<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 June 30, 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 July 31, 1995
----------------------------- -----------------------------
Common Stock, $1.00 Par Value 160,665,916
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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
June 30 December 31 June 30
1995 1994 1994
------------ ------------ ------------
<S> <C> <C> <C>
Cash and Due From Banks................................... $ 2,375,480 $ 2,587,007 $ 2,279,698
Interest-Bearing Deposits................................. 579,125 630,688 637,726
Federal Funds Sold and Resale Agreements.................. 138,112 399,725 316,504
Trading Account Securities................................ 143,361 122,135 209,552
Investment Securities (Note B):
Available-for-Sale (At Fair Value)..................... 3,986,717 4,814,252 5,134,842
Held-to-Maturity (Fair Value of $7,234,024,
$7,381,476 and $8,190,292, respectively)............ 7,105,624 7,608,713 8,184,134
------------ ------------ ------------
11,092,341 12,422,965 13,318,976
------------ ------------ ------------
Loans and Leases (Net of Unearned Income of $201,247,
$171,207 and $139,563, respectively):
Commercial............................................. 16,872,291 15,525,645 14,527,791
Real Estate Construction............................... 896,671 817,452 729,421
Residential Mortgage................................... 4,158,906 3,351,840 2,955,520
Mortgages Held For Sale................................ 52,455 30,171 39,155
Consumer............................................... 8,037,442 7,667,907 7,154,088
Lease Financing........................................ 404,811 363,200 301,804
Foreign................................................ 1,544,589 1,473,449 1,142,117
------------ ------------ ------------
31,967,165 29,229,664 26,849,896
Allowance For Possible Credit Losses (Note C).......... (469,803) (435,051) (423,624)
------------ ------------ ------------
31,497,362 28,794,613 26,426,272
------------ ------------ ------------
Net Premises and Equipment................................ 650,510 630,357 637,907
Customers' Liability on Acceptances....................... 190,282 193,866 160,209
Other Assets.............................................. 1,384,121 1,329,777 1,245,268
------------ ------------ ------------
Total Assets.................................. $48,050,694 $47,111,133 $45,232,112
============ ============ ============
</TABLE>
<PAGE>
Page 2
<TABLE>
<CAPTION>
Liabilities and Shareholders' Equity
June 30 December 31 June 30
1995 1994 1994
------------ ------------ ------------
Deposits:
<S> <C> <C> <C>
Demand (Non-Interest Bearing)........................... $ 6,805,618 $ 6,731,050 $ 6,810,491
Savings................................................. 7,474,257 7,679,922 7,986,172
Money Market Accounts................................... 4,980,571 4,959,816 5,204,159
Time.................................................... 9,636,043 8,055,429 7,540,540
Foreign Office.......................................... 3,658,670 5,803,224 3,402,024
------------ ------------ ------------
32,555,159 33,229,441 30,943,386
Short-Term Borrowings..................................... 7,861,259 7,119,972 7,822,834
Liability on Acceptances.................................. 190,282 193,866 160,209
Accrued Expenses and Sundry Liabilities................... 829,551 771,963 723,010
Long-Term Debt............................................ 3,012,177 2,504,348 2,332,530
------------ ------------ ------------
Total Liabilities..................................... 44,448,428 43,819,590 41,981,969
------------ ------------ ------------
Shareholders' Equity:
Series A Preferred Stock - Par Value $1, Stated Value $50 - - -
June 30 December 31 June 30
No. of Shares 1995 1994 1994
-------------- ------------ ------------ ------------
Authorized.... 460,000 460,000 460,000
Issued........ - - -
Preferred Stock - No Par Value.......................... - - -
June 30 December 31 June 30
No. of Shares 1995 1994 1994
-------------- ------------ ------------ ------------
Authorized.... 10,000,000 10,000,000 10,000,000
Issued........ - - -
Common Stock - Par Value $1............................. 160,883 160,877 160,877
June 30 December 31 June 30
No. of Shares 1995 1994 1994
-------------- ------------ ------------ ------------
Authorized.... 500,000,000 500,000,000 500,000,000
Issued........ 160,883,008 160,876,819 160,876,769
Capital Surplus......................................... 533,129 545,717 546,829
Retained Earnings....................................... 3,082,012 2,903,394 2,712,268
Fair Value Adjustment on Investment Securities
Available-for-Sale (Note B)........................... (39,327) (154,305) (89,936)
Accumulated Translation Adjustment...................... 9,444 6,942 7,118
Deferred Compensation................................... (27,364) (17,438) (23,897)
Treasury Stock (3,743,613, 4,968,147 and
2,107,170 shares, respectively)...................... (116,511) (153,644) (63,116)
------------ ------------ ------------
Total Shareholders' Equity............................ 3,602,266 3,291,543 3,250,143
------------ ------------ ------------
Total Liabilities and Shareholders' Equity...... $48,050,694 $47,111,133 $45,232,112
============ ============ ============
</TABLE>
<PAGE>
Page 3
<TABLE>
<CAPTION>
NBD BANCORP, Inc. Consolidated Statement of Income
(in thousands except per share data)
Quarter Ended Six Months Ended
June 30 June 30
------------------------- -------------------------
1995 1994 1995 1994
----------- ----------- ----------- -----------
Interest Income:
<S> <C> <C> <C> <C>
Loans and Leases (including fees)................................. $ 698,570 $ 506,959 $1,345,790 $ 969,020
Investment Securities:
Taxable......................................................... 166,572 160,528 350,298 299,474
Non-Taxable..................................................... 23,171 24,490 47,140 49,829
Trading Account Securities........................................ 1,746 1,495 3,534 2,379
Federal Funds Sold and Resale Agreements.......................... 2,232 1,914 6,343 2,863
Interest-Bearing Deposits......................................... 11,654 7,992 22,928 14,992
----------- ----------- ----------- -----------
Total Interest Income........................................... 903,945 703,378 1,776,033 1,338,557
----------- ----------- ----------- -----------
Interest Expense:
Deposits.......................................................... 311,486 207,290 604,061 390,829
Short-Term Borrowings............................................. 115,590 62,302 231,311 107,675
Long-Term Debt.................................................... 48,296 27,398 91,396 52,405
----------- ----------- ----------- -----------
Total Interest Expense.......................................... 475,372 296,990 926,768 550,909
----------- ----------- ----------- -----------
Net Interest Income................................................. 428,573 406,388 849,265 787,648
Provision for Possible Credit Losses.............................. 20,091 8,579 40,187 24,039
----------- ----------- ----------- -----------
Net Interest Income After Provision
For Possible Credit Losses........................................ 408,482 397,809 809,078 763,609
----------- ----------- ----------- -----------
Non-Interest Income:
Trust Fees........................................................ 42,242 39,803 80,753 77,913
Service Charges on Deposit Accounts............................... 40,964 38,790 81,071 79,769
Credit Card Fees.................................................. 10,615 9,691 20,131 18,068
Securities Gains.................................................. 308 (85) 1,684 305
Other............................................................. 51,277 45,749 97,497 96,643
----------- ----------- ----------- -----------
Total Non-Interest Income....................................... 145,406 133,948 281,136 272,698
----------- ----------- ----------- -----------
Non-Interest Expenses:
Compensation:
Salaries........................................................ 138,259 134,856 273,349 268,315
Benefits........................................................ 46,209 43,906 88,416 87,195
----------- ----------- ----------- -----------
Total Compensation............................................ 184,468 178,762 361,765 355,510
Net Occupancy..................................................... 29,920 29,968 60,327 60,049
Equipment Rentals, Depreciation and Maintenance................... 23,220 23,597 46,434 45,551
FDIC and Other Regulatory Assessments............................. 16,507 16,741 33,114 33,416
Amortization of Intangibles....................................... 7,521 6,577 15,025 13,101
Other............................................................. 74,622 76,664 143,064 147,001
----------- ----------- ----------- -----------
Total Non-Interest Expenses..................................... 336,258 332,309 659,729 654,628
----------- ----------- ----------- -----------
Income before Income Taxes.......................................... 217,630 199,448 430,485 381,679
Income Tax Expense(Benefit) (Including tax effect of $120, ($35),
$592 and $114, respectively, on securities sales)............... 74,188 64,224 146,152 123,579
----------- ----------- ----------- -----------
Income before Extraordinary Item and Cumulative
Effect of Accounting Change....................................... 143,442 135,224 284,333 258,100
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.......................................................... $ 143,442 $ 135,224 $ 284,333 $ 242,485
=========== =========== =========== ===========
Net Income Per Share (on average shares outstanding):
Income before Extraordinary Item and Cumulative
Effect of Accounting Change..................................... $ 0.91 $ 0.84 $ 1.79 $ 1.61
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................................................ $ 0.91 $ 0.84 $ 1.79 $ 1.51
=========== =========== =========== ===========
</TABLE>
<PAGE>
Page 4
<TABLE>
<CAPTION>
NBD BANCORP, Inc. Consolidated Statement of Shareholders' Equity
(in thousands except share data)
Quarter Ended Six Months Ended
June 30 June 30
------------------------ ------------------------
1995 1994 1995 1994
----------- ----------- ----------- -----------
Preferred Stock:
<S> <C> <C> <C> <C>
Balance, Beginning and End of Period....................... $ - $ - $ - $ -
----------- ----------- ----------- -----------
Common Stock:
Balance, Beginning of Period............................... 160,883 160,872 160,877 160,715
Acquisition of Subsidiary Bank........................... - - 270 -
Cancellation of Shares Held in Treasury.................. - - (270) -
Other.................................................... - 5 6 162
----------- ----------- ----------- -----------
Balance, End of Period..................................... 160,883 160,877 160,883 160,877
