UNITED STATES
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 15, 1997
(Date of Report [Date of earliest event reported]:)
FIRST OF AMERICA BANK CORPORATION
(Exact name of registrant as specified in charter)
MICHIGAN
(State or other jurisdiction of incorporation or organization)
1-10534
(Commission File No.)
38-1971791
(I.R.S. Employer Identification No.)
211 S. ROSE STREET
KALAMAZOO, MICHIGAN
(Address of principal executive offices)
49007
(Zip Code)
(616) 376-9000
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year,
if changed since last report.)<PAGE>
Item 5. Other Events
(1) On January 14, 1997, First of America Bank Corporation
("First of America") issued a news release announcing its
earnings and related financial information for the fourth
quarter and full year 1996. The text of the news release
and the financial information released with it follow.<PAGE>
CONTACTS AT FIRST OF AMERICA:
Jennifer D. Cox, Senior Vice President-Accounting Division,
(616) 376-7115 / fax 376-7079
Tony Thompson, Public & Media Relations Manager, (616) 376-
7266 / fax 376-7273
FOR IMMEDIATE RELEASE
FIRST OF AMERICA BANK CORP. REPORTS 4TH QTR
NET INCOME OF $84.0 MILLION;
FULL YEAR EPS OF $4.16
KALAMAZOO, Mich., January 14, 1997 -- First of America Bank
Corporation (NYSE: FOA) today reported fourth quarter net income
of $84.0 million, or $1.38 per share compared with $66.0 million
and $1.04 per share for the fourth quarter of 1995. On a core
basis, excluding one-time factors, net income was $73.9 million
compared with $57.3 million for 1995, a 28.8 percent increase.
The differences between core and reported results on an after tax
basis for the fourth quarter of 1996 were $14.3 million in gains
from branch sales and one-time charges of $4.2 million associated
with severance and various write-downs. Excluding these one-time
charges from both periods (1995 quarter results included $9.1
million in gains from branch sales after tax), earnings per share
for the quarter would have been $1.22, up 35.6 percent from 1995
benefiting from fewer shares outstanding. Reported net income
and earnings per share for full year 1996 were $256.9 million and
$4.16. On a core basis, excluding one-time factors, net income
would have been up 11.2 percent from 1995 to $261.1 million and
earnings per share would have been up 14.3 percent to $4.23.
Richard F. Chormann, chairman, president and chief executive
officer, First of America Bank Corporation, said, "During 1996,
First of America made further progress in its financial goals as
we focused on improving core profitability and restructuring the
company's balance sheet to obtain a more profitable mix within
earning assets and deposits. As a result of these actions, our
net interest margin was up from a year ago and our return on
assets and return on equity also improved for the same comparable
periods. In addition, our strengthening capital position allowed
us to repurchase 3.6 million shares of our common stock during
the year."
"We were able to improve revenue growth especially in the area of
retail sales across our lines of business and while we made
progress in 1996, we know there are further opportunities for a
similar pace in 1997."
Chormann continued, "While net charge-offs for the quarter were
up slightly and for the year up 4.3 percent, overall our asset
quality improved again in 1996. Over the long term, we have
experienced asset quality levels that continue to compare
favorably with industry trends. At December 31, 1996, our
allowance for loan losses to loans was 1.68 percent up from the
1.50 percent reported a year ago and coverage of our
nonperforming loans and assets were at all time highs -- 279
percent and 220 percent, respectively.
"In the fourth quarter, we announced several upcoming changes to
our current structure and have over the past few months, started
the implementation process. These changes will further our
realignment to a line of business focus and a simplified
organizational structure. I believe this structure, which is
customer focused, will improve our prospects for reaching higher
levels of profitability in 1997, allow us to achieve significant
improvement in our non-interest expense level and provide us the
next step in achieving our goal of maximizing the franchise we
have built."
