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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
DECEMBER 4, 1995
Date of Report (Date of earliest event reported)
FIRST CHICAGO NBD CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 1-7127 38-1984850
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(Name or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
ONE FIRST NATIONAL PLAZA
CHICAGO, ILLINOIS 60670
(Address of principal executive offices) (ZIP Code)
Registrant's Telephone Number, including area code : (312) 732-4000
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
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c) Exhibits
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Attached hereto or incorporated herein are the following Exhibits relating to
the merger of First Chicago Corporation, a Delaware corporation with and into
NBD Bancorp, Inc., a Delaware corporation:
Exhibit Description of
Number Exhibit
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4(a) Restated Certificate of Incorporation of the Registrant
4(b) By-Laws of the Registrant
23 Consent of Arthur Andersen LLP
27 Financial Data Schedules
99(a) Supplemental financial information as of December 31, 1994 and
1993, and for the three years in the period then ended.
99(b) Supplemental financial information as of September 30, 1995 and
1994 and for the three months and nine months then ended.
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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 hereunto duly authorized.
FIRST CHICAGO NBD CORPORATION
By: William J. Roberts
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Name: William J. Roberts
Title: Senior Vice President and Comptroller
Date: December 4, 1995
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EXHIBIT INDEX
Exhibit Description of
Number Exhibits
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4(a) Restated Certificate of Incorporation of the Registrant
4(b) By-Laws of the Registrant
23 Consent of Arthur Andersen LLP
27 Financial Data Schedules
99(a) Supplemental financial information as of December 31, 1994 and
1993, and for the three years in the period then ended.
99(b) Supplemental financial information as of September 30, 1995 and
1994 and for the three months and nine months then ended.
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Exhibit 4(a)
RESTATED CERTIFICATE OF INCORPORATION OF
NBD BANCORP, INC.
(As last amended effective October 28, 1993)
FIRST. The name of the corporation is
NBD Bancorp, Inc.
SECOND. The address of its registered office in the State of Delaware is
32, Loockerman Square, Suite L-100, Dover, Delaware 19901. The name of its
registered agent at such address if The Prentice-Hall Corporation System, Inc.
THIRD. The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.
FOURTH. The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 510,460,000 shares which shall be
divided into three classes as follows:
(a) 460,000 shares of Preferred Stock without par value of $1.00 per share;
(b) 10,000,000 shares of Preferred Stock without par value (the two classes
so provided for in the foregoing subparagraphs (a) and (b) being Preferred
Stock); and
(c) 500,000,000 shares of Common Stock of the par value of $1.00 per share
(Common Stock).
The designations, voting powers, preferences and relative, participating,
optional or other special rights, and qualifications, limitations or
restrictions of the above classes of stock and other general provisions relating
thereto shall be as follows:
PART I
PREFERRED STOCK
(a) Shares of Preferred Stock may be issued in one or more series at such
time or times and for such consideration or considerations as the Board of
Directors may determine. All shares of any one series shall be of equal rank
and identical in all respects except that the dates from which dividends accrue
or accumulate with respect thereto may vary.
(b) The Board of Directors is expressly authorized at any time, and from
time to time, to provide for the issuance of shares of Preferred Stock in one or
more series, with such voting powers, full or limited, or without voting powers,
and with such designations, preferences and relative, participating, optional or
other special rights, and qualifications, limitations or restrictions thereof,
as shall be stated and expressed in the resolution or resolutions providing for
the issue thereof adopted by the Board of Directors, and as are not stated and
expressed in this Certificate of Incorporation, or any amendment thereto,
including (but without limiting the generality of the foregoing) the following:
(i) The distinctive designation and number of shares comprising such
series, which number may (except where otherwise provided by the Board of
Directors in creating such series) be increased or decreased (but not below the
number of shares then outstanding) from time to time by action of the Board of
Directors.
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(ii) The dividend rate or rates on the shares of such series and the
relation which such dividends shall bear to the dividends payable on any other
class of capital stock or on any other series of Preferred Stock, the terms and
conditions upon which and the periods in respect of which dividends shall be
payable, whether and upon what conditions such dividends shall be cumulative
and, if cumulative, the date or dates from which dividends shall accumulate.
(iii) Whether the shares of such series shall be redeemable, and, if
redeemable, whether redeemable for cash, property or rights, including
securities of any other corporation, at the option of either the holder or the
corporation or upon the happening of a specified event, the limitations and
restrictions with respect to such redemption, the time or times when, the price
or prices or rate or rates at which, the adjustments with which and the manner
in which such shares shall be redeemable, including the manner of selecting
shares of such series for redemption if less than all shares are to be redeemed.
(iv) The rights to which the holders of shares of such series shall be
entitled, and the preferences, if any, over any other series (or of any other
series over such series), upon the voluntary or involuntary liquidation,
dissolution, distribution or winding up of the corporation, which rights may
vary depending on whether such liquidation, dissolution, distribution or winding
up is voluntary or involuntary, and, if voluntary, may vary at different dates.
(v) Whether the shares of such series shall be subject to the operation of
a purchase, retirement or sinking fund, and, if so, whether and upon what
conditions such purchase, retirement or sinking fund shall be cumulative or
noncumulative, the extent to which and the manner in which such fund shall be
applied to the purchase or redemption of the shares of such series for
retirement or to other corporate purposes and the terms and provisions relative
to the operation thereof.
(vi) Whether the shares of such series shall be convertible into or
exchangeable for shares of any other class or of any other series of any class
of capital stock of the corporation, and, if so convertible or exchangeable, the
price or prices or the rate or rates of conversion or exchange and the method,
if any, of adjusting the same, and any other terms and conditions of such
conversion or exchange.
(vii) The voting powers, full and/or limited, if any, of the shares of
such series, and whether and under what conditions the shares of such series
(along or together with the shares of one or more other series having similar
provisions) shall be entitled to vote separately as a single class, for the
election of one or more additional directors of the corporation in case of
dividend arrearages or other specified events, or upon other matters.
(viii) Whether the issuance of any additional shares of such series, or of
any shares of any other series, shall be subject to restrictions as to issuance,
or as to the powers, preferences or rights of any such other series.
(ix) Any other preferences, privileges and powers and relative,
participating, optional or other special rights, and qualifications, limitations
or restrictions of such series, as the Board of Directors may deem advisable and
as shall not be inconsistent with the provisions of this Certificate of
Incorporation.
(c) Unless and except to the extent otherwise required by law or provided
in the resolution or resolutions of the Board of Directors creating any series
of Preferred Stock pursuant to this Part I, the holders of the Preferred Stock
shall have no voting power with respect to any matter whatsoever. In no event
shall the Preferred Stock be entitled to more than one vote in respect of each
share of stock.
(d) Shares of Preferred Stock redeemed, converted, exchanged, purchased,
retired or surrendered to the corporation, or which have been issued and
reacquired in any manner, may, upon compliance with any
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applicable provisions of the General Corporation Law of the State of Delaware,
be given the status of authorized and unissued shares of Preferred Stock and may
be reissued by the Board of Directors as part of the series of which they were
originally a part or may be reclassified into and reissued as part of a new
series or as a part of any other series, all subject to the protective
conditions or restrictions of any outstanding series of Preferred Stock.
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PART II
COMMON STOCK
(a) Except as otherwise required by law or by any amendment to this
Certificate of Incorporation, each holder of Common Stock shall have one vote
for each share of stock held by him on all matters voted upon by the
stockholders.
(b) Subject to the preferential dividend rights, if any, applicable to
shares of Preferred Stock and subject to applicable requirements, if any, with
respect to the setting aside of sums for purchase, retirement or sinking funds
for Preferred Stock, the holders of Common Stock shall be entitled to receive,
to the extent permitted by law, such dividends as may be declared from time to
time by the Board of Directors.
(c) In the event of the voluntary or involuntary liquidation, dissolution,
distribution of assets or winding up of the corporation, after distribution in
full of the preferential amounts, if any, to be distributed to the holders of
shares of Preferred Stock, holders of Common Stock shall be entitled to receive
all of the remaining assets of the corporation of whatever kind available for
distribution to stockholders ratably in proportion to the number of shares of
Common Stock held by them respectively. The Board of Directors may distribute in
kind to the holders of Common Stock such remaining assets of the corporation, or
may sell, transfer, or otherwise dispose of all or any part of such remaining
assets to any corporation, trust or entity, or any combination thereof, and may
sell all or any part of the consideration so received and distribute any balance
thereof in kind to holders of Common Stock. The merger or consolidation of the
corporation into or with any other corporation, or the merger of any other
corporation into it, or any purchase or redemption of shares of stock of the
corporation of any class, shall not be deemed to be a dissolution, liquidation
or winding up of the corporation for the purposes of this paragraph.
(d) Such numbers of shares of Common Stock as may from time to time be
required for such purpose shall be reserved for issuance (i) upon conversion of
any shares of Preferred Stock or any obligation of the corporation convertible
into shares of Common Stock which is at the time outstanding or issuable upon
exercise of any options or warrants at the time outstanding and (ii) upon
exercise of any options or warrants at the time outstanding to purchase shares
of Common Stock.
PART III
GENERAL PROVISIONS
(a) At any meeting of stockholders, the presence in person or by proxy of
the holders of record of a majority of the outstanding shares of stock of the
corporation entitled to be voted at such meeting shall constitute a quorum for
all purposes, except as otherwise provided by this Certificate of Incorporation
or required by applicable law.
(b) Subject to the protective conditions or restrictions of any
outstanding series of Preferred Stock, any amendment to this Certificate of
Incorporation which shall increase or decrease the authorized capital stock of
any class or classes may be adopted by the affirmative vote of the holders of a
majority of the stock of the corporation entitled to vote.
(c) No holder of stock of any class of the corporation shall be entitled
as a matter of right to purchase or subscribe for any part of any unissued stock
of any class, or of any additional stock of any class of capital stock of the
corporation, or of any bonds, certificates of indebtedness, debentures, or other
securities, whether or not convertible into stock of the corporation, now or
hereafter authorized, but any such stock or other securities may
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be issued and disposed of pursuant to resolution by the Board of Directors to
such persons, firms, corporations or associations and upon such terms and for
such consideration (not less than the par value or stated value thereof) as the
Board of Directors in the exercise of its discretion may determine and may be
permitted by law without action by the stockholders. The Board of Directors may
provide for payment therefor to be received by the corporation in cash, personal
property, real property (or leases thereof) or services. Any and all shares of
stock so issued for which the consideration so fixed has been paid or delivered,
shall be deemed fully paid and not liable to any further call or assessment.
FIFTH. The names and mailing addresses of the incorporators are as
follows:
<TABLE>
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Name Mailing Address
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<S> <C>
Robert M. Surdam......................... 611 Woodward Avenue
Detroit, Michigan 48226
Charles T. Fisher III.................... 611 Woodward Avenue
Detroit, Michigan 48226
Norman B. Weston......................... 611 Woodward Avenue
Detroit, Michigan 48226
William G. McClintock.................... 611 Woodward Avenue
Detroit, Michigan 48226
</TABLE>
SIXTH. Subject to any provision contained in any resolution of the Board
of Directors adopted pursuant to Part I of Article Fourth of this Certificate of
Incorporation requiring an increase or increases in the number of directors, the
number of directors constituting the Board of Directors shall be that number as
shall be fixed from time to time in the manner provided by Article Eleventh of
this Restated Certificate of Incorporation and by By-laws in conformity
therewith. Election of directors need not be by written ballot unless the By-
laws of the corporation shall so provide.
In addition to all of the powers conferred by statute, the Board of
Directors is expressly authorized to make, alter or repeal the By-laws of the
corporation.
Wherever the term "Board of Directors" is used in this Certificate of
Incorporation, such term shall mean the Board of Directors of the corporation;
provided, however, that, to the extent any committee of directors of the
corporation is lawfully entitled to exercise the powers of the Board of
Directors, such committee may exercise any right or authority of the Board of
Directors under this Certificate of Incorporation.
SEVENTH. No contract or transaction between the corporation and one or
more of its directors or officers, or between the corporation and any other
corporation, partnership, association, or other organization in which one or
more of its directors or officers are directors or officers, or have a financial
interest, shall be void or voidable solely for this reason, or solely because
the director or officer is present at or participates in the meeting of the
Board of Directors or committee thereof which authorizes the contract or
transaction, or solely because his or their votes are counted for such purpose,
if:
(a) The material facts as to his relationship or interest and as to the
contract or transaction are disclosed or are known to the Board of Directors or
the committee, and the Board of Directors or committee in good faith authorizes
the contract or transaction by the affirmative votes of a majority of the
disinterested directors, even though the disinterested directors be less than a
quorum; or
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(b) The material facts as to his relationship or interest and as to the
contract or transaction are disclosed or are known to the stockholders entitled
to vote thereon, and the contract or transaction is specifically approved in
good faith by vote of the stockholders; or
(c) The contract or transaction is fair as to the corporation as of the
time it is authorized, approved or ratified, by the Board of Directors, a
committee thereof, or the stockholders.
Common or interested directors may be counted in determining the presence of a
quorum at a meeting of the Board of Directors or of a committee which authorizes
the contract or transaction.
EIGHTH. (a) The corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or plea of nolo contendere or its equivalent, shall not, of itself,
create a presumption that the person did not act in good faith and in a manner
which he reasonably believed to be in or not opposed to the best interests of
the corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
(b) The corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable for negligence or misconduct in the performance of his duty to the
corporation unless and only to the extent that the Court of Chancery of Delaware
or the court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery of Delaware or such
other court shall deem proper. Any person entitled to indemnification against
expenses under this paragraph (b) shall, to the extent not prohibited by the
laws of Delaware and any other applicable law, also be entitled to
indemnification, and the corporation shall indemnify him, against judgments and
amounts paid in settlement actually and reasonably incurred by him in connection
with such action or suit, upon the same terms and conditions and subject to the
same limitations as provided with respect to expenses.
(c) To the extent that a director, officer, employee or agent of a
corporation has been successful on merits or otherwise in defense of any action,
suit or proceeding referred to in paragraphs (a) and (b) of this Article or in
defense of any claim, issue or matter therein, he shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
(d) Any indemnification under paragraphs (a) and (b) of this Article
(unless ordered by a court) shall be made by the corporation only as authorized
in the specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because he has met the
applicable standard of
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conduct set forth in paragraphs (a) and (b). Such determination shall be made
(i) by the Board of Directors by a majority vote of a quorum (as defined in the
By-laws of the corporation) consisting of directors who were not parties to such
action, suit or proceeding, or (ii) if such quorum is not obtainable, or, even
if obtainable a quorum of disinterested directors so directs, by independent
legal counsel in a written opinion or (iii) by the stockholders. Notwithstanding
the failure or refusal of the directors, counsel and stockholders to make
provision therefor, such indemnification shall be made if a court of competent
jurisdiction makes a determination that the director, officer, employee or agent
has a right to indemnification hereunder in any specific case upon the
application of such director, officer, employee or agent.
(e) Expenses incurred in defending a civil or criminal action, suit or
proceeding may be paid by the corporation in advance of the final disposition of
such action, suit or proceeding as authorized by the Board of Directors in the
specific case upon receipt of an undertaking by or on behalf of the director,
officer, employee or agent to repay such amount unless it shall ultimately be
determined that he is entitled to be indemnified by the corporation.
(f) The indemnification provided by this Article shall not be deemed
exclusive of any other rights to which those seeking indemnification may be
entitled under any statute, by-law, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his official capacity
and as to action in another capacity while holding such office, and shall
continue as to a person who has ceased to be a director, officer, employee or
agent and shall inure to the benefit of the heirs, executors and administrators
of such a person.
(g) The corporation shall have power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not the corporation would have the power to indemnify him against
such liability under the provisions of this Article.
(h) For the purposes of this Article, references to "the corporation"
include all constituent corporations absorbed in a consolidation or merger as
well as the resulting or surviving corporation so that any person who is or was
a director, officer, employee or agent of such a constituent corporation or is
or was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise shall stand in the same position under the provisions
of this Article with respect to the resulting or surviving corporation as he
would if he had served the resulting or surviving corporation in the same
capacity.
(i) Neither the corporation nor its directors or officers nor any person
acting on its behalf shall be liable to anyone for any determination as to the
existence or absence of conduct which would provide a basis for making or
refusing to make any payment under this Article or for taking or omitting to
take any other action under this Article, in reliance upon the advice of
counsel.
(j) A director of the corporation shall not be personally liable to the
corporation or its shareholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the corporation or its shareholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the director derived any improper
personal benefit. If the Delaware General Corporation Law is amended after
approval by the shareholders of this provision to authorize corporate action
further eliminating or limiting the personal liability of directors, then the
liability of a director of the Corporation shall be eliminated or limited to the
fullest extent permitted by the Delaware General Corporation Law, as so amended.
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Any repeal or modification of the foregoing paragraph by the shareholders
of the corporation shall not adversely affect any right or protection of a
director of the corporation existing at the time of such repeal or modification.
NINTH. The corporation shall have perpetual existence.
TENTH. The corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by the laws of Delaware, and all rights conferred herein
upon stockholders and directors are granted subject to this reservation.
ELEVENTH. Board of Directors.
(a) Number, Election and Terms of Directors: The business and affairs of
the corporation shall be managed by or under the direction of a Board of
Directors. The number of the directors of the corporation shall be fixed from
time to time by resolution adopted by the affirmative vote of a majority of the
entire Board of Directors of the corporation, except that the minimum number of
directors shall be fixed at no less than 15 and the maximum number of directors
shall be fixed at no more than 30. The directors shall be divided into three
classes, designated Class I, Class II and Class III. Each class shall consist,
as nearly equal in number as possible, of one-third of the total number of
directors constituting the entire Board of Directors. At the 1986 annual
meeting of stockholders, Class I directors shall be elected for a one-year term,
Class II directors for a two-year term and Class III directors for a three-year
term. At each succeeding annual meeting of stockholders beginning in 1987,
successors of the class of directors whose term expires at that annual meeting
shall be elected for a three-year term. If the number of directors is changed,
any increase or decrease shall be apportioned among the classes so as to
maintain the number of directors in each class as nearly equal as possible.
(b) Stockholder Nomination of Director Candidates: Nominations for
election to the Board of Directors of the corporation at a meeting of
stockholders may be made by the Board of Directors, on behalf of the Board of
Directors by any nominating committee appointed by the Board of Directors, or by
any stockholder of the corporation entitled to vote for the election of
directors at the meeting. Nominations, other than those made by or on behalf of
the Board of Directors, shall be made by notice in writing delivered to or
mailed, postage prepaid, and received by the Secretary of the Corporation at
least 60 days but no more than 90 days prior to the anniversary date of the
immediately preceding Annual Meeting of Stockholders. The notice shall set
forth (i) the name and address of the stockholder who intends to make the
nomination; (ii) the name, age, business address and, if known, residence
address of each nominee; (iii) the principal occupation or employment of each
nominee; (iv) the number of shares of stock of the corporation which are
beneficially owned by each nominee and by the nominating stockholder; (v) any
other information concerning the nominee that must be disclosed of nominees in
proxy solicitation pursuant to Regulation 14A of the Securities Exchange Act of
1934 (or any subsequent provisions replacing such Regulation); and (vi) the
executed consent of each nominee to serve as a director of the corporation, if
elected. The chairman of the meeting of stockholders may, if the facts warrant,
determine that a nomination was not made in accordance with the foregoing
procedures, and if the chairman should so determine, the chairman shall so
declare to the meeting and the defective nomination shall be disregarded.
(c) Newly Created Directorships and Vacancies: Newly created directorships
resulting from any increase in the number of directors and any vacancies on the
Board of Directors resulting from death, resignation, disqualification, removal
or other cause shall be filled by the affirmative vote of a majority of the
remaining directors then in office, even though less than a quorum, or by a sole
remaining director. Any director of any class chosen to fill a vacancy in such
class shall hold office for a term that shall coincide with the remaining term
of that class, but in no case will a decrease in the number of directors shorten
the term of any incumbent director. A director shall hold office until the next
annual meeting for the year in which his or her term expires and until such
director's successor shall have been elected and qualified.
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(d) Removal: Any director may be removed from office only for cause and
only by the affirmative vote of the holders of at least a majority of the voting
power of all the shares of the corporation entitled to vote generally in the
election of directors, voting together as a single class.
(e) Preferred Stock: Notwithstanding the foregoing paragraphs, whenever
the holders of any one or more classes or series of Preferred Stock issued by
the corporation shall have the right, voting separately by class or series, to
elect directors at an annual or special meeting of stockholders, the election,
term of office, filling of vacancies and other features of such directorships
shall be governed by the terms of the Certificate of Incorporation applicable
thereto. The then authorized number of directors of the corporation shall be
increased by the number of additional directors to be elected, and such
directors so elected shall not be divided into classes pursuant to this Article
Eleventh unless expressly provided by such terms.
(f) Amendment or Repeal: Notwithstanding anything contained in this
Certificate of Incorporation or the By-laws of the corporation to the contrary,
the affirmative vote of the holders of at least 80% of the voting power of all
the shares of the corporation entitled to vote generally in the election of
directors, voting together as a single class, shall be required to alter, amend,
repeal or adopt any provision inconsistent with the purpose and intent of this
Article ELEVENTH.
TWELFTH. Stockholder Action.
Any action required or permitted to be taken by any stockholders of the
corporation must be effected at a duly called annual or special meeting of such
stockholders and may not be effected by any consent in writing by such
stockholders. Except as may be otherwise required by law, special meetings of
stockholders of the corporation may be called only by the Board of Directors
pursuant to a resolution approved by a majority of the Board of Directors.
Notwithstanding anything contained in this Certificate of Incorporation or the
By-laws of the corporation to the contrary, the affirmative vote of at least 80%
of the voting power of all the shares of the corporation entitled to vote
generally in the election of directors, voting together as a single class, shall
be required to alter, amend or adopt any provision inconsistent with the purpose
and intent of this
Article TWELFTH.
THIRTEENTH. (a) In addition to any affirmative vote required by law or by
or under this Restated Certificate of Incorporation or the By-laws and except as
otherwise expressly herein provided in this Article Thirteenth, the approval or
authorization of a Business Combination (which together with certain other terms
used in this Article, are hereinafter defined) shall require the affirmative
vote of a majority of the voting power of all the shares of Voting Stock held by
stockholders other than an Interested Stockholder, with which or by or on whose
behalf, directly or indirectly, a Business Combination is proposed, voting
together as a single class. Such affirmative vote shall be required
notwithstanding the fact that no vote may be required or that a lesser
percentage or separate class vote may be otherwise required.
(b) The provisions of paragraph (a) of this Article shall not be applicable
to any particular Business Combination, and such Business Combination shall
require only such affirmative vote, if any, as is required by law or by or under
any other provision of this Restated Certificate of Incorporation, or the By-
laws of the corporation, or otherwise, if all the conditions specified in either
of the following paragraphs First or Second are met:
First: The Business Combination shall have been approved by a majority
(whether such approval is made prior to or subsequent to the acquisition of
beneficial ownership of the Voting Stock that caused the Interested Stockholder
to become an Interested Stockholder) of the Continuing Directors; or
Second: All of the following conditions shall have been met:
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(1) The aggregate amount of the cash and the Fair Market Value as of
the date of the consummation of the Business Combination of consideration other
than cash to be received per share by holders of Common Stock in such Business
Combination shall be at least equal to the highest amount determined under
subparagraphs (i) and (ii) below:
(i) The highest per share price (including any brokerage
commissions, transfer taxes and soliciting dealers' fees) paid by or on behalf
on the Interested Stockholder for any shares of Common Stock in connection with
the acquisition by the Interested Stockholder of beneficial ownership of shares
of Common Stock (a) within the two-year period immediately prior to the first
public announcement of the proposed Business Combination (the "Announcement
Date") or (b) in the transaction in which it became an Interested Stockholder,
whichever is higher; and
(ii) The Fair Market Value per share of Common Stock on the
Announcement Date or on the date on which the Interested Stockholder became an
Interested Stockholder (the "Determination Date"), whichever is higher.
All per share prices shall be adjusted to reflect any intervening stock
splits, stock dividends, and reverse stock splits.
(2) The aggregate amount of the cash and the Fair Market Value as of
the date of the consummation of the Business Combination of consideration other
than cash to be received per share by holders of shares of any class or series
of outstanding Voting Stock, other than Common Stock, shall be at least equal to
the highest amount determined under clauses (i), (ii), and (iii) below.
(i) The highest per share price (including any brokerage commissions,
transfer taxes, and soliciting dealers' fees) paid by or on behalf of the
Interested Stockholder for any share of such class or series of Voting Stock in
connection with the acquisition by the Interested Stockholder of beneficial
ownership of shares of such class or series of Voting Stock (a) within the two-
year period immediately prior to the Announcement Date or (b) in the transaction
in which it became an Interested Stockholder, whichever is higher.
(ii) The Fair Market Value per share of such class or series of
Voting Stock on the Announcement Date or on the Determination Date, whichever is
higher; and
(iii) The highest preferential amount per share to which the holders
of shares of such class or series of Voting Stock would be entitled, if any, in
the event of any voluntary or involuntary liquidation, dissolution or winding up
of the corporation, regardless of whether the Business Combination to be
consummated constitutes such an event.
All per share prices shall be adjusted for intervening stock splits,
stock dividends, and reverse stock splits.
The provisions of this paragraph Second (2) shall be required to be
met with respect to every class or series of outstanding Voting Stock, whether
or not the Interested Stockholder has previously acquired beneficial ownership
of any shares of a particular class or series of Voting Stock.
(3) After such Interested Stockholder has become an Interested
Stockholder and prior to the consummation of such Business Combination: (i)
except as approved by a majority of the Continuing Directors, there shall have
been no failure to declare and pay at the regular date therefor any full
periodic dividends (whether or not cumulative) in accordance with the terms of
any outstanding Preferred Stock; (ii)
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<PAGE>
there shall have been (a) no reduction in the annual rate of dividend paid on
the Common Stock (except as necessary to reflect any stock split, stock dividend
or subdivision of the Common Stock), except as approved by a majority of the
Continuing Directors, and (b) an increase in such annual rate of dividends as
necessary to reflect any reclassification (including any reverse stock split),
recapitalization, reorganization, or any similar transaction which has the
effect of reducing the number of outstanding shares of Common Stock, unless the
failure so to increase such annual rate is approved by a majority of the
Continuing Directors, and (iii) such Interested Stockholder shall have not
become the beneficial owner of any additional shares of Voting Stock except as
part of the transaction which results in such Interested Stockholder becoming an
Interested Stockholder and except in a transaction that, after giving effect
thereto, would not result in any increase in the Interested Stockholder's
percentage of beneficial ownership of any class or series of capital stock.
(4) After such Interested Stockholder has become an Interested
Stockholder, such Interested Stockholder shall not have received the benefit,
directly or indirectly (except proportionately as a stockholder), of any loans,
advances, guarantees, pledges, or other financial assistance or any tax credits
or other tax advantages provided by the corporation, whether in anticipation of
or in connection with such Business Combination or otherwise.
(5) A proxy or information statement describing the proposed Business
Combination and complying with the requirements of the Securities Exchange Act
of 1934 and the rules and regulations thereunder (or any subsequent provisions
replacing such Act, rules or regulations) shall be mailed to stockholders of the
corporation at least 30 days prior to the consummation of such Business
Combination (whether or not such proxy or information statement is required to
be mailed pursuant to such Act or subsequent provisions).
(6) Such Interested Stockholder shall not have made any major change
in the corporation's business or equity capital structure without the approval
of a majority of the Continuing Directors.
(c) For the purposes of this Article Thirteenth:
(i) The term "Business Combination" shall mean:
(a) any merger or consolidation of the corporation or any Subsidiary (as
hereinafter defined) with (a) any Interested Stockholder or (b) any other
company (whether or not such other company is an Interested Stockholder)
which is, or after such merger or consolidation would be, an Affiliate or
Associate of an Interested Stockholder; or
(b) any sale, lease, exchange, mortgage, pledge, transfer or other disposition
or security arrangement, investment, loan, advance, guarantee, agreement to
purchase, agreement to pay, extension of credit, joint venture
participation or other arrangement (in one transaction or a series of
transactions) with or for the benefit of any Interested Stockholder or any
Affiliate or Associate of any Interested Stockholder involving any
Substantial Part of the assets, securities or commitments of the
corporation, any Subsidiary or any Interested Stockholder or any Affiliate
or Associate of any Interested Stockholder; or
(c) the adoption of any plan or proposal for the liquidation or dissolution of
the corporation proposed by or on behalf of any Interested Stockholder or
any Affiliate or Associate of any Interested Stockholder; or
(d) any reclassification of securities (including any reverse stock split), or
recapitalization of the corporation or any merger or consolidation of the
corporation with any of its Subsidiaries or any other transaction (whether
or not with or otherwise involving an Interested Stockholder) that has the
effect, directly or indirectly, of increasing the proportionate share of
the outstanding shares of any class or series of Voting Stock, or any
securities convertible into Voting Stock, or into equity securities of any
Subsidiary, that is beneficially owned by an Interested Stockholder
-11-
<PAGE>
or any Affiliate or Associate of any Interested Stockholder; or
(e) any agreement, contract, or other arrangement providing for any one or
more of the actions specified in the foregoing clauses (a) through (d).
(ii) The term "Voting Stock" shall mean all outstanding shares of
capital stock of the corporation of whatever class or series which is entitled
to vote under any circumstances in the election of directors of the corporation.
(iii) A "person" shall mean any individual, firm, corporation,
partnership, trust or other entity and shall include any group comprised of any
person and any other person with whom such person or any Affiliate or Associate
of such person has any agreement, arrangement or understanding, directly or
indirectly, for the purpose of acquiring, holding, voting, or disposing of
Voting Stock.
(iv) "Interested Stockholder" shall mean any person (other than the
corporation or any Subsidiary and other than any profit-sharing, employee stock
ownership or other employee benefit plan of the corporation or any Subsidiary or
any trustee of or fiduciary with respect to any such plan when acting in such
capacity) who or which:
(a) is a person who is the beneficial owner, directly or
indirectly, of more than 10% of the voting power of the then outstanding Voting
Stock; or
(b) is an Affiliate or Associate of the corporation and at any
time within the two-year period immediately prior to the date in question was
the beneficial owner of 10% or more of the voting power of the then outstanding
Voting Stock; or
(c) is an assignee of or has otherwise succeeded to any shares of
Voting Stock which were at any time within the two-year period immediately prior
to the date in question beneficially owned by any Interested Stockholder, if
such assignment or succession shall have occurred in the course of a transaction
or series of transactions not involving a public offering within the meaning of
the Securities Act of 1933.
(v) A person shall be a "beneficial owner" of any Voting Stock:
(a) which such person or any of its Affiliates or Associates
beneficially owns, directly or indirectly; or
(b) which such person or any of its Affiliates or Associates has
(1) the right to acquire (whether such right is exercisable immediately or only
after the passage of time), pursuant to any agreement, arrangement or
understanding or upon the exercise of conversion rights, exchange rights,
warrants or options, or otherwise, or (2) the right to vote pursuant to any
agreement, arrangement or understanding; or
(c) which are beneficially owned, directly or indirectly, by any
other person with which such person or any of its Affiliates or Associates has
any agreement, arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of any shares of Voting Stock. For the purposes of
determining whether a person is an Interested Stockholder pursuant to paragraph
(c)(iv) of this Article, the number of shares of capital stock deemed to be
outstanding shall include shares deemed beneficially owned by such person
through application of paragraph (c)(v) of this Article but shall not include
any other shares of Voting Stock that may be issuable pursuant to any agreement,
arrangement or understanding, or upon exercise of conversion rights, warrants or
options, or otherwise.
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<PAGE>
(vi) An "Affiliate" of, or a person "affiliated" with, a specified
person, is a person that directly or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with,
the person specified.
(vii) "Associate" used to indicate a relationship with any person,
means (1) any corporation or organization (other than the corporation or a
majority-owned subsidiary of the corporation) of which such person is an officer
or partner or is, directly or indirectly, the beneficial owner of 10% or more of
any class of equity securities, (2) any trust or other estate in which such
person has a substantial beneficial interest or as to which such person serves
as trustee or in a similar fiduciary capacity, and (3) any relative or spouse of
such person, or any relative of such spouse, who has the same home as such
person.
(viii) "Subsidiary" means any company of which a majority of any class
of equity security is owned, directly or indirectly, by the corporation.
(ix) The term "Substantial Part" shall mean an amount equal to or
greater than an amount equal to fifteen percent of the stockholders' equity of
the corporation as reflected in the most recent fiscal year-end consolidated
balance sheet of the corporation.
(x) "Continuing Director" means any member of the Board of Directors
of the corporation (the "Board") while such person is a member of the Board, who
is not an Affiliate or Associate or representative of the Interested Stockholder
and was a member of the Board prior to the time that the Interested Stockholder
became an Interested Stockholder, and any successor of a Continuing Director,
while such successor is a member of the Board, who is not an Affiliate or
Associate or representative of the Interested Stockholder and is recommended to
succeed the Continuing Director by a majority of Continuing Directors then on
the Board.
(xi) "Fair Market Value" means (a) in the case of stock, the highest
closing sale price during the 30-day period immediately preceding the date in
question of a share of such stock on the Composite Tape for New York Stock
Exchange-Listed Stocks, or, if such stock is not quoted on the Composite Tape
for the New York Stock Exchange, or if such stock is not listed on such
Exchange, on the principal United States securities exchange registered under
the Securities Exchange Act of 1934 on which such stock is listed, or if such
stock is not listed on any such exchange, the highest closing bid quotation with
respect to a share of such stock during the 30-day period preceding the date in
question on the National Association of Securities Dealers, Inc. Automated
Quotations System or any system then in use, or if no such quotations are
available, the Fair Market Value on the date in question of a share of such
stock as determined by a majority of the Continuing Directors in good faith and
(b) in the case of property other than cash or stock, the Fair Market Value of
such property on the date in question as determined in good faith by a majority
of Continuing Directors then on the Board.
(xii) In the event of any Business Combination in which the
corporation survives, the phrase "consideration other than cash to be received"
as used in paragraphs (b) Second (1) and (2) of this Article shall include the
shares of Common Stock and/or the shares of any other class of outstanding
Voting Stock retained by the holders of such shares.
(d) The Board shall have the power and duty to determine for the purposes
of this Article Thirteenth, on the basis of information known to it after
reasonable inquiry (i) whether a person is an Interested Stockholder; (ii) the
number of shares of Voting Stock beneficially owned by any person; (iii) whether
a person is an Affiliate or Associate of another; (iv) whether the requirements
of paragraph (b) Second of this Article have been met with respect to any
Business Combination; and (v) whether any sale, lease, exchange, mortgage,
pledge, transfer or other disposition or security arrangement, investment, loan,
advance, guarantee, agreement to purchase, agreement to pay, extension of
credit, joint venture participation or other arrangement (in one transaction or
a series of transactions)
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<PAGE>
with or for the benefit of any Interested Stockholder or any Affiliate or
Associate of any Interested Stockholder involving any assets, securities or
commitments of the corporation, any Subsidiary, or any Interested Stockholder,
or any Affiliate or Associate of any Interested Stockholder constitutes a
Substantial Part. Any such determination made in good faith shall be binding
and conclusive on all parties.
(e) The Board of Directors shall not approve, adopt or recommend any
proposal to enter into a Business Combination, or any offer of any person, other
than the corporation, to make a tender or exchange offer for any capital stock
of the corporation, unless and until the Board of Directors shall first
establish a procedure for evaluating, and shall have evaluated, the proposal or
offer, and determined that it would be in compliance with all applicable laws
and in the best interests of the corporation and its stockholders. In
connection with its evaluation, the Board of Directors may seek and obtain the
advice of independent investment counsel, may seek and rely upon an opinion of
legal counsel and other independent advisers, and may test such compliance with
laws in any state or federal court or before any state or federal administrative
agency which may have appropriate jurisdiction. In connection with its
evaluation as to the best interests of the corporation and its stockholders, the
Board of Directors shall consider all factors which it deems relevant, or the
stockholders might deem relevant, including without limitation: (i) the
adequacy and fairness of the consideration to be received by the corporation
and/or its stockholders considering the future prospects for the corporation and
its business, historical trading prices of the corporation's capital stock, the
price that might be achieved in a negotiated sale of the corporation as a whole,
and premiums over trading prices which have been proposed or offered with
respect to the securities of other companies in the past in connection with
similar offers; (ii) the business, financial condition and earnings prospects of
the acquiring person or entity and the competence, experience and integrity of
the acquiring person or entity and their or its management, and (iii) the
potential social and economic impact of the offer and its consummation on the
communities in which the corporation and its subsidiaries operate or are located
and upon the corporation, its subsidiaries, and their employees, depositors, and
loan and other customers.
(f) The Board of Directors shall not approve, adopt or recommend any offer
of any person, other than the corporation, to make a tender or exchange offer
for any capital stock of the corporation in which the Fair Market Value per
share of the consideration to be received by one or more stockholders is
substantially more than the Fair Market Value per share of the consideration to
be received by other stockholders holding shares of the same class and series,
or any tender or exchange offer the consummation of which is reasonably likely,
in the good faith determination of the Board of Directors, in one transaction or
a series of transactions, to have that result.
(g) Nothing contained in this Article Thirteenth shall be construed to
relieve any Interested Stockholder from any fiduciary obligation imposed by law.
(h) The fact that any Business Combination complies with the provisions of
paragraph (b) Second of this Article Thirteenth shall not be construed to impose
any fiduciary duty, obligation, or responsibility on the Board of Directors, or
any member thereof, to approve such Business Combination or recommend its
adoption or approval to the stockholders of the corporation, nor shall such
compliance limit, prohibit or otherwise restrict in any manner the Board of
Directors, or any member thereof, with respect to evaluations of or actions and
responses taken with respect to such Business Combination.
(i) Notwithstanding any other provisions of this Restated Certificate of
Incorporation or the By-laws of the corporation (and notwithstanding the fact
that a lesser percentage may be specified by law, this Restated Certificate of
Incorporation or the By-laws of the corporation), the affirmative vote of the
holders of at least 80% of the voting power of all the shares of the Voting
Stock, voting together as a single class, shall be required to alter, amend or
adopt any provisions inconsistent with or to repeal this Article Thirteenth;
provided, however, that if such action has been proposed, directly or
indirectly, on behalf of an Interested Stockholder, it must also be approved by
the affirmative vote of a majority of the voting power of all the shares of
Voting Stock held by stockholders other than such Interested Stockholder.
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<PAGE>
CERTIFICATE OF MERGER
OF
FIRST CHICAGO CORPORATION
INTO
NBD BANCORP, INC.
-----------------
******
The undersigned corporation, organized and existing under and by virtue of
the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
FIRST: That the name and state of incorporation of each of the constituent
corporations of the merger is as follows:
<TABLE>
<CAPTION>
NAME STATE OF INCORPORATION
---- ----------------------
<S> <C>
First Chicago Corporation Delaware
NBD Bancorp, Inc. Delaware
</TABLE>
SECOND: That an Agreement and Plan of Merger dated as of July 11, 1995, as
amended, (the "Agreement") between the parties to the merger has been approved,
adopted, certified, executed and acknowledged by each of the constituent
corporations in accordance with the requirements of subsection (c) of Section
251 of the General Corporation Law of the State of Delaware.
THIRD: That the name of the surviving corporation of the merger is NBD
Bancorp, Inc., amending its name to First Chicago NBD Corporation.
<PAGE>
FOURTH: That the Restated Certificate of Incorporation of NBD Bancorp,
Inc. shall be the certificate of incorporation of the surviving corporation,
except that:
1. Article First is being amended to read as follows:
"The name of the corporation is FIRST CHICAGO NBD CORPORATION." ;
2. Article Second is being amended to read as follows:
"The address of its registered office in the State of Delaware is 1209
Orange Street, County of New Castle, Wilmington, Delaware 19801. The
name of its registered agent at such address is The Corporation Trust
Company."; and
3. The first sentence of Article Fourth is being amended to read as
follows:
"The total number of shares of all classes of stock which the
corporation shall have authority to issue is 510,000,000 shares which
shall be divided into two classes as follows:
(a) 10,000,000 shares of Preferred Stock without par value
(Preferred Stock); and
(b) 500,000,000 shares of Common Stock of the par value of $1.00
per share (Common Stock)."
FIFTH: That the executed Agreement is on file at the principal place of
business of the surviving corporation. The address of the principal place of
business of the surviving corporation is One First National Plaza, Suite 0287,
Chicago, Illinois 60670.
SIXTH: That a copy of the Agreement will be furnished by the surviving
corporation, on request and without cost, to any stockholder of any constituent
corporation.
2
<PAGE>
SEVENTH: This Certificate of Merger shall be effective at 12:01 a.m.
Eastern Standard Time on December 1, 1995, (the "Effective Time") in accordance
with the provisions of Sections 103 and 251(c) of the General Corporation Law of
the State of Delaware.
Dated: November 29, 1995
NBD BANCORP, INC.
By: \s\ Verne G. Istock
--------------------------------
Title: Chairman and Chief Executive Officer
ATTEST:
By: \s\ Daniel T. Lis
---------------------------
Daniel T. Lis
Secretary
3
<PAGE>
CERTIFICATE OF THE VOTING POWERS, DESIGNATION, PREFERENCES AND RELATIVE,
PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS, AND THE QUALIFICATIONS,
LIMITATIONS OR RESTRICTIONS THEREOF, WHICH HAVE NOT BEEN SET FORTH IN THE
RESTATED CERTIFICATE OF INCORPORATION OR IN ANY AMENDMENT THEREOF, OF THE
PREFERRED STOCK WITH CUMULATIVE AND ADJUSTABLE DIVIDENDS,
SERIES B
(Without Par Value)
OF
FIRST CHICAGO NBD CORPORATION
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
The undersigned DOES HEREBY CERTIFY that the following resolution was duly
adopted by the Board of Directors of FIRST CHICAGO NBD CORPORATION, formerly
known as NBD BANCORP, INC., a Delaware corporation (hereinafter called the
"Corporation"), at a meeting duly convened and held on July 11, 1995, at which a
quorum was present and acting throughout:
"RESOLVED, that pursuant to authority conferred upon the Board of Directors
(the "Board") of the Corporation, by the Restated Certificate of Incorporation,
as amended (the "Certificate of Incorporation") of the Corporation, the Board
hereby provides for and authorizes the issuance of a series of Preferred Stock
of the Corporation to consist of 1,191,000 shares, and hereby fixes the voting
powers, designation, preferences and relative, participating, optional or other
special rights, and the qualifications, limitations or restrictions thereof, of
the shares of such series, in addition to those set forth in the Certificate of
Incorporation, as follows:
(a) Designation.
------------
The designation of the series of Preferred Stock created by this resolution
shall be "Preferred Stock with Cumulative and Adjustable Dividends, Series B"
(hereinafter called this "Series") and the number of shares constituting this
Series is 1,191,000. Shares of this Series shall have a stated value of $100
per share. The number of authorized shares of this Series may be reduced by
further resolution duly adopted by the Board and by the filing of a certificate
pursuant to the provisions of the General Corporation Law of the State of
Delaware stating that such reduction has been so authorized, but the number of
authorized shares of this Series shall not be increased.
<PAGE>
(b) Dividend Rate.
--------------
(1) Dividend rates on the shares of this Series shall be for each
quarterly dividend period (hereinafter referred to as a "Quarterly Dividend
Period"; and any Quarterly Dividend Period being hereinafter individually
referred to as a "Dividend Period" and collectively referred to as "Dividend
Periods"), which Quarterly Dividend Periods shall commence on March 1, June 1,
September 1 and December 1 in each year and shall end on and include the day
next preceding the first day of the next Quarterly Dividend Period, at a rate
per annum of the stated value thereof 3.75% below the Applicable Rate (as
defined in paragraph (2) of this Section (b)) in respect of such Quarterly
Dividend Period. Anything to the contrary herein notwithstanding, the dividend
rate for any Quarterly Dividend Period shall in no event be less than 6.00% or,
greater than 12.00% per annum. Such dividends shall be cumulative from December
1, 1995, and shall be payable, when and as declared by the Board, on the last
day of February, May, August and November of each year, commencing the last day
of February, 1996. Each such dividend shall be paid to the holders of record of
shares of this Series as they appear on the stock register of the Corporation on
such record date, not exceeding 30 days preceding the payment date thereof, as
shall be fixed by the Board. Dividends on account of arrears for any past
Dividend Periods may be declared and paid at any time, without reference to any
regular dividend payment date, to holders of record on such date, not exceeding
45 days preceding the payment date thereof, as may be fixed by the Board.
(2) Except as provided below in this paragraph, the "Applicable Rate" for
any Quarterly Dividend Period shall be the highest of the Treasury Bill Rate,
the Ten Year Constant Maturity Rate or the Twenty Year Constant Maturity Rate
(each as hereinafter defined) for such Dividend Period. In the event that the
Corporation determines in good faith that for any reason one or more of such
rates cannot be determined for any Quarterly Dividend Period, then the
Applicable Rate for such Dividend Period shall be the higher of whichever of
such rates can be so determined. In the event that the Corporation determines
in good faith that none of such rates can be determined for any Quarterly
Dividend Period, then the Applicable Rate in effect for the preceding Dividend
Period shall be continued for such Dividend Period.
(3) Except as provided below in this paragraph, the "Treasury Bill Rate"
for each Quarterly Dividend Period shall be the arithmetic average of the two
most recent weekly per annum market discount rates (or the one weekly per annum
market discount rate, if only one such rate shall be published during the
relevant Calendar Period as provided below) for three-month U.S. Treasury bills,
as published weekly by the Federal Reserve Board during the Calendar Period
immediately prior to the ten calendar days immediately preceding the last day of
February, May, August or November, as the case may be, prior to the Quarterly
Dividend Period for which the dividend rate on this Series is being determined.
In the event that the Federal Reserve Board does not publish such a weekly per
annum market discount rate during such Calendar Period, then the Treasury Bill
Rate for such Dividend Period shall be the arithmetic average of the two most
recent weekly per annum market discount rates (or
2
<PAGE>
the one weekly per annum market discount rate, if only one such rate shall be
published during the relevant Calendar Period as provided below) for three-month
U.S. Treasury bills, as published weekly during such Calendar Period by any
Federal Reserve Bank or by any U.S. Government department or agency selected by
the Corporation. In the event that a per annum market discount rate for three-
month U.S. Treasury bills shall not be published by the Federal Reserve Board or
by any Federal Reserve Bank or by any U.S. Government department or agency
during such Calendar Period, then the Treasury Bill Rate for such Dividend
Period shall be the arithmetic average of the two most recent weekly per annum
market discount rates (or the one weekly per annum market discount rate, if only
one such rate shall be published during the relevant Calendar Period as provided
below) for all of the U.S. Treasury bills then having maturities of not less
than 80 nor more than 100 days, as published during such Calendar Period by the
Federal Reserve Board or, if the Federal Reserve Board shall not publish such
rates, by any Federal Reserve Bank or by any U.S. Government department or
agency selected by the Corporation. In the event that the Corporation
determines in good faith that for any reason no such U.S. Treasury Bill Rates
are published as provided above during such Calendar Period, then the Treasury
Bill Rate for such Dividend Period shall be the arithmetic average of the per
annum market discount rates based upon the closing bids during such Calendar
Period for each of the issues of marketable noninterest-bearing U.S. Treasury
securities with a maturity of not less than 80 nor more than 100 days from the
date of each such quotation, as quoted daily for each business day in New York
City (or less frequently if daily quotations shall not be generally available)
to the Corporation by at least three recognized U.S. Government securities
dealers selected by the Corporation. In the event that the Corporation
determines in good faith that for any reason the Corporation cannot determine
the Treasury Bill Rate for any Quarterly Dividend Period as provided above in
this paragraph, the Treasury Bill Rate for such Dividend Period shall be the
arithmetic average of the per annum market discount rates based upon the closing
bids during such Calendar Period for each of the issues of marketable interest-
bearing U.S. Treasury securities with a maturity of not less than 80 nor more
than 100 days from the date of each such quotation, as quoted daily for each
business day in New York City (or less frequently if daily quotations shall not
be generally available) to the Corporation by at least three recognized U.S.
