SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended Commission File No.
June 30, 1996 1-10534
FIRST OF AMERICA BANK CORPORATION
(Exact name of Registrant as specified in its Charter)
Michigan 38-1971791
(State or other jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
211 South Rose Street, Kalamazoo, Michigan 49007
(Address of principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code
616-376-9000
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15 (d) of
the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.
Class Outstanding at
Common Stock, July 31, 1996
$10 Par Value 60,779,521<PAGE>
FIRST OF AMERICA BANK CORPORATION
INDEX
PART I. FINANCIAL INFORMATION Page
No.
Consolidated Balance Sheets (Unaudited),
June 30, 1996 and December 31, 1995 . . . 1
Consolidated Statements of Income
(Unaudited) - Three and Six Months Ended
June 30, 1996 . . . . . . . . . . . . . . 2
Consolidated Statements of Cash Flows
(Unaudited) - Six Months Ended June 30,
1996 and 1995 . . . . . . . . . . . . . . 3
Notes to Consolidated Financial Statements
(Unaudited) . . . . . . . . . . . . . . . 4
Management's Discussion and Analysis of
Financial Condition and Results of
Operations . . . . . . . . . . . . . . . . 6
PART II. OTHER INFORMATION<PAGE>
<TABLE>
<CAPTION>
FIRST OF AMERICA BANK COPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
June 30 December 31
($ In thousands) 1996 1995
------------------------------- --------- ---------
<S> <C> <C>
ASSETS
Cash and due from banks $ 1,140,400 1,207,062
Federal Funds sold and other short term investments 139,173 269,737
Securities:
Securities available for sale, amortized cost of $4,504,854 at
June 30, 1996 and $5,020,954 at December 31, 1995 4,464,190 5,060,746
Loans, net of unearned income:
Consumer 4,109,320 4,504,255
Commercial, financial and agricultural 2,679,611 2,589,038
Commercial real estate 3,841,317 3,812,001
Residential real estate 4,748,129 5,070,369
Loans held for sale, market value of $109,053 at June 30, 1996
and $104,132 at December 31, 1995 107,429 101,279
----------- -----------
Total loans 15,485,806 16,076,942
Less: Allowance for loan losses 249,388 241,182
----------- -----------
Net loans 15,236,418 15,835,760
Premises and equipment, net 453,311 465,498
Other assets 770,173 761,292
------------------------------------------------------------------- ------------ ------------
TOTAL ASSETS $22,203,665 23,600,095
=================================================================== ============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Deposits:
Non-interest bearing $ 2,936,675 2,925,679
Interest bearing 15,458,167 16,416,788
----------- -----------
Total deposits 18,394,842 19,342,467
Securities sold under repurchase agreements -- 429,483
Other short term borrowings 1,371,355 1,220,482
Long term debt 433,067 490,315
Other liabilities 267,684 289,367
----------- -----------
Total liabilities 20,466,948 21,772,114
----------- -----------
SHAREHOLDERS' EQUITY
Common stock-$10 par value 609,847 632,839 <PAGE>
Capital surplus 200,096 283,409
Net unrealized gain/(loss) on securities available for sale, net
of tax benefit of $14,181 at June 30, 1996 and net of tax
expense of $13,853 at December 31, 1995 (26,483) 25,939
Retained earnings 953,257 885,794
----------- -----------
Total shareholders' equity 1,736,717 1,827,981
------------------------------------------------------------------- ----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $22,203,665 23,600,095
=================================================================== ============ ===========
See accompanying notes to consolidated financial statements.
/TABLE
<PAGE>
<TABLE>
<CAPTION>
FIRST OF AMERICA BANK COPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended, Six Months Ended
June 30, June 30,
($ in thousands except per share data) 1996 1995 1996 1995
------------------------------- --------- --------- --------- ---------
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans and fees on loans $ 340,569 378,265 689,795 749,190
Securities:
Taxable income 68,288 77,547 140,864 158,363
Tax exempt income 3,645 3,829 7,093 7,373
Money Market investments 2,861 999 4,647 2,107
--------- --------- --------- ---------
Total interest income 415,363 460,640 842,399 917,033
--------- --------- --------- ---------
INTEREST EXPENSE
Deposits 160,510 181,808 327,783 358,379
Short term borrowings 20,492 32,022 44,279 61,069
Long term debt 9,062 12,436 18,614 25,071
--------- --------- --------- ---------
Total interest expense 190,064 226,266 390,676 444,519
--------- --------- --------- ---------
NET INTEREST INCOME 225,299 234,374 451,723 472,514
Provision for loan losses 23,230 22,000 47,831 42,510
--------- --------- --------- ---------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 202,069 212,374 403,892 430,004
--------- --------- --------- ---------
NON-INTEREST INCOME
Service charges on deposit accounts 27,640 25,124 53,777 49,434
Trust and financial services income 29,067 23,346 56,432 45,034
Investment securities transactions, net (472) 81 (759) (1,382)
Bank card revenue 18,321 12,017 35,478 21,881
Mortgage banking revenue 7,030 10,917 13,105 15,499
Other operating income 14,367 12,065 32,089 22,686
--------- --------- --------- ---------
Total non-interest income 95,953 83,550 190,122 153,152
--------- --------- --------- ---------
NON-INTEREST EXPENSE
Personnel 111,770 110,795 223,112 226,155
Occupancy, net 15,323 15,052 32,153 31,370
Equipment 14,289 14,548 29,016 29,247
Outside data processing 4,482 4,679 9,191 9,474
Amortization of intangibles 5,237 5,367 10,474 10,620
Other operating expenses 52,142 58,555 104,757 116,715
--------- --------- --------- ---------<PAGE>
Total non-interest expense 203,243 208,996 408,703 423,581
--------- --------- --------- ---------
Income before income taxes 94,779 86,928 185,311 159,575
Income taxes 32,508 30,342 63,419 55,600
--------- --------- --------- ---------
NET INCOME 62,271 56,586 121,892 103,975
--------- --------- --------- ---------
EARNINGS PER SHARE
Common and commmon equivalents 1.00 0.89 1.94 1.64
See accompanying notes to consolidated financial statements.
