<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
--------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
--------------- ---------------
Commission file number 1-75
----
HOUSEHOLD FINANCE CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 36-1239445
- ------------------------ ------------------------------------
(State of Incorporation) (I.R.S. Employer Identification No.)
2700 Sanders Road, Prospect Heights, Illinois 60070
- ------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (708) 564-5000
--------------
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 [ ]
At April 30, 1995, there were 1,000 shares of registrant's common stock
outstanding.<PAGE>
<PAGE> 2
Part 1. FINANCIAL INFORMATION
1. FINANCIAL STATEMENTS
Household Finance Corporation and Subsidiaries
STATEMENTS OF INCOME
- --------------------
<TABLE>
<CAPTION>
In millions.
- -------------------------------------------------------------------------------------------------------------
Three months ended March 31 1995 1994
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Finance income . . . . . . . . . . . . . . . . . . . . . . . . $400.0 $348.0
Interest income from noninsurance investment securities. . . . 9.5 9.6
Interest expense . . . . . . . . . . . . . . . . . . . . . . . 192.4 123.5
--------------------------------
Net interest margin. . . . . . . . . . . . . . . . . . . . . . 217.1 234.1
Provision for credit losses on owned receivables . . . . . . . 117.7 123.9
--------------------------------
Net interest margin after provision for credit losses. . . . . 99.4 110.2
--------------------------------
Securitization and servicing fee income. . . . . . . . . . . . 109.6 85.9
Insurance premiums and contract revenues . . . . . . . . . . . 71.9 69.1
Investment income. . . . . . . . . . . . . . . . . . . . . . . 135.4 136.3
Fee income . . . . . . . . . . . . . . . . . . . . . . . . . . 23.5 18.1
Other income . . . . . . . . . . . . . . . . . . . . . . . . . 12.2 17.7
--------------------------------
Total other revenues . . . . . . . . . . . . . . . . . . . . . 352.6 327.1
--------------------------------
Salaries and fringe benefits . . . . . . . . . . . . . . . . . 58.5 57.7
Other operating expenses . . . . . . . . . . . . . . . . . . . 165.1 176.9
Policyholders' benefits. . . . . . . . . . . . . . . . . . . . 134.0 124.2
--------------------------------
Total costs and expenses . . . . . . . . . . . . . . . . . . . 357.6 358.8
--------------------------------
Income before income taxes . . . . . . . . . . . . . . . . . . 94.4 78.5
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . 30.7 25.4
--------------------------------
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . $ 63.7 $ 53.1
================================
</TABLE>
See notes to condensed financial statements.<PAGE>
<PAGE> 3
Household Finance Corporation and Subsidiaries
BALANCE SHEETS
- --------------
<TABLE>
<CAPTION>
In millions.
- ----------------------------------------------------------------------------------------------------
March 31, December 31,
1995 1994
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
- ------
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 110.0 $ 97.3
Investment securities (fair value of $7,343.4 and $7,205.7). . . 7,303.4 7,249.6
Receivables, net . . . . . . . . . . . . . . . . . . . . . . . . 11,284.8 10,476.3
Assets pending sale. . . . . . . . . . . . . . . . . . . . . . . - 398.3
Advances to parent company and affiliates. . . . . . . . . . . . 467.8 482.3
Deferred insurance policy acquisition costs. . . . . . . . . . . 554.0 621.4
Acquired intangibles . . . . . . . . . . . . . . . . . . . . . . 342.7 357.2
Properties and equipment . . . . . . . . . . . . . . . . . . . . 207.6 211.5
Assets acquired through foreclosure. . . . . . . . . . . . . . . 181.2 176.3
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . 844.5 941.2
--------------------------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . $21,296.0 $21,011.4
==========================
LIABILITIES AND SHAREHOLDER'S EQUITY
- ------------------------------------
Debt:
Commercial paper, bank and other borrowings. . . . . . . . . . $ 4,360.5 $ 3,800.6
Senior and senior subordinated debt (with original
maturities over one year). . . . . . . . . . . . . . . . . . 7,218.6 7,728.3
--------------------------
Total debt . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,579.1 11,528.9
Insurance policy and claim reserves. . . . . . . . . . . . . . . 6,773.7 6,643.4
Other liabilities. . . . . . . . . . . . . . . . . . . . . . . . 908.8 880.0
--------------------------
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . 19,261.6 19,052.3
--------------------------
Preferred stock. . . . . . . . . . . . . . . . . . . . . . . . . 100.0 100.0
--------------------------
Common shareholder's equity:
Common stock and paid-in capital . . . . . . . . . . . . . . . 691.2 691.2
Retained earnings. . . . . . . . . . . . . . . . . . . . . . . 1,302.1 1,260.2
Foreign currency translation adjustments . . . . . . . . . . . (9.4) (8.9)
Unrealized loss on investments, net. . . . . . . . . . . . . . (49.5) (83.4)
--------------------------
Total common shareholder's equity. . . . . . . . . . . . . . . . 1,934.4 1,859.1
--------------------------
Total liabilities and shareholder's equity . . . . . . . . . . . $21,296.0 $21,011.4
==========================
</TABLE>
See notes to condensed financial statements.<PAGE>
<PAGE> 4
Household Finance Corporation and Subsidiaries
STATEMENTS OF CASH FLOWS
- ------------------------
<TABLE>
<CAPTION>
In millions.
