-----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, Feg4ymkrhWkNPCBxQhse7rX+wkysnqaOMC8IjTr0L7zlAZFJMApW7n6LRZs3PB7G c5fynR5Y1IXNmL782eLmPw== 0000950152-97-003979.txt : 19970520 0000950152-97-003979.hdr.sgml : 19970520 ACCESSION NUMBER: 0000950152-97-003979 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970515 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: BANC ONE CORP /OH/ CENTRAL INDEX KEY: 0000036090 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 310738296 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-08552 FILM NUMBER: 97607335 BUSINESS ADDRESS: STREET 1: 100 E BROAD ST CITY: COLUMBUS STATE: OH ZIP: 43271 BUSINESS PHONE: 6142485944 MAIL ADDRESS: STREET 1: 100 EAST BROAD STREET STREET 2: 18TH FLOOR CITY: COLUMBUS STATE: OH ZIP: 43271-0251 FORMER COMPANY: FORMER CONFORMED NAME: FIRST BANC GROUP OF OHIO INC /OH/ DATE OF NAME CHANGE: 19800301 10-Q 1 BANC ONE 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997 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 (IRS Employer I.D. Number) incorporation or organization) 100 East Broad Street, Columbus, Ohio 43271 --------------------------------------------------- (Address of principal executive offices) (Zip Code) (614) 248-5944 ---------------------------------------------------- (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- The number of shares outstanding of the registrant's common stock, no par value, $5 stated value, was 420,176,171 at April 30, 1997. 2 FORM 10-Q TABLE OF CONTENTS PART I - FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheet..................................................3 Consolidated Statement of Income............................................4 Consolidated Condensed Statement of Cash Flows..............................5 Consolidated Statement of Changes in Stockholders' Equity...................6 Notes to the Consolidated Financial Statements..............................7 Consolidated Quarterly Financial Data.......................................8 Average Balance, Income and Expense, Yields and Rates......................10 Item 2. Management's Discussion and Analysis Pending Acquisitions.......................................................11 Results of Operations......................................................11 Net Interest Income/Net Interest Margin................................12 Non-Interest Income....................................................13 Non-Interest Expense...................................................14 Income Taxes .........................................................14 Balance Sheet Analysis.....................................................14 Securities .........................................................14 Loans and Leases.......................................................15 Deposits .........................................................15 Borrowings.............................................................16 Treasury Stock.........................................................16 Credit Quality .........................................................16 Interest Rate Risk Management..............................................17 PART II - OTHER INFORMATION Item 1. Legal Proceedings.........................................................20 Item 2. Changes in Securities.....................................................20 Item 3. Defaults upon Senior Securities...........................................20 Item 4. Submission of Matters to a Vote of Security Holders.......................20 Item 5. Other Information.........................................................20 Item 6. Exhibits and Reports on Form 8-K..........................................20 SIGNATURES..........................................................................21
2 3 BANC ONE CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET
MARCH 31, DECEMBER 31, $(MILLIONS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED) 1997 1996 - ----------------------------------------------------------------------------------------------------------------------- ASSETS Cash and due from banks $5,241.8 $6,350.8 Short-term investments 367.8 348.7 Loans held for sale 2,369.0 1,473.8 Securities: Securities held to maturity 816.6 887.4 Securities available for sale 14,001.4 14,635.2 ---------- ---------- Total securities (fair value approximates $14,831.2 and $15,552.6 at March 31,1997 and December 31, 1996, respectively) 14,818.0 15,522.6 Loans and leases 74,056.6 74,193.9 Allowance for credit losses 1,097.9 1,075.1 ---------- ---------- Net loans and leases 72,958.7 73,118.8 Other assets: Bank premises and equipment, net 1,670.8 1,673.4 Interest earned, not collected 684.3 710.2 Other real estate owned 59.6 53.0 Excess of cost over net assets of affiliates purchased 463.9 471.6 Other 2,954.0 2,125.2 ---------- ---------- Total other assets 5,832.6 5,033.4 ---------- ---------- TOTAL ASSETS $101,587.9 $101,848.1 ========== ========== LIABILITIES Deposits: Non-interest bearing $15,696.7 $16,195.1 Interest bearing 56,471.5 56,178.0 ---------- ---------- Total deposits 72,168.2 72,373.1 Federal funds purchased and repurchase agreements 8,505.0 8,740.9 Other short-term borrowings 5,285.9 5,364.7 Long-term borrowings 4,905.6 4,189.5 Accrued interest payable 369.6 399.6 Other liabilities 1,956.1 2,133.3 ---------- ---------- TOTAL LIABILITIES 93,190.4 93,201.1 ---------- ---------- STOCKHOLDERS' EQUITY Preferred stock, 35,000,000 shares authorized: Series C convertible, no par value, 3,911,876 and 4,140,314 shares issued and outstanding at March 31, 1997 and December 31, 1996, respectively 195.6 207.0 Common stock, no par value, $5 stated value, 600,000,000 shares authorized, 433,657,210 and 433,093,188 shares issued at March 31, 1997 and December 31, 1996, respectively 2,168.3 2,165.5 Capital in excess of aggregate stated value of common stock 4,458.7 4,453.3 Retained earnings 2,221.7 2,013.9 Net unrealized holding gains (losses) on securities available for sale, net of tax (75.9) 20.3 Treasury stock (13,919,627 and 5,829,915 shares at March 31, 1997 and December 31, 1996 respectively), at cost (570.9) (213.0) ---------- ---------- TOTAL STOCKHOLDERS' EQUITY 8,397.5 8,647.0 ---------- ---------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $101,587.9 $101,848.1 ========== ==========
The accompanying notes are an integral part of the consolidated financial statements. 3 4 BANC ONE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF INCOME
