<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, 1995
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 25, 1995
Common Stock, $4.00 Par Value - 147,258,479
<PAGE> 2
NATIONAL CITY CORPORATION
QUARTER ENDED SEPTEMBER 30, 1995
FINANCIAL REPORT
AND FORM 10-Q
<PAGE> 3
NATIONAL CITY CORPORATION
FINANCIAL REPORT AND FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1995
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 Note 8 on page 10.
Exhibits and Reports on Form 8-K (Item 6)
Exhibit 27:
Financial Data Schedule
Reports on Form 8-K:
July 24, 1995: The Board of Directors elected David A. Daberko president and chief
executive officer, effective immediately, and to succeed Edward B. Brandon as chairman
upon Mr. Brandon's retirement, effective September 30, 1995.
August 30, 1995: National City announced, on August 28, 1995, it had reached a
definitive agreement to acquire Integra Financial Corporation, a $15 billion asset bank
holding company headquartered in Pittsburgh, Pennsylvania.
Signature......................................................................... 19
</TABLE>
2
<PAGE> 4
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
- ------------------------------------------------------------------------------------------------------------------
Percent Percent
1995 1994 Change 1995 1994 Change
<S> <C> <C> <C> <C> <C> <C>
EARNINGS (IN THOUSANDS):
Net interest income -- fully taxable
equivalent................................... $343,669 $317,391 8% $1,006,847 $940,804 7%
Provision for loan losses...................... 28,160 19,235 46 74,327 59,748 24
Fees and other income.......................... 232,224 207,153 12 656,847 622,707 5
Security gains................................. 9,837 2,772 -- 11,471 9,464 21
Noninterest expense............................ 378,260 344,785 10 1,089,756 1,032,677 6
Net income..................................... 120,012 108,411 11 343,573 318,059 8
Net income applicable to common stock.......... 116,291 104,625 11 332,411 306,610 8
PERFORMANCE RATIOS:
Net interest margin............................ 4.39% 4.68% 4.48% 4.65%
Return on average assets....................... 1.37 1.41 1.37 1.40
Return on average common equity................ 17.60 17.21 17.72 16.87
Return on average total equity................. 16.96 16.53 17.05 16.21
PER SHARE MEASURES:
Net income per common share:
Primary.................................... $.78 $.69 13% $2.24 $1.99 13%
Fully diluted.............................. .76 .67 13 2.18 1.95 12
Dividends paid per common share................ .33 .30 10 .97 .88 10
Book value per common share.................... 18.21 16.33 12
Market value per share (close):
Common..................................... 30.88 28.13 10
Preferred.................................. 74.00 68.56 8
AVERAGE BALANCES (IN MILLIONS):
Assets......................................... $34,837 $30,510 14% $33,469 $30,328 10%
Loans.......................................... 25,636 21,815 18 24,546 21,420 15
Securities..................................... 5,155 4,723 9 4,868 4,778 2
Earning assets................................. 31,251 27,188 15 29,985 27,002 11
Deposits....................................... 24,553 22,736 8 24,480 22,641 8
Common stockholders' equity.................... 2,622 2,412 9 2,508 2,430 3
Total stockholders' equity..................... 2,808 2,601 8 2,694 2,623 3
AT PERIOD END:
Total equity to assets......................... 8.24% 8.49%
Tier 1 capital ratio........................... 8.84 9.30
Total risk-based capital ratio................. 13.58 12.76
Leverage ratio................................. 7.30 8.09
Common shares outstanding...................... 147,397,746 150,148,676 (2)%
Full-time equivalent employees................. 20,772 20,098 3
ASSET QUALITY:
Net charge-offs to loans (annualized).......... .32% .29% .28% .24%
Loan loss reserve to loans..................... 1.94 2.10
Nonperforming assets to loans & OREO........... .51 .69
</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
- -----------------------------------------------------------------------------------------------------------
1995 1994 1995 1994
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans:
Taxable..................................... $574,640 $444,397 $1,626,231 $1,272,811
Exempt from Federal income taxes............ 3,412 4,281 11,100 11,687
Securities:
Taxable..................................... 68,527 51,757 193,658 149,246
Exempt from Federal income taxes............ 9,035 10,595 28,793 29,971
Federal funds sold and security resale
agreements.................................. 5,124 5,465 20,694 15,150
Eurodollar time deposits in banks............. 104 7 104 2,983
Other short-term investments.................. 1,471 1,252 3,625 4,241
----------- ----------- ----------- -----------
Total interest income..................... 662,313 517,754 1,884,205 1,486,089
INTEREST EXPENSE
Deposits...................................... 219,501 151,275 643,981 422,189
Federal funds borrowed and security repurchase
agreements.................................. 45,869 26,113 115,207 68,528
Borrowed funds................................ 38,094 17,023 86,469 41,615
Corporate long-term debt...................... 20,215 13,196 48,677 35,278
----------- ----------- ----------- -----------
Total interest expense.................... 323,679 207,607 894,334 567,610
----------- ----------- ----------- -----------
Net interest income....................... 338,634 310,147 989,871 918,479
PROVISION FOR LOAN LOSSES....................... 28,160 19,235 74,327 59,748
----------- ----------- ----------- -----------
Net interest income after provision for
loan losses............................ 310,474 290,912 915,544 858,731
NONINTEREST INCOME
Item processing revenue....................... 81,943 78,909 239,743 228,299
Service charges on deposit accounts........... 40,325 38,790 117,424 114,728
Trust fees.................................... 35,101 28,946 102,562 94,668
Credit card fees.............................. 20,725 19,471 56,745 59,464
Mortgage banking revenue...................... 15,969 13,584 53,038 45,052
Brokerage revenue............................. 8,686 4,798 18,915 13,988
Other......................................... 29,475 22,655 68,420 66,508
----------- ----------- ----------- -----------
Total fees and other income............... 232,224 207,153 656,847 622,707
Security gains................................ 9,837 2,772 11,471 9,464
----------- ----------- ----------- -----------
Total noninterest income.................. 242,061 209,925 668,318 632,171
NONINTEREST EXPENSE
Salaries and employee benefits................ 176,504 164,505 508,838 488,399
Equipment..................................... 21,851 22,226 69,543 68,707
Net occupancy................................. 23,728 22,403 69,492 67,599
Assessments and taxes......................... 21,543 19,684 61,966 60,541
Other......................................... 134,634 115,967 379,917 347,431
----------- ----------- ----------- -----------
Total noninterest expense................. 378,260 344,785 1,089,756 1,032,677
----------- ----------- ----------- -----------
Income before income taxes...................... 174,275 156,052 494,106 458,225
Income tax expense.............................. 54,263 47,641 150,533 140,166
----------- ----------- ----------- -----------
NET INCOME...................................... $120,012 $108,411 $ 343,573 $ 318,059
========== ========== ========== ==========
NET INCOME APPLICABLE TO COMMON STOCK........... $116,291 $104,625 $ 332,411 $ 306,610
========== ========== ========== ==========
NET INCOME PER COMMON SHARE..................... $.78 $.69 $2.24 $1.99
Average Common Shares Outstanding............... 149,737,114 152,077,200 148,677,629 154,166,306
</TABLE>
See notes to financial statements.
