0000950131-95-002257.txt : 19950816 0000950131-95-002257.hdr.sgml : 19950816 ACCESSION NUMBER: 0000950131-95-002257 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19950815 ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19950815 SROS: CSX SROS: NYSE SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIRST CHICAGO CORP CENTRAL INDEX KEY: 0000036161 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 362669970 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-06052 FILM NUMBER: 95564420 BUSINESS ADDRESS: STREET 1: ONE FIRST NATL PLZ MAIL STE 0287 CITY: CHICAGO STATE: IL ZIP: 60670 BUSINESS PHONE: 3127324000 8-K 1 FORM 8-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------- FORM 8-K 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) FIRST CHICAGO CORPORATION (Exact name of registrant as specified in its charter) DELAWARE 1-6052 36-2669970 --------------------------- ------------ ------------------- (Name or other jurisdiction (Commission (IRS Employer of incorporation) File Number) Identification No.) ONE FIRST NATIONAL PLAZA CHICAGO, ILLINOIS 60670 (Address of principal executive offices) (ZIP Code) Registrant's Telephone Number, including area code : (312) 732-4000 ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS ------ c) Exhibits -------- Attached hereto or incorporated herein are the following Exhibits relating to the previously announced merger of First Chicago Corporation, a Delaware corporation (the "Corporation"), and NBD Bancorp, Inc., a Delaware corporation ("NBD"): Exhibit Description of Number Exhibit ------ -------------- 27 The Corporation's Financial Data Schedule. (Incorporated by reference to Exhibit (27) to the Corporation's Form 10-Q for the quarter ended June 30, 1995). 99(a) Pro forma financial information. 99(b) Certain NBD historical financial information for the quarters and six months ended June 30, 1995 and 1994. -2- Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. FIRST CHICAGO CORPORATION By: /s/ William J. Roberts ---------------------------------------------- Name: William J. Roberts Title: Senior Vice President and Comptroller Date: August 15, 1995 -3- EX-99.A 2 PRO FORMA FINANCIAL DATA FIRST CHICAGO NBD CORPORATION PRO FORMA FINANCIAL INFORMATION First Chicago Corporation (the "Corporation" or "First Chicago") and NBD Bancorp, Inc. ("NBD") entered into an Agreement and Plan of Merger, dated July 11, 1995 (the "Merger Agreement"), pursuant to which the Corporation will merge with and into NBD. The name of the combined company will be First Chicago NBD Corporation ("FCNBD"). It is anticipated that the Merger will be accounted for as a pooling-of- interests and that it will be consummated by early 1996, pending approvals of the 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. -4- 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. 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 NBD. 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 the $760 million asset Deerbank Corporation ("Deerbank") of Deerfield, Illinois, which was 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. -5- 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 First Chicago's historical financial condition of the merger with NBD. 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) ----------------------------------------------------------------------------------------------------- First Chicago NBD Pro forma Pro forma (as reported) (as reported) adjustments FCNBD ----------------------------------------------------------------------------------------------------- ASSETS ----------------------------------------------------------------------------------------------------- Cash and due from banks-noninterest bearing.. $ 3,646 $ 2,376 $ 6,022 ----------------------------------------------------------------------------------------------------- Due from banks-interest bearing.............. 9,484 579 10,063 ----------------------------------------------------------------------------------------------------- Federal funds sold and securities ----------------------------------------------------------------------------------------------------- under resale agreements................... 14,274 138 14,412 ----------------------------------------------------------------------------------------------------- Trading account assets....................... 7,706 144 7,850 ----------------------------------------------------------------------------------------------------- Derivative product assets.................... 8,909 87 8,996 ----------------------------------------------------------------------------------------------------- Investment securities........................ 2,583 11,092 13,675 ----------------------------------------------------------------------------------------------------- Loans........................................ 26,517 31,967 58,484 ----------------------------------------------------------------------------------------------------- Allowance for credit losses.................. (689) (470) (1,159) ----------------------------------------------------------------------------------------------------- Other assets................................. 2,898 2,138 5,036 ----------------------------------------------------------------------------------------------------- Total assets................................. $75,328 $48,051 $ - $123,379 ----------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------- LIABILITIES ----------------------------------------------------------------------------------------------------- Deposits: ----------------------------------------------------------------------------------------------------- Demand...................................... $ 6,941 $ 6,805 $ 13,746 ----------------------------------------------------------------------------------------------------- Savings..................................... 7,442 12,455 19,897 ----------------------------------------------------------------------------------------------------- Time........................................ 5,681 9,636 15,317 ----------------------------------------------------------------------------------------------------- Foreign offices............................. 13,700 3,659 17,359 ----------------------------------------------------------------------------------------------------- Total deposits............................... 33,764 32,555 - 66,319 ----------------------------------------------------------------------------------------------------- Short-term borrowings........................ 23,516 7,862 31,378 ----------------------------------------------------------------------------------------------------- Long-term debt............................... 2,271 3,012 5,283 ----------------------------------------------------------------------------------------------------- Derivative product liabilities............... 8,581 92 8,673 ----------------------------------------------------------------------------------------------------- Other liabilities............................ 2,425 928 146 3,499 ----------------------------------------------------------------------------------------------------- Total liabilities............................ 