<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
NOVEMBER 14, 1995
Date of Report (Date of earliest event reported)
NBD BANCORP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 1-7127 38-1984850
-------------------------- ------------- -----------------
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
611 WOODWARD AVENUE, DETROIT, MICHIGAN 48226
Registrant's telephone number, including area code : (313) 225-1000
<PAGE> 2
Item 5. Other Events
Reference is made to the Current Report on Form 8-K filed by the Registrant on
July 19, 1995, announcing the signing of a definitive agreement pursuant to
which First Chicago Corporation ("First Chicago"), a $72 billion-asset bank
holding company headquartered in Chicago, Illinois, would merge with and into
NBD Bancorp, Inc., and to the Current Reports on Form 8-K filed by the
registrant on July 21, 1995 and August 15, 1995, in which was filed certain
First Chicago historical financial information and certain pro forma financial
information reflecting the proposed merger.
Item 7. Financial Statements and Exhibits
The following documents are filed as a part of this Report:
(a) Financial Statements of Business Acquired
The following financial statements of First Chicago
Corporation and subsidiaries:
Consolidated Interim Balance Sheet - September 30, 1995 and
1994 (Unaudited)
Consolidated Interim Statement of Income - Three and Nine
Months Ended September 30, 1995 and 1994 (Unaudited)
Consolidated Interim Statement of Changes to Stockholders'
Equity - Nine Months Ended September 30, 1995 and 1994
(Unaudited)
Consolidated Interim Statement of Cash Flows - Nine Months
Ended September 30, 1995 and 1994 (Unaudited)
Notes to Consolidated Interim Financial Statements (Unaudited)
(b) Pro Forma Financial Information
The following pro forma condensed combined financial
statements (unaudited) of NBD Bancorp, Inc. and subsidiaries
reflecting the proposed merger with First Chicago Corporation:
Pro Forma Condensed Combined Balance Sheet - September 30,
1995 (Unaudited)
Pro Forma Condensed Combined Statement of Income - Nine Months
Ended September 30, 1995 and 1994 (Unaudited)
Notes to Pro Forma Condensed Combined Financial Statements
(Unaudited)
2
<PAGE> 3
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.
By: /s/ DANIEL T. LIS
--------------------------
Daniel T. Lis
Senior Vice President,
Secretary and Chief Legal
Officer
Dated: November 14, 1995
3
<PAGE> 4
FIRST CHICAGO CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
September 30 December 31 September 30
(Dollars in millions) 1995 1994 1994
------------ ----------- ------------
<S> <C> <C> <C>
ASSETS
Cash and due from banks--noninterest-bearing . . . . . . . . . . . . . . . . . . . $ 3,808 $ 4,265 $ 4,096
Due from banks--interest-bearing . . . . . . . . . . . . . . . . . . . . . . . . . 9,633 8,066 7,827
Federal funds sold and securities under resale agreements . . . . . . . . . . . . . 14,034 13,302 13,804
Trading account assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,911 4,967 5,327
Derivative product assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,928 4,389 6,016
Investment securities (fair values--$2,217, $2,589, and $2,515, respectively) . . . 2,209 2,592 2,514
Loans (net of unearned income--$287, $297, and $270, respectively) . . . . . . . . 27,663 25,947 23,817
Allowance for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . (743) (723) (683)
Premises and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 785 665 659
Customers' acceptance liability . . . . . . . . . . . . . . . . . . . . . . . . . . 602 526 632
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,917 1,904 1,738
---------- ---------- ----------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $75,747 $65,900 $65,747
========== ========== ==========
LIABILITIES
Deposits
Demand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,585 $ 7,647 $ 7,217
Savings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,413 7,448 7,426
Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,757 5,149 4,602
Foreign offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,480 11,422 10,425
---------- ---------- ----------
Total deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,235 31,666 29,670
Federal funds purchased and securities under repurchase agreements . . . . . . . . 16,409 13,026 12,303
Other funds borrowed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,997 7,665 9,059
Long-term debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,274 2,271 2,272
Acceptances outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 602 526 632
Derivative product liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . 7,562 4,097 5,539
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,964 2,116 1,731
---------- ---------- ----------
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71,043 61,367 61,206
---------- ---------- ----------
STOCKHOLDERS' EQUITY
Preferred stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 491 611 611
Common stock--$5 par value . . . . . . . . . . . . . . . . . . . . . . . . . . . . 467 466 465
Number of shares authorized--150,000,000
Number of shares issued--93,479,339; 93,148,134; and 93,064,700, respectively
Number of shares outstanding--88,308,227; 89,859,798; and 91,850,482, respectively
Surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,714 1,712 1,741
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,313 1,905 1,788
Other adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 (4) (4)
---------- ---------- ----------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,986 4,690 4,601
Less treasury stock at cost--5,171,112; 3,288,336; and 1,214,218 shares, respectively 282 157 60
---------- ---------- ----------
Stockholders' equity . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,704 4,533 4,541
---------- ---------- ----------
Total liabilities and stockholders' equity . . . . . . . . . . . . . . . . $75,747 $65,900 $65,747
========== ========== ==========
</TABLE>
1
<PAGE> 5
FIRST CHICAGO CORPORATION AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENT
<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
Interest and fees on loans . . . . . . . . . . . . . . . . . . . . . $ 594.5 $ 476.9 $ 1,792.8 $ 1,384.8
Interest on bank balances . . . . . . . . . . . . . . . . . . . . . . 151.2 97.8 432.9 255.3
Interest on federal funds sold and securities under resale
agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 229.1 175.3 708.6 400.0
Interest on trading account assets . . . . . . . . . . . . . . . . . 138.1 76.0 328.9 191.8
Interest on investment securities (including dividends) . . . . . . . 23.2 18.2 67.1 48.7
------- ------- ------- -------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,136.1 844.2 3,330.3 2,280.6
------- ------- ------- -------
INTEREST EXPENSE
Interest on deposits . . . . . . . . . . . . . . . . . . . . . . . . 353.6 203.9 989.3 540.7
Interest on federal funds purchased and securities under repurchase
agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 244.7 149.6 712.7 341.4
Interest on other funds borrowed . . . . . . . . . . . . . . . . . . 131.9 112.8 401.3 275.0
Interest on long-term debt . . . . . . . . . . . . . . . . . . . . . 44.9 43.5 136.8 125.7
------- ------- ------- -------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 775.1 509.8 2,240.1 1,282.8
------- ------- ------- -------
NET INTEREST INCOME . . . . . . . . . . . . . . . . . . . . . . . . . 361.0 334.4 1,090.2 997.8
Provision for credit losses . . . . . . . . . . . . . . . . . . . . . 100.0 55.0 235.0 148.0
------- ------- ------- ------
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES . . . . . . . . 261.0 279.4 855.2 849.8
------- ------- ------- -------
NONINTEREST INCOME
Combined trading profits . . . . . . . . . . . . . . . . . . . . . . 78.6 41.6 144.8 53.6
Equity securities gains . . . . . . . . . . . . . . . . . . . . . . . 66.7 20.0 181.2 158.1
Investment securities gains (losses) . . . . . . . . . . . . . . . . -- (2.2) -- (1.1)
------- ------- ------- -------
Market-driven revenue . . . . . . . . . . . . . . . . . . . . . . 145.3 59.4 326.0 210.6
Credit card fee revenue . . . . . . . . . . . . . . . . . . . . . . . 235.9 221.1 640.7 597.3
Service charges and commissions . . . . . . . . . . . . . . . . . . . 113.9 112.8 337.3 318.3
Fiduciary and investment management fees . . . . . . . . . . . . . . 49.7 48.6 150.6 150.3
Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.2 13.2 62.2 109.3
------- ------- ------- -------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . 559.0 455.1 1,516.8 1,385.8
------- ------- ------- -------
NONINTEREST EXPENSE
Salaries and employee benefits . . . . . . . . . . . . . . . . . . . 249.4 225.1 710.6 645.4
Occupancy expense of premises, net . . . . . . . . . . . . . . . . . 41.4 32.0 115.7 102.5
Equipment rentals, depreciation and maintenance . . . . . . . . . . . 29.2 35.1 93.0 120.7
Other expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . 182.5 199.2 549.0 567.9
------- ------- ------- -------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 502.5 491.4 1,468.3 1,436.5
------- ------- ------- -------
INCOME BEFORE INCOME TAXES . . . . . . . . . . . . . . . . . . . . . 317.5 243.1 903.7 799.1
Applicable income taxes . . . . . . . . . . . . . . . . . . . . . . . 110.3 89.3 314.0 282.8
------- ------- ------ -------
NET INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 207.2 $ 153.8 $589.7 $ 516.3
======= ======= ====== =======
NET INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS' EQUITY . . . . . . . $ 197.8 $ 143.8 $560.3 $ 474.2
======= ======= ====== =======
EARNINGS PER SHARE
NET INCOME-PRIMARY . . . . . . . . . . . . . . . . . . . . . . . . $2.18 $1.54 $6.16 $5.29
NET INCOME-FULLY DILUTED. . . . . . . . . . . . . . . . . . . . . $2.12 $1.51 $6.00 $5.17
</TABLE>
2
<PAGE> 6
FIRST CHICAGO CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES TO STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Nine Months Ended September 30 1995 1994
(In millions, except per share data) -------- ---------
<S> <C> <C>
Stockholders' Equity
Balance, beginning of period . . . . . . . $4,533 $4,264
Net income . . . . . . . . . . . . . . . 590 516
Acquisition of Lake Shore Bancorp . . . . -- 123
Issuance of common stock . . . . . . . . 15 8
Issuance of treasury stock . . . . . . . 37 23
Treasury stock purchases . . . . . . . . (174) (76)
Redemption of preferred stock . . . . . . (120) (150)
Other . . . . . . . . . . . . . . . . . . 5 (2)
------- -------
4,886 4,706
Cash dividends declared on preferred stock (30) (42)
Cash dividends declared on common stock . (152) (123)
