Filed with the Securities and Exchange Commission on October 7, 1994
Registration No 33-
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
F O R M S - 4
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
BANC ONE CORPORATION
(Exact name of Registrant as specified in its charter)
Ohio
(State or other jurisdiction of incorporation or organization)
6712
(Primary Standard Industrial Classification Code Number)
31-0738296
(I.R.S. Employer Identification No.)
100 East Broad Street, Columbus, Ohio 43271, (614) 248-5944
(Address, including Zip Code, and telephone number, including area code,
of Registrant's principal executive offices)
Steven Alan Bennett, Esq., BANC ONE CORPORATION
100 East Broad Street, Columbus, Ohio 43271, (614) 248-7590
(Name, address, including Zip Code, and telephone number,
including area code, of agent for service)
With Copies to:
Carter K. McDowell, Esq.
BANC ONE CORPORATION
100 East Broad Street
Columbus, Ohio 43215
614/248-6697
Approximate date of commencement of proposed sale of the securities to the
public: As soon as practicable after the effective date of this Registration
Statement and all other conditions to the merger of American Holding Co. with
and into a wholly owned subsidiary of the Registrant pursuant to the Merger
Agreement described in the enclosed Prospectus and Joint Proxy Statement have
been satisfied or waived.
If the securities being registered on this Form are being offered in connection
with the formation of a holding company and there is compliance with General
Instruction G, check the following box. q
Calculation of Registration Fee
Proposed Proposed
maximum maximum
Title of each class Amount offering aggregate Amount of
of securities to be price offering registration
to be registered registered(1) per unit(2) price(2) fee(2)
Common Stock 952,946 $ 20.11 $ 19,165,107 $ 3,838.02
(1) Based on an estimate of the maximum number of shares of common stock of the
Registrant to be issued in connection with the merger of American Holding
Co. with and into a wholly owned subsidiary of the Registrant and the
merger of First Bank of Highland Park, a subsidiary of American Holding
Co., with and into a wholly owned bank subsidiary of Registrant.
(2) Estimated solely for purpose of computing the registration fee based upon
the book value of the common stock, no par value of American Holding Co.
and the book value of the common stock, par value $5.00 per share, of First
Bank of Highland Park as of June 30, 1994 in accordance with Rule 457(f)(2)
of the General Rules and Regulations under the Securities Act of 1933.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
BANC ONE CORPORATION
Cross Reference Sheet
Caption in Prospectus
Item of Form S-4 and Proxy Statement
A. Information about the Transaction
Item 1 - Forepart of Registration
Outside Front Cover Page
Statement and Outside Front Cover
Reference Sheet
Page of Prospectus
Item 2 - Inside Front and Outside Available Information; Incorpora-
Back Cover Pages of Prospectus tion by Reference; Table of
Contents
Item 3 - Risk Factors, Ratio of Information About the Transactions
Earnings to Fixed Charges and
Other Information
Item 4 - Terms of the Transaction Merger and Consolidation;
Comparative
Rights of Shareholders
Item 5 - Pro Forma Financial Infor- Incorporation by Reference
mation
Item 6 - Material Contacts with Background of Transactions
the Company Being Acquired
Item 7 - Additional Information *
Required for Reoffering by
Persons and Parties Deemed To Be
Underwriters
Item 8 - Experts Experts
Item 9 - Disclosure of Commission *
Position on Indemnification for
Securities Act Liabilities
B. Information about the Registrant
Item 10 - Information with Respect Information about BANC ONE
to S-3 Registrants CORPORATION; Comparative Rights
of Shareholders
Item 11 - Incorporation of Certain Incorporation by Reference;
Information by Reference Incorporation of Certain Informa-
tion About BANC ONE by Reference
Item 12 - Information with Respect *
to S-2 or S-3 Registrants
Item 13 - Incorporation of Certain *
Information by Reference
Item 14 - Information with Respect *
to Registrants Other Than S-2 or
S-3 Registrants
Caption in Prospectus
Item of Form S-4 and Proxy Statement
C. Information about the Company
Being Acquired
Item 15 - Information with Respect *
to S-3 Companies
Item 16 - Information with Respect *
to S-2 or S-3 Companies
Item 17 - Information with Respect Information About American Holding
to Companies Other Than S-2 or Co.; Information About First Bank
S-3 Companies of Highland Park; Information About
the Transactions
D. Voting and Management Information
Item 18 - Information if Proxies, Introduction; The Special Meeting
Consents or Authorizations Are To of Shareholders of AMERICAN; The
Be Solicited Special Meeting of Shareholders of
First Bank; Voting and Management
Information
Item 19 - Information if Proxies, *
Consents or Authorizations Are
Not To Be Solicited or in an
Exchange Offer
* Omitted because item is inapplicable or answer to item is negative
, 1994
American Holding Co. First Bank of Highland Park
75 Aspen Lane 1835 First Street
Glencoe, Illinois 60022 Highland Park, Illinois 60035
Notice of Special Meeting of Shareholders
To be Held , 1994
To the Shareholders of American Holding Co.
and the Shareholders of First Bank of Highland Park:
The documents following this letter are notices of special meetings of the
shareholders of American Holding Co. ("AMERICAN") and the shareholders of First
Bank of Highland Park ("First Bank") and a Prospectus and Joint Proxy Statement
for the special meetings of the shareholders of AMERICAN and FIRST BANK, each
of which will be held at . The special meeting of
AMERICAN's shareholders will be held on , 1994 at :00 .M. and the
special meeting of First Bank's shareholders will commence at .M. that
same day.
The special meetings are of great importance to the shareholders of AMERICAN
and FIRST BANK. AMERICAN shareholders will be asked to approve a Merger
Agreement dated February 4, 1994 (the "Merger Agreement") between Banc One
Illinois Corporation ("Banc One Illinois") and AMERICAN, joined in by BANC ONE
CORPORATION ("BANC ONE"), the parent of Banc One Illinois. The shareholders of
First Bank will be asked to ratify and confirm a Bank Merger Agreement dated
April 19, 1994 (as amended on August 1, 1994, the "Consolidation Agreement")
between FIRST BANK and Bank One, Chicago, National Association ("Bank One
Chicago"), a wholly owned subsidiary of Banc One Illinois and an indirect
subsidiary of BANC ONE.
BANC ONE is a bank holding company which as of June 30, 1994 owned all of the
capital stock of 81 commercial banks located in Arizona, California, Colorado,
Illinois, Indiana, Kentucky, Michigan, Ohio, Oklahoma, Texas, Utah, West
Virginia and Wisconsin. Banc One Illinois is a wholly owned subsidiary of BANC
ONE and is the parent of seven commercial banks located in Illinois, including
Bank One Chicago.
If the shareholders of AMERICAN approve the Merger Agreement and if the
shareholders of FIRST BANK ratify and confirm the Consolidation Agreement,
subject to receipt of regulatory approval and satisfaction of other conditions,
AMERICAN will combine its business and operations with those of Banc One
Illinois through a statutory merger (the "Merger") of AMERICAN with Banc One
Illinois and First Bank will subsequently combine its business and operations
with those of Bank One Chicago through a merger (the "Consolidation") of First
Bank with and into Bank One Chicago.
Shareholders of American Holding Co.
Shareholders of First Bank of Highland Park
, 1994
Page Two
If the Merger and Consolidation become effective, as described in the
Prospectus and Joint Proxy Statement, shareholders of AMERICAN will become
entitled to receive 6.2700 shares of BANC ONE Common Stock in exchange for each
share of AMERICAN Common Stock held by them and shareholders of FIRST BANK,
other than AMERICAN (or BANC ONE or Banc One Illinois, as successor by merger
to AMERICAN), will become entitled to receive 2.7227 shares of BANC ONE Common
Stock for each share of FIRST BANK Common Stock held by them.
No fractional shares of BANC ONE Common Stock will be issued in the proposed
transactions. In lieu thereof, shareholders of AMERICAN and FIRST BANK with an
entitlement to fractional shares of BANC ONE Common Stock will be entitled to
receive cash equal to the applicable fractional share times the market value of
BANC ONE Common Stock as provided in each of the Merger Agreement and
Consolidation Agreement. Shareholders of AMERICAN and of FIRST BANK are
advised to consult their tax advisors with respect to income tax consequences
of the transaction. Details of the proposed transactions are set forth in the
accompanying Prospectus and Joint Proxy Statement.
The Board of Directors of AMERICAN has unanimously approved the terms of the
Merger Agreement and recommends that all the shareholders of AMERICAN vote to
approve the Merger Agreement. The Board of Directors of FIRST BANK has
unanimously agreed to the terms of the Consolidation Agreement and recommends
that all the shareholders of FIRST BANK vote to ratify and confirm the
Consolidation Agreement. The Boards believe that the Merger and the
Consolidation will benefit the shareholders of AMERICAN and FIRST BANK and the
customers and employees of FIRST BANK.
IN ORDER TO APPROVE THE MERGER AGREEMENT, IT IS NECESSARY THAT THE HOLDERS OF
NOT LESS THAN TWO-THIRDS OF THE OUTSTANDING SHARES OF AMERICAN VOTE
AFFIRMATIVELY IN FAVOR OF THE MERGER AGREEMENT AND IN ORDER TO RATIFY AND
CONFIRM THE CONSOLIDATION AGREEMENT, IT IS NECESSARY THAT THE HOLDERS OF NOT
LESS THAN TWO-THIRDS OF THE OUTSTANDING SHARES OF FIRST BANK BE VOTED TO RATIFY
AND CONFIRM THE CONSOLIDATION AGREEMENT.
Very truly yours,
Sanford E. Takiff
Chairman, American Holding Co.
Chairman, FIRST BANK of Highland Park
Enclosure
PROSPECTUS
952,946 Shares
BANC ONE CORPORATION
Common Stock
AMERICAN HOLDING CO.
PROXY STATEMENT
for
Special Meeting of Shareholders
, 1994
FIRST BANK OF HIGHLAND PARK
PROXY STATEMENT
for
Special Meeting of Shareholders
, 1994
This Prospectus and Joint Proxy Statement (the "Prospectus" or "Prospectus and
Joint Proxy Statement") relates to the proposed merger of American Holding Co.
("AMERICAN") with and into Banc One Illinois Corporation ("Banc One Illinois"),
a wholly owned subsidiary of BANC ONE CORPORATION ("BANC ONE") and the
subsequent merger of AMERICAN's sole subsidiary, FIRST BANK of Highland Park
("FIRST BANK"), with and into Banc One Illinois' subsidiary, Bank One, Chicago,
National Association ("Bank One Chicago").
If the proposed merger of AMERICAN with and into Banc One Illinois (the
"Merger") is consummated, each outstanding share of AMERICAN Class A Common
Stock, no par value, and AMERICAN Class B Common Stock, no par value (the Class
A and Class B Common Stock, together, the "AMERICAN Common Stock"), will be
converted into shares of BANC ONE Common Stock, no par value ("BANC ONE Common
Stock"), at the rate of 6.2700 shares of BANC ONE Common Stock for each share
of AMERICAN Common Stock. The Merger is subject to the approval of the holders
of not less than two-thirds of the outstanding shares of AMERICAN Common Stock
entitled to vote thereon and to the satisfaction of certain other conditions,
including obtaining various regulatory approvals.
Following the Merger, if the proposed merger of FIRST BANK with and into Bank
One Chicago (the "Consolidation") is consummated, the shares of FIRST BANK
Common Stock, par value $5.00 per share ("FIRST BANK Common Stock"), not owned
by AMERICAN, or Banc One Illinois or BANC ONE as the successors to AMERICAN
("FIRST BANK Common"), will be converted into BANC ONE Common Stock at the rate
of 2.7227 shares of BANC ONE Common Stock for each share of AMERICAN Common
Stock. The Consolidation is subject to approval of the holders of not less
than two-thirds of the outstanding shares of FIRST BANK Common Stock entitled
to vote thereon and to the satisfaction of certain other conditions, including
obtaining various regulatory approvals. AMERICAN owns more than two-thirds
(approximately 94.29%) of the outstanding FIRST BANK Common Stock and,
therefore, the required approval of the FIRST BANK Common Stock is assured.
This Prospectus and Joint Proxy Statement does not cover any resales of BANC
ONE Common Stock received by affiliates of AMERICAN and FIRST BANK upon
consummation of the Merger and Consolidation, respectively, and no person is
authorized to make use of this Prospectus and Joint Proxy Statement in
connection with any such resale.
The outstanding shares of BANC ONE Common Stock are, and the shares of BANC ONE
Common Stock offered hereby will be, listed and traded on the New York Stock
Exchange. The closing price of BANC ONE Common Stock on the New York Stock
Exchange on ,1994 was $ .
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
A Special Meeting of Shareholders of AMERICAN and FIRST BANK will be held at
, on , 1994, to consider a
proposal to approve the Merger Agreement and the Consolidation Agreement,
respectively (as hereinafter defined).
The date of this Prospectus and Joint Proxy Statement is , 1994.
AVAILABLE INFORMATION
BANC ONE is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Reports, proxy and
information statements and other information filed by BANC ONE can be inspected
and copied, at prescribed rates, at the public reference facilities maintained
by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the Commission's Regional Offices located at Northwestern Atrium Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661-2511, and 7 World
Trade Center, Suite 1300, New York, New York 10048. Reports, proxy and
information statements and other information concerning BANC ONE can be
inspected at the offices of the New York Stock Exchange, 20 Broad Street, New
York, New York 10005. This Prospectus does not contain all information set
forth in the Registration Statement and exhibits thereto which BANC ONE has
filed with the Commission under the Securities Act of 1933, as amended (the
"Securities Act"), and to which reference is hereby made.
BANC ONE has filed with the Commission a Registration Statement on Form S-4
(together with any amendments thereto, the "Registration Statement") under the
Securities Act with respect to the BANC ONE Common Stock to be issued pursuant
to the Merger and Consolidation. This Prospectus and Joint Proxy Statement
does not contain all information set forth in the Registration Statement and
exhibits thereto. Such additional information may be inspected and copied as
set forth above. Statements contained in this Prospectus and Joint Proxy
Statement or in any document incorporated into this Prospectus and Joint Proxy
Statement by reference as to the contents of any contract or other document
referred to herein or therein are not necessarily complete, and in each
instance reference is made to the copy of such contract or document filed as an
exhibit to the Registration Statement or such other document, each such
statement being qualified in all respects by such reference.
INCORPORATION BY REFERENCE
THIS PROSPECTUS AND JOINT PROXY STATEMENT INCORPORATES DOCUMENTS BY REFERENCE
WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. COPIES OF ANY SUCH
DOCUMENTS, OTHER THAN EXHIBITS TO SUCH DOCUMENTS WHICH ARE NOT SPECIFICALLY
INCORPORATED BY REFERENCE THEREIN, ARE AVAILABLE WITHOUT CHARGE TO ANY PERSON,
INCLUDING ANY AMERICAN OR FIRST BANK SHAREHOLDER, TO WHOM THIS PROSPECTUS AND
JOINT PROXY STATEMENT IS DELIVERED UPON ORAL OR WRITTEN REQUEST TO WILLIAM C.
LEITER, SENIOR VICE PRESIDENT, BANC ONE CORPORATION, 100 EAST BROAD STREET,
COLUMBUS, OHIO 43271-0251, TELEPHONE NUMBER 614/248-5905. IN ORDER TO ENSURE
TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY
, 1994.
BANC ONE's Annual Report on Form 10-K for the fiscal year ended December 31,
1993, BANC ONE's Quarterly Report on Form 10-Q for the quarters ended March 31,
1994 and June 30, 1994, and BANC ONE's Current Reports on Form 8-K, including
the Form 8-K filed January 28, 1994 and the Form 8-K filed February 17, 1994,
in each case filed with the Commission pursuant to Section 13 of the Exchange
Act, and the description of BANC ONE Common Stock which is contained in BANC
ONE's registration statement filed under Section 12 of the Exchange Act,
including any amendment or report filed for the purpose of updating such
description, are incorporated into this Prospectus and Joint Proxy Statement by
reference.
All documents filed by BANC ONE pursuant to Sections 13(a), 13(c), 14 or 15(d)
of the Exchange Act after the date of this Prospectus and prior to the Special
Meeting of Shareholders of AMERICAN and FIRST BANK shall be deemed to be
incorporated by reference in this Prospectus and Joint Proxy Statement and to
be a part hereof from the respective dates of filing of such documents. Any
statement contained in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus and Joint Proxy Statement to the extent that such statement is
modified or superseded by a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein. Any such statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Prospectus and Joint Proxy Statement.
No person is authorized to give any information or to make any representations
other than those contained in this Prospectus and Joint Proxy Statement and, if
given or made, such information or representation must not be relied upon as
having been authorized by BANC ONE, AMERICAN or FIRST BANK. This Prospectus
and Joint Proxy Statement does not constitute an offer to sell, or a
solicitation of an offer to buy, any securities, or the solicitation of a
proxy, in any jurisdiction to or from any person to whom it is unlawful to make
any such offer or solicitation in such jurisdiction. Neither the delivery of
this Prospectus and Joint Proxy Statement nor any distribution of securities
made hereunder shall, under any circumstances, create an implication that there
has been no change in the affairs of BANC ONE, AMERICAN or FIRST BANK since the
date hereof or that the information herein is correct as of any time subsequent
to such date.
TABLE OF CONTENTS
Page
A. INFORMATION ABOUT THE TRANSACTION . . . . . . . . . . . . . . . . .
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amercian Holding Co. Special Meeting . . . . . . . . . . . . . .
First Bank of Highland Park Special Meeting . . . . . . . . . . .
AMERICAN and FIRST BANK . . . . . . . . . . . . . . . . . . . .
BANC ONE and Banc One Illinois . . . . . . . . . . . . . . . . .
SUMMARY OF THE TRANSACTION . . . . . . . . . . . . . . . . . . . . .
Terms of Merger Agreement and Exchange Rate . . . . . . . . . . .
Terms of Consolidation Agreement
and Consolidation Rate . . . . . . . . . . . . . . . . . . . .
Management After the Merger . . . . . . . . . . . . . . . . . . .
Tax Consequences . . . . . . . . . . . . . . . . . . . . . . . .
Vote Required . . . . . . . . . . . . . . . . . . . . . . . . . .
Rights of Dissenting Shareholders . . . . . . . . . . . . . . . .
Differences in Shareholder Rights . . . . . . . . . . . . . . . .
Regulatory Approvals . . . . . . . . . . . . . . . . . . . . . .
Conditions; Termination . . . . . . . . . . . . . . . . . . . . .
Selected Financial Data . . . . . . . . . . . . . . . . . . . .
Comparative Per Share Data . . . . . . . . . . . . . . . . . . .
THE SPECIAL MEETING OF SHAREHOLDERS OF AMERICAN . . . . . . . . . .
Purpose of the Special Meeting of Shareholders . . . . . . . . .
Record Date and Voting Rights . . . . . . . . . . . . . . . . . .
Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
THE SPECIAL MEETING OF SHAREHOLDERS OF FIRST BANK . . . . . . . . .
Purpose of the Special Meeting of Shareholders . . . . . . . . .
Record Date and Voting Rights . . . . . . . . . . . . . . . . . .
Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
MERGER and CONSOLIDATION . . . . . . . . . . . . . . . . . . . . . .
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operations After the Merger and Consolidation . . . . . . . . . .
Background of Transaction . . . . . . . . . . . . . . . . . . . .
Merger and Consolidation Recommendations
and Reasons for Transactions . . . . . . . . . . . . . . . . .
Conditions to the Merger; Termination . . . . . . . . . . . . .
Conditions to the Consolidation . . . . . . . . . . . . . . . . .
Federal Tax Income Tax Consequences of the Merger . . . . . . . .
Federal Income Tax Consequences of the Consolidation . . . . . .
Tax Consequences -- General . . . . . . . . . . . . . . . . . . .
Conversion of Shares and Exchange of Certificates . . . . . . . .
Fractional Shares . . . . . . . . . . . . . . . . . . . . . . . .
Resales by Affiliates . . . . . . . . . . . . . . . . . . . . . .
Accounting Treatment . . . . . . . . . . . . . . . . . . . . . .
Page
COMPARATIVE RIGHTS OF SHAREHOLDERS . . . . . . . . . . . . . . . . .
Description of BANC ONE Stock . . . . . . . . . . . . . . . . . .
Special Voting Requirements for Certain Transactions . . . . . .
Comparison of BANC ONE Common Stock and
AMERICAN Common Stock . . . . . . . . . . . . . . . . . . . .
Comparison of BANC ONE Common Stock and
FIRST BANK Common Stock . . . . . . . . . . . . . . . . . .
MISCELLANEOUS INFORMATION . . . . . . . . . . . . . . . . . . . . .
Transfer and Exchange Agents . . . . . . . . . . . . . . . . . .
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sources of Information . . . . . . . . . . . . . . . . . . . . .
Registration Statement . . . . . . . . . . . . . . . . . . . . .
Other Matters . . . . . . . . . . . . . . . . . . . . . . . . . .
B. INFORMATION ABOUT BANC ONE CORPORATION . . . . . . . . . . . . . . .
General--Business . . . . . . . . . . . . . . . . . . . . . . . . .
Recent Developments . . . . . . . . . . . . . . . . . . . . . . . .
Market Prices of and Dividends Paid on BANC ONE Common Stock . . . .
Certain Regulatory Matters . . . . . . . . . . . . . . . . . . . . .
Incorporation of Certain Information About BANC ONE
by Reference . . . . . . . . . . . . . . . . . . . . . . . . .
C. INFORMATION ABOUT AMERICAN HOLDING CO. AND FIRST BANK OF HIGHLAND PARK
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends Paid on AMERICAN Common Stock and FIRST BANK Common Stock
Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . .
Financial Statements for AMERICAN . . . . . . . . . . . . . . . .
Financial Statements for FIRST BANK . . . . . . . . . . . . . . . .
D. VOTING AND MANAGEMENT INFORMATION . . . . . . . . . . . . . . . . .
Voting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rights of Dissenting AMERICAN Shareholders . . . . . . . . . . . . .
Rights of Dissenting FIRST BANK Shareholders . . . . . . . . . . . .
Management and Principal Shareholders of BANC ONE . . . . . . . . .
Principal Shareholders of AMERICAN . . . . . . . . . . . . . . . .
Principal Shareholders of FIRST BANK . . . . . . . . . . . . . . . .
EXHIBITS
Exhibit A - Sections 11.65 and 11.70 of the Illinois Business Corporations
Act
Exhibit B Title 12, Section 215a of the United States Code
PROSPECTUS AND JOINT PROXY STATEMENT
AMERICAN HOLDING CO.
and
FIRST BANK OF HIGHLAND PARK
SPECIAL MEETINGS OF SHAREHOLDERS
A. INFORMATION ABOUT THE TRANSACTION
INTRODUCTION
American Holding Co. Special Meeting
This Prospectus and Joint Proxy Statement is furnished in connection with the
Special Meeting of Shareholders of American Holding Co. ("AMERICAN") to be held
on , 1994 for the purpose of approving an Agreement and Plan of
Merger dated February 4, 1994 (the "Merger Agreement"), by and between AMERICAN
and Banc One Illinois Corporation ("Banc One Illinois"), a wholly owned
subsidiary of BANC ONE CORPORATION ("BANC ONE"), a registered multi-bank
holding company headquartered in Columbus, Ohio, and joined in by BANC ONE.
The Merger Agreement provides for the merger of AMERICAN with and into Banc One
Illinois.
First Bank of Highland Park Special Meeting
This Prospectus is also furnished in connection with a Special Meeting of
Shareholders of First Bank of Highland Park ("FIRST BANK") to be held on
, 1994 for the purpose of ratifying and confirming a Bank Merger
Agreement dated as of April 19, 1994 (as amended on August 1, 1994, the
"Consolidation Agreement"), by and between FIRST BANK and Bank One, Chicago,
National Association ("Bank One Chicago"), a wholly owned subsidiary of
Banc One Illinois and an indirect subsidiary of BANC ONE. The Consolidation
Agreement provides for the merger of FIRST BANK with and into Bank One Chicago.
AMERICAN and FIRST BANK
AMERICAN is a registered single bank holding company organized under the laws
of the State of Illinois with its principal office in Glencoe, Illinois.
AMERICAN owns 94.29 percent of the outstanding FIRST BANK Common Stock. At
June 30, 1994, AMERICAN had total consolidated assets of approximately [$ ]
million and total consolidated deposits of approximately $[ ] million. The
principal office of AMERICAN is located at 75 Aspen Lane, Glencoe, Illinois
60022 and its telephone number is 708/432-7800.
FIRST BANK is an FDIC-insured state chartered banking institution, with its
main and sole banking office in Highland Park, Illinois. The main and sole
banking office of FIRST BANK is located at 1835 First Street, Highland Park,
Illinois 60035 and its telephone number is 708/432-7800.
BANC ONE and Banc One Illinois
BANC ONE is a multi-bank holding company incorporated under the laws of the
State of Ohio which as of June 30, 1994 owned all of the capital stock of one
Arizona, one California, six Colorado, seven Illinois, eight Indiana, two
Kentucky, one Oklahoma, one Texas, four Michigan, eighteen Ohio, one Utah,
sixteen West Virginia and fifteen Wisconsin commercial banks. These 81 banks
operate more than 1,300 offices in this thirteen-state area and, at June 30,
1994, BANC ONE, its affiliate banks and its non-bank subsidiaries had total
assets of approximately $84.5 billion and total deposits of approximately $62.1
billion. Banc One Illinois, a direct subsidiary of BANC ONE, is the direct
parent of BANC ONE's commercial banks situated in the State of Illinois. See
"INFORMATION ABOUT BANC ONE CORPORATION," which includes information about
pending acquisitions. The principal office of BANC ONE is located at 100 East
Broad Street, Columbus, Ohio 43271 and its telephone number is 614/248-5944.
SUMMARY OF THE TRANSACTION
Terms of Merger Agreement and Exchange Rate
Upon the Merger becoming effective, each of the outstanding shares of AMERICAN
Common Stock will be converted into 6.2700 shares of BANC ONE Common Stock (the
"Exchange Rate"). Upon the consummation of the Merger, AMERICAN will be merged
into Banc One Illinois and the separate corporate existence of AMERICAN will
cease. Banc One Illinois, as the surviving corporation in the Merger and a
wholly owned subsidiary of BANC ONE, will continue operations under the name
Banc One Illinois Corporation.
