<PAGE>
Cover
- ---------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
FORM 10-Q
Washington, D.C. 20549
(Mark One)
/X/ Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended March 31, 1995
/ / Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File Number 1-7127
- -----------------------------------------------------------------------------
NBD BANCORP, INC.
(Exact name of registrant as specified in its charter)
Delaware 38-1984850
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
611 Woodward Avenue, Detroit, Michigan 48226
(Address of principal executive offices) (zip code)
(313) 225-1000
(Registrant's telephone number, including area code)
- ----------------------------------------------------------------------------
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes /X/ No / /
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
Class Outstanding at April 30, 1995
----------------------------- -----------------------------
Common Stock, $1.00 Par Value 157,635,222
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<PAGE>
Page 1
Part 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
- ------- --------------------
NBD Bancorp, Inc. Consolidated Balance Sheet
(in thousands except share data)
<TABLE>
<CAPTION>
Assets
March 31 December 31 March 31
1995 1994 1994
------------ ------------ ------------
<S> <C> <C> <C>
Cash and Due From Banks........................................... $ 2,788,541 $ 2,587,007 $ 2,421,942
Interest-Bearing Deposits......................................... 653,945 630,688 612,284
Federal Funds Sold and Resale Agreements.......................... 121,625 399,725 316,544
Trading Account Securities........................................ 125,362 122,135 93,555
Investment Securities (Note B):
Available-for-Sale (At Fair Value)............................. 4,250,057 4,814,252 4,285,088
Held-to-Maturity (Fair Value of $7,343,626
$7,381,476 and $7,848,646, respectively).................... 7,342,256 7,608,713 7,667,607
------------ ------------ ------------
11,592,313 12,422,965 11,952,695
------------ ------------ ------------
Loans and Leases (Net of Unearned Income of $181,620,
$171,207 and $136,526, respectively):
Commercial..................................................... 16,232,268 15,525,645 14,088,500
Real Estate Construction....................................... 856,762 817,452 765,715
Residential Mortgage........................................... 3,961,567 3,351,840 2,773,533
Mortgages Held For Sale........................................ 21,383 30,171 62,663
Consumer....................................................... 7,750,807 7,667,907 6,823,794
Lease Financing................................................ 379,201 363,200 283,451
Foreign........................................................ 1,523,879 1,473,449 1,080,032
------------ ------------ ------------
30,725,867 29,229,664 25,877,688
Allowance For Possible Credit Losses (Note C).................. (458,157) (435,051) (423,410)
------------ ------------ ------------
30,267,710 28,794,613 25,454,278
Net Premises and Equipment........................................ 647,192 630,357 635,993
Customers' Liability on Acceptances............................... 197,339 193,866 187,516
Other Assets...................................................... 1,361,817 1,329,777 1,257,862
------------ ------------ ------------
Total Assets.......................................... $47,755,844 $47,111,133 $42,932,669
============ ============ ============
</TABLE>
<PAGE>
Page 2
<TABLE>
<CAPTION>
Liabilities and Shareholders' Equity
March 31 December 31 March 31
1995 1994 1994
------------ ------------ ------------
<S> <C> <C> <C>
Deposits:
Demand (Non-Interest Bearing).................................. $ 6,636,995 $ 6,731,050 $ 6,602,773
Savings........................................................ 7,504,825 7,679,922 8,029,415
Money Market Accounts.......................................... 4,940,018 4,959,816 5,431,509
Time........................................................... 9,566,186 8,055,429 7,332,600
Foreign Office................................................. 2,912,675 5,803,224 2,779,319
------------ ------------ ------------
31,560,699 33,229,441 30,175,616
Short-Term Borrowings............................................. 8,928,829 7,119,972 6,917,420
Liability on Acceptances.......................................... 197,339 193,866 187,516
Accrued Expenses and Sundry Liabilities........................... 860,646 771,963 803,810
Long-Term Debt.................................................... 2,703,335 2,504,348 1,583,608
------------ ------------ ------------
Total Liabilities........................................... 44,250,848 43,819,590 39,667,970
------------ ------------ ------------
Shareholders' Equity:
Series A Preferred Stock - Par Value $1, Stated Value $50...... - - -
March 31 December 31 March 31
No. of Shares 1995 1994 1994
--------------- ------------ ------------ ------------
Authorized..... 460,000 460,000 460,000
Issued......... - - -
Preferred Stock - No Par Value................................. - - -
March 31 December 31 March 31
No. of Shares 1995 1994 1994
--------------- ------------ ------------ ------------
Authorized..... 10,000,000 10,000,000 10,000,000
Issued......... - - -
Common Stock - Par Value $1.................................... 160,883 160,877 160,872
March 31 December 31 March 31
No. of Shares 1995 1994 1994
--------------- ------------ ------------ ------------
Authorized..... 500,000,000 500,000,000 500,000,000
Issued......... 160,883,008 160,876,819 160,872,446
Capital Surplus................................................ 533,576 545,717 546,969
Retained Earnings.............................................. 2,990,430 2,903,394 2,624,608
Fair Value Adjustment on Investment Securities
Available-for-Sale (Note B)................................. (78,559) (154,305) (53,753)
Accumulated Translation Adjustment............................. 9,618 6,942 5,122
Deferred Compensation.......................................... (22,131) (17,438) (19,119)
Treasury Stock (2,854,769 and 4,968,147 shares, respectively).. (88,821) (153,644) -
------------ ------------ ------------
Total Shareholders' Equity.................................. 3,504,996 3,291,543 3,264,699
------------ ------------ ------------
Total Liabilities and Shareholders' Equity............ $47,755,844 $47,111,133 $42,932,669
============ ============ ============
</TABLE>
<PAGE>
Page 3
<TABLE>
<CAPTION>
NBD Bancorp, Inc. Consolidated Statement of Income
(in thousands except per share data)
Quarter Ended
March 31
---------------------
1995 1994
--------- ---------
<S> <C> <C>
Interest Income:
Loans and Leases (including fees)............................... $647,220 $462,061
Investment Securities:
Taxable....................................................... 183,726 138,946
Non-Taxable................................................... 23,969 25,339
Trading Account Securities...................................... 1,788 884
Federal Funds Sold and Resale Agreements........................ 4,111 949
Interest-Bearing Deposits....................................... 11,274 7,000
--------- ---------
Total Interest Income......................................... 872,088 635,179
--------- ---------
Interest Expense:
Deposits........................................................ 292,575 183,539
Short-Term Borrowings........................................... 115,721 45,373
Long-Term Debt.................................................. 43,100 25,007
--------- ---------
Total Interest Expense........................................ 451,396 253,919
--------- ---------
Net Interest Income............................................... 420,692 381,260
Provision For Possible Credit Losses............................ 20,096 15,460
--------- ---------
Net Interest Income After Provision
For Possible Credit Losses...................................... 400,596 365,800
--------- ---------
Non-Interest Income:
Trust Fees...................................................... 38,511 38,110
Service Charges on Deposit Accounts............................. 40,107 40,979
Credit Card Fees................................................ 9,516 8,377
Securities Gains................................................ 1,376 390
Other........................................................... 46,220 50,894
--------- ---------
Total Non-Interest Income..................................... 135,730 138,750
--------- ---------
Non-Interest Expenses:
Compensation:
Salaries...................................................... 135,090 133,459
Benefits...................................................... 42,207 43,289
--------- ---------
Total Compensation......................................... 177,297 176,748
Net Occupancy................................................... 30,407 30,081
Equipment Rentals, Depreciation and Maintenance................. 23,214 21,954
FDIC and Other Regulatory Assessments........................... 16,607 16,675
Amortization of Intangibles..................................... 7,504 6,524
Other........................................................... 68,442 70,337
--------- ---------
Total Non-Interest Expenses................................ 323,471 322,319
--------- ---------
Income before Income Taxes........................................ 212,855 182,231
Income Tax Expense (Including tax effect of $472 and $149,
respectively, on securities sales)............................ 71,964 59,355
--------- ---------
Income before Extraordinary Item and Cumulative
Effect of Accounting Change..................................... 140,891 122,876
Extraordinary Item (net of income tax effect) (Note E).......... - (7,730)
Cumulative Effect of Accounting Change (net of
income tax effect) (Note A)................................... - (7,885)
--------- ---------
Net Income........................................................ $140,891 $107,261
========= =========
Net Income Per Share (on average shares outstanding):
Income before Extraordinary Item and Cumulative
Effect of Accounting Change................................... $ 0.88 $ 0.77
Extraordinary Item (net of income tax effect)................... - (0.05)
Cumulative Effect of Accounting Change (net of
income tax effect)............................................ - (0.05)
--------- ---------
Net Income Per Share.............................................. $ 0.88 $ 0.67
========= =========
</TABLE>
<PAGE>
Page 4
<TABLE>
<CAPTION>
NBD Bancorp, Inc. Consolidated Statement of Shareholders' Equity
(in thousands except share data)
Quarter Ended
March 31
