<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
AUGUST 15, 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
June 30, 1995).
99(a) Pro forma financial information.
99(b) Certain NBD historical financial information for the quarters and six
months ended June 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: /s/ William J. Roberts
----------------------------------------------
Name: William J. Roberts
Title: Senior Vice President and Comptroller
Date: August 15, 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 (the "Merger Agreement"), pursuant to which the Corporation will
merge 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 by early 1996, pending approvals of
the 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.
-4-
<PAGE>
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.
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 June 30, 1995, and (ii) the unaudited
pro forma condensed combined statements of income for the six-month periods
ended June 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. Accordingly, the historical financial information
for NBD as of and for the six months ended June 30, 1995, include the operations
of AmeriFed. On July 1, 1995, NBD acquired the $760 million asset Deerbank
Corporation ("Deerbank") of Deerfield, Illinois, which was accounted for as a
purchase. With respect to the following pro forma condensed combined financial
statements, the historical financial information for NBD was not restated to
otherwise include amounts for AmeriFed and Deerbank as such acquisitions are not
considered material.
-5-
<PAGE>
FIRST CHICAGO NBD CORPORATION
PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF JUNE 30, 1995
(UNAUDITED)
The following pro forma condensed combined balance sheet as of June 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 JUNE 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.. $ 3,646 $ 2,376 $ 6,022
-----------------------------------------------------------------------------------------------------
Due from banks-interest bearing.............. 9,484 579 10,063
-----------------------------------------------------------------------------------------------------
Federal funds sold and securities
-----------------------------------------------------------------------------------------------------
under resale agreements................... 14,274 138 14,412
-----------------------------------------------------------------------------------------------------
Trading account assets....................... 7,706 144 7,850
-----------------------------------------------------------------------------------------------------
Derivative product assets.................... 8,909 87 8,996
-----------------------------------------------------------------------------------------------------
Investment securities........................ 2,583 11,092 13,675
-----------------------------------------------------------------------------------------------------
Loans........................................ 26,517 31,967 58,484
-----------------------------------------------------------------------------------------------------
Allowance for credit losses.................. (689) (470) (1,159)
-----------------------------------------------------------------------------------------------------
Other assets................................. 2,898 2,138 5,036
-----------------------------------------------------------------------------------------------------
Total assets................................. $75,328 $48,051 $ - $123,379
-----------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------
LIABILITIES
-----------------------------------------------------------------------------------------------------
Deposits:
-----------------------------------------------------------------------------------------------------
Demand...................................... $ 6,941 $ 6,805 $ 13,746
-----------------------------------------------------------------------------------------------------
Savings..................................... 7,442 12,455 19,897
-----------------------------------------------------------------------------------------------------
Time........................................ 5,681 9,636 15,317
-----------------------------------------------------------------------------------------------------
Foreign offices............................. 13,700 3,659 17,359
-----------------------------------------------------------------------------------------------------
Total deposits............................... 33,764 32,555 - 66,319
-----------------------------------------------------------------------------------------------------
Short-term borrowings........................ 23,516 7,862 31,378
-----------------------------------------------------------------------------------------------------
Long-term debt............................... 2,271 3,012 5,283
-----------------------------------------------------------------------------------------------------
Derivative product liabilities............... 8,581 92 8,673
-----------------------------------------------------------------------------------------------------
Other liabilities............................ 2,425 928 146 3,499
-----------------------------------------------------------------------------------------------------
Total liabilities............................ 70,557 44,449 146 115,152
-----------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
-----------------------------------------------------------------------------------------------------
Preferred stock.............................. 611 - 611
-----------------------------------------------------------------------------------------------------
Common stock................................. 467 161 (467) 323
-----------------------------------------------------------------------------------------------------
162
-----------------------------------------------------------------------------------------------------
Surplus...................................... 1,712 533 (1,712) 2,362
-----------------------------------------------------------------------------------------------------
1,829
-----------------------------------------------------------------------------------------------------
Retained earnings............................ 2,169 3,082 (142) 5,105
-----------------------------------------------------------------------------------------------------
(4)
-----------------------------------------------------------------------------------------------------
Other........................................ - (57) (57)
-----------------------------------------------------------------------------------------------------
Total........................................ 4,959 3,719 (334) 8,344
-----------------------------------------------------------------------------------------------------
Less: Treasury stock......................... 188 117 (188) 117
-----------------------------------------------------------------------------------------------------
Stockholders' equity......................... 4,771 3,602 (146) 8,227
-----------------------------------------------------------------------------------------------------
Total liabilities and
-----------------------------------------------------------------------------------------------------
stockholders' equity.................... $75,328 $48,051 $ - $123,379
-----------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to unaudited pro forma condensed combined financial
statements.