4
<PAGE> 6
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SEPTEMBER 30 December 31 September 30
1995 1994 1994
<S> <C> <C> <C>
ASSETS
Loans:
Commercial.................................... $ 9,865,647 $8,667,539 $ 8,490,914
International................................. 42,306 52,356 52,923
Real estate construction...................... 468,899 421,505 424,842
Lease financing............................... 245,772 216,499 213,164
Real estate mortgage -- nonresidential........ 2,453,323 2,473,329 2,495,465
Real estate mortgage -- residential........... 5,029,961 4,123,084 3,861,391
Mortgage loans held for sale.................. 50,256 42,064 155,289
Consumer...................................... 5,446,170 4,781,759 4,605,299
Revolving credit.............................. 2,089,353 2,256,640 1,999,325
----------- ---------- -----------
Total loans.............................. 25,691,687 23,034,775 22,298,612
Allowance for loan losses................ 499,053 469,019 467,272
----------- ---------- -----------
Net loans................................ 25,192,634 22,565,756 21,831,340
Securities held to maturity (market value
$957,748, $1,156,811 and $1,333,604,
respectively)................................. 950,839 1,176,115 1,323,727
Securities available for sale, at market......... 3,786,782 3,218,940 3,581,608
Federal funds sold and security resale
agreements.................................... 432,252 672,945 388,925
Trading account assets........................... 27,982 7,940 6,091
Other short-term money market investments........ 73,968 96,615 75,643
Cash and demand balances due from banks.......... 2,226,019 2,401,728 2,074,640
Properties and equipment......................... 421,600 389,980 386,974
Customers' acceptance liability.................. 54,745 102,005 86,779
Accrued income and other assets.................. 1,671,069 1,481,984 1,358,186
----------- ---------- -----------
TOTAL ASSETS............................. $34,837,890 $32,114,008 $31,113,913
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Demand deposits (noninterest bearing)............ $ 4,911,651 $5,331,789 $ 4,726,733
Savings and NOW accounts......................... 4,266,427 4,599,988 4,702,631
Insured money market accounts.................... 4,811,390 4,964,741 5,061,210
Time deposits of individuals..................... 8,979,000 7,298,056 6,535,091
Other time deposits.............................. 521,101 472,023 397,089
Deposits in overseas offices..................... 976,241 1,805,323 1,494,656
----------- ---------- -----------
Total deposits........................... 24,465,810 24,471,920 22,917,410
Federal funds borrowed and security repurchase
agreements.................................... 2,975,090 2,608,801 2,395,827
Borrowed funds................................... 2,588,482 1,104,989 1,832,172
Acceptances outstanding.......................... 54,745 102,005 86,779
Accrued expenses and other liabilities........... 668,340 481,570 493,147
Corporate long-term debt......................... 1,215,639 743,669 748,104
----------- ---------- -----------
TOTAL LIABILITIES........................ 31,968,106 29,512,954 28,473,439
Stockholders' Equity:
Preferred stock.................................. 186,040 187,540 189,290
Common stock..................................... 2,683,744 2,413,514 2,451,184
----------- ---------- -----------
TOTAL STOCKHOLDERS' EQUITY............... 2,869,784 2,601,054 2,640,474
----------- ---------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY................................. $34,837,890 $32,114,008 $31,113,913
=========== =========== ===========
</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>
1995 1994
OPERATING ACTIVITIES
Net income..................................................... $ 343,573 $ 318,059
Adjustments to reconcile net income to net cash provided by
operating activities:
Provision for loan losses................................. 74,327 59,748
Depreciation and amortization of goodwill and
intangibles............................................ 85,779 84,123
Security gains............................................ (11,471) (9,464)
Net change in trading account assets...................... (10,938) 144,205
Other gains, net.......................................... (9,663) --
Originations and purchases of mortgage loans held for
sale................................................... (320,965) (1,053,532)
Proceeds from the sale of mortgage loans held for sale.... 318,114 1,438,865
Net change in interest receivable......................... (82,310) (29,659)
Net change in interest payable............................ 107,149 27,372
Net change in other assets................................ (140,201) 34,640
Net change in other liabilities........................... 66,219 86,566
----------- -----------
Net Cash Provided (Used) by Operating Activities....... 419,613 1,100,923
LENDING AND INVESTING ACTIVITIES
Net change in short-term investments........................... 296,762 689,852
Purchases of securities........................................ (3,524,469) (1,991,820)
Proceeds from sales of securities.............................. 2,861,163 1,155,138
Proceeds from maturities and prepayments of securities......... 659,340 1,012,982
Net change in loans............................................ (2,176,066) (1,433,692)
Proceeds from sales of loans................................... 61,225 --
Net change in properties and equipment......................... (51,203) (42,984)
Acquisitions................................................... 30,156 --
----------- -----------
Net Cash Provided (Used) by Lending and Investing
Activities........................................... (1,843,092) (610,524)
DEPOSIT AND FINANCING ACTIVITIES
Net change in Federal funds borrowed and security repurchase
agreements.................................................. 343,194 (686,994)
Net change in borrowed funds................................... 1,455,666 631,161
Net change in demand, savings, NOW, insured money market
accounts, and deposits in overseas offices.................. (2,264,589) (353,139)
Net change in time deposits.................................... 1,529,377 207,528
Repayment of long-term debt.................................... (690) (11,038)
Proceeds from issuance of long-term debt....................... 470,630 247,080
Dividends paid, net of tax benefit of ESOP shares.............. (154,006) (145,760)
Issuances of common stock...................................... 24,574 18,056
Repurchase of common and preferred stock....................... (161,977) (262,957)
ESOP trust repayment........................................... 5,591 6,416
----------- -----------
Net Cash Provided (Used) by Deposit and Financing
Activities........................................... 1,247,770 (349,647)
----------- -----------
Net Increase (Decrease) in Cash and Cash Equivalents........... (175,709) 140,752
Cash and Cash Equivalents, January 1........................... 2,401,728 1,933,888
----------- -----------
Cash and Cash Equivalents, September 30........................ $ 2,226,019 $ 2,074,640
============ ============
SUPPLEMENTAL DISCLOSURES
Interest paid.................................................. $ 787,000 $ 541,000
Income taxes paid.............................................. 126,000 142,000
Shares issued in purchase acquisitions......................... 110,739 --
</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, 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)
============ ============ ============ ============ ============
Balance January 1, 1995.................... $187,540 $590,223 $100,051 $1,732,258 $ (9,018)
Net income............................... 343,573
Common dividends paid, $.97 per share.... (143,271)
Preferred dividends paid, $3.00 per
depositary share....................... (11,192)
Issuance of 1,231,554 common shares
under corporate stock and dividend
reinvestment plans..................... 4,933 19,641
Issuance of 4,267,760 common shares
pursuant to acquisitions............... 17,071 93,668
Purchase of 5,657,200 common shares and
30,000 depositary shares of preferred
stock.................................. (1,500) (22,635) (14,273) (123,569)
Shares distributed by ESOP trust and tax
benefit on dividends................... 457 5,591
Change in unrealized market value
adjustment on securities available for
sale, net of tax....................... 100,236
------------ ------------ ------------ ------------ ------------
Balance September 30, 1995................. $186,040 $589,592 $199,087 $1,898,492 $ (3,427)
============ ============ ============ ============ ============
<CAPTION>
(Dollars in Thousands Except Per
Share Amounts) Total
<S> <C>
- --------------------------------------------------------
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
============
Balance January 1, 1995.................... $2,601,054
Net income............................... 343,573
Common dividends paid, $.97 per share.... (143,271)
Preferred dividends paid, $3.00 per
depositary share....................... (11,192)
Issuance of 1,231,554 common shares
under corporate stock and dividend
reinvestment plans..................... 24,574
Issuance of 4,267,760 common shares
pursuant to acquisitions............... 110,739
Purchase of 5,657,200 common shares and
30,000 depositary shares of preferred
stock.................................. (161,977)
Shares distributed by ESOP trust and tax
benefit on dividends................... 6,048
Change in unrealized market value
adjustment on securities available for
sale, net of tax....................... 100,236
------------
Balance September 30, 1995................. $2,869,784
============
</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.
