ------
Total................................... 163 163 6 - 169
Other bonds, notes and debentures
Held to maturity...................... 29 29 - - 29
Available for sale.................... 4 4 - - 4
------ ------ ---- --- ------
Total................................... 33 33 - - 33
Equity securities (1)
Venture capital....................... 1,327 948 460 81 1,327
Available for sale (2)................ 231 230 1 - 231
------ ------ ---- --- ------
Total................................... 1,558 1,178 461 81 1,558
Total investment securities............... $2,583 $2,204 $470 $84 $2,590
====== ====== ==== === ======
- --------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The fair values for certain securities for which market quotations are not
available have been estimated. In addition, the values reflect liquidity and
other market-related factors.
(2) Includes Federal Reserve stock.
35
<PAGE>
<TABLE>
<CAPTION>
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.
- ----------------------------------------------------------------------------------------------------------------------------
Three Months Ended June 30, 1995 Three Months Ended June 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...................... $ 365 $ 166 $ 531 $ 339 $ 127 $ 466
Provision for credit
losses.................................... 70 78 148 43 62 105
Noninterest income.......................... 488 (88) 400 429 (65) 364
Noninterest expense......................... 488 - 488 461 - 461
Net income.................................. 187 - 187 169 - 169
Assets--quarter-end......................... $75,328 $7,986 $83,314 $64,089 $5,617 $69,706
--average............................. 76,076 6,896 82,972 60,490 5,106 65,596
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Six Months Ended June 30, 1995 Six Months Ended June 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...................... $ 745 $ 304 $ 1,049 $ 674 $ 250 $ 924
Provision for credit
losses.................................... 135 140 275 93 118 211
Noninterest income.......................... 958 (164) 794 931 (132) 799
Noninterest expense......................... 966 - 966 945 - 945
Net income.................................. 383 - 383 363 - 363
Assets--quarter-end......................... $75,328 $7,986 $83,314 $64,089 $5,617 $69,706
--average............................. 72,964 6,461 79,425 60,982 4,977 65,959
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
36
<PAGE>
<TABLE>
<CAPTION>
FIRST CHICAGO CORPORATION AND SUBSIDIARIES
SELECTED STATISTICAL INFORMATION
- -----------------------------------------------------------------------------------------------------------------
ANALYSIS OF ALLOWANCE FOR CREDIT LOSSES
- -----------------------------------------------------------------------------------------------------------------
(In millions) June 30 March 31 December 31 September 30 June 30
1995 1995 1994 1994 1994
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, beginning of quarter
Commercial.......................................... $ 529 $ 516 $ 520 $ 502 $ 507
Consumer............................................ 225 207 163 179 203
------- -------- ------ ------- --------
Total balance, beginning of quarter.............. 754 723 683 681 710
- -----------------------------------------------------------------------------------------------------------------
Provision for credit losses
Commercial.......................................... 8 7 5 5 (14)
Consumer............................................ 62 58 71 50 57
------- -------- ------ ------- --------
Total provision for credit losses................ 70 65 76 55 43
- -----------------------------------------------------------------------------------------------------------------
Charge-offs
Commercial
Domestic
Commercial........................................ 2 2 6 7 2
Real estate....................................... 3 5 4 4 12
Other............................................. -- -- 1 2 --
Foreign, including TCD............................. -- 1 2 -- --
Consumer
Credit card....................................... 50 55 41 39 49
Other............................................. 4 3 3 4 2
------- -------- ------ ------- --------
Total charge-offs................................ 59 66 57 56 65
- -----------------------------------------------------------------------------------------------------------------
Recoveries
Commercial
Domestic
Commercial........................................ 3 9 3 3 3
Real estate....................................... -- 2 -- -- 1
Other............................................. 2 1 1 -- 1
Foreign, including TCD............................. -- 2 -- 7 18
Consumer
Credit card....................................... 8 7 6 7 7
Other............................................. 1 1 1 1 1
------- -------- ------ ------- --------
Total recoveries................................. 14 22 11 18 31
- -----------------------------------------------------------------------------------------------------------------
Net charge-offs/(recoveries)
Commercial.......................................... -- (6) 9 3 (9)
Consumer............................................ 45 50 37 35 43
------- -------- ------ ------- --------
