-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OyT+ZM5cdPUztG7mAVgn7IGjaZy3Edyv9OPgRUq57jNvwo25iqkPr8KlQ49c+x3F 2QwSpuU96Iq5J8RGn9+wRQ== 0000950131-95-003246.txt : 19951120 0000950131-95-003246.hdr.sgml : 19951120 ACCESSION NUMBER: 0000950131-95-003246 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19951114 ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19951114 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: 95593055 BUSINESS ADDRESS: STREET 1: ONE FIRST NATL PLZ STREET 2: STE 0284 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 NOVEMBER 14, 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 September 30, 1995). 99(a) Pro forma financial information. 99(b) Certain NBD historical financial information for the quarters and nine months ended September 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: William J. Roberts --------------------------------------- Name: William J. Roberts Title: Senior Vice President and Comptroller Date: November 14, 1995 -3- EX-99.(A) 2 PRO FORMA DOCUMENT 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, as amended (the "Merger Agreement"), pursuant to which the Corporation will merge (the "Merger") with and into NBD. The name of the combined company will be First Chicago NBD Corporation ("FCNBD"). It is anticipated that the Merger will be accounted for as a pooling-of- interests and that it will be consummated on November 30, 1995. In November 1995 the Board of Governors of the Federal Reserve System approved the merger and in October 1995 shareholders of both First Chicago and NBD approved the merger in separate special meetings. Pursuant to the Merger Agreement, 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. -4- At the effective time of the Merger, each share of First Chicago's outstanding preferred stock, and each outstanding depositary share, will be exchanged for one share of FCNBD preferred stock and one depositary share, respectively, with terms substantially identical to those of the existing First Chicago preferred stock and depositary shares, as appropriate. -5- In connection with the execution of the Merger Agreement, First Chicago granted NBD an option to purchase, under certain circumstances, newly issued common stock equal to 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, newly issued common stock equal to 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 September 30, 1995, and (ii) the unaudited pro forma condensed combined statements of income for the nine-month periods ended September 30, 1995 and 1994. The pro forma condensed combined financial statements should be read in conjunction with the historical consolidated financial statements and notes thereto of the Corporation and 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. On July 1, 1995, NBD acquired the $760 million asset Deerbank Corporation ("Deerbank") of Deerfield, Illinois, which was accounted for as a purchase. Accordingly, the historical income statement for NBD for the nine months ended September 30, 1995, include the operations of AmeriFed and Deerbank since their respective dates of acquisition. With respect to the following pro forma condensed combined financial statements, the historical income statements for NBD were not restated to otherwise include amounts for AmeriFed and Deerbank as such acquisitions are not considered material. -6- FIRST CHICAGO NBD CORPORATION PRO FORMA CONDENSED COMBINED BALANCE SHEET AS OF SEPTEMBER 30, 1995 (UNAUDITED) The following pro forma condensed combined balance sheet as of September 30, 1995, is presented to show the impact on 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 SEPTEMBER 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........... $ 3,808 $ 2,540 $ - $ 6,348 Due from banks-interest bearing....................... 9,633 669 10,302 Federal funds sold and securities under resale agreements............................. 14,034 210 14,244 Trading account assets................................ 7,911 205 8,116 Derivative product assets............................. 7,928 53 7,981 Investment securities................................. 2,209 9,701 11,910 Loans................................................. 27,663 33,413 61,076 Allowance for credit losses........................... (743) (488) (1,231) Other assets.......................................... 3,304 2,199 (181) 5,322 - -------------------------------------------------------------------------------------------------------------- Total assets..................................... $75,747 $48,502 $ (181) $124,068 - -------------------------------------------------------------------------------------------------------------- LIABILITIES Deposits: Demand.............................................. $ 6,585 $ 6,700 $ 13,285 Savings............................................. 7,413 12,373 19,786 Time................................................ 5,757 10,199 15,956 Foreign offices..................................... 13,480 4,427 17,907 - -------------------------------------------------------------------------------------------------------------- Total deposits................................... 33,235 33,699 - 66,934 Short-term borrowings................................. 25,406 6,941 32,347 Long-term debt........................................ 2,274 3,111 5,385 Derivative product liabilities........................ 7,562 47 7,609 Other liabilities..................................... 2,566 950 (28) 3,488 - -------------------------------------------------------------------------------------------------------------- Total liabilities................................ 71,043 44,748 (28) 115,763 STOCKHOLDERS' EQUITY Preferred stock....................................... 491 - 491 Common stock.......................................... 467 161 (467) 321 160 Surplus............................................... 1,714 538 (1,714) 2,277 1,739 Retained earnings..................................... 2,313 3,178 (153) 5,338 Other................................................. 1 (52) (51) - -------------------------------------------------------------------------------------------------------------- Total............................................ 4,986 3,825 (435) 8,376 Less: Treasury stock.................................. 282 71 (282) 71 Stockholders' equity................................ 4,704 3,754 (153) 8,305 - -------------------------------------------------------------------------------------------------------------- Total liabilities and stockholders' equity....... $75,747 $48,502 $ (181) $124,068 - -------------------------------------------------------------------------------------------------------------- See accompanying notes to unaudited pro forma condensed combined financial statements.