------- -------
1995 1994
---- ----
Rate per common share for period $1.70 $1.40
Balance, end of period . . . . . . . . . . $4,704 $4,541
======= =======
</TABLE>
3
<PAGE> 7
FIRST CHICAGO CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended September 30 (In millions) 1995 1994
-------------------------------------------- ---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 590 $ 516
Adjustments to reconcile net income to net cash (used in) operating activities
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122 131
Provision for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 235 148
Equity securities gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (181) (158)
Net (increase) in net derivative product balances . . . . . . . . . . . . . . . . . . . . (63) (245)
Net (increase) in trading account assets . . . . . . . . . . . . . . . . . . . . . . . . (2,859) (776)
Net (increase) in accrued income receivable . . . . . . . . . . . . . . . . . . . . . . . (80) (15)
Net decrease in other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87 111
Interest income from Brazilian debt restructuring . . . . . . . . . . . . . . . . . . . . (1) (16)
Other noncash adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (75) (19)
------ -------
Total adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,815) (839)
Net cash (used in) operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . (2,225) (323)
------ -------
CASH FLOWS FROM INVESTING ACTIVITIES
Net (increase) in federal funds sold and securities under resale agreements . . . . . . . . (732) (5,009)
Purchase of investment securities--available for sale . . . . . . . . . . . . . . . . . . . (1,484) (769)
Purchase of debt investment securities--held to maturity . . . . . . . . . . . . . . . . . (97) (240)
Purchase of venture capital investments . . . . . . . . . . . . . . . . . . . . . . . . . . (319) (100)
Proceeds from maturities of debt securities--available for sale . . . . . . . . . . . . . . 1,224 695
Proceeds from maturities of debt securities--held to maturity . . . . . . . . . . . . . . . 115 200
Proceeds from sales of debt securities--available for sale . . . . . . . . . . . . . . . . 167 82
Proceeds from sales of equity securities--available for sale . . . . . . . . . . . . . . . 1 48
Proceeds from sales of venture capital investments . . . . . . . . . . . . . . . . . . . . 906 257
Net (increase) in credit card receivables . . . . . . . . . . . . . . . . . . . . . . . . . (2,984) (1,359)
Credit card receivables securitized. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,286 2,000
Net (increase) in loans of bank subsidiaries . . . . . . . . . . . . . . . . . . . . . . . (1,185) (798)
Loans made to customers and purchased from others by nonbank subsidiaries . . . . . . . . . (271) (436)
Principal collected on and proceeds from sale of loans by nonbank subsidiaries . . . . . . 273 470
Loan recoveries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 63
Purchases of premises and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . (205) (127)
Proceeds from sales of premises and equipment . . . . . . . . . . . . . . . . . . . . . . . 38 24
Net cash and cash equivalents due to acquisitions . . . . . . . . . . . . . . . . . . . . . -- 44
------ -------
Net cash (used in) investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . (2,221) (4,955)
------ -------
CASH FLOWS FROM FINANCING ACTIVITIES
Net (decrease) in demand and savings deposits . . . . . . . . . . . . . . . . . . . . . . . (1,100) (1,386)
Net increase (decrease) in time deposits . . . . . . . . . . . . . . . . . . . . . . . . . 608 (1,016)
Net increase in deposits in foreign offices . . . . . . . . . . . . . . . . . . . . . . . . 2,014 2,993
Net increase in federal funds purchased and securities under repurchase agreements . . . . 3,383 3,998
Proceeds from other funds borrowed . . . . . . . . . . . . . . . . . . . . . . . . . . . . 189,115 184,536
Repayment of other funds borrowed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (187,835) (181,392)
Proceeds from issuance of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . 3 203
Repayment of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2) (7)
Net (decrease) in other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . (242) (197)
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (179) (155)
Proceeds from issuance of common stock. . . . . . . . . . . . . . . . . . . . . . . . . . . 17 8
Payment for purchase of treasury stock . . . . . . . . . . . . . . . . . . . . . . . . . . (174) (76)
Redemption of preferred stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (121) (150)
Proceeds from reissuance of treasury stock . . . . . . . . . . . . . . . . . . . . . . . . 19 12
------ -------
Net cash provided by financing activities . . . . . . . . . . . . . . . . . . . . . . . . . 5,506 7,371
------ -------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS . . . . . . . . . . . . . . . 50 (123)
------ -------
NET INCREASE IN CASH AND CASH EQUIVALENTS . . . . . . . . . . . . . . . . . . . . . . . . . 1,110 1,970
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD . . . . . . . . . . . . . . . . . . . . . 12,331 9,953
------ -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . . $13,441 $11,923
======= =======
</TABLE>
See Note 6 on page 7.