Total net charge-offs/(recoveries)............... 45 44 46 38 34
- -----------------------------------------------------------------------------------------------------------------
Other
Commercial.......................................... -- -- -- 16 --
Consumer............................................ (90) 10 10 (31) (38)
------- -------- ------ ------- --------
Total............................................ (90) 10 10 (15) (38)
- -----------------------------------------------------------------------------------------------------------------
Balance, end of quarter
Commercial.......................................... 537 529 516 520 502
Consumer............................................ 152 225 207 163 179
------- -------- ------ ------- --------
Total balance, end of quarter.................... $ 689 $ 754 $ 723 $ 683 $ 681
======= ======== ====== ======= ========
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
37
<PAGE>
<TABLE>
<CAPTION>
FIRST CHICAGO CORPORATION AND SUBSIDIARIES
SELECTED STATISTICAL INFORMATION
- ----------------------------------------------------------------------------------------------------------------------------
Average Balances/Net Interest Margin/Rates
- ----------------------------------------------------------------------------------------------------------------------------
(Three Months Ended) June 30, 1995 March 31, 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)................. $ 9,449 $ 150.1 6.37% $ 8,602 $ 131.6 6.20%
Federal funds sold and securities under resale
agreements.......................................... 15,899 238.7 6.02 16,778 240.8 5.82
Trading account assets............................... 6,434 102.8 6.41 5,226 89.3 6.93
Investment securities
U.S. government and federal agency................. 1,043 15.5 5.96 758 10.2 5.46
States and political subdivisions.................. 170 4.4 10.38 174 3.9 9.09
Other.............................................. 1,632 7.9 1.94 1,648 8.7 2.14
- ----------------------------------------------------------------------------------------------------------------------------
Total investment securities........................ 2,845 27.8 3.92 2,580 22.8 3.58
Loans (2)(3)
Domestic offices................................... 24,368 562.3 9.54 24,276 577.2 9.94
Foreign offices.................................... 1,777 35.3 7.97 1,758 31.4 7.24
- ----------------------------------------------------------------------------------------------------------------------------
Total loans.......................................... 26,145 597.6 9.43 26,034 608.6 9.75
- ----------------------------------------------------------------------------------------------------------------------------
Total earning assets (4)........................... 60,772 1,117.0 7.37 59,220 1,093.1 7.49
Cash and due from banks--noninterest-bearing......... 4,383 3,992
Allowance for credit losses.......................... (720) (731)
Other assets......................................... 11,641 7,371
- ----------------------------------------------------------------------------------------------------------------------------
Total assets......................................... $76,076 $69,852
======= =======
- ----------------------------------------------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
Deposits--interest-bearing
Savings............................................ $ 8,777 $ 66.9 3.06% $ 7,874 $ 57.3 2.95%
Time............................................... 5,744 91.3 6.38 5,607 82.0 5.93
Foreign offices (5)................................ 12,604 183.5 5.84 11,051 154.7 5.68
- ----------------------------------------------------------------------------------------------------------------------------
Total deposits--interest-bearing................. 27,125 341.7 5.05 24,532 294.0 4.86
Federal funds purchased and securities under
repurchase agreements............................... 15,420 231.9 6.03 16,383 236.1 5.84
Other funds borrowed................................. 8,962 132.0 5.91 8,564 137.4 6.51
Long-term debt....................................... 2,271 46.0 8.12 2,273 45.9 8.19
- ----------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities................. 53,778 751.6 5.61 51,752 713.4 5.59
Demand deposits...................................... 6,837 6,956
Other liabilities.................................... 10,748 6,555
Preferred stock...................................... 611 611
Common stockholders' equity.......................... 4,102 3,978
- ----------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity....... $76,076 $69,852
======= =======
Interest income/earning assets....................... $1,117.0 7.37% $1,093.1 7.49%
Interest expense/earning assets...................... 751.6 4.96 713.4 4.89
- ----------------------------------------------------------------------------------------------------------------------------------
Net interest margin.................................. $ 365.4 2.41% $ 379.7 2.60%
======== ==== ======== ====
</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
June 30, 1995, was $9.8 million, compared with $6.1 million, $7.0 million,
$6.4 million and $5.9 million for the three months ended March 31, 1995,
December 31, 1994, September 30, 1994, and June 30, 1994, respectively.