70,557 44,449 146 115,152 ----------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------- STOCKHOLDERS' EQUITY ----------------------------------------------------------------------------------------------------- Preferred stock.............................. 611 - 611 ----------------------------------------------------------------------------------------------------- Common stock................................. 467 161 (467) 323 ----------------------------------------------------------------------------------------------------- 162 ----------------------------------------------------------------------------------------------------- Surplus...................................... 1,712 533 (1,712) 2,362 ----------------------------------------------------------------------------------------------------- 1,829 ----------------------------------------------------------------------------------------------------- Retained earnings............................ 2,169 3,082 (142) 5,105 ----------------------------------------------------------------------------------------------------- (4) ----------------------------------------------------------------------------------------------------- Other........................................ - (57) (57) ----------------------------------------------------------------------------------------------------- Total........................................ 4,959 3,719 (334) 8,344 ----------------------------------------------------------------------------------------------------- Less: Treasury stock......................... 188 117 (188) 117 ----------------------------------------------------------------------------------------------------- Stockholders' equity......................... 4,771 3,602 (146) 8,227 ----------------------------------------------------------------------------------------------------- Total liabilities and ----------------------------------------------------------------------------------------------------- stockholders' equity.................... $75,328 $48,051 $ - $123,379 -----------------------------------------------------------------------------------------------------
See accompanying notes to unaudited pro forma condensed combined financial statements. -6-
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 -------------------------------------------------------------------------------- First Chicago NBD Pro Forma (as reported) (as reported) FCNBD -------------------------------------------------------------------------------- INTEREST INCOME -------------------------------------------------------------------------------- Interest and fees on loans............ $1,198.3 $1,345.8 $2,544.1 -------------------------------------------------------------------------------- Interest on federal funds sold and -------------------------------------------------------------------------------- securities under resale agreements.. 479.5 6.4 485.9 -------------------------------------------------------------------------------- Interest on trading account assets.... 190.8 3.5 194.3 -------------------------------------------------------------------------------- Interest on investment securities..... 43.9 397.4 441.3 -------------------------------------------------------------------------------- Other interest income................. 281.7 22.9 304.6 -------------------------------------------------------------------------------- Total................................. 2,194.2 1,776.0 3,970.2 -------------------------------------------------------------------------------- INTEREST EXPENSE -------------------------------------------------------------------------------- Interest on deposits.................. 635.7 604.0 1,239.7 -------------------------------------------------------------------------------- Interest on short-term borrowings..... 737.4 231.3 968.7 -------------------------------------------------------------------------------- Interest on long-term debt............ 91.9 91.4 183.3 -------------------------------------------------------------------------------- Total................................. 1,465.0 926.7 2,391.7 -------------------------------------------------------------------------------- NET INTEREST INCOME................... 729.2 849.3 1,578.5 -------------------------------------------------------------------------------- Provision for credit losses........... 135.0 40.2 175.2 -------------------------------------------------------------------------------- Net Interest Income After -------------------------------------------------------------------------------- Provision for Credit Losses......... 594.2 809.1 1,403.3 -------------------------------------------------------------------------------- NONINTEREST INCOME -------------------------------------------------------------------------------- Equity securities gains............... 114.5 - 114.5 -------------------------------------------------------------------------------- Investment securities gains........... - 1.7 1.7 -------------------------------------------------------------------------------- Credit card fee revenue............... 404.8 20.1 424.9 -------------------------------------------------------------------------------- Other noninterest income.............. 438.5 259.3 697.8 -------------------------------------------------------------------------------- Total................................. 957.8 281.1 1,238.9 -------------------------------------------------------------------------------- NONINTEREST EXPENSE -------------------------------------------------------------------------------- Salaries and employee benefits........ 461.2 361.8 823.0 -------------------------------------------------------------------------------- Occupancy and equipment expense....... 138.1 106.8 244.9 -------------------------------------------------------------------------------- Other noninterest expense............. 366.5 191.1 557.6 -------------------------------------------------------------------------------- Total................................. 965.8 659.7 1,625.5 -------------------------------------------------------------------------------- INCOME BEFORE INCOME TAXES............ 586.2 430.5 1,016.7 -------------------------------------------------------------------------------- Applicable income taxes............... 203.7 146.2 349.9 -------------------------------------------------------------------------------- INCOME FROM CONTINUING OPERATIONS..... $ 382.5 $ 284.3 $ 666.8 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- COMMON SHARE DATA -------------------------------------------------------------------------------- Income from continuing operations -------------------------------------------------------------------------------- Primary............................... $ 3.98 $ 1.79 $ 2.00 -------------------------------------------------------------------------------- Fully diluted......................... $ 3.88 $ 1.79 $ 1.97 -------------------------------------------------------------------------------- Weighted average shares -------------------------------------------------------------------------------- Primary............................... 91.1 158.6 323.5 -------------------------------------------------------------------------------- Fully diluted......................... 95.0 158.6 330.5 -------------------------------------------------------------------------------- --------------------------------------------------------------------------------