-7-
FIRST CHICAGO NBD CORPORATION Pro Forma Condensed Combined Statement of Income For Nine Months Ended September 30, 1995 (in millions, except per share data) UNAUDITED First Chicago NBD Pro Forma (as reported) (as reported) FCNBD - --------------------------------------------------------------------------------------------- INTEREST INCOME Interest and fees on loans....................... $1,792.8 $2,069.3 $3,862.1 Interest on federal funds sold and securities under resale agreements............. 708.6 7.9 716.5 Interest on trading account assets............... 328.9 5.9 334.8 Interest on investment securities................ 67.1 577.4 644.5 Other interest income............................ 432.9 33.3 466.2 - --------------------------------------------------------------------------------------------- Total....................................... 3,330.3 2,693.8 6,024.1 INTEREST EXPENSE Interest on deposits............................. 989.3 928.1 1,917.4 Interest on short-term borrowings................ 1,114.0 339.3 1,453.3 Interest on long-term debt....................... 136.8 142.6 279.4 - --------------------------------------------------------------------------------------------- Total....................................... 2,240.1 1,410.0 3,650.1 NET INTEREST INCOME.............................. 1,090.2 1,283.8 2,374.0 Provision for credit losses...................... 235.0 65.2 300.2 - --------------------------------------------------------------------------------------------- Net Interest Income After Provision for Credit Losses.................... 855.2 1,218.6 2,073.8 NONINTEREST INCOME Equity securities gains.......................... 181.2 - 181.2 Investment securities gains...................... - 3.2 3.2 Credit card fee revenue.......................... 640.7 31.1 671.8 Other noninterest income......................... 694.9 392.7 1,087.6 - --------------------------------------------------------------------------------------------- Total....................................... 1,516.8 427.0 1,943.8 NONINTEREST EXPENSE Salaries and employee benefits................... 710.6 549.9 1,260.5 Occupancy and equipment expense.................. 208.7 158.3 367.0 Other noninterest expense........................ 549.0 278.6 827.6 - --------------------------------------------------------------------------------------------- Total....................................... 1,468.3 986.8 2,455.1 INCOME BEFORE INCOME TAXES....................... 903.7 658.8 1,562.5 Applicable income taxes.......................... 314.0 224.9 538.9 - --------------------------------------------------------------------------------------------- INCOME FROM CONTINUING OPERATIONS................ $ 589.7 $ 433.9 $1,023.6 - --------------------------------------------------------------------------------------------- COMMON SHARE DATA Income from continuing operations Primary.......................................... $6.16 $2.73 $3.07 Fully diluted.................................... $6.00 $2.72 $3.03 Weighted average shares Primary.......................................... 90.9 159.2 323.8 Fully diluted.................................... 94.8 159.5 331.2 - ---------------------------------------------------------------------------------------------
See accompanying notes to unaudited pro forma condensed combined financial statements. -8-
FIRST CHICAGO NBD CORPORATION Pro Forma Condensed Combined Statement of Income For Nine Months Ended September 30, 1994 (in millions, except per share data) UNAUDITED First Chicago NBD Pro Forma (as reported) (as reported) FCNBD - -------------------------------------------------------------------------------- INTEREST INCOME Interest and fees on loans............ $1,384.8 $1,511.3 $2,896.1 Interest on federal funds sold and securities under resale agreements.. 400.0 5.7 405.7 Interest on trading account assets.... 191.8 4.3 196.1 Interest on investment securities..... 48.7 556.1 604.8 Other interest income................. 255.3 24.2 279.5 - -------------------------------------------------------------------------------- Total............................ 2,280.6 2,101.6 4,382.2 INTEREST EXPENSE Interest on deposits.................. 540.7 618.5 1,159.2 Interest on short-term borrowings..... 616.4 192.2 808.6 Interest on long-term debt............ 125.7 88.5 214.2 - -------------------------------------------------------------------------------- Total............................ 1,282.8 899.2 2,182.0 NET INTEREST INCOME................... 997.8 1,202.4 2,200.2 Provision for credit losses........... 148.0 31.9 179.9 - -------------------------------------------------------------------------------- Net Interest Income After Provision for Credit Losses......... 849.8 1,170.5 2,020.3 NONINTEREST INCOME Equity securities gains............... 158.1 - 158.1 Investment securities gains (losses).. (1.1) 1.0 (0.1) Credit card fee revenue............... 597.3 28.1 625.4 Other noninterest income.............. 631.5 380.2 1,011.7 - -------------------------------------------------------------------------------- Total............................ 1,385.8 409.3 1,795.1 NONINTEREST EXPENSE Salaries and employee benefits........ 645.4 537.2 1,182.6 Occupancy and equipment expense....... 223.2 155.4 378.6 Other noninterest expense............. 567.9 284.5 852.4 - -------------------------------------------------------------------------------- Total............................ 1,436.5 977.1 2,413.6 INCOME BEFORE INCOME TAXES............ 799.1 602.7 1,401.8 Applicable income taxes............... 282.8 196.9 479.7 - -------------------------------------------------------------------------------- INCOME FROM CONTINUING OPERATIONS..... $ 516.3 $ 405.8 $ 922.1 - -------------------------------------------------------------------------------- COMMON SHARE DATA Income from continuing operations Primary............................... $5.29 $2.54 $2.73 Fully diluted......................... $5.17 $2.53 $2.69 Weighted average shares Primary............................... 89.7 159.7 322.1 Fully diluted......................... 93.5 161.5 330.7 - --------------------------------------------------------------------------------