- ---------------------------------------------------------------------------------------------------
Three months ended March 31 1995 1994
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH PROVIDED BY OPERATIONS
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$ 63.7 $ 53.1
Adjustments to reconcile net income to net cash provided by operations:
Provision for credit losses on owned receivables . . . . . . . . . . . 117.7 123.9
Insurance policy and claim reserves. . . . . . . . . . . . . . . . . . 112.1 90.4
Depreciation and amortization. . . . . . . . . . . . . . . . . . . . . 42.2 43.4
Net realized (gains) losses from sales of assets . . . . . . . . . . . 4.9 (8.4)
Deferred insurance policy acquisition costs. . . . . . . . . . . . . . (20.6) (19.8)
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99.9 71.7
---------------------------
Cash provided by operations. . . . . . . . . . . . . . . . . . . . . . . 419.9 354.3
---------------------------
INVESTMENTS IN OPERATIONS
Investment securities:
Purchased. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (384.2) (984.1)
Matured. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85.8 198.6
Sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105.7 786.7
Short-term investment securities, net change . . . . . . . . . . . . . . 260.6 (77.9)
Receivables, excluding bankcard:
Originated or purchased. . . . . . . . . . . . . . . . . . . . . . . . (1,748.9) (1,606.6)
Collected. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,042.1 984.3
Sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 604.8 68.7
Bankcard receivables:
Originated or collected, net . . . . . . . . . . . . . . . . . . . . . (953.1) (403.1)
Purchased. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3.3) (3.7)
Sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 542.7 470.9
Properties and equipment purchased . . . . . . . . . . . . . . . . . . . (9.1) (4.6)
Properties and equipment sold. . . . . . . . . . . . . . . . . . . . . . .1 .2
Advances to (from) parent company and affiliates . . . . . . . . . . . . 14.5 (11.1)
---------------------------
Cash decrease from investments in operations . . . . . . . . . . . . . . (442.3) (581.7)
---------------------------
FINANCING AND CAPITAL TRANSACTIONS
Short-term debt, net change. . . . . . . . . . . . . . . . . . . . . . . 559.9 (231.0)
Senior and senior subordinated debt issued . . . . . . . . . . . . . . . 585.5 966.3
Senior and senior subordinated debt retired. . . . . . . . . . . . . . . (1,109.4) (637.7)
Policyholders' benefits paid . . . . . . . . . . . . . . . . . . . . . . (195.5) (117.3)
Cash received from policyholders . . . . . . . . . . . . . . . . . . . . 216.4 188.7
Dividends on preferred stock . . . . . . . . . . . . . . . . . . . . . . (1.8) (1.7)
Capital contribution (to) from parent company. . . . . . . . . . . . . . (20.0) 45.0
---------------------------
Cash increase from financing and capital transactions. . . . . . . . . . 35.1 212.3
---------------------------
Increase (decrease) in cash. . . . . . . . . . . . . . . . . . . . . . . 12.7 (15.1)
Cash at January 1. . . . . . . . . . . . . . . . . . . . . . . . . . . . 97.3 27.8
---------------------------
Cash at March 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . .$ 110.0 $ 12.7
===========================
Supplemental cash flow information:
Interest paid. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$ 161.0 $ 128.9
===========================
Income taxes paid (received) . . . . . . . . . . . . . . . . . . . . . .$ (75.7) $ 1.2
===========================
</TABLE>
See notes to condensed financial statements.<PAGE>
<PAGE> 5
Household Finance Corporation and Subsidiaries
BUSINESS SEGMENT DATA
- ---------------------
The company reassessed the significance of its Liquidating Commercial
Lines ("LCL") segment as of December 31, 1994. In recognition of the
significant 1994 decline in the level of LCL assets and a reduced
risk posture for these assets, the LCL segment has been combined with
the Finance and Banking segment. To better analyze financial
condition and results of operations and related trends, prior year
earnings and selected balance sheet data have been reclassified to
reflect this combination.
<TABLE>
<CAPTION>
In millions.
- --------------------------------------------------------------------------------------------------------------
Three months ended March 31 1995 1994
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
REVENUES
- --------
Finance and Banking. . . . . . . . . . . . . . . . . . . . . . . $ 590.3 $ 513.2
Individual Life Insurance. . . . . . . . . . . . . . . . . . . . 171.8 171.5
---------------------------------
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 762.1 $ 684.7
=================================
NET INCOME
- ----------
Finance and Banking. . . . . . . . . . . . . . . . . . . . . . . $ 52.5 $ 41.4
Individual Life Insurance. . . . . . . . . . . . . . . . . . . . 11.2 11.7
---------------------------------
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 63.7 $ 53.1
=================================
Return on average owned assets*. . . . . . . . . . . . . . . . . 1.18% 1.06%
---------------------------------
Return on average common shareholder's equity* . . . . . . . . . 12.4% 12.0%
---------------------------------
*Annualized
In millions.
- --------------------------------------------------------------------------------------------------------------
March 31, Dec. 31,
Assets 1995 1994
- --------------------------------------------------------------------------------------------------------------
Finance and Banking. . . . . . . . . . . . . . . . . . . . . . . $13,555.5 $13,570.0
Individual Life Insurance. . . . . . . . . . . . . . . . . . . . 7,740.5 7,441.4
---------------------------------
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $21,296.0 $21,011.4
=================================
</TABLE>
See notes to condensed financial statements.<PAGE>
<PAGE> 6
NOTES TO CONDENSED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
Accounting policies used in preparation of the quarterly condensed
financial statements are consistent with accounting policies described
in the notes to financial statements contained in Household Finance
Corporation's (the "company") Annual Report on Form 10-K for its fiscal
year ended December 31, 1994. The information furnished herein
reflects all adjustments which are, in the opinion of management,
necessary for a fair statement of results for the interim periods. All
such adjustments are of a normal recurring nature. Certain prior
period amounts have been reclassified to conform with the current
period's presentation.
