-----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, CMotG0LhLyuwtJRpf0bHRjGOVRz4W8ifWlYACGgIVnd3MFh8bad5svms+M69oY9z LCeUTfO0g7thaum9mIJNgA== 0000950152-96-001221.txt : 19960329 0000950152-96-001221.hdr.sgml : 19960329 ACCESSION NUMBER: 0000950152-96-001221 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960328 SROS: NYSE 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-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-08552 FILM NUMBER: 96540279 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-K 1 BANCK ONE COLUMBUS, NA 10-K 1 Form 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 (X) ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1995 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 (I.R.S. Employer Identification Number) incorporation or organization) 100 East Broad Street, Columbus, Ohio 43271 --------------------------------------- --------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (614) 248-5944 Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered New York Stock Exchange Common Stock Cincinnati Stock Exchange without par value Midwest Stock Exchange ----------------- ------------------------- Securities registered pursuant to Section 12(g) of the Act: Series C Convertible Preferred Stock with no par value ---------------------------------------------------------- (Title of Class) 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 ------ ----- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] As of March 6, 1996 the aggregate market value of the common voting stock held by non-affiliates of the Registrant calculated by reference to the quoted price of BANC ONE Common Stock as reported on the New York Stock Exchange was $16,165,307,379. As of March 6, 1996 there were outstanding 435,429,155 shares of BANC ONE CORPORATION Common Stock, no par value, which stock is the only class of Registrant's common stock. As of February 26, 1996 there were 86,374 common stockholders of record. DOCUMENTS INCORPORATED BY REFERENCE ----------------------------------- Portions of the 1995 Annual Report to Shareholders are incorporated by reference into Parts I and II. Portions of the Definitive Proxy Statement for the BANC ONE CORPORATION Annual Meeting to be held April 16, 1996 are incorporated by reference into Part III. 2 BANC ONE CORPORATION 1995 FORM 10-K ANNUAL REPORT TABLE OF CONTENTS
Page PART I ------ Item 1 Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Item 2 Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Item 3 Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Item 4 Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . . . . . . . . . 10 Directors and Executive Officers of the Registrant . . . . . . . . . . . . . . . . . . . . . . . . . 10 PART II ------- Item 5 Market for the Registrant's Common Stock and Related Stockholder Matters . . . . . . . . . . . . . . 12 Item 6 Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . 12 Item 8 Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . . . . . . 12 PART III -------- Item 10 Directors and Executive Officers of the Registrant . . . . . . . . . . . . . . . . . . . . . . . . . 13 Item 11 Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Item 12 Security Ownership of Certain Beneficial Owners and Management . . . . . . . . . . . . . . . . . . . 13 Item 13 Certain Relationships and Related Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 PART IV ------- Item 14 Exhibits, Financial Statement Schedules and Reports on Form 8-K - Index to Financial Statements and Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3 PART I ------ ITEM 1 BUSINESS -------- BANC ONE CORPORATION ("Registrant" or "BANC ONE") is a multi-bank holding company incorporated under the laws of the State of Ohio that, at December 31, 1995, operated 1,352 banking offices in Arizona, Colorado, Illinois, Indiana, Kentucky, Ohio, Oklahoma, Texas, Utah, West Virginia and Wisconsin. On January 2, 1996, BANC ONE added 150 banking offices with the acquisition of Premier Bancorp, Inc. of Baton Rouge, Louisiana. Its executive offices are located at 100 East Broad Street, Columbus, Ohio 43215, and its telephone number is (614) 248-5944. At December 31, 1995, BANC ONE had consolidated total assets of $90.5 billion, consolidated total deposits of $67.3 billion and consolidated total stockholders' equity of $8.2 billion (9.1% of its consolidated total assets). At December 31, 1995, BANC ONE ranked tenth among the nation's publicly owned bank holding companies in terms of consolidated average total assets and eighth in terms of consolidated average common equity. BANC ONE's 1995 consolidated net income of $1.3 billion ranked seventh among the nation's 50 largest publicly owned bank holding companies. At December 31, 1995 BANC ONE's affiliate banks held the largest statewide share of total bank deposits in Arizona and Kentucky, the second largest share of such deposits in Indiana, Ohio and West Virginia, and the third largest share of such deposits in Colorado, Wisconsin and Texas. BANC ONE has smaller statewide market shares in the other states in which BANC ONE operates banks. At December 31, 1995, except for Bank One Texas, N.A., no single BANC ONE affiliate bank accounted for more than 20% of BANC ONE's consolidated total assets. BANC ONE also owns nonbank subsidiaries that engage in credit card and merchant processing, consumer finance, mortgage banking, insurance, trust and investment management, brokerage, investment and merchant banking, venture capital, equipment leasing and data processing. Since its formation in 1968, BANC ONE has acquired over 100 banking institutions and the number of banking offices of its affiliate banks has increased from 24 to over 1,300. BANC ONE continues to explore opportunities to acquire banks and nonbank companies permitted by the Bank Holding Company Act. Discussions are continually being carried on relating to such acquisitions. It is not presently known whether, or on what terms, such discussions will result in further acquisitions. BANC ONE's acquisition strategy is flexible in that it does not require BANC ONE to effect specific acquisitions so as to enter certain markets or to attain specified growth levels. Rather than being market driven or size motivated, BANC ONE's acquisition strategy reflects BANC ONE's willingness to consider potential acquisitions wherever and whenever such opportunities arise based on the then-existing market conditions and other circumstances. Banks to be acquired must be of sufficient size to support and justify having management of a caliber capable of making lending and other management decisions at the local level under BANC ONE's operating philosophy. BANC ONE also is willing from time to time to acquire a smaller bank when it can be acquired through a reorganization into an existing affiliate. BANC ONE's interest in the acquisition of nonbank companies has been limited to bank-related services with which BANC ONE already has familiarity. BANC ONE's acquisitions may be made by the exchange of stock, through cash purchases and with other consideration. BANC ONE is a legal entity separate and distinct from its affiliate banks and its nonbanking subsidiaries (collectively, the "affiliates"). Accordingly, the right of BANC ONE, and thus the right of BANC ONE's creditors and shareholders, to participate in any distribution of the assets or earnings of any affiliate is necessarily subject to the prior claims of creditors of the affiliate, except to the extent that claims of BANC ONE in its capacity as a creditor may be recognized. The principal sources of BANC ONE's revenues are dividends and fees from its affiliates. See "Regulatory Matters--Dividend Restrictions" for a discussion of the restrictions on the affiliate banks' ability to pay dividends to BANC ONE. For a further description of BANC ONE's business, refer to the following sections of the 1995 Annual Report to Shareholders, which are expressly incorporated herein by reference: 1. Location of Banking offices and list of subsidiaries on the inside back cover. 2. Note 2, "Affiliations, Pending Affiliations, and Divestitures," on page 54. 3. "Five Year Summary - Average Balances, Income and Expenses, Yields and Rates" table on pages 24 and 25. 4. "Rate-Volume Analysis" table on page 26. 5. Note 3, "Securities and Investment Products", on pages 55 through 58. 6. Loans and leases on pages 51, 52, 59 through 61, 32 and 33. 7. "Deposit Analysis" on page 34. 8. The Key Operating Ratios section of the "Consolidated Quarterly Financial Data" on page 44. 9. Note 7, "Short-term Borrowings", on page 62. 10. The portions of the feature section on pages 7 through 19 except for the information under the captions "Our Affiliation Philosophy", "Measuring Financial Strength", "The Changing Role of the Branch Delivery System" and the "Conclusion". 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 for 1996 and beyond to differ materially from those expressed or implied. 1 4 COMPETITION - ----------- Active competition exists in all principal areas in which BANC ONE or one or more of its subsidiaries is presently engaged, not only with respect to commercial banks, but also with savings and loan associations, credit unions, finance companies, credit card issuers, mortgage companies, leasing companies, insurance companies, money market mutual funds and brokerage firms together with other domestic and foreign financial and non-financial institutions such as General Electric, General Motors and Ford. EMPLOYEES - --------- As of December 31, 1995 BANC ONE and its consolidated subsidiaries had approximately 46,900 full-time equivalent employees. REGULATORY MATTERS GENERAL BANC ONE is subject to the supervision of, and to regular inspection by, the Board of Governors of the Federal Reserve System (the "Federal Reserve"). BANC ONE's principal bank affiliates are organized as national banking associations, which are subject to regulation and regular inspection by the Office of the Comptroller of the Currency ("OCC"). In addition, various state authorities regulate BANC ONE's state affiliate banks, and all of BANC ONE's affiliate banks are subject to regulation in some degree by the Federal Reserve and the Federal Deposit Insurance Corporation (the "FDIC"). In addition to banking laws, regulations and regulatory agencies, BANC ONE and its affiliates are subject to various other laws, regulations and regulatory agencies, all of which directly or indirectly affect BANC ONE's operations, management and ability to make distributions. For example, BANC ONE's affiliate banks are affected by various state and federal laws and by the fiscal and monetary policies of the federal government and its agencies, including the Federal Reserve. An important purpose of these fiscal and monetary policies is to 2 5 curb inflation and control recessions through control of the supply of money and credit. The Federal Reserve uses its powers to regulate reserve requirements of its member banks, to set the discount rate on extensions of credit to insured depository institutions and to conduct open market operations in United States government securities so as to exercise control over the supply of money and credit. These policies directly affect the amount of, and the interest rates on, bank loans and deposits, and this materially affects bank earnings. Future policies of the Federal Reserve and other authorities cannot be predicted, nor can their effect on future bank earnings be predicted. Similarly, future changes in state and federal laws and wage, price and other economic restraints of the federal government cannot be predicted nor can their effect on future bank earnings be predicted. The following discussion summarizes certain aspects of those laws and regulations that affect BANC ONE. Proposals to change the laws and regulations governing the banking industry are frequently raised in Congress, in the state legislatures and by the various bank regulatory agencies. The likelihood and timing of any legislative or regulatory changes and the impact such changes might have on BANC ONE and its affiliates are difficult to determine. HOLDING COMPANY STRUCTURE BANC ONE is a legal entity separate and distinct from its affiliates. However, the right of BANC ONE, and thus the rights of BANC ONE's creditors and shareholders, to participate in any distribution of the assets or earnings of any affiliate is necessarily subject to regulatory restrictions on such distributions and to the prior claims of creditors of such affiliate, except to the extent that claims of BANC ONE in its capacity as a creditor may be recognized. BANC ONE's affiliate banks are subject to restrictions under federal law which limit the transfer of funds by the affiliate banks to BANC ONE and its nonbanking subsidiaries, whether in the form of loans, extensions of credit, investments or asset purchases. Such transfers by any affiliate bank to BANC ONE or any nonbanking subsidiary are limited in amount to 10% of the bank's capital and surplus and, with respect to BANC ONE and all such nonbanking subsidiaries, to an aggregate of 20% of such bank's capital and surplus. Furthermore, such loans and extensions of credit are required to be secured in specified amounts. The Federal Reserve has a policy to the effect that a bank holding company is expected to act as a source of financial and managerial strength to each of its affiliate banks and to maintain resources adequate to support each such affiliate bank. This support may be required at times when BANC ONE may not have the resources to provide it. Any capital loans by BANC ONE to any of the affiliate banks are subordinate in right of payment to deposits and to certain other indebtedness of such affiliate bank. In addition, in the event of a bank holding company's bankruptcy any commitment by the bank holding company to a federal bank regulatory agency to maintain the capital of an affiliate bank will be assumed by the bankruptcy trustee and entitled to a priority of payment. 3 6 A depository institution insured by the FDIC can be held liable for any loss incurred by, or reasonably expected to be incurred by, the FDIC after August 9, 1989, in connection with (i) the default of a commonly controlled FDIC-insured depository institution or (ii) any assistance provided by the FDIC to a commonly controlled FDIC-insured depository institution in danger of default. "Default" is defined generally as the appointment of a conservator or receiver and "in danger of default" is defined generally as the existence of certain conditions indicating that a "default" is likely to occur in the absence of regulatory assistance. Federal law (12 U.S.C. Section 55) permits the OCC to order the pro rata assessment of shareholders of a national bank whose capital stock has become impaired, by losses or otherwise, to relieve a deficiency in such national bank's capital stock. This statute also provides for the enforcement of any such pro rata assessment of shareholders of such national bank to cover such impairment of capital stock by sale, to the extent necessary, of the capital stock of any assessed shareholder failing to pay the assessment. Similarly, the laws of certain states provide for such assessment and sale with respect to banks chartered by such states. BANC ONE, as the sole shareholder of its affiliate national banks, is subject to such provisions. CAPITAL REQUIREMENTS BANC ONE is subject to capital ratios, requirements and guidelines imposed by the Federal Reserve, which are substantially similar to the ratios, requirements and guidelines imposed by the Federal Reserve, the OCC and the FDIC on the banks within their respective jurisdictions. These capital requirements establish higher capital standards for banks and bank holding companies that assume greater credit risks. For this purpose, a bank's or holding company's assets and certain specified off-balance sheet commitments are assigned to four risk categories, each weighted differently based on the level of risk that is ascribed to such assets or commitments. A bank's or holding company's capital, in turn, is divided into two tiers: core ("Tier 1") capital, which includes common equity, non-cumulative perpetual preferred stock and related surplus (excluding auction rate issues), and minority interests in equity accounts of consolidated subsidiaries, less goodwill, certain identifiable intangible assets and certain other assets; and supplementary ("Tier 2") capital, which includes, among other items, perpetual preferred stock not meeting the Tier 1 definition, mandatory convertible securities, subordinated debt and allowances for loan and lease losses, subject to certain limitations, less certain required deductions. BANC ONE, like other bank holding companies, currently is required to maintain Tier 1 and total capital (the sum of Tier 1 and Tier 2 capital) equal to at least 4% and 8% of its total risk-weighted assets, respectively. At December 31, 1995, BANC ONE met both requirements, with Tier 1 and total capital equal to 10.05% and 14.05% of its total risk-weighted assets, respectively. The Federal Reserve also requires bank holding companies to maintain a minimum "leverage ratio" (Tier 1 capital to adjusted total assets) of 3%, if the holding company has the 4 7 highest regulatory rating and meets certain other requirements, or of 3% plus an additional cushion of at least 100 to 200 basis points if the holding company does not meet these requirements. At December 31, 1995, BANC ONE's leverage ratio was 8.87%. The Federal Reserve may set capital requirements higher than the minimums noted above for holding companies whose circumstances warrant it. For example, holding companies experiencing or anticipating significant growth may be expected to maintain capital ratios including tangible capital positions well above the minimum levels. The Federal Reserve has not, however, imposed any such special capital requirement on BANC ONE. On August 2, 1995, the Federal Reserve, the FDIC and the OCC jointly adopted a two-step approach to implementing minimum capital standards for interest rate risk exposures. First, the three agencies have revised their respective capital standards to include a bank's (or bank holding company's) exposure to declines in the economic value of its capital due to changes in interest rates as a factor that the agencies will consider in evaluating the bank's (or holding company's) capital. Second, after collecting industry data and evaluating the level of interest rate risk exposure in the banking industry generally, the agencies plan, at some future date, to issue a proposed rule that would establish an explicit minimum capital charge for interest rate risk. DIVIDEND RESTRICTIONS Various federal and state statutory provisions limit the amount of dividends BANC ONE's affiliate banks can pay to BANC ONE without regulatory approval. The approval of the appropriate bank regulator is required for any dividend by a national bank or by a state-chartered bank that is a member of the Federal Reserve System (a "state member bank") if the total of all dividends declared by the bank in any calendar year would exceed the total of its net profits, as defined by regulatory agencies, for such year combined with its retained net profits for the preceding two years. In addition, a national bank or a state member bank may not pay a dividend in an amount greater than its net profits then on hand. At December 31, 1995, total stockholders' equity of the affiliate banks approximated $7.6 billion, of which $1.1 billion was available for payment of dividends without approval by the applicable regulatory authority. In addition, federal bank regulatory authorities have authority to prohibit the affiliate banks from engaging in an unsafe or unsound practice in conducting their business. The payment of dividends, depending upon the financial condition of the bank in question, could be deemed to constitute such an unsafe or unsound practice. The ability of BANC ONE's affiliate banks to pay dividends in the future is presently, and could be further, influenced by bank regulatory policies and capital guidelines. FEDERAL DEPOSIT INSURANCE CORPORATION IMPROVEMENT ACT OF 1991 5 8 The Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA") significantly expanded the regulatory and enforcement powers of federal banking regulators, in particular the FDIC, and has important consequences for BANC ONE, its affiliate banks and other depository institutions located in the United States. A major feature of FDICIA is the comprehensive directions it gives to federal banking regulators to promptly direct or require the correction of problems at inadequately capitalized banks in the manner that is least costly to the federal deposit insurance funds. The degree of corrective regulatory involvement in the operations and management of banks and their holding companies is, under FDICIA, largely determined by the actual or anticipated capital positions of the subject institution. FDICIA established five tiers of capital measurement for regulatory purposes ranging from "well capitalized" to "critically undercapitalized." Under regulations adopted by the federal banking agencies, a depository institution is well capitalized if it significantly exceeds the minimum level required by regulation for each relevant capital measure, adequately capitalized if it meets each such measure, undercapitalized if it fails to meet any such measure, significantly undercapitalized if it is significantly below any such measure and critically undercapitalized if, among other things, its tangible equity is not greater than 2% of total tangible assets. A depository institution may be deemed to be in a capitalization category lower than is indicated by its actual capital position if it receives an unsatisfactory examination rating. FDICIA requires banking regulators to take increasingly strong corrective steps, based on the capital tier of any subject bank, to cause such bank to achieve and maintain capital adequacy. Even if a bank is adequately capitalized, however, the banking regulators are authorized to apply corrective measures if the bank is determined to be in an unsafe or unsound condition or engaging in an unsafe or unsound activity. Depending on the level of capital of an insured depository institution, the banking regulatory agencies' corrective powers can include: requiring a capital restoration plan; placing limits on asset growth and restrictions on activities; requiring the institution to reduce total assets; requiring the institution to issue additional stock (including voting stock) or to be acquired; placing restrictions on transactions with affiliates; restricting the interest rate the institution may pay on deposits; ordering a new election for the institution's board of directors; requiring that certain senior executive officers or directors be dismissed; prohibiting the institution from accepting deposits from correspondent banks; requiring the institution to divest certain subsidiaries; prohibiting the payment of principal or interest on subordinated debt; prohibiting the institution's parent bank holding company from making capital distributions without prior regulatory approval; and, ultimately, appointing a conservator or receiver for the institution. If the insured depository institution is undercapitalized, the parent bank holding company is required to guarantee that the institution will comply with any capital restoration plan submitted to, and approved by, the appropriate federal banking agency in an amount equal to the lesser of (i) 5% of the institution's total assets at the time the institution became undercapitalized 6 9 or (ii) the amount which is necessary (or would have been necessary) to bring the institution into compliance with all applicable capital standards as of the time the institution failed to comply with the capital restoration plan. If such parent bank holding company guarantee is not obtained, the capital restoration plan may not be accepted by the banking regulators. As a result, such institution would be subject to the more severe restrictions imposed on significantly undercapitalized institutions. Further, the failure of such a depository institution to submit an acceptable capital plan is grounds for the appointment of a conservator or receiver. FDICIA also contains a number of other provisions affecting depository institutions, including additional reporting and independent auditing requirements, the establishment of safety and soundness standards, the changing of FDIC insurance premiums from flat amounts to the system of risk-based assessments described below under "Deposit Insurance Assessments", a review of accounting standards, and supplemental disclosures and limits on the ability of all but well capitalized depository institutions to acquire brokered deposits. The Riegle Community Development and Regulatory Improvement Act of 1994, however, among other things, contains a number of specific provisions easing the regulatory burden on banks and bank holding companies, including some imposed by FDICIA, and making the bank regulatory system more efficient. Federal banking regulators are taking actions to implement these provisions. DEPOSIT INSURANCE ASSESSMENTS The deposits of each of BANC ONE's affiliate banks are insured up to regulatory limits by the FDIC and, accordingly, are subject to deposit insurance assessments to maintain the Bank Insurance Fund ("BIF") and Savings Association Insurance Fund ("SAIF") administered by the FDIC. The FDIC has adopted regulations establishing a permanent risk-related deposit insurance assessment system. Under this system, the FDIC places each insured bank in one of nine risk categories based on (a) the bank's capitalization and (b) supervisory evaluations provided to the FDIC by the institution's primary federal regulator. Each insured bank's insurance assessment rate is then determined by the risk category in which it is classified by the FDIC. Until June 1, 1995, there was an eight basis point spread between the highest and lowest assessment rates, with banks classified in the highest capital and supervisory evaluation categories being subject to a rate of $0.23 per $100 of deposits and banks classified in the lowest capital and supervisory evaluation categories being subject to a rate of $0.31 per $100 of deposits. These assessment rates reflected, in substantial part, the amount the FDIC had determined necessary to increase the reserve ratio of the BIF to 1.25% of total insured bank deposits. Under FDICIA, the FDIC was required to set deposit insurance premium rates at a level sufficient to achieve that ratio by 2006. On August 8, 1995, having determined that the BIF had attained the required 1.25% reserve ratio during May 1995, the FDIC amended its regulations to adopt a new assessment rate schedule for BIF deposits, effective retroactively on June 1, 1995. This new schedule 7 10 established a 27 basis point spread between the highest and lowest assessment rates, with banks classified in the highest capital and supervisory evaluation categories being subject to a rate of $0.04 per $100 of deposits and banks classified in the lowest capital and supervisory evaluation categories continuing to be subject to a rate of $0.31 per $100 of deposits. The new regulations also authorized the FDIC to increase or reduce annual assessment rates by up to 5 basis points from those set forth in the new assessment rate schedule, without formal rulemaking, based on the amount of assessment revenue necessary to maintain the required 1.25% reserve ratio and the assessment schedule that would generate that amount of assessment revenue considering the risk profile of BIF members. On December 11, 1995, based on these factors, the FDIC made such an adjustment, reducing assessment rates by 4 basis points for the semiannual assessment period beginning January 1, 1996. For this six-month period, the annual assessment rate thus will range from $0.00 per $100 of deposits for banks classified in the highest capital and supervisory evaluation categories to $0.27 per $100 of deposits for banks classified in the lowest capital and supervisory evaluation categories subject to a $2,000 per bank minimum assessment. There can be no assurance, however, that this adjustment will continue in effect for subsequent assessment periods, or that the FDIC will not make further adjustments, up or down, in assessment rates. Because the SAIF, which insures savings institution deposits, has not yet reached the required 1.25% reserve ratio, and is not projected to do so for several years, SAIF deposit insurance premium rates have not been lowered, and will continue to range from $0.23 per $100 of deposits for savings institutions classified in the highest capital and supervisory evaluation categories to $0.31 per $100 of deposits for savings institutions classified in the lowest capital and supervisory evaluation categories. However, Congress is considering proposals to recapitalize the SAIF and/or merge the SAIF with the BIF. It is uncertain whether or when such proposals might be adopted, or what impact they might have on the BIF or on FDIC-insured institutions. Some BANC ONE affiliate banks hold deposits that were acquired from savings institutions and that, accordingly, are insured by SAIF. At December 31, 1995, BANC ONE's affiliate banks held $6.3 billion of such deposits. Deposit insurance premiums will be charged on these deposits at the higher SAIF rate. DEPOSITOR PREFERENCE STATUTE Federal legislation has been enacted providing that deposits and certain claims for administrative expenses and employee compensation against an insured depository institution would be afforded a priority over other general unsecured claims against such institution, including federal funds and letters of credit, in the "liquidation or other resolution" of the institution by any receiver. BROKERED DEPOSITS 8 11 Under FDIC regulations, no FDIC-insured bank or savings institution can accept brokered deposits unless it is (a) well capitalized or (b) adequately capitalized and receives a waiver from the FDIC. In addition, these regulations prohibit any bank or savings institution that is not well capitalized from (a) paying an interest rate on deposits in excess of 75 basis points over certain prevailing market rates or (b) offering "pass through" deposit insurance on certain employee benefit plan accounts unless it provides certain notice to affected depositors. At December 31, 1995, BANC ONE's affiliate banks had aggregate total brokered deposits of approximately $87 million. INTERSTATE BANKING Under the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 ("Riegle-Neal"), subject to certain concentration limits, (a) bank holding companies such as BANC ONE are permitted, beginning September 29, 1995, to acquire banks and bank holding companies located in any state; (b) any bank that is a subsidiary of a bank holding company is permitted, again beginning September 29, 1995, to receive deposits, renew time deposits, close loans, service loans and receive loan payments as an agent for any other bank subsidiary of that holding company; and (c) banks are permitted, beginning June 1, 1997, to acquire branch offices outside their home states by merging with out-of-state banks, purchasing branches in other states and establishing de novo branch offices in other states, provided that, in the case of any such purchase or opening of individual branches, the host state has adopted legislation "opting in" to those provisions of Riegle-Neal; and provided that, in the case of a merger with a bank located in another state, the host state has not adopted legislation "opting out" of that provision of Riegle-Neal. BANC ONE might use Riegle-Neal to acquire banks in additional states and to consolidate its affiliate banks under a smaller number of separate charters. 9 12 ITEM 2 PROPERTIES ---------- BANC ONE leases its principal offices in Columbus, Ohio under several long-term leases. As of December 31, 1995 BANC ONE's affiliate banks had 1,352 banking offices located in Arizona, Colorado, Illinois, Indiana, Kentucky, Michigan, Ohio, Oklahoma, Texas, Utah, West Virginia and Wisconsin. BANC ONE and its subsidiaries own or lease various office space, computer centers and warehouses. For additional information see the following portions of the 1995 Annual Report to Shareholders, which are expressly incorporated herein by reference: 1. Note 6, "Bank Premises, Equipment and Leases" on page 61. ITEM 3 LEGAL PROCEEDINGS ----------------- In 1992, Bank One, Columbus, N.A. ("Columbus") was named a defendant in a purported class action lawsuit in Pennsylvania challenging whether Columbus can impose various types of fees, allowed by the state of Ohio, on credit cardholders residing in Pennsylvania (the "Suit"). The Suit seeks unquantified compensatory and triple damages and other equitable relief. The Suit is one of many similar class action lawsuits brought against credit card issuing banks throughout the United States. The dismissal of the Suit by the Court of Common Pleas of Philadelphia County, Pennsylvania, which had been upheld by a panel of the Pennsylvania Superior Court, was reversed by the entire Pennsylvania Superior Court in December 1994. Columbus has appealed the decision to the Pennsylvania Supreme Court, which has postponed oral argument pending a decision by the United States Supreme Court in a similar action entitled SMILEY V. CITIBANK, in which the California Supreme Court has affirmed the lower court's decision in favor of the bank. Legal counsel believes that the decision of the entire Pennsylvania Superior Court is contrary to the decisions of most state and federal courts outside Pennsylvania that have considered the issue, which have held that national banks may use the rates and fees of the bank's home state in contracts with cardholders from other states. There can be no assurance that bank affiliates of BANC ONE will not be named as defendants in future similar lawsuits. Except as stated above, neither BANC ONE nor any of its subsidiaries is involved in any material pending legal proceedings other than ordinary routine litigation incident to the business. Similarly, no property owned by any of said entities is the subject of any material pending legal proceedings other than ordinary routine litigation incident to the business. ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS --------------------------------------------------- During the fourth quarter of 1995 no matters were submitted to a vote of securityholders. EXECUTIVE OFFICERS OF THE REGISTRANT - ------------------------------------ Executive officers as of January 1, 1996 are set forth below. Unless otherwise designated, they are officers of BANC ONE CORPORATION. Others hold the positions indicated in wholly owned subsidiaries. All of these executive officers, with the exception of Messrs. Chancey, Lehmann, Logan, Neubert and Steinhart, have been employed by BANC ONE in various capacities during the past 5 years.
Year Joined Name Age Title BANC ONE - -------------------------------------------------------------------------------------------------- Joseph D. Barnette, Jr. 56 Chairman/CEO--Banc One Indiana Corporation 1982 Steven A. Bennett 43 Senior Vice President 1989 William P. Boardman 54 Senior Executive Vice President 1984 Malcolm B. Chancey, Jr. 64 Chairman/CEO--Banc One Kentucky Corporation 1994 Roman J. Gerber 63 Executive Vice President 1966 Richard D. Headley 47 Chairman/CEO--Banc One Services Corporation 1975 Thomas E. Hoaglin 46 Chairman/CEO--Banc One Ohio Corporation 1973 Craig J. Kelly 50 Senior Vice President 1987 David J. Kundert 54 Chairman/CEO--Bank One Investment Management and Trust Group 1971 James C. LaVelle 57 Senior Vice President and Senior Credit Officer 1978 Richard J. Lehmann 51 President/COO 1993 William C. Leiter 56 Senior Vice President and Controller 1981 Richard D. Lodge 48 Senior Vice President 1973
10 13 Robert F. B. Logan 63 Chairman/CEO--Bank One, Arizona, N.A. 1993 John B. McCoy 52 Chairman/CEO 1967 Michael J. McMennamin 50 Executive Vice President-Finance 1990 (1) George R. L. Meiling 53 Treasurer 1977 Jeffrey P. Neubert 53 Chairman--Banc One Diversified Services Corporation 1991 Ronald G. Steinhart 55 Chairman/CEO--Bank One, Texas, N.A. 1992
(1) From June 1981 to April 1985, Mr. McMennamin was the Vice Chairman of Bank One Columbus, N.A. and Chief Investment Officer of Banc One Corporation. Mr. Chancey has served as Chairman and Chief Executive Officer of Banc One Kentucky Corporation since August 1994. From January 1993 until the acquisition of Liberty National Bancorp, Inc. by BANC ONE in August 1994, Mr. Chancey served as Chairman, President and Chief Executive Officer of Liberty National Bancorp. Inc. and as Chairman and Chief Executive Officer of Liberty National Bank and Trust Company of Kentucky. From February 1990 to December 1992, Mr. Chancey served as President of Liberty National Bancorp. Inc. and Liberty National Bank and Trust Company of Kentucky. Mr. Logan has served as Chairman and Chief Executive Officer of Bank One, Arizona, N.A. since April 1995. From May 1993 to March 1995, Mr. Logan served as a director of Banc One Arizona Corporation. From January 1990 until the acquisition of Valley National Bank in April 1993, Mr. Logan served as President and Chief Operating Officer of Valley National Bank (now Bank One, Arizona, N.A.) Mr. Neubert has served as Executive Vice President of BANC ONE since 1991. From 1974 to 1991, Mr. Neubert served in various positions with Citicorp. Mr. Steinhart has served as Chairman and Chief Executive Officer of Bank One, Texas, N.A. since January 1995. From December 1992 to January 1995, Mr. Steinhart served as President and Chief Operating Officer of Bank One, Texas, N.A. From February 1988 until the acquisition of Team Bancshares, Inc. by BANC ONE in November 1992, Mr. Steinhart served as Chairman and Chief Executive Officer of Team Bancshares, Inc., a bank holding company. Information regarding Mr. Lehmann's business experience during the past five years is set forth under the caption "Election of Directors" in the definitive Proxy Statement for the 1996 Annual Meeting of Shareholders to be held April 16, 1996 (the "Proxy Statement"), which information is expressly incorporated by reference herein. 11 14 PART II ------- ITEM 5 MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER ---------------------------------------------------------------- MATTERS ------- STOCK LISTING COMMON - ------ New York Stock Exchange: BancOne Ticker Symbol: ONE SERIES C PREFERRED - ------------------ NASD National Market Symbol: BancOne pfC Ticker Symbol: BONEO See the following portions of the 1995 Annual Report to Shareholders which are expressly incorporated herein by reference: - - "Financial Highlights" on page 1. - - "Consolidated Quarterly Financial Data" on pages 44 and 45. - - Notes 8, 9, 10, and 15 on pages 63, 64 and 70. - - "Five Year Performance Summary" on page 22. - - "Ten Year Performance Summary" on pages 42 and 43. ITEM 6 SELECTED FINANCIAL DATA ----------------------- See the following portions of the 1995 Annual Report to Shareholders which are expressly incorporated herein by reference: - - "Five Year Performance Summary" on page 22. - - "Ten Year Performance Summary" on pages 42 and 43. - - Note 2 on page 54. ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND --------------------------------------------------------------- RESULTS OF OPERATIONS --------------------- See the following portions of the 1995 Annual Report to Shareholders which are expressly incorporated herein by reference: - - "Management's Discussion and Analysis" on pages 22 through 41. - - "Five Year Summary-Average Balances, Income and Expense, Yields and Rates" on pages 24 and 25. - - "Rate-Volume Analysis" on page 26. - - "Allowance for credit loans" on page 32. - - "Loan and Lease Analysis" on page 33. - - "Consolidated Quarterly Financial Data" on pages 44 and 45. ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ------------------------------------------- See the following portions of the 1995 Annual Report to Shareholders which are expressly incorporated herein by reference: - - "Consolidated Financial Statements and footnotes" on pages 46 through 74. - - "Consolidated Quarterly Financial Data" on pages 44 and 45. ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND --------------------------------------------------------------- FINANCIAL DISCLOSURE -------------------- Registrant has had no disagreement on accounting and financial disclosure matters and has not changed accountants during the two year period ending December 31, 1995. 12 15 PART III -------- ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT -------------------------------------------------- The information set forth under the captions "Election of Directors" and "Certain Reports" in the Proxy Statement is expressly incorporated herein by reference. Reference is made to Part I of this Form 10-K for information as to the executive officers of the registrant. ITEM 11 EXECUTIVE COMPENSATION ---------------------- The information set forth under the captions "Directors Fees and Compensation" and "Executive Compensation" (excluding the information set forth under the caption "Executive Compensation--Comparison of Five Year Cumulative Total Return") and "Compensation Committee Interlocks and Insider Participation" in the Proxy Statement is expressly incorporated herein by reference. ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT -------------------------------------------------------------- Information concerning the beneficial ownership of BANC ONE Common Stock as of January 1, 1996 by (i) each person who is known by the Registrant to own beneficially more than 5% of BANC ONE Common Stock (ii) all BANC ONE directors and executive officers (30 individuals) as a group as of January 1, 1996 and (iii) by the executive officers of BANC ONE named in the Summary Compensation Table (except with respect to Messrs. John B. McCoy and Lehmann whose share ownership is reported in the information on nominees for election as directors under "Election of Directors" in the Proxy Statement) is set forth under the caption "Ownership of Shares" in the Proxy Statement, which information is expressly incorporated herein by reference. Information concerning the beneficial ownership of BANC ONE Common Stock as of January 1, 1996 by each current director and each nominee for director is set forth under the caption "Election of Directors" in the Proxy Statement, which information is expressly incorporated herein by reference. No shares of BANC ONE Preferred Stock are beneficially owned by any BANC ONE director or executive officer, except for 600 shares of BANC ONE Preferred Stock owned by one executive officer and constituting less than 1% of the outstanding shares of BANC ONE Preferred Stock. ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS ---------------------------------------------- The information set forth under the captions "Compensation Committee Interlocks and Insider Participation" and "Transactions with Management and Others" in the Proxy Statement is expressly incorporated herein by reference. 13 16 PART IV ------- ITEM 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K INDEX ---------------------------------------------------------------------- TO FINANCIAL STATEMENTS AND SCHEDULES - ------------------------------------- BANC ONE CORPORATION and Subsidiaries
Annual Report Data incorporated by reference from the to Shareholders 1995 Annual Report to Shareholders: Page ----------------- Financial Highlights 1 Discussion of our Business 7 - 19 Management's Discussion and Analysis 22 - 41 Additional financial information 42 - 45 Consolidated Balance Sheet, December 31, 1995 and 1994 46 Consolidated Statement of Income for the years ended December 31, 1995, 1994 and 1993 47 Consolidated Statement of Changes in Stockholders' Equity for the years ended December 31, 1995, 1994 and 1993 48 Consolidated Statement of Cash Flows for the years ended December 31, 1995, 1994 and 1993 49 Notes to Consolidated Financial Statements 50 - 74 Report of Independent Accountants 75 Location of Banking offices and list of subsidiaries inside back cover
No schedules are included because they are not required, not applicable, or the required information is contained elsewhere. 14 17 INDEX TO EXHIBITS -----------------
Exhibit Number -------------- 3.1 Amended Articles of Incorporation of BANC ONE CORPORATION.(1) 3.2 Code of Regulations of BANC ONE CORPORATION.(1) 10 Material Contracts a. BANC ONE CORPORATION Amended 1994 Key Executive Management Incentive Compensation Plan.(4) b. BANC ONE CORPORATION Dividend Equivalent Unit Plan.(3) c. BANC ONE CORPORATION Executive Management Incentive Compensation Plan.(3) d. BANC ONE CORPORATION Incentive Compensation Deferral Plan.(3) e. BANC ONE Executive Life Insurance Plan.(3) f. Deferred Compensation Plan for Directors of BANC ONE CORPORATION and BANC ONE Affiliates.(2) g. BANC ONE CORPORATION 1989 Stock Incentive Plan.(2) 1. Agreement for Restricted Stock Award under the BANC ONE CORPORATION 1989 Stock Incentive Plan.(2) 2. Stock Option Agreement for Non-Qualified Stock Options under the BANC ONE CORPORATION 1989 Stock Incentive Plan. (2) 3. Stock Option agreement for Incentive Stock Options under the BANC ONE CORPORATION 1989 Stock Incentive Plan .(2) h. BANC ONE CORPORATION Amended Incentive Compensation Deferral Plan. i. BANC ONE Supplemental Executive Security Savings Plan. (2) j. BANC ONE CORPORATION Supplemental Employees Retirement Plan, As Amended and Restated Effective January 1, 1993.(2) k. The Valley National Bank of Arizona Supplemental Excess Benefit Retirement Plan. (2) l. American Fletcher Corporation Deferred Compensation Plan. (2) m. Valley National Corporation 401(+)TM Executive Deferred Compensation Plan. (2) n. BANC ONE CORPORATION 1995 Stock Incentive Plan. (4) o. Agreement dated October 2, 1995 between BANC ONE CORPORATION and Richard Lehmann. 11 Statement regarding computation of earnings per common share. 12 Statement regarding computation of ratio of earnings to fixed charges. 13a Portions of BANC ONE's Annual Report to Shareholders for the calendar year ended December 31, 1995. 21 Subsidiaries of Registrant. 23 Consent of Coopers & Lybrand L.L.P. 27 Financial Data Schedules.
