<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
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 March 31, 1999 - 314,420,971
<PAGE> 2
[NATIONAL CITY CORPORATION LOGO]
QUARTER ENDED MARCH 31, 1999
FINANCIAL REPORT
AND FORM 10-Q
<PAGE> 3
FINANCIAL REPORT AND FORM 10-Q
QUARTER ENDED MARCH 31, 1999
TABLE OF CONTENTS
<TABLE>
<S> <C>
PART I -- FINANCIAL INFORMATION
Financial Highlights........................................ 3
Item 1. Financial Statements:
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
Item 2. Management's Discussion and Analysis................ 13
Daily Average Balances/Net Interest Income/Rates............ 18
Item 3. Quantitative and Qualitative Disclosures About
Market Risk
There were no material changes to the market risk
disclosures included in National City Corporation's 1998
Annual Report on Form 10-K. Refer to the Management's
Discussion and Analysis for further discussion.
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings (None)
Item 2. Changes in Securities and Use of Proceeds (None)
Item 3. Defaults Upon Senior Securities (None)
Item 4. Submission of Matters to a Vote of Security Holders
(None)
Item 5. Other Information (None)
Item 6. Exhibits and Reports on Form 8-K
Exhibits:
Exhibit 12 -- Computation of Ratio of Earnings to Fixed
Charges
Exhibit 27 -- Financial Data Schedule
Reports on Form 8-K:
February 2, 1999 -- National City Corporation reported
that it had filed a prospectus and a prospectus
supplement with the Commission relating to its
issuance of 5 3/4 subordinated notes due February 1,
2009.
Signature................................................... 21
</TABLE>
2
<PAGE> 4
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Three Months Ended
March 31
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------
<CAPTION>
Percent
1999 1998 Change
<S> <C> <C> <C>
EARNINGS (IN THOUSANDS):
- --------------------------------
Net interest income -- fully taxable equivalent..... $764,699 $708,276 8%
Provision for loan losses........................... 68,034 56,267 21
Fees and other income (excluding nonrecurring
items)............................................ 554,093 493,771 12
Securities gains.................................... 23,688 1,052 --
Noninterest expense (excluding nonrecurring
items)............................................ 739,202 699,303 6
Net income before nonrecurring items................ 347,871 297,607 17
Nonrecurring items*
Pre-tax........................................... 36,798 (274,698) --
After-tax......................................... 3,148 (193,885) --
Net income.......................................... 351,019 103,722 238
PERFORMANCE RATIOS:
- ------------------------------
Net interest margin................................. 4.02% 4.19%
Return on average assets**.......................... 1.65 1.61
Return on average common equity**................... 20.94 19.23
Return on average total equity**.................... 20.87 19.23
PER SHARE MEASURES:
- ------------------------------
Net income per common share:
Basic............................................. $1.09 $.33 230%
Diluted........................................... 1.08 .32 238
Diluted-adjusted**................................ 1.07 .92 16
Dividends paid per common share..................... .52 .46 13
Book value per common share......................... 19.80 20.73 (4)
Market value per common share (close)............... 66.38 73.31 (9)
Average shares -- diluted........................... 326,110,250 323,006,334 1
AVERAGE BALANCES (IN MILLIONS):
- ------------------------------------------
Assets.............................................. $85,520 $74,769 14%
Loans............................................... 57,319 52,158 10
Securities.......................................... 15,126 13,728 10
Earning assets...................................... 76,514 67,789 13
Deposits............................................ 54,457 51,637 5
Common stockholders' equity......................... 6,728 6,276 7
Stockholders' equity................................ 6,761 6,276 8
AT PERIOD END:
- --------------------
Equity to assets ratio.............................. 7.44% 8.46%
Tier 1 capital ratio................................ 7.50 8.67
Total risk-based capital ratio...................... 12.20 12.75
Leverage ratio...................................... 6.10 7.64
Common shares outstanding........................... 314,420,971 327,513,959 (4)%
Full-time equivalent employees...................... 39,742 41,056 (3)
ASSET QUALITY:
- --------------------
Net charge-offs to average loans (annualized)....... .48% .41%
Loan loss reserve to loans (period-end)............. 1.69 1.80
Nonperforming assets to loans and OREO.............. .47 .52
- -------------------------------------------------------------------------------------------
</TABLE>
* Comprised of net gains on asset disposals in 1999 (Electronic Payment
Services, Inc. -- $95.7 million pre-tax, $62.2 million after-tax; Stored
Value Systems, Inc. -- $6.1 million pre-tax, $4.0 million after-tax; National
Processing, Inc. business lines, net of minority interest -- ($65.0) million
pre-tax, ($63.1) million after-tax) and merger expenses in 1998.
** Excluding after-tax effects of nonrecurring items.
3
<PAGE> 5
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended
(In Thousands Except Per Share Amounts) March 31
<S> <C> <C>
- -------------------------------------------------------------------------------------
<CAPTION>
1999 1998
<S> <C> <C>
INTEREST INCOME
Loans..................................................... $1,212,303 $1,140,421
Securities:
Taxable................................................ 223,913 206,412
Exempt from Federal income taxes....................... 10,199 11,600
Federal funds sold and security resale agreements......... 11,013 6,006
Other short-term investments.............................. 3,062 4,206
---------- ----------
Total interest income................................ 1,460,490 1,368,645
INTEREST EXPENSE
Deposits.................................................. 419,023 446,461
Federal funds borrowed and security repurchase
agreements............................................. 99,694 73,763
Borrowed funds............................................ 28,484 51,276
Long-term debt and capital securities..................... 157,154 99,170
---------- ----------
Total interest expense............................... 704,355 670,670
---------- ----------
NET INTEREST INCOME......................................... 756,135 697,975
PROVISION FOR LOAN LOSSES................................... 68,034 56,267
---------- ----------
Net interest income after provision
for loan losses................................... 688,101 641,708
NONINTEREST INCOME
Item processing revenue................................... 121,703 112,540
Service charges on deposit accounts....................... 99,863 91,713
Trust and investment management fees...................... 81,847 76,954
Card-related fees......................................... 45,310 46,891
Mortgage banking revenue.................................. 92,995 61,250
Other..................................................... 149,173 104,423
---------- ----------
Total fees and other income.......................... 590,891 493,771
Securities gains.......................................... 23,688 1,052
---------- ----------
Total noninterest income............................. 614,579 494,823
NONINTEREST EXPENSE
Salaries and other personnel.............................. 400,764 383,854
Equipment................................................. 52,761 51,728
Net occupancy............................................. 54,127 48,737
Third party services...................................... 45,570 49,602
Merger and restructuring.................................. -- 274,698
Other..................................................... 185,980 165,382
---------- ----------
Total noninterest expense............................ 739,202 974,001
---------- ----------
Income before income taxes.................................. 563,478 162,530
Income tax expense.......................................... 212,459 58,808
---------- ----------
NET INCOME.................................................. $ 351,019 $ 103,722
========== ==========
NET INCOME APPLICABLE TO COMMON STOCK....................... $ 350,604 $ 103,722
========== ==========
</TABLE>
<TABLE>
<S> <C> <C>
NET INCOME PER COMMON SHARE
Basic..................................................... $1.09 $.33
Diluted................................................... 1.08 .32
AVERAGE COMMON SHARES OUTSTANDING
Basic..................................................... 320,495 316,227
Diluted................................................... 326,110 323,006
</TABLE>
See notes to consolidated financial statements.
