<PAGE> 1
PROSPECTUS SUPPLEMENT 424(b)(5)
- ----------------------------------- 33-39480 as
(TO PROSPECTUS DATED JULY 11, 1994) amended by
33-54323
$250,000,000
NATIONAL CITY CORPORATION
7.20% SUBORDINATED NOTES DUE 2005
------------------------
The 7.20% Subordinated Notes due 2005 (the "Notes") offered hereby will
mature on May 15, 2005. Interest on the Notes is payable semiannually on May 15
and November 15, beginning November 15, 1995. The Notes are direct, unsecured
obligations of National City Corporation (the "Company"), and are subordinated
in right of payment to all present and future Senior Indebtedness of the
Company. Payment of principal of the Notes may be accelerated only in the case
of certain events involving bankruptcy, insolvency or reorganization of the
Company or any Principal Constituent Bank. There is no right of acceleration of
the Notes in the case of a failure to pay principal or interest on the Notes or
in the performance of any other obligation of the Company. The Notes will not be
redeemable prior to maturity, and no sinking fund is provided for the Notes.
The Notes will be issued only in fully registered form and will be
represented by one or more Global Securities registered in the name of The
Depository Trust Company (the "Depositary"). Beneficial interests in the Notes
will be shown on, and transfers thereof will be effected only through, the
records maintained by the Depositary's participants. Except as described herein,
owners of beneficial interests in the Notes will not be entitled to receive the
Notes in definitive form and will not be deemed to be holders thereof. The Notes
will trade in the Depositary's Same-Day Funds Settlement System until maturity,
and secondary market trading activity for the Notes will therefore settle in
immediately available funds. See "Description of the Notes -- Same-Day
Settlement and Payment."
THE NOTES ARE NOT SAVINGS ACCOUNTS, DEPOSITS OR OTHER OBLIGATIONS OF ANY BANK OR
NONBANK SUBSIDIARY OF THE COMPANY AND ARE NOT INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY OR INSTRUMENTALITY.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
===============================================================================
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) DISCOUNT COMPANY(1)(2)
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Note............. 99.884% .65% 99.234%
- -------------------------------------------------------------------------------
Total................ $249,710,000 $1,625,000 $248,085,000
===============================================================================
<FN>
(1) Plus accrued interest, if any, from May 24, 1995 to date of delivery.
(2) Before deduction of expenses payable by the Company estimated to be
$200,000.
</TABLE>
------------------------
The Notes are offered subject to receipt and acceptance by the
Underwriters, to prior sale and to the Underwriters' right to reject any order
in whole or in part and to withdraw, cancel or modify the offer without notice.
It is expected that delivery of the Global Securities will be made through the
facilities of The Depository Trust Company on or about May 24, 1995.
------------------------
MERRILL LYNCH & CO.
CS FIRST BOSTON
LEHMAN BROTHERS
MCDONALD & COMPANY
SECURITIES, INC.
SALOMON BROTHERS INC
SMITH BARNEY INC.
RAFFENSPERGER, HUGHES & CO.
------------------------
The date of this Prospectus Supplement is May 17, 1995.
<PAGE> 2
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES
OFFERED HEREBY AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED IN THE OVER-THE-COUNTER MARKET OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
---------------
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the year ended December 31,
1994 and the Company's 1994 Annual Report to Stockholders (but only to the
extent such Annual Report to Stockholders is expressly incorporated by reference
into the referenced Form 10-K); its Report on Form 8-K dated February 28, 1995;
and Form 10-Q for the quarter ended March 31, 1995 as filed by the Company with
the Securities and Exchange Commission (the "Commission"), are incorporated in
and made a part of this Prospectus Supplement by reference.
All documents filed by the Company with the Commission pursuant to Section
13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), subsequent to the date of this Prospectus Supplement and
prior to the termination of the offering of the Notes offered hereby shall be
deemed to be incorporated by reference in this Prospectus Supplement and to be a
part hereof from the date of filing of such documents. Any statement contained
in a document incorporated or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Prospectus
Supplement to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus Supplement.
The Company will provide without charge to each person to whom this
Prospectus Supplement is delivered, on the written or oral request of any such
person, a copy of any or all of the documents incorporated herein by reference
(other than exhibits, unless such exhibits are specifically incorporated by
reference in such documents). Written requests for such copies should be
directed to National City Corporation, National City Center, 1900 East Ninth
Street, Cleveland, Ohio 44114-3484 Attention: Thomas A. Richlovsky, Senior Vice
President and Treasurer. Telephone requests may be directed to 216/575-2126.
S-2
<PAGE> 3
THE COMPANY
The Company is a multibank holding company which owns substantially all of
the outstanding capital stock of 10 commercial banks, having a total of 615
banking offices in Ohio, Kentucky and Indiana. At March 31, 1995, the Company
had consolidated total assets of $32.6 billion and total stockholders' equity of
$2.7 billion. Based on consolidated total assets at March 31, 1995, the Company
was the third largest bank holding company headquartered in the State of Ohio
and approximately the 29th largest commercial banking organization in the United
States. The Company's principal banking subsidiaries are National City Bank
(Cleveland); National City Bank, Columbus; National City Bank, Kentucky; and
National City Bank, Indiana.
The Company's subsidiaries and divisions offer a wide range of other
financial services, such as credit card, retail payment and airline ticket
processing, brokerage services, trust and investment management, leasing,
merchant banking, mortgage banking, public finance, venture capital, small
business and community investment, and credit life insurance.
USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of the Notes
offered hereby will be added to the general funds of the Company to be available
for general corporate purposes, including the retirement of the Company's 8 3/8%
Notes at maturity on March 15, 1996 and investments in or advances to existing
or future subsidiaries.
