<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
AUGUST 15, 1995
Date of Report (Date of earliest event reported)
NBD BANCORP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 1-7127 38-1984850
---------------------------- ------------------ -------------------
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
611 WOODWARD AVENUE, DETROIT, MICHIGAN 48226
Registrant's telephone number, including area code : (313) 225-1000
<PAGE> 2
Item 5. Other Events
Reference is made to the Current Report on Form 8-K filed by the Registrant on
July 19, 1995, announcing the signing of a definitive agreement pursuant to
which First Chicago Corporation ("First Chicago"), a $72 billion-asset bank
holding company headquartered in Chicago, Illinois, would merge with and into
NBD Bancorp, Inc., and to the Current Report on Form 8-K filed by the
registrant on July 21, 1995, in which was filed certain First Chicago
historical financial information and certain pro forma financial information
reflecting the proposed merger.
Item 7. Financial Statements and Exhibits
The following documents are filed as a part of this Report:
(a) Financial Statements of Business Acquired
The following financial statements of First Chicago Corporation and
subsidiaries:
Consolidated Interim Balance Sheet - June 30, 1995 and 1994
(Unaudited)
Consolidated Interim Statement of Income - Three and Six Months
Ended June 30, 1995 and 1994 (Unaudited)
Consolidated Interim Statement of Changes to Stockholders' Equity -
Six Months Ended June 30, 1995 and 1994 (Unaudited)
Consolidated Interim Statement of Cash Flows - Six Months Ended June
30, 1995 and 1994 (Unaudited)
Notes to Consolidated Interim Financial Statements (Unaudited)
(b) Pro Forma Financial Information
The following pro forma condensed combined financial statements
(unaudited) of NBD Bancorp, Inc. and subsidiaries reflecting the
proposed merger with First Chicago Corporation:
Pro Forma Condensed Combined Balance Sheet - June 30, 1995
(Unaudited)
Pro Forma Condensed Combined Statement of Income - Six Months Ended
June 30, 1995 and 1994 (Unaudited)
Notes to Pro Forma Condensed Combined Financial Statements
(Unaudited)
2
<PAGE> 3
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
NBD BANCORP, INC.
By: /s/ DANIEL T. LIS
-------------------------
Daniel T. Lis
Senior Vice President,
Secretary and Chief Legal
Officer
Dated: August 15, 1995
3
<PAGE> 4
FIRST CHICAGO CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
June 30 December 31 June 30
-----------------------------------------------------------------------------------------------------------------------------
(Dollars in millions) 1995 1994 1994
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Cash and due from banks--noninterest-bearing ......................................... $ 3,646 $ 4,265 $ 3,373
Due from banks--interest-bearing ..................................................... 9,484 8,066 7,759
Federal funds sold and securities under resale agreements ............................ 14,274 13,302 13,674
Trading account assets ............................................................... 7,706 4,967 5,037
Derivative product assets............................................................. 8,909 4,389 6,086
Investment securities (fair values--$2,590, $2,589, and $2,255, respectively) ........ 2,583 2,592 2,254
Loans (net of unearned income--$297, $297, and $263, respectively) ................... 26,517 25,947 23,680
Allowance for credit losses .......................................................... (689) (723) (681)
Premises and equipment ............................................................... 697 665 639
Accrued income receivable ............................................................ 534 485 444
Customers' acceptance liability ...................................................... 534 526 486
Other assets ......................................................................... 1,133 1,419 1,338
-------- ------- -------
Total assets ............................................................... $75,328 $65,900 $64,089
======== ======= =======
-----------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Deposits
Demand ............................................................................. $ 6,941 $ 7,647 $ 7,009
Savings ............................................................................ 7,442 7,448 7,401
Time ............................................................................... 5,681 5,149 4,321
Foreign offices .................................................................... 13,700 11,422 9,846
-------- ------- -------
Total deposits ............................................................. 33,764 31,666 28,577
Federal funds purchased and securities under repurchase agreements ................... 15,710 13,026 12,208
Other funds borrowed ................................................................. 7,806 7,665 8,051
Long-term debt ....................................................................... 2,271 2,271 2,269
Acceptances outstanding .............................................................. 534 526 486
Derivative product liabilities ....................................................... 8,581 4,097 6,094
Other liabilities .................................................................... 1,891 2,116 1,880
-------- ------- -------
Total liabilities .......................................................... 70,557 61,367 59,565
-----------------------------------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Preferred stock ...................................................................... 611 611 761
Common stock--$5 par value ........................................................... 467 466 434
Number of shares authorized--150,000,000
Number of shares issued--93,430,319; 93,148,134; and 86,824,888, respectively
Number of shares outstanding--89,719,497; 89,859,798; and 86,697,805, respectively
Surplus .............................................................................. 1,712 1,712 1,721
Retained earnings .................................................................... 2,169 1,905 1,616
Other adjustments .................................................................... - (4) (2)
-------- ------- -------
Total ...................................................................... 4,959 4,690 4,530
Less treasury stock at cost--3,710,822; 3,288,336; and 127,083 shares,
respectively ...................................................................... 188 157 6
-------- ------- -------
Stockholders' equity ....................................................... 4,771 4,533 4,524
-------- ------- -------