---------------------------
1995 1994
------------ ------------
Preferred Stock:
<S> <C> <C>
Balance, Beginning and End of Period................... $ - $ -
------------ ------------
Common Stock:
Balance, Beginning of Period........................... 160,877 160,715
Acquisition of Subsidiary Bank....................... 270 -
Cancellation of Shares Held in Treasury.............. (270) -
Other................................................ 6 157
------------ ------------
Balance, End of Period................................. 160,883 160,872
------------ ------------
Capital Surplus:
Balance, Beginning of Period........................... 545,717 541,232
Acquisition of Subsidiary Bank....................... (6,323) -
Cancellation of Shares Held in Treasury.............. (8,130) -
Other................................................ 2,312 5,737
------------ ------------
Balance, End of Period................................. 533,576 546,969
------------ ------------
Retained Earnings:
Balance, Beginning of Period........................... 2,903,394 2,565,627
Net Income........................................... 140,891 107,261
Cash Dividends Declared on Common Stock
($.33 and $.30 per share, respectively)............ (53,855) (48,280)
------------ ------------
Balance, End of Period................................. 2,990,430 2,624,608
------------ ------------
Fair Value Adjustment on Investment Securities
Available-for-Sale:
Balance, Beginning of Period........................... (154,305) (7,012)
Change in Fair Value (net of tax).................... 75,746 (46,741)
------------ ------------
Balance, End of Period................................. (78,559) (53,753)
------------ ------------
Accumulated Translation Adjustment:
Balance, Beginning of Period........................... 6,942 4,384
Translation Gain (net of tax)........................ 2,676 738
------------ ------------
Balance, End of Period................................. 9,618 5,122
------------ ------------
Deferred Compensation:
Balance, Beginning of Period........................... (17,438) (16,347)
Awards Granted....................................... (4,813) (6,378)
Amortization of Deferred Compensation................ 2,337 3,301
Other................................................ (2,217) 305
------------ ------------
Balance, End of Period................................. (22,131) (19,119)
------------ ------------
Treasury Stock:
Balance, Beginning of Period........................... (153,644) -
Purchase of Common Stock (3,294,502 shares in 1995).. (102,493) (3,822)
Acquisition of Subsidiary Bank (4,963,433 shares).... 153,501 -
Cancellation of Shares Held in Treasury.............. 8,400 -
Other................................................ 5,415 3,822
------------ ------------
Balance, End of Period................................. (88,821) -
------------ ------------
Total Shareholders' Equity, End of Period................ $ 3,504,996 $ 3,264,699
============ ============
</TABLE>
<PAGE>
Page 5
<TABLE>
<CAPTION>
NBD Bancorp, Inc. Consolidated Statement of Cash Flows
(in thousands)
Three Months Ended
March 31
---------------------------
1995 1994
------------ ------------
Cash Flows from Operating Activities:
<S> <C> <C>
Net Income..................................................................... $ 140,891 $ 107,261
Adjustments to Reconcile Net Income to Net Cash Provided by Operations:
Depreciation and Amortization................................................ 27,084 25,512
Provision for Possible Credit Losses......................................... 20,096 15,460
Securities Gains............................................................. (1,376) (390)
Extraordinary Item - Redemption of Debt...................................... - 7,730
Increase in Interest Receivable.............................................. (43,696) (21,869)
Increase in Current Income Taxes Payable..................................... 64,552 31,868
(Increase)Decrease in Accrued Expenses....................................... 11,088 (64,651)
(Increase)Decrease in Trading Account Investments............................ (3,032) 16,172
Decrease in Mortgages Held for Sale.......................................... 8,788 193,239
Other, net................................................................... (11,129) 5,236
------------ ------------
Net Cash Provided by Operating Activities.................................. 213,266 315,568
------------ ------------
Cash Flows from Investing Activities:
(Increase)Decrease in Interest-Bearing Deposits................................ (7,467) 112,098
Decrease(Increase) in Federal Funds Sold and Resale Agreements................. 278,100 (34,063)
Purchase of Investment Securities Available-for-Sale........................... (590,089) (1,201,731)
Proceeds from Maturity or Call of Investment Securities Available-for-Sale..... 377,216 579,866
Proceeds from Sale of Investment Securities Available-for-Sale................. 1,251,206 44,889
Purchase of Investment Securities Held-to-Maturity............................. (11,936) (1,664,381)
Proceeds from Maturity or Call of Investment Securities Held-to-Maturity....... 274,944 601,114
Increase in Loans and Leases................................................... (935,112) (523,066)
Proceeds from Sale of Loan Portfolios.......................................... 6,003 -
Purchase of Premises and Equipment and Other Assets............................ (22,501) (222,627)
Proceeds from Sale of Premises and Equipment and Other Assets.................. 10,644 19,294
Net Cash Acquired in Purchase of Subsidiaries.................................. 17,290 -
------------ ------------
Net Cash Provided(Used) by Investing Activities.............................. 648,298 (2,288,607)
------------ ------------
Cash Flows from Financing Activities:
(Decrease)Increase in Deposits................................................. (2,500,350) 334,733
Increase in Short-Term Borrowings.............................................. 1,796,666 1,560,986
Proceeds from the Issuance of Long-Term Debt................................... 250,000 350,000
Principal Payments on Long-Term Debt........................................... (50,340) (573)
Redemption of Long-Term Debt................................................... - (208,734)
Proceeds from Stock Option Exercises........................................... 460 132
Payments to Acquire Treasury Stock............................................. (102,493) (3,822)
Dividends Paid................................................................. (53,147) (43,411)
------------ ------------
Net Cash (Used)Provided by Financing Activities.............................. (659,204) 1,989,311
------------ ------------
Effect of Exchange Rate Changes on Cash and Due From Banks....................... (826) (24)
------------ ------------
Net Increase in Cash and Due From Banks.......................................... 201,534 16,248
Cash and Due From Banks - Beginning of Period.................................... 2,587,007 2,405,694
------------ ------------
Cash and Due From Banks - End of Period.......................................... $ 2,788,541 $ 2,421,942
============ ============
Other Cash Flow Disclosures:
Interest Paid.................................................................. $ 452,466 $ 328,523
State and Federal Taxes Paid................................................... 7,412 23,048
</TABLE>
<PAGE>
Page 6
Notes to Consolidated Financial Statements
------------------------------------------
Note A - Accounting Policies
- ----------------------------
Accounting policies of NBD Bancorp, Inc. and its subsidiaries (the
Corporation) are described below.
Basis of Presentation:
The unaudited consolidated financial statements as of and for the three
months ended March 31, 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. These financial statements should be read in conjunction
with the consolidated financial statements included in the Corporation's
Form 10-K Annual Report for the year ended December 31, 1994.
The Corporation has adopted Statement of Financial Accounting Standard
(SFAS) No. 114, "Accounting by Creditors for Impairment of a Loan," as
amended by SFAS No. 118, "Accounting by Creditors for Impairment of a
Loan - Income Recognition and Disclosures," effective January 1, 1995.
These statements require that an impaired loan be measured based on the
present value of the expected future cash flows discounted at the loan's
effective interest rate, the observable market price of the loan or the
fair value of the collateral if the loan is collateral dependent. The
adoption of these statements did not have an impact on the Corporation's
financial statements.
The Corporation has 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 cumulative effect of
adopting SFAS No. 112 was a charge of $12,323,000 ($7,885,000 net of
income taxes).
Consolidation:
The consolidated financial statements of the Corporation include the
accounts of its subsidiaries, principally NBD Bank (Michigan). All
material inter-company accounts and transactions have been eliminated.
Investments in unconsolidated affiliates in which ownership is at least
20 percent are accounted for by the equity method and are reported in
"Other Assets."
Securities:
In accordance with SFAS No. 115, Investment Securities are accounted for
as follows: (a) Debt securities that the Corporation has the positive
intent and ability to hold to maturity are classified as Held-to-Maturity
and reported at amortized cost; (b) Debt and equity securities that are
bought and held principally for the purpose of selling in the near term
are classified as Trading and reported at fair value, with realized and
unrealized gains and losses included in Other Non-Interest Income; and
(c) Debt and equity securities not classified as Held-to-Maturity or
Trading are classified as Available-for-Sale and reported at fair value,
with unrealized gains and losses excluded from earnings and reported in
a separate component of shareholders' equity, net of tax.
<PAGE>
Page 7
Notes to Consolidated Financial Statements (cont'd.)
Gains and losses realized on the sale of Investment Securities are
determined on the specific identification method and included in
Securities Gains(Losses).
Loans:
Loans are generally reported at the principal amount outstanding, net of
unearned income. Non-refundable loan origination and commitment fees, and
certain costs of origination, are deferred and either included in
interest income over the term of the related loan or commitment or, if
the loan is held for sale, included in Other Non-Interest Income when the
loan is sold.
