<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 March 31, 1996
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 April 25, 1996
Common stock, $4.00 Par Value -- 146,527,249
<PAGE> 2
[LOGO]
QUARTER ENDED MARCH 31, 1996
FINANCIAL REPORT
AND FORM 10-Q
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[LOGO]
FINANCIAL REPORT AND FORM 10-Q
QUARTER ENDED MARCH 31, 1996
TABLE OF CONTENTS
<TABLE>
<S> <C>
PART I -- FINANCIAL INFORMATION
Financial Highlights.............................................................. 3
Financial Statements (Item 1):
Consolidated Statements of Income............................................ 4
Consolidated Balance Sheets.................................................. 5
Consolidated Statements of Cash Flows........................................ 6
Consolidated Statements of Changes in Stockholders' Equity................... 7
Notes to Financial Statements................................................ 7
Management's Discussion and Analysis (Item 2)..................................... 11
Daily Average Balances/Net Interest Income/Rates.................................. 16
PART II -- OTHER INFORMATION
Changes in Securities (Item 2)
Refer to Note 9 on page 10.
Exhibits and Reports on Form 8-K (Item 6)
Exhibit 27:
Financial Data Schedule
Reports on Form 8-K: None.
Signature......................................................................... 19
</TABLE>
2
<PAGE> 4
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Three Months Ended
March 31
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
<CAPTION>
Percent
1996 1995 Change
<S> <C> <C> <C>
EARNINGS (IN THOUSANDS):
Net interest income -- fully taxable equivalent....... $343,969 $327,410 5%
Provision for loan losses............................. 28,039 22,590 24
Fees and other income................................. 236,406 207,859 14
Security gains........................................ 5,436 1,396 --
Noninterest expense................................... 367,989 347,404 6
Net income............................................ 124,834 111,031 12
Net income applicable to common stock................. 121,345 107,311 13
PERFORMANCE RATIOS:
Net interest margin................................... 4.44% 4.59%
Return on average assets.............................. 1.44 1.39
Return on average common equity....................... 17.69 17.98
Return on average total equity........................ 17.10 17.28
PER SHARE MEASURES:
Net income per common share:
Primary.......................................... $ .81 $ .72 13%
Fully diluted.................................... .79 .70 13
Dividends paid per common share....................... .36 .32 13
Book value per common share........................... 19.06 16.97 12
Market value per share (close):
Common........................................... 35.13 26.63 32
Preferred........................................ 83.88 64.13 31
Average shares -- primary............................. 149,064,623 148,837,218 --
Average shares -- fully diluted....................... 157,566,698 157,775,305 --
AVERAGE BALANCES (IN MILLIONS):
Assets................................................ $34,860 $32,023 9%
Loans................................................. 26,006 23,481 11
Securities............................................ 4,446 4,461 --
Earning assets........................................ 30,987 28,612 8
Deposits.............................................. 24,359 24,366 --
Common stockholders' equity........................... 2,759 2,420 14
Total stockholders' equity............................ 2,937 2,606 13
AT PERIOD END:
Equity to assets ratio................................ 8.44% 8.19%
Tier 1 capital ratio.................................. 9.33 8.95
Total risk-based capital ratio........................ 14.70 12.18
Leverage ratio........................................ 7.58 7.59
Common shares outstanding............................. 146,398,162 146,570,786 --
Full-time equivalent employees........................ 21,152 20,315 4%
ASSET QUALITY:
Net charge-offs to loans (annualized)................. .40% .33%
Loan loss reserve to loans............................ 1.86 1.97
Nonperforming assets to loans & OREO.................. .51 .57
</TABLE>
3
<PAGE> 5
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended
(Dollars in Thousands Except Per Share Amounts) March 31
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------
<CAPTION>
1996 1995
<S> <C> <C>
INTEREST INCOME
Loans:
Taxable............................................................ $ 565,975 $ 507,970
Exempt from Federal income taxes................................... 3,209 3,908
Securities:
Taxable............................................................ 62,341 57,081
Exempt from Federal income taxes................................... 8,424 10,134
Federal funds sold and security resale agreements.................... 6,001 7,960
Eurodollar time deposits in banks.................................... 117 --
Other short-term investments......................................... 551 1,380
----------- -----------
Total interest income............................................ 646,618 588,433
INTEREST EXPENSE
Deposits............................................................. 208,330 204,617
Federal funds borrowed and security repurchase agreements............ 45,122 29,182
Borrowed funds....................................................... 31,584 20,002
Corporate long-term debt............................................. 21,540 13,375
----------- -----------
Total interest expense........................................... 306,576 267,176
----------- -----------
NET INTEREST INCOME.................................................... 340,042 321,257
PROVISION FOR LOAN LOSSES.............................................. 28,039 22,590
----------- -----------
Net interest income after provision for loan losses.............. 312,003 298,667
NONINTEREST INCOME
Item processing revenue.............................................. 80,306 75,726
Service charges on deposit accounts.................................. 40,725 38,133
Trust fees........................................................... 35,713 33,455
Credit card fees..................................................... 24,062 17,162
Mortgage banking revenue............................................. 22,626 20,358
Brokerage revenue.................................................... 12,218 4,637
Other................................................................ 20,756 18,388
----------- -----------
Total fees and other income...................................... 236,406 207,859
Security gains....................................................... 5,436 1,396
----------- -----------
Total noninterest income......................................... 241,842 209,255
NONINTEREST EXPENSE
Salaries and employee benefits....................................... 176,883 164,385
Equipment............................................................ 24,944 23,847
Net occupancy........................................................ 24,777 22,891
Assessments and taxes................................................ 8,701 20,207
Other................................................................ 132,684 116,074
----------- -----------
Total noninterest expense........................................ 367,989 347,404
----------- -----------
Income before income taxes............................................. 185,856 160,518
Income tax expense..................................................... 61,022 49,487
----------- -----------
NET INCOME............................................................. $ 124,834 $ 111,031
========== ==========
NET INCOME APPLICABLE TO COMMON STOCK.................................. $ 121,345 $ 107,311
========== ==========
NET INCOME PER COMMON SHARE
Primary.............................................................. $.81 $.72
Fully Diluted........................................................ .79 .70
AVERAGE COMMON SHARES OUTSTANDING...................................... 149,064,623 148,837,218
</TABLE>
See notes to financial statements.