----------- ----------- ----------- -----------
Capital Surplus:
Balance, Beginning of Period............................... 533,576 546,969 545,717 541,232
Acquisition of Subsidiary Bank........................... - - (6,323) -
Cancellation of Shares Held in Treasury.................. - - (8,130) -
Other.................................................... (447) (140) 1,865 5,597
----------- ----------- ----------- -----------
Balance, End of Period..................................... 533,129 546,829 533,129 546,829
----------- ----------- ----------- -----------
Retained Earnings:
Balance, Beginning of Period............................... 2,990,430 2,624,608 2,903,394 2,565,627
Net Income............................................... 143,442 135,224 284,333 242,485
Cash Dividends Declared on Common Stock
($.33, $.30, $.66 and $.60 per share, respectively).... (51,860) (47,564) (105,715) (95,844)
----------- ----------- ----------- -----------
Balance, End of Period..................................... 3,082,012 2,712,268 3,082,012 2,712,268
----------- ----------- ----------- -----------
Fair Value Adjustment on Investment Securities
Available-for-Sale:
Balance, Beginning of Period............................... (78,559) (53,753) (154,305) (7,012)
Change in Fair Value (net of tax)........................ 39,232 (36,183) 114,978 (82,924)
----------- ----------- ----------- -----------
Balance, End of Period..................................... (39,327) (89,936) (39,327) (89,936)
----------- ----------- ----------- -----------
Accumulated Translation Adjustment:
Balance, Beginning of Period............................... 9,618 5,122 6,942 4,384
Translation Gain(Loss) (net of tax)...................... (174) 1,996 2,502 2,734
----------- ----------- ----------- -----------
Balance, End of Period..................................... 9,444 7,118 9,444 7,118
----------- ----------- ----------- -----------
Deferred Compensation:
Balance, Beginning of Period............................... (22,131) (19,119) (17,438) (16,347)
Awards Granted........................................... (8,434) (7,944) (13,247) (14,322)
Amortization of Deferred Compensation.................... 3,139 2,186 5,476 5,487
Other.................................................... 62 980 (2,155) 1,285
----------- ----------- ----------- -----------
Balance, End of Period..................................... (27,364) (23,897) (27,364) (23,897)
----------- ----------- ----------- -----------
Treasury Stock:
Balance, Beginning of Period............................... (88,821) - (153,644) -
Purchase of Common Stock (4,488,298 shares in 1995)...... (37,181) (71,099) (139,674) (74,921)
Acquisition of Subsidiary Bank (4,963,381 shares)........ (1) - 153,500 -
Cancellation of Shares Held in Treasury.................. - - 8,400 -
Other.................................................... 9,492 7,983 14,907 11,805
----------- ----------- ----------- -----------
Balance, End of Period..................................... (116,511) (63,116) (116,511) (63,116)
----------- ----------- ----------- -----------
Total Shareholders' Equity, End of Period.................... $3,602,266 $3,250,143 $3,602,266 $3,250,143
=========== =========== =========== ===========
</TABLE>
<PAGE>
Page 5
<TABLE>
<CAPTION>
NBD BANCORP, Inc. Consolidated Statement of Cash Flows
(in thousands)
Six Months Ended
June 30
---------------------------
1995 1994
------------ ------------
Cash Flows from Operating Activities:
<S> <C> <C>
Net Income.................................................................. $ 284,333 $ 242,485
Adjustments to Reconcile Net Income to Net Cash Provided by Operations:
Depreciation and Amortization............................................. 55,030 50,724
Provision for Possible Credit Losses...................................... 40,187 24,039
Securities Gains.......................................................... (1,684) (305)
Extraordinary Item - Redemption of Debt................................... - 7,730
Increase in Interest Receivable........................................... (84,056) (23,380)
Decrease in Current Income Taxes Payable.................................. (24,528) (11,884)
Increase(Decrease) in Accrued Expenses.................................... 72,014 (61,956)
Increase in Trading Account Investments................................... (20,741) (99,663)
(Increase)Decrease in Mortgages Held for Sale............................. (22,284) 216,747
Other, net................................................................ (4,568) 15,952
------------ ------------
Net Cash Provided by Operating Activities............................... 293,703 360,489
------------ ------------
Cash Flows from Investing Activities:
Decrease in Interest-Bearing Deposits....................................... 69,516 90,358
Decrease(Increase) in Federal Funds Sold and Resale Agreements.............. 261,613 (34,023)
Purchase of Investment Securities Available-for-Sale........................ (1,037,643) (3,240,460)
Proceeds from Maturity or Call of Investment Securities Available-for-Sale.. 653,739 1,344,020
Proceeds from Sale of Investment Securities Available-for-Sale.............. 1,734,571 387,517
Purchase of Investment Securities Held-to-Maturity.......................... (19,794) (2,671,607)
Proceeds from Maturity or Call of Investment Securities Held-to-Maturity.... 516,877 1,062,770
Increase in Loans and Leases................................................ (2,153,018) (1,486,161)
Proceeds from Sale of Loan Portfolios....................................... 12,253 -
Purchase of Premises and Equipment and Other Assets......................... (51,915) (249,111)
Proceeds from Sale of Premises and Equipment and Other Assets............... 18,265 37,076
Net Cash Acquired(Paid) in Purchase of Subsidiaries......................... 17,290 (5,788)
------------ ------------
Net Cash Provided(Used) by Investing Activities........................... 21,754 (4,765,409)
------------ ------------
Cash Flows from Financing Activities:
(Decrease)Increase in Deposits.............................................. (1,519,693) 1,090,329
Increase in Short-Term Borrowings........................................... 729,052 2,463,980
Proceeds from the Issuance of Long-Term Debt................................ 625,000 1,200,000
Principal Payments on Long-Term Debt........................................ (115,802) (100,939)
Redemption of Long-Term Debt................................................ - (208,734)
Proceeds from Stock Option Exercises........................................ 834 805
Payments to Acquire Treasury Stock.......................................... (139,674) (74,921)
Dividends Paid.............................................................. (105,289) (91,606)
------------ ------------
Net Cash (Used)Provided by Financing Activities........................... (525,572) 4,278,914
------------ ------------
Effect of Exchange Rate Changes on Cash and Due From Banks.................... (1,412) 10
------------ ------------
Net Increase in Cash and Due From Banks....................................... (211,527) (125,996)
Cash and Due From Banks - Beginning of Period................................. 2,587,007 2,405,694
------------ ------------
Cash and Due From Banks - End of Period....................................... $ 2,375,480 $ 2,279,698
============ ============
Other Cash Flow Disclosures:
Interest Paid............................................................... $ 844,360 $ 640,731
State and Federal Taxes Paid................................................ 170,680 131,025
</TABLE>
<PAGE>
Page 6
Notes to Consolidated Financial Statements
------------------------------------------
Note A - Accounting Policies
- ----------------------------
Accounting policies of NBD Bancorp, Inc. and its subsidiaries (the
Corporation) are described below.
Basis of Presentation:
---------------------
The unaudited consolidated financial statements as of and for the three
and six months ended June 30, 1995 and 1994, are prepared in conformity
with generally accepted accounting principles for interim financial
information and the rules and regulations of the Securities and Exchange
Commission. In the opinion of management, all adjustments (consisting
only of normal recurring accruals) necessary for a fair presentation have
been included. 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.
Gains and losses realized on the sale of Investment Securities are
determined on the specific identification method and included in
Securities Gains(Losses).
<PAGE>
Page 7
Notes to Consolidated Financial Statements (cont'd.)
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 Six Months Ended
June 30 June 30
------------------------ ------------------------
1995 1994 1995 1994
---------- ------------ ----------- -----------
Average Shares
Outstanding.. 157,666,309 160,321,949 158,560,032 160,708,551
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 June 30, 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........................... $ 423,089 $ 2,863 $ 35 $ 425,917
U.S. Government Agencies:
Mortgage-backed Securities............ 1,504,874 715 24,936 1,480,653
Collateralized Mortgage Obligations... 1,497,034 6,813 15,514 1,488,333
Other................................. 205,270 832 44 206,058
States and Political Subdivisions....... 88,933 145 1 89,077
Collateralized Mortgage Obligations(a).. 97,741 310 144 97,907
Other................................... 230,995 2,593 34,816 198,772
----------- ----------- ----------- -----------
Total............................... $4,047,936 $ 14,271 $ 75,490 $3,986,717
=========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
Investment Securities Held-to-Maturity
--------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
----------- ----------- ----------- -----------
(in thousands)
<S> <C> <C> <C> <C>
U.S. Treasury........................... $ 515,989 $ 4,144 $ 763 $ 519,370
U.S. Government Agencies:
Mortgage-backed Securities............ 5,277,633 110,531 59,025 5,329,139
Other................................. 7,836 18 85 7,769
States and Political Subdivisions....... 1,303,666 77,931 4,351 1,377,246
Other................................... 500 - - 500
----------- ----------- ----------- -----------
Total............................... $7,105,624 $ 192,624 $ 64,224 $7,234,024
=========== =========== =========== ===========
(a) All 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
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
Investment Securities Held-to-Maturity
------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
------------ ------------ ------------ ------------
(in thousands)
<S> <C> <C> <C> <C>
U.S. Treasury........................... $ 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 Collateralized Mortgage Obligations of private issuers have underlying collateral
consisting of obligations of U.S. Government Agencies.
