<PAGE> 1
UNITED STATES
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 the quarterly period ended September 30, 1994
Commission file number 1-10074
-------
NATIONAL CITY CORPORATION
-------------------------
(Exact name of registrant as specified in its charter)
Delaware 34-1111088
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1900 East Ninth Street
Cleveland, Ohio 44114
---------------------
(Address of principal executive office)
216-575-2000
------------
(Registrant's telephone number, including area code)
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
------ ------
Indicated the number shares outstanding of each of the issuer's classes
of Common Stock as of October 21, 1994
Common Stock, $4.00 Par Value - 150,185,904
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[Paste-up National City Logo]
QUARTER ENDED SEPTEMBER 30, 1994
FINANCIAL REPORT
AND FORM 10-Q
<PAGE> 3
LOGO
FINANCIAL REPORT AND FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1994
TABLE OF CONTENTS
<TABLE>
<S> <C>
PART I -- FINANCIAL INFORMATION
Financial Highlights.............................................................. 3
Financial Statements (Item 1):
Consolidated Statements of Income............................................ 4
Consolidated Balance Sheets.................................................. 5
Consolidated Statements of Cash Flows........................................ 6
Consolidated Statements of Changes in Stockholders' Equity................... 7
Notes to Financial Statements................................................ 7
Management's Discussion and Analysis (Item 2)..................................... 11
Consolidated Average Balance Sheets............................................... 15
Daily Average Balances/Net Interest Income/Rates.................................. 16
PART II -- OTHER INFORMATION
Changes in Securities (Item 2)
Refer to Reports on Form 8-K below and Note 8 on page 9.
Exhibits and Reports on Form 8-K (Item 6)
Exhibit 27:
Financial Data Schedule
Reports on Form 8-K:
August 1, 1994: The Board of Directors authorized the purchase, in the open market or
otherwise, of up to 10 million shares of its outstanding common stock, subject to a
total expenditure limit of $300 million.
Signature......................................................................... 19
</TABLE>
2
<PAGE> 4
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
<S> <C> <C> <C> <C> <C> <C>
- - - ------------------------------------------------------------------------------------------------------------------
<CAPTION>
Percent Percent
1994 1993 Change 1994 1993 Change
<S> <C> <C> <C> <C> <C> <C>
EARNINGS (IN THOUSANDS):
Net interest income -- fully taxable
equivalent................................... $317,391 $311,127 2% $940,804 $920,163 2%
Provision for loan losses...................... 19,235 23,861 (19) 59,748 73,139 (18)
Fees and other income.......................... 207,153 196,961 5 622,707 585,555 6
Security gains................................. 2,772 2,851 (3) 9,464 8,555 11
Noninterest expense............................ 344,785 330,886 4 1,032,677 988,226 4
Net income..................................... 108,411 102,676 6 318,059 300,452 6
Net income applicable to common stock.......... 104,625 98,676 6 306,610 288,452 6
PERFORMANCE RATIOS:
Net interest margin............................ 4.68% 4.90% 4.65% 4.86%
Overhead ratio................................. 43.36 43.05 43.58 43.76
Efficiency ratio............................... 65.73 65.12 66.05 65.63
Return on average assets....................... 1.41 1.43 1.40 1.42
Return on average common equity................ 17.21 16.26 16.87 16.26
Return on average total equity................. 16.53 15.62 16.21 15.62
PER SHARE MEASURES:
Net income per common share.................... $.69 $.61 13% $1.99 $1.79 11%
Dividends paid per common share................ .30 .27 11 .88 .79 11
Book value per common share.................... 16.33 15.53 5
Market value per share (close):
Common..................................... 28.13 26.75 5
Preferred.................................. 68.56 71.00 (3)
AVERAGE BALANCES (IN MILLIONS):
Assets......................................... $30,510 $ 28,479 7% $30,328 $28,286 7%
Loans.......................................... 21,815 19,500 12 21,420 18,934 13
Securities..................................... 4,723 5,407 (13) 4,778 5,506 (13)
Earning assets................................. 27,188 25,349 7 27,002 25,259 7
Deposits....................................... 22,736 21,015 8 22,641 21,260 6
Common stockholders' equity.................... 2,412 2,408 -- 2,430 2,372 2
Total stockholders' equity..................... 2,601 2,608 -- 2,623 2,572 2
AT PERIOD END:
Total equity to assets......................... 8.49% 9.20%
Tier 1 capital ratio........................... 9.30 9.98
Total risk-based capital ratio................. 12.76 12.81
Leverage ratio................................. 8.09 8.67
Common shares outstanding...................... 150,148,676 158,243,950
Full-time equivalent employees................. 20,098 18,902
ASSET QUALITY:
Net charge-offs to loans (annualized).......... .29% .48% .24% .41%
Loan loss reserve to loans..................... 2.10 2.00
Nonperforming assets to loans & OREO........... .69 1.23
</TABLE>
3
<PAGE> 5
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
(Dollars in Thousands Except Per Share Amounts) September 30 September 30
<S> <C> <C> <C> <C>
- - - -----------------------------------------------------------------------------------------------------------
<CAPTION>
1994 1993 1994 1993
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans:
Taxable..................................... $ 444,397 $ 396,340 $ 1,272,811 $ 1,156,307
Exempt from Federal income taxes............ 4,281 4,008 11,687 12,557
Securities:
Taxable..................................... 51,757 53,587 149,246 175,962
Exempt from Federal income taxes............ 10,595 11,338 29,971 36,308
Federal funds sold and security resale
agreements.................................. 5,465 1,570 15,150 8,409
Eurodollar time deposits in banks............. 7 630 2,983 7,718
Other short-term investments.................. 1,252 1,683 4,241 6,749
----------- ----------- ----------- -----------
Total interest income..................... 517,754 469,156 1,486,089 1,404,010
INTEREST EXPENSE
Deposits...................................... 151,275 129,326 422,189 405,815
Federal funds borrowed and security repurchase
agreements.................................. 26,113 19,426 68,528 51,273
Borrowed funds................................ 17,023 11,152 41,615 33,498
Corporate long-term debt...................... 13,196 7,748 35,278 20,877
----------- ----------- ----------- -----------
Total interest expense.................... 207,607 167,652 567,610 511,463
----------- ----------- ----------- -----------
Net interest income....................... 310,147 301,504 918,479 892,547
PROVISION FOR LOAN LOSSES....................... 19,235 23,861 59,748 73,139
----------- ----------- ----------- -----------
Net interest income after provision for
loan losses............................ 290,912 277,643 858,731 819,408
NONINTEREST INCOME
Item processing revenues...................... 78,909 67,455 228,299 191,417
Service charges on deposit accounts........... 38,790 38,215 114,728 113,041
Trust fees.................................... 28,946 29,005 94,668 89,482
Credit card fees.............................. 19,471 22,957 59,464 70,687
Mortgage banking revenues..................... 13,584 11,867 45,052 42,648
Other......................................... 27,453 27,462 80,496 78,280
----------- ----------- ----------- -----------
Total fees and other income............... 207,153 196,961 622,707 585,555
Security gains................................ 2,772 2,851 9,464 8,555
----------- ----------- ----------- -----------
Total noninterest income.................. 209,925 199,812 632,171 594,110
NONINTEREST EXPENSE
Salaries and employee benefits................ 164,505 153,279 488,399 463,848
Equipment..................................... 22,226 20,901 68,707 65,986
Net occupancy................................. 22,403 22,121 67,599 66,659
Assessments and taxes......................... 19,684 19,543 60,541 60,070
Other......................................... 115,967 115,042 347,431 331,663
----------- ----------- ----------- -----------
Total noninterest expense................. 344,785 330,886 1,032,677 988,226
----------- ----------- ----------- -----------
Income before income taxes...................... 156,052 146,569 458,225 425,292
Income tax expense.............................. 47,641 43,893 140,166 124,840
----------- ----------- ----------- -----------
NET INCOME...................................... $ 108,411 $ 102,676 $ 318,059 $ 300,452
========== ========== ========== ==========
NET INCOME APPLICABLE TO COMMON STOCK........... $ 104,625 $ 98,676 $ 306,610 $ 288,452
========== ========== ========== ==========
NET INCOME PER COMMON SHARE..................... $.69 $.61 $1.99 $1.79
Average Common Shares Outstanding............... 152,077,200 160,109,139 154,166,306 160,968,761
</TABLE>
See notes to financial statements.