(5) Includes International Banking Facilities deposit balances in domestic
offices and balances of Edge Act and overseas offices.
38
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
December 31, 1994 September 30, 1994 June 30, 1994
- ------------------------------------------------------------------------------------------
Average Average Average Average Average Average
Balance Interest Rate Balance Interest Rate Balance Interest Rate
- ------------------------------------------------------------------------------------------
$ 7,823 $106.4 5.40% $ 8,029 $ 97.8 4.83% $ 7,556 $ 82.5 4.38%
16,457 215.2 5.19 15,102 175.3 4.61 13,287 133.7 4.04
5,084 86.5 6.75 5,044 76.6 6.03 4,342 56.9 5.26
795 10.2 5.09 801 9.5 4.71 518 5.6 4.34
186 4.1 8.75 189 4.3 9.03 141 3.2 9.10
1,648 7.8 1.88 1,577 6.5 1.64 1,680 8.6 2.05
- ------------------------------------------------------------------------------------------
2,629 22.1 3.34 2,567 20.3 3.14 2,339 17.4 2.98
22,669 485.1 8.77 21,776 459.2 8.65 21,166 428.9 8.41
1,666 31.1 7.40 1,708 21.4 4.97 1,774 44.3 10.02
- ------------------------------------------------------------------------------------------
24,335 516.2 8.67 23,484 480.6 8.37 22,940 473.2 8.54
- ------------------------------------------------------------------------------------------
56,328 946.4 6.67 54,226 850.6 6.22 50,464 763.7 6.07
4,170 4,073 4,222
(692) (695) (711)
8,733 8,446 6,515
- ------------------------------------------------------------------------------------------
$68,539 $66,050 $60,490
======= ======= =======
- ------------------------------------------------------------------------------------------
$ 7,794 $ 52.6 2.68% $ 8,174 $ 49.8 2.42% $ 8,018 $ 44.9 2.25%
4,847 57.1 4.67 4,721 46.9 3.94 4,435 34.2 3.09
10,188 129.1 5.03 9,509 107.2 4.47 9,553 103.8 4.36
- ------------------------------------------------------------------------------------------
22,829 238.8 4.15 22,404 203.9 3.61 22,006 182.9 3.33
14,252 184.8 5.14 13,085 149.6 4.54 11,140 110.0 3.96
9,605 138.2 5.71 8,962 112.8 4.99 8,146 90.8 4.47
2,271 44.4 7.76 2,271 43.5 7.60 2,267 41.3 7.31
- ------------------------------------------------------------------------------------------
48,957 606.2 4.91 46,722 509.8 4.33 43,559 425.0 3.91
7,104 7,005 7,003
7,936 7,897 5,504
611 611 761
3,931 3,815 3,663
- ------------------------------------------------------------------------------------------
$68,539 $66,050 $60,490
======= ======= =======
$946.4 6.67% $850.6 6.22% $763.7 6.07%
606.2 4.27 509.8 3.73 425.0 3.38
- ------------------------------------------------------------------------------------------
$340.2 2.40% $340.8 2.49% $338.7 2.69%
====== ==== ====== ==== ====== ====
</TABLE>
39
<PAGE>
<TABLE>
<CAPTION>
FIRST CHICAGO CORPORATION AND SUBSIDIARIES
SELECTED STATISTICAL INFORMATION
- ----------------------------------------------------------------------------------------------------------------------
Average Balances/Net Interest Margin/Rates
- ----------------------------------------------------------------------------------------------------------------------
(Six Months Ended June 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)....................... $ 9,025 $ 281.7 6.29% $ 7,765 $ 157.5 4.09%
Federal funds sold and securities under resale agreements.. 16,339 479.5 5.92 12,516 224.7 3.62
Trading account assets..................................... 5,830 192.1 6.64 4,507 116.4 5.21
Investment securities
U.S. government and federal agency....................... 900 25.7 5.76 655 13.0 4.00
States and political subdivisions........................ 172 8.3 9.73 146 6.5 8.98
Other.................................................... 1,640 16.6 2.04 1,673 15.4 1.86
- ----------------------------------------------------------------------------------------------------------------------
Total investment securities.............................. 2,712 50.6 3.76 2,474 34.9 2.84
Loans (2)(3)
Domestic offices......................................... 24,322 1,139.5 9.74 20,904 843.2 8.42
Foreign offices.......................................... 1,768 66.7 7.61 1,810 70.5 7.85
- ----------------------------------------------------------------------------------------------------------------------
Total loans................................................ 26,090 1,206.2 9.59 22,714 913.7 8.37
- ----------------------------------------------------------------------------------------------------------------------