2. INVESTMENT SECURITIES
---------------------
Investment securities consisted of the following:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
In millions. March 31, 1995 December 31, 1994
-----------------------------------------------------------------------------------------------------------
Carrying Fair Carrying Fair
Value Value Value Value
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TRADING INVESTMENTS
Government securities and other . . . . . . . . . . . . . . - - $ 2.9 $ 2.9
---------------------------------------------
AVAILABLE-FOR-SALE INVESTMENTS
Marketable equity securities . . . . . . . . . . . . . . . $ 67.5 $ 67.5 53.9 53.9
Corporate debt securities . . . . . . . . . . . . . . . . . 2,561.5 2,561.5 2,545.9 2,545.9
Government debt securities. . . . . . . . . . . . . . . . . 224.0 224.0 211.3 211.3
Mortgage-backed securities. . . . . . . . . . . . . . . . . 879.7 879.7 817.9 817.9
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . 23.9 23.9 62.5 62.5
---------------------------------------------
Subtotal. . . . . . . . . . . . . . . . . . . . . . . . . . 3,756.6 3,756.6 3,691.5 3,691.5
---------------------------------------------
HELD-TO-MATURITY INVESTMENTS
Corporate debt securities . . . . . . . . . . . . . . . . . 1,802.7 1,845.9 1,827.4 1,818.3
Government debt securities. . . . . . . . . . . . . . . . . 21.7 20.4 23.1 20.6
Mortgage-backed securities. . . . . . . . . . . . . . . . . 1,074.0 1,076.5 1,063.1 1,041.9
Mortgage loans on real estate . . . . . . . . . . . . . . . 146.9 150.0 161.9 158.5
Policy loans. . . . . . . . . . . . . . . . . . . . . . . . 75.2 75.2 72.7 72.7
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . 313.7 306.2 298.1 290.4
---------------------------------------------
Subtotal. . . . . . . . . . . . . . . . . . . . . . . . . . 3,434.2 3,474.2 3,446.3 3,402.4
---------------------------------------------
Accrued investment income . . . . . . . . . . . . . . . . . 112.6 112.6 108.9 108.9
---------------------------------------------
Total investment securities . . . . . . . . . . . . . . . . $7,303.4 $7,343.4 $7,249.6 $7,205.7
=============================================
/TABLE
<PAGE>
<PAGE> 7
3. RECEIVABLES
-----------
Receivables consisted of the following:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------
March 31, December 31,
In millions. 1995 1994
-------------------------------------------------------------------------------------------------
<S> <C> <C>
Home equity . . . . . . . . . . . . . . . . . . . . . . . . $ 1,863.5 $ 1,570.4
Other secured . . . . . . . . . . . . . . . . . . . . . . . 185.7 141.9
Bankcard. . . . . . . . . . . . . . . . . . . . . . . . . . 3,040.0 2,663.0
Merchant participation. . . . . . . . . . . . . . . . . . . 1,889.0 1,843.4
Other unsecured . . . . . . . . . . . . . . . . . . . . . . 3,078.0 2,865.9
Equipment financing and other commercial. . . . . . . . . . 1,050.3 1,066.6
--------------------------------
Total receivables owned . . . . . . . . . . . . . . . . . . 11,106.5 10,151.2
Accrued finance charges . . . . . . . . . . . . . . . . . . 192.3 176.5
Credit loss reserve for owned receivables . . . . . . . . . (446.2) (413.7)
Unearned credit insurance premiums and claims reserves. . . (48.6) (45.9)
Amounts due and deferred from receivables sales . . . . . . 640.2 789.9
Reserve for receivables serviced with limited recourse. . . (159.4) (181.7)
--------------------------------
Total receivables owned, net. . . . . . . . . . . . . . . . 11,284.8 10,476.3
Receivables serviced with limited recourse. . . . . . . . . 7,348.1 7,808.8
Receivables serviced with no recourse . . . . . . . . . . . 989.6 1,312.9
--------------------------------
Total receivables owned or serviced, net. . . . . . . . . . $19,622.5 $19,598.0
================================
The outstanding balance of receivables serviced with limited recourse consisted of the following:
-------------------------------------------------------------------------------------------------
March 31, December 31,
In millions. 1995 1994
-------------------------------------------------------------------------------------------------
Home equity . . . . . . . . . . . . . . . . . . . . . . . . $ 4,867.9 $ 5,074.6
Bankcard. . . . . . . . . . . . . . . . . . . . . . . . . . 1,659.8 1,866.0
Merchant participation. . . . . . . . . . . . . . . . . . . 820.4 868.2
--------------------------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,348.1 $ 7,808.8
================================
The combination of receivables owned and receivables serviced with limited recourse, which the company
considers its managed portfolio, is shown below:
-------------------------------------------------------------------------------------------------
March 31, December 31,
In millions. 1995 1994
-------------------------------------------------------------------------------------------------
Home equity . . . . . . . . . . . . . . . . . . . . . . . . $ 6,731.4 $ 6,645.0
Other secured . . . . . . . . . . . . . . . . . . . . . . . 185.7 141.9
Bankcard. . . . . . . . . . . . . . . . . . . . . . . . . . 4,699.8 4,529.0
Merchant participation. . . . . . . . . . . . . . . . . . . 2,709.4 2,711.6
Other unsecured . . . . . . . . . . . . . . . . . . . . . . 3,078.0 2,865.9
Equipment financing and other commercial. . . . . . . . . . 1,050.3 1,066.6
--------------------------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . $18,454.6 $17,960.0
================================
The outstanding balance of receivables serviced with no recourse consisted of the following:
-------------------------------------------------------------------------------------------------
March 31, December 31,
In millions. 1995 1994
-------------------------------------------------------------------------------------------------
Home equity . . . . . . . . . . . . . . . . . . . . . . . . $ 122.7 $ 311.8
Other unsecured . . . . . . . . . . . . . . . . . . . . . . 866.9 1,001.1
--------------------------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 989.6 $ 1,312.9
================================
/TABLE
<PAGE>
<PAGE> 8
The amounts due and deferred from receivables sales of $640.2 million
at March 31, 1995 included unamortized excess servicing assets and
funds established pursuant to the recourse provisions and holdback
reserves for certain sales totaling $605.6 million. The amounts due
and deferred also included customer payments not yet remitted by the
securitization trustee to the company. In addition, the company has
made guarantees relating to certain securitizations of $281.3 million
plus unpaid interest and has subordinated interests in certain
transactions, which are recorded as receivables, for $83.9 million at
March 31, 1995. The company maintains credit loss reserves pursuant
to the recourse provisions for receivables serviced with limited
recourse which are based on estimated probable losses under such
provisions. These reserves totaled $159.4 million at March 31, 1995
and represent the company's best estimate of probable losses on
receivables serviced with limited recourse.
