<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
Commission file number 1-10074
NATIONAL CITY CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of
incorporation or organization)
34-1111088
(I.R.S. Employer
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 the latest practicable date.
Common stock - $4.00 Par Value
Outstanding as of July 21, 1998 - 329,711,442
<PAGE> 2
[NATIONAL CITY CORPORATION LOGO]
QUARTER ENDED JUNE 30, 1998
FINANCIAL REPORT
AND FORM 10-Q
<PAGE> 3
FINANCIAL REPORT AND FORM 10-Q
QUARTER ENDED JUNE 30, 1998
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)............... 13
Consolidated Average Balance Sheets......................... 17
Daily Average Balances/Net Interest Income/Rates............ 18
PART II -- OTHER INFORMATION
Changes in Securities (Item 2)
Refer to Reports on Form 8-K below and Note 11 on page 11.
Exhibits and Reports on Form 8-K (Item 6)
Exhibit 27:
Financial Data Schedule
Reports on Form 8-K:
April 14, 1998: National City announced that on March
31, 1998 the merger of First of America Bank
Corporation (FOA) into National City had been
consummated and qualified as a pooling-of-interests
transaction for accounting purposes. National City
also announced that, effective at the merger date,
the size of National City's board of directors was
expanded by five members.
Under Item 7(a), the historical consolidated
financial statements of First of America Bank
Corporation were incorporated by reference from FOA's
Annual Report on Form 10-K filed for the fiscal year
ended December 31, 1997.
Under Item 7(b), the unaudited pro forma combined
consolidated financial information of National City
and FOA was incorporated by reference from National
City's Registration Statement No. 333-46571 on Form
S-4 dated February 19, 1998.
Signature................................................... 21
</TABLE>
2
<PAGE> 4
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
<CAPTION>
Percent Percent
1998 1997 Change 1998 1997 Change
<S> <C> <C> <C> <C> <C> <C>
EARNINGS (IN THOUSANDS):
- ---------------------------
Net interest income -- fully
taxable equivalent............ $739,915 $717,919 3% $1,448,191 $1,420,099 2%
Provision for loan losses....... 43,033 54,580 (21) 99,300 113,277 (12)
Fees and other income........... 554,129 415,971 33 1,047,900 828,927 26
Securities gains................ 19,714 31,177 (37) 20,766 47,128 (56)
Noninterest expense (excluding
merger and restructuring)..... 749,178 669,217 12 1,448,481 1,315,651 13
Merger and restructuring
expense....................... -- 33,300 (100) 274,698 39,640 593
Net income...................... 331,244 271,430 22 434,966 546,997 (20)
Net income before merger and
restructuring expense......... 331,244 293,075 13 628,851 572,509 10
PERFORMANCE RATIOS:
- -------------------------
Net interest margin............. 4.15% 4.41% 4.16% 4.40%
Return on average assets*....... 1.66 1.64 1.63 1.62
Return on average common
equity*....................... 19.47 19.61 19.07 18.82
Return on average total
equity*....................... 19.43 19.61 19.05 18.82
PER SHARE MEASURES:
- -------------------------
Net income per common share:....
Basic......................... $1.01 $.84 20% $ 1.34 $ 1.68 (20)%
Diluted....................... .99 .83 19 1.32 1.65 (20)
Diluted-adjusted*............. .99 .90 10 1.91 1.73 10
Dividends paid per common
share......................... .46 .41 12 .92 .82 12
Book value per common share..... 21.25 18.89 12
Market value per common share
(close)....................... 71.00 52.50 35
Average shares -- diluted....... 336,382,782 326,791,913 3 329,543,875 330,741,135 --
AVERAGE BALANCES
- ----------------------
(IN MILLIONS):
--------------
Assets.......................... $79,927 $71,578 12% $77,616 $71,321 9%
Loans........................... 56,709 51,343 10 55,112 51,002 8
Securities...................... 13,874 13,166 5 13,803 13,095 5
Earning assets.................. 71,414 65,093 10 69,609 64,693 8
Deposits........................ 54,559 52,040 5 53,275 51,939 3
Common stockholders' equity..... 6,802 5,995 13 6,639 6,136 8
Stockholders' equity............ 6,839 5,995 14 6,658 6,136 9
AT PERIOD END:
- -----------------
Equity to assets ratio.......... 8.64% 8.23%
Tier 1 capital ratio............ 8.92 9.49
Total risk-based capital
ratio......................... 12.91 13.79
Leverage ratio.................. 7.38 7.74
Common shares outstanding....... 328,627,647 320,628,124 2%
Full-time equivalent
employees..................... 42,920 38,449 12
ASSET QUALITY:
- -----------------
Net charge-offs to loans
(annualized).................. .30% .38% .35% .40%
Loan loss reserve to loans...... 1.70 1.86
Nonperforming assets to loans &
OREO.......................... .45 .51
- -------------------------------------------------------------------------------------------------------------
</TABLE>
Note: All previously reported amounts, except for dividends paid per share and
market value per share, have been restated to reflect the
pooling-of-interests transaction with First of America Bank Corporation,
which closed March 31, 1998.
* Excluding merger and restructuring expenses, which totaled $21.6 million
for the second quarter of 1997, and $193.9 million and $25.5 million for
the first six months of 1998 and 1997, respectively.
3
<PAGE> 5
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
(Dollars In Thousands Except Per Share Amounts) June 30 June 30
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------
<CAPTION>
1998 1997 1998 1997
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans......................................... $1,210,235 $1,118,794 $2,350,656 $2,199,596
Securities:
Taxable.................................... 207,228 202,718 413,640 399,109
Exempt from Federal income taxes........... 14,562 11,071 26,162 21,984
Federal funds sold and security resale
agreements................................. 8,293 5,105 14,299 10,213
Other short-term investments.................. 4,973 3,871 9,179 8,344
---------- ---------- ---------- ----------
Total interest income.................... 1,445,291 1,341,559 2,813,936 2,639,246
INTEREST EXPENSE
Deposits...................................... 472,064 453,120 918,525 896,107
Federal funds borrowed and security repurchase
agreements................................. 81,101 56,461 154,864 126,271
Borrowed funds................................ 48,564 50,922 99,840 84,438
Long-term debt................................ 113,439 73,316 212,609 132,211
---------- ---------- ---------- ----------
Total interest expense................... 715,168 633,819 1,385,838 1,239,027
---------- ---------- ---------- ----------
NET INTEREST INCOME............................. 730,123 707,740 1,428,098 1,400,219
PROVISION FOR LOAN LOSSES....................... 43,033 54,580 99,300 113,277
---------- ---------- ---------- ----------
Net interest income after provision
for loan losses....................... 687,090 653,160 1,328,798 1,286,942
NONINTEREST INCOME
Item processing revenue....................... 117,686 91,402 230,226 176,893
Service charges on deposit accounts........... 97,739 89,196 191,199 175,322
Trust fees.................................... 69,996 60,501 137,405 118,454
Card-related fees............................. 49,383 51,018 96,274 98,278
Mortgage banking revenue...................... 97,223 36,826 158,473 67,503
Other......................................... 122,102 87,028 234,323 192,477
---------- ---------- ---------- ----------
Total fees and other income.............. 554,129 415,971 1,047,900 828,927
Securities gains.............................. 19,714 31,177 20,766 47,128
---------- ---------- ---------- ----------
Total noninterest income................. 573,843 447,148 1,068,666 876,055
NONINTEREST EXPENSE
Salaries and other personnel.................. 396,574 357,759 780,428 707,329
Equipment..................................... 51,471 51,305 103,199 102,074
Net occupancy................................. 49,671 48,491 98,408 97,737
Assessments and taxes......................... 12,097 16,101 23,786 31,396
Merger and restructuring...................... -- 33,300 274,698 39,640
Other......................................... 239,365 195,561 442,660 377,115
---------- ---------- ---------- ----------
Total noninterest expense................ 749,178 702,517 1,723,179 1,355,291
---------- ---------- ---------- ----------
Income before income taxes...................... 511,755 397,791 674,285 807,706
Income tax expense.............................. 180,511 126,361 239,319 260,709
---------- ---------- ---------- ----------
NET INCOME...................................... $ 331,244 $ 271,430 $ 434,966 $ 546,997
========== ========== ========== ==========
NET INCOME APPLICABLE TO COMMON STOCK........... $ 330,145 $ 271,430 $ 433,867 $ 546,997
========== ========== ========== ==========
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
NET INCOME PER COMMON SHARE
Basic......................................... $1.01 $.84 $1.34 $1.68
Diluted....................................... .99 .83 1.32 1.65
AVERAGE COMMON SHARES OUTSTANDING
Basic......................................... 328,187 321,749 322,240 325,686
Diluted....................................... 336,383 326,792 329,544 330,741
</TABLE>
See notes to consolidated financial statements.