Total earning assets (4)............................... 59,996 2,210.1 7.43 49,976 1,447.2 5.84
Cash and due from banks--noninterest-bearing............... 4,188 4,240
Allowance for credit losses................................ (726) (702)
Other assets............................................... 9,506 7,468
- ----------------------------------------------------------------------------------------------------------------------
Total assets............................................... $72,964 $60,982
======= =======
- ----------------------------------------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
Deposits--interest-bearing
Savings.................................................. $ 8,325 $ 124.2 3.01% $ 8,059 $ 86.2 2.16%
Time..................................................... 5,676 173.3 6.16 4,592 63.8 2.80
Foreign offices (5)...................................... 11,827 338.2 5.77 9,448 186.8 3.99
- ----------------------------------------------------------------------------------------------------------------------
Total deposits--interest-bearing....................... 25,828 635.7 4.96 22,099 336.8 3.07
Federal funds purchased and securities under repurchase
agreements............................................... 15,902 468.0 5.93 10,912 191.8 3.54
Other funds borrowed....................................... 8,763 269.4 6.20 7,709 162.2 4.24
Long-term debt............................................. 2,272 91.9 8.16 2,239 82.2 7.40
- ----------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities....................... 52,765 1,465.0 5.60 42,959 773.0 3.63
Demand deposits............................................ 6,897 7,089
Other liabilities.......................................... 8,651 6,532
Preferred stock............................................ 611 761
Common stockholders' equity................................ 4,040 3,641
- ----------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity............. $72,964 $60,982
======= =======
Interest income/earning assets............................. $2,210.1 7.43% $1,447.2 5.84%
Interest expense/earning assets............................ 1,465.0 4.93 773.0 3.12
- ----------------------------------------------------------------------------------------------------------------------
Net interest margin........................................ $ 745.1 2.50% $ 674.2 2.72%
======== ==== ======== ====
</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 $15.9 and $10.8 million based on a
35% federal income tax rate for the six months ended June 30, 1995 and
1994, respectively.
(5) Includes International Banking Facilities deposit balances in domestic
offices and balances of Edge Act and overseas
offices.
40
<PAGE>
<TABLE>
<CAPTION>
FIRST CHICAGO CORPORATION AND SUBSIDIARIES
FIVE-QUARTER CONSOLIDATED INCOME STATEMENT
- -------------------------------------------------------------------------------------------------------------------------------
Three Months Ended
June 30 March 31 Dec. 31 Sept. 30 June 30
(Dollars in millions, except per share data) 1995 1995 1994 1994 1994
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans............................................. $ 593.4 $ 604.9 $ 512.4 $ 476.9 $ 470.3
Interest on bank balances.............................................. 150.1 131.6 106.4 97.8 82.5
Interest on federal funds sold and securities under resale agreements.. 238.7 240.8 215.2 175.3 133.7
Interest on trading account assets..................................... 102.1 88.7 85.9 76.0 56.7
Interest on investment securities (including dividends)................ 22.9 21.0 19.5 18.2 14.6
-------- -------- ------- ------- -------
Total........................................................ 1,107.2 1,087.0 939.4 844.2 757.8
- -------------------------------------------------------------------------------------------------------------------------------
INTEREST EXPENSE
Interest on deposits................................................... 341.7 294.0 238.8 203.9 182.9
Interest on federal funds purchased and securities under repurchase
agreements............................................................ 231.9 236.1 184.8 149.6 110.0
Interest on other funds borrowed....................................... 132.0 137.4 138.2 112.8 90.8
Interest on long-term debt............................................. 46.0 45.9 44.4 43.5 41.3