4
<PAGE> 6
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31 December 31 March 31
(DOLLARS IN THOUSANDS) 1999 1998 1998
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Loans:
Commercial.................................... $22,306,928 $22,243,114 $19,996,064
Real estate -- commercial..................... 6,309,277 6,251,879 6,491,789
Real estate -- residential.................... 8,693,757 9,664,115 10,110,368
Consumer...................................... 15,022,782 14,822,759 12,834,912
Credit card................................... 1,846,719 1,852,635 1,855,401
Home equity................................... 3,133,121 3,176,664 3,030,871
----------- ----------- -----------
Total loans.............................. 57,312,584 58,011,166 54,319,405
Allowance for loan losses................ (970,336) (970,243) (976,464)
----------- ----------- -----------
Net loans................................ 56,342,248 57,040,923 53,342,941
Mortgage loans held for sale..................... 2,519,462 3,507,487 2,133,398
Securities available for sale, at market......... 15,263,581 16,119,370 15,635,191
Federal funds sold and security resale
agreements.................................... 978,138 930,492 475,890
Other short-term investments..................... 101,696 218,149 111,687
Cash and demand balances due from banks.......... 3,443,365 4,783,491 3,745,235
Properties and equipment......................... 1,129,305 1,150,210 1,037,159
Accrued income and other assets.................. 4,316,701 4,495,510 4,234,687
----------- ----------- -----------
TOTAL ASSETS............................. $84,094,496 $88,245,632 $80,716,188
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Noninterest bearing deposits..................... $11,200,312 $10,911,926 $10,449,115
NOW and money market accounts.................... 16,800,510 18,610,832 17,312,998
Savings accounts................................. 3,957,576 4,021,113 4,359,381
Time deposits of individuals..................... 16,821,451 17,450,904 18,980,294
Other time deposits.............................. 1,340,458 2,280,973 2,482,568
Deposits in overseas offices..................... 1,930,292 4,971,161 1,802,535
----------- ----------- -----------
Total deposits........................... 52,050,599 58,246,909 55,386,891
Federal funds borrowed and security repurchase
agreements.................................... 8,753,759 9,427,309 7,967,150
Borrowed funds................................... 2,840,983 2,117,916 2,762,173
Long-term debt................................... 11,999,109 9,009,448 5,533,614
Corporation-obligated mandatorily redeemable
capital securities of subsidiary trusts
holding solely debentures of the
Corporation................................... 679,896 679,894 679,894
Accrued expenses and other liabilities........... 1,513,241 1,751,248 1,560,664
----------- ----------- -----------
TOTAL LIABILITIES........................ 77,837,587 81,232,724 73,890,386
Stockholders' Equity:
Preferred stock.................................. 30,513 36,098 36,999
Common stock..................................... 6,226,396 6,976,810 6,788,803
----------- ----------- -----------
TOTAL STOCKHOLDERS' EQUITY............... 6,256,909 7,012,908 6,825,802
----------- ----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY................................. $84,094,496 $88,245,632 $80,716,188
=========== =========== ===========
</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
- -----------------------------------------------------------------------------------------
1999 1998
<S> <C> <C>
OPERATING ACTIVITIES
Net income................................................ $ 351,019 $ 103,722
Adjustments to reconcile net income to net cash provided
(used) by operating activities:
Provision for loan losses............................ 68,034 56,267
Depreciation and amortization........................ 40,493 33,630
Amortization of intangibles and servicing rights..... 41,902 24,425
Amortization of securities discount and premium...... 4,668 4,495
Securities gains..................................... (23,688) (1,052)
Other gains, net..................................... (37,391) (45,866)
Net (increase) decrease in trading account assets.... (4,398) 6,333
Originations and purchases of mortgage loans held for
sale.............................................. (4,471,969) (3,339,955)
Proceeds from sales of mortgage loans held for
sale.............................................. 5,562,488 3,019,870
(Increase) decrease in interest receivable........... (21,801) 7,528
Increase (decrease) increase in interest payable..... 42,221 (33,317)
Net change in other assets/liabilities............... (51,229) (57,485)
----------- -----------
Net Cash Provided (Used) by Operating
Activities...................................... 1,500,349 (221,405)
LENDING AND INVESTING ACTIVITIES
Net decrease in short-term investments.................... 73,205 52,268
Purchases of securities................................... (1,266,508) (3,683,967)
Proceeds from sales of securities......................... 982,094 2,133,433
Proceeds from maturities and prepayments of securities.... 1,048,873 684,850
Net decrease (increase) in loans.......................... 482,471 (840,390)
Proceeds from sales of loans.............................. 46,269 --
Net (increase) decrease in properties and equipment....... (16,810) 14,617
Acquisitions/Disposals.................................... 8,535 157,632
----------- -----------
Net Cash Provided (Used) by Lending and Investing
Activities...................................... 1,358,129 (1,481,557)
DEPOSIT AND FINANCING ACTIVITIES
Net (decrease) increase in Federal funds borrowed and
security repurchase agreements......................... (673,550) 2,871,580
Net increase (decrease) in borrowed funds................. 723,067 (1,532,917)
Net (decrease) increase in demand, savings, NOW, money
market accounts, and deposits in overseas offices...... (4,626,342) 124,553
Net (decrease) increase in time deposits.................. (1,569,968) 94,969
Repayment of long-term debt............................... (570,143) (302,415)
Proceeds from issuance of long-term debt, net............. 3,560,000 101,404
Dividends paid............................................ (170,388) (127,680)
Issuances of common stock................................. 56,299 45,394
Repurchase of common stock................................ (927,579) (146,000)
----------- -----------
Net Cash (Used) Provided by Deposit and Financing
Activities...................................... (4,198,604) 1,128,888
----------- -----------
Net (Decrease) in Cash and Demand Balances Due From
Banks.................................................. (1,340,126) (574,074)
Cash and Demand Balances Due From Banks, January 1........ 4,783,491 4,319,309
----------- -----------
Cash and Demand Balances Due From Banks, March 31......... $ 3,443,365 $ 3,745,235
=========== ===========
SUPPLEMENTAL DISCLOSURES
Interest paid............................................. $ 662,134 $ 703,987
Income taxes paid......................................... 30,169 5,529
Common and preferred 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, 1998................. $ -- $1,262,790 $1,108,920 $3,440,763 $345,787
Comprehensive Income:
Net income.......................... 103,722
Other comprehensive income, net of
tax............................... 27,994
Total comprehensive income............
Common dividends declared, $.46 per
share............................... (150,752)
Issuance of 997,719 common shares
under corporate stock and dividend
reinvestment plans.................. 3,991 41,403
Net issuance of 10,818,752 common
shares and 739,976 preferred shares
pursuant to acquisitions............ 36,999 43,275 691,734 (130,824)
------- ---------- ---------- ---------- --------
Balance March 31, 1998.................. $36,999 $1,310,056 $1,842,057 $3,262,909 $373,781
======= ========== ========== ========== ========
Balance January 1, 1999................. $36,098 $1,305,309 $1,968,751 $3,430,672 $272,078
Comprehensive Income:
Net income.......................... 351,019
Other comprehensive income, net of
tax
Unrealized losses on securities of
($56,172) net of reclassification
adjustment for gains included in
net income of $15,397............. (71,569)
Total comprehensive income............
Common dividends declared, $.52 per
share............................... (163,754)
Preferred dividends declared.......... (415)
Issuance of 1,147,939 common shares
under corporate stock and dividend
reinvestment plans.................. 4,592 51,707
Purchase of 13,223,500 common
shares.............................. (52,894) (45,484) (829,201)
Conversion of 111,697 shares of
preferred stock to 169,172 common
shares.............................. (5,585) 677 4,908
------- ---------- ---------- ---------- --------
Balance March 31, 1999.................. $30,513 $1,257,684 $1,979,882 $2,788,321 $200,509
======= ========== ========== ========== ========
<CAPTION>
(Dollars in Thousands Except Per
Share Amounts) Total
<S> <C>
- -------------------------------------------------------------------
Balance January 1, 1998................. $6,158,260
Comprehensive Income:
Net income.......................... 103,722
Other comprehensive income, net of
tax............................... 27,994
----------
Total comprehensive income............ 131,716
Common dividends declared, $.46 per
share............................... (150,752)
Issuance of 997,719 common shares
under corporate stock and dividend
reinvestment plans.................. 45,394
Net issuance of 10,818,752 common
shares and 739,976 preferred shares
pursuant to acquisitions............ 641,184
----------
Balance March 31, 1998.................. $6,825,802
==========
Balance January 1, 1999................. $7,012,908
Comprehensive Income:
Net income.......................... 351,019
Other comprehensive income, net of
tax
Unrealized losses on securities of
($56,172) net of reclassification
adjustment for gains included in
net income of $15,397............. (71,569)
----------
Total comprehensive income............ 279,450
Common dividends declared, $.52 per
share............................... (163,754)
Preferred dividends declared.......... (415)
Issuance of 1,147,939 common shares
under corporate stock and dividend
reinvestment plans.................. 56,299
Purchase of 13,223,500 common
shares.............................. (927,579)
Conversion of 111,697 shares of
preferred stock to 169,172 common
shares.............................. --
----------
Balance March 31, 1999.................. $6,256,909
==========
</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 of National City Corporation ("National City" or the
"Corporation") 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
DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION: In
June 1997, the Financial Accounting Standards Board issued SFAS No. 131,
Disclosures about Segments of an Enterprise and Related Information. The
provisions of this statement require disclosure of financial and descriptive
information about an enterprise's operating segments in annual and interim
financial reports issued to shareholders. The statement defines an operating
segment as a component of an enterprise that engages in business activities that
generate revenue and incur expense, whose operating results are reviewed by the
chief operating decision maker in the determination of resource allocation and
performance, and for which discrete financial information is available. The
Corporation first provided disclosures in accordance with the provisions of the
statement in the 1998 annual report. Interim disclosures for the current period
are
7
<PAGE> 9
presented in Note 15. These disclosure requirements had 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. The provisions of this statement require 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. 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
estimable 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. BUSINESS COMBINATIONS AND ASSET DISPOSALS
During the first quarter of 1999, National City sold its 20% ownership
interest in Electronic Payment Services, Inc. ("EPS"), a provider of transaction
processing services, to Concord EFS, Inc. and recognized a gain of $95.7 million
pre-tax, or $62.2 million after-tax, on the sale. The transaction was effected
by exchanging each common share of EPS for 7.9091 unregistered shares of Concord
EFS, Inc. common stock. As a result, National City currently owns 5.9 million
shares of unregistered Concord EFS, Inc. common stock.