Terms of Consolidation Agreement and Consolidation Rate
As a result of and contemporaneously with the Merger, Banc One Illinois will
become the owner of 330,000 of the 350,000 shares of FIRST BANK Common Stock
outstanding and will, provided that shareholders of FIRST BANK approve the
Consolidation Agreement, effect the merger of FIRST BANK with and into Bank One
Chicago (the "Consolidation") pursuant to Federal law, the laws of the State of
Illinois and the Consolidation Agreement . Pursuant to the terms of the
Consolidation Agreement, each of the outstanding shares of FIRST BANK Common
Stock, other than FIRST BANK Common Stock owned by AMERICAN or BANC ONE or Banc
One Illinois as the successor to AMERICAN, will be converted into 2.7227
shares of BANC ONE Common Stock (the "Consolidation Rate").
Management After the Merger
Banc One Illinois will operate with Banc One Illinois' current officers and
employees, with its principal place of business in Springfield, Illinois. Banc
One Illinois' current directors will serve as the directors of the surviving
corporation following the Merger. It is anticipated that following the Merger,
FIRST BANK will merge with Banc One Illinois' subsidiary, Bank One Chicago, and
operate under the name of Bank One, Chicago, National Association (the
"Resulting Bank"). The Resulting Bank will conduct its banking operations at
its present offices and, except for offices which are consolidated, FIRST
BANK's office will become a branch of the Resulting Bank.
The Resulting Bank, as a BANC ONE affiliate after the Consolidation, will
continue to operate under BANC ONE's operating philosophy whereby it will have
autonomy to match its products and services to the needs of its local
communities. BANC ONE bank affiliates have authority to make decisions locally
in "people-related" matters such as lending, personnel, charitable
contributions and other community and related matters, relying upon BANC ONE
and its state holding companies for "paper and computer related" matters such
as assistance in accounting, auditing, loan review, certain legal matters,
investment portfolio management, regulatory compliance, data processing and
other matters which are generally best performed by specialists on a
centralized basis.
Tax Consequences
Consummation of the Merger is conditioned upon receipt by AMERICAN and BANC ONE
of an opinion dated as of the effective date of the Merger from Squire, Sanders
& Dempsey to the effect that no gain or loss will be recognized by AMERICAN's
shareholders for Federal income tax purposes as a result of the exchange of
their AMERICAN Common Stock for BANC ONE Common Stock in the Merger,
disregarding for purposes of the opinion any cash received pursuant to the
Merger in connection with fractional share interests or the assertion of
dissenters' rights. Such opinion will not address the Consolidation, which may
not qualify as a tax-free transaction. The tax consequences of the proposed
transaction to shareholders of AMERICAN and FIRST BANK are summarized under
"MERGER AND CONSOLIDATION--Federal Income Tax Consequences of the Merger" and
- --Federal Income Tax Consequences of the Consolidation."
Vote Required
Holders of not less than two-thirds of the outstanding shares of AMERICAN
Common Stock entitled to vote thereon must vote in favor of the approval of the
Merger Agreement in order for the transaction to be completed. Holders of not
less than two-thirds of the outstanding shares of FIRST BANK Common Stock
entitled to vote thereon must vote in favor of ratification and confirmation of
the Consolidation Agreement in order for the Consolidation to be completed.
The directors and executive officers of AMERICAN, together with their
affiliates, are entitled to vote approximately 83% of the outstanding shares of
AMERICAN Common Stock and each such holder has indicated his or her intent to
vote such shares for approval of the Merger Agreement. The directors and
executive officers of FIRST BANK, together with their affiliates, are entitled
to vote approximately 3% of the outstanding shares of FIRST BANK Common Stock
and each such holder has indicated his or her intent to vote such shares for
ratification and confirmation of the Consolidation Agreement. Additionally,
AMERICAN owns approximately 94% of FIRST BANK Common Stock and will vote such
shares to approve the Consolidation Agreement. It is not necessary for the
shareholders of BANC ONE to approve the merger or consolidation proposals.
However, BANC ONE, as the sole shareholder of Banc One Illinois, has or will
approve the Merger and the Merger Agreement and Banc One Illinois as the sole
shareholder of Bank One Chicago has or will approve the Consolidation and the
Consolidation Agreement. For information concerning voting by shareholders of
AMERICAN or FIRST BANK on the proposed Merger or Consolidation, see "MERGER AND
CONSOLIDATION--General" and "VOTING AND MANAGEMENT INFORMATION--Voting."
Rights of Dissenting Shareholders
Under Illinois law, certain rights are available to an AMERICAN shareholder
whose shares of AMERICAN Common Stock are not voted in favor of the Merger and
who in writing appropriately makes a demand for payment of his or her AMERICAN
Common Stock in the manner provided by Illinois law. Any FIRST BANK
shareholder who votes against the Consolidation or who gives written notice at
or before such meeting that he or she dissents from the Consolidation will be
entitled to receive the value of his or her FIRST BANK Common Stock subject to
and in accordance with Title 12, Section 215a of the United States Code. See
"VOTING AND MANAGEMENT INFORMATION--Rights of Dissenting AMERICAN Shareholders"
and--Rights of Dissenting FIRST BANK Shareholders." It is a condition to BANC
ONE's obligation to consummate the Merger that not more than 10% of the maximum
aggregate total number of shares of BANC ONE Common Stock which could be issued
by BANC ONE in the Merger and Consolidation are to be settled in cash as a
result of fractional share interests or are to be issued or paid to AMERICAN
shareholders who have asserted rights as dissenting shareholders pursuant to
applicable law.
Differences in Shareholder Rights
There are differences between the rights of AMERICAN shareholders and BANC ONE
shareholders. For example, BANC ONE's Articles of Incorporation ("BANC ONE'S
Articles"), unlike AMERICAN's Articles of Incorporation ("AMERICAN'S
Articles"), authorize the issuance of preferred as well as common stock. Under
the Illinois Business Corporation Act of 1983, as amended ("IBCA"), and
AMERICAN's Bylaws, AMERICAN shareholders have the right to cumulate voting
power in the election of directors. BANC ONE shareholders have no such right.
Both Ohio law and BANC ONE's Articles contain "control share acquisition"
provisions which mandate certain procedures and shareholder consents to approve
certain share acquisitions. Neither the IBCA nor AMERICAN's Articles contain
any similar provisions applicable to AMERICAN. The IBCA provides that a
merger, consolidation, sale, lease, exchange or other disposition of all or
substantially all of a corporation's assets may be effected upon the
affirmative vote of two-thirds of a corporation's outstanding shares entitled
to vote. BANC ONE's Articles contain a so-called "fair price" provision which
mandates certain procedures and approvals for a business combination.
AMERICAN's Articles do not contain similar provisions. In addition, Ohio law
contains provisions prohibiting certain business combinations between
corporations and "Interested Stockholders." The IBCA does not contain a
similar provision applicable to AMERICAN. The effect of the supermajority and
fair price provisions contained in BANC ONE's Articles may be to discourage
certain potential business combinations which some shareholders may believe to
be in their best interests and to make more difficult management changes which
might occur if the potential business combination were successful. See
"COMPARATIVE RIGHTS OF SHAREHOLDERS--Comparisons of BANC ONE Common Stock and
AMERICAN Common Stock."
There are differences between the rights of FIRST BANK Shareholders and BANC
ONE shareholders. For example, BANC ONE's Articles, unlike FIRST BANK's
charter ("FIRST BANK's Charter"), authorize the issuance of preferred as well
as common stock. The Illinois Banking Act, as amended ("IBA"), gives FIRST
BANK shareholders preemptive rights to subscribe for proportionate amounts of
any newly issued shares of FIRST BANK Common Stock as well as the right to
cumulate voting power in the election of directors. BANC ONE shareholders have
no such rights. Both Ohio law and BANC ONE's Articles contain "control share
acquisition" provisions which mandate certain procedures and shareholder
consents to approve certain share acquisitions. In addition, under Ohio law,
in evaluating an acquisition proposal, directors of an Ohio corporation such as
BANC ONE are permitted, in determining whether any matter is in the best
interest of the corporation, to take into account a wide range of interests and
considerations. Neither the IBA nor FIRST BANK's charter contain any similar
provisions. BANC ONE's Articles contain a so-called "fair price" provision
which mandates certain procedures and approvals for a business combination.
FIRST BANK's Charter does not contain similar provisions. In addition, Ohio
law contains provisions prohibiting certain business combinations between
corporations and "Interested Stockholders." The IBA does not contain a similar
provision. The effect of the supermajority and fair price provisions contained
in BANC ONE's Articles may be to discourage certain potential business
combinations which some shareholders may believe to be in their best interests
and to make more difficult management changes which might occur if the
potential business combination were successful. See "COMPARATIVE RIGHTS OF
SHAREHOLDERS--Comparisons of BANC ONE Common Stock and FIRST BANK Common Stock."
Regulatory Approvals
In order for the proposed transactions to be completed, approval of BANC ONE's
acquisition of AMERICAN must be obtained from the Board of Governors of the
Federal Reserve System (the "Federal Reserve") and the Illinois Commissioner of
Banks and Trust Companies (the "Illinois Commissioner"). The Consolidation
must also be approved by the Office of the Comptroller of the Currency (the
"OCC"). These approvals have not yet been obtained.
Conditions; Termination
Consummation of the Merger is subject to satisfaction or waiver of various
conditions, including compliance by each party with its respective covenants
and confirmation by each party of its respective representations and
warranties, the absence of any material adverse change in the financial
condition or business of AMERICAN, FIRST BANK or BANC ONE, the fulfillment of
certain earnings tests and other matters. Under certain circumstances
AMERICAN, by action of its Board of Directors, may elect to terminate the
Merger Agreement, whether before or after approval of the Merger by the
shareholders of AMERICAN, by giving written notice of such election to BANC ONE
within two NYSE trading days after the Valuation Period (the ten consecutive
days on which shares of BANC ONE Common Stock are traded on the NYSE ending on
the sixth NYSE trading day immediately prior to the consummation of the
Merger). The Merger Agreement provides that either party may abandon the
Merger if it is not consummated on or before December 31, 1994. See "MERGER
AND CONSOLIDATION--Conditions to the Merger" for a more complete discussion of
the conditions to the Merger. Consummation of the Consolidation is subject to
ratification and confirmation of the Consolidation Agreement by not less than
two-thirds of the outstanding shares of FIRST BANK Common Stock and all of the
outstanding shares of Bank One Chicago Common Stock, consummation of the Merger
and procurement of all required regulatory approvals. See "MERGER AND
CONSOLIDATION--Conditions to the Consolidation" for a more complete discussion
of the conditions to the Consolidation.
Selected Financial Data
The acquisition of AMERICAN will be accounted for as a pooling of interests.
BANC ONE has announced one acquisition and two sales which are not material
individually or in the aggregate, and, are therefore not included in the
accompanying selected financial data. For further discussion on this
acquisition, see "INFORMATION ABOUT BANC ONE CORPORATION."
The following table presents on a historical basis selected unaudited
consolidated financial data for BANC ONE, AMERICAN and FIRST BANK. The
financial data is based on the consolidated financial statements of BANC ONE
incorporated herein by reference and the financial statements of AMERICAN and
FIRST BANK included herein.
<TABLE>
SELECTED FINANCIAL DATA (2)
(thousands, except per share)
(UNAUDITED)
Six months
ended
June 30, Year ended December 31,
--------------------------------------------------------------------------------
1994 1993 1992 1991 1990 1989
---------- ---------- ---------- ---------- ---------- ----------
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Total interest income and other income:
BANC ONE....................$ 1,888,287 $7,226,790 $7,358,393 $6,828,327 $6,151,959 $5,473,099
AMERICAN...................... 9,070 19,657 21,799 22,304 20,274 16,840
FIRST BANK.................... 9,070 19,657 21,799 22,281 20,271 16,840
Income (loss) from continuing operations:
BANC ONE....................$ 315,938 $1,120,589 $ 876,588 $ 664,288 $ 536,066 $ 304,916
AMERICAN...................... 1,210 3,221 3,466 2,195 1,571 1,501
FIRST BANK.................... 1493 3,963 4,261 3,008 2,499 2,434
Income (loss) from continuing operations
per common share:
BANC ONE....................$ 0.81 $ 2.93 $ 2.29 $ 1.82 $ 1.56 $ 0.97 (1)
AMERICAN...................... 8.46 $ 22.52 24.26 $ 15.43 $ 11.04 $ 10.54
FIRST BANK.................... 4.27 $ 11.32 12.17 $ 8.59 $ 7.14 $ 6.97
Historical dividends declared per
common share:
BANC ONE....................$ 0.31 $ 1.07 $ 0.89 $ 0.76 $ 0.69 $ 0.63
AMERICAN...................... 2.50 3 10.00 3 5.00 3 5.00 3
FIRST BANK.................... 4.00 6.00 8.00 6.00 4.00 4.00
Total assets (end of period):
BANC ONE....................$84,544,235 $79,918,561 $76,739,119 $73,840,498 $56,610,126 $48,111,384
AMERICAN...................... 239,726 230,733 254,792 260,360 233,423 195,975
FIRST BANK.................... 236,901 228,780 252,885 258,428 231,408 193,909
Long-term borrowings (end of period):
BANC ONE....................$ 1,741,221 $1,701,662 $1,357,462 $ 943,726 $ 810,197 $ 624,232
AMERICAN...................... 4,800 6,000 6,760 8,260 9,500 9,906
FIRST BANK....................
Total stockholders' equity (end of period):
BANC ONE....................$ 7,266,974 $7,033,638 $6,241,586 $5,559,370 $4,514,653 $3,633,542
AMERICAN...................... 17,974 16,905 13,947 10,523 8,455 6,883
FIRST BANK.................... 21,077 21,062 19,199 17,738 16,831 15,731
</TABLE>
(1) 1989's income from continuing operations per common share was impacted
by a significant increase in Banc One Arizona (former provision for
loan losses.
(2) All BANC ONE per common share amounts are restated to give retroactive
effect to the 10% dividend paid on March 4, 1994 to s
(3) Amounts represent dividends declared on AMERICAN's outstanding shares
of Class A Common Stock. No dividends are declared on
Comparative Per Share Data
Based upon the Exchange Rate and the Consolidation Rate, the following tables
set forth per common share income from continuing operations, dividends, book
value and market value of (i) BANC ONE; (ii) AMERICAN; (iii) FIRST BANK;
(iv) pro forma equivalent of one share of AMERICAN Common Stock based on BANC
ONE Common Stock; and (v) pro forma equivalent of one share of FIRST BANK
Common Stock based on BANC ONE Common Stock.
<TABLE>
(iv)Per Share of (v)Per Share of
AMERICAN Common FIRST BANK
Stock assuming an assuming an
exchange rate of exchange rate of one
one share of AMERI- share of FIRST BANK
CAN Common Stock Common Stock for
for 6.2700 shares for 2.7227 shares
of BANC ONE of BANC ONE
(i) (ii) (iii) Common Stock Common Stock
-------------- -------------- --------------- ------------------ -----------------
BANC FIRST BANC BANC
ONE AMERICAN BANK ONE ONE
-------------- -------------- --------------- ------------------ -----------------
<CAPTION>
<S> <C> <C> <C> <C> <C>
Income from continuing
operations per common share:
December 31, 1989 $ (5) $ 10.54 $ 6.97
December 31, 1990 1.56 11.04 7.14 9.78 4.25
December 31, 1991 1.82 15.43 8.59 11.41 4.96
December 31, 1992 2.29 24.26 12.17 14.36 6.23
December 31, 1993 2.93 22.52 11.32 18.37 7.98
June 30, 1994, 1994 0.81 8.46 4.27 5.08 2.21
Dividends declared per common share:
December 31, 1989 0.63 4.00 3.95 1.72
December 31, 1990 0.69 4.00 4.33 1.88
December 31, 1991 0.76 5.00 6 6.00 4.77 2.07
December 31, 1992 0.89 5.00 6 8.00 5.58 2.42
December 31, 1993 1.07 10.00 6 6.00 6.71 2.91
June 30, 1994 0.31 2.50 6 4.00 1.94 0.84
Book value per common share
as of June 30, 1994 18.29 125.43 60.22 114.68 49.80
Market value per common share
as of February 7, 1994(1) 33.07 (2) (3) (3) 207.35 90.04
Market value per common share
as of October __, 1994(4) (2) (3) (3)
</TABLE>
(1)The business day immediately preceding public announcement of the proposed
merger.
(2)Based on the closing price of BANC ONE Common Stock as reported on the
New York Stock Exchange. The February 7, 1994 price is adjusted for
the 10% stock dividend effective February 10, 1994.
(3)No active trading exists for AMERICAN or FIRST BANK common stock.
(4)A recent business day preceding the date of this Prospectus.
(5)1989's income from continuing operations per common share was impacted
by a significant increase in Banc One Arizona (formerly Valley National)
Corporation's provision for loan losses.
(6)Amounts represent dividends declared on AMERICAN's outstanding shares of
Class A Common Stock. No dividends are declared on AMERICAN's Class B
Common Stock.
THE SPECIAL MEETING OF SHAREHOLDERS OF AMERICAN
This Prospectus and Joint Proxy Statement is being furnished to the
shareholders of AMERICAN in connection with the solicitation of proxies by the
AMERICAN Board for use at AMERICAN's Special Meeting of Shareholders and at any
adjournment or adjournments thereof (the "AMERICAN Special Meeting"). The
AMERICAN Special Meeting will be held on , 1994, at : .m.,
local time at , Highland Park, Illinois.
Purpose of the Special Meeting of Shareholders
At the AMERICAN Special Meeting, the holders of AMERICAN Common Stock will vote
on the approval of the Merger Agreement.
Record Date and Voting Rights
The AMERICAN Board has fixed the close of business on , 1994 as the
record date for determination of shareholders entitled to notice of and to vote
at the Special Meeting. As of the record date, AMERICAN had outstanding and
entitled to vote 26,300 shares of AMERICAN Class A Common Stock and 117,000
shares of AMERICAN Class B Common Stock. Each share of AMERICAN Class A Common
Stock and AMERICAN Class B Common Stock is entitled to one vote, and such
shares vote together as a class. The Merger Agreement must be approved by the
affirmative vote of not less than two-thirds of the outstanding shares of
AMERICAN Common Stock entitled to vote thereon.
Votes, whether in person or by proxy, will be counted and tabulated by
inspectors appointed by AMERICAN. Abstentions and broker non-votes will not be
counted as votes either "for" or "against" any matters coming before the
AMERICAN Special Meeting, nor will such abstentions and broker non-votes be
counted toward determining a quorum. In accordance with Illinois law and
AMERICAN's Articles and Bylaws, such abstentions have the effect of a "no" vote
since state law requires the Merger Agreement to be authorized and approved by
the affirmative vote of not less than two-thirds of the AMERICAN Common Stock
entitled to be voted, rather than two-thirds of those shares actually voting.
Proxies
Proxies for use at the AMERICAN Special Meeting accompany this Prospectus and
Joint Proxy Statement. A shareholder may use a proxy whether or not he or she
intends to attend the AMERICAN Special Meeting in person. The proxy may be
revoked in writing by the person giving it at any time before it is exercised
by notice to the Secretary of AMERICAN, by submitting a later dated proxy or by
attending and voting in person at the AMERICAN Special Meeting. All proxies
validly submitted and not revoked will be voted in the manner specified
therein. IF NO SPECIFICATION IS MADE, THE PROXIES WILL BE VOTED IN FAVOR OF
APPROVAL OF THE MERGER AGREEMENT. The AMERICAN Board is not aware of any other
matters which may be presented for action at the AMERICAN Special Meeting, but
if other matters do properly come before the meeting it is intended that the
shares represented by the accompanying proxy will be voted by the persons named
in the proxy in accordance with their best judgment.
Solicitation of proxies will be made in person, by mail or by telephone or
telegraph by present and former directors, officers and employees of AMERICAN
and FIRST BANK for which no additional compensation will be paid. AMERICAN
will bear the cost of solicitation of proxies from its shareholders and may
reimburse brokers and others for their expenses in forwarding solicitation
material to beneficial owners of its voting stock.
AMERICAN held its 1994 Annual Meeting of Shareholders on February 15, 1994.
THE SPECIAL MEETING OF SHAREHOLDERS OF FIRST BANK
This Prospectus and Joint Proxy Statement is being furnished to the
shareholders of FIRST BANK in connection with the solicitation of proxies by
the FIRST BANK Board for use at FIRST BANK's Special Meeting of Shareholders
and at any adjournment or adjournments thereof (the "FIRST BANK Special
Meeting"). The FIRST BANK Special Meeting will be held on , 1994,
at : .m., local time at , Illinois.
Purpose of the Special Meeting of Shareholders
At the FIRST BANK Special Meeting, the holders of FIRST BANK Common Stock will
vote on the ratification and confirmation of the Consolidation Agreement.
Record Date and Voting Rights
The FIRST BANK Board has fixed the close of business on , 1994 as
the record date for determination of shareholders entitled to notice of and to
vote at the Special Meeting. As of the record date, FIRST BANK had outstanding
and entitled to vote 350,000 shares of FIRST BANK Common Stock. Each share of
FIRST BANK Common Stock is entitled to one vote. The Consolidation Agreement
must be approved by the vote of not less than two-thirds of the outstanding
shares of FIRST BANK Common Stock entitled to vote thereon.
Votes, whether in person or by proxy, will be counted and tabulated by
inspectors appointed by FIRST BANK. Abstentions and broker non-votes will not
be counted as votes either "for" or "against" any matters coming before the
FIRST BANK Special Meeting, nor will such abstentions and broker non-votes be
counted toward determining a quorum. In accordance with Illinois and Federal
law, such abstentions have the effect of a "no" vote since Illinois and Federal
law require the Consolidation Agreement to be ratified and confirmed by the
affirmative vote of not less than two-thirds of the FIRST BANK Common Stock
entitled to be voted, rather than two-thirds of those shares actually voting.
Proxies
Proxies for use at the FIRST BANK Special Meeting accompany this Prospectus and
Joint Proxy Statement. A shareholder may use a proxy whether or not he or she
intends to attend the FIRST BANK Special Meeting in person. The proxy may be
revoked in writing by the person giving it at any time before it is exercised
by notice to the Secretary of FIRST BANK, by submitting a later dated proxy or
by attending and voting in person at the FIRST BANK Special Meeting. All
proxies validly submitted and not revoked will be voted in the manner specified
therein. IF NO SPECIFICATION IS MADE, THE PROXIES WILL BE VOTED IN FAVOR OF
RATIFICATION AND CONFIRMATION OF THE CONSOLIDATION AGREEMENT. The FIRST BANK
Board is not aware of any other matters which may be presented for action at
the FIRST BANK Special Meeting, but if other matters do properly come before
the meeting it is intended that the shares represented by the accompanying
proxy will be voted by the persons named in the proxy in accordance with their
best judgment.
Solicitation of proxies will be made in person, by mail or by telephone or
telegraph by present and former directors, officers and employees of AMERICAN
and FIRST BANK for which no additional compensation will be paid. FIRST BANK
will bear the cost of solicitation of proxies from its shareholders and may
reimburse brokers and others for their expenses in forwarding solicitation
material to beneficial owners of its voting stock.
FIRST BANK held its 1994 Annual Meeting of Shareholders on February 15, 1994.
MERGER AND CONSOLIDATION
The information in this Prospectus and Joint Proxy Statement concerning the
terms of the Merger and Consolidation is a summary only and is qualified in its
entirety by reference to the Merger Agreement and the Consolidation Agreement,
which agreements are incorporated by reference herein.
General
The Merger Agreement provides for the Merger of AMERICAN with and into Banc One
Illinois. As a result of the Merger, FIRST BANK will become a subsidiary of
BANC ONE and Banc One Illinois. Upon the effectiveness of the Merger (the
"Effective Time") each of the outstanding shares of AMERICAN Common Stock will
be converted into 6.2700 shares of BANC ONE Common Stock (subject to
adjustments in certain circumstances), which shares of BANC ONE Common Stock
will be issued as a result of the Merger.
The Consolidation Agreement provides for the merger of FIRST BANK with and into
Bank One Chicago. Upon the effectiveness of the Consolidation (the
"Consolidation Effective Time") each of the outstanding shares of FIRST BANK
Common Stock not owned by AMERICAN or BANC ONE or Banc One Illinois following
the Merger will be converted into 2.7227 shares of BANC ONE Common Stock
(subject to adjustments in certain circumstances), which shares of BANC ONE
Common Stock will be issued as a result of the Consolidation.
The affirmative vote of holders of not less than two-thirds of the outstanding
shares of AMERICAN Common Stock entitled to vote at the AMERICAN Special
Meeting is required in order to approve the Merger Agreement. See "VOTING AND
MANAGEMENT INFORMATION-Voting." However, it is a condition to BANC ONE's
obligation to consummate the Merger that not more than 10% of the maximum
aggregate total number of shares of BANC ONE Common Stock which could be issued
by BANC ONE in the Merger and Consolidation are to be settled in cash as a
result of fractional share interests or are to be issued to AMERICAN
shareholders who have asserted rights as dissenting shareholders under
applicable law. The affirmative vote of holders of not less than two-thirds of
the outstanding shares of FIRST BANK Common Stock entitled to vote at the FIRST
BANK Special Meeting is required in order to ratify and confirm the
Consolidation Agreement. See "VOTING AND MANAGEMENT INFORMATION-Rights of
Dissenting Shareholders."
Subject to such shareholder approval and the satisfaction of certain conditions
and receipt of all requisite regulatory approvals, in each case as provided for
in the Merger Agreement, the Merger will become effective upon the issuance by
the Secretary of State of the State of Illinois of a certificate of merger with
respect thereto as provided in applicable provisions of the Illinois Business
Corporation Act of 1983, as amended.
The Boards of Directors of BANC ONE, Banc One Illinois and AMERICAN have
approved the Merger Agreement and the Boards of Directors of Bank One Chicago
and FIRST BANK have approved the Consolidation Agreement. BANC ONE, as the
sole shareholder of Banc One Illinois,has or will approve the Merger Agreement
and Banc One Illinois, as the sole shareholder of Bank One Chicago, has or will
approve the Consolidation Agreement. Approval of the Merger Agreement by the
shareholders of BANC ONE is not required for consummation of the Merger or
Consolidation.