Total liabilities and stockholders' equity ................................. $75,328 $65,900 $64,089
======== ======= =======
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>
-1-
<PAGE> 5
FIRST CHICAGO CORPORATION AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENT
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------
Three Months Ended Six Months Ended
June 30 June 30
----------------------------------------------------------------------------------------------------------------------------
(In millions, except per share data) 1995 1994 1995 1994
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans .................................................. $ 593.4 $470.3 $1,198.3 $ 907.9
Interest on bank balances ................................................... 150.1 82.5 281.7 157.5
Interest on federal funds sold and securities under resale agreements ....... 238.7 133.7 479.5 224.7
Interest on trading account assets .......................................... 102.1 56.7 190.8 115.8
Interest on investment securities (including dividends) ..................... 22.9 14.6 43.9 30.5
------- ------- ------- -------
Total ............................................................. 1,107.2 757.8 2,194.2 1,436.4
----------------------------------------------------------------------------------------------------------------------------
INTEREST EXPENSE
Interest on deposits ........................................................ 341.7 182.9 635.7 336.8
Interest on federal funds purchased and securities under repurchase
agreements ................................................................ 231.9 110.0 468.0 191.8
Interest on other funds borrowed ............................................ 132.0 90.8 269.4 162.2
Interest on long-term debt .................................................. 46.0 41.3 91.9 82.2
------- ------- ------- -------
Total ............................................................. 751.6 425.0 1,465.0 773.0
----------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME ......................................................... 355.6 332.8 729.2 663.4
Provision for credit losses ................................................. 70.0 43.0 135.0 93.0
------- ------- ------- -------
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES ....................... 285.6 289.8 594.2 570.4
----------------------------------------------------------------------------------------------------------------------------
NONINTEREST INCOME
Combined trading profits .................................................... 15.8 36.7 66.2 12.0
Equity securities gains ..................................................... 59.6 3.9 114.5 138.1
Investment securities gains ................................................. - 0.6 - 1.1
------- ------- ------- -------
Market-driven revenue ..................................................... 75.4 41.2 180.7 151.2
Credit card fee revenue ..................................................... 213.6 193.9 404.8 376.2
Service charges and commissions ............................................. 115.5 104.2 223.4 205.5
Fiduciary and investment management fees .................................... 49.3 49.3 100.9 101.7
Other income ................................................................ 33.9 40.2 48.0 96.1
------- ------- ------- -------
Total ............................................................. 487.7 428.8 957.8 930.7
----------------------------------------------------------------------------------------------------------------------------
NONINTEREST EXPENSE
Salaries and employee benefits .............................................. 229.4 212.9 461.2 420.3
Occupancy expense of premises, net .......................................... 37.9 35.7 74.3 70.5
Equipment rentals, depreciation and maintenance ............................. 32.4 32.3 63.8 85.6
Other expense ............................................................... 188.0 179.7 366.5 368.7
------- ------- ------- -------
Total ............................................................. 487.7 460.6 965.8 945.1
----------------------------------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES .................................................. 285.6 258.0 586.2 556.0
Applicable income taxes ..................................................... 98.2 89.3 203.7 193.5
------- ------- ------- -------
NET INCOME .................................................................. $ 187.4 $ 168.7 $ 382.5 $ 362.5
======= ======= ======= =======
NET INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS' EQUITY ...................... $ 177.4 $ 150.4 $ 362.5 $ 330.4
======= ======= ======= =======
----------------------------------------------------------------------------------------------------------------------------
EARNINGS PER SHARE
NET INCOME-PRIMARY ........................................................ $1.95 $1.71 $3.98 $3.76
NET INCOME-FULLY DILUTED .................................................. $1.90 $1.67 $3.88 $3.67
----------------------------------------------------------------------------------------------------------------------------
</TABLE>
-2-
<PAGE> 6
FIRST CHICAGO CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES TO STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
---------------------------------------------------------------------
Six Months Ended June 30 (In millions) 1995 1994
---------------------------------------------------------------------
<S> <C> <C>
Stockholders' Equity
Balance, beginning of period .................... $4,533 $4,264
Net income .................................... 383 363
Issuance of common stock ...................... 13 5
Issuance of treasury stock .................... 29 19
Treasury stock purchases ...................... (73) (16)
Other ......................................... 5 (2)
------ ------
4,890 4,633
Cash dividends declared on preferred stock .... (20) (32)
Cash dividends declared on common stock ....... (99) (77)
------ ------
1995 1994
--------------------------------------------------
Rate per common share for period $1.10 $0.90
--------------------------------------------------
Balance, end of period .......................... $4,771 $4,524
====== ======
---------------------------------------------------------------------
</TABLE>
-3-
<PAGE> 7
FIRST CHICAGO CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------
Six Months Ended June 30 (In millions) 1995 1994
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income ...................................................................................... $ 383 $ 363
Adjustments to reconcile net income to net cash provided by (used in) operating activities .......