-6-
<PAGE>
<TABLE>
<CAPTION>
FIRST CHICAGO NBD CORPORATION
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR SIX MONTHS ENDED JUNE 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............ $1,198.3 $1,345.8 $2,544.1
--------------------------------------------------------------------------------
Interest on federal funds sold and
--------------------------------------------------------------------------------
securities under resale agreements.. 479.5 6.4 485.9
--------------------------------------------------------------------------------
Interest on trading account assets.... 190.8 3.5 194.3
--------------------------------------------------------------------------------
Interest on investment securities..... 43.9 397.4 441.3
--------------------------------------------------------------------------------
Other interest income................. 281.7 22.9 304.6
--------------------------------------------------------------------------------
Total................................. 2,194.2 1,776.0 3,970.2
--------------------------------------------------------------------------------
INTEREST EXPENSE
--------------------------------------------------------------------------------
Interest on deposits.................. 635.7 604.0 1,239.7
--------------------------------------------------------------------------------
Interest on short-term borrowings..... 737.4 231.3 968.7
--------------------------------------------------------------------------------
Interest on long-term debt............ 91.9 91.4 183.3
--------------------------------------------------------------------------------
Total................................. 1,465.0 926.7 2,391.7
--------------------------------------------------------------------------------
NET INTEREST INCOME................... 729.2 849.3 1,578.5
--------------------------------------------------------------------------------
Provision for credit losses........... 135.0 40.2 175.2
--------------------------------------------------------------------------------
Net Interest Income After
--------------------------------------------------------------------------------
Provision for Credit Losses......... 594.2 809.1 1,403.3
--------------------------------------------------------------------------------
NONINTEREST INCOME
--------------------------------------------------------------------------------
Equity securities gains............... 114.5 - 114.5
--------------------------------------------------------------------------------
Investment securities gains........... - 1.7 1.7
--------------------------------------------------------------------------------
Credit card fee revenue............... 404.8 20.1 424.9
--------------------------------------------------------------------------------
Other noninterest income.............. 438.5 259.3 697.8
--------------------------------------------------------------------------------
Total................................. 957.8 281.1 1,238.9
--------------------------------------------------------------------------------
NONINTEREST EXPENSE
--------------------------------------------------------------------------------
Salaries and employee benefits........ 461.2 361.8 823.0
--------------------------------------------------------------------------------
Occupancy and equipment expense....... 138.1 106.8 244.9
--------------------------------------------------------------------------------
Other noninterest expense............. 366.5 191.1 557.6
--------------------------------------------------------------------------------
Total................................. 965.8 659.7 1,625.5
--------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES............ 586.2 430.5 1,016.7
--------------------------------------------------------------------------------
Applicable income taxes............... 203.7 146.2 349.9
--------------------------------------------------------------------------------
INCOME FROM CONTINUING OPERATIONS..... $ 382.5 $ 284.3 $ 666.8
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
COMMON SHARE DATA
--------------------------------------------------------------------------------
Income from continuing operations
--------------------------------------------------------------------------------
Primary............................... $ 3.98 $ 1.79 $ 2.00
--------------------------------------------------------------------------------
Fully diluted......................... $ 3.88 $ 1.79 $ 1.97
--------------------------------------------------------------------------------
Weighted average shares
--------------------------------------------------------------------------------
Primary............................... 91.1 158.6 323.5
--------------------------------------------------------------------------------
Fully diluted......................... 95.0 158.6 330.5
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
</TABLE>
See accompanying notes to unaudited pro forma condensed combined financial
statements.