Operations After the Merger and Consolidation
Upon the consummation of the Merger, AMERICAN will be merged into Banc One
Illinois and the separate corporate existence of AMERICAN will cease. Banc One
Illinois, as the surviving corporation in the Merger and a wholly owned
subsidiary of BANC ONE, will continue operations under the name "Banc One
Illinois Corporation" and will operate with Banc One Illinois's current
officers and employees, with its principal place of business at Springfield,
Illinois. Banc One Illinois's current directors will serve as the directors of
the surviving corporation following the Merger. It is anticipated that
following the Merger, the Consolidation will occur. Following the
Consolidation, the present directors, officers and employees of Bank One
Chicago will continue in those same capacities for the Resulting Bank. The
Resulting Bank will conduct its banking operations at its present offices and
at the office of FIRST BANK.
The Resulting Bank, as a BANC ONE affiliate after the Consolidation, will
continue to operate under BANC ONE's operating philosophy whereby it will have
autonomy to match its products and services to the needs of its local
communities. Similarly, BANC ONE bank affiliates have authority to make
decisions locally in "people-related" matters such as lending, personnel,
charitable contributions and other community and related matters, relying upon
BANC ONE and its state holding companies for "paper and computer related"
matters such as assistance in accounting, certain legal matters, investment
portfolio management, regulatory compliance, data processing and other matters
which are generally best performed by specialists on a centralized basis.
Background of Transaction
In the fall of 1992, Management of AMERICAN determined that in view of general
conditions in the banking industry and the increased competition in the banking
climate from large banks and financial institutions, it would be desirable to
consider a combination with a larger bank holding company.
After discussions with several knowledgeable persons, a firm was engaged to
identify and make contact with banks and bank holding companies that would be
interested in an acquisition or combination with AMERICAN and FIRST BANK.
Management of AMERICAN had preliminary discussions in late 1992 and early 1993
with several interested parties; however, no definite agreements were reached
and the subject was temporarily placed on hold.
In the fall of 1993, Management of AMERICAN reviewed the growth prospects for
FIRST BANK as a single bank versus as a part of a larger banking organization
and renewed its interest in seeking an acquisition or combination with a larger
banking organization. In the fall of 1993, Management of AMERICAN held
discussions with representatives of several bank holding companies and
financial institutions, including representatives of BANC ONE regarding the
possible acquisition of FIRST BANK and AMERICAN.
In December, 1993, a preliminary draft of a merger agreement was received from
BANC ONE and discussed with the officers of AMERICAN and its legal counsel.
During the last two weeks of December, 1993 and in early January, 1994,
detailed negotiations between representatives of BANC ONE and representatives
of AMERICAN took place resulting in a finalized merger proposal. This proposal
was unanimously approved by the Boards of Directors of AMERICAN and FIRST BANK
on February 3, 1994.
Merger and Consolidation Recommendations and Reasons for Transaction
The terms of the merger and consolidation as outlined in the Merger Agreement
and Consolidation Agreement were the result of arms length negotiations between
AMERICAN, FIRST BANK, BANC ONE ILLINOIS and BANC ONE and their respective
representatives. In the course of reaching the decision to approve the Merger
Agreement and Consolidation Agreement the Boards of Directors of AMERICAN and
FIRST BANK consulted with their legal advisors and members of management, and
without assigning any relative or specific weights, considered numerous
factors, including but not limited to the following:
1. The current condition and growth prospects for FIRST BANK, including
historical and prospective results of operations, financial condition and
capital position.
2. The economic environment and competitive banking climate in Illinois, with
special consideration given to the increased competition from out-of-state
financial institutions.
3. That a business combination with a larger bank holding company, like BANC
ONE, would provide greater short term and long term risk adjusted returns
to FIRST BANK's and AMERICAN's shareholders and would benefit depositors,
loan customers and the community in which FIRST BANK operates.
4. General industry conditions, including increased competition for deposits
and loans from non-regulated financial institutions, and the heightened
competitive environment created by the rapid consolidation occurring in the
banking industry.
5. BANC ONE's proposed exchange ratios in monetary value to FIRST BANK's and
AMERICAN's shareholders, both in absolute terms and as compared to other
similar merger and consolidation transactions.
6. The merger and consolidation transactions offer FIRST BANK's and AMERICAN's
shareholders the prospect of greater liquidity and trading value and better
prospects for future growth than if FIRST BANK and AMERICAN were to remain
independent.
FIRST BANK's and AMERICAN's Boards of Directors believe that the affiliation
with BANC ONE will result in a competitively stronger combined entity with
increased financial and human resources which will lead to enhanced financial
performance and a larger and more geographically diverse banking operation.
As of August 31, 1994, the directors and executive officers of AMERICAN,
together with their affiliates and associates, as a group, were entitled to
vote approximately 119,267 shares of AMERICAN Common Stock representing
approximately 83% of the shares outstanding. These persons will be entitled to
receive the same consideration for their shares as any other AMERICAN
shareholder upon approval of the Merger. The directors and executive officers
of FIRST BANK, together with their affiliates are entitled to vote 3% of the
outstanding shares of FIRST BANK Common Stock. Additionally, American owns
approximately 94% of the outstanding shares of FIRST BANK Common Stock. The
FIRST BANK shares owned by American will not be converted into BANC ONE Common
Stock. AMERICAN believes that all of the directors' and executive officers'
shares will be voted in favor of the Merger and AMERICAN will vote all of the
FIRST BANK shares it owns in favor of the Consolidation. After the Merger,
AMERICAN's directors and executive officers will own less than 1% of the
outstanding shares of BANC ONE Common Stock.
AMERICAN'S AND FIRST BANK'S BOARDS OF DIRECTORS UNANIMOUSLY RECOMMEND THAT THE
MERGER AGREEMENT AND CONSOLIDATION AGREEMENT BE APPROVED BY THE SHAREHOLDERS OF
AMERICAN AND FIRST BANK, RESPECTIVELY.
BANC ONE believes that the affiliation of AMERICAN with BANC ONE and the
acquisition of FIRST BANK thereby will provide BANC ONE with a more meaningful
presence in the Chicago area and an expansion of BANC ONE's customer base and
assets. Such expansion will provide BANC ONE with the opportunity to realize
increased economies of scale while serving new customers with the expertise and
assistance of the capable and experienced staff of FIRST BANK.
Conditions to the Merger; Termination
Consummation of the Merger is subject to satisfaction of a number of
conditions, including:
(1) the receipt of all necessary approvals of the transactions contemplated by
the Merger Agreement by governmental agencies and authorities, including
the Federal Reserve and the Illinois Commissioner, and each of such
approvals shall remain in full force and effect at the Effective Time;
(2) there being no change in the consolidated financial condition, aggregate
net assets, shareholders' equity, business or operating results of
AMERICAN and FIRST BANK, taken as a whole, or BANC ONE and its
subsidiaries, taken as a whole, from September 30, 1993 to the Effective
Time, that has had a material adverse effect;
(3) compliance by AMERICAN, BANC ONE and Banc One Illinois with their
respective covenants and confirmation of their respective representations
and warranties as set forth in the Merger Agreement, including the
agreement of AMERICAN that, except with the approval of BANC ONE or as
otherwise permitted by the Merger Agreement, it will not
(a) from January 1, 1994 to the Effective Time, pay any cash dividends on
American Class B Common or more than $1.25 per share per quarter on
American Class A Common Stock;
(b) effect any changes in connection with its equity capitalization; or
(c) conduct its banking operations other than in the ordinary course of
business;
(4) approval of the Merger Agreement and the Merger by the requisite vote of
shareholders of AMERICAN Common Stock and ratification and confirmation of
the Consolidation Agreement and the Consolidation by the requisite vote of
shareholders of FIRST BANK (see "MERGER AND CONSOLIDATION--General, and
"VOTING AND MANAGEMENT INFORMATION--Voting");
(5) receipt by AMERICAN and BANC ONE of the opinion relative to the Federal
income tax consequences of the Merger referred to under the caption
"MERGER AND CONSOLIDATION--Federal Income Tax Consequences of the Merger";
(6) receipt by BANC ONE of an opinion from AMERICAN's counsel and receipt by
AMERICAN of an opinion from counsel for BANC ONE and Banc One Illinois,
which opinions are to be in the general form of those annexed to the
Merger Agreement;
(7) satisfaction by BANC ONE and AMERICAN of the respective earnings tests set
forth in the Merger Agreement or as otherwise agreed between the parties;
(8) the aggregate of the fractional share interests of BANC ONE Common Stock
to be paid to former holders of AMERICAN Common Stock in cash in the
exchange (see "MERGER AND CONSOLIDATION--Fractional Shares") and the
shares of BANC ONE Common Stock to which holders of AMERICAN Common Stock
would have been entitled as of the consummation of the Merger, but who
have taken steps to perfect their rights as dissenting shareholders
pursuant to applicable law, shall not be more than 10% of the maximum
aggregate number of shares of BANC ONE Common Stock which could be issued
as a result of the Merger and Consolidation;
(9) the shares of BANC ONE Common Stock to be issued in exchange for AMERICAN
Common Stock and FIRST BANK Common Stock shall have been approved for
listing on the New York Stock Exchange ("NYSE");
(10) receipt by BANC ONE of the written opinion of Coopers & Lybrand,
independent certified public accountants, that the transaction
contemplated by the Merger Agreement may be properly accounted for as a
pooling-of-interests;
(11) the total number of shares of AMERICAN Common Stock issued and outstanding
shall not be more than 143,300 shares and there shall be no options,
warrants or commitments of any kind related to AMERICAN's capital stock;
(12) FIRST BANK's capital stock shall consist solely of 350,000 shares of FIRST
BANK Common Stock, not fewer than 330,000 of which shall be owned by
AMERICAN and there shall be no options, warrants or commitments of any
kind related to FIRST BANK's capital stock; and
(13) the holders of all credit agreements on which AMERICAN or FIRST BANK is
the maker, issuer or guarantor and which contain provisions which make the
acquisition of AMERICAN by or its merger with or into another entity a
condition of default or acceleration, which default or acceleration would
have a material adverse effect, shall have provided BANC ONE with a
written waiver of all such provisions.
Any of the provisions of the Merger Agreement, including the foregoing
conditions, may be waived at any time by the party which is entitled to the
benefits thereof. However, after the shareholders of AMERICAN have approved
the Merger Agreement, AMERICAN may only amend the Merger Agreement if, in the
opinion of AMERICAN's Board of Directors, such amendment will not have a
material adverse effect on the benefits intended under the Merger Agreement for
the shareholders of AMERICAN and will not require resolicitation of any proxies
from such shareholders.
The Merger Agreement may be terminated at any time prior to the Effective Time
of the Merger, whether before or after approval by the shareholders of
AMERICAN, by written notice from BANC ONE to AMERICAN, or from AMERICAN to BANC
ONE, as the case may be, upon the occurrence of any of the following: (i) if
any material condition to either party's obligations under the Merger Agreement
is not substantially satisfied or waived at the time or times contemplated
thereby (each party's right to terminate under this clause (i) shall relate
only to conditions to that party's obligations); (ii) in the event of a
material breach by a party of any representation, warranty, condition or
agreement contained in the Merger Agreement that is not cured within 30 days of
the time that notice of such breach is received by such party from the other
party; or (iii) if the Merger shall not have been consummated on or before
December 31, 1994. The Merger Agreement also may be terminated, and the Merger
thereby abandoned, by the mutual consent of the Boards of Directors of
AMERICAN, BANC ONE and Banc One Illinois at any time prior to the effective
date of the Merger.
AMERICAN, by action of its Board of Directors, may elect to terminate the
Merger Agreement, whether before or after approval of the Merger by the
shareholders of AMERICAN, by giving written notice of such election to BANC ONE
within two NYSE trading days after the Valuation Period (the ten consecutive
days on which shares of BANC ONE Common Stock are traded on the NYSE ending on
the sixth NYSE trading day immediately prior to the consummation of the Merger)
provided that the average price of BANC ONE Common Stock during the Valuation
Period is less than $29.55 per share.
Additionally, AMERICAN, by action of its Board of Directors, may elect to
terminate the Merger Agreement, whether before or after approval of the Merger
by the shareholders of AMERICAN, by giving written notice of such election to
BANC ONE within two NYSE trading days after the Valuation Period provided that
(i) the average price of BANC ONE Common Stock during the Valuation Period is
less than $30.45 per share and (ii) the number obtained by dividing (A) the
average price per share of BANC ONE Common Stock during the Valuation Period by
(B) $33.253 (the closing trade price of BANC ONE Common Stock as reported in
The Wall Street Journal for NYSE Composite Transactions on January 26, 1994,
after giving effect to the 10% common stock dividend paid to holders of BANC
ONE Common Stock on March 4, 1994, is less than (iii) the number obtained by
dividing (A) the weighted average closing prices of the common stock of certain
specified bank holding companies as reported in The Wall Street Journal for
NYSE Composite Transactions for the Valuation Period, by (B) $46.64 (the
average closing prices of the common stock of the bank holding companies in
question as reported in The Wall Street Journal for NYSE Composite Transactions
for January 26, 1994).
If the Merger is not consummated other than by reason of a willful breach of
any party to the Merger Agreement, AMERICAN, BANC ONE and Banc One Illinois
will each pay all of its own expenses incurred incident to such transaction,
except for printing expenses which will be paid by BANC ONE.
Conditions to the Consolidation
Consummation of the Consolidation is subject to certain conditions including
(but not limited to) the following significant conditions:
(1) approval of the Consolidation by the OCC;
(2) ratification and confirmation of the Consolidation Agreement by the
requisite vote of FIRST BANK shareholders and the Bank One Chicago
shareholder, Banc One Illinois (see "MERGER AND CONSOLIDATION--General"
and "Voting by FIRST BANK Shareholders"); and
(3) Consummation of the Merger.
As a result of the consolidation being conditioned upon consummation of the
Merger, the conditions of the Merger could be viewed as indirect conditions of
the Consolidation.
The Consolidation Agreement may be amended at any time by agreement between
Bank One Chicago and FIRST BANK. The Consolidation may be terminated at any
time by FIRST BANK and Bank One Chicago and by either bank if the Merger
Agreement is terminated.
Federal Income Tax Consequences of the Merger
The following is a summary of certain material U.S. Federal income tax
consequences of the Merger, including certain consequences to holders of
AMERICAN Common Stock who are citizens or residents of the United States and
who hold their shares as capital assets. It does not discuss all tax
consequences that may be relevant to AMERICAN shareholders subject to special
Federal income tax treatment (such as insurance companies, dealers in
securities, certain retirement plans, financial institutions, tax exempt
organizations or foreign persons) or to AMERICAN shareholders who acquired
their shares of AMERICAN Common Stock pursuant to the exercise of employee
stock options or otherwise as compensation. The summary does not address the
state, local or foreign tax consequences of the Merger, if any.
Pursuant to the terms of the Merger Agreement, AMERICAN and BANC ONE will
receive the opinion of Squire, Sanders & Dempsey, date as of the Effective
Date, to the effect that, based upon the Internal Revenue Code of 1986, as
amended (the "Internal Revenue Code"), the regulations thereunder, and rulings
issued by the Internal Revenue Service in transactions similar to those
contemplated by the Merger Agreement and assuming the Merger occurs in
accordance with the Merger Agreement and conditioned on the accuracy of certain
representations made by AMERICAN and BANC ONE, for Federal income tax purposes:
(1) The Merger will constitute a reorganization within the meaning of Section
368(a)(1)(A) and Section 368(a)(2)(D) of the Internal Revenue Code;
(2) No gain or loss will be recognized by BANC ONE or AMERICAN as a
consequence of the transactions contemplated by the Merger Agreement;
(3) No gain or loss will be recognized to the shareholders of AMERICAN on the
exchange of their shares of AMERICAN Common Stock, except as described
below with respect to cash received pursuant to the exercise of statutory
dissenters' rights or for fractional share interests;
(4) The Federal income tax basis of the BANC ONE Common Stock (including
fractional share interests) received by holders of AMERICAN Common Stock
will be the same as the Federal income tax basis of the AMERICAN Common
Stock surrendered in exchange therefor; and
(5) The holding period of the BANC ONE Common Stock received by a holder of
AMERICAN Common Stock will include the period for which the AMERICAN
Common Stock exchanged therefor was held, provided the exchanged AMERICAN
Common Stock was held as a capital asset by such holder on the date of the
exchange.
An AMERICAN shareholder who receives cash in lieu of a fractional share
interest in BANC ONE Common Stock will be treated as having received the cash
in redemption of the fractional share interest. The receipt of cash in lieu of
a fractional share interest should generally result in capital gain or loss to
the holder equal to the difference between the amount of cash received and the
portion of the holder's Federal income tax basis in the AMERICAN Common Stock
allocable to the fractional share interest. Such capital gain or loss will be
long-term capital gain or loss if the holder's holding period for the BANC ONE
Common Stock received, determined as set forth above, is longer than one year.
A dissenting shareholder who receives cash in exchange for shares of AMERICAN
Common Stock will recognize capital gain or loss equal to the difference
between the amount of cash received and the holder's Federal income tax basis
in the shares. Such capital gain or loss will be long-term capital gain or
loss if the holder has held the shares for more than one year as of the
Effective Time of the Merger.
Federal Income Tax Consequences of the Consolidation
A tax ruling from the Internal Revenue Service with respect to the tax
consequences of the Consolidation has not been requested. The exchange by
FIRST BANK's minority shareholders of their shares of FIRST BANK Common Stock
for shares of BANC One Common Stock will result in a taxable event to such
shareholders. The exchange of FIRST BANK Common Stock for shares of BANC ONE
Common Stock by the minority shareholders of FIRST BANK pursuant to the
Consolidation Agreement will require such shareholders to recognize gain or
loss equal to the difference of the tax basis of their shares of FIRST BANK
Common Stock and the fair market value of the BANC ONE Common Stock they
receive pursuant to the Consolidation. FIRST BANK's minority shareholders
should consult their tax advisors to determine the impact of the Consolidation
on their individual taxes.
Tax Consequences -- General
THE INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL INFORMATION
ONLY AND IS BASED ON THE INTERNAL REVENUE CODE (AND AUTHORITIES THEREUNDER) AS
IN EFFECT ON THE DATE OF THIS PROSPECTUS AND PROXY STATEMENT, WITHOUT
CONSIDERATION OF THE PARTICULAR FACTS OR CIRCUMSTANCES OF ANY SHAREHOLDER.
SHAREHOLDERS ARE URGED TO CONSULT WITH THEIR OWN TAX ADVISORS WITH RESPECT TO
THE FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER IN THEIR PARTICULAR
SITUATIONS, AS WELL AS CONSEQUENCES UNDER ANY APPLICABLE STATE, LOCAL OR
FOREIGN TAX LAWS.
Conversion of Shares and Exchange of Certificates
Upon consummation of the Merger, the outstanding shares of AMERICAN Common
Stock and FIRST BANK Common Stock will be converted into shares of BANC ONE
Common Stock at the Exchange Rate and Consolidation Rate, respectively. Except
in the event that AMERICAN, FIRST BANK or BANC ONE shall declare a stock
dividend or distribution upon or subdivide, split up, reclassify or combine
their respective Common Stock or declare a dividend, or make a distribution, on
their respective Common Stock in any security convertible into such Common
Stock prior to the time the Merger becomes effective, no further adjustments
will be made in the Exchange Rate or the Consolidation Rate. However, in the
event of such a transaction, appropriate adjustment will be made in the
Exchange Rate and Consolidation Rate.
As soon as practicable after the Merger and Consolidation becomes effective,
instructions and forms will be furnished to the shareholders of AMERICAN for
use in exchanging their AMERICAN and FIRST BANK share certificates for
certificates of BANC ONE Common Stock. If any certificate for shares of BANC
ONE Common Stock is to be issued in a name other than that in which the
certificate for shares of AMERICAN Common Stock or FIRST BANK Common Stock
surrendered for exchange is registered, the certificate so surrendered must be
properly endorsed or otherwise be in proper form for transfer and the person
requesting such exchange must pay to BANC ONE or its transfer agent any
applicable transfer or other taxes required by reason of the issuance of the
certificate.
Until so surrendered, certificates formerly representing shares of AMERICAN
Common Stock and FIRST BANK Common Stock will be deemed for all purposes to
evidence ownership of the number of shares of BANC ONE Common Stock into which
such shares have been converted. Dividends and other distributions, if any,
that become payable on BANC ONE Common Stock pending exchange of certificates
representing shares of AMERICAN Common Stock and FIRST BANK Common Stock will
be retained by BANC ONE until surrender of such certificates, at which time
such dividends and distributions will be paid, without interest. In addition,
after the Effective Time the holders of certificates formerly representing
shares of AMERICAN Common Stock and FIRST BANK Common Stock shall cease to have
rights with respect to such shares (except such rights, if any, as holders of
certificates representing AMERICAN Common Stock or FIRST BANK Common Stock may
have as dissenting shareholders), and, except as aforesaid, their sole rights
shall be to exchange such certificates for shares of BANC ONE Common Stock in
accordance with the Merger Agreement and Consolidation Agreement.
Fractional Shares
No fractional shares of BANC ONE Common Stock will be exchanged for shares of
AMERICAN Common Stock or FIRST BANK Common Stock. In lieu thereof, each
shareholder of AMERICAN and FIRST BANK having a fractional interest resulting
from the exchange of AMERICAN Common Stock and FIRST BANK Common Stock for BANC
ONE Common Stock will be paid by BANC ONE an amount in cash equal to the value
of such fractional interest based upon the average of the closing prices of
BANC ONE Common Stock on the NYSE during the Valuation Period as reported in
The Wall Street Journal for NYSE Composite Transactions.
Resales by Affiliates
The shares of BANC ONE Common Stock issuable to AMERICAN and FIRST BANK
shareholders upon consummation of the Merger and Consolidation, respectively,
have been registered under the Securities Act, but such registration does not
cover resales by any person who, directly or indirectly, controls, or is
controlled by, or is under common control with AMERICAN or FIRST BANK at the
time the Merger Agreement and Consolidation Agreement are submitted for
approval by a vote of the AMERICAN and FIRST BANK shareholders ("Affiliates").
BANC ONE Common Stock received and beneficially owned by those AMERICAN and
FIRST BANK shareholders who are deemed to be Affiliates may be resold without
registration as provided for by Rule 145 under the Securities Act, or as
otherwise permitted. Each Affiliate who desires to resell the BANC ONE Common
Stock received in the Merger must sell such BANC ONE Common Stock either
(i) pursuant to an effective registration statement under the Securities Act,
(ii) in accordance with the applicable provisions of Rule 145 under the
Securities Act or (iii) in a transaction which, in the opinion of counsel for
such Affiliate or as described in a "no-action" or interpretive letter from the
Staff of the Commission, in each case reasonably satisfactory in form and
substance to BANC ONE, states that such resale is exempt from the registration
requirements of the Securities Act.
Rule 145(d) requires that persons deemed to be Affiliates resell their BANC ONE
Common Stock pursuant to certain of the requirements of Rule 144 under the
Securities Act if such BANC ONE Common Stock is sold within the first two years
after the receipt thereof. After two years, if such person is not an affiliate
of BANC ONE and BANC ONE is current in the filing of its periodic securities
law reports, a former Affiliate of AMERICAN or FIRST BANK may freely resell the
BANC ONE Common Stock received in the Merger without limitation. After three
years from the issuance of the BANC ONE Common Stock, if such person is not an
affiliate of BANC ONE at the time of sale or for at least three months prior to
such sale, such person may freely resell such BANC ONE Common Stock, without
limitation, regardless of the status of BANC ONE's periodic securities law
reports.
AMERICAN has agreed to use reasonable best efforts to cause each person who is
at the Effective Time or was, at the time of the FIRST BANK Special Meeting, an
Affiliate to execute and deliver to BANC ONE a written undertaking to the
effect that no sale will be made of any shares of BANC ONE Common Stock
received in the Merger or Consolidation by an Affiliate of AMERICAN or FIRST
BANK except (i) in accordance with the Securities Act and (ii) if, as it
expects to do, BANC ONE utilizes pooling-of-interests accounting in accounting
for the Merger, until such time as BANC ONE shall first publish the financial
results of at least 30 days of post-merger combined operations, provided that
BANC ONE shall publish such results not later than five months from the
Effective Time. The certificates of BANC ONE Common Stock issued to Affiliates
of AMERICAN and FIRST BANK in the Merger or Consolidation may contain an
appropriate restrictive legend, and appropriate stop transfer orders may be
given to the transfer agent for such certificates.
Accounting Treatment
BANC ONE expects to account for the acquisition of FIRST BANK as a pooling of
interests. BANC ONE does not expect to account for the acquisition of the
minority shares of FIRST BANK Common Stock not owned by AMERICAN as a pooling
of interests.
COMPARATIVE RIGHTS OF SHAREHOLDERS
Description of BANC ONE Stock
General. The authorized capital stock of BANC ONE consists of 600,000,000
shares of BANC ONE Common Stock and 35,000,000 shares of Preferred Stock,
without par value ("Preferred Stock"), divided into 10,000,000 shares of Class
A Preferred Stock, 1,000,000 shares of Class B Convertible Preferred Stock
("Class B Preferred Stock") and 24,000,000 shares of Class C Preferred Stock of
which the $3.50 Cumulative Convertible Preferred Stock constitutes a series
("Class C Preferred Stock"). As of June 30, 1994, there were issued and
outstanding 4,998,000 shares of Class C Preferred Stock and 382,900,000 shares
of BANC ONE Common Stock.
The following summary of the terms of BANC ONE's capital stock does not purport
to be complete and is qualified in its entirety by reference to the applicable
provisions of the Ohio General Corporation Law and BANC ONE's Articles.
Common Stock. Holders of BANC ONE Common Stock are entitled to receive
dividends out of funds legally available therefor as and if declared by the
Board of Directors, provided that, so long as any shares of Preferred Stock are
outstanding, no dividends (other than dividends payable in BANC ONE Common
Stock) or other distributions (including redemptions and purchases) may be made
with respect to the BANC ONE Common Stock unless full cumulative dividends on
the shares of Preferred Stock have been paid.
Holders of shares of BANC ONE Common Stock are entitled to one vote for each
share for the election of directors and on all other matters. Holders of
BANC ONE Common Stock vote together as a class with holders of Class A
Preferred Stock and Class B Preferred Stock. Generally, holders of Class C
Preferred Stock have no voting rights.
The issued and outstanding shares of BANC ONE Common Stock are fully paid and
nonassessable. The holders of BANC ONE Common Stock are not entitled to
preemptive rights or conversion or redemption rights. The BANC ONE Common
Stock does not have cumulative voting rights in the election of directors.
In the event of the voluntary or involuntary dissolution, liquidation or
winding up of BANC ONE, holders of BANC ONE Common Stock will be entitled to
receive, pro rata, after satisfaction in full of the prior rights of creditors
(including holders of BANC ONE's indebtedness) and holders of Preferred Stock,
all the remaining assets of BANC ONE available for distribution.