4
<PAGE> 6
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
- - - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SEPTEMBER 30 December 31 September 30
1994 1993 1993
<S> <C> <C> <C>
ASSETS
Loans:
Commercial.................................... $ 8,490,914 $8,429,119 $ 8,118,571
International................................. 52,923 69,776 42,145
Real estate construction...................... 424,842 439,406 492,287
Lease financing............................... 213,164 228,352 221,393
Real estate mortgage -- nonresidential........ 2,495,465 2,328,228 2,246,598
Real estate mortgage -- residential........... 3,861,391 3,523,836 2,928,611
Mortgage loans held for sale.................. 155,289 509,187 487,623
Consumer...................................... 4,605,299 4,241,461 3,954,928
Revolving credit.............................. 1,999,325 1,516,776 1,523,885
------------ ----------- ------------
Total loans.............................. 22,298,612 21,286,141 20,016,041
Allowance for loan losses................ 467,272 443,412 399,462
------------ ----------- ------------
Net loans................................ 21,831,340 20,842,729 19,616,579
Securities held to maturity (market value
$1,333,604, $1,824,855 and $2,695,333,
respectively)................................. 1,323,727 1,763,025 2,599,696
Securities available for sale (market value
$2,651,555 at September 30, 1993)............. 3,581,608 3,403,201 2,592,314
Federal funds sold and security resale
agreements.................................... 388,925 611,743 319,150
Trading account assets........................... 6,091 150,296 4,526
Eurodollar time deposits in banks................ -- 457,000 --
Other short-term money market investments........ 75,643 85,677 142,120
Cash and demand balances due from banks.......... 2,074,640 1,933,888 1,966,794
Properties and equipment......................... 386,974 386,219 368,979
Customers' acceptance liability.................. 86,779 68,148 48,005
Accrued income and other assets.................. 1,358,186 1,365,783 1,216,600
------------ ----------- ------------
TOTAL ASSETS............................. $31,113,913 $31,067,709 $28,874,763
============== ============= ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Demand deposits (noninterest bearing)............ $ 4,726,733 $5,214,560 $ 4,729,779
Savings and NOW accounts......................... 4,702,631 5,161,593 4,463,416
Insured money market accounts.................... 5,061,210 5,489,785 5,146,019
Time deposits of individuals..................... 6,535,091 6,224,231 5,964,840
Other time deposits.............................. 397,089 500,421 482,782
Deposits in overseas offices..................... 1,494,656 472,431 268,369
------------ ----------- ------------
Total deposits........................... 22,917,410 23,063,021 21,055,205
Federal funds borrowed and security repurchase
agreements.................................... 2,395,827 3,082,821 2,975,264
Borrowed funds................................... 1,832,172 1,201,011 1,259,871
Acceptances outstanding.......................... 86,779 68,148 48,005
Accrued expenses and other liabilities........... 493,147 379,268 371,540
Corporate long-term debt......................... 748,104 510,173 507,557
------------ ----------- ------------
TOTAL LIABILITIES........................ 28,473,439 28,304,442 26,217,442
Stockholders' Equity:
Preferred stock.................................. 189,290 198,310 200,000
Common stock..................................... 2,451,184 2,564,957 2,457,321
------------ ----------- ------------
TOTAL STOCKHOLDERS' EQUITY............... 2,640,474 2,763,267 2,657,321
------------ ----------- ------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY................................. $31,113,913 $31,067,709 $28,874,763
============== ============= ==============
</TABLE>
See notes to financial statements.
5
<PAGE> 7
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended
(Dollars in Thousands) September 30
- - - ----------------------------------------------------------------------------------------------
<S> <C> <C>
1994 1993
OPERATING ACTIVITIES
Net income..................................................... $ 318,059 $ 300,452
Adjustments to reconcile net income to net cash provided by
operating activities:
Provision for loan losses................................. 59,748 73,139
Depreciation and amortization of goodwill and
intangibles............................................ 84,123 85,893
Security gains............................................ (9,464) (8,555)
Net change in trading account assets...................... 144,205 8,518
Originations and purchases of mortgage loans held for
sale................................................... (1,053,532) (2,357,717)
Proceeds from sales of mortgage loans held for sale....... 1,438,865 2,254,579
Net change in interest receivable......................... (29,659) (25,133)
Net change in interest payable............................ 27,372 26,997
Net change in other assets................................ 34,640 (169,249)
Net change in other liabilities........................... 86,566 50,224
----------- -----------
Net Cash Provided (Used) by Operating Activities....... 1,100,923 239,148
LENDING AND INVESTING ACTIVITIES
Net change in short-term investments........................... 689,852 1,136,118
Purchases of securities........................................ (1,991,820) (3,060,281)
Proceeds from sales of securities.............................. 1,155,138 1,760,983
Proceeds from maturities of securities......................... 1,012,982 1,610,475
Net change in loans............................................ (1,433,692) (1,259,072)
Proceeds from sales of loans................................... -- 26,208
Net change in properties and equipment......................... (42,984) (38,189)
Acquisitions................................................... -- (19,641)
----------- -----------
Net Cash Provided (Used) by Lending and Investing
Activities........................................... (610,524) 156,601
DEPOSIT AND FINANCING ACTIVITIES
Net change in Federal funds borrowed and security repurchase
agreements.................................................. (686,994) 1,156,540
Net change in borrowed funds................................... 631,161 (133,349)
Net change in demand, savings, NOW, insured money market
accounts, and deposits in overseas offices.................. (353,139) (559,552)
Net change in time deposits.................................... 207,528 (970,567)
Proceeds from issuance of long-term debt....................... 247,080 197,950
Repayment of long-term debt.................................... (11,038) (18,557)
Dividends paid, net of tax benefit of ESOP shares.............. (145,760) (136,856)
Issuances of common stock...................................... 18,056 23,805
Repurchase of common and preferred stock....................... (262,957) (66,167)
ESOP trust repayment........................................... 6,416 6,866
----------- -----------
Net Cash Provided (Used) by Deposit and Financing
Activities........................................... (349,647) (499,887)
----------- -----------
Net Increase (Decrease) in Cash and Cash Equivalents........... 140,752 (104,138)
Cash and Cash Equivalents, January 1........................... 1,933,888 2,070,932
----------- -----------
Cash and Cash Equivalents, September 30........................ $ 2,074,640 $ 1,966,794
============ ============
SUPPLEMENTAL DISCLOSURES
Interest paid.................................................. $ 541,000 $ 484,000
Income taxes paid.............................................. 142,000 126,000
Shares issued in purchase acquisitions......................... -- 29,335
</TABLE>
See notes to financial statements.
6
<PAGE> 8
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Unallocated
Shares
(Dollars in Thousands Except Per Preferred Common Capital Retained Held by
Share Amounts) Stock Stock Surplus Earnings ESOP Trust
<S> <C> <C> <C> <C> <C>
- - - ----------------------------------------------------------------------------------------------------------------------------
Balance January 1, 1993.................... $200,000 $316,335 $300,307 $1,708,506 $(25,262)
Net income............................... 300,452
Common dividends paid, $.79 per share.... (125,502)
Preferred dividends paid, $3.00 per
depositary share....................... (12,000)
Issuance of 1,277,600 common shares under
corporate stock and dividend
reinvestment plans..................... 2,936 20,869
Issuance of 1,514,070 restricted shares
pursuant to acquisition................ 3,028 26,307
Purchase of 2,714,900 common shares...... (5,430) (9,778) (50,959)
Two-for-one stock split.................. 316,107 (316,107)
Shares distributed by ESOP trust and tax
benefit on dividends................... 646 6,866
------------ ------------ ------------ ------------ ------------
Balance September 30, 1993................. $200,000 $632,976 $ 21,598 $1,821,143 $(18,396)
============ ============ ============ ============ ============
Balance January 1, 1994.................... $198,310 $635,119 $105,140 $1,841,144 $(16,446)
Net income............................... 318,059
Common dividends paid, $.88 per share.... (134,621)
Preferred dividends paid, $3.00 per
depositary share....................... (11,629)
Issuance of 935,865 common shares
under corporate stock and dividend
reinvestment plans..................... 3,743 14,313
Purchase of 9,566,800 common shares and
180,400 depositary shares of preferred
stock.................................. (9,020) (38,267) (19,741) (195,929)
Shares distributed by ESOP trust and tax
benefit on dividends................... 490 6,416
Adjustment to unrealized (loss) on
securities available for sale, net of
tax.................................... (56,607)
------------ ------------ ------------ ------------ ------------
Balance September 30, 1994................. $189,290 $600,595 $ 99,712 $1,760,907 $(10,030)
============ ============ ============ ============ ============
<CAPTION>
(Dollars in Thousands Except Per
Share Amounts) Total
<S> <C>
- - - --------------------------------------------------------
Balance January 1, 1993.................... $2,499,886
Net income............................... 300,452
Common dividends paid, $.79 per share.... (125,502)
Preferred dividends paid, $3.00 per
depositary share....................... (12,000)
Issuance of 1,277,600 common shares under
corporate stock and dividend
reinvestment plans..................... 23,805
Issuance of 1,514,070 restricted shares
pursuant to acquisition................ 29,335
Purchase of 2,714,900 common shares...... (66,167)
Two-for-one stock split.................. --
Shares distributed by ESOP trust and tax
benefit on dividends................... 7,512
------------
Balance September 30, 1993................. $2,657,321
============
Balance January 1, 1994.................... $2,763,267
Net income............................... 318,059
Common dividends paid, $.88 per share.... (134,621)
Preferred dividends paid, $3.00 per
depositary share....................... (11,629)
Issuance of 935,865 common shares
under corporate stock and dividend
reinvestment plans..................... 18,056
Purchase of 9,566,800 common shares and
180,400 depositary shares of preferred
stock.................................. (262,957)
Shares distributed by ESOP trust and tax
benefit on dividends................... 6,906
Adjustment to unrealized (loss) on
securities available for sale, net of
tax.................................... (56,607)
------------
Balance September 30, 1994................. $2,640,474
============
</TABLE>
See notes to financial statements.
