<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
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 of shares outstanding of each of the issuer's classes
of Common Stock as of April 23, 1997.
Common stock, $4.00 Par Value -- 219,216,597
<PAGE> 2
NATIONAL CITY CORPORATION LOGO
QUARTER ENDED MARCH 31, 1997
FINANCIAL REPORT
AND FORM 10-Q
<PAGE> 3
NATIONAL CITY CORPORATION LOGO
FINANCIAL REPORT AND FORM 10-Q
QUARTER ENDED MARCH 31, 1997
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 Consolidated Financial Statements................................... 7
Management's Discussion and Analysis (Item 2)..................................... 12
Daily Average Balances/Net Interest Income/Rates.................................. 16
PART II -- OTHER INFORMATION
Changes in Securities (Item 2)
Refer to Note 10 on page 10.
Exhibits and Reports on Form 8-K (Item 6)
Exhibit 27:
Financial Data Schedule
Reports on Form 8-K:
February 3, 1997: On February 3, 1997, National City announced that its
president, William R. Robertson, will be retiring effective July 31, 1997.
Mr. Robertson will continue as a member of the Board of Directors pending
reelection at the Annual Meeting of Stockholders on April 14, 1997.
Signature......................................................................... 19
</TABLE>
2
<PAGE> 4
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Three Months Ended
March 31
- -------------------------------------------------------------------------------------------------------
1997 1996 Percent
Change
<S> <C> <C> <C>
EARNINGS (IN THOUSANDS):
- ---------------------------------
Net interest income -- fully taxable equivalent....... $477,379 $480,817 (1)%
Provision for loan losses............................. 35,881 32,039 12
Fees and other income................................. 289,010 261,033 11
Security gains........................................ 15,964 12,735 25
Noninterest expense................................... 451,338 457,782 (1)
Net income............................................ 196,142 176,864 11
Net income applicable to common stock................. 196,142 173,375 13
PERFORMANCE RATIOS:
- ------------------------------
Net interest margin................................... 4.26% 4.35%
Return on average assets.............................. 1.61 1.46
Return on average common equity....................... 17.71 17.82
Return on average total equity........................ 17.71 17.39
PER SHARE MEASURES:
- ------------------------------
Fully diluted net income per common share............. $ .87 $ .79 10%
Dividends paid per common share....................... .41 .36 14
Book value per common share........................... 19.69 18.43 7
Market value per common share (close)................. 46.63 35.13 33
Average shares -- fully diluted....................... 226,625,587 224,153,336 1
AVERAGE BALANCES (IN MILLIONS):
- -------------------------------------------
Assets................................................ $49,544 $48,830 1%
Loans................................................. 35,834 34,312 4
Securities............................................ 8,534 9,263 (8)
Earning assets........................................ 44,944 44,203 2
Deposits.............................................. 34,793 34,661 --
Common stockholders' equity........................... 4,491 3,913 15
Stockholders' equity.................................. 4,491 4,091 10
AT PERIOD END:
- --------------------
Equity to assets ratio................................ 8.62% 8.39%
Tier 1 capital ratio.................................. 9.70 9.80
Total risk-based capital ratio........................ 14.74 14.70
Leverage ratio........................................ 7.86 7.48
Common shares outstanding............................. 220,595,443 212,633,248 4%
Full-time equivalent employees........................ 26,291 25,905 1
ASSET QUALITY:
- --------------------
Net charge-offs to loans (annualized)................. .36% .36%
Loan loss reserve to loans............................ 1.94 2.03
Nonperforming assets to loans & OREO.................. .47 .63
</TABLE>
3
<PAGE> 5
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended
(Dollars in Thousands Except Per Share Amounts) March 31
- ----------------------------------------------------------------------------------------------------------
1997 1996
<S> <C> <C>
INTEREST INCOME
Loans................................................................ $755,786 $752,799
Securities:
Taxable............................................................ 123,738 133,747
Exempt from Federal income taxes................................... 12,921 17,528
Federal funds sold and security resale agreements.................... 4,924 6,661
Other short-term investments......................................... 2,921 1,238
------------ ------------
Total interest income............................................ 900,290 911,973
INTEREST EXPENSE
Deposits............................................................. 299,652 304,498
Federal funds borrowed and security repurchase agreements............ 58,143 57,410
Borrowed funds....................................................... 21,623 23,340
Long-term debt....................................................... 47,826 51,503
------------ ------------
Total interest expense........................................... 427,244 436,751
------------ ------------
NET INTEREST INCOME.................................................... 473,046 475,222
PROVISION FOR LOAN LOSSES.............................................. 35,881 32,039
------------ ------------
Net interest income after provision for loan losses.............. 437,165 443,183
NONINTEREST INCOME
Item processing revenue.............................................. 85,491 80,306
Service charges on deposit accounts.................................. 53,325 51,358
Trust fees........................................................... 46,818 43,401
Card-related fees.................................................... 32,121 28,681
Mortgage banking revenue............................................. 20,518 19,487
Brokerage revenue.................................................... 10,686 12,593
Other................................................................ 40,051 25,207
------------ ------------
Total fees and other income...................................... 289,010 261,033
Securities gains..................................................... 15,964 12,735
------------ ------------
Total noninterest income......................................... 304,974 273,768
NONINTEREST EXPENSE
Salaries and employee benefits....................................... 231,113 222,433
Equipment............................................................ 34,980 32,680
Net occupancy........................................................ 32,828 33,318
Assessments and taxes................................................ 12,120 11,979
Restructuring and merger-related charges............................. 6,340 3,406
Other................................................................ 133,957 153,966
------------ ------------
Total noninterest expense........................................ 451,338 457,782
------------ ------------
Income before income taxes............................................. 290,801 259,169
Income tax expense..................................................... 94,659 82,305
------------ ------------
NET INCOME............................................................. $196,142 $176,864
============ ============
NET INCOME APPLICABLE TO COMMON STOCK.................................. $196,142 $173,375
============ ============
NET INCOME PER COMMON SHARE
Primary.............................................................. $.87 $.80
Fully Diluted........................................................ .87 .79
AVERAGE COMMON SHARES OUTSTANDING
Primary.............................................................. 226,557,392 215,545,255
Fully Diluted........................................................ 226,625,587 224,153,336
</TABLE>
See notes to consolidated financial statements.