Government securities dealers selected by the Corporation.
(4) Except as provided below in this paragraph, the "Ten Year Constant
Maturity Rate" for each Quarterly Dividend Period shall be the arithmetic
average of the two most recent weekly per annum Ten Year Average Yields (or the
one weekly per annum Ten Year Average Yield, if only one such Yield shall be
published during the relevant Calendar Period as provided below), as published
weekly by the Federal Reserve Board during the Calendar Period immediately prior
to the ten calendar days immediately preceding the last day of February, May,
August or November, as the case may be, prior to the Quarterly Dividend Period
for which the dividend rate on this Series is being determined. In the event
that the Federal Reserve Board does not publish such a weekly per annum Ten Year
Average Yield during such Calendar Period, then the Ten Year Constant Maturity
Rate for such Dividend Period shall be the arithmetic average of the two most
recent weekly per annum Ten Year Average Yields (or the one weekly per annum Ten
Year Average Yield, if only one such
3
<PAGE>
Yield shall be published during the relevant Calendar Period as provided below),
as published weekly during such Calendar Period by any Federal Reserve Bank or
by any U.S. Government department or agency selected by the Corporation. In the
event that a per annum Ten Year Average Yield shall not be published by the
Federal Reserve Board or by any Federal Reserve Bank or by any U.S. Government
department or agency during such Calendar Period, then the Ten Year Constant
Maturity Rate for such Dividend Period shall be the arithmetic average of the
two most recent weekly per annum average yields to maturity (or the one weekly
average yield to maturity, if only one such yield shall be published during the
relevant Calendar Period as provided below) for all of the actively traded
marketable U.S. Treasury fixed interest rate securities (other than Special
Securities) then having maturities of not less than eight nor more than twelve
years, as published during such Calendar Period by the Federal Reserve Board or,
if the Federal Reserve Board shall not publish such yields, by any Federal
Reserve Bank or by any U.S. Government department or agency selected by the
Corporation. In the event that the Corporation determines in good faith that
for any reason the Corporation cannot determine the Ten Year Constant Maturity
Rate for any Quarterly Dividend Period as provided above in this paragraph, then
the Ten Year Constant Maturity Rate for such Dividend Period shall be the
arithmetic average of the per annum average yields to maturity based upon the
closing bids during such Calendar Period for each of the issues of actively
traded marketable U.S. Treasury fixed interest rate securities (other than
Special Securities) with a final maturity date not less than eight nor more than
twelve years from the date of each such quotation, as quoted daily for each
business day in New York City (or less frequently if daily quotations shall not
be generally available) to the Corporation by at least three recognized U.S.
Government securities dealers selected by the Corporation.
(5) Except as provided below in this paragraph, the "Twenty Year Constant
Maturity Rate" for each Quarterly Dividend Period shall be the arithmetic
average of the two most recent weekly per annum Twenty Year Average Yields (or
the one weekly per annum Twenty Year Average Yield, if only one such Yield shall
be published during the relevant Calendar Period as provided below), as
published weekly by the Federal Reserve Board during the Calendar Period
immediately prior to the ten calendar days immediately preceding the last day of
February, May, August or November, as the case may be, prior to the Quarterly
Dividend Period for which the dividend rate on this Series is being determined.
In the event that the Federal Reserve Board does not publish such a weekly per
annum Twenty Year Average Yield during such Calendar Period, then the Twenty
Year Constant Maturity Rate for such Dividend Period shall be the arithmetic
average of the two most recent weekly per annum Twenty Year Average Yields (or
the one weekly per annum Twenty Year Average Yield, if only one such Yield shall
be published during the relevant Calendar Period as provided below), as
published weekly during such Calendar Period by any Federal Reserve Bank or by
any U.S. Government department or agency selected by the Corporation. In the
event that a per annum Twenty Year Average Yield shall not be published by any
Federal Reserve Board or by any Federal Reserve Bank or by any U.S. Government
department or agency during such Calendar Period, then the Twenty Year Constant
Maturity Rate for such Dividend Period shall be the arithmetic average of the
two most recent weekly
4
<PAGE>
per annum average yields to maturity (or the average yield to maturity, if only
one such yield shall be published during the relevant Calendar Period as
provided below) for all of the actively traded marketable U.S. Treasury fixed
interest rate securities (other than Special Securities) then having maturities
of not less than eighteen nor more than twenty-two years, as published during
such Calendar Period by the Federal Reserve Board or, if the Federal Reserve
Board shall not publish such yields, by any Federal Reserve Bank or by any U.S.
Government department or agency selected by the Corporation. In the event that
the Corporation determines in good faith that for any reason the Corporation
cannot determine the Twenty Year Constant Maturity Rate for any Quarterly
Dividend Period as provided above in this paragraph, then the Twenty Year
Constant Maturity Rate for such Dividend Period shall be the arithmetic average
of the per annum average yields to maturity based upon the closing bids during
such Calendar Period for each of the issues of actively traded marketable U.S.
Treasury fixed interest rate securities (other than Special Securities) with a
final maturity date not less than eighteen nor more than twenty-two years from
the date of each such quotation, as quoted daily for each business day in New
York City (or less frequently if daily quotations shall not be generally
available) to the Corporation by at least three recognized U.S. Government
securities dealers selected by the Corporation.
(6) The Treasury Bill Rate, the Ten Year Constant Maturity Rate and the
Twenty Year Constant Maturity Rate shall each be rounded to the nearest five
hundredths of a percentage point.
(7) The dividend rate with respect to each Quarterly Dividend Period will
be calculated as promptly as practicable by the Corporation according to the
appropriate method described herein. The mathematical accuracy of each such
calculation will be confirmed in writing by independent accountants of
recognized standing. The Corporation will cause each dividend rate to be
published in a newspaper of general circulation in New York City prior to the
commencement of the new Quarterly Dividend Period to which it applies and will
cause notice of such dividend rate to be enclosed with the dividend payment
checks next mailed to the holders of shares of this Series.
(8) For purposes of this Section (b), the term
(i) "Calendar Period" shall mean 14 calendar days;
(ii) "Special Securities" shall mean securities which can, at the option of
the holder, be surrendered at face value in payment of any Federal estate tax or
which provide tax benefits to the holder and are priced to reflect such tax
benefits or which were originally issued at a deep or substantial discount;
(iii) "Ten Year Average Yield" shall mean the average yield to maturity for
actively traded marketable U.S. Treasury fixed interest rate securities
(adjusted to constant maturities of ten years); and
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<PAGE>
(iv) "Twenty Year Average Yield" shall mean the average yield to maturity
for actively traded marketable U.S. Treasury fixed interest rate securities
(adjusted to constant maturities of 20 years).
(9) No full dividends shall be declared or paid or set apart for payment
on Preferred Stock of any series ranking, as to dividends, on a parity with or
junior to this Series for any period unless full cumulative dividends have been
or contemporaneously are declared and paid or declared and a sum sufficient for
the payment thereof set apart for such payment on this Series for all dividend
payment periods terminating on or prior to the date of payment of such full
cumulative dividends. When dividends are not paid in full, as aforesaid, upon
the shares of this Series and any other Preferred Stock ranking on a parity as
to dividends with this Series, all dividends declared upon shares of this Series
and any other Preferred Stock ranking on a parity as to dividends with this
Series shall be declared pro rata so that the amount of dividends declared per
share on this Series and such other Preferred Stock shall in all cases bear to
each other the same ratio that accrued dividends per share on the shares of this
Series and such other Preferred Stock bear to each other. Holders of shares of
this Series shall not be entitled to any dividend, whether payable in cash,
property or stocks, in excess of full cumulative dividends, as herein provided,
on this Series. No interest, or sum of money in lieu of interest, shall be
payable in respect of any dividend payment or payments on this Series which may
be in arrears.
(10) So long as any shares of this Series are outstanding, no dividend
(other than a dividend in Common Stock or in any other stock ranking junior to
this Series as to dividends and upon liquidation and other than as provided in
paragraph (9) of this Section (b)) shall be declared or paid or set aside for
payment or other distribution declared or made upon the Common Stock or upon any
other stock ranking junior to or on a parity with this Series as to dividends or
upon liquidation, nor shall any Common Stock or any other stock of the
Corporation ranking junior to or on a parity with this Series as to dividends or
upon liquidation be redeemed, purchased or otherwise acquired for any
consideration (or any moneys paid to or made available for a sinking fund for
the redemption of any shares of any such stock) by the Corporation (except by
conversion into or exchange for stock of the Corporation ranking junior to this
Series as to dividends and upon liquidation) unless, in each case, the full
cumulative dividends on all outstanding shares of this Series shall have been
paid for all past dividend payment periods.
(11) Dividends payable on each share of this Series for each full
Quarterly Dividend Period shall be computed by dividing the dividend rate for
such Quarterly Dividend Period by four and applying such rate against the stated
value per share of this Series. Dividends payable on this Series for any period
less than a full Quarterly Dividend Period shall be computed on the basis of a
360 day year consisting of 30 day months.
6
<PAGE>
(c) Redemption.
-----------
(1) The Corporation, at its option, may redeem shares of this Series, as a
whole or in part, at any time or from time to time, at a redemption price of
$100 per share, plus, in each case, accrued and unpaid dividends thereon to the
date fixed for redemption.
(2) In the event that fewer than all the outstanding shares of this Series
are to be redeemed, the number of shares to be redeemed shall be determined by
the Board and the shares to be redeemed shall be determined by lot or pro rata
as may be determined by the Board or by any other method as may be determined by
the Board in its sole discretion to be equitable.
(3) In the event the Corporation shall redeem shares of this Series,
notice of such redemption shall be given by first class mail, postage prepaid,
mailed not less than 30 nor more than 60 days prior to the redemption date, to
each holder of record of the shares to be redeemed, at such holder's address as
the same appears on the stock register of the Corporation. Each such notice
shall state: (i) the redemption date; (ii) the number of shares of this Series
to be redeemed and, if fewer than all the shares held by such holder are to be
redeemed, the number of such shares to be redeemed from such holder; (iii) the
redemption price; (iv) the place or places where certificates for such shares
are to be surrendered for payment of the redemption price; and (v) that
dividends on the shares to be redeemed will cease to accrue on such redemption
date.
(4) Notice having been mailed as aforesaid, from and after the redemption
date (unless default shall be made by the Corporation in providing money for the
payment of the redemption price) dividends on the shares of this Series so
called for redemption shall cease to accrue, and said shares shall no longer be
deemed to be outstanding, and all rights of the holders thereof as stockholders
of the Corporation (except the right to receive from the Corporation the
redemption price) shall cease. Upon surrender in accordance with said notice of
the certificates for any shares so redeemed (properly endorsed or assigned for
transfer, if the Board shall so require and the notice shall so state), such
shares shall be redeemed by the Corporation at the redemption price aforesaid.
In case fewer than all the shares represented by any such certificate are
redeemed, a new certificate shall be issued representing the unredeemed shares
without cost to the holder thereof.
(5) Any shares of this Series which shall at any time have been redeemed
shall, after such redemption, have the status of authorized but unissued shares
of Preferred Stock, without designation as to series until such shares are once
more designated as part of a particular series by the Board.
(6) Notwithstanding the foregoing provisions of this Section (c), if any
dividends on this Series are in arrears, no shares of this Series shall be
redeemed unless all outstanding shares of this Series are simultaneously
redeemed, and the Corporation shall not purchase or otherwise acquire any shares
of this Series; provided, however, that the foregoing shall not
7
<PAGE>
prevent the purchase or acquisition of shares of this Series pursuant to a
purchase or exchange offer made on the same terms to holders of all outstanding
shares of this Series.
(d) Conversion or Exchange.
-----------------------
The holders of shares of this Series shall not have any rights herein to
convert such shares into or exchange such shares for shares of any other class
or classes or of any other series of any class or classes of capital stock of
the Corporation.
(e) Voting.
-------
The shares of this Series shall not have any voting powers either general
or special, except that
(1) Unless the vote or consent of the holders of a greater number of
shares shall then be required by law, the consent of the holders of at least
66-2/3% of all of the shares of this Series at the time outstanding, given in
person or by proxy, either in writing or by a vote at a meeting called for the
purpose at which the holders of shares of this Series shall vote together as a
separate class, shall be necessary for authorizing, effecting or validating the
amendment, alteration, or repeal of any of the provisions of the Certificate of
Incorporation or of any certificate amendatory thereof or supplemental thereto
(including any Certificate of Designation, Preferences and Rights or any similar
document relating to any series of Preferred Stock) which would adversely affect
the preferences, rights, powers or privileges of this Series;
(2) Unless the vote or consent of the holders of a greater number of
shares shall then be required by law, the consent of the holders of at least
66-2/3% of all of the shares of this Series and all other series of Preferred
Stock ranking on a parity with shares of this Series, either as to dividends or
upon liquidation, at the time outstanding, given in person or by proxy, either
in writing or by a vote at a meeting called for the purpose at which the holders
of shares of this Series and such other series of Preferred Stock shall vote
together as a single class without regard to series, shall be necessary for
authorizing, effecting or validating the creation, authorization or issue of any
shares of any class of stock of the Corporation ranking prior to the shares of
this Series as to dividends or upon liquidation, or the reclassification of any
authorized stock of the Corporation into any such prior shares, or the creation,
authorization or issue of any obligation or security convertible into or
evidencing the right to purchase any such prior shares;
(3) If at any time a default in preference dividends on the Preferred
Stock shall exist, the number of directors constituting the Board of Directors
of the Corporation shall be increased by two, and the holders of the Preferred
Stock of all series shall have the right at an annual or special meeting of
stockholders, voting together as a single class without regard to series, to the
exclusion of the holders of Common Stock, to elect two directors of the
Corporation to fill such newly created directorships. Such right shall continue
until there are
8
<PAGE>
no dividends in arrears upon the Preferred Stock. Each director elected by the
holders of shares of Preferred Stock (herein called a "Preferred Director")
shall continue to serve as such director for the full term for which he shall
have been elected, notwithstanding that prior to the end of such term a default
in preference dividends shall cease to exist. Any Preferred Director may be
removed by, and shall not be removed except by, the vote of the holders of
record of the outstanding shares of Preferred Stock, voting together as a single
class without regard to series, at a meeting of the stockholders, or of the
holders of shares of Preferred Stock, called for that purpose. So long as a
default in any preference dividends on the Preferred Stock shall exist, (A) any
vacancy in the office of a Preferred Director may be filled (except as provided
in the following clause (B)) by an instrument in writing signed by the remaining
Preferred Director and filed with the Corporation and (B) in the case of the
removal of any Preferred Director, the vacancy may be filled by the vote of the
holders of the outstanding shares of Preferred Stock, voting together as a
single class without regard to series, at the same meeting at which such removal
shall be voted. Each director appointed as aforesaid by the remaining Preferred
Director shall be deemed, for all purposes hereof, to be a Preferred Director.
Whenever the term of office of the Preferred Directors shall end and a default
in preference dividends shall no longer exist, the number of directors
constituting the Board of Directors of the Corporation shall be reduced by two.
For the purposes hereof, a "default in preference dividends" on the Preferred
Stock shall be deemed to have occurred whenever the amount of accrued dividends
upon any series of the Preferred Stock shall be equivalent to six full quarter-
yearly dividends or more, and, having so occurred, such default shall be deemed
to exist thereafter until, but only until, all accrued dividends on all shares
of Preferred Stock of each and every series then outstanding shall have been
paid to the end of the last preceding quarterly dividend period.
(f) Liquidation Rights.
-------------------
(1) Upon the dissolution, liquidation or winding up of the Corporation,
the holders of the shares of this Series shall be entitled to receive out of the
assets of the Corporation, before any payment or distribution shall be made on
the Common Stock or on any other class of stock ranking junior to the Preferred
Stock upon liquidation, the amount of $100 per share, plus a sum equal to all
dividends (whether or not earned or declared) on such shares accrued and unpaid
thereon to the date of final distribution.
(2) Neither the sale of all or substantially all the property or business
of the Corporation, nor the merger or consolidation of the Corporation into or
with any other corporation or the merger or consolidation of any other
corporation into or with the Corporation, shall be deemed to be a dissolution,
liquidation or winding up, voluntary or involuntary, for the purposes of this
Section (f).
(3) After the payment to the holders of the shares of this Series of the
full preferential amounts provided for in this Section (f), the holders of this
Series as such shall have no right or claim to any of the remaining assets of
the Corporation.
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<PAGE>
(4) In the event the assets of the Corporation available for distribution
to the holders of shares of this Series upon any dissolution, liquidation or
winding up of the Corporation, whether voluntary or involuntary, shall be
insufficient to pay in full all amounts to which such holders are entitled
pursuant to paragraph (1) of this Section (f), no such distribution shall be
made on account of any shares of any other class or series of Preferred Stock
ranking on a parity with the shares of this Series upon such dissolution,
liquidation or winding up unless proportionate distributive amounts shall be
paid on account of the shares of this Series, ratably, in proportion to the full
distributable amounts for which holders of all such parity shares are
respectively entitled upon such dissolution, liquidation or winding up.
(5) Upon the dissolution, liquidation or winding up of the Corporation,
the holders of shares of this Series then outstanding shall be entitled to be
paid out of the assets of the Corporation available for distribution to its
stockholders all amounts to which such holders are entitled pursuant to
paragraph (1) of this Section (f) before any payment shall be made to the
holders of any class of capital stock of the Corporation ranking junior upon
liquidation to this Series.
(g) For purposes of this resolution, any stock of any class or classes of
the Corporation shall be deemed to rank:
(1) prior to the shares of this Series, either as to dividends or upon
liquidation, if the holders of such class or classes shall be entitled to the
receipt of dividends or of amounts distributable upon dissolution, liquidation
or winding up of the Corporation, as the case may be, in preference or priority
to the holders of shares of this Series;
(2) on a parity with shares of this Series, either as to dividends or upon
liquidation, whether or not the dividend rates, dividend payment dates or
redemption or liquidation prices per share or sinking fund provisions, if any,
be different from those of this Series, if such stock is the Corporation's
Preferred Stock with Cumulative and Adjustable Dividends, Series C (Without Par
Value), the Corporation's 8.45% Cumulative Preferred Stock, Series E (Stated
Value $625 per share) or the Corporation's 5 3/4% Cumulative Convertible
Preferred Stock, Series B (Stated Value $5,000 per share), or if the holders of
such stock shall be entitled to the receipt of dividends or of amounts
distributable upon dissolution, liquidation or winding up of the Corporation, as
the case may be, in proportion to their respective dividend rates or liquidation
prices, without preference or priority, one over the other, as between the
holders of such stock and the holders of shares of this Series; and
(3) junior to shares of this Series, either as to dividends or upon
liquidation, if such class shall be Common Stock or if the holders of shares of
this Series shall be entitled to receipt of dividends or of amounts
distributable upon dissolution, liquidation or winding up of the Corporation, as
the case may be, in preference or priority to the holders of shares of such
class or classes."
10
<PAGE>
The foregoing Certificate of Voting Powers, Designation, Preferences and
Relative, Participating, Optional and Other Special Rights and the
Qualifications, Limitations or Restrictions relating to this Series shall be
effective at 12:01 a.m. Eastern Standard Time on December 1, 1995 in accordance
with the provisions of Sections 103 and 151(g) of the General Corporation Law of
the State of Delaware.
IN WITNESS WHEREOF, First Chicago NBD Corporation has caused this
certificate to be signed by Verne G. Istock, its Chief Executive Officer, and
the same to be attested by Daniel T. Lis, its Assistant Secretary, this 29th day
of November, 1995.
FIRST CHICAGO NBD CORPORATION
By: \s\ Verne G. Istock
------------------------------
Title: Chief Executive Officer
By: \s\ Daniel T. Lis
---------------------------
Assistant Secretary
11
<PAGE>
CERTIFICATE OF THE VOTING POWERS, DESIGNATION, PREFERENCES AND RELATIVE,
PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS, AND THE QUALIFICATIONS,
LIMITATIONS OR RESTRICTIONS THEREOF, WHICH HAVE NOT BEEN SET FORTH IN THE
RESTATED CERTIFICATE OF INCORPORATION OR IN ANY AMENDMENT THEREOF, OF THE
PREFERRED STOCK WITH CUMULATIVE AND ADJUSTABLE DIVIDENDS,
SERIES C
(Without Par Value)
OF
FIRST CHICAGO NBD CORPORATION
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
The undersigned DOES HEREBY CERTIFY that the following resolution was duly
adopted by the Board of Directors of FIRST CHICAGO NBD CORPORATION, formerly
known as NBD BANCORP, INC., a Delaware corporation (hereinafter called the
"Corporation"), at a meeting duly convened and held on July 11, 1995, at which a
quorum was present and acting throughout:
"RESOLVED, that pursuant to authority conferred upon the Board of Directors
(the "Board") of the Corporation, by the Restated Certificate of Incorporation,
as amended (the "Certificate of Incorporation") of the Corporation, the Board
hereby provides for and authorizes the issuance of a series of Preferred Stock
of the Corporation to consist of 713,800 shares, and hereby fixes the voting
powers, designation, preferences and relative, participating, optional or other
special rights, and the qualifications, limitations or restrictions thereof, of
the shares of such series, in addition to those set forth in the Certificate of
Incorporation, as follows:
(a) Designation.
------------
The designation of the series of Preferred Stock created by this resolution
shall be "Preferred Stock with Cumulative and Adjustable Dividends, Series C"
(hereinafter called this "Series") and the number of shares constituting this
Series is 713,800. Shares of this Series shall have a stated value of $100 per
share. The number of authorized shares of this Series may be reduced by further
resolution duly adopted by the Board and by the filing of a certificate pursuant
to the provisions of the General Corporation Law of the State of Delaware
stating that such reduction has been so authorized, but the number of authorized
shares of this Series shall not be increased.
<PAGE>
(b) Dividend Rate.
--------------
(1) Dividend rates on the shares of this Series shall be for each quarterly
dividend period (hereinafter referred to as a "Quarterly Dividend Period"; and
any Quarterly Dividend Period being hereinafter individually referred to as a
"Dividend Period" and collectively referred to as "Dividend Periods"), which
Quarterly Dividend Periods shall commence on, March 1, June 1, September 1 and
December 1 in each year and shall end on and include the day next preceding the
first day of the next Quarterly Dividend Period, at a rate per annum of the
stated value thereof 1.80% below the Applicable Rate (as defined in paragraph
(2) of this Section (b)) in respect of such Quarterly Dividend Period. Anything
to the contrary herein notwithstanding, the dividend rate for any Quarterly
Dividend Period shall in no event be less than 6.50% or greater than 12.50% per
annum. Such dividends shall be cumulative from December 1, 1995 and shall be
payable, when and as declared by the Board, on the last day of February, May,
August and November of each year, commencing the last day of February, 1996.
Each such dividend shall be paid to the holders of record of shares of this
Series as they appear on the stock register of the Corporation on such record
date, not exceeding 30 days preceding the payment date thereof, as shall be
fixed by the Board. Dividends on account of arrears for any past Dividend
Periods may be declared and paid at any time, without reference to any regular
dividend payment date, to holders of record on such date, not exceeding 45 days
preceding the payment date thereof, as may be fixed by the Board.
(2) Except as provided below in this paragraph, the "Applicable Rate" for
any Quarterly Dividend Period shall be the highest of the Treasury Bill Rate,
the Ten Year Constant Maturity Rate or the Twenty Year Constant Maturity Rate
(each as hereinafter defined) for such Dividend Period. In the event that the
Corporation determines in good faith that for any reason one or more of such
rates cannot be determined for any Quarterly Dividend Period, then the
Applicable Rate for such Dividend Period shall be the higher of whichever of
such rates can be so determined. In the event that the Corporation determines
in good faith that none of such rates can be determined for any Quarterly
Dividend Period, then the Applicable Rate in effect for the preceding Dividend
Period shall be continued for such Dividend Period.
(3) Except as provided below in this paragraph, the "Treasury Bill Rate"
for each Quarterly Dividend Period shall be the arithmetic average of the two
most recent weekly per annum market discount rates (or the one weekly per annum
market discount rate, if only one such rate shall be published during the
relevant Calendar Period as provided below) for three-month U.S. Treasury bills,
as published weekly by the Federal Reserve Board during the Calendar Period
immediately prior to the ten calendar days immediately preceding the last day of
February, May, August or November, as the case may be, prior to the Quarterly
Dividend Period for which the dividend rate on this Series is being determined.
In the event that the Federal Reserve Board does not publish such a weekly per
annum market discount rate during such Calendar Period, then the Treasury Bill
Rate for such Dividend Period shall be the arithmetic average of the two most
recent weekly per annum market discount rates (or
2
<PAGE>
the one weekly per annum market discount rate, if only one such rate shall be
published during the relevant Calendar Period as provided below) for three-month
U.S. Treasury bills, as published weekly during such Calendar Period by any
Federal Reserve Bank or by any U.S. Government department or agency selected by
the Corporation. In the event that a per annum market discount rate for three-
month U.S. Treasury bills shall not be published by the Federal Reserve Board or
by any Federal Reserve Bank or by any U.S. Government department or agency
during such Calendar Period, then the Treasury Bill Rate for such Dividend
Period shall be the arithmetic average of the two most recent weekly per annum
market discount rates (or the one weekly per annum market discount rate, if only
one such rate shall be published during the relevant Calendar Period as provided
below) for all of the U.S. Treasury bills then having maturities of not less
than 80 nor more than 100 days, as published during such Calendar Period by the
Federal Reserve Board or, if the Federal Reserve Board shall not publish such
rates, by any Federal Reserve Bank or by any U.S. Government department or
agency selected by the Corporation. In the event that the Corporation
determines in good faith that for any reason no such U.S. Treasury Bill Rates
are published as provided above during such Calendar Period, then the Treasury
Bill Rate for such Dividend Period shall be the arithmetic average of the per
annum market discount rates based upon the closing bids during such Calendar
Period for each of the issues of marketable noninterest-bearing U.S. Treasury
securities with a maturity of not less than 80 nor more than 100 days from the
date of each such quotation, as quoted daily for each business day in New York
City (or less frequently if daily quotations shall not be generally available)
to the Corporation by at least three recognized U.S. Government securities
dealers selected by the Corporation. In the event that the Corporation
determines in good faith that for any reason the Corporation cannot determine
the Treasury Bill Rate for any Quarterly Dividend Period as provided above in
this paragraph, the Treasury Bill Rate for such Dividend Period shall be the
arithmetic average of the per annum market discount rates based upon the closing
bids during such Calendar Period for each of the issues of marketable interest-
bearing U.S. Treasury securities with a maturity of not less than 80 nor more
than 100 days from the date of each such quotation, as quoted daily for each
business day in New York City (or less frequently if daily quotations shall not
be generally available) to the Corporation by at least three recognized U.S.
Government securities dealers selected by the Corporation.
(4) Except as provided below in this paragraph, the "Ten Year Constant
Maturity Rate" for each Quarterly Dividend Period shall be the arithmetic
average of the two most recent weekly per annum Ten Year Average Yields (or the
one weekly per annum Ten Year Average Yield, if only one such Yield shall be
published during the relevant Calendar Period as provided below), as published
weekly by the Federal Reserve Board during the Calendar Period immediately prior
to the ten calendar days immediately preceding the last day of February, May,
August or November, as the case may be, prior to the Quarterly Dividend Period
for which the dividend rate on this Series is being determined. In the event
that the Federal Reserve Board does not publish such a weekly per annum Ten Year
Average Yield during such Calendar Period, then the Ten Year Constant Maturity
Rate for such Dividend Period shall be the arithmetic average of the two most
recent weekly per annum Ten Year Average Yields (or the one weekly per annum Ten
Year Average Yield, if only one such
3
<PAGE>
Yield shall be published during the relevant Calendar Period as provided below),
as published weekly during such Calendar Period by any Federal Reserve Bank or
by any U.S. Government department or agency selected by the Corporation. In the
event that a per annum Ten Year Average Yield shall not be published by the
Federal Reserve Board or by any Federal Reserve Bank or by any U.S. Government
department or agency during such Calendar Period, then the Ten Year Constant
Maturity Rate for such Dividend Period shall be the arithmetic average of the
two most recent weekly per annum average yields to maturity (or the one weekly
average yield to maturity, if only one such yield shall be published during the
relevant Calendar Period as provided below) for all of the actively traded
marketable U.S. Treasury fixed interest rate securities (other than Special
Securities) then having maturities of not less than eight nor more than twelve
years, as published during such Calendar Period by the Federal Reserve Board or,
if the Federal Reserve Board shall not publish such yields, by any Federal
Reserve Bank or by any U.S. Government department or agency selected by the
Corporation. In the event that the Corporation determines in good faith that
for any reason the Corporation cannot determine the Ten Year Constant Maturity
Rate for any Quarterly Dividend Period as provided above in this paragraph, then
the Ten Year Constant Maturity Rate for such Dividend Period shall be the
arithmetic average of the per annum average yields to maturity based upon the
closing bids during such Calendar Period for each of the issues of actively
traded marketable U.S. Treasury fixed interest rate securities (other than
Special Securities) with a final maturity date not less than eight nor more than
twelve years from the date of each such quotation, as quoted daily for each
business day in New York City (or less frequently if daily quotations shall not
be generally available) to the Corporation by at least three recognized U.S.
Government securities dealers selected by the Corporation.
(5) Except as provided below in this paragraph, the "Twenty Year Constant
Maturity Rate" for each Quarterly Dividend Period shall be the arithmetic
average of the two most recent weekly per annum Twenty Year Average Yields (or
the one weekly per annum Twenty Year Average Yield, if only one such Yield shall
be published during the relevant Calendar Period as provided below), as
published weekly by the Federal Reserve Board during the Calendar Period
immediately prior to the ten calendar days immediately preceding the last day of
February, May, August or November, as the case may be, prior to the Quarterly
Dividend Period for which the dividend rate on this Series is being determined.
In the event that the Federal Reserve Board does not publish such a weekly per
annum Twenty Year Average Yield during such Calendar Period, then the Twenty
Year Constant Maturity Rate for such Dividend Period shall be the arithmetic
average of the two most recent weekly per annum Twenty Year Average Yields (or
the one weekly per annum Twenty Year Average Yield, if only one such Yield shall
be published during the relevant Calendar Period as provided below), as
published weekly during such Calendar Period by any Federal Reserve Bank or by
any U.S. Government department or agency selected by the Corporation. In the
event that a per annum Twenty Year Average Yield shall not be published by any
Federal Reserve Board or by any Federal Reserve Bank or by any U.S. Government
department or agency during such Calendar Period, then the Twenty Year Constant
Maturity Rate for such Dividend Period shall be the arithmetic average of the
two most recent weekly
4
<PAGE>
per annum average yields to maturity (or the one weekly average yield to
maturity, if only one such yield shall be published during the relevant Calendar
Period as provided below) for all of the actively traded marketable U.S.
Treasury fixed interest rate securities (other than Special Securities) then
having maturities of not less than eighteen nor more than twenty-two years, as
published during such Calendar Period by the Federal Reserve Board or, if the
Federal Reserve Board shall not publish such yields, by any Federal Reserve Bank
or by any U.S. Government department or agency selected by the Corporation. In
the event that the Corporation determines in good faith that for any reason the
Corporation cannot determine the Twenty Year Constant Maturity Rate for any
Quarterly Dividend Period as provided above in this paragraph, then the Twenty
Year Constant Maturity Rate for such Dividend Period shall be the arithmetic
average of the per annum average yields to maturity based upon the closing bids
during such Calendar Period for each of the issues of actively traded marketable
U.S. Treasury fixed interest rate securities (other than Special Securities)
with a final maturity date not less than eighteen nor more than twenty-two years
from the date of each such quotation, as quoted daily for each business day in
New York City (or less frequently if daily quotations shall not be generally
available) to the Corporation by at least three recognized U.S. Government
securities dealers selected by the Corporation.
(6) The Treasury Bill Rate, the Ten Year Constant Maturity Rate and the
Twenty Year Constant Maturity Rate shall each be rounded to the nearest five
hundredths of a percentage point.
(7) The dividend rate with respect to each Quarterly Dividend Period will
be calculated as promptly as practicable by the Corporation according to the
appropriate method described herein. The mathematical accuracy of each such
calculation will be confirmed in writing by independent accountants of
recognized standing. The Corporation will cause each dividend rate to be
published in a newspaper of general circulation in New York City prior to the
commencement of the new Quarterly Dividend Period to which it applies and will
cause notice of such dividend rate to be enclosed with the dividend payment
checks next mailed to the holders of shares of this Series.
(8) For purposes of this Section (b), the term
(i) "Calendar Period" shall mean 14 calendar days;
(ii) "Special Securities" shall mean securities which can, at the option of
the holder, be surrendered at face value in payment of any Federal estate tax or
which provide tax benefits to the holder and are priced to reflect such tax
benefits or which were originally issued at a deep or substantial discount;
(iii) "Ten Year Average Yield" shall mean the average yield to maturity
for actively traded marketable U.S. Treasury fixed interest rate securities
(adjusted to constant maturities of ten years); and
5
<PAGE>
(iv) "Twenty Year Average Yield" shall mean the average yield to maturity
for actively traded marketable U.S. Treasury fixed interest rate securities
(adjusted to constant maturities of 20 years).
(9) No full dividends shall be declared or paid or set apart for payment on
Preferred Stock of any series ranking, as to dividends, on a parity with or
junior to this Series for any period unless full cumulative dividends have been
or contemporaneously are declared and paid or declared and a sum sufficient for
the payment thereof set apart for such payment on this Series for all dividend
payment periods terminating on or prior to the date of payment of such full
cumulative dividends. When dividends are not paid in full, as aforesaid, upon
the shares of this Series and any other Preferred Stock ranking on a parity as
to dividends with this Series, all dividends declared upon shares of this Series
and any other Preferred Stock ranking on a parity as to dividends with this
Series shall be declared pro rata so that the amount of dividends declared per
share on this Series and such other Preferred Stock shall in all cases bear to
each other the same ratio that accrued dividends per share on the shares of this
Series and such other Preferred Stock bear to each other. Holders of shares of
this Series shall not be entitled to any dividend, whether payable in cash,
property or stocks, in excess of full cumulative dividends, as herein provided,
on this Series. No interest, or sum of money in lieu of interest, shall be
payable in respect of any dividend payment or payments on this Series which may
be in arrears.
(10) So long as any shares of this Series are outstanding, no dividend
(other than a dividend in Common Stock or in any other stock ranking junior to
this Series as to dividends and upon liquidation and other than as provided in
paragraph (9) of this Section (b)) shall be declared or paid or set aside for
payment or other distribution declared or made upon the Common Stock or upon any
other stock ranking junior to or on a parity with this series as to dividends or
upon liquidation, nor shall any Common Stock or any other stock of the
Corporation ranking junior to or on a parity with this Series as to dividends or
upon liquidation be redeemed, purchased or otherwise acquired for any
consideration (or any moneys paid to or made available for a sinking fund for
the redemption of any shares of any such stock) by the Corporation (except by
conversion into or exchange for stock of the Corporation ranking junior to this
Series as to dividends and upon liquidation) unless, in each case, the full
cumulative dividends on all outstanding shares of this Series shall have been
paid for all past dividend payment periods.
(11) Dividends payable on each share of this Series for each full
Quarterly Dividend Period shall be computed by dividing the dividend rate for
such Quarterly Dividend Period by four and applying such rate against the stated
value per share of this Series. Dividends payable on this Series for any period
less than a full Quarterly Dividend Period shall be computed on the basis of a
360 day year consisting of 30 day months.
6
<PAGE>
(c) Redemption.
-----------
(1) The Corporation, at its option, may redeem shares of this Series, as a
whole or in part, at any time or from time to time, at a redemption price of
$100 per share, plus, in each case, accrued and unpaid dividends thereon to the
date fixed for redemption.
(2) In the event that fewer than all the outstanding shares of this Series
are to be redeemed, the number of shares to be redeemed shall be determined by
the Board and the shares to be redeemed shall be determined by lot or pro rata
as may be determined by the Board or by any other method as may be determined by
the Board in its sole discretion to be equitable.
(3) In the event the Corporation shall redeem shares of this Series, notice
of such redemption shall be given by first class mail, postage prepaid, mailed
not less than 30 nor more than 60 days prior to the redemption date, to each
holder of record of the shares to be redeemed, at such holder's address as the
same appears on the stock register of the Corporation. Each such notice shall
state: (i) the redemption date; (ii) the number of shares of this Series to be
redeemed and, if fewer than all the shares held by such holder are to be
redeemed, the number of such shares to be redeemed from such holder; (iii) the
redemption price; (iv) the place or places where certificates for such shares
are to be surrendered for payment of the redemption price; and (v) that
dividends on the shares to be redeemed will cease to accrue on such redemption
date.
(4) Notice having been mailed as aforesaid, from and after the redemption
date (unless default shall be made by the Corporation in providing money for the
payment of the redemption price) dividends on the shares of this Series so
called for redemption shall cease to accrue, and said shares shall no longer be
deemed to be outstanding, and all rights of the holders thereof as stockholders
of the Corporation (except the right to receive from the Corporation the
redemption price) shall cease. Upon surrender in accordance with said notice of
the certificates for any shares so redeemed (properly endorsed or assigned for
transfer, if the Board shall so require and the notice shall so state), such
shares shall be redeemed by the Corporation at the redemption price aforesaid.
In case fewer than all the shares represented by any such certificate are
redeemed, a new certificate shall be issued representing the unredeemed shares
without cost to the holder thereof.
(5) Any shares of this Series which shall at any time have been redeemed
shall, after such redemption, have the status of authorized but unissued shares
of Preferred Stock, without designation as to series until such shares are once
more designated as part of a particular series by the Board.
(6) Notwithstanding the foregoing provisions of this Section (c), if any
dividends on this Series are in arrears, no shares of this Series shall be
redeemed unless all outstanding shares of this Series are simultaneously
redeemed, and the Corporation shall not purchase or otherwise acquire any shares
of this Series; provided, however, that the foregoing shall not
7
<PAGE>
prevent the purchase or acquisition of shares of this Series pursuant to a
purchase or exchange offer made on the same terms to holders of all outstanding
shares of this Series.
(d) Conversion or Exchange.
-----------------------
The holders of shares of this Series shall not have any rights herein to
convert such shares into or exchange such shares for shares of any other class
or classes or of any other series of any class or classes of capital stock of
the Corporation.
(e) Voting.
-------
The shares of this Series shall not have any voting powers either general
or special, except that
(1) Unless the vote or consent of the holders of a greater number of shares
shall then be required by law, the consent of the holders of at least 66-2/3%
of all of the shares of this Series at the time outstanding, given in person or
by proxy, either in writing or by a vote at a meeting called for the purpose at
which the holders of shares of this Series shall vote together as a separate
class, shall be necessary for authorizing, effecting or validating the
amendment, alteration or repeal of any of the provisions of the Certificate of
Incorporation or of any certificate amendatory thereof or supplemental thereto
(including any Certificate of Designation, Preferences and Rights or any similar
document relating to any series of Preferred Stock) which would adversely affect
the preferences, rights, powers or privileges of this Series;
(2) Unless the vote or consent of the holders of a greater number of shares
shall then be required by law, the consent of the holders of at least 66-2/3% of
all of the shares of this Series and all other series of Preferred Stock ranking
on a parity with shares of this Series, either as to dividends or upon
liquidation, at the time outstanding, given in person or by proxy, either in
writing or by a vote at a meeting called for the purpose at which the holders of
shares of this Series and such other series of Preferred Stock shall vote
together as a single class without regard to series, shall be necessary for
authorizing, effecting or validating the creation, authorization or issue of any
shares of any class of stock of the Corporation ranking prior to the shares of
this Series as to dividends or upon liquidation, or the reclassification of any
authorized stock of the Corporation into any such prior shares, or the creation,
authorization or issue of any obligation or security convertible into or
evidencing the right to purchase any such prior shares;
(3) If at any time a default in preference dividends on the Preferred Stock
shall exist, the number of directors constituting the Board of Directors of the
Corporation shall be increased by two, and the holders of the Preferred Stock of
all series shall have the right at an annual or special meeting of stockholders,
voting together as a single class without regard to series, to the exclusion of
the holders of Common Stock, to elect two directors of the Corporation to fill
such newly created directorships. Such right shall continue until there are
8
<PAGE>
no dividends in arrears upon the Preferred Stock. Each director elected by the
holders of shares of Preferred Stock (herein called a "Preferred Director")
shall continue to serve as such director for the full term for which he shall
have been elected, notwithstanding that prior to the end of such term a default
in preference dividends shall cease to exist. Any Preferred Director may be
removed by, and shall not be removed except by, the vote of the holders of
record of the outstanding shares of Preferred Stock, voting together as a single
class without regard to series, at a meeting of the stockholders, or of the
holders of shares of Preferred Stock, called for that purpose. So long as a
default in any preference dividends on the Preferred Stock shall exist, (A) any
vacancy in the office of a Preferred Director may be filled (except as provided
in the following clause (B)) by an instrument in writing signed by the remaining
Preferred Director and filed with the Corporation and (B) in the case of the
removal of any Preferred Director, the vacancy may be filled by the vote of the
holders of the outstanding shares of Preferred Stock, voting together as a
single class without regard to series, at the same meeting at which such removal
shall be voted. Each director appointed as aforesaid by the remaining Preferred
Director shall be deemed, for all purposes hereof, to be a Preferred Director.
Whenever the term of office of the Preferred Directors shall end and a default
in preference dividends shall no longer exist, the number of directors
constituting the Board of Directors of the Corporation shall be reduced by two.
For the purposes hereof, a "default in preference dividends" on the Preferred
Stock shall be deemed to have occurred whenever the amount of accrued dividends
upon any series of the Preferred Stock shall be equivalent to six full quarter-
yearly dividends or more, and, having so occurred, such default shall be deemed
to exist thereafter until, but only until, all accrued dividends on all shares
of Preferred Stock of each and every series then outstanding shall have been
paid to the end of the last preceding quarterly dividend period.
(f) Liquidation Rights.
-------------------
(1) Upon the dissolution, liquidation or winding up of the Corporation, the
holders of the shares of this Series shall be entitled to receive out of the
assets of the Corporation, before any payment or distribution shall be made on
the Common Stock or on any other class of stock ranking junior to the Preferred
Stock upon liquidation, the amount of $100 per share, plus a sum equal to all
dividends (whether or not earned or declared) on such shares accrued and unpaid
thereon to the date of final distribution.
(2) Neither the sale of all or substantially all the property or business
of the Corporation, nor the merger or consolidation of the Corporation into or
with any other corporation or the merger or consolidation of any other
corporation into or with the Corporation, shall be deemed to be a dissolution,
liquidation or winding up, voluntary or involuntary, for the purposes of this
Section (f).
(3) After the payment to the holders of the shares of this Series of the
full preferential amounts provided for in this Section (f), the holders of this
Series as such shall have no right or claim to any of the remaining assets of
the Corporation.
9
<PAGE>
(4) In the event the assets of the Corporation available for distribution
to the holders of shares of this Series upon any dissolution, liquidation or
winding up of the Corporation, whether voluntary or involuntary, shall be
insufficient to pay in full all amounts to which such holders are entitled
pursuant to paragraph (1) of this Section (f), no such distribution shall be
made on account of any shares of any other class or series of Preferred Stock
ranking on a parity with the shares of this Series upon such dissolution,
liquidation or winding up unless proportionate distributive amounts shall be
paid on account of the shares of this Series, ratably, in proportion to the full
distributable amounts for which holders of all such parity shares are
respectively entitled upon such dissolution, liquidation or winding up.
(5) Upon the dissolution, liquidation or winding up of the Corporation, the
holders of shares of this Series then outstanding shall be entitled to be paid
out of the assets of the Corporation available for distribution to its
stockholders all amounts to which such holders are entitled pursuant to
paragraph (1) of this Section (f) before any payment shall be made to the
holders of any class of capital stock of the Corporation ranking junior upon
liquidation to this Series.
(g) For purposes of this resolution, any stock of any class or classes of
the Corporation shall be deemed to rank:
(1) prior to the shares of this Series, either as to dividends or upon
liquidation, if the holders of such class or classes shall be entitled to the
receipt of dividends or of amounts distributable upon dissolution, liquidation
or winding up of the Corporation, as the case may be, in preference or priority
to the holders of shares of this Series;
(2) on a parity with shares of this Series, either as to dividends or upon
liquidation, whether or not the dividend rates, dividend payment dates or
redemption or liquidation prices per share or sinking fund provisions, if any,
be different from those of this Series, if such stock is the Corporation's
Preferred Stock with Cumulative and Adjustable Dividends, Series B (Without Par
Value), the Corporation's 8.45% Cumulative Preferred Stock, Series E (Stated
Value $625 per share), or the Corporation's 5 3/4% Cumulative Convertible
Preferred Stock, Series B (Stated Value $5,000 per share), or if the holders of
such stock shall be entitled to the receipt of dividends or of amounts
distributable upon dissolution, liquidation or winding up of the Corporation, as
the case may be, in proportion to their respective dividend rates or liquidation
prices, without preference or priority, one over the other, as between the
holders of such stock and the holders of shares of this Series; and
(3) junior to shares of this Series, either as to dividends or upon
liquidation, if such class shall be Common Stock or if the holders of shares of
this Series shall be entitled to receipt of dividends or of amounts
distributable upon dissolution, liquidation or winding up of the Corporation, as
the case may be, in preference or priority to the holders of shares of such
class or classes."
10
<PAGE>
The foregoing Certificate of Voting Powers, Designation, Preferences and
Relative, Participating, Optional and Other Special Rights and the
Qualifications, Limitations or Restrictions relating to this Series shall be
effective at 12:01 a.m. Eastern Standard Time on December 1, 1995 in accordance
with the provisions of Sections 103 and 151(g) of the General Corporation Law of
the State of Delaware.
IN WITNESS WHEREOF, First Chicago NBD Corporation has caused this
certificate to be signed by Verne G. Istock, its Chief Executive Officer, and
the same to be attested by Daniel T. Lis, its Assistant Secretary, this 29th day
of November, 1995.
FIRST CHICAGO NBD CORPORATION
By: \s\ Verne G. Istock
---------------------------------
Title: Chief Executive Officer
ATTEST:
By: \s\ Daniel T. Lis
---------------------------
Assistant Secretary
11
<PAGE>
CERTIFICATE OF THE VOTING POWERS, DESIGNATION, PREFERENCES AND RELATIVE,
PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS, AND THE QUALIFICATIONS,
LIMITATIONS OR RESTRICTIONS THEREOF, WHICH HAVE NOT BEEN SET FORTH IN THE
RESTATED CERTIFICATE OF INCORPORATION OR IN ANY AMENDMENT THEREOF, OF THE
8.45% CUMULATIVE PREFERRED STOCK,
SERIES E
(Stated Value $625 per share)
OF
FIRST CHICAGO NBD CORPORATION
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
The undersigned DOES HEREBY CERTIFY that the following resolution was duly
adopted by the Board of Directors of FIRST CHICAGO NBD CORPORATION, formerly
known as NBD BANCORP, INC., a Delaware corporation (hereinafter called the
"Corporation"), at a meeting duly convened and held on July 11, 1995, at which a
quorum was present and acting throughout:
"RESOLVED, that pursuant to authority conferred upon the Board of Directors
(the "Board") of the Corporation, by the Restated Certificate of Incorporation,
as amended (the "Certificate of Incorporation") of the Corporation, the Board
hereby provides for and authorizes the issuance of a series of Preferred Stock
of the Corporation to consist of 160,000 shares, and hereby fixes the voting
powers, designation, preferences and relative, participating, optional or other
special rights, and the qualifications, limitations or restrictions thereof, of
the shares of such series, in addition to those set forth in the Certificate of
Incorporation, as follows:
(a) Designation.