See Note 4, "Credit Loss Reserves" for an analysis of credit loss
reserves for receivables. See "Management's Discussion and Analysis"
on pages 14 through 16 for additional information related to the credit
quality of receivables.
4. CREDIT LOSS RESERVES
--------------------
An analysis of credit loss reserves for the three months ended March
31 was as follows:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
In millions. 1995 1994
------------------------------------------------------------------------------------------------
<S> <C> <C>
Credit loss reserves for owned receivables at January 1 . . . . . . . . $ 413.7 $ 452.7
Provision for credit losses - owned receivables . . . . . . . . . . . . 117.7 123.9
Owned receivables charged off . . . . . . . . . . . . . . . . . . . . . (115.0) (141.0)
Recoveries on owned receivables . . . . . . . . . . . . . . . . . . . . 20.5 18.9
Credit loss reserves on receivables purchased, net. . . . . . . . . . . - .3
Other, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.3 .3
-----------------------
TOTAL CREDIT LOSS RESERVES FOR OWNED RECEIVABLES AT MARCH 31 446.2 455.1
-----------------------
Credit loss reserves for receivables serviced with
limited recourse at January 1 . . . . . . . . . . . . . . . . . . . . 181.7 134.5
Provision for credit losses . . . . . . . . . . . . . . . . . . . . . . 14.9 30.6
Chargeoffs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (42.7) (36.3)
Recoveries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.9 .9
Other, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.6 (.3)
-----------------------
TOTAL CREDIT LOSS RESERVES FOR RECEIVABLES SERVICED WITH
LIMITED RECOURSE AT MARCH 31. . . . . . . . . . . . . . . . . . . . . 159.4 129.4
-----------------------
TOTAL CREDIT LOSS RESERVES FOR MANAGED RECEIVABLES AT MARCH 31. . . . . $ 605.6 $ 584.5
=======================
</TABLE>
5. INCOME TAXES
------------
Effective tax rates for the three months ended March 31, 1995 and 1994
of 32.5 and 32.4 percent, respectively, differ from the statutory
federal income tax rate for the respective periods primarily because
of the effects of (a) leveraged lease tax benefits, (b) amortization of
intangible assets, (c) state and local income taxes, (d) increase in
1995 and reduction in 1994 of noncurrent tax requirements and (e)
foreign loss carry forwards in 1994.
6. TRANSACTIONS WITH PARENT COMPANY AND AFFILIATES
-----------------------------------------------
HFC periodically advances funds to Household International and
affiliates or receives amounts in excess of the parent company's current
requirements. Advances to parent company and affiliates were $467.8
million at March 31, 1995 compared to $482.3 million at December 31,
1994. Advances from parent company and affiliates, which are included
in other liabilities, were $202.6 million at March 31, 1995 and $203.0
million at December 31, 1994. Net interest income on these affiliated
balances was $8.0 and $4.1 million for the three months ended March 31,
1995 and 1994, respectively.<PAGE>
PAGE> 9
2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
CONSOLIDATED OVERVIEW
Operations Summary
------------------
Net income for the first quarter was $63.7 million, up 20 percent from
$53.1 million in 1994.
During the first quarter of 1995, the company's profitability was
affected by the following:
- The consumer finance business increased earnings primarily due
to managed receivable portfolio growth, lower credit costs and
improved operating efficiency.
The credit card business reported slightly higher earnings compared
to the prior year quarter. The bankcard business reported higher
net interest margin and fee income due to portfolio growth. In the
second quarter of 1994, the company began issuing the General
Motors credit card ("GM Card"), which previously had been issued
by an affiliate of the company. Partially offsetting higher
bankcard earnings were lower earnings in the private-label credit
card business primarily due to higher credit costs.
The commercial business reported breakeven operating results in
the first quarter compared to a loss last year primarily due to
lower credit costs.
Balance Sheet Review
--------------------
- In the fourth quarter of 1994, the company formed a joint venture
and entered into an agreement to sell $398 million of performing
commercial receivables to this entity, contingent upon the joint
venture obtaining third-party, non-recourse financing. The joint
venture received the financing in March 1995 and completed the
purchase of the receivables. These receivables were classified
as Assets Pending Sale on the Balance Sheet at December 31, 1994.
- Owned assets totaled $21.3 billion, up slightly from $21.0 billion
at December 31, 1994. Growth in other unsecured receivables was
offset by the previously-mentioned sale of commercial receivables
to a joint venture.
- Managed consumer receivables (owned receivables plus those serviced
with limited recourse) were up 13 percent over the prior year
period. Home equity receivable volumes in the company's consumer
finance business were up 13 percent compared to the prior year
period due to strong demand in the wholesale and retail networks.
Demand for credit cards and unsecured loans also remained strong
as volume on these products increased 31 percent during the first
three months compared to the same year-ago period.
- Consumer two-months-and-over contractual delinquency ("delinquency")
as a percent of managed consumer receivables was 3.50 percent, down
from 3.58 percent at December 31, 1994 and 4.24 percent at March 31,
1994. Consumer credit loss reserves as a percent of managed
consumer delinquency were 76.0 percent, flat compared to
December 31, 1994 and up 24 percent from a year ago. The annualized
total consumer managed chargeoff ratio in the first quarter of 1995
was 2.97 percent, essentially unchanged compared to 3.00 percent
in the prior quarter and down from 3.42 percent in the year-ago
quarter.
- In April 1995 the company entered into an agreement to sell to a
third party its purchased mortgage servicing rights. The sale is
not expected to have a material impact on the company's operating
results.
<PAGE>
<PAGE> 10
- The company's debt to equity ratio was 5.7 to 1 compared to 5.9
to 1 at December 31, 1994. The ratios were affected by Statement
of Financial Accounting Standards No. 115 ("FAS No. 115") which
requires that unrealized gains or losses in certain debt and equity
securities be recorded as an adjustment to shareholder's equity.