Depreciation and amortization .................................................................. 82 89
Provision for credit losses ................................................................... 135 93
Equity securities gains ....................................................................... (115) (138)
Net (increase) decrease in net derivative product balances ..................................... (34) 244
Net (increase) in trading account assets........................................................ (2,739) (501)
Net (increase) in accrued income receivable .................................................... (49) (37)
Net decrease in other assets ................................................................... 221 226
Interest income from Brazilian debt restructuring .............................................. (1) (14)
Other noncash adjustments ...................................................................... (40) (125)
--------- --------
Total adjustments .............................................................................. (2,540) (163)
Net cash provided by (used in) operating activities .............................................. (2,157) 200
------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Net (increase) in federal funds sold and securities under resale agreements ...................... (972) (4,891)
Purchase of investment securities--available for sale ............................................ (1,228) (548)
Purchase of debt investment securities--held to maturity .......................................... (97) (100)
Purchase of venture capital investments ........................................................... (118) (55)
Proceeds from maturities of debt securities--available for sale ................................... 990 630
Proceeds from maturities of debt securities--held to maturity .................................... 98 30
Proceeds from sales of debt securities--available for sale ........................................ 167 27
Proceeds from sales of equity securities--available for sale ...................................... 1 1
Proceeds from sales of venture capital investments ................................................ 326 231
Net (increase) in credit card receivables ......................................................... (1,556) (677)
Credit card receivables securitized ............................................................... 2,286 1,000
Net (increase) in loans of bank subsidiaries ...................................................... (1,402) (1,134)
Loans made to customers and purchased from others by nonbank subsidiaries ......................... (178) (430)
Principal collected on and proceeds from sale of loans by nonbank subsidiaries .................... 161 446
Loan recoveries ................................................................................... 35 44
Purchases of premises and equipment ............................................................... (86) (94)
Proceeds from sales of premises and equipment ..................................................... 27 23
Net cash and cash equivalents due to acquisitions ................................................. - (4)
-------- ---------
Net cash (used in) investing activities ........................................................... (1,546) (5,501)
------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net (decrease) in demand and savings deposits .................................................... (717) (1,340)
Net increase (decrease) in time deposits ......................................................... 532 (616)
Net increase in deposits in foreign offices ...................................................... 2,150 2,086
Net increase in federal funds purchased and securities under repurchase agreements ............... 2,684 3,953
Proceeds from other funds borrowed ............................................................... 116,665 116,917
Repayment of other funds borrowed ............................................................... (116,528) (114,852)
Proceeds from issuance of long-term debt ......................................................... 2 202
Repayment of long-term debt ...................................................................... (2) (7)
Net (decrease) in other liabilities .............................................................. (267) (31)
Dividends paid .................................................................................. (120) (97)
Proceeds from issuance of common stock ........................................................... 14 5
Payment for purchase of treasury stock ........................................................... (73) (16)
Proceeds from reissuance of treasury stock ....................................................... 15 8
--------- --------
Net cash provided by financing activities ........................................................ 4,355 6,212
------------------------------------------------------------------------------------------------------------------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS ..................................... 147 268
------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN CASH AND CASH EQUIVALENTS ....................................................... 799 1,179
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ................................................. 12,331 9,953
--------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ..................................................... $ 13,130 $ 11,132
========= ========
------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Note 6 on page 6.
