-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, A4DDeloi1C8Bpi490VpICCqkujPUamErRk6Y7UlMYmsv/cw6f719avLtjFSc0YHU LZbOdVmhYyKIkh/v/ceXbQ== 0000950152-96-002499.txt : 19960517 0000950152-96-002499.hdr.sgml : 19960517 ACCESSION NUMBER: 0000950152-96-002499 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960515 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: BANC ONE CORP /OH/ CENTRAL INDEX KEY: 0000036090 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 310738296 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-08552 FILM NUMBER: 96566445 BUSINESS ADDRESS: STREET 1: 100 E BROAD ST CITY: COLUMBUS STATE: OH ZIP: 43271 BUSINESS PHONE: 6142485944 MAIL ADDRESS: STREET 1: 100 EAST BROAD STREET STREET 2: 18TH FLOOR CITY: COLUMBUS STATE: OH ZIP: 43271-0251 FORMER COMPANY: FORMER CONFORMED NAME: FIRST BANC GROUP OF OHIO INC /OH/ DATE OF NAME CHANGE: 19800301 10-Q 1 BANC ONE CORPORATION 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For The Quarterly Period Ended March 31, 1996. OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 1-8552 BANC ONE CORPORATION -------------------- (Exact name of registrant as specified in its charter) Ohio 31-0738296 ---- ---------- (State or other jurisdiction of incorporation or (IRS Employer I.D. Number) organization)
100 East Broad Street, Columbus, Ohio 43271-0251 ------------------------------------------------- (Address of principal executive offices) (Zip Code) (614) 248-5944 -------------- (Registrant's telephone number, including area code) N/A --- (Former name, former address and former fiscal year, if changed since last report) 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, no par value, $5 stated value, was 435,554,944 at April 30, 1996. 2 FORM 10-Q TABLE OF CONTENTS PART I - FINANCIAL INFORMATION
Item 1. Financial Statements Page ---- Consolidated Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Consolidated Statement of Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Consolidated Statement of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Supplemental Disclosures for Statement of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Consolidated Statement of Changes in Stockholders' Equity . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Notes to the Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Consolidated Quarterly Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Average Balances, Income and Expense, Yields and Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Item 2. Management's Discussion and Analysis Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Net Interest Income/Net Interest Margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Non-Interest Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Non-Interest Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Balance Sheet Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Loans and Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Liquidity and Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Asset Liability Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
1 3 BANC ONE CORPORATION AND SUBSIDIARIES PART I FINANCIAL INFORMATION BANC ONE CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET
MARCH 31, DECEMBER 31, MARCH 31, $(THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED) 1996 1995 1995 - --------------------------------------------------------------------------------------------------------------------------- ASSETS Cash and due from banks $5,002,275 $5,501,266 $4,730,810 Short-term investments 288,709 454,718 1,102,748 SECURITIES: Securities held to maturity 1,080,099 1,087,654 4,857,981 Securities available for sale 16,289,926 14,620,334 10,915,170 ---------- ---------- ---------- Total securities (fair value approximates $17,400,000, $15,756,000 and $15,801,000 at March 31,1996, December 31, 1995 and March 31, 1995, respectively) 17,370,025 15,707,988 15,773,151 Loans and leases 69,207,168 65,328,665 62,495,481 Allowance for credit losses 1,005,808 938,008 885,292 --------- ------- ------- Net loans and leases 68,201,360 64,390,657 61,610,189 OTHER ASSETS: Bank premises and equipment, net 1,657,424 1,558,676 1,501,926 Interest earned, not collected 660,529 669,709 563,543 Other real estate owned 76,584 75,483 82,080 Excess of cost over net assets of affiliates purchased 473,304 242,817 258,732 Other 1,977,972 1,852,649 2,207,279 --------- --------- --------- Total other assets 4,845,813 4,399,334 4,613,560 --------- --------- --------- Total assets $95,708,182 $90,453,963 $87,830,458 =========== =========== =========== LIABILITIES DEPOSITS: Non-interest bearing $14,428,845 $14,767,497 $13,204,733 Interest bearing 55,788,128 52,552,653 52,203,157 ---------- ---------- ---------- Total deposits 70,216,973 67,320,150 65,407,890 Federal funds purchased and repurchase agreements 7,416,144 6,261,009 6,685,235 Other short-term borrowings 4,029,182 3,516,191 3,234,449 Long-term borrowings 3,010,097 2,720,373 2,125,949 Accrued interest payable 357,686 410,946 329,011 Other liabilities 2,248,017 2,027,816 2,352,459 --------- --------- --------- Total liabilities 87,278,099 82,256,485 80,134,993 ---------- ---------- ---------- STOCKHOLDERS' EQUITY Preferred stock, 35,000,000 shares authorized: Series C convertible, no par value 4,908,961, 4,992,694 and 4,997,999 shares issued and outstanding, respectively 245,448 249,635 249,900 Common stock, no par value, $5 stated value, 600,000,000 shares authorized, 435,430,889, 451,741,054 and 410,009,224 shares issued, respectively (December 31, 1995 shares reflect the 10% stock dividend paid March 6, 1996 to shareholders of record on February 21, 1996) 2,177,154 2,258,705 2,050,046 Capital in excess of aggregate stated value of common stock 4,610,573 5,157,763 3,810,815 Retained earnings 1,384,532 1,100,345 2,082,213 Net unrealized holding gains (losses) on securities available for sale, net of tax 12,376 91,804 (56,503) Treasury stock (0, 24,090,000 and 15,630,500 shares at March 31,1996, December 31, 1995 and March 31, 1995, respectively), at cost 0 (660,774) (441,006) - --------- --------- Total stockholders' equity 8,430,083 8,197,478 7,695,465 --------- --------- --------- Total liabilities and stockholders' equity $95,708,182 $90,453,963 $87,830,458 =========== =========== ===========
The accompanying notes are an integral part of the financial statements. 2 4 BANC ONE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF INCOME FOR THE THREE MONTHS ENDED MARCH 31,