S-3
<PAGE> 4
SELECTED FINANCIAL DATA
The following table sets forth, in summary form, certain consolidated
financial data for the Company and its subsidiaries for each of the five years
ended December 31, 1994 and the quarters ended March 31, 1995 and 1994 and is
qualified in its entirety by the detailed information and financial statements
included in the documents incorporated herein by reference. See "Incorporation
of Certain Documents by Reference." The financial statements for the quarters
ended March 31, 1995 and 1994 are unaudited; however, in the opinion of the
management of the Company, all adjustments (consisting only of normal recurring
accruals) necessary for a fair statement of the results of operations have been
included. Interim results may not necessarily be representative of the full year
results of operations.
<TABLE>
<CAPTION>
QUARTER ENDED MARCH 31, YEAR ENDED DECEMBER 31,
UNAUDITED ---------------------------------------------------------
1995 1994 1993 1992 1991 1990
------------ ------------ ------------ ------------ ------------ ------------
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net interest income.................... $321 $302 $1,200 $1,152 $1,131 $1,094
Provision for loan losses.............. 22 20 93 129 251 231
Net income after provision for loan
losses............................... 299 282 1,107 1,023 880 863
Noninterest income..................... 209 210 812 752 676 583
Noninterest expense.................... 347 341 1,348 1,311 1,242 1,115
Income before income taxes............. 161 151 571 464 314 331
Income taxes........................... 50 47 167 117 77 82
Net income............................. 111 104 404 347 237 249
Net income applicable to common
stock................................ 107 100 388 331 226 249
STOCKHOLDER DATA:
Average common shares outstanding...... 148,837,218 158,277,962 161,163,816 158,011,980 154,430,222 153,839,484
Net income per common share
(primary)............................ $.72 $.63 $2.41 $2.09 $1.46 $1.62
Dividends paid per common share........ .32 .29 1.06 .94 .94 .94
Book value per common share
(period-end) (a)..................... 16.97 15.87 16.15 14.54 13.31 12.71
ENDING BALANCE SHEET DATA:
Loans.................................. $24,045 $21,257 $21,286 $18,738 $19,171 $19,587
Total earning assets (net of
allowance)........................... 28,586 26,146 27,314 25,463 26,160 25,534
Total assets........................... 32,641 29,861 31,068 28,963 29,976 29,561
Deposits............................... 24,683 22,673 23,063 22,585 22,758 22,730
Corporate long-term debt............... 743 757 510 328 330 308
Stockholders' equity................... 2,674 2,591 2,763 2,500 2,258 1,946
SELECTED RATIOS:
Net interest margin.................... 4.59% 4.61% 4.80% 4.65% 4.51% 4.50%
Return on average assets............... 1.39 1.39 1.40 1.21 .81 .87
Return on average common equity........ 17.98 16.11 16.12 15.31 11.20 12.97
Equity to assets (period-end).......... 8.19 8.68 8.89 8.63 7.53 6.58
Net charge-offs to average loans....... .33 .27 .43 .72 1.07 1.16
Allowance for loan losses to loans
(period-end)......................... 1.97 2.12 2.08 2.05 2.01 1.67
Allowance for loan losses to
nonperforming
loans (period-end)................... 395.83 332.92 292.90 171.60 112.70 101.20
Nonperforming assets to loans and other
real estate owned (period-end)....... .57 .87 .98 1.94 2.78 2.44
REGULATORY CAPITAL RATIOS (PERIOD-END):
Tier 1 capital......................... 8.95% 9.65% 8.94% 9.90% 8.64% 7.19%
Total capital.......................... 12.18 13.35 11.62 12.23 11.00 9.58
Tier 1 leverage........................ 7.59 7.79 8.18 8.22 7.26 6.34
EARNINGS TO FIXED CHARGES (B):
Excluding interest on deposits......... 3.42x 4.52x 4.51x 3.72x 2.18x 1.91x
Including interest on deposits......... 1.59 1.86........ 1.81 1.52 1.23 1.20
</TABLE>
- ---------------
(a) The Company adopted SFAS No. 115 "Accounting for Certain Investments in Debt
and Equity Securities" on December 31, 1993. As a result, book value per
share at March 31, 1995, December 31, 1994 and 1993 included ($.07), ($.34)
and $.22 per share, respectively, related to the market value
(depreciation)/appreciation of securities available for sale.
(b) For purposes of computing the ratios of earnings to fixed charges, income
before income taxes plus fixed charges is divided by fixed
charges. Fixed charges, excluding interest on deposits, consist of interest
on Federal funds purchased, security repurchase agreements, other borrowed
funds, corporate long-term debt, and that portion of rental expense which is
deemed representative of the interest factor. Fixed charges, including
interest on deposits, consist of the same items plus interest on deposits.
S-4
<PAGE> 5
CAPITALIZATION
<TABLE>
The following table sets forth the capitalization of the Company at March
31, 1995, and as adjusted to give effect to the sale of the Notes offered
hereby. The table should be read in conjunction with the financial information
incorporated herein by reference or appearing elsewhere herein.
