<PAGE>
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 September 30, 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 October 31, 1994
----------------------------- -------------------------------
Common Stock, $1.00 Par Value 155,924,683
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<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
September 30 December 31 September 30
1994 1993 1993
------------ ------------ ------------
<S> <C> <C> <C>
Cash and Due From Banks...................................... $ 2,344,939 $ 2,405,694 $ 2,056,432
Interest-Bearing Deposits.................................... 642,969 722,109 668,534
Federal Funds Sold and Resale Agreements..................... 163,295 282,481 383,865
Other Money Market Investments............................... - - 45,771
Trading Account Securities................................... 187,474 109,637 211,683
Investment Securities (Note B):
Available-for-Sale (At Fair Value)........................ 4,791,169 3,784,384 -
Held-to-Maturity (Fair Value of $7,757,535,
$7,017,903 and $10,876,664, respectively).............. 7,832,855 6,607,409 10,375,874
------------ ------------ ------------
12,624,024 10,391,793 10,375,874
------------ ------------ ------------
Loans and Leases (Net of Unearned Income of $150,832,
$140,412 and $133,601, respectively):
Commercial................................................ 14,898,990 13,794,714 13,708,446
Real Estate Construction.................................. 785,543 789,248 754,072
Residential Mortgage...................................... 3,187,130 2,560,539 2,430,268
Mortgages Held For Sale................................... 41,008 255,902 313,307
Consumer.................................................. 7,421,699 6,758,171 6,668,797
Lease Financing........................................... 335,860 284,805 268,983
Foreign................................................... 1,215,322 1,107,413 1,111,537
------------ ------------ ------------
27,885,552 25,550,792 25,255,410
Allowance For Possible Credit Losses (Note C)............. (423,700) (423,030) (422,964)
------------ ------------ ------------
27,461,852 25,127,762 24,832,446
------------ ------------ ------------
Net Premises and Equipment................................... 636,755 634,541 626,322
Customers' Liability on Acceptances.......................... 186,370 172,171 149,921
Other Assets................................................. 1,318,624 929,717 1,032,265
------------ ------------ ------------
Total Assets..................................... $45,566,302 $40,775,905 $40,383,113
============ ============ ============
</TABLE>
<PAGE>
Page 2
<TABLE>
<CAPTION>
Liabilities and Shareholders' Equity
September 30 December 31 September 30
1994 1993 1993
------------ ------------ ------------
<S> <S> <S> <S>
Deposits:
Demand (Non-Interest Bearing)............................ $ 6,349,603 $ 6,667,958 $ 6,170,527
Savings.................................................. 7,745,473 8,051,337 7,429,681
Money Market Accounts.................................... 5,110,887 5,561,573 5,771,605
Time..................................................... 7,603,690 7,474,234 7,910,879
Foreign Office........................................... 3,693,457 2,066,005 2,072,373
------------ ------------ ------------
30,503,110 29,821,107 29,355,065
Short-Term Borrowings....................................... 8,483,258 5,354,839 5,613,055
Liability on Acceptances.................................... 186,370 172,171 149,921
Accrued Expenses and Sundry Liabilities..................... 757,595 744,242 699,001
Long-Term Debt.............................................. 2,381,382 1,434,947 1,386,465
------------ ------------ ------------
Total Liabilities..................................... 42,311,715 37,527,306 37,203,507
------------ ------------ ------------
Shareholders' Equity:
Series A Preferred Stock - Par Value $1, Stated Value $50.. - - -
September 30 December 31 September 30
No. of Shares 1994 1993 1993
-------------- ------------ ------------ ------------
Authorized.... 460,000 460,000 460,000
Issued........ - - -
Preferred Stock - No Par Value............................. - - -
September 30 December 31 September 30
No. of Shares 1994 1993 1993
-------------- ------------ ------------ ------------
Authorized.... 10,000,000 10,000,000 10,000,000
Issued........ - - -
Common Stock - Par Value $1................................ 160,877 160,715 160,626
September 30 December 31 September 30
No. of Shares 1994 1993 1993
-------------- ------------ ------------ ------------
Authorized.... 500,000,000 500,000,000 500,000,000
Issued........ 160,876,819 160,715,173 160,626,007
Capital Surplus............................................ 547,710 541,232 541,204
Retained Earnings.......................................... 2,813,263 2,565,627 2,490,077
Unrealized Loss on Available-for-Sale Securities........... (111,675) (7,012) -
Accumulated Translation Adjustment......................... 7,663 4,384 6,077
Deferred Compensation...................................... (21,859) (16,347) (18,378)
Less Treasury Stock (4,546,230 shares)..................... (141,392) - -
------------ ------------ ------------
Total Shareholders' Equity............................ 3,254,587 3,248,599 3,179,606
------------ ------------ ------------
Total Liabilities and Shareholders' Equity...... $45,566,302 $40,775,905 $40,383,113
============ ============ ============
</TABLE>
<PAGE>
Page 3
<TABLE>
<CAPTION>
NBD Bancorp, Inc. Consolidated Statement of Income
(in thousands except per share data)
Quarter Ended Nine Months Ended
September 30 September 30
--------------------- ---------------------------
1994 1993 1994 1993
--------- --------- ------------ ------------
<S> <C> <C> <C> <C>
Interest Income:
Loans and Leases (including fees)............................... $542,238 $490,070 $ 1,511,258 $ 1,450,541
Investment Securities:
Taxable....................................................... 182,319 130,194 481,793 415,969
Non-Taxable................................................... 24,557 26,354 74,386 81,157
Trading Account Securities...................................... 1,878 1,530 4,257 4,157
Federal Funds Sold and Resale Agreements........................ 2,849 1,653 5,712 3,445
Other Money Market Investments.................................. - 375 - 1,794
Interest-Bearing Deposits....................................... 9,236 8,124 24,228 26,969
--------- --------- ------------ ------------
Total Interest Income......................................... 763,077 658,300 2,101,634 1,984,032
--------- --------- ------------ ------------
Interest Expense:
Deposits........................................................ 227,662 201,272 618,491 631,771
Short-Term Borrowings........................................... 84,526 40,541 192,201 118,915
Long-Term Debt.................................................. 36,098 21,296 88,503 57,921
--------- --------- ------------ ------------
Total Interest Expense........................................ 348,286 263,109 899,195 808,607
--------- --------- ------------ ------------
Net Interest Income............................................... 414,791 395,191 1,202,439 1,175,425
Provision For Possible Credit Losses............................ 7,907 24,853 31,946 99,833
--------- --------- ------------ ------------
Net Interest Income After Provision
For Possible Credit Losses...................................... 406,884 370,338 1,170,493 1,075,592
--------- --------- ------------ ------------
Non-Interest Income:
Trust Fees...................................................... 39,400 36,860 117,313 109,648
Service Charges on Deposit Accounts............................. 40,752 41,373 120,521 125,213
Securities Gains................................................ 740 55 1,045 2,858
Other........................................................... 55,705 62,830 170,416 191,562
--------- --------- ------------ ------------
Total Non-Interest Income..................................... 136,597 141,118 409,295 429,281
--------- --------- ------------ ------------
Non-Interest Expenses:
Compensation:
Salaries...................................................... 137,292 137,764 405,607 398,933
Benefits...................................................... 44,436 44,178 131,631 125,885
--------- --------- ------------ ------------
Total Compensation......................................... 181,728 181,942 537,238 524,818
Net Occupancy................................................... 29,242 28,837 89,291 87,792
Equipment Rentals, Depreciation and Maintenance................. 21,842 20,309 67,393 62,422
FDIC and Other Regulatory Assessments........................... 16,631 16,868 50,047 51,839
Amortization of Intangibles..................................... 6,415 9,291 19,516 26,414
Other........................................................... 66,634 72,418 213,635 223,540
--------- --------- ------------ ------------
Total Non-Interest Expenses................................ 322,492 329,665 977,120 976,825
--------- --------- ------------ ------------
Income before Income Taxes........................................ 220,989 181,791 602,668 528,048
Income Tax Expense(Benefit) (Including tax effect of $260,
$44, $374 and $1,043, respectively, on securities sales)...... 73,335 56,639 196,914 165,167
--------- --------- ------------ ------------
Income before Extraordinary Item and Cumulative