-------- -------- ------- ------- -------
Total........................................................ 751.6 713.4 606.2 509.8 425.0
- -------------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME.................................................... 355.6 373.6 333.2 334.4 332.8
Provision for credit losses............................................ 70.0 65.0 76.0 55.0 43.0
-------- -------- ------- ------- -------
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES.................. 285.6 308.6 257.2 279.4 289.8
- -------------------------------------------------------------------------------------------------------------------------------
NONINTEREST INCOME
Combined trading profits............................................... 15.8 50.4 12.1 41.6 36.7
Equity securities gains................................................ 59.6 54.9 70.5 20.0 3.9
Investment securities gains (losses)................................... - - 2.3 (2.2) 0.6
-------- -------- ------- ------- -------
Market-driven revenue............................................. 75.4 105.3 84.9 59.4 41.2
Credit card fee revenue................................................ 213.6 191.2 234.8 221.1 193.9
Service charges and commissions........................................ 115.5 107.9 103.6 112.8 104.2
Fiduciary and investment management fees............................... 49.3 51.6 48.9 48.6 49.3
Other income........................................................... 33.9 14.1 16.6 13.2 40.2
-------- -------- ------- ------- -------
Total........................................................ 487.7 470.1 488.8 455.1 428.8
- -------------------------------------------------------------------------------------------------------------------------------
NONINTEREST EXPENSE
Salaries and employee benefits......................................... 229.4 231.8 223.5 225.1 212.9
Occupancy expense of premises, net..................................... 37.9 36.4 34.8 32.0 35.7
Equipment rentals, depreciation and maintenance........................ 32.4 31.4 36.7 35.1 32.3
Other expense.......................................................... 188.0 178.5 187.1 199.2 179.7
-------- -------- ------- ------- -------
Total........................................................ 487.7 478.1 482.1 491.4 460.6
- -------------------------------------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES............................................. 285.6 300.6 263.9 243.1 258.0
Applicable income taxes.............................................. 98.2 105.5 90.5 89.3 89.3
-------- -------- ------- ------- -------
NET INCOME............................................................. $ 187.4 $ 195.1 $ 173.4 $ 153.8 $ 168.7
======== ======== ======= ======= =======
NET INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS' EQUITY................. $ 177.4 $ 185.1 $ 163.3 $ 143.8 $ 150.4
======== ======== ======= ======= =======
- -------------------------------------------------------------------------------------------------------------------------------
EARNINGS PER SHARE
Net Income - Primary................................................. $ 1.95 $ 2.03 $ 1.76 $ 1.54 $ 1.71
Net Income - Fully diluted........................................... $ 1.90 $ 1.98 $ 1.72 $ 1.51 $ 1.67
- -------------------------------------------------------------------------------------------------------------------------------
Average number of common and common-equivalent shares (in millions).... 91.2 91.0 92.9 93.4 88.0
Average number of shares, assuming full dilution (in millions)......... 95.1 94.8 96.7 97.1 91.8
Average full-time-equivalent staff..................................... 17,338 17,304 17,270 17,727 17,366
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
41
<PAGE>
<TABLE>
<CAPTION>
FIRST CHICAGO CORPORATION AND SUBSIDIARIES
SELECTED STATISTICAL INFORMATION
- ------------------------------------------------------------------------------------------------------------------------------------
1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
(Dollars in millions, except per share data) June 30 March 31 December 31 September 30 June 30
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET INTEREST INCOME DATA
Actual
Net interest income--tax-equivalent basis........................... $ 365.4 $ 379.7 $ 340.2 $ 340.8 $ 338.7