-4-
<PAGE> 8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1
Although the interim amounts are unaudited, they do reflect all adjustments
that, in the opinion of management, are necessary for a fair presentation of
the results of operations for the interim periods. All such adjustments are of
a normal, recurring nature. Because the results from commercial banking
operations are so closely related and responsive to changes in economic
conditions, fiscal policy and monetary policy, and because the results for the
venture capital and trading portfolios are largely market-driven, the results
for any interim period are not necessarily indicative of the results that can
be expected for the entire year.
Note 2
The Corporation presents earnings per share on both a primary and a fully
diluted basis. Primary earnings per share were computed by dividing net
income, after deducting dividends on preferred stock, by the average number of
common and common-equivalent shares outstanding during the period.
Common-equivalent shares consist of shares issuable under the Employee Stock
Purchase and Savings Plan and outstanding stock options. Fully diluted shares
also include the common shares that would result from the conversion of
convertible preferred stock.
To compute fully diluted earnings per share, net income was reduced by
preferred stock dividend requirements, except those related to convertible
stock.
The net income, preferred stock dividends and shares used to compute primary
and fully diluted earnings per share are presented in the following table.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------
Six Months Ended
(In millions) June 30
1995 1994
------------------------------------------------------------------------------------------------------
<S> <C> <C>
PRIMARY
Net income ................................................................ $382.5 $362.5
Preferred stock dividends (1) ............................................. 20.0 32.1
------ ------
Net income attributable to common
stockholders' equity .................................................... $362.5 $330.4
====== ======
Average number of common and
common-equivalent shares ................................................ 91.1 87.9
====== ======
FULLY DILUTED
Net income ................................................................ $382.5 $362.5
Preferred stock dividends, excluding
convertible Series B (1) ................................................ 14.3 26.3
------ ------
Fully diluted net income .................................................. $368.2 $336.2
====== ======
Average number of shares,
assuming full dilution .................................................. 95.0 91.7
====== ======
------------------------------------------------------------------------------------------------------
</TABLE>
(1) 1994 results include $4.5 million of additional preferred dividends
representing a 3 percent premium over the $150 million par value of
the Corporation's Preferred Stock, Series D, that was redeemed on July
1, 1994.
Note 3
At June 30, 1995, credit card receivables aggregated $5.5 billion. These
receivables are available for sale at face value through credit card
securitization programs.
-5-
<PAGE> 9
Note 4
The accelerated asset disposition portfolio was established in September 1992.
Nonperforming assets in this portfolio totaled $27 million at June 30, 1995,
compared with $37 million at year-end 1994 and $42 million a year ago.
Note 5
Effective January 1, 1995, the Corporation adopted Financial Accounting
Standards Board (FASB) Statement (SFAS) No. 114, "Accounting by Creditors for
Impairment of a Loan," and SFAS No. 118, "Accounting by Creditors for
Impairment of a Loan -- Income Recognition and Disclosures." SFAS No. 114
addresses the accounting for a loan when it is probable that all principal and
interest amounts due will not be collected in accordance with its contractual
terms. The Corporation generally identifies nonperforming loans as "impaired
loans." Certain loans, such as loans carried at the lower-of-cost or market or
small-balance homogeneous loans (e.g., credit card, installment credit), are
exempt from SFAS No. 114 provisions.
On a quarterly basis, the Corporation identifies impaired loans and the extent
to which such loans are impaired. Impairment is recognized to the extent the
recorded investment of an impaired loan or pool of loans exceeds the calculated
present value. For non-collateral dependent loans, the calculated present
value is measured using a discounted cash flow approach. Loans having a
significant recorded investment are measured on an individual basis while loans
not having a significant recorded investment are grouped and measured on a pool
basis. Collateral dependent loans, primarily real estate, are separately
measured for impairment by determining the fair value of the collateral less
estimated costs to sell.
The allocated reserve associated with impaired loans is considered in
management's determination of the Corporation's allowance for credit losses.
The adoption of this accounting standard did not have a significant effect on
the Corporation's net income or its allowance for credit losses.
At June 30, 1995, the recorded investment in loans considered impaired under
SFAS No. 114 was $112 million, which required a related allowance for credit
losses of $22 million.
The Corporation retained its prior method of recognizing interest and applying
cash payments received with respect to impaired loans. The average recorded
investment in impaired loans for the quarter ended June 30, 1995, was
approximately $118 million and $114 million year to date. The Corporation
recognized interest income associated with impaired loans of $3 million during
the second quarter and $4 million year to date.