In March 1999, National City sold its interest in Stored Value Systems, Inc
("SVS"), a subsidiary that had been involved in developing smart card
technology, for a gain of $6.1 million pre-tax or $4.0 million after-tax.
Also during the first quarter of 1999, National Processing, Inc. ("National
Processing"), an 88%-owned subsidiary of the Corporation, adopted a formal plan
to either sell, liquidate or dispose of its freight payables, payables
outsourcing, remittance and merchant check services business lines. A $73.9
million impairment loss was recorded related to these planned dispositions. Net
of the minority interest benefit of $8.9 million, the net loss for the
Corporation totaled $65.0 million pre-tax or $63.1 million after-tax.
The transactions described above are collectively referred to as the Asset
Disposals. The aggregate net gain from the Asset Disposals totaled $36.8 million
pre-tax, or $3.1 million after-tax, and is included in other income in the
Consolidated Statements of Income.
On March 30, 1998, National City acquired Fort Wayne National Corporation
("Fort Wayne"), a $3 billion asset bank holding company headquartered in Fort
Wayne, Indiana, in a transaction accounted for as a purchase.
On March 31, 1998, National City merged with First of America Bank
Corporation ("First of America"), a $21 billion asset bank holding company
headquartered in Kalamazoo, Michigan, in a transaction accounted for as a
pooling of interests. The historical financial statements have been restated to
reflect this transaction.
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.
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) 1999 1998
<S> <C> <C>
- --------------------------------------------------------------
Balance at beginning of year............. $970,243 $941,874
Provision................................ 68,034 56,267
Allowance related to loans acquired...... 93 30,679
Charge-offs:
Commercial............................. 13,023 9,870
Real estate -- commercial.............. 2,858 2,207
Real estate -- residential............. 1,702 1,923
Consumer............................... 55,671 42,435
Credit card............................ 27,106 25,710
Home equity............................ 2,009 2,283
-------- --------
Total charge-offs...................... 102,369 84,428
Recoveries:
Commercial............................. 4,207 5,290
Real estate -- commercial.............. 2,216 3,088
Real estate -- residential............. 143 9
Consumer............................... 21,437 17,392
Credit card............................ 5,326 5,588
Home equity............................ 1,006 705
-------- --------
Total recoveries....................... 34,335 32,072
-------- --------
Net charge-offs.......................... 68,034 52,356
-------- --------
Balance at end of period................. $970,336 $976,464
======== ========
</TABLE>
The allowance for loan losses is maintained at a level believed adequate to
absorb estimated probable credit losses and is periodically evaluated based on
an assessment of the losses inherent in the loan portfolio. This assessment
results in an allowance consisting of two components, allocated and unallocated.
The allocated component reflects expected losses resulting from the analysis
of individual loans, developed through specific credit allocations for
individual loans,
8
<PAGE> 10
historical loss experience for loan categories and management's determination of
the amounts necessary for concentrations and changes in mix and volume of the
portfolio.
The unallocated portion of the allowance is determined based on management's
assessment of general economic conditions as well as specific economic factors
in the individual markets in which National City operates. This determination
inherently involves a higher degree of uncertainty and considers current risk
factors that may not have yet manifested themselves in the Corporation's
historical loss factors used to determine the allocated component of the
allowance, and it recognizes that knowledge of the portfolio may be incomplete.
Details regarding nonperforming loans are included in the Asset Quality
section of Management's Discussion and Analysis. At March 31, 1999, December 31,
1998 and March 31, 1998, loans that were considered to be impaired under SFAS
No. 114 totaled $34.2 million, $16.9 million and $27.9 million, respectively.
The related allowance allocated to these loans was $13.6 million, $7.4 million
and $11.6 million, respectively. All impaired loans were included in
nonperforming assets and had an associated allowance. The contractual interest
due and actual interest recorded on nonperforming assets for the three months
ended March 31, 1999, was $6.9 million and $2.0 million, respectively.
6. SECURITIES
The following is a summary of securities available for sale:
<TABLE>
<CAPTION>
MARCH 31, 1999
---------------------------------------------------
AMORTIZED UNREALIZED UNREALIZED MARKET
(IN THOUSANDS) COST GAINS LOSSES VALUE
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------
U.S. Treasury and
Federal agency
debentures.......... $ 1,162,635 $ 9,264 $ 6,687 $ 1,165,212
Mortgage-backed
securities.......... 9,168,546 60,513 44,398 9,183,001
Asset-backed and
corporate debt
securities.......... 2,693,953 9,786 7,076 2,696,663
States and political
subdivisions........ 891,417 43,475 2,525 935,046
Other................ 1,038,813 245,947 82 1,283,659
----------- -------- ------- -----------
Total securities.... $14,955,364 $368,985 $60,768 $15,263,581
=========== ======== ======= ===========
</TABLE>
<TABLE>
<CAPTION>
March 31, 1998
---------------------------------------------------
Amortized Unrealized Unrealized Market
(In Thousands) Cost Gains Losses Value
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------
U.S. Treasury and
Federal agency
debentures.......... $ 3,284,438 $ 12,591 $ 8,963 $ 3,288,066
Mortgage-backed
securities.......... 8,043,467 72,753 12,719 8,103,501
Asset-backed and
corporate debt
securities.......... 1,854,553 10,492 2,571 1,862,474
States and political
subdivisions........ 1,050,290 46,462 227 1,096,525
Other................ 828,012 456,883 270 1,284,625
----------- -------- ------- -----------
Total securities.... $15,060,760 $599,181 $24,750 $15,635,191
=========== ======== ======= ===========
</TABLE>
Other securities include the Corporation's internally-managed equity
portfolio of bank and thrift common stock investments, which had an amortized
cost and market value of $488.3 million and $711.9 million, respectively, as of
March 31, 1999 and $262.5 million and $705.1 million, respectively, at March 31,
1998.
For the three months ended March 31, 1999 and 1998, gross gains of $31.1
million and $15.9 million, and gross losses of $7.4 million and $14.8 million
were realized, respectively, for the entire securities portfolio.
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.
As of March 31, 1999, there were no securities of a single issuer, other
than U.S. Treasury securities and other U.S. government agencies, which exceeded
10% of stockholders' equity.
7. BORROWED FUNDS
<TABLE>
<CAPTION>
Mar. 31 Dec. 31 Mar. 31
(IN THOUSANDS) 1999 1998 1998
<S> <C> <C> <C>
- ---------------------------------------------------------------
U.S. Treasury demand notes
and Federal funds
borrowed-term........... $1,512,701 $ 916,342 $1,160,768
Notes payable to Student
Loan Marketing
Association............. -- -- 300,000
FHLB advances............. 250,000 250,000 350,000
Bank notes and other...... 123,041 556,313 622,671
---------- ---------- ----------
Total bank
subsidiaries.......... 1,885,742 1,722,655 2,433,439
Commercial paper.......... 950,683 392,938 325,990
Other..................... 4,558 2,323 2,744
---------- ---------- ----------
Total parent company and
other subsidiaries.... 955,241 395,261 328,734
---------- ---------- ----------
Total............. $2,840,983 $2,117,916 $2,762,173
========== ========== ==========
</TABLE>
8. LONG-TERM DEBT
<TABLE>
<CAPTION>
Mar. 31 Dec. 31 Mar. 31
(IN THOUSANDS) 1999 1998 1998
- ---------------------------------------------------------------
<S> <C> <C> <C>
9 7/8% subordinated
notes due 1999.......... $ 64,977 $ 64,965 $ 64,925
6.50% subordinated
notes due 2000.......... 99,944 99,931 99,892
8.50% subordinated
notes due 2002.......... 99,926 99,920 99,902
6 5/8% subordinated
notes due 2004.......... 249,363 249,330 249,234
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................ 249,819 249,814 249,792
5.75% subordinated notes
due 2009................ 298,870 -- --
Other.................... 10,000 10,000 11,345
----------- ---------- ----------
Total parent company... 1,422,899 1,123,960 1,125,090
----------- ---------- ----------
6.50% subordinated
notes due 2003.......... 199,694 199,675 199,619
7.25% subordinated
notes due 2010.......... 223,148 223,107 222,984
6.30% subordinated
notes due 2011.......... 200,000 200,000 200,000
</TABLE>
9
<PAGE> 11
<TABLE>
<CAPTION>
Mar. 31 Dec. 31 Mar. 31
(IN THOUSANDS) 1999 1998 1998
- ---------------------------------------------------------------
<S> <C> <C> <C>
7.25% subordinated
notes due 2011.......... 197,524 197,475 197,326
6.25% subordinated
notes due 2011.......... 297,220 -- --
Other.................... 1,216 1,475 1,607
----------- ---------- ----------
Total subsidiary....... 1,118,802 821,732 821,536
----------- ---------- ----------
Total long-term debt
qualifying for Tier 2
Capital.............. 2,541,701 1,945,692 1,946,626
----------- ---------- ----------
Senior bank notes........ 6,987,144 4,992,219 2,144,170
Federal Home Loan Bank
advances................ 2,462,286 2,063,207 1,421,310
Other.................... 7,978 8,330 21,508
----------- ---------- ----------
Total other long-term
debt................. 9,457,408 7,063,756 3,586,988
----------- ---------- ----------
Total................ $11,999,109 $9,009,448 $5,533,614
=========== ========== ==========
</TABLE>
During the first quarter of 1999, National City and its wholly owned
subsidiary, National City Bank, each issued $300 million in subordinated notes.