</TABLE>
Note C - Allowance For Possible Credit Losses
- ---------------------------------------------
The changes in the Allowance for Possible Credit Losses are summarized below:
Six Months Ended
June 30
-------------------------
1995 1994
--------- ---------
(in thousands)
Balance, Beginning of Period.......... $435,051 $423,030
Provision.......................... 40,187 24,039
Charge-offs........................ (50,355) (61,925)
Recoveries......................... 42,205 38,052
--------- ---------
Net Charge-offs.................. (8,150) (23,873)
Acquisition and Other.............. 2,715 290
--------- ---------
Balance, End of Period................ $469,803 $423,624
========= =========
<PAGE>
Page 10
Notes to Consolidated Financial Statements (cont'd.)
Note D - Interest Rate Contracts
- --------------------------------
The Corporation, in the normal course of business, utilizes various types of
contracts for managing the market risk in its balance sheet instruments, for
accommodating customer needs, including mitigating the risk in customer
accommodation contracts, and, on a limited scale, generating trading profits.
These contracts include interest rate swaps, futures and option contracts.
The following tables show the contract or notional amount of risk management
contracts and the related unrealized gains and losses as of the periods
indicated.
<TABLE>
<CAPTION>
Risk Management Contracts:
June 30, 1995
--------------------------------------------------
Contract or Net
Notional Unrealized Unrealized Unrealized
Amount Gains Losses Gains(Losses)
----------- ----------- ----------- -----------
(in thousands)
Interest Rate Swaps:
Modifying the Interest Rate Characteristics of:
<S> <C> <C> <C> <C>
Interest-Earning Assets......................... $ 700,653 $ 473 $ (22,428) $ (21,955)
Interest-Bearing Liabilities.................... 1,430,000 24,999 (13,638) 11,361
----------- ----------- ----------- -----------
$2,130,653 25,472 (36,066) (10,594)
===========
Futures and Options Contracts:
Purchased:
Modifying the Interest Rate Characteristics of
Interest-Earning Assets........................ $ 60,096 - (50) (50)
Sold:
Modifying the Interest Rate Characteristics of
Interest-Earning Assets........................ 700,000 - - -
-----------
$ 760,096
=========== ----------- ----------- -----------
$ 25,472 $ (36,116) $ (10,644)
=========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
December 31, 1994
--------------------------------------------------
Contract or Net
Notional Unrealized Unrealized Unrealized
Amount Gains Losses Gains(Losses)
----------- ----------- ----------- -----------
(in thousands)
Interest Rate Swaps:
Modifying the Interest Rate Characteristics of:
<S> <C> <C> <C> <C>
Interest-Earning Assets......................... $ 686,095 $ 1,072 $ (8,231) $ (7,159)
Interest-Bearing Liabilities.................... 1,209,028 20,197 (8,368) 11,829
----------- ----------- ----------- -----------
$1,895,123 21,269 (16,599) 4,670
===========
Futures and Options Contracts Purchased:
Modifying the Interest Rate Characteristics of
Interest-Earning Assets......................... $ 11,103 299 - 299
=========== ----------- ----------- -----------
$ 21,568 $ (16,599) $ 4,969
=========== =========== ===========
</TABLE>
Unrealized gains and losses in the preceding tables are calculated based on
differences between current market interest rates, as of the dates indicated,
and the interest rates specified in the contracts. Unrealized gains are also
a measure of the credit risk applicable to the contracts. Credit risk occurs
when one party to a contract fails to perform in accordance with the terms
of the contract.
Gains and losses can also occur if the Corporation should elect to terminate
a contract prior to maturity. Such realized gains or losses are deferred and
recognized over the period to which the risk management contract related.
As of June 30, 1995, there was $5,179,000 of deferred losses which will be
amortized over a period of approximately two years.
<PAGE>
Page 11
Notes to Consolidated Financial Statements (cont'd.)
The following tables show the contract or notional amount and the fair value
of customer accommodation and other contracts at June 30, 1995, and December
31, 1994. Fair values are the amounts that would be received (asset amount)
and the amounts that would be paid (liability amount) to replace existing
contracts with new contracts given current market interest rates.
<TABLE>
<CAPTION>
Customer Accommodation and
Other Contracts:
June 30, 1995
----------------------------------------
Contract or Fair Value
Notional --------------------------
Amount Asset Liability
------------ ------------ ------------
(in thousands)
Interest Rate Swaps:
<S> <C> <C> <C>
Receive Fixed............ $ 744,238 $ 17,839 $ 13,840
Pay Fixed................ 653,056 13,331 14,966
Basis.................... 450,000 393 304
------------ ------------ ------------
$ 1,847,294 31,563 29,110
============
Futures Contracts:
Purchased................ $ 10,799 - 427
Sold..................... 1,439,850 - -
Interest Rate Options:
Purchased................ 226,062 1,436 -
Written.................. 633,777 - 1,407
------------ ------------
$ 32,999 $ 30,944
============ ============
</TABLE>
<TABLE>
<CAPTION>
December 31, 1994
----------------------------------------
Contract or Fair Value
Notional --------------------------
Amount Asset Liability
------------ ------------ ------------
(in thousands)
Interest Rate Swaps:
<S> <C> <C> <C>
Receive Fixed............ $ 666,419 $ 6,008 $ 17,262
Pay Fixed................ 584,388 15,963 5,683
Basis.................... 430,000 75 64
------------ ------------ ------------
$ 1,680,807 22,046 23,009
============
Futures Contracts:
Purchased................ $ 69,100 - -
Sold..................... 614,100 - -
Interest Rate Options:
Purchased................ 224,904 4,415 -
Written.................. 224,892 - 4,435
------------ ------------
$ 26,461 $ 27,444
============ ============
</TABLE>
In contrast to risk management contracts, where only realized gains and
losses in value are recorded, unrealized valuation changes for customer
accommodation and other contracts are recognized and recorded currently in
Non-Interest Income. The net amount of such gains and losses recognized in
each of the following periods was:
Six Months Ended June 30
--------------------------
1995 1994
------------ ------------
(in thousands)
Interest Rate Swaps....... $ 3,700 $ (28)
Futures Contracts......... (3,994) 907
Interest Rate Options..... 80 35
------------ ------------
$ (214) $ 914
============ ============
<PAGE>
Page 12
Notes to Consolidated Financial Statements (cont'd.)
Note E - Assets Pledged
- -----------------------
Assets, principally Investment Securities, carried at approximately
$6,655,578,000 were pledged at June 30, 1995, to secure public deposits
(including deposits of $66,930,000 of the Treasurer, State of Michigan),
repurchase agreements and for other purposes required by law.
Note F - Extraordinary Item
- ----------------------------
On March 15, 1994, an extraordinary item charge of $7,730,000 (net of income
taxes) was incurred, representing the premium paid and unamortized issuance
costs related to the Corporation's call and redemption of the $199,985,000
7.25% Convertible Subordinated Debentures Due 2006.
Note G - Commitments and Contingencies
- --------------------------------------
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 June 30, 1995, totaled approximately
$2,373,000,000.
Note H - Subsequent Event
- -------------------------
The Corporation and First Chicago Corporation (First Chicago) entered into
an Agreement and Plan of Merger, dated July 11, 1995, pursuant to which First
Chicago will merge with and into the Corporation. The name of the combined
companies will be First Chicago NBD Corporation (FCNBD). It is anticipated
that the merger will be accounted for as a pooling-of-interests and will be
consummated by early 1996, pending approvals of stockholders of the
Corporation and First Chicago, regulatory approvals, and other customary
conditions of closing.
Pursuant to the merger agreement, 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.
Each share of common stock of the Corporation will remain outstanding after
the merger and represent one share of FCNBD.
At the effective time of the merger, each share of First Chicago's
outstanding series of preferred stock will be exchanged for one share of
FCNBD preferred stock with terms substantially identical to those of the
existing First Chicago preferred stock.
In connection with the execution of the merger agreement, the Corporation
granted First Chicago an option to purchase, under certain circumstances, up
to 19.9 percent of the Corporation's outstanding shares of common stock.
First Chicago also granted the Corporation an option to purchase, under
certain circumstances, up to 19.9 percent of First Chicago's outstanding
shares of common stock.