While FAS No. 115 provides for the adjustment of certain debt and
equity securities to fair value, it does not allow for a
corresponding adjustment for a change in related liabilities.
Therefore, the unrealized loss does not reflect the change in the
economic value of shareholder's equity due to higher interest
rates. The company believes that the change in fair value of
liabilities should offset a significant amount of the reduction
in the fair value of its investment portfolio. Excluding the
effect of the FAS No. 115 component of shareholder's equity, the
company's debt to equity ratio was 5.6 to 1 at March 31, 1995,
flat with December 31, 1994.
<PAGE>
<PAGE> 11
FINANCE AND BANKING
-------------------
Statements of Income
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------
All dollar amounts are stated in millions.
Three months ended March 31 1995 1994
----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Finance income. . . . . . . . . . . . . . . . . . . . . . $ 400.0 $ 348.0
Interest income from noninsurance investment securities . 9.5 9.6
Interest expense. . . . . . . . . . . . . . . . . . . . . 192.4 122.4
-----------------------------------
Net interest margin . . . . . . . . . . . . . . . . . . . 217.1 235.2
Provision for credit losses on owned receivables. . . . . 117.7 123.9
-----------------------------------
Net interest margin after provision for credit losses . . 99.4 111.3
-----------------------------------
Securitization and servicing fee income . . . . . . . . . 109.6 85.9
Insurance premiums and contract revenues. . . . . . . . . 32.9 30.3
Investment income . . . . . . . . . . . . . . . . . . . . 2.6 3.6
Fee income. . . . . . . . . . . . . . . . . . . . . . . . 23.5 18.1
Other income. . . . . . . . . . . . . . . . . . . . . . . 12.2 17.7
-----------------------------------
Total other revenues. . . . . . . . . . . . . . . . . . . 180.8 155.6
-----------------------------------
Costs and expenses:
Salaries and fringe benefits. . . . . . . . . . . . . . 53.1 51.0
Other operating expenses. . . . . . . . . . . . . . . . 134.7 141.4
Policyholders' benefits . . . . . . . . . . . . . . . . 15.5 14.3
Income taxes. . . . . . . . . . . . . . . . . . . . . . 24.4 18.8
-----------------------------------
Net income. . . . . . . . . . . . . . . . . . . . . . . . $ 52.5 $ 41.4
===================================
Average receivables:
Owned . . . . . . . . . . . . . . . . . . . . . . . . . $10,934.7* $10,318.7
Serviced with limited recourse. . . . . . . . . . . . . 7,670.4 6,846.8
-----------------------------------
Average managed receivables . . . . . . . . . . . . . . . 18,605.1* 17,165.5
Serviced with no recourse . . . . . . . . . . . . . . . . 1,130.5 1,599.8
-----------------------------------
Average receivables owned or serviced . . . . . . . . . . $19,735.6* $18,765.3
===================================
Return on average owned assets - annualized . . . . . . . 1.50% 1.26%
===================================
* Includes average balance of Assets Pending Sale, which consisted of commercial receivables sold to a
joint venture in March 1995.
----------------------------------------------------------------------------------------------------------
March 31, December 31,
In millions. 1995 1994
----------------------------------------------------------------------------------------------------------
End-of-period receivables:
Owned . . . . . . . . . . . . . . . . . . . . . . . . . $11,106.5 $10,151.2
Serviced with limited recourse. . . . . . . . . . . . . 7,348.1 7,808.8
-----------------------------------
Managed receivables . . . . . . . . . . . . . . . . . . . 18,454.6 17,960.0
Serviced with no recourse . . . . . . . . . . . . . . . . 989.6 1,312.9
-----------------------------------
Receivables owned or serviced . . . . . . . . . . . . . . $19,444.2 $19,272.9
===================================
/TABLE
<PAGE>
<PAGE> 12
Overview
--------
Finance and Banking earnings for the first quarter increased to $52.5
million from $41.4 million in the year-ago period, with positive
contributions from all businesses. See Operations Summary on page 9
for further discussion of the operating results of the company's
Finance and Banking businesses.
Receivables
-----------
Managed consumer receivables were up 3 percent compared to December 31,
1994 and 13 percent compared to the March 31, 1994 level. See Balance
Sheet Review on page 9 for further discussion.
Receivables owned totaled $11.1 billion at March 31, 1995, up from both
December 31, 1994 and March 31, 1994. The level of owned receivables
may vary from quarter to quarter depending on the timing and
significance of securitization transactions in a particular period.
Net interest margin
-------------------
Net interest margin was $217.1 million for the first quarter of 1995,
down from $235.2 million in the first quarter of 1994. Higher finance
income generated by the higher level of interest-earning assets and the
shift in product mix towards higher-yielding unsecured receivables was
offset by higher funding costs. Net interest margin as a percent of
average owned interest-earning assets, annualized, was 7.59 percent,
compared to 7.75 percent in the prior quarter and 8.68 percent in the
first quarter of 1994. This decline primarily was attributable to
higher short-term rates and lags in repricing variable rate products,
partially offset by the shift in product mix towards higher-yielding
unsecured receivables.
Due to the securitization of assets over the past several years, the
comparability of net interest margin between years may be affected by
the level and type of assets securitized. As receivables are
securitized and sold rather than held in portfolio, net interest income
is shifted to securitization and servicing fee income. Net interest
margin on a managed basis, assuming receivables securitized and sold
were instead held in the portfolio, was $348.6 million for the first
quarter of 1995, down from $356.3 million in the same year-ago period.
Net interest margin on a managed basis as a percent of average managed
interest-earning assets, annualized, was 7.30 percent compared to 7.39
percent in the previous quarter and 8.06 percent in the year-ago
quarter. Net interest margin on an owned basis was greater than on a
managed basis because home equity receivables, which have lower
spreads, were a larger proportion of the portfolio serviced with
limited recourse than of the owned portfolio.
Provision for credit losses
---------------------------
The provision for credit losses for receivables totaled $117.7 million,
down 5 percent from $123.9 million in the comparable prior year period.