There are no agreements with respect to long-term debt of the Registrant to authorize securities in an amount 15 18 which exceeds 10% of the total assets of the Registrant and its subsidiaries on a consolidated basis. The Registrant agrees to furnish a copy of any agreement with respect to long-term debt of the Registrant to the Securities and Exchange Commission upon request. (1) Incorporated by reference from the Registrant's Annual Report on Form 10-K for the year ended December 31, 1991. (2) Incorporated by reference from the Registrant's Annual Report on Form 10-K for the year ended December 31, 1993. (3) Incorporated by reference from the Registrant's Annual Report on Form 10-K for the year ended December 31, 1994. (4) Incorporated by reference from the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1995.
16 19 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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 By: John B. McCoy March 28, 1996 -------------------------------------- --------------------------- John B. McCoy Date its Chairman By: Michael J. McMennamin March 28, 1996 -------------------------------------- --------------------------- Michael J. McMennamin Date its Executive Vice President - Finance By: William C. Leiter March 28, 1996 -------------------------------------- --------------------------- William C. Leiter Date its Controller 20 Pursuant to the requirements of Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. By: Charles E. Exley, Jr March 28, 1996 -------------------------------------- --------------------------- Charles E. Exley, Jr., Director Date By: E. Gordon Gee March 28, 1996 -------------------------------------- --------------------------- E. Gordon Gee, Director Date By: John R. Hall March 28, 1996 -------------------------------------- --------------------------- John R. Hall, Director Date By: Laban P. Jackson, Jr. March 28, 1996 -------------------------------------- --------------------------- Laban P. Jackson, Jr., Director Date By: John W. Kessler March 28, 1996 -------------------------------------- --------------------------- John W. Kessler, Director Date By: Richard J. Lehmann March 28, 1996 -------------------------------------- --------------------------- Richard J. Lehmann, Director Date By: John B. McCoy March 28, 1996 -------------------------------------- --------------------------- John B. McCoy, Director Date By: John G. McCoy March 28, 1996 -------------------------------------- --------------------------- John G. McCoy, Director Date By: Richard L. Scott March 28, 1996 -------------------------------------- --------------------------- Richard L. Scott, Director Date By: Thekla R. Shackelford March 28, 1996 -------------------------------------- --------------------------- Thekla R. Shackelford, Director Date By: Alex Shumate March 28, 1996 -------------------------------------- --------------------------- Alex Shumate, Director Date By: Frederick P. Stratton, Jr. March 28, 1996 -------------------------------------- --------------------------- Frederick P. Stratton, Jr., Director Date By: Robert D. Walter March 28, 1996 -------------------------------------- --------------------------- Robert D. Walter, Director Date EX-10.H 2 EXHIBIT 10(H) 1 EXHIBIT 10h BANC ONE CORPORATION INCENTIVE COMPENSATION DEFERRAL PLAN PURPOSE ------- The purpose of the BANC ONE CORPORATION Incentive Compensation Deferral Plan (the "Plan") is to provide a means by which eligible Participants of the BANC ONE CORPORATION Key Management Incentive Compensation Plan or any specialized incentive compensation plan designated by the Board of Directors or Plan Administrator may defer such compensation earned under such plan. Effective Date - -------------- This Plan was originally effective as of January 1, 1982. This amended and restated version of the Plan is effective October 1, 1994. ARTICLE I DEFINITIONS When used herein, the following terms shall have the meaning stated herein, unless the context clearly indicates otherwise Section 1.1 - Appeals Committee - ------------------------------- A committee consisting of three (3) or more officers of the Corporation who shall be appointed by the Chief Executive Officer of the Corporation to hear appeals of denied employee, Participant, or Beneficiary benefit claims under the Plan, provided that with respect to denied claims of an executive officer who has been identified by the Corporation as an "Insider", as defined by applicable Securities and Exchange Commission (SEC) rules, such Appeals Committee shall be the Personnel and Compensation Committee of the Board. Section 1.2 - Base Salary - ------------------------- The employee's annual basic salary or wage rate with the Corporation or a Related Corporation in effect at any given point in time, prior to the application of any salary deferrals to qualified or non-qualified plans sponsored by BANC ONE CORPORATION or Related Corporation. Section 1.3 - Beneficiary - ------------------------- A person or persons designated by a Participant in accordance with provisions of Section 3.8, to receive any death benefit which may be payable under this Plan upon the death of said Participant. Section 1.4 - Board - ------------------- The Board of Directors of BANC ONE CORPORATION or the Personnel and Compensation Committee of said Board which shall have the authority of said -1- 2 Board with respect to this Plan. Section 1.5 - Change of Control - ------------------------------- Any change in control of a nature that would be required to be reported in response to Item 5(f) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended ("Exchange Act"); provided that, without limitation, such a change of control shall be deemed to have occurred if: (i) any "person" (as such term is defined in Sections 13(d) and 14(d)(2) of the Exchange Act) other than the Corporation or an entity then directly or indirectly controlling, controlled by or under common control with the Corporation is, becomes or commences a tender offer to become the beneficial owner, directly or indirectly, of securities of the Corporation representing 20% or more of the combined voting power of the Corporation's then-outstanding securities; (ii) the Corporation merges or consolidates with another corporation; or (iii) a sale, lease, exchange, or other disposition of all or substantially all of the assets of the Corporation takes place. Section 1.6 - Corporation - ------------------------- BANC ONE CORPORATION including all of its Related Corporations. Section 1.7 - Incentive Compensation - ------------------------------------ The annual monetary award given to an employee under the Incentive Plan. Section 1.8 - Incentive Plan - ---------------------------- The BANC ONE CORPORATION Key Management Incentive Compensation Plan or any specialized incentive compensation plan designated by the Board of Directors. Section 1.9 - Participant - ------------------------- Any person who satisfies the eligibility and participation requirements of this Plan and who elects or has previously elected to defer incentive compensation under this Plan. Section 1.10 - Plan Administrator - --------------------------------- BANC ONE CORPORATION. Section 1.11 - Plan Year - ------------------------ The twelve (12) month period commencing on January 1 and ending the following December 31. Section 1.12 - Related Corporation - ---------------------------------- A subsidiary or any entity which is a member of a common controlled group with BANC ONE CORPORATION pursuant to Internal Revenue Code Sections 414(b), -2- 3 (c),(m) or (o). ARTICLE II PARTICIPATION Section 2.1 - Eligibility - ------------------------- Any officer of the Corporation (a) who is designated by the Plan Administrator as a participant in the Incentive Plan, (b) who is awarded compensation under the Incentive Plan on an annual basis only, and (c) whose Base Salary as of December 31 of the preceding calendar year equals or exceeds One Hundred Thousand Dollars ($100,000), shall be eligible to participate in the Plan. The Plan Administrator shall notify officers as to their eligibility. Section 2.2 - Conditions of Participation - ----------------------------------------- An individual shall not become a Participant hereunder until he or she furnishes within a reasonable time limit established by the Plan Administrator such completed and executed elections, Beneficiary designations, consents and other documents and information prescribed by the Plan Administrator. Each person upon becoming a Participant shall be deemed conclusively, for all purposes, to have assented to the terms and provisions of this Plan and shall be bound thereby. Section 2.3 - Election To Defer - ------------------------------- (a) DEFERRAL OF ANNUAL INCENTIVE COMPENSATION. A Participant may elect, on or before December 31 of any calendar year, to defer payment of any portion of his Incentive Compensation which he will receive during the calendar year following such election. Notwithstanding the preceding sentence, if an officer of the Corporation first becomes eligible to participate in the Plan during the calendar year, such officer may elect to participate in the Plan and to defer his Incentive Compensation which he has not yet received, but will receive during the calendar year, if he makes such election within thirty (30) days of becoming eligible to participate in the Plan. The minimum amount of such Compensation which may be deferred under this subparagraph (a) is Five Thousand Dollars ($5,000). Any such elections shall be made in such format (including but not limited to approved forms or electronic data response) and in the manner provided by the Plan Administrator. Any such election shall be effective on and until the earlier of the following events: (1) December 31 of the calendar year for which the election applies; or (2) the Participant ceases to be an employee of the Corporation. (b) TIMELINESS OF ELECTION. If a Participant who is eligible to participate in this Plan fails to file (or fails to timely file) the forms(s) or take any action required by the Plan Administrator to participate in this Plan for each Plan year, such person shall not be permitted to participate in this Plan until the next open enrollment period applicable for the next calendar year. -3- 4 Section 2.4 - Participant Directed Accounts - ------------------------------------------- Incentive Compensation deferred at the election of a Participant shall be held in the general funds of the Corporation and shall be credited to an account established by the Corporation in the Participant's name to which deferrals made in accordance with this Plan are credited. Each Participant who chooses to participate in this Plan shall elect, on the form(s) and in the manner prescribed by the Plan Administrator, to direct the investment of his account in any of the alternative investment funds established by the Board from time to time. Participants may change their investment decisions in the manner permitted by the Plan Administrator which shall be no less frequently than quarterly. The Plan Administrator may, in its discretion, disregard the investment directions of participants at any time and from time to time. Any Participant who is required to file reports of his beneficial ownership of BANC ONE CORPORATION capital stock with the Securities and Exchange Commission pursuant to Section 16(a) of the Securities and Exchange Act of 1934 shall only be permitted to invest in BANC ONE CORPORATION capital stock by making an irrevocable election, during the annual election period described in Section 2.3 hereof, to invest all or a portion of the next year's deferral amount in such BANC ONE stock. No other transfers for such "Insiders" in or out of BANC ONE stock will be permitted. Participants with deferred vested account balances who have terminated employment and who will be receiving a distribution of their entire account balances as soon as administratively feasible (within thirty (30) days) on or after January 1, 1995 pursuant to Section 3.1 hereof, shall not be eligible to change their investment elections or otherwise access any electronic information source with respect to their accounts with regard to this Section 2.4. Such participants' account balances shall remain in the same funds and/or stock they chose in accordance with such participants' most current investment elections made prior to October 1, 1994. Section 2.5 - Funding - --------------------- The Plan shall be entirely unfunded and no provision shall at any time be made with respect to segregating any assets of the Corporation for payment of any benefits hereunder. No Participant, Participant's spouse or any other person shall have any interest in any particular assets of the Corporation by reason of the right to receive a benefit under the Plan, and any such Participant, Participant's spouse, or other person shall have only the rights of a general unsecured creditor of the Corporation with respect to any rights under the Plan. Nothing contained in the Plan shall constitute a guaranty by the Corporation or other entity or person that the assets of the Corporation will be sufficient to pay any benefit hereunder. Section 2.6 - Statement of Accounts - ----------------------------------- At least once annually, the Plan Administrator shall furnish each Participant with a written statement of his account setting forth the net income or loss -4- 5 of the account; any administrative expenses charged to the account; all payments and distributions made from the account; and such further information as the Plan Administrator deems appropriate. ARTICLE III DISTRIBUTIONS Section 3.1 - Timing of Distributions - ------------------------------------- Amounts credited to a Participant under the Plan shall be distributed as soon as administratively feasible (within thirty (30) days of the stated event) as follows: (a) On or after January 1st on or following the Participant's retirement or termination of employment from the Corporation; (b) Upon the death of the Participant, in accordance with Section 3.4; or (c) After an acceleration of benefits under Section 3.6; (d) After termination of this Plan in accordance with Section 5.1. For those participants with deferred vested account balances who terminated employment prior to reaching age fifty-five (55) and who have not yet received a distribution of their entire account balance, such accounts shall be distributed in a lump sum as soon as administratively feasible (within thirty (30) days) on or after January 1, 1995. Section 3.2 - Form of Distributions - ----------------------------------- Amounts credited to a Participant under the Plan shall be distributed in a lump sum payment or in annual installments over a five- or ten-year period as the Participant has elected on the form(s) and in the manner provided by the Plan Administrator. Any such payment election shall continue in effect until the Participant elects a different form of payment. All such elections must be made prior to the date on which the Participant ceases to be an employee. The Participant's election regarding form of payment only applies to those Participants who terminate employment due to retirement or disability. If a Participant terminates employment for any other reason or if a Participant fails to make such an election with respect to the amounts credited to his account, such amount shall be paid in a lump sum. The first installment (or the lump sum payment if the Participant so elects) shall be paid on the commencement date described above and subsequent installments shall be paid within thirty (30) days after the first (1st) business day of each succeeding calendar year until the entire amount credited to the Participant's deferred account shall have been paid. During such time as amounts credited to a Participant under the Plan continue to be held for the Participant or the Participant's beneficiary, such amounts shall continue -5- 6 to earn interest or cash dividends in accordance with the Participant's investment elections and shall be charged administrative expenses as provided in Section 4.2. Section 3.3 - Cash Payments; Determination of Amount - ---------------------------------------------------- All distributions to Participants shall be made in the form of cash. Subject to Section 3.2, the amount to be distributed shall be determined based on the fair market value of the balance credited to the Participant's account as of the close of business on last day of the calendar month immediately preceding distribution. Section 3.4 - Payments in the Event of a Participant's Death - ------------------------------------------------------------ In the event a Participant dies before payments from the Participant's account have commenced or after such payments have commenced but before the entire amount credited to the Participant's account has been paid, all amounts credited to the Participant's account at the time of the Participant's death, together with accumulated earnings thereon net of charges for administrative expenses, shall be paid to the beneficiary or beneficiaries described in Section 3.8, below, in a lump sum payment as soon as administratively feasible after the Plan Administrator is notified of the Participant's death unless the Participant has indicated on any beneficiary designation forms an alternate manner of payment which is permitted by the Plan Administrator. Section 3.5 - Vesting - --------------------- Each Participant is immediately one hundred percent (100%) vested in all amounts credited to his account and any earnings thereon. Section 3.6 - Acceleration Of Benefits For Unforeseeable Emergencies - -------------------------------------------------------------------- The Plan Administrator may accelerate the payment of any amounts held in any Participant's account in the case of unforeseeable emergencies. An "unforeseeable emergency" is a severe financial hardship to the Participant or beneficiary resulting from a sudden and unexpected illness or accident of the Participant or dependent of the Participant, loss of Participant's property due to casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant. The circumstances which will constitute a "unforeseeable emergency" will depend upon the facts of each case, but in any case, payment will not be made to the extent that such hardship is or may be relieved: (a) Through reimbursement or compensation by insurance or otherwise; (b) By liquidation of the Participant's assets, to the extent the liquidation of such assets would not itself cause severe financial hardships; or (c) By cessation of deferrals under the Plan. "Unforeseeable emergency" will not include the need to send the Participant's child to college or the desire to purchase a home. Any early distributions made under this Section 3.6 will only be permitted to the extent reasonably needed to satisfy the emergency needs. -6- 7 Section 3.7 - Withholding and Deductions - ---------------------------------------- All benefit payments made under the Plan to any Participant or Beneficiary shall be subject to allocable withholding and to such other deductions as shall at the time of such payment be required under any income tax or other law, whether of the United States or any other jurisdiction, and, in the case of payments to the Beneficiary of a Participant, the delivery to the Plan Administrator of all necessary documents. To the extent that the Corporation is required to withhold any current taxes at the time of deferral of Incentive Compensation, the deferral amount shall be reduced by the required taxes. Determinations by the Plan Administrator as to withholding shall be binding on the Participant and applicable Beneficiary(ies). Section 3.8 - Beneficiary Designation - ------------------------------------- Each Participant who has a deferred account hereunder may from time to time designate a beneficiary(ies) to receive the amounts credited to the Participant's account in the event of the Participant's death prior to the time such account is distributed to the Participant. Such designation shall be made pursuant to the procedures established by the Plan Administrator and in a form satisfactory to the Plan Administrator. Each proper designation of beneficiary will revoke all previous beneficiary designations. The revocation of a beneficiary designation, no matter how effected, shall not require the consent of or notice to any designated beneficiary. If any Participant fails to designate a beneficiary in the manner provided above, or if any Participant is not survived by such beneficiary(ies) the Participant's account shall be paid as follows: (1) If the Participant is married, to the Participant's spouse; (2) If the Participant is unmarried, to the Participant's estate. Section 3.9 - Rights to Benefits - -------------------------------- Nothing contained in this Plan is intended to give or shall give any spouse, former spouse or beneficiary of a Participant or any other person any right to benefits under this Plan by virtue of Internal Revenue Code Sections 401(a)(11) and 417 (relating to qualified pre-retirement survivor annuities) and qualified joint and survivor annuities) or Internal Revenue Code Sections 401(a)(13)(B) and 414(p) (relating to qualified domestic relations orders) as amended. ARTICLE IV ADMINISTRATION Section 4.1 - Administrative Powers and Duties - ---------------------------------------------- BANC ONE CORPORATION shall be responsible for the general operation and administration of the Plan and for carrying out the provisions thereof. The -7- 8 Chief Executive Officer of BANC ONE CORPORATION may, in his discretion, appoint an employee or employees or an administrative committee in writing to administer the provisions of this Plan. The decision of the Plan Administrator with respect to any questions arising as to the administration or interpretation of this Plan, including the discontinuance of any or all of the provisions thereof, shall be final, conclusive, and binding. If the Plan is administered by a committee, such committee may act by a majority of its members by a vote at a meeting or in writing without a meeting signed by all the members of the committee. Section 4.2 - Expenses - ---------------------- Any cost or expense of administering the Plan shall be paid by BANC ONE CORPORATION. Notwithstanding the above, the Plan Administrator may charge each Participant's account with the amount of reasonable administrative expenses it determines, in its sole discretion, for the cost of administering this Plan. Any such charges shall reduce the earnings credited to the Participant's account and shall be applied in a uniform and nondiscriminatory manner. Section 4.3 - Records - --------------------- The Plan Administrator shall keep such records of such information, as shall be proper, necessary or desirable to effectuate the purposes of the Plan, including without in any manner limiting the generality of the foregoing, records and information with respect to deferral elections, Participant accounts, dates of employment and termination and determinations made hereunder. To the extent that the Plan Administrator shall prescribe forms for use by the Participants and their Beneficiaries in communicating with the Plan Administrator and shall establish periods during which communications may be received, the Plan Administrator shall be protected in disregarding any notice or communication for which a form shall so have been prescribed and which shall not be made in such form and any notice or communication for the receipt of which a period shall so have been established and which shall not be received during such period. The Corporation, the Plan Administrator and the Appeals Committee shall respectively also be protected in acting upon any notice or other communication purporting to be signed by any person and reasonably believed to be genuine and accurate, including the Participant's current mailing address. Section 4.4 - Determinations - ---------------------------- All determinations hereunder made by the Plan Administrator or the Appeals Committee shall be made in the sole and absolute discretion of the Plan Administrator or Appeals Committee, as the case may be. Section 4.5 - Claims Procedure - ------------------------------ The Plan Administrator shall have discretion regarding benefit determinations. If required by the Plan Administrator, any person entitled to benefits -8- 9 hereunder must file a claim with the Plan Administrator upon forms furnished by the Plan Administrator. Notwithstanding any other provision of this Plan, payment of benefits need not be made until receipt of the claim and the expiration of the time periods specified in this Section 4.5 for rendering a decision on the claim. In the event a claim is denied, benefits need not be made or commence until a final decision is reached by the Appeals Committee subject to the provisions of Section 4.6. The Plan Administrator shall notify the claimant of its decision within ninety (90) days after receipt of the claim. However, if special circumstances require, the Plan Administrator may defer action on a claim for benefits for an additional period not to exceed ninety (90) days, and in that case it shall notify the claimant of the special circumstances involved and the time by which it expects to render a decision. If the Plan Administrator determines that any benefits claimed should be denied, it shall give notice to the claimant setting forth the specific reason or reasons for the denial and provide a specific reference to the Plan provisions on which the denial is based. The Plan Administrator shall also describe any additional information necessary for the claimant to perfect the claim and explain why the information is necessary. Such claimant shall be entitled to full and fair review by the Appeals Committee of the denial. Section 4.6 - Appeal and Review Procedure - ----------------------------------------- If a claim has been denied by the Plan Administrator, the claimant shall have sixty (60) days after receipt of the denial in which to file a notice of appeal with the Plan Administrator. A final determination by the Plan Administrator shall be rendered within sixty (60) days after receipt of the claimant's notice of appeal. Under special circumstances such determination may be delayed for an additional period not to exceed sixty (60) days, in which case the claimant shall be notified of the delay prior to the close of the initial sixty (60) day period. The Appeals Committee's final decision shall set forth the reasons and the references to the Plan provisions on which it is based. Section 4.7 - Facility of Payment - --------------------------------- Whenever a person entitled under the Plan to receive any payment of a benefit, or installment thereof, is under a legal disability or incapacity or is in any way unable to manage his financial affairs, the Plan Administrator may, in its discretion, direct payments on behalf of such person to be made to the incapacitated person's legal representative, custodian, relative, or other such individual(s) as is (are) known by the Plan Administrator to be assisting such person. Such decision by the Plan Administrator shall be made after consultation with those persons, if any, which may include legal counsel and/or medical personnel, which the Plan Administrator in his sole discretion determines are necessary in order to make such decision. Any payment of a benefit or installment thereof in accordance with the provisions of this Section 4.7 shall be a complete discharge of any liability relating to the -9- 10 making of or entitlement to such payment under the provisions of the Plan. Section 4.8 - Action by the Corporation - --------------------------------------- Any action by the Corporation under this Plan may be by resolution of its Board of Directors, or by any person or persons, duly authorized by resolution of said Board to take such action. Section 4.9 - Exemption from Liability/Indemnification - ------------------------------------------------------ The members of the Appeals Committee and the persons acting on behalf of the Plan Administrator, shall be free from all liability, joint or several, for their acts, omissions, and conduct, and for the acts, omissions and conduct of their duly appointed agents, in the administration of the Plan, except for those acts or omissions and conduct resulting from willful misconduct or lack of good faith. The Corporation shall indemnify each member of the Appeals Committee, the persons acting on behalf of the Plan Administrator and any other employee, officer or director of the Corporation against any claims, loss, damage, expense and liability, by insurance or otherwise, reasonably incurred by the individual in connection with any action or failure to act by reason of membership on the Appeals Committee or performance of an authorized duty or responsibility for or on behalf of the Corporation pursuant to the Plan unless the same is judicially determined to be the result of the individual's gross negligence or willful misconduct. Such indemnification by the Corporation shall be made only to the extent such expense or liability is not payable to or on behalf of such person under any liability insurance coverage. The foregoing right to indemnification shall be in addition to any other rights to which any such person may be entitled as a matter of law. Section 4.10 - Nonassignability - ------------------------------- No right or benefit under the Plan shall be subject to anticipation, alienation, sale, assignment, pledge, encumbrance or charge, and any attempt to anticipate, alienate, assign, sell, pledge, encumber or charge the same shall be void. The Plan shall not in any manner be liable for or subject to the debts, contracts, liabilities, engagements or torts of any person entitled to benefits hereunder. ARTICLE V AMENDMENT OR TERMINATION Section 5.1 - Amendment or Termination - -------------------------------------- BANC ONE CORPORATION reserves the right in its sole discretion to amend or terminate this Plan at any time. In the event of a termination, BANC ONE CORPORATION in its sole discretion may pay Plan benefits to those Participants -10- 11 participating in the Plan on the date of such termination, to the extent such benefits would be otherwise payable as defined in Section 3.1 determined on the basis that each Participant's presumed termination date was the date the Plan was terminated. Section 5.2 - Transfer Between Related Companies - ------------------------------------------------ In the event that a Participant's employment is transferred from one Related Corporation to another, the transfer shall not adversely affect the administration of amounts then credited to the Plan account(s) of such Participant on or as of the date of transfer. Section 5.3 - Change of Control - ------------------------------- The Plan shall not be automatically terminated upon change of control or by a transfer or sale of assets of the Corporation or by the merger or consolidation of the Corporation into or with any other Corporation or other entity when the Corporation is not the surviving or continuing Corporation, but the Plan shall be continued after such sale, merger or consolidation only if and to the extent that the transferee, purchaser or successor entity, shall be obligated to pay Plan benefits to those Participants participating in the Plan on the date of such termination, to the extent such Plan benefits would be otherwise payable as defined in Section 3.1, determined on the basis that each Participant's presumed termination date was the date the Plan was terminated. ARTICLE VI GENERAL PROVISIONS Section 6.1 - Offset to Benefits - -------------------------------- Notwithstanding any provisions of the Plan to the contrary, the Corporation may, in its sole and absolute discretion, enforce the right to offset against any amounts to be paid to a Participant under the Plan against any debt of the Participant which has been reduced to judgment in favor of the Corporation. Section 6.2 - Construction - -------------------------- In the construction of the Plan, the masculine shall include the feminine and the singular the plural where such meanings would be appropriate. Section 6.3 - Controlling Law - ----------------------------- The laws of the State of Ohio shall be controlling in all matters relating to the Plan and shall be controlling state law in all matters relating to the Plan and shall apply to the extent that it is not preempted by the laws of the United States of America. -11- 12 Section 6.4 - Effect of Invalid Provisions - ------------------------------------------ If any provision of this Plan is held invalid or unenforceable for any reason, such invalidity or unenforceability shall not effect any provisions hereof, and the remaining provisions of this Plan shall be construed and enforced as if such provisions had not been included. Section 6.5 - ERISA Status - -------------------------- This Plan shall constitute a plan which is unfunded and which maintained primarily for the purpose of providing deferred compensation benefits for a select group of management or highly compensated employees within the meaning of Section 202, 301, and 401 of ERISA and the ERISA reporting and disclosure regulation. IN WITNESS WHEREOF, BANC ONE CORPORATION has caused this Plan to be adopted and effective October 1, 1994. Date: March 24, 1995 BANC ONE CORPORATION ------------------------- Attest: By: /s/ ROMAN J. GERBER ------------------------ ---------------------------- Roman J. Gerber Executive Vice President and Secretary -12- EX-10.O 3 EXHIBIT 10(O) 1 Exhibit 10o RICHARD J. LEHMANN In re: Retirement Benefits This letter agreement constitutes the commitment of BANC ONE CORPORATION (BANC ONE) with regard to your retirement, deferred compensation and certain benefits as set forth herein. In consideration of your prior employment agreement with The Valley National Bank of Arizona, the supplemental retirement and other benefits described in this letter will be provided by BANC ONE as a supplement the retirement and other benefits otherwise provided under BANC ONE's Qualified Retirement Plan (the Plan), BANC ONE's Supplemental Employees Retirement Plan (the SERP) and other benefit plans. This commitment is made so as to assure you that the retirement and related benefits to which you are and will be entitled to receive from BANC ONE will be calculated and payable as though you had been employed with BANC ONE during the time you were employed by Citicorp. This special calculation of your retirement and survivor benefit which is being provided to you as a supplemental benefit shall be effective in the event of your death while employed by BANC ONE or in the event your employment by BANC ONE terminates for any reason other than for your gross negligence or malfeasance as an employee of BANC ONE. The following shall constitute the terms and provisions of the supplemental benefit available to you in consideration of your employment with BANC ONE: 1. In computing your retirement benefits under the BANC ONE CORPORATION Retirement Plan and the BANC ONE Supplemental Employees Retirement Plan, your Credited Service shall include all of your service with BANC ONE, Valley National Bank and Citicorp. 2. Your retirement benefits calculated under the Plan shall be the greater benefit as between: a. The sum of i. the frozen accrued benefit under the Retirement Plan for Employees of The Valley National Bank of Arizona plus ii. the benefit accrued under the BANC ONE CORPORATION Retirement Page 1 2 Plan, recognizing Credited Service from and after January 1, 1994, or b. the benefit accrued under the Plan recognizing Credited Service for all eligible periods of employment. 3. Your supplemental retirement benefit shall be calculated using all of your Credited Service with BANC ONE, Valley National Bank of Arizona and Citicorp less the amount payable under the qualified plan as stated in the foregoing paragraph two. 4. Your supplemental plan retirement benefit as determined under paragraph three, shall be calculated in accordance with the terms of the Plan governing early retirement and the optional forms of payment and shall be offset by the actual retirement benefits to be received under the retirement plan or plans of Citicorp. The benefits payable under the retirement plan or plans of Citicorp shall be adjusted as necessary to be actuarially equivalent to the benefit payable under the BANC ONE CORPORATION Retirement Plan using reasonable actuarial assumptions. 5. In the event the amount of your benefit calculated under the BANC ONE CORPORATION Retirement Plan exceeds the benefit limits permitted under Section 415(e) of the Internal Revenue Code, then the excess amount which is payable at the time of such calculation to eligible BANC ONE employees through the BANC ONE CORPORATION Supplemental Employees Retirement Plan will also be payable to you under said Plan. 6. The supplemental benefits to be provided pursuant to this agreement shall also cover benefits payable to your spouse under the BANC ONE CORPORATION Retirement Plan taking into account your service with Citicorp, should you die prior to retirement. 7. For all purposes, you will be considered fully vested in the benefit calculated and payable under the Valley National Supplemental Retirement Plan with the amount payable under said plan being a frozen minimum benefit as set forth in the attachment. If when you retire from BANC ONE, you are at least age fifty five (55) with a minimum of ten (10) years of service (with such service to include service with Valley National Bank of Arizona), you will receive the greater of the benefit calculated under the BANC ONE CORPORATION Supplemental Employees Retirement Plan or said frozen minimum benefit. If however, your Page 2 3 employment by BANC ONE terminates prior to age fifty five (55), you will be eligible to receive only said frozen minimum benefit in addition to the benefit accrued under the BANC ONE CORPORATION Retirement as of the date of termination. 8. Benefits under this supplemental benefit arrangement shall be forfeited in the event that BANC ONE terminates your employment due to your gross negligence or malfeasance. If you terminate employment due to death, retirement or are terminated by BANC ONE for any reason other than those set forth above, you will be fully vested in the benefit described in this agreement. 9. Payments actually made under the BANC ONE CORPORATION Retirement Plan, under the retirement plan or plans of Citicorp or the Supplemental Retirement Plan of the former Valley National Bank of Arizona shall be credited against SERP payments due hereunder so that no duplication of benefits shall occur. All payments due hereunder shall be subject to any applicable withholding taxes. /s/ Richard J. Lehmann October 2, 1995 - ------------------------------- ------------------------------------- Richard J. Lehmann, President /s/ John B. McCoy /s/ Michael W. Hager - ------------------------------- ------------------------------------- John B. McCoy, Chairman and Michael W. Hager, Secretary Chief ExecutiveOfficer Personnel and Compensation Committee Page 3 EX-11 4 EXHIBIT 11 1 EXHIBIT 11 BANC ONE CORPORATION and Subsidaries STATEMENT REGARDING COMPUTATION OF EARNINGS PER COMMON SHARE (000's, except per share amounts)
For the year ended December 31, ------------------------------------------ 1995 1994 1993 ------------ ------------ ------------ PRIMARY: Earnings: Net income $ 1,277,863 $ 1,005,109 $ 1,191,494 Deduct: Dividends on preferred shares 17,487 17,492 17,714 ------------ ------------ ------------ Net income available to common shareholders $ 1,260,376 $ 987,617 $ 1,173,780 ============ ============ ============ Shares: Weighted average common shares outstanding $ 432,093 $ 446,645 $ 439,356 Add: Dilutive effect of outstanding options, as determined by the application of the treasury stock method 1,230 1,473 1,995 ------------ ------------ ------------ Weighted average common shares outstanding, as adjusted $ 433,323 $ 448,118 $ 441,351 ============ ============ ============ PRIMARY EARNINGS PER COMMON SHARE $ 2.91 $ 2.20 $ 2.66 ============ ============ ============ FULLY DILUTED: Earnings: Net income $ 1,277,863 $ 1,005,109 $ 1,191,494 ============ ============ ============ Shares: Weighted average common shares outstanding $ 432,093 $ 446,645 $ 439,356 Add: Dilutive effect of outstanding options, as determined by the application of the treasury stock method 1,945 1,473 2,062 Add: Conversion of preferred stock 9,639 9,642 10,021 ------------ ------------ ------------ Weighted average common shares outstanding, as adjusted $ 443,677 $ 457,760 $ 451,439 ============ ============ ============ FULLY DILUTED EARNINGS PER COMMON SHARE $ 2.88 $ 2.20 $ 2.64 ============ ============ ============
Share information restated to reflect the 10% common stock dividend effective February 21, 1996. EX-12 5 EXHIBIT 12 1 Exhibit 12 BANC ONE CORPORATION and Subsidiaries STATEMENT REGARDING COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES $(thousands)
Years Ended December 31, ----------------------------------------------------------------------- 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 of Bank One, Texas, NA (1) $ 1,910,282 $ 1,518,852 $ 1,770,712 $ 1,341,249 $ 928,947 Fixed charges 736,249 633,569 348,327 321,402 419,274 Less: Capitalized interest (1,671) (1,000) (652) (1,199) (1,732) ------------- ----------- ------------ ------------ ----------- Earnings $ 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 expense $ 683,372 $ 575,734 $ 298,857 $ 278,615 $ 379,708 Portion of rental payments under operating leases deemed to be interest 52,877 57,835 49,470 42,787 39,566 ------------- ----------- ------------ ------------ ----------- Fixed charges $ 736,249 $ 633,569 $ 348,327 $ 321,402 $ 419,274 ============ =========== ============== ============ ============ Ratio of earnings to fixed charges excluding interest on deposits 3.59 x 3.40 x 6.08 x 5.17 x 3.21 x Calculation including interest on deposits: Earnings: Income before income taxes and change in accounting principle and equity in earnings of of Bank One, Texas, NA (1) $ 1,910,282 $ 1,518,852 $ 1,770,712 $ 1,341,249 $ 928,947 Fixed charges 3,026,343 2,307,832 1,826,018 2,318,274 2,955,918 Less: Capitalized interest (1,671) (1,000) (652) (1,199) (1,732) ------------- ----------- ------------ ------------ ----------- Earnings $ 4,934,954 $ 3,825,684 $ 3,596,078 $ 3,658,324 $ 3,883,133 ============ =========== ============== ============ ============ Fixed charges: As detailed above $ 736,249 $ 633,569 $ 348,327 $ 321,402 $ 419,274 Interest on deposits 2,290,094 1,674,263 1,477,691 1,996,872 2,536,644 ------------- ----------- ------------ ------------ ------------ Fixed charges $ 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 1.63 x 1.66 x 1.97 x 1.58 x 1.31 x