4
<PAGE> 8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1
Although the interim amounts are unaudited, they do reflect all adjustments
that, in the opinion of management, are necessary for a fair presentation of
the results of operations for the interim periods. All such adjustments are of
a normal, recurring nature. 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.
Note 2
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 shares issuable under the Employee Stock
Purchase and Savings Plan and outstanding stock options. Fully diluted shares
also include the common shares that would result from the conversion of
convertible preferred stock.
To compute fully diluted earnings per share, net income was reduced by
preferred stock dividend requirements, except those related to convertible
stock.
The net income, preferred stock dividends and shares used to compute primary
and fully diluted earnings per share are presented in the following table.
<TABLE>
<CAPTION>
Nine Months Ended
(In millions) September 30
1995 1994
---- ----
<S> <C> <C>
PRIMARY
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $589.7 $516.3
Preferred stock dividends (1) . . . . . . . . . . . . . . . . . . . . . 29.4 42.1
------- -------
Net income attributable to common
stockholders' equity . . . . . . . . . . . . . . . . . . . . . . . . $560.3 $474.2
======= =======
Average number of common and
common-equivalent shares . . . . . . . . . . . . . . . . . . . . . . 90.9 89.7
======= =======
FULLY DILUTED
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $589.7 $516.3
Preferred stock dividends, excluding
convertible Series B (1) . . . . . . . . . . . . . . . . . . . . . . 20.8 33.5
------- -------
Fully diluted net income . . . . . . . . . . . . . . . . . . . . . . . $568.9 $482.8
======= =======
Average number of shares,
assuming full dilution . . . . . . . . . . . . . . . . . . . . . . . 94.8 93.5
======= =======
</TABLE>
(1) 1994 results include $4.5 million of additional preferred dividends
representing a 3 percent premium over the $150 million stated value of the
Corporation's Preferred Stock, Series D, that was redeemed on July 1, 1994.
5
<PAGE> 9
Note 3
At September 30, 1995, credit card receivables aggregated $6.9 billion. These
receivables are available for sale at face value through credit card
securitization programs.
Note 4
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 5
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 the
recorded investment of an impaired loan or pool of loans exceeds the calculated
present value. For non-collateral 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. Loans that are 90 days past due as to principal or
interest and are not well secured and in the process of collection are
considered nonaccrual. In some instances, such loans are not considered
impaired if there is no anticipated loss of principal or interest. Such loans
totaled $10 million at September 30, 1995.
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 $123 million, which required a related allowance for
credit losses of $26 million. An allowance was allocated to all impaired
loans.
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 $123 million for the quarter
ended September 30, 1995, and $120 million year to date. The Corporation
recognized interest income associated with impaired loans of $2 million during
the third quarter and $6 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> 10
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 account
assets in the third quarter of 1995.
Loans of $4.2 million and $12.0 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
5 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 1.7x, 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 NBD Bancorp, Inc. (NBD) entered into an Agreement and Plan
of Merger, dated July 11, 1995, as amended, pursuant to which the Corporation
will merge with and into NBD. The respective shareholders of the Corporation
and NBD approved the merger at special meetings held by each company on October
20, 1995.
The combined company will be called First Chicago NBD Corporation (FCNBD).
Subject to receiving all required regulatory approvals, management of the
Corporation expects the merger to be completed on November 30, 1995.
Under terms of the transaction, the Corporation's shareholders will receive
1.81 shares of common stock of FCNBD in exchange for each share of the
Corporation's common stock. Each share of NBD common stock will represent one
share in FCNBD. In addition, each holder of the Corporation's preferred stock
and depositary shares will be entitled to receive preferred stock or depositary
shares, as applicable, with substantially similar terms, of FCNBD.
Shares of common stock of FCNBD will be listed on the New York Stock Exchange,
the Chicago Stock Exchange and the Pacific Stock Exchange and trade under the
symbol FCN.
Note 9
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 regulatory 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.
7
<PAGE> 11
FIRST CHICAGO NBD CORPORATION
PRO FORMA FINANCIAL INFORMATION
NBD Bancorp, Inc. (the "Corporation" or "NBD") and First Chicago Corporation
("First Chicago") entered into an Agreement and Plan of Merger dated as of July
11, 1995, as amended (the Merger Agreement), pursuant to which First Chicago
will merge (the "Merger") with and into NBD. The name of the combined company
will be First Chicago NBD Corporation ("FCNBD").
It is anticipated that the Merger will be accounted for as a
pooling-of-interests and that it will be consummated on November 30, 1995. In
November 1995 the Board of Governors of the Federal Reserve System approved the
merger and in October 1995 shareholders of both First Chicago and NBD approved
the merger in separate special meetings.
