<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
January 14, 1994
(date of earliest event reported)
KEYCORP
(Exact name of registrant as specified in its charter)
NEW YORK
(State of Incorporation)
1-7022 14-1538208
(Commission File Number) (I.R.S. Employer
Identification Number)
One KeyCorp Plaza, P.O. Box 88, Albany, New York 12201-0088
(Address of executive offices)
(518) 486-8000
(Registrant's telephone number, including area code)
<PAGE> 2
ITEM 5. OTHER EVENTS
PENDING MERGERS AND ACQUISITIONS
KeyCorp is filing this Current Report on Form 8-K to present the
financial statements for Society Corporation of Cleveland, Ohio.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
Listed below are the financial statements filed as part of this report.
(A) Financial Statements of Society Corporation and Subsidiaries:
Consolidated Balance Sheet as of September 30, 1993, December 31,
1992 and September 30, 1992.
Consolidated Statement of Income for the three month and nine month
periods ended September 30, 1993 and 1992.
Consolidated Statement of Shareholders' Equity for the nine month
periods ended September 30,1993 and 1992.
Consolidated Statement of Cash Flows for the nine month periods
ended September 30, 1993 and 1992.
Notes to Consolidated Financial Statements.
(B) Pro Forma Financial Information:
None required.
(C) Exhibits:
99 Financial Statements of Society Corporation and Subsidiaries.
SIGNATURE
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.
KEYCORP
By
--------------------------------------
David J. DeLuca
Senior Vice President
and Controller
DATE: January 14, 1994
<PAGE> 3
<TABLE>
SOCIETY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<CAPTION>
September 30, December 31, September 30,
(dollars in thousands) 1993 1992 1992
- ---------------------------------------------------------------------------------------------------------------------------------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
ASSETS
Cash and due from banks $979,703 $1,345,085 $1,432,473
Interest-bearing deposits with banks 252,191 677,794 537,424
Federal funds sold and security resale agreements 526,200 98,047 103,887
Trading account assets 13,188 3,034 22,402
Mortgage loans held for sale 280,878 170,300 168,279
Securities available for sale (market value: $793,208 and $1,149,577) 737,053 1,122,224
Investment securities (market value: $5,039,901, $4,568,734 and $5,707,018) 4,906,794 4,484,381 5,477,912
Loans, net of unearned income:
Commercial, financial and agricultural 4,263,969 4,430,027 4,591,864
Real estate -- construction 686,382 737,583 807,074
Real estate -- residential 3,294,337 2,317,676 2,098,814
Real estate -- commercial 2,159,038 2,320,787 2,332,839
Consumer 4,133,164 4,130,056 5,007,530
Lease financing 1,082,132 923,856 829,499
Foreign 63,702 101,363 74,512
Student loans held for sale 1,336,616 1,070,140
- --------------------------------------------------------------------------------------------------------------------------------
Total loans 17,019,340 16,031,488 15,742,132
Less: Allowance for loan losses 484,992 502,744 512,736
- --------------------------------------------------------------------------------------------------------------------------------
Net loans 16,534,348 15,528,744 15,229,396
Premises and equipment 430,253 406,560 406,570
Customers' liability on acceptances 16,327 29,428 73,979
Other assets 1,083,698 1,112,705 936,559
- --------------------------------------------------------------------------------------------------------------------------------
Total assets $25,760,633 $24,978,302 $24,388,881
================================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits in domestic offices:
Noninterest-bearing $3,090,748 $3,658,878 $2,982,442
Interest-bearing 14,101,268 13,883,943 14,058,673
Deposits in foreign office -- interest-bearing 572,972 1,115,179 286,079
- --------------------------------------------------------------------------------------------------------------------------------
Total deposits 17,764,988 18,658,000 17,327,194
Federal funds purchased 1,601,535 1,316,567 1,606,465
Securities sold under repurchase agreements 1,529,235 1,517,538 1,769,092
Other short-term borrowings 1,161,099 276,357 441,586
Acceptances outstanding 16,327 29,428 73,979
Other liabilities 601,621 426,257 684,741
Long-term debt 1,077,832 886,052 687,121
- --------------------------------------------------------------------------------------------------------------------------------
Total liabilities 23,752,637 23,110,199 22,590,178
SHAREHOLDERS' EQUITY
Preferred Stock, without par value; authorized 25,000,000 shares,
none issued
Fixed/Adjustable Rate Cumulative Preferred Stock, $50 stated
value; authorized 1,200,000 shares; issued 1,200,000 shares in 1992 60,000 60,000
Common Shares, $1 par value; authorized 400,000,000 shares;
issued 118,658,008, 118,658,008 and 59,329,004 shares 118,658 118,658 59,329
Capital surplus 634,087 632,789 689,190
Retained earnings 1,344,531 1,153,309 1,096,773
Loans to ESOP trustee (63,909) (65,478) (65,478)
Common Shares in treasury, at cost (1,572,340, 1,932,032 and
1,273,911 shares) (25,371) (31,175) (41,111)
- --------------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 2,007,996 1,868,103 1,798,703
- --------------------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $25,760,633 $24,978,302 $24,388,881
================================================================================================================================
<FN>
See notes to consolidated financial statements.
