<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 June 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
------ ------
Indicate the number shares outstanding of each of the issuer's classes
of Common Stock as of July 24, 1995
Common Stock, $4.00 Par Value -- 147,320,360
<PAGE> 2
[NATIONAL CITY CORPORATION LOGO]
QUARTER ENDED JUNE 30, 1995
FINANCIAL REPORT
AND FORM 10-Q
<PAGE> 3
<TABLE>
[NATIONAL CITY CORPORATION LOGO]
FINANCIAL REPORT AND FORM 10-Q
QUARTER ENDED JUNE 30, 1995
TABLE OF CONTENTS
<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
</TABLE>
PART II -- OTHER INFORMATION
Changes in Securities (Item 2)
Refer to Note 8 on page 10.
Submission of Matters to a Vote of Security Holders (Item 4)
On April 24, 1995, at the Annual Meeting of Stockholders of the Registrant,
stockholders took the following actions:
<TABLE>
1. elected as directors all nominees designated in the proxy statement of March 8,
1995, as follows:
<CAPTION>
NUMBER OF VOTES
---------------------------
FOR WITHHELD
------------ ---------
<S> <C> <C>
Sandra H. Austin.............................. 131,990,284 893,220
James M. Biggar............................... 131,957,763 925,741
Charles H. Bowman............................. 131,853,953 1,029,551
Edward B. Brandon............................. 131,909,388 974,116
John G. Breen................................. 132,169,257 714,247
Duane Collins................................. 131,690,964 1,192,540
David A. Daberko.............................. 131,997,887 885,616
Richard E. Disbrow............................ 132,050,598 832,905
Daniel E. Evans............................... 132,142,457 741,047
Otto N. Frenzel III........................... 132,038,505 844,998
Joseph H. Lemieux............................. 132,121,181 762,323
A. Stevens Miles.............................. 132,001,255 882,248
William R. Robertson.......................... 131,993,039 890,465
Stephen A. Stitle............................. 132,123,447 760,057
Morry Weiss................................... 127,777,849 5,105,655
2. approved the National City Corporation Annual Corporate Performance Incentive Plan:
122,612,667 votes cast for, 7,538,264 votes cast against, 2,732,572 votes withheld;
3. approved the National City Corporation Long-Term Incentive Compensation Plan for
Senior Officers: 122,432,900 votes cast for, 6,886,470 votes cast against, 3,584,133
votes withheld;
4. approved the selection of independent auditors for 1995: 131,484,625 votes cast for,
624,455 votes cast against, 756,424 votes withheld.
Exhibits and Reports on Form 8-K (Item 6)
Exhibit 27:
Financial Data Schedule
Reports on Form 8-K:
May 24, 1995: Submission of exhibits for filing in the Prospectus dated July 11, 1994
and Prospectus Supplement dated May 17, 1995 in connection therewith.
Signature.................................................................................. 19
</TABLE>
2
<PAGE> 4
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 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........................ $335,768 $314,006 7% $663,178 $623,413 6%
Provision for loan losses........... 23,577 20,071 17 46,167 40,513 14
Fees and other income............... 216,764 211,746 2 424,623 415,554 2
Security gains...................... 238 799 (70) 1,634 6,692 (76)
Noninterest expense................. 364,092 346,954 5 711,496 687,892 3
Net income.......................... 112,530 105,841 6 223,561 209,648 7
Net income applicable to common
stock............................. 108,808 102,055 7 216,119 201,985 7
PERFORMANCE RATIOS:
Net interest margin................. 4.47% 4.68% 4.53% 4.65%
Overhead ratio...................... 43.88 43.06 43.26 43.69
Efficiency ratio.................... 65.90 65.99 65.41 66.21
Return on average assets............ 1.35 1.41 1.38 1.40
Return on average common equity..... 17.60 17.32 17.79 16.70
Return on average total equity...... 16.93 16.61 17.10 16.05
PER SHARE MEASURES:
Net income per common share --
primary........................... $.74 $.67 10% $1.46 $1.30 12%
Net income per common share -- fully
diluted........................... .72 .66 9 1.42 1.28 11
Dividends paid per common share..... .32 .29 10 .64 .58 10
Book value per common share......... 17.54 16.02 9
Market value per share (close):
Common.......................... 29.38 27.38 7
Preferred....................... 70.50 65.75 7
AVERAGE BALANCES (IN MILLIONS):
Assets.............................. $33,521 $30,146 11% $32,774 $30,235 8%
Loans............................... 24,504 21,359 15 23,995 21,219 13
Securities.......................... 4,981 4,691 6 4,723 4,806 (2)
Earning assets...................... 30,074 26,843 12 29,347 26,907 9
Deposits............................ 24,533 22,600 9 24,449 22,594 8
Common stockholders' equity......... 2,479 2,363 5 2,450 2,440 --
Total stockholders' equity.......... 2,665 2,555 4 2,636 2,634 --
AT PERIOD END:
Total equity to assets.............. 7.89% 8.58%
Tier 1 capital ratio................ 8.45 9.10
Total risk-based capital ratio...... 12.37 12.65
Leverage ratio...................... 7.35 7.86
Common shares outstanding........... 144,825,469 150,086,328 (4)%
Full-time equivalent employees...... 20,484 20,415 --
ASSET QUALITY:
Net charge-offs to loans
(annualized)...................... .21% .18% .27% .22%
Loan loss reserve to loans.......... 1.93 2.14
Nonperforming assets to loans &
OREO.............................. .57 .76
</TABLE>
3
<PAGE> 5
<TABLE>
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
(Dollars in Thousands Except Per Share Three Months Ended Six Months Ended
Amounts) June 30 June 30
- ------------------------------------------------------------------------------------------------
1995 1994 1995 1994
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans:
Taxable.............................. $543,621 $423,738 $1,051,591 $828,414
Exempt from Federal income taxes..... 3,780 3,881 7,688 7,406
Securities:
Taxable.............................. 68,050 48,664 125,131 97,489
Exempt from Federal income taxes..... 9,624 10,287 19,758 19,376
Federal funds sold and security resale
agreements........................... 7,610 6,108 15,570 9,685
Eurodollar time deposits in banks....... -- 578 -- 2,976
Other short-term investments............ 774 1,206 2,154 2,989
----------- ----------- ----------- -----------
Total interest income.............. 633,459 494,462 1,221,892 968,335
INTEREST EXPENSE