Preferred Stock. The Board of Directors has the authority to issue each class
of Preferred Stock in one or more series and to fix the designations, number of
shares, dividends, redemption rights, sinking fund requirements, liquidation
prices, conversion rights and other rights, qualifications, limitations or
restrictions thereon (except voting rights) as the Board of Directors may from
time to time be permitted by law to fix or change.
Generally holders of shares of Class C Preferred Stock have no voting rights.
The approval of a majority of the outstanding shares of Class C Preferred Stock
voting together as a class is required in order to amend BANC ONE's Articles to
affect adversely the rights of the holders of the Class C Preferred Stock or to
take any action that would result in the creation of or an increase in the
number of authorized shares senior or superior with respect to dividends or
upon liquidation to the Class C Preferred Stock. Holders of Class C Preferred
Stock also have the right to elect two additional directors during any period
in which dividends on Class C Preferred Stock are cumulatively in arrears in
the amount of six or more full quarterly dividends.
Currently, there are outstanding shares of Class C Preferred Stock. Holders of
Class C Preferred Stock are entitled to receive out of funds legally available
therefor cumulative cash dividends at the annual rate of $3.50 per share
payable quarterly on the last day of March, June, September and December in
each year.
In the event that full cumulative dividends on outstanding shares of Class C
Preferred Stock have not been paid, no dividends may be declared or paid on,
and no amounts may be set aside or applied to the redemption or purchase of,
any shares of BANC ONE Common Stock or any other shares of capital stock of
BANC ONE ranking junior to shares of Class C Preferred Stock.
Upon the voluntary or involuntary dissolution, liquidation or winding up of
BANC ONE, holders of Class C Preferred Stock are entitled to receive a
preferential distribution of $50 per share plus accrued and unpaid dividends,
if any.
At the option of the holder of any shares of Class C Preferred Stock, such
shares may be converted into shares of BANC ONE Common Stock at the conversion
rate then in effect. The present conversion rate is 1.75362 shares of BANC ONE
Common Stock for each share of Class C Preferred Stock and is subject to
adjustment for stock dividends, subdivisions, splits and combinations and any
distribution of rights or warrants to purchase BANC ONE Common Stock at a price
per share less than the BANC ONE Common Stock's then-current market value.
The issued shares of Class C Preferred Stock may be redeemed, in whole or in
part, by BANC ONE at its election at any time after April 15, 1995, at a
redemption price of $52.10 per share during the period from April 15, 1995, to
but not including March 31, 1996, and thereafter at the redemption prices
during the 12-month periods beginning on March 31 of the years shown below,
plus accrued and unpaid dividends, if any.
Year Redemption Price
1996 . . . . . . . . . . . . . . . . $51.75
1997 . . . . . . . . . . . . . . . . $51.40
1998 . . . . . . . . . . . . . . . . $51.05
1999 . . . . . . . . . . . . . . . . $50.70
2000 . . . . . . . . . . . . . . . . $50.35
2001 and thereafter . . . . . . . . . $50.00
Special Voting Requirements for Certain Transactions
Article Eleventh of BANC ONE's Articles incorporates, to a large extent, the
provisions of the Ohio control share acquisition statute (Section 1701.831 of
the Ohio Revised Code). Article Eleventh sets forth procedures for obtaining
shareholder consent of "control share acquisitions" subject to the right of the
Board of Directors to screen out proposals that do not meet certain standards
set forth in Article Eleventh. Article Eleventh defines a "control share
acquisition" as any acquisition, directly or indirectly, of shares of BANC ONE
which, when added to all other shares of BANC ONE owned or controlled by the
acquiror, would entitle the acquiror, alone or with others, to exercise or
direct the exercise of voting power in BANC ONE in the election of directors
within any of the following ranges of voting power: (a) one-fifth or more but
less than one-third; (b) one-third or more but less than a majority; and (c) a
majority or more. A bank, broker, nominee, trustee or other person who
acquires shares in the ordinary course of business for the benefit of others in
good faith and not for the purpose of circumventing Article Eleventh shall,
however, be deemed to have voting power only of shares in respect of which such
person would be able to exercise or direct the exercise of votes without
further instruction from others at a meeting of shareholders called under
Article Eleventh. A control share acquisition which meets certain criteria set
forth in Article Eleventh as determined by the Board of Directors must be
presented to a meeting of the shareholders of BANC ONE and approved by the
affirmative vote of both (a) a majority of the voting power represented at the
meeting and (b) a majority of that portion of such voting power excluding any
"interested shares"; that is, those shares held by the acquiring person,
executive officers of BANC ONE and employees of BANC ONE who are also
directors. Article Eleventh may be amended by a vote of 85% of the votes
entitled to be cast by all holders of voting stock.
BANC ONE's Articles also include a "fair price" provision which is designed to
provide reasonable assurances to shareholders that in the event any shareholder
or group of shareholders acquires 20% or more of BANC ONE's voting stock (the
"Acquiror") and then seeks to acquire all or part of the remaining voting stock
through a merger or other transaction which would force a change or termination
of the other shareholders' ownership interests (a "Business Combination"), such
other shareholders must receive consideration at least equivalent to that paid
by the Acquiror in acquiring its 20% stock interest, unless the Business
Combination is approved either (i) by a majority of directors who are unrelated
to the Acquiror or (ii) by the affirmative vote of 75% of all the votes
entitled to be cast by all holders of voting stock and 67% of the votes
entitled to be cast by all holders of voting stock held by shareholders other
than the Acquiror ("Special Shareholder Vote").
This provision operates by requiring that after an Acquiror emerges, any
Business Combination which has the effect of requiring shareholders to
surrender their shares must satisfy one of the following conditions:
(a) Fair Consideration to Shareholders. The terms of the Business
Combination must provide for payment of consideration which is at
least equivalent to the highest price paid to other shareholders by
the Acquiror in acquiring its 20% stock position and must be approved
by shareholders as otherwise required by applicable law; or
(b) Unrelated Director Approval. The Business Combination must be
approved as fair to shareholders by a majority of the directors who
are not affiliated with the Acquiror and who were directors before the
Acquiror acquired its 20% stock position or who were nominated or
elected to succeed such directors by the other unaffiliated directors
("Unrelated Directors") and must be approved by shareholders as
otherwise required by applicable law; or
(c) Special Shareholder Vote. The Business Combination must be approved
by a Special Shareholder Vote.
The Article containing this provision may be amended only by a vote of 85% of
the votes entitled to be cast by all holders of voting stock, unless the
amendment is approved unanimously by the Unrelated Directors, in which case
only majority shareholder approval would be required.
Chapter 1704 of the Ohio Revised Code (the "Ohio Statute") is similar to the
"fair price" provision contained in BANC ONE's Articles. The Ohio Statute
prohibits an "Issuing Public Corporation" from engaging in a "Chapter 1704
Transaction" with an "Interested Shareholder" for a period of three years
following the date on which the person becomes an "Interested Shareholder"
unless, prior to such date, the directors of the "Issuing Public Corporation"
approve either the "Chapter 1704 Transaction" or the acquisition of shares
pursuant to which such person became an "Interested Shareholder." An "Issuing
Public Corporation" is an Ohio corporation with 50 or more shareholders which
has its principal place of business, principal executive offices or substantial
assets within the State of Ohio. BANC ONE is currently an Issuing Public
Corporation. An "Interested Shareholder" is any person who is the beneficial
owner of a sufficient number of shares to allow such person, directly or
indirectly, alone or with others, including affiliates and associates, to
exercise or direct the exercise of 10% of the voting power of the Issuing
Public Corporation. A "Chapter 1704 Transaction" includes any merger,
consolidation, combination or majority share acquisition between or involving
an Issuing Public Corporation and an Interested Shareholder or an affiliate or
associate of an Interested Shareholder. A Chapter 1704 Transaction also
includes certain transfers of property, dividends and issuance or transfers of
shares, from or by an Issuing Public Corporation or a subsidiary of an Issuing
Public Corporation to, with or for the benefit of an Interested Shareholder or
an affiliate or associate of an Interested Shareholder unless such transaction
is in the ordinary course of business of the Issuing Public Corporation on
terms no more favorable to the Interested Shareholder than those acceptable to
third parties as demonstrated by contemporaneous transactions. Finally,
Chapter 1704 Transactions include certain transactions which (i) increase the
proportionate share ownership of an Interested Shareholder, (ii) result in the
adoption of a plan or proposal for the dissolution, winding up of the affairs
or liquidation of the Issuing Public Corporation if such plan is proposed by or
on behalf of the Interested Shareholder, or (iii) pledge or extend the credit
or financial resources of the Issuing Public Corporation to or for the benefit
of the Interested Shareholder.
After the initial three-year moratorium has expired, an Issuing Public
Corporation may engage in a Chapter 1704 Transaction if (i) the acquisition of
shares pursuant to which the person became an Interested Shareholder received
the prior approval of the board of directors of the Issuing Public Corporation,
(ii) the Chapter 1704 Transaction is approved by the affirmative vote of the
holders of shares representing at least two-thirds of the voting power of the
Issuing Public Corporation and by the holders of at least a majority of voting
shares which are not beneficially owned by an Interested Shareholder or an
affiliate or associate of an Interested Shareholder, or (iii) the Chapter 1704
Transaction meets certain statutory tests designed to ensure that it be
economically fair to all shareholders.
Comparison of BANC ONE Common Stock and AMERICAN Common Stock
The rights of BANC ONE shareholders are governed by BANC ONE's Articles and
Code of Regulations and the applicable provisions of Ohio Law, while the rights
of AMERICAN shareholders are governed by AMERICAN's Articles of Incorporation
("AMERICAN's Articles") and Bylaws and the applicable provisions of the
Illinois Business Corporation Act of 1983, as amended ("IBCA"). If the
shareholders of AMERICAN approve the Merger Agreement and the Merger is
subsequently consummated, holders of AMERICAN Common Stock, other than those
exercising dissenters' rights, will become holders of BANC ONE Common Stock.
The following comparison of the rights of holders of BANC ONE Common Stock and
AMERICAN Common Stock is based on current terms of the governing documents of
the respective companies and on the current provisions of applicable state law.
The rights of holders of AMERICAN Common Stock and holders of BANC ONE Common
Stock are similar in several respects: each shareholder is entitled to one
vote for each share held on all matters submitted to a vote of shareholders,
each shareholder is entitled to receive pro rata any assets distributed to
shareholders upon liquidation, dissolution or winding up of the affairs of the
company (after all creditors have been satisfied and requisite preferential
amounts are paid to the holders of outstanding preferred stock), and
dissenters' rights are available to the shareholders of both AMERICAN and BANC
ONE in the event of certain mergers or other business combinations. (In this
regard, a description of dissenters' rights available to AMERICAN shareholders
and the procedures to be followed to process such rights is provided at "VOTING
AND MANAGEMENT INFORMATION--Rights of Dissenting AMERICAN Shareholders").
Although it is impracticable to note all the differences between Ohio Law and
the IBCA generally and all of the differences between the applicable governing
documents of BANC ONE and AMERICAN, the following is intended to be a summary
of certain significant differences between the rights of holders of BANC ONE
Common Stock and the rights of holders of AMERICAN Common Stock.
Capital Stock. AMERICAN's authorized capital stock consists entirely of
200,000 shares which is divided into two classes, AMERICAN Class A Common Stock
and AMERICAN Class B Common Stock. The AMERICAN Class A Common Stock and
AMERICAN Class B Common Stock shall not exceed 25% and 75%, respectively, of
the authorized total shares of AMERICAN. Each class has equal voting rights
and shares equally from the proceeds of a voluntary or involuntary liquidation
or sale of AMERICAN; however, the AMERICAN Class A Common Stock has precedence
in the declaration of any dividends declared from time to time over the
AMERICAN Class B Common Stock. As of August 31, 1994, AMERICAN's issued and
outstanding capital stock consisted of 26,300 shares of AMERICAN Class A Common
Stock and 117,000 shares of AMERICAN Class B Common Stock. BANC ONE's
authorized capital stock consists of one class of common stock and permits the
issuance of one or more classes of preferred stock.
Cumulative Voting and Preemptive Rights. Under the IBCA and AMERICAN's Bylaws,
with regard to the election of directors, each shareholder has the right to
cumulate the voting power on a share of AMERICAN Common Stock and to give one
nominee for election as a director as many votes as the number of directors to
be elected multiplied by the number of shares such shareholder holds, or to
distribute his votes using the same principle for two or more candidates as
such shareholder sees fit. Cumulative voting may allow minority interests in a
corporate entity to concentrate voting power on one or more candidates and,
thereby, achieve representation on a board which might not be possible without
cumulative voting. Shareholders of BANC ONE Common Stock may not cumulate
voting power in the election of directors. Under the IBCA, American's
shareholders have preemptive rights to subscribe for or purchase any stock or
other securities in proportion to their respective holdings upon the offering
or Sale by American of such securities to others.
Directors. All of the directors of AMERICAN and BANC ONE are elected by the
shareholders each year. To qualify for election to BANC ONE's Board of
Directors, an individual must own a substantial number of shares of BANC ONE's
capital stock, and must not also serve as a director or officer of or in any
other management relationship for any financial institution that is in
competition with BANC ONE or any of its subsidiaries. Neither the IBCA nor
AMERICAN's governing documents impose any similar requirements on AMERICAN
directors.
AMERICAN's board of directors may be removed with or without cause by the
shareholders, provided that if less than the entire board is to be removed, no
director may be removed if the votes cast against his or her removal would be
sufficient to elect him or her if then cumulatively voted at an election of the
entire board of directors. BANC ONE's board of directors may be removed with
or without cause by the shareholders.
Dividends. Under the IBCA, a distribution cannot be made if giving the
distribution effect would cause the corporation to be insolvent or would cause
the net assets of the corporation to be less than zero or less than the maximum
payable at the time of the distribution to shareholders having preferential
rights in liquidation if the corporation were then to be liquidated. Under
Ohio Law, dividends may be paid out of surplus, including both earned surplus
and capital surplus, in cash, property or shares of the corporation, provided
that such dividend payments are not in violation of the rights of any other
class of securities and are not made when the corporation is insolvent or there
is reasonable ground to believe that by such payment it will be rendered
insolvent. The payment of dividends by bank holding companies also is subject
to certain regulatory constraints. Dividends paid by both BANC ONE and
AMERICAN are subject to federal income tax. It is suggested that in connection
with voting on the Merger, shareholders contact their tax advisors to determine
the tax consequences of the Merger to them.
Supermajority and Fair Price Provisions. Neither the IBCA nor AMERICAN's
Articles contain provisions applicable to AMERICAN similar to the provisions of
BANC ONE's Articles relating to control share acquisitions and fair price
provisions for business combinations. BANC ONE's Articles contain provisions
requiring a supermajority vote for certain business combinations. See
"COMPARATIVE RIGHTS OF SHAREHOLDERS--Special Voting Requirements for Certain
Transactions." The IBCA generally requires the affirmative vote of the holders
of two-thirds of the outstanding shares of each class entitled to vote as a
class to approve a merger, consolidation, share exchange or sale, lease,
exchange or other disposition of all or substantially all of AMERICAN's
assets. No vote of AMERICAN shareholders is required to approve a merger or
exchange if (a) AMERICAN is the surviving corporation of the merger or the
acquiring corporation in the exchange, (b) the related plan of merger or
exchange does not amend AMERICAN's Articles, (c) each share of AMERICAN stock
outstanding immediately before the effective date of the merger or exchange is
to be an identical outstanding or treasury share of AMERICAN after the merger
or exchange and (d) the number or shares of AMERICAN to be issued in the merger
or exchange (or to be issuable upon conversion of any convertible instruments
to be issued in the merger or exchange) does not exceed 20% of the voting stock
of AMERICAN outstanding immediately before the merger or exchange.
In addition to being subject to the laws of Illinois and Ohio, respectively,
AMERICAN and BANC ONE, as bank holding companies, are subject to various
provisions of federal law with respect to mergers, consolidations and certain
other corporate transactions.
Evaluation of Tender Offers and Business Combinations. In discharging the
duties of their respective positions, the board of directors, committees of the
board and individual directors and officers of an Illinois corporation may, in
considering the best long term and short term interests of the corporation,
consider the effects of any action (including action which may involve or
relate to a change or potential change in control of the corporation) upon
employees, suppliers and customers of the corporation or its subsidiaries,
communities in which offices or other establishments of the corporation or its
subsidiaries are located, and all other pertinent factors.
Ohio Law includes a provision which permits directors, in determining whether
any matter is in the best interests of the corporation, to take into
consideration the interests of the corporation's employees, suppliers,
creditors and customers, the economy of the state and the nation, community and
societal considerations and the long-term and short-term interests of the
corporation and its shareholders, including the possibility that such interests
may be best served by the continued independence of the corporation.
Amendment of Governing Documents. Under the IBCA, amendments to AMERICAN's
Articles require the affirmative vote of two-thirds of the outstanding shares
of AMERICAN's Common Stock. In limited circumstances, the Board may effect
such amendments by a majority of the entire board. BANC ONE's Articles may be
amended by the affirmative vote of the holders of a majority of the voting
power of BANC One, except that amendments to the "control share acquisition"
and "fair price" provisions require a supermajority vote. See "COMPARATIVE
RIGHTS OF SHAREHOLDERS--Special Voting Requirements for Certain Transactions."
The Code of Regulations of BANC ONE may only be amended by the affirmative vote
of a majority of the voting power represented by the outstanding voting stock
of BANC ONE present in person or by proxy at an annual or special meeting
called for such purpose.
Indemnification; Limitation of Liability. The IBCA provides that a corporation
may indemnify an officer, director, employee or agent against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection with certain
actions, suits or proceedings (other than derivative actions) if such person
acted in good faith and in a manner he or she reasonably believed to be in, or
not opposed to, the corporation's best interests. In the case of any criminal
action or proceeding, it is further required that such person have no
reasonable cause to believe that his or her conduct was unlawful. In the case
of derivative actions, a corporation may indemnify an officer, director,
employee or agent against expenses (including attorney's fees) actually and
reasonably incurred by such person in connection with certain actions or suits
if such person acted in good faith and in a manner he or she reasonably
believed to be in , or not opposed to, the corporation's best interests,
provided that no indemnification shall be made with respect to any claim, issue
or matter as to which such person has bee adjudged to have been liable to the
corporation, unless, and only to the extent that the court in which such action
or suit was brought shall determine upon application that, despite the
adjudication of liability, but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses as
the court shall deem proper.
Under the IBCA, a corporation must indemnify an officer, director, employee or
agent as against expenses (including attorney's fees) actually and reasonably
incurred by him or her when such a person is wholly successful, on the merits
or otherwise, in defense of any proceeding to which he or she was a party. A
corporation may also pay for expenses incurred by such a person in advance of
the final disposition of an action, suit or proceeding when certain criteria
are met. The statutory right to indemnity is not exclusive in Illinois. The
IBCA provides express authority for a corporation to purchase and maintain
insurance against any liability asserted against an officer, director, employee
or agent, whether or not the corporation would have the power to indemnify such
person against liability under the above provisions. The IBCA also provides
that a corporation's articles of incorporation may eliminate or limit the
personal liability of a director to the corporation or its shareholders for
breach of fiduciary duty as a director under certain circumstances. AMERICAN's
Articles do not provide for such limitations of director liability.
Under Ohio law, Ohio corporations are authorized to indemnify directors,
officers and agents within prescribed limits and must indemnify them under
certain circumstances. Ohio law does not provide statutory authorization for a
corporation to indemnify directors and officers for settlements, fines or
judgments in the context of derivative suits. However, it provides that
directors (but not officers) are entitled to mandatory advancement of expenses,
including attorneys' fees, incurred in defending any action, including
derivative actions, brought against the director, provided the director agrees
to cooperate with the corporation concerning the matter and to repay the amount
advanced if it is provided by clear and convincing evidence that this act or
failure to act was one with deliberate intent to cause injury to the
corporation or with reckless regard for the corporation's best interests. Ohio
law does not authorize payment of expenses or judgments to an officer or other
agent after a finding of negligence or misconduct in a derivative suit absent a
court order. Indemnification is required, however, to the extent such person
succeeds on the merits. In all other cases, if a director or officer acted in
good faith and in a manner he reasonably believed to be in (or not opposed to)
the best interests of the corporation, indemnification is discretionary except
as otherwise provided by a corporation's articles, code of regulations or by
contract except with respect to the advancement of expenses of directors. The
statutory right to indemnity is not exclusive in Ohio. Ohio law provides
express authority for Ohio corporations to procure not only insurance policies,
buy also to furnish protection similar to insurance, including trust funds,
letters of credit and self-insurance, or to provide similar protection such as
indemnity against loss of insurance.
Ohio law has codified the traditional business judgment rule. Ohio law
provides that the business judgment presumption of good faith may only be
overcome by clear and convincing evidence, rather than the preponderance of the
evidence standard applicable in most states. Further, Ohio law provides
specific statutory authority for directors to consider, in addition to the
interests of the corporation's shareholders, other factors such as the
interests of the corporation's employees, suppliers, creditors and customers;
the economy of the state and nation; community and societal considerations; the
long-term and short-term interests of the corporation and its shareholders; and
the possibility that these interests may be best served by the continued
independence of the corporation.
Comparison of BANC ONE Common Stock and FIRST BANK Common Stock
The rights of shareholders of BANC ONE are governed by BANC ONE's Articles and
Code of Regulations and the applicable provisions of Ohio Law, while the rights
of the shareholders of FIRST BANK are governed by FIRST BANK's Charter and
Bylaws and the applicable provisions of the Illinois Banking Act, as amended
("IBA"). If the shareholders of FIRST BANK ratify and confirm the
Consolidation Agreement and the Consolidation is subsequently consummated,
holders of FIRST BANK Common Stock, other than those exercising dissenters'
rights, will become holders of BANC ONE Common Stock. The following comparison
of the rights of holders of FIRST BANK Common Stock and BANC ONE Common Stock
is based on current terms of the governing documents of the respective
companies and on the current provisions of applicable state law.
The rights of holders of FIRST BANK Common Stock and holders of BANC ONE Common
Stock are similar in several respects: each shareholders is entitled to one
vote for each share held on all matters submitted to a vote of shareholders,
each shareholder is entitled to receive pro rata any assets distributed to
shareholders upon liquidation, dissolution or winding up of the affairs of the
company (after all creditors have been satisfied and requisite preferential
amounts are paid to the holders of outstanding preferred stock), and
dissenters' rights are available to the shareholders of both FIRST BANK and
BANC ONE in the event of certain mergers or other business combinations.
Although it is impracticable to note all the differences between Ohio law and
the IBA generally and all of the differences between the applicable governing
documents of BANC ONE and FIRST BANK, the following is intended to be a summary
of certain significant differences between the rights of holders of BANC ONE
Common Stock and the rights of holders of FIRST BANK Common Stock.
Capital Stock. FIRST BANK's Charter, unlike BANC ONE's, does not authorize the
issuance of preferred stock. Instead, FIRST BANK's authorized capital stock
consists entirely of 350,000 shares of FIRST BANK Common Stock.
Cumulative Voting. Under the IBA, with regard to the election of directors,
each shareholder has the right to cumulate the voting power on a share of FIRST
BANK Common Stock and to give one nominee for election as a director as many
votes as the number of directors to be elected multiplied by the number of
shares such shareholder holds, or to distribute his votes using the same
principle for two or more candidates as such shareholder sees fit. Cumulative
voting may allow minority interests in a corporate entity to concentrate voting
power on one or more candidates and, thereby, achieve representation on a board
which might not be possible without cumulative voting. Shareholders of BANC
ONE Common Stock may not cumulate voting power in the election of directors.
Directors. All of the directors of FIRST BANK and BANC ONE are elected by the
shareholders annually to one-year terms. Directors of the two companies,
however, must meet somewhat different qualification requirements. To qualify
for election to BANC ONE's Board of Directors, an individual must own a
substantial number of shares of BANC ONE's capital stock, and must not also
serve as a director or officer of or in any other management relationship for
any financial institution that is in competition with BANC ONE or any of its
subsidiaries. Under the IBA, not less than one-half of FIRST BANK's directors
must be domiciled within the state of Illinois and not less than two-thirds of
FIRST BANK's directors must be domiciled within the state of Illinois or, if
outside the state of Illinois, within 100 miles of FIRST BANK's main banking
premises.
FIRST BANK's board of directors may be removed with cause by the shareholders,
provided that if less than the entire board is to be removed, no director may
be removed if the votes cast against his or her removal would be sufficient to
elect him or her if then cumulatively voted at an election of the entire board
of directors. BANC ONE's board of directors may be removed with or without
cause by the shareholders.
Dividends. Under the IBA, the board of directors of a state may declare a
dividend of so much of such bank's net profits as it shall judge expedient, but
each bank before the declaration of a dividend shall carry at least one-tenth
of its net profits since the date of the declaration of the last preceding
dividend, or since the issuance of its charter in the case of its first
dividend, to its surplus until the same shall be equal to its capital. The IBA
further provides that no bank shall withdraw, either in the form of dividends
or otherwise, any portion of its capital, and no dividends shall be paid by a
state bank while it continues its banking business to an amount greater than
its net profits then on hand, deducting first therefrom its losses and bad
debts. Under Ohio Law, dividends may be paid out of surplus, including both
earned surplus and capital surplus, in cash, property or shares of the
corporation, provided that such dividend payments are not in violation of the
rights of nay other class of securities and are not made when the corporation
is insolvent or there is reasonable ground to believe that by such payment it
will be rendered insolvent. The payment of dividends by bank holding companies
and banks also is subject to certain regulatory constraints. Dividends paid by
both BANC ONE and FIRST BANK are subject to federal income tax. It is
suggested that in connection with voting on the Consolidation, shareholders
contact their tax advisors to determine the tax consequences of the
Consolidation to them.
Of course, neither BANC ONE nor FIRST BANK could pay a dividend that would
reduce its capital below the minimum required by bank regulatory authorities.
Preemptive Rights. Under the IBA, with certain limited exceptions, each FIRST
BANK Common Stockholder has the preemptive right to subscribe for a
proportionate share of any issuance of additional shares of FIRST BANK Common
Stock. BANC ONE Common Stockholders have no such preemptive rights.