On January 1, 1996, the Corporation plans to adopt SFAS No. 122 "Accounting
for Mortgage Servicing Rights." The adoption of this accounting standard is not
expected to have a material impact on the financial position or results of
operations of the Corporation.
Certain prior period amounts have been reclassified to conform with current
period presentation.
2. ACQUISITIONS
On July 1, 1995, the Corporation acquired United Bancorp of Kentucky, Inc.
(UBK), a $625 million asset bank holding company headquartered in Lexington,
Kentucky. The Corporation paid approximately $75 million for the common and
preferred stock of UBK, consisting of approximately 2.5 million shares of common
stock and $10 million in cash. The transaction was accounted for as a purchase.
Total goodwill in the transaction was approximately $39 million and will be
amortized over 20 years.
On July 13, 1995, the Corporation acquired, for cash, the net assets of
Raffensperger, Hughes & Co., a full-service investment banking/brokerage firm
headquartered in Indianapolis, Indiana in a purchase transaction. The cost of
the acquisition was not material to the Corporation.
7
<PAGE> 9
On August 28, 1995, the Corporation announced the signing of a definitive
merger agreement with Integra Financial Corporation, a $15 billion asset bank
holding company headquartered in Pittsburgh, Pennsylvania. The merger agreement
calls for an exchange of two shares of National City common stock for each share
of Integra. The transaction will be accounted for as a pooling of interests, and
is expected to close in the second quarter of 1996, subject to regulatory and
shareholder approvals.
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. LOANS AND ALLOWANCE FOR LOAN LOSSES
On January 1, 1995, the Corporation adopted SFAS No. 114 "Accounting By
Creditors For Impairment of a Loan." Under this accounting standard, the 1995
allowance for loan losses includes an evaluation based on the fair value of the
collateral for certain collateral dependent loans and/or discounted cash flows
using the loan's initial effective interest rate. The adoption of the accounting
standard did not have a material effect on the financial position or results of
operations of the Corporation.
The following table summarizes the activity in the allowance for loan
losses:
<TABLE>
<CAPTION>
Nine Months Ended
September 30
-------------------
(In Thousands) 1995 1994
<S> <C> <C>
- -------------------------------------------------------------
Balance at beginning of year............. $469,019 $443,412
Provision................................ 74,327 59,748
Reserves acquired (sold)................. 7,749 3,458
Charge-offs:
Commercial............................. 18,871 22,495
Real estate -- construction............ 3,075 298
Real estate -- commercial.............. 5,651 4,864
Real estate -- residential............. 1,048 1,551
Revolving credit....................... 44,824 27,599
Consumer............................... 26,117 23,877
-------- --------
Total charge-offs...................... 99,586 80,684
Recoveries:
Commercial............................. 11,470 12,742
Real estate -- construction............ 1,696 1,095
Real estate -- commercial.............. 7,502 871
Real estate -- residential............. 817 723
Revolving credit....................... 9,257 8,272
Consumer............................... 16,802 17,635
-------- --------
Total recoveries....................... 47,544 41,338
-------- --------
Net charge-offs.......................... 52,042 39,346
-------- --------
Balance at end of period................. $499,053 $467,272
========= =========
</TABLE>
The allowance for loan losses is maintained at a level believed adequate to
absorb estimated probable credit losses. Both the provision and allowance for
loan losses are based upon an analysis of individual credits, adverse situations
that could affect a borrower's ability to repay (including the timing of future
payments), prior and current loss experience, overall growth in the portfolio,
current economic conditions, and other factors. This evaluation is inherently
subjective and it requires material estimates, including the amounts and timing
of future cash flows expected to be received on impaired loans, that could be
susceptible to change.
Table 5 on page 13 provides detail regarding nonperforming loans. At
September 30, 1995, loans that were considered to be impaired under SFAS No. 114
totalled $71 million, all of which were included in nonperforming assets. The
related allowance allocated to these loans was $14 million. The contractual
interest due and actual interest recorded on impaired loans, as well as on total
nonperforming assets, for the nine months ended September 30, 1995 was $5.6
million and $7.5 million, respectively.
5. SECURITIES
The following is a summary of securities held to maturity and available for
sale:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1995
----------------------------------------------
UNREALIZED UNREALIZED MARKET
(In Thousands) COST GAINS LOSSES VALUE
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------
Held to Maturity:
U.S. Treasury and
Federal agency
debentures..... $ 33,867 $ 108 $ 198 $ 33,777
Mortgage-backed
securities..... 551,977 2,837 9,357 545,457
States and
political
subdivisions... 316,927 17,738 4,191 330,474
Other............ 48,068 52 80 48,040
---------- ---------- ---------- ----------
Total held to
maturity..... 950,839 20,735 13,826 957,748
Available for
Sale:
U.S. Treasury and
Federal agency
debentures..... 1,317,310 5,703 12,478 1,310,535
Mortgage-backed
securities..... 2,132,888 17,235 6,922 2,143,201
States and
political
subdivisions... 26,943 323 3 27,263
Other............ 236,749 80,832 11,798 305,783
---------- ---------- ---------- ----------
Total available
for sale..... 3,713,890 104,093 31,201 3,786,782
---------- ---------- ---------- ----------
Total
securities... $4,664,729 $124,828 $ 45,027 $4,744,530
========== ========== ========== ==========
</TABLE>
8
<PAGE> 10
<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>
For the nine months ended September 30, 1995 and 1994, gross gains of $26.5
million and $13.9 million, and gross losses of $15.0 million and $4.4 million
were realized, respectively.