/TABLE
<PAGE>
<TABLE>
<CAPTION>
FIRST OF AMERICA BANK COPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended,
June 30,
---------------------
($ in thousands) 1996 1995
------------------------------- --------- ---------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net income $ 121,892 103,975
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 23,550 23,811
Provision for loan losses 47,831 42,510
Provision for deferred taxes (2,308) (1,538)
Amortization of intangibles 10,474 10,620
(Gain) loss on sale of securities available for sale/held for sale 758 (2,074)
(Gain) loss on sale of mortgage loans held for sale (8,865) (9,182)
(Gain) loss on sale of other assets (4,571) (1,689)
Proceeds from the sales of mortgage loans held for sale 626,622 259,194
Originations of mortgage loans held for sale, net (623,907) (336,699)
Change in assets and liabilities net of acquisitions:
(Increase) decrease in interest and other income receivable 56,519 (22,203)
(Increase) decrease in other assets 60,338 (19,418)
Increase decrease) in accrued expenses and other liabilities 7,426 22,638
--------- ---------
Net cash provided by operating activities 315,759 69,945
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from the maturities of investment securities (held to maturity) 0 194,570
Purchases of investment securities (held to maturity) 0 (95,987)
Proceeds from the sale of securities available/held for sale 686,554 453,009
Proceeds from the maturities of securities available/held for sale 542,791 232,458
Purchases of securities available/held for sale (714,794) (241,944)
Proceeds from the securitization of loans 0 498,588
Net other (increase) decrease in loans and leases 557,661 (107,364)
Premises and equipment purchased (23,259) (52,890)
Proceeds from the sale of premises and equipment 16,706 36,640
(Acquisition)sale of affiliates, net of cash acquired 944 373
---------- ---------
Net cash provided by investing activities 1,066,603 917,453
---------- ---------
CASH FLOWS FROM FINANCING ACTIVITES:
Net increase (decrease) in short term deposits (82,203) (416,788)
Net increase (decrease) in time deposits (865,422) (252,755)
Net increase (decrease) in short term borrowings (278,610) (193,426)
Proceeds from issuance of long term debt 925 25,004
Repayments of long term debt (58,173) (33,301)
Proceeds from issuance of common stock 402 1,015
Dividends paid (55,362) (53,017)
Payments for purchase and retirement of common stock (110,581) 0
--------- ---------
Net cash provided by financing activities (1,449,024) (923,268)
--------- ---------
Net increase (decrease) in cash and cash equivalents (66,662) 64,130
Cash and cash equivalents at beginning of year 1,207,062 1,060,788
--------- ---------
CASH AND CASH EQUIVALENTS AT YEAR END $1,140,400 1,124,918
See accompanying notes to consolidated financial statements.
/TABLE
<PAGE>
NOTE 1: GENERAL
The accompanying interim financial statements are unaudited.
In the opinion of management, all adjustments necessary for a
fair presentation of the consolidated financial statements
have been included and all such adjustments are of a normal
recurring nature. Certain amounts included in the prior
period financial statements have been reclassified to conform
with the current financial statement presentation.
NOTE 2: NON-PERFORMING ASSETS
<TABLE>
<CAPTION>
June 30,
-------------------------
(in thousands) 1996 1995
----------------------------- ----------- ---------
<S> <C> <C>
Non-accrual loans $ 95,705 104,277
Restructured loans 9,531 4,726
Other real estate owned 30,933 33,376
----------- ---------
Total non-performing assets $ 136,169 142,379
============ ==========
</TABLE>
NOTE 3: ALLOWANCE FOR LOAN LOSSES
<TABLE>
<CAPTION>
Three Months Ended, Six Months Ended
June 30, June 30,
(in thousands) 1996 1995 1996 1995
--------------------------------- --------- --------- --------- ---------
<S> <C> <C> <C> <C>
Balance, beginning of period $ 245,207 230,524 241,182 228,115
Provision charged against income 23,230 22,000 47,831 42,510
Recoveries 15,395 14,076 31,838 26,906
Loans charged off (34,444) (30,661) (71,463) (61,592)
--------- --------- --------- ---------
Balance, end of period $ 249,388 235,939 249,388 235,939
========= ========= ========= =========
</TABLE>
On January 1, 1995, First of America adopted Financial
Accounting Standards Board Statement No. 114, "Accounting by
Creditors for Impairment of a Loan," as amended by Statement
No. 118, "Accounting by Creditors for Impairment of a Loan -
Income Recognition and Disclosures." First of America's non-
performing loan policies, which address nonaccrual and
restructured loans, indicate that such loans meet the
definitions set forth for "impaired loans" in Statement No.
114. Therefore, commercial loans and commercial mortgage
loans meeting the definition of nonaccrual and restructured
are reported as impaired loans for disclosure purposes.
At June 30, 1996, the total loans considered to be impaired
under Statement No. 114 were $ 85.6 million with an average
during the quarter of approximately $ 82.3 million. At
June 30, 1995, the total loans considered impaired were
$81.0 million with a quarterly average of approximately
$79.7 million. At quarter-ends, the allowance for impaired
loans was $19.0 million and $14.9 million, respectively.
At June 30, 1996, the impaired allowance related to
$36.4 million of the impaired loans, while the remaining
$49.2 million of impaired loans did not require a specific
allowance for loan losses according to Statement No.114.
NOTE 4: COMMON STOCK AND CALCULATION OF EARNINGS PER SHARE
At June 30, 1996 and 1995, there were 60,984,715 and
63,242,491 common shares outstanding, respectively. At the
same dates, there were 100,000,000 authorized shares of $10
par value common stock. Common and common equivalent earnings
per share amounts were calculated by dividing net income
applicable to common stock by the weighted average number of
common and common equivalent shares outstanding during the
respective periods adjusted for outstanding stock options.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
----------------------------- -----------------------------
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Average common and common
equivalents shares outstanding 61,867,429 63,240,197 62,700,390 63,377,736
</TABLE>
NOTE 5: MERGERS AND ACQUISITIONS
<TABLE>
<CAPTION>
Date of Total Assets Financial
($ in thousands) Acquisition Acquired Reporting Value
--------------------------------- ---------------- ----------- --------------
<S> <C> <C> <C>
Huttenlockers Kerns Norvell, Inc. February 12, 1996 $ 3,994 3,912
West Suburban Financial Corp. August 4, 1995 12 --
Underwriting Consultants, Inc. February 1, 1995 1,255 1
New England Trust Company January 1, 1995 1,576 1,092
/TABLE
<PAGE>
Item 2. Managements' Discussion and Analysis of Financial Condition
and Results of Operations
<TABLE>
<CAPTION>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Summary: The following table sets forth the period to period
changes in the principal items included in the
consolidated statement of income for the three and six
months ended June 30, 1996, compared with the
corresponding 1995 periods. The bracketed amounts
represent decreases.