4
<PAGE> 6
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARCH 31 December 31 March 31
1996 1995 1995
<S> <C> <C> <C>
ASSETS
Loans:
Commercial.................................... $10,157,690 $10,020,008 $ 9,211,089
International................................. 59,353 58,285 53,153
Real estate construction...................... 495,429 529,273 438,578
Lease financing............................... 288,712 271,246 215,934
Real estate mortgage -- nonresidential........ 2,339,764 2,412,937 2,446,537
Real estate mortgage -- residential........... 4,833,530 4,926,766 4,403,403
Mortgage loans held for sale.................. 326,867 166,998 55,220
Home equity................................... 1,140,898 1,119,310 951,772
Consumer...................................... 5,693,127 5,545,225 4,950,172
Credit card................................... 1,108,859 1,172,271 1,319,179
----------- ----------- -----------
Total loans.............................. 26,444,229 26,222,319 24,045,037
Allowance for loan losses................ 492,821 490,679 474,838
----------- ----------- -----------
Net loans................................ 25,951,408 25,731,640 23,570,199
Securities held to maturity (market value
$1,100,991)................................... -- -- 1,098,219
Securities available for sale, at market......... 4,425,489 4,949,654 3,373,402
Federal funds sold and security resale
agreements.................................... 313,956 724,564 445,115
Trading account assets........................... 31,398 23,715 30,391
Other short-term money market investments........ 57,911 51,207 69,643
Cash and demand balances due from banks.......... 2,209,008 2,637,049 2,086,211
Properties and equipment......................... 427,158 424,479 393,352
Customers' acceptance liability.................. 61,345 66,169 101,474
Accrued income and other assets.................. 1,631,850 1,590,533 1,473,016
----------- ----------- -----------
TOTAL ASSETS............................. $35,109,523 $36,199,010 $32,641,022
============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Demand deposits (noninterest bearing)............ $ 4,917,699 $ 5,563,717 $ 4,755,404
Savings and NOW accounts......................... 3,978,694 4,241,140 4,473,467
Insured money market accounts.................... 5,405,327 5,153,738 4,637,302
Time deposits of individuals..................... 8,977,174 9,039,981 8,511,470
Other time deposits.............................. 430,447 484,109 502,616
Deposits in overseas offices..................... 630,274 717,823 1,802,716
----------- ----------- -----------
Total deposits........................... 24,339,615 25,200,508 24,682,975
Federal funds borrowed and security repurchase
agreements.................................... 3,359,031 4,010,149 2,540,191
Borrowed funds................................... 2,409,085 2,089,150 1,393,130
Acceptances outstanding.......................... 61,345 66,169 101,474
Accrued expenses and other liabilities........... 660,899 696,701 505,982
Corporate long-term debt......................... 1,315,316 1,215,356 743,390
----------- ----------- -----------
TOTAL LIABILITIES........................ 32,145,291 33,278,033 29,967,142
Stockholders' Equity:
Preferred stock.................................. 174,450 185,400 186,040
Common stock..................................... 2,789,782 2,735,577 2,487,840
----------- ----------- -----------
TOTAL STOCKHOLDERS' EQUITY............... 2,964,232 2,920,977 2,673,880
----------- ----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY................................. $35,109,523 $36,199,010 $32,641,022
============ ============ ============
</TABLE>
See notes to financial statements.
5
<PAGE> 7
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(Dollars in Thousands) Three Months Ended March 31
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
1996 1995
OPERATING ACTIVITIES
Net income...................................................... $ 124,834 $ 111,031
Adjustments to reconcile net income to net cash provided by
operating activities:
Provision for loan losses.................................. 28,039 22,590
Depreciation and amortization of goodwill and
intangibles............................................... 31,267 26,675
Security gains............................................. (5,436) (1,396)
Net (increase) in trading account assets................... (7,683) (22,451)
Other gains, net........................................... (170) (5,718)
Originations and purchases of mortgage loans held for
sale...................................................... (703,087) (52,224)
Proceeds from the sale of mortgage loans held for sale..... 545,446 40,327
(Increase) in interest receivable.......................... (42,888) (44,089)
Increase in interest payable............................... 24,714 59,990
Decrease in other assets................................... 6,755 35,684
(Decrease) in other liabilities............................ (60,516) (40,641)
----------- -----------
Net Cash Provided (Used) by Operating Activities........ (58,725) 129,778
LENDING AND INVESTING ACTIVITIES
Net decrease in short-term investments.......................... 403,904 283,194
Purchases of securities......................................... (590,342) (209,261)
Proceeds from sales of securities............................... 876,195 71,845
Proceeds from maturities and prepayments of securities.......... 189,506 162,690
Net (increase) in loans......................................... (90,166) (849,715)
Net (increase) in properties and equipment...................... (18,558) (15,804)
Acquisitions.................................................... -- 8,539
----------- -----------
Net Cash Provided (Used) by Lending and Investing
Activities........................................... 770,539 (548,512)
DEPOSIT AND FINANCING ACTIVITIES
Net (decrease) in Federal funds borrowed and security repurchase
agreements................................................... (651,118) (68,610)
Net increase in borrowed funds.................................. 319,935 288,141
Net (decrease) in demand, savings, NOW, insured money market
accounts, and deposits in overseas offices................... (744,424) (1,032,952)
Net increase (decrease) in time deposits........................ (116,469) 1,043,362
Proceeds from issuance of long-term debt, net................... 199,144 --
Repayment of long-term debt..................................... (100,178) (372)
Dividends paid, net of tax benefit of ESOP shares............... (56,060) (51,282)
Issuances of common stock....................................... 7,486 4,903
Repurchase of common and preferred stock........................ -- (83,313)
ESOP trust repayment............................................ 1,829 3,340
----------- -----------
Net Cash Provided (Used) by Deposit and Financing
Activities........................................... (1,139,855) 103,217
----------- -----------
Net (Decrease) in Cash and Cash Equivalents..................... (428,041) (315,517)
Cash and Cash Equivalents, January 1............................ 2,637,049 2,401,728
----------- -----------
Cash and Cash Equivalents, March 31............................. $ 2,209,008 $ 2,086,211
============ ============
SUPPLEMENTAL DISCLOSURES
Interest paid................................................... $ 282,000 $ 208,000
Income taxes paid............................................... 10,149 623
Common stock issued in purchase acquisitions.................... -- 46,206
</TABLE>
See notes to financial statements.