At September 30, 1995, the unrealized appreciation in securities available
for sale included in retained earnings totalled $47.4 million, net of tax,
compared to unrealized depreciation of $(21.6) million, net of tax, at September
30, 1994. The Corporation's debt 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, 1995, 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>
- --------------------------------------------------------------
September 30, 1995:
Purchases of
securities............. $3,505,464 $ 19,005 $3,524,469
Proceeds from sale of
securities............. 2,861,163 -- 2,861,163
Proceeds from maturities
of securities.......... 300,311 359,029 659,340
September 30, 1994:
Purchases of
securities............. $1,875,207 $116,613 $1,991,820
Proceeds from sale of
securities............. 1,155,138 -- 1,115,138
Proceeds from maturities
of securities.......... 445,450 567,532 1,012,982
</TABLE>
As of September 30, 1995, 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.
6. BORROWED FUNDS
<TABLE>
<CAPTION>
SEPT 30 Dec 31 Sept 30
(In Thousands) 1995 1994 1994
<S> <C> <C> <C>
- -----------------------------------------------------------------------
U.S. Treasury demand
notes and Federal
funds borrowed-term...... $ 869,428 $ 159,949 $ 759,103
Notes payable to Student
Loan Marketing
Association.............. 600,000 300,000 300,000
Bank notes................. 439,524 -- --
Military banking
liabilities.............. 146,503 215,951 264,789
Other...................... 62,487 49,754 72,995
---------- ---------- ----------
Bank subsidiaries........ 2,117,942 725,654 1,396,887
Commercial paper........... 470,493 379,276 435,224
Other...................... 47 59 61
---------- ---------- ----------
Other subsidiaries....... 470,540 379,335 435,285
---------- ---------- ----------
Total.............. $2,588,482 $1,104,989 $1,832,172
========== ========== ==========
</TABLE>
7. CORPORATE LONG-TERM DEBT
<TABLE>
<CAPTION>
SEPT 30 Dec 31 Sept 30
(In Thousands) 1995 1994 1994
<S> <C> <C> <C>
- -----------------------------------------------------------------------
7.20% Sub. Notes due 2005...... $ 250,000 $ -- $ --
Less discount................ (193) -- --
6 5/8% Sub. Notes due 2004..... 250,000 250,000 250,000
Less discount................ (1,090) (1,187) (1,220)
8 3/8% Notes due 1996.......... 100,000 100,000 100,000
Less discount................ (34) (94) (114)
Floating Rate Sub. Notes due
1997.......................... 75,000 75,000 75,000
Less discount................ (25) (39) (44)
9 7/8% Sub. Notes due 1999..... 65,000 65,000 65,000
Less discount................ (187) (222) (233)
Floating Rate Notes due 1997... 50,000 50,000 50,000
Less discount................ (43) (59) (64)
Other.......................... 2,881 3,377 7,900
---------- -------- --------
Total parent company......... 791,309 541,776 546,225
7.25% Sub. Notes due 2010...... 225,000 -- --
Less discount................ (2,425) -- --
6 1/2% Sub. Notes due 2003..... 200,000 200,000 200,000
Less discount................ (568) (624) (643)
Other.......................... 2,323 2,517 2,522
---------- -------- --------
Total subsidiaries........... 424,330 201,893 201,879
---------- -------- --------
Total.................. $1,215,639 $743,669 $748,104
========== ========= =========
</TABLE>
In May 1995, the Corporation issued $250 million principal amount of 7.20%
Subordinated Notes Due 2005. Interest on the notes is payable semiannually. The
notes are not redeemable prior to their maturity and qualify as Tier 2 capital
for regulatory purposes.
In July 1995, five subsidiary banks of the Corporation issued a combined
$225 million principal amount of 7.25% Subordinated Bank Notes Due 2010. The
notes are not redeemable prior to their maturity and qualify as Tier 2 capital
for regulatory purposes.
9
<PAGE> 11
A credit agreement with a group of banks allows the Corporation to borrow
up to $300 million until June 30, 1998, with a provision to extend the
expiration date, under certain circumstances. The Corporation pays an annual fee
of 1/8 percent on the amount of the line. There were no borrowings outstanding
under this agreement at September 30, 1995.
8. STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
SEPT 30 Dec 31 Sept 30
(Outstanding Shares) 1995 1994 1994
<S> <C> <C> <C>
- --------------------------------------------------------------------------
Preferred Stock, no par
value, authorized
5,000,000 shares.......... 744,160 750,160 757,160
Common Stock, $4.00
par value, authorized
350,000,000 shares........ 147,397,746 147,555,632 150,148,676
</TABLE>
9. INCOME TAX EXPENSE
The composition of income tax expense follows:
<TABLE>
<CAPTION>
Nine Months Ended
September 30
---------------------------
(In Thousands) 1995 1994
<S> <C> <C>
- ------------------------------------------------------------
Applicable to income exclusive
of security transactions..... $ 147,854 $ 136,793
Applicable to security
transactions................. 2,679 3,373
----------- -----------
Total.................. $ 150,533 $ 140,166
=========== ===========
</TABLE>
The effective tax rate was approximately 30.5% and 30.6% for the nine
months ended September 30, 1995 and 1994, respectively.
10. 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, 1995, bank subsidiaries may
pay the Parent company, without prior regulatory approval, approximately $282
million of dividends. During the first nine months of 1995, dividends totalling
$5.4 million were declared and $119 million of previously declared dividends
were paid to the Parent company.
11. EARNINGS PER SHARE
The calculation of net income per common share follows:
<TABLE>
<CAPTION>
Three Months Nine Months
(Dollars In Ended Ended
Thousands, Sept 30 Sept 30
except per share ------------------------ ------------------------
amounts) 1995 1994 1995 1994
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------
PRIMARY:
Net income....... $120,012 $108,411 $343,573 $318,059
Less preferred
dividend
requirements... 3,721 3,786 11,162 11,449
----------- ----------- ----------- -----------
Net income
applicable to
common stock... $116,291 $104,625 $332,411 $306,610
============= ============= ============= =============
Average common
shares
outstanding.... 149,737,114 152,077,200 148,677,629 154,166,306
============= ============= ============= =============
Net income per
common share... $.78 $.69 $2.24 $1.99
============= ============= ============= =============
ASSUMING FULL
DILUTION:
Net income....... $120,012 $108,411 $343,573 $318,059
============= ============= ============= =============
Average common
shares
outstanding.... 149,737,114 152,077,200 148,677,629 154,166,306
Stock option
adjustment..... 74,096 85,008 74,096 85,008
Preferred stock
adjustment..... 8,870,387 9,025,347 8,870,387 9,025,347
----------- ----------- ----------- -----------
Average common
shares
outstanding, as
adjusted....... 158,681,597 161,187,555 157,622,112 163,276,661
============= ============= ============= =============
Pro forma fully
diluted net
income per
common share... $.76 $.67 $2.18 $1.95
============= ============= ============= =============
</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 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, 1995 was $120.0 million, or
$.78 per common share, compared with $108.4 million, or $.69 per common share,
for the quarter ended September 30, 1994, representing a 13% increase per share.