NOTES TO FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES
In the opinion of management, the accompanying unaudited consolidated
financial statements have been prepared on a basis consistent with accounting
principles applied in the prior periods and include all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation of
the financial position, results of operations and cash flows for the interim
periods presented. The results of operations for the interim periods are not
necessarily indicative of the results that may be expected for the full year or
any other interim period.
Certain prior period amounts have been reclassified to conform with current
period presentation.
2. ACQUISITIONS
On February 1, 1993, the Corporation acquired JBS Associates, Inc. (JBS), a
check authorization business, and accounted for the acquisition as a purchase.
JBS stockholders received cash of
$24.3 million and were issued approximately 1.5 million shares of the
Corporation's common stock. A provision in the purchase agreement guarantees the
total value of the consideration received by the JBS stockholders to be not less
than $56.6 million as of February 1, 1998. Total goodwill recorded was $51.5
million and is being amortized over 20 years.
In October 1993, the Corporation acquired Ohio Bancorp, a $1.6 billion
assets bank holding company headquartered in Youngstown, Ohio.
7
<PAGE> 9
Ohio Bancorp shareholders received approximately $104 million in cash and were
issued approximately 4.3 million shares of the Corporation's common stock, for a
total transaction value of approximately $215 million. The transaction was
accounted for as a purchase. Total goodwill recorded was $67 million and is
being amortized over 20 years.
3. CONTINGENT LIABILITIES
In the normal course of business, there are outstanding commitments to
extend credit, guarantees, etc., which are not reflected in the financial
statements. In addition, the Corporation's subsidiaries are involved in a number
of legal proceedings arising out of their businesses. In management's opinion,
the financial statements would not be materially affected by the outcome of any
present legal proceedings or other commitments and contingent liabilities.
4. SECURITIES
On December 31, 1993, the Corporation adopted the requirements of SFAS 115
"Accounting For Certain Investments in Debt and Equity Securities." The adoption
did not have a material effect on the results of operations in 1993 and prior
period financial statements were not restated.
The following is a summary of securities held to maturity and available for
sale:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1994
----------------------------------------------
UNREALIZED UNREALIZED MARKET
(In Thousands) COST GAINS LOSSES VALUE
<S> <C> <C> <C> <C>
- - - ---------------------------------------------------------------
Held to
Maturity:
U.S. Treasury
and Federal
agency
debentures.... $ 134,358 $ -- $ 909 $ 133,449
Mortgage-backed
securities.... 656,140 2,373 25,131 633,382
States and
political
subdivisions... 468,058 39,428 5,886 501,600
Other........... 65,171 146 144 65,173
---------- ---------- ---------- ----------
Total held to
maturity.... 1,323,727 41,947 32,070 1,333,604
Available for
Sale:
U.S. Treasury
and Federal
agency
debentures.... 1,462,178 4,598 31,585 1,435,191
Mortgage-backed
securities.... 1,889,025 1,243 34,903 1,855,365
States and
political
subdivisions... 31,556 279 22 31,813
Other........... 232,139 36,571 9,471 259,239
---------- ---------- ---------- ----------
Total
available
for sale.... 3,614,898 42,691 75,981 3,581,608
---------- ---------- ---------- ----------
Total
securities... $4,938,625 $ 84,638 $108,051 $4,915,212
========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
September 30, 1993
----------------------------------------------
Unrealized Unrealized Market
(In Thousands) Cost Gains Losses Value
<S> <C> <C> <C> <C>
- - - ----------------------------------------------------------------
Held to Maturity:
U.S. Treasury and
Federal agency
debentures..... $ 361,573 $ 14,302 $ -- $ 375,875
Mortgage-backed
securities..... 1,342,186 16,990 1,476 1,357,700
States and
political
subdivisions... 658,345 68,919 3,657 723,607
Other............ 237,592 2,454 1,895 238,151
---------- ---------- ---------- ----------
Total held to
maturity..... 2,599,696 102,665 7,028 2,695,333
Available for
Sale:
U.S. Treasury and
Federal agency
debentures..... 793,208 25,967 195 818,980
Mortgage-backed
securities..... 1,670,947 12,725 1,155 1,682,517
Other............ 128,159 23,822 1,923 150,058
---------- ---------- ---------- ----------
Total available
for sale..... 2,592,314 62,514 3,273 2,651,555
---------- ---------- ---------- ----------
Total
securities... $5,192,010 $165,179 $ 10,301 $5,346,888
========== ========== ========== ==========
</TABLE>
For the nine months ended September 30, 1994 and 1993, gross gains of $13.9
million and $10.4 million, and gross losses of $4.4 million and $1.8 million
were realized, respectively.
At September 30, 1994, the unrealized depreciation in securities available
for sale included in retained earnings totalled $(21.6) million, net of tax. The
Corporation's securities portfolio consists mainly of financial instruments that
pay back par value upon maturity. Market value fluctuations occur over the lives
of the instruments due to changes in market interest rates. Management has
concluded that current declines in value are temporary and, accordingly, no
valuation adjustments have been included as a charge to earnings.
For the nine months ended September 30, 1994, the following represents the
segregation of cash flows between securities available for sale and securities
held to maturity:
<TABLE>
<CAPTION>
AVAILABLE HELD TO
(In Thousands) FOR SALE MATURITY TOTAL
<S> <C> <C> <C>
- - - --------------------------------------------------------------
Purchases of securities.... $1,875,207 $116,613 $1,991,820
Proceeds from sale of
securities............... 1,155,138 -- 1,155,138
Proceeds from maturities of
securities............... 445,450 567,532 1,012,982
</TABLE>
As of September 30, 1994, there were no securities of a single issuer,
other than U.S. Treasury securities and other U.S. government
agencies, which exceeded 10% of stockholders' equity.