Deposits................................ 219,863 138,492 424,480 270,914
Federal funds borrowed and security
repurchase agreements................ 40,156 22,778 69,338 42,415
Borrowed funds.......................... 28,373 13,260 48,375 24,592
Corporate long-term debt................ 15,087 13,745 28,462 22,082
----------- ----------- ----------- -----------
Total interest expense............. 303,479 188,275 570,655 360,003
----------- ----------- ----------- -----------
Net interest income................ 329,980 306,187 651,237 608,332
PROVISION FOR LOAN LOSSES................. 23,577 20,071 46,167 40,513
----------- ----------- ----------- -----------
Net interest income after provision
for loan losses................. 306,403 286,116 605,070 567,819
NONINTEREST INCOME
Item processing revenues................ 82,074 77,195 157,800 149,390
Service charges on deposit accounts..... 38,966 38,581 77,099 75,938
Trust fees.............................. 34,006 32,559 67,461 65,722
Credit card fees........................ 18,858 20,183 36,020 39,993
Mortgage banking revenues............... 16,711 17,315 37,069 31,468
Other................................... 26,149 25,913 49,174 53,043
----------- ----------- ----------- -----------
Total fees and other income........ 216,764 211,746 424,623 415,554
Security gains.......................... 238 799 1,634 6,692
----------- ----------- ----------- -----------
Total noninterest income........... 217,002 212,545 426,257 422,246
NONINTEREST EXPENSE
Salaries and employee benefits.......... 167,949 162,598 332,334 323,894
Equipment............................... 23,845 23,246 47,692 46,481
Net occupancy........................... 22,873 22,286 45,764 45,196
Assessments and taxes................... 20,216 20,672 40,423 40,857
Other................................... 129,209 118,152 245,283 231,464
----------- ----------- ----------- -----------
Total noninterest expense.......... 364,092 346,954 711,496 687,892
----------- ----------- ----------- -----------
Income before income taxes................ 159,313 151,707 319,831 302,173
Income tax expense........................ 46,783 45,866 96,270 92,525
----------- ----------- ----------- -----------
NET INCOME................................ $112,530 $105,841 $223,561 $209,648
============ ============ ============ ============
NET INCOME APPLICABLE TO COMMON STOCK..... $108,808 $102,055 $216,119 $201,985
============ ============ ============ ============
NET INCOME PER COMMON SHARE............... $.74 $.67 $1.46 $1.30
Average Common Shares Outstanding......... 147,448,666 152,211,896 148,139,106 155,228,172
<FN>
See notes to financial statements.
</TABLE>
4
<PAGE> 6
<TABLE>
CONSOLIDATED BALANCE SHEETS
<CAPTION>
(Dollars in Thousands)
- --------------------------------------------------------------------------------------------------
JUNE 30 December 31 June 30
1995 1994 1994
<S> <C> <C> <C>
ASSETS
Loans:
Commercial.................................... $ 9,696,076 $ 8,667,539 $ 8,512,112
International................................. 47,453 52,356 52,384
Real estate construction...................... 462,703 421,505 417,837
Lease financing............................... 214,455 216,499 222,743
Real estate mortgage -- nonresidential........ 2,371,788 2,473,329 2,500,083
Real estate mortgage -- residential........... 4,545,850 4,123,084 3,598,905
Mortgage loans held for sale.................. 171,065 42,064 212,555
Consumer...................................... 5,177,421 4,781,759 4,396,513
Revolving credit.............................. 2,445,747 2,256,640 1,768,998
----------- ----------- -----------
Total loans.............................. 25,132,558 23,034,775 21,682,130
Allowance for loan losses................ 485,503 469,019 463,829
----------- ----------- -----------
Net loans................................ 24,647,055 22,565,756 21,218,301
Securities held to maturity (market value
$1,059,565, $1,156,811, and $1,433,530,
respectively)................................. 1,050,755 1,176,115 1,427,438
Securities available for sale, at market......... 4,137,689 3,218,940 3,246,081
Federal funds sold and security resale
agreements.................................... 426,505 672,945 563,945
Trading account assets........................... 2,256 7,940 9,235
Other short-term money market investments........ 93,859 96,615 73,865
Cash and demand balances due from banks.......... 2,225,828 2,401,728 1,858,076
Properties and equipment......................... 398,524 389,980 389,363
Customers' acceptance liability.................. 100,181 102,005 67,489
Accrued income and other assets.................. 1,478,886 1,481,984 1,398,789
----------- ----------- -----------
TOTAL ASSETS............................. $34,561,538 $32,114,008 $30,252,582
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Demand deposits (noninterest bearing)............ $ 4,923,620 $ 5,331,789 $ 4,869,746
Savings and NOW accounts......................... 4,263,658 4,599,988 5,080,010
Insured money market accounts.................... 4,847,167 4,964,741 5,034,272
Time deposits of individuals..................... 8,680,183 7,298,056 6,335,247
Other time deposits.............................. 476,262 472,023 454,102
Deposits in overseas offices..................... 1,237,965 1,805,323 803,886
----------- ----------- -----------
Total deposits........................... 24,428,855 24,471,920 22,577,263
Federal funds borrowed and security repurchase
agreements.................................... 2,855,015 2,608,801 2,408,619
Borrowed funds................................... 2,868,598 1,104,989 1,432,792
Acceptances outstanding.......................... 100,181 102,005 67,489
Accrued expenses and other liabilities........... 588,773 481,570 415,680
Corporate long-term debt......................... 993,186 743,669 756,101
----------- ----------- -----------
TOTAL LIABILITIES........................ 31,834,608 29,512,954 27,657,944
Stockholders' Equity:
Preferred stock.................................. 186,040 187,540 189,890
Common stock..................................... 2,540,890 2,413,514 2,404,748
----------- ----------- -----------
TOTAL STOCKHOLDERS' EQUITY............... 2,726,930 2,601,054 2,594,638
----------- ----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY................................. $34,561,538 $32,114,008 $30,252,582
=========== =========== ===========
<FN>
See notes to financial statements.