-7-
<PAGE>
<TABLE>
<CAPTION>
FIRST CHICAGO NBD CORPORATION
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR SIX MONTHS ENDED JUNE 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............ $ 907.9 $ 969.0 $1,876.9
--------------------------------------------------------------------------------
Interest on federal funds sold and
--------------------------------------------------------------------------------
securities under resale agreements.. 224.7 2.8 227.5
--------------------------------------------------------------------------------
Interest on trading account assets.... 115.8 2.4 118.2
--------------------------------------------------------------------------------
Interest on investment securities..... 30.5 349.3 379.8
--------------------------------------------------------------------------------
Other interest income................. 157.5 15.0 172.5
--------------------------------------------------------------------------------
Total................................. 1,436.4 1,338.5 2,774.9
--------------------------------------------------------------------------------
INTEREST EXPENSE
--------------------------------------------------------------------------------
Interest on deposits.................. 336.8 390.8 727.6
--------------------------------------------------------------------------------
Interest on short-term borrowings..... 354.0 107.7 461.7
--------------------------------------------------------------------------------
Interest on long-term debt............ 82.2 52.4 134.6
--------------------------------------------------------------------------------
Total................................. 773.0 550.9 1,323.9
--------------------------------------------------------------------------------
NET INTEREST INCOME................... 663.4 787.6 1,451.0
--------------------------------------------------------------------------------
Provision for credit losses........... 93.0 24.0 117.0
--------------------------------------------------------------------------------
Net Interest Income After
--------------------------------------------------------------------------------
Provision for Credit Losses......... 570.4 763.6 1,334.0
--------------------------------------------------------------------------------
NONINTEREST INCOME
--------------------------------------------------------------------------------
Equity securities gains............... 138.1 - 138.1
--------------------------------------------------------------------------------
Investment securities gains........... 1.1 0.3 1.4
--------------------------------------------------------------------------------
Credit card fee revenue............... 376.2 18.1 394.3
--------------------------------------------------------------------------------
Other noninterest income.............. 415.3 254.3 669.6
--------------------------------------------------------------------------------
Total................................. 930.7 272.7 1,203.4
--------------------------------------------------------------------------------
NONINTEREST EXPENSE
--------------------------------------------------------------------------------
Salaries and employee benefits........ 420.3 355.5 775.8
--------------------------------------------------------------------------------
Occupancy and equipment expense....... 156.1 105.6 261.7
--------------------------------------------------------------------------------
Other noninterest expense............. 368.7 193.5 562.2
--------------------------------------------------------------------------------
Total................................. 945.1 654.6 1,599.7
--------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES............ 556.0 381.7 937.7
--------------------------------------------------------------------------------
Applicable income taxes............... 193.5 123.6 317.1
--------------------------------------------------------------------------------
INCOME FROM CONTINUING OPERATIONS..... $ 362.5 $ 258.1 $ 620.6
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
COMMON SHARE DATA
--------------------------------------------------------------------------------
Income from continuing operations
--------------------------------------------------------------------------------
Primary............................... $ 3.76 $ 1.61 $ 1.84
--------------------------------------------------------------------------------
Fully diluted......................... $ 3.67 $ 1.59 $ 1.81
--------------------------------------------------------------------------------
Weighted average shares
--------------------------------------------------------------------------------
Primary............................... 87.9 160.7 319.8
--------------------------------------------------------------------------------
Fully diluted......................... 91.7 163.5 329.4
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
</TABLE>
See accompanying notes to unaudited pro forma condensed combined financial
statements.
-8-
<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 by the first quarter of
1996.
b) The Corporation is still in the process of reviewing its accounting policies
in light of those employed by NBD. As a result of this review, it might be
necessary to restate either the Corporation's or NBD's financial statements
to conform to those accounting policies that are most appropriate. No
restatements of prior periods have been included in the pro forma condensed
combined financial statements. Any restatements, if appropriate, will be
made upon the completion of this review process.
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 June 30, 1995, reflect
the Merger accounted for as a pooling-of-interests, through the exchange of
162.4 million shares of FCNBD common stock (using the common exchange ratio
of 1.81) for the 89.7 million outstanding shares of the
-9-
<PAGE>
Corporation. Retained earnings and dividends payable have been adjusted by
approximately $4 million, reflecting the pro forma number of shares at NBD's
current dividend rate.
The pro forma entries are displayed below (in millions):
<TABLE>
<S> <C> <C>
Debit-- Common stock (First Chicago)...... $ 467
Debit-- Common surplus (First Chicago).... 1,712
Credit-- Treasury stock (First Chicago). $ 188
Credit-- Common stock (FCNBD)........... 162
Credit-- Common surplus (FCNBD)......... 1,829
Debit-- Retained earnings................. $ 4
Credit-- Other liabilities.............. $ 4
</TABLE>
e) The pro forma financial information presented does not give effect to the
Corporation's and NBD's plan to repurchase in the aggregate approximately
$300 million worth of the Corporation and NBD's common stock prior to the
consummation of the Merger.
f) 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.
g) 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
-10-
<PAGE>
the largest component. Product synergies in the large corporate and middle
markets, and staff and functional areas, also provide additional expense
reduction opportunities.