Per share earnings were $2.24 for the first nine months, versus $1.99 in
1994, also up 13%. Net income for the first nine months was $343.6 million,
compared with $318.1 million in the prior year.
Returns on average common equity for the third quarter and nine months of
1995 were 17.60% and 17.72%, respectively, compared with 17.21% and 16.87%,
respectively, for the same periods in 1994. Returns on average assets for the
third quarter and year-to-date 1995 were 1.37%, compared with 1.41% and 1.40%,
respectively, for the same periods last year.
Net income per share included net after-tax security gains of $.05 for the
third quarter 1995 and $.06 year-to-date, compared with $.01 and $.04 per share
for the third quarter and year-to-date 1994, respectively.
The improved profitability for the quarter and first nine months was due to
strong loan growth which resulted in higher net interest income. Total loans of
$25.7 billion at September 30, 1995, were 15% higher than a year ago. Excluding
the effects of two acquisitions that closed in the first and third quarters,
loans increased 12% from a year ago. Higher fee income during the quarter and
year-to-date also contributed to the growth in earnings.
Partially offsetting revenue growth were higher loan loss provisions and
noninterest expenses.
UNIT PROFITABILITY
Table 1 presents 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. Cost allocations for
centrally provided services are included in the reported amounts approximating
the pro-rata cost to the units for the use of those services. Equity has been
allocated among the business units to reflect well-capitalized levels as defined
by bank regulatory agencies. 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. Investment securities and all gains and losses
associated with interest rate risk are reported in the investment/funding unit.
Corporate banking earnings increased 17% for the first nine months of 1995
from the same period a year ago due primarily to higher net interest income and
a decline in non-interest expenses. The higher net interest income resulted from
strong loan growth.
The 39% increase in retail banking net income was due to higher net
interest income from loan growth as well as wider spreads on transaction
accounts.
The increase in national credit card net income was due primarily to a gain
on the sale of a credit card portfolio offset somewhat by a higher loan loss
provision and costs associated with new account acquisitions.
The loss in investment/funding was due to narrower spreads on investment
securities and interest rate swaps, reflecting a flat yield curve.
The increased profitability in the item processing subsidiary was due to
increased volume and expense control measures. The lower return on equity
relative to the other functional units reflects a higher equity allocation to
this business as if it were an independent business.
The increase in mortgage banking net income was due to gains on the sale of
mortgage servicing in 1995.
EARNING ASSETS AND
INTEREST-BEARING LIABILITIES
Average earning assets totalled $31,251 million for the quarter ended
September 30, 1995, an increase of 4% from the quarter ended June 30, 1995 and
15% from the third quarter 1994. The increase in the third quarter was due to a
combination of higher average loan balances and acquisitions.
TABLE 1: UNIT PROFITABILITY
<TABLE>
<CAPTION>
NINE MONTHS ENDED Nine months ended
SEPTEMBER 30, 1995 September 30, 1994
--------------------- ---------------------
NET RETURN ON Net Return on
(Dollars in Millions) INCOME EQUITY Income Equity
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Corporate banking............................................................ $161.5 19.90% $138.4 16.74%
Retail banking............................................................... 187.0 24.06 134.5 18.76
National credit card......................................................... 7.3 11.21 6.3 9.08
Investment/funding........................................................... (36.5 ) ( 17.51) 26.2 9.06
Trust........................................................................ 25.9 27.19 24.7 23.88
Item processing.............................................................. 15.2 13.34 11.6 11.49
Mortgage banking............................................................. 4.5 17.62 .7 6.37
Corporate.................................................................... (21.3) -- (24.3) --
------ ------
Total..................................................................... $343.6 17.72% $318.1 16.87%
====== ======
</TABLE>
11
<PAGE> 13
Average core deposits increased slightly in the third quarter versus the
second quarter due mainly to the acquisition of United Bancorp of Kentucky.
NET INTEREST INCOME
On a fully taxable equivalent basis, net interest income was $343.7 million
in the third quarter compared with $317.4 million for the third quarter in 1994.
For the first nine months of 1995, fully taxable equivalent net interest income
increased 7% to $1,006.8 million from $940.8 million in 1994.
The tax equivalent net interest margin was 4.39% in the quarter ended
September 30, 1995, compared with 4.47% and 4.68% for the quarters ended June
30, 1995 and September 30, 1994, respectively. The decline in the third quarter
margin was primarily due to lower spreads from the use of purchased funding to
support loan growth.
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, 1995, the Corporation was slightly more asset-sensitive
than at December 31, 1994. The cumulative one-year gap was (7.2)% of adjusted
earning assets compared to (7.4)% at year-end 1994. The earnings simulation
model projects that net income would increase by 1.0% if rates rose two
percentage points over the next year. At the end of 1994, the corresponding
change was .8% of net income. 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 1.2%
of total assets, compared to 1.0% at year-end 1994.
During the first nine months of 1995, the notional outstandings of
interest-rate swap agreements increased by $1,294 million while the notional
amount of interest-rate caps, floors and corridors increased by $1,811 million.
The net unrealized gains in the derivative portfolio were $37 million at
September 30, 1995, compared to unrealized losses of $199 million at December
31, 1994. The contribution to net interest income of the interest-rate
derivative portfolio is presented in Table 2.
FEES AND OTHER INCOME
Fee income was $232.2 million for the third quarter 1995, up 12% from
$207.2 million for the third quarter 1994. Year-to-date
fee income was $656.8 million, compared with $622.7 million for the same period
in 1994, an increase of 5%. The increase in the third quarter and first nine
months versus a year ago is primarily due to a $9.2 million gain, recorded as
other income, on the sale of $50 million credit card receivables in September.
The acquisition of Raffensperger Hughes & Co., a full-service investment
banking/brokerage firm, increased brokerage revenue. Trust fees also increased.
Year-to-date fee income also included $14.1 million from gains on the sale
of mortgage servicing realized during the first half of 1995. Fee income
year-to-date in 1994 included a $4.3 million gain on the sale of mortgage
servicing.
During the month of September a $440 million credit card securitization was
transacted. Impact on third quarter results was
TABLE 2: CONTRIBUTION OF INTEREST RATE DERIVATIVE PORTFOLIO
<TABLE>
<CAPTION>
Nine months ended
September 30
--------------------
(In Millions) 1995 1994
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
Interest adjustment to loans.............................................................................. $ (11.6) $ 36.5
Interest adjustment to securities......................................................................... (2.5) (13.2)
------- ------
Interest adjustment to earning assets................................................................... (14.1) 23.3
Interest adjustment to deposits........................................................................... (10.3) (10.3)
------- ------
Effect on net interest income........................................................................... $(3.8) $ 33.6
====== =====
</TABLE>
NOTE: Amounts in brackets represent reductions of the related interest income or
expense line, as applicable.