See accompanying notes to unaudited pro forma condensed combined financial statements. -9- FIRST CHICAGO NBD CORPORATION NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS a) The pro forma information presented is not necessarily indicative of the results of operations or the combined financial position that would have resulted had the Merger been consummated at the beginning of the periods indicated, nor is it necessarily indicative of the results of operations in future periods or the future financial position of the combined entities. It is anticipated that the Merger will be consummated in the fourth quarter of 1995. b) The Corporation has reviewed its accounting policies in light of those employed by NBD. At this time, it is not expected that conformance of such accounting policies will have a material impact on the pro forma condensed combined financial statements. c) Certain reclassifications have been included in the unaudited pro forma condensed combined balance sheet and statements of income to conform statement presentations. Transactions conducted in the ordinary course of business between the two companies are immaterial, and accordingly, have not been eliminated. d) Pro forma adjustments to common shares and surplus at September 30, 1995, reflect the Merger accounted for as a pooling-of-interests, through the exchange of 159.8 million shares of FCNBD common stock (using the common exchange ratio of 1.81) for the 88.3 million outstanding shares of the Corporation. -10- The pro forma entries are displayed below (in millions): Debit-- Common stock (First Chicago) ................. $ 467 Debit-- Common surplus (First Chicago) ............... 1,714 Credit-- Treasury stock (First Chicago) ...... $ 282 Credit-- Common stock (FCNBD) ................ 160 Credit-- Common surplus (FCNBD) .............. 1,739 e) A pro forma entry of $181 million was made to reclassify NBD's deferred tax receivable from other assets to other liabilities. f) As of September 30, 1995, the Corporation and NBD were approximately 50% completed with the plan to repurchase in the aggregate approximately $300 million worth of the Corporation's and NBD's common stock prior to the consummation of the Merger. The pro forma condensed combined balance sheet does not include the impact of the remaining shares anticipated to be repurchased, prior to the consummation of the Merger. g) Income per share data has been computed based on the combined historical income from continuing operations applicable to common stockholders of the Corporation and 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. -11- h) The pro forma condensed combined financial statements do not include the anticipated cost savings in connection with the Merger. It is estimated, however, that approximately $200 million in pre-tax annualized cost savings ($126 million after-tax) will be realized by the combined company in 1997. Reductions resulting from elimination of the overlap in Chicago-area retail branch expense constitute the largest component. Product synergies in the large corporate and middle markets, and staff and functional areas, also provide additional expense reduction opportunities. i) The Financial Accounting Standards Board, in conjunction with the finalization of their implementation guide relating to SFAS #115- "Accounting for Certain Investments in Debt and Equity Securities"- has given registrants an opportunity to assess the classification of their existing investment securities portfolio between the held-to-maturity and available-for-sale classifications. In conjunction with this guidance, as well as in accordance with the combined company's existing interest rate risk position, it is anticipated that a significant portion of the companies' investment securities currently classified as held-to-maturity will be transferred to the available-for-sale classification. If subsequent sales of such securities occur as part of this overall process, such sales would not preclude accounting for the combination as a pooling of interests in accordance with either EITF Abstracts, Topic No. D-40, or paragraph 8(c) of SFAS #115, which represents an exception to paragraph 48(c) of APB Opinion #16. Based on current market conditions, it is not expected that any such sales would result in any material probable losses that would require an adjustment to the pro forma financial statements. -12- Any transfers of securities is anticipated to occur in the fourth quarter of 1995 and will be accounted for in accordance with SFAS #115. j) A liability of $225 million has been recorded in the unaudited pro forma condensed combined balance sheet to reflect First Chicago's and NBD's current estimate of merger and restructuring related charges in connection with the attainment by 1997 of annualized pre-tax cost savings of approximately $200 million. This resulted in a $153 million after-tax charge to retained earnings in the unaudited pro forma condensed combined balance sheet. The pro