6
<PAGE> 8
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Unallocated
Shares
(Dollars in Thousands Except Per Preferred Common Capital Retained Held by
Share Amounts) Stock Stock Surplus Earnings ESOP Trust
<S> <C> <C> <C> <C> <C>
- -------------------------------------------
Balance January 1, 1995.................... $187,540 $590,223 $100,051 $1,732,258 $ (9,018)
Net income............................... 111,031
Common dividends paid, $.32 per share.... (47,706)
Preferred dividends paid, $1.00 per
depositary share....................... (3,751)
Issuance of 262,028 common shares under
corporate stock and dividend
reinvestment plans..................... 1,048 3,855
Issuance of 1,785,726 common shares
pursuant to acquisition................ 7,143 39,063
Purchase of 3,032,600 common shares and
30,000 depositary shares of preferred
stock.................................. (1,500) (12,130) (6,730) (62,953)
Shares distributed by ESOP trust and tax
benefit on dividends................... 175 3,340
Change in unrealized market value
adjustment on securities available for
sale, net of tax....................... 41,941
------------ ------------ ------------ ------------ ------------
Balance March 31, 1995..................... $186,040 $586,284 $136,239 $1,770,995 $ (5,678)
============ ============ ============ ============ ============
Balance January 1, 1996.................... $185,400 $582,183 $202,669 $1,953,466 $ (2,741)
Net income............................... 124,834
Common dividends paid, $.36 per share.... (52,529)
Preferred dividends paid, $1.00 per
depositary share....................... (3,573)
Issuance of 330,440 common shares under
corporate stock and dividend
reinvestment plans..................... 1,322 6,262 (98)
Conversion of 218,999 depositary shares
of preferred stock to 522,033 common
shares................................. (10,950) 2,088 8,862
Shares distributed by ESOP trust and tax
benefit on dividends................... 42 1,829
Change in unrealized market value
adjustment on securities available for
sale, net of tax....................... (34,834)
------------ ------------ ------------ ------------ ------------
Balance March 31, 1996..................... $174,450 $585,593 $217,793 $1,987,308 $ (912)
============ ============ ============ ============ ============
<CAPTION>
(Dollars in Thousands Except Per
Share Amounts) Total
<S> <C>
- -------------------------------------------
Balance January 1, 1995.................... $2,601,054
Net income............................... 111,031
Common dividends paid, $.32 per share.... (47,706)
Preferred dividends paid, $1.00 per
depositary share....................... (3,751)
Issuance of 262,028 common shares under
corporate stock and dividend
reinvestment plans..................... 4,903
Issuance of 1,785,726 common shares
pursuant to acquisition................ 46,206
Purchase of 3,032,600 common shares and
30,000 depositary shares of preferred
stock.................................. (83,313)
Shares distributed by ESOP trust and tax
benefit on dividends................... 3,515
Change in unrealized market value
adjustment on securities available for
sale, net of tax....................... 41,941
------------
Balance March 31, 1995..................... $2,673,880
============
Balance January 1, 1996.................... $2,920,977
Net income............................... 124,834
Common dividends paid, $.36 per share.... (52,529)
Preferred dividends paid, $1.00 per
depositary share....................... (3,573)
Issuance of 330,440 common shares under
corporate stock and dividend
reinvestment plans..................... 7,486
Conversion of 218,999 depositary shares
of preferred stock to 522,033 common
shares................................. --
Shares distributed by ESOP trust and tax
benefit on dividends................... 1,871
Change in unrealized market value
adjustment on securities available for
sale, net of tax....................... (34,834)
------------
Balance March 31, 1996..................... $2,964,232
============
</TABLE>
See notes to financial statements.
NOTES TO FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES
In the opinion of management, the accompanying unaudited consolidated
financial statements have been prepared on a basis consistent with accounting
principles applied in the prior periods and include all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation of
the financial position, results of operations and cash flows for the interim
periods presented. The results of operations for the interim periods are not
necessarily indicative of the results that may be expected for the full year or
any other interim period.
Certain prior period amounts have been
reclassified to conform with current period presentation.
2. ACCOUNTING CHANGES
ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED
ASSETS TO BE DISPOSED OF: On January 1, 1996, the Corporation adopted Statement
of Financial Accounting Standards ("SFAS") No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to
7
<PAGE> 9
be Disposed Of." This standard requires that long-lived assets and certain
identifiable intangibles be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. If the expected undiscounted future cash flows from the use of the
asset and its eventual disposition are less than the carrying amount of the
asset, an impairment loss is recognized. The impairment loss is measured based
upon the present value of the expected future cash flows. The adoption of this
standard did not have a material impact on financial position or results of
operations.
ACCOUNTING FOR MORTGAGE SERVICING RIGHTS: On January 1, 1996, the
Corporation adopted SFAS No. 122, "Accounting for Mortgage Servicing Rights."
This standard requires that entities recognize rights to service mortgage loans
for others as separate assets, whether those rights are acquired through loan
origination activities or through purchase activities. Additionally, the
enterprise must periodically assess its capitalized mortgage servicing rights
for impairment based on the fair value of those rights. The adoption of this
standard did not have a material impact on financial position or results of
operations.
3. ACQUISITIONS
On August 28, 1995, the Corporation announced the signing of a definitive
merger agreement with Integra Financial Corporation, a $14 billion asset bank
holding company headquartered in Pittsburgh, Pennsylvania. The merger agreement
calls for an exchange of two shares of National City common stock for each share
of Integra. The transaction will be accounted for as a pooling of interests, and
is expected to close in the second quarter of 1996.
4. 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.
5. LOANS AND ALLOWANCE FOR LOAN LOSSES
The following table presents the activity in the allowance for loan losses:
<TABLE>
<CAPTION>
Three Months Ended
March 31
-------------------------
(In Thousands) 1996 1995
<S> <C> <C>
- ------------------------------------------------------------
Balance at beginning of year........ $ 490,679 $ 469,019
Provision........................... 28,039 22,590
Reserves acquired (sold)............ -- 2,220
Charge-offs:
Commercial........................ 12,159 8,952
Real estate -- construction....... -- 244
Real estate -- commercial......... 91 541
Real estate -- residential........ 348 208
Home equity....................... 560 84
Consumer.......................... 15,190 8,712
Credit card....................... 14,017 14,094
----------- -----------
Total charge-offs................. 42,365 32,835
Recoveries:
Commercial........................ 5,710 3,584
Real estate -- construction....... 357 56
Real estate -- commercial......... 469 950
Real estate -- residential........ 101 154
Home equity....................... 125 206
Consumer.......................... 7,119 5,879
Credit card....................... 2,587 3,015
----------- -----------
Total recoveries.................. 16,468 13,844
----------- -----------
Net charge-offs..................... 25,897 18,991
----------- -----------
Balance at end of period............ $ 492,821 $ 474,838
=========== ===========
</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 as 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 March
31, 1996 and December 31, 1995, loans that were considered to be impaired under
SFAS No. 114 totalled $37.0 million and $26.7 million, respectively. All
impaired loans are included in nonperforming assets. The related allowance
allocated to these loans was $22.8 million and $16.4 million, respectively. The
contractual interest due and actual interest recorded on impaired loans, as well
as total nonperforming assets, for the three months ended March 31, 1996 was
$6.2 million and $2.4 million, respectively.