Mortgages Held For Sale are valued at the lower of aggregate cost or fair
value. Unrealized losses, as well as realized gains or losses, are
included in Other Non-Interest Income.
Interest income on loans is accrued as earned. Except for consumer
loans, loans are placed on non-accrual status and previously accrued but
unpaid interest is reversed against current period interest income when
collectibility of principal or interest is considered doubtful, payment
of principal or interest is 90 days or more past due, or the loan is
completely or partially charged off. Interest income on loans considered
doubtful or 90 days or more past due is recorded as collected.
Collections of principal and interest on charged-off loans are applied in
the following sequence: (1) as a reduction of remaining principal
balance; (2) as recovery of principal charged off; and (3) as interest
income.
Consumer loans are not placed on a non-accrual status because they are
generally charged off when 120 days to 150 days past due. Accrued but
unpaid interest is reversed against current period interest income when
the loan is charged off.
Allowance for Possible Credit Losses:
The Allowance is maintained at a level considered by management to be
adequate to provide for probable loan and lease losses inherent in the
portfolio. Management's evaluation is based on a continuing review of
the loan and lease portfolio and includes consideration of the actual
loan and lease loss experience, the present and prospective financial
condition of borrowers, the balance of the loan and lease portfolio,
industry and country concentrations within the portfolio and general
economic conditions.
Income Taxes:
The Corporation accounts for income taxes in accordance with SFAS No.
109, 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. SFAS No. 109 also
specifies the criteria for recognition and measurement of deferred income
tax benefits.
<PAGE>
Page 8
Notes to Consolidated Financial Statements (cont'd.)
Income Per Share:
Per share amounts are based on the weighted average number of shares
outstanding throughout the period adjusted for the assumed exercise of
stock options.
Quarter Ended
March 31
--------------------------
1995 1994
----------- -----------
Average Shares Outstanding..... 159,463,677 161,099,451
Note B - Investment Securities
- ------------------------------
The following is a summary of the amortized cost and fair value of Investment
Securities Available-for-Sale and Held-to-Maturity at March 31, 1995:
<TABLE>
<CAPTION>
Investment Securities Available-for-Sale
------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
------------ ------------ ------------ ------------
(in thousands)
<S> <C> <C> <C> <C>
U.S. Treasury............................... $ 525,394 $ 2,707 $ 143 $ 527,958
U.S. Government Agencies:
Mortgage-backed Securities................ 1,801,590 656 55,110 1,747,136
Collateralized Mortgage Obligations....... 1,394,722 5,080 28,201 1,371,601
Other..................................... 206,790 144 358 206,576
States and Political Subdivisions........... 90,453 112 137 90,428
Collateralized Mortgage Obligations(a)...... 103,540 359 140 103,759
Other....................................... 250,236 516 48,153 202,599
------------ ------------ ------------ ------------
Total................................... $ 4,372,725 $ 9,574 $ 132,242 $ 4,250,057
============ ============ ============ ============
Investment Securities Held-to-Maturity
------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
------------ ------------ ------------ ------------
(in thousands)
U.S. Treasury............................... $ 517,869 $ 782 $ 5,152 $ 513,499
U.S. Government Agencies:
Mortgage-backed Securities................ 5,449,913 77,274 134,186 5,393,001
Other..................................... 8,305 6 145 8,166
States and Political Subdivisions........... 1,365,669 69,887 7,098 1,428,458
Other....................................... 500 2 - 502
------------ ------------ ------------ ------------
Total................................... $ 7,342,256 $ 147,951 $ 146,581 $ 7,343,626
============ ============ ============ ============
(a) All of the Collateralized Mortgage Obligations of private issuers have underlying collateral
consisting of obligations of U.S. Government Agencies.
</TABLE>
<PAGE>
Page 9
Notes to Consolidated Financial Statements (cont'd.)
The following is a summary of the amortized cost and fair value of Investment
Securities Available-for-Sale and Held-to-Maturity at December 31, 1994:
<TABLE>
<CAPTION>
Investment Securities Available-for-Sale
------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
------------ ------------ ------------ ------------
(in thousands)
<S> <C> <C> <C> <C>
U.S. Treasury.................................... $ 505,540 $ 96 $ 592 $ 505,044
U.S. Government Agencies:
Mortgage-backed Securities..................... 2,655,673 4 160,195 2,495,482
Collateralized Mortgage Obligations............ 1,461,321 4,940 45,974 1,420,287
Other.......................................... 22,916 1,267 3 24,180
States and Political Subdivisions................ 76,586 33 363 76,256
Collateralized Mortgage Obligations(a)........... 111,351 76 936 110,491
Other............................................ 222,931 459 40,878 182,512
------------ ------------ ------------ ------------
Total........................................ $ 5,056,318 $ 6,875 $ 248,941 $ 4,814,252
============ ============ ============ ============
Investment Securities Held-to-Maturity
------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
------------ ------------ ------------ ------------
(in thousands)
U.S. Treasury.................................... $ 519,656 $ 225 $ 13,145 $ 506,736
U.S. Government Agencies:
Mortgage-backed Securities..................... 5,664,739 45,612 282,356 5,427,995
Other.......................................... 8,420 6 145 8,281
States and Political Subdivisions................ 1,415,398 46,182 23,626 1,437,954
Other............................................ 500 10 - 510
------------ ------------ ------------ ------------
Total........................................ $ 7,608,713 $ 92,035 $ 319,272 $ 7,381,476
============ ============ ============ ============
(a) All of the Collateralized Mortgage Obligations of private issuers have underlying collateral
consisting of obligations of U.S. Government Agencies.
</TABLE>
Note C - Allowance For Possible Credit Losses
- ---------------------------------------------
The Corporation has adopted SFAS No. 114, "Accounting by Creditors for
Impairment of a Loan," as amended by SFAS No. 118, "Accounting by Creditors
for Impairment of a Loan - Income Recognition and Disclosures," effective
January 1, 1995. Under these statements, a loan is considered impaired when
it is probable that all amounts due will not be collected according to the
contractual terms of the loan agreement. The statements require that an
impaired loan be measured based on the present value of the expected future
cash flows discounted at the loan's effective interest rate, the observable
market price of the loan or the fair value of the collateral if the loan is
collateral dependent.
Nonperforming Loans are defined by the Corporation to include loans on which
interest is not being accrued, and restructured loans where interest rates
have been renegotiated at below market rates. Nonperforming loans totaled
$166,746,000 at March 31, 1995, and $180,041,000 at January 1, 1995.
<PAGE>
Page 10
Notes to Consolidated Financial Statements (cont'd.)
For purposes of calculating an impairment reserve in accordance with SFAS No.
114, the Corporation considers all nonperforming loans as meeting the
statements' definition of impaired. Large balance nonperforming loans
(generally those with balances of $1 million or more) accounted for
$118,743,000, or 71 percent, of total nonperforming loans at March 31, 1995,
and $148,942,000, or 83 percent, at January 1, 1995, and were individually
evaluated to determine a reserve for impairment. The impairment reserve
included in the Allowance for Possible Credit Losses balances disclosed below
amounted to $1,721,000 at March 31, 1995, and $535,000 at January 1, 1995.
Other nonperforming loans were collectively evaluated for impairment, along
with the performing loan and lease portfolio.
The average balance of nonperforming loans was $169,383,000 for the three
months ended March 31, 1995. Interest income recognized during the time the
loans were impaired was $2,564,000 (of which $2,464,000 was recorded on a cash
basis).
The changes in the Allowance for Possible Credit Losses are summarized below:
Quarter Ended
March 31
-----------------------
1995 1994
---------- ----------
(in thousands)
Balance, Beginning of Period........ $ 435,051 $ 423,030
Provision........................ 20,096 15,460
Charge-offs...................... (19,239) (31,044)
Recoveries....................... 19,743 15,674
---------- ----------
Net (Charge-offs)Recoveries... 504 (15,370)
Acquisition and Other............ 2,506 290
---------- ----------
Balance, End of Period.............. $458,157 $423,410
========== ==========
Note D - Assets Pledged
- -----------------------
Assets, principally Investment Securities, carried at approximately
$6,587,596,000 were pledged at March 31, 1995, to secure public deposits
(including deposits of $44,206,000 of the Treasurer, State of Michigan),
repurchase agreements and for other purposes required by law.
Note E - Extraordinary Item
- ----------------------------
On March 15, 1994, an extraordinary item charge of $7,730,000 (net of income
taxes) was incurred, representing the premium paid and unamortized issuance
costs related to the Corporation's call and redemption of the $199,985,000
7.25% Convertible Subordinated Debentures Due 2006.
<PAGE>
Page 11
Note F - Other Commitments and Contingent Liabilities
- ------------------------------------------------------
In the normal course of business the Corporation and its subsidiaries have
various outstanding commitments and contingent liabilities, including
guarantees, commitments to extend credit, foreign exchange futures contracts,
etc., which are not reflected in the financial statements. Management does
not anticipate any material loss as a result of these transactions.