THREE MONTHS ENDED MARCH 31, ------------------------------ $(MILLIONS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED) 1997 1996 - ---------------------------------------------------------------------------------------------------------------------------- INTEREST INCOME: Interest and fees on loans and leases $1,832.5 $1,693.8 Interest and dividends on: Taxable securities 220.1 250.0 Tax exempt securities 21.7 25.0 Interest income on loans held for sale 44.2 10.8 Other interest income 5.6 5.4 -------- -------- Total interest income 2,124.1 1,985.0 INTEREST EXPENSE: Interest on deposits: Demand, savings and money market deposits 260.1 246.8 Time deposits 337.4 345.4 Interest on borrowings 242.1 197.8 -------- -------- Total interest expense 839.6 790.0 -------- -------- Net interest income 1,284.5 1,195.0 Provision for credit losses 235.0 162.4 -------- -------- Net interest income after provision for credit losses 1,049.5 1,032.6 NON-INTEREST INCOME: Investment management and advisory activities 74.2 62.5 Service charges on deposit accounts 166.0 156.8 Loan processing and servicing income 106.1 117.3 Securities gains 15.2 1.0 Other 223.9 165.0 -------- -------- Total non-interest income 585.4 502.6 NON-INTEREST EXPENSE: Salaries and related costs 525.0 502.8 Net occupancy expense, exclusive of depreciation 47.7 44.7 Equipment expense 28.2 28.1 Taxes other than income and payroll 22.6 24.1 Depreciation and amortization 85.7 86.2 Outside services and processing 140.0 125.2 Marketing and development 40.2 48.1 Communication and transportation 78.6 75.2 Other 100.9 84.7 -------- -------- Total non-interest expense 1,068.9 1,019.1 -------- -------- Income before income taxes 566.0 516.1 Provision for income taxes 195.3 170.2 -------- -------- Net income $370.7 $345.9 ======== ======== Net income per common share $0.86 $.77 ======== ======== Weighted average common shares outstanding (millions) 426.1 444.0 ======== ========
The accompanying notes are an integral part of the consolidated financial statements. 4 5 BANC ONE CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, ----------------------------- $(MILLIONS) (UNAUDITED) 1997 1996 - --------------------------------------------------------------------------------------------------------------------------- CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES: Net income $370.7 $345.9 Depreciation expense 69.2 65.0 Amortization of other intangibles 16.5 21.2 Other cash (used in) provided by operating activities (279.7) 131.5 -------- -------- Net cash provided by operating activities 176.7 563.6 -------- -------- CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES: Purchases of securities available for sale (1,676.9) (1,337.7) Purchases of securities held to maturity (38.5) (36.7) Maturities of securities available for sale 580.3 905.8 Maturities of securities held to maturity 109.1 90.9 Sales of securities available for sale 1,241.2 439.6 Net increase in loans, excluding sales and purchases (1,115.9) (1,934.2) Sales of loans 187.6 1,767.3 Purchases of loans and related premiums (165.4) (89.1) Net (increase) decrease in short-term investments (19.1) 237.0 Additions to bank premises and equipment (73.9) (72.8) Sale of banks and branch offices (22.3) (97.7) Net cash acquired in acquisitions 0.0 315.7 All other investing activities, net 10.9 20.6 -------- -------- Net cash (used in) provided by investing activities (982.9) 208.7 -------- -------- CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES: Net increase (decrease) in demand deposit, money market and savings accounts 282.2 (264.9) Net decrease in time deposits (461.6) (953.0) Net (decrease) increase in short-term borrowings (314.6) 1,236.1 Issuance of long-term borrowings, net 964.1 507.2 Repayment of long-term borrowings (248.9) (1,052.1) Cash dividends paid (162.9) (152.3) Purchase of treasury stock (356.7) (593.0) Other, net (decrease) increase (4.4) 0.7 -------- -------- Net cash used in financing activities (302.8) (1,271.3) -------- -------- Decrease in cash and cash equivalents (1,109.0) (499.0) Cash and cash equivalents at January 1 6,350.8 5,501.3 -------- -------- Cash and cash equivalents at March 31 $5,241.8 $5,002.3 ======== ========
The accompanying notes are an integral part of the consolidated financial statements. 5 6 BANC ONE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
THREE MONTHS ENDED MARCH 31, ----------------------------- $(MILLIONS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED) 1997 1996 - --------------------------------------------------------------------------------------------------------------------------------- BALANCE, BEGINNING OF PERIOD $8,647.0 $8,197.5 Net income 370.7 345.9 Exercise of stock options, net of shares purchased (3.3) (3.0) Shares issued in acquisitions 710.5 Sales of stock to employee benefit plans and other (1.1) 3.9 Cash dividends: Common ($.38 and $.34 per share for the three months ended March 31, 1997 and 1996, respectively) (159.5) (148.0) Series C Preferred ($.88 per share for the three months ended March 31, 1997 and 1996, respectively) (3.4) (4.3) Change in unrealized holding losses on securities available for sale, net of tax (96.2) (79.4) Purchase of treasury stock (356.7) (593.0) -------- -------- BALANCE, END OF PERIOD $8,397.5 $8,430.1 ======== ========
The accompanying notes are an integral part of the consolidated financial statements. 6 7 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. The accompanying consolidated financial statements are unaudited. However, in the opinion of management, they contain the adjustments, all of which are normal and recurring in nature, necessary to present fairly the consolidated financial position and the results of operations. The notes to the consolidated financial statements contained in the Annual Report on Form 10-K for the year ended December 31, 1996 should be read in conjunction with these consolidated financial statements. "The Corporation" is defined as the parent company only. "BANC ONE" is defined as the Corporation and all significant majority-owned subsidiaries. Certain prior period amounts have been reclassified to be consistent with current presentation. 2. On January 19, 1997, the Corporation entered into an agreement to merge with First USA, Inc. ("First USA"), located in Dallas, Texas. Terms of the agreement call for First USA shareholders to receive 1.1659 shares of the Corporation's common stock for each outstanding share of First USA common stock. First USA had total assets of $10.3 billion and stockholders' equity of $1.3 billion at December 31, 1996. First USA is a financial services company specializing in the credit card business with $22.4 billion in managed receivables and 16 million cardholders at December 31, 1996. The transaction is subject to regulatory and shareholder approvals, is expected to be completed in the second quarter of 1997 and will be accounted for as a pooling of interests. On December 28, 1996, the Corporation entered into an agreement with Liberty Bancorp, Inc. ("Liberty"), which provides for the merger of Liberty with and into a wholly owned subsidiary of the Corporation. Liberty is a multi-bank holding company headquartered in Oklahoma City, Oklahoma, with 29 banking offices in Oklahoma City and Tulsa. Terms of the merger agreement call for an exchange of 1.175 shares of the Corporation's common stock for each share of Liberty common stock. Liberty had total assets of approximately $2.9 billion at December 31, 1996. This transaction, which has been approved by regulatory authorities and Liberty's shareholders, is expected to close during the second quarter of 1997 and will be accounted for as a purchase. 3. On January 19, 1997, the Board of Directors approved the repurchase of up to 12 million shares of the Corporation's common stock for reissuance in connection with the acquisition of Liberty. In May 1997 the Corporation terminated the authorization to make further purchases of the Corporation's common stock pursuant to the January 1997 authorization and pursuant to the April 1996 authorization to purchase up to 10 million shares of the Corporation's common stock. The Corporation repurchased 8.1 million shares of its common stock pursuant to the January 1997 authorization, all of which occurred during the first quarter of 1997, and repurchased 9.5 million shares of its common stock pursuant to the April 1996 authorization, all of which occurred during calendar year 1996. 