<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------------
FORM 8-K
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
NOVEMBER 14, 1995
Date of Report (Date of earliest event reported)
FIRST CHICAGO CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 1-6052 36-2669970
- ---------------------------- --------------- --------------------
(Name or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
ONE FIRST NATIONAL PLAZA
CHICAGO, ILLINOIS 60670
(Address of principal executive offices) (ZIP Code)
Registrant's Telephone Number, including area code : (312) 732-4000
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
- ------
c) Exhibits
--------
Attached hereto or incorporated herein are the following Exhibits relating to
the previously announced merger of First Chicago Corporation, a Delaware
corporation (the "Corporation"), and NBD Bancorp, Inc., a Delaware corporation
("NBD"):
Exhibit Description of
Number Exhibit
- ------- --------------
27 The Corporation's Financial Data Schedule. (Incorporated by
reference to Exhibit (27) to the Corporation's Form 10-Q for the
quarter ended September 30, 1995).
99(a) Pro forma financial information.
99(b) Certain NBD historical financial information for the quarters and
nine months ended September 30, 1995 and 1994.
-2-
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
FIRST CHICAGO CORPORATION
By: William J. Roberts
---------------------------------------
Name: William J. Roberts
Title: Senior Vice President and Comptroller
Date: November 14, 1995
-3-
<PAGE>
FIRST CHICAGO NBD CORPORATION
PRO FORMA FINANCIAL INFORMATION
First Chicago Corporation (the "Corporation" or "First Chicago") and NBD
Bancorp, Inc. ("NBD") entered into an Agreement and Plan of Merger, dated July
11, 1995, as amended (the "Merger Agreement"), pursuant to which the Corporation
will merge (the "Merger") with and into NBD. The name of the combined company
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 on November 30, 1995. In November 1995
the Board of Governors of the Federal Reserve System approved the merger and in
October 1995 shareholders of both First Chicago and NBD approved the merger in
separate special meetings.
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.
-4-
<PAGE>
At the effective time of the Merger, each share of First Chicago's outstanding
preferred stock, and each outstanding depositary share, will be exchanged for
one share of FCNBD preferred stock and one depositary share, respectively, with
terms substantially identical to those of the existing First Chicago preferred
stock and depositary shares, as appropriate.
-5-
<PAGE>
In connection with the execution of the Merger Agreement, First Chicago granted
NBD an option to purchase, under certain circumstances, newly issued common
stock equal to 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, newly issued common stock equal to up to 19.9 percent of
NBD's outstanding shares of common stock.
The following pro forma financial information giving effect to the Merger,
accounted for as a pooling-of-interests, includes: (i) the unaudited pro forma
condensed combined balance sheet as of September 30, 1995, and (ii) the
unaudited pro forma condensed combined statements of income for the nine-month
periods ended September 30, 1995 and 1994. The pro forma condensed combined
financial statements should be read in conjunction with the historical
consolidated financial statements and notes thereto of the Corporation and NBD.
Effective January 7, 1995, NBD consummated its acquisition of the $910 million
asset AmeriFed Financial Corp. ("AmeriFed") of Joliet, Illinois, which was
accounted for as a purchase. On July 1, 1995, NBD acquired the $760 million
asset Deerbank Corporation ("Deerbank") of Deerfield, Illinois, which was
accounted for as a purchase. Accordingly, the historical income statement for
NBD for the nine months ended September 30, 1995, include the operations of
AmeriFed and Deerbank since their respective dates of acquisition. With respect
to the following pro forma condensed combined financial statements, the
historical income statements for NBD were not restated to otherwise include
amounts for AmeriFed and Deerbank as such acquisitions are not considered
material.
-6-
<PAGE>
FIRST CHICAGO NBD CORPORATION
PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF SEPTEMBER 30, 1995
(UNAUDITED)
The following pro forma condensed combined balance sheet as of September 30,
1995, is presented to show the impact on First Chicago's historical financial
condition of the merger with NBD. The Merger has been reflected under the
pooling-of-interests method of accounting.
<TABLE>
<CAPTION>
FIRST CHICAGO NBD CORPORATION
PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF SEPTEMBER 30, 1995
(in millions)
First Chicago NBD Pro forma Pro forma
(as reported) (as reported) adjustments FCNBD
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Cash and due from banks-noninterest bearing........... $ 3,808 $ 2,540 $ - $ 6,348
Due from banks-interest bearing....................... 9,633 669 10,302
Federal funds sold and securities
under resale agreements............................. 14,034 210 14,244
Trading account assets................................ 7,911 205 8,116
Derivative product assets............................. 7,928 53 7,981
Investment securities................................. 2,209 9,701 11,910
Loans................................................. 27,663 33,413 61,076
Allowance for credit losses........................... (743) (488) (1,231)
Other assets.......................................... 3,304 2,199 (181) 5,322
- --------------------------------------------------------------------------------------------------------------
Total assets..................................... $75,747 $48,502 $ (181) $124,068
- --------------------------------------------------------------------------------------------------------------
LIABILITIES
Deposits:
Demand.............................................. $ 6,585 $ 6,700 $ 13,285
Savings............................................. 7,413 12,373 19,786
Time................................................ 5,757 10,199 15,956
Foreign offices..................................... 13,480 4,427 17,907
- --------------------------------------------------------------------------------------------------------------
Total deposits................................... 33,235 33,699 - 66,934
Short-term borrowings................................. 25,406 6,941 32,347
Long-term debt........................................ 2,274 3,111 5,385
Derivative product liabilities........................ 7,562 47 7,609
Other liabilities..................................... 2,566 950 (28) 3,488
- --------------------------------------------------------------------------------------------------------------
Total liabilities................................ 71,043 44,748 (28) 115,763
STOCKHOLDERS' EQUITY
Preferred stock....................................... 491 - 491
Common stock.......................................... 467 161 (467) 321
160
Surplus............................................... 1,714 538 (1,714) 2,277
1,739
Retained earnings..................................... 2,313 3,178 (153) 5,338
Other................................................. 1 (52) (51)
- --------------------------------------------------------------------------------------------------------------
Total............................................ 4,986 3,825 (435) 8,376
Less: Treasury stock.................................. 282 71 (282) 71
Stockholders' equity................................ 4,704 3,754 (153) 8,305
- --------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity....... $75,747 $48,502 $ (181) $124,068
- --------------------------------------------------------------------------------------------------------------
See accompanying notes to unaudited pro forma condensed combined financial statements.