8
<PAGE> 10
5. BORROWED FUNDS
<TABLE>
<CAPTION>
SEPT 30 Dec 31 Sept 30
(In Thousands) 1994 1993 1993
<S> <C> <C> <C>
- - - -----------------------------------------------------------------------
U.S. Treasury demand
notes and Federal
funds borrowed-term...... $ 759,103 $ 309,832 $ 346,105
Trading account
liabilities-short
sales.................... 19 -- 100,031
Securities sold with
recourse................. 4,919 12,805 13,902
Notes payable to Student
Loan Marketing
Association.............. 300,000 243,400 243,400
Military banking
liabilities.............. 264,789 185,493 192,732
Other...................... 68,057 50,632 51,086
---------- ---------- ----------
Bank subsidiaries........ 1,396,887 802,162 947,256
Commercial paper........... 435,224 398,790 312,386
Other...................... 61 59 229
---------- ---------- ----------
Other subsidiaries....... 435,285 398,849 312,615
---------- ---------- ----------
Total.............. $1,832,172 $1,201,011 $1,259,871
========== ========== ==========
</TABLE>
6. CORPORATE LONG-TERM DEBT
<TABLE>
<CAPTION>
SEPT 30 Dec 31 Sept 30
(In Thousands) 1994 1993 1993
<S> <C> <C> <C>
- - - ---------------------------------------------------------------------
6 5/8% Subordinated Notes due
2004......................... $250,000 $ -- $ --
Less discount.................. (1,220) -- --
8 3/8% Notes due 1996.......... 100,000 100,000 100,000
Less discount................ (114) (174) (195)
Floating Rate Sub. Notes due
1997.......................... 75,000 75,000 75,000
Less discount................ (44) (58) (63)
9 7/8% Sub. Notes due 1999..... 65,000 65,000 65,000
Less discount................ (233) (268) (291)
Floating Rate Notes due 1997... 50,000 50,000 50,000
Less discount................ (64) (80) (85)
Medium-Term Notes.............. 2,000 6,000 6,000
Less discount................ (1) (9) (12)
Floating Rate Notes due 1994... -- 5,000 5,000
Other.......................... 5,901 7,609 4,191
-------- -------- --------
Total parent company......... 546,225 308,020 304,545
6 1/2% Sub. Notes due 2003..... 200,000 200,000 200,000
Less discount................ (643) (699) (718)
Other.......................... 2,522 2,852 3,730
-------- -------- --------
Total subsidiaries........... 201,879 202,153 203,012
-------- -------- --------
Total.................. $748,104 $510,173 $507,557
========= ========= =========
</TABLE>
In March 1994 the Corporation issued $250 million principal amount of
6 5/8% Subordinated Notes Due 2004. Interest on the notes is payable
semi-annually. The notes are not redeemable prior to their maturity and qualify
as Tier 2 capital for regulatory purposes.
A credit agreement dated June 30, 1994 with a group of banks allows the
Corporation to borrow up to $300 million until June 30, 1997, with a provision
to extend the expiration date under certain circumstances. There were no
borrowings outstanding under this agreement at September 30, 1994.
7. STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
SEPT 30 Dec 31 Sept 30
(Outstanding Shares) 1994 1993 1993
<S> <C> <C> <C>
- - - ---------------------------------------------------------------------------
Preferred Stock, no par
value, authorized
5,000,000 shares.......... 757,160 793,240 800,000
Common Stock, $4.00
par value, authorized
350,000,000 shares........ 150,148,676 158,779,611 158,243,950
</TABLE>
8. INCOME TAX EXPENSE
The composition of income tax expense follows:
<TABLE>
<CAPTION>
Nine Months Ended
September 30
---------------------------
(In Thousands) 1994 1993
<S> <C> <C>
- - - ------------------------------------------------------------
Applicable to income exclusive
of security transactions..... $ 136,793 $ 121,712
Applicable to security
transactions................. 3,373 3,128
----------- -----------
Total.................. $ 140,166 $ 124,840
=========== ===========
</TABLE>
The effective tax rate was approximately 30.6% and 29.4% for the nine
months ended September 30, 1994 and 1993, respectively. The increase reflects
declining levels of tax-exempt interest income and a higher federal statutory
rate.
9. REGULATORY DIVIDENDS
A significant source of liquidity for the Parent company is dividends from
subsidiaries. Dividends paid by the subsidiary banks are subject to various
legal and regulatory restrictions. At September 30, 1994, bank subsidiaries may
pay the Parent company, without prior regulatory approval, approximately $194.3
million of dividends. During the first nine months of 1994, dividends totalling
$118.9 million were declared and $169.5 million of previously declared dividends
were paid to the Parent company.
9
<PAGE> 11
10. EARNINGS PER SHARE
The calculation of net income per common share follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
Sept 30 Sept 30
------------------------ ------------------------
(Dollars In
Thousands, except
per share amounts) 1994 1993 1994 1993
<S> <C> <C> <C> <C>
- - - --------------------------------------------------------------------
PRIMARY:
Net income....... $108,411 $102,676 $318,059 $300,452
Less preferred
dividend
requirements... 3,786 4,000 11,449 12,000
----------- ----------- ----------- -----------
Net income
applicable to
common stock... $104,625 $98,676 $306,610 $288,452
=========== =========== =========== ===========
Average common
shares
outstanding.... 152,077,200 160,109,139 154,166,306 160,968,761
=========== =========== =========== ===========
Net income per
common share... $.69 $.61 $1.99 $1.79
=========== =========== =========== ===========
ASSUMING FULL
DILUTION:
Net income....... $108,411 $102,676 $318,059 $300,452
=========== =========== =========== ===========
Average common
shares
outstanding.... 152,077,200 160,109,139 154,166,306 160,968,761
Stock option
adjustment..... 85,008 72,150 85,008 72,150
Preferred stock
adjustment..... 9,025,347 9,535,160 9,025,347 9,535,160
----------- ----------- ----------- -----------
Average common
shares
outstanding, as
adjusted....... 161,187,555 169,716,449 163,276,661 170,576,071
=========== =========== =========== ===========
Pro forma fully
diluted net
income per
common share... $.67 $.60 $1.95 $1.76
=========== =========== =========== ===========
</TABLE>
The stock option adjustment in the calculation of fully diluted common
shares outstanding represents the assumed exercise of all outstanding stock
options as of the beginning of the year or date of grant, if later, computed
using the treasury stock method.
The preferred stock adjustment in the calculation of fully diluted common
shares outstanding represents the proforma effect of the assumed conversion of
8% Cumulative Convertible Preferred Stock.
10
<PAGE> 12
MANAGEMENT'S DISCUSSION AND ANALYSIS
EARNINGS SUMMARY
Net income for the quarter ended September 30, 1994 was $108.4 million,
or $.69 per common share, compared with $102.7 million, or $.61 per common
share, for the quarter ended September 30, 1993, representing a 13% increase per
share.
Per share earnings were $1.99 for the first nine months, up 11% over
$1.79 in 1993. Net income for the first nine months was $318.1 million, compared
with $300.5 million in the prior year.
Returns on average common equity for the third quarter and nine months
of 1994 were 17.21% and 16.87%, respectively, compared with 16.26% in both of
the same periods in 1993. Return on average assets for the third quarter 1994
was 1.41%, compared with 1.43% for the corresponding period in 1993. For the
first nine months of 1994, return on average assets was 1.40% versus 1.42% a
year ago.
Net income per share included net after-tax security gains of $.01 for
the third quarter 1994 and $.04 year-to-date, compared with $.01 and $.03 per
share for the third quarter and year-to-date 1993, respectively.
The improved profitability for the quarter and year-to-date was driven
by several factors including higher net interest income resulting from loan
growth and a continuing decline in the provision for loan losses. Average loan
outstandings in the third quarter increased 2.1% over second quarter 1994 (an
8.4% annualized growth rate). Fee income increased 5.2% and 6.3%, respectively,
over the third quarter and year-to-date 1993. Noninterest expenses increased
4.2% and 4.5% for the quarter and year-to-date, respectively, versus the same
periods last year due mainly to the acquisition of Ohio Bancorp in October 1993.
Excluding the effect of acquired companies, noninterest expense in 1994 was flat
compared to 1993.
UNIT PROFITABILITY
Tables 1 and 2 present profitability contributions by the Corporation's
major units to consolidated results. The units shown are reflective of how
management operates and monitors these businesses internally. Inherent in the
reported amounts are cost allocations for centrally provided services that
approximate the pro-rata cost to the units using such services. Equity has been
allocated among the business units in the current and prior year to reflect
well-capitalized levels as defined by bank regulatory agencies. An income credit
is granted to the functional units to reflect their use of this
noninterest-bearing source of funds. Return on equity as reported in both years
reflects these allocations. Corporate and retail banking net income results
include actual interest earned and paid on transactions with customers, with
adjustments for matched-maturity, internal funds transfer charges and credits
for loans and deposits. Income on investment securities and all gains and losses
associated with interest rate risk are reported in the investment/funding unit.
The corporate and retail banking businesses' earnings improved for the
first nine months of 1994 compared with 1993 due primarily to higher net
interest income that resulted from loan growth and the continuing decline in the
provision for loan losses. Also contributing to the improvement are lower
expense levels, as seen in the improved overhead and efficiency ratios
(Table 4).