</TABLE>
5
<PAGE> 7
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
(Dollars in Thousands) Six Months Ended June 30
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
1995 1994
OPERATING ACTIVITIES
Net income..................................................... $ 223,561 $ 209,648
Adjustments to reconcile net income to net cash provided by
operating activities:
Provision for loan losses................................. 46,167 40,513
Depreciation and amortization of goodwill and
intangibles............................................ 53,617 57,824
Security gains............................................ (1,634) (6,692)
Net change in trading account assets...................... 5,684 141,061
Other gains, net.......................................... (9,272) (6,000)
Originations and purchases of mortgage loans held for
sale................................................... (193,516) (873,840)
Proceeds from the sale of mortgage loans held for sale.... 67,720 1,186,410
Net change in interest receivable......................... (49,495) (15,969)
Net change in interest payable............................ 85,254 12,308
Net change in other assets................................ 4,782 (9,925)
Net change in other liabilities........................... 16,886 24,160
----------- -----------
Net Cash Provided (Used) by Operating Activities....... 249,754 759,498
LENDING AND INVESTING ACTIVITIES
Net change in short-term investments........................... 277,588 516,610
Purchases of securities........................................ (2,793,704) (1,312,292)
Proceeds from sales of securities.............................. 1,883,675 932,730
Proceeds from maturities and prepayments of securities......... 286,984 808,176
Net change in loans............................................ (1,836,249) (728,655)
Net change in properties and equipment......................... (35,645) (31,882)
Acquisitions................................................... 8,539 --
----------- -----------
Net Cash Provided (Used) by Lending and Investing
Activities........................................... (2,208,812) 184,687
DEPOSIT AND FINANCING ACTIVITIES
Net change in Federal funds borrowed and security repurchase
agreements.................................................. 246,214 (674,202)
Net change in borrowed funds................................... 1,763,609 231,781
Net change in demand, savings, NOW, insured money market
accounts, and deposits in overseas offices.................. (1,429,431) (550,455)
Net change in time deposits.................................... 1,185,721 64,697
Proceeds from issuance of long-term debt....................... 248,085 247,080
Repayment of long-term debt.................................... (403) (2,946)
Dividends paid, net of tax benefit of ESOP shares.............. (101,741) (97,088)
Issuances of common stock...................................... 14,228 10,457
Repurchase of common and preferred stock....................... (147,196) (254,643)
ESOP trust repayment........................................... 4,072 5,322
----------- -----------
Net Cash Provided (Used) by Deposit and Financing
Activities........................................... 1,783,158 (1,019,997)
----------- -----------
Net Increase (Decrease) in Cash and Cash Equivalents........... (175,900) (75,812)
Cash and Cash Equivalents, January 1........................... 2,401,728 1,933,888
----------- -----------
Cash and Cash Equivalents, June 30............................. $ 2,225,828 $ 1,858,076
============ ============
SUPPLEMENTAL DISCLOSURES
Interest paid.................................................. $ 486,000 $ 348,000
Income taxes paid.............................................. 75,129 101,000
Shares issued in purchase acquisitions......................... 46,206 --
<FN>
See notes to financial statements.
</TABLE>
6
<PAGE> 8
<TABLE>
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<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............................... 209,648
Common dividends paid, $.58 per share.... (89,560)
Preferred dividends paid, $2.00 per
depositary share....................... (7,843)
Issuance of 582,117 common shares under
corporate stock and dividend
reinvestment plans..................... 2,329 8,128
Purchase of 9,275,400 common shares and
180,400 depositary shares of preferred
stock.................................. (8,420) (37,102) (19,401) (189,720)
Shares distributed by ESOP trust and tax
benefit on dividends................... 315 5,322
Adjustment to unrealized gain on
securities available for sale, net of
tax.................................... (42,325)
------------ ------------ ------------ ------------ ------------
Balance June 30, 1994...................... $189,890 $600,346 $ 93,867 $1,721,659 $(11,124)
============ ============ ============ ============ ============
Balance January 1, 1995.................... $187,540 $590,223 $100,051 $1,732,258 $ (9,018)
Net income............................... 223,561
Common dividends paid, $.64 per share.... (94,619)
Preferred dividends paid, $2.00 per
depositary share....................... (7,472)
Issuance of 791,311 common shares under
corporate stock and dividend
reinvestment plans..................... 3,172 11,056
Issuance of 1,785,726 common shares
pursuant to acquisition................ 7,143 39,063
Purchase of 5,307,200 common shares and
30,000 depositary shares of preferred
stock.................................. (1,500) (21,235) (9,578) (114,883)
Shares distributed by ESOP trust and tax
benefit on dividends................... 350 4,072
Change in unrealized market value
adjustment on securities available for
sale, net of tax....................... 86,746
------------ ------------ ------------ ------------ ------------
Balance June 30, 1995...................... $186,040 $579,303 $140,592 $1,825,941 $ (4,946)
============ ============ ============ ============ ============
<CAPTION>
(Dollars in Thousands Except Per
Share Amounts) Total
- ----------------------------------------------------------
<S> <C>
Balance January 1, 1994.................... $2,763,267
Net income............................... 209,648
Common dividends paid, $.58 per share.... (89,560)
Preferred dividends paid, $2.00 per
depositary share....................... (7,843)
Issuance of 582,117 common shares under
corporate stock and dividend
reinvestment plans..................... 10,457
Purchase of 9,275,400 common shares and
180,400 depositary shares of preferred
stock.................................. (254,643)
Shares distributed by ESOP trust and tax
benefit on dividends................... 5,637
Adjustment to unrealized gain on
securities available for sale, net of
tax.................................... (42,325)
------------
Balance June 30, 1994...................... $2,594,638
============
Balance January 1, 1995.................... $2,601,054
Net income............................... 223,561
Common dividends paid, $.64 per share.... (94,619)
Preferred dividends paid, $2.00 per
depositary share....................... (7,472)
Issuance of 791,311 common shares under
corporate stock and dividend
reinvestment plans..................... 14,228
Issuance of 1,785,726 common shares
pursuant to acquisition................ 46,206
Purchase of 5,307,200 common shares and
30,000 depositary shares of preferred
stock.................................. (147,196)
Shares distributed by ESOP trust and tax
benefit on dividends................... 4,422
Change in unrealized market value
adjustment on securities available for
sale, net of tax....................... 86,746
------------
Balance June 30, 1995...................... $2,726,930
============
<FN>
See notes to financial statements.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES
In the opinion of management, the accompanying unaudited consolidated
financial statements have been prepared on a basis consistent with accounting
principles applied in the prior periods and include all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation of
the financial position, results of operations and cash flows for the interim
periods presented. The results of operations for the interim periods are not
necessarily indicative of the results that may be expected for the full year or
any other interim period.
Certain prior period amounts have been reclassified to conform with current
period presentation.
2. ACQUISITIONS
On 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 will be accounted for as a
purchase. Total goodwill in the transaction was ap-
7
<PAGE> 9
proximately $35 million and will be amortized over 20 years.
On July 13, 1995, the Corporation acquired the net assets of Raffensperger,
Hughes & Co., a full-service investment banking/brokerage firm headquartered in
Indianapolis, Indiana in a cash purchase. This acquisition was not material.