forma entries are displayed below (in millions): Debit-- Retained earnings $153 Debit-- Other liabilities-taxes payable 72 Credit-- Other liabilities-reserve $225 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 ==== -13- Personnel-related costs reflect severance and assistance costs for separated employees. Facilities costs consist of lease termination costs and other facilities-related exit costs arising from the closing of duplicate branch facilities and from the consolidation of duplicate headquarters and operational facilities. Equipment costs consist of computer equipment and software write-offs due to duplication or incompatibility. The reserve will be established in compliance with Emerging Issues Task Force #94-3. Substantially all of the personnel-related costs represent employee severance costs. An estimate of staff reductions totals 1,700 coming primarily from the overlap in the Chicago retail banking business, product synergies in the large corporate and middle market businesses, as well as from staff and administrative support functions. The contemplated timeframe for completion of these actions is a 12 to 15 month period subsequent to the Merger. Other merger-related costs include investment banking fees, securities registration and filing fees, as well as accounting, legal and other related costs. Investment banking fees, estimated at $12 million, represent the largest component of such costs. -14- EX-99.(B) 3 NBD FINANCIALS
NBD Bancorp, Inc. Consolidated Balance Sheet (in thousands except share data) Assets September 30 December 31 September 30 1995 1994 1994 ------------ ----------- ------------ Cash and Due From Banks........................................ $ 2,540,295 $ 2,587,007 $ 2,344,939 Interest-Bearing Deposits...................................... 668,931 630,688 642,969 Federal Funds Sold and Resale Agreements....................... 210,147 399,725 163,295 Trading Account Securities..................................... 205,051 122,135 187,474 Investment Securities (Note B): Available-for-Sale (At Fair Value)........................ 2,868,502 4,814,252 4,791,169 Held-to-Maturity (Fair Value of $6,963,401, $7,381,476 and $7,757,535, respectively)................ 6,831,803 7,608,713 7,832,855 ------------ ----------- ------------ 9,700,305 12,422,965 12,624,024 ------------ ----------- ------------ Loans and Leases (Net of Unearned Income of $214,642, $171,207 and $150,832, respectively): Commercial................................................ 17,199,483 15,525,645 14,898,990 Real Estate Construction.................................. 935,833 817,452 785,543 Residential Mortgage...................................... 4,422,097 3,351,840 3,187,130 Mortgages Held For Sale................................... 341,829 30,171 41,008 Consumer.................................................. 8,372,663 7,667,907 7,421,699 Lease Financing........................................... 428,125 363,200 335,860 Foreign................................................... 1,712,762 1,473,449 1,215,322 ------------ ----------- ------------ 33,412,792 29,229,664 27,885,552 Allowance For Possible Credit Losses (Note C)............. (487,726) (435,051) (423,700) ------------ ----------- ------------ 32,925,066 28,794,613 27,461,852 ------------ ----------- ------------ Net Premises and Equipment..................................... 670,372 630,357 636,755 Customers' Liability on Acceptances............................ 183,898 193,866 186,370 Other Assets................................................... 1,397,581 1,329,777 1,318,624 ------------ ----------- ------------ Total Assets......................................... $48,501,646 $47,111,133 $45,566,302 ============ =========== ============
NBD Bancorp, Inc. Consolidated Balance Sheet (in thousands except share data) Liabilities and Shareholders' Equity September 30 December 31 September 30 1995 1994 1994 --------------- ------------- -------------- Deposits: Demand (Non-Interest Bearing)........................................... $ 6,700,165 $ 6,731,050 $ 6,349,603 Savings................................................................. 7,341,687 7,679,922 7,745,473 Money Market Accounts................................................... 5,030,957 4,959,816 5,110,887 Time.................................................................... 10,198,717 8,055,429 7,603,690 Foreign Office.......................................................... 4,427,137 5,803,224 3,693,457 ----------- ----------- ----------- 33,698,663 33,229,441 30,503,110 Short-Term Borrowings..................................................... 6,940,959 7,119,972 8,483,258 Liability on Acceptances.................................................. 183,898 193,866 186,370 Accrued Expenses and Sundry Liabilities................................... 813,398 771,963 757,595 Long-Term Debt............................................................ 3,111,426 2,504,348 2,381,382 ----------- ----------- ----------- Total Liabilities.................................................... 44,748,344 43,819,590 42,311,715 ----------- ----------- ----------- Shareholders' Equity: Series A Preferred Stock - Par Value $1, Stated Value $50............... - - - September 30 December 31 September 30 No. of Shares 1995 1994 1994 ------------- ------------ ----------- ------------ Authorized.... 460,000 460,000 460,000 Issued........ - - - Preferred Stock - No Par Value.......................................... - - - September 30 December 31 September 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 September 30 December 31 September 30 No. of Shares 1995 1994 1994 ------------- ------------ ----------- ------------ Authorized.... 