ML20212F741
| ML20212F741 | |
| Person / Time | |
|---|---|
| Site: | Perry  |
| Issue date: | 12/31/1985 |
| From: | Butcher W, Labrecque T CHASE MANHATTAN CORP. |
| To: | |
| Shared Package | |
| ML20212F471 | List: |
| References | |
| NUDOCS 8703050149 | |
| Download: ML20212F741 (345) | |
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l Chase FinancialHighlights Percentage increase (Decrease) 1985 vs. 1984 vs. 1985 1984 1983 1984 1983 For the Year ($ in thousands) Net interest lncome $2,748,730 $2,308.491 $2.169.055 19% 6% Provision for Possible Loon losses 435,000 365,000 285,000 19 28 Other Operating income 1,315,731 929,584 864,211 42 8 Other Operot:ng Expenses 2.731,878 2,244,526 2.045,561 22 10 Net income 564.818 405.818 429.607 39 (6) P rCommonShore' Prunory Earnings 5 6.39 5 4.51 $ 5.48 42% (18)% Fully Diluted Earnings 6.15 4.32 5.22 42 (17) Cosh Dmdends Dedored. Annually _ 1.90 1.82b 1.75 4 4 Cosh Dividends Declared,Ouorterly .475 .455: 434 4 4 Common Stockholders' Equity of Year end 49.19 45.8I 43 91 7 4 j Market Value of Year end 36.314 23.87b 22.75 52 5 ; Averone Shores Outstandina fin thousands) 75.240 71,153 68.748 6 3 l mamammum Financial Ratios i 1 Net income os a Percentoge of: AverageTotal Assets .65% .48% .54% 35% (1 11% Average Cc,mmon Stockholders' Equity 13.6 10.1 13.1 35 (23) Cash Dmdends Poid on Common Stock os a Percentage of Net income Applicable to Common Stock 29.6 40.3 3 I .9 (27) 26 At Y4ar-end ($ in millions) Interest-Beanng Deposits Placed with Banks $ 4,671 $ 4,355 $ 8,659 7% (50)% investment Secunties and Trading Account Assets 7.467 6.600 3,698 13 78 toons 61,931 62,003 55,894 - 11 Reserve for Possible toonlosses 908 761 564 19 35 Toiol Assets 87.685 86,883 81,921 1 6 Deposits 61,353 59,680 56,300 3 6 tong-Term Notes ond Debentures 2,806 2.320 1,376 21 69 Redeemoble Preferred Stock 62 62 150 - (59) Nonredeemoble Preferred Stock 602 602 375 - 6I Common Stockholders' Equity 3.795 3.359 3.051 13 10 Ccpital Ratios at Year-end Pnmory Capital as a Percentage of Total Gross Assets 6.9% 6.4% 5.4% 8% 19% Total Capital as a Percentooe of Total Gross Assets 9.2 8.1 6.7 14 21
' Amounts restated to reflect two-lor.one stock split declared January 15,1986.
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l.etter to Stockhdders i To Our Stockholders: 1985-o year of substantial progress. profitable U.S. credit cord market.We introduced a That is the way we would chorocterize the per- Chose MasterCard to complement Chose VISA, formance of The Chose Manhatton Corporation and as year-end, Chose ranked as the th;rd forgest lost year. Importantly, this progress resulted from bank credit card issuer in the United States. solid ochievement in each major banking group. Internationally, we launched a maior initiative to in light of our earnings,the Board of Directors expand our consumer banking business.We pur-in January 1986 increased the regular quorterly chosed Bank of America's credit cord operation in cash dividend to $1.025 per shore. At the some Ponomo, for example, giving Chose the dominant time, principolly in response to the increase in the shore of thatimportant consumer market.in Asia, market price of our common stock, the Board we established a stand-alone Chose credit cord declared a 2-for-1 split of the common stock in operation in Hong Kong. And in Europe,we storted the form of a 100% stock dividend. up a consumer finance business in Italy. In 1985, the Corporation earned $565 million, The year was ciso o most successful one for up 39% from the $406 million eomed in 1984. our mortgage banking subsidiary, Chase Home This translated into per common shore earnings, Mortgage Corporation, and our consumer finance of ter the stock split,of $6.39,up from the $4.51 operation.Both units turned in profitable per-comed in 1984. Both total and per common shore ormances as they increased their roles in the comings were records for the Corporotion. nationwide consumer lending market. The year's financial highlights included: You may recall that several yeors ago we set out
-Return on overage assets for the year was .65%, to build, de novo, o substantial consumer finance compared with .48% a year earlier. business.We ore pleased that this business has -Return on overage common stockholders' equity become profitable, and we plan to continue to for the year was 1384 up from 10.1% in 1984. develop this increasingly valuable osset. -Net interest income on a toxoble equivalent -In Global Banking, under Anthony P.Terrocciano, basis was almost $3 billion,up from $2.5 billion a we modified our structure to further integrate our year earlier, wholesale banking resources and expand our in- -Operating income,induding fees from products vestment banking emphasis around the world, and services, foreign exchange trading income, By combining our securities trading operation and gains on the sole of investment securities, with our corporate finance, international, corporate, increased to $1.3 billion,up from the $930 million and institutional businesses, we believe we have comedin 1984. created a formidable and unique worldwide whole. -Pnmary capital, os defined by the Federal sole bank.In 1985, investment banking activities Reserve Board, increased to $6 billion. At year-end, represented a major competitive strength and o our primary capital to gross assets ratio s'ood of significant source of profit growth.
6.87%,up from 6.37% or year-end 1984. At the some time, we enhanced our internationo!
-Totoi copitolincreased to $8 billion. At year-end, network by opening our Chase AMP Bank Ltd.in our total capital to gross assets ratio stood at Australio,in which we have o 50% interest with that 9.23%, up from 8.11% ot yeor-end 1984. notion's largest insurance company. Chase also Business Highlights purchased the Banco de finanzas in Spain to As we indicated, the most encouraging aspect of develop Chase's presence in the consumer and our financial performance was that it resulted from capitol markets in that important notion.
solid earnings improvement in each of our three -In National Banking, under Robert R. Dougloss, major banking groups-Consumer Banking, we ocquired nine troubled sovings and loan asso-Global Banking, and National Banking.This year's ciations in Ohio and Maryland and converted annual report more fully descnbes our accom, them to full service commercial banks, Chase Bank plishments in these three core businesses, of Ohio and Chase Bank of Maryland.
-In Consumer Banking.under Atthur F. Ryon, Also dunng the year we agreed to acquire we expanded significantly our penetration of the Continental Bank of Arizona,a high-quality institu-3
l-tion with assets of $500 million. And in February Commerce We sincerely appreciate the ef forts in 1986, we opened Chase Bank of Florido, becom- behalf of Chase of both individuals and wish them
- ing the first money center bank with a full-service wellin their new roles.
commercial bank in the desirable Florida market. The Challenge Ahead I We have launched this nationwide expansion tooking forward,1986 promises to be a year of elfort despite continued Congressional foot- continuing challenge forThe Chase Manhatton dragging on the interstate banking issue. Fortu" Corporation. Although we expect modest eco-notely, the notion's forward looking states have nomic growth to continue in the United States and begun to open their borders to out-of-state bank in much of the world, the impact of a disinflationcg holding componies. Chose has thus been able t environment will continue to have both positive and advance-albeit slowly-toward our goal of cre" negative elfects on the world's economic structure. l oting a nationwide commercial banking franchise. We believe Chase is in o particularly strong posi-In the area of leasing, where we have become tion today to deal with such an environment. leading vendor leasing bank,we increased our in this ragord, we have placed considerable role in new and used aircraff and small-ticket leas ~ emphasis on and resources against the challenge i ing-olso through acquisitions during the year. of improving the quality of our lending portfolio-Board of Directors both the wholesale and consumer cc,mponents.This f' We wekomed four new members to Chose's is on importont, continuing challenge for us in 1986. Board of Directors during 1985. In Apol, At the some time, we will continue to invest this year ; H. tourance Fuller, president of Amoco in the areas of our future growth-investment . Corporation, joined the Board. In June, Messrs. banking, electronic banking, domestic and inter- ! Douglass, Ryan, and Terrocciano were elected vice notional consumer banking, national expansion, , 4 choirmen of the Board. and the like-and ensure that these investments I Also in June, John A. Hooper retired as vice help sustain ambitious growth into the 1990s. I chairman of the Board and Chose's credit policy The substantial progress that Chose achieved [ executive. Jack Hooper contnbuted enormously in 1985 positions us well for 1986-o year in which ; to Chase's success during 37 years of service,and we look forward to continued solid performance. ( we ore indebted to him. ! We also accepted the resignations of Phip Caldwell, who resigned offer three years os o l Board member to become senior monoging WJiard C. Butcher,Cho.rrnon and Chief E xecutwe Of hcer ; I director of Shearson,lehman Brothers, and // S. Bruce Smort, Jr., who resigned of ter nine years 7^ j of service to Chase to become Under Secretary Thomas G tabrecque. President and Chief Operating Of ficer for internationalTrade for the U.S. Deportment of March 3,1986 i
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l_. Consumer Banking l i Ch:se's consumer business spans the , ( giche. In 1985, Consumer Banking i menaged consumer lending, residential l msrtgage banking, and discount broker- , I j cga businesses in 50 U.S. of fices; a direct
- msil business including credit cards, in.
I stallment loans, and deposit gathering; [ student loan, auto, and boat financing cpsrations;home banking services; e and activities in more than 20 countries. 1 , Customers Respond to Direct ! Response Banking ! l More and more consumers find that direct response ' l banking, by mail and telephone, meets their needs for convenience and service.During 1985, ' Chase sent over 50 milhon direct mail solicitations A and hand!ed over 2 mi!! ion telephone calls for its % ==u= %d - three major direct response product lines: credit l , j cords, Chose Advantage Credit,and notionwide . m I deposit gathering. j f' ' Among the world's leading credit cord issuers, Chase aggressively expanded its business in 1985. ( ' j In the United states, Chose added MasterCard to
@ 'I its VISA Classic and Premier Wo id Cord products. g gV Adding over 1.5 milhon new cordmembers in 1985
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[ brought total domestic credit cord outstondings to , 1 A more than $3 bilhon.Overscos. Chose launched its M first foreign currency VISA card in Hong Kong; _
' A I Chase AMP Ltd. introduced on Australian cord; f
f g \ and,in January 1986, Chose acquired Bank of ,j,$ ' f (Yl [f gs
- h'!/ ['j America's credit card porifolio in Ponomo. / /, / e A p oneer in adding extra benefits to save cord- V;M 7 -' ,'
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f-members time and money, Chase of fers travel sov. / / ff
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major direct response product. Nationwide mail- - ings in 1985 drew over 200.000 new customers, and outstandings topped $800 million. Chase also used telephone and mail to attract consumer deposits from all over the country to its Delaware subsidiary, Chose Monhotton Bank (USA). ( Chase (USATs Money Market Account of fers on interest rate to consumers that outperforms the overage of the top 50 U.S. commercial banks and Q"g",O"" '[' g,"jley'"' ,
- Yo'k pro <ewa9 'ooy Almos"hree-thnf ta. Lost year Chase (USA) begon construction osomers olConsumer Bankingictv, one of a new Delowore f.codquorfers foolity to aCCom- or rotons related modate its growing business.
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?4 FinanCings Consumer Needs: l 74.
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From New York to Son Diego, from Boca Roton to Chose Home Mortgage Pres. der
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Koons visits with New Jersey homeownert Minneapolis, Chose tailors consumer financial ser- < vices to local markets, helpinr., people meet their l needs for shelter, education, transportation, and c
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. .g opproximately 30 dif ferent kinds of mortgages for i ~.
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In 1985, the Student toon division began of fering
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( , [Wf f ?.;:' ; f . [. 6 I.5. ).r :j.' / graduate, and professional students oiso joined j 4 _. .,'..a.- ..' 'A l 4 . J,- the product roster. l l Ej - 1. E ,Q with 24 of fices in 11 states, Personal Financial I t.. .-
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Services (PFS) provides automobile lease and loan
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folios more than doubled m many oflices in 1985. A.%
,; ,- y; ; e , . . 93 Rose & Company, Chose's discount brokerage
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; based Parker, Alexander & Co., Incorporated,
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2.43 .f ,y.{ . bolstenng its presence on the East Coast. Rose U E , ,%:p ' . f [. .;'#w.. & Company is I.nked to other Chase financiot W; ?. . , , 3. Y services through such products os Video Broker,'
"*4 % .7 , the secunties trading segment of Spectrum, 43 - .
in;; .. y .n . sc , . Chose's electronic home banking system. 1JG.. rT n.x. y. Business with individuals will continue to con-t% - . w inbute on increasing shore of Chase's earnings.
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w# . group to serving the full service financial needs of asCEJ. A a,._ _ .- individuals around the world. Studen toon t sewhe Ocborah tobot. lef t. loks with New Yoth Un=erwy Dwooor of finanoal Aid ole B< yoni at NYU's Bobu bhror y 9 l
l Global Banking f. Global Banking unifies,in one wholesole business, Chase's traditional corporate I and institutional relationships, lts f rapidly growing investment banking, foreign exchange, and securities trading g operations,lts technology- based
- service products, and a weridwide r
E distribution network. E i E Redefining the Whalesale ! Banking Business h in 1985 Chase virtually redefined the wholeso's banking business by marrying investment banking. h . g commercial banking, and technology-based - [ service products in one entity and delivering these . I products globolly through on unrivaled world-f wide network. 'h . I Brood product expertise, of fices in more than 'W ... I 100 countries, leadership in electron;c banking. 4 . ~ p and valuable long-standing relationships position -> - I Chose uniquely for the sea change occurnng ,,
- in the financiat industry Old distinctions between , ' t, [
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commercial and investment banking have [ l blurred Inte0roted global product delivery is the new game. s f- { The recent de ferTextron tnc.of its Austration ..
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3 division, Voteritine Sands limited, er emplified - j 4 . E Chose's distinct strengths in wholesale banking. y $ WhenTextron,a U.S. customer of the Corporate , . t L
- Industries unit, gave Chose the mandate to sell -
E its division, Corporate Industries marsholed the F mergers and acquisitions expertise of Chose's . _ _ g investment banking unit in New York and the Iw Pueblo inewnutional Osam arranged a
$1/ moon mdusinal revenue bond to fund i resources of Chose AMP Ltd in Australio to close p const,uo,on o#.#i n wp.,mortes hom lof t Dov.d Morrow, proudent of Pueblo; 1-the sole. m,uopy,iw,,,,,, ,,, con,,,,
cww uan%non c,ioi uo,6 ,s Pu to 1 As lead placement agent for a $220 million R,co. Manuel Volleollo, Pueblo vge (boir-p. man. ond a.< o,do to,o. chos. Puo,to n<o [ of fering for the Puerto Rico Housing Finance Corporation, Chase brought together five distinct h units in New York and Puer to Rico: the bronch, the
$ government securities trcding desk in New York,
$r the public finance team, the interest rate " swaps" f oreo, and the investment bank in Puerto Rico. 1 As the lines between financial specialties fade ond financial markets increasingly become more [ _~ global,less than a handful of institutions possess h such broad product strength and global reach. !s < rh. .c $ Chaseis oneof the few. 'I jJew,"l- = (V'3C e ;y 7 10 v'A
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l l l l Chcne works ..th PCzer inc to monage PCzer's doJy cash pos tai worldwde umg the Chose InfoCoshMicrosiationJoeeground Global ' Oeceronic Banlung Emecvieve Phd Guw,wo ' oeaPre. - - re - B % u TappingTechnology ground. les! e Bomar. Chase conh manage-meni ipecoi.st, ond eo, t.b.,oio,e. rs,.< s careciar of cosh management, IO Create New Products i Chase moved electronic br. n, cn g forward in 1985 i with CHESS,o unique ted clogy based, risk man- l ogement product.The Chose Electronic Swaps System-o dual service product-typifies Chase's integration of service and investment banking pro-i ducts with global electronic delivery copobilities. f Chase designed the product, the first of its kind, ' for companies with outstanding short term debt in i excess of $200 million or with significant cash
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reserves. CHESS creates a global dato base ; of interest and exchange rates that makes swaps
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,a day, around the world.The excellent initial response l to CHESS was testimony to Chose's technological
'I capabilities in the investment banking creo.
Chose added other new products in 1985, M including on electronic letter of credit and a tool to manage foreign exchange contracts.roising to more than 40 Chase's electronic treasury, trade, cash monogement, secanties, and payments prod-ucts. An electronic link between Chase and some
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for hedging foreign exchange investments, moni-e, , f. O,'.f * ' q. %) , i .: ' toring trade ogreements, and trading secunties. i :. ,{i[ , . g jg y. , p k New electronic products like CHESS that cross 9
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Answering the Challenge of a __5 c'. ;-,, n< . s ~ M. Global Financial Marketplace The world is rapidly becoming one electronically .:.
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stoc k brokers tourie. Milbank & Co and simon & a ,.o swme,wy ., .p.:.4. . . ' .- < . - y { ," f 5.1 yj[ se.e,y ist
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u_ - L !r' i National Banking National Banking is responsible for 4 accelerating the development of Chase's business across the United States.The w ' 9roup is made up of regional banking, leasing, real estate finance, and trust, x investment, and information services businesses. In 1985, Chase added l regional banks in Ohio and Maryland, N ' agreed to purchase a bank in Arizona, , , and acquired two leasing businesses. l l ' CMLC promies specic42ed Cnonceg ser- I vices y corporate cherds incluckngThe Hertz l Corpom onJromlah%wt. Treasurer Dems Brody CMLC Mo teteg Of 6cer Reggie s#ond C=C ere,ve,Tse*e t. Leasing Locks to New Markets Dole. den. !: leasing is an expanding business for Chase and I one of the Corporation's targets for strategic investment in 1985. Chase Manhattan teasing
, Company (CMLC) entered new markets and broadened its range of leasing services through I
two acquisitions last year. Building on its already strong position in vendor leasing, CMLC ocquired certain assets and the ongoing business of Piper Acceptance Corpora-l tion.The Aircraf t Finance Group, created as a result i of this acquisition, provides both a private label vendor program for Piper Aircraf t Corporation and direct financing for new and used general , aviaton aircraft of other manufacturers and dea'ers around the country l q Third Century leasing, a high-volume supplier , Qp of small-ticket leases, was acquired by CMLC in l
'f b p February 1986, moving Chase into yet another l \ specialty leasing niche.Thod Century uses cost-ef fective telemarketing to sellits leasing services to
, over 500 dealers and distributors of of fice equip-rient locatea throughout the United States.
Formed in t?74 to serve Chase's major I manufacturing customers, CMLC in just 11 years has grown to 400 people servicing more gha than 100.000individuollease customers from y ' offices in 12 U.S. cities. Last year alone, the f? company funded more than $900 million in j new equipment lease businew at year-end, j outstandings totaled approximately $1.5 billion. l leasing will co. Mrve to be on attractive financing vehide for quality companies in many w '~ ,_ u.a
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-y waerg2 y industries. looking ahead, CMLC will continue to a : a g .,i~ 7 % enter new leasing markets while expanding its ,
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e' Regional Banks Break New Ground f g} t .
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l Five giant steps have moved Chase closer to iI its goal of estabhshing a notionwide commercial ,{ [rt banking network Chose Bank of Ohio,o full-service / Ly commercial bank. opened for business in June. e ad in November, Chase formed a second out-of state bank. Chose Bank of Maryland. Also in the fall, Chase ogreed to acquire Continental Bank. Anzona's sixth largest bank. ~ And in February 1986, Chase Bank of Flondo opened its doors, the first f ull-ser vice cornmercial bank to be estabhshed in Flondo by a money center bank. ~ finally. Chose brought its consumer. small I business banking. and middle market businesses together in the metropohton New York morket. The new organization means that commercial I banking teams con meet both the business and c2 personal banking needs of local companie3 and their employees The restructured Metropohton Community Bank provides c ustomers Chase's big bank cdvantages- .
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innovative products. competitne rates, operating (Ag"*;{,' { { ' { 5^ m a m,e + i /x ~ m-w xa etfiriency. and international reach - through ioco! lull-ser vic e community banks In upstate New York. .[,,) for example, Chase Lincoln First continued to prove its value as o prof.tohle acquisition Breaking new ground in Ohio, Maryland Araono, and flondo. Chose has ! aid 'he foundation for o nationwide network of bank.ng othces. This network of fers opportun ities for other Chase businesses suc h as Reo! E state financ e Web on estabhshed position in onme markets Real E state's loon volun and earnings eueeded cor-porate forgets .n I M Going forword Chas , combination of regonal ex pertise and investment banking c opabihties mil enhanc e Real E state Finance's obihty to meet c ustomers needs. I8
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Financial Charts Notincome os o Percentage of Notinterestincome-Toxoble fee-based Income ($in MAons) k s Of K m Bankeg Fees ($ in MAons) m Domeshc Ofhces m Trust &FduciaryimestmentFees G Netincome m Irwernotend Busmess Fees M um on Average C 5 ockholders' Equery (ROEl% 600 3000 1000 450 2250 750
- ,. 5.
150 750 250 0 0 0
%.O RIserve for Possibleloanlosses, Nonaccruct and Reduced Rote Loans Period-end Capital ($ m maons) o s( Cr ired WP d or P tooni sses W NetCharge-offs l
l 2500 9000 750 1875 6750 500 1250 4500 m 81 82 83 84 85 Reserve Bolonce os o Percentage of loans at Year end Prwnory Copd % 417 4.73 544 6 37 6 87 TotalCopd %
% 105 1 01 1 01 123 147 173 6 01 6 69 8.11 923 20
Rnancial Report 22 Management's Discussion and Analysis of Financial Condition I and Results of Operations 42 Summary of Significant Accounting Policies The Chase Manhattan Corporation and Subsidiaries 44 Consolidated Statement of Condition 45 Consolidated Statement of income 46 Statement of Changes in Common Stockholden' Equity 47 Consolidated Statement of Changes in Financiol Position The Chase Manhattan Corporation (Company Only) 48 BolonceSheet 49 Statementofincome 50 Statementof ChangesinFinancioIPosition The Chase Monhattan Bank,N.A.and Subsidiaries 51 Consolidated Statement of Condten 52 Consolidated Statement of income 53 Consolidated Statement of Changes in Stockholder's Equity 54 Consolidoted Statement of Changes in FinancioI Position , 55 Notes to Financial Statements 65 Independent Accountants' Report 66 Reportof Monogement Supplementary Financiallnformation 67 Consolidated Summary of Assets, liabilities and Stockholders' Equity 68 Average Bolonces, interest and Average Rates-Taxable Equivalent 70 Summary Quorterly Statements of income for 1985,1984 ond 1983 71 Consolidated Analysis of loon loss Expenence 72 Selected Loon Maturities and Sensitivity to Changes in Interest Rotes 73 Consolidated loon Bolonces byType and Percentoge Distribution 73 Consolidated Average toon Bolonces 74 Financiol Rotios 75 Stockholder Dato 76 Combined Bolonce Sheet of Nonbanking Subsidiaries of the Company 77 Combined Statement of income of Nonbanking Subsidiaries of theCompany 78 Statements of Condition of Chase Lincoln Erst Bonk N A., The Chase Manhatton Bonk (USA),N.A., Chose Bank of Maryland and Chase Bank of Ohio 79 Financial Reporting and Analysis of the EIfects of Changing Prices 80 The Art Collection of The Chase Monhotton Bank,NA 21
Management's Discussion and Analysis of-Financial Condition and Results of Operations
- The Chose Monhotton Corporation and Subsidiones 23 Netincome
~ 24 ; Domestic ond International Operations ,25 NetInterestincome-TaxobleEquivalentBosis ,
27 Provision for Possible Loon losses and Net Loon Chorge-ofis - 27 ReserveforPossibleLoonlosses 28 _Other Operatog income ~ 29 OtherOperatogExpenses 29 Provision forincomeTaxes . 30 - Liquidity and Interest Sensitivity Monogement - 30 CapitalMonogement - - 32 LoonPortfolio 33 Risk Elements CountryRisk
. 37 -Nonaccruol, Reduced Rote and Post Due toons 38 -LoonConcentrations ~39 investmentSecuritites 40 Interest-BeoringDepositsPlocedwithBonks 40 Deposits'-
41 FundsBorrowed 41 ~ Fourth Ovorter 1985 Versus Fourth Quorter 1984 i '22
Net income Summary of Selected Financial Doto 1985 1984 1983 1982 19 81 For the Year ($ in millions) Not interest income $ 2.749 $ 2.308 $ 2,169 $ 2,024 $ 1,772 Provision for Possible Loonlosses 435 365 285 263 211 ! Other Operating income 1,316 930 864 698 609 l Other Operating Expenses 2.732 2,245 2,046 2,135 1,606 Net bcome 565 406 430 307 412 Average Common Shares Outstanding' (in thousandst 75.240 71,I53 68.748 67,157 65.454 Per Common Share
- Net income:
Pnmary $ 6.39 $ 4.51 $ 5.48 $ 3.864 $ 5.76 Fully Difuted 6.15 4.32 5.22 3.64 5.37 Cosh Dividends Declared 1.90 f.82b 1.75 1.70 1.55 Stockholders' Equity at Year-end 49.19 45.81 43.91 40.71 39.18 Market Volue at Yeor end 36 31% 23 87b 22.75 24.50 26.93h At Year-end ($ in millions) loans $61,931 $62,003 $55,894 $55,532 $51.331 Total Assets 87,685 86,883 81,921 80.863 77,839 tong-Ttrm Notes and Debentures 2,806 2,320 1,376 1.046 944 Redeemoble Preferred Stock 62 62 150 150 280 Nonrrdeemable Preferred Stock 602 602 375 375 125 Common Stockholders' Equity 3.795 3,359 3.051 2.761 2.593 Financial Rotios Returnon AverageTotal Assets .65% .48% .54% .40% .55% Return on Average Common Stockholders' Equity 13 6 10.1 13.1 9.8 15.9 Prrnory Capitol os 9a of Total Gross Assets __ 6 87 6.37 5.44 4.73 4.17 TotalCopitolos % of fotoiGross Assets 9.23 8.11 6.69 6 01 5.73
' Amounts reflect the 2-for-1 common stock split ef fected in the form of a 100% stock dividend dedored on January 15,1986, to stockholders of record on January 31,1986, and distributed on February 13.1986.
Consolidated net income was a record $565 million for 1985,up $159 Averoge total assets were $86.3 billion in 1985, o 1% increase over 1984 million, or 39%, from the $406 million earned in 1984, and up $135 mill 3n and a 90ncrease over 1983. Chose's return on overage total assets from 1983's level of $430 rnillion. In comparison with 1984, eamings Ior 1985 (ROA) based on net income was .65% in 1985The ROA was .48% for 1984 included increased net interest income and higher other operot ng income, and .54% for 1983.The return on overage common stockholders' equity including substantiol increases in virtually all fee-based income categories, (ROE), based on net income opplicable to common stock, was 13.6Un 1981 in foreign exchange trodng income and in gains from the sole of investment The ROE for 1984 was 10.1% and for 1983 was 13.1%. Cash dvidends per securities. Portially ofIsetting this strong income per formance were increased common shore increased to $190 in 1981up from $1E2h in 1984 and $1.75 operoting expenses and a higher provision for possible loon losses. Net in 1983. In January 1986, for the eighth consecutive year, Chase's Board of income for 1985 reflects the full year impact of the ocquisitions of Neder. Directors opproved on increase in the quorterly common dividend. The in. lands Credietbank NV (NCB) and lincoln First Bonks Inc. (bncoln} while 1984 crease, to $.51% per shore, equates to on annual rote of $2.05 per shore. included only the impact of ter the mid-year consolidations of the two On January 15,1986, Chose's Board of Directors declared a 2-for-1 stock entities. Accordingly, net income for the first half of 1985 was favorably split elfected in the form of a 100% stock dividend on Chose's common irapocted by opproximately $22 million from those acquisitions. stock,distnbutable on February 13,1986,to stockholders of record on On a per common shore basis, consolidated net income was $6.39 January 31,1986. Averoge common shares outstondog, earnings per com. in 1985, compared with $4.51 in 1984 and $148 in 1983. Fully diluted net mon shore and cash dyidends dedored for 1985 ond prior years have incoma per common share was $6.15 in 1985, compared with $4.32 in 1984 been restated to reflect the 2-for-1 stock split For further information see and $122 in 1983. Note 2 of Notes to Financial Statements: Common Stock Split. Net income per common shore amounts in 1985 reflect the issu,nce of in the second quorter of 1985, Chose acquired six Ohio sov ngs and loon common shores pursuant to: the 1984 bncoln acquisition, the dividend rein. institutions, with total assets of opproximately $450 million, and converted vestment and stock purchase plan, poyment of interest in common shores on them into a commercial bank named Chase Bank of Ohio (Chose Ohio). Flootog Rote Subordinated Notes (Due 1996) and conversions of convertible in the fourth quarter of 1985, Chose acquired three Maryland savings and capitol notes and debentures.The 1985 per common shore amounts also loan institutions, with total assets of approximately $700 million, and r;flect the full year impact of increased preferred stock dyidend require- converted them into o commercial bank named Chose Bonk of Maryland ments.pnmonly attnbutable to the Floating Rote Senes F Nonredeemable (Chase Maryland). Both acquisitions were occounted for os purchases.
- Preferred Stock issued in coniunc son with the 1964 ocquisition of bncolrt Statements of condrion at year end 1985 for Chose Ohio and Chase l
Senes F preferred dividends had been initioily set at $3.10 per shore for Maryland are presented on pogo 78. coch of the quorterly evidend periods ended May 31,1985 ond thereof ter Dunng 1985 Chose made other acquisitions, ocluding Banco de are od iusted based on o formulo. Finanzas, of Modnd, Spain, with total ossets of opproxitaotely $ 265 million. Chose's Consolidated Statements of Income for the years 1985,1984 and These other ocquisitions were also accounted for as purchases. l 1983 are presented on page 41 Summary income statements by quorter for 1985,1984 and 1983 are presented on page 70.The elfects of general increases in the price level (inflation) on selected financial dato are presented on page 79 23
Domestic and International Operations Averoge assets by geogrophic region ore shown in the following table: Average Assets by Geographic Region l United Mddle East Western Total Total ($ in mdlions) Stotes Asia Europe and Ainco Hemisphere Intemot onal Corporchon Cash ond Due irom Bonks' $ 4.333 5 855 5 3,413 $ 44 5 930 $ 5,242 $ 9,575 > Investment Secunties 4,358 117 790 10 262 1,179 5,537 loons (Net of loon toss Reserve) 28.849 6,971 10,378 1,596 12,909 31,854 60,703 Customers'liobihty on Acceptances 326 1,507 1.304 100 788 3.695 4,025 Other Assets 4,142 352 1,219 75 663 2,309 6.451 Totol Assets-1985 $42.008 $ 9,802 $ 17,104 $ 1,825 $15,552 $44.283 $86,291 unmimmumimumm mimummmimmin Percentone of Total 49% 11% 20% 2% 18% 51% 100%
- usummmusumma Totc3 Assets-1984 $37,608 $11,165 $17,449 $2.435 $ 16,684 $47,733 $85,341 Percentone of Total 44% 13% 20% 3% 20% 56% 100%
ummmmmmmmm - Total Assets-1983 $33,277 $ 10,645 $ 16.209 $2,520 $ 16,420 $45,794 $79,071 Percantooe ofiotal 42% 13% 21% 3% 21% 58% 100%
'incbdes Interest-8eoring Deposits Placed with Banks.
Note: No foreign country occounted for more than 10% of overage cc,nsohdoied total ossets in 1985,1984 or 1983. Average internot onalliabihhes, pnncipolly deposits, represented 62% af overage to'oll.obilines n 1985, compored with 65% in 1984 and 63%n 1983. Domestic Earnings,represeniing results of operations in the United International Earnings', which include the operating results of States,were $371 mdlion in 1985, compared with $299 milho in 1984 and Chase's overseas oflices os well as intemot onal business activihes con-
$249 mdhon in 1983. Domestic eornings accounted for 66% of consolidated ducted from the Head Of fice in New York and other domeshc of fices,were net income in 1985, compared with 74% in 1984 and 58%n 1983. $194 rndhon in 1985,up 80% from $107 mdhon in 1984 ond up 7% from in componson with both 1984 ond 1983, domestic earnings for 1985 were $181 milhon in 1983.The substonhol mcrease in 1985 international earnings favorably of fected by higher net interest income, increased fee-based caused the percentage contnbuhon of internahonal earnings to con income, net gains from the sole of investment securities and the full year solidated net income to increase to 34%n 1985, con pared with 26%
impact of the Lincoln acquisihon.These favorable factors were portiolly in 1984 and 42%in 1983. ofIset by increased operahng expenses and a higher provision for possible further information regarding international activihes is contained in loan losses. Domestic net interest income increased pnmorily due to o higher Note 18 of Notes to Financial Statements as well as in the Country Risk volume of interest-earning assets, resulting in port from the Lincoln acquisi- sectionof thisonalysis. tion, to generolly lower interest rotes poid on interest-beanng hobihhes Internahonal earnings for 1985 increased compared with 1984 and 1983 ond a higher level of net norunterest-beanng demand deposits. due pnmarily to increases in net interest income caused by wider interest Domestic other operahng income increased 49%,or $261 mdlion in 1985 rote spreods and increases in other operating income. Intemational fee-to $797 mdhon, compared with $536 mdhon for 1984 and $492 mdhon based income increased to $253 n4llion in 1985 from $215 milhon in 1984 for 1983.The tincoln acquisihon accounted for $65 mdlion of this increase, and from $196 mdhon in 1983 Investment banking, global trust and custody includng the impact of opproximately $40 mdhon in the first six months activities and letters of credit fee income increased while fee income from of 1985. Domeshc fee-based income increased from $405 million c 1983 occeptances dechned Nonfee-based internahonal income increased to and from $501 mdhon in 1984 to $656 mdhon in 1985, primonly due to the $266 mdhon in 1985 from $179 mdhon in 1984 and from $185 million in 1983, conhnued growth of Chase's consumer credit cord, trust and fiduciary and due largely to strong foreign exchange trod ng income, gains from the investment bonbng ochvihes and to the impact of the Lincoln ocquisition. soles of real estote and substantially all of Chose's interest in Diamond lease Domeshc nonfee-based income was $141 mdlion in 1985, on increase Company Ltd,both in japon,and pre-tox net foreign exchange translation of $106 mdlion over 1984 and of $54 million over 1983 Domestic nonfee- goins on investments in overseas branches, subsidiories and associated based income for 1985 included net investment securines gains of $90 companies.These increases in nonfee. based income were porholly ofIset milhon,up $77 mdhon from 1984 ond up $68 mdhon from 1983. by reduced equity income from Chose's investments in overseas ossnciated The domeshc provision for loan losses for 1985 was $330 mdhon, com bonbng inshtuhons. pared with $ 215 mdhon in 1984 and $135 mdlion in 1983.This increase of The international provision for loon losses for 1985 was $105 mdhon,
$115 mdhon and $195 mdhon. respectively, pnmonly reflected ocruol expen- compared with $150 mdhon in 1984 and 1983. internchonal operating ence and onhcipated higher levels of domeshe consumer charge.ofis expenses increased to $1.073 mdhon in 1985 from $984 mdkon in 1984 ond due to Chase's expandng consumer lending activihes. Domeshc operahng from $911 mdhon in 1983.Excludng the impact of approunately $36 mdlion expenses increased to $1,659 mdhon in 1985 from $1,261 mdhon in 1984 ond in the f rst six months of 1985 resulnng from the consolidation of NCB.1985 from $1.134 milhon in 1983 Exdud ng both the impact of approximately expenses increased 5% over 1984 and 14% over 1983, reflecting the $79 mahon in the Itrst six months of 1985 resulhng from the acquisition of ellect of expense monogement programs and more favoroble foreign ex-tincoln, and the $49 mdhon special recovery in 1984 related to the 1982 change rates in 1985.
Drysdale loss 1985 domeshc operahng enpenses increased 21% over 1984 i and 39% over 1983.See pcge 29 for further informat on on Cd.es 2Esnmated based on inter nal allocahons and allowances (see Note 18 of Notes to Operahng Expenses. haunc'ol 5'o'emen's In'ernahonal Ac'n"hesh l I i 24
f The contnbuten to 1985 intermtional earnings from operations in Europe Net Interest Income-Taxable Equivalent Basis was $41 m4 hon, compared with $16 mdhon in 1984 ond $33 mAon in 1983.
- Net interest income and fee-based income, porticularly international busi. Net interest income on a taxoble equivalent basis was $2,994 mdhon in 1985, ness, commercial banking gnd global custody fees,and nonfee based m. on increase of 18% over 1984 and of 28% over 1983. Net interest income come, mainly foreign exchange trading income, increased in 1985 compared increased over 1984 pnmonly due to o higher volume of interest- g with 1984.These increases were por tiolly of fset by higher operating assets and wider interest rote spreads resulting from the dechnog expenses in 1985, resulting in port from the consolidation of NCB. In 1985, rote environment in oddition, net interest income benefited from Chos .
eornings in the United Kingdom, The Netherlands, West Germany Belgium increased octmties in the oferest rote and currency swoo markets. In 1985, and Setzerland increased compared with 1984, whde earnings from Italy overage interest-earning ossets were $74 2 bJhon,up $19 bilhon,or 3%, and Sweden dechned. from 1984, and up $79 bilhon,or 12%, compared with 1983. Operations in the Western Hemisphere (other than the United States) contnbuted $109 mJhon to international earnings in 1985, compared mth The following table presents a reconciliation of net interest income on a
$66 million in 1984 ond $75 mdhon in 1983. In 1985, net interest income from taxoble equivalent bosis and on a financial statement basis.
thes oreo increased compared with 1984 pnmonly due to wider interest rate spreads ond improved collections of interest on nonacc ruol loons.The pro- Net Interest income-Tomoble Equivalent Adjustment vision for loan losses for this oreo declined in 1985 compared with 1984 and l$ in m.Ilionst 1985 1984 1983 fre-based income increased modestly from the 1984 level, pnmanly due to Domestic Of fices on increase in investment banking fees. Nonfee based income increased in Net interest income-1085 due to pre-rox net foreign exchange translation gains on investments Taxoble Equivalent Basis $ 1,914 $ 1,611 $ 1,377 in overseos bronches, subsidiones onc4 associated componies, compared Tox ble Eauwolent Adiustment 213 198 156 with losses on such investments in 1984.The increase in nonfee-based Net Interest income income was partiolly ofIset by a decrease in equity income from Chose's E'n nml St renent Basist $ 1.221 investments m overseas ossociated banking institutions. In 1985, earnings overseas offices from octwities in Argentino. Puerto Rico and Ecuador increased compared Net Interest income-with 1984,while earnings from Peru, Colombio, the Bahamos and local Tomble Equwolent Basis $ 1,080 $ 926 $ 970 Tamble Equivalent Adiustment 32 31 22 octwiries in Brozil dechned. Operations in the Middle East and Africo contributed a loss of $6 milhon Net Interest Inmme to international earnings in 1985, compared with net income of $4 rshon II'n nc. Istatement Basis! $ 1.048 $ 895 in 1984 ond $24 mJhon in 1983. In 1985, net interest income and fee-based corporation consolidated mcome ftom this area increosed over the 1984 level. However, nonfee. Net Interest income-Taxable Equwolent Basis 52,994 $ 2,537 $ 2,347 based income in 1985 declined significantly compared with 1984 and 1983. TomoUe Eauwoknt Adiustment 245 229 178 primanly due to o substantial decreose in equcy income from Chose's n r investments m overseas associated banking inst tutions. Also,nonfee-based Netjr unc o ent Basis) $ 2.749 $ 2.308 ,$,2,.1,6,9 income in 1983 mcluded $26 mJlion from Chase s settiement with fron. In oddition, o higher level of net loon charge-ofis in 1985, compared with 1984 2Toxoble equivalent amounts have been odi usted (by applying a combined and 1983 contnbuted to the 1985 loss recorded in this area. U S.federol, state and local mcome tax rate of approxirnately 51% 59% and 60% Operations in Asia contnbuted $50 mdhon to 1985 international earnings, Iw 1985,1984 ond 1983, respeo velypo recognize the d.f ferens al between interest
'nc me that is exempt from taxes and enierest ncome that is fully saxable.
compored with $21 miihen in 1984 and $49 milhon in 1983. Net interest mcome and fee-based income increased moderately compared with 1984 Over the post five years, net oferest income on o taxoble equivalent bosis and 1983. Nonfee based income increased in 1985, compared with 1984 incre sed t 12% annual compound growth rote os a result of generolly and 1983, primonly due to o gain of $22 mdhon ($15 milhon of ter taxes) from higher net interest rote spreads and a growing volume of interest-earning the sole of substantially oil of Chose's investment in Diamond lease Com, ssets During this fue year period, net interest income os a percentage pony lid.,and a gain of $23 mdl on ($15 mdhon of ter taxes) on the sole I gross inteest+ ming ossets Huduated between a low of 3.25% for 1981 of real estate, both in Jopn, and from increased foreign exchange trading onct high of 4.03% for 1985,while the overage for the fae-year period income. Operating expenses in 1985 increased compared with 1984, w s 3.54%. in 1985, earnings from activities en jopan,Hong Kong and Singapore Nenntweshncome on a taxable equivalent basis in domestic oflices increased compared with 1984,while eoraings in Austroho, Indonesia and t t led $1.914 mdhon in 1985,up 19% compared with $1,611 mdlion in 1984 the Ph6ppines dedined. ond up 39% from $1,377 million in 1983.The 1985 increase was primonly attnbutoble to o higher volume of interest-eoming ossets, porfly opphcoble to the Lincoln acquisition, to generally lower mterest rates paid on interest-beanng habJities and a higher level of net noninterestbeanng demand deposits. Compared with 1984, domestic net interest income for 1985 induded a lower amount of cash collections of interest on nonperforming loans.The 1985 overage volume of interest-earning assets in domestic of fices was $3L2 bdhon.up 13% compared with $277 bJlion in 1984 ond up 30% from $24.0 bJhon in 1983. Net interest income on a taxable equwalent basis in overseas of fices totaled $1,080 moon in 1985, up 17% compared with $926 mdhon in 1984 and up 11% compared with $970 million in 1983. Overseas net interest income increased in 1985, compared with 1984 de e pnmanly to wider net interest rate spreads, and compared with 1983 due pnmordy to o higher level of noninterest-beenng funding sources. 25
The table below presents net interest incorne on a taxable equivalent basis and related interest rote spreads for the post three years for domestic of fices, ovtrseas of fices and the consolidated Corporation. Net Interest income and Interest Rote Spreads-Tomable Equivalent Basis
&mece Offres 1985 1984 1983
($ in millions) Amount Rote Amount Rote Amount Rote interest f orned $3,714 11.88% $3,568 12.90% $2,871 11.98% interest Poid* 1.800 8.10 1.957 9 99 1,494 9.03 Net interest income $ 1.914 3.78% $1.611 2.91% $1,377 2.95%
- m- m- -os o % olGross;nterest-Earning Assets 612% 5.82% $75%
am - Oeseos Offres 1985 1984 1983 Amount Rote Amount Rote Amount Rote Interest Earned $4.949 11.52% $5,612 12.58% $4,966 11.72% interest Poid* 3.869 9.52 4.686 10.83 3.996 9.74 Not lnterest income $1,080 2.00% $ 926 1.75% $ 970 1.98% summmmmmmme ammmmmmmmm -
-os a % of Gross Interest.Eamino Assets 2.52% 2.08% 2.29%
summmmmmum ammmmmmmmu Consched Corporohon 1985 1984 1983 Amount Rote Amount Rote Amount Rote Intereat Earned $8.663 11.68% $9.180 12.70% $7.837 11.81% Interest Poid 5,669 9.02 6.643 10.57 5.490 9.53 Not lnterest rocome $2,994 2.66% $2.537 2.13% $2.347 2.28%
- m- -os a % of Gross interest-Earnino Assets 4.03% 3.51% 3.54% ' Includes oppropnote ollocotions for the cost of time deposits received by overseas of fices for domestic use and the cost of domestic rnonies raised for use in overseas of fices.
The following tobie presents the elfects of changes in overage bolonces and interest rates of rnojor categories of ossets and liabitties on net interest income on a taxoble equivalent basis. Net Interest income-Tomable Equivalent Bosis increase (Decrease) Due to Changes in Average Bolonces and Ratess 1985 vs.1984 1984 vs.1983 ($ in millions) Bolonce Rote Total Bolonce Ro+e Total Inter:st-Earning Assets: Interest.Beanng Deposits Placed with Banks $l194) $ (94) $(288) $ (79) $121 $ 42 Federal Funds Sold and Secunt.es Purchased ( Under Resole Agreements 43 (ISl 28 14 6 20 Trading Account Assets 39 (ll) 28 (II) 13 2 Investment 5ecunties 149 37 186 65 (40) 25 loons: Domestic of fices 281 (229) 52 437 208 645 Overseas Of fices (49) 1474) 1523) 333 276 609 Totalinterest-Eormno Assets 269 (786) (517) 759 584 1.343 m- - um - summmmmmmme inter:st-Bearing Liabilitiesi Depositst Oomestic Of fices 252 (328) (76) 299 167 416 ! Overseas Of fices (231) (413) (644l 178 314 492 l Federal funds Purchased and Secunties Sold Under Repurchase Agreements 14 0) (46) (86) (89) 82 (7) Other Borrowed Money (92) (122) (214) 62 104 166 tonq Jerm Notes ond Debentures 74 (2 81 46 74 12 86 Totolinterest-Beanno liabilities (37) 1937) 1974) 524 629 1,153 Not interest income-Taxable Equivalent Bosis $ 306 $ 151 $457 $235 $(45) $ 190 num - - ammmmmmme um -
$Chonges not solely due to bolonces or to interest rates have been allocated equally to botonces and eterest rates.
26
Provision for Possible loan losses The preceding oiiocat,on of the provision fo, possbie ioon iosses be'*een domes'ic ond in'erno' on'l octivi'ies ho$ been prepared based Ond Net Loan Cnarge-offs on subiective estimates, os further discussed in the following section. The provision for possble loon losses for 1985 increased to $435 milhon,vp Reserve for Possbie toon tosses.
$70 million from the $365 million recorded in 1984 and up $150 million from the $285 million recorded in 1983.The increase in the 1985 provision for . possbie loon losses was due to the higher level of net loan charge-ofis,and Reserve for Possible loan losses the continuing uncertoin condtions in cortoin developing countnes, and in implicit in iending actrvities is the fact that losses will be experienced and . onticipation of higher levels of domeshc consumer charge-ofis due to the that the amount of such losses will vary from time to hme, dependng upon ropid growth of the domestic consumer loon portfolio.
the risk chorocteristics of the port folio os of fected by worldwide economic Net loan charge ofis for 1985 were $320 million,up $105 melhon ond condihons and the financial experienc , of borrowers.The reserve for possi-
$66 milhon compared with 1984 ond 1983, respectively Domestic net loon ble loon losses, which provides for the risk of losses inherent in the lending charge-ofis were $234 miffion for 1985,a $72 million increase from 1984 process,is increased by the provision Ior poss6te loan losses charged to and o $79 million increase from 1983,and represented 73%,75% ond 61%
expenses and decreosed by the omount of net loon charge-ofIs.There is of total net loon charge-ofis for 1985,1984 ond 1983,respectively Domestic no precise method of preachng specihc losses or omounts which ulhmately consumer net loon charge-of fs, primonly ofinbutoble to credit cord may be charged of f on particular segments of the loan port folio.The activihes,were $131 milhon for 1985,up $73 million from 1984 ond up $97 conclusion that a loon may become uncollectble in whole or in part,is o ini!! ion from 1983, and represented 56% of domestic net loan charge-of f5 motter of tudgment.Smlarly,the adequocy of the reserve for possbleloon for 1985. Induded in 1985 domeshc net loon charge-ofis was opproximately losses con be determined only on o judgmental basis, of ter full review,
$3 m flion of net charge-ofis of loans ocquired through the former Penn ; 9 Square Bank,N.A.,down from $43 million and $40 million in 1984 ond 1983, IE c nd s their elfects on porncular countrieundustries respectively Details on loon charge-ofis and recoveries by loan type may g g be found on page 71 Consohdoted Analysis of loan loss Experience. _go,,,,,,, ,
financial dato,together with industry dato, competition, Net pre-tax gains or losses on securines ond reol estate properties tWrmeri rnonagement copobihties, evolvohons of the underlying ocquired in sotisfochon of debts previously controcred are not reflected in colloterol for secured lending including, when appropriate, independent net loon charge of fs. Included in 1985 other income were net pre tax gains oppraisols of real estate properhes, and other factors; of $11 milhon from the d sposinon of securines ocquired in sotisfochon
-A continuing evoluotion of the loon portfolio ond ofI bolonce sheet credt of debts previously contracted,compored with $7 milhon in 1984 ond $34 exposures.includng monitoring by lendng of ficers and credit supervisory million in 1983. Net gains on the disposihon of real estate properties personnel of loans which are idenh fied as being of less than acceptable ocquired in satisfaction of foons, of ter voluotion od iustments on properties qual.ty in addhon, penodic examinations are conducted in lending oreos he!d at year end,were $12 milhon in 1985, compared with net gains of W tr e Credt Audt Dmsion of Chose's General Auditing deportment;
$18 milkon in 1984 ond net losses of $6 milhon in 1983. Gains and losses on -Monthly in-depth oppraisal of loans which present a possbility of loss. lf, d sposihons and vduchon odiustments of reol estate properhes ocquired as o result of such monthly appraisds, o loon is judged to be not collectble, are reflectedin other expenses, the carrying vdue of the loon is reduced,in accordance with internd pohcy, Net loon charge-ofIs, loon loss expenence ratios and the estimated to shot port on which is considered to be collectble.
diocahon of the provision for possble loon losses attr6utoble to domeshc in oddahon to the cont nuing internal assessment of the toon portfoho, the and internationd activities for the post Isve years are summarized in the consolidated financial statements are examined by Chose's independent ION *'"9 '
- pubhc occountants,whose examination includes a review of the odequacy of the reserve for possble loan losses. Also, examinations of Chose's loon Net Loon Charge-of fs and Loon loss E aperience Ratios ortfoho are conducted penod colly by the lederd banking authonties.
($ in rnillions) 1985 1984 1983 1982 1981 The reserve for possble loon losses is maintained as o genetof reserve Net Loan Charge-of fs without any internal oHocahon to the components of the loan port foho. Domestic -Consumer * $131 $ 59 $ 35 $ 34 $ 32 When potentid losses on specific bans are idenhfied, the portion deemed
'N 103 1I7 76 uncoHechble is charged of f. However,on allocation of the reserve has been 103 121 prep red based on subjective estimates which talte into account historical Total Domestic 234 162 156 151 108 53 99 79 loss dato and Monogement's views os to the relohve nsk choroctenstics Intemahonal 86 18 f the portfolio.