$(THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED) 1996 1995 - ----------------------------------------------------------------------------------------------------------------------- INTEREST INCOME: Interest and fees on loans and leases $1,704,641 $1,454,956 Interest and dividends on: Taxable securities 249,955 208,167 Tax exempt securities 24,997 31,614 Other interest income 5,389 28,557 ----- ------ Total interest income 1,984,982 1,723,294 INTEREST EXPENSE: Interest on deposits: Demand, savings and money market deposits 246,830 218,852 Time deposits 345,387 331,078 Interest on borrowings 197,786 163,776 ------- ------- Total interest expense 790,003 713,706 ------- ------- Net interest income 1,194,979 1,009,588 Provision for credit losses 162,421 66,517 ------- ------ Net interest income after provision for credit losses 1,032,558 943,071 NON-INTEREST INCOME: Income from fiduciary activities 62,511 58,582 Service charges on deposit accounts 156,816 127,111 Loan processing and servicing income 117,245 112,443 Securities gains 5,835 9,786 Other 160,168 143,832 ------- ------- Total non-interest income 502,575 451,754 NON-INTEREST EXPENSE: Salaries and related costs 502,812 442,950 Net occupancy expense, exclusive of depreciation 44,673 39,576 Equipment expense 28,099 26,907 Taxes other than income and payroll 24,062 21,972 Depreciation and amortization 86,216 74,730 Outside services and processing 125,237 103,502 Marketing and development 48,114 44,236 Communication and transportation 75,171 66,063 Other 84,694 103,661 ------ ------- Total non-interest expense 1,019,078 923,597 --------- ------- Income before income taxes 516,055 471,228 INCOME TAX PROVISION: Income excluding securities transactions 168,115 165,016 Securities transactions 2,059 3,694 ----- ----- Provision for income taxes 170,174 168,710 ------- ------- Net income $345,881 $302,518 ======== ======== Net income per common share (amounts reflect the 10% common stock dividend paid March 6, 1996 to shareholders of record on February 21, 1996) $.77 $.68 ==== ===== Weighted average common shares outstanding (000) 444,027 435,893 ======= =======
The accompanying notes are an integral part of the financial statements. 3 5 BANC ONE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31,
$(THOUSANDS) (UNAUDITED) 1996 1995 - --------------------------------------------------------------------------------------------------------------------- CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES: Net income $345,881 $302,518 ADJUSTMENTS: Provision for credit losses 162,421 66,517 Depreciation expense 65,007 60,637 Amortization of other intangibles 21,209 14,093 Amortization (accretion) of securities premiums and discounts, net 7,954 (33,864) Amortization of mortgage servicing rights 6,031 1,699 Net decrease in trading account 47,732 41,865 Net (increase) decrease in loans held for sale (228,985) 80,667 Net increase in deferred loan fees 8,051 1,036 Securities gains (5,835) (9,786) Gain on sales of banks and branch offices (14,514) (47,247) (Gain) loss on sales of loans and other assets (11,679) 43,256 Net (increase) decrease in other assets 88,979 (60,556) Net increase in other liabilities 8,218 249,855 Net increase in deferred income taxes 63,097 42,638 ------ ------ Net cash provided by operating activities 563,567 753,328 ------- ------- CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES: Purchases of securities available for sale (1,337,656) (3,395,234) Purchases of securities held to maturity (36,731) (381,118) Maturities of securities available for sale 905,788 2,417,777 Maturities of securities held to maturity 90,937 347,295 Sales of securities available for sale 439,644 543,349 Net increase in loans, excluding sales and purchases (1,934,191) (1,137,676) Sales of loans and other assets 1,794,763 172,631 Purchases of loans and related premiums (89,058) (244,799) Net decrease in short-term investments 236,947 2,495,368 Additions to bank premises and equipment (72,827) (66,213) Sale of banks 18,532 95,698 Net cash acquired in acquisitions 315,715 42,413 Net increase in purchased mortgage servicing rights (6,857) (35,448) -------- -------- Net cash provided by investing activities 325,006 854,043 ------- ------- CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES: Net decrease in demand deposit, money market and savings accounts (264,910) (1,481,433) Net decrease in time deposits (952,988) (669,241) Net increase in short-term borrowings 1,236,142 295,421 Issuance of long-term borrowings, net 507,171 320,110 Repayment of long-term borrowings (1,052,126) (60,336) Cash dividends paid (152,293) (262,371) Sales of branch offices: Deposit liabilities assumed by purchasers (125,642) Other, net 9,372 Purchase of treasury shares (592,950) (104,553) Other, net increase 660 12,425 --- ------ Net cash used in financing activities (1,387,564) (1,949,978) ----------- ----------- Decrease in cash and cash equivalents (498,991) (342,607) Cash and cash equivalents at January 1 5,501,266 5,073,417 --------- --------- Cash and cash equivalents at March 31 $5,002,275 $4,730,810 ========== ==========
The accompanying notes are an integral part of the financial statements. 4 6 BANC ONE CORPORATION AND SUBSIDIARIES SUPPLEMENTAL DISCLOSURES FOR STATEMENT OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31,
$(THOUSANDS) (UNAUDITED) 1996 1995 - ------------------------------------------------------------------------------------------------------------------- Common stock issued and treasury stock reissued in purchase acquisitions $710,515 $3,647 ======== ====== Transfer from loans to other real estate owned (OREO) 23,138 20,121 ====== ====== Net increase in securities trades not settled 39,850 88,766 ====== ====== Loans issued to facilitate the sale of OREO properties 759 1,179 === ===== Additional Disclosures: Interest paid 874,093 732,736 ======= ======= Income taxes paid $3,718 $6,112 ====== ======
The accompanying notes are an integral part of the financial statements. BANC ONE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY For the three months ended March 31,
$(THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED) 1996 1995 - ------------------------------------------------------------------------------------------------------------------- BALANCE, BEGINNING OF PERIOD $8,197,478 $7,564,860 Net income 345,881 302,518 Exercise of stock options, net of shares purchased (3,039) (286) Shares issued in acquisitions 710,515 3,647 Sales of stock to employee benefit plans and other 3,919 12,711 Cash dividends: Corporation: Common ($.34 and $.31 per share) (147,998) (134,073) Series C Preferred ($.88 per share) (4,295) (4,373) Change in unrealized holding gains (losses) on securities available for sale, net of tax (79,428) 55,014 Purchase of treasury stock (592,950) (104,553) --------- --------- BALANCE, END OF PERIOD $8,430,083 $7,695,465 ========== ==========
