Cover
- - ------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
FORM 10-Q
Washington, D.C. 20549
(Mark One)
/X/Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended March 31, 1994
/ /Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File Number 1-7127
- - ------------------------------------------------------------------------------
NBD BANCORP, INC.
(Exact name of registrant as specified in its charter)
Delaware 38-1984850
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
611 Woodward Avenue, Detroit, Michigan 48226
(Address of principal executive offices) (zip code)
(313) 225-1000
(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.
Class Outstanding at April 30, 1994
----------------------------- -----------------------------
Common Stock, $1.00 Par Value 160,491,206
- - -----------------------------------------------------------------------------
<PAGE>
Page 1
Part 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
- - ------- -----------------------------------------
NBD Bancorp, Inc. Consolidated Balance Sheet
(in thousands except share data)
<TABLE>
<CAPTION>
Assets
March 31 December 31 March 31
1994 1993 1993
------------ ------------ ------------
<S> <C> <C> <C>
Cash and Due From Banks..................................... $ 2,421,942 $ 2,405,694 $ 2,315,300
Interest-Bearing Deposits................................... 612,284 722,109 635,695
Federal Funds Sold and Resale Agreements.................... 316,544 282,481 122,208
Other Money Market Investments.............................. - - 31,624
Trading Account Securities.................................. 93,555 109,637 92,806
Investment Securities (Note B):
Available-for-Sale (At Fair Value)....................... 4,285,088 3,784,384 -
Held-to-Maturity (Fair Value of $7,848,646,
$7,017,903 and $11,023,368, respectively)............. 7,667,607 6,607,409 10,474,611
------------ ------------ ------------
11,952,695 10,391,793 10,474,611
------------ ------------ ------------
Loans and Leases (Net of Unearned Income of $136,526,
$140,412 and $134,752, respectively):
Commercial............................................... 14,088,500 13,794,714 13,718,318
Real Estate Construction................................. 765,715 789,248 842,144
Residential Mortgage..................................... 2,773,533 2,560,539 2,635,705
Mortgages Held For Sale.................................. 62,663 255,902 199,681
Consumer................................................. 6,823,794 6,758,171 6,300,921
Lease Financing.......................................... 283,451 284,805 248,640
Foreign.................................................. 1,080,032 1,107,413 1,092,312
------------ ------------ ------------
25,877,688 25,550,792 25,037,721
Allowance For Possible Credit Losses (Note C)............ (423,410) (423,030) (419,271)
------------ ------------ ------------
25,454,278 25,127,762 24,618,450
------------ ------------ ------------
Net Premises and Equipment.................................. 635,993 634,541 575,279
Customers' Liability on Acceptances......................... 187,516 172,171 191,254
Other Assets................................................ 1,257,862 929,717 996,021
------------ ------------ ------------
Total Assets.................................... $42,932,669 $40,775,905 $40,053,248
============ ============ ============
</TABLE>
<PAGE>
Page 2
<TABLE>
<CAPTION>
Liabilities and Shareholders' Equity
March 31 December 31 March 31
1994 1993 1993
------------ ------------ ------------
<S> <C> <C> <C>
Deposits:
Demand (Non-Interest Bearing)...............................$ 6,602,773 $ 6,667,958 $ 5,936,577
Savings..................................................... 8,029,415 8,051,337 7,061,316
Money Market Accounts....................................... 5,431,509 5,561,573 6,074,967
Time........................................................ 7,332,600 7,474,234 8,748,879
Foreign Office.............................................. 2,779,319 2,066,005 2,378,269
------------ ------------ ------------
30,175,616 29,821,107 30,200,008
Short-Term Borrowings......................................... 6,917,420 5,354,839 5,006,424
Liability on Acceptances...................................... 187,516 172,171 191,254
Accrued Expenses and Sundry Liabilities....................... 803,810 744,242 665,110
Long-Term Debt................................................ 1,583,608 1,434,947 972,474
------------ ------------ ------------
Total Liabilities......................................... 39,667,970 37,527,306 37,035,270
------------ ------------ ------------
Shareholders' Equity:
Series A Preferred Stock - Par Value $1, Stated Value $50... - - -
No. of March 31 December 31 March 31
Shares 1994 1993 1993
------ ------------ ------------ ------------
Auth..... 460,000 460,000 460,000
Issued... - - -
Preferred Stock - No Par Value.............................. - - -
No. of March 31 December 31 March 31
Shares 1994 1993 1993
------- ------------ ------------ ------------
Auth..... 10,000,000 10,000,000 10,000,000
Issued... - - -
Common Stock - Par Value $1................................. 160,872 160,715 160,507
No. of March 31 December 31 March 31
Shares 1994 1993 1993
------ ------------ ------------ ------------
Auth..... 500,000,000 500,000,000 500,000,000
Issued... 160,872,446 160,715,173 160,506,869
Capital Surplus............................................. 546,969 541,232 540,664
Retained Earnings........................................... 2,624,608 2,565,627 2,329,017
Unrealized Loss on Available-for-Sale Securities ........... (53,753) (7,012) -
Accumulated Translation Adjustment.......................... 5,122 4,384 6,544
Deferred Compensation....................................... (19,119) (16,347) (18,754)
------------ ------------ ------------
Total Shareholders' Equity................................ 3,264,699 3,248,599 3,017,978
------------ ------------ ------------
Total Liabilities and Shareholders' Equity..........$42,932,669 $40,775,905 $40,053,248
============ ============ ============
</TABLE>
<PAGE>
Page 3
<TABLE>
<CAPTION>
NBD Bancorp, Inc. Consolidated Statement of Income
(in thousands except per share data)
Quarter Ended
March 31
---------------------
1994 1993
--------- ---------
<S> <C> <C>
Interest Income:
Loans and Leases (including fees).........................$462,061 $478,816
Investment Securities:
Taxable................................................. 138,946 147,459
Non-Taxable............................................. 25,339 27,688
Trading Account Securities................................ 884 1,148
Federal Funds Sold and Resale Agreements................... 949 873
Other Money Market Investments............................ - 614
Interest-Bearing Deposits................................. 7,000 10,326
--------- ---------
Total Interest Income................................... 635,179 666,924
--------- ---------
Interest Expense:
Deposits.................................................. 183,539 219,796
Short-Term Borrowings..................................... 45,373 41,690
Long-Term Debt............................................ 25,007 16,977
--------- ---------
Total Interest Expense.................................. 253,919 278,463
--------- ---------
Net Interest Income......................................... 381,260 388,461
Provision For Possible Credit Losses...................... 15,460 39,920
--------- ---------
Net Interest Income After Provision
For Possible Credit Losses................................ 365,800 348,541
--------- ---------
Non-Interest Income:
Trust Fees................................................ 38,110 35,348
Service Charges on Deposit Accounts....................... 40,979 41,983
Securities Gains.......................................... 390 1,114
Other..................................................... 59,271 66,549
--------- ---------
Total Non-Interest Income............................... 138,750 144,994
--------- ---------
Non-Interest Expenses:
Compensation:
Salaries................................................ 133,459 129,993
Benefits................................................ 43,289 39,853
--------- ---------
Total Compensation................................... 176,748 169,846
Net Occupancy............................................. 30,081 29,526