4
<PAGE> 6
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
June 30 December 31 June 30
1998 1997 1997
<S> <C> <C> <C>
ASSETS
Loans:
Commercial............................................ $18,153,768 $16,280,575 $15,291,012
Real estate construction.............................. 1,326,904 1,302,305 1,226,599
Lease financing....................................... 739,563 635,957 521,568
Commercial real estate................................ 6,518,933 6,410,531 6,581,028
Residential real estate............................... 9,761,171 9,987,066 10,803,359
Mortgage loans held for sale.......................... 2,560,612 1,249,708 726,909
Consumer.............................................. 13,473,157 12,357,229 12,026,985
Credit card........................................... 1,830,355 2,047,769 2,044,307
Home equity........................................... 3,113,685 2,972,987 2,697,567
----------- ----------- -----------
Total loans...................................... 57,478,148 53,244,127 51,919,334
Allowance for loan losses........................ 976,469 941,874 965,429
----------- ----------- -----------
Net loans........................................ 56,501,679 52,302,253 50,953,905
Securities available for sale, at market................. 13,898,032 13,797,566 13,483,875
Federal funds sold and security resale agreements........ 1,333,374 542,156 1,054,883
Other short-term investments............................. 80,220 84,204 206,064
Cash and demand balances due from banks.................. 4,111,415 4,319,309 3,847,218
Properties and equipment................................. 1,081,876 1,031,912 1,039,238
Customers' acceptance liability.......................... 31,785 45,823 62,081
Accrued income and other assets.......................... 4,219,487 3,655,858 2,979,971
----------- ----------- -----------
TOTAL ASSETS..................................... $81,257,868 $75,779,081 $73,627,235
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Demand deposits (noninterest bearing).................... $10,750,524 $10,287,007 $10,234,597
NOW and money market accounts............................ 17,150,088 15,547,560 15,230,486
Savings accounts......................................... 4,855,384 4,781,806 5,189,582
Time deposits of individuals............................. 18,417,699 18,631,280 19,595,012
Other time deposits...................................... 2,484,797 1,633,282 1,563,312
Deposits in overseas offices............................. 1,173,497 1,736,419 577,486
----------- ----------- -----------
Total deposits................................... 54,831,989 52,617,354 52,390,475
Federal funds borrowed and security repurchase
agreements............................................ 6,069,853 4,810,953 3,739,576
Borrowed funds........................................... 4,330,313 4,264,556 4,542,427
Long-term debt........................................... 6,916,808 5,647,302 4,764,698
Corporation-obligated mandatorily redeemable capital
securities of subsidiary trusts holding solely
debentures of the Corporation......................... 679,894 649,892 649,890
Acceptances outstanding.................................. 31,785 45,823 62,081
Accrued expenses and other liabilities................... 1,378,230 1,584,941 1,420,972
----------- ----------- -----------
TOTAL LIABILITIES................................ 74,238,872 69,620,821 67,570,119
Stockholders' Equity:
Preferred stock.......................................... 36,592 -- --
Common stock............................................. 6,982,404 6,158,260 6,057,116
----------- ----------- -----------
TOTAL STOCKHOLDERS' EQUITY....................... 7,018,996 6,158,260 6,057,116
----------- ----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY....... $81,257,868 $75,779,081 $73,627,235
=========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
5
<PAGE> 7
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(Dollars in Thousands) Six Months Ended June 30
- ---------------------------------------------------------------------------------------
1998 1997
<S> <C> <C>
OPERATING ACTIVITIES
Net income................................................ $ 434,966 $ 546,997
Adjustments to reconcile net income to net cash provided
by operating activities:
Provision for loan losses............................ 99,300 113,277
Depreciation and amortization........................ 77,454 70,529
Amortization of intangibles and servicing rights..... 59,326 39,016
Amortization of securities discount and premium...... 5,650 (183)
Securities gains..................................... (20,766) (47,128)
Other gains, net..................................... (117,102) (40,242)
Net (increase) decrease in trading account assets.... (9,815) 142,877
Originations and purchases of mortgage loans held for
sale.............................................. (8,714,309) (1,670,144)
Proceeds from sales of mortgage loans held for
sale.............................................. 7,400,440 1,582,222
(Increase) decrease in interest receivable........... 21,840 (1,982)
(Decrease) in interest payable....................... (50,729) (31,202)
Net change in other assets/liabilities............... (162,496) 66,391
----------- -----------
Net Cash (Used) Provided by Operating
Activities...................................... (976,241) 770,428
LENDING AND INVESTING ACTIVITIES
Net (increase) in short-term investments.................. (757,601) (253,988)
Purchases of securities................................... (6,235,915) (2,903,457)
Proceeds from sales of securities......................... 5,380,095 2,099,263
Proceeds from maturities and prepayments of securities.... 1,716,040 994,525
Net (increase) in loans................................... (936,742) (1,124,863)
Proceeds from sales of loans.............................. -- 79,625
Net (increase) in properties and equipment................ (73,924) (44,811)
Acquisitions.............................................. 157,632 --
----------- -----------
Net Cash (Used) by Lending and Investing
Activities...................................... (750,415) (1,153,706)
DEPOSIT AND FINANCING ACTIVITIES
Net increase (decrease) in Federal funds borrowed and
security repurchase agreements......................... 974,283 (1,416,994)
Net increase in borrowed funds............................ 35,223 1,590,277
Net increase (decrease) in demand, savings, NOW, money
market accounts, and deposits in overseas offices...... 130,017 (930,317)
Net (decrease) in time deposits........................... (465,397) (294,948)
Repayment of long-term debt............................... (615,253) (132,278)
Proceeds from issuance of long-term debt, net............. 1,796,915 2,031,530
Dividends paid............................................ (278,573) (237,617)
Issuances of common stock................................. 87,547 39,537
Repurchase of common stock................................ (146,000) (559,938)
----------- -----------
Net Cash Provided by Deposit and Financing
Activities...................................... 1,518,762 89,252
----------- -----------
Net (Decrease) in Cash and Demand Balances Due From
Banks.................................................. (207,894) (294,026)
Cash and Demand Balances Due From Banks, January 1........ 4,319,309 4,141,244
----------- -----------
Cash and Demand Balances Due From Banks, June 30.......... $ 4,111,415 $ 3,847,218
=========== ===========
SUPPLEMENTAL DISCLOSURES
Interest paid............................................. $1,438,574 $1,270,224
Income taxes paid......................................... 76,868 106,361
Common stock issued in purchase acquisitions.............. 787,184 --
</TABLE>
See notes to consolidated financial statements.
6
<PAGE> 8
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Accumulated
Other
(Dollars in Thousands Except Per Preferred Common Capital Retained Comprehensive
Share Amounts) Stock Stock Surplus Earnings Income
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------
Balance January 1, 1997................. $ -- $1,323,449 $ 935,970 $3,800,658 $156,184
Comprehensive Income:
Net income.......................... 546,996
Other comprehensive income, net of
tax............................... 41,384
Total comprehensive income............
Common dividends declared, $.835 per
share............................... (181,448)
Common dividends declared of pooled
company, prior to merger............ (55,156)
Stock dividend declared of pooled
company, prior to merger............ 293,963 (293,963)
Issuance of 1,786,953 common shares
under corporate stock and dividend
reinvestment plans.................. 7,148 32,167
Issuance of 301,662 shares pursuant to
acquisitions........................ 1,207 8,507
Purchase of 12,340,000 common
shares.............................. (49,360) (96,092) (414,498)
------- ---------- ---------- ---------- --------
Balance June 30, 1997................... $ -- $1,282,444 $1,174,515 $3,402,589 $197,568
======= ========== ========== ========== ========
Balance January 1, 1998................. $ -- $1,262,790 $1,108,920 $3,440,763 $345,787
Comprehensive Income:
Net income.......................... 434,966
Other comprehensive income, net of
tax
Unrealized gains on securities of
$21,724 net of reclassification
adjustment for gains included in
net income of $13,498............. 8,226
Total comprehensive income............