The accompanying notes are an integral part of the financial statements. 5 7 NOTES TO THE FINANCIAL STATEMENTS 1. The accompanying financial statements are unaudited. However, in the opinion of management, they contain the adjustments (all of which are normal and recurring in nature) necessary to present fairly the financial position and the results of operations. The notes to the financial statements contained in the Annual Report on Form 10-K for the year ended December 31, 1995 should be read in conjunction with these financial statements. "The Corporation" is defined as parent company only. "BANC ONE" is defined as the Corporation and all significant majority-owned subsidiaries. Certain prior period amounts have been reclassified to compare with current presentation. 2. The provision for income taxes is at a rate which management believes will approximate the effective rate for the year. 3. On January 2, 1996, the Corporation acquired all of the outstanding shares of Premier Bancorp, Inc. (Premier) of Baton Rouge, Louisiana in exchange for 24 million shares of the Corporation's treasury stock (adjusted for the 10% common stock dividend paid March 6, 1996 to shareholders of record on February 21, 1996) valued at $711 million. The acquisition was accounted for as a purchase, and therefore, prior period financial statements have not been restated to include Premier. Premier had assets of $6.3 billion at December 31, 1995. On March 15, 1996, the Corporation completed the sale of Bank One, Pikeville, NA which had assets of $224 million at December 31, 1995, resulting in a pretax gain of $8 million. 4. Mortgage loans held for sale were $747 million, $503 million and $275 million at March 31, 1996, December 31, 1995 and March 31, 1995, respectively. Such loans are carried at the lower of cost or market determined on an aggregate basis. 5. BANC ONE adopted Financial Accounting Standard No. 121 (SFAS 121), "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of" as of January 1, 1996. The impact on BANC ONE's financial position and results of operations is not material. 6. On February 13, 1996, the Corporation repurchased 15 million shares of common stock (16.5 million shares after the 10% stock dividend). The shares were retired and subsequently reissued to pay the 10% stock dividend. On April 16, 1996, the Board of Directors approved the repurchase of up to 10 million shares of BANC ONE common stock to be used for general corporate purposes. 6 8 \CONSOLIDATED QUARTERLY FINANCIAL DATA
QUARTERS --------------------------------------------------------------- 1996 1995 --------------------------------------------------------------- $(MILLIONS) (UNAUDITED) FIRST FOURTH THIRD SECOND FIRST - ----------------------------------------------------------------------------------------------------------------------- PERIOD END BALANCES Loans and leases (net of unearned income) $69,207.2 $65,328.7 $65,412.7 $63,335.0 $62,495.5 Earning assets 85,860.1 80,553.4 79,020.9 77,272.1 78,486.1 Total assets 95,708.2 90,454.0 88,353.3 86,783.3 87,830.5 Total deposits 70,217.0 67,320.2 66,291.7 65,612.9 65,407.9 Long-term borrowings 3,010.1 2,720.4 2,677.2 2,088.0 2,125.9 Allowance for credit losses 1,005.8 938.0 915.5 891.5 885.3 Total stockholders' equity 8,430.1 8,197.5 8,002.2 7,839.1 7,695.5 CONDENSED INCOME STATEMENT Net interest income (1) 1,210.87 1,094.55 1,057.66 1,024.36 1,032.31 Provision for credit losses 162.42 165.90 132.52 92.56 66.51 ------ ------ ------ ----- ----- Net funds function (1) 1,048.45 928.65 925.14 931.80 965.80 NON-INTEREST INCOME Income from fiduciary activities 62.51 62.23 60.05 58.54 58.58 Service charges on deposit accounts 156.82 144.31 140.81 132.46 127.11 Loan processing and servicing income 117.24 135.53 142.59 130.24 112.44 Securities gains 5.83 7.98 7.29 2.79 9.79 Other 160.17 141.16 122.13 130.10 143.83 ------ ------ ------ ------ ------ Total non-interest income 502.57 491.21 472.87 454.13 451.75 NON-INTEREST EXPENSE Salaries and related costs 502.81 448.35 430.14 429.08 442.95 Other 516.27 477.15 450.07 473.25 480.65 ------ ------ ------ ------ ------ Total non-interest expense 1,019.08 925.50 880.21 902.33 923.60 Taxable equivalent adjustment 15.89 16.57 19.25 20.89 22.72 ----- ----- ----- ----- ----- Income before income taxes 516.05 477.79 498.55 462.71 471.23 Income tax provision 170.17 140.94 167.53 155.23 168.71 ------ ------ ------ ------ ------ Net income $345.88 $336.85 $331.02 $307.48 $302.52 ======= ======= ======= ======= ======= Net income available to common shareholders $341.59 $332.48 $326.65 $303.11 $298.15 ======= ======= ======= ======= ======= 1) Fully taxable equivalent basis. The Federal statutory rate used was 35% for all periods presented.
7 9 CONSOLIDATED QUARTERLY FINANCIAL DATA
QUARTERS -------------------------------------------------------------- 1996 1995 -------------------------------------------------------------- $(MILLIONS, EXCEPT PER SHARE DATA) (UNAUDITED) FIRST FOURTH THIRD SECOND FIRST - --------------------------------------------------------------------------------------------------------------------------- KEY RATIOS Return on average assets (1) 1.45% 1.51% 1.51% 1.43% 1.42% Return on average common equity (1) 16.38 17.00 17.09 16.34 16.61 Average common equity to assets 8.77 8.80 8.74 8.60 8.40 Tier I capital ratio 9.57 10.05 10.11 10.36 10.23 Total risk adjusted capital ratio 13.44 14.05 14.17 13.76 13.62 Leverage ratio 8.24 8.87 8.88 8.72 8.58 MARGIN ANALYSIS (1)(2)(3) Interest income 9.34 9.26 9.19 9.15 9.06 Interest expense 3.69 3.79 3.80 3.86 3.70 ---- ---- ---- ---- ---- Net interest income 5.65 5.47 5.39 5.29 5.36 Provision for credit losses .76 .83 .68 .48 .35 --- --- --- --- --- Net funds function 4.89 4.64 4.71 4.81 5.01 CREDIT ANALYSIS Net charge-offs to average loans and leases (1) .89 .87 .67 .56 .49 Ending allowance to loans and leases 1.45% 1.44% 1.40% 1.41% 1.42% Nonperforming assets (6): Total $486.3 $429.8 $444.7 $430.8 $449.4 Percent of total loans and leases .70% .66% .68% .68% .72% Loans delinquent 90 days or more (4): Total $250.2 $254.4 $212.3 $186.7 $172.9 Percent of total loans and leases .36% .39% .32% .29% .28% Allowance to nonperforming loans 245.5% 264.8% 253.3% 249.1% 241.0% PER SHARE DATA (5) Net income $.77 $.77 $.76 $.70 $.68 Cash dividends declared .34 .31 .31 .31 .31 Book value 18.80 18.58 18.02 17.59 17.16 Common stock price: High 38.50 36.48 34.41 31.94 27.39 Low 31.94 30.35 27.95 26.03 22.85 Close 35.63 34.21 33.18 29.32 25.91 Preferred Series C stock price: High 73.88 70.75 64.00 61.75 54.25 Low 62.00 59.38 55.58 52.25 49.63 Close $69.13 $65.63 $63.75 $58.25 $51.75 SHARES TRADED (000) Common 62,091 37,100 39,873 53,708 48,353 Preferred Series C 1,222 1,678 990 1,316 1,233 (1) Ratios presented on an annualized basis. (2) Fully taxable equivalent basis. The Federal statutory rate used was 35% for all periods presented. (3) As a percent of average earning assets. (4) Excluding nonperforming loans. (5) Amounts have been restated for the 10% common stock dividend paid March 6, 1996 to shareholders of record on February 21, 1996. (6) Excludes certain smaller balance loans collectively evaluated for impairment.