Total $126
,,,$,3,2,0, ,,,$,2,,15, ,,$,255
, , , , ,,,$,2,30,
, ,,- The year-end 1985 reserve allocation to internationalloans of $400 Loon Loss Eaperience million, up $25 million f rom year end 1984, reflected the continuing untertoin Rotios' global economic condtions, porticularly in cortoin developing countnes, and Domeshc-Consumer
- 1.60% l.07% .79% .85% .94%
the conhnuinq high but somewhat reduced level of nonaccruolloons.The
~
t .49 48 66 .63 .47 year end 1985 allocahon to domeshe commercialloons,which increased by Totot Domesne 80 .60 68 .67 .56 $10 million, reflected Monogement's continued concern over the uneven Intemononal .27 .16 32 .27 .06 economic recovery in the United States.The diocohon to domeshc consumer Comolidated 52 36 .47 44 .26 loans wasincreased substantially by $95 milhon to $175 million of year end Allocationof the 1985 in onhcipohon of higher levels of charge-ofis consistent with the rapid Provision for Possible growth of the domeshc consumer loan portfoho and cond tions currently l t estc $330 $2I5 $135 $163 $161 P'"* E"9 'n the consumer credt markets. Int:rnational 105 150 150 100 50 Total $435 $365 $285 $263 $211 mm ammmmme ammmmmu ammmmmms 6tocns to Indmducts for Personal E rpenditures and 1 4 f omily Residenhal Propertes
' Net loon charge-offs as o percentage of overage loans 27
The c'locotion of the reserve account will change whenever Monogemen, Fee-Based Income determines that the nsk choroctenstics of the loan portfoho have changed it should not be construed that the amount ollocoted to a porticular segment in 1985, fee income from trust and fiduciary investment services ocreased is the only omount ovadable for future charge-ofis that might occur within 25% over 1984 and 61% over 1983.The increase in 1985 reflected the impoct that segment smce the reserve is o general reserve available against the of opproximately $28 mdkon resulting from the Lincoln ocquisition and totolloon portfoha ln oddition, the amounts so ollocated by segment moy growth in Chase's global custody services and specolty ovestment services not b2 nacottve of future charge-ofI trends. In the opinion of Management, of fered by Chase Investors Monogement Corporation New York. Consumer the r: serve for pos9ble ioon losses of December 31,1985,is odequate to banking fees mcreased 44% compored with 1984 and 86% compared obsorb onticipated losses in the lonn portfoho of that dote. Chose's ode- with 1983.This increase was prinanly of tnbutoble to continued growth of pendent pubhc occountants have concurred with Monagement's opinion, the VISA credit cord businessSther fee-based income induded income At December 31,1985, the bolonce in the reserve for possible loon losses from ovestment banking actmties, mformation services, mortgoge bonking was $908 mdlion, compared with $761 mdlion of year-end 1984 and $564 ond commercial banking octmties. investment bankog fees increased 60% mahon at year-end 1983. At year end 1985, the reserve for ponible loan and 108% compared with 1984 ond 1983, respectively, due to substantial loss:s represented 1.47% of loans, compared with 1.23% ond 1.01% of year- increases in fee income from mergers and acquisitions, loon syndicotion and end 1984 and 1983, respectively.The following table presents the allocation overseos underwnting actmties,leosing and hnoncial advisory services. of the reserve for possible loon losses at year end 1985 compared with in odation, dunng 1985 the investment Bonking Group consummated ths prior four year-ends. opproomorely 300 interest rate and cunency swop transoctions oggregatog opproximately $7 bdhon in notional pnncipal. fee income from interest rote Allocation of the Reserve for Possible Loon Losses and currency swaps in 1985 nereosed substantially compared with 1984. December 31 Other fees generated from information services, mortgage banking and l$ m mAons! 1985 1984 1983 1982 19 81 c mmerciaWonkog admties mcreased 23% over 1984 and 44% over 1983. Allocated Portion of "a-l' Nonfee-Based income Real tsrate loons ._ $ 25 $ 25 $ 20 $ 25 $ 25 Commercialand Foreign exchange trodng mcome fu 1985 was $173 mdt on, compared with Industnoltoont 235 225 150 160 150 $119 mdhon n 1984 ond $117 mdhon in 1983.The oppronmately 49% in. I ['( 'f I5 Espendtures _ 175 80 55 50 50 ueose in foreign exchange trodng income from 1983 to 1985 reflacted the global eilativeness of Chase's network in the highly competitive foreign leose Fmoncogs _ l5 15 10 10 10 exchange environment Chose is o major market maker in oil of the world's international ._ 400 375 300 275 250 freely traded currencies and through its globoi network of trading centers is Total Allocated oble to timely and occurotely execute foreign exchange transactions for Por tion 850 720 535 520 485 customers and to orbitroGe the vorious spot, forward, f uturas and options Unoilocated Portion ___ 58 41 29 38 56 markets Total Reserve Tradng account profits, ocludng prol ts from dealer bond and precious con to s $908 $761 $564 $558 $54I me s tr dng omhes,wem m honin1985, compared with $29 muon mimumme mmmes mummime mmmmmum ummmme in 1984 and $24 milhon in 1983. In oddtion to ocreased prohtab lity, sub-stantial gains were achieved in underwnting presence and global sesunties dstobution. Other Operating Income Net ovestment smont,es goins increased subsionnolly to $98 muon, up $81 mAon from 1984, and up $73 milhon compored with 1983,ref tecting Other operating income totaled $1.316 moon in 1985, up 42% from dechning interest rates and favorable market condtions prevaihng through.
$930 rnoon in 1984 and up 52% from $864 mAon in 1983. os reflected in out most of 1985.
the followog table. Other nonfee-based encome mdudes equity mcome from assoooted companies (20% to 50% owned by Chose). net gains on the esposition of Other Operating income ossets, net foreign enchange translation gains and losses, and rniscellaneous 15 m m.li.onsi 1985 1984 1983 incomo The mcrease in other nonfee-based income, from $49 moon Fee.Bosed incomes m 1984 to $105 mAon in 1985,ocludes o pre-ton gain of $22 milhon from the internot,onalBusmes Fees $ 162 $152 $i44 sole of substantially oil of Chose's interest in Diamond lease Company Ltd Trust and Fiducory Investment Fees 193 154 120 and o$23 mAon pre-ton gain from the sole of realestate both in japon. N e Oiher nonfee based income in 1983 oduded $26 mAon resuhin0 from Chase s settloment with Iran. Net goms, before occme tones, from the involfee Basedincome dsposition of securities acquired m sc,tisfaction of debts preuously con-Nonfee.80 sed lncome tracted totaled $11 million m 1985. compared with $7 muon in 1984 Forsign E nthonge Trading income $ 173 $I19 $II/ and $ 34 mAon in 1983 Equity income from annooted bankog mshtutions Trodng AcountProhts 31 29 24 dodned $7 mAon from 1984 Net fore,gn exchango translohon gains on Chmo's mvestments in overseas bronches, subudonm and associated com-r ce n [ed n _ . I ponins wmo appronmately $ 5 mAon in 1985 compared with lonm of toWthf.e Basedincome M $214 $263 $4 moon m 1984 and of $40 million in 1983 On on of ter ton basis, Total other operating incom* g net foreign eachungo translation loues were oppecomotely $9 moon,
$15 mAon and $27 moon in 1941984 and 1983, respodively
'Redmified for compumtive purposes. 1 1 28
Other Operating Expenses Provision forInComeTaxes Other operatog expenses were $2,732 milhon in 1985, up 22% from 1984 The provison for income taxes applicoble to net income increased to $333 and 34% from 1983, os shown in the following table. Included m 1984 other melhon in 1985 from $223 milhon in 1984 ond $273 mJlion m 1983, prrunrily operatog expenses was o speciof recovery of $49 mJhon ($20 milhon due to on increase m income before taxes. portially of fset by on ocrease in of Dr taxes} os a result of Chose's sett!ements with cer tom defendants in the ocome exempt rom 8 federolincome taxes. In 1985, New York State and City oction the Bonk brought ogainst Drysdale Secunties Corporation,Drysdale odopted a new wome tax low allecting bonlong institutions.The ellect of Govemment Secunties. Inc. and others in 1982 and the net recovery reobred the new low, while lavorable, was not motenol to Chase's 1985 net income. on cer fain other transactions relotog to the Drysdale situoton. Excluding The omount of inccine tax reflected on the tax kne of the financial both this 1984 speciai s e,uy and the first six months 1985 impact of the statements moy creo.a on erron9ous impression that Chose is subiect to o consolidations of NCB ond Lincoln,1985 other operating expenses would lowenncome tax burden than are other types of business corporations, have been up 14% over 1984 ond up 28% over 1983.The impact of the Actually, Chose and other commercial bankmg institutions in ellect pay acqusitions of NCB ond lincoln on the first six months of 1985 increased odditonal amounts which are equivalent to income taxes by accepting operatog eapenses by $115 mdhon. lower yields on lederally tax-exempt municipol obhgotons and by virtue of the required mointenonce olinterest. free reserves with federol ReserveBonks. Other Operating E xpenses The follow ng table presents both the direct and mdirect 1985 taxes borne ($ m moond 1985 1984 1983 by Chose and the resulting ef fective income tax rote: J Sdanes ond Employee Benehts $1.451 $ 1,219 $ 1,122 Net Ocrepancy 284 245 213 Overall E f f ec tive lncome Ta xes-1985 Ecppment Rentals. Deprecotion Pre.Tox Net ord Mointenance 203 171 139 l$ m meons) income Ton incorne Other E xpenses 794 659 572 SpeooHRecoveryl - (4 91 - Fconod 5totementt os published $ 898 $333 $565 Isempt Obligations imphot Ton 233 233 0 Total Other Operating E s penses $ 2 732 $2.245 $2.046 Federal Reserve Bank indirect in= " $9 59 0 mmmmmmm Solones and employee benefits were $1,451 mdhon in 1985,up $232 mJhon f rom 1984 and up $329 milhon from 1983.The mcrease in 1985 was Ef fectiveiax Rate MM 53% I* due to normal stofI ment ocreases and higher profit shonng ond other "
' Computed using Chose's overage cost of domestic interest beanng funds on $746 incentive compensation expenses, procipolly as a result of substantially millon mointamed by Chose m interest-free reserves *,th Federal Reserve Banks.
irrgoved earnings. In additon,1985 staf f expenses reflect recent acquisi-tions including omong others.the acquisit ons of Lincoln.NCBond Chase Ohio, and $15 mdhon m oggregate severonce payments mode in cortoin overseas locotons. Penson expense for Chose's maior plon was $19 mdhon in 1985. compared with $17 milhon m 1984 and $33 mdhon in 1983 The reductons from 1983 pension en pense ware pr mcipolly due to revisions in the interest rate assumpf ons in 1984 to more occurately reflect recent expenence ond future expec totions. All other items of operatog expense, mluding net occupancy, equip-ment costs and other expenses, mreosed by $206 mJhon, or 19%, en 1985 to $1,281 mJlion, compared with $1,075 rnJhon in 192,4 and $924 mJhon in 1983.The increase in 1985 other operating expenses prrnonly teflects conhnved investments in equ pment, systems technology and product innovaton, and esponsson in existog and new markets, por holly ofIset by sovings reakied f rom en pense management programs instituted to r: duce unproductive and marginal o(tivities and other discret onary typos of spending The number of nmployees at year.end 1985 was higher by 2.850 em. ployees, or 7%, than in 1984 and 25% higher than in 1983.The increase in 1984 (ompored with 1983 is substant olly atinbutable to the acquisitions of NCB ond locoln.The fonowog table sets forth both the number of domestic omployees and a geographic datobution of employees in overseas of fices. Number of Employees at Year.end 1985 1984 1983 Do mi.e Of hw 29 s/0 26 800 23.I30 Omsem othces A so _ _ .___ __ _ _ 3.450 3E0 3.140 furope' _ 6,480 o410 3.780 Mdilo lost and Afnca _ _ . . _ 550 600 650 Westem Hemere _ _. 6400 6 410 o $ 30 Totot Ovcescos Oll4 es y 16.800 14.100 Totot imployees 46 450 43 # 0 3/ 230 mummme mumumm mummmme
*Dnmestic olhr es intkde npptosimn'ely 4 000 employees in 1985 and 14 30 m IV84 re3ulicg from the comitrons of bne oln. C hme Oh.o und Chme Morplund Omeos oll<es m('ude 2.33 5 enAyees a 1985 omi 2.310 in 1984 resuhing from the or quesiticm of RB ond Bonco da hnonins.
29
liquidity and Interest Sensitivity Management Capital Management the centroi role of Chase's liquidity monogement is to ensure that Chase hos The capital monogement function of Chase is a contmuous process which possession of and occess to sulficient liquid funds to meet the normal trans. consists of providing capital for both current fooxiol positioning and oction requwements of its customers, toiake advantoge of rnorket oppor- onticipated future growth. Key to this process is internal generation of tunities requinng flexibility and speed and to provide o cushion ogoinst pranary capital through earnings retenhon and net increases to the reserve unforeseeable and unforeseen liquidity needs.The need for o disophned for possible loon losses. Dunng 1985. internally generated prenary copitol and comprehensive program for hquidity monogement hos been height. totaled $454 mdhon,up from the $332 mAon generated in 1984, and oned substantially by economic developments in recent yeors. Movements in included a $122 million net ncrease in the reserve for possible loon losses. economies of motor counines oround the wodd are significontly more syn. The annual roto of pomory capitol generation from neernal sources aos chronized and financial morkets are more dosely integrated. 8.1% m 1985, compared with 74%n 1984, and 6 6%n 1983. In recent years, the deregulation ohnterest rote ce hngs on most domestic Three external sources of equity generation ore denved from issuonce of deposits of under $100.000 ond the permission granted to banks by federal common stock to existing investors in Chase: pursuont to the Dividend Rein-authonties to of fer money market deposit accounts, cornb ned with elfecrive vestment and Stock Purchose Fion; shores issued upon conversions of the marketing progroms to acquire these deposits, have favorably of fected two outstonding convertible debt issues, the 4 Ts% Convertible Capital Notes hquidity monogernent by creating significont new sources of funds. Also Due 1993 ond the ob% Convertible Subordinated Debentures Due 1996; enhancog liquidity management were the acquisition of bncoln,which has and shares issued o payment of oferest on Floating Rote Subordinated access to o sign hcont consumer deposit network in New York State, and the Notes Due 1996. Dunng 1985, common stockholders reinvested $39 million issuance in the third quorter of 1983 and the second quorter of 1985 of of dmdends in 717000 new shores, a por ticipation rote of opproximotoly Flooting Rote E x tendable Notes Due 1992 and 1992 respectively Chose hos 27% of chgeblo shores.This compares with $33 million and 770.000 shares been able to utitre theso new sources of funds to reduce its traditional dunng 1984,a portecipation rate of opproximately 25%dNumbers of shares rehance on large denomination negotiable cerfificates of deposit from on are before gmng ellect to the 2 for 1 stock spht doctored on January 15,19861 overage of $2 7 bilhon in 1983 to $1.4 buon in 1984 and $ 9 buon in 1985 Chose's primary copitolincreased by $510 milhon to $6,090 mAon of As on essential port of its hquidit y management, Chase continues to place year end 1985 from the $5,580 mAon level of year end 1984,as .hown in a high pnonty on dosely monitonng its worldwide mix of osset and hab hty the accompanying tables. In 1984 Chose issued $400 rnAon in floating rote positions and mczntaining its abiht y to odi ost these positions throughout subordinated notes shot quohhed as pnmary capital ond $227 million in its worldwide network.This network provides diverse sources of funding and nonredeemoble preferred stock. At year-end 1985, Chose's pornary capital lending that enable Chose to choose the most cost.eIbcient means to to total gross assets ratio was 6.87%, well m excess of the 5.5% rninimum erecute buuness strategies. roteo estobbshed n 1984 by Chose's pnncipal boniung regulators,and up 50 in addition to its hquid assets and shot t-term Lobikties, Chase oko utihres basis points from the 6.37% ratio or year end 1984. inte<est rate futures contracts to monogo neerest rote nsk enposure os Total copitol odudes,in addition to the elements of pnmory capitol, port of its global osset/habihty monogement atrotegies and for hquidity secondary capital which is compnsed of redeemable preferred stock and monogement long term debt, Chose augmented its secondary capitohn Apol,May and The following roble shows selected overage hquid assets and shert.torm November 1985 with the issuance of French Francs 350 mAon (opproxi. habihtees for the yeors 1985,1984 and 1983 motely $45 million) of floating Rote Bonds Due 1993, $250 mAon of floot. ing Rote Subordinated Notes Due 2000 ond $175 mAon of floating Rote Selected liquid Assets and Short Term tiabilities $ubordinated Notes Due 1997 tespectively The net increases in secondary llin rmit.ons- Avernoed lY85 1984 1983 capitol, combined with the net increases m pnmory capital, resulted in on Selected tiquid Assets inm se'n t 'okopitoldunng I985 cf $1.069 million.Totalcopitolot interest Beanng Depesies Placed year-end 1985 was $8.176 mAon compared with $7107 rnaon at year. with Bonu _ _ $5,100 $ 7.000 $ 7,800 end 1984. At year end 1985, Chase's total capitol to total gross ossets ratio V 5 Treasur y Sec unties . 1,800 t,500 1./00 wog 923%, oho weihn excess of the 6 0% minimum ratio estabhshed in 1984 by Chose's poncipal banking regulators and up 112 basis points from of u i 5 es Purchased Under Resote Agreamenen_ 1,200 800 600 the 8 Ilboro at vor.end 1984 icons to Brnlses and Denierun Sec unt.es _. 600 000 600 Bankers' Aucptonces m Portlofio ._._ 500 500 600 AveroneTotal Astets - _ __- $M 300 $M300 $/9 t00 enemme summinius e-Selected 5hort Termliabileties Net Nonentere9 Rennnq Demand Depm ts e Dommtic Oll<es _ __ __ $ 6.300 $ 5.500 $ 5.300 Non nierest Bennng Depeutun Ovenens Of fir on.. ___ _ l.400 l.200 1,200 f ederalI uru h Purthosed and Secunt.es Schlunder Repurchase Aiyeemenn _ 4f00 5,200 6,100 E urodoilor and f urot unency Deposits mih Original Moivt, im of 5even Dovs or l eu _.__'_._ -- - _ J800 3,200 4 000 4 200 Commerriol Poper of the Company ._ 3 E00 3.600 Neagatuhle CeAf<oim of Depost in Donm sM Oll< cs __ ___ _ _ _ .. _._ 900 1.400 2./00 Average Totallichilities $81 100 181 600 $/5 /00 summmmme simme ammmmmme It) monogeth) hquujety Monoge. ment takes into orcount bank reqidotory i limitot,ons on the abilty of a national bank to pay duidends to its poront i holding company Sco Noto lo of Notes to finonvol storoments Rogohitnry linutotons 30
The followng iable shows changes in pnrnory and total copetd during 1985, The following table shows the year end pernary capital and total capital 1984 ond 1983. occounts for 19851984 ond 1983. Summary of Changes in Capitol for 1985,1984 and 1983 Primary and Secondary Capital" {$ e mAons) December 3tr (Totals may not odd due to rounderd 1985 1984 1983 (5 m mAons) 1985 1984
- 1983 Prrnory Copel at Beneneq of Year $ 5.580 $ 4.486 _$ 3.848 Pnery Copd.
Primary Copital Generated from Common 5tockholders' Equity $ 3,795 $3.359 $ 3,05l Internal Sources Minonty In4 rest e Retomed Earnegs [ Net of f X Translorian) _ 332 200 248 Consohdoied 5ubsidiones 3 3 4 Not Chonge e Reserve for PosS6'e Common Stock Equay Contracts 150 150 150 toon losses 122 132 6 Promise to Equitae flootog TotoI Pr nnory Condol from lnternal Sounes 454 332 254 Due 5 Primary Capital Generated from floateg Rote Subordinated Enternol5ources Notes Due 1996u 362 396 - floateg Rote Senes F Preferred Stod - 227 - Reserve for Poubleloanlosses 908 761 564 Reserve for Possbleloonlosses Nonredeemoble Preferred Stock 602 602 375 of Acquired 5ubsidiones 24 65 6.090 T5E yo,oI Prnnory Coned 4.486 Net Gom on Retirement of Senes B and C Preferred 5tod - 28 - Secondary Capitd: Promise to f quitue floating Rute Notes Redeemoble Preferred Stock 62 62 150 Due l995-Poyment to Note fund (39) (33) - Long Term Notes ond Debentures 2.806 2.320 1,376
-Net of Note fund - -
342 long-Term Notes incbded flootog Rote Subordinated Notes Due 1996 - {34) 396 - m Pnmary Capital (782) 1855l (492) Common Stock luued Pursuont to, 70,01 secondary Conda 2.086 1.527 1.034 flootog Rote Subordinated Notes Due 1996 34 20 - Total Capital $ 8.176 $ 7.107 5 5.520 Acquesdion of incoln - l9 - Conversion of Convert 6le Notes "I'd*'al R*58'v8 BN'd d*Iinition revised May 1985: Pnmory condal consists of ond Debentures 27 8 15 (om"*n 5'odholders' equity.minonty eterest m equity of consobdoted sub. Dividend Reinvestment Plan 39 33 26 Sd'o"*5.PS'P*'uol re'*r'ed P stod.mondotory convertele securdies (mcbd ng E sercae of 5tod Options 4 - I mandatory stod purthose controc ts) and the reserwe for possble loon losses. Minonty Interast n Consolidated Secondory condal consats of limded kle preferred stod and longlerm debt. Subsidiones - (1) -
Pnnapol amount less value of eterest paid m shares of common stod of the fotol Prwnory Capitol from f a ternal Sourc es 56 762 384 Company Net Pnmary Copitd Generation 510 1.094 638 musumme um Primory Capitalat Year end $6090 $ 5 580 $ 4.486 Seleoed rotios monitored by rnonagornent are shown belows m- -
Secondary Coodal of Becenning of Year $l.527 $ l .034 $ l .046 5 elected CapitalRatios Retirement of Senes B and C Preferred 5tod . - {88) - December 31' tong term Debt of Acquired 5vbsidiones _ - 1I4 - luvonce of Notes and Debentures 462 886 350 1985 1984 1983 Accretion on Zero Coupon Notes V 8 7 Prwnary Copdal os a Percent of < E xchanges end Conversions (27) (8) (15) loans 9.83% 9.00% 8.03% R: purchases ond Retirement of Notes (1 01 (26l - R,sk An.,5" 7.53 6 85 5 83 fore 49n E mchangeironstation Adiustments _ 52 (30) (9) yo,olo,os,An.,v' 6 87 6 37 5 44 Long Term Notes E uluded from One luded ml Totd Capitol as o Percene of. Pe nnw y Copital 73 (363) (3421 loans 13 20 11.46 9 88 Net Chonoe n Secondary Condol 559 493 (1 21 8'5h Aue's"- 10 11 8 72 7.18
- TotalGrou AuctC* 9 23 8.11 6 69 Secondary Capitolat Year end $ 2 086 $ 1,577 $ l.034 Common 5todbokters' Equity os o summmme su m Percent of Total Gross Auetv' 4.28 3 83 3 70 foW Copid ot Beginneg ot Year $ 7,10 7 $5,520 $ 4,894 Totoi stodbolden' E quit y os o N t Condal Additions . ___ 1.069 I587 626 Perr.ent of Total Gross Aueev*-- 5 03 4 59 4 34 Total Capitol at Year-end $ 8176 $ 7.107 $5 520 Tohl Preferred 5tod as o Percent a- - ol Common Stodhokiers' f quay 17.49 19 77 17 21 Mondorory Corwe,tible Sec unt.es os o Parrone of Other Pomary Conda __ l4 73 18 10 12 32 ammmume "Rak Ane+s are def med os iotal Grou Auers leu Cosh and Due from Bonks and U S freasury andiedarol Agency Secunt<es.
" foul Grou Assets are dOned os Total Anets plus the Reserve for Pouble loan touws 31
I e in January 1986,the Board of Governors of the Federal Reserve System lease hnoncogs o domestic of hces oggregoted $1.5 bdhon at December issued,or.d requested comments on,a new proposd for Risk-Based Prunery 31,1981 compared with $1.0 bdhon of December 31,1984. In 1985, lease Capitol Guideknes. Chase understands that these proposed guidelines, f noncings in domeshc of fices overaged opproximately $1.1 bdhon com-which incorporate some ofI-bdonce sheet commitments,will be used o pared with opproximately $600 million for 1984.This grow th is the result of congunction with the current prunory copitd (pnmory capitol to totd gross Chose's strategic thrust in this important business segt sent.f or 1985, the asse7 guidehnes to determine minernum capital reqvvements. Since the init d overage interest rate earned, on a tomoble equivalent bosis, on domestic f:deral Reserve releme has not quonhfied mL band copitol guiddnes, the lease Iconc ogs wm 1111% compared with 11.23% for 1984. impact of the proposd connot be exphcitly determined However, Chose's Real estate loans, endudng 1-4 family mortgages, in dorneshc of fices inonagement beheves that Chose's capitalis f ully odequote and that it ogg,,ga,ed $3.7 bdhon of December 31,1985, compared with $3.1 bilhon would continue to be so under the newly proposed nsk based capital o, o,c en Lc, 31,1984. In 1985, suc.h real estote loons in domestic of fices guidehnes,if adopted. overaged approximately $3.1 bilhon compored with approxenotely $2.8 bAon for 1984 f or 1985, the overage interest rate earned on these domes-hc real estate loans wm 10.94 % compared with 12 92 % Ior 1984. Loan Portfolio 3, yeo,.ena 1981 the boiance of commerciai ond inaustnd ioons o domestic of fices was $8.8 bilhon, compared with $10.0 bdhon of year-Chose's loon portfoko was $619 bdhon at year-end 1985 and $62.0 bill m end1984.Theyear endtoyear enddechne ncommercialandodustnol at year-end 1984. Average loan balonces were $61.5 bilhon m 1985, a $18 loon volume is pnmonly atenbutoble to rehnoncings by corporate borrowers bJhon increase from $597 bilhon m 1984 The overago rate corned, on a m the enternal markets and to the Asset Soles Program. Chase's pnme rate tozoble equivdent bous,on the loon portfolio donng 1985 was 11.8 J% overaged 993% for 1981 compared with 12.04% for 1984 and 10.78% for compared with 1299% for 1984. 1983 included m overage loans in overseas of f aces was approximately $56 Cho3e hos substonhdly expanded its capacity to seilloons through its bdhon of loons to U 5. commercid borrowers, compared with $5 5 bdhon of Asset Salm Program.The 1985 sales volume of hort and medumaerm such loans for 1984. Dunny 1981 the overage balance of loans which were loans exceeded $24 b4 hon,up from $3 bdhon in 1984 At year-end 1981 exem t from U 5. federalincome tones, pnncipally loans to , tote and polih. total ossets wore reduced by loan sdes of oppronimotely $2.6 bdlion cd subawuons, wat i $12 bdl on, up opproximately $400 mAon from 1984. compared with $1.1 nilhon at year end 1984 Asset Sales diow Chase t The o<erage rate earned on these loans, on a taxoble equivalent basis, more competihvely meet customer credt needs whde funchonog as wm oppronmotely 14% and 17% for 1985 and 1984, respechvely. finoneiol entermedory bet *nen supplien and usen of funds. Chme's loon volume in overseas of hces decreased from $373 baleon of Chme s loon portfcho in domestic oflices inoeosed f rom $24 7 billion year-end 1984 to $340 bdhon at year end 1985 On on overage basis, of year-end 1984 to $279 bAon at year-end 1985The increase was largely loons recorded en oveneos of hces, eadudng opprom nnately $5 6 bAon of due to the increased loon volume empenenced m the dommhc consumer toons to domestic obligors,occounted for 50% of Choso's rotolloon port-sector.prnnonly because of Chase s consumer mothehng thrust At year' foho for 1985, compared with 53% for 1984.The overage yield on loans end 1981 Chase s domeshc consumer loans for persond expendtures booked m Chme's overseas of ficm wm 1161% for 1981 compored were $74 boon,up 39% from $53 bAon at year end 1984 The overoge with 12.91% for 1984 and 12.13% for 1983. Real estate loans in overseas oternt rote earned on domestic consumer loans for persond ee pendtures of f,ces totaled $2.8 bAon at year end 198& of which appronmately was 1170% for 198& compared with 16,32% for 1984. $15 bAon,or $3%,was for 14 family moregogm. At year end 1981 foreign ihe corsumer financial products provided by Chme include credt card currency denomenoted loans constituted oppronwnotely 35% of total octmhes, revolving c red t foes, guoronteed student loons, c ash reserve overseas loans. A breakdown by type of loans recorded m overseas oflices checbng. mstdlment loans and l 4 family residential mortgage loans Chme cit year end 1985 is presented on poqe 73 has several subudones which of fer thme credit products and serwces t The following table sets forth the dstobuhon of dommhc and inter-consumers. Among these are Chose U 5. Consumer Services. Inc.and its notonal loons 'ot December 31,1985 ond 1984, based on the domicdes of subudiaries (CUSC5) which estabhsh orect relotonships with comumers m selected markets throughout the United states CU5CS'i network has
- 9*
been exponded to compose 25 locatons in 11 states of year end 1981 with loans Based on DomMles of Obligors-Year end loans of opproumately $855 rnoon compared with $410 mAon at year-erwi l?84 in 1981 the recently formed Chase Auto leoung Corporat on was b" *M"I *
- tromforred fromThe Chme Manhatton Bonk.N A. to CUSCS, with kmns Dnmmtdoons.
$2 124 of appeomnnately $70 moon at year end 1985 The Chmn Monhotton Bank f] jj '""h'((", _ __
(USA). N A. [Chmo (USA)}. o bankinq subudor y in Delowore, provides con-kt@ommndmns 32 520 30M wmer credt and depout products nohonwide through droct mod market-In'emnw;nnu cm mg At December 31,1981 Chasu (USA) had outstandng comumer loons of $4A buon,onincreme of opproumotely $2 7 bAon compared w,th the provous year.crxl Indoded m this wx.rcosn was opproumately $920 mAon
"'{- -
29 0 31 5 I"'"'"'"*"'"vuu nan s ?? O 31M m credi cordloons at your.end 1985 as a tesult of the transfer of the VISA portIof.o 1o Chow (USA) from The Chme Manhatton Bonk, N A in the Totalloans Smond and four th quor ten of 1985, Chme increased its consumer dopout bme with its capution of wveral Oh.o and Mar y ond f ihnf f inshtuhnm whgh formed Chme Ohio and Chow Mary tond ,espectwely At December 31,1985, Chow Oho ond Chose Morvlorw i nod ouarondrxi comumor loom of opproumately $170 moon and $175 mAon respechwly Stoenments of condhon for Chose (USA). Chase Oh'o and Chow Maryto,d are on page 78. Domeshc consumer mor tgage loans for 1 4 fomdy houung were $2 / becm of year erxj 1981 up oppeonmotely $947 moon <ompored with the pronous year end The meroge rate corned on thme 1 4 fomdy mortgoon loons wm 1016% in 1981 compared wah 1002% in 1984 32
B y Average internotonalloons, based on the domiale of the obligor,induding loons to foreign obhgors booked in dernestic of hces,were 532.2 bilhon a 1985,down 1% from the $32.7 bAon in 1984. A breakdown of overage internatioriolloons, by type of borrower, for the three most recent years followsr Average international Loons-8y Type ($ m millions. based on month.end balances) 1985 1984 1983 Commercad ond industndloons $20,410 $ 20.780 $20.580 toons to 8arb 3.310 3,930 4.260 tcons so foreign Govemments and Of f<iolinstitutions 3.910 3,800 2.290 Red Estote toons 1,810 1.570 1,160 loans to Other Finanool institutions 640 770 810 toons to individuals for Persond E spenditures 1,120 840 490 tease Finanongs 260 180 120 Other loans 970 980 1.160 Torollnternatonolloons Gross $32,430 $32.850 $30,670 tess UneornedDiscount 190 150 130 Totalinternationalloons $32.240 $ 32.700 $ 30.,40 Risk Elements
- mus -
Schedules on Selected Loon Matunties and Sensitivity to Changes in interest Risk elements in *he port foho are descr bed in the Country Risk; the Non-Wates and on year end and overage loan balances by type ore presented occrud Reduced Rote and Post Due loans; and the loan Concentrations on pages 72 and 73. sections os idlows: Country Risk Internotonallending requires not only the normal credit nsk onalysis ossoci- the countries in which it conducts business or in which its bor rowers reside. oted with the deosion to entend hnonong to o por ticular customer but also These in-depth assessments, performed by a team of economists and politi-on ossessment of "counery nsk." Country nsk orises f rom economic, social cd ondysts in coniuncton with locol Chase management, ore ut hzed by and pohtical loctors that meght oflect a borrower's ability to repoy in the Chase within its planning cyde for such countnes as well as in Chose's system currency of the toon. Cross-border loons are those which borrowers must of monoging total country exposures. repoy in a currency other than their locd currency or to o lendeon a The Id!owing Iwo tables i!!ustrate Chose's pohcy of por t folio divenihco-dilferent country One of the maior nsk factors ossoooted with cross border ton by whkh exposures are *,pread over a wide spectrum of geogrophic lending is the possibility that a country's foreign exchange reserves rnay be regions, individual countnes and economic structures.The hrst table presents insu'haent to perrnit timely repoyment of cross border loons by borrowen the distnbuten of internatonol loons by country dossihcotion,induding domialed in that country. even if the borrowers possess sulbcient local loons of overseas of f aes and internatonolloons booked of domestic currenc y In addition, foreign government decisions and onociated events of hces, based on the domicile of the ultimate obhgor, of December 31,1985, con oflect business oc tivities in a country ond oflect a borrower's ability to 1984 and 1983, respectively As evidenced by the table, the maionty of repoy its toons. Chate's exposure is to borrowers in vonous industrid countries and countnes Chose has a systematic country risk assessment process by which it dossified as pomary product empor ters.The distnbution by classihcotion ondyres and monitors the politicd, soool and economic environment in oil hos not substantrolly changed over the three year penod Structure of International loans by World Economic Divisions's 1985 1984 1983 foicion Currenc y Icons Foreign foreign fod Currency Currency local Onnnni Matunty (Pnno. Loc al (Pnno- tocol (Pnno-Cor- Under over pdly Cue . polly Cur- pdly {$ m m.Itionsi renc y I Year i Year U S $1 Total rency US$) Total renc y U S $) Totd Indimnol Countnes _ $6.990 $ 2,200 $ 3.560 $5 760 $ 12.750 $6.660 $ 7,360 $ 14.020 $4.640 $ 8.630 $ 13.270 Centrdly rtonned iconomies - - 30 30 30 - 70 70 - 90 90 Ohr Countnes fuelf sporters ~. 120 1,300 2,740 4.040 4.160 120 4.380 4.500 90 4.250 4 340 inmary Produc t inporten . 850 1.600 4.190 5 790 6.640 780 6.080 6.860 850 $.800 6.650 Esporters of Monofottures _ I.440 380 950 1,330 2.770 1.340 1,650 2.990 1, t 00 1.540 2.640 Servve nnd linmittnmn _ _ . . 140 190 590 780 920 140 950 1 090 130 970 1.050 Total _ .. _ _ _ _ _ _ - .
$9. 540 $ 5 670 $ 12 060 $17 730 $ 27.270 $ 9.040 $20 490 $ 29.530 $6.810 $21230 $28 040 mmmmu amimum mumme emummme - musamms summmmms summmme as - ammimum
" Country (km.f<ntions are based on international Monetory Fund dehnitons. cacept for centrnily planned economies and cennen territones and dependennes whKh do not moinso in indepowient foreign nchange reserves 33
r The second table shows those countnes in which Chase had cross border outstondogs which exceed 1% of Chase's total assets at December 31,1985,1984 I and 1983,respectively, ocludog a breakdown by type of borrower within eodi country Cross Sorder Outstandings Which Enceed1% of fetal Assets t5 in mill.ons! Governments Banks and Commercial Total % of fotal and Of hcial Other Fmonaal and Other Other Country Name Outstondinns Assets institutons inst tutons industnot Borrowers Outsrandonns As of Duember 31 , 1985 Japan $3,020 34% $ - $1,270 $ t ,450 $120 $180 Broid 2.820 3.2 500 700 1,380 120 120 United Kmgdom 2,740 3.1 40 690 1,270 170 570 Mexico I,680 1.9 320 490 840 - 30 West Germany 1,420 1.6 - 340 870 180 30 Venezuela I,250 1.4 190 210 800 30 20 France 930 1.1 10 470 280 90 80 Aroentino 920 1.1 180 130 580 10 20 Japan 2.980 34 - 1,190 1,660 80 50 1984 United Kmgdom 2,840 33 50 820 1,420 140 410 Braid 2,830 33 440 800 1,280 130 180 Mex<o I,750 2.0 340 440 860 60 50 West Germany 1,690 1.9 - 300 1.160 170 60 france 1,380 1.6 40 560 640 70 70 Venezuelo 1,280 1,5 180 230 8'O 40 20 Koreo I.230 1.4 10 540 680 - - Jopon 4,870 6.0 - 2,660 2,110 70 30 1983 United Kmgdom 3,130 38 60 1,410 1,290 90 280 Broid 2.560 3.1 320 740 1,240 80 180 frorxe 2,120 2.6 60 1,490 410 110 50 West Germany 1,920 2.3 - 440 1.280 180 20 Meuco 1,550 1.9 260 380 860 10 40 Korea 1,340 1.6 - 740 600 - - Venezuelo 1,230 1.5 140 220 780 70 20 lioly 1,220 1.5 20 770 370 50 10 Conodo 970 f.2 10 400 470 60 30 Nott Cross.8ords outstondings are de6ned for this purpose to mclude: Toeollcr. ins ( ncludeg cKcrued eterest), occeptances, interbank ploangs, other mierest-beenng invtstments, and any ott.or monetory assets denominaied n dos ori or other non-local currency. Govenment entities that are maionty-owned are dossified by type of borrower based on the industry of she busmess enterpnse. Because of slowing growth m the industnolized countnes, porticulody the The following table presents those countrics a which Chose had cross border outstondings of between .75% and 1% of its total assets o, United States,and dechning commodity prices, exports from the heavily-indebted developing countnes showed littie tendency to increase in 1985. y:or end 1985,1984 ond 1983. There was thus some reduction in the overall trade surplus of the heavily-Cross Border Outstandingi 8etween .75% and 1% of Total Assets indebted developing countnes lost year.The flow of new bank credits to these countries also dedined.To oddress this situation, of the joint onnvol December 3I.
***hng I the International Monetary fund (IMF) and the International
($ in mistiona 1985 1984 1983 Bank for Reconstruction and Development OBRD), the U.S. Government
.75% Through 1% Ronce- $655 to $880 1650 to $8/0 $610 to $820 proposed a Program for Sustained Growth,on inihotive oimed at strength.
Countnes Korea Argentmo Argenhno ening the international debt strategy to acnprove prospects for growth in the indonesia Austrolio debtor countries. Y Dnk,"o Throughout 1985, Chose continued its close cooperation with the inten ti n I bonhng community.the IMF,the IBRD and other multilaterol Total Outstanding $s40 $2.250 $2 810 organizations in addressog the debt service problems of latin Americon and other countnes the recent U.S inihotive is aimed of consohdoting the of forts of each of these porties with those of both creditor and debtor coun-tnes in building stronger economies and aiding in resolution of debt service dilliculhes. Desp te the dose cooperchon and elforts to resolve these payment dilhculties, os long as uncer tointres with respect to these countnes remom.st ts posvble that odditional amounts of Chose's cross-border out-stond ngs could be placed in or returned to o nonaccruol status. The following section discusses recent developments in the principol rescheduling countnes in whgh Chose hos cross-border outstondings exceeding 1% of its total aswts 34
Brazil Mexico At December 31,1985, Chase's cross-border outstondngs in BrozJ were At December 3L 1985 and 1984, Chose's cross border outstondogs in Men-opproximately $2.8 bilhon, including extensions of credt to pubhc and ico oggregated opproxmotely $t7 bJhon. included m this omount were privare sector borrowers of opproxwnotely $t7 bJhon and $10 bilhon, extensions of credt to pubhc and pnvote sector borrowers of opproxanotely respectively, compored with $1.5 buon ond $1.2 bJhon,respectively, at $t3 billion and $400 milhon,respectively. December 31,1984. Approximotely 17% of Chose's Brazilion uoss- Multi Year Debt Restructurmg ogreements have been entered oto and border outstond ngs at December 31,1985,was related to shor -term signed for Mexico and encompassi o) on omendment of the 1983 $50 trade financing. bJhon new money Credt Agreement with Mexico and a prepayment of $l2 At the request o' the Centrol Bonk of Brazil, international cornmercial bJhon pnncipal amount (Chose shore $30 milhonllooned thereunder, b) the boris agreed to ex tend the term c! the $98 bJhon (Chose shore $371 multryear restructure of motunties of Mexican public sector debt to com-milhon) foality for trade finance and the $14 bJhon (Chase shore $118 meraal banks folhng due in 1985 through 1990 (approximately $20.1 bJlion), milhon) of interbank deposits, which were port of the 1984 financog pock- c) the extension of the 1987 through 1990 matunties (approximately $23.6 oge, through Januory 171986.The Centrol Bank of BrazJ olso odvised bJhon) under the existing res'ructure agreements negotiated in 1982 ond d) niernationd commercid banks of intenm measures it pl aced n eIfect with od iustment of interest rotes on the restructured debtThe elfact of the Debt respect to commercial bank cross-border medum-term debt maturmg of ter Restructunng would be to reduce the amounts of matunties folhng due January I,1985, up to and includng January 171986. Borrowers were dunng 1985-1990 ond to estobbsh a more manageoble amortization sched-instructed to deposit the crureiro equivalent of pnncipd payments f alhng ute beginning in 1986 and endng in 1998.The documentation necessary to due dunng that penod in the Centrol Bank of BrozJ Subject to poyn ent unplement the Debt Restructunng was completed and signed but has not yet being modo, the Centrol Bonk has opened interest-beanng, U.S dollar become ef fective. denominated, deposit accounts in the omount of the pnnc pol motunty in in March 1985, prepoyfrent was mode of $250 mJhon (Chose shore $6 favor of the lender and gueronteed by the Federal Repubhc of Brazil million) of the amount loon +d under the 1933 $10 bJhon new money Credt Tha Bank Advisory Corrm.fiee for Brazil and the Brazilian outhonties Agreement with Mexico os omer ded in U8iln October 1985,of the continued to discuss the possible terms pertorning to the restructunng of the request of the Mexican Goverrnent, paytent of the remaining $950 rrdlion 1985 morunties as well as new trade and mterbank focJ. ties. Whde progress balance (Chose shoro $24 rnd!.on) was extended for six months. hos b:en mode,ogreement wcs not reached before the espiration of the The interest rote odi ustments, whgh are to be eIfective retroactive to int:run measures descr, bed above. On January 18,1986, the Government of January I,1985, wdi result in a change in the interest rote on Chose's Brord and the CentrolBank advised the Bank Advisory Committee of on opprommately $930 mJlion shore (of ter the estrnated remaining pre-prension of the obove oter m arrangements to cover medum term debt payment of opproximately $24 mJlion)in the MultnYear Debt Restructurmg. matunng on or of ter January 18,1986, and on or before March 15,1986,and Appronnnovely $665 milhon of Chose's shore currently corries a weighted r: quested its cred for banks to continue to maintain trade and deposit overage spreod of approximately 1 %% over the prevailing pnme rate outstondngs of the levelof ther previous commitments.The Bank Advisory and opproumotely $265 mJhon currently cornes a weighted overage Committee,of which Chose is o member, supports the continuance of spread of approximately 'W% over the london Interbonk Of fered Rote thess antenm arrangements and hos requested the international banking (llBOR) followmg the restructurmg, the estincted weighted overage spread community to do hkewise. on Chose's $930 milhon shore wdi be opproximotely 'W% over llBOR The Bank Advisory Committee and the Centrol Bank of BrozJ will prepare for 1985, and Chose reported total income on its shore on that basis in 1981 o proposd to be sent to di credtor banks before March 15,1986,encom- Under the terms of the restructunng, this estimated weighted overage possing the restructure of the 1985 matunties and arrangements for the spreod is scheduled to increase over trne to 14% over llBOR m 1992 interim deposit of 1986 matunties (both of which may eventually be included through 1998. in a multryear debt restructunng) and maintenance of trode and mterbank A 1984 $3.8 bdhon commerc of bank loan (Chose shore $100 rnillion)is not focdifies thrc,i yh 1986.The Government of Brazil and the Centrol Bank have included n tho MulteYear Debt Restructunng agreements. Dunng 1985, Chose dso requated that interest rates on the 1985 and 1986 intenm deposits be loaned the remaining $26 mdhon of its shore under this commitment at a od i usted retroactively from the oflective date of the restructunng through spread of 1% over pnme. Janvory 18,1986, to reflect the mterest rotes eventudly ogreed upon for the Dunng 1985, Chose's cross-border outstandngs to pubhc sector borrow-r: structured debt provided that a specific proposolis issued to the inter. ers in Mexico were subsiantially unc honged of oppreximately $1.3 bJiion notiond banking community by Marc h 15,1986, and the t such rates are and were current as to payment of pnncipol and interest Chose reported sp:cified mit opprommately $129 milhon as income on such outstond-ngs for the year in i?81 Chose reported totd income on crostborder outstandngs to ended December 31,1981 Dunng l981opproxrnotely $139 mdhon in enter-Brorihon borrowers of approximately $342 mdhon. Dunng 1981 est payments was received in cash. In 1985, Chase received minemol opprom anotely $345 mdhon in interest payments was received in cash. pnnopal repayments on cross-border outstondngs to Mencon pubhc No rnatend pnnopd payments were received donng 1985 on cross- sector borrowers. border outstandngs to Bratihan borrowers other than opproximately The amount of Chose's cross. border nonaccrud loons to Mencon pnvote
$250 mdlion pursvont to the interrn depout arrangement descobed above. sector borrowers was oppronrnately $123 mJhon of December 31,1981This The amount of Chose's cross border nonaccrud loans to borrowers in amount is wxluded in the table on page 37. The negative impact of such Bro 2A of December 31,1981was approxanotelf$7 million.This amount is nonaccruol toons on Chase's not income was opproumately $2 milhon of ter included in the table on poge 37 The negative ""poc t of these nonoccruoi tones for the year ended December 31.1981 foons on Chase's net income for the year ended December 31.1981 In koht of continuing uncer tointies regardng Mexico,includng condtions was insupfscont c urrently prevading in the world petroleum markets,it is possible that addo In hght of continuing uncertointies regardng Broril,it is possible that tional amounts of Chase's uoss border outstond ngs to borrowers m Menco oddtional omounts of Chose's crospborder outstondngs to borrowers in could be placed in nonaccrud status.
Brasil could be placed in nonoccruol status. 35
Venezuela Argentina At December 31,1985 ond 1984, Chose's cross-border outstandings e At December 31,1985, Chose's cross-border outstandings in Argentino Venezuelo oggregated oppromanotely $13 bAort included n that amount aggregated opproarnotely $920 million, compared e ith $845 mAon wer3 entensions of credit to public sector and privote sector borrowers m 1984. included in the 1985 omount were extensions of credit of opproxi-totohng opprommately $900 mAon and $400 m il on.respectively motely $600 mAon and $300 mAon.respectively, to pubhc and pnvote . The Government of Venezuelo and the Bonk Advisory Committee of sector borrowers,compored with $530 r-Aon and $300 mAon at Venezuelo cornpleied negotiation of the terms of restructunng agreements December 31,1984. Approx motely $333 mikon and $125 milion respec-covenng the proposed restructunng of approximately $212 billion of fively,of pmopd matunties owng to Chose from public ond privote sector V:nezuelon pubhc sector debt.The restructunng ogreements coli for a borrowers would be rescheduled under the Argentme Repubhc 19841985 down payment of oppromimotely $750 mAon (Chose shore opproximately Financing Plan (Financog Plan).
$26 meon) and the restructonng of oil motunties folhng due between March The Finanong Plan was signed in August 1985 ond provides fon o) o new 22,1983,and December 31,198aThe remainog opproxirnately $20.5 billion ten year $3.7 buon term credit facihty and $500 million four year trode pmopol would be repaid over o 12 year penod endog on June 30,1997 and deposit focihty (Chase shore $129 meon and $18 mil l ion,respectively).
The restructunng agreements have been distnbuted to the international b) the restructure of pmopol motunties of pubhc sector debt originally boriing community Approximately $800 million of Chase's cross-border falling due durog 1982 through 1985 over o 10 to 12 year penod (Chose outstandings to the Venezuelon public sector would be restructured under shore $333 mAon).c) the restructure of motunties over a ten year period of shew ogreements.The restructured proopd will be repored on the elfec- private sector indebtedness onginolly due in 1984 ond 1985, together with tiva date of the restructunng and the elfect on Chase will be opproximately certom 1982 ond 1983 motunties not already covered by existing ogree-os follows: rnents (Chose shoie $125 moon), d) committed one-year foc Atees for trade finonong (Chose shore $20 mAon) and el one-year agreements to maintain Pnnopol Amount Average Interest Rote
- Interest Rote mterbonk outstondings l Chose shore $53 million).
($ in m.llions) Before Restructureg Alter Restructunn9 The pnnopol to be restructured was repriced under the Financing Plan Pnme plus 2 61 % and the eIfect on Chase was opprox.motely as follows:
$600 llBOR plus 1.125%
200 llBOR nlus 1.29%
"'"""""" Prmcipal Amount Averoge Interest Rote ? Interest Rote
" At December 31,1985, we 0h ted by pnnopoloutsionchng gg m m,ii,onsl Before Restructunng Alter Restructurmg At December 31,1985, Chose's cross border Venezuelo pubhc sector If $80Rp,,
llBOR plus 1.375% loans were current as to paymer t of pnnopol and interest.The followog table compares the amount of intnrest mome reported in 1985 related to the UAt December 31,1985, weighted by ponopol outstond ng. precipal to be restructured with that which would have been repor ted on a pro formo bous had that procipal been restructured as of January 1,1985 On September 30,1985, the Argentme Centrol Bank repaid the $750 mAon (Chose shore $29 million) which was outstondog under the 1983 $1.1 ($mmitt.ond buon bndge loon, which was guaranteed by the Republic of Argeritino, and Pnncipal Actual Pro formolnterest drew down $1.7 bAon (Chose share $59 mAon) of the new $3.7 billion to be Interest income income AccruolBasis ten-year term credit foolity and all of the new $500 moon (Chose shore Restructured Reported Alter Restructunnq $18 mAon) four year trade and deposit fochty An odditional $800 m ihon
$800 $eo $77 (Chose shore $28 million) was de bursed under the $3.7 bAon ten year term credit foolity in the fourth quor ter of 1981 Chase repor ted total ocome on cross-border outstondogs to Venezuelon Other than the $ 29 million repaid by the Argentine Centrol Bank under pubhc and private sector borrowers of $136 mAon for the year ended the bodge loan, Chase received minimal pnnapol poyments on c ross-December 31,1985 Of that omount, $86 meon related to the poncipal to be border outstond ngs to Argentine borrowers in 1981 restructured Dunng 1981 Chase received $141 meon in interest payments in cash on c ross-border outstandogs to borrowers in Venezuelo. Minimal pnn-cipol poyments were received durog the year ended December 31,1981 The amount of Chose's cross border nonaccruolloons to pnvote sector borrowers in Venezueio was approximately $200 mAon at December al,1985, compared with $95 million c: December 31,1984 This amount is aluded in the toble on page 37. The negative impact of such nonaccruoi loans on Chase's net income for the year ended December 31.1985,was opproximately $4 moon of ter tones.
In I ght of continuing uncertointies tegarding Venezuelo, including conds-tions currently prevoAng m the world petroleum markets it is possible that additional omounts of Chose's cross border outstandings to borrowers n Venezuelo could be placed in nonaccruol status. 36
i Dunng 1985 Chose's cross border outstandings to borrowers in Argenhno The followog table sets for th the distnbution of nonoccruol and reduced increased opproximotely $75 muon. Chose reported totalincome on cross- rate loans based on the domiciles of the obligors. border outstandings to Argenhne borrowers of $116 million for the year ended December 31,1981 Of that omount. $59 meon of interest income Nonaccruoland Reduced Rote Loons (including $10 mAon ofpost due nterest opplicable to the prior year) December 31 reloted to pnncipol to be restructured under the Fmoncog Plon.Dunng 1985, l$ willionsi 1985 1984 1983 1982 19 81
- Chose received $118 rnillion in interest payments in cash on cross border outstondings to Argentme borrowers. Dometimons.