Chormann concluded, "One of the best indicators of the progress
we made in 1996 - and one that reflects the value of our company
in the market place - was our stock price. First of America's
stock price reached its highest closing price ever on November
29th of $60.75. On December 31st it closed at $60.13. Going
forward, our efforts will continue to be focused on managing
First of America in ways that will add shareholder value and meet
our responsibilities to customers and employees."
On a normalized operating, or core basis, return on average
assets was 1.35 percent for the fourth quarter of 1996 compared
with 0.98 percent a year ago and return on equity on the same
basis, was 16.46 percent, up from 12.66 percent a year ago. For
the year, after the same adjustments, return on average assets
was 1.18 percent compared with 0.99 percent in 1995, and the
return on equity was 14.62 percent and 13.74 percent,
respectively.
NET INTEREST MARGIN AND NET INTEREST INCOME
The balance sheet restructuring completed in 1996, improved the
net interest margin as less profitable earning assets and
deposits were sharply reduced and targeted, more profitable loan
portfolios and deposit products were increased. Especially
affected were investments which declined by 9.9 percent and
certificates of deposits which were reduced 22.0 percent.
Fourth quarter net interest income, on a fully taxable equivalent
basis, was $230.2 million compared with $231.1 million a year
ago, but up slightly over the third quarter of 1996. Net
interest income, FTE, was $920.0 million for 1996, or 2.1 percent
less than 1995's. The decrease was primarily due to the lower
level of earning assets resulting from the balance sheet
restructuring. During 1996, earning assets declined each
quarter, but the rate of decline slowed during the second half of
the year.
As a direct consequence of these actions the net interest margin
for the fourth quarter of 1996 was 4.64 percent compared with
4.32 percent for the fourth quarter of 1995. For 1996, the net
interest margin improved to 4.53 percent compared with 4.28
percent. Adjusted for the impact of the June 1995 credit card
securitization the increase year over year would have been 32
basis points as the credit card securitization shifted interest
income to non-interest income.
NON-INTEREST REVENUE
For the fourth quarter of 1996, non-interest revenue increased
29.2 percent to $130.2 million. Full year non-interest revenue
was $419.3 million, or 21.2 percent above 1995. Excluding the
impact of branch sales, non-interest revenue would have increased
21.0 percent for the fourth quarter and 18.1 percent for the full
year. The branch sale gains, new service fee schedules,
increased trust fees and the full year impact of bank card
securitization fees contributed to the increase. The three main
components of non-interest revenue each turned in strong
performances over the year ago quarter; service charges, trust
revenue and bank card revenue increased 16.3 percent, 19.0
percent and 6.4 percent, respectively.
Trust and financial services benefited from the strong gains in
the financial markets and from substantial increases in sales of
financial products, such as mutual funds and annuities. Assets
under management increased 28.1 percent for the year and
expectedly, the fees generated by these assets were up 6.5
percent. Cash management, brokerage and investment management
fees increased 27.7 percent, 46.0 percent and 67.7 percent,
respectively. First of America's insurance businesses
contributed $5.1 million to non-interest revenue versus $1.6
million in 1995.
Mortgage banking revenue was up 15.0 percent for the quarter.
Gains on the sale of residential mortgages totaled $6.1 million
for the quarter versus $4.5 million a year ago, offsetting lower
servicing income. For the year, gains were up 11.3 percent
compared with 1995 while servicing income decreased 12.1 percent.
Bank card revenue increased 6.4 percent for the quarter and 22.3
percent for the year. The full year impact from the credit card
securitization added $15.2 million to 1996 bank card revenue.
The total managed portfolio was $1.3 billion at December 31,
1996, level with a year ago.