500,000,000 500,000,000 500,000,000 Issued........ 160,883,008 160,876,819 160,876,819 Capital Surplus......................................................... 537,722 545,717 547,710 Retained Earnings....................................................... 3,177,975 2,903,394 2,813,263 Fair Value Adjustment on Investment Securities Available-for-Sale (Note B).......................................... (34,544) (154,305) (111,675) Accumulated Translation Adjustment...................................... 9,254 6,942 7,663 Deferred Compensation................................................... (26,786) (17,438) (21,859) Treasury Stock (2,008,872, 4,968,147 and 4,546,230 shares, respectively)....................................... (71,202) (153,644) (141,392) ----------- ----------- ----------- Total Shareholders' Equity........................................... 3,753,302 3,291,543 3,254,587 ----------- ----------- ----------- Total Liabilities and Shareholders' Equity...................... $48,501,646 $47,111,133 $45,566,302 =========== =========== ===========
NBD Bancorp, Inc. Consolidated Statement of Income (in thousands except per share data) Quarter Ended Nine Months Ended September 30 September 30 ----------------------------- ----------------------------- 1995 1994 1995 1994 --------------- ------------ --------------- ------------ Interest Income: Loans and Leases (including fees)............................ $723,508 $542,238 $2,069,298 $1,511,258 Investment Securities: Taxable.................................................... 158,225 182,319 508,523 481,793 Non-Taxable................................................ 21,804 24,557 68,944 74,386 Trading Account Securities................................... 2,372 1,878 5,906 4,257 Federal Funds Sold and Resale Agreements..................... 1,518 2,849 7,861 5,712 Interest-Bearing Deposits.................................... 10,368 9,236 33,296 24,228 -------- -------- ---------- ---------- Total Interest Income................................... 917,795 763,077 2,693,828 2,101,634 -------- -------- ---------- ---------- Interest Expense: Deposits..................................................... 324,068 227,662 928,129 618,491 Short-Term Borrowings........................................ 107,971 84,526 339,282 192,201 Long-Term Debt............................................... 51,248 36,098 142,644 88,503 -------- -------- ---------- ---------- Total Interest Expense.................................. 483,287 348,286 1,410,055 899,195 -------- -------- ---------- ---------- Net Interest Income............................................ 434,508 414,791 1,283,773 1,202,439 Provision for Possible Credit Losses......................... 25,038 7,907 65,225 31,946 -------- -------- ---------- ---------- Net Interest Income After Provision For Possible Credit Losses................................... 409,470 406,884 1,218,548 1,170,493 -------- -------- ---------- ---------- Non-Interest Income: Trust Fees................................................... 41,568 39,400 122,321 117,313 Service Charges on Deposit Accounts.......................... 41,777 40,752 122,848 120,521 Credit Card Fees............................................. 11,008 10,052 31,139 28,120 Securities Gains............................................. 1,493 740 3,177 1,045 Other........................................................ 50,046 45,653 147,543 142,296 -------- -------- -------- -------- Total Non-Interest Income............................... 145,892 136,597 427,028 409,295 -------- -------- -------- -------- Non-Interest Expenses: Compensation: Salaries................................................... 142,838 137,292 416,187 405,607 Benefits................................................... 45,261 44,436 133,677 131,631 -------- -------- -------- -------- Total Compensation...................................... 188,099 181,728 549,864 537,238 Net Occupancy................................................ 29,115 29,242 89,442 89,291 Equipment Rentals, Depreciation and Maintenance.............. 23,239 21,387 68,877 66,126 FDIC and Other Regulatory Assessments........................ 173 16,631 33,287 50,047 Amortization of Intangibles.................................. 8,659 6,415 23,684 19,516 Other........................................................ 77,804 67,089 221,664 214,902 -------- -------- -------- -------- Total Non-Interest Expenses............................. 327,089 322,492 986,818 977,120 -------- -------- -------- -------- Income before Income Taxes..................................... 228,273 220,989 658,758 602,668 Income Tax Expense (Benefit) (Including tax effect of $513, $260, $1,105 and $374, respectively, on securities sales)....................................... 78,723 73,335 224,875 196,914 -------- -------- -------- -------- Income before Extraordinary Item and Cumulative Effect of Accounting Change.................................. 149,550 147,654 433,883 405,754 Extraordinary Item (net of income tax effect) (Note F)................................................. - - - (7,730) Cumulative Effect of Accounting Change (net of income tax effect) (Note A).............................. - - - (7,885) -------- -------- -------- -------- Net Income..................................................... $149,550 $147,654 $433,883 $390,139 ======== ======== ======== ======== Net Income Per Share (on average shares outstanding): Income before Extraordinary Item and Cumulative Effect of Accounting Change................................ $ 0.94 $ 0.93 $ 2.73 $ 2.54 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........................................... $ 0.94 $ 0.93 $ 2.73 $ 2.44 ======== ======== ======== ========