TABLE 3: FULL-TIME EQUIVALENT STAFFING AND OVERHEAD PERFORMANCE MEASURES
<TABLE>
<CAPTION>
SEPTEMBER 30, 1995 September 30, 1994
-------------------------------------- --------------------------------------
FULL-TIME Full-Time
EQUIVALENT OVERHEAD EFFICIENCY Equivalent Overhead Efficiency
STAFF RATIO RATIO Staff Ratio Ratio
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------
Corporate and retail
banking............. 11,664 42.42% 52.77% 11,590 47.70% 58.35%
National credit
card................ 632 47.55 57.51 529 57.01 63.51
Investment/ funding... 446 8.70 (120.27) 287 (18.98) 52.96
Trust................. 1,052 -- 64.88 1,001 -- 63.82
Item processing....... 5,661 -- 89.91 5,277 -- 91.23
Mortgage banking...... 707 -- 87.34 754 -- 97.68
Corporate............. 610 -- -- 660 -- --
-------- --------
Total............. 20,772 43.00% 65.50% 20,098 43.58% 66.05%
======== ========
</TABLE>
12
<PAGE> 14
minimal, but future quarters will reflect increased fee income from servicing
the securitized receivables with an offsetting decline in net interest income.
NONINTEREST EXPENSES
Noninterest expenses were $378.3 million for the quarter
ended September 30, 1995, compared with $344.8 million for the corresponding
quarter in 1994. Year-to-date noninterest expenses were $1,089.8 million
compared with $1,032.7 million in 1994. For the first nine months, approximately
$9.0 million of the increase in expenses was due to higher business volumes at
the item processing subsidiary and approximately $13.0 million from
acquisitions. Third quarter 1995 included $4.0 million one-time professional
fees related to the proposed acquisition of Integra Financial Corporation as
well as $4.3 million of other nonrecurring expenses. Year to date nonrecurring
expenses totaled $12.8 million. There were no unusual items for the first nine
months of 1994.
Total staff at September 30, 1995 increased from the second quarter due to
acquisitions. The United Bancorp of Kentucky acquisition added 353 in staff and
the Raffensperger, Hughes acquisition added 148 employees. Compared to a year
ago, total staff increased due to acquisitions and growth at the item processing
subsidiary.
ASSET QUALITY
The allowance for loan losses was $499.1 million at September 30, 1995
representing 1.94% of loans outstanding at that date. This ratio was 2.04% at
year-end 1994 and 2.10% at September 30, 1994.
The provision for loan losses increased to $28.2 million for the third
quarter 1995 and $74.3 million year-to-date from $19.2 million and $59.7 million
for the same periods in 1994, respectively.
Net charge-offs were $20.3 million and $15.8 million for the quarters ended
September 30, 1995 and 1994, respectively, and $52.0 million and $39.3 million,
respectively, for the first nine months of 1995 and 1994.
Table 4 shows net charge-offs as a percentage of average loans by portfolio
type.
Table 5 summarizes nonperforming assets and related data.
Nonperforming assets of $130 million at September 30, 1995 declined by $14
million from the prior quarter and $25 million from a year ago. The decline in
OREO was due to the sale of foreclosed properties.
Nonperforming assets as a percentage of loans and OREO were .51% at
September 30, 1995 compared with .69% at September 30, 1994, and .56% at
December 31, 1994.
CAPITAL
Table 6 reflects various measures of capital at quarter-end.
The changes in the ratios from a year ago reflect lower capital levels that have
resulted from the repurchase of outstanding capital stock and a slightly higher
asset base. Book value per common share was $18.21 at September 30, 1995,
compared with $16.33 at September 30, 1994 and $16.36 at December 31, 1994.
TABLE 4: ANNUALIZED NET CHARGE-OFFS AS A PERCENTAGE OF
AVERAGE LOANS
<TABLE>
<CAPTION>
First Nine
Third Quarter Months
-------------- --------------
1995 1994 1995 1994
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
Commercial.................................................................................. .10 % .20 % .10 % .15%
Real estate -- construction................................................................. (.03) (.07) .41 (.25)
Real estate -- commercial................................................................... .16 .19 (.10) .22
Real estate -- residential.................................................................. (.02) .03 .01 .03
Revolving credit............................................................................ 2.12 1.64 2.03 1.53
Consumer.................................................................................... .32 .22 .24 .19
Total net charge-offs to average loans...................................................... .32 .29 .28 .24
</TABLE>
TABLE 5: NONPERFORMING ASSETS
<TABLE>
<CAPTION>
SEPT 30 Dec 31 Sept 30
(In Millions) 1995 1994 1994
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
Commercial:
Nonaccrual.................................................................................. $ 66.0 $ 58.8 $ 58.3
Restructured................................................................................ .1 -- .7
--------- ------- ---------
Total commercial.......................................................................... 66.1 58.8 59.0
Real estate related:
Nonaccrual.................................................................................. 50.4 48.8 56.9
Restructured................................................................................ 4.3 4.4 4.5
--------- ------- ---------
Total real estate related................................................................. 54.7 53.2 61.4
--------- ------- ---------
Total nonperforming loans................................................................. 120.8 112.0 120.4
Other real estate owned (OREO)................................................................ 9.1 16.5 34.7
--------- ------- ---------
Nonperforming assets.......................................................................... $ 129.9 $128.5 $ 155.1
======== ======= =========
Loans 90 days past-due accruing interest...................................................... $ 38.6 $ 27.9 $ 48.4
======== ======= =========
</TABLE>
13
<PAGE> 15
The book value at September 30, 1995 and December 31, 1994 included $.32
and $(.34), respectively, related to the market value appreciation/
(depreciation) of securities available for sale.
In May 1995, the Corporation issued $250 million principal amount of 7.2%
Subordinated Notes which qualify as Tier 2 capital for regulatory purposes. In
July 1995, five subsidiary banks of the Corporation issued a combined $225
million principal amount of 7.25% Subordinated Notes which qualify as Tier 2
capital for regulatory purposes.
In the first three quarters of 1995, approximately 5.6 million shares of
common stock were repurchased in the open market. At September 30, 1995, the
Corporation had authorization to acquire an additional 3.8 million common
shares.
TABLE 6: CAPITAL AND CAPITAL/ASSET RATIOS
<TABLE>
<CAPTION>
SEPT 30, 1995 Dec 31, 1994 Sept 30, 1994
(In Millions) AMOUNT RATIO Amount Ratio Amount Ratio
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------
Total equity1............... $2,869.8 8.24 % $2,601.1 8.10 % $2,640.5 8.49 %
Common equity1.............. 2,683.7 7.70 2,413.5 7.52 2,451.2 7.88
Tangible common equity2..... 2,239.0 6.51 2,026.4 6.39 2,062.7 6.71
Tier 1 capital3............. 2,521.6 8.84 2,442.2 8.45 2,446.9 9.30
Total risk-based capital4... 3,874.1 13.58 3,374.8 11.68 3,357.0 12.76
Leverage ratio5............. 2,521.6 7.30 2,442.2 7.82 2,446.9 8.09
<FN>
- ---------------
1 Computed in accordance with generally accepted accounting principles,
including unrealized market value adjustment of securities available for sale.