------------
The designation of the series of Preferred Stock created by this resolution
shall be "8.45% Cumulative Preferred Stock, Series E" (hereinafter called this
"Series") and the number of shares constituting this Series is 160,000. Shares
of this Series shall have a stated value of $625 per share. The number of
authorized shares of this Series may be reduced by further resolution duly
adopted by the Board of Directors and by the filing of a certificate pursuant to
the provisions of the General Corporation Law of the State of Delaware stating
that such reduction has been so authorized, but the number of authorized shares
of this Series shall not be increased.
<PAGE>
(b) Dividend Rate.
--------------
(1) Shares of this Series shall be entitled to receive dividends at a
fixed annual rate of $52.8125 per share. Such dividends shall be cumulative
from October 1, 1995, and shall be payable, when and as declared by the Board of
Directors, on the first day of January, April, July and October of each year,
commencing the first day of January, 1996. Each such dividend shall be paid to
the holders of record of shares of this Series as they appear on the stock
register of the Corporation on the applicable record date, not exceeding 30 days
preceding the payment date thereof, as shall be fixed by the Board of Directors.
Dividends on account of arrears for any past dividend periods may be declared
and paid at any time, without reference to any regular dividend payment date, to
holders of record on such date as may be fixed by the Board of Directors which
shall not exceed 45 days preceding such dividend payment date thereof.
(2) No full dividends shall be declared or paid or set apart for payment
on Preferred Stock of any series ranking, as to dividends, on a parity with this
Series for any period unless full cumulative dividends have been or
contemporaneously are declared and paid or declared and a sum sufficient for the
payment thereof set apart for such payment on this Series for all dividend
payment periods terminating on or prior to the date of payment of such full
cumulative dividends. When dividends are not paid in full, as aforesaid, upon
the shares of this Series and any other Preferred Stock ranking on a parity as
to dividends with this Series, all dividends declared upon shares of this Series
and any other Preferred Stock ranking on a parity as to dividends with this
Series shall be declared pro rata so that the amount of dividends declared per
share on this Series and such other Preferred Stock shall in all cases bear to
each other the same ratio that accrued dividends per share on the shares of this
Series and such other Preferred Stock bear to each other. Holders of shares of
this Series shall not be entitled to any dividend, whether payable in cash,
property or stocks, in excess of full cumulative dividends, as herein provided,
on this Series. No interest, or sum of money in lieu of interest, shall be
payable in respect of any dividend payment or payments on this Series which may
be in arrears.
(3) So long as any shares of this Series are outstanding, no dividend
(other than a dividend in Common Stock or in any other stock ranking junior to
this Series as to dividends and upon liquidation and other than as provided in
paragraph (2) of this Section (b)) shall be declared or paid or set aside for
payment or other distribution declared or made upon the Common Stock or upon any
other stock ranking junior to or on a parity with this Series as to dividends or
upon liquidation, nor shall any Common Stock or any other stock of the
Corporation ranking junior to or on a parity with this Series as to dividends or
upon liquidation be redeemed, purchased or otherwise acquired for any
consideration (or any moneys paid to or made available for a sinking fund for
the redemption of any shares of any such stock) by the Corporation (except by
conversion into or exchange for stock of the Corporation ranking junior to this
Series as to dividends and upon liquidation) unless, in each case, the full
cumulative dividends on all outstanding shares of this Series shall have been
paid for all past dividend payment periods.
2
<PAGE>
(4) Dividends payable on this Series for any period less than a full
quarterly dividend period shall be computed on the basis of a 360 day year
consisting of twelve 30-day months. The amount of dividends payable on shares
of this Series for each full quarterly dividend period shall be computed by
dividing by four the annual rate per share set forth in Section (b)(1).
(c) Redemption.
-----------
(1) The shares of this Series shall not be redeemable prior to November
16, 1997. On and after November 16, 1997, the Corporation, at its option, and
with the prior consent of the Board of Governors of the Federal Reserve System
may redeem shares of this Series, as a whole or in part, at any time or from
time to time, at a redemption price per share of $625, plus, in each case,
accrued and unpaid dividends thereon to the date fixed for redemption.
(2) In the event that fewer than all the outstanding shares of this Series
are to be redeemed, the number of shares to be redeemed shall be determined by
the Board of Directors and the shares to be redeemed shall be determined by lot
or pro rata as may be determined by the Board of Directors or by any other
method as may be determined by the Board of Directors in its sole discretion to
be equitable.
(3) In the event the Corporation shall redeem shares of this Series,
notice of such redemption shall be given by first class mail, postage prepaid,
mailed not less than 30 nor more than 60 days prior to the redemption date, to
each holder of record of the shares to be redeemed, at such holder's address as
the same appears on the stock register of the Corporation. Each such notice
shall state: (i) the redemption date; (ii) the number of shares of this Series
to be redeemed and, if fewer than all the shares held by such holder are to be
redeemed, the number of such shares to be redeemed from such holder; (iii) the
redemption price; (iv) the place or places where certificates for such shares
are to be surrendered for payment of the redemption price; and (v) that
dividends on the shares to be redeemed will cease to accrue on such redemption
date.
(4) Notice having been mailed as aforesaid, from and after the redemption
date (unless default shall be made by the Corporation in providing money for the
payment of the redemption price) dividends on the shares of this Series so
called for redemption shall cease to accrue, and said shares shall no longer be
deemed to be outstanding, and all rights of the holders thereof as stockholders
of the Corporation (except the right to receive from the Corporation the
redemption price) shall cease. Upon surrender in accordance with said notice of
the certificates for any shares so redeemed (properly endorsed or assigned for
transfer, if the Board of Directors shall so require and the notice shall so
state), such shares shall be redeemed by the Corporation at the redemption price
aforesaid. In case fewer than all the shares represented by any such
certificate are redeemed, a new certificate shall be issued representing the
unredeemed shares without cost to the holder thereof.
3
<PAGE>
(5) Any shares of this Series which shall at any time have been redeemed
shall, after such redemption, have the status of authorized but unissued shares
of Preferred Stock, without designation as to series until such shares are once
more designated as part of a particular series by the Board of Directors.
(6) Notwithstanding the foregoing provisions of this Section (c), if any
dividends on this Series are in arrears, no shares of this Series shall be
redeemed unless all outstanding shares of this Series are simultaneously
redeemed, and the Corporation shall not purchase or otherwise acquire any shares
of this Series; provided, however, that the foregoing shall not prevent the
purchase or acquisition of shares of this Series pursuant to a purchase or
exchange offer made on the same terms to holders of all outstanding shares of
this Series.
(d) Conversion.
-----------
The holders of shares of this Series shall not have any rights herein to
convert such shares into or exchange such shares for shares of any other class
or classes or of any other series of any class or classes of capital stock of
the Corporation.
(e) Voting.
-------
The shares of this Series shall not have any voting powers either general
or special, except that:
(1) Unless the vote or consent of the holders of a greater number of
shares shall then be required by law, the consent of the holders of at least 66
2/3% of all of the shares of this Series at the time outstanding, given in
person or by proxy, either in writing or by a vote at a meeting called for the
purpose at which the holders of shares of this Series shall vote together as a
separate class, shall be necessary for authorizing, effecting or validating the
amendment, alteration or repeal of any of the provisions of the Certificate of
Incorporation or of any certificate amendatory thereof or supplemental thereto
(including any Certificate of Designation, Preferences and Rights or any similar
document relating to any series of Preferred Stock) which would adversely affect
the preferences, rights, powers or privileges of this Series;
(2) Unless the vote or consent of the holders of a greater number of
shares shall then be required by law, the consent of the holders of at least 66
2/3% of all of the shares of this Series and all other series of Preferred Stock
ranking on a parity with shares of this Series, either as to dividends or upon
liquidation, at the time outstanding, given in person or by proxy, either in
writing or by a vote at a meeting called for the purpose at which the holders of
shares of this Series and such other series of Preferred Stock shall vote
together as a single class without regard to series, shall be necessary for
authorizing, effecting or validating the creation, authorization or issue of any
shares of any class of stock of the Corporation ranking prior to the shares of
this Series as to dividends or upon liquidation, or the reclassification of any
authorized stock of the Corporation into any such prior shares, or
4
<PAGE>
the creation, authorization or issue of any obligation or security convertible
into or evidencing the right to purchase any such prior shares;
(3) If at any time a default in preference dividends (as defined below) on
the Preferred Stock shall exist, the number of directors constituting the Board
of Directors of the Corporation shall be increased by two, and the holders of
the Preferred Stock of all series shall have the right at an annual or special
meeting of stockholders voting together as a single class without regard to
series, to the exclusion of the holders of Common Stock, to elect two directors
of the Corporation to fill such newly created directorships. Such right shall
continue until there are no dividends in arrears upon the Preferred Stock. Each
director elected by the holders of shares of Preferred Stock (herein called a
"Preferred Director") shall continue to serve as such director for the full term
for which he shall have been elected, notwithstanding that prior to the end of
such term a default in preference dividends shall cease to exist. Any Preferred
Director may be removed by, and shall not be removed except by, the vote of the
holders of record of the outstanding shares of Preferred Stock, voting together
as a single class without regard to series, at a meeting of the stockholders, or
of the holders of shares of Preferred Stock, called for that purpose. So long
as a default in any preference dividends on the Preferred Stock shall exist, (i)
any vacancy in the office of a Preferred Director may be filled (except as
provided in the following clause (ii)) by an instrument in writing signed by the
remaining Preferred Director and filed with the Corporation and (ii) in the case
of the removal of any Preferred Director, the vacancy may be filled by the vote
of the holders of the outstanding shares of Preferred Stock, voting together as
a single class without regard to series, at the same meeting at which such
removal shall be voted. Each director appointed as aforesaid by the remaining
Preferred Director shall be deemed, for all purposes hereof, to be a Preferred
Director. Whenever the term of office of the Preferred Directors shall end and
a default in preference dividends shall no longer exist, the number of directors
constituting the Board of Directors of the Corporation shall be reduced by two.
For the purposes hereof, a "default in preference dividends" on the Preferred
Stock shall be deemed to have occurred whenever the amount of accrued dividends
upon any series of the Preferred Stock shall be equivalent to six full quarter-
yearly dividends or more, and, having so occurred, such default shall be deemed
to exist thereafter until, but only until, all accrued dividends on all shares
of Preferred Stock of each and every series then outstanding shall have been
paid to the end of the last preceding quarterly dividend period.
(4) A holder of shares of this Series shall be entitled to one vote per
share of the Series held by him when such holder is permitted to vote pursuant
to the foregoing.
(f) Liquidation Rights.
-------------------
(1) Upon the dissolution, liquidation or winding up of the Corporation,
the holders of the shares of this Series shall be entitled to receive out of the
assets of the Corporation, before any payment or distribution shall be made on
the Common Stock or on any other class of stock ranking junior to the Preferred
Stock upon liquidation, the amount of $625 per share,
5
<PAGE>
plus a sum equal to all dividends (whether or not earned or declared) on such
shares accrued and unpaid thereon to the date of final distribution.
(2) Neither the sale of all or substantially all the property or business
of the Corporation, nor the merger or consolidation of the Corporation into or
with any other corporation or the merger or consolidation of any other
corporation into or with the Corporation, shall be deemed to be a dissolution,
liquidation or winding up, voluntary or involuntary, for the purposes of this
Section (f).
(3) After the payment to the holders of the shares of this Series of the
full preferential amounts provided for in this Section (f), the holders of this
Series as such shall have no right or claim to any of the remaining assets of
the Corporation.
(4) In the event the assets of the Corporation available for distribution
to the holders of shares of this Series upon any dissolution, liquidation or
winding up of the Corporation, whether voluntary or involuntary, shall be
insufficient to pay in full all amounts to which such holders are entitled
pursuant to paragraph (1) of this Section (f), no such distribution shall be
made on account of any shares of any other class or series of Preferred Stock
ranking on a parity with the shares of this Series upon such dissolution,
liquidation or winding up unless proportionate distributive amounts shall be
paid on account of the shares of this Series, ratably, in proportion to the full
distributable amounts for which holders of all such parity shares are
respectively entitled upon such dissolution, liquidation or winding up.
(5) Upon the dissolution, liquidation or winding up of the Corporation,
the holders of shares of this Series then outstanding shall be entitled to be
paid out of the assets of the Corporation available for distribution to its
stockholders all amounts to which such holders are entitled pursuant to
paragraph (1) of this Section (f) before any payment shall be made to the
holders of any class of capital stock of the Corporation ranking junior upon
liquidation to this Series.
(g) Priority.
---------
For purposes of this resolution, any stock of any class or classes of the
Corporation shall be deemed to rank:
(1) prior to the shares of this Series, either as to dividends or upon
liquidation, if the holders of such class or classes shall be entitled to the
receipt of dividends or of amounts distributable upon dissolution, liquidation
or winding up of the Corporation, as the case may be, in preference or priority
to the holder of shares of this Series;
(2) on a parity with shares of this Series, either as to dividends or upon
liquidation, whether or not the dividend rates, dividend payment dates or
redemption or liquidation prices per share or sinking fund provisions, if any,
be different from those of this Series, if such stock is the Corporation's
Preferred Stock with Cumulative and Adjustable Dividends, Series
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B (Without Par Value), Preferred Stock with Cumulative and Adjustable Dividends,
Series C (Without Par Value) or the Corporation's 5 3/4% Cumulative Convertible
Preferred Stock, Series B (Stated Value $5,000 per share), or if the holders of
such stock shall be entitled to the receipt of dividends or of amounts
distributable upon dissolution, liquidation or winding up of the Corporation, as
the case may be, in proportion to their respective dividend rates or liquidation
prices, without preference or priority, one over the other, as between the
holders of such stock and the holders of shares of this Series; and
(3) junior to shares of this Series, either as to dividends or upon
liquidation, if such class shall be Common Stock or if the holders of shares of
this Series shall be entitled to receipt of dividends or of amounts
distributable upon dissolution, liquidation or winding up of the Corporation, as
the case may be, in preference or priority to the holders of shares of such
class or classes.
(h) Sinking or Retirement Fund.
---------------------------
The shares of this Series shall not be entitled to the benefit of a sinking
or retirement fund to be applied to the purchase or redemption of such stock."
7
<PAGE>
The foregoing Certificate of Voting Powers, Designation, Preferences and
Relative, Participating, Optional and Other Special Rights and the
Qualifications, Limitations or Restrictions relating to this Series shall be
effective at 12:01 a.m. Eastern Standard Time on December 1, 1995 in accordance
with the provisions of Sections 103 and 151(g) of the General Corporation Law of
the State of Delaware.
IN WITNESS WHEREOF, First Chicago NBD Corporation has caused this
certificate to be signed by Verne G. Istock, its Chief Executive Officer, and
the same to be attested by Daniel T. Lis, its Assistant Secretary, this 29th day
of November, 1995.
FIRST CHICAGO NBD CORPORATION
By: \s\ Verne G. Istock
---------------------------------
Title: Chief Executive Officer
ATTEST:
By: \s\ Daniel T. Lis
---------------------------
Assistant Secretary
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CERTIFICATE OF THE VOTING POWERS, DESIGNATION, PREFERENCES AND RELATIVE,
PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS, AND THE QUALIFICATIONS,
LIMITATIONS OR RESTRICTIONS THEREOF, WHICH HAVE NOT BEEN SET FORTH IN THE
RESTATED CERTIFICATE OF INCORPORATION OR IN ANY AMENDMENT THEREOF, OF THE
5-3/4% CUMULATIVE CONVERTIBLE PREFERRED STOCK,
SERIES B
(Stated Value $5,000 per share)
OF
FIRST CHICAGO NBD CORPORATION
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
The undersigned DOES HEREBY CERTIFY that the following resolution was duly
adopted by the Board of Directors of FIRST CHICAGO NBD CORPORATION, formerly
known as NBD BANCORP, INC., a Delaware corporation (hereinafter called the
"Corporation"), at a meeting duly convened and held on July 11, 1995, at which a
quorum was present and acting throughout:
"RESOLVED, that pursuant to authority conferred upon the Board of Directors
(the "Board") of the Corporation by the Restated Certificate of Incorporation,
as amended (the "Certificate of Incorporation") of the Corporation, the Board
hereby provides for and authorizes the issuance of a series of Preferred Stock
of the Corporation to consist of 40,000 shares, and hereby fixes the voting
powers, designation, preferences and relative, participating, optional or other
special rights, and the qualifications, limitations or restrictions thereof, of
the shares of such series, in addition to those set forth in the Certificate of
Incorporation, as follows:
(a) Designation.
------------
The designation of the series of Preferred Stock created by this resolution
shall be "5-3/4% Cumulative Convertible Preferred Stock, Series B" (hereinafter
called this "Series") and the number of shares constituting this Series is
40,000. Shares of this Series shall have a stated value of $5,000 per share.
The number of authorized shares of this Series may be reduced by further
resolution duly adopted by the Board of Directors and by the filing of a
certificate pursuant to the provisions of the General Corporation Law of the
State of Delaware stating that such reduction has been so authorized, but the
number of authorized shares of this Series shall not be increased.
<PAGE>
(b) Dividend Rate.
--------------
(1) Shares of this Series shall be entitled to receive dividends at a
fixed annual rate of $287.50 per share. Such dividends shall be cumulative from
October 1, 1995, and shall be payable, when and as declared by the Board of
Directors, on the first day of January, April, July and October of each year,
commencing the first day of January, 1996. Each such dividend shall be paid to
the holders of record of shares of this Series as they appear on the stock
register of the Corporation on the applicable record date, not exceeding 30 days
preceding the payment date thereof, as shall be fixed by the Board of Directors.
Dividends on account of arrears for any past dividend periods may be declared
and paid at any time, without reference to any regular dividend payment date, to
holders of record on such date as may be fixed by the Board of Directors which
shall not exceed 45 days prior to such dividend payment date thereof.
(2) No full dividends shall be declared or paid or set apart for payment
on Preferred Stock of any series ranking, as to dividends, on a parity with this
Series for any period unless full cumulative dividends have been or
contemporaneously are declared and paid or declared and a sum sufficient for the
payment thereof set apart for such payment on this Series for all dividend
payment periods terminating on or prior to the date of payment of such full
cumulative dividends. When dividends are not paid in full, as aforesaid, upon
the shares of this Series and any other Preferred Stock ranking on a parity as
to dividends with this Series, all dividends declared upon shares of this Series
and any other Preferred Stock ranking on a parity as to dividends with this
Series shall be declared pro rata so that the amount of dividends declared per
share on this Series and such other Preferred Stock shall in all cases bear to
each other the same ratio that accrued dividends per share on the shares of this
Series and such other Preferred Stock bear to each other. Holders of shares of
this Series shall not be entitled to any dividend, whether payable in cash,
property or stocks, in excess of full cumulative dividends, as herein provided,
on this Series. No interest, or sum of money in lieu of interest, shall be
payable in respect of any dividend payment or payments on this Series which may
be in arrears.
(3) So long as any shares of this Series are outstanding, no dividend
(other than a dividend in Common Stock or in any other stock ranking junior to
this Series as to dividends and upon liquidation and other than as provided in
paragraph (2) of this Section (b)) shall be declared or paid or set aside for
payment or other distribution declared or made upon the Common Stock or upon any
other stock ranking junior to or on a parity with this Series as to dividends or
upon liquidation, nor shall any Common Stock or any other stock of the
Corporation ranking junior to or on a parity with this Series as to dividends or
upon liquidation be redeemed, purchased or otherwise acquired for any
consideration (or any moneys paid to or made available for a sinking fund for
the redemption of any shares of any such stock) by the Corporation (except by
conversion into or exchange for stock of the Corporation ranking junior to this
series as to dividends and upon liquidation) unless, in each case, the full
cumulative dividends on all outstanding shares of this series shall have been
paid for all past dividend payment periods.
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<PAGE>
(4) Dividends payable on this Series for any period less than a full
quarterly dividend period shall be computed on the basis of a 360 day year
consisting of twelve 30-day months. The amount of dividends payable on shares
of this Series for each full quarterly dividend period shall be computed by
dividing by four the annual rate per share set forth in Section (b)(1).
(c) Redemption.
-----------
(1) The shares of this series shall not be redeemable prior to April 1,
1997. On and after April 1, 1997, the Corporation, at its option, and with the
prior consent of the Board of Governors of the Federal Reserve System may redeem
shares of this Series, as a whole or in part, at any time or from time to time,
at a redemption price as set forth below, plus, in each case, accrued and unpaid
dividends thereon to the date fixed for redemption:
If Redeemed During the
Twelve-Month Period Redemption Price
Beginning on April 1, per share
--------------------- ----------------
1997 $5,172.50
1998 5,143.75
1999 5,115.00
2000 5,086.25
2001 5,057.50
2002 5,028.75
2003 and thereafter 5,000.00
(2) In the event that fewer than all the outstanding shares of this series
are to be redeemed, the number of shares to be redeemed shall be determined by
the Board of Directors and the shares to be redeemed shall be determined by lot
or pro rata as may be determined by the Board of Directors or by any other
method as may be determined by the Board of Directors in its sole discretion to
be equitable.
(3) In the event the Corporation shall redeem shares of this Series, notice
of such redemption shall be given by first class mail, postage prepaid, mailed
not less than 30 nor more than 60 days prior to the redemption date, to each
holder of record of the shares to be redeemed, at such holder's address as the
same appears on the stock register of the Corporation. Each such notice shall
state: (i) the redemption date; (ii) the number of shares of this Series to be
redeemed and, if fewer than all the shares held by such holder are to be
redeemed, the number of such shares to be redeemed from such holder; (iii) the
redemption price; (iv) the then current Conversion Price (as defined herein),
together with a statement that all conversion rights with respect to the shares
of the Series called for redemption will terminate at the close of business on
the fifth Business Day preceding the redemption date; (v) the place or places
where certificates for such shares are to be surrendered for payment of the
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<PAGE>
redemption price; and (vi) that dividends on the shares to be redeemed will
cease to accrue on such redemption date.
(4) Notice having been mailed as aforesaid, from and after the redemption
date (unless default shall be made by the Corporation in providing money for the
payment of the redemption price) dividends on the shares of this Series so
called for redemption shall cease to accrue, and said shares shall no longer be
deemed to be outstanding, and all rights of the holders thereof as stockholders
of the Corporation (except the right to receive from the Corporation the
redemption price) shall cease. Upon surrender in accordance with said notice of
the certificates for any shares so redeemed (properly endorsed or assigned for
transfer, if the Board of Directors shall so require and the notice shall so
state), such shares shall be redeemed by the Corporation at the redemption price
aforesaid. In case fewer than all the shares represented by any such
certificate are redeemed, a new certificate shall be issued representing the
unredeemed shares without cost to the holder thereof.
(5) Any shares of this Series which shall at any time have been redeemed
shall, after such redemption, have the status of authorized but unissued shares
of Preferred Stock, without designation as to series until such shares are once
more designated as part of a particular series by the Board of Directors.
(6) Notwithstanding the foregoing provisions of this Section (c), if any
dividends on this Series are in arrears, no shares of this Series shall be
redeemed unless all outstanding shares of this Series are simultaneously
redeemed, and the Corporation shall not purchase or otherwise acquire any shares
of this Series; provided, however, that the foregoing shall not prevent the
purchase or acquisition of shares of this Series (i) upon the conversion of
shares of the Series into shares of Common Stock pursuant to Section (d) hereof
or (ii) pursuant to a purchase or exchange offer made on the same terms to
holders of all outstanding shares of this Series.
(d) Conversion.
-----------
(1) (A) Subject to the provisions for adjustment hereinafter set forth,
each share of the Series shall be convertible at the option of the holder
thereof, in whole or part, in the manner hereinafter set forth, into fully paid
and nonassessable shares of Common Stock (as hereinafter defined) at the
conversion price, determined as hereinafter provided, in effect on the date of
conversion, each share of the Series being credited at its stated value;
provided that if any shares of the Series are called for redemption, the
conversion rights pertaining thereto will terminate at the close business on the
fifth Business Day preceding the redemption date, unless the Corporation shall
default in providing money for the payment of the redemption price as provided
in Section (c) hereof. The price at which shares of Common Stock shall be
delivered upon conversion of the shares of the Series (hereinafter referred to
as the "Conversion Price") shall be initially $29.6271 per share of Common
Stock. The Conversion Price shall be adjusted in certain instances as provided
in paragraph (2) of this Section (d).
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<PAGE>
(B) Any holder of shares of the Series desiring to convert such stock into
shares of Common Stock shall surrender the certificate or certificates for the
shares of the Series being converted, duly endorsed or assigned to the
Corporation or in blank, at the principal office of the Corporation for that
purpose, accompanied by a written notice of conversion specifying the number of
shares of the Series to be converted and the name or names in which such holder
wishes the certificate or certificates for shares of Common Stock to be issued;
in case such notice shall specify a name or names other than that of such
holder, such notice shall be accompanied by payment of all transfer taxes
payable upon the issue of shares of Common Stock in such name or names. In case
less than all of the shares of the Series represented by a certificate are to be
converted by a holder, upon such conversion the Corporation shall issue and
deliver or cause to be issued and delivered to such holder a certificate or
certificates for the shares of the Series not so converted. The holders of
shares of the Series at the close of business on a dividend payment record date
shall be entitled to receive the dividend payable on such shares of the Series
(except shares of the Series redeemed on a redemption date between such record
date and the dividend payment date) on the corresponding dividend payment date
notwithstanding the subsequent conversion thereof or the Corporation's default
in payment of the dividend due on such dividend payment date. However, shares
of the Series surrendered for conversion during the period from the close of
business on any dividend payment record date for the Series to the opening of
business on the corresponding dividend payment date (except shares of the Series
called for redemption on a redemption date after the dividend payment record
date and on or before the fifth business day following the dividend payment
date) must be accompanied by payment of an amount equal to the dividend payable
on such shares of the Series on such dividend payment date. A holder of shares
of the Series on a dividend payment record date who (or whose transferee)
converts shares of the Series on a dividend payment date will receive the
dividend payable on such shares of the Series by the Corporation on such date,
and the converting holder need not include payment in the amount of such
dividend upon surrender of shares of the Series for conversion. Except as
provided above, no payment or adjustment will be made on account of accrued or
unpaid dividends upon the conversion of shares of the Series.
(C) As promptly as practicable after the surrender of certificates for
shares of the Series as aforesaid, the Corporation shall issue and shall deliver
at such office to such holder, or on his or her written order, a certificate or
certificates for the number of full shares of Common Stock issuable upon the
conversion of such share in accordance with the provisions of this Section (d),
and any fractional interest in respect of a share of Common Stock arising upon
such conversion shall be promptly settled as provided in paragraph (11) of this
Section (d).
(D) Each conversion shall be deemed to have been effected immediately prior
to the close of business on the date on which the certificates for shares of the
Series shall have been surrendered and such notice (and if applicable, payment
of an amount equal to the dividend payable on such shares) received by the
Corporation as aforesaid; the shares of the Series so surrendered for conversion
shall no longer be deemed to be outstanding and all rights with respect to such
shares of the Series shall cease, except the right of the holders thereof to
5
<PAGE>
receive full shares of Common Stock in exchange therefor and payment for any
fractional shares; and the person or persons in whose name or names any
certificate or certificates for shares of Common Stock shall be issuable upon
such conversion shall be deemed to have become the holder or holders of record
of the shares represented thereby at such time on such date and such conversion
shall be at the Conversion Price in effect at such time on such date, unless the
stock transfer books of the Corporation shall be closed on that date, in which
event such person or persons shall be deemed to have become such holder or
holders of record at the close of business on the next succeeding day on which
stock transfer books are open, but such conversion shall be at the Conversion
Price in effect on the date upon which such shares shall have been surrendered
and such notice received by the Corporation. All shares of Common Stock
delivered upon conversion of shares of the Series will upon delivery be duly and
validly issued and fully paid and nonassessable.
(2) The Conversion Price shall be adjusted from time to time as follows:
(A) In case the Corporation shall pay or make a dividend or other
distribution on any class of capital stock of the Corporation in shares of
Common Stock, the Conversion Price in effect at the opening of business on the
date following the date fixed for the determination of stockholders entitled to
receive such dividend or other distribution shall be reduced by multiplying such
Conversion Price by a fraction of which the numerator shall be the number of
shares of Common Stock outstanding at the close of business on the date fixed
for such determination, and the denominator shall be the sum of (i) such number
of shares and (ii) the total number of shares constituting such dividend or
other distribution, such reduction to become effective immediately after the
opening of business on the date following the date fixed for such determination.
(B) In case the Corporation shall issue rights or warrants to all holders
of its shares of Common Stock entitling them to subscribe for or purchase Common
Stock at a price per share less than the current market price per share
(determined as provided in paragraph (3)) of the Common Stock on the date fixed
for the determination of stockholders entitled to receive such rights or
warrants, the Conversion Price in effect at the opening of business on the date
following the date fixed for such determination shall be reduced by multiplying
such Conversion Price by a fraction of which the numerator shall be the sum of
(i) the number of shares of Common Stock outstanding at the close of business on
the date fixed for such determination plus (ii) the number of shares of Common
Stock which the aggregate offering price of the total number of shares of Common
Stock so offered for subscription or purchase would purchase at such current
market price, and the denominator shall be the sum of (x) the number of shares
of Common Stock outstanding at the close of business on the date fixed for such
determination plus (y) the number of shares of Common Stock so offered for
subscription or purchase, such reduction to become effective immediately after
the opening of business on the date following the date fixed for such
determination.
(C) In case the Corporation shall, by dividend or otherwise, distribute to
all holders of shares of Common Stock evidences of indebtedness or assets
(including securities, but
6
<PAGE>
excluding any rights or warrants referred to in paragraph (2)(B), any dividend
or distribution paid in cash out of the surplus or retained earnings of the
Corporation and any dividend or distribution referred to in paragraph (2)(A)),
the Conversion Price shall be adjusted so that the same shall equal the price
determined by multiplying the Conversion Price in effect immediately prior to
the close of business on the date fixed for the determination of stockholders
entitled to receive such distribution by a fraction of which the numerator shall
be the current market price per share (determined as provided in paragraph (3))
of the Common Stock on the date fixed for such determination, less the then fair
market value (as determined by the Board of Directors of the Corporation, whose
determination shall be conclusive) of the portion of the assets or evidences of
indebtedness so distributed allocable to one share of Common Stock, and the
denominator shall be such current market price per share of Common Stock, such
adjustment to become effective immediately prior to the opening of business on
the day following the date fixed for the determination of stockholders entitled
to receive such distribution. Notwithstanding the foregoing, in the event that
the Corporation shall distribute or shall have distributed any rights or
warrants to acquire capital stock ("Rights") pursuant to this subparagraph (C),
the distribution of separate certificates representing the Rights subsequent to
their initial distribution (whether or not the initial distribution of the
Rights shall have occurred prior to the date of the issuance of the Series)
shall be deemed to be the distribution of the Rights for purposes of this
subparagraph (C); provided that the Corporation may, in lieu of making any
adjustment pursuant to this subparagraph (C) upon a distribution of separate
certificates representing the Rights, make proper provision so that each holder
of the Series who converts the shares of this Series (or any portion hereof) (i)
on or before the record date for such distribution of separate certificates
shall be entitled to receive upon conversion shares of Common Stock issued with
Rights and (ii) after such record date and prior to the expiration, redemption
or termination of the Rights shall be entitled to receive upon conversion, in
addition to the shares of Common Stock issuable upon conversion, the same number
of Rights as would a holder of the number of shares of Common Stock that the
shares of such Series so converted would have entitled the holder thereof to
purchase in accordance with the terms and provisions applicable to the Rights if
the shares of such Series were converted immediately prior to the record date
for such distribution. Common Stock owned by or held for the account of the
Corporation or any majority owned subsidiary shall not be deemed outstanding for
the purpose of any adjustment required under this subparagraph (C).
(D) In case the outstanding shares of Common Stock shall be subdivided into
a greater number of shares, the Conversion Price in effect at the opening of
business on the date following the date upon which such subdivision becomes
effective shall be proportionately reduced, and, conversely, in case outstanding
shares of Common Stock shall each be combined into a smaller number of shares,
the Conversion Price in effect at the opening of business on the date following
the date upon which such combination becomes effective shall be proportionately
increased, such reduction or increase, as the case may be, to become effective
immediately after the opening of business on the day following the date upon
which such subdivision or combination becomes effective.
7
<PAGE>
(E) The reclassification of Common Stock into securities other than Common
Stock (other than any reclassification upon a consolidation or merger to which
paragraph (6) applies) shall be deemed to involve (i) a distribution of such
securities other than Common Stock to all holders of Common Stock (and the
effective date of such reclassification shall be deemed to be "the date fixed
for the determination of stockholders entitled to receive such distribution" and
the "date fixed for such determination" within the meaning of paragraph (2)(C)),
and (ii) a subdivision or combination, as the case may be, of the number of
shares of Common Stock outstanding immediately prior to such reclassification
into the number of shares of Common Stock outstanding immediately thereafter
(and the effective date of such reclassification shall be deemed to be "the day
upon which such subdivision becomes effective," or "the day upon which such
combination becomes effective," as the case may be, and "the day upon which such
subdivision or combination becomes effective" within the meaning of paragraph
(2)(D) of this Section (d)).
(3) For the purpose of any computation under paragraphs (2)(B) and 2(C),
the current market price per share of Common Stock on any day shall be deemed to
be the average of the daily Closing Prices (as hereinafter defined) per share of
Common Stock for the 30 consecutive Trading Days (as hereinafter defined) ending
on the fifth Trading Day before the day in question.
(4) Notwithstanding the provisions of paragraph (2) above, no adjustment in
the Conversion Price shall be required unless such adjustment (plus any
adjustments not previously made by reason of this paragraph (4)) would require
an increase or decrease of at least 1% in such price; provided, however, that
any adjustments which by reason of this paragraph (4) are not required to be
made shall be carried forward and taken into account in any subsequent
adjustment. Notwithstanding any other provisions of this Section (d), the
Corporation shall not be required to make any adjustment of the Conversion Price
for the issuance of any shares of Common Stock pursuant to any plan providing
for the reinvestment of dividends or interest payable on securities of the
Corporation and the investment of additional optional amounts in shares of
Common Stock under such plan. All calculations under this Section (d) shall be
made to the nearest 1/100 of a cent (with $.00005 being rounded upward) or to
the nearest 1/10,000 of a share (with .00005 of a share being rounded upward),
as the case may be.
(5) The Corporation may make such reductions in the Conversion Price, in
addition to those required by this Section (d), as it considers to be advisable
in order to avoid or diminish any income tax to any holder of shares of Common
Stock resulting from any dividend or distribution of stock or issuance of rights
or warrants to purchase or subscribe for stock or from any event treated as such
for income tax purposes or for any other reasons. The Corporation shall have
the power to resolve any ambiguity or correct any error in this Section (d) and
its actions in so doing shall be final and conclusive.
(6) In case the Corporation shall effect any capital reorganization of the
Common Stock (other than a subdivision, combination, capital reorganization or
reclassification
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<PAGE>
provided for in paragraph (2)) or shall consolidate, merge or engage in a
statutory share exchange with or into any other corporation (other than a
consolidation, merger or share exchange in which the Corporation is the
surviving corporation and each share of Common Stock outstanding immediately
prior to such consolidation or merger is to remain outstanding immediately after
such consolidation or merger) or shall sell or transfer all or substantially all
its assets to any other corporation, lawful provision shall be made as a part of
the terms of such transaction whereby the holders of shares of the Series shall
receive upon conversion thereof, in lieu of each share of Common Stock which
would have been issuable upon conversion of such stock if converted immediately
prior to the consummation of such transaction, the same kind and amount of stock
(or other securities, cash or property, if any) as may be issuable or
distributable in connection with such transaction with respect to each share of
Common Stock outstanding at the effective time of such transaction subject to
subsequent adjustments for subsequent stock dividends and distributions,
subdivisions or combinations of shares, capital reorganizations,
reclassification, consolidations, mergers or share exchanges, as nearly
equivalent as possible to the adjustments provided for in this Section (d).
(7) Whenever the Conversion Price is adjusted as herein provided:
(A) the Corporation shall compute the adjusted Conversion Price and shall
cause to be prepared a certificate signed by the chief financial or accounting
officer of the Corporation setting forth the adjusted Conversion Price and
showing in reasonable detail the facts upon which such adjustment is based and
the computation thereof and such certificate shall forthwith be filed with each
transfer agent for the Series; and
(B) a notice stating that the Conversion Price has been adjusted and
setting forth the adjusted Conversion Price shall, as soon as practicable, be
mailed to the holders of record of outstanding shares of the Series.
(8) In case:
(A) the Corporation shall declare a dividend or other distribution on the
Common Stock other than in cash out of its surplus or retained earnings;
(B) the Corporation shall authorize the granting to the holders of the
Common Stock of rights or warrants entitling them to subscribe for or purchase
any shares of capital stock of any class or of any other rights;
(C) of any reclassification of the Common Stock (other than a subdivision
or combination of outstanding shares of Common Stock), or of any consolidation,
merger or share exchange to which the Corporation is a party and for which
approval of any stockholders of the Corporation is required, or of the sale or
transfer of all or substantially all the assets of the Corporation; or
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<PAGE>
(D) of the voluntary or involuntary liquidation, dissolution or winding up
of the Corporation;
then the Corporation shall cause to be mailed to each transfer agent for the
Series and to the holders of record of the outstanding shares of the Series, at
least 20 days (or 10 days in any case specified in paragraph (A) or (B) above)
prior to the applicable record or effective date hereinafter specified, a notice
stating (i) the date as of which the holders of record of shares of Common Stock
to be entitled to such dividend, distribution, rights or warrants are to be
determined, or (ii) the date on which such reclassification, consolidation,
merger, share exchange, sale, transfer, liquidation, dissolution or winding up
is expected to become effective and the date as of which it is expected that
holders of record of Common Stock shall be entitled to exchange their shares for
securities or other property, if any, deliverable upon such reclassification,
consolidation, merger, share exchange, sale, transfer, liquidation, dissolution
or winding up. Such notice shall also state whether such transaction will
result in any adjustment in the Conversion Price applicable to the Series and,
if so, shall state what the adjusted Conversion Price will be and when it will
become effective. Neither the failure to give the notice required by this
paragraph (8), nor any defect therein, to any particular holder shall affect the
sufficiency of the notice or the legality or validity of the proceedings
described in paragraphs (8)(A) through (8)(D).
(9) Any shares of this Series which shall at any time have been converted
shall, after such conversion, have the status as authorized but unissued shares
of Preferred Stock, without designation as to series until such shares are once
more designated as part of a particular series by the Board of Directors. The
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock for the purpose of issuance upon conversion
of shares of the Series, the full number of shares of Common Stock then issuable
upon the conversion of all shares of the Series then outstanding and shall take
all action necessary so that shares of Common Stock so issued will be validly
issued, fully paid and nonassessable; provided, however, that nothing contained
herein shall preclude the Corporation from satisfying its obligations in respect
of the conversion of the shares by delivery of purchased shares of Common Stock
which are held in the treasury of the Corporation.
(10) The Corporation will pay any and all stamp or similar taxes that may
be payable in respect of the issuance or delivery of shares of Common Stock on
conversion of shares of the Series. The Corporation shall not, however, be
required to pay any tax which may be payable in respect of any transfer involved
in the issuance and delivery of shares of Common Stock in a name other than that
in which the shares of the Series so converted were registered, and no such
issuance or delivery shall be made unless and until the person requesting such
issuance has paid to the Corporation the amount of any such tax or has
established to the satisfaction of the Corporation that such tax has been paid.
(11) No fractional shares or scrip representing fractional shares of
Common Stock shall be issued upon the conversion of shares of the Series. If
any such conversion would
10
<PAGE>
otherwise require the issuance of such a fractional share (determined to the
extent of four decimal places after taking into account all shares of the Series
being converted into Common Stock by the holder), an amount equal to such
fraction multiplied by the Closing Price per share of Common Stock for the day
of conversion shall be paid to the holder in cash by the Corporation. Any share
of the Series may be converted, at the request of its holder, in part into
Common Stock. If a part of a share of the Series is converted, then the
Corporation will convert such shares into the requested shares of Common Stock
(subject to this paragraph (11)) and issue a fractional share of the Series
evidencing the remaining interest of such holder.
(12) Notwithstanding anything elsewhere contained herein, any funds which
at any time shall have been deposited by the Corporation or on its behalf with
any paying agent for the purpose of paying dividends on, or the redemption price
of, any shares of the Series and which shall not be required for such purposes
because of the conversion of such shares shall after such conversion be repaid
to the Corporation by the paying agent.
(13) In any case in which paragraph (2) of this Section (d) provides that
an adjustment shall become effective on the day next following a record date for
an event, the Corporation may defer until the occurrence of such event (a)
issuance to the holder of any share of this Series converted after such record
date and before the occurrence of such event the additional shares of Common
Stock issuable upon such conversion by reason of the adjustment required by such
event over and above the Common Stock issuable upon such conversion before
giving effect to such adjustment and (B) paying to such holder any amount in
cash in lieu of any fraction pursuant to paragraph (11) of this Section (d).
(14) If any action or transaction would require adjustment of the
Conversion Price pursuant to more than one paragraph of this Section (d), only
one adjustment shall be made and such adjustment shall be the amount of
adjustment that has the highest absolute value.
(15) If the Corporation shall take any action affecting the Common Stock,
other than action described in this Section (d), that in the opinion of the
Board of Directors would materially adversely affect the conversion rights of
the holders of the shares of the Series, the Conversion Price for the Series may
be adjusted, to the extent permitted by law, in such manner, if any, and at such
time, as the Board of Directors may determine to be equitable in the
circumstances.
(16) The certificate of any independent firm of public accountants of
recognized standing selected by the Board shall be presumptive evidence of the
correctness of any computation made under this Section (d).
(17) For purposes of this resolution, the following terms shall have the
following meanings:
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(i) "Closing Price" shall mean the last sale price as shown on the New York
Stock Exchange Composite Transactions Tape, or in case no such sale takes place
on such day, the average of the closing bid and asked prices on the New York
Stock Exchange, or, if the Common Stock is not listed or admitted to trading on
such Exchange, on the principal national securities exchange on which the Common
Stock is listed or admitted to trading, or, if it is not listed or admitted to
trading on any national securities exchange, on the National Association of
Securities Dealers Automated Quotations National Market System, or, if the
Common Stock is not listed or admitted to trading on any national securities
exchange or quoted on such National Market System, the average of the closing
bid and asked prices as furnished by any New York Stock Exchange member firm
selected from time to time by the Board of Directors for such purposes (other
than the Corporation or a subsidiary thereof).
(ii) "Common Stock" shall mean the Corporation's Common Stock, $1.00 par
value per share, as the same exists at the date of filing of the Certificate of
Designation relating to this Series or any other class of stock resulting from
successive changes or reclassification of such Common Stock consisting solely of
changes in par value, or from par value to no par value, or from no par value to
par value.
(iii) "Trading Day" shall mean a day on which the principal national
securities exchange on which the Common Stock is listed or admitted to trading
is open for the transaction of business or, if the Common Stock is not listed or
admitted to trading on any national securities exchange, a day which is a
Business Day.
(iv) "Business Day" shall mean a day which is not a Saturday, Sunday or
other day on which commercial banking institutions in the City of Chicago,
Illinois or The City of New York, New York are authorized or obligated by law or
executive order to close.
(e) Voting.
-------
The shares of this Series shall not have any voting powers either general
or special, except that:
(1) Unless the vote or consent of the holders of a greater number of
shares shall then be required by law, the consent of the holders of at least 66
2/3% of all of the shares of this Series at the time outstanding, given in
person or by proxy, either in writing or by a vote at a meeting called for the
purpose at which the holders of shares of this Series shall vote together as a
separate class, shall be necessary for authorizing, effecting or validating the
amendment, alteration or repeal of any of the provisions of the Certificate of
Incorporation or of any certificate amendatory thereof or supplemental thereto
(including any Certificate of Designation, Preferences and Rights or any similar
document relating to any series of Preferred Stock) which would adversely affect
the preferences, rights, powers or privileges of this Series;
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<PAGE>
(2) Unless the vote or consent of the holders of a greater number of
shares shall then be required by law, the consent of the holders of at least 66
2/3% of all of the shares of this Series and all other series of Preferred Stock
ranking on a parity with shares of this Series, either as to dividends or upon
liquidation, at the time outstanding, given in person or by proxy, either in
writing or by a vote at a meeting called for the purpose at which the holders of
shares of this Series and such other series of Preferred Stock shall vote
together as a single class without regard to series, shall be necessary for
authorizing, effecting or validating the creation, authorization or issue of any
shares of any class of stock of the Corporation ranking prior to the shares of
this Series as to dividends or upon liquidation, or the reclassification of any
authorized stock of the Corporation into any such prior shares, or the creation,
authorization or issue of any obligation or security convertible into or
evidencing the right to purchase any such prior shares;
(3) If at any time a default in preference dividends (as defined below) on
the Preferred Stock shall exist, the number of directors constituting the Board
of Directors of the Corporation shall be increased by two, and the holders of
the Preferred Stock of all series shall have the right at an annual or special
meeting of stockholders, voting together as a single class without regard to
series, to the exclusion of the holders of Common Stock, to elect two directors
of the Corporation to fill such newly created directorships. Such right shall
continue until there are no dividends in arrears upon the Preferred Stock. Each
director elected by the holders of shares of Preferred Stock (herein called a
"Preferred Director") shall continue to serve as such director for the full term
for which he shall have been elected, notwithstanding that prior to the end of
such term a default in preference dividends shall cease to exist. Any Preferred
Director may be removed by, and shall not be removed except by, the vote of the
holders of record of the outstanding shares of Preferred Stock, voting together
as a single class without regard to series, at a meeting of the stockholders, or
of the holders of shares of Preferred Stock, called for that purpose. So long as
a default in any preference dividends on the Preferred Stock shall exist, (i)
any vacancy in the office of a Preferred Director may be filled (except as
provided in the following clause (ii)) by an instrument in writing signed by the
Preferred Director and filed with the Corporation and (ii) in the case of the
removal of any Preferred Director, the vacancy may be filled by the vote of
holders of the outstanding shares of Preferred Stock, voting together as a
single class without regard to series, at the same meeting at which such removal
shall be voted. Each director appointed as aforesaid by the remaining Preferred
Director shall be deemed, for all purposes hereof, to be a Preferred Director.
Whenever the term of office of the Preferred Directors shall end and a default
in preference dividends shall no longer exist, the number of directors
constituting the Board of Directors of the Corporation shall be reduced by two.
For the purposes hereof, a "default in preference dividends" on the Preferred
Stock shall be deemed to have occurred whenever the amount of accrued dividends
upon any series of the Preferred stock shall be equivalent to six full quarter-
yearly dividends or more, and, having so occurred, such default shall be deemed
to exist thereafter until, but only until, all accrued dividends on all shares
of Preferred Stock of each and every series then outstanding shall have been
paid to the end of the last preceding quarterly dividend period.
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<PAGE>
(4) A holder of shares of this Series shall be entitled to one vote per
share of the Series held by him when such holder is permitted to vote pursuant
to the foregoing.
(f) Liquidation Rights.
-------------------
(1) Upon the dissolution, liquidation or winding up of the Corporation, the
holders of the shares of this Series shall be entitled to receive out of the
assets of the Corporation, before any payment or distribution shall be made on
the Common Stock or on any other class of stock ranking junior to the Preferred
Stock upon liquidation, the amount of $5,000 per share, plus a sum equal to all
dividends (whether or not earned or declared) on such shares accrued and unpaid
thereon to the date of final distribution.
(2) Neither the sale of all or substantially all the property or business
of the Corporation, nor the merger or consolidation of the Corporation into or
with any other corporation or the merger or consolidation of any other
corporation into or with the Corporation, shall be deemed to be a dissolution,
liquidation or winding up, voluntary or involuntary, for the purposes of this
Section (f).
(3) After the payment to the holders of the shares of this Series of the
full preferential amounts provided for in this Section (f), the holders of this
Series as such shall have no right or claim to any of the remaining assets of
the Corporation.