</TABLE>
-7-
<PAGE>
<TABLE>
<CAPTION>
FIRST CHICAGO NBD CORPORATION
Pro Forma Condensed Combined Statement of Income
For Nine Months Ended September 30, 1995
(in millions, except per share data)
UNAUDITED
First Chicago NBD Pro Forma
(as reported) (as reported) FCNBD
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans....................... $1,792.8 $2,069.3 $3,862.1
Interest on federal funds sold and
securities under resale agreements............. 708.6 7.9 716.5
Interest on trading account assets............... 328.9 5.9 334.8
Interest on investment securities................ 67.1 577.4 644.5
Other interest income............................ 432.9 33.3 466.2
- ---------------------------------------------------------------------------------------------
Total....................................... 3,330.3 2,693.8 6,024.1
INTEREST EXPENSE
Interest on deposits............................. 989.3 928.1 1,917.4
Interest on short-term borrowings................ 1,114.0 339.3 1,453.3
Interest on long-term debt....................... 136.8 142.6 279.4
- ---------------------------------------------------------------------------------------------
Total....................................... 2,240.1 1,410.0 3,650.1
NET INTEREST INCOME.............................. 1,090.2 1,283.8 2,374.0
Provision for credit losses...................... 235.0 65.2 300.2
- ---------------------------------------------------------------------------------------------
Net Interest Income After
Provision for Credit Losses.................... 855.2 1,218.6 2,073.8
NONINTEREST INCOME
Equity securities gains.......................... 181.2 - 181.2
Investment securities gains...................... - 3.2 3.2
Credit card fee revenue.......................... 640.7 31.1 671.8
Other noninterest income......................... 694.9 392.7 1,087.6
- ---------------------------------------------------------------------------------------------
Total....................................... 1,516.8 427.0 1,943.8
NONINTEREST EXPENSE
Salaries and employee benefits................... 710.6 549.9 1,260.5
Occupancy and equipment expense.................. 208.7 158.3 367.0
Other noninterest expense........................ 549.0 278.6 827.6
- ---------------------------------------------------------------------------------------------
Total....................................... 1,468.3 986.8 2,455.1
INCOME BEFORE INCOME TAXES....................... 903.7 658.8 1,562.5
Applicable income taxes.......................... 314.0 224.9 538.9
- ---------------------------------------------------------------------------------------------
INCOME FROM CONTINUING OPERATIONS................ $ 589.7 $ 433.9 $1,023.6
- ---------------------------------------------------------------------------------------------
COMMON SHARE DATA
Income from continuing operations
Primary.......................................... $6.16 $2.73 $3.07
Fully diluted.................................... $6.00 $2.72 $3.03
Weighted average shares
Primary.......................................... 90.9 159.2 323.8
Fully diluted.................................... 94.8 159.5 331.2
- ---------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to unaudited pro forma condensed combined financial
statements.
-8-
<PAGE>
<TABLE>
<CAPTION>
FIRST CHICAGO NBD CORPORATION
Pro Forma Condensed Combined Statement of Income
For Nine Months Ended September 30, 1994
(in millions, except per share data)
UNAUDITED
First Chicago NBD Pro Forma
(as reported) (as reported) FCNBD
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans............ $1,384.8 $1,511.3 $2,896.1
Interest on federal funds sold and
securities under resale agreements.. 400.0 5.7 405.7
Interest on trading account assets.... 191.8 4.3 196.1
Interest on investment securities..... 48.7 556.1 604.8
Other interest income................. 255.3 24.2 279.5
- --------------------------------------------------------------------------------
Total............................ 2,280.6 2,101.6 4,382.2
INTEREST EXPENSE
Interest on deposits.................. 540.7 618.5 1,159.2
Interest on short-term borrowings..... 616.4 192.2 808.6
Interest on long-term debt............ 125.7 88.5 214.2
- --------------------------------------------------------------------------------
Total............................ 1,282.8 899.2 2,182.0
NET INTEREST INCOME................... 997.8 1,202.4 2,200.2
Provision for credit losses........... 148.0 31.9 179.9
- --------------------------------------------------------------------------------
Net Interest Income After
Provision for Credit Losses......... 849.8 1,170.5 2,020.3
NONINTEREST INCOME
Equity securities gains............... 158.1 - 158.1
Investment securities gains (losses).. (1.1) 1.0 (0.1)
Credit card fee revenue............... 597.3 28.1 625.4
Other noninterest income.............. 631.5 380.2 1,011.7
- --------------------------------------------------------------------------------
Total............................ 1,385.8 409.3 1,795.1
NONINTEREST EXPENSE
Salaries and employee benefits........ 645.4 537.2 1,182.6
Occupancy and equipment expense....... 223.2 155.4 378.6
Other noninterest expense............. 567.9 284.5 852.4
- --------------------------------------------------------------------------------
Total............................ 1,436.5 977.1 2,413.6
INCOME BEFORE INCOME TAXES............ 799.1 602.7 1,401.8
Applicable income taxes............... 282.8 196.9 479.7
- --------------------------------------------------------------------------------
INCOME FROM CONTINUING OPERATIONS..... $ 516.3 $ 405.8 $ 922.1
- --------------------------------------------------------------------------------
COMMON SHARE DATA
Income from continuing operations
Primary............................... $5.29 $2.54 $2.73
Fully diluted......................... $5.17 $2.53 $2.69
Weighted average shares
Primary............................... 89.7 159.7 322.1
Fully diluted......................... 93.5 161.5 330.7
- --------------------------------------------------------------------------------
</TABLE>
See accompanying notes to unaudited pro forma condensed combined financial
statements.
-9-
<PAGE>
FIRST CHICAGO NBD CORPORATION
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS
a) The pro forma information presented is not necessarily indicative of the
results of operations or the combined financial position that would have
resulted had the Merger been consummated at the beginning of the periods
indicated, nor is it necessarily indicative of the results of operations in
future periods or the future financial position of the combined entities.
It is anticipated that the Merger will be consummated in the fourth quarter
of 1995.
b) The Corporation has reviewed its accounting policies in light of those
employed by NBD. At this time, it is not expected that conformance of such
accounting policies will have a material impact on the pro forma condensed
combined financial statements.
c) Certain reclassifications have been included in the unaudited pro forma
condensed combined balance sheet and statements of income to conform
statement presentations. Transactions conducted in the ordinary course of
business between the two companies are immaterial, and accordingly, have
not been eliminated.
d) Pro forma adjustments to common shares and surplus at September 30, 1995,
reflect the Merger accounted for as a pooling-of-interests, through the
exchange of 159.8 million shares of FCNBD common stock (using the common
exchange ratio of 1.81) for the 88.3 million outstanding shares of the
Corporation.