<CAPTION>
OUTSTANDING AS ADJUSTED
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
LONG-TERM DEBT
Senior Debt:
8 3/8% Notes due 1996....................................... $ 99,926 $ 99,926
Floating Rate Notes due 1997................................ 49,946 49,946
Other....................................................... 3,252 3,252
Borrowings under revolving credit facility.................. -- --
----------- -----------
Total Senior Debt......................................... 153,124 153,124
Subordinated Debt:
Notes offered hereby........................................ -- 250,000
6 5/8% Subordinated Notes due 2004.......................... 248,845 248,845
6 1/2% Subordinated Notes due 2003 (a)...................... 199,395 199,395
Floating Rate Subordinated Notes due 1997................... 74,966 74,966
9 7/8% Subordinated Notes due 1999.......................... 64,790 64,790
Other....................................................... 2,270 2,270
----------- -----------
Total Subordinated Debt................................... 590,266 840,266
----------- -----------
Total Long-Term Debt...................................... 743,390 993,390
STOCKHOLDERS' EQUITY
Preferred Stock, without par value, 8% Cumulative Convertible,
$250 liquidation preference per share, 5,000,000 shares
authorized, 744,160 shares outstanding (3,720,800 depositary
shares)..................................................... 186,040 186,040
Common Stock, par value $4 per share, 350,000,000 shares
authorized, 146,570,786 shares outstanding.................. 586,284 586,284
Capital Surplus................................................ 136,239 136,239
Retained Earnings (b).......................................... 1,770,995 1,770,995
Unallocated Shares held by Employee Stock Ownership Plan (ESOP)
Trust....................................................... (5,678) (5,678)
----------- -----------
Total Stockholders' Equity..................................... 2,673,880 2,673,880
----------- -----------
Total Long-Term Debt and Stockholders' Equity.................. $3,417,270 $3,667,270
=========== ===========
At March 31, 1995, the Company also had commercial paper outstanding of
$556.1 million.
<FN>
- ---------------
(a) The 6 1/2% Subordinated Notes are direct obligations of the Company's
Cleveland and Columbus banking subsidiaries. As such, these obligations
constitute claims against such subsidiaries prior to the Company's equity
interest therein.
(b) Includes $10.9 million related to the market value depreciation of
securities available for sale.
</TABLE>
S-5
<PAGE> 6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL RESULTS
YEAR ENDED DECEMBER 31, 1994:
EARNINGS SUMMARY
National City Corporation's consolidated net income was $429.4 million in
1994, compared with $404.0 million in 1993. Net income per common share, after
dividend requirements on preferred stock, increased 12% in 1994 to $2.70,
compared with $2.41 in 1993.
Return on average common equity, a key performance measure, was 17.06% in
1994, compared with 16.12% in 1993. Return on average assets was 1.40% in 1994
and 1993.
<TABLE>
The following table reconciles the major changes in net income per share:
<S> <C>
Net income per common share, 1993............................ $2.41
Increase (decrease) from changes in:
Net interest income........................................ .23
Provision for loan losses.................................. .08
Fee income................................................. .33
Noninterest expense........................................ (.34)
Income taxes............................................... (.14)
After-tax security gains................................... (.01)
Average shares outstanding................................. .14
-----
Net income per common share, 1994............................ $2.70
=====
</TABLE>
UNIT PROFITABILITY
<TABLE>
The contribution of the Corporation's major units to consolidated net
income for the past two years is summarized in the following table:
<CAPTION>
1994 1993
---------- ----------
(DOLLARS IN MILLIONS)
<S> <C> <C>
Corporate banking....................................... $186.6 $166.6
Retail banking.......................................... 174.6 139.0
National credit card.................................... 9.4 17.2
Investment/funding...................................... 40.1 55.5
Trust................................................... 31.0 32.4
Item processing......................................... 15.0 17.2
Mortgage banking........................................ 5.7 (13.4)
Corporate............................................... (33.0) (10.5)
---------- ----------
Consolidated total................................. $429.4 $404.0
=========== ===========
</TABLE>
The corporate and retail banking businesses' earnings improved in 1994 from
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 were lower expense levels.
The decline in national credit card net income is due to the settlement of
litigation in the second quarter 1994, the loss of a major private label
customer in the fourth quarter 1993, and increased marketing expenses in 1994
directed at replacing the lost business.
S-6
<PAGE> 7
The decline in the earnings of the investment/funding group in 1994 was due
primarily to the adverse effect of rising interest rates.
Trust net income declined slightly in 1994 compared with 1993. Increased
competition from nonbanks in investment management services and products caused
a decline in new business sales in 1994.
The decline in earnings in the item processing business in 1994 was due
mainly to losses and one-time charges in the check processing business.
The increase in mortgage banking net income was due to the sales of
mortgage servicing in the second and fourth quarters of 1994 and lower
amortization of purchased mortgage servicing rights from the unusually high
levels recorded in 1993.
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 and higher interest expense on the Corporation's variable rate
long-term debt.
EARNING ASSETS
Average earning assets for 1994 were $27,261 million compared with $25,745
million in 1993. Average earning assets in 1994 increased 6% due to higher loan
balances and the acquisition of Ohio Bancorp in the fourth quarter of 1993,
offset somewhat by a decline in the securities portfolio.
<TABLE>
LOANS: At year-end 1994, loans were $23,035 million, representing an
increase of 8% from year-end 1993. Ending loan balances are summarized in the
table below:
<CAPTION>
1994 1993
------- -------
(DOLLARS IN MILLIONS)
<S> <C> <C>
Commercial and industrial...................................... $ 8,414 $ 8,168
Nontaxable..................................................... 254 262
International.................................................. 52 70
Real estate construction....................................... 422 439
Leasing........................................................ 216 228
Commercial mortgage............................................ 2,473 2,328
Residential mortgage........................................... 4,165 4,033
Consumer....................................................... 4,782 4,241
Home equity.................................................... 919 798
Credit card.................................................... 1,338 719
------- -------
Total loans............................................... $23,035 $21,286
======= =======
</TABLE>
The acquisition of Ohio Bancorp in 1993 added $809 million to year-end 1993
loan balances, including $254 million to commercial, $320 million to residential
mortgage and $200 million to consumer.
The commercial loan portfolio remained fairly stable for most of 1994, the
result of growth in middle-market commercial and industrial loans offset by a
substantial decline in loans to mortgage bankers.
Commercial mortgages included $1,912 million of loans secured by
income-producing real estate in 1994, compared with $1,777 million in 1993 and
$1,643 million in 1992. The remainder consists of owner-occupied loans.