Effect of Accounting Change..................................... 147,654 125,152 405,754 362,881
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........................................................ $147,654 $125,152 $ 390,139 $ 366,831
========= ========= ============ ============
Net Income Per Share (on average shares outstanding):
Income before Extraordinary Item and Cumulative
Effect of Accounting Change................................... $ 0.93 $ 0.77 $ 2.54 $ 2.24
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.............................................. $ 0.93 $ 0.77 $ 2.44 $ 2.27
========= ========= ============ ============
</TABLE>
<PAGE>
Page 4
<TABLE>
<CAPTION>
NBD Bancorp, Inc. Consolidated Statement of Shareholders' Equity
(in thousands except share data)
Quarter Ended Nine Months Ended
September 30 September 30
-------------------------- --------------------------
1994 1993 1994 1993
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Preferred Stock:
Balance, Beginning and End of Period..................... $ - $ - $ - $ -
------------ ------------ ------------ ------------
Common Stock:
Balance, Beginning of Period............................. 160,877 160,570 160,715 160,386
Conversion of Subordinated Debentures and
Other (161,646 shares in 1994)....................... - 56 162 240
------------ ------------ ------------ ------------
Balance, End of Period................................... 160,877 160,626 160,877 160,626
------------ ------------ ------------ ------------
Capital Surplus:
Balance, Beginning of Period............................. 546,829 540,024 541,232 536,900
Conversion of Subordinated Debentures and Other........ 881 1,180 6,478 4,304
------------ ------------ ------------ ------------
Balance, End of Period................................... 547,710 541,204 547,710 541,204
------------ ------------ ------------ ------------
Retained Earnings:
Balance, Beginning of Period............................. 2,712,268 2,408,300 2,565,627 2,253,332
Net Income............................................. 147,654 125,152 390,139 366,831
Cash Dividends Declared on Common Stock
($.30, $.27, $.90 and $.81 per share, respectively).. (46,659) (43,375) (142,503) (130,086)
------------ ------------ ------------ ------------
Balance, End of Period................................... 2,813,263 2,490,077 2,813,263 2,490,077
------------ ------------ ------------ ------------
Unrealized Loss on Available-for-Sale Securities:
Balance, Beginning of Period............................. (89,936) - (7,012) -
Net Unrealized Loss.................................... (21,739) - (104,663) -
------------ ------------ ------------ ------------
Balance, End of Period................................... (111,675) - (111,675) -
------------ ------------ ------------ ------------
Accumulated Translation Adjustment:
Balance, Beginning of Period............................. 7,118 4,826 4,384 5,610
Aggregate Translation Gain............................. 545 1,251 3,279 467
------------ ------------ ------------ ------------
Balance, End of Period................................... 7,663 6,077 7,663 6,077
------------ ------------ ------------ ------------
Deferred Compensation:
Balance, Beginning of Period............................. (23,897) (19,865) (16,347) (15,335)
Awards Granted......................................... - (101) (14,322) (9,845)
Amortization of Deferred Compensation.................. 2,899 2,484 8,386 7,705
Other.................................................. (861) (896) 424 (903)
------------ ------------ ------------ ------------
Balance, End of Period................................... (21,859) (18,378) (21,859) (18,378)
------------ ------------ ------------ ------------
Treasury Stock:
Balance, Beginning of Period............................. (63,116) (396) - -
Purchase of Common Stock (4,971,358 shares in 1994).... (78,893) (558) (153,814) (10,677)
Conversion of Subordinated Debentures
and Other (425,128 shares in 1994)................... 617 954 12,422 10,677
------------ ------------ ------------ ------------
Balance, End of Period................................... (141,392) - (141,392) -
------------ ------------ ------------ ------------
Total Shareholders' Equity, End of Period.................. $ 3,254,587 $ 3,179,606 $ 3,254,587 $ 3,179,606
============ ============ ============ ============
</TABLE>
<PAGE>
Page 5
<TABLE>
<CAPTION>
NBD Bancorp, Inc. Consolidated Statement of Cash Flows
(in thousands)
Nine Months Ended
September 30
---------------------------
1994 1993
------------ ------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income.................................................................... $ 390,139 $ 366,831
Adjustments to Reconcile Net Income to
Net Cash Provided by Operations:
Depreciation and Amortization.............................................. 76,474 78,204
Provision for Possible Credit Losses....................................... 31,946 99,833
Securities Gains........................................................... (1,045) (2,858)
Increase in Interest Receivable............................................ (37,807) (81,948)
Increase in Income Taxes Payable........................................... 18,801 2,477
Decrease in Accrued Expenses............................................... (123,244) (114,089)
Increase in Trading Account Investments.................................... (77,043) (42,528)
Decrease (Increase) in Mortgages Held for Sale............................. 214,894 (23,621)
Other, net................................................................. (10,261) (31,974)
------------ ------------
Net Cash Provided by Operating Activities.............................. 482,854 250,327
------------ ------------
Cash Flows from Investing Activities:
Decrease in Interest-Bearing Deposits......................................... 87,826 15,402
Decrease (Increase) in Federal Funds Sold and Resale Agreements.............. 119,186 (260,409)
Increase in Money Market Investments.......................................... - (1,274)
Purchase of Investment Securities Available-for-Sale.......................... (3,768,241) -
Proceeds from Maturity or Call of Investment Securities Available-for-Sale.... 1,576,672 -
Proceeds from Sale of Investment Securities Available-for-Sale................ 978,305 -
Purchase of Investment Securities Held-to-Maturity............................ (2,763,717) (3,040,545)
Proceeds from Maturity or Call of Investment Securities Held-to-Maturity...... 1,502,523 3,529,318
Proceeds from Sale of Investment Securities Held-to-Maturity.................. - 45,531
Increase in Loans and Leases.................................................. (2,468,850) (108,542)
Purchase of Loan Portfolios................................................... - (19,617)
Proceeds from Sale of Loan Portfolios......................................... - 70,107
Purchase of Premises and Equipment and Other Assets........................... (273,717) (115,755)
Proceeds from Sale of Premises and Equipment and Other Assets................. 51,019 43,758
Net Cash Paid in Purchase of Subsidiary....................................... (5,720) -
------------ ------------
Net Cash (Used) Provided by Investing Activities....................... (4,964,714) 157,974
------------ ------------
Cash Flows from Financing Activities:
Increase (Decrease) in Deposits............................................... 635,152 (1,670,187)
Increase in Short-Term Borrowings............................................. 3,127,198 495,445
Proceeds from the Issuance of Debt............................................ 1,250,000 450,035
Principal Payments on Long-Term Debt.......................................... (299,921) (37,876)
Proceeds from Stock Option Exercises.......................................... 1,285 2,272
Payments to Acquire Treasury Stock............................................ (153,814) (10,677)
Dividends Paid................................................................ (138,996) (130,026)
------------ ------------
Net Cash Provided (Used) by Financing Activities....................... 4,420,904 (901,014)
------------ ------------
Effect of Exchange Rate Changes on Cash and Due From Banks...................... 201 (126)
------------ ------------
Net Decrease in Cash and Due From Banks......................................... (60,755) (492,839)
Cash and Due From Banks - Beginning of Period................................... 2,405,694 2,549,271
------------ ------------
Cash and Due From Banks - End of Period......................................... $ 2,344,939 $ 2,056,432
============ ============
Other Cash Flow Disclosures:
Interest Paid................................................................... $ 994,071 $ 941,153
State and Federal Taxes Paid.................................................... 169,514 158,740
</TABLE>
<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
and nine months ended September 30, 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
Notes to Consolidated Financial Statements (cont'd.)
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
generally charged off when 120 days to 150 days past due. Accrued but
unpaid interest is 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
Notes to Consolidated Financial Statements (cont'd.)
Income Per Share:
Per share amounts are based on the weighted average number of shares
outstanding throughout the period.