Equipment Rentals, Depreciation and Maintenance........... 21,954 21,197
FDIC and Other Regulatory Assessments..................... 16,675 18,662
Amortization of Intangibles............................... 6,524 9,126
Other..................................................... 70,337 77,198
--------- ---------
Total Non-Interest Expenses.......................... 322,319 325,555
--------- ---------
Income before Income Taxes.................................. 182,231 167,980
Income Tax Expense (Including tax effect of $149 and $426,
respectively, on securities sales)...................... 59,355 52,899
--------- ---------
Income before Extraordinary Item and Cumulative
Effect of Accounting Change............................... 122,876 115,081
Extraordinary Item (net of income tax effect) (Note E).... (7,730) -
Cumulative Effect of Accounting Change (net of
income tax effect) (Note A)............................. (7,885) 3,950
--------- ---------
Net Income..................................................$107,261 $119,031
========= =========
Net Income Per Share (on average shares outstanding):
Income before Extraordinary Item and Cumulative
Effect of Accounting Change.............................$ 0.77 $ 0.71
Extraordinary Item (net of income tax effect)............. (0.05) -
Cumulative Effect of Accounting Change (net of
income tax effect)...................................... (0.05) 0.03
--------- ---------
Net Income Per Share........................................$ 0.67 $ 0.74
========= =========
</TABLE>
<PAGE>
Page 4
<TABLE>
<CAPTION>
NBD Bancorp, Inc. Consolidated Statement of Shareholders' Equity
(in thousands except share data)
Quarter Ended
March 31
------------------------
1994 1993
----------- -----------
<S> <C> <C>
Preferred Stock:
Balance, Beginning and End of Period...............$ - $ -
----------- -----------
Common Stock:
Balance, Beginning of Period....... 160,715 160,386
Conversion of Subordinated Debentures and
Other (157,273 shares in 1994)................. 157 121
----------- -----------
Balance, End of Period............................. 160,872 160,507
----------- -----------
Capital Surplus:
Balance, Beginning of Period....................... 541,232 536,900
Conversion of Subordinated Debentures and Other.. 5,737 3,764
----------- -----------
Balance, End of Period............................. 546,969 540,664
----------- -----------
Retained Earnings:
Balance, Beginning of Period....................... 2,565,627 2,253,332
Net Income....................................... 107,261 119,031
Cash Dividends Declared on Common Stock
($.30 and $.27 per share, respectively)........ (48,280) (43,346)
----------- -----------
Balance, End of Period............................. 2,624,608 2,329,017
----------- -----------
Unrealized Loss on Available-for-Sale Securities:
Balance, Beginning of Period....................... (7,012) -
Net Unrealized Loss.............................. (46,741) -
----------- -----------
Balance, End of Period............................. (53,753) -
----------- -----------
Accumulated Translation Adjustment:
Balance, Beginning of Period....................... 4,384 5,610
Aggregate Translation Gain....................... 738 934
----------- -----------
Balance, End of Period............................. 5,122 6,544
----------- -----------
Deferred Compensation:
Balance, Beginning of Period....................... (16,347) (15,335)
Awards Granted................................... (6,378) (4,292)
Amortization of Deferred Compensation............ 3,301 2,456
Other............................................ 305 (1,583)
----------- -----------
Balance, End of Period............................. (19,119) (18,754)
----------- -----------
Treasury Stock:
Balance, Beginning of Period....................... - -
Purchase of Common Stock (131,748 shares in 1994) (3,822) (3,798)
Conversion of Subordinated Debentures
and Other (131,748 shares in 1994)............. 3,822 3,798
----------- -----------
Balance, End of Period............................. - -
----------- -----------
Total Shareholders' Equity, End of Period............$3,264,699 $3,017,978
=========== ===========
</TABLE>
<PAGE>
Page 5
<TABLE>
<CAPTION>
NBD Bancorp, Inc. Consolidated Statement of Cash Flows
(in thousands)
Quarter Ended
March 31
---------------------------
1994 1993
------------ ------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income....................................................... $ 107,261 $ 119,031
Adjustments to Reconcile Net Income to
Net Cash Provided by Operations:
Depreciation and Amortization................................. 25,512 25,357
Provision for Possible Credit Losses.......................... 15,460 39,920
Securities Gains.............................................. (390) (1,114)
Increase in Interest Receivable............................... (21,869) (36,869)
Increase in Current Income Taxes Payable...................... 27,706 15,184
Decrease in Accrued Expenses.................................. (64,651) (57,347)
Decrease in Trading Account Investments....................... 16,172 75,684
Decrease in Mortgages Held for Sale........................... 193,239 90,005
Other, net.................................................... 7,046 (4,671)
------------ ------------
Net Cash Provided by Operating Activities................. 305,486 265,180
------------ ------------
Cash Flows from Investing Activities:
Decrease in Interest-Bearing Deposits............................ 112,098 51,255
(Increase) Decrease in Federal Funds Sold and Resale Agreements.. (34,063) 1,248
Decrease in Other Money Market Investments....................... - 11,531
Purchase of Investment Securities................................ (2,866,112) (653,528)
Proceeds from Maturity or Call of Investment Securities.......... 1,180,980 1,080,727
Proceeds from Sale of Investment Securities...................... 44,889 8,970
Increase in Loans and Leases..................................... (523,066) (71,726)
Purchase of Loan Portfolios...................................... - (19,617)
Proceeds from Sale of Loan Portfolios............................ - 70,107
Purchase of Premises and Equipment and Other Assets.............. (222,627) (20,432)
Proceeds from Sale of Premises and Equipment and Other Assets.... 19,294 13,735
------------ ------------
Net Cash (Used) Provided by Investing Activities.......... (2,288,607) 472,270
------------ ------------
Cash Flows from Financing Activities:
Increase (Decrease) in Deposits.................................. 334,733 (809,734)
Increase (Decrease) in Short-Term Borrowings..................... 1,560,986 (113,550)
Proceeds from the Issuance of Debt............................... 350,000 -
Principal Payments on Long-Term Debt............................. (199,225) (2,423)
Proceeds from Stock Option Exercises............................. 132 1,025
Payments to Acquire Treasury Stock............................... (3,822) (3,798)
Dividends Paid................................................... (43,411) (43,318)
------------ ------------
Net Cash Provided (Used) by Financing Activities.......... 1,999,393 (971,798)
------------ ------------
Effect of Exchange Rate Changes on Cash and Due From Banks......... (24) 377
------------ ------------
Net Increase (Decrease) in Cash and Due From Banks................. 16,248 (233,971)
Cash and Due From Banks - Beginning of Period...................... 2,405,694 2,549,271
------------ ------------
Cash and Due From Banks - End of Period............................ $ 2,421,942 $ 2,315,300
============ ============
Other Cash Flow Disclosures:
Interest Paid................................................... $ 328,523 $ 336,838
State and Federal Taxes Paid.................................... 23,048 33,765
</TABLE>
[TEXT]
<PAGE>
Page 6
Notes to Consolidated Financial Statements
Note A - Accounting Policies
- - ----------------------------
Accounting policies of NBD Bancorp, Inc. and its subsidiaries (the
Corporation) are described below.
Basis of Presentation:
The unaudited consolidated financial statements as of and for the three
months ended March 31, 1994 and 1993, are prepared in conformity with
generally accepted accounting principles for interim financial information
and the rules and regulations of the Securities and Exchange Commission.