Both issuances qualify for inclusion in Tier 2 capital.
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,
1999.
9. CORPORATION OBLIGATED MANDATORILY REDEEMABLE CAPITAL SECURITIES OF SUBSIDIARY
TRUSTS HOLDING SOLELY DEBENTURES OF THE CORPORATION
<TABLE>
<CAPTION>
Mar. 31 Dec. 31 Mar. 31
(IN THOUSANDS) 1999 1998 1998
- ----------------------------------------------------------------
<S> <C> <C> <C>
8.12% Capital Securities of First
of America Capital Trust I, due
January 31, 2027................ $150,000 $150,000 $150,000
9.85% Capital Securities of Fort
Wayne Capital Trust I, due April
15, 2027........................ 30,000 30,000 30,000
-------- -------- --------
Total Capital Securities
qualifying as Tier 1 capital... 180,000 180,000 180,000
6.75% Capital Securities of
National City Capital Trust I,
due June 1, 2029................ 499,896 499,894 499,894
-------- -------- --------
Total.......................... $679,896 $679,894 $679,894
======== ======== ========
</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 and Fort Wayne
Capital Trust I are first redeemable, in whole or in part, by the Corporation on
January 31, 2007 and April 15, 2007, respectively. The debentures held by
National City Capital Trust I are first redeemable by the Corporation on June 1,
1999. If the National City Capital Trust I 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. CAPITAL RATIOS
The following table reflects various measures of capital:
<TABLE>
<CAPTION>
Mar. 31 Dec. 31 Mar. 31
1999 1998 1998
(Dollars in ---------------- ---------------- ----------------
MILLIONS) AMOUNT Ratio Amount Ratio Amount Ratio
<S> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------
Total
equity(1)... $6,256.9 7.44% $7,012.9 7.95% $6,825.8 8.46%
Total common
equity(1)... 6,226.4 7.40 6,976.8 7.91 6,788.8 8.41
Tangible
common
equity(2)... 5,122.5 6.17 5,850.6 6.72 5,634.4 7.08
Tier 1
capital(3).. 5,135.4 7.50 5,726.1 7.95 5,584.7 8.67
Total risk-
based
capital(4)... 8,352.1 12.20 8,493.7 11.79 8,206.3 12.75
Leverage(5)... 5,135.4 6.10 5,726.1 6.94 5,584.7 7.64
- ----------------------------------------------------------------------
</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; computed as a ratio
to total assets less intangible assets.
(3) Stockholders' equity and qualifying capital securities 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, subordinated debt and
unrealized holding gains on certain equity securities; 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.
- ------------------------------------------------------------
The parent company and its banking subsidiaries must meet specific capital
requirements that involve quantitative measures of assets, liabilities, and
certain off-balance sheet items as set forth by banking industry regulators.
Failure to meet minimum capital requirements can result in certain mandatory and
possible additional discretionary actions by regulators that could have a
material effect on a bank's operations.
National City's Tier 1, total risk-based capital and leverage ratios for the
current period are based on preliminary data. Such 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
10
<PAGE> 12
minimums of 6.00%, 10.00% and 5.00% for the Tier 1 capital, total risk-based
capital and leverage ratios, respectively.
Intangible assets used in the capital ratio calculations are summarized
below:
<TABLE>
<CAPTION>
Mar. 31 Dec. 31 Mar. 31
(DOLLARS IN MILLIONS) 1999 1998 1998
- ------------------------------------------------------------------
<S> <C> <C> <C>
Goodwill........................... $1,025.3 $1,043.3 $1,062.8
Other intangibles.................. 78.6 82.9 91.6
-------- -------- --------
Total intangibles.................. $1,103.9 $1,126.2 $1,154.4
======== ======== ========
</TABLE>
11. STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Mar. 31 Dec. 31 Mar. 31
(OUTSTANDING SHARES) 1999 1998 1998
<S> <C> <C> <C>
- ---------------------------------------------------
Preferred Stock, no par
value, authorized
5,000,000 shares...... 610,258 721,954 739,976
Common Stock, $4.00 par
value, authorized
700,000,000 shares.... 314,420,971 326,327,360 327,513,959
</TABLE>
National City's preferred stock has 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 the Corporation 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.
During the fourth quarter of 1998, the board of directors authorized the
purchase of up to 30 million shares of National City common stock in the open
market or through privately negotiated transactions subject to an aggregate
purchase limit of $2.7 billion. To date, 18 million shares have been
repurchased. Of the 18 million repurchased shares, 13 million were repurchased
during the first quarter of 1999.
On April 12, 1999, the Corporation's stockholders approved an increase in
the number of authorized common shares from 700,000,000 to 1,400,000,000.
12. INCOME TAX EXPENSE
The composition of income tax expense follows:
<TABLE>
<CAPTION>
Three Months
Ended
March 31
--------------------------
(IN THOUSANDS) 1999 1998
<S> <C> <C>
- -----------------------------------------------------------
Applicable to income exclusive
of securities transactions... $204,168 $58,440
Applicable to securities
transactions................. 8,291 368
-------- -------
Total.................. $212,459 $58,808
======== =======
</TABLE>
The effective tax rate was approximately 37.7% and 36.2% for the three
months ended March 31, 1999 and 1998, respectively. Income taxes for the first
quarter of 1999 include the effect of the write off of nondeductible goodwill
related to the planned disposal of certain National Processing business lines.
See Note 3 for further discussion of the Asset Disposals.
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 March 31, 1999, bank subsidiaries may pay
the Parent company, without prior regulatory approval, approximately $1.2
billion of dividends. During the first three months of 1999, there were no
dividends declared and $76.0 million of previously declared dividends were paid
to the Parent company by the bank subsidiaries.
14. NET INCOME PER SHARE
The calculation of net income per common share follows:
<TABLE>
<CAPTION>
Three Months
Ended
March 31
-------------------
In Thousands Except(Per Share Amounts) 1999 1998
- ----------------------------------------------------------------------
<S> <C> <C>
BASIC:
Net income...................................... $351,019 $103,722
Less preferred dividends........................ 415 --
-------- --------
Net income applicable to common stock........... $350,604 $103,722
======== ========
Average common shares outstanding............... 320,495 316,227
======== ========
Net income per common share -- basic............ $1.09 $.33
======== ========
DILUTED:
Net income...................................... $351,019 $103,722
======== ========
Average common shares outstanding............... 320,495 316,227
Stock option adjustment......................... 4,700 6,779
Preferred stock adjustment...................... 915 --
-------- --------
Average common shares outstanding -- diluted.... 326,110 323,006
======== ========
Net income per common share -- diluted.......... $1.08 $.32
======== ========
</TABLE>
11
<PAGE> 13
15. LINE OF BUSINESS REPORTING
National City operates three major lines of businesses: corporate banking,
retail banking and fee-based businesses. The business units are identified by
the product or services offered and the channel through which the product or
service is delivered. The accounting policies of the individual business units
are the same as those of the Corporation. When material, prior period amounts
are reclassified to conform to the current reporting structure. Transactions
between business units are primarily conducted at fair value, resulting in
profits that are eliminated for reporting consolidated results of operations.