Average earning assets.............................................. 60,772 59,220 56,328 54,226 50,464
Net interest margin................................................. 2.41% 2.60% 2.40% 2.49% 2.69%
Adjusted (1)
Net interest income--tax-equivalent basis........................... $ 528.6 $ 513.7 $ 486.5 $ 485.5 $ 463.7
Average earning assets.............................................. 56,985 53,766 51,562 50,046 47,382
Net interest margin................................................. 3.72% 3.87% 3.74% 3.85% 3.93%
- ------------------------------------------------------------------------------------------------------------------------------------
AT QUARTER-END
BALANCE SHEET DATA
Assets................................................................ $ 75,328 $ 72,378 $65,900 $65,747 $64,089
Loans................................................................. 26,517 27,018 25,947 23,817 23,680
Deposits.............................................................. 33,764 32,191 31,666 29,670 28,577
Long-term debt........................................................ 2,271 2,272 2,271 2,272 2,269
Common stockholders' equity........................................... 4,160 4,057 3,922 3,930 3,763
Stockholders' equity.................................................. 4,771 4,668 4,533 4,541 4,524
- ------------------------------------------------------------------------------------------------------------------------------------
CAPITAL DATA (2)
Common equity/assets.................................................. 6.1% 6.2% 6.6% 6.6% 6.5%
Regulatory leverage ratio (3)......................................... 7.0 7.7 7.5 7.8 8.0
Risk-based capital (3)
Tier 1 capital ratio................................................ 8.8 8.6 8.8 9.2 8.9
Total capital ratio................................................. 13.1 13.0 13.4 13.9 13.8
Tier 1 capital...................................................... $ 4,567 $ 4,460 $ 4,325 $ 4,319 $ 4,148
Total capital....................................................... 6,783 6,736 6,566 6,561 6,424
- ------------------------------------------------------------------------------------------------------------------------------------
FINANCIAL RATIOS
FOR THE QUARTER ENDED
Net income as a percentage of:
Average stockholders' equity........................................ 15.9% 17.2% 15.1% 13.8% 15.3%
Average common stockholders' equity................................. 17.3 18.9 16.5 15.0 16.5
Average total assets................................................ 0.99 1.13 1.00 0.92 1.12
Average earning assets.............................................. 1.24 1.34 1.22 1.13 1.34
Stockholders' equity as a percentage of:
Total assets........................................................ 6.3 6.4 6.9 6.9 7.1
Total loans......................................................... 18.0 17.3 17.5 19.1 19.1
Total deposits...................................................... 14.1 14.5 14.3 15.3 15.8
Average stockholders' equity as a percentage of:
Average assets...................................................... 6.2 6.6 6.6 6.7 7.3
Average loans....................................................... 18.0 17.6 18.7 18.8 19.3
Average deposits.................................................... 13.9 14.6 15.2 15.1 15.3
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCK DATA
FOR THE QUARTER ENDED
Market price
High................................................................ $ 61 7/8 $ 51 3/8 $50 1/4 $52 1/4 $55 1/2
Low................................................................. 49 15/16 45 42 5/8 45 1/2 46 5/8
At quarter-end...................................................... 59 7/8 50 1/8 47 3/4 45 7/8 48 1/8
Price earnings ratio.................................................. 8.2 7.1 6.8 6.5 5.5
Book value............................................................ $ 46.37 $ 45.16 $ 43.65 $ 42.79 $ 43.40
Market price/book value............................................... 129% 111% 109% 107% 111%
Dividends declared on common stock.................................... $ 0.55 $ 0.55 $ 0.55 $ 0.50 $ 0.50
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(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.
(3) June 30, 1994, excludes $150 million of Preferred Stock, Series D, that was
redeemed on July 1, 1994.
42
<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 June 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 July 31, 1995.