8 10 AVERAGE BALANCES, INCOME AND EXPENSE, YIELDS AND RATES (1)
1996 1995 FIRST QUARTER FIRST QUARTER ---------------------------------------------------------------------------------- AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/ $(THOUSANDS)(UNAUDITED) BALANCE EXPENSE RATE BALANCE EXPENSE RATE - -------------------------------------------------------------------------------------------------------------------------- ASSETS: Short-term investments $392,058 $5,422 5.56% $1,898,213 $30,294 6.47% SECURITIES: (3) Taxable 15,474,779 250,096 6.50 13,193,528 208,735 6.42 Tax-exempt 1,733,202 36,572 8.49 2,145,188 46,746 8.84 --------- ------ --------- ------ Total securities 17,207,981 286,668 6.70 15,338,716 255,481 6.75 LOANS AND LEASES: (2) Commercial 18,864,165 383,599 8.18 16,570,122 331,677 8.12 Real estate: Commercial 5,988,637 134,276 9.02 5,535,898 120,596 8.83 Construction 2,920,323 71,788 9.89 2,281,247 59,470 10.57 Residential 11,690,758 265,822 9.15 11,355,325 243,958 8.71 Consumer, net 20,027,947 487,575 9.79 18,911,300 438,775 9.41 Credit card 8,289,355 333,274 16.17 5,806,591 241,036 16.83 Leases, net 1,776,069 32,451 7.35 1,354,105 24,731 7.41 Allowance for credit losses (1,008,214) (897,228) --------- --------- --------- --------- Net loans and leases 68,549,040 1,708,785 10.03 60,917,360 1,460,243 9.72 ---------- --------- ---------- --------- Total earning assets 86,149,079 2,000,875 9.34 78,154,289 1,746,018 9.06 Other assets (3) 9,523,446 8,491,705 --------- --------- Total assets $95,672,525 $86,645,994 =========== =========== LIABILITIES: DEPOSITS: Non-interest bearing demand $13,951,625 $12,922,201 Interest bearing demand 3,115,025 14,847 1.92 8,928,081 49,618 2.25 Savings 5,571,321 36,992 2.67 6,735,705 50,742 3.06 Money market savings 22,481,902 194,991 3.49 12,548,007 118,492 3.83 Time deposits: CDs less than $100,000 19,794,454 276,031 5.61 19,185,642 256,111 5.41 CDs $100,000 and over: Domestic 3,915,866 50,209 5.16 3,769,780 47,482 5.11 Foreign 1,433,338 19,147 5.37 1,959,255 27,485 5.69 --------- ------ --------- ------ Total deposits 70,263,531 592,217 3.39 66,048,671 549,930 3.38 Borrowed Funds: Short-term 11,531,237 149,573 5.22 9,310,890 127,328 5.55 Long-term 3,018,706 48,213 6.42 2,056,018 36,448 7.19 --------- ------ --------- ------ Total borrowed funds 14,549,943 197,786 5.47 11,366,908 163,776 5.84 ---------- ------- ---------- ------- Total interest bearing liabilities 70,861,849 790,003 4.48 64,493,378 713,706 4.49 Other liabilities 2,225,888 1,700,296 --------- --------- Total liabilities 87,039,362 79,115,875 Preferred stock 247,442 249,900 Common stockholders' equity 8,385,721 7,280,219 --------- --------- Total liabilities and stockholders' equity $95,672,525 $86,645,994 =========== =========== Net interest income 1,210,872 5.65 1,032,312 5.36 Provision for credit losses (162,421) (.76) (66,517) (.35) --------- ----- -------- ----- Net funds function $1,048,451 4.89% $965,795 5.01% ========== ===== ======== ===== (1) Fully taxable equivalent basis. The Federal statutory rate used was 35% for all periods presented. (2) Nonaccrual loans are included in loan balances. Interest income includes related fee income. (3) Average securities balances are based on amortized historical cost, excluding SFAS 115 adjustments to fair value which are included in other assets.
9 11 MANAGEMENT'S DISCUSSION AND ANALYSIS This discussion should be read in conjunction with the financial statements, notes and tables included elsewhere in this report and in the 1995 BANC ONE CORPORATION Annual Report on Form 10-K. BANC ONE cautions that any forward looking statements contained in this report, in a report incorporated by reference to this report or made by management of the company involve risks and uncertainties and are subject to change based on various important factors. The forward looking statements could cause actual results to differ materially from those expressed or implied. RESULTS OF OPERATIONS NET INTEREST INCOME/NET INTEREST MARGIN BANC ONE's interest income (FTE) increased 14.6% to $2.0 billion and interest expense increased 10.7% to $.8 billion from first quarter 1995, resulting in a slight increase in net interest income. These increases were primarily due to the acquisition of Premier Bancorp, Inc. (Premier) on January 2, 1996. BANC ONE's financial position and results of operations have not been restated to include Premier as this acquisition was accounted for using the purchase method of accounting. Average earning asset balances increased 10.2% to $86.1 billion when compared to $78.2 billion in the first quarter of 1995. Premier's first quarter average earning assets of $5.1 billion contributed to this increase. The increase in interest income was primarily due to a significant shift in earning asset mix and earning asset growth. On books average loans and leases grew 12.5% to $69.6 billion in 1996 from $61.8 billion in 1995. Excluding $3.5 billion in first quarter average loans related to the Premier acquisition, the growth is primarily due to a $2.0 billion increase in credit card loans and $700 million increase in real estate loans. On-balance sheet loan growth was funded by an increase in short-term and long-term borrowings, a decrease in short-term investments and a decrease in investment securities. Excluding the $1.6 billion increase in first quarter 1996 of average investment securities related to the purchase of Premier and the $1.4 billion related to mortgage loans that were securitized and reclassified to investment securities from loans during the fourth quarter of 1995, total investment securities decreased $.9 billion, on average, from the first quarter of 1995. BANC ONE's net interest margin in the first quarter of 1996 was also impacted by a lower contribution from tax refund anticipation loan products, which increased the margin 10 basis points in first quarter of 1996 compared with 13 basis points for the same period in 1995. The decrease in the margin is largely offset by higher fee income from electronic tax filing programs. BANC ONE relies on both traditional bank funding sources and on sales of loans with servicing retained to fund the origination of earning assets. Most of the loan sales during 1996 and 1995 include arrangements whereby BANC ONE continues to service the loans sold with revenue in excess of net charge-offs and interest paid to investors recorded as servicing income. BANC ONE's net income is not significantly affected by these loan sales; however, classifications within the income statement have changed. Net interest income and provision for credit losses decrease while non-interest income increases due to these sales. While these loan sales have included both consumer loans and credit card receivables (credit card sales) and may in the future include other types of loans, the most significant impact on BANC ONE's income statement classifications results from credit card sales. The following table presents the impact of credit card sales with servicing retained on income statement line items and certain other information pertaining to the total credit card portfolio. 10 12
QUARTER ENDED MARCH 31, 1996 QUARTER ENDED MARCH 31, 1995 ------------------------------------------------------------------------------ EFFECT OF EFFECT OF CREDIT PRO-FORMA CREDIT PRO-FORMA $(MILLIONS) REPORTED CARD SALES ADJUSTED REPORTED CARD SALES ADJUSTED - -------------------------------------------------------------------------------------------------------------------------- Income statement: Net interest income - fully taxable $1,211 $91 $1,302 $1,032 $66 $1,098 equivalent Provision for credit losses 162 53 215 67 28 95 Non-interest income 502 (35) 467 452 (37) 415 Non-interest expense 1,019 3 1,022 924 1 925 Net income 346 346 303 303 Other Data: Credit card balances: Ending, at March 31, 7,278 4,440 11,718 5,850 2,680 8,530 Average for first quarter $8,289 $3,489 $11,778 $5,807 $2,680 $8,487 Net charge-offs as a percentage of average credit cards 4.64% 6.11% 5.09% 3.23% 4.24% 3.54% Credit card delinquencies over 90 days as a percentage of ending credit cards 1.70 1.94 1.79 1.26 1.75 1.42 Net interest margin 5.65% 10.49% 5.84% 5.36% 9.99% 5.51% - --------------------------------------------------------------------------------------------------------------------------
BANC ONE's retail funding base continued to shift away from relatively low-cost deposit products (including interest-bearing demand and savings accounts) into other deposit products offering yields which enabled BANC ONE to compete effectively against non-bank providers of retail money market investment products. The offering of competitively priced products enabled BANC ONE to avoid runoff of its retail funding base during the first quarter of 1996 and ensured continued access to retail funds at rates which remained below large liability funding cost. BANC ONE's policy is to manage interest rate risk to a level which places narrow limits on the sensitivity of its earnings to changes in market interest rates. Various capital markets transactions were executed in both 1994 and 1995 to ensure that interest rate risk remains within policy limits. Consequently, the significant changes in market interest rates which occurred in 1995 and 1996 did not significantly impact net interest income. An explanation of the asset-liability management process is found beginning on page 17 and in the Annual Report on Form 10-K for the year ended December 31, 1995 beginning on page 34. Off-balance sheet investment products, primarily interest rate swaps, decreased interest income by $20 million in the first quarter of 1996 compared with $33 million in the first quarter of 1995. Off-balance sheet investment products increased deposit and other borrowing costs by $.5 million in the first quarter of 1996 and $20 million during the first quarter of 1995. In the current rate environment, it is anticipated that these off-balance sheet products will continue to reduce yields on interest earning assets and increase interest rates on interest bearing liabilities in the future. 11 13 NON-INTEREST INCOME