</TABLE>
-3-
<PAGE> 4
<TABLE>
SOCIETY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
-------------------------- ------------------------
(dollars in thousands, except per share amounts) 1993 1992 1993 1992
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INTEREST AND FEE INCOME
Loans -- taxable $330,652 $329,608 $1,006,591 $1,058,463
Loans -- tax-exempt 3,441 4,905 11,600 16,817
Mortgage loans held for sale 4,995 2,417 12,013 9,248
Investment securities -- taxable 92,441 108,446 292,190 307,952
Investment securities -- tax-exempt 6,611 9,002 22,130 28,356
Securities available for sale 15,476 51,035
Short-term investments 4,248 3,364 15,634 18,857
- ------------------------------------------------------------------------------------------------------------------
Total interest and fee income 457,864 457,742 1,411,193 1,439,693
- ------------------------------------------------------------------------------------------------------------------
INTEREST EXPENSE
Deposits 118,708 145,188 375,794 510,651
Federal funds purchased 6,759 4,976 24,931 16,478
Securities sold under repurchase agreements 10,927 12,064 35,967 36,423
Other short-term borrowings 8,343 3,309 19,153 9,926
Long-term debt 19,048 10,743 53,953 26,712
- ------------------------------------------------------------------------------------------------------------------
Total interest expense 163,785 176,280 509,798 600,190
- ------------------------------------------------------------------------------------------------------------------
Net interest income 294,079 281,462 901,395 839,503
PROVISION FOR LOAN LOSSES 17,037 33,877 59,080 116,257
- ------------------------------------------------------------------------------------------------------------------
Net interest income after provision for loan losses 277,042 247,585 842,315 723,246
NONINTEREST INCOME
Trust income 53,640 49,399 160,744 159,428
Service charges on deposit accounts 25,118 24,482 73,586 74,328
Credit card fees 12,390 13,963 35,778 41,513
Net securities gains 25,102 963 26,399 9,633
Gain on sale of subsidiary 29,410 29,410
Gain on sale of branch offices and loans 20,074
Other income 25,229 31,812 70,230 82,676
- ------------------------------------------------------------------------------------------------------------------
Total noninterest income 170,889 120,619 396,147 387,652
- ------------------------------------------------------------------------------------------------------------------
NONINTEREST EXPENSE
Salaries and employee benefits 131,688 122,834 372,544 375,084
Net occupancy 24,743 23,276 70,575 65,436
Equipment 19,867 19,150 58,918 56,993
FDIC insurance 9,808 10,659 31,032 33,174
Professional fees 4,531 7,651 14,898 21,101
Restructuring charges 50,016
Other expense 94,215 62,483 242,538 196,989
- ------------------------------------------------------------------------------------------------------------------
Total noninterest expense 284,852 246,053 790,505 798,793
- ------------------------------------------------------------------------------------------------------------------
Income before income taxes 163,079 122,151 447,957 312,105
PROVISION FOR INCOME TAXES 64,859 39,345 157,811 97,401
- ------------------------------------------------------------------------------------------------------------------
NET INCOME $98,220 $82,806 $290,146 $214,704
==================================================================================================================
Net income applicable to Common Shares $98,220 $81,249 $289,108 $210,034
Net income per Common Share .83 .69 2.44 1.79
Cash dividends per Common Share .28 .245 .84 .735
Weighted average Common Shares and
Common Share equivalents outstanding 118,497,341 117,298,612 118,375,534 117,199,990
==================================================================================================================
<FN>
See notes to consolidated financial statements.