NBD Bancorp, Inc. Consolidated Statement of Shareholders' Equity (in thousands except share data) Quarter Ended Nine Months Ended September 30 September 30 ------------------------ ------------------------ 1995 1994 1995 1994 ---------- ---------- ---------- ---------- Preferred Stock: Balance, Beginning and End of Period.................... $ - $ - $ - $ - ---------- ---------- ---------- ---------- Common Stock: Balance, Beginning of Period............................ 160,883 160,877 160,877 160,715 Acquisition of Subsidiary Bank........................ - - 270 - Cancellation of Shares Held in Treasury............... - - (270) - Other................................................. - - 6 162 ---------- ---------- ---------- ---------- Balance, End of Period.................................. 160,883 160,877 160,883 160,877 ---------- ---------- ---------- ---------- Capital Surplus: Balance, Beginning of Period............................ 533,129 546,829 545,717 541,232 Acquisition of Subsidiary Bank........................ 2,885 - (3,438) - Cancellation of Shares Held in Treasury............... - - (8,130) - Other................................................. 1,708 881 3,573 6,478 ---------- ---------- ---------- ---------- Balance, End of Period.................................. 537,722 547,710 537,722 547,710 ---------- ---------- ---------- ---------- Retained Earnings: Balance, Beginning of Period............................ 3,082,012 2,712,268 2,903,394 2,565,627 Net Income............................................ 149,550 147,654 433,883 390,139 Cash Dividends Declared on Common Stock ($.33, $.30, $.99 and $.90 per share, respectively)....................................... (53,587) (46,659) (159,302) (142,503) ---------- ---------- ---------- ---------- Balance, End of Period.................................. 3,177,975 2,813,263 3,177,975 2,813,263 ---------- ---------- ---------- ---------- Fair Value Adjustment on Investment Securities Available-for-Sale: Balance, Beginning of Period............................ (39,327) (89,936) (154,305) (7,012) Change in Fair Value (net of tax)..................... 4,783 (21,739) 119,761 (104,663) ---------- ---------- ---------- ---------- Balance, End of Period.................................. (34,544) (111,675) (34,544) (111,675) ---------- ---------- ---------- ---------- Accumulated Translation Adjustment: Balance, Beginning of Period............................ 9,444 7,118 6,942 4,384 Translation Gain (Loss) (net of tax).................. (190) 545 2,312 3,279 ---------- ---------- ---------- ---------- Balance, End of Period.................................. 9,254 7,663 9,254 7,663 ---------- ---------- ---------- ---------- Deferred Compensation: Balance, Beginning of Period............................ (27,364) (23,897) (17,438) (16,347) Awards Granted........................................ (171) - (13,418) (14,322) Amortization of Deferred Compensation................. 3,207 2,899 8,683 8,386 Other................................................. (2,458) (861) (4,613) 424 ---------- ---------- ---------- ---------- Balance, End of Period.................................. (26,786) (21,859) (26,786) (21,859) ---------- ---------- ---------- ---------- Treasury Stock: Balance, Beginning of Period............................ (116,511) (63,116) (153,644) - Purchase of Common Stock (6,301,179 shares in 1995)... (65,156) (78,893) (204,830) (153,814) Acquisition of Subsidiary Bank (8,457,369 shares)..... 108,743 - 262,243 - Cancellation of Shares Held in Treasury............... - - 8,400 - Other................................................. 1,722 617 16,629 12,422 ---------- ---------- ---------- ---------- Balance, End of Period.................................. (71,202) (141,392) (71,202) (141,392) ---------- ---------- ---------- ---------- Total Shareholders' Equity, End of Period................. $3,753,302 $3,254,587 $3,753,302 $3,254,587 ========== ========== ========== ==========
NBD Bancorp, Inc. Consolidated Statement of Cash Flows (in thousands) Nine Months Ended September 30 --------------------------------- 1995 1994 ---------------- -------------- Cash Flows from Operating Activities: Net Income.......................................................................... $ 433,883 $ 390,139 Adjustments to Reconcile Net Income to Net Cash Provided by Operations: Depreciation and Amortization..................................................... 85,078 76,474 Provision for Possible Credit Losses.............................................. 65,225 31,946 Securities Gains.................................................................. (3,177) (1,045) Extraordinary Item - Redemption of Debt........................................... - 7,730 Increase in Interest Receivable................................................... (97,800) (37,807) Increase(Decrease) in Income Taxes Payable........................................ (12,159) 22,963 Increase(Decrease) in Accrued Expenses............................................ 58,183 (123,244) Increase in Trading Account Investments........................................... (81,778) (77,043) (Increase)Decrease in Mortgages Held for Sale..................................... (311,658) 214,894 Other, net........................................................................ 6,286 (12,071) ---------- ---------- Net Cash Provided by Operating Activities...................................... 