The following table compares the amount of interest mcome reported Red Estore loans-- $ 199 $ 174 $ i33 $ 64 5 64 m 1985 refored to the pnncipal to be restructured with that which would loans to Fmonad have been reported on o pro formo basis had the poncipd to be restruc- 'n5htuhons 7 7 7 45 37 C d tured been on a full occruol basis in 1985 and that which would have been reported had that pnncipal been restructured as of Jonvory 1,19852 othe,toons 17 17 19 9 3 Total Domestic l$ in millions) toons 774 738 790 551 326 Prmcipal Actud Pro Forma interest locome Internohonalloons: to be Interest income Assumingfull Arcruol80ses Red Estateloons 51 65 89 116 65 Restructured Reported Before Restructuring At ter Restructurog toons to Governments and Of had
$458 $59 $49 $45 Inshtuhons _ 93 170 26 7 9 Loons to Banks and _
Crostborder nonaccruolloons to Argentre borrowers decreased by Other Fmonad
$410 mAon to opproximately $155 mAon at year.end 1985 from $565 inshtuhons - 104 87 68 77 25 mAon of year end 1984. Commerod and bnoccruolloons to Argentine borrowers are included in the occom- Orh a pony ng table.The decrease m cross. border nonoccruolloons reflects the $ 29 rnAon pnncipol payment in Septernber and the approximotely $380 I '$'n" '*" ' I.231 I.397 979 666 319 mAon of loans to pubhc sector borrowers which was returned to ocerud -
status in the fourth quorter of 1981The remaining opproximotely $155 Total Nonaccruol Loans $ 2.005 $ 2.135 g $1.217 $ 645 rnAon o cross-border nonoccruolloons is to Argenhne pnvote sector bor-rowers.The impact of nonaccrud loons to Argentine borrowers on Chose's net income for the year ended December 31,1985,was insignificant. In light of conhnuing uncertointies regarding Argonhno.it is possible rhot December 31. odditional amounts of Chose's cross-border outstondings to borrowers in [$ in m.flons) 1985 1984 1983 1982 19 81 Argenhno could be placed in nonaccruol status. Reduced Rote Loonu Domeshe loans i7 $ 25 $ iO9 $ i5i NonacCrual, Reduced Rote tj,'7,L no"l,,- $ 4 $ and Past Due loans insh'eh-s 7 i 54 6i 59 Commeroof and industnd toons __ 19 9 7 1 37 bnoccruolloons,on which interest income occruols have been suspended, ond reduced rote loons, on which mierest encome is accrued of a rote lower than that onginolly contracted,fotoled $2.0 boon at year end 1985 and I N * 30 m-27 86 171 summmmu amm - sm - 247
$2 2 buon at year end 1984. Nonaccruolloons attnbutable to internahonal In'ernahond loons:
lending octivities. primonly m lotin Amenco. decreased $166 mAon. por. Red E sto'e bns _ - - - 6 - I holly of(set by on increase of $36 million in domeshc nonaccruolloons. "$f5al ona Cross-border loons to Argentine publ.c sector borrowers of opproximotely Inshtutens_ ~ I - l7 15
$380 rn liion were returned to occruol status in the fourth quarter Commeroot and
'"d"" I I" "5 -- - 4 15 16 -
d1985 Chose's pokcy is to disconhnue the occruol of interest income on loans. Totd internatend I "" -- 5 other than consumer loans,where reasonable doubt exists os to t mely y cdlectibility, or il payment of principd or mterest is contractually post due Total Reduced 90 days or more and the loon is not well secured ond in the process of Rote Loon $ 30 $ 32 $ 101 $ 2I0 $ 262 collechott Post due consumer loans are generally charged of f according to To o u " on established dehnquency schedule which does not exceed 180 days. .u7dRoYeLoons $ 2.035 $ 2167 $ 1.870 $I.427 $ 907 mm - - ammme
-os a % ol toH loans 33% 35% 3 34 26% 18%
mumumm summe mummme - ammmma 37
The decrease in the negative impact of nonoccruol and reduced rote loans for 1965 compared with 1984, as set for th m the followog loble,resulted pnmonly from lower interest rates. Negative Impact of Nonoctrual and Reduced Rote loans Totalloons Domestic loons Internationallon-s ($ in m!!>ons7 1985 1984 1985 1984 1985 1984 Interest income Which Wouid Hove 8een Recorded under Ong nolTerms _ $224 $278 5 83 5 85 $141 $193 Interest income Actually Realaed - 105 122 18 21 87 101 Reduction m interest income: Balore ApplicobleTomes $119 $156 $ 65 $64 $ 54 $ 92 Af ter ApolienbleTones 58 76 32 27 26 49
- ummuuumme Accruing loons which are contractuolly post due 90 days or more ore Accruing Lo ns Past Due 90 Daya or More December 31, loons whch are both weR secured or guoronteed by financially responsible ($ = m4ons! 1985 1984 1983 1982 third porties and are o the process of collectiort The omount of occruing Dometic loons $I36 $ 93 $ 60 $ 86 loans post due 90 days or more of year end 1985,1984 and 1983, including in'emcwonalloons 75 99 75 It3 $113 rmfl on, $68 m.thon,and $43 milhon, respectively, of consumer loons,is Total Accruing Loans Past Due pr:sonted m the occompanymg table. 90 Days or More $211 $192 $135 $199 summe - ummme Chose's policy, setor to that of most maior bank holding componies,is to The net elfect on earnings for the most recent five years resulting f rom discontmue the occruol of interest income on loans os to which reasonable operating expenses, net of related mcome, with respect to real estats doubt exists with respect to the timely collectibility of intetest or pnncipal properties acquired m satisfaction of loans ts presented in the accom.
Where there are "senous doubts" os to the obelity of the borrower to ponyrg table: comply with present loon repoyment terms, such loans also are placed m nonoccruol status.With respect to loons which are current as to payments Real Estate Properties Acquired in 5atisfaction of Loans of pancipal and mierest but have o somewhat higher than normal nsk l$ in m,il,ons) 1985 1984 1983 1982 1981 of becommg nonoccruolor reduced rate in the near future, Chase would Direct Operohng estimate such loans os rotoling opproximately $270 mdhon,or .4% of E spenses Reported totalloons, of year-end 198$, compared with $ 205 million, or .3%, at year- m other E ipensei __ $12 $18 $ 18 $ 15 $ 15 end 1984. At December 31,1985, oppromirnately $185 million of these loons income (Net of Wnte. was owed by domestic borrowers and opproximately $85 milhon was owed d o,*"j",',P ','l,d 14 25 - - 161 by mternational borrowers. in addition,in connection with the acquisition of troubled ihnf f institutions (formed mio Chose Maryland), opproximately I"'{P'"S]'h,,,
,g p)p
$l13 mdhon of investments in ond odvances to real estote related entdies was Acquired, Net of ocquiredihese transactions were recorded of estimated net realiioble Retoted income 2 7 (18l 11 5) (21) volues of date of acquisition. Consistent with post expenence, Chose incomeTom (8 neti __ l 4 (91 17) i1 01 onticipates that some loons m nonaccruol or reduced rate status at year- Net Af ter Tam income cod 1985 will be returned to occruol status or be repaid m 1986. As shown below,real estate properties ocquired m satisfaction of loons' (Im pan 5*) J J gl gl gl In odddion,opproximately $43 milhon of other assets was ocquired m which are ocluded in other assets, increased $10 milhon,from $90 milhon of satisfaction of loans dunng 1985 compared with $7 me t hon in 1984. Opero. year end 1984 to $100 milhon or year end 1985 tog en enses net of mcome earned from these other oswts had a negL geble impact on netincome. Analysis of Changes in Real Estate Properties Acquired in Satisfaction of loans ($ m mini,onsi 19 8 s 1984 t983 1982 1981 [OOn COnCOnfroliOnS Balonce at Beginning of Year $ 90 $70 $103 $ 84 $136 On a global bovs no single industry Group's ogspegate borrowngs from C d'htie Chase exceeded 10% of the totalloon porifolio of December 31,1981 of Acqwred Subudinnes 3 24 - - - foreclosures. Asset Swops and Other, Net 47 76 23 57 9 Advances 1 5 - - 3 Decreases: Dispos.'ons and Wnte.dnwns _ 41 85 56 38 64 Balance nt End of Year $100 $90 $ /0 $l03 $ 84 ! mummme mummmun mmmme um mummmum 38
lnvestment Securities Net goins from the sole of ovestment secunties mcluded e nonlee based respectively See Note 4 of Notes to finonool stotements for odditionci income,were $98 million pre tox l$49 mellion of ter tomes) m 1985, up sub- information on the investment Secunties Portioho. stantially from $17 rnillion and $25 moon pre ton ($8 million and $11 million The following table presents the carrying solves, eshmoted market values of ter taxes) m 1984 and 1983, respectively Induded m the 1985 sales of and yields of mestment secunties of year end 1985,1984 and 1983. ovestment securities were pre tax gains on U S. Treasury secunhes of Average balances, eterest mcome and overage ir perest rotes earned for
$67 mAon, compared with $9 million and $16 mAon in 1984 and 1983, the post three years are presented on pages 68 ond 69 investrnent Securities of December 3L 1985 1984 1983 Af ter i Alter 5 but but Within Within Within After
($ in inittiomi I Yr 5 Yet 10 Yrs 10 Yrs total Total total U.S. Treasury Corrymg Volue $ 46 $ 1,389 $400 $ 4 $1.839 $ 1.735 $ 985 Morks volve 47 1.446 410 4 1,907 1,748 983 Yield ___. 10 91% 9 88% 91 t% 7 56% 9 73% 11 11% 11.60% u- nummuumus musummumm - Federal Agency Corr ying Valo. $4 $ 263 $ 38 $ 2$ $ 330 $ 193 $ 153 Moht value $ 212 38 23 338 193 137 Yr kJ _ _ _ _ II 21% 9 85% 10 03% 10 27% 9 92% i1.58% 953% _. mummmmmmmuu sumumma sumummmme amummmme summmmum um- - State and Pohtkal Subdivisions Con ymg volue $228 5 592 1429 $ l,161 $2.410 $2 iO3 $1.583 Morkat votve 225 592 424 1.051 2,292 1,863 1,316 Yelif._ _ _ ___ _ ___ ____ _ 10 41% 1235% 1184% 14 25% 13 35% 1460% 1326% unummmmmme e- - Other Bonds, Notes ond Debentures Corrymq volue $433 $ 688 $224 $ 64 $1,409 $ 1,071 $ $87 Mmket value 423 692 231 57 1,403 1,057 553 Y.id_-. _ _ _ _ _ _ . _ _ _ 9 89% 815% 9 92% 8 72% 8 99% 8 89% 9 62% mummmmum nummusums um- um. - Nuta Intere9 mome es od ioved for omortuotion of premium and ouresion of dn<ount and dmded by total carry ng value to denve the yields Yields are stated on a tomoble equivalent bows,opply;ng a combined lederal, state and lotof los rote of oppronimotely $1%, $9% and 60% m 1985,1984 and 1983.rmpettively The annualised forble equivalent od ustments i for the four motunty tonges shown obove ore oppronimately $10 miltion, $ 33 m llion, $28 mAon and $77 million,respectively Avernge bfe for 1985 -7 years and 2 months,1984 -7 years and 8 months; 1983 -8 years und 2 months. Induded in the cophon $ tate and Political sibdivisions are ovestments E mcept for secunties of the U S. Government and of New York City and in securihes issued by New York Store, New York City and their related New York State, including their related agences and independent authon-ogonoes and independent authonties with carryog values fotoling $613 ties, there was no individualissuor whose mestment por tloho secunties mAon and $800 million at December 31,1985 and 1984, respectively exceded 10% of Chase's Preferred Stoc k and Common Stockholders' Th2 motunties and estimated market values of such New York obligations Equity of December 31,1985. beklin the investment por tloho of December 31,1985, are set forth in the in 1982,the Company made o $50 million oggregate ovestment in followmg table preferred stock of Equimonk Corporation and Equibonk whichit corned m its mvestment porifolio The ovestment ocluded on option to acquire Equibank, New York investment Securities o Pittsburgh based bank domg business primonly in western Pennsyhunio. corrvenn votue in 1985, the Company disposed of its mvestment m proferred stock of y ,,, , Equimark for $ 25 million, torminated its option to ucquiee tquibonk. ogreed but hteased to o revision of the terms of its $25 million investment in preferred stoc k of Within With n Af ter Market E cpbank to make it nonredeemoble and received $2 mAon m cash and {$ in manml I Year 5 Years 5Yems fotal Volue olso worronts to acquire 49% of Equimork's conwnon stock. Municipal Assoforxe Corporabon - __ $- $- $269 $269 $295 Securit.es hsved or Guaronteed by or OtAgateng Now York City 5 12 55 72 $$ New York State and Imancially Related Agees 55 18 145 218 182 Reenue Obigotions of Irependent Authorities _ ~ - _ 3 11 40 54 4/ Total 163 $41 $509 1613 $V9 summmum summus am m um am e 39
lnferest Bearing Deposits Domesti. Noninte,est.8..,ing D.posi,e Placed with Banks Dece*- at Dow-e-l$ c m.fl.omi 1985 1904 1985 1984 1983 Chow piores depo 9ts wdh other bonb s, prmipolly of overseas of fices, Orm%nintee e9-pr unorJy for 5 ornings and liquidty purposes interest earned on thesa Beanny Depmos - $13.500 $ 11,149 $9.822 $8.843 $8,731 depouts decreased 37% from $769 rnJhon in 1984 to $486 mdhon m 1965, low Due from BA prananly due to o decrease in the overage interest role earned from it03% Np, $['" to 948% and a decrease m the overoge bdonce of $19 bdhon from 1984 Collection 4.I14 2.901 7.864 2.870 3.015 Y;or-end 1985 depoui bdances plo(ed *dh bankiincreased by oppromi-Net Domestic tr.otely $300 milhon from the year end 1984 level of $44 b41on,The idlow- Noninterest-ing loble prewnts the matunty dstributon of over eos depout placm05 at Bearing Deposits $ 9 3R6 $ 8 248 $6.9 58 $ 5.973 $5 716 December 31,1985 ond 1984 " " """"
%Iudes appronnnovely $635 mann m 1985 ond $375 m.It.on m 1984 ei nverage Over seas Interest Beoring Deposits Pfoced with Bonh a Time memoining to Moturity Ahhough cmh dems in the process of collection ore reflec ted on o net D'" "*" 3L bom o the procoang table, suc h items are ecluded os ossets and habihties l$ in maom) t985 1984 in Chosei financid voternents on o Oross bovs. In recent years, there hcs 3 Months or less - $3.700 $ 3,300 beten considenhle dscuwon between the maior bankog nstdutons and Over 3 through 6 Months 600 800 the occounting profewon wdh respect to the hivoncd proctice of treatog f[ iou,hi 00 cash items m the process of collection onsing from cheds credred to depo $ dor occounts (termed "depout floot"l os on osset and liobihty even TotolOverseosinterest Bearing Deposits Placed with 8anks $4 500 $ 4,300 though such cred4 ore condmond upon the collection of the cheds. Chose
- ummme n of the opnon that tho histoncol prochte should be changed to provide for the reclassili cation of depout floot os on ofIsot ogainst depositt Chme beheves there is 9rong suppori for this pothon m both the bankog commu-Deposits nety and the oc counting profewon ond, therefore. .s hopeful that the oppro-pnote occountog und regulatory rule molog bodes wJIreview this motter Depouts reprewnt Chosei prnipal source of fundi Chmei depout bme in 1986 The nettog of dommtic depout float would have reduced Chowi conuts of demand deposds,(orhficates of depout, savings and money total mwts of December 31,1985,by opprovirnatul y $3 0 bJiion3 Chase market ouounts and other t.me depoSn fotof depouts wern $614 bJlon at netted deposo floot, ds year end 1985 pr vnory capitol to lotd gross ossets Decemtwr 31,1981 compared *dh $ 597 billon at year end 1984 Total ratio would have been / l 1 % rather than 6 87% ond its return on overage deposds overoged $60 2 bdhon for 1985,on wxteose of $16 bilhon from the msets would have been .67% rather than .65%.
1984 ovmoge foto dome 9ic depovts areased appronmotely $3.7 bJiion the balances and matunty dstobunom of cor blicates of dopour and Ine year.end 1984 to $326 bdhon at Det ember 31.1981 praipaly due other nme depouts m denominations of $100.000 or more ore presented in to o sub9antialincreme o enoney enork et deposas and other deregulated the idlowog table. depout accounts, Another lactor contnbuhng to th<s n rome was the O(qui. sit on of brKoln, accompanied by the subsequent promohon oct vihes Moturity Distribution of Time Deposits of $100,000 or More begun,in 1984, for Chowi ond locolni downuoto Now Yor k bronch net-Duomb- 31.198 5 worki These events have enabled Chme to increase the balance of ds re nh. Oiher money market onounts and deregulated cor hficotm of deposit to $124 cates of Time boon of year end 1981up from $112 bdhon and $6.7 bJhon of year.cnd q$ an mitt.omi Denmd Denm.ts forni 1984 and I?83, respec tively This rapid grow th m dmequio'od consumer come,nc o,y . depouts has wremed the pobJdy of Chosei overdi depout base $sn(e 3 Mon hs or (ms . $ 2,790 $ 1,310 $ 4,100 year end 1983,the growth in thme depouts prenorJy represented now funds Ove 3 through 6 Months . 410 80 490 for Chase fotof domeshe deposit bobnces oyeroond $281 bdhan for 1981 compared wdh $24 3 bJhon for 1984 Chose s overage overseas dopmds
$*' fyh'
, y "[,12 Months _ _
pg] g dnc reawd from $ 34 3 bJ!.on in 1934 to $ 321 bJlion in 1985 0verwm depovts were pomorJy m omounts in en esi of $100.000 and reprewnted fotot Domestic olh<es g$W g totos o,e,seos ornees s 7 i 30 $in of o $20140 depouts te(cived pon(ipdly from (orporof e and m9.tuhonal eupomers " " 8MM'E 1 40 1 l
Funds Borrowed Fourth Quarter 1985 runds sonowed gruipoiiy ociode lederoilunds purchased. ,ecurihes soki "b U under repurc hase o0reements, commerc ial paper, term federal funds. notes Results of o erotions for the fourth quorvers of 1985 and 1984 ore shown m payoble, ocluding notes repoyable of the option of their holders, and notes g rediscounted by oveneos oflicet funds borrowedin 1985 overaged $114 bAon,down 60% from $12.6 Fourth ouarter inded December si, bAon m 1984. Domestic overoge borrowogs decreased 12%, pnmonly P en due to o decrease m lederal f unth purchosed and sec unhos soki under ;g ,n mung g9g3 ,qg, reporthose myeements, down oppromimately $526 million to on overage of $4 6 bAort Neunteepinc nw - $/33 $m 12% Provevon for Powbie toon losses . I25 90 39 funds borrowed m oveneas oflices overaged nopeonirnately $1.4 b.llion o,he, Ogm,,ng im ome 381 265 44 c 1985,up from $1.3 bAon in 1984 The avorogo nderest rato poid on these Other Op-anno tipensn . 744 630 18 borrowngs was 22.74% m 1985, compared with 2097% in 1984 The m. Inm** *as ---- 91 79 20 ctros) of 177 bous points in the overope rote paid m 1985 reflects the Notincome - _ __ . _ - . - %i$l $I20 2W c;traordinonly high level of local eterest rates prevailog m cor toin South Amene.on countnet f ur ther oformation on Chose's borrowingus presented n yNA~- m Note 10 of Notes to financial Statements, Other Borrowed Money w notami rouis . _ . _ ._ i44% I4% The followng tuble summonies federal funds Purchased and Seconhes - - Sokf Under Repurchase Agreements,CommercialPopor of the Company andTerm f ederol funds Purchosed in 1985,1984 and 1983. Consolidated net wome for the love th quor ter of 1985 was $151 million, compared with $120 million for the fourth quor ter of 1984 ond $149 mAon Selected Funds Borrowed for the third quor ter of 1985 in comparison with the four th quor ter of 1984, four th quor ter 1985 cornings oduded inc reased not inforest income and ($ in milhong 1985 1984 1983
"" N Fidmul hnh Purchased and Secuntim 9" P'*' son for ponde nbun Su'd Under Rwur(hme Agreements "P""'" U"d 0 Bukne oilnd of Pwiod -__ $4. I 32 $ 4.480 $3.74i Not ofere9 ocomo on o tasoblo erpvolent bous for the four th quor ter Do tv Avemga Batonte Ountandng of 1985 was $79? milion,cornpored l with $724 mAon for the fourth qunrter Dunno Year _. - $4.804 $ 5.204 $6.116 of 1984 The mcrease in net orme9 nome m the Inorth quor ter of 1985 was (D r $6,108 onhoh h knph inwshow spmW 4 2Np V Any M i 3 $ 5.675 $8.223 D Sty A<woge Intend Ror's bm points from the 3.88% recorded o the fourth quorter of 1984 Intere9 Dureg Year __ _ 9 61% 10 $2% 9 07% corning onets overaged $74 6 bAon for the fourth quorter of 1985.
%,oge Intw.u Rote on Bokme compo,ed with $74 2 bAon for the fourth quarter of 1984, os l nd of bor . _ - , _ _ _ . I4 69% 8 70% 10 23% The 198$ fourth quorter proviuon for pon,ble loon tones was $125 CommernulPuner of the Company million, compored with $90 mAon for the lour th quor for of 1984. Net loan Bokn eottndefPmiod _ _. _ $ 3.3 52 $4.341 $ 4,157 charge of fs were $104 rnoon ond $59 mAon for the fourth quarters Dal BabrweOuwwdng of l985 cnd l?B4.respechvely Domenhc net loon c harge-of fs for the 3.163 $3 824 $3A36 Monimurn Balon(o Out9anding us of Iour th quorter of 1985 were appronimately $80 mAon, on mcreose of Any Month end Durmq Yeus --- $ 4.115 $ 4.849 $4.473 oppromsately $40 million over tho lourth quartev oll?84 Theincreases Dwty Avemos interest Rote e dorne9ic not loon charge ofis wero sub9annolfy ortnbutoble to
/w te #5 on BolAe~~ P""d'"9d *""'< (0"$"'"*' I""d'"9 "< h*'h"*
of ind ol Yaor . - - /83% 886% 9/w Other operatog income for the fourth quarter of 1985 was $381 mAon, UP b* ~ the $265 mAon eorned m the iome ponod of 1984 fca. letm iederalivnth Pur< hnel Bokme nt (nd ol Penod ___ $ 480 $ 184 $ 956 based encome wus %262 mAon. compared with $203 mAon for tho lourth Didy A<ernme Bokm Outvanong quorfor of 1984 f ourth juorfor 1985 fee bmed mcome in6ded ocomo DuregYaor $ 389 $ 680 $ 843 from true and Inivciory a(tivihes of $ 53 million.up 24% from the $43 mAon
** '" **"" P"" d 0 "" **""'b""""U**'
e _
$ 562 $ t ,107 $ 1. I 21 bank mq oc hvihen whic h increased 129% compored with the some penod Dody A,wnoe Intereo Rare Durog Yaor ,_._ _ _ _ 8 90% ii 17% 9 37% in !?84 foreign euhange teoding income was $ 46 million. compared with Averny9 Intee9 Rate on f%nr e $ 37 mAon for the fourth goorter of 1984 Profits from bond trading occount atInd ol W ar %
me re $11 mill Wo omd with $14 mAon for the fourth quorter of 1984 Inc luded in the four th quor ter 1985 orber operahng mcome was a
$23 mAon p,e-ton gain ($15 mAon alter toney from the sole of reoleCote ici japon Nr+t pre los goir% on soins of invedm ?nt se(urit es transo(hons woro $ 20 meonaompared with $6 mAon for the fourth quor ter of 1984.
Other operanno espemes for the four th quarter of 198 5 wee $744 rnAon,up $ll4 mAon,or 18%, compared with $630 r%Ihon for the fourth quoiter of 1984 Approximately $11 million of the fourth quoifor mcrease toloted to or quisitions c onsummated m the lotfor hoif of 198 $ 4l
Summary of Significant Accounting Policies ibe Chme Monhonon Corporof on and Sutmdmon Introduction Translation of Foreign Currency Financial n,e faoweg summmy d the ,gn,f 4 ant acountog pokim d The Osose Statements Manhatton Corporation (the Compony) and its subudom induday its ponopol subsidory. The Chme M ,chotton Bank, NA ond its subudanes Anets and hab Ahes of overwas entites are tromfoted mio U.S. dollors of the respective year-end exchange rotet income and empenses are trans. (the Bank),is pre ented to osmt the rooder in unduruandry the iconod lated monthly of prevoAng rate of exchange. satements notes thereto and other dato contoined m this repor t through. f meign enchange trondonon goms and loues rmulhng f rom the Cor. out this report, the term "Corporchon' refers to the Chow Monhotton
,,,n.s mv tments in overscos enhhes, eacept Ior those located m h ghly Corporation and as subudionet 4, onory economies not of related hedgag tronmchons and income ton General ACCountinq Policies """'" ** "'d"*d * 'h*9" d""c tly t the stakhdden,ty acount.
Fore on E xchange Translohon Adp9mentt f oregn eac hongo tromfation The Corporohon Idiows g"neralb orcepted accounhng preoples ond, goinmnd loum pm toining to entdim bmted m highly oflohonory econo. where oprA(obla, the accounhng ord reporbng guidehnm presuibed by nm me &cm n W nW be enMiet preman nd emp. the Sec untes and I nchange Commnuon and bank regulatory outhontiet met and the related deprecahon ond omortizahon thereof oro translated the Corporahon cornes di m,e8 and habAhes prmopolly on the hatc*nc of "h""9* ' '*' P'ev Ang ut data of ocquivhon. cost bmn ond folbws the occruol meihod of accountum Auen hehl by commerool bonhng subudor e and by trust and ovmt. Tradin9 Account Asseis ment odynory sulnidones e on ogency or fiduoory copocdy are not onets frodng occount ouets are valued at oshmated current modet pnces of th2 Corporation and, occudingly, ore not eduded m the occompanying obloohons to deliver sec unt.es sdd but not yet purchmed are induded in Iconool statementt Ac counts Payable, Accrued I s pemos and Other bobAhet Gains and Pnor years' iconod votements have been redouified to conform woh bum todiid kom trodng omt ooivihm and unrealized vduchon the current hnonod statement presentohont odpstments are repor ted nTradng Account Prohet Consolidation Policies investment SoCurities The uansolidated hnonod statements alude the occounts of the Company Investment secunhm me corned at (mt, odp9ed for omor hechon of pre-ond as subudanes, pnnapolly the Bank,of ter elenohon of motunal mte meum and ou renon of dst ount Premiums and d6coun% on investment company tronsochont sec unties oro omor hied or oureted, respec hvely, to interest oc ome on hetments m anocoted componies (20W50% ownership meerntf ore wwestment sec unhos uung the stroght4ng method over the penod to matur-wrned on the equity method of accounhng and reported m Other Aswes sty koil dates,il earlier, with respoo to premiums) of the related sec unnm. Ihn Corporchon s equdy mtere9 in the earnings of thmo ossoooted com. Intmet and dvidends on oveument secunhes are reported m Intermt pan.m and gains and losses rechied on Jnposaions of investmenton income. Gains and loues realised on sde of investment wcunhes me mmooted componin ore reported in other trx ome. gedy determined on the spoofic idennf g otion enethod and ore ie. Inymtmenn m companies whah are less than 20% owned are corned of portod in Invmtment Sec unhe Goem (tonm). (mt and are reported m federal Rewrve Bank and Other Stock Investments Co h dmdends received on these eveoments oro reported m Dmdend$ lnterest Rate Swap Contracts on Federd Reserve B,nk and oiber Stock inveoments Gains and losses realised on the dnpouhon of thew eve 9ments are reported in invetment the Corporohon generdly enforunto intero9 roto swap c ontroos to increow 5ecurites Gains (touest net overnt ocome and to generute fee mcome All yield related payments or rec e+ pts a soooted with mtorest roto saap contracts me occrued over the hfe of the contracts Arrangomnnt fem are reccynited in current mcome Interest Rote Futures The Corporchon use meere9 rate futurm contracts to manage os overd! insurc9 rate r6k e>posure Gains and loues on futures controos uwd for onet/liobAty monogement purposes are deferred and omorhied over the hic of the hedged auch or liabahm and are induded as odp9ments to interest income or interest es penw as appropnote Goins and knse on futures controos owd m conneoion wdh irodna Anount mtmtim are recogruled m corront mome by usmg the mmb to. mothet method of ouounteg. 42
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Loans Promisos and Equipment loons are reported of their prropol omount outstantling.not of uneorned Frenuse und equipment, endudng kmd, c.,e reporteht onginal cost less escount,il ony Interest income on loans not mode on a duount bom is ou umulated deprecohon and amor brahon lond is reported at onginol cedted to mcome based on loon proepal omounts outstondog of oppro- cou Depreochon is c hargod to opwotog empenses over the eshmated use-pnote mtorest rotos,uneorned dscount onloans mode on a dscount bom r fullims of the related onets loosehold improvements are omortired over uedted to mcomo on a bas 6 which results in oppron rnately level rotes the, terms of the respedive leases or the estwnoted useful hves of the vnprove-of return over the terms of theloons. menet whgheer are shot ter Depreciohon and amor titotion ore generally Indudad e loans are leoso finonongs which conut of deoct finanong computed on the straight.hne method and lisveraged looses. Intermt mcome on teoso finonongundvde the Maintona te, repoirs and minor improvements are charged to operatog os. iunt of ovestment ton cedts on dred financmg and leveroged leows capomos S :runed Maior improvements ore copdokred ornortired dunng the year.
.oc.ns on which the occruoi of interest hm been escononued are deig. IorO'gnjXChangoTrading inComo noted os nonou rvol loons. loons, other than consumer toons, are pkved on nonoscruoi 90tus if reasonable doubt emts os to hmely col!co.b4ty, or if t he Corporotion folhws the gnneml proctece of volving monthly as foreign payment of pnnopol or interest is contractuolty post due ninety days or o'ch(oge t ading posthom, edudoq spot and forword enchange contracts, rnors and the loon n not well secured and in the process of cdledion. Any at est muted c urrent modet eotes and repor hng the resultant profits or fones ourued but unpaid mterest previously recorded on such loans a reverwd m I*Nn Inchonge frodng Ic*oma agoimt current penod eterest ocome Interest income on norouruolloons is r: cognised subsequently only in the pened realized loans are retvined Pension Plans to on ourvol status when the collet hbAty of both ponopol and interest ihe Corporanon hm truveed, noncontnbutor y pension plans covenng on a twnefy bom ora remonably ouvred and all def.nquent proopol and
$E"""h"Hy oW twne and pmt brne ernpbyees Costs of the plant bawd oter:st a brought c urrent, or the loan becomes well secured and n the on aduoneomt s %hans of cunent and futee benef ts for employent are procen of collection.
Comumer loans are charged of f ogainst the resorve for possible loon **0"O P"*h' 'l"'P""$'S ""d ** G*oll4nded as ourued Poor 5"""' "^4 ""$'"O"inuwendnents to tl e plans me mna heed ovenho . s foam ouoidng to on euablished dehnquency schedula loans wh< h have been renegotiated for economic or other reasons
*1" b '* * '"' ' M"" "I P"' hop't relot:d to debtori Imanoul af hculhos to rates below thme whd the Corporonon would be willeg to ouept for new k ans wah compomble nsk Incomo IOXes .
ora deignoted as reduced rote loanslnteret on suc b loons is otrued at the Company und 6 to,n of duubadone file comokdared federol, New the renegohoved rotesJf remonoble doubt emts wah rmped to coiled" Yod State and Now Yod Cd y im n,turm Other subsidone file separate - bAty of oferest of the renegohoted rotet such loons are fromferred to non. dehdoni Wm mte as ened Applicabl., tones of the indviv ourual potut Where arrangements c oll for oddaionol rderest to be paid on vol(ornponin me genrolly determined on the bom J f Ar g separate o conhngent bon, suc h intere9 m not recognited unni deemed rechtable mtw Amounts te a paid or vedred woh re pod to current toses deter.
'"'"'d ' ' 'd"'" "* '"da """'d'd d '" ""' "' *" P"d '"
- Roscrvo for Possible loan losses rec mved from the Coropoqi I*"S*"'S T"I"' defe ad emes on tmmomons wt . h are reponed Th2 Rmerve for Powbfe loan tones is mucosed by prom ons chorund to for (concial Co*wnf pupmm kt dyerent yems dmn Ic ton purpmes crpanwsanddoucosedbycharge oll notof t recovenes hens ob i or nwne cn 3 ng defened ton promem odurk iep.e-The Provnion for Powbfo loan lonm is bo ed on Monagemenft evoluo.
tion of the odequoc y of the Resei ve for Powblo loon loues, whe h evnluohon
- h"" *d """ *" "I ' *D *" ""d '9"'P**"' " d" '0"9 encompones com doraton of pmt lou esponence or, i other Imfors,are
- PP'""d# d'h'b # # N " "* *""'"hS"I*"" ""d * '"W'#I (ludng changm in the compoubon and ydce ni ehe por tiob, the reletion. '"*P""*' P#
- I"' P'? "I M""" I"""'""d 'A'"'mt on nonornual h""'
ship of the rewrwe lo the porfloho and worldwide enoaomic conc +cs lu 9mee t toe ocats on ry enent ywr ed other than loow finanocq Real Estato Proporties Acquired *P'"*"' dd""* l *~""' '*"' *"* = W"o mm "I 'm
- t. . pen.
In Satisfaction of loans P;ol e9 ate proper bes ocquired in soinfocton of loont whg h nte repor tnd in Other Aucts me recorded of the lower of co9 or eveinted fair modet voluu on thov ocquadion dotes und of the lower of suc h inihol amount or current net rechioblo value thereof ter. Operahng e penus ol suc h pwper het net oi relatod incorno, ond gann and loum on ther dapmehon oro repor tod m Other iiponset l t I 41
e e Cordolidated'StEtement of Condition The Chase Monbanon Corporar on end Subud ones
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[ $ December 31
' ($ M thousands) 1985 1984 Assets Coa ordDue irom BorAs [/ '
$ 5,!74,055 4,671,048
$ 4,197,801 4,355,191 Interest 4 ao.,ng D po9ts Placed with Banks
' I,174,371 1,293,205 Fedorol fund; 5cid oed $ecuaties Purchased Under Resc.!s kyeerne'nts --
Tradinq Accognt Anots _ _..~ 1,344,495 1,354,571 Irwe9rt s'*/ :,unte U S.freusury Secunties , 1,839,207 1,734,862
'" r ~ fede%ricy Seconfies m 330,259 192,963 1 / ' State dblitecol 5ubdivis on secunt.es - 2,410,373 2,102,785
/' Other B'nds, Notes end Debentures - 1,408,541 1,070,934 fedmal Ress, ve Boe A and Other Stod Irwetrnents . __._. .__. __ _ _ _ _ l34,012 144,262 lotallnvestenent Secuntes (Market voluc ol $6,098,000 0nd i$.0 A).000, Respectwely) 6,122,392 5,245,806
' 61,930,527 62,003,386 toons . _.'
" 907,672 761,439
,_less: Reim se for Posuble tcon t osses ___ . __ __ .- ._ _ _ _ _ .
e loo 6, Net -- ol.022.855 61,241,947
;r'ustameriliob,lity on Acceptances 2,820,471 5,250,637 Aurved interest ksceivable _.
1,028,986 1,191,949 l Pramisgori Ecupmer's ._ 913.580 793,546
,- Other Anet. __ _.,. __ .__. _ _ _ _ _._ _ _ _ _ . _ _ . 3.013,189 1,958.365 Total Assets , $8/.685.442 $86.883.018 asu m m uuuuuummunuuss> -
Llobilities ond 5tockhviders' Equit y Deposits Domevic OMcesi / Nonenterest Beanna _ ._.,%.- $ 13,499,638 $ 11,149,045 Intormt Beoreg . __ . _ . . 19.130,323 17,733,994 Ovescos Of fices Noninterest-Beorng _ ._.l . I,939,120 1,423,674 {.., 29,373,298 _ ntmmtBmry .__ _ _ _._. _ ...__.-.__.._ _ t _ _ . - _ _ - . _ _ _ _ . 26.783.968 iovat t@n ts _.. 61,353,049 59,680,01I fedotal A.d'urchased ond 5cconties 5old Under Repue 'nne Aryeoment . 4,131,793 4,480,290 I CommwoulPoper _ .. ' . 3,483,501 4,408,866 Other Honowod Money _ . . _ . _ _ _ . 4.671,994 3,236,446 Aucptw es Out9andrig ._ , ._ =. , . . - 2,828,696 5,362,800 Acuved intermi Puyoble _._ ._ . -, ; . 668.961 803.730 Aurwts royoblw Arc rund E s p er ie. and Ott,, r imbatim _ _ . _ - - - _ - ~_. _ . _ _ _ 3,282,175 2.567,995 80,420,l69 80,540,138 te* i.fo, a F49cs oncl D+.bontines 2.806,499 2,320.198
,, f ] IWl hoh4 tim, ,
83.226.668 82.860.336
' (.orroutmenti and Corve%ent liobates Wo res 5,23 crd 24)
Prefened Stod (Wn,%ut Po, Vulue-20,000.000 $tn es Authontedb Podoemable r:Ger><,d $r o d 616 3s'9 5hona Ouwond.ng _ .. 61,638 61,638 Noneodoomoble Prola.w! $hd. I 12/139,737 Shormr Ou ior'd.ng _ _. 60I,987 601.987
', Crnnon 5 odholdorf !cp,v.
t,*r;e,non Siod (Piv %e l' 7 50 Per Shornt 19 % Dd4 A.,f,x,n/ed 51wn 125,000,000 125,000,000
/ 77,157,724 36,659 653 - - 964,472 458,246 Outvorwie $hore e _ _ _ - . _ -
* 'wk% _ ._, _ _ . - - _ . _ . . , _ _ . _ _ _ . _ _ . _ . . . _ . - .- _ _ . _ . . 276,288 678,342
- Iorean bdogs franslotion Ad uvments i _.___._..-. _ ---._- _ _..-_ _ _ (22,265) ll 8,730)
Retocod f orn,nro . _. _ . _,~ . . _ 2.576.654 2,241,199 r . 'ntollommon 5to< hon <f irsty 3./95.14V 3.359.05/ fotollinhAtem ond '3W holderi ( a s ty $H/.68 S.44 2 $86 883 018 f o os comexinyeg no'es are on interyol po i of the finonool votements 4 A
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Consolidated Statement of Income lhe Chose Manhat ton Corporar.on and Subsidiones
} 1: 1 Year EndedDecember 31
- I l$ Shousands. except per common shore dato) b s' 1985 1984 1983 4 ' interest income ;
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% l Interest und fees en toons $7,173,915 $7,657,578 $6.420,274
%"' interest co Bank Deposit Placings ,c 486.230 769,072 729,985 interest and Dividends on investment Securities: -!
intermt on-U.S. Treasury Securities 19 L447 170,556 198,397
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FeJoul Agwxy Securities _ '25,371 21,226 15,571 State and Politecol Subdivision Secunties Exempt from FederalincomeTaxes 150,102 115,162 78.340 e t Other Bonds, Notes and Debentures _ 197.865 89,075 105,076-F Dividends on Federol Reserve Bank ond Other Sec ck investments 10.241 5.438 7.610 575.026 401.457 404,994 Interest on federolha I 5old ond Secunties Purchased under Rosole Agreements 105.417 77.589 56,437 _ Interest onTrading Account Assets 76.917 45,982 47.144' Totolinterest income 8.417.505 8,951.678 - 7.658.834
- Interest Expense Deposits 4,275,695 4,997.270 4,087,74i Federal Funds Purchased and Secunties Sold Under Repurchase Agreements 461.796 547,672 554,878 CommercioIPoper 265,596 408.002 344,434 Other Borrowed Money 425,644 496,338 394,981 tonTerm Notes ond Debentures 240.044 193.905 107.745 TotalInterest Expense 5.668.775 6.643.I87 5.489.779 Net Interest income
- 2,748,730 2,308,491 2,169,055 Provision for Possible locn losses 435.000 365.000 285.000 Net Interest income Af ter Provision for Possible Loan Losses 2,313.730 1.943.491 1,884.055 Other Operating income 715,886 600,844 4 Fees ond Commissions Foreign ExchangeTroding income 908.805 173,385 119,462 116,742 Trading Account Profits 31,415 29.364 24,301 Investment Securities Goins (Losses) 98,106 16,704 24.793 Other Income 104.020 48.168 97.531 Total Other Operating income 1.315.731 929,584 864,211 Other Operating Expenses Solaries and Employee Benefits:
Solories 1,103.521 918,464 822,794 Profit Shanng 82,368 60,725 72.884 Other Employee Benefits 264.663 ' 239.639 226.693 1,450,552 1,218,828 1,122,371:
~ NetOccupancy 283,703 244,765 212,558 Equipment Rentals.Depreciotion ond Mointenance 203,194 170,894 138,670 Othar Expenses - -- 794.429 658.598 571.962 Recovery of Payments on. ond lioundation of. Assumed U.S. Government Seconties Positions __ -
(48.559) -
. Total Other Opero*ing Expenses 2,731.878 2.244.526 2.045,561
- bcome BeforeTo*% 897,583 628,549 702,705
. ApplicableincomeToxes 332.765 222.731 273.098 Net income 5 564.818 5 405.818 5 429.607 Net income Applicable to Common Stock 3 _
$ 480.573 5 320.700 5 376.656 Avoroge Sharm Outstonding _. 75,240,464 71,152.544 68.748,158 Eornings Per Conron Shore:
Pnmory, Based on Average Shores Outstanding ___ $ 6.39 $ 4.51 $ 5.48 Assuming FullDilution _ 6.15 4.32 5.22 Cosh Dmdends Dectored Per Common Shore 5 1.90 5 1.82W 5 1.75 The occompanying notes are on integrol port of the hnoncial statements. , 45 v
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Statement of Changes in Common Stockholders' Equity
- The Chase Monhoiton Corporonon ond Subs,diones ond Th; Chose Monhatton Corporotion (Company Ork)
Year Ended December 31, ($ in thousands! 1985 1984 1983 Common Stock Bolonce of Beginnng of Yeor (36,659,653 %res, 34,740931 Shores and 33,916,049 Shores, Respectively) $ 458,246 $ 434,262 $ 423,951 Conversion of Capital Notes and Debentures (465,501 Shores, 144,727 Shores and 258,667 Shores !ssued, Respectively) 5,819 1.809 3,233 E xercise of Stock Options (100,823 Shores.5,229 Shores and 13,427 Shores issued. Respectively) _ 1,260 65 168 hres issued Pursuant to Dividend Reinvestment Plan (716,812 Shores, 770,241 Shores and 552,788 Shores, Respectively) 8,960 9,628 6,910 Shores issued Pursuont to 1984 Acquisition { 484,663 Shores) - 6,058 -
- Shores issued Pursuont to flootog Rote Subordinated Notes Due 1996 (636,073 %res and 513,862 Shores, Respectively) 7,951 6,424 -
, _ Shores issued Pursuont to TwoJor-One Stock Spht Declared January 15,1986 , (38.578.862 Shores) 482,236 - - Bolonce o End of Year (77,157.724 Shores,36,659,6!3 . Shores and 34.740931 %res,Respectively) 964.472 458,246 434,262-Surplus -
. Bolonce of Beginning of Year 678,342 594,195 563,266 Conversion ol Copitol Notes ond Debentures 20,788 6,140 11,487 Exercise of Stock Options 3,151 161 469 Shores issued Pursuont to Dividend Reinvestment Plan 29,627 23,672- 18.973 Shores issued Pursuant to Acquisition - 12,791 -
%res issued Pursuont to floatog Rote Subordinated Noths Due 1996 26,616 13,221 -
Shores issued Pursuont toTwoJor-One Stock Spht Dectored January 15,1986 (482,236) - - Goin on Retirement of Redeemable Preferred Stock - 28,162 - Bolonce at End of Year 276,288 678.342 594,195 Foreign ExchongeTranslation Adjustments . BolonceatBeginningof fear (18,730) (22,341) (13,921) Aggregate Translation Goin (loss) Af ter Applicoble incomeTaxes (Benefits) of $(32,164),$29,281 and $18,433.Respectively (5,445) 8,187 (8,994) AmountTransferred to Net income Af ter Applicable incomeTaxes (Benehts) of $11.476), $360 and $423,Respectively 1.910 (4,576) 574 Bolonce of End of Year (22,265) (18,730) (22,341) Retained Earnings Bolonce at Beginning of Yeor 2,241,199 2,044,709 1,788,117 Net income 564,818 405,818 429,607 Cash Dividends Declared: Redeemoble Preferred Stock (4,432) (6,038) (10,856) Nonredeemoble Preferred Stock (82,659) (74,122) (42,095) Common Stock (142,272) (129,168) (120.064) Bolonce at End of Year 2,576,654 2/24I.199 2,044,709 Totoi Common Stockholders' Equity $3,795.149 $3,359,05/ $3,050,825 The accomponying notes are on integrol port of the financial statements.