</TABLE>
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<PAGE> 5
<TABLE>
SOCIETY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (UNAUDITED)
<CAPTION>
Loans to Common
(dollars in thousands, except Preferred Common Capital Retained ESOP Shares in
per share amounts) Stock Shares Surplus Earnings Trustee Treasury
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1992 $60,000 $62,557 $809,889 $965,472 $(65,349) $(177,379)
Adjustments relating to pooling
of interests (2) (132) (381)
Cancellation of treasury stock of
pooled company (3,300) (124,793) 128,093
Net income for the nine months
ended September 30, 1992 214,704
Cash dividends on Common
Shares, $.735 per share (73,044)
Cash dividends on Fixed/Adjustable
Rate Cumulative Preferred Stock,
$1.297 per share (3,113)
Cash dividends of pooled company
prior to merger:
Common Shares (6,098)
Preferred Stock (1,556)
Issuance of 327,426 Common Shares
under stock option plans 74 4,226 8,175
Tax benefits attributable to ESOP
dividends 789
Loan payment from ESOP trustee
received or accrued (129)
- -------------------------------------------------------------------------------------------------------------
BALANCE AT SEPTEMBER 30, 1992 $60,000 $59,329 $689,190 $1,096,773 $(65,478) $(41,111)
=============================================================================================================
BALANCE AT JANUARY 1, 1993 $60,000 $118,658 $632,789 $1,153,309 $(65,478) $(31,175)
Net income for the nine months
ended September 30, 1993 290,146
Cash dividends on Common
Shares, $.84 per share (98,205)
Cash dividends on Fixed/Adjustable
Rate Cumulative Preferred Stock,
$1.297 per share (1,556)
Redemption of 1,200,000 shares of
Fixed/Adjustable Rate Cumulative
Preferred Stock (60,000) (1,800)
Issuance of 359,692 Common
Shares under stock option plans 3,098 5,804
Tax benefits attributable to ESOP
dividends 837
Loan payment from ESOP trustee
received or accrued 1,569
- -------------------------------------------------------------------------------------------------------------
BALANCE AT SEPTEMBER 30, 1993 $118,658 $634,087 $1,344,531 $(63,909) $(25,371)
=============================================================================================================
<FN>
See notes to consolidated financial statements.
</TABLE>
- 5 -
<PAGE> 6
<TABLE>
SOCIETY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
<CAPTION>
Nine months ended
September 30,
-----------------------------------------
(in thousands) 1993 1992
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $290,146 $214,704
Adjustments to reconcile net income to net cash provided by
operating activities:
Provision for loan losses 59,080 116,257
Provision for depreciation and amortization 93,057 62,151
Deferred income tax provision 28,334 9,425
Net increase in trading account assets (10,154) (20,837)
Net increase in mortgage loans held for sale (110,578) (63,650)
Net securities gains (26,399) (9,633)
Gain on sale of subsidiary (29,410)
Gain on sale of branch offices and loans (20,074)
Decrease in interest receivable 15,422 778
Increase (decrease) in interest payable 17,084 (13,537)
Net increase (decrease) in accrued restructuring charges (19,123) 11,555
Other, net 61,102 270,962
- ---------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 368,561 558,101
- ---------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Proceeds from prepayments and maturities of investment securities 1,118,076 1,222,610
Proceeds from sales of investment securities 116,246 610,458
Purchases of investment securities (1,551,294) (2,472,487)
Net decrease in securities available for sale 461,639
Net decrease (increase) in Federal funds sold and security resale
agreements (428,153) 454,650
Net decrease in interest-bearing deposits with banks 529,228 441,437
Net decrease (increase) in loans held by bank subsidiaries, excluding
loans purchased or sold (448,500) 454,831
Principal collected on loans held by nonbank subsidiaries and loans
sold 453,639 310,555
Loans originated by nonbank subsidiaries and loans purchased (281,931) (71,773)
Purchases of premises and equipment (62,560) (133,702)
Proceeds from sales of premises and equipment 4,172 8,988
Proceeds from sale of subsidiary (117,858)
Purchase of thrift or bank subsidiary, net of cash acquired 148,054 (2,286)
- ---------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities (59,242) 823,281
- ---------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Net decrease in deposits (1,929,498) (1,799,908)
Net increase in short-term borrowings 1,181,407 859,858
Net proceeds from issuance of long-term debt 310,499 200,000