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 presents the activity in the allowance for loan losses:
<TABLE>
<CAPTION>
Six Months Ended
June 30
-------------------
(In Thousands) 1995 1994
<S> <C> <C>
- -------------------------------------------------------------
Balance at beginning of year............. $469,019 $443,412
Provision................................ 46,167 40,513
Reserves acquired (sold)................. 2,016 3,458
Charge-offs:
Commercial............................. 15,436 16,026
Real estate -- construction............ 3,075 265
Real estate -- commercial.............. 3,055 3,222
Real estate -- residential............. 761 939
Revolving credit....................... 28,898 17,113
Consumer............................... 16,774 15,852
-------- --------
Total charge-offs...................... 67,999 53,417
Recoveries:
Commercial............................. 10,476 10,561
Real estate -- construction............ 1,658 988
Real estate -- commercial.............. 5,901 443
Real estate -- residential............. 328 412
Revolving credit....................... 6,161 5,408
Consumer............................... 11,776 12,051
-------- --------
Total recoveries....................... 36,300 29,863
-------- --------
Net charge-offs.......................... 31,699 23,554
-------- --------
Balance at end of period................. $485,503 $463,829
========= =========
</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 June
30, 1995, loans that were considered to be impaired under SFAS No. 114 totalled
$71 million, all of which are included in nonperforming assets. The related
allowance allocated to these loans was $16 million. The contractual interest due
and actual interest recorded on impaired loans, as well as total nonperforming
assets, for the six months ended June 30, 1995 was $4.4 million and $1.2
million, respectively.
5. SECURITIES
The following is a summary of securities held to maturity and available for
sale:
<TABLE>
<CAPTION>
JUNE 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...... $ 33,994 $ 131 $ 243 $ 33,882
Mortgage-backed
securities...... 596,500 3,384 9,082 590,802
States and
political
subdivisions.... 369,313 18,526 3,949 383,890
Other............. 50,948 88 45 50,991
---------- ---------- ---------- ----------
Total held to
maturity...... 1,050,755 22,129 13,319 1,059,565
Available for
Sale:
U.S. Treasury and
Federal agency
debentures...... 1,539,307 8,120 14,181 1,533,246
Mortgage-backed
securities...... 2,282,732 20,799 14,303 2,289,228
States and
political
subdivisions.... 30,717 403 4 31,116
Other............. 232,785 62,562 11,248 284,099
---------- ---------- ---------- ----------
Total available
for sale...... 4,085,541 91,884 39,736 4,137,689
---------- ---------- ---------- ----------
Total
securities.... $5,136,296 $114,013 $ 53,055 $5,197,254
========== ========== ========== ==========
</TABLE>
8
<PAGE> 10
<TABLE>
<CAPTION>
June 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..... $ 128,687 $ -- $ 664 $ 128,023
Mortgage-backed
securities..... 689,833 2,862 21,030 671,665
States and
political
subdivisions... 532,503 29,031 4,275 557,259
Other............ 76,415 290 122 76,583
---------- ---------- ---------- ----------
Total held to
maturity..... 1,427,438 32,183 26,091 1,433,530
Available for
Sale:
U.S. Treasury and
Federal agency
debentures..... 1,213,178 4,514 25,341 1,192,351
Mortgage-backed
securities..... 1,802,931 3,003 25,044 1,780,890
States and
political
subdivisions... 31,849 332 31 32,150
Other............ 209,443 36,733 5,486 240,690
---------- ---------- ---------- ----------
Total available
for sale..... 3,257,401 44,582 55,902 3,246,081
---------- ---------- ---------- ----------
Total
securities... $4,684,839 $ 76,765 $ 81,993 $4,679,611
========== ========== ========== ==========
</TABLE>
For the six months ended June 30, 1995 and 1994, gross gains of $9.4
million and $10.5 million, and gross losses of $7.8 million and $3.8 million
were realized, respectively.
At June 30, 1995, the unrealized appreciation in securities available for
sale included in retained earnings totalled $33.9 million, net of tax, compared
to unrealized depreciation of $(7.4) million, net of tax, at June 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 six months ended June 30, 1995 and 1994, the following represents
the segregation of cash flows between securities available for sale and
securities held to maturity:
<TABLE>
<CAPTION>
AVAILABLE HELD TO
(In Thousands) FOR SALE MATURITY TOTAL
<S> <C> <C> <C>
- --------------------------------------------------------------
JUNE 30, 1995:
Purchases of securities... $2,774,728 $18,976 $2,793,704
Proceeds from sale of
securities.............. 1,883,675 -- 1,883,675
Proceeds from maturities
of securities........... 140,157 146,827 286,984
June 30, 1994:
Purchase of securities.... $1,221,176 $91,116 $1,312,292
Proceeds from sale of
securities.............. 932,730 -- 932,730
Proceeds from maturities
of securities........... 348,364 459,812 808,176
</TABLE>
As of June 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>
JUNE 30 Dec. 31 June 30
(In Thousands) 1995 1994 1995
<S> <C> <C> <C>
- -----------------------------------------------------------------
U.S. Treasury demand
notes and Federal funds
borrowed-term.......... $1,199,701 $ 159,949 $ 491,307
Notes payable to Student
Loan Marketing
Association............ 510,000 300,000 300,000
Bank notes............... 274,599 -- --
Military banking
liabilities............ 228,136 215,951 161,366
Other.................... 157,789 49,754 55,537
---------- ---------- ----------
Bank subsidiaries...... 2,370,225 725,654 1,008,210
Commercial paper......... 498,319 379,276 424,520
Other.................... 54 59 62
---------- ---------- ----------
Other subsidiaries..... 498,373 379,335 424,582
---------- ---------- ----------
Total............ $2,868,598 $1,104,989 $1,432,792
========== ========== ==========
</TABLE>
7. CORPORATE LONG-TERM DEBT
<TABLE>
<CAPTION>
JUNE 30 Dec. 31 June 30
(In Thousands) 1995 1994 1994
<S> <C> <C> <C>
- ------------------------------------------------------------
7.20% Subordinated Notes due
2005........................... $250,000 $ -- $ --
Less discount.................. (266) -- --
6 5/8% Subordinated Notes due
2004........................... 250,000 250,000 250,000
Less discount.................. (1,122) (1,187) (1,252)
8 3/8% Notes due 1996............ 100,000 100,000 100,000
Less discount.................. (54) (94) (134)
Floating Rate Sub. Notes due
1997............................ 75,000 75,000 75,000
Less discount.................. (30) (39) (48)
9 7/8% Sub. Notes due 1999....... 65,000 65,000 65,000
Less discount.................. (198) (222) (243)
Floating Rate Notes due 1997..... 50,000 50,000 50,000
Less discount.................. (49) (59) (69)
Other............................ 3,232 3,377 15,976
-------- -------- --------
Total parent company........... 791,513 541,776 554,230
6 1/2% Sub. Notes due 2003....... 200,000 200,000 200,000
Less discount.................. (587) (624) (662)
Other............................ 2,260 2,517 2,533
-------- -------- --------
Total subsidiaries............. 201,673 201,893 201,871
-------- -------- --------
Total.................... $993,186 $743,669 $756,101
========= ========= =========
</TABLE>
9
<PAGE> 11
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.