The Corporation is a defendant in various legal proceedings arising in the
normal course of business. In the opinion of management, based on the advice
of legal counsel, the ultimate resolution of these proceedings will not have
a material effect on the Corporation's financial position.
Outstanding standby letters of credit at March 31, 1995, totaled approximately
$2,126,000,000.
<PAGE>
Page 12
Item 2. Management's Discussion and Analysis of Financial Condition and
- ------- ----------------------------------------------------------------
Results of Operations.
----------------------
The following discussion and analysis supplements information contained in the
financial statements and related notes appearing in this report.
NBD Bancorp, Inc.
Financial Highlights
(in thousands except per share data)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
Operating Results Quarter Ended March 31
-----------------------------------
1995 1994 Change
---------- ---------- ---------
<S> <C> <C> <C>
Net Interest Income.......................................... $ 420,692 $ 381,260 10.3 %
Provision for Possible Credit Losses......................... 20,096 15,460 30.0
Non-Interest Income.......................................... 135,730 138,750 (2.2)
Non-Interest Expenses........................................ 323,471 322,319 0.4
---------- ----------
Income before Income Taxes................................... 212,855 182,231 16.8
Income Tax Expense........................................... 71,964 59,355 21.2
---------- ----------
Income before Extraordinary Item and Accounting Change....... 140,891 122,876 14.7
Extraordinary Item (Redemption of Debt)...................... - (7,730)
Cumulative Effect of Accounting Change (SFAS No. 112)........ - (7,885)
---------- ----------
Net Income................................................... $ 140,891 $ 107,261 31.4 %
- ---------------------------------------------------------------------------------------------------
Per Share:
Income before Extraordinary Item and
Accounting Change........................................ $ 0.88 $ 0.77 14.3 %
Net Income................................................. 0.88 0.67 31.3
Net Interest Margin.......................................... 4.02 % 4.31 %
- ---------------------------------------------------------------------------------------------------
Stock Data (per share)
Cash Dividends Declared...................................... $ 0.33 $ 0.30 10.0 %
Book Value (period end)...................................... 22.18 20.29 9.3
Market Value:
Period End................................................. 32 1/2 28 1/4
High....................................................... 32 7/8 30 3/4
Low........................................................ 27 3/8 27 1/4
Average Shares Outstanding................................... 159,464 161,099
- ---------------------------------------------------------------------------------------------------
Financial and Capital Ratios
Return on Average Shareholders' Equity:
Before Extraordinary Item and Accounting Change............ 16.12 % 14.79 %
After Extraordinary Item and Accounting Change............. 16.12 12.92
Return on Average Assets:
Before Extraordinary Item and Accounting Change............ 1.18 1.20
After Extraordinary Item and Accounting Change............. 1.18 1.05
Capital Ratios (period end):
Tier 1 Capital Ratio....................................... 8.20 9.14
Total Capital Ratio........................................ 12.14 12.94
Tier 1 Leverage Ratio...................................... 6.81 7.12
- ---------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Balance Sheet Data March 31 December 31 March 31
1995 1994 1994
------------ ------------ ------------
<S> <C> <C> <C>
Total Assets................................................. $47,755,844 $47,111,133 $42,932,669
Total Earning Assets......................................... 43,219,112 42,805,177 38,852,766
Total Loans and Leases....................................... 30,725,867 29,229,664 25,877,688
Total Goodwill............................................... 325,670 245,003 260,010
Total Deposits............................................... 31,560,699 33,229,441 30,175,616
Total Common Shareholders' Equity............................ 3,504,996 3,291,543 3,264,699
- ----------------------------------------------------------------------------------------------------------
Credit Quality March 31 December 31 March 31
1995 1994 1994
------------ ------------ ------------
Allowance for Possible Credit Losses......................... $ 458,157 $ 435,051 $ 423,410
Nonperforming Loans.......................................... 166,746 180,041 248,797
Other Real Estate Owned...................................... 28,334 29,376 35,583
Total Nonperforming Assets................................... 195,080 209,417 284,380
Net Loan Charge-offs(Recoveries) (quarter-ended)............. (504) 8,732 15,370
- ----------------------------------------------------------------------------------------------------------
Ratios:
Nonperforming Loans to Total Loans......................... 0.54 % 0.62 % 0.96 %
Allowance to Total Loans................................... 1.49 1.49 1.64
Allowance to Nonperforming Loans........................... 274.76 241.64 170.18
Net Loan Charge-offs(Recoveries) (annualized).............. (0.01) 0.12 0.24
- ----------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Page 13
SUMMARY OF OPERATIONS
- ---------------------
Net Income for the first quarter of 1995 totaled $140,891,000, or $.88 per
share. This was 15 percent higher than the $122,876,000, or $.77 per share,
earned before the effect of an extraordinary item and an accounting change in
the first quarter of 1994.
An extraordinary charge of $7,730,000 (net of income taxes), or five cents per
share, was incurred in the first quarter of 1994 relating to the redemption
on March 15, 1994, of the $199,985,000 7.25% Convertible Subordinated
Debentures due March 2006. Also, Financial Accounting Standard No. 112,
Employers' Accounting for Postemployment Benefits, was adopted as of January
1, 1994, which required a charge against earnings of $7,885,000 (net of income
taxes), or five cents per share. Net Income for the first quarter of 1994
after these charges was $107,261,000, or $.67 per share.
Results for the quarter ended March 31, 1995, include the $910 million asset
AmeriFed Financial Corp., which was acquired on January 9, 1995, and accounted
for as a purchase.
The Corporation's proposed acquisition of Deerbank Corporation, a thrift
holding company with $766 million in assets headquartered in Deerfield,
Illinois, is proceeding on schedule toward a mid-year closing.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
Table 1
Summary of Operations
(in thousands except per share data)
Quarter Ended
----------------------------------------------------------
March December September June March
1995 1994 1994 1994 1994
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Interest Income - Including Taxable
Equivalent Adjustment........................ $ 886,955 $ 828,739 $ 778,523 $ 719,742 $ 651,998
Interest Expense.............................. (451,396) (391,431) (348,286) (296,990) (253,919)
---------- ---------- ---------- ---------- ----------
Net Interest Income - Taxable Equivalent...... 435,559 437,308 430,237 422,752 398,079
Taxable Equivalent Adjustment................. (14,867) (14,979) (15,446) (16,364) (16,819)
---------- ---------- ---------- ---------- ----------
Net Interest Income........................... 420,692 422,329 414,791 406,388 381,260
Provision For Possible Credit Losses.......... (20,096) (20,086) (7,907) (8,579) (15,460)
Securities Gains(Losses)...................... 1,376 (3,514) 740 (85) 390
Other Non-Interest Income (Table 2)........... 134,354 139,785 135,857 134,033 138,360
---------- ---------- ---------- ---------- ----------
Total Non-Interest Income.................... 135,730 136,271 136,597 133,948 138,750
---------- ---------- ---------- ---------- ----------
Compensation.................................. (177,297) (183,495) (181,728) (178,762) (176,748)
Other Non-Interest Expenses (Table 3)......... (146,174) (143,655) (140,764) (153,547) (145,571)
---------- ---------- ---------- ---------- ----------
Total Non-Interest Expenses.................. (323,471) (327,150) (322,492) (332,309) (322,319)
---------- ---------- ---------- ---------- ----------
Income Before Taxes........................... 212,855 211,364 220,989 199,448 182,231
Applicable Taxes.............................. (71,964) (69,839) (73,335) (64,224) (59,355)
---------- ---------- ---------- ---------- ----------
Income before Extraordinary Item and
Cumulative Effect of Accounting Change....... 140,891 141,525 147,654 135,224 122,876
Extraordinary Item........................... - - - - (7,730)
Cumulative Effect of Accounting Change....... - - - - (7,885)
---------- ---------- ---------- ---------- ----------
Net Income.................................... $ 140,891 $ 141,525 $ 147,654 $ 135,224 $ 107,261
========== ========== ========== ========== ==========
Income Per Share:
Income before Extraordinary Item and
Accounting Change.......................... $ 0.88 $ 0.91 $ 0.93 $ 0.84 $ 0.77
Net Income................................... $ 0.88 $ 0.91 $ 0.93 $ 0.84 $ 0.67
Average Shares Outstanding.................... 159,464 156,279 157,667 160,322 161,099
Average Earning Assets (in millions).......... $ 43,550 $ 41,906 $ 41,242 $ 39,540 $ 37,127
Net Interest Margin........................... 4.02 % 4.16 % 4.16 % 4.28 % 4.31 %
Expense Ratio................................. 56.76 % 56.69 % 56.97 % 59.68 % 60.08 %
</TABLE>
<PAGE>
Page 14
Net Interest Income
Taxable equivalent net interest income in the first quarter of 1995 was $435.6
million, an increase of $37.5 million, or 9.4 percent, compared with the first
quarter of last year. The increase was attributable to an increase of $6.4
billion, or 17.3 percent, in average earning assets, partially offset by a
lower net interest margin, which decreased 29 basis points from 4.31 percent
in the first quarter of 1994 to 4.02 percent in the first quarter of 1995.