.46
Consolidated Statement of Changes in Financial Position The Choss Monhotton Corporonon ond Subsidiories Yeor Ended December 31, ($ in thousands) 1985 1984 1983 Funds Provided Net income $ 564,818 $ 405,818 $ 429,607 Add (Deduct) Noncash items included in Net income: Depreciation and Arnortization of Premises and Equipment 138,440 108.010 81,252 Provriion for Possible Loan tosses 435,000 365,000 285,000 Amutization of Discount on long-Term Notes and Other Borrowed Money 9,782 8,478- 7,099 DeferredincomeToxes (Benefits) 69,239 104,165 168,279 Funds Provided from Operations 1,217,279 991,471 971,237 Issuonce of: Common Stock 104.172 79,969 41,240 Nonredeemoble Preferred Stock, floating Rote Series F - '226,987 - Goin on Retrement of Redeemoble Preferred Stock - 28,162 - Foreign ExchangeTronslation Adjustments - 3,611 - Increases in: Deposits 1,o73,038 3,380,454 - Federal Funds Purchased and Securities Sold Under Repurchase Agreements - 739,597 . ComrnercialPoper - 122,408 969,541 Other Borrowed Money 1,435,377 - - Accrued Interest Poyable - 127,817 - Accounts Poyable, Accrued Expenses and Other Liobilities 644,941 673,962 - long-Term Notes ond Debentures 512,983 955,304 348,015 Decreases ini . Cosh and Due from Banks - 242,407 77,706 Interest-Bearing Deposits Ploced with Banks _
- 4,303,454 -
Federal Funds Sold and Securities Purchased Under Resole Agreements i I 8,834 - 188,367 Trading Account Assets 10,076 - 922,948 investment Securities - - 711.762 Accruedlnterest Receivoble 162,963 ~ - 157,597 Other Assets - -
'795.754 Other-Net 15.446 140,42_7 59,046 Totd Funds Provided $5,895,109 $ 12.016.030 $5,243,213 . Funds Used Cosh Dividends Declared:
Redeemable Preferred Stock ___ $ 4,432 $ 6,038 $ 10,856 Nonredeemoble Preferred Stock 82,659 74,122 42,095 Common Stock 142,272 129,168 120.064 Conversion of Convertib!e Capitol Notes and Subordinated Debentures into Common Stock 26,615 7,952 14,726
- Retirement of Redeemoble Preferred Stock - 88,362 -
Foreign ExchangeTranslation Adjustments . 3,535 - 8,420-Increases in: Cosh andDue from Bonks . 1,376,254 - - Interest-Beonng Deposits Placed with Bonks _ 315,857 - 767,877 Federal Funds Sold and Securities Purchased Under Resole Agreements __
- I,i 18,082 -
Troding Account Assets ._
- 1.075,023 -
investment Securities - 876,586 1,827.697 - toons,Before Chorge. Offs 344,970 6,388,392 691.138 Premises and Equipment 258,474 356,814 111,867 Accruedinterest Receivoble - 118,979 - Other Assets 1,054,824 527.095 - Decreases in: Deposits - - 558,290 Federal Funds Purchased and Securities Sold Under Repurchase Agreements 348,497 - 1,315,151 Commercid Paper 925,365 - - Other Borrowed Money - 298,306 831,572 Accrued Interest Payoble 134,769 - 109,890 Accounts Poyable. Accrued Expenses and Other tiobilities - - 661.267 Totd Funds Used $5,895,109 $ 12,016.030 $5.243,213 The occompanying notes are on integrd part of the hnoncid statements. 47 L
Balance Sheet The Chose Moahotton Corporot on (Company Cch) December 31, , ($ in thousands) 1985 1984 Assets - Cosh in Bonks-Demond Deposits: The Chose Monhatton Bonk,NA S 6,013 $ 14,676 Other Bonks 4,778 6,646 Short-Term Money Market Instruments: Time Deposits with Banks: i The Chase Monhotton Bank,NA 2,748,369 3,651,136 ' l 1 Other Bonks 66,216 4,077
' U.S. Treasury Securities - 49,066 Total Short-Term Money Market instruments 2,8I4,585 3,704,279
- Notes Receivable from Nonbonking Subsidiories -- 1,849,793 1,377,012 Accounts Receivoble fromThe Chose Manhatton Bonk,N.A. 51,937 50,711
' Other Stock investments 41,360 55,330 Subordinated Debenture Receivoble fromThe Chase Monhotton Bank,NA 400,000 400,000 Investments in Subsidiories (of Equity in Net Assets):
Bonking Subsidiaries: The Chase Monhotton Bonk,NA 4,454,725 4,228,746 Other Bonking Subsidiaries 705,971 467,205 Nonbanking Subsidioraes 343,571 286,838 AccruedInterest Receivable, Banking Subsidiones 26,865 33,218 Nonbanking Subsidiaries 21,643 17,496 Other 1,822 30 Other Assets 94.149 88,026 Totol Assets 510,817,212 510.730,213
. Liabilities and Stockholders' Equity Secunties Sold Under Repurchase Agreements $ -
$ 48,983 CommercioI Poper 3,351,756 4,341,035 Other Borrowed Money 573,648 325,647 Accounts Povabfe. Accrued Expenses and Other Liabilities 290.683 257,511 4,216,087 4,973,176
'Long.Tcrm Notes and Debentures 2,I42,351 I.734,355 Tc,tolliabilities - 6,358,438 6,707,531 Commitments and Contingent Liobekties (Notes 23 and 24)
Priferred Stock (Without Por Volve-20,000,000 Shores Authorized): Redeemoble Preferred Stock: 616,3795hores Outstonding 61,638 61,638 Nonredeemoble Preferred Stock: 12,039737 Shores Outstanding 601,987 601,987 . Common Stockholders' Equity: Common Stock (Por Value $12.50 Per Shore): 1985 1984 Authorized Shores 125,000,000 125,000,000 Outstor. ding Shores 77,157,724 36,659.653 964,472 458,246 Surplus 276,288 678,342 foreign ExchangeTronsloton Ad iustments {22,265) (l8,730) Retained Eorninos ______ .. 2,576.654 2,241,199 Total Common Stockholders' Equity 3,795,I49 3,359,057 Total ltabilities ond Stockholders' Eovity 510.817,212 510,730.213 The occompanying notes are on integral port of the financial statements. s, j I i 1 -48
Statement of Income Ihe Chas a Manhatton Corporation (Cornpony Only) Yeor Ended Decernber 31 ($ in thousands) - 1985 1984 1983 income - Dividends Received: The Chosa Monhotton Bank,NA. $300,000 $300,000 $300,000 Nonbonking Subsidiaries - 2,500 3,079 Other Stock investments 4,549 344 3,869 Interestincome: Trne Deposits with Banks: The Chose Manhatton Bank,N.A. 215,755 358,380 -284,071 Other Banking Subsidiories 'I72 504 5,023 Other Bonks 6.010 6,196 .14.019 U.S. Treasury Secuntics 322 295 760 Bonkers' Acceptances - 108 277 Notes Receivable from Nonbanking Subsidories 150,688 146,802 I i 1,726 Subordnoted Debenture Receivable from The Chase Manhatton Bank, N.A. 36,137 11,308 - Other income 7,291 1.748 107 Totollncome 720,924 828.185 722,931 Expenses interest Expense: Securities Sold Under Repurchase Agreenients 36 54 90 CommercioIPoper 259,168 400,268 336,874 Other Borrowed Money 39,949 35,152 6,103 Long-Term Notes ond Debentures 183,389 143,588 0,050 Fees Poid to-The Chase Monhotton Bonk,NA 2,778 3,232 3,616 Nonbanking Subsidiories 26,469 - 25.654 21,040 Other Expenses 10.203 9.519 '4,032 Total Expenses 521,992 617,467 441.805 incorne Before incomeTax Benehts and Equity in Undstnbuted income (losses) of Subsidiories 198,932 210,718 281,126 Applicable incomeTax Benehts: Federal ~ (42,895) (31,096) (8,780) State and local (9.830) (20.414) (4,620) TotoI Applicobic incomeTox Benehts (52,725) 151,510) 113,400) Income Befere Equity in Undistributed Income (Losses) of Subsidiories 251,657 262,228 294,526 Equity in Undstributed income { losses) of Subsidories; Banking Subsidories: The Chose Monhotton Bonk,N. A. I92.798 83,493 120,421 Other Banking Subsidories 79,385 49,127 7.749 Nonbonkina Subsidories 40.978 10.970 6,911 Net income 5564.818 $405.818 5429.607 The occompanying notes are on integral port of the hnoncial statements. 49
r Statement of Changes in Financial Position The Chase Monhatton Corporation (Company Only) Year Ended December 31, 1985 1984 1983 ($ in thousands) Funds Provided - - Net income $ 564,818 $ 405,818 - $ 429,607
. Add (Deduct} Noncosh items included in Net income:
Equity in Undistributed Losses (income) of Bonking Subsidiones: The Chose Monhotton Bonk,N.A. (192,798)_ (83,493) (120,421) Other Banking subsidiaries (79,385)- (49,127) (7.749)
. Equity in Undistobuted Losses (Incomej ol Nonbanking Subsidiories (40,978) (10,970) (6,911)
Amortization of Discount on long-Term Notes and Other Borrowed Money 9,782 8,478 7,099 Deferred incomeToxes (Benefitsi 1,120 2,503 10.860 Funds Provided from Operations 262,559 273,209 312,485 issuonce oli Common Stock 104,172 79,969 41,240
~ Norvedeemoble Preferred Stock, Floating Rote Series F - 226,987 -
Goin on Retrement of Redeemoble Preferred Stock
- 28,162 -
Other Stoc.k Investments i3,970 - - Foreign ExchongeTronslation Adjustments
- 3,611 -
bcreasesin: Securities Sold Under Repurchase Agreements - 48,983 - CommercioI Poper - 184,168 835.659 Other Borrowed Money 247,830 - 296,802 Accounts Payable, Accrued Expenses and Other Liabilities 32,052 4,320 118,734 Long-Term Notes and Debentures 425,000 779,035 348,600
. C: creases in:
Cosh in Banks-Demand Deposits 10,531 - - Time Deposits with Bonks 840,628 233.443 - U.S. Treasury Securities 49,066 - 46,493 Bankers' Acceptonces - 9,827 15,119 Accounts Receivable fromThe Chose Monhotton Bank,NA - - 13.153 Accrued interest Receivable 414 4,184 4,823 Total Funds Provided $ 1,986,222 $ 1,875,898 $2,033,108 Funds Used Cosh Dividends Dedored: Redeemoble Preferred Stock $ 4,432 $ 6,038 $ 10,856 Noncedeemoble P.eferred Stock 82,659 74,122 42,095 Common Stock I42,272- 129,168 120,064 Other Stock Investments
- 5,330 .-
Investments in Subsidiaries: The Chose Monhotton Bonk,NA 33,181 482,683 293,709 Other Banking Subsidiaries 159,381 310,042 51,050 Nonbanking Subsiciories 15,755 16,815 59,953 Conversion of Convert 6le Capito! Notes and Subordinoted Debentures into Common Stock 26,615 7,952 14,726 Retirement of Redeemoble Preferred Stock - 88,362- . Foreign ExchangeTranslotion Ad iustments 3,535 - 8,420 Incr;osesin: Coshin Bonks-Demond Deposits - 10,361 6,329 Time Deposits with Banks - - 1,084,424 U.S.Treosury Securities - 3,690 - Subordinoted Debenture Receivable fromThe Chose Monhotton Bonk, NA - 400,000 - Notes Receivoble from Nonbanking Subsidiaries 472,781 284,055 207,459 Accounts Receivoble fromThe Chose Monhotton Bank, NA 1,226 40,753 - Decreases in: Securities Sold Under Repurchase Agreements 48,983 - 91,436 CommercioIPoper 989,279 - - l Other Borrowed Money - 3,900 - l Other-Net 6,123 12,627 42,587 l Totalfunds Used $ I .986,222 $ 1,875,898 $2,033,108 ; The occompanying notes are on integrol port of the hnoncial statements. 50
n Consolidated Statement of Condition The Chase Manhatton Bonk,NA cr:d Subsidianes December 31, ($ in thousands) 1985 1984 Assets Cash and Due from Banks 5 5,208.200 $ 3,903,069 Interest-Beoring Deposits Placed with Banks 4,566,219 4.371,576 Federal Funds Sold and Securities Purchased Under Resole Agreements 2,458,090 :1,254,335 Trading Account Assets 1,331,638 1,342,061 Investment Securities: U.S. Treasury Securities 1,721,697 1,617,811 Federol Agency Securities _ . 290,391 81,829 State ond Political Subdivision Secunties 2,185,798 1,833,812 Other Bonds, Notes and Debentures 1,357,862 990,829 Federal Reserve Bank and Other Stock Invesenents 82,509- 81.934 Totalinvestenent Securities (Morket Volue of $5,596.000 and $4,356,000,Respectively) 5,638,257 4,606,21 $ toons - 52,176,137 56,248,996 L:ss: Reserve for Possible toon tosses 699,054 660,763 ivuo:,, Nel 51,477,083 55,588,233 Customers' tiobey on Acceptances 2,810,159 5,217,219 Accruedinterest Receivoble 1,002,649 1,150,414 Premises and Equipment 753,834 662,935 Other Assets 2,474,067 1,630,566 TotoI Assets $77,720,196 $79,726,623 Liabilities and Stockholder's Equity . Deposits: Domestic Offices: Noninterest Beoring $12,677,180 $10,425,631 Interest-Bearing 14,629,437 14,533,189 Overseas Oflices: Noninterest-Beoring 1,939,120 1,423,674 Interest-Beannq 29,500,685 33,017,195 TotoIDeposits 58,746,422 59,399,689 Federal Funds Purchased and Securities Sold Under Repurchose Agreements 3,972,397 4,434,382 Other Borrowed Funds 3,160,191 2,359,911 Acceptances Outstanding 2,818,384 5,329,382 Accrued Interest Poyoble 611,150 767,264 Accounts Poyable Accrued Expenses and Other liabilities 2,925,095 2.254,082 72,233,639 74,544,710 Long-Term Notes and Debentures 1,031,832 953,167 Torolliobelities 73,265.471 75,497,877 Commitments and Contingent liabilities (Notes 5,23 ond 24)
. Stockholder's Equity:
Capitol Stock (Por Volue $15.00 Per Shoreb 1985 1984 Authonzed Shores 61,744,445 61,744,445 Outstonding Shores 50,009,247 49,333,684 750,139 740,005 Sucplus 1,772,407 1,745,409 Foreign ExchangeTranslation Adjustments (22,345) {l8,394) Undivided Profits 1,954,524 1,761,726 TotalStockholder's Equity 4,454,725 4,228,746 Total liabilities and Stockholder's Equity $77,720,196 $79.726,623 The occompanying notes are on integral port of the financial statements. Member Federal Deposit Insuronce Corporation 51
Consolidated Statement ofIncome
' The Chase Monhotton Bank,NA ond Subsidiories Year Ended December 31 1985 1984 1983
.- ($ in thousonds) Interest income
$6,092,577 $7,035.4I 8 $6,165,367 Interest and Fees on toons Interest on Bank Deposit Pfoongs 483.682 762,096 719,567 Interest and Dividends on Investment Secunties:
Interest on-U.S. Treasury Secunties 180,933 163,606 197,310 Federol Agency Securities 18,019 13.910 15,565 State and Politicol Subdivision Securities Exempt from Federal Income Taxes 132,157 106,055 78,230 189,252 85,d,47 105,062 Other Bonds Notes and Debentures 5,228 4,750 3,613 Dividends on Federal Reserve Bank and Other Stock investments 525,589 373,968 399,780 Interest on Federol funds Sold and Securities Purchased Under Resole Agreements 96,571 78,384 57,487 Interest onTrading Account Assets 75,893 - 45,270 47.144 7,274,312 8,295.136 7,389,345 Totolinterestincome Interest Expense Deposits 4,129,669 5,205,575 4,365,309 Federal Funds Purchased and Securities Sold Under Repurchase Agreements 446,031 528,729 552,240 Other Borrowed Funds 334,192 416.541 383.610 Long-TermNotes and Debentures 90,334 60,386 37,695 Totalinterest Expense -5,000,226 6.211,231 5,338.854 2,274,086 2,083.905 2,050,491 Net Interest income 218.663 293,228 245,696 Provision for Possible Loonlossa 2,055.423 1,790.677 I 804,795 Net Interest income Af ter Provision for Possible toon Losses Other Operating income 687,984 589.757 541,207 Fees ond Commissions 172,865 119,016 116,742 Foragn ExchangeTrodingincome 28,774 28,328 24,301 Troding Account Profits 76,290 16,149 24,793 inustment Secunties Goins (Losses) 66,794 41,781 96,316 Other income Total Other Operating income 1.032,707 795.031 803,359 Other Operating Expenses Sc! aries and Employee Benefits: Solaries ~ 954,697 827,924 780.501 Profit Sharing 74,745 56,553 69,844 Other Employee Benefits 245,039 227,118 219,946 1,274,481 1,111,595 1,070,291 Net Occuponcy 255,888 227,337 206,507 184,434 160,241 135,477 ~ Equipment Rentals, Depreciation ond Mointenance Other Expenses 588,041 530,001 506,968 Recovery of Payments on, and liquidation of, Assumed U.S. Government Securities Posites - (48,559) - TotalOther Operating Expenses 2,302.844 1.980,615 1,919,243 Income Belore Taxes 785,286 605,093 688.9 I I Applicoble incomeTaxes 292,488 221.600 268,490 Net income $ 492.798 $ 383.493 $ 420,421 The occompanying notes are on integral port of the financial statements. Member Federal Deposit Insurance Corporation 52' l
Consolidated Statement of Changes in Stockholder's Equity The Chose Manhatton Bank,HA.ord Subsidiones Year Ended December 31, ($ in thousands) 1985 1984 1983 Capitol Stock Bolonce of Beginning of Year $ 740,005 ' $ 738,591 5 738,591 Shores issued Pursvont to Floctang Rote Subordnoted Debenture Due 1996
- (675,563 Shores and 94.296 Shores,Respectively) 10,134 1,414 -
Bolonce of End of Year - 750,I39 740,005 738,591 ' Surplus - . . Bolonce of Beginning of Year 1,745,409 .1.268,012 967,585 Shores issued Pursuant to floating Rote Subordnoted Debenture Due 1996 24,433 2,175 -
. Copitol Contnbutions byThe Chose Manhatton Corporation 2,372 475,195 300,375 Tax Benefit Resulting from the Exercise of Stock Options 193 27- 52 Bolonce at End of Year 1.772,407 1.745.409 i.268,012 Foreign ExchangeTranslotion Adjustments Bolonce of Beginning of Year (18,394) (22,266) {l3,784]
Aggregate Irorulation Goin (Loss) After Applicable income Taxes (Benefits) of
$(32,389), $29,385 and $18,401, Respectively (5,797) 8,448 (9,056)
AmountTransferred to Net income Af ter Applicable IncomeTaxes (Benefits) of
$(1,514). $360 ond $423,Respectively 1,846 (4,576) ' 574-Bolonce of End of Year (22,345) 118,394) (22,266)
Undivided Profits Bolonce et Beginning of Year ~ -- 1,761,726 1,678,233 1,556,048-Net income 492,798 383,493 420,421 Cash Dividends Poid (300,000) (300,000) (300,000) Sole of Shores of Subsidiory - - 1,764 Bolonce ot End of Year 1,954,524 1,761,726 1,678.233 Total 5tockholder's Equity S4,454 725 S4,228.746 13.062,570 The occompanyng notes are on niegrol part of the hnoncial statemets. Member Federal Deposit insurance Corporotion . 53
Consolidated Statement of Changes in Financial Position The Chose Manhatton Bonk, NA and Subsidiones Year Ended December 31 ($ in thousonds) 1985 1984 1983 Funds Provided
- Netincome $ 492,798 $ 383.493 $ 420,421 ' Add (Deduct) Noncash items included in Net inconn -
Depreciation and Amortization of Premises and Equipment 124,808 101.180 79,921 Provision for Possible Loonlosses 218,663 293,228 238,502 Deferred incomeToxes (Benefits) 34.830 93.775 150.979 fcnds Provided from Operations 871,099 - 871,676- 889,823
> lssuance of Capitol Stock Pursuont to Floating Rote Subordinated Debenture Due 1996 34,567 3,589 -
Capitol Contnbutions byThe Chose Manhatton Corporation 2,372 475,195 300,375 increoses in:
- Deposits -
507,801 F:;deral Funds Purchased and Securities Sold Under Repurchase Agreements - 718,689 - Other Borrowed Funds 800,280 - - Long-Term Notes and Debentures 87,984 543,593 -
. Decreasesin:
Ccsh and Due from Bc.nks - 515,580 86,653 Interest Beoring Deposits Placed eith Banks - 4,366,2071 -
' Trad<g Account Assets 10,423 - 922,948-Investment Securities - - 667,910
- Loons,Before Charge-Ofis 3.806,557 - 264,897 Other-Net -
434.723 - 313.145
' Totol funds Provided $5.613.282 $7.929.252 $3.953.552 Funds Used Cosh Dividends Poid $ 300,000 $ 300,000 $ 300,000 - Increases in:
Cash and Due from Books 1,305,131 - - Interest-Beoring Deposits Placed with Banks 194,643 - 1,026,748 -
' Federal Funds Sold and Secunties Purchased Under Resole Agreements 1,203,755 I 055,2I4 --
Troding Account Assets - 1,062,513 - Investment Securities I,032,042 1,290,430 - Loons,Before Charge-Offs - 2,867,244 -- Premises and Equipment 215,707 - 228,253 107,283 -
- Dect!oses in:
Deposits 653,267 424,909 - Ftderol Funds Purchosed and Securities Sold Under Repurchase Agreements 461,985 - 1,243,716 Other Borrowed Funds - 700,689 1,270,805 Other-Net 246.752 - .-
-lotal tunds Used $5.613.282 $7,929.252 $3.953,552 The occompanying notes are on integral pori of the firx2ncrol statements. Member Federal Deposit insuroxe Corporotion l
I 54 ^
Notes to Anancial Staternents The Chose Manhatton Corporation and Subsidiories Nota L General Note 3. Acquisitions The occounting policies followed byThe Chase Manhatton Corporation (the On April 4,1984, Chose Monhotton Overseas Banking Corporation Company) and its subsidories,includng its principal subsidory,The Chose ("CMOBC"),a wholly owned subsidiary of the Bonk,ocquired for cash Monhotton Bank, N A. ond its subsidiories (the Bonk), are disclosed in the substantially oil of the outstanding shores not already held by CMOBC,or accompanying Summary of Significont Accounting Pohcies on pages 42 ond opproximately 68.5%,of Nederlandse Credietbonk NV.("NCB"),o Dutch 43.This summary is on integrol port of the hnoncial statements and should bank with headquarters in Amsterdom,The Netherionds.The acquisition of be read in coniunction with these notes.Throughout the notes, the term the additionol interest cost CMOBC $45 million and resulted in CMOBC
" Corporation" refers toThe Chose Manhatton Corporation and its owning 99.6% of the shores of NCB.The osset and liabikty accounts of NCB subsidories.The term "Nonbanking Subsid ories" used in the financial state- were consolidated into the Corporation's Consolidated Statement of ments and notes thereto refers to subsidories of the Company not chartered Condtion at June 30,1984.
os commercial banks. Such subsidiones are engoged in mortgage banking. On July 1,1984, Chose Monhotton National Corporation ("CMNC"), o
- discount brokoroge, commercial and consumer hnoncino investinent wholly owned subsidiary of the Compor'y.ocquired Lincoln First Bank,N. A.
odvisory and other finoncial services. (renamed Chase Lincoln First Bank,N.A.),o commerciol bonk based in Rochester, New York, through the merger of its parent company, Lincoln First f>onks Inc.(" Lincoln"),into CMNC.The ocquisition cost induded $51 milhon Note 2. Common Stock Split in cash, $18 million of common stock (969,326 shores-restated for the two-for-one stock spht declared January 15,1986) of the Company, $727 On Jonvory 15.1986,the Board of Directors declared o two-for-one million (stated value) of Preferred Stock, Floating Rote Series F (Series F stock spht in the form of u 100 per cent stock d vidend on the Company's Preferred),of the Company and $10 million of open market purchases of common stock.l he shores issued to ef fect the stock sph: were dstnbuted on Lincoln shores in the first quorter of 1984. Februory 13,1986 to stockholders of record on January 31,1986. Accord. Both ocquisitions were accounted for os purchases and, os such, the ingly,the Consol; doted Statement of Condrion,the Bolonce Sheet (Com- ossets and habihties of Lincoln and NCB were recorded at their estimated pony Only), cud the Statement of "honges in Common Stockholders Equity fair values os of the dotes of ocquisition. Goodwill and on idert. Led core
' reflect the stock split as of December 31,1985.The por value of the addi- deposit intangible amounted to opproximotely $170 milhon and are being tional shores of common stock issued in connection with the stock split was amortized ogoinst income over periods not exceedng 20 years.The fi-credted to common stock and o i ke amount charged to surplus. References noncio! results of both NCB and CMNC commenced to be fully consolidated -
to per common share amounts and overage common shores octandng in ir"o the Corporation's hnonciol stotements in the third quarter of 1984. the conschdoted hnancial statements are presented of ter giving ellect to Pro forma combined net income for the years ended December 31,1984 the spht. and 1983 of $418 milhon and $457 milhon,respectively,gives elfect to the
' The earnings per common shore, cash dividends per common shore and Lincoln and NCB ocquisitions os if they had been consummated on Jonuary overage common shores outstanding omounts prior to the split for the 1,1983, and is not necessarily indicotive of the results that would have respective years ended December 31 were os follows: octually occurred had the ocquisitions token place at that date.
In the second quarter of 1985, the Company ocquired six Ohio savings and loon institutions, with totol ossets of opproximately $450 million and 1985 1984 1983 converted them into o commercol bank, named Chose Bank of Ohio. in the Earnings Per Common Shore: fourth quarter of 1985, the Company acquired three Maryland sovings and Pnmary $12.77 $9.01 $10.96 loon institutions with total assets of opproximately $700 million and con-Fully Diluted $ 12.30 $8.65 $ 10.44 verted them into o commercial bank nomed. Chose Bank of MarylandThe Pr$ Shore $3.80 $3.65 $3.50 newc mmerci lbanksarebothwhollyownedsubsidioriescf theCompany. Average Common The Ohio and Marytond acquisitions were also occour.ted for os pur-Shores Outstanding - 37.620.232 35.576.272 34.374.079 choses and ossets and liabilities were recorded of their estimated fair volves Average Common os of the dotes of acquisition.The total acquisition cost of $45 milhon I teIBo I 39.276.548 37.417.381 36.323.212
"
- 9 * '" 9 "*""# ""
penods not exceeding 20 years.The Company s net income for the years ended December 31,1985 and December 31,1984 would not have been substantially changed had the combined acquisitions of the Ohio and Maryland savings and loon institutions been reflected on o pro forma basis os of January 1,1984. Dunng the year the Company made other ocquisitions includ ng Banco de Finonzos,of Modnd Spain with total ossets of approximately
$265 million.
t 55
Note 4. Investment Securities Shown below ora the carrying and eshmoted morlot volves of Inysstmont Securities of December 31,1985 ond 1984. 1985 1984 Carryog Estimated Corrying Estimated
'($ b mdhonsi Value Market Value Value Market Value U.S. Treasury Secunties $1,839 $ 1,907 $ 1.735 $ 1.748 Fcderd Agency Securities 330 338 193 193 State and Poltical Subdivision $ecunties 2,410 2,292 2,103 1,863 Other Bonds, Notes and Debentures 1,409 1,403 1,071 1,057 federd Reserve Bank and Other Stock Investments 134 158 144 159 Totallnvestment Secunhes* $6.122 $6,098 55,246 $5.020 'The rrorket volues of secunties ore estwnoted utshring odependent pncmg services and are bosed on ovadable market dato,which of ten reflect tronsochons of relohvely small size and are not necessarily indicotive of the pnces of which large amounts of porhcular issues could be sold.
Note 5. Loans loons o* December 31,1985 and 1984 ore summarized below: lease hnoncings at December 31,1985 ond 1984 consisted of the following: ($ in thousands) 1985 1984 Domestic Of fices: 15 'n thousands! 1985 1984 p, rect Fmancing leases $1,500,882 5 974,536 Real Estate loansbd land Development Construction _
$ 2,427,453 $ 2,009,101 Less: Unearned Discount 222.064 131,145 Secured by 1-4 FamJy Residento Properties 2,668,866 1,722,189 Total Direct Fooncmqleases 1,278.818 -843.391 Other Real Estoie lc ons 1,243,639 1,051,504 leveragedleases 300,245 275,455 loons to Finonodinshrutions 1,683.152 1,801,380 less: Unearned Discount $2.092 34.457
~ loans to Purchase or Corry Securities, Principally to Brokers and Dealers _ 502,967 Totolleveraged leases
- 248.153 240.998 543.303 Commerad ond industriolloons 8.754,752 10.034,945 Tota lease Financnos $ 1,526.971 51.084.389 Loons to Indinduals for Personal En,nditures 7,407,269 5,313,237 *Related deferred mcome taxes toto!ed $167030thousand and $159,411 thousand, lease Fnoncmgs 1,464,327 1,013,010 respechvely Tox-Exempt ioons 1,692,590 1,177,453 Other toons 654.856 502.009 loans made by the Corporation during 1985 and 1984 to directors, Tord Domeshc Olhces, Gross 28,499,871 25,168.131 executive of ficers,or principal holders of equity secunties of the Company less: Uneorned Discount 580.536 460.058 ond/or the Bank, or to any associate of such persons,os defined by the Total Domestic Of hces 27.919,335 24,708.073 Secunties and Exchange Commission,of no time exceeded 5% of the total of Preferred Stock and Common Stockholders' Equity.
2,818,483 2 278,600 Nonoccruol and redsced rate loons at December 31,1985,1984 Estot to ns Commercid andIndustnoltoons 21,932,966 24,663.203 ond 1983 totaled $2,035 million, $2,167 million and $1,870 million,respectively. lease Fnoncogs 336,800 236.981 Interest income realized and foregone on these loons for the respectrve Other toons 9,138.392 10.325.862 years ended December 31 was os follows: TotalOverseas Of hces, Gross 34,226,641 37,504,646 Less: Unearned Discount 215.449 209,333 gg ,n mJ1,onsi 1985 1984 1983 Total Overseas Of fices 34,011,192 37.295.313 Interest income Which Would Have Totalloons 561,930.527 $62.003,386 8een Recorded Under Ongind Terms $224 $278 $210 Interest income Actually Rechzed _ 105 122 65 The fotbwing roble sets forth the distnbution of loans of December 31, Reduction m interest income: 1985 ond 1984 based on the domiciles of the obligors: 84 re Appbc ble Tones $119 $156 $145 Af ter ApplicableToxes 58 76 70 15 in thovsonds) 1985 1984 Af December 31,1985,1984 ond 1983, unused.conditionoi commitments to loans to Domestic Obhgors: lend to borrowers whose loons were in nonoccruoi or reduced rote status i Domeshc Olhces $27,515,276 $24,286,564 oggregated $9 million, $12 million and $5 million, respectively. t Overseas Of fices 5.007.323 5.751,815 Totd 32,522.599 30.038,379 loans to InternchonalObhgors: Dorr ashc Of fices 404.059 421.509 Overseas Oflices 29.003.869 31.543.498 Totd 29.407.928 31.965.007 Totalloons $61.930.527 562.003.386 I i l 56
Nota 6 Reserve for Possible Loan losses Note 9. Deposits Changes in the Reserve for Possible Loon losses for the threa years ended A summary of Deposits of Decemb:r 31,1985 ond 1984 follows: Cccember 31,1985,1984 and 1983,respectively,are shown below ($ in thousands) 1985 1984 ($ m thousands) 1985 1984 1983 Domeshc Oflices: Bc': ace of Beginning of Year $761,439 $564,110 $558,277 Noninterest-Beoring Deposits $ 13.499,638 $11,149,045 Adddions. Savings Deposits 1,187,141 1,204.702 Provision Chorged to Expenses- 435,000 365.000 285.000 Negohable Order of Withdrawol Reserves of Acquired Subsidiones. 24,120 64,932 - Deposits 762.771 679,268 Deduct vi: Savogs Cernhcotesand Nest Egg Chorge-Offs ' 417,829 278,534 329,151 Account Deposits 399.773 554,'9 9 less: Recoveries 97,475 63,172 74.642 Money Market Deposos 8,562.879 6.237,154 Negohoble Certihcotes of Deposit 937,233 1.054,289 Net Chorge-Ofis 320,354 215.362 254.509 otherTime Deposits 7.280.526 8.004.232 Foragn EmchongeTranslation Adiustments 7.467 l17.241) (24.658) Total Domeshc Olhces 32.629.961 28.883.039 BdonceatEndof Year $907.672 $761.439 $564.110 Overseas Of hces: ammmmmmmm Noninterest-Beoring Deposits 1,939,120 1.423,674 Savings Deposits 918,317 829,550 Sovmgs Certshcotes and Nest Egg
^<aua'oepos'. i4a604 i27.457 Note Z Premises and Ea,uinment r- Money Market Deposits 218.687 158,064 Negotioble Cerhhcotes of Deposit 1.451,378 2,346,327 A su nmory of Premises and Equipment at December 31,1985 and 1984 OtherTime Deposits 24.054.982 25.911.900 ICEo*5: Totd Overseas Of f ces 28.723.088 30,796.972
* '#' 8#I
($ in thousands) 1985 1984 Domeshc Olhces: Deposits by foreign depositors in domestic oflices at December 31,1985, tond $ 43.859 $ 47,110 1984 and 1983 were $3,977000,000, $3,684,000,000 ond I hbimprovements $3.272,000.000,respectively. Equipment 450.984 372,375
**'"' """' ' 6' ' 53
' 'd '3 ' ' '8 Note 10.Other Borrowed Money Ovmros Of hces, Bu dings 1 I A summary of Other Borrowed Money of December 31,1985 and 1984 lsosehold improvements 88,520 69,322 fo!!ows:
Equipment 205.895 148.741 Totd Overseas Of hces 533.300 413,120 l$ in thousands) 1985 1984 TotoI Premises ond Equipment, Gross I.600,453 1,344,318 Maturir.g Within onn Year: less: Accumulated Depreciohon Bank: ond Amortization 686.873 550,772 Domeshc Of hces: 5 9I3,580 $ 793.546 Term Federolfunds 5 233.113 $ 358,712 Totd Premises and Equipment Notes issued to U S. Treasury
" Department 900,000 456.347 Premises and equipment includes capitolized leases, pnncipally those Student Loon Marketing related to butidings which omounted to $33 million at December 31,1985. Asswohcm 125,000 225.000 Other Borrowings 18,248 25.035 Depreciation and omortization of premises and equpx.ent lodhe y; ors 1985,1984 ond 1983 omounted to $138,440.000, $108,010,000 and
$81,252,000, respectively O'*'2'chites
, 237,I i 1 227,116 Other Borrowmgs 1,152,675 525.887 Bonkog Subsidiones of Company:
Stud 3ntloan Marketing Association- 611.250 391.000 Note 8.Other Assets other Borrowm9, Nonbanking Subsidiones of Company _ 293.543 100,678 87.584 61,849 Matunng After One Year: A summary of Other Assets of December 31,1985 and 1984 follows Company: Floating Rote Eatendable Notes ($ in thousandsl 1985 1934 (Due 1992) 299,784 299,672 Flooting Rote Extendoble Notes Accounts Receivoble $1,138,100 $ 722.094 249,746 (Ove 1997) - Due for Secunhes Sold 601,435 246,900 Flouhag Rote Notes (Due 1999) 24.118 25,975 Red Esiote Properties Acquired Bank. in Sohsfoction ofloans 100.480 89,711 Domeshc Of hces: Investmentsin AssociotedComponies I16,974 72.062 Student loon Markehng Other 1.056.200 827.598 Assooohon - 125.000 Totd Other Assets $3.013,189 $1.958.365 Other Borrowngs 866 8.798 Overseos Of fices 344,168 329,404 Ebnkog Subsidiones of Company: Student loon Markenng Assoootion 38,750 45.000 Other Bc,rrowinos 42.944 44.067 Totd Other Borrowed Money $ 4.671.994 $3.236.446 l 1 57 J
n Interest rotes on the borrowings from the Student toon Marketing The Company has two Eurodollor Revolmg Credit Agrnments with Association,which ora s: cured by student loons held in the Bank's pcrtfolio, groups of bon!ang institutions,one for $200 mAon expiring June 1,1986, and on the Flooting Rote Extendoble Notes (Due 1992) and the Floating and one for $300 million expinng February 28,1989.Under the terms of each Rote Notes (Due 1999) are determined by formulos based on the yield of ogreement, the Company may borrow, renew,repoy and reborrow, from three-month U.S. Treasury bills.The interest rate on the Flooting Rote Extend. time to time, $10 mAon or o muinple thereof,with repayment due in three or oble Notes (Due 1997) hos been fixed at 900% through June 14,1987 ond six months,os the Company elects. Borrowings under eoch ogreement bear will thereof ter be od iusted on each June 15, storting in 1987 to a rote, or to o interest of the greater of London interbonk of fered rotes (LIBOR) plus % of 1%
. rote to be determined pursuont to o formulo, established by the Company per annum,or 7% for the $200 million focihty and at the greater of LIBOR The interest rates in elfect on these borrowings at December 31,1985 and plus 4 of 1% per annum, or 6% for the $300 million facility. Eoch ogreement 1984 follows - requires payment of commitment fees of 4 of 1%.Such fees are reported os interest expense.There were no borrowings under these or smlior ogree- . Interest Rates 1985 1984 ments during 1985,1984 or 1983.
Student Loon Marketog Association 8.70% 9.69%
' floating Rote Emtendable Notes (Due 1992) 7.82% 8,68%
Fboting Rote E a tendable Notes (Due 1997) _ 9.00% - Flootag Rote Notes (Due 1999) 8.35% 10.20% Note 11. Long-Term Notes and Debentures A sumrnory of long. Term Notes and Debentures outstanding of December 31,1985 and 1984 and certoin opplicable terms follows: Interest Amount Outstondog Other ($ in thousandsl Motunty Date Rote (1) 1985 1984 Dato 12) Earl TheChoseManhatvonBank.N A.: Capitol Notes 1986 8h% $ 200.000 $ 200.000 S CapitolNotes 1990 4.60% 3,833 4.288 5 Floccing Rote Subordinated Debenture 1996 8%(10W)% 400,000 400,000 S,P Chose Monhoiton Overseas Bonking Corporotion: Floating Rote Notes 1993 8%(124)% 150.000 150.000 G Deutsche Mark Bearer Bonds 1993 6% 32,300 28.976 GF Swiss fronc Bonds 1993 4% 30,288 25.839 G,F Chase Monhotton SA. French Franc Floating Rote Bonds 1992 9.88(11.53)% 97,485 78.411 S.G - French Franc Floot ng Rote Bonds 1993 10.30% 45,493 - 5.G Nederlandse Crediesbonk NL NCB Notes ond Debentures 1986-2002 7412b% 72.433 65.653 $ Total I,031,832 953.167 Choss Monhotton National Corporohon: Copdol Notes 1986-1989 4.70% 3.976 4.336 F Debentures 1992 6%% 7,250 ?250 F Debentures 1996 8b% 21.090 21.090 G,F Total 32.316 32,676 Company: Zero Coupon Notes 1992 14%% 72.964 63.602 Notes issued with Detochable EquafContracts 1992 154 % 150,000 150.000 P Convertible CapitalNotes 1993 45% 7,245 9,989 5 Floating Rote Subordinated Notes 1995 8W19%)% 348,843 348,726 S.P Flooting Ra'e Subordinoted Notes 1996 8b(10NJ% 398.632 398,499 S.P Convertible Subordinated Debentures 1996 6b% 57,282 81,154 5 Flootog Rote Subordinated Notes 1997 84% 175.000 - 5 Floating Rote Subordinated Notes 2000 8W% 250,000 - S
' flootog Rote Subord noted N tes 2009 8N(9%)% 400.000 400,000 S Flooteg Rote Notes 2009 8.20(I 1.30j% 282.385 282.385 F Total 2.142.351 I.734.355 less: Investment by the Company m floonng Rote Subordinated Debenture of the Bank 400.000 400.000 Total tonmierm Notes and Debentures $2.806.499 $2,320.198 ll) The mtered rates shown for flootog rote issues are those o elfect of December 31,1985 and, e parentheses, at December 31,1984. Such mterest rates are determined by formulos, subi ect to certain mm mum rates. The rate shown for the Zero Coupon Notes, which do not bear eterest, represents a level yield to matunty on their carrymg volue, whgh mcreases os the discount on the Notes is amortged to eterest expense. The precipal amoun' of the Zero Coupon Notes is $ 175 m4on.
(2) Issues mdcated by
" 5 " -Subordmated in nght of povment to claims of depositors and/or certain other creditors, os opplicoble. " P "-Consdered pnmory capital for United States bank regulatory purposes. "G"-Guaranteed as to payment by the Company. " F "-Sub ect t to sinkmg fund requirements.
58
r-Except for the Notes of the Company issued with detachable pnor to moturity. .
' Equity Contracts,the CMNC 4.70% CopitolNotes and the NCB Notes The principal amounts of moturities and sinkirs fund r;quirements for and Debentures,oB of the long Term Notes and Debentures are Long-Term Notes and Debentures during coch of the five years commencing redeemobie in whole,or in port,of the option of the Corporotron, January 1,1986 follow:
Capitol Capital . Deutsche Smss Aggregote Aggregote Notes Notes Mark 8eorer Franc of NCB of CMNC (8k% (460% Bonds (6% Bonds (4% Notes and Notes and Due 1986) Due 1990) Due 1993) Due 19931 Debentures Debentures Total l$ in thousands) 1986 $200,000 - $ 2,844 $1,683 $ 4,310 $ 361 $209,198 1987 - - 4,063 1,683 4,310 361 10,417 1988 - - 4,063 1,683 4,310 361 10,417 1989 - - 4.063 1,683 5,968 2.893 14.607 1990 -
$3.833 4.063 1,683 4.642 - 14.221 five# eor Total $200,000 $3.833 $ 19.096 $8.415 - $23.540 $3.976 $258.860 The per shore price of which the Convertible Copital Notes are con- Purchases of certoin Long. Term Notes and Debentures, at a discount, vertible into common stock of the Company was od iusted in 1984 from resulted in goins of $187 thousand, $2,971 thousond and $294 thousand, . $2750 to $2Zi665.The conversion price of the Convertible Subordinated before opplicable income toxes,in 1985,1984 and 1983, respectivelyThese Deb:ritures is $28.75 per shore.(Per shore amounts restated to reflect gains are reported in Otherincome.
the two-for one stock split declared January 15,1986), The pnncipal of the Flooting Rote Subordinated Notes due 1995 is to be During 1985, foreign exchange tronslation odiustments pertoining to the repaid with the net proceeds from the issue of shores of common stock or Deutsche Mark Bearer 8onds and the Swiss Franc Bonds were $6,884 nonredeemoble preferred stock of the Compony which have been depos.
; thousand and $5,898 thousand,respectively in addition, $3,561 thousand ited in a " Note Fund" created pursuont to the indenture unds which the pnncipal amount of the Deutsche Mark Beorer Bonds and $1,449 thousand Notes were issued.The Note Fund ;s exp ;cted to provido o source of funds pnncipol amount of the Swiss Franc Bonds were repurchased during 1985. for the payment of the Notes, but dom not constitute security for the Notes.
Note 12. Redeemable Preferred Stock A summary of Redeemable Prefermd Stock of the Company (stated value Dividends on shores of Series B and C are payable quorterly and ore
$100 per shore) outstanding or December 31,1985,1984 ond 1983 is os cumulo:ive. Shores of Series B ond C have liquidation preferences of $100 follows; per shore, plus occrued and unpoid dividends. Holders of shores of Series B ond C generally have only contingent voting rights.There are no redempton Stat rd Value ($ e thousandst 1985 1984 1983 requirements for either series of preferred stock dunng the next five years.
6t% Senes 8 (297,583 Shores, Both the Series B ond th'e Senes C shores moy be redeemed, as a whole 297,583 Shores and 640,000 or in port,of any time,of the opton of the Company at $100 per shore plus Shores,Respectwely) 529.758 $29,758 $ 64,000 occrued and unpoid dwidends. Beginning on Apnl 15,1999, and on each 3 S r nd 0y Apnl 15 thereof ter, the Company is to redeem, through on annuol sinking fund,5% of the nuanum number of shores of Senes B ond Series C,until all Shores.Respectwelyi 31.880 31.880 86.000 such shores are redeemed. During 1984, the Corporation retired through o TotalRedeemoble PreferredStock cash tender of fer 342,417 shores of Series B and 541,204 shores of Series C (616,379 Shores.616,379 Shores and I,500,000 Shores, ($88 mAon stated value), resulting in a $28 million gain that was credited to Respectivelyl $61.638 $61.638 $ 150.000 Surplus. Note 13. Nonredeemable Preferred Stock A sunnory of Nonredeemoble Preferred Stock of the Company (stated Dwidends on shares of Senes D,E ond F ore payable quarterly and volus $50 per share) outstonding of December 31,1985,1984 and 1983 is os are cumulative. Shores of Senes D E ond F have hquidoton preferences of follows: $50 per shore, plus accrued ond unpond divjdends. Holders of shores of Seres D, E ond F generolly have only contingent votog rights. ($ in thousands) Seres D: The shores of Series D may be redeemed, os a whole or in port, Stated value 10 % flootog Rote Flooteg Rote Total Non- of any time,of the option of the Company,of $50 per shore plus a pre-
$50 rer Shore, Senes D Senes E"' Senes F " redeemable mium of $3.95 per shore until July 1,1986, declining thereof ter, and without premium on and of ter July 1,2000, plus occrued and unpoid dividends. Prior t no ots S es Shar c December 31,1985 _ $125.000 $250,000 $226,987 $601,987 December 31,1984 125,000 25(1,000 226,987 601,987 pr ceedsof cert inrefin ncing per ti nsif theeifectivecostof moneyto December 31.1983_ 125,000 25L000 - 375.000 the Company is less than the dividend rate on shores of Series D.
Adi ustable Dmdend Senes E:The shores of Series E ore not redeemable until June 1,1987 when Rates. they will be redeemoble,os a whole or in port.ot the opton of the Company, Minimum Rote _ - 7h% 6% of $51.50 per shore until June 1,1992,and thereof ter at $50 per shore,in Monimum Rote _ - 16 % 15% each cose plus occrued and unpoid dividends. Di o y ,( e Senes F: In connection with the merger of Lincoln into CMNC,4.539,737 shores of Senes F were tssued in July 1984.The shores of Series F ore not December 31.1985 10 5% 11.30% 9.75% December 31,1984 10.5% 13.I5% redeemoble until July 1,1989, when they will be redeemoble, as a whole or in December 31.1983 port,et tFe npt on i of the Company.of $50 per shore, plus accrued and Notes based on certoin money mortet rotes, except the init,ol dmderids on See ses f ""E 5' for each of the best four dmdend penods ending August 31.1984. November 30. The shores of Senes D, E ond F ore not sub i ect to ony sisiing fund or other 1984,Februory 28.1985 and May 36,1985 were of the rate of $3.10 per shore. repurchase or retirement obligation of the Company 59
- Notel4 Common' Stockholders' Equity
~ A summary of shores of common stock reserved for issvonca os of prics per shors, but not iess than $41.67 per shora (per shors amounts ra-December 31,1985 follows: stated for two-for-one stock split declared January 15,1986).Such purchase obligotions are subject to odiustment in certoin events and may be poid,in Shores Ruserved' whole or in port, by surrender to the Company of specified obligotions.
4 % Convertible Copital Notes 325,990 Interest on the Flooting Rote Subordinated Notes due 1996 on eoch 6h% Convert.ble Subordinated Debentures 1.992,846 interest payment date is payable in shores of common stock of the Company
. Equity Contracts (Issued with the 15% Notes Due 1992) 3.599,712 to the extent that such interest is payable of the rote of 8h% per annum.
Floating Rote Subordmated Notes Due 1996 13,700,130 Dividend Reevestment and Stock Purchase Plan 7,787,330 Under the Dividend Reinvestment and Stock Purchose Plan, domestic
- 1978 Non-Qualified Stock Option Plan 473,178 stockholders of record, without payment of service charges or brokeroge 1982 tong Term incenhve Plan 1,763,222 commissions, may reinvest all or port of their quarterly common stock divi-
~ bncoS First 1982 incentive Stock Plan 73.952 dends in shores of common stock at prices 5% below current overoge Total 29.716.360 market prices and may purchase up to $3,000 per quarter in additional common shores at current overage market prices.
- Restated for two-for one stock spkt dectored Jonvory 15,1986.
Unless full cumulative dividends have been paid on all of the outstonding The Equity Contracts, which were sold with the 15b% Notes due 1992 os shores of Nonredeemoble and Redeemoble Preferred Stock of the units (each consisting of $1,000 pnncipal omount of such Notes and Company and the Company is not in defoult or in arrears with respect to
$1,000 Equity Contract),are detochable from the 15h% Notes and obligote any sinking fund or redemption requirement, no cosh dividends may be paid the registered owners to purchase on May 1,1992, shores of the Company's on or any payments mode to purchase or redeem any shores of common common sto.k of a price of $48.78 per shore or the then current market stock of the Company.
Note 15. Stock Option and incentive Plans A summory of changes in shores of common stock under option for the years 1985 ond 1984 is shown below? Option Pnce Market Value Stock Options Stock with Apprecohon Per Aggregate Per Aggregate Options Rights Shore ($ in thousands) Shore ($ in thousands) Outstonding at December 31,1983 559,890 430,642 $16%r26b $22,524 $22"/ . $22,473 Gronted dunng l984 174,896 117,504 19 % 5,684 19N 5,684 L5coln first Plon Assumed 152,582 13.958 6 617 19.45 2,818 232 % 3,981 Exercised during l984 (9,752) [32,286) 16%r23% (759) 232%2-25 % (1,008) Conceled dunno 1984 (36,802) 126.950) 16%r26% (1,408) 21%-24 (1,403) Outstonding ot Decernber 31,1984 840,814 502,868 6 617 26N 28,859 232 % 32,122 Granted dunng l985 201,566 228,234 31 13,391 31 % 13,391 Exerosed during l985 {l89.660) (88,156) 6.617 26N (5,243) 25.125-34 'N (8,185) Conceled durogl985 (9.808) f6.392) 19 31 % 1396) 24 h-36% (488; Outstondinn ot December 31.1985 842.912 636,554 $6.617 31 $36.611 $36% $53,816 E terosoble ct December 31,1984 555,840 371,406 $6.617 26% $20,763 $232% $22.167 Exerosobre at December 31,1985 644.554 411,112 $6.617-26N $23.407 $36% $38.400
%nounts restored to reflect two for-one stock spht dectored January 15,1986.
Ths Chase Manhatton 1982 Long Term lncentive Plan (the 1982 Plan) The total number of shores of common stock which may be issued provides for the granting of three types of awards to key personnel: optioris with respect to awards under the 1982 Plon and the fotoi number of per-to purchase shores of common stock with or without related stock oppre- formance shore units which may be granted under the 1982 Plan may not ciation rights, restricted stock units and performance shore units. exceed 1,809,030 shores and 536,400 units, respectively (shores and units Pursuont to the Lincoln ocquisition, options with or without related stock restated for two-for-one stock split declared January 15,1986), At December oppreciation rights outstanding under the Lincoln 1982 Incentive Stock Pion 31,198,5 ond December 31,1984, respectively,494,200 ond 1,019,400 shores wers assumed by the Company and restricted shores of common stock of of common stock { shore on$ounts restated for two-for-one stock split de-Lincoln were converted into restncted shores of common stock of the Com- clored January 15,1986) were ovoiloble for issuance with respect to future pony grants or awards under the 1982 Plon, Under the 1982 Plon, options to purchase stock are granted at pnces not Dunng 1985 and 1984,127.900 and 73,500 restricted stock units and less than the market price per shore on the date of grant and ore exen 91.000 ond 96,500 pedormance shore units (units restated for two-for-one cisable not less than one year nor more than ten years from the dote of stock spht dedored Januory 15,1986) were granted, respechvely Compen-grant. Stock oppreaction nghts permit their holders to surrender related sotion expense is recorded over the service penod based on the bir cerersoble options,or any portion thereof,in exchange for cash or stock in market value of the common stock of the Company or the end of each on omount equal to the excess of the market price of the common stock on reported penod.The fair market value (morket value restated for two-for. the dote the right is exercised over the related option price. one stock spht declared January 15,1986) of the common stock of Decem-tstncted stock uruts and restricted stock into which units may be con- ber 31,1985 and 1984 was $36% and $23%,respectively verted entitle their holders to receive common stock of ter o certoin period Compensation expense for stock oppreciation nghts associated with of continued employment.The ho!ders of restricted stock units are entitled to non-quohfied s:ock options granted under the 1982 Plan or the 1978 Non-rec:ive cash payments equivolent to the dividends which would have been Qualified Stock Option Plan is recorded based upon the amount by which received if the units were common stock. the market pnce of the common stock of the end of each reported penod Per formance shore units entitle their holders to receive cosh, shores of exceeds the option pnce.
' common stock or o combination of cash and common stock of the end of the For 1985,1984 and 1983, compensation expense of $12,914,000, performance period upon the satisfactory of toinment of specified financ 01 $3.612.000 and $1,812,000,respectively, was recognized in connection with goals ond deportmentolobrectives- Stoc k oppreaction rights, restncted stoc k units ond performove shore units.
60
Note 16. Regulatory Limitations securrd by U.S. Treasury or other specified co!!aterol Further, such securzd extensions of credit by each bank are limited in omount as to the Company National banks are subject to legallimitorions on the amount of dividends or any such of fdicte to 10 per cent of each bonk's capitol and surplus and os that con be pond to their shareholders.The opprovolof the Comptroller of to the Company and all >uch of fJiotes in the oggregate to 20 per cent of the Currencyis requiredif the totalof alldividends dectored by a notional each bank's capitaland surplus. Lank in any cdendor year exceeds such bank's net profits (os defined) for
~t hat year, combined with its retained net profits for the preceding two cdondor yea,,,iess ony , qu,rea ,,onsre,5,o surp6s.under this simitoten. Note 1Z Recovery of Payments on,and the Bank, Chose lincoln First Bonk, N.A. and The Chose Monhot ton Bank
[jC]uidation of, Assumed U.S. Government
- (USA), N.A.could declare dividends in 1986,without opprovol of the Comp-troller of the Currency,of opproximately $352,000,000,$74,000,000 ond beCurii.les Pos.tions i .
$118,000,000, respectively, plus on addihond amount equal to each bank's retoined net profits for 1986 up to the date of any dividend dectoratiort in 1984, the Corporation recovered $49 million ($20 million of ter taxes)
The Federd Reserve Act imposes vonous legal limitotions on the extent to os result of its set elements with certoin defendonis in the action it brought which banks which ore members of the Federd Reserve System con finonce C' gainst Drysdde Secunties Corporonon,Drysdale Government Secunties, or otherwise :vpply funds to certoin of their offiliates.in porticulor,each Inc. ond others to recover o special loss (incurred by the Corporation in borA is subject to certoin restoctions on any extensions of credit to, or other 1982,related to the liquidation of securities positions assumed from covered tronsactions, such as certain purchases of assets,with the Com. . Drysdde Govemment Secunties. Inc. or d performance by the Bonk of pony, or such of fJiotes. Such restrictions prevent each bank from lending to obligonons related to those posihons) and of the net recovery realized by the Company and such of hinotes unless such extensions of credit are the Corporation on certoin other transactions reloung to the Drysdde - situottort Note 18. International Activities Intemational activines include the business conducted by overseas of fices, ginalcostof fundsconcept. os well as international business conducted from domestic oflices, pnn- - Allocation of expenses incurred by one geogrophic oreo on behdf of cipotly the Head Of hce in New York. Becouse of the close integration of the another,induding generd and administrofive costs. Corporation's foreign and domestic octivities.it is dilficult to eshn ate the -Provision for Possible toon losses based on charge-ofI experience and amount of ossets, liabilities, income and expenses of tributable to inter. risk chorocteristics of the portfolio, including on allocation of the total nahonal activines. Such ornounts are based on internol ollocotions and Reserve for Possible toon losses to intemohonal activities. ollowances,whch are necessonly subjective.Soch ollocations of ossets, -Allowance for the dif ferences between foreign and United States tax income and expenses to geographic oreos are based on the domiciles of rotes. the obligors.The principol internd diocations and ollowances used to esti- The fdiowing table sets forth estimatedTotal Assets at December 31,1985, mota the assets, income and expenses related to intemational ochvities are 1984 and 1983, respectively, and Gross income, Gross Expenses. Income os fdlows. BeforeTaxes and Net income for the respective years then ended:
- Allocation of the cost of funds based substonhally on a computed mor.
1985 income ($ in milions) Total Assets Grossincome Gross Expenses BeforeToxes Neilncome Domeshc $46.860 $4.709 $4.170 $539 $371 International: Asio 9.070 925 842 83 50 Europe _ 15.550 1,645 1,570 75 41 M.dd!e East and Afnco 2,080 197 208 lil) 16) Westem Hem sphere 14.130 2,257 2.045 212 109 Tord intemational 40.830 5.024 4.665 359 194 Totd $87.690 $9.733 $8.835 $898 $565 1984 income - ($ in mAons) Total Assets Gross income Gioss E wpenses BeforeToxes Net income Domeshe $44.140 $4.409 $3.914 $495 $299 Intemahond. Asia 10.910 1,055 1,025 30 21 Europe 14.800 1,664 1.654 10 16 Middle Eost and Afnco 2.690 266 264 2 4 r wgstem Hemisphere 14.340 2.487 2.395 92 66 Totd intemational 42.740 5.472 5.338 134 107 Tord $86.880 $9.881 $9.252 $629 $406 1983 Income l$ in melliors) Total Assets Gross tncome Gross E =penses Beforefoxes Net income Domeshe $35.570 $3.580 $3.145 $435 $249 int";mobonal: As o i2.400 958 885 73 49 Europe 16.150 1.514 1.473 41 33 M:ddle East and Ainco 3,540 288 255 33 24 W1 stem Hemisphere i4.260 2.183 2.062 121 75 Totd intemational 46 350 4.943 4.675 268 181 Tota $81.920 $8.523 $7.820 $703 $430 61
$ The following is on onolysis of certoin osset and liability accounts related Note 19. Pension Plans I
to international octuities at December 31,1985 and 1984: The Corporation hos o number of pension plans covering substantioily ($ m maonsi 1985 1984 oft employees.The cost of the plans charged to operating expenses in 1985,1984 ond 1983 was $41,203.000, $45.265,000 ond $4Z363.000, Cosh and Nonnterest.Beanng Deposats $ 690- $ 551 Intenrst- Beanno Deposits Placed with Bank s 4.442 4.11I respectively,induding $18,968,000, $1Z085,000 ond $33.38Z000 respectively,f r the Corporation's major defned benefit piort Post service toons (Obl. Domiated Outside the United States): costs were fully funded in prior years.
. Ir:clude cons-Domestic Of fices $ 404- $ 421 Includedin toons-Overseas Oflices 29.219 31.753 The calculation of the cost of the Corporation's motor plan in 1985 32,174 ond 1984 is bases on on interest rote assumption which was revised in 1984 Totd toons. Gross 29.623 tess: Uneorned Discount 215 209 from 8.0% to 8.85% to better reflect recent experience and future expecto-Totd ic,u.
tions. Had the current assumption been used in 1983, pension costs for 1%3
$29.408 $31.965 w u d have been $14 million lower than reported A Summary ofloons byType:
$ 1,919 $ 1,814 The octuonal present value of occumulated plon benefits and plan R:d Estate Govemment and O;hcid institutions 3,786 3.781 net assets cet their estimated market value for all defined benefit plans and Banks and 02her Financiol institutions 3,277 4.796 for the Corporation's major defined benefit pion at December 31,1985 Commersiol ond industriol 18.253 19,870 and 1984 follow:
Other 2.388 I.913 Torol toons. Gross 29,623 32,174 All Plans Moiw Plon less: Uneorned Discount 215 209 ($ m millions) 1985 1984 1985 1984 Tc:alloons $29.408 $31,965
- Actuarial Present Volue Deposits: of AccumulatedPlanBenefits:
Foreign Bonks $ 7.345 5 8.570 Vested $451 $395 $347 $320 Foreign Governments and Olhcid lnstitutions _ 2.635 3,438 Nonvested 53 47 44 ' 40 Other foreign Demond Deposits _ 4,524 3.429 Total $504 $442 5391 $360
- Other forexpTnne and Sovmos Deposits 18,196 19.043
$32,700 Net Assets Bendits W8 $753 $750 $606 Total Deposits $34.480 eunueu Fu% Borrowed. In determining the present value of occumulated plan benefits for the Other Borrowed Money $ l.829 $ 1,139 Corporation's motor defined benefit plon and other plans,o rote of return Commercid Paper of Bonk Subsid.ories 146 75 opproximotog 8.85% was assumed.in oddition to providing pension bene-Long. Term Notes and Debentures 428 349 fits, the Corporation provides certain health core and hfe insurance benefits Totalfunds Borrowed 5 2.403 for retired employees.The Corporotion recognizes the cost of providing these benefim by expensing them in the year incurred The 1985 expense Th2 table below shows cross-border outstondings for the countries to P* *'"*" #"* " " " ' ' " ' ** "
which such outstondings totaled more than one per cent of Total Assets of December 31.1985 ond 1984: Note 20.InComeTaxes Percentage of ($ m millions) Total Tord Assets The following table sets forth the income before taxes from domestic and landings at December 31,1985: I rei 9" Perotions for the years ended December 31,1985,1984 and 1983,
$3 020 3M Brant 2.820 3.2 mspectively. As specifically defoed by the Secunties and Exchange United Kingdom 2,740 3.1 Commission for this purpose, the determination of the income of foreign Mexico 1,680 1.9 operations is based on the fact that such operations are located outside West Germany 1,420 1.6 the United States.