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
September 30 September 30
--------------------------- ---------------------------
1994 1993 1994 1993
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Average Shares Outstanding.......... 157,667,003 161,278,016 159,683,663 161,280,521
</TABLE>
Note B - Investment Securities
- ------------------------------
Following are the amortized cost and fair value of Investment Securities
Available-for-Sale and Held-to-Maturity at September 30, 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. Treasury.......................... $ 586,372 $ 79 $ 2,342 $ 584,109
U.S. Government Agencies:
Mortgage-backed Securities........... 2,693,962 393 108,917 2,585,438
Collateralized Mortgage Obligations.. 1,264,030 1,470 33,855 1,231,645
Other................................ 1,705 40 - 1,745
States and Political Subdivisions...... 68,692 9 30 68,671
Collateralized Mortgage Obligations(a). 124,608 68 991 123,685
Other.................................. 226,978 409 31,511 195,876
------------ ------------ ------------ ------------
Total.............................. $ 4,966,347 $ 2,468 $ 177,646 $ 4,791,169
============ ============ ============ ============
</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. Treasury.......................... $ 521,501 $ 1,346 $ 6,159 $ 516,688
U.S. Government Agencies:
Mortgage-backed Securities........... 5,872,170 82,260 211,447 5,742,983
Other................................ 8,511 6 100 8,417
States and Political Subdivisions...... 1,430,173 71,707 12,941 1,488,939
Other.................................. 500 8 - 508
------------ ----------- ------------ ------------
Total.............................. $ 7,832,855 $ 155,327 $ 230,647 $ 7,757,535
============ =========== ============ ============
(a) All of the Collateralized Mortgage Obligations of private issuers have underlying collateral consisting of obligations of U.S.
Government Agencies.
</TABLE>
<PAGE>
Page 9
Notes to Consolidated Financial Statements (cont'd.)
Following are the amortized cost and fair value of Investment Securities
Available-for-Sale and Held-to-Maturity at December 31, 1993:
<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. Treasury.......................... $ 965,190 $ 9,405 $ 1 $ 974,594
U.S. Government Agencies:
Mortgage-backed Securities........... 729,612 2,639 2,509 729,742
Collateralized Mortgage Obligations.. 1,663,910 3,055 9,026 1,657,939
Other................................ 3,405 88 - 3,493
States and Political Subdivisions...... 1,261 112 - 1,373
Collateralized Mortgage Obligations(a). 240,213 803 650 240,366
Other.................................. 191,275 279 14,677 176,877
------------ ------------ ------------ ------------
Total.............................. $ 3,794,866 $ 16,381 $ 26,863 $ 3,784,384
============ ============ ============ ============
</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. Treasury.......................... $ 525,698 $ 22,020 $ 36 $ 547,682
U.S. Government Agencies:
Mortgage-backed Securities........... 4,563,883 252,693 2,354 4,814,222
Other................................ 9,978 153 2 10,129
States and Political Subdivisions...... 1,505,270 139,527 1,585 1,643,212
Other.................................. 2,580 78 - 2,658
------------ ------------ ------------ ------------
Total.............................. $ 6,607,409 $ 414,471 $ 3,977 $ 7,017,903
============ ============ ============ ============
(a) All of the Collateralized Mortgage Obligations of private issuers have underlying collateral consisting of obligations of U.S.
Government Agencies.
</TABLE>
Note C - Allowance For Possible Credit Losses
The changes in the Allowance for Possible Credit Losses are summarized
below:
Nine Months Ended
September 30
---------------------
1994 1993
--------- ---------
(in thousands)
Balance, Beginning of Period........... $423,030 $417,764
Provision........................... 31,946 99,833
Charge-offs......................... (87,320) (152,858)
Recoveries.......................... 55,586 58,092
--------- ---------
Net Charge-offs.................. (31,734) (94,766)
Translation Adjustments............. 458 133
--------- ---------
Balance, End of Period................. $423,700 $422,964
========= =========
<PAGE>
Page 10
Notes to Consolidated Financial Statements (cont'd.)
Note D - Assets Pledged
- ------------------------
Assets, principally Investment Securities, carried at approximately
$6,859,072,000 were pledged at September 30, 1994, to secure public deposits
(including deposits of $56,325,000 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 September 30, 1994, totaled
approximately $1,939,000,000.
<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
Quarter Ended September 30
----------------------------
Pct.
1994 1993 Change
--------- --------- ------
(in thousands,
except per share data)
Operating Results:
Net Interest Income........... $ 414,791 $ 395,191 5.0
Provision for Possible
Credit Losses.............. 7,907 24,853 (68.2)
Non-Interest Income........... 136,597 141,118 (3.2)
Non-Interest Expenses......... 322,492 329,665 (2.2)
--------- ---------
Income before Income Taxes.... 220,989 181,791 21.6
Income Tax Expense............ 73,335 56,639 29.5
--------- ---------
Income before Extraordinary
Item and Accounting Change.. 147,654 125,152 18.0
Extraordinary Item
(Redemption of Debt)........ - -
Cumulative Effect of Accounting
Change (SFAS Nos. 112 and 109,
respectively)............... - -
--------- ---------
Net Income.................... $ 147,654 $ 125,152 18.0
========= =========
Per Share:
Income before Extraordinary
Item and Accounting Change $ 0.93 $ 0.77 20.8
Net Income.................. 0.93 0.77 20.8
Net Interest Margin......(pct.) 4.16 4.55
Stock Data (per share):
Cash Dividends Declared....... $ 0.30 $ 0.27 11.1
Book Value (period end)....... 20.82 19.80 5.2
Market Value:
Period End................. 28 5/8 34 1/4
High....................... 33 34 3/8
Low........................ 28 3/8 31 3/8
Average Shares Outstanding.... 157,667 161,278
Financial and Capital Ratios:
Return on Average Shareholders'
Equity:
Before Extraordinary Item and
Accounting Change..(pct.) 17.97 15.98
After Extraordinary Item and
Accounting Change..(pct.) 17.97 15.98
Return on Average Assets:
Before Extraordinary Item and
Accounting Change..(pct.) 1.31 1.26
After Extraordinary Item and
Accounting Change..(pct.) 1.31 1.26
Capital Ratios (period end):
Tier 1 Capital Ratio..(pct.) 8.63 9.08
Total Capital Ratio...(pct.) 12.18 13.64
Tier 1 Leverage Ratio (pct.) 6.82 7.21
Nine Months Ended September 30
------------------------------
Pct.
1994 1993 Change
---------- ---------- -------
(in thousands,
except per share data)
Operating Results:
Net Interest Income........... $1,202,439 $1,175,425 2.3
Provision for Possible
Credit Losses.............. 31,946 99,833 (68.0)
Non-Interest Income........... 409,295 429,281 (4.7)
Non-Interest Expenses......... 977,120 976,825 0.0
---------- ----------
Income before Income Taxes.... 602,668 528,048 14.1
Income Tax Expense............ 196,914 165,167 19.2
---------- ----------
Income before Extraordinary
Item and Accounting Change.. 405,754 362,881 11.8
Extraordinary Item
(Redemption of Debt)........ (7,730) -
Cumulative Effect of
Accounting Change (SFAS
Nos. 112 and 109,
respectively)............... (7,885) 3,950
---------- ----------
Net Income.................... $ 390,139 $ 366,831 6.4
========== ==========
Per Share:
Income before Extraordinary
Item and Accounting Change $ 2.54 $ 2.24 13.4
Net Income.................. 2.44 2.27 7.5
Net Interest Margin......(pct.) 4.25 4.52
Stock Data (per share):
Cash Dividends Declared....... $ 0.90 $ 0.81 11.1
Book Value (period end)....... 20.82 19.80 5.2
Market Value:
Period End................. 28 5/8 34 1/4
High....................... 33 36 3/8
Low........................ 27 1/4 29 5/8
Average Shares Outstanding.... 159,684 161,281
Financial and Capital Ratios:
Return on Average Shareholders'
Equity:
Before Extraordinary Item and
Accounting Change..(pct.) 16.32 15.77
After Extraordinary Item and
Accounting Change..(pct.) 15.75 15.92
Return on Average Assets:
Before Extraordinary Item and
Accounting Change..(pct.) 1.25 1.21
After Extraordinary Item and
Accounting Change..(pct.) 1.20 1.23
Capital Ratios (period end):
Tier 1 Capital Ratio..(pct.) 8.63 9.08
Total Capital Ratio...(pct.) 12.18 13.64
Tier 1 Leverage Ratio.(pct.) 6.82 7.21
Balance Sheet Data:
September 30 June 30 September 30
1994 1994 1993
------------ ------------ ------------
(in thousands)
Total Assets.................. $45,566,302 $45,232,112 $40,383,113
Total Earning Assets.......... 41,503,314 41,332,654 36,941,137
Total Loans and Leases........ 27,885,552 26,849,896 25,255,410
Total Goodwill................ 249,949 254,848 268,871
Total Deposits................ 30,503,110 30,943,386 29,355,065
Total Common Shareholders'
Equity...................... 3,254,587 3,250,143 3,179,606
Credit Quality:
September 30 June 30 September 30
1994 1994 1993
------------ ------------ ------------
(in thousands)
Allowance for Possible
Credit Losses.............. $ 423,700 $ 423,624 $ 422,964
Nonperforming Loans........... 177,547 225,577 307,071
Other Real Estate Owned....... 27,962 26,263 53,572
Total Nonperforming Assets.... 205,509 251,840 360,643
Net Loan Charge-offs
(quarter-ended)............ 7,861 8,503 23,241
Ratios:
Nonperforming Loans
to Total Loans......(pct.) 0.64 0.84 1.22
Allowance to Total
Loans...............(pct.) 1.52 1.58 1.67
Allowance to Nonperforming
Loans...............(pct.) 238.64 187.80 137.74
Net Loan Charge-offs
(annualized)........(pct.) 0.12 0.13 0.37
<PAGE>
Page 12
SUMMARY OF OPERATIONS
- ---------------------
Net Income for the third quarter of 1994 amounted to a record $147,654,000,
or $.93 per share. This was 18 percent higher than the $125,152,000, or $.77
per share, earned in the third quarter of 1993 and 9 percent higher than the
$135,224,000, or $.84 per share, earned in the second quarter of 1994.