The decline in national credit card net income is due to the
<TABLE>
TABLE 1: UNIT PROFITABILITY
<CAPTION>
NINE MONTHS ENDED Nine months ended
SEPTEMBER 30, 1994 September 30, 1993
------------------------------------- ----------------------------------
NET RETURN ON RETURN ON Net Return on Return on
(Dollars in Millions) INCOME ASSETS(1) EQUITY Income Assets(1) Equity
- - - ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Corporate banking......... $137.3 1.76% 16.60% $121.4 1.63% 16.58%
Retail banking............ 125.8 .87 17.57 104.0 .77 17.04
National credit card...... 6.4 1.47 9.19 17.4 3.55 24.59
Investment/funding........ 35.8 .56 12.72 43.9 .73 22.34
Trust..................... 24.7 23.55 23.88 24.5 24.69 26.69
Item processing........... 11.6 5.03 11.49 12.5 6.42 14.85
Mortgage banking.......... .7 1.34 3.52 (5.1) (8.27) (16.29)
Corporate................. (24.2) -- -- (18.1) -- --
------ ------
Total..................... $318.1 1.40% 16.87% $300.5 1.42% 16.26%
======== ======= ======== ======= ======== ========
<FN>
(1) Return on revenue in the case of fee-based businesses.
</TABLE>
<PAGE> 13
<TABLE>
TABLE 2: GEOGRAPHIC UNIT PERFORMANCE
<CAPTION>
NINE MONTHS ENDED Nine months ended
SEPTEMBER 30, 1994 September 30, 1993
--------------------------------------------- -----------------------------------------------
CORPORATE BANKING RETAIL BANKING Corporate Banking Retail Banking
-------------------- -------------------- ----------------------- ---------------------
(Dollars NET RETURN ON NET RETURN ON Net Return on Net Return on
in millions) INCOME ASSETS INCOME ASSETS Income Assets Income Assets
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Cleveland...... $51.7 2.02% $33.0 1.06% $43.0 1.77% $25.8 .84%
Columbus....... 24.5 1.87 22.3 .80 22.1 1.71 20.4 .73
Indiana........ 11.9 1.65 27.9 1.05 11.9 1.49 19.8 .72
Kentucky....... 25.3 1.45 17.3 .76 24.5 1.36 17.6 .76
Akron(1)....... 8.4 1.43 11.6 .60 7.0 2.17 6.4 .72
Dayton......... 8.4 1.68 9.4 .91 7.5 1.54 10.7 .98
Toledo......... 7.1 1.92 4.3 .75 5.4 1.59 3.3 .57
------ ------ ------ ------
Total....... $137.3 1.76% $125.8 .87% $121.4 1.63% $104.0 .77%
======== =========== ======== =========== ======== ============ ======== ============
<FN>
(1) Includes Ohio Bancorp in 1994.
</TABLE>
11
<PAGE> 14
settlement of litigation in the sec-
ond quarter 1994, the loss of a
major customer in the fourth quarter 1993, and increased marketing expenses
directed at replacing the lost business.
The lower return on equity in the item processing business relative to the
other functional units reflects a higher equity allocation to this business as
if it were an independent organization. The decline in return on equity versus
the prior year is due to increased equity allocations to cover the full purchase
price of companies acquired in 1993.
The increase in mortgage banking net income was due to the sale of mortgage
servicing in the second quarter 1994 and reduced amortization of purchased
mortgage servicing rights from the level recorded in 1993. An additional sale of
servicing is scheduled to close in the fourth quarter 1994. The reduced
amortization is expected to continue unless mortgage refinancings accelerate.
The decrease in the corporate contribution is due primarily to interest
expense associated with the $250 million subordinated debt issued in the first
quarter 1994.
EARNING ASSETS AND INTEREST-BEARING LIABILITIES
Average earning assets totalled $27,188 million for the quarter ended
September 30, 1994, an increase of $345 million from the quarter ended June 30,
1994 and $1,839 million from the third quarter 1993. The increase in the quarter
was due to increased loan balances and a slightly higher securities portfolio.
The increase over third quarter last year is due to loan growth and the
acquisition of Ohio Bancorp in the fourth quarter of 1993.
Core deposits decreased slightly in the third quarter due mainly to runoff
in savings balances. The third quarter also
experienced a shifting of cus-
tomer savings balances into higher-paying certificates of de-
posit. At September 30, 1994,
average core deposits funded over 100% of average loans.
NET INTEREST INCOME
On a fully taxable equivalent basis, net interest income was
$317.4 million in the third quarter compared with $311.1 million for the
corresponding quarter 1993. For the nine months of 1994, fully taxable
equivalent net interest income increased 2.2% to $940.8 million from $920.2
million in 1993.
The tax equivalent net interest margin was 4.68% in the quarter ended
September 30, 1994, compared with 4.68% and 4.90% for the quarters ended June
30, 1994 and September 30, 1993, respectively. For the quarter, the net spread
between interest earned and paid on
assets and liabilities declined
3 basis points, however, the contribution of noninterest bearing
sources of funds increased by the same amount due to the
rising interest rate environment. The lower margin in comparison
to the prior year was mainly due to the loss of a large credit card customer in
the fourth quarter 1993.
Management attempts to prevent adverse swings in net
interest income resulting from interest rate movements by placing conservative
limits on interest rate risk. Interest rate risk is monitored through static
gap, simulation and duration analyses.
At September 30, 1994, the Corporation was less liability-sensitive than at
December 31, 1993. The cumulative one-year gap had contracted to 4.1% of
adjusted earning assets from 10.8% at year-end 1993. The earnings simulation
model projects that net income would decrease by .8% if rates rose two
percentage points over the next year. At the end of 1993, the corresponding
exposure was 2.0% of net income. Finally,
TABLE 3: CONTRIBUTION OF INTEREST RATE DERIVATIVE PORTFOLIO
<TABLE>
<CAPTION>
Nine months ended
September 30
-------------------
(In Millions) 1994 1993
<S> <C> <C>
----------------------------------------------------------------------------------
Interest adjustment to loans.................................... $ 36.5 $ 52.8
Interest adjustment to securities............................... (13.2) (21.7)
------ ------
Interest adjustment to earning assets......................... 23.3 31.1
Interest adjustment to deposits................................. (10.3) (16.6)
------ ------
Effect on net interest income................................. $ 33.6 $ 47.7
===== =====
</TABLE>
<PAGE> 15
NOTE: Amounts in brackets represent reductions of
the related interest income or expense line,
as applicable.
TABLE 4: FULL-TIME EQUIVALENT STAFFING AND OVERHEAD
PERFORMANCE MEASURES
<TABLE>
<CAPTION>
SEPTEMBER 30, 1994 September 30, 1993
-------------------------------------- -----------------------
FULL-TIME Full-Time
EQUIVALENT OVERHEAD EFFICIENCY Equivalent Overhead
STAFF RATIO RATIO Staff Ratio
<S> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------------
Corporate and retail
banking(1)......... 11,623 48.51% 59.13% 10,904 49.61%
National credit
card............... 529 56.86 63.37 624 40.42
Investment/ funding.. 284 (11.90) 41.96 234 (28.58)
Trust(1)............. 968 -- 63.82 943 --
Item processing...... 5,277 -- 91.23 4,460 --
Mortgage
servicing.......... 754 -- 97.68 859 --
Corporate............ 663 -- -- 878 --
---------- ----------
Total............ 20,098 43.58% 66.05% 18,902 43.76%
========== ========= ========== ========== ========
<CAPTION>
Efficiency
Ratio
<S> <C>
---------------------------------------------
Corporate and retail
banking(1)......... 60.28%
National credit
card............... 47.92
Investment/ funding.. 31.66
Trust(1)............. 62.11
Item processing...... 90.43
Mortgage
servicing.......... 113.52
Corporate............ --
Total............ 65.63%
=========
</TABLE>
(1) Includes Ohio Bancorp in 1994.
12
<PAGE> 16
the Corporation's duration model indicates that a two percentage point immediate
upward shock
in rates would cause a reduction in the value of expected asset and liability
cash-flows by an amount equal to 1.0% of total assets, down from 1.1% at
year-end 1993.
Contributing to the decreased liability sensitivity was a reduced volume of
interest-rate swaps where the Corporation receives a fixed rate along with
increased volume of swaps which hedge exposure to rising rates. The contribution
to net interest income of the interest-rate derivative portfolio is presented in
Table 3.