<PAGE>
Page 13
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 June 30 Six Months Ended June 30
----------------------------- -----------------------------
1995 1994 Change 1995 1994 Change
---------- ---------- ------- ---------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
Net Interest Income...................................... $ 428,573 $ 406,388 5.5 % $ 849,265 $ 787,648 7.8 %
Provision for Possible Credit Losses..................... 20,091 8,579 134.2 40,187 24,039 67.2
Non-Interest Income...................................... 145,406 133,948 8.6 281,136 272,698 3.1
Non-Interest Expenses.................................... 336,258 332,309 1.2 659,729 654,628 0.8
---------- ---------- ---------- ----------
Income before Income Taxes............................... 217,630 199,448 9.1 430,485 381,679 12.8
Income Tax Expense....................................... 74,188 64,224 15.5 146,152 123,579 18.3
---------- ---------- ---------- ----------
Income before Extraordinary Item and Accounting Change... 143,442 135,224 6.1 284,333 258,100 10.2
Extraordinary Item (Redemption of Debt).................. - - - (7,730)
Cumulative Effect of Accounting Change (SFAS No. 112).... - - - (7,885)
---------- ---------- ---------- ----------
Net Income............................................... $ 143,442 $ 135,224 6.1 % $ 284,333 $ 242,485 17.3 %
- --------------------------------------------------------------------------------------------------------------------------
Per Share:
Income before Extraordinary Item and
Accounting Change.................................... $ 0.91 $ 0.84 8.3 % $ 1.79 $ 1.61 11.2 %
Net Income............................................. 0.91 0.84 8.3 1.79 1.51 18.5
Net Interest Margin...................................... 4.06 % 4.28 % 4.04 % 4.30 %
- --------------------------------------------------------------------------------------------------------------------------
Stock Data (per share)
Cash Dividends Declared.................................. $ 0.33 $ 0.30 10.0 % $ 0.66 $ 0.60 10.0 %
Book Value (period end).................................. 22.92 20.47 12.0 22.92 20.47 12.0
Market Value:
Period End............................................. 32 31 5/8 32 31 5/8
High................................................... 33 1/4 32 33 1/4 32
Low.................................................... 30 1/8 27 3/8 27 3/8 27 1/4
Average Shares Outstanding............................... 157,666 160,322 158,560 160,709
- --------------------------------------------------------------------------------------------------------------------------
Financial and Capital Ratios
Return on Average Shareholders' Equity:
Before Extraordinary Item and Accounting Change........ 16.02 % 16.39 % 16.07 % 15.55 %
After Extraordinary Item and Accounting Change......... 16.02 16.39 16.07 14.65
Return on Average Assets:
Before Extraordinary Item and Accounting Change........ 1.20 1.24 1.19 1.22
After Extraordinary Item and Accounting Change......... 1.20 1.24 1.19 1.15
Capital Ratios (period end):
Tier 1 Capital Ratio................................... 7.99 8.85 7.99 8.85
Total Capital Ratio.................................... 12.25 12.53 12.25 12.53
Tier 1 Leverage Ratio.................................. 6.91 6.80 6.91 6.80
</TABLE>
<TABLE>
<CAPTION>
Balance Sheet Data June 30 December 31 June 30
1995 1994 1994
------------ ------------ ------------
<S> <C> <C> <C>
Total Assets............................................. $48,050,694 $47,111,133 $45,232,112
Total Earning Assets..................................... 43,920,104 42,805,177 41,332,654
Total Loans and Leases................................... 31,967,165 29,229,664 26,849,896
Total Goodwill........................................... 319,209 245,003 254,848
Total Deposits........................................... 32,555,159 33,229,441 30,943,386
Total Common Shareholders' Equity........................ 3,602,266 3,291,543 3,250,143
- --------------------------------------------------------------------------------------------------------------------------
Credit Quality June 30 December 31 June 30
1995 1994 1994
------------ ------------ ------------
Allowance for Possible Credit Losses..................... $ 469,803 $ 435,051 $ 423,624
Nonperforming Loans...................................... 178,905 180,041 225,577
Other Real Estate Owned.................................. 28,365 29,376 26,263
Total Nonperforming Assets............................... 207,270 209,417 251,840
Net Loan Charge-offs (quarter-ended)..................... 8,654 8,732 8,503
- --------------------------------------------------------------------------------------------------------------
Ratios:
Nonperforming Loans to Total Loans..................... 0.56 % 0.62 % 0.84 %
Allowance to Total Loans............................... 1.47 1.49 1.58
Allowance to Nonperforming Loans....................... 262.60 241.64 187.80
Net Loan Charge-offs (quarter-ended) (annualized)...... 0.11 0.12 0.13
</TABLE>
<PAGE>
Page 14
SUMMARY OF OPERATIONS
- ---------------------
Net Income for the second quarter of 1995 totaled $143,442,000, or $.91 per
share. This was 6 percent higher than the $135,224,000, or $.84 per share,
earned in the second quarter of 1994.
For the first six months of 1995, Net Income was $284,333,000, or $1.79 per
share, a 10 percent increase over the $258,100,000, or $1.61 per share, of
Income before the effect of an extraordinary item and an accounting change
for the first six months of 1994. Net Income for the first six months of
1994 was $242,485,000, or $1.51 per share.
An extraordinary charge of $7,730,000 (net of income taxes), or five cents
per share, was incurred in the first quarter of 1994 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.
Results for 1995 include the $910 million asset AmeriFed Financial Corp.,
which was acquired on January 9, 1995, and accounted for as a purchase.
On July 12, 1995, the Corporation announced the signing of a definitive
merger agreement pursuant to which First Chicago Corporation, a $72 billion
asset bank holding company headquartered in Chicago, Illinois, would merge
with and into NBD Bancorp, Inc. See Note H to the interim consolidated
financial statements for further information on the merger agreement. On
July 1, 1995, the Corporation completed its acquisition of Deerbank
Corporation, a thrift holding company with $760 million in assets
headquartered in Deerfield, Illinois.
<TABLE>
<CAPTION>
Table 1
Summary of Operations
(in thousands except per share data)
Quarter Ended Year-to-Date
---------------------------------------------------------- ------------------------
June March December September June June 30
1995 1995 1994 1994 1994 1995 1994
---------- ---------- ---------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Interest Income - Including Taxable
Equivalent Adjustment.................. $ 918,744 $ 886,955 $ 828,739 $ 778,523 $ 719,742 $1,805,699 $1,371,739
Interest Expense........................ (475,372) (451,396) (391,431) (348,286) (296,990) (926,768) (550,909)
---------- ---------- ---------- ---------- ---------- ----------- -----------
Net Interest Income - Taxable
Equivalent........................... 443,372 435,559 437,308 430,237 422,752 878,931 820,830
Taxable Equivalent Adjustment........... (14,799) (14,867) (14,979) (15,446) (16,364) (29,666) (33,182)
---------- ---------- ---------- ---------- ---------- ----------- -----------
Net Interest Income..................... 428,573 420,692 422,329 414,791 406,388 849,265 787,648
Provision For Possible Credit Losses.... (20,091) (20,096) (20,086) (7,907) (8,579) (40,187) (24,039)
Securities Gains(Losses)................ 308 1,376 (3,514) 740 (85) 1,684 305
Other Non-Interest Income (Table 2)..... 145,098 134,354 139,785 135,857 134,033 279,452 272,393
---------- ---------- ---------- ---------- ---------- ----------- -----------
Total Non-Interest Income.............. 145,406 135,730 136,271 136,597 133,948 281,136 272,698
---------- ---------- ---------- ---------- ---------- ----------- -----------
Compensation............................ (184,468) (177,297) (183,495) (181,728) (178,762) (361,765) (355,510)
Other Non-Interest Expenses (Table 3)... (151,790) (146,174) (143,655) (140,764) (153,547) (297,964) (299,118)
---------- ---------- ---------- ---------- ---------- ----------- -----------
Total Non-Interest Expenses............ (336,258) (323,471) (327,150) (322,492) (332,309) (659,729) (654,628)
---------- ---------- ---------- ---------- ---------- ----------- -----------
Income Before Taxes..................... 217,630 212,855 211,364 220,989 199,448 430,485 381,679
Applicable Taxes........................ (74,188) (71,964) (69,839) (73,335) (64,224) (146,152) (123,579)
---------- ---------- ---------- ---------- ---------- ----------- -----------
Income before Extraordinary Item and
Cumulative Effect of Accounting Change 143,442 140,891 141,525 147,654 135,224 284,333 258,100
Extraordinary Item..................... - - - - - - (7,730)
Cumulative Effect of Accounting Change - - - - - - (7,885)
---------- ---------- ---------- ---------- ---------- ----------- -----------
Net Income.............................. $ 143,442 $ 140,891 $ 141,525 $ 147,654 $ 135,224 $ 284,333 $ 242,485
========== ========== ========== ========== ========== =========== ===========
Income Per Share:
Income before Extraordinary Item and
Accounting Change.................... $ 0.91 $ 0.88 $ 0.91 $ 0.93 $ 0.84 $ 1.79 $ 1.61
Net Income............................. $ 0.91 $ 0.88 $ 0.91 $ 0.93 $ 0.84 $ 1.79 $ 1.51
Average Shares Outstanding.............. 157,666 159,464 156,279 157,667 160,322 158,560 160,709
Average Earning Assets (in millions).... $ 43,764 $ 43,550 $ 41,906 $ 41,242 $ 39,540 $ 43,658 $ 38,341
Net Interest Margin..................... 4.06 % 4.02 % 4.16 % 4.16 % 4.28 % 4.04 % 4.30 %
Expense Ratio........................... 57.14 % 56.76 % 56.69 % 56.97 % 59.68 % 56.95 % 59.88 %
</TABLE>
<PAGE>
Page 15
Net Interest Income
Taxable equivalent net interest income in the second quarter of 1995 was
$443.4 million, an increase of $20.6 million, or 4.9 percent, compared with
the second quarter of last year. The growth was attributable to an increase
of $4.2 billion, or 10.7 percent, in average earning assets, partially offset
by a lower net interest margin, which decreased 22 basis points from 4.28
percent in the second quarter of 1994 to 4.06 percent in the second quarter
of 1995.