-10-
<PAGE>
The pro forma entries are displayed below (in millions):
Debit-- Common stock (First Chicago) ................. $ 467
Debit-- Common surplus (First Chicago) ............... 1,714
Credit-- Treasury stock (First Chicago) ...... $ 282
Credit-- Common stock (FCNBD) ................ 160
Credit-- Common surplus (FCNBD) .............. 1,739
e) A pro forma entry of $181 million was made to reclassify NBD's deferred tax
receivable from other assets to other liabilities.
f) As of September 30, 1995, the Corporation and NBD were approximately 50%
completed with the plan to repurchase in the aggregate approximately $300
million worth of the Corporation's and NBD's common stock prior to the
consummation of the Merger. The pro forma condensed combined balance sheet
does not include the impact of the remaining shares anticipated to be
repurchased, prior to the consummation of the Merger.
g) Income per share data has been computed based on the combined historical
income from continuing operations applicable to common stockholders of the
Corporation and NBD using the historical weighted average number of
outstanding shares of NBD's common stock and the historical weighted
average number of outstanding shares of the Corporation's common stock
adjusted to equivalent shares of FCNBD's common stock, as of the earliest
period presented.
-11-
<PAGE>
h) The pro forma condensed combined financial statements do not include the
anticipated cost savings in connection with the Merger. It is estimated,
however, that approximately $200 million in pre-tax annualized cost savings
($126 million after-tax) will be realized by the combined company in 1997.
Reductions resulting from elimination of the overlap in Chicago-area retail
branch expense constitute the largest component. Product synergies in the
large corporate and middle markets, and staff and functional areas, also
provide additional expense reduction opportunities.
i) The Financial Accounting Standards Board, in conjunction with the
finalization of their implementation guide relating to SFAS #115-
"Accounting for Certain Investments in Debt and Equity Securities"- has
given registrants an opportunity to assess the classification of their
existing investment securities portfolio between the held-to-maturity and
available-for-sale classifications.
In conjunction with this guidance, as well as in accordance with the
combined company's existing interest rate risk position, it is anticipated
that a significant portion of the companies' investment securities
currently classified as held-to-maturity will be transferred to the
available-for-sale classification.
If subsequent sales of such securities occur as part of this overall
process, such sales would not preclude accounting for the combination as a
pooling of interests in accordance with either EITF Abstracts, Topic No.
D-40, or paragraph 8(c) of SFAS #115, which represents an exception to
paragraph 48(c) of APB Opinion #16. Based on current market conditions, it
is not expected that any such sales would result in any material probable
losses that would require an adjustment to the pro forma financial
statements.
-12-
<PAGE>
Any transfers of securities is anticipated to occur in the fourth quarter
of 1995 and will be accounted for in accordance with SFAS #115.
j) A liability of $225 million has been recorded in the unaudited pro forma
condensed combined balance sheet to reflect First Chicago's and NBD's
current estimate of merger and restructuring related charges in connection
with the attainment by 1997 of annualized pre-tax cost savings of
approximately $200 million. This resulted in a $153 million after-tax
charge to retained earnings in the unaudited pro forma condensed combined
balance sheet.
The pro forma entries are displayed below (in millions):
Debit-- Retained earnings $153
Debit-- Other liabilities-taxes payable 72
Credit-- Other liabilities-reserve $225
It is anticipated that substantially all of these charges will be paid
within a 12-15 month time frame subsequent to the Merger. This charge has
been excluded from the pro forma condensed combined income statement due to
its nonrecurring nature. The following table provides details of the
estimated pre-tax charges (in millions).
Amount
------
Personnel $150
Facilities and equipment 45
Other Merger expenses 30
----
$225
====
-13-
<PAGE>
Personnel-related costs reflect severance and assistance costs for
separated employees. Facilities costs consist of lease termination costs
and other facilities-related exit costs arising from the closing of
duplicate branch facilities and from the consolidation of duplicate
headquarters and operational facilities. Equipment costs consist of
computer equipment and software write-offs due to duplication or
incompatibility. The reserve will be established in compliance with
Emerging Issues Task Force #94-3.
Substantially all of the personnel-related costs represent employee
severance costs. An estimate of staff reductions totals 1,700 coming
primarily from the overlap in the Chicago retail banking business, product
synergies in the large corporate and middle market businesses, as well as
from staff and administrative support functions. The contemplated timeframe
for completion of these actions is a 12 to 15 month period subsequent to
the Merger.
Other merger-related costs include investment banking fees, securities
registration and filing fees, as well as accounting, legal and other
related costs. Investment banking fees, estimated at $12 million, represent
the largest component of such costs.