Common dividends declared, $.94 per
share............................... (308,672)
Preferred dividends declared.......... (1,099)
Issuance of 2,107,762 common shares
under corporate stock and dividend
reinvestment plans.................. 8,432 79,223
Net issuance of 10,810,084 common
shares and 739,976 preferred shares
pursuant to acquisitions............ 36,999 43,240 690,245 (130,824)
Conversion of 8,130 shares of
preferred stock to 12,312 common
shares.............................. (407) 49 358
------- ---------- ---------- ---------- --------
Balance June 30, 1998................... $36,592 $1,314,511 $1,878,746 $3,435,134 $354,013
======= ========== ========== ========== ========
<CAPTION>
(Dollars in Thousands Except Per
Share Amounts) Total
<S> <C>
- -------------------------------------------------------------------
Balance January 1, 1997................. $6,216,261
Comprehensive Income:
Net income.......................... 546,996
Other comprehensive income, net of
tax............................... 41,384
----------
Total comprehensive income............ 588,380
Common dividends declared, $.835 per
share............................... (181,448)
Common dividends declared of pooled
company, prior to merger............ (55,156)
Stock dividend declared of pooled
company, prior to merger............ --
Issuance of 1,786,953 common shares
under corporate stock and dividend
reinvestment plans.................. 39,315
Issuance of 301,662 shares pursuant to
acquisitions........................ 9,714
Purchase of 12,340,000 common
shares.............................. (559,950)
----------
Balance June 30, 1997................... $6,057,116
==========
Balance January 1, 1998................. $6,158,260
Comprehensive Income:
Net income.......................... 434,966
Other comprehensive income, net of
tax
Unrealized gains on securities of
$21,724 net of reclassification
adjustment for gains included in
net income of $13,498............. 8,226
----------
Total comprehensive income............ 443,192
Common dividends declared, $.94 per
share............................... (308,672)
Preferred dividends declared.......... (1,099)
Issuance of 2,107,762 common shares
under corporate stock and dividend
reinvestment plans.................. 87,655
Net issuance of 10,810,084 common
shares and 739,976 preferred shares
pursuant to acquisitions............ 639,660
Conversion of 8,130 shares of
preferred stock to 12,312 common
shares.............................. --
----------
Balance June 30, 1998................... $7,018,996
==========
</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
REPORTING COMPREHENSIVE INCOME: In June 1997, the Financial Accounting
Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS)
No. 130, Reporting Comprehensive Income. This state-
7
<PAGE> 9
ment establishes standards for reporting the components of comprehensive income
and requires that all items that are required to be recognized under accounting
standards as components of comprehensive income be included in a financial
statement that is displayed with the same prominence as other financial
statements. Comprehensive income includes net income as well as certain items
that are reported directly within a separate component of stockholders' equity
and bypass net income. The provisions of this statement became effective
beginning with 1998 interim reporting and have no impact on financial position
or results of operations.
ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES: In June 1998,
the FASB issued SFAS No. 133, Accounting for Derivative Instruments and Hedging
Activities, in an effort to standardize the accounting for derivative
instruments and hedging activities. The provisions of this statement contrast
the current accounting for derivative instruments by requiring that derivative
instruments be carried at fair value on the balance sheet. The statement
continues to allow derivative instruments to be used to hedge various risks and
sets forth specific criteria to be used to determine when hedge accounting can
be used. The statement also provides for offsetting changes in fair value or
cash flows of both the derivative and the hedged asset or liability to be
recognized in earnings in the same period; however, any changes in fair value or
cash flow that represent the ineffective portion of a hedge are required to be
recognized in earnings and cannot be deferred. For derivative instruments not
accounted for as hedges, changes in fair value are required to be recognized in
earnings.
The provisions of this statement become effective for quarterly and annual
reporting beginning January 1, 2000 and cannot be applied retroactively to prior
periods at the time of adoption. The statement allows for early adoption in any
quarterly period after June 1998. At this time, National City has no plans to
adopt the provisions of SFAS No. 133 prior to the effective date. The impact of
adopting the provisions of this statement on National City's financial position,
results of operations and cash flow subsequent to the effective date is not
currently estimatable and will depend on the financial position of the
Corporation and the nature and purpose of the derivative instruments in use by
management at that time.
3. MERGERS AND ACQUISITIONS
On March 30, 1998, National City acquired Fort Wayne National Corporation
(FWNC), a $3 billion asset bank holding company headquartered in Fort Wayne,
Indiana. Upon acquisition, each share of FWNC common stock outstanding was
converted into .75 shares of National City common stock. A net of 10.8 million
shares of National City common stock were issued. National City also issued .7
million shares of 6% Cumulative Convertible Preferred Stock, Series 1 in
exchange for all of the outstanding shares of FWNC's 6% Cumulative Convertible
Class B Preferred Stock. Goodwill of $522.3 million and core deposit intangible
of $71.9 million were recorded in connection with the acquisition and are being
amortized on a straight-line basis over twenty-five and seven years,
respectively. The pro forma effects of this transaction would not have been
material to historical results of operations or financial condition.
On March 31, 1998, National City Corporation merged with First of America
Bank Corporation (FOA), a $21 billion asset bank holding company headquartered
in Kalamazoo, Michigan, in a transaction accounted for as a
pooling-of-interests. National City issued 104.9 million shares of common stock
to the shareholders of FOA based upon an exchange ratio of 1.2 shares of
National City common stock for each outstanding share of FOA common stock. The
historical consolidated financial statements have been restated to reflect this
transaction.
Net income and diluted net income per common share for National City and FOA
as reported for 1997 prior to restatement are as follows:
<TABLE>
<CAPTION>
Three Six
Months Months
Ended Ended
June 30, June 30,
1997 1997
- --------------------------------------------------------------
<S> <C> <C>
Net income
National City.......................... $198,276 $394,418
First of America....................... 73,154 152,579
-------- --------
Combined............................... $271,430 $546,997
======== ========
Diluted net income per common share
National City.......................... $.90 $1.77
First of America....................... .82 1.70
Combined............................... .83 1.65
</TABLE>
Merger and restructuring expenses for the first half of 1998 totaled $274.7
million as a result of this transaction. The major components of merger and
restructuring expenses included: personnel-related accruals in the amount of
$105.9 million, facilities and equipment adjustments of $73.4 million,
professional fees of $48.6 million, and miscellaneous expenses and accruals
totaling $46.7 million. An additional $100 million of merger and restructuring
costs are expected to be incurred in the remainder of 1998.
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 or its subsidiaries are involved in a
number of legal proceedings arising out of their businesses and regularly face
various claims, including unasserted claims, which may ultimately result in
litigation. While in management's opinion the financial statements would not be
materially affected by the outcome of any present legal proceedings,
commitments, or asserted claims, management is aware of a potential claim,
currently unasserted, by the Internal Revenue Service concerning the
Corporation's corporate-owned life insurance programs. While the exact nature of
the potential claim is unknown, management believes that it has complied with
all applicable tax laws and regulations with respect to such programs and will
vigorously contest any claim.
8
<PAGE> 10
5. LOANS AND ALLOWANCE FOR LOAN LOSSES
The following table presents the activity in the allowance for loan losses:
<TABLE>
<CAPTION>
Six Months
Ended
June 30
-------------------
(IN THOUSANDS) 1998 1997
<S> <C> <C>
- --------------------------------------------------------------
Balance at beginning of year............. $941,874 $958,739
Provision................................ 99,300 113,277
Reserves acquired (sold)................. 30,679 (4,906)
Charge-offs:
Commercial............................. 17,815 27,443
Real estate -- construction............ 33 211
Real estate -- commercial.............. 4,733 3,420
Real estate -- residential............. 3,427 3,448
Consumer............................... 76,759 86,772
Credit card............................ 50,404 56,023
Home equity............................ 4,516 1,629
-------- --------
Total charge-offs...................... 157,687 178,946
Recoveries:
Commercial............................. 11,308 13,838
Real estate -- construction............ 135 1,301
Real estate -- commercial.............. 4,009 4,926
Real estate -- residential............. 249 756
Consumer............................... 34,579 44,958
Credit card............................ 10,654 10,808
Home equity............................ 1,369 678
-------- --------
Total recoveries....................... 62,303 77,265
-------- --------
Net charge-offs.......................... 95,384 101,681
-------- --------
Balance at end of period................. $976,469 $965,429
======== ========
</TABLE>
The allowance for loan losses is maintained at a level believed adequate to
absorb estimated probable credit losses. Both the provision and allowance for
loan losses are based upon an analysis of individual credits, adverse situations
that could affect a borrower's ability to repay (including the timing of future
payments), prior and current loss experience, overall growth in the portfolio,
current economic conditions, and other factors. This evaluation is inherently
subjective and it requires material estimates, including the amounts and timing
of future cash flows expected to be received on impaired loans, that could be
susceptible to change.