4
<PAGE> 6
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(Dollars in Thousands)
- --------------------------------------------------------------------------------------------------
MARCH 31 December 31 March 31
1997 1996 1996
<S> <C> <C> <C>
ASSETS
Loans:
Commercial.................................... $12,181,500 $11,217,815 $11,501,502
Real estate construction...................... 746,496 774,991 638,048
Lease financing............................... 490,659 515,576 368,165
Commercial real estate........................ 3,118,004 3,440,696 3,262,785
Residential real estate....................... 7,220,908 7,288,677 7,162,117
Mortgage loans held for sale.................. 331,775 334,742 374,139
Consumer...................................... 9,321,083 9,251,982 8,440,513
Credit card................................... 1,147,998 1,222,129 1,462,465
Home equity................................... 1,824,565 1,783,460 1,565,291
----------- ----------- -----------
Total loans.............................. 36,382,988 35,830,068 34,775,025
Allowance for loan losses................ (704,264) (705,893) (707,401)
----------- ----------- -----------
Net loans................................ 35,678,724 35,124,175 34,067,624
Securities available for sale, at market......... 8,831,006 8,997,322 9,129,101
Federal funds sold and security resale
agreements.................................... 414,488 493,733 313,906
Trading account assets........................... 28,997 102,493 31,398
Other short-term money market investments........ 161,973 281,563 78,712
Cash and demand balances due from banks.......... 2,467,170 2,935,282 2,522,328
Properties and equipment......................... 637,428 616,426 589,700
Customers' acceptance liability.................. 81,232 66,767 61,345
Accrued income and other assets.................. 2,079,867 2,238,074 1,982,232
----------- ----------- -----------
TOTAL ASSETS............................. $50,380,885 $50,855,835 $48,776,346
============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Demand deposits (noninterest bearing)............ $ 6,877,486 $ 7,436,403 $ 6,387,729
NOW and money market accounts.................... 9,041,382 9,162,353 9,111,824
Savings accounts................................. 3,894,812 3,896,234 4,180,273
Time deposits of individuals..................... 13,795,070 13,896,667 13,762,410
Other time deposits.............................. 861,452 721,647 635,925
Deposits in overseas offices..................... 596,212 886,443 630,274
----------- ----------- -----------
Total deposits........................... 35,066,414 35,999,747 34,708,435
Federal funds borrowed and security repurchase
agreements.................................... 4,744,272 4,276,722 3,845,406
Borrowed funds................................... 1,776,838 1,994,009 1,734,404
Long-term debt................................... 3,334,163 2,994,418 3,375,493
Acceptances outstanding.......................... 81,232 66,767 61,345
Accrued expenses and other liabilities........... 1,033,560 1,092,109 956,969
----------- ----------- -----------
TOTAL LIABILITIES........................ 46,036,479 46,423,772 44,682,052
Stockholders' Equity:
Preferred stock.................................. -- -- 174,450
Common stock..................................... 4,344,406 4,432,063 3,919,844
----------- ----------- -----------
TOTAL STOCKHOLDERS' EQUITY............... 4,344,406 4,432,063 4,094,294
----------- ----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY................................. $50,380,885 $50,855,835 $48,776,346
============ ============ ============
</TABLE>
See notes to consolidated financial statements.
5
<PAGE> 7
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(Dollars in Thousands) Three Months Ended
March 31
- -----------------------------------------------------------------------------------------------
1997 1996
<S> <C> <C>
OPERATING ACTIVITIES
Net income...................................................... $ 196,142 $ 176,864
Adjustments to reconcile net income to net cash provided by
operating activities:
Provision for loan losses.................................. 35,881 32,039
Depreciation and amortization.............................. 23,315 22,154
Amortization of goodwill and servicing rights.............. 14,273 15,865
Amortization of securities discount and premium............ 377 735
Securities gains........................................... (15,964) (12,735)
Net (increase) decrease in trading account securities...... 73,496 (7,683)
Other gains, net........................................... (6,229) (5,974)
Originations and purchases of mortgage loans held for
sale...................................................... (749,736) (703,087)
Proceeds from sales of mortgage loans held for sale........ 749,892 545,446
(Increase) decrease in interest receivable................. 52,834 (46,743)
Increase (decrease) in interest payable.................... (68,488) 50,666
Net change in other assets/liabilities..................... 129,415 (26,682)
---------- ----------
Net Cash Provided by Operating Activities............... 435,208 40,865
LENDING AND INVESTING ACTIVITIES
Net decrease in short-term investments.......................... 198,835 447,939
Purchases of securities......................................... (989,107) (783,138)
Proceeds from sales of securities............................... 856,156 1,352,974
Proceeds from maturities and prepayments of securities.......... 256,430 546,471
Net (increase) in loans......................................... (670,211) (182,042)
Proceeds from sales of loans.................................... 79,625 --
Net (increase) in properties and equipment...................... (44,317) (18,348)
---------- ----------
Net Cash Provided (Used) by Lending and Investing
Activities........................................... (312,589) 1,363,856
DEPOSIT AND FINANCING ACTIVITIES
Net increase (decrease) in Federal funds borrowed and security
repurchase agreements........................................ 467,550 (1,454,160)
Net increase (decrease) in borrowed funds....................... (217,171) 171,900
Net (decrease) in demand, savings, NOW, insured money market
accounts, and deposits in overseas offices................... (971,541) (634,721)
Net increase (decrease) in time deposits........................ 38,208 (237,811)
Proceeds from issuance of long-term debt, net................... 416,111 550,501
Repayment of long-term debt..................................... (76,327) (200,174)
Dividends paid, net of tax benefit of ESOP shares............... (91,555) (91,825)
Issuance of common stock........................................ 22,895 16,121
Repurchase of common stock...................................... (178,901) --
ESOP trust repayment............................................ -- 1,871
---------- ----------
Net Cash (Used) by Deposit and Financing Activities..... (590,731) (1,878,298)
---------- ----------
Net (Decrease) in Cash and Demand Balances Due From Banks....... (468,112) (473,577)
Cash and Demand Balances Due From Banks, January 1.............. 2,935,282 2,995,905
---------- ----------
Cash and Demand Balances Due From Banks, March 31............... $2,467,170 $2,522,328
========== ==========
SUPPLEMENTAL DISCLOSURES
Interest paid................................................... $ 496,730 $ 386,085
Income taxes paid............................................... 982 10,149
</TABLE>
See notes to consolidated 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, 1996.................... $185,400 $846,284 $399,813 $2,635,090 $ (2,741)
Net income............................... 176,864
Common dividends declared of National
City, $.36 per share................... (52,529)
Common dividends declared of Integra
prior to merger........................ (35,723)
Preferred dividends paid, $1.00 per
depositary share....................... (3,573)
Issuance of 702,894 common shares under
corporate stock and dividend
reinvestment plans..................... 2,812 13,407 (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....................... (72,583)
-------- -------- -------- ---------- -------
Balance March 31, 1996..................... $174,450 $851,184 $422,082 $2,647,490 $ (912)
======== ======== ======== ========== =======
Balance January 1, 1997.................... $ -- $892,794 $622,543 $2,916,726 $ --
Net income............................... 196,142
Common dividends declared, $.41 per
share.................................. (90,076)
Issuance of 962,949 common shares under
corporate stock and dividend
reinvestment plans..................... 3,852 19,043
Purchase of 3,566,000 common shares...... (14,264) (8,561) (156,076)
Change in unrealized market value
adjustment on securities available for
sale, net of tax....................... (37,717)
-------- -------- -------- ---------- -------
Balance March 31, 1997..................... $ -- $882,382 $633,025 $2,828,999 $ --
======== ======== ======== ========== =======
<CAPTION>
(Dollars in Thousands Except Per
Share Amounts) Total
- --------------------------------------------------------
<S> <C>
Balance January 1, 1996.................... $4,063,846
Net income............................... 176,864
Common dividends declared of National
City, $.36 per share................... (52,529)
Common dividends declared of Integra
prior to merger........................ (35,723)
Preferred dividends paid, $1.00 per
depositary share....................... (3,573)
Issuance of 702,894 common shares under
corporate stock and dividend
reinvestment plans..................... 16,121
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....................... (72,583)
----------
Balance March 31, 1996..................... $4,094,294
==========
Balance January 1, 1997.................... $4,432,063
Net income............................... 196,142
Common dividends declared, $.41 per
share.................................. (90,076)
Issuance of 962,949 common shares under
corporate stock and dividend
reinvestment plans..................... 22,895
Purchase of 3,566,000 common shares...... (178,901)
Change in unrealized market value
adjustment on securities available for
sale, net of tax....................... (37,717)
----------
Balance March 31, 1997..................... $4,344,406
==========
</TABLE>
See notes to consolidated financial statements.