Special Requirements for Certain Transactions. Unlike the OGCL and BANC ONE's
Articles, neither the IBA nor FIRST BANK's Charter or Bylaws impose any
restrictions on "control share acquisitions," transactions with "interested
shareholders" or the like. There is no analogue in the IBA to the Ohio Control
Share or Business Combination Statutes, and no analogue in FIRST BANK's
governing documents to the "control share acquisition" or "fair price
provisions" in BANC ONE's Articles.
As noted above, under BANC ONE's Articles of Incorporation, only approval by a
majority of the outstanding shares of BANC ONE Common Stock generally is
required for a merger, consolidation or similar transaction to which BANC ONE
is a party. See "--Description of BANC ONE Stock--Special Voting Requirements
for Certain Transactions." Under the IBA and federal law, in contrast,
approval by at least two-thirds of the outstanding shares of FIRST BANK Common
Stock generally is required for a merger, consolidation or similar transaction,
including the proposed Consolidation, to which FIRST BANK is a party.
Director Discretion. The OGCL permits the directors (but not the officers) of
an Ohio corporation such as BANC ONE, in determining whether any matter
(including a proposed tender offer or business combination) is in the best
interests of the corporation, to take into consideration the interests of the
corporation's employees, suppliers, creditors and customers, the economy of the
state and the nation, community and societal considerations and the long-term
and short-term interests of the corporation and its shareholders, including the
possibility that such interests may be best served by the continued
independence of the corporation. Neither the IBA nor FIRST BANK's governing
documents include any comparable provision.
Amendment of Governing Documents. Under the IBA, FIRST BANK's Articles can be
amended only with the affirmative vote of at least two-thirds of the
outstanding shares of FIRST BANK Common Stock, either at a regular meeting or
at a special meeting called for the purpose, and only with the approval of the
Illinois Commissioner of Banks and Trust Companies. Under the IBA, FIRST
BANK's Bylaws can be amended by a majority vote of the Board of Directors.
BANC ONE's Articles may be amended by the affirmative vote of the holders of a
majority of the voting power of BANC ONE, except that amendments to the
"control share acquisition" and "fair price" provisions require a supermajority
vote. See "COMPARATIVE RIGHTS OF SHAREHOLDERS--Special Voting Requirements for
Certain Transactions." The Code of Regulations of BANC ONE may only be amended
by the affirmative vote of a majority of the voting power represented by the
outstanding voting stock of BANC ONE present in person or by proxy at an annual
or special meeting called for such purpose.
Indemnification; Limitation of Liability. Under Ohio law, Ohio corporations
are authorized to indemnify directors, officers and agents within prescribed
limits and must indemnify them under certain circumstances. See "COMPARATIVE
RIGHTS OF SHAREHOLDERS--Comparison of BANC ONE Common Stock and AMERICAN Common
Stock." Neither the IBA nor FIRST BANK's Charter or Bylaws provide for
indemnification of directors, officers or agents of an Illinois state-chartered
bank.
Ohio law has codified the traditional business judgment rule. Ohio law
provides that the business judgment presumption of good faith may only be
overcome by clear and convincing evidence, rather than the preponderance of the
evidence standard applicable in most states. There is no counterpart to this
provision in the IBA.
Dissenters' Appraisal Rights. Under both the OGCL and the IBA, a shareholder
who dissents from certain transactions is entitled to receive payment of the
fair value of his or her shares. However, where, as in the case of the
proposed Consolidation, an Illinois-chartered bank is to be merged into a
national banking association, the dissenters' appraisal rights of the
shareholders of the Illinois-chartered bank are governed, not by the IBA, but
instead by the National Bank Act. The National Bank Act's provisions governing
dissenters' appraisal rights are described below. See "VOTING AND MANAGEMENT
INFORMATION--Rights of Dissenting FIRST BANK Shareholders."
Under the OGCL, dissenting shareholders are entitled to appraisal rights in
connection with the lease, sale, exchange, transfer or other disposition of all
or substantially all of the assets of a corporation and in connection with
certain amendments to its articles of incorporation. In addition, shareholders
of an Ohio corporation being merged into a new corporation are entitled to
appraisal rights, and shareholders of an acquiring corporation are entitled to
appraisal rights in a merger, combination or majority share acquisition in
which such shareholders are entitled to voting rights.
MISCELLANEOUS INFORMATION
Transfer and Exchange Agents
Bank One, Indianapolis, N.A., Indianapolis, Indiana, serves as Transfer Agent
and as Registrar for BANC ONE Common Stock. Bank One, Indianapolis, N.A. will
act as Exchange Agent in connection with the Merger. FIRST BANK acts as
Transfer Agent and Registrar for its and AMERICAN's Common Stock.
Experts
The consolidated financial statements of BANC ONE incorporated by reference in
this Prospectus and Proxy Statement have been audited by Coopers & Lybrand,
independent public accountants, to the extent and for the years included in
their reports, which reports are included or are incorporated herein, and have
been so included or incorporated in reliance upon their reports given on the
authority of that firm as experts in accounting and auditing. The financial
statements of AMERICAN and FIRST BANK as of December 31, 1993 and 1992,
included herein and elsewhere in the registration statement, have been included
in reliance upon the report of Hutton, Nelson & McDonald, independent certified
public accountants, appearing elsewhere herein, and upon the authority of said
firm as experts in accounting and auditing.
Certain legal matters will be passed upon for AMERICAN and FIRST BANK by
counsel for AMERICAN, Much Shelist Freed Denenberg & Ament, P.C. Attorneys of
Much Shelist Freed Denenberg & Ament, P.C. representing American and First Bank
do not hold a substantial interest in American Common Stock or First Bank
Common Stock. Norman Shubert, a principal of Much Shelist Freed Deneberg &
Ament, P.C., is a member of the board of American and First Bank and as of
August 31, 1994, beneficially owned 2,167 and 358 shares, respectively, of
American Common Stock and First Bank Common Stock. An opinion on the Federal
income tax consequences of the Merger will be issued by Squire, Sanders &
Dempsey, Columbus, Ohio. Attorneys of Squire, Sanders & Dempsey participating
in the preparation of the tax opinion do not hold a substantial interest in
BANC ONE through ownership or investment discretion with respect to BANC ONE
Common Stock. Alex Shumate, a partner of Squire, Sanders & Dempsey, is a
member of the BANC ONE Board and as of August 31, 1994, beneficially owned
1,160 shares of BANC ONE Common Stock. An opinion on the validity of the BANC
ONE Common Stock offered hereby has been passed upon by Steven Alan Bennett,
General Counsel of BANC ONE.
Sources of Information
The information concerning BANC ONE, AMERICAN and FIRST BANK has been supplied
by the management of the respective companies.
Registration Statement
This Prospectus and Proxy Statement does not include all of the information set
forth or incorporated by reference in the Registration Statement on Form S-4
and the exhibits thereto filed by BANC ONE with the Commission under the
Securities Act. The Registration Statement may be inspected at the principal
office of the Commission in Washington, D.C., and copies may be obtained upon
payment of prescribed fees. See "AVAILABLE INFORMATION" for addresses of the
Commission's offices. Reference is hereby made to the Registration Statement
and exhibits thereto for further information pertaining to BANC ONE and
AMERICAN.
Other Matters
The Board of Directors of AMERICAN does not know of any other matters which may
come before the AMERICAN Special Meeting. The Board of Directors of FIRST BANK
does not know of any other matters which may come before the FIRST BANK Special
Meeting.
B. INFORMATION ABOUT BANC ONE CORPORATION
General -- Business.
BANC ONE is a multi-bank holding company with bank subsidiaries in Arizona,
California, Colorado, Illinois, Indiana, Kentucky, Michigan, Ohio, Oklahoma,
Texas, Utah, West Virginia and Wisconsin. At June 30, 1994, BANC ONE had
consolidated total assets of approximately $84.5 billion, consolidated total
deposits of approximately $62.1 billion and consolidated total stockholders'
equity of approximately $7.3 billion. At June 30, 1994, BANC ONE ranked eighth
among the nation's publicly owned bank holding companies in terms of period-end
assets and at June 30, 1994, BANC ONE ranked sixth among the nation's publicly
owned bank holding companies in terms of quarter-end common equity. For the
six months ended June 30, 1994, BANC ONE's return on average assets was 1.56%.
As of June 30, 1994, BANC ONE owned indirectly all of the outstanding stock of
81 commercial banks (the "affiliate banks"). Except for Bank One, Texas, N.A.,
BANC ONE had no single affiliate bank comprising in excess of 20% of its
consolidated assets at June 30, 1994. Based on total assets as of December 31,
1993, BANC ONE's affiliate banks ranked second in Arizona and Ohio, first in
Indiana, and third in Colorado, Texas, and Wisconsin. The affiliate banks have
similar statewide market shares in the other states in which BANC ONE
operates. BANC ONE also owns subsidiaries which offer services in the areas of
mortgage banking, credit card processing, consumer finance, equipment leasing,
fiduciary and trust services, venture capital, credit life insurance, discount
brokerage 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 anticipates that it will continue to
expand by acquisition in the future. BANC ONE is frequently in discussions
regarding possible acquisitions. See "Recent Developments" for information
with respect to pending and potential acquisitions.
BANC ONE is a legal entity separate and distinct from its affiliate banks and
its nonbanking subsidiaries. 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 bank or other
subsidiary is necessarily subject to the prior claims of creditors of the
affiliate bank or subsidiary, except to the extent that claims of BANC ONE in
its capacity as a creditor may be recognized. The principal source of
BANC ONE's revenues is dividends and fees from its affiliates. See "Certain
Regulatory Matters" for a discussion of regulatory restrictions on the ability
of the affiliate banks to pay dividends to BANC ONE.
Recent Developments.
In recent years, BANC ONE has pursued an active acquisition program. On August
15, 1994, Banc One completed its acquisition of Liberty National Bancorp, Inc.,
a multi-bank holding company headquartered in Louisville, Kentucky with assets
of approximately $4.9 billion as of December 31, 1993. BANC ONE currently has
pending one other acquisition and two sales which are not material in the
aggregate.
BANC ONE continues to explore opportunities to acquire banks and nonbank
companies permitted by the Bank Holding Company Act of 1956. Discussions are
continually being carried on relating to the acquisition of bank-related
companies and other banks. 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 non-bank 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.
Other than as described above, BANC ONE does not currently have any definite
understandings or agreements for any acquisitions material to BANC ONE.
However, BANC ONE anticipates that it will continue to expand by acquisition in
the future.
During the last two years, one of the issues in the banking industry and at
BANC ONE has been the use of a financial instrument known as "interest rate
swaps" used to protect banks against changes in interest rates. For a
discussion of BANC ONE's use of interest rate swaps and its policies and
procedures to manage them, reference is made to BANC ONE's 1993 Annual Report
on Form 10-K for the fiscal year ended December 31, 1993. See "INCORPORATION
BY REFERENCE."
Market Prices of and Dividends Paid on BANC ONE Common Stock
BANC ONE Common Stock is, and the shares offered hereby will be, listed on the
New York Stock Exchange. The following table sets forth, for the periods
indicated, the high and low reported closing sale prices per share of BANC ONE
Common Stock on the New York Stock Exchange Composite Tape and cash dividends
per share of BANC ONE Common Stock. The dividend and stock price information
has been adjusted to reflect all stock dividends and stock splits on BANC ONE
Common Stock. The dividend and stock price information has been adjusted to
reflect the 10% dividend on BANC ONE Common Stock paid on March 4, 1994, the
five shares for four shares BANC ONE Common Stock split paid on August 31, 1993
and the 10% dividend on BANC ONE Common Stock paid on February 14, 1992.
Price Range of Common Stock
High Low Dividends
1992
First Quarter . . . . . $36.36 $30.75 $.21
Second Quarter . . . . 34.55 30.73 .21
Third Quarter . . . . . 34.27 30.64 .24
Fourth Quarter . . . . 38.91 31.82 .24
1993
First Quarter . . . . . $42.27 $36.36 $.25
Second Quarter. . . . . 44.73 36.73 .26
Third Quarter . . . . . 42.19 34.55 .28
Fourth Quarter 39.77 32.27 .28
1994
First Quarter . . . . . $35.47 $31.88 $.31
Second Quarter . . . . . 38.00 30.75 .31
Third Quarter . . . . . .31
Fourth Quarter . . . . .
(through , 1994)
BANC ONE intends to continue its present policy of paying quarterly cash
dividends to its shareholders so that dividends as a percentage of income will
average between 35 and 40 percent of net income. The timing and amount of
future dividends will depend upon earnings, cash requirements, the financial
condition of BANC ONE and its subsidiaries, applicable government regulations
and other factors deemed relevant by the Board of Directors. Certain debt
instruments to which BANC ONE is a party limit its ability to pay dividends on
BANC ONE Common Stock. Under the most restrictive of these limitations, BANC
ONE would have been permitted to pay cash dividends on BANC ONE Common Stock in
excess of its $1.2 billion of retained earnings as of December 31, 1993. As
described under "Certain Regulatory Matters," various state and federal laws
limit the ability of affiliate banks to pay dividends to BANC ONE.
Certain Regulatory Matters
General
BANC ONE is subject to the supervision of, and to regular inspection by, the
Federal Reserve. BANC ONE's principal banking subsidiaries are organized as
national banking associations, which are subject to regulation by the
Comptroller of the Currency (the "Comptroller"). In addition, various state
authorities regulate BANC ONE's state banking subsidiaries. Furthermore, the
various banking subsidiaries are subject to regulation by the Federal Deposit
Insurance Corporation (the "FDIC") and other federal bank regulatory bodies.
In addition to banking laws, regulations and regulatory agencies, BANC ONE and
its subsidiaries and 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. 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 before the various
bank regulatory agencies. The likelihood and timing of any changes and the
impact such changes might have on BANC ONE and its subsidiaries are difficult
to determine.
According to Federal Reserve policy, bank holding companies are expected to act
as a source of financial strength to each subsidiary bank and to commit
resources to support each such subsidiary. This support may be required at
times when a bank holding company may not be able to provide such support.
Furthermore, in the event of a loss suffered or anticipated by the FDIC --
either as a result of default of a banking or thrift subsidiary of BANC ONE or
related to FDIC assistance provided to a subsidiary in danger of default -- the
other banking subsidiaries of BANC ONE may be assessed for the FDIC's loss,
subject to certain exceptions.
BANC ONE's 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 policies is to
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, the discount rate on its member bank
borrowings, interest rates on time and savings deposits of its member banks,
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
have a direct effect on the amount of bank loans and deposits and on the
interest rates charged on loans and paid on deposits, with the result that
federal policies have a material effect on bank earnings. Policies which are
directed toward increasing the supply of money and credit and reducing interest
rates may have an adverse effect on 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.
Capital Requirements
The Federal Reserve, the FDIC and the Comptroller have issued substantially
similar minimum risk-based and leverage capital guidelines for United States
banking organizations. In addition, those regulatory agencies may from time to
time require that a banking organization maintain capital above the minimum
levels, whether because of its financial condition or actual or anticipated
growth.
The Federal Reserve risk-based guidelines applicable to BANC ONE define a
two-tier capital framework. Tier 1 capital consists of common and qualifying
preferred shareholders' equity, minority interests less goodwill and certain
other intangible assets, and one-half of investments in unconsolidated
subsidiaries.
Tier 2 capital consists of mandatory convertible debt, subordinated and other
qualifying term debt, preferred stock not qualifying as Tier 1 capital and the
allowance for credit losses, subject to certain limitations less one-half of
investments in unconsolidated subsidiaries. The sum of Tier 1 and Tier 2
capital represents qualifying total capital, at least 50% of which must consist
of Tier 1 capital. Risk-based capital ratios are calculated by dividing Tier 1
and total capital by the sum of four categories of risk-weighted assets, such
risk weights based primarily on relative credit risk. The regulatory minimum
qualifying total risk-based capital ratio is 8%, of which at least 4% must
consist of Tier 1 capital. BANC ONE's Tier 1 and total risk-based capital
ratios under these guidelines at December 31, 1993 were 10.51% and 14.19%,
respectively.
The leverage ratio is determined by dividing Tier 1 capital by adjusted total
assets. Although the stated minimum ratio is 3%, most banking organizations
are required to maintain ratios of at least 100 to 200 basis points above 3%.
BANC ONE's estimated leverage ratio at December 31, 1993 was 8.66%. Although
BANC ONE has not been informed of any specific leverage ratio requirement
applicable to it, management believes that BANC ONE meets its leverage ratio
requirement.
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 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. Under these provisions and various state law restrictions,
BANC ONE's affiliate banks could have declared, as of December 31, 1993,
without obtaining prior regulatory approval, aggregate dividends of
approximately $1.2 billion. 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.
FDICIA
The Federal Deposit Insurance Corporation Improvement Act of 1991 (the
"FDICIA"), which became law on December 19, 1991, revises several banking
statutes, including the Federal Deposit Insurance Act, affecting bank
regulation, deposit insurance and provisions for funding of the Bank Insurance
Fund administered by the FDIC. Under FDICIA the bank regulators' authority to
intervene is linked to the deterioration of a bank's capital level. In
addition, FDICIA places limits on real estate lending and brokered deposit
activities, expands audit and reporting requirements, and imposes limitations
and requirements on various banking functions. BANC ONE believes that the
deposit insurance and brokered deposit limitations under FDICIA will not have
any material impact on the liquidity or funding of BANC ONE or its affiliate
banks.
Deposit Insurance Assessments
The deposits of each of BANC ONE's banks are insured up to regulatory limits by
the FDIC. Accordingly, BANC ONE's banks are subject to deposit insurance
assessments to maintain the Bank Insurance Fund of the FDIC.
On September 14, 1992, the FDIC adopted regulations to implement a transitional
risk-related insurance assessment system, starting January 1, 1993. Under this
system, the FDIC will place each insured bank in one of nine risk categories
based on its level of capital and other relevant information (such as
supervisory evaluations). Each insured bank's insurance assessment rate will
then be determined by the risk category in which it has been classified by the
FDIC. Under this transitional system, the average insurance assessment rate
will be .254% per $100 of deposits. However, there will be an eight basis
point spread between the highest and lowest assessment rates, so that banks
classified as strongest by the FDIC will be subject to a rate of $0.23 per $100
of deposits and banks classified as weakest by the FDIC will be subject to a
rate of $0.31 per $100 of deposits. The FDIC has indicated that it expects
that the majority of banks will be subject to an assessment rate of $0.23 per
$100 of deposits (the same rate as under the current flat-rate assessment
system). However, the FDIC has also indicated that it expects to recommend
that the permanent risk-related premium system, to be implemented in 1994,
incorporate a wider differential between the highest and lowest assessment
rates.
Depositor Preference Statute
Federal legislation has been enacted providing that deposits and certain claims
for administrative expenses and employee compensation against an insured
depositary institution would be afforded a priority over other general
unsecured claims against such an institution, including federal funds and
letters of credit, in the "liquidation or other resolution" of such an
institution by any receiver.
Brokered Deposits
The FDIC has also adopted final regulations governing the receipt of brokered
deposits. Under these regulations, an FDIC-insured bank or savings association
cannot accept brokered deposits unless: (a) it is well capitalized or (b) it
is adequately capitalized and receives a waiver from the FDIC.
A bank or savings association that cannot receive brokered deposits also cannot
offer "pass-through" insurance on certain employee benefit accounts, unless it
provides certain notice to affected depositors. In addition, a bank or savings
association that is not well capitalized may not pay an interest rate on any
deposits in excess of 75 basis points over certain prevailing market rates.
Incorporation of Certain Information
About BANC ONE By Reference
BANC ONE's Annual Report on Form 10-K for the fiscal year ended December 31,
1993, BANC ONE's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1994 and June 30, 1994 and BANC ONE's Current Reports on Form 8-K,
including the Form 8-K filed January 28, 1994, and the Form 8-K filed February
17, 1994, in each case filed with the Commission pursuant to Section 13 of the
Exchange Act and the description of BANC ONE Common Stock which is contained in
its registration statement filed under Section 12 of the Exchange Act,
including any amendment or report filed for the purpose of updating such
description, are incorporated into this Prospectus and Joint Proxy Statement by
reference. See "Incorporation by Reference."
INFORMATION ABOUT AMERICAN AND FIRST BANK
General
AMERICAN is a registered single bank holding company organized under the laws
of the state of Illinois with its principal office in Glencoe, Illinois.
AMERICAN owns approximately 94 percent of the outstanding FIRST BANK Common
Stock of Highland Park ("FIRST BANK"). At June 30, 1994, AMERICAN had
consolidated total assets of approximately million and consolidated total
deposits of approximately million. FIRST BANK is an FDIC insured state
chartered banking institution, with its main and sole banking office in
Highland Park, Illinois.
Dividends Paid on AMERICAN Common Stock and FIRST BANK Common Stock
As of December 31, 1993, there were 174 holders of record of AMERICAN Common
Stock, and 41 holders of record of FIRST BANK Common Stock. The shares of
AMERICAN Common Stock and FIRST BANK Common Stock are not listed on any stock
exchange nor is there an active market for such securities.
In May 1992, AMERICAN sold 1,000 shares of AMERICAN Common Stock to certain
officers and employees of First Bank at a price of $89.25 per share.
Management is unaware of any other significant private transactions involving
securities of AMERICAN or FIRST BANK during the last three years.
The following table sets forth the cash dividends paid per share for AMERICAN
Class A and Class B Common Stock and FIRST BANK Common Stock for the periods
indicated:
AMERICAN AMERICAN
Class A Class B FIRST BANK
1992
First Quarter $5.00 -- $3.00
Second Quarter -- -- 3.00
Third Quarter 5.00 -- 1.00
Fourth Quarter -- -- 1.00
1993
First Quarter 5.00 -- --
Second Quarter -- -- --
Third Quarter 5.00 -- 4.00
Fourth Quarter -- -- 2.00
1994
First Quarter -- -- 2.00
Second Quarter 2.50 -- 2.00
Third Quarter 1.25 -- 2.00
Fourth Quarter
Beginning with the first calendar quarter of 1994, pursuant to the Merger
Agreement, AMERICAN has agreed not to pay quarterly cash dividends in excess of
$1.25 on AMERICAN Class A Common Stock and not to pay any dividends on AMERICAN
Class B Common Stock through and until the effective date of the Merger.
AMERICAN will pay no dividends and will make no distributions during the
quarter in which the Effective Date occurs, and in which the shareholders of
AMERICAN common stock are entitled to receive the regular quarterly dividends
on the shares of BANC ONE Common Stock, into which the AMERICAN Common Stock is
to be converted. The Consolidation Agreement requries that FIRST BANK continue
to pay dividends in accordance with its regular practice through and until the
effective date of the Consolidation.
Management's Discussion and
Analysis of the Results of Operations
and Financial Condition
OVERVIEW
FIRST BANK's net income of $3,963,000 in 1993 represented a 7.0% decrease from
net income of $4,261,000 in 1992. The decrease in net income resulted
primarily from a drop in market rates and loan volume. Net income in 1992
surpassed 1991's net income of $3,008,000 by 31.7%. Total assets were
$228,780,000 and $252,885,000 at December 31, 1993 and 1992, respectively. As
of December 31, 1991, total assets were $258,428,000. Loans decreased from
$187,086,000 as of December 31, 1992 to $164,639,000 as of December 31, 1993.
Loans as of December 31, 1991 were $167,696,000. Total deposits were
$205,207,000, $226,613,000 and $237,099,000 at December 31, 1993, 1992 and
1991, respectively. Stockholders' equity was $21,062,018 at December 31, 1993
compared to $19,199,000 at December 31, 1992 and $17,738,000 at December 31,
1991.
RESULTS OF OPERATIONS
Net Interest Income. Net interest income, the difference between total
interest income earned on earning assets and total interest expense paid on
interest bearing liabilities, is FIRST BANK's principal source of earnings.
The amount of net interest income is affected by changes in the volume of
earnings assets, the level of rates earned on those assets, the volume of
interest bearing liabilities and the level of rates paid on those interest
bearing liabilities.
Net interest income for 1993 was $8,669,000, a decrease of 6.3% from 1992. Net
interest income for 1992 was $9,241,000, an increase of 17.9% from $7,841,000
in 1991. The decrease from 1992 to 1993 can be attributed to run-off of
deposits and corresponding loan reduction coupled with the repricing of
maturing high fixed rate loans and investments made at the lower market rates
available in 1993. The increase from 1991 to 1992 can be attributed to
significant growth in the loan/lease portfolio.
FIRST BANK's cost of funds decreased .52 percent and 1.84 percent during 1993
and 1992, respectively. During the same periods, the yield on average earning
assets decreased .84 percent and 1.83 percent, respectively.
Net interest margin, which is determined by dividing net interest income by
average interest earnings assets decreased in 1993 to 2.51%, as compared to
3.05% and 3.13% in 1992 and 1991, respectively. The decrease in net interest
margin during 1993 and 1992 is primarily the result of the repricing of
maturing high fixed rate investments and loans at the prevailing lower interest
rates in 1992 and in 1993.
Provision for Loan Losses. Management determines the provision for loan losses
which it considers sufficient to maintain an adequate allowance for loan loss
balance. Many factors are considered in determining the provision for loan
losses, and estimating the risk of loss and the amount of loss on any loan is
subjective. Ultimate losses may vary from current estimates. These estimates
are reviewed periodically and, as adjustments become necessary, the adjustments
are reported in income through the provision for loan losses in the appropriate
period. The ratio of the allowance to non-performing loans was 397% at
December 31, 1993, 0% at December 31, 1992 and 1,240% at December 31, 1991.
The 1993 provision for loan losses totaled $220,000, compared to $240,000 and
$425,000 in 1992 and 1991, respectively. Net charge-offs were $58,000, $43,000
and $121,000 in those years, respectively.
Non-Interest Income. Total non-interest income was $794,000 in 1993, a
decrease of $512,000 or 39.2% from 1992 non-interest income of $1,306,000,
primarily due to a decrease in net investment securities gains. As of
December 31, 1991 total non-interest income was $825,000. Total non-interest
income excluding the impact of net investment securities gains increased
slightly from 1992 to 1993, and declined $208,000 from 1991 to 1992 due to the
elimination of a gain realized on the sale of other real estate. Fees for
customer services decreased by $34,000 or 7.5% during 1993, as compared to
1992. The major factor in the decrease was a result of a drop in home
refinancings. Fees for customer services increased by $88,000 or 24.1% during
1992, as compared to 1991.
Net investment securities gains were $126,000, $647,000 and ($20,000) for the
years 1993, 1992 and 1991, respectively. The 1992 sales were generally the
result of FIRST BANK restructuring its investment portfolio.