For the first six months of 1995, taxable equivalent net interest income rose
$58.1 million, or 7.1 percent, over the corresponding period of 1994. The
increase was attributable to a $5.3 billion, or 13.9 percent, increase in
average earning assets, partially offset by a 26 basis point decrease in the
net interest margin.
Further detail on average balances, yields and rates is shown in Table 7.
Provision for Possible Credit Losses
The Provision for Possible Credit Losses in the second quarter of 1995
amounted to $20.1 million, an increase from the $8.6 million in the same
period one year ago, reflecting increased loan and lease volume. On a year-
to-date basis, the provision was $40.2 million in 1995 versus $24.0 million
in 1994. 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 $145.1
million in the second quarter of 1995 versus $134.0 million in the comparable
period of 1994, an increase of $11.1 million, or 8.3 percent. For the first
half of 1995 and 1994, Other Non-Interest Income totaled $279.5 million and
$272.4 million, respectively. Table 2 and its related discussion provide
additional details of the composition of Other Non-Interest Income.
Compensation
In the second quarter of 1995, compensation expense amounted to $184.5
million, which was $5.7 million, or 3.2 percent, higher than the second
quarter of 1994.
For the first half of 1995, compensation expense was $361.8 million, an
increase of $6.3 million, or 1.8 percent, compared with the first half of
1994. Salaries increased $5.1 million, or 1.9 percent, the net result of a
4.5 percent average merit increase partially offset by a 2.9 percent decrease
in average full-time equivalent employment. Benefits expense increased $1.2
million, or 1.4 percent.
<PAGE>
Page 16
Other Non-Interest Expenses
Non-Interest Expenses (excluding compensation expense) totaled $151.8 million
for the second quarter of 1995 compared with $153.5 million for the same
quarter one year ago, a decrease of 1.1 percent. On a year-to-date basis,
Other Non-Interest Expenses decreased 0.4 percent. Table 3 provides detail
on the components of Other Non-Interest Expenses.
Income Taxes
Income Tax Expense was $74.2 million in the second quarter of 1995 versus
$64.2 million in the same quarter last year. For the first half of 1995 and
1994, Income tax expense was $146.2 million and $123.6 million, respectively.
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 six months of both 1995 and 1994.
<PAGE>
Page 17
OTHER NON-INTEREST INCOME
- -------------------------
The table below provides details of the composition of Other Non-Interest
Income. The decrease of $4.3 million in Profit on Mortgage Sales for the
first six months of 1995 compared with the comparable 1994 period was due to
lower residential mortgage originations and related sales activity.
<TABLE>
<CAPTION>
Table 2
Other Non-Interest Income
(in thousands)
Quarter Ended Year-to-Date
------------------------------------------ ----------------
June March Dec. Sept. June June 30
1995 1995 1994 1994 1994 1995 1994
-------- -------- -------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Deposit Service Charges.................$ 40,964 $ 40,107 $ 39,475 $ 40,752 $ 38,790 $ 81,071 $ 79,769
Trust Income............................ 42,242 38,511 40,042 39,400 39,803 80,753 77,913
Credit Card Fees........................ 10,615 9,516 10,446 10,052 9,691 20,131 18,068
Data Processing Fees.................... 8,741 7,979 8,214 8,416 7,830 16,720 15,044
Letter of Credit Fees................... 7,301 5,635 7,032 5,583 5,586 12,936 10,278
Other Domestic and International Fees... 6,474 4,980 5,641 5,105 5,062 11,454 10,963
Foreign Exchange and Translation........ 5,160 4,105 4,174 3,219 3,138 9,265 6,103
Insurance Premiums and Commissions...... 3,650 4,187 3,255 3,552 3,886 7,837 8,227
Mortgage Loan Servicing................. 3,818 3,770 3,933 4,061 4,162 7,588 8,274
Retail Banking Fees..................... 3,302 3,550 3,172 3,583 3,380 6,852 6,679
Rental Income........................... 2,584 2,466 2,575 2,574 2,630 5,050 5,286
Mutual Fund and Annuity Product Fees.... 1,874 2,083 2,038 1,742 1,506 3,957 3,248
OREO Gains.............................. 1,419 940 1,497 1,172 1,892 2,359 3,715
Securities Trading and Underwriting..... 1,242 585 1,433 1,278 1,434 1,827 2,920
Profit(Loss) on Mortgage Sales.......... (115) (516) (636) 112 (193) (631) 3,670
Other................................... 5,827 6,456 7,494 5,256 5,436 12,283 12,236
-------- -------- -------- -------- -------- -------- --------
Total Other Non-Interest Income......$145,098 $134,354 $139,785 $135,857 $134,033 $279,452 $272,393
======== ======== ======== ======== ======== ======== ========
</TABLE>
<PAGE>
Page 18
OTHER NON-INTEREST EXPENSES
- ---------------------------
The table below provides details of the composition of Other Non-Interest
Expenses. The expense ratio for the first half of 1995 improved to 56.95
percent from 59.88 percent for the 1994 period.
The increase in Marketing expense from the first quarter of 1995 was largely
the result of a direct mail solicitation program for credit cards. The
decrease in Operating and Other Taxes from the first quarter of 1995 was
attributable to a refund of prior years' Indiana bank taxes.
<TABLE>
<CAPTION>
Table 3
Other Non-Interest Expenses
(in thousands)
Quarter Ended Year-to-Date
------------------------------------------ ----------------
June March Dec. Sept. June June 30
1995 1995 1994 1994 1994 1995 1994
-------- -------- -------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Occupancy...............................$ 29,920 $ 30,407 $ 27,962 $ 29,242 $ 29,968 $ 60,327 $ 60,049
Equipment............................... 23,220 23,214 22,197 21,842 23,597 46,434 45,551
FDIC & Other Regulatory Assessments..... 16,507 16,607 16,616 16,631 16,741 33,114 33,416
Telephone............................... 8,847 8,173 7,379 7,687 9,214 17,020 16,066
Marketing............................... 9,931 5,656 6,595 5,351 5,995 15,587 9,941
Amortization of Intangibles............. 7,521 7,504 6,290 6,415 6,577 15,025 13,101
Professional Services................... 7,540 6,851 7,033 6,449 7,567 14,391 14,000
Purchased Services...................... 7,516 6,172 6,518 7,255 7,577 13,688 14,715
Operating and Other Taxes............... 4,285 6,581 6,056 5,699 6,016 10,866 12,882
Postage................................. 5,289 5,225 4,680 5,168 4,719 10,514 9,993
Travel and Entertainment................ 4,553 3,764 4,599 3,913 4,025 8,317 7,680
Public Relations........................ 3,742 3,782 3,987 2,968 3,082 7,524 5,668
Stationery and Supplies................. 3,202 4,123 3,844 3,803 4,269 7,325 8,985
Loan and Credit Charges................. 2,360 2,075 2,362 1,841 2,811 4,435 4,878
Armored Carrier and Cartage............. 1,836 1,970 1,918 2,084 2,198 3,806 4,017
Federal Reserve Service Charges......... 1,620 1,525 1,596 1,913 2,060 3,145 4,018
Other Insurance......................... 927 892 804 938 961 1,819 1,874
OREO Expense............................ 982 466 822 950 1,440 1,448 2,410
Other................................... 11,992 11,187 12,397 10,615 14,730 23,179 29,874
-------- -------- -------- -------- -------- -------- --------
Total Other Non-Interest Expenses....$151,790 $146,174 $143,655 $140,764 $153,547 $297,964 $299,118
======== ======== ======== ======== ======== ======== ========
</TABLE>
<PAGE>
Page 19
FINANCIAL CONDITION AND CAPITAL ACCOUNTS
- ----------------------------------------
The Corporation's consolidated balance sheet is presented on pages 1 and 2.
Total assets at June 30, 1995, were $48.1 billion, an increase of $0.9
billion since year-end 1994, principally the net result of an increase of
$2.7 billion in Loans and Leases partially offset by a decrease of $1.3
billion in Investment Securities.
The $1.3 billion decrease in Investment Securities since year-end 1994
primarily reflects decreases in mortgage-backed U.S. Agency Securities due
to sales from the Available-for-Sale portfolio and maturities from the Held-
to-Maturity portfolio.
The increase in Total Loans and Leases of $2.7 billion since December 31,
1994, was mainly attributable to commercial loan growth of $1.3 billion and
an increase in residential mortgages of $0.8 billion. The increase in
residential mortgages related mostly to the AmeriFed acquisition.
The $0.6 billion increase in Total Liabilities since year-end 1994 was
primarily the result of a $1.2 billion increase in Short-Term Borrowings and
Long-Term Debt, partially offset by a $0.7 billion decrease in deposit
liabilities.
The decrease of $0.7 billion in total deposits was comprised of a decrease
of $2.1 billion in Foreign Office Deposits partially offset by an increase
of $1.6 billion in Time Deposits. Savings decreased $206 million, while
Demand and Money Market Accounts increased $75 million and $21 million,
respectively. The increase of $1.6 billion in Time Deposits consisted of a
$1.4 billion increase in retail deposits and a $0.2 billion increase in large
certificates of deposit. The increase in retail deposits reflected a
leveling of the growth trend noted in the first quarter of this year caused
by the competitive rate structure instituted by the Corporation's banks in
1994. The $2.1 billion decrease in Foreign Office Deposits occurred
concurrent with the increases of $0.7 billion in Short-Term Borrowings and
$0.2 billion in large certificates of deposit, which are alternative sources
of short-term funding, and the increase of $0.5 billion in Long-Term Debt.