8
<PAGE> 10
6. SECURITIES
The following is a summary of securities held to maturity and available for
sale:
<TABLE>
<CAPTION>
MARCH 31, 1996
----------------------------------------------
AMORTIZED UNREALIZED UNREALIZED MARKET
(In Thousands) COST GAINS LOSSES VALUE
<S> <C> <C> <C> <C>
- ------------------------------------------------------------
AVAILABLE FOR
SALE:
U.S. Treasury and
Federal agency
debentures...... $1,155,452 $ 5,920 $(19,063) $1,142,309
Mortgage-backed
securities...... 2,576,899 19,750 (20,440) 2,576,209
States and
political
subdivisions.... 274,429 15,340 (1,168) 288,601
Other............. 327,336 93,695 (2,661) 418,370
---------- ---------- ---------- ----------
Total
securities.... $4,334,116 $134,705 $(43,332) $4,425,489
========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
March 31, 1995
----------------------------------------------
Amortized Unrealized Unrealized Market
(In Thousands) Cost Gains Losses Value
<S> <C> <C> <C> <C>
- ------------------------------------------------------------
Held to maturity:
U.S. Treasury and
Federal agency
debentures....... $ 34,137 $ -- $ (693) $ 33,444
Mortgage-backed
securities....... 623,848 2,002 (20,342) 605,508
States and
political
subdivisions..... 385,388 26,104 (4,200) 407,292
Other.............. 54,846 74 (173) 54,747
---------- ---------- ---------- ----------
Total held to
maturity....... 1,098,219 28,180 (25,408) 1,100,991
Available for sale:
U.S. Treasury and
Federal agency
debentures....... 1,334,098 5,454 (24,877) 1,314,675
Mortgage-backed
securities....... 1,787,186 6,560 (28,980) 1,764,766
States and
political
subdivisions..... 30,830 278 (28) 31,080
Other.............. 238,072 38,991 (14,182) 262,881
---------- ---------- ---------- ----------
Total available
for sale....... 3,390,186 51,283 (68,067) 3,373,402
---------- ---------- ---------- ----------
Total
securities..... $4,488,405 $ 79,463 $(93,475) $4,474,393
========== ========== ========== ==========
</TABLE>
For the three months ended March 31, 1996 and 1995, gross gains of $10.9
million and $1.5 million, and gross losses of $5.5 million and $.1 million were
realized, respectively.
At March 31, 1996, the unrealized appreciation in securities available for
sale included in retained earnings totalled $59.4 million, net of tax, compared
to unrealized depreciation of $10.9 million, net of tax, at March 31, 1995. The
Corporation's securities portfolio consists mainly of financial instruments that
pay back par value upon maturity. Market value fluctuations occur over the lives
of the instruments due to changes in market interest rates. Management has
concluded that current declines in value are temporary and, accordingly, no
valuation adjustments have been included as a charge to earnings.
For the three months ended March 31, 1996 and 1995, the following
represents the cash flows of the securities portfolio:
<TABLE>
<CAPTION>
AVAILABLE HELD TO
(In Thousands) FOR SALE MATURITY TOTAL
<S> <C> <C> <C>
- ------------------------------------------------------------
MARCH 31, 1996:
Purchases of securities.... $ 590,342 $ -- $590,342
Proceeds from sale of
securities............... 876,195 -- 876,195
Proceeds from maturities of
securities............... 189,506 -- 189,506
March 31, 1995:
Purchases of securities.... $ 190,286 $ 18,975 $209,261
Proceeds from sale of
securities............... 71,845 -- 71,845
Proceeds from maturities of
securities............... 64,749 97,941 162,690
</TABLE>
As of March 31, 1996, 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.
7. BORROWED FUNDS
<TABLE>
<CAPTION>
MARCH 31 Dec 31 March 31
(In Thousands) 1996 1995 1995
<S> <C> <C> <C>
- ------------------------------------------------------------
U.S. Treasury demand notes
and Federal funds
borrowed-term........... $ 177,147 $ 254,706 $ 271,599
Notes payable to Student
Loan Marketing
Association............. 600,000 600,000 300,000
Bank notes................ 654,571 554,547 --
Military banking
liabilities............. 125,399 109,401 190,668
Other..................... 350,365 230,753 74,688
---------- ---------- ----------
Bank subsidiaries....... 1,907,482 1,749,407 836,955
Commercial paper.......... 501,560 339,698 556,120
Other..................... 43 45 55
---------- ---------- ----------
Other subsidiaries...... 501,603 339,743 556,175
---------- ---------- ----------
Total............. $2,409,085 $2,089,150 $1,393,130
========== ========== ==========
</TABLE>
8. CORPORATE LONG-TERM DEBT
<TABLE>
<CAPTION>
MARCH 31 Dec 31 March 31
(In Thousands) 1996 1995 1995
<S> <C> <C> <C>
- ------------------------------------------------------------
7.20% Sub. Notes due 2005...... $ 250,000 $ 250,000 $ --
Less discount................ (266) (273) --
6 5/8% Sub. Notes due 2004..... 250,000 250,000 250,000
Less discount................ (1,025) (1,058) (1,155 )
8 3/8% Notes due 1996.......... -- 100,000 100,000
Less discount................ -- (13) (74 )
Floating Rate Sub. Notes
due 1997...................... 75,000 75,000 75,000
Less discount................ (15) (20) (34 )
9 7/8% Sub. Notes due 1999..... 65,000 65,000 65,000
Less discount................ (163) (175) (210 )
Floating Rate Notes due 1997... 50,000 50,000 50,000
Less discount................ (33) (38) (54 )
Other.......................... 2,557 2,561 3,252
---------- ---------- --------
Total parent company......... 691,055 790,984 541,725
6.30% Sub. Notes due 2011...... 200,000 -- --
7.25% Sub. Notes due 2010...... 225,000 225,000 --
Less discount................ (2,344) (2,388) --
6 1/2% Sub. Notes due 2003..... 200,000 200,000 200,000
Less discount................ (530) (549) (605 )
Other.......................... 2,135 2,309 2,270
---------- ---------- --------
Total subsidiaries........... 624,261 424,372 201,665
---------- ---------- --------
Total.................. $1,315,316 $1,215,356 $743,390
========== ========== =========
</TABLE>
9
<PAGE> 11
In February 1996, one subsidiary bank of the Corporation issued $200
million principal amount of 6.30% Subordinated Notes due 2011. The notes are not
redeemable prior to maturity and qualify as Tier 2 capital for regulatory
purposes.
A credit agreement with a group of banks, dated February 2, 1996, allows
the Corporation to borrow up to $350 million until February 2, 2001. The
Corporation pays an annual facility fee of 10 basis points on the amount of the
line. There were no borrowings outstanding under this agreement at March 31,
1996.
9. STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
MARCH 31 Dec 31 March 31
(Outstanding Shares) 1996 1995 1995
<S> <C> <C> <C>
- --------------------------------------------------------------
Preferred Stock, no par
value, authorized
5,000,000 shares...... 697,800 741,600 744,160
Common Stock, $4.00 par
value, authorized
350,000,000 shares.... 146,398,162 145,545,689 146,570,786
</TABLE>
On March 5, 1996, the Corporation called for redemption its outstanding
Depositary Shares of the 8% Cumulative Convertible Preferred Stock, effective
May 1, 1996. It is expected that this action will result in conversion into
common stock of substantially all of the outstanding preferred stock.
10. INCOME TAX EXPENSE
The composition of income tax expense follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31
-------------------------
(In Thousands) 1996 1995
<S> <C> <C>
- ------------------------------------------------------------
Applicable to income exclusive of
security transactions........... $59,121 $48,998
Applicable to security
transactions.................... 1,901 489
----------- -----------
Total..................... $61,022 $49,487
=========== ===========
</TABLE>
The effective tax rate was approximately 32.8% and 30.8% for the three
months ended March 31, 1996 and 1995, respectively.