Payments on long-term debt (104,411) (12,276)
Redemption of preferred stock (61,800)
Proceeds from exercise of stock options 7,149 10,548
Cash dividends (99,761) (83,811)
Sales of branch offices and loans:
Deposit liabilities assumed by purchasers (1,032,006)
Loans sold in conjunction with branch sales 377,578
Long-term debt issued to fund branch sale 36,154
Other, net 23,956
Other financing activities, net 21,714 (2,922)
- ---------------------------------------------------------------------------------------------------------
Net cash used in financing activities (674,701) (1,422,829)
- ---------------------------------------------------------------------------------------------------------
DECREASE IN CASH AND DUE FROM BANKS (365,382) (41,447)
CASH AND DUE FROM BANKS AT BEGINNING OF PERIOD 1,345,085 1,473,920
- ---------------------------------------------------------------------------------------------------------
CASH AND DUE FROM BANKS AT END OF PERIOD $979,703 $1,432,473
=========================================================================================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash interest payments $492,714 $613,727
Cash income tax payments 53,731 66,300
=========================================================================================================
<FN>
See notes to consolidated financial statements.
</TABLE>
- 6 -
<PAGE> 7
SOCIETY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Basis of Presentation
- ----------------------
The unaudited consolidated financial statements include the accounts of Society
Corporation and its subsidiaries (the "Corporation"). Significant intercompany
transactions have been eliminated. The financial statements contain all
adjustments and disclosures which, in the opinion of management, are necessary
for a fair presentation of the results of the interim periods presented and
should be read in conjunction with the Notes to Consolidated Financial
Statements included in Society's 1992 Annual Report to shareholders. Certain
amounts previously reported in the financial statements have been reclassified
to conform with the current presentation. The results of operations for the
first nine months of 1993 are not necessarily indicative of the results to be
expected for the full year.
Common Shares
- -------------
Net income per Common Share is computed by dividing net income, less any
dividend requirement on preferred stock, by the weighted average number of
Common Shares and Common Share equivalents outstanding during the period as
presented below. These amounts have been adjusted to reflect a two-for-one
stock split declared January 21, 1993, and effected by means of a 100% stock
dividend paid on March 22, 1993, to shareholders of record on March 2, 1993.
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
------------------------------ ------------------------------
1993 1992 1993 1992
------------- -------------- ------------ --------------
<S> <C> <C> <C> <C>
Weighted average Common Shares outstanding 117,059,185 115,999,142 116,904,270 115,833,334
Common Share equivalents -- stock options 1,438,156 1,299,470 1,471,264 1,366,656
------------- -------------- ------------ --------------
Weighted average Common Shares and
Common Share equivalents outstanding 118,497,341 117,298,612 118,375,534 117,199,990
============= ============== ============ ==============
</TABLE>
Mergers, Acquisitions and Divestitures
- --------------------------------------
On October 1, 1993, KeyCorp and Society entered into a definitive agreement
which provides for the merger of KeyCorp into and with Society, which will be
the surviving corporation. Under the terms of the agreement, each outstanding
share of KeyCorp Common Stock will be converted into 1.205 common shares of the
surviving corporation. The outstanding preferred stock of KeyCorp will be
exchanged for a comparable, newly-created issue of preferred stock of the
surviving corporation on a share-for-share basis. The merger, which is subject
to the approval of KeyCorp and Society shareholders, as well as appropriate
regulatory authorities, is presently expected to close in early 1994. It is
anticipated that the transaction will be accounted for as a pooling of
interests and will qualify as a tax-free exchange for KeyCorp and Society
shareholders. Total merger expenses and restructuring charges are estimated to
be in the range of $90 to $110 million. KeyCorp, a bank holding company based
in Albany, New York, had total assets of $32.4 billion at September 30, 1993,
and has banking offices in Alaska, Colorado, Idaho, Maine, New York, Oregon,
Utah, Washington, and Wyoming.