Parent and other is comprised of several smaller business units including
venture capital and the investment funding unit as well as inter-segment income
elimination and unallocated expenses. Operating results of the business units
are discussed in the Line of Business Results section of Management's Discussion
and Analysis. Selected line of business information is included in the following
table:
<TABLE>
<CAPTION>
Corporate Retail Fee-Based Parent Consolidated
Banking Banking Businesses and Other Total
(Dollars In Thousands) --------- -------- ---------- --------- ------------
<S> <C> <C> <C> <C> <C>
QUARTER ENDED MARCH 31, 1999
External revenues............................ $264,817 $660,490 $276,024 $ 177,947 $1,379,278
Intersegment revenues........................ -- 12,036 11,746 (23,782) --
-------- -------- -------- --------- ----------
Total revenues............................... $264,817 $672,526 $287,770 $ 154,165 $1,379,278
======== ======== ======== ========= ==========
Net income (loss)............................ $103,861 $150,862 $ (4,635) $ 100,931 $ 351,019
======== ======== ======== ========= ==========
Average assets (In millions)................. $ 25,827 $ 33,387 $ 6,308 $ 19,998 $ 85,520
======== ======== ======== ========= ==========
QUARTER ENDED MARCH 31, 1998
External revenues............................ $250,269 $640,334 $291,615 $ 20,881 $1,203,099
Intersegment revenues........................ -- 6,936 9,497 (16,433) --
-------- -------- -------- --------- ----------
Total revenues............................... $250,269 $647,270 $301,112 $ 4,448 $1,203,099
======== ======== ======== ========= ==========
Net income (loss)............................ $ 88,285 $144,402 $ 42,057 $(171,022) $ 103,722
======== ======== ======== ========= ==========
Average assets (In millions)................. $ 22,806 $ 31,532 $ 4,047 $ 16,384 $ 74,769
======== ======== ======== ========= ==========
</TABLE>
12
<PAGE> 14
MANAGEMENT'S DISCUSSION AND ANALYSIS
FINANCIAL HIGHLIGHTS
National City reported net income for the first quarter of 1999 of $351.0
million, or $1.08 per diluted share compared with $103.7 million, or $.32 per
diluted share, for the same period in 1998. Included in reported net income were
after-tax net gains on Asset Disposals of $3.1 million, or $.01 per diluted
share, for 1999 and after-tax merger expenses of $193.9 million, or $.60 per
diluted share, for 1998. The first quarter 1999 Asset Disposals are discussed in
further detail in Note 3 to the Consolidated Financial Statements. The 1998
merger expenses relate to the merger with First of America and the acquisition
of Fort Wayne.
Excluding the effects of the Asset Disposals and merger charges, net income
for the first quarter of 1999 was $347.9 million, or $1.07 per diluted share, an
increase of 16.9% over the respective first quarter 1998's net income of $297.6
million, or $.92 per diluted share. On this basis, returns on average common
equity and average assets were 20.94% and 1.65%, respectively, compared with
19.23% and 1.61%, respectively, for the same period last year.
Consolidated results of operations for the first quarter of 1999 reflect
loan growth and increased revenue.
TABLE 1: NET INCOME BY LINE OF BUSINESS
<TABLE>
<CAPTION>
Three Months Ended March 31,
-------------------------------------------------------
1999 1998
-------------------------- --------------------------
Excluding Excluding
AS Nonrecurring As Nonrecurring
(DOLLARS IN MILLIONS) REPORTED Items Reported Items
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------
Corporate banking............ $103.9 $103.9 $ 88.3 $ 88.3
Retail banking............... 150.9 150.9 144.4 144.4
Fee-based businesses......... (4.6) 58.5 42.1 42.1
Parent and other............. 100.8 34.6 (171.1) 22.8
------ ------ ------ ------
Consolidated total....... $351.0 $347.9 $103.7 $297.6
====== ====== ====== ======
</TABLE>
LINE OF BUSINESS RESULTS
National City's operations are managed along three major lines of business:
Corporate Banking, Retail Banking and Fee-Based Businesses. Note 15 to the
Consolidated Financial Statements provides selected financial information for
each business line. Table 1 summarizes
net income by line of business for the quarters ended March 31, 1999 and 1998.
Corporate banking net income increased over the prior year as a result of
revenue growth in both net interest income and fee income coupled with lower
credit costs. Growth in both general commercial lending and specialized lending,
including asset-based and syndicated lending, drove the increase in net interest
income and fee income.
The increase in retail banking net income reflected growth in noninterest
income associated with deposit account fees and fees related to mortgage
production conducted through bank branches. Net interest income increased
slightly as a result of a change in the mix of loans to products with more
attractive yields.
On a reported basis, first quarter 1999 net income for the fee-based
businesses includes the $63.1 million after-tax impairment loss on certain
National Processing business lines. Excluding this loss, net income for the
fee-based businesses in-creased primarily as a result of improved mortgage
banking results.
On a reported basis, net income for parent and other includes $66.2 million
in after-tax gains from the sale of EPS and
SVS. Excluding these gains, net income increased due to an increase in
securities gains and a higher contribution from the investment/funding unit.
NET INTEREST INCOME
On a tax-equivalent basis, net interest income was $764.7 million for the
first quarter of 1999, up $56.4 million from the same period in 1998. The
acquisition of Fort Wayne added approximately $30 million to net interest income
for the first quarter of 1999. The remaining increase reflected a 12.9% growth
in average earning assets partially offset by a decline in net interest margin
to 4.02%. The decline in net interest margin is attributed to the combination of
lower yields on earning assets, a reliance on higher cost funding sources for
loans, and a lower contribution from noninterest bearing deposits.
National City's net interest income is affected by the use of off-balance
sheet derivative financial instruments. For the first three months of 1999, the
derivatives portfolio contributed $15.0 million to net interest income and added
8 basis points to the net interest margin.
During the first quarter of 1999, the notional amount of interest rate swap
agreements increased by $800 million to $18.8 billion. During the quarter,
13
<PAGE> 15
$351.1 million of swaps were added to hedge fixed rate loans; $309.3 million of
swaps were added to reduce the price risk of mortgage servicing rights; $465.0
million of basis swaps were added to synthetically convert the repricing index
of variable rate purchased funding and variable rate loans; $2.0 billion of
swaps were added to synthetically convert fixed rate debt to variable rate; and
$175.1 million of swaps were added to facilitate interest rate risk management
at third parties. Swap agreements totaling $2.5 billion matured or were
terminated during the quarter. The net unrealized gains in the derivative
portfolio were $88.1 million at March 31, 1999 compared to unrealized gains of
$169.2 million at December 31, 1998.
Since the end of 1998, there have been no significant changes in the nature
of the off-balance sheet instruments used to manage exposure from changes in
interest rates, which represents the Corporation's primary market risk.
Management attempts to prevent adverse swings in current and future net
interest income and capital resulting from interest rate movements by placing
limits on interest rate risk. Interest rate risk is monitored through static
gap, income simulation and net present value analyses.
At March 31, 1999, the Corporation's interest rate risk position remained
modestly liability sensitive. The earnings simulation model projects that net
income would decrease by 3.0% 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
2.6%, relative to a stable-rate scenario. At the end of December 1998, the
corresponding changes were (2.8)% of net income in the rising-rate environment
and 2.2% in the falling-rate environment. The cumulative one-year gap was
(11.8)% of adjusted earning assets at March 31, 1999 compared to (8.8)% at
December 31, 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 6.4% of total net present value at the end of the quarter. In addition,
a one-and-a-half percentage point immediate down ward rate shock is estimated to
cause total net present value to fall by 1.5%.
TABLE 2: CONTRIBUTION OF INTEREST RATE DERIVATIVE PORTFOLIO
<TABLE>
<CAPTION>
Three months ended
March 31
---------------------------
(IN MILLIONS) 1999 1998
<S> <C> <C>
- -----------------------------------------------------------------------------------
Interest adjustment to loans......................... $ 2.1 $ .7
Interest adjustment to securities.................... (.3) (.4)
------ ------
Interest adjustment to earning assets.............. 1.8 .3
Interest adjustment to interest bearing
liabilities........................................ (13.2) (9.9)
------ ------
Effect on net interest income...................... $ 15.0 $ 10.2
====== ======
</TABLE>
NOTE: Amounts in brackets represent reductions of the related interest income
or expense line, as applicable.
NONINTEREST INCOME
For the first quarter of 1999, noninterest income, excluding securities
gains and the effects of the Asset Disposals, increased 12.2% to $554.1 million
from $493.8 million in 1998. The acquisition of Fort Wayne added approximately
$9 million to noninterest income for the current period.