Table 5 on page 15 provides detail regarding nonperforming loans. At June
30, 1998 and December 31, 1997, loans that were considered to be impaired under
SFAS No. 114 totaled $20.3 million and $28.8 million, respectively. All impaired
loans are included in nonperforming assets. The related allowance allocated to
these loans was $8.4 million and $10.1 million, respectively. The contractual
interest due and actual interest recorded on nonperforming assets, for the six
months ended June 30, 1998, was $24.3 million and $4.9 million, respectively.
6. SECURITIES
The following is a summary of securities available for sale:
<TABLE>
<CAPTION>
JUNE 30, 1998
---------------------------------------------------
AMORTIZED UNREALIZED UNREALIZED MARKET
(IN THOUSANDS) COST GAINS LOSSES VALUE
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------
U.S. Treasury and
Federal agency
debentures.......... $ 2,039,417 $ 12,115 $ 3,450 $ 2,048,082
Mortgage-backed
securities.......... 7,354,617 88,405 17,584 7,425,438
Asset-backed and
corporate debt
securities.......... 2,282,725 20,366 795 2,302,296
States and political
subdivisions........ 992,663 42,877 938 1,034,602
Other................ 682,149 405,490 25 1,087,614
----------- -------- ------- -----------
Total securities.... $13,351,571 $569,253 $22,792 $13,898,032
=========== ======== ======= ===========
</TABLE>
<TABLE>
<CAPTION>
June 30, 1997
---------------------------------------------------
Amortized Unrealized Unrealized Market
(In Thousands) Cost Gains Losses Value
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------
U.S. Treasury and
Federal agency
debentures.......... $ 2,590,626 $ 4,675 $ 30,012 $ 2,565,289
Mortgage-backed
securities.......... 7,769,330 42,155 31,268 7,780,217
Asset-backed and
corporate debt
securities.......... 1,319,008 5,738 2,213 1,322,533
States and political
subdivisions........ 783,140 21,244 862 803,522
Other................ 716,397 299,071 3,154 1,012,314
----------- -------- --------- -----------
Total securities.... $13,178,501 $372,883 $ 67,509 $13,483,875
=========== ======== ========= ===========
</TABLE>
Other securities includes the Corporation's internally-managed equity
portfolio of bank and thrift common stock investments, which had an amortized
cost and market value of $288.4 million and $672.3 million, respectively, as of
June 30, 1998.
For the six months ended June 30, 1998 and 1997, gross gains of $47.7
million and $53.9 million, and gross losses of $26.9 million and $6.8 million
were realized, respectively, for the entire securities portfolio.
At June 30, 1998, the unrealized appreciation in securities available for
sale included in stockholders' equity totaled $354.0 million, net of tax,
compared to unrealized appreciation of $197.6 million, net of tax, at June 30,
1997. 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.
As of June 30, 1998, 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.
9
<PAGE> 11
7. BORROWED FUNDS
<TABLE>
<CAPTION>
June 30 December 31 June 30
(IN THOUSANDS) 1998 1997 1997
<S> <C> <C> <C>
- -------------------------------------------------------------
U.S. Treasury demand
notes and Federal
funds borrowed-term.. $3,577,371 $2,001,665 $2,584,602
Notes payable to
Student Loan
Marketing
Association.......... -- 300,000 300,000
Bank notes............. 199,998 574,973 603,957
FHLB advances.......... 200,000 450,000 350,000
Other.................. 36,468 141,729 60,459
---------- ---------- ----------
Total bank
subsidiaries....... 4,013,837 3,468,367 3,899,018
Commercial paper....... 299,655 795,895 643,026
Other.................. 16,821 294 383
---------- ---------- ----------
Total parent company
and other
subsidiaries....... 316,476 796,189 643,409
---------- ---------- ----------
Total.......... $4,330,313 $4,264,556 $4,542,427
========== ========== ==========
</TABLE>
8. LONG-TERM DEBT
<TABLE>
<CAPTION>
June 30 December 31 June 30
(IN THOUSANDS) 1998 1997 1997
- ----------------------------------------------------------------
<S> <C> <C> <C>
Floating rate notes due
1997..................... $ -- $ -- $ 49,992
9 7/8% subordinated notes
due 1999................. 64,936 64,918 64,895
6.50% subordinated notes
due 2000................. 99,906 99,881 99,854
8.50% subordinated notes
due 2002................. 99,908 99,896 99,884
6 5/8% subordinated notes
due 2004................. 249,266 249,201 249,136
7.75% subordinated notes
due 2004................. 200,000 200,000 200,000
8.50% subordinated notes
due 2004................. 150,000 150,000 150,000
7.20% subordinated notes
due 2005................. 249,799 249,785 249,770
Other..................... 11,368 10,939 11,680
---------- ---------- ----------
Total parent company.... 1,125,183 1,124,620 1,175,211
---------- ---------- ----------
6.50% subordinated notes
due 2003................. 199,638 199,600 199,563
7.25% subordinated notes
due 2010................. 223,025 222,944 222,862
6.30% subordinated notes
due 2011................. 200,000 200,000 200,000
7.25% subordinated notes
due 2011................. 197,376 197,278 197,179
Other..................... 1,597 3,133 1,864
---------- ---------- ----------
Total subsidiary........ 821,636 822,955 821,468
---------- ---------- ----------
Total long-term debt
qualifying for Tier II
Capital............... 1,946,819 1,947,575 1,996,679
---------- ---------- ----------
Senior bank notes......... 3,490,423 2,394,055 1,937,969
Federal Home Loan Bank
advances................. 1,470,875 1,303,721 827,991
Other..................... 8,691 1,951 2,059
---------- ---------- ----------
Total other long-term
debt.................. 4,969,989 3,699,727 2,768,019
---------- ---------- ----------
Total................. $6,916,808 $5,647,302 $4,764,698
========== ========== ==========
</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 June 30,
1998.
9. CORPORATION OBLIGATED MANDATORILY REDEEMABLE CAPITAL SECURITIES OF SUBSIDIARY
TRUSTS HOLDING SOLELY DEBENTURES OF THE CORPORATION
<TABLE>
<CAPTION>
June 30 December 31 June 30
(IN THOUSANDS) 1998 1997 1997
- ---------------------------------------------------------------
<S> <C> <C> <C>
Capital Securities of First
of America Capital Trust
I........................... $150,000 $150,000 $150,000
Capital Securities of Fort
Wayne Capital Trust I....... 30,000 -- --
-------- -------- --------
Total Capital Securities
qualifying as Tier 1
capital.................... 180,000 150,000 150,000
Capital Securities of
National City Capital Trust
I........................... 499,894 499,892 499,890
-------- -------- --------
Total...................... $679,894 $649,892 $649,890
======== ======== ========
</TABLE>
The corporation-obligated mandatorily redeemable capital securities (the
capital securities) of subsidiary trusts holding solely junior subordinated debt
securities of the Corporation (the debentures) were issued by three statutory
business trusts, First of America Capital Trust I, Fort Wayne Capital Trust I
and National City Capital Trust I, of which 100% of the common equity in each of
the trusts is owned by the Corporation. The trusts were formed for the purpose
of issuing the capital securities and investing the proceeds from the sale of
such capital securities in the debentures. The debentures held by each trust are
the sole assets of that trust. Distributions on the capital securities issued by
each trust are payable semiannually at a rate per annum equal to the interest
rate being earned by the trust on the debentures held by that trust and are
recorded as interest expense by the Corporation. The capital securities are
subject to mandatory redemption, in whole or in part, upon repayment of the
debentures. The Corporation has entered into agreements which, taken
collectively, fully and unconditionally guarantee the capital securities subject
to the terms of each of the guarantees.
The debentures held by First of America Capital Trust I have a stated
maturity of January 31, 2027 and an interest rate of 8.12%. These debentures are
first redeemable, in whole or in part, by the Corporation on January 31, 2007.
The capital securities issued by First of America Capital Trust I qualify as
Tier 1 capital under Federal Reserve Board Guidelines.
The debentures held by Fort Wayne Capital Trust I have a stated maturity of
April 15, 2027 and an interest rate of 9.85%. These debentures are first
redeemable, in whole or in part, by the Corporation on April 15, 2007. The
capital securities issued by Fort Wayne Capital Trust I qualify as Tier 1
capital.
The debentures held National City Capital Trust I have a stated maturity of
June 1, 2029 and an interest rate of 6.75%. These debentures are first
redeemable by the Corporation on June 1, 1999. If the debentures are not
redeemed on June 1, 1999, the interest rate per annum will be reset based on an
interest rate auction at that time.
10
<PAGE> 12
The capital securities issued by National City Capital Trust I currently do not
qualify as Tier 1 capital.