The increase of $0.7 billion in Short-Term Borrowings mostly reflects
increases in Federal Funds purchased, while the increase in Long-Term Debt
of $0.5 billion reflects $300 million of bank note issuances since year-end
1994 and the issuance in May 1995 of $200 million 7.125% Fixed Rate
Subordinated Notes Due 2007.
Shareholders' Equity totaled $3.6 billion at June 30, 1995, an increase of
$311 million since year-end 1994. In addition to a net increase of $179
million in Retained Earnings, the increase was also caused by a positive
change in fair value of $115 million (net of tax) in Investment Securities
Available-for-Sale, and a net decrease of $37 million in the amount of
Treasury Stock held.
<PAGE>
Page 20
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)
June 30 March 31 Dec. 31 Sept. 30 June 30
1995 1995 1994 1994 1994
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Capital Components:
Tier 1 Capital:
Common Shareholders' Equity........ $3,602,266 $3,504,996 $3,291,543 $3,254,587 $3,250,143
Intangible Assets and Other
Adjustments................... (303,510) (269,401) (111,670) (159,834) (187,852)
----------- ----------- ----------- ----------- -----------
Total Tier 1 Capital............. $3,298,756 $3,235,595 $3,179,873 $3,094,753 $3,062,291
=========== =========== =========== =========== ===========
Total Capital:
Common Shareholders' Equity........ $3,602,266 $3,504,996 $3,291,543 $3,254,587 $3,250,143
Qualifying Allowance for Possible
Credit Losses................. 469,803 458,157 435,051 423,700 423,624
Qualifying Long-Term Debt.......... 1,300,000 1,102,000 1,102,000 852,000 852,000
Intangible Assets and Other
Adjustments................... (313,084) (276,828) (117,021) (164,006) (191,898)
----------- ----------- ----------- ----------- -----------
Total Capital.................... $5,058,985 $4,788,325 $4,711,573 $4,366,281 $4,333,869
=========== =========== =========== =========== ===========
Ratios (End of Period):
Risk-Based Capital Ratios:
Tier 1 Capital Ratio............... 7.99 % 8.20 % 8.44 % 8.63 % 8.85 %
Total Capital Ratio................ 12.25 % 12.14 % 12.50 % 12.18 % 12.53 %
Tier 1 Leverage Ratio............... 6.91 % 6.81 % 6.77 % 6.82 % 6.80 %
</TABLE>
<PAGE>
Page 21
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 June 30, 1995, of $469.8 million was equal to 1.47 percent
of total loans and leases, slightly below the percentages at December 31,
1994, and June 30, 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 262.60 percent as of June 30, 1995, compared with 241.64
percent at year-end 1994 and 187.80 percent at June 30, 1994.
The Corporation recorded net charge-offs of $8.2 million for the first six
months of 1995, representing an annualized net charge-off ratio of 0.05
percent, compared with net charge-offs of $23.9 million and an annualized net
charge-off ratio of 0.18 percent in the comparable period of 1994.
Nonperforming loans and leases totaled $178.9 million as of June 30, 1995,
compared with $180.0 million at December 31, 1994, and $225.6 million at the
end of the second quarter of 1994.
<TABLE>
<CAPTION>
Table 5
(dollars in thousands)
Allowance for Possible Credit Losses
Quarter Ended Year-to-Date
------------------------------------------------- -------------------
June March December September June June 30
1995 1995 1994 1994 1994 1995 1994
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at Beginning of Period..........$458,157 $435,051 $423,700 $423,624 $423,410 $435,051 $423,030
Provision for Credit Losses............. 20,091 20,096 20,086 7,907 8,579 40,187 24,039
Acquisition and Other................... 209 2,506 (3) 30 138 2,715 428
Charge-Offs............................. (31,116) (19,239) (33,706) (25,395) (30,881) (50,355) (61,925)
Recoveries.............................. 22,462 19,743 24,974 17,534 22,378 42,205 38,052
--------- --------- --------- --------- --------- --------- ---------
Net (Charge-Offs)Recoveries.......... (8,654) 504 (8,732) (7,861) (8,503) (8,150) (23,873)
--------- --------- --------- --------- --------- --------- ---------
Balance at End of Period................$469,803 $458,157 $435,051 $423,700 $423,624 $469,803 $423,624
========= ========= ========= ========= ========= ========= =========
Net Loan (Charge-Offs)Recoveries by Category:
Commercial and Foreign.................. $3,605 $4,583 $806 ($2,397) ($3,709) $8,188 ($12,336)
Real Estate Construction................ (3,998) 2,142 765 758 (243) (1,856) (631)
Residential Mortgage.................... (5) (11) (226) (60) (35) (16) (210)
Consumer................................ (8,021) (7,117) (9,547) (6,256) (4,400) (15,138) (10,080)
Lease Financing......................... (235) 907 (530) 94 (116) 672 (616)
--------- --------- --------- --------- --------- --------- ---------
Total Net (Charge-Offs)Recoveries.... ($8,654) $504 ($8,732) ($7,861) ($8,503) ($8,150) ($23,873)
========= ========= ========= ========= ========= ========= =========
Net Charge-Off(Recovery)
Ratio (Annualized)................... 0.11% (0.01)% 0.12% 0.12% 0.13% 0.05% 0.18%
Allowance for Possible Credit Losses as a Percent of:
Total Loans and Leases............... 1.47% 1.49% 1.49% 1.52% 1.58% 1.47% 1.58%
Nonperforming Loans and
Leases.......................... 262.60% 274.76% 241.64% 238.64% 187.80% 262.60% 187.80%
- ---------------------------------------------------------------------------------------------------------------
Analysis of Nonperforming Assets
June 30 March 31 Dec. 31 Sept. 30 June 30
1995 1995 1994 1994 1994
--------- --------- --------- --------- ---------
Loans:
Non-Accrual..........................$159,922 $147,760 $157,141 $177,491 $225,495
Restructured......................... 18,983 18,986 22,900 56 82
--------- --------- --------- --------- ---------
Total Loans........................ 178,905 166,746 180,041 177,547 225,577
Other Real Estate Owned................. 28,365 28,334 29,376 27,962 26,263
--------- --------- --------- --------- ---------
Total Nonperforming Assets.........$207,270 $195,080 $209,417 $205,509 $251,840
========= ========= ========= ========= =========
Nonperforming Assets as a Percent of:
Total Loans and Leases............... 0.65% 0.63% 0.72% 0.74% 0.94%
Allowance for Possible
Credit Losses...................... 44.12% 42.58% 48.14% 48.50% 59.45%
- ---------------------------------------------------------------------------------------------------------------
Loans 90 Days or More Past Due
and Still Accruing Interest.......... $42,380 $42,236 $44,750 $45,984 $40,627
</TABLE>
<PAGE>
Page 22
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 June 30, 1995 Michigan Indiana Illinois All Other Total
- ------------------------------------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net Income................................. $ 93,857 $ 34,820 $ 19,487 $ (4,722) $ 143,442
Average Earning Assets ($ millions)........ 28,757 9,438 5,669 (100) 43,764
Return on Assets........................... 1.20 % 1.34 % 1.26 % - 1.20 %
Full-Time Equivalent Employees............. 8,517 4,776 2,154 2,395 17,842
For the Quarter Ended March 31, 1995
- -------------------------------------------
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 (Before Accounting Changes) 1.34 % 0.96 % 1.45 % - 1.24 %
Full-Time Equivalent Employees............. 8,580 5,224 1,963 2,630 18,397
</TABLE>
<PAGE>
Page 23
AVERAGE BALANCES, YIELDS AND RATES
- ----------------------------------
The following table presents average asset and liability balances and related
yields and rates for the latest five quarters and the year-to-date periods.
<TABLE>
<CAPTION>
Table 7
Average Balances, Yields and Rates
(Yields are on a fully taxable equivalent basis.)