In the opinion of management, all adjustments (consisting only of normal
recurring accruals) necessary for a fair presentation have been included.
These financial statements should be read in conjunction with the
consolidated financial statements included in the Corporation's Form 10-K
Annual Report for the year ended December 31, 1993.
The Corporation has adopted Statement of Financial Accounting Standard
(SFAS) No. 112, "Employers' Accounting for Postemployment Benefits,"
effective January 1, 1994. This statement requires the accrual of benefits
provided to former or inactive employees after employment but before
retirement. The cumulative effect of adopting SFAS No.112 was a charge of
$12,323,000 ($7,885,000 net of income taxes).
The Corporation has adopted SFAS No. 109, "Accounting for Income Taxes,"
effective in the first quarter of 1993, and SFAS No. 115, "Accounting for
Certain Investments in Debt and Equity Securities," effective December 31,
1993.
Consolidation:
The consolidated financial statements of the Corporation include the
accounts of its subsidiaries, principally NBD Bank, N.A. (Michigan). All
material inter-company accounts and transactions have been eliminated.
Investments in unconsolidated affiliates in which ownership is at least 20
percent are accounted for by the equity method and are reported in Other
Assets.
Securities:
In accordance with SFAS No. 115, Investment Securities are accounted for
as follows: (a) Debt securities that the Corporation has the positive
intent and ability to hold to maturity are classified as Held-to-Maturity
and reported at amortized cost; (b) Debt and equity securities that are
bought and held principally for the purpose of selling in the near term are
classified as Trading and reported at fair value, with realized and
unrealized gains and losses included in Other Non-Interest Income; and (c)
Debt and equity securities not classified as Held-to-Maturity or Trading
are classified as Available-for-Sale and reported at fair value, with
unrealized gains and losses excluded from earnings and reported in a
separate component of shareholders' equity, net of tax.
Prior to December 31, 1993, the Corporation classified securities purchased
with the intent and the ability to hold to maturity as Investment
Securities and reported them at amortized cost. If it was subsequently
determined that certain investment securities were to be sold, their
reported
<PAGE>
Page 7
value was adjusted as necessary to the lower of cost or fair value with the
adjustments included in Securities Gains(Losses). The Corporation's
accounting for Trading Account Securities was not changed by the adoption
of SFAS No. 115.
Gains and losses realized on the sale of Investment Securities are
determined on the specific identification method and included in Securities
Gains(Losses).
Loans:
Loans are generally reported at the principal amount outstanding, net of
unearned income. Non-refundable loan origination and commitment fees, and
certain costs of origination, are deferred and either included in interest
income over the term of the related loan or commitment or, if the loan is
held for sale, included in Other Non-Interest Income when the loan is sold.
Mortgages Held For Sale are valued at the lower of aggregate cost or fair
value. Unrealized losses, as well as realized gains or losses, are
included in Other Non-Interest Income.
Interest income on loans is accrued as earned. Except for consumer loans,
loans are placed on non-accrual status and previously accrued but unpaid
interest is reversed against current period interest income when
collectibility of principal or interest is considered doubtful, payment of
principal or interest is 90 days or more past due, or the loan is
completely or partially charged off. Interest income on loans considered
doubtful or 90 days or more past due is recorded as collected. Collections
of principal and interest on charged-off loans are applied in the following
sequence: (1) as a reduction of remaining principal balance; (2) as
recovery of principal charged off; and (3) as interest income.
Consumer loans are not placed on a non-accrual status because they are
charged off when 120 days to 150 days past due. Accrued but unpaid
interest is generally reversed against current period interest income when
the loan is charged off.
Allowance for Possible Credit Losses:
The Allowance is maintained at a level considered by management to be
adequate to provide for probable loan and lease losses inherent in the
portfolio. Management's evaluation is based on a continuing review of the
loan and lease portfolio and includes consideration of the actual loan and
lease loss experience, the present and prospective financial condition of
borrowers, balance of the loan and lease portfolio, industry and country
concentrations within the portfolio and general economic conditions.
Income Taxes:
SFAS No. 109 requires an asset and liability approach to accounting and
reporting for income taxes. Under this approach, current and deferred
income taxes payable and refundable are remeasured annually using
provisions of then enacted tax laws and rates. SFAS No. 109 also specifies
the criteria for recognition and measurement of deferred income tax
benefits.
<PAGE>
Page 8
<TABLE>
<CAPTION>
Income Per Share:
Per share amounts are based on the weighted average number of shares outstanding throughout the period.
Quarter Ended
March 31
----------------------------
1994 1993
----------- -----------
<S> <C> <C>
Average Shares Outstanding.................................... 161,099,451 161,322,452
</TABLE>
[TEXT]
Note B - Investment Securities
- - ------------------------------
Following are the amortized cost and fair value of Investment Securities
Available-for-Sale and Held-to-Maturity at March 31, 1994:
<TABLE>
<CAPTION>
Investment Securities Available-for-Sale
----------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- -----------
(in thousands)
<S> <C> <C> <C> <C>
U.S. Govt............................................$ 1,115,903 $ 3,868 $ 3,072 $ 1,116,699
U.S. Govt Agencies (principally mortgage-backed)..... 2,867,736 3,252 59,446 2,811,542
Other Securities..................................... 385,760 560 29,473 356,847
----------- ---------- --------- ------------
Total...........................................$ 4,369,399 $ 7,680 $ 91,991 $ 4,285,088
=========== ========== ========= ============
</TABLE>
<TABLE>
<CAPTION>
Investment Securities Held-to-Maturity
-----------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---------- ---------- ---------- -----------
(in thousands)
<S> <C> <C> <C> <C>
U.S. Govt............................................$ 525,010 $ 9,531 $ 1,615 $ 532,926
U.S. Govt Agencies (principally mortgage-backed)..... 5,636,256 178,481 105,410 5,709,327
States and Political Subdivisions.................... 1,505,425 105,704 5,668 1,605,461
Other Securities..................................... 916 16 - 932
---------- ---------- --------- -----------
Total...........................................$ 7,667,607 $ 293,732 $ 112,693 $ 7,848,646
========== ========== ========= ===========
</TABLE>
<PAGE>
Page 9
<TABLE>
<CAPTION>
Following are the amortized cost and fair value of Investment Securities Available-for
- - -Sale and Held-to-Maturity at December 31, 1993:
Investment Securities Available-for-Sale
-----------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---------- ---------- ---------- -----------
(in thousands)
<S> <C> <C> <C> <C>
U.S. Govt............................................$ 965,190 $ 9,405 $ 1 $ 974,594
U.S. Govt Agencies (principally mortgage-backed)..... 2,396,927 5,782 11,535 2,391,174
States and Political Subdivisions.................... 1,261 112 - 1,373
Other Securities..................................... 431,488 1,082 15,327 417,243
---------- ---------- --------- -----------
Total...........................................$ 3,794,866 $ 16,381 $ 26,863 $ 3,794,866
=========== ========== ========= ===========
</TABLE>
<TABLE>
Investment Securities Held-to-Maturity
-----------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---------- ---------- ---------- -----------
(in thousands)
<S> <C> <C> <C> <C>
U.S. Govt............................................$ 525,698 $ 22,020 $ 36 $ 547,682
U.S. Govt Agencies (principally mortgage-backed)..... 4,573,861 252,846 2,356 4,824,351
States and Political Subdivisions.................... 1,505,270 139,527 1,585 1,643,212
Other Securities..................................... 2,580 78 - 2,658
---------- ---------- --------- ------------
Total...........................................$ 6,607,409 $ 414,471 $ 3,977 $ 7,017,903
=========== ========= ========= ===========
</TABLE>
[TEXT]
Note C - Allowance For Possible Credit Losses
- - ----------------------------------------------
The changes in the Allowance for Possible Credit Losses are summarized below:
<TABLE>
<CAPTION>
Quarter Ended
March 31
-----------------------
1994 1993
-------- --------
(in thousands)
<S> <C> <C>
Balance, Beginning of Period.........................$423,030 $417,764
Provision.......................................... 15,460 39,920
Charge-offs........................................ (31,044) (55,704)
Recoveries......................................... 15,674 16,955
Translation Adjustments............................ 290 336
-------- --------
Balance, End of Period...............................$423,410 $419,271
======== ========
</TABLE>
[TEXT]
<PAGE>
Page 10
Note D - Assets Pledged
- - -----------------------
Assets, principally Investment Securities, carried at approximately
$6,315,916,000 were pledged at March 31, 1994 to secure public deposits
(including deposits of $101,428,000 of the Treasurer, State of Michigan),
repurchase agreements and for other purposes required by law.