(4) In the event the assets of the Corporation available for distribution
to the holders of shares of this Series upon any dissolution, liquidation or
winding up of the Corporation, whether voluntary or involuntary, shall be
insufficient to pay in full all amounts to which such holders are entitled
pursuant to paragraph (1) of this Section (f), no such distribution shall be
made on account of any shares of any other class or series of Preferred Stock
ranking on a parity with the shares of this Series upon such dissolution,
liquidation or winding up unless proportionate distributive amounts shall be
paid on account of the shares of this Series, ratably, in proportion to the full
distributable amounts for which holders of all such parity shares are
respectively entitled upon such dissolution, liquidation or winding up.
(5) Upon the dissolution, liquidation or winding up of the Corporation, the
holders of shares of this Series then outstanding shall be entitled to be paid
out of the assets of the Corporation available for distribution to its
stockholders all amounts to which such holders are entitled pursuant to
paragraph (1) of this Section (f) before any payment shall be made to the
holders of any class of capital stock of the Corporation ranking junior upon
liquidation to this Series.
(g) Priority. For purposes of this resolution, any stock of any class or
classes of the Corporation shall be deemed to rank:
(1) prior to the shares of this Series, either as to dividends or upon
liquidation, if the holders of such class or classes shall be entitled to the
receipt of dividends or of amounts
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<PAGE>
distributable upon dissolution, liquidation or winding up of the Corporation, as
the case may be, in preference or priority to the holder of shares of this
Series;
(2) on a parity with shares of this Series, either as to dividends or upon
liquidation, whether or not the dividend rates, dividend payment dates or
redemption or liquidation prices per share or sinking fund provisions, if any,
be different from those of this Series, if such stock is the Corporation's
Preferred Stock with Cumulative and Adjustable Dividends, Series B (Without Par
Value), Preferred Stock with Cumulative and Adjustable Dividends, Series C
(Without Par Value), or the Corporation's 8.45% Cumulative Preferred Stock,
Series E (Stated Value $625 per share), or if the holders of such stock shall be
entitled to the receipt of dividends or of amounts distributable upon
dissolution, liquidation or winding up of the Corporation, as the case may be,
in proportion to their respective dividend rates or liquidation prices, without
preference or priority, one over the other, as between the holders of such stock
and the holders of shares of this Series; and
(3) junior to shares of this Series, either as to dividends or upon
liquidation, if such class shall be Common Stock or the holders of shares of
this Series shall be entitled to receipt of dividends or of amounts
distributable upon dissolution, liquidation or winding up of the Corporation, as
the case may be, in preference or priority to the holders of shares of such
class or classes.
(h) Sinking or Retirement Fund.
---------------------------
The shares of this Series shall not be entitled to the benefit of a sinking
or retirement fund to be applied to the purchase or redemption of such stock."
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<PAGE>
The foregoing Certificate of Voting Powers, Designation, Preferences and
Relative, Participating, Optional and Other Special Rights and the
Qualifications, Limitations or Restrictions relating to this Series shall be
effective at 12:01 a.m. Eastern Standard Time on December 1, 1995 in accordance
with the provisions of Sections 103 and 151(g) of the General Corporation Law of
the State of Delaware.
IN WITNESS WHEREOF, First Chicago NBD Corporation has caused this
certificate to be signed by Verne G. Istock, its Chief Executive Officer, and
the same to be attested by Daniel T. Lis, its Assistant Secretary, this 29th day
of November, 1995.
FIRST CHICAGO NBD CORPORATION
By: \s\ Verne G. Istock
-----------------------
Title: Chief Executive Officer
ATTEST:
By: \s\ Daniel T. Lis
-----------------------
Assistant Secretary
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<PAGE>
Exhibit 4(b)
BY-LAWS
As Adopted December 29, 1972
(As last amended effective December 1, 1995)
First Chicago NBD Corporation
(A Delaware Corporation)
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ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of the Corporation is
located at 1209 Orange Street, Wilmington, Delaware 19801. The Corporation may,
by resolution of the Board of Directors, change the location to any other place
in Delaware.
Section 2. Other offices. The Corporation may have such other offices, within
or without the State of Delaware, as the Board of Directors may from time to
time establish.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Annual Meetings. The annual meeting of the stockholders for the
election of directors and for the transaction of any other business as may
properly come before the meeting shall be held on the third Monday in May of
each year at eleven o'clock in the forenoon or at such other date and hour as
from time to time may be designated by the Board of Directors.
Section 2. Special Meetings. A special meeting of the stockholders may be
called at any time only by the Board of Directors pursuant to a resolution
approved by a majority of the Board of Directors.
Section 3. Place of Meetings. The Board of Directors may designate any place,
either within or without the State of Delaware, as the place of meeting for any
annual meeting or for any special meeting of stockholders.
<PAGE>
Section 4. Notice of Meetings. Written notice stating the place, date and hour
of the meeting and, in the case of a special meeting, the purpose or purposes
for which the meeting is called, shall be given by or under the direction of the
Secretary, to each stockholder of record entitled to vote at such meeting.
Except as otherwise required by statute, the written notice shall be given not
less than ten nor more than sixty days before the date of the meeting. If
mailed, such notice shall be deemed to be given when deposited in the United
States mail, postage prepaid, directed to the stockholder at his address as it
appears on the records of the Corporation. Attendance of a person at a meeting
of stockholders shall constitute a waiver of notice of such meeting, except when
the stockholder attends for the express purpose of objecting, at the beginning
of the meeting, to the transaction of any business because the meeting is not
lawfully called or convened.
Section 5. Adjourned Meetings. When a meeting is adjourned to another time or
place, notice need not be given of the adjourned meeting if the time and place
thereof are announced at the meeting at which the adjournment is taken. At the
adjourned meeting the Corporation may transact any business which might have
been transacted at the original meeting. If the adjournment is for more than
thirty days, or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
Section 6. Voting Lists. The officer who has charge of the stock ledger of the
Corporation shall prepare and make, at least ten days before every meeting of
stockholders, a complete list of the stockholders of record entitled to vote at
the meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder of record
who is present.
Section 7. Quorum. Except as otherwise required by statute, the presence at
any meeting, in person or by proxy, of the holders of record of a majority of
the shares then issued and outstanding and entitled to vote shall be necessary
and sufficient to constitute a quorum for the transaction of business. In the
absence of a quorum, the stockholders of record entitled to vote, present in
person or by proxy, may adjourn the meeting from time to time until a quorum is
present.
Section 8. Proxies. Each stockholder of record entitled to vote at a meeting
of stockholders may authorize another person or persons (but no more than three)
to act for him by proxy, but no such proxy shall be voted or acted upon other
than at the meeting specified in the proxy or any adjournment of such meeting.
Section 9. Voting Rights. Except as otherwise provided by statute or by the
Certificate of Incorporation, and subject to the provisions of Article VII of
these By-Laws, each stockholder of record shall at every meeting of the
stockholders be entitled to one vote for each share of the capital stock having
voting power held by such stockholder.
Section 10. Required Vote. Except as otherwise required by statute or by the
Certificate of Incorporation, the holders of record of a majority of the capital
stock having voting power, present in person or by proxy, shall decide any
question brought before a meeting of the stockholders at which a quorum is
present.
Section 11. Elections of Directors. Elections of directors need not be by
written ballot.
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<PAGE>
ARTICLE III
BOARD OF DIRECTORS
Section 1. General Powers. The business of the Corporation shall be managed by
the Board of Directors, except as otherwise provided by statute or by the
Certificate of Incorporation.
Section 2. Number. The number of the Directors of the Corporation shall be
fixed from time to time by resolution adopted by the affirmative vote of a
majority of the entire Board of Directors of the Corporation, except that the
minimum number of directors shall be fixed at no less than 15 and the maximum
number of directors shall be fixed at no more than 30. The directors shall be
divided into three classes, designated Class I, Class II and Class III. Each
class shall consist, as nearly equal in number as possible, of one-third of the
total number of directors constituting the entire Board of Directors. At the
1986 annual meeting of stockholders, Class I directors shall be elected for a
one-year term, Class II directors for a two-year term and Class III directors
for a three-year term. At each succeeding annual meeting of stockholders
beginning in 1987, successors of the class of directors whose term expires at
that annual meeting shall be elected for a three-year term. If the number of
directors is changed, any increase or decrease shall be apportioned among the
classes so as to maintain the number of directors in each class as nearly equal
as possible.
Section 3. Election and Term of Office. Except as otherwise provided in these
By-laws, directors shall be elected at the annual meeting of stockholders.
Newly created directorships resulting from any increase in the number of
directors and any vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal or other cause shall be filled by the
affirmative vote of a majority of the remaining directors then in office, even
though less than a quorum, or by a sole remaining director. Any director of any
class chosen to fill a vacancy in such class shall hold office for a term that
shall coincide with the remaining term of that class, but in no case will a
decrease in the number of directors shorten the term of any incumbent director.
A director shall hold office until the next annual meeting for the year in which
his or her term expires and until such director's successor shall have been
elected and qualified.
Section 4. First Meetings. The first meeting of each newly elected Board of
Directors shall be held without notice immediately after the annual meeting of
the stockholders for the purpose of the organization of the Board, the election
of officers, and the transaction of such other business as may properly come
before the meeting.
Section 5. Regular Meetings. Regular meetings of the Board of Directors may be
held without notice at such times and at such places, within or without the
State of Delaware, as shall from time to time be determined by the Board.
Section 6. Special Meetings. Special meetings of the Board of Directors may be
called by the Chairman of the Board, the President, any Director who is a Vice
Chairman of the Board or the Secretary, and shall be called by the Secretary on
the written request of three directors. Such meetings shall be held at such
times and at such places, within or without the State of Delaware, as shall be
determined by the officer calling or by the directors requesting the meeting.
Notice of the time and place thereof shall be mailed to each director, addressed
to him at his address as it appears on the records of the Corporation, at least
two days before the day on which the meeting is to be held, or sent to him at
such place by telegraph, radio or cable, or telephoned or delivered to him
personally, not later than the day before the day on which the meeting is to be
held. Such notice need not state the purposes of the meeting. Any or all
directors may waive notice of any meeting, either before or after the meeting.
Attendance of a director at a meeting shall constitute a waiver of notice of
such meeting, except when the director attends for the express purpose of
objecting, at the beginning of the meeting, to the transaction of any business
because the meeting is not lawfully called or convened.
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<PAGE>
Section 7. Quorum, Required Vote, and Adjournment. The presence, at any
meeting, of a majority of the whole Board shall be necessary and sufficient to
constitute a quorum for the transaction of business. Except as otherwise
required by statute or by the Certificate of Incorporation, the vote of a
majority of the directors present at a meeting at which a quorum is present
shall be the act of the Board of Directors. In the absence of a quorum, a
majority of the directors present at the time and place of any meeting may
adjourn such meeting from time to time until a quorum be present.
Section 8. Consent of Directors in Lieu of Meeting. Any action required or
permitted to be taken at any meeting of the Board of Directors or any committee
thereof may be taken without a meeting if all the members of the Board or
committee consent thereto in writing, and the writing or writings are filed with
the minutes of proceedings of the Board or Committee.
Section 9. Participation - Meeting by Telephone. A member of the Board or any
committee thereof may participate in a meeting of such Board or committee by
means of conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other, and
participation in a meeting pursuant to this subsection shall constitute presence
in person at such meeting.
Section 10. Compensation. The Board of Directors may authorize the payment to
directors of a fixed fee and expenses for attendance at meetings of the board or
any committee thereof, and annual fees for service as directors. No such
payment shall preclude any director from serving the Corporation in any other
capacity and receiving compensation therefor.
ARTICLE IV
EXECUTIVE COMMITTEE
Section 1. Number and Qualifications. There shall be a committee composed of
not less than four (4) members to be known as the Executive Committee which
shall consist of all the officer-directors of the Corporation and two (2) other
directors appointed as shall be provided by the Board of Directors. Provision
shall be made by the Board of Directors for the appointment of alternates from
among the directors, to act for members in the event of their absence or
disability.
Section 2. Presiding Officer. The Chairman of the Board shall act as presiding
officer of any meeting of the Executive Committee. In the event of the absence
or disability of the Chairman of the Board, the President shall act as
presiding officer. In the event of the absence or disability of the Chairman of
the Board and the President, another officer-director, if present, shall act as
the presiding officer. If no officer-director is present, the other members
present at the meeting shall elect one of their number as presiding officer.
Section 3. Quorum. Any two (2) persons each of whom is a member or alternate
member of the Executive Committee, of whom not less than one (1) shall be non-
officer directors, shall constitute a quorum for the transaction of business at
any meeting of the Executive Committee.
Section 4. Duties. The Executive Committee shall function from day to day or
such other short intervals as shall be found requisite and expedient in carrying
on of the business and affairs of the Corporation, and between meetings of the
Board of Directors, said Committee shall have and may exercise, so far as may be
permitted by law, all power and authority of the Board of Directors (including
the right to authorize the seal of the Corporation to be affixed to all
instruments on which the same may be required or appropriate). A record of the
meetings of the
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<PAGE>
Committee shall be kept, which shall be accessible to inspection by the
Directors at all times, and the Committee shall, at each regular meeting of the
Board of Directors and at such other times as the Board of Directors may
request, submit in writing a full report of its actions. The Board of Directors
shall approve or disapprove the report of the Executive Committee, such action
to be recorded in the minutes of the meeting; provided, however, that no rights
of third parties shall be affected by any action of the Board of Directors, if
such rights have attached by virtue of action of the Executive Committee.
ARTICLE V
OTHER COMMITTEES
The Board of Directors may, by resolution, designate one or more other regular
and special committees, consisting of directors, officers or other persons which
shall have and may exercise such powers and functions as the Board may prescribe
in the management of the business and affairs of the Corporation.
Such committees shall keep regular minutes of their proceedings and report the
same to the Board of Directors when required.
The Board of Directors may from time to time suspend, alter, continue or
terminate any such committee or the powers and functions thereof.
ARTICLE VI
OFFICERS
Section 1. Number, Election, Term of Office and Qualification. The number,
titles and duties of the officers shall be determined by the Board of Directors
from time to time, subject to the provisions of applicable law, the Certificate
of Incorporation, and these By-Laws. Each officer shall be elected by the Board
of Directors and shall hold office until such officer's successor is elected and
qualified or until such officer's death, resignation or removal. The election of
officers shall be held annually at the first meeting of the Board of Directors
held after each annual meeting of stockholders, subject to the power of the
Board of Directors to designate any office at any time and elect any person
thereto. The officers shall include a Chairman of the Board, a President, and
may include one or more Vice Chairman of the Board, one or more Vice Presidents,
a Secretary, a Treasurer, and such other officers as the Board of Directors may
determine. The same person may hold any two or more offices, and in any such
case, these By-Laws shall be construed and understood accordingly; provided that
the same person may not hold the offices of Chairman of the Board and Secretary
or President and Secretary. No officer other than the Chairman of the Board,
President or Vice Chairman of the Board need be a director of the Corporation.
Section 2. Removal. Any officer or agent may be removed at any time, with or
without cause, by the Board of Directors.
Section 3. Vacancies. Any vacancy occurring in any office of the Corporation
may be filled for the unexpired term in the manner prescribed by these By-Laws
for the regular election to such office.
Section 4. Chief Executive Officer. The Board of Directors shall designate one
of the officers to be the Chief Executive Officer. Subject to the direction and
under the supervision of the Board of Directors, the Chief Executive Officer
shall have general charge of the business, affairs and property of the
Corporation, and control over its officers, agents and employees.
-5-
<PAGE>
Section 5. The Secretary. The Secretary shall keep the minutes of the
proceedings of the stockholders and of the Board of Directors in one or more
books to be kept for that purpose. He shall have custody of the seal of the
Corporation and shall have authority to cause such seal to be affixed to, or
impressed or otherwise reproduced upon, all documents the execution and delivery
of which on behalf of the Corporation shall have been duly authorized. He shall
in general, perform all duties and have all powers incident to the office of
Secretary and shall perform such other duties and have such other powers as may
from time to time be assigned to him by these By-Laws, by the Board of Directors
or by the Chief Executive Officer.
Section 6. Treasurer. The Treasurer shall have custody of the corporate funds
and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation. He shall cause all moneys
and other valuable effects to be deposited in the name and to the credit of the
Corporation in such depositories as may be designated by the Board of Directors.
He shall cause the funds of the Corporation to be disbursed when such
disbursements have been duly authorized, taking proper vouchers for such
disbursements, and shall render to the Chief Executive Officer and the Board of
Directors, whenever requested, an account of all his transactions as Treasurer
and of the financial condition of the Corporation. He shall, in general, perform
all duties and have all powers incident to the office of Treasurer and shall
perform such other duties and have such other powers as may from time to time be
assigned to him by these By-Laws, by the Board of Directors or by the Chief
Executive Officer.
ARTICLE VII
FIXING RECORD DATE
In order that the Corporation may determine the stockholders entitled to notice
of or to vote at any meeting of stockholders or any adjournment thereof, or
entitled to receive payment of any dividend or other distribution or allotment
of any rights, or entitled to exercise any rights in respect of any change,
conversion or exchange of stock, or for the purpose of any other lawful action,
the Board of Directors may fix, in advance, a record date, which shall not be
more than sixty days nor less than ten days before the date of such meeting, nor
more than sixty days prior to any other action. If no record date is fixed, the
record date for determining stockholders entitled to notice of or to vote at a
meeting of stockholders shall be at the close of business on the day next
preceding the day on which notice is given, or, if notice is waived, at the
close of business on the day next preceding the day on which the meeting is held
and the record date for determining stockholders for any other purpose shall be
at the close of business on the day on which the Board of Directors adopts the
resolution relating thereto.
A determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
ARTICLE VIII
EXECUTION OF INSTRUMENTS
Section 1. Execution of Instruments Generally. All documents, instruments or
writings of any nature shall be signed, executed, verified, acknowledged and
delivered by such officer or officers or such agent or agents of the Corporation
and in such manner as the Board of Directors from time to time may determine.
Section 2. Checks, Drafts, Etc. All notes, drafts, acceptances, checks,
endorsements, and all evidence of indebtedness of the Corporation whatsoever,
shall be signed by such officer or officers or such agent or agents of the
Corporation and in such manner as the Board of Directors from time to time may
determine. Endorsements
-6-
<PAGE>
for deposit to the credit of the Corporation in any of its duly authorized
depositories shall be made in such manner as the Board of Directors from time to
time may determine.
Section 3. Proxies and Consents. Proxies to vote and written consent with
respect to shares of stock of other corporations owned by or standing in the
name of the Corporation may be executed and delivered from time to time on
behalf of the Corporation by two officers, one of whom shall be the Chairman,
President, Vice Chairman, or a Vice President and the other of whom shall be
the Secretary or an Assistant Secretary of the Corporation; or by any other
person or persons duly authorized by the Board of Directors.
ARTICLE IX
CAPITAL STOCK
Section 1. Stock Certificates. The interest of every holder of stock in the
Corporation shall be evidenced by a certificate or certificates signed by, or in
the name of the Corporation by the Chairman, President, Vice Chairman or a Vice
President, and by the Secretary or an Assistant Secretary of the Corporation
certifying the number of shares owned by him in the Corporation and in such form
not inconsistent with the Certificate of Incorporation or applicable law as the
Board of Directors may from time to time prescribe. If such certificate is
countersigned (1) by a transfer agent, whether or not a subsidiary of the
Corporation, other than the Corporation or its employee, or (2) by a registrar,
whether or not a subsidiary of the Corporation, other than the Corporation or
its employee, the signatures of the officers of the Corporation may be
facsimiles. In case any officer who has signed or whose facsimile signature has
been placed upon a certificate shall have ceased to be such officer before such
certificate is issued, it may be issued by the Corporation with the same effect
as if he were such officer at the date of issue.
Section 2. Transfer of Stock. Shares of stock of the Corporation shall only be
transferred on the books of the Corporation by the holder of record thereof or
by his attorney duly authorized in writing, upon surrender to the Corporation of
the certificates for such shares endorsed by the appropriate person or persons,
with such evidence of the authenticity of such endorsement, transfer,
authorization and other matters as the Corporation may reasonably require, and
accompanied by all necessary stock transfer tax stamps. In that event it shall
be the duty of the Corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate, and record the transaction on its books.
Section 3. Rights of Corporation with Respect to Registered Owners. Prior to
the surrender to the Corporation of the certificates for shares of stock with a
request to record the transfer of such shares, the Corporation may treat the
registered owner as the person entitled to receive dividends, to vote, to
receive notifications, and otherwise to exercise all the rights and powers of an
owner.
Section 4. Transfer Agents and Registrars. The Board of Directors may make
such rules and regulations as it may deem expedient concerning the issuance and
transfer of certificates for shares of the stock of the Corporation and may
appoint transfer agents or registrars or both, and may require all certificates
of stock to bear the signature of either or both. Nothing herein shall be
construed to prohibit the Corporation or any subsidiary of it from acting as its
own transfer agent or registrar at any of its offices.
Section 5. Lost, Destroyed and Stolen Certificates. Where the owner of a
certificate for shares claims that such certificate has been lost, destroyed or
wrongfully taken, the Corporation shall issue a new certificate in place of the
original certificate if the owner satisfies such reasonable requirements,
including evidence of such loss, destruction, or wrongful taking, as may be
imposed by the Corporation, including but without limitation, the delivery to
the Corporation of an indemnity bond satisfactory to it.
-7-
<PAGE>
ARTICLE X
SEAL
The corporate seal, subject to alteration by the Board of Directors, shall be in
the form of a circle and shall bear the name of the Corporation and the year of
its incorporation and shall indicate its formation under the laws of the State
of Delaware. Such seal may be used by causing it or a facsimile thereof to be
impressed or affixed or in any other manner reproduced.
ARTICLE XI
FISCAL YEAR
The fiscal year of the Corporation shall be the calendar year except as
otherwise provided by the Board of Directors.
ARTICLE XII
AMENDMENTS
The By-Laws of the Corporation may be amended or repealed, or new By-Laws not
inconsistent with law or any provision of the Certificate of Incorporation, as
amended, may be made and adopted by a majority vote of the whole Board of
Directors at any regular or special meeting of the Board.
-8-
<PAGE>
Exhibit 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To First Chicago NBD Corporation:
As independent public accountants, we hereby consent to the incorporation
of our report dated December 1, 1995, on the supplemental consolidated financial
statements of First Chicago NBD Corporation included in this Current Report on
Form 8-K dated December 4, 1995, into First Chicago NBD Corporation's
previously filed Form S-8 Registration Statement No. 33-21036, Form S-8
Registration Statement No. 33-17494, Form S-8 Registration Statement No.
33-48773, Form S-8 Registration Statement No. 33-46906, Form S-8 Registration
Statement No. 33-50300, Form S-8 Registration Statement No. 33-53928, Form S-3
Registration Statement No. 33-60788 and Form S-8 Registration Statement No.
33-62713.
ARTHUR ANDERSEN LLP
Chicago, Illinois,
December 1, 1995
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<CASH> 6,852
<INT-BEARING-DEPOSITS> 8,697
<FED-FUNDS-SOLD> 13,702
<TRADING-ASSETS> 5,089
<INVESTMENTS-HELD-FOR-SALE> 5,544<F1>
<INVESTMENTS-CARRYING> 8,065<F1>
<INVESTMENTS-MARKET> 7,834<F1>
<LOANS> 55,176
<ALLOWANCE> (1,158)
<TOTAL-ASSETS> 112,763
<DEPOSITS> 64,895
<SHORT-TERM> 25,341
<LIABILITIES-OTHER> 6,755
<LONG-TERM> 7,246
<COMMON> 329
0
611
<OTHER-SE> 6,869<F2>
<TOTAL-LIABILITIES-AND-EQUITY> 112,763
<INTEREST-LOAN> 4,000
<INTEREST-INVEST> 833
<INTEREST-OTHER> 1,019
<INTEREST-TOTAL> 6,136
<INTEREST-DEPOSIT> 1,653
<INTEREST-EXPENSE> 3,180
<INTEREST-INCOME-NET> 2,956
<LOAN-LOSSES> 276
<SECURITIES-GAINS> (1)<F3>
<EXPENSE-OTHER> 3,220<F4>
<INCOME-PRETAX> 1,853
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,221
<EPS-PRIMARY> 3.62
<EPS-DILUTED> 3.58
<YIELD-ACTUAL> 3.29
<LOANS-NON> 267
<LOANS-PAST> 150
<LOANS-TROUBLED> 27
<LOANS-PROBLEM> 30
<ALLOWANCE-OPEN> 1,106
<CHARGE-OFFS> 364
<RECOVERIES> 172
<ALLOWANCE-CLOSE> 1,158
<ALLOWANCE-DOMESTIC> 1,099
<ALLOWANCE-FOREIGN> 59
<ALLOWANCE-UNALLOCATED> 0
<FN>
<F1> In addition to the investment securities disclosed in this Financial Data
Schedule, the Corporation has investment securities in its venture capital
business. These securities had a carrying value of $1,406 million as of
December 31, 1994.
<F2> Treasury stock of $310 million is included as a reduction of other
stockholders' equity.
<F3> Investment securities gains/losses do not include the Corporation's equity
securities gains which totaled $229 million.
<F4> Other expenses include: Salaries and Employee benefit expense of
$1,602 million, Occupancy expense of $244 million, Equipment rentals,
depreciation and maintenance expense of $245 million, and other expenses
which totaled $1,129 million.
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 6,348
<INT-BEARING-DEPOSITS> 10,302
<FED-FUNDS-SOLD> 14,244
<TRADING-ASSETS> 8,116
<INVESTMENTS-HELD-FOR-SALE> 3,591<F1>
<INVESTMENTS-CARRYING> 7,367<F1>
<INVESTMENTS-MARKET> 7,506<F1>
<LOANS> 61,076
<ALLOWANCE> (1,230)
<TOTAL-ASSETS> 124,056
<DEPOSITS> 66,934
<SHORT-TERM> 29,288
<LIABILITIES-OTHER> 10,161
<LONG-TERM> 8,445
<COMMON> 330
0
491
<OTHER-SE> 7,624<F2>
<TOTAL-LIABILITIES-AND-EQUITY> 124,056
<INTEREST-LOAN> 3,862
<INTEREST-INVEST> 645
<INTEREST-OTHER> 1,182
<INTEREST-TOTAL> 6,024
<INTEREST-DEPOSIT> 1,917
<INTEREST-EXPENSE> 3,650
<INTEREST-INCOME-NET> 2,374
<LOAN-LOSSES> 300
<SECURITIES-GAINS> 3<F3>
<EXPENSE-OTHER> 2,447<F4>
<INCOME-PRETAX> 1,563
<INCOME-PRE-EXTRAORDINARY> 1,024
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,024
<EPS-PRIMARY> 3.07
<EPS-DILUTED> 3.03
<YIELD-ACTUAL> 3.11
<LOANS-NON> 275
<LOANS-PAST> 0<F5>
<LOANS-TROUBLED> 21
<LOANS-PROBLEM> 0<F5>
<ALLOWANCE-OPEN> 1,158
<CHARGE-OFFS> 264
<RECOVERIES> 107
<ALLOWANCE-CLOSE> 1,230
<ALLOWANCE-DOMESTIC> 0<F6>
<ALLOWANCE-FOREIGN> 0<F6>
<ALLOWANCE-UNALLOCATED> 0<F6>
<FN>
<F1> In addition to the investment securities disclosed in this Financial Data
Schedule, the Corporation has investment securities in its venture capital
business. These securities had a carrying value of $952 million as of
September 30, 1995.
<F2> Treasury stock of $353 million is included as a reduction of other
stockholders' equity.
<F3> Investment securities gains/losses do not include the Corporation's equity
securities gains which totaled $181 million.
<F4> Other expenses include: Salaries and Employee benefit expense of $1,260
million, Occupancy expense of $198 million, Equipment rentals, depreciation
and maintenance expense of $162 million, and other expenses which totaled
$827 million.
<F5> Amounts not disclosed for this filing.
<F6> Allowance-Domestic, Allowance-Foreign, and Allowance-Unallocated are only
disclosed on an annual basis in the Corporation's Form 10-K and are
therefore not included in this Financial Data Schedule.
</FN>
</TABLE>
<PAGE>
EXHIBIT 99(A)
FIRST CHICAGO NBD CORPORATION
INDEX TO SUPPLEMENTAL FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Page
----
<S> <C>
Introduction............................................. 2
Selected Supplemental Financial Data..................... 3
Supplemental Business Segments........................... 4
Supplemental Earnings Analysis........................... 5
Supplemental Liquidity Risk Management................... 11
Supplemental Market Risk Management...................... 12
Supplemental Credit Risk Management...................... 19
Supplemental Derivative Financial Instruments............ 25
Supplemental Capital Management.......................... 28
Supplemental Consolidated Financial Statements........... 31
Notes to Supplemental Consolidated Financial Statements.. 35
Report of Independent Public Accountants................. 64
Supplemental Selected Statistical Information............ 65
</TABLE>
1
<PAGE>
INTRODUCTION
Effective December 1, 1995, First Chicago Corporation ("First Chicago" or "FCC")
merged into NBD Bancorp, Inc. ("NBD Bancorp" or "NBD"). NBD was renamed First
Chicago NBD Corporation (the "Corporation" or "FCNBD"). The combination
produced the Midwest's leading provider of banking services to consumers, middle
market companies and large corporate customers. At September 30, 1995, the
Corporation had assets of $124 billion, total deposits of $67 billion, and
stockholders' equity of $8 billion, after giving effect to the merger and an
anticipated restructuring charge estimated to be $225 million.
The merger has been accounted for as a pooling of interests and, accordingly,
the amounts for all current and prior periods reported in this supplemental
filing, except as otherwise noted, are reported on a combined basis including
both FCC and NBD.
2
<PAGE>
SELECTED SUPPLEMENTAL FINANCIAL DATA
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
(Dollars in millions, except per share data) 1994 1993 1992 1991
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SUMMARY OF INCOME
Net interest income............................................................ $ 2,956 $ 2,784 $ 2,692 $ 2,418
Provision for credit losses.................................................... 276 390 653 606
Provision for loans held for
accelerated disposition...................................................... - - 491 -
Noninterest income............................................................. 2,393 2,769 2,018 1,703
Noninterest expense(1)......................................................... 3,220 3,161 3,294 2,867
Income before cumulative effect of changes
in accounting principles..................................................... 1,221 1,290 224 478
Net income..................................................................... 1,221 1,290 394 478
- --------------------------------------------------------------------------------------------------------------------------
EARNINGS PER SHARE
Primary
Income before cumulative effect of changes
in accounting principles................................................... $ 3.62 $ 3.91 $ 0.60 $ 1.56
Net income................................................................... 3.62 3.91 1.17 1.56
Fully Diluted
Income before cumulative effect of changes
in accounting principles................................................... 3.58 3.79 0.60 1.55
Net income................................................................... 3.58 3.79 1.17 1.55
- --------------------------------------------------------------------------------------------------------------------------
PERIOD-END BALANCES
Total assets................................................................... $112,763 $93,140 $90,011 $87,573
Long-term debt................................................................. 7,246 5,250 4,175 3,822
Total stockholders' equity..................................................... 7,809 7,499 6,323 5,660
- --------------------------------------------------------------------------------------------------------------------------
COMMON SHARE DATA
Dividends declared............................................................. $ 1.23 $ 1.08 $ 1.04 $ 0.95
Book value, year-end........................................................... 22.60 21.25 18.27 18.06
Market price, year-end......................................................... 27-3/8 29-3/4 32-3/4 29-3/4
- --------------------------------------------------------------------------------------------------------------------------
CAPITAL RATIOS(2)
Common equity-to-assets ratio.................................................. 6.8% 7.6% 6.5% 6.0%
Regulatory leverage ratio...................................................... 7.3 7.8 6.6 6.5
Risk-based capital
Tier 1 ratio................................................................. 8.6 9.0 7.4 6.5
Total capital ratio.......................................................... 13.0 13.6 11.3 9.8
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) 1992 includes $134 million of provision for other real estate held for
accelerated disposition.
(2) Net of investment in First Chicago Capital Markets, Inc.
3
<PAGE>
SUPPLEMENTAL BUSINESS SEGMENTS
For external reporting purposes, First Chicago NBD Corporation's business
segments are structured as follows:
. Business Banking - principally the customer-related activities in the large
corporate market (Corporate and Institutional Banking), as well as the
middle market banking activities of American National in Illinois and NBD
Michigan and Indiana.
. Consumer Banking - the national credit card business (First Card) and
retail activities in the branches across the FCNBD franchise.
. Corporate Investments - generally noncustomer-oriented activities
including the venture capital portfolio; funding and arbitrage; leveraged
leasing; investment portfolio; and certain trading activities.
. Other - includes special corporate charges or the results of other
transactions not directly associated with the activities of the above
business segments.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------
Net Income Average Assets
(In millions) (In billions)
--------------------- ----------------------
1994 1993 1992 1994 1993 1992
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Business banking....... $ 418 $ 461 $ 148 $ 59.1 $ 51.8 $51.7
Consumer banking....... 521 438 291 27.7 24.9 22.9
Corporate investments.. 224 318 178 26.6 24.3 23.2
Other.................. 58 73 (223) - 0.5 0.3
------ ------ ----- ------ ------ -----
Total............. $1,221 $1,290 $ 394 $113.4 $101.5 $98.1
- -----------------------------------------------------------------------
</TABLE>
The estimated historical financial results aligned by these business segments
were derived from the internal management reporting systems of First Chicago
and NBD. Any major differences in management accounting policies and practices
were identified and, to the extent appropriate, changes were made at the
line-of-business level to reconcile these differences toward a common standard.
The combined Corporation intends to continue to present the financial
performance of its key business segments in the future. A uniform approach to
management accounting and reporting is being developed, which will allow for
more detailed analysis of the underlying performance trends of the various
business segments of First Chicago NBD Corporation in future filings with the
Commission.
4
<PAGE>
SUPPLEMENTAL EARNINGS ANALYSIS
SUMMARY
Net income for 1994 was $1.221 billion, or $3.58 per share, compared with $1.290
billion, or $3.79 per share, in 1993 and $394 million, or $1.17 per share, in
1992.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
(In millions, except per share data) 1994 1993 1992
- ---------------------------------------------------------------------
<S> <C> <C> <C>
NET INCOME
Income before cumulative effect of changes
in accounting principles.................. $1,221 $1,290 $ 224
Cumulative effect of changes in
accounting principles..................... - - 170
------ ------ -----
Net income............................. $1,221 $1,290 $ 394
FULLY DILUTED EARNINGS PER SHARE
Income before cumulative effect of changes
in accounting principles.................. $ 3.58 $ 3.79 $0.60
Cumulative effect of changes in
accounting principles..................... - - 0.57
------ ------ -----
Net income............................. $ 3.58 $ 3.79 $1.17
- ---------------------------------------------------------------------
</TABLE>
The Corporation's 1994 results continued to reflect excellent performance in its
core businesses. Highlights of the year were:
. The credit card business posted record earnings of $338 million. Average
managed credit card receivables increased 19% and managed receivables
topped $13 billion at year-end 1994.
. Credit quality continued to improve. The commercial provision for credit
losses was 8 basis points of commercial loans in 1994, compared with 57
basis points in 1993. Commercial nonperforming assets declined to $351
million at year-end 1994, resulting in an overall nonperforming asset ratio
of 0.6% and a commercial reserve coverage ratio of 309%.
. Noninterest expense was well managed. Overall expense growth in 1994 was
limited to 2%.
. The Corporation continued to expand through its merger with Lake Shore
Bancorp, Inc. in July 1994 as well as through the acquisition in January
1995 of AmeriFed Financial Corp. of Joliet, Illinois. In addition, in early
1995 the Corporation reached an agreement to acquire Deerbank Corporation
of Deerfield, Illinois.
. The Corporation's venture capital portfolio produced excellent results,
with net income of $95 million and a 26% return on equity.
. The Corporation's strong capital position was maintained during 1994 and
stockholder returns were enhanced as the annual dividend on common stock
was increased by 14%, to $1.23 per share.
Return on common equity was 16.6% for 1994, compared with 19.9% for 1993 and
6.3% for 1992.
5
<PAGE>
The Corporation's regulatory capital ratios continued to exceed the well-
capitalized guidelines. At December 31, 1994, the risk-based capital ratio was
13.0%, while the regulatory leverage ratio was 7.3%. These ratios were 13.6%
and 7.8%, respectively, at December 31, 1993.
NET INTEREST INCOME
Net interest income includes fundamental spreads on earning assets as well as
such items as loan fees, cash interest collections on problem loans, dividend
income, interest reversals, and income or expense on interest rate derivatives
used to manage interest rate risk.
Net interest margin measures the efficiency of the use of the Corporation's
earning assets and its underlying capital. In order to analyze fundamental
trends in net interest margin, it is useful to adjust for: 1) securitization of
credit card receivables and 2) the activities of First Chicago Capital Markets,
Inc. (FCCM).
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
(Dollars in millions) 1994 1993 1992
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
REPORTED:
Net interest income - tax-equivalent basis.. $ 3,043 $ 2,893 $ 2,804
Average earning assets...................... 92,598 84,891 82,934
Net interest margin......................... 3.29% 3.41% 3.38%
ADJUSTED:
Net interest income - tax-equivalent basis.. $ 3,579 $ 3,353 $ 3,141
Average earning assets...................... 88,969 82,984 81,222
Net interest margin......................... 4.02% 4.04% 3.87%
- ---------------------------------------------------------------------------
</TABLE>
When credit card receivables are sold in securitization transactions, the
Corporation's earnings are unchanged. However, the net interest income related
to these high-yield assets is displaced by increased servicing fees, net of
related credit losses. The average levels of securitized receivables were $5.5
billion in 1994, $4.8 billion in 1993 and $3.9 billion in 1992.
FCCM is the Corporation's wholly owned subsidiary engaged in permissible
investment banking activities. Because capital requirements for FCCM are risk-
exposure driven rather than based on asset levels, FCCM can generate substantial
volumes of relatively riskless, thin-spread earning assets that require little
additional capital. The Corporation's net interest margin trends can be better
analyzed if these earning assets and related margins are excluded.
Cash interest collections related to Brazilian debt added 2 basis points to
adjusted net interest margin in 1994. For 1993, the adjusted net interest margin
included 5 basis points from Brazilian cash interest collections and the effect
of revaluing the leveraged lease portfolio because of a change in federal income
tax rates. Excluding these special items, the adjusted net interest margin in
1994 was up slightly from 1993 levels.
The cost of carrying nonperforming assets declined as average nonperforming
assets (including those held for accelerated disposition) decreased to $0.5
billion in 1994 from $0.9 billion in 1993 and $1.5 billion in 1992.
6
<PAGE>
<TABLE>
<CAPTION>
NONINTEREST INCOME
- -----------------------------------------------------------------------------
Percent
Increase (Decrease)
---------------------
(Dollars in millions) 1994 1993 1992 1993-1994 1992-1993
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Combined trading
profits.................... $ 86 $ 305 $ 197 (71.8)% 54.8%
Equity securities gains...... 229 488 205 (53.1) 138.0
Investment securities gains
(losses)................... (1) 2 10 (150.0) (80.0)
------ ------ ------
Market-driven revenue...... 314 795 412 (60.5) 93.0
Credit card fee revenue...... 871 730 553 19.3 32.0
Fiduciary & investment
management fees............ 377 374 346 0.8 8.1
Service charges on deposits.. 372 377 333 (1.3) 13.2
Other service charges
and commissions............ 316 327 313 (3.4) 4.5
Gain on sale of loans........ 6 50 22 (88.0) 127.3
Accelerated disposition
portfolio gains............ 46 60 - (23.3) N/M
Gain on sale of investment
advisory business.......... 35 - - N/M N/M
Other........................ 56 56 39 - 43.6
------ ------ ------
Total................... $2,393 $2,769 $2,018 (13.6) 37.2
====== ====== ======
- -----------------------------------------------------------------------------
</TABLE>
Noninterest income declined by $376 million, or 13.6%, in 1994, following an
increase of $751 million, or 37.2%, in 1993. Much of the change in both years
reflected the volatility in market-driven revenue, principally trading profits
and equity securities gains.
Combined trading profits were $86 million in 1994, compared with a record $305
million in 1993 and $197 million in 1992. The following factors contributed to
depressed trading profits in 1994:
. reduced market liquidity and significant volatility, which caused losses in
emerging markets trading activities;
. the sharp rise in short-term interest rates, which led to reduced financial
asset values and profit opportunities; and
. well-publicized issues related to the use of derivative financial
instruments throughout the banking industry, which resulted in reduced
customer transaction activity.
Equity securities gains during 1994 were $229 million, compared with a record
$488 million in 1993 and $205 million in 1992. Equity securities gains arise
principally from the Corporation's venture capital activities, and to a lesser
extent from corporate finance activities and from the sale of securities
received in troubled-debt restructurings, as presented in the following table.
7
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------
(In millions) 1994 1993 1992
- ---------------------------------------------------------
<S> <C> <C> <C>
Venture capital................ $189 $381 $188
Corporate finance.............. 39 72 7
Debt restructuring............. 1 35 10
---- ---- ----
Total equity securities gains.. $229 $488 $205
==== ==== ====
- ---------------------------------------------------------
</TABLE>
The venture capital and corporate finance gains include changes in the fair
value of investments. Details of the venture capital activities are presented on
pages 18 and 19.
Credit card fee revenue, adjusted for the effects of credit card
securitizations, grew 16% in 1994 to $574 million and 24% in 1993 to $493
million. Revenue growth in both periods resulted from increased transaction
volume, due in part to a growing cardholder base.
Fiduciary and investment management fees include revenue generated by the
Corporation's traditional trust products and services, investment management
activities, and the shareholder services business. Fees generated from trust and
fiduciary activities grew modestly in both periods, reflecting increased
transaction volume in each year, while 1993 results were also favorably affected
by the increase in stock and bond prices. Revenues from the shareholder services
business was $81 million in both 1994 and 1993, and $72 million in 1992. Revenue
growth in this business was dampened by industry consolidation and increased
price competition.
Service charges on deposits include retail deposit fees and deficient balance
fees. Deficient balance fees were down slightly in 1994 due in part to a higher
credit given for balances maintained in business accounts as the general level
of interest rates rose substantially during the year.
Gains on the sale of loans, principally home mortgage loans, were down sharply
in 1994 as a result of lower mortgage refinancing volumes and a decision to hold
more of the mortgages generated in the loan portfolio.
Net gains from the active management of assets held in the accelerated
disposition portfolio totaled $46 million in 1994, compared with $60 million in
1993.
Other noninterest income in 1994 included a $35 million gain related to the sale
of the Corporation's remaining interest in Brinson Holdings, Inc. to Brinson's
management.
PROVISION FOR CREDIT LOSSES
Details of the Corporation's credit risk management and performance are
presented in the Credit Risk Management section, beginning on page 19.
NONINTEREST EXPENSE
Operating expense in 1994 was $3.217 billion, compared with $3.148 billion in
1993 and $3.095 billion in 1992. Overall expense growth was limited to 2%,
8
<PAGE>
reflecting higher employee costs, increased equipment costs, and investments in
selected businesses.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
SALARIES AND BENEFITS
- ------------------------------------------------------------------------------
Percent
Increase(Decrease)
- ------------------------------------------------------------------------------
(Dollars in millions) 1994 1993 1992 1993-1994 1992-1993
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Salaries..................... $1,325 $1,324 $1,233 0.1% 7.4%
Employee benefits............ 277 234 191 18.4 22.5
------ ------ ------
Total.................... $1,602 $1,558 $1,424 2.8 9.4
====== ====== ======
Average full-time
equivalent employees....... 35,642 35,795 35,438 (0.4)% 1.0%
- ------------------------------------------------------------------------------
</TABLE>
Employee costs increased by $44 million, or 2.8%, in 1994, following an increase
of $134 million, or 9.4%, between 1992 and 1993. Increases in both periods were
due to staff increases in certain business units as well as the increased cost
of pension and medical benefits programs. Partially offsetting these increases
in 1994 were lower performance-based incentive accruals related to lower trading
profits.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
OTHER NONINTEREST EXPENSE
- ------------------------------------------------------------------------------
Percent
Increase(Decrease)
- ------------------------------------------------------------------------------
(Dollars in millions) 1994 1993 1992 1993-1994 1992-1993
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Occupancy expense of
premises, net.............. $ 244 $ 256 $ 289 (4.7)% (11.4)%
Equipment rentals,
depreciation & maintenance. 245 194 191 26.3 1.6
Marketing & public relations. 128 108 56 18.5 92.9
FDIC insurance expense....... 105 116 116 (9.5) -
Amortization of intangible
assets..................... 93 123 108 (24.4) 13.9
Telephone.................... 67 64 57 4.7 12.3
Freight & postage............ 68 65 60 4.6 8.3
Travel & entertainment....... 47 46 40 2.2 15.0
Stationery & supplies........ 39 46 47 (15.2) (2.1)
Operating and other taxes.... 31 29 27 6.9 7.4
Other........................ 548 543 604 0.9 (10.1)
------ ------ ------
Other operating expense.. 1,615 1,590 1,595 1.6 (0.3)
Provision for other
real estate*............... 3 13 199 (76.9) (93.5)
Merger-related expenses...... - - 76 N/M N/M
------ ------ ------
Total.................... $1,618 $1,603 $1,870 0.9 (14.3)
====== ====== ======
- ------------------------------------------------------------------------------
</TABLE>
* Includes $134 million in provisions taken relative to assets transferred to
the accelerated disposition portfolio in the third quarter of 1992.
9
<PAGE>
Other operating expense increased by $25 million, or 1.6%, in 1994, following a
decrease of $5 million, or 0.3%, in 1993.
Occupancy expense declined by 4.7% in 1994 to $244 million. Occupancy expense
in 1993 included the incremental costs associated with both the relocation of
the Corporation's shareholder services business and a reduction in other
occupancy requirements. Relocation and space reduction costs of $29 million
were included in occupancy expense in 1992. Excluding these charges, occupancy
expense was 1.5% lower in 1993 than in 1992.
Equipment expense in 1994 increased 26.3% to $245 million, reflecting the
expensing of personal computer equipment; previously, purchases of such
equipment were capitalized and depreciated. A special charge of $25 million was
taken in 1994 to reflect the reduction in the estimated useful life of existing
personal computer equipment.
Intangible amortization expense decreased $30 million in 1994 as core deposit
intangibles related to certain acquisitions became fully amortized. The 1993
results included a $12 million charge for the accelerated amortization of
certain acquired intangibles.
Special corporate expenses totaled $19 million in 1994, $14 million in 1993 and
$57 million in 1992, primarily associated with litigation and other corporate
activities. Excluding special corporate expense items, other operating expense
increased 1.3% in 1994 and 2.5% in 1993.
APPLICABLE INCOME TAXES
The following table shows the Corporation's income before income taxes,
applicable income taxes, and effective tax rate for each of the past three
years:
<TABLE>
<CAPTION>
- ---------------------------------------------------------
(Dollars in millions) 1994 1993 1992
- ---------------------------------------------------------
<S> <C> <C> <C>
Income before income taxes...... $1,853 $2,002 $ 272
Applicable income taxes......... 632 712 48
Effective tax rate.............. 34.1% 35.6% 17.6%
- ---------------------------------------------------------
</TABLE>
Tax expense in 1994 included a one-time tax benefit related to the
implementation of the final Internal Revenue Service bad debt recapture
regulations as well as the effect of several favorable tax rulings. These
factors contributed to the decline in the effective tax rate from 35.6% in 1993
to 34.1% in 1994.
The effective tax rate increased from 17.6% in 1992 to 35.6% in 1993 because of
a higher proportion of pre-tax income that was subject to tax as well as an
increase in the statutory tax rate. Also affecting the effective tax rate in
1993 was the accelerated write-off of an intangible asset that was not tax
benefited.
10
<PAGE>
SUPPLEMENTAL LIQUIDITY RISK MANAGEMENT
Liquidity risk is the possibility of being unable to meet all present and future
financial obligations in a timely manner. The Corporation views strong capital
ratios, high credit quality and solid core earnings as essential to retaining
high credit ratings and, thereby, cost-effective access to market liquidity.