QUARTER ENDED --------------------------- MARCH 31, MARCH 31, INCREASE $(THOUSANDS) 1996 1995 (DECREASE) - -------------------------------------------------------------------------------------------- Income from fiduciary activities $62,511 $58,582 $3,929 Service charges on deposit accounts 156,816 127,111 29,705 Loan processing and servicing income: Mortgage banking 19,862 15,716 4,146 Credit card and merchant processing fees 39,738 41,743 (2,005) Loan servicing income 57,645 54,984 2,661 ------ ------ ----- TOTAL LOAN PROCESSING AND SERVICING INCOME 117,245 112,443 4,802 Other income: Insurance 26,215 18,672 7,543 Securities related activities 17,587 11,462 6,125 Investment banking 8,387 4,570 3,817 Other 107,979 109,128 (1,149) ------- ------- ------- Total other income 160,168 143,832 16,336 ------- ------- ------ Non-interest income before securities gains 496,740 441,968 54,772 ------- ------- ------ Securities gains 5,835 9,786 (3,951) ----- ----- ------- TOTAL NON-INTEREST INCOME $502,575 $451,754 $50,821 ======== ======== =======
The increase in service charges on deposit accounts for the three months ended March 31, 1996 is due mainly to a $13 million increase related to the acquisition of Premier, an $11 million increase in overdraft fees due to an increase in the per occurrence fee in second quarter 1995 and an overall increase in demand deposit account volume. The majority of the increase in mortgage banking income for the three months ended March 31, 1996 is a result of higher origination volume due to higher loan demand generated by lower interest rates. The shift from credit card and merchant processing fees to loan servicing income in first quarter 1996 is primarily attributable to sales of credit card loans with servicing retained in second and third quarter 1995 totalling $.8 billion. Also contributing to the increase in loan servicing income was a consumer loan sale of $1.2 billion in April 1995. The increase in insurance income for the three months ended March 31, 1996 is primarily due to $7 million of commissions earned in first quarter 1996 as a result of an annuity product sales campaign which began in fourth quarter 1995. The increase in income from securities-related activities for the three months ended March 31, 1996 is primarily attributable to increased mutual fund sales volume as a result of a sales campaign which began in fourth quarter 1995. Other non-interest income decreased $1 million in the first quarter of 1996, compared to the same quarter in 1995. The decrease is attributable to $29 million of gains recognized in 1995, while only $28 million was recognized in 1996. This $28 million is composed of an $8 million gain recognized on the sale of Bank One Pikeville, NA, a $14 million gain on sale of loans, branches, and other assets, a $3 million joint venture gain, and a $3 million increase related to the acquisition of Premier and other transactions. 12 14 NON-INTEREST EXPENSE
QUARTER ENDED ----------------------------- MARCH 31, MARCH 31, INCREASE $(THOUSANDS) 1996 1995 (DECREASE) - --------------------------------------------------------------------------------------------------- Salary and related costs $502,812 $442,950 $59,862 Net occupancy expense, exclusive of depreciation 44,673 39,576 5,097 Equipment expense 28,099 26,907 1,192 Taxes other than income and payroll 24,062 21,972 2,090 Depreciation and amortization 86,216 74,730 11,486 Outside services and processing 125,237 103,502 21,735 Marketing and development 48,114 44,236 3,878 Communication and transportation 75,171 66,063 9,108 FDIC Insurance 4,246 35,915 (31,669) Other 80,448 67,746 12,702 ------ ------ ------ TOTAL NON-INTEREST EXPENSE $1,019,078 $923,597 $95,481 ========== ======== =======
Salaries and related costs increased for the three months ended March 31, 1996 due primarily to $26 million related to the acquisition of Premier, $7 million related to headcount resulting from growth in non-bank businesses and data processing support personnel, $10 million related to new incentive programs started in 1996, $5 million in benefit accruals in 1996 due to higher company matching contributions based on expected higher earnings and higher pension costs due to lower interest rates, and $4 million in commission expense resulting from increased securities-related and investment banking activities in 1996. As a result of the Premier acquisition, $238 million of goodwill and $58 million of other intangibles were recorded during first quarter 1996. This resulted in an increase in amortization expense of $7 million. Amortization expense for the full year of 1996 is expected to increase $28 million due to these new intangible assets. The Premier acquisition also resulted in an increase in depreciation of bank premises and equipment of $4 million. Outside services and processing increased for the three months ended March 31, 1996 due to $3 million of expense related to the Premier acquisition, an increase in consulting of $7 million primarily related to the consolidation and standardization efforts across BANC ONE in 1996, a $5 million increase in temporary employees as a result of consolidation and standardization efforts, and an increase in outside legal fees of $2 million. The scope of the consolidation and standardization project has been expanded which has resulted in costs being higher in 1996 than originally anticipated. It is anticipated that expenses related to the consolidation and standardization efforts will continue to be incurred before the benefits of this effort are realized. Communication and transportation increased for the three months ended March 31, 1996 due to $3 million of expense related to the Premier acquisition, $3 million of expense incurred in 1996 related to consolidation and standardization efforts, a $1 million increase in general telephone charges, and a $3 million increase in general business travel to support the emerging national line of business management. The increases above are offset by a reduction in credit card solicitation expense of $3 million in 1996. The remaining increase is a result of increased usage of data transmission and computer/communications technology. FDIC insurance expense decreased $32 million for the three months ended March 31, 1996 as a result of the FDIC's decision to lower deposit insurance premiums from $.23 per $100 in Bank Insurance Fund (BIF) deposits to a $2,000 per bank minimum assessment for well capitalized and well managed banks. At March 31, 1996, BANC ONE's affiliate banks held approximately $6 billion of deposits insured by the Savings Association Insurance Fund (SAIF). Deposit insurance premiums continue to be charged on SAIF insured deposits at $.23 per $100 in deposits. Other non-interest expense increased $13 million for the three months ended March 31, 1996. Contributing to the increase were $4 million related to the Premier acquisition and a $2 million overall increase in supplies. INCOME TAXES The provision for income taxes was 33.0% of pretax income for the three months ended March 31, 1996 as compared to 35.8% of pretax income for the same period in 1995. The effective tax rate for the three months ended March 31, 1996 approximates the anticipated effective tax rate for the year. The decrease in the effective rate from first quarter 1995 is a result of BANC ONE's reorganization efforts which resulted in a reduction of state income taxes in 1996 and a reduction in federal income tax reserves relating to agreements reached with the Internal Revenue Service in 1996. 13 15 BALANCE SHEET ANALYSIS LOANS AND LEASES
MARCH 31, DECEMBER 31, MARCH 31, $(THOUSANDS)(as of end of period) 1996 1995 1995 - ----------------------------------------------------------------------------------------------------------------- Commercial, financial and agricultural $19,304,204 $17,903,692 $17,316,409 Real Estate: Commercial 6,032,762 5,667,826 5,540,730 Construction 3,004,064 2,692,587 2,375,130 Residential 11,835,885 11,259,495 11,483,772 Consumer, net 19,839,140 18,407,595 18,529,994 Credit card 7,278,083 7,665,274 5,849,644 Leases, net 1,913,030 1,732,196 1,399,802 --------- --------- --------- Total loans and leases $69,207,168 $65,328,665 $62,495,481 =========== =========== ===========
The $3.9 billion increase in ending loans and leases from December 31, 1995 is primarily due to a $3.3 billion increase related to the acquisition of Premier. For a more detailed analysis refer to the Average Balances, Income and Expense, Yields and Rates found on page 9. Also, refer to the table on page 11 which provides certain information on managed credit card loans. BANC ONE experienced loan growth primarily in credit card and consumer loans. Significant origination activity is not fully reflected in ending loan balances due to the following sales and securitizations of loans during the first quarter of 1996: - - Consumer loan sales of $ .5 billion - - Credit card loan sales of $1 billion BANC ONE's process for monitoring loan quality includes detailed, monthly analysis of delinquencies, nonperforming assets and potential problem loans from each affiliate bank. Management extensively monitors credit, including appraisals, assessing the financial condition of borrowers, restrictions on out-of-area lending and avoidance of loan concentrations. The following summarizes the activity in nonaccrual loans and OREO for the quarter ended March 31, 1996.