Note E - Extraordinary Item
- - ---------------------------
On March 15, 1994, an extraordinary item charge of $7,730,000 (net of income
taxes) was incurred, representing the premium paid and unamortized issuance
costs related to the Corporation's call and redemption of the $199,985,000
7.25% Convertible Subordinated Debentures Due 2006.
Note F - Other Commitments and Contingent Liabilities
- - -----------------------------------------------------
In the normal course of business the Corporation and its subsidiaries have
various outstanding commitments and contingent liabilities, including
guarantees, commitments to extend credit, foreign exchange futures contracts,
etc., which are not reflected in the financial statements. Management does
not anticipate any material loss as a result of these transactions.
The Corporation is a defendant in various legal proceedings arising in the
normal course of business. In the opinion of management, based on the advice
of legal counsel, the ultimate resolution of these proceedings will not have
a material effect on the Corporation's financial position.
Outstanding standby letters of credit at March 31, 1994, totaled approximately
$1,719,000,000.
<PAGE>
Page 11
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
- - ------- ------------------------------------------------------
The following discussion and analysis supplements information contained in the
financial statements and related notes appearing in this report.
NBD BANCORP, INC. FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Quarter Ended March 31
--------------------------
Pct.
1994 1993 Change
-------- -------- ------
(dollars in thousands,
except per share data)
<S> <C> <C> <C>
Income Before Extraordinary
Item and Cumulative Effect
of Accounting Change........... $122,876 $115,081 6.8
Extraordinary Item
(Redemption of Debt)........... (7,730) -
Cumulative Effect of Accounting
Change (SFAS Nos. 112 and 109,
respectively).................. (7,885) 3,950
-------- --------
Net Income....................... $107,261 $119,031 (9.9)
======== ========
Per Share:
Income before Extraordinary
Item and Accounting Change $ 0.77 $ 0.71 8.5
Net Income..................... $ 0.67 $ 0.74 (9.5)
Cash Dividends Paid............ $ 0.27 $ 0.27 0.0
Book Value..................... $ 20.29 $ 18.80 7.9
Return on Average Shareholders'
Equity:
Before Extraordinary Item and
Accounting Change....(pct.) 14.79 15.27
After Extraordinary Item and
Accounting Change....(pct.) 12.92 15.77
Return on Average Assets:
Before Extraordinary Item and
Accounting Change....(pct.) 1.20 1.15
After Extraordinary Item and
Accounting Change....(pct.) 1.05 1.19
Net Interest Margin........(pct.) 4.31 4.48
Balance Sheet Data:
March 31
--------------------------------
Pct.
1994 1993 Change
----------- ----------- ------
(dollars in thousands)
<S> <C> <C> <C>
Total Assets............ $42,932,669 $40,053,248 7.2
Total Earning Assets.... $38,852,766 $36,394,665 6.8
Total Loans and Leases.. $25,877,688 $25,037,721 3.4
Total Deposits.......... $30,175,616 $30,200,008 (0.1)
Total Common Shareholders'
Equity................ $ 3,264,699 $ 3,017,978 8.2
Risk-Based Capital Ratios:
Tier I Capital........ $ 3,040,316 $ 2,710,696
Ratio.............(pct) 9.14 8.78
Total Capital......... $ 4,307,040 $ 3,802,372
Ratio.............(pct) 12.94 12.31
Leverage Ratio........(pct) 7.12 6.82
NBD Bancorp Common Stock:
Quarter Ended
-------------------------------------------
3-31-94 12-31-93 9-30-93 6-30-93 3-31-93
------- -------- ------- ------- -------
Market Value:
<S> <C> <C> <C> <C> <C>
End of Period...$28 1/4 $29 3/4 $34 1/4 $32 3/8 $35 1/4
High............$30 3/4 $34 5/8 $34 3/8 $36 1/4 $36 3/8
Low.............$27 1/4 $28 5/8 $31 3/8 $29 5/8 $31 3/8
(a) Price/Earnings
Ratio....... 9.6 9.9 11.5 13.3 15.8
(a) Based on most recent twelve-month Net Income per share
and end-of-period stock prices.
</TABLE>
[TEXT]
<PAGE>
Page 12
SUMMARY OF OPERATIONS
- - ---------------------
In the first quarter of 1994, Net Income amounted to $107,261,000, or $.67 per
share. Income before the effects of an extraordinary item and an accounting
change totaled $122,876,000, or $.77 per share. Net Income in the first
quarter of 1993 totaled $119,031,000, or $.74 per share, while income before
the effect of an accounting change amounted to $115,081,000, or $.71 per
share.
An extraordinary charge of $7,730,000 (net of income taxes), or five cents per
share, was incurred, representing premium paid and unamortized issuance costs
related to the redemption on March 15, 1994, of the $199,985,000 outstanding
7.25% Convertible Subordinated Debentures Due March 2006. Also, Financial
Accounting Standards (SFAS) No. 112, "Employers' Accounting for Postemployment
Benefits," was adopted as of January 1, 1994, which required a charge against
earnings of $7,885,000 (net of income taxes), or five cents per share. In the
first quarter of 1993, SFAS No. 109, "Accounting for Income Taxes," was
adopted, which had the effect of increasing earnings by $3,950,000, or three
cents per share.