Residential mortgage loans increased in 1994 due to new loan origination
activity offset somewhat by a dramatic decline in refinancing activity. Loan
originations totalled approximately $2.4 billion in 1994, compared with $5.0
billion in 1993. Of the 1994 originations, $1.7 billion were sold in the
secondary market.
S-7
<PAGE> 8
During 1994, consumer spending patterns remained robust. Year-end consumer
loans increased 13% from year-end 1993. More than 75% of consumer loans are
installment loans, and of these more than 70% are indirect, with the majority
being fixed rate. The remainder of the consumer portfolio is largely student
loans.
The growth in credit card and home equity outstandings was due to purchases
of small card portfolios as well as the completion of the amortization of a $350
million credit card securitization back onto the balance sheet. At year-end,
credit card securitizations outstanding were $70 million, compared with $363
million a year ago, and these remaining securitized assets will return to the
balance sheet in 1995.
SECURITIES: On December 31, 1993, the Corporation adopted SFAS 115
"Accounting for Certain Investments in Debt and Equity Securities". At December
31, 1994, the net unrealized loss of $53 million, net of tax, was included in
stockholders' equity, as compared to a net unrealized gain of $35 million, net
of tax, at December 31, 1993.
On a cost basis, the portfolio decreased from $5.1 billion in 1993 to $4.5
billion at December 31, 1994. The reduction in the portfolio was in response to
an anticipated rise in interest rates throughout 1994. The decline was
characterized by mortgage prepayments and maturities of $860 million and $365
million, respectively. Net purchases of securities which totalled $587 million
were about evenly split between adjustable rate mortgage-backed securities and
short-term fixed rate obligations.
The book yield of the securities portfolio at December 31, 1994 was 6.94%.
INTEREST-BEARING LIABILITIES
Average balances in transaction accounts, which include demand deposits,
savings, and interest-bearing checking, increased by 3% in 1994, while time
deposits of individuals increased by 2%. Overall, average core deposits
increased less than earning assets.
On average, use of purchased funds increased by $934 million in 1994. The
increase was due to the Corporation's efforts to obtain cost-effective funding
in the existing interest rate environment to support the growth in assets.
CAPITAL
The Corporation's Tier 1, total risk-based capital and leverage ratios of
8.45%, 11.68% and 7.82% are well above the required minimum levels of 4.00%,
8.00% and 4.00%, respectively.
At December 31, 1994, all of National City's member banks were
well-capitalized under the capital definitions prescribed in the FDIC
Improvement Act of 1991.
Book value per common share at December 31, 1994 was $16.36 compared with
$16.15 at December 31, 1993. The 1994 book value includes $.34 of market
depreciation in the securities available for sale portfolio compared with $.22
of market appreciation at year-end 1993.
During the year, 12.4 million common shares were repurchased in the open
market. Of those shares, 4.3 million were purchased under a program announced in
December, 1993. The remaining 8.1 million shares were purchased under programs
announced in March and July, 1994. At December 31, 1994 the Corporation had
remaining authorization to purchase up to 6.9 million common shares.
LIQUIDITY MANAGEMENT
Effective liquidity management ensures that the cash flow requirements of
depositors and borrowers, as well as the operating cash needs of the
Corporation, are met.
Funds are available from a number of sources, including the securities
portfolio, the extensive core deposit base, the ability to acquire large
deposits in the local and national markets, and the capability to securitize or
package loans for sale.
S-8
<PAGE> 9
The company has four major sources of funding to meet its liquidity
requirements: dividends from its subsidiaries, the commercial paper market, a
revolving credit agreement, and access to the capital markets.
The main source for parent company cash requirements has been dividends
from its subsidiaries. At January 1, 1995, $77 million was available within the
bank subsidiaries to pay the parent company in dividends without prior
regulatory approval, compared with $96 million at January 1, 1994. During 1994,
subsidiary banks declared $250 million in dividends to the parent company.
Funds raised in the commercial paper market through the Corporation's
subsidiary, National City Credit Corporation, are primarily used to support the
activities of National City Mortgage Co., the Corporation's mortgage banking
subsidiary, as well as other occasional short-term cash needs. Commercial paper
outstandings at December 31, 1994 were $379 million, compared with $399 million
at year-end 1993.
The Corporation has a $300 million revolving credit agreement with a group
of unaffiliated banks which serves as a back-up liquidity facility. The
agreement expires June 30, 1997, with a provision to extend the expiration date
under certain circumstances. No borrowings have occurred under this facility.
NET INTEREST INCOME
On a fully taxable equivalent basis, net interest income was $1,266.3
million in 1994 compared with $1,235.8 million in 1993.
The net interest margin was 4.65% in 1994 and 4.80% in 1993. The margin
decline in 1994 was due mainly to the loss of a large credit card customer in
the fourth quarter 1993.
FEES AND OTHER INCOME
Fees and other income increased 7% in 1994 from 1993 due primarily to
growth in item processing, mortgage banking and brokerage revenues.
Item processing revenues grew in both 1994 and 1993 due to growth in the
existing airline and bankcard processing businesses, as well as acquisitions.
Credit card fees declined in 1994 due mainly to 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 related loan balances were returned to
the balance sheet.
Mortgage banking revenues increased due to $14 million of gains on the sale
of mortgage servicing rights. Also contributing to the improved mortgage banking
revenue was lower amortization of capitalized excess service fees, which is
recorded as an adjustment to revenue. The 1994 amortization was lower by $11
million as compared to 1993. Offsetting these increases were reduced loan
origination fees that resulted mainly from the decline in refinancing activity
in 1994.
NONINTEREST EXPENSE
Noninterest expense rose 4% in 1994 compared with 1993. Excluding the
impact of acquired companies, total expenses were unchanged from 1993 levels.
Nonrecurring expenses recorded in 1994 included $8.7 million related to the
settlement of litigation and a $4.5 million write-off in the item processing
subsidiary. Amortization of intangibles included the amortization of purchased
mortgage servicing rights, which totalled $14.5 million in 1994 and $34.5
million in 1993.