Three Months Ended Six Months Ended
June 30, June 30,
1996 vs 1995 1996 vs 1995
-------------------- ---------------------
($ in thousands) Change Percent Change Percent
----------------------------- -------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Interest and fee income on loans $ (37,696) (10.0)% $ (59,395) (7.9)%
Interest income on investments (9,443) (11.6) (17,779) (10.7)
Interest income on money market
investments 1,862 186.4 2,540 120.6
--------- --------- ---------- ---------
Total interest income (45,277) (9.8) (74,634) (8.1)
--------- --------- ---------- ---------
Interest expense on deposits (21,298) (11.7) (30,596) (8.5)
Interest expense on borrowed funds (14,904) (33.5) (23,247) (27.0)
--------- --------- ---------- ---------
Total interest expense (36,202) (16.0) (53,843) (12.1)
--------- --------- ---------- ---------
Net interest income (9,075) (3.9) (20,791) (4.4)
Provision for loan losses 1,230 5.6 5,321 12.5
Non-interest income 12,403 14.8 36,970 24.1
Non-interest expense (5,753) (2.8) (14,878) (3.5)
--------- --------- ---------- ---------
Income before income taxes 7,851 9.0 25,736 16.1
Income taxes 2,166 7.1 7,819 14.1
--------- --------- ---------- ---------
Net income $ 5,685 10.0 % $ 17,917 17.2 %
========= ========= ========== =========
</TABLE>
See accompanying notes to consolidated financial statements.
OVERVIEW
Net income for the second quarter was $62.3 million, or $1.00
per share, compared with $56.6 million, or $0.89 per share,
last year. For the year-to-date period, net income was $121.9
million, up 17.2 percent, and earnings per share were $1.94,
up 18.3 percent from 1995. A higher net interest margin,
growing non-interest revenue, and lower non-interest expense
were the primary reasons for the 1996 results. Last year's
results included one-time charges for restructuring -- $6.6
million in the second quarter and $12.6 million in the year-
to-date period.
At June 30, 1996, total assets were $22.2 billion, down 7.1
percent from $23.9 billion a year ago, primarily as a result
of the planned restructuring of the balance sheet. Higher
priced deposits and selected loan portfolios with narrower net
interest spreads were reduced and greater emphasis was placed on
loans and deposits meeting specific target returns. As a result,
total deposits and loans decreased.
The average indirect installment loan portfolio for the second
quarter was down 25.0 percent from a year ago, and the average
residential mortgage loan portfolio was down 8.8 percent,
while average commercial loans and commercial mortgage loans
were both up over 7 percent. Average negotiated CD's for the
quarter declined 20.5 percent from 1995 and other CD's were
down 13.6 percent. Non-interest bearing transaction accounts
increased 3.6 percent from last year, and checking accounts
were up 11.7 percent. This shift in mix within loans and
deposits aided the improvement in the quarter's net interest
margin.
The return on average assets for the second quarter was 1.12
percent compared with 0.94 percent a year ago. Year-to-date,
the return on average assets was 1.09 percent compared with
0.86 percent. These higher profitability measures have also
resulted in higher returns on equity, even though the equity-
to-assets ratios have increased over last year. Return on
average equity was 14.09 percent and 13.49 percent for the
respective quarters and 13.52 percent and 12.79 percent for
the year-to-date periods.
CONSOLIDATED INCOME ANALYSIS
Net interest income for the second quarter was down 3.9
percent from the 1995 second quarter, and year-to-date, it was
down 4.4 percent. However, if 1995 net interest income
was restated for the impact of the securitization of credit
card receivables, 1996's net interest income would have been
level with last year's as the higher net interest margin
offset the lower level of earning assets.
For both the quarter and year-to-date periods, the net
interest margin showed improvement over 1995 as a result of
the balance sheet restructuring and the pricing discipline
exercised with new loans and deposits particularly in consumer
indirect installment loans and residential mortgage loans.
For the six month periods, the net interest margin was 4.44
percent in 1996 and 4.28 percent in 1995. Table 1 provides
detail on the average yields on earning assets and the average
rates paid on interest-bearing liabilities for the last six
quarters.
Management currently expects that the net interest margin
should increase by approximately 5 to 7 basis points in both
the third and fourth quarters of 1996. At the same time, the
impact of balance sheet restructuring is currently expected to
lessen so that earning assets in the third quarter should
decline at a slower pace than the first half of the year, and
in the fourth quarter, earning assets are expected to remain
level or to grow modestly. The preceding statements in this
paragraph are forward-looking, and First of America's actual
results may differ from those currently expected. Such
differences could result from a variety of factors including
changes in loan demand and the interest rate environment.
The provision for loan losses was up 5.6 percent over 1995's
second quarter, but down slightly from the first quarter of
1996 in the face of slowing loan growth. As a percent of
average loans, net charge-offs were 0.49 percent for the
quarter compared with 0.39 percent last year. Net charge-offs
in consumer installment loans appear to have stabilized;
however, net charge-offs in the managed credit card portfolio
continued to trend upward. The provision expense for the 1996
second quarter covered net charge-offs by 122 percent. Charge-
offs and recoveries by portfolio type are detailed in Table 3.
Total non-interest revenue for the quarter was up 14.8 percent
from a year ago and for the year-to-date period was up 24.1
percent largely due to strong growth in trust and financial
services revenue. The 1996 total also included servicing
fees from the credit card securitization and $4.4 million
in branch sale gains during the first quarter. Service charges
on deposit accounts were up 10.0 percent for the quarter,
benefiting from the increase in non-interest bearing
transaction accounts.
Trust and financial services revenue grew 24.5 percent for the
quarter and 25.3 percent for the year-to-date period over last
year. Traditional trust fees, totalling $35.7 million year-
to-date, were up 8.5 percent as assets under management grew.
At quarter-end total assets under management were $18.8
billion compared with $14.8 billion a year ago. Other
financial services revenue, generated by cash management,
investment management, brokerage and insurance services, was
$20.7 million for the six month period compared with $12.1
million a year ago, benefiting from the sales and services
strategies implemented in partnership with the branch
employees. Mutual funds sales revenue for the year-to-date
period was $4.3 million versus $1.9 million last year, and
annuities sales revenue was $3.0 million versus $2.7 million.
Mortgage banking revenue was level for the quarter and up
slightly for the year-to-date period excluding the $4.1
million gain in 1995 from the sale of servicing rights. For
the year-to-date periods, mortgage originations were $802
million compared with $753 million a year ago, and the gains
on mortgage loan sales were $8.9 million versus $ 5.1 million
last year excluding the gain from the sale of servicing rights.
Bank card fee revenue was approximately level for the quarter
and the year-to-date periods when adjusted for the 1995 credit
card securitization. Revenue for the second quarter of 1996
was up from the first quarter of 1996 with higher merchant
discount and interchange revenue.
Total non-interest expense declined 2.8 percent for the
quarter and 3.5 percent for the year-to-date period. The 1995
expense included one-time charges for severance and other
restructuring costs of $6.6 million for the quarter and $12.6
million for the six month period. If those one-time charges
are excluded from the comparisons, non-interest expense was
approximately level with last year's quarter and six month
periods. Compared with the first quarter of 1996, non-interest
expense for the second quarter was down $2.2 million as a
result of lower building and equipment costs.