10. CAPITAL RATIOS
The following table reflects various measures of capital:
<TABLE>
<CAPTION>
June 30 December 31 June 30
1998 1997 1997
(Dollars in ---------------- ---------------- ----------------
MILLIONS) AMOUNT Ratio Amount Ratio Amount Ratio
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------
Total
equity(1)..... $7,019.0 8.64% $6,158.3 8.13% $6,057.1 8.23%
Total common
equity(1)..... 6,982.4 8.59 6,158.3 8.13 6,057.1 8.23
Tangible common
equity(2)..... 5,433.4 6.82 5,327.3 7.11 5,313.5 7.30
Tier 1
capital(3).... 5,782.5 8.92 5,435.1 8.93 5,509.7 9.49
Total risk-based
capital(4).... 8,368.9 12.91 8,013.4 13.16 8,006.1 13.79
Leverage(5)..... 5,782.5 7.38 5,435.1 7.58 5,509.7 7.74
- ------------------------------------------------------------------------
</TABLE>
(1) Computed in accordance with generally accepted accounting principles,
including unrealized market value adjustment of securities available for
sale.
(2) Common 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>
June 30 December 31 June 30
(DOLLARS IN MILLIONS) 1998 1997 1997
- ----------------------------------------------------------------
<S> <C> <C> <C>
Goodwill....................... $1,045.4 $544.9 $522.6
Other intangibles.............. 90.5 18.1 25.6
-------- ------ ------
Total intangibles.............. $1,135.9 $563.0 $548.2
Mortgage servicing rights...... $413.1 $268.0 $195.4
- ----------------------------------------------------------------
</TABLE>
11. STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
June 30 December 31 June 30
(OUTSTANDING SHARES) 1998 1997 1997
<S> <C> <C> <C>
- -------------------------------------------------
Preferred Stock, no
par value,
authorized 5,000,000
shares.............. 731,846 -- --
Common Stock, $4.00
par value,
authorized
700,000,000 shares.. 328,627,647 315,697,488 320,628,124
</TABLE>
As part of the acquisition of Fort Wayne National Corporation (FWNC),
National City issued 739,976 shares of 6% Cumulative Convertible Preferred
Stock, Series 1 in exchange for all of the outstanding shares of FWNC's 6%
Cumulative Convertible Class B Preferred Stock. The preferred shares have a
stated value of $50 per share. The holders of the preferred shares are entitled
to receive cumulative preferred dividends payable quarterly at the annual rate
of 6%. The preferred shares may be redeemed by National City at its option at
any time, or from time to time, on or after April 1, 2002 at $50 per share, plus
accrued and unpaid dividends. Such redemption may be subject to prior approval
by the Federal Reserve Bank. Holders of the preferred shares have the right, at
any time at their option, to convert each share of preferred stock into 1.51455
shares of National City common stock.
12. INCOME TAX EXPENSE
The composition of income tax expense follows:
<TABLE>
<CAPTION>
Six Months Ended
June 30
--------------------------
(IN THOUSANDS) 1998 1997
<S> <C> <C>
- -----------------------------------------------------------
Applicable to income exclusive
of securities transactions... $232,071 $244,214
Applicable to securities
transactions................. 7,248 16,495
-------- --------
Total.................. $239,319 $260,709
======== ========
</TABLE>
The effective tax rate was approximately 35.5% and 32.3% for the six months
ended June 30, 1998 and 1997, respectively.
13. REGULATORY DIVIDENDS
A significant source of liquidity for the Parent company is dividends from
subsidiaries. Dividends paid by the subsidiary banks are subject to various
legal and regulatory restrictions. At June 30, 1998, bank subsidiaries may pay
the Parent company, without prior regulatory approval, approximately $991.5
million of dividends. During the first six months of 1998, dividends totaling
$138.4 million were declared and $138.4 million of previously declared dividends
were paid to the Parent company.
11
<PAGE> 13
14. EARNINGS PER SHARE
The calculation of net income per common share follows:
<TABLE>
<CAPTION>
Three Months Six Months
Ended Ended
In Thousands June 30 June 30
Except Per Share ------------------- -------------------
Amounts) 1998 1997 1998 1997
- ----------------------------------------------------------------
<S> <C> <C> <C> <C>
BASIC:
Net income......... $331,244 $271,430 $434,966 $546,997
Less preferred
dividends........ 1,099 -- 1,099 --
-------- -------- -------- --------
Net income
applicable to
common stock..... $330,145 $271,430 $433,867 $546,997
======== ======== ======== ========
Average common
shares
outstanding...... 328,187 321,749 322,240 325,686
======== ======== ======== ========
Net income per
common
share -- basic... $1.01 $.84 $1.34 $1.68
======== ======== ======== ========
DILUTED:
Net income......... $331,244 $271,430 $434,966 $546,997
======== ======== ======== ========
Average common
shares
outstanding...... 328,187 321,749 322,240 325,686
Stock option
adjustment....... 7,079 5,043 6,742 5,055
Preferred stock
adjustment....... 1,117 -- 562 --
-------- -------- -------- --------
Average common
shares
outstanding --
diluted.......... 336,383 326,792 329,544 330,741
======== ======== ======== ========
Net income per
common
share -- diluted.. $.99 $.83 $1.32 $1.65
======== ======== ======== ========
</TABLE>
Net income per common share for 1997 has been restated in accordance with
the provisions of SFAS No. 128, Earnings Per Share. This statement became
effective for the Corporation for reporting periods ending after December 15,
1997.
12
<PAGE> 14
MANAGEMENT'S DISCUSSION AND ANALYSIS
FINANCIAL HIGHLIGHTS
Net income for the second quarter of 1998 was $331.2 million, or $.99 per
diluted share, compared to $271.4 million, or $.83 per diluted share, in 1997.
Return on average common equity and return on average assets for the second
quarter of 1998 were 19.47% and 1.66%, respectively.
Excluding merger and restructuring expenses, net income for the first six
months of 1998 was $628.9 million, or $1.91 per diluted share, compared to
$572.5 million, or $1.73 per diluted share, for the same period in 1997. On this
basis, returns on average common equity and average assets were 19.07% and
1.63%, respectively, compared to 18.82% and 1.62%, respectively, for the same
period last year. After-tax merger and restructuring expenses were $193.9
million or $.59 per diluted share for the first six months of 1998, and $25.5
million or $.08 per diluted share for the same period in 1997.
Financial data for all prior periods have been restated to reflect the
merger with First of America Bank Corporation ("First of America"), which was
completed March 31, 1998 and accounted for as a pooling of interests. The
financial results of Fort Wayne National Corporation ("Fort Wayne"), accounted
for as a purchase acquisition, are included in the results of operations
subsequent to the date of acquisition, March 30, 1998.
Results for the second quarter and first half of 1998 reflect solid loan
growth, increased revenue, maintenance
of expenses relative to increased business activity, and excellent credit
quality.
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 commercial leasing. The retail banking business includes
the deposit gathering branch franchise, small business lending, and consumer
lending. The fee-based businesses include institutional trust, mortgage banking,
item processing, brokerage and the Private Client Group.
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 amongst businesses
on a risk-adjusted basis. The businesses are match-funded and interest rate risk
is centrally managed by the investment/
funding unit which is reported 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 22.0% increase in corporate banking net income was driven by higher net
interest income and noninterest income, with no increase in credit costs. The
quarter reflected strong loan growth primarily in the core middle market lending
business, and was supplemented by growth in commercial leasing, asset-based
lending, loan syndications and cash management.
The 12.8% increase in retail banking net income was due to higher service
fee income, lower operating expenses and a lower loan loss provision.
The 35.6% increase in fee-based net income reflected broad based revenue
growth with notably strong growth in mortgage banking.
The decline in the parent and other category reflects the after-tax merger
and restructuring expense of $193.9 million, partially offset by securities
gains.
NET INTEREST INCOME
On a tax-equivalent basis, net interest income was $739.9 million in the
second quarter of 1998, up 3.1% from last year. The increase was the net result
of a 9.7% increase in average earning assets, primarily loans, offset by lower
loan spreads and higher funding costs.
National City's net interest income is affected by the use of off-balance
sheet derivative financial instruments. For the first six months of 1998, the
derivatives portfolio contributed $20.4 million to net interest income and added
6 basis points to the net interest margin.
During the second quarter of 1998 the notional outstandings of interest
rate swap agreements increased $1.0 billion to $14.3 billion. During the
quarter, $320 million of swaps were added to manage the Corporation's interest
rate risk position by syntheti-
13
<PAGE> 15
cally converting fixed rate debt to variable rate; $500 million of swaps were
added to hedge loans; $128 million of swaps were added to reduce the mortgage
loan prepayment risk; and $456 million of swap agreements were added to
facilitate interest rate risk management at third parties. A total of $404
million of swaps matured or were terminated during the quarter. The net
unrealized gains in the derivative portfolio were $119.6 million at June 30,
1998, compared to unrealized gains of $75.4 million at March 31, 1998.