NOTES TO CONSOLIDATED 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. RECENT ACCOUNTING PRONOUNCEMENTS
ACCOUNTING FOR TRANSFERS AND SERVICING OF FINANCIAL ASSETS AND
EXTINGUISHMENTS OF LIABILITIES: In June 1996, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards (SFAS) No. 125,
Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities which provides standards for distinguishing between transfers of
financial assets that are sales from transfers that are secured borrowings. The
statement also extends the treatment of mortgage servicing rights to all
servicing assets. The provisions of SFAS No. 125 were adopted by the Corporation
prospectively as of January 1, 1997 for the following types of transactions:
securitizations, recognition of servicing assets and liabilities,
7
<PAGE> 9
transfers of receivables with recourse, loan participations, and extinguishments
of liabilities.
Certain provisions of SFAS No. 125, relating to repurchase agreements,
securities lending and other similar transactions, and pledged collateral, were
deferred for one year by SFAS No. 127 and will be adopted prospectively on
January 1, 1998. The adoption of these statements is not expected to have a
material impact on financial position or results of operations.
EARNINGS PER SHARE: In February 1997, the Financial Accounting Standards
Board issued SFAS No. 128, Earnings per Share, which is required to be adopted
on December 31, 1997. At that time, the Corporation will be required to change
the method currently used to compute earnings per share and to restate all prior
periods. Under the new requirements, primary earnings per share will be replaced
by a more simply calculated basic earnings per share which will not include the
impact of any potentially dilutive securities. The impact is expected to result
in an increase in primary earnings per share for the first quarter ended March
31, 1997 and March 31, 1996 of $.01 and $.02 per share, respectively. Diluted
earnings per share will continue to be disclosed and will be calculated using a
methodology not significantly different from that presently used to calculate
fully diluted earnings per share. As a result, the impact of the statement on
fully diluted earnings per share for the quarters presented is not expected to
be material.
DERIVATIVE AND MARKET RISK DISCLOSURES: In January 1997, the Securities and
Exchange Commission issued Release No. 33-7386 relating to derivatives and
exposures to market risk from derivative financial instruments and other
financial instruments. The new rules require (i) quantitative and qualitative
disclosures outside the financial statements about the market risk inherent in
derivative and other financial instruments and (ii) expanded accounting policy
disclosures for derivatives in the notes to the financial statements. The
expanded accounting policy disclosures are required to be included in financial
statements filed by the Corporation for periods ending after June 15, 1997. The
market risk disclosures are required commencing with the Corporation's 1997
annual report. The Corporation is currently evaluating the impact of this
release on disclosures included in its interim and annual financial statements.
3. ACQUISITIONS
On January 17, 1997, National City Mortgage Co., a subsidiary of the
Corporation, signed a definitive agreement to purchase certain assets of the
mortgage loan origination business owned by Bank United, a federal savings bank
and its subsidiaries doing business principally under the name Commonwealth
United Mortgage. National City Mortgage Co. assumed the assets February 1, 1997.
The cost of the acquisition was not material to the Corporation.
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) 1997 1996
- ------------------------------------------------------------
<S> <C> <C>
Balance at beginning of year........ $ 705,893 $ 705,846
Provision........................... 35,881 32,039
Reserves acquired (sold)............ (4,906) 546
Charge-offs:
Commercial........................ 7,439 12,436
Real estate -- construction....... 151 51
Real estate -- commercial......... 1,100 136
Real estate -- residential........ 1,725 583
Consumer.......................... 30,545 20,273
Credit card....................... 15,865 16,143
Home equity....................... 830 739
-------- --------
Total charge-offs................. 57,655 50,361
Recoveries:
Commercial........................ 6,295 7,308
Real estate -- construction....... 27 357
Real estate -- commercial......... 1,568 441
Real estate -- residential........ 140 133
Consumer.......................... 13,360 8,415
Credit card....................... 3,295 2,541
Home equity....................... 366 136
-------- --------
Total recoveries.................. 25,051 19,331
-------- --------
Net charge-offs..................... 32,604 31,030
-------- --------
Balance at end of period............ $ 704,264 $ 707,401
======== ========
</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
8
<PAGE> 10
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 14 provides detail regarding nonperforming loans. At March
31, 1997 and December 31, 1996, loans that were considered to be impaired under
SFAS No. 114 totaled $5.6 million and $13.9 million, respectively. All impaired
loans are included in nonperforming assets. The related allowance allocated to
these loans was $5.3 million and $9.6 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, 1997, was $5.9
million and $1.5 million, respectively.
6. SECURITIES
The following is a summary of securities available for sale:
<TABLE>
<CAPTION>
MARCH 31, 1997
----------------------------------------------
AMORTIZED UNREALIZED UNREALIZED MARKET
(In Thousands) COST GAINS LOSSES VALUE
- ----------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury and
Federal agency
debentures...... $1,777,730 $ 610 $ (46,208) $1,732,132
Mortgage-backed
securities...... 4,742,770 23,789 (68,028) 4,698,531
Asset-backed and
corporate debt
securities...... 1,004,285 3,373 (6,055) 1,001,603
States and
political
subdivisions.... 304,393 12,188 (1,414) 315,167
Other............. 832,828 253,636 (2,891) 1,083,573
---------- -------- -------- ----------
Total
securities.... $8,662,006 $293,596 $(124,596) $8,831,006
========== ======== ======== ==========
</TABLE>
<TABLE>
<CAPTION>
March 31, 1996
----------------------------------------------
Amortized Unrealized Unrealized Market
(In Thousands) Cost Gains Losses Value
- -----------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury and
Federal agency
debentures...... $2,135,353 $ 5,920 $(27,296) $2,113,977
Mortgage-backed
securities...... 4,874,725 19,750 (38,157) 4,856,318
Asset-backed and
corporate debt
securities...... 804,822 2,208 (45) 806,985
States and
political
subdivisions.... 404,196 17,791 (1,168) 420,819
Other............. 719,508 214,110 (2,616) 931,002
---------- -------- -------- ----------
Total
securities.... $8,938,604 $259,779 $(69,282) $9,129,101
========== ======== ======== ==========
</TABLE>
For the three months ended March 31, 1997 and 1996, gross gains of $19.4
million and $19.7 million, and gross losses of $3.4 million and $7.0 million
were realized, respectively.