The full-time equivalent (FTE) staff for the Corporation increased by 346
in 1994 due to increases at the item processing subsidiary which were volume
related.
The overhead ratio (noninterest expense less fee income as a percentage of
fully taxable net interest income) was 43.46% in 1994 compared with 44.34% in
1993.
The efficiency ratio (noninterest expense as a percentage of fee income
plus fully taxable net interest income) was 66.21% in 1994 and 1993.
S-9
<PAGE> 10
SECURITY GAINS AND LOSSES
The security gains contributions to net income were $6.8 million and $7.7
million, respectively, in 1994 and 1993.
INCOME TAXES
The consolidated income tax provision was $188.3 million in 1994 compared
with $167.0 million in 1993. The effective tax rate of the Corporation was 30.5%
in 1994 and 29.2% in 1993. The higher 1994 effective rate reflects declining
levels of tax-exempt income and a greater portion of income subject to state
income taxation.
ASSET QUALITY
<TABLE>
NONPERFORMING ASSETS: A summary of nonaccrual, reduced rate and
renegotiated loans and other nonperforming assets at December 31 follows:
<CAPTION>
1994 1993
------ ------
(DOLLARS IN MILLIONS)
<S> <C> <C>
Commercial:
Nonaccrual..................................................... $ 58.8 $ 79.4
Restructured................................................... -- 1.1
------ ------
Total commercial............................................ 58.8 80.5
Real estate related:
Nonaccrual..................................................... 48.8 64.4
Restructured................................................... 4.4 6.5
------ ------
Total real estate related................................... 53.2 70.9
------ ------
Total nonperforming loans................................... 112.0 151.4
Other real estate owned (OREO)................................... 16.5 57.8
------ ------
Nonperforming assets........................................ $128.5 $209.2
====== ======
Loans 90 days past due accruing interest......................... $ 27.9 $ 42.2
====== ======
Nonperforming loans and OREO as a percent of:
Loans and OREO................................................. .6% 1.0%
Assets......................................................... .4 .7
Equity......................................................... 4.9 7.6
Loan loss allowance to nonperforming loans....................... 418.8% 292.9%
</TABLE>
Nonperforming assets declined in 1994 due to payoffs and recoveries in
nonaccrual commercial and real estate loans, as well as the liquidation of
foreclosed real estate.
S-10
<PAGE> 11
<TABLE>
ALLOWANCE FOR LOAN LOSSES: The following table presents the reconciliation
of the allowance for loan losses:
<CAPTION>
1994 1993
------ ------
(DOLLARS IN MILLIONS)
<S> <C> <C>
Balance at beginning of year..................................... $443.4 $383.9
Provision........................................................ 79.4 93.1
Net acquired allowance........................................... 9.7 50.7
Loans charged off:
Commercial..................................................... 34.6 55.0
International.................................................. -- 1.9
Real estate mortgage........................................... 11.5 14.9
Consumer....................................................... 33.0 35.0
Revolving credit............................................... 41.1 37.7
------ ------
Total charge-offs........................................... 120.2 144.5
Recoveries:
Commercial..................................................... 18.6 26.1
International.................................................. -- --
Real estate mortgage........................................... 4.3 2.3
Consumer....................................................... 22.8 21.6
Revolving credit............................................... 11.0 10.2
------ ------
Total recoveries............................................ 56.7 60.2
------ ------
Net charged-off loans............................................ 63.5 84.3
------ ------
Balance at end of year........................................... $469.0 $443.4
====== ======
Ratio of ending allowance to ending loans........................ 2.04% 2.08%
</TABLE>
The commercial category included real estate construction net
charge-offs/(recoveries) of $(1.8) million in 1994 and $4.9 million in 1993.
Real estate mortgage loans included commercial real estate net charge-offs of
$5.3 million in 1994 and $10.3 million in 1993.
Both the provision and the allowance are based on an analysis of individual
credits, prior and current loss experience, overall growth in the portfolio,
current economic conditions, and other factors. Consumer and credit card loans
are charged off within industry norms, while commercial loans are evaluated
individually.
QUARTER ENDED MARCH 31, 1995:
EARNINGS SUMMARY
Net income for the quarter ended March 31, 1995 was $111.0 million, an
increase of 7% over the $103.8 million earned in the first quarter 1994. Net
income per common share was $.72 for the first quarter 1995 compared with $.63
for the corresponding quarter last year.
Return on average common equity was 17.98% for the three months ended March
31, 1995 compared with 16.11% for the same quarter in 1994. Return on average
assets was 1.39% for the first three months of both 1995 and 1994.
Net income for the quarter increased from a year ago due primarily to
higher net interest income that resulted from loan growth. Fee income was up
slightly versus first quarter last year and the provision for loan losses
increased $2.1 million over the same period. Noninterest expenses increased 2.0%
during the first quarter 1995 compared with the same quarter a year ago.
S-11
<PAGE> 12
After-tax security gains were insignificant in the first quarter 1995,
compared with $.02 per share for the first quarter 1994.
UNIT PROFITABILITY
<TABLE>
The following table presents net income contributions by the Corporation's
major units to consolidated results.
<CAPTION>
THREE MONTHS
ENDED
MARCH 31,
-----------------
1995 1994
------ ------
(DOLLARS IN MILLIONS)
<S> <C> <C>
Corporate banking................................................ $ 50.8 $ 45.9
Retail banking................................................... 58.4 42.6
National credit card............................................. 1.7 2.7
Investment/funding............................................... (3.8) 12.2
Trust............................................................ 8.1 9.0
Item processing.................................................. 4.3 3.1
Mortgage banking................................................. 3.2 (1.1)
Corporate........................................................ (11.7) (10.6)
------ ------
Consolidated total.......................................... $111.0 $103.8
====== ======
</TABLE>
The corporate and retail banking businesses' earnings improved for the
first three months of 1995 compared with the first quarter 1994 due to higher
net interest income that resulted from loan growth as well as wider spreads on
transaction accounts.