142,083 492,936 ---------- ---------- Cash Flows from Investing Activities: Decrease in Interest-Bearing Deposits............................................... 50,886 87,826 Decrease in Federal Funds Sold and Resale Agreements................................ 189,578 119,186 Purchase of Investment Securities Available-for-Sale................................ (1,407,332) (3,768,241) Proceeds from Maturity or Call of Investment Securities Available-for-Sale.......... 1,012,297 1,576,672 Proceeds from Sale of Investment Securities Available-for-Sale...................... 3,114,766 978,305 Purchase of Investment Securities Held-to-Maturity.................................. (20,498) (2,763,717) Proceeds from Maturity or Call of Investment Securities Held-to-Maturity............ 788,099 1,502,523 Increase in Loans and Leases........................................................ (2,933,993) (2,468,850) Proceeds from Sale of Loan Portfolios............................................... 42,467 - Purchase of Premises and Equipment and Other Assets................................. (74,622) (273,717) Proceeds from Sale of Premises and Equipment and Other Assets....................... 24,641 51,019 Net Cash Acquired(Paid) in Purchase of Subsidiaries................................. 33,715 (5,720) ---------- ---------- Net Cash Provided(Used) by Investing Activities................................ 820,004 (4,964,714) ---------- ---------- Cash Flows from Financing Activities: (Decrease)Increase in Deposits...................................................... (1,049,241) 635,152 (Decrease)Increase in Short-Term Borrowings......................................... (206,633) 3,127,198 Proceeds from the Issuance of Long-Term Debt........................................ 725,000 1,250,000 Principal Payments on Long-Term Debt................................................ (116,046) (101,269) Redemption of Long-Term Debt........................................................ - (208,734) Proceeds from Stock Option Exercises................................................ 1,186 1,285 Payments to Acquire Treasury Stock.................................................. (204,830) (153,814) Dividends Paid...................................................................... (158,299) (138,996) ---------- ---------- Net Cash (Used)Provided by Financing Activities................................ (1,008,863) 4,410,822 ---------- ---------- Effect of Exchange Rate Changes on Cash and Due From Banks............................ 64 201 ---------- ---------- Net Decrease in Cash and Due From Banks............................................... (46,712) (60,755) Cash and Due From Banks - Beginning of Period......................................... 2,587,007 2,405,694 ---------- ---------- Cash and Due From Banks - End of Period............................................... $2,540,295 $2,344,939 ========== ========== Other Cash Flow Disclosures: Interest Paid....................................................................... $1,332,888 $ 994,071 State and Federal Taxes Paid........................................................ 237,034 169,514
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 nine months ended September 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). -6- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont'd.) LOANS: Loans are generally reported at the principal amount outstanding, net of unearned income. Non-refundable loan origination and commitment fees, and certain costs of origination, are deferred and either included in interest income over the term of the related loan or commitment or, if the loan is held for sale, included in Other Non-Interest Income when the loan is sold. Mortgages Held For Sale are valued at the lower of aggregate cost or fair value. Unrealized losses, as well as realized gains or losses, are included in Other Non-Interest Income. Interest income on loans is accrued as earned. Except for consumer loans, loans are placed on non-accrual status and previously accrued but unpaid interest is reversed against current period interest income when collectibility of principal or interest is considered doubtful, payment of principal or interest is 90 days or more past due, or the loan is completely or partially charged off. Interest income on loans considered doubtful or 90 days or more past due is recorded as collected. Collections of principal and interest on charged-off loans are applied in the following sequence: (1) as a reduction of remaining principal balance; (2) as recovery of principal charged off; and (3) as interest income. For purposes of applying SFAS Nos. 114 and 118, "impaired loans" are defined as equivalent to non-accrual and restructured loans. 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. -7- 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 NINE MONTHS ENDED SEPTEMBER 30 SEPTEMBER 30 ------------------------ ------------------------ 1995 1994 1995 1994 ----------- ----------- ----------- ----------- Average Shares Outstanding.. 160,510,231 157,667,003 159,217,241 159,683,663
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 SEPTEMBER 30, 1995:
INVESTMENT SECURITIES AVAILABLE-FOR-SALE --------------------------------------------------------------- GROSS GROSS AMORTIZED UNREALIZED UNREALIZED FAIR COST GAINS LOSSES VALUE ---------- ---------- ---------- --------- (in thousands) U.S. Treasury.................................... $ 419,344 $ 1,492 $ 24 $ 420,812 U.S. Government Agencies: Mortgage-backed Securities............... 1,360,236 1,164 17,399 1,344,001 Collateralized Mortgage Obligations...... 647,710 2,863 8,388 642,185 Other.................................... 205,162 609 11 205,760 States and Political Subdivisions................ 40,820 188 7 41,001 Collateralized Mortgage Obligations(a)........... 25,846 61 93 25,814 Other............................................ 223,205 867 35,143 188,929 ---------- -------- ------- ---------- Total............................ $2,922,323 $ 7,244 $61,065 $2,868,502 ========== ======== ======= ========== INVESTMENT SECURITIES HELD-TO-MATURITY --------------------------------------------------------------- GROSS GROSS AMORTIZED UNREALIZED UNREALIZED FAIR COST GAINS LOSSES VALUE ---------- ---------- ---------- -------- (in thousands) U.S. Treasury.................................... $ 514,115 $ 2,794 $ 634 $ 516,275 U.S. Government Agencies: Mortgage-backed Securities............... 5,049,319 113,775 54,339 5,108,755 Other.................................... 7,765 3 37 7,731 States and Political Subdivisions................ 1,260,604 74,653 4,617 1,330,640 ---------- -------- ------- ---------- Total............................ $6,831,803 $191,225 $59,627 $6,963,401 ========== ======== ======= ========== (a) All Collateralized Mortgage Obligations of private issuers have underlying collateral consisting of obligations of U.S. Government Agencies.
-8- 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:
NINE MONTHS ENDED SEPTEMBER 30 -------------------------- 1995 1994 --------- --------- (in thousands) Balance, Beginning of Period.......................... $435,051 $423,030 Provision........................................ 65,225 31,946 Charge-offs...................................... (81,516) (87,320) Recoveries....................................... 59,828 55,586 -------- -------- Net Charge-offs................................ (21,688) (31,734) Acquisition and Other............................ 9,138 458 -------- -------- Balance, End of Period................................ $487,726 $423,700 ======== ========
-9- 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: SEPTEMBER 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............................ $ 583,148 $ 460 $(19,641) $(19,181) Interest-Bearing Liabilities....................... 1,545,000 27,202 (5,370) 21,832 ---------- ------- -------- -------- $2,128,148 27,662 (25,011) 2,651 ========== Futures and Options Contracts: Purchased: Modifying the Interest Rate Characteristics of Interest-Earning Assets.......................... $ 55,911 1 (29) (28) Sold: Modifying the Interest Rate Characteristics of Interest-Earning Assets.......................... 31,660 ---------- $ 87,571 - - - ========== ------- -------- -------- $27,663 $(25,040) $ 2,623 ======= ======== ======== 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 September 30, 1995, there was $10,529,000 of deferred losses which will be amortized over a period of approximately two years. -10- 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 September 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: SEPTEMBER 30, 1995 ----------------------------------------- CONTRACT OR FAIR VALUE NOTIONAL ----------------------- AMOUNT ASSET LIABILITY ------------ ---------- ----------- (in thousands) Interest Rate Swaps: Receive Fixed.................................... $ 807,798 $13,893 $ 6,022 Pay Fixed........................................ 706,069 6,532 13,201 Basis............................................ 450,000 339 169 ---------- ------- ------- $1,963,867 20,764 19,392 ========== Futures Contracts: Purchased........................................ $ 2,000 221 577 Sold............................................. 1,378,500 - - Interest Rate Options: Purchased........................................ 215,778 770 - Written.......................................... 623,727 - 741 ------- ------- $21,755 $20,710 ======= ======= 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:
NINE MONTHS ENDED SEPTEMBER 30 -------------------------------- 1995 1994 ------------ ------------ (in thousands) Interest Rate Swaps............................... $ 3,792 $ 298 Futures Contracts................................. (3,866) 1,104 Interest Rate Options............................. 141 73 ------- ------ $ 67 $1,475 ======= ======
-11- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont'd.) NOTE E - ASSETS PLEDGED - ----------------------- Assets, principally Investment Securities, carried at approximately $5,464,870,000 were pledged at September 30, 1995, to secure public deposits (including deposits of $106,709,000 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 September 30, 1995, totaled approximately $2,328,000,000. NOTE H - PENDING MERGER - ----------------------- The Corporation and First Chicago Corporation (First Chicago) entered into an Agreement and Plan of Merger, dated July 11, 1995, pursuant to which First Chicago will merge with and into the Corporation. The name of the combined companies will be First Chicago NBD Corporation (FCNBD). Stockholders of the Corporation and First Chicago approved the merger in October 1995, and the final regulatory approval was received in November 1995. It is anticipated that the merger will be accounted for as a pooling-of-interests and will be consummated on November 30, 1995, pending 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. -12- -----END PRIVACY-ENHANCED MESSAGE-----