4. Supplemental disclosure for the consolidated condensed statement of cash flows are as follows: common stock issued and treasury stock reissued in purchase acquisitions was $710.5 million for the three months ended March 31, 1996, securities trades not settled decreased $337.0 million for the three months ended March 31, 1997 and increased $39.9 million for the three months ended March 31, 1996. 5. BANC ONE adopted Statement of Financial Accounting Standards (SFAS) No. 125. "Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities," effective January 1, 1997. SFAS 125 requires that after a transfer of financial assets, an entity must recognize the financial and servicing assets controlled and liabilities incurred and derecognize financial assets and liabilities in which control is surrendered or when debt is extinguished. The impact on BANC ONE's 1997 first quarter consolidated financial position and results of operations was not material. 6. SFAS 128 "Earnings Per Share" was issued in February 1997 and is effective for financial statements issued for periods ending after December 15, 1997. The statement specifies the computation, presentation and disclosure requirements for earnings per share for entities with publicly held common stock. The impact of the statement on BANC ONE's earnings per share is not expected to be material. 7 8 CONSOLIDATED QUARTERLY FINANCIAL DATA
QUARTER --------------------------------------------------------------- 1997 1996 ----------- -------------------------------------------------- $(MILLIONS) (UNAUDITED) FIRST FOURTH THIRD SECOND FIRST - ---------------------------------------------------------------------------------------------------------------------------- PERIOD END BALANCES Loans and leases $74,056.6 $74,193.9 $72,680.8 $70,119.8 $68,460.0 Allowance for credit losses 1,097.9 1,075.1 1,054.9 1,026.3 1,005.8 Earning assets 91,611.4 91,539.0 89,336.0 87,765.9 86,865.9 Total assets 101,587.9 101,848.1 98,562.0 97,051.1 95,708.2 Total deposits 72,168.2 72,373.1 71,527.6 70,954.1 70,217.0 Long-term borrowings 4,905.6 4,189.5 3,022.8 3,020.8 3,010.1 Total stockholders' equity 8,397.5 8,647.0 8,439.4 8,517.4 8,430.1 CONDENSED INCOME STATEMENT Net interest income (1) 1,298.5 1,278.6 1,214.9 1,214.2 1,210.9 Provision for credit losses 235.0 243.8 210.7 171.1 162.4 --------- --------- --------- --------- --------- Net funds function (1) 1,063.5 1,034.8 1,004.2 1,043.1 1,048.5 NON-INTEREST INCOME Investment management and advisory activities 74.2 77.1 71.8 67.7 62.5 Service charges on deposit accounts 166.0 170.3 165.8 161.2 156.8 Loan processing and servicing income 106.1 105.5 114.3 114.5 117.3 Securities gains 15.2 8.7 0.9 4.5 1.0 Other 223.9 260.7 216.5 185.4 165.0 --------- --------- --------- --------- --------- Total non-interest income 585.4 622.3 569.3 533.3 502.6 NON-INTEREST EXPENSE Salaries and related costs 525.0 523.4 490.6 501.6 502.8 Other 543.9 583.2 539.5 526.8 516.3 --------- --------- --------- --------- --------- Total non-interest expense 1,068.9 1,106.6 1,030.1 1,028.4 1,019.1 Taxable equivalent adjustment 14.0 15.2 15.8 16.3 15.9 --------- --------- --------- --------- --------- Income before income taxes 566.0 535.3 527.6 531.7 516.1 Provision for income taxes 195.3 165.5 171.7 176.8 170.2 --------- --------- --------- --------- --------- Net income $370.7 $369.8 $355.9 $354.9 $345.9 ========= ========= ========= ========= ========= - ----------------------------------------------------------------------------------------------------------------------------
(1) Fully taxable equivalent basis. 8 9 CONSOLIDATED QUARTERLY FINANCIAL DATA (CONTINUED)
QUARTERS --------------------------------------------------------------- 1997 1996 --------------------------------------------------------------- $(MILLIONS, EXCEPT PER SHARE DATA) (UNAUDITED) FIRST FOURTH THIRD SECOND FIRST - --------------------------------------------------------------------------------------------------------------------------------- KEY RATIOS Return on average assets (1) 1.50% 1.49% 1.48% 1.50% 1.45% Return on average common stockholders' equity (1) 18.20 17.60 17.07 17.37 16.38 Average common stockholders' equity to average asset 8.16 8.40 8.54 8.51 8.77 Tier I capital ratio 8.75 9.03 9.18 9.52 9.57 Total risk adjusted capital ratio 12.80 13.12 12.83 13.23 13.44 Leverage ratio 7.89 8.24 8.31 8.43 8.24 MARGIN ANALYSIS (1)(2)(3) Interest income 9.48 9.35 9.17 9.09 9.23 Interest expense 3.72 3.69 3.66 3.49 3.64 ------ ------ ------ ------ ------ Net interest income 5.76 5.66 5.51 5.60 5.59 Provision for credit losses 1.04 1.08 .96 .79 .75 ------ ------ ------ ------ ------ Net funds function 4.72 4.58 4.55 4.81 4.84 CREDIT ANALYSIS Net charge-offs to average loans and leases (1)(6) 1.13 1.23 1.01 .86 .89 Ending allowance to loans and leases 1.48% 1.45% 1.45% 1.46% 1.47% Non-performing assets: (5) Total $433.8 $435.4 $478.2 $458.2 $486.3 Percent of total loans and leases (6) .57% .58% .65% .65% .70% Loans delinquent 90 days or more: (4) Total $432.9 $396.6 $345.3 $280.3 $250.2 Percent of total loans and leases (6) .57% .52% .47% .40% .36% Allowance to non-performing loans 293.4% 281.1% 253.3 % 264.7% 245.5% PER SHARE DATA Net income $.86 $.85 $.81 $.80 $.77 Cash dividends declared .38 .34 .34 .34 .34 Book value 19.54 19.75 19.24 19.07 18.80 Common stock price: High 49.25 47.88 41.38 37.75 38.50 Low 39.38 40.38 31.25 32.88 31.94 Close 39.75 43.00 41.00 34.00 35.63 Preferred Series C stock price: High 94.50 91.25 80.00 72.63 73.88 Low 76.50 77.75 60.75 63.88 62.00 Close $77.88 $83.00 $79.13 $66.75 $69.13 SHARES TRADED Common 133.4 54.3 60.7 50.7 62.1 Preferred Series C 0.6 0.9 2.1 0.9 1.2
(1) Ratios presented on an annualized basis. (2) Fully taxable equivalent basis. (3) As a percent of average earning assets. (4) Excludes non-performing loans. (5) Excludes certain smaller balance loans collectively evaluated for impairment. (6) Includes loans held for sale. 9 10 AVERAGE BALANCES, INCOME AND EXPENSE, YIELDS AND RATES (1)
THREE MONTHS ENDED THREE MONTHS ENDED MARCH 31, 1997 MARCH 31, 1996 ------------------------------------- ---------------------------------------- AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/ $(MILLIONS)(UNAUDITED) BALANCE EXPENSE RATE BALANCE EXPENSE RATE - ------------------------------------------------------------------------------- ---------------------------------------- ASSETS: Short-term investments $423.6 $5.6 5.36% $392.0 $5.4 5.56% Loans held for sale 1,420.6 44.1 12.59 590.0 10.8 7.38 SECURITIES: (3) Taxable 13,633.2 220.2 6.55 15,474.8 250.1 6.50 Tax-exempt 1,574.3 32.0 8.24 1,733.2 36.6 8.49 ---------- ------- --------- -------- Total securities 15,207.5 252.2 6.73 17,208.0 286.7 6.70 LOANS AND LEASES: (2) Commercial 20,150.1 411.9 8.29 18,864.2 383.6 8.18 Real estate: Commercial 6,195.7 136.4 8.93 5,988.6 134.3 9.02 Construction 3,770.5 90.0 9.68 2,920.3 71.8 9.89 Residential 14,087.8 330.1 9.50 11,100.8 255.0 9.24 Consumer, net 19,946.6 482.4 9.81 20,027.9 487.6 9.79 Credit card 7,950.5 344.5 17.57 8,289.4 333.3 16.17 Leases, net 2,312.6 40.9 7.17 1,776.1 32.4 7.35 ---------- ------- --------- -------- Net loans and leases 74,413.8 1,836.2 10.01 