The decline in national credit card net income was due primarily to a
higher loan loss provision.
The increased profitability in the item processing subsidiary was due to
increased volume and expense control measures.
The increase in mortgage servicing net income was due to gains on the sale
of mortgage servicing in 1995.
The decrease in investment/funding net income was due to higher gains on
the sale of securities in the first quarter 1994, a reduced contribution from
the interest rate derivative portfolio and increased use of purchased funds to
support loan growth.
The decrease in the corporate contribution is due primarily to higher
interest expense on corporate debt.
EARNING ASSETS AND INTEREST-BEARING LIABILITIES
Average earning assets totalled $28,612 million for the quarter ended March
31, 1995, an increase of $583 million from the quarter ended December 31, 1994
and $1,641 million from the quarter ended March 31, 1994. The increase over the
first and fourth quarters of last year was due to loan growth and the
acquisition of Central Indiana Bancorp ($166 million of earning assets).
Average core deposits increased $655 million in the first quarter from the
fourth quarter 1994 due to the acquisition of Central Indiana Bancorp and
increased certificate of deposit balances. The increases were partially offset
by runoff in savings and money market balances. Purchased deposit balances also
increased due to efforts to obtain cost-effective funding in the existing
interest rate environment to support the growth in assets.
NET INTEREST INCOME
On a fully taxable equivalent basis, net interest income increased to
$327.5 million in the first quarter 1995 compared with $309.4 million for the
corresponding quarter in 1994.
S-12
<PAGE> 13
The tax equivalent net interest margin was 4.59% in the quarter ended March
31, 1995 compared with 4.61% a year ago and 4.63% for the quarter ended December
31, 1994. The lower net interest margin was due primarily to the increased use
of purchased funding to support the growth in earning assets.
FEES AND OTHER INCOME
Fee income was $207.9 million for the quarter ended March 31, 1995 versus
$203.8 million for the first quarter 1994. The increase in fee income was due
primarily to increased item processing volume and a $7.1 million gain on the
sale of mortgage servicing. Offsetting these increases was a decline in credit
card fees from the unwinding of a securitization. The fees associated with the
credit card securitization were offset by net interest income as the related
loan balances returned to the balance sheet.
NONINTEREST EXPENSES
Noninterest expenses were $347.4 million for the quarter ended March 31,
1995 compared with $340.9 million a year ago, an increase of 2.0%. Excluding the
effects of the Central Indiana Bancorp acquisition, expenses increased 1.6% over
the first quarter 1994.
The efficiency ratio (noninterest expense as a percentage of fee income
plus fully-taxable net interest income) was 64.90% for the first quarter 1995
compared with 66.43% a year ago.
The overhead ratio (noninterest expenses less fee income as a percentage of
fully-taxable net interest income) was 42.62% for the first quarter 1995
compared with 44.32% a year ago.
Total staff at March 31, 1995 increased slightly from a year ago due mainly
to business growth.
ASSET QUALITY
The allowance for loan losses was $474.8 million at March 31, 1995
representing 1.97% of loans outstanding at quarter-end. This loan loss reserve
ratio compared with 2.04% at year-end 1994 and 2.12% at March 31, 1994.
The provision for loan losses of $22.6 million for the first quarter
increased from $20.4 million in the first quarter 1994.
Net charge-offs for the first quarter 1995 were $19.0 million compared with
$14.2 million for the first three months of 1994.
S-13
<PAGE> 14
<TABLE>
The following table summarizes nonperforming assets and related data.
<CAPTION>
MARCH 31,
---------------------
1995 1994
-------- --------
(IN MILLIONS)
<S> <C> <C>
Commercial:
Nonaccrual................................................ $ 68.8 $ 70.1
Restructured.............................................. .1 1.0
-------- --------
Total commercial....................................... 68.9 71.1
Real estate related:
Nonaccrual................................................ 46.8 59.6
Restructured.............................................. 4.3 4.5
-------- --------
Total real estate related.............................. 51.1 64.1
-------- --------
Total nonperforming loans.............................. 120.0 135.2
Other real estate owned (OREO).............................. 17.7 49.1
-------- --------
Nonperforming assets........................................ $137.7 $184.3
========= =========
Loans 90 days past-due accruing interest.................... $ 37.1 $ 31.1
========= =========
</TABLE>
Nonperforming assets of $138 million at March 31, 1995 increased by $9
million from the fourth quarter 1994.
Nonperforming assets as a percentage of loans and OREO were .57% at March
31, 1995 compared with .86% a year ago and .56% at December 31, 1994.
CAPITAL
The Corporation's Tier 1 capital, total capital and regulatory ratios were
8.95%, 12.18% and 7.59%, respectively at March 31, 1995.
Book value per common share at March 31, 1995 was $16.97 compared with
$15.87 at March 31, 1994 and $16.36 at December 31, 1994. The book value per
common share at March 31, 1995, December 31, 1994, and March 31, 1994 included
$(.07), $(.34), and $.09, respectively, related to the market value
appreciation/(depreciation) of securities available for sale.
In the first three months of 1995, approximately 3 million shares of common
stock were repurchased in the open market. At March 31, 1995 the Corporation had
remaining authorization to acquire 6.3 million common shares.
DESCRIPTION OF THE NOTES
GENERAL
The following is a brief description of the terms of the Notes. This
description does not purport to be complete, should be read in conjunction with
the statements under "Description of Debt Securities" in the accompanying
Prospectus and is subject to, and qualified in its entirety by, such description
and the Subordinated Indenture dated as of February 1, 1994 (the "Indenture"),
between the Company and NBD Bank, National Association, as Trustee (the
"Trustee"). The form of the Indenture is an exhibit to the Registration
Statement of which the accompanying Prospectus and this Prospectus Supplement
form a part.