Venezuelo 1,250 1.4 Fronce 930 1.1 Argentmo 920 1.1 I$ m thousands! 1985 1984 1983 Domestic locations $615,535 $439,454 $376,189 - Outstandings at December 31,1984: Foreigniocations 282.048 I89.095 326.516 Japon $ 2.980 3.4% United Kogdom 2 840 3.3 Total $897.583 $628.549 $702.705 Brazil - 2.830 3.3 " """"" "'"""""
- Mexico 1.750 20 investment securities gains (losses) included in income before taxes and West Germany 1,690 1.9 the opphcoble taxes for the years ended December 31,1985,1984 and h[*gg [j 1983 respectively, were as follows:
Korso 1.230 1.4 ($ m thousands) 1985 1984 1983 income alter opplicoble income taxes of overseas of fices not included in lovestment Secunties Gains [ tosses) __ $98,106 $16,704 $24.793 consohdoted net income because of restrictions on the remittonce of income, Applic.oble income Taxes (Benef,ts) _._ 49.182 8.839 13.341 net of poor years' remitronces,was $(3.1) milhon, $.4 milhon and $(3.2) milhon Inves, men, Secunties Gains (tossesl for the years ended December 31,1985,1984 ond 1983,respectively Af ter Applicoble income Taxes $48.924 $ 7.865 $11.452 At December 31.1985. the cumulative amount of such income not included was $1.3 milhon. In the years 1985,1984 ond 1983, net foreign exchange translation loss:s on investments in overseos bronches, subsidiaries and ossociated l l componies, mcluded in income, amounted to opproximotely $91 milhon,
$15,2 milhon ond $273 milhon, respectively, of ter opplicable income taxes.
62
o.
. The current and deferred tax provisions for tha years ended December The pnncipal items which caused the timing dilIerences result:ng in
' 31,1985,1984 or.d 1983, respecticly,were os follows: deferred taxes in the years ended December 31,1985,1984 ond 1983, respectively,and the tox eflect of each follow
($ in thousands! 1985 1984 1983 Current, - ($ m thousonds) 1985- 1984- 1983
' F:;deral $ 27,102 $ 31,125 - ' $ 12,102 toon toss Deduction for tncomeTox State ondlocal '43.792 14,329 10.643 Purposes (Under) Over Provision Foreion 158.992 102.753 100,930' for Posuble Loon tosses Charged TotalCurrent 229.886 148.207 123.675 to Expenses $!40.968) $ [26,725) $ 55,537 Undiserbuted Earnings of Overseas Deferred: Subsidiones and Associoted Federal 95,086 80.442 140,347 Companies 9,181 48,374 15.818 4.515 State andlocal (i4,017) 4I,706 leose FnoncingTronsoctions and foreign (11.8301 (24.651) (13.774)
Premises ond Equipment 80.990 75,179 33,224 TotolDeferred 69.239 104,165 168.279 Interest on Nonouruol toons (2,666) (22.288) 39,555 toon interest Subi ectio Refund Total Provision forincomeTones $299.125 $252.372 $291.954 18,206 - 2,311
' " " " (CAP loon interest) (250)
Other-Net 16.315 50.612 33.137
. Although not oflectog the total tax provision, current tax payments may TotoIProvision for DeferredTaxes 5 69.239 $ 104.165 $ 168.279 dilfer from the amounts treated above os current pending the hnol nummumm
- determinations os to the timing of certoin income, deductions and credits. Toxes,other than taxes on income,omounted to $151 mdlion, $132 million The eifects.if any,of these determinations are reflected n the following year. and $118 mdlion for the years 1985,1984 ond 1983, respectively.
The provisions for income taxes for each of the years ended December 31,1985,1984 ond 1983, respectively, vary from the amounts computed by applying the opplicable U.S. Federahncome tax rote to income before taxes.The pnncipal reasons for these dif ferences,which result in o lower ef fective tax rate, follow: 1985 1984 1983
. . Percent of Income Percent of income Percent of ncome
- ($ in thousands) Amount BeforeTaxes Amount BeforeTones Amount BeforeTaxes Provision Apphcoble to Net income at U S.
FederollncomeTox Rote - $412,888 46 00% $289.133 46.00% $323,244 ' 46.00%
. Increase (Decreaseh Tox-E xernpt Interest on Investments in Sto+e and PoliticalSubdivision Secunties (64,191) (7.15) (52.715) (8.39) (38.006) (5.41)
' Tox Exemptinterest-loons (50,371) (5.61) (44,837} (7.13) (34.335) (4.89)
State and localincomeToxes, Net of federollncomeTox Benefits _ 21,858 2.44 23.714 3.77 21,730 3.09 Other-Net 12.581 1.39 7.436 1.19 465 .07 Provision Applicable to Net income 332,765 37.07 222.731 35 44 273,098 38.86 Provision Applicoble to Foreign E xchange Translation Adi ustments included m Stockholders' Equity (33.640} (2 30) 29,641 2.69 18.856 2.08 Total Provision for tncomeioxes $299.125 34.77% $252.372 38.13% $291.954 40.94%
- Note 21. Earnings per Common Share Note 23. Commitments and Pnmary earnings per common shore amounts are computed by divid.ng Contingentliabilities l Net income offer deduction of preferred stock dividends by the overage in the normal course of business, the Corporation makes various commit-nenber of common shores outstanding dunng the period. Per common ments and incurs certoin contingent liabihties which are not reflected in the
- shore amounts assuming full dilution give elfect to the assumed conversion accompanying financial statements. A summary of certain of these commit-of oli outstonding convertible capitol notes and debentures and the ossumed ments and contingent liobilities of December 31,1985 follows:
cxercise of outstonding ddutive stock options and conversion of restnct. ed stock units. Averego common shores on a fully diluted basis for the ($ in thousands) years 1985,1984 and 1983 were 78,553.000,74,835.000 and 72.646,000, Ex respectively,(restoted for two-for-one stock spht declared January 15,1986). h 'j"* y*g*,,'gt d Foreign Of fice Guarantees , 000 Other letters of Credit 2.600.000 Foreign E xchange Contracts-Purchases 80.900,000 Note 22. Pledged Assets and Requ. ired Reserves ruturesandFor oraContracts Commitments to Purchase 2,200,000 Comen tments to
- Pledged ossets consisted of certoin nvestment and trading occount securi- gy g, , p ,,, c, o s So d ties ond other ossets oggregoring opproximately $6.1 billion at December 31.1985.of these, opproximately $1.3 bilkon were pledged to secure repurchase ogreements and opproximotely $4.8 bil',on were pledged to g ggg g secure public and trust deposits and for other purposes. Total stondby letters of credit and foreign of fice guorontees (SBLCs) have I In addition, the Bank and certain bonking subsid.ories of the Company been reduced by opproximately $2.1 billion for SBtCs participated to other ore required to maintain overage reserves on deposit with federal Reserve finonoolinstitutions or collaterolized by cash or marketoble secunties. Fees Banks agornst outstond ng dornestic deposet liabdities.The reserves, which from issuing SBtCs are recognized pnncipolfy over the penod to maturity.
are induded in Cash ond Due from Bonks, were $383 mdhon and $390 tosses. if any, are chorged to the Reserve for Possible toon tosses.These million of December 31,1985 ond 1984,respectively. Average required SBtCs have on overage nsk prof de comparable to investment grade reserves dunng 1985 and 1984 were $746 milhon and $595 mill on, obhgotions. respectively. 63
1 . sBtCs have beenissuedin suppor of the foliowir.g obligotions Note 24. Litigation Approximate Various octions and proceedings are pending ogoinst the Company, the
. gema,n,ng Bank and certoin of their subsidiories,in which claims for substontial money .
Average domoges are osserted. Monogement, of ter consultation with legal counsel, Mo'unhe5 is of the opinion that the ultimate ellect on the Corporation of all such Percentooe (Months) ctions and proceedings would not be material in relation to its Pn o sdebt. 15% 30 financiol position. .
- Public debt _ _ 5 60 Purthose of products and services 45 10
,her 35 '
Note 25. Fees and Commissions Interest-Rote Swops Fees and Cornmissions included trust and fiduciory investment fees of I
$193,334,000, $154,056,000 ond $119,589,000 for the yeors 1985,1984 Notional principal on outstonding interest-rote swap transoctions in which and 1983,respectively.
Chose acts os pnncipal opproximated $10 bJlion at December 31,1985. The hypothetical risk associated with these contracts colculated on o present volve basis using current market rotes opproximated $270 Note 26. Notes Receivable From maon at December au985 Because this analysis is based on curra' Nonbanking Subsidiaries (Company Only market rotes, this omount wJhncrease or decrease during the life of the contracts pnmonly as a function of moturity and market interest rates. Financial Statements) Guarantees Notes Receivable from Nonbonking Subsidiones of the Company are evidenced by promissory notes.The overage interest rates eamed on these The Company,in the normal course of business, may guorontee the notes were 980%,11.73% and 11.60% for the years 1985,1984 ond 1983, obligations of its subsidiaries. A summary of certoin of these guorontees respectivelyThese notes represent funding of the nonbanking subsidiories. or December 31,1985 follows:
-The Chase Manhatton Bank of Conodo-op to Conodion $500 million or Note 2Z Summarized Financial information of its equivalent n of r currencies for commerciol paper, acceptances and Chase Manhattan National Corporation -The Chase Monhatton Bank (USA), N. A.-$ 350 million in borrowings from On July 1,1984, Lincoln merged into CMNC os further discussed in Note 3 of the Student Loon Marketing Association secured by student loons held in the Notes to Financial Statements.The following summarized financial dofo ths Bank's port folio, of CMNC,are being reported because o class of Lincoln's debt securities -Chose Monhotton Overseas Boniang Corporation-$150,000,000 ore publicly held. In connection with the merger CMNC assumed, and (pnncipol amount} of unsecured Floating Rote Notes due 1993, $32,300,000 subsequently the Company guoronteed, Lincoln's 8h% Debentures due (Deutsche Mark 79,500,000) (principal amount) of unsecured 6% Deutsche Mark Bearer Bonds due 1993 and $30,288.000 (Swiss Franc 63,000,000) 1996. Set forth below is summarized financialinformation for CMNC ond Lincoln for the periods indicated. Information for periods pnor to July 1,1984 (principal omount) of unsecured 4% Swiss Franc Bonds due 1993.
is on Lincoln's historical cost basis. Subsequent informotion gives eIfect to the -
-Chose Monhot ton, S. A.-$97485,000 (French Franc 750,000,000) purchase method of occounting.
(pnncipalomount) of unsecured Floating Rote Bonds due 1992 and
$45,493,000 (French franc 350,000,000)(principol omount) of unsecured 3,o,,,,n, og incom, ingo,mo, ion Floating Rote Bonds due 1993
-Chose Monhotton National Corporation-$21.090,000 ($ ,n mai,onsi Year1985Ended December l 3 (principal amount} of unsecured 8h% Debentures due 1996. NetInterest income Af ter Provtsion These guorontees rank on a pority with all other unsecured and unsub- For Possible Loon losses $144 $157 ordinated indebtedness of the Company Net income 43 31 lease Commitments Statement of Condition information The Corporotion leases many properties under stondord reof estate December 31, leases which include renewol options and escolation clouses. Equipment ($ in mJI;onsl 1985 1984 is rented under borb long-term ond month-to-month leases. Certain of these toons $2,986 $2,621 leases are conceloble in the normol course of business without substontial Total Assets 4,164 4,227 Deposits 3.319 3,306 penalty Rental expense charged to operating expenses in 1985,1984 3 3 ond 1983 was opproximately $187,502,000, $165.735,000 and [' l,'{s 8,
$152,949,000,respectively Total tiabdit.es ond 5tockholder's f ou ty 4.164 4,227 Moimum future rentals under long-term nonconceloble operoting leases at December 31,1985 ore :,hown below:
Years - l$ nthousands!
.1986 $ 131,320 1987 116.040 1988 106.525 1989 100.061 1990 92.8I5 1991 andThereaf terlAcoreooteL_ _ 805.651 Total M.nimum Future Rentals $ I .352.412 64
.r. .-
-Independent Accountants' Report h Chose Morhotton Corpcration and Subsidones -
R
~
~1% ice 11ateriwuse 153 East 53rd Street New York,New York 10022 To the Boord of Directors and Stockholders of The Chose Monhotton Corporotion in our opinion, the occompanying consohdoted statement of condtion of The Chose Monhotton Corporation and Subsidiaries,the bolonce sheet of -.
The Chose Monhotton Corporation (Company Only) and the consolidated statement of condrion of The Chase Monhotton Bank,NA and Subsidiones and the related statements of income, changes in stockholders' equity and changes in fooncial position present fairly the financial position of - The Chose Manhatton Corporation and Subsidiories.The Chose Manhatton Corporation (Company Only) andThe Chose Monhotton Bank, NA and Subsidiories at December 31,1985 and 1984, and the results of their wero-tions and the changes in their financial position for each of the three years in the period ended December 31,1985,in conformity with generally accepted accounting principles consistently opplied. Our examinations of these statements were mode in accordonce with generolly accepted audit-ing stondords and accordingly included such tests of the accounting records - ond such other oudting procedures as we considered necessory in the - circumstances. k January 15,1986
- f 65 11
l Report of Management
' The Chose Monhotton Corporor on ord Subsid,ories - To the Stockholders
- Monogement is responsible for the co ttent of the fnonc' i ol stotements in- occountants the scopa of their oudt and oudit reports and meets with
- cluded in this annud report and the int annotion contoined in other sections ~ them on a scheduled basis to review their find ngs and any oction to be J of this annud report,which information is beheved to be consi; tent with the - token thereon. In addtion,the Committee meets seporately with the internoi content of the financial statements.Monogement beheves that the hnoncial ouditors and with Monogement to review the scope of the internal oudt statements have been prepored in conformity with generally c ccepted progrom and the performance and hndings of the internol oudt stoff and occounting principles oppropriote in the circumstances to reflect,in all mate- ony oction to be token by Monogement.The independent public occount-rid respects,the substonce of events and transactions that should be . onts and the internal ouditors have free access to the Committee without Monogement being present,os the Committee deems necessary.
( inth;ded.The hnoncial statements of necessity reflect Monogement's judg-
- The independent pubhc occountants are engoged kn ' hair annual oudit -
- ments and estanotes os to the ef fects of events and transactions that are function, to express on opinion on the Corporation's financial statements, occounted for or disclosed. .
Monogement hos long recognized the importonce of the Corporation which opinion is based on their performance of generdfy accepted maintcining and reinforcing the highest possible stonderds of conduct in di oud tog procedures believed by them to be suf ficient to provide reason-t of its octions, including the preparotion and assemination of statements _ oble assurorce that the hnonciot statements included in this onnual fairly presenting the hnoncial condition of the Corporotion.In this regard,it report are not materidly misleading ond do not contain materiol errors. has developed a system of internal accounting control which plays on i
. important role in assisting Monogement in fulkiling its responsibihties in preparing the Corporation's hnone.iol statements.The Corporation's system ofinternol accounting controlis designed to provide reasonable ossuronce that assets are soleguarded and that transactions are executed in accord-once with Monagement's outhorizations and recorded properly to permit the preparotion of hnoncial statements in accordonce with generally oc- Chairman and Chief Executive Of ficer , 'cepted accounting principles.This system is ougmented by written pohcies and procedures and by on independent worldwide internal oudit stolI, which reports to the_ Audit Committee of the Board of Directors.Monoge-ment recognizes thot because of cost-beneht considerations and other *
- inherent firnitations on the eIfectiveness of any internol accounting control ,
system, some errors and irregularities moy occur.However,Monogement believes that the Corporatioris internd occounting control system provides reasonoble assurance thot errors or irregularities that could be material to . Executive Vice President and Controller - th3 financial statements are prevented or would be detected on a timely'
. basis and corrected in the normal course of business. .
January 15,1986 The Audit Committee of the Boord of Directors, composed entirely of
- outside Directors, hos responsibAty for recommendng the independent public occountants for the Corporotion who are oppointed by the Board of Directors.The Audit Committee reviews with the independent public ,
1 1 1
. bh
.LConsolidated Summary of Assets,1.iabilities and Stockholders' Equity The Chose Monhat ton Corporation and Subsidores December 31,
($ in thousands) ~ 1985 1984 1983 1982 19 81
. Assets
. Cosh ond Due irom Bonks $ 5,574,055 $ 4.197.801 5 4.440.208 5 4,517.914 $ 3.963.010
. invest-Beonng Deposits Placed with 8anks 4,671.048 4.355.191 8,658.645 7,890,768 10,230,566 .
federal funde Sold and Securities Purchased Under Resde Agreements 1,174,371 1,293.205 175.123 363.490 592.856 Trading Account Assets 1,344.495 1.354,571 279,548 .l.202,496_ 1,113,697 bvestment Secunties
- U.S. Treasury $ecurities 1,839,207 1,734,862 984.795 f.996,359 1,253.279
. Frderol Agency Secunties 330.259 192.963 153.438 213.249 500.274 State and Politicol Subdmsson Secunties 2,410,373 2,102.785 1,582.976 1,163.651 1,356,517 Other Bonds. Notes ond Debentures 1,408.541 1.070,934 587,021 644.480 645.742 Federof Reserve 8ank and Other Stock Investments i34.012 144262 109.879 112.132 65.067
- Totollnvestment Securities 6,122.392 5.245,806 3.418,109 4.129.871 _ 3,820,879 loans 61.930.527 62.003,386 55.893,528 55.531,541 51,331,191 lassr Reserve for Possible loon tosses 907.672 761,439 564.110 558.277 541.082 loans, Net 61,022.855 61.241,947 55,329.418 54,973,264
- 50.790.109 Customers bobelity on Acceptances 2.820.47I 5,250,637 6.571.416 3.8i3.382 3.552.229 Accrued loteress Receivoble 1,028,986 1.191,949 1.072,970 1,230.567 ~1.479,525 .
Prennses ond Equipment 913.580 793,545 544.742 514.127 431.068-Other Assets 3.013.189 f .958265 -I.431.270 2.227.024 1,865.399 Toto! Assets - $ 87.685.442 $86 683.018 $81.921.449 - $80.862,903 $77.839.338 Liabilities and Srockholders' Equity Deposits: Domestic Olhces: Noninterest-8eonng $ 13.499.638 $ 11.149.045 $ 9.938,372 510.191,118 $ 9.706.147 Interest-Beonng 19.130.323 17,733.994 13,370.594 11,746,385 14.012.493 Overseas Othces: Nonenterest Beanng 1.939.120 1.423.674 1.393.139 1,449.775 1,617,831 interest-Beannq __ 26.783.968 29.373.298 31.597.452 33.470.569 29.963.199 TotolDeposits 61,353.049 59,680,011 56.299.557 56.857,847 55,299,670 federal funds Purchosed and Secunties Sold Under Repurchase Agreements 4,131,793 4,480.290 3.740.693 5.055,844 4.854,867
. Commercel Poper 3.483.501 4.408.866 4.286,458 3.316.917 4.206.208 Other Borrowed Money 4,671,994 3.236.446 3.534.634 4.366.202 1.866.146 Accrptonces Outstond.ng 2,828,696 5.362.800 .6.642.711 3.865.281 3.603.482 Accruid inforest Payable 668.961 803,730 675.913 785.803 1,057.144 Accounts Poyable. Accrued Emoenses and Other liabil.t.es 3.282.I75 2,567.995 1.789.868 2.282.856 2.919.714 80,420,169 80.540.138 76,969.834 76,530.750 73,897.231 long. Term Notes ond Debentures 2.806.499 2.320,198 1.375.790 1.045.740 944,408 Totalliabaties 83.226.668 82.860.336 78.345.624 77,576,490 74.841.639 Redecmoble Preferred Stock 61,638 61,638 150.000 150.000 280,000 Nonredeemoble Preferred Stock 601.987 601,987 375.000 375,000 125.000 Common Stockholders' Equity:
Comenon Stock . 964,472 458.246 434.262 423.951 413.615 Surplus 276.288 678.342 594,195 563,266 536.080
- Foreign Exchangeironslation Ad ustments i (22,265) (18,730) (22,341) (13,921) -
Retained Earnings 2.576,654 2.241.199 2.044.709 1.788.117 1,643.004 Total Common Stoc kholders' Eauity 3.795.149 3.359.057 3.050.825 2.761.413 2.592.699 Totoll6cb& ties ond Stockholders' Equity $ 87.685.442 $86.883.018 $81.921.449 $80.862.903 $77.839.338 l r 67
r Average Balances;lnterest and Average Rates-Taxable Equivalent The Chosa Monhotton Corporohon ond Subsidiaries 1985 Average Average Bolonce interest Rote
- l$ .n m.flions. bosed on doily overones)
Assets
- Interest-Earning Assets: $ 5,127 Interest Bear.ng Deposits Ptoced we 3anks 5 486 9.48%
l.234 105 8.55 l F2deral Funds Sold and Secunties Purchased Under Rosale Agreements 764 82 10.79-Trod.ng Account Assets Investment Secunties: Domeshc Of hces: ' U S. Treasury Securities I,836 191 10.43 240 25 10.54 Federal Agency Secunties 1,985 262 13.11 State and Polincol Subdivision Secunhes 259 27 10 41 Other Secunties 4,320 505 I l .67 TotalDomestic Of hces 1,217' 202 16.57 Overseas Oflices 5.537 707 12.74 Totallnvestment Secunhes loans: 25,202 3,064 12.16
. Domestic Of bees 36.334 4.219 11.61-Overseos Ot hces 61,536 7 283 11.83 Totalloons 833 - -
tess: Reserve for Possible toon losses
- loans, Net 60.703 7.283 11.83 TotalInterest-Earning Assets,' Net 73.365 8.663 I l .68 Summary-Grossinterest-Earning Assets: 31,247 3,714 11.88 Domestic Of hces 42.951 4.949 11.52 Overseos Othces Total Gross interest-f ormr , Assets 74.198 8,663 11.68 -
Noninterest-Earning Assets: 4,448 Cosh ond Due from Bank 5 4,025 Customers'liabatyon Acceptances Other Assets - 4.453 TotalNoninterest-Earning Assets 12.926 Total Assets $86.291 m-Llobilities ond Stodholders' Equity Interest-Bearing Liabilities: Interest.Beanng Depositu Domestic Of hces: . Savings and Negotiable Order oh Athdrowo!Depos,ts 5 I,90I $ 98 5.18% 'i Savings Certihcotes and Nest Egg Account Deposits 393 35 8.84 7,693 561 7.29 Money Market Deposits Negedoble Cortificates of Deposit 908 76 8.35 Other rime Deposits 7.348 677 9.21 Total Domeshc othces i8,243 i,447 7.93 30,705 2.829 9.21 Oveneas Of hces 48,948 4,276 8.74 Iotolinterest 8eonngDeposits Federal Funds Purchased ond Secunties Sold Under Repurchase Agreements 4.804 462 9.61 Other Borrowed Money; 5,369 476 8.86 Domeshc Of hces 1,224 215 17.59 O<erseas Of hces Toto!Other Borrowed Money 6.593 691 10.48 tongJerm Notes ond Debentures 2.525 240 9.51 Totallnterest-Bearing Liabilities 62.870 5.669 9.02 Summory-interest Bearing Liabilities: 22,240 1,800 8.10 Domesuc Of hces 40,630 3.869 9.52 Overseas Of hces -._ l Noninterest-Beorin Liabilities: 9,822 Deposits in Domeshc O hces 1,438 Deposits m Overseas Olhces Acceptonces Outstanding 4.068 Accounts Poyable Accrued Expenses and Other liobat es 3.906 TotolNoninterest Bearingliabilities 19.234 Total Liabilities _ 82,104 Redeemable Preferred Stock 62 Nonredeemoble Preferred Stock 602 Common Stockholders' Equity 3.523 Total Liabilities and Stockholders' Equity 586.29i ( amm - amminuous Tomoble Equivalent Net Interest income and Average interest Rote Spread 52.994 2.66% Netinterestincome os a Percentage of Gross Interest-Eorning Assets 4.03% n m 1
*Re'.er we kV postble locm bsses es evdeded bora rokulowns el eneroge tmionces and overaoe rotes. ca oporcoriore Nose; toon omourws dde nococuual and reduced rare loans. os onAcobla l
.g L
1984 1983 4rh Otr.1985 4th otr.1984 Average Average Average Averoge Average Average Averoge Averoge Bolonce Interest Rote Bolonce interest Rote Bolonce interest Rote Bolonce Interest Rote $ F,015 $ 774 11.03% $ 7.792 $ 732 9.40% $ 5.042 $ 121 9.56% $ 4,960 $ 138 11.08% 772 77 10.05 619 57 9.12 I,408 36 10.12 997 24 9.40 425 54 12.67 521 52 10.06 877 24 13.02 586 17 11.61 1,489 171 11.46 1,682 198 11.78 1,743 44 9.98 1,556 45 11.38 201 21 10.48 163 16 9.55 311 7 9.36 237 7 11.34 1,595 222 13.92 1,196 157 13.14 2.040 67 12.87 2.008 73 14.42 213 13 6.24 161- 16 10.16 243 6 9.63 270 4 7.37 3,498 427 12.21 3.202 387 12.10 4,337 124 11.28 4.071 129 12.61 841 94 11.18 612 109 17.71 1.418 59 16.43 1.059 35 13.32 4.339 52I I2.01 3.8 I 4 496 13.00 5,755 183 12.55 5,I30 164 12.76 22,969 3,012 13.11 19,513 2,367 12.13 26.435 808 12.13 24,958 621 13.08 36,741 4,742 12.91 34.074 4,133 12.13 35.048 1.025 11.60 37,535 1,248 13.23 59,710 7,754 12.99 53,587 6,500 12.13 61,483 1,833 11.83 62,493 2,069 13.17 659 - - 569 - - 902 - - 757 - - 59.051 7.754 12.99 53.018 6.500 12.13 60,581 1.833 12.01 61.736 2.069 13.17 71.602 9.180 12 70 65.764 7.837 11.81 73.663 2,197 11.69 73.409 2.5 12.94 27.667 3,568 12.90 23,952 2.871 11.98 32,528 967 I L80 30,525 988 12.89 44.594 5.612 12.58 42.381 4.966 11.72 42.037 1.230 11.61 43.641 1,424 12.98 F2.26I 9,I80 12.70 66.333 7.837 I I .81 74.565 2,I97 1I.69 74,I66 2,412 12.94 4.354 4.551 4,905 4.472 5.743 5.737 3,184 4,727 3.642 3.019 4.797 4.230 13.739 13.307 12.886 13.429 $85.341 $79.071 $86.549 $86.838 $ 1,611 $ 82 5.09% $ 1,440 $ 73 5.03% $ 1,909 5 25 5.12% $ 1,853 $ 24 5.14% 382 36 9.48 1,293 118 9.10 359 9 9.24 416 9 8.84 4,994 469 9.39 3,742 333 8.91 8,368 147 6.99 5,968 135 9.03 1,364 143 10.50 2,665 247 9.28 911 18 7.93 1,154 31 10.62 7,067 793 11.23 3.111 336 10.80 7.340 162 8.76 8.303 245 11.71 15.418 I,523 9.88 12,251 1,107 9.03 18 887 361 7.58 17,694 444 9.98 33.057 3.473 10.51 31,268 2.98I 9.53 29.929 (45 8.56 33.158 859 10.30 48,475 4,996 10.31 43.519 4.088 9.39 48.816 1,006 8.18 50,052 1.303 10.19 5,204 548 10.52 6.116 555 9.07 4,823 125 10.32 5,268 135 10.20 6,164 653 10.59 5.835 542 9.28 5,061 113 8.90 5,277 136 10.29 1,237 252 20.35 1.028 197 19.22 1.484 92 24.53 1,191 58 19.43 7,401 905 12.22 6.863 739 10.77 6.545 205 12.44 6,468 194 11.97 1,795 194 10.81 1.083 iC8 9.95 2.690 62 9.10 2.051 56 10.87 62.875 6.643 10.57 57,581 5.490 9.53 62.874 1.398 8.82 64.639 1.688 10 39 19,592 1,957 9.99 16,540 1,494 9.03 23,209 454 7.77 22,161 556 9.99 43.283 4.686 10.83 41.041 3.996 9.74 39.665 944 9.44 ' 1.132 10.60 _ -7.478 8,843 8,731 10,562 9,308 1,250 1,223 1.614 1,251 5.866 5.795 3,220 4.861 2.755 2.342 3.925 2.844 I8.714 I8 091 19.321 18.264 81,589 . 75 672 82,195 82.903 95 150 62 62 489 375 602 602 3.168 2.874 3.690 3.271 $85.341 $75.071 $86.549 $86.838 annummma - - nummmmmme mummmmma - - mu -
$2.537 2.13% $2.347 2.28% $ 799 2.87% $ 724 2.55%
mummmmmma - mmmmmmus 3.51% 3 54% 4.25% 3.88% mm- ammm - 69
Summary Quarterly Statement of Income for 1985 Tha Chase Monhotton Corporation ond Subsidiories Quorter Ended ($ in thousands, eutest per common shore dato) Dec. 31.1985 Sept. 30.1985 June 30.1985 March 31.1985 interest income $2,131,271 $2.068.141 $2,4 03.616 $2.114,477
' interestEmpense
_ l.398.239 1.359.071 1.442.786 1.468.679 Nrt interess income 733.032 709,070 660,830 645.798 Provision for Possible toonlosses 125.000 110.000 105.000 95.000 Net interest incorr.e Alter Provision for Poss,ble Loon losses 608.032 599.070 555.830 550.798 Other Operateg incorne 381.309 321.281 329.742 283,399 Other Operot nq Expenses 744.216 698.377 667.058 622.227 income 8eforeTomes 245.125 221.974 218,514 211,970 Applicable incomeToxes 94.445 72.550 87.699 78.071 Not income $ 150.680 $ 149.424 5 130.815 $ 133.899 Net income Applicable to Common Stock $ 133.484 5 132.143 $ 107.135 5 107.8 I I Average Shores Outstanding
- 76,789.784 75.898.388 74.497.664 73.735.222 Earn ngs Per Common Shore.'
Pranary.Bosed on Average Shores Outstor. ding $ 1.74 5 1.74 5 1.44 5 1.46 Assuminq Full Dilution 1.68 1.68 1.38 1.41 Cesh Dividends Declared Per Common Shore' $ .47h $ .474 5 .47He $ .474 Summary Quarterly Statement of Income for 1984 Ouorter Ended ($ in thousands. except per common shore dotal Dec_31,1984 Sept 30.1984 June 30.1984 March 31.1984 Interest income _ $2.343.060 $2,468,612 $2,108.875 $2.031,131 Interesi E xpense _ l.688.709 l.879.533 1.575.564 1.499.381 Net interest income 654.351 589.079 533.311 531.750 Provision for Possible toonIosses 90.000 125.000 75.000 75.000 Net interest income Aher Provision for Possible loan tosses 564.351 464.079 458.311 456.750 Other Operating income 264.804 237.771 220,513 206.496 Other Operotmq Expenses 630.073 564.842 536.832 512.779 income BeforeToxes 199.082 137.008 141,992 150.467 Applicable tncomeTomes 78.973 43.998 51.787 47.973 Nit tncome $ 120.109 $ 93.010 $ 90.205 $ 102.494 Net income Applicable to Common Stock 5 93.427 5 61.137 $ 77.483 $ 88.654 Averoge Shores Outstanding" 72.928,852 71,952.776 70.039.596 69.660.640 Earnings Pu Common Sore? Primary. Based on Average Shores Outstonding $ 1.28 $ .85 $ 1.11 5 1.27 Assumina full Dilution 1.23 .82 1.06 1.22 Ccsh Dividends Declared Per Common Shore * $ .45% $ .45% $ .45% $ .45% l Summary Quarterly Statement of Income for 1983 Ouorter Ended ($ m thousands, eacept per common shore dotal Dec. 31.1983 Sept 30.1983 June 30.1983 March 31.1983 Interestincome $1.998,963 $ 1.936.490 $ 1.824.424 $ 1.898.958 Interest Expense 1.454.044 1.375.127 1.313.295 1.347.314 Net interest income 544.919 561,363 511.129 551,644 Provision for Possible Loon losses _ 75.000 70.000 70.000 70.000 Net interest income Alter Provision for Possible toon losses 469.9I9 49I.363 441.129 48i.644 Other Operahng income 222.854 203.697 238.582 199,077 Other Operatinq Expenses 508.296 515.090 512.552 509.622 income Before foxes 184.477 179.970 167.159 171.099 Applicable incomeToxes 74.343 71.750 62.016 64.989 Nit tncome $ 110.134 $ 108.220 $ 105.143 $ 106.110 Net income Applicable to Common Stock $ 96.389 $ 95.005 $ 92.052 $ 93.210 Average Shores Outstanding
- 69.290,536 68.935.694 68.574,i20 68,177,990 Eonungs Per Common Shore."
Prenory,Bosed on Average Shores Outstanding $ 1.39 $ 1.38 $ l.34 5 1.37 Assommo MI DA,t.on 1.33 1 31 1.28 1.30 Cash Dividends Dectored Per Common 5hore' 5 .43% $ .434 5 .43 % $ .43%
' Amounts restored to reflect two for-one stock spkt declared January 15.1986.
70
c Corisolidcned Analysis olloan loss Experience . A nn The Chase MenhUtan Corporateori and Subsidiories /
- 1e
/ :
l , 1985 1984
%w Ended Dacernber 31 r 1983 1982 19 81
/ /.
~ '
Loons l$ in nullions)
*- ,, [
-Outstondag Bolonce of loans $ 61,931 $ o2,003 $ $5,894 $ 55.532 $ 51.331
-Average Bolonce olloons 61,536 59,710 53.587 52,057 . 47.634
- surnme-Reserve for Possible Loan Losses at Beginning of Year
($ b thousands) $761,439 $564,110 $558,277 j ' ,$M2 ?2 5467,807 , g' Charge-Offs / Domestic Loons: "
/ /
125,909 1.'7,929 164,437 " 115,520 , 78.362 ' Commercid ond industrialloons ' loons to Fmo,cid utitutions I1,000
~
-- 2,592 4.000 5,383 /
loans for Pu,chosing or Corrying Secvnties - 700 - / 2,690 ' 1,918 / b' , RealEstoie toons 14,551 2.596 1,070 ' 2,802 11.296 / ~ toons to indmduds for Personol E xpenditures 149.974 '73755 47,671 44,570 37,998 Liose Fmoncags 1.175 316 37 4,102 - 0;hertoo<,s . 1.204 . 1.075 - 529 457 Toml Domestic toons 303.813 206.8/l 215,807 204,213 135,914 International Loons: Commerciolondindustrialloons 67,317 32.893 82.h6 62,33h 21,799 Real Estote loons 1,404 M 93. 17.037 24,33 2,372 loans to individuals for Personal E xpenditures 13,947 W ,830 12,700 4,700 4,99/ toons to Foreign Governments and 30,672 '~ Of ficiolinshtutions ,;5,581 1,531 17,100 - Other toons 676 66 - 5,241 567-Totalinternchonolloons . I14.016 71.663 113,344 113.704 29,,6 / TotalChorge-Offs - - 417.829 278.534 329,151 317.917 165,649 Recoveries: Domestic Loans: Commerciolond industnoltoons 33,069 13,077 28,238 24,293 7,571 _ toons to financiolinstitutions 10,721 7,909 11,947 13,401 11,297 . Loons for Purchoseg or Corrymg Secunties 3 43 20 1,713 612 ? Rzol Esiote loons 6,300 3,471 6.231 3,101 1,571 Loons to indmducis for Personal Expenditures 18.496 14,959 13,156 10.340 6,174 2 trase fmoncogs I77 30 10 2 t Other toons 746 382 742 772 499q Total Domestic toons _ 69.512 44.871 60.344 53.622 27,724 International Loans:
- Commerciol ond industnoltoons 19,060 12,619 7,967 28 103 6.558 RealEstoteloons - 1,263 721 2,921 J,776 /17 loons to individuc/s for Personol E xpendaures 6,335 3.117 / 3,335 I,961 1 540 - l/
toons to fore;gn Governments and i Of ficiclinstitutions 645 261 s- - 2/ ~ 0:her toons 660 1,583 ,5* t79 1.1 #.:, Totalinternationolloons 27.963 18.301 14.298 34,3 3 12024 Total Recovenes 97,475 63,172 74.642 B7dd 3 9,748 Net Charge-Of f s 320.354 215,362 254,509 22U 76 125,901 Provision Charged to Eapenses 435,000 365,000 285,000 267,000 211,000 Reserves of Acquired Subsidiaries 24,120 64.932 - -- - Foreign ExchangeTranslation Adjustments 7.467 (17 241) 124.658) (15,829) ti l 8241- l Reserve for Persible Loan Losses at End of Year $907.672 $N),U9 $564.110 $558,277 $54:f5 amm -- Rotios: , '4 Total Recoveries to Totol Chorge-Of fs 23.3% 22.7% 22.7% 27.7% 24 016 ' Net Charge-Of fs to: Outstonding Bolonce of loons .52 .35 .46 41 .25 Averoge Bolonce of Loons .52 .06 .47 SI , .26 Reserve for Possible toon tosses 35.3 28.3 45.1 4'.2 23.3 Provision for Poss ble toonlosses 73.6 t,v O 69.3 67.4 59 7 Reserve for Possible toon tosses to: Outstonding Bolonce of loans 1.47 1 23 1.01 1.01 1.05 Averone Bolonce of loans 1.48
;-- , 1.28 1 05 1.0/ 1.14 mt.em p Summaryof NetCharge Off::
Domestic loons $234,301 $162.000 $155.463 $150.5?! $108.190 Internationol toons 86,0$3 53.362 99.046 79,353 17,711 Total Net charge-Of fs $320. 454- $215.362 - $254300 $ 229.rr/6 $ 125.901 ' P- a6 . t l l
/1
g : Y . y g$ elected Loan Maturities and Sensitivity to Changes in Interest Rat t The Chosaw3nhotion Corporotor Jnd 5ubsid.ories . /
/, .f
~ %-
i
# Af ter l a f Within but Withm Afler
($ in avons) 1 Year 5 Years 5 Yeors Total stenening Maturities of Selected Loans as of December 31,1983: Domestk Offkes: f d<< Red Estateloons Construction ond tond Developrnent $ 1,230 $ 1.165 $ 32 $ 2,427
.r - Other Red Eslote toon.='Enduding toons Secured by 1 4 Fornily Residentd Properties) 331 533 380 1,244 toons to financiallnstitutions." .
Merigoga Componies 232 36 12 280
- Do/wtic Commercid Bonks 141 1 - 142 r ~ Bonksin Foreign Countnes 1 325 2 -
327
% Other Depository Institutions 6 - -
6 Other friancd inshtutions 448 413 67 928 y toons for Purchos' or Corrying Secunties 482 21 - 503 tra toons 4.785 3.353 617 8.755
/ . %x-f Commercid sempt louns ond 414 523 756 1,693 t>her toons (E scluding ioons to Individuals for Personal E xpend lures orumase Financmost 564 73 18 655
. Col Domestic Of fices 8.958 6,120 1.882 16,960 s Os wees Of fices 18.969 10.369 4.889 34,227
$27.927 $ 16.489 5 6.771 551,187
};.' ,Icisoit electe4 toons nte est Rote $c.isitivity of Selected Loans:"
Don.estic of fkoss-Pied Rote $ 2.262 $ 890 g] Z unable Rote 3.858 992
- g_ -sosd 6.120 1,882
'
- Overseas t)f fice n -f,xed Rote 3,002 1,168
( -Varioble Rote 7,367 3.721
~
[ / -Totcl 10.369 4.889 Consol Joted -Fixed Rote 5.264 2,058
-Vonable Rote 11,225 4,713
[ -Total $ 16,489 5 6.771
*tadudes loons e domeshC olhces secured by 1-4 lomdy resdentd propert.es, loans to ir:div:luols for persond empenditures ond lease Iconongs.
p.
/.
/:
pA fA , 6
w - V, y g h ' UC6nsolidated Loan Belances byType and Percentage Distribution The Chase Monhatton orporotion ond Subsidories g a @* . < ,.f:
'! !t- ,
S 6 December 31,
; l($in maons) V 1985 1984 1983 1982 1981
'l Domestic Of fices: .-
,'.W i' d Estate Loons: T Constructe and Land Devdpment
. $ 2,427
{. 3.9% - $ 2,009 '
- 3.2% $ 1,552 2.8% $ 1,566 2.8% $ 1,197 2.3%
i Secured by b4 FamJy Pucit, tid
, . , Pnperties _' 2,669 4.3 k,722 2.7 1,307 2.3 1,237 2.2 1,280 25
~ f - OtherRealEstotetoons " , 1,244 2.0 s 1,052 1.7 821 1.5 826 1.5 785 1.5 -
" toons to financiolinstitutions. 1 Mortgage Companies 280 0.4 1 208 0.3 132 0.2 132 0.2 - 118 0.2 Domestic CommercialBonks 142. 0.2 70 0.1 84 0.1 91 0.2 89 0.2 Banks in Foreign Countries '327 ., 0.5 353 0.6 339 0.6 356 0.6 418 . 0.8 Other Depositorylcstitutions 6 - 7 -
2 - 9 - 7 - Other financidinswutions ~928- 1.5 1,I63 1.9 1,126 2.0 1,261 . 2.2 'I,083 2.1
, loons for Purchasing orCorryng $ccurities- . .i 503 0.8 -
- 543 0.9 718 I.3 1,209 2.2 607 1.2 i Commerciolandindustriohans 8.755 14.0 10,035 16.0 9,736 17.3 9,838 17.6 .10,422 20.1 toons to indviduds for Personal Expendtures _ .7,407 11.8 5,313 8.5 3,605 6.4 3,085 5.5 2,726. 5.3
' teose Financings 1,464 2.3 1,013 1.6 398 0.7 394 0.7 385 0.7 .
Tox-Exemptioons . 1,693 2.7 1,178 1.9 687 1.2 752 1.4 884 1,7
' Other toons 655 1.0 502 0.8 815 1.4 854 1.5 784 1.5 TotoIDomestic C$ces, Gross 28,500 45.4 25,168 40.2 21,322 37.8 21,610 38.6 20,785- 40.1 tess UneornedDiscount 580 460 354 397 372 TotdDomesticOfhces s 27.920 24,708 20.968 21,213 20.413
. Overseas Officere V-Red Estatetoons ' 2.818 4.5 2,279 3.6 1,294 2.3 1,395 2.5 1,578 3.0 loans to Bonks o 2,462 3.9 3,743 5.9 3,801 6.7 4,251 7.6 3,547 6.9 Loons to Other Financid institutions 804 1.3 972 1.6 855 1.5 1,065 1,9 1,136 2.2 Loons to Governenents and Ofhciat institutions. 3,491 5.6 13,780 6.0 2,735 4.8 2.559 4.6 2,749 5.3
- Commerndandindustrioltoons 21,933 35.0 24,663 39.3 24,516 43.5 23,673 42.2 20.552 39.7 Loons to indviduals for Persond Expenditures- 1,265 2.0 1.038 1.7 575 1.0 575 1.0 637 1.2 1:ase Financings 337 0.5 ,' 237 0.4 149 0.3 85 0.1 50 - 0.1 Otherloons __ 1,117 T.8 793 1.3 1,147 2.1 . 843 1.5 791 1.5 '-
~
' TotalOverseasCFa'ces, Gross 34,227 $4.6 37,505 59.8 35,072 62.2 34,446 61.4 31,040 59.9 Less: Unearned Dise.vnt 216 210 146 127 122 Totd Overseas Offres 34.011 37.295 34.926 - 34,319 30,918 Total Loons ~ $61,931 $62.003 $55,894 . $55.532 $51,331 1 /Cansolidated Average Loan Balances Year Ended December 31,
($ ininAons. based on doJy overoges) 1985 1984 1983 1982 19 81 Domestic Offices: Red Estote Loons -$ 5,157 5 4,263 $ 3,908 '5 3,841 $ 3,623 loans to Mortgage Componies J300 160 149 100 103 toons to Other Financiallnsitut: ens - ; 1,614' 1,982 1,971 2,106 2,244 loans for Purchasing or Corrying Secu ities % 582 591 633 493 329 Commerciolondindustridloons 8,990 10.444 8,791 - 9.633 9,946 Loons to individuals for Persond Expenditures 6,270 4.285 3,181 2,918 2.364 le;ose Financings 'g I,105 585 370 382- 362 Toz-Exemptloons I,182 775 626 783 793 Other Loons ,. 468 259 235 -274 378 TotalDomestic Offices Gross 15.668 23,344 19,864 20,530 20,142 less UnearnedDiscount 466 375 351 392 302 Totd Domestic Of hces '. 25,202 22,969 19,513 20,138 19,840
~ Overseas of fices 36,527 36,892 ' 34,208 32,033 27,911 tess: Une sned Discount 193 151 134 114 117 Totd Overs +cs Of hces 36.334 36,741 34,074 31,919 27,794
. Total Average toons 001.536 $59.710 $53,587 $52,057 $47,634 m -
t9
\
f
+ + 2
C Financial Ratios. The Chase Monhorion Corporation and Subsidiories 1985 1984 1983 1982 19 81 Earnings Ratios - Net income os a Percentage of: . AverageTotalinterest-Eaming Assets ..77% .57% .65% .47% .67%
, Average Totd Assets .65 .48 .54 .40 ' .55 Average Conwnon Stockholders
- Equity
- 13.64 10.12 13.11 9.79 15.87 Average Conwnon Stockholders' Equity and Nonredeernable Preferred Stock
- 13.58 10.92 12.89 10.01 15.61 Averoge Cornrnon Stockholders' Equity and Totol Preferred Stock 13.49 ~ .10.82 12.64 9.84 14.78
- Not Interest income (Taxable Equivalent Basis) as a Percentage of: '
AverageTotolinterest.Eorning Assets 4.08% 3.54% 3.57% 3.40% 3.28% AerageTotal Assets 3.47 2.97 2.97 2.90 -2.67
- Cash Dividends Paid on Common Stock as a Percentage of
. Net income Applicobie to Common Stock 29.60% 40.28% 31.88% 43.92% 26.8I%
' Total Cosh Dividends Paid as a Percentage of Net income 40.61 51.98 40.27 -52.81 32.80 Leverage Ratios-Averages -
Common Stockholders' Equity as a Percentage of: Loons. Net 5.80% 5.36% 5.42% 5.15% 5.06%
' Totallnierest-Eoming Assets _. 4.80 4.42 4.37 4.02 3.90 ToroIAssets 4.08 3.71 3.63 3.43 - 3.18 Common Stockholders' Equity. Total Preferred Stc;k and long-Term Notes and Debentures 52.50 57.12 64.12 63.59 63.54 Common Stockholders' Equity and Nonredeemobie Preferred Stock as a Percentage of:
loans, Net 6.80% 6.19% 6.13% 5.67% 5.32% Totolinterest-Eorning Assets 5.62 5.11 4.94 4.43 4.11 Total Assets 4.78 4.29 4.11 3.78 3.34 Common Stockholders' Equity and Total Preferred Stock as a Percentage of loans, Net 6.90% 6.35% 6.41% 6.07% 5.92% Totolinterest-Eoming Assets 5.71 5.24 5.17 4.74 4.57 Total Assets 4.85 4.40 ' 4.30 4.05 3.72 Leverage Rotios-at December 31, Common Stockholders' Equity as a Percentage of: loans. Net 6.?2% 5.48% 5.51% 5.02% 5.10% Totalinterest-Eorning Assets 5.11 4.57 4.50 4.03 3.90 Totol Assets 4.33 3.87 3.72 3.41 3.33 Common Stockholders
- Equity.Totd Preferred Stock and long-Term Notes ond Debentures :2.24 52.96 61.61 63.74 65.77 Common Stockholders
- Equity and Nonredeemable Preferred Stock as a Percentage of:
loans, Net ^ 7.21% 6.47% 6.19% 5.71 % 5.35% Totolinterest-Eoming Assets 5.92 5.39 5.05 4.57 4.08 Totd Assets' 5.01 4.56 4.18 3.88 3.49 Common Stockholders' Equity and Total Preferred Stock as a Percentage of t loans. Net 7.31% 6.57% 6.46% 5.98% 5.90%
. Totdiriterest-Eoming Assets 6.00 5.47 5.27 4.79 4.50 Total Assets 5.08 4.63 4.36 4.06 3.85 Copitol Ratios-at December 31, Prnnory Capitd" os o Percentoge of Total Gross Assets 6.87% 6.37% 5.44% 4.73% 4.17%
Total Capitol" os o Percentooe of Total Gross Assets 9.23 8. I 1 6.69 6.01 5.73
- Based on Net income. Adgusted as Applicoble.
" Based on Federal Reserve Board deintion. See page 30 for discussion of Capital.
The Chose Manhattan Bank,N.A.ond Subsidiaries Capitol Ratios-at Dev3mber 31, Prrnary Copstol"* an Percento y of Total Gross Assets 7.05% 6.57% 5.26% 4.75% 4.83% Totd Capitol"
- os a Percentooe of Total Gross Assets 7.46 6.90 S.52 5.01 5.18
- - e- *" Based onOflice of the Comptrollerof the Currency deIntion.
74
u - Stockholder Data The Chosi Monhot,on Corporotion and Subsidiories Common Stock Preferred Stock Per floating Floating
.,. . Total Common 6%% 760% 10h% Rote Rote Total
($ in thousands, except per common shore dato) Poid . Shore *" Senes B Senes C Series D SenesE Series F Poid
- Quarterly Cash Dividends .1985 - Istovorter ' $ 34,838 $ .47h $ 502 $ 606 5 3.281 5 7,626 - $14,073 $26,088 - 2nd Ovorter 35,194 .47% 502 606 3,281 7,875 14.073. 26.337 - 3rdOoorter 35,924 .47h 502 .606 3,281 6.875 6,101' 17,365
- 4th Ouorter ' 36.316
.47h 502 606 3,281 7.065 5.847 17,301 Total $ 142,272 . $ 1.90 $2.008 $2.424 $13,124 $29.441 $40,094 $87,091 1984 1st Quarter $ 31,710 $ .45% $1,080 $1,634 $ 3,281 $ 7,845 $ - - $13.840 2rd Overter 31,865 .45% 1,080 1,634 3,281 8,065 : -
14.060
- 3rd Ouarter 32.546 45% 502 606 3,281 8,721 14,073 27,183 4th Ouarter 33.047 .45% 502 606 3.281 8.221 14.073 26,683 Total $129,168 $ 1.82h $3.164 $4,480 $13.124 $32,852 $28.146 $81,766 -
maammmmuun - nummmmmma Quarterly Comparison of Market Prices" Common Stock"* 1985 1984 1983 1982 19 81 High low Close Ngh low Close High low Close High low Close High low Close 1st Ouorter 27% 23% 25% 26% 22% 24N 27W 23% 26% 30h 26% 2/h 24'W 204 22% 2nd Ovorter 30h 25 % 30 % 26 18N 19' 314 25'N 26' 29 % 19'N 20'N 294 22% 26% 3rd Ouurter 31'W . 24h 24 % 23h 17'N 21h 26% 23 24 21 % 15%- 214 27% 24W 25N 4th Ouarter 36% 24h 36W 24 19% 23% 24% 20 % 22% 28"A. 204 24h 29'N 24 % 26'N Flooteg Rote flootog Rote Preferred Stock . 6%% Series B 7.60% Senes C 10b% Series D Series E SenesF High low - Close . Hioh low Close High low Ck,se High low Close High low Close 1985 1st Ouorter 59 55 57%* 68- 60% 64* 46 40% 42% 56 52% 53% 55%- 52 534 2nd Overter 62 58 6th' 74 64 73h* 48h 424 47h 564 52% 54 55 51% 52% 3rd Ouarter 65 59 65* 73% 72% 724' 484 45h 46% 56% 53h 54 4* -56% 52 52h 4th Ouorter 69 634 68h 75 72h 72h 50% 45% 49M 56% 52 534 54% 50h 51% 1984 Ist Ouorter 57 53% 55 64 olk 61%* 44 39% 394 57h '54% 55%* - - - 2nd ouarter 63 53h 56* 70% 61 68* 43% 37% 37h 58 48 485 - - - 3rd Ovorter 56 54 52%* 674 63% 62* 41% 36% 39% 56 48 51% 57h 52% 53 4th ouorter 56% 52h 544 64 60h 60%* 43 39% 40% SS% 50% SP 5^h 51 52% u- ummme ammme umummu mmmum ummmum - mumm umme m-
- No soles. Based on the overoge of bid and asked prices.