NON-INTEREST EXPENSE AND RESTRUCTURING CHARGES
Total non-interest expense increased 5.0 percent over the year
ago quarter and included $3.8 million in severance charges, $1.7
million in building write-downs and $2.4 million in goodwill
write-downs. The building and goodwill write-downs were recorded
in accordance with Financial Accounting Standards Board Statement
No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed Of," which became effective
for all companies January 1, 1996. Excluding one-time charges,
non-interest expense was up only 2.0 percent from 1995's fourth
quarter. Full year 1996 non-interest expense included $22.0
million for the FDIC one-time SAIF assessment and $11.5 million
for severance and write-downs. If one-time charges are excluded
from both periods (1995 expense included $13.2 million of
restructuring charges), non-interest expense would have only been
1.2 percent higher for 1996 compared with 1995.
Total personnel cost increased 11.5 percent over the year ago
quarter excluding severance charges, but only 1.1 percent over
the third quarter of 1996. For the year, total personnel costs
excluding severance charges increased 6.6 percent as higher
incentives for improved sales performance more than offset the
reduction in total personnel.
Total full-time equivalent employees (FTEs) were 12,148 at
December 31, 1996, a reduction of 586 FTEs from year-end 1995.
The 1996 FTE number included 200 employees who received
notification that their positions were being eliminated as part
of the company's ongoing restructuring process. In addition,
approximately 400 employees are expected to be notified by the
end of the first quarter of 1997. Severance costs for the
employees to be notified is expected to be between $4 and $5
million.
ASSET QUALITY
First of America's allowance coverage ratios improved over each
of the last two quarters of 1996 from already solid levels. The
improvement in these ratios was due to nonperforming loans and
nonperforming assets reaching their lowest quarterly levels
within the last five years and a steadily increasing allowance
for loan losses. The coverage by the allowance of nonperforming
loans and assets were 279.09 percent and 220.27 percent at
December 31, 1996 compared with 207.02 percent and 163.40 percent
at year-end 1995, respectively.
The net charge-offs to average loans ratio for the fourth quarter
at 0.62 percent represented the highest quarterly ratio reported
for 1996 primarily due to an increase in commercial net charge-
offs and a decreasing average loan portfolio. However, the 0.62
percent was one basis point lower than fourth quarter 1995's
ratio as net charge-offs for both the commercial portfolio, down
31.3 percent, and consumer portfolio, down 3.2 percent, decreased
over the year ago quarter. For full year 1996, the net charge-
offs to average loans ratio increased 6 basis points over 1995 to
0.53 percent also due to lower average outstandings and a 4.3
percent increase in net charge-offs.
First of America Bank Corporation, headquartered in Kalamazoo,
Michigan is a $22 billion bank holding company which has $15
billion in loans and $18 billion in deposits and serves over 3
million households in Michigan, Illinois, Indiana and Florida.
The company engages in commercial banking, retail banking as well
as mortgage origination services in North Carolina and Arizona.
The company also provides trust and other financial services,
managing over $20 billion in trust and Parkstone Mutual Fund
assets. Based on total assets, First of America is ranked 32nd
among banking companies in the United States.