(1) Results of Bank One, Texas, NA are consolidated beginning October 1, 1991 EX-13.A 6 EXHIBIT 13(A) 1 EXHIBIT 13a Financial Highlights
Percent 1995 1994 Change - ------------------------------------------------------------------------------- Per common share: Net income $ 2.91 $ 2.20 32.3 % Cash dividends declared 1.24 1.13 9.7 Book value 18.58 16.75 10.9 For the year: $(millions) --------------------------- Total revenue $ 8,971 $ 7,778 15.3 % Net income 1,278 1,005 27.2 At year end: Assets $ 90,454 $ 88,923 1.7 % Deposits 67,320 68,090 (1.1) Total loans and leases 65,329 61,993 5.4 Total equity $ 8,197 $ 7,565 8.4 Weighted average common shares outstanding (000) 433,323 448,118 Common stockholders of record 87,632 82,253 Employees (full-time equivalent) 46,900 48,800
Shares and per share data reflect the 10% common stock dividend payable March 6, 1996 to shareholders of record on February 21, 1996. 2 DISCUSSION OF OUR BUSINESS POISED TO TAKE ADVANTAGE OF A VASTLY CHANGING FINANCIAL SERVICES BUSINESS. We're living in extraordinarily interesting times...an era when competitors become strategic partners, challenges become opportunities and opportunities may be loaded with consequences. In order to thrive, most successful national companies have a set of fundamentals that guide their operations. These fundamentals serve almost like lasers, designed to focus the enterprise in a common direction with a common purpose. While structure and function are likely to change radically over time, it is important that the fundamentals remain relatively constant. This consistency provides a common thread and a clear set of values that serve as a foundation for all activities. Over the years, our core values have remained essentially the same. However, major structure and functional changes are weaving what used to be a confederation of exceptional banks into a national company dedicated to providing improved customer access, service, simplicity and efficiency. In early 1995, senior management endorsed a comprehensive plan which set this new direction for BANC ONE. This plan includes a new, crisper and more customer-focused direction for retail, middle-market, wholesale and business banking, as well as a standard platform for systems and operations. It means an important shift in direction, one that enables us to function like a national company rather than a group of individually managed entities. While BANC ONE has set many of the important records in the industry for the last 27 years, including earning over $1 billion in each of the last three years, it is important to look ahead, not to live in the past, since historic successes have little to do with future accomplishments. We are all in a different business now than we were five years ago, and it is sure to be very different five years from now. The transition we are making is necessary, based on a boundlessly different operating environment we see developing in the financial services business. The result is a far more focused company, dedicated to taking care of our customers. The scope of our competition has changed across the board. Who would have thought just a couple of years ago that AT&T would have 24 million credit card customers today, and that the major automobile companies would also be major credit card competitors? Or that there would be almost $3 trillion invested in mutual funds by the end of last year and that the largest lenders in the country are not commercial banks? Non-banks have replaced large banks as lenders. The fact is that many other companies are trying to attract our most profitable customer segments. In addition, we have yet to see who the major players will be on the Internet or who will thrive in the new world of national electronic banking. The only thing we do know for sure is that the competition is smarter and faster, has better resources and is a lot bigger than it used to be. There simply is no mercy to be shown for companies which can't move fast and adjust to this new operating environment. This phenomenon has enormous implications, not only for BANC ONE, but also for the companies that provide us with product, service and technical support that ultimately deliver information to our customers. For example, 3 customers and investors are currently able to access product and financial information about BANC ONE over the Internet or in person. A FOND FAREWELL TO THE "UNCOMMON PARTNERSHIP" For the first quarter century of our history, BANC ONE operated what we called an "Uncommon Partnership" philosophy. The core of this structure revolved around a highly refined financial management and reporting system which permitted affiliate banks to operate on an almost totally autonomous basis. Products offered and pricing were determined by each bank. The "Uncommon Partnership" served us exceptionally well as we grew from a small organization to the current position we hold in the industry. It enabled each of our bank chief executive officers to have total control over the bank and the market. However, as we grew, it automatically placed roadblocks in the way of taking advantage of a unified effort in any direction. Since affiliates had the option of opting in or out of any decision, the "Uncommon Partnership" also hampered the deployment of the new technology BANC ONE has been developing over the past five years. We were faced with the prospect that there may not be a single product or service being consistently offered by all banks. At the same time, systems support for all the various services being offered across the country reached an unacceptable high watermark of inefficiency. Perhaps most important, it became impossible to communicate to customers about all the benefits of banking with BANC ONE affiliates. Therefore, this "total freedom" mentality stood in the way of progress and actually started to strangle the Company. We realized that there could no longer be over 60 separate entities comprising BANC ONE. We realized that a national perspective was critical to the way we'll operate in the future. However, we also realized that there are a few elements of the old "Uncommon Partnership" that we need to retain. They include the importance of strong, local leadership, the need for local credit decisions and for local management of our people. We need to stay involved in our local communities. These important elements we have retained enable us to differentiate ourselves from other national companies. A NEW STRUCTURE AND FUNCTION FOR BANC ONE Successfully running a national financial services company requires a different mind- and skill-set than for running a highly decentralized banking company. In our particular case, consolidated size plays an important role in being able to take advantage of talent, technology and economies of scale in almost all areas. The new structure for our operations focuses on four major principles: - - Accepting the fact that we now are a national company. The center of this vision is that we are transforming ourselves into a national, financial services company. This objective does not mean a bank with offices nationally-we currently have 1,500 bank offices-but rather a national, financial services company able to meet all of its customers' financial service needs wherever customers happen to be located. - - Recognizing our critical need for standardization. National companies can't survive without a common focus and approach. We have made significant progress 4 developing common approaches in all areas of our operation. Our objective is to make sure that customers know exactly what kind of products we offer and what kind of service they can expect from us across the country. Common approaches also permit us to take advantage of the cost savings associated with using the best practices across the Company. - - Establishing our vision by line of business. A national company has one vision for its major lines of business that operate across markets; it takes advantage of economies of scale; it leverages its size; it's not parochial; it's global. In addition, the vision must be flexible enough to accommodate different needs, based on different customer segments. For example, while the retail function can operate on a national platform, small business financial services can operate from a common platform but can be tailored and delivered, based on individual customer needs, on a local basis. Establishing a common vision is not easy for any company. At one time, under the "Uncommon Partnership," we had 88 visions - one for each bank. We needed a single, clear and inspiring vision for each of the major product lines within the Company. The vision defines how we create more value for our customers than the competition. - - Streamlining all operations services and functions. Operating from national platforms greatly enhances our decision-making process. Now we can make single decisions that affect all affiliates, rather than having to address individual issues in each affiliate. MEASURING OUR NATIONAL SCOPE If we have common products and common systems supporting those products, then we can also have a common performance system to measure results. The performance measuring system includes market potential, actual penetration, and product and customer profitability. When current local and regional activities are aggregated and tabulated by lines of business, BANC ONE plays a major role in a number of areas in the financial services business, including credit card, finance, mortgage, investment banking, brokerage and leasing functions. For example, the indirect lending function in BANC ONE now has some financial relationship with 8,300 of the 22,000 automobile dealers in the country. BANC ONE is one of the leading lenders in the country to business banking clients with sales up to $5 million. We are now the third-largest Visa? card processor and the largest issuer of Visa check cards. BANC ONE is also the third-largest automated clearing house processor in the country. Banc One POS Services Company was formed in April 1995, and was charged with the responsibility for managing all of the Corporation's merchant card processing business. It currently ranks ninth in the U. S. in volume sales processed, and serves over 80,000 merchant customers who processed over $7.5 billion in bank card transactions in 1995. In June 1995, Banc One POS Services entered into an agreement with First Data Resources Inc./CES, forming a joint venture named Banc One Payment Services, LLC. The arrangement enables BANC ONE to focus its attention on building stronger merchant relationships by expanding access to a broader merchant base while taking advantage of 5 state-of-the-art processing capabilities. Banc One POS Services Company is also charged with managing the Corporation's national effort for commercial electronic commerce activities over the Internet. Banc One sponsors a group of proprietary mutual funds in which customers have invested over $11 billion, placing BANC ONE third in the country among the 25 largest banks. Successes in these and other areas are changing the dynamics of our business. As a result, we continually refine and streamline all operating areas to take advantage of these changing dynamics. THE MOVE TO STATE AND NATIONAL CHARTERS At the end of 1994, BANC ONE had 69 well-run, profitable banking organizations operating in an autonomous way. However, what we didn't have was consistency. We needed consistency to be a core strength. It's now hard to copy our consistency, so it differentiates us. Consistency harmonizes the organization and enables our people to provide exceptionally high levels of service to our customers. As recently as the 1990s, it made sense to maintain separate charters for each of our banks. However, the rules were changed when national banking and branching were approved by Congress in 1994. The increasingly high cost of governmental compliance and regulation made it impractical to continue to operate with individual charters. Over the past few years, we have been consolidating our individually chartered banks into a single charter by state. At the beginning of the decade, we had 88 separate banks and approximately $30 billion in assets. At the end of 1995, we had 59 banks and $90 billion in assets. Arizona, Colorado, Oklahoma, Texas and Utah currently operate under single charters and Premier Bank, NA in Louisiana joined BANC ONE as a single charter financial institution on January 2, 1996. Consolidation of charters has also taken place in all other states where BANC ONE operates, and we expect to make significant progress toward the goal of single state charters in 1996. In addition, we anticipate the BANC ONE affiliate banks and other non-bank affiliates could operate under a single charter nationally some time in the future. Regulations are in place or are changing to permit nationally chartered financial institutions. MANAGING CHANGE AS A LINE OF BUSINESS Our objective is to be in a position to anticipate, rather than react to, change. We believe it is virtual, and, therefore, have structured BANC ONE to manage change as a line of business. The scope of this activity is continuous and immense. The numerous standardization, consolidation and reengineering projects currently under way across the Corporation have been brought together and are administered by a single organization called Project One. The Project One group is responsible for streamlining the process used to determine which functions to standardize and consolidate, for establishing priorities and for 6 ensuring that our efforts are leveraged across all projects. The focus of Project One is to standardize, consolidate and reengineer our affiliate banks and the areas that support them. This will accelerate our progress toward becoming a national financial services company. A NEW NATIONAL RETAIL BANKING STRUCTURE The forces of change are reshaping our entire distribution system, management responsibility, product structure and our strategic partnership arrangements. If we are to stand out in an increasingly crowded financial services industry and remain successful, we must continue to concentrate relentlessly on adding value. This requires a constant quest for enhancing service. It impacts every area of the Company, from the roles which branches will play to the redefinition of the role of the chief executive officers in our affiliates. During the year, we focused a great deal of time, attention and talent on reshaping our decentralized retail structure into a national chain of financial services offices. The retail banking units in each affiliate are being centralized as a single retail group across BANC ONE. The move was driven by a need to give us the ability to react swiftly to trends and changes in the marketplace. A centralized structure will move retail business in a single direction quickly while ensuring direct accountability for results. The national structure, which is expected to be completed during 1996, will place a chief retail executive in charge of all retail business for all affiliates. The retail executive position will have at least six key management areas under it: sales, product and segmentation management, distribution, marketing, change management and risk management. In the new structure, regional sales managers representing each geographic area of BANC ONE will report directly to the national sales manager. A group of senior managers and retail heads from around the Company, called the Retail Operating Group, is presiding over this transition. The group includes statewide retail heads and representatives of mortgage, securities, operations and systems groups. The transition signals a move from a pure geographic focus to a customer focus. A great deal of work has already been completed by the Retail Operating Group. Standard operating systems have been identified and put in place. Key support management has been identified and is in place, functioning to support the retail effort. National sales training has been completed from the ranks of executive management to all contact staff. Several national sales programs have been completed across the retail group with encouraging results. For example, the "Smart Choices" campaign challenged all Bank One branches with a $200 million goal in mutual fund and annuity sales over a 60-day period. The banking offices exceeded the goal by 153 percent and generated $305 million in sales. COMMERCIAL BANKING INITIATIVES The changing character of our national branch delivery system has also transformed the role of the chief executive officers responsible for the branches of our affiliates. In the 7 1980s, our CEOs were primarily responsible for a bank in a defined market, and had direct management responsibility for employees, products and pricing of all services in that market. This was a well-defined economic unit. Operations consolidation and standardization permit our CEOs to concentrate more on assessing and meeting the financial needs of their customers and much less on systems and operations management. Local presidents of BANC ONE affiliates concentrate on the commercial side of their affiliate's business. They also act as the Company's senior representatives in their areas and will ensure that strategic partners, like the Company's mortgage and finance affiliates, continue to act as one unit with the retail business in their affiliates. Keeping commercial lending close to the marketplace is a distinguishing characteristic of the new structure. In addition, bank staff in each of the offices now concentrate on determining the financial needs of their customers and fulfilling those needs with a wider range of products. This also requires a level of selling skills not normally associated with bankers. Therefore, extensive sales training has become an important element in future operations. There is every indication that this trend will continue as banks become full, financial service providers in the future. In addition to being known for our expertise in retail and middle-market banking, we also want to be an exceptional provider serving other niche markets, including middle-market corporate banking, merchant and investment banking, mortgage banking, bank card, trust and cash management services. These services have all been developed to be complemented by the affiliate network and distribution system. Banc One Capital Corporation's objective has been to offer alternative funding sources for current and prospective corporate customers. Banc One Capital works in conjunction with the corporate banking staff to expand and augment banking relationships. The company has grown from a staff of 25 in 1989 to a staff that exceeds 250 people today. They have successfully expanded their business by offering a wider range of funding options, which have enabled us to redefine the traditional role of corporate lending officers from primarily developing a commercial lending portfolio to establishing a total financing and cash management relationship with customers. We believe there still is ample opportunity in corporate banking, particularly aimed at companies in the middle market with sales of $10 million to $125 million. We have found that companies in this group traditionally are looking for a financial relationship with a partner who can provide counsel and solutions, not just funding that is available from many non-bank sources. Our strategy is to help these companies by building new capabilities within BANC ONE wherever possible. In addition, since business lending decisions are made by each affiliate on a local basis, we need to ensure that all lenders are following the same set of "blueprints" in evaluating credit. Three years ago, the Corporation created a corporate credit development group and charged it with the development of a systemwide credit training program. It includes a three-tier credit education program designed to reinforce our credit culture. It starts with formal credit training for all lenders and ends with a program of continuing education for all commercial credit employees. Nearly 1,500 corporate bankers are in the process of completing this training. 8 SUBSIDIARY ACTIVITIES Finance One Corporation is BANC ONE's fast-growing, non-bank finance subsidiary. It consists of Banc One Financial Services, Inc., a consumer finance company with 72 offices in 24 states, and Banc One Leasing Corporation, which provides commercial finance services from 27 offices in 13 states. Banc One Financial Services has $913 million in consumer loans on the books, a 44 percent increase in new loans over a year ago. The company specializes in helping customers who have difficulty qualifying for traditional bank loans, often because they already have a high level of debt. By consolidating and restructuring their loans, Banc One Financial Services puts them on an affordable payment schedule. The loans are marketed through the branches as well as by direct mail promotion with follow-up via telemarketing. Banc One Leasing, with total assets of $455 million, realized a 35 percent increase in new leasing volume in 1995 compared to 1994. Most of its business involves equipment leases to Bank One commercial clients who are referred by the affiliate banks. However, the company is planning significant expansion of its direct business nationwide. BANC ONE INVESTMENT MANAGEMENT AND TRUST GROUP 1995 was a year of significant progress for Banc One Investment Management and Trust Group. The group reorganized into a national line of business, created a common vision and implemented a 1995 tactical plan which resulted in a significant boost of the group's earnings contribution to BANC ONE CORPORATION. The One Group(R) Family of Mutual Funds, advised by the investment affiliate of Banc One Investment Management and Trust Group, called Banc One Investment Advisors Corporation, continued its growth and reputation as one of the premier mutual fund sources in the nation. In 1995, The One Group grew to $11 billion in assets under management from conversions of existing mutual funds of newly acquired BANC ONE affiliates, increased sales and strong investment performance. The One Group continued its strong investment performance from 1994. Of 23 funds in The One Group, almost half performed in the top third of their Lipper Universe in 1995. One of the funds, The One Group Income Equity Fund, placed in the top 15 of all funds in the equity income category for the second year in a row and was cited by The Wall Street Journal. As part of its nationalization plan, Banc One Investment Management and Trust Group combined 11 independently operated and geographically scattered Banc One organizations. These actions resulted in expense savings of $5 million in 1995 and will result in $7 million annualized expense savings in 1996. By the end of 1995, 12 investment management and trust operating systems were consolidated into one set of common systems in one location. As a result, operations expense savings exceeded expectations by $2 million. The full benefits of these consolidation and standardization efforts are expected to be realized in 1996 and beyond. 9 With continued consolidation and nationalization, an enhanced sales and service culture and solid investment performance, Banc One Investment Management and Trust Group is counting on becoming a key contributor to BANC ONE's success in the future. ELECTRONIC BANKING AND "SURFING" THE INTERNET While there are legitimate questions about who the winning service providers are likely to be on the Internet, there is no question about the future potential of this rapidly developing international electronic highway. New major players, including Microsoft, Visa, Intuit and others, almost guarantee that the Internet will develop into an integral avenue for all types of electronic commerce, including financial services. BANC ONE is working with a number of strategic partners to ensure that we are ready for any Internet opportunities that are sure to develop. These partners include well-known, major corporations like Visa, as well as new business start-ups specifically formed to develop services for Internet providers. For example, we are working with a Massachusetts company to bring commerce to the Internet, the vast network of interconnected computers that until recently offered little or no security for business transactions. The security issue has been solved by Open Market, Inc., a Cambridge, Massachusetts-based technology company that is also providing BANC ONE with a spot on the World Wide Web, the graphics-based, easily navigable portion of the Internet that many businesses are focusing on as a way to reach customers. The Internet is an open network, meaning nobody owns it or controls what is on it. Because it is so wide open, businesses need to make sure the information they send out is secure and received by the party it is intended to reach. The first application of the new technology is Subscribe96, a system that helps libraries use the Internet to automate the way they order and pay for magazine and journal subscriptions. The system, developed with RoweCom, a service provider for libraries, routes subscription orders to BANC ONE's web site and then to the appropriate publishers. Payment orders are then sent to BANC ONE which routes debits and credits to the libraries' and publishers' banks as automated clearing house transactions. Future Internet projects could include corporate purchasing of supplies, electronic bill paying and automated applications for financial services. BANC ONE is also experimenting with a range of home financial service programs to make sure we stay on the leading edge of these developments. We are now jointly experimenting with a screen phone, home information system with GTE and Visa in Dallas, Texas. This project permits customers with special phones which include displays to complete banking, retailing and other transactions from home. Customers in Columbus, Ohio, can use the Prodigy(R) system to complete banking transactions with Bank One. It is our belief that customers will want to use multiple devices, including personal computers, touch-tone phones and screen phones, to access BANC ONE in the future. Therefore, we are developing our systems to accommodate a multitude of access devices to serve the expected range of individual needs. 10 BANC ONE CORPORATION and Subsidiaries - -------------------------------------------------------------------------------- FINANCIAL REVIEW
PAGE ---- MANAGEMENT'S DISCUSSION AND ANALYSIS I. Overview of Operations....................................................................... 22 II. Net Interest Income.......................................................................... 22 III. Non-Interest Income and Non-Interest Expense................................................. 27 IV. Balance Sheet Analysis....................................................................... 29 V. Asset Liability Management................................................................... 34 VI. Capital...................................................................................... 39 VII. Fourth Quarter Review........................................................................ 40 VIII. Comparison of 1994 versus 1993............................................................... 40 Ten Year Performance Summary.......................................................................... 42 Consolidated Quarterly Financial Data................................................................. 44 CONSOLIDATED BALANCE SHEET............................................................................ 46 CONSOLIDATED STATEMENT OF INCOME...................................................................... 47 CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY............................................. 48 CONSOLIDATED STATEMENT OF CASH FLOWS.................................................................. 49 NOTES TO FINANCIAL STATEMENTS Note 1 Summary of Significant Accounting Policies........................................... 50 Note 2 Affiliations, Pending Affiliations and Divestitures.................................. 54 Note 3 Securities and Investment Products................................................... 55 Note 4 Loans and Leases..................................................................... 59 Note 5 Allowance for Credit Losses.......................................................... 60 Note 6 Bank Premises, Equipment and Leases.................................................. 61 Note 7 Short-Term Borrowings................................................................ 62 Note 8 Long-Term Borrowings................................................................. 63 Note 9 Stock Dividends and Convertible Preferred Stock...................................... 63 Note 10 Dividend and Capital Restrictions.................................................... 64 Note 11 Income Taxes......................................................................... 64 Note 12 Disclosures About Fair Value of Financial Instruments................................ 65 Note 13 Pledged Securities and Contingent Liabilities........................................ 68 Note 14 Employee Benefit Plans............................................................... 68 Note 15 Stock Compensation................................................................... 70 Note 16 Related Party Transactions........................................................... 71 Note 17 Supplemental Disclosures for Statement of Cash Flows................................. 72 Note 18 Parent Company Financial Statements.................................................. 72 REPORT OF INDEPENDENT ACCOUNTANTS..................................................................... 75
21 11 BANC ONE CORPORATION and Subsidiaries - -------------------------------------------------------------------------------- MANAGEMENT'S DISCUSSION AND ANALYSIS (UNAUDITED) I. OVERVIEW OF OPERATIONS "The Corporation" is defined as parent company only. "BANC ONE" is defined as the Corporation and all significant majority-owned subsidiaries. Net income for 1995 was $1.3 billion, or $2.91 per share, increasing from $1.0 billion, or $2.20 per share, in 1994. Results for 1994 were significantly impacted by securities losses, merger and litigation expenses and operations consolidation charges (a total of $271 million, after tax). As discussed further on the following pages, 1995 results were favorably impacted by significant earning asset generation in 1995 and 1994. BANC ONE's sources of funding, like that of the rest of the banking industry, are in the process of changing from traditional commercial and retail bank deposits to a mix of such deposits, borrowings and loan sales with servicing retained. As a result, average earning assets were approximately equal in 1995 to the 1994 level due to numerous loan sales in late 1994 and throughout 1995. Net interest income declined only slightly, despite these sales. The provision for credit losses increased during 1995 reflecting loan growth and cyclical behavior of consumer credit. Non-interest income increased $540 million and non-interest expense decreased $136 million during 1995, as further described on the following pages. Key performance measures were strong with return on average assets increasing to 1.47% from 1.15% in 1994. The 1995 return on average common equity increased to 16.77% compared to 13.35% in 1994. The five year performance summary below and the ten year performance summary on page 42 provide additional operating statistics. FIVE YEAR PERFORMANCE SUMMARY
$(MILLIONS, EXCEPT FOR PER SHARE DATA) 1995 1994 1993 1992 1991 ------------------------------------------------------------------------------------------------ Net income....................... $1,277.9 $1,005.1 $1,191.5 $ 922.2 $ 703.4 Total revenue.................... 8,970.9 7,777.9 7,547.1 7,740.7 7,223.9 Net income per common share(1)... $ 2.91 $ 2.20 $ 2.66 $ 2.06 $ 1.65 Return on average assets......... 1.47% 1.15% 1.50% 1.20% 1.10% Return on average common equity......................... 16.77 13.35 17.58 15.14 13.53 Average common equity to average assets......................... 8.64% 8.50% 8.40% 7.74% 7.95% At year end: Total assets..................... $ 90,454 $ 88,923 $ 84,835 $ 81,305 $ 78,179 Long-term borrowings............. $ 2,720 $ 1,866 $ 1,805 $ 1,397 $ 983
(1) Amounts have been restated to reflect the 10% common stock dividend payable March 6, 1996 to shareholders of record on February 21, 1996. - -------------------------------------------------------------------------------- II. NET INTEREST INCOME BANC ONE's interest income increased 10.1% to $7.1 billion and interest expense increased 32.1% to $3.0 billion from 1994 to 1995, resulting in a slight decline in net interest income. Earning asset balances remained essentially constant when compared to 1994 and the increase in interest income was primarily due to a significant shift in asset mix. Average loans and leases grew 6.2% to $63.5 billion in 1995 from $59.8 billion in 1994, while average investment security balances declined 19.6% to $14.8 billion in 1995 from $18.3 billion in 1994. Yields in all major loan portfolios increased from 1994 to 1995, generally reflecting the higher level of market interest rates in 1995 as compared to 1994. Margins in some loan portfolios and product lines showed evidence of declining spreads due to the impact of competitive pricing pressure and marketing efforts which utilized introductory pricing to achieve growth in balances. Loan interest income in 1995 was also negatively impacted by a lower contribution from tax refund anticipation loan products, largely offset by higher fee income, due primarily to changes in Internal Revenue Service regulations governing electronic tax filing programs. As discussed above, BANC ONE relies on both traditional bank funding sources and loan sales with servicing retained to fund the origination of earning assets. Most of the loan sales during 1995 and 1994 include arrangements whereby BANC ONE continues to service the loans sold, to yield a specified amount of interest to investors with revenue in excess of net 22 12 BANC ONE CORPORATION and Subsidiaries - -------------------------------------------------------------------------------- charge-offs and such interest to investors recorded as servicing income. BANC ONE's net income is substantially unaffected by these loan sales; however, classifications within the income statement are 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.
YEAR ENDED DECEMBER 31, 1995 YEAR ENDED DECEMBER 31, 1994 ----------------------------------- ----------------------------------- EFFECT OF PRO- EFFECT OF PRO- CREDIT CARD FORMA CREDIT CARD FORMA $ (MILLIONS) REPORTED SALES ADJUSTED REPORTED SALES ADJUSTED --------------------------------------------------------------------------------------------------- Income statement: Net interest income -- fully taxable equivalent........... $4,209 $ 308 $ 4,517 $4,288 $ 115 $ 4,403 Provision for credit losses............... 457 139 596 242 46 288 Non-interest income.... 1,870 (163) 1,707 1,330 (68) 1,262 Non-interest expense... 3,632 6 3,638 3,768 1 3,769 Net income............. $1,278 $ 1,278 $1,005 $ 1,005 Other data: Credit card balances: Ending at December 31,.................. $7,665 $ 3,440 $11,105 $5,924 $ 2,680 $ 8,604 Average for year....... 6,438 2,990 9,428 6,253 931 7,184 Net charge-offs as a percentage of average credit cards......... 3.75% 4.65% 4.03 % 3.52% 4.94% 3.70% Credit card delinquencies over 90 days as a percentage of ending credit cards................ 1.54% 1.86% 1.64 % 1.24% 1.52% 1.33% Net interest margin.... 5.37% 10.30% 5.56 % 5.48% 12.35% 5.56%
---------------------------------------------------------- The increase in interest expense reflects a rise in the average rate paid on interest-bearing liabilities from 3.49% in 1994 to 4.61% in 1995. Higher funding costs were attributable to higher market interest rates and to a shift in the composition of BANC ONE's retail funding base 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 1995 and ensured continued access to retail funds at rates which remained below large liability funding costs. 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 market 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 did not significantly impact net interest income. A detailed explanation of the asset liability management process is found beginning on page 34. Off-balance sheet investment products, primarily interest rate swaps, decreased interest income by $145 million in 1995 compared with increasing interest income $22 million in 1994. Off-balance sheet investment products increased deposit and other borrowing costs by $59 million in 1995 and decreased such costs $72 million during 1994. 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 1996. BANC ONE's net interest income and the net interest margin declined from 1994 to 1995, however, both increased during each of the last three quarters of 1995 primarily reflecting the earning asset mix changes discussed above. 23 13 BANC ONE CORPORATION and Subsidiaries - -------------------------------------------------------------------------------- FIVE YEAR SUMMARY -- AVERAGE BALANCES, INCOME AND EXPENSE, YIELDS AND RATES(1)(4)
1995 1994 ----------------------------------------- -------------------------- AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ $(THOUSANDS) BALANCE EXPENSE RATE BALANCE EXPENSE - ----------------------------------------------------------------------------------------------------------------------------- ASSETS: Short-term investments........................... $ 950,833 $ 59,862 6.30% $ 1,113,465 $ 53,388 SECURITIES:(3) Taxable........................................ 12,791,932 834,808 6.53 16,010,679 876,420 Tax-exempt..................................... 1,964,544 171,626 8.74 2,331,794 202,042 ------------- ------------ ----------- ---------- TOTAL SECURITIES............................... 14,756,476 1,006,434 6.82 18,342,473 1,078,462 LOANS AND LEASES:(2) Commercial, financial and agricultural......... 17,439,240 1,426,070 8.18 15,533,301 1,174,391 Real estate.................................... 19,941,310 1,796,487 9.01 18,086,356 1,538,546 Consumer, net.................................. 18,209,617 1,710,328 9.39 18,768,362 1,614,093 Credit card.................................... 6,437,512 1,074,026 16.68 6,253,282 989,165 Leases, net.................................... 1,479,726 107,143 7.24 1,174,142 88,549 Allowance for credit losses.................... (900,061) (958,989) ------------- ------------ ----------- ---------- Net loans and leases............................. 62,607,344 6,114,054 9.77 58,856,454 5,404,744 Note receivable from FDIC........................ ------------- ------------ ----------- ---------- Total earning assets............................. 78,314,653 7,180,350 9.17 78,312,392 6,536,594 Other assets(3).................................. 8,736,993 8,777,863 ------------- ----------- Total assets..................................... $ 87,051,646 $87,090,255 ============ ============ LIABILITIES: DEPOSITS: Non-interest bearing demand.................. $ 12,968,315 $13,460,795 Interest bearing demand...................... 8,263,124 175,734 2.13 9,277,460 168,959 Savings...................................... 6,108,441 181,323 2.97 7,703,848 191,253 Money market savings......................... 13,986,972 565,241 4.04 12,307,266 360,314 Time deposits: CDs less than $100,000....................... 19,181,386 1,089,761 5.68 17,718,121 753,590 CDs $100,000 and over: Domestic................................... 3,724,043 190,453 5.11 3,575,446 144,464 Foreign.................................... 1,531,360 87,582 5.72 1,298,988 55,683 ------------- ------------ ----------- ---------- TOTAL DEPOSITS................................... 65,763,641 2,290,094 3.48 65,341,924 1,674,263 BORROWED FUNDS: Short-term................................... 9,302,237 518,682 5.58 10,811,619 442,767 Long-term.................................... 2,339,092 162,692 6.96 1,834,439 131,811 ------------- ------------ ----------- ---------- TOTAL BORROWED FUNDS............................. 11,641,329 681,374 5.85 12,646,058 574,578 ------------- ------------ ----------- ---------- TOTAL INTEREST BEARING LIABILITIES............... 64,436,655 2,971,468 4.61 64,527,187 2,248,841 Other liabilities................................ 1,879,174 1,451,990 ------------- ----------- TOTAL LIABILITIES................................ 79,284,144 79,439,972 Preferred stock.................................. 249,855 249,900 Common stockholders' equity...................... 7,517,647 7,400,383 ------------- ----------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY....... $ 87,051,646 $87,090,255 ============ ============ NET INTEREST INCOME.............................. 4,208,882 5.37 4,287,753 Provision for credit losses...................... (457,499) (.58) (242,269) ------------ ------ ---------- NET FUNDS FUNCTION............................... $ 3,751,383 4.79% $4,045,484 =========== ===== =========== YIELD/ $(THOUSANDS) RATE - --------------------------------------------------------------- ASSETS: Short-term investments........................... 4.79% SECURITIES:(3) Taxable........................................ 5.47 Tax-exempt..................................... 8.66 TOTAL SECURITIES............................... 5.88 LOANS AND LEASES:(2) Commercial, financial and agricultural......... 7.56 Real estate.................................... 8.51 Consumer, net.................................. 8.60 Credit card.................................... 15.82 Leases, net.................................... 7.54 Allowance for credit losses.................... Net loans and leases............................. 9.18 Note receivable from FDIC........................ Total earning assets............................. 8.35 Other assets(3).................................. Total assets..................................... LIABILITIES: DEPOSITS: Non-interest bearing demand.................. Interest bearing demand...................... 1.82 Savings...................................... 2.48 Money market savings......................... 2.93 Time deposits: CDs less than $100,000....................... 4.25 CDs $100,000 and over: Domestic................................... 4.04 Foreign.................................... 4.29 TOTAL DEPOSITS................................... 2.56 BORROWED FUNDS: Short-term................................... 4.10 Long-term.................................... 7.19 TOTAL BORROWED FUNDS............................. 4.54 TOTAL INTEREST BEARING LIABILITIES............... 3.49 Other liabilities................................ TOTAL LIABILITIES................................ Preferred stock.................................. Common stockholders' equity...................... TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY....... NET INTEREST INCOME.............................. 5.48 Provision for credit losses...................... (.31) ----- NET FUNDS FUNCTION............................... 5.17% ======