As of December 31, 1994, NBD and First Chicago had prudent policies in place to
ensure adequate liquidity to fund anticipated needs based on an assessment of
asset liquidity, core deposit levels, wholesale funding sources, and contractual
asset and liability maturities. In addition, each institution had a contingency
funding plan that identifies actions to be taken in response to a liquidity
event. The Corporation is in the process of developing an integrated approach to
liquidity, including more detailed management practices and measurement
processes in this area, which will be presented in the Corporation's 1995 Form
10-K.
The Corporation's Statement of Cash Flows, on page 34, presents data on cash and
cash equivalents provided and used by the Corporation in its operating,
investing and financing activities.
The Corporation's ability to attract wholesale funds on a regular basis and at a
competitive cost is fostered by strong credit ratings from the major rating
agencies. As of December 31, 1994, NBD's and First Chicago's debt securities
held the following ratings.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------
Senior Long-Term Subordinated Commercial
Debt Debt Paper
- -------------------------------------------------------------------
S&P Moody's S&P Moody's S&P Moody's
- -------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NBD............ AA- Aa3 A+ A1 A-1+ P-1
First Chicago.. A A2 A- A3 A-1 P-1
- -------------------------------------------------------------------
</TABLE>
As of December 31, 1994, NBD and First Chicago's long- and short-term debt
ratings for their respective banks were as follows.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
Long-Term Debt Short-Term Debt
- ---------------------------------------------------------------------------
S&P Moody's S&P Moody's
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NBD Bank, N.A. (Indiana)............ AA Aa2 A-1+ P-1
NBD Bank (Michigan)................. AA Aa2 A-1+ P-1
The First National Bank of Chicago.. A+ A1 A-1 P-1
American National Bank and Trust
Company of Chicago................ A+ A1 A-1 P-1
FCC National Bank................... A+ A1 A-1 P-1
- ---------------------------------------------------------------------------
</TABLE>
Management considers the asset liquidity of the Corporation to be excellent.
Liquid assets are maintained in the form of short-term interbank placements and
saleable investment securities. In addition, as part of the Corporation's
11
<PAGE>
normal liquidity management process, assets are securitized and sold.
Securitization of credit card receivables is an important funding vehicle that
enables the Corporation to diversify its funding sources and to access large
amounts of term funding in a cost-effective manner. During 1994, $2 billion of
credit card receivables was securitized, bringing the total amount of
securitized credit card receivables to $6.1 billion at year-end 1994.
Access to a variety of funding markets and customers is vital to liquidity
management. Adequate liquidity is provided by maintaining stable sources of
funding based on diversification and customer relationships in both the retail
and wholesale funding markets. The following table shows the combined NBD and
First Chicago funding source mix at the end of each of the past four years.
<TABLE>
<CAPTION>
DEPOSITS AND OTHER PURCHASED FUNDS
- ----------------------------------------------------------------------------
December 31 (In millions) 1994 1993 1992 1991
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Domestic offices
Demand................................ $14,378 $14,852 $14,247 $11,409
Savings............................... 20,088 21,154 20,929 18,102
Time
Under $100,000...................... 8,720 8,310 9,779 12,426
$100,000 and over................... 4,484 4,089 5,688 8,787
Foreign offices......................... 17,225 9,602 10,098 10,869
------- ------- ------- -------
Total deposits.................. 64,895 58,007 60,741 61,593
- ----------------------------------------------------------------------------
Federal funds purchased and securities
under repurchase agreements........... 16,919 11,038 10,591 8,611
Commercial paper........................ 206 323 357 364
Other funds borrowed.................... 8,216 6,506 3,808 2,609
Long-term debt.......................... 7,246 5,250 4,175 3,822
------- ------- ------- -------
Total other purchased funds..... 32,587 23,117 18,931 15,406
------- ------- ------- -------
Total........................... $97,482 $81,124 $79,672 $76,999
======= ======= ======= =======
- ----------------------------------------------------------------------------
</TABLE>
SUPPLEMENTAL MARKET RISK MANAGEMENT
OVERVIEW
Market risk arises from changes in interest rates, exchange rates, commodity
prices and equity prices. The Corporation maintains risk management policies
that monitor and limit exposure to market risk. Through its trading activities,
it strives to take advantage of profit opportunities available in interest and
exchange rate movements. In asset and liability management activities, the
Corporation attempts to minimize structural interest rate and foreign exchange
rate risk. The measurement of market risk associated with financial instruments
is meaningful only when all related and offsetting on- and off-balance-sheet
transactions are aggregated, and the resulting net positions are identified.
Disclosures about fair value of financial instruments, which reflect changes in
market prices and rates, can be found in Note 17, beginning on page 57.
12
<PAGE>
TRADING ACTIVITIES
The Corporation maintains active trading positions in a variety of markets and
instruments, including U.S. government, municipal and money market securities.
It also maintains positions in derivative products associated with these markets
and instruments, such as interest rate and currency swaps, and commodity and
equity index options.
The majority of the trading activity occurred at First Chicago where revenue
related to trading activities was $130 million, down from a record $387 million
in 1993. Most of the shortfall came in the emerging markets segment and in the
foreign exchange and derivatives category.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
Trading Revenue--First Chicago* (In millions) 1994 1993 1992
- ---------------------------------------------------------------------
<S> <C> <C> <C>
Foreign exchange and derivatives............... $ 40 $ 98 $ 103
Fixed income and derivatives................... 66 114 94
Emerging markets............................... (49) 57 21
Funding and arbitrage.......................... 39 63 74
Other trading.................................. 34 55 40
----- ----- -----
Total...................................... $ 130 $ 387 $ 332
===== ===== =====
- ---------------------------------------------------------------------
</TABLE>
*Includes trading profits and related net interest income.
Most of the Corporation's trading activities are customer-oriented, and trading
positions are established as necessary for customers. However, in order to
anticipate customer demand for such transactions, the Corporation also carries
an inventory in capital markets instruments, and maintains its access to market
liquidity by making bid-offer prices to other market makers. Although these two
activities constitute its proprietary trading business, they are essential in
order to continue providing customers with capital markets products at
competitive prices.
Many trading positions are kept open for brief periods of time, often less than
one day. Other trading positions are maintained for longer periods, and these
positions are valued at prevailing market rates on a present value basis.
Realized and unrealized gains and losses on these trading positions are also
included in noninterest income as combined trading profits.
First Chicago utilizes a risk point system to measure and control market risk in
its trading activities. Business units are assigned risk point limits which
establish risk parameters for their daily trading activities. Risk points
measure the market risk (potential overnight loss) in a capital markets product.
Products that have more inherent price volatility incur more risk points.
First Chicago monitors value at risk in each of its significant trading
portfolios on a daily basis. The following table shows average, maximum and
minimum daily value at risk for each quarter of 1994, and the actual trading
revenue for each quarter.
13
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
Daily Value at Risk 4th Qtr. 3rd Qtr. 2nd Qtr. 1st Qtr.
(In millions) 1994 1994 1994 1994
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C>
Average.................... $42 $44 $41 $55
Maximum.................... 47 53 46 66
Minimum.................... 38 36 34 42
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
Quarter Ended 4th Qtr. 3rd Qtr. 2nd Qtr. 1st Qtr.
(In millions) 1994 1994 1994 1994
- ---------------------------------------------------------------------
Trading revenue*........... $30 $56 $42 $ 2
- ---------------------------------------------------------------------
</TABLE>
*Includes trading profits and related net interest income.
Value at risk is estimated using statistical models calibrated at a three-
standard-deviation confidence interval, which means that the actual daily
result should exceed the value at risk one day out of each two hundred. The
value at risk shown represents portfolio aggregates and overstates the value at
risk because it only partially considers offsets and correlations across
different trading portfolios.
NBD's trading risks are also controlled through detailed counterparty limits,
preapproved position limits, and closely supervised and monitored maturity gaps.
The following table shows NBD's combined trading profits that are included in
noninterest income in the Corporation's financial statements.
<TABLE>
<CAPTION>
- ---------------------------------------------------------
Trading Profits--NBD (In millions) 1994 1993 1992
- ---------------------------------------------------------
<S> <C> <C> <C>
Combined trading profits............ $21 $21 $20
- ---------------------------------------------------------
</TABLE>
STRUCTURAL INTEREST RATE RISK MANAGEMENT
Net interest income can fluctuate with movements in the interest rate market due
to an imbalance in the repricing or maturity of the Corporation's assets and
liabilities. Whenever possible, assets are matched with liabilities of similar
repricing characteristics. However, the loans and deposits generated through
the Corporation's ordinary business activity do not naturally create offsetting
positions with respect to repricing or maturity. For assets having indefinite
maturities or repricing sensitivities, liability pools based on such assets'
estimated maturities and repricing characteristics may be used to match the
interest rate risk. Finally, asset and liability positions that are not
appropriately offset with either specific on-balance-sheet transactions or with
liability pools are offset through off-balance-sheet derivatives positions (ALM
derivatives).
Traditional gap analysis is one of a variety of measurement tools used to
monitor and control the Corporation's interest rate risk position. To measure
the gap, asset, liability, equity and off-balance sheet positions are
distributed to future calendar periods based primarily on contractual interest
14
<PAGE>
rate repricing dates and on contractual maturity (including principal
amortization) dates. Maturity distributions, however, are modified based on
historical differences between contractual versus actual payment flows and to
reflect management's assumptions as to the effect future interest rate levels
may have on principal prepayment trends. Additionally, distributions reflect
management's current assumptions as to repricing frequency of indeterminate
maturity liabilities and changes in deposit balances in reaction to interest
rate levels. Finally, credit card securitizations, which subject credit card
servicing fee revenue to interest rate risk, are included in the gap analysis
measure.
The net difference between the amount of assets and funding sources distributed
to a calendar period is typically referred to as either the "asset/liability
gap" or the "rate sensitivity position." The magnitude of the gap in the various
calendar periods provides a general indication of the extent to which future
earnings, primarily net interest income, may be affected by interest rate
changes. A positive cumulative one-year gap position indicates more assets than
liabilities are anticipated to reprice over the next 12-month period. Such a
position implies that, assuming no management action, the Corporation's net
interest income would be positively affected by rising interest rates and
negatively affected by falling rates.
The following table shows First Chicago's "managerial" interest rate gap
analysis as of December 31, 1994, used to identify exposure from domestic
nontrading asset and liability positions. Interest rate risks in trading and
overseas asset and liability positions are excluded from the gap analysis and
managed principally as trading risks. It is First Chicago's policy to maintain
the cumulative one-year gap position, including ALM derivatives, to within 2% of
total domestic assets.
<TABLE>
<CAPTION>
FIRST CHICAGO'S GAP POSITION
- ---------------------------------------------------------------------------
December 31, 1994 0-90 91-180 181-365 1-5 Beyond
(Dollars in millions) days days days years 5 years
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Interest rate sensitivity
gap...................... $ 1,662 $ (520) $ (191) $ 2,113 $(3,064)
Cumulative gap............. 1,662 1,142 951 3,064 -
Cumulative gap as a % of
domestic assets.......... 2.7% 1.9% 1.6% 5.0% -
- ---------------------------------------------------------------------------
</TABLE>
The following table summarizes NBD Bancorp's rate sensitivity of earning assets
and funding sources as of December 31, 1994. It is NBD's policy that the
cumulative gap out to one year may not exceed 10% of total earning assets.
15
<PAGE>
<TABLE>
<CAPTION>
NBD BANCORP'S GAP POSITION
- ---------------------------------------------------------------------------
December 31, 1994 0-90 91-180 181-365 1-5 Beyond
(Dollars in millions) days days days years 5 years
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset (liability) gap... $(3,491) $ 254 $2,918 $(1,795) $ 2,114
Cumulative net asset
(liability) gap........... (3,491) (3,237) (319) (2,114) -
Cumulative gap as a % of
total earning assets...... (8.2)% (7.6)% (0.7)% (4.9)% -
- ---------------------------------------------------------------------------
</TABLE>
The Corporation is in the process of finalizing policies and practices for the
management of structural interest rate risk and the monitoring of interest rate
risk positions. Future disclosures, consistent with these finalized policies
and practices, will be presented in the Corporation's 1995 Form 10-K.
In addition to static gap analysis, the Corporation performs an earnings
simulation analysis to estimate the effect that specific interest rate changes
would have on annual pretax earnings. For NBD, this analysis, as of December
31, 1994, was based on a parallel rise in interest rates of 1 percentage point,
in increments of 25 basis points, over a four-month period. The results indicate
that net interest income for 1995 would be an estimated $23 million lower than
if rates were unchanged. First Chicago's simulation analysis involves a parallel
and immediate change in rates of 100 basis points. As of December, 31, 1994,
this analysis indicates an estimated earnings sensitivity of $12 million.
Access to the derivatives market is an important element in the Corporation's
ability to maintain its interest rate risk position. As of year-end 1994, the
Corporation had a total of $10.4 billion in ALM interest rate swaps, including
$3.7 billion of swaps against specific transactions and $6.7 billion against
specific pools of assets or liabilities. Swaps used to adjust the interest rate
sensitivity of specific transactions will not need to be replaced as they mature
along with the swap. However, swaps against the asset and liability pools will
have an impact on the Corporation's risk position as they mature and, assuming
no change to the underlying pool's characteristics, will need to be reissued to
maintain the same interest rate risk profile. These swaps could create modest
sensitivity of earnings to changes in interest rates.
The following table summarizes the interest rate swaps used by the Corporation
for asset and liability management purposes.
16
<PAGE>
<TABLE>
<CAPTION>
ASSET AND LIABILITY MANAGEMENT SWAPS - NOTIONAL PRINCIPAL
- -------------------------------------------------------------------------------------------
December 31, 1994 Receive Fixed Pay Fixed Basis
Pay Floating Receive Floating Swaps Total
- ----------------------------------------------------------------------------------------
(In millions) Specific Pool Specific Pool Pool
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Swaps associated with:
Loans...................... $ 38 $1,061 $ 228 $ 224 $275 $ 1,826
Investment securities...... - - 225 225 - 450
Securitized credit
card receivables......... - 1,225 - - - 1,225
Deposits................... 309 2,324 11 - 175 2,819
Funds borrowed (including
long-term debt).......... 1,987 - 916 875 325 4,103
------ ------ ------ ------ ---- -------
Total........................ $2,334 $4,610 $1,380 $1,324 $775 $10,423
====== ====== ====== ====== ==== =======
- ----------------------------------------------------------------------------------------
</TABLE>
Substantially all interest rate swaps used by the Corporation for asset and
liability management are standard interest rate swap contracts. The table that
follows summarizes the contractual maturities and weighted average pay and
receive rates for the asset and liability management swap position at December
31, 1994. The variable interest rates, which generally are the three-month and
six-month LIBOR rates in effect on the date of repricing, have been assumed to
remain constant. However, the variable interest rates will change with changes
in interest rates and would affect the related weighted average information
presented in the following table.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
(Dollars in millions) 1995 1996 1997 1998 1999 Thereafter Total
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Receive fixed/pay floating swaps:
Notional amount................. $1,738 $1,858 $1,384 $ 246 $ 91 $1,627 $ 6,944
Weighted average:
Receive rate................. 5.57% 6.96% 6.29% 6.82% 8.51% 7.32% 6.58%
Pay rate..................... 6.14% 6.18% 6.34% 6.51% 7.12% 6.36% 6.27%
Pay fixed/receive floating swaps:
Notional amount................. $1,543 $ 681 $ 324 $ 31 $ 74 $ 51 $ 2,704
Weighted average:
Receive rate................. 6.07% 5.96% 5.76% 6.25% 5.39% 5.54% 5.36%
Pay rate..................... 9.13% 6.40% 6.54% 8.42% 6.80% 8.01% 8.04%
Basis swaps:
Notional amount................. $ 775 - - - - - $ 775
Weighted average:
Receive rate................. 5.68% - - - - - 5.68%
Pay rate..................... 5.78% - - - - - 5.78%
- ----------------------------------------------------------------------------------------------------
Total notional amount...... $4,056 $2,539 $1,708 $ 277 $ 165 $1,678 $10,423
- ----------------------------------------------------------------------------------------------------
</TABLE>
17
<PAGE>
FOREIGN EXCHANGE RISK MANAGEMENT
Wherever possible, foreign currency-denominated assets are funded with liability
instruments denominated in the same currency. If a liability denominated in the
same currency is not immediately available or desired, a forward foreign
exchange contract is used to fully hedge the foreign exchange risk due to cross-
currency funding.
To minimize the earnings and capital impact of translation gains or losses
measured on an after-tax basis, the Corporation uses forward foreign exchange
contracts on a selective basis to hedge the exposure created by investments in
overseas branches and subsidiaries.
VENTURE CAPITAL ACTIVITIES
The Corporation's portfolio of venture capital investments is composed of
publicly traded equity securities held directly, publicly traded equity
securities held indirectly (e.g., through limited partnerships), and investments
in private companies. Equity securities gains related to venture capital
activities totaled $189 million in 1994, $381 million in 1993 and $188 million
in 1992. Net income related to the venture capital portfolio in 1994 was $95
million, or 27 cents per share, compared with $204 million, or 59 cents per
share, in 1993.
While the Corporation intends to reduce its exposure to equity risk in its
existing venture capital portfolio, it will continue to participate in this
business primarily through participation in a venture capital fund established
by the former management of the Corporation's venture capital subsidiaries,
through existing investment commitments and through other corporate financing
activities.
The Corporation uses fair value accounting for its venture capital portfolio.
Under this method, fair value of publicly traded securities is determined by
quoted market valuations, adjusted for illiquidity due to the size or nature of
the Corporation's holdings. Privately held securities are valued using
traditional valuation techniques conservatively applied.
<TABLE>
<CAPTION>
VENTURE CAPITAL PORTFOLIO
- ------------------------------------------------------------------------
Investments Investments
December 31, 1994 Held Held
(In millions) Directly Indirectly Total
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Publicly traded equity investments
Gross value...................... $448 $ 544 $ 992
Discount......................... (15) (129) (144)
---- ----- ------
Fair value................... $433 $ 415 848
==== =====
Investments in private companies.... 731
------
Total........................ $1,579
======
- ------------------------------------------------------------------------
</TABLE>
The Corporation has instituted a program intended to reduce volatility relative
to expected returns through the use of equity derivatives, including options,
and the sale of investments. As an example, during the first quarter of 1994
the Corporation issued Debt Exchangeable for Common Stock (DECS) related to
7.475 million shares of its holdings in NEXTEL Communications, Inc. The DECS
transaction limits the Corporation's downside risk on this investment
18
<PAGE>
to the $271 million DECS proceeds and, at the same time, allows the Corporation
to share in potential market appreciation. At December 31, 1994, 68% of the
Corporation's $848 million in publicly traded investments was hedged under this
program. Management intends to continue to use these and other techniques to
hedge the price risk inherent in this portfolio.
The following table provides fair value and sale information on the portfolio
during 1994.
<TABLE>
<CAPTION>
VENTURE CAPITAL PORTFOLIO ACTIVITY
- ---------------------------------------------------------------------------
Publicly
Traded Private
(In millions) Companies Companies Total
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Fair value, December 31, 1993................. $ 759 $698 $1,457
Additional investments........................ 92 124 216
Appreciation recorded as equity
securities gains............................ 189 56 245
Sales proceeds (1)............................ (189) (57) (246)
Other (2)..................................... (3) (90) (93)
----- ---- ------
Fair value, December 31, 1994 (3)............. $ 848 $731 $1,579
===== ==== ======
Unrealized appreciation at December 31, 1994.. $ 554 $ 45 $ 599
===== ==== ======
- ---------------------------------------------------------------------------
</TABLE>
(1) Net of transaction costs.
(2) Includes principal repayments, fund distribution and sales, and certain
reclassifications.
(3) Publicly traded amount includes net unrealized gains of $166 million related
to hedging instruments used to reduce the earnings volatility of the venture
capital portfolio.
In addition to the $1.6 billion of investments in the venture capital portfolio
at December 31, 1994, there were unfunded commitments of $145 million.
SUPPLEMENTAL CREDIT RISK MANAGEMENT
OVERVIEW
The Corporation has developed policies and procedures to manage the level and
composition of risk in its credit portfolio. The objective of this credit risk
management process is to reduce the risk of a loss resulting from a customer's
failure to perform according to the terms of a transaction.
Customer transactions create credit exposure that is reported both on and off
the Corporation's balance sheet. On-balance-sheet credit exposure includes such
items as loans and derivative financial instruments. Off-balance-sheet credit
exposure includes credit-related and derivative financial instruments.
ACCELERATED ASSET DISPOSITION PORTFOLIO
During the third quarter of 1992, the Corporation segregated approximately $2.0
billion of commercial real estate exposure at The First National Bank of Chicago
to be managed under an accelerated disposition program. By year-end 1994, the
liquidation of this portfolio had been virtually completed.
19
<PAGE>
During 1994, assets having nearly $250 million in original contractual exposure
were sold or otherwise liquidated. This resulted in a $75 million reduction in
the portfolio's carrying value and the recognition of net gains of $46 million
in noninterest income during 1994. The carrying value of the remaining assets
in the portfolio was $51 million at year-end 1994, representing 22% of original
contractual exposure. Nonperforming assets in this portfolio totaled $37
million at year-end 1994, $87 million at year-end 1993, and $372 million at
year-end 1992.
SUMMARY
The following discussion and related tables do not include those assets in the
accelerated asset disposition portfolio since their transfer in the third
quarter of 1992.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
SELECTED STATISTICAL INFORMATION
- ---------------------------------------------------------------------------------
(Dollars in millions) 1994 1993 1992 1991
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
At year-end
Loans outstanding....................... $55,176 $48,654 $47,836 $49,434
Nonperforming loans..................... 294 485 717 1,209
Other real estate, net.................. 57 87 81 517
Nonperforming assets.................... 351 572 798 1,726
Allowance for credit losses............. 1,158 1,106 1,041 1,136
Nonperforming assets/loans outstanding
and other real estate, net............ 0.6% 1.2% 1.7% 3.5%
Allowance for credit losses/
nonperforming loans................... 394% 228% 145% 94%
For the year
Average loans........................... $50,083 $47,110 $49,042 $50,571
Net charge-offs......................... 192 296 572 702
Net charge-offs/average loans........... 0.4% 0.6% 1.2% 1.4%
- ---------------------------------------------------------------------------------
</TABLE>
For analytical purposes, the Corporation's portfolio is divided into commercial
(domestic and foreign) and consumer (credit card and other nonbusiness credit to
individuals) segments.
20
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------
LOAN COMPOSITION
- -------------------------------------------------------
December 31 (In millions) 1994 1993 1992
- -------------------------------------------------------
<S> <C> <C> <C>
Commercial risk
Domestic
Commercial.............. $22,546 $19,310 $19,944
Commercial real estate
Construction.......... 1,074 1,105 1,323
Other................. 5,903 5,613 5,869
Lease financing......... 1,381 1,295 1,312
Foreign................... 3,305 3,083 3,176
------- ------- -------
Subtotal.......... 34,209 30,406 31,624
------- ------- -------
Consumer Risk
Credit cards.............. 6,980 6,393 4,829
Secured by real estate
Mortgage................ 4,963 4,285 4,257
Home equity............. 2,062 1,803 1,906
Automotive................ 3,994 3,241 2,911
Other..................... 2,968 2,526 2,309
------- ------- -------
Subtotal.......... 20,967 18,248 16,212
------- ------- -------
Total............. $55,176 $48,654 $47,836
======= ======= =======
- -------------------------------------------------------
</TABLE>
At December 31, 1991, total loans were $49.434 billion, which included $34.666
billion of commercial loans and $14.768 billion of consumer loans. Further
category breakdowns within the commercial and consumer portfolio are not
available.
ALLOWANCE FOR CREDIT LOSSES
The allowance for credit losses is maintained at a level that in management's
judgment is adequate to provide for estimated probable credit losses resulting
from on-balance-sheet credit exposure for financial instruments such as loans
and derivatives, and off-balance-sheet credit exposure for credit-related and
derivative financial instruments. The amount of the allowance is based on
management's formal review and analysis of potential credit losses, as well as
prevailing economic conditions.
21
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
ALLOWANCE FOR CREDIT LOSSES
- ----------------------------------------------------------------------
1994
- ----------------------------------------------------------------------
(Dollars in millions) Commercial Consumer Total
- ----------------------------------------------------------------------
<S> <C> <C> <C>
Balance, beginning of period.......... $ 870 $ 236 $1,106
Provision for credit losses........... 26 250 276
Net charge-offs....................... (6) (186) (192)
Other, transferred to other assets
related to securitized receivables.. - (49) (49)
Acquisitions and dispositions, net.... 17 - 17
----- ----- ------
Balance, end of period................ $ 907 $ 251 $1,158
===== ===== ======
Allowance as a percentage of:
loans outstanding................... 2.7% 1.2% 2.1%
nonperforming loans................. 309% - 394%
- ----------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
1993
- ----------------------------------------------------------------------
(Dollars in millions) Commercial Consumer Total
- ----------------------------------------------------------------------
<S> <C> <C> <C>
Balance, beginning of period.......... $ 863 $ 178 $1,041
Provision for credit losses........... 172 218 390
Net charge-offs....................... (165) (131) (296)
Other, transferred to other assets
related to securitized receivables.. - (29) (29)
----- ----- ------
Balance, end of period................ $ 870 $ 236 $1,106
===== ===== ======
Allowance as a percentage of:
loans outstanding................... 2.9% 1.3% 2.3%
nonperforming loans................. 179% - 228%
- ----------------------------------------------------------------------
</TABLE>
The Corporation's provision for credit losses decreased to $276 million in 1994
from $390 million in 1993. The $32 million increase in the consumer provision
was attributable to the growth in credit card receivables. The reduced level of
commercial provisions in 1994 reflects the Corporation's judgment as to the
portfolio's improved overall credit quality.
A reserve is maintained for securitized credit card receivables that is not
included in the allowance for credit losses. This reserve totaled $255 million
at December 31, 1994, compared with $196 million at December 31, 1993.
NONPERFORMING ASSETS
Nonperforming assets, which consist of nonperforming loans and other real
estate, decreased from $572 million at December 31, 1993, to $351 million at
December 31, 1994. Although quarterly fluctuations may occur, the Corporation
does not expect nonperforming assets to increase significantly in 1995.
22
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
NONPERFORMING ASSETS
- ------------------------------------------------------------------------
December 31 (Dollars in millions) 1994 1993 1992 1991
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Nonaccrual loans........................ $ 267 $ 478 $ 712 $1,195
Accrual renegotiated loans.............. 27 7 5 14
----- ----- ----- ------
Total nonperforming loans............. 294 485 717 1,209
Other real estate, net.................. 57 87 81 517
----- ----- ----- ------
Total nonperforming assets............ $ 351 $ 572 $ 798 $1,726
===== ===== ===== ======
Nonperforming loans:
Domestic.............................. $ 284 $ 421 $ 589 $1,001
Foreign............................... 10 64 128 208
----- ----- ----- ------
Total nonperforming loans........... $ 294 $ 485 $ 717 $1,209
===== ===== ===== ======
Nonperforming loans:
Commercial real estate................ $ 129 $ 203 $ 203 $ 463
TCD................................... 1 50 87 151
Other................................. 164 232 427 595
----- ----- ----- ------
Total nonperforming loans........... $ 294 $ 485 $ 717 $1,209
===== ===== ===== ======
Nonperforming loans/loans outstanding... 0.5% 1.0% 1.5% 2.4%
Nonperforming assets/loans outstanding
and other real estate, net............ 0.6% 1.2% 1.7% 3.5%
- ------------------------------------------------------------------------
</TABLE>
In addition to loans classified as nonperforming, there were other loans
totaling $30 million at December 31, 1994 (and $56 million and $73 million at
December 31, 1993 and 1992, respectively), where management was closely
monitoring the borrowers' ability to comply with payment terms, but where
existing conditions did not warrant either a partial charge-off or
classification as nonaccrual.
CONSUMER RISK MANAGEMENT
Consumer loans consist of credit card receivables as well as home mortgage
loans, home equity loans, automotive loans and other forms of installment
credit. Consumer loans totaled $21.0 billion at December 31, 1994, up 14.9% from
$18.2 billion a year ago. Including securitized credit card receivables, these
loans totaled $27.1 billion at December 31, 1994, up 16.7% from a year ago.
Total managed credit card receivables (i.e. those held in the portfolio and
those sold to investors through securitization) were $13.1 billion at December
31, 1994, up 15.4% from a year earlier.
23
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
CONSUMER LOANS
- --------------------------------------------------------------------------
December 31 (In millions) 1994 1993 1992 1991
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Credit card loans.................. $ 6,980 $ 6,393 $ 4,829 $ 4,472
Securitized credit card
receivables...................... 6,117 4,958 4,500 3,573
Total managed credit card
receivables.................. 13,097 11,351 9,329 8,045
Other consumer loans............... 13,987 11,855 11,383 10,296
------- ------- ------- -------
Total.......................... $27,084 $23,206 $20,712 $18,341
======= ======= ======= =======
- --------------------------------------------------------------------------
</TABLE>
Average managed credit card receivables grew to $11.4 billion in 1994, up 19.1%
from 1993.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
AVERAGE CREDIT CARD RECEIVABLES
- --------------------------------------------------------------------------------------
(Dollars in millions) 1994 1993 1992 1991
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Credit card loans.............................. $ 5,904 $ 4,772 $ 4,155 $ 4,127
Securitized credit card receivables............ 5,538 4,839 3,918 3,320
------- ------- ------- -------
Total managed credit card receivables........ $11,442 $ 9,611 $ 8,073 $ 7,447
======= ======= ======= =======
Total net charge-offs
(including securitizations).................. $403 $342 $333 $328
==== ==== ==== ====
Net charge-offs/average total
receivables.................................. 3.5% 3.6% 4.1% 4.4%
=== === === ===
- --------------------------------------------------------------------------------------
</TABLE>
The increase in net charge-offs in 1994 primarily reflects continued portfolio
growth. The net charge-off rate for the total average managed credit card
portfolio was 3.5% in 1994, compared with 3.6% a year ago. Current levels of
unemployment and personal bankruptcy filings make reductions in the charge-off
rate unlikely in the near term.
COMMERCIAL RISK MANAGEMENT
The commercial risk portfolio includes all domestic commercial credit exposure
and all foreign exposure. Credit exposure includes the credit risks associated
with both on- and off-balance-sheet financial instruments. Credit risks from
off-balance-sheet instruments arise from credit-related and derivative financial
instruments. See Note 15, on page 54, for information on the credit exposure
associated with these off-balance-sheet instruments.
Commercial loans increased 12.5% from $30.4 billion at December 31, 1993, to
$34.2 billion at December 31, 1994. The increase primarily reflects growth in
the middle market portfolio.
Commercial credit quality continued to improve as net charge-offs totaled $6
million in 1994, compared with $165 million in 1993. In addition, the
24
<PAGE>
provision for commercial credit losses decreased to $26 million in 1994 from
$172 million in 1993; this represents 8 basis points of related loans, a
significant improvement from 57 basis points in 1993. The year-end commercial
reserve of $907 million represented 2.7% of total commercial loans and 309% of
related nonperforming loans.
COMMERCIAL REAL ESTATE
Commercial real estate consists primarily of loans secured by real estate as
well as certain loans that are real estate-related. A loan is categorized as
real estate-related when 80% or more of the borrower's revenues are derived from
real estate activities and the loan is not collateralized by cash or marketable
securities.
At December 31, 1994, commercial real estate loans totaled $7.0 billion. During
1994, net charge-offs in the commercial real estate portfolio segment were $26
million. Nonperforming commercial real estate assets, including other real
estate, totaled $186 million, or 2.6% of related assets, at December 31, 1994.
SUPPLEMENTAL DERIVATIVE FINANCIAL INSTRUMENTS
The Corporation enters into a variety of derivative financial instruments in its
trading, asset and liability management, and venture capital activities. These
instruments include interest rate, currency, commodity and equity swaps,
forwards, futures, options, caps, floors, forward rate agreements, and other
conditional or exchange contracts, and include both exchange-traded and
over-the-counter contracts. See Note 15, on page 54, for a discussion of the
nature and terms of derivative financial instruments.
NOTIONAL PRINCIPAL OR CONTRACTUAL AMOUNTS OF DERIVATIVE FINANCIAL INSTRUMENTS
The following tables represent the gross notional principal or contractual
amounts of outstanding derivative financial instruments used in the
Corporation's trading, asset and liability management, and venture capital
activities. They include swaps, forwards, futures, options, caps, floors,
forward rate agreements, and other conditional or exchange contracts. These
amounts do not represent the market or credit risk associated with these
instruments but instead indicate the volume of the transactions. The amounts
greatly exceed the credit risk associated with these instruments and do not
reflect the netting of offsetting transactions.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------
Asset and
DECEMBER 31, 1994 Liability Venture
(In billions) Trading Management Capital Total
- ------------------------------------------------------------------
<S> <C> <C> <C> <C>
Foreign exchange contracts.. $295.1 $ 1.2 $ - $296.3
Interest rate contracts..... 320.4 10.4 - 330.8
Commodity contracts......... 0.1 - - 0.1
Equity contracts............ 2.7 - 0.3 3.0
------ ----- ------- ------
Total.................. $618.3 $11.6 $0.3 $630.2
====== ===== ======= ======
- ------------------------------------------------------------------
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------
Asset and
DECEMBER 31, 1993 Liability Venture
(In billions) Trading Management Capital Total
- ------------------------------------------------------------------
<S> <C> <C> <C> <C>
Foreign exchange contracts.. $221.8 $ 1.1 $ - $222.9
Interest rate contracts..... 204.1 9.9 - 214.0
Commodity contracts......... 0.2 - - 0.2
Equity contracts............ 0.1 - 0.1 0.2
------ ----- ------- ------
TOTAL.................. $426.2 $11.0 $0.1 $437.3
====== ===== ======= ======
- ------------------------------------------------------------------
</TABLE>
ACCOUNTING FOR DERIVATIVE FINANCIAL INSTRUMENTS
Derivative financial instruments used in trading and venture capital activities
are carried at fair value. Realized and unrealized gains and losses are included
in noninterest income as combined trading profits and equity securities gains.
Where appropriate, compensation for credit risk and ongoing servicing is
deferred and taken into income over the term of the derivative financial
instrument.
Income or expense on derivative financial instruments used to manage interest
rate exposure is recorded on an accrual basis as an adjustment to the yield of
the related interest rate exposures over the periods covered by the contracts.
If a derivative financial instrument that is used to manage interest rate risk
is terminated early, any resulting gain or loss is deferred and amortized as
an adjustment of the yield on the underlying interest rate exposure position
over the remaining periods originally covered by the terminated swap.
In general, purchased option, cap and floor contracts are reported in derivative
product assets, and written option, cap and floor contracts are reported in
derivative product liabilities. For other derivative financial instruments, an
unrealized gain is reported in derivative product assets and an unrealized loss
is reported in derivative product liabilities. Derivative financial instruments
executed with the same counterparty under a legally enforceable master netting
arrangement are reported on a net basis as derivative product assets or
liabilities.
INCOME RESULTING FROM DERIVATIVE FINANCIAL INSTRUMENTS
A discussion of the Corporation's income from derivatives used in trading and
venture capital activities, is presented on pages 13 and 18, respectively.
The Corporation uses interest rate derivative financial instruments to reduce
structural interest rate risk and the volatility of net interest margin. The
consistency of the Corporation's net interest margin reflects the effective use
of these derivatives. Without their use, net interest income would have been
lower by $48 million in 1994, $110 million in 1993 and $95 million in 1992.
The sale of fixed- and floating-rate credit card receivables as securities to
investors subjects the Corporation's servicing revenue to interest rate risk.
The Corporation uses interest rate derivatives to reduce the volatility of the
servicing income on credit card securitizations. Without the use of these
instruments, credit card fee revenue would have been reduced by $39 million in
1994, $67 million in 1993 and $57 million in 1992. The terms of these
derivatives match the terms of the credit card securitizations.
26
<PAGE>
Deferred gains and losses on the early termination of interest rate swaps used
to manage interest rate risk total a net deferred gain of $46 million as of
December 31, 1994, and a net deferred gain of $93 million as of December 31,
1993. A significant portion of these deferred gains was related to securitized
credit card receivables. The amount at December 31, 1994, is scheduled to be
amortized into income in the following periods: $28 million in 1995, $19 million
in 1996, $1 million in 1997 and $(2) million thereafter.
CREDIT EXPOSURE RESULTING FROM DERIVATIVE FINANCIAL INSTRUMENTS
The Corporation maintains risk management policies that monitor and limit
exposure to credit risks. For a further discussion of credit risks, see the
Credit Risk Management section, on page 19.
The Corporation's credit exposure resulting from derivative financial
instruments is represented by their fair value amounts, increased by an estimate
of maximum adverse position exposure. The incremental amount of credit exposure
for potential adverse movement is calculated by using a statistical model that
estimates changes over time in exchange rates, interest rates and other relevant
factors. Credit exposure amounts fluctuate as a function of maturity, interest
rates, foreign exchange rates, commodity prices and equity prices. Gross credit
exposure may be overstated because it does not consider collateral and other
security or the offsetting of losses with the same counterparties based on
legally enforceable termination and netting rights. A reconciliation between
gross credit exposure and balance sheet exposure is presented in the following
table.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
December 31, 1994 (In billions)
- ----------------------------------------------------------------------
<S> <C>
Gross credit exposure.......................................... $12.3
Less additional exposure based on estimate of maximum adverse
position exposure............................................ 5.4
-----
Gross fair value exposure...................................... $ 6.9
=====
Gross fair value exposure by type of contract
Interest rate contracts...................................... $ 3.6
Foreign exchange contracts................................... 3.2
Equity contracts............................................. 0.1
-----
Gross fair value exposure............................. 6.9
Less netting adjustments due to master netting agreements...... 2.5
Add unrecognized net loss due to nontrading activities......... -
-----
Balance sheet exposure......................................... $ 4.4
=====
- ----------------------------------------------------------------------
</TABLE>
At December 31, 1993, the gross credit exposure and the gross fair value
exposure resulting from derivative financial instruments were $10.6 billion and
$6.5 billion, respectively. There were no net charge-offs in 1994 related to
derivative financial instruments.
27
<PAGE>
SUPPLEMENTAL CAPITAL MANAGEMENT
The following section shows combined First Chicago and NBD capital management
information on a pro forma basis. It is not intended to suggest that the
companies have been managed on a combined basis, but only to present a view of
capital when the entities are added together. Upon consummation of the merger,
integrated capital management policies and practices will be in effect and will
be discussed in the Corporation's 1995 Annual Report.
Capital represents the stockholders' investment on which the Corporation strives
to generate attractive returns. It supports business growth and provides
protection to depositors and creditors. It is the Corporation's intent to
maintain a strong capital base, which, when coupled with attractive earnings, is
instrumental in enhancing long-term stockholder value.
The following table represents selected capital ratios for the Corporation as of
December 31.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
SELECTED CAPITAL RATIOS 1994 1993 1992 1991
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common equity/total assets ratio(1)................... 6.8% 7.6% 6.5% 6.0%
Tangible common equity ratio(1)....................... 6.3 6.9 5.7 5.1
Stockholders' equity/total assets..................... 6.9 8.1 7.0 6.5
Risk-based capital ratios(1)(2)
Tier 1.............................................. 8.6 9.0 7.4 6.5
Total............................................... 13.0 13.6 11.3 9.8
Leverage ratio(1)(2).................................. 7.3 7.8 6.6 6.5
Double leverage ratio................................. 113 108 112 111
- ------------------------------------------------------------------------------------
</TABLE>
(1) Net of investment in First Chicago Capital Markets, Inc.
(2) Under 1992 risk-based capital rules.
As shown in the table above, the Corporation has maintained a well-capitalized
regulatory position over the past three years. The regulatory guidelines for
well-capitalized status are a Tier 1 capital ratio of 6%, a total risk-based
capital ratio of 10% and a leverage ratio of 5%.
The principal banking subsidiaries of the Corporation -- The First National Bank
of Chicago (FNBC), FCC National Bank (FCCNB), American National Bank and Trust
Company of Chicago (ANB), NBD Bank (Michigan), NBD Bank, N.A. (Indiana), and NBD
Bank (Illinois) -- have exceeded the well-capitalized guidelines for the past
two years, as shown in the following table.
28
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
DECEMBER 31, 1994 NBD Bank NBD Bank, N.A. NBD Bank
FNBC FCCNB ANB (Michigan) (Indiana) (Illinois)
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Risk-Based Capital Ratios
Tier 1 capital........... 8.1% 12.1% 9.5% 7.5% 12.4% 10.3%
Total capital............ 12.5 15.0 12.0 11.1 13.7 11.5
Leverage ratio............. 6.3 14.4 9.1 6.1 8.9 7.9
- -----------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
December 31, 1993 NBD Bank NBD Bank, N.A. NBD Bank
FNBC FCCNB ANB (Michigan) (Indiana) (Illinois)
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Risk-Based Capital Ratios
Tier 1 capital........... 7.7% 10.0% 10.1% 8.1% 12.5% 11.8%
Total capital............ 11.8 12.9 11.8 11.3 13.8 13.0
Leverage ratio............. 6.7 12.3 8.7 6.7 8.9 9.1
- -----------------------------------------------------------------------------------------
</TABLE>
It is important to note that by maintaining regulatory well-capitalized status
the subsidiary banks benefit from lower Federal Deposit Insurance Corporation
deposit premiums.
The following table shows the components of the Corporation's regulatory risk-
based capital and total risk-weighted assets.
<TABLE>
<CAPTION>
- ------------------------------------------------------
December 31 (In millions) 1994 1993 1992
- ------------------------------------------------------
<S> <C> <C> <C>
Tier 1 capital............. $ 7,489 $ 7,051 $ 5,829
Tier 2 capital............. 3,806 3,649 3,089
------- ------- -------
Total capital........... $11,295 $10,700 $ 8,918
======= ======= =======
Risk-weighted assets....... $86,630 $78,641 $79,108
- ------------------------------------------------------
</TABLE>
DIVIDENDS
During 1994, First Chicago declared two increases in its quarterly common
dividend. The $0.55 per share common dividend declared on November 11, 1994,
and paid on January 1, 1995, represents a 38% increase from the dividend paid on
January 1, 1994, and an 83% increase from the dividend paid on October 1, 1993.
During 1994, NBD also declared two increases in its quarterly common dividend.
The $0.33 per share common dividend declared on December 19, 1994, and paid on
February 10, 1995, represents a 22% increase from the dividend paid on February
10, 1994.
29
<PAGE>
OTHER CAPITAL ACTIVITIES
During 1994, the Corporation repurchased 13.7 million shares of its common stock
at an average price of $28 per share.
On July 1, 1994, the Corporation redeemed its $150 million issue of Preferred
Stock, Series D, reducing annual dividend requirements by $15 million.
During the 1992-94 period, the Corporation strengthened its capital position
through the net increase of $772 million in subordinated debt of the parent
company, First Chicago NBD Corporation. In addition, NBD Bank (Michigan) issued
$450 million of subordinated debt to bolster its capital position.
DOUBLE LEVERAGE
Double leverage is the extent to which holding company debt is used to finance
the company's equity investments in its subsidiaries. On December 31, 1994,
First Chicago NBD Corporation's double leverage ratio was 113%, compared with
108% at year-end 1993.
30
<PAGE>
<TABLE>
<CAPTION>
S U P P L E M E N T A L C O N S O L I D A T E D B A L A N C E S H E E T
FIRST CHICAGO NBD CORPORATION AND SUBSIDIARIES
- -------------------------------------------------------------------------------------------------
December 31 (Dollars in millions) 1994 1993
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and due from banks..................................................... $ 6,852 $ 6,322
Interest-bearing due from banks............................................. 8,697 6,758
Federal funds sold and securities under
resale agreements.......................................................... 13,702 9,066
Trading assets.............................................................. 5,089 4,646
Derivative product assets................................................... 4,447 -
Investment securities (fair values--$14,784
in 1994 and $13,066 in 1993)............................................... 15,015 12,647
Loans (net of unearned income--$469 in
1994 and $422 in 1993)..................................................... 55,176 48,654
Allowance for credit losses................................................. (1,158) (1,106)
Premises and equipment...................................................... 1,295 1,270
Customers' acceptance liability............................................. 717 688
Other assets................................................................ 2,931 4,195
-------- -------
Total assets............................................................. $112,763 $93,140
======== =======
- -------------------------------------------------------------------------------------------------
LIABILITIES
Deposits
Demand..................................................................... $ 14,378 $14,852
Savings.................................................................... 20,088 21,154
Time....................................................................... 13,204 12,399
Foreign offices............................................................ 17,225 9,602
-------- -------
Total deposits........................................................... 64,895 58,007
Federal funds purchased and securities
under repurchase agreements................................................ 16,919 11,038
Other short-term borrowings................................................. 8,422 6,829
Long-term debt.............................................................. 7,246 5,250
Acceptances outstanding..................................................... 717 688
Derivative product liabilities.............................................. 4,172 -
Other liabilities........................................................... 2,583 3,829
-------- -------
Total liabilities........................................................ 104,954 85,641
- -------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Preferred stock-without par value,
- ----------------------------------------------------------------------------
Shares Outstanding: 1994 1993
- ----------------------------------------------------------------------------
Series A ($50 stated value)................. 2,410,000 2,410,000 121 121
Series B ($100 stated value)................ 1,191,000 1,191,000 119 119
Series C ($100 stated value)................ 713,800 713,800 71 71
Series D ($25 stated value)................. - 6,000,000 - 150
Series E ($625 stated vaue)................. 160,000 160,000 100 100
Convertible Series B ($5,000 stated value).. 40,000 40,000 200 200
Common stock--$1 par value.................................................. 329 318
- ----------------------------------------------------------------------------
1994 1993
- ----------------------------------------------------------------------------
Number of shares authorized.............. 500,000,000 500,000,000
Number of shares issued.................. 329,474,942 317,670,793
Number of shares outstanding............. 318,554,906 317,096,648
Surplus..................................................................... 2,555 2,542
Retained earnings........................................................... 4,808 3,924
Fair value adjustment on investment securities available-for-sale........... (158) (6)
Deferred compensation....................................................... (33) (30)
Accumulated translation adjustment.......................................... 7 3
Treasury stock at cost, 10,920,036 shares
in 1994 and 574,145 shares in 1993......................................... (310) (13)
- ------------------------------------------------------------------------------------------------
Stockholders' equity..................................................... 7,809 7,499
-------- -------
Total liabilities and stockholders' equity............................... $112,763 $93,140
======== =======
- ------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of this Balance Sheet.