Item processing revenue generated by National Process-ing increased 8.1% as
a result of increases in revenues generated
by National Processing's merchant card services, travel services and outsourcing
services businesses.
Service charges on deposit accounts increased 8.9% over revenues generated
in the first quarter of 1998. The increase was attributed to increases in debit
card and other transaction volume and the inclusion of service charges on former
Fort Wayne deposits, which added approximately $2.0 million to first quarter
1999 revenues.
Trust and investment management fees grew 6.4% over revenues for the first
quarter of 1998 due to new business volume and an increase in the market value
of assets under management.
Mortgage banking revenues increased 51.8% over the first quarter of last
year due to substantial growth in origination volume and the servicing portfolio
accompanied by gains on the sale of mortgages. Origination volume for the first
quarter of 1999 increased 33.9% to $4.5 billion from $3.3 billion for the same
period in 1998. A favorable rate environment drove the growth in mortgage
originations. Pre-tax gains on mortgage loans sold totaled $60.3 million and
$45.4 million in the first quarters of 1999 and 1998, respectively. The volume
of loans originated over the last 12 months increased the size of the servicing
portfolio to $38.9 billion at
14
<PAGE> 16
March 31, 1999 from $27.3 billion at March 31, 1998, resulting in an increase in
related servicing revenue.
The increase in other noninterest income was primarily due to the pre-tax
net gain of $36.8 million associated with the Asset Disposals. Excluding the
effects of these transactions and the $1.2 million branch sale gain recorded in
the first quarter of 1998, the remaining increase in other noninterest revenue
was related to growth in brokerage revenues, venture capital gains and the
acquisition of Fort Wayne.
Net realized securities gains, on a pre-tax basis, totaled $23.7 million
and $1.1 million for the first quarter of 1999 and 1998, respectively. The
after-tax effect of the securities gains on net income was $15.4 million and $.7
million for the first quarter of 1999 and 1998, respectively.
NONINTEREST EXPENSE
For the first quarter of 1999, noninterest expense increased 5.7% to $739.2
million compared to $699.3 million, excluding pre-tax merger charges of $274.7
million, for the first quarter of 1998. The acquisition of Fort Wayne added
approximately $27 million to noninterest expense for the current period. The
remaining increase reflects growth in expenses related to mortgage banking and
item processing.
National City's staffing level on a full-time equivalent basis was 39,742
at March 31, 1999, down from 41,056 at March 31, 1998 as a result of
efficiencies gained from the 1998 business combinations with First of America
and Fort Wayne partially offset by volume-driven growth in certain businesses.
The efficiency ratio calculates noninterest expense as a percentage of fee
and other income plus tax equivalent net interest income. The overhead ratio
calculates noninterest expense less fee and other income as a percentage of tax-
equivalent net interest income. Excluding the effects of the first quarter 1999
Asset Disposals and 1998 merger charges, the efficiency ratios for the first
quarter of 1999 and 1998 were 56.05% and 58.18%, respectively. On the same
basis, the overhead ratios for the first quarter of 1999 and 1998 were 24.21%
and 29.02%, respectively.
TABLE 3: OVERHEAD AND EFFICIENCY PERFORMANCE
MEASURES BY LINE OF BUSINESS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------------------------
MARCH 31, 1999 March 31, 1998
--------------------- ---------------------
OVERHEAD EFFICIENCY Overhead Efficiency
RATIO RATIO Ratio Ratio
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------
Corporate banking....... 18.59% 34.63% 25.10% 43.77%
Retail banking.......... 39.48 53.78 43.77 56.20
Fee-based businesses.... -- 73.38 77.68
Parent and Other........ -- -- -- --
Total................ 24.21% 56.05% 29.02% 58.18%
</TABLE>
Note: Ratios exclude nonrecurring items.
EARNING ASSETS AND INTEREST BEARING LIABILITIES
Average earning assets for the first quarter of 1999 were $76,514 million,
up 1.3% from $75,513 million in the fourth quarter of 1998 and 12.9% from
$67,789 million in the first quarter of last year. The increase was primarily
due to growth in loans, which increased 1.0% and 9.9% over average loans for the
fourth and first quarters of 1998, respectively. Considerable increases in
average loans over both the fourth and first quarters of 1998 occurred in the
commercial and consumer installment categories. This growth was offset somewhat
by the planned runoff of residential real estate loans as those loans were
replaced by higher yielding assets. An increase in average securities of 4.3%
and 10.2% over average securities for the fourth and first quarters of 1998,
respectively, also contributed to the overall growth in average earning assets.
The acquisition of Fort Wayne contributed $3.1 billion to the increase in
average earning assets over the first quarter of last year.
Average interest bearing liabilities for the first quarter of 1999 were
$65,919 million, up slightly from $65,533 million in the fourth quarter of 1998
and 13.9% from $57,889 million in the first quarter of 1998. The change from
both the first and fourth quarters of 1998 was driven by an increase in
long-term debt partially offset by a decrease in interest bearing deposits.
For the first quarter of 1999, average core deposits decreased 1.0% to
$49,670 million from $50,177 million in the fourth quarter of 1998 and increased
3.2% from $48,125 million in the first quarter of 1998. The increase from the
first quarter of 1998 was primarily due to the acquisition of Fort Wayne.
15
<PAGE> 17
ASSET QUALITY
The allowance for loan losses was $970.3 million at March 31, 1999 or 1.69%
of loans, compared with $970.2 million or 1.67% of loans at December 31, 1998
and $976.5 million or 1.80% of loans at March 31, 1998. For the first quarter of
1999, net charge-offs were $68.0 million compared with $52.4 million for the
same period last year. Net charge-offs were covered by the provision in both
periods.
Table 4 presents net charge-offs as a percentage of average loans by
portfolio type. Net charge-offs were .48% of average loans for the first quarter
of 1999 compared with .41% for the same period in 1998.
Nonperforming assets (Table 5) were $271.9 million at March 31, 1999 up
from $248.5 million at December 31, 1998 and down from $281.1 million at March
31, 1998. Nonperforming assets as a percentage of loans and OREO were .47% at
March 31, 1999, .43% at December 31, 1998 and .52% at March 31, 1998. Loans 90
days past due and accruing interest were $223.2 million at March 31, 1999
compared with $209.5 million at December 31, 1998 and $146.0 million at March
31, 1998. The increase from fourth quarter 1998 was concentrated in the
commercial and credit card loan categories with slight improvement in
residential real estate loans. Increases from first quarter 1998 occurred mainly
in the commercial, residential and consumer installment loan categories.
CAPITAL
At March 31, 1999, total stockholders' equity was $6.3 billion compared to
$7.0
billion at December 31, 1998 and $6.8 billion at March 31, 1998. Book value per
common share at March 31, 1999, December 31, 1998 and March 31, 1998 was $19.80,
$21.38 and $20.73, respectively. Book value per common share at March 31, 1999,
December 31, 1998 and March 31, 1998 included unrealized gains on securities
available for sale of $.64, $.83 and $1.14 per share, respectively.
During the first quarter of 1999, 13 million common shares were repurchased
by the Corporation. As of March 31, 1999, approximately 12 million shares
remained authorized for repurchase under the 30 million share authorization
granted by the board of directors in the fourth quarter of 1998.
TABLE 4: ANNUALIZED NET CHARGE-OFFS AS A PERCENTAGE OF
AVERAGE LOANS
<TABLE>
<CAPTION>
First Quarter
1999 1998
<S> <C> <C>
----------------------------------------------------------------------------
Commercial................................................ .16% .10%
Real estate -- commercial................................. .04 (.06)
Real estate -- residential................................ .07 .08
Consumer.................................................. .93 .80
Credit card............................................... 4.83 4.14
Home equity............................................... .13 .21
Total net charge-offs to average loans.................. .48% .41%
</TABLE>
TABLE 5: NONPERFORMING ASSETS
<TABLE>
<CAPTION>
Mar. 31 Dec. 31 Mar. 31
(IN MILLIONS) 1999 1998 1998
<S> <C> <C> <C>
------------------------------------------------------------------------------
Commercial:
Nonaccrual..................................... $119.1 $ 95.4 $108.3
Restructured................................... .3 .4 .4
------ ------ ------
Total commercial............................. 119.4 95.8 108.7
Real estate mortgage:
Nonaccrual..................................... 120.6 120.2 131.3
Restructured................................... 2.5 2.6 4.0
------ ------ ------
Total real estate mortgage................... 123.1 122.8 135.3
------ ------ ------
Total nonperforming loans.................... 242.5 218.6 244.0
Other real estate owned (OREO)................... 29.4 29.9 37.1
------ ------ ------
Nonperforming assets............................. $271.9 $248.5 $281.1
====== ====== ======
Loans 90 days past-due accruing interest......... $223.2 $209.5 $146.0
====== ====== ======
</TABLE>
YEAR 2000
Management initiated the process of preparing its computer systems and
applications for the Year 2000 in January 1995. The process involves identifying
and remediating date recognition problems in computer systems and software and
other operating equipment that could be caused by the date change from December
31, 1999 to January 1, 2000.