h) The Corporation and NBD are still in the process of reviewing their combined
investment securities portfolio to determine the classification of such
securities as either available-for-sale or held-to-maturity in connection
with the combined company's existing interest rate risk position. As a
result of this review, certain reclassifications of the combined company's
investment securities might take place. No adjustments have been made to
existing securities classifications in the pro forma condensed combined
balance sheet. Any such reclassifications will be accounted for in
accordance with Financial Accounting Standards Board's Statement No. 115.
i) A liability of $225 million has been recorded in the unaudited pro forma
condensed combined balance sheet to reflect management's current estimate of
merger and restructuring related charges in connection with the Merger. This
resulted in a $142 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):
<TABLE>
<S> <C> <C>
Debit-- Retained earnings................ $142
Debit-- Other liabilities-taxes payable.. 83
Credit-- Other liabilities-reserve..... $225
</TABLE>
-11-
<PAGE>
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).
<TABLE>
<CAPTION>
Amount
------
<S> <C>
Personnel $150
Facilities and equipment 45
Other Merger expenses 30
----
$225
====
</TABLE>
-12-
<PAGE>
NBD BANCORP, Inc. Consolidated Balance Sheet
(in thousands except share data)
<TABLE>
<CAPTION>
Assets
June 30 December 31 June 30
1995 1994 1994
------------ ------------ ------------
<S> <C> <C> <C>
Cash and Due From Banks................................ $ 2,375,480 $ 2,587,007 $ 2,279,698
Interest-Bearing Deposits.............................. 579,125 630,688 637,726
Federal Funds Sold and Resale Agreements............... 138,112 399,725 316,504
Trading Account Securities............................. 143,361 122,135 209,552
Investment Securities (Note B):
Available-for-Sale (At Fair Value).................... 3,986,717 4,814,252 5,134,842
Held-to-Maturity (Fair Value of $7,234,024,
$7,381,476 and $8,190,292, respectively)............. 7,105,624 7,608,713 8,184,134
----------- ----------- -----------
11,092,341 12,422,965 13,318,976
----------- ----------- -----------
Loans and Leases (Net of Unearned Income of $201,247,
$171,207 and $139,563, respectively):
Commercial............................................ 16,872,291 15,525,645 14,527,791
Real Estate Construction.............................. 896,671 817,452 729,421
Residential Mortgage.................................. 4,158,906 3,351,840 2,955,520
Mortgages Held For Sale............................... 52,455 30,171 39,155
Consumer.............................................. 8,037,442 7,667,907 7,154,088
Lease Financing....................................... 404,811 363,200 301,804
Foreign............................................... 1,544,589 1,473,449 1,142,117
----------- ----------- -----------
31,967,165 29,229,664 26,849,896
Allowance For Possible Credit Losses (Note C)......... (469,803) (435,051) (423,624)
----------- ----------- -----------
31,497,362 28,794,613 26,426,272
----------- ----------- -----------
Net Premises and Equipment............................. 650,510 630,357 637,907
Customers' Liability on Acceptances.................... 190,282 193,866 160,209
Other Assets........................................... 1,384,121 1,329,777 1,245,268
----------- ----------- -----------
Total Assets........................................ $48,050,694 $47,111,133 $45,232,112
=========== =========== ===========
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
Liabilities and Shareholders' Equity
June 30 December 31 June 30
1995 1994 1994
------------ ------------ ------------
<S> <C> <C> <C>
Deposits:
Demand (Non-Interest Bearing).............................. $ 6,805,618 $ 6,731,050 $ 6,810,491
Savings.................................................... 7,474,257 7,679,922 7,986,172
Money Market Accounts...................................... 4,980,571 4,959,816 5,204,159
Time....................................................... 9,636,043 8,055,429 7,540,540
Foreign Office............................................. 3,658,670 5,803,224 3,402,024
----------- ----------- -----------
32,555,159 33,229,441 30,943,386
Short-Term Borrowings........................................ 7,861,259 7,119,972 7,822,834
Liability on Acceptances..................................... 190,282 193,866 160,209
Accrued Expenses and Sundry Liabilities...................... 829,551 771,963 723,010
Long-Term Debt............................................... 3,012,177 2,504,348 2,332,530
----------- ----------- -----------
Total Liabilities........................................ 44,448,428 43,819,590 41,981,969
----------- ----------- -----------
Shareholders' Equity:
Series A Preferred Stock - Par Value $1, Stated Value $50 - - -
June 30 December 31 June 30
No. of Shares 1995 1994 1994
-------------- ----------- ----------- -----------
Authorized.... 460,000 460,000 460,000
Issued........ - - -
Preferred Stock - No Par Value............................. - - -
June 30 December 31 June 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
June 30 December 31 June 30
No. of Shares 1995 1994 1994
-------------- ----------- ----------- -----------
Authorized.... 500,000,000 500,000,000 500,000,000
Issued........ 160,883,008 160,876,819 160,876,769