-14-
<PAGE>
<TABLE>
<CAPTION>
NBD Bancorp, Inc. Consolidated Balance Sheet
(in thousands except share data)
Assets
September 30 December 31 September 30
1995 1994 1994
------------ ----------- ------------
<S> <C> <C> <C>
Cash and Due From Banks........................................ $ 2,540,295 $ 2,587,007 $ 2,344,939
Interest-Bearing Deposits...................................... 668,931 630,688 642,969
Federal Funds Sold and Resale Agreements....................... 210,147 399,725 163,295
Trading Account Securities..................................... 205,051 122,135 187,474
Investment Securities (Note B):
Available-for-Sale (At Fair Value)........................ 2,868,502 4,814,252 4,791,169
Held-to-Maturity (Fair Value of $6,963,401,
$7,381,476 and $7,757,535, respectively)................ 6,831,803 7,608,713 7,832,855
------------ ----------- ------------
9,700,305 12,422,965 12,624,024
------------ ----------- ------------
Loans and Leases (Net of Unearned Income of $214,642,
$171,207 and $150,832, respectively):
Commercial................................................ 17,199,483 15,525,645 14,898,990
Real Estate Construction.................................. 935,833 817,452 785,543
Residential Mortgage...................................... 4,422,097 3,351,840 3,187,130
Mortgages Held For Sale................................... 341,829 30,171 41,008
Consumer.................................................. 8,372,663 7,667,907 7,421,699
Lease Financing........................................... 428,125 363,200 335,860
Foreign................................................... 1,712,762 1,473,449 1,215,322
------------ ----------- ------------
33,412,792 29,229,664 27,885,552
Allowance For Possible Credit Losses (Note C)............. (487,726) (435,051) (423,700)
------------ ----------- ------------
32,925,066 28,794,613 27,461,852
------------ ----------- ------------
Net Premises and Equipment..................................... 670,372 630,357 636,755
Customers' Liability on Acceptances............................ 183,898 193,866 186,370
Other Assets................................................... 1,397,581 1,329,777 1,318,624
------------ ----------- ------------
Total Assets......................................... $48,501,646 $47,111,133 $45,566,302
============ =========== ============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NBD Bancorp, Inc. Consolidated Balance Sheet
(in thousands except share data)
Liabilities and Shareholders' Equity
September 30 December 31 September 30
1995 1994 1994
--------------- ------------- --------------
<S> <C> <C> <C>
Deposits:
Demand (Non-Interest Bearing)........................................... $ 6,700,165 $ 6,731,050 $ 6,349,603
Savings................................................................. 7,341,687 7,679,922 7,745,473
Money Market Accounts................................................... 5,030,957 4,959,816 5,110,887
Time.................................................................... 10,198,717 8,055,429 7,603,690
Foreign Office.......................................................... 4,427,137 5,803,224 3,693,457
----------- ----------- -----------
33,698,663 33,229,441 30,503,110
Short-Term Borrowings..................................................... 6,940,959 7,119,972 8,483,258
Liability on Acceptances.................................................. 183,898 193,866 186,370
Accrued Expenses and Sundry Liabilities................................... 813,398 771,963 757,595
Long-Term Debt............................................................ 3,111,426 2,504,348 2,381,382
----------- ----------- -----------
Total Liabilities.................................................... 44,748,344 43,819,590 42,311,715
----------- ----------- -----------
Shareholders' Equity:
Series A Preferred Stock - Par Value $1, Stated Value $50............... - - -
September 30 December 31 September 30
No. of Shares 1995 1994 1994
------------- ------------ ----------- ------------
Authorized.... 460,000 460,000 460,000
Issued........ - - -
Preferred Stock - No Par Value.......................................... - - -
September 30 December 31 September 30
No. of Shares 1995 1994 1994
------------- ------------ ----------- ------------
Authorized... 10,000,000 10,000,000 10,000,000
Issued........ - - -
Common Stock - Par Value $1............................................. 160,883 160,877 160,877
September 30 December 31 September 30
No. of Shares 1995 1994 1994
------------- ------------ ----------- ------------
Authorized.... 500,000,000 500,000,000 500,000,000
Issued........ 160,883,008 160,876,819 160,876,819
Capital Surplus......................................................... 537,722 545,717 547,710
Retained Earnings....................................................... 3,177,975 2,903,394 2,813,263
Fair Value Adjustment on Investment Securities
Available-for-Sale (Note B).......................................... (34,544) (154,305) (111,675)
Accumulated Translation Adjustment...................................... 9,254 6,942 7,663
Deferred Compensation................................................... (26,786) (17,438) (21,859)
Treasury Stock (2,008,872, 4,968,147 and
4,546,230 shares, respectively)....................................... (71,202) (153,644) (141,392)
----------- ----------- -----------
Total Shareholders' Equity........................................... 3,753,302 3,291,543 3,254,587
----------- ----------- -----------
Total Liabilities and Shareholders' Equity...................... $48,501,646 $47,111,133 $45,566,302
=========== =========== ===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NBD Bancorp, Inc. Consolidated Statement of Income
(in thousands except per share data)
Quarter Ended Nine Months Ended
September 30 September 30
----------------------------- -----------------------------
1995 1994 1995 1994
--------------- ------------ --------------- ------------
<S> <C> <C> <C> <C>
Interest Income:
Loans and Leases (including fees)............................ $723,508 $542,238 $2,069,298 $1,511,258
Investment Securities:
Taxable.................................................... 158,225 182,319 508,523 481,793
Non-Taxable................................................ 21,804 24,557 68,944 74,386
Trading Account Securities................................... 2,372 1,878 5,906 4,257
Federal Funds Sold and Resale Agreements..................... 1,518 2,849 7,861 5,712
Interest-Bearing Deposits.................................... 10,368 9,236 33,296 24,228
-------- -------- ---------- ----------
Total Interest Income................................... 917,795 763,077 2,693,828 2,101,634
-------- -------- ---------- ----------
Interest Expense:
Deposits..................................................... 324,068 227,662 928,129 618,491
Short-Term Borrowings........................................ 107,971 84,526 339,282 192,201
Long-Term Debt............................................... 51,248 36,098 142,644 88,503
-------- -------- ---------- ----------
Total Interest Expense.................................. 483,287 348,286 1,410,055 899,195
-------- -------- ---------- ----------
Net Interest Income............................................ 434,508 414,791 1,283,773 1,202,439
Provision for Possible Credit Losses......................... 25,038 7,907 65,225 31,946
-------- -------- ---------- ----------
Net Interest Income After Provision
For Possible Credit Losses................................... 409,470 406,884 1,218,548 1,170,493
-------- -------- ---------- ----------
Non-Interest Income:
Trust Fees................................................... 41,568 39,400 122,321 117,313
Service Charges on Deposit Accounts.......................... 41,777 40,752 122,848 120,521
Credit Card Fees............................................. 11,008 10,052 31,139 28,120
Securities Gains............................................. 1,493 740 3,177 1,045
Other........................................................ 50,046 45,653 147,543 142,296
-------- -------- -------- --------
Total Non-Interest Income............................... 145,892 136,597 427,028 409,295
-------- -------- -------- --------
Non-Interest Expenses:
Compensation:
Salaries................................................... 142,838 137,292 416,187 405,607
Benefits................................................... 45,261 44,436 133,677 131,631
-------- -------- -------- --------
Total Compensation...................................... 188,099 181,728 549,864 537,238
Net Occupancy................................................ 29,115 29,242 89,442 89,291
Equipment Rentals, Depreciation and Maintenance.............. 23,239 21,387 68,877 66,126
FDIC and Other Regulatory Assessments........................ 173 16,631 33,287 50,047
Amortization of Intangibles.................................. 8,659 6,415 23,684 19,516
Other........................................................ 77,804 67,089 221,664 214,902
-------- -------- -------- --------
Total Non-Interest Expenses............................. 327,089 322,492 986,818 977,120
-------- -------- -------- --------
Income before Income Taxes..................................... 228,273 220,989 658,758 602,668
Income Tax Expense (Benefit) (Including tax effect
of $513, $260, $1,105 and $374, respectively,
on securities sales)....................................... 78,723 73,335 224,875 196,914
-------- -------- -------- --------
Income before Extraordinary Item and Cumulative
Effect of Accounting Change.................................. 149,550 147,654 433,883 405,754
Extraordinary Item (net of income tax effect)
(Note F)................................................. - - - (7,730)
Cumulative Effect of Accounting Change (net of
income tax effect) (Note A).............................. - - - (7,885)
-------- -------- -------- --------
Net Income..................................................... $149,550 $147,654 $433,883 $390,139
======== ======== ======== ========
Net Income Per Share (on average shares outstanding):
Income before Extraordinary Item and Cumulative
Effect of Accounting Change................................ $ 0.94 $ 0.93 $ 2.73 $ 2.54
Extraordinary Item (net of income tax effect)................ - - - (0.05)
Cumulative Effect of Accounting Change (net of
income tax effect)......................................... - - - (0.05)
-------- -------- -------- --------
Net Income Per Share........................................... $ 0.94 $ 0.93 $ 2.73 $ 2.44
======== ======== ======== ========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NBD Bancorp, Inc. Consolidated Statement of Shareholders' Equity
(in thousands except share data)
Quarter Ended Nine Months Ended
September 30 September 30
------------------------ ------------------------
1995 1994 1995 1994
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Preferred Stock:
Balance, Beginning and End of Period.................... $ - $ - $ - $ -
---------- ---------- ---------- ----------
Common Stock:
Balance, Beginning of Period............................ 160,883 160,877 160,877 160,715
Acquisition of Subsidiary Bank........................ - - 270 -
Cancellation of Shares Held in Treasury............... - - (270) -
Other................................................. - - 6 162
---------- ---------- ---------- ----------
Balance, End of Period.................................. 160,883 160,877 160,883 160,877
---------- ---------- ---------- ----------
Capital Surplus:
Balance, Beginning of Period............................ 533,129 546,829 545,717 541,232
Acquisition of Subsidiary Bank........................ 2,885 - (3,438) -
Cancellation of Shares Held in Treasury............... - - (8,130) -
Other................................................. 1,708 881 3,573 6,478
---------- ---------- ---------- ----------
Balance, End of Period.................................. 537,722 547,710 537,722 547,710
---------- ---------- ---------- ----------
Retained Earnings:
Balance, Beginning of Period............................ 3,082,012 2,712,268 2,903,394 2,565,627
Net Income............................................ 149,550 147,654 433,883 390,139
Cash Dividends Declared on Common Stock
($.33, $.30, $.99 and $.90 per share,
respectively)....................................... (53,587) (46,659) (159,302) (142,503)
---------- ---------- ---------- ----------
Balance, End of Period.................................. 3,177,975 2,813,263 3,177,975 2,813,263
---------- ---------- ---------- ----------
Fair Value Adjustment on Investment Securities
Available-for-Sale:
Balance, Beginning of Period............................ (39,327) (89,936) (154,305) (7,012)
Change in Fair Value (net of tax)..................... 4,783 (21,739) 119,761 (104,663)
---------- ---------- ---------- ----------
Balance, End of Period.................................. (34,544) (111,675) (34,544) (111,675)
---------- ---------- ---------- ----------
Accumulated Translation Adjustment:
Balance, Beginning of Period............................ 9,444 7,118 6,942 4,384
Translation Gain (Loss) (net of tax).................. (190) 545 2,312 3,279
---------- ---------- ---------- ----------
Balance, End of Period.................................. 9,254 7,663 9,254 7,663
---------- ---------- ---------- ----------
Deferred Compensation:
Balance, Beginning of Period............................ (27,364) (23,897) (17,438) (16,347)
Awards Granted........................................ (171) - (13,418) (14,322)
Amortization of Deferred Compensation................. 3,207 2,899 8,683 8,386
Other................................................. (2,458) (861) (4,613) 424
---------- ---------- ---------- ----------
Balance, End of Period.................................. (26,786) (21,859) (26,786) (21,859)
---------- ---------- ---------- ----------
Treasury Stock:
Balance, Beginning of Period............................ (116,511) (63,116) (153,644) -
Purchase of Common Stock (6,301,179 shares in 1995)... (65,156) (78,893) (204,830) (153,814)
Acquisition of Subsidiary Bank (8,457,369 shares)..... 108,743 - 262,243 -
Cancellation of Shares Held in Treasury............... - - 8,400 -
Other................................................. 1,722 617 16,629 12,422
---------- ---------- ---------- ----------
Balance, End of Period.................................. (71,202) (141,392) (71,202) (141,392)
---------- ---------- ---------- ----------
Total Shareholders' Equity, End of Period................. $3,753,302 $3,254,587 $3,753,302 $3,254,587
========== ========== ========== ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NBD Bancorp, Inc. Consolidated Statement of Cash Flows
(in thousands)
Nine Months Ended
September 30
---------------------------------
1995 1994
---------------- --------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income.......................................................................... $ 433,883 $ 390,139
Adjustments to Reconcile Net Income to Net Cash Provided by Operations:
Depreciation and Amortization..................................................... 85,078 76,474
Provision for Possible Credit Losses.............................................. 65,225 31,946
Securities Gains.................................................................. (3,177) (1,045)
Extraordinary Item - Redemption of Debt........................................... - 7,730
Increase in Interest Receivable................................................... (97,800) (37,807)
Increase(Decrease) in Income Taxes Payable........................................ (12,159) 22,963
Increase(Decrease) in Accrued Expenses............................................ 58,183 (123,244)
Increase in Trading Account Investments........................................... (81,778) (77,043)
(Increase)Decrease in Mortgages Held for Sale..................................... (311,658) 214,894
Other, net........................................................................ 6,286 (12,071)
---------- ----------
Net Cash Provided by Operating Activities...................................... 142,083 492,936
---------- ----------
Cash Flows from Investing Activities:
Decrease in Interest-Bearing Deposits............................................... 50,886 87,826
Decrease in Federal Funds Sold and Resale Agreements................................ 189,578 119,186
Purchase of Investment Securities Available-for-Sale................................ (1,407,332) (3,768,241)