For the first nine months of 1994, Net Income amounted to $390,139,000, or
$2.44 per share. Income before the effects of an extraordinary item and an
accounting change was $405,754,000, or $2.54 per share. Net Income for the
first nine months of 1993 was $366,831,000, or $2.27 per share, and income
before the effect of an accounting change was $362,881,000, or $2.24 per
share.
An extraordinary charge of $7,730,000 (net of income taxes), or five cents per
share, was incurred in the first quarter of 1994, 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 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, Financial Accounting
Standards 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 Year-to-Date
---------------------------------------------------------- ------------ ------------
September June March December September
1994 1994 1994 1993 1993 1994 1993
---------- ---------- ---------- ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Interest Income - Including Taxable
Equivalent Adjustment................. $ 778,523 $ 719,742 $ 651,998 $ 655,717 $ 676,236 $ 2,150,263 $ 2,039,466
Interest Expense....................... (348,286) (296,990) (253,919) (256,106) (263,109) (899,195) (808,607)
---------- ---------- ---------- ---------- ---------- ------------ ------------
Net Interest Income - Taxable Equivalent 430,237 422,752 398,079 399,611 413,127 1,251,068 1,230,859
Taxable Equivalent Adjustment.......... (15,446) (16,364) (16,819) (16,929) (17,936) (48,629) (55,434)
---------- ---------- ---------- ---------- ---------- ------------ ------------
Net Interest Income.................... 414,791 406,388 381,260 382,682 395,191 1,202,439 1,175,425
Provision For Possible Credit Losses... (7,907) (8,579) (15,460) (19,841) (24,853) (31,946) (99,833)
Securities Gains(Losses)............... 740 (85) 390 6,470 55 1,045 2,858
Other Non-Interest Income.............. 135,857 134,033 138,360 149,632 141,063 408,250 426,423
Compensation........................... (181,728) (178,762) (176,748) (178,926) (181,942) (537,238) (524,818)
Other Non-Interest Expenses............ (140,764) (153,547) (145,571) (166,089) (147,723) (439,882) (452,007)
---------- ---------- ---------- ---------- ---------- ------------ ------------
Income Before Taxes.................... 220,989 199,448 182,231 173,928 181,791 602,668 528,048
Applicable Taxes....................... (73,335) (64,224) (59,355) (54,968) (56,639) (196,914) (165,167)
---------- ---------- ---------- ---------- ---------- ------------ ------------
Income before Extraordinary Item and
Cumulative Effect of Accounting Change 147,654 135,224 122,876 118,960 125,152 405,754 362,881
Extraordinary Item.................... - - (7,730) - - (7,730) -
Cumulative Effect of Accounting Change - - (7,885) - - (7,885) 3,950
---------- ---------- ---------- ---------- ---------- ------------ ------------
Net Income............................. $ 147,654 $ 135,224 $ 107,261 $ 118,960 $ 125,152 $ 390,139 $ 366,831
========== ========== ========== ========== ========== ============ ============
Income Per Share:
Income before Extraordinary Item and
Accounting Change................... $ 0.93 $ 0.84 $ 0.77 $ 0.74 $ 0.77 $ 2.54 $ 2.24
Net Income............................ $ 0.93 $ 0.84 $ 0.67 $ 0.74 $ 0.77 $ 2.44 $ 2.27
Average Shares Outstanding............. 157,667 160,322 161,099 161,173 161,278 159,684 161,281
Average Earning Assets (in millions)... $ 41,242 $ 39,540 $ 37,127 $ 36,398 $ 36,209 $ 39,318 $ 36,366
Net Interest Margin.................... 4.16% 4.28% 4.31% 4.38% 4.55% 4.25% 4.52%
</TABLE>
<PAGE>
Page 13
Net Interest Income
Taxable equivalent net interest income in the third quarter of 1994 was $430.2
million, an increase of $17.1 million, or 4.1 percent, compared with the third
quarter of last year. The increase was attributable to an increase of $5.0
billion, or 13.9 percent, in average earning assets, partially offset by lower
interest margin, which decreased 39 basis points from 4.55 percent in the
third quarter of 1993 to 4.16 percent in the third quarter of 1994.
For the first nine months of 1994, tax equivalent net interest income grew
$20.2 million, or 1.6 percent over the first three quarters of 1993. The
increase was attributable to a $3.0 billion, or 8.1 percent, increase in
average earning assets, partially offset by a 27 basis point decrease in the
interest margin.
Further detail on average balances, yields and rates is shown in Table 7.
Provision for Possible Credit Losses
The Provision for Possible Credit Losses in the third quarter of 1994 amounted
to $7.9 million, down from the $24.9 million in the same period one year ago,
reflecting continuing improvement in loan credit quality.
On a year-to-date basis, the provision was $31.9 million in 1994 and $99.8
million in 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
Over the last five quarters securities gains or losses were insignificant.
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 amounted to $135.9 million in the third quarter of
1994 versus $141.1 million in the comparable period of 1993, a decrease of
$5.2 million, or 3.7 percent. For the first nine months of 1994 and 1993,
Other Non-Interest Income totaled $408.3 million and $426.4 million,
respectively, a decrease of $18.2 million, or 4.3 percent.
Table 2 and its related discussion provide additional details of the
composition of Other Non-Interest Income.
Compensation
In the third quarter of 1994, compensation expense was $181.7 million, a
decrease of $0.2 million compared with the third quarter of 1993.
Compensation expense for the first three quarters of 1994 totaled $537.2
million, 2.4 percent over the comparable period of 1993. Salaries increased
$6.7 million, or 1.7 percent, attributable to a 4.5 percent average merit
increase, partially offset by a 1.6 percent decrease in average full-time
equivalent employment. Benefits expense increased $5.7 million, or 4.6
percent.
<PAGE>
Page 14
Other Non-Interest Expenses
Other Non-Interest Expenses totaled $140.8 million for the third quarter of
1994 compared with $147.7 million for the same quarter one year ago, which
represents a decrease of 4.7 percent. On a year-to-date basis, Other
Non-Interest Expenses declined $12.1 million, or 2.7 percent. Factors
influencing period-to-period changes are discussed in connection with Table
3.
Taxes on Income
Income tax expense was $73.3 million in the third quarter of 1994 versus $56.6
million in the same quarter last year. The third quarter of 1993 included the
impact of a change in the federal income tax rate from 34 percent to 35
percent retroactive to January 1, 1993. The one percent rate change increased
income tax expense by $4.3 million, however, this was more than offset by a
$4.8 million income tax benefit related to a revaluation of the net deferred
income tax receivable due to the rate change.
For the first nine months of 1994, income tax expense totaled $196.9 million,
an increase of $31.7 million over the same period of last year. The
Corporation's effective tax rate, when computed after adding the taxable
equivalent adjustment to both pre-tax income and income tax expense, and
excluding the $4.8 million tax benefit, was 38 percent for the first nine
months of 1994 and 39 percent the first three quarters of 1993.
<PAGE>
Page 15
OTHER NON-INTEREST INCOME
- -------------------------
Deposit Service Charges of $40.8 million in the third quarter of 1994 and
$120.5 million in the first nine months of 1994 decreased 1.5 percent and 3.7
percent, respectively, compared with the same periods of 1993. The decreases
were attributable to a higher credit given for balances maintained on business
accounts.