** The high, low and closing soles pnces for transactions reported on the composite tope.
"
- Amounts restated to reflect two-for one stock sphe doctored Janucry 15,1986.
Number of Common Stockholders, Preferred Stockholders and Convertible Security Holders Th a following table sets forth the opproximate number of holders of record of each class of squity and securities convert.ble into equity secunties of the Corporation at the end of the years indicated: 1985 1984 1983 1982 19 81
- Common Stock,Por Value $12.50 49,900 53,800 48,700 53,000 57,000 Common Stock Equity Contracts 82 83 82 72 -
Prti:rred Stock 6%% Serie> 8 600 600 2,300 2,500 2,700 Prtlured Stock,760% Series C 100 100 500 500 600 Prsf ured Stock 10h% Series D 2,100 2,100 2,000 2,000 2,000 Prtferred Stock, Floating Rote Senes E 100 100 100 100 - Prtlerred Stock Floating Rote Series F 6,700 6,800 - - -
. ConvertNe Copitol Notes (4 h% Due 1993) 2,900 3,200 3,400 3,800 4,300 ConvertNe Subordmated Debentures loh% Due 1996) 1,000 1.200 1.300 1.700 2.100 sammmmmmmme m- -
Notei The pnnopol market n whch the Company's Common Stock is traded is the New York Stock Exchange. 75
Combine'd Bdance Sheet The Chose Monhot ton Corporotion Nonbonking Subsidiones of the Company December 31 ($ m thousands! 1985 1984 1983 1982 19 81 Assets Cosh m Banks: The Chose Manhatton Bonk N.A. $ 5,754 $ 11,254 $ 9,381 $ 6.087 $ 7.080 Other Banks . 4,895 13,I99 4.792 8.965 -5.86i Tune Deposits Placed with Bcnks 29.384 15,016 14,640 12.005 11.680 EderoI Funds Sold ond Secunties Purchased Under Resole Agreements _ 58,181 30.719 11.003 - - Investment in U.S. Treasury Secunties 2,516 4.923 2.927 1,809 - Due from the Compony and AfIActed Componies: CommercidPaperof theCompany 13.775 - 7,100 6.945 21.997 4,570 Secunnes Purchased Under Resole Agreements .
- - - - 1,165 locas:
Residenhd Propertyloons 491.092 296.735 263.173 169.730 42.929 C:her Red Estoteloons 27.428 29,427 28.966 48,813 58,028
' Commercial- 934.803 936.378 790.923 684.015 561,618 Consumer Loor.;, 430.035 192.951 62.533 21.115 1,935 loans for Purchasing or Carrymg Secunhes 54.942 40.369 45,848 - -
Laose f mancogs 286.580 183,025 169.761 149.414 123,797-Loons to Alf&otes of The Chase Monhatton Bonk. N. A. 3.490 3.681 20.399 20.132 - 2,228,370 1,682,566 1,381.603 1.093.219 788.307 Less: Reserve for Pc,ssible loon tosses 26.113 . 20.909 15.061 13.218 11.615 tcons. Net 2.202.257 1.661.657 1,366,542 1,080.001 776.692 Red Estote Properties Acquired m Sotnfoction of Loons 4,252 2,737 2.517 1,992 8.255 investments m Associated Componies(ot Equity m Net Assets) - 4,981 4,708 4,391 2.466 Other Assets 66.628 52.649 38 798 21.793 17,647 Totol Assets 52.387.642 51.804.235 S t .462.253 51.159.040 5835.416 Liabilities and Stockholder's Equity
' Da to the Company and AlI&oted Componses:
Notes Poyable $1.849,793 $1,377.012 $1,092.957 $ 885,498 $654,014 Accounts Poyable-Taxes. Net 37.339 28,350 15,017 13.495 1.979 Accruedinterest Payable 21,643 17.496 11,455 27.879 10,854 Accounts Poyable. Accrued Empenses and Other liabaties 6.247 89 7,916 3,324 129 Savings Accounts ondTrne Cerhficates 1.449 1.122 3,333 1,242 99 Other Borrowed Money 100.678 61.849 51,540 14.911 11,823 Accounts Poyable. Accrued Expenses and Other Liob4hes 26,922 31.479 20.982 20.502 15.725 htailiabanes 2.044.071 1.517,397 1.203,200 966.851 694.623 Stodbolder's Equ.ty: Common Stock 1.057 1,056 1.105 1.504 1,504 Addihond Poid-in Copied 369,478 354.140 336.232 275.932 230,989 - foreign ExchangeTranslohon Adjustments 80 (336l - (75) (137) - Retained fornings tDeliciti -(27.044) (68.022) (78.209) (85.110) (91,700) Total Stockholder's Equiry 343.571 286.838 259.053 192.189, 140.793 Total liababes and Stockholder's Eouity 52.387.642 51.804.235 5I.462.253 5I.159.040 5835.416 76 .
Combined Statement ofIncome The Chose Monhotton Corporation Nonbonking bbsidiones of the Company Yeor Ended December 31 N in thousands) 1785 1984 1983 1982 19 81 income Interest and fees on loons $251,7i3 $219.347 5175.803 5156.075 $ 92,771 interest onTrne Deposits Ploced mth Bonk5 2.583 1.738 1,021 1,511 2.145 Interest on Federal Funds Sold and Secunt:es Purchased Under Resole Agreements 3.492 2.079 666 - - Interest on investment in U.S. Treasury Securities 261 299 210 48 -
- Interest on Commercial Paper of the Cornpony 811 868 891 2.609 349 fees and Commissions 62.834 51,306 36.464 18.837 15.038 Equity m Earnings (tossesl oI Associated Componies -
654 317 328 29 Gain on Sole of Associated Componies 20.595 - - - - Fces irom Af filiated Componies 61,513 48,136 35.568 30.356 18.602 Other income . 2.182 3.509 1.018 2.951 1,136 Totalincome 405.984 327.936 251.958 212.715 130.070 i Expenses interest on Notes Poyable to the Company 150,688 146.802 111,726 107.926 80.221
- Interest on Savings Accounts andTwne Certificates 70 242 238 50 -
Interest on Other Borrowed Money 5.207 4.395 1.893 1.167 671 Woves;on for Possible toon tosses 18.679 12.702 14,617 10,647 6,781 Solories ond Employee Benefits 75.428 59.859 46,793 35.285 22,873 Fees Chorged by Alblioted Componses 11,176 6.194 5.852 8.343 5.790 Enp.me of Reui tarote Properties Acquired. Net ol Reicted income (760) (2.424) 918 853 '6.757 Other E mpenses 74.740 69.531 48.917 30.812 17.308 Totol E xpenses 335.228 297.301 230.954 195.083 140.401 income {tossl Bef ore Toxes tBenehts) 70.756 30.635 21.004 17.632 (10.331)
. ApplicobleincomeTaxes(Benehtsh Curre,t 5.869 9.940 497 11.699 (4,456)
Deferred 23.909 - 7.225 - 10.517 f2.657} 604 Totol ApplicobleincomeToxes!Benehts) 29.778 17.165 11.014 9.042 f3.852) Not lncome (Loss) 5 40.978 5 13.470 $ 9.990 5 8.590 $ (6.479) 77
/ Statements of Condition of Chase Lincoln First Bank, N A,,
The Chase Manhattan Bank LUSA), N.A., Chase Bank of Maryland and Chase Bank of Ohio The Chose Monhotton Corporotion ond Subsdones Chose Lincoln The Chose Monhatton Bonk Chose Bonk Chose Bonk FirstBonk NA' (USA).N A 2 of Maryland 2 of Ohio * ($ in mAons) ' Dec.31,1985 Dec,31,1984 Dec.31,1985 Dec. 31.1984 Dec.31,1985 Dec. 31,198.
' Assets -
Cosh and Due from Bonks $.330 $ 249 $ :27 $ 16 5 12 $ 7 Interest-Beanng Deposits Placed with Banks 17 20 - - 4 5
- FederalFunds Sold and Securities Purchased Under Resole Agreements 120 419 - - 4 73 Trcdng Account Assets 6 13 - - - -
Investment Secunties 408 557 3 3 24 15 Loons 3,006 2,655 4,577 1,960 347 274 Less: Reserve for Possible toon losses 41 37 128 43 7 7-loons Net 2,965 2,618 4,449 1,917 340 267 Customers' tiobelity on Acceptances 10 29 - - - - O.her Assets 208 241 41 21 235 45 Totol Assets $4.064 $4.146 $4.520 $ 1,957 $619 $412
- m- -
Liabilitie, and Stockholder's Equity
' Deposits:
' Noninterest-Beonng $ 735 $ 733 $ 100 $ 33 $ 2 $ 3 Interest-Beanng 2,598 2,578 1,193 676 422 355 FIderal Funds Purchased and Secunties Sold Under Repurchase Agreements 211 269 1,394 143 95 -
Other Borrowed Money 165 196 1,493 878 - - Acc:ptances Outstanding 10 29 - - - - Accounts Poyable, Accrued Expenses or:d Other tiobilities 41 48 149 91 8 5 Long. Term Notes and Debentures 4 4 - - - - Totalliabdities 3.764 3.857 4.329 1,821 527 363 Capital Stock 64 64 24 24 2- -- Surplus 64 64 89 74 93 50 thdivided Profits (Losses) 172 161 78 38 (3) (1) Total Stockholder's Ecuity 300 289 191 136 92 49 Totalliabilities and Stockholder's Eauety $4,064 $4,146 $4.520 $1,957 $619 $412
- a- m- - -
(Il Headquarters in Rochester,New York,with over 100 bronches in New York State. Members Federal Deposit insurance Corporat on (2} Headquarters in Wilrnington.Delowore. (3] Acquiredin 1985. Headquarters in Bethesdo, Maryland,with l3 bronches in Moryland. (4) Acquired in 1985. Headquorters in Columbus, Ohio,with 23 bronches in Ohio. l l l l 78 l
o Financial Reporting and Analysis of the Effects of Changing Prices The Choss Manhatton Corporation and Subsidiones Financiof statements presented in occordame with generdly accepted ef fects of changing prices.These inflation-odiusted dato are referred to os occounting pnnciples have traditionolly reported amounts in historical constant dollor amounts ond were computed by adjusting the historical dollars without taking into occount the elfects of inflation. Statement of dollor data by the U.S. Consumer Pnce index for Al! Urban Consumers (CPI) Financial Accounting Standards No. 33 entitled " Financial Reporting and to reflect changes in general purchosing power. it should be noted, however. Chonging Prices" is on ef fort to report the ellects of changing prices that the use of the cpl may not be appropnote in that it does not necessosily (inflation).The schedule below is o five-year comparison of certoin historicol bear any direct relationship to all of the ossets,liobilities, stockholders
- i dollor financiol dato ond certain supplementory dato odiusted for the equity, income or expenses of financiolinstitutions.
Year Ended December 31, l$ m thousands,except per shore dotal 1985 Ir84 1983 1982 19 81 Net Interest income Histoncol0ollars- _ -. _ - _ . - - $2,748,730 $2,30s,e91 $2.169,055 $2,023.882 $1,771,937 Conston Dollars (l) 2,748,730 2,390,858 2,342,057 2,255.605 2,095,884 Net income HistoncolDollars 564,818 405,818 429,607 307,483 412,150 Constant Dollars (2) 534,940 392.833 437,225 312,695 460,570 Eomings Per Common Shore
- Historicol Dollars 6.39 4.51 5.48 3.86% 5.78 Constant Dollars (2) 5.99 4.29 5.53 3.86 6.43 Cash Dividends Dedored Per Common Shore
- HistoricolDollars I.90 1.824 1.75 1.70 1.55 Constant Dollars 1.90 1.89 1.89 1.894 1.83M Market Price Per Common Shore of End of Year
- HistoncolDollars 36 31% 23.87h 22.75 24.50 26.93%
. Constant Dollars 35.73% 24.384 24.154 26.994 30.83%
Net Assets of End of Year HsioricalDollars 4,397,136 3,961,044 3,425.825 3.136,413 2,717,699 Constant Dollars 4.663,008 4,420,212 3,930,570 3,768.298 3,474,511 Average Monetory Assets Histoncot Dollars 84,023,000 83,801,000 77,637,000 75,893,000 73,934,000 Constant Dollars ' 84,023,000 86,791.000 83,829,000 84,582A00 97.4'.,1,000 Decline in Net Monetary Assets (3) 49,159 77,862 64.001 37,014 83,834 Averoqe Consumer Price Index 322.2 311.1 298.4 289.1 272.4
- (ll Because the Corporation does not have significant amounts of property, plant and equipment, Constant Dollar dato has been substituted for Current Cos'information.
l2) The Constant Dollar omounts eclude on odi ustment to Depreciation and Amortization Expense due to the restatement of the underlyng assets for the elfect of changing pnces. For the year ended December 31,1985,this odiustment amounted to opproximately $30 mill.on. (3)Th3 Decline m Not Moneiory Assets (purchasing power loss) represents the ef fect on the Corporation of restoting its Net Monetary Assets (totalassets less nonmonetary
. ossets,oilliob.lities and redeemoble preferred stock).The Corporation's mcyor nonmonetory assets includeTrad.ng Account Assets, Premises and Equipment investments n Associated Componies and Real Estate Properties Acquired in Satisfaction of Icons. ' Amounts restated to reflect two-for one stod split declared January 15,1986.
On the Historical Dollor basis, Net interest income increased 55% from On the Historicol Dollar basis Net Assets at End of Year increased by 1981 to 1985. For the some five-year period, however, Net Interest income 62% over the five-year period.On the Constant Dollar basis, Net Assets of in Constant Dollars increased by 31%. End of Year increosed by approximately 34% over the period. Net income showed the some general trend in both Historical Dollars and Average Monetary Assets on the Historical Dollar basis increased over Constont Dc!!ars. For the five-year period, Net income in Constant Dollars the five-year period.On the Constant Dollar basis Average Monetary incr:osed by opproximotely 17%. Eamings Per Common Shore fluctuated Assets decreased by 4% between 1981 ond 1985, indicating that the overall dunng the period from 1981 to 1985 ond the Conston Dollar omounts reflect change in the CPI has been greater than the growth in Averoge Monetary this pottern. Assets. Cosh Dividends Declared on the Historical Dollar basis have increased The Decline in Net Monetary Assets in Constant Dollars reflects the fact from $1.55 per common shore in 1981 to $1.90 in 1985. On the Constant that,as in most banking institutions, the Corporation's monetary assets Dollor basis, dividends declared ranged from $1.836 in 1981 o t $1.90 in exceed its monetary habilities.That is,the erosion of the purchasing power of 1985,indicoting that the increase in dividends declared has been slightly monetary assets exceeded the benefit attoched to the lesser "real" burden greater than the increase in the cpl. of monetaryliabilities. The octual market price of the Corporation's common stock fluctuated dunr.g the period from 1981 to 1985 ond the Constant Dollar amounts reflect this pottern. 79
The Art Collection of The Chase Manhattan Bank, N A. The Chose Manhatton Corporation and Subsidiones The Chose ort collection includes 10.732 works of art exhibited in Chose Statementof AssetsHeldin ArtCollection ofI ces worldwide, including 188 locotions in New York State,57 domestic December 31. oflices outside New York State and 101 overseoslocations.The conection 1985 1984 is oppraised by category on a rototing basis so that each work of ort is d r:opproised at least once every Iwe -ors by experts in the held. At the ^' 7,*n $ 4,402,588 53.816.175 close of 1985,the estimated current market value of the collection, based Pnnts 1,077,607 942,411 on the obove-mentioned oppraisols,was in excess of $172 million (cost- Sculpture 927.695 792.464 $10,273,6111 D'o*'ngs 1,495,642 1,294.408 Dunng 1985,852 items were purchased of a cost of $1,321,511.During the year,2 items with on onginol cost of $1,514 were given os gif ts to otha ro hs 385,243 k 362,363 Constructions bstitutions and 44 items with on original cost of $18,524 were deleted from Other 744.513 638.016 the collection for other reasons (sole, loss, domoge or normal deteriorotion)- Total $10.273.611 $8.972.138 The Chase Art Committee, which is composed of both Chose executives t'4 te:The amounts obove represent the purchose cost of the wc rks of ort, excluding and outside ort experts, develops general ort policy Ior Chose, opproves sules taxes and the cost of froming.both of which ore charged to expense. Works of moior additions to the collection and advises the progrom director.The art received os 9.f ts from outside sources are included in the above statement at _
~
committee lost met formally on September 23,1985 informol meehngs with nominoicost vanous members are held periodically. Further informohon obout the coffection and progrom is available in the Statement of Changes in Assets Held in Art Collection onnvol acquisitions brochure, o separate publication which stockholders Year Ended December 31 may obtain from The Chase Monhotton Bank Ari Program,410 Park Avenue, New York,New York 10022, 1985 1984 Bolonce of Beg.nn.ng of Year 5 8.972,138 $7,I I 2,085 Add: Purchases 1,321,511 1,862,489 less. Donations and Gilts 1,514 225 Other Deletions 18.524 2.211 Bolonce at End of Year $10,273.611 $8.972.138 International Advisory Committee David Rockefeller Hong Kong The Netherlands Richord M.Furioud Choirman Sir Yue. Kong Pao G.A. Wagner Chairman and Chief Executue Dr. Henry A.Kissinger Chairman and Chief Executwe Chairman of the Supervisory Board Ofhcer Counsellor World. Wide Shipping Agencylimited Royal Dutch Petroleum Company Squibb Corporohon Audrolio India Saudi Arabio Pierre Gousseland Sir ArviH.Porbo J.R D. Toto Sheikh Ahmed Julfoli Choirmanof theBoord Choirman and Monoging Director Chairman Monoging Director AMAX Inc. Western Mining Corporation limited Toto Sons Limited E.A. Julfoli & Bros. Edson W. Spencer Brozil Italy Sweden Chairman and Chief Executwe Pou!o D.Wlores Dr.Giovanru Agnelli Pehr G.Gyllenhommor Ofhcer Chairman Chairman and Chief Executive Honeywell,inc. Chairmanof theBoard Wlores Group FIAT S p.A. Officer Venezuelo AB Volvo Gustovo A.Osneros Conodo JoPon The Hon ton D.Sinclair isomu Yamashiro Switzerland President and Chiei O C..O C., Senator Chairman Fntz Gerber Executive Olkcer Retired Chairmon MitsuiEngineenng & Chairmon of the Board of Directors Organizacion Diego Gsneros Conodion Pacific Enterpnses limited Shipbuilding Co.,Ltd. E Hof(monn.lo Roche & Co.Ltd. Ex-Of ficio Members France Mexico United Kingdom (The Chose Jean.Poul Porayre lic.Ernesto Fernandez Hurtodo Kenneth Durham Manhatton !!ank, N.A.) Chief Execuhve Of hcer Director General Chairman willard C. Butcher Dumez 5.A. Boncomer, S.N C. Unifever PLC Thomas G.tabrecque United States Robert R.l> glass Germany John B.Fery Arthur ERyan Hons t.Merkfe Chairman of the Board and Chief Anthony P.Terrocciono Chairman of the Supervisory Board Executwe Of ficer Donald L.Boudreou Robert Bosch GmbH Boise Coscode Corporohon Francis X.Stankard
\
l 80
TV
~
Board of Directors Board of Directors i Willord C. Butcher. - . ' Anthony P.Terrocciono Robert E.Flowerree . James E.Olson
- Chairman and Chief Executive Vice Chairmon ofThe Chose RetiredChairmanof theBoardof ~ President and Chief Operating 2 Oflicer of The Chose Manhatton Monhotton Corporation Georgio-Pocific Corporation Ofhcerof AmericonTelephone Corporation andThe Chose andThe Chose Monhotton H.Louronce Fuller . andTelegraph Company Monhotton Bonk,NA - Bank,NA President of Amoco Corporation Edmund T.Pratt,Jr.
in Thomas G.Lobrecque . Alexander D.Hargrove Howard C.Kouffmonn Chairman and Chief Executive
. President and Chief Operating Chairman of Chose Retired President of Exxon Ofhcer of Phzer Inc.
= Of ficer of The Chose Manhoiton ~ lincoln First Bonk,N.A. Corporation ~ Henry B.Schocht
. Corporation ondThe Chose William T.Colomon,Jr. DavidT.Koorns Chairman and Chief Executive MariottonBonk,NA - Senior Portnerin thelow firm of Officer of Cummins Engine Chairman and Chief Executive Robert R.Douglass . O'Melveny & Myers Ofhcerof Xerox Corporation ' Company,Inc.
VicyChairman of The Chose . Joon Gonz Cooney Richard R.Shinn - Richard W.Lyman Monhotton Corporatim President of Former Chairman and Chief . President of The Rockefeller
- andThe Chose Monhorton Children'sTelevisionWorkshop . Executive Officer of Metropoliton
. Bmk,NA: Foundation James LFerguson John D.Mocomber --
'#"' ""P "Y Arthur F.Ryan Choirman and Chief Executive of Donald H.Troutlein Chairman and Chief Executive VicaChairman ofThe Chose ' General Foods Corporation Chairman ond Chief Executive Officer of Celonese Corporation Monhatton Corporation andThe Chose Manhatton and Vice Choirman and Director John H.McArthur O$cerof BeMen9eEm of Philip Morris ComponiesInc. RolP h E.Wai B mk,N A - Deanof theHorvordGraduate Edward S.Finkelstein Schoolof Business Administration Chairman and Chief Executive Chairman and Chief Executive '" *
- Oflicer of R.H.Macy & Co.,Inc. ~
DavidT.McLoughlin President of Dortmouth College Kay R.Whitmore President of Eastman Kodok Company Committees of the Board
~
Executive Committee Compensation Committee committee selects theindependent This committeeis responsible for Mc Butcher, W Kouffmann, auditors for oppointment by the reviewing the general conduct of choirman chairman Board. . the business of Chose Investors Mrs.Cooney Mc Ferguson Employee Benefits Review ' ManagementCorporationNew Mr Fokelstein Mc Keoms Committee York,a wholly owned subsidiary of '~
- Mr.Kauffmonn Mc Mocomber McPratt the Corporation withinvestment Dr lymon Mc McArthur chairman monogement and advisory Mr.Olson . McOlson McColemon I""i " '
. M c Proti This committee reviews and makes & Flowerree Nominating Committee W Shim recommendations to the Board ' Mc McLoughlin W Shim, W WNd. concerning mojor compensation Mr.Schocht choinnon cgubr members policies and compensation of McTroutlein Mc Ferguson Mc Lobrecque of ficer directors. This committee reviews reports of Mc KoufImonn Mr.Douglass Audit Committee the Bank's employee benefit plans Mr.Mocomber Mc Rym Mc Mocomber, mode by the named fiduciaries
- 05" Mr.Terroccio o chairman oppointed pursuont to the Mc Prott, Mc Horgrave; Employee Retirementincome regubr mmbes Mc Ferguson n ernbars emoffid Secunty Act of 1974. Mc Butcher, Mc Finkelstein Mc Colemon Mc Kearns investment Committee mernber ecoffido
. Mr. Ferguson Mr.McLaughlin Mc Colemon, This committee is responsible
. Mr.Mocomber, Mr. Shinn choirman for considering and moking o4 emote members McTroutlein recommendations to the Board Mrs.Cooney This committeeis entitled to This committeeis responsible for Mc Flowerree regwding nominees for election exarcise,to the extent permitted by reviewing the hnonciof condtion of Mc Fuller to the Board, Board committee .
Iow,olithepowersof theBoard the Corporation,its internal Dr. Lyman 055'gnments,and succession in the l of Dir:ctors when the Boardis not controls and audit program,the Mr McArthur, oflices of Chairman of the Board, in session- performanceandhndingsof the President,and Vice Chairmen mular members i internaloudit stof f,and any action W Butcher e Boad l fo be taken thereon by Mclobrecque Monogement.It reviews oudit and W Douglass , exammation reports of Mc Ryan governmentalagenciesandof the McTerrocciono. independent ouddors.The rnembers e= officio 81
l Policy.an.d Planriing Committee
< The Policy and Planning Committee ' Arthur F.Ryan executiva He assumed his present . L. Edward Show, Jr.
uoforumbroodlyrepresentative _ is vice chairmanin charge of positionin 1984. is executive vice president and
. of businesses and corporate Consumer Bonking.He joined ' Richard J.Boyle General CounselPrior to joining functions for the chief executive Chasein1972in the dato is executive vice presidentin Chose in 1983,Mr.Show was o i officer to obtain inputs periodically, processing division.He was named charge of the Corporate industries . partner in Milbank, Tweed, . exploreimplications,and build a group executive for the owner Sector.Since joining Chose in 1965, Hodey and McCoy where he was common perspective concerning securities handing division in 1976. Mr.Boyle hos heoded RealEstate o member of the Executwe -
key bonk-wide monogement issues. In 1982 he become head of Finance,U.S NationalIndustries Committee.
. Suchissuesinclude: Corporate Operations and and.most recently,the Commerciol Francis X.Stonierd
-Periodc review of broad Systems.He was named Consumer sectoc . is executive vice president and strategies in light of anticipated Bonking executivein 1984 ond was chairmon of Chose Monhotton A. Wright Elliott exnnolcondtions. elected to the Boardin 1981 is executive vice president for CapitolMarkets.Mc Stankord
-Significant changes in Anthony P.Terrocciono Corporate Communications. Prior joined Chasein 1955, served os corporate-wide policies. is vice choirman in charge of to joining the Bankin 1974,Mr.Eltot creaexecutiveof Asia,the '
Global Banking,includog was executive vice president and Middle East,and Europe and, prior
-Assessnvent and corporate Corporate Industries. International chief administrativeofficerof the to assuming his present position response to major extemol Banking,and Chase Monhorton National Association of in 1984,was head of International developments.
CapitolMarkets.He joined Chose Manufacturers.- Banking.
-Approoches to emerging in 1964,was named treasurer choe Michool Urkow.tz i constroints on corporate in 1976,and become chief financiol is acch e{ vice P.Esposito,Jr.
president and - is executive vice president n P"I "" "C" officerin 1983.He become head c ntr llecHejoinedtheBank charge of Corporate Operations
-Plannog guidance and areas of of GlobalBankingin1984 ond was in 1961 and was oppointed head of and Systems.He joined Chose bank-wide performance emphasis. elected to the Board in 1985 in 1974 and was promoted to the occount ng and reports dvision . Willard C. Butcher in 1970.He was named controller senior vice president in 1980. Prior - is choirman ond chief executive in 1974. to assuming his present position officet He began his career at A. Edward Alh,nson in1984,he was responsible for is executwe vice presidentin josepg j.Ho, ins .
Chosein 1947ondin1960 was .
's executwe vice president in named senior vice president and charge of the institutional, Trust. p chargeof theCommercidSector,o head of retailand corpomte investment and information PS9*"'
Services Sectoc Prior to joining position he assumedin 1981 business for the New York midtown Poult.Wolker Mc Horkins joined Chosein 1954 orro.He was named executive Chose in 1977he was executive es executive vice president and nd servedin the bronch system. vicipresidentinchorgeof the vice president of the State Street Subsequently.he become senior credt policy oflicet Heis also Intemationd Departmentin 1969, Bank andTrust Company of Boston. bankog executive in Corporate chairmanof theBonk'sCredtRisk
- president and chief operating Previously,he spent 14 years with Monogement Committee.
Bonking and was thereofter olhcerin1972,and was elected IBM,includng a year os o Sloon McWdker joined Chose m 1957, executive in charge ofIntemational choirmanin 1981. fellow of Mossochusetts institute of ossumed responsibility for the and Domestic Institutiond Bonking. Thomas G.Labrecque Technolo9Y- tending Services Groupin 1976, is president and chief operating Wilh,am Bolderston 111 Robert M. Licht'" . and was named senior vice
's executwe vice president and officer.He joined Chase in 1964. is president and chief executive resident for Credit Policyin 1979.
officer of Chase Lincdn First Bank, president of Chose Monhotton In 1974 he become executive vice Gerald Weiss CapitalMarkets and executive for president andTreasury Department N.A.He was elected president , is seniorvice president for of Lincoln First Bonk,N.A.,the Capitol Plonning.He joined Chase ex;cutive. Prior to assuming the Corporate Planning and forerunner of Chose Lincoln First, iri1966andisomemberof the presidency n 1981,Mc Lobrecque Development.He joined Chose AssetLi bilityMonogement wos vice chairman with overdi in 1980 ond was named chief in 1975 of ter 24 years with the Committee. responsibility for Commercial executive officer in 1984. Bonkbg. instituhonol Bonking. Retail O.J.McGW @dOCD "W" Elaine R. Bond o is smia vice president and general Banking. Trust and Fiduciary is senior vice president and drector uditor. Prior to joining Chase {s c mQfh investment os we'l os Corpomte of Corporate Systems.She joined
- Operations and Systems. in i984 he was vice president and q Chose in 1981 ofter 23 years with genad uditorof Gulf Oil J. Richard Zecher Robert R.Douglass IBM,where she served in many Corporot' - A cerhfied public is senior vice president Treos is vics chairmanin charge et executive copocities. lastly as a executive,and treasurer of the cc untant,he was a senior oudt b'otional Banking.Before joining group director ofinformation Corporation.He joined Chose systems ofiBM's dato processing mon ger tPriceWaterhouse Chose in 1976 as executive vice in 1981 and was chief economist complex in White Ploins.
before joining Gulf. president and Generd Counsel,he was a partnerin Melbonk, Tweed, Wolfgang Schoellkopf priwf ossuminghiscent Donald L.Boudreou p sih nmJ nu ry1986.Mr.Zecher Hadley and McCloy and servedos is executive vice presidentin is executive vice presidentin s aves s publicdirectorof the
. Counseland then Secretary to the chorge of Intemational Banking.
chargeof thenewTrodngand Chicogo Board Options Exchange. Govemor of New York State.He Secunhes Sector with responsibility He joined Chose in 1961,was become heod of NationalBanking promoted to senior vice presiden, fugl bdoctivihesinforeign in 1984 ond was elected to the in 1975 ond,in 1980,become oreo exchange, securities and bullion Boardin 1985 executive for Chose's Middle Eos, trodng, municipal finance, and buseness.In 1982 he was oppointed bmkm/deder banking.He joined intemahonolinstitutionol conk ng se n1963. 82
Domestic locations: The Chase Monhotton Corporation andThe Chase Monhotton Bank,N A. ConwnercialBanking Chose Home Wrtgage Corp. Chose Monhotton Overseas Computer Power,Inc. Subsidiones - Montvale,RJ.(201)S/3 5000 . Bonking Corp. Jacksonville,Fla(904) 350-1400 '
.The Chose knhotton Bonk,; Type of Busness Newark, Del (302)366-0390 Type dBusness.
N.A. ' ' Mortgage Banking . Type of Busness- ' MorIgoge Servicing, Software and New York,NY(212) 552-2222 : ogges. Edge Act Company - Computer Services for Red Estate-s L222BranchOflicesin Brandon, Jacksonville, Miami, chose Monhotton Service Reloted Applications
. New York State l Oronge Park,Orlando,Tompo, Corp. Chose Trons. info,Inc.
The Chose Monhotton Bank West Polm Beach, Winter Pork,Fla New York,NY(212) 223-7009 . New York,RY.(212) 676-5817
. (USA),N.A. Annapolis,Boltimore,Rockville Md.;
Type dBusines ' TypedBusons.
; Wilmington, Del (302)651-7500 d Moss in,
. ,, dg. Equipmentleasing Automated Frei t Bill Payment,
- Chose Lincoln First Bonk,N.A. Inf nnori n DecisionSupport .
Nw York, Rochester,Wontogh, Chose hnhottonTreasury
. Rochester,NY(716)258-5000 ; White Plains,NY: Loncoster, Corp. Senices for $ppers
.109 Branch Oflicesin - Wayne.Penn.:Cear toke,Dollas, Offee:
New York,NY(212) 552-5395 New York State Grand Prairie, Houston,Texos Type Son Francisco,Cdit -
' Chose Bonk of Ohio Annondde,Va Columbus, Ohio (614) 463-1700 Chose Invessors W.= . - .."/ Brokers,Inc.
Products
- 23BronchOflicesinOhio Corp.New York -
~
Ofic". Chicogo,R(312)663 8300 Chose Bonk of Wryland - NewYork,NY(212)730-2967 7yp , g Bethesda,Md.(301)652 6800 ' Type of Busness. Miami,$larChicago,R Boston, 13 BronchOfficesin Marylond Discount Secunties Broker Investment Advice and Mass.: Philadelphia,Penn. oggg. Asset Monogement Houston Texas Other Subsalmries los Angeles, Son Francisco,Cdits Chase Monhotton Capital Chose NationalCorporate Boston, Moss.:New York,NY: Chose Bonk International Morkets Corp. Services,Inc. Pittsburgh,Penn.: Houston, Texas: Newark,Det(302) 3661165 New'rork,N.Y.(212)S52 4372 New York,NY(212)907 6455 Washington,0.C Type of Business: Type of Busness. Type of Busness Chose Auto Leosing Corp. Edge Act Banking Company investment Banking - Regiond Marketing Oflices Monhosset,NY(516) 574-0343 Offices: Offices: Offices: Type of Busness.
~ Los Angeles,SonFrancisco,Colil: Los Angeles, San Francisco,Colil los Angeles, Son Francisco,Cdif. Auto Leosing
- Miami.fla: Atlanto,Ga; Miami,Fla: Chicago,R: Boston, Stamford, Conn. Boco Roton,Fla.:
Chicago,R: Houston,Texos Mass.: White Ploins,N.Y.: Atlanto, Gas Boston, Mass.; Chose Monhotton Financiol Philadelphio Penry Houston,Texos: c'"#' ,""* Chose Commercial Corp. Hasbrouck Heights,N.J.; Dallos, Hato Rey, Son juon,P.R. Houston, Texas Minneopolis,Minn.(612) 831-0006
)$.4 Chase Manhatton Financial 5*'*i'**' l"C-ChaseTrade,Inc.
New York,NY(212) 432-8075 Type of Business: Consumer F nonciolServices dh Equ pmentleasing Type of Busness. hnen Futures
- Offices: '"* "' "*
um r ciot Services New York,NY(212)552 3610 Irvine,Los Angeies,SonCarlos Son Mee: Francisco, Coal.; Stomford, Conn.: Mices: TYpe dBusnes. St.Croix,U.S. Virgin islands lokeland, Miami,Fla: Atlonto,Ga; Phoenix, Tucson. Ariz.: Beverly Hills, Fut resCommissions, Merchant Chico R Boston,Conton, Moss la jolla Newport Beach,Pdo Alto, ChoseVC Serw*ce Corp *
. West b,omfield,Mich.: Poromus, New York,NY(212) 676-2904 The Chose MonhottonTrust Walnut Creek, Calif.: Greenwich, Company of California,N.A.
N.J.: Cleveland, Ohio; Dollos,Texos Conry Boca Roton,CoralGobles, TypedBusness. Son Froncisco,Cdf. c sonvh,Moitland.Tompo,Fla Marketing, Distribution and Interactive Doto Corp. (415)433-8430 Art ntaGa;RocMe,6sa Senicing of VISATrovelers Checks
. Wdthorn, Moss.(617)8901234 TMBusins-Okla: Austin,Ddlos, Fort Worth, issued by Chose Type of Busness Houston, Son Antonio, Texas * '**
Chose Econometrics,Inc. Time Shoring, Securities The Chose MonhottonTrust
' Informotion, investment Andysis Bdo Cynwyd,Penn.
Chase h Manhatton , ties,lnc.
.,..stSecun Company of Florido,N.A.
and Securities Pricing Services (215)667-6000 Palm Beach,Fla(305)659 6704 New York,N.Y.(212) 552-3842 Type dBe OFm . g% tos Angeles, Son Francisco,Colit: Type of Busness Economic Forecasting and Consulting Services Trust Services
- Hartford,Stomford, Conn.: U.S. Govemment
- Atlanto,GasChicago,R: Securities Trading ort,ces, Mees:
l , Boston,Combridge,Wobum, Chase Monhotton of Son Francisco,Colif.: Chic o, R: Boca Roton,Noples Fla
- j. Mass.: Detroit, Mich.: Minneopolis. CaliforniaThrift New York,N.Y.: Ceveland bio; Chose Automated Clearing
. Minn. West Orang ,N.J. New Newport Beach,Colil Washogton,D.C. House,lnc. -
= III e b[ .:
(714) 760-2671 Type ofBusness Chose Access Services Corp. New York,N.Y.(212)676-4207 Houston,Texos:Was ington,D.C. Waltham, Mass.(617) 890-1234 Type of Busness. l_ Chase Monhatton industriol Consumer Financid Services Type of Busness: Automoted Geonng House l Bonk Chose Manhatton of Utah Cash Management Services Denver, Col (303) 7591411 Sdt Lake City, Utah (801) 363 0750 oft,ees, i Type ofBusinesso Type of Business: Son Francisco,Colil:New York, Consumer FinancialServices Consumer Financid Services NY: Ceveland, Ohio; Dollos, Texas 83
s Overseas locations The Chose Monhatton Corporation ond The Chose Manhatton Bank, N.A. Europe Subsid6ery and Associate Asia and Austrolosio Subsidsory and Associate Componies gran a , Bonks
~ Bronches France' Guam,Hong Kong,Indonesio, Argentmo:
Belgium,Channelislands, Denmark, I'nonciere d1nvestissements et de Chose ManhattonTrading,S.A. England, France, Germany, Greece, Japon, Korea,Molaysia, Pakistan, Italy, Monaco,Portugol, Spain, Construction Irnmobiliere (El.C.I.) The Philippines,Sogopore,Toiwan, The Bohomos: Switzerland,Turicey Germany' Thailand The Chose MonhottonTrust Inter cinreDatoGmbH Corporofion timited N -- .._..a Offices ltepresentative Offices
.. Norway, Sweden, Switzerland, l'olY ' Austrolio, Chino, india Broz&
Chosefen-Chose Finanziario,S.p.A. Bonco de investimentos Lor U.S.S.R. S baadeorycmd Ah Brasileiro,SA Subsideory and Associate Spain: Banks Chase leasing SAE. Bonco lor Brasileiro,SA Bonks Austrdio. United Kingdom: Chose AMPBank Limited Conodo: Austria: ChoseTrade Finance Ltd. The Chose Monhotton Bonk Chose Manhatton Bank Hong Kong: ofConodo
. (Austrio) A.G. Chase Monhotton Asiolimited Middle East and Africo Chase Monhotton Financial CoymonIslands:
Belgium, Chose Banque de Commerce,S.A. Services (Hong Kong)Ltd . Chose MonhottonTrust Cayman Ltd Bronches Bahrain,1vory Coast, Chose Manhattoninvestment Chile: Channellslands: lebonon,Liberio Services (Hong Kong) Ltd. Chose Monhotton Copetd Markets Chose Bank andTrust Co.[C.L),Ltd Chose MonhottonTrust Company internationd Limitado Foland: Representative Offices Chase Monhotton Bonk,0Y (Hong Kong)ted Colornbia: Egypt,Nigerio, South Africa J pon: Bonco delComercio France: Subsidiary and Associate Chose Monhotton,SA Chase MonhottonTrust and Ponomo: Banks Comeroon: BoAmg Compony(Japon)Ltd Bonco delComercio (Ponomo),SA Germany: Chose Bonk Comeroon,S.A. Moloysia: Puerto Rico: Chose BotA, A.G. Amon hChoseMerchantBonk Chose Manhatton CopitolMarkets tuxembourg: Egypt: Berhad Corporation of Puerto Rico Chose Monhotson Bank The Chose Nationd Bonk (Egypt) Luxembourg,SA S A E. Singapore: Subsidiary and Associate Chase Capital Marketslimited Componies The Netherlandst Nigeria, ContinentalMerchant Bonk Subsidiary and Associate BrazA Nederlandse Crediesbonk N.V. Financeira tor Brasileiro,SA Nigeriolimited Companies Norway, Indonese Saudi Arabio: Conodo: Chose Monhotton Bank P.T. Chose leasing Indonesia Chase Manhattonleasing (Norway) A.S. The Saudiinvestment Bonk J p n: Conodo,ltd Republic of keland: Choseleasing(Jopon)Ltd Chose Boni ,trefond) Ltd Western Hemisphere Bo deimzos Bronches Chase Asesoramiento Argentino,The Bohomas,Coymon Financiero SA Isl nds, Chile,Dominicon Republic, Switzerland: Guodeloupe,Marfinique,Ponomo, Chose Manhatton Bank Porogvoy, Peru, Puerto Rico, (Switzerfond) St. Moorten,U.S.ond Bntish Virgin Uratzd Kingdom: I5' ' Chose Manhatton Capital Markets R*Presentative Of fices (U.K.) Ltd Brazil,Colombio. Ecuador, Mexico, Chose Monhottan tirnited Uruguay,Venezuelo libro Bank timited 84
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Exalair 28 36 Summarized Financial Information - Chase Manhattan National Corporation In connection with the merger of Lincoln First Banks Inc. (" Lincoln") into 1 Chase Manhattan National Corporation ("CE") on July /$% Debentures Due1984, CMC assumed, and subsequently the Company guaranteed, Lincoln's 81 1996. Set forth below is summarized consolidated financial information for CMC for the periods indicated. Statement of Income Information Nine Months Ended September 30, 1986 L985 ($ in millions) Net Interest Income After Provision For Possible Loan Losses $113 $110 22 34 Net Income Statement of Condition Information Sept. 30, Dec. 31, Sept. 30, 1986 1985 1985 ($ in millions) Loans $3,420 $2,986 $2,888 4,363 4,164 4 ,158 Total Assets Deposits 3,415 3,319 3,345 Total Liabilities 3,969 3,792 3,795 Stockholder's Equity 394 372 363 Total Liabilities and Stockholder's Equity 4,363 4 ,164 4 ,158 n- ..-..-.imaf
EXHIBIT 12 The Chase Manhattan Corporation and Subsidiaries Computation of Consolidated Ratios of Earninas to Fixed Charaes Nine Months Ended September 30, ($ in thousands) 1986 1985 EARNINGS: Net Income (Less: Equity in Undistributed Income (Loss) of Unconsolidated Subsidiaries and Associated Companies) $ 431,028 $ 427,171 Income Taxes 209,180 238,320 Fixed Charges Excluding Interest on Deposits 1,129,392 1,052,294 Total Earnings for Ratio Excluding Interest 8 on Deposits 1,769,600 1,717,785 Interest on Deposits 2,575,666 3,269,464 Total Earnings for Ratio Including Interest on Deposits $4.345.266 $4.987.249 FIXED CHARGES: Interest Expense and Amortization of Debt Discount and Issuance Coste (Excluding Interest on Deposits) $1,070,829 $1,002,996 One-Third of Net Rental Expense 58,563 49,298 Total Fixed Charges for Ratio Excluding Interest , on Deposits 1,129,392 1,052,294 Interest on Deposits 2,575,666 3,269,464 Total Fixed Charges for Ratio Including Interest l on Deposits $3.705.058 $4.321.758 RATIO OF EARNINGS TO FIXED CHARGES: Excluding Interest on Deposits 1.6x 1.6x Including Interest on Deposits 1.2 1.2
EXHIBIT 11 }4 l The Chase Manhattan Corporation and Subsidiaries Computation of Earnings Per Common Share Quarter Ended Nine Months Ended September 30, S tember 30 1986 1985 ($ in thousands) (except per share amounts) Primary Net Income $ 138,105 $ 149,424 $ 427,564 $ 414,138 Less: Preferred Stock Dividend Requirements 13,888 17,281 44,746 67 048 Net Income Applicable to Comon Stock $ :24.217 $ 132.143 $ 382.818 $ Average Common Shares Outstanding L 2_3m2Q7_ 75.898.388 79.223.224 4 .7 18 . 4 , Primary Earnings Per Common Share $ 1.55 $ 1.74 $ 4.83 $ 4.6 Assuming Full Dilution Net Income Applicable to Common Stock - as adjusted * $ 124.393 $ 132.647 $ 383.435 4 97 Shares of Common Stock Outstanding During the Period, retroactively adjusted for conversions of capital notes and subordinated debentures and exercises of stock options 80,154,104 76,079,620 79,603,863 75,392,7 Add: Shares Issuable upon Conversion of Convertible Capital Notes and Debentures 770,174 2,276,312 770,174 2,276,31 Shares Issuable upon Exercise of Stock Options and Conversion of Restricted Stock Units 599,242 492,568 617,865 484 74 Shares of Common Stock Outstanding - as adjusted 81.523.520 78.848.500 80.991.902 7 Earnings Per Common Share Assuming Full Dilution $ 1.53 $ 1.68 $ 4.73 $ 4.4
' Adjusted for interest expense on convertible notes and debentures after applicable income taxes.
33 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. THE CHASE MANHATTAN COW ORATION (Registrant) By MICHAEL P. ESPOSITO, JR. (Michael P. Esposito, Jr.) (Executive Vice President and Controller) November 4,1986
l PART II - OTHER IW ORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits g Exhibit 11 Statement re: Computation of Earnings Per _ Common Share for the quarters and nine months ended September 30,1986 and 1985 34 Exhibit 12 Statement re: Computation of Consolidated Ratios of Earnings to Fixed Charges-for the nine months ended September 30,1986 and 1985. 35 Exhibit 28 Summarized Financial Information - Chase Manhattan 36 National Corporation (b) Reports on Form 8-K The registrant filed a report on Form 8-K during the quarter ended September 30, 1986: Date of Report Items Reported 7/14/86 - News release announcing the Corporation's earnings for the quarter ended June 30, 1986
3I The Chase Manhattan Corporation and Subsidiaries Consolidated Statement of Income 1986 1985 ($ in thousands, except per comon share data) 3rd Qtr. Znd Qtr. 1st Qtr. 4th Qtr. 3rd Qtr. Intertst Income lntarat and Fees on Loans $1,546,531 $1,593,492 $1,808,867 $1,802,486 $1,755,003 Intersst on Bank Deposit Placings 111,961 124,910 115,318 121,013 130,551 Intsrsst and Dividends on Investment Securities: Intsrest on-U.S. Treasury Securities 43,039 41,872 40,072 43,857 49,044 Federal Agency Securities 2,364 5,385 9,050 7,356 7,310 State and Political S@ division Securities Exempt from Federar Income Taxes 37,782 41,778 43,232 38,509 37,876 Other Bonds, Notes and Debentures 34,034 32,157 70,742 57,054 45,153 Dividends on Federal Reserve Bank and Other Stock Investments 3, 190 2,338 2,416 2,373 3,293 120,409 12J,330 163,312 149,149 142,676 Interzst on Federal Ftrids Sold and Securities Purchased Under Rssale Agreements 18,084 23,408 49,236 35,919 21,300 Interest on Trading Account Assets 25,666 22,143 28,171 22,704 18,611 Total Interest Income 1,822,631 1,887,483 Z,167,104 Z ,131,271 2,068,141 Intsreet Expense 04 posits 783,888 832,055 959,723 1,006,231 1,031,908 Federal Funds Purchased and Securities Sold Under Repurchase Agreements 93,552 98,125 161,119 125,090 116,825 Comercial Paper 45,156 54,164 56,844 60,547 63,346 Other Borrowed Money 97,127 100,632 177,545 144,668 86,585 Long-Term Notes and Debentures 57,889 62,623 63,421 61,703 60,407 Total Interest Expense 1,077,612 1,147,399 1,415,632 1,398,Z39 1,359,071 Nst Interest Income 745,039 739,884 748,452 733,032 709,070 Provision for Possible Loan Losses 190,000 135,000 130,000 125,000 110,000 Net Interest Income Af ter Provision for Possible Loan losses 355,039 6G4,584 618,43Z 6G8,032 399,G70 Other Operating Income Fees and Gomissions 276,562 282,913 241,580 262,220 228,404 Foreign Exchange Trading Income 54,821 62,836 60,277 46,470 48,231 Trading Account Profits (Losses) 17,993 9,255 22,173 11,460 3,022 Investment Securities Gains (Losses) 51,152 46,577 40,204 20,021 28,776 Other Income 105 47,054 9,085 41,138 12,848 Total Other Operating Income M.244I 448,635 373,319 3a1,309 321, Z81 Other Operating Expenses salaries and Employee Benefits: Salaries 341,482 322,500 319,065 311,613 280,038 Profit Sharing 26,082 25,763 20,502 22,489 22,351 Other Employee Benefits 98,245 83,233 84,863 63,641 72,336 46),809 431,496 4Z4,430 397,743 J74,725 Net Occupancy 94,530 77,187 71,182 68,055 67,869 Equipment Rentals, Oepreciation and Maintenance 67,428 70,767 67,867 54,700 59,456 Other Expenses 233,720 254,963 209,978 223,718 196,327 Total Other Operating Expenses 861,487 834,413 7/J,457 744,Z16 698 J77 Income eefore Taxes 199,324 219,106 218,314 245,125 221,974 Applicable Income Taxes 61,219 73,337 74,624 94 ,445 72,550 Net Ineve $ 138.105 $ 145.769 1 14 3 . 6 M $ 150.660 $ 149.424 Net Incme Witmie to Ce ste* $ 124.217 $ 131.192 $ 127.408 $ 133.484 $ 132.143 Average Shares Outstanding 80,193,207 79,308,817 78,156,253 76,789,784 75,898,388 Earnings Per Common Share: Primary, 9ased on Average Shares Outstanding $ 1,55 $ 1.65 $ 1.63 $ 1,74 $ 1.74 Assumingur ll Oilution $ 1.53 $ 1.62 $ 1.59 $ 1.68 $ 1.68 Casn Dividends Declared Per Comnon share $ .51 U4 $ 51 U4 $ 51 U4 $ 47 1/2 $ 47 U2
30 The Chase Manhattan Corporation and $@sidiaries Lono-Term Notes and Debentures 1986 1985
' sept. 30 June 30 March 31, Dec. 31, sept. 30
($ in thousands) Company: 6,759 $ 7,245 $ 7,626 Convertible Capital Notes (4 7/85 Due 1993) $ - $ - $ 22,143 23,929 25,862 57,282 57,374 Convertible S@ordinated Debentures (61/2% Due 1996) Notes Issued with Detachable Equity 150,000 150,000 150,000 150,000 150,000 Contracts (151/2% Cue 1992) 249,031 249,006 - - Notes (8 1/2% Due 1996) 249,056 80,893 78,157 75,515 72,964 70,499 Zero Cop Notes (Due 1992) 74 74 - - - Sinking Fund Debentures (81/2% Due 2009) 282,385 282,385 282,385 Floating Rate Notes (Due 2009) 282,311 282,311 348,930 348,901 348,872 348,843 M8,814 Floating Rate $@ordinated Notes (Due 1995) 398,665 398,632 398,598
- Floating Rate Subordinated Notes (Due 1996) 398,731 398,698 175,000 175,000 175,000 175,000 -
Floating Rate Subordinated Notes (Due 1997) 250,000 250,000 250,000 Floating Rate Subordinated Notes (Due 2000) 250,000 250,000 400,000 400,000 400,000 400,000 ~ 400,000 Floating Rate Subordinated Notes (Due 2009) 2.362,064 2,142,331 1,963,z96 Total Z ,337,135 Z,J36.101 Chase Manhattan National Corporation: 7,250 7,250 7,250 7,250 7,250 Debentures (6 1/4% Oue 1992) 21,090 21,090 21,090 21,090 Debentures (81/25 Due 1996)* 21,090 Chase Lincoln First Bank N.A. 3,614 3,614 3,974 3,976 3,975 Capital Notes (4.70% Due 1989) Jz,314 Jz,316 32,313 J1,954 31,954 Total Banks - - 200,000 200,000 200,000
' Capital Notes (8 3/45 Oue 1986) - - 3,768 3,833 3,886 Capital Notes (4.60% Oue 1990) 150,000 150,000 150,000 150,000 150,000 Floating Rate Notes (Due 1993)** 32,976 31,284 32,300 29,297 Deutsche Mark Bearer Bonds (65 Due 1993)** 29,755 113,259 106,967 105,152 97,485 90,744 French Franc Floating Rate Bonds (Due 1992)*** 45,493 42,347 French Franc Floating Rate Bonds (Due 1993)"* 52,854 49,918 49,071 36,280 33,203 31,594 30,288 28,750 Swiss Franc Bonds (45 Due 1993)* 86,658 83,620 81,825 72,433 65,998 Nederlandse CredietDank N.V. Notes and Debentures 400,000 400,000 400,000 400,000 400,000 Floating Rate S@ordinated Debenture (Due 1996) 1,03z,694 1,oJ1,5Jz 1,011,0z2 565,506 556,654 Total L:7.s: Investment by the Company in Floating Rate 400,000 400,000 400,000 400,000 400,000 S@ordinated Debenture of the Bank (Due 1996) 1z.837.s98 iz s44.73y $3.047.072 12.so6.499 iz.60s.653 Tctal Long-Term Notes and Decentures
- Guaranteed by the Company.