FEES AND OTHER INCOME
Fee income was $207.2 million for the third quarter 1994, up 5.2% from
$197.0 million for the third quarter 1993. Year-to-date fee income was $622.7
million, compared with $585.6 million for the same period in 1993, an increase
of 6.3%. The increases are due primarily to growth in item processing revenues
which have resulted from business growth and acquisitions. Year-to-date mortgage
banking revenues have increased due to a $4.3 million gain on sale of mortgage
servicing rights in the second quarter 1994. Also contributing to the improved
mortgage banking revenues was lower amortization of capitalized excess service
fees, which are recorded as adjustments to revenue. The 1994 amortization was
lower by $5.2 million for the quarter and $6.5 million year-to-date as compared
to 1993. Offsetting the revenue increases was a decline in credit card fees that
resulted from the loss of a large customer in the fourth quarter 1993 and the
unwinding of a credit card securitization. The fees associated with the credit
card securitization were replaced with net interest income as the re-
lated loan balances were returned to the balance sheet.
NONINTEREST EXPENSES
Noninterest expenses were $344.8 million for the quarter
ended September 30, 1994, com-
pared with $330.9 million for the corresponding quarter in 1993. Year-to-date
noninterest
expenses were $1,032.7 million
compared with $988.2 million in 1993. Excluding the impact of the acquired
companies, total expenses for the quarter and year-to-date were flat compared to
1993 levels. There were no significant nonrecurring expenses recorded in the
third quarter 1994. Included in other noninterest expense is the amortization of
purchased mortgage servicing rights. The 1994 amortization expense was lower by
$6.1 million for the quarter and $11.5 million year-to-date as
compared to 1993. Severance and other costs related to the
Corporation's cost redesign program, as well as writedowns of
OREO properties, totalled $18.4
million for the nine months ended September 30, 1993.
The efficiency ratio, defined as noninterest expense as a percentage of fee
income plus fully
taxable net interest income, was 66.1% for the first nine months of 1994 versus
65.6% for 1993.
The overhead ratio, defined as noninterest expense less fee income as a
percentage of fully taxable net interest income, was 43.6% for September 30,
1994 versus 43.8% a year ago.
Total corporate and retail banking staff at September 30, 1994 increased
from a year ago due to the acquisition of Ohio Bancorp. The increase in item
processing was due to both ac-
<PAGE> 17
TABLE 5: ALLOWANCE FOR LOAN LOSSES
<TABLE>
<CAPTION>
Nine Months Ended
September 30
-----------------------
(In Thousands) 1994 1993
<S> <C> <C>
-------------------------------------------------------------------------------
Balance at beginning of year.......................... $443,412 $383,849
Provision............................................. 59,748 73,139
Reserves acquired .................................... 3,458 575
Charge-offs:
Commercial.......................................... 22,495 30,437
Real estate -- construction......................... 298 5,558
Real estate -- commercial........................... 4,864 7,753
Real estate -- residential.......................... 1,551 2,314
Revolving credit.................................... 27,599 29,515
Consumer............................................ 23,877 23,621
-------- --------
Total Charge-offs................................... 80,684 99,198
Recoveries:
Commercial.......................................... 12,742 15,084
Real estate -- construction......................... 1,095 712
Real estate -- commercial........................... 871 1,156
Real estate -- residential.......................... 723 690
Revolving credit.................................... 8,272 7,797
Consumer............................................ 17,635 15,658
-------- --------
Total Recoveries.................................... 41,338 41,097
-------- --------
Net Charge-offs....................................... 39,346 58,101
-------- --------
Balance at end of period.............................. $467,272 $399,462
========= =========
</TABLE>
TABLE 6: ANNUALIZED NET CHARGE-OFFS AS A PERCENTAGE OF
AVERAGE LOANS
<TABLE>
<CAPTION>
First Nine
Third Quarter Months
------------- -------------
1994 1993 1994 1993
<S> <C> <C> <C> <C>
-----------------------------------------------------------------------------------
Commercial....................................... .20 % .26 % .15 % .25%
Real estate -- construction...................... (.07) 1.67 (.25) 1.28
Real estate -- commercial........................ .19 .76 .22 .41
Real estate -- residential....................... .03 .10 .03 .08
Revolving credit................................. 1.64 2.13 1.53 1.99
Consumer......................................... .22 .29 .19 .28
Total net charge-offs to average loans........... .29 .48 .24 .41
</TABLE>
13
<PAGE> 18
quisitions and increased business volume.
ASSET QUALITY
Table 5 summarizes the activity in the allowance for loan losses.
The allowance for loan losses was $467.3 million at September 30, 1994
representing 2.1% of loans outstanding at
that date. This ratio compared with 2.08% at year-end 1993 and 2.00% at
September 30, 1993.
The provision for loan losses declined to $19.2 million for the third
quarter 1994 and $59.7 million year-to-date from $23.9 million and $73.1 million
for the same periods in 1993, respectively.
Net charge-offs were $15.8 million and $23.4 million for the quarters ended
September 30, 1994 and 1993, respectively, and $39.3 million and $58.1 million,
respectively, for the first nine months of 1994 and 1993.
The decline in provision and net charge-offs for both the quarter and
year-to-date reflects the continued improvement in overall asset quality. Table
6
shows net charge-offs as a per-
centage of average loans by portfolio type.
Table 7 summarizes nonperforming assets and related data.
Nonperforming assets of $155 million at September 30, 1994 declined by $9
million from the prior quarter and $93 million from a year ago. The decline in
nonaccrual commercial loans was due to both charge-offs and customer paydowns
and the decline in OREO was due to the sale of foreclosed properties.
Nonperforming assets as a percentage of loans and OREO were .69% at
September 30, 1994 compared with 1.23% a year ago and .98% at December 31, 1993.
In May 1993, the Financial Accounting Standards Board issued Statement of
Financial
Accounting Standards No. 114, "Accounting By Creditors for
Impairment of a Loan". The Corporation plans to adopt this standard on January
1, 1995 and does not expect the adoption to have a material impact on financial
position or results of operations.
CAPITAL
Table 8 reflects various measures of capital at quarter-end. The changes in
the equity ratios reflect the repurchase of outstanding capital stock and a
slightly lower asset base.
In the first half of 1994, approximately 10 million shares of common
stock were repurchased in the open market. In July 1994, the Board of Directors
authorized the purchase, in the open market or otherwise, of
up to 10 million shares of its outstanding common stock, subject to a total
expenditure limit of $300 million. At September 30, 1994, 9.7 million common
shares remained available for repurchase under this authorization.
Book value per common share was $16.33 at September 30, 1994, compared with
$15.53 at September 30, 1993
and $16.15 at December 31, 1993. The book value at September 30, 1994 and
December 31, 1993 included ($.14) and $.22, respectively, related to the market
value (depreciation)/
appreciation of securities available for sale.
In March 1994 the Corporation issued $250 million principal amount of
6 5/8% Subordinated Notes which qualify as Tier 2 capital for regulatory
purposes.
TABLE 7: NONPERFORMING ASSETS
<TABLE>
<CAPTION>
SEPT 30 Dec 31 Sept 30
(In Millions) 1994 1993 1993
<S> <C> <C> <C>
----------------------------------------------------------------------------------
Commercial:
Nonaccrual...................................... $ 58.3 $ 79.4 $ 93.6
Restructured.................................... .7 1.1 2.7
--------- ------- ---------
Total commercial.............................. 59.0 80.5 96.3
Real estate related:
Nonaccrual...................................... 56.9 64.4 80.2
Restructured.................................... 4.5 6.5 6.9
--------- ------- ---------
Total real estate related..................... 61.4 70.9 87.1
--------- ------- ---------
Total nonperforming loans..................... 120.4 151.4 183.4
Other real estate owned (OREO).................... 34.7 57.8 64.4
--------- ------- ---------
Nonperforming assets.............................. $ 155.1 $209.2 $ 247.8
========== ======= ==========
Loans 90 days past-due accruing interest.......... $ 48.4 $ 42.2 $ 34.3
========== ======= ==========
</TABLE>
<PAGE> 19
TABLE 8: CAPITAL AND CAPITAL/ASSET RATIOS
<TABLE>
<CAPTION>
SEPT 30, 1994 Dec 31, 1993
(In Millions) AMOUNT RATIO Amount Ratio
<S> <C> <C> <C> <C>
-----------------------------------------------------------------------------
Total equity1............... $2,640.5 8.49 % $2,763.3 8.89%
Common equity1.............. 2,451.2 7.88 2,565.0 8.26
Tangible common equity2..... 2,062.7 6.71 2,185.2 7.12
Tier 1 capital3............. 2,446.9 9.30 2,468.9 8.94
Total risk-based capital4... 3,357.0 12.76 3,206.8 11.62
Leverage ratio5............. 2,446.9 8.09 2,468.9 8.18
<CAPTION>
Sept 30, 1993
(In Millions) Amount Ratio
<S> <C> <C>
-----------------------------------------------------------------------------
Total equity1............... $2,657.3 9.20 %
Common equity1.............. 2,457,3 8.51
Tangible common equity2..... 2,131.9 7.47
Tier 1 capital3............. 2,452.8 9.98
Total risk-based capital4... 3,148.9 12.81
Leverage ratio5............. 2,452.8 8.67
</TABLE>
--------------------------------------------
1 Computed in accordance with generally accepted
accounting principles, which includes the market
value adjustment to securities at December 31,
1993 and September 30, 1994.