Further detail on average balances, yields and rates is shown in Table 7.
Provision for Possible Credit Losses
The Provision for Possible Credit Losses in the first quarter of 1995 amounted
to $20.1 million, an increase from the $15.5 million in the same period one
year ago, reflecting increased loan and lease volume. A comprehensive
analysis of the related Allowance for Possible Credit Losses, charge-offs,
nonperforming assets and ratios is presented in Table 5.
Securities Transactions
Securities gains or losses were insignificant over the last five quarters.
The securities losses realized in the fourth quarter of 1994 were primarily
attributable to the sale of U.S. Treasury securities from the Available-for-
Sale portfolio.
Other Non-Interest Income
Non-Interest Income (excluding securities gains or losses) amounted to $134.4
million in the first quarter of 1995 versus $138.4 million in the comparable
period of 1994, a decrease of $4.0 million, or 2.9 percent. Table 2 and its
related discussion provide additional details of the composition of Other
Non-Interest Income.
Compensation
In the first quarter of 1995, compensation expense was $177.3 million, an
increase of $0.5 million compared with the first quarter of 1994. Salaries
increased $1.6 million, or 1.2 percent, the net result of a 4.5 percent
average merit increase partially offset by a 2.8 percent decrease in average
full-time equivalent employment. Benefits expense decreased $1.1 million, or
2.5 percent.
Other Non-Interest Expenses
Non-Interest Expenses (excluding compensation expense) totaled $146.2 million
for the first quarter of 1995 compared with $145.6 million for the same
quarter one year ago, an increase of 0.4 percent. Table 3 provides detail on
the components of Other Non-Interest Expenses.
Income Taxes
Income tax expense was $72.0 million in the first quarter of 1995 versus $59.4
million in the same quarter last year. The Corporation's effective tax rate,
when computed after adding the taxable equivalent adjustment to both pre-tax
income and income tax expense, was 38 percent for the first quarter of both
1995 and 1994.
<PAGE>
Page 15
OTHER NON-INTEREST INCOME
- -------------------------
The decrease of $4.0 million in Other Non-Interest Income from the first
quarter of 1994 to the most recent quarter was largely attributable to a
decrease in Profit on Mortgage Sales due to lower residential mortgage
originations and related sales activity.
<TABLE>
<CAPTION>
Table 2
Other Non-Interest Income
(in thousands)
Quarter Ended
-------------------------------------------------
March Dec. Sept. June March
1995 1994 1994 1994 1994
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Deposit Service Charges................. $ 40,107 $ 39,475 $ 40,752 $ 38,790 $ 40,979
Trust Income............................ 38,511 40,042 39,400 39,803 38,110
Credit Card Fees........................ 9,516 10,446 10,052 9,691 8,377
Data Processing Fees.................... 7,979 8,214 8,416 7,830 7,214
Letter of Credit Fees................... 5,635 7,032 5,583 5,586 4,692
Other Domestic and International Fees... 4,649 5,302 4,715 4,643 5,469
Insurance Premiums and Commissions...... 4,187 3,255 3,552 3,886 4,341
Foreign Exchange and Translation........ 4,105 4,174 3,219 3,138 2,965
Mortgage Loan Servicing................. 4,101 4,272 4,451 4,581 4,544
Retail Banking Fees..................... 3,550 3,172 3,583 3,380 3,299
Rental Income........................... 2,466 2,575 2,574 2,630 2,656
Mutual Fund and Annuity Product Fees.... 2,083 2,038 1,742 1,506 1,742
OREO Gains.............................. 940 1,497 1,172 1,892 1,823
Securities Trading and Underwriting..... 585 1,433 1,278 1,434 1,486
Profit(Loss) on Mortgage Sales.......... (516) (636) 112 (193) 3,863
Other................................... 6,456 7,494 5,256 5,436 6,800
--------- --------- --------- --------- ---------
Total Other Non-Interest Income...... $134,354 $139,785 $135,857 $134,033 $138,360
========= ========= ========= ========= =========
</TABLE>
<PAGE>
Page 16
OTHER NON-INTEREST EXPENSES
- ---------------------------
Non-Interest Expenses (excluding compensation expense) were up only $0.6
million from the year earlier period. The expense ratio improved to 56.76
percent from 60.08 percent over the same period.
<TABLE>
<CAPTION>
Table 3
Other Non-Interest Expenses
(in thousands)
Quarter Ended
-------------------------------------------------
March Dec. Sept. June March
1995 1994 1994 1994 1994
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Occupancy.................................. $ 30,407 $ 27,962 $ 29,242 $ 29,968 $ 30,081
Equipment.................................. 23,214 22,197 21,842 23,597 21,954
FDIC & Other Regulatory Assessments........ 16,607 16,616 16,631 16,741 16,675
Telephone.................................. 8,173 7,379 7,687 9,214 6,852
Amortization of Intangibles................ 7,504 6,290 6,415 6,577 6,524
Professional Services...................... 6,851 7,033 6,449 7,567 6,433
Operating and Other Taxes.................. 6,581 6,056 5,699 6,016 6,866
Purchased Services......................... 6,172 6,518 7,255 7,577 7,138
Marketing.................................. 5,656 6,595 5,351 5,995 3,946
Postage.................................... 5,225 4,680 5,168 4,719 5,274
Stationery and Supplies.................... 4,123 3,844 3,803 4,269 4,716
Public Relations........................... 3,782 3,987 2,968 3,082 2,586
Travel and Entertainment................... 3,764 4,599 3,913 4,025 3,655
Loan and Credit Charges.................... 2,075 2,362 1,841 2,811 2,067
Armored Carrier and Cartage................ 1,970 1,918 2,084 2,198 1,819
Federal Reserve Service Charges............ 1,525 1,596 1,913 2,060 1,958
Other Insurance............................ 892 804 938 961 913
OREO Expense............................... 466 822 950 1,440 970
Other...................................... 11,187 12,397 10,615 14,730 15,144
--------- --------- --------- --------- ---------
Total Other Non-Interest Expenses....... $146,174 $143,655 $140,764 $153,547 $145,571
========= ========= ========= ========= =========
</TABLE>
<PAGE>
Page 17
FINANCIAL CONDITION AND CAPITAL ACCOUNTS
- ----------------------------------------
The Corporation's consolidated balance sheet is presented on pages 1 and 2.
Total assets at March 31, 1995, were $47.8 billion, an increase of $0.6
billion since year-end 1994, principally the net result of a decrease of $0.8
billion in Investment Securities and an increase of $1.5 billion in Loans and
Leases.
The $0.8 billion decrease in Investment Securities since year-end 1994 was
primarily due to sales of mortgage-backed U.S. Agency Securities from the
Available-for-Sale portfolio.
The increase in Total Loans and Leases of $1.5 billion since December 31,
1994, was mainly attributable to commercial loan growth of $0.7 billion and
an increase in residential mortgages of $0.6 billion. The increase in
residential mortgages related mostly to the AmeriFed acquisition.
Investment property term loan commitments amounted to $1.9 billion, of which
$1.6 billion were outstanding at March 31, 1995, and $45.2 million were
classified as nonperforming.
As of March 31, 1995, real estate construction loan commitments totaled $1.5
billion, of which $856.8 million were outstanding and $10.3 million were
classified as nonperforming.
The $0.4 billion increase in Total Liabilities since year-end 1994 was
primarily the result of a $2.0 billion increase in Short-Term Borrowings and
Long-Term Debt, partially offset by a $1.7 billion decrease in deposit
liabilities.
The decrease of $1.7 billion in total deposits was comprised of a decrease of
$2.9 billion in Foreign Office Deposits partially offset by an increase of
$1.5 billion in Time Deposits. Demand, Savings, and Money Market Accounts
decreased $94 million, $175 million and $20 million, respectively. The
increase of $1.5 billion in Time Deposits consisted of a $1.1 billion increase
in retail deposits and a $0.4 billion increase in large certificates of
deposit. The increase in retail deposits continued the trend of the latter
part of last year caused by the competitive rate structure instituted by the
Corporation's banks in 1994. The $2.9 billion decrease in Foreign Office
Deposits occurred concurrent with the increases of $1.8 billion in Short-Term
Borrowings and $0.4 billion in large certificates of deposit, all of which are
alternative sources of short-term funding.
The increase of $1.8 billion in Short-Term Borrowings mostly reflects
increases in Federal Funds purchased, while the increase in Long-Term Debt of
$0.2 billion reflects issuances of bank notes since year-end 1994.