The level of provision for credit losses may vary from quarter to
quarter, depending on the amount of securitizations and sales of
receivables in a particular period. The decrease in the provision in
1995 reflected the underlying improvement in the receivable portfolio,
which experienced lower delinquency and chargeoffs in the first quarter
of 1995 than in the first quarter of 1994. See the credit quality
section for further discussion of factors affecting the provision for
credit losses.
Other revenues
--------------
Securitization and servicing fee income consists of two components:
income, net of provision for credit losses, associated with the
securitizations and sales of receivables with limited recourse and
servicing fee income related primarily to the servicing of receivables
with no recourse. Securitization income increased compared to the same
year-ago period due to a higher level of securitized receivables
outstanding and a shift in the mix of the serviced portfolio toward
higher-yielding and fee-based credit card receivables. Servicing fee
income was higher than the first quarter of 1994, which was impacted
by the write-downs of purchased mortgage servicing rights.<PAGE>
<PAGE> 13
Fee income includes revenues from fee-based products such as bankcards
and private-label credit cards. Fee income was $23.5 million in the
first quarter of 1995, up from $18.1 million in the comparable period
of the prior year primarily due to interchange and other fees related
to growth in owned credit card receivables.
Expenses
--------
Salaries and fringe benefits were $53.1 million compared to $51.0
million in the first quarter of 1994. Other operating expenses were
$134.7 million in the first quarter of 1995, down from $141.4 million
in the same period of 1994.
The effective tax rate for the Finance and Banking segment was 31.7
percent, compared to 31.2 percent in the first quarter of 1994.
Credit Loss Reserves
--------------------
The company's credit portfolios and credit management policies have
historically been divided into two distinct components - consumer and
commercial. For consumer products, credit policies focus on product
type and specific portfolio risk factors. The consumer credit
portfolio is diversified by product and geographic location. The
commercial credit portfolio is monitored on an individual transaction
basis and is also evaluated based on overall risk factors. See Note
3, "Receivables" in the accompanying financial statements for
receivables by product type.
Total managed credit loss reserves, which include reserves for recourse
obligations for receivables sold, were as follows (in millions):
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------
March 31, December 31, March 31,
1995 1994 1994
-----------------------------------------------------------------------------------------------
<S> <C> <C>
Owned . . . . . . . . . . . . . . . . . $446.2 $413.7 $455.1
Serviced with limited recourse. . . . . 159.4 181.7 129.4
-----------------------------------------------
Total . . . . . . . . . . . . . . . . . $605.6 $595.4 $584.5
===============================================
</TABLE>
Managed credit loss reserves were up 2 percent from December 31, 1994
and up 4 percent from March 31, 1994. Managed credit loss reserves as
a percent of nonperforming managed receivables were 105.7 percent,
increased slightly from 103.5 percent at December 31, 1994 and were up
from 82.9 percent at March 31, 1994. Consumer credit loss reserves as
a percent of managed consumer delinquency were 76.0 percent at March
31, 1995 compared to 75.0 percent at December 31, 1994 and 61.3 percent
at March 31, 1994. Consumer credit loss reserves as a percent of
annualized consumer net chargeoffs were 91.1 percent for the first
quarter, essentially unchanged compared to 90.0 percent for the fourth
quarter of 1994 but up from 75.8 percent for the first quarter of 1994.
Total owned and managed credit loss reserves as a percent of
receivables were as follows:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
March 31, December 31, March 31,
1995 1994 1994
----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Owned . . . . . . . . . . . . . . . . . 4.02% 4.08% 4.33%
Managed . . . . . . . . . . . . . . . . 3.28 3.32 3.42
----------------------------------------------
</TABLE>
The level of reserves for consumer credit losses is based on
delinquency and chargeoff experience by product and judgmental factors.
The level of reserves for commercial credit losses is based on a
quarterly review process for all commercial credits and management's
evaluation of probable future losses in the portfolio as a whole given
its geographic and industry diversification and historical loss
experience. Management also evaluates the potential impact of existing
and anticipated national and regional economic conditions on the<PAGE>
<PAGE> 14
managed receivable portfolio when establishing consumer and commercial
credit loss reserves. While management allocates substantially all
reserves among the company's various products, all reserves are
considered to be available to cover total loan losses. See Note 4,
"Credit Loss Reserves" in the accompanying financial statements for
analyses of reserves.
Credit Quality
--------------
Delinquency declined compared to both the prior and year-ago quarters,
while chargeoff levels were essentially unchanged from the prior
quarter and were below the year-ago quarter.
Delinquency
-----------
Delinquency levels are monitored on a managed basis which includes both
receivables owned and receivables serviced with limited recourse. The
latter portfolio is included since it is subjected to underwriting
standards comparable to the owned portfolio, is managed by operating
personnel without regard to portfolio ownership and results in a
similar credit loss exposure for the company.
Two-Months-and-Over Contractual Delinquency (as a percent of managed
consumer receivables):
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------
3/31/95 12/31/94 9/30/94 6/30/94 3/31/94
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Home equity . . . . . . . . . . . . . . 2.81% 2.80% 2.83% 2.97% 3.32%
Other secured . . . . . . . . . . . . . 1.09 1.23 4.00 5.01 4.32
Bankcard. . . . . . . . . . . . . . . . 2.71 2.88 3.18 3.40 3.52
Merchant participation. . . . . . . . . 4.67 4.87 5.02 4.55 5.03
Other unsecured . . . . . . . . . . . . 5.34 5.40 6.27 6.76 7.28
----------------------------------------------------
Total . . . . . . . . . . . . . . . . . 3.50% 3.58% 3.85% 3.95% 4.24%
====================================================
</TABLE>
Delinquency as a percent of managed consumer receivables declined from
both the prior quarter and the prior year level. The decline in the
delinquency ratio compared to the previous quarter was driven by
improvements in all unsecured products. The year-over-year decline in
the delinquency ratio was driven by continued improvement in the home
equity and other unsecured portfolios in part resulting from a recently
implemented scoring system which provides the company with growth
opportunities while controlling the associated incremental risk.