Capital Surplus............................................ 533,129 545,717 546,829
Retained Earnings.......................................... 3,082,012 2,903,394 2,712,268
Fair Value Adjustment on Investment Securities
Available-for-Sale (Note B).............................. (39,327) (154,305) (89,936)
Accumulated Translation Adjustment......................... 9,444 6,942 7,118
Deferred Compensation...................................... (27,364) (17,438) (23,897)
Treasury Stock (3,743,613, 4,968,147 and
2,107,170 shares, respectively).......................... (116,511) (153,644) (63,116)
----------- ----------- -----------
Total Shareholders' Equity............................... 3,602,266 3,291,543 3,250,143
----------- ----------- -----------
Total Liabilities and Shareholders' Equity........... $48,050,694 $47,111,133 $45,232,112
=========== =========== ===========
</TABLE>
<PAGE>
NBD BANCORP, Inc. Consolidated Statement of Income
(in thousands except per share data)
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
June 30 June 30
------------------------ --------------------------
1995 1994 1995 1994
--------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Interest Income:
Loans and Leases (including fees).................................. $698,570 $506,959 $1,345,790 $ 969,020
Investment Securities:
Taxable........................................................... 166,572 160,528 350,298 299,474
Non-Taxable....................................................... 23,171 24,490 47,140 49,829
Trading Account Securities......................................... 1,746 1,495 3,534 2,379
Federal Funds Sold and Resale Agreements........................... 2,232 1,914 6,343 2,863
Interest-Bearing Deposits.......................................... 11,654 7,992 22,928 14,992
-------- -------- ---------- ----------
Total Interest Income............................................. 903,945 703,378 1,776,033 1,338,557
-------- -------- ---------- ----------
Interest Expense:
Deposits........................................................... 311,486 207,290 604,061 390,829
Short-Term Borrowings.............................................. 115,590 62,302 231,311 107,675
Long-Term Debt..................................................... 48,296 27,398 91,396 52,405
-------- -------- ---------- ----------
Total Interest Expense............................................ 475,372 296,990 926,768 550,909
-------- -------- ---------- ----------
Net Interest Income................................................. 428,573 406,388 849,265 787,648
Provision for Possible Credit Losses............................... 20,091 8,579 40,187 24,039
-------- -------- ---------- ----------
Net Interest Income After Provision
For Possible Credit Losses......................................... 408,482 397,809 809,078 763,609
-------- -------- ---------- ----------
Non-Interest Income:
Trust Fees......................................................... 42,242 39,803 80,753 77,913
Service Charges on Deposit Accounts................................ 40,964 38,790 81,071 79,769
Credit Card Fees................................................... 10,615 9,691 20,131 18,068
Securities Gains................................................... 308 (85) 1,684 305
Other.............................................................. 51,277 45,749 97,497 96,643
-------- -------- ---------- ----------
Total Non-Interest Income......................................... 145,406 133,948 281,136 272,698
-------- -------- ---------- ----------
Non-Interest Expenses:
Compensation:
Salaries.......................................................... 138,259 134,856 273,349 268,315
Benefits.......................................................... 46,209 43,906 88,416 87,195
-------- -------- ---------- ----------
Total Compensation............................................... 184,468 178,762 361,765 355,510
Net Occupancy...................................................... 29,920 29,968 60,327 60,049
Equipment Rentals, Depreciation and Maintenance.................... 23,220 23,597 46,434 45,551
FDIC and Other Regulatory Assessments.............................. 16,507 16,741 33,114 33,416
Amortization of Intangibles........................................ 7,521 6,577 15,025 13,101
Other.............................................................. 74,622 76,664 143,064 147,001
-------- -------- ---------- ----------
Total Non-Interest Expenses....................................... 336,258 332,309 659,729 654,628
-------- -------- ---------- ----------
Income before Income Taxes.......................................... 217,630 199,448 430,485 381,679
Income Tax Expense(Benefit) (Including tax effect of $120, ($35),
$592 and $114, respectively, on securities sales)................. 74,188 64,224 146,152 123,579
-------- -------- ---------- ----------
Income before Extraordinary Item and Cumulative
Effect of Accounting Change........................................ 143,442 135,224 284,333 258,100
Extraordinary Item (net of income tax effect) (Note E)............ - - - (7,730)
Cumulative Effect of Accounting Change (net of
income tax effect) (Note A)...................................... - - - (7,885)
-------- -------- ---------- ----------
Net Income.......................................................... $143,442 $135,224 $ 284,333 $ 242,485
======== ======== ========== ==========
Net Income Per Share (on average shares outstanding):