(1) Income amounts are presented on a fully taxable equivalent basis (FTE), which is defined as income on earning assets that is subject to either a reduced rate or zero rate of income tax, adjusted to give effect to the appropriate incremental federal income tax rate and adjusted for non-deductible carrying costs, where applicable. Where appropriate, yield calculations include these adjustments. The federal statutory rate was 35% for 1995, 1994 and 1993 and 34% for other years presented. (2) Non-accrual 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. (4) All average balances are calculated on the basis of daily averages. 24 14 BANC ONE CORPORATION and Subsidiaries - --------------------------------------------------------------------------------
1993 1992 1991 - ------------------------------------------- ------------------------------------------- --------------------------- AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ BALANCE EXPENSE RATE BALANCE EXPENSE RATE BALANCE EXPENSE - --------------------------------------------------------------------------------------------------------------------------- $ 1,319,605 $ 44,892 3.40% $ 3,216,327 127,345 3.96% $ 3,183,564 $ 191,385 15,004,127 846,403 5.64 15,041,378 1,032,202 6.86 10,965,094 919,036 2,042,759 194,441 9.52 2,065,168 216,009 10.46 2,311,533 255,385 - ----------- ----------- ----------- ----------- ----------- ----------- 17,046,886 1,040,844 6.11 17,106,546 1,248,211 7.30 13,276,627 1,174,421 14,598,413 1,176,101 8.06 15,545,313 1,267,719 8.15 14,824,496 1,432,591 16,772,290 1,472,321 8.78 15,230,418 1,411,004 9.26 12,291,283 1,254,689 15,657,193 1,479,106 9.45 13,201,395 1,414,312 10.71 9,768,011 1,167,571 5,128,076 848,978 16.56 4,537,506 786,934 17.34 3,274,340 607,075 1,020,028 83,882 8.22 991,395 87,740 8.85 916,623 98,107 (975,743) (952,868) (771,424) - ----------- ----------- ----------- ----------- ----------- ----------- 52,200,257 5,060,388 9.69 48,553,159 4,967,709 10.23 40,303,329 4,560,033 213,502 18,808 - ----------- ----------- ----------- ----------- ----------- ----------- 70,566,748 6,146,124 8.71 68,876,032 6,343,265 9.21 56,977,022 5,944,647 8,878,172 8,197,518 7,056,261 - ----------- ----------- ----------- $79,444,920 $77,073,550 $64,033,283 ============ ============ ============ $12,779,430 $11,662,949 $ 8,419,318 8,757,283 141,064 1.61 8,145,956 183,521 2.25 5,643,601 238,075 7,244,979 181,366 2.50 5,595,777 180,630 3.23 3,674,076 179,176 12,140,688 320,608 2.64 12,665,456 423,884 3.35 10,313,415 521,214 17,826,413 676,142 3.79 19,968,163 993,774 4.98 18,414,440 1,267,710 3,555,761 135,002 3.80 4,386,790 192,715 4.39 4,796,718 305,771 694,585 23,509 3.38 560,578 22,348 3.99 423,227 24,698 - ----------- ----------- ----------- ----------- ----------- ----------- 62,999,139 1,477,691 2.35 62,985,669 1,996,872 3.17 51,684,795 2,536,644 6,480,247 196,845 3.04 5,558,597 196,177 3.53 5,091,734 292,133 1,630,343 101,215 6.21 1,073,515 80,777 7.52 910,266 85,838 - ----------- ----------- ----------- ----------- ----------- ----------- 8,110,590 298,060 3.67 6,632,112 276,954 4.18 6,002,000 377,971 - ----------- ----------- ----------- ----------- ----------- ----------- 58,330,299 1,775,751 3.04 57,954,832 2,273,826 3.92 49,267,477 2,914,615 1,404,471 1,223,979 1,056,315 - ----------- ----------- ----------- 72,514,200 70,841,760 58,743,110 253,385 264,811 202,704 6,677,335 5,966,979 5,087,469 - ----------- ----------- ----------- $79,444,920 $77,073,550 $64,033,283 ============ ============ ============ 4,370,373 6.19 4,069,439 5.91 3,030,032 (388,261) (.55) (630,731) (.92) (611,851) ----------- ----------- ----------- ----------- ----------- $ 3,982,112 5.64% $ 3,438,708 4.99% $ 2,418,181 =========== ====== =========== ====== =========== COMPOUND ANNUAL - ----------- ------------------------ AVERAGE YIELD/ AVERAGE INCOME/ BALANCE RATE BALANCE EXPENSE - --------------------------------------------------------------------- $ 1,319,605 6.01% (13.63)% (18.26)% 15,004,127 8.38 8.03 1.67 2,042,759 11.05 (5.32) (10.11) - ----------- 17,046,886 8.85 5.53 (1.05) 14,598,413 9.66 4.17 (1.27) 16,772,290 10.21 13.83 9.79 15,657,193 11.95 15.49 9.56 5,128,076 18.54 21.87 19.09 1,020,028 10.70 10.46 1.39 (975,743 - ----------- 52,200,257 11.31 11.65 7.41 8.81 - ----------- 70,566,748 10.43 9.51 5.34 8,878,172 6.63 - ----------- $79,444,920 9.20 =========== $12,779,430 8,757,283 4.22 11.70 (4.92) 7,244,979 4.88 13.11 .48 12,140,688 5.05 11.74 2.88 17,826,413 6.88 3.15 (3.82) 3,555,761 6.37 (6.43) (14.11) 694,585 5.84 39.26 30.95 - ----------- 62,999,139 4.91 7.71 (2.86) 6,480,247 5.74 15.23 7.75 1,630,343 9.43 25.98 16.82 - ----------- 8,110,590 6.30 16.98 9.55 - ----------- 58,330,299 5.92 8.27 (.72) 1,404,471 - ----------- 72,514,200 8.97 253,385 60.15 6,677,335 11.17 - ----------- $79,444,920 9.20% =========== 5.31 11.37 (1.07) (.52) ----------- -------- 4.24% 13.56% ====== =========
25 15 BANC ONE CORPORATION and Subsidiaries - -------------------------------------------------------------------------------- RATE-VOLUME ANALYSIS(1, 2)
1995-94 1994-93 --------------------------------------- ------------------------------------ CHANGE IN CHANGE IN INCOME/ RATE VOLUME INCOME/ RATE VOLUME $(THOUSANDS) EXPENSE EFFECT EFFECT EXPENSE EFFECT EFFECT - --------------------------------------------- EARNING ASSETS: Short-term investments..................... $ 6,474 $ 15,048 $ (8,574) $ 8,496 $ 16,302 $ (7,806) Securities:(5) Taxable.................................... (41,612) 151,894 (193,506) 30,017 (25,597) 55,614 Tax exempt................................. (30,416) 1,655 (32,071) 7,601 (18,401) 26,002 ----------- --------- --------- --------- --------- -------- Total securities........................... (72,028) 153,549 (225,577) 37,618 (43,998) 81,616 Loans and Leases:(3)(4) Commercial................................. 251,679 100,519 151,160 (1,710 ) (74,664) 72,954 Real estate................................ 257,941 94,234 163,707 66,225 (46,569) 112,794 Consumer, net.............................. 96,235 145,369 (49,134) 134,987 (140,765) 275,752 Credit card................................ 84,861 55,161 29,700 140,187 (39,201) 179,388 Leases, net................................ 18,594 (3,655) 22,249 4,667 (7,328) 11,995 ----------- --------- --------- --------- --------- -------- Total loans and leases....................... 709,310 391,628 317,682 344,356 (308,527) 652,883 TOTAL EARNING ASSETS......................... 643,756 560,225 83,531 390,470 (336,223) 726,693 INTEREST BEARING LIABILITIES: Demand-interest bearing...................... 6,775 26,471 (19,696) 27,895 19,174 8,721 Savings...................................... (9,930) 33,662 (43,592) 9,887 (1,516) 11,403 Money market savings......................... 204,927 150,812 54,115 39,706 35,253 4,453 Time deposits: CDs less than $100,000................... 336,171 269,810 66,361 77,448 81,579 (4,131) CDs $100,000 and over: Domestic............................. 45,989 39,769 6,220 9,462 8,711 751 Foreign.............................. 31,899 20,777 11,122 32,174 7,544 24,630 ----------- --------- --------- --------- --------- -------- Total deposits 615,831 541,301 74,530 196,572 150,745 45,827 Borrowed funds: Short-term................................. 75,915 143,954 (68,039) 245,922 84,231 161,691 Long-term.................................. 30,881 (4,340) 35,221 30,596 17,042 13,554 ----------- --------- --------- --------- --------- -------- Total borrowed funds......................... 106,796 139,614 (32,818) 276,518 101,273 175,245 ----------- --------- --------- --------- --------- -------- Total interest bearing liabilities........... 722,627 680,915 41,712 473,090 252,018 221,072 ----------- --------- --------- --------- --------- -------- Net interest income.......................... $ (78,871) $(120,690) $ 41,819 $(82,620 ) $(588,241) $505,621 ========= ========= ========= ========== ========= ========
(1) Fully taxable equivalent basis. The Federal statutory rate was 35% for all years presented. (2) The change not solely due to volume or rate has been prorated into rate and volume components. (3) Interest income on loans and leases includes $131 million, $156 million and $143 million of credit card fees in 1995, 1994 and 1993, respectively. Other fees included in interest income are not material. (4) Non-accrual loans and related income are included in their respective loan categories. (5) Average securities balances are based on amortized historical cost, excluding SFAS 115 adjustments to fair value which are included in other assets. 26 16 BANC ONE CORPORATION and Subsidiaries - -------------------------------------------------------------------------------- III. NON-INTEREST INCOME AND NON-INTEREST EXPENSE NON-INTEREST INCOME
INCREASE $(THOUSANDS) 1995 1994 (DECREASE) -------------------------------------------------------------------------------- Income from fiduciary activities...... $ 239,411 $ 232,700 $ 6,711 Service charges on deposit accounts... 544,697 483,884 60,813 Loan processing and servicing income: Mortgage banking.................... 78,185 74,519 3,666 Credit card and merchant processing fees............................. 193,479 204,442 (10,963) Loan servicing income............... 249,137 103,531 145,606 ---------- ---------- ---------- Total loan processing and servicing income.............................. 520,801 382,492 138,309 Other income: Insurance........................... 84,808 69,567 15,241 Securities.......................... 50,602 48,479 2,123 Investment banking.................. 30,857 30,621 236 Income from management of collection pools............................ 23,436 21,035 2,401 Other............................... 347,511 321,799 25,712 ---------- ---------- ---------- Total other income.................... 537,214 491,501 45,713 ---------- ---------- ---------- Non-interest income before securities gains (losses)...................... 1,842,123 1,590,577 251,546 Securities gains (losses)............. 27,847 (261,052) 288,899 ---------- ---------- ---------- TOTAL NON-INTEREST INCOME............. $1,869,970 $1,329,525 $540,445 ========== ========== ==========
---------------------------------------------------------- Income from fiduciary activities increased $7 million or 3% during 1995 due primarily to an increase in investment management fees resulting from increased funds under management in proprietary mutual funds. Service charges on deposit accounts increased $61 million or 12.6% during 1995. The increase is attributable to an increase in fees on overdrafts as a result of a change in check processing made in June 1994, an overall increase in fees per transaction in 1995 and improved service fee collection in 1995. Mortgage banking income increased $4 million during 1995 due to the $5.3 million impact of adoption of SFAS 122 "Accounting for Mortgage Servicing Rights." Credit card and merchant processing fees decreased by $11 million during 1995 after reflecting the impact of credit card sales. Credit card interchange and merchant processing volume increased $10 million and $27 million respectively in 1995. Offsetting these increases was the effect of credit card sales with servicing retained which resulted in $49 million in credit card fee income being reported as loan servicing income in 1995. Loan servicing income increased $146 million or 141% during 1995. The increase is attributable to an increase in servicing fee income related to sales of loans with servicing retained. Credit card sales, along with a $1 billion student loan sale in September 1994 and a consumer loan sale of $1.2 billion in April 1995, contributed to the increase. Insurance income increased $15 million or 22% in 1995. The increase is attributable to improved sales during 1995 related to credit life insurance policies and annuity products as a result of customers' continued focus on tax deferred investment products. 27 17 BANC ONE CORPORATION and Subsidiaries - -------------------------------------------------------------------------------- Other non-interest income increased $26 million or 8% in 1995. The following transactions contributed to the increase:
$ (MILLIONS) -------------------------------------------------------------------------------- $47 Gain recognized on the 1995 sale of four Michigan banks 6 Increase from 1994 to 1995 from the gain on the sale of credit card processing software licenses 21 Gain on the sale of branches during 1995 10 Increase in fees resulting from a shift in 1995 from originating tax refund anticipation loans to receiving fees for arranging for direct deposit of income tax refunds 35 Net change in the gain on sale of loans and other assets (49) Gain recognized on the 1994 sale of $1 billion of student loans (52) Loss related to the sale of $1.2 billon of low yielding consumer loans in 1995 8 Computer processing and other increases --- $26 Total increase in other non-interest income ====
The change in securities gains (losses) is primarily due to sales of $8 billion in U.S. Treasury and Agency securities during 1994 to reduce liability sensitivity which resulted in an aggregate pretax loss of $285 million. NON-INTEREST EXPENSE
INCREASE $(THOUSANDS) 1995 1994 (DECREASE) -------------------------------------------------------------------------------- Salary and related costs.............. $1,750,517 $1,753,672 $ (3,155) Net occupancy expense, exclusive of depreciation........................ 164,456 182,223 (17,767) Equipment expense..................... 104,030 119,270 (15,240) Taxes other than income and payroll... 87,805 56,628 31,177 Depreciation and amortization......... 292,522 356,762 (64,240) Outside services and processing....... 426,897 424,559 2,338 Marketing and development............. 171,163 178,905 (7,742) Communication and transportation...... 274,694 245,455 29,239 Other: Foreclosed property expense, net.... (3,926) (2,636) (1,290) FDIC Insurance...................... 81,144 141,778 (60,634) Other............................... 282,337 311,363 (29,026) ---------- ---------- ---------- Total other expense................... 359,555 450,505 (90,950) ---------- ---------- ---------- TOTAL NON-INTEREST EXPENSE............ $3,631,639 $3,767,979 $(136,340) ========== ========== ==========
---------------------------------------------------------- Salaries and related costs decreased $3 million or .2% in 1995 as a result of the recognition of $36 million in severance costs in 1994 related to operations consolidation, offset by merit and other pay increases and a continued shift to incentive compensation in 1995. Net occupancy expense, exclusive of depreciation, decreased $18 million or 10% in 1995. The decrease is primarily attributable to $12 million of expenses related to operations consolidation that were recognized during 1994. Equipment expense decreased $15 million or 13% in 1995. The decrease is primarily due to $6.4 million in operations consolidation expenses recognized during 1994 and $6.3 million in reduced rental expense due to the negotiation of favorable lease terms. 28 18 BANC ONE CORPORATION and Subsidiaries - -------------------------------------------------------------------------------- Taxes other than income and payroll increased $31 million or 55% during 1995. This increase is primarily due to the resolution of franchise and intangible tax matters which resulted in a refund of $26 million in 1994. Depreciation and amortization decreased $64 million or 18% during 1995. The decrease is due to expenses recognized during 1994 of $46 million related to the operations consolidation and $21 million of merger-related costs. Communication and transportation expense increased $29 million or 12% during 1995. The increase is a result of increased postage for statement mailings due to the increase in credit card accounts, an increase in the volume of mailings related to credit card solicitations and an increase in postage rates in 1995. FDIC insurance expense decreased $61 million or 43% during 1995. The decrease is attributable to the Federal Deposit Insurance Corporation's decision to lower deposit insurance premiums from $.23 to $.04 per $100 in Bank Insurance Fund (BIF) deposits for well capitalized and well managed banks. Congress is considering various proposals for fully capitalizing the Savings Association Insurance Fund (SAIF). Certain proposals include a special assessment on SAIF insured deposits of which BANC ONE has $6 billion at December 31, 1995. It is uncertain whether or when this pending legislation will become law. Other non-interest expense decreased $29 million or 9% during 1995. The following contributed to the change: a $10 million reversal of accrued interest due to a favorable IRS appeals negotiation principally regarding the timing of deductibility of loan charge-offs, a net decrease in litigation expense of $6 million in 1995 and $7 million in expenses related to operations consolidation recognized in 1994. - -------------------------------------------------------------------------------- IV. BALANCE SHEET ANALYSIS Loans and Leases BANC ONE experienced 6.2% growth in average loans and leases from $59.8 billion in 1994 to $63.5 billion in 1995. Significant origination activity is not fully reflected in the average or ending loan balances due to the following sales and securitizations of loans: 1995 ---- - $1.3 billion of consumer loans sold during the first three quarters of 1995 - $1.4 billion of mortgage loans securitized and reclassified to investment securities during the fourth quarter of 1995 - $.8 billion of credit card sales in the first three quarters of 1995 - $.6 billion related to the first quarter 1995 sale of four Michigan banks 1994 ---- - $1 billion of student loans sold during the third quarter of 1994 - $2 billion of credit card sales during the fourth quarter of 1994 The table on the following page depicts the maturities of certain loans at December 31, 1995. As noted in the table, significant loan maturities occur in 1996; most of these balances are expected to be replaced or renewed. Demand loans and loans having no stated maturity are classified as being due within one year. Loans that have adjustable rates are shown in their maturity category by their scheduled principal repayment dates rather than the dates at which they are repriced. The repricing characteristics of certain loans included below have 29 19 BANC ONE CORPORATION and Subsidiaries - -------------------------------------------------------------------------------- been synthetically altered by the use of off-balance sheet investment products, however classifications below are based on the contractual terms of the loans.
COMMERCIAL, FINANCIAL AND REAL ESTATE, AGRICULTURAL CONSTRUCTION ---------------------- ---------------------- $ (MILLIONS) FIXED VARIABLE FIXED VARIABLE -------------------------------------------------------------------------------------- 1996................................ $1,471 $7,897 $ 166 $1,503 1997 through 2000................... 1,787 4,907 105 800 After 2000.......................... 573 1,269 38 81 ------ ----------- ------ ----------- $3,831 $14,073 $ 309 $2,384 ====== ========= ====== =========
---------------------------------------------------------- Credit Quality BANC ONE's process for monitoring loan quality includes detailed, monthly analyses of delinquencies, nonperforming assets and potential problem loans from each affiliate bank. Management extensively monitors credit policies, including policies related to appraisals, assessing the financial condition of borrowers, restrictions on out-of-area lending and avoidance of loan concentrations. BANC ONE has no significant loan concentration with any single borrower or area of the country. The commercial loan portfolio consists primarily of numerous small balance loans in diverse businesses located throughout the markets served by BANC ONE affiliates. Only 18 customers had borrowings greater than $50 million at December 31, 1995, with the largest outstanding being $107 million. As BANC ONE enters new markets, a standardized loan- monitoring system and credit policies, including underwriting standards, are implemented immediately. Centralized management of problem assets with active programs for resolution and disposition of foreclosed properties, as well as implementation of BANC ONE's internal loan monitoring system at newly acquired affiliates, have aided in the reduction of the level of nonperforming assets. As shown in the following table, the loan portfolio continues to reflect BANC ONE's policy of minimizing concentrations in any one industry.
1995 1994 -------------------------------- --------------------------------- BALANCE AT PERCENT OF BALANCE AT PERCENT OF $ (MILLIONS) YEAR-END WHOLESALE LOANS(1) YEAR-END WHOLESALE LOANS(1) --------------------------------------------------------------------------------------------------- Real estate operators, managers and developers.... $4,401 16.76% $3,957 16.23% Retail....................... 2,249 8.56 1,896 7.78 Construction contractors..... 1,788 6.81 1,495 6.13 Oil and mining............... 1,443 5.49 1,208 4.95 Mortgage banking, finance companies, financial institutions and brokers... 1,138 4.33 909 3.73 Wholesale trade -- durables................... 1,067 4.06 992 4.07 Manufacturing -- machinery... 1,030 3.92 880 3.61 Holding and investment companies.................. 933 3.55 833 3.42 Transportation and public utilities.................. 842 3.21 657 2.69 Health services.............. 761 2.90 688 2.82
(1) Wholesale loans include commercial, financial and agricultural, commercial real estate and construction real estate loans. ---------------------------------------------------------- BANC ONE's foreign loans totaled less than 1% of total loans at December 31, 1995 and 1994. 30 20 BANC ONE CORPORATION and Subsidiaries - -------------------------------------------------------------------------------- Non-accrual loans decreased $28 million and other real estate owned (OREO) decreased $9 million during 1995. Management expects credit quality to decline somewhat throughout 1996, due substantially to cyclical deterioration of consumer credit quality. The banking industry is currently experiencing an increase in consumer delinquencies and charge-offs. The following summarizes the activity in non-accrual loans and OREO.
($ THOUSANDS) 1995 ------------------------------------------------------------------------------- NON-ACCRUAL LOANS: Balance, beginning of period......................................... $377,409 Non-accrual additions................................................ 375,029 Loans returned to accrual and payments received...................... (278,919) Reductions due to transfers to OREO.................................. (26,158) Charge-offs.......................................................... (98,541) Other, net........................................................... 264 -------- Balance, end of period............................................... $349,084 ======== OREO: Balance, beginning of period......................................... $ 84,355 Additions............................................................ 91,163 Write-downs.......................................................... (19,382) Sales and other, net................................................. (80,653) -------- Balance, end of period............................................... $ 75,483 ========
---------------------------------------------------------- The following shows delinquent loans by loan type:
DECEMBER 31, DECEMBER 31, LOANS DELINQUENT 90 DAYS OR MORE (1) 1995 1994 ------------------------------------------------------------------------------- Wholesale......................................... .15% .10% Real estate, residential.......................... .25 .16 Consumer.......................................... .34 .29 Credit card....................................... 1.54 1.24 Leases............................................ .03 .02 TOTAL LOANS AND LEASES............................ .39 .28
(1) Ratios presented exclude nonperforming loans and are expressed as a percent of ending balances. ---------------------------------------------------------- Allowance for Credit Losses The allowance for credit losses increased to $938 million at December 31, 1995 from $897 million at December 31, 1994. This increase was caused by an increase in the consumer loan and credit card provisions due to the growth in these portfolios and the cyclical deterioration in consumer credit quality offsetting improvement in wholesale credit quality. Refer to the Allowance for Credit Losses and the Loan and Lease Analysis tables on the following pages for more detail. The adequacy of the allowance for credit losses is assessed based upon the above credit quality and other pertinent loan portfolio information. The allowance for credit losses as a percentage of ending loans remained essentially constant from December 31, 1994 to 1995. The allowance continues to provide strong nonperforming loan coverage, increasing to 265% at December 31, 1995, compared with 235% at December 31, 1994. The adequacy of the allowance and provision for credit losses is consistent with the composition of the portfolio and recent credit quality history. 31 21 BANC ONE CORPORATION and Subsidiaries - -------------------------------------------------------------------------------- ALLOWANCE FOR CREDIT LOSSES
COMMERCIAL, FINANCIAL AND REAL CREDIT TOTAL $(THOUSANDS) AGRICULTURAL ESTATE CONSUMER CARD LEASES UNALLOCATED ALLOWANCES - --------------------------------------------------------------------------------------------------------------------------------- BALANCE, DECEMBER 31, 1990................... $227,539 $ 131,801 $133,897 $ 93,559 $10,173 $108,021 $704,990 Allowances associated with loans acquired and other...................................... 53,617 36,681 31,928 32,625 933 11,231 167,015 Provision.................................... 165,789 95,121 135,761 208,314 13,615 (6,749) 611,851 Charge-offs.................................. (218,488) (93,408) (189,158) (184,313) (20,524) (705,891) Recoveries................................... 37,317 6,948 55,180 25,364 5,629 130,438 ---------- --------- -------- --------- ------- ----------- ---------- Net charge-offs.............................. (181,171) (86,460) (133,978) (158,949) (14,895) (575,453) ---------- --------- -------- --------- ------- ----------- ---------- BALANCE, DECEMBER 31, 1991................... 265,774 177,143 167,608 175,549 9,826 112,503 908,403 Allowances associated with loans acquired and other...................................... 2,997 2,319 1,381 119 3 6,819 Provision.................................... 170,052 37,862 158,120 209,682 14,970 40,045 630,731 Charge-offs.................................. (187,375) (97,098) (219,552) (242,459) (15,007) (761,491) Recoveries................................... 51,015 12,424 68,995 29,103 6,175 167,712 ---------- --------- -------- --------- ------- ----------- ---------- Net charge-offs.............................. (136,360) (84,674) (150,557) (213,356) (8,832) (593,779) ---------- --------- -------- --------- ------- ----------- ---------- BALANCE, DECEMBER 31, 1992................... 302,463 132,650 176,552 171,994 15,967 152,548 952,174 Allowances associated with loans acquired and other...................................... 3,169 5,327 2,586 2,461 2,746 16,289 Provision.................................... (41,856) 85,728 92,052 248,587 4,835 (1,085) 388,261 Charge-offs.................................. (95,136) (64,956) (167,096) (251,492) (11,878) (590,558) Recoveries................................... 70,917 13,454 77,252 34,495 4,970 201,088 ---------- --------- -------- --------- ------- ----------- ---------- Net charge-offs.............................. (24,219) (51,502) (89,844) (216,997) (6,908) (389,470) ---------- --------- -------- --------- ------- ----------- ---------- BALANCE, DECEMBER 31, 1993................... 239,557 172,203 181,346 206,045 13,894 154,209 967,254 Allowances associated with loans acquired and other...................................... 738 812 (224) 4,317 (1,117) 4,526 Provision.................................... (69,068) (36,315) 68,783 195,318 1,030 82,521 242,269 Charge-offs.................................. (49,504) (29,373) (176,045) (260,510) (5,737) (521,169) Recoveries................................... 60,088 19,806 80,662 40,386 3,358 204,300 ---------- --------- -------- --------- ------- ----------- ---------- Net (charge-offs) recoveries................. 10,584 (9,567) (95,383) (220,124) (2,379) (316,869) ---------- --------- -------- --------- ------- ----------- ---------- BALANCE, DECEMBER 31, 1994................... 181,811 127,133 154,522 185,556 12,545 235,613 897,180 Allowances associated with loans acquired and other...................................... (7) (1,562) (2,737) (60) 478 (3,888) Provision.................................... (10,760) (5,646) 143,624 330,156 7,081 (6,956) 457,499 Charge-offs.................................. (50,335) (36,016) (218,763) (287,546) (11,334) (603,994) Recoveries................................... 41,057 16,696 83,580 46,379 3,499 191,211 ---------- --------- -------- --------- ------- ----------- ---------- Net charge-offs.............................. (9,278) (19,320) (135,183) (241,167) (7,835) (412,783) ---------- --------- -------- --------- ------- ----------- ---------- BALANCE, DECEMBER 31, 1995................... $161,766 $ 100,605 $160,226 $ 274,485 $12,269 $228,657 $938,008 ============ ========= ========== ========= ======= ============ ===========
32 22 BANC ONE CORPORATION and Subsidiaries - -------------------------------------------------------------------------------- LOAN AND LEASE ANALYSIS
$(THOUSANDS) 1995 1994 1993 1992 1991 - ----------------------------------------------------------------------------------------------------------------------- ENDING LOAN AND LEASE BALANCES: Commercial, financial and agricultural....................... $17,903,692 $16,619,186 $15,208,355 $15,085,540 $16,955,907 Real estate........................... 19,619,908 19,039,988 17,780,781 16,335,864 14,753,327 Consumer, net......................... 18,407,595 19,070,286 17,311,474 14,062,562 11,476,940 Credit card........................... 7,665,274 5,924,383 6,112,545 5,087,076 4,676,589 Leases, net........................... 1,732,196 1,339,069 1,107,220 1,000,484 975,340 ----------- ----------- ----------- ----------- ----------- TOTAL LOANS AND LEASES.................. $65,328,665 $61,992,912 $57,520,375 $51,571,526 $48,838,103 =========== =========== =========== =========== =========== Nonperforming assets and delinquencies: Non-accrual loans..................... $ 349,084 $ 377,409 $ 482,331 $ 680,408 $ 767,238 Renegotiated loans(1)................. 5,211 3,910 7,567 28,361 22,669 Other real estate owned............... 75,483 84,355 153,260 191,665 387,296 ----------- ----------- ----------- ----------- ----------- TOTAL NONPERFORMING ASSETS.............. $ 429,778 $ 465,674 $ 643,158 $ 900,434 $ 1,177,203 =========== =========== =========== =========== =========== Loans delinquent 90 days or more and accruing interest..................... $ 254,417 $ 173,456 $ 207,816 $ 211,832 $ 296,309 Loans classified as doubtful (included in non-accrual)(2).................... 53,789 33,160 59,949 78,120 203,119 Interest foregone on nonperforming loans (after tax)(3)........................ $ 27,540 $ 18,584 $ 26,727 $ 35,483 $ 46,504 ALLOWANCE AND LOSS RATIOS: Ending allowance to ending balances: Commercial, financial and agricultural....................... .90% 1.09% 1.58% 2.00% 1.57% Real estate........................... .51 .67 .97 .81 1.20 Consumer.............................. .87 .81 1.05 1.26 1.46 Credit card........................... 3.58 3.13 3.37 3.38 3.75 Leases................................ .71 .94 1.25 1.60 1.01 TOTAL LOANS AND LEASES.................. 1.44 1.45 1.68 1.85 1.86 Net charge-offs (recoveries) to average balances: Commercial, financial and agricultural....................... .05 (.07) .17 .88 1.22 Real estate........................... .10 .05 .31 .56 .70 Consumer.............................. .74 .51 .57 1.14 1.37 Credit card........................... 3.75 3.52 4.23 4.70 4.85 Leases................................ .53 .20 .68 .89 1.62 TOTAL LOANS AND LEASES.................. .65 .53 .73 1.20 1.40 Recoveries to gross charge-offs......... 31.66 39.20 34.05 22.02 18.48 To ending loans and leases: Nonperforming assets.................. .66 .75 1.12 1.75 2.41 Loans delinquent 90 days or more...... .39% .28% .36% .41% .61%
(1) Excludes certain smaller balance loans collectively evaluated for impairment. (2) Defined as loans with a high loss possibility after collateral liquidation based on existing facts, market conditions and value. These loans are provided for in the allowance for credit losses, as appropriate. Any interest income recognized on these loans is immaterial. (3) The amount of gross interest on nonperforming loans that would have been recorded during 1995 if the loans had been current throughout the year totaled $52 million. Of this amount, $9 million of interest was actually recorded on nonperforming loans during 1995. Texas is included in the amounts in the table for the whole year of 1991 even though it was consolidated beginning October 1, 1991. 33 23 BANC ONE CORPORATION and Subsidiaries - -------------------------------------------------------------------------------- Deposit Analysis Total deposits decreased slightly compared with December 31, 1994. The decrease is primarily due to the replacement of $1.6 billion in Eurodollar deposits with less expensive borrowings and a $539 million decrease in deposits from the sale of the four Michigan banks during the first quarter of 1995. The retail deposit mix continues to change as consumers shift funds out of lower rate savings and demand accounts into higher yielding market rate products, primarily money market savings and time deposits. The repricing characteristics of certain deposits included below have been synthetically altered by the use of off-balance sheet investment products, however classifications below are based on the contractual terms of the deposits. The following represents the time remaining until maturity of time deposits (including all foreign deposits) greater than $100,000.
DECEMBER 31, DECEMBER 31, $(MILLIONS) 1995 1994 -------------------------------------------------------------------------------- 0-3 months........................................ $2,782 $4,304 4-6 months........................................ 527 441 7-12 months....................................... 524 393 Over 1 year....................................... 700 972 ------ ------ Total............................................. $4,533 $6,110 ====== ======
- -------------------------------------------------------------------------------- V. ASSET LIABILITY MANAGEMENT BANC ONE takes a unified approach to management of liquidity, capital and interest rate risk through its Asset and Liability Management (ALM) process. The following discussion describes certain key elements of this process, including BANC ONE's use of on- and off- balance sheet investment products to manage risk. BANC ONE's Natural Asset Sensitivity BANC ONE serves as a financial intermediary by taking deposits and making loans. Although the interest rate risk profile of BANC ONE may change in the future as new business activity changes, historically, the terms of loans and deposits create an interest rate risk profile with asset maturities and terms to repricing shorter than those of liabilities (asset sensitive). Asset sensitivity results in higher earnings from rising interest rates and lower earnings from falling interest rates. The table on the following page shows BANC ONE's Structural Gap which is defined as interest rate sensitivity excluding all investment products (on-and off- balance sheet). BANC ONE's one year cumulative structural gap is a positive $15.1 billion. This indicates that without investment products, BANC ONE is naturally asset sensitive. The middle of the table contains all investment products in their expected repricing periods. A consolidated gap position is then calculated. 34 24 BANC ONE CORPORATION and Subsidiaries - -------------------------------------------------------------------------------- STRUCTURAL GAP
0-3 4-12 YEAR 1 YEAR 2 3 TO 5 ($ MILLIONS) MONTHS MONTHS TOTAL TOTAL YEARS ------------------------------------------------------------------------------------------ Structural gap.............. $ 16,662 $ (1,589) $ 15,073 $ 2,558 $ 8,484 Cumulative structural gap... 16,662 15,073 17,631 26,115 Investment products: On-balance sheet........ 6,307 2,109 8,416 1,810 3,639 Wholesale borrowings.... (11,693) (4) (11,697) (8) (1,651) Off-balance sheet....... (14,049) 5,255 (8,794) 4,454 2,433 Total investment products.............. (19,435) 7,360 (12,075) 6,256 4,421 Cumulative investment product gap........... (19,435) (12,075) (5,819) (1,398) Consolidated corporate gap position.............. (2,773) 5,771 2,998 8,814 12,905 Cumulative gap.............. (2,773) 2,998 11,812 24,717 Percent of total assets..... (3.1)% 3.3% 13.1% 27.3% OVER 5 ($ MILLIONS) YEARS TOTAL ---------------------------- Structural gap.............. $(28,128) $ (2,013) Cumulative structural gap... (2,013) Investment products: On-balance sheet........ 2,154 16,019 Wholesale borrowings.... (650) (14,006) Off-balance sheet....... 1,907 Total investment products.............. 3,411 2,013 Cumulative investment product gap........... 2,013 Consolidated corporate gap position.............. (24,717) Cumulative gap.............. Percent of total assets..... ------------------------------------------------------------------------------------------
Although this table provides an indication of the direction of risk for a change in interest rates, it does not fully depict the effect of option-like characteristics contained in loans, investments and deposits. These characteristics can be best analyzed by the use of earnings sensitivity models and economic value at risk analysis. The Asset Liability Management (ALM) Process The impact of changes in interest rates is measured on both near-term earnings and long-term earnings. BANC ONE measures the first impact by determining how earnings from existing assets and liabilities would change over a 12 to 24 month period if interest rates changed. This is called Earnings Sensitivity Risk (ESR). The risk of changing spreads between certain categories of indexed assets and liabilities is measured over a 12 to 24 month period. This is referred to as Basis Risk. As an indicator of the sensitivity of longer term earnings to interest rates, BANC ONE determines a baseline measure of the economic value of future earnings to be derived from the current balance sheet and then measures the percentage change in that value for given changes in rates. This method is referred to as Economic Value at Risk (VAR). Earnings Sensitivity Risk (ESR) ESR is defined as the percentage change in forecasted earnings over a 12 month period for a specified change in forecasted interest rates. At BANC ONE, ESR is measured against simulated increases and decreases in interest rates of 1%, 2% and 3%. BANC ONE has established guidelines which limit the amount of short-term earnings sensitivity it is willing to tolerate for these changes in interest rates. 35 25 BANC ONE CORPORATION and Subsidiaries - -------------------------------------------------------------------------------- Assumptions used in earnings simulations include the behavior of loan and deposit repricings and volumes. Major assumptions include loan and deposit growth, mix changes, loan and deposit pricing spreads, prepayment volatility on various fixed rate assets, and spread and volume elasticity of interest and non-interest bearing deposit accounts. A significant portion of consumer deposits do not reprice or mature on a contractual basis. These deposit balances and rates are expected to react to market rates with a lag. Assumptions are based upon historical experience with BANC ONE's markets and customers, and include projections for how management expects to price loans and deposits in response to market changes. Because markets and consumer behavior are not entirely predictable, the assumptions are continually monitored and updated as market conditions change. The following table reflects ESR at December 31, 1995 for gradual rate changes (i.e. .25% per quarter for a 1% annual rate movement).
GRADUAL RATE CHANGE ESR ---------------------------------------------------------------------- ----- +3%......................................................... (4.30)% +2%......................................................... (2.20)% +1%......................................................... (.50)% -1%......................................................... (1.50)% -2%......................................................... (3.10)%
---------------------------------------------------------- Changes in income are not symmetrical to changes in rates due to option-like characteristics embedded in balance sheet assets and liabilities and expected customer responses to rate changes. Basis Risk The primary basis risk faced by BANC ONE is the risk that the spread between Prime loan rates and short-term funding rates will narrow. At December 31, 1995, BANC ONE had approximately $19.1 billion of Prime rate related loans. Basis risk has been reduced by entering into $8.0 billion of basis swaps in which BANC ONE pays Prime, less a spread, and receives London Inter-Bank Offered Rate (LIBOR), which, in some cases, is subject to certain caps. These basis swaps have declined in market value since their purchase because the amount BANC ONE receives in certain contracts has been limited by the caps. An immediate decline of ten 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 .6%. 36 26 BANC ONE CORPORATION and Subsidiaries - -------------------------------------------------------------------------------- Economic Value at Risk The change in the economic value of BANC ONE's long-term revenue flows for a 1% and 2% shock in rates, both up and down, provides a measurement of long-term risk, as shown below.