(dollars in millions)
Second Quarter First Quarter Fourth Quarter Third Quarter Second Quarter
1995 1995 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......$ 668 6.99 % $ 711 6.43 % $ 624 5.40 % $ 682 5.37 % $ 655 4.90 %
Federal Funds Sold and
Resale Agreements............ 145 6.18 280 5.95 219 5.39 245 4.62 188 4.09
Trading Account Securities..... 122 5.79 122 5.96 185 5.44 159 4.80 131 4.67
Investment Securities:
U.S. Treasury................. 967 6.58 1,083 6.69 1,095 5.87 1,231 5.55 1,615 5.33
U.S. Government Agencies...... 8,572 6.93 9,472 6.86 9,706 6.76 9,938 6.56 8,706 6.47
States and Political
Subdivisions................ 1,413 8.82 1,468 9.14 1,498 9.37 1,459 9.44 1,476 8.78
Other......................... 295 7.95 318 7.35 321 6.64 332 5.98 346 3.87
------- ------ ------- ------ ------- ------ ------- ------ ------- ------
Total Investment Securities.... 11,247 7.16 12,341 7.13 12,620 6.99 12,960 6.77 12,143 6.52
------- ------ ------- ------ ------- ------ ------- ------ ------- ------
Loans and Leases:
Commercial.................... 16,870 9.09 15,803 8.92 15,014 8.41 14,549 7.88 14,378 7.51
Real Estate Construction...... 886 9.93 855 9.42 801 8.89 763 7.88 755 7.60
Residential Mortgage.......... 4,027 7.85 3,891 7.79 3,293 7.61 3,084 7.55 2,906 7.53
Consumer...................... 7,869 9.17 7,712 8.98 7,537 8.70 7,313 8.59 6,981 8.51
Lease Financing............... 393 10.07 368 9.91 343 9.74 314 9.52 291 10.14
Foreign....................... 1,537 7.39 1,467 7.23 1,270 7.04 1,173 5.89 1,112 5.93
------- ------ ------- ------ ------- ------ ------- ------ ------- ------
Total Loans and Leases......... 31,582 8.91 30,096 8.73 28,258 8.36 27,196 7.97 26,423 7.74
------- ------ ------- ------ ------- ------ ------- ------ ------- ------
Total Earning Assets........... 43,764 8.41 % 43,550 8.22 % 41,906 7.87 % 41,242 7.52 % 39,540 7.29 %
====== ====== ====== ====== ======
Cash and Due From Banks........ 2,479 2,327 2,509 2,328 2,365
Other Assets................... 2,159 2,135 2,064 2,074 2,031
Less Allowance for Possible
Credit Losses................ (473) (452) (432) (434) (436)
------- ------- ------- ------- -------
Total Assets...................$47,929 $47,560 $46,047 $45,210 $43,500
======= ======= ======= ======= =======
Liabilities and Shareholders'
Equity:
Interest-Bearing Deposits:
Savings.....................$ 7,395 2.73 % $ 7,588 2.73 % $ 7,597 2.46 % $ 7,797 2.34 % $ 7,933 2.29 %
Money Market Accounts....... 4,928 4.51 4,971 4.35 5,048 3.71 5,208 3.22 5,345 2.79
Time........................ 11,147 5.69 10,974 5.37 9,915 4.86 9,205 4.48 8,908 4.24
Foreign Office.............. 3,069 6.21 2,864 6.05 2,963 5.22 2,981 4.71 2,803 4.37
------- ------ ------- ------ ------- ------ ------- ------ ------- ------
Total Interest-Bearing
Deposits..................... 26,539 4.71 26,397 4.49 25,523 3.96 25,191 3.59 24,989 3.33
------- ------ ------- ------ ------- ------ ------- ------ ------- ------
Short-Term Borrowings.......... 7,471 6.21 7,833 5.99 7,404 5.27 7,182 4.67 6,331 3.95
Long-Term Debt................. 2,886 6.69 2,624 6.57 2,420 6.33 2,375 6.08 1,821 6.02
------- ------ ------- ------ ------- ------ ------- ------ ------- ------
Total Interest-Bearing
Liabilities.................. 36,896 5.17 % 36,854 4.96 % 35,347 4.39 % 34,748 3.98 % 33,141 3.59 %
====== ====== ====== ====== ======
Demand Deposits................ 6,472 6,293 6,472 6,297 6,232
Other Liabilities.............. 980 917 915 877 827
Shareholders' Equity........... 3,581 3,496 3,313 3,288 3,300
------- ------- ------- ------- -------
Total Liabilities and
Shareholders' Equity.........$47,929 $47,560 $46,047 $45,210 $43,500
======= ======= ======= ======= =======
Interest Rate Spread........... 3.24 % 3.26 % 3.48 % 3.54 % 3.70 %
====== ====== ====== ====== ======
Net Interest Margin............ 4.06 % 4.02 % 4.16 % 4.16 % 4.28 %
====== ====== ====== ====== ======
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. Based on the amortized cost of Investment Securities Available-for-Sale, the combined average
balance for the Second Quarter 1995 would be $11,344 million and the average yield would be 7.10%, and the combined
average balance for Year-to-Date June 30, 1995, would be $11,936 million and the average yield would be 7.06%.
</TABLE>
<PAGE>
Page 24
<TABLE>
<CAPTION>
Year-to-Date Year-to-Date
June 30, 1995 June 30, 1994
--------------- ---------------
Average Yield/ Average Yield/
Balance Rate Balance Rate
------- ------ ------- ------
Assets:
<S> <C> <C> <C> <C>
Interest-Bearing Deposits......$ 689 6.71 % $ 650 4.65 %
Federal Funds Sold and
Resale Agreements............ 212 6.03 152 3.82
Trading Account Securities..... 123 5.87 112 4.34
Investment Securities:
U.S. Treasury................. 1,025 6.64 1,599 5.31
U.S. Government Agencies...... 9,019 6.90 8,139 6.45
States and Political
Subdivisions................ 1,441 8.98 1,484 8.49
Other......................... 306 7.66 367 4.32
------- ------ ------- ------
Total Investment Securities.... 11,791 7.15 11,589 6.49
------- ------ ------- ------
Loans and Leases:
Commercial.................... 16,339 9.01 14,028 7.25
Real Estate Construction...... 871 9.68 755 7.40
Residential Mortgage.......... 3,960 7.82 2,833 7.50
Consumer...................... 7,791 9.08 6,866 8.56
Lease Financing............... 380 9.99 287 10.19
Foreign....................... 1,502 7.31 1,069 5.82
------- ------ ------- ------
Total Loans and Leases......... 30,843 8.82 25,838 7.60
------- ------ ------- ------
Total Earning Assets........... 43,658 8.31 % 38,341 7.19 %
====== ======
Cash and Due From Banks........ 2,404 2,325
Other Assets................... 2,147 1,980
Less Allowance for Possible
Credit Losses................ (463) (434)
------- -------
Total Assets...................$47,746 $42,212
======= =======
Liabilities and Shareholders'
Equity:
Interest-Bearing Deposits:
Savings.....................$ 7,491 2.73 % $ 7,894 2.29 %
Money Market Accounts....... 4,949 4.43 5,430 2.74
Time........................ 11,061 5.53 8,355 4.27
Foreign Office.............. 2,967 6.13 2,421 4.20
------- ------ ------- ------
Total Interest-Bearing
Deposits..................... 26,468 4.60 24,100 3.27
------- ------ ------- ------
Short-Term Borrowings.......... 7,651 6.10 5,991 3.62
Long-Term Debt................. 2,756 6.63 1,719 6.10
------- ------ ------- ------
Total Interest-Bearing
Liabilities.................. 36,875 5.06 % 31,810 3.49 %
====== ======
Demand Deposits................ 6,383 6,225
Other Liabilities.............. 949 867
Shareholders' Equity........... 3,539 3,310
------- -------
Total Liabilities and
Shareholders' Equity.........$47,746 $42,212
======= =======
Interest Rate Spread........... 3.25 % 3.70 %
====== ======
Net Interest Margin............ 4.04 % 4.30 %
====== ======
</TABLE>
<PAGE>
Page 25
RATE SENSITIVITY ANALYSIS
- -------------------------
The following table summarizes the Rate Sensitivity of Earning Assets and
Funding Sources as of June 30, 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 June 30, 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....................... $ 579 $ - $ - $ - $ - $ - $ 579
Federal Funds Sold and Resale Agreements........ 138 - - - - - 138
Trading Account Securities...................... 143 - - - - - 143
Investment Securities........................... 1,062 463 986 2,067 3,602 2,912 11,092
Commercial Loans................................ 11,169 1,660 762 572 2,070 639 16,872
Real Estate Construction Loans.................. 644 46 37 13 130 27 897
Residential Mortgage Loans...................... 157 252 404 726 1,676 944 4,159
Mortgage Loans Held For Sale.................... 52 - - - - - 52
Consumer Loans.................................. 2,173 496 572 1,169 3,225 403 8,038
Lease Financing................................. 13 23 34 63 258 14 405
Foreign Loans................................... 1,475 38 18 14 - - 1,545
------- ------- ------- ------- ------- ------- -------
Total Earning Assets.................. $ 17,605 $ 2,978 $ 2,813 $ 4,624 $ 10,961 $ 4,939 $ 43,920
------- ------- ------- ------- ------- ------- -------
Savings Deposits................................ $ 3,966 $ - $ - $ - $ 3,508 $ - $ 7,474
Money Market Accounts........................... 4,362 - - - 619 - 4,981
Time Deposits................................... 1,452 1,490 2,129 1,728 2,749 88 9,636
Foreign Office Deposits......................... 3,234 250 175 - - - 3,659
Short-Term Borrowings........................... 3,961 1,238 1,180 1,088 394 - 7,861
Long-Term Debt.................................. 2 97 1 577 1,135 1,200 3,012
Non-Interest-Bearing Liabilities and Equity
Capital...................................... 1,358 - - - 3,236 2,703 7,297
------- ------- ------- ------- ------- ------- -------
Total Sources of Funding.............. $ 18,335 $ 3,075 $ 3,485 $ 3,393 $ 11,641 $ 3,991 $ 43,920
------- ------- ------- ------- ------- ------- -------
Asset(Liability) Funding Gap.................... $ (730) $ (97) $ (672) $ 1,231 $ (680) $ 948 $ -
------- ------- ------- ------- ------- ------- -------
Net Interest Rate Swap Position................. $ 286 $ 587 $ 265 $ (593) $ (743) $ 198 $ -
------- ------- ------- ------- ------- ------- -------
Net Asset(Liability) Funding Gap................ $ (444) $ 490 $ (407) $ 638 $ (1,423) $ 1,146 $ -
------- ------- ------- ------- ------- ------- -------
Cumulative Net Asset(Liability) Funding Gap..... $ (444) $ 46 $ (361) $ 277 $ (1,146) $ - $ -
------- ------- ------- ------- ------- ------- -------
</TABLE>
<PAGE>
Page 26
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 June 30, 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 June 30, 1995,
would be 1 basis point higher than if rates were unchanged. A simulation
based on interest rates corresponding to the June 30, 1995, forward yield
curve indicates that the margin would increase by 2 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 June 30, 1995,
there were $2.1 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 rate management swaps reduced
net interest income by $8.8 million, or 4 basis points, for the first six
months of 1995 and by $22.6 million, or 11 basis points, in the comparable
period of 1994. See Note D to the interim consolidated financial
statements for further information on interest rate contracts.