Total personnel costs, excluding 1995 one-time severance
charges, increased 5.6 percent for the quarter and 3.7 percent
for the year-to-date period. Personnel cost for the second
quarter was approximately level with the linked 1996 quarter,
as lower benefit costs offset a $3.1 million increase in
salaries. Second quarter salaries included higher incentives
for sales success in retail banking and trust and financial
services.
The burden ratio, excluding branch sale gains and last year's
restructuring costs, was 1.94 percent versus 1.99 percent for
the comparative quarters and 1.99 percent versus 2.15 percent
for the six month periods. On the same basis, the efficiency
ratio was 62.46 percent compared with 63.05 percent for the
second quarters and 63.31 percent compared with 64.93 percent
for the six month periods.
LINE OF BUSINESS RESULTS
Line of business reporting requires certain assumptions and
allocations. Equity is allocated on the basis of required
regulatory levels, inherent operational risk or market-
determined factors as evidenced by similar independent single
business line companies. Centrally provided support services
are allocated on a per-unit cost basis or in proportion to the
balances of assets and liabilities associated with a
particular business line. Funds transfer pricing, based on
market-determined indices, is used to allocate a cost of funds
used or a credit for funds provided. Because of these
assumptions and allocations, the financial results of the
individual business lines might vary from the actual results
if those lines were in fact separate operating entities.
For the 1996 year-to-date period, Community Banking accounted
for 64.4 percent of the consolidated net income, Bank Card
12.8 percent, Mortgage Banking 11.3 percent and Trust and
Financial Services 9.4 percent. Branch sale gains accounted
for 2.1 percent. Table 1 presents summarized income
statements for the second quarter of 1996 and selected
quarterly information for the past six quarters for the
business lines.
Community Banking -- Community Banking includes deposit
management and commercial, home equity and installment
lending, as well as other general and international banking
services. This business line reported net income of $40.8
million for the second quarter of 1996, compared with $37.7
million for the first quarter of 1996 and $40.5 million for
the second quarter of 1995. Return on equity was 11.59
percent compared with 12.27 percent in 1995 as growth in
equity outpaced net income growth. The efficiency ratio
improved to 66.47 percent from 67.62 percent a year ago.
Community Banking's fee revenue for the quarter was up 12.2
percent to $40.2 million, reflecting the updating of fee
structures, and non-interest expense declined 1.4 percent
due to efficiencies from the company's restructuring
efforts in 1995. Net interest income (FTE) decreased 1.9
percent largely due to the lower volume of earning assets.
The business line's provision for loan losses increased to
$13.0 million from $9.9 million a year ago, as a result of
the higher level of net charge-offs in the installment loan
portfolio.
Bank Card -- Bank Card is responsible for managing and
servicing First of America's $1.4 billion managed portfolio of
credit card and other revolving loans, as well as the merchant
services operation. Bank Card's net income for the second
quarter was approximately level with a year ago, primarily the
result of higher credit losses in the managed portfolio. Even
though the amount booked as provision for loan losses was
lower than a year ago, the flow of fee revenue from the
securitization was reduced by the net charge-offs occurring in
the securitized portfolio. Net charge-offs in the total
managed portfolio were $13.6 million compared with $9.2
million a year ago.
As a result of the net income decrease, Bank Card's return on
equity for the second quarter was 29.87 percent compared with
32.56 percent last year, and the efficiency ratio was 40.73
percent versus 37.00 percent.
Mortgage Banking -- Mortgage Banking originates all
residential mortgages across First of America's four core
states and in separate origination offices in Arizona, North
Carolina and South Carolina. Also, the business line services
a $7.3 billion mortgage loan portfolio for both First of
America and external investors. The interest income and
related funds transfer charge of First of America's portfolio
are included in Mortgage Banking's results.
Mortgage Banking's net income for the quarter was $7.4 million
compared with $7.2 million a year ago, as a result of higher
net interest income, gains on loan sales and lower non-
interest expense. Net interest income (FTE) was up 16.2
percent to $17.0 million due to lower funding costs. Mortgage
originations were $396 million for the second quarter compared
with $406 million in the first quarter of 1996 and $426
million in the second quarter of 1995. Even though more
mortgage originators were compensated on a commission basis,
this business line's non-interest expense was down 12.7 percent
from a year ago due to efficiencies implemented during the
company's 1995 restructuring.
Trust and Financial Services -- This business line provides
traditional trust services, as well as investment management,
cash management, brokerage and insurance services. Trust and
Financial Services' net income for the quarter grew 35.2
percent to $6.2 million, primarily due to increased customer
investment activity and the higher market value of the managed
assets upon which fees are assessed. At quarter-end, total
managed assets were $18.8 billion compared with $14.8 billion
a year ago.
As a result, Trust and Financial Services' non-interest
revenue for the quarter was up 26.6 percent over a year ago,
and its return on equity was 56.22 percent compared with
49.04 percent. The business line's efficiency ratio improved
to 67.96 percent from 69.79 percent even with a 22.8 percent
increase in non-interest expense. Non-interest expense
increased primarily due to higher incentive compensation in
correlation with higher sales activity and compensation costs
added by the insurance business.
<TABLE>
<CAPTION>
TABLE 1
LINE OF BUSINESS FINANCIAL PERFORMANCE
For quarter ended June 30, 1996 Trust &
Community Bank Mortgage Financial Consolidated
INCOME STATEMENT Banking Card Banking Services Results
--------- --------- --------- --------- ---------
- - - ($ in thousands) - - -
<S> <C> <C> <C> <C> <C>
Net interest income (FTE) $ 191,924 19,399 16,976 1,121 229,420
Provision for loan losses 12,981 10,200 49 -- 23,230
Non-interest income 40,195 19,034 7,289 29,435 95,953
Non-interest expense 154,296 15,652 12,528 20,767 203,243
Income tax expense (FTE) 24,016 4,659 4,329 3,625 36,629
--------- --------- --------- --------- ---------
Net income $ 40,826 7,922 7,359 6,164 62,271
---------
Contribution to consolidated results 65.6 % 12.7 11.8 9.9 100.0
1996 1995
----------------------- -----------------------------------------------------
2nd Qtr. 1st Qtr. 4th Qtr. 3rd Qtr. 2nd Qtr. 1st Qtr.