The Notes offered hereby will mature on May 15, 2005, and are limited to
$250,000,000 aggregate principal amount. The Notes will bear interest at the
rate of 7.20% per annum, commencing on May 24, 1995. Interest will be payable
semiannually on May 15 and November 15 of each year, commencing November 15,
1995, to the persons in whose names the Notes are registered on the May 1 and
November 1 next preceding
S-14
<PAGE> 15
such May 15 and November 15, respectively, and at maturity to the persons to
whom principal is payable upon proper presentment. The Notes are not subject to
redemption prior to maturity. No sinking fund is provided for the Notes.
The Notes will be unsecured and subordinated in right of payment to the
prior payment in full of all present and future Senior Indebtedness of the
Company as described under the caption "Description of Debt
Securities -- Subordinated Securities" in the accompanying Prospectus. As of
March 31, 1995, the Company had approximately $912.8 million principal amount of
Senior Indebtedness outstanding.
Payment of principal of the Notes may be accelerated only in the case of
certain events of bankruptcy, insolvency or reorganization of the Company or any
of its Principal Constituent Banks. There will be no right of acceleration of
the payment of principal of the Notes upon a default in the payment of interest
on the Notes or in the performance of any covenant or agreement of the Company
contained in the Notes or the Indenture.
BOOK-ENTRY SYSTEM
The Notes will be issued only in fully registered form and will be
represented by one or more global securities ("Global Securities") registered in
the name of The Depository Trust Company, New York, New York, or a successor
thereof (which successor shall be a clearing agency registered under the
Exchange Act if so required by applicable law) (The Depository Trust Company or
such successor being herein referred to as the "Depositary") or the Depositary's
nominee.
Upon the issuance of a Global Security, the Depositary will credit, on its
book-entry registration and transfer system, the respective principal amount of
the Notes represented by such Global Security to the accounts of institutions
that have accounts with the Depositary ("participants"). Ownership of beneficial
interests in the Global Security will be limited to participants or persons that
may hold interests through participants. Ownership of beneficial interests in
the Global Security will be shown on, and the transfer of that ownership will be
effected only through, records maintained by the Depositary or its nominee (with
respect to interests of participants) or by participants or persons that hold
through participants (with respect to interests of persons other than
participants). The laws of certain states require that certain purchasers of
securities take physical delivery of such securities as certificates issued in
definitive form. Such limits and such laws may impair the ability to transfer
beneficial interests in a Global Security.
Principal, premium, if any, and interest payments on the Global Security
will be made to the Depositary or its nominee, as the case may be, as the
registered holder thereof. The Company has been advised that the Depositary or
its nominee, upon receipt of any payment of principal, premium, if any, or
interest in respect of a Global Security, will immediately credit participants'
accounts with payments in amounts proportionate to their respective beneficial
interests in the principal amount of such Global Security as shown on the
records of the Depositary or its nominee. Payments by participants (or by
persons that hold interests for customers through participants) to owners of
beneficial interests in such Global Security held through such participants will
be governed by standing instructions and customary practices, as is now the case
with securities held for the accounts of customers registered in "street name",
and will be the responsibility of such participants (or of such persons that
hold interests for customers through participants).
Each owner of a beneficial interest in a Global Security must ensure that
the person through whom its interest is held (i.e., either a participant or
other person that holds interests through a participant) maintains accurate
records of such owner's beneficial interest in the Global Security. The
interests of participants (which may be in the form of a custodial relationship)
will be shown on records maintained by the Depositary for such Global Security.
The designation of the Depositary or its nominee as custodian for participants
and persons that hold interests through participants (either as principal,
nominee or custodian) will be shown on the register maintained by the Trustee.
Neither the Company nor the Trustee will have any responsibility or
liability for any aspect of the records relating to, or for payments made on
account of beneficial ownership interests in, a Global Security or for
maintaining, supervising or reviewing any records relating to such beneficial
ownership interests.
S-15
<PAGE> 16
If the Depositary notifies the Company that it is unwilling or unable to
continue as Depositary for the Global Securities or if at any time the
Depositary ceases to be a clearing agency registered under the Exchange Act if
so required by applicable law or regulation, and, in either case, a successor
depositary is not appointed by the Company within 90 days, the Company will
issue Notes in certificated form ("Certificated Notes") in exchange for such
Global Securities. In addition, the Company may at any time and in its sole
discretion determine not to have any Notes represented by Global Securities and,
in such event, will issue Certificated Notes in exchange for such Global
Securities. Furthermore, after the occurrence of an Event of Default, the
Company will issue Certificated Notes in exchange for such Global Securities.
The Certificated Notes so issued in exchange for such Global Securities shall be
in the same minimum denominations and be of like aggregate principal amount and
tenor as the portion of each such Global Security to be exchanged. Except as
provided above, owners of beneficial interests in a Global Security will not be
entitled to receive physical delivery of Certificated Notes and will not be
considered the registered holders of such Notes for any purpose (including
receiving payments of principal, premium, if any, and interest).
The Depositary has advised the Company that it is a limited-purpose trust
company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the New
York Uniform Commercial Code and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. The Depositary was created to
hold securities of its participants and to facilitate the clearance and
settlement of securities transactions among its participants in such securities
through electronic book-entry changes in accounts of the participants, thereby
eliminating the need for physical movement of securities certificates. The
Depositary's participants include securities brokers and dealers, banks, trust
companies, clearing corporations, and certain other organizations, some of whom
(and/or their representatives) own the Depositary. Access to the Depositary's
book-entry system is also available to others, such as banks, brokers, dealers
and trust companies that clear through or maintain a custodial relationship with
a participant, either directly or indirectly.