INTERNATIONAL BANKING
- ---------------------
At June 30, 1995, the Corporation had total foreign cross-border
outstandings of $0.8 billion. Foreign outstandings consist primarily of
interest-bearing deposits, bankers acceptances, federal funds sold, and
loans denominated in dollars or other non-local currency. Assets
denominated in the local currency are included to the extent they are not
hedged or are not funded by local Borrowings. An item is classified as
either foreign or domestic based on the domicile of the party ultimately
responsible for payment.
At June 30, 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 June 30, 1995, were $30.4 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.
<PAGE>
Page 27
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
- ------- ---------------------------------------------------
(a) The Corporation's annual meeting of stockholders was held
on May 15, 1995.
(b) All nominees for director as listed in the Corporation's
proxy statement dated April 7, 1995, were elected. The
directors whose terms of office continued after the
meeting are also listed in the proxy statement.
(c) A brief description and the results of the matters voted
upon at the meeting follow.
1) Election of the following directors:
Withheld
Nominees For Against Authority
------------------- ----------- ------- ---------
Terence E. Adderley 129,925,235 - 787,696
James K. Baker 129,952,141 - 760,790
Thomas H. Jeffs II 129,981,361 - 731,570
John E. Lobbia 129,914,496 - 798,435
Richard A. Manoogian 129,903,141 - 809,790
Thomas E. Reilly, Jr.129,966,444 - 746,487
Peter W. Stroh 129,758,436 - 954,495
2) Approval of the performance-based, annual incentive
criteria under the NBD Executive Incentive Plan to
preserve NBD's tax deduction for plan awards.
For: 123,913,814
Against: 4,897,157
Abstain: 1,901,960
3) Approval of the performance-based, long-term
incentive criteria under the NBD Performance
Incentive Plan to preserve NBD's tax deduction for
plan awards.
For: 122,055,403
Against: 6,782,312
Abstain: 1,875,216
4) Ratification of the selection of Deloitte & Touche
LLP as the Corporation's independent auditors.
For: 129,499,261
Against: 419,169
Abstain: 794,501
<PAGE>
Page 28
PART II - OTHER INFORMATION (cont'd.)
Item 6. Exhibits and Reports on Form 8-K
- ------ ---------------------------------
(a) Exhibits
(11) The Earnings Per Share Computation is attached
hereto.
(27) Financial Data Schedule
(b) Reports on Form 8-K
The Corporation filed a Current Report on Form 8-K with
the Securities and Exchange Commission dated July 11,
1995, reporting under Item 5 the Agreement and Plan of
Merger (the "Merger Agreement") dated July 11, 1995,
entered into by the Corporation and First Chicago
Corporation (First Chicago), pursuant to which First
Chicago will merge with and into the Corporation. In
addition, the Merger Agreement, certain other related
agreements and the Press Release dated July 12, 1995,
were filed as exhibits under Item 7.
The Corporation filed a Current Report on Form 8-K with
the Securities and Exchange Commission dated July 21,
1995, referencing under Item 5 the above noted Current
Report on Form 8-K dated July 11, 1995, and filing under
Item 7 the following Financial Statements and Exhibits:
(a) Financial Statements of Business Acquired
The following financial statements of First Chicago
Corporation and subsidiaries:
Independent Auditors' Report
Consolidated Balance Sheet - December 31, 1994 and
1993
Consolidated Statement of Income - Three Years Ended
December 31, 1994, 1993 and 1992
Consolidated Statement of Changes in Stockholders'
Equity - Three Years Ended
December 31, 1994, 1993 and 1992
Consolidated Statement of Cash Flows - Three Years
Ended December 31, 1994, 1993 and 1992
Notes to Consolidated Financial Statements
Consolidated Interim Balance Sheet - March 31, 1995
and 1994 (Unaudited)
Consolidated Interim Statement of Income - Three
Months Ended March 31, 1995 and 1994 (Unaudited)
Consolidated Interim Statement of Changes in
Stockholders' Equity - Three Months Ended March 31,
1995 and 1994 (Unaudited)
Consolidated Interim Statement of Cash Flows - Three
Months Ended March 31, 1995 and 1994 (Unaudited)
Notes to Consolidated Interim Financial Statements
(Unaudited)
<PAGE>
Page 29
(b) Pro Forma Financial Information
The following pro forma combined condensed financial
statements (unaudited) of the Corporation reflecting
the proposed merger with First Chicago Corporation:
Pro Forma Condensed Combined Balance Sheet - March
31, 1995 (Unaudited)
Pro Forma Condensed Combined Statement of Income -
Three Years Ended December 31, 1994, 1993 and 1992
and Three Months Ended March 31, 1995 and 1994
(Unaudited)
Notes to Pro Forma Condensed Combined Financial
Statements (Unaudited)
(c) Exhibits
(23) Consent of Arthur Andersen LLP
<PAGE>
Page 30
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
August 11, 1995
<TABLE>
<CAPTION>
Exhibit (11)
NBD Bancorp, Inc. Consolidated Earnings Per Share Computation
(in thousands except per share data)
Quarter Ended Six Months Ended
June 30 June 30
----------------------- -----------------------
1995 1994 1995 1994
---------- ---------- ---------- ----------
Primary:
<S> <C> <C> <C> <C>
Net Income.......................................... $ 143,442 $ 135,224 $ 284,333 $ 242,485
========== ========== ========== ==========
Average Shares Outstanding.......................... 157,317 159,990 158,231 160,374
Adjustment:
Shares Applicable to Common Stock Options......... 349 332 329 335
---------- ---------- ---------- ----------
Shares Applicable to Primary Earnings............... 157,666 160,322 158,560 160,709
========== ========== ========== ==========
Fully Diluted:
Net Income.......................................... $ 143,442 $ 135,224 $ 284,333 $ 242,485
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................................... $ 143,442 $ 135,224 $ 284,333 $ 244,469
========== ========== ========== ==========
Average Shares Outstanding.......................... 157,317 159,990 158,231 160,374
Adjustment:
Shares Applicable to Convertible Debentures....... - - - 2,653
Shares Applicable to Common Stock Options......... 369 441 389 427
---------- ---------- ---------- ----------
Shares Applicable to Fully Diluted Earnings......... 157,686 160,431 158,620 163,454
========== ========== ========== ==========
Per Share Data:
Primary-Net Income per Share of Common Stock.......... $ 0.91 $ 0.84 $ 1.79 $ 1.51
========== ========== ========== ==========
Fully Diluted - Net Income per Share of Common Stock.. $ 0.91 $ 0.84 $ 1.79 $ 1.50
========== ========== ========== ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 2,375,480
<INT-BEARING-DEPOSITS> 579,125
<FED-FUNDS-SOLD> 138,112
<TRADING-ASSETS> 143,361
<INVESTMENTS-HELD-FOR-SALE> 3,986,717
<INVESTMENTS-CARRYING> 7,105,624
<INVESTMENTS-MARKET> 7,234,024
<LOANS> 31,967,165
<ALLOWANCE> 469,803
<TOTAL-ASSETS> 48,050,694
<DEPOSITS> 32,555,159
<SHORT-TERM> 7,861,259
<LIABILITIES-OTHER> 829,551
<LONG-TERM> 3,012,177
<COMMON> 160,883
0
0
<OTHER-SE> 3,441,383
<TOTAL-LIABILITIES-AND-EQUITY> 48,050,694
<INTEREST-LOAN> 1,345,790
<INTEREST-INVEST> 397,438
<INTEREST-OTHER> 32,805
<INTEREST-TOTAL> 1,776,033
<INTEREST-DEPOSIT> 604,061
<INTEREST-EXPENSE> 926,768
<INTEREST-INCOME-NET> 849,265
<LOAN-LOSSES> 40,187
<SECURITIES-GAINS> 1,684
<EXPENSE-OTHER> 659,729
<INCOME-PRETAX> 430,485
<INCOME-PRE-EXTRAORDINARY> 284,333
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 284,333
<EPS-PRIMARY> 1.79
<EPS-DILUTED> 1.79
<YIELD-ACTUAL> 4.04
<LOANS-NON> 159,922
<LOANS-PAST> 42,380
<LOANS-TROUBLED> 18,986
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 435,051
<CHARGE-OFFS> 50,355
<RECOVERIES> 42,205
<ALLOWANCE-CLOSE> 469,803
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 469,803
</TABLE>