QUARTER RESULTS June 30 Mar. 31 Dec. 31 Sept. 30 June 30 Mar. 31
--------- --------- --------- --------- --------- ----------
COMMUNITY BANKING
Net income $ 40,826 37,699 40,208 44,847 40,546 35,600
Return on equity 11.59 % 10.31 11.31 12.96 12.27 11.47
Efficiency ratio 66.47 68.43 65.88 64.49 67.62 70.91
BANK CARD
Net income $ 7,922 7,700 6,227 8,477 7,855 9,032
Return on equity 29.87 % 28.05 23.54 33.39 32.56 39.33
Efficiency ratio 40.73 38.87 39.59 38.92 37.00 34.64
MORTGAGE BANKING
Net income $ 7,359 6,378 5,877 7,051 7,218 2,939
Return on equity 14.11 % 11.52 9.95 12.03 12.96 5.68
Efficiency ratio 51.63 56.13 58.48 53.36 55.46 75.95
TRUST & FINANCIAL SERVICES
Net income $ 6,164 5,228 5,368 5,410 4,560 3,526
Return on equity 56.22 % 46.64 53.20 55.29 49.04 40.13
Efficiency ratio 67.96 70.72 67.40 65.90 69.79 75.19
/TABLE
<PAGE>
ASSET QUALITY AND CREDIT RISK PROFILE
First of America's loan portfolio has no significant
concentrations of credit to any specific borrower or within
any geographic region, thereby reducing credit risk
exposure. Also reducing credit risk are First of America's
conservative lending policies and loan review process. At
June 30, 1996, the loan portfolio was comprised of residential
mortgages (31.4 percent), consumer loans (26.5 percent),
commercial mortgages (24.8 percent) and commercial loans
(17.3 percent).
The allowance for loan losses was 1.61 percent of total loans
at June 30, 1996 compared with 1.43 percent a year ago. The
allowance coverage of non-performing loans was 263.98 percent
compared with 216.45 percent a year ago. Non-performing loans
and loans 90 days past due are detailed by portfolio in Table
4.
The asset quality in the commercial loan and residential
mortgage portfolios, almost three-quarters of total loans,
remained strong. Over the last two years, these portfolios
have experienced minimal net charge-offs.
Across the banking industry there has been a deterioration of
consumer loan quality, and since mid-1995, First of America also
experienced a rise in both delinquencies and net losses in the
installment loan and credit card portfolios from the favorable
levels previously experienced.
First of America has intensified its collection efforts and
tightened credit controls. As a result, after an increase in
net charge-offs during 1995, the consumer installment loan
portfolio's net charge-offs appear to have leveled off. The
consumer installment net charge-offs to average loans for the
second quarter was down slightly at 0.86 percent compared with
1.22 percent for the first quarter of 1996 and 1.37 percent
for the last quarter of 1995. For the managed credit card
portfolio, net charge-offs to average loans continued to move
up and were 4.35 percent, 4.07 percent and 3.92 percent,
respectively, over the last three quarters. While this trend
continues to be of concern, management believes the allowance
for loan losses adequately covers expected future risk levels.
FUNDING, LIQUIDITY AND INTEREST RATE RISK
First of America continues to monitor appropriate interest
rate risk, provide liquidity and moderate changes in the
market value of the investment securities portfolio through a
centralized funds management division.
Liquidity is measured by a financial institution's ability to
raise funds through deposits, borrowed funds, capital or the
sale of assets. First of America relies primarily upon core
deposits for its liquidity. At June 30, 1996, core deposits
equalled 95.6 percent of total deposits. First of America does
not issue negotiated CD's in the national money markets, and
the level of purchased funds is limited by corporate policy to
less than 10 percent of assets. The majority of negotiated
CD's and purchased funds originate from the core deposit
customer base, including downstream correspondents.
First of America's interest rate risk policy is to minimize
the effect on net income resulting from a change in interest
rates through asset/liability management at all levels in the
company. Each banking affiliate completes an interest rate
analysis monthly using an asset/liability model, and a
consolidated analysis is then completed using the affiliates'
data.
The difference between rate sensitive assets and liabilities,
including the impact of off-balance sheet interest rate swaps,
is presented in Table 7. The GAP reports' reliability in
measuring the risk to income from a change in interest rates
is tested through the use of simulation models. The most
recent simulation models, using various interest rate shock
scenarios, show that less than four percent of First of
America's annual net income is at risk if interest rates were
to move up or down an immediate one percent. Management has
determined that these simulation models provide a more
accurate measurement of the company's interest rate risk
position than the GAP tables. <PAGE>
TABLE 2
INTEREST RATE SWAPS
<TABLE>
<CAPTION>
($ in thousands) Net Interest Income
Impact for the
Weighted Average Average Six Months Ended
Notional Fair Market Average Rate Received Rate Paid June 30,
Hedged Asset/Liability Amount Value Maturity (Mos.) Variable/Fixed Variable/Fixed 1996 1995
------------------------ --------- ------------ -------------- --------------- --------------- ---------------------
<S> <C> <C> <C> <C> <C> <C>
Rising Rate CDs -- -- -- -- -- -- (1,158)
Market Rate CDs * 255 19 1.3 -- -- (62) (562)
FHLB Advance -- -- -- -- -- -- 25
FirstRate Fund deposits 12,000 (10) 1.5 5.50%/variable 6.03/fixed (22) 2
Bank notes 10,000 (18) 1.8 5.49%variable 6.23/fixed (36) 29
Long term debt 50,000 (647) 19.4 5.60%/fixed 5.48/variable (3) (580)
------------------------ --------- ------------ ----------------------------- --------------- ---------------------
Total $ 72,255 (656) 13.9 (123) $(2,244)
========================= ========== ============= ============== =====================
* This represents a basis swap.
</TABLE>
To manage interest rate sensitivity First of America and its
subsidiaries have entered into interest rate swaps as a hedge
against certain debt and deposit liabilities. The contracts
represent an exchange of interest payments, and the underlying
principal balances of the assets or liabilities are not
affected. Net settlement amounts are reported as adjustments
to interest income or interest expense. Gains or losses on
the termination of interest rate swaps are deferred and
amortized over the remaining lives of the designated balance
sheet liability. When the swap becomes uncovered during the
swap agreement period, the swap is immediately marked-to-
market with a corresponding charge to current earnings.
Although the notional amounts are often used to express the
volume of these transactions, the amounts potentially subject
to credit risk are much smaller. The company minimizes this
risk by performing normal credit reviews of its counterparties
and collateralizing its exposure when it exceeds a
predetermined limit. Table 2 outlines First of America's
outstanding interest rate swaps at June 30, 1996.
First of America had outstanding interest rate swaps with a
notional value of $72.3 million which included $50 million as
a hedge against parent company debt, $10 million as a hedge
against subsidiary bank debt, and the remainder as hedges
against various deposit products. The outstanding swaps had a
negative market value of $656 thousand. At June 30, 1995,
outstanding swaps totalled $159 million in notional amounts
with a negative market value of $244 thousand.