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 unrealized market value
adjustment of securities available for sale; computed as a ratio to
risk-adjusted assets, as defined.
4 Tier 1 capital plus qualifying loan loss allowance and subordinated debt;
computed as a ratio to risk-adjusted assets, as defined.
5 Tier 1 capital; computed as a ratio to average total assets less certain
intangibles.
</TABLE>
14
<PAGE> 16
CONSOLIDATED AVERAGE BALANCE SHEETS
<TABLE>
<CAPTION>
Three Months Nine Months
(Dollars In Millions) Ended September 30 Ended September 30
- ---------------------------------------------------------------------------------------------------------------
1995 1994 1995 1994
-------- -------- -------- --------
<S> <C> <C> <C> <C>
ASSETS
Earning Assets:
Loans:
Commercial.................................................. $ 10,430 $ 9,062 $ 10,033 $ 9,101
Real estate mortgage--nonresidential........................ 2,474 2,491 2,453 2,417
Real estate mortgage--residential........................... 4,899 3,724 4,557 3,576
Mortgage loans held for sale................................ 111 177 79 280
Consumer.................................................... 5,324 4,498 5,084 4,358
Revolving credit............................................ 2,398 1,863 2,340 1,688
-------- -------- -------- --------
Total loans............................................... 25,636 21,815 24,546 21,420
Securities.................................................... 5,155 4,723 4,868 4,778
Federal funds sold and security resale agreements............. 349 475 464 518
Trading account assets........................................ 18 8 17 17
Eurodollar time deposits in banks............................. 7 1 2 143
Other short-term money market investments..................... 86 166 88 126
-------- -------- -------- --------
Total earning assets...................................... 31,251 27,188 29,985 27,002
Allowance for loan losses..................................... (496) (467) (485) (458)
Market value appreciation (depreciation) of securities
available for sale.......................................... 57 (14) 4 12
Cash and demand balances due from banks....................... 2,049 2,012 2,038 2,024
Properties and equipment...................................... 423 390 405 390
Customers' acceptance liability............................... 86 68 99 64
Accrued income and other assets............................... 1,467 1,333 1,423 1,294
-------- -------- -------- --------
Total assets.............................................. $ 34,837 $ 30,510 $ 33,469 $ 30,328
======= ======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Demand deposits............................................. $ 4,738 $ 4,713 $ 4,660 $ 4,772
Savings and NOW accounts.................................... 4,342 4,872 4,410 5,070
Insured money market accounts............................... 4,842 5,129 4,788 5,226
Time deposits of individuals................................ 8,926 6,449 8,532 6,269
Other time deposits......................................... 514 448 504 476
Deposits in overseas office................................. 1,191 1,125 1,586 828
-------- -------- -------- --------
Total deposits............................................ 24,553 22,736 24,480 22,641
Federal funds borrowed and security repurchase agreements... 3,059 2,453 2,760 2,532
Borrowed funds.............................................. 2,590 1,497 1,994 1,356
Acceptances outstanding..................................... 86 68 99 64
Accrued expenses and other liabilities...................... 587 405 525 411
Corporate long-term debt.................................... 1,154 750 917 701
-------- -------- -------- --------
Total liabilities......................................... 32,029 27,909 30,775 27,705
STOCKHOLDERS' EQUITY:
Preferred stock............................................. 186 189 186 193
Common stock................................................ 2,622 2,412 2,508 2,430
-------- -------- -------- --------
Total stockholders' equity................................ 2,808 2,601 2,694 2,623
-------- -------- -------- --------
Total liabilities and stockholders' equity................ $ 34,837 $ 30,510 $ 33,469 $ 30,328
======= ======= ======= =======
</TABLE>
15
<PAGE> 17
DAILY AVERAGE BALANCE SHEETS/NET INTEREST INCOME/RATES
<TABLE>
<CAPTION>
(Dollars In Millions) Daily Average Balance
- ----------------------------------------------------------------------------------------------------------
1995 1994
----------------------------- ------------------
THIRD Second First Fourth Third
QUARTER Quarter Quarter Quarter Quarter
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
ASSETS
Earning Assets:
Loans:
Commercial...................................... $10,430 $10,141 $ 9,528 $ 9,225 $ 9,062
Real estate mortgage............................ 7,484 6,959 6,817 6,565 6,392
Consumer........................................ 7,722 7,404 7,136 6,800 6,361
------- ------- ------- ------- -------
Total loans................................... 25,636 24,504 23,481 22,590 21,815
Securities:
Taxable......................................... 4,554 4,344 3,805 3,976 3,977
Tax-exempt...................................... 601 637 656 718 746
------- ------- ------- ------- -------
Total securities.............................. 5,155 4,981 4,461 4,694 4,723
Federal funds sold................................ 78 85 74 87 76
Security resale agreements........................ 271 402 485 499 399
Eurodollar time deposits in banks................. 7 -- -- -- 1
Short-term money market investments............... 104 102 111 159 174
------- ------- ------- ------- -------
Total earning assets/
Total interest income/rates................ 31,251 30,074 28,612 28,029 27,188
Market value appreciation (depreciation) of
securities available for sale..................... 57 10 (56) (56) (14)
Allowance for loan losses........................... (496) (482) (477) (475) (467)
Cash and demand balances due from banks............. 2,049 2,048 2,017 2,133 2,012
Properties and equipment............................ 423 397 395 390 390
Customers' acceptance liability..................... 86 106 106 86 68
Accrued income and other assets..................... 1,467 1,368 1,426 1,359 1,333
------- ------- ------- ------- -------
Total assets.................................. $34,837 $33,521 $32,023 $31,466 $30,510
======= ======= ======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Savings and NOW accounts.......................... $ 4,342 $ 4,348 $ 4,543 $ 4,661 $ 4,872
Insured money market accounts..................... 4,842 4,759 4,762 5,058 5,129
Time deposits of individuals...................... 8,926 8,632 8,040 6,708 6,449
Other time deposits............................... 514 517 480 495 448
Deposits in overseas offices...................... 1,191 1,645 1,931 1,612 1,125
Federal funds borrowed............................ 1,335 1,408 1,133 1,280 1,218
Security repurchase agreements.................... 1,724 1,494 1,199 1,281 1,235
Borrowed funds.................................... 2,590 1,969 1,411 1,593 1,497
Corporate long-term debt.......................... 1,154 848 743 746 750
------- ------- ------- ------- -------
Total interest bearing liabilities/
Total interest expense/rates............... 26,618 25,620 24,242 23,434 22,723
Non-interest bearing deposits..................... 4,738 4,632 4,610 4,873 4,713
Acceptances outstanding........................... 86 106 106 86 68
Accrued expenses and other liabilities............ 587 498 459 464 405
------- ------- ------- ------- -------
Total liabilities............................. 32,029 30,856 29,417 28,857 27,909
Stockholders' equity.......................... 2,808 2,665 2,606 2,609 2,601
------- ------- ------- ------- -------
Total liabilities and stockholders' equity.... $34,837 $33,521 $32,023 $31,466 $30,510
======= ======= ======= ======= =======
Net interest income.......................................................................................