</TABLE>
31
<PAGE>
<TABLE>
<CAPTION>
S U P P L E M E N T A L C O N S O L I D A T E D I N C O M E S T A T E M E N T
First Chicago NBD Corporation and Subsidiaries
- -----------------------------------------------------------------------
For the Year (In millions, except per 1994 1993 1992
share data)
- -----------------------------------------------------------------------
INTEREST INCOME
<S> <C> <C> <C>
Loans, including fees................... $4,000 $3,612 $3,934
Bank balances........................... 395 332 405
Federal funds sold and securities under
resale agreements...................... 624 350 291
Trading assets.......................... 284 227 268
Investment securities-taxable........... 716 598 666
Investment securities-tax exempt
(including dividends).................. 117 128 149
------ ------ ------
Total......................... 6,136 5,247 5,713
- -----------------------------------------------------------------------
INTEREST EXPENSE
Deposits................................ 1,653 1,472 2,083
Federal funds purchased and securities
under repurchase agreements............ 704 404 469
Other short-term borrowings............. 378 253 159
Long-term debt.......................... 445 334 310
------ ------ ------
Total......................... 3,180 2,463 3,021
- -----------------------------------------------------------------------
NET INTEREST INCOME..................... 2,956 2,784 2,692
Provision for credit losses............. 276 390 653
Provision for loans held for
accelerated disposition................ - - 491
------ ------ ------
NET INTEREST INCOME AFTER PROVISION FOR
CREDIT LOSSES AND PROVISION FOR LOANS
HELD FOR ACCELERATED DISPOSITION....... 2,680 2,394 1,548
- -----------------------------------------------------------------------
NONINTEREST INCOME
Combined trading profits................ 86 305 197
Equity securities gains................. 229 488 205
Investment securities gains (losses).... (1) 2 10
------ ------ ------
Market-driven revenue................. 314 795 412
Credit card fee revenue................. 871 730 553
Fiduciary and investment management fees 377 374 346
Service charges and commissions......... 688 704 646
Other................................... 143 166 61
------ ------ ------
Total......................... 2,393 2,769 2,018
- -----------------------------------------------------------------------
NONINTEREST EXPENSE
Salaries and employee benefits.......... 1,602 1,558 1,424
Occupancy expense of premises, net...... 244 256 289
Equipment rentals, depreciation and
maintenance............................ 245 194 191
FDIC insurance expense.................. 105 116 116
Amortization of intangible assets....... 93 123 108
Merger-related expenses................. - - 76
Other................................... 928 901 891
------ ------ ------
Subtotal...................... 3,217 3,148 3,095
Provision for other real estate held
for accelerated disposition............ - - 134
Provision for other real estate......... 3 13 65
------ ------ ------
Total......................... 3,220 3,161 3,294
- -----------------------------------------------------------------------
INCOME BEFORE INCOME TAXES.............. 1,853 2,002 272
Applicable income taxes................. 632 712 48
------ ------ ------
INCOME BEFORE CUMULATIVE EFFECT OF
CHANGES IN ACCOUNTING PRINCIPLES....... 1,221 1,290 224
CUMULATIVE EFFECT OF CHANGES IN
ACCOUNTING PRINCIPLES.................. - - 170
------ ------ ------
NET INCOME.............................. $1,221 $1,290 $ 394
====== ====== ======
NET INCOME ATTRIBUTABLE TO COMMON
STOCKHOLDERS' EQUITY................... $1,169 $1,233 $ 349
====== ====== ======
- -----------------------------------------------------------------------
COMMON SHARE DATA
PRIMARY
Income before cumulative effect of
changes in accounting principles... $3.62 $3.91 $0.60
Cumulative effect of changes in
accounting principles.............. - - 0.57
------ ------ ------
Net income.......................... $3.62 $3.91 $1.17
====== ====== ======
FULLY DILUTED
Income before cumulative effect of
changes in accounting principles... $3.58 $3.79 $0.60
Cumulative effect of changes in
accounting principles.............. - - 0.57
------ ------ ------
Net income.......................... $3.58 $3.79 $1.17
====== ====== ======
- -----------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of this statement.
32
<PAGE>
S U P P L E M E N T A L C O N S O L I D A T E D S T A T E M E N T O F
S T O C K H O L D E R S' E Q U I T Y
First Chicago NBD Corporation and Subsidiaries
- -----------------------------------------------------------------------
For Year Ended December 31
(In millions) 1994 1993 1992
- -----------------------------------------------------------------------
PREFERRED STOCK:
Balance, beginning of period.......... $ 761 $ 669 $ 569
Issuance of stock................... - 200 100
Redemption of preferred stock....... (150) (108) -
------ ------ ------
Balance, end of period................ 611 761 669
------ ------ ------
COMMON STOCK:
Balance, beginning of period.......... 318 309 284
Issuance of stock................... - 3 25
Redemption of preferred stock....... - 6 -
Acquisition of subsidiaries......... 11 - 3
Cancellation of shares held in
treasury........................... - - (3)
------ ------ ------
Balance, end of period............... 329 318 309
------ ------ ------
CAPITAL SURPLUS:
Balance, beginning of period.......... 2,542 2,399 2,058
Issuance of common stock............ 14 38 331
Issuance of treasury stock.......... (39) (1) -
Issuance of preferred stock......... - (4) (4)
Redemption of preferred stock....... (5) 101 -
Acquisition of subsidiaries......... 39 - 91
Cancellation of shares held in
treasury........................... - - (86)
Other............................... 4 9 9
------ ------ ------
Balance, end of period................ 2,555 2,542 2,399
------ ------ ------
RETAINED EARNINGS:
Balance, beginning of period.......... 3,924 2,974 2,880
Net income........................... 1,221 1,290 394
Cash dividends declared on common
stock............................... (367) (283) (255)
Cash dividends declared on preferred
stock............................... (47) (57) (45)
Acquisition of subsidiary............ 77 - -
------ ------ ------
Balance, end of period................ 4,808 3,924 2,974
------ ------ ------
FAIR VALUE ADJUSTMENT ON INVESTMENT SECURITIES
AVAILABLE-FOR-SALE:
Balance, beginning of period.......... (6) - -
Unrealized loss at December 31,
1993 (net of tax benefit of $3).... - (6) -
Change in net unrealized loss (net
of tax benefit of $87)............. (148) - -
Acquisition of subsidiary........... (4) - -
------ ------ ------
Balance, end of period................ (158) (6) -
------ ------ ------
DEFERRED COMPENSATION:
Balance, beginning of period.......... (30) (34) (73)
Awards granted...................... (28) (17) (16)
Amortization of deferred
compensation....................... 21 16 23
Termination - ESOP.................. - - 28
Other............................... 4 5 4
------ ------ ------
Balance, end of period................ (33) (30) (34)
------ ------ ------
ACCUMULATED TRANSLATION ADJUSTMENT:
Balance, beginning of period.......... 3 7 12
Translation gain (loss), net of
taxes............................. 4 (4) (5)
------ ------ ------
Balance, end of period................ 7 3 7
------ ------ ------
TREASURY STOCK:
Balance, beginning of period.......... (13) (1) (70)
Purchase of common stock............. (388) (21) (135)
Acquisition of subsidiaries.......... - - 74
Cancellation of shares held in
treasury............................ - - 89
Issuance of stock.................... 91 9 41
------ ------ ------
Balance, end of period................ (310) (13) (1)
------ ------ ------
Total stockholders' equity, end of
period................................. $7,809 $7,499 $6,323
====== ====== ======
- -----------------------------------------------------------------------
The accompanying notes are an integral part of this statement.
33
<PAGE>
<TABLE>
<CAPTION>
S U P P L E M E N T A L C O N S O L I D A T E D S T A T E M E N T O F C A S H F L O W S
First Chicago NBD Corporation and Subsidiaries
- --------------------------------------------------------------------------------------------------------------------------------
For the Year (In millions) 1994 1993 1992
- --------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C>
Net income............................................................................. $ 1,221 $ 1,290 $ 394
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization........................................................ 277 295 282
Combined credit provisions (including accelerated disposition provision)............. 279 403 1,343
Equity securities gains.............................................................. (229) (488) (205)
Net (increase) in net derivative product balances.................................... (62) - -
Net gains from accelerated disposition portfolio activities.......................... (46) (60) -
Cumulative effect of changes in accounting principles................................ - - (170)
Net (increase) in trading assets..................................................... (427) (1,165) (1,334)
Net (increase) decrease in loans held for sale....................................... 197 (111) 7
Net (increase) decrease in accrued income receivable................................. (143) (37) 189
Net increase (decrease) in accrued expenses payable.................................. 102 317 (172)
Net (increase) decrease in other assets.............................................. (212) 66 631
Interest income from Brazilian debt restructuring.................................... (17) - -
Other noncash adjustments............................................................ 70 (421) 18
-------- ------- -------
Total adjustments.................................................................... (211) (1,201) 589
Net cash provided by operating activities.............................................. 1,010 89 983
- --------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Net (increase) in federal funds sold and securities under resale agreements............ (4,623) (2,050) (1,419)
Purchase of investment securities...................................................... - (7,722) (6,686)
Purchase of investment securities--available for sale.................................. (6,392) - -
Purchase of debt investment securities--held to maturity............................... (3,081) - -
Purchase of venture capital investments................................................ (181) - -
Proceeds from maturities of debt securities............................................ - 8,265 4,834
Proceeds from maturities of debt securities--available for sale........................ 2,811 - -
Proceeds from maturities of debt securities--held to maturity.......................... 2,052 - -
Proceeds from sales of investment securities........................................... - 679 1,336
Proceeds from sales of investment securities--available for sale....................... 2,164 - -
Proceeds from sales of venture capital investments..................................... 333 - -
Credit card receivables securitized.................................................... 2,000 1,700 1,000
Net (increase) in loans................................................................ (8,200) (2,830) (899)
Loan recoveries........................................................................ 155 189 146
Net proceeds from sales of assets held for accelerated disposition..................... 112 829 174
Purchases of premises and equipment.................................................... (370) (347) (237)
Proceeds from sales of premises and equipment.......................................... 107 137 101
Net cash and cash equivalents due to mergers and acquisitions.......................... 38 - 100
-------- ------- -------
Net cash (used in) investing activities................................................ (13,075) (1,150) (1,550)
- --------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in deposits.................................................... 5,776 (2,700) (1,966)
Net increase in federal funds purchased and securities under repurchase agreements..... 5,832 447 1,799
Net increase in other short-term borrowings............................................ 1,581 2,663 1,183
Proceeds from issuance of long-term debt............................................... 3,357 1,964 1,325
Repayment of long-term debt............................................................ (1,231) (893) (965)
Net increase (decrease) in other liabilities........................................... 2 285 (1,102)
Dividends paid......................................................................... (397) (331) (298)
Proceeds from issuance of common and treasury stock.................................... 52 47 382
Purchase of treasury stock............................................................. (397) (26) (135)
Proceeds from issuance of preferred stock.............................................. - 196 96
Payment for redemption of preferred stock.............................................. (150) (1) -
-------- ------- -------
Net cash provided by financing activities.............................................. 14,425 1,651 319
- --------------------------------------------------------------------------------------------------------------------------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS........................... 109 (80) (47)
- --------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS................................... 2,469 510 (295)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR......................................... 13,080 12,570 12,865
-------- ------- -------
CASH AND CASH EQUIVALENTS AT END OF YEAR............................................... $ 15,549 $13,080 $12,570
======== ======= =======
- --------------------------------------------------------------------------------------------------------------------------------
OTHER CASH FLOW DISCLOSURES:
Interest paid........................................................................ $ 3,165 $ 2,451 $ 2,767
State and federal income taxes paid.................................................. 575 379 187
- --------------------------------------------------------------------------------------------------------------------------------
The Corporation financed the sale of other real estate in the amount of $2 million, $2 million and $135 million in 1994, 1993
and 1992, respectively. Loans transferred to other real estate were $29 million, $57 million and $214 million in 1994, 1993
and 1992, respectively. In 1993 the Corporation reclassified $89 million of United Mexican States obligations from loans to
investment securities.
The accompanying notes are an integral part of this statement.
</TABLE>
34
<PAGE>
N O T E S T O S U P P L E M E N T A L C O N S O L I D A T E D
F I N A N C I A L S T A T E M E N T S
First Chicago NBD Corporation and Subsidiaries
_______________________________________________________________________________
N O T E 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements for First Chicago NBD Corporation and
subsidiaries (the Corporation) have been prepared in conformity with generally
accepted accounting principles. Prior years' financial statements have been
reclassified to conform with the current financial statement presentation.
(A) PRINCIPLES OF CONSOLIDATION
The Corporation's consolidated financial statements include the accounts of
First Chicago NBD Corporation (the Parent) and all subsidiaries more than 50%
owned. All significant intercompany accounts and transactions have been
eliminated in consolidation.
(B) TRADING ASSETS
Trading assets are carried at fair value. Realized and unrealized gains and
losses are reflected in noninterest income as combined trading profits.
Combined trading profits include interest rate, exchange rate, commodity price,
and equity price trading results from both cash and derivative financial
instruments. First Chicago's net trading revenue by activity, including both
combined trading profits and related net interest income, is shown in the table
on page 13.
(C) INVESTMENT SECURITIES
In 1993, the Corporation adopted Statement of Financial Accounting Standards
(SFAS) No. 115, "Accounting for Certain Investments in Debt and Equity
Securities", for debt and equity securities except those held by its venture
capital subsidiaries. This adoption did not have a material impact on the
Corporation's financial statements.
Under SFAS No. 115, debt investment securities are designated as held-to-
maturity, available-for-sale, or trading assets at the time of acquisition and
are reevaluated to determine appropriate classification in subsequent reporting
periods. Debt securities that the Corporation has the positive intent and
ability to hold to maturity are carried at amortized cost. Previously, such
accounting treatment was applied to debt securities that were intended to be
held as long-term investments. Debt and equity securities that are bought with
the intent of profiting from short-term price movements are included and
accounted for as trading assets. All other debt and equity securities covered
by SFAS No. 115 are classified as available-for-sale and are carried at fair
value, with unrealized gains and losses net of applicable income taxes reported
in a separate component of stockholders' equity. Previously, these securities
were carried at the lower of cost or fair value.
Realized gains and losses and other than temporary impairments related to debt
and equity investment securities are determined using the specific
identification method and are reported in noninterest income as investment
securities gains (losses) for debt securities and as equity securities gains
(losses) for equity securities.
The Corporation carries investments of its venture capital subsidiaries at fair
value. Changes in the fair value of such investments are recognized in
noninterest income as equity securities gains. The fair value of publicly
traded investments takes into account their quoted market prices with
adjustments made for market liquidity or sale restrictions. For investments
that are not publicly traded, management has made estimates of fair value that
consider the investees' financial results, conditions and prospects, and the
values of comparable public companies. Because of the nature of these
investments, the equity method of accounting is not used in situations where the
Corporation has a greater than 20% ownership interest.
35
<PAGE>
(D) LOANS
Loans are generally reported at the principal amount outstanding, net of
unearned income. Loans held for sale are valued at the lower of cost or fair
value. Unrealized losses, as well as realized gains or losses, are included in
other noninterest income.
Loan origination and commitment fees, net of costs, are deferred and amortized
as interest income over the life of the related loan. Other credit-related
fees, such as syndication management fees, commercial letters of credit fees,
and fees on unused, available lines of credit, are recorded as noninterest
income when earned.
Loans, including lease-financing receivables, are considered nonperforming when
placed on nonaccrual status, or when renegotiated at terms that represent an
economic concession to the borrower.
A commercial loan is placed on nonaccrual status when the collection of
contractual principal or interest is deemed doubtful by management or becomes 90
days or more past due, and the loan is not well-secured and in the process of
collection. Accrued but uncollected interest is reversed and charged against
interest income when the commercial loan is placed on nonaccrual status.
Interest payments received on a nonaccrual loan, in which ultimate collection of
its recorded investment amount is considered doubtful, are recorded as a
reduction to principal until such doubt no longer exists; thereafter, interest
payments received are recorded as a recovery, to the extent of prior charge-
offs, and then as interest income.
Consumer loans are generally not placed on nonaccrual status but are charged off
after reaching certain delinquency periods (120-180 days). Accrued but
uncollected interest on a consumer loan is reversed against interest income when
the loan is charged off.
An economic concession on a renegotiated loan may represent forgiveness of
principal and/or interest or a below-market interest rate offered to the
borrower to maximize the Corporation's recovery of the loan. Generally, this
occurs when the borrower's cash flow is insufficient to service the loan under
its original terms. Subject to the above nonaccrual policy, interest on these
loans is accrued at the reduced rates.
(E) CREDIT CARD SECURITIZATION
The Corporation actively packages and sells credit card receivables as
securities to investors. No gain or loss is recorded at the time of sale since
the amount realized upon sale is equal to the recorded investment amount of the
receivables. Transaction costs are deferred and amortized ratably as a
reduction of servicing fees over the terms of the related securitizations. The
amount of credit card interest income and fee revenue in excess of interest paid
to certificate holders, credit losses and other trust expenses is recognized
monthly as servicing fees in credit card fee revenue.
(F) ALLOWANCE FOR CREDIT LOSSES
The allowance for credit losses is maintained at a level that in management's
judgment is adequate to provide for estimated probable credit losses inherent in
on- and off-balance-sheet credit exposure attributable to financial instruments.
The amount of the allowance is based on management's formal review and analysis
of potential credit losses, as well as prevailing economic conditions.
(G) PREMISES AND EQUIPMENT
Premises and equipment are carried at cost less accumulated depreciation and
amortization. Depreciation is charged to noninterest expense over the estimated
useful lives of the assets and is computed on either a straight-line or an
accelerated depreciation method. Leasehold improvements are amortized over the
terms of the respective leases or the estimated useful lives of the
improvements, whichever is shorter. Maintenance, repairs and minor alterations
are expensed as incurred. Gains and losses on disposition are reflected in
other noninterest income.
36
<PAGE>
(H) OTHER REAL ESTATE
Other real estate includes assets that either have been acquired in satisfaction
of debt (assets owned) or are classified as in-substance foreclosures. Other
real estate is recorded at the lower of cost or fair value less estimated
selling costs at the date of transfer. Any valuation adjustments required at
the date of transfer are reflected in the allowance for credit losses. Other
real estate is subsequently carried at the lower of cost or fair value, based on
periodic evaluations that consider changes in market conditions, development and
disposition costs, and estimated holding periods. Operating results from other
real estate are recorded in other noninterest expense.
(I) ASSETS HELD FOR ACCELERATED DISPOSITION
In 1992, the Corporation segregated certain commercial real estate assets and
related commitments in an accelerated disposition portfolio. The Corporation
transferred assets to this portfolio at their estimated disposition value. The
assets in this portfolio are carried at the lower of the initially established
carrying values or newly estimated disposition value. The credit and valuation
process related to this portfolio is performed quarterly to assess the ongoing
condition of each individual credit, to determine any change in credit risk
classification, and to determine the need, if any, for additional valuation
adjustments. Income recognition is based on the credit characteristics of the
individual assets in the disposition portfolio. Net gains as a result of
transaction activity related to disposition portfolio assets are included in
noninterest income.
(J) INTANGIBLE ASSETS
Intangible assets are included in other assets. Goodwill, representing the cost
of investments in subsidiaries and affiliated companies in excess of the fair
value of net assets acquired, is amortized on a straight-line basis over periods
ranging from 10 to 25 years.
Other intangible assets, such as purchased mortgage service rights, customer
lists, core deposits and credit card relationships, are amortized using various
methods over the periods benefited.
(K) INCOME TAXES
In 1992, the Corporation adopted SFAS No. 109, "Accounting for Income Taxes,"
which 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.
(L) DERIVATIVE FINANCIAL INSTRUMENTS
In 1994, the Corporation prospectively adopted Financial Accounting Standards
Board (FASB) Interpretation No. 39, "Offsetting of Amounts Related to Certain
Contracts". This interpretation is applicable to the balance sheet presentation
of derivative financial instruments. These derivatives include interest rate,
currency, commodity and equity swaps, forwards, options, caps, floors, forward
rate agreements, and other conditional or exchange contracts, and include both
exchange-traded and over-the-counter contracts.
37
<PAGE>
In general, purchased option, cap and floor contracts are reported in derivative
product assets, and written option, cap and floor contracts are reported in
derivative product liabilities. For other derivative financial instruments, an
unrealized gain is reported in derivative product assets and an unrealized loss
is reported in derivative product liabilities. Amounts related to derivative
financial instruments executed with the same counterparty under a legally
enforceable master netting arrangement are reported on a net basis as a
derivative product asset or liability.
For a discussion of the Corporation's accounting policies for derivative
financial instruments, see the Derivative Financial Instruments section, on page
26.
(M) FOREIGN CURRENCY TRANSLATION
If the Corporation's foreign installation's primary operating currency
(functional currency) is the U.S. dollar, foreign currency denominated assets
and liabilities are remeasured into U.S. dollars at current exchange rates
except for premises and equipment, which are remeasured at historical exchange
rates. Remeasurement effects and results of related hedging transactions are
included in other noninterest income.
If the Corporation's foreign installation has a functional currency that is
other than the U.S. dollar, the adjustment related to translating the net asset
or liability position of that foreign installation into U.S. dollars is reported
in a separate component of stockholders' equity along with any related hedge
transaction, net of tax.
(N) EMPLOYEE BENEFITS
The Corporation adopted SFAS No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions," effective January 1, 1992. This statement
recognizes the expected cost of providing postretirement benefits in the
financial statements during an employee's active service period.
The Corporation adopted 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 Corporation's prior practice was to expense these benefits when
paid.
(O) CASH FLOW REPORTING
The Corporation uses the indirect method to report cash flows from operating
activities. Under this method, net income is adjusted to reconcile it to net
cash flow from operating activities. Net reporting of cash transactions has
been used when the balance sheet items consist predominantly of maturities of
three months or less, or where otherwise permitted. Other items are reported on
a gross basis. Cash flows related to sales of debt investment securities within
three months of the maturity date are classified as maturities in the
consolidated statement of cash flows. Cash flows from derivative financial
instruments are reported net as operating activities. Cash and cash equivalents
consist of cash and due from banks, whether interest-bearing or not.
Upon adopting FASB Interpretation No. 39 on January 1, 1994, a noncash transfer
of balances attributable to derivative financial instruments on December 31,
1993, was made from other assets ($1.5 billion) and other liabilities ($1.3
billion) to net derivative product balances.
38
<PAGE>
N O T E 2 -- CHANGES IN ACCOUNTING PRINCIPLES
In 1992, the Corporation changed its accounting policy for investments held by
its venture capital subsidiaries. Under the new policy, these investments are
carried at fair value with changes in fair value recognized in earnings.
Previously, these investments were carried at the lower of aggregate cost or
fair value.
Also in 1992, the Corporation changed its accounting policy for the recognition
of certain credit card solicitation costs. Under the new policy, costs of
sourcing credit card accounts through third-party marketing firms are expensed
as incurred. Previously, these costs were deferred and amortized over the
estimated life of the account.
The Corporation adopted SFAS No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions" effective January 1, 1992. This statement
requires that the expected cost of providing postretirement benefits be
recognized in the financial statements during an employee's active service
period.
The cumulative effect of adopting these accounting principles was recognized in
earnings in the year of adoption. The cumulative adjustment amounts and related
impact on earnings per share are displayed below.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------
(In millions, except per share data) 1992
- -----------------------------------------------------------------------
<S> <C>
Net Income
Venture capital portfolio adjusted to fair value............... $ 221
Credit card solicitation costs................................. (13)
Postretirement benefits........................................ (38)
------
Total cumulative effect of changes in accounting principles.. $ 170
======
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
Earnings per share--primary
Venture capital portfolio adjusted to fair value............... $ 0.74
Credit card solicitation costs................................. (0.04)
Postretirement benefits........................................ (0.13)
------
Total cumulative effect of changes in accounting principles.. $ 0.57
======
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
Earnings per share--fully diluted
Venture capital portfolio adjusted to fair value............... $ 0.74
Credit card solicitation costs................................. (0.04)
Postretirement benefits........................................ (0.13)
------
Total cumulative effect of changes in accounting principles.. $ 0.57
======
- -----------------------------------------------------------------------
</TABLE>
39
<PAGE>
N O T E 3 -- EARNINGS PER SHARE
The Corporation presents earnings per share on both a primary and a fully
diluted basis. Primary earnings per share were computed by dividing net income,
after deducting dividends on preferred stock, by the average number of common
and common-equivalent shares outstanding during the period. Common-equivalent
shares consist of net shares issuable under the Employee Stock Purchase and
Savings Plan and outstanding stock options.
The fully diluted earnings per share calculation also includes common shares
that would result from the conversion of convertible preferred stock and
convertible notes. Accordingly, net income was not reduced by preferred stock
dividend requirements related to convertible preferred stock or the interest
expense on the convertible notes.
The net income, preferred stock dividends, interest on the convertible notes,
and shares used to compute primary and fully diluted earnings per share are
presented in the following table.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
(In millions) 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PRIMARY
Net income....................................................................................... $ 1,221 $ 1,290 $ 394
Preferred stock dividends (1).................................................................... (52) (57) (45)
-------- -------- --------
Net income attributable to common
stockholders' equity............................................................................ $ 1,169 $ 1,233 $ 349
======== ======== ========
FULLY DILUTED
Net income....................................................................................... $ 1,221 $ 1,290 N/M
Preferred stock dividends, excluding
convertible Series A and B, where
applicable (1).................................................................................. (40) (44) N/M
Interest on convertible notes,
net of taxes.................................................................................... 2 10 N/M
-------- -------- --------
Fully diluted net income......................................................................... $ 1,183 $ 1,256 N/M
======== ======== ========
- -----------------------------------------------------------------------------------------------------------------------------------
(In thousands) 1994 1993 1992
- -----------------------------------------------------------------------------------------------------------------------------------
Average shares outstanding....................................................................... 319,929 313,248 297,215
Common stock equivalents......................................................................... 2,737 2,170 1,960
-------- -------- --------
Average number of common and common
equivalent shares (primary)..................................................................... 322,666 315,418 299,175
Incremental shares related to
convertible preferred stock,
debentures and other............................................................................ 8,145 15,871 N/M
-------- -------- --------
Average number of shares, assuming
full dilution................................................................................... 330,811 331,289 N/M
======== ======== ========
- -----------------------------------------------------------------------------------------------------------------------------------
Earnings Per Share 1994 1993 1992
- -----------------------------------------------------------------------------------------------------------------------------------
Net Income Per Share
Primary.......................................................................................... $3.62 $3.91 $1.17
===== ===== =====
Fully Diluted.................................................................................... $3.58 $3.79 $1.17
===== ===== =====
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) 1994 preferred dividends include a 3% premium, totaling $4.5 million, paid
on the redemption of the Corporation's Cumulative Preferred Stock, Series D.
N/M = Not Meaningful
For 1992, the calculation of fully diluted earnings per share would have
produced an anti-dilutive result and, therefore is not shown in the preceding
table.
40
<PAGE>
N O T E 4 -- FIRST CHICAGO CORPORATION MERGER WITH NBD BANCORP, INC.
On December 1, 1995, First Chicago Corporation ("First Chicago") merged with and
into NBD Bancorp, Inc. ("NBD"), with the combined company renamed First Chicago
NBD Corporation ("FCNBD"). Pursuant to the merger, each share of common stock of
First Chicago was converted into 1.81 shares of common stock of FCNBD. In
aggregate, 87.1 million shares of First Chicago common stock were converted into
157.7 million shares of FCNBD. Each share of common stock of NBD remained
outstanding and represents one share of FCNBD. Each share of preferred stock of
First Chicago outstanding immediately prior to the merger was converted into one
share of preferred stock of FCNBD with terms substantially similar to those of
existing First Chicago preferred stock. The merger was accounted for as a
pooling of interests.
Previously reported financial information for First Chicago and NBD for the
three years ended December 31, 1994, is shown in the table below. To conform to
consistent methods of accounting, certain reclassifications of historical data
were made. Among these were the reclassification of the 1994 extraordinary item
(to other income), the 1994 cumulative effect of changes in accounting
principles (to salaries and benefits), and the 1993 cumulative effect of changes
in accounting principles (to income taxes).
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
1994 1993 1992
--------------- --------------- ----------------
First First First
(In millions) Chicago NBD Chicago NBD Chicago NBD
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net interest income................... $1,331 $1,625 $1,226 $1,558 $1,183 $1,510
Noninterest income.................... 1,875 545 2,202 585 1,488 529
Noninterest expense................... 1,919 1,304 1,858 1,322 1,955 1,338
Income before income taxes............ 1,063 814 1,300 702 (200) 472
Income before extraordinary item and
cumulative effect of changes in
accounting principles................ 690 547 804 482 (114) 338
Extraordinary items................... - (8) - - - -
Cumulative effect of changes in
accounting principles................ - (8) - 4 208 (38)
Net income............................ 690 531 804 486 94 300
- -------------------------------------------------------------------------------------------
</TABLE>
41
<PAGE>
N O T E 5 -- OTHER ACQUISITIONS
In January 1995, the Corporation entered into a definitive agreement under which
Deerbank Corporation, a $766 million thrift holding company located in
Deerfield, Illinois, would become affiliated with the Corporation. Under the
terms of the agreement, valued at approximately $120 million, each share of
Deerbank Corporation common stock will be exchanged for $45.00 of the
Corporation's common stock, based on the average market price of the
Corporation's common stock for a certain period preceding the closing of the
merger. The Corporation will have repurchased an equivalent number of its common
shares at or soon after the closing of the merger. The merger, which will be
accounted for as a purchase, is subject to the approval of Deerbank Corporation
shareholders and regulatory authorities.
During 1994, the Corporation entered into a merger agreement with AmeriFed
Financial Corp., a thrift holding company located in Joliet, Illinois, with
total assets of $910 million. The merger was consummated on January 9, 1995, and
accounted for as a purchase. Essentially all of the purchase price of $148
million was provided by the issuance of 5.2 million shares of the Corporation's
common stock. The Corporation had repurchased 5.0 million of the shares issued
before the closing of the merger, and repurchased an amount equivalent to the
remaining shares issued soon after the closing.
On July 8, 1994, the Corporation issued approximately 11.6 million shares of its
common stock for all of the common stock of Lake Shore Bancorp, Inc. (Lake
Shore) of Chicago, Illinois. As of the acquisition date, Lake Shore's assets
totaled $1.2 billion and capital totaled $123 million. The combination was
accounted for on a pooling-of-interests basis; however, because the transaction
was not considered significant from an accounting perspective, the Corporation
did not restate either 1994 or prior-year financial data.
On October 15, 1992, the Corporation issued approximately 29.9 million shares of
its common stock for all of the common stock of INB Financial Corporation, Inc.
(INB), of Indianapolis, Indiana. This merger was also accounted for as a
pooling of interests.
In the third quarter of 1992, the Corporation recorded $70 million ($48 million
after tax) of merger-related expenses for severance and early retirement,
elimination of duplicate facilities and equipment, and intangibles revaluation.
In addition, INB recorded a $42 million ($25 million after tax) provision for
credit losses to conform its credit policies to those of the Corporation.
On July 1, 1992, the Corporation issued approximately 11.9 million shares of its
common stock in exchange for all the common stock of Summcorp, a bank holding
company located in Fort Wayne, Indiana. The combination was accounted for as a
pooling of interests.
In June 1992, the Corporation recorded $6 million ($4 million after tax) of
merger-related expenses. These expenses were composed of charges taken for the
elimination of duplicate facilities and equipment, and intangibles revaluation.
The Corporation also recorded a $10 million ($6 million after tax) provision for
possible credit losses to conform Summcorp's credit evaluation policies to those
of the Corporation.
On January 23, 1992, the Corporation acquired all of the common stock of Gainer
Corporation, a bank holding company located in Merrillville, Indiana. The
acquisition was accounted for as a purchase, and, accordingly, operations of
Gainer Corporation are included in the consolidated statements since the date of
acquisition. Essentially all of the purchase price of $168 million was provided
by issuing approximately 5.7 million shares of the Corporation's common stock.
The fair value of assets acquired amounted to $1.5 billion, and liabilities
assumed totaled $1.4 billion.
42
<PAGE>
N O T E 6 -- INVESTMENT SECURITIES
The following is a summary of the Corporation's available-for-sale, held-to-
maturity and venture capital securities.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
Investment Securities -- Available-for-Sale
--------------------------------------------------------------------
Amortized Gross Unrealized Gross Unrealized Fair Value
DECEMBER 31, 1994 (IN MILLIONS) Cost Gains Losses (Book Value)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury............................. $ 951 $ - $ 7 $ 944
U.S. government agencies
Mortgage-backed securities.............. 2,658 - 160 2,498
Collateralized mortgage obligations..... 1,461 5 46 1,420
Other................................... 47 1 - 48
States and political subdivisions......... 77 - 1 76
Collateralized mortgage obligations (1)... 111 - - 111
Other debt securities..................... 206 - 41 165
Equity securities (2)..................... 281 1 - 282
------ ---- ---- ------
Total................................. $5,792 $ 7 $255 $5,544
====== ==== ==== ======
--------------------------------------------------------------------
Investment Securities -- Held-to-Maturity
--------------------------------------------------------------------
Amortized Cost Gross Unrealized Gross Unrealized
(Book Value) Gains Losses Fair Value
--------------------------------------------------------------------
U.S. Treasury............................. $ 785 $ - $ 21 $ 764
U.S. government agencies
Mortgage-backed securities.............. 5,666 45 282 5,429
Other................................... 18 - - 18
States and political subdivisions......... 1,591 53 26 1,618
Other debt securities..................... 5 - - 5
------ ---- ---- ------
Total................................. $8,065 $ 98 $329 $7,834
====== ==== ==== ======
--------------------------------------------------------------------
Investment Securities -- Venture Capital
--------------------------------------------------------------------
Gross Unrealized Gross Unrealized Fair Value
Cost Gains Losses (Book Value)
--------------------------------------------------------------------
Venture capital (2)....................... $ 974 $525 $ 93 $1,406
====== ==== ==== ======
- ----------------------------------------------------------------------------------------------------------------
Investment Securities -- Available-for-Sale
--------------------------------------------------------------------
Amortized Gross Unrealized Gross Unrealized Fair Value
December 31, 1993 (In millions) Cost Gains Losses (Book Value)
- ----------------------------------------------------------------------------------------------------------------
U.S. Treasury............................. $1,205 $ 9 $ - $1,214
U.S. government agencies
Mortgage-backed securities.............. 732 3 2 733
Collateralized mortgage obligations..... 1,664 3 9 1,658
Other................................... 3 1 - 4
States and political subdivisions......... 1 - - 1
Collateralized mortgage obligations (1)... 241 1 1 241
Other debt securities..................... 139 - 15 124
Equity securities (2)..................... 188 1 - 189
------ ---- ---- ------
Total................................. $4,173 $ 18 $ 27 $4,164
====== ==== ==== ======
-----------------------------------------------------------------
Investment Securities -- Held-to-Maturity
--------------------------------------------------------------------
Amortized Cost Gross Unrealized Gross Unrealized
(Book Value) Gains Losses Fair Value
--------------------------------------------------------------------
U.S. Treasury............................. $ 766 $ 24 $ - $ 790
U.S. government agencies
Mortgage-backed securities.............. 4,566 253 3 4,816
Other................................... 12 - - 12
States and political subdivisions......... 1,667 146 1 1,812
Other debt securities..................... 7 - - 7
------ ---- ---- ------
Total................................. $7,018 $423 $ 4 $7,437
====== ==== ==== ======
--------------------------------------------------------------------
Investment Securities -- Venture Capital
--------------------------------------------------------------------
Gross Unrealized Gross Unrealized Fair Value
Cost Gains Losses (Book Value)
--------------------------------------------------------------------
Venture capital (2)....................... $ 955 $627 $117 $1,465
====== ==== ==== ======
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) All collateralized mortgage obligations of private issuers have underlying
collateral consisting of obligations of U.S. government agencies.
(2) The fair values of certain securities for which market quotations were not
available were estimated. In addition, the fair values reflect liquidity and
other market-related factors.
43
<PAGE>
Proceeds from the sale of investment securities available-for-sale during 1994
were $2.164 billion, resulting in gross realized gains of $14 million and gross
realized losses of $15 million. Proceeds from the sale of debt investment
securities during 1993 were $57 million, resulting in gross realized gains of $3
million and gross realized losses of $1 million. Proceeds from the sale of debt
investment securities during 1992 were $1.069 billion, resulting in gross
realized gains of $18 million and gross realized losses of $8 million.
The maturity distribution of debt investment securities at December 31, 1994, is
shown below. The distribution of mortgage-backed securities and collateralized
mortgage obligations is based on average expected maturities. Actual maturities
may differ because issuers may have the right to call or prepay obligations.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
(In millions) Available-for-Sale Held-to-Maturity
- -----------------------------------------------------------------------------------------------------------
Amortized Fair Amortized Fair
Cost Value Cost Value
----------------------------------------------------------
<S> <C> <C> <C> <C>
Due in one year or less................... $1,259 $1,252 $ 267 $ 269
Due after one year through five years..... 969 940 2,826 2,771
Due after five years through ten years.... 700 673 4,598 4,436
Due after ten years....................... 2,583 2,397 374 358
------ ------ ------ ------
$5,511 $5,262 $8,065 $7,834
====== ====== ====== ======
- -----------------------------------------------------------------------------------------------------------
</TABLE>
N O T E 7 -- LOANS
Following is a breakdown of loans included in the consolidated balance sheet as
of December 31, 1994 and 1993.
<TABLE>
<CAPTION>
- ------------------------------------------------------------
(In millions) 1994 1993
- ------------------------------------------------------------
<S> <C> <C>
Commercial
Domestic
Commercial............. $22,546 $19,310
Real estate
Construction......... 1,074 1,105
Other................ 5,903 5,613
Lease financing........ 1,381 1,295
Foreign.................. 3,305 3,083
------- -------
Subtotal......... 34,209 30,406
------- -------
- ------------------------------------------------------------
Consumer
Credit cards............. 6,980 6,393
Secured by real estate
Mortgage............. 4,963 4,285
Home equity.......... 2,062 1,803
Automotive............... 3,994 3,241
Other.................... 2,968 2,526
------- -------
Subtotal......... 20,967 18,248
------- -------
Total............ $55,176 $48,654
======= =======
- ------------------------------------------------------------
</TABLE>
44
<PAGE>
The amount of interest shortfall (the difference between interest contractually
due and interest actually recorded) related to nonperforming loans at year-end
was $16 million in 1994 and $26 million in 1993.
Credit card receivables are available for sale through the Corporation's credit
card securitization program. In addition, other loans available for sale at
December 31, 1994 and 1993, totaled $312 million and $509 million, respectively.
The Corporation has loans outstanding to certain of its directors and executive
officers and to partnerships or companies in which a director or executive
officer has at least a 10% beneficial interest. At December 31, 1994 and 1993,
$297 million and $372 million, respectively, of such loans to related parties
were outstanding. An analysis of the activity during 1994 with respect to such
loans includes additions of $825 million and reductions of $900 million.
N O T E 8 -- ALLOWANCE FOR CREDIT LOSSES
Changes in the allowance for credit losses for the three years ended December
31, 1994, were as follows.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
(In millions) 1994 1993 1992
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, beginning of year.............. $1,106 $1,041 $1,136
Additions (deductions)
Charge-offs........................... (364) (485) (718)
Recoveries............................ 172 189 146
------ ------ ------
Net charge-offs....................... (192) (296) (572)
Provision for credit losses........... 276 390 653
Provision for loans held for
accelerated disposition.............. - - 491
Charge-offs of loans upon transfer to
accelerated disposition portfolio.... - - (636)
Other:
Mergers and acquisitions.............. 16 - 12
Transfers related to securitized
receivables......................... (49) (29) (42)
Other................................. 1 - (1)
------ ------ ------
Balance, end of year.................... $1,158 $1,106 $1,041
====== ====== ======
- ------------------------------------------------------------------------
</TABLE>
In May 1993, the FASB issued SFAS No. 114, "Accounting by Creditors for
Impairment of a Loan." This standard was amended by SFAS No. 118, "Accounting by
Creditors for Impairment of a Loan--Income Recognition and Disclosure." SFAS No.
114 addresses the accounting for a loan when it is probable that all principal
and interest amounts due will not be collected in accordance with its
contractual terms (i.e., "impaired loan"). SFAS No. 114 also changes the
definition of in-substance foreclosures (ISFs) which will result in currently
reported ISFs being reclassified as nonaccrual loans. SFAS No. 118 allows for
existing income recognition practices to continue.
The Corporation has adopted SFAS No. 114 and SFAS No. 118 as of January 1, 1995.
The adoption of these standards did not have a material effect on the
Corporation's net income. The allowance for credit losses allocated to impaired
loans is estimated at $26 million.
The January 1, 1995, aggregate recorded investment of loans that will be
reclassified from ISFs to nonaccrual loans is approximately $15 million. In
general, the Corporation will retain its existing income recognition practices
as described in Note 1(d), on page 36.
45
<PAGE>
N O T E 9 -- PLEDGED AND RESTRICTED ASSETS
Assets carried at $23.5 billion in the consolidated balance sheet at December
31, 1994, were pledged to secure government deposits, trust deposits, and
borrowings, and for other purposes required by law.
The subsidiary banks of the Corporation are required to maintain noninterest-
bearing cash balances with the Federal Reserve Bank based on the types and
amounts of deposits held. During 1994 and 1993, the average balances maintained
to meet this requirement were $928 million and $882 million, respectively.
N O T E 10 -- LONG-TERM DEBT
Long-term debt consists of borrowings having an original maturity of over one
year. Original issue discount and deferred issuance costs are amortized over
the terms of the related notes. Long-term debt at December 31, 1994 and 1993,
was as follows.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------
(In millions) 1994 1993
- ----------------------------------------------------------------
PARENT COMPANY:
SUBORDINATED DEBT:
<S> <C> <C>
9% notes due 1999............................ $ 199 $ 199
9-7/8% notes due 2000........................ 99 99
9-1/5% notes due 2001........................ 5 5
9-1/4% notes due 2001........................ 100 100
10-1/4% notes due 2001........................ 100 100
11-1/4% notes due 2001........................ 96 96
8-7/8% notes due 2002........................ 100 100
8-1/10% notes due 2002....................... 200 200
8-1/4% notes due 2002........................ 100 100
7-5/8% notes due 2003........................ 199 199
6-7/8% notes due 2003........................ 200 200
Floating rate notes due 2003.................. 149 149
7-1/4% debentures due 2004.................... 200 200
Floating rate notes due 2005.................. 96 96
7-1/4% convertible debentures due 2006........ - 200
6-3/8% notes due 2009......................... 198 -
7-1/2% preferred purchase units due 2023...... 150 150
9-7/8% equity commitment notes due 1999....... 200 200
Floating rate equity contract notes due 1996.. 125 125
SENIOR DEBT:
8-1/2% notes due 1998......................... 100 99
Other Parent Company debt..................... 1,385 1,239
------ ------
Total Parent Company.................. 4,001 3,856
------ ------
SUBSIDIARIES:
Bank notes, various rates and maturities...... 2,434 853
Subordinated 6-1/4% notes due 2003............ 200 200
Subordinated 8-1/4% notes due 2024............ 250 -
8 3/4% notes due 1997-1999.................... 10 10
Capitalized lease obligations, various rates
and maturities............................... 52 39
Other......................................... 299 292
------ ------
Total subsidiaries.................... 3,245 1,394
------ ------
Total long-term debt.................. $7,246 $5,250
====== ======
- ----------------------------------------------------------------
</TABLE>
46
<PAGE>
A) PARENT COMPANY LONG-TERM DEBT
SUBORDINATED NOTES
These notes are subordinated to other indebtedness of the Corporation. The
fixed-rate notes have interest rates that range from 6-3/8% to 11-1/4% and
maturities that range from 1999 to 2023. The floating rate notes due in 2003
have an interest rate priced at the greater of 4-1/4% or the three-month London
interbank offered rate plus 1/8%. The interest rate on this issue on December
31, 1994, was 5.81%. The floating rate notes due 2005 may be redeemed by the
Corporation, in whole or in part, on any interest payment date at par. Interest
payment on the notes is at a rate of 1/4% above the average offered rate quoted
in the London interbank market for three-month Eurodollar deposits. In no event
will the rate be less than 5.25%. On December 31, 1994, the interest rate was
6.50%.
Each 7-1/2% preferred purchase unit consists of a 7.40% subordinated debenture
due May 10, 2023, in a principal amount of $25 and a related purchase contract
paying fees of 0.10% of the principal amount of the debenture per year. The
contract requires the purchase on May 10, 2023, of one depositary share
representing a one-fourth interest in a share of 7-1/2% cumulative preferred
stock of the Corporation at a purchase price of $25 per depositary share.
The equity commitment notes may not be redeemed prior to their stated maturity.
The agreements under which these notes were issued require the Corporation,
prior to maturity to issue common stock, perpetual preferred stock or other
forms of equity approved by the Federal Reserve Board in an amount equal to the
original aggregate principal amount of the notes. As of December 31, 1994, the
Corporation had issued all the equity securities required by the agreements.
The interest rate on the floating rate equity contract notes is reset quarterly
at 3/16% over the average offered rate quoted in the London interbank market for
three-month Eurodollar deposits. The interest rate on this issue as of December
31, 1994, was 6.625%.
The 7-1/4% convertible subordinated debentures due 2006 were called by the
Corporation for redemption on March 15, 1994, at a redemption price of $1,050.75
per $1,000 of the principal amount. The Corporation incurred a charge of
$11,892,000 ($7,730,000 net of income taxes) on the redemption. Prior to
redemption, holders elected to convert $1,333,000 of the debentures into shares
of common stock of the Corporation at a conversion price of $30.40 per share.
During 1993, $15,000 of the debentures were converted.
8-1/2% NOTES
These notes are unsecured obligations that are not subordinated to any other
indebtedness of the Corporation and may not be redeemed prior to their stated
maturity.
OTHER PARENT COMPANY DEBT
Other long-term debt of $1.385 billion includes various notes with a weighted
average interest rate of 6.97% and remaining weighted average maturity of 24
months at December 31, 1994.
B) SUBSIDIARIES' LONG-TERM DEBT
The bank notes are unsecured and unsubordinated debt obligations of the
Corporation's bank subsidiaries. At December 31, 1994, the weighted average
rate of the bank notes was 5.93% and remaining weighted average maturity was 20
months.
The 6-1/4% subordinated notes due 2003 are unsecured, subordinated to the claims
of depositors and other creditors of NBD Bank (Michigan), and are not redeemable
prior to maturity.
The 8-1/4% subordinated notes due 2024 are unsecured, subordinated to the claims
of depositors and other creditors of NBD Bank (Michigan), and are not redeemable
by the bank prior to maturity. Registered holders have a one-time right to
redeem the notes at par, in whole or in part, on November 1, 2004.
Other long-term debt at December 31, 1994, included $276 million related to the
sale and lease-back of certain bank properties. The effective interest rate
related to this transaction is 8.7%, with expected maturity in 2018.
Of the Corporation's $7.2 billion total long-term debt, $773 million, $1.609
billion, $1.266 billion, $208 million, and $576 million is scheduled to mature
in 1995, 1996, 1997, 1998 and 1999, respectively.
47
<PAGE>
N O T E 11 -- PREFERRED STOCK
The Corporation is authorized to issue 10,000,000 shares of preferred stock,
without par value. The Board of Directors is authorized to fix the particular
designations, preferences, rights, qualifications and restrictions for each
series of preferred stock issued. All preferred shares rank prior to common
shares both as to dividends and liquidation, but have no general voting rights.
The dividend rate on each of the cumulative adjustable rate series is based on
stated value and adjusted quarterly, based on a formula that considers the
interest rates for selected short- and long-term U.S. Treasury securities
prevailing at the time the rate is set. The minimum, maximum and current
dividend rates, as of December 31, 1994, are presented in the following table.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Stated Annual Dividend Rate Earliest Redemption
Preferred Shares Value Per ---------------------------- Redemption Price
Stock Series Outstanding Share Maximum Minimum Current Date (1)
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Cumulative Adjustable Rate:
Series A...... 2,410,000 $ 50.00 15.00% 7.00% 7.00% (2) $ 50.00
Series B...... 1,191,000 100.00 12.00 6.00 6.00 (2) 100.00
Series C...... 713,800 100.00 12.50 6.50 6.50 (2) 100.00
Cumulative Fixed Rate:
Series E (3).. 160,000 625.00 8.45 8.45 8.45 11/16/97 (4) 625.00
Cumulative Convertible Fixed Rate:
Series B (5).. 40,000 5,000.00 5.75 5.75 5.75 04/01/97 (6) 5,172.50
- ------------------------------------------------------------------------------------------------
</TABLE>
(1) Plus accrued and unpaid dividends.
(2) Currently redeemable.
(3) Represented by 4,000,000 depositary shares, with a corresponding annual
dividend rate of $2.11 each and a $25 stated value.
(4) The preferred shares are redeemable on or after November 16, 1997, at $625
per share (equivalent to $25 per depositary share).
(5) Represented by 4,000,000 depositary shares, with a corresponding annual
dividend rate of $2.875 each and a $50 stated value.
(6) The preferred shares may be converted into shares of the Corporation's
common stock at the option of the stockholders at any time at the
conversion price of $29.6271 per common share, subject to adjustment under
certain conditions. Shares are redeemable beginning April 1, 1997, at the
option of the Corporation, at a price of $5,172.50 ($51.725 per depositary
share), with the redemption price decreasing annually until the shares are
redeemable on or after April 1, 2003, at their stated value of $5,000 per
share ($50 per depositary share).