Non-Interest Expense. Non-interest expense decreased from $4,028,000 in 1992
to $3,936,000 in 1993. Non-interest expense for the year 1991 was $4,067,000.
Salaries and employee benefits represent the largest category of non-interest
expense, accounting for 52.7%, 51.7% and 48.1% of all non-interest expenses for
calendar years 1993, 1992 and 1991, respectively. The increases over the years
are due primarily to normal merit increases given to employees and rising
insurance costs.
FINANCIAL CONDITION
Loan Portfolio. FIRST BANK's largest source of net income is interest and fees
on loans. Loans decreased by $22,447,000 or 12% during 1993 as compared to
1992. The decrease in loans from 1992 to 1993 was primarily the result of low
demand in FIRST BANK's loan area, a factor which prevailed nationally, as well.
Commercial and industrial loans, the largest component of FIRST BANK's loan
portfolio, decreased by $8,592,000 or 8%, to $104,524,000 as of December 31,
1993 from 1992. Commercial and industrial loans represented 63.5%, 60.4% of
gross loans at December 31, 1993 and 1992, respectively. At December 31, 1993,
loans of $98,000,000 were secured by leases for computers and related
equipment. FIRST BANK anticipates that this concentration will continue in
1994.
Real estate -- construction loans decreased from 1992 to $2,391,000 as of
December 31, 1993. The decrease during 1993 was the result of less new
construction. Real estate -- construction loans represented 1.5%, 5.4% and
4.4% of gross loans at December 31, 1993, 1992 and 1991 respectively.
Real estate mortgage loans decreased by $6,032,000 to $58,767,000 during 1992
and decreased an additional $4,327,000 to $54,441,000 as of December 31, 1993.
However, together with home equity loans, real estate mortgage loans
represented 33%, 31.4% and 38.6% of gross loans at December 31, 1993, 1992 and
1991, respectively.
Consumer loans (loans to individuals not secured by real estate) declined from
$6,339,000 at December 31, 1991 to $5,088,000 and $3,275,000 at December 31,
1992 and 1993, respectively. This reduction is attributed to an overall
decline in loan demand in the bank's primary market area.
The ratio of loans outstanding to deposits outstanding was 80.2%, 82.6% and
70.7% at December 31, 1993, 1992 and 1991, respectively.
Non-Performing Loans. Management reviews the loan portfolio for problem loans
through a loan review function. During the ordinary course of business,
management becomes aware of borrowers that may not be able to meet contractual
obligations of loan agreements. Such loans are placed under close supervision
with consideration given to placing the loan on non-accrual status if
delinquent 90 or more days. There are no potential problem loans that
management is aware of that are not already included in the required disclosure.
Non-performing loans amounted to $403,000 at December 31, 1993, or .24% of
total loans. There were no non-performing loans at December 31, 1992 and
$100,000 at December 31, 1991, or .06% of total loans.
An allowance for loan and lease losses has been established to provide for
loans which may not be repaid in their entirety. The allowance for loan losses
is that amount that management believes will be adequate to absorb future
losses in the existing loan portfolio. The allowance is increased by
provisions charged to expense and decreased by charge-offs, net of recoveries.
Although a loan may be charged-off by management when deemed uncollectible,
collection efforts continue and future recoveries may occur. The allowance is
maintained by management at a level considered adequate to cover losses that
are currently anticipated based on the past loss experience, general economic
conditions, information about specific borrowers, and other factors and
estimates which are subject to change over time. Management believes that
FIRST BANK's allowance for loan losses is adequate to absorb all existing loans
that may become uncollectible, but there can be no assurance that the allowance
will prove sufficient to cover actual loan losses in the future.
The allowance for loan losses totaled $1,599,000 or 1% of total loans
outstanding as of December 31, 1993. The loan loss allowance as a percentage
of total loans was .8% and .73% for the years ended December 31, 1992 and 1991,
respectively.
Investment Securities. The primary purpose of the investment portfolio is to
provide a source of earnings and secondarily for liquidity management
purposes. In managing the portfolio, FIRST BANK seeks to maintain a balance
among earnings, credit and liquidity considerations, with a goal of maximizing
the longer term overall yield. Investments in securities decreased from
$55,346,000 in 1992 to $51,867,000 in 1993. The decrease in investments and
securities was the result of maturities and deposit run-off. As of December
31, 1991 total securities were $77,187,520.
Deposits. Total deposits decreased by 9.5% in 1993 from 1992. The decrease in
deposits was primarily the result of lower interest rates on all deposit
categories.
Non-interest bearing deposits decreased by $1,637,000 during 1993 to
$18,365,000. Interest bearing deposits were $186,842,000 in 1993, a decrease
of 9.0% from 1992. Interest bearing deposits were 219,447,000 at December 31,
1991.
Capital. FIRST BANK actively monitors compliance with bank regulatory capital
requirements, focusing primarily on risk based capital guidelines. As of
December 31, 1993, the FIRST BANK tier one risk weighted capital ratio was
11.493% and its total risk weighted capital ratio was 12.368%. As of
December 31, 1992 the FIRST BANK tier one risk weighted capital ratio was
9.386% and its total risk weighted capital ratio was 10.088%. The tier one and
total risk weighted capital ratios as of December 31, 1991 were 7.779% and
8.323%, respectively. The Federal Reserve Board guidelines require that the
tier one minimum capital be no less than 4% and the total capital guideline no
less than 8%.
Liquidity. For any financial institution, liquidity is the ability to meet
cash flow requirements which may arise from existing or new commitments to lend
money and meet fluctuating withdrawals from depository accounts. The bank's
deposit base has historically provided a stable source of funds. A portion of
these funds has been invested in high-credit quality securities of mixed
maturities, providing a steady stream of maturing reinvestible assets.
Inflation. A financial institution's assets and liabilities are primarily
monetary. Therefore, such an institution does not necessarily gain or lose due
to the effects of inflation. Interest rates, which may correspond with changes
in expected inflation, have potentially the most significant effect on the
firm's net interest income; however, interest rates do not necessarily
correspond to changes in the prices of goods and services. To the extent that
maturities of interest bearing assets and liabilities can be matched, the
effects of inflation can be mitigated.
Income Taxes. Effective January 1, 1993, FIRST BANK adopted Financial
Accounting Standards Board Statement 109 requiring recognition of deferred tax
assets and liabilities for the expected future tax consequences of temporary
differences between the financial reporting and tax basis of assets and
liabilities. The cumulative effect of this accounting change amounted to
$113,000.
First Half Results, 1994 Total assets increased approximately $8,121,282 from
December 31, 1993 to June 30, 1994. This was due to an increase in deposits
and short term borrowings which are the result of an increase in market rates.
Net income for the comparable period ending June 30, 1994 as against June 30,
1993 is down $650,000 due to an increase in deposit rates against fixed rate
loans. Other income was off due to no security gains; however, we have been
able to keep other expenses down due to cost controls being kept in place which
we are constantly monitoring.
INDEPENDENT AUDITORS' REPORT
The Board of Directors
American Holding Company
We have audited the accompanying consolidated balance sheets of Ameri-
can Holding Company and subsidiary as of December 31, 1993 and 1992, and the
related consolidated statements of income, changes in s and
cash flows for each of the three years in the period ended December 31, 1993.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
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 consolidated financial
statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management,
as well as evaluating the overall consolidated financial statement
presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to in
the first paragraph present fairly, in all material respects, the consolidated
financial position of American Holding Company and subsidiary as of December 31,
1993 and 1992, and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 1993, in conformity with
generally accepted accounting principles.
As discussed in Note 12 to the consolidated financial statements, the
Company changed its method of accounting for income taxes in 1993 to adopt the
provisions of the Financial Accounting Standards Board's Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes."
HUTTON, NELSON & MC DONALD
Oakbrook Terrace, Illinois
February 9, 1994
-1-
<TABLE>
AMERICAN HOLDING COMPANY AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
ASSETS
<CAPTION>
December 31,
1993 1992
<S> <C> <C>
Cash and due from banks (Note 2) $ 8,212,553 $ 7,846,285
Interest bearing deposits in other banks 98,000 98,000
Investment securities (market value
$52,444,163 in 1993 and $56,549,794
in 1992) (Note 3) 51,866,667 55,345,719
Federal funds sold 1,600,000 500,000
Loans, net of unearned income (Note 4) 164,638,979 187,085,769
Allowance for loan losses (Note 5) (1,598,661) (1,436,330)
Premises and equipment (Note 6) 719,474 770,547
Accrued interest receivable 1,533,451 1,960,229
Excess cost of investment in subsidiary,
over net assets acquired, net (Note 7) 1,797,440 1,863,300
Other real estate owned 1,123,376 189,782
Other assets 742,157 568,240
$230,733,436 $254,791,541
</TABLE>
<TABLE>
LIABILITIES AND SHAREHOLDERS' EQUITY
<CAPTION>
<S> <C> <C>
Liabilities
Deposits (Note 8)
Noninterest bearing $ 18,355,632 $ 19,953,301
Interest bearing 185,730,943 206,209,939
Total deposits 204,086,575 226,163,240
Short-term borrowings (Note 9) 900,705 5,182,108
Other liabilities 1,638,135 1,642,251
Notes payable (Note 10) 6,000,000 6,760,000
Total liabilities 212,625,415 239,747,599
Minority interest in subsidiary 1,203,283 1,096,833
Shareholders' equity
Common stock, stated value $.01 per
share (Note 13);
Class A, authorized 50,000 shares;
issued and outstanding 26,300 shares 263 263
Class B, authorized 150,000 shares;
issued and outstanding 117,000 shares 1,170 1,170
Additional paid-in capital 2,236,458 2,236,458
Retained earnings (Note 16) 14,666,847 11,709,218
Total shareholders' equity 16,904,738 13,947,109
$230,733,436 $254,791,541
</TABLE>
The accompanying notes are an integral
part of these financial statements.
-2-
<TABLE>
AMERICAN HOLDING COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
Year Ended December 31,
1993 1992 1991
<S> <C> <C> <C>
Interest income
Interest and fees on loans $12,847,071 $14,413,571 $13,834,730
Interest on federal funds sold 126,121 40,931 631,843
Interest on investment securities
Taxable 5,266,037 5,252,429 5,877,871
Exempt from federal income tax 619,367 771,836 986,549
Interest on deposits in other banks 4,521 14,314 125,700
Total interest income 18,863,117 20,493,081 21,456,693
Interest expense
Interest on deposits 6,858,262 9,301,971 13,496,966
Interest on short-term borrowings 3,322,926 1,948,456 118,881
Interest on notes payable 389,233 451,422 771,571
Total interest expense 10,570,421 11,701,849 14,387,418
Net interest income 8,292,696 8,791,232 7,069,275
Provision for loan losses (Note 5) 220,000 240,000 425,000
Net interest income after provision
for loan losses 8,072,696 8,551,232 6,644,275
Other income
Fees for customer services 419,010 453,095 365,136
Other operating income 249,151 206,542 502,479
Investment securities gains (losses)125,687 646,679 (20,194)
Total other income 793,848 1,306,316 847,421
Other expenses
Salaries and employee benefits 2,480,327 2,449,198 2,256,177
Occupancy and equipment expense 301,068 288,680 385,127
Data processing 246,008 238,100 212,280
Other 1,412,418 1,517,472 1,707,931
Minority interest in income of
subsidiary 226,450 243,474 171,880
Total other expenses 4,666,271 4,736,924 4,733,395
The accompanying notes are an integral
part of these financial statements.
-3-
</TABLE>
<TABLE>
AMERICAN HOLDING COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(Continued)
<CAPTION>
Year Ended December 31,
1993 1992 1991
<S> <C> <C> <C>
Income before income taxes and cumulative
effect of change in accounting for
income taxes $ 4,200,273 $ 5,120,624 $ 2,758,301
Applicable income taxes (Note 12) 1,092,756 1,654,635 563,107
Income before cumulative effect of
change in accounting for
income taxes 3,107,517 3,465,989 2,195,194
Cumulative effect of change in accounting
for income taxes (Note 12) 113,112
Net income $ 3,220,629 $ 3,465,989 $ 2,195,194
Average number of common shares
outstanding 143,000 142,871 142,300
Earnings per common share
Income before cumulative effect of
change in accounting $21.73 $24.26 $15.43
Cumulative effect of change in
accounting .79
Net income $22.52 $24.26 $15.43
</TABLE>
The accompanying notes are an integral
part of these financial statements.
-4-
<TABLE>
AMERICAN HOLDING COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
<CAPTION>
Common Stock Additional
Class A Class B Paid-in Retained
Shares Amount Shares Amount Shares Amount Capital Earnings
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1991 $ $ 142,300 $ 1,423 $2,147,218 $6,306,035
Shares issued in exchange
for outstanding common 25,300 253 117,000 1,170 (142,300) (1,423) 2,195,194
Net income
Cash dividend declared
Class A - $5 per share (126,500)
Balance, December 31, 1991 5,300 253 117,000 1,170 2,147,218 8,374,729
Shares sold to officers 1,000 10
Net income 3,465,989
Cash dividend declared
Class A - $5 per share (131,500)
Balance, December 31, 1992 26,300 263 117,000 1,170 2,236,458 11,709,218
Net income
Cash dividend declared
Class A - $10 per share
Balance, December 31, 1993 26,300 $263 117,000 $1,170 $ 2,236,458 14,666,847
The accompanying notes are an integral
part of these financial statements.
-5-
</TABLE>
<TABLE>
AMERICAN HOLDING COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Year Ended December 31,
1993 1992 1991
<S> <C> <C> <C>
Cash flows from operating activities:
Interest received $ 16,682,342 $ 21,924,818 $ 21,907,422
Fees and commissions received 664,849 694,841 631,399
Interest paid (10,888,597) (12,240,670) (14,003,333)
Cash paid to suppliers and employees (3,693,153) (5,154,479) (3,714,552)
Income taxes paid (1,360,600) (2,140,000) (300,021)
Net cash provided by operating
activities 1,404,841 3,084,510 4,520,915
Cash flows from investing activities:
Net decrease in interest bearing
deposits in other banks 494,000 4,095,000
Proceeds from sales of investment
securities 13,405,944 19,524,440 8,947,424
Proceeds from maturing investment
securities 496,770,879 239,857,882 27,781,301
Purchase of investment securities (503,964,531) (237,316,157) (36,588,353)
Net (increase) decrease in loans 21,390,298 (19,708,575) (41,584,534)
Capital expenditures (63,577) (76,226) (204,401)
Proceeds from sale of other real
estate owned 23,482 263,627 765,450
Net cash provided by (used in)
investing activities 27,562,495 3,038,991 (36,788,113)
Cash flows from financing activities:
Net (decrease) increase in deposits (22,076,665) (10,856,844) 25,268,739
Net increase (decrease) in short-term
borrowings (4,281,403) 4,784,364 (571,690)
Proceeds from issuance of notes 160,000
Repayment of notes (760,000) (1,500,000) (1,400,000)
Dividends paid to minority interest (120,000) (160,000) (120,000)
Dividends paid to Class A common stock (263,000) (258,000)
Issuance of Class A common stock 89,250
Net cash provided by (used in)
financing activities (27,501,068) (7,901,230) 23,337,049
Net increase (decrease) in cash and cash
equivalents 1,466,268 (1,777,729) (8,930,149)
Cash and cash equivalents at beginning
of year 8,346,285 10,124,014 19,054,163
Cash and cash equivalents
at end of year $ 9,812,553 8,346,285 $ 10,124,014
The accompanying notes are an integral
part of these financial statements.
-6-
</TABLE>
<TABLE>
AMERICAN HOLDING COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)
<CAPTION>
Year Ended December 31,
1993 1992 1991
<S> <C> <C> <C>
Reconciliation of net income to net
cash provided by operating activities:
Net income $ 3,220,629 $ 3,465,989 $2,195,194
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for premium amortization 486,647 1,429,911 518,423
Provision for discount accretion (3,094,200) (1,007,596) (349,920)
Provision for depreciation 114,650 118,465 109,454
Provision for loan losses 220,000 240,000 425,000
Amortization of excess cost 65,860 63,409 63,408
Cumulative effect of change in accounting
for income taxes (113,112)
Provision for deferred income taxes (99,459) (82,846)
Minority interest in income of
subsidiary 226,450 243,474 171,880
Loss (gain) on sale of investment
securities (125,687) (646,679) 20,194
Loss (gain) on sale of other real
estate owned 35,204 (143,466)
Decrease in other assets 846,041 518,580 283,288
Increase (decrease) in other
liabilities (342,978) (1,293,401) 1,227,460
Total adjustments (1,815,788) (381,479) 2,325,721
Net cash provided by
operating activities $ 1,404,841 $3,084,510 $4,520,915
Supplemental schedule of noncash investing
and financing activities:
Loans transferred to other real estate
owned throughout the year $998,823 $275,359 $ 171,507
Excess of note received over carrying
value of other real estate sold $(41,747) $41,747
Other real estate owned transferred
to other assets $58,234
</TABLE>
The accompanying notes are an integral
part of these financial statements.
-7-
AMERICAN HOLDING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying financial statements have been prepared in conformity
with generally accepted accounting principles and conform to practices within
the banking industry. A description of the significant accounting policies
follows:
Principles of Consolidation - The consolidated financial statements of
American Holding Company include the accounts of the Company and its majority
owned subsidiary, First Bank of Highland Park. Material intercompany accounts
and transactions have been eliminated.
Statement of Cash Flows - For purposes of reporting cash flows, cash
and cash equivalents include cash and due from banks and federal funds sold.
Generally, federal funds are sold for one day periods.
Investment Securities - Investment securities are stated at cost,
adjusted for amortization of premium and accretion of discount, which are recog-
nized as adjustments to interest income generally computed using the interest
method. Gains or losses on disposition are based on the net proceeds and the
adjusted carrying amount of the securities sold, using the specific identifica-
tion method.
Loans - Loans are stated at the principal amount outstanding, net of
any unearned income. Interest on commercial, real estate and other loans is
included in interest income over the terms of the respective loans based upon
principal balances outstanding. On installment loans, the unearned income is
recognized in interest income using both the sum-of-the-months digits method and
the constant yield method. The income recognized by using the sum-of-the-months
digits method is not materially different from that obtained by using the
interest method. Accrual of interest is discontinued on a loan when management
believes, after considering economic conditions and collection efforts, that the
borrower's financial condition is such that collection of interest is doubtful.
Loan origination fees are recognized as an adjustment of the yield on the
related loans.
Allowance for Loan Losses - The allowance for loan losses is maintained
at a level considered adequate to provide for potential loan losses and is based
on management's evaluation of the loan portfolio under current economic condi-
tions. Loans are charged to the allowance for loan losses when, in management's
judgment, the loans become uncollectible.
Premises and Equipment - Premises and equipment are stated at cost less
accumulated depreciation. The provision for depreciation included in operating
expenses is computed on the straight-line method based on the estimated useful
lives of the assets.
Other Real Estate Owned - Other real estate owned represents properties
acquired by the Company in satisfaction of customers' indebtedness. Such real
estate is recorded at the carrying amount of the related indebtedness or its
fair market value at the date of acquisition, whichever is lower. Subsequent
declines in market value, routine holding costs and losses or gains on
disposition of other real estate are included in other operating income or
expense.
-8-
AMERICAN HOLDING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Income Taxes - The Company files consolidated income tax returns with
its subsidiary, First Bank of Highland Park. Each member of the consolidated
group provides for income taxes on a separate return basis and is charged or
credited by the Company with the tax or tax benefit shown in a separate return.
The provision for income taxes is based on amounts reported in the statements of
income adjusted for differences that do not enter into the computation of taxes
payable under applicable laws. Deferred taxes are provided for temporary
differences in the recognition of income and expense for tax and financial
reporting purposes. Deferred taxes in 1993 are computed using the asset and
liability approach as prescribed in FASB Statement 109, "Accounting for Income
Taxes". See Note 12.
Earnings Per Common Share - Earnings per common share are based on the
weighted average number of shares outstanding during the year. See Note 13.
2. CASH AND DUE FROM BANKS
Included in cash and due from banks are amounts required to be
deposited with the Federal Reserve Bank. These reserve balances vary depending
on the level of customer deposits in the subsidiary bank. At December 31, 1993
and 1992, the reserve balance requirement was approximately $1,800,000 and
$600,000, respectively.
3. INVESTMENT SECURITIES
The amortized cost and estimated market values of investments in
securities at December 31, 1993 and 1992 are as follows:
<TABLE>
<CAPTION>
December 31, 1993
Gross Gross Estimated
Amortized UnrealizedUnrealized Market
Cost Gains Losses Value
<S> <C> <C> <C> <C>
U. S. Treasury securities$32,178,856 $ 76,793 $153,315 $32,102,334
U. S. Government agencies 10,911,167 76,642 17,784 10,970,025
Obligations of states and
political subdivisions 6,767,510 551,546 1,276 7,317,780
Corporate debt securities 409,568 7,932 417,500
Mortgage-backed securities 589,566 51,313 14,355 626,524
Debt securities issued by
foreign governments 1,010,000 1,010,000
$51,866,667 $764,226 $186,730 $52,444,163
-9-
AMERICAN HOLDING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
3. INVESTMENT SECURITIES (Continued)
<CAPTION>
December 31, 1992
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
<S> <C> <C> <C> <C>
U. S. Treasury securities $28,318,246 $ 195,188 $ $28,513,434
U. S. Government agencies 8,500,238 149,512 8,649,750
Obligations of states and
political subdivisions 8,057,923 683,243 3,168 8,737,998
Corporate debt securities 8,752,465 70,041 55,394 8,767,112
Mortgage-backed securities 706,847 164,653 871,500
Debt securities issued by
foreign governments 1,010,000 1,010,000
$55,345,719 $1,262,637 $58,562 $56,549,794
</TABLE>
<TABLE>
The amortized cost and estimated market value of debt securities at
December 31, 1993, by contractual maturity, are shown below. Expected
maturities will differ from contractual maturities because borrowers may
have the right to call or prepay obligations with or without call or
prepayment penalties.
<CAPTION>
Estimated
Amortized Market
Cost Value
<S> <C> <C>
Due in one year or less $12,944,913 $13,049,203
Due after one year through five years 35,383,355 35,804,109
Due after five years through ten years 2,948,833 2,964,327
51,277,101 51,817,639
Mortgage-backed securities 589,566 626,524
$51,866,667 $52,444,163
</TABLE>
Proceeds from sales of investments during 1993 and 1992 were
$13,410,844 and $19,524,440. Gross gains of $141,350 and $646,679 were realized
in 1993 and 1992, and gross losses of $15,663 were realized in 1993.
Investment securities with carrying values of $16,028,640 and
$24,360,627 on December 31, 1993 and 1992, respectively, were pledged to secure
public and trust deposits, securities sold under agreements to repurchase, and
for other purposes as required or permitted by law.
-10-
AMERICAN HOLDING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
3. INVESTMENT SECURITIES (Continued)
The Financial Accounting Standards Board has issued Statement 115,
"Accounting For Certain Investments In Debt and Equity Securities," which
establishes new standards of accounting and reporting for debt securities
held as assets and equity securities. Statement 115 requires that debt and
equity securities be classified into one of three reporting categories and
accounted for as follows: (1) held to maturity securities reported at
amortized cost, (2) trading securities reported at fair value, with
unrealized gains and losses included in earnings, (3) available for sale
securities reported at fair value with unrealized gains and losses reported
as a separate component of shareholders' equity. The Company is required to
adopt Statement 115 beginning January 1, 1994.
The Company estimates that if this Statement had been adopted in 1993,
shareholders' equity would have been decreased by approximately $1,320.
4. LOANS
<TABLE>
A summary of loans outstanding follows:
<CAPTION>
December 31,
1993 1992
<S> <C> <C>
Commercial and industrial $104,524,252 $113,115,872
Real estate - construction 2,390,737 10,078,739
Real estate - mortgage 54,440,667 58,767,281
Loans to individuals 3,275,283 5,087,651
Other 20,763 81,617
164,651,702 187,131,160
Unearned income 12,723 45,391
$164,638,979 $187,085,769
</TABLE>
Nonperforming loans amounted to $402,656 at December 31, 1993.
Interest income based on the original contract terms of the loans would have
approximated $23,001 in 1993.
Loans to directors of the Company were made in the ordinary course of
business and were made on substantially the same terms, including rates and
collateral, as those prevailing at the time for comparable transactions with
other persons and did not involve more than the normal risk of collectibility or
present other unfavorable features.
As of December 31, 1993 and 1992 no loans with an original amount
exceeding $60,000 were outstanding to any director, officer or shareholder.
-11-
AMERICAN HOLDING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
4. LOANS (Continued)
Real estate mortgages with carrying values of $6,203,459 and $8,157,464
on December 31, 1993 and 1992, respectively, were pledged to secure any borrow-
ings the Company may enter into with the Federal Reserve Bank.
At December 31, 1993 and 1992, commercial and industrial loans included
loans of approximately $98,000,000 and $101,000,000, respectively, that were
secured by leases for computers and related equipment.
5. ALLOWANCE FOR LOAN LOSSES
<TABLE>
Changes in the allowance for loan losses were as follows:
<CAPTION>
Year Ended December 31,
1993 1992 1991
<S> <C> <C> <C>
Balance, beginning of year $1,436,330 $1,239,811 $ 935,977
Provision for loan losses 220,000 240,000 425,000
Loan recoveries 43,930 7,109 14,935
1,700,260 1,486,920 1,375,912
Loans charged off 101,599 50,590 136,101
Balance, end of year $1,598,661 $1,436,330 $1,239,811
</TABLE>
6. PREMISES AND EQUIPMENT
<TABLE>
Premises and equipment are summarized as follows:
<CAPTION>
December 31,
1993 1992
<S> <C> <C>
Land $ 192,500 $ 192,500
Buildings and improvements 694,674 694,674
Equipment 642,853 656,564
1,530,027 1,543,738
Accumulated depreciation 810,553 773,191
$ 719,474 $ 770,547
</TABLE>
Depreciation charged to operations amounted to $114,650 in 1993,
$118,465 in 1992 and $109,454 in 1991.
On December 9, 1993, the Company entered into agreements to purchase
from Central Avenue Limited Partnership 6,945 square feet of parking lot
together with an easement granted to the Partnership for its use of the
parking lot in the amounts of $30,000 and $110,000, respectively. These
transactions were consummated on January 5, 1994.