Shareholders' Equity totaled $3.5 billion at March 31, 1995, an increase of
$213 million since year-end 1994. In addition to a net increase of $87
million in Retained Earnings, the increase was also caused by a positive
change in fair value of $76 million in Investment Securities Available-for-
Sale, and a net decrease of $65 million in the amount of Treasury Stock held.
<PAGE>
Page 18
ANALYSIS OF CAPITAL
- -------------------
The table that follows presents the components of Tier I Capital and Total
Capital. Both Tier I and Total capital ratios exceed the regulatory minimum
requirements of 4.0 percent and 8.0 percent, respectively. The Tier I
Leverage Ratio, also presented below, exceeds the regulatory minimum of 3.0
percent.
<TABLE>
<CAPTION>
Table 4
Analysis of Capital
(dollars in thousands)
March 31 Dec. 31 Sept. 30 June 30 March 31
1995 1994 1994 1994 1994
----------- ----------- ----------- ----------- -----------
Capital Components:
Tier 1 Capital:
<S> <C> <C> <C> <C> <C>
Common Shareholders' Equity........ $3,504,996 $3,291,543 $3,254,587 $3,250,143 $3,264,699
Intangible Assets and Other
Adjustments................... (269,401) (111,670) (159,834) (187,852) (224,383)
----------- ----------- ----------- ----------- -----------
Total Tier 1 Capital............. $3,235,595 $3,179,873 $3,094,753 $3,062,291 $3,040,316
=========== =========== =========== =========== ===========
Total Capital:
Common Shareholders' Equity........ $3,504,996 $3,291,543 $3,254,587 $3,250,143 $3,264,699
Qualifying Allowance for Possible
Credit Losses................. 458,157 435,051 423,700 423,624 416,050
Qualifying Long-Term Debt.......... 1,102,000 1,102,000 852,000 852,000 854,000
Intangible Assets and Other
Adjustments................... (276,828) (117,021) (164,006) (191,898) (227,709)
----------- ----------- ----------- ----------- -----------
Total Capital.................... $4,788,325 $4,711,573 $4,366,281 $4,333,869 $4,307,040
=========== =========== =========== =========== ===========
Ratios (End of Period):
Risk-Based Capital Ratios:
Tier 1 Capital Ratio............... 8.20 % 8.44 % 8.63 % 8.85 % 9.14 %
Total Capital Ratio................ 12.14 % 12.50 % 12.18 % 12.53 % 12.94 %
Tier 1 Leverage Ratio............... 6.81 % 6.77 % 6.82 % 6.80 % 7.12 %
</TABLE>
<PAGE>
Page 19
ALLOWANCE FOR POSSIBLE CREDIT LOSSES
- ------------------------------------
An analysis of the changes in the Allowance for Possible Credit Losses and
related credit quality data is presented below. The Allowance for Possible
Credit Losses at March 31, 1995, of $458.2 million was equal to 1.49 percent
of total loans and leases, the same as the percentage at December 31, 1994,
and marginally below the 1.64 percent at March 31, 1994. While the Allowance
has increased over the past year, the amount of nonperforming loans has
declined over the same period, generating an improvement in the Allowance as
a percent of nonperforming loans and leases to 274.76 percent as of March 31,
1995, compared with 241.64 percent at year-end 1994 and 170.18 percent at
March 31, 1994.
The Corporation realized net recoveries of $0.5 million for the first quarter
of 1995, compared with net charge-offs of $15.4 million and an annualized net
charge-off ratio of 0.24 percent in the comparable period of 1994.
Nonperforming loans and leases totaled $166.7 million as of March 31, 1995,
compared with $180.0 million at December 31, 1994, and $248.8 million at the
end of the first quarter of 1994.
<TABLE>
<CAPTION>
Table 5
(dollars in thousands)
Allowance for Possible Credit Losses
Quarter Ended
----------- ----------- ----------- ----------- -----------
March December September June March
1995 1994 1994 1994 1994
----------- ----------- ----------- ----------- -----------
Summary of Transactions:
<S> <C> <C> <C> <C> <C>
Balance at Beginning of Period............... $ 435,051 $ 423,700 $ 423,624 $ 423,410 $ 423,030
Provision for Credit Losses.................. 20,096 20,086 7,907 8,579 15,460
Acquisition and Other........................ 2,506 (3) 30 138 290
Charge-Offs.................................. (19,239) (33,706) (25,395) (30,881) (31,044)
Recoveries................................... 19,743 24,974 17,534 22,378 15,674
----------- ----------- ----------- ----------- -----------
Net (Charge-Offs)Recoveries............... 504 (8,732) (7,861) (8,503) (15,370)
----------- ----------- ----------- ----------- -----------
Balance at End of Period..................... $ 458,157 $ 435,051 $ 423,700 $ 423,624 $ 423,410
=========== =========== =========== =========== ===========
Net Loan (Charge-Offs)Recoveries by Category:
Commercial and Foreign....................... $ 4,583 $ 806 $ (2,397) $ (3,709) $ (9,919)
Real Estate Construction..................... 2,142 765 758 (243) 904
Residential Mortgage......................... (11) (226) (60) (35) (175)
Consumer..................................... (7,117) (9,547) (6,256) (4,400) (5,680)
Lease Financing.............................. 907 (530) 94 (116) (500)
----------- ----------- ----------- ----------- -----------
Total Net (Charge-Offs)Recoveries......... $ 504 $ (8,732) $ (7,861) $ (8,503) $ (15,370)
=========== =========== =========== =========== ===========
Net Charge-Off(Recovery)
Ratio (Annualized)........................ (0.01)% 0.12% 0.12% 0.13% 0.24%
Allowance for Possible Credit Losses as a Percent of:
Total Loans and Leases.................... 1.49% 1.49% 1.52% 1.58% 1.64%
Nonperforming Loans and
Leases............................... 274.76% 241.64% 238.64% 187.80% 170.18%
Analysis of Nonperforming Assets
March 31 Dec. 31 Sept. 30 June 30 March 31
1995 1994 1994 1994 1994
---------- ---------- ---------- ---------- ----------
Loans:
Non-Accrual............................... $ 147,760 $ 157,141 $ 177,491 $ 225,495 $ 248,690
Restructured.............................. 18,986 22,900 56 82 107
----------- ----------- ----------- ----------- -----------
Total Loans............................. 166,746 180,041 177,547 225,577 248,797
Other Real Estate Owned...................... 28,334 29,376 27,962 26,263 35,583
----------- ----------- ----------- ----------- -----------
Total Nonperforming Assets.............. $ 195,080 $ 209,417 $ 205,509 $ 251,840 $ 284,380
=========== =========== =========== =========== ===========
Nonperforming Assets as a Percent of:
Total Loans and Leases.................... 0.63% 0.72% 0.74% 0.94% 1.10%
Allowance for Possible
Credit Losses........................... 42.58% 48.14% 48.50% 59.45% 67.16%
Loans 90 Days or More Past Due
and Still Accruing Interest............... $ 42,236 $ 44,750 $ 45,984 $ 40,627 $ 36,950
</TABLE>
<PAGE>
Page 20
ORGANIZATIONAL PERFORMANCE
- ---------------------------
Table 6 presents performance data and other information organized by the three
major geographical banking markets serviced by the Corporation.
<TABLE>
<CAPTION>
Table 6
Organizational Performance
(dollars in thousands)
For the Quarter Ended March 31, 1995 Michigan Indiana Illinois All Other Total
- ------------------------------------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net Income................................. $ 90,510 $ 32,559 $ 18,658 $ (836) $ 140,891
Average Earning Assets ($ millions)........ 28,796 9,383 5,730 (359) 43,550
Return on Assets........................... 1.16 % 1.26 % 1.20 % - 1.18 %
Full-Time Equivalent Employees............. 8,512 4,856 2,229 2,402 17,999
For the Quarter Ended December 31, 1994
- -------------------------------------------
Net Income................................. $ 102,085 $ 24,659 $ 17,117 $ (2,336) $ 141,525
Average Earning Assets ($ millions)........ 28,334 9,241 4,878 (547) 41,906
Return on Assets........................... 1.32 % 0.95 % 1.30 % - 1.23 %
Full-Time Equivalent Employees............. 8,404 5,011 1,897 2,480 17,792
For the Quarter Ended September 30, 1994
- -------------------------------------------
Net Income................................. $ 101,425 $ 28,593 $ 18,372 $ (736) $ 147,654
Average Earning Assets ($ millions)........ 27,814 9,182 4,773 (527) 41,242
Return on Assets........................... 1.34 % 1.12 % 1.43 % - 1.31 %
Full-Time Equivalent Employees............. 8,551 5,157 1,942 2,576 18,226
For the Quarter Ended June 30, 1994
- -------------------------------------------
Net Income................................. $ 95,056 $ 24,271 $ 17,390 $ (1,493) $ 135,224
Average Earning Assets ($ millions)........ 25,986 9,113 4,459 (18) 39,540
Return on Assets........................... 1.34 % 0.96 % 1.45 % - 1.24 %
Full-Time Equivalent Employees............. 8,580 5,224 1,963 2,630 18,397
For the Quarter Ended March 31, 1994
- -------------------------------------------
Income before Accounting Changes........... $ 85,297 $ 22,967 $ 15,051 $ (439) $ 122,876
Net Income................................. 79,855 22,128 14,547 (9,269) 107,261
Average Earning Assets ($ millions)........ 23,535 8,927 4,357 308 37,127
Return on Assets (Before Accounting Changes) 1.32 % 0.92 % 1.28 % - 1.20 %
Full-Time Equivalent Employees............. 8,583 5,310 1,955 2,660 18,508
</TABLE>
<PAGE>
Page 21
Average Balances, Yields and Rates
The following table presents average asset and liability balances and related
yields and rates for the latest five quarters.