Pursuant to the Merger Agreement, each share of common stock of NBD will remain
outstanding after the Merger and represent one share of FCNBD. At the
effective time of the Merger, common stockholders of First Chicago will receive
1.81 shares of common stock of FCNBD in exchange for each outstanding share of
First Chicago common stock.
At the effective time of the Merger, each share of First Chicago's outstanding
preferred stock, and each outstanding depositary share, will be exchanged for
one share of FCNBD preferred stock and one depositary share, respectively, with
terms substantially identical to those of the existing First Chicago preferred
stock and depositary shares, as appropriate.
In connection with the execution of the Merger Agreement, NBD granted First
Chicago an option to purchase, under certain circumstances, up to 19.9 percent
of NBD's outstanding shares of common stock. First Chicago also granted NBD an
option to purchase, under certain circumstances, up to 19.9 percent of First
Chicago's outstanding shares of common stock.
The following pro forma financial information giving effect to the Merger,
accounted for as a pooling-of-interests, includes: (i) the unaudited pro forma
condensed combined balance sheet as of September 30, 1995, and (ii) the
unaudited pro forma condensed combined statements of income for the nine-month
periods ended September 30, 1995 and 1994. The pro forma condensed combined
financial statements should be read in conjunction with the historical
consolidated financial statements and notes thereto of the Corporation and
First Chicago.
Effective January 7, 1995, NBD consummated its acquisition of the $910 million
asset AmeriFed Financial Corp. ("AmeriFed") of Joliet, Illinois, which was
accounted for as a purchase. On July 1, 1995, NBD acquired the $760 million
asset Deerbank Corporation ("Deerbank") of Deerfield, Illinois which was
accounted for as purchase. Accordingly, the historical income statement for
NBD for the nine months ended September 30, 1995, includes the operations of
AmeriFed and Deerbank since their respective dates of acquisition. With
respect to the following pro forma condensed combined financial statements, the
historical income statements for NBD were not restated to otherwise include
amounts for AmeriFed and Deerbank as such acquisitions are not considered
material.
1
<PAGE> 12
FIRST CHICAGO NBD CORPORATION
PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF SEPTEMBER 30, 1995
(UNAUDITED)
The following pro forma condensed combined balance sheet as of September 30,
1995, is presented to show the impact on NBD's historical financial condition
of the merger with First Chicago. The Merger has been reflected under the
pooling-of-interests method of accounting.
FIRST CHICAGO NBD CORPORATION
PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF SEPTEMBER 30, 1995
(IN MILLIONS)
<TABLE>
<CAPTION>
NBD FIRST CHICAGO PRO FORMA PRO FORMA
(AS REPORTED) (AS REPORTED) ADJUSTMENTS FCNBD
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Cash and due from banks-noninterest bearing . . . . . . . $ 2,540 $ 3,808 $ 6,348
Due from banks-interest bearing . . . . . . . . . . . . 669 9,633 10,302
Federal funds sold and securities under
resale agreements . . . . . . . . . . . . . . . . . . . 210 14,034 14,244
Trading account assets . . . . . . . . . . . . . . . . . 205 7,911 8,116
Derivative product assets . . . . . . . . . . . . . . . . 53 7,928 7,981
Investment securities . . . . . . . . . . . . . . . . . . 9,701 2,209 11,910
Loans . . . . . . . . . . . . . . . . . . . . . . . . . 33,413 27,663 61,076
Allowance for credit losses . . . . . . . . . . . . . . . (488) (743) (1,231)
Other assets . . . . . . . . . . . . . . . . . . . . . . 2,199 3,304 (181) 5,322
- -----------------------------------------------------------------------------------------------------------
Total assets . . . . . . . . . . . . . . . . . . . $48,502 $75,747 $ (181) $124,068
- -----------------------------------------------------------------------------------------------------------
LIABILITIES
Deposits:
Demand . . . . . . . . . . . . . . . . . . . . . . . $ 6,700 $ 6,585 $ $ 13,285
Savings . . . . . . . . . . . . . . . . . . . . . . . 12,373 7,413 19,786
Time . . . . . . . . . . . . . . . . . . . . . . . . 10,199 5,757 15,956
Foreign offices . . . . . . . . . . . . . . . . . . . 4,427 13,480 17,907
- -----------------------------------------------------------------------------------------------------------
Total deposits . . . . . . . . . . . . . . . . . . 33,699 33,235 66,934
Short-term borrowings . . . . . . . . . . . . . . . . . . 6,941 25,406 32,347
Long-term debt . . . . . . . . . . . . . . . . . . . . . 3,111 2,274 5,385
Derivative product liabilities . . . . . . . . . . . . . 47 7,562 7,609
Other liabilities . . . . . . . . . . . . . . . . . . . . 950 2,566 (28) 3,488
- -----------------------------------------------------------------------------------------------------------
Total liabilities . . . . . . . . . . . . . . . . 44,748 71,043 (28) 115,763
STOCKHOLDERS' EQUITY
Preferred stock . . . . . . . . . . . . . . . . . . . . . -- 491 491
Common stock . . . . . . . . . . . . . . . . . . . . . . 161 467 (467) 321
160
Surplus . . . . . . . . . . . . . . . . . . . . . . . . . 538 1,714 (1,714) 2,277
1,739
Retained earnings . . . . . . . . . . . . . . . . . . . . 3,178 2,313 (153) 5,338
Other . . . . . . . . . . . . . . . . . . . . . . . . . . (52) 1 (51)
- -----------------------------------------------------------------------------------------------------------
Total . . . . . . . . . . . . . . . . . . . . . . . 3,825 4,986 (435) 8,376
Less: Treasury stock . . . . . . . . . . . . . . . 71 282 (282) 71
Stockholders' equity . . . . . . . . . . . . . . . 3,754 4,704 (153) 8,305
- -----------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity . . . . $48,502 $75,747 $ (181) $124,068
- -----------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to unaudited pro forma condensed combined financial
statements.