68,967.3 1,698.0 9.90 ---------- ------- --------- -------- Total earning assets 91,465.5 2,138.1 9.48 87,157.3 2,000.9 9.23 Allowance for credit losses (1,076.2) (1,008.2) Other assets (3) 9,967.0 9,523.4 ---------- --------- Total assets $100,356.3 $95,672.5 ========== ========= LIABILITIES: DEPOSITS: Non-interest bearing demand $14,424.6 $13,951.6 Interest bearing demand 1,918.0 7.5 1.59 3,115.0 14.8 1.92 Money market and savings 30,075.1 252.6 3.41 28,053.2 232.0 3.33 Time deposits: CDS less than $100,000 18,140.5 247.1 5.52 19,794.5 276.0 5.61 CDS $100,000 and over: Domestic 4,291.1 55.8 5.27 3,915.9 50.2 5.16 Foreign 2,591.7 34.5 5.40 1,433.3 19.2 5.37 ---------- ------- --------- -------- Total deposits 71,441.0 597.5 3.39 70,263.5 592.2 3.39 BORROWED FUNDS: Short-term 13,929.4 175.7 5.12 11,531.3 149.6 5.22 Long-term 4,168.9 66.4 6.46 3,018.7 48.2 6.42 ---------- ------- --------- -------- Total borrowed funds 18,098.3 242.1 5.43 14,550.0 197.8 5.47 ---------- ------- --------- -------- Total interest bearing liabilities 75,114.7 839.6 4.53 70,861.9 790.0 4.48 Other liabilities 2,431.2 2,225.9 ---------- ------- --------- -------- Total liabilities 91,970.5 87,039.4 Preferred stock 200.9 247.4 Common stockholders' equity 8,184.9 8,385.7 ---------- --------- Total liabilities and stockholders' equity $100,356.3 $95,672.5 ========== ========= Net interest income 1,298.5 5.76 1,210.9 5.59 Provision for credit losses (235.0) (1.04) (162.4) (.75) -------- ----- -------- ----- Net funds function $1,063.5 4.72% $1,048.5 4.84% ======== ===== ======== =====
(1) Fully taxable equivalent basis. (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. 10 11 MANAGEMENT'S DISCUSSION AND ANALYSIS This discussion should be read in conjunction with the consolidated financial statements, notes and tables included elsewhere in this report and in the BANC ONE CORPORATION Annual Report on Form 10-K for the year ended December 31, 1996 (the "1996 Form 10-K"). For purposes of this report, the term "the Corporation" is defined as the parent company only and "BANC ONE" is defined as the Corporation and all significant majority-owned subsidiaries. Management's discussion and analysis contains forward-looking statements that are provided to assist in the understanding of anticipated future financial performance. However, such performance involves risks and uncertainties which may cause actual results to differ materially from those in such statements. For a discussion of certain factors that may cause such forward-looking statements to differ materially from actual results, see the 1996 Form 10-K. PENDING ACQUISITIONS On January 19, 1997, the Corporation entered into an agreement to merge with First USA, Inc. ("First USA"), located in Dallas, Texas. Terms of the agreement call for First USA shareholders to receive 1.1659 shares of the Corporation's common stock for each outstanding share of First USA common stock. First USA had total assets of $10.3 billion and stockholders' equity of $1.3 billion at December 31, 1996. First USA is a financial services company specializing in the credit card business with $22.4 billion in managed receivables and 16 million cardholders at December 31, 1996. Even though First USA has traditionally produced high growth in earnings, management estimates that this transaction will be dilutive to BANC ONE's earnings per common share in 1997, neutral in 1998 and accretive to earnings per common share thereafter. Further, given the operational overlap of credit card operations between BANC ONE and First USA, and the incurrence of certain costs resulting from this transaction, management estimates a charge to earnings of $150 million at acquisition, however, the actual charge could be substantially greater. The transaction is subject to regulatory and shareholder approvals, is expected to be completed in the second quarter of 1997 and will be accounted for as a pooling of interests. On December 28, 1996, the Corporation entered into an agreement to merge with Liberty Bancorp, Inc. ("Liberty"), a multi-bank holding company headquartered in Oklahoma City, Oklahoma, with 29 banking offices in Oklahoma City and Tulsa. Terms of the merger agreement call for an exchange of 1.175 shares of BANC ONE common stock for each share of Liberty common stock. Liberty had assets of approximately $2.9 billion at December 31, 1996. This transaction, which has been approved by regulatory authorities and Liberty's shareholders, is expected to close during the second quarter of 1997 and will be accounted for as a purchase. While these transactions did not impact performance comparisons between first quarter 1997 and the prior year quarter, the pending acquisition of both First USA and Liberty will impact 1997 financial performance and future comparisons of financial results to prior periods. RESULTS OF OPERATIONS OVERVIEW Net income for the 1997 first quarter totaled $370.7 million, up 7% from the year-ago quarter reflecting increases in both net interest income and non-interest income, which were only partially offset by a higher provision for credit losses and an increase in non-interest expense. Earnings per common share in the quarter ended March 31, 1997, were $.86, up 12% from the prior year which reflected the benefit of these same factors, as well as the favorable impact of lower average number of shares outstanding. Net interest income reflected the favorable impacts of both an increase in average earning assets compared with the year-ago quarter and a higher net interest margin. The increase in the provision for credit losses reflected higher levels of net charge-offs, primarily with respect to credit card loans, with the higher level of non-interest expense primarily reflecting implementation costs associated with Project One initiatives. 11 12 NET INTEREST INCOME / NET INTEREST MARGIN Net interest income on a fully taxable equivalent (FTE) basis in the 1997 first quarter was $1.3 billion, up $88 million or 7% from the prior-year period reflecting a 5% increase in average earning assets compared with the year-ago quarter, as well as a higher net interest margin from the prior year period, 5.76% compared with 5.59%. Average earning assets were $91.5 billion for the three months ended March 31, 1997, a $4.3 billion increase from the 1996 first quarter. The increase was primarily due to higher average loans of $5.4 billion, which was partially offset by a $1.1 billion decrease in average other earning assets, mostly investment securities, reflecting the ongoing strategy to use proceeds from lower yielding investment securities to fund higher yielding loans and leases. Average commercial loans increased $1.3 billion, or 7%, from the year-ago period. The increase was due to both the strong economic environment which has fueled commercial loan growth throughout the industry, along with the positive impact of more focused sales efforts reflecting the shift to line of business management. Average residential real estate loans increased $3.0 billion, or 27%, compared with the 1996 first quarter, primarily due to higher home equity loan volumes as a result of marketing efforts, as well as loans purchased through the broker network. Including credit card loans held for sale, average credit card loans were $9.0 billion, a $0.7 billion increase from the same period of last year. The growth rate has slowed reflecting