<TABLE>
<CAPTION>
Table 7
Average Balances, Yields and Rates
(Yields are on a fully taxable equivalent basis.)
(dollars in millions)
First Quarter Fourth Quarter Third Quarter Second Quarter First Quarter
1995 1994 1994 1994 1994
--------------- --------------- --------------- --------------- ---------------
Average Yield/ Average Yield/ Average Yield/ Average Yield/ Average Yield/
Balance Rate Balance Rate Balance Rate Balance Rate Balance Rate
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Assets:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-Bearing Deposits....$ 711 6.43 % $ 624 5.40 % $ 682 5.37 % $ 655 4.90 % $ 645 4.40 %
Federal Funds Sold and
Resale Agreements.......... 280 5.95 219 5.39 245 4.62 188 4.09 114 3.37
Trading Account Securities... 122 5.96 185 5.44 159 4.80 131 4.67 92 3.88
Investment Securities:
U.S. Treasury............... 1,083 6.69 1,095 5.87 1,231 5.55 1,615 5.33 1,583 5.30
U.S. Government Agencies.... 9,472 6.86 9,706 6.76 9,938 6.56 8,706 6.47 7,565 6.44
States and Political
Subdivisions.............. 1,468 9.14 1,498 9.37 1,459 9.44 1,476 8.78 1,492 8.21
Other....................... 318 7.35 321 6.64 332 5.98 346 3.87 389 4.72
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total Investment Securities.. 12,341 7.13 12,620 6.99 12,960 6.77 12,143 6.52 11,029 6.45
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Loans and Leases:
Commercial.................. 15,803 8.92 15,014 8.41 14,549 7.88 14,378 7.51 13,673 6.97
Real Estate Construction.... 855 9.42 801 8.89 763 7.88 755 7.60 754 7.19
Residential Mortgage........ 3,891 7.79 3,293 7.61 3,084 7.55 2,906 7.53 2,759 7.46
Consumer.................... 7,712 8.98 7,537 8.70 7,313 8.59 6,981 8.51 6,751 8.61
Lease Financing............. 368 9.91 343 9.74 314 9.52 291 10.14 284 10.25
Foreign..................... 1,467 7.23 1,270 7.04 1,173 5.89 1,112 5.93 1,026 5.70
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total Loans and Leases....... 30,096 8.73 28,258 8.36 27,196 7.97 26,423 7.74 25,247 7.46
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total Earning Assets......... 43,550 8.22 % 41,906 7.87 % 41,242 7.52 % 39,540 7.29 % 37,127 7.08 %
======= ======= ======= ======= =======
Cash and Due From Banks...... 2,327 2,509 2,328 2,365 2,285
Other Assets................. 2,135 2,064 2,074 2,031 1,931
Less Allowance for Possible
Credit Losses.............. (452) (432) (434) (436) (433)
------- ------- ------- ------- -------
Total Assets.................$47,560 $46,047 $45,210 $43,500 $40,910
======= ======= ======= ======= =======
Liabilities and Shareholders'
Equity:
Interest-Bearing Deposits:
Savings...................$ 7,588 2.73 % $ 7,597 2.46 % $ 7,797 2.34 % $ 7,933 2.29 % $ 7,854 2.29 %
Money Market Accounts..... 4,971 4.35 5,048 3.71 5,208 3.22 5,345 2.79 5,516 2.68
Time...................... 10,974 5.37 9,915 4.86 9,205 4.48 8,908 4.24 7,796 4.30
Foreign Office............ 2,864 6.05 2,963 5.22 2,981 4.71 2,803 4.37 2,035 3.96
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total Interest-Bearing
Deposits................... 26,397 4.49 25,523 3.96 25,191 3.59 24,989 3.33 23,201 3.21
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Short-Term Borrowings........ 7,833 5.99 7,404 5.27 7,182 4.67 6,331 3.95 5,647 3.26
Long-Term Debt............... 2,624 6.57 2,420 6.33 2,375 6.08 1,821 6.02 1,615 6.20
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total Interest-Bearing
Liabilities................ 36,854 4.96 % 35,347 4.39 % 34,748 3.98 % 33,141 3.59 % 30,463 3.37 %
======= ======= ======= ======= =======
Demand Deposits.............. 6,293 6,472 6,297 6,232 6,217
Other Liabilities............ 917 915 877 827 909
Shareholders' Equity......... 3,496 3,313 3,288 3,300 3,321
------- ------- ------- ------- -------
Total Liabilities and
Shareholders' Equity.......$47,560 $46,047 $45,210 $43,500 $40,910
======= ======= ======= ======= =======
Interest Rate Spread......... 3.26 % 3.48 % 3.54 % 3.70 % 3.71 %
======= ======= ======= ======= =======
Net Interest Margin.......... 4.02 % 4.16 % 4.16 % 4.28 % 4.31 %
======= ======= ======= ======= =======
The FTE adjustments are computed using a combined federal and state income tax rate of 36.4% in 1995 and 1994.
The combined amounts for Investment Securities Available-for-Sale and Held-to-Maturity are based on their respective
carrying values.
</TABLE>
<PAGE>
Page 22
RATE SENSITIVITY ANALYSIS
- -------------------------
The following table summarizes the Rate Sensitivity of Earning Assets and
Funding Sources as of March 31, 1995. Balances are distributed to future
calendar periods based primarily on contractual interest 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 current interest rate levels may have on
historical 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.
The net difference between the amount of earning assets and funding sources
distributed to a calendar period is typically referred to as either the
"asset/liability funding gap" or the "rate sensitivity position." The
magnitude of the funding 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.
To mitigate the risk to earnings of changes in interest rates, it is the
Corporation's policy that the cumulative funding gap out to one year may not
exceed 10 percent of total earning assets. A funding gap in excess of 5
percent requires Board of Directors approval. In addition, the Corporation
has an "interest rate shock" policy which specifies that in the event of an
immediate change in interest rates of 3 percentage points, the existing
funding gap would not cause the average interest rate margin over the ensuing
year to decline by more than 15 percent.
<TABLE>
<CAPTION>
Rate Sensitivity of Earning Assets and Funding Sources
(in millions)
As of March 31, 1995
-------------------------------------------------------------------
1-30 31-90 91-180 181-365 1-5 Over 5
Days Days Days Days Years Years Total
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Interest-Bearing Deposits...................... $ 654 $ - $ - $ - $ - $ - $ 654
Federal Funds Sold and Resale Agreements....... 122 - - - - - 122
Trading Account Securities..................... 125 - - - - - 125
Investment Securities.......................... 1,577 374 728 2,020 3,515 3,378 11,592
Commercial Loans............................... 10,685 1,819 535 532 2,135 526 16,232
Real Estate Construction Loans................. 637 53 24 21 100 22 857
Residential Mortgage Loans..................... 123 194 363 738 1,603 941 3,962
Mortgage Loans Held For Sale................... 21 - - - - - 21
Consumer Loans................................. 2,043 712 552 972 3,097 375 7,751
Lease Financing................................ 11 22 31 58 240 18 380
Foreign Loans.................................. 1,451 40 19 14 - - 1,524
------- ------- ------- ------- ------- ------- -------
Total Earning Assets................. $ 17,449 $ 3,214 $ 2,252 $ 4,355 $ 10,690 $ 5,260 $ 43,220
------- ------- ------- ------- ------- ------- -------
Savings Deposits............................... $ 4,004 $ - $ - $ - $ 3,501 $ - $ 7,505
Money Market Accounts.......................... 4,328 - - - 612 - 4,940
Time Deposits.................................. 1,155 1,525 1,931 2,143 2,718 94 9,566
Foreign Office Deposits........................ 2,638 125 150 - - - 2,913
Short-Term Borrowings.......................... 5,941 1,338 1,328 209 113 - 8,929
Long-Term Debt................................. - 162 1 102 1,437 1,001 2,703
Non-Interest-Bearing Liabilities and Equity
Capital..................................... 863 - - - 3,136 2,665 6,664
------- ------- ------- ------- ------- ------- -------
Total Sources of Funding............. $ 18,929 $ 3,150 $ 3,410 $ 2,454 $ 11,517 $ 3,760 $ 43,220
------- ------- ------- ------- ------- ------- -------
Asset(Liability) Funding Gap................... $ (1,480) $ 64 $ (1,158) $ 1,901 $ (827) $ 1,500 $ -
------- ------- ------- ------- ------- ------- -------
Net Interest Rate Swap Position................ $ 277 $ 1,068 $ (122) $ (372) $ (1,047) $ 196 $ -
------- ------- ------- ------- ------- ------- -------
Net Asset(Liability) Funding Gap............... $ (1,203) $ 1,132 $ (1,280) $ 1,529 $ (1,874) $ 1,696 $ -
------- ------- ------- ------- ------- ------- -------
Cumulative Net Asset(Liability) Funding Gap.... $ (1,203) $ (71) $ (1,351) $ 178 $ (1,696) $ - $ -
======= ======= ======= ======= ======= ======= =======
</TABLE>
<PAGE>
Page 23
It can be seen from the table that management's assumptions regarding the
repricing of indeterminate maturity liabilities (e.g., savings deposits) and
the reaction of non-interest bearing liabilities (primarily net demand
deposits) to rate changes has a significant bearing on the stated funding gap
in a given period.