2
<PAGE> 13
FIRST CHICAGO NBD CORPORATION
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR NINE MONTHS ENDED SEPTEMBER 30, 1995
(IN MILLIONS, EXCEPT PER SHARE DATA)
UNAUDITED
<TABLE>
<CAPTION>
NBD FIRST CHICAGO PRO FORMA
(AS REPORTED)(AS REPORTED) FCNBD
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans . . . . . . . . . . . . . . . . . . . $2,069.3 $1,792.8 $3,862.1
Interest on federal funds sold and securities under resale
agreements . . . . . . . . . . . . . . . . . . . . . . . . . 7.9 708.6 716.5
Interest on trading account assets . . . . . . . . . . . . . . . 5.9 328.9 334.8
Interest on investment securities . . . . . . . . . . . . . . . . 577.4 67.1 644.5
Other interest income . . . . . . . . . . . . . . . . . . . . . . 33.3 432.9 466.2
- -----------------------------------------------------------------------------------------------------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . 2,693.8 3,330.3 6,024.1
INTEREST EXPENSE
Interest on deposits . . . . . . . . . . . . . . . . . . . . . . 928.1 989.3 1,197.4
Interest on short-term borrowings . . . . . . . . . . . . . . . . 339.3 1,114.0 1,453.3
Interest on long-term debt . . . . . . . . . . . . . . . . . . . 142.6 136.8 279.4
- -----------------------------------------------------------------------------------------------------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,410.0 2,240.1 3,650.1
NET INTEREST INCOME . . . . . . . . . . . . . . . . . . . . . . . 1,283.8 1,090.2 2,374.0
Provision for credit losses . . . . . . . . . . . . . . . . . . . 65.2 235.0 300.2
- -----------------------------------------------------------------------------------------------------------
Net Interest Income After Provision for Credit Losses . . . . . . 1,218.6 855.2 2,073.8
NONINTEREST INCOME
Equity securities gains . . . . . . . . . . . . . . . . . . . . . -- 181.2 181.2
Investment securities gains . . . . . . . . . . . . . . . . . . . 3.2 -- 3.2
Credit card fee revenue . . . . . . . . . . . . . . . . . . . . . 31.1 640.7 671.8
Other noninterest income . . . . . . . . . . . . . . . . . . . . 392.7 694.9 1,087.6
- -----------------------------------------------------------------------------------------------------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . 427.0 1,516.8 1,943.8
NONINTEREST EXPENSE
Salaries and employee benefits . . . . . . . . . . . . . . . . . 549.9 710.6 1,260.5
Occupancy and equipment expense . . . . . . . . . . . . . . . . . 158.3 208.7 367.0
Other noninterest expense . . . . . . . . . . . . . . . . . . . . 278.6 549.0 827.6
- -----------------------------------------------------------------------------------------------------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . 986.8 1,468.3 2,455.1
INCOME BEFORE INCOME TAXES . . . . . . . . . . . . . . . . . . . 658.8 903.7 1,562.5
Applicable income taxes . . . . . . . . . . . . . . . . . . . . . 224.9 314.0 538.9
- -----------------------------------------------------------------------------------------------------------
Income from Continuing Operations . . . . . . . . . . . . . . . . $433.9 $ 589.7 $1,023.6
- -----------------------------------------------------------------------------------------------------------
COMMON SHARE DATA
Income from continuing operations
Primary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6.16 $ 2.73 $ 3.07
Fully diluted . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6.00 $ 2.72 $ 3.03
WEIGHTED AVERAGE SHARES
Primary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90.9 159.2 323.8
Fully diluted . . . . . . . . . . . . . . . . . . . . . . . . . . 94.8 159.5 331.2
- -----------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to unaudited pro forma condensed combined financial
statements.