Trust fees for the third quarter of 1994 and the first three quarters of 1994
increased 6.9 percent and 7.0 percent, respectively, over the comparable
periods one year ago.
The decrease in Profit on Mortgage Sales in 1994 was attributable to changes
in interest rates, lower mortgage refinancing volumes and the retention of
more mortgages in the portfolio.
Significant items in Other Income for the first nine months of 1994 include
an increase in the profit on the sale of property of $4.1 million in 1994
versus 1993, and $5.8 million attributable to the return on the Corporation's
investment in corporate owned life insurance. The 1993 amount included a gain
of $9.6 million on the sale of credit card receivables.
<TABLE>
<CAPTION>
Table 2
Other Non-Interest Income
(in thousands)
Quarter Ended Year-to-Date
---------------------------------------------------------- ----------------------
Sept. June March Dec. Sept.
1994 1994 1994 1993 1993 1994 1993
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Deposit Service Charges.......... $ 40,752 $ 38,790 $ 40,979 $ 40,203 $ 41,373 $ 120,521 $ 125,213
Trust Income..................... 39,400 39,803 38,110 39,904 36,860 117,313 109,648
Charge Card Merchant
Processing Fees............... 9,400 8,715 7,689 9,167 10,118 25,804 21,769
Data Processing Fees............. 8,416 7,830 7,214 7,372 8,017 23,460 21,491
Letter of Credit Fees............ 5,583 5,586 4,692 5,649 5,610 15,861 14,909
Other Domestic and
International Fees............ 4,715 4,643 5,469 5,476 5,293 14,827 16,558
Mortgage Loan Servicing.......... 4,451 4,581 4,544 5,156 4,079 13,576 14,241
Insurance Premiums
and Commissions............... 3,552 3,886 4,341 4,600 3,697 11,779 12,326
Retail Banking Fees.............. 3,583 3,380 3,299 3,082 3,688 10,262 10,307
Foreign Exchange
and Translation............... 3,219 3,138 2,965 2,927 3,177 9,322 9,641
Rental Income.................... 2,574 2,630 2,656 2,572 2,655 7,860 7,605
Mutual Fund and Annuity
Product Fees.................. 1,742 1,506 1,742 2,311 2,354 4,990 6,557
OREO Gains....................... 1,172 1,892 1,823 8,037 1,784 4,887 5,815
Securities Trading and
Underwriting.................. 1,278 1,434 1,486 1,476 1,807 4,198 6,195
Profit(Loss) on Mortgage Sales... 112 (193) 3,863 9,306 9,262 3,782 21,537
Charge Card Fees................. 652 976 688 1,496 989 2,316 3,618
Other............................ 5,256 5,436 6,800 898 300 17,492 18,993
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total Other Non-Interest
Income..................... $ 135,857 $ 134,033 $ 138,360 $ 149,632 $ 141,063 $ 408,250 $ 426,423
========== ========== ========== ========== ========== ========== ==========
</TABLE>
<PAGE>
Page 16
OTHER NON-INTEREST EXPENSES
- ---------------------------
Occupancy expense for the first nine months of 1994 totaled $89.3 million,
which was $1.5 million, or 1.7 percent, higher than the same period last year.
Equipment expense amounted to $67.4 million in the first three quarters of
1994, an increase of $5.0 million, or 8.0 percent, compared with the first
nine months of 1993.
Amortization of Intangibles decreased $6.9 million in the first nine months
of 1994 compared with the same period last year. Most of the decrease was
attributable to a higher level of amortization of purchased mortgage servicing
rights during 1993. The remaining amount of unamortized mortgage servicing
rights at September 30, 1994, was $2.6 million.
Stationery and Supplies expense in the third quarter of 1994 and the first
three quarters of 1994 decreased $1.8 million and $4.5 million, respectively,
compared with the corresponding periods one year ago. Most of the decrease
was attributable to the Corporation's emphasis on tight expense control.
OREO Expense for year-to-date September 1994 totaled $3.4 million, a decrease
of $6.2 million compared with the same period last year. The decrease
resulted primarily from lower write-downs on properties in the 1994 period.
<TABLE>
<CAPTION>
Table 3
Other Non-Interest Expenses
(in thousands)
Quarter Ended Year-to-Date
---------------------------------------------------------- ----------------------
Sept. June March Dec. Sept.
1994 1994 1994 1993 1993 1994 1993
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Occupancy............................. $ 29,242 $ 29,968 $ 30,081 $ 30,271 $ 28,837 $ 89,291 $ 87,792
Equipment............................. 21,842 23,597 21,954 21,858 20,309 67,393 62,422
FDIC & Other Regulatory
Assessments........................ 16,631 16,741 16,675 16,927 16,868 50,047 51,839
Telephone............................. 7,687 9,214 6,852 7,999 6,627 23,753 21,175
Purchased Services.................... 7,255 7,577 7,138 7,559 6,824 21,970 20,069
Professional Services................. 6,449 7,567 6,433 9,034 7,580 20,449 20,818
Amortization of Intangibles........... 6,415 6,577 6,524 9,328 9,291 19,516 26,414
Operating and Other Taxes............. 5,699 6,016 6,866 6,352 5,653 18,581 17,277
Marketing............................. 5,351 5,995 3,946 7,246 4,569 15,292 14,779
Postage............................... 5,168 4,719 5,274 5,396 4,635 15,161 15,262
Stationery and Supplies............... 3,803 4,269 4,716 5,712 5,576 12,788 17,246
Travel and Entertainment.............. 3,913 4,025 3,655 5,667 4,587 11,593 12,633
Public Relations...................... 2,968 3,082 2,586 2,777 2,725 8,636 8,357
Loan and Credit Charges............... 1,841 2,811 2,067 2,500 1,855 6,719 6,282
Armored Carrier and Cartage........... 2,084 2,198 1,819 2,105 1,919 6,101 5,983
Federal Reserve Service Charges....... 1,913 2,060 1,958 1,845 2,124 5,931 6,566
OREO Expense.......................... 950 1,440 970 2,000 468 3,360 9,582
Other Insurance....................... 938 961 913 970 1,451 2,812 3,226
Other................................. 10,615 14,730 15,144 20,543 15,825 40,489 44,285
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total Other Non-Interest Expenses.. $ 140,764 $ 153,547 $ 145,571 $ 166,089 $ 147,723 $ 439,882 $ 452,007
========== ========== ========== ========== ========== ========== ==========
</TABLE>
<PAGE>
Page 17
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 September 30, 1994, were $45.6
billion, an increase of $4.8 billion since year-end 1993, principally due to
increases of $2.2 billion and $2.3 billion in investment securities and loans
and leases, respectively.
The $2.2 billion increase in Investment Securities since year-end 1993 was
primarily attributable to the acquisition of mortgage-backed U.S. Agency
Securities during the first three quarters of 1994.
Total Loans and Leases increased $2.3 billion since December 31, 1993, almost
one-half of which was attributable to commercial loan growth. Additionally,
consumer loans rose $663.5 million, or 9.8 percent, and residential mortgages
increased $626.6 million, or 24.5 percent. Mortgages Held For Sale declined
$214.9 million due to lower mortgage refinancing activity and the retention
of more mortgages in the portfolio.
Investment property real estate loan commitments amounted to $1,993.7 million,
of which $1,590.8 million were outstanding at September 30, 1994, and $53.0
million were classified as nonperforming.
As of September 30, 1994, real estate construction loan commitments totaled
$1,373.6 million, of which $785.5 million were outstanding and $16.3 million
were classified as nonperforming.
Other Assets increased $388.9 million since year-end 1993. Approximately $200
million of the increase related to an investment in corporate owned life
insurance.
The $4.8 billion increase in Total Liabilities since year-end 1993 was
comprised of increases in Short-Term Borrowings, Long-Term Debt, and deposit
liabilities of $3.1 billion, $0.9 billion, and $0.7 billion, respectively.
The increase of $682.0 million in total deposits was primarily attributable
to an increase of $1.6 billion in Foreign Office Deposits, partially offset
by decreases in Money Market Accounts, Demand, and Savings of $450.7 million,
$318.4 million, and $305.9 million, respectively. Time Deposits increased
$129.5 million since December 31, 1993.