See accompanying notes to unaudited pro forma condensed combined financial statements. -7-
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 -------------------------------------------------------------------------------- First Chicago NBD Pro Forma (as reported) (as reported) FCNBD -------------------------------------------------------------------------------- INTEREST INCOME -------------------------------------------------------------------------------- Interest and fees on loans............ $ 907.9 $ 969.0 $1,876.9 -------------------------------------------------------------------------------- Interest on federal funds sold and -------------------------------------------------------------------------------- securities under resale agreements.. 224.7 2.8 227.5 -------------------------------------------------------------------------------- Interest on trading account assets.... 115.8 2.4 118.2 -------------------------------------------------------------------------------- Interest on investment securities..... 30.5 349.3 379.8 -------------------------------------------------------------------------------- Other interest income................. 157.5 15.0 172.5 -------------------------------------------------------------------------------- Total................................. 1,436.4 1,338.5 2,774.9 -------------------------------------------------------------------------------- INTEREST EXPENSE -------------------------------------------------------------------------------- Interest on deposits.................. 336.8 390.8 727.6 -------------------------------------------------------------------------------- Interest on short-term borrowings..... 354.0 107.7 461.7 -------------------------------------------------------------------------------- Interest on long-term debt............ 82.2 52.4 134.6 -------------------------------------------------------------------------------- Total................................. 773.0 550.9 1,323.9 -------------------------------------------------------------------------------- NET INTEREST INCOME................... 663.4 787.6 1,451.0 -------------------------------------------------------------------------------- Provision for credit losses........... 93.0 24.0 117.0 -------------------------------------------------------------------------------- Net Interest Income After -------------------------------------------------------------------------------- Provision for Credit Losses......... 570.4 763.6 1,334.0 -------------------------------------------------------------------------------- NONINTEREST INCOME -------------------------------------------------------------------------------- Equity securities gains............... 138.1 - 138.1 -------------------------------------------------------------------------------- Investment securities gains........... 1.1 0.3 1.4 -------------------------------------------------------------------------------- Credit card fee revenue............... 376.2 18.1 394.3 -------------------------------------------------------------------------------- Other noninterest income.............. 415.3 254.3 669.6 -------------------------------------------------------------------------------- Total................................. 930.7 272.7 1,203.4 -------------------------------------------------------------------------------- NONINTEREST EXPENSE -------------------------------------------------------------------------------- Salaries and employee benefits........ 420.3 355.5 775.8 -------------------------------------------------------------------------------- Occupancy and equipment expense....... 156.1 105.6 261.7 -------------------------------------------------------------------------------- Other noninterest expense............. 368.7 193.5 562.2 -------------------------------------------------------------------------------- Total................................. 945.1 654.6 1,599.7 -------------------------------------------------------------------------------- INCOME BEFORE INCOME TAXES............ 556.0 381.7 937.7 -------------------------------------------------------------------------------- Applicable income taxes............... 193.5 123.6 317.1 -------------------------------------------------------------------------------- INCOME FROM CONTINUING OPERATIONS..... $ 362.5 $ 258.1 $ 620.6 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- COMMON SHARE DATA -------------------------------------------------------------------------------- Income from continuing operations -------------------------------------------------------------------------------- Primary............................... $ 3.76 $ 1.61 $ 1.84 -------------------------------------------------------------------------------- Fully diluted......................... $ 3.67 $ 1.59 $ 1.81 -------------------------------------------------------------------------------- Weighted average shares -------------------------------------------------------------------------------- Primary............................... 87.9 160.7 319.8 -------------------------------------------------------------------------------- Fully diluted......................... 91.7 163.5 329.4 -------------------------------------------------------------------------------- --------------------------------------------------------------------------------
See accompanying notes to unaudited pro forma condensed combined financial statements. -8- 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 NBD. As a result of this review, it might be necessary to restate either the Corporation's or NBD'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 the -9- Corporation. Retained earnings and dividends payable have been adjusted by approximately $4 million, reflecting the pro forma number of shares at NBD's current dividend rate. The pro forma entries are displayed below (in millions): 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
e) The pro forma financial information presented does not give effect to the Corporation's and NBD's plan to repurchase in the aggregate approximately $300 million worth of the Corporation and NBD'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 NBD using the historical weighted average number of outstanding shares of NBD's common stock and the historical weighted average number of outstanding shares of the Corporation'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 -10- the largest component. Product synergies in the large corporate and middle markets, and staff and functional areas, also provide additional expense reduction opportunities. h) The Corporation and NBD 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
-11- It is anticipated that substantially all of these charges will be paid within a 12-15 month time frame subsequent to the Merger. This charge has been excluded from the pro forma condensed combined income statement due to its nonrecurring nature. The following table provides details of the estimated pre-tax charges (in millions).