3
<PAGE> 14
FIRST CHICAGO NBD CORPORATION
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR NINE MONTHS ENDED SEPTEMBER 30, 1994
(IN MILLIONS, EXCEPT PER SHARE DATA)
UNAUDITED
<TABLE>
<CAPTION>
NBD FIRST CHICAGO PRO FORMA
(AS REPORTED)(AS REPORTED) FCNBD
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans . . . . . . . . . . . . . . . . . . . $1,511.3 $1,384.8 $2,896.1
Interest on federal funds sold and securities under resale
agreements . . . . . . . . . . . . . . . . . . . . . . . . . 5.7 400.0 405.7
Interest on trading account assets . . . . . . . . . . . . . . . 4.3 191.8 196.1
Interest on investment securities . . . . . . . . . . . . . . . . 556.1 48.7 604.8
Other interest income . . . . . . . . . . . . . . . . . . . . . . 24.2 255.3 279.5
- -----------------------------------------------------------------------------------------------------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . 2,101.6 2,280.6 4,382.2
INTEREST EXPENSE
Interest on deposits . . . . . . . . . . . . . . . . . . . . . . 618.5 540.7 1,159.2
Interest on short-term borrowings . . . . . . . . . . . . . . . . 192.2 616.4 808.6
Interest on long-term debt . . . . . . . . . . . . . . . . . . . 88.5 125.7 214.2
- -----------------------------------------------------------------------------------------------------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . 899.2 1,282.8 2,182.0
NET INTEREST INCOME . . . . . . . . . . . . . . . . . . . . . . . 1,202.4 997.8 2,200.2
Provision for credit losses . . . . . . . . . . . . . . . . . . . 31.9 148.0 179.9
- -----------------------------------------------------------------------------------------------------------
Net Interest Income After Provision for Credit Losses . . . . . . 1,170.5 849.8 2,020.3
NONINTEREST INCOME
Equity securities gains . . . . . . . . . . . . . . . . . . . . . -- 158.1 158.1
Investment securities gains (losses) . . . . . . . . . . . . . . 1.0 (1.1) (0.1)
Credit card fee revenue . . . . . . . . . . . . . . . . . . . . . 28.1 597.3 625.4
Other noninterest income . . . . . . . . . . . . . . . . . . . . 380.2 631.5 1,011.7
- -----------------------------------------------------------------------------------------------------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . 409.3 1,385.8 1,795.1
NONINTEREST EXPENSE
Salaries and employee benefits . . . . . . . . . . . . . . . . . 537.2 645.4 1,182.6
Occupancy and equipment expense . . . . . . . . . . . . . . . . . 155.4 223.2 378.6
Other noninterest expense . . . . . . . . . . . . . . . . . . . . 284.5 567.9 852.4
- -----------------------------------------------------------------------------------------------------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . 977.1 1,436.5 2,413.6
Income Before Income Taxes . . . . . . . . . . . . . . . . . . . 602.7 799.1 1,401.8
Applicable income taxes . . . . . . . . . . . . . . . . . . . . . 196.9 282.8 479.7
- -----------------------------------------------------------------------------------------------------------
Income from Continuing Operations . . . . . . . . . . . . . . . . $ 405.8 $ 516.3 $ 922.1
- -----------------------------------------------------------------------------------------------------------
COMMON SHARE DATA
Income from continuing operations
Primary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2.54 $ 5.29 $ 2.73
Fully diluted . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2.53 $ 5.17 $ 2.69
WEIGHTED AVERAGE SHARES
Primary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 159.7 89.7 322.1
Fully diluted . . . . . . . . . . . . . . . . . . . . . . . . . . 161.5 93.5 330.7
- -----------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to unaudited pro forma condensed combined financial
statements.
4
<PAGE> 15
FIRST CHICAGO NBD CORPORATION
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS
a) The pro forma information presented is not necessarily indicative of the
results of operations or the combined financial position that would have
resulted had the Merger been consummated at the beginning of the periods
indicated, nor is it necessarily indicative of the results of operations in
future periods or the future financial position of the combined entities.
It is anticipated that the Merger will be consummated in the fourth quarter
of 1995.
b) The Corporation has reviewed its accounting policies in light of those
employed by First Chicago. At this time, it is not expected that
conformance of such accounting policies will have a material impact on the
pro forma condensed combined financial statements.
c) Certain reclassifications have been included in the unaudited pro forma
condensed combined balance sheet and statements of income to conform
statement presentations. Transactions conducted in the ordinary course of
business between the two companies are immaterial, and accordingly, have not
been eliminated.
d) Pro forma adjustments to common shares and surplus at September 30, 1995,
reflect the Merger accounted for as a pooling-of-interests, through the
exchange of 159.8 million shares of FCNBD common stock (using the common
exchange ratio of 1.81) for the 88.3 million outstanding shares of First
Chicago.