11. 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 March 31, 1996, bank subsidiaries may pay
the parent company, without prior regulatory approval, approximately $563
million of dividends. During the first quarter 1996, no dividends were declared
or paid to the parent company.
12. EARNINGS PER SHARE
The calculation of net income per common share follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31
(Dollars In Thousands Except Per -------------------------
Share Amounts) 1996 1995
<S> <C> <C>
- -----------------------------------------------------------
PRIMARY:
Net income..................... $124,834 $111,031
Less preferred dividend
requirements................. 3,489 3,720
----------- -----------
Net income applicable to common
stock........................ $121,345 $107,311
=========== ===========
Average common shares
outstanding.................. 149,064,623 148,837,218
=========== ===========
Primary net income per common
share........................ $.81 $.72
=========== ===========
ASSUMING FULL DILUTION:
Net income..................... $124,834 $111,031
=========== ===========
Average common shares
outstanding.................. 149,064,623 148,837,218
Stock option adjustment........ 184,297 67,700
Preferred stock adjustment..... 8,317,778 8,870,387
----------- -----------
Average common shares
outstanding, as adjusted..... 157,566,698 157,775,305
=========== ===========
Fully diluted net income per
common share................. $.79 $.70
=========== ===========
</TABLE>
The stock option adjustment in the calculation of fully diluted common
shares outstanding represents the assumed exercise of all outstanding stock
options as of the beginning of the year or date of grant, if later, computed
using the treasury stock method.
The preferred stock adjustment in the calculation of fully diluted common
shares outstanding represents the assumed conversion of the 8% Cumulative
Convertible Preferred Stock.
10
<PAGE> 12
MANAGEMENT'S DISCUSSION AND ANALYSIS
EARNINGS SUMMARY
Net income for the quarter ended March 31, 1996 was $124.8 million, an
increase of 12% over the $111.0 million earned in the first quarter 1995. Fully
diluted net income per common share was $.79 for the first quarter of 1996,
compared with $.70 for the corresponding quarter last year.
Return on average common equity was 17.69% for the three months ended March
31, 1996 and 17.98% for the same quarter in 1995. Return on average assets was
1.44% for the first three months of 1996 and 1.39% for the first quarter of
1995.
Net income for the quarter increased from a year ago due to solid revenue
growth from both net interest income and fee income sources. The increase in net
interest income was the result of higher loan balances, up 11% from a year ago.
Fee income was up 14% in the first quarter versus first quarter last year mainly
from higher credit card, brokerage, and item processing revenue. Offsetting
revenue growth somewhat were higher loan loss provisions and noninterest
expenses. The provision for loan losses increased $5.4 million over the same
period in 1995. Noninterest expenses increased 6.0% during the first quarter
1996 compared with the same quarter a year ago. Half of the increase was due to
acquisitions made during the third quarter of 1995.
After-tax security gains were $.02 per share in the first quarter 1996,
compared with $.01 per share for the first quarter 1995.
TABLE 1: UNIT PROFITABILITY
The financial performance of National City is monitored by an internal
profitability measurement
<TABLE>
<CAPTION>
THREE MONTHS ENDED Three months ended
MARCH 31, 1996 March 31, 1995
-------------------- --------------------
NET RETURN ON Net Return on
(Dollars in Millions) INCOME EQUITY Income Equity
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------
Corporate banking.................. $52.0 17.24% $50.8 19.84%
Retail banking..................... 71.4 23.34 58.4 22.79
National credit card............... 3.8 13.00 1.7 8.18
Investment/funding................. 4.2 6.61 (3.8 ) (5.63)
Trust.............................. 9.3 26.63 8.1 25.84
Item processing.................... 4.7 12.48 4.3 11.91
Mortgage banking................... 2.6 27.78 3.2 39.10
Corporate.......................... (23.2 ) -- (11.7 ) --
------ ------
Total.......................... $124.8 17.69% $111.0 17.98%
======= =======
</TABLE>
system which produces line-of-business results and key performance measures.
National City's major businesses include corporate banking, retail banking,
national credit cards, investment/
funding, trust and investment management, item processing and mortgage banking.
Table 1 presents profitability contributions by the Corporation's major
units to consolidated results. Unit profitability is determined based on an
internal accounting process. Unlike generally accepted accounting principles, no
authoritative guidance exists for internal financial accounting and reporting.
National City's internal accounting process is based on practices which support
the management structure of the Corporation. Expenses for centrally provided
services are allocated based on estimated usage of those services. Lending and
deposit-taking activities are match-funded and interest rate risk is reported in
the investment/funding unit. Capital has been allocated among the businesses on
a risk-adjusted basis. Methodologies may change from time to time as accounting
systems are enhanced or business products change.
The increase in corporate banking net income was due to higher net interest
income from growth in loan outstandings.
The increase in retail banking reflects strong loan growth and continued
favorable spreads on core deposit accounts.
National credit card results improved due to higher volume. The results in
1995 were dampened by costs associated with portfolio acquisitions.
Results improved in the investment/funding unit primarily due to security
gains as well as modifications made to the internal crediting rate for
noncontractual deposits.
The increased profitability in trust and the item processing subsidiary was
due to increased volume and expense control measures. The lower return on equity
in the item processing business relative to the other functional units reflects
the amortization of goodwill from purchase acquisitions.
The decrease in mortgage banking net income was due to gains on the sale of
mortgage servicing in the first quarter of 1995.
11
<PAGE> 13
EARNING ASSETS AND
INTEREST-BEARING LIABILITIES
Average earning assets totalled $30,987 million for the first quarter of
1996 compared with $30,972 million for the fourth quarter of 1995 and $28,612
million for the first quarter of 1995. The increase over the first quarter of
last year was due to commercial and consumer loan growth as well as the
acquisition of United Bancorp of Kentucky in the second half of 1995.
Earning assets were stable compared with the fourth quarter due to growth
in loans offset by a decline in securities.
Average core deposits increased $1,145 million in the first quarter from
the first quarter 1995 due to growth in time deposits and the aforementioned
acquisition. The increase was 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
$344.0 million in the first quarter 1996 versus $327.4 million for the
corresponding quarter in 1995.
The tax equivalent net interest margin was 4.44% in the quarter ended March
31, 1996
compared with 4.59% a year ago and 4.32% for the quarter ended December 31,
1995. The lower net interest margin relative to a year ago was due primarily to
the increased use of purchased funding to support the growth in earning assets.
The increase from the fourth quarter was due to a higher-yielding asset mix and
a lower cost of funds.
TABLE 2: CONTRIBUTION OF INTEREST RATE DERIVATIVE PORTFOLIO
<TABLE>
<CAPTION>
Three months ended
March 31
-----------------------------
(In Millions) 1996 1995
<S> <C> <C>
- ----------------------------------------------------------------------------------
Interest adjustment to loans......................... $ 3.9 $ (2.4)
Interest adjustment to securities.................... .1 (.9)
----------- -----------
Interest adjustment to earning assets.............. 4.0 (3.3)
Interest adjustment to deposits...................... (3.5) (4.3)
----------- -----------
Effect on net interest income...................... $ 7.5 $ 1.0
=========== ===========
</TABLE>
NOTE: Amounts in brackets represent reductions of the related interest income
or expense line, as applicable.