PERCENT CHANGE IN ECONOMIC SHOCK SCENARIO VALUE ---------------------------------------------------------------- -------------- +2%................................................... 1.0 % +1%................................................... .9 % -1%................................................... (5.0)% -2%................................................... (12.0)%
---------------------------------------------------------- The decrease in economic value when rates fall is primarily caused by BANC ONE's limited ability to reduce rates on deposits in step with market rates and by the accelerated amortization of interest rate swaps. On the other hand, changes in economic value are modest when rates rise. It is expected that as rates rise, customers will accelerate the shift from low-cost deposits to higher cost products and deposit rates will therefore increase. In addition, amortization of certain interest rate swaps will be slower in a higher rate climate than in a falling rate climate. The mix of these two factors makes the change in economic value for rising rates disproportionately smaller than the change for falling rates and their mix is substantially responsible for the lack of significant economic value change between the +1% and +2% shock scenarios. Balance Sheet Transactions and Investment Products Used to Manage Interest Rate Risk In 1994, BANC ONE was active in both the local and capital markets to reduce its liability sensitive position. This was accomplished principally by selling $8 billion in fixed rate U.S. Treasury and Agency securities. By the end of 1994, earnings sensitivity was within narrow bounds. Throughout 1995, earnings sensitivity was managed within a modest band of risk. Since BANC ONE's structural gap is asset sensitive, as investment products mature, exposure to falling rates increases. As a result, various programs were entered into to offset this exposure. BANC ONE purchased approximately $2 billion of U.S. Treasury and Agency securities, entered into approximately $1.9 billion of receive-fixed interest rate swaps and extended the duration of approximately $1.6 billion of asset-backed and U.S. Agency assets by sale and subsequent purchase of a like amount of similar, but longer duration, securities. In addition, almost $4.5 billion of receive-fixed rate index amortizing interest rate swaps were converted to generic swaps, both increasing the positive earnings impact on these instruments in a falling interest rate environment and reducing the negative earnings impact on these instruments from a rising interest rate environment. Because these actions increased BANC ONE's near term exposure to increased interest rates BANC ONE purchased $2.1 billion of interest rate caps. 37 27 BANC ONE CORPORATION and Subsidiaries - -------------------------------------------------------------------------------- Credit Risk There were no past due amounts or reserves for possible credit losses at December 31, 1995, related to off-balance sheet investment product transactions, nor were there any charge-offs during the three years ending December 31, 1995. In October 1994, the Office of the Comptroller of the Currency created new tiering categories for off-balance sheet investment product contracts. Based on these criteria, BANC ONE is a Tier II dealer. Customer cap and swap agreements are created to accommodate the needs of BANC ONE's commercial loan customers. BANC ONE enters into offsetting transactions with third parties and has prudent controls on transaction size, term and customer disclosure guidelines. BANC ONE has customer outstandings, excluding offsetting transactions, with notional amounts of $1.2 billion at December 31, 1995. Liquidity Management Liquidity is managed in order to preserve stable and reliable sources of cash to fund loan growth as well as expected and unexpected outflows of deposits and other liabilities. In addition, liquidity management seeks to avoid over-concentration on a limited number of liability sources and to minimize reliance on potentially volatile wholesale funds and large liabilities. The liquidity management guidelines at BANC ONE include those practices that promote adequate but not excessive liquidity, resulting in a balanced blend of several liabilities each of which is used in moderation. This allows BANC ONE entry into several markets and provides the mechanisms to either hypothecate unmarketable loans to generate cash or enable the securitization of loans for sale in the marketplace. BANC ONE has a number of significant sources of liquidity. The most reliable source is "On-Books Liquidity". Substantial funding can be extracted from the $15.1 billion of short-term investments and securities available for sale. The other sources of liquidity are: (i) a geographically diverse retail network comprised of affiliate banks in 12 states, providing access to a substantial number of retail deposits; (ii) the ability to acquire large liabilities in affiliate markets; (iii) the ability to sell and securitize loans; (iv) the ability to access large liabilities in the national marketplace; and (v) the ability to borrow against specific unmarketable loans. In addition to using the securities portfolio to collateralize repurchase agreements and public funds deposits, $111 million is pledged as collateral on off-balance sheet investment products. The amount pledged will increase as rates rise and decrease as rates decline. BANC ONE's size and high credit quality ratings have made numerous external funding sources available. A bank note program is available, as are commercial paper lines of credit totaling $2 billion. During 1995, BANC ONE affiliate banks issued $4.1 billion of bank notes, with $2.8 billion outstanding at December 31, 1995. BANC ONE also maintains an extensive contingency funding plan. The various sources of liquidity available to BANC ONE provide ample long-term as well as short-term funding alternatives. At December 31, 1995, large liability dependence was 17.3%, an increase from 16.0% at December 31, 1994. BANC ONE's policy is that the large liability position be no greater than 30 percent of net earning assets. In practice, BANC ONE manages the position at much lower levels as summarized in the table on the following page. The sales of loans and securities coupled with the issuance of long-term debt, allowed BANC ONE to reduce reliance on short- 38 28 BANC ONE CORPORATION and Subsidiaries - -------------------------------------------------------------------------------- term debt during 1995. Because the large liability dependence is calculated net of short-term investments, the decrease of short-term investments has slightly increased the net large liability reliance. During 1996, BANC ONE expects to continue to enter into loan sale transactions as funding tools. LIQUIDITY
DECEMBER 31, DECEMBER 31, $(MILLIONS) 1995 1994 ------------------------------------------------------------------------------ Earning assets, net of short-term investments.... $80,099 $76,248 Large liabilities: Net national market liabilities................ $3,209 $1,954 As a percent of net earning assets............. 4.01% 2.56% Total net large liabilities.................... $13,857 $12,195 As a percent of net earning assets............. 17.30% 15.99%
---------------------------------------------------------- Non-bank affiliates are partially funded by advances from the Corporation. Funding for the Corporation comes principally from dividends from bank affiliates, management fees and the issuance of commercial paper and term debt. During 1995, the Corporation reduced commercial paper usage and financed its purchase of $324 million of treasury stock with funds from dividends from its bank affiliates and the issuance of $600 million of subordinated notes. - -------------------------------------------------------------------------------- VI. CAPITAL Historically, BANC ONE has used common stock as consideration in acquisitions so that stockholders' equity is increased as assets are acquired. BANC ONE has generally issued shares in acquisitions in an amount such that little or no dilution to earnings per share resulted based on expected earnings from the acquiree. On January 2, 1996, the Corporation acquired Premier Bancorp, Inc. for 24 million common shares (previously held as treasury shares and adjusted for the 10% common stock dividend payable March 6, 1996 to shareholders of record on February 21, 1996) valued at $711 million. BANC ONE has long had a policy of maintaining superior capital ratios. Total equity to assets at December 31, 1995 of 9.06% increased 55 basis points, from 8.51% a year ago. This was caused by the increase in net income and in the net unrealized holding gains on securities available for sale. BANC ONE's policies require it to maintain, at a minimum, a capital position that meets the federal regulators "well capitalized" classification. Tier I capital is defined as the sum of common stockholders' equity and preferred stock, less goodwill and certain other deductions (including net unrealized holding gains (losses) on securities available for sale, certain intangible assets and 50% of the investment in unconsolidated subsidiaries). Tier I and total risk adjusted capital ratios were 10.05% and 14.05% respectively, both significantly above regulatory capital requirements of 4% and 8%. All of the Corporation's banks meet the regulatory definition of well capitalized banks. In February 1996, the Corporation purchased and retired 16.5 million common shares (15 million prior to the 10% common stock dividend). Since these shares have been effectively reissued in connection with the 10% common stock dividend, they will not prohibit the Corporation from entering into an acquisition using the pooling of interests method. BANC ONE generally matches dividend increases with earnings increases so that dividends paid out typically average between 35% and 45% of net income. The dividend payout ratio was 43% and 51% in 1995 and 1994, respectively. Payout ratios based on BANC ONE's historical net income per common share are presented in the Ten Year Performance Summary. 39 29 BANC ONE CORPORATION and Subsidiaries - -------------------------------------------------------------------------------- VII. FOURTH QUARTER REVIEW Net income for the fourth quarter of 1995 was $337 million or $.77 per share compared to $64 million or $.13 per share for the same period in 1994. The following significantly impacted net income in the fourth quarter: - FDIC premiums paid in 1995 decreased $26 million as a result of reduced deposit insurance premiums from $.23 to $.04 per $100 for Bank Insurance Fund (BIF) deposits for well capitalized and well managed banks. - An after tax loss of $160 million was recognized in 1994 due to the sale of $6 billion in U.S. Treasury and Agency securities. - An after tax accrual of $60 million was recorded related to operations consolidation and other charges in 1994. See the Consolidated Quarterly Financial Data Schedules on pages 44 and 45 for a comparison of quarterly results for 1995 and 1994. - -------------------------------------------------------------------------------- VIII. COMPARISON OF 1994 VERSUS 1993 Overview of Operations -- Net income for 1994 was $1,005 million or $2.20 per share, declining from $1,191 million or $2.66 per share in 1993. All per share amounts have been restated for two 10% common stock dividends effective February 10, 1994 and February 21, 1996. The 1994 earnings decrease was primarily due to a loss on the sale of securities to reduce BANC ONE's exposure to rising interest rates, merger and litigation expenses and operations consolidation charges relating to standardization and consolidation of certain loan, deposit and back office functions. These decreases were partially offset by a gain on sale of student loans. Return on average assets decreased to 1.15% in 1994 from 1.50% in 1993. Return on average common equity decreased to 13.35% in 1994 from 17.58% in 1993. The ending ratio of average common equity to average assets increased to 8.50% in 1994 from 8.40% in 1993. Net Interest Income -- Average interest-earning assets increased 11% to $78.3 billion in 1994 from $70.6 billion in 1993. The growth was primarily due to an increase in average loans and leases in 1994. Net interest margin decreased to 5.48% in 1994 from 6.19% in 1993. Correspondingly, net interest income (FTE) decreased by $83 million in 1994 from 1993. Cost of funds increased while the yield on average earning assets declined during 1994. The national market interest rate increases contributed to an increase in the average rate paid on deposits and borrowed funds for the year ended December 31, 1994. The decrease in the yield on average earning assets reflects the impact of increasingly competitive pricing and contractual repricing lags on loans. Loan Portfolio -- Interest income on loans (FTE) increased by $344 million in 1994 over 1993. Average total loans and leases increased to $59.8 billion for 1994, up from $53.2 billion for 1993. The overall yield on loans declined to 9.2% in 1994 from 9.7% in 1993. Yields on retail loans paid off in 1994 were generally higher than rates on new originations which were impacted by increasingly competitive pricing in 1994. Some new credit card accounts were originated at low, introductory rates in 1994. Although loan yields declined during 1994, interest and fees on loans and leases increased, due to growth in consumer and credit card loans. 40 30 BANC ONE CORPORATION and Subsidiaries - -------------------------------------------------------------------------------- Deposits and Borrowed Funds -- Total average interest-bearing liabilities increased 10.6% to $64.5 billion in 1994 from $58.3 billion in 1993, primarily reflecting increases in short-term borrowings. Deposit growth lagged loan growth during 1994 as consumers chose other higher yielding forms of investment. Average borrowed funds increased $4.5 billion in 1994 from 1993 and the average rate paid increased to 4.54% in 1994 from 3.67% in 1993, resulting in related interest expense growth of $277 million. To fund increased loan growth, BANC ONE issued short-term bank notes during 1994 and, on average, purchased more federal funds compared to the previous year. Off-Balance Sheet Investment Products -- The use of off-balance sheet investment products increased interest income by $22 million, or 3 basis points, and decreased deposit and other borrowing costs by $72 million, or 11 basis points, in 1994. The use of off-balance sheet investment products increased income by $230 million, or 33 basis points, and decreased deposit and other borrowing costs by $216 million, or 38 basis points, in 1993. Non-Interest Income, Non-Interest Expense and Income Taxes -- Other non-interest income increased $88 million in 1994 from 1993. The increase was primarily due to a gain on the sale of student loans and a gain on the sale of mortgage loan servicing rights. Salaries and related expense increased $66 million during 1994 compared to 1993. Severance pay of $36 million related to operations consolidation was recorded in 1994. The increase also reflects merit and other pay increases and an increase in headcount resulting from expansion into new markets, products and business opportunities. This increase is offset by a decrease in bonuses and a decrease in 401(k) benefits due to a decreased employer match. Net occupancy expense, exclusive of depreciation, increased $22 million in 1994 from 1993. The increase is primarily attributable to expenses related to the operations consolidation. Depreciation and amortization increased $82 million in 1994 compared to 1993. The increase is primarily due to $46 million of expenses related to the operations consolidation and $21 million of merger-related expenses. Other non-interest expenses decreased $15 million in 1994 from 1993. Included in these amounts are other real estate owned (OREO) expenses, which declined $35 million in 1994 as compared to 1993. The decrease in OREO expenses relates to a decline of $69 million in OREO property held. These decreases were offset by an increase in litigation expenses, and expenses related to the operations consolidation. Loan Quality -- The allowance for credit losses decreased to $897 million at December 31, 1994 from $967 million at December 31, 1993. This decrease can be primarily attributed to $52 million of credit loss provision reduction related to the sale of $2 billion in credit card receivables, coupled with a continued general improvement in credit quality evidenced by a decrease in nonperforming assets of $178 million and a decrease in net charge-offs of $73 million from 1993 to 1994. 41 31 BANC ONE CORPORATION and Subsidiaries - -------------------------------------------------------------------------------- TEN YEAR PERFORMANCE SUMMARY (unaudited) NOT RESTATED FOR ACQUISITIONS - --------------------------------------------------------------------------------
YEARLY AVERAGE BALANCES YEAR-END BALANCES BALANCE ------------------------------------- ------------------------------------------------------ SHEET TOTAL COMMON EARNING LOANS AND LONG-TERM TOTAL $(MILLIONS) YEAR ASSETS EQUITY ASSETS LEASES DEPOSITS BORROWINGS ASSETS - ------------------------------------------------------------------------------------------------------------------------ 1995 $87,052 $7,518 $78,315 $65,329 $67,320 $2,720 $90,454 1994 87,090 7,400 78,312 61,993 68,090 1,866 88,923 1993 74,716 6,301 66,326 53,846 60,943 1,702 79,919 1992 58,249 4,685 52,114 38,722 48,465 1,198 61,417 1991 33,861 3,103 30,184 30,197 37,057 703 46,293 1990 27,654 2,590 24,568 20,363 22,316 581 30,336 1989 25,518 2,145 22,945 17,909 20,952 372 26,552 1988 23,484 1,906 21,054 17,325 19,502 379 25,274 1987 17,538 1,372 15,651 12,934 14,478 266 18,730 1986 16,299 1,178 14,482 11,549 13,371 170 17,372 1985 9,539 703 8,412 6,687 8,141 92 10,823 Annual Growth: 1995/94 (.04)% 1.59% 0% 5.38% (1.13)% 45.77% 1.72% Compound Growth: 5 Years 25.78 23.75 26.09 26.26 24.71 36.17 24.42 10 Years 24.75 26.74 25.00 25.60 23.52 40.31 23.65
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NET TOTAL INCOME BEFORE CASH MARKET DATA PER NET SECURITIES DIVIDENDS BOOK STOCK CAPITAL COMMON SHARE YEAR INCOME TRANSACTIONS DECLARED VALUE PRICE $(MILLIONS) - ------------------------------------------------------------------------------------------------------------------------------- 1995 $2.91 $2.87 $1.24 $18.58 $34.21 $14,630 1994 2.20 2.57 1.13 16.75 23.07 10,076 1993 2.71 2.68 .97 16.20 32.34 13,542 1992 2.16 2.14 .81 14.12 35.13 12,331 1991 1.93 1.93 .69 12.69 31.64 8,833 1990 1.66 1.67 .63 10.88 16.68 4,408 1989 1.51 1.52 .57 9.41 17.69 4,239 1988 1.42 1.40 .50 8.52 12.15 2,876 1987 1.08 1.05 .45 7.52 11.93 2,360 1986 1.05 .97 .41 6.83 11.36 2,082 1985 1.00 .97 .35 6.03 11.63 1,491 Annual Growth: 1995/94 32.27% 11.67% 9.73% 10.93% 48.29% 45.20% Compound Growth: 5 Years 11.88 11.44 14.50 11.30 15.45 27.12 10 Years 11.27 11.46 13.48 11.91 11.39 25.65
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AVERAGE COMMON SHARES SHARES STOCK DIVIDEND YEAR-END COMMON OUTSTANDING TRADED COMMON SPLITS AND PAYOUT PRICE/ STOCK DATA YEAR (000) (000)(1) SHAREHOLDERS DIVIDENDS RATIO EARNINGS - -------------------------------------------------------------------------------------------------------------------------- 1995 433,323 179,034 87,632 43% 11.8x 1994 448,118 242,656 82,253 10% 51 10.5 1993 414,511 163,327 71,384 5:4 36 11.9 1992 351,146 113,186 58,114 10% 37 16.2 1991 242,905 69,241 43,935 36 16.4 1990 230,292 63,717 44,572 10% 38 10.1 1989 196,804 54,155 43,437 37 11.7 1988 195,733 42,347 43,892 10% 35 8.5 1987 158,826 38,297 37,693 42 11.0 1986 151,611 21,457 36,855 10% 39 10.7 1985 103,235 8,270 24,748 3:2 34 11.6
42 32 BANC ONE CORPORATION and Subsidiaries - -------------------------------------------------------------------------------- $(MILLIONS) - --------------------------------------------------------------------------------
NET INCOME NET BEFORE INCOME AND TOTAL INTEREST NON-INTEREST NON-INTEREST SECURITIES NET EXPENSES YEAR REVENUE INCOME (2) INCOME (3) EXPENSE TRANSACTIONS INCOME - -------------------------------------------------------------------------------------------------------------------------- 1995 $8,970.9 $4,208.9 $1,842.1 $3,631.6 $1,260.4 $1,277.9 1994 7,777.9 4,287.8 1,590.6 3,768.0 1,168.9 1,005.1 1993 7,163.3 4,169.6 1,412.1 3,450.6 1,129.6 1,140.0 1992 5,999.0 3,240.1 1,156.9 2,663.6 772.7 781.3 1991 4,154.1 1,838.5 844.3 1,486.2 529.3 529.5 1990 3,506.9 1,309.3 706.7 1,102.7 424.3 423.4 1989 3,163.0 1,193.7 513.5 967.4 365.3 362.9 1988 2,734.5 1,142.0 452.3 893.1 332.9 340.2 1987 1,959.6 907.3 284.0 666.5 203.5 208.9 1986 1,847.4 830.4 250.8 608.5 185.3 199.8 1985 1,192.2 523.2 158.1 361.2 127.6 130.4 Annual Growth: 1995/94 15.34% (1.84)% 15.81% (3.62)% 7.83% 27.14% Compound Growth: 5 Years 20.67 26.31 21.12 26.92 24.33 24.72 10 Years 22.36 23.18 27.83 25.96 25.74 25.64
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EMPLOYEES NET INCOME RETURN ON NET NON-INTEREST (FT EQUIV.) PER FT OPERATING AVERAGE INTEREST INCOME TO EFFICIENCY PER $MILLION EQUIV. RATIOS YEAR ASSETS MARGIN(2) EXPENSE (3) RATIO (4) OF ASSETS EMPLOYEE - ------------------------------------------------------------------------------------------------------------------------------ 1995 1.47% 5.37% 50.7% 60.0% .52 $27,235 1994 1.15 5.48 42.2 64.1 .55 20,596 1993 1.53 6.29 40.9 61.8 .57 25,165 1992 1.34 6.22 43.4 60.6 .53 23,912 1991 1.56 6.09 56.8 55.4 .59 21,449 1990 1.53 5.33 64.1 54.7 .63 19,871 1989 1.42 5.20 53.1 56.7 .67 20,388 1988 1.45 5.42 50.6 56.0 .67 20,166 1987 1.19 5.80 42.6 55.9 .74 15,064 1986 1.23 5.73 41.2 56.3 .73 15,790 1985 1.37 6.22 43.8 53.0 .79 15,167 Average: 5 Years 1.41% 5.89% 46.8% 60.4% .55 $23,671 10 Years 1.39 5.69 48.6 58.2 .62 20,964
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AVERAGE RETURN ON COMMON LONG-TERM AVERAGE EQUITY TO BORROWINGS TO TOTAL EQUITY COMMON AVERAGE COMMON MARKET TO RETURN TO RATIOS YEAR EQUITY ASSETS EQUITY BOOK VALUE INVESTORS - ---------------------------------------------------------------------------------------------------------------------------- 1995 16.77% 8.64% 34.2% 184.1% 54.4% 1994 13.35 8.50 25.5 137.7 (25.7) 1993 17.81 8.43 25.1 199.6 (5.4) 1992 16.26 8.04 24.2 248.9 13.9 1991 16.58 9.16 19.8 249.2 95.0 1990 16.24 9.36 20.2 153.3 (2.0) 1989 16.79 8.41 16.5 187.9 50.5 1988 17.69 8.12 18.8 142.7 5.8 1987 15.12 7.82 17.9 158.5 8.6 1986 16.49 7.23 13.6 166.4 .8 1985 17.77 7.37 11.9 193.1 56.1 Average: 5 Years 16.15% 8.55% 25.8% 203.9% 19.26(7) 10 Years 16.31 8.37 21.6 182.8 15.21(7) - --------------- (1) Amounts do not reflect stock dividends and stock splits. (2) Fully taxable equivalent basis. (3) Excluding security transactions. (4) Non-interest expense divided by net interest income (2) plus non-interest income excluding securities transactions. (5) 1990 and 1991 net income exclude equity in earnings of Bank One, Texas, NA. (6) Market change year to year with dividends reinvested. (7) Calculation is 5- and 10-year compound growth.
43 33 BANC ONE CORPORATION and Subsidiaries - -------------------------------------------------------------------------------- CONSOLIDATED QUARTERLY FINANCIAL DATA (unaudited)
QUARTERS ------------------------------------------------------------------------------- 1995 1994 --------------------------------------------------- ----------------------- $(MILLIONS, EXCEPT PER SHARE DATA) FOURTH THIRD SECOND FIRST FOURTH THIRD - ---------------------------------------- KEY AVERAGE BALANCES: Taxable securities(1)................. $ 12,436 $ 12,154 $ 13,400 $ 13,194 $ 14,079 $ 16,534 Tax-exempt securities(1).............. 1,769 1,905 2,043 2,145 2,248 2,351 --------- --------- --------- --------- --------- --------- TOTAL SECURITIES........................ 14,205 14,059 15,443 15,339 16,327 18,885 Commercial loans...................... 17,913 17,686 17,570 16,570 16,087 15,576 Real estate loans..................... 20,451 20,426 19,697 19,172 18,872 18,241 Consumer loans, net................... 18,387 17,904 17,645 18,911 19,054 19,354 Credit card loans..................... 7,296 6,542 6,088 5,807 6,166 6,569 Leases, net........................... 1,636 1,507 1,419 1,354 1,255 1,184 Allowance for credit losses........... (918) (894) (891) (897) (928) (960) --------- --------- --------- --------- --------- --------- NET LOANS AND LEASES.................... 64,765 63,171 61,528 60,917 60,506 59,964 Other earning assets.................. 456 673 795 1,898 1,876 725 TOTAL EARNING ASSETS.................... 79,426 77,903 77,766 78,154 78,709 79,574 TOTAL ASSETS............................ 88,237 86,780 86,529 86,646 87,273 88,254 Demand deposits: Non-interest bearing................ 13,280 12,978 12,689 12,922 13,674 13,397 Interest bearing.................... 7,050 8,416 8,677 8,928 9,142 9,221 Savings and money market deposits..... 21,875 19,994 19,202 19,284 19,659 20,062 Time deposits......................... 23,442 24,229 25,180 24,915 23,670 22,982 --------- --------- --------- --------- --------- --------- TOTAL DEPOSITS.......................... 65,647 65,617 65,748 66,049 66,145 65,662 Borrowed funds: Short-term.......................... 9,871 8,918 9,107 9,310 10,127 11,603 Long-term........................... 2,676 2,524 2,091 2,056 1,843 1,840 --------- --------- --------- --------- --------- --------- TOTAL BORROWED FUNDS.................... 12,547 11,442 11,198 11,366 11,970 13,443 TOTAL INTEREST BEARING LIABILITIES...... 64,914 64,081 64,257 64,493 64,441 65,708 Preferred stock......................... 250 250 250 250 250 250 Common stockholders' equity............. 7,761 7,582 7,442 7,280 $ 7,440 $ 7,465 MARGIN ANALYSIS(2)(5)(6) Interest income..................... 9.26% 9.19% 9.15% 9.06% 8.47% 8.28% Interest expense.................... 3.79 3.80 3.86 3.70 3.29 3.02 --------- --------- --------- --------- --------- --------- Net interest income................. 5.47 5.39 5.29 5.36 5.18 5.26 Provision for credit losses......... .83 .68 .48 .35 .18 .38 --------- --------- --------- --------- --------- --------- Net funds function.................. 4.64 4.71 4.81 5.01 5.00 4.88 KEY OPERATING RATIOS Return on average assets(5)........... 1.51 1.51 1.43 1.42 .29 1.27 Return on average common equity(5).... 17.00 17.09 16.34 16.61 3.20 14.82 Return on average total equity(5)..... 16.68 16.77 16.03 16.29 3.32 14.56 Average common equity to average assets...................... 8.80 8.74 8.60 8.40 8.52 8.46 Average total equity to average assets.............................. 9.08 9.02 8.89 8.69 8.81 8.74 Tier I capital ratio.................. 10.05 10.11 10.36 10.23 9.93 10.51 Total risk adjusted capital ratio..... 14.05 14.17 13.76 13.62 13.33 13.97 Leverage ratio........................ 8.87 8.88 8.72 8.58 8.28 8.53 CREDIT ANALYSIS: Net charge-offs to average loans and leases(5)........................... .87 .67 .56 .49 .59 .50 Ending allowance to loans and leases.............................. 1.44 1.40 1.41 1.42 1.45 1.55 Nonperforming assets(3): Total............................... $ 429.8 $ 444.7 $ 430.8 $ 449.4 $ 465.7 $ 524.2 Percent of total loans and leases... .66 .68 .68 .72 .75 .85 Loans delinquent 90 or more days(4): Total............................... $ 254.4 $ 212.3 $ 186.7 $ 172.9 $ 173.5 $ 195.4 Percent of total loans and leases... .39 .32 .29 .28 .28 .32 Allowance to nonperforming loans...... $ 264.8 $ 253.3 $ 249.1 $ 241.0 $ 235.3 $ 220.2 COMMON STOCK: Average shares outstanding (000)(7)... 431,746 432,891 434,214 435,893 445,719 449,859 Shares traded (000)................... 37,100 39,873 53,708 48,353 72,342 46,939 Per share data(7): Net income.......................... $ .77 $ .76 $ .70 $ .68 $ .13 $ .62 Cash dividends declared............. .31 .31 .31 .31 .28 .28 Book value.......................... 18.58 18.02 17.59 17.16 16.75 16.84 Stock price: High.............................. 36.48 33.41 31.94 27.39 27.73 32.27 Low............................... 30.35 27.95 26.03 22.85 21.94 26.82 Close............................. $ 34.21 $ 33.18 $ 29.32 $ 25.91 $ 23.07 $ 27.27 PREFERRED STOCK, SERIES C: Shares traded (000)................... 1,678 990 1,316 1,233 1,679 892 Stock price: High................................ $ 70.75 $ 64.00 $ 61.75 $ 54.25 $ 57.50 $ 63.75 Low................................. 59.38 55.58 52.25 49.63 49.00 57.00 Close............................... $ 65.63 $ 63.75 $ 58.25 $ 51.75 $ 49.63 $ 57.50 $(MILLIONS, EXCEPT PER SHARE DATA) SECOND FIRST - ---------------------------------------- KEY AVERAGE BALANCES: Taxable securities(1)................. $ 18,122 $ 15,316 Tax-exempt securities(1).............. 2,384 2,346 --------- --------- TOTAL SECURITIES........................ 20,506 17,662 Commercial loans...................... 15,443 15,015 Real estate loans..................... 17,674 17,543 Consumer loans, net................... 18,745 17,901 Credit card loans..................... 6,192 6,081 Leases, net........................... 1,143 1,114 Allowance for credit losses........... (975) (974) --------- --------- NET LOANS AND LEASES.................... 58,222 56,680 Other earning assets.................. 785 1,062 TOTAL EARNING ASSETS.................... 79,513 75,404 TOTAL ASSETS............................ 88,349 84,442 Demand deposits: Non-interest bearing................ 13,338 13,433 Interest bearing.................... 9,392 9,357 Savings and money market deposits..... 20,315 20,012 Time deposits......................... 21,951 21,742 --------- --------- TOTAL DEPOSITS.......................... 64,996 64,544 Borrowed funds: Short-term.......................... 12,479 9,017 Long-term........................... 1,844 1,811 --------- --------- TOTAL BORROWED FUNDS.................... 14,323 10,828 TOTAL INTEREST BEARING LIABILITIES...... 65,981 61,939 Preferred stock......................... 250 250 Common stockholders' equity............. $ 7,351 $ 7,344 MARGIN ANALYSIS(2)(5)(6) Interest income..................... 8.15% 8.49% Interest expense.................... 2.71 2.44 --------- --------- Net interest income................. 5.44 6.05 Provision for credit losses......... .25 .43 --------- --------- Net funds function.................. 5.19 5.62 KEY OPERATING RATIOS Return on average assets(5)........... 1.50 1.57 Return on average common equity(5).... 17.80 17.81 Return on average total equity(5)..... 17.44 17.46 Average common equity to average assets...................... 8.32 8.70 Average total equity to average assets.............................. 8.60 8.99 Tier I capital ratio.................. 10.36 10.59 Total risk adjusted capital ratio..... 13.81 14.17 Leverage ratio........................ 8.44 8.61 CREDIT ANALYSIS: Net charge-offs to average loans and leases(5)........................... .49 .54 Ending allowance to loans and leases.............................. 1.58 1.66 Nonperforming assets(3): Total............................... $ 523.7 $ 600.2 Percent of total loans and leases... .87 1.02 Loans delinquent 90 or more days(4): Total............................... $ 211.9 $ 189.0 Percent of total loans and leases... .35 .32 Allowance to nonperforming loans...... $ 225.7 $ 208.7 COMMON STOCK: Average shares outstanding (000)(7)... 449,359 448,129 Shares traded (000)................... 55,251 68,124 Per share data(7): Net income.......................... $ .73 $ .72 Cash dividends declared............. .28 .28 Book value.......................... 16.59 16.47 Stock price: High.............................. 34.55 32.25 Low............................... 27.95 28.98 Close............................. $ 31.14 $ 30.00 PREFERRED STOCK, SERIES C: Shares traded (000)................... 1,200 2,851 Stock price: High................................ $ 68.25 $ 68.75 Low................................. 57.50 60.50 Close............................... $ 62.50 $ 61.00
44 34 BANC ONE CORPORATION and Subsidiaries - -------------------------------------------------------------------------------- CONSOLIDATED QUARTERLY FINANCIAL DATA (unaudited)
QUARTERS ------------------------------------------------------------------------------- 1995 1994 --------------------------------------------------- ----------------------- $(MILLIONS) FOURTH THIRD SECOND FIRST FOURTH THIRD - ---------------------------------------- CONDENSED INCOME STATEMENT: Interest income(2) Taxable securities.................... $ 204.09 $ 200.87 $ 221.12 $ 208.73 $ 206.53 $ 228.44 Tax-exempt securities................. 37.81 41.84 45.23 46.75 48.89 50.27 --------- --------- --------- --------- --------- --------- Total interest on securities............ 241.90 242.71 266.35 255.48 255.42 278.71 Commercial loans...................... 368.78 364.82 360.79 331.68 302.64 294.85 Real estate loans..................... 464.35 464.42 443.69 424.02 412.08 388.84 Consumer loans........................ 438.79 422.88 409.89 438.77 412.03 406.11 Credit card loans..................... 303.86 273.37 255.76 241.04 246.93 261.98 Leases................................ 30.37 26.47 25.58 24.73 25.01 21.47 --------- --------- --------- --------- --------- --------- Total interest on loans and leases...... 1,606.15 1,551.96 1,495.71 1,460.24 1,398.69 1,373.25 Total interest on other earning assets.............................. 6.50 10.53 12.52 30.30 26.63 9.12 TOTAL INTEREST INCOME................... 1,854.55 1,805.20 1,774.58 1,746.02 1,680.74 1,661.08 Interest expense Demand deposits....................... 35.35 43.25 47.52 49.62 46.73 43.03 Savings and money market deposits..... 205.90 191.43 180.00 169.23 156.03 143.66 Time deposits: CDs under $100,000.................. 275.25 280.28 278.12 256.11 227.37 201.93 CDs $100,000 and over............... 58.84 63.57 80.65 74.97 59.25 52.17 --------- --------- --------- --------- --------- --------- TOTAL INTEREST ON DEPOSITS.............. 575.34 578.53 586.29 549.93 489.38 440.79 Borrowed funds: Short-term.......................... 137.64 124.72 129.00 127.33 124.43 128.41 Long-term........................... 47.02 44.29 34.93 36.45 39.10 37.23 --------- --------- --------- --------- --------- --------- TOTAL INTEREST ON BORROWED FUNDS........ 184.66 169.01 163.93 163.78 163.53 165.64 --------- --------- --------- --------- --------- --------- TOTAL INTEREST EXPENSE.................. 760.00 747.54 750.22 713.71 652.91 606.43 --------- --------- --------- --------- --------- --------- Net interest income(2).................. 1,094.55 1,057.66 1,024.36 1,032.31 1,027.83 1,054.65 Provision for credit losses............. 165.90 132.52 92.56 66.51 35.62 75.94 --------- --------- --------- --------- --------- --------- Net funds function(2)................... 928.65 925.14 931.80 965.80 992.21 978.71 NON-INTEREST INCOME: Income from fiduciary activities...... 62.23 60.05 58.54 58.58 56.03 55.19 Service charges on deposit accounts... 144.31 140.81 132.46 127.11 128.15 125.03 Loan processing and servicing income.............................. 135.53 142.59 130.24 112.44 115.50 90.69 Securities gains (losses)............. 7.98 7.29 2.79 9.79 (254.27) (12.98) Other................................. 141.16 122.13 130.10 143.83 111.83 172.87 --------- --------- --------- --------- --------- --------- TOTAL NON-INTEREST INCOME............... 491.21 472.87 454.13 451.75 157.24 430.80 NON-INTEREST EXPENSE: Salaries and related costs............ 448.35 430.14 429.08 442.95 459.15 427.29 Other................................. 477.15 450.07 473.25 480.65 582.39 530.87 --------- --------- --------- --------- --------- --------- TOTAL NON-INTEREST EXPENSE.............. 925.50 880.21 902.33 923.60 1,041.54 958.16 Taxable equivalent adjustment........... 16.57 19.25 20.89 22.72 21.04 22.33 --------- --------- --------- --------- --------- --------- Income before income taxes.............. 477.79 498.55 462.71 471.23 86.87 429.02 Income tax (provision) benefit: Income excluding securities transactions........................ (137.86) (165.00) (154.16) (165.02) (117.35) (150.35) Securities transactions............... (3.08) (2.53) (1.07) (3.69) 94.86 4.54 --------- --------- --------- --------- --------- --------- Net income.............................. $ 336.85 $ 331.02 $ 307.48 $ 302.52 $ 64.38 $ 283.21 ======== ======== ======== ======== ========= ========= Net income available to common stockholders.......................... $ 332.48 $ 326.65 $ 303.11 $ 298.15 $ 60.00 $ 278.84 ======== ======== ======== ======== ========= ========= $(MILLIONS) SECOND FIRST - ---------------------------------------- CONDENSED INCOME STATEMENT: Interest income(2) Taxable securities.................... $ 244.99 $ 196.45 Tax-exempt securities................. 51.33 51.55 --------- --------- Total interest on securities............ 296.32 248.00 Commercial loans...................... 288.73 288.17 Real estate loans..................... 372.14 365.48 Consumer loans........................ 386.02 409.93 Credit card loans..................... 243.91 236.34 Leases................................ 21.24 20.84 --------- --------- Total interest on loans and leases...... 1,312.04 1,320.76 Total interest on other earning assets.............................. 8.26 9.38 TOTAL INTEREST INCOME................... 1,616.62 1,578.14 Interest expense Demand deposits....................... 40.56 38.65 Savings and money market deposits..... 131.42 120.46 Time deposits: CDs under $100,000.................. 169.34 154.94 CDs $100,000 and over............... 46.54 42.18 --------- --------- TOTAL INTEREST ON DEPOSITS.............. 387.86 356.23 Borrowed funds: Short-term.......................... 120.23 69.70 Long-term........................... 29.07 26.41 --------- --------- TOTAL INTEREST ON BORROWED FUNDS........ 149.30 96.11 --------- --------- TOTAL INTEREST EXPENSE.................. 537.16 452.34 --------- --------- Net interest income(2).................. 1,079.46 1,125.80 Provision for credit losses............. 50.54 80.17 --------- --------- Net funds function(2)................... 1,028.92 1,045.63 NON-INTEREST INCOME: Income from fiduciary activities...... 61.13 60.35 Service charges on deposit accounts... 116.64 114.07 Loan processing and servicing income.............................. 89.01 87.30 Securities gains (losses)............. 2.74 3.45 Other................................. 101.41 105.39 --------- --------- TOTAL NON-INTEREST INCOME............... 370.93 370.56 NON-INTEREST EXPENSE: Salaries and related costs............ 425.24 441.99 Other................................. 457.35 443.70 --------- --------- TOTAL NON-INTEREST EXPENSE.............. 882.59 885.69 Taxable equivalent adjustment........... 22.81 21.99 --------- --------- Income before income taxes.............. 494.45 508.51 Income tax (provision) benefit: Income excluding securities transactions........................ (162.92) (180.35) Securities transactions............... (.96) (1.21) --------- --------- Net income.............................. $ 330.57 $ 326.95 ========= ========= Net income available to common stockholders.......................... $ 326.20 $ 322.58 ========= =========
(1) Average balances are based on amortized historical cost excluding SFAS 115 adjustments to fair value which are included in other assets. (2) Fully taxable equivalent basis. The Federal statutory rate used was 35% for all periods presented. (3) Excludes certain smaller balance loans collectively evaluated for impairment. (4) Excluding nonperforming loans. (5) Ratios presented on an annualized basis. (6) As a percent of average earning assets. (7) Amounts have been restated for the 10% common stock dividend payable March 6, 1996 to shareholders of record on February 21, 1996. 45 35 BANC ONE CORPORATION and Subsidiaries - -------------------------------------------------------------------------------- CONSOLIDATED BALANCE SHEET at December 31, 1995 and 1994
DECEMBER 31, ----------------------------- $(THOUSANDS, EXCEPT PER SHARE AMOUNTS) 1995 1994 ------------------------------------------------------------------------------------------ ASSETS: Cash and due from banks................................... $ 5,501,266 $ 5,073,417 Short-term investments (including Eurodollar placements and foreign negotiable certificates of deposit of $1,000,982 at December 31, 1994)........................ 454,718 3,539,596 SECURITIES: Securities held to maturity............................. 1,087,654 4,834,384 Securities available for sale........................... 14,620,334 10,318,030 ------------- ----------- Total securities (fair value approximates $15,756,000 and $15,108,000, at December 31, 1995 and 1994, respectively).......................... 15,707,988 15,152,414 LOANS AND LEASES (NET OF UNEARNED INCOME OF $978,831 AND $802,703 AT DECEMBER 31, 1995 AND 1994, RESPECTIVELY)... 65,328,665 61,992,912 Allowance for credit losses............................... 938,008 897,180 ------------- ----------- NET LOANS AND LEASES................................ 64,390,657 61,095,732 OTHER ASSETS: Bank premises and equipment, net........................ 1,558,676 1,517,647 Interest earned, not collected.......................... 669,709 566,840 Other real estate owned................................. 75,483 84,355 Excess of cost over net assets of affiliates purchased............................................. 242,817 262,895 Other................................................... 1,852,649 1,629,690 ------------- ----------- Total other assets.................................. 4,399,334 4,061,427 ------------- ----------- TOTAL ASSETS........................................ $ 90,453,963 $88,922,586 ============ ============ LIABILITIES: DEPOSITS: Non-interest bearing.................................... $ 14,767,497 $14,405,707 Interest bearing........................................ 52,552,653 53,684,347 ------------- ----------- TOTAL DEPOSITS........................................ 67,320,150 68,090,054 Federal funds purchased and repurchase agreements......... 6,261,009 5,186,527 Other short-term borrowings............................... 3,516,191 4,435,242 Long-term borrowings...................................... 2,720,373 1,866,448 Accrued interest payable.................................. 410,946 351,293 Other liabilities......................................... 2,027,816 1,428,162 ------------- ----------- TOTAL LIABILITIES..................................... 82,256,485 81,357,726 ------------- ----------- Commitments and contingencies (Notes 4, 6 and 13) STOCKHOLDERS' EQUITY: Preferred stock, 35,000,000 shares authorized: Series C convertible, no par value 4,992,694 and 4,997,999 shares issued and outstanding, respectively.......................................... 249,635 249,900 Common stock, no par value, $5 stated value, 600,000,000 shares authorized, 451,741,054 and 408,985,564 shares issued, respectively (December 31, 1995 shares reflect the 10% stock dividend payable March 6, 1996 to shareholders of record on February 21, 1996)............ 2,258,705 2,044,928 Capital in excess of aggregate stated value of common stock................................................... 5,157,763 3,796,746 Retained earnings......................................... 1,100,345 1,921,256 Net unrealized holding gains (losses) on securities available for sale, net of tax.......................... 91,804 (111,517) Treasury stock (24,090,000 and 11,999,500 shares, respectively), at cost.................................. (660,774) (336,453) ------------- ----------- TOTAL STOCKHOLDERS' EQUITY............................ 8,197,478 7,564,860 ------------- ----------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY............ $ 90,453,963 $88,922,586 ============ ============
The accompanying notes are an integral part of the financial statements. 46 36 BANC ONE CORPORATION and Subsidiaries - -------------------------------------------------------------------------------- CONSOLIDATED STATEMENT OF INCOME for the three years ended December 31, 1995
$(THOUSANDS, EXCEPT PER SHARE AMOUNTS) 1995 1994 1993 - ------------------------------------------------------------------------------------------------------------------------- INTEREST INCOME: Interest and fees on loans and leases..................................... $ 6,094,335 $5,386,139 $5,038,807 Interest and dividends on: Taxable securities...................................................... 833,715 875,846 844,791 Tax-exempt securities................................................... 116,737 136,841 132,590 Other interest income, including interest on Eurodollar placements and foreign negotiable certificates of deposits of $6,740, $6,802 and $2,415 in 1995, 1994 and 1993, respectively......................... 56,131 49,590 40,438 ------------ ---------- ---------- TOTAL INTEREST INCOME..................................................... 7,100,918 6,448,416 6,056,626 INTEREST EXPENSE: Interest on deposits: Demand, savings and money market deposits............................... 922,298 720,526 643,038 Time deposits........................................................... 1,367,796 953,737 834,653 Interest on borrowings.................................................... 681,374 574,578 298,060 ------------ ---------- ---------- TOTAL INTEREST EXPENSE.................................................. 2,971,468 2,248,841 1,775,751 ------------ ---------- ---------- NET INTEREST INCOME..................................................... 4,129,450 4,199,575 4,280,875 Provision for credit losses................................................. 457,499 242,269 388,261 ------------ ---------- ---------- Net interest income after provision for credit losses..................... 3,671,951 3,957,306 3,892,614 NON-INTEREST INCOME: Income from fiduciary activities.......................................... 239,411 232,700 227,700 Service charges on deposit accounts....................................... 544,697 483,884 450,998 Loan processing and servicing income...................................... 520,801 382,492 391,348 Securities gains (losses)................................................. 27,847 (261,052) 17,114 Other..................................................................... 537,214 491,501 403,344 ------------ ---------- ---------- TOTAL NON-INTEREST INCOME............................................... 1,869,970 1,329,525 1,490,504 NON-INTEREST EXPENSE: Salaries and related costs................................................ 1,750,517 1,753,672 1,687,778 Net occupancy expense, exclusive of depreciation.......................... 164,456 182,223 159,837 Equipment expense......................................................... 104,030 119,270 113,315 Taxes other than income and payroll....................................... 87,805 56,628 82,083 Depreciation and amortization............................................. 292,522 356,762 274,520 Outside services and processing........................................... 426,897 424,559 425,370 Marketing and development................................................. 171,163 178,905 170,931 Communication and transportation.......................................... 274,694 245,455 232,596 Other..................................................................... 359,555 450,505 465,976 ------------ ---------- ---------- TOTAL NON-INTEREST EXPENSE.............................................. 3,631,639 3,767,979 3,612,406 ------------ ---------- ---------- INCOME BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE...................................................... 1,910,282 1,518,852 1,770,712 INCOME TAX PROVISION (BENEFIT): Income excluding securities transactions.................................. 622,039 610,970 592,619 Securities transactions................................................... 10,380 (97,227) 5,990 ------------ ---------- ---------- Provision for income taxes.............................................. 632,419 513,743 598,609 ------------ ---------- ---------- INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE........... 1,277,863 1,005,109 1,172,103 Cumulative effect of change in method of accounting for income taxes........ 19,391 ------------ ---------- ---------- NET INCOME.................................................................. $ 1,277,863 $1,005,109 $1,191,494 =========== =========== =========== NET INCOME PER COMMON SHARE (AMOUNTS REFLECT THE 10% COMMON STOCK DIVIDEND PAYABLE MARCH 6, 1996 TO SHAREHOLDERS OF RECORD ON FEBRUARY 21, 1996): Income before cumulative effect of change in method of accounting for income taxes........................................................ $ 2.91 $ 2.20 $ 2.62 Cumulative effect of change in accounting for income taxes................ .04 ------------ ---------- ---------- NET INCOME PER COMMON SHARE................................................. $ 2.91 $ 2.20 $ 2.66 =========== =========== =========== Weighted average common shares outstanding (000)............................ 433,323 448,118 441,351 =========== =========== ===========
The accompanying notes are an integral part of the financial statements. 47 37 BANC ONE CORPORATION and Subsidiaries - -------------------------------------------------------------------------------- CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY for the three years ended December 31, 1995
CAPITAL IN NET UNREALIZED EXCESS OF HOLDING GAINS AGGREGATE (LOSSES) ON TOTAL STATED VALUE SECURITIES TREASURY STOCK- $ (THOUSANDS, EXCEPT PER PREFERRED COMMON OF COMMON RETAINED AVAILABLE STOCK, HOLDERS' SHARE AMOUNTS) STOCK STOCK STOCK EARNINGS FOR SALE AT COST EQUITY - ----------------------------------------------------------------------------------------------------------------------------------- BALANCE, DECEMBER 31, 1992......... $259,700 $1,451,504 $3,033,359 $1,850,250 $6,594,813 Net income........................ 1,191,494 1,191,494 Cash dividends: Corporation: Common ($.97 per share)(1).... (388,245) (388,245) Class B Preferred ($.75 per share)...................... (216) (216) Series C Preferred ($3.50 per share)...................... (17,498) (17,498) Pooled affiliates............. (25,505) (25,505) Shares issued in acquistions..... 24,539 12,269 59,409 96,217 Conversion of Preferred into common......................... (9,800) 5,029 4,771 Exercise of stock options, net of share purchased................ (2,876) (44,758) (47,634) Pooled affiliate stock issuance, sales of stock to employee benefit plans and other........ 34,973 (9,244) 4,015 29,744 Common stock split five-for-four, effective August 31, 1993...... 340,949 (340,949) 10% common stock dividend at fair market value.............. 173,040 1,180,995 (1,354,035) -------- ---------- ---------- ---------- --------- ---------- ---------- BALANCE, DECEMBER 31, 1993........ 249,900 2,027,158 3,836,443 1,319,669 7,433,170 Accounting change, adjustment for unrealized gains on securities available for sale at January 1, 1994........................ $ 84,105 84,105 Net income....................... 1,005,109 1,005,109 Cash dividends: Corporation: Common ($1.13 per share)(1)... (487,218) (487,218) Series C Preferred ($3.50 per share)...................... (17,492) (17,492) Pooled affiliates............. (10,040) (10,040) Shares issued in acquistions..... 8,342 11,166 14,316 (316) 33,508 Exercise of stock options, net of shares purchased................ 193 (5,852) (5,659) Pooled affiliate stock issuance, sales of stock to employee benefit plans and other......... 9,235 (45,011) 96,912 61,136 Purchase of treasury stock....... $ (336,453) (336,453) Change in unrealized holding gains (losses) on securities available for sale, net of tax.. (195,306) (195,306) -------- ---------- ---------- ---------- --------- ---------- ---------- BALANCE, DECEMBER 31, 1994........ 249,000 2,044,928 3,796,746 1,921,256 (111,517) (336,453) 7,564,860 Net income....................... 1,277,863 1,277,863 Cash dividends: Corporation: Common ($1.24 per share)(1)... (532,807) (532,807) Series C Preferred ($3.50 per share)....................... (17,487) (17,487) Shares issued in acquisitions.... 2,500 4,262 (3,115) 3,647 Conversion of preferred into common (265) 46 219 Exercise of stock options, net of shares purchased............ 1,998 (7,458) (5,460) Sales of stock to employee benefit plans and other........ 3,896 23,966 27,862 Purchase of treasury stock....... (324,321) (324,321) Change in unrealized holding gains (losses) on securities available for sale, net of tax. 203,321 203,321 10% common stock dividend at fair market value.............. 205,337 1,340,028 (1,545,365) -------- ---------- ---------- ---------- --------- ---------- ---------- BALANCE, DECEMBER 31, 1995........ $249,635 $2,258,705 $5,157,763 $1,100,345 $ 91,804 $ (660,774) $8,197,478 ======== ========== ========== ========== ========= ========== ========== - --------------- (1) Amounts reflect the effect of the 10% common stock dividends effective February 10, 1994 and February 21, 1996.