Proceeds from Maturity or Call of Investment Securities Available-for-Sale.......... 1,012,297 1,576,672
Proceeds from Sale of Investment Securities Available-for-Sale...................... 3,114,766 978,305
Purchase of Investment Securities Held-to-Maturity.................................. (20,498) (2,763,717)
Proceeds from Maturity or Call of Investment Securities Held-to-Maturity............ 788,099 1,502,523
Increase in Loans and Leases........................................................ (2,933,993) (2,468,850)
Proceeds from Sale of Loan Portfolios............................................... 42,467 -
Purchase of Premises and Equipment and Other Assets................................. (74,622) (273,717)
Proceeds from Sale of Premises and Equipment and Other Assets....................... 24,641 51,019
Net Cash Acquired(Paid) in Purchase of Subsidiaries................................. 33,715 (5,720)
---------- ----------
Net Cash Provided(Used) by Investing Activities................................ 820,004 (4,964,714)
---------- ----------
Cash Flows from Financing Activities:
(Decrease)Increase in Deposits...................................................... (1,049,241) 635,152
(Decrease)Increase in Short-Term Borrowings......................................... (206,633) 3,127,198
Proceeds from the Issuance of Long-Term Debt........................................ 725,000 1,250,000
Principal Payments on Long-Term Debt................................................ (116,046) (101,269)
Redemption of Long-Term Debt........................................................ - (208,734)
Proceeds from Stock Option Exercises................................................ 1,186 1,285
Payments to Acquire Treasury Stock.................................................. (204,830) (153,814)
Dividends Paid...................................................................... (158,299) (138,996)
---------- ----------
Net Cash (Used)Provided by Financing Activities................................ (1,008,863) 4,410,822
---------- ----------
Effect of Exchange Rate Changes on Cash and Due From Banks............................ 64 201
---------- ----------
Net Decrease in Cash and Due From Banks............................................... (46,712) (60,755)
Cash and Due From Banks - Beginning of Period......................................... 2,587,007 2,405,694
---------- ----------
Cash and Due From Banks - End of Period............................................... $2,540,295 $2,344,939
========== ==========
Other Cash Flow Disclosures:
Interest Paid....................................................................... $1,332,888 $ 994,071
State and Federal Taxes Paid........................................................ 237,034 169,514
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - ACCOUNTING POLICIES
- ----------------------------
Accounting policies of NBD Bancorp, Inc. and its subsidiaries (the Corporation)
are described below.
BASIS OF PRESENTATION:
The unaudited consolidated financial statements as of and for the three and
nine months ended September 30, 1995 and 1994, are prepared in conformity with
generally accepted accounting principles for interim financial information and
the rules and regulations of the Securities and Exchange Commission. In the
opinion of management, all adjustments (consisting only of normal recurring
accruals) necessary for a fair presentation have been included. These
financial statements should be read in conjunction with the consolidated
financial statements included in the Corporation's Form 10-K Annual Report for
the year ended December 31, 1994.
The Corporation has adopted Statement of Financial Accounting Standard (SFAS)
No. 114, "Accounting by Creditors for Impairment of a Loan," as amended by
SFAS No. 118, "Accounting by Creditors for Impairment of a Loan - Income
Recognition and Disclosures," effective January 1, 1995. These statements
require that an impaired loan be measured based on the present value of the
expected future cash flows discounted at the loan's effective interest rate,
the observable market price of the loan or the fair value of the collateral if
the loan is collateral dependent. The adoption of these statements did not
have an impact on the Corporation's financial statements.
The Corporation has adopted SFAS No. 112, "Employers' Accounting For
Postemployment Benefits," effective January 1, 1994. This statement requires
the accrual of benefits provided to former or inactive employees after
employment but before retirement. The cumulative effect of adopting SFAS No.
112 was a charge of $12,323,000 ($7,885,000 net of income taxes).
CONSOLIDATION:
The consolidated financial statements of the Corporation include the accounts
of its subsidiaries, principally NBD Bank (Michigan). All material inter-
company accounts and transactions have been eliminated. Investments in
unconsolidated affiliates in which ownership is at least 20 percent are
accounted for by the equity method and are reported in "Other Assets."
SECURITIES:
In accordance with SFAS No. 115, Investment Securities are accounted for as
follows: (a) Debt securities that the Corporation has the positive intent and
ability to hold to maturity are classified as Held-to-Maturity and reported at
amortized cost; (b) Debt and equity securities that are bought and held
principally for the purpose of selling in the near term are classified as
Trading and reported at fair value, with realized and unrealized gains and
losses included in Other Non-Interest Income; and (c) Debt and equity
securities not classified as Held-to-Maturity or Trading are classified as
Available-for-Sale and reported at fair value, with unrealized gains and
losses excluded from earnings and reported in a separate component of
shareholders' equity, net of tax.
Gains and losses realized on the sale of Investment Securities are determined
on the specific identification method and included in Securities
Gains(Losses).
-6-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont'd.)
LOANS:
Loans are generally reported at the principal amount outstanding, net of
unearned income. Non-refundable loan origination and commitment fees, and
certain costs of origination, are deferred and either included in interest
income over the term of the related loan or commitment or, if the loan is held
for sale, included in Other Non-Interest Income when the loan is sold.
Mortgages Held For Sale are valued at the lower of aggregate cost or fair
value. Unrealized losses, as well as realized gains or losses, are included
in Other Non-Interest Income.
Interest income on loans is accrued as earned. Except for consumer loans,
loans are placed on non-accrual status and previously accrued but unpaid
interest is reversed against current period interest income when
collectibility of principal or interest is considered doubtful, payment of
principal or interest is 90 days or more past due, or the loan is completely
or partially charged off. Interest income on loans considered doubtful or 90
days or more past due is recorded as collected. Collections of principal and
interest on charged-off loans are applied in the following sequence: (1) as a
reduction of remaining principal balance; (2) as recovery of principal charged
off; and (3) as interest income. For purposes of applying SFAS Nos. 114 and
118, "impaired loans" are defined as equivalent to non-accrual and
restructured loans.
Consumer loans are not placed on a non-accrual status because they are
generally charged off when 120 days to 150 days past due. Accrued but unpaid
interest is reversed against current period interest income when the loan is
charged off.
ALLOWANCE FOR POSSIBLE CREDIT LOSSES:
The Allowance is maintained at a level considered by management to be adequate
to provide for probable loan and lease losses inherent in the portfolio.
Management's evaluation is based on a continuing review of the loan and lease
portfolio and includes consideration of the actual loan and lease loss
experience, the present and prospective financial condition of borrowers, the
balance of the loan and lease portfolio, industry and country concentrations
within the portfolio and general economic conditions.