To more closely monitor the earnings risk of interest rate changes, the
Corporation regularly performs simulation analyses of the effect that specific
interest rate changes would have on net interest income and net interest
margin. Utilizing March 31, 1995, data shown in the preceding table, a
simulation based on interest rates rising by 1 percentage point, in increments
of 25 basis points, over a four-month period indicates that average interest
margin for the 12 months subsequent to March 31, 1995, would be only 1 basis
point lower than if rates were unchanged. A simulation based on interest
rates corresponding to the March 31, 1995, forward yield curve indicates that
the margin would likewise decrease by 1 basis point in comparison to a static
rate environment. A "shock" analysis, calculated on the basis of an immediate
3 percentage point increase in rates, would cause the average interest margin
for the following 12 months to decline by an amount significantly less than
the policy limit of 15 percent.
The Corporation utilizes interest rate swap contracts to alter the funding
gap, or interest sensitivity, on the balance sheet. At March 31, 1995, there
were $2.2 billion notional amount of interest rate swap contracts outstanding
for rate management purposes, of which $1.8 billion notional amount had terms
whereby the Corporation was paying a fixed rate of interest and receiving a
variable rate. The gross unrealized gains on these swaps totaled $11.7
million and gross unrealized losses amounted to $12.9 million, resulting in
a net unrealized loss of $1.2 million as of March 31, 1995. The rate
management swaps reduced net interest income by $3.6 million, or 3 basis
points, in the first quarter of 1995 and by $12.6 million, or 14 basis points,
in the comparable period of 1994. Below is a table summarizing the activity
in the rate management swap portfolio for the first three months of 1995.
Rate Management Swaps
(in millions)
Notional Amount:
As of January 1, 1995...... $1,895
Additions............ 555
Maturities........... 204
-------
As of March 31, 1995....... $2,246
=======
In addition, $1.5 billion notional amount of interest rate swap contracts used
for customer accommodation and other purposes, unrelated to the funding of
specific earning assets or interest-bearing liabilities of the Corporation,
was outstanding as of March 31, 1995. In contrast to rate management swaps,
where only realized gains and losses in value are recorded, unrealized
valuation changes for customer accommodation and other swap contracts are
recognized and recorded currently in Non-Interest Income. As of March 31,
1995, the gross fair value asset related to these swaps totaled $26.9 million
and the gross fair value liability amounted to $26.6 million. Below is a
table summarizing activity in the portfolio of swaps used for customer
accommodation and other purposes for the first three months of 1995.
Customer Accommodation and Other Swaps
(in millions)
Notional Amount:
As of January 1, 1995...... $1,667
Additions............ 56
Maturities........... 232
-------
As of March 31, 1995....... $1,491
=======
<PAGE>
Page 24
INTERNATIONAL BANKING
- ---------------------
At March 31, 1995, the Corporation had total foreign cross-border outstandings
of $0.9 billion. Foreign outstandings consist primarily of interest-bearing
deposits, bankers acceptances, federal funds sold, and loans denominated in
dollars or other non-local currency. Assets denominated in the local currency
are included to the extent they are not hedged or are not funded by local
borrowings. An item is classified as either foreign or domestic based on the
domicile of the party ultimately responsible for payment.
At March 31, 1995, the Corporation had no foreign outstandings to any
individual country which exceeded 0.75 percent of total assets. However,
foreign cross-border outstandings at March 31, 1995, were $36.3 million
(excluding $109.3 million par value of obligations collateralized by U. S.
Treasury securities) for all countries that the Corporation considers to be
experiencing severe economic and liquidity problems. Of such outstandings,
none were nonperforming. No special reserve was required to be established
under the International Lending Supervision Act of 1983.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
- ------- ---------------------------------
(a) Exhibits
(11) Earnings Per Share Computation
(27) Financial Data Schedule
(b) Reports on Form 8-K
None.
<PAGE>
Page 25
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NBD BANCORP, INC.
-----------------
(Registrant)
By: /s/ Philip S. Jones
-------------------
Philip S. Jones
Executive Vice President,
Treasurer and
Chief Financial Officer
By: /s/ Gerald K. Hanson
---------------------
Gerald K. Hanson
Senior Vice President and
Comptroller
May 9, 1995
Exhibit (11)
NBD Bancorp, Inc. Consolidated Earnings Per Share Computation
(in thousands except per share data)
<TABLE>
CAPTION>
Quarter Ended
March 31
-----------------------
1995 1994
---------- ----------
<S> <C> <C>
Primary:
- --------
Net Income..................................... $ 140,891 $ 107,261
========== ==========
Average Shares Outstanding..................... 159,156 160,762
Adjustment:
Shares Applicable to Common Stock Options.... 308 337
---------- ----------
Shares Applicable to Primary Earnings.......... 159,464 161,099
========== ==========
Fully Diluted:
- -------------
Net Income..................................... $ 140,891 $ 107,261
Adjustment:
Interest on 7.25% Convertible Debentures..... - 3,052
Tax Effect on Above.......................... - (1,068)
---------- ----------
Net Adjustment............................... - 1,984
---------- ----------
Adjusted Net Income Applicable
to Common Stock.............................. $ 140,891 $ 109,245
========== ==========
Average Shares Outstanding..................... 159,156 160,762
Adjustment:
Shares Applicable to Convertible Debentures.. - 5,336
Shares Applicable to Common Stock Options.... 416 337
---------- ----------
Shares Applicable to Fully Diluted Earnings.... 159,572 166,435
========== ==========
Per Share Data:
- ---------------
Primary-Net Income per Share of Common Stock..... $ 0.88 $ 0.67
========== ==========
Fully Diluted-Net Income per
Share of Common Stock.......................... $ 0.88 $ 0.66
========== ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 2,788,541
<INT-BEARING-DEPOSITS> 653,945
<FED-FUNDS-SOLD> 121,625
<TRADING-ASSETS> 125,362
<INVESTMENTS-HELD-FOR-SALE> 4,250,057
<INVESTMENTS-CARRYING> 7,342,256
<INVESTMENTS-MARKET> 7,343,626
<LOANS> 30,725,867
<ALLOWANCE> 458,157
<TOTAL-ASSETS> 47,755,844
<DEPOSITS> 31,560,699
<SHORT-TERM> 8,928,829
<LIABILITIES-OTHER> 860,646
<LONG-TERM> 2,703,335
<COMMON> 160,833
0
0
<OTHER-SE> 3,344,113
<TOTAL-LIABILITIES-AND-EQUITY> 47,755,844
<INTEREST-LOAN> 647,220
<INTEREST-INVEST> 207,695
<INTEREST-OTHER> 17,173
<INTEREST-TOTAL> 872,088
<INTEREST-DEPOSIT> 292,575
<INTEREST-EXPENSE> 451,396
<INTEREST-INCOME-NET> 420,692
<LOAN-LOSSES> 20,096
<SECURITIES-GAINS> 1,376
<EXPENSE-OTHER> 323,471
<INCOME-PRETAX> 212,855
<INCOME-PRE-EXTRAORDINARY> 140,891
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 140,891
<EPS-PRIMARY> 0.88
<EPS-DILUTED> 0.88
<YIELD-ACTUAL> 4.02
<LOANS-NON> 147,760
<LOANS-PAST> 42,236
<LOANS-TROUBLED> 22,900
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 435,051
<CHARGE-OFFS> 19,239
<RECOVERIES> 19,743
<ALLOWANCE-CLOSE> 458,157
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 458,157
</TABLE>