-12-
AMERICAN HOLDING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
7. EXCESS COST OF INVESTMENT IN SUBSIDIARY OVER NET ASSETS ACQUIRED
The excess of the cost of investment in subsidiary over equity in net
assets acquired at acquisition dates is being amortized on a straight-line basis
over forty years. Amortization charged to operations amounted to $65,860 in
1993, $63,409 in 1992 and $63,408 in 1991.
8. DEPOSITS
Time certificates of deposit over $100,000 included in interest bearing
deposits at December 31, 1993 and 1992 amounted to $26,630,646 and $42,011,962,
respectively.
9. SHORT-TERM BORROWINGS
Short-term borrowings consist of securities sold under agreements to
repurchase, which generally mature in one day and bear interest at money market
rates.
10. NOTES PAYABLE
<TABLE>
A summary of notes payable follows:
<CAPTION>
December 31,
1993 1992
<S> <C> <C>
Secured bank note payable, due
January 30, 1994 with interest
at prime rate floating $ 540,000 $ 600,000
Subordinated notes to shareholders,
unsecured, bearing interest at
prime rate floating, due
December 9, 2002 960,000 1,060,000
Unsecured subordinated note due
January 30, 2001 with interest
at prime rate floating 4,500,000 5,100,000
$6,000,000 $6,760,000
</TABLE>
The secured bank note payable is secured by 330,000 shares of capital
stock of First Bank of Highland Park.
The subordinated notes to shareholders are subordinated only to
senior debt of the Company except at the maturity date of December 9, 2002. On
January 4, 1994, with the permission of the senior debt holder, $900,000 of
these notes were repaid. Interest on these notes charged to expense amounted to
$60,963 in 1993, $68,977 in 1992 and $78,726 in 1991.
The unsecured subordinated note due January 30, 2001 permits prepay-
ments of principal in amounts not less than $100,000 and requires the
maintenance of certain capital ratios by the Company and by the subsidiary bank.
-13-
AMERICAN HOLDING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
11. EMPLOYEE RETIREMENT BENEFIT PLAN
The Company's subsidiary has a profit-sharing and 401(k) plan which
covers all employees who have completed one year of service and 1,000 hours of
service within a plan year. The Plan is administered by a committee
appointed by the bank and is funded through a trust fund with Connecticut
General Life Insurance Company acting as Trustee. The annual contributions
to the Trust are determined by the subsidiary's Board of Directors.
The contributions charged to expense for the years ended December 31,
1993, 1992 and 1991, amounted to $35,025, $35,265 and $35,443, respectively.
12. INCOME TAXES
Effective January 1, 1993, the Company prospectively adopted the provi-
sions of Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes". SFAS 109 requires recognition of deferred tax assets and
liabilities for the expected future tax consequences of temporary differences
between the financial reporting and tax basis of the Company's assets and
liabilities. Measurement of deferred tax assets and liabilities is based
upon the provision of enacted tax laws and the effects of future changes in
tax laws or rates. The cumulative effect of this accounting change at
January 1, 1993 amounted to $113,112.
<TABLE>
Income tax expense is comprised of the following:
<CAPTION>
Year Ended December 31,
1993 1992 1991
<S> <C> <C> <C>
Current income tax
expense (benefit)
Federal $1,276,041 $1,646,597 $ 788,399
State (83,826) 90,884 (5,179)
1,192,215 1,737,481 783,220
Deferred income tax
benefit
Federal (81,024) (67,492) (179,317)
State (18,435) (15,354) (40,796)
(99,459) (82,846) (220,113)
$1,092,756 $1,654,635 $ 563,107
</TABLE>
-14-
AMERICAN HOLDING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
12. INCOME TAXES (Continued)
<TABLE>
The reasons for the differences between applicable income taxes and the
amount computed at the applicable statutory federal tax rate of 34 percent
follows:
<CAPTION>
Year Ended December 31,
1993 1992 1991
<S> <C> <C> <C>
Federal income tax at statutory rate $1,428,093 $1,741,013 $ 937,822
Increase (decrease) due to
Interest exempt from federal
income taxes (195,435) (239,617) (295,717)
Adjustment of prior years (181,941)
State income taxes, net of
federal income taxes (55,878) 51,598 (25,399)
Alternative minimum tax credit (125,565)
Minority interest in subsidiary 76,993 82,781 58,439
Amortization of excess cost 22,392 21,559 21,559
Sundry (1,468) (2,699) (8,032)
(335,337) (86,378) (374,715)
$1,092,756 $1,654,635 $ 563,107
</TABLE>
<TABLE>
The deferred tax assets and deferred tax liabilities are as follows at
the dates indicated:
<CAPTION>
December 31, January 1,
1993 1993
<S> <C> <C>
Deferred tax assets
Loan loss deduction $475,669 $390,443
Deferred loan origination
fees 64,917 71,738
Accrued vacation pay 10,847 10,847
Gross deferred tax assets 551,433 473,028
Deferred tax liabilities
Accumulated accretion income 19,107 33,823
Depreciation 19,905 26,243
Gross deferred tax liabilities 39,012 60,066
Net deferred income tax benefits $512,421 $412,962
</TABLE>
<TABLE>
The significant components of deferred income tax benefit for the year
ended December 31, 1993 follows:
<CAPTION>
<S> <C>
Deferred tax benefit $78,405
Deferred tax expense 21,054
$99,459
</TABLE>
-15-
AMERICAN HOLDING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
12. INCOME TAXES (Continued)
<TABLE>
Deferred income taxes according to the timing differences which caused
them were as follows:
<CAPTION>
Year Ended
December 31,
1992 1991
<S> <C> <C>
Accretion of discount on
investment securities $ 86,307 $(22,111)
Provision for loan losses 92,973 117,701
Amortization of loan origination
fees 21,720 (9,234)
Depreciation 1,593 9,793
Accrued vacation pay 343 7,748
Accrued expense (116,216) 116,216
Provision for decline in value
of investment securities (3,874)
$ 82,846 $220,113
</TABLE>
13. COMMON STOCK
The Company's Articles of Incorporation provide for two classes of
common stock known as Class A and Class B. Each has equal voting rights and
share equally in the proceeds of liquidation of the Company. Class A common
stock has precedence in the declaration of any dividends over Class B common
shares.
14. COMMITMENTS AND CONTINGENT LIABILITIES
The Company's subsidiary is a defendant in various legal proceedings
arising from normal business activities. With respect to each of these
suits, it is the opinion of both management of the Company and the Company's
legal counsel either that the suits are without merit or that even if the
plaintiff prevails therein the disposition thereof will not have a material
effect on the consolidated financial condition of the Company.
In 1987, the subsidiary sold a portion of certain real estate it
acquired through foreclosure to the Township of Libertyville for $480,000. The
Illinois Appellate Court, in a suit brought by the former owner, set aside the
sale as the property sold in the transaction did not meet the statute require-
ments for an open spaces program. The Township has filed a second appeal and
the Appellate Court has not ruled on the appeal at present. The subsidiary
has been negotiating the sale of the real estate to its former owner at a
price that will prevent the subsidiary from incurring a loss should the
subsidiary reacquire the property from the Township. The property has not
been included in these financial statements.
-16-
AMERICAN HOLDING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
14. COMMITMENTS AND CONTINGENT LIABILITIES (Continued)
The Company is a party to financial instruments with off-balance-sheet
risk in the normal course of business to meet financing needs of its customers.
These financial instruments include commitments to extend credit and standby
letters of credit. Those instruments involve, to varying degrees, elements of
credit and interest rate risk in excess of the amount recognized in the balance
sheet.
The Company's exposure to credit loss in the event of nonperformance by
the other party to the financial instrument to extend credit and standby letters
of credit is represented by the contractual amount of those instruments. The
Company uses the same credit policies in making commitments and conditional
obligations as it does for on-balance-sheet instruments.
<TABLE>
At December 31, 1993 and 1992, financial instruments whose contract
amounts represent credit risk were:
<CAPTION>
<S> <C> <C>
1993 1992
Commitments to extend
credit $21,556,376 $20,290,683
Standby letters of credit 313,252 606,046
</TABLE>
Commitments to extend credit are agreements to lend to a customer as
long as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. Since many of the commitments are expected to
expire without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. The Company evaluates each customer's
credit worthiness on a case-by-case basis. The amount of collateral obtained
if deemed necessary by the Company upon extension of credit is based on
management's credit evaluation of the counter party. Collateral held varies
but may include certificates of deposit, accounts receivable, inventory,
property and equipment, incomeproducing commercial properties and real estate.
Standby letters of credit are conditional commitments issued by the
Company to guarantee performance of a customer to a third party. The credit
risk involved in issuing letters of credit is essentially the same as that
involved in extending loan facilities to customers. The Company holds
various types of collateral supporting those commitments. At December 31,
1993, those commitments were approximately 84 percent collateralized.
-17-
AMERICAN HOLDING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
15. PARENT COMPANY STATEMENTS
<TABLE>
Presented below are the balance sheets and the statements of operations
and cash flows for the Parent Company:
<CAPTION>
BALANCE SHEETS
ASSETS
December 31,
1993 1992
<S> <C> <C>
Cash* $ 1,119,972 $ 419,370
Investment in subsidiary* 19,858,735 18,102,341
Excess cost of investment in subsidiary
over net assets acquired, net 1,797,440 1,863,300
Due from subsidiary* 85,340 295,433
Equipment 29,144 37,944
Other assets 127,139 4,900
Total assets $23,017,770 $ 20,723,288
</TABLE>
<TABLE>
LIABILITIES AND SHAREHOLDERS' EQUITY
<CAPTION>
December 31,
1993 1992
<S> <C> <C>
Other liabilities $ 113,032 $ 16,179
Notes payable 6,000,000 6,760,000
Total liabilities 6,113,032 6,776,179
Shareholders' equity 16,904,738 13,947,109
Total liabilities and
shareholders' equity $23,017,770 $20,723,288
* Eliminated in consolidation
</TABLE>
-18-
AMERICAN HOLDING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
15. PARENT COMPANY STATEMENTS (Continued)
<TABLE>
STATEMENTS OF OPERATIONS
<CAPTION>
Year Ended December 31,
1993 1992 1991
<S> <C> <C> <C>
Operating income
Dividends received from bank
subsidiary* $1,980,000 $2,640,000 $1,980,000
Interest income 12,778* 2,058* 22,750
Other* 10,503
Total operating income 2,003,281 2,642,058 2,002,750
Operating expense
Interest expense 389,233 451,422 771,571
Salaries 405,000 365,450
Other expense 43,451 36,520 430,740
Amortization of excess cost 65,860 63,408 63,408
Total operating expense 903,544 916,800 1,265,719
Income before equity in undistributed
income of subsidiary 1,099,737 1,725,258 737,031
Equity in undistributed income of
subsidiary* 1,756,394 1,377,316 855,996
Income before income tax benefit 2,856,131 3,102,574 1,593,027
Applicable income tax benefit 364,498 363,415 602,167
Net income $3,220,629 $3,465,989 $2,195,194
* Eliminated in consolidation
</TABLE>
-19-
AMERICAN HOLDING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
15. PARENT COMPANY STATEMENTS (Continued)
<TABLE>
STATEMENTS OF CASH FLOWS
<CAPTION>
Year Ended December 31,
1993 1992 1991
<S> <C> <C> <C>
Cash flows from operating activities:
Interest received $ 12,778 $ 2,058 $ 22,750
Interest paid (375,717) (590,788) (861,692)
Cash paid to suppliers and employees (433,336) (399,210) (431,740)
Net income tax payments received 529,374 428,600 553,734
Other income 10,503
Dividends received 1,980,000 2,640,000 1,980,000
Net cash provided by operating
activities 1,723,602 2,080,660 1,263,052
Cash flows from investing activity:
Capital expenditures (40,704)
Cash flows from financing activities:
Proceeds from issuance of notes 160,000
Proceeds from issuance of Class A stock 89,250
Repayment of notes (760,000) (1,500,000) (1,400,000)
Dividends paid (263,000) (258,000)
Net cash used in financing
activities (1,023,000) (1,668,750) (1,240,000)
Net increase in cash 700,602 371,206 23,052
Cash at beginning of year 419,370 48,164 25,112
Cash at end of year $ 1,119,972 $ 419,370 $ 48,164
Reconciliation of net income to net
cash provided by operating activities:
Net income $ 3,220,629 $ 3,465,989 $ 2,195,194
Adjustments to reconcile net income to net
cash provided by operating activities:
Amortization of excess cost 65,860 63,409 63,408
Depreciation 8,800 2,760
Excess of equity in earnings of subsidiary
over dividends received (1,756,394) (1,377,316) (855,996)
Increase (decrease) in due
from subsidiary 210,093 65,185 (48,433)
Increase in other assets (122,239)
Increase (decrease) in
other liabilities 96,853 (139,367) (91,121)
Total adjustments (1,497,027) (1,385,329) (932,142)
Net cash provided by
operating activities $ 1,723,602 $ 2,080,660 $ 1,263,052
</TABLE>
-20-
AMERICAN HOLDING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
16. RESTRICTIONS ON DIVIDENDS
The Company's retained earnings includes undistributed retained
earnings of its subsidiary of $8,672,682 and $6,916,288 at December 31, 1993 and
1992, respectively.
Provisions of Illinois banking laws place restrictions upon the amount
of dividends that can be paid by the subsidiary. Illinois state law requires
that no dividends may be paid in an amount greater than the net profits then on
hand, reduced by certain loan losses (as defined). Based on the Illinois
limitations, the subsidiary could have declared, without regulatory approval,
$3,062,018 of dividends at December 31, 1993. However, the availability of
dividends may be further limited because of the need to maintain capital
ratios by the subsidiary satisfactory to applicable regulatory agencies and
by the requirements of the subordinated note agreement.
17. RELATED PARTY TRANSACTIONS
The Company is affiliated pursuant to Section 35.2 of the Illinois
Banking Act with PNB Financial Corporation, the holding company for Park
National Bank of Chicago.
At December 31, 1993 and 1992, the First Bank of Highland Park had sold
approximately $716,000 and $847,000 in loans to Park National Bank and Trust of
Chicago and at December 31, 1992 held approximately $815,000 in loans purchased
from Park National Bank and Trust of Chicago.
At December 31, 1993 and 1992, the major shareholders of the Company
had funds on deposit with the subsidiary bank in the approximate amount of
$3,356,000 and $3,059,000 which were accepted by the bank on the same terms and
rates as those prevailing at the time for comparable transactions with other
persons. Interest paid on these deposits in 1993 and 1992 amounted to approxi-
mately $145,600 and $160,400. At December 31, 1993 and 1992 the bank had sold
approximately $500,000 in security participations to shareholders of the
Company.
18. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair
value of each class of financial instrument for which it is practicable to
estimate that value:
Investment Securities - For U. S. Treasury and U. S. Government agency
securities, fair values are based on market prices or dealer quotes. For other
investment securities, fair value equals quoted market price if available. If a
quoted market price is not available, fair value is estimated using quoted
market prices for similar securities.
-21-
AMERICAN HOLDING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
18. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)
Loans - The fair value of loans is estimated by discounting the future
cash flows using the current rates at which similar loans would be made to
borrowers with similar credit ratings and for the same remaining maturities.
Deposit Liabilities - The fair value of demand deposits, savings
accounts, NOW and money market accounts is the amount payable on demand at the
reporting date. The fair value of fixed-maturity certificates of deposit is
estimated using the rates currently offered for deposits of similar remaining
maturities.
Short-term Borrowings - The fair value of short-term borrowings is the
amount payable on demand at the reporting date.
Commitments to Extend Credit and Standby Letters of Credit - The fair
value of commitments is estimated using the fees currently charged to enter into
similar agreements, taking into account the remaining terms of the agreements
and the present credit worthiness of the counter parties. For fixed-rate loan
commitments fair value also considers the difference between current levels of
interest rates and the committed rates. The fair value of letters of credit is
based on fees currently charged for similar agreements or on the estimated cost
to terminate these or otherwise settle the obligations with the counter parties
at the reporting date.
<TABLE>
The estimated fair values of the Company's financial instruments at
December 31, 1993 and 1992 are as follows:
<CAPTION>
1993 1992
Carrying Fair Carrying Fair
Amount Value Amount Value
<S> <C> <C> <C> <C>
Financial assets
Cash $ 8,212,553 $ 8,212,553 $ 7,846,285 $ 7,846,285
Interest bearing
deposits 98,000 98,000 98,000 98,000
Investment securities 51,866,667 52,444,163 55,345,719 56,549,794
Federal funds sold 1,600,000 1,600,000 500,000 500,000
Loans 164,638,979 168,242,088 187,085,769 192,080,920
Allowance for loan
losses (1,598,661) (1,436,330)
Financial liabilities
Deposits $205,206,547 $205,590,045 $226,613,060 $226,448,300
Short-term borrowings 900,705 900,705 5,182,108 5,182,108
Notes payable 6,000,000 6,000,000 6,760,000 6,760,000
Unrecognized financial
instruments
Commitments to extend
credit $21,556,376 $21,556,376 $20,290,683 $20,290,683
Standby letters of
credit 313,252 313,252 606,046 606,046
</TABLE>
-22-
AMERICAN HOLDING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
19. SUBSEQUENT EVENT
On February 4, 1994, the Company executed an agreement for the merger
of American Holding Company with Banc One Illinois Corporation. The obligation
of the Company and Banc One to proceed with the proposed merger is subject to a
number of conditions. No assurances can be given that the merger will be
consummated.
-23-
INDEPENDENT AUDITORS' REPORT
The Board of Directors
First Bank of Highland Park
We have audited the accompanying balance sheets of First Bank of
Highland Park as of December 31, 1993 and 1992, and the related statements of
income, changes in shareholders' equity and cash flows for each of the three
years in the period ended December 31, 1993. These financial statements are the
responsibility of the Bank's 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 financial position of First Bank of
Highland Park as of December 31, 1993 and 1992, and the results of its
operations and its cash flows for each of the three years in the period
ended December 31, 1993, in conformity with generally accepted accounting
principles.
As discussed in Note 10 to the financial statements, the Bank changed
its method of accounting for income taxes in 1993 to adopt the provisions of
The Financial Accounting Standards Board's Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes."
HUTTON, NELSON & MC DONALD
Oakbrook Terrace, Illinois
February 9, 1994
-1-
<TABLE>
FIRST BANK OF HIGHLAND PARK
BALANCE SHEETS
ASSETS
<CAPTION>
December 31,
1993 1992
<S> <C> <C>
Cash and due from banks (Note 2) $ 8,212,553 $ 7,846,285
Interest bearing deposits in other banks 98,000 98,000
Investment securities (market value
$52,444,163 in 1993 and $56,549,794
in 1992) (Note 3) 51,866,667 55,345,719
Federal funds sold 1,600,000 500,000
Loans, net of unearned income (Note 4) 164,638,979 187,085,769
Allowance for loan losses (Note 5) (1,598,661) (1,436,330)
Premises and equipment (Note 6) 690,330 732,603
Accrued interest receivable 1,533,451 1,960,229
Other real estate owned 1,123,376 189,782
Other assets 615,018 563,290
$228,779,713 $252,885,347
</TABLE>
<TABLE>
LIABILITIES AND SHAREHOLDERS' EQUITY
<CAPTION>
<S> <C> <C>
Deposits (Note 7)
Noninterest bearing $ 18,364,515 $ 20,001,063
Interest bearing 186,842,032 206,611,997
Total deposits 205,206,547 226,613,060
Short-term borrowings (Note 8) 900,705 5,182,108
Other liabilities 1,610,443 1,891,005
Total liabilities 207,717,695 233,686,173
Shareholders' equity
Capital stock, par value $5 per share;
authorized, issued and outstanding
350,000 shares 1,750,000 1,750,000
Surplus 16,250,000 15,250,000
Retained earnings (Note 12) 3,062,018 2,199,174
Total shareholders' equity 21,062,018 19,199,174
$228,779,713 $252,885,347
</TABLE>
The accompanying notes are an integral
part of these financial statements.
-2-
<TABLE>
FIRST BANK OF HIGHLAND PARK
STATEMENTS OF INCOME
<CAPTION>
Year Ended December 31,
1993 1992 1991
<S> <C> <C> <C>
Interest income
Interest and fees on loans $12,847,071 $14,413,571 $13,834,730
Interest on federal funds sold 126,121 40,931 631,843
Interest on investment securities
Taxable 5,266,037 5,252,429 5,877,871
Exempt from federal income tax 619,367 771,836 986,549
Interest on deposits in other banks 4,521 14,314 125,700
Total interest income 18,863,117 20,493,081 21,456,693
Interest expense
Interest on deposits 6,871,040 9,304,029 13,496,966
Interest on short-term borrowings 322,926 1,948,456 118,881
Total interest expense 10,193,966 11,252,485 13,615,847
Net interest income 8,669,151 9,240,596 7,840,846
Provision for loan losses (Note 5) 220,000 240,000 425,000
Net interest income after provision
for loan losses 8,449,151 9,000,596 7,415,846
Other income
Service charges on deposit accounts 419,010 453,095 365,136
Other operating income 249,151 206,542 479,729
Investment securities gains 125,687 646,679 (20,194)
Total other income 793,848 1,306,316 824,671
Other expenses
Salaries and employee benefits 2,075,327 2,083,748 1,956,177
Occupancy and equipment expense 302,771 285,920 385,127
Data processing 246,008 238,100 212,280
Other 1,311,907 1,420,304 1,513,783
Total other expenses 3,936,013 4,028,072 4,067,367
Income before income taxes
and cumulative effect of change
in accounting for income taxes 5,306,986 6,278,840 4,173,150
Applicable income taxes (Note 10) 1,457,254 2,018,050 1,165,274
Income before cumulative effect
of change in accounting for
income taxes 3,849,732 4,260,790 3,007,876
Cumulative effect of change in
accounting for income taxes (Note 10) 113,112
Net income $ 3,962,844 $ 4,260,790 $ 3,007,876
Average capital shares outstanding 350,000 350,000 350,000
Earnings per capital share
Income before cumulative effect of change
in accounting $11.00 $12.17 $8.59
Cumulative effect of change in accounting .32
Net income $11.32 $12.17 $8.59
</TABLE>
The accompanying notes are an integral
part of these financial statements.
-3-
<TABLE>
FIRST BANK OF HIGHLAND PARK
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
<CAPTION>
Capital Stock Retained
Shares Amount Surplus Earnings
<S> <C> <C> <C> <C>
Balance, January 1, 1991 350,000 $1,750,000 $13,250,000 $ 1,830,508
Net income 3,007,876
Cash dividends declared (2,100,000)
Transfer to surplus 1,000,000 (1,000,000)
Balance, December 31, 1991 350,000 1,750,000 14,250,000 1,738,384
Net income 4,260,790
Cash dividends declared (2,800,000)
Transfer to surplus 1,000,000 (1,000,000)
Balance, December 31, 1992 350,000 1,750,000 15,250,000 2,199,174
Net income 3,962,844
Cash dividends declared (2,100,000)
Transfer to surplus 1,000,000 (1,000,000)
Balance, December 31, 1993 350,000 $1,750,000 $16,250,000 $ 3,062,018
</TABLE>
The accompanying notes are an integral
part of these financial statements.
-4-
<TABLE>
FIRST BANK OF HIGHLAND PARK
STATEMENTS OF CASH FLOWS
<CAPTION>
Year Ended December 31,
1993 1992 1991
<S> <C> <C> <C>
Cash flows from operating activities:
Interest received $ 16,682,342 $ 21,924,818 $ 21,884,672
Fees and commissions received 664,849 694,841 631,399
Interest paid (10,525,658) (11,651,940) (13,141,641)
Cash paid to suppliers and employees(3,239,870) (4,755,269) (3,282,812)
Income taxes paid (1,889,974) (2,568,600) (853,755)
Net cash provided by operating
activities 1,691,689 3,643,850 5,237,863
Cash flows from investing activities:
Decrease in interest bearing deposits
in other banks 494,000 4,095,000
Proceeds from sales of investment
securities 13,405,944 19,524,440 8,947,424
Proceeds from maturing investment
securities 496,770,879 239,857,882 27,781,301
Proceeds from sale of equipment 12,127
Proceeds from sale of other real
estate owned 23,482 263,627 765,450
Purchase of investment securities (503,964,531)(237,316,157) (36,588,353)
Net (increase) decrease in loans 21,390,298 (19,708,575) (41,584,534)
Capital expenditures (63,577) (47,649) (204,401)
Net cash provided by (used in)
investing activities 27,562,495 3,079,695 (36,788,113)
Cash flows from financing activities:
Net increase (decrease) in deposits(21,406,513) (10,485,638) 25,311,299
Net increase (decrease) in short-term
borrowings (4,281,403) 4,784,364 (571,690)
Dividends paid (2,100,000) (2,800,000) (2,100,000)
Net cash provided by (used in)
financing activities (27,787,916) (8,501,274) 22,639,609
Net increase (decrease) in cash and
cash equivalents 1,466,268 (1,777,729) (8,910,641)
Cash and cash equivalents at beginning
of year 8,346,285 10,124,014 19,034,655
Cash and cash equivalents
at end of year $ 9,812,553 $ 8,346,285 $ 10,124,014
The accompanying notes are an integral
part of these financial statements.
-5-
FIRST BANK OF HIGHLAND PARK
STATEMENTS OF CASH FLOWS
(Continued)
<CAPTION>
Year Ended December 31,
1993 1992 1991
<S> <C> <C> <C>
Reconciliation of net income to net cash
provided by operating activities:
Net income $ 3,962,844 $ 4,260,790 $3,007,876
Adjustments to reconcile net income to
net cash provided by operating
activities:
Provision for premium amortization 486,647 1,429,911 518,423
Provision for discount accretion (3,094,200) (1,007,596) (349,920)
Provision for depreciation 105,850 115,705 109,454
Provision for loan losses 220,000 240,000 425,000
Provision for deferred taxes (99,459) (82,846)
Gain on sale of investment securities (125,687) (646,679) 20,194
(Gain) loss on sale of other real estate
owned 35,204 (143,466)
Cumulative effect of change in accounting
for income taxes (113,112)
Decrease in other assets 968,230 518,580 283,288
Increase (decrease) in other liabilities (619,424) (1,219,219) 1,367,014
Total adjustments (2,271,155) (616,940) 2,229,987
Net cash provided by operating activities $1,691,689 $ 3,643,850 $5,237,863
Supplemental schedule of noncash investing
and financing activities:
Loans transferred to other real estate
owned $ 998,823 $ 275,359 $ 171,507
Excess of note received over carrying
value of other real estate sold $ (41,747) $ 41,747
Other real estate owned transferred to
other assets $ 58,234
</TABLE>
The accompanying notes are an integral
part of these financial statements.