The increase in Long-Term Debt was attributable to an increase of $1.2 billion
in bank notes with maturities greater than one year 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 September 1994, an increase of
$6.0 million since year-end 1993. The increase in the Unrealized Loss on
Available-for-Sale Securities since December 31, 1993, is due to temporary
declines in the fair value of these securities that resulted directly from the
general increase in interest rates in the financial markets. As management
does not intent to dispose of any of the affected securities in the
foreseeable future, it is not probable that the Corporation will ultimately
realize the declines in value.
<PAGE>
Page 18
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.
<TABLE>
<CAPTION>
Table 4
Analysis of Capital
(dollars in thousands)
Sept. 30 June 30 March 31 Dec. 31 Sept. 30
1994 1994 1994 1993 1993
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Capital Components:
Tier 1 Capital:
Common Shareholders' Equity........ $ 3,254,587 $ 3,250,143 $ 3,264,699 $ 3,248,599 $ 3,179,606
Intangible Assets and Other
Adjustments................... (159,834) (187,852) (224,383) (281,507) (290,557)
------------ ------------ ------------ ------------ ------------
Total Tier 1 Capital............. $ 3,094,753 $ 3,062,291 $ 3,040,316 $ 2,967,092 $ 2,889,049
============ ============ ============ ============ ============
Total Capital:
Common Shareholders' Equity........ $ 3,254,587 $ 3,250,143 $ 3,264,699 $ 3,248,599 $ 3,179,606
Qualifying Allowance for Possible
Credit Losses................. 423,700 423,624 416,050 406,618 398,047
Qualifying Long-Term Debt.......... 852,000 852,000 854,000 1,053,985 1,053,985
Intangible Assets and Other
Adjustments................... (164,006) (191,898) (227,709) (284,819) (290,691)
------------ ------------ ------------ ------------ ------------
Total Capital.................... $ 4,366,281 $ 4,333,869 $ 4,307,040 $ 4,424,383 $ 4,340,947
============ ============ ============ ============ ============
Ratios (End of Period):
Risk-Based Capital Ratios:
Tier 1 Capital Ratio............... 8.63 % 8.85 % 9.14 % 9.13 % 9.08 %
Total Capital Ratio................ 12.18 % 12.53 % 12.94 % 13.61 % 13.64 %
Tier 1 Leverage Ratio............... 6.82 % 6.80 % 7.12 % 7.33 % 7.21 %
</TABLE>
<PAGE>
Page 19
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 September 30, 1994, of $423.7 million was equal to 1.52
percent of total loans and leases, compared with 1.66 percent at December 31,
1993, and 1.67 percent at September 30, 1993. Although the Allowance has
stayed at relatively the same level over the last five quarters, the amount
of nonperforming loans has declined over the same period, generating an
improvement in the Allowance as a percent of nonperforming loans and leases
to 238.64 percent as of September 30, 1994, compared with 157.28 percent at
year-end 1993 and 137.74 percent at September 30, 1993.
The annualized net charge-off ratio for the third quarter of 1994 and first
nine months of 1994 was 0.12 percent and 0.16 percent, respectively,
representing a significant decrease from the 0.37 percent and 0.50 percent,
respectively, in the comparable periods of 1993.
Nonperforming loans and leases totaled $177.5 million as of September 30,
1994, compared with $225.6 million at June 30, 1994, $269.0 million as of
year-end 1993, and $307.1 million at the end of the third quarter of 1993.
<TABLE>
<CAPTION>
Table 5
(dollars in thousands)
Allowance for Possible Credit Losses
Quarter Ended Year-to-Date
------------------------------------------------- ------------------
September June March December September
1994 1994 1994 1993 1993 1994 1993
--------- --------- --------- --------- --------- --------- --------
Summary of Transactions:
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at Beginning of Period.....$423,624 $423,410 $423,030 $422,964 $421,505 $423,030 $417,764
Provision for Credit Losses........ 7,907 8,579 15,460 19,841 24,853 31,946 99,833
Translation Adjustment............. 30 138 290 (16) (153) 458 133
Charge-Offs........................ (25,395) (30,881) (31,044) (53,243) (47,116) (87,320) (152,858)
Recoveries......................... 17,534 22,378 15,674 33,484 23,875 55,586 58,092
--------- --------- --------- --------- --------- --------- ---------
Net Charge-Offs................. (7,861) (8,503) (15,370) (19,759) (23,241) (31,734) (94,766)
--------- --------- --------- --------- --------- --------- ---------
Balance at End of Period...........$423,700 $423,624 $423,410 $423,030 $422,964 $423,700 $422,964
========= ========= ========= ========= ========= ========= =========
Net Loan Charge-Offs by Category:
Commercial and Foreign............. ($2,397) ($3,709) ($9,919) ($12,602) ($8,077) ($16,025) ($53,177)
Real Estate Construction........... 758 (243) 904 1,012 (7,641) 1,419 (20,366)
Residential Mortgage............... (60) (35) (175) (47) (96) (270) (29)
Consumer........................... (6,256) (4,400) (5,680) (7,898) (6,971) (16,336) (20,056)
Lease Financing.................... 94 (116) (500) (224) (456) (522) (1,138)
--------- --------- --------- --------- --------- --------- ---------
Total Net Charge-Offs........... ($7,861) ($8,503) ($15,370) ($19,759) ($23,241) ($31,734) ($94,766)
========= ========= ========= ========= ========= ========= =========
Net Charge-Off Ratio (Annualized) 0.12% 0.13% 0.24% 0.31% 0.37% 0.16% 0.50%
Allowance for Possible Credit Losses as a Percent of:
Total Loans and Leases.......... 1.52% 1.58% 1.64% 1.66% 1.67% 1.52% 1.67%
Nonperforming Loans and
Leases*.................... 238.64% 187.80% 170.18% 157.28% 137.74% 238.64% 137.74%
Analysis of Nonperforming Assets
Sept. 30 June 30 March 31 Dec. 31 Sept. 30
1994 1994 1994 1993 1993
Loans: --------- --------- --------- --------- ---------
Non-Accrual.....................$177,491 $225,495 $248,690 $265,699 $306,916
Restructured*................... 56 82 107 3,268 155
--------- --------- --------- --------- ---------
Total Loans................... 177,547 225,577 248,797 268,967 307,071
Other Real Estate Owned............ 27,962 26,263 35,583 44,014 53,572
--------- --------- --------- --------- ---------
Total Nonperforming Assets....$205,509 $251,840 $284,380 $312,981 $360,643
========= ========= ========= ========= =========
Nonperforming Assets* as a Percent of:
Total Loans and Leases.......... 0.74% 0.94% 1.10% 1.22% 1.43%
Allowance for Possible
Credit Losses................. 48.50% 59.45% 67.16% 73.99% 85.27%
*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..... $45,984 $40,627 $36,950 $40,618 $40,907
</TABLE>
<PAGE>
Page 20
ORGANIZATIONAL PERFORMANCE
- --------------------------
Table 6 presents performance data and other information organized by the three
major geographical banking markets serviced by the Corporation.
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
five million of its treasury shares, acquired for this purpose, 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 ($ millions)............. 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
For the Quarter Ended June 30, 1994
- ------------------------------------------------
Net Income...................................... $ 95,056 $ 24,271 $ 17,390
Average Earning Assets ($ millions)............. 25,986 9,113 4,459
Return on Assets................................ 1.34 % 0.96 % 1.45 %
Full-Time Equivalent Employees.................. 8,580 5,224 1,963
For the Quarter Ended September 30, 1994
Net Income...................................... $ 101,425 $ 28,593 $ 18,372
Average Earning Assets ($ millions)............. 27,814 9,182 4,773
Return on Assets................................ 1.34 % 1.12 % 1.43 %
Full-Time Equivalent Employees.................. 8,551 5,157 1,942
</TABLE>
<PAGE>
Page 21
<TABLE>
<CAPTION>
Average Balances, Yields and Rates
The following table presents average asset and liability balances and related yields and rates for the latest five quarters and the
year-to-date periods.
Table 7
Average Balances, Yields and Rates
(Yields are on a fully taxable equivalent basis.)