At times First of America also utilizes interest rate caps to
manage its interest rate risk. Interest rate caps are
agreements to make/receive payments for interest rate
differentials between an index rate and a specified maximum
rate, computed on notional amounts. At June 30, 1996, First
of America had no outstanding interest rate caps compared
with $125 million in interest rate cap agreements at
June 30, 1995.
At June 30, 1996, First of America had no securities
classified as held to maturity. At June 30, 1995, securities
held to maturity totalled $2.9 billion, with a net unrealized
loss of $30.5 million. In accordance with Financial
Accounting Standards Board Statement No. 115 "Accounting for
Certain Investments in Debt and Equity Securities," securities
available for sale are carried at market value which totalled
$4.464 billion at June 30, 1996, compared with an amortized
book value of $4.505 billion. The $40.7 million net unrealized
loss in securities available for sale resulted in a
corresponding, after-tax market value adjustment to equity of
$(26.5) million. At December 31, 1995, the market value
adjustments to securities and equity from the securities
available for sale portfolio were $40.0 million and $25.9
million, respectively.
CAPITAL STRENGTH
First of America began its share repurchase program during
March 1996, continuing its capital management strategy. By
June 30, 1996, 2,414,600 shares of First of America Common
Stock were repurchased at a total cost of $110.6 million. The
repurchase of a remaining 1.2 million shares is currently
authorized.
Total shareholders' equity at June 30, 1996, remained level
with a year ago at $1.7 billion. The share repurchase program
and the negative change in the market value adjustment to equity
for available for sale securities since June 30, 1995,
offset the impact of net earnings retention. Since year-end
1995, the change in the adjustment in the market value of
such securities reduced total equity by $52.4 million. The book
value per share rose to $28.48 from the $27.35 reported a year
ago.
First of America continues to maintain, both on a consolidated
level and an affiliate basis, capital levels within the
parameters of "well capitalized" as defined by regulatory
guidelines. The consolidated total capital to risk adjusted
assets ratio at June 30, 1996 was 12.91 percent, the tier I
ratio was 9.50 percent and the tier I leverage ratio was 6.97
percent.
UPDATE
There is pending legislation in Congress which would assess a
one-time premium on thrift deposits insured by the Savings
Association Insurance Fund of which First of America has
approximately $4.2 billion. This one-time charge could result
in a maximum $36 million pre-tax charge, based on an assessment of
$.85 per $100 of deposits. The premium rate on these
deposits is expected to match the lower bank deposit rate after
the one-time charge. The status of this legislation is
indefinite, and therefore, the assessment is possible for 1996,
but more likely will be implemented in 1997.
Management's statements of expectations for certain financial
results for the remainder of 1996, as included in this report,
are forward-looking statements. First of America's actual
performance and financial results may differ from these
projections as a result of a variety of factors, including but
not limited to changes in the economy, competition and the
implementation of internal business plans.<PAGE>
<TABLE>
<CAPTION>
TABLE 3
CONSOLIDATED YIELD ANALYSIS (a)
1996 1995
------------------- ---------------------------------------
2nd Qtr. 1st Qtr. 4th Qtr. 3rd Qtr. 2nd Qtr. 1st Qtr.
June 30 Mar. 31 Dec. 31 Sept. 30 June 30 Mar. 31
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Average Prime Rate (b) 8.25 % 8.30 8.70 8.80 9.00 8.90
EARNING ASSETS
Money Market Investments 5.75 % 7.30 4.46 6.74 5.96 5.18
U.S. Government and agencies 6.13 6.12 5.89 5.89 5.90 5.90
securities
State and municipal securities 8.32 8.35 8.32 8.55 8.94 8.71
Other securities 6.24 6.28 6.16 6.36 6.33 5.32
--------- -------- --------- -------- -------- --------
Total securities 6.28 6.18 6.06 6.07 6.06 6.08
--------- -------- --------- -------- -------- --------
Consumer installment loans 8.85 8.46 8.45 8.41 8.25 8.01
Comsumer revolving loans 13.96 14.38 14.40 14.43 14.67 14.08
Commercial loans 8.69 8.87 9.16 9.17 9.33 9.25
Commercial real estate loans 9.16 9.18 9.35 9.30 9.40 9.35
Residential real estate loans 7.97 7.96 7.96 7.95 7.95 7.84
--------- -------- --------- -------- -------- --------
Total loans 8.85 8.90 8.96 8.92 9.06 8.95
--------- -------- --------- -------- -------- --------
Total earning assets 8.23 % 8.24 8.24 8.24 8.32 8.20
========= ======== ========= ======== ======== ========
INTEREST-BEARING LIABILITIES
Time deposits:
CD's - less than 12 months 4.98 % 5.12 5.34 5.45 5.19 4.79
CD's - 12 months or more 5.75 5.75 5.76 5.68 5.55 5.26
CD's - $100,000 or more 5.27 5.50 5.73 5.80 6.10 5.72
Other time deposits 5.58 5.59 5.70 5.67 5.71 5.46
Other core deposits:
Savings deposits and NOW 1.70 1.72 1.73 1.74 1.71 1.70
Money market savings and checking 3.68 3.71 3.80 3.91 3.98 4.01
--------- -------- --------- -------- -------- --------
Total deposits 4.15 4.23 4.35 4.40 4.35 4.16
--------- -------- --------- -------- -------- --------
Short term borrowings 5.46 5.66 6.09 6.38 6.09 5.96
Long term debt 7.83 7.83 7.80 7.36 7.53 7.66
--------- -------- --------- -------- -------- --------
Total borrowed funds 6.02 6.15 6.56 6.72 6.44 6.39
--------- -------- --------- -------- -------- --------
Total interest-bearing liabilities 4.36 % 4.46 4.57 4.64 4.65 4.45
========= ======== ========= ======== ======== ========
NET INTEREST MARGIN
Interest income to average earning 8.23 % 8.24 8.24 8.24 8.32 8.20
assets
Interest expense to average earning 3.74 3.84 3.92 4.01 4.06 3.91
assets
Net interest margin 4.49 4.40 4.32 4.23 4.26 4.29
(a) Fully taxable equivalent, based on a marginal federal income tax rate of 35%.
(b) The First National Bank of Chicago Corporate Base Rate.