$(THOUSANDS) - ------------------------------------------------------------------------------------------ NONACCRUAL LOANS: Balance, beginning of period $349,084 Premier acquisition 30,516 Nonaccrual additions 123,620 Loans returned to accrual and payments received (64,475) Reductions due to transfers to OREO (8,341) Charge-offs (22,994) Other, net 195 --- Balance, end of period $407,605 ======== OREO: Balance, beginning of period $75,483 Premier acquisition 3,982 Additions 19,156 Write-downs (6,566) Sales (13,784) Customer Payments (204) Other (1,483) ------- Balance, end of period $76,584 =======
14 16 The following tables summarize charge-offs and recoveries as percentages of average loans and leases for the periods indicated and loans delinquent 90 days or more as a percentage of loans at the dates indicated.
NET GROSS CHARGE-OFFS CHARGE-OFFS RECOVERIES (RECOVERIES) FOR THE THREE MONTHS ENDED: (1) (1) (1) - ---------------------------------------------------------------------------------------------------------------- MARCH 31, 1996 Commercial, financial and agricultural .32% .16% .16% Real estate .16 .08 .08 Consumer, net 1.58 .66 .92 Credit card 5.25 .61 4.64 Leases, net .54 .15 .39 TOTAL LOANS AND LEASES 1.23% .34% .89% MARCH 31, 1995 Commercial, financial and agricultural .22% .30% (.08)% Real estate .08 .08 0 Consumer, net 1.12 .47 .65 Credit card 4.01 .78 3.23 Leases, net .55 .27 .28 TOTAL LOANS AND LEASES .81% .32% .49% (1) Ratios are presented on an annualized basis.
MARCH 31, DECEMBER 31, MARCH 31, LOANS DELINQUENT 90 DAYS OR MORE (1) 1996 1995 1995 - ------------------------------------------------------------------------------------------------------------------ Wholesale (2) .10% .15% .14% Real estate, residential .23 .25 .15 Consumer, net .31 .34 .23 Credit card 1.70 1.54 1.26 Leases, net .03 .03 .15 TOTAL LOANS AND LEASES .36 .39 .28 (1) Ratios presented are expressed as a percent of ending balances excluding nonperforming loans. (2) Includes commercial, financial, agricultural; commercial real estate and construction real estate loans.
Excluding $46 million related to Premier, total nonperforming assets at March 31, 1996 have increased slightly from December 31, 1995. This increase is primarily in non-accrual loans. Loans delinquent 90 days or more have decreased slightly for the same period. The increase in net charge-offs has been driven by the deterioration of consumer credit experienced by BANC ONE and the banking industry as well as the decline in commercial loan recoveries. The consumer credit deterioration is evident in the statistics shown above for consumer loans and credit cards and is expected to continue throughout 1996. 15 17 The following summarizes activity in the allowance for credit losses.
FOR THE THREE MONTHS ENDED -------------------------------------- $(THOUSANDS) 1996 1995 - --------------------------------------------------------------------------------------------- BALANCE, BEGINNING OF PERIOD $938,008 $897,180 Allowance associated with loans acquired (sold) and other 60,065 (4,052) Provision for credit losses 162,421 66,517 Losses charged to the allowance (212,372) (124,016) Recoveries 57,686 49,663 ------ ------ Net losses charged to the allowance (154,686) (74,353) --------- -------- BALANCE, END OF PERIOD $1,005,808 $885,292 ========== ========
The increase in the provision for credit losses is primarily due to loan growth as well as an increase to provide coverage of increasing net charge-offs. LIQUIDITY AND CAPITAL At March 31, 1996, large liability dependence was 18.58%, an increase from 17.30% at December 31, 1995. BANC ONE's policy is that the large liabilities position be no greater than 30% of net earning assets. In practice, BANC ONE manages the position at much lower levels as summarized below.
MARCH 31, DECEMBER 31, MARCH 31, $(MILLIONS) 1996 1995 1995 - --------------------------------------------------------------------------------------------------------------------- Earning assets, net of short term investments $85,571 $80,099 $77,383 Large liabilities: Net national market liabilities $3,388 $3,209 $ 3,107 As a percent of net earning assets 3.96% 4.01% 4.02% Total net large liabilities $15,898 $13,857 $13,766 As a percent of net earning assets 18.58% 17.30% 17.79%
Competition from non-bank investment providers continues to impact BANC ONE's deposit gathering and retention efforts. During the first quarter of 1996, deposit runoff was minimal, but the deposit mix continued to shift to more costly market priced products. This mix change is expected to continue for the foreseeable future. The competitive environment for retail and commercial bank deposits continues to cause BANC ONE to look to non-traditional bank sources to fund its earning asset growth. BANC ONE's large liability dependence increased due to an increase in repurchase agreements and other short-term borrowings which were used to fund loan growth. During the first quarter 1996, $ 500 million of auto loans and $1 billion of credit card receivables were sold. Loan sales such as these are expected to continue to generate funding for loan growth and to mitigate the need to increase large liabilities. During the first quarter of 1996, the Corporation repurchased 15 million common shares (16.5 million after the 10% stock split) for $593 million. In the second quarter of 1996, the Board of Directors authorized the repurchase of up to 10 million common shares to be used for general corporate purposes. Stock repurchase transactions may increase BANC ONE's reliance on large liabilities. BANC ONE has long had a policy of maintaining superior capital ratios. BANC ONE's policies require it to maintain, at a minimum, a capital position that meets the federal regulators "well capitalized" classification. At March 31, 1996, risk based tier I capital, total risk adjusted capital and leverage ratios were 9.57%, 13.44% and 8.24%, respectively. All of these ratios are significantly above regulatory minimum capital requirements. 16 18 ASSET/LIABILITY MANAGEMENT BANC ONE uses a unified approach to management of liquidity, capital and interest rate risk through its Asset and Liability Management (ALM) process. The key elements of the ALM process are discussed in further detail on pages 34 through 39 of BANC ONE CORPORATION's 1995 Annual Report on Form 10-K. The management of interest rate risk in the ALM process can be broken down into three components; earnings sensitivity risk (ESR), basis risk and economic value at risk (EVAR). ESR is defined as the percentage change in forecasted earnings over a 12 month period for a specified gradual change in forecasted interest rates. BANC ONE measures ESR by determining how earnings from existing assets and liabilities would change if interest rates changed. The following table reflects ESR at March 31, 1996 for gradual rate changes (i.e. .25% per quarter for a 1% annual rate movement).