decisions to tighten standards and increase selectivity in new card solicitations. Funding for year-over-year average earning asset growth came from increases in both average borrowings and deposits. Average short-term borrowings in the 1997 first quarter increased $2.4 billion from the year-ago quarter while both average long-term borrowings and average total deposits increased $1.2 billion. In addition to funding earning asset growth, these funds were also used to purchase $294 million of First USA common stock in anticipation of the pending acquisition and $357 million of the Corporation's common stock in anticipation of the Liberty acquisition. The mix of average total deposits continued to shift away from lower yielding interest bearing demand accounts into higher yielding money market savings accounts. The overall growth in total deposits also reflected marketing efforts to promote money market deposit growth. Also affecting net interest income, but not net income, is the securitization of consumer and credit card loans. The financial statement impact of securitizing loans is to remove such loans from the balance sheet and record the excess yield as loan servicing income. While securitized loans have included both consumer and credit card loans, the most significant impact on income statement classifications results from credit card securitizations. Excess yield for credit card loans represents the interest and fee income of the credit card assets, less the sum of the securitized coupon rate, charge-offs, and costs of servicing. Because credit losses are charged against loan servicing income over the life of these transactions, loan servicing income may vary depending upon the credit performance of the loans securitized (ie. as charge-offs increase, servicing income decreases). However, exposure to credit losses on securitized loans is limited to future servicing income and certain receivables classified as other assets. The following table presents the impact of credit card securitizations on income statement line items and certain other information pertaining to the managed credit card portfolio. 12 13
QUARTER ENDED MARCH 31, 1997 QUARTER ENDED MARCH 31, 1996 ----------------------------------------- ------------------------------------------ IMPACT OF IMPACT OF CREDIT CREDIT CARD PRO-FORMA CARD PRO-FORMA $(MILLIONS) REPORTED SECURITIZATIONS ADJUSTED REPORTED SECURITIZATIONS ADJUSTED - --------------------------------------------------------------------------------------------------------------------------------- Income statement: - ---------------- Net interest income - fully taxable equivalent $1,298.5 $94.4 $1,392.9 $1,210.9 $91.2 $1,302.1 Provision for credit losses 235.0 60.5 295.5 162.4 53.4 215.8 Non-interest income 585.4 (31.9) 553.5 502.6 (35.3) 467.3 Non-interest expense 1,068.9 2.0 1,070.9 1,019.1 2.6 1,021.7 Net income 370.7 370.7 345.9 345.9 Net interest margin 5.76% 11.46% 5.96% 5.59% 10.49% 5.78% Other credit card data: (1) - ---------------------- Ending balances (1) $8,553.8 $3,340.0 $11,893.8 $7,278.1 $4,440.0 $11,718.1 Average balances (1) 8,950.5 3,340.0 12,290.5 8,289.4 3,489.4 11,778.8 Net charge-offs as a percentage of average loan balances 5.51% 7.35% 6.01% 4.64% 6.11% 5.09% Delinquencies over 30 days as a percentage of ending loan balances 6.26% 6.59% 6.35% 4.63% 4.81% 4.70% Delinquencies over 90 days as a percentage of ending loan balances 2.73% 2.98% 2.80% 1.70% 1.94% 1.79% - ---------------------------------------------------------------------------------------------------------------------------------
(1) Includes loans held for sale. Off-balance sheet investment products are used to manage interest rate risk and the impact on net interest income reflects the cost or benefit as a result of these products. During first quarter 1997, the net impact of off-balance sheet investment products was a decrease in net interest income of $1.0 million compared with a reduction of $20.5 million in first quarter 1996. However, these amounts alone are not an indication of the effectiveness of such instruments, as the on balance sheet instruments hedged move in the opposite direction. In addition, the cost or benefit from hedging transactions is significantly impacted by customer preferences, the historical interest rate environment in which the instruments were acquired and current market rates. NON-INTEREST INCOME
THREE MONTHS ENDED -------------------------- MARCH 31, MARCH 31, INCREASE $(MILLIONS) 1997 1996 (DECREASE) -------------------------------------------------------------------------------------------------------- Investment management and advisory activities $74.2 $62.5 $11.7 Service charges on deposit accounts 166.0 156.8 9.2 Loan processing and servicing income 106.1 117.3 (11.2) Securities gains 15.2 1.0 14.2 Other 223.9 165.0 58.9 ------ ------ ------ TOTAL NON-INTEREST INCOME $585.4 $502.6 $82.8 ====== ====== ======
The increase in income from investment management and advisory activities for the three months ended March 31, 1997 compared with the same 1996 period was due primarily to a 5% increase in managed assets and an increase in account fees. The increase in service charges on deposit accounts was due primarily to higher account analysis charges of $7.0 million, reflecting an increase in the number of customers using this service, as well as higher fees charged on overdrafts. The decrease in loan processing and servicing income primarily reflected an increase in net charge-offs on securitized credit card loans. The increase in securities gains reflected the first quarter 1997 sale of government mortgage-backed securities. 13 14 Other non-interest income was higher due primarily to a $42.5 million increase in venture capital gains. In addition, an $8.5 million gain was recognized in first quarter 1997 in connection with the reorganization and partial sale of the commercial mortgage origination and servicing line of business. NON-INTEREST EXPENSE
THREE MONTHS ENDED -------------------------- MARCH 31, MARCH 31, INCREASE $(MILLIONS) 1997 1996 (DECREASE) -------------------------------------------------------------------------------------------------------- Salaries and related costs $525.0 $502.8 $22.2 Net occupancy expense, exclusive of depreciation 47.7 44.7 3.0 Equipment expense 28.2 28.1 0.1 Taxes other than income and payroll 22.6 24.1 (1.5) Depreciation and amortization 85.7 86.2 (0.5) Outside services and processing 140.0 125.2 14.8 Marketing and development 40.2 48.1 (7.9) Communication and transportation 78.6 75.2 3.4 Other 100.9 84.7 16.2 -------- -------- ----- TOTAL NON-INTEREST EXPENSE $1,068.9 $1,019.1 $49.8 ======== ======== =====