(dollars in millions)
Third Quarter Second Quarter First Quarter Fourth Quarter Third Quarter
1994 1994 1994 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....$ 682 5.37% $ 655 4.90% $ 645 4.40% $ 576 4.97% $ 673 4.79%
Federal Funds Sold and
Resale Agreements.......... 245 4.62 188 4.09 114 3.37 176 3.11 203 3.23
Money Market Investments..... - - - - - - 34 3.99 35 4.27
Trading Account Securities... 159 4.80 131 4.67 92 3.88 140 3.56 172 3.62
Investment Securities:
U.S. Treasury............... 1,231 5.55 1,615 5.33 1,583 5.30 1,518 5.36 1,559 5.51
U.S. Government Agencies.... 9,938 6.56 8,706 6.47 7,565 6.44 6,802 6.60 6,472 6.90
States and Political
Subdivisions.............. 1,459 9.44 1,476 8.78 1,492 8.21 1,503 8.43 1,519 8.64
Other....................... 332 5.98 346 3.87 389 4.72 362 4.52 428 4.33
-------- ------ -------- ------ --------- ------ --------- ------ -------- ------
Total Investment Securities.. 12,960 6.77 12,143 6.52 11,029 6.45 10,185 6.62 9,978 6.84
-------- ------ -------- ------ --------- ------ --------- ------ -------- ------
Loans and Leases:
Commercial.................. 14,549 7.88 14,378 7.51 13,673 6.97 13,699 6.83 13,685 7.26
Real Estate Construction.... 763 7.88 755 7.60 754 7.19 751 7.94 811 7.04
Residential Mortgage........ 3,084 7.55 2,906 7.53 2,759 7.46 2,739 7.99 2,763 8.11
Consumer.................... 7,313 8.59 6,981 8.51 6,751 8.61 6,703 8.78 6,567 9.05
Lease Financing............. 314 9.52 291 10.14 284 10.25 273 10.49 260 11.42
Foreign..................... 1,173 5.93 1,112 5.93 1,026 5.70 1,122 5.73 1,062 6.01
-------- ------ -------- ------ --------- ------ --------- ------ -------- ------
Total Loans and Leases....... 27,196 7.97 26,423 7.74 25,247 7.46 25,287 7.50 25,148 7.81
-------- ------ -------- ------ --------- ------ --------- ------ -------- ------
Total Earning Assets......... 41,242 7.52% 39,540 7.29% 37,127 7.08% 36,398 7.17% 36,209 7.43%
====== ====== ====== ====== ======
Cash and Due From Banks...... 2,328 2,365 2,285 2,766 2,204
Other Assets................. 2,074 2,031 1,931 1,573 1,772
Less Allowance for Possible
Credit Losses.............. (434) (436) (433) (435) (437)
-------- -------- -------- -------- --------
Total Assets.................$45,210 $43,500 $40,910 $40,302 $39,748
======== ======== ======== ======== ========
Liabilities and Shareholders'
Equity:
Interest-Bearing Deposits:
Savings...................$ 7,797 2.34% $ 7,933 2.29% $ 7,854 2.29% $ 7,624 2.42% $ 7,346 2.50%
Money Market Accounts..... 5,208 3.22 5,345 2.79 5,516 2.68 5,683 2.73 5,885 2.78
Time...................... 9,205 4.48 8,908 4.24 7,796 4.30 8,471 4.33 8,388 4.49
Foreign Office............ 2,981 4.71 2,803 4.37 2,035 3.96 1,707 4.24 1,729 4.35
-------- ------ -------- ------ --------- ------ --------- ------ -------- ------
Total Interest-Bearing
Deposits................... 25,191 3.59 24,989 3.33 23,201 3.21 23,485 3.31 23,348 3.42
-------- ------ -------- ------ --------- ------ --------- ------ -------- ------
Short-Term Borrowings........ 7,182 4.67 6,331 3.95 5,647 3.26 4,739 3.12 5,141 3.13
Long-Term Debt............... 2,375 6.08 1,821 6.02 1,615 6.20 1,402 6.47 1,320 6.45
-------- ------ -------- ------ --------- ------ --------- ------ -------- ------
Total Interest-Bearing
Liabilities................ 34,748 3.98% 33,141 3.59% 30,463 3.37% 29,626 3.43% 29,809 3.50%
====== ====== ====== ====== ======
Demand Deposits.............. 6,297 6,232 6,217 6,565 5,966
Other Liabilities............ 877 827 909 850 841
Shareholders' Equity......... 3,288 3,300 3,321 3,261 3,132
-------- -------- -------- -------- --------
Total Liabilities and
Shareholders' Equity.......$45,210 $43,500 $40,910 $40,302 $39,748
======== ======== ======== ======== ========
Interest Rate Spread......... 3.54% 3.70% 3.71% 3.74% 3.93%
====== ====== ====== ====== ======
Net Interest Margin.......... 4.16% 4.28% 4.31% 4.38% 4.55%
====== ====== ====== ====== ======
The FTE adjustments are computed using a combined federal and state income tax rate of 36.4% in 1994 and 1993.
The combined amounts for Investment Securities Available-for-Sale and Held-to-Maturity for 1994 are based on their
respective carrying values.
</TABLE>
<PAGE>
Page 22
<TABLE>
<CAPTION>
Year-to-Date Year-to-Date
September 30, 1994 September 30, 1993
------------------- -------------------
Average Yield/ Average Yield/
Balance Rate Balance Rate
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Assets:
Interest-Bearing Deposits....$ 660 4.90% $ 684 5.27%
Federal Funds Sold and
Resale Agreements.......... 183 4.18 143 3.23
Money Market Investments..... - - 57 4.16
Trading Account Securities... 128 4.52 150 3.79
Investment Securities:
U.S. Treasury............... 1,475 5.38 1,619 5.53
U.S. Government Agencies.... 8,745 6.49 6,588 7.18
States and Political
Subdivisions.............. 1,476 8.81 1,555 8.65
Other....................... 355 4.84 515 4.67
-------- ------ -------- ------
Total Investment Securities.. 12,051 6.59 10,277 7.01
-------- ------ -------- ------
Loans and Leases:
Commercial.................. 14,204 7.47 13,696 7.08
Real Estate Construction.... 757 7.56 834 7.06
Residential Mortgage........ 2,918 7.52 2,799 8.34
Consumer.................... 7,017 8.57 6,422 9.28
Lease Financing............. 296 9.95 253 11.68
Foreign..................... 1,104 5.85 1,051 6.34
-------- ------ -------- ------
Total Loans and Leases....... 26,296 7.73 25,055 7.80
-------- ------ -------- ------
Total Earning Assets......... 39,318 7.30% 36,366 7.49%
====== ======
Cash and Due From Banks...... 2,326 2,222
Other Assets................. 2,012 1,733
Less Allowance for Possible
Credit Losses.............. (434) (433)
-------- --------
Total Assets.................$43,222 $39,888
======== ========
Liabilities and Shareholders'
Equity:
Interest-Bearing Deposits:
Savings...................$ 7,861 2.31% $ 7,126 2.56%
Money Market Accounts..... 5,355 2.90 5,997 2.83
Time...................... 8,642 4.35 8,917 4.60
Foreign Office............ 2,610 4.40 1,753 4.68
-------- ------ -------- ------
Total Interest-Bearing
Deposits................... 24,468 3.38 23,793 3.55
-------- ------ -------- ------
Short-Term Borrowings........ 6,392 4.02 5,080 3.13
Long-Term Debt............... 1,940 6.08 1,171 6.59
-------- ------ -------- ------
Total Interest-Bearing
Liabilities................ 32,800 3.66% 30,044 3.60%
====== ======
Demand Deposits.............. 6,249 5,940
Other Liabilities............ 870 832
Shareholders' Equity......... 3,303 3,072
-------- --------
Total Liabilities and
Shareholders' Equity.......$43,222 $39,888
======== ========
Interest Rate Spread......... 3.64% 3.89%
====== ======
Net Interest Margin.......... 4.25% 4.52%
====== ======
</TABLE>
<PAGE>
Page 23
RATE SENSITIVITY ANALYSIS
- -------------------------
To mitigate the potential impact on earnings of changes in interest rates, it
is the Corporation's policy that the cumulative asset or liability gap out to
one year may not exceed 10 percent of total earning assets, although
individual bank subsidiaries, other than Michigan, may exceed this level from
time to time with the approval of NBD Bancorp management. Positions are
monitored daily by management and reviewed monthly by the Board of Directors
for compliance with corporate policy.
The following table presents the Corporation's interest rate sensitivity as
of September 30, 1994, and indicates a net liability sensitive position of
$180 million, or 0.4 percent of total earning assets, within the one year
range. Within the six months range, the Corporation was net liability
sensitive $3.0 billion, or 7.3 percent of total earning assets.