In accordance with SFAS No. 114, a loan is classified as an in-substance
foreclosure when the Corporation has effectively taken possession of the
collateral. Loans of $15 million, which no longer qualify as in-substance
foreclosures, were reclassified from other assets to loans as of January 1,
1995. Prior reporting periods were not restated since the amounts involved
were not material.
Note 6
For purposes of the Statement of Cash Flows, cash and cash equivalents consist
of cash and due from banks--noninterest-bearing and interest-bearing.
Loans of $3.3 million and $11.0 million were transferred to other real estate
in the first six months of 1995 and 1994, respectively.
Loans of $15 million were reclassified from other assets to loans as of January
1, 1995, as a result of the Corporation's adoption of SFAS No. 114. See Note
5 above for further information.
-6-
<PAGE> 10
Note 7
The ratio of income to fixed charges for the six months ended June 30, 1995,
excluding interest on deposits was 1.7x, and including interest on deposits was
1.4x. The ratio has been computed on the basis of the total enterprise (as
defined by the Securities and Exchange Commission) by dividing income before
fixed charges and income taxes by fixed charges. Fixed charges consist of
interest expense on all long- and short-term borrowings, excluding or including
interest on deposits.
Note 8
The Corporation and NBD Bancorp, Inc. (NBD) entered into an Agreement and Plan
of Merger, dated July 11, 1995, pursuant to which the Corporation will merge
with and into NBD. 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 that it will be consummated by early 1996, pending
approvals of stockholders of the Corporation and NBD, 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 NBD 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, First Chicago granted
NBD an option to purchase, under certain circumstances, up to 19.9 percent of
First Chicago's outstanding shares of common stock. NBD also granted First
Chicago an option to purchase, under certain circumstances, up to 19.9 percent
of NBD's outstanding shares of common stock.
Note 9
The Corporation and certain of its subsidiaries are defendants in various
lawsuits, including certain class actions, arising out of normal corporate
activities, and the Corporation has received certain tax deficiency
assessments. Since the Corporation and certain of its subsidiaries, which are
regulated by one or more federal and state regulatory authorities, also are the
subject of numerous examinations and reviews by such authorities, the
Corporation is and will be, from time to time, normally engaged in various
disagreements with regulators, primarily related to banking matters. In the
opinion of management and the Corporation's general counsel, the ultimate
resolution of the matters referred to in this note will not have a material
effect on the Corporation's consolidated financial statements.
-7-
<PAGE> 11
FIRST CHICAGO NBD CORPORATION
PRO FORMA FINANCIAL INFORMATION
NBD Bancorp, Inc. (the "Corporation" or "NBD") and First Chicago Corporation
(First Chicago) have entered into an Agreement and Plan of Merger dated as of
July 11, 1995 (the Merger Agreement) pursuant to which First Chicago will merge
with and into NBD Bancorp, Inc. 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 the
stockholders of the Corporation and First Chicago, regulatory approvals, and
other customary conditions of closing.
Pursuant to the Merger Agreement, each share of common stock of NBD will remain
outstanding after the Merger and represent one share of FCNBD. At the
effective time of the Merger, common stockholders of First Chicago will receive
1.81 shares of common stock of FCNBD in exchange for each outstanding share of
First Chicago common stock.
At the effective time of the Merger, each share of First Chicago's outstanding
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, NBD granted First
Chicago an option to purchase, under certain circumstances, up to 19.9 percent
of NBD's outstanding shares of common stock. First Chicago also granted NBD an
option to purchase, under certain circumstances, up to 19.9 percent of First
Chicago's outstanding shares of common stock.
The following pro forma financial information giving effect to the Merger,
accounted for as a pooling of interests, includes: (i) the unaudited pro forma
condensed combined balance sheet as of June 30, 1995, and (ii) the unaudited
pro forma condensed combined statements of income for the six-month periods
ended June 30, 1995 and 1994. The pro forma condensed combined financial
statements should be read in conjunction with the historical consolidated
financial statements and notes thereto of the Corporation and First Chicago.
Effective January 7, 1995, NBD consummated its acquisition of the $910 million
asset AmeriFed Financial Corp. ("AmeriFed") of Joliet, Illinois, which was
accounted for as a purchase. Accordingly, the historical financial information
for NBD as of and for the six months ended June 30, 1995, include the
operations of AmeriFed. On July 1, 1995, NBD acquired $760 million asset
Deerbank Corporation ("Deerbank") of Deerfield, Illinois, which was also
accounted for as a purchase. With respect to the following pro forma condensed
combined financial statements, the historical financial information for NBD was
not restated to otherwise include amounts for AmeriFed and Deerbank as such
acquisitions are not considered material.