TABLE 3: FULL-TIME EQUIVALENT STAFFING AND
OVERHEAD PERFORMANCE MEASURES
<TABLE>
<CAPTION>
MARCH 31, 1996 March 31, 1995
-------------------------------------- --------------------------------------
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..................... 11,198 37.76% 49.02% 11,437 43.24% 53.51%
National credit card......... 689 47.50 53.09 579 54.20 59.80
Investment/funding........... 455 49.85 -- 283 12.66 --
Trust........................ 1,190 -- 63.34 1,054 -- 66.24
Item processing.............. 6,173 -- 89.59 5,599 -- 89.85
Mortgage banking............. 811 -- 75.30 709 -- 75.81
Corporate.................... 636 -- -- 654 -- --
---------- ----------
Total..................... 21,152 38.25% 63.41% 20,315 42.62% 64.90%
=========== ============
</TABLE>
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 March 31, 1996, the Corporation had moved to a slightly more
liability-sensitive position than at December 31, 1995. The cumulative one-year
gap was (10.2)% of adjusted earning assets at March 31, 1996, versus (8.5)% at
year-end 1995. The earnings simulation model projects that net income would
decrease by .7% if market rates rose gradually by two percentage points over the
next year, relative to a stable-rate scenario. At the end of 1995, the
corresponding change was .3% of net income. The Corporation's net present value
model indicates
that a two percentage point immediate increase in rates would cause a reduction
in the present value of expected asset and liability cash flows by an amount
equal to 1.4% of total assets, compared to 1.3% at year-end 1995.
During the first three months of 1996, the notional outstandings of
interest-rate swap agreements increased by $4,296 million. Of this increase,
$1,950 million were added to manage the Corporation's interest-rate risk
position by synthetically converting variable-rate loans to fixed rate, $320
million were used to convert fixed-rate debt to variable rate and $185 million
were used to reduce the risk of mortgage servicing rights. The remainder of the
swap agreements were entered into to
facilitate interest-rate risk management at third parties,
12
<PAGE> 14
TABLE 4: ANNUALIZED NET CHARGE-OFFS AS A PERCENTAGE OF
AVERAGE LOANS
<TABLE>
<CAPTION>
First Quarter
1996 1995
<S> <C> <C>
----------------------------------------------------------------------------
Commercial................................................. .24 % .24 %
Real estate -- construction................................ (.01) .18
Real estate -- commercial.................................. (.06) (.07)
Real estate -- residential................................. .02 .01
Home equity................................................ .15 (.04)
Consumer................................................... .59 .24
Credit card................................................ 4.06 3.35
Total net charge-offs to average loans..................... .40 % .33 %
</TABLE>
TABLE 5: NONPERFORMING ASSETS
<TABLE>
<CAPTION>
MARCH 31 December 31 March 31
(In Millions) 1996 1995 1995
<S> <C> <C> <C>
----------------------------------------------------------------------------
Commercial:
Nonaccrual.......................... $ 73.7 $ 75.0 $ 68.8
Restructured........................ .1 .1 .1
--------- ------------ ---------
Total commercial.................. 73.8 75.1 68.9
Real estate related:
Nonaccrual.......................... 42.6 50.3 46.8
Restructured........................ 6.3 4.1 4.3
--------- ------------ ---------
Total real estate related......... 48.9 54.4 51.1
--------- ------------ ---------
Total nonperforming loans......... 122.7 129.5 120.0
Other real estate owned (OREO)........ 13.4 9.0 17.7
--------- ------------ ---------
Nonperforming assets.................. $ 136.1 $138.5 $ 137.7
========== ============= ==========
Loans 90 days past-due accruing
interest............................ $ 47.8 $ 38.6 $ 37.1
========== ============= ==========
</TABLE>
TABLE 6: CAPITAL AND CAPITAL/ASSET RATIOS
<TABLE>
<CAPTION>
MARCH 31, 1996 Dec 31, 1995 March 31, 1995
(In Millions) AMOUNT RATIO Amount Ratio Amount Ratio
<S> <C> <C> <C> <C> <C> <C>
----------------------------------------------------------------------------
Total equity1.............. $2,964.2 8.44 % $2,921.0 8.07 % $2,673.9 8.19 %
Common equity1............. 2,789.8 7.91 2,735.6 7.56 2,487.8 7.61
Tangible common equity2.... 2,344.4 6.73 2,297.3 6.42 2,106.8 6.52
Tier 1 capital3............ 2,621.7 9.33 2,544.7 8.54 2,432.3 8.95
Total risk-based
capital4................. 4,130.9 14.70 3,913.1 13.13 3,308.2 12.18
Leverage ratio5............ 2,621.7 7.58 2,544.7 7.37 2,432.3 7.59
<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>
including Integra Financial Corporation. The notional amount of interest-rate
caps, floors, and corridors increased by $490 million and were primarily used to
reduce the risk of mortgage servicing rights. The net unrealized losses in the
derivative portfolio were $25 million at March 31, 1996, compared to unrealized
gains of $115 million at December 31, 1995.
FEES AND OTHER INCOME
Fee income was $236.4 million for the quarter ended March 31, 1996 versus
$207.9 million for the first quarter of 1995. The increase in fee income was due
primarily to increased brokerage revenue, credit card fees and item processing
volume.
Effective January 1, 1996, the Corporation adopted SFAS 122, "Accounting
for Mortgage Servicing Rights." The adoption of this statement has a positive
effect on mortgage banking revenue and net income due to the deferral and
amortization of costs associated with originated mortgage servicing rights.
There was no significant nonrecurring income in the first quarter of 1996.
The first quarter of 1995 included $7.1 million gains on the sale of mortgage
servicing.
NONINTEREST EXPENSE
Noninterest expense was $368.0 million for the quarter ended March 31,
1996, up 6% from $347.4 million a year ago. Half of the increase was due to
acquisitions. FDIC expenses declined in the first quarter of 1996 versus a year
ago due to a reduction in the assessment rate. There were no significant unusual
expenses in the first quarters of 1996 and 1995.
The efficiency ratio, defined as noninterest expense as a percentage of fee
income plus fully-
13
<PAGE> 15
taxable net interest income, was
63.41% for the first quarter 1996 compared with 64.90% a year ago.
The overhead ratio, defined as noninterest expenses less fee income as a
percentage of fully-taxable net interest income, was 38.25% for the first
quarter 1996 compared with 42.62% a year ago.
Table 3 shows full-time equivalent staff and the efficiency
and overhead ratios within the Corporation's major units.
Total staff at March 31, 1996 increased from a year ago due mainly to
business growth and acquisitions.
ASSET QUALITY
The allowance for loan losses was $492.8 million at March 31, 1996
representing 1.86% of loans outstanding at quarter-end. This loan loss reserve
ratio compared with 1.87% at year-end 1995 and 1.97% at March 31, 1995.