Management has completed its assessment of all business processes that
could be affected by the Year 2000 issue. Each business process assessment
included a review of the information systems used in that process, including
related hardware and software, the involvement of any third parties, and any
affected operating equipment. To date, the affected sys-
16
<PAGE> 18
tems within 90% of those business processes determined to be critical for
supporting the core services offered by National City have been remediated, unit
tested, and returned to production. As part of the testing process, National
City established a separate isolated testing environment that further tests the
functioning of modified systems when linked together. Management expects to
complete the remediation and testing of all affected systems within the critical
business processes by the end of the second quarter of 1999.
Management is also working with significant customers, vendors, and
business counterparties to monitor the progress of their Year 2000 efforts.
Management believes it has an effective plan in place to resolve the Year
2000 issue in a timely manner and, thus far, activities have tracked in
accordance with the original plan. Management is in the process of modifying its
existing business continuity plans and is also developing contingency plans to
address potential risks in the event of Year 2000 failures, including
non-compliance by third parties. Despite National City's efforts to date to
remediate affected systems and develop contingency plans for potential risks,
management has not yet completed all activities associated with resolving its
Year 2000 issues. Under the unlikely scenario that the additional phases are not
completed, National City could be materially adversely affected as a result of
not being able to process transactions related to its core business activities.
In addition, non-compliance by third parties (including loan customers) and
disruptions to the economy in general resulting from Year 2000 issues could also
have a negative impact of undeterminable magnitude on National City.
The total cost of the Year 2000 project is estimated at $65 million.
Approximately one-half of this estimate represents costs related to internal
personnel working on the project and certain capitalizable costs related to
replacing non-compliant hardware and software. To date, $46 million of the total
project costs have been incurred. During the first quarter of 1999, incremental
noninterest expense associated with the project totaled approximately $4
million.
FORWARD-LOOKING STATEMENTS
The discussion regarding the Corporation's interest rate risk position
included in the section entitled "Net Interest Income" as well as the section
entitled "Year 2000" contain certain forward-looking statements (as defined in
the Private Securities Litigation Reform Act of 1995). These forward-looking
statements involve risks and uncertainties including changes in general economic
conditions, the Corporation's ability to execute its business plans, including
its plan to address the Year 2000 issue, and the ability of third parties to
effectively address their Year 2000 issues. Although National City believes that
the expectations reflected in such forward-looking statements are reasonable,
actual results may differ materially from the results discussed in these
forward-looking statements.
17
<PAGE> 19
DAILY AVERAGE BALANCES/NET INTEREST INCOME/RATES
<TABLE>
<CAPTION>
(Dollars In Millions) Daily Average Balance
<S> <C> <C> <C> <C> <C>
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998
------- -------------------------------------
First Fourth Third Second First
Quarter Quarter Quarter Quarter Quarter
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
ASSETS
Earning Assets:
Loans:
Commercial(1)................................... $28,459 $27,923 $26,672 $26,735 $24,777
Residential real estate(2)...................... 11,902 12,318 12,030 11,932 11,215
Consumer........................................ 14,956 14,491 13,964 13,107 12,546
Credit Card..................................... 1,829 1,818 1,818 1,861 1,944
Home equity..................................... 3,149 3,193 3,144 3,074 3,006
------- ------- ------- ------- -------
Total loans................................... 60,295 59,743 57,628 56,709 53,488
Securities:
Taxable......................................... 14,227 13,563 12,647 12,846 12,890
Tax-exempt...................................... 899 937 967 1,028 838
------- ------- ------- ------- -------
Total securities.............................. 15,126 14,500 13,614 13,874 13,728
Federal funds sold................................ 43 141 175 169 70
Security resale agreements........................ 902 1,016 1,002 544 378
Other short-term investments...................... 148 113 110 118 125
------- ------- ------- ------- -------
Total earning assets/
Total interest income/rates................ 76,514 75,513 72,529 71,414 67,789
Allowance for loan losses........................... (985) (988) (994) (995) (958)
Market value appreciation of securities available
for sale.......................................... 377 509 511 564 537
Cash and demand balances due from banks............. 4,068 3,826 3,685 3,616 3,359
Properties and equipment............................ 1,145 1,148 1,124 1,055 1,042
Accrued income and other assets..................... 4,401 4,200 4,207 4,273 3,000
------- ------- ------- ------- -------
Total assets.................................. $85,520 $84,208 $81,062 $79,927 $74,769
======= ======= ======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
NOW and money market accounts..................... $16,899 $18,181 $17,890 $17,628 $16,158
Savings accounts.................................. 3,955 4,033 4,157 4,282 4,169
Time deposits of individuals...................... 17,135 17,795 18,222 18,640 18,406
Other time deposits............................... 1,757 2,472 2,505 2,536 1,940
Deposits in overseas offices...................... 3,030 2,050 1,785 1,420 1,572
Federal funds borrowed............................ 3,970 3,730 3,397 2,676 2,687
Security repurchase agreements.................... 5,034 5,465 4,034 3,757 3,194
Borrowed funds.................................... 2,838 2,515 2,644 3,395 3,499
Long-term debt and capital securities............. 11,301 9,292 7,962 7,235 6,264
------- ------- ------- ------- -------
Total interest bearing liabilities/
Total interest expense/rates............... 65,919 65,533 62,596 61,569 57,889
Noninterest bearing deposits...................... 11,681 10,168 10,051 10,053 9,392
Accrued expenses and other liabilities............ 1,159 1,144 1,195 1,466 1,212
------- ------- ------- ------- -------
Total liabilities............................. 78,759 76,845 73,842 73,088 68,493
Stockholders' equity.......................... 6,761 7,363 7,220 6,839 6,276
------- ------- ------- ------- -------
Total liabilities and stockholders' equity.... $85,520 $84,208 $81,062 $79,927 $74,769
======= ======= ======= ======= =======
Net interest income..................................................................................
Interest spread......................................................................................
Contribution of noninterest bearing sources of funds.................................................
Net interest margin..................................................................................
</TABLE>
(1) Includes commercial real estate loans.
(2) Includes mortgage loans held for sale.
18
<PAGE> 20
\
<TABLE>
<CAPTION>
Quarterly Interest Average Annualized Rate
---------------------------------------------------- ------------------------------------------------
1999 1998 1999 1998
-------- ----------------------------------------- -------- -------------------------------------
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>
$ 553.6 $ 560.4 $ 567.5 $ 564.8 $ 525.3 7.89% 7.96% 8.44% 8.47% 8.56%
215.3 221.6 226.1 225.9 212.6 7.24 7.20 7.52 7.57 7.58
313.3 315.6 305.6 289.4 271.6 8.50 8.64 8.68 8.86 8.78
59.6 63.6 62.9 64.7 67.3 13.22 13.88 13.72 13.92 14.03
72.0 71.4 72.4 69.2 67.3 9.27 8.87 9.14 9.03 9.08
-------- -------- -------- -------- --------
1,213.8 1,232.6 1,234.5 1,214.0 1,144.1 8.14 8.20 8.51 8.58 8.64
223.9 215.4 205.8 207.8 207.4 6.30 6.35 6.50 6.47 6.45
17.3 19.9 18.7 19.9 17.3 7.68 8.42 7.76 7.78 8.26
-------- -------- -------- -------- --------
241.2 235.3 224.5 227.7 224.7 6.38 6.48 6.59 6.57 6.56
.5 1.8 3.0 1.7 .8 4.79 4.93 6.71 4.07 4.78
10.5 11.0 13.7 6.6 5.2 4.73 4.34 5.42 4.85 5.56
3.1 2.2 4.3 5.1 4.2 8.38 8.48 15.49 16.79 13.65
-------- -------- -------- -------- --------
$1,469.1 $1,482.9 $1,480.0 $1,455.1 $1,379.0 7.75% 7.81% 8.11% 8.16% 8.20%
$ 126.5 $ 133.2 $ 143.9 $ 139.5 $ 125.5 3.04% 2.91% 3.19% 3.18% 3.15%
16.9 18.6 20.8 21.8 21.7 1.73 1.83 1.99 2.04 2.11
219.3 243.1 253.1 257.8 252.4 5.19 5.42 5.51 5.55 5.56
21.4 31.7 33.9 34.1 25.9 4.94 5.08 5.38 5.38 5.42
35.0 25.2 24.2 18.9 21.0 4.68 4.86 5.39 5.34 5.42
47.8 46.4 48.2 36.8 36.4 4.89 4.93 5.63 5.51 5.50
51.9 56.3 48.2 44.3 37.3 4.18 4.08 4.74 4.74 4.67
28.5 30.5 38.1 48.6 51.3 4.22 4.81 5.71 6.57 5.93
157.1 140.0 123.8 113.4 99.2 5.60 5.99 6.16 6.29 6.42
-------- -------- -------- -------- --------
$ 704.4 $ 725.0 $ 734.2 $ 715.2 $ 670.7 4.33% 4.38% 4.65% 4.66% 4.67%
$ 764.7 $ 757.9 $ 745.8 $ 739.9 $ 708.3
======== ======== ======== ======== ========
........................................................ 3.42% 3.43% 3.46% 3.50% 3.53%
........................................................ .60 .57 .64 .65 .66
-------- ----- ----- ----- -----
........................................................ 4.02% 4.00% 4.10% 4.15% 4.19%
======== ===== ===== ===== =====
</TABLE>
19
<PAGE> 21
CORPORATE INVESTOR INFORMATION
CORPORATE HEADQUARTERS
National City Center
1900 East Ninth Street
Cleveland, Ohio 44114-3484
(216) 575-2000
www.national-city.com
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
Vice President, Investor Relations
Department 2145
P.O. Box 5756
Cleveland, Ohio 44101-0756
1-800-622-4204
COMMON STOCK LISTING
National City Corporation common stock
is traded on the New York Stock
Exchange under the symbol NCC. The
stock is abbreviated in financial
publications as NTLCITY.