-1-
<PAGE> 12
FIRST CHICAGO NBD CORPORATION
PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF JUNE 30, 1995
(UNAUDITED)
The following pro forma condensed combined balance sheet as of June 30, 1995,
is presented to show the impact on NBD's historical financial condition of the
merger with First Chicago. The Merger has been reflected under the
pooling-of-interests method of accounting.
FIRST CHICAGO NBD CORPORATION
PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF JUNE 30, 1995
(IN MILLIONS)
<TABLE>
<CAPTION>
NBD FIRST CHICAGO PRO FORMA PRO FORMA
(AS REPORTED) (AS REPORTED) ADJUSTMENTS FCNBD
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Cash and due from banks-noninterest
bearing .................................. $ 2,376 $ 3,646 $ 6,022
Due from banks-interest bearing .............. 579 9,484 10,063
Federal funds sold and securities
under resale agreements ................... 138 14,274 14,412
Trading account assets ....................... 144 7,706 7,850
Derivative product assets .................... 87 8,909 8,996
Investment securities ........................ 11,092 2,583 13,675
Loans ........................................ 31,967 26,517 58,484
Allowance for credit losses .................. (470) (689) (1,159)
Other assets ................................. 2,138 2,898 5,036
---------------------------------------------------------------------------------------------------------------------
Total assets ........................... $48,051 $75,328 $ - $123,379
---------------------------------------------------------------------------------------------------------------------
LIABILITIES
Deposits:
Demand ...................................... $ 6,805 $ 6,941 $ 13,746
Savings ..................................... 12,455 7,442 19,897
Time ........................................ 9,636 5,681 15,317
Foreign offices ............................. 3,659 13,700 17,359
---------------------------------------------------------------------------------------------------------------------
Total deposits ......................... 32,555 33,764 - 66,319
Short-term borrowings ........................ 7,862 23,516 31,378
Long-term debt ............................... 3,012 2,271 5,283
Derivative product liabilities ............... 92 8,581 8,673
Other liabilities ............................ 928 2,425 146 3,499
---------------------------------------------------------------------------------------------------------------------
Total liabilities ...................... 44,449 70,557 146 115,152
STOCKHOLDERS' EQUITY
Preferred stock .............................. - 611 611
Common stock ................................. 161 467 (467) 323
162
Surplus ...................................... 533 1,712 (1,712) 2,362
1,829
Retained earnings ............................ 3,082 2,169 (142) 5,105
(4)
Other ........................................ (57) - (57)
---------------------------------------------------------------------------------------------------------------------
Total ............................... 3,719 4,959 (334) 8,344
Less: Treasury stock ......................... 117 188 (188) 117
Stockholders' equity ................ 3,602 4,771 (146) 8,227
---------------------------------------------------------------------------------------------------------------------
Total liabilities and
stockholders' equity ........... $48,051 $75,328 $ - $123,379
---------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to unaudited pro forma condensed combined financial
statements.