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 June 30, 1998, the Corporation's interest-rate risk position remained
modestly liability sensitive. The earnings simulation model projects that net
income would decrease by 3.6% 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 2.1%, relative to a stable-rate
scenario. At the end of March 1998, the corresponding changes were (2.9)% of net
income in the rising-rate environment and 2.7% in the falling-rate environment.
The cumulative one-year gap was (6.0%) of adjusted earning assets at June 30,
1998. The Corporation's net present value model indicates that a one and a half
percentage point immediate upward shock in rates would cause a reduction in the
value of expected asset and liability cash flows by an amount equal to 2.3% of
total net present value at the end of the quarter. In addition, a one and a half
percentage point immediate downward rate shock is estimated to cause total net
present value to fall by 3.1%.
NONINTEREST INCOME
For the second quarter of 1998, noninterest income, excluding securities
gains, increased 33.2% to $554.1 million compared to $416.0 million in 1997. For
the first half of 1998, noninterest income increased 26.4% to $1,047.9 million
compared to $828.9 million for the same period in 1997. The increase reflects
broad-based growth among virtually all the fee businesses, particularly mortgage
banking, and the full quarter inclusion of Fort Wayne, which added $8.6 million
of noninterest income. In the second quarter and first six months of 1998,
mortgage banking revenue
more than doubled to $97.2 million and $158.5 million, respectively, when
compared against the same periods in 1997. This growth was due to increased
mortgage origination activity, which was spurred by lower mortgage rates. For
the first half of 1998, residential loans originated increased to $9.3 billion
compared to $3.0 billion in 1997.
The second quarters of 1998 and 1997 included branch sale gains of $7.5
million and $2.6 million, respectively, and the first six months of 1998 and
1997 included branch sale gains of $8.7 million and $25.7 million, respectively.
In the second quarter of 1998, pre-tax securities gains totaled $19.7
million or $.04 per share after-tax, compared to $31.2 million, or $.06 per
share after-tax, in the second quarter of 1997. For the first six months of
1998, pre-tax securities gains totaled $20.8 million, or $.04 per share
after-tax, compared to $47.1 million, or $.09 per share
TABLE 1: UNIT PROFITABILITY
<TABLE>
<CAPTION>
Six months ended Six months ended
June 30, 1998 June 30, 1997
-------------------- -------------------
NET Return on Net Return on
(DOLLARS IN MILLIONS) INCOME Equity Income Equity
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------
Corporate banking................. $ 151.8 21.01% $124.1 21.39%
Retail banking.................... 349.2 25.31 309.6 22.64
Fee-based businesses.............. 101.7 25.69 75.0 16.65
Parent and other.................. (167.7) -- 38.3 --
------- ------
Consolidated total............ $ 435.0 13.17% $547.0 17.98%
======= ======
Excluding merger and
restructuring expenses...... $ 628.9 19.05% $572.5 18.82%
======= ======
</TABLE>
TABLE 2: CONTRIBUTION OF INTEREST RATE DERIVATIVE PORTFOLIO
<TABLE>
<CAPTION>
Six months ended
June 30
---------------------------
(IN MILLIONS) 1998 1997
<S> <C> <C>
- -----------------------------------------------------------------------------------
Interest adjustment to loans......................... $ 1.2 $ 7.2
Interest adjustment to securities.................... (.6) (1.3)
------ ------
Interest adjustment to earning assets.............. .6 5.9
Interest adjustment to interest bearing
liabilities........................................ (19.8) (16.6)
------ ------
Effect on net interest income...................... $ 20.4 $ 22.5
====== ======
</TABLE>
NOTE: Amounts in brackets represent reductions of the related interest income
or expense line, as applicable.
14
<PAGE> 16
after-tax, for the same period in 1997.
NONINTEREST EXPENSE
For the second quarter and first half of 1998, noninterest expense totaled
$749.2 million and $1,723.2 million, respectively, compared to $702.5 million
and $1,355.3 million, respectively, for the same periods last year. Excluding
merger and restructuring expenses, noninterest expenses for the second quarter
and first six months of 1998 were $749.2 million and $1,448.5 million,
respectively, compared to $669.2 million and $1,315.7
million, respectively, for the second quarter and first six months of 1997.
Higher operating expenses in 1998 were primarily attributable to growth in the
fee-based businesses, as well as the acquisition of Fort Wayne, which added
approximately $28.7 million to operating expenses in the second quarter of 1998.
For the first six months of 1998, merger and restructuring expenses totaled
$274.7 million in connection with the First of America merger which closed March
31, 1998. For the first six months of 1997, merger and restructuring expenses
totaled $39.6 million and included a $33.3 million one-time charge to cover the
costs of reorganizing National City's six Ohio banking subsidiaries under a
single statewide charter, and a one-time charge of $6.3 million related to
organizational restructuring at National City's 88%-owned item processing
subsidiary, National Processing, Inc.
As Table 3 indicates, National City's staffing level on a full-time
equivalent basis was 42,920 at June 30, 1998, up from 38,449 at June 30, 1997.
Corporate and retail banking staff levels were up due to the Fort
TABLE 3: FULL-TIME EQUIVALENT STAFFING AND
OVERHEAD PERFORMANCE MEASURES
<TABLE>
<CAPTION>
June 30, 1998 June 30, 1997
---------------------------------- ----------------------------------
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................ 22,091 37.38% 51.71% 21,590 41.70% 54.30%
Fee-based businesses.... 16,356 -- 74.59 11,812 -- 76.67%
Corporate............... 4,473 -- -- 5,046 -- --
---------- ----------
Total................ 42,920 46.63% 69.04% 38,449 37.07% 60.26%
========== ==========
Excluding merger and
restructuring
charges................ 27.66% 58.03% 34.27% 58.50%
</TABLE>
TABLE 4: ANNUALIZED NET CHARGE-OFFS AS A PERCENTAGE OF
AVERAGE LOANS
<TABLE>
<CAPTION>
Second Quarter First Six Months
1998 1997 1998 1997
<S> <C> <C> <C> <C>
----------------------------------------------------------------------------
Commercial........................ .04% .31% .07% .18%
Real estate -- construction....... -- (.38) -- (.17)
Real estate -- commercial......... .09 (.08) .02 .05
Real estate -- residential........ .04 .02 .05 .70
Consumer.......................... .52 .56 .65
Credit card....................... 4.24 4.11 4.18 4.25
Home equity....................... .20 .08 .21 .07
Total net charge-offs to average
loans........................... .30% .38% .35% .40%
</TABLE>
TABLE 5: NONPERFORMING ASSETS
<TABLE>
<CAPTION>
June 30 December 31 June 30
(IN MILLIONS) 1998 1997 1997
<S> <C> <C> <C>
-----------------------------------------------------------------------------
Commercial:
Nonaccrual............................. $ 97.9 $103.7 $ 93.5
Restructured........................... .4 1.1 2.1
------ ------ ------
Total commercial..................... 98.3 104.8 95.6
Real estate related:
Nonaccrual............................. 124.2 128.5 129.1
Restructured........................... 2.5 4.5 4.9
------ ------ ------
Total real estate related............ 126.7 133.0 134.0
------ ------ ------
Total nonperforming loans............ 225.0 237.8 229.6
Other real estate owned (OREO)........... 32.0 35.5 37.7
------ ------ ------
Nonperforming assets..................... $257.0 $273.3 $267.3
====== ====== ======
Loans 90 days past-due accruing
interest............................... $142.5 $136.1 $116.0
====== ====== ======
</TABLE>
15
<PAGE> 17
Wayne acquisition, partially offset by reductions resulting from ongoing branch
reconfigurations. The increased staff level in the fee-based businesses was due
to acquisitions made by the Corporation's item-processing subsidiary and
increased business activity in mortgage banking.
The efficiency ratio is defined as noninterest expenses as a percentage of
fee income plus tax-equivalent net interest income. Excluding merger and
restructuring expenses, the efficiency ratio for the first six months of 1998
and 1997 was 58.03% and 58.50%, respectively.
The overhead ratio is defined as noninterest expenses less fee income as a
percentage of tax-equivalent net interest income. Excluding merger and
restructuring expenses, the overhead ratio for the first six months of 1998 and
1997 was 27.66% and 34.27%, respectively.