2 Common equity less all intangible assets;
computed as a ratio to total assets less
intangible assets.
3 Stockholders' equity less certain intangibles and
the market value adjustment to securities
available for sale; computed as a ratio to
risk-adjusted assets, as defined in risk based
capital guidelines.
4 Tier 1 capital plus qualifying loan loss
allowance and subordinated debt; computed as a
ratio to risk-adjusted assets.
5 Tier 1 capital; computed as a ratio to average
total assets less certain intangibles.
14
<PAGE> 20
CONSOLIDATED AVERAGE BALANCE SHEETS
<TABLE>
<CAPTION>
Three Months Nine Months
(Dollars In Millions) Ended September 30 Ended September 30
- - - --------------------------------------------------------------------------------------------------------------
1994 1993 1994 1993
-------- -------- -------- --------
<S> <C> <C> <C> <C>
ASSETS
Earning Assets:
Loans:
Commercial................................................ $ 9,062 $ 8,695 $ 9,101 $ 8,712
Real estate mortgage--nonresidential...................... 2,491 2,245 2,417 2,131
Real estate mortgage--residential......................... 3,724 2,741 3,576 2,463
Mortgage loans held for sale.............................. 177 421 280 382
Consumer.................................................. 4,498 3,886 4,358 3,792
Revolving credit.......................................... 1,863 1,512 1,688 1,454
-------- -------- -------- --------
Total loans............................................. 21,815 19,500 21,420 18,934
Securities.................................................. 4,723 5,407 4,778 5,506
Federal funds sold and security resale agreements........... 475 214 518 348
Trading account assets...................................... 8 32 17 24
Eurodollar time deposits in banks........................... 1 73 143 297
Other short-term money market investments................... 166 123 126 150
-------- -------- -------- --------
Total earning assets...................................... 27,188 25,349 27,002 25,259
Allowance for loan losses................................... (467) (402) (458) (395)
Market value appreciation (depreciation) of securities
available for sale........................................ (14) -- 12 --
Cash and demand balances due from banks..................... 2,012 1,948 2,024 1,908
Properties and equipment.................................... 390 362 390 360
Customers' acceptance liability............................. 68 45 64 49
Accrued income and other assets............................. 1,333 1,177 1,294 1,105
-------- -------- -------- --------
Total assets............................................ $ 30,510 $ 28,479 $ 30,328 $ 28,286
======= ======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Demand deposits........................................... $ 4,713 $ 4,524 $ 4,772 $ 4,463
Savings and NOW accounts.................................. 4,872 4,409 5,070 4,314
Insured money market accounts............................. 5,129 5,291 5,226 5,374
Time deposits of individuals.............................. 6,449 6,036 6,269 6,260
Other time deposits....................................... 448 510 476 600
Deposits in overseas office............................... 1,125 245 828 249
-------- -------- -------- --------
Total deposits.......................................... 22,736 21,015 22,641 21,260
Federal funds borrowed and security repurchase
agreements.............................................. 2,453 2,735 2,532 2,430
Borrowed funds............................................ 1,497 1,187 1,356 1,177
Acceptances outstanding................................... 68 45 64 49
Accrued expenses and other liabilities.................... 405 380 411 366
Corporate long-term debt.................................. 750 509 701 432
-------- -------- -------- --------
Total liabilities....................................... 27,909 25,871 27,705 25,714
STOCKHOLDERS' EQUITY:
Preferred stock........................................... 189 200 193 200
Common stock.............................................. 2,412 2,408 2,430 2,372
-------- -------- -------- --------
Total stockholders' equity.............................. 2,601 2,608 2,623 2,572
-------- -------- -------- --------
Total liabilities and stockholders' equity.............. $ 30,510 $ 28,479 $ 30,328 $ 28,286
======= ======= ======= =======
</TABLE>
15
<PAGE> 21
DAILY AVERAGE BALANCE SHEETS/NET INTEREST INCOME/RATES
<TABLE>
<CAPTION>
(Dollars In Millions; Fully Taxable Equivalent
Basis) Daily Average Balances
- - - ----------------------------------------------------------------------------------------------------------
1994 1993
----------------------------- ------------------
THIRD Second First Fourth Third
QUARTER Quarter Quarter Quarter Quarter
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
ASSETS
Earning Assets:
Loans:
Commercial...................................... $ 9,062 $ 9,148 $ 9,105 $ 9,123 $ 8,695
Real estate mortgage............................ 6,392 6,228 6,192 6,251 5,407
Consumer........................................ 6,361 5,983 5,780 5,623 5,398
------- ------- ------- ------- -------
Total loans................................... 21,815 21,359 21,077 20,997 19,500
Securities:
Taxable......................................... 3,977 3,903 4,164 4,636 4,560
Tax-exempt...................................... 746 788 759 839 847
------- ------- ------- ------- -------
Total securities.............................. 4,723 4,691 4,923 5,475 5,407
Federal funds sold................................ 76 52 46 86 28
Security resale agreements........................ 399 569 412 302 186
Eurodollar time deposits in banks................. 1 66 366 223 73
Short-term money market investments............... 174 106 147 135 155
------- ------- ------- ------- -------
Total earning assets/
Total interest income/rates................ 27,188 26,843 26,971 27,218 25,349
Market value appreciation (depreciation) of
securities available for sale..................... (14) 4 46 -- --
Allowance for loan losses........................... (467) (457) (450) (452) (402)
Cash and demand balances due from banks............. 2,012 2,029 2,033 2,111 1,948
Properties and equipment............................ 390 391 390 386 362
Customers' acceptance liability..................... 68 58 64 57 45
Accrued income and other assets..................... 1,333 1,278 1,271 1,148 1,177
------- ------- ------- ------- -------
Total assets.................................. $30,510 $30,146 $30,325 $30,468 $28,479
======= ======= ======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Savings and NOW accounts.......................... $ 4,872 $ 5,169 $ 5,174 $ 5,065 $ 4,409
Insured money market accounts..................... 5,129 5,239 5,313 5,482 5,291
Time deposits of individuals...................... 6,449 6,209 6,146 6,291 6,036
Other time deposits............................... 448 488 487 565 510
Deposits in overseas offices...................... 1,125 716 640 305 245
Federal funds borrowed............................ 1,218 1,352 1,588 1,631 1,649
Security repurchase agreements.................... 1,235 1,127 1,079 1,158 1,086
Borrowed funds.................................... 1,497 1,301 1,266 1,237 1,187
Corporate long-term debt.......................... 750 757 592 509 509
------- ------- ------- ------- -------
Total interest bearing liabilities/
Total interest expense/rates............... 22,723 22,358 22,285 22,243 20,922
Non-interest bearing deposits..................... 4,713 4,779 4,828 5,087 4,524
Acceptances outstanding........................... 68 58 64 57 45
Accrued expenses and other liabilities............ 405 396 435 372 380
------- ------- ------- ------- -------
Total liabilities............................. 27,909 27,591 27,612 27,759 25,871
Stockholders' equity.......................... 2,601 2,555 2,713 2,709 2,608
------- ------- ------- ------- -------
Total liabilities and stockholders' equity.... $30,510 $30,146 $30,325 $30,468 $28,479
======= ======= ======= ======= =======
Net interest income.................................................................................
Interest spread.....................................................................................