Bankcard delinquency decreased from December 1994 and March 1994.
Delinquency benefited from the issuance of GM Card receivables since
June 1994. This new product positively impacted the delinquency
percent, as new accounts were added to the receivables base but had
only a minimal impact on delinquency. The non-GM Card portfolio also
continued to show improvement in the first quarter of 1995 primarily
due to tight underwriting standards. Excluding the impact of the GM
Card program, bankcard and total delinquency at March 31, 1995 would
have still been below the prior year levels.
Future changes in delinquency will depend on economic conditions in the
various regional areas where the company operates, the composition of
the managed receivables base, and the maturation of the GM Card
portfolio.<PAGE>
<PAGE> 15
Net Chargeoffs of Consumer Receivables
--------------------------------------
Net Chargeoffs of Consumer Receivables (as a percent, annualized, of
average managed consumer receivables):
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------
First Fourth Third Second First
Quarter Quarter Quarter Quarter Quarter
1995 1994 1994 1994 1994
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Home equity . . . . . . . . . . . . . . .82% .93% 1.02% 1.42% 1.27%
Other secured . . . . . . . . . . . . . - 1.42 1.86 1.95 1.51
Bankcard. . . . . . . . . . . . . . . . 4.73 4.89 4.78 5.26 5.74
Merchant participation. . . . . . . . . 4.85 4.26 3.87 3.81 3.87
Other unsecured . . . . . . . . . . . . 3.54 4.11 4.76 5.57 5.60
----------------------------------------------------
Total . . . . . . . . . . . . . . . . . 2.97% 3.00% 3.02% 3.38% 3.42%
====================================================
</TABLE>
Net chargeoffs as a percent of average managed consumer receivables for
the first quarter of 1995 were essentially unchanged compared to the
fourth quarter of 1994 and were lower than the year-ago quarter. The
other unsecured and home equity portfolios continued to show
improvement in the first quarter due to the favorable performance of
recently underwritten receivables. Bankcard chargeoffs also continued
to decline, primarily due to improvement in the non-GM Card portfolio.
Bankcard chargeoffs also continued to benefit from the GM Card
receivables, as new accounts were added to the receivable base but only
contributed minimal chargeoffs. Excluding the impact of the GM Card
program, bankcard and total chargeoffs for the quarter would still have
declined. Increased merchant participation chargeoffs in the quarter
primarily related to merchant programs the company has decided to exit.
Chargeoffs are a lagging indicator of credit quality and generally
reflect prior delinquency trends. However, future changes in chargeoff
trends may be impacted by factors such as a shift in product mix,
economic conditions and the impact of personal bankruptcies.
Consequently, the extent and timing of improvements in the chargeoff
trend remains uncertain.
Nonperforming Assets
--------------------
Nonperforming assets consisted of the following:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------
In millions. 3/31/95 12/31/94 9/30/94 6/30/94 3/31/94
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Nonaccrual managed receivables. . . . . $355.6 $395.5 $424.5 $ 468.7 $ 536.1
Accruing managed consumer receivables
90 or more days delinquent. . . . . . 131.7 138.2 135.3 133.5 140.1
Renegotiated commercial loans . . . . . 85.9 41.8 44.9 28.5 29.2
------------------------------------------------------
Total nonperforming managed receivables 573.2 575.5 604.7 630.7 705.4
Real estate owned . . . . . . . . . . . 129.3 124.6 318.3 317.0 327.7
Other assets acquired through foreclosure 51.9 51.7 58.1 79.8 81.3
------------------------------------------------------
Total nonperforming assets. . . . . . . $754.4 $751.8 $981.1 $1,027.5 $1,114.4
======================================================
Managed credit loss reserves as a percent
of nonperforming managed receivables. 105.7% 103.5% 97.1% 90.9% 82.9%
------------------------------------------------------
</TABLE>
Effective January 1, 1995 the company adopted Statement of Financial
Accounting Standards No. 114, "Accounting by Creditors for Impairment
of a Loan" ("FAS No. 114"), as amended by Statement of Financial
Accounting Standards No. 118, "Accounting by Creditors for Impairment
of a Loan - Income Recognition and Disclosure." FAS No. 114 requires
that a loan be recognized as impaired when it is probable that all
contractual amounts due will not be repaid. FAS No. 114 specifically
excludes groups of individually small dollar, homogenous loans where
collectibility is evaluated collectively, such as the company's
consumer receivable portfolio. At March 31, impaired commercial loans
included in the above table were not significant and their ultimate
disposition is not expected to have a material impact on the company's
results of operations. The adoption of FAS No. 114 had no impact on
<PAGE>
<PAGE> 16
the company's results of operations for the three months ended March
31, 1995. Credit loss reserves for impaired loans are included in
reserves for managed receivables described on page 13.
INDIVIDUAL LIFE INSURANCE
-------------------------
Individual Life Insurance net income was $11.2 million, compared to
$11.7 million in the prior year period.
Statements of Income
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------
All dollar amounts are stated in millions.
Three months ended March 31 1995 1994
--------------------------------------------------------------------------------------
<S> <C> <C>
Investment income . . . . . . . . . . . . . $ 132.8 $ 132.7
Insurance premiums and
contract revenues . . . . . . . . . . . . 39.0 38.8
----------------------------------
Total revenues. . . . . . . . . . . . . . . 171.8 171.5
Costs and expenses:
Policyholders' benefits . . . . . . . . . 118.5 109.9
Operating expenses. . . . . . . . . . . . 35.8 43.3
Income taxes. . . . . . . . . . . . . . . 6.3 6.6
----------------------------------
Net income. . . . . . . . . . . . . . . . . $ 11.2 $ 11.7
==================================
Return on average assets - annualized . . . .59% .68%
==================================
--------------------------------------------------------------------------------------
March 31, December 31,
In millions. 1995 1994
--------------------------------------------------------------------------------------
Investment securities . . . . . . . . . . . . . $ 6,790.3 $ 6,669.9
Life insurance in-force . . . . . . . . . . . . 39,619.1 36,560.4
================================
</TABLE>
Investment securities for the Individual Life Insurance segment totaled
$6.8 billion, up from the December 31, 1994 level. The Individual Life
Insurance portfolio represented approximately 93 percent of the
company's total investment portfolio at March 31, 1995. Higher-risk
securities, which include non-investment grade bonds, common and
preferred stocks, commercial mortgage loans and real estate,
represented 7.2 percent of the insurance investment portfolio at March
31, 1995, compared to 6.9 percent at December 31, 1994.