The accompanying notes are an integral part of the financial statements. 38 BANC ONE CORPORATION and Subsidiaries - -------------------------------------------------------------------------------- CONSOLIDATED STATEMENT OF CASH FLOWS for the three years ended December 31, 1995
$(THOUSANDS) 1995 1994 1993 ------------------------------------------------------------------------------------------------ CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES: NET INCOME...................................... $ 1,277,863 $ 1,005,109 $ 1,191,494 Adjustments: Provision for credit losses................. 457,499 242,269 388,261 Depreciation expense........................ 236,287 271,928 191,348 Amortization of intangibles................. 56,235 84,834 83,172 Amortization of securities premiums and discounts, net........................... (57,118) 97,945 74,482 Amortization of purchased mortgage servicing rights................................... 12,939 10,948 18,134 Net (increase) decrease in trading account.................................. (30,199) 92,549 (7,777) Net (increase) decrease in loans held for sale..................................... (187,758) 869,482 (429,375) Net decrease in deferred loan fees.......... (4,178) (13,416) (7,335) Securities (gains) losses................... (27,847) 261,052 (17,114) Gain on the sale of banks and branch offices.................................. (68,297) (390) (803) Gain on sale of loans and other assets...... (5,995) (71,898) (26,058) Net (increase) decrease in other assets..... (323,381) (145,441) 16,694 Net increase (decrease) in other liabilities.............................. 161,828 2,355 (130,746) Net increase in deferred income taxes....... 172,034 173,090 48,180 Cumulative effect of change in accounting principle................................ (19,391) ----------- ----------- ----------- NET CASH PROVIDED BY OPERATING ACTIVITIES... 1,669,912 2,880,416 1,373,166 ----------- ----------- ----------- CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES: Purchases of securities available/held for sale.......................................... (8,110,473) (11,739,005) (350,000) Purchases of securities held to maturity........ (630,407) (1,090,779) (6,402,608) Maturities of securities available/held for sale.......................................... 6,712,867 2,142,467 476,242 Maturities of securities held to maturity....... 1,474,813 2,501,689 6,439,257 Sales of securities available/held for sale..... 2,544,358 10,900,079 716,764 Sales of securities held to maturity............ 101,844 Net increase in loans, excluding sales and purchases..................................... (9,038,907) (8,283,794) (4,555,005) Sales of loans and other assets................. 3,694,661 3,620,460 306,673 Purchases of loans and related premiums......... (667,442) (641,556) (768,264) Net decrease (increase) in short-term investments................................... 3,143,398 (2,450,281) 1,478,925 Additions to bank premises and equipment........ (340,606) (325,291) (293,288) Sale of banks................................... 95,698 Net cash acquired in acquisitions............... 42,413 1,180,497 36,148 Net increase in mortgage servicing rights....... (44,153) (8,186) (4,948) All other investing activities, net............. 100 1,245 ----------- ----------- ----------- NET CASH USED IN INVESTING ACTIVITIES....... (1,123,680) (4,193,700) (2,817,015) ----------- ----------- ----------- CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES: Net increase (decrease) in demand, money market and savings deposits.......................... 1,639,689 (1,385,486) 683,978 Net (decrease) increase in time deposits........ (1,472,921) 2,943,921 (2,237,643) Net increase in short-term borrowings........... 163,166 557,093 2,629,422 Issuance of long-term borrowings, net........... 1,081,389 94,536 475,798 Repayment of long-term borrowings............... (221,729) (32,535) (67,288) Cash dividends paid............................. (674,219) (496,708) (399,936) Sales of branch offices: Deposit liabilities assumed by purchasers..... (405,182) (52,318) (39,102) Other, net.................................... 73,343 25,675 2,711 Purchase of treasury shares..................... (324,321) (336,453) Other, net increase (decrease).................. 22,402 59,087 (33,889) ----------- ----------- ----------- NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES............................... (118,383) 1,376,812 1,014,051 ----------- ----------- ----------- Increase (decrease) in cash and cash equivalents................................... 427,849 63,528 (429,798) Cash and cash equivalents at January 1.......... 5,073,417 5,009,889 5,439,687 ----------- ----------- ----------- CASH AND CASH EQUIVALENTS AT DECEMBER 31........ $ 5,501,266 $ 5,073,417 $ 5,009,889 ============ ============ ============
The accompanying notes are an integral part of the financial statements. 49 39 BANC ONE CORPORATION and Subsidiaries - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BANC ONE is one of the country's largest bank holding companies offering a full range of financial services through operating offices in Arizona, Colorado, Illinois, Indiana, Kentucky, Louisiana, Ohio, Oklahoma, Texas, Utah, West Virginia and Wisconsin. BANC ONE also engages in credit card and merchant processing, consumer finance, mortgage banking, insurance, trust and investment management, brokerage, investment and merchant banking, venture capital, equipment leasing and data processing activities. "The Corporation" is defined as parent company only. "BANC ONE" is defined as the Corporation and all significant majority-owned subsidiaries. The consolidated financial statements include the accounts of the Corporation and all significant majority-owned subsidiaries (affiliates). See Note 2 for information relative to affiliations, pending affiliations and divestitures. Material intercompany transactions have been eliminated. BANC ONE operates principally in a single business segment. For purposes of comparability, certain prior period amounts have been reclassified to conform with current year presentation. The following is a summary of significant accounting policies followed in the preparation of the financial statements. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Securities On January 1, 1994, BANC ONE adopted Statement of Financial Accounting Standards (SFAS) No. 115, "Accounting for Certain Investments in Debt and Equity Securities" (SFAS 115), which specifies the accounting for investments in securities that have readily determinable fair values. Securities that management has both the positive intent and ability to hold to maturity are classified as securities held to maturity and are carried at cost, adjusted for amortization of premium or accretion of discount using the interest method. Securities that may be sold prior to maturity for asset/liability management purposes, or that may be sold in response to changes in interest rates, changes in prepayment risk, to increase regulatory capital or other similar factors, are classified as securities available for sale and carried at fair value with any adjustments to fair value, after tax, reported as a separate component of stockholders' equity. Securities purchased for trading purposes are held in the trading portfolio at market value, with market adjustments included in non-interest income. In October 1995, the Financial Accounting Standards Board (FASB) issued a Special Report entitled "A Guide to Implementation of Statement 115 on Accounting for Certain Investments in Debt and Equity Securities," which provided for a one-time transfer of investment securities prior to December 31, 1995. BANC ONE transferred the majority of securities in its held to maturity portfolio to available for sale. The securities were marked to market at the date of transfer in accordance with SFAS 115. Interest and dividends on securities, including the amortization of premiums and the accretion of discounts, are reported in interest and dividends on securities using the interest method. Gains and losses on securities are recorded on the trade date and are calculated based on the security with the highest cost unless specific securities are identified. 50 40 BANC ONE CORPORATION and Subsidiaries - -------------------------------------------------------------------------------- Loans Loans are reported at the principal amount outstanding, net of unearned income. Loans identified as held for sale are carried at the lower of cost or market determined on an aggregate basis. Income earned is recognized principally on the accrual method of accounting. Under this method, finance charges are recognized in decreasing amounts each period which provides a level rate of return on the outstanding principal balance. Unearned income, which includes deferred fees net of deferred direct incremental loan origination costs, is amortized to interest income generally over the contractual life of the loan using the interest method or the straight-line method if not materially different. Loan origination fees and costs on demand loans are deferred and amortized into interest income on a straight-line basis over a period which is consistent with the understanding between BANC ONE and the borrower or, if no understanding exists, over the estimated loan term. Loan origination fees and costs on credit card and other revolving loans are deferred and amortized into interest or other income using a straight-line method typically over one year. Commercial loans are placed on non-accrual at the time the loan is 90 days delinquent unless the credit is well secured and in process of collection. Residential real estate loans are typically placed on non-accrual at the time the loan is 120 days delinquent. Credit card loans, other unsecured personal credit lines and certain consumer finance loans are typically charged-off no later than 180 days delinquent. Other consumer loans are charged-off at 120 days delinquent. In all cases, loans must be placed on non-accrual or charged-off at an earlier date if collection of principal or interest is considered doubtful. All interest accrued but not collected for loans that are placed on non-accrual or charged-off is reversed against interest income. The interest on these loans is accounted for on the cash basis or cost recovery method, until qualifying for return to accrual. Loans are returned to accrual status when all the principal and interest amounts contractually due are reasonably assured of repayment within a reasonable time frame and when the borrower has demonstrated payment performance of cash or cash equivalents for a minimum of six months. A loan is considered restructured when BANC ONE allows certain concessions to a financially troubled debtor that would not normally be considered. On January 1, 1995, BANC ONE adopted SFAS No. 122, "Accounting for Mortgage Servicing Rights" which amends SFAS No. 65, "Accounting for Certain Mortgage Banking Activities." This statement requires that a mortgage banking enterprise recognize as separate assets the rights to service mortgage loans for others, however those rights are acquired. The impact on BANC ONE's financial position and results of operations for the year ended December 31, 1995 was not material. Leases The leasing operations of the affiliates consist of the leasing of automobiles (carried in consumer loans) and various types of equipment under leases principally classified as direct financing leases. Income, net of initial direct costs, is deferred and reported in amounts over the term of the lease so as to provide a constant yield on the outstanding net investment. Leases are charged-off at the earlier of 120 days delinquent or when collection is in doubt. 51 41 BANC ONE CORPORATION and Subsidiaries - -------------------------------------------------------------------------------- Provision for Credit Losses The provision for credit losses charged to expense is based upon each affiliate's past credit loss experience and an evaluation of potential losses in the current loan and lease portfolios. In management's opinion, the provision is sufficient to maintain the allowance for credit losses at a level that adequately provides for potential losses. BANC ONE adopted SFAS No.'s 114 and 118 (collectively, SFAS 114), "Accounting by Creditors for Impairment of a Loan" and "Accounting by Creditors for Impairment of a Loan - Income Recognition and Disclosures" as of January 1, 1995. The adoption of SFAS 114 did not result in additional provisions for credit losses primarily because the majority of impaired loan valuations continue to be based on the fair value of collateral. Bank Premises and Equipment Bank premises and equipment are stated at cost less accumulated depreciation. Depreciation is provided principally on the straight-line method over the estimated useful lives of the assets. Upon the sale or other disposal of assets, the cost and related accumulated depreciation are retired and the resulting gain or loss is recognized. Maintenance and repairs are charged to expense as incurred, while renewals and betterments are capitalized. Software costs for internally developed systems are expensed as incurred. Software costs related to externally developed systems are capitalized and include systems intended for internal and external use. In March 1995, the FASB issued SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." BANC ONE will adopt SFAS 121 effective January 1, 1996. The impact on BANC ONE's financial position and results of operations is not expected to be material. Other Real Estate Owned Other real estate owned primarily represents properties acquired by the Corporation's affiliates through customer loan defaults and owned properties no longer used in the banking business. The real estate is stated at an amount equal to the lesser of the loan balance prior to foreclosure, plus certain costs incurred for improvements to the property, or fair value less estimated selling costs of the property. Purchase Method of Accounting Net assets of organizations acquired in purchase transactions are recorded at fair value at date of acquisition. The excess of cost over net assets of affiliates purchased is being amortized using the straight-line and accelerated methods over terms ranging from five to 40 years. Core deposits and other identifiable intangible assets are typically amortized on an accelerated basis. Off-Balance Sheet Investment Products BANC ONE enters into a variety of off-balance sheet investment products as part of its interest rate risk management strategy and in its customer service and trading activities. The most frequently used off-balance sheet investment products are various types of interest rate swaps. However, interest rate floors, options, swap options, caps, forward rate agreements and currency swaps are also utilized. Off-balance sheet investment products are typically classified as synthetic alterations, anticipatory hedges or matched book agreements. The 52 42 BANC ONE CORPORATION and Subsidiaries - -------------------------------------------------------------------------------- criteria that must be satisfied for each of these methods is as follows: Synthetic Alteration -- (1) The asset or liability to be converted exposes BANC ONE to interest rate risk and (2) The off-balance sheet investment product is designated and effective as a synthetic alteration of the balance sheet item. Anticipatory Hedge -- (1) The transaction to be hedged exposes BANC ONE to interest rate risk; (2) The off-balance sheet investment product acts to reduce the interest rate risk by moving closer to being insensitive to interest rate changes; (3) The off-balance sheet investment product is designated and effective as a hedge of the transaction; (4) The significant characteristics and expected terms of the anticipated transaction must be identified; and (5) It must be probable that the anticipated transaction will occur. Matched Book -- There must be separate agreements that have offsetting payment streams and the same maturity, repricing dates and notional amounts. In order for off-balance sheet investment products with forward start dates to be accounted for as a synthetic alteration, they must satisfy the appropriate criteria above as well as the following additional criteria: (1) The start date of the off-balance sheet investment product must not extend beyond that point in time at which BANC ONE believes its modeling systems produce reliable interest rate sensitivity information; and (2) The related balance sheet item must, from trade date to final maturity, have sufficient balances for alteration. If the initial assignment is changed, or should sufficient balances not be available, the excess portion of the off-balance sheet investment product must be marked to market. Accrual accounting is applied for off-balance sheet investment products classified as described above and income and expense are recorded in the same category as that of the related balance sheet item. The related balance sheet item is generally a pool of similar products. For matched book transactions, income and expense are recorded in non-interest income. Fees related to these off-balance sheet investment products are amortized on the interest method over the life of the off-balance sheet investment products. If the balance of the related balance sheet item falls below that of the related off-balance sheet investment product, the excess portion of the off-balance sheet investment product is marked to market and the resulting gain or loss included in income. If an off-balance sheet investment product is terminated, the gain or loss is deferred and amortized over the remaining life of the off-balance sheet investment product. Off-balance sheet investment products that do not satisfy the criteria above, including those used in trading activities, are carried at market value. Any changes in market value are recognized in non-interest income. Investment in Majority-Owned Affiliates (Parent Company Only) The Corporation's investment in affiliates represents the total equity of majority-owned consolidated subsidiaries, using the equity method of accounting for investments. Statement of Cash Flows For purposes of reporting cash flows, cash and cash equivalents include cash and due from banks. 53 43 BANC ONE CORPORATION and Subsidiaries - -------------------------------------------------------------------------------- Net Income Per Common Share Net income per common share is calculated by dividing net income available to common stockholders (net income less preferred dividends) by the average number of common shares outstanding (total shares issued less treasury shares) and any dilutive common stock equivalents for the period. Stock Dividend All per share and average share information has been restated for the 10% common stock dividend payable March 6, 1996 to shareholders of record on February 21, 1996. Stock Compensation In October 1995, the FASB issued SFAS No. 123 "Accounting for Stock-Based Compensation", which defines a fair value based method of accounting for employee stock options or similar equity instruments granted after December 31, 1994. However, it also allows an entity to continue to account for these plans according to Accounting Principles Board Opinion No. 25 (APB 25), provided pro forma disclosures of net income and earnings per share are made as if the fair value based method of accounting defined by SFAS No. 123 had been applied. BANC ONE anticipates electing to continue to measure compensation cost related to employee stock purchase options using APB 25, and will provide pro forma disclosures as required in the 1996 Annual Report. - -------------------------------------------------------------------------------- NOTE 2: AFFILIATIONS, PENDING AFFILIATIONS AND DIVESTITURES The Corporation was a party to business combinations and divestitures with various entities as detailed below. 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 payable March 6, 1996 to shareholders of record on February 21, 1996) valued at $711 million. The acquisition was accounted for as a purchase. Premier had assets of $6.3 billion at December 31, 1995. No effects of this acquisition are included in the accompanying financial statements. On September 28, 1995, the Corporation signed a definitive agreement for the sale of Bank One, Pikeville, NA. The Pikeville bank had assets of $224 million at December 31, 1995. The sale is expected to close in the first quarter of 1996 and is expected to result in a gain of approximately $9 million. On March 10, 1995, the Corporation acquired all of the outstanding shares of 1st*Bank of Coppell, Texas, in exchange for 550,000 (adjusted for the 10% common stock dividend payable March 6, 1996 to shareholders of record on February 21, 1996) shares of the Corporation's common stock. 1st*Bank had total assets of approximately $143 million at February 28, 1995. The acquisition of 1st*Bank was accounted for as a pooling of interests; however, financial statements prior to the acquisition date have not been restated because the transaction was not material to BANC ONE. On February 28, 1995, the Corporation completed the sale of its four Michigan banks which had combined assets of $614 million as of December 31, 1994. The sale resulted in the recognition of a gain of $47 million during the first quarter of 1995. 54 44 BANC ONE CORPORATION and Subsidiaries - -------------------------------------------------------------------------------- NOTE 3: SECURITIES AND INVESTMENT PRODUCTS Following are the fair value and amortized cost of securities by type and the estimated maturities and weighted average rates of securities.
ENDING BALANCES AT MATURITIES OF SECURITIES AT DECEMBER 31, 1995(1) DECEMBER ------------------------------------------------------------------------ 31, 2001- ------- $(MILLIONS) 1996 1997 1998 1999 2000 2005 2006+ 1995 - ------------------------------------------------------------------------------------------------------------------------------ SECURITIES HELD TO MATURITY(4) Tax-exempt Amortized cost...................... $ 260 $ 162 $ 116 $ 85 $ 107 $ 138 $ 41 $ 909 Fair value.......................... 263 170 122 91 117 146 44 953 Weighted average yield(2)........... 5.77% 7.64% 6.95% 6.70% 7.41% 6.50% 5.55% 6.63% Other Amortized cost...................... 36 23 25 20 3 65 7 179 Fair value.......................... 37 23 24 21 3 68 7 183 Weighted average yield.............. 6.03% 6.62% 6.85% 7.10% 6.32% 6.25% 5.12% 6.38% Total amortized cost.................... $ 296 $ 185 $ 141 $ 105 $ 110 $ 203 $ 48 $ 1,088 ====== ====== ====== ====== ====== ====== ====== ======= Total fair value........................ $ 300 $ 193 $ 146 $ 112 $ 120 $ 214 $ 51 $ 1,136 ====== ====== ====== ====== ====== ====== ====== ======= SECURITIES AVAILABLE FOR SALE(3)(4) United States treasury and agencies Amortized cost...................... $1,051 $ 606 $ 619 $ 202 $ 206 $ 328 $ 17 $ 3,029 Fair value.......................... 1,051 613 631 205 214 329 17 3,060 Weighted average yield.............. 5.80% 6.21% 6.02% 5.99% 6.53% 6.37% 8.34% 6.06% Mortgage and asset-backed securities Government Amortized cost.................. 252 536 1,245 2,690 343 1,440 47 6,553 Fair value...................... 252 539 1,268 2,739 350 1,465 47 6,660 Weighted average yield.......... 8.09% 6.77% 7.07% 6.98% 7.10% 7.03% 8.33% 7.05% Other Amortized cost.................. 491 788 536 472 700 551 57 3,595 Fair value...................... 491 789 536 468 710 536 57 3,587 Weighted average yield.......... 5.68% 6.58% 6.23% 6.06% 6.92% 6.67% 7.61% 6.43% Tax-exempt Amortized cost...................... 48 128 95 107 115 316 4 813 Fair value.......................... 48 130 96 109 116 322 4 825 Weighted average yield(2)........... 5.24% 5.17% 4.94% 4.98% 4.82% 5.00% 8.06% 5.02% Other Amortized cost...................... 38 12 25 51 47 106 207 486 Fair value.......................... 38 12 25 51 47 106 209 488 Weighted average yield.............. 8.40% 6.36% 10.46% 11.94% 11.96% 8.22% 5.58% 7.93% Total amortized cost.................... $1,880 $2,070 $2,520 $3,522 $1,411 $2,741 $ 332 $14,476 ====== ====== ====== ====== ====== ====== ====== ======= Total fair value........................ $1,880 $2,083 $2,556 $3,572 $1,437 $2,758 $ 334 $14,620 ====== ====== ====== ====== ====== ====== ====== ======= $(MILLIONS) 1994 - ---------------------------------------- SECURITIES HELD TO MATURITY(4) Tax-exempt Amortized cost...................... $ 2,182 Fair value.......................... 2,167 Weighted average yield(2)........... Other Amortized cost...................... 2,652 Fair value.......................... 2,623 Weighted average yield.............. Total amortized cost.................... $ 4,834 ======= Total fair value........................ $ 4,790 ======= SECURITIES AVAILABLE FOR SALE(3)(4) United States treasury and agencies Amortized cost...................... $ 3,700 Fair value.......................... 3,693 Weighted average yield.............. Mortgage and asset-backed securities Government Amortized cost.................. 3,312 Fair value...................... 3,206 Weighted average yield.......... Other Amortized cost.................. 3,144 Fair value...................... 3,072 Weighted average yield.......... Tax-exempt Amortized cost...................... 34 Fair value.......................... 34 Weighted average yield(2)........... Other Amortized cost...................... 306 Fair value.......................... 313 Weighted average yield.............. Total amortized cost.................... $10,496 ======= Total fair value........................ $10,318 =======
(1) Reflects estimated maturity. (2) Weighted average yields on tax-exempt securities are not reflected on a tax equivalent basis. (3) Weighted average yields for available-for-sale securities are based on amortized historical cost. (4) BANC ONE reclassified $2.9 billion in held-to-maturity securities, with a fair value of $2.9 billion, to available-for-sale in December 1995. 55 45 BANC ONE CORPORATION and Subsidiaries - -------------------------------------------------------------------------------- The following are net realized gains and losses on securities sold or called and unrealized gains or losses on securities held:
REALIZED GAIN (LOSS) DURING 1995 --------------------------------------------------------------------------- NET REALIZED AMORTIZED REALIZED REALIZED GAIN $(MILLIONS) COST PROCEEDS GAINS LOSSES (LOSS) - ------------------------------------------------------------------------------------------------------------------------ Securities held to maturity: Tax-exempt............................. $ 95 $ 96 $ 1 $ 1 Other.................................. 24 28 6 $ (2) 4 Securities available for sale: United States treasury and federal agencies.............................. 635 636 7 (6) 1 Mortgage and asset-backed securities: Government.......................... 591 585 1 (7) (6) Other............................... 1,209 1,204 3 (8) (5) Tax-exempt............................. Other.................................. 108 141 33 33 ----------- ----------- ----------- ----------- ----------- Total..................................... $ 2,662 $ 2,690 $ 51 $ (23) $ 28 ============ ============ ============ ============ ============ UNREALIZED GAIN (LOSS) ------------------------------------------- NET UNREALIZED UNREALIZED UNREALIZED GAIN $(MILLIONS) GAINS LOSSES (LOSS) < - ------------------------------------------ Securities held to maturity: Tax-exempt............................. $ 51 $ (7) $ 44 Other.................................. 6 (2) 4 Securities available for sale: United States treasury and federal agencies.............................. 33 (2) 31 Mortgage and asset-backed securities: Government.......................... 117 (10) 107 Other............................... 25 (33) (8) Tax-exempt............................. 16 (4) 12 Other.................................. 3 (1) 2 ----------- ----------- ----------- Total..................................... $ 251 $ (59) $ 192 ============ ============ ============
REALIZED GAIN (LOSS) DURING 1994 --------------------------------------------------------------------------- NET REALIZED AMORTIZED REALIZED REALIZED GAIN $(MILLIONS) COST PROCEEDS GAINS LOSSES (LOSS) - ------------------------------------------------------------------------------------------------------------------------ Securities held to maturity: Tax-exempt............................. $ 55 $ 56 $ 2 $ (1) $ 1 Other.................................. 45 46 4 (3) 1 Securities available for sale: United States treasury and federal agencies.............................. 10,556 10,271 140 (425) (285) Mortgage and asset-backed securities: Government.......................... 104 103 (1) (1) Other............................... 563 562 1 (2) (1) Tax-exempt and other................... 64 88 27 (3) 24 ----------- ----------- ----------- ----------- ----------- Total..................................... $ 11,387 $ 11,126 $ 174 $ (435) $ (261) ============ ============ ============ ============ ============ UNREALIZED GAIN (LOSS) ------------------------------------------- NET UNREALIZED UNREALIZED UNREALIZED GAIN $(MILLIONS) GAINS LOSSES (LOSS) < - ------------------------------------------ Securities held to maturity: Tax-exempt............................. $ 51 $ (66) $ (15) Other.................................. 31 (60) (29) Securities available for sale: United States treasury and federal agencies.............................. 5 (12) (7) Mortgage and asset-backed securities: Government.......................... (106) (106) Other............................... 26 (98) (72) Tax-exempt and other................... 8 (1) 7 ----------- ----------- ----------- Total..................................... $ 121 $ (343) $ (222) ============ ============ ============
REALIZED GAIN (LOSS) DURING 1993 --------------------------------------------------------------------------- NET AMORTIZED REALIZED REALIZED REALIZED $(MILLIONS) COST PROCEEDS GAINS LOSSES GAIN - ------------------------------------------------------------------------------------------------------------------------ Securities held to maturity: United States treasury and agencies.... $ 82 $ 85 $ 3 $ 3 Mortgage and asset-backed securities: Government.......................... 5 5 Other............................... Tax-exempt............................. 99 100 2 (1) 1 Other.................................. 99 110 12 (1) 11 Securities held for sale.................. 715 717 4 (2) 2 ----------- ----------- ----------- ----------- ----------- Total..................................... $ 1,000 $ 1,017 $ 21 $ (4) $ 17 ============ ============ ============ ============ ============ UNREALIZED GAIN (LOSS) ------------------------------------------- NET UNREALIZED UNREALIZED UNREALIZED $(MILLIONS) GAINS LOSSES GAIN < - ------------------------------------------ Securities held to maturity: United States treasury and agencies.... $ 130 $ (14) $ 116 Mortgage and asset-backed securities: Government.......................... 36 (8) 28 Other............................... 27 (7) 20 Tax-exempt............................. 136 (5) 131 Other.................................. 35 (4) 31 Securities held for sale.................. 45 45 ----------- ----------- ----------- Total..................................... $ 409 $ (38) $ 371 ============ ============ ============
56 46 BANC ONE CORPORATION and Subsidiaries - -------------------------------------------------------------------------------- Off-Balance Sheet Investment Products Information is provided below for each significant type of off-balance sheet investment product. The off-balance sheet investment products BANC ONE utilizes are primarily interest rate swaps. Interest rate swap agreements generally involve the exchange of fixed and floating rate 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 program to manage the impact of fluctuating interest rates. The notional amounts of generic swaps do not change for the life of the contract. The notional amounts and lives of amortizing swaps change based on certain interest rate indices. Generally, as rates fall the notional amounts of amortizing swaps decline more rapidly and as rates increase notional amounts decline more slowly. 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 December 31, 1995. To the extent that rates move in a fashion other than indicated by the forward interest rate curve the maturity information will change. Basis swaps are contracts under which BANC ONE receives amounts based on LIBOR, typically subject to certain defined caps, and pays amounts based on prime. Accrual of interest on forward starting swaps commences at a predetermined future date. Purchased caps require the payment of a fee for the right to receive interest payments on the contract notional amount when a floating rate (typically LIBOR) rises above a strike rate. The impact on net interest income is the excess of the floating rate over the strike rate less the periodic amortization of the premium paid. The notional amounts shown below represent agreed upon amounts on which calculations of interest payments to be exchanged are based. Notional amounts do not represent direct credit exposures. BANC ONE's direct credit exposure is limited to the net difference between the calculated pay and receive amounts on each transaction, which is generally netted and paid or received quarterly, and the ability of the counterparty to perform its payment obligation under the agreement. BANC ONE has very stringent policies governing off-balance sheet investment product activities and collateral is typically exchanged with the counter-parties to further minimize credit risk. The methods used to determine counterparties and credit lines are formally reviewed and approved annually. There were $23 million and $49 million of net deferred items primarily representing premiums paid at December 31, 1995 and 1994, respectively. There were no past due payments, nor were there any reserves for credit losses on off-balance sheet investment products, as of these dates. BANC ONE's trading and dealer activities are not material and thus not separately disclosed. The following are the estimated maturities and weighted average fixed rates of off-balance sheet investment products by type at December 31, 1995. 57 47 BANC ONE CORPORATION and Subsidiaries - --------------------------------------------------------------------------------
MATURITIES OF OFF-BALANCE SHEET INVESTMENT PRODUCTS AT DECEMBER 31, 1995(1)(2) ENDING BALANCES AT ------------------------------------------------------------------------ DECEMBER 31, 2001- ------------------- $(MILLIONS) 1996 1997 1998 1999 2000 2005 2006+ 1995 1994 - ----------------------------------------------------------------------------------------------------------------------------------- Receive fixed swaps: Notional value................. $1,785 $4,553 $1,500 $ 45 $ 760 $ 846 $ 300 $ 9,789 $ 6,995 Weighted average receive rate......................... 6.06% 5.41% 5.82% 8.82% 6.32% 6.70% 7.23% 5.85% Receive fixed amortizing swaps: Notional value................. 6,508 1,351 68 19 7,946 15,442 Weighted average receive rate......................... 5.27% 5.27% 7.48% 7.26% 5.29% Pay fixed swaps: Notional value................. 2,455 95 110 6 7 2,673 5,548 Weighted average pay rate...... 5.62% 8.54% 6.22% 8.69% 8.17% 5.76% Purchased caps: Notional value................. 4,712 503 4 4 4 26 5,253 6,186 ------ ------ ------ ------ ------ ------ ------ ------- ------- Net receive fixed position....... $1,126 $5,306 $1,454 $ 54 $ 749 $ 820 $ 300 $ 9,809 $10,703 Basis swaps: Notional value................. 4,268 3,730 306 8,304 8,102 Other:(3) Notional value................. $2,612 $ 440 $1,000 $ 4,052 $ 2,191
(1) Maturities are based on estimated future interest rates from the forward interest rate curve at December 31, 1995. (2) Variable receive and pay interest rates, which are based primarily on three month LIBOR or prime, are not included in the table. (3) Other off-balance sheet investment products include forward starting contracts ($1.4 billion at December 31, 1995), floors, futures, options, swap options, forward rate agreements, currency swaps and anticipatory hedges. Customer transactions of $1.2 billion and $.6 billion at December 31, 1995 and December 31, 1994, respectively, and the related offsetting transactions are excluded. Unrealized gains and losses in off-balance sheet investment products at December 31, 1995 and 1994 are summarized as follows:
UNREALIZED GAIN (LOSS) AS OF DECEMBER 31, 1995 ------------------------------------------------------- NET NOTIONAL UNREALIZED UNREALIZED UNREALIZED $(MILLIONS) AMOUNT GAINS LOSSES GAIN (LOSS) - ------------------------------------------------------------------------------------- Receive fixed swaps......... $ 9,789 $ 147 $ (11) $ 136 Receive fixed amortizing.... 7,946 16 (29) (13) Pay fixed swaps............. 2,673 3 (16) (13) Purchased caps.............. 5,253 (18) (18) Basis swaps................. 8,304 (37) (37) Forward starting and other..................... 4,052 (8) (8) -------- ---------- ---------- ------------ Total....................... $ 38,017 $ 166 $ (119) $ 47 ======= ========= ========= =============
UNREALIZED GAIN (LOSS) AS OF DECEMBER 31, 1994 ------------------------------------------------------- NET NOTIONAL UNREALIZED UNREALIZED UNREALIZED $(MILLIONS) AMOUNT GAINS LOSSES GAIN (LOSS) - ------------------------------------------------------------------------------------- Receive fixed swaps......... $ 6,995 $ 1 $ (154) $ (153) Receive fixed amortizing.... 15,442 1 (989) (988) Pay fixed swaps............. 5,548 91 (5) 86 Purchased caps.............. 6,186 83 (2) 81 Basis swaps................. 8,102 (342) (342) Forward starting and other..................... 2,191 44 (34) 10 -------- ---------- ---------- ------------ Total....................... $ 44,464 $ 220 $ (1,526) $ (1,306) ======= ========= ========= =============
58 48 BANC ONE CORPORATION and Subsidiaries - -------------------------------------------------------------------------------- NOTE 4: LOANS AND LEASES The composition of the loan and lease portfolio at December 31, 1995 and 1994 is summarized as follows:
$ (THOUSANDS) 1995 1994 ----------------------------------------------------------------------------------- Commercial, financial and agricultural.............. $ 17,903,692 $16,619,186 Real estate: Commercial........................................ 5,667,826 5,571,296 Construction...................................... 2,692,587 2,195,003 Residential....................................... 11,259,495 11,273,689 Consumer (net of unearned income of $487,147 and $423,024 at December 31, 1995 and 1994, respectively)...... 18,407,595 19,070,286 Credit card......................................... 7,665,274 5,924,383 Leases (net of unearned income of $491,684 and $379,679 at December 31, 1995 and 1994, respectively)..................................... 1,732,196 1,339,069 ------------- ----------- Total loans and leases.............................. $ 65,328,665 $61,992,912 =========== ===========
Mortgage loans held for sale were $503 million and $356 million at December 31, 1995 and 1994, respectively. Such loans are carried at the lower of cost or market determined on an aggregate basis. In the normal course of business, BANC ONE issues commitments to extend credit, standby letters of credit, and commercial and other letters of credit to meet the financing needs of its customers. These instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the balance sheet. The contract amounts of these instruments are shown below.