<TABLE>
<CAPTION>
Table 1
Summary of Operations
(in thousands except per share data)
Quarter Ended
----------------------------------------------------------
March December September June March
1994 1993 1993 1993 1993
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Interest Income - Including Taxable
Equivalent Adjustment.................... $ 651,998 $ 655,717 $ 676,236 $ 677,365 $ 685,865
Interest Expense.......................... (253,919) (256,106) (263,109) (267,035) (278,463)
---------- ---------- ---------- ---------- ----------
Net Interest Income - Taxable Equivalent.. 398,079 399,611 413,127 410,330 407,402
Taxable Equivalent Adjustment............. (16,819) (16,929) (17,936) (18,557) (18,941)
---------- ---------- ---------- ---------- ----------
Net Interest Income....................... 381,260 382,682 395,191 391,773 388,461
Provision For Possible Credit Losses...... (15,460) (19,841) (24,853) (35,060) (39,920)
Securities Gains.......................... 390 6,470 55 1,689 1,114
Other Non-Interest Income................. 138,360 149,632 141,063 141,480 143,880
Compensation.............................. (176,748) (178,926) (181,942) (173,030) (169,846)
Other Non-Interest Expenses............... (145,571) (166,089) (147,723) (148,575) (155,709)
---------- ---------- ---------- ---------- ----------
Income Before Taxes....................... 182,231 173,928 181,791 178,277 167,980
Applicable Taxes.......................... (59,355) (54,968) (56,639) (55,629) (52,899)
---------- ---------- ---------- ---------- ----------
Income before Extraordinary Item and
Cumulative Effect of Accounting Change... 122,876 118,960 125,152 122,648 115,081
Extraordinary Item....................... (7,730) - - - -
Cumulative Effect of Accounting Change... (7,885) - - - 3,950
---------- ---------- ---------- ---------- ----------
Net Income................................ $ 107,261 $ 118,960 $ 125,152 $ 122,648 $ 119,031
========== ========== ========== ========== ==========
Income Per Share:
Income before Extraordinary Item and
Accounting Change...................... $ 0.77 $ 0.74 $ 0.77 $ 0.76 $ 0.71
Net Income............................... $ 0.67 $ 0.74 $ 0.77 $ 0.76 $ 0.74
Average Shares Outstanding................ 161,099 161,173 161,278 161,243 161,322
Average Earning Assets (in millions)...... $ 37,127 $ 36,398 $ 36,209 $ 36,302 $ 36,598
Net Interest Margin....................... 4.31 % 4.38 % 4.55 % 4.53 % 4.48 %
(/TABLE>
[TEXT]
<PAGE>
Page 13
Net Interest Income
Taxable equivalent net interest income in the first quarter of 1994 was $398.1
million, a decrease of $9.3 million, or 2.3 percent, versus the same quarter last
year. The decrease was attributable to lower interest margin, which decreased 17
basis points from 4.48 percent in the first quarter of 1993 to 4.31 percent in the
first quarter of 1994. The unfavorable rate variance was partially offset by an
increase of $529 million, or 1.4 percent, in average earning assets, which rose
from $36.6 million in the first quarter of 1993 to $37.1 million in the same 1994
period.
Further detail on average balances, yields and rates is shown in Table 7.
Provision for Possible Credit Losses
Reflecting continuing improvement in loan quality, the first quarter 1994
Provision for Possible Credit Losses was $15.5 million, $24.5 million lower than
the first quarter of 1993 and lower than the $19.8 million in the fourth quarter
of 1993. A comprehensive analysis of the related Allowance for Possible Credit
Losses, charge-offs, nonperforming assets and ratios is presented in Table 5.
Securities Transactions
Other than the fourth quarter of 1993, securities gains over the last five
quarters were nominal. Essentially all of the securities gains in the fourth
quarter of 1993 were attributable to the sale of an equity holding in a nonbank
financial services company.
Other Non-Interest Income
Other Non-Interest Income of $138.4 million was earned in the first quarter of
1994 compared with $143.9 million in the first three months of 1993, a decrease
of $5.5 million, or 3.8 percent. Table 2 and its related discussion provide
additional details of the composition of Other Non-Interest Income.
Compensation
Compensation expense in the first quarter of 1994 totaled $176.7 million, which
was $6.9 million, or 4.1 percent, higher than the comparable period of last year.
Salaries increased $3.5 million, or 2.7 percent, while benefits expense increased
$3.4 million, or 8.6 percent.
Other Non-Interest Expenses
Other Non-Interest Expenses amounted to $145.6 million for the first quarter of
1994 compared with $155.7 million for the same quarter last year, or a decrease
of 6.5 percent. Factors influencing period-to-period changes are discussed in
connection with Table 3.
<PAGE>
Page 14
Taxes on Income
Income tax expense of $59.4 million in the first quarter of 1994 was $6.5 million,
or 12.2 percent, over the same quarter last year, reflecting both an 8.5 percent
increase in pre-tax income and the use of a 34 percent tax rate for reporting
first quarter 1993 net income versus a rate of 35 percent in the first three
months of 1994. In the third quarter of 1993, the tax rate was increased to 35
percent from 34 percent retroactive to January 1, 1993. The Corporation's
effective tax rate, when computed after adding the taxable equivalent adjustment
to both pre-tax income and income tax expense, was 38 percent for the first
quarters of both 1994 and 1993.
OTHER NON-INTEREST INCOME
- - -------------------------
Deposit Service Charges for the first quarter of 1994 amounted to $41.0 million
versus $42.0 million in the comparable period of 1993, or a decrease of 2.4
percent. The reduction was attributable to a higher credit given for balances
maintained on business accounts.
Trust fees of $38.1 million in the first quarter of 1994 increased $2.8 million,
or 7.8 percent, over the first three months of 1993.
The increase in Insurance Premiums and Commissions in the first quarter of 1994
compared with the first three months of 1993 was attributable to the earnings
related to $200 million of corporate owned life insurance purchased by the
Corporation in January 1994.
Profit on Mortgage Sales over the last five quarters has shown variability due to
changes in interest rates and in the volume of refinancing activity.
The "Other" classification contains income items which are generally small in
amount or infrequent in occurrence. Other Income in the first quarter of 1994 was
$5.2 million versus $14.5 million in the same period of last year. Included in
the first quarter of 1993 amount was a gain of $9.6 million on the sale of credit
card receivables.
Table 2
Other Non-Interest Income
</TABLE>
<TABLE>
<CAPTION>
(in thousands)
Quarter Ended
------------------------------------------------------
March Dec. Sept. June March
1994 1993 1993 1993 1993
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Deposit Service Charges................ $ 40,979 $ 40,203 $ 41,373 $ 41,857 $ 41,983
Trust Income........................... 38,110 39,904 36,860 37,440 35,348
Charge Card Merchant Processing Fees... 7,689 9,167 10,118 5,679 5,972
Data Processing Fees................... 7,214 7,372 8,017 7,032 6,442
Insurance Premiums and Commissions..... 5,925 4,600 3,697 4,017 4,612
Other Domestic and International Fees.. 5,469 5,476 5,293 5,157 6,108
Letter of Credit Fees.................. 4,692 5,649 5,610 4,817 4,482
Mortgage Loan Servicing................ 4,544 5,156 4,079 5,164 4,998
Profit on Mortgage Sales............... 3,863 9,306 9,262 7,773 4,502
Retail Banking Fees.................... 3,299 3,082 3,688 3,294 3,325
Foreign Exchange and Translation....... 2,965 2,927 3,177 3,199 3,265
Rental Income.......................... 2,656 2,572 2,655 2,633 2,317
OREO Gains............................. 1,823 8,037 1,784 3,651 380
Mutual Fund and Annuity Product Fees... 1,742 2,311 2,354 2,543 1,660
Securities Trading and Underwriting.... 1,486 1,476 1,807 1,710 2,678
Charge Card Fees....................... 688 1,496 989 1,310 1,319
Other.................................. 5,216 898 300 4,204 14,489
---------- ---------- ---------- ---------- ----------
Total Other Non-Interest Income..... $ 138,360 $ 149,632 $ 141,063 $ 141,480 $ 143,880
========== ========== ========== ========== ==========
</TABLE>
[TEXT]
<PAGE>
Page 15
OTHER NON-INTEREST EXPENSES
- - ---------------------------
Occupancy expense for the first three months of 1994 totaled $30.1 million,
which represents an increase of 1.9 percent over the same period last year.