-6-
FIRST BANK OF HIGHLAND PARK
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The financial statements have been prepared in conformity with gen-
erally accepted accounting principles and conform to practices within the
banking industry. A description of the significant accounting policies follows:
Basis of Presentation - First Bank of Highland Park is a subsidiary of
American Holding Company, a bank holding company. These financial statements
present the accounts of the Bank only.
Statement of Cash Flows - For purposes of reporting cash flows, cash
and cash equivalents include cash and due from banks and federal funds sold.
Generally, federal funds are sold for one day periods.
Investment Securities - Investment securities are stated at cost,
adjusted for amortization of premium and accretion of discount which are recog-
nized as adjustments to interest income generally computed by the interest
method, which are recognized as adjustments to interest income. Gains or losses
on disposition are based on the net proceeds and the adjusted carrying amount of
the securities sold, using the specific identification method.
Loans - Loans are stated at the principal amount outstanding, net of
any unearned income. Interest on commercial and real estate mortgage loans is
included in interest income over the terms of the respective loans based upon
principal balances outstanding. On installment loans, the unearned income is
recognized in interest income using both the sum-of-the-months digits method and
the constant yield method. The income recognized by using the sum-of-the-months
digits method is not materially different from that obtained by using the
interest method. Accrual of interest is discontinued on a loan when management
believes, after considering economic conditions and collection efforts, that the
borrower's financial condition is such that collection of interest is doubtful.
Loan origination fees are recognized as an adjustment of the yield on the
related loan.
Allowance for Loan Losses - The allowance for loan losses is maintained
at a level considered adequate to provide for potential loan losses and is based
on management's evaluation of the loan portfolio under current economic condi-
tions. Loans are charged to the allowance for loan losses when, in management's
judgment, the loans become uncollectible.
Premises and Equipment - Premises and equipment are stated at cost less
accumulated depreciation. The provision for depreciation included in operating
expenses is computed on the straight-line method based on the estimated useful
lives of the assets.
Other Real Estate Owned - Other real estate owned represents properties
acquired by the Bank in satisfaction of customers' indebtedness. Such real
estate is recorded at the carrying amount of the related indebtedness or its
fair market value at the date of acquisition, whichever is lower. Subsequent
declines in market value, routine holding costs and losses or gains on
disposition of other real estate are included in other operating income or
expense.
-7-
FIRST BANK OF HIGHLAND PARK
NOTES TO FINANCIAL STATEMENTS
(Continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Income Taxes - The Bank files consolidated tax returns with American
Holding Company, its parent. The tax treaty with its parent provides that each
member of the consolidated group will record and pay the tax computed as if the
corporation filed its return on a separate return basis. Consequently, the Bank
pays the parent the tax benefits received through filing a consolidated return.
The provision for income taxes is based on amounts reported in the
statements of income adjusted for differences that do not enter into the
computation of taxes payable under applicable laws. Deferred taxes are
provided for temporary differences in the recognition of income and expense
for tax and financial reporting purposes. Deferred taxes in 1993 are
computed using the asset and liability approach as prescribed in FASB
Statement 109, Accounting for Income Taxes. See Note 10.
Earnings Per Capital Share - Earnings per capital share are based on
the weighted average number of shares outstanding during the period.
2. CASH AND DUE FROM BANKS
Included in cash and due from banks are amounts required to be depos-
ited with the Federal Reserve Bank. These reserve balances vary depending on
the level of customer deposits in the Bank. At December 31, 1993 and 1992, the
reserve balance requirement was approximately $1,800,000 and $600,000, respec-
tively.
3. INVESTMENT SECURITIES
<TABLE>
The amortized cost and estimated market values of investments in
securities at December 31, 1993 and 1992 are as follows:
<CAPTION>
December 31, 1993
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
<S> <C> <C> <C> <C>
U. S. Treasury securities $32,178,856 $ 76,793 $153,315 $32,102,334
U. S. Government agencies 10,911,167 76,642 17,784 10,970,025
Obligations of states and
political subdivisions 6,767,510 551,546 1,276 7,317,780
Corporate debt securities 409,568 7,932 417,500
Mortgage-backed securities 589,566 51,313 14,355 626,524
Debt securities issued by
foreign governments 1,010,000 1,010,000
$51,866,667 $764,226 $186,730 $52,444,163
-8-
FIRST BANK OF HIGHLAND PARK
NOTES TO FINANCIAL STATEMENTS
(Continued)
3. INVESTMENT SECURITIES (Continued)
<CAPTION>
December 31, 1992
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
<S> <C> <C> <C> <C>
U. S. Treasury securities $28,318,246 $ 195,188 $ $28,513,434
U. S. Government agencies 8,500,238 149,512 8,649,750
Obligations of states and
political subdivisions 8,057,923 683,243 3,168 8,737,998
Corporate debt securities 8,752,465 70,041 55,394 8,767,112
Mortgage-backed securities 706,847 164,653 871,500
Debt securities issued by
foreign governments 1,010,000 1,010,000
$55,345,719 $1,262,637 $ 58,562 $56,549,794
</TABLE>
<TABLE>
The amortized cost and estimated market value of debt securities at
December 31, 1993, by contractual maturity, are shown below. Expected maturities
will differ from contractual maturities because borrowers may have the right to
call or prepay obligations with or without call or prepayment penalties.
<CAPTION>
Estimated
Amortized Market
Cost Value
<S> <C> <C>
Due in one year or less $12,944,913 $13,049,203
Due after one year through five years 35,383,355 35,804,109
Due after five years through ten years 2,948,833 2,964,327
51,277,101 51,817,639
Mortgage - backed securities 589,566 626,524
$51,866,667 $52,444,163
</TABLE>
Proceeds from sales of investments in debt securities during 1993 and
1992 were $13,405,944 and $19,524,440, respectively. Gross gains of $141,350
and $646,679 were realized in 1993 and 1992 and gross losses of $15,663 were
realized in 1993.
Investment securities with carrying values of $16,028,640 and
$24,360,627 on December 31, 1993 and 1992, respectively, were pledged to secure
public and trust deposits, securities sold under agreements to repurchase, and
for other purposes as required or permitted by law.
-9-
FIRST BANK OF HIGHLAND PARK
NOTES TO FINANCIAL STATEMENTS
(Continued)
3. INVESTMENT SECURITIES (Continued)
The Financial Accounting Standards Board has issued Statement 115,
Accounting For Certain Investments In Debt and Equity Securities which estab-
lishes new standards of accounting and reporting for debt securities held as
assets and equity securities. Statement 115 requires that debt and equity
securities be classified into one of three reporting categories and accounted
for as follows: (1) held to maturity securities reported at amortized cost, (2)
trading securities reported at fair value, with unrealized gains and losses
included in earnings, (3) available for sale securities reported at fair value,
with unrealized gains and losses reported as a separate component of share-
holders' equity. The Bank is required to adopt Statement 115 beginning
January 1, 1994.
The Bank estimates that if this Statement had been adopted in 1993,
shareholders' equity would have been decreased by approximately $1,400.
4. LOANS
<TABLE>
A summary of loans outstanding at December 31 follows:
<CAPTION>
1993 1992
<S> <C> <C>
Commercial and industrial loan $104,524,252 $113,115,872
Real estate mortgage 54,440,667 58,767,281
Real estate - construction 2,390,737 10,078,739
Loans to individuals 3,275,283 5,087,651
Other 20,763 81,617
164,651,702 187,131,160
Unearned income 12,723 45,391
$164,638,979 $187,085,769
</TABLE>
Nonperforming loans amounted to $402,656 at December 31, 1993.
Interest income based on the original contract terms of the loans would have
approximated $23,001 in 1993.
Loans to directors of the Bank were made in the ordinary course of
business and on substantially the same terms, including rates and collateral, as
those prevailing at the time for comparable transactions with other persons and
did not involve more than the normal risk of collectibility or present other
unfavorable features.
As of December 31, 1993 and 1992 no loans with an original amount
exceeding $60,000 were outstanding to any director, officer or shareholder.
-10-
FIRST BANK OF HIGHLAND PARK
NOTES TO FINANCIAL STATEMENTS
(Continued)
4. LOANS (Continued)
Real estate mortgages with carrying values of $6,203,459 and $8,157,464
on December 31, 1993 and 1992, respectively, were pledged to secure any borrow-
ings the Bank may enter into with the Federal Reserve Bank.
At December 31, 1993 and 1992, commercial and industrial loans included
loans of approximately $98,000,000 and $101,000,000, respectively, that were
secured by leases for computers and related equipment.
5. ALLOWANCE FOR LOAN LOSSES
<TABLE>
Changes in the allowance for loan losses were as follows:
<CAPTION>
Year Ended December 31,
1993 1992 1991
<S> <C> <C> <C>
Balance, beginning of year $1,436,330$1,239,811$ 935,977
Provision for loan losses 220,000 240,000 425,000
Loan recoveries 43,930 7,109 14,935
1,700,260 1,486,920 1,375,912
Loans charged off 101,599 50,590 136,101
Balance, end of year $1,598,661$1,436,330$1,239,811
</TABLE>
6. PREMISES AND EQUIPMENT
<TABLE>
Premises and equipment are summarized as follows:
<CAPTION>
December 31,
1993 1992
<S> <C> <C>
Land $ 192,500 $ 192,500
Building and improvements 694,674 694,674
Office equipment 602,149 615,860
1,489,323 1,503,034
Accumulated depreciation 798,993 770,431
$ 690,330 $ 732,603
</TABLE>
Depreciation charged to operations amounted to $105,850 in 1993,
$115,705 in 1992 and $109,454 in 1991.
On December 9, 1993, the Bank entered into agreements to purchase from
Central Avenue Limited Partnership 6,945 square feet of parking lot together
with an easement granted to the Partnership for its use of the parking lot in
the amounts of $30,000 and $110,000, respectively. These transactions were
consummated on January 5, 1994.
-11-
FIRST BANK OF HIGHLAND PARK
NOTES TO FINANCIAL STATEMENTS
(Continued)
7. DEPOSITS
Time certificates of deposit over $100,000 included in interest bearing
deposits at December 31, 1993 and 1992 amounted to $26,630,646 and $42,011,962,
respectively.
8. SHORT-TERM BORROWINGS
Short-term borrowings consist of securities sold under agreements to
repurchase, which generally mature in one day and bear interest at money market
rates.
9. EMPLOYEE RETIREMENT BENEFIT PLAN
The Bank has a profit-sharing and 401(k) plan which covers all
employees who have completed one year of service and 1,000 hours of service
within a plan year. The Plan is administered by a committee appointed by the
Bank and is funded through a trust fund with Connecticut General Life Insurance
Company acting as Trustee. The annual contributions to the Trust are determined
by the Bank's Board of Directors.
The contribution charged to expense for the years ended December 31,
1993, 1992 and 1991 amounted to $35,025, $35,265 and $35,443, respectively.
10. INCOME TAXES
Effective January 1, 1993, the Bank prospectively adopted the provi-
sions of Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes." SFAS 109 requires recognition of deferred tax assets and
liabilities for the expected future tax consequences of temporary differences
between the financial reporting and tax basis of the Bank's assets and
liabilities. Measurement of deferred tax assets and liabilities is based upon
the provision of enacted tax laws and the effects of future changes in tax laws
or rates. The cumulative effect of this accounting change at January 1, 1993
amounted to $113,112.
-12-
FIRST BANK OF HIGHLAND PARK
NOTES TO FINANCIAL STATEMENTS
(Continued)
10. INCOME TAXES (Continued)
<TABLE>
Income tax expense is comprised of the following:
<CAPTION>
Year Ended December 31,
1993 1992 1991
<S> <C> <C> <C>
Current income tax
expense (benefit)
Federal $1,586,071 $1,899,296 $1,278,034
State (29,358) 201,600 107,353
1,556,713 2,100,896 1,385,387
Deferred income
tax benefit
Federal (81,024) (67,492) (179,317)
State (18,435) (15,354) (40,796)
(99,459) (82,846) (220,113)
$1,457,254 $2,018,050 $1,165,274
</TABLE>
<TABLE>
The reasons for the differences between applicable income taxes and the
amount computed at the applicable statutory federal tax rate of 34% follows:
<CAPTION>
Year Ended December 31,
1993 1992 1991
<S> <C> <C> <C>
Federal income tax at
statutory rate $1,804,375 $2,134,806 $1,418,871
Increase (decrease) due to
Interest exempt from
federal income taxes (195,435) (239,617) (295,717)
Adjustment of prior years (134,069)
State income taxes, net of
federal income taxes (19,570) 124,671 48,872
Sundry 1,953 (1,810) (6,752)
(347,121) (116,756) (253,597)
$1,457,254 $2,018,050 $1,165,274
</TABLE>
-13-
FIRST BANK OF HIGHLAND PARK
NOTES TO FINANCIAL STATEMENTS
(Continued)
10. INCOME TAXES (Continued)
The deferred tax assets and deferred tax liabilities are as follows at
the dates indicated:
December 31, January 1,
1993 1993
Deferred tax assets
Loan loss deduction $475,669 $390,443
Deferred loan origination
fees 64,917 71,738
Accrued vacation pay 10,847 10,847
Gross deferred tax assets 551,433 473,028
Deferred tax liabilities
Depreciation 19,905 26,243
Accumulated accretion income 19,107 33,823
Gross deferred tax liabilities 39,012 60,066
Net deferred income tax
benefits $512,421 $412,962
The significant components of deferred income tax benefit for the year
ended December 31, 1993 follows:
Deferred tax benefit $78,405
Deferred tax expense 21,054
$99,459
<TABLE>
Deferred income taxes according to the timing differences which caused
them were as follows:
<CAPTION>
Year Ended
December 31,
1992 1991
<S> <C> <C>
Accretion of discount on
investment securities $ 86,307 $(22,111)
Provision for loan losses 92,973 117,701
Loan origination fees 21,720 (9,234)
Depreciation 1,593 9,793
Accrued vacation pay 343 7,748
Accrued expense (116,216) 116,216
Provision for decline in value
of investment securities (3,874)
$ 82,846 $220,113
</TABLE>
-14-
FIRST BANK OF HIGHLAND PARK
NOTES TO FINANCIAL STATEMENTS
(Continued)
11. COMMITMENTS AND CONTINGENT LIABILITIES
The Bank is a defendant in various legal proceedings. With respect to
each of these suits, it is the opinion of both management of the Bank and the
Bank's legal counsel either that the lawsuits are without merit, or that even if
the plaintiff prevails therein, the disposition thereof will not have a material
effect on the financial condition of the Bank.
In 1987, the Bank sold a portion of certain real estate it acquired
through foreclosure to the Township of Libertyville for $480,000. The Illinois
Appellate Court, in a suit brought by the former owner, set aside the sale as
the property sold in the transaction did not meet the statute requirements
for an open spaces program. The Township has filed a second appeal and the
Appellate Court has not ruled on the appeal at present. The Bank has been
negotiating the sale of the real estate to its former owner at a price that will
prevent the Bank from incurring a loss, should the Bank reacquire the property
from the Township. The property has not been included in these financial
statements.
The Bank is a party to financial instruments with off-balance-sheet
risk in the normal course of business to meet financing needs of its customers.
These financial instruments include commitments to extend credit and standby
letters of credit. Those instruments involve, to varying degrees, elements of
credit and interest rate risk in excess of the amount recognized in the balance
sheet.
The Bank's exposure to credit loss in the event of nonperformance by
the other party to the financial instrument to extend credit and standby letters
of credit is represented by the contractual amount of those instruments. The
Bank uses the same credit policies in making commitments and conditional obliga-
tions as it does for on-balance-sheet instruments.
<TABLE>
At December 31, 1993 and 1992, financial instruments whose contract
amounts represent credit risk were:
<CAPTION>
1993 1992
<S> <C> <C>
Commitments to extend credit $21,556,376 $20,290,683
Standby letters of credit 313,252 606,046
</TABLE>
Commitments to extend credit are agreements to lend to a customer as
long as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. Since many of the commitments are expected to
expire without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. The Bank evaluates each customer's credit
worthiness on a case-by-case basis. The amount of collateral obtained if deemed
necessary by the Bank upon extension of credit is based on management's credit
evaluation of the counter party. Collateral held varies but may include
certificates of deposit, accounts receivable, inventory, property and equipment,
income producing commercial properties and real estate.
-15-
FIRST BANK OF HIGHLAND PARK
NOTES TO FINANCIAL STATEMENTS
(Continued)
11. COMMITMENTS AND CONTINGENT LIABILITIES (Continued)
Standby letters of credit are conditional commitments issued by the
Bank to guarantee performance of a customer to a third party. The credit risk
involved in issuing letters of credit is essentially the same as that involved
in extending loan facilities to customers. The Bank holds various types of
collateral supporting those commitments. At December 31, 1993, those
commitments were approximately 84 percent collateralized.
12. RESTRICTIONS ON DIVIDENDS
Provisions of Illinois banking laws place restrictions upon the amount
of dividends that can be paid by the Bank. Illinois state law requires that no
dividends may be paid in an amount greater than the net profits then on hand,
reduced by certain loan losses (as defined). Based on the Illinois limitations,
the Bank could have declared, without regulatory approval, $3,062,018 of divi-
dends at December 31, 1993. However, the availability of dividends may be
further limited because of the need to maintain capital ratios by the Bank
satisfactory to applicable regulatory agencies and by the requirement of the
Parent Company's subordinated note agreement with Firststar Bank of Milwaukee,
N.A.
13. RELATED PARTY TRANSACTIONS
At December 31, 1993 and 1992, American Holding Company had deposits
with the Bank whose balances amounted to $1,119,972 and $419,370, respectively.
Interest paid on these deposits in 1993 and 1992 amounted to $12,778 and $2,058,
respectively.
At December 31, 1993 and 1992, the major shareholders of the parent had
funds on deposit with the Bank in the approximate amount of $3,356,000 and
$3,059,000 which were accepted on the same terms and rates as those
prevailing at the time for comparable transactions with other persons. Interest
paid on these deposits in 1993 and 1992 amounted to approximately $145,600 and
$160,400. At December 31, 1993 and 1992, the Bank had sold approximately
$500,000 in security participations to these parties.
The Bank is affiliated pursuant to Section 35.2 of the Illinois Banking
Act with PNB Financial Corporation, the holding company for Park National Bank
and Trust of Chicago.
At December 31, 1993 and 1992, the Bank had sold approximately
$716,000 and $847,000 in loans to Park National Bank and Trust of Chicago and
at December 31, 1992 the Bank held approximately $815,000 in loans purchased
from Park National Bank and Trust of Chicago.
-16-
FIRST BANK OF HIGHLAND PARK
NOTES TO FINANCIAL STATEMENTS
(Continued)
14. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair
value of each class of financial instruments for which it is practicable to
estimate that value:
Investment Securities - For U. S. Treasury and U. S. Government agency
securities, fair values are based on market prices or dealer quotes. For other
investment securities, fair value equals quoted market price if available. If a
quoted market price is not available, fair value is estimated using quoted
market prices for similar securities.
Loans - The fair value of loans is estimated by discounting the future
cash flows using the current rates at which similar loans would be made to
borrowers with similar credit ratings and for the same remaining maturities.
Deposit Liabilities - The fair values of demand deposits, savings
accounts, NOW and money market accounts is the amount payable on demand at the
reporting date. The fair value of fixed-maturity certificates of deposit is
estimated using the rates currently offered for deposits of similar remaining
maturities.
Short-Term Borrowings - The fair value of short-term borrowings is the
amount payable on demand at the reporting date.
Commitments to Extend Credit and Standby Letters of Credit - The fair
value of commitments is estimated using the fees currently charged to enter into
similar agreements, taking into account the remaining terms of the agreements
and the present credit worthiness of the counter parties. For fixed rate loan
commitments fair value also considers the difference between current levels of
interest rates and the committed rates. The fair value of letters of credit is
based on fees currently charged for similar agreements or on the estimated cost
to terminate these or otherwise settle the obligations with the counter parties
at the reporting date.
-17-
FIRST BANK OF HIGHLAND PARK
NOTES TO FINANCIAL STATEMENTS
(Continued)
14. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)
<TABLE>
The estimated fair values of the Bank's financial instruments at
December 31, 1993 and 1992 are as follows:
<CAPTION>
1993 1992
Carrying Fair Carrying Fair
Amount Value Amount Value
<S> <C> <C> <C> <C>
Financial assets
Cash $ 8,212,553 $ 8,212,553 $ 7,846,285 $ 7,846,285
Interest bearing
deposits 98,000 98,000 98,000 98,000
Investment securities 51,866,667 52,444,163 55,345,719 56,549,794
Federal funds sold 1,600,000 1,600,000 500,000 500,000
Loans 164,638,980 168,242,088 187,085,769 192,080,920
Allowance for loan
losses (1,598,661) (1,436,330)
Financial liabilities
Deposits $205,206,547 $205,590,045 $226,613,060 $226,448,300
Short-term borrowings 900,705 900,705 5,182,108 5,182,108
Unrecognized financial
instruments
Commitments to extend
credit $ 21,556,376 $ 21,556,376 $ 20,290,683 $ 20,290,683
Standby letters of
credit 313,252 313,252 606,046 606,046
</TABLE>
15. SUBSEQUENT EVENT
On February 4, 1994, American Holding Company, the Bank's parent
company, executed an agreement for the merger of American with Banc One Illinois
Corporation. The obligation of American and Banc One to proceed with the
proposed merger is subject to a number of conditions. No assurances can be
given that the merger will be consummated.
-18-
<TABLE>
AMERICAN HOLDING COMPANY AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Unaudited)
ASSETS
June 30,
1994 1993
<CAPTION>
<S> <C> <C>
Cash and due from banks $ 8,272,037 $ 8,437,070
Interest bearing deposits in other banks 98,000
Investment securities
Held to maturity, at amortized cost
(market value $44,613,681 in 1994 and
$52,136,965 in 1993) 45,499,363 50,917,415
Available for sale, at fair value 9,588,569
Federal funds sold 9,900,000 600,000
Loans, net of unearned income 160,901,824 172,733,244
Allowance for loan losses (1,644,802) (1,534,349)
Premises and equipment 811,781 762,130
Accrued interest receivable 1,598,209 1,782,874
Excess cost of investment in subsidiary,
over net assets acquired 1,764,509 1,831,596
Other real estate owned 1,357,557 147,711
Other assets 676,793 558,368
--------- ---------
$238,725,840 $236,334,059
=========== ===========
</TABLE>
<TABLE>
LIABILITIES AND SHAREHOLDERS' EQUITY
<CAPTION>
<S> <C> <C>
Liabilities
Deposits
Noninterest bearing $ 18,365,798 $ 20,596,870
Interest bearing 187,765,713 188,506,447
----------- -----------
Total deposits 206,131,511 209,103,317
Short-term borrowings 7,330,971 2,040,990
Other liabilities 1,284,746 1,616,820
Notes payable 4,800,000 6,760,000
--------- ---------
Total liabilities 219,547,228 219,521,127
----------- -----------
Minority interest in subsidiary 1,204,124 1,219,290
--------- ----------
Shareholders' equity
Common stock, stated value $.01 per
share;
Class A, authorized 50,000 shares;
issued and outstanding 26,300 shares 263 263
Class B, authorized 150,000 shares
issued and outstanding 117,000 shares 1,170 1,170
Additional paid-in capital 2,236,458 2,236,458
Retained earnings 15,810,715 13,355,751
Net unrealized losses on available for sale
securities (74,118)
-------- -----------
Total shareholders' equity 17,974,488 15,593,642
---------- ----------
$238,725,840 $236,334,059
=========== ===========
The accompanying notes are an integral
part of these financial statements.
-2-
</TABLE>
<TABLE>
AMERICAN HOLDING COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Six Months Ended
June 30,
1994 1993
<CAPTION>
<S> <C> <C>
Interest income
Interest and fees on loans $5,679,646 $6,887,553
Interest on federal funds sold 138,258 45,500
Interest on investment securities
Taxable 2,642,596 2,605,019
Exempt from federal income tax 285,133 322,428
Interest on deposits in other banks 1,182 2,242
--------- ---------
Total interest income 8,746,815 9,862,742
--------- ---------
Interest expense
Interest on deposits 3,329,346 3,579,240
Interest on short-term borrowings 1,625,717 1,692,776
Interest on notes payable 157,657 203,489
--------- ---------
Total interest expense 5,112,720 5,475,505
--------- ---------
Net interest income 3,634,095 4,387,237
Provision for loan losses 50,000 120,000
--------- ---------
Net interest income after provision for
loan losses 3,584,095 4,267,237
--------- ---------
Other income
Fees for customer services 233,777 219,777
Other operating income 89,820 122,204
Investment securities gains 103,301
------- -------
Total other income 323,597 445,282
------- -------
Other expenses
Salaries and employee benefits 1,097,315 1,219,001
Occupancy and equipment expense 154,993 157,938
Data processing 124,938 122,913
Other 688,553 707,551
Minority interest in income of subsidiary 85,333 122,457
--------- --------
Total other expenses 2,151,132 2,329,860
========= =========
The accompanying notes are an integral
part of these financial statements.
</TABLE>
<TABLE>
AMERICAN HOLDING COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Continued)
Six Months Ended
June 30,
1994 1993
<CAPTION>
<S> <C> <C>
Income before income taxes and cumulative
effect of change in accounting for
income taxes $1,756,560$2,382,659
Applicable income taxes 546,942 717,738
--------- ---------
Income before cumulative effect of change
in accounting for income taxes 1,209,618 1,664,921
Cumulative effect of change in accounting
for income taxes 113,112
--------- ---------
Net income $1,209,618$1,778,033
========= =========
Average number of common shares outstanding 143,000 143,000
========= ========
Earnings per common share
Income before cumulative effect of change
in accounting $8.46 $11.64
Cumulative effect of change in accounting .79
---- ------
Net income $8.46 $12.43
==== =====
The accompanying notes are an integral
part of these financial statements.
-4-
</TABLE>
<TABLE>
AMERICAN HOLDING COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(Unaudited)
Net
Unrealized
Common Stock Additional Losses on
Class A Class B Paid-in Retained for sale
Shares Amount Shares Amount Capital Earnings Securities
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1993 26,300 $263 117,000 $1,170 $2,236,458 $11,709,218
Net income 1,778,033
Cash dividends paid (131,500)
------ ---- ------- ------ ---------- ---------- ---------
Balance, June 30, 1993 26,300 $263 117,000 $1,170 $2,236,458 $13,355,751
====== ==== ======= ===== =========
Balance, January