SAME-DAY SETTLEMENT AND PAYMENT
Settlement for the Notes will be made in immediately available funds. The
Notes will trade in the Depositary's Same-Day Funds Settlement System until
maturity, unless otherwise exchanged for Certificated Notes as described above,
and therefore the Depositary will require secondary trading activity in the
Notes to be settled in immediately available funds. Secondary trading in
long-term notes and debentures of corporate issuers is generally settled in
clearing-house or next-day funds. No assurance can be given as to the effect, if
any, of settlement in immediately available funds on secondary trading activity
in the Notes.
S-16
<PAGE> 17
UNDERWRITING
<TABLE>
Subject to the terms and conditions set forth in an underwriting agreement
(the "Underwriting Agreement"), the Company has agreed to sell to Merrill,
Lynch, Pierce, Fenner & Smith Incorporated, CS First Boston Corporation, Lehman
Brothers Inc., McDonald & Company Securities, Inc., Salomon Brothers Inc, Smith
Barney Inc. and Raffensperger, Hughes & Co., Inc. and the Underwriters have
severally agreed to purchase, the respective principal amounts of the Notes set
forth opposite their names below. In the Underwriting Agreement, the
Underwriters have agreed, subject to the terms and conditions set forth therein,
to purchase all of the Notes offered hereby if any Notes are purchased.
<CAPTION>
PRINCIPAL
UNDERWRITER AMOUNT
- --------------------------------------------------------------------- ------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated............................................ $ 39,000,000
CS First Boston Corporation.......................................... 39,000,000
Lehman Brothers Inc.................................................. 39,000,000
McDonald & Company Securities, Inc................................... 39,000,000
Salomon Brothers Inc................................................. 39,000,000
Smith Barney Inc..................................................... 39,000,000
Raffensperger, Hughes & Co., Inc..................................... 16,000,000
------------
Total................................................... $250,000,000
===========
</TABLE>
The Company has been advised by the Underwriters that they propose
initially to offer the Notes to the public at the public offering price set
forth on the cover page of this Prospectus Supplement, and to certain dealers at
such price less a concession not in excess of .4% of the principal amount of the
Notes. The Underwriters may allow and such dealers may reallow a concession not
in excess of .25% of such principal amount. After the initial public offering,
the public offering price and such concessions may be changed.
The Notes are a new issue of securities with no established trading market.
The Company has been advised by the Underwriters that they intend to make a
market in the Notes, but are not obligated to do so, and may discontinue market
making at any time without notice. No assurance can be given as to the liquidity
of the trading market for the Notes.
The Underwriting Agreement provides that the Company will indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, or contribute to payments the Underwriters may be
required to make in respect thereof.
The Company has entered into an agreement with Raffensperger, Hughes & Co.,
Inc. ("RHC") pursuant to which the Company will acquire the assets of RHC upon
receipt of regulatory approvals.
LEGAL OPINIONS
The validity of the Notes will be passed upon for the Company by David L.
Zoeller, Senior Vice President, General Counsel and Secretary for the Company,
and for the Underwriters by Brown & Wood, One World Trade Center, New York, New
York 10048. As of May 17, 1995, Mr. Zoeller had a direct or indirect interest in
41,340 shares of the Company's Common Stock and had options to purchase an
additional 58,240 shares, of which options to purchase 54,239 shares will be
exerciseable within 60 days after May 17, 1995.
EXPERTS
The consolidated financial statements of the Company included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1994 have
been audited by Ernst & Young LLP, independent accountants, as set forth in
their report thereon appearing therein and incorporated herein by reference.
Such consolidated financial statements are incorporated herein by reference in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
S-17
<PAGE> 18
------------------------------------------------------
------------------------------------------------------
NO DEALER, SALESPERSON, OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS, IN CONNECTION WITH THE OFFER CONTAINED
IN THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS, AND IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR THE UNDERWRITERS. NEITHER THE DELIVERY OF THIS PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE AN IMPLICATION THERE HAS BEEN NO CHANGE IN THE FACTS SET
FORTH IN THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS OR IN THE AFFAIRS OF THE
COMPANY SINCE THE DATE HEREOF. THIS PROSPECTUS SUPPLEMENT DOES NOT CONSTITUTE AN
OFFER OR SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH THE PERSON MAKING
SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT
IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
PROSPECTUS SUPPLEMENT
<S> <C>
Incorporation of Certain Documents by
Reference........................... S-2
The Company........................... S-3
Use of Proceeds....................... S-3
Selected Financial Data............... S-4
Capitalization........................ S-5
Management's Discussion and Analysis
of Financial Results................ S-6
Description of the Notes.............. S-14
Underwriting.......................... S-17
Legal Opinions........................ S-17
Experts............................... S-17
PROSPECTUS
Incorporation of Certain Documents by
Reference........................... 2
Available Information................. 2
The Company........................... 3
Use of Proceeds....................... 5
Ratio of Earnings to Fixed Charges.... 5
Description of the Debt Securities.... 5
Senior Securities..................... 11
Subordinated Securities............... 12
Description of the Preferred Stock.... 14
Description of Common Stock........... 19
United States Taxation................ 19
Limitations on Issuance of Bearer
Securities.......................... 27
Plan of Distribution.................. 28
Legal Opinions........................ 29
Experts............................... 29
</TABLE>
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
$250,000,000
NATIONAL CITY CORPORATION
7.20% SUBORDINATED NOTES
DUE 2005
------------------------------
PROSPECTUS SUPPLEMENT
------------------------------
MERRILL LYNCH & CO.
CS FIRST BOSTON
LEHMAN BROTHERS
MCDONALD & COMPANY
SECURITIES, INC.
SALOMON BROTHERS INC
SMITH BARNEY INC.
RAFFENSPERGER, HUGHES & CO.
MAY 17, 1995
- ------------------------------------------------------
- ------------------------------------------------------