At March 31, 1997, the unrealized appreciation in securities available for
sale included in retained earnings totaled $110.0 million, net of tax, compared
to unrealized appreciation of $123.8 million, net of tax, at March 31, 1996. 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 income.
At March 31, 1997, there were no securities of a single issuer, other than
U.S. Treasury and other U.S. government agency securities, which exceeded 10% of
stockholders' equity.
7. BORROWED FUNDS
<TABLE>
<CAPTION>
MARCH 31 Dec 31 March 31
(In Thousands) 1997 1996 1996
- -----------------------------------------------------------------
<S> <C> <C> <C>
U.S. Treasury demand notes
and Federal funds
borrowed-term........... $ 918,326 $1,056,499 $ 340,741
Notes payable to Student
Loan Marketing
Association............. 300,000 300,000 600,000
Other..................... 38,105 79,648 260,961
---------- ---------- ----------
Total bank
subsidiaries.......... 1,256,431 1,436,147 1,201,702
Commercial paper.......... 516,610 556,100 532,234
Other..................... 3,797 1,762 468
---------- ---------- ----------
Total parent company and
other subsidiaries.... 520,407 557,862 532,702
---------- ---------- ----------
Total............. $1,776,838 $1,994,009 $1,734,404
========== ========== ==========
</TABLE>
9
<PAGE> 11
8. LONG-TERM DEBT
<TABLE>
<CAPTION>
MARCH 31 Dec 31 March 31
(In Thousands) 1997 1996 1996
- ---------------------------------------------------------------
<S> <C> <C> <C>
Floating rate subordinated
notes due 1997.............. $ -- $ 74,998 $ 74,985
Floating rate notes due
1997........................ 49,986 49,983 49,967
9 7/8% subordinated notes due
1999........................ 64,883 64,872 64,837
6.50% subordinated notes due
2000........................ 99,841 99,820 99,787
8.50% subordinated notes due
2002........................ 99,879 99,881 99,857
6 5/8% subordinated notes due
2004........................ 249,104 249,072 248,975
7.20% subordinated notes due
2005........................ 249,763 249,756 249,734
Other........................ 1,774 1,794 2,557
---------- ---------- ----------
Total parent company....... 815,230 890,176 890,699
---------- ---------- ----------
6.50% subordinated notes due
2003........................ 199,544 199,525 199,470
7.25% subordinated notes due
2010........................ 222,822 222,779 222,656
6.30% subordinated notes due
2011........................ 200,000 200,000 200,000
7.25% subordinated notes due
2011........................ 197,129 197,080 --
Other........................ 1,847 2,103 2,135
---------- ---------- ----------
Total subsidiary
subordinated notes....... 821,342 821,487 624,261
---------- ---------- ----------
Total long-term debt
qualifying for Tier II
Capital.................. 1,636,572 1,711,663 1,514,960
Senior bank notes............ 1,169,437 754,582 754,571
Federal Home Loan Bank
advances.................... 528,154 528,173 1,105,962
---------- ---------- ----------
Total other long-term debt
of subsidiaries.......... 1,697,591 1,282,755 1,860,533
---------- ---------- ----------
Total................ $3,334,163 $2,994,418 $3,375,493
========== ========== ==========
</TABLE>
A credit agreement dated March 14, 1997, with a group of unaffiliated
banks, allows the Corporation to borrow up to $350 million until February 1,
2001, with a provision to extend the expiration date under certain
circumstances. 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, 1997.
9. CAPITAL RATIOS
The following table reflects various measures of capital:
<TABLE>
<CAPTION>
MARCH 31 December 31 March 31
1997 1996 1996
(Dollars in --------------- --------------- ---------------
Millions) AMOUNT RATIO Amount Ratio Amount Ratio
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total
equity(1)...... $4,344.4 8.62% $4,432.1 8.71% $4,094.3 8.39%
Tangible
equity(2)...... 3,829.1 7.68 3,932.7 7.81 3,569.2 7.40
Tier 1
capital(3)..... 3,867.9 9.70 3,976.5 9.84 3,649.4 9.80
Total risk-based
capital(4)..... 5,875.7 14.74 5,980.6 14.79 5,473.7 14.70
Leverage(5)..... 3,867.9 7.86 3,976.5 8.16 3,649.4 7.48
- ------------------------------------------------------------------------
</TABLE>
(1) Computed in accordance with generally accepted accounting principles,
including unrealized market value adjustment of securities available for
sale.
(2) Stockholders' equity less all intangible assets and servicing rights;
computed as a ratio to total assets less intangible assets and servicing
rights.
(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.
- ----------------------------------------------------------------
National City's Tier 1, total risk-based capital and leverage ratios are
well above the required minimum levels of 4.00%, 8.00%, and 4.00%, respectively.
The capital levels at all of National City's subsidiary banks are
maintained at or above the well-capitalized minimums of 6.00%, 10.00% and 5.00%
for the Tier 1 capital, total risk-based capital and leverage ratios,
respectively.
Intangible asset and mortgage servicing right totals used in the capital
ratio calculations are summarized below:
<TABLE>
<CAPTION>
MARCH 31 December 31 March 31
(Dollars in Millions) 1997 1996 1996
- -----------------------------------------------------------
<S> <C> <C> <C>
Goodwill.................. $ 319.6 $ 307.8 $320.0
Core deposit
intangibles............. 15.8 17.7 24.6
Other intangibles......... 1.5 1.6 2.1
Purchased credit cards.... 25.4 31.1 47.1
Mortgage servicing
rights.................. 153.1 141.2 131.3
- -----------------------------------------------------------
</TABLE>
10. STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
MARCH 31 Dec 31 March 31
(Outstanding Shares) 1997 1996 1996
- --------------------------------------------------------------
<S> <C> <C> <C>
Preferred Stock, no par
value, authorized
5,000,000 shares...... -- -- 697,800
Common Stock, $4.00 par
value, authorized
350,000,000 shares.... 220,595,443 223,198,494 212,633,248
</TABLE>
On March 5, 1996, the Corporation called for redemption its 8% Cumulative
Convertible Preferred Stock, effective May 1, 1996. During the second quarter of
1996, all outstanding depositary shares of the 8% Cumulative Convertible
Preferred Stock converted into common stock.
11. INCOME TAX EXPENSE
The composition of income tax expense follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31
-------------------------
(In Thousands) 1997 1996
- ------------------------------------------------------------
<S> <C> <C>
Applicable to income exclusive of
securities transactions......... $89,072 $77,848
Applicable to securities
transactions.................... 5,587 4,457
------- -------
Total..................... $94,659 $82,305
======= =======
</TABLE>
The effective tax rate was approximately 32.6% and 31.8% for the three
months ended March 31, 1997 and 1996, respectively.