The provision for loan losses of $28.0 million for the first quar-
ter increased from $22.6 million in the first quarter of 1995.
Net charge-offs for the first quarter of 1996 were $25.9 million compared
with $19.0 million for the first three months of 1995.
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 $136.1 million at March 31, 1996 declined slightly
from the fourth quarter 1995.
Nonperforming assets as a percentage of loans and OREO were .51% at March
31, 1996 compared with .57% a year ago and .53% at December 31, 1995.
CAPITAL
Table 6 reflects various measures of capital at quarter-end. Book value per
common share at March 31, 1996 was $19.06 compared with $16.97 at March 31, 1995
and $18.80 at December 31, 1995. The book value per common share at March 31,
1996, December 31, 1995, and March 31, 1995 included
$.40, $.63, and $(.07), respectively, related to the market value
appreciation/(depreciation) of securities available for sale.
14
<PAGE> 16
(This page left intentionally blank)
15
<PAGE> 17
<TABLE>
DAILY AVERAGE BALANCE SHEETS/NET INTEREST INCOME/RATES
<CAPTION>
(Dollars In Millions) Daily Average Balance
- ----------------------------------------------------------------------------------------------------------
1996 1995
------- ----------------------------------------
FIRST Fourth Third Second First
QUARTER Quarter Quarter Quarter Quarter
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
ASSETS
Earning Assets:
Loans:
Commercial...................................... $10,714 $10,690 $10,430 $10,141 $ 9,528
Real estate mortgage............................ 7,413 7,483 7,484 6,959 6,817
Consumer........................................ 7,879 7,621 7,722 7,404 7,136
------- ------- ------- ------- -------
Total loans................................... 26,006 25,794 25,636 24,504 23,481
Securities:
Taxable......................................... 3,906 3,963 4,554 4,344 3,805
Tax-exempt...................................... 540 570 601 637 656
------- ------- ------- ------- -------
Total securities.............................. 4,446 4,533 5,155 4,981 4,461
Federal funds sold................................ 112 81 78 85 74
Security resale agreements........................ 315 458 271 402 485
Eurodollar time deposits in banks................. 9 -- 7 -- --
Short-term money market investments............... 99 106 104 102 111
------- ------- ------- ------- -------
Total earning assets/
Total interest income/rates................ 30,987 30,972 31,251 30,074 28,612
Market value appreciation (depreciation) of
securities
available for sale................................ 141 96 57 10 (56)
Allowance for loan losses........................... (491) (501) (496) (482) (477)
Cash and demand balances due from banks............. 2,192 2,178 2,049 2,048 2,017
Properties and equipment............................ 427 427 423 397 395
Customers' acceptance liability..................... 66 65 86 106 106
Accrued income and other assets..................... 1,538 1,578 1,467 1,368 1,426
------- ------- ------- ------- -------
Total assets.................................. $34,860 $34,815 $34,837 $33,521 $32,023
======= ======= ======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Savings and NOW accounts.......................... $ 4,108 $ 4,241 $ 4,342 $ 4,348 $ 4,543
Insured money market accounts..................... 5,199 5,020 4,842 4,759 4,762
Time deposits of individuals...................... 8,998 9,007 8,926 8,632 8,040
Other time deposits............................... 467 523 514 517 480
Deposits in overseas offices...................... 792 707 1,191 1,645 1,931
Federal funds borrowed............................ 1,371 1,424 1,335 1,408 1,133
Security repurchase agreements.................... 1,912 1,745 1,724 1,494 1,199
Borrowed funds.................................... 2,292 2,318 2,590 1,969 1,411
Corporate long-term debt.......................... 1,297 1,215 1,154 848 743
------- ------- ------- ------- -------
Total interest bearing liabilities/
Total interest expense/rates............... 26,436 26,200 26,618 25,620 24,242
Non-interest bearing deposits..................... 4,795 4,941 4,738 4,632 4,610
Acceptances outstanding........................... 66 65 86 106 106
Accrued expenses and other liabilities............ 626 735 587 498 459
------- ------- ------- ------- -------
Total liabilities............................. 31,923 31,941 32,029 30,856 29,417
Stockholders' equity.......................... 2,937 2,874 2,808 2,665 2,606
------- ------- ------- ------- -------
Total liabilities and stockholders' equity.... $34,860 $34,815 $34,837 $33,521 $32,023
======= ======= ======= ======= =======
Net interest income.................................................................................
Interest spread.....................................................................................
Contribution of non-interest bearing sources of funds...............................................
Net interest margin.................................................................................
</TABLE>
16
<PAGE> 18
<TABLE>
<CAPTION>
(Dollars In Millions) Quarterly Interest
- ----------------------------------------------------- -------------------------------------------------------
1996 1995
------- -------------------------------------------
FIRST Fourth Third Second First
QUARTER Quarter Quarter Quarter Quarter
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
ASSETS
Earning Assets:
Loans:
Commercial...................................... $223.8 $227.0 $224.2 $215.8 $201.7
Real estate mortgage............................ 151.6 154.0 155.5 144.4 137.8
Consumer........................................ 195.3 189.4 200.2 189.3 174.7
------- ------- ------- ------- -------
Total loans................................... 570.7 570.4 579.9 549.5 514.2
Securities:
Taxable......................................... 62.3 62.6 68.5 68.0 57.1
Tax-exempt...................................... 10.8 11.0 12.3 13.3 14.0
------- ------- ------- ------- -------
Total securities.............................. 73.1 73.6 80.8 81.3 71.1
Federal funds sold................................ 1.6 1.2 1.1 1.3 1.1
Security resale agreements........................ 4.4 6.7 4.0 6.3 6.8
Eurodollar time deposits in banks................. .1 -- .1 -- --
Short-term money market investments............... .7 1.2 1.5 .8 1.4
------- ------- ------- ------- -------
Total earning assets/
Total interest income/rates................ $650.6 $653.1 $667.4 $639.2 $594.6
Market value appreciation (depreciation) of
securities
available for sale................................
Allowance for loan losses...........................
Cash and demand balances due from banks.............
Properties and equipment............................
Customers' acceptance liability.....................
Accrued income and other assets.....................
Total assets..................................
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Savings and NOW accounts.......................... $ 27.7 $ 28.4 $ 29.2 $ 29.4 $ 30.3
Insured money market accounts..................... 36.4 36.4 34.8 33.1 31.7
Time deposits of individuals...................... 127.9 132.6 131.3 125.7 108.7
Other time deposits............................... 6.1 7.1 7.1 7.1 6.3
Deposits in overseas offices...................... 10.3 9.8 17.1 24.6 27.7
Federal funds borrowed............................ 22.1 25.5 23.3 19.8 14.3
Security repurchase agreements.................... 22.9 23.2 22.5 20.2 14.8
Borrowed funds.................................... 31.7 33.7 38.1 28.4 20.0
Corporate long-term debt.......................... 21.5 21.0 20.2 15.1 13.4
------- ------- ------- ------- -------
Total interest bearing liabilities/
Total interest expense/rates............... 306.6 317.7 323.6 303.4 267.2
------- ------- ------- ------- -------
Non-interest bearing deposits.....................