Issued by Chase Manhattan Overseas Banking Corporation, a wholly owned subsidiary of the Bank, and guaranteed by the Comany.
***1ssued by Chase Manhattan S.A., a wholly owned s@sidiary of the Bank, and guaranteed by the Company.
^
29 The Chase Manhattan Corporation and subsidiaries Funds Borrowed 1986 1985 ($ in thousands) Sept. 30 June 30 March 31, Dec. 31, Sept. 30 Federal Funds Purchased $ 3,494,918 $ 3,949,104 $ 2,662,949 $ 2,585,402 $ 1,863,0 % Securities Sold Under Repurchase Agreenunts 1,210,999 1,163,015 1,319,836 1,546,391 2,280,031 l Total 4,705,917 5,112,119 3,752,755 4,131,773 4,143,067 l Comunercial Paper: i Company 2,810,365 3,190,708 3,116,410 3,337,981 3,M7,949 l Subsidiaries of Bank 18,106 77,955 126,091 145,520 120,346 ' Total. 2.525,471 3,z65,663 3,zaz ,501 3,453,501 3,655,z95 Other Borrowed Money:
- Maturing Within One Year:
Banking Subsidiaries of Company 1,274,151 1,155,108 1,086,008 904,793 504,017' Nonbanking Subsidiaries of Capany 100,669 104,476 113,489 100,678 83,329 Bank: . Domestic Offices 1,0 % ,676 1,068,330 548,966 1,276,M1 1,129,833 Oyerseas Offices 944,357 1,063,222 1,268,296 1,389,786 1,013,239
$ aaring After One Year:
Company: Floating Rate Notes (Due 1991) 250,000 - - - - Floating Rate Extendable Notes (Due 1992) 299,869 299,841 299,813 299,784 299,7 % Floating Rate Extendable Notes (Due 1997) 249,834 249,805 249,775 249,746 249,717 Floating Rate Notes (Due 1999) 23,378 23,383 24,118 24,118 25,147 Banking S@sidiaries of Coopany . 331,040 181,053 109,790 81,694 88,107 Nonbanking Subsidiary of Company - 4,610 7,269 - - Bank: Domestic Offices 869 869 869 866 2,654 - Overseas Offices 427,872 435,358 427,723 344 ,168 398,863 Total 4,755,715 4,556,055 4,136,116 4,671,994 3,774,662 Total Fwxis Borrowed 112.a93. ia3 $12.966 s37 $11. 361.402 $12.zs7 zas $11.626.024
28 The Chase Manhattan Corporation and S@sidiaries Consolidated Average Loan Balances
- Nine Months Ended 1986 1985 September 30, 3rd Qtr. zno atr. 3rd Qtr. 1986 1953
($ in millions) Domestic Offices: Real Estate Loans: $ 2,218 $ 3,235 $ 1,942 Secured by 1-4 Family Residential Properties $ 3,764 $ 3,212 4,306 4 ,129 2,974 4,167 2,927 Other Real Estate Loans 472 300 493 284 Loans to Mortgage Companies 667 1,201 1,220 1,548 1,245 1,676 Loans to Other Financial Institutions 567 608 587 576 Loans for Purchasing or Carrying Securities 614 7,800 7,780 8,799 7,929 9,127 Connercial and Industrial Loans 6,548 7,794 6,020 Loans to Individuals for Personal Expenditures 8,223 7,733 1,223 1,515 1,167 1,350 1,047 Lease Financings 1,801 1,150 Tax-Exegt Loans 2,098 1,642 1,189 810 744 504 707 490 Other Loans Total Domestic Offices. Cross W 445 W 436 W 504 W 432 W 453 Less: unearnec Discount A "1. m m :eitti= - Less: Unearned Discount UUUUU 221 218 3ET87 194 218 194 Total Overseas Offices Total Average Loans $g Moans in overseas offices include loans to U.S. connercial $g borrowers $2 $M $_LZZZ $3 Consolidated Analysis of Loan Loss Experience
- Nine Months Ended 1986 1985 September 30, 3rd Qtr. znd Qtr. 3rd Qtr. 1956 1955
($ in thousands) Reserve for Possible Loan losses at Beginning of Period $ 955,859 $934,835 $820,690 $ 907,672 $761,439 Net Loan charge-Of f s: Domestic Loans: 47,236 72,201 connercial and InckJstrial Loans 21,859 19,737 24,236 (806) (72) (67) (953) (177) Loans to Financial Institutions - - (81) (3) Loans for Purchasing or Carrying Securities - 5,327 1,582 (542) 13,075 (488) Real Estate Loans 195,266 82,710 Loans to Individuals for Personal Expenditures 66,067 65,259 33,881 493 604 103 1,830 67 Lease Financings (192) Other Loans (19) 169) 314) (197) Total Domestic Net Loan Charge-Offs yz,9zl , , z36,176 6 International Loans: 11,385 55,088 26,062 connercial and Industrial Loans 12,661 17,273 (403) 3,980 (529) 3,717 362 Real Estate Loans 5,371 Loans to Individuals for Personal Expenditures 4,329 2,674 2,992 9,827 Loans to Foreign Governments and Official Institutions 4,872 7,890 1,309 22,393 29,948 4,054 515 538 4,691 29 Other Loans Total International Net Loan Charge-Of fs z3,513 Tl"777 'I579T 93,716 W 118,434 351,892 , Total Net Loan charae-Of f s , , 190,000 135,000 110,000 455,000 310,000 Provision Charged to Expenses 5,489 16,783 Reserves of AcqJired Subsidiaries - - 9,923 6,740 5 297 4 778 17,896 67 Ftreign ExchanDe Translation Adjustments Reserve for Possible Loan Losses at End of Period $1 o M 163 8 8 11 on 163 $M
- Prior period amounts have been reclassified for cagarative purposes.
' - 27 The Chase Mereietten Comeretion one $@e181eries eversee talences. Interest end Aversee metee.Tesente Ceutveient Nine Menthe Enese Nine Monthe Eneae . Sentemer 30, 1986 Sente ner 30. 1985 average averste . mverage average
. ($ in eL111ene) . talence Interest Rate talence Interest Rete
-Easnine Asseter:
_ _ _ _ . _ _ r, cepeeste Pleens with Berese...........,. $ S 409 $ 352 . 8.235 < $ S.156 $ 365 9.445 Pesarel Fmee Se&d one Securities Pugeneses LNiest - Rosale Agressante...................................... 1,0S8 - - 91 ' 11.46 = 1,175 49
-Tre e ng Ases e t 4eeste..................................
7.91 1.236 81 8.88 725 30 10.10
. Investeent Seeuritiest Genestic Officest U.S. Treasury Securities............................. 1.919 125 8.71 . - 1.058 las 10.57 Federal Agency Securities. . . . . . . . . . . . . . . . . . . . . . ... . . 215 17 10.41 - 216 la 11.12 State end Politteel Sidselvielen Securities.......... 2.024 . 201 13.25 1,9e6 ' 19e 13.20 Other Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . 223
'Jm 0.de 2M
' Total Dessatic 0ffices............................ "Ilf 10.09 ~UN J2
. ma 10.65 11.80 Overeses 0ffices...................................... 1 49 Total Investment Socieritise................... .... ,
103 J- m 12.42 11.32 13
. nu 16.63 12.82 -
Leonet. Desmette 0ffices...................................... 28.876 2,S19 11.M 24,706 2.256 12.17 Overeses Off1ces...................................... 33 356 2 S4 10.18 36 Me 23 193 - 11.61 Total Leone. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . , , 10.87 , . 3,4J 11.e6 27 .. 39 .
~ Leses Leone , Not Reserve
. . . . . . . . . . for
. . . . .Poselste
. . . . . . . . . . . .Lean
. . . . . . .Leseos'..............
..... 10.s7 F 1ET -
11.as T *
............... . 10.49 N 11.67
...................................... 34,901 2,988 11.37 30,815 2,746 11.91 Oversees Off1ees...................................... 4 3 10.12 43 250 37 11.30 Total Gross Internet-(eening Aseste............... 10.89 11.67 4
................................. 4,953 4,294 Custseers' Lient11ty en Acceptenses..................... 2,604 4,308 -
Other Aseste............................................ Total ^^--r c _2 'Ebut 4eeste. . . . . . . . . . . . . . . . . . Total aseste....................................
,I 0 - .t,. 0,,, t
- Savings and lebte Greer of withereuel Deposite. $ 1,983 $ 77 S.225 $ 74 Savings Certif es and Nest Egg Accessit Ospeelte.. $ 1.099 S.205 407 26 8.63 404 26 4.72 Money Masmet 0epeelte............... .............. 9,314 431 6.19 7,466 Nogetteele Certificates of Depeelt.................. 4 14 7.41 -
306 31 7.02 907 37 8.49
. Other f las Depos1te. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 440 0.43 7 35 S 9.36 Total Oesestic Off1ces............................ , TUD 6.99 8.06 Oversese 0ffices......................................
Total Interset-emoring 0aposite............ ....... 20 LM3 7.23 30 2 9.43 Federal Funde Pugefused one Seeurities Sete Under M.875 I.3M 7.13 IW4,986 PF , 8.92 Repusenese Agressante. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S.127 353 9.20 4,797 336 9.37 Other getrouse Moneyt Desestic Off1eet...................................... S.462 337 7.97 S,474 M2
'Oversese 0ffices...................................... 8.05 Total Other terrenes Money........................
64 7 gm 15.00 _E 14 .54 9.73 see 9.03 Long. Tere Notes and 0egentures.... . ................... .. 2, 8.52 2 469 78 9.M Seemory .54 to;al Interest-teertru Listilitico................ M.000WF . .. 7.M 9.08
.. -seerine L =" m=
passet
- Un ,ces . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2e 690 1,332 7.21 21,913 1,346 8.21 Oversees 0ffices......................................
Total Interest-Gest 35 23 7.95 40 9M 2 924 9.35 List 111tico................ . . 7.M . 9.08 1
............................ 11,300 9,572 Deposite in Overseet Off1ees............................ 1.925 1,378 Asemptensee Outetene1ng.... ..... .... ................ ... . 2.495 4 ,394 Ascensite Payable. Accrues Esquences and Other Listilitise 4 SS 3 Total ^ u c ____ ___ W ta.manea ,,,,,,,,,,,,,
Teral L """ **.............................. Assenestle Prer tree 3 een. . . . . . . . . . . . . . . . . . . . . . . . .. . . . . Nutrosseostle Preferres Stesk........................... 802 402 Casemi Steese eleers' Em1ty. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 9e6 3 467 T ta il L M (1lpe , ne p - We' rad tv. . . .. . Tese is,E a,v @ rit ses. nt iest anesse ans
., ,. . .'se e it nei,e ;ee d........................... $TTW - Not aiseir, ,nese se oe i
eentase or Gross 3.035 STIM 2.392 tai ,. A m une a soete . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.305 3.965 e Reserve for possible loan losses to escluesd free calculations of everage belances one everage rates, as sacropriate.
** Reflects the first earter Aspect of the outreerdinertly hieh level of local interest rates unich prevelled in certetn South American countries.
Met 2 Leon asowite include noneccruel and reduces rete leans, se sep11ce01e.
26 e _ .t _.49. e.d t et.s.m averses solemeos, lete.eet and teorees heteo.faaette testeeleet Thted toerter 1986 Seemed toerter lee 6 ftted Seerter 1996 Aserege meerees Aeerece avere,e Merege acerose ealesee toterest este toisese totweet este Se teese toterest mate (3 se et110 men aseets toterest teresse assetet 6.245 $ 4.464 $ 13e 9 .461 laterest-toer tog Depostte Flooed of te tests... ......u.....u......... $ 4.110 $ lit FJft $ 4.644 $ Its l.ett le F.88 f.tst 23 F.84 f.MI ti s.M federal Feeds sold eed Seeerttles Pereseed ender Ameele Aeressante..... 38 4.73 799 to 9.96 fr edtag Asseest Assets......................n. ....... ...u.n...u. 1.482 If F.M 1.MF looseteset Sasertttee Dennette effleest 0.08 I.900 49 9.90 e S. treseery Seeer t t les.......................un.... ........... 1.140 48 F.H 1.908 41
.......... ..............n.. 93 2 10.M t1e 8 9.M 306 7 14 .39 Federe t Aeoner Soserttsee.. u...u M 1.MF 61 13.16 2.0e9 to 13Je f.M9 13.99 State eed Polttiset sendtetsten Seewittes................u..... att 8.48 tot e 83.00 taber leser t iles.n... ...... ..u....u.....n.................o #ff 8 F.90 8 f ete t essest le 0ff tees...u...............u...................... W 7 10J3 4.430 7E 14.M 4,485 7 11.50 Seer sese 0ff tees.....u........n........u........n u.......... f. ell 43 9J3 f.He 30 9.30 f tot de 14 .48
. Tota l looseteest Seeur ttles.........n...u...un.n........n... 4 lte 7 9.93 6.000 7 10.43 5.F46 "lE 18.19 Lemest Demoot te 9ff tses... ....n...u....... ......no..........u..n..... 30.248 M3 11.17 34.878 est 11.48 ts.M1 743 11.68 33,764 Fat 8.04 33.306 790 9.M M 467 1 436 11JF Seer see s 0ff tees.......... ....u.........u.n......u...un..nu.
Tete l Leses.. ...u...........u..un...........un....u......n E4II TSH 9.M 41.M8 1.4M 10.54 M . II.48 See . He . . MF . . Loest baseree f or Pose ttle Lees Laeses*...............u...u...u.. L e ons . 9et... .... . .. .. ...... .u un . ......u .....u....u..u.... 68 MS 10.11 41 ett t ese 10.7f M ITE ll.43 9.44 s. 10.38 4 4 6 ftJP fete t Interest-teretes neests.e est.............. .......... ... . . tuomary.eroes feterestateretse seeste M.339 tot 10.06 H.707 903 11.36 31.444 906 11.43 teaset t e 0ffiseen.n...u....u..u.uu...............un........o 6.41 41.H1 9F7 9.40 43 4tf I 280 1 8.14 Seer ess e Of f f ee s.. ... .... ... .....u...... ... tou s ar en in=n.sereine Asen................................ 41.346 MM ett e.M M i .m M.M To'.M Nt. ii.n mesta.. -testes anne. S.M1 S ees 4.3ef C . sh end See ff es east s.un ..n .....u.....u...u...u........we... testener s' Lleef f tty se Aseeptanees..n.....n...u..................u. 3.004 f.744 8.968
...u 4.MF 4 See Schar Assets....... ..u.u..u.u.....u.......u......u... .
- 18. # 3 fetal moetetereet-terstee Assets.....u..u... . ....un...n.. .
#,ett eneianos.................................................... 1W3T6 Llehtitttes med Steethelders' testly laserest-enertes tiestittles latereet-toertog esseettet Demootte Off teest
$ t.064 $ 17 6.195 $ 1.m $ to 8.308 $ 1.933 $ to 6.245 lettegs med nogetteele order of Utthdresel tapestte..n.............
9 8.e3 487 9 e.31 306 9 9.30 leetege Certtf tsetos med test Agg Aseeeet topoetts.............u... 4 13 9.768 1M l.68 9.431 144 4.19 f.est 134 4.43 nosey nort et gepee t t e. ......uu..uu.......u.............. ..... esgottette teet tf tsotee of tapee tt.....u....u..........u......... 818 e 4.33 6F4 le 6.94 eF4 IF F.M 4 771 14e 6.14 7.164 149 a.38 7 313 163 0.31 Sther f lee Depee f t s. ......u.......u.....................u........ feta l geenot t e 0f f tees........un....u.....................un. . 7 4.84 19.674 8M 4.98 fe.Je5 348 FJ6 29 tot 46 4JF 30.893 495 6.99 30.306 698 9.06 teer esas 0ff t ees. .u.u.............. ......u.........u............ fetal latereet teortes Bessetts........u.uu ..u...... u. . 7 4.34 I)E ~M 4.93 44.M9 III a.48 federal feeds fordeoed eed laserteles Sold esser espereses Agresseets 6.4H 94 4.79 S.th 98 f.49 8.089 fle 9.13 Other terresed assoft 8.30 l.414 les PJ1 8.7M 184 F.94 8.479 til Deanet te 0ff tees..........n.u....n....u.u...n.u..un.......... 1 586 39 14.06 f .604 of 9.70 f 208 M If.64 overese s 4ff l ee su..................u..........u...........u....u. noser............................. "T'.TE 7 r.M T.W ""TK s.M e.m TK e.9e tou t mn omend ......... et 9.M
..... t .aN M e.es t,He 63 a.s3 f.us Lee, two som ud eeneann...................................
e.u i i nent.#, t.e t ea m t t=.. .............................. u,tM T35 6.M IT3F T3W r.tt U3F T3R s.M is-w ,-i.w nt N-testient mi.e al.He 434 4.74 to.54e 441 FJ1 atJoe ett F.St teenot t e 0f f tees.....u.......u.............u..u.........u........ 30,th 648 6.H 39.337 fes FJi es.ef t 9 88 9 .12 trer ess e 0f f ice s.. . . . . .. ..n .. ... . . .u . .. .... .. ... .. ... ..u. .. ........ fetal laterest toer tet t iett19t tes.....u......uu............n. U"TK "T3E 4.44 U3eT T347 f.It U3W T3K 4.84 mestaterest eeertoe teattletteet - sepee tts to esseet te of f tees..u.u........n....u.u........u....u.. 11.4M ll.MF 9.e64 espee t t s to Deer sees ef f tees....... ..................n.......u.....u. 3.Nf 1.961 f.470 Aseepteeses est eleed tet................n.........................u..u 3 .694 3.f ft 3.940 an.une es, i.. aure.d me,e== eed m. tiali ma................ .9a 4.u2 v.u i M.i.wrat , f.e un t 1 m ............................. Tr',T. I N3n 9942.M ir H .e M M.Fet et .686 f eta l ( t et t t t e tes....... u....u...uunnu................... tedsment l e Pr ef erred S tese ...... ... ................n..u............... 68 et 64 tot 600 6et eseressesseio pref erred 9teet..n......u.......u u.....n.......u... 4 est 3 964 5 Sfs (easse Steethe l eer s ' age t ty..u.. ... .......un o....u............... ToteI LteetI tties and $testbeleers' leef 47............. ..u... S . .
- _
SH.ei r
$g 3.016 SE 3.MS $ 767 8.788 f asette test eleet met letweet leases eed teorees laterest este lereed. 4.0Fs en i . t i.e. . . f .e.ee of e,.e iner.n.ur et.0 ==u.... 4.Mi 4.tri e Deeerse for peestate lees lossee to oesteded free setselettese of everage balescos med everage rates, as oppreertete.
e91Il tote esteetS teele4e eteGeeros] Sed redeced tste lates. es opplise6le.
I 25 The Ch*se Manhattan Bank, N.A. and Stbsidiaries CCNSC1." DATED STATEENT OF CCN)ITICN ($ in thousands) Sept. 30,1986 Dec. 31, 1985 Sect. 30,1985 Assets Cash and Due frem Banks $ 3,820,451 $ 5,208,200 $ 4,733,575 Interzst-Bearing Deposits Placed with Banks 5,974,796 4,566,219 5,150,460 Federal Funds Sold and Securities Purchased Under Resale Agreements 2,693,130 2,458,090 1,538,847 Trt. ding Account Assets 1,714,824 1,331,638 1,445,548 Investment Securities: U.S. Treasury Securities 1,721,715 1,721,697 1,449,431 Federal Agency Securities 198 290,391 240,892 State and Political Stbdivision Securities 1,991,572 2,185,798 1,940,020 Other Bonds, Notes and Debentures 1,656,772 1,357,862 1,159,880 Federal Reserve Bank and Other Stock Investments 85,853 82,509 82,459 Total Investment Securities (Estimated Market value or
$3,528,000, $5,596,000 and $4,725,000, Respectively) 5,456,110 5,638,257 4,872,682 Loans 51,762,788 52,176,137 54,208,193 Less: Reserve for Possible Loan losses 765,079 699,054 723,331 Loans, Net 30,99/,/09 31,477,083 53,484,86Z Customers' Liability on Acceptances 2,654,407 2,810,159 3,644,418 Accrued Interest Receivable 762,247 1,002,649 988,410 Premis:s and Equipment 917,076 753,834 711,229 Other Assets 2,859,592 2,474,067 2,526,868 Total Assets 177.850.342 177.7Z0.196 179.096.899 Liabilities and Stockholder's Equity Deposits:
Domestic Offices: Noninterest-Bearing $11,234,793 $12,677,180 $11,069,562 Interest-Bearing 14,611,813 14,629,437 14,388,198 Ovsrseas Offices: Noninterest-Bearing 2,075,823 1,939,120 1,895,830 Interest-Bearino 29,910,081 29,500,685 32,050,374 Total Deposits 57,83Z,510 58,746,4ZZ 59,403,964 Federal Funds Purchased and Securities Sold Under Repurchase Agreements 4,727,245 3,972,397 4,109,921 0;her Borrowed Funds 2,451,996 3,160,191 2,669,197 Acceptances Outstanding 2,663,367 2,818,384 3,651,587 Accrued Interest Payable 575,651 611,150 663,721 Accounts Payable, Accrued Expenses and Other Liabilities 4,127,326 2,925,095 3,218,201 72,J78,095 7Z,Z33,639 73,716,591 Lono-Titrm Notes and Debentures 868,806 1,031,832 1,011,022 Total Liabilities 73.246.901 73.Z65.471 74./Z/.613 Stockholder's Equity: Capital Stock (Par Value $15.00 Per Share): 9/30/86 12/31/85 9/30/85 Authorized Shares 61,744,445 61,744,445 61,744,445 Outstanding Shares 50,371,225 50,009,247 49,849,642 755,568 750,139 747,745 Surplus 1,796,126 1,772,407 1,764,674 Forsign Exchange Translation Adjustments (25,771) (22,345) (24,344) Undivided Profits 2,077,518 1,954,524 1,881,211 Total Stockholder's Equity 4,603,441 4,454,/Z3 4,369,Z86 Total Liabilities and Stockholder's Ecuitv 177. 850. 34 Z 577. /Z0.196 179.096.899 Member Federal Deposit Insurance Corporation
[
~ l 24 The Chase Manhattan Corporation _(Capany Only) ,
BALAMI 9EET ($ in thousands) _ Sep t._ 30, - 1996 Dec. 31Q985 ' Sot. 30,1985 Assets Cash in Banks-Demand Deposits: The Chase Manhattan Bank, N.fi. $ 2,12 1 $ 6,0 13 $ 5,781 12 4,778 4,431 Other Banks Short-Term Money Market Instrumentst Time Deposits with Bankst The Chase Manhattan Bank, N.A. 1,445,394 2,748,M9 2,997,139 150,010 66,216 112,473 i Other Banks ' U.S. Treasury Securities 44,445 - - Total Short-Term Money Market Instruments
'I,6 3 ,047 z,514,5s3 3,107,612 Notes Receivable from Nonbanking Subsidiaries 2,798,033 1,849,793 1,695,466 Accounts Receivable from The Chase Manhattan Bank, N.A. f.3,867 51,937 89,966 68,150 41,%0 32,860 Other Stock Investments 400,000 400,3) !
Subordinated Debenture Receivable from The Chsse Manhattan Bank, N.A. 400,000 Investments in Subsidiaries (at Equity in Net Assets)i - - Banking Subsidiariest The Chase Manhattan Bank, N.A. ' 4,603,441 4,454,73 4,M9,286 894,333 705,971 585,142 Other Banking Subsidiaries 335,973 Nonbanking Subsidiaries 399,222 343,571 Accrued Interest Receivablet 28,843 Banking S@sidiaries 10,835 26,865 Nonbanking S@sidiaries 21,712 21,M 3 19,251 1,940 1,822, 1,611 Other 94,149 81,754 77,424 Other Assets 110.517 T12 110.739.776 Total Annata 111.010.946 -~~ Liabilities and Stockholders' Equity Commercial Paper $ 2,837,MS $ 3,351,7% $ 3,562,982 823,081 573,f.4'l 574,620 Other Borrowed Money 2934468 Accounts Payable. Accrued Expenses and Other Liabilities 168 606 290,683
~
3,52 , 5I 4,zi6,0s7 4,4'T6,u 75 2,357,138 _,2A42,351 1,965,2M Lono. Term Notes and Debentures 6 J38,4J5 6,4213f Total Liabilities 6.186.190 g Prefctred Stock (Without Par /alue-Authorized Shares of 50,000,000, 20,000,000 and 20,000,000, Respectively)! Reddemable Preferred Stockt 61,638 61,638 61,638 616,379 Shares Outstanding Nonredeemable Preferred Stockt 601,987 601,987 60!,'i87 12,039,737 Shares Outstanding Cormon Stockholders' Equityt Comon Stock (Par Value $12.50 Per Share) 9/30/86 12/31/85 9/30/85 Authorized Shares Z30,000,000 125,000,000 1Z3,000,000 477,542 80,407,582 77,157,724 38,203,372 1,005.095 964,472 Outstanding Shares 276,288 742,198 343,000 Surplus (22,265) (24,346) Ftreign Exchange Translation Adjustments (2f,f25) ' 2,87._,661 ' 2,576,654 2,479,591 Retained Earninos
- 4 ,16 L cl31 3,773,149 3,674,755 Total Comon Stockholders' Equity 111.01G.946 E10.517.212 11D.737.776 Total L iabilit t en and Ettv'khnir4mes' Eaultv r
.y <u e
7ht hMMllen C24Ber9tien gnd hag & digging 23
$teststelder Date Nine henthe Ended 1986 19e5 5estenser 30
($ in thousando. .e agot ther commen ehefe date) - Jte Utt. zna Utt. M Aves Lyes Guetter1r Ceedhgg commen stocm Per Sha.e - . $.31 1/4 $.51 U4 $.47 U2 $1.33 3/4 $1.42 U2 Aggregate t $ 40,921 $ 40,307 $ 35,924 $121,290 Preferred Steek8 $103.956 6 3/st Settee t ' 302 902 S02 1.306 1,306 7.60s Settee C - 806 606 506 1.814 1,818 10 U2s Serise D 'C 3.281 3.281 3.281 9,443 p,e43 Fleeting pote Settee C S,375 5,440 6,875 17.345 22.376 Fleeting Rete Sortes F 21 2 5 4 5 34 7 e fetal Prereffed Steth " fetal Coen 0141amsta $ $ $ $ $ Ceeh Davidamen poist e ( mmen Stock es e T of Not legene Aepligels to Commen $teek W }2.get 30.g35 gy.195 31.685 30.S35 Total Cash Ottidunde Pe&d se a Peteentage of Not Income 39.74 37.98 39.66 30.95 42.44 Wt. H e al M in ,Asecte. et .m .m . 05 ,,65 .. Agrege Total Aseste .41 45 .de 64 44 ii Average Caumm Steesealders' Cesity(1) 12. 0 U.32 14 .65 12.97
' 13.34 Average Cem Stgghneldete' Cestty and Nanteesumetle
;. Preferred Steet W 11.6S 12.75 14.00 12.47 13.30
-A- Average fasen Stoeh mteters' Castty and fetal Profetted Steak 11.39 12.67 13.90 12.40 13.40 Levereur Retiet-Avernmes
. : _ , =e' tedt r se e Pametems of f nos "
- 6.395 6.475 S.075 6.445 S.713 Lees,Internet4avning fetal Asaste, Not 3.29 3.24 4.83 fetal Assexe S.24 4.73 4.49 4.42 4.12 4.45 4.02 Casam Stedneiders' Cedty, fetal Preferred Stessi erW Lm pfise Notes and Gegentures 33.39 S2.24 S2.24 52.63 Commen <,tastelmers' CasLtv and 1_ S2.54
' ?.e- e stam ie a- R e.aras eri kere, met 7.925 7.465 6.065 7.425 6.705
'futeJ Intsteet4 stn1rg Assets, Not 6.08 6.03 S.65 6.04 S 55 l Total Aseste <
S.14 S.iG 4.41 S.12
' 4.72
+& s' Cadtv and fatal ProfuM **=* es a Leone. Iset , ,, 7.621 7.564 6.965 7.325 6.005 y Total Interest-Camtiq Assets, het 4.14 6.12 S.73 6.12 S.64 tots! Ascote ,
3.23 S.17 4.08 S.19 4.79 Ceesn Stechmidete' (Ssity Per Com Shave $ 31.75 $ S0.04 $ 44.10 $ $1.75 $ 44.10 Casital m.tjee - Wseletjeg Primary Capital f be e t'oreentage of fetal Stees Aeeste 7.145 6.995 6.713 g Total Cap'.tal b ee e Peteentage of fatal Groes Aseste 9.98 9.31 8.82 fM C&e testietten tank, If.A. and $idueldtettee Pttasty fau tel ID es e Percentage of total Grose Aseste 7.14 7.03 6.00 j fet 61 Cep1'al IU es a Peteentage of fetal Stees Aseste 7.33 7.20 7.26 IU teced (n seet Eneans, ed)seted se esplicaele. (2)seeed on reestel neeerve sente definiti m. W Pesed e Offlee of the Comptrollet of the Cuttency definitten. ten %et *ttue of Prefeie ord P . Steck** Mieft 6 5 tete, e J/05 3ettet 5 Mita $ 91 $ 90 $ 65 $ 93 $ 69
, Lee St 81 39 64 SS Close 08 84 U2* 6S' OS 65*
Pretorted Steet, 7.cos lettee C Migh 99 U2 100 73 3/4 100 74 Les 49 07 U2 72 1/2 49 to U2 Close . 99* 89* 72 1/O' 9S* 72 1/8' Proforted $ teen,10 l*2s $ertoe O pingh 97 U4 $6 U2 44 U2 $7 1/4 4e U2 Lou S3 S1 3/4 4S U2 49 U4 40 3/4 Close $4 U4 13 U2 46 3/8 54 U4 46 3/8 Profetted Stort Fleet,tng mete lettee C Mign , '
, S3 U2 S4 US $6 1/4 SS 1/4 36 1/4 Lee , $1 U2 S1 7/8 53 U2 91 U2 12 1/4 Close $2 1/4 52 3/4 54 US* S2 1/4 S4 US*
Prefetted Stock, Floating Aete lettes F Mign/ , 52 S/8 53 U2 56 S/0 S4 U2 $6 S/8 Les 49 1/2 SO 1/4 S2 49 1/2 11 1/4 Cluse $2 U2 11 3/8 S2 U2 52 U2 S2 1/2 Camen Stock High 49 1/4 49 U2 31 15/16 49 U2 31 IS/16 Los , SS U2 39 3/8 24 U2 34 23 1/4 Close M 3/4 44 3/4 to 9/16 M 3/4 24 9/16
*ses selee, beeed on evetese of tid and sesed prices.
**1ha eign. Les erW eteeing tekee prices for treneettime reported
{thecesseentetese.
Provision far Income Taxes ; 22 The provision for income taxes was $61 million for the third quarter
- of 1986, compared with $73 million for the third quarter of"1985 For the
'first-nine months of 1986, the provision-for income taxes totaled.$209 million' compared with $238 million for_the same period of 1985. _The decrease in the provision for income taxes for the first nine months of 1986 compared with the same period.of 1985 was primarily due to a lower level of pre-tax income, sn increase in income exempt from federal income taxes and the mix of income. In addition, the cumulative impact of the New York income tax rate changes applicable to leveraged lease financings reduced Chase's third quarter and nine months 1985 provision for income taxes by approximately $22 million. !,
9 V
.t
?
i \ s 6 Y s 1
.f5
'Other Operatina Income (Cont'd)
Other Operatina Income (4) Third Quarter Nine Months ($ in millions) 1986 1983 1986 1983 Fec ",ased Income: International Business Fees $ 39 $ 41 $ 122 $120 Trust and Fiduciary Investment Fees 69 48 194 140 . Consumer Banking Fees 61 53 186 157 Other Fee-Based Income 108 86 299 229 Total Fee-Based Income z// ZZ8 801 646 Nonfee-Based Income: Foreign Exchange Trading Income 55 48 178 127 Trading Account Profits (Losses) 18 - 3 49 20 Investment Securities Gains (Losses) 51 29 138 78 Other Nonfee-Based Income 104 13 162 63 Total Nonfee-Based Income 228 93 527 288 Total Other Oneratina Int nma 1505 1321 11.328 1934 (4) 1985 restated for comparability with current period classifications. Other Operatina Expenses Third quarter 1986 other operating expenses totaled $861 million, up 23% from the $698 million reported for the third quarter of 1985 For the first nine months of 1986, other operating expenses were $2,469 million, up 24% from the $1,988 million reported for, the first nine months of 1985 The increases in operating expenses are primarily related to strategic areas of emphasis such as nationwide expansion, investment banking and domestic and international consumer activities. Included in the third quarter and first nine months of 1986 were approximately.$32 million and $78 million, respectively, of expenses applicable to recent acquisitions. For the comparable periods in 1985, those expenses were approximately $5 million. The adverse impact of foreign exchange rate changes on expenses of overseas offices amounted to approximately $22 million in the third quarter and $68 million for the first nine months of 1986 In addition, third quarter 1986 operating expenses included approximately $30 million of one-time charges relating to selective reductions in Chase's domestic and overseas office network, which will be more than recovered in annual savings in the future. Excluding this $30 million increase, third quarter 1986 operating expenses were essentially flat compared with second quartr,r 1986 Other Operatina Expenses (5) Third Quarter Nine Months ($ in millions) 1986 1985 1986 1985 Salaries and Employee Benefits $466 5373 51,322 51,072' Net Occupancy 94 68 243 189 Equipment Rentals, Depreciation and Maintenance 67 59 206 171 Other Expenses 234 196 698 556 Total Other Ooeratina Exnenses 5861 5698 52.469 11.988 (5) 1985 restated for comparability with current period classifications.
I 20 Other Operatino Income Third quarter 1986 other operating income totaled $505 million, compared with $321 million for the third quarter of.1985. Third quarter
~1986 other operating income-included increases of approximately $49 million in fee-based-income (investment banking fee income, included in
. Other fee-based income in the accompanying table, was up 45%) and $7
- million in foreign exchange trading income. Net gains, before applicable l income taxes, from investment securities transactions were $51 million for Lthe third quarter 1986 compared with $29 million for the third quarter l 1985.
- Income taxes applicable to investment securities gains were $25 million compared with $14 million for the third quarter of 1985 Dealer trading account profits were up $15 million from the third quarter of 1985 Included in other nonfee-based income was a gain of $100 million
($60 million after taxes) from the sale of Computer Power, Inc., a subsidiary company. Net foreign. exchange translation losses on Chase's investments in : overseas branches, subsidiaries and associated companies in the third quarter of 1986 were approximately $6.million, compared with gains of approximately $2 million for the third quarter of 1985 On an af ter-tax basis, net foreign exchange translation losses in the third quarter of both 1986 and 1985 were approximately $3 million. 4 Other operating income for the first nine months of 1986-totaled ! $1,328 million, compared with $934 million for the first nine months of , 1985 First nine months of 1986 other operating income included increases of $155 million-in fee-based income (investment banking fee income, - included in other fee-based income in the accompanying table, was up 61%),
$51 million in foreign exchange trading income and $29 million in dealer trading account profits. Pre-tax gains from dispositions of securities acquired in satisfaction of loans for the first nine months of 1986 totaled approximately $2B million, compared with approximately $7.million'
! for the same period of 1985. Net gains, before applicable income taxes, . from investment securities transactions were $138 million for the first
- nine months of 1986 compared with $78 million for the first nine months of !
1985 Income taxes applicable to investment securities gains were $69 million for the first nine months of 1986, compared with $39 million for the first nine months of 1985. First nine months 1986 other nonfee-based income included gains from the sale of Computer Power, Inc., as previously mentioned, and the sale of the remaining portion of Chase's minority 1 interest in a leasing company in Japan of $14 million ($9 million after i taxes). Included in first nine months 1985 other nonfee-based income was a gain of $22 million ($15 million after taxes) resulting from the sale of a portion of Chase's minority interest in a leasing company in Japan. Net f oreign exchange translation losses on Chase's investments in overseas branches, subsidiaries and associated companies were . approximately $14 million, compared with net gains of approximately $7 million for the first nine months of 1986 and 1985, respectively. On an after-tax basis, net foreign exchange translation losses were
,approximately $7 million and $8 million for the first nine months of 1986 and 1985, respectively.
l
.I9' The following table compares the amount of interest income reported in the third quarter of 1986 related to the restructured principal with that which would have been reported on a pro forma basis had that principal been restructured as of January 1, 1986:
($ in Millions) Principal Actual Interest Pro Forma' Interest to be Income Income Accrual Basis Restructured Reported After Restructuring
$ 800- $ 15 $ 14
- At September 30, 1986, Chase's cross-border Venezuela public sector debt was current as to payment of principal and interest.
Chase recorded approximately $25 million as income on cross-border outstandings to Venezuelan public and private sector borrowers in the third quarter of 1986 and Chase received approximately $28 million in interest payments in cash. Minimal principal payments were received.
.The negative impact of the approximately $30 million in nonaccrual loans to Venezuelan private sector borrowers on Chase's net' income for the third quarter of 1986 was not material.
During the third quarter, Venezuela repealed legislation, enacted in July 1986, and outlined in Chase's 1986 second quarter Form 10-Q, which would have affected the manner in which foreign exchange may be made available to. Venezuelan private sector debtors for the purpose of_ servicing their officially registered net foreign currency-indebtedness. Also during the third quarter, the Government of Venezuela. requested the Bank Advisory Committee of Venezuela to consider changes in the terms of the public sector restructuring that would lengthen the maturities and reduce the interest rate spreads on the restructured debt. Argentina At September 30, 1986, Chase's cross-border Argentine public-sector loans were substantially current as to payment of principal and interest although delays are being experienced in the payment of interest on some loans. In the third quarter of 1986, Chase reported total income on cross-border outstandings to t public and private sector borrowers in Argentina of $20 million and received interest-payments of approximately $18 million in cash. Chase received no material principal payments on cross-border outstandings to Argentine borrowers in the third quarter of 1986
-The negative impact on Chase's net income of the approximately $50 million in cross-border nonaccrual loans to Argentine private sector borrowers in the third quarter of 1986 was not material.
l8 contingency financing, f) adjustment in interest rates on the debt in a-e above to provide a margin, retroactive January 1,1987, of 13/16% over LIBOR or a domestic reference rate, and, g) other facilities to be made available by the IW and World Bank in support of Mexico's economic program of growth-oriented adjustment and structural reform. Details of the agreement, which must be approved by Mexico's creditor banks, remain to be negotiated. At September 30, 1986, Chase's cross-border outstandings to Mexican public sector borrowers were current as to payment of principal and interest. During the third quarter of 1986, Chase received minimal principal payments on cross-border outstandings to public sector borrowers in Mexico. For the third quarter of 1986, Chase recorded income of approximately $28 million on such outstandings and approximately $20 million in interest was received in cash. During the same period, Chase recorded income on cross-border outstandings to Mexican private sector borrowers of approximately $6 million and $5 million of interest was received in cash. The negative impact of Chase's approximately
$89 million of cross-border nonaccrual loans to private sector borrowers in Mexico on Chase's net income for the thiro quarter of 1986 was approximately $1 million after taxes.
Venezuela Agreements covering the restructuring of $21.2 billion (Chase share: approximately $800 million) of Venezuelan public sector debt that were signed on February 26, 1986, became effective on October 3,1986. These agreements call for a down payment of approximately $750 million (Chase share: approximately $26 million) and the restructuring of all maturities f alling due between March 22, 1983 and December 31,1988 (approximately $20.5 billion), to be repaid over a 12-year period ending on June 30, 1997. The restructured principal is to be repriced on extension dates beginning in November,1986, and the effect on Chase is approximately as follows: Before Restructuring After Restructuring l Approximate Average Approximate j Principal Interest Principal Interest I ($ in Millions) Rate (a) ($ in Millions) Rate ! $ 600 Prime $ 400 Domestic reference rate (b) plus 1.125% (
$ 200 LIBOR plus 1.39% $ 400 LIBOR plus 1.125%
i (a) At September 30, 1986, weighted by principal outstanding. (b) As defined in the agreements.
, . l7-The $9.5 billion (Chase share: $371 million) facility for trade finance and the $5.3 billion (Chase share: $118 million) of interbank deposits were
. extended to March 31, 1987. ,
For the third quarter of 1986, Chase recorded total income on cross-border outstandings to'public and private sector borrowers in Brazil of approximately
$67.million~and approximately $77 million of interest payments were received in cash.- With the exception of approximately_ $106 million, with respect to 1986 maturities, . received at the Central' Bank pursuant to the deposit +
arrangement described above, minimal principal payments were received in'the third quarter of 1986 .The negative impact of Chase's cross-border nonaccrual loans to Brazilian borrowers on Chase's net income for the third quarter of 1986 was not material. > Mexico i The Multi-Year Debt Restructuring agreements which became effective in the i first quarter of 1986 encompassed a) an amendment of the 1983 $5.0 billion
-new money Credit Agreement with Mexico and a prepayment of $1.2 billion principal amount (Chase share: $30 million) loaned thereunder, b) the 4
. multi-year restructuring of approximately $43.7 billion -(Chase share:
approximately $930 million) of maturities of Mexican public sector debt to commercial banks falling due during 1985-1990 over a 12 year period ending in 1998 and,- c) the adjustment of interest rates on the restructured debt. ! retroactive to January 1, 1985.
-In March 1985, prepayment was made of $250 million (Chase share:? $6 million) , of the-amount loaned under the 1983 $5.0 billion new money Credit Agreement. i The remainder of the prepayment, which was expected to have been made in 1985 was postponed to October 1986 and as a result of the proposed restructuring agreement ~ described below would be amortized over the remaining life of its existing agreement (1989-1994).
Of Chase's approximately $930 million share in the Multi-Year Debt Restructuring, approximately $665 million carried a weighted average spread of 1 9/16% over the prevailing prime rate and approximately $265 million carried a weighted average spread of 11/16% over LIBOR. Following the restructuring I
-the estimated weighted average spread on Chase's approximately $930 million j share is 15/16% over LIBOR and is scheduled to increase over time to 11/4% '
over LIBOR in 1992 through 1998 However, the interest rates and repayment , schedules are subject to the proposed agreement described below. ; In the third quarter of 1986, the Mexican Government, the IW, the l International Bank for Reconstruction and Development (World Bank) and other I multilateral agencies, together with the Bank Advisory Group for Mexico
-announced agreements in principle which, among other things, provide for a) a recasting of the maturity of the deferred $950 million prepayment on the 1983 new money Credit Agreement to quarterly installments to be paid from 1989 to
.- 1994, which is the present maturity structure pertaining to the $8.8 billion
- of new term money borrowed since mid 1982, b) the amendment of the
, amortization schedule of the approximately $43.7 billion of restructured debt to extend repayment dates by approximately seven years with a final maturity of 2006, c) $6 billion in new money from commercial banks, of which $500 i million would be guaranteed by the World Bank under a $1.0 billion co-financing, d) a $500 million commercial bank contingency co.-financing, of which $250 million would be guaranteed by the World Bank, e) a $1.2 billion commercial bank contingency financing in connection with a $600 million IW
~
I61 l Country Risk l During the third quarter of 1986, Chase continued to cooperate with the international financial community, including the International Monetary Fund
'(IW), in efforts to satisfactorily resolve various issues relating to the >
debt obligations of certain countries in Latin America and elsewhere.' While some progress has been made, in light of the. liquidity problems affecting , these countries,;it is possible that the amount of Chase's cross-border outstandings in nonaccrual status may increase in the future. . The principal countries in Latin America which have been affected by such
-liquidity problems and in which, at September 30, 1986, Chase had cross-border-6, outstandings exceeding 1% of its total assets are shown in the table below
-together with the approximate amounts of Chase's extensions of credit to i- public and private sector borrowers in those countries and the approximate principal amounts of nonaccrual loans included in such extensions of credit.
Extensions of Credit f
~
Total Cross-Border Public Private Nonaccrual ($ in Millions) Outstandinas Sector Sector . Loans l Brazil 2,800 1,740 910 4 ,
-Mexico 1,610 1,230 360_ 89 i
Venezuela, 1,180 860 310 30
- Argentina 970 700 240 50 ,
At September 30, 1986, Chase's cross-border outstandings to borrowers in Chile
-were approximately $670 million or .75% of total assets, including extensions of credit of approximately $500 million and $160 million, to public and
' private sector borrowers, respectively. Approximately $ 2 million of loans to i Chilean private sector borrowers were in nonaccrual status at September 30, 1986 Brazil L The 1985-1986 Financing Plan became effective on September 4,1986 Under the Plan, the 1985 maturing amounts of cross-border medium-term debt (Chase share: _$250 million), the cruzado equivalent of which was deposited in the Central Bank of Brazil, will be repaid over seven years, with a five year l
grace period. The interest rate on the deposits will be the London Interbank 0ffered Rate (LIBOR) plus 1 1/8% retroactive to January 18, 1986 The 1985 l deposits are available for. re-lending to public sector and private sector borrowers 'at interest rates of LIBOR plus 11/8% and LIBOR plus 11/4%, respectively, repayable over seven years with a five year grace period. The cruzado equivalent of 1986 maituring amounts of cross-border medium-term debt l' are to be deposited by the borrowers in the Central Bank. Subject to such
- payment being made, the Central Bank will open interest-bearing, U.S. dollar denominated, deposit accounts in the amount of the principal maturity in favor i: of the lender and guaranteed by the Federal Republic of Brazil. The interest rate on the deposits, which are not available for re-lending, will be LIBOR plus 1 1/8% effective as of January 18, 1986 It is intended that both the
-1985 deposits (or loans made from the proceeds) and the 1986 deposits will be included in a multi-year rescheduling agreement to be negotiated later this i
year.
l 55 Nonaccrual and Reduced Rate Loans Sept. 30, Dec. 31, Sept. 30, ($ in millions) 1986 1985- 1985 Nonaccrual Loans: Real Estate Loans $ 324 $ 250 $ 221 Loans to Banks and Other Financial Institutions 114 111 14 1 Commercial and Industrial Loans 1,334 1,500 1,857 Other Loans 110 144 172 Total Nonaccrual Loans 1,882 2,005 2,391 Reduced Rate Loans: Real Estate Loans. 3 4 7 Loans to Banks and Other Financial Institutions - 7 8 Commercial and Industrial Loans 14 19 17 Total Reduced Rate Loans 17 30 32 Total Nonaccrual and Redneed Rate Loans 11.899 E2.035 E2.423 Distribution of Nonaccrual and Reduced
;- Rate Loans:
Domestic Loans $ 961 $ 804 $ 824 International Loans 938 1,231 1,599 Total Nonaccrual and Reduced Rate Loans 51.899 52 .03) 52.423 Real estate properties acquired in satisfaction of loans totaled $88 million at September 30, 1986, compared with $100 million and $99 million at year-end 1985 and September 30, 1985, respectively. I 1
l4ll i Net Loan Charge-Offs and Loan Loss Experience Ratios Third Quarter _Nine Months ($ in millions) 1986 1985 1986 1985 Net Loan Charge-Offs Domestic - Consumer (2) $ 66 $ 34 $195 $ 83
- Commercial and Other 27 23 61 71 Total Domestic 93 >/ Z36 134 International 25 16 96 62 Total 5118 5 /3 1332 E216 Loan Loss Experience Ratios (Annualized) (3)
Domestic - Consumer (2) 2.19% 1.53% 2.37% 1.39%
- Commercial and Other .49 44 .38 .45 Total Domestic 1.09 77 1.06 71 International .35 .19 43 25 Total .75% .47% .76% .47%
(2) Loans to Individuals for Personal Expenditures and 1-4 Family Residential Properties. (3) Net Loan Charge-offs as a percentage of average loans. Nonaccrual, Reduced Rate and Past Due Loans Nonaccrual and reduced rate loans were approximately $1.9 billion at September 30, 1986, compared with approximately $2.0 billion at year-end 1985 and approximately $2.4 billion at September 30, 1985. Nonaccrual and reduced rate loans equaled 3.0% of total loans at September 30, 1986 At December 31, 1985 and September 30, 1985, the comparable ratios were 3.3% and 3.9%, respectively. Accruing loans past due 90 days or more were $228 million at September 30, 1986, compared with $211 million and $189 million at year-end 1985 and September 30, 1985, respectively. The negative impact on third quarter 1986 earnings from nonaccrual and reduced rate loans was approximately $23 million after taxes, compared with $16 million after taxes for the third quarter of 1985 The negative impact of nonaccrual and reduced rate loans on nine months 1986 net income was approximately $59 million af ter taxes compared with the $51 million after-tax impact reported for the first nine months of 1985.
Provision and Rnserva for Possiblo Loan Losses I3 The provision for possible loan losses for the third quarter of.1986
. was $190 million, up $80 million from $110 rr.illion for the third quarter of 1985 and up $55 million over the second quarter of 1986 The increase in the provision over the third quarter of 1985 was primarily in recognition - of higher levels of consumer loan net charge-offs and conditions prevailing in certain developing countries. The $55 million increase in the provision over the.second quarter of 1986 was primarily in recognition of conditions currently prevailing in certain Latin American countries. Third quarter 1986 net loan charge-offs totaled $118 million, compared with $73 million for the third quarter a year ago. Domestic net loan charge-offs for the third quarter of 1986 increased $36 million over the third quarter of 1985, to approximately $93 million. Third quarter 1986. domestic consumer net loan charge-offs, primarily attributable to credit card activities, were approximately $66 million, compared with approximately $34 million for the third quarter of 1985 Third quarter 1986 international net loan charge-offs were approximately $25 million, an increase of approximately $9 million over the third quarter of last year.
The provision for possible loan losses was $455 million for the first nine months of 1986, compared with $310 million for the first nine months of 1985 Net loan charge-offs totaled $352 million for the first nine months of 1986, compared with $216 million for the same period last year. First nine months 1986 domestic net loan charge-offs were approximately
$256 million, up $102 million over the same period last year. Domestic consumer net loan charge-offs for the first nine months of 1986, primarily attributable to credit card activities, were approximately $195 million, compared with approximately $83 million for the same period last year.