Interest spread...........................................................................................
Contribution of non-interest bearing sources of funds.....................................................
Net interest margin.......................................................................................
</TABLE>
16
<PAGE> 18
<TABLE>
<CAPTION>
Quarterly Interest Average Annualized Rate
------------------------------------------------------- -------------------------------------------------------
1995 1994 1995 1994
------------------------------- ------------------- ------------------------------- -------------------
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> <C>
$224.2 $215.8 $201.7 $190.4 $178.0 8.53% 8.54% 8.58% 8.19% 7.80%
155.5 144.4 137.8 130.7 124.4 8.31 8.30 8.09 7.97 7.78
200.2 189.3 174.7 162.9 148.9 10.31 10.24 9.88 9.53 9.31
------- ------- ------- ------- -------
579.9 549.5 514.2 484.0 451.3 9.00 8.99 8.83 8.53 8.23
68.5 68.0 57.1 55.2 51.8 6.00 6.27 6.02 5.54 5.19
12.3 13.3 14.0 14.6 15.3 8.14 8.32 8.52 8.12 8.18
------- ------- ------- ------- -------
80.8 81.3 71.1 69.8 67.1 6.25 6.53 6.39 5.94 5.66
1.1 1.3 1.1 1.2 .9 5.67 6.14 6.14 5.25 4.86
4.0 6.3 6.8 6.6 4.5 5.89 6.29 5.72 5.24 4.51
.1 -- -- .1 -- 5.89 -- -- -- 2.93
1.5 .8 1.4 1.2 1.2 5.56 3.04 5.00 3.09 2.85
------- ------- ------- ------- -------
$667.4 $639.2 $594.6 $562.9 $525.0 8.50% 8.52% 8.38% 8.00% 7.69%
$ 29.2 $ 29.4 $ 30.3 $ 30.9 $ 31.7 2.67% 2.71% 2.71% 2.63% 2.59%
34.8 33.1 31.7 31.2 29.9 2.85 2.79 2.70 2.45 2.31
131.3 125.7 108.7 82.1 72.6 5.84 5.84 5.48 4.85 4.47
7.1 7.1 6.3 5.7 4.5 5.50 5.50 5.25 4.61 4.00
17.1 24.6 27.7 20.8 12.6 5.71 5.99 5.81 5.13 4.44
23.3 19.8 14.3 17.6 13.9 6.92 5.66 5.12 5.45 4.54
22.5 20.2 14.8 15.1 12.2 5.20 5.45 5.04 4.69 3.91
38.1 28.4 20.0 20.1 17.0 5.84 5.78 5.74 5.12 4.15
20.2 15.1 13.4 14.0 13.2 6.94 7.14 7.30 7.42 6.98
------- ------- ------- ------- -------
323.6 303.4 267.2 237.5 207.6 4.83% 4.75% 4.42% 4.03% 3.60%
------- ------- ------- ------- -------
$343.8 $335.8 $327.4 $325.4 $317.4
======= ======= ======= ======= =======
........................................................... 3.67% 3.77% 3.91% 3.97% 4.09%
........................................................... .72 .70 .68 .66 .59
------- ------- ------- ------- -------
........................................................... 4.39% 4.47% 4.59% 4.63% 4.68%
======= ======= ======= ======= =======
</TABLE>
17
<PAGE> 19
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 D-1+
Senior debt.................................... A1 A AA-
Subordinated debt.............................. A2 A- A+
Preferred stock................................ "a1" BBB+ A
Bank Subsidiaries:*
Certificates of deposit........................ Aa3 A+ AA
Subordinated bank notes........................ A1 A AA-
* Includes the following subsidiaries:
National City Bank-Cleveland
National City Bank, Columbus
National City Bank, Kentucky
National City Bank, Indiana
National City Bank, Northeast (Akron)
National City Bank, Dayton
National City Bank, Northwest (Toledo)
</TABLE>
Duff & Phelps ratings for certificates of deposit apply only to the banks
in Cleveland, Columbus, Kentucky and Indiana. Duff & Phelps subordinated bank
note ratings apply only to the banking subsidiaries in Cleveland and Columbus.
18
<PAGE> 20
NATIONAL CITY CORPORATION
FORM 10-Q -- SEPTEMBER 30, 1995
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 30, 1995
/s/ ROBERT G. SIEFERS
Robert G. Siefers
Executive Vice President
Chief Financial Officer
(Duly Authorized Signer and
Principal Financial Officer)
19
<PAGE> 21
NATIONAL CITY CORPORATION
Bulk Rate
National City Center U.S. Postage
1900 East Ninth Street PAID
Cleveland, Ohio 44114-3484 National City
Corporation
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 2,226,019
<INT-BEARING-DEPOSITS> 73,968
<FED-FUNDS-SOLD> 432,252
<TRADING-ASSETS> 27,982
<INVESTMENTS-HELD-FOR-SALE> 3,786,782
<INVESTMENTS-CARRYING> 950,839
<INVESTMENTS-MARKET> 957,748
<LOANS> 25,691,687
<ALLOWANCE> 499,053
<TOTAL-ASSETS> 34,837,890
<DEPOSITS> 24,465,810
<SHORT-TERM> 5,618,317
<LIABILITIES-OTHER> 668,340
<LONG-TERM> 1,215,639
<COMMON> 589,592
0
186,040
<OTHER-SE> 2,094,152
<TOTAL-LIABILITIES-AND-EQUITY> 34,837,890
<INTEREST-LOAN> 1,637,331
<INTEREST-INVEST> 222,451
<INTEREST-OTHER> 24,423
<INTEREST-TOTAL> 1,884,205
<INTEREST-DEPOSIT> 643,981
<INTEREST-EXPENSE> 894,334
<INTEREST-INCOME-NET> 989,871
<LOAN-LOSSES> 74,327
<SECURITIES-GAINS> 11,471
<EXPENSE-OTHER> 1,089,756
<INCOME-PRETAX> 494,106
<INCOME-PRE-EXTRAORDINARY> 494,106
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 343,573
<EPS-PRIMARY> 2.24
<EPS-DILUTED> 2.18
<YIELD-ACTUAL> 4.48
<LOANS-NON> 129,900
<LOANS-PAST> 38,600
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 469,019
<CHARGE-OFFS> 99,586
<RECOVERIES> 47,544
<ALLOWANCE-CLOSE> 499,053
<ALLOWANCE-DOMESTIC> 499,053
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