# # #<PAGE>
<TABLE>
FIRST OF AMERICA BANK CORPORATION
Financial Highlights
($ in thousands, except per share data)
Three Months Ended Dec. 31,
------------------------------------------
<S> <C> <C> <C>
%
1996 1995 Change
----------- --------- ---------
NET INCOME $ 83,971 66,019 27.2 %
EARNINGS PER SHARE 1.38 1.04 32.7
PROFITABILITY RATIOS
Net interest margin (FTE) 4.64 % 4.32
Return on average assets 1.54 1.13
Return on average total equity 18.84 14.64
Efficiency ratio 57.82 59.79
Burden ratio 1.43 1.67
Year Ended Dec. 31,
------------------------------------------
%
1996 1995 Change
----------- --------- ---------
NET INCOME $ 256,886 236,708 8.5 %
EARNINGS PER SHARE 4.16 3.73 11.5
PROFITABILITY RATIOS
Net interest margin (FTE) 4.53 % 4.28
Return on average assets 1.16 1.00
Return on average total equity 14.39 13.89
Efficiency ratio 63.09 63.39
Burden ratio 1.92 1.97
At Dec. 31,
--------------------------
1996 1995
----------- ---------
RISK BASED CAPITAL RATIOS
Tier I capital ratio 9.76 % 9.52
Total capital ratio 13.19 12.89
Tier 1 leverage ratio 7.15 6.70
ASSET QUALITY RATIOS
Allowance to total loans 1.68 % 1.50
Coverage of non-performing loans 279.09 207.02
Coverage of non-performing assets 220.27 163.40
At Dec. 31,
----------------------------
1996 1995
----------- ---------
NON-PERFORMING ASSETS
Non-accrual loans $ 84,185 104,174
Restructured loans 6,414 12,327
Other real estate owned 24,190 31,103
----------- ---------
Total non-performing assets $ 114,789 147,604
=========== =========
90 Days past due Loans $ 26,726 28,124
Non-performing assets to loans plus OREO 0.76 % 0.92
Non-performing assest as a % of total
assets 0.52 % 0.63
ALLOWANCE FOR LOAN LOSSES
Year-to-Date
Balance, beginning of period $ 241,182 228,115
Operating provision 93,456 91,488
Net charge-offs (81,792) (78,421)
----------- ---------
Balance, December 31 $ 252,846 241,182
=========== =========
Annualized net charge-offs
to average loans 0.53 % 0.47
/TABLE
<PAGE>
<TABLE>
FIRST OF AMERICA BANK CORPORATION
Trend Analysis
Quarter Statements of Earnings
($ in thousands, except per share data)
1996 1995
------------------------------------------------ ----------------------
4th Qtr 3rd Qtr 2nd Qtr 1st Qtr 4th Qtr 3rd Qtr
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Total interest income $ 409,036 412,119 415,363 427,036 437,492 441,999
Total interest expense 183,827 186,563 190,064 200,612 210,580 217,429
--------- --------- --------- --------- --------- ---------
NET INTEREST INCOME 225,209 225,556 225,299 226,424 226,912 224,570
Provision for loan losses 23,659 21,966 23,230 24,601 27,610 21,368
--------- --------- --------- --------- --------- ---------
Net interest income after provision 201,550 203,590 202,069 201,823 199,302 203,202
NON-INTEREST REVENUE
Service charges on deposit accounts 29,714 29,025 27,640 26,137 25,550 25,297
Investment security gains (losses) 345 (101) (472) (287) 987 457
Trust and financial services revenue 29,479 28,113 29,067 27,365 24,780 24,365
Bankcard revenues 19,711 18,711 18,321 17,157 18,524 20,044
Mortgage revenues 8,063 7,357 7,030 6,075 7,013 8,993
Other non-interest revenue 42,851 15,924 14,367 17,722 23,898 13,040
--------- --------- --------- --------- --------- ---------
Total non-interest revenue 130,163 99,029 95,953 94,169 100,752 92,196
--------- --------- --------- --------- --------- ---------
NON-INTEREST EXPENSE
Personnel 116,924 114,134 111,770 111,342 102,124 102,698
Occupancy and equipment, net 30,676 31,488 29,612 31,557 32,113 30,700
FDIC expense (2,201) 25,826 2,372 2,688 3,861 1,740
Amortization of intangibles 7,630 5,251 5,237 5,237 5,266 5,260