$ (MILLIONS) 1995 1994 ------------------------------------------------------------------------------ Commitments to extend credit.......................... $ 79,436 $ 60,185 Standby letters of credit............................. 3,493 3,003 Commercial and other letters of credit................ 278 260
Commitments to extend credit are agreements to lend to a customer provided there is not a violation of any condition established in the contract. Non-credit card commitments generally have fixed expiration dates, may require payment of a fee and contain termination and other clauses that provide for relief from funding in the event that there is a significant deterioration in the credit quality of the customer. Since many of the commitments are expected to or typically expire without being drawn upon, the total commitment amount does not necessarily represent future cash requirements. At December 31, 1995, BANC ONE had $79.4 billion of loan commitments outstanding, including approximately $61.7 billion of credit card commitments expiring in two years or less and $9.3 billion of other loan commitments expiring within one year. The same amounts for 1994 were $60.2 billion, $42.6 billion and $8.3 billion, respectively. The exposure to credit loss in the event of nonperformance by the other party to these commitments is represented by the contractual amount. BANC ONE applies the same credit policies in making commitments as it does for on-balance sheet instruments, mainly by evaluating each customer's creditworthiness on a case by case basis. The amount of collateral obtained, if deemed necessary by BANC ONE upon extension of credit, is based on management's credit evaluation of the borrower. The collateral varies, but may include residential real estate, accounts receivable, inventories, investments, property, plant and equipment and income-producing commercial properties. 59 49 BANC ONE CORPORATION and Subsidiaries - -------------------------------------------------------------------------------- Letters of credit are conditional commitments issued by BANC ONE guaranteeing payment on drafts drawn in accordance with the terms of the documents. Commercial letters of credit are used to facilitate trade or commerce with the drafts being drawn when the underlying transaction is consummated. Standby letters of credit guarantee the performance of a customer to a third party. These guarantees are primarily issued to support public and private borrowing arrangements, including commercial paper, bond financing and similar transactions. The credit risk involved in issuing letters of credit is essentially the same as that involved in making loan commitments to customers. BANC ONE uses the same credit policies in providing these conditional obligations as it does for on-balance sheet instruments. Collateral for those commitments when deemed necessary varies, but may include accounts receivable, inventories, investments and real estate. Except for short-term guarantees that expire within one year, most guarantees extend for more than five years and expire in decreasing amounts through the year 2029. BANC ONE has sold loans with servicing retained. The risk associated with these transactions is limited to certain on-balance sheet receivables (approximately $295 million). The remaining market and credit risks are transferred to the investors and the third party institutions providing credit enhancement. At December 31, 1995 and 1994, respectively, BANC ONE had $6.2 billion and $5.5 billion of loans to real estate operators, managers and developers and construction contractors which represented 9.47% and 8.79% of total loans and leases. There were no other significant concentrations. BANC ONE's real estate loans and loan commitments are primarily for properties located throughout the Midwest and Southwest. Repayment of these loans is dependent in part upon the economic conditions in those regions. BANC ONE evaluates each customer's creditworthiness on an individual basis and requires collateral on real estate loans consisting primarily of residential and income-producing properties. BANC ONE's credit card loans, consumer loans and related loan commitments are located throughout the United States. Repayment of these loans is dependent in part upon regional and national economic factors. BANC ONE has approximately 10.7 million managed Visa and Mastercard accounts with an average outstanding balance of $852 and 6.0 million private label accounts with an average outstanding balance of $299. The average unfunded commitments for all credit card accounts is $3,707 per account. BANC ONE does not require collateral on credit card loans because of the low average balance of each loan. The average balance per consumer loan is $7,647. Collateral typically required for consumer loans includes automobiles and other equipment. - -------------------------------------------------------------------------------- NOTE 5: ALLOWANCE FOR CREDIT LOSSES The following summarizes activity in the allowance for credit losses for 1995, 1994 and 1993.
$(THOUSANDS) 1995 1994 1993 ------------------------------------------------------------------------------------------ BALANCE, BEGINNING OF PERIOD................. $ 897,180 $ 967,254 $ 952,174 Allowance associated with loans acquired and other...................................... (3,888) 4,526 16,289 Provision for credit losses.................. 457,499 242,269 388,261 Charge-offs.................................. (603,994) (521,169) (590,558) Recoveries................................... 191,211 204,300 201,088 ----------- ---------- ---------- Net charge-offs.............................. (412,783) (316,869) (389,470) ----------- ---------- ---------- BALANCE, END OF PERIOD....................... $ 938,008 $ 897,180 $ 967,254 ========= ========= =========
60 50 BANC ONE CORPORATION and Subsidiaries - -------------------------------------------------------------------------------- The provision for credit losses charged to expense is based upon each affiliate's credit loss experience and an evaluation of potential losses in the current loan and lease portfolio, including the evaluation of impaired loans under SFAS 114. A loan is considered to be impaired when, based upon current information and events, it is probable that BANC ONE will be unable to collect all amounts due according to the contractual terms of the loan. Impairment is primarily measured based on the fair value of the loan's collateral. Impairment losses are included in the provision for credit losses. SFAS 114 does not apply to large groups of smaller balance homogeneous loans that are collectively evaluated for impairment, except for those loans restructured under a troubled debt restructuring. Loans collectively evaluated for impairment include certain smaller balance commercial loans, consumer loans, residential real estate loans and credit card loans, and are included in the following summary of impaired loans, only if restructured. The following table summarizes impaired loan information.
DECEMBER 31, $(THOUSANDS) 1995 --------------------------------------------------------------------------------- Impaired loans................................................. $217,161 Impaired loans with related allowance calculated under SFAS 114.......................................................... 141,467 Allowance on impaired loans calculated under SFAS 114.......... 41,119 Impaired loans with no related allowance calculated under SFAS 114.......................................................... 75,694
FOR THE YEAR ENDED $(THOUSANDS) DECEMBER 31, 1995 --------------------------------------------------------------- Average impaired loans......................................... $219,962 Interest income recognized on impaired loans................... 6,706 Cash basis interest income recognized on impaired loans........ 3,698
Interest payments on impaired loans are typically applied to principal unless collectibility of the principal amount is fully assured, in which case interest is recognized on the cash basis. Interest may be recognized on the accrual basis for certain troubled debt restructurings which are included in the impaired loan data above. - -------------------------------------------------------------------------------- NOTE 6: BANK PREMISES, EQUIPMENT AND LEASES The major categories of banking premises and equipment and accumulated depreciation at December 31, 1995 and 1994 are summarized as follows:
$(THOUSANDS) 1995 1994 ------------------------------------------------------ Land.................................................. $ 208,164 $ 213,461 Building.............................................. 1,040,104 1,008,394 Equipment............................................. 1,498,789 1,393,807 Leasehold improvements................................ 274,618 258,230 ------------ ---------- 3,021,675 2,873,892 Less accumulated depreciation and amortization........ 1,462,999 1,356,245 ------------ ---------- Bank premises and equipment, net...................... $ 1,558,676 $1,517,647 ========== ==========
As of December 31, 1995, the future minimum rental payments required under noncancelable operating leases with initial terms in excess of one year are $102 million, $94 million, $82 million, $69 million and $56 million for each of the years 1996 through 2000, respectively and $362 million thereafter. Rental expense under operating leases approximated $160 million in 1995, $175 million in 1994 and $149 million in 1993. 61 51 BANC ONE CORPORATION and Subsidiaries - -------------------------------------------------------------------------------- NOTE 7: SHORT-TERM BORROWINGS Information pertaining to BANC ONE's short-term borrowings for 1995, 1994 and 1993 is summarized below:
FEDERAL COMMERCIAL FUNDS REPURCHASE $(THOUSANDS) PAPER(1) PURCHASED(2) AGREEMENTS(2 OTHER(3) -------------------------------------------------------------------------------------- 1995: Ending balance................ $ 652,801 $3,229,938 $3,031,071 $2,863,390 Highest month-end balance..... 1,469,476 3,229,938 3,883,409 3,738,168 Average daily balance......... 1,278,631 2,767,037 3,012,345 2,244,224 Weighted average interest rate: As of year-end.............. 5.72% 5.43% 4.91% 5.73% Paid during year............ 6.16 5.93 4.94 5.66 1994: Ending balance................ $1,272,660 $2,114,015 $3,072,512 $3,162,582 Highest month-end balance..... 1,272,660 3,522,126 6,199,725 3,962,375 Average daily balance......... 1,047,795 2,836,104 4,359,420 2,568,300 Weighted average interest rate: As of year-end.............. 5.61% 6.01% 4.62% 5.02% Paid during year............ 4.61 4.46 3.55 4.42 1993: Ending balance................ $1,119,760 $3,185,538 $3,780,088 971,814 Highest month-end balance..... 1,374,047 3,185,538 3,780,088 971,814 Average daily balance......... 1,087,393 2,157,458 2,905,051 330,345 Weighted average interest rate: As of year-end.............. 3.21% 3.11% 2.84% 2.84% Paid during year............ 3.48 3.32 2.68 2.86
(1) The commercial paper of the Corporation and certain affiliates is supported by a $2 billion line of credit of the Corporation maturing in the year 2000 with unaffiliated banks and carrying an annual commitment fee of .10%. (2) Federal funds purchased and repurchase agreements represent primarily overnight borrowings. (3) Other includes demand notes - U.S. Treasury, short-term bank notes and other notes. Short-term bank notes were $2.4 billion at December 31, 1995 and 1994. 62 52 BANC ONE CORPORATION and Subsidiaries - -------------------------------------------------------------------------------- NOTE 8: LONG-TERM BORROWINGS Long-term borrowings are as follows:
DECEMBER 31, STATED EFFECTIVE MATURITY ----------------------- $(THOUSANDS) RATE RATE(1) DATE 1995 1994 ------------- Corporation: Subordinated Notes(2)(3) 7.25% 5.94% 2002 $ 346,337 $ 345,781 Subordinated Notes(2) 8.74 8.74 2003 169,881 169,866 Subordinated Notes(2) 10.00 10.25 2010 197,369 197,285 Subordinated Notes(2) 9.88 10.11 2009 196,012 195,712 Subordinated Notes(2) 7.75 6.63 2025 294,272 Subordinated Notes(2) 7.00 6.30 2005 296,155 Affiliates: Subordinated Notes(4) Various Various Various 598,580 599,244 Notes(5) Various Various Various 522,006 227,565 Capital leases and other Various Various Various 99,761 130,995 ---------- ---------- Total.................................................. $2,720,373 $1,866,448 =========== ===========
(1) The effective rate includes amortization of premium or discount. Interest rate swap agreements have been entered into by BANC ONE that have altered the stated interest rate for certain of the borrowings to variable interest rates. The effective rates include the impact of these swap agreements at December 31, 1995. The terms to maturity of the swaps are shorter than the altered borrowings. (2) These notes are not subject to redemption and impose certain limitations relating to funded debt, liens and the sale or issuance of capital stock of significant bank subsidiaries. (3) In January 1996, the related interest rate swap was called by the counterparty. (4) These notes have stated rates ranging from 6.0% to 7.38%. The effective rates range from 5.35% to 6.77%. The notes mature between 2002 and 2005, and are not subject to early redemption. (5) Notes have stated or variable rates ranging from 5.64% to 9.88%, effective rates ranging from 5.47% to 9.90%, and mature between 1996 and 2016. Notes of $80 million are subject to early redemption at the option of the affiliate beginning in 1996, and commencing in 2002, mandatory annual payments in the amount of $4 million are required to be made to a sinking fund to repay these notes. Notes of $23 million were called on January 1, 1996, at a call price of 102. On December 31, 1995, the aggregate annual repayments of long-term borrowings for BANC ONE affiliates (excluding the Corporation) are $365 million, $118 million, $19 million, $14 million and $10 million for each of the years 1996 through 2000, respectively and $695 million thereafter. All long-term borrowings of the Corporation are due after the year 2000. - -------------------------------------------------------------------------------- NOTE 9: STOCK DIVIDENDS AND CONVERTIBLE PREFERRED STOCK On January 23, 1996 and January 25, 1994, the Corporation declared 10% common stock dividends to stockholders of record on February 21, 1996 and February 10, 1994, respectively. On July 20, 1993, the Corporation declared a five-shares-for-four-shares common stock split, effective August 31, 1993. Accordingly, certain common stock share data have been adjusted to include the effect of the stock split and stock dividends. On April 21, 1993, the Corporation called all of the outstanding shares of the Class B preferred stock for redemption. All but a minor amount of Class B preferred shares were converted to common stock. Each of the Series C preferred shares can be converted into 1.928982 shares of the Corporation's common stock and provides for cumulative quarterly dividends at an annual rate of $3.50 per share. The Series C preferred shares have a stated liquidation value of $50 per share plus an amount per share equal to all dividends cumulating or accrued and unpaid thereon to the date of such liquidation. The Series C preferred shares are redeemable by BANC ONE beginning April 15, 1995 at an initial call price of $52.10 per share, declining to $50.00 per share on and after March 31, 2001. 63 53 BANC ONE CORPORATION and Subsidiaries - -------------------------------------------------------------------------------- NOTE 10: DIVIDEND AND CAPITAL RESTRICTIONS (ALSO SEE NOTE 8) Payment of dividends by the bank affiliates and certain other non-bank affiliates is subject to various national and/or state regulatory restrictions. The amount of dividends available from the non-bank affiliates that are subject to dividend restrictions is regulated by the governing agency to which they report. At December 31, 1995, total stockholders' equity of the banking affiliates approximated $7.6 billion, of which $1.1 billion was available for payment of dividends without approval by the applicable regulatory authority. Regulatory capital requirements specify certain minimum capital levels. Applicable minimums for BANC ONE's Tier I and total capital to "risk weighted" assets, as defined by bank regulations are 4% and 8%, respectively. BANC ONE's Tier I and total risk adjusted capital ratios at December 31, 1995 were 10.05% and 14.05%, respectively. BANC ONE's leverage ratio at December 31, 1995 was 8.87%. - -------------------------------------------------------------------------------- NOTE 11: INCOME TAXES The Corporation and its affiliates file a consolidated Federal income tax return and income tax expense is apportioned among all affiliates based upon their taxable income or loss and tax credits. The effective income tax rate is below the statutory rate due to the following:
$(THOUSANDS) 1995 1994 1993 ----------------------------------------------------------------------------------------------- Statutory tax rate................. $ 668,599 35.0% $531,598 35.0% $619,750 35.0% Increase (reduction) in tax rate resulting from: State income taxes, net of federal income tax benefit... 50,844 2.7 49,155 3.2 41,557 2.3 Tax exempt interest............ (50,853) (2.7) (59,273) (3.9) (65,229) (3.7) Issuance of IRS regulations relating to acquisitions of troubled financial institutions................. (22,265) (1.2) Other, net..................... (13,906) (.7) (7,737) (.5) 2,531 .2 ---------- ---- -------- ---- -------- ---- Actual tax rate.................... $ 632,419 33.1% $513,743 33.8% $598,609 33.8% ========= ===== ========= ===== ========= =====
BANC ONE adopted Statement of Financial Accounting Standards No. 109 "Accounting for Income Taxes," effective January 1, 1993. Components of the provision for income taxes follow:
$(THOUSANDS) 1995 1994 1993 -------------------------------------------------------------------------------------------- Deferred federal tax........................... $ 154,409 $ 146,287 $ 21,385 Federal amount currently payable............... 399,788 290,722 513,291 Deferred state tax............................. 17,625 26,803 7,164 State amount currently payable................. 60,597 49,931 56,769 ------------ ---------- ---------- Total provision for income taxes............... $ 632,419 $ 513,743 $ 598,609 =========== =========== ===========
64 54 BANC ONE CORPORATION and Subsidiaries - -------------------------------------------------------------------------------- Deferred tax assets and liabilities at December 31, 1995 and 1994 consisted of the following:
$(THOUSANDS) 1995 1994 ----------------------------------------------------------------------------------------- Deferred tax assets Loan loss reserve....................................... $ 341,080 $ 338,917 Accrued liabilities..................................... 93,426 86,533 Unrealized holding loss on securities available for sale.................................................. 66,366 Other................................................... 54,901 7,785 ------------ ---------- 489,407 499,601 =========== =========== Deferred tax liabilities: Leased assets and depreciation.......................... (646,894) (520,279) Unrealized holding gain on securities available for sale.................................................. (52,289) Other................................................... (160,245) (58,670) ------------ ---------- (859,428) (578,949) ------------ ---------- Net deferred tax liability.................................. $ (370,021) $ (79,348) =========== ===========
Deferred income taxes are determined separately for each taxable entity of BANC ONE in each tax jurisdiction. For each separate tax paying component, all deferred tax assets and liabilities are netted and presented in a single amount, which is included in other assets or other liabilities on the balance sheet, as follows:
$(THOUSANDS) 1995 1994 ------------------------------------------------------------------------------------------ Other assets: State deferred tax assets................................ $ 5,388 ---------- Other liabilities: Federal deferred tax liabilities......................... $ (313,328) (49,280) State deferred tax liabilities........................... (56,693) (35,456) ------------ ---------- (370,021) (84,736) ------------ ---------- Net deferred tax liability................................... $ (370,021) $ (79,348) =========== ===========
- -------------------------------------------------------------------------------- NOTE 12: DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS The table below summarizes the information required by SFAS No. 107, "Disclosures About Fair Values of Financial Instruments".
DECEMBER 31, -------------------------------------------------- 1995 1994 ----------------------- ---------------------- ESTIMATED ESTIMATED CARRYING FAIR CARRYING FAIR $(MILLIONS) AMOUNT VALUE AMOUNT VALUE ------------------------------------------------------------------------------------------- FINANCIAL ASSETS: Cash and short-term investments... $ 5,956 $ 5,956 $ 8,613 $ 8,613 Securities - held to maturity..... 1,088 1,136 4,834 4,790 Securities - available/held for sale(1)......................... 14,622 14,622 10,291 10,291 Loans, net(2)..................... 60,025 62,453 57,841 58,753 FINANCIAL LIABILITIES: Deposits.......................... $ 67,320 $ 67,400 $68,090 $ 67,615 Short-term borrowings............. 9,777 9,777 9,622 9,622 Long-term borrowings.............. 2,720 3,002 1,866 1,869 OFF-BALANCE SHEET INVESTMENT PRODUCTS............................ 35 82 64 (1,242)
(1) The carrying amount and fair value of securities available for sale do not include the related fair value of off-balance sheet investment products, a $2 million loss and a $27 million gain at December 31, 1995 and 1994, respectively. (2) Excludes net leases with a carrying amount of $4,366 million and $3,255 million at December 31, 1995 and 1994, respectively. Fair value amounts represent estimates of value at a point in time. Significant assumptions regarding economic conditions, loss experience, risk characteristics associated with particular 65 55 BANC ONE CORPORATION and Subsidiaries - -------------------------------------------------------------------------------- financial instruments and other factors were used for the purposes of this disclosure. These assumptions are subjective in nature and involve matters of judgment. Therefore, they cannot be determined with precision. Changes in the assumptions could have a material impact on the amounts estimated. While these estimated fair value amounts are designed to represent estimates of the amounts at which these instruments could be exchanged in a current transaction between willing parties (excluding the value of customer relationships), many of BANC ONE's financial instruments lack an available trading market as characterized by willing parties engaged in an exchange transaction. In addition, it is BANC ONE's intent to hold most of its financial instruments to maturity, therefore, it is not probable that the fair values shown will be realized in a current transaction. The estimated fair values disclosed do not reflect the value of assets and liabilities that are not considered financial instruments. In addition, the value of long-term relationships with depositors (core deposit intangibles) and other customers (e.g. credit card intangibles) are not reflected. The value of these items is significant. Because of the wide range of valuation techniques and the numerous estimates which must be made, it may be difficult to make reasonable comparisons of BANC ONE's fair value information to that of other financial institutions. It is important that the many uncertainties discussed above be considered when using the estimated fair value disclosures and to realize that because of these uncertainties, the aggregate fair value amount should in no way be construed as representative of the underlying value of BANC ONE. The following describes the methodology and assumptions used to estimate fair value of financial instruments required by SFAS 107. CASH AND SHORT-TERM INVESTMENTS. Cash and short-term investments are by definition short-term and do not present any unanticipated credit issues. Therefore, the carrying amount is a reasonable estimate of fair value. SECURITIES. The estimated fair values of securities by type are provided in Note 3 to the financial statements. These are based on quoted market prices, when available. If a quoted market price is not available, fair value is estimated using quoted market prices for similar securities. LOANS. The loan portfolio was segmented based on loan type, credit quality and repricing characteristics. For certain variable rate loans with no significant credit concerns and frequent repricings, estimated fair values are based on the carrying values. The fair values of other loans are estimated using discounted cash flow analyses. The discount rates used in these analyses are generally based on BANC ONE's funding cost plus a spread. The spread incorporates the impact of credit quality, servicing costs and the cost of embedded options such as prepayments and caps. Maturity estimates are based on historical experience with prepayments and current economic and lending conditions. The estimated fair value of credit card receivables is based on the present value of cash flows arising from receivables outstanding and does not include the value associated with the relationships BANC ONE has with its credit card customers. Therefore, it reflects neither the value associated with new receivables created by customers nor the value associated with the fee income from credit card relationships. These values are significant. 66 56 BANC ONE CORPORATION and Subsidiaries - -------------------------------------------------------------------------------- DEPOSITS. Under SFAS 107, the fair value of deposits with no stated maturity is equal to the amount payable on demand. Therefore, the fair value estimates for these products do not reflect the benefits that BANC ONE receives from the low-cost, long-term funding they provide. These benefits are significant. The estimated fair value of fixed rate time deposits are based on discounted cash flow analyses. The discount rates used in these analyses are based on market rates of alternative funding sources currently available for similar remaining maturities, adjusted for servicing and deposit insurance costs. SHORT-TERM BORROWINGS. Short-term borrowings reprice frequently, therefore, the carrying amount is a reasonable estimate of fair value. LONG-TERM BORROWINGS. For publicly traded debt, estimated fair values are based on quoted market prices. Where such prices are not available, fair value is estimated using quoted market prices for similar instruments or by discounted cash flow analysis. OFF-BALANCE SHEET INVESTMENT PRODUCTS. Carrying values for off-balance sheet investment products represent deferred amounts arising from these financial instruments. Where possible, the fair values are based upon quoted market prices. Where such prices do not exist, these values are based on dealer quotes and generally represent an estimate of the amount that BANC ONE would receive or pay to terminate the agreement at the reporting date, taking into account current interest rates and the current creditworthiness of the counterparties. COMMITMENTS TO EXTEND CREDIT, STANDBY LETTERS OF CREDIT AND LETTERS OF CREDIT. Pricing of these financial instruments is based on the credit quality and relationship, fees, interest rates, probability of funding, compensating balances and other covenants or requirements. Non-credit card commitments generally have fixed expiration dates, are variable rate and contain termination and other clauses which provide for relief from funding in the event that there is a significant deterioration in the credit quality of the customer. Many loan commitments are expected to, and typically do, expire without being drawn upon. Approximately 78% of BANC ONE's commitments to lend relate to credit cards which expire within two years. Of the remaining commitments, approximately 53% expire within one year. The rates and terms of BANC ONE's commitments to lend, standby letters of credit and letters of credit are competitive with others in the various markets in which BANC ONE operates. The carrying amounts are reasonable estimates of the fair value of these financial instruments. Carrying amounts which are comprised of the unamortized fee income and, where necessary, reserves for any expected credit losses from these financial instruments, are immaterial. 67 57 BANC ONE CORPORATION and Subsidiaries - -------------------------------------------------------------------------------- NOTE 13: PLEDGED SECURITIES AND CONTINGENT LIABILITIES As of December 31, 1995, investment securities having a book value of $8.1 billion were pledged as collateral for repurchase agreements sold, off-balance sheet investment products and as collateral for governmental and trust department deposits in accordance with federal and state requirements. The Corporation's bank affiliates are required to maintain average balances with the Federal Reserve Bank. The average required reserve balances were $.8 billion and $1.1 billion for 1995 and 1994, respectively. In 1992, Bank One, Columbus, N.A. ("Columbus") was named a defendant in a purported class action lawsuit in Pennsylvania challenging whether Columbus can impose various types of fees, allowed by the state of Ohio, on credit cardholders residing in Pennsylvania (the "Suit"). The Suit seeks unquantified compensatory and triple damages and other equitable relief. The Suit is one of many similar class action lawsuits brought against credit card issuing banks throughout the United States. The dismissal of the Suit by the Court of Common Pleas of Philadelphia County, Pennsylvania, which had been upheld by a panel of the Pennsylvania Superior Court, was reversed by the entire Pennsylvania Superior Court in December 1994. Columbus has appealed the decision to the Pennsylvania Supreme Court, which has postponed oral argument pending a decision by the United States Supreme Court in a similar action entitled Smiley v. Citibank, in which the California Supreme Court has affirmed the lower court's decision in favor of the bank. Legal counsel believes that the decision by the entire Pennsylvania Superior Court is contrary to the decisions of most state and federal courts outside Pennsylvania that have considered the issue, which have held that national banks may use the rates and fees of the bank's home state in contracts with cardholders from other states. There can be no assurance that bank affiliates of BANC ONE will not be named as defendants in future similar lawsuits. The Corporation and certain of its affiliates have been named as defendants in various other legal proceedings. Management believes that liabilities arising from the Suit and these other proceedings, if any, will not have a material adverse effect on the consolidated financial position, liquidity or results of operations of BANC ONE. - -------------------------------------------------------------------------------- NOTE 14: EMPLOYEE BENEFIT PLANS BANC ONE sponsors noncontributory pension plans covering substantially all employees. The retirement benefits are based on length of service and the employee's highest five years of compensation during the last 10 years of service. BANC ONE's funding policy is to contribute amounts necessary to meet the funding requirements set forth in the Employee Retirement Income Security Act of 1974. The following table sets forth the plans' funded status. Accrued pension cost at December 31, 1995 and 1994 includes $23 million and $16 million, respectively, for BANC ONE's non-qualified, unfunded supplemental pension plans.