Income before Extraordinary Item and Cumulative
Effect of Accounting Change....................................... $ 0.91 $ 0.84 $ 1.79 $ 1.61
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................................................ $ 0.91 $ 0.84 $ 1.79 $ 1.51
======== ======== ========== ==========
</TABLE>
15
<PAGE>
NBD BANCORP, Inc. Consolidated Statement of Shareholders' Equity
(in thousands except share data)
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
June 30 June 30
------------------------- ------------------------
1995 1994 1995 1994
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Preferred Stock:
Balance, Beginning and End of Period................... $ - $ - $ - $ -
---------- ---------- ---------- ----------
Common Stock:
Balance, Beginning of Period........................... 160,883 160,872 160,877 160,715
Acquisition of Subsidiary Bank........................ - - 270 -
Cancellation of Shares Held in Treasury............... - - (270) -
Other................................................. - 5 6 162
---------- ---------- ---------- ----------
Balance, End of Period................................. 160,883 160,877 160,883 160,877
---------- ---------- ---------- ----------
Capital Surplus:
Balance, Beginning of Period........................... 533,576 546,969 545,717 541,232
Acquisition of Subsidiary Bank........................ - - (6,323) -
Cancellation of Shares Held in Treasury............... - - (8,130) -
Other................................................. (447) (140) 1,865 5,597
---------- ---------- ---------- ----------
Balance, End of Period................................. 533,129 546,829 533,129 546,829
---------- ---------- ---------- ----------
Retained Earnings:
Balance, Beginning of Period........................... 2,990,430 2,624,608 2,903,394 2,565,627
Net Income............................................ 143,442 135,224 284,333 242,485
Cash Dividends Declared on Common Stock
($.33, $.30, $.66 and $.60 per share, respectively).. (51,860) (47,564) (105,715) (95,844)
---------- ---------- ---------- ----------
Balance, End of Period................................. 3,082,012 2,712,268 3,082,012 2,712,268
---------- ---------- ---------- ----------
Fair Value Adjustment on Investment Securities
Available-for-Sale:
Balance, Beginning of Period........................... (78,559) (53,753) (154,305) (7,012)
Change in Fair Value (net of tax)..................... 39,232 (36,183) 114,978 (82,924)
---------- ---------- ---------- ----------
Balance, End of Period................................. (39,327) (89,936) (39,327) (89,936)
---------- ---------- ---------- ----------
Accumulated Translation Adjustment:
Balance, Beginning of Period........................... 9,618 5,122 6,942 4,384
Translation Gain(Loss) (net of tax)................... (174) 1,996 2,502 2,734
---------- ---------- ---------- ----------
Balance, End of Period................................. 9,444 7,118 9,444 7,118
---------- ---------- ---------- ----------
Deferred Compensation:
Balance, Beginning of Period........................... (22,131) (19,119) (17,438) (16,347)
Awards Granted........................................ (8,434) (7,944) (13,247) (14,322)
Amortization of Deferred Compensation................. 3,139 2,186 5,476 5,487
Other................................................. 62 980 (2,155) 1,285
---------- ---------- ---------- ----------
Balance, End of Period................................. (27,364) (23,897) (27,364) (23,897)
---------- ---------- ---------- ----------
Treasury Stock:
Balance, Beginning of Period........................... (88,821) - (153,644) -
Purchase of Common Stock (4,488,298 shares in 1995)... (37,181) (71,099) (139,674) (74,921)
Acquisition of Subsidiary Bank (4,963,381 shares)..... (1) - 153,500 -
Cancellation of Shares Held in Treasury............... - - 8,400 -
Other................................................. 9,492 7,983 14,907 11,805
---------- ---------- ---------- ----------
Balance, End of Period................................. (116,511) (63,116) (116,511) (63,116)
---------- ---------- ---------- ----------
Total Shareholders' Equity, End of Period............... $3,602,266 $3,250,143 $3,602,266 $3,250,143
========== ========== ========== ==========
</TABLE>
16
<PAGE>
NBD BANCORP, Inc. Consolidated Statement of Cash Flows
(in thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30
-------------------------
1995 1994
----------- -----------
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income.................................................................. $ 284,333 $ 242,485
Adjustments to Reconcile Net Income to Net Cash Provided by Operations:
Depreciation and Amortization.............................................. 55,030 50,724
Provision for Possible Credit Losses....................................... 40,187 24,039
Securities Gains........................................................... (1,684) (305)
Extraordinary Item - Redemption of Debt.................................... - 7,730
Increase in Interest Receivable............................................ (84,056) (23,380)
Decrease in Current Income Taxes Payable................................... (24,528) (11,884)
Increase(Decrease) in Accrued Expenses..................................... 72,014 (61,956)
Increase in Trading Account Investments.................................... (20,741) (99,663)