Other operating expenses 55,336 51,236 54,252 54,636 55,029 52,899
--------- --------- --------- --------- --------- ---------
Total non-interest expense 208,365 227,935 203,243 205,460 198,393 193,297
--------- --------- --------- --------- --------- ---------
Income before income tax expense 123,348 74,684 94,779 90,532 101,661 102,101
Income tax expense 39,377 23,661 32,508 30,911 35,642 35,387
--------- --------- --------- --------- --------- ---------
NET INCOME $ 83,971 51,023 62,271 59,621 66,019 66,714
========= ========= ========= ========= --------- ---------
Earnings per share $ 1.38 0.84 1.00 0.94 1.04 1.05
========= ========= ========= ========= --------- ---------
FTE adjustment $ 4,966 4,401 4,121 4,055 4,140 3,827
Common dividends $ 28,261 28,311 26,541 27,888 27,860 27,847
Common dividends per share declared $ 0.47 0.47 0.44 0.44 0.44 0.44
/TABLE
<PAGE>
<TABLE>
FIRST OF AMERICA BANK CORPORATION
Financial Highlights
Consolidated Balance Sheets
Quarter Average Year to Date Average
($ in thousands, except per share data) At December 31, December 31, December 31,
---------------------- ---------------------- -----------------------
1996 1995 1996 1995 1996 1995
---------- ---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and due from banks 1,205,962 1,207,062 927,324 951,575 932,239 919,598
Federal funds sold and other short term 163,400 269,737 191,704 178,065 168,182 108,480
investments
Securities:
Held to maturity -- -- -- 1,906,767 -- 2,708,421
Available for sale 4,562,381 5,060,746 4,511,778 3,162,186 4,681,984 2,617,014
Loans, net of unearned income
Consumer 3,774,803 4,504,255 3,797,803 4,577,194 4,079,585 5,141,728
Commercial, financial and agricultural 2,722,676 2,589,038 2,686,430 2,536,932 2,637,744 2,459,687
Commercial real estate 3,918,248 3,812,001 3,891,453 3,761,226 3,861,537 3,628,780
Residential real estate 4,640,279 5,171,648 4,735,337 5,223,850 4,884,469 5,302,557
---------- ---------- ---------- ---------- ---------- -----------
Total loans 15,056,006 16,076,942 15,111,023 16,099,202 15,463,335 16,532,752
Less: Allowance for loan losses 252,846 241,182 255,117 240,452 249,833 234,933
---------- ---------- ---------- ---------- ---------- -----------
Net loans 14,803,160 15,835,760 14,855,906 15,858,750 15,213,502 16,297,819
---------- ---------- ---------- ---------- ---------- -----------
Total earning assets 19,781,787 21,407,425 19,814,505 21,346,220 20,313,501 21,966,667
---------- ---------- ---------- ---------- ---------- -----------
Premises and equipment, net 433,408 465,498 441,389 465,820 451,361 468,382
Intangibles 201,631 226,979 209,550 230,397 217,427 240,609
Other assets 692,237 534,313 619,222 395,041 529,645 391,949
---------- ---------- ---------- ---------- ---------- -----------
TOTAL ASSETS $ 22,062,179 23,600,095 21,756,873 23,148,601 22,194,340 23,752,272
========== ========== =========== ========== =========== ============
LIABILITIES
Deposits
Non-interest bearing $ 3,009,252 2,925,679 2,858,212 2,774,770 2,790,118 2,710,566
Other core deposits 7,780,372 7,820,558 7,798,863 7,637,091 7,742,586 7,698,610
CD's - negotiated 749,058 875,871 757,987 871,888 798,984 989,946
Other time deposits 6,080,614 7,720,359 6,479,156 7,988,781 6,940,420 8,115,992
---------- ---------- ---------- ---------- ---------- -----------
Total deposits 17,619,296 19,342,467 17,894,218 19,272,530 18,272,108 19,515,114
---------- ---------- ---------- ---------- ---------- -----------
Short term borrowings 1,887,990 1,649,965 1,419,184 1,300,916 1,443,047 1,647,634
Long term debt 471,124 490,315 405,803 490,733 445,329 616,357
Other liabilities 299,571 289,367 264,598 294,849 248,448 269,073