EARNING ASSETS AND INTEREST BEARING LIABILITIES
Average earning assets were $71,414 million for the second quarter of 1998,
compared to $67,789 for the first quarter of 1998 and $65,093 million for the
second quarter of 1997. The increase in average earning assets over both periods
was primarily due to growth in average loans and investment securities and
includes $3.1 billion acquired in the Fort Wayne acquisition.
For the second quarter of 1998, average interest-bearing liabilities were
$61,569 million, up from $58,195 million for the first quarter of 1998 and
$55,244 million for the second quarter of 1997. The increase over both periods
was primarily due to increased use of longer-term funding, and the acquisition
of Fort Wayne.
For the second quarter of 1998, average core deposits increased slightly to
$40,550 million compared to $39,013 million for the first quarter of 1998 and
$40,171 million for the second quarter of 1997.
ASSET QUALITY
The allowance for loan losses was $976.5 million at June 30, 1998 or 1.70%
of loans, compared to $965.4 million or 1.86% of loans at June 30, 1997. For the
second quarter and first six months of 1998, the provision for loan losses was
$43.0 million and $99.3 million, respectively, compared to $54.6 million and
$113.3 million, respectively, for the same periods last year. During these
periods, the provision for loan losses equaled or exceeded net charge-offs.
Table 4 presents net charge-offs as a percentage of average loans by
portfolio type. For the second quarter and
first six months of 1998, net charge-offs totaled $43.0 million and $95.4
million, respectively, compared to $49.2 million and $101.7 million,
respectively, for the same periods last year. Net charge-offs as a percentage of
loans were .30% and .35%, respectively, for the second quarter and first six
months of 1998, down from .38% and .40%, respectively, for the same periods last
year.
As Table 5 indicates, nonperforming assets were $257.0 million at June 30,
1998, down $16.3 million from $273.3 million at December 31, 1997, and $10.3
million from $267.3 million at June 30, 1997. Nonperforming assets as a
percentage of loans and OREO at June 30, 1998, December 31, 1997 and June 30,
1997, were .45%, .51% and .51%, respectively.
CAPITAL
At June 30, 1998, total stockholders' equity was $7.0 billion compared to
$6.1 billion at June 30, 1997. Book value per common share at June 30, 1998,
December 31, 1997 and June 30, 1997 was $21.25, $19.51 and $18.89, respectively.
Book value per common share at June 30, 1998, December 31, 1997 and June 30,
1997 included unrealized gains on securities available for sale of $1.08, $1.10
and $.62 per share, respectively.
16
<PAGE> 18
CONSOLIDATED AVERAGE BALANCE SHEETS
<TABLE>
<CAPTION>
Three Months Six Months
(Dollars In Millions) Ended June 30 Ended June 30
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------
<CAPTION>
1998 1997 1998 1997
------- ------- ------- -------
<S> <C> <C> <C> <C>
ASSETS
Earning Assets:
Loans:
Commercial.............................................. $26,735 $23,303 $25,764 $22,977
Residential real estate................................. 11,932 11,338 11,577 11,336
Consumer................................................ 13,107 12,005 12,828 11,997
Credit card............................................. 1,861 2,081 1,903 2,130
Home equity............................................. 3,074 2,616 3,040 2,562
------- ------- ------- -------
Total loans........................................... 56,709 51,343 55,112 51,002
Securities................................................ 13,874 13,166 13,803 13,095
Federal funds sold and security resale agreements......... 713 377 577 382
Other short-term investments.............................. 118 207 117 214
------- ------- ------- -------
Total earning assets.................................. 71,414 65,093 69,609 64,693
Market value appreciation of securities available for
sale...................................................... 564 162 550 195
Allowance for loan losses................................... (995) (974) (977) (970)
Cash and demand balances due from banks..................... 3,616 3,346 3,500 3,379
Properties and equipment.................................... 1,055 1,053 1,044 1,055
Customers' acceptance liability............................. 33 73 37 77
Accrued income and other assets............................. 4,240 2,825 3,853 2,892
------- ------- ------- -------
Total assets.......................................... $79,927 $71,578 $77,616 $71,321
======= ======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Demand deposits........................................... $10,053 $ 9,173 $ 9,734 $ 9,144
NOW and money market accounts............................. 17,040 15,372 16,371 15,359
Savings accounts.......................................... 4,870 5,266 4,814 5,298
Time deposits of individuals.............................. 18,640 19,533 18,606 19,568
Other time deposits....................................... 2,536 1,628 2,241 1,573
Deposits in overseas office............................... 1,420 1,068 1,509 997
------- ------- ------- -------
Total deposits........................................ 54,559 52,040 53,275 51,939
Federal funds borrowed and security repurchase
agreements.............................................. 6,433 4,404 6,178 4,958
Borrowed funds............................................ 3,395 3,488 3,448 3,025
Long-term debt and capital securities..................... 7,235 4,485 6,753 4,087
Acceptances outstanding................................... 33 73 37 77
Accrued expenses and other liabilities.................... 1,433 1,093 1,267 1,099
------- ------- ------- -------
Total liabilities..................................... 73,088 65,583 70,958 65,185
Stockholders' Equity:
Preferred stock........................................... 37 -- 19 --
Common stock.............................................. 6,802 5,995 6,639 6,136
------- ------- ------- -------
Total stockholders' equity............................ 6,839 5,995 6,658 6,136
------- ------- ------- -------
Total liabilities and stockholders' equity............ $79,927 $71,578 $77,616 $71,321
======= ======= ======= =======
</TABLE>
17
<PAGE> 19
DAILY AVERAGE BALANCES/NET INTEREST INCOME/RATES
<TABLE>
<CAPTION>
(Dollars In Millions) Daily Average Balance
<S> <C> <C> <C> <C> <C>
1998 1997
----------------- ---------------------------
SECOND First Fourth Third Second
QUARTER Quarter Quarter Quarter Quarter
------- ------- ------- -------
ASSETS
Earning Assets:
Loans:
Commercial...................................... $26,735 $24,777 $24,116 $23,503 $23,303
Residential real estate......................... 11,932 11,215 11,160 11,529 11,338
Consumer........................................ 13,107 12,546 12,254 12,197 12,005
Credit Card..................................... 1,861 1,944 1,991 2,031 2,081
Home equity..................................... 3,074 3,006 2,907 2,775 2,616
------- ------- ------- ------- -------
Total loans................................... 56,709 53,488 52,428 52,035 51,343
Securities:
Taxable......................................... 12,846 12,890 12,157 12,354 12,400
Tax-exempt...................................... 1,028 838 812 812 766
------- ------- ------- ------- -------
Total securities.............................. 13,874 13,728 12,969 13,166 13,166
Federal funds sold................................ 169 70 62 85 93
Security resale agreements........................ 544 378 260 289 284
Other short-term investments...................... 118 125 113 199 207
------- ------- ------- ------- -------
Total earning assets/
Total interest income/rates................ 71,414 67,789 65,832 65,774 65,093
Allowance for loan losses........................... (995) (958) (961) (976) (974)
Market value appreciation of securities available
for sale.......................................... 564 537 490 377 162
Cash and demand balances due from banks............. 3,616 3,359 3,416 3,213 3,346
Properties and equipment............................ 1,055 1,042 1,023 1,038 1,053
Customers' acceptance liability..................... 33 41 69 66 73
Accrued income and other assets..................... 4,240 2,959 2,909 2,812 2,825
------- ------- ------- ------- -------
Total assets.................................. $79,927 $74,769 $72,778 $72,304 $71,578
======= ======= ======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
NOW and money market accounts..................... $17,040 $15,691 $15,329 $15,450 $15,372
Savings accounts.................................. 4,870 4,756 4,842 5,085 5,266
Time deposits of individuals...................... 18,640 18,566 18,896 19,561 19,533
Other time deposits............................... 2,536 1,940 1,538 1,579 1,628
Deposits in overseas offices...................... 1,420 1,598 1,149 1,030 1,068
Federal funds borrowed............................ 2,676 2,687 1,896 1,358 1,464
Security repurchase agreements.................... 3,757 3,194 2,691 2,615 2,940
Borrowed funds.................................... 3,395 3,499 3,291 3,328 3,488
Long-term debt and capital securities............. 7,235 6,264 6,118 5,605 4,485
------- ------- ------- ------- -------
Total interest bearing liabilities/
Total interest expense/rates............... 61,569 58,195 55,750 55,611 55,244
Noninterest bearing deposits...................... 10,053 9,411 9,406 9,228 9,173
Acceptances outstanding........................... 33 41 69 66 73
Accrued expenses and other liabilities............ 1,433 846 1,360 1,202 1,093
------- ------- ------- ------- -------
Total liabilities............................. 73,088 68,493 66,585 66,107 65,583
Stockholders' equity.......................... 6,839 6,276 6,193 6,197 5,995
------- ------- ------- ------- -------
Total liabilities and stockholders' equity.... $79,927 $74,769 $72,778 $72,304 $71,578
======= ======= ======= ======= =======
Net interest income..................................................................................