10
<PAGE> 12
12. 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, 1997, bank subsidiaries may pay
the parent company, without prior regulatory approval, approximately $557.6
million of dividends. During the first quarter of 1997, no dividends were
declared and $327.5 million of previously declared dividends were paid to the
parent company by the bank
subsidiaries.
13. 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) 1997 1996
- -----------------------------------------------------------
<S> <C> <C>
PRIMARY:
Net income..................... $196,142 $176,864
Less preferred dividend
requirements................. -- 3,489
----------- -----------
Net income applicable to common
stock........................ $196,142 $173,375
=========== ===========
Average common shares
outstanding-primary.......... 226,557,392 215,545,255
=========== ===========
Primary net income per common
share........................ $.87 $.80
=========== ===========
ASSUMING FULL DILUTION:
Net income..................... $196,142 $176,864
=========== ===========
Average common shares
outstanding.................. 226,557,392 215,545,255
Stock option adjustment........ 68,195 184,297
Preferred stock adjustment..... -- 8,423,784
----------- -----------
Average common shares
outstanding--fully-diluted... 226,625,587 224,153,336
=========== ===========
Fully diluted net income per
common share................. $.87 $.79
=========== ===========
</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.
11
<PAGE> 13
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Net income for the quarter ended March 31, 1997 was $196.1 million, an
increase of 11% over the $176.9 million earned in the first quarter of 1996.
Fully-diluted net income per common share was $.87 for the first quarter of
1997, a 10% increase over $.79 earned in 1996.
Return on average common equity and return on average assets was 17.71% and
1.61%, respectively, for the three months ended March 31, 1997. This compares to
returns of 17.82% and 1.46%, respectively, for the same period in 1996.
Growth in net income was due to increased fee income, coupled with control
of operating expenses. Fee income growth was driven by gains in trust fees,
card-related fees, service charges on deposits, and item processing revenue.
Noninterest expense, excluding non-recurring
charges, declined 2.1% from the same period last year.
After-tax securities gains were $.05 per share in the first quarter of
1997, compared to $.04 per share for the first quarter of 1996.
Results for the first quarter of 1997 reflect the full quarter impact from
the sale of a $400 million private label credit card portfolio ("Private Label")
in mid-November 1996. Although the portfolio was small relative to National
City's total loan portfolio, it did have a disproportionate impact on net
interest income, the net interest margin and net loan charge-offs. On average,
the Private Label loan portfolio yielded over 20%, however, this was offset by a
loss charge-off rate approaching 6% and a rela-
[table 1:]
tively costly supporting infrastructure. The table below isolates the impact of
Private Label on the first quarter of 1996 (assumes investment yield of 7% on
reinvested proceeds from the sale).
<TABLE>
<CAPTION>
FIRST QUARTER OF
PRO-
FORMA
EXCLUDING
1996 PRIVATE
REPORTED LABEL
-------- ---------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Net interest
income........... $475,222 $ 460,000
Net interest
margin........... 4.35% 4.21%
Loan yield........ 8.84% 8.67%
Net charge-offs... $32,604 $26,606
</TABLE>
UNIT PROFITABILITY
The financial performance of National City is monitored by an internal
profitability measurement system which produces line-of-business results and key
performance measures. National City's major business units include corporate
banking, retail banking and fee-based businesses. The corporate banking business
includes commercial and corporate lending, commercial real estate finance,
asset-based lending and leasing. The retail banking business includes the
deposit gathering branch
franchise, small business lending, consumer lending, and the Private Client
Group. The fee-based businesses include institutional
trust, mortgage banking, item processing and brokerage.
Table 1 reflects the results underlying the fundamentals of each of these
businesses. Expenses for centrally provided services are allocated based on
estimated usage of those services. Capital has been allocated among the
businesses on a risk-adjusted basis. The businesses are match-funded and
interest rate risk is centrally managed by the investment/funding unit within
the "Parent and other" line item in Table 1. Methodologies may change from time
to time as accounting systems are enhanced or organizational changes occur.
The increase in corporate banking net income is primarily due to a decline
in the provision for loan losses, an increase in fee income and flat operating
expenses.
The decline in retail banking net income is due to tighter spreads on
deposit accounts, an increase in the provision for loan losses, and to a lesser
extent, the sale of Private Label.
Fee-based net income is relatively flat compared to last year as a result
of lower operating profitability in the Merchant Services division of National
City's item processing subsidiary, National Processing, Inc.
12
<PAGE> 14
TABLE 1: UNIT PROFITABILITY
<TABLE>
<CAPTION>
THREE MONTHS ENDED Three months ended
MARCH 31, 1997 March 31, 1996
-------------------- --------------------
NET RETURN ON Net Return on
(Dollars in Millions) INCOME EQUITY Income Equity
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------
Corporate banking.................. $50.0 23.73% $46.9 22.23%
Retail banking..................... 112.9 24.02 122.0 26.14
Fee-based businesses............... 11.9 10.14 12.2 16.32
Parent and other................... 21.3 -- (4.2) --
------ ------
Consolidated total............. $196.1 17.71% $176.9 17.82%
====== ======
</TABLE>
TABLE 2: CONTRIBUTION OF INTEREST RATE DERIVATIVE PORTFOLIO
<TABLE>
<CAPTION>
Three months ended
March 31
-----------------------------
(In Millions) 1997 1996
<S> <C> <C>
- ----------------------------------------------------------------------------------
Interest adjustment to loans......................... $ 5.1 $ 4.2
Interest adjustment to securities.................... (.8) (.1)
----- -----
Interest adjustment to earning assets.............. 4.3 4.1
Interest adjustment to deposits...................... (7.4) (3.3)
----- -----
Effect on net interest income...................... $11.7 $ 7.4
===== =====
</TABLE>
NOTE: Amounts in brackets represent reductions of the related interest income
or expense line, as applicable.
<PAGE> 15
NET INTEREST INCOME
On a tax-equivalent basis, net interest income was $477.4 million in the
first quarter of 1997, down $3.4 million from $480.8 million in the first
quarter of 1996. National City's net interest margin was 4.26%, down 9 basis
points from the comparable period in 1996. Although average total loans were up
4.4%, the lower net interest income and the resulting contraction of the margin
was due to the sale of Private Label, overall tighter spreads on loans, and the
use of higher cost funding to support earning asset growth.
National City's net interest income is affected by the use of off-balance
sheet derivative financial instruments. In the first quarter of 1997, net
interest income included approximately $11.7 million related to the use of
derivative instruments, compared to $7.4 million in 1996. For the quarters
ending March 31, 1997 and March 31, 1996, the derivatives portfolio contributed
approximately 10 basis points and 7 basis points, respectively, to the net
interest margin.