All shares of the Corporation's 10% Cumulative Preferred Stock, Series D, were
called for redemption on July 1, 1994. The redemption price of $25.75 per share
plus accrued and unpaid dividends incorporates a 3% premium, totaling $4.5
million.
All shares of the Corporation's Cumulative Convertible Preferred Stock, Series
A, were called for redemption on September 2, 1993. Each Series A share was
convertible into 2.518 shares of the Corporation's common stock at the option of
the stockholder, and approximately 2.1 million shares of the preferred stock
were converted into approximately 5.4 million shares of common stock. Resultant
fractional shares were paid in cash. On September 2, 1993, the Corporation
redeemed the remaining shares of the Cumulative Convertible Preferred, Series A,
at the redemption price of $51.50 per share plus accrued and unpaid dividends.
48
<PAGE>
N O T E 12 -- EMPLOYEE BENEFITS
(A) PENSION PLANS
The Corporation is now in the process of reviewing its pension, postemployment,
and postretirement benefit plans with a view to providing uniform benefits to
the employees of the combined Corporation. Completion and approval of the new
plans is expected sometime by 1997.
The Corporation sponsors pension plans covering substantially all salaried
employees. The pension plans are noncontributory, defined-benefit plans that
provide benefits based on years of service and compensation level. The funding
policy varies for each plan. Depending on the plan, consideration is given to
net periodic pension cost for the year, the minimum required by ERISA, and the
maximum tax deductible amount based on IRS limits.
Plan assets primarily include equity securities and debt securities issued by
the U.S. government and its agencies or corporations. Plan assets include
common stock of the Corporation having a fair value of $20 million in 1994 and
$18 million in 1993.
Net periodic pension (credit) cost include the following components for the
years ended December 31.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
(In millions) 1994 1993 1992
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost - benefits earned during period...... $ 53 $ 42 $ 43
Interest cost on projected benefit obligation..... 93 84 78
Actual loss (return) on assets.................... 13 (183) (130)
Net amortization and deferral..................... (154) 49 (11)
----- ----- -----
Net periodic pension (credit) cost................ $ 5 $ (8) $ (20)
===== ===== =====
- ---------------------------------------------------------------------------
</TABLE>
The following table reconciles the aggregated funded status of the plans
and amounts recognized in the consolidated balance sheet at December 31.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
(In millions) 1994 1993
- ---------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of the projected benefit
obligation, based on employment service to date, and
current salary levels:
Vested employees.......................................... $ 816 $ 859
Nonvested employees....................................... 80 88
------ ------
Accumulated benefit obligation............................ 896 947
Additional amounts related to projected salary increases 230 271
------ ------
Projected benefit obligation.............................. 1,126 1,218
Plan assets (at fair value)............................... 1,499 1,551
------ ------
Plan assets in excess of projected benefit obligation..... 373 333
Unrecognized net gain due to experience different from
assumptions............................................. (54) (20)
Unrecognized transition asset............................. (64) (74)
Unrecognized prior service cost........................... 107 97
------ ------
Prepaid pension cost included in the consolidated
balance sheet........................................... $ 362 $ 336
====== ======
- ---------------------------------------------------------------------------
</TABLE>
49
<PAGE>
Each plan was separately valued based on the individual plan's underlying terms,
demographics and asset mix. The range of assumptions used in determining the
projected benefit obligation and net periodic pension (credit) cost of such
plans at December 31 are as follows.
- -----------------------------------------------------------------------------
1994 1993 1992
- -----------------------------------------------------------------------------
Discount rate.............................. 8.0%-9.0% 7.0%-7.5% 8.0%-8.5%
Salary increase assumption................. 5.0%-5.5% 4.5%-5.5% 5.0%-6.0%
Expected long-term rate of return on plan
assets................................... 9.5% 9.5% 9.5%
- -----------------------------------------------------------------------------
(B) POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Corporation sponsors postretirement plans that provide life insurance and
health care benefits for certain employees when they retire. The postretirement
health care benefit, which can also cover eligible dependents, is contributory,
with retiree contributions adjusted annually to reflect increases in the
Corporation's health care costs. The postretirement life insurance benefit is
noncontributory.
The Corporation elected to immediately recognize the January 1, 1992,
accumulated benefit obligation, which resulted in a charge of $59 million ($38
million after tax) to 1992 earnings.
Net periodic postretirement benefit cost included the following components for
the years ended December 31.
- ---------------------------------------------------------------
(In millions) 1994 1993 1992
- ---------------------------------------------------------------
Service cost.............................. $1 $2 $1
Interest cost............................. 3 5 5
--- --- ---
Net periodic postretirement benefit cost.. $4 $7 $6
=== === ===
- ---------------------------------------------------------------
The Corporation funds postretirement benefit cost as claims are incurred. The
following table reconciles the plan's funded status and amounts recognized in
the consolidated balance sheet at December 31.
- --------------------------------------------------------------------
(In millions) 1994 1993
- --------------------------------------------------------------------
Accumulated postretirement benefit obligation:
Retirees......................................... $ 37 $ 44
Fully eligible active plan participants.......... 4 8
Other active plan participants................... 8 21
---- ----
Total accumulated postretirement benefit obligation.. 49 73
Plan assets (at market value)........................ - -
---- ----
Accumulated postretirement benefit obligation in
excess of plan assets............................... (49) (73)
Unrecognized net (gain) loss......................... (17) 7
---- ----
Accrued postretirement benefit liability recognized
in the consolidated balance sheet.................. $(66) $(66)
==== ====
- --------------------------------------------------------------------
The assumption used to measure postretirement benefit costs is a 10% annual rate
of increase in the per capita cost of covered health care benefits for 1995,
trending downward to 5.5% by the year 2000, and remaining at that level
thereafter. This assumption has a significant effect on the amounts reported.
Increasing the assumed health care cost trend rates by one percentage point in
each year would have increased the accumulated postretirement benefit obligation
as of December 31, 1994, by $4 million and the aggregate of the service and
interest cost components of net periodic postretirement benefit cost for 1994 by
approximately $0.4 million.
50
<PAGE>
The weighted average discount rate used in determining the accumulated
postretirement benefit obligation was 8.0% at December 31, 1994, and 7.0% at
year-end 1993.
The Corporation adopted SFAS No. 112, "Employers' Accounting for Postemployment
Benefits," effective January 1, 1994. The cumulative effect of adoption was a
charge of $12 million ($8 million net of income taxes). The impact of the
new accounting method in 1994 on income before accounting changes was not
significant.
(C) EMPLOYEE SAVINGS PLANS
The Corporation maintains various 401(k) savings plans and profit sharing plans
for U.S.-based employees meeting certain eligibility requirements.
Under the existing First Chicago 401(k) plan, participants may contribute from
1% to 6% of their salary on a pretax basis, and an additional 1% to 10% of
salary on an after-tax basis. Beginning in 1994, the employer contribution to
the plan was determined as 100% of the first $750 of pretax contributions made
by participants and 50% of any pretax contributions in excess of $750. The plan
was amended in 1993 to allow a supplemental profit-based contribution to the
plan. For 1994, that contribution was $250 for each eligible salaried employee
and $125 for each eligible hourly employee.
The existing NBD 401(k) plan requires employer contributions equal to
participants' contributions up to 2% of their compensation, plus an amount
equal to one-half of participants' contributions between 2% and 6% of their
contributions subject to certain limitations imposed by the Internal Revenue
Service.
Total expense for these plans was $36 million in 1994, $35 million in 1993, and
$26 million in 1992.
The Corporation also maintains an Employee Stock Purchase and Savings Plan that
allows eligible employees to authorize payroll deductions for deposit in
interest-bearing savings accounts for up to two years. Employees then have the
option to either withdraw their savings balance in cash or purchase shares of
the Corporation's common stock at a price fixed under the plan. The Corporation
recognizes no expense in connection with such stock purchases.
(D) STOCK AWARD AND STOCK OPTION PLANS
The Corporation maintains various incentive plans that allow the granting of
restricted shares, stock options, or other stock-based awards to eligible
employees. Restricted shares granted to key officers require them to continue
employment from one to seven years beginning on the original grant date before
the shares are ultimately distributed to the employee. The market value of the
restricted shares as of the date of grant is amortized to compensation expense
over the restriction period.
The Corporation also maintains a performance-based stock plan. The shares
issued under this program are distributed only if performance criteria are met.
The ultimate expense attributable to this plan is based on the market value of
the shares on the date they become unrestricted. For both the restricted stock
plans and the performance-based stock plans, the unamortized cost of such shares
is included in stockholders' equity. At December 31, 1994, the number of
restricted shares and performance-based shares outstanding was approximately
3,639,000.
The various incentive plans also permit the granting of stock options. In
addition, stock options may be granted that include the right to receive a
reload option. A reload option allows a participant who exercises the original
option, and who meets several specific criteria related to the payment of the
purchase price of the option with shares of the Corporation's common stock, the
right to receive an option to purchase the number of shares of the Corporation's
common stock equal to the number of shares used by the participant in payment
of the original option price. The exercise price of the reload option is equal
to the fair market value of the common stock on the date the reload option is
granted.
51
<PAGE>
The following table summarizes stock option activity related to the various
incentive plans for 1994.
- -------------------------------------------------------------
Options
(Shares in thousands) Outstanding Option Price
- -------------------------------------------------------------
Balance as of January 1, 1994.... 10,624 $ 6.62-$36.06
Granted........................ 5,243 $23.07-$31.56
Exercised...................... 2,880 $ 6.62-$29.94
Forfeited, expired or canceled. 123 $13.26-$35.69
------
Balance as of December 31, 1994.. 12,864 $ 9.38-$36.06
======
- -------------------------------------------------------------
At December 31, 1994, 6,141,000 options were exercisable.
N O T E 13 -- INCOME TAXES
The components of total applicable income tax expense (benefit) in the
consolidated income statement for the years ended December 31, 1994, 1993
and 1992, are as follows.
- ----------------------------------------------------
(In millions) 1994 1993 1992
- ----------------------------------------------------
Income Tax Expense (Benefit):
Current
Federal.................... $397 $372 $ 155
Foreign.................... 14 31 22
State...................... 64 63 24
---- ---- -----
Total................... 475 466 201
Deferred
Federal.................... 149 228 (139)
State...................... 8 18 (14)
---- ---- -----
Total................... 157 246 (153)
Applicable income tax.......... $632 $712 $ 48
==== ==== =====
- ----------------------------------------------------
The tax effects of fair value adjustments on securities available-for-sale,
foreign currency translation adjustments, and certain tax benefits related to
stock options are recorded directly to stockholders' equity. The net tax
benefits recorded directly in stockholders' equity amounted to $86 million, $14
million and $6 million in 1994, 1993 and 1992, respectively. Also in 1992, a
$102 million tax expense was recorded for changes in accounting principles.
A summary reconciliation of the differences between applicable income taxes and
the amounts computed at the applicable regular federal tax rates of 35% in 1994,
35% in 1993 and 34% in 1992 were as follows.
- ---------------------------------------------------------------------
(In millions) 1994 1993 1992
- ---------------------------------------------------------------------
Taxes at statutory federal income tax rate.... $657 $701 $ 93
Increase (decrease) in taxes resulting from:
Tax-exempt income (net).................... (50) (57) (64)
State income taxes, net of federal income
tax.................................... 47 46 7
Goodwill amortization...................... 10 15 12
Other...................................... (32) 7 -
---- ---- ----
Applicable income taxes....................... $632 $712 $ 48
==== ==== ====
- ---------------------------------------------------------------------
52
<PAGE>
Neither First Chicago nor NBD had an alternative minimum tax credit carryforward
for tax purposes at December 31, 1994. First Chicago had alternative minimum tax
credit carryforwards for tax purposes of $109 million at December 31, 1993, and
$41 million at December 31, 1992.
First Chicago had a foreign tax credit carryforward of $43 million at December
31, 1992, that was fully utilized in 1993. First Chicago also had a federal tax
return net operating loss carryforward of $644 million at December 31, 1992,
which was also fully utilized in 1993.
A net deferred tax liability is included in other liabilities in the
consolidated balance sheet as a result of temporary differences between the
carrying amounts of assets and liabilities in the financial statements and their
related tax bases. The components of the net deferred tax liability as of
December 31, 1994 and 1993, are as follows.
- ----------------------------------------------------------------
(In millions) 1994 1993
- ----------------------------------------------------------------
DEFERRED TAX LIABILITIES
Deferred income on lease financing.............. $ 785 $ 757
Appreciation on venture capital investments..... 219 182
Prepaid pension asset........................... 98 94
Other........................................... 237 228
------ ------
Gross deferred tax liabilities.................. 1,339 1,261
------ ------
DEFERRED TAX ASSETS
Allowance for credit losses..................... 451 451
Securitization of credit card receivables....... 86 65
Alternative minimum tax credit carryforward..... - 116
Fair value adjustment on investment securities
available-for-sale.......................... 90 3
Other........................................... 306 332
------ ------
Gross deferred tax assets....................... 933 967
Valuation allowance............................. - -
------ ------
Gross deferred tax assets, net of valuation
allowance................................... 933 967
------ ------
Net deferred tax liability...................... $ 406 $ 294
====== ======
- ----------------------------------------------------------------
N O T E 14 -- LEASE COMMITMENTS
The Corporation has entered into a number of operating and capitalized lease
agreements for premises and equipment. The minimum annual rental commitments
under these leases are shown below.
- ---------------------------
(In millions)
- ---------------------------
1995 . . . . . . . . . $ 91
1996 . . . . . . . . . 86
1997 . . . . . . . . . 81
1998 . . . . . . . . . 74
1999 . . . . . . . . . 71
2000 and thereafter. . 383
----
$786
====
- ---------------------------
Occupancy expense has been reduced by rental income from premises leased to
others in the amount of $38 million in 1994, $38 million in 1993 and $34 million
in 1992.
53
<PAGE>
N O T E 15 -- FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
In the normal course of business, the Corporation is a party to financial
instruments containing credit and/or market risks that are not required to be
reflected in a balance sheet. These financial instruments include credit-
related instruments as well as certain derivative and cash instruments. The
Corporation maintains risk management policies that monitor and limit exposure
to credit, liquidity and market risks.
(A) CREDIT RISK
The following disclosures represent the Corporation's credit exposure, assuming
that every counterparty to financial instruments with off-balance-sheet credit
risk fails to perform completely according to the terms of the contracts, and
that the collateral and other security, if any, proves to be of no value to the
Corporation.
(B) MARKET RISK
This note does not address the amount of market losses the Corporation would
incur if future changes in market prices make financial instruments with off-
balance-sheet market risk less valuable or more onerous. The measurement of
market risk associated with financial instruments is meaningful only when all
related and offsetting on- and off-balance-sheet transactions are aggregated,
and the resulting net positions are identified.
(C) COLLATERAL AND OTHER SECURITY ARRANGEMENTS
The credit risk of both on- and off-balance-sheet financial instruments varies
based on many factors, including the value of collateral held and other security
arrangements. To mitigate credit risk, the Corporation generally determines the
need for specific covenant, guarantee and collateral requirements on a case-by-
case basis, depending on the nature of the financial instrument and the
customer's creditworthiness. The Corporation may also receive comfort letters
and oral assurances. The amount and type of collateral held to reduce credit
risk varies but may include real estate, machinery, equipment, inventory and
accounts receivable, as well as cash on deposit, stocks, bonds and other
marketable securities that are generally held in the Corporation's possession or
at another appropriate custodian or depository. This collateral is valued and
inspected on a regular basis to ensure both its existence and adequacy. The
Corporation requests additional collateral when appropriate.
(D) CREDIT-RELATED FINANCIAL INSTRUMENTS
The table below summarizes the Corporation's credit-related financial
instruments, including both commitments to extend credit and letters of credit.
- ------------------------------------------------------------------------------
Commitments and Letters of Credit
December 31 (In billions) 1994 1993
- ------------------------------------------------------------------------------
Unused loan commitments*.................................. $45.6 $40.4
Unused credit card lines.................................. 65.0 48.4
Unused home equity lines.................................. 1.8 1.5
Commercial letters of credit.............................. 1.1 0.9
Standby letters of credit and foreign office guarantees... 6.2 6.4
- ------------------------------------------------------------------------------
*Includes unused commercial real estate exposure of $1.0 billion and $0.6
billion at December 31, 1994 and 1993, respectively.
Since many of the Corporation's unused commitments are expected to expire unused
or be only partially used, the total amount of unused commitments in the
preceding table does not necessarily represent future cash requirements.
Loan commitments are agreements to make or acquire a loan or lease as long as
the agreed-upon terms (e.g., expiry, covenants or notice) are met. The
Corporation's commitments to purchase or extend loans help its customers meet
their liquidity needs. Credit card lines allow customers to use a credit card
to buy goods or services and to obtain cash advances. However, the Corporation
has the right to change or terminate any terms or conditions of the credit card
account. Extensions of credit under home equity lines are secured by
residential real estate.
54
<PAGE>
Commercial letters of credit are issued or confirmed by the Corporation to
ensure payment of its customers' payables or receivables in short-term
international trade transactions. Generally, drafts will be drawn when the
underlying transaction is consummated as intended. However, the short-term
nature of this instrument serves to mitigate the Corporation's risk associated
with these contracts.
Standby letters of credit and foreign office guarantees are issued in connection
with agreements made by the Corporation's customers to counterparties. If the
customer fails to comply with the agreement, the counterparty may enforce the
standby letter of credit or foreign office guarantee as a remedy. Credit risk
arises from the possibility that the customer may not be able to repay the
Corporation for standby letters of credit or foreign office guarantees. At
December 31, 1994 and 1993, the Corporation had issued standby letters of credit
and foreign office guarantees for the following purposes.
- -------------------------------------------
Standby Letters of Credit
December 31 (In millions) 1994 1993
- -------------------------------------------
Financial:
Tax-exempt obligations... $2,032 $1,834
Insurance-related........ 796 765
Other financial.......... 2,614 3,162
Performance................ 770 630
------ ------
Total*........... $6,212 $6,391
====== ======
- -------------------------------------------
*Includes $820 million and $609 million participated to other institutions at
December 31, 1994, and December 31, 1993, respectively.
At December 31, 1994, $5.125 billion of standby letters of credit was due to
expire within three years and $1.087 billion was to expire after three years.
(E) DERIVATIVE FINANCIAL INSTRUMENTS
The Corporation enters into a variety of derivative financial instruments in its
trading, asset and liability management, and venture capital activities. These
instruments offer customers protection from rising or falling interest rates,
exchange rates, commodity prices and equity prices. They can either reduce or
increase the Corporation's exposure to such changing rates or prices.
The Corporation's objectives and strategies for using derivative financial
instruments for structural interest rate risk management, foreign exchange risk
management, and venture capital activities are discussed on pages 14 to 19.
The Corporation's balance sheet exposure for derivative financial instruments
includes the amount of recognized gains in the market valuation of those
contracts. Those amounts fluctuate as a function of maturity, interest rates,
foreign exchange rates, commodity prices and equity prices. Prior to 1994, the
Corporation presented certain unrealized gains and unrealized losses on a net
basis. The gross balance sheet exposure as of December 31, 1993, was $3.6
billion for interest rate contracts and $2.6 billion for foreign exchange
contracts. These amounts are overstated because they do not reflect the
offsetting of losses with the same counterparties based on legally enforceable
termination and netting rights.
The credit risk associated with exchange-traded derivative financial instruments
is limited to the relevant clearinghouse. Options written do not expose the
Corporation to credit risk, except to the extent of the underlying risk in a
financial instrument that the Corporation may be obligated to acquire under
certain written put options. Caps and floors written do not expose the
Corporation to credit risk.
55
<PAGE>
On some derivative financial instruments, the Corporation may have additional
risk. This is due to the underlying risk in the financial instruments that the
Corporation may be obligated to acquire or the risk that the Corporation will
deliver under a contract but the customer will fail to deliver the
countervailing amount. The Corporation believes its credit and settlement
procedures minimize these risks.
Not all derivative financial instruments have off-balance-sheet market risk.
Market risk associated with options purchased and caps and floors purchased is
recorded in the balance sheet.
The tables on pages 25 and 26 report the Corporation's gross notional principal
or contractual amounts of derivative financial instruments as of December 31,
1994, and December 31, 1993. These instruments include swaps, forwards, futures,
options, caps, floors, forward rate agreements, and other conditional and
exchange contracts. The amounts do not represent the market or credit risk
associated with these contracts but rather give an indication of the volume of
the transactions. The amounts exceed the credit risk associated with these
contracts and do not reflect the netting of offsetting transactions.
Interest rate forward and futures contracts represent commitments to either
purchase or sell a financial instrument at a specified future date for a
specified price, and may be settled in cash or through delivery.
An interest rate swap is an agreement in which two parties agree to exchange, at
specified intervals, interest payment streams calculated on an agreed-upon
notional principal amount with at least one stream based on a specified floating
rate index. Certain agreements are combined interest rate and foreign currency
swap transactions.
Interest rate options are contracts that grant the purchaser, for a premium
payment, the right to either purchase or sell a financial instrument at a
specified price within a specified period of time or on a specified date from
the writer of the option.
Interest rate caps and floors are contracts with notional principal amounts that
require the seller, in exchange for a fee, to make payments to the purchaser if
a specified market interest rate exceeds the fixed cap rate or falls below the
fixed floor rate on specified future dates.
Forward rate agreements are contracts with notional principal amounts that
settle in cash at a specified future date based on the differential between a
specified market interest rate and a fixed interest rate.
Foreign exchange contracts represent spot, forward, futures and option contracts
to exchange currencies.
Commodity price contracts represent swap, futures, cap, floor and option
contracts that derive their value from underlying commodity prices.
Equity price contracts represent futures, cap, floor and option contracts that
derive their value from underlying equity prices.
(F) CASH FINANCIAL INSTRUMENTS
Securities sold but not yet purchased are obligations of the Corporation to
deliver securities sold but not yet purchased. The face amount of such
securities totaled $1.036 billion at December 31, 1994, and $776 million at
December 31, 1993. The fair value of these obligations is reflected in the
balance sheet in other short-term borrowings. The fair value of such securities
totaled $972 million at December 31, 1994, and $757 million at December 31,
1993.
56
<PAGE>
N O T E 16 -- CONCENTRATIONS OF CREDIT RISK
The Corporation provides a wide range of financial services, including credit
products, to consumers, middle market businesses and large corporate customers.
Credit policies and processes emphasize diversification of risk among
industries, geographic areas and borrowers. The only significant domestic
credit concentrations, for the Corporation were consumer, commercial real estate
and the U.S. government.
Information on the Corporation's consumer and commercial real estate loans is
presented in Note 7, on page 44, and information on unused consumer and
commercial real estate commitments is presented on page 54 of Note 15.
U.S. government risk arises primarily from the Corporation's holding of
government securities and short-term credits collateralized by such securities.
Information on the Corporation's foreign outstandings is presented in the table
on page 69. In addition to credit exposure, the Corporation's exposure from
derivative financial instruments and other off-balance-sheet commitments to
banks in Japan was approximately $1.3 billion and $1.6 billion at December 31,
1994, and December 31, 1993, respectively.
N O T E 17 -- ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
The Corporation is required to disclose the estimated fair value of its
financial instruments in accordance with SFAS No. 107, "Disclosures about Fair
Value of Financial Instruments." These disclosures do not attempt to estimate
or represent an estimate of the Corporation's fair value as a whole. The
Corporation does not plan to dispose of, either through sale or settlement, the
majority of its financial instruments at these estimated fair values. Certain
limitations are inherent to the methodologies used to estimate fair value. As a
result, disclosed fair values may not be the amount realized in a current
transaction between willing parties. Specifically, the fair values disclosed
represent point-in-time estimates that may change in subsequent reporting
periods due to market conditions or other factors. Further, quoted market
prices may not be realized because the financial instrument may be traded in a
market that lacks liquidity; or a fair value derived using a discounted cash
flow approach may not be the amount realized because of the subjectivity
involved in selecting underlying assumptions, such as projecting cash flows or
selecting a discount rate. The fair value amount also may not be realized
because it ignores transaction costs and does not include potential tax effects.
Additionally, estimated fair values of certain financial instruments ignore
intangible value associated with the financial instruments; for example,
significant unrecognized value exists that is attributable to the Corporation's
credit card relationships and core deposits.
The only fair value disclosure provided in addition to those made for the
Corporation's financial instruments pertains to credit card securitizations;
this disclosure is provided because the interest rate risk exposure related to
such securitization is reduced by financial instruments.
57
<PAGE>
The following table summarizes the carrying values and estimated fair values of
financial instruments as of December 31, 1994 and 1993.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
December 31, 1994 December 31, 1993
----------------------- -----------------------
Carrying Estimated Carrying Estimated
(In millions) Value Fair Value Value Fair Value
- -------------------------------------------------------------------------------------------------------
FINANCIAL ASSETS:
<S> <C> <C> <C> <C>
Cash and short-term financial instruments(a)... $29,251 $29,251 $22,146 $22,146
Trading assets(a).............................. 5,089 5,089 4,646 4,646
Investment securities(b)....................... 15,015 14,784 12,647 13,066
Loans, net of allowance(c)..................... 54,018 53,871 47,548 48,144
Other financial instruments(a)................. 1,516 1,516 1,379 1,379
Currency options purchased(a).................. - - 536 536
Derivative product assets
Trading purposes(1)(a)....................... 4,408 4,408 - -
Other than trading purposes(f)............... 39 52 - -
Total derivative product assets............ 4,447 4,460 - -
Off-balance-sheet derivative financial
instruments, net.............................. - - 357 520
FINANCIAL LIABILITIES:
Deposits(d).................................... $64,895 $64,749 $58,007 $58,170
Securities sold but not yet purchased(a)....... 972 972 757 757
Other short-term financial instruments(a)...... 25,089 25,089 17,799 17,799
Long-term debt(e).............................. 7,246 7,084 5,250 5,577
Currency options written(a).................... - - 501 501
Derivative product liabilities
Trading purposes(1)(a)....................... 4,133 4,133 - -
Other than trading purposes(f)............... 39 311 - -
Total derivative product liabilities....... 4,172 4,444 - -
Off-balance-sheet exposure - nonfinancial
instruments:
Credit card securitizations, net(g).......... 265 (60) 242 191
- -------------------------------------------------------------------------------------------------------
</TABLE>
(1) The estimated average fair values of derivative financial instruments used
in trading activities during 1994 were $5.2 billion classified as assets and
$4.9 billion classified as liabilities.
Estimated fair values are determined as follows:
(A) FINANCIAL INSTRUMENTS WHERE CARRYING VALUE APPROXIMATES FAIR VALUE
A financial instrument's carrying value approximates its fair value in cases
where the financial instrument has an immediate or short-term maturity
(generally 90 days or less), has no stated maturity, or is carried at fair
value. Additionally, the carrying value of financial instruments that reprice
frequently, such as floating rate loans or debt, represents fair value provided
there has been no significant change in credit quality or there is no embedded
financial instrument with significant value.
The estimated fair value of trading securities and securities sold but not yet
purchased was generally based on quoted market prices or dealer quotes. The
estimated fair value of commercial real estate loans held for accelerated
disposition was based on their estimated liquidation value. The estimated fair
value of derivative product assets and liabilities was based on quoted market
prices or pricing and valuation models on a present value basis using current
market information.
The majority of commitments to extend credit and letters of credit would result
in loans with a market rate of interest if funded. The fair value of these
commitments are the fees that would be charged customers to enter into similar
agreements with comparable pricing and maturity. The recorded book value of
deferred fee income approximates the fair value.
(B) INVESTMENT SECURITIES
The estimated fair values of debt investment securities were generally based on
quoted market prices or dealer quotes. See Notes 1 and 6 for information on
methods for estimating the fair value of equity investment securities, including
those held by venture capital subsidiaries.
58
<PAGE>
(C) LOANS
The discounted cash flow method was used to estimate the fair value of
commercial and consumer loans, except for certain fixed rate, medium- or long-
term consumer mortgage loans. Discount rates used represent current lending
rates for new loans with similar characteristics.
The estimated fair value of certain consumer mortgage loans was based on
committed sales prices and a valuation model using current market information.
(D) DEPOSITS
The fair value of demand and savings deposits with no defined maturity is, by
definition, the amount payable on demand at the reporting date. The fair value
of time deposits is estimated by discounting the future cash flows to be paid,
using the current rates at which similar deposits with similar remaining
maturities would be issued.
(E) LONG-TERM DEBT
Quoted market prices or the discounted cash flow method was used to estimate the
fair value of the Corporation's long-term debt. Discounting was based on the
contractual cash flows and the current rates at which debt with similar terms
could be issued.
(F) DERIVATIVE PRODUCT ASSETS AND LIABILITIES--OTHER THAN TRADING PURPOSES
The estimated fair values of derivative product assets and liabilities used for
risk management purposes, primarily interest rate swaps used by the Corporation
to manage its interest rate exposure, were based on quoted market prices or
pricing and valuation models on a present value basis using current market
information.
G) CREDIT CARD SECURITIZATIONS (OFF-BALANCE-SHEET EXPOSURE)
Floating and fixed rate credit card receivables sold as securities to investors
through a separate trust are not financial instruments of the Corporation.
However, the Corporation uses financial instruments (see (f) above) to reduce
interest rate risk exposure attributable to these securitizations. Interest
rate risk exposure exists with respect to the amount of anticipated excess
servicing fee income, which fluctuates with interest rate movements.
Accordingly, the carrying value and the interest rate effect on anticipated
excess servicing fee income are disclosed. The carrying value represents the
reserve for credit losses related to securitized credit card receivables and net
deferred income. The interest rate effect on anticipated excess servicing fee
income represents the difference between the par value and the quoted market
price of the securitized credit card receivables held by investors.
N O T E 18 -- CONTINGENCIES
The Corporation and certain of its subsidiaries are defendants in various
lawsuits arising out of the normal course of business, and the Corporation has
received certain tax deficiency assessments. Since the Corporation and certain
of its subsidiaries, which are regulated by one or more federal and state
regulatory authorities, also are the subject of numerous examinations and
reviews by such authorities, the Corporation is and will, from time to time,
normally be engaged in various disagreements with regulators, related primarily
to banking matters. In the opinion of management and the Corporation's general
counsel, the ultimate resolution of the matters referred to in this note will
not have a material effect on the Corporation's consolidated financial
statements.
59
<PAGE>
N O T E 19 -- BUSINESS SEGMENTS
An analysis of the Corporation's results on a line-of-business basis is shown in
the table on page 4.
The Corporation is primarily engaged in the banking business, and with the
continuing globalization of financial markets, the distinction between
international and domestic activities has become less important. The following
table shows approximate consolidated financial data for the three years ended
December 31, 1994, attributable to domestic and foreign operations. The 1992
foreign results have been further split by geographic region. No foreign
geographic region accounted for more than 10% of consolidated results in either
1994 or 1993.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
Income
Before
Income Net Total
(IN MILLIONS) Revenues(1) Expenses(2) Taxes Income Assets
- -------------------------------------------------------------------------------------------
1994
<S> <C> <C> <C> <C> <C>
DOMESTIC OPERATIONS............. $7,745 $5,926 $1,819 $1,204 $ 97,372
FOREIGN OPERATIONS.............. 784 750 34 17 15,391
------ ------ ------ ------ --------
CONSOLIDATED.................... $8,529 $6,676 $1,853 $1,221 $112,763
====== ====== ====== ====== ========
- -------------------------------------------------------------------------------------------
1993
Domestic operations............. $7,202 $5,375 $1,827 $1,172 $ 82,830
Foreign operations.............. 814 639 175 118 10,310
------ ------ ------ ------ --------
Consolidated.................... $8,016 $6,014 $2,002 $1,290 $ 93,140
====== ====== ====== ====== ========
- -------------------------------------------------------------------------------------------
1992
Domestic operations............. $6,838 $6,714 $ 124 $ 285 $ 79,019
Foreign operations
Europe-Middle East-Africa.... 514 460 54 42 5,403
Asia-Pacific................. 205 192 13 8 3,429
Other........................ 174 93 81 59 2,160
------ ------ ------ ------ --------
Total foreign operations........ 893 745 148 109 10,992
------ ------ ------ ------ --------
Consolidated.................... $7,731 $7,459 $ 272 $ 394 $ 90,011
====== ====== ====== ====== ========
- -------------------------------------------------------------------------------------------
(1) Includes interest income and noninterest income.
(2) Includes interest expense, provision for credit losses and noninterest expense.
</TABLE>
Results from foreign operations include provisions for credit losses of $(42)
million in 1994, $(16) million in 1993 and $7 million in 1992. Brazilian bonds
received as part of a debt restructuring, which were treated as loan loss
recoveries, and other recoveries related to foreign loans were the primary
reasons for the $42 million negative provision in 1994.
Because many of the resources employed by the Corporation are common to both its
foreign and domestic activities, it is difficult to segregate assets, related
revenues and expenses into their foreign and domestic components. The amounts in
the preceding table are estimated on the basis of internally developed
assignment and allocation procedures, which to some extent are subjective. The
principal internal allocations used to prepare this information are described in
the following text.
The allocation of corporate overhead expense is based on allocations appropriate
to individual activities. Expenses incurred for the benefit of another
geographic area, including certain domestic administrative expenses, are
allocated to the area benefited.
Total assets and revenues reflect the allocation of loans and related interest
income among geographic areas based on the domicile of the customer.
Distribution of certain fee income among geographic areas is reflected on the
basis of services rendered. Capital, with the exception of capital at
foreign subsidiaries, has been allocated to domestic operations.
60
<PAGE>
<TABLE>
<CAPTION>
N O T E 20 -- FIRST CHICAGO NBD CORPORATION (PARENT COMPANY ONLY) CONDENSED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------------------------------------
CONDENSED BALANCE SHEET
- ------------------------------------------------------------------------------------------------------------
December 31 (In millions) 1994 1993
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Cash and due from banks--bank subsidiaries................................ $ 2 $ 22
Interest-bearing due from banks
Bank subsidiaries....................................................... 161 170
Other................................................................... 396 348
Resale agreement with bank subsidiary..................................... 42 221
Investment securities--available-for-sale................................. 93 28
Loans and receivables--subsidiaries
Bank subsidiaries....................................................... 1,783 1,677
Nonbank subsidiaries.................................................... 1,014 1,184
Investment in subsidiaries
Bank subsidiaries....................................................... 7,831 7,289
Nonbank subsidiaries.................................................... 993 846
Premises and equipment.................................................... 53 56
Other assets.............................................................. 133 160
------- -------
Total assets.......................................................... $12,501 $12,001
======= =======
- ------------------------------------------------------------------------------------------------------------
LIABILITIES
Borrowings--nonbank subsidiaries.......................................... $ 82 $ 29
Other short-term borrowings............................................... 189 323
Long-term debt............................................................ 4,001 3,856
Other liabilities......................................................... 420 294
------- -------
Total liabilities..................................................... 4,692 4,502
- ------------------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY...................................................... 7,809 7,499
------- -------
Total liabilities and stockholders' equity............................ $12,501 $12,001
======= =======
- ------------------------------------------------------------------------------------------------------------
CONDENSED INCOME STATEMENT
- ------------------------------------------------------------------------------------------------------------
For the Year (In millions) 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------
OPERATING INCOME
Dividends
Bank subsidiaries....................................................... $ 575 $ 377 $ 284
Nonbank subsidiaries.................................................... 111 71 198
Interest income
Bank subsidiaries....................................................... 139 140 119
Nonbank subsidiaries.................................................... 62 82 102
Other................................................................... 29 15 17
Other income (loss)
Bank subsidiaries....................................................... 9 11 8
Nonbank subsidiaries.................................................... 1 1 1
Other................................................................... 26 (2) 3
------ ------- -------
Total................................................................. 952 695 732
- ------------------------------------------------------------------------------------------------------------
OPERATING EXPENSE
Interest expense
Nonbank subsidiaries.................................................... 1 4 6
Other................................................................... 298 293 296
Other expense............................................................. 31 30 48
------ ------- -------
Total................................................................. 330 327 350
- ------------------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES AND EQUITY IN UNDISTRIBUTED
NET INCOME OF SUBSIDIARIES................................................ 622 368 382
Applicable income tax (benefit)......................................... (26) (31) (34)
- ------------------------------------------------------------------------------------------------------------
INCOME BEFORE EQUITY IN UNDISTRIBUTED
NET INCOME OF SUBSIDIARIES................................................ 648 399 416
Equity in undistributed net income (loss) of subsidiaries before
cumulative effect of changes in accounting principles
Bank subsidiaries....................................................... 552 732 (63)
Nonbank subsidiaries.................................................... 21 159 (129)
------ ------ -------
Income before cumulative effect of
changes in accounting principles......................................... 1,221 1,290 224
Cumulative effect of changes in accounting principles..................... - - 170
------ ------- -------
NET INCOME................................................................ $1,221 $ 1,290 $ 394
====== ======= =======
- ------------------------------------------------------------------------------------------------------------
The Parent Company Only Statement of Changes in Stockholders' Equity is the same as the Consolidated Statement
of Changes in Stockholders' Equity (see page 33).
</TABLE>
61
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
Condensed Statement of Cash Flows
- -----------------------------------------------------------------------------------------------------------
For the Year (In millions) 1994 1993 1992
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Flows from Operating Activities
Net income................................................................ $ 1,221 $ 1,290 $ 394
Adjustments to reconcile net income to net cash provided by
operating activities:
Equity in net income of subsidiaries before cumulative effect
of changes in accounting principles.................................. (1,259) (1,340) (289)
Cumulative effect of changes in accounting principles................. - - (170)
Dividends received from subsidiaries.................................. 677 422 478
Depreciation and amortization......................................... 9 9 8
Net (increase) decrease in accrued income receivable.................. (2) 5 (8)
Net increase (decrease) in accrued expenses payable................... (5) (5) 9
Other noncash adjustments............................................. 46 3 14
------- ------- -------
Total adjustments..................................................... (534) (906) 42
------- ------- -------
Net cash provided by operating activities................................. 687 384 436
- -----------------------------------------------------------------------------------------------------------
Cash Flows from Investing Activities
Net decrease (increase) in loans to subsidiaries.......................... 66 241 (635)
Net decrease (increase) in resale agreements with bank subsidiary......... 179 (134) 38
Net capital investments in subsidiaries................................... (141) (135) (613)
Purchase of investment securities--available-for-sale..................... (225) - -
Purchase of investment securities......................................... - (16) (35)
Proceeds from maturities of investment securities--available-for-sale..... 52 - -
Proceeds from maturities of investment securities......................... - 8 22
Proceeds from sales of investment securities--available-for-sale.......... 107 - -
Proceeds from sales of investment securities.............................. - 6 2
Purchases of premises and equipment....................................... - (4) (4)
Sales of premises and equipment........................................... - 4 -
Other, net................................................................ - 1 1
------- ------- -------
Net cash provided by (used in) investing activities....................... 38 (29) (1,224)
- -----------------------------------------------------------------------------------------------------------
Cash Flows from Financing Activities
Net (decrease) increase in short-term borrowings.......................... (80) (180) 101
Proceeds from issuance of long-term debt.................................. 935 887 1,093
Redemption and repayment of long-term debt................................ (640) (748) (808)
Net increase (decrease) in other liabilities.............................. (29) 48 (23)
Dividends paid............................................................ (397) (331) (298)
Proceeds from issuance of common and treasury stock....................... 52 47 382
Purchase of treasury stock................................................ (397) (26) (135)
Proceeds from issuance of preferred stock................................. - 196 96
Payment for redemption of preferred stock................................. (150) (1) -
------- ------- -------
Net cash provided by (used in) financing activities....................... (706) (108) 408
- -----------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents...................... 19 247 (380)
Cash and cash equivalents at beginning of year............................ 540 293 673
------- ------- -------
Cash and cash equivalents at end of year.................................. $ 559 $ 540 $ 293
======= ======= =======
- -----------------------------------------------------------------------------------------------------------
Other Cash Flow Disclosures
Interest paid........................................................... $ 322 $ 322 $ 308
Income tax payment (receipt)............................................ $ 6 $ (96) $ 5
- -----------------------------------------------------------------------------------------------------------
</TABLE>
Dividends that may be paid by national bank subsidiaries are subject to two
statutory limitations. Under the first, dividends cannot exceed the level of
"undivided profits then on hand" less the amount of bad debts, as defined, in
excess of the allowance for credit losses. In addition, a bank cannot declare a
dividend, without regulatory approval, in an amount in excess of its net
profits, as defined, for the current year combined with the retained net profits
for the preceding two years. State bank subsidiaries may also be subject to
limitations on dividend payments.
62
<PAGE>
Based on these statutory requirements, the Corporation's bank subsidiaries
could, in the aggregate, have declared additional dividends of up to
approximately $1.553 billion without regulatory approval at January 1, 1995. The
payment of dividends by any bank may also be affected by other factors, such as
the maintenance of adequate capital. As of December 31, 1994, all of the
Corporation's banking subsidiaries significantly exceeded the regulatory
guidelines for "well-capitalized" status.
Federal banking law also restricts each bank subsidiary from extending credit to
the Corporation as the parent bank holding company (The Parent Company) in
excess of 10% of the subsidiary's capital stock and surplus, as defined. Any
such extensions of credit are subject to strict collateral requirements.
In connection with issuances of commercial paper, the Corporation has agreements
providing future credit availability (back-up lines of credit) with various
banks. The agreements with nonaffiliated banks aggregated $270 million at
December 31, 1994 and 1993. The Corporation also had agreements for back-up
lines of credit with The First National Bank of Chicago aggregating $130 million
at December 31, 1994, and $160 million at December 31, 1993. In 1994, the
Corporation had agreements to pay between 0.125% and 0.175% in annual commitment
fees on any unused lines. The back-up lines of credit, together with overnight
money market loans, short-term investments and other sources of liquid assets,
exceeded the amount of commercial paper issued at December 31, 1994.
63
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors of First Chicago NBD Corporation:
We have audited the accompanying supplemental consolidated balance sheet of
First Chicago NBD Corporation (a Delaware corporation) and subsidiaries as of
December 31, 1994 and 1993, and the related supplemental consolidated statements
of income, stockholders' equity and cash flows for each of the years in the
three-year period ended December 31, 1994. The supplemental consolidated
statements give retroactive effect to the merger of First Chicago Corporation
and NBD Bancorp, Inc. on December 1, 1995, which has been accounted for as a
pooling of interests as described in Note 4. These financial statements are the
responsibility of First Chicago NBD Corporation's management. Our
responsibility is to express an opinion on these supplemental financial
statements based on our audits.
We have previously audited the consolidated financial statements of First
Chicago Corporation and subsidiaries included in the supplemental consolidated
financial statements of First Chicago NBD Corporation and issued our report
thereon dated January 17, 1995. We did not audit the consolidated financial
statements of NBD Bancorp, Inc. included in the supplemental consolidated
financial statements of First Chicago NBD Corporation, which statements reflect
total assets, total interest income, and net income constituting 42 percent, 48
percent and 44 percent, respectively in 1994, and 44 percent, 50 percent and 38
percent, respectively in 1993 and 50 percent and 76 percent of total interest
income and net income in 1992, of the related supplemental consolidated totals.
These statements were audited by other auditors whose report thereon dated
January 17, 1995, has been furnished to us, and our opinion expressed herein,
insofar as it relates to the amounts included for NBD Bancorp, Inc. is based
solely upon the report of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, based upon our audits and the report of other auditors, the
supplemental consolidated financial statements referred to above present fairly,
in all material respects, the financial position of First Chicago NBD
Corporation and its subsidiaries as of December 31, 1994 and 1993, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1994, after giving retroactive effect to
the merger of First Chicago Corporation and NBD Bancorp, Inc. as described in
Note 4, all in conformity with generally accepted accounting principles.
As explained in Note 2 to the supplemental consolidated financial
statements, effective January 1, 1992, First Chicago NBD Corporation changed its
method of accounting for postretirement benefits other than pensions to conform
to a pronouncement of the Financial Accounting Standards Board, and also changed
its methods of accounting for the valuation of venture capital investment
securities and the recognition of certain credit card solicitation costs.
ARTHUR ANDERSEN LLP
Chicago, Illinois,
December 1, 1995
64
<PAGE>
S U P P L E M E N T A L S E L E C T E D S T A T I S T I C A L
I N F O R M A T I O N
FIRST CHICAGO NBD CORPORATION AND SUBSIDIARIES
SECURITIZATION OF CREDIT CARD RECEIVABLES
Since 1987, the Corporation has actively packaged and sold credit card assets as
securities to investors. The securitization of credit card receivables is an
effective balance sheet management tool since capital is freed for other uses.
In addition, while such securitizations affect net interest income, the
provision for credit losses and noninterest income, the Corporation's net income
is essentially unaffected.
The Corporation's First Card unit continues to service credit card accounts even
after receivables are securitized. The Corporation no longer recognizes net
interest income and certain fee revenue on the securitized portfolio; however,
this is offset by servicing fees as well as by lower provisions for credit
losses.
At year-end 1994, $6.1 billion in credit card receivables was securitized,
compared with $5.0 billion at year-end 1993.
For analytical purposes only, the following table shows income statement line
items for the Corporation adjusted for the net impact of securitization of
credit card receivables.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
1994 1993
------------------------------------ -------------------------------------
CREDIT CARD Credit Card
(In millions) REPORTED SECURITIZATIONS ADJUSTED Reported Securitizations Adjusted
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net interest income--
tax-equivalent basis... $ 3,043 $ 550 $ 3,593 $ 2,893 $ 471 $ 3,364
Provision for credit
losses................. 276 253 529 390 234 624
Noninterest income....... 2,393 (297) 2,096 2,769 (237) 2,532
Noninterest expense...... 3,220 - 3,220 3,161 - 3,161
Net income............... 1,221 - 1,221 1,290 - 1,290
Assets--year-end......... $112,763 $6,117 $118,880 $93,140 $ 4,958 $98,098
--average.......... 107,846 5,538 113,384 96,642 4,839 101,481
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
COMMON STOCK AND STOCKHOLDER DATA * 1994 1993 1992 1991
- -------------------------------------------------------------------------------------------------------
Market price
High for the year.................................. $33 $36-3/8 $33-1/8 $30-1/8
Low for the year................................... 26-3/4 28-5/8 26-3/4 20-3/4
At year-end........................................ 27-3/8 29-3/4 32-3/4 29-3/4
Book value (at year-end)............................. 22.60 21.25 18.27 18.06
Dividends as a percentage of net income
attributable to common stock....................... 31% 23% 73% 63%
- -------------------------------------------------------------------------------------------------------
*There were approximately 41,000 common stockholders of record as of December 31, 1994.
</TABLE>
65
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------
QUARTERLY COMMON STOCK DATA
- ----------------------------------------------------------------------------
QUARTERLY DIVIDENDS AND MARKET PRICE SUMMARY
- ----------------------------------------------------------------------------
Dividends Stock Market
Declared Price Range (1)
- ----------------------------------------------------------------------------
Per
Share Low High
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
1994
First quarter.............................. $0.30 $27-1/4 $30-3/4
Second quarter............................. 0.30 27-3/8 32
Third quarter.............................. 0.30 28-3/8 33
Fourth quarter............................. 0.33 26-3/4 31
-----
Year............................... $1.23 26-3/4 33
1993
First quarter.............................. $0.27 $31-3/8 $36-3/8
Second quarter............................. 0.27 29-5/8 36-1/4
Third quarter.............................. 0.27 31-3/8 34-3/8
Fourth quarter............................. 0.27 28-5/8 34-5/8
-----
Year................................ $1.08 28-5/8 36-3/8
- ----------------------------------------------------------------------------
</TABLE>
(1) The principal market for the Corporation's common stock is the New York
Stock Exchange.