<TABLE>
<CAPTION>
Rate Sensitivity of Earning Assets And Interest-Bearing Liabilities
(in millions)
1 2-3 4-6 7-12 1-5 Over 5
Month Months Months Months Years Years Total
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
As of September 30, 1994 :
Interest-Bearing Deposits.................. $ 280 $ 268 $ 65 $ 30 $ - $ - $ 643
Federal Funds Sold & Resale Agreements..... 163 - - - - - 163
Trading Account Securities................. 187 - - - - - 187
Investment Securities...................... 1,492 433 718 2,534 4,101 3,346 12,624
Loans - Domestic........................... 12,786 2,070 1,364 2,048 6,366 1,701 26,335
- Foreign............................ 596 308 127 81 92 11 1,215
Lease Financing............................ 13 22 30 57 206 8 336
------- ------- ------- ------- ------- ------- -------
Total Earning Assets.................. $ 15,517 $ 3,101 $ 2,304 $ 4,750 $ 10,765 $ 5,066 $ 41,503
------- ------- ------- ------- ------- ------- -------
Savings and Time Deposits.................. $ 5,450 $ 1,196 $ 1,502 $ 1,607 $ 5,522 $ 73 $ 15,350
Money Market Accounts...................... 4,420 - - - 691 - 5,111
Foreign Office Deposits.................... 3,236 328 107 22 - - 3,693
Short-Term Borrowings...................... 5,849 1,509 974 23 128 - 8,483
Long-Term Debt............................. 150 97 52 68 1,263 751 2,381
------- ------- ------- ------- ------- ------- -------
Total Interest-Bearing Liabilities.... $ 19,105 $ 3,130 $ 2,635 $ 1,720 $ 7,604 $ 824 $ 35,018
------- ------- ------- ------- ------- ------- -------
Net Interest Rate Swap Position............ $ 173 $ 772 $ (10) $ (197) $ (971) $ 233 $ -
------- ------- ------- ------- ------- ------- -------
Net Asset (Liability) Funding Gap.......... $ (3,415) $ 743 $ (341) $ 2,833 $ 2,190 $ 4,475 $ 6,485
------- ------- ------- ------- ------- ------- -------
Cumulative Net Asset (Liability)
Funding Gap............................. $ (3,415) $ (2,672) $ (3,013) $ (180) $ 2,010 $ 6,485 $ -
======= ======= ======= ======= ======= ======= =======
Note: Variable rate balances are reported based on their repricing dates. Repricing periods for fixed rate balances
are based on their contractual maturities, as well as the Corporation's historical experience of the impact of
interest rate changes on the prepayment and withdrawal patterns of certain assets and liabilities.
</TABLE>
<PAGE>
Page 24
RATE SENSITIVITY ANALYSIS (cont'd.)
- -------------------------
In addition to asset/liability gap management, simulations of the effect on
net interest income of changes in interest rate levels, of various magnitudes
and over various time periods, are periodically reviewed by management to
determine, given the probability of interest rate changes, whether changes in
the composition of the balance sheet are prudent. Based on the simulation
models, if interest rates were to gradually rise 100 basis points over a four-
month period, net interest income would be negatively affected by
approximately one percent for a 12 month period following September 30, 1994.
Conversely, if interest rates were to fall 100 basis points over a four-month
period, net interest income would be positively affected by an identical
amount.
The Corporation enters into various interest rate contracts to manage the
interest rate risk of its assets and liabilities. Such interest rate
contracts consist primarily of interest rate swaps. As of September 30, 1994,
there were $1.7 billion notional amount of interest rate swaps outstanding for
these purposes. Below is a table summarizing the activity of the rate
management swap portfolio for the first nine months of 1994.
Rate Management Swaps
(in millions)
As of January 1, 1994...... $ 1,381
Additions............... 1,117
Maturities.............. (803)
--------
As of September 30, 1994... $ 1,695
========
<PAGE>
Page 25
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 does not
expect the standard to have a material impact on the financial statements.
INTERNATIONAL BANKING
- ---------------------
At September 30, 1994, the Corporation had total foreign cross-border
outstandings of $0.8 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 September 30, 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 September 30, 1994, were $18.0 million
(excluding $98.9 million par value 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 26
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
- ------- --------------------------------
(a) Exhibits
(11) The Earnings Per Share Computation is attached
hereto.
(27) The Financial Data Schedule for the electronic
filing of this Form 10-Q is attached hereto.
(b) Reports on Form 8-K
None.
<PAGE>
Page 27
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
November 8, 1994
<TABLE>
<CAPTION>
Exhibit (11)
NBD Bancorp, Inc. Consolidated Earnings Per Share Computation
(in thousands except per share data)
Quarter Ended Nine Months Ended
September 30 September 30
----------------------- -----------------------
1994 1993 1994 1993
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Primary:
Net Income..................................... $ 147,654 $ 125,152 $ 390,139 $ 366,831
========== ========== ========== ==========
Average Shares Outstanding..................... 157,230 160,604 159,315 160,527
Adjustment:
Shares Applicable to Common Stock Options.... 437 674 369 754
---------- ---------- ---------- ----------
Shares Applicable to Primary Earnings.......... 157,667 161,278 159,684 161,281
========== ========== ========== ==========
Fully Diluted:
Net Income..................................... $ 147,654 $ 125,152 $ 390,139 $ 366,831
Adjustment:
Interest on 7.25% Convertible Debentures..... - 3,662 3,052 10,988
Tax Effect on Above.......................... - (1,355) (1,068) (3,846)
---------- ---------- ---------- ----------
Net Adjustment............................... - 2,307 1,984 7,142
---------- ---------- ---------- ----------
Adjusted Net Income Applicable
to Common Stock.............................. $ 147,654 $ 127,459 $ 392,123 $ 373,973
========== ========== ========== ==========
Average Shares Outstanding..................... 157,230 160,604 159,315 160,527
Adjustment:
Shares Applicable to Convertible Debentures.. - 6,578 1,759 6,579
Shares Applicable to Common Stock Options.... 437 737 397 806
---------- ---------- ---------- ----------
Shares Applicable to Fully Diluted Earnings.... 157,667 167,919 161,471 167,912
========== ========== ========== ==========
Per Share Data:
Primary-Net Income per Share of Common Stock..... $ 0.93 $ 0.77 $ 2.44 $ 2.27
========== ========== ========== ==========
Fully Diluted-Net Income per
Share of Common Stock.......................... $ 0.93 $ 0.76 $ 2.43 $ 2.23
========== ========== ========== ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1994
<CASH> 2,344,939
<INT-BEARING-DEPOSITS> 642,969
<FED-FUNDS-SOLD> 163,295
<TRADING-ASSETS> 187,474
<INVESTMENTS-HELD-FOR-SALE> 4,791,169
<INVESTMENTS-CARRYING> 7,832,855
<INVESTMENTS-MARKET> 7,757,535
<LOANS> 27,885,552
<ALLOWANCE> 423,700
<TOTAL-ASSETS> 45,566,302
<DEPOSITS> 30,503,110
<SHORT-TERM> 8,483,258
<LIABILITIES-OTHER> 757,595
<LONG-TERM> 2,381,382
<COMMON> 160,877
0
0
<OTHER-SE> 3,093,710
<TOTAL-LIABILITIES-AND-EQUITY> 45,566,302
<INTEREST-LOAN> 1,511,258
<INTEREST-INVEST> 556,179
<INTEREST-OTHER> 29,940
<INTEREST-TOTAL> 2,101,634
<INTEREST-DEPOSIT> 618,491
<INTEREST-EXPENSE> 899,195
<INTEREST-INCOME-NET> 1,202,439
<LOAN-LOSSES> 31,946
<SECURITIES-GAINS> 1,045
<EXPENSE-OTHER> 977,120
<INCOME-PRETAX> 602,668
<INCOME-PRE-EXTRAORDINARY> 405,754
<EXTRAORDINARY> (7,730)
<CHANGES> (7,885)
<NET-INCOME> 390,139
<EPS-PRIMARY> 2.44
<EPS-DILUTED> 2.43
<YIELD-ACTUAL> 4.25
<LOANS-NON> 177,491
<LOANS-PAST> 45,984
<LOANS-TROUBLED> 56
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 423,030
<CHARGE-OFFS> 87,320
<RECOVERIES> 55,586
<ALLOWANCE-CLOSE> 423,700
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 423,700
</TABLE>