INCOME TAXES:
The Corporation accounts for income taxes in accordance with SFAS No. 109,
which requires an asset and liability approach to accounting and reporting for
income taxes. Under this approach, current and deferred income taxes payable
and refundable are remeasured annually using provisions of then enacted tax
laws and rates. SFAS No. 109 also specifies the criteria for recognition and
measurement of deferred income tax benefits.
-7-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont'd.)
INCOME PER SHARE:
Per share amounts are based on the weighted average number of shares
outstanding throughout the period adjusted for the assumed exercise of stock
options.
<TABLE>
<CAPTION>
QUARTER ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
------------------------ ------------------------
1995 1994 1995 1994
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Average Shares Outstanding.. 160,510,231 157,667,003 159,217,241 159,683,663
</TABLE>
NOTE B - INVESTMENT SECURITIES
- ------------------------------
The following is a summary of the amortized cost and fair value of Investment
Securities Available-for-Sale and Held-to-Maturity at SEPTEMBER 30, 1995:
<TABLE>
<CAPTION>
INVESTMENT SECURITIES AVAILABLE-FOR-SALE
---------------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
---------- ---------- ---------- ---------
(in thousands)
<S> <C> <C> <C> <C>
U.S. Treasury.................................... $ 419,344 $ 1,492 $ 24 $ 420,812
U.S. Government Agencies:
Mortgage-backed Securities............... 1,360,236 1,164 17,399 1,344,001
Collateralized Mortgage Obligations...... 647,710 2,863 8,388 642,185
Other.................................... 205,162 609 11 205,760
States and Political Subdivisions................ 40,820 188 7 41,001
Collateralized Mortgage Obligations(a)........... 25,846 61 93 25,814
Other............................................ 223,205 867 35,143 188,929
---------- -------- ------- ----------
Total............................ $2,922,323 $ 7,244 $61,065 $2,868,502
========== ======== ======= ==========
INVESTMENT SECURITIES HELD-TO-MATURITY
---------------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
---------- ---------- ---------- --------
(in thousands)
U.S. Treasury.................................... $ 514,115 $ 2,794 $ 634 $ 516,275
U.S. Government Agencies:
Mortgage-backed Securities............... 5,049,319 113,775 54,339 5,108,755
Other.................................... 7,765 3 37 7,731
States and Political Subdivisions................ 1,260,604 74,653 4,617 1,330,640
---------- -------- ------- ----------
Total............................ $6,831,803 $191,225 $59,627 $6,963,401
========== ======== ======= ==========
(a) All Collateralized Mortgage Obligations of private issuers have underlying collateral consisting of obligations of U.S.
Government Agencies.
</TABLE>
-8-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont'd.)
The following is a summary of the amortized cost and fair value of Investment
Securities Available-for-Sale and Held-to-Maturity at DECEMBER 31, 1994:
<TABLE>
<CAPTION>
Investment Securities Available-for-Sale
-----------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---------- ---------- ---------- ----------
(in thousands)
<S> <C> <C> <C> <C>
U.S. Treasury.................................. $ 505,540 $ 96 $ 592 $ 505,044
U.S. Government Agencies:
Mortgage-backed Securities................... 2,655,673 4 160,195 2,495,482
Collateralized Mortgage Obligations.......... 1,461,321 4,940 45,974 1,420,287
Other........................................ 22,916 1,267 3 24,180
States and Political Subdivisions.............. 76,586 33 363 76,256
Collateralized Mortgage Obligations(a)......... 111,351 76 936 110,491
Other.......................................... 222,931 459 40,878 182,512
---------- ------- -------- ---------
Total..................................... $5,056,318 $ 6,875 $248,941 $4,814,252
========== ======= ======== ==========
Investment Securities Held-to-Maturity
-----------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---------- ---------- ---------- ----------
(in thousands)
U.S. Treasury.................................. $ 519,656 $ 225 $ 13,145 $ 506,736
U.S. Government Agencies:
Mortgage-backed Securities................... 5,664,739 45,612 282,356 5,427,995
Other........................................ 8,420 6 145 8,281
States and Political Subdivisions.............. 1,415,398 46,182 23,626 1,437,954
Other.......................................... 500 10 - 510
---------- ------- -------- ----------
Total..................................... $7,608,713 $92,035 $319,272 $7,381,476
========== ======= ======== ==========
(a) All Collateralized Mortgage Obligations of private issuers have underlying collateral consisting of obligations of U.S.
Government Agencies.
</TABLE>
NOTE C - ALLOWANCE FOR POSSIBLE CREDIT LOSSES
- ---------------------------------------------
The changes in the Allowance for Possible Credit Losses are summarized below:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30
--------------------------
1995 1994
--------- ---------
(in thousands)
<S> <C> <C>
Balance, Beginning of Period.......................... $435,051 $423,030
Provision........................................ 65,225 31,946
Charge-offs...................................... (81,516) (87,320)
Recoveries....................................... 59,828 55,586
-------- --------
Net Charge-offs................................ (21,688) (31,734)
Acquisition and Other............................ 9,138 458
-------- --------
Balance, End of Period................................ $487,726 $423,700
======== ========
</TABLE>
-9-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont'd.)
NOTE D - INTEREST RATE CONTRACTS
- --------------------------------
The Corporation, in the normal course of business, utilizes various types of
contracts for managing the market risk in its balance sheet instruments, for
accommodating customer needs, including mitigating the risk in customer
accommodation contracts, and, on a limited scale, generating trading profits.
These contracts include interest rate swaps, futures and option contracts.
The following tables show the contract or notional amount of risk management
contracts and the related unrealized gains and losses as of the periods
indicated.