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 June 30, 1995.
8. STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
JUNE 30 Dec. 31 June 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.... 144,825,469 147,555,632 150,086,328
</TABLE>
9. INCOME TAX EXPENSE
The composition of income tax expense follows:
<TABLE>
<CAPTION>
Six Months Ended
June 30
---------------------------
(In Thousands) 1995 1994
<S> <C> <C>
- ------------------------------------------------------------
Applicable to income exclusive
of security transactions..... $95,950 $90,122
Applicable to security
transactions................. 320 2,403
----------- -----------
Total.................. $96,270 $92,525
=========== ===========
</TABLE>
The effective tax rate was approximately 30.1% and 30.6% for the six months
ended June 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 June 30, 1995, bank subsidiaries may pay
the Parent company, without prior regulatory approval, approximately $181
million of dividends. During the first six months of 1995, no dividends 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 Ended Six Months Ended
June 30 June 30
------------------------ --------------------------
(In Thousands) 1995 1994 1995 1994
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------
PRIMARY:
Net income....... $112,530 $105,841 $223,561 $209,648
Less preferred
dividend
requirements... 3,722 3,786 7,442 7,663
----------- ----------- ----------- -----------
Net income
applicable to
common stock... $108,808 $102,055 $216,119 $201,985
=========== =========== =========== ===========
Average common
shares
outstanding.... 147,448,666 152,211,896 148,139,106 155,228,172
=========== =========== =========== ===========
Net income per
common share... $.74 $.67 $1.46 $1.30
=========== =========== =========== ===========
ASSUMING FULL
DILUTION:
Net income....... $112,530 $105,841 $223,561 $209,648
=========== =========== =========== ===========
Average common
shares
outstanding.... 147,448,666 152,211,896 148,139,106 155,228,172
Stock option
adjustment..... 76,026 73,220 76,026 73,220
Preferred stock
adjustment..... 8,870,387 9,025,347 8,870,387 9,025,347
----------- ----------- ----------- -----------
Average common
shares
outstanding, as
adjusted....... 156,395,079 161,310,463 157,085,519 164,326,739
=========== =========== =========== ===========
Pro forma fully
diluted net
income per
common share... $.72 $.66 $1.42 $1.28
=========== =========== =========== ===========
</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 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 per common share was $.74 for the quarter ended June 30, 1995,
an increase of 10% over the $.67 for the corresponding quarter last year. Net
income for the quarter ended June 30, 1995 was $112.5 million versus $105.8
million earned in the quarter ended June 30, 1994.
Per share earnings were $1.46 for the first six months, up 12% over the
$1.30 earned in 1994. Net income for the first six months was $223.6 million,
compared with $209.6 million in the prior year.
Returns on average common equity for the second quarter and first half of
1995 were 17.60% and 17.79%, respectively, compared with 17.32% and 16.70% for
the same periods in 1994. Returns on average assets for the second quarter and
first half of 1995 were 1.35% and 1.38%, respectively, compared with 1.41%, and
1.40% for the same periods in 1994.
Net after-tax security gains were negligible for the second quarter and
year-to-date 1995, and increased net income per share $.01 and $.02 for the
second quarter and year-to-date 1994, respectively.
The improved profitability for the quarter and year to date was driven by
higher net interest income resulting from loan growth. Average loan outstandings
in the second quarter increased 4.4% over first quarter 1995 (a 17% annualized
growth rate) and 16% on an annualized basis over fourth quarter 1994 (excluding
the impact of Central Indiana Bancorp which was acquired on January 1, 1995).
Fee income was up slightly versus the prior year quarter and year-to-date
periods. Offsetting these increases were a higher provision for loan losses in
1995 and higher noninterest expenses. The increase in noninterest expenses was
due primarily to the acquisition of Central Indiana Bancorp, increased volume at
the item processing subsidiary, and one-time miscellaneous 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.
The corporate and retail banking businesses' earnings improved for the
first six months of 1995 compared with 1994 due primarily 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 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 was due to gains on the sale of mortgage
servicing in 1995.
The loss in Investment/Funding was due to significantly narrower spreads on
investment securities and interest rate swaps, reflecting a flat yield curve, as
well as lower gains on sales of securities in 1995.
The decrease in the corporate contribution was due primarily to higher
interest expense on corporate debt, primarily on the new debt issued in 1995,
and nonrecurring miscellaneous expenses.
EARNING ASSETS AND
INTEREST-BEARING LIABILITIES
Average earning assets totalled $30,074 million for the quarter ended June
30, 1995, an increase of $1,462 million from the quarter ended March 31, 1995
and an increase of $3,231 million from the quarter ended June 30,
TABLE 1: UNIT PROFITABILITY
<TABLE>
<CAPTION>
SIX MONTHS ENDED Six months ended
JUNE 30, 1995 June 30, 1994
-------------------- --------------------
NET RETURN ON Net Return on
(Dollars in Millions) INCOME EQUITY Income Equity
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Corporate banking................................................................. $105.0 19.51% $89.2 16.27%
Retail banking.................................................................... 122.1 23.69 84.3 17.72
National credit card.............................................................. 2.9 6.85 3.5 7.63
Investment/funding................................................................ (17.3) ( 12.75) 21.5 11.35
Trust............................................................................. 16.0 25.35 18.2 26.66
Item processing................................................................... 9.8 13.23 7.4 11.27
Mortgage banking.................................................................. 4.6 26.58 1.3 9.61
Corporate......................................................................... (19.5) -- (15.8) --
------ ------
Total.......................................................................... $223.6 17.79% $209.6 16.70%
====== ======
</TABLE>
11
<PAGE> 13
1994. The increase in the second quarter was due primarily to higher average
loan balances.
Average core deposits increased slightly in the second quarter due mainly
to increased certificate of deposit balances. There has also been a shifting of
deposits from customer savings accounts to certificates of deposit. Purchased
deposit balances also increased to support the growth in assets.
NET INTEREST INCOME
On a fully taxable equivalent basis, net interest income increased to
$335.8 million in the second quarter 1995 compared with $314.0 million for the
corresponding quarter in 1994. For the first half 1995, fully taxable equivalent
net interest income increased 6% to $663.2 million from $623.4 million in 1994.