The increase in total non-interest expense for the 1997 first quarter of $49.8 million was primarily due to BANC ONE's ongoing consolidation and standardization initiatives referred to collectively as Project One. Costs associated with Project One were $55.1 million for the three months ended March 31, 1997 compared with $14.4 million for the three months ended March 31, 1996. Project One initiatives accounted for increases of $22.7 million in salaries, $11.6 million in outside services and processing expense, $1.8 million in marketing and development expense, and $3.4 million in communication and transportation expense. It is anticipated that the benefits from these initiatives will increasingly be realized in the second half of 1997. The decrease in marketing and development expense was primarily due to the postponement of certain marketing efforts related to credit card programs in anticipation of the pending acquisition of First USA. Other non-interest expense increased primarily due to a reclassification of check rebates between non-interest income and expense. INCOME TAXES The provision for income taxes was 34.5% of pretax income for the three months ended March 31, 1997 compared with 33.0% for the same period in 1996. The increase in the effective rate from first quarter 1996 was a result of certain tax issues resolved with taxing authorities in 1996 that are not expected to occur in 1997. The effective tax rate for the three months ended March 31, 1997 approximates the anticipated effective tax rate for the year. The provision for income tax associated with securities gains in the 1997 and 1996 first quarters were $5.5 million and $.4 million, respectively. BALANCE SHEET ANALYSIS Securities Total securities at March 31, 1997 were $14.8 billion, a decrease of $721 million from December 31, 1996. This decrease primarily reflected the sale of $1.2 billion of securities available for sale, the proceeds of which were used to fund loan growth. The following provides a summary of securities at March 31, 1997 and December 31, 1996: 14 15
MARCH 31, 1997 DECEMBER 31, 1996 ------------------------ -------------------------- AMORTIZED ESTIMATED AMORTIZED ESTIMATED $ (MILLIONS) COST FAIR VALUE COST FAIR VALUE - ----------------------------------------------------------------------------------------------------------------- SECURITIES HELD TO MATURITY: United States treasury and agencies $154.9 $152.8 $132.9 $135.1 Mortgage and asset-backed securities 45.0 37.0 45.4 44.5 Tax exempt 595.8 619.1 685.4 714.1 Other 20.9 20.9 23.7 23.7 --------- --------- --------- --------- Total securities held to maturity $816.6 $829.8 $887.4 $917.4 ========= ========= ========= ========= SECURITIES AVAILABLE FOR SALE: United States treasury and agencies $3,814.9 $3,735.3 $4,235.8 $4,213.8 Mortgage and asset-backed securities: Government 6,530.3 6,511.0 6,729.8 6,791.8 Other 1,860.4 1,834.9 2,074.4 2,056.3 Tax exempt 909.6 912.4 973.5 980.5 Other 1,007.1 1,007.8 591.3 592.8 --------- --------- --------- --------- Total securities available for sale $14,122.3 $14,001.4 $14,604.8 $14,635.2 ========= ========= ========= =========
Loans and Leases At March 31, 1997, total loans and leases were $74.1 billion, down $137 million from December 31, 1996 reflecting a net $895 million transfer from loans and leases to loans held for sale. Including loans held for sale, total loans and leases were up $758 million, or 4% on an annualized basis, from December 31, 1996 levels. At March 31, 1997, loans held for sale were $2.4 billion, with $2.0 billion representing credit card receivables and $0.4 billion representing single family mortgage loans. A summary of the components of loans and leases at March 31, 1997 and December 31, 1996 is as follows:
MARCH 31, DECEMBER 31, $(MILLIONS)(AS OF END OF PERIOD) 1997 1996 - ---------------------------------------------------------------------------------------- Commercial, financial and agricultural $20,707.6 $20,232.2 Real estate: Commercial 5,969.8 6,429.4 Construction 3,920.0 3,602.0 Residential 14,292.2 13,917.0 Consumer, net 20,278.4 19,385.4 Credit card 6,553.8 8,301.4 Leases, net 2,334.8 2,326.5 --------- --------- Total loans and leases, net $74,056.6 $74,193.9 ========= =========
In addition to the growth in end of period loans, the managed loan portfolio also increased. Managed loans represent end of period loans and leases, including loans held for sale, and off-balance sheet securitized loans adjusted to net out any impact from acquisitions and/or dispositions. During the 1997 first quarter, end of period managed loans increased at an annualized rate of 8% from December 31, 1996. On this same basis wholesale loans increased 6%, consumer loans excluding credit card loans, increased 11%, and credit card loans were up 5%, reflecting tightened credit standards and lower solicitation activity. Deposits Total deposits at March 31, 1997 were $72.2 billion, relatively unchanged from December 31, 1996. The deposit mix continued to shift toward money market savings accounts due to aggressive marketing of these products as well as the ongoing migration of customer deposits to higher yielding money market savings accounts. 15 16
MARCH 31, DECEMBER 31, $(MILLIONS)(AS OF END OF PERIOD) 1997 1996 - ------------------------------------------------------------------------------------------------ Demand deposits: Non-interest bearing $15,696.7 $16,195.1 Interest bearing 1,950.8 2,241.7 Money market and savings 30,493.3 29,434.6 Time 24,027.4 24,501.7 --------- --------- Total deposits $72,168.2 $72,373.1 ========= =========
Borrowings Long term borrowings increased $716 million, to $4.9 billion at March 31, 1997 from December 31, 1996. During the first quarter of 1997 the Corporation established a medium term note facility and issued $750 million of medium term notes due between 2000 and 2002. In April 1997, the Corporation issued $500 million of subordinated debentures due 2027 and $400 million of subordinated notes due 2007. Treasury Stock Treasury stock increased to $571 million at March 31, 1997, up $358 million from December 31, 1996. During first quarter 1997, 8.1 million shares of the Corporation's common stock were purchased for reissuance in connection with the acquisition of Liberty. CREDIT QUALITY The process for monitoring loan quality includes detailed, monthly analysis of delinquencies, non-performing assets and potential problem loans. Management extensively monitors credit through appraisals, assessment of the financial condition of borrowers and avoidance of loan concentrations. In addition to these factors, historically-based migration methodologies are applied to determine a calculated reserve for certain of the loan and lease portfolios. Further, each portfolio is reviewed to determine if additional subjective reserves are necessary. This subjective review is systematic for each portfolio, with consideration given to the current trends in the portfolio, changes in underwriting of the product, and results of recent loan review or internal audit examinations. Management believes that its methodology of determining the allowance for credit losses and projection of future economic and business trends is reflected in the current level of the overall allowance. BANC ONE is experiencing the deterioration of consumer credit quality, also experienced throughout the financial services industry, which is expected to continue through second quarter of 1997. In order to mitigate this trend, BANC ONE has tightened and refined consumer credit underwriting criteria. In addition, BANC ONE's portfolio management strategy has included enhanced collection efforts resulting in earlier contact with delinquent customers in an effort to reduce future charge-offs and delinquencies. During first quarter 1997 BANC ONE also changed the timing of when credit card accounts involved in bankruptcies are charged off. Credit card accounts are now charged-off 90 days after bankruptcy notification, when previously these accounts were charged-off in the month of notification. This additional time will afford the ability to work with customers to reaffirm their debt and increase the probability of ultimate collection. Annualized total net charge-offs for the first quarter of 1997, before the bankruptcy charge-off change, increased to 1.29% of average loans from 1.23% in fourth quarter of 1996. Loans delinquent 90 days or more as a percentage of ending loans increased to .57% at March 31, 1997 from .52% at December 31, 1996 as a result of the bankruptcy charge-off change and the deterioration of consumer credit quality discussed above. The following table summarizes net charge-offs expressed as an annualized percentage of average loans and leases for the periods indicated and loans delinquent 90 days or more expressed as a percentage of loans at the dates indicated. Delinquency and net charge-off trends over time are a reflection of a number of factors including credit quality of the loan portfolio, general economic conditions and the successful results of portfolio management techniques including collection strategies. 16 17