At March 31, 1995 the market value for the insurance held-to-maturity
investment portfolio was 102 percent of the carrying value compared to
99 percent at December 31, 1994. The increase in market value over
book value during the first three months of 1995 was mainly the result
of slightly lower long-term interest rates. The company continuously
monitors the fair value of its available-for-sale investment portfolio
in light of market interest rate conditions and may sell securities in
an attempt to maximize its capital position.
Investment income includes both interest income on investment
securities and realized gains and losses on the sale of available-for-
sale investments. Investment income in the first quarter of 1995 was
$132.8 million, flat compared with the year-ago period despite losses
on sales of available-for-sale investments compared to gains in the
first quarter of 1994, before interest rates began to rise. These
losses were partially offset by higher interest income resulting from
higher yields and a larger investment portfolio.
Insurance premiums and contract revenues for the first quarter were
flat with the prior year period.
Policyholders' benefits in the first quarter of 1995 were $118.5
million, up from $109.9 million in the same period in 1994 due to
higher interest credited to policyholders caused by higher interest
rates and life insurance in-force.
Operating expenses in the first quarter were down compared to the year-
ago period due to lower amortization of deferred insurance policy
acquisition costs ("DAC") primarily resulting from lower gains from
investment sales.
<PAGE>
<PAGE> 17
The effective tax rate was 36.0 percent for the first quarter of 1995,
compared to 36.1 percent a year ago.<PAGE>
<PAGE> 18
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
12 Statement of Computation of Ratio of Earnings to Fixed
Charges and to Combined Fixed Charges and Preferred Stock
Dividends.
27 Financial Data Schedule.
(b) Reports on Form 8-K
During the first quarter of 1995, the Registrant filed a Current
Report on Form 8-K dated February 21, 1995, reporting pursuant to
Item 5, "Other Events" selected unaudited financial information
which presents the results of operations for Household Finance
Corporation as of and for the years ended December 31, 1994 and
1993.
<PAGE>
<PAGE> 19
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 thereunto duly authorized.
HOUSEHOLD FINANCE CORPORATION
-----------------------------
(Registrant)
Date: May 12, 1995 By: /s/ David A. Schoenholz
------------ ----------------------------
David A. Schoenholz,
Vice President, Chief Accounting Officer
and Chief Financial Officer, Director
and on behalf of
Household Finance Corporation
<PAGE>
<PAGE> 20
Exhibit Index
-------------
12 Statement of Computation of Ratio of Earnings to Fixed
Charges and to Combined Fixed Charges and Preferred
Stock Dividends.
27 Financial Data Schedule.
EXHIBIT 12
----------
HOUSEHOLD FINANCE CORPORATION AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND TO COMBINED
FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
- -----------------------------------------------------------------
All dollar amounts are stated in millions.
Three months ended March 31 1995 1994
- -----------------------------------------------------------------
Net income $ 63.7 $ 53.1
- -----------------------------------------------------------------
Income taxes 30.7 25.4
- -----------------------------------------------------------------
Fixed charges:
Interest expense (1) 208.6 129.4
Interest portion of rentals (2) 2.2 1.4
- -----------------------------------------------------------------
Total fixed charges 210.8 130.8
- -----------------------------------------------------------------
Total earnings as defined $305.2 $209.3
=================================================================
Ratio of earnings to fixed charges 1.45 1.60
=================================================================
Preferred stock dividends (3) $ 2.7 $ 2.5
=================================================================
Ratio of earnings to combined fixed charges
and preferred stock dividends 1.43 1.57
=================================================================
(1) For financial statement purposes, interest expense includes
income earned on temporary investment of excess funds,
generally resulting from over-subscriptions of commercial
paper.
(2) Represents one-third of rentals, which approximates the
portion representing interest.
(3) Preferred stock dividends are grossed up to their pretax
equivalent based upon an effective tax rate of 32.5 and
32.4 percent for March 31, 1995 and 1994, respectively.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE FOLLOWING SUMMARY FINANCIAL INFORMATION OF THE COMPANY AND ITS
SUBSIDIARIES IS QUALIFIED IN ITS ENTIRETY BY THE DETAILED INFORMATION
AND FINANCIAL STATEMENTS PREVIOUSLY FILED WITH THE SECURITIES &
EXCHANGE COMMISSION.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 110,000
<SECURITIES> 7,303,400
<RECEIVABLES> 11,106,500
<ALLOWANCES> 605,600
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 438,600
<DEPRECIATION> 231,000
<TOTAL-ASSETS> 21,296,000
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 7,218,600
<COMMON> 1
0
100,000
<OTHER-SE> 1,934,399
<TOTAL-LIABILITY-AND-EQUITY> 21,296,000
<SALES> 0
<TOTAL-REVENUES> 762,100
<CGS> 0
<TOTAL-COSTS> 357,600
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 117,700
<INTEREST-EXPENSE> 192,400
<INCOME-PRETAX> 94,400
<INCOME-TAX> 30,700
<INCOME-CONTINUING> 63,700
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 63,700
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>FINANCIAL STATEMENTS OF THE COMPANY WERE PREPARED IN ACCORDANCE WITH
FINANCIAL INSTITUTION INDUSTRY STANDARDS. ACCORDINGLY, THE COMPANY'S
BALANCE SHEETS WERE NON-CLASSIFIED.
</FN>
</TABLE>