Class Number of Shares Outstanding
- ------------------------- ----------------------------
Common Stock $5 par value 89,470,319
43
<PAGE>
FORM 10-Q CROSS-REFERENCE INDEX
PART I - FINANCIAL INFORMATION
------------------------------
<TABLE>
<CAPTION>
ITEM 1. Financial Statements
Page
------
<S> <C>
Consolidated Balance Sheet --
June 30, 1995 and 1994, and December 31, 1994 28
Consolidated Income Statement --
Three and Six Months Ended June 30, 1995 and 1994 29
Consolidated Statement of Changes in Stockholders' Equity --
Six Months Ended June 30, 1995 and 1994 30
Consolidated Statement of Cash Flows --
Six Months Ended June 30, 1995 and 1994 31
Notes to Consolidated Financial Statements 32-34
Selected Statistical Information 1,
20-22,
35-42
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 1-27
PART II - OTHER INFORMATION
---------------------------
ITEM 1. Legal Proceedings 45
ITEM 2. Changes in Securities 45
ITEM 3. Defaults Upon Senior Securities 45
ITEM 4. Submission of Matters to a Vote of Security Holders 45
ITEM 5. Other Information 45
ITEM 6. Exhibits and Reports on Form 8-K 45
Signatures 46
</TABLE>
44
<PAGE>
PART II. - OTHER INFORMATION
----------------------------
ITEM 1. Legal Proceedings
- -------------------------
None
ITEM 2. Changes in Securities
- -----------------------------
None
ITEM 3. Defaults Upon Senior Securities
- ---------------------------------------
Not applicable
ITEM 4. Submission of Matters to a Vote of Security Holders
- -----------------------------------------------------------
None
ITEM 5. Other Information
- -------------------------
None
ITEM 6. Exhibits and Reports on Form 8-K
- ----------------------------------------
(a) Exhibit 12 Statements re computation of ratios
Exhibit 27 Financial Data Schedules
(b) The Registrant filed the following Current Reports on Form 8-K during
the quarter ended June 30, 1995.
Date Item Reported
---- -------------
4/17/95 The Registrant's earnings for the quarter ended
March 31, 1995.
45
<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 August 10, 1995 Richard L. Thomas
--------------------- ------------------------------
Richard L. Thomas
Chairman of the Board
Date August 10, 1995 William J. Roberts
--------------------- ------------------------------
William J. Roberts
Principal Accounting Officer
46
<PAGE>
EXHIBIT INDEX
-------------
Exhibit Number Description of Exhibit Page
- -------------- ---------------------- ----
12 - Statement re computation of ratios 48
27 - Financial Data Schedules 49
47
<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 34 of the Form
10-Q.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 3,646
<INT-BEARING-DEPOSITS> 9,484
<FED-FUNDS-SOLD> 14,274
<TRADING-ASSETS> 7,706
<INVESTMENTS-HELD-FOR-SALE> 704<F1>
<INVESTMENTS-CARRYING> 552<F1>
<INVESTMENTS-MARKET> 559<F1>
<LOANS> 26,517
<ALLOWANCE> (689)
<TOTAL-ASSETS> 75,328
<DEPOSITS> 33,764
<SHORT-TERM> 23,516
<LIABILITIES-OTHER> 1,891
<LONG-TERM> 2,271
<COMMON> 467
0
611
<OTHER-SE> 3,693<F2>
<TOTAL-LIABILITIES-AND-EQUITY> 75,328
<INTEREST-LOAN> 1,198
<INTEREST-INVEST> 44
<INTEREST-OTHER> 761
<INTEREST-TOTAL> 2,194
<INTEREST-DEPOSIT> 636
<INTEREST-EXPENSE> 1,465
<INTEREST-INCOME-NET> 729
<LOAN-LOSSES> 135
<SECURITIES-GAINS> 0<F3>
<EXPENSE-OTHER> 966<F4>
<INCOME-PRETAX> 586
<INCOME-PRE-EXTRAORDINARY> 383
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 383
<EPS-PRIMARY> 3.98
<EPS-DILUTED> 3.88
<YIELD-ACTUAL> 2.50
<LOANS-NON> 124
<LOANS-PAST> 63
<LOANS-TROUBLED> 4
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 723
<CHARGE-OFFS> 125
<RECOVERIES> 36
<ALLOWANCE-CLOSE> 689
<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 $1.3 billion as of
June 30, 1995.
<F2> Treasury stock of $188 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 $115 million.
<F4> Other expenses includes: Salaries and Employee benefit expense of $461
million, Occupancy expense of $74 million, Equipment rentals, depreciation
and maintenance expense of $64 million, and other expenses which totalled
$367 million.
<F5> Allowance-Domestic, Allowance-Foreign, and Allowance-Unallocated are only
disclosed on an annual basis in the Corporation's 10-K and are therefore
not included in this Financial Data Schedule.
</FN>
</TABLE>