Gradual Rate Change ESR - ---------------------------- --- +3% (6.00)% +2% (3.50)% +1% (1.30)% -1% ( .50)% -2% (1.90)%
Basis risk is the risk of changing spreads between certain categories of indexed assets and liabilities. The primary risk faced by BANC ONE is the risk that the spread between Prime loan rates and short-term funding rates will narrow. An immediate decline of 10 basis points in the spread between Prime and Fed Funds and Prime and LIBOR, lasting a full year would cause projected earnings to decline by .7%. EVAR is defined as the percentage change in economic value of future earnings for a specified immediate change in rates. EVAR is an indicator of the sensitivity of longer term earnings to interest rates. BANC ONE measures EVAR by determining a baseline gauge of the economic value of future earnings to be derived from the current balance sheet and then calculates the percentage change in that value for given changes in rates. The following table reflects EVAR at March 31, 1996 for 1% and 2% immediate changes in rates.
Immediate Rate Change EVAR - --------------------- ---- +2% (1.70)% +1% ( .50)% -1% (3.10)% -2% (8.30)%
Major assumptions used in measuring interest rate risk include the behavior of loan and deposit repricings and volumes, prepayments on various fixed rate assets, and spread and volume elasticity of interest and non-interest bearing deposit accounts which may not have contractually defined maturities. A significant portion of consumer deposits do not reprice or mature on a contractual basis. Banc One uses both on-balance and off-balance sheet investments products to manage interest rate risk. The off-balance sheet investment products utilized are primarily interest rate swaps. Interest rate swap agreements involve the exchange of interest payments without the exchange of the underlying notional amount on which the interest payments are calculated. BANC ONE has entered into interest rate swap agreements that synthetically alter assets and liabilities as part of its ALM process to manage the impact of fluctuating interest rates. Following are the estimated fair value and amortized cost of securities by type and the estimated maturities and weighted average fixed rates of off-balance sheet investment products by type. A key assumption in the maturity information below is that future variable rates move as indicated by the forward interest rate curve in existence at March 31, 1996. To the extent that the interest rates move in a fashion other than indicated in the forward interest rate curve the maturity information will change. 17 19
MARCH 31, 1996 DECEMBER 31, 1995 MARCH 31, 1995 -------------------------- --------------------------- ---------------------------- Amortized Estimated Amortized Estimated Amortized Estimated $ (MILLIONS) Cost Fair Value Cost Fair Value Cost Fair Value - ------------------------------------------------------------------------------------------------------------------------------- SECURITIES HELD TO MATURITY: United States treasury and agencies $125 $125 $91 $91 $490 $482 Mortgage and asset-backed securities: Government 58 61 58 62 1,572 1,572 Other 1 1 6 6 536 535 Tax exempt 850 884 909 953 2,050 2,073 Other 46 39 24 24 210 224 -- -- -- -- --- --- Total securities held to maturity 1,080 1,110 1,088 1,136 4,858 4,886 ----- ----- ----- ----- ----- ----- SECURITIES AVAILABLE FOR SALE: United States treasury and agencies 4,058 4,042 3,029 3,060 4,615 4,614 Mortgage and asset-backed securities: Government 6,999 7,050 6,553 6,660 3,489 3,438 Other 3,762 3,740 3,595 3,587 2,672 2,629 Tax exempt 900 903 813 825 7 7 Other 554 555 486 488 223 227 --- --- --- --- --- --- Total securities available for sale 16,273 16,290 14,476 14,620 11,006 10,915 ------ ------ ------ ------ ------ ------ TOTAL SECURITIES $17,353 $17,400 $15,564 $15,756 $15,864 $15,801 ======= ======= ======= ======= ======= =======
MATURITIES OF OFF-BALANCE SHEET INVESTMENT PRODUCTS AT MARCH 31, 1996(1)(2) ENDING BALANCES AT ------------------------------------------------------- --------------------------------------- 2001- March 31, December 31, March 31, $(MILLIONS) 1996 1997 1998 1999 2000 2005 2006+ 1996 1995 1995 - -------------------------------------------------------------------------------------------------------------------------------- Receive fixed swaps: Notional value $1,255 $3,753 $1,500 $545 $1,160 $1,596 $300 $10,109 $9,789 $8,134 Weighted average 6.20% 5.22% 5.82% 6.20% 6.29% 6.43% 7.23% 5.86% 5.85% 5.50% receive rate Receive fixed amortizing swaps: Notional value $4,297 $1,283 $517 $13 $129 $6,239 $7,946 $11,780 Weighted average 5.26% 5.26% 5.56% 7.27% 5.54% 5.29% 5.29% 5.36% receive rate Pay fixed swaps: Notional value $359 $95 $100 $6 $6 $566 $2,673 $4,358 Weighted average pay 7.53% 8.54% 6.15% 8.69% 8.17% 7.47% 5.76% 5.94% rate Purchased caps: Notional value $2,502 $503 $4 $4 $4 $26 $3,043 $5,253 $4,754 ------ ---- -- -- -- --- ---- ------ ------ ------ Net receive fixed position $2,691 $4,438 $1,913 $548 $1,279 $1,570 $300 $12,739 $9,809 $10,802 Basis swaps: Notional value 2,475 3,730 405 74 6,684 8,304 8,528 Other(3) Notional value $1,916 $440 $1,000 $3,356 $4,052 $4,485 (1)Maturities are based on estimated future interest rates from the forward interest curve at March 31, 1996. (2)Variable receive and pay interest rates, which are based primarily on three month LIBOR or prime, are not included in the table above. (3)Other off-balance sheet investment products include forward starting contracts ($1.4 billion at March 31, 1996), floors, options, swaptions, forward rate agreements, currency swaps, and anticipatory hedges. Customer transactions of $1.3 billion, $1.2 billion and $600 million at March 31, 1996, December 31, 1995 and March 31, 1995, respectively, have been excluded.