The tax equivalent net interest margin was 4.47% in the quarter ended June
30, 1995, compared with 4.59% and 4.68% for the quarters ended March 31, 1995
and June 30, 1994, respectively. The decline in the second quarter 1995 relative
to the first quarter was due mainly to lower spreads resulting 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 June 30, 1995, the Corporation had moved to a slightly more
asset-sensitive position. The cumulative one-year gap was (3.8)% of adjusted
earning assets at June 30, 1995, versus (7.4%) at year-end 1994. The earnings
simulation model projects that net income would increase by 2.0% if rates rose
by two percentage points over the next year. At the end of 1994, the
corresponding change was 0.8% 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 cashflows by an
amount equal to 0.9% of total assets, compared to 1.0% at year-end 1994.
During the first six months of 1995, the notional outstandings of
interest-rate swap agreements increased by $360 million while the notional
amount of interest-rate caps, floors and corridors increased by $1,073 million.
The net unrealized gains in the derivative portfolio were $47 million at June
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 $216.8 million for the second quarter 1995, up 2.4% from
$211.7 million for the second quarter 1994. The increase in fee income was due
primarily to growth in item processing revenues resulting from business growth.
The increase in mortgage banking revenue year to date was due to $10.6 million
in gains on sale of mortgage servicing, of which $3.5 million occurred in the
second quarter 1995. The second quarter 1994 included a similar gain of $4.3
million. Offsetting these increases was a decline in credit card fees from the
unwinding of a credit card securitization. The fees associated with the credit
card securitization were offset by net interest income as the related loan
balances were returned to the balance sheet.
NONINTEREST EXPENSES
Noninterest expenses were $364.1 million for the quarter ended June 30,
1995, compared with $347.0 million for the corresponding quarter in 1994. Year-
to-date noninterest expenses were $711.5 million compared with $687.9 million in
1994. For the first half, $7.5 million of the
TABLE 2: CONTRIBUTION OF INTEREST RATE DERIVATIVE PORTFOLIO
<TABLE>
<CAPTION>
Six months ended
June 30
-----------------------
(In Millions) 1995 1994
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
Interest adjustment to loans......................................................................... $(8.1) $30.6
Interest adjustment to securities.................................................................... (1.8) (9.3)
--------- -------
Interest adjustment to earning assets.............................................................. (9.9) 21.3
Interest adjustment to deposits...................................................................... (9.0) (8.0)
--------- -------
Effect on net interest income...................................................................... $ (.9) $29.3
========= ========
<FN>
NOTE: Amounts in brackets represent reductions of the related interest income or
expense line, as applicable.
</TABLE>
<TABLE>
TABLE 3: FULL-TIME EQUIVALENT STAFFING AND OVERHEAD PERFORMANCE MEASURES
<CAPTION>
JUNE 30, 1995 June 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............ 11,686 42.76% 53.04% 11,951 49.74% 60.10%
National credit
card............... 587 56.29 61.68 491 57.76 64.46
Investment/ funding.. 287 12.54 (192.43) 285 (11.09) 38.11
Trust................ 1,064 -- 67.03 974 -- 61.38
Item processing...... 5,519 -- 88.99 5,179 -- 91.36
Mortgage banking..... 691 -- 81.15 803 -- 94.32
Corporate............ 650 -- -- 732 -- --
---------- ----------
Total............ 20,484 43.26% 65.41% 20,415 43.69% 66.21%
========== ==========
</TABLE>
12
<PAGE> 14
increased expenses was due to higher business volumes at the item processing
subsidiary and $1.8 million was due to the acquisition of Central Indiana
Bancorp. Excluding the effects of Central Indiana, year-to-date expenses were
3% higher than 1994. The second quarter 1995 included approximately $4.5
million of miscellaneous nonrecurring expenses. There were no other unusual
expenses in 1995, while 1994 included a $3.5 million charge related to the
settlement of litigation.
The efficiency ratio, defined as noninterest expense as a percentage of fee
income plus fully taxable net interest income, was 65.41% for the first six
months of 1995 versus 66.21% for the first half of 1994.
The overhead ratio, defined as noninterest expense less fee income as a
percentage of fully-taxable net interest income, was 43.26% for the first half
of 1995 versus 43.69% a year ago.
The relationships between the overhead and efficiency ratios in comparison
to the prior year reflect relatively equivalent dollar growth in both
noninterest income and expense, as well as higher net interest income.
Total staff at June 30, 1995 was essentially flat versus the first quarter
1995 and the same date a year ago.
ASSET QUALITY
The allowance for loan losses was $486 million at June 30, 1995
representing 1.93% of loans outstanding at that date. This ratio was 2.04% at
year-end 1994 and 2.14% at June 30, 1994.
The provision for loan losses increased to $23.6 million for the second
quarter 1995 and $46.2 million year-to-date from $20.1 million and $40.3 million
for the same periods in 1994, respectively.
Net charge-offs were $12.7 million and $9.4 million for the quarters ended
June 30, 1995 and 1994, respectively, and $31.7 million and $23.6 million,
respectively, for the first six 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 $144 million at June 30, 1995 increased by $6
million from the prior quarter.
Nonperforming assets as a percentage of loans and OREO were .57% at June
30, 1995 compared with .76% a year ago and .56% at December 31, 1994.
CAPITAL
Table 6 reflects various measures of capital at quarter-end. The changes
in the ratios 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 $17.54 at June 30, 1995, compared with $16.02 at
June 30, 1994 and $16.36 at December 31, 1994.
The book value per common share at June 30, 1995 and December 31, 1994
included $.23 and ($.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
<TABLE>
TABLE 4: ANNUALIZED NET CHARGE-OFFS AS A PERCENTAGE OF
AVERAGE LOANS
<CAPTION>
Second Quarter First Six
Months
1995 1994 1995 1994
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
Commercial.................................................................................. (.02)% .03% .11% .13%
Real estate -- construction................................................................. 1.09 (.02) .65 (.33)
Real estate -- commercial................................................................... (.40) .24 (.24) .23
Real estate -- residential.................................................................. .03 .02 .02 .03
Revolving credit............................................................................ 2.01 1.49 1.99 1.46
Consumer.................................................................................... .17 .09 .20 .18
Total net charge-offs to average loans...................................................... .21 .18 .27 .22
</TABLE>
<TABLE>
TABLE 5: NONPERFORMING ASSETS
<CAPTION>
JUNE 30 December 31 June 30
(In Millions) 1995 1994 1994
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
Commercial:
Nonaccrual............................................................................ $ 74.4 $ 58.8 $ 59.7
Restructured.......................................................................... .1 -- 1.1
--------- ------------ ---------
Total commercial.................................................................... 74.5 58.8 60.8
Real estate related:
Nonaccrual............................................................................ 49.1 48.8 57.8
Restructured.......................................................................... 4.3 4.4 4.6
--------- ------------ ---------
Total real estate related........................................................... 53.4 53.2 62.4
--------- ------------ ---------
Total nonperforming loans........................................................... 127.9 112.0 123.2
Other real estate owned (OREO).......................................................... 15.7 16.5 41.2
--------- ------------ ---------
Nonperforming assets.................................................................... $143.6 $128.5 $164.4
========== ============= ==========
Loans 90 days past-due accruing interest................................................ $ 31.8 $ 27.9 $ 30.1
========== ============= ==========
</TABLE>
13
<PAGE> 15
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 half of 1995, approximately 5.3 million shares of common stock
were repurchased in the open market. At June 30, 1995, the Corporation had
authorization to acquire an additional 4.1 million common shares.