DIVIDEND REINVESTMENT AND STOCK
PURCHASE PLAN
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.
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+
National City Bank
National City Bank of Indiana
National City Bank of Kentucky
National City Bank of Pennsylvania
National City Bank of Michigan/Illinois
</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 -- MARCH 31, 1999
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NATIONAL CITY CORPORATION
Date: May 5, 1999
/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>
<PAGE> 1
NATIONAL CITY CORPORATION EXHIBIT 12
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31 Years Ended December 31
------------------------ -------------------------------------------------------------------
(Dollars in Thousands) 1999 1998 1998 1997 1996 1995 1994
- ----------------------------------------------------------- -------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
COMPUTATION EXCLUDING PREFERRED
STOCK DIVIDENDS:
Income before income taxes $ 563,478 $ 162,530 $ 1,647,277 $ 1,640,033 $ 1,441,787 $ 1,208,000 $ 1,183,000
Interest on non-deposit interest
bearing liabilities 285,332 224,209 998,753 738,923 611,741 673,000 420,000
Portion of rental expense deemed
representative of interest 7,759 7,174 30,397 27,597 25,053 23,563 22,050
----------------------- -------------------------------------------------------------------
Total income for computation
excluding interest on deposits 856,569 393,913 2,676,427 2,406,553 2,078,581 1,904,563 1,625,050
Interest on deposits 419,023 446,461 1,846,276 1,813,251 1,862,084 1,975,000 1,478,700
----------------------- -------------------------------------------------------------------
Total income for computation
including interest on deposits $ 1,275,592 $ 840,374 $ 4,522,703 $ 4,219,804 $ 3,940,665 $ 3,879,563 $ 3,103,750
======================= ===================================================================
Fixed charges excluding interest
on deposits $ 293,091 $ 231,383 $ 1,029,150 $ 766,520 $ 636,794 $ 696,563 $ 442,050
======================= ===================================================================
Fixed charges including interest
on deposits $ 712,114 $ 677,844 $ 2,875,426 $ 2,579,771 $ 2,498,878 $ 2,671,563 $ 1,920,750
======================= ===================================================================
Ratio excluding interest on
deposits 2.92x 1.70x 2.60x 3.14x 3.26x 2.73x 3.68x
Ratio including interest on
deposits 1.79x 1.24x 1.57x 1.64x 1.58x 1.45x 1.62x
COMPUTATION INCLUDING PREFERRED
STOCK DIVIDENDS:
Total income for computation
excluding interest on deposits $ 856,569 $ 393,913 $ 2,676,427 $ 2,406,553 $ 2,078,581 $ 1,904,563 $ 1,625,050
======================= ===================================================================
Total income for computation
including interest on deposits $ 1,275,592 $ 840,374 $ 4,522,703 $ 4,219,804 $ 3,940,665 $ 3,879,563 $ 3,103,750
======================= ===================================================================
Fixed charges excluding interest
on deposits and dividends on
preferred stock $ 293,091 $ 231,383 $ 1,029,150 $ 766,520 $ 636,794 $ 696,563 $ 442,050
Tax-effected preferred stock
dividends 638 - 3,357 - 6,197 22,815 23,385
----------------------- -------------------------------------------------------------------
Fixed charges including preferred
stock dividends, excluding
interest on deposits 293,729 231,383 1,032,507 766,520 642,991 719,378 465,435
Interest on deposits 419,023 446,461 1,846,276 1,813,251 1,862,084 1,975,000 1,478,700
----------------------- -------------------------------------------------------------------
Fixed charges including interest
on deposits and dividends on
preferred stock $ 712,752 $ 677,844 $ 2,878,783 $ 2,579,771 $ 2,505,075 $ 2,694,378 $ 1,944,135
======================= ===================================================================
Ratio excluding interest on
deposits 2.92x 1.70x 2.59x 3.14x 3.23x 2.65x 3.49x
Ratio including interest on
deposits 1.79x 1.24x 1.57x 1.64x 1.57x 1.44x 1.60x
COMPONENTS OF FIXED CHARGES:
Interest:
Interest on deposits $ 419,023 $ 446,461 $ 1,846,276 $ 1,813,251 $ 1,862,084 $ 1,975,000 $ 1,478,700
Interest on non-deposit interest
bearing liabilities 285,332 224,209 998,753 738,923 611,741 673,000 420,000
----------------------- -------------------------------------------------------------------
Total interest charges $ 704,355 $ 670,670 $ 2,845,029 $ 2,552,174 $ 2,473,825 $ 2,648,000 $ 1,898,700
======================= ===================================================================
Rental Expense:
Building rental expense $ 23,513 $ 21,738 $ 92,112 $ 83,627 $ 75,918 $ 71,403 $ 66,818
Portion of rental expense deemed
representative of interest 7,759 7,174 30,397 27,597 25,053 23,563 22,050
Preferred Stock Charge:
Preferred stock dividends 415 - 2,182 - 4,028 14,830 15,200
Tax-effected preferred dividends 638 - 3,357 - 6,197 22,815 23,385
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<EXCHANGE-RATE> 1
<CASH> 3,443,365
<INT-BEARING-DEPOSITS> 40,850,287
<FED-FUNDS-SOLD> 978,138
<TRADING-ASSETS> 21,754
<INVESTMENTS-HELD-FOR-SALE> 15,263,581
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 59,832,016
<ALLOWANCE> 970,336
<TOTAL-ASSETS> 84,094,496
<DEPOSITS> 52,050,599
<SHORT-TERM> 11,594,742
<LIABILITIES-OTHER> 1,513,241
<LONG-TERM> 12,679,005
0
30,513
<COMMON> 1,257,684
<OTHER-SE> 4,968,712
<TOTAL-LIABILITIES-AND-EQUITY> 84,094,496
<INTEREST-LOAN> 1,212,303
<INTEREST-INVEST> 234,112
<INTEREST-OTHER> 14,075
<INTEREST-TOTAL> 1,460,490
<INTEREST-DEPOSIT> 419,023
<INTEREST-EXPENSE> 704,355
<INTEREST-INCOME-NET> 756,135
<LOAN-LOSSES> 68,034
<SECURITIES-GAINS> 23,688
<EXPENSE-OTHER> 739,202
<INCOME-PRETAX> 563,478
<INCOME-PRE-EXTRAORDINARY> 351,019
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 351,019
<EPS-PRIMARY> 1.09
<EPS-DILUTED> 1.08
<YIELD-ACTUAL> 4.02
<LOANS-NON> 242,500
<LOANS-PAST> 223,200
<LOANS-TROUBLED> 2,800
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 970,243
<CHARGE-OFFS> 102,369
<RECOVERIES> 34,335
<ALLOWANCE-CLOSE> 970,336
<ALLOWANCE-DOMESTIC> 970,224
<ALLOWANCE-FOREIGN> 112
<ALLOWANCE-UNALLOCATED> 415,121
</TABLE>