Equipment expense amounted to $22.0 million in the first quarter of 1994, an
increase of 3.6 percent.
Amortization of Intangibles decreased $2.6 million to $6.5 million in the
first quarter of 1994 compared with the first three months of 1993. Most of
the decrease was attributable to a higher level of amortization of purchased
mortgage servicing rights in the 1993 period prompted by the high activity in
mortgage refinancing.
OREO Expense for the first quarter of 1994 totaled $0.9 million, a decrease
of $5.8 million below the first quarter of 1993. The decrease resulted
primarily from write-downs recorded on properties in the 1993 period.
<TABLE>
<CAPTION>
Table 3
Other Non-Interest Expenses
(in thousands)
Quarter Ended
------------------------------------------------------
March Dec. Sept. June March
1994 1993 1993 1993 1993
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Occupancy........................ $ 30,081 $ 30,271 $ 28,837 $ 29,429 $ 29,526
Equipment........................ 21,954 21,858 20,309 20,916 21,197
FDIC & Other Regulatory
Assessments................... 16,675 16,927 16,868 16,309 18,662
Purchased Services............... 7,138 7,559 6,824 6,389 6,856
Operating and Other Taxes........ 6,866 6,352 5,653 5,731 5,893
Telephone........................ 6,852 7,999 6,627 7,245 7,303
Amortization of Intangibles...... 6,524 9,328 9,291 7,997 9,126
Professional Services............ 6,433 9,034 7,580 6,880 6,358
Postage.......................... 5,274 5,396 4,635 4,977 5,650
Stationery and Supplies.......... 4,716 5,712 5,576 5,391 6,279
Marketing........................ 3,946 7,246 4,569 4,967 5,243
Travel and Entertainment......... 3,655 5,667 4,587 4,308 3,738
Public Relations................. 2,586 2,777 2,725 2,343 3,289
Loan and Credit Charges.......... 2,067 2,500 1,855 2,730 1,697
Federal Reserve Service Charges.. 1,958 1,845 2,124 2,134 2,308
Armored Carrier and Cartage...... 1,819 2,105 1,919 2,076 1,988
OREO Expense..................... 970 2,000 468 2,326 6,788
Other Insurance.................. 913 970 1,451 907 868
Other............................ 15,144 20,543 15,825 15,520 12,940
Total Other Non-Interest ---------- ---------- ---------- ---------- ----------
Expenses................... $ 145,571 $ 166,089 $ 147,723 $ 148,575 $ 155,709
========== ========== ========== ========== ==========
</TABLE>
[TEXT]
<PAGE>
Page 16
FINANCIAL CONDITION AND CAPITAL ACCOUNTS
- - ----------------------------------------
The Corporation's consolidated balance sheet is presented on pages 1 and 2.
NBD Bancorp, Inc. consolidated total assets at March 31, 1994, were $42.9
billion, an increase of $2.2 billion since December 31, 1993.
Investment Securities increased $1.6 billion since year-end 1993, primarily
attributable to the acquisition of mortgage-backed U.S. Agency Securities
during the first quarter of 1994.
Total Loans and Leases increased $326.9 million since December 31, 1993,
primarily attributable to increases of $293.8 million and $213.0 million in
commercial loans and residential mortgages, respectively, partially offset by
a reduction of $193.2 million in Mortgages Held For Sale.
Included in the commercial loan portfolio are highly leveraged transactions
(HLTs) and investment property term loans. As of March 31, 1994, HLT
commitments totaled $381.4 million, of which $210.5 million were outstanding.
A total of $3.5 million of HLT outstandings were classified as nonperforming.
About 79 percent of the outstanding amount was domiciled in the Midwest and
67 percent was related to manufacturing activities.
Investment property term loan commitments amounted to $1,860.1 million, of
which $1,553.7 million were outstanding at March 31, 1994, and $50.5 million
were classified as nonperforming.
As of March 31, 1994, real estate construction loan commitments totaled
$1,233.0 million, of which $765.7 million were outstanding and $34.4 million
were classified as nonperforming.
Other Assets increased $328.1 million since December 31, 1993. Most of the
increase related to a $200 million investment in corporate owned life
insurance.
The increase of $2.1 billion in total liabilities since December 31, 1993,
primarily consisted of increases in Short-Term Borrowings, total deposits, and
Long-Term Debt of $1.6 billion, $354.5 million, and $148.7 million,
respectively.
The increase in total deposits was attributable to an increase of $713.3
million in Foreign Office Deposits, partially offset by moderate decreases in
each of the other deposit categories, which in total decreased 1.3 percent
since year-end 1993.
The change in Long-Term Debt was attributable to an increase of $350 million
in bank notes since year-end 1993, partially offset by the redemption of
approximately $200 million of convertible subordinated debentures noted
earlier.
Shareholders' Equity totaled $3.3 billion at March 31, 1994, an increase of
$16.1 million since year-end 1993.
<PAGE>
Page 17
ANALYSIS OF CAPITAL
- - -------------------
The table that follows presents the components of Tier I Capital and Total
Capital. Both Tier I and Total capital ratios exceed the regulatory minimum
requirements of 4.0 percent and 8.0 percent, respectively. The Tier I
Leverage Ratio, also presented below, exceeds the regulatory minimum of 3.0
percent.
In March of 1994, the Corporation declared a dividend of $0.30 per share,
payable on May 10 to shareholders of record April 19. This represents an
increase of 11.1 percent in the quarterly dividend rate and marks the 28th
consecutive year of increased dividend payments to shareholders.
<TABLE>
<CAPTION>
Table 4
Analysis of Capital
(dollars in thousands)
March 31 Dec. 31 Sept. 30 June 30 March 31
1994 1993 1993 1993 1993
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Capital Components:
Tier 1 Capital:
Common Shareholders'
Equity..................... $3,264,699 $3,248,599 $3,179,606 $3,093,459 $3,017,978
Intangible Assets and Other
Adjustments.............. (224,383) (281,507) (290,557) (300,596) (307,282)
----------- ----------- ----------- ----------- -----------
Total Tier 1 Capital........ $3,040,316 $2,967,092 $2,889,049 $2,792,863 $2,710,696
=========== =========== =========== =========== ===========
Total Capital:
Common Shareholders'
Equity..................... $3,264,699 $3,248,599 $3,179,606 $3,093,459 $3,017,978
Qualifying Allowance for
Possible Credit Losses..... 416,050 406,618 398,047 393,241 386,440
Qualifying Long-Term
Debt....................... 854,000 1,053,985 1,053,985 854,067 705,400
Intangible Assets and Other
Adjustments.............. (227,709) (284,819) (290,691) (300,743) (307,446)
----------- ----------- ----------- ----------- -----------
Total Capital............... $4,307,040 $4,424,383 $4,340,947 $4,040,024 $3,802,372
=========== =========== =========== =========== ===========
Ratios (End of Period):
Risk-Based Capital Ratios:
Tier 1 Capital Ratio.......... 9.14 % 9.13 % 9.08 % 8.89 % 8.78 %
Total Capital Ratio........... 12.94 % 13.61 % 13.64 % 12.85 % 12.31 %
Tier 1 Leverage Ratio.......... 7.12 % 7.33 % 7.21 % 6.97 % 6.82 %
</TABLE>
[TEXT]
<PAGE>
Page 18
ALLOWANCE FOR POSSIBLE CREDIT LOSSES
- - ------------------------------------
An analysis of the changes in the Allowance for Possible Credit Losses and
related credit quality data is presented below. The Allowance for Possible
Credit Losses at March 31, 1994, of $423.4 million was equal to 1.64 percent
of total loan and leases, compared with 1.66 percent at December 31, 1993, and
1.67 percent at March 31, 1993. While the Allowance has stayed relatively
constant over the last several quarters, the level of nonperforming loans has
dropped, which generated an improvement in the Allowance as a percent of
nonperforming loans and leases to 170.18 percent as of March 31, 1994,
compared with 157.28 percent at year-end 1993 and 129.85 percent at March 31,
1993.