In July 1995 the quarterly dividend on common stock was raised $.01 from
its previous level of $.32 to $.33 per share.
<TABLE>
TABLE 6: CAPITAL AND CAPITAL/ASSET RATIOS
<CAPTION>
JUNE 30, 1995 Dec. 31, 1994 June 30, 1994
(In Millions) AMOUNT RATIO Amount Ratio Amount Ratio
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
Total equity1............... $2,726.9 7.89% $2,601.1 8.10% $2,594.6 8.58%
Common equity1.............. 2,540.9 7.34 2,413.5 7.52 2,404.7 7.95
Tangible common equity2..... 2,153.2 6.30 2,026.4 6.39 2,017.2 6.75
Tier 1 capital3............. 2,445.2 8.45 2,442.2 8.45 2,350.4 9.10
Total risk-based capital4... 3,579.9 12.37 3,374.8 11.68 3,267.9 12.65
Leverage ratio5............. 2,445.2 7.35 2,442.2 7.82 2,350.4 7.86
<FN>
--------------------------------------------
1 Computed in accordance with generally accepted
accounting principles, including the 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
<TABLE>
CONSOLIDATED AVERAGE BALANCE SHEETS
<CAPTION>
Three Months Six Months
(Dollars In Millions) Ended June 30 Ended June 30
- ---------------------------------------------------------------------------------------------------------------
1995 1994 1995 1994
-------- -------- -------- --------
<S> <C> <C> <C> <C>
ASSETS
Earning Assets:
Loans:
Commercial................................................ $ 10,141 $ 9,148 $ 9,836 $ 9,121
Real estate mortgage--nonresidential...................... 2,425 2,449 2,442 2,380
Real estate mortgage--residential......................... 4,421 3,518 4,339 3,501
Mortgage loans held for sale.............................. 113 261 107 332
Consumer.................................................. 5,051 4,322 4,962 4,286
Revolving credit.......................................... 2,353 1,661 2,309 1,599
-------- -------- -------- --------
Total loans............................................. 24,504 21,359 23,995 21,219
Securities.................................................. 4,981 4,691 4,723 4,806
Federal funds sold and security resale agreements........... 487 621 523 540
Trading account assets...................................... 16 10 16 21
Eurodollar time deposits in banks........................... -- 66 -- 216
Other short-term money market investments................... 86 96 90 105
-------- -------- -------- --------
Total earning assets.................................... 30,074 26,843 29,347 26,907
Allowance for loan losses..................................... (482) (457) (480) (454)
Market value appreciation (depreciation) of securities
available for sale.......................................... 10 4 (22) 25
Cash and demand balances due from banks....................... 2,048 2,029 2,032 2,031
Properties and equipment...................................... 397 391 396 390
Customers' acceptance liability............................... 106 58 106 61
Accrued income and other assets............................... 1,368 1,278 1,395 1,275
-------- -------- -------- --------
Total assets............................................ $ 33,521 $ 30,146 $ 32,774 $ 30,235
======= ======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Demand deposits............................................. $ 4,632 $ 4,779 $ 4,621 $ 4,802
Savings and NOW accounts.................................... 4,348 5,169 4,445 5,170
Insured money market accounts............................... 4,759 5,239 4,760 5,276
Time deposits of individuals................................ 8,632 6,209 8,337 6,178
Other time deposits......................................... 517 488 499 490
Deposits in overseas office................................. 1,645 716 1,787 678
-------- -------- -------- --------
Total deposits.......................................... 24,533 22,600 24,449 22,594
Federal funds borrowed and security repurchase agreements... 2,902 2,479 2,608 2,572
Borrowed funds.............................................. 1,969 1,301 1,692 1,284
Acceptances outstanding..................................... 106 58 106 61
Accrued expenses and other liabilities...................... 498 396 487 415
Corporate long-term debt.................................... 848 757 796 675
-------- -------- -------- --------
Total liabilities....................................... 30,856 27,591 30,138 27,601
Stockholders' Equity:
Preferred stock............................................. 186 192 186 194
Common stock................................................ 2,479 2,363 2,450 2,440
-------- -------- -------- --------
Total stockholders' equity.............................. 2,665 2,555 2,636 2,634
-------- -------- -------- --------
Total liabilities and stockholders' equity.............. $ 33,521 $ 30,146 $ 32,774 $ 30,235
======= ======= ======= =======
</TABLE>
15
<PAGE> 17
<TABLE>
DAILY AVERAGE BALANCE SHEETS/NET INTEREST INCOME/RATES
<CAPTION>
(Dollars In Millions) Daily Average Balance
- ----------------------------------------------------------------------------------------------------------
1995 1994
------------------ -----------------------------
SECOND First Fourth Third Second
QUARTER Quarter Quarter Quarter Quarter
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
ASSETS
Earning Assets:
Loans:
Commercial...................................... $10,141 $ 9,528 $ 9,225 $ 9,062 $ 9,148
Real estate mortgage............................ 6,959 6,817 6,565 6,392 6,228
Consumer........................................ 7,404 7,136 6,800 6,361 5,983
------- ------- ------- ------- -------
Total loans................................... 24,504 23,481 22,590 21,815 21,359
Securities:
Taxable......................................... 4,344 3,805 3,976 3,977 3,903
Tax-exempt...................................... 637 656 718 746 788
------- ------- ------- ------- -------
Total securities.............................. 4,981 4,461 4,694 4,723 4,691
Federal funds sold................................ 85 74 87 76 52
Security resale agreements........................ 402 485 499 399 569
Eurodollar time deposits in banks................. -- -- -- 1 66