During the first quarter of 1997, the notional outstandings of interest
rate swap agreements decreased by $1.1 billion to
$9.9 billion. Swaps totaling $635 million were added to manage the Corporation's
interest rate risk position by synthetically converting fixed rate debt to
variable rate; $82 million of swaps were added to hedge loans; $83 million of
swaps were added to hedge new securities; $58 million of swaps were added to
hedge the market value of mortgage servicing rights; and $61 million of swap
agreements were added to facilitate interest rate risk management at third
[table 2:]
[table 3:]
parties. A total of $2.0 billion of swaps matured or were terminated during the
quarter. The Corporation purchased interest rate caps totaling $565 million in
notional amount to hedge variable rate funding costs and mortgage servicing
rights during the quarter. The net unrealized losses in the derivative portfolio
were $95.4 million at March 31, 1997, compared to gains of $13.7 million at
December 31, 1996.
Management attempts to prevent adverse swings in current and future net
interest income and capital resulting from interest rate movements by placing
conservative limits on interest rate risk. Interest rate risk is monitored
through static gap, income simulation and net present value analyses.
At March 31, 1997, the Corporation's interest-rate risk position remained
modestly liability sensitive. The earnings simulation model projects that net
income
will decrease by 1.1% if market rates rise gradually by two percentage points
over the next year, relative to a stable-rate scenario. In an environment where
market rates fall gradually by two percentage points over the next year, the
model estimates an increase in net income of 1.0%, relative to a stable-rate
scenario. At the end of December 1996, the corresponding changes were (1.2)% of
net income in the rising-rate environment and 1.1% in the falling-rate
environment. The cumulative one-year gap was (11.4%) of adjusted earning assets
at March 31, 1997. The Corporation's net present value 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 1.7%
of total assets at the end of the quarter.
13
<PAGE> 16
TABLE 1: UNIT PROFITABILITY
<TABLE>
<CAPTION>
THREE MONTHS ENDED Three months ended
MARCH 31, 1997 March 31, 1996
-------------------- --------------------
NET RETURN ON Net Return on
(Dollars in Millions) INCOME EQUITY Income Equity
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------
Corporate banking.................. $50.0 23.73% $46.9 22.23%
Retail banking..................... 112.9 24.02 122.0 26.14
Fee-based businesses............... 11.9 10.14 12.2 16.32
Parent and other................... 21.3 -- (4.2) --
------ ------
Consolidated total............. $196.1 17.71% $176.9 17.82%
====== ======
</TABLE>
TABLE 2: CONTRIBUTION OF INTEREST RATE DERIVATIVE PORTFOLIO
<TABLE>
<CAPTION>
Three months ended
March 31
-----------------------------
(In Millions) 1997 1996
<S> <C> <C>
- ----------------------------------------------------------------------------------
Interest adjustment to loans......................... $ 5.1 $ 4.2
Interest adjustment to securities.................... (.8) (.1)
----- -----
Interest adjustment to earning assets.............. 4.3 4.1
Interest adjustment to deposits...................... (7.4) (3.3)
----- -----
Effect on net interest income...................... $11.7 $ 7.4
===== =====
</TABLE>
NOTE: Amounts in brackets represent reductions of the related interest income
or expense line, as applicable.
<PAGE> 17
TABLE 3: FULL-TIME EQUIVALENT STAFFING AND OVERHEAD
PERFORMANCE MEASURES
<TABLE>
<CAPTION>
MARCH 31, 1997 March 31, 1996
-------------------------------------- --------------------------------------
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..................... 16,216 40.76% 52.86% 17,182 41.54% 52.35%
Fee-based business........... 8,855 -- 93.79 7,632 -- 86.85
Corporate.................... 1,220 -- -- 1,091 -- --
------ ------
Total..................... 26,291 34.00% 58.89% 25,905 40.92% 61.71%
====== ======
</TABLE>
<PAGE> 18
TABLE 4: ANNUALIZED NET CHARGE-OFFS AS A PERCENTAGE OF
AVERAGE LOANS
<TABLE>
<CAPTION>
First Quarter
1997 1996
<S> <C> <C>
----------------------------------------------------------------------------
Commercial................................................. .04% .18%
Real estate -- construction................................ .05 (.18)
Real estate -- commercial.................................. (.06) (.04)
Real estate -- residential................................. .09 .02
Consumer................................................... .74 .57
Credit card................................................ 4.25 3.64
Home equity................................................ .11 .15
Total net charge-offs to average loans..................... .36% .36%
</TABLE>
<PAGE> 19
TABLE 5: NONPERFORMING ASSETS
<TABLE>
<CAPTION>
MARCH 31 December 31 March 31
(In Millions) 1997 1996 1996
<S> <C> <C> <C>
----------------------------------------------------------------------------
Commercial:
Nonaccrual.......................... $ 94.8 $ 82.7 $ 109.7
Restructured........................ -- -- --
------ ------ ------
Total commercial.................. 94.8 82.7 109.7
Real estate related:
Nonaccrual.......................... 50.6 57.2 75.2
Restructured........................ 3.1 3.2 6.3
------ ------ ------
Total real estate related......... 53.7 60.4 81.5
------ ------ ------
Total nonperforming loans......... 148.5 143.1 191.2
Other real estate owned (OREO)........ 24.3 24.5 24.1
------ ------ ------
Nonperforming assets.................. $ 172.8 $167.6 $ 215.3
====== ====== ======
Loans 90 days past-due accruing
interest............................ $ 106.1 $107.1 $ 69.2
====== ====== ======
</TABLE>
<PAGE> 20
[table 4:]
[table 5:]
NONINTEREST INCOME
Noninterest income increased 10.7% to $289.0 million for the quarter ended
March 31, 1997, from $261.0 million a year ago. All categories of noninterest
income, with the exception of brokerage revenue, increased over the results
reported for the first quarter of 1996. The most noteworthy trends include
increased card-related fees, trust fees, item processing fees and service
charges.
NONINTEREST EXPENSE
Noninterest expense was $451.3 million for the quarterended March 31, 1997,
down 1.4% from $457.8 million for the same period a year ago. The decrease was
primarily due to
lower third party services and reduced general administrative expenses.
As Table 3 indicates, National City's staff level on a full-time equivalent
basis was 26,291 at
March 31, 1997, up from 25,905 at March 31,1996. The increase was due to
business growth and acquisitions primarily within the fee-based businesses.
The efficiency ratio, defined as noninterest expense as a percentage of fee
income plus tax-equivalent net interest income, was 58.89% for the first quarter
of 1997, an improvement from 61.71% a year ago.
The overhead ratio, defined as noninterest expense less fee income as a
percentage of tax-equivalent net interest income,
was 34.00% for the first quarter of 1997, an improvement from 40.92% a year ago.
For the quarter ended March 31, 1997, restructuring and merger-related
charges included a one-time charge of $6.3 million relating to organizational
restructuring at National City's item processing subsidiary, National
Processing, Inc. For the same time last year, restructuring and merger-related
charges of $3.4 million were recorded in connection with the Integra Financial
Corporation merger which closed on May 3, 1996.