-2-
<PAGE> 13
FIRST CHICAGO NBD CORPORATION
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR SIX MONTHS ENDED JUNE 30, 1995
(IN MILLIONS, EXCEPT PER SHARE DATA)
UNAUDITED
<TABLE>
<CAPTION>
NBD FIRST CHICAGO PRO FORMA
(AS REPORTED) (AS REPORTED) FCNBD
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans .......................... $1,345.8 $1,198.3 $2,544.1
Interest on federal funds sold and
securities under resale agreements ................ 6.4 479.5 485.9
Interest on trading account assets .................. 3.5 190.8 194.3
Interest on investment securities ................... 397.4 43.9 441.3
Other interest income ............................... 22.9 281.7 304.6
---------------------------------------------------------------------------------------------------------
Total ...................................... 1,776.0 2,194.2 3,970.2
INTEREST EXPENSE
Interest on deposits ............................... 604.0 635.7 1,239.7
Interest on short-term borrowings ................... 231.3 737.4 968.7
Interest on long-term debt .......................... 91.4 91.9 183.3
---------------------------------------------------------------------------------------------------------
Total ....................................... 926.7 1,465.0 2,391.7
NET INTEREST INCOME ................................. 849.3 729.2 1,578.5
Provision for credit losses ......................... 40.2 135.0 175.2
---------------------------------------------------------------------------------------------------------
Net Interest Income After
Provision for Credit Losses ...................... 809.1 594.2 1,403.3
NONINTEREST INCOME
Equity securities gains ............................. - 114.5 114.5
Investment securities gains ......................... 1.7 - 1.7
Credit card fee revenue ............................. 20.1 404.8 424.9
Other noninterest income ............................ 259.3 438.5 697.8
---------------------------------------------------------------------------------------------------------
Total ....................................... 281.1 957.8 1,238.9
NONINTEREST EXPENSE
Salaries and employee benefits ...................... 361.8 461.2 823.0
Occupancy and equipment expense ..................... 106.8 138.1 244.9
Other noninterest expense ........................... 191.1 366.5 557.6
---------------------------------------------------------------------------------------------------------
Total ....................................... 659.7 965.8 1,625.5
INCOME BEFORE INCOME TAXES .......................... 430.5 586.2 1,016.7
Applicable income taxes ............................. 146.2 203.7 349.9
---------------------------------------------------------------------------------------------------------
INCOME FROM CONTINUING OPERATIONS ................... $ 284.3 $382.5 $ 666.8
---------------------------------------------------------------------------------------------------------
COMMON SHARE DATA
Income from continuing operations
Primary ............................................. $1.79 $3.98 $2.00
Fully diluted ....................................... $1.79 $3.88 $1.97
Weighted average shares
Primary ............................................. 158.6 91.1 323.5
Fully diluted ....................................... 158.6 95.0 330.5
---------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to unaudited pro forma condensed combined financial
statements.
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<PAGE> 14
FIRST CHICAGO NBD CORPORATION
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR SIX MONTHS ENDED JUNE 30, 1994
(IN MILLIONS, EXCEPT PER SHARE DATA)
UNAUDITED
<TABLE>
<CAPTION>
NBD FIRST CHICAGO PRO FORMA
(AS REPORTED) (AS REPORTED) FCNBD
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans ......................... $ 969.0 $ 907.9 $1,876.9
Interest on federal funds sold and
securities under resale agreements ............... 2.8 224.7 227.5
Interest on trading account assets ................. 2.4 115.8 118.2
Interest on investment securities .................. 349.3 30.5 379.8
Other interest income .............................. 15.0 157.5 172.5
----------------------------------------------------------------------------------------------------------
Total ..................................... 1,338.5 1,436.4 2,774.9
INTEREST EXPENSE
Interest on deposits ............................... 390.8 336.8 727.6
Interest on short-term borrowings .................. 107.7 354.0 461.7
Interest on long-term debt ......................... 52.4 82.2 134.6
----------------------------------------------------------------------------------------------------------
Total ..................................... 550.9 773.0 1,323.9
NET INTEREST INCOME ................................ 787.6 663.4 1,451.0
Provision for credit losses ........................ 24.0 93.0 117.0
----------------------------------------------------------------------------------------------------------
Net Interest Income After
Provision for Credit Losses ...................... 763.6 570.4 1,334.0
NONINTEREST INCOME
Equity securities gains ............................ - 138.1 138.1
Investment securities gains ........................ 0.3 1.1 1.4
Credit card fee revenue ........................... 18.1 376.2 394.3
Other noninterest income ........................... 254.3 415.3 669.6
----------------------------------------------------------------------------------------------------------
Total ..................................... 272.7 930.7 1,203.4
NONINTEREST EXPENSE
Salaries and employee benefits ..................... 355.5 420.3 775.8
Occupancy and equipment expense ................... 105.6 156.1 261.7
Other noninterest expense .......................... 193.5 368.7 562.2
----------------------------------------------------------------------------------------------------------
Total ..................................... 654.6 945.1 1,599.7
INCOME BEFORE INCOME TAXES ........................ 381.7 556.0 937.7
Applicable income taxes ........................... 123.6 193.5 317.1
----------------------------------------------------------------------------------------------------------
INCOME FROM CONTINUING OPERATIONS .................. $ 258.1 $ 362.5 $ 620.6
----------------------------------------------------------------------------------------------------------
COMMON SHARE DATA
Income from continuing operations
Primary ............................................ $1.61 $3.76 $1.84
Fully diluted ..................................... $1.59 $3.67 $1.81
Weighted average shares
Primary ............................................ 160.7 87.9 319.8
Fully diluted ..................................... 163.5 91.7 329.4
----------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to unaudited pro forma condensed combined financial
statements.