18 20
DECEMBER 31, MARCH 31, 1996 1995 ----------------------------------------------------------------------- ----------------- TOTAL NET NET $(MILLIONS) NOTIONAL UNREALIZED UNREALIZED UNREALIZED UNREALIZED AMOUNT GAINS LOSSES LOSS GAIN (LOSS) ---------------------------------------------------------------------- ----------------------------------- ----------------- Receive fixed swaps $10,109 $29 $(58) $(29) $136 Receive fixed amortizing swaps 6,239 10 (35) (25) (13) Pay fixed swaps 566 1 (10) (9) (13) Purchased caps 3,043 0 (10) (10) (18) Basis swaps 6,684 0 (37) (37) (37) Other 3,356 1 (7) (6) (8) ----------------------------------- ----------------------------------- ----------------- Total $29,997 $41 ($157) ($116) $47 =================================== =================================== =================
BANC ONE CORPORATION's 1995 Annual Report on Form 10K provided certain fair value information based on interest rates at December 31, 1995. Since that date, long-term market interest rates have increased and, as a result, the fair value of fixed rate liabilities has become more favorable and the value of certain loan products less favorable. The net change is not material. 19 21 BANC ONE CORPORATION AND SUBSIDIARIES PART II OTHER INFORMATION Item 1 - Inapplicable Item 2 - Inapplicable Item 3 - Inapplicable Item 4 - Inapplicable Item 5 - Inapplicable Item 6 - EXHIBITS AND REPORTS ON FORM 8-K a. In compliance with Part I Financial Information the following exhibits are incorporated by reference: Exhibit 11 Statement Regarding Computation of Earnings per Common Share Exhibit 12 Statement Regarding Computation of Ratio of Earnings to Fixed Charges Exhibit 27 Financial Data Schedules 20 22 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. BANC ONE CORPORATION May 15, 1996 /s/ William C. Leiter - ---------------------------- ---------------------------------------- Date William C. Leiter Chief Accounting Officer 21 23 INDEX TO EXHIBITS Exhibit Number - -------------- 11 Statement Regarding Computation of Earnings per Common Share 12 Statement Regarding Computation of Ratio of Earnings to Fixed Charges 27 Financial Data Schedules 22 EX-11 2 EXHIBIT 11 1 BANC ONE CORPORATION and Subsidiaries EXHIBIT 11 STATEMENT REGARDING COMPUTATION OF EARNINGS PER COMMON SHARE $(thousands, except per share amounts)
THREE MONTHS ENDED MARCH 31, ---------------------------------- 1996 1995 ---------------------------------- PRIMARY: Earnings: Net income $345,881 $302,518 Deduct: Dividends on preferred shares 4,295 4,373 ----- ----- Net income available to common shareholders $341,586 $298,145 ======== ======== Shares: Weighted average common shares outstanding 441,994 434,632 Add: Dilutive effect of outstanding options, as determined by the application of the treasury stock method 2,033 1,261 ----- ----- Weighted average common shares outstanding, as adjusted 444,027 435,893 ======= ======= PRIMARY EARNINGS PER COMMON SHARE $.77 $.68 ==== ==== FULLY DILUTED: Earnings: Net income $345,881 $302,518 ======== ======== Shares: Weighted average common shares outstanding 441,994 434,632 Add: Dilutive effect of outstanding options, as determined by the application of the treasury stock method 2,165 1,288 Add: Conversion of preferred stock 9,546 9,642 ----- ----- Weighted average common shares outstanding, as adjusted 453,705 445,562 ======= ======= FULLY DILUTED EARNINGS PER COMMON SHARE $.76 $.68 ==== ====
23 EX-12 3 EXHIBIT 12 1 BANC ONE CORPORATION and Subsidiaries EXHIBIT 12 Statement Regarding Computation of Ratio of Earnings to Fixed Charges $(thousands)
THREE MONTHS ENDED Years Ended MARCH 31, December 31, ---------------------------------------------------------------------------------------- 1996 1995 1995 1994 1993 1992 1991 ------------------------ --------------------------------------------------------------- Calculation excluding interest on deposits: Earnings Income before income taxes and change in accounting principle and equity in earnings of Bank One, Texas, NA (1) $516,055 $471,228 $1,910,282 $1,518,852 $1,770,712 $1,341,249 $928,947 Fixed charges 211,903 177,384 736,249 633,569 348,327 321,402 419,274 Less: Capitalized interest (343) (341) (1,671) (1,000) (652) (1,199) (1,732) ----- ----- ------- ------- ----- ------- ------- Earnings $727,615 $648,271 $2,644,860 $2,151,421 $2,118,387 $1,661,452 $1,346,489 ======== ======== ========== ========== ========== ========== ========== Fixed Charges: Interest expense, including interest factor of capitalized leases and amortization of deferred debt expenses $198,129 $164,164 $683,372 $575,734 $298,857 $278,615 $379,708 Portion of rental payments under operating leases deemed to be interest 13,774 13,220 52,877 57,835 49,470 42,787 39,566 ------ ------ ------ ------ ------ ------ ------ Fixed charges $211,903 $177,384 $736,249 $633,569 $348,327 $321,402 $419,274 ======== ======== ======= ======= ======= ======= ======= Ratio of earnings to fixed charges excluding interest on deposits: 3.43X 3.65x 3.59x 3.40x 6.08x 5.17x 3.21x Calculation including interest on deposits: Earnings: Income before income taxes and change in accounting principle and equity in earnings of Bank One, Texas, NA (1) $516,055 $471,228 $1,910,282 $1,518,852 $1,770,712 $1,341,249 $928,947 Fixed charges 804,120 727,314 3,026,343 2,307,832 1,826,018 2,318,274 2,955,918 Less: Capitalized interest (343) (341) (1,671) (1,000) (652) (1,199) (1,732) ----- ----- ------- ------- ----- ------- ------- Earnings $1,319,832 $1,198,201 $4,934,954 $3,825,684 $3,596,078 $3,658,324 $3,883,133 ========== ========== ========= ========= ========= ========= ========= Fixed charges: As detailed above $211,903 $177,384 $736,249 $633,569 $348,327 $321,402 $419,274 Interest on deposits 592,217 549,930 2,290,094 1,674,263 1,477,691 1,996,872 2,536,644 ------- ------- --------- --------- --------- --------- --------- Fixed charges $804,120 $727,314 $3,026,343 $2,307,832 $1,826,018 $2,318,274 $2,955,918 ======== ======== ========= ========= ========= ========= ========= Ratio of earnings to fixed charges including interest on deposits 1.64X 1.65x 1.63x 1.66x 1.97x 1.58x 1.31x (1)Results of Bank One, Texas, NA are consolidated beginning October 1, 1991.
24 EX-27 4 EXHIBIT 27
9 1,000 3-MOS DEC-31-1996 JAN-01-1996 MAR-31-1996 5,002,275 2,108 266,096 195,668 16,289,926 1,080,099 1,109,908 69,207,168 1,005,808 95,708,182 70,216,973 11,445,326 2,605,703 3,010,097 2,177,154 0 245,448 6,007,481 95,708,182 1,704,641 274,952 5,389 1,984,982 592,217 790,003 1,194,979 162,421 5,835 1,019,078 516,055 3435,881 0 0 345,881 .77 .76 5.65 407,605 250,179 2,126 0 938,008 212,372 57,686 1,005,808 812,582 0 193,226
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