On October 6, 1993, the Corporation completed the previously-announced cash
purchase of Schaenen Wood & Associates, Inc. ("SWA"), a New York City-based
investment management firm which manages approximately $1.3 billion in assets.
The transaction was accounted for as a purchase with the excess of the cost
over the fair value of net assets acquired recorded as goodwill. Accordingly,
the results of operations of SWA will be included in the consolidated financial
statements subsequent to the date of acquisition.
On September 15, 1993, the Corporation completed the sale of Ameritrust Texas
Corporation ("ATC") to Texas Commerce Bank National Association, an affiliate
of Chemical Banking Corporation. ATC was based in Dallas, Texas, and provided a
range of investment management and fiduciary services to institutions,
businesses and individuals through 11 offices operating in Texas. For the
year-to-date period through the closing date, ATC had operating
- 7 -
<PAGE> 8
revenues (primarily trust income) of $37.4 million and net income of $3.2
million. The $29.4 million gain on the sale ($12.2 million after-tax, $.10 per
Common Share) is included in noninterest income for the third quarter of 1993.
On January 22, 1993, the Corporation acquired all the outstanding shares of
First Federal Savings and Loan Association of Fort Myers ("Society First
Federal"), a federal stock savings bank, at a price of $45 per share for a
total cash consideration of $144.0 million. The transaction was accounted for
as a purchase with the excess of the cost over the fair value of net assets
acquired recorded as goodwill. Accordingly, the results of operations of
Society First Federal have been included in the consolidated financial
statements subsequent to the date of acquisition. Society First Federal
operates 24 offices in southwestern and central Florida and had approximately
$1.1 billion in total assets at the acquisition date.
Securities
- ----------
The book values, unrealized gains and losses, and approximate market values of
securities held for investment and available for sale were as follows (in
thousands):
<TABLE>
<CAPTION>
September 30, 1993
-----------------------------------------------------------
Book Unrealized Unrealized Market
Value Gains Losses Value
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Federal agency $3,717,421 $98,176 $867 $3,814,730
States and political subdivisions 427,930 17,313 227 445,016
Other securities 761,443 18,731 19 780,155
----------- ---------- ---------- -----------
Total investment securities $4,906,794 $134,220 $1,113 $5,039,901
=========== ========== ========== ===========
Securities available for sale $737,053 $56,155 $0 $793,208
=========== ========== ========== ===========
</TABLE>
<TABLE>
<CAPTION>
December 31, 1992
-----------------------------------------------------------
Book Unrealized Unrealized Market
Value Gains Losses Value
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Federal agency $3,358,457 $ 74,094 $24,244 $3,408,307
States and political subdivisions 524,825 18,317 298 542,844
Other securities 601,099 16,683 199 617,583
----------- ---------- ---------- -----------
Total investment securities $4,484,381 $109,094 $24,741 $4,568,734
=========== ========== ========== ===========
Securities available for sale $1,122,224 $32,042 $4,689 $1,149,577
=========== ========== ========== ===========
</TABLE>
<TABLE>
At September 30, 1993, the Corporation's securities had the following
maturities (in thousands):
<CAPTION>
September 30, 1993
-----------------------------------------------------------
Investment Securities Securities Available for Sale
---------------------------- -----------------------------
Book Market Book Market
Value Value Value Value
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Due in one year or less $371,100 $376,882 $203,343 $206,418
Due after one through five years 2,596,063 2,687,663 330,286 351,686
Due after five through ten years 1,822,418 1,857,892 200,881 231,937
Due after ten years 117,213 117,464 2,543 3,167
----------- ---------- ---------- -----------
Total $4,906,794 $5,039,901 $737,053 $793,208
=========== ========== ========== ===========
</TABLE>
[FN]
Collateralized mortgage obligations and mortgage-backed securities, primarily
included in Federal agency securities, amounted to $3,703.2 million at
September 30, 1993. These securities are included in the above investment
securities maturity schedule based on their expected average lives.