-4-
<PAGE> 15
FIRST CHICAGO NBD CORPORATION
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS
a) The pro forma information presented is not necessarily indicative of
the results of operations or the combined financial position that
would have resulted had the Merger been consummated at the beginning
of the periods indicated, nor is it necessarily indicative of the
results of operations in future periods or the future financial
position of the combined entities. It is anticipated that the Merger
will be consummated by the first quarter of 1996.
b) The Corporation is still in the process of reviewing its accounting
policies in light of those employed by First Chicago. As a result of
this review, it might be necessary to restate either the Corporation's
or First Chicago's financial statements to conform to those accounting
policies that are most appropriate. No restatements of prior periods
have been included in the pro forma condensed combined financial
statements. Any restatements, if appropriate, will be made upon the
completion of this review process.
c) Certain reclassifications have been included in the unaudited pro
forma condensed combined balance sheet and statements of income to
conform statement presentations. Transactions conducted in the
ordinary course of business between the two companies are immaterial,
and accordingly, have not been eliminated.
d) Pro forma adjustments to common shares and surplus at June 30, 1995,
reflect the Merger accounted for as a pooling-of-interests, through
the exchange of 162.4 million shares of FCNBD common stock (using the
common exchange ratio of 1.81) for the 89.7 million outstanding shares
of First Chicago. Retained earnings and dividends payable have been
adjusted by approximately $4 million, reflecting the pro forma number
of shares at the Corporation's current dividend rate.
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<PAGE> 16
The pro forma entries are displayed below (in millions):
<TABLE>
<S> <C> <C>
Debit--Common stock (First Chicago) ................ $ 467
Debit--Common surplus (First Chicago) .............. 1,712
Credit--Treasury stock (First Chicago).......... $ 188
Credit--Common stock (FCNBD) ................... 162
Credit--Common surplus (FCNBD) ................. 1,829
Debit--Retained earnings ........................... $ 4
Credit--Other liabilities ...................... $ 4
</TABLE>
e) The pro forma financial information presented does not give effect to
the Corporation's and First Chicago's plan to repurchase in the
aggregate approximately $300 million worth of the Corporation's and First
Chicago's common stock prior to the consummation of the Merger.
f) Income per share data has been computed based on the combined historical
income from continuing operations applicable to common stockholders of
the Corporation and First Chicago using the historical weighted average
number of outstanding shares of the Corporation's common stock, and the
historical weighted average number of outstanding shares of First
Chicago's common stock adjusted to equivalent shares of FCNBD's common
stock, as of the earliest period presented.
g) The pro forma condensed combined financial statements do not include the
anticipated cost savings in connection with the Merger. It is estimated,
however, that approximately $200 million in pre-tax annualized cost
savings ($126 million after-tax) will be realized by the combined company
in 1997. Reductions resulting from elimination of the overlap in
Chicago-area retail branch expense constitute the largest component.
Product synergies in the large corporate and middle markets, and staff
and functional areas, also provide additional expense reduction
opportunities.
-6-
<PAGE> 17
h) The Corporation and First Chicago are still in the
process of reviewing their combined investment
securities portfolio to determine the classification
of such securities as either available-for-sale or
held-to-maturity in connection with the combined
company's existing interest rate risk position. As a
result of this review, certain reclassifications of
the combined company's investment securities might
take place. No adjustments have been made to
existing securities classifications in the pro forma
condensed combined balance sheet. Any such
reclassifications will be accounted for in accordance
with Financial Accounting Standards Board's Statement
No. 115.
i) A liability of $225 million has been recorded in the
unaudited pro forma condensed combined balance sheet
to reflect management's current estimate of merger
and restructuring related charges in connection with
the Merger. This resulted in a $142 million
after-tax charge to retained earnings in the
unaudited pro forma condensed combined balance sheet.
The pro forma entries are displayed below (in millions):
Debit--Retained earnings . . . . . . . . . . . . . $142
Debit--Other liabilities-taxes payable . . . . . . 83
Credit--Other liabilities-reserve . . . . . . $225
It is anticipated that substantially all of these charges will be paid
within a 12-15 month timeframe subsequent to the Merger. This charge
has been excluded from the pro forma condensed combined income statement
due to its nonrecurring nature. The following table provides details of
the estimated pre-tax charges (in millions).
Amount
--------
Personnel $ 150
Facilities and equipment 45
Other Merger expenses 30
-------
$ 225
=======
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