LOANS DELINQUENT NET CHARGE-OFFS (1)(4) 90 DAYS OR MORE (2)(4) - ----------------------------------------------------------------------------- -------------------------------------- THREE MONTHS ENDED -------------------------------------- MARCH 31, MARCH 31, MARCH 31, DECEMBER 31, 1997 1996 1997 1996 -------------------------------------- -------------------------------------- Wholesale (3) .05% .11% .21% .18% Real estate, residential .18 .13 .28 .24 Consumer, net 1.61 .92 .45 .49 Credit card (5) 5.51 4.64 2.73 2.25 Leases, net .17 .39 .16 .08 Total loans and leases (5) 1.13% .89% .57% .52%
(1) Ratios are presented on an annualized basis as a percent of average balances. (2) Ratios presented exclude non-performing loans and are expressed as a percent of ending balances. (3) Wholesale loans include commercial, financial, agricultural, commercial real estate and construction real estate loans. (4) Includes loans held for sale. (5) Net charge-offs for the three months ended March 31, 1997 reflect the change relating to credit card bankruptcy charge-offs. Without this change, net charge-offs for credit card and total loans and leases would have been 6.86% and 1.29%, respectively, and loans delinquent 90 days or more would have been 2.71% and .55%, respectively. Allowance for Credit Losses The following table summarizes activity in the allowance for credit losses:
THREE MONTHS ENDED MARCH 31, ----------------------- $(MILLIONS) 1997 1996 - -------------------------------------------------------------------------------------- BALANCE, BEGINNING OF PERIOD $1,075.1 $938.0 Allowance associated with acquisitions and other 0.0 60.1 Provision for credit losses 235.0 162.4 Total charge-offs (290.3) (212.4) Recoveries 78.1 57.7 -------- -------- Net charge-offs (212.2) (154.7) -------- -------- BALANCE, END OF PERIOD $1,097.9 $1,005.8 ======== ========
The allowance for credit losses at March 31, 1997 totaled $1.1 billion and represented 1.48% of ending loans and leases, up slightly from 1.45% at December 31, 1996. The allowance for credit losses expressed as a percentage of non-performing loans is another measure of the adequacy of the allowance for credit losses. The March 31, 1997 allowance for credit losses represented 293% of non-performing loans, up from 281% at December 31, 1996. It is management's view that the allowance for credit losses at March 31, 1997 was adequate and consistent with the composition of the portfolio and credit quality trends. INTEREST RATE RISK MANAGEMENT Interest rate risk is measured in two ways to capture both near-term and long-term effects of rate volatility: (1) Earnings at Risk (EAR), a measure of forecasted earnings (after tax net income) volatility; and (2) Value at Risk (VAR), a measure of the volatility of market value of equity (defined as the present value of all future expected cash flows of currently held assets, liabilities, and off-balance sheet items). To measure EAR and VAR risks, BANC ONE incorporates historical movements (volatility) of market rates over a trailing 24 month period to calculate in excess of 99% of statistically probable future rate movements over the next 90 days. As a result, the probability of the measured risk positions being realized or exceeded should be less than 1%. When considering the historical stability of interest rate movements, the low level of volatility suggest statistically that as of March 31, 1997 rates could move up by 66 basis points or down by 59 basis points over the next 90 days. Given these potential rate movements, forecasted earnings for the next 12 months are estimated to decrease by 1.7% in the up rate scenario and increase by 1.9% in the down rate scenario. Given these same assumptions, market value of equity would decline by 0.3% in the up rate 17 18 scenario and remain unchanged in the down rate scenario. A forecasted earnings impact is also estimated using a more traditional measurement, which assumes a gradual 100 basis point change over a 12 month period (25 basis points each quarter). On this basis, forecasted earnings over that 12 month period are estimated to decrease 1.2% if rates rose and increase 1.1% if rates declined. Trading Risk Management Using historical market volatilities for each asset and the expected time needed to liquidate the position (generally 10 trading days), the maximum adverse value change (using three standard deviations of historical volatility) is calculated. As of March 31, 1997, the value at risk of all trading assets was $9 million. Liquidity Risk Management Due to BANC ONE's capital, size and high credit quality ratings, the Corporation has access to substantial and diverse sources of liquidity. Core deposits, representing approximately 74% of funding, remain the primary source of liquidity, and are generated by a geographically diverse retail network of affiliate banks in 12 states. Approximately 19% of funding is supported through a variety of wholesale markets. Additionally, 7% of funding is generated by asset securitizations, which is viewed as a growing source of reliable and efficient funding. Reliance on the wholesale markets is projected to increase with the acquisition of First USA. Funds generated by asset securitization, First USA's primary funding method, are also expected to increase. Credit Risk Management for Capital Markets Activities There were no past due amounts or reserves for possible credit losses at March 31, 1997, related to off-balance sheet investment product transactions, nor were there any charge-offs during the three months ended March 31, 1997. Customer cap and swap agreements are created to accommodate the needs of commercial loan customers. BANC ONE enters into offsetting transactions with third parties and has prudent controls on transaction size, term and customer disclosure guidelines. Customer contracts outstanding, excluding offsetting transactions, had notional amounts of $1.9 billion at March 31, 1997. Following are the estimated maturities and weighted average fixed rates of off-balance sheet investment products by type. A key assumption in the maturity information below is that future variable rates move as indicated by the forward interest rate curve in existence at March 31, 1997. To the extent that the interest rates move in a fashion other than indicated in the forward interest rate curve the maturity information will change.