First nine months 1986 international net loan charge-offs were approximately $96 million, an increase of approximately $34 million over the same period last year. At September 30, 1986, the balance in the reserve for possible loan
- losses was $1,034 million and represented 1.62% of loans outstanding. This l ratio compares with 1.47% at year-end 1985 and 1.42% at September 30, 1985.
i Analysis of Loan Loss Experience Third Quarter Nine Months ($ in millions) 1986 1985 1986 1985
- Loan Charge-Offs $ 14 2 5 90 $ 426 $ 277 i- Less
- Loan Recoveries 24 17 74 61 j, Net Lcan Charae-Offs 5 118 1 73 $ 352 1 216 Provision for Possible Loan Losses 1 190 1 110 1 455 1 310 i
l l Reserve for Possible Loan Losses September 30, September 30, ($ in millions) 1986 1985 At End of Period 51,U34 5 5/Z As a % of Total Loans 1.62% 1.42_%
1 22 Capital and Liquidity Management Discussions regarding both capital management and liquidity management are set forth on pages 30, 31 and 32 of The Chase Manhattan Corporation Annual Report 1985 filed as Exhibit 13 to the registrant's Report on Form LD-K for the year ended December 31, 1985, portions of which were incorporated by reference in the Report on Form 10-K (the "1985 Annual Report"). During the first nine months of 1986, there were no material changes from the capital and liquidity positions disclosed in the 1985 Annual Report. Primary and Secondary Capital
- Sept. 30, Dec. 31, Sept'. 30,
($ in millions) 1986 1985 1985 Primary Capital: Common Stockholders' Equity $4,161 $3,795 $3,675 Minority Interest in Consolidated Subsidiaries 4 3 2 Mandatory Conyertible Securities (Net of Note Fund) 723 782 802 Reserve for Possible Loan Losses 1,034 908 872 Nonredeemable Preferred Stock 602 602 602 Total Primary Capital 6,524 6,090 5,953 Secondary Capital: Redeemable Preferred Stock 62 62 62 Long-Term Notes and Debentures 2 , 135 2,024 1,806 Total Secondary Capital Z,197 Z,086 1,858 Total Canital 18.721 58.176 57.821 End of Period Capital as % of Gross Assets: Primary Capital 7.16% 6.87% 6.71% Total Caoital 9.58% 9.23% 8.82%
- Based on Federal Reserve Board definition.
Gross Assets consist of Total Assets and the Reserve for Possible Loan Losses.
y' PE=4' ie sw I II Average loans recorded in overseas offices decreased approximately l $3.7 billion, or 10% from the third quarter.of 1985 Average loans . recorded in overseas offices for the first nine months of 1986 were $33.4 billion, down approximately 9%, from $36.8 billion for the first nine months of last year. Average loans recorded in overseas offices included t approximately $5.2 billion and $5.7 billion of loans to U.S. commercial borrowers for' the nine months ended September 30, 1986 and 1985, respectively. Net Interest Income and Interest Rate Spreads - Taxable I Equivalent Basis Third Quarter Nine Months ($ in millions) 1986 1985 1986 1985 Domestic Offices Interest Earned $ 995 $ 906 $2,968 $2,746 Interest Paid (l) 436 421 1,332 1,346 Net Interest Income 5 559 5 485 51.636 51.400
--as a % of Gross Interest-Earnina Assets 6 . 10 % 6 . 12 % 6.27% 6.07%
Overseas Offices Interest Earned $ 898- $1,220 $3,131 $3,719 Interest Paid (l) 642 938 2,312 2,924 Net Interest Income 5 256 5 282 5 819 5 795
--as a % of Gross Interest-Earnina Assets 2.46% 2.58% 2.65% 2.46%
Corporation Consolidated Interest Earned $1,893 $2,126 $6,099 $6,465 Interest Paid 1,078 1,359 3,644 4,270 Net Interest Incnma 5 815 5 767 52.455 52 .195
--as a % of Gross Interest-Earnina Assets 4 . 16% 4.07% 4.30% 3.96%
(1)-Includes appropriate allocations for the cost of time deposits received by overseas offices for domestic use and the cost of domestic monies raised for use in overseas offices.
N;t Int:r:st Income - Taxabl9 Equivalent Basise lO Net interest income on a taxable equivalent basis for the third quarter of 1986 was $815 million, up 6% compared with $767 million for the third quarter of last year. On a taxable equivalent basis, the spread between the average rate earned on interest-earning assets and the average rate paid to fund such assets, including the effect of noninterest-bearing sources, was 4.16% for the third quarter of 1986, compared with 4.07% for the third quarter of 1985 For the first nine months of 1986 net interest income on a taxable equivalent basis totaled $2,455 million, up 12% compared with $2,195 million for the first nine months of 1985 The net interest rate spread for the first nine months increased to 4.30% from 3.96% for the first nine months last year, and average interest-earning assets increased by approximately $2.2 billion from the $74.1 billion average level reported for the first nine months of 1985 The leveraged lease recalculation resulting from New York income tax rate changes had a negative pretax impact on third quarter and nine months 1985 net interest income on a taxable equivalent basis of approximately $17 million (on a financial statement basis of approximately $14 million, more than offset by a reduction in the third quarter and nine months provision for income taxes of approximately $22 million). Domestic net interest income on a taxable equivalent basis for the third quarter of 1986 was $559 million, up 15% compared with $485 million for the third quarter of last year. The increase in domestic net interest income was attributable to a higher volume of interest-earning assets and to generally lower rates paid on interest-bearing liabilities. Domestic net interest income for the first nine months of 1986 was $1,636 million, compared with $1,400 million for the first nine months of 1985 Third quarter 1986 overseas net interest income on a taxable equivalent basis was $256 million, down 9% compared with $282 million for i the third quarter of-last year. Overseas net interest income decreased in l the third quarter of 1986 due to a lower volume of interest-earning assets l and a narrower interest rate spread. Overseas net interest income for the l first nine months of 1986 was $819 million, compared with $795 million for the first nine months of 1985 The increase in the nine month period was attributable to generally lower rates paid on-interest-bearing liabilities. l Average loans recorded in domestic offices increased approximately l $4.9 billion, or 19% over the third quarter of 1985 Average loans recorded in domestic offices for the first nine months of 1986 increased approximately $4.1 billion, or 17%, over the average amount recorded for the first nine months of 1985. i
- Net interest income on a taxable equivalent basis was higher by $70 million and $58 million for the third quarter of 1986 and the third l quarter of 1985, respectively, than comparable net interest income amounts reported on a financial statement basis. These taxable equivalent amounts have been adjusted (by applying a combined U.S. federal, state and local income tax rate of approximately 51% for both 1986 and 1985) to recognize the differential between interest income that is exempt from income taxes and interest income that is fully taxable.
l
- 9 Profitability ratios b sed on net income r;nd the psriod-end book:
value per. common share for the third quarter and first nine months of 1986 and 1985 were as follows: Third Quarter Nine Months 1986 1905 1986 1983 Profitability Ratios ! i Return on Average Assets .61% 68% 64% 64% Return on Average Common Stockholders' Equity 12.1 % 14 .7 % 13.0 % 13 .4 % Book Value Common Stockholders' Equity oer Common Share 151.75 14 8.10 l
Item 2. - Manmaaaant's' Discussion and Analysis' of Financial Condition and Results of Operations Consolidated net income for the third quarter of 1986 was $138
. million, or $1.55 per common share, compared with consolidated net -income of $149 million, or.$1.74 per common share, for the third quarter of 1985. ..The net income per common' share amount for the third quarter of-1986 reflects thel impact.of lower levels of. income and an increased number of common shares outstanding, partially offset by a reduction of preferred stock dividend requirements.
F Third ^ quarter 1986 net income, compared with the third quarter of' 1985, reflected increased net interest income and other operating income, including increases in most fee-based income categories, foreign exchange trading income, dealer trading account profits, and gains from the sales of investment securities. ' Reflected in third quarter 1986 net income-was a gain of $60 million after taxes from the sale of Computer Power, Inc., a subsidiary company providing data processing services to the mortgage banking industry. Reflected in third quarter 1985 net income was approximately $8 million after taxes due to the cumulative impact on . Chase's leveraged lease financing portfolio resulting from New York state and city income tax rate changes.
. More than offsetting the third quarter 1986 favorable factors were increases in operating expenses and a substantial increase in the provision for possible loan losses. Included in third quarter 1986 .
operating expenses were approximately $30 million of one-time charges relating to selective reductions in Chase's domestic and overseas' office network. Excluding these one-time charges, third quarter 1986 operating i expenses were essentially flat compared with the second quarter of 1986 The provision for possible loan losses increased by $80 million over the third quarter of 1985 and by $55 million over the second quarter of 1986. Net loan charge-offs were $118 million in the third quarter of 1986 compared with $119 million in the second quarter of 1986 and $73 million in the third quarter of 1985 Consolidated net income for the first nine months of 1986 was $428' million, compared with $414 million for the first nine months of 1985 On a per common share basis, net income for the first nine months of 1986 was ,
$4.83 compared with $4.65 for the first nine months of last year.
Earnings Summary Third Quarter Nine Months ($ in millions) 1986 1985 1986 1985 Net Interest Income $ 745 $ 709 $2,233 $2,016 Provision for Possible Loan Losses 190 110 455 310 Other Operating Income: Fee-Based 277 228 801 646 Nonfee-Based 228 93 527 288 Other Operating Expenses 861 698 2,469 1,988 Income Before Taxes 199 222 637 652 Applicable Income Taxes 61 73 209 238 Net Income 5 138 5 149 5 428 5 4 14
-The Chas? Manhattan Corporation and Subsidiaritis -
~ CONS (1.IDATED STATEENT .0F CHANGES IN FINANCIAL POSITION 4
-Nine Months Ended
' September 30,
($ in thousands) 1986 -1985 Funds Provided Net Income . .
.$ '427,564- $ 414,138 Add (Deduct) Noncash Items Included in Net Income:
Depreciation and Amortization of Premises and Equipment ' 125,404 .100,244-Provision for Possible Loan Losses . 455,000 310,000'
' Amortization of Discount on Long-Term Notes and Other -
~ Borrowed Money .
8,347 7,197 36,230- ( 14 ,143) Deferred-Income Taxes (Benefits)
. Funds Provided from Operations 1,052,545 817,436 Issuance of:
Common Stock- 108,235 83,152~ i -8 1/2% Notes Due 1996 248,998 . Floating Rate Notes Due 2000 - 250,000 L Extendable Notes Due 1997 ; - 249,683 French Franc Floating Rate Bonds Due 1993 - 37,359 Floating Rate Notes Due 1991 250,000. - Increases in: Deposits . _ 764,637 1,544,949 Federal Funds Purchased and Securities Sold Under Repurchase Agreements . 574,124 - Other Borrowed Money . 36,547 308,415 Accounts Payable, Accrued Expenses and Other Liabilities 1,072,701 1,041,702 Decreases in: Cash and.Due from Banks 1,427,462 - Investment Securities 279,587 - Loans, Before Charge-Offs -- 135,436 Accrued Interest Receivable 179,901 180,343
- Other-Net 139,530- -
, Total Funds Provided 56.134.267 54.648.480 Funds used
' Cash Dividends Declared:
. Redeemable Preferred Stock $ 3,324 $ 3,324 Nonredeemable Preferred Stock 41,943 66,466 [ Common Stock 121,290 105,956 j Conversion of Convertible Capital-Notes and l Subordinated Debentures into Common Stock 41,576 26,143 Repurchase of Capital Notes (4.70% Due 1989) 362 361 Retirement of Capital Notes (8 3/4% Due 1986) 200,000 - Retirement of Capital Notes (4 7/8% Due 1993) 809 - .- Retirement of Capital Notes (4.60% Due 1990) - 402
'Defeasance of Capital Notes (4.60% Due 1990) 3,833 -
Foreign Exchange Translation Adjustments 3,260 5,616 Increases in: Cash and Due from Banks - 889,433
- Interest-Bearing Deposits Placed With Banks 1,506,856 915,810 Federal Funds Sold and Securities Purchased Under f Resale Agreements 49,446 273,077 Trading Account Assets 390,649 101,844 Investment Securities - 89,493
+ Loans, Before Charge-Offs 2,322,338 -
. Premises and Equipment 335,593 163,272
; Other Assets 457,958 887,926 Decreases in:
Federal Funds Purchased and Securities Sold Under Repurchase Agreements - 337,223
- Commercial Paper 655,030 720,571 Accrued Interest Payable - 55,078 Other-Net - 6,485 Total Funds used 56.134.267 54.648.480
6 The Chase Manhattan Corporation and Subsidiaries and 1 The Chase Manhattan Corporation (Company Only) STATEENT OF CHANGES IN COM)N STOCKH(LDERS' EQUITY
~Nine Months Ended September 30,
($ in thousands) 1986 1985 Common Stock Balance at Beginning of. Period (77,157,724 Shares and.36,659,653 Shares,Respectively) '$ 964,472 $ 458,246' Conversion of Capital Notes and Debentures (1,459,039 Shares and 456,945 Shares, Respectively) . 18,238 5,712 Exercise of Stock Options (230,419 Shares and
' 59,461 Shares, Respectively) 2,880 743
+ Shares Issued Pursuant to Dividend Reinvestment
. Plan (920,150 Shares and 544,576 Shares, Respectively) 11,502 6,807 Shares Issued Pursuant to Floating Rate Subordinated Notes Due 1996 (640,250 Shares and 482,737 Shares, Respectively) 8,003 6,034
- i. Balance at End of Period (80,407,582 Shares and 38,203,372 Shares, Respectively) 1,005,095 477,542 Surplus r Balance at Beginning of Period 276,288 678,342 Conversion of Capital Notes and Debentures 23,334 '20,425 Exercise of Stock Options 2,887 1,724
~ Shares Issued Pursuant to Dividend Reinvestment Plan 23,611 21,863 Shares Issued Pursuant to Floating Rate Subordinated Notes Due 1996 17,780 19,844 Balance at End of Period 343,yuu /4Z ,1y5 Foreign Exchange Translation Adjustments Balance at Beginning of Period (22,265) (18,730)
Aggregate Translation Gain (Loss) After Applicable Income Taxes (Benefits) of $(24,585) and
$(25,042), Respectively (3,260) (5,616)
Balance at End of Period (25,525) (24.,346) R;tained Earnings L - Balance at Beginning of Period 576,654 2,241,199 2,427,564 414,138-Net Income , Cash Dividends Declared: Redeemable Preferred Stock (3,324) (3,324) Nonredeemable Preferred Stock (41,943) (66,466) Common Stock (121,290) (105,956). Balance at End of Period 2,837,661 2,479,591 Total C- -i Stockholders' Emi tv 54.161.131 53.6/4.Y53
5 The Chase Manhattan Corporation and subsidiaries CONm in4TED STATDENT CF INColE Quarter Ended Nine Months Ended September 30,- Sootember 30 ($ in thousands, except per common share data) 1956 1953 1956 1955 Interest Income Int: rest and Fees on Loans $A,546,531 $1,755,003 $4,948,890 $5,371,428 Int rest on Bank Deposit Placings 111,961 130,551 352,189 365,217 Int: rest and Dividends on Investment Securities: Int: rest oMJ.S. Treasury securities 43,039 49,044 124,983 147,589 Federal Agency Securities 2,364 7,310 15,799 18,015 State and Political 5 2 division Securities Exempt from Federal Income Taxes 37,782 37,876 122,792 111,594 Other Bonds, Notes and Debentures 34,034 45,153 136,933 140,812
- Dividends on Federal Reserve Bank and Other Stock Investments 3,190 3,293 7,944 7,868 120,409 14Z,676 409,451 4Z3,575 Intsrest on Federal Funds Sold and Securities Purchased Under Res-le Agreements 18,084 21,300 90,728 69,498 Int rest on Tradino Account Assets 25,666 18,611 75,900 54,213 Total Interest income 1,sZz,631 z,use,141 5,siz ,U5 6,zas ,us Interest Expense . Deposits- 783,888 1,031,908 2,575,666 3,269,464 Federal Funds Purchased and Securities Sold Under Repurchase Agreements 93,552 116,825 352,796 336,706 Commercial Paper 45,156 63,346 156,164 205,049 Other Borrowed Noney 97,127 86,585 375,304 280,976 Lono-Term Notes and Debentures 57,889 60,407 183,933 178,341 Total Interest Expense 1,077,61Z 1,359,071 3,643,563 4,Z70,336 Net Interest Income 745,039 709,070 2,Z33,373 Z,013,695 Provision for Possible Loan Losses '190,000 110,000 455,000 310,000 Net Interest Income After Provision for Poss1Dle Loan Losses 555,039 599,070 1,775,375 1,705,695 Other Operating Income Fees and Connissions - . 276,562 228,404 801,062 646,585 Forsign Exchange Trading Income 54,821 48,231 177,934 126,915 ' Trading Account Profits (Losses) 17,993 3,022 49,413 17,955 Inv:stment Securities Gains (Losses) 51,152 28,776 137,932 78,084 12,848 161,385 62,883 ' Other Income 105,244 1
Total Other Operatino Income 305,772 321,251 1,327,726 934,422 r Other Operating Expenses l Salaries and Employee Benefits: l Sr.laries 341,482 280,038 983,047 - 801,709 i Profit Sharing 26,082 22,351 72,347 60,943 Other Employee Benefits 98,245 72,336 266,341 209,273 4 463,509 374,723 1,321,735 1,071,9Z3 Net Occtcancy - 94,530 67,869 242,899 188,549 l Equipment Rentals, Depreciation and Maintenance 67,428 59,456 206,062 171,068 } Other Expenses 233,720 196,327 698,661 556,120 Total Other Operatina Expenses 861,457 695,377 Z,469 J37 1,957,662 l Income serore Taxes 199,JZ4 ZZ1,974 636,744 63Z,438 Applicable Income Taxes 61,219 72,550 209.180 238,320 Pet ,#aama E .35.103 i ..49.LZ4 i 4Z7.564 i i 414.138 p Pet ..naa== Anal ienM a to r a==an Stock 1 24.217 ' 32.14 3 <
< 382.818 , 347.090 4
Av4 rage Shares Outstanding 80,.33,207 15,098,768 19,223,224 T4,718,348 Ecrnings Per Common Share: Primary, Based on Average Shares Outstanding $ 1,55 $ 1.74 $ 4.83 $ 4.65 Assuming Full Oilution $ 1.53 $ 1.68 $ 4.73 $ 4.47 Cash DivMands neelsred Per Cn==nn share 10.51 U4 10.47 U2 1 1.53 3/4 1 1_42 U2
4 The Chase Manhattan Corporation and Stesidiaries CONM In4TED STATEENT CF CIDOITION ($ in thousands) Sect. 30, 1986 Dec. 31, 1985 Sept. 30,1985 Assets Cash and Due from Banks $ 4,146,593 $ 5,574,055 $ 5,087,234 Interest-Bearing Deposits Placed with Banks 6,177,904 4,671,048 5,271,001 Federal Funds Sold and Securities Purchased Under Resale Agreements 1,223,817 1,174,371 '1,566,282 Trading Acccmt Assets 1,735,144 1,344,495 1,456,415 Investment Securities: U.S. Treasury Securities 1,903,501 1,839,207 1,572,866 Federal Agency securities 31,865 330,259 260,291 State and Political Stbdivision Securities 2,058,407 2,410,373 2,151,669 Other Bonds, Notes and Debentures 1,683,979 1,408,541 1,226,469 Federal Reserve Bank and Other Stock Investments 165,053 134,0 12 ' 124,004 Total Investment Securities (E,stimated Market Value of
$5,933,000, $6,098,000 and $5,204,000, Respectively) 5,842,805 6,122,392 5,335,299 Loans 63,826,371 61,930,527 61,591,300 Less: Reserve for Possible Loan Losses 1,034,165 907,672 872,399 Loans, Net 6Z,/9Z,2D6 61,UZZ,533 60,718,901 Customers' Liability on Acceptances 2,669,197 2,820,471 3,658,162 Accrued Interest Receivable 849,085 1,028,986 1,011,606 Premises and Equipment 1,123,769 ~913,580 856,574 Other Assets 3,471,147 3,013,189 2,846,291 Total Assets 190.031.667 557.683.44Z 557.507.763 Liabilities and Stockholders' Equity Deposits:
Domestic Offices: Noninterest-Bearing $12,196,513 $13,499,638 $11,837,900 Interest-Bearing 19,377,177 19,130,323 18,437,256 Overseas Offices: Noninterest-Bearing 2,075,823 1,939,120 1,895,830 Interest-Bearino 28,468,173 26,783, % 8 29,053,974 Total Deposits 62,117,686 61,J53,049 61,ZZ4,960 Federal Funds Purchased and Securities Sold Under Repurchase Agreements 4,705,917 4,131,793 4,143,067 Comercial Paper 2,828,471 3,483,501 3,688,295 Other Borrowed Noney 4,958,715 4,671,994 3,794,662 Acceptances Outstanding 2,678,157 2,828,696 3,665,332 Accrued Interest Payable 703,755 668,961 748,652 Accounts Payable, Accrued Expenses and Other Liabilities 4,356,312 3,282,175 3,595,554 82,349,013 80,420,169 80,860,522 Lono-Term Notes and Oebentures 2,857,898 2,806,499 2,608,633 Total Liabilities 83,ZO6,911 83,Z26,668 83,469,133 Preferred Stock (Without Par Value-Authorized Shares of 50,000,000, 20,000,000 and 20,000,000, Respectively): Redeemable Preferred Stock: 616,379 Shares Outstanding 61,638 61,638 61,638 Nonredeemable Preferred Stock: 12,039,737 Shares Outstanding 601,987 601,987 601,987 Comon Stockholders' Equity: Comon Stock (Par Value $12.50 Per Share): 9/30/86 12/31/85 9/30/85 Authorized Shares 250,000,000 125,000,000 125,000,000 Outstanding Shares 80,407,582 77,157,724 38,203,372 1,005,095 964,472 477,542 Surplus 343,900 276,288 742,198 Foreign Exchange Translation Adjustments (25,525) (22,265) (24,346) Retained Earnings 2,837,661 2,576,654 2,479,591 Total Conunon Stockholoers' Equity 4,161,131 3,I93,149 3,674,953 Total Liabilities and Stockhnl e rs' Ecuity 590.031.667 557.685 A42 557.507.763
7...., l 3 PART I - FINANCIAL INFORMATION Item 1. Financial Statements The Consolidated Statement of Condition of The Chase Manhattan Corporation and its subsidiaries (the " Corporation") as of September 30, 1986, December 31, 1985, and September 30, 1985, the Consolidated Statement of Income for the quarters and the nine months ended September 30,1986 and 1985, the Statement of Changes in Common Stockholders' Equity for the nine months ended September 30,1986 and 1985, and the p Consolidated ' Statement of Changes in Financial Position for the nine ; months ended September 30,1986 and 1985, are set forth on the following pages. The interim consolidated financial statements are unaudited. However, in the opinion of Management, all adjustments, consisting only of normal recurring accruals, necessary for the fair presentation of the financial position, results of operations and changes in financial position for such periods have been made. Prior periods' financial statements have been reclassified to conform with the current financial statement presentations. l
I. L TAB.E OF C0iUENTS , Ea2ae PART I.- FINANCIAL I W OR mTION Item 1. Financial Statements 3 The Chase Manhattan Corporation and Subsidiaries: Consolidated Statement of Condition 4 Consolidated Statement of Income 5 Statement of Changes in Common Stockholders' Equity 6 Consolidated Statement of Changes in Financial Position 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 Comparative Financial Information: Stockholder Data 23 The Chase Manhattan Corporation (Company Only) Balance Sheet 24 The Chase Manhattan Bank, N.A. and Subsidiaries Consolidated Statement of. Condition 25 Average Balances, Interest and Average Rates - Taxable Equivalent 26 Consolidated Average Loan Balances 28 Consolidated Analysis of Loan Loss Experience 28 Funds Borrowed 29 Long-Term Notes and Debentures 30 Consolidated Statement of Income (Five Quarters) 31 PART II - OTHER I W OR mTION Item 6 Exhibits and Reports on Form 8-K 32 SIGNATURE 33 EXHIBITS 34
I , SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 l' FORM 10-Q
. QUARTERLY REPORT 'JNDER SECTION 13 or 15(d) 0F THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended: September 30, 1986 Commission file number: 1-5945 The Chase Manhattan Corporation (Exact name of registrant as specified in its charter)
Delaware 13-2633613 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1 Chase Manhattan Plaza, New York, New York 10081 (Address of principal executive offices) (Zip Code) 212-552-2222 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No The number of shares outstanding of the registrant's common stock (par value $12.50 per share) was 80,407,582 at September 30, 1986. I
CHASE The Chase Manhattan Corporation Form 10-Q for the Quarter Ended September 30,1986 i L
The Chase Manhattcm Corporation
, P I l
I Form 10-K for the Year Ended December 31,1985
SECURITIES AND EXCHANGE C0tNISSION Washington, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) 0F THE SECURITIES EXCHANCE ACT OF 1934 For the fiscal year Cbnmission file ended December 31, 1985 number 1-5945 THE CHASE MAfHATTAN CORPORATION (Exact name of registrant as specified in its charter) Delaware 13-2633613 (State or other jurisdiction of (I.R.S. Ehployer incorporation or organization) Identification tb.) 1 01ase Manhattan Plaza, thw York, thw York 10081 (Address of principal executive offices) (Zip Code) = Registrant's telephone number, including area code: 212-552-2222 . Securities registered pursuant to Section 12(b) of the Act: tbne of each Exchange Title of each Class on which Registered Connon Stock ($12.50 Par Value) tew York Stock Exchange _ - Preferred Stock, 6 3/4% Series B tew York Stock Exchange l Preferred Stock, 7.60% Series C thw York Stock Exchange } Preferred Stock, 10 1/2% Series D thw York Stock Exchange Preferred Stock, Floating Rate Series E New York Stock Exchange Preferred Stock, Floating Rate Series F thw York Stock Exchange 4 7/8% Convertible Capital Ibtes Due 1993 of The Glase Manhattan Bank, N. A. Assumed by Registrant New York Stock Exchange , 61/2% Convertible Subordinated l Debentures Due 1996 lbw York Stock Exchange Floating Rate Subordinated ibtes Due 1995 thw York Stock Exchange Floating Rate tbtes Due 1999 tbw York Stock Exchange Floating Rate tbtes Dtje 2009 tbw York Stock Exchange Floating Rate Subordinated ibtes Due 1996 lbw York Stock Exchange Extendable tbtes Due 1997 thw York Stock Exchange Securities re01stered pursuant to Section 12(g) of the Act: tbne, i Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 nonths (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X ib . The number of shares outstanding of the registrant's Connon Stock ($12.50 ~. Par Value) was 78,782,123 shares at February 27, 1986 The aggregate market value of the voting stock held by non-affiliates of the registrant amounted to
$3,323,000,000 at February 27, 1986.
DOCUMENTS INCORPORATED BY REFERENCE
- Documents Part of Forn 10-K Incorporated into lhe 01ase Manhattan Corporation Annual Report 1985 Part I, Part II, Part IV The Chase Manhattan (brporation Proxy Statement for its 1986 Annual Meeting Part III
- Such documents are incorporated herein only to the extent specifically set forth in response to an iten herein.
PART I Iten 1. Business. General Information The Chase Manhattan Corporation (the " Company") is a bank holding company which was incorporated in 1969 and whose principal subsidiary is The Chase Manhattan Bank, N.A. Throughout this document the tern " Corporation" refers to The mase Manhattan Carporation and its subsidiaries and the term " Bank" refers to lhe mase Manhattan Bank, N. A. and its subsidiaries. The Bank, which naintains its head office in New York City, provides a full range of connercial banking and trust services. Heasured by total assets at December ( 31, 1985, the Bank was one of the largest connercial banks in the world and the third largest in the U11ted States. j The Corporation has a number of other banking subsidiaries which also engage in a range of connercial banking activities. In addition, nonbanking subsidiaries of the Company engage in nortgage banking, connercial and ,, consumer financing, discount brokerage, investnent advisory and other financial services. Donestic Activities Die Bank's domestic branch offices provide a wide variety of services l which are designed to assist individuals and small businesses, as well as serve large domestic and nultinational corporations. Consumer and small business services include numerous types of savings accounts, checking accounts and noney narket deposit accounts, as well as installment loans, lines of credit, accounts receivable and other asset-based financing services, Bank-by-Phone, electronic home banking and safe deposit facilities. The Company offers other consumer services including the issuance of Chase Hanhattan VISA Travelers' Cheques. A subsidiary of the Company, The Chase Manhattan Bank (USA), N. A. ("WB (USA)"), issues mase Manhattan VISA credit cards and mase Manhattan MasterCards. l Commercial lending divisions of the Bank, operating on an industry basis, provide financial services to custoners in practically all industries. The Bank draws on the skill and expertise of lending and staff department officers to provide specialized services designed to meet custoners' business needs. In addition, the Bank's global cash management systen enables corporate and institutional customers to obtain directly multi-account balance and transaction information, transfer funds and manage debt and investnent portfolios. Approximately 3,000 correspondent banks located throughout the United States maintain deposit accounts with the Bank. In 1986, the Bank and Chase Lincoln First Bank, N. A. ("mase Lincoln") will begin to operate an automated 1
. c1rring house (ACH) throudi a new sub2idiary,$tha Mrs3 Automated Clearing
^ House, Inc. L lhis will enable the LBank and 01ase Lincoln to reduce. operating
, costs and enhance the services provided to their~ customers.
- The Trust Depar'tnent of'the $nkt administers estates,' personal trusts and pension and profit-sharing funds, and provides custody and investment' advisor'y services. It acts as . trustee of bond issues and unit trusts, serves as '
transfer agent or registrar for securitiesj paying agent for dividends and interest and agent for sWscriptions and redemptions. It also provides a dividend reinvestment service for stockholders of publicly held corporation o Other subsidiaries of the Corscration f.ncluding, 01ase Lincoln, provide some-s ,
- or alb of. the foregoing services.
3
~
The, Bank or one or more of its subsidiaries is active as a dealer in U.S. - Dovernment and state and municipal securities and'is a major underwriter ano-distributor,of state and local government securities. The Corporation's worldwide toerchant banking activities ~ are consolidated under 01ase Manhattan - Capital ~ Markets (Holdings), Inc. (" Holdings"), a subsidiary of the Bank. Subsidiaries of Holdings offer merchant banking ac.d investment banking s services and engage in certain government and municipal finance activities. CE -(USA), a wholly owned banking subsidiary of the Company, that commenced operations-in 1982, extends credit and offers noney narket deposits.
'to consumers nationwide from its office in the State of Delaware. 01ase U.S.,
Consumer Services, Inc. ("CUSCS"), a W1olly owned sub'sidiaiy of the Company, - ' ' and its subsidiaries with offices located 1n eleven states, also extend 3 consumer credit.
. Rose & Cordpany, a subsidiary of the Company acquired in 1983, offers discount brokerage services. Other subsidiaries of the Company, such as mase Home Mortgage Corporation, are engaged in domestic real estate and nortgage financing and servicing activities. 3 A seoarate subsidiary 0f the Company, 01ase Investors Management 4
Corporation New York, 'provides investment-related research and investment advisory services fnr employea benefit funds, charitable foundations ano foreign custoners N c m During the second. quarter of 1985, the Company acquired six 0110 savings and loan institutions with total assets of approximately $450 nillion and nerged and converted then into a wholly owned connercial bank named mase Bank j of Olio. During the fourth quarter of 1985, the Donpany acquired three .J Maryland savings and loan institutions with total assets of approximately $700 L nillion and'nerged and converted then into a wholly owned connercial bank named 01ase Bank of Haryland. During 1985 the Donpany entered into an agreenent to' acquire Continental Bancor of Phoenix, Arizona when pernitted (October 1,1986) under inter-state banking legislation adopted by Arizona. _ Separately, the Conpany through a subsidiary also acquired, in early .1986, Third Century trasing Group (The . Group) a supplier of office equipment leases with asst;ts of $45 million, based in Hoberly, Missouri. The Group 1,s a separate divisian 'of '01ase Connercial - Corporation.
.t s
f
On July 1,1984, Glase fianhattan thtional Corporation ("DiNC"), a wholly owned subsidiary of the Company, acquired Lincoln First Bank, ll. A. , renamed "Diase Lincoln First Bank, N. A." ("Olase Lincoln"), through the nerger of its parent conpany, Lincoln First Banks Inc., into DiNC. 01ase llncoln, a connercial bann based in Rochester, ibw York, had over $4 billion in assets at the tine of the acquisition. Subsequent to the merger, 01ase Lincoln sold its downstate ibw York branch network to the Bank. At the same time, Chase Lincoln acquired the Bank's upstate branch network. At December 31,1985, the Bank and Olase Lincoln had a conbined total of 330 donestic branch offices in thw York State. International Activities International connercial banking activities are conducted by the International Banking Sector of the Bank, headquartered in thw York City, and foreign subsidiary and associated banks and trust conpanies. International banking activities are also conducted through 01ase Bank International ("CBI"), an Edge Act banking subsidiary headquartered in Delaware with braches in Atlanta, Chicago, Houston, Los Angeles, tilani and San Francisco. Through loans, letters of credit, acceptances, collections and foreign exchange services, the Bank assists both donestic and foreign custoners in ( transacting business worldwide. The Bank maintains a comprehensive network of correspondent relationships with foreign connercial banks and serves as the principal depository in the U.S. for many foreign central banks. L A najority of the Bank's investnents in banking and financial institutions and trust companies, which conduct their businesses outside the thited States, are held. through 01ase 11anhattan Overseas Banking Corporation ("010BC"). CHOBC is an Edge Act corporation with its principal office in ibwark, Delaware. In April 1984, 010BC acquired substantially all (approxinately 68.5%) of die outstanding shares not already neld by 010BC, of ibderlandse Credietbank, N.V. ("NCB"), with headquarters in thsterdan, The tbtherlands, and with assets of approximately $4.2 billion, net of intercompany accounts with the Corporation. In 1985, 010BC acquired Banco de Finanzas of Madrid, Spain with total assets of approximately $265 nillion and six branch offices. l During 1985, a subsidiary of the Bank acquired a 29.9% linited partnership interest in Sinon & Coates and a 5% limited partnership interest in Laurie, Milbank & Company. Simon & Coates and Laurie, Milbank & Company are London stockbrokers that are nenbers of the London Stock Exchange. The Bank plans to increase its interest in each of the two firns to 100% in 1986, when pernitted by the London Stock Exchange. During 1985, the Bank and the Australian Mutual Provident Society ("AFF"), Australia's largest insurance company, received approval from the Australian regulatory authorities and the lhited States bank regulatory authorities and began to operate a full-service bank in Australia. CHASE AtP Bank, Ltd. in which 010BC has a 50% interest, combines investnent and connercial banking with securities trading, treasury services and consumer banking services. 3
l l l , Inidraation with respect to the international earnings performance of the Corocration is included in " Management's Discussion and Analysis of Financial Condition and Results of Operations" beginning on page 22 and in ibte 18:
"?ternational Activities",' of the tbtes to Financial Statements in The 01ase Hartiattan Corporation Annuri? Peport 1985, which is filed herewith as Exhibit 13 (The Annual Report or Exhibit 13) and such information is incorporated herein by reference.
Competition The Company, the Bank and their subsidiaries compete with various financial institutions, ranging fron leading multinational bank holding companies and their subsidiaries to local thrif t institutions, as well as securities brokers, underwriters, government agencies and other businesses providing financial services. The Bank and other banking subsidiarie.s of the Corporation compete for deposits with other banks and for other sources of funds with both bank and nonbanking institutions which are not subject to the same regulatory restrictions and wtiich have intensified the competition for funds bot i donestically and abroad. Staff A comparison of the number of people employed by the Corporation at - December 31,1985,1984 and 1983 is included in Management's Discussion and Analysis under the caption "Other Cperating Expenses" on page 29 of the Mnual Report and such information is incorporated herein by reference. Statistical Information The following statistical information concerning the financial condition and operating performance of the Corporation is included in the Annual Report and such information is incorporated herein by reference; page numbers below correspond to pa0e numbers in the Annual Report. Statistical Information Page and Caption Distribution of Assets, Liabilities Page: 68 Caption: " Average and Stockholders' Equity; Interest Balances, Interest and Average Rates and Interest Differential Rates B.vable Equivalent". The Effect of 01anges in Average Pr:p y r ption: "flet Interest Balances and Average Rates on ~ac. a 1xable E4uivalent Basis Interest Income Ir.orease (Cecrease) Due to 01anges in Average Balances and Rates". Percentage of Total Assets Page: 24 Caption: " Domestic and and Total Liabilitica Internat.fonal Operations-Average Attributable to Foreign Assets by (bographic Region". Activities on the Basis of Averages 4
Statistical Information Page and Caption Investment Portfolio - Book Value by Page: 67 Caption: "(bnsolidated Category Summary of Assets, Liabilities and Stockholders' E'uity" q Carrying Value of Consolidated Page: 39 Caption: " Investment Investment Securities including Securities at December 31". Maturity Distributions, Weighted Average Yields and Estimated Market Values Loan Portfolio - Types of Loans Page: 73 Caption: " Consolidated Loan Balances by Type and Percent-age Distribution". Maturities and Sensitivities of Page: 72 Caption: " Selected Loan Loans to manges in Interest Fates Maturities and Sensitivity to 01anges in Interest Rates". Risk Elements Page: 37 Caption: "tbnaccrual, Reduced Rate and Past Due Loans". Page: 34 Caption: " Country Risk - Cross-Border Outstandings W11ch Exceed 1% of Total Assets" and
" Cross-Border Outstandings Between
.75% and 1% of Total Assets".
Sunnary of loan Loss Experience Page: 71 Caption: " Consolidated Analysis of Loan tmss Experience". Allocation of the Reserve Page: 28 Caption: " Allocation of , for Possible Loan Losses the Reserve for Possible Loan ! Losses". Deposits - Types of Deposits Page: 68 Caption: " Average Balances, Interest and Average Rates - Taxable E14uivaletit". Haturity Distribution of Time Page: 40 Caption: " Maturity , Certificates of Deposit Distribution of Tine Deposits of
$100,000 or More".
Return on Equity and Assets Page: 74 Caption: " Financial Ratios". S1 ort-Term Borrowings Page: 41 Caption: " Selected Funds Borrowed" 5 s . .
Supervision and Regulation The Company is a bank holding company within the meaning of the Bank Holding Company Act of 1956, as amended (the "Act"), and is required to file with the Board of (bvernors of the Federal Reserve System (the " Federal Reserve Board") an annual report and such other information as may be required pursuant to the Act. The Company is subject to the examination power of the Federal Reserve Board. Under the Act and Regulation Y of the Federal Reserve Board, as in effect on December 31, 1985, the Company, with certain exceptions, may not acquire direct or indirect ownership or control of more than 5% of the voting shares of any bank without the prior approval of the Federal Reserve Board. The Federal Reserve Board is not authorized to approve the acquisition of any bank unless-it finds that any anticonpetitive effects of the proposed acquisition are clearly outweighed by the probable effect of the transaction in neeting the convenience and needs of the community to be served. The Federal Reserve Board is prohibited from approving any application by a bank holding company to acquire voting shares of any bank in another state unless such acquisition is specifically authorized by the laws of such state or unless, under certain circumstances, such bank is a "failing bank". While an increasing number of states have adopted laws authorizing certain acquisitions by out-of-state bank holding companies, few states permit unrestricted entry by bank holding companies located in ibw York. Pursuant to the Act, the Company may not engage in any business other than managing and controlling banks or furnishing certain services and may not acquire voting control of nonbanking corporations except those businesses or services which the Federal Reserve Board deems to be closely related to banking. Subject to obtaining the prior approval of the Federal Reserve Board, the Company also may acquire voting control of nonbanking corporations engaged in such activities. In naking any such determination, the Federal Reserve Board is required to consider whether the performance of such activities by an affiliate of the Company can reasonably be expected to produce benefits to the public, such as greater convenience, increased competition, or gains in efficiency, Ulat outweigh possible adverse effects, such as undue concentration of resources, decreased or unfair competition, conflicts of interest or unsound banking practices. Further, the Federal Reserve Board is empowered to differentiate between activities commenced de novo and activities commenced by acquisitions, in whole or in part, of going concerns. The Bank, as a national banking association and menber of the Federal Reserve System and Federal Deposit Insurance Corporation, is subject to supervision and regulation by the Comptroller of the Currency and the Federal 4 Reserve Board. Such supervision and regulation includes periodic examinations of the Bank, periodic reporting requirements, limitations on the investment ( and other powers of the Bank and regulation of the establishment and operation of branches. See tbte 16 of tbtes to Financial Statenents on page 61 of the Annual Report for a description of the Bank's, Chase Lincoln's and Cl1B (USA's) legal 6
limitations pertaining to the amount of dividends that can be paid to the Company and the extent to which the Bank can finance or otherwise supply funds to its affiliates. The Donpany, the Bank and their affiliates are also subject to restrictions with respect to issuing, floating and underwriting, or publicly selling or distributing, securities in the United States. Regulations inplementing the International Lending Supervision Act of 1983 ("ILSA") require federal banking agencies to jointly determine when and to what extent banking institutions are to establish and maintain special reserves against certain foreign loans or other foreign assets. Reserves are required whenever, in the judgement of the federal banking agencies, the quality of these loans or assets has been impaired by protracted inability of public or private borrowers in a foreign country to make payments on their external indebtedness or no definite prospects exist for orderly restoration of debt service. Such reserves are to be charged against current incone and will not be considered as part of capital and surplus or allowances for possible loan losses for regulatory, supervisory, or disclosure purposes. In addition, no banking institution is allowed to charge, in connection with the restructuring of an international loan, any fee exceeding the administrative cost of restructuring unless it amortizes such fee over the effective life of the loan. _A ILSA also directed the federal banking agencies to establish minimum levels of capital for banking institutions. (Capital requirements of bank regulators are discussed on pages 30 and 31 of Edlibit 13, under the caption " Capital Management.") Lhder regulations of the Board of Dovernors of the Federal Reserve System, the minimum acceptable ratio of total capital to total gross assets for nultinational bank holding companies, such as the Corporation, is 6% and the minimum ratio of total primary capital to total gross assets has been established at 51/2%. Effect of Government Policies The earnings of the Corporation are significantly influenced by fluctuations in economic activity, the general price level and relative prices throughout the world economy. In addition, fiscal and other policies adopted by the United States and foreign governments can have inportant consequences i on the financial performance of the Corporation. In particular, the actions I and policies of the Federal Reserve Board and foreign central banks exert a major influence on interest rates, credit conditions, exchange rates and asset prices. Recognizing the inherent difficulties of forecasting government behavior and asset prices, the Corporation endeavors to accurately assess and manage these economic and other risks which it faces in the conduct of its
- business.
Item 2. Properties. The Donpany's Executive Office and the Bank's Head Office are located in a sixty-story building owned in fee by the Bank at 1 Chase Manhattan Plaza, New 7 L_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ . _ _ _ _ _
York, thw Yo rk which repr stnts e significant portion of the value of banking premises owned by the Bank. Of total space of approximately two million square feet in this building, approximately two-thirds is occupied by the Bank and the Company and the renainder is leased to tenants. In 1984, the Bank purchased a 350,000 sq. ft. facility in Lake Success, Long Island for use as a processing center. The Bank also owns in fee other banking premises, principally in overseas locations such as D7 gland, Puerto Rico, Dernany, Panana and Brazil. The Bank leases space occupied by many of its branch offices and facilities used in its donestic and foreign operations. Leases of prenises include a lease, expiring August 31, 2000, with options to renew to the year 2030, for approximately 1 million square feet on 21 floors in a fifty-story building at 1 New York Plaza, thw York, thw York. The Bank has an option to purchase the ground lease and the entire building at 1 thw York Plaza on various dates in the future. The Lincoln First Tower, located in Rochester, Ibw York is the leased headquarters of 01ase Lincoln. Iten 3. Legal Proceedings. Various actions and proceedings are pending against the Company, the Bank and certain of their subsidiaries in which clains for substantial noney damages are asserted. Management of the Company, after consulting with legal counsel, is of the opinion that the ultimate effect on the Corporation of all pending actions and proceedings would not be naterial in relation to the financial position of the Corporation.These actions and proceedings include CHR Companies, Inc. et al.v. Continental Illinois National Bank and Trust Company of Chicago, et al. , (Lhited States Bankruptcy Court, Southern District of Texas, Houston Division, connenced December 9,1983) which is an adversary proceeding connenced by GHR Companies, Inc. and affiliated entities ("GHR") under Chapter 11 of the Bankruptcy Code against the Bank and other lenders to GHR in which GHR alleges that the Bank wrongfully controlled and dominated CHR and its affairs and seeks the disallowance of any clain filed by the Bank in the bankruptcy proceedings within which this proceeding was connenced, equitable subordination of any such clain, avoidance of alleged fraudulent transfers and other relief. Other adversary proceedings brought by CHR against the Bank and other lenders to GIR seeking substantially the same relief are pending in the same Court. CHR 00mpanies, Inc. et al. v. Banque Paribas, et al. , (U.S. Dist. Ct. , S.D.N.Y. , connenced Decenber 13,1983) is a case against the Bank and two other lenders to CHR in which it is alleged that the Bank violated Federal antitrust laws and Federal banking laws and that the Bank wrongfully controlled and dominated CHR and its affairs. Actual damages in the amount of $1 billion are sought and punitive damages are also demanded. Iten 4. Subnission of Matters to a Vote of Security Holders. The Company did not subnit any natters to a vote of security holders during die last quarter of 1985. 8
\
PART II
.= It'em 5. -
Market for Registrant's Comnon Equity and Related Stockholder -
- . Matters.
Information setting forth the high and low sales prices of the j- 00mnon Stock for each quarterly period during the past two years, the approximate nunber of holders 'of Cbmmon Stock and the amounts of dividends - declared on such Common Stock during the past two years is presented in
. tabular form on.page 75 of EWibit 13, " Stockholder Data", and such information-is incorporated herein by reference. Information setting
. forth restrictions on the ability to pay dividends:on the Company's Common Stock is presented in Note 14: "00nnon Stockholders' Equity" and ibte 16: . " Regulatory Limitations" of the ibtes to Financial. Statements on page 60 and 61, respectively, of Exhibit 13, and is incorporated herein by reference.
-item 6.- Selected Financial Data.
Information concerning the Corporation's selected financial data is
. set forth on page 23-of Exhibit 13 under the caption "Sunnary of Selected Financial Data" and is incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
' Management's discussion and analysis of the Corporation's financial condition, results of operations and changes therein, is set forth on pages 22 through 41 of Exhibit 13, and is incorporated herein by reference.
Item 8. . Financial Statements and Supplementary Data. The consolidated statement of condition of lhe Chase Manhattan Corporation and Subsidiaries, at December 31, 1985 and 1984 as well as the related balance sheet of The. Chase Manhattan Corporation (Company only) at December 31,1985 and 1984 and the related statements of incone, changes in common stockholders' equity and changes in financial position for each of the years in-the three year period ended December 31, 1985, together with the related notes and the report of Price Waterhouse, independent public accountants, thereon, centair.cd on pages 44 through 50 and 55 through 65 of Exhibit 13, are incorporated herein by- reference. Information related to the impact of inflation and changing prices on the
' Corporation's consolidated financial statements is contained on page 79 of Exhibit 13, under the caption " Financial Reporting and Analysis of the Effects of Changing Prices", and such information is incorporated herein by reference. Quarterly financial information for the two years ended December 31, 1985 is set forth on page 70 of Exhibit 13, and such information is incorporated herein by reference.
9
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_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ . _ - - - - _ _ _ . _ _ _ _ _ _ _ _ __ _ _ _ _ __ _- I
n- ,m - 4 Item 9.- LDisagreements on. Accounting and Financial:Di closura. u iThe-Company has'nothing to report under this item. Part III-F _ j
~' Item 10. . Directors ~ and Executive Officers'of the Registrant.
The-information called for by this item is. set forth in the. Proxy Statement of the Company for its 1986 Annual Meeting under.the caption
" Election'ofLDirectors", and such information is incorporated herein by reference. See also the'information set forth below, which information,.
.in.accordance with the instructions to Item 401(b) of Regulation S-K,-
shall be deemed to be a ' portion of Part I of this Report on Fona 10-K..
- Executive Officers of.the Company
- The following is a list' as of March 1,1986 showing the names and ages of all principal executive officers of the Company;and the position
.' or office with the Company held by ecch of -them and the date from which' said office has been continuously held. There are no family relationships between -any of the principal ~ executive officers or directors. thder the
- By-Laws, the mairman of the Board, the President and the Vice mairmen of the= Board hold office until the next. annual organization meeting of the Board. All other officers hold office at the pleasure of the Board.
Position and Offices Held and Date from Name g which Ftrid
- Willard C... Butcher 59 mairman of the Board -
April 21, 1981, m ief Executive Officer - January 1,1980 and Director - January 19, 1972 - Thomas G. Labrecque 47 President - April 21,-1981 mief Operating Officer and Director -.3Jne 25, 1980 - Robert R. Douglass- 54 Vice mairman of the Board - July 1, 1985 and Director L Arthur F. Ryan 43 Vice mairman of the Board - July 1, 1985 and Director Anthony P. Terracciano 47 Vice mairman of the Board - July 1, 1985 and Director 10 i . -_ -- ._- - . . - _ - _ _ - . . , . - _ _ - . _ - . - , _ . _ _ - _ ._
- ~
,y f-Position and 0fficGs-4 Held and Date from.
-Name _ Age _ which Held. .
A. Edward Allinson- 51 ' Executive Vice~ President - April 1, 1983 - JamesjW. Bergford 59 Executive Vice President - February 17,1971 Donald L..Boudreau- 45. : Executive ..Vice President - Deceober 1, 1984:
- Richard J. Boyle: -42 Executive Vice Presidenti-April 1, 1984.
A. Wricfit ' Elliott :50 Executive Vice President . April 1, 1983 Michael P. . Esposito, Jr. 46 . -Executive Vice Presiderit - April l, 1983 and'. Controller --. February 'l',1976
- Joseph J. Harkins 54 Executive Vice President -
January 1, 1986
' Robert M. Lichten Executive Vice President -
-45 Dececber 1,' 1984' Wolfgang Schoellkopf 53 Executive Vice President -
October 1, 1980 L. Edward Shaw, Jr. 41 Executive Vice President - January 1,1986 and General Counsel - February 1,.1983 . Francis X. Stankard 54 Executive Vice President - December 18, 1974 Michael Urkowitz . 42 Executive Vice President - December 1, 1984 Paul-T. Walker 50 Executive Vice President - July 1, 1985 Except as noted below, each officer (i) has as his principal occupation the corresponding office with the principal subsidiary of the Company, the Bank,
'and (ii) for more than the last five years has been employed in such principal
- occupation or in other executive positions with the Bank, or'other
" subsidiaries of the Company .
Mr. Saw has served as General Counsel of the Company and the Bank since February 1,1983. Since 1977, Mr. Shaw had been a member of the firm Milbank, Tweed,.Hadley & McCloy, attorneys. Item 11. Management Remuneration.
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11
Information in response to this iten is set forth in the Proxy Statement of - the Company for its 1986 Annual Meeting under the captions " Election of Directors", " Executive Compensation", "The Retirement Plan", "1978 Non-Qualified Stock Option Plan", "1982 Long-Tern Incentive Plan", "The Thrift-Incentive Plan", "Other Incentive Plans", and " Transactions with - Management and Others", and such information is incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and lianagement. Information concerning beneficial ownership of equity securities of the LCompany by management is set forth under the caption " Stock Ownership" in the Proxy Statement of the Company for its 1986 Annual tieeting and such ~information is incorporated herein by reference. Iten 13. Certain Relationships and Related Transactions. Information in response to this itea is set forth in the Proxy Statement of the Company for its 1986 Annual Meeting under the caption " Transactions with Management and Others", and such information is incorporated herein by reference. PART IV Item 14. Exhibits, Financial Statenent Schedules, and Reports on Form 8-K. (a) (1) Financial statements have been included in Item 8 above. (b) 1he Company filed a report on Form 8-K during the quarter ended December 31, 1985. Date of Report Itens Reported October 14, 1985 thws release announcing the Corporation's earnings for the quarter ended Septeuber 30, 1985. (c) The following exhibits are filed as a part of this report: Location in this Forn 10-K Exhibit 3A - Restated Certificate of Incorporation p. 17 of the (bapany (including certificates of designation, preferences and rights of series of Preferred Stock). 12
Loc tion in this Forn 10-K
. Exhibit 3B Certificates of Change of Address of p. 112 Registered Office and of Registered Agent.
Exhibit 3C - By-Laws of the Company.- p. 115 Exhibit 10A - The clase Manhattan 1982 Long-Tera p. 123 Incentive Plan. ExhD31t 10B - 1978 tbn-Qualified Stock Option p. 138 Plan. Exhibit}}