Interest spread......................................................................................
Contribution of noninterest bearing sources of funds.................................................
Net interest margin..................................................................................
</TABLE>
18
<PAGE> 20
<TABLE>
<CAPTION>
Quarterly Interest Average Annualized Rate
---------------------------------------------------- -----------------------------------------------
1998 1997 1998 1997
------------------- ------------------------------ ----------------- ---------------------------
Second First Fourth Third SECOND Second First Fourth Third Second
Quarter Quarter Quarter Quarter QUARTER Quarter Quarter Quarter Quarter Quarter
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 564.8 $ 525.2 $ 526.5 $ 516.6 $ 505.9 8.47% 8.56% 8.69% 8.75% 8.70%
225.9 212.6 214.6 223.9 221.4 7.57 7.58 7.69 7.77 7.81
289.4 271.6 273.6 272.3 263.3 8.86 8.78 8.86 8.86 8.80
64.7 67.3 68.9 69.9 72.3 13.92 14.03 13.84 13.77 13.91
69.2 67.3 67.1 63.7 59.6 9.03 9.08 9.15 9.11 9.13
-------- -------- -------- -------- --------
1,214.0 1,144.0 1,150.7 1,146.4 1,122.5 8.58 8.64 8.74 8.77 8.76
207.8 207.4 197.6 199.6 203.1 6.47 6.45 6.49 6.46 6.56
19.9 17.3 17.4 17.4 17.2 7.78 8.26 8.54 8.59 8.98
-------- -------- -------- -------- --------
227.7 224.7 215.0 217.0 220.3 6.57 6.56 6.62 6.59 6.70
1.7 .8 .8 1.3 1.3 4.07 4.78 5.48 5.86 5.76
6.6 5.2 3.6 4.2 3.8 4.85 5.56 5.57 5.82 5.31
5.1 4.2 3.4 3.9 3.9 16.79 13.65 11.91 7.69 7.17
-------- -------- -------- -------- --------
$1,455.1 $1,378.9 $1,373.5 $1,372.8 $1,351.8 8.16% 8.20% 8.31% 8.31% 8.32%
$ 135.0 $ 121.3 $ 124.6 $ 124.1 $ 118.1 3.18% 3.14% 3.23% 3.19% 3.08%
26.3 25.8 27.8 29.7 30.8 2.16 2.20 2.28 2.32 2.35
257.8 252.4 267.7 273.8 269.6 5.55 5.51 5.63 5.56 5.53
34.1 25.9 19.9 20.4 20.9 5.38 5.42 5.17 5.18 5.14
18.9 21.0 15.3 13.7 14.3 5.34 5.33 5.28 5.28 5.36
36.8 36.4 26.8 19.3 20.4 5.51 5.50 5.60 5.64 5.59
44.3 37.3 32.0 31.4 36.1 4.74 4.67 4.73 4.77 4.92
48.6 51.3 47.8 47.9 50.4 6.57 5.93 5.76 5.71 5.79
113.4 99.2 99.8 91.0 73.3 6.29 6.42 6.47 6.44 6.56
-------- -------- -------- -------- --------
$ 715.2 $ 670.6 $ 661.7 $ 651.3 $ 633.9 4.66% 4.67% 4.71% 4.65% 4.60%
$ 739.9 $ 708.3 $ 711.8 $ 721.5 $ 717.9
======== ======== ======== ======== ========
........................................................ 3.50% 3.53% 3.60% 3.66% 3.72%
........................................................ .65 .66 .72 .72 .69
----- ----- ----- ----- -----
........................................................ 4.15% 4.19% 4.32% 4.38% 4.41%
===== ===== ===== ===== =====
</TABLE>
19
<PAGE> 21
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
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
INVESTORS STANDARD DUFF & THOMSON
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:
<TABLE>
<S> <C> <C> <C> <C>
National City Bank
National City Bank of Indiana
National City Bank of Kentucky
National City Bank of Pennsylvania
First of America Bank, N.A.
Fort Wayne National Bank
</TABLE>
Duff & Phelps ratings for certificates of deposit apply only to the banks
in Ohio, Kentucky and Indiana. Duff & Phelps subordinated bank note ratings
apply only to the Ohio banking subsidiary.
20
<PAGE> 22
FORM 10-Q -- JUNE 30, 1998
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: August 7, 1998
/s/ ROBERT G. SIEFERS
Robert G. Siefers
Vice Chairman and
Chief Financial Officer
(Duly Authorized Signer and
Principal Financial Officer)
21
<PAGE> 23
<TABLE>
<S> <C>
National City Corporation Logo 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
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<EXCHANGE-RATE> 1
<CASH> 4,111,415
<INT-BEARING-DEPOSITS> 45,879
<FED-FUNDS-SOLD> 1,333,374
<TRADING-ASSETS> 34,341
<INVESTMENTS-HELD-FOR-SALE> 13,898,032
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 57,478,148
<ALLOWANCE> 976,469
<TOTAL-ASSETS> 81,257,868
<DEPOSITS> 54,831,989
<SHORT-TERM> 10,400,166
<LIABILITIES-OTHER> 1,410,015
<LONG-TERM> 7,596,702
0
36,592
<COMMON> 1,314,511
<OTHER-SE> 5,667,769
<TOTAL-LIABILITIES-AND-EQUITY> 81,257,868
<INTEREST-LOAN> 2,350,656
<INTEREST-INVEST> 439,802
<INTEREST-OTHER> 23,478
<INTEREST-TOTAL> 2,813,936
<INTEREST-DEPOSIT> 918,525
<INTEREST-EXPENSE> 1,385,838
<INTEREST-INCOME-NET> 1,428,098
<LOAN-LOSSES> 99,300
<SECURITIES-GAINS> 20,766
<EXPENSE-OTHER> 1,723,179
<INCOME-PRETAX> 674,285
<INCOME-PRE-EXTRAORDINARY> 434,966
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 434,966
<EPS-PRIMARY> 1.34
<EPS-DILUTED> 1.32
<YIELD-ACTUAL> 4.16
<LOANS-NON> 222,100
<LOANS-PAST> 142,500
<LOANS-TROUBLED> 2,900
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 941,874
<CHARGE-OFFS> 157,687
<RECOVERIES> 62,303
<ALLOWANCE-CLOSE> 976,469
<ALLOWANCE-DOMESTIC> 620,144
<ALLOWANCE-FOREIGN> 233
<ALLOWANCE-UNALLOCATED> 356,122
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<RESTATED>
<MULTIPLIER> 1
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<CASH> 3,847,218
<INT-BEARING-DEPOSITS> 172,490
<FED-FUNDS-SOLD> 1,054,883
<TRADING-ASSETS> 33,574
<INVESTMENTS-HELD-FOR-SALE> 13,483,875
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 51,919,334
<ALLOWANCE> 965,429
<TOTAL-ASSETS> 73,627,235
<DEPOSITS> 52,390,475
<SHORT-TERM> 8,282,003
<LIABILITIES-OTHER> 1,483,053
<LONG-TERM> 5,414,588
0
0
<COMMON> 1,282,444
<OTHER-SE> 4,774,672
<TOTAL-LIABILITIES-AND-EQUITY> 73,627,235
<INTEREST-LOAN> 2,199,596
<INTEREST-INVEST> 421,093
<INTEREST-OTHER> 18,557
<INTEREST-TOTAL> 2,639,246
<INTEREST-DEPOSIT> 896,107
<INTEREST-EXPENSE> 1,239,027
<INTEREST-INCOME-NET> 1,400,219
<LOAN-LOSSES> 113,277
<SECURITIES-GAINS> 47,128
<EXPENSE-OTHER> 1,355,291
<INCOME-PRETAX> 807,706
<INCOME-PRE-EXTRAORDINARY> 546,997
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 546,997
<EPS-PRIMARY> 1.68
<EPS-DILUTED> 1.65
<YIELD-ACTUAL> 4.40
<LOANS-NON> 222,600
<LOANS-PAST> 116,000
<LOANS-TROUBLED> 7,000
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 958,739
<CHARGE-OFFS> 178,946
<RECOVERIES> 77,265
<ALLOWANCE-CLOSE> 965,429
<ALLOWANCE-DOMESTIC> 677,233
<ALLOWANCE-FOREIGN> 146
<ALLOWANCE-UNALLOCATED> 288,050
</TABLE>