(Increase)Decrease in Mortgages Held for Sale.............................. (22,284) 216,747
Other, net................................................................. (4,568) 15,952
----------- -----------
Net Cash Provided by Operating Activities................................. 293,703 360,489
----------- -----------
Cash Flows from Investing Activities:
Decrease in Interest-Bearing Deposits....................................... 69,516 90,358
Decrease(Increase) in Federal Funds Sold and Resale Agreements.............. 261,613 (34,023)
Purchase of Investment Securities Available-for-Sale........................ (1,037,643) (3,240,460)
Proceeds from Maturity or Call of Investment Securities Available-for-Sale.. 653,739 1,344,020
Proceeds from Sale of Investment Securities Available-for-Sale.............. 1,734,571 387,517
Purchase of Investment Securities Held-to-Maturity.......................... (19,794) (2,671,607)
Proceeds from Maturity or Call of Investment Securities Held-to-Maturity.... 516,877 1,062,770
Increase in Loans and Leases................................................ (2,153,018) (1,486,161)
Proceeds from Sale of Loan Portfolios....................................... 12,253 -
Purchase of Premises and Equipment and Other Assets......................... (51,915) (249,111)
Proceeds from Sale of Premises and Equipment and Other Assets............... 18,265 37,076
Net Cash Acquired(Paid) in Purchase of Subsidiaries......................... 17,290 (5,788)
----------- -----------
Net Cash Provided(Used) by Investing Activities............................ 21,754 (4,765,409)
----------- -----------
Cash Flows from Financing Activities:
(Decrease)Increase in Deposits.............................................. (1,519,693) 1,090,329
Increase in Short-Term Borrowings........................................... 729,052 2,463,980
Proceeds from the Issuance of Long-Term Debt................................ 625,000 1,200,000
Principal Payments on Long-Term Debt........................................ (115,802) (100,939)
Redemption of Long-Term Debt................................................ - (208,734)
Proceeds from Stock Option Exercises........................................ 834 805
Payments to Acquire Treasury Stock.......................................... (139,674) (74,921)
Dividends Paid.............................................................. (105,289) (91,606)
----------- -----------
Net Cash (Used)Provided by Financing Activities............................ (525,572) 4,278,914
----------- -----------
Effect of Exchange Rate Changes on Cash and Due From Banks................... (1,412) 10
----------- -----------
Net Increase in Cash and Due From Banks...................................... (211,527) (125,996)
Cash and Due From Banks - Beginning of Period................................ 2,587,007 2,405,694
----------- -----------
Cash and Due From Banks - End of Period....................................... $ 2,375,480 $ 2,279,698
=========== ===========
Other Cash Flow Disclosures:
Interest Paid............................................................... $ 844,360 $ 640,731
State and Federal Taxes Paid................................................ 170,680 131,025
</TABLE>
17
<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 six
months ended June 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).
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.
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.
18
<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.
Quarter Ended Six Months Ended
June 30 June 30
------------------------ ------------------------
1995 1994 1995 1994
---------- ------------ ----------- -----------
Average Shares
Outstanding.. 157,666,309 160,321,949 158,560,032 160,708,551
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 June 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........................... $ 423,089 $ 2,863 $ 35 $ 425,917
U.S. Government Agencies:
Mortgage-backed Securities............. 1,504,874 715 24,936 1,480,653
Collateralized Mortgage Obligations.... 1,497,034 6,813 15,514 1,488,333
Other.................................. 205,270 832 44 206,058
States and Political Subdivisions....... 88,933 145 1 89,077
Collateralized Mortgage Obligations(a).. 97,741 310 144 97,907
Other................................... 230,995 2,593 34,816 198,772
---------- ------- ------- ----------
Total................................. $4,047,936 $14,271 $75,490 $3,986,717
========== ======= ======= ==========
</TABLE>
<TABLE>
<CAPTION>
Investment Securities Held-to-Maturity
-----------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---------- ---------- ---------- ----------
(in thousands)
<S> <C> <C> <C> <C>
U.S. Treasury...................... $ 515,989 $ 4,144 $ 763 $ 519,370
U.S. Government Agencies:
Mortgage-backed Securities........ 5,277,633 110,531 59,025 5,329,139
Other............................. 7,836 18 85 7,769
States and Political Subdivisions.. 1,303,666 77,931 4,351 1,377,246
Other.............................. 500 - - 500
---------- -------- ------- ----------
Total............................ $7,105,624 $192,624 $64,224 $7,234,024
========== ======== ======= ==========
</TABLE>
(a) All Collateralized Mortgage Obligations of private issuers have underlying
collateral consisting of obligations of U.S. Government Agencies.