Amount ------ Personnel $150 Facilities and equipment 45 Other Merger expenses 30 ---- $225 ====
-12- EX-99.B 3 HISTORICAL DATA NBD BANCORP, Inc. Consolidated Balance Sheet (in thousands except share data)
Assets June 30 December 31 June 30 1995 1994 1994 ------------ ------------ ------------ 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 =========== =========== ===========
13
Liabilities and Shareholders' Equity June 30 December 31 June 30 1995 1994 1994 ------------ ------------ ------------ Deposits: 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 =========== =========== ===========
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: 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 ======== ======== ========== ==========
15 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: 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 ========== ========== ========== ==========
16 NBD BANCORP, Inc. Consolidated Statement of Cash Flows (in thousands)
Six Months Ended June 30 ------------------------- 1995 1994 ----------- ----------- Cash Flows from Operating Activities: 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
17 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). 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. 18 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:
Investment Securities Available-for-Sale ---------------------------------------------- Gross Gross Amortized Unrealized Unrealized Fair Cost Gains Losses Value ---------- ---------- ---------- ---------- (in thousands) 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 ========== ======= ======= ==========
Investment Securities Held-to-Maturity ----------------------------------------------- Gross Gross Amortized Unrealized Unrealized Fair Cost Gains Losses Value ---------- ---------- ---------- ---------- (in thousands) 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. 19 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:
Investment Securities Available-for-Sale ------------------------------------------------ Gross Gross Amortized Unrealized Unrealized Fair Cost Gains Losses Value ----------- ---------- ---------- ----------- (in thousands) U.S. Treasury........................... $ 505,540 $ 96 $ 592 $ 505,044 U.S. Government Agencies: Mortgage-backed Securities............. 2,655,673 4 160,195 2,495,482 Collateralized Mortgage Obligations.... 1,461,321 4,940 45,974 1,420,287 Other.................................. 22,916 1,267 3 24,180 States and Political Subdivisions....... 76,586 33 363 76,256 Collateralized Mortgage Obligations(a).. 111,351 76 936 110,491 Other................................... 222,931 459 40,878 182,512 ---------- ------ -------- ---------- Total................................. $5,056,318 $6,875 $248,941 $4,814,252 ========== ====== ======== ==========
Investment Securities Held-to-Maturity ------------------------------------------------ Gross Gross Amortized Unrealized Unrealized Fair Cost Gains Losses Value ----------- ---------- ---------- ----------- (in thousands) U.S. Treasury...................... $ 519,656 $ 225 $ 13,145 $ 506,736 U.S. Government Agencies: Mortgage-backed Securities........ 5,664,739 45,612 282,356 5,427,995 Other............................. 8,420 6 145 8,281 States and Political Subdivisions.. 1,415,398 46,182 23,626 1,437,954 Other.............................. 500 10 - 510 ---------- ------- -------- ---------- Total............................ $7,608,713 $92,035 $319,272 $7,381,476 ========== ======= ======== ==========
(a) All Collateralized Mortgage Obligations of private issuers have underlying collateral consisting of obligations of U.S. Government Agencies. 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 ======== ========
20 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.
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: 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) ======= ======== ========
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: 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 ======= ======== =======
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. 21 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.
Customer Accommodation and Other Contracts: June 30, 1995 -------------------------------------- Contract or Fair Value Notional ------------------------ Amount Asset Liability ----------- -------------- --------- (in thousands) Interest Rate Swaps: 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 ======= ======= December 31, 1994 ------------------------------------- Contract or Fair Value Notional ------------------------ Amount Asset Liability ----------- ------------- --------- (in thousands) Interest Rate Swaps: 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 ======= =======
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 ======= ====
22 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 as of 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. 23