- 8 -
<PAGE> 9
In May 1993, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." SFAS No. 115 requires that
investments in equity securities having readily determinable fair values and
all investments in debt securities be classified and accounted for in three
categories. Debt securities that management has the positive intent and ability
to hold to maturity are to be classified as "held-to-maturity securities" and
reported at amortized cost. Debt and equity securities that are bought and held
principally for the purpose of selling them in the near term are to be
classified as "trading securities" and reported at fair value, with unrealized
gains and losses included in operating results. Debt and equity securities not
classified as either held-to-maturity securities or trading securities are to
be classified as "available for sale securities" and reported at fair value,
with unrealized gains and losses excluded from operating results and reported
in a separate component of shareholders' equity. Adoption of the standard is
required for fiscal years beginning after December 15, 1993, with earlier
application permitted. The Corporation has not yet determined if it will
early-adopt the new standard. Based upon the Corporation's securities portfolio
as of September 30, 1993, the estimated impact of adopting the standard would
be an increase to shareholders' equity of approximately $37 million, with no
impact on the results of operations.
Pledged Assets
- --------------
Corporate assets, primarily securities, with a book value of approximately
$4,547.1 million at September 30, 1993, were pledged to secure public and trust
deposits and securities sold under repurchase agreements, and for other
purposes required or permitted by law.
Allowance for Loan Losses
- -------------------------
<TABLE>
Changes in the allowance for loan losses are summarized as follows (in
thousands):
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
-------------------------- --------------------------
1993 1992 1993 1992
--------- -------- --------- ---------
<S> <C> <C> <C> <C>
Balance at beginning of period $489,044 $523,142 $502,744 $525,916
Recoveries 11,815 13,819 38,856 42,464
Charge-offs (32,904) (59,130) (116,537) (172,929)
--------- -------- --------- ---------
Net charge-offs (21,089) (45,311) (77,681) (130,465)
Provision for loan losses 17,037 33,877 59,080 116,257
Allowances of affiliates purchased 1,028 849 1,028
--------- -------- --------- ---------
Balance at end of period $484,992 $512,736 $484,992 $512,736
========= ======== ========= =========
</TABLE>
- 9 -
<PAGE> 10
Nonperforming Assets
- --------------------
Nonperforming assets were as follows (in thousands):
<TABLE>
<CAPTION>
September 30, December 31, September 30,
1993 1992 1992
------------- ------------ -------------
<S> <C> <C> <C>
Nonaccrual loans $199,351 $347,779 $394,617
Restructured loans 402 934 1,246
------------- ------------ -------------
Total nonperforming loans 199,753 348,713 395,863
Other real estate owned 90,897 133,341 161,877
Other nonperforming assets 13,633 14,903 16,551
------------- ------------ -------------
Total nonperforming assets $304,283 $496,957 $574,291
============= ============ =============
</TABLE>
In May 1993, the FASB issued SFAS No. 114, "Accounting by Creditors for
Impairment of a Loan." SFAS No. 114 requires that impaired loans, as defined in
the statement, be measured based on the present value of expected future cash
flows discounted at the loan's effective interest rate, or based on the loan's
observable market price or fair value of the collateral, if the loan is
collateral-dependent. Adoption of the standard is required for fiscal years
beginning after December 15, 1994, with earlier application permitted. The
Corporation has not yet made a final determination as to when to adopt the new
standard. An estimate of its impact upon the Corporation's financial condition
and results of operations has not yet been finalized.
Postretirement Benefits Other Than Pensions
- -------------------------------------------
The Corporation provides postretirement health care and life insurance benefits
generally to employees who retire at age 55 or later and have at least 10 years
of service. The postretirement health care plan is nonfunded and contributory,
with retirees' contributions adjusted annually to reflect certain cost-sharing
provisions and benefit limitations. The postretirement life insurance plan is
noncontributory. Life insurance benefits for participants who retired before
1993 are generally provided for through outside insurance carriers. Life
insurance benefits for employees retiring in 1993 or later years will be paid
from the Corporation's pension plan and are, accordingly, included in the
determination of the pension benefit obligation.