<TABLE>
<CAPTION>
Table 5
(dollars in thousands)
Allowance for Possible Credit Losses
Quarter Ended
--------------------------------------------------------------
March December September June March
1994 1993 1993 1993 1993
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Summary of Transactions:
Balance at Beginning of Period..... $ 423,030 $ 422,964 $ 421,505 $ 419,271 $ 417,764
Provision for Credit Losses........ 15,460 19,841 24,853 35,060 39,920
Translation Adjustment............. 290 (16) (153) (50) 336
Charge-Offs........................ (31,044) (53,243) (47,116) (50,038) (55,704)
Recoveries......................... 15,674 33,484 23,875 17,262 16,955
---------- ---------- ---------- ---------- ----------
Net Charge-Offs................. (15,370) (19,759) (23,241) (32,776) (38,749)
---------- ---------- ---------- ---------- ----------
Balance at End of Period........... $ 423,410 $ 423,030 $ 422,964 $ 421,505 $ 419,271
========== ========== ========== ========== ==========
Net Loan Charge-Offs by Category:
Commercial and Foreign............. $ (9,217) $ (12,602) $ (8,077) $ (18,382) $ (26,718)
Real Estate Construction........... 202 1,012 (7,641) (8,524) (4,201)
Residential Mortgage............... (175) (47) (96) 4 63
Consumer........................... (5,680) (7,898) (6,971) (5,349) (7,736)
Lease Financing.................... (500) (224) (456) (525) (157)
---------- ---------- ---------- ---------- ----------
Total Net Charge-Offs........... $ (15,370) $ (19,759) $ (23,241) $ (32,776) $ (38,749)
========== ========== ========== ========== ==========
Net Charge-Off Ratio (Annualized) 0.24% 0.31% 0.37% 0.52% 0.62%
Allowance for Possible Credit Losses as a Percent of:
Total Loans and Leases.......... 1.64% 1.66% 1.67% 1.66% 1.67%
Nonperforming Loans and
Leases*.................... 170.18% 157.28% 137.74% 148.71% 129.85%
Analysis of Nonperforming Assets
March 31 Dec. 31 Sept. 30 June 30 March 31
1994 1993 1993 1993 1993
Loans: ---------- ---------- ---------- ---------- ----------
Non-Accrual..................... $ 248,690 $ 265,699 $ 306,916 $ 283,263 $ 322,296
Restructured*................... 107 3,268 155 178 591
---------- ---------- ---------- ---------- ----------
Total Loans................... 248,797 268,967 307,071 283,441 322,887
Other Real Estate Owned............ 35,583 44,014 53,572 55,589 53,516
---------- ---------- ---------- ---------- ----------
Total Nonperforming Assets.... $ 284,380 $ 312,981 $ 360,643 $ 339,030 $ 376,403
========== ========== ========== ========== ==========
Nonperforming Assets* as a Percent of:
Total Loans and Leases.......... 1.10% 1.22% 1.43% 1.34% 1.50%
Allowance for Possible
Credit Losses................. 67.16% 73.99% 85.27% 80.43% 89.78%
*Excludes $88,941 of Mexican restructured debt for the first three quarters of 1993.
These obligations were reclassified to investment securities available-for-sale at
year-end 1993, concurrent with the implementation of SFAS No. 115.
Loans 90 Days or More Past Due
and Still Accruing Interest..... $ 33,461 $ 36,905 $ 38,550 $ 35,188 $ 35,377
</TABLE>
[TEXT]
<PAGE>
Page 19
ORGANIZATIONAL PERFORMANCE
- - --------------------------
Table 6 presents performance data and other information organized by the three
major geographical banking markets serviced by the Corporation. Various
mergers and transfers of certain business activities made to establish
operations in each state and position them for the future have minimized the
usefulness of comparative data for prior periods.
In the first quarter of 1994, an agreement was reached to acquire AmeriFed
Financial Corporation (AFFC), a thrift holding company with $885 million in
assets located in Joliet, Illinois. The Corporation will issue approximately
5.2 million of its shares for all of the outstanding shares of AFFC. The
acquisition, which is subject to the approval of AFFC shareholders and
regulatory authorities, will be accounted for as a purchase.
<TABLE>
<CAPTION>
Table 6
Organizational Performance
(dollars in thousands)
For the Quarter Ended March 31, 1994
------------------------------------
Michigan Indiana Illinois
-------- -------- --------
<S> <C> <C> <C>
Income before Accounting Changes................ $85,297 $22,967 $15,051
Net Income...................................... 79,855 22,128 14,547
Average Earning Assets.......................... 23,535 8,927 4,357
Return on Assets (Before Accounting Changes).... 1.32 % 0.92 % 1.28 %
Full-Time Equivalent Employees.................. 8,583 5,310 1,955
</TABLE>
<PAGE>
Page 20
Average Balances, Yields and Rates
The following table presents average asset and liability balances and related
yields and rates for the latest five quarters.
Table 7
Average Balances, Yields and Rates
(Yields are on a fully taxable equivalent basis.)