EARNING ASSETS AND INTEREST-BEARING LIABILITIES
Average earning assets totaled $44,944 million for the first quarter of
1997, compared to $44,485 million for the fourth quarter of 1996, and $44,203
million for the first quarter of 1996. Although average loans increased 4.4%
from the same period last year, this growth was
offset by a 7.9% decline in the securities portfolio to $8,534 million from
$9,263 million in 1996. Compared to the fourth quarter of 1996, earning assets
were relatively stable.
Average core deposits declined slightly compared to the fourth quarter of
1996 and were flat compared to the first quarter of 1996. The decline from the
fourth quarter primarily reflected seasonal run-off in savings and time deposit
accounts. Purchased deposits increased from both periods in an effort to obtain
funding to support loan growth.
ASSET QUALITY
The allowance for loan losses was $704.3 million at March 31, 1997, or
1.94% of loans outstanding, compared to $707.4 million
14
<PAGE> 21
or 2.03% at March 31, 1996. The provision for loan losses was $35.9 million for
the first quarter of 1997, up from $32.0 million for the same period a year ago.
The provision for loan losses exceeded loan net charge-offs for the period.
Table 4 shows net charge-offs as a percentage of average loans by portfolio
type. Net charge-offs were $32.6 million and $31.0 million for the quarters
ended March 31, 1997 and 1996, respectively. Net charge-offs as a percentage of
average loans were .36% for the first quarter of 1997, unchanged from the same
period a year ago.
As indicated in Table 5, nonperforming assets were $172.8 million at March
31, 1997, down $42.5 million from last year. Nonperforming assets as a
percentage of loans and OREO were .47%, compared to .63% a year ago.
CAPITAL
At March 31, 1997, stockholders' equity totaled $4.3 billion, up from $4.1
billion at March 31, 1996.
In connection with National City's previously announced five million share
repurchase program, the Corporation repurchased 3.6 million shares of its common
stock at an average cost of $50.17 during the first quarter of 1997. The
remaining shares were repurchased in early April. On April 14, 1997, the board
of directors authorized the repurchase of up to 10 million shares of National
City common stock in the open market or through privately negotiated
transactions.
Book value per common share at March 31, 1997 was $19.69 compared to $18.43
per share at March 31, 1996 and $19.86 at December 31, 1996. Book value per
common share at March 31, 1997, December 31, 1996, and March 31, 1996 included
$.50, $.66, and $.57 per share, respectively, related to market value
appreciation of securities available for sale.
On April 14, 1997, National City stockholders approved an increase in the
number of authorized shares of capital stock from 355,000,000 to 705,000,000.
The shares may be used in connection with payments of stock dividends or other
stock distributions, the dividend reinvestment program, possible acquisitions,
equity financing arrangements or employee stock incentive programs.
15
<PAGE> 22
DAILY AVERAGE BALANCE SHEETS/NET INTEREST INCOME/RATES
<TABLE>
<CAPTION>
(Dollars In Millions) Daily Average Balance
- ----------------------------------------------------------------------------------------------------------
1997 1996
------- ----------------------------------------
FIRST Fourth Third Second First
QUARTER Quarter Quarter Quarter Quarter
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
ASSETS
Earning Assets:
Loans:
Commercial...................................... $16,048 $15,769 $15,544 $15,723 $15,480
Residential real estate......................... 7,486 7,503 7,473 7,477 7,491
Consumer........................................ 9,295 9,161 8,913 8,590 8,288
Credit card..................................... 1,196 1,418 1,527 1,487 1,493
Home equity..................................... 1,809 1,753 1,667 1,594 1,560
------- ------- ------- ------- -------
Total loans................................... 35,834 35,604 35,124 34,871 34,312
Securities:
Taxable......................................... 8,225 7,991 8,045 8,414 8,851
Tax-exempt...................................... 309 331 344 381 412
------- ------- ------- ------- -------
Total securities.............................. 8,534 8,322 8,389 8,795 9,263
Federal funds sold................................ 73 82 110 184 165
Security resale agreements........................ 293 263 256 309 315
Other short-term money market investments......... 210 214 73 114 148
------- ------- ------- ------- -------
Total earning assets/
Total interest income/rates................ 44,944 44,485 43,952 44,273 44,203
Market value appreciation of securities available
for sale.......................................... 222 201 49 114 298
Allowance for loan losses........................... (712) (711) (709) (705) (706)
Cash and demand balances due from banks............. 2,360 2,468 2,341 2,447 2,482
Properties and equipment............................ 637 599 592 589 588
Customers' acceptance liability..................... 81 65 68 59 66
Accrued income and other assets..................... 2,012 1,939 1,991 2,000 1,899
------- ------- ------- ------- -------
Total assets.................................. $49,544 $49,046 $48,284 $48,777 $48,830
======= ======= ======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
NOW and money market accounts..................... $ 9,055 $ 8,973 $ 9,004 $ 9,171 $ 8,976
Savings accounts.................................. 3,894 3,982 4,135 4,180 4,174
Time deposits of individuals...................... 13,787 14,038 13,875 13,725 13,780
Other time deposits............................... 771 671 597 624 701
Deposits in overseas offices...................... 931 946 994 720 792
Federal funds borrowed............................ 1,426 1,089 983 959 1,016
Security repurchase agreements.................... 3,212 2,807 2,809 2,926 3,105
Borrowed funds.................................... 1,627 1,441 1,307 1,733 1,709
Long-term debt.................................... 3,072 2,950 3,065 3,325 3,293
------- ------- ------- ------- -------
Total interest bearing liabilities/
Total interest expense/rates............... 37,775 36,897 36,769 37,363 37,546
Noninterest bearing deposits...................... 6,355 6,635 6,347 6,373 6,238
Acceptances outstanding........................... 81 65 68 59 66
Accrued expenses and other liabilities............ 842 1,113 887 884 889
------- ------- ------- ------- -------
Total liabilities............................. 45,053 44,710 44,071 44,679 44,739
Stockholders' equity.......................... 4,491 4,336 4,213 4,098 4,091
------- ------- ------- ------- -------
Total liabilities and stockholders' equity.... $49,544 $49,046 $48,284 $48,777 $48,830
======= ======= ======= ======= =======
Net interest income.................................................................................
Interest spread.....................................................................................
Contribution of noninterest bearing sources of funds................................................
Net interest margin.................................................................................