$(THOUSANDS) 1995 1994 ------------------------------------------------------------------------------------------- Accumulated benefit obligation, including vested benefits of $469,995 and $368,934 in 1995 and 1994, respectively......... $ (492,522) $ (389,005) =========== =========== Projected benefit obligation for service rendered to date...... $ (711,900) $ (611,527) Plan assets at fair value...................................... 678,811 498,563 ---------- ---------- Projected benefit obligation in excess of plan assets.......... (33,089) (112,964) Unrecognized net loss from past experience different from that assumed and effects of changes in assumptions................ 24,248 53,416 Unrecognized prior service cost................................ 11,605 3,281 Unrecognized net transition asset.............................. (13,969) (16,649) ---------- ---------- Accrued pension cost........................................... $ (11,205) $ (72,916) =========== ===========
68 58 BANC ONE CORPORATION and Subsidiaries - -------------------------------------------------------------------------------- Plan assets primarily consist of U.S. Treasury and Federal Agency securities and mutual funds. Plan assets include 927,836 shares of the Corporation's common stock at December 31, 1995 and 927,402 shares at December 31, 1994. The fair value of the Corporation's common stock held as plan assets was $32 million and $21 million at December 31, 1995 and 1994, respectively. During 1994, 31,610 shares of the Corporation's common stock were sold primarily to comply with generally accepted fiduciary responsibilities that allow no more than a certain level of employer securities in comparison to other investments. No shares of the Corporation's common stock were sold during 1995. Dividends received by the plans on the Corporation's common stock totaled $1 million in 1995 and 1994. All share amounts are adjusted for the 10% stock dividend payable March 6, 1996 to shareholders of record on February 21, 1996. Net periodic pension cost for BANC ONE for 1995, 1994 and 1993 included the following:
$(THOUSANDS) 1995 1994 1993 --------------------------------------------------------------------------------------------- Service cost - benefits earned during the period................................... $ 41,641 $ 45,921 $ 43,553 Interest cost on projected benefit obligation............................... 46,367 43,284 41,724 Actual (return) loss on plan assets........ (101,875) 29,024 (30,965) Net amortization and deferral.............. 43,810 (82,897) (13,294) --------- -------------- -------------- Net periodic pension costs................. $ 29,943 $ 35,332 $ 41,018 ========== =============== =============== Actuarial assumptions: Weighted average discount rate for projected benefit obligation............. 7.50% 7.90% to 8.50% 7.00% to 8.75% Weighted average rate of compensation increase................................. 6.00% 4.50% to 6.25% 4.50% to 6.00% Expected long-term rate of return on plan assets................................... 9.00% 9.50% to 9.75% 7.00% to 9.75%
Postretirement Benefits Other Than Pension BANC ONE currently sponsors a defined benefit postretirement plan that covers salaried employees. The plan provides medical, dental and life insurance benefits. Benefits are available to retired employees with more than 10 years of service who retire under the normal or early retirement provisions of the BANC ONE Retirement Plan. The medical and dental benefits are contributory, while the life insurance is non-contributory. Prior to 1993, BANC ONE accounted for post retirement benefits other than pensions on a cash basis. BANC ONE is amortizing the unrecognized transition obligation existing at January 1, 1993 when the accrual method of accounting for these benefits was adopted over a 20-year period. BANC ONE funds retiree medical benefits to the extent such benefits are deductible for federal income tax purposes; however, these assets are not restricted as to use for such benefits and therefore do not meet the definition of plan assets. The following table sets forth the status of BANC ONE's postretirement benefit obligation at December 31, 1995 and 1994:
$(THOUSANDS) 1995 1994 ------------------------------------------------------------------------------- Accumulated postretirement benefit obligation: Retirees............................................ $(64,149) $(49,883) Fully eligible active plan participants............. (19,323) (24,940) Other active plan participants...................... (33,900) (26,682) -------- -------- Accumulated postretirement benefit obligation in excess of plan assets............................... (117,372) (101,505) Unrecognized net gain................................. (20,137) (33,094) Unrecognized transition obligation.................... 95,681 101,309 -------- -------- Accrued postretirement benefit cost................... $(41,828) $(33,290) ======== ========
69 59 BANC ONE CORPORATION and Subsidiaries - -------------------------------------------------------------------------------- Net periodic cost for postretirement health care and life insurance benefits during 1995, 1994 and 1993 include the following:
$(THOUSANDS) 1995 1994 1993 --------------------------------------------------------------------------------- Service cost -- benefits earned during the period..................................... $ 2,954 $ 3,591 $ 3,840 Interest cost on accumulated postretirement benefit obligation......................... 8,595 8,602 9,582 Amortization of unrecognized transition obligation................................. 5,628 5,629 5,670 Amortization of unrecognized net gain........ (1,097) ------- ------- ------- Net periodic postretirement benefit cost..... $16,080 $17,822 $19,092 ======= ======= =======
The weighted average discount rates used in determining the accumulated postretirement benefit obligation at December 31, 1995, 1994 and 1993 were 7.50%, 8.75% and 7.50%, respectively. For measurement purposes, a 9.0% annual rate of increase in the cost of covered health care benefits was assumed for 1996; the rate was assumed to decrease gradually to 5.0% in the year 2000 and thereafter. A one-percentage point increase in the health care cost trend rate in each year would increase the accumulated postretirement benefit obligation as of December 31, 1995 by $12.1 million, or 10.3%, and would increase the aggregate of the service cost and interest cost components of net periodic postretirement benefit cost for 1995 by $1.1 million or 9.2%. BANC ONE sponsors various 401(k) plans which include substantially all of its employees. BANC ONE is required to make contributions to the plans in varying amounts. For 1995, 1994 and 1993, the expense related to these plans was $8 million, $12 million and $32 million, respectively. - -------------------------------------------------------------------------------- NOTE 15: STOCK COMPENSATION On April 18, 1995, the Corporation adopted the 1995 Stock Incentive Plan which provides for the granting of incentive and non-qualified stock options and stock awards to the Corporation's directors and certain key BANC ONE employees for up to an aggregate of one percent of the outstanding common stock of the Corporation as reported in BANC ONE's Annual Report on Form 10-K for the year ending immediately prior to such years; further, the total number of shares available for grants of stock awards in any year shall not exceed one fourth of one percent of the Corporation's outstanding common stock as so reported. Based on December 31, 1994 outstanding shares, 4,498,842 shares of the Corporation's common stock were available for grant in 1995. In 1995, 626,410 shares were granted as stock awards. Under the 1995 Stock Incentive Plan, the awards vest over a period of years and expense is recognized over the vesting period. Options are not exercisable for at least one year from the date of grant and are thereafter exercisable for such periods as the Board of Directors, or a committee thereof, specify (which may not exceed 10 years for incentive stock options or 20 years for non-qualified stock options), provided that the optionee has remained in the employment of the Corporation or its affiliates. The Board or the committee may accelerate the exercise period for an option upon the optionee's disability, retirement, or death. All options expire at the end of the exercise period. 70 60 BANC ONE CORPORATION and Subsidiaries - -------------------------------------------------------------------------------- On April 18, 1989, the Corporation adopted the 1989 Stock Incentive Plan (as amended April 21, 1992) (which was in addition to a stock option plan approved by its shareholders on April 24, 1984, and amended December 16, 1986), which provided incentive and non-qualified options and stock awards to the Corporation's directors and certain key BANC ONE employees for up to 6,930,000 common shares of the Corporation. The 1989 Stock Incentive Plan was terminated by the Corporation's board of directors effective April 17, 1995. Outstanding awards under the 1989 Stock Incentive Plan remain in effect under the terms of their respective awards. Cumulatively, 1,751,815 shares were granted as stock awards under the plan. The awards vest over a period of years and expense is recognized over the vesting period. BANC ONE does not recognize options on the balance sheet until such options are exercised and no amounts applicable thereto are reflected in net income. All options were granted at 100% of fair market value and reflect the effect of the 10% common stock dividend payable March 6, 1996 to shareholders of record on February 21, 1996. Options of acquired entities are converted to BANC ONE options at the time of acquisition. These shares are included in the amounts shown below. Outstanding stock options have been considered as common stock equivalents in the computation of earnings per share. Stock option activity in BANC ONE's various stock option plans for 1995 and 1994 is summarized as follows:
1995 1994 ------------------------- ------------------------- NUMBER OF NUMBER OF SHARES OPTION PRICE SHARES OPTION PRICE ----------------------------------------------------------------------------------------- Outstanding at beginning of year............................ 7,286,296 $ 5.65-38.02 5,829,915 $ 4.07-38.02 Granted......................... 2,522,635 25.57-34.55 2,200,001 25.45-31.03 Exercised....................... (1,160,919) 6.45-29.32 (471,706) 4.07-28.60 Cancelled....................... (514,615) 17.51-38.02 (271,914) 12.02-38.02 ---------- ---------- Outstanding at end of year........ 8,133,397 5.65-38.02 7,286,296 5.65-38.02 =========== ============ Exercisable at end of year........ 1,839,962 5.65-38.02 2,180,176 5.65-38.02 =========== ============
- -------------------------------------------------------------------------------- NOTE 16: RELATED PARTY TRANSACTIONS Certain BANC ONE executive officers, directors and their related interests are loan customers of the Corporation's affiliates. The Securities and Exchange Commission (SEC) has determined with respect to the Corporation and four significant subsidiaries (as defined by the SEC) disclosure of borrowings by directors and executive officers and certain of their related interests should be made, if the loans are greater than 5% of stockholders' equity, in the aggregate. These loans in aggregate were not greater than 5% of stockholders' equity at December 31, 1995 or 1994. 71 61 BANC ONE CORPORATION and Subsidiaries - -------------------------------------------------------------------------------- NOTE 17: SUPPLEMENTAL DISCLOSURES FOR STATEMENT OF CASH FLOWS
$(THOUSANDS) 1995 1994 1993 ---------------------------------------------------------------------------------- Common stock issued in purchase acquisitions......................... $ 9,518 ========== Transfer from loans to other real estate owned (OREO).................. $ 91,163 $ 68,806 $ 140,963 ========== ========== ========== Securitization of mortgage loans....... $1,426,766 ========== Reclassification of private placement securities from loans to securities........................... $ 533,057 ========== Reclassification of held to maturity securities to available for sale, at amortized cost (fair value $2,943,526).......................... $2,883,654 ========== Net increase in securities trades not settled.......................... $ 185,009 $ 139,346 $ 156,803 ========== ========== ========== Loans issued to facilitate the sale of OREO properties................... $ 7,220 $ 26,287 $ 37,353 ========== ========== ========== Additional disclosures: Interest paid........................ $2,908,562 $2,140,363 $1,815,831 ========== ========== ========== Income taxes paid.................... $ 351,392 $ 412,727 $ 534,543 ========== ========== ========== Dividends declared but not paid at year end....................... $ 123,925 $ 105,884 ========== ==========
- -------------------------------------------------------------------------------- NOTE 18: PARENT COMPANY FINANCIAL STATEMENTS
DECEMBER 31, BALANCE SHEET ---------------------------- $(THOUSANDS) 1995 1994 --------------------------------------------------------------------------------- ASSETS: Cash and due from banks......................... $ 25,002 $ 9,941 Short-term investments.......................... 72,710 537,030 Securities available for sale, at fair value.... 41,115 20,123 Investment in majority-owned affiliates: Banking...................................... 7,791,232 7,344,770 Non-banking.................................. 483,615 399,135 Advances due from affiliates: Banking...................................... 191,000 197,000 Non-banking.................................. 1,498,104 997,319 Amounts due from Premier Bancorp, Inc........... 65,000 65,000 Excess of cost over net assets of affiliates purchased.................................... 8,543 9,907 Other assets.................................... 268,016 195,110 ------------- ---------- TOTAL ASSETS................................. $ 10,444,337 $9,775,335 =========== ========== LIABILITIES: Commercial paper and other short-term borrowings................................... $ 560,360 $1,145,200 Notes payable to non-banking affiliates......... 53,896 45,974 Long-term borrowings............................ 1,500,026 908,644 Other liabilities............................... 132,577 110,657 ------------- ---------- TOTAL LIABILITIES............................ 2,246,859 2,210,475 ------------- ---------- TOTAL STOCKHOLDERS' EQUITY................... 8,197,478 7,564,860 ------------- ---------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY... $ 10,444,337 $9,775,335 =========== ==========
72 62 BANC ONE CORPORATION and Subsidiaries - --------------------------------------------------------------------------------
STATEMENT OF INCOME for the three years ended December 31, $(THOUSANDS, EXCEPT PER SHARE AMOUNTS) 1995 1994 1993 ------------------------------------------------------------------------------------------------- INCOME: Dividends from affiliates: Banking......................................... $ 1,129,400 $ 614,617 $ 662,868 Non-banking..................................... 12,086 19,049 Management and other fees from affiliates......... 116,623 118,577 108,063 Interest.......................................... 128,155 100,063 89,665 Securities gains.................................. 669 11,343 152 Other............................................. 8,248 16,942 6,375 ------------ ---------- ---------- TOTAL INCOME 1,383,095 873,628 886,172 ------------ ---------- ---------- EXPENSE: Interest.......................................... 183,452 129,302 104,391 Salaries and related costs........................ 69,036 67,351 57,255 Professional fees and services.................... 47,358 60,260 61,319 Marketing and development......................... 37,596 37,866 43,418 Other............................................. 57,398 22,407 30,637 ------------ ---------- ---------- TOTAL EXPENSE................................... 394,840 317,186 297,020 ------------ ---------- ---------- Income before income taxes and equity in undistributed earnings of consolidated affiliates........................................ 988,255 556,442 589,152 Income tax (provision) benefit: Income excluding securities transactions.......... 55,256 35,599 29,373 Securities transactions........................... (234) (3,970) (53) ------------ ---------- ---------- Income before equity in undistributed earnings of consolidated affiliates........................ 1,043,277 588,071 618,472 Equity in undistributed earnings of consolidated affiliates........................................ 234,586 417,038 573,022 ------------ ---------- ---------- NET INCOME...................................... $ 1,277,863 $1,005,109 $1,191,494 =========== =========== =========== NET INCOME PER COMMON SHARE (AMOUNTS REFLECT THE 10% COMMON STOCK DIVIDEND PAYABLE MARCH 6, 1996 TO SHAREHOLDERS OF RECORD ON FEBRUARY 21, 1996.): INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE............................ $ 2.91 $ 2.20 $ 2.62 Cumulative effect of change in method of accounting for income taxes................... .04 ------------ ---------- ---------- NET INCOME PER COMMON SHARE......................... $ 2.91 $ 2.20 $ 2.66 =========== =========== =========== Weighted average shares outstanding (000)........... 433,323 448,118 441,351 =========== =========== ===========
73 63 BANC ONE CORPORATION and Subsidiaries - --------------------------------------------------------------------------------
STATEMENT OF CASH FLOWS for the three years ended December 31, $(THOUSANDS) 1995 1994 1993 --------------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES: NET INCOME.................................... $ 1,277,863 $ 1,005,109 $1,191,494 Adjustments: Equity in undistributed earnings of consolidated affiliates................ (234,586) (417,038) (573,022) Noncash dividends received................ (54,649) (10,160) (170,001) Depreciation and amortization............. 13,346 11,818 10,786 Securities (gains) losses................. (669) (11,343) (152) Net change in trading account portfolio... (20,974) 936 (19,777) Net change in other assets................ (23,757) (42,127) (16,503) Net change in other liabilities........... 20,346 (12,730) 49,436 ------------ ----------- ---------- NET CASH PROVIDED BY OPERATING ACTIVITIES............................. 976,920 524,465 472,261 ------------ ----------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES: Net (increase) decrease in short-term investments................................. 464,320 (208,988) 250,820 Purchases of investment securities............ (32,111) (14,884) Proceeds from sales and maturities of investment securities....................... 33,000 37,766 35,890 Net (increase) decrease in loans.............. (498,366) 768,948 (826,216) Additions to premises and equipment........... (81,038) (23,378) (4,585) Net increase in investment in majority-owned affiliates.................................. (12,145) (19,321) (27,000) All other investing activities, net........... (2,598) 494 519 ------------ ----------- ---------- NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES............................. (128,938) 555,521 (585,456) ------------ ----------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES: Net (decrease) increase in commercial paper... (623,432) 151,722 92,751 Net increase (decrease) in short-term notes payable............................... 52,545 (437,681) 463,780 Proceeds from the issuance of long-term borrowings.................................. 590,179 Cash dividends paid........................... (550,294) (504,710) (405,959) Purchase of treasury shares................... (324,321) (336,453) Exercise of stock options, net of shares purchased................................... (5,460) (5,659) (47,634) All other financing activities, net........... 27,862 60,627 11,187 ------------ ----------- ---------- NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES............................. (832,921) (1,072,154) 114,125 ------------ ----------- ---------- Increase in cash and cash equivalents..... 15,061 7,832 930 Cash and cash equivalents at January 1,....... 9,941 2,109 1,179 ------------ ----------- ---------- CASH AND CASH EQUIVALENTS AT DECEMBER 31,..... $ 25,002 $ 9,941 $ 2,109 =========== ============ ===========
74 64 BANC ONE CORPORATION and Subsidiaries - -------------------------------------------------------------------------------- REPORT OF INDEPENDENT ACCOUNTANTS To the Stockholders and the Board of Directors BANC ONE CORPORATION We have audited the accompanying consolidated balance sheets of BANC ONE CORPORATION and Subsidiaries as of December 31, 1995 and 1994, and the related statements of income, changes in stockholders' equity and cash flows for each of the three years in the period ended December 31, 1995. These financial statements are the responsibility of management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of BANC ONE CORPORATION and Subsidiaries at December 31, 1995 and 1994 and the results of operations, changes in stockholders' equity and cash flows for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles. As disclosed in Note 1, effective January 1, 1994, BANC ONE CORPORATION changed its method of accounting for certain investment securities. As discussed in Note 11 and Note 14, effective January 1, 1993, BANC ONE CORPORATION changed its method of accounting for income taxes and postretirement benefits other than pensions. COOPERS & LYBRAND L.L.P. Columbus, Ohio February 21, 1996 75 65 BANKING OFFICES IN: Arizona Ohio Colorado Oklahoma Illinois Texas Indiana Utah Kentucky West Virginia Louisiana Wisconsin SUBSIDIARIES Banc One Capital Corporation Banc One Commercial Loan Origination Corporation Banc One Community Development Corporation Banc One Credit Card Services Company Banc One Financial Card Services Corporation Banc One Financial Services Corporation Banc One Funds Management Company Banc One Insurance Services Corporation Banc One Investment Advisors Corporation Banc One Management and Consulting Corporation Banc One Mortgage Corporation Banc One POS Services Company Banc One Private Label Credit Services Banc One Securities Corporation Banc One Services Corporation Banc One Trust companies EX-21 7 EXHIBIT 21 1 EXHIBIT 21 SUBSIDIARIES OF BANC ONE CORPORATION (AS OF 12/31/95) (100% OWNERSHIP UNLESS OTHERWISE INDICATED)
JURISDICTION OF NAME IN WHICH INCORPORATION BUSINESS IS NAME OF SUBSIDIARY OR ORGANIZATION CONDUCTED - -------------------------- --------------- --------- BANC ONE ARIZONA CORPORATION Arizona Corporation SAME BANC ONE ARIZONA INVESTMENT CORPORATION Arizona Corporation " " BANK ONE, ARIZONA, NATIONAL ASSOCIATION National Bank " " ARIZONA TRUST DEED CORPORATION (Unknown) " " BANC ONE ARIZONA INVESTMENT SERVICES CORPORATION Arizona Corporation " " BANC ONE ARIZONA LEASING CORPORATION Arizona Corporation " " BANC ONE OPERATIONS SERVICES CORPORATION Arizona Corporation " " SUN COUNTRY LEASING CORPORATION Arizona Corporation " " VALLEY BANK BUILDING, INC. Arizona Corporation " " VALLEY NATIONAL FINANCIAL SERVICES COMPANY Arizona Corporation " " VALLEY NATIONAL INVESTORS, INC. Arizona Corporation " " WASHINGTON STREET FOODS, INC. Arizona Corporation " " BANK ONE, UTAH, NATIONAL ASSOCIATION National Bank " " 50 WEST BROADWAY ASSOCIATES (50%) Utah Corporation " " SUN COUNTRY FINANCIAL SERVICES OF UTAH, INC. Utah Corporation " " BANC ONE BETA CORPORATION Ohio Corporation " " BANC ONE CAPITAL HOLDINGS CORPORATION Ohio Corporation " " AFFILIATED BANKSHARES INSURANCE AGENCY, INC. Colorado Corporation " " AMERICAN INSURANCE AGENCY, INC. Arizona Corporation " " BANC ONE CAPITAL CORPORATION Ohio Corporation " " BANC ONE CAPITAL PARTNERS CORPORATION Texas Corporation " " BANC ONE CAPITAL SERVICES CORPORATION Ohio Corporation " " BANC ONE LIFE INSURANCE COMPANY Arizona Corporation " " BANC ONE SECURITIES CORPORATION Ohio Corporation " " BOCP HOLDINGS CORPORATION Ohio Corporation " " BANC ONE CAPITAL PARTNERS, L.P. Ohio L.P. " " BANC ONE CAPITAL PARTNERS II, LTD. Ohio L.L.C. " " BANC ONE CAPITAL PARTNERS II LIMITED PARTNERSHIP (80%) Delaware L.P. " " BANC ONE CAPITAL PARTNERS III, LIMITED PARTNERSHIP (80%) Ohio Partnership " " BANC ONE CAPITAL PARTNERS IV, LIMITED PARTNERSHIP (80%) Delaware L.P. " " BANC ONE CAPITAL PARTNERS V, LTD. Ohio Partnership " " BANC ONE CAPITAL PARTNERS VI, LTD. Ohio L.L.C. " " BOCC FUNDING CORPORATION Ohio Corporation " " BANC ONE CARD SERVICES CORPORATION Texas Corporation " " BANC ONE COLORADO CORPORATION Colorado Corporation " " AFFILIATED BANKS BUILDING CO. Colorado Corporation " " BANK ONE, COLORADO, NATIONAL ASSOCIATION National Bank " " BANC ONE BOULDER LEASING SERVICES CORPORATION Colorado Corporation " " BANC ONE COLORADO SPRINGS LEASING SERVICES CORPORATION Colorado Corporation " " BANC ONE DENVER LEASING SERVICES CORPORATION Colorado Corporation " " BANC ONE COMMERCIAL LOAN ORIGINATION CORPORATION Ohio Corporation " " BANC ONE COMMUNITY DEVELOPMENT CORPORATION Ohio Corporation " " BANC ONE COMMUNITY DEVELOPMENT/WISCONSIN CORPORATION Ohio Corporation " " BANC ONE FOREIGN INVESTMENT HOLDING CORPORATION Ohio Corporation " " BANC ONE ILLINOIS CORPORATION Illinois Corporation " " BANK ONE, BLOOMINGTON-NORMAL Illinois Bank " "
PAGE 1 2 EXHIBIT 21 SUBSIDIARIES OF BANC ONE CORPORATION (AS OF 12/31/95) (100% OWNERSHIP UNLESS OTHERWISE INDICATED)
JURISDICTION OF NAME IN WHICH INCORPORATION BUSINESS IS NAME OF SUBSIDIARY OR ORGANIZATION CONDUCTED - -------------------------- --------------- --------- BANK ONE, CHICAGO, NATIONAL ASSOCIATION National Bank " " LAZARUS PROPERTIES, INC. Illinois Corporation " " BANK ONE, PEORIA Illinois Bank " " BANK ONE, QUAD CITIES, NATIONAL ASSOCIATION National Bank " " BANK ONE, ROCKFORD, NATIONAL ASSOCIATION National Bank " " FIRST ROCKFORD COMMUNITY DEVELOPMENT CORPORATION Illinois Corporation " " NORTHERN ILLINOIS DEVELOPMENT CORPORATION (30%) Illinois Corporation " " BANK ONE, SPRINGFIELD Illinois Bank " " MCU CORPORATION Illinois Corporation " " BANK ONE, CHAMPAIGN-URBANA Illinois Bank " " BANC ONE INDIANA CORPORATION Indiana Corporation " " AMERICAN FLETCHER REALTY CORPORATION Indiana Corporation " " BANK ONE, BLOOMINGTON, NATIONAL ASSOCIATION National Bank " " BANK ONE, CRAWFORDSVILLE, NATIONAL ASSOCIATION National Bank " " BANK ONE, INDIANAPOLIS, NATIONAL ASSOCIATION National Bank " " BANC ONE EQUIPMENT FINANCE, INC. Indiana Corporation " " BANC ONE INDIANAPOLIS AUTO LEASE, INC. Indiana Corporation " " BANK SERVICE CORPORATION OF INDIANA (33-1/3%) Indiana Corporation " " BIL INTERNATIONAL HOLDINGS, INC. Indiana Corporation " " BO-UA FSC, INC. Indiana Corporation " " BO-FE FSC, INC. Indiana Corporation " " BO-LKEUA, INC. Virgin Islands Corporation " " BANK ONE, LAFAYETTE, NATIONAL ASSOCIATION National Bank " " BANK ONE, MARION, INDIANA, NATIONAL ASSOCIATION National Bank " " BANK ONE, MERRILLVILLE, NATIONAL ASSOCIATION National Bank " " BANK ONE, RENSSELAER, NATIONAL ASSOCIATION National Bank " " BANK ONE, RICHMOND, NATIONAL ASSOCIATION National Bank " " BOI LEASING CORPORATION Indiana Corporation " " BANC ONE INTERIM CORPORATION Ohio Corporation " " BANC ONE KENTUCKY CORPORATION Kentucky Corporation " " BANK ONE, KENTUCKY, NATIONAL ASSOCIATION National Bank " " FINANCIAL DOMINION BANKCARD SERVICES, INC. Kentucky Corporation " " LIBERTY LEASING CORPORATION Kentucky Corporation " " LIBERTY NATIONAL LEASING COMPANY Kentucky Corporation " " LIBERTY PAYMENT SERVICES, INC. Kentucky Corporation " " LIBERTY PROPERTIES INCORPORATED Kentucky Corporation " " LIBERTY VEHICLE LEASING COMPANY Kentucky Corporation " " LNB LIFE INSURANCE COMPANY Kentucky Corporation " " MONEY CARD, INC. Kentucky Corporation " " BANK ONE, LEXINGTON, NATIONAL ASSOCIATION National Bank " " FIRST PROPERTY DEVELOPMENT COMPANY Kentucky Corporation " " FS FINANCIAL SERVICES CORPORATION OF KENTUCKY Kentucky Corporation " " SECURITY PROPERTY DEVELOPMENT COMPANY Kentucky Corporation " " BANK ONE, PIKEVILLE, NATIONAL ASSOCIATION National Bank " " BANK ONE, SOUTHERN INDIANA, NATIONAL ASSOCIATION National Bank " " FIRST B.C. REALTY CORPORATION Indiana Corporation " " BANK ONE, WESTERN KENTUCKY, NATIONAL ASSOCIATION National Bank " " LIBERTY FINANCIAL SERVICES, INCORPORATED Kentucky Corporation " " BANC ONE MANAGEMENT AND CONSULTING CORPORATION Ohio Corporation " " BANC ONE BETA ASSET MANAGEMENT CORPORATION Ohio Corporation " "
PAGE 2 3 EXHIBIT 21 SUBSIDIARIES OF BANC ONE CORPORATION (AS OF 12/31/95) (100% OWNERSHIP UNLESS OTHERWISE INDICATED)
JURISDICTION OF NAME IN WHICH INCORPORATION BUSINESS IS NAME OF SUBSIDIARY OR ORGANIZATION CONDUCTED - -------------------------- --------------- --------- BANC ONE NEW HAMPSHIRE ASSET MANAGEMENT CORPORATION Ohio Corporation " " BONNET RESOURCES CORPORATION Ohio Corporation " " PINE VALLEY RESOURCES CORPORATION Ohio Corporation " " JR-1, INC. Texas Corporation " " JR-2, INC. Texas Corporation " " FAMCO SERVICES, INC. Texas Corporation " " FAMCO SERVICES II, INC. Texas Corporation " " FAMCO SERVICES III, INC. Texas Corporation " " SUBSIDIARY CONSULTANTS, INC. Texas Corporation " " BANC ONE MORTGAGE CORPORATION Delaware Corporation " " BANC ONE OHIO CORPORATION Ohio Corporation " " BANK ONE, AKRON, NATIONAL ASSOCIATION National Bank " " BANC ONE AKRON SERVICE CORPORATION Ohio Corporation " " BANK ONE, ATHENS, NATIONAL ASSOCIATION National Bank " " ATHENS SERVICE CORPORATION West Virginia Corpor " " BANK ONE, CAMBRIDGE, NATIONAL ASSOCIATION National Bank " " BANK ONE, CINCINNATI, NATIONAL ASSOCIATION National Bank " " BANC ONE CINCINNATI AUTOLEASE CORPORATION Ohio Corporation " " BANK ONE, CLEVELAND, NATIONAL ASSOCIATION National Bank " " BANC ONE CLEVELAND FINANCIAL SERVICES CORPORATION Ohio Corporation " " BANK ONE, COLUMBUS, NATIONAL ASSOCIATION National Bank " " BANC ONE ACCEPTANCE CORPORATION Ohio Corporation " " BOX LEASING CORPORATION Ohio Corporation " " BANC ONE COMPENSATION SERVICES CORPORATION (80%) Ohio Corporation " " BANC ONE INVESTMENT ADVISORS CORPORATION Ohio Corporation " " BANC ONE VEHICLE FINANCE CORPORATION Ohio Corporation " " BOC REALTY, INC. Ohio Corporation " " BOC AFFILIATES, INC. Ohio Corporation " " BOC FLORIDA, INC. Ohio Corporation " " BOC MIDWEST, INC. Ohio Corporation " " BOC SOUTHERN, INC. Ohio Corporation " " BOC TOLEDO, INC. Ohio Corporation " " GULF SHORES CONDOMINIUMS, INC. Ohio Corporation " " ICF INVESTMENT CORPORATION Ohio Corporation " " MARIETTA HOTEL COMPANY Ohio Corporation " " MAUMEE RIVER HOTEL CORPORATION Ohio Corporation " " 29160 CENTER RIDGE COMPANY, INC. Ohio Corporation " " BANK ONE, COSHOCTON, NATIONAL ASSOCIATION National Bank " " BANK ONE, DAYTON, NATIONAL ASSOCIATION National Bank " " BANC ONE DAYTON SERVICE CORPORATION Ohio Corporation " " BANK ONE, DOVER, NATIONAL ASSOCIATION National Bank " " BANK ONE, FREMONT, NATIONAL ASSOCIATION National Bank " " BANK ONE LIMA, NATIONAL ASSOCIATION National Bank " " BANC ONE WAPAKONETA SERVICE CORPORATION Indiana Corporation " " BANK ONE, MANSFIELD Ohio Bank " " BANC ONE TRAVEL CORPORATION Ohio Corporation " " BANK ONE, MARIETTA, NATIONAL ASSOCIATION (99.99%) National Bank " " BANK ONE, MARION Ohio Bank " " BANK ONE, PORTSMOUTH, NATIONAL ASSOCIATION National Bank " " BANK ONE, SIDNEY, NATIONAL ASSOCIATION National Bank " " BANK ONE, STEUBENVILLE, NATIONAL ASSOCIATION National Bank " " BANC ONE LOAN SERVICES CORPORATION Pennsylvania Corporation " "
PAGE 3 4 EXHIBIT 21 SUBSIDIARIES OF BANC ONE CORPORATION (AS OF 12/31/95) (100% OWNERSHIP UNLESS OTHERWISE INDICATED)
JURISDICTION OF NAME IN WHICH INCORPORATION BUSINESS IS NAME OF SUBSIDIARY OR ORGANIZATION CONDUCTED - -------------------------- --------------- --------- BANK ONE TRUST COMPANY, NATIONAL ASSOCIATION National Bank " " BANK ONE, YOUNGSTOWN, NATIONAL ASSOCIATION National Bank " " BANC ONE, YOUNGSTOWN FINANCIAL SERVICES CORPORATION Pennsylvania Corporation " " BANC ONE OKLAHOMA CORPORATION Oklahoma Corporation " " BANK ONE, OKLAHOMA CITY Oklahoma Bank " " BANC ONE POS SERVICES CORPORATION (1) Ohio Corporation " " BANC ONE REALTY COLUMBUS CORPORATION Ohio Corporation " " BANC ONE SERVICES CORPORATION Ohio Corporation " " BANC ONE FINANCIAL CARD SERVICES CORPORATION Ohio Corporation " " BANC ONE SERVICES FSC-I, INC. Virgin Islands Corporation " " ELECTRONIC PAYMENT SERVICES, INC. (31.01%) Delaware Corporation " " ELECTRONIC PAYMENT SERVICES 1, INC. (80.62%) Delaware Corporation " " ELECTRONIC PAYMENT SERVICES 2, INC. (80.00%) Delaware Corporation " " ELECTRONIC PAYMENT SERVICE CORPORATION Delaware Corporation " " BUYPASS CORPORATION Georgia Corporation " " BUYPASS ELECTRONIC TRANSACTION SYSTEM, INC. Georgia Corporation " " BUYPASS INCO CORP Delaware Corporation " " BUYPASS PETROLEUM SYSTEMS, INC. Georgia Corporation " " DATA NOW NATIONAL SERVICES, INC. Georgia Corporation " " EPS NETWORK CORPORATION Georgia Corporation " " MONEY ACCESS SERVICE, INC. Delaware Corporation " " MAS INCO CORPORATION Delaware Corporation " " METROTELLER SECURITY CORPORATION Delaware Corporation " " MONEY ACCESS SERVICE CORP. Delaware Corporation " " BANC ONE STUDENT LOAN FUNDING CORPORATION Ohio Corporation " " BANC ONE TEXAS CORPORATION Ohio Corporation " " BANC ONE TEXAS SERVICE CORPORATION Ohio Corporation " " BANK ONE, TEXAS, NATIONAL ASSOCIATION National Bank " " 12603 SOUTHWEST FREEWAY, INC. Texas Corporation " " BANC ONE TEXAS LEASING CORPORATION Texas Corporation " " BAY OPERATING COMPANY, INC. Texas Corporation " " FREER PROPERTIES, INC. Texas Corporation " " GP HOLDER, INC. Texas Corporation " " INDIAN PRODUCTION COMPANY, INC. Texas Corporation " " METROPOLITAN HOLDINGS, INC. Texas Corporation " " POST OAK OPERATING, INC. Texas Corporation " " PSB LAND COMPANY, INC. Texas Corporation " " SOUTHMORE-TATAR CORPORATION Texas Corporation " " TAB ASSETS CORPORATION Texas Corporation " " TEAM BANK SERVICES, INC. Texas Corporation " " TEAM BROKERAGE, INC. Texas Corporation " " TEAM LIFE INSURANCE COMPANY Texas Corporation " " TEAMVEST, INC. Texas Corporation " " TEXAS ASSET ACQUISITION CORPORATION Texas Corporation " " TEXAS INVESTMENT HOLDING CORPORATION Texas Corporation " " TEXAS LYRIC CORPORATION Texas Corporation " " WEST U21, INC. Texas Corporation " "
PAGE 4 5 EXHIBIT 21 SUBSIDIARIES OF BANC ONE CORPORATION (AS OF 12/31/95) (100% OWNERSHIP UNLESS OTHERWISE INDICATED)
JURISDICTION OF NAME IN WHICH INCORPORATION BUSINESS IS NAME OF SUBSIDIARY OR ORGANIZATION CONDUCTED - -------------------------- --------------- ------------- BANC ONE WEST VIRGINIA CORPORATION West Virginia Corporation " " BANK ONE, WEST VIRGINIA, NATIONAL ASSOCIATION National Bank " " CHARLESTON NATIONAL PLAZA COMPANY West Virginia Corporation " " BANK ONE, WEST VIRGINIA, NEW MARTINSVILLE, NATIONAL ASSOCIATION National Bank " " BANK ONE, WEST VIRGINIA, WHEELING, NATIONAL ASSOCIATION National Bank " " FIRST NATIONAL REALTY CO., INC. West Virginia Corporation " " HOBBS REALTY CORPORATION, INC. West Virginia Corporation " " RELIABLE MORTGAGE CO. West Virginia Corporation " " BANC ONE WISCONSIN CORPORATION Wisconsin Corporation " " BANC ONE BUILDING MANAGEMENT CORPORATION Wisconsin Corporation " " BANC ONE INTERNATIONAL SERVICES CORPORATION Wisconsin Corporation " " BANK ONE, ANTIGO Wisconsin Bank " " ANTIGO INVESTMENT HOLDING COMPANY Nevada Corporation " " BANK ONE, APPLETON, NATIONAL ASSOCIATION National Bank " " APPLETON INVESTMENT HOLDING COMPANY Nevada Corporation " " BANK ONE, BEAVER DAM Wisconsin Bank " " BEAVER DAM INVESTMENT HOLDING COMPANY Nevada Corporation " " BANK ONE, ELKHORN, NATIONAL ASSOCIATION National Bank " " ELKHORN INVESTMENT HOLDING COMPANY Nevada Corporation " " BANK ONE, FOND DU LAC Wisconsin Bank " " FOND DU LAC INVESTMENT HOLDING COMPANY Nevada Corporation " " BANK ONE, GREEN BAY Wisconsin Bank " " GREEN BAY INVESTMENT HOLDING COMPANY Nevada Corporation " " BANK ONE, JANESVILLE, NATIONAL ASSOCIATION National Bank " " JANESVILLE INVESTMENT HOLDING COMPANY Nevada Corporation " " BANK ONE, MADISON Wisconsin Bank " " MADISON INVESTMENT HOLDING COMPANY Nevada Corporation " " BANK ONE, MILWAUKEE, NATIONAL ASSOCIATION National Bank " " BANC ONE VENTURE CORPORATION Wisconsin Corporation " " BANC ONE WISCONSIN BANKCARD CORPORATION Wisconsin Corporation " " BANC ONE WISCONSIN INVESTMENT SERVICES CORPORATION Wisconsin Corporation " " BANC ONE WISCONSIN LEASING CORPORATION Wisconsin Corporation " " BOMOREO, INC. Wisconsin Corporation " " CROGHAN & ASSOCIATES, INC. Colorado Corporation System One, Inc. MILWAUKEE INVESTMENT HOLDING COMPANY Nevada Corporation SAME BANK ONE, MONROE Wisconsin Bank " " MONROE INVESTMENT HOLDING COMPANY Nevada Corporation " " BANK ONE, OSHKOSH, NATIONAL ASSOCIATION (99.53%) National Bank " " OSHKOSH INVESTMENT HOLDING COMPANY Nevada Corporation " " BANK ONE, STEVENS POINT, NATIONAL ASSOCIATION National Bank " " STEVENS POINT INVESTMENT HOLDING CORPORATION Nevada Corporation " " BANK ONE, WEST BEND Wisconsin Bank " " BANC ONE INSURANCE SERVICES CORPORATION Wisconsin Corporation " " HIGHWAY "P" MOTEL, INC. Wisconsin Corporation " " WEST BEND INVESTMENT HOLDING CORPORATION Nevada Corporation " " BANK ONE, WISCONSIN, NATIONAL ASSOCIATION National Bank " " WISCONSIN INVESTMENT HOLDING COMPANY Nevada Corporation " " BANK ONE WISCONSIN TRUST COMPANY, NATIONAL ASSOCIATION National Bank " " WITRUST INVESTMENT HOLDING COMPANY Wisconsin Corporation " " FINANCE ONE CORPORATION Ohio Corporation " " BANC ONE FINANCIAL SERVICES, INC. Indiana Corporation " " BANC ONE CONSUMER DISCOUNT COMPANY, A NON-BANKING
PAGE 5 6 EXHIBIT 21 SUBSIDIARIES OF BANC ONE CORPORATION (AS OF 12/31/95) (100% OWNERSHIP UNLESS OTHERWISE INDICATED)
JURISDICTION OF NAME IN WHICH INCORPORATION BUSINESS IS NAME OF SUBSIDIARY OR ORGANIZATION CONDUCTED - ------------------------------- --------------- ------------- AFFILIATE OF BANC ONE CORPORATION Indiana Corporation " " BANC ONE FINANCIAL SERVICES OF MINNESOTA, INC. Minnesota Corporation " " BANC ONE FINANCIAL SERVICES OF TENNESSEE, INC. Tennessee Corporation " " BANC ONE FINANCIAL SERVICES OF WEST VIRGINIA, INC. West Virginia Corporation " " GUARDIAN AGENCY, INC. Indiana Corporation " " BENEFICIAL INSURANCE AGENCY, INC. Indiana Corporation " " GUARDIAN AGENCY OF BLOOMINGTON, INC. Indiana Corporation " " GUARDIAN AGENCY OF DELPHI, INC. Indiana Corporation " " GUARDIAN AGENCY OF FORT WAYNE, INC. Indiana Corporation " " GUARDIAN AGENCY OF GREENCASTLE, INC. Indiana Corporation " " GUARDIAN AGENCY OF LEBANON, INC. Indiana Corporation " " GUARDIAN AGENCY OF RUSHVILLE, INC. Indiana Corporation " " GUARDIAN AGENCY OF VALPARAISO, INC. Indiana Corporation " " BANC ONE LEASING CORPORATION Ohio Corporation " " BANC ONE FLORIDA CORPORATION Ohio Corporation " " BANC ONE LEASING COMPANY OF FLORIDA Ohio Corporation " " FM LEASING CORPORATION Colorado Corporation " " PREMIER ACQUISITION CORPORATION Ohio Corporation " " STERLING ASSURANCE COMPANY Ohio Corporation " " - --------------- (1) This bank service corporation is 100% owned by BANC ONE subsidiary banks with Bank One, Arizona, N.A. owning 30.890%; Bank One, Columbus, N.A. 9.289%; Bank One, Akron, N.A. 6.503%; Bank One, Indianapolis, N.A. 9.360%; Bank One, Milwaukee, N.A. 9.225%; and Bank One, Texas, N.A. 9.678%. All other BANC ONE banks own less than 5%. REV. 3/6/96
PAGE 6 EX-23 8 EXHIBIT 23 1 Exhibit 23 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in the registration statements listed below of BANC ONE CORPORATION of our report dated February 21, 1996 on our audits of the consolidated financial statements of BANC ONE CORPORATION and Subsidiaries, which includes an explanatory paragraph regarding the change in method of accounting for certain investment securities in 1994 and the change in method of accounting for income taxes and post-retirement benefits other than pensions in 1993, as of December 31, 1995 and 1994, and for the years ended December 31, 1995, 1994, and 1993, included in BANC ONE CORPORATION's annual report on form 10-k for the year ended December 31, 1995. Registration Statements on form S-8 Registration numbers: ..33-14475 ..33-55172 ..33-10822 ..33-55174 ..33-18277 ..33-54100 ..33-27849 ..33-61760 ..33-34294 ..33-61758 ..33-37400 ..33-60424 ..33-20890 ..33-50117 ..33-20990 ..33-55149 ..33-40041 ..33-55315 ..33-45473 ..33-58923 ..33-46189 .333-00445 ..33-53752 Registration Statements on Form S-3 Registration Numbers: ..33-64195 COOPERS & LYBRAND L.L.P. Columbus, Ohio March 28, 1996 EX-27 9 EXHIBIT 27
9 1000 YEAR DEC-31-1995 JAN-01-1995 DEC-31-1995 5,501,266 1,603 434,398 243,400 14,620,334 1,087,654 1,135,954 65,328,665 938,008 90,453,963 67,320,150 9,777,200 2,438,762 2,720,373 2,258,705 0 249,635 5,689,138 90,453,963 6,094,335 950,452 56,131 7,100,918 2,290,094 2,971,468 4,129,450 457,499 27,847 3,631,639 1,910,282 1,277,863 0 0 1,277,863 2.91 2.89 5.37 349,084 254,417 5,211 0 897,180 603,994 191,211 938,008 709,351 0 228,657
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