Contribution of noninterest bearing sources of funds................................................
Net interest margin.................................................................................
</TABLE>
16
<PAGE> 22
<TABLE>
<CAPTION>
Quarterly Interest Average Annualized Rate
------------------------------------------------------- -------------------------------------------------------
1994 1993 1994 1993
------------------------------- ------------------- ------------------------------- -------------------
THIRD Second First Fourth Third THIRD Second First Fourth Third
QUARTER Quarter Quarter Quarter Quarter QUARTER Quarter Quarter Quarter Quarter
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$178.0 $175.4 $164.6 $167.6 $162.5 7.80% 7.69% 7.33% 7.29% 7.42%
124.4 118.9 116.5 120.0 106.6 7.78 7.63 7.53 7.68 7.89
148.9 135.7 129.1 127.8 134.1 9.31 9.09 9.02 9.03 9.88
------- ------- ------- ------- -------
451.3 430.0 410.2 415.4 403.2 8.23 8.07 7.85 7.87 8.23
51.8 48.7 48.8 54.1 53.6 5.19 4.99 4.71 4.65 4.69
15.3 15.7 14.3 17.7 18.1 8.18 7.97 7.52 8.45 8.56
------- ------- ------- ------- -------
67.1 64.4 63.1 71.8 71.7 5.66 5.49 5.14 5.23 5.30
.9 .5 .3 .7 .2 4.86 4.14 2.82 2.95 3.01
4.5 5.6 3.3 2.4 1.4 4.51 3.93 3.21 3.14 2.90
-- .6 2.4 1.9 .6 2.93 3.51 2.66 3.40 3.43
1.2 1.2 1.8 2.1 1.7 2.85 4.56 4.92 6.29 4.31
------- ------- ------- ------- -------
$525.0 $502.3 $481.1 $494.3 $478.8 7.69% 7.50% 7.19% 7.23% 7.52%
$ 31.7 $ 33.2 $ 33.0 $ 33.9 $ 29.7 2.59% 2.58% 2.58% 2.66% 2.67%
29.9 28.4 27.5 28.5 28.5 2.31 2.17 2.10 2.06 2.14
72.6 66.2 63.9 67.1 65.2 4.47 4.27 4.21 4.23 4.29
4.5 4.1 3.9 4.7 4.3 4.00 3.53 3.23 3.36 3.34
12.6 6.6 4.1 2.1 1.6 4.44 3.68 2.62 2.73 2.65
13.9 13.6 12.4 14.3 12.6 4.54 4.02 3.18 3.48 3.03
12.2 9.2 7.2 7.6 6.8 3.91 3.28 2.71 2.60 2.49
17.0 13.3 11.3 12.9 11.2 4.15 4.09 3.63 4.14 3.73
13.2 13.7 8.4 7.5 7.8 6.98 7.28 5.71 5.85 6.04
------- ------- ------- ------- -------
207.6 188.3 171.7 178.6 167.7 3.60% 3.38% 3.12% 3.19% 3.18%
------- ------- ------- ------- -------
$317.4 $314.0 $309.4 $315.7 $311.1
======= ======= ======= ======= =======
...........................................................
........................................................... 4.09% 4.12% 4.07% 4.04% 4.34%
........................................................... .59 .56 .54 .59 .56
- - - ----------------------------------------------------------- ------- ------- ------- ------- -------
4.68% 4.68% 4.61% 4.63% 4.90%
======= ======= ======= ======= =======
</TABLE>
17
<PAGE> 23
CORPORATE INVESTOR INFORMATION
CORPORATE HEADQUARTERS
National City Center
1900 East Ninth Street
Cleveland, Ohio 44114-3484
(216) 575-2000
TRANSFER AGENT AND REGISTRAR
National City Bank
Corporate Trust Department
1900 East Ninth Street
Cleveland, Ohio 44114-3484
1-800-622-6757
INVESTOR INFORMATION
Janis E. Lyons, Vice President
Corporate Investor Relations
Department 2145
P.O. Box 5756
Cleveland, Ohio 44101-0756
1-800-622-4204
COMMON STOCK LISTING
National City Corporation common stock is traded on the New York Stock
Exchange under the symbol NCC. The stock is abbreviated in financial
publications as NTLCITY.
PREFERRED STOCK LISTING
National City Corporation 8% Cumulative Convertible Preferred Stock
depositary shares are traded on the New York Stock Exchange under the
symbol NCC PR. The preferred stock is abbreviated as NTLCITY PF in
financial publications.
DIVIDEND REINVESTMENT AND STOCK
PURCHASE PLAN
Common stockholders participating in the plan receive a three percent
discount from market price when they reinvest their National City dividends
in additional shares. Participants can also make optional cash purchases of
common stock at a three percent discount from market price and pay no
brokerage commissions. To obtain our Plan prospectus and authorization
card, write or call:
National City Bank
Corporate Trust Department
Dividend Reinvestment Plan
P.O. Box 92301
Cleveland, Ohio 44193-0900
1-800-622-6757
DEBT RATINGS
<TABLE>
<CAPTION>
STANDARD DUFF & THOMSON
MOODY'S & POOR'S PHELPS BANKWATCH
- - - -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
National City Corporation........................ A/B
Commercial paper (short-term debt)............. P-1 A-1 Duff 1+
Senior debt.................................... A1 A AA-
Subordinated debt.............................. A2 A- A+
Preferred stock................................ "a1" BBB+ A
Certificates of deposit:
National City Bank (Cleveland)................. Aa3 A+ AA
National City Bank, Columbus................... Aa3 A+ AA
National City Bank, Kentucky................... Aa3 A+ AA
National City Bank, Indiana.................... Aa3 A+ AA
National City Bank, Northeast (Akron).......... Aa3 -- --
National City Bank, Dayton..................... Aa3 -- --
National City Bank, Northwest (Toledo)......... Aa3 -- --
Subordinated Bank Notes:
National City Bank (Cleveland)................. A1 A AA
National City Bank, Columbus................... A1 A AA
</TABLE>
18
<PAGE> 24
[LOGO]
FORM 10-Q -- SEPTEMBER 30, 1994
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.
NATIONAL CITY CORPORATION
Date: October 31, 1994
/s/ ROBERT G. SIEFERS
--------------------------------------
Robert G. Siefers
Executive Vice President
Chief Financial Officer
(Duly Authorized Signer and
Principal Financial Officer)
19
<PAGE> 25
<TABLE>
<S> <C>
NEW LOGO HERE Bulk Rate
National City Center U.S. Postage
1900 East Ninth Street PAID
Cleveland, Ohio 44114-3484 National City
Corporation
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> SEP-30-1994
<CASH> 2,074,640
<INT-BEARING-DEPOSITS> 75,643
<FED-FUNDS-SOLD> 388,925
<TRADING-ASSETS> 6,091
<INVESTMENTS-HELD-FOR-SALE> 3,581,608
<INVESTMENTS-CARRYING> 1,323,727
<INVESTMENTS-MARKET> 1,333,604
<LOANS> 22,298,612
<ALLOWANCE> 467,272
<TOTAL-ASSETS> 31,113,913
<DEPOSITS> 22,917,410
<SHORT-TERM> 4,227,999
<LIABILITIES-OTHER> 579,926
<LONG-TERM> 748,104
<COMMON> 600,595
0
189,290
<OTHER-SE> 1,850,589
<TOTAL-LIABILITIES-AND-EQUITY> 31,113,913
<INTEREST-LOAN> 1,284,498
<INTEREST-INVEST> 179,217
<INTEREST-OTHER> 22,374
<INTEREST-TOTAL> 1,486,089
<INTEREST-DEPOSIT> 422,189
<INTEREST-EXPENSE> 567,610
<INTEREST-INCOME-NET> 918,479
<LOAN-LOSSES> 59,748
<SECURITIES-GAINS> 9,464
<EXPENSE-OTHER> 1,032,677
<INCOME-PRETAX> 458,225
<INCOME-PRE-EXTRAORDINARY> 458,225
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 318,059
<EPS-PRIMARY> 1.99
<EPS-DILUTED> 1.95
<YIELD-ACTUAL> 0
<LOANS-NON> 115,200
<LOANS-PAST> 48,400
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 443,412
<CHARGE-OFFS> 80,684
<RECOVERIES> 41,338
<ALLOWANCE-CLOSE> 467,272
<ALLOWANCE-DOMESTIC> 467,272
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 190,136
</TABLE>