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FIRST CHICAGO PLANS DISPOSITION OF $2.1 BILLION OF REAL ESTATE EXPOSURE; ADOPTS FAIR VALUE ACCOUNTING FOR VENTURE CAPITAL PORTFOLIO

 FIRST CHICAGO PLANS DISPOSITION OF $2.1 BILLION OF REAL ESTATE


EXPOSURE; ADOPTS FAIR VALUE ACCOUNTING FOR VENTURE CAPITAL PORTFOLIO
 CHICAGO, Sept. 14 /PRNewswire/ -- First Chicago Corporation (NYSE: FNB) announced today that it has identified $2.1 billion of commercial real estate exposure at The First National Bank of Chicago (FNBC) that will be segregated as "held-for-sale" and managed separately under an accelerated disposition program. In connection with the implementation of this strategy, a special provision of $625 million is being taken to record this portfolio at estimated disposition values.
 Also in the third quarter, the corporation is adopting fair value accounting for its $1.1 billion venture capital portfolio, thereby recognizing the substantial appreciation in that portfolio. Under this new approach, which is proposed to become the industry accounting standard for investment portfolios, the corporation's cumulative pretax appreciation is conservatively estimated to be $300 million. The corporation is currently negotiating to accelerate the sale of certain of these equity securities.
 "We have looked closely at the U.S. commercial real estate market and see no recovery in the near term," Chairman Richard L. Thomas said.
 "Therefore, we believe it is in the best interests of the corporation and its stockholders to aggressively reduce our exposure to real estate. We are establishing additional reserves now because we intend to accelerate the sale of these problem real estate assets. And we are working with interested parties to transact sales as soon as possible."
 The "held-for-sale" portfolio encompasses virtually all of FNBC's lowest-rated commercial real estate assets. The pool includes $700 million of nonperforming real estate assets, including loans, in- substance foreclosed properties and other real estate owned, representing all of FNBC's nonperforming real estate assets at June 30, 1992. An additional $1.4 billion of performing real estate exposure is included in the pool.
 In addition to the $625 million special provision, $150 million of existing reserves are being allocated to the $2.1 billion pool. Prior to this special reserve, write-downs and existing reserves for this portfolio totaled 20 percent of contractual exposure. After today's action, the carrying value of the "held-for-sale" portfolio is approximately 54 percent of contractual exposure.
 "The decision to dispose of our lower quality real estate assets reflects the same philosophy we applied to our troubled-country debt portfolio five years ago -- reserve and liquidate," Thomas said. "We believe it is important to take the markdowns now, so that management can move beyond the onerous day-to-day requirements of dealing with these assets and alleviate their burden on our ongoing quarterly financial results. Also, we believe that the quality of future earnings will improve as the vulnerability to swings in credit costs is reduced."
 Successful execution of the disposition program has favorable long- term implications for many of the corporation's credit, earnings and capital goals. If this year's second quarter results were adjusted for the "held-for-sale" portfolio, the nonperforming asset ratio at June 30 would have been 2.6 percent, a substantial improvement from the reported 5.1 percent. And the ratio of reserves to nonperforming loans in the remaining portfolio at June 30 would have been 135 percent on the same pro forma basis. The corporation has established a target for average annual provisions related to commercial credits of half its current rate.
 The corporation's Tier 1 capital ratio and total risk-adjusted capital ratio remain well-above the minimum regulatory capital guidelines of 4 percent and 8 percent, respectively.
 "Our core businesses -- community banking, credit card, American National Corporation and corporate banking -- continue to perform in line with our expectations for 1992," Thomas said. "And we believe that the benefits of the programs announced today will be reflected in our 1993 performance. As we execute our corporate strategy, we are on track to making First Chicago a high performing institution."
 First Chicago Corporation had assets of $47.4 billion at the end of the second quarter and is the nation's tenth largest bank holding company.
 -0- 9/14/92
 /CONTACT: Lisabeth Weiner, 312-732-4455; or investor contacts, Colleen Mulligan, 312-732-4812, Susan Temple, 312-732-8013, all at First Chicago/
 (FNB) CO: First Chicago Corporation ST: Illinois IN: FIN SU:


SH -- NY015 -- 8925 09/14/92 09:04 EDT
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Publication:PR Newswire
Date:Sep 14, 1992
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