<TABLE>
<CAPTION>
CONSOLIDATED SUMMARY OF QUARTERLY FINANCIAL INFORMATION
- --------------------------------------------------------------------------------------------
1994 (In millions, except per share data) December 31 September 30 June 30 March 31
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest income............................ $1,754 $1,607 $1,461 $1,314
Net interest income........................ 756 749 739 712
Provision for credit losses................ 96 63 52 65
Noninterest income......................... 622 589 558 624
Noninterest expense........................ 806 811 788 815
Net income................................. 315 301 304 301
Earnings per share
Primary.................................... $ 0.94 $ 0.89 $ 0.89 $ 0.90
Fully diluted.............................. 0.93 0.88 0.88 0.88
- --------------------------------------------------------------------------------------------
1993 (In millions, except per share data) December 31 September 30 June 30 March 31
- --------------------------------------------------------------------------------------------
Interest income............................ $1,287 $1,327 $1,307 $1,326
Net interest income........................ 684 718 695 687
Provision for credit losses................ 90 90 105 105
Noninterest income......................... 675 821 642 631
Noninterest expense........................ 823 799 784 755
Net income................................. 292 409 291 298
Earnings per share
Primary.................................... $ 0.87 $ 1.25 $ 0.88 $ 0.91
Fully diluted.............................. 0.85 1.20 0.85 0.89
- --------------------------------------------------------------------------------------------
</TABLE>
66
<PAGE>
Average Balances/Net Interest Margin/Rates
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
Year Ended December 31 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------------------------
(Income and rates on tax-equivalent basis)
Average Average Average Average Average Average
(Dollars in millions) Balance Interest Rate Balance Interest Rate Balance Interest Rate
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets
Due from banks--interest-bearing (1) .. $ 8,497 $ 395 4.65% $ 8,098 $ 332 4.10% $ 8,136 $ 406 4.99%
Federal funds sold and securities under
resale agreements ................... 14,340 624 4.35 11,740 350 2.98 8,356 291 3.48
Trading assets ........................ 4,927 286 5.80 4,876 229 4.70 4,556 270 5.93
Investment securities (2)
U.S. government and federal agency .. 11,093 698 6.29 8,973 585 6.52 8,084 613 7.58
States and political subdivisions ... 1,649 146 8.85 1,757 151 8.59 2,009 179 8.91
Other ............................... 1,990 48 2.41 2,054 57 2.78 2,552 95 3.72
-------- ------ ----- ------- ------ ---- ------- ------ ----
Total investment securities ....... 14,732 892 6.05 12,784 793 6.20 12,645 887 7.01
Loans (3)(4)
Domestic offices .................... 47,189 3,829 8.24 43,979 3,413 7.86 45,315 3,661 8.17
Foreign offices ..................... 2,894 194 6.70 3,131 211 6.74 3,727 293 7.86
-------- ------ ----- ------- ------ ---- ------- ------ ----
Total loans ....................... 50,083 4,023 8.15 47,110 3,624 7.79 49,042 3,954 8.15
Assets held for accelerated
disposition (5) ..................... 19 3 13.16 283 28 9.82 199 17 8.79
-------- ------ ----- ------- ------ ---- ------- ------ ----
Total earning assets (6) .............. 92,598 6,223 6.72 84,891 5,356 6.31 82,934 5,825 7.02
Cash and due from banks ............... 6,553 6,171 5,425
Allowance for credit losses ........... (1,132) (1,062) (1,117)
Other assets .......................... 9,827 6,642 6,968
-------- ------- -------
Total assets ...................... $107,846 $96,642 $94,210
======== ======= =======
Liabilities and Stockholders' Equity
Deposits--interest-bearing
Savings ............................. $ 11,815 $ 274 2.32% $11,100 $ 265 2.39% $ 9,732 $ 296 3.04%
Money market ........................ 9,280 261 2.81 10,163 247 2.43 10,211 311 3.05
Time ................................ 13,650 570 4.18 14,204 543 3.82 18,665 910 4.88
Foreign offices (7) ................. 12,347 548 4.44 10,944 417 3.81 11,972 566 4.73
-------- ------ ----- ------- ------ ---- ------- ------ ----
Total deposits--interest-bearing .. 47,092 1,653 3.51 46,411 1,472 3.17 50,580 2,083 4.12
Federal funds purchased and securities
under repurchase agreements ......... 16,365 704 4.30 13,245 404 3.05 13,419 469 3.50
Other short-term borrowings ........... 8,629 378 4.38 7,374 253 3.43 3,896 159 4.08
Long-term debt ........................ 6,755 445 6.59 4,817 334 6.93 4,025 310 7.70
-------- ------ ----- ------- ------ ---- ------- ------ ----
Total interest-bearing
liabilities ..................... 78,841 3,180 4.03 71,847 2,463 3.43 71,920 3,021 4.20
Demand deposits ....................... 13,377 13,078 11,620
Other liabilities ..................... 7,898 4,730 4,505
Preferred stock ....................... 686 794 581
Common stockholders' equity ........... 7,044 6,193 5,584
-------- ------- -------
Total liabilities and
stockholders' equity ............ $107,846 $96,642 $94,210
======== ======= =======
Interest income/earning assets (6) .... $6,223 6.72% $5,356 6.31% $5,825 7.02%
Interest expense/earning assets ....... 3,180 3.43 2,463 2.90 3,021 3.64
------ ----- ------ ---- ------ ----
Net interest margin ................... $3,043 3.29% $2,893 3.41% $2,804 3.38%
====== ===== ====== ==== ====== ====
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Principally balances in overseas offices.
(2) The combined amounts for investment securities available-for-sale and held-
to-maturity for 1994 are based on their respective carrying values. Based
on the amortized cost of investment securities available-for-sale, the
combined average balance for 1994 would be $14.846 billion and the average
earned rate would be 6.01%.
(3) Rates are calculated on average lease-financing receivables balances
reduced by deferred liability for taxes.
(4) Nonperforming loans are included in average balances used to determine
rates.
(5) Excludes other real estate held for accelerated disposition.
(6) Includes tax-equivalent adjustments based on federal income tax rate of 35%
for 1994 and 1993, and 34% for 1992.
(7) Includes International Banking Facilities' deposit balances in domestic
offices and balances of Edge Act and overseas offices.
67
<PAGE>
ANALYSIS OF CHANGES IN NET INTEREST INCOME
The following table shows the approximate effect on the net interest income of
volume and rate changes for 1994 and 1993. For purposes of this table, changes
that are not due solely to volume or rate changes are allocated to volume.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
1994 over 1993 1993 over 1992
--------------------- ----------------------
Year Ended December 31 (In millions) Volume Rate Total Volume Rate Total
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in
Interest income
Interest-bearing due from banks.............. $ 19 $ 44 $ 63 $ (2) $ (72) $ (74)
Federal funds sold and securities under
resale agreements.......................... 113 161 274 101 (42) 59
Trading assets............................... 3 54 57 15 (56) (41)
Investment securities
U.S. government and federal agency......... 133 (20) 113 58 (86) (28)
States and political subdivisions.......... (10) 5 (5) (22) (6) (28)
Other...................................... (1) (8) (9) (14) (24) (38)
Loans
Domestic offices........................... 261 155 416 (104) (144) (248)
Foreign offices............................ (16) (1) (17) (40) (42) (82)
Assets held for accelerated disposition (1).. (34) 9 (25) 8 3 11
---- -----
Total.................................. 867 (469)
- ----------------------------------------------------------------------------------------------------------
Increase (decrease) in
Interest expense
Deposits
Savings.................................... 17 (8) 9 33 (64) (31)
Money market............................... (25) 39 14 (1) (63) (64)
Time....................................... (23) 50 27 (171) (196) (367)
Foreign offices............................ 62 69 131 (39) (110) (149)
Federal funds purchased and securities
under repurchase agreements................ 134 166 300 (5) (60) (65)
Other short-term borrowings.................. 55 70 125 119 (25) 94
Long-term debt............................... 128 (17) 111 55 (31) 24
---- -----
Total.................................. 717 (558)
---- -----
Increase in net interest income.................. $150 $ 89
==== =====
- ----------------------------------------------------------------------------------------------------------
</TABLE>
(1) Excludes other real estate held for accelerated disposition.
68
<PAGE>
FOREIGN OUTSTANDINGS
The Corporation's cross-border outstandings consist of loans (including accrued
interest), acceptances, interest-bearing deposits with other banks, equity
investments, other interest-bearing investments and other nonlocal currency
monetary assets. At year-end 1994 and year-end 1993, the only country for which
cross-border outstandings exceeded 1.0% of total assets was Japan. A breakout of
these outstandings is presented in the table below.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
Government Banks and
and Other Commercial
(In millions) Official Financial and
Country December 31 Institutions Institutions Industrial Other Total
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Japan 1994 $-- $4,724 $156 $30 $4,910
1993 -- 3,693 85 21 3,799
- ---------------------------------------------------------------------------------------
</TABLE>
At December 31, 1994, the only countries for which cross-border outstandings
totaled between 0.75% and 1.0% of the Corporation's total assets were the United
Kingdom and Korea; such outstandings totaled $1.921 billion.
At December 31, 1993, the only country for which cross-border outstandings
totaled between 0.75% and 1.0% of the Corporation's total assets was Canada;
such outstandings totaled $830 million.
INTEREST SHORTFALL ON NONPERFORMING LOANS
Interest at original contractual rates (based on average outstanding balances)
and interest actually recorded for those periods at December 31 was as follows.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
1994 1993
---------------------------------------- ----------------------------------------
Accelerated Accelerated
Disposition Disposition
(In millions) Domestic Foreign Portfolio Total Domestic Foreign Portfolio Total
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest at original
contract rates........... $25 $ 1 $ -- $26 $32 $ 9 $ 3 $44
- ----------------------------------------------------------------------------------------------------------------
Interest actually
recognized............... 10 -- -- 10 12 3 2 17
- ----------------------------------------------------------------------------------------------------------------
Interest shortfall,
before income tax
effect................... $15 $ 1 $ -- $16 $20 $ 6 $ 1 $27
=== === ==== === === === === ===
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
At December 31, 1994 and 1993, there were no material commitments to lend
additional funds in connection with nonperforming restructured loans.
LOANS 90 DAYS OR MORE PAST DUE STILL ACCRUING INTEREST
The following table summarizes those loans that are 90 days or more past due and
still accruing interest.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
December 31 (In millions) 1994 1993 1992 1991
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Domestic................................ $150 $121 $122 $188
Foreign................................. -- -- -- 3
---- ---- ---- ----
Total............................. $150 $121 $122 $191
==== ==== ==== ====
- ----------------------------------------------------------------------
</TABLE>
69
<PAGE>
<TABLE>
<CAPTION>
ANALYSIS OF ALLOWANCE FOR CREDIT LOSSES
- ------------------------------------------------------------------------------------------------------
(In millions) 1994 1993 1992 1991
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance, beginning of year....................................... $1,106 $1,041 $1,136 $1,257
- ------------------------------------------------------------------------------------------------------
Provision for credit losses...................................... 276 390 653 606
Provision for loans held for accelerated disposition............. - - 491 -
- ------------------------------------------------------------------------------------------------------
Charge-offs
Commercial
Domestic
Commercial................................................. 68 122 253 259
Real estate................................................ 41 99 149 229
Lease financing............................................ 3 6 6 18
Foreign (1).................................................. 9 47 78 83
Consumer
Credit card.................................................. 193 165 180 194
Other........................................................ 50 46 52 56
------ ------ ------ ------
Total charge-offs........................................ 364 485 718 839
- ------------------------------------------------------------------------------------------------------
Recoveries
Commercial
Domestic
Commercial................................................. 55 81 39 28
Real estate................................................ 15 9 6 4
Lease financing............................................ 1 2 5 2
Foreign...................................................... 44 17 22 35
Consumer
Credit card.................................................. 32 57 52 48
Other........................................................ 25 23 22 20
------ ------ ------ ------
Total recoveries......................................... 172 189 146 137
- ------------------------------------------------------------------------------------------------------
Net charge-offs.................................................. 192 296 572 702
Charge-offs of loans upon transfer to accelerated
disposition portfolio.......................................... - - 636 -
- ------------------------------------------------------------------------------------------------------
Transfers related to securitized receivables..................... (49) (29) (42) (28)
Other (2)........................................................ 17 - 11 3
------ ------ ------ ------
- ------------------------------------------------------------------------------------------------------
Balance, end of year............................................. $1,158 $1,106 $1,041 $1,136
====== ====== ====== ======
- ------------------------------------------------------------------------------------------------------
</TABLE>
(1) 1992 amounts include $12 million defined as commercial real estate.
(2) Primarily acquisitions.
70
<PAGE>
ALLOCATED ALLOWANCE FOR CREDIT LOSSES
While the allowance for credit losses is available to absorb credit losses in
the entire portfolio, the tables below present an estimate of the allowance for
credit losses allocated by loan type and the percentage of loans in each
category to total loans.
<TABLE>
<CAPTION>
- -------------------------------------------------------
December 31 (Dollars in millions) 1994 1993
- -------------------------------------------------------
<S> <C> <C>
Commercial
Domestic.......................... $ 848 $ 789
Foreign........................... 59 81
Consumer
Credit card....................... 215 201
Other............................. 36 35
------ ------
Total..................... $1,158 $1,106
====== ======
- -------------------------------------------------------
Percentage of loans in each category to total loans
Commercial
Domestic.......................... 56% 56%
Foreign........................... 6 6
Consumer
Credit card....................... 13 13
Other............................. 25 25
--- ---
Total..................... 100% 100%
=== ===
- -------------------------------------------------------
</TABLE>
71
<PAGE>
SHORT-TERM BORROWINGS
The Corporation classifies borrowings with original maturities of less than one
year as short-term borrowings. The following is a summary of short-term
borrowings for each of the two years ended December 31, 1994.
<TABLE>
<CAPTION>
- --------------------------------------------------------------
(Dollars in millions) 1994 1993
- --------------------------------------------------------------
<S> <C> <C>
Federal funds purchased
Outstanding at year-end................. $ 2,562 $ 2,923
Weighted average rate at year-end....... 5.72% 3.03%
Daily average outstanding for the year.. $ 2,846 $ 3,263
Weighted average rate for the year...... 4.48% 3.25%
Highest outstanding at any month-end.... $ 3,087 $ 4,850
Securities under repurchase agreements
Outstanding at year-end................. $14,357 $ 8,115
Weighted average rate at year-end....... 4.65% 2.95%
Daily average outstanding for the year.. $13,519 $ 9,982
Weighted average rate for the year...... 4.27% 2.98%
Highest outstanding at any month-end.... $17,977 $11,178
Bank notes
Outstanding at year-end................. $ 6,070 $ 3,720
Weighted average rate at year-end....... 5.72% 3.35%
Daily average outstanding for the year.. $ 5,181 $ 3,067
Weighted average rate for the year...... 4.71% 3.33%
Highest outstanding at any month-end.... $ 6,537 $ 3,823
Other short-term borrowings
Outstanding at year-end................. $ 2,352 $ 3,109
Weighted average rate at year-end....... 4.51% 3.68%
Daily average outstanding for the year.. $ 3,448 $ 4,307
Weighted average rate for the year...... 3.88% 3.50%
Highest outstanding at any month-end.... $ 4,722 $ 5,982
Total short-term borrowings
Outstanding at year-end................. $25,341 $17,867
Weighted average rate at year-end....... 5.00% 3.17%
Daily average outstanding for the year.. $24,994 $20,619
Weighted average rate for the year...... 4.33% 3.19%
- --------------------------------------------------------------
</TABLE>
72
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
1994 1993 1992 1991
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Financial Ratios
Net income as a percentage of:
Average stockholders' equity........................ 15.8% 18.5% 6.4% 8.6%
Average common stockholders' equity................. 16.6 19.9 6.3 8.7
Average total assets................................ 1.13 1.33 0.42 0.53
Average earning assets.............................. 1.32 1.52 0.48 0.61
Stockholders' equity at year-end as a percentage of:
Total assets at year-end............................ 6.9 8.1 7.0 6.5
Total loans at year-end............................. 14.2 15.4 13.2 11.4
Total deposits at year-end.......................... 12.0 12.9 10.4 9.2
Average stockholders' equity as a percentage of:
Average assets...................................... 7.2 7.2 6.5 6.2
Average loans....................................... 15.4 14.8 12.6 11.0
Average deposits.................................... 12.8 11.7 9.9 8.9
Income to fixed charges:
Excluding interest on deposits...................... 2.2x 3.0x 1.3x 1.6x
Including interest on deposits...................... 1.6x 1.8x 1.1x 1.1x
- ---------------------------------------------------------------------------------
</TABLE>
73
<PAGE>
EXHIBIT 99(b)
FIRST CHICAGO NBD CORPORATION
INDEX TO SUPPLEMENTAL QUARTERLY FINANCIAL INFORMATION
Page
----
Supplemental Consolidated Financial Statements.................. 2
Notes to Supplemental Consolidated Financial Statements......... 6
Supplemental Selected Statistical Information................... 9
1
<PAGE>
S U P P L E M E N T A L C O N S O L I D A T E D B A L A N C E S H E E T
FIRST CHICAGO NBD CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
Sept. 30 Dec. 31 Sept. 30
- ------------------------------------------------------------------------------------------------------------------
(Dollars in millions) 1995 1994 1994
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Cash and due from banks........................................................... $ 6,348 $ 6,852 $ 6,441
Interest-bearing due from banks................................................... 10,302 8,697 8,470
Federal funds sold and securities under resale agreements......................... 14,244 13,702 13,968
Trading assets.................................................................... 8,116 5,089 5,514
Derivative product assets......................................................... 7,981 4,447 6,054
Investment securities (fair values--$12,049, $14,784 and $15,064, respectively)... 11,910 15,015 15,138
Loans (net of unearned income--$502, $469, and $421, respectively)................ 61,076 55,176 51,702
Allowance for credit losses....................................................... (1,230) (1,158) (1,106)
Premises and equipment............................................................ 1,456 1,295 1,296
Customers' acceptance liability................................................... 783 717 818
Other assets...................................................................... 3,070 2,931 2,746
-------- -------- --------
Total assets........................................................... $124,056 $112,763 $111,041
======== ======== ========
- ------------------------------------------------------------------------------------------------------------------
LIABILITIES
Deposits
Demand.......................................................................... $ 13,286 $ 14,378 $ 13,567
Savings......................................................................... 19,785 20,088 20,282
Time............................................................................ 15,956 13,204 12,206
Foreign offices................................................................. 17,907 17,225 14,118
-------- -------- --------
Total deposits......................................................... 66,934 64,895 60,173
Federal funds purchased and securities under repurchase agreements................ 20,031 16,919 17,551
Other short-term borrowings....................................................... 9,257 8,422 9,745
Long-term debt.................................................................... 8,445 7,246 7,203
Acceptances outstanding........................................................... 783 717 818
Derivative product liabilities.................................................... 7,609 4,172 5,591
Other liabilities................................................................. 2,552 2,583 2,184
-------- -------- --------
Total liabilities.............................................................. 115,611 104,954 103,265
- ------------------------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Preferred stock................................................................... 491 611 611
- ----------------------------------------------------------------------------------
Common stock--$1 par value........................................................ 330 329 329
- ----------------------------------------------------------------------------------
September 30 December 31 September 30
1995 1994 1994
- ----------------------------------------------------------------------------------
<C> <C> <C>
Number of shares authorized............ 500,000,000 500,000,000 500,000,000
Number of shares issued................ 330,080,612 329,474,942 329,323,926
Number of shares outstanding........... 318,712,027 318,554,906 322,579,961
Surplus........................................................................... 2,550 2,555 2,585
Retained earnings................................................................. 5,491 4,808 4,601
Fair value adjustment on investment securities available-for-sale................. (34) (158) (115)
Deferred compensation............................................................. (39) (33) (42)
Accumulated translation adjustment................................................ 9 7 8
Treasury stock at cost, 11,368,585, 10,920,036, and 6,743,965 shares.............. (353) (310) (201)
- ------------------------------------------------------------------------------------------------------------------
Stockholders' equity................................................... 8,445 7,809 7,776
-------- -------- --------
Total liabilities and stockholders' equity............................. $124,056 $112,763 $111,041
======== ======== ========
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE>
S U P P L E M E N T A L C O N S O L I D A T E D I N C O M E S T A T E M E N T
First Chicago NBD Corporation and Subsidiaries
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
September 30 September 30
- ------------------------------------------------------------------------------------
(In millions, except per share data) 1995 1994 1995 1994
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans, including fees................... $1,318 $1,019 $3,862 $2,896
Bank balances........................... 161 107 466 279
Federal funds sold and securities under
resale agreements...................... 230 178 716 406
Trading assets.......................... 141 78 335 196
Investment securities-taxable........... 176 196 561 518
Investment securities-tax exempt 28 29 84 87
(including dividends).................. ------ ------ ------ ------
Total......................... 2,054 1,607 6,024 4,382
- ------------------------------------------------------------------------------------
INTEREST EXPENSE
Deposits................................ 677 431 1,917 1,159
Federal funds purchased and securities
under repurchase agreements............ 304 203 906 460
Other short term borrowings............. 131 105 396 244
Long-term debt.......................... 146 119 431 319
------ ----- ------ ------
Total......................... 1,258 858 3,650 2,182
- ------------------------------------------------------------------------------------
NET INTEREST INCOME..................... 796 749 2,374 2,200
Provision for credit losses............. 125 63 300 180
------ ------ ------ ------
NET INTEREST INCOME AFTER PROVISION FOR
CREDIT LOSSES.......................... 671 686 2,074 2,020
- ------------------------------------------------------------------------------------
NONINTEREST INCOME
Combined trading profits................ 85 46 162 68
Equity securities gains................. 66 20 181 158
Investment securities gains (losses).... 2 (1) 3 -
------ ------ ------ ------
Market-driven revenue................. 153 65 346 226
Credit card fee revenue................. 248 231 673 626
Fiduciary and investment management fees 97 93 290 283
Service charges and commissions......... 184 181 545 517
Other................................... 20 19 82 119
------ ------ ------ ------
Total......................... 702 589 1,936 1,771
- ------------------------------------------------------------------------------------
NONINTEREST EXPENSE
Salaries and employee benefits.......... 437 407 1,260 1,195
Occupancy expense of premises, net...... 69 59 198 184
Equipment rentals, depreciation and
maintenance............................ 53 57 162 187
FDIC insurance expense.................. 2 26 54 78
Amortization of intangible assets....... 21 23 67 71
Other................................... 245 239 706 699
------ ------ ------ ------
Total......................... 827 811 2,447 2,414
- ------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES.............. 546 464 1,563 1,377
Applicable income taxes................. 189 163 539 471
------ ------ ------ ------
NET INCOME.............................. $ 357 $ 301 $1,024 $ 906
====== ====== ====== ======
NET INCOME ATTRIBUTABLE TO COMMON
STOCKHOLDERS' EQUITY................... $ 347 $ 291 $ 994 $ 864
====== ====== ====== ======
- ------------------------------------------------------------------------------------
COMMON SHARE DATA
NET INCOME-PRIMARY.................... $1.07 $0.89 $3.07 $2.68
NET INCOME-FULLY DILUTED.............. $1.06 $0.88 $3.03 $2.65
- ------------------------------------------------------------------------------------
</TABLE>
3
<PAGE>
S U P P L E M E N T A L C O N S O L I D A T E D S T A T E M E N T O F
S T O C K H O L D E R S' E Q U I T Y
First Chicago NBD Corporation and Subsidiaries
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Nine Months Ended
September 30
(In millions) 1995 1994
- ------------------------------------------------------------------------------
<S> <C> <C>
PREFERRED STOCK:
Balance, beginning of period.................... $ 611 $ 761
Redemption of preferred stock................. (120) (150)
------ ------
Balance, end of period.......................... 491 611
------ ------
COMMON STOCK:
Balance, beginning of period.................... 329 318
Acquisition of subsidiaries................... -- 11
Other......................................... 1 --
------ ------
Balance, end of period......................... 330 329
------ ------
CAPITAL SURPLUS:
Balance, beginning of period.................... 2,555 2,542
Redemption of preferred stock................. -- (5)
Acquisition of subsidiaries................... (3) 39
Cancellation of shares held in treasury (8) --
Other......................................... 6 9
------ ------
Balance, end of period.......................... 2,550 2,585
------ ------
RETAINED EARNINGS:
Balance, beginning of period.................... 4,808 3,924
Net income..................................... 1,024 906
Cash dividends declared on common stock........ (311) (268)
Cash dividends declared on preferred stock..... (30) (38)
Acquisition of subsidiary...................... -- 77
------ ------
Balance, end of period.......................... 5,491 4,601
------ ------
FAIR VALUE ADJUSTMENT ON INVESTMENT SECURITIES
AVAILABLE-FOR-SALE:
Balance, beginning of period.................... (158) (6)
Change in net unrealized loss (net of taxes)
and other.................................... 124 (109)
------ ------
Balance, end of period.......................... (34) (115)
------ ------
DEFERRED COMPENSATION:
Balance, beginning of period.................... (33) (30)
Awards granted................................ (17) (27)
Amortization of deferred compensation......... 17 14
Other......................................... (6) 1
------ ------
Balance, end of period.......................... (39) (42)
------ ------
ACCUMULATED TRANSLATION ADJUSTMENT:
Balance, beginning of period.................... 7 3
Translation gain net of taxes................ 2 5
------ ------
Balance, end of period.......................... 9 8
------ ------
TREASURY STOCK:
Balance, beginning of period.................... (310) (13)
Purchase of common stock....................... (379) (229)
Acquisition of subsidiaries.................... 262 --
Cancellation of shares held in treasury........ 8 --
Other.......................................... 66 41
------ ------
Balance, end of period.......................... (353) (201)
------ ------
Total stockholders' equity, end of period......... $8,445 $7,776
====== ======
- ----------------------------------------------------------------------------
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
S U P P L E M E N T A L C O N S O L I D A T E D S T A T E M E N T O F C A S H F L O W S
First Chicago NBD Corporation and Subsidiaries
- -------------------------------------------------------------------------------------------------------
For the Nine Months Ended September 30 (In millions) 1995 1994
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income.......................................................................... $ 1,024 $ 906
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization..................................................... 207 207
Provision for credit losses....................................................... 300 180
Equity securities gains........................................................... (181) (158)
Net (increase) in net derivative product balances................................. (87) (236)
Net (increase) in trading assets.................................................. (2,941) (853)
Net (increase) decrease in loans held for sale.................................... (407) 261
Net (increase) in accrued income receivable....................................... (177) (53)
Net increase (decrease) in accrued expenses payable............................... 200 (110)
Net (increase) decrease in other assets........................................... 93 (116)
Interest income from Brazilian debt restructuring................................. (1) (16)
Other noncash adjustments......................................................... (214) (2)
------- -------
Total adjustments................................................................. (3,208) (896)
Net cash provided by (used in) operating activities................................. (2,184) 10
- -------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Net (increase) in federal funds sold and securities under resale agreements......... (543) (4,889)
Purchase of investment securities--available for sale............................... (2,892) (4,537)
Purchase of debt investment securities--held to maturity............................ (117) (3,004)
Purchase of venture capital investments............................................. (318) (101)
Proceeds from maturities of debt securities--available for sale..................... 2,236 2,272
Proceeds from maturities of debt securities--held to maturity....................... 903 1,702
Proceeds from sales of investment securities--available for sale.................... 3,283 1,110
Proceeds from sales of venture capital investments.................................. 906 257
Credit card receivables securitized................................................. 2,286 2,000
Net (increase) in loans............................................................. (7,017) (4,687)
Loan recoveries..................................................................... 106 118
Purchases of premises and equipment................................................. (280) (201)
Proceeds from sales of premises and equipment....................................... 63 75
Net cash and cash equivalents due to mergers and acquisitions....................... 115 38
------- -------
Net cash (used in) investing activities............................................. (1,269) (9,847)
- -------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits............................................................ 473 1,226
Net increase in federal funds purchased and securities under repurchase agreements.. 3,112 6,464
Net increase in other short-term borrowings......................................... 809 2,905
Proceeds from issuance of long-term debt............................................ 1,878 2,660
Repayment of long-term debt......................................................... (734) (624)
Net (decrease) in other liabilities................................................. (242) (197)
Dividends paid...................................................................... (337) (294)
Proceeds from issuance of common and treasury stock................................. 18 9
Purchase of treasury stock.......................................................... 19 12
Proceeds from issuance of preferred stock........................................... (378) (229)
Payment for redemption of preferred stock........................................... (121) (150)
------- -------
Net cash provided by (used in) financing activities................................. 4,497 11,782
- -------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash and cash equivalents........................ 57 (114)
- -------------------------------------------------------------------------------------------------------
NET INCREASE IN CASH AND CASH EQUIVALENTS........................................... 1,101 1,831
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR...................................... 15,549 13,080
------- -------
CASH AND CASH EQUIVALENTS AT END OF YEAR............................................ $16,650 $14,911
======= =======
- -------------------------------------------------------------------------------------------------------
</TABLE>
See Note 6 on page 8.
5
<PAGE>
NOTES TO SUPPLEMENTAL FINANCIAL STATEMENTS
Note 1
- ------
The unaudited consolidated financial statements for the three-and nine-month
periods ended September 30, 1995 and 1994, 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. Because the
results from commercial banking operations are so closely related and responsive
to changes in economic conditions, fiscal policy and monetary policy, and
because the results for the venture capital and trading portfolios are largely
market-driven, the results for any interim period are not necessarily indicative
of the results that can be expected for the entire year. These financial
statements should be read in conjunction with the supplemental consolidated
financial statements for the year-ended December 31, 1994. See Exhibit 99(a) of
this Form 8-K.
Note 2
- ------
Effective January 1, 1995, the Corporation adopted Statement of Financial
Accounting Standards (SFAS) No. 114, "Accounting by Creditors for Impairment of
a Loan," and SFAS No. 118, "Accounting by Creditors for Impairment of a Loan --
Income Recognition and Disclosures." SFAS No. 114 addresses the accounting for
a loan when it is probable that all principal and interest amounts due will not
be collected in accordance with its contractual terms. The Corporation generally
identifies nonperforming loans as "impaired loans." Certain loans, such as loans
carried at the lower-of-cost or market or small-balance homogeneous loans (e.g.,
credit card, installment credit), are exempt from SFAS No. 114 provisions.
On a quarterly basis, the Corporation identifies impaired loans and the extent
to which such loans are impaired. Impairment is recognized to the extent to
which the recorded investment of an impaired loan or pool of loans exceeds the
calculated present value. For noncollateral dependent loans, the calculated
present value is measured using a discounted cash flow approach. Loans having a
significant recorded investment are measured on an individual basis while loans
not having a significant recorded investment are grouped and measured on a pool
basis. Collateral-dependent loans, primarily real estate, are separately
measured for impairment by determining the fair value of the collateral less
estimated costs to sell.
The allocated reserve associated with impaired loans is considered in
management's determination of the Corporation's allowance for credit losses. The
adoption of this accounting standard did not have a significant effect on the
Corporation's net income or its allowance for credit losses.
At September 30, 1995, the recorded investment in loans considered impaired
under SFAS No. 114 was $296 million, which required a related allowance for
credit losses of $26 million. Of the $296 million in impaired loans, $150
million required the establishment of an allocated reserve.
The Corporation retained its prior method of recognizing interest and applying
cash payments received with respect to impaired loans. The average recorded
investment in impaired loans was approximately $281 million for the quarter
ended September 30, 1995, and $270 million year-to-date. The Corporation
recognized interest income associated with impaired loans of $5 million during
the third quarter and $13 million year-to-date.
In accordance with SFAS No. 114, a loan is classified as an in-substance
foreclosure when the Corporation has effectively taken possession of the
collateral. Loans of $15 million, which no longer qualify as in-substance
foreclosures, were reclassified from other assets to loans as of January 1,
1995. Prior reporting periods were not restated since the amounts involved
were not material.
6
<PAGE>
Note 3
- ------
The Corporation presents earnings per share on both a primary and a fully
diluted basis. Primary earnings per share were computed by dividing net income,
after deducting dividends on preferred stock, by the average number of common
and common-equivalent shares outstanding during the period. Common-equivalent
shares consist of net shares issuable under the Employee Stock Purchase and
Savings Plan and outstanding stock options.
The fully diluted earnings per share calculation also includes common shares
that would result from the conversion of convertible preferred stock and
convertible notes. Accordingly, net income was not reduced by preferred stock
dividend requirements related to convertible preferred stock or the interest
expense on the convertible notes.
The net income, preferred stock dividends, interest on the convertible notes and
shares used to compute primary and fully diluted earnings per share are
presented in the following table.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
NINE MONTHS ENDED
SEPTEMBER 30
- --------------------------------------------------------------------------------------------
(In millions) 1995 1994
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Primary
Net income........................................................ $1,024 $906
Preferred stock dividends (1)..................................... (30) (42)
------ ----
Net income attributable to common stockholders' equity............ $ 994 $864
====== ====
Fully diluted
Net income........................................................ $1,024 906
Preferred stock dividends, excluding convertible Series A and B,
where applicable (1)............................................. (21) (33)
Interest on convertible notes, net of taxes....................... - 2
------ ----
Fully diluted net income.......................................... $1,003 $875
====== ====
- --------------------------------------------------------------------------------------------
(In thousands) 1995 1994
- --------------------------------------------------------------------------------------------
Average shares outstanding........................................ 321,237 319,068
Common stock equivalents.......................................... 2,564 2,984
------- -------
Average number of common and common equivalent shares (primary)... 323,801 322,052
======= =======
Incremental shares related to convertible preferred stock,
debentures and other............................................. 7,376 8,603
------- -------
Average number of shares, assuming full dilution.................. 331,177 330,655
======= =======
- --------------------------------------------------------------------------------------------
Earnings Per Share 1995 1994
- --------------------------------------------------------------------------------------------
Net Income Per Share
Primary........................................................... $3.07 $2.68
===== =====
Fully Diluted..................................................... $3.03 $2.65
===== =====
- --------------------------------------------------------------------------------------------
</TABLE>
(1) 1994 preferred dividends include a 3% premium, totaling $4.5 million, paid
on the redemption of the Corporation's Cumulative Preferred Stock, Series D.
7
<PAGE>
Note 4
- ------
At September 30, 1995, the Corporation's credit card receivables aggregated $7.6
billion. These receivables are available for sale at face value through credit
card securitization programs. In addition, other loans available for sale at
September 30, 1995, totaled $719 million. Such loans were valued at the lower
of cost or fair value. Unrealized losses, as well as realized gains or losses,
are included in noninterest income.
Note 5
- ------
The accelerated asset disposition portfolio was established in September 1992.
Nonperforming assets in this portfolio totaled $23 million at September 30,
1995, compared with $37 million at year-end 1994 and $33 million a year ago.
Note 6
- ------
For purposes of the Statement of Cash Flows, cash and cash equivalents consist
of cash and due from banks--noninterest-bearing and interest-bearing.
A venture capital investment of $96 million was transferred to trading assets in
the third quarter of 1995.
Loans of $10 million and $19 million were transferred to other real estate in
the first nine months of 1995 and 1994, respectively.
Loans of $15 million were reclassified from other assets to loans as of January
1, 1995, as a result of the Corporation's adoption of SFAS No. 114. See Note 2
above for further information.
Note 7
- ------
The ratio of income to fixed charges for the nine months ended September 30,
1995, excluding interest on deposits was 1.9x, and including interest on
deposits was 1.4x. The ratio has been computed on the basis of the total
enterprise (as defined by the Securities and Exchange Commission) by dividing
income before fixed charges and income taxes by fixed charges. Fixed charges
consist of interest expense on all long- and short-term borrowings, excluding
or including interest on deposits.
Note 8
- ------
The Corporation and certain of its subsidiaries are defendants in various
lawsuits, including certain class actions, arising out of normal corporate
activities, and the Corporation has received certain tax deficiency assessments.
Since the Corporation and certain of its subsidiaries, which are regulated by
one or more federal and state authorities, also are the subject of numerous
examinations and reviews by such authorities, the Corporation is and will be,
from time to time, normally engaged in various disagreements with regulators,
primarily related to banking matters. In the opinion of management and the
Corporation's general counsel, the ultimate resolution of the matters referred
to in this note will not have a material effect on the Corporation's
consolidated financial statements.
8
<PAGE>
<TABLE>
<CAPTION>
S U P P L E M E N T A L S E L E C T E D S T A T I S T I C A L I N F O R M A T I O N
FIRST CHICAGO NBD CORPORATION AND SUBSIDIARIES
- ------------------------------------------------------------------------------------------------------------------
INVESTMENT SECURITIES
- ------------------------------------------------------------------------------------------------------------------
Investment Securities -- Available-for-Sale
----------------------------------------------------------------
Amortized Gross Unrealized Gross Unrealized Fair Value
September 30, 1995 (In millions) Cost Gains Losses (Book Value)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury.................................... $ 747 $ 2 $ 2 $ 747
U.S. government agencies
Mortgage-backed securities..................... 1,362 1 17 1,346
Collateral mortgage obligations................ 648 3 9 642
Other.......................................... 344 1 - 345
States and political subdivisions................ 41 - - 41
Collateralized mortgage obligations (1).......... 26 - - 26
Other securities (2)............................. 476 3 35 444
------ ---- --- ------
Total........................................ $3,644 $ 10 $63 $3,591
====== ==== === ======
----------------------------------------------------------------
Investment Securities -- Held-to-Maturity
----------------------------------------------------------------
Amortized Cost Gross Unrealized Gross Unrealized
(Book Value) Gains Losses Fair Value
- ------------------------------------------------------------------------------------------------------------------
U.S. Treasury.................................... $ 838 $ 5 $ 2 $ 841
U.S. government agencies
Mortgage-backed securities..................... 5,051 114 55 5,110
Other.......................................... 32 - - 32
States and political subdivisions................ 1,416 81 4 1,493
Other debt securities............................ 30 - - 30
------ ---- --- ------
Total........................................ $7,367 $200 $61 $7,506
====== ==== === ======
----------------------------------------------------------------
Investment Securities -- Venture Capital
----------------------------------------------------------------
Gross Unrealized Gross Unrealized Fair Value
Cost Gains Losses (Book Value)
----------------------------------------------------------------
Venture capital (2).............................. $878 $149 $75 $952
==== ==== === ====
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) All collateralized mortgage obligations of private issuers have underlying
collateral consisting of obligations of U.S. government agencies.
(2) The fair values of certain securities for which market quotations were not
available were estimated. In addition, the fair values reflect liquidity
and other market-related factors.
9
<PAGE>
<TABLE>
<CAPTION>
FIRST CHICAGO NBD CORPORATION AND SUBSIDIARIES
- -------------------------------------------------------------------------------------------------
Selected Credit Information 1995 1994
(Dollars in millions) September 30 June 30 March 31 December 31 September 30
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
At period-end:
Loans outstanding.............. $61,076 $58,484 $57,744 $55,176 $51,702
Nonaccrual loans............... 275 267 248 267 311
Accrual renegotiated loans..... 21 22 23 27 4
Nonperforming loans............ 296 289 271 294 315
Other real estate, net......... 36 36 36 57 52
Nonperforming assets........... 332 325 307 351 367
Allowance for credit losses.... 1,230 1,159 1,212 1,158 1,106
Nonperforming assets/loans
outstanding and other
real estate, net.............. 0.5% 0.6% 0.5% 0.6% 0.7%
Allowance for credit losses/
nonperforming loans........... 416% 401% 447% 394% 351%
For the quarter ended:
Average loans outstanding...... $59,661 $57,727 $56,130 $52,593 $50,680
Net charge-offs................ 60 53 44 54 46
Net charge-offs/average loans.. 0.4% 0.4% 0.3% 0.4% 0.4%
- -------------------------------------------------------------------------------------------------
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
FIRST CHICAGO NBD CORPORATION AND SUBSIDIARIES
ANALYSIS OF ALLOWANCE FOR CREDIT LOSSES
- ---------------------------------------------------------------------------------------------------------------
(In millions) September 30 June 30 March 31 December 31 September 30
1995 1995 1995 1994 1994
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, beginning of quarter................. $1,159 $1,212 $1,158 $1,106 $1,104
- ------------------------------------------------------------------------------------------------------------
Provision for credit losses................... 125 90 85 96 63
- ------------------------------------------------------------------------------------------------------------
Charge-offs
Commercial
Domestic
Commercial................................. 11 11 5 20 16
Real estate................................ 6 10 7 8 10
Lease financing............................ 1 - - 1 -
Foreign..................................... - - 1 2 -
Consumer
Credit card................................ 53 54 58 44 43
Other...................................... 18 15 14 16 12
------ ------ ------ ------ ------
Total charge-offs........................ 89 90 85 91 81
- ------------------------------------------------------------------------------------------------------------
Recoveries
Commercial
Domestic
Commercial................................. 10 15 18 15 12
Real estate................................ 4 5 6 5 3
Lease financing............................ - - 1 - -
Foreign..................................... 1 1 2 3 7
Consumer
Credit card................................ 8 9 8 8 7
Other...................................... 6 7 6 6 6
------ ------ ------ ------ ------
Total recoveries......................... 29 37 41 37 35
- ------------------------------------------------------------------------------------------------------------
Net charge-offs/(recoveries).................. 60 53 44 54 46
- ------------------------------------------------------------------------------------------------------------
Transfers related to securitized receivables.. - (90) 10 10 (31)
Other......................................... 6 - 3 - 16
- ------------------------------------------------------------------------------------------------------------
Balance, end of quarter....................... $1,230 $1,159 $1,212 $1,158 $1,106
====== ====== ====== ====== ======
- ------------------------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
FIRST CHICAGO NBD CORPORATION AND SUBSIDIARIES
- --------------------------------------------------------------------------------------------------------------------
Average Balances/Net Interest Margin/Rates
- --------------------------------------------------------------------------------------------------------------------
(Nine Months Ended September 30) 1 9 9 5 1 9 9 4
- --------------------------------------------------------------------------------------------------------------------
(Income and rates on tax-equivalent basis) Average Average Average Average
(Dollars in millions) Balance Interest Rate Balance Interest Rate
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Assets
Due from banks--interest-bearing (1)....................... $ 9,962 $ 466 6.25% $ 8,513 $ 280 4.40%
Federal funds sold and securities under resale agreements.. 16,296 716 5.87 13,561 406 4.00
Trading assets............................................. 6,820 337 6.61 4,814 197 5.47
Investment securities (2)
U.S. government and federal agency....................... 10,574 538 6.80 10,924 507 6.21
States and political subdivisions........................ 1,575 107 9.08 1,636 107 8.74
Other.................................................... 1,939 50 3.45 1,996 35 2.34
- --------------------------------------------------------------------------------------------------------------------
Total investment securities.............................. 14,088 695 6.60 14,556 649 5.96
Loans (3)(4)
Domestic offices......................................... 54,537 3,700 9.20 46,387 2,775 8.12
Foreign offices.......................................... 3,313 183 7.39 2,880 140 6.50
- --------------------------------------------------------------------------------------------------------------------
Total loans................................................ 57,850 3,883 9.09 49,267 2,915 8.03
- --------------------------------------------------------------------------------------------------------------------
Total earning assets (5)............................... 105,016 6,097 7.76 90,711 4,447 6.55
Cash and due from banks.................................... 6,392 6,510
Allowance for credit losses................................ (1,186) (1,133)
Other assets............................................... 11,685 9,581
- --------------------------------------------------------------------------------------------------------------------
Total assets............................................... $121,907 $105,669
======== ========
- --------------------------------------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
Deposits--interest-bearing
Savings.................................................. $ 11,441 $ 238 2.78% $ 11,880 $ 211 2.37%
Money market............................................. 9,370 267 3.81 9,433 176 2.49
Time..................................................... 16,949 737 5.81 13,277 392 3.95
Foreign offices (6)...................................... 15,646 675 5.77 12,078 380 4.21
- --------------------------------------------------------------------------------------------------------------------
Total deposits--interest-bearing....................... 53,406 1,917 4.80 46,668 1,159 3.32
Federal funds purchased and securities under repurchase
agreements............................................... 20,388 906 5.94 15,558 460 3.95
Other short-term borrowings................................ 9,222 396 5.74 8,190 244 3.98
Long-term debt............................................. 7,833 431 7.36 6,597 319 6.47
- --------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities....................... 90,849 3,650 5.37 77,013 2,182 3.79
Demand deposits............................................ 13,189 13,310
Other liabilities.......................................... 9,585 7,650
Preferred stock............................................ 597 711
Common stockholders' equity................................ 7,687 6,985
- --------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity............. $121,907 $105,669
======== ========
Interest income/earning assets............................. $6,097 7.76% $4,447 6.55%
Interest expense/earning assets............................ 3,650 4.65 2,182 3.21
- --------------------------------------------------------------------------------------------------------------------
Net interest margin........................................ $2,447 3.11% $2,265 3.34%
====== ====== ====== =======
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Principally balances in overseas offices.
(2) The combined amounts for investment securities available-for-sale and held-
to-maturity are based on their respective carrying amounts. Based on the
amortized cost of investment securities, the combined average balance for
the nine months ended September 30, 1995, would be $14.191 billion and the
average earned rate would be 6.55%.
(3) Rates are calculated on average lease-financing receivables balances
reduced by deferred liability for taxes.
(4) Nonperforming loans are included in average balances used to determine
rates.
(5) Includes tax-equivalent adjustments based on a 35% federal income tax rate.
(6) Includes International Banking Facilities deposit balances in domestic
offices and balances of Edge Act and overseas offices.
12
<PAGE>
<TABLE>
<CAPTION>
FIRST CHICAGO NBD CORPORATION AND SUBSIDIARIES
- -----------------------------------------------------------------------------------------------------------------
1995 1994
- -----------------------------------------------------------------------------------------------------------------
(Dollars in millions, except per share data) September 30 June 30 March 31 December 31 September 30
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
AT QUARTER-END
BALANCE SHEET DATA
Assets.......................................... $124,056 $123,180 $119,915 $112,763 $111,041
Loans........................................... 61,076 58,484 57,744 55,176 51,702
Deposits........................................ 66,934 66,319 63,752 64,895 60,173
Long-term debt.................................. 8,445 8,065 7,639 7,246 7,203
Common stockholders' equity..................... 7,954 7,749 7,548 7,198 7,165
Stockholders' equity............................ 8,445 8,360 8,159 7,809 7,776
- -----------------------------------------------------------------------------------------------------------------
CAPITAL DATA (1)
Common equity/assets ratio...................... 6.8% 6.7% 6.7% 6.8% 6.7%
Regulatory leverage ratio....................... 6.9 7.0 7.3 7.3 7.3
Risk-based capital
Tier 1 capital ratio.......................... 8.2 8.5 8.4 8.6 8.9
Total capital ratio........................... 12.4 12.8 12.7 13.0 13.2
- -----------------------------------------------------------------------------------------------------------------
FINANCIAL RATIOS
AT QUARTER-END
Stockholders' equity as a percentage of:
Total assets.................................. 6.8% 6.8% 6.8% 6.9% 7.0%
Total loans................................... 13.8 14.3 14.1 14.2 15.0
Total deposits................................ 12.6 12.6 12.8 12.0 12.9
FOR THE QUARTER ENDED
Net income as a percentage of:
Average stockholders' equity.................. 16.7 16.0 16.9 16.0 15.5
Average common stockholders' equity........... 17.4 16.8 17.7 16.7 16.3
Average total assets.......................... 1.14 1.07 1.16 1.09 1.08
Average earning assets........................ 1.31 1.27 1.33 1.27 1.25
Average stockholders' equity as a percentage of:
Average assets................................ 6.8 6.7 6.9 6.9 6.9
Average loans................................. 14.3 14.3 14.4 14.9 15.2
Average deposits.............................. 12.4 12.4 12.6 12.7 12.6
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
COMMON STOCK DATA
FOR THE QUARTER ENDED
- -----------------------------------------------------------------------------------------------------------------
Market price
High.......................................... $39 1/4 $33 1/4 $32 7/8 $31 $33
Low........................................... 31 1/2 30 1/8 27 3/8 26 3/4 28 3/8
At quarter-end................................ 38 1/4 32 32 1/2 27 3/8 28 5/8
Book value...................................... 24.96 24.25 23.54 22.60 22.21
Dividends declared on common stock.............. 0.33 0.33 0.33 0.33 0.30
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Net of investment in First Chicago Capital Markets, Inc.
13