Effective January 1, 1993, the Corporation adopted the provisions of SFAS No.
106, "Employers' Accounting For Postretirement Benefits Other Than Pensions."
This standard requires that employers recognize the cost of providing
postretirement benefits over the employees' active service period to the date
they attain full eligibility for such benefits. Postretirement benefit costs
for 1992, which were recorded on a cash basis, will not be restated. The
Corporation elected to recognize the transition obligation, estimated to be
approximately $74 million, prospectively over a 20-year period. The transition
obligation represents the unfunded accumulated retirement obligation at the
date the standard was adopted. Adoption of the new standard is expected to add
an estimated $5 million to full-year 1993 postretirement benefits cost.
Postemployment Benefits
- -----------------------
Effective in the third quarter of 1993, the Corporation adopted the provisions
of SFAS No. 112, "Employers' Accounting for Postemployment Benefits." This
standard requires that employers who provide benefits to former or inactive
employees after employment but before retirement recognize a liability for such
benefits if specified conditions are met. Adoption of the standard increased
third quarter and year-to-date noninterest expense by $4.0 million,
representing both the cumulative "catch-up" adjustment as of January 1, 1993,
and the current year impact. Postemployment benefits for prior interim
periods, which were recorded on a cash basis, will not be restated due to
immateriality.
- 10 -
<PAGE> 11
Restructuring Charges
- ---------------------
Noninterest expense for the first three months of 1992 included restructuring
charges of $50.0 million ($34.2 million after tax, $.29 per Common Share)
recorded in connection with the merger with Ameritrust. These charges included
accruals for severance payments, estimated costs for the integration or
elimination of operations and facilities, and other merger-related charges and
accruals.
Income Taxes
- ------------
The current and deferred components of the provision for income taxes were as
follows (in thousands):
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
------------------------ -------------------------
1993 1992 1993 1992
------- -------- --------- --------
<S> <C> <C> <C> <C>
Current -- Federal $59,962 $24,262 $126,083 $86,590
Current -- State/Local 1,439 192 3,394 1,386
Deferred -- Federal 3,156 14,632 27,678 9,065
Deferred -- State/Local 302 259 656 360
------- -------- -------- --------
Provision for income taxes $64,859 $39,345 $157,811 $97,401
======= ======== ======== ========
</TABLE>
Income taxes on securities transactions are provided for at the statutory
income tax rate and included in the current portion of the Federal income tax
provision.
On August 10, President Clinton signed the Omnibus Budget Reconciliation Act of
1993. The Act includes a number of key items which will impact the
Corporation's Federal income tax provision. Primary among these items was a
retroactive increase in the Federal statutory tax rate from 34% to 35% as of
January 1, 1993, and certain limitations on deductible expenses which take
effect after this year. A "catch-up" adjustment of $3.0 million, primarily for
current Federal income taxes, was recorded as part of the provision for income
taxes for the third quarter of 1993 to reflect the retroactive increase in the
statutory tax rate.
Commitments and Contingent Liabilities
- --------------------------------------
In the normal course of business, various commitments and contingent
liabilities arise, including commitments to extend credit, standby letters of
credit, interest rate swaps, forward contracts, futures, options on financial
futures, and interest rate caps, collars and floors. The following table
summarizes the Corporation's exposure to these off-balance sheet commitments
and contingent liabilities as of September 30, 1993 (in thousands):
<TABLE>
<CAPTION>
Contractual or
Notional Value at
September 30, 1993
---------------------
<S> <C>
Financial instruments with off-balance sheet credit risk:
Commitments to extend credit $9,919,240
Standby letters of credit 926,331
Financial instruments with off-balance sheet market risk:
Interest rate swap agreements $5,733,237
Forward contracts 1,570,262
Futures and options on financial futures 547,580
Interest rate caps, collars and floors 62,758
</TABLE>
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