Short-term money market investments............... 102 111 159 174 106
------- ------- ------- ------- -------
Total earning assets/
Total interest income/rates................ 30,074 28,612 28,029 27,188 26,843
Market value appreciation (depreciation) of
securities available for sale..................... 10 (56) (56) (14) 4
Allowance for loan losses........................... (482) (477) (475) (467) (457)
Cash and demand balances due from banks............. 2,048 2,017 2,133 2,012 2,029
Properties and equipment............................ 397 395 390 390 391
Customers' acceptance liability..................... 106 106 86 68 58
Accrued income and other assets..................... 1,368 1,426 1,359 1,333 1,278
------- ------- ------- ------- -------
Total assets.................................. $33,521 $32,023 $31,466 $30,510 $30,146
======= ======= ======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Savings and NOW accounts.......................... $ 4,348 $ 4,543 $ 4,661 $ 4,872 $ 5,169
Insured money market accounts..................... 4,759 4,762 5,058 5,129 5,239
Time deposits of individuals...................... 8,632 8,040 6,708 6,449 6,209
Other time deposits............................... 517 480 495 448 488
Deposits in overseas offices...................... 1,645 1,931 1,612 1,125 716
Federal funds borrowed............................ 1,408 1,133 1,280 1,218 1,352
Security repurchase agreements.................... 1,494 1,199 1,281 1,235 1,127
Borrowed funds.................................... 1,969 1,411 1,593 1,497 1,301
Corporate long-term debt.......................... 848 743 746 750 757
------- ------- ------- ------- -------
Total interest bearing liabilities/
Total interest expense/rates............... 25,620 24,242 23,434 22,723 22,358
Non-interest bearing deposits..................... 4,632 4,610 4,873 4,713 4,779
Acceptances outstanding........................... 106 106 86 68 58
Accrued expenses and other liabilities............ 498 459 464 405 396
------- ------- ------- ------- -------
Total liabilities............................. 30,856 29,417 28,857 27,909 27,591
Stockholders' equity.......................... 2,665 2,606 2,609 2,601 2,555
------- ------- ------- ------- -------
Total liabilities and stockholders' equity.... $33,521 $32,023 $31,466 $30,510 $30,146
======= ======= ======= ======= =======
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
------------------- ------------------------------- ------------------- -------------------------------
SECOND First Fourth Third Second SECOND First Fourth Third Second
QUARTER Quarter Quarter Quarter Quarter QUARTER Quarter Quarter Quarter Quarter
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$215.8 $201.7 $190.4 $178.0 $175.4 8.54% 8.58% 8.19% 7.80% 7.69%
144.4 137.8 130.7 124.4 118.9 8.30 8.09 7.97 7.78 7.63
189.3 174.7 162.9 148.9 135.7 10.24 9.88 9.53 9.31 9.09
------- ------- ------- ------- -------
549.5 514.2 484.0 451.3 430.0 8.99 8.83 8.53 8.23 8.07
68.0 57.1 55.2 51.8 48.7 6.27 6.02 5.54 5.19 4.99
13.3 14.0 14.6 15.3 15.7 8.32 8.52 8.12 8.18 7.97
------- ------- ------- ------- -------
81.3 71.1 69.8 67.1 64.4 6.53 6.39 5.94 5.66 5.49
1.3 1.1 1.2 .9 .5 6.14 6.14 5.25 4.86 4.14
6.3 6.8 6.6 4.5 5.6 6.29 5.72 5.24 4.51 3.93
-- -- .1 -- .6 -- -- -- 2.93 3.51
.8 1.4 1.2 1.2 1.2 3.04 5.00 3.09 2.85 4.56
------- ------- ------- ------- -------
$639.2 $594.6 $562.9 $525.0 $502.3 8.52% 8.38% 8.00% 7.69% 7.50%
$ 29.4 $ 30.3 $ 30.9 $ 31.7 $ 33.2 2.71% 2.71% 2.63% 2.59% 2.58%
33.1 31.7 31.2 29.9 28.4 2.79 2.70 2.45 2.31 2.17
125.7 108.7 82.1 72.6 66.2 5.84 5.48 4.85 4.47 4.27
7.1 6.3 5.7 4.5 4.1 5.50 5.25 4.61 4.00 3.53
24.6 27.7 20.8 12.6 6.6 5.99 5.81 5.13 4.44 3.68
19.8 14.3 17.6 13.9 13.6 5.66 5.12 5.45 4.54 4.02
20.2 14.8 15.1 12.2 9.2 5.45 5.04 4.69 3.91 3.28
28.4 20.0 20.1 17.0 13.3 5.78 5.74 5.12 4.15 4.09
15.1 13.4 14.0 13.2 13.7 7.14 7.30 7.42 6.98 7.28
------- ------- ------- ------- -------
303.4 267.2 237.5 207.6 188.3 4.75% 4.42% 4.03% 3.60% 3.38%
------- ------- ------- ------- -------
$335.8 $327.4 $325.4 $317.4 $314.0
======= ======= ======= ======= =======
........................................................... 3.77% 3.91% 3.97% 4.09% 4.12%
........................................................... .70 .68 .66 .59 .56
------- ------- ------- ------- -------
........................................................... 4.47% 4.59% 4.63% 4.68% 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
<TABLE>
DEBT RATINGS
<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-
<FN>
* 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 LOGO]
FORM 10-Q -- JUNE 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: July 31, 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 LOGO]
National City Center Bulk Rate
1900 East Ninth Street U.S. Postage
Cleveland, Ohio 44114-3484 PAID
National City
Corporation
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 2,225,828
<INT-BEARING-DEPOSITS> 93,859
<FED-FUNDS-SOLD> 426,505
<TRADING-ASSETS> 2,256
<INVESTMENTS-HELD-FOR-SALE> 4,137,689
<INVESTMENTS-CARRYING> 1,050,755
<INVESTMENTS-MARKET> 1,059,565
<LOANS> 25,132,558
<ALLOWANCE> 485,503
<TOTAL-ASSETS> 34,561,538
<DEPOSITS> 24,428,855
<SHORT-TERM> 5,823,794
<LIABILITIES-OTHER> 588,773
<LONG-TERM> 993,186
<COMMON> 579,303
0
186,040
<OTHER-SE> 1,961,587
<TOTAL-LIABILITIES-AND-EQUITY> 34,561,538
<INTEREST-LOAN> 1,059,279
<INTEREST-INVEST> 144,889
<INTEREST-OTHER> 17,724
<INTEREST-TOTAL> 1,221,892
<INTEREST-DEPOSIT> 424,480
<INTEREST-EXPENSE> 570,655
<INTEREST-INCOME-NET> 651,237
<LOAN-LOSSES> 46,167
<SECURITIES-GAINS> 1,634
<EXPENSE-OTHER> 711,496
<INCOME-PRETAX> 319,831
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 223,561
<EPS-PRIMARY> 1.46
<EPS-DILUTED> 1.42
<YIELD-ACTUAL> 4.53
<LOANS-NON> 143,600
<LOANS-PAST> 31,800
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 469,019
<CHARGE-OFFS> 67,999
<RECOVERIES> 36,300
<ALLOWANCE-CLOSE> 485,503
<ALLOWANCE-DOMESTIC> 485,503
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