/TABLE
<PAGE>
<TABLE>
<CAPTION>
TABLE 4
ANALYSIS OF NET INTEREST INCOME
Second Quarter 1996 Versus Second Quarter 1996 Versus
($ in thousands) Second Quarter 1995 First Quarter 1996
------------------------------ -------------------------------- --------------------------------
CHANGES IN RATE AND VOLUME Total Change Due To Total Change Due To
INCREASE (DECREASE): Change Volume Rate Change Volume Rate
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
INTEREST INCOME
Loans (FTE) $ (38,296) (28,877) (9,419) (8,662) (6,786) (1,876)
Taxable securities (9,494) (12,030) 2,536 (4,313) (5,363) 1,050
Tax exempt securities (FTE) 841 877 (36) 293 311 (18)
Money market investments 1,862 1,884 (22) 1,075 1,521 (446)
------- ------- ------- ------- ------- -------
Total Interest Income (45,087) (38,146) (6,941) (11,607) (10,317) (1,290)
------- ------- ------- ------- ------- -------
INTEREST EXPENSE
Interest-bearing deposits (21,298) (12,773) (8,525) (6,763) (3,588) (3,175)
Short term borrowings (11,530) (8,547) (2,983) (3,295) (2,533) (762)
Long term borrowings (3,374) (3,868) 494 (490) (529) 39
------- ------- ------- ------- ------- -------
Total Interest Expense (36,202) (25,188) (11,014) (10,548) (6,650) (3,898)
------- ------- ------- ------- ------- -------
Change in net interest income (FTE) $ (8,885) (12,958) 4,073 (1,059) (3,667) 2,608
======= ======= ======= ======= ======= =======
NOTE: The change in income attributable to volume is calculated by multiplying the change in volume times
the prior year's rate. The change in income attributable to rate is calculated by multiplying the change in rate
times the prior year's volume. Any variance attributable jointly to volume and rate changes is allocated to
volume and rate in proportion to the relationship of the absolute dollar amount of the change in each. Fully
taxable equivalent income on certain tax exempt loans and securities is calculated using a 35% tax rate.
/TABLE
<PAGE>
<TABLE>
<CAPTION>
TABLE 5 SUMMARY OF LOAN LOSS EXPERIENCE
($ in thousands) 1996 1995
----------------------------- -------------------- -------------------------------------------
2nd Qtr. 1st Qtr. 4th Qtr. 3rd Qtr. 2nd Qtr. 1st Qtr.
June 30 Mar. 31 Dec. 31 Sept. 30 June 30 Mar. 31
ALLOWANCE FOR LOAN LOSSES --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance, at beginning of period $ 245,207 241,182 238,948 235,939 230,524 228,115
Provision charged against income 23,230 24,601 27,610 21,368 22,000 20,510
Recoveries:
Consumer installment 10,839 12,508 10,604 10,510 10,043 8,093
Consumer revolving 2,084 1,820 1,745 1,853 2,183 2,200
Commercial 1,632 1,012 831 1,925 1,375 1,626
Commercial mortgage 789 1,060 1,583 911 456 884
Residential mortgage 51 43 60 10 19 27
--------- -------- --------- --------- --------- ---------
Total recoveries 15,395 16,443 14,823 15,209 14,076 12,830
--------- -------- --------- --------- --------- ---------
Charge-offs:
Consumer installment 17,781 22,785 23,178 20,386 15,133 16,554
Consumer revolving 11,824 11,534 10,228 10,085 12,058 12,558
Commercial 2,868 988 2,919 1,792 1,177 1,119
Commerical mortgage 1,635 1,590 3,863 1,067 2,220 627
Residential mortgage 336 122 11 238 73 73
--------- -------- --------- --------- ---------- ---------
Total charge-offs 34,444 37,019 40,199 33,568 30,661 30,931
--------- -------- --------- --------- ---------- ---------
Net charge-offs 19,049 20,576 25,376 18,359 16,585 18,101
--------- --------- --------- --------- ---------- ---------
Balance, at end of period $ 249,388 245,207 241,182 238,948 235,939 230,524
========= ========= ========= ========= ========== =========
Average loans outstanding (net of
unearned income) $ 15,546,597 15,854,148 16,099,202 16,337,833 16,848,514 16,855,909
========= ========= ========= ========= ========== =========
NET CHARGE-OFFS BY PORTFOLIO
AS % OF LOANS OUTSTANDING
Consumer installment 0.86 % 1.22 1.37 1.00 0.05 0.81
Consumer revolving 4.30 4.13 3.56 3.50 2.96 2.85
Commercial 0.19 -- 0.33 (0.02) (0.03) (0.09)
Commerical mortgage 0.09 0.06 0.24 0.02 0.20 (0.03)
Residential mortgage 0.02 0.01 -- 0.02 -- --
MANAGED BANKCARD NET CHARGE-OFFS
On balance sheet $ 8,740 8,711 8,480 7,495 9,249 9,069
Securitized 4,811 4,313 4,241 2,789 -- --
---------- -------- -------- -------- --------- ---------
Total managed bankcard net
charge-offs 13,551 13,024 12,721 10,284 9,249 9,069
========== ========= ========= ========= ========= =========
Net charge-offs as % of managed
loans 4.35 % 4.07 3.92 3.21 2.94 2.84
CHARGE-OFFS AND RECOVERIES RATIOS
Net charge-offs to average loans (a) 0.49 % 0.52 0.63 0.45 0.39 0.44
Earnings coverage of net charge-offs 6.20 x 5.60 5.09 6.73 6.57 5.15
Recoveries to total charge-offs 44.70 % 44.42 36.87 45.31 45.91 41.48
Provision to average loans (a) 0.60 0.62 0.68 0.52 0.52 0.49
Allowance to total period end loans 1.61 1.56 1.50 1.46 1.43 1.36
(a) Annualized
/TABLE
<PAGE>
<TABLE>
<CAPTION>
TABLE 6
MEASUREMENT OF ASSET QUALITY
($ in thousands) 1996 1995
----------------------------- --------------------- --------------------------------------------
2nd Qtr. 1st Qtr. 4th Qtr. 3rd Qtr. 2nd Qtr. 1st Qtr.