---------- ---------- ---------- ---------- ---------- -----------
Total liabilities 20,277,981 21,772,114 19,983,803 21,359,028 20,408,932 22,048,178
---------- ---------- ---------- ---------- ---------- -----------
Total interest bearing liabilities 16,969,158 18,557,068 16,860,993 18,289,409 17,370,366 19,068,539
---------- ---------- ---------- ---------- ---------- -----------
SHAREHOLDERS' EQUITY
Common equity 1,784,198 1,827,981 1,773,070 1,789,573 1,785,408 1,704,094
---------- ---------- ---------- ---------- ---------- -----------
Total shareholders' equity 1,784,198 1,827,981 1,773,070 1,789,573 1,785,408 1,704,094
---------- ---------- ---------- ---------- ---------- -----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 22,062,179 23,600,095 21,756,873 23,148,601 22,194,340 23,752,272
========== ========== ========== ========== ========== ===========
Shares outstanding 59,813,234 63,283,857 60,666,705 63,670,603 61,775,353 63,500,784
Book value per share $ 29.83 28.89
/TABLE
<PAGE>
<TABLE>
FIRST OF AMERICA BANK CORPORATION
Trend Analysis
($ in thousands, except per share data)
1996 1995
----------------------------------------------- ---------------------
AVERAGE BALANCE SHEET DATA: 4th Qtr 3rd Qtr 2nd Qtr 1st Qtr 4th Qtr 3rd Qtr
---------- --------- ---------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
LOANS
Consumer 3,797,803 4,007,547 4,171,711 4,345,169 4,577,194 4,840,497
Commercial loans 2,686,430 2,630,441 2,631,382 2,602,268 2,536,932 2,483,740
Commercial real estate 3,891,453 3,880,961 3,845,652 3,827,540 3,761,226 3,664,115
Residential real estate 4,735,337 4,827,782 4,897,852 5,079,171 5,223,850 5,349,481
---------- --------- ---------- ---------- --------- ---------
Total gross loans 15,111,023 15,346,731 15,546,597 15,854,148 16,099,202 16,337,833
Less: allowance for loan losses 255,117 252,138 248,500 243,492 240,452 237,231
---------- --------- ---------- ---------- --------- ---------
Net loans 14,855,906 15,094,593 15,298,097 15,610,656 15,858,750 16,100,602
---------- --------- ---------- ---------- --------- ---------
Earning assets 19,814,505 19,987,245 20,459,672 21,001,651 21,346,220 21,550,415
Total assets 21,756,873 21,874,995 22,278,672 22,875,138 23,148,601 23,372,407
Core deposits 17,136,231 17,484,462 17,505,966 17,769,415 18,400,642 18,499,697
CD's - negotiated 757,987 801,840 808,971 827,558 871,888 970,747
Short term borrowings 1,419,184 1,172,521 1,499,867 1,683,852 1,300,916 1,225,580
Long term debt 405,803 421,901 463,627 490,679 490,733 644,881
Total interest bearing liabilities 16,860,993 17,054,376 17,509,902 18,065,268 18,289,409 18,607,133
===============================================================================================================================
PROFITABILITY RATIOS:
Net interest margin (FTE) 4.64 % 4.59 4.49 4.40 4.32 4.23
Return on average assets excluding SAIF assesment 1.52 1.20 1.12 1.05 1.13 1.13
Return on average total equity
excluding SAIF assessment 18.51 15.00 14.09 12.97 14.64 15.17
Efficiency ratio excluding SAIF assessment,
one-time charges and branch sale gains 60.21 61.53 62.04 64.17 62.23 60.57
Burden ratio excluding SAIF assessment,
one-time charges and branch sale gains 1.77 1.88 1.91 2.04 1.90 1.74
</TABLE>
================================================================================
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 hereunto duly authorized.
FIRST OF AMERICA BANK CORPORATION
REGISTRANT
Date: January 15, 1997 /S/ THOMAS W. LAMBERT
Thomas W. Lambert
Executive Vice President and Chief
Financial Officer
(Principal Financial and
Accounting Officer)<PAGE>