<TABLE>
<CAPTION>
RISK MANAGEMENT CONTRACTS:
SEPTEMBER 30, 1995
--------------------------------------------------------------
CONTRACT OR NET
NOTIONAL UNREALIZED UNREALIZED UNREALIZED
AMOUNT GAINS LOSSES GAINS (LOSSES)
-------------- ----------- ------------ -------------
(in thousands)
<S> <C> <C> <C> <C>
Interest Rate Swaps:
Modifying the Interest Rate Characteristics of:
Interest-Earning Assets............................ $ 583,148 $ 460 $(19,641) $(19,181)
Interest-Bearing Liabilities....................... 1,545,000 27,202 (5,370) 21,832
---------- ------- -------- --------
$2,128,148 27,662 (25,011) 2,651
==========
Futures and Options Contracts:
Purchased:
Modifying the Interest Rate Characteristics of
Interest-Earning Assets.......................... $ 55,911 1 (29) (28)
Sold:
Modifying the Interest Rate Characteristics of
Interest-Earning Assets.......................... 31,660
----------
$ 87,571 - - -
========== ------- -------- --------
$27,663 $(25,040) $ 2,623
======= ======== ========
DECEMBER 31, 1994
--------------------------------------------------------------
CONTRACT OR NET
NOTIONAL UNREALIZED UNREALIZED UNREALIZED
AMOUNT GAINS LOSSES GAINS (LOSSES)
-------------- ----------- ------------ -------------
(in thousands)
Interest Rate Swaps:
Modifying the Interest Rate Characteristics of:
Interest-Earning Assets............................ $ 686,095 $ 1,072 $ (8,231) $ (7,159)
Interest-Bearing Liabilities....................... 1,209,028 20,197 (8,368) 11,829
---------- ------- -------- --------
$1,895,123 21,269 (16,599) 4,670
==========
Futures and Options Contracts Purchased:
Modifying the Interest Rate Characteristics of
Interest-Earning Assets............................ $ 11,103 299 - 299
========== ------- -------- --------
$21,568 $(16,599) $ 4,969
======= ======== ========
</TABLE>
Unrealized gains and losses in the preceding tables are calculated based on
differences between current market interest rates, as of the dates indicated,
and the interest rates specified in the contracts. Unrealized gains are also a
measure of the credit risk applicable to the contracts. Credit risk occurs when
one party to a contract fails to perform in accordance with the terms of the
contract.
Gains and losses can also occur if the Corporation should elect to terminate a
contract prior to maturity. Such realized gains or losses are deferred and
recognized over the period to which the risk management contract related. As of
September 30, 1995, there was $10,529,000 of deferred losses which will be
amortized over a period of approximately two years.
-10-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont'd.)
The following tables show the contract or notional amount and the fair value of
customer accommodation and other contracts at September 30, 1995, and December
31, 1994. Fair values are the amounts that would be received (asset amount) and
the amounts that would be paid (liability amount) to replace existing contracts
with new contracts given current market interest rates.
<TABLE>
<CAPTION>
CUSTOMER ACCOMMODATION AND
OTHER CONTRACTS:
SEPTEMBER 30, 1995
-----------------------------------------
CONTRACT OR FAIR VALUE
NOTIONAL -----------------------
AMOUNT ASSET LIABILITY
------------ ---------- -----------
(in thousands)
<S> <C> <C> <C>
Interest Rate Swaps:
Receive Fixed.................................... $ 807,798 $13,893 $ 6,022
Pay Fixed........................................ 706,069 6,532 13,201
Basis............................................ 450,000 339 169
---------- ------- -------
$1,963,867 20,764 19,392
==========
Futures Contracts:
Purchased........................................ $ 2,000 221 577
Sold............................................. 1,378,500 - -
Interest Rate Options:
Purchased........................................ 215,778 770 -
Written.......................................... 623,727 - 741
------- -------
$21,755 $20,710
======= =======
DECEMBER 31, 1994
-----------------------------------------
CONTRACT OR FAIR VALUE
NOTIONAL -----------------------
AMOUNT ASSET LIABILITY
------------ ---------- -----------
(in thousands)
Interest Rate Swaps:
Receive Fixed.................................... $ 666,419 $ 6,008 $17,262
Pay Fixed........................................ 584,388 15,963 5,683
Basis............................................ 430,000 75 64
---------- ------- -------
$1,680,807 22,046 23,009
==========
Futures Contracts:
Purchased........................................ $ 69,100 - -
Sold............................................. 614,100 - -
Interest Rate Options:
Purchased........................................ 224,904 4,415 -
Written.......................................... 224,892 - 4,435
------- -------
$26,461 $27,444
======= =======
</TABLE>
In contrast to risk management contracts, where only realized gains and losses
in value are recorded, unrealized valuation changes for customer accommodation
and other contracts are recognized and recorded currently in Non-Interest
Income. The net amount of such gains and losses recognized in each of the
following periods was:
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30
--------------------------------
1995 1994
------------ ------------
(in thousands)
<S> <C> <C>
Interest Rate Swaps............................... $ 3,792 $ 298
Futures Contracts................................. (3,866) 1,104
Interest Rate Options............................. 141 73
------- ------
$ 67 $1,475
======= ======
</TABLE>
-11-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont'd.)
NOTE E - ASSETS PLEDGED
- -----------------------
Assets, principally Investment Securities, carried at approximately
$5,464,870,000 were pledged at September 30, 1995, to secure public deposits
(including deposits of $106,709,000 of the Treasurer, State of Michigan),
repurchase agreements and for other purposes required by law.
NOTE F - EXTRAORDINARY ITEM
- ---------------------------
On March 15, 1994, an extraordinary item charge of $7,730,000 (net of income
taxes) was incurred, representing the premium paid and unamortized issuance
costs related to the Corporation's call and redemption of the $199,985,000 7.25%
Convertible Subordinated Debentures Due 2006.
NOTE G - COMMITMENTS AND CONTINGENCIES
- --------------------------------------
In the normal course of business the Corporation and its subsidiaries have
various outstanding commitments and contingent liabilities, including
guarantees, commitments to extend credit, foreign exchange futures contracts,
etc., which are not reflected in the financial statements. Management does not
anticipate any material loss as a result of these transactions.
The Corporation is a defendant in various legal proceedings arising in the
normal course of business. In the opinion of management, based on the advice of
legal counsel, the ultimate resolution of these proceedings will not have a
material effect on the Corporation's financial position.
Outstanding standby letters of credit at September 30, 1995, totaled
approximately $2,328,000,000.
NOTE H - PENDING MERGER
- -----------------------
The Corporation and First Chicago Corporation (First Chicago) entered into an
Agreement and Plan of Merger, dated July 11, 1995, pursuant to which First
Chicago will merge with and into the Corporation. The name of the combined
companies will be First Chicago NBD Corporation (FCNBD). Stockholders of the
Corporation and First Chicago approved the merger in October 1995, and the final
regulatory approval was received in November 1995. It is anticipated that the
merger will be accounted for as a pooling-of-interests and will be consummated
on November 30, 1995, pending 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 the Corporation 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, the Corporation
granted First Chicago an option to purchase, under certain circumstances, up to
19.9 percent of the Corporation's outstanding shares of common stock. First
Chicago also granted the Corporation an option to purchase, under certain
circumstances, up to 19.9 percent of First Chicago's outstanding shares of
common stock.
-12-