June 30 Mar. 31 Dec. 31 Sept. 30 June 30 Mar. 31
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Non-accrual loans:
Commercial $ 36,454 30,636 28,943 26,231 21,880 21,203
Commercial mortgage 40,398 41,391 48,190 48,658 55,339 53,270
Residential mortgage 18,251 19,800 23,191 23,595 25,155 18,368
Revolving mortgage 602 615 606 622 426 492
Consumer installment -- -- 3,244 3,006 1,477 981
Consumer revolving -- -- -- -- -- --
--------- --------- --------- --------- --------- ---------
Total non-accrual loans $ 95,705 92,442 104,174 102,112 104,277 94,314
--------- --------- --------- --------- --------- ---------
Renegotiated loans:
Commercial $ 6,895 6,521 10,481 6643 3,306 3,310
Commercial mortgage 1,895 934 943 219 503 514
Residential mortgage 741 749 903 920 917 960
Revolving mortgage -- -- -- -- -- --
Consumer installment -- -- -- -- -- --
Consumer revolving -- -- -- -- -- --
--------- --------- --------- --------- --------- ---------
Total renegotiated loans $ 9,531 8,204 12,327 7,782 4,726 4,784
--------- --------- --------- --------- --------- ---------
Total non-performing loans $ 105,236 100,646 116,501 109,894 109,003 99,098
--------- --------- --------- --------- --------- ---------
Other real estate owned $ 30,933 30,621 31,103 31691 33,376 40,349
--------- --------- --------- --------- --------- ---------
Total non-performing assets $ 136,169 131,267 147,604 141,585 142,379 139,447
========= ========= ========= ========= ========= =========
Loans past due 90 days or more:
Commercial $ 1,479 1,387 1,406 1,589 1,360 674
Commercial mortgage 2,853 3,235 1,766 1,884 1,297 1,838
Residential mortgage 3,010 1,637 2,019 3,879 3,001 2,593
Revolving mortgage 1,411 1,123 940 610 390 395
Consumer installment 12,347 12,833 14,967 10,244 7,661 5,947
Consumer revolving 7,000 7,385 7,026 4,713 6,136 6,276
--------- --------- --------- --------- --------- ---------
Total loans past due 90 days or
more $ 28,100 27,600 28,124 22,919 19,845 17,723
========= ========= ========= ========= ========= =========
ASSET QUALITY RATIOS
Non-performing assets as a % of
total assets 0.61 % 0.58 0.63 0.60 0.60 0.57
Non-performing assets as a % of
total loans + OREO 0.88 0.83 0.92 0.87 0.86 0.82
Allowance coverage of non-performing
loans 263.98 243.63 207.02 217.43 216.45 232.62
Allowance coverage of non-performing
assets 183.15 186.80 163.40 168.76 165.71 165.31
/TABLE
<PAGE>
<TABLE>
<CAPTION>
TABLE 7
INTEREST RATE SENSITIVITY
June 30, 1996
0 to 0 to 0 to 0 to 0 to
($ in millions) 30 Days 60 Days 90 Days 180 Days 365 Days
----------------------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
ASSETS
Other earning assets $ 150 150 150 150 150
Investment securities (1) 130 234 329 634 1,156
Loans, net of unearned income (2) 4,921 5,332 6,064 6,964 8,509
--------- --------- --------- --------- ---------
Total rate sensitive assets (RSA) $ 5,201 5,717 6,543 7,748 9,815
========= ========= ========= ========= =========
LIABILITIES (3)
Money market type deposits $ 3,988 3,988 3,988 3,988 3,988
Other core savings and time deposits 1,181 2,054 2,893 4,310 5,909
Negotiated deposits 424 557 648 746 753
Borrowings 718 786 924 1,269 1,444
Interest rate swap agreements (12) (12) 50 50 50
--------- --------- --------- --------- ---------
Total rate sensitive liabilities (RSL) $ 6,299 7,373 8,503 10,363 12,144
========= ========= ========= ========= =========
GAP (RSA - RSL) $ (1,098) (1,656) (1,960) (2,615) (2,329)
========= ========= ========= ========= =========
RSA divided by RSL 82.57 % 77.53 76.95 74.76 80.83
GAP divided by total assets (4.91) (7.41) (8.76) (11.70) (10.41)
Assumptions:
(1) Maturities of rate sensitive securities are based on contractual maturities and estimated prepayments.
(2) Maturities of rate sensitive loans are based on contractual maturities, estimated prepayments and
estimated repricing impact.
(3) Maturities of rate sensitive liabilities, interest rate swaps and interest rate caps are based on contractual
maturities and estimated repricing.
/TABLE
<PAGE>
II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Registrant's Annual Meeting of Shareholders was
held on April 17, 1996.
(c) At the Annual Meeting, shareholders elected as
directors the nominees listed in the following table:
<TABLE>
<CAPTION>
Number of Shares Number of
Nominees Voted For Shares Withheld
--------------------- ------------------------ ---------------------
<S> <C> <C>
Joseph J. Fitzsimmons 47,640,938 676,660
Robert L. Hetzler 47,722,849 593,949
Daniel R. Smith 47,636,426 680,372
Ley S. Smith 47,692,691 624,107
</TABLE>
Shareholders also voted to approve the First of America
Bank Corporation Stock Compensation Plan with 39,743,516 shares
voting in favor, 7,236,552 shares voting against, 1,336,730
shares abstaining, and no broker non-votes.
Shareholders also voted to ratify the selection of KPMG Peat
Marwick LLP as the Registrant's independent auditors for 1996;
47,292,288 shares voted in favor of the ratification, 486,261
shares voted against, 538,249 shares abstained from voting, and
there were no broker non-votes.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(11) Statement regarding computation of per
share earnings.
The computation of common and common
equivalents per share is described in Note
4 to the Consolidated Financial Statements
of this report.
(27) Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the
Registrant during the three months ended June
30, 1996.<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, First of America has duly caused this report
to be signed on its behalf by the undersigned thereunto
duly authorized.
FIRST OF AMERICA BANK CORPORATION
REGISTRANT
Date: August 9, 1996 /s/ Thomas W. Lambert
Thomas W. Lambert
Executive Vice President
and Chief Financial Officer
(Principal Financial and Accounting
Officer)<PAGE>
EXHIBIT INDEX
(27) Financial Data Schedule<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 1,140,400
<INT-BEARING-DEPOSITS> 115,371
<FED-FUNDS-SOLD> 23,802
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 15,485,806
<ALLOWANCE> 249,388
<TOTAL-ASSETS> 22,203,665
<DEPOSITS> 18,394,842
<SHORT-TERM> 1,371,355
<LIABILITIES-OTHER> 267,684
<LONG-TERM> 433,067
0
0
<COMMON> 609,847
<OTHER-SE> 1,126,870
<TOTAL-LIABILITIES-AND-EQUITY> 22,203,665
<INTEREST-LOAN> 689,795
<INTEREST-INVEST> 147,957
<INTEREST-OTHER> 4,647
<INTEREST-TOTAL> 842,399
<INTEREST-DEPOSIT> 327,783
<INTEREST-EXPENSE> 62,893
<INTEREST-INCOME-NET> 451,723
<LOAN-LOSSES> 47,831
<SECURITIES-GAINS> (759)
<EXPENSE-OTHER> 408,703
<INCOME-PRETAX> 185,311
<INCOME-PRE-EXTRAORDINARY> 121,892
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 121,892
<EPS-PRIMARY> 1.94
<EPS-DILUTED> 1.94
<YIELD-ACTUAL> 4.44
<LOANS-NON> 95,705
<LOANS-PAST> 28,100
<LOANS-TROUBLED> 9,531
<LOANS-PROBLEM> 38,029
<ALLOWANCE-OPEN> 241,182
<CHARGE-OFFS> 71,463
<RECOVERIES> 31,838
<ALLOWANCE-CLOSE> 249,388
<ALLOWANCE-DOMESTIC> 249,388
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