(dollars in millions)
<TABLE>
<CAPTION>
First Quarter Fourth Quarter Third Quarter Second Quarter First Quarter
1994 1993 1993 1993 1993
------------------ ------------------ ------------------ ------------------ ------------------
Average Yield/ Average Yield/ Average Yield/ Average Yield/ Average Yield/
Balance Rate Balance Rate Balance Rate Balance Rate Balance Rate
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets:
Interest-Bearing Deposits......$ 645 4.40 % $ 576 4.97 % $ 673 4.79 % $ 661 5.17 % $ 719 5.82 %
Federal Funds Sold and
Resale Agreements............ 114 3.37 176 3.11 203 3.23 110 3.35 114 3.09
Money Market Investments....... - - 34 3.99 35 4.27 82 3.96 57 4.39
Trading Account Securities..... 92 3.88 140 3.56 172 3.62 165 3.64 111 4.29
Investment Securities:
U.S. Government............... 1,583 5.30 1,518 5.36 1,559 5.51 1,637 5.56 1,662 5.53
U.S. Government Agencies...... 7,565 6.44 6,802 6.60 6,472 6.90 6,504 7.23 6,793 7.39
States and Political
Subdivisions................ 1,492 8.21 1,503 8.43 1,519 8.64 1,551 8.72 1,595 8.58
Other......................... 389 4.72 362 4.52 428 4.33 512 4.59 608 4.96
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total Investment Securities.... 11,029 6.45 10,185 6.62 9,978 6.84 10,204 7.06 10,658 7.14
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Loans and Leases:
Commercial.................... 13,673 6.97 13,699 6.83 13,685 7.26 13,775 7.01 13,626 6.96
Real Estate Construction...... 754 7.19 751 7.94 811 7.04 830 6.88 862 7.26
Residential Mortgage.......... 2,759 7.46 2,739 7.99 2,763 8.11 2,822 8.41 2,814 8.49
Consumer...................... 6,751 8.61 6,703 8.78 6,567 9.05 6,354 9.30 6,346 9.51
Lease Financing............... 284 10.25 273 10.49 260 11.42 249 11.57 251 11.88
Foreign....................... 1,026 5.70 1,122 5.73 1,062 6.01 1,050 6.43 1,040 6.60
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total Loans and Leases......... 25,247 7.46 25,287 7.50 25,148 7.81 25,080 7.76 24,939 7.83
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total Earning Assets........... 37,127 7.08 % 36,398 7.17 % 36,209 7.43 % 36,302 7.47 % 36,598 7.55 %
====== ====== ====== ====== ======
Cash and Due From Banks........ 2,285 2,766 2,204 2,271 2,190
Other Assets................... 1,931 1,573 1,772 1,703 1,720
Less Allowance for Possible
Credit Losses................ (433) (435) (437) (433) (431)
-------- -------- -------- -------- --------
Total Assets...................$40,910 $40,302 $39,748 $39,843 $40,077
======== ======== ======== ======== ========
Liabilities and Shareholders'
Equity:
Interest-Bearing Deposits:
Savings.....................$ 7,854 2.29 % $ 7,624 2.42 % $ 7,346 2.50 % $ 7,175 2.54 % $ 6,852 2.64 %
Money Market Accounts....... 5,516 2.68 5,683 2.73 5,885 2.78 5,955 2.83 6,154 2.88
Time........................ 7,796 4.30 8,471 4.33 8,388 4.49 9,049 4.55 9,310 4.76
Foreign Office.............. 2,035 3.96 1,707 4.24 1,729 4.35 1,810 4.54 1,720 5.18
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total Interest-Bearing
Deposits..................... 23,201 3.21 23,485 3.31 23,348 3.42 23,989 3.52 24,036 3.71
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Short-Term Borrowings.......... 5,647 3.26 4,739 3.12 5,141 3.13 4,746 3.10 5,357 3.16
Long-Term Debt................. 1,615 6.20 1,402 6.47 1,320 6.45 1,216 6.46 974 6.98
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total Interest-Bearing
Liabilities.................. 30,463 3.37 % 29,626 3.43 % 29,809 3.50 % 29,951 3.57 % 30,367 3.71 %
====== ====== ====== ====== ======
Demand Deposits................ 6,217 6,565 5,966 6,011 5,853
Other Liabilities.............. 909 850 841 816 838
Shareholders' Equity........... 3,321 3,261 3,132 3,065 3,019
-------- -------- -------- -------- --------
Total Liabilities and
Shareholders' Equity.........$40,910 $40,302 $39,748 $39,843 $40,077
======== ======== ======== ======== ========
Interest Rate Spread........... 3.71 % 3.74 % 3.93 % 3.90 % 3.84 %
====== ====== ====== ====== ======
Net Interest Margin............ 4.31 % 4.38 % 4.55 % 4.53 % 4.48 %
====== ====== ====== ====== ======
The FTE adjustments are computed using a combined federal and state income tax rate of 36.4% in 1994 and 1993.
The combined amounts for Investment Securities Available-for-Sale and Held-to-Maturity for 1994 are based on their respective
carrying values.
</TABLE>
<PAGE>
Page 21
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
- - ----------------------------------------------
In May 1993, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 114, "Accounting by Creditors for
Impairment of a Loan." This statement requires that impaired loans be
measured based on the present value of the expected future cash flows
discounted at the loan's effective interest rate. The statement is effective
for fiscal years beginning after December 15, 1994. The Corporation has not
determined the impact that adoption of the standard will have on the financial
statements.
INTERNATIONAL BANKING
- - ---------------------
At March 31, 1994, the Corporation had total foreign cross-border outstandings
of $1.0 billion. Foreign outstandings consist primarily of interest-bearing
deposits, bankers acceptances, federal funds sold, and loans denominated in
dollars or other non-local currency. Assets denominated in the local
currency are included to the extent they are not hedged or are not funded by
local borrowings. An item is classified as either foreign or domestic based
on the domicile of the party ultimately responsible for payment.
At March 31, 1994, the Corporation had no foreign outstandings to any
individual country which exceeded 0.75 percent of total assets. However,
foreign cross-border outstandings at March 31, 1994, were $21.0 million
(excluding $98.9 million of obligations collateralized by U. S. Treasury
securities) for all countries that the Corporation considers to be
experiencing severe economic and liquidity problems. Of such outstandings,
none were nonperforming. No special reserve was required to be established
under the International Lending Supervision Act of 1983.
<PAGE>
Page 22
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
- - ------- ---------------------------------
(a) Exhibits
(11) The Earnings Per Share Computation is attached hereto.
(b) Reports on Form 8-K
None.
<PAGE>
Page 23
SIGNATURES
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.
NBD Bancorp, Inc.
---------------------------------
(Registrant)
By: /s/ Louis Betanzos
------------------------------
Louis Betanzos
Executive Vice President and
Chief Financial Officer
By: /s/ Gerald K. Hanson
-------------------------------
Gerald K. Hanson
Senior Vice President and
Comptroller
May 10, 1994
<PAGE>
Page 24
<TABLE>
<CAPTION>
Exhibit (11)
NBD Bancorp, Inc. Consolidated Earnings Per Share Computation
(in thousands except per share data)
Quarter Ended
March 31
-----------------------
1994 1993
---------- ----------
<S> <C> <C>
Primary:
Net Income..................................... $ 107,261 $ 119,031
========== ==========
Average Shares Outstanding..................... 160,762 160,438
Adjustment:
Shares Applicable to Common Stock Options.... 337 884
---------- ----------
Shares Applicable to Primary Earnings.......... 161,099 161,322
========== ==========
Fully Diluted:
Net Income..................................... $ 107,261 $ 119,031
Adjustment:
Interest on 7.25% Convertible Debentures..... 3,052 3,663
Tax Effect on Above.......................... (1,068) (1,246)
---------- ----------
Net Adjustment............................... 1,984 2,417
Adjusted Net Income Applicable ---------- ----------
to Common Stock.............................. $ 109,245 $ 121,448
========== ==========
Average Shares Outstanding..................... 160,762 160,438
Adjustment:
Shares Applicable to Convertible Debentures.. 5,336 6,579
Shares Applicable to Common Stock Options.... 337 934
---------- ----------
Shares Applicable to Fully Diluted Earnings.... 166,435 167,951
========== ==========
Per Share Data:
Primary-Net Income per Share of Common Stock..... $ 0.67 $ 0.74
Fully Diluted-Net Income per ========== ==========
Share of Common Stock.......................... $ 0.66 $ 0.72
========== ==========
</TABLE>