The pro forma entries are displayed below (in millions):
<TABLE>
<S> <C> <C>
Debit-- Common stock (First Chicago) . . . . . . . . $ 467
Debit-- Common surplus (First Chicago) . . . . . . . 1,714
Credit-- Treasury stock (First Chicago) . . $ 282
Credit-- Common stock (FCNBD) . . . . . . . 160
Credit-- Common surplus (FCNBD) . . . . . . 1,739
</TABLE>
e) A pro forma entry of $181 million was made to reclassify the Corporation's
deferred tax receivable from other assets to other liabilities.
f) As of September 30, 1995, the Corporation and First Chicago were
approximately 50% completed with the plan to repurchase in the aggregate
approximately $300 million worth of the Corporation's and First Chicago's
common stock prior to the consummation of the Merger. The pro forma
condensed combined balance sheet does not include the impact of the
remaining shares anticipated to be repurchased, prior to the consummation
of the Merger.
g) Income per share data has been computed based on the combined historical
income from continuing operations applicable to common stockholders of the
Corporation and First Chicago using the historical weighted average number
of outstanding shares of the Corporation's common stock and the historical
weighted average number of outstanding shares of First Chicago's common
stock adjusted to equivalent shares of FCNBD's common stock, as of the
earliest period presented.
h) The pro forma condensed combined financial statements do not include the
anticipated cost savings in connection with the Merger. It is estimated,
however, that approximately $200 million in pre-tax annualized
5
<PAGE> 16
cost savings ($126 million after-tax) will be realized by the combined
company in 1997. Reductions resulting from elimination of the overlap in
Chicago-area retail branch expense constitute the largest component.
Product synergies in the large corporate and middle markets, and staff and
functional areas, also provide additional expense reduction opportunities.
i) The Financial Accounting Standards Board, in conjunction with the
finalization of their implementation guide relating to SFAS #115--
"Accounting for Certain Investments in Debt and Equity Securities"-- has
given registrants an opportunity to assess the classification of their
existing investment securities portfolio between the held-to-maturity and
available-for-sale classifications.
In conjunction with this guidance, as well as in accordance with the
combined company's existing interest rate risk position, it is anticipated
that a significant portion of the companies' investment securities
currently classified as held-to-maturity will be transferred to the
available-for-sale classification.
If subsequent sales of such securities occur as part of this overall
process, such sales would not preclude accounting for the combination as a
pooling of interests in accordance with either EITF Abstracts, Topic No.
D-40, or paragraph 8(c) of SFAS #115, which represents an exception to
paragraph 48(c) of APB Opinion #16. Based on current market conditions, it
is not expected that any such sales would result in any material probable
losses that would require an adjustment to the pro forma financial
statements.
Any transfers of securities are anticipated to occur in the fourth quarter
of 1995 and will be accounted for in accordance with SFAS #115.
j) A liability of $225 million has been recorded in the unaudited pro forma
condensed combined balance sheet to reflect the Corporation's and First
Chicago's current estimate of merger and restructuring related charges in
connection with the attainment by 1997 of annualized pre-tax cost savings
of approximately $200 million. This resulted in a $153 million after-tax
charge to retained earnings in the unaudited pro forma condensed combined
balance sheet.
The pro forma entries are displayed below (in millions):
<TABLE>
<S> <C> <C>
Debit--Retained earnings . . . . . . . . $153
Debit--Other liabilities-taxes payable . . 72
Credit--Other liabilities-reserve . . . $225
</TABLE>
It is anticipated that substantially all of these charges will be paid
within a 12-15 month time frame subsequent to the Merger. This charge has
been excluded from the pro forma condensed combined income statement due to
its nonrecurring nature. The following table provides details of the
estimated pre-tax charges (in millions).
<TABLE>
<CAPTION>
AMOUNT
------
<S> <C>
Personnel $ 150
Facilities and equipment 45
Other Merger expenses 30
------
$ 225
======
</TABLE>
6
<PAGE> 17
Personnel-related costs reflect severance and assistance costs for separated
employees. Facilities costs consist of lease termination costs and other
facilities-related exit costs arising from the closing of duplicate branch
facilities and from the consolidation of duplicate headquarters and
operational facilities. Equipment costs consist of computer equipment and
software write-offs due to duplication or incompatibility. The reserve will
be established in compliance with Emerging Issues Task Force Issue #94-3.
Substantially all of the personnel-related costs represent employee
severance costs. An estimate of staff reductions totals 1,700 coming
primarily from the overlap in the Chicago retail banking business, product
synergies in the large corporate and middle market businesses, as well as
from staff and administrative support functions. The contemplated timeframe
for completion of these actions is a 12 to 15 month period subsequent to the
Merger.
Other merger-related costs include investment banking fees, securities
registration and filing fees, as well as accounting, legal and other related
costs. Investment banking fees, estimated at $12 million, represent the
largest component of such costs.
7