Acceptances outstanding...........................
Accrued expenses and other liabilities............
Total liabilities.............................
Stockholders' equity..........................
Total liabilities and stockholders' equity.... $344.0 $335.4 $343.8 $335.8 $327.4
======= ======= ======= ======= =======
Net interest income.........................................................................................
Interest spread.............................................................................................
Contribution of non-interest bearing sources of funds.......................................................
Net interest margin.........................................................................................
</TABLE>
<TABLE>
<CAPTION>
(Dollars In Millions)
- ----------------------------------------------------- Average Annualized Rate
-------------------------------------------------------
1996 1995
------- -------------------------------------------
FIRST Fourth Third Second First
QUARTER Quarter Quarter Quarter Quarter
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
ASSETS
Earning Assets:
Loans:
Commercial...................................... 8.40% 8.43% 8.53% 8.54% 8.58%
Real estate mortgage............................ 8.18 8.23 8.31 8.30 8.09
Consumer........................................ 9.96 9.87 10.31 10.24 9.88
Total loans................................... 8.81 8.80 9.00 8.99 8.83
Securities:
Taxable......................................... 6.39 6.31 6.00 6.27 6.02
Tax-exempt...................................... 8.01 7.72 8.14 8.32 8.52
Total securities.............................. 6.59 6.49 6.25 6.53 6.39
Federal funds sold................................ 5.57 6.12 5.67 6.14 6.14
Security resale agreements........................ 5.68 5.82 5.89 6.29 5.72
Eurodollar time deposits in banks................. 5.22 -- 5.89 -- --
Short-term money market investments............... 2.24 4.27 5.56 3.04 5.00
Total earning assets/
Total interest income/rates................ 8.42% 8.39% 8.50% 8.52% 8.38%
Market value appreciation (depreciation) of
securities
available for sale................................
Allowance for loan losses...........................
Cash and demand balances due from banks.............
Properties and equipment............................
Customers' acceptance liability.....................
Accrued income and other assets.....................
Total assets..................................
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Savings and NOW accounts.......................... 2.71% 2.66% 2.67% 2.71% 2.71%
Insured money market accounts..................... 2.81 2.88 2.85 2.79 2.70
Time deposits of individuals...................... 5.72 5.84 5.84 5.84 5.48
Other time deposits............................... 5.21 5.47 5.50 5.50 5.25
Deposits in overseas offices...................... 5.21 5.51 5.71 5.99 5.81
Federal funds borrowed............................ 6.49 7.06 6.92 5.66 5.12
Security repurchase agreements.................... 4.84 5.27 5.20 5.45 5.04
Borrowed funds.................................... 5.54 5.77 5.84 5.78 5.74
Corporate long-term debt.......................... 6.68 6.86 6.94 7.14 7.30
Total interest bearing liabilities/
Total interest expense/rates............... 4.66% 4.81% 4.83% 4.75% 4.42%
Non-interest bearing deposits.....................
Acceptances outstanding...........................
Accrued expenses and other liabilities............
Total liabilities.............................
Stockholders' equity..........................
Total liabilities and stockholders' equity....
Net interest income.....................................
Interest spread......................................... 3.76% 3.58% 3.67% 3.77% 3.91%
Contribution of non-interest bearing sources of funds... .68 .74 .72 .70 .68
------- ------- ------- ------- -------
Net interest margin..................................... 4.44% 4.32% 4.39% 4.47% 4.59%
======= ======= ======= ======= =======
</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 Operations
Department 5352
P.O. Box 92301
Cleveland, Ohio 44193-0900
1-800-622-6757
INVESTOR INFORMATION
Janis E. Lyons, Vice President
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.
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 may 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 Operations
Dividend Reinvestment Plan
P.O. Box 92301
Cleveland, Ohio 44193-0900
1-800-622-6757
DEBT RATINGS
<TABLE>
<CAPTION>
MOODY'S STANDARD DUFF & THOMSON
INVESTORS SERVICE & 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+ TBW1
Senior debt........................... A1 A AA-
Subordinated debt..................... A2 A- A+ A
Preferred stock....................... "a1" BBB+ A
Bank Subsidiaries:*
Certificates of deposit............... Aa3 A+ AA
Subordinated bank notes............... A1 A AA- A+
</TABLE>
* Includes the following subsidiaries:
National City Bank, Cleveland
National City Bank of Columbus
National City Bank of Kentucky
National City Bank of Indiana
National City Bank, Northeast (Akron)
National City Bank of Dayton
National City Bank, Northwest (Toledo)
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
[LOGO]
FORM 10-Q -- MARCH 31, 1996
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: May 1, 1996
/s/ ROBERT G. SIEFERS
----------------------------
Robert G. Siefers
Executive Vice President
Chief Financial Officer
(Duly Authorized Signer and
Principal Financial Officer)
19
<PAGE> 21
[LOGO]
<TABLE>
<S> <C>
Bulk Rate
National City Center U.S. Postage
1900 East Ninth Street PAID
Cleveland, Ohio 44114- 3484 National City
Corporation
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 2,209,008
<INT-BEARING-DEPOSITS> 57,911
<FED-FUNDS-SOLD> 313,956
<TRADING-ASSETS> 31,398
<INVESTMENTS-HELD-FOR-SALE> 4,425,489
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 26,444,229
<ALLOWANCE> 492,821
<TOTAL-ASSETS> 35,109,523
<DEPOSITS> 24,339,615
<SHORT-TERM> 5,768,116
<LIABILITIES-OTHER> 722,244
<LONG-TERM> 1,315,316
<COMMON> 585,593
0
174,450
<OTHER-SE> 2,204,189
<TOTAL-LIABILITIES-AND-EQUITY> 35,109,523
<INTEREST-LOAN> 569,184
<INTEREST-INVEST> 70,765
<INTEREST-OTHER> 6,669
<INTEREST-TOTAL> 646,618
<INTEREST-DEPOSIT> 208,330
<INTEREST-EXPENSE> 306,576
<INTEREST-INCOME-NET> 340,042
<LOAN-LOSSES> 28,039
<SECURITIES-GAINS> 5,436
<EXPENSE-OTHER> 367,989
<INCOME-PRETAX> 185,856
<INCOME-PRE-EXTRAORDINARY> 185,856
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 124,834
<EPS-PRIMARY> .81
<EPS-DILUTED> .79
<YIELD-ACTUAL> 4.44
<LOANS-NON> 116,300
<LOANS-PAST> 47,800
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 490,679
<CHARGE-OFFS> 42,365
<RECOVERIES> 16,468
<ALLOWANCE-CLOSE> 492,821
<ALLOWANCE-DOMESTIC> 310,395
<ALLOWANCE-FOREIGN> 261
<ALLOWANCE-UNALLOCATED> 182,165
</TABLE>