MATURITIES OF OFF-BALANCE SHEET INVESTMENT PRODUCTS AT MARCH 31, 1997(1)(2) ENDING BALANCES AT --------------------------------------------------------------------------------------- 2002 - MARCH 31, DECEMBER 31, $(MILLIONS) 1997 1998 1999 2000 2001 2006 2007+ 1997 1996 - -------------------------------------------------------------------------------------------------------------------------- Receive fixed swaps: Notional value $3,853 $ 1,800 $1,545 $1,560 $750 $1,566 $800 $11,874 $10,524 Weighted average receive rate 5.24% 5.94% 6.53% 6.35% 6.12% 6.58% 6.97% 6.01% 5.90% Receive fixed amortizing swaps: Notional value $ 865 $ 460 $76 $150 $ 1,551 $ 2,056 Weighted average receive rate 4.95% 5.32% 7.26% 5.54% 5.23% 5.35% Pay fixed swaps: Notional value $(88) $(1,935) $ (87) $ (507) $(2,617) $(2,108) Weighted average pay rate 8.62% 6.14% 6.73% 6.54% 6.32% 6.36% ------ ------ ------ ------ ---- ------ ---- ------- ------- Net receive fixed position $4,630 $325 $1,534 $1,203 $750 $1,566 $800 $10,808 $10,472 Notional value of basis swaps 3,240 754 53 50 131 4,228 4,729 Notional value of purchased caps 440 $1,004 $16 $1 $3 10 1,474 1,973 Notional value-other (3) $1,880 $ 16 $ 1,896 $ 2,056 - -----------------------------------
(1) Maturities are based on estimated future interest rates from the forward interest curve at March 31, 1997. (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, floors, options and futures. Customer transactions of $1.9 billion and $1.6 billion at March 31, 1997 and December 31, 1996, respectively, have been excluded. 18 19
NET UNREALIZED GAIN (LOSS) ---------------------------- MARCH 31, DECEMBER 31, $(MILLIONS) 1997 1996 - --------------------------------------------------------------- Receive fixed swaps $(147) $(15) Receive fixed amortizing swaps (8) (6) Pay fixed swaps 8 (13) Purchased caps (6) (8) Basis swaps (2) (6) Other 1 10 ---------------------------- Total $(154) $(38) ----------------------------
The 1996 Form 10-K provided certain fair value information based on interest rates at December 31, 1996. While the net unrealized value of the off-balance sheet investment product portfolio has decreased, due to an increase in long-term market interest rates, the fair value of fixed rate liabilities has increased. 19 20 BANC ONE CORPORATION AND SUBSIDIARIES PART II OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Inapplicable ITEM 2. CHANGE IN SECURITIES Inapplicable ITEM 3. DEFAULTS UPON SENIOR SECURITIES Inapplicable ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Inapplicable ITEM 5. OTHER INFORMATION Inapplicable ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a. Exhibits. Exhibit 11 Statement Regarding Computation of Earnings per Common Share Exhibit 12 Statement Regarding Computation of Ratio of Earnings to Fixed Charges Exhibit 27 Financial Data Schedules b. Reports on Form 8-K The following reports on Form 8-K were filed by BANC ONE during the quarter ended March 31, 1997: Current Report on Form 8-K filed January 28, 1997 (Items 5 and 7). Current Report on Form 8-K filed January 29, 1997 (Items 5 and 7). There are no agreements with respect to long-term debt of the Registrant to authorize securities in an amount 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. - ------------------------ 20 21 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. BANC ONE CORPORATION /s/ Bobby L. Doxey - ------------------------------- -------------------------------- Date Bobby L. Doxey Chief Accounting Officer 21 EX-11 2 EXHIBIT 11 1 EXHIBIT 11 BANC ONE CORPORATION and Subsidiaries STATEMENT REGARDING COMPUTATION OF EARNINGS PER COMMON SHARE $(millions, except per share amounts)
Three Months Ended March 31, ------------------------------- 1997 1996 ------------------------------- PRIMARY: Earnings: Net income $370.7 $345.9 Deduct: Dividends on preferred shares 3.4 4.3 ------ ------ Net income available to common shareholders $367.3 $341.6 ====== ====== Shares: Weighted average common shares outstanding 422.2 442.0 Add: Dilutive effect of outstanding options, as determined by the application of the treasury stock method 3.9 2.0 ------ ------ Weighted average common shares outstanding, as adjusted 426.1 444.0 ====== ====== PRIMARY EARNINGS PER COMMON SHARE $0.86 $0.77 ====== ====== FULLY DILUTED: Earnings: Net income $370.7 $345.9 ====== ====== Shares: Weighted average common shares outstanding 422.2 442.0 Add: Dilutive effect of outstanding options, as determined by the application of the treasury stock method 3.9 2.2 Add: Conversion of preferred stock 7.8 9.5 ------ ------ Weighted average common shares outstanding, as adjusted 433.9 453.7 ====== ====== FULLY DILUTED EARNINGS PER COMMON SHARE $0.85 $0.76 ====== ======
EX-12 3 EXHIBIT 12 1 EXHIBIT 12 BANC ONE CORPORATION and Subsidiaries Statement Regarding Computation of Ratio of Earnings to Fixed Charges $(millions)
Three Months ended Years Ended March 31, December 31, ------------------- -------------------------------------------------------- 1997 1996 1996 1995 1994 1993 1992 ------------------- -------------------------------------------------------- Calculation excluding interest on deposits: Earnings Income before income taxes and change in accounting principle $566.0 $516.1 $2,110.7 $1,910.3 $1,518.9 $1,770.7 $1,341.2 Fixed charges 258.2 211.9 881.7 736.3 633.5 348.3 321.4 Less: Capitalized interest (1.1) (0.4) (4.9) (1.7) (1.0) (0.6) (1.2) ------ ------ -------- -------- -------- -------- -------- Earnings $823.1 $727.6 $2,987.5 $2,644.9 $2,151.4 $2,118.4 $1,661.4 ====== ====== ======== ======== ======== ======== ======== Fixed Charges: Interest expense, including interest factor of capitalized leases and amortization of deferred debt expenses $243.2 $198.1 $827.0 $683.4 $575.7 $298.8 $278.6 Portion of rental payments under operating leases deemed to be interest 15.0 13.8 54.7 52.9 57.8 49.5 42.8 ------ ------ -------- -------- -------- -------- -------- Fixed charges $258.2 $211.9 $881.7 $736.3 $633.5 $348.3 $321.4 ====== ====== ======== ======== ======== ======== ======== Ratio of earnings to fixed charges excluding interest on deposits 3.19x 3.43x 3.39x 3.59x 3.40x 6.08x 5.17x Calculation including interest on deposits: Earnings: Income before income taxes and change in accounting $566.0 $516.1 $2,110.7 $1,910.3 $1,518.9 $1,770.7 $1,341.2 principle Fixed Charges 855.7 804.1 3,249.0 3,026.4 2,307.8 1,826.0 2,318.3 Less: Capitalized interest (1.1) (0.4) (4.9) (1.7) (1.0) (0.6) (1.2) ------ ------ -------- -------- -------- -------- -------- Earnings $1,420.6 $1,319.8 $5,354.8 $4,935.0 $3,825.7 $3,596.1 $3,658.3 ======== ======== ======== ======== ======== ======== ======== Fixed charges: As detailed above $258.2 $211.9 $881.7 $736.3 $633.5 $348.3 $321.4 Interest on deposits 597.5 592.2 2,367.3 2,290.1 1,674.3 1,477.7 1,996.9 ------ ------ -------- -------- -------- -------- -------- Fixed charges $855.7 $804.1 $3,249.0 $3,026.4 $2,307.8 $1,826.0 $2,318.3 ====== ====== ======== ======== ======== ======== ======== Ratio of earnings to fixed charges including interest on deposits 1.66x 1.64x 1.65x 1.63x 1.66x 1.97x 1.58x
EX-27 4 EXHIBIT 27
9 1,000 3-MOS DEC-31-1997 JAN-01-1997 MAR-31-1997 5,241,781 1,715 337,783 491,635 13,509,731 816,637 829,859 74,056,654 1,097,928 101,587,905 72,168,215 13,790,966 2,325,660 4,905,539 0 195,594 2,168,286 6,033,645 101,587,905 1,832,544 241,883 49,734 2,124,161 597,504 839,602 1,284,559 235,011 15,235 1,068,926 566,045 370,665 0 0 370,665 0.86 0.85 5.76 371,915 432,944 2,271 0 1,075,092 290,265 78,090 1,097,928 1,097,928 0 0
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