</TABLE>
16
<PAGE> 23
<TABLE>
<CAPTION>
Quarterly Interest Average Annualized Rate
------------------------------------------------------- -------------------------------------------------------
1997 1996 1997 1996
------- ------------------------------------------- ------- -------------------------------------------
FIRST Fourth Third Second First FIRST Fourth Third Second First
QUARTER Quarter Quarter Quarter Quarter QUARTER Quarter Quarter Quarter Quarter
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$334.8 $338.6 $337.0 $340.0 $332.8 8.43% 8.56% 8.64% 8.68% 8.64%
144.4 144.1 144.7 147.4 146.0 7.72 7.68 7.74 7.88 7.79
199.3 201.5 194.4 186.5 181.7 8.70 8.75 8.68 8.73 8.82
38.6 51.9 59.0 58.1 60.1 12.90 14.64 15.47 15.64 16.09
40.6 38.6 36.9 35.0 35.3 8.99 8.77 8.79 8.83 9.11
------- ------- ------- ------- -------
757.7 774.7 772.0 767.0 755.9 8.53 8.67 8.76 8.83 8.84
132.0 128.7 127.4 139.7 144.6 6.43 6.41 6.30 6.68 6.57
7.1 8.3 9.8 9.4 9.6 9.19 9.98 11.33 9.92 9.37
------- ------- ------- ------- -------
139.1 137.0 137.2 149.1 154.2 6.53 6.57 6.54 6.67 6.67
1.0 1.1 1.6 2.4 2.3 5.46 5.58 5.67 5.37 5.49
3.9 3.5 3.4 4.1 4.4 5.43 5.36 5.26 5.31 5.63
2.9 2.8 1.1 1.7 .8 5.68 5.20 5.76 5.98 2.17
------- ------- ------- ------- -------
$904.6 $919.1 $915.3 $924.3 $917.6 8.11% 8.24% 8.31% 8.35% 8.33%
$ 64.0 $ 64.2 $ 63.6 $ 62.7 $ 62.1 2.87% 2.85% 2.81% 2.75% 2.78%
24.5 25.7 26.8 27.2 27.7 2.55 2.58 2.58 2.62 2.67
190.3 197.6 195.3 191.2 195.8 5.60 5.61 5.60 5.59 5.72
9.2 8.2 6.7 7.7 9.0 4.79 4.86 4.48 4.95 5.14
11.7 12.2 13.2 8.9 10.3 5.08 5.15 5.26 4.98 5.21
19.9 17.1 15.8 15.6 17.4 5.66 6.24 6.39 6.54 6.88
38.2 36.0 34.6 37.1 40.0 4.83 5.10 4.90 5.10 5.18
21.6 17.9 16.7 28.2 23.0 5.39 4.94 5.08 6.55 5.41
47.8 47.0 47.8 51.0 51.5 6.32 6.34 6.20 6.17 6.29
------- ------- ------- ------- -------
$427.2 $425.9 $420.5 $429.6 $436.8 4.59% 4.59% 4.55% 4.62% 4.68%
$477.4 $493.2 $494.8 $494.7 $480.8
======= ======= ======= ======= =======
....................................................... 3.52% 3.65% 3.76% 3.73% 3.65%
....................................................... .74 .78 .74 .72 .70
------- ------- ------- ------- -------
....................................................... 4.26% 4.43% 4.50% 4.45% 4.35%
======= ======= ======= ======= =======
</TABLE>
17
<PAGE> 24
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 CONTACT
Julie I. Sabroff
Manager, 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
Participating common stockholders receive a three percent discount from
market price when reinvesting 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, call
1-800-622-6757
INTERNET ADDRESS
www.national-city.com
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
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 of Pennsylvania
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> 25
National City Logo
FORM 10-Q -- MARCH 31, 1997
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: April 30, 1997
/s/ ROBERT G. SIEFERS
--------------------------------------
Robert G. Siefers
Executive Vice President
Chief Financial Officer
(Duly Authorized Signer and
Principal Financial Officer)
19
<PAGE> 26
National City Logo
Bulk Rate
National City Center U.S. Postage
1900 East Ninth Street PAID
Cleveland, Ohio 44114-3484 National City
Corporation
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 2,467,170
<INT-BEARING-DEPOSITS> 161,973
<FED-FUNDS-SOLD> 414,488
<TRADING-ASSETS> 28,997
<INVESTMENTS-HELD-FOR-SALE> 8,831,006
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 36,382,988
<ALLOWANCE> 704,264
<TOTAL-ASSETS> 50,380,885
<DEPOSITS> 35,066,414
<SHORT-TERM> 6,521,110
<LIABILITIES-OTHER> 1,114,792
<LONG-TERM> 3,334,163
<COMMON> 882,382
0
0
<OTHER-SE> 3,462,024
<TOTAL-LIABILITIES-AND-EQUITY> 50,380,885
<INTEREST-LOAN> 755,786
<INTEREST-INVEST> 136,659
<INTEREST-OTHER> 7,845
<INTEREST-TOTAL> 900,290
<INTEREST-DEPOSIT> 299,652
<INTEREST-EXPENSE> 427,244
<INTEREST-INCOME-NET> 473,046
<LOAN-LOSSES> 35,881
<SECURITIES-GAINS> 15,964
<EXPENSE-OTHER> 451,338
<INCOME-PRETAX> 290,801
<INCOME-PRE-EXTRAORDINARY> 290,801
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 196,142
<EPS-PRIMARY> .87
<EPS-DILUTED> .87
<YIELD-ACTUAL> 4.26
<LOANS-NON> 172,800
<LOANS-PAST> 106,100
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 705,893
<CHARGE-OFFS> 57,655
<RECOVERIES> 25,051
<ALLOWANCE-CLOSE> 704,264
<ALLOWANCE-DOMESTIC> 428,054
<ALLOWANCE-FOREIGN> 194
<ALLOWANCE-UNALLOCATED> 276,016
</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> 2,522,328
<INT-BEARING-DEPOSITS> 78,712
<FED-FUNDS-SOLD> 313,906
<TRADING-ASSETS> 31,398
<INVESTMENTS-HELD-FOR-SALE> 9,129,101
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 34,775,025
<ALLOWANCE> 707,401
<TOTAL-ASSETS> 48,776,346
<DEPOSITS> 34,708,435
<SHORT-TERM> 5,579,810
<LIABILITIES-OTHER> 1,018,314
<LONG-TERM> 3,375,493
<COMMON> 851,184
0
174,450
<OTHER-SE> 3,068,660
<TOTAL-LIABILITIES-AND-EQUITY> 48,776,346
<INTEREST-LOAN> 752,799
<INTEREST-INVEST> 151,275
<INTEREST-OTHER> 7,899
<INTEREST-TOTAL> 911,973
<INTEREST-DEPOSIT> 304,498
<INTEREST-EXPENSE> 436,751
<INTEREST-INCOME-NET> 475,222
<LOAN-LOSSES> 32,039
<SECURITIES-GAINS> 12,735
<EXPENSE-OTHER> 457,782
<INCOME-PRETAX> 259,169
<INCOME-PRE-EXTRAORDINARY> 259,169
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 176,864
<EPS-PRIMARY> .80
<EPS-DILUTED> .79
<YIELD-ACTUAL> 4.35
<LOANS-NON> 215,300
<LOANS-PAST> 69,200
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 705,846
<CHARGE-OFFS> 50,361
<RECOVERIES> 19,331
<ALLOWANCE-CLOSE> 707,401
<ALLOWANCE-DOMESTIC> 424,180
<ALLOWANCE-FOREIGN> 261
<ALLOWANCE-UNALLOCATED> 282,960
</TABLE>