19
<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
========== ====== ======== ==========
</TABLE>
<TABLE>
<CAPTION>
Investment Securities Held-to-Maturity
------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
----------- ---------- ---------- -----------
(in thousands)
<S> <C> <C> <C> <C>
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
========== ======= ======== ==========
</TABLE>
(a) All Collateralized Mortgage Obligations of private issuers have underlying
collateral consisting of obligations of U.S. Government Agencies.
Note C - Allowance For Possible Credit Losses
---------------------------------------------
The changes in the Allowance for Possible Credit Losses are summarized below:
<TABLE>
<CAPTION>
Six Months Ended
June 30
--------------------------
1995 1994
-------- ---------
(in thousands)
<S> <C> <C>
Balance, Beginning of Period............ $435,051 $423,030
Provision.............................. 40,187 24,039
Charge-offs............................ (50,355) (61,925)
Recoveries............................. 42,205 38,052
-------- --------
Net Charge-offs....................... (8,150) (23,873)
Acquisition and Other.................. 2,715 290
-------- --------
Balance, End of Period................. $469,803 $423,624
======== ========
</TABLE>
20
<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:
June 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......................... $ 700,653 $ 473 $(22,428) $(21,955)
Interest-Bearing Liabilities.................... 1,430,000 24,999 (13,638) 11,361
---------- ------- -------- --------
$2,130,653 25,472 (36,066) (10,594)
==========
Futures and Options Contracts:
Purchased:
Modifying the Interest Rate Characteristics of
Interest-Earning Assets........................ $ 60,096 - (50) (50)
Sold:
Modifying the Interest Rate Characteristics of
Interest-Earning Assets........................ 700,000 - - -
----------
$ 760,096
========== ------- -------- --------
$25,472 $(36,116) $(10,644)
======= ======== ========
</TABLE>
<TABLE>
<CAPTION>
December 31, 1994
---------------------------------------------------
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......................... $ 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
June 30, 1995, there was $5,179,000 of deferred losses which will be amortized
over a period of approximately two years.
21
<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 June 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:
June 30, 1995
--------------------------------------
Contract or Fair Value
Notional ------------------------
Amount Asset Liability
----------- -------------- ---------
(in thousands)
<S> <C> <C> <C>
Interest Rate Swaps:
Receive Fixed........... $ 744,238 $17,839 $13,840
Pay Fixed............... 653,056 13,331 14,966
Basis................... 450,000 393 304
---------- ------- -------
$1,847,294 31,563 29,110
==========
Futures Contracts:
Purchased............... $ 10,799 - 427
Sold.................... 1,439,850 - -
Interest Rate Options:
Purchased............... 226,062 1,436 -
Written................. 633,777 - 1,407
------- -------
$32,999 $30,944
======= =======
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>
Six Months Ended June 30
--------------------------
1995 1994
------------- -----------
(in thousands)
<S> <C> <C>
Interest Rate Swaps........ $ 3,700 $(28)
Futures Contracts.......... (3,994) 907
Interest Rate Options...... 80 35
------- ----
$ (214) $914
======= ====
</TABLE>
22
<PAGE>
Notes to Consolidated Financial Statements (cont'd.)
Note E - Assets Pledged
-----------------------
Assets, principally Investment Securities, carried at approximately
$6,655,578,000 were pledged at June 30, 1995, to secure public deposits
(including deposits of $66,930,000 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 June 30, 1995, totaled approximately
$2,373,000,000.
Note H - Subsequent Event
-------------------------
The Corporation and First Chicago Corporation (First Chicago) entered into an
Agreement and Plan of Merger dated as of 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). It is anticipated that
the merger will be accounted for as a pooling-of-interests and will be
consummated by early 1996, pending approvals of stockholders of the Corporation
and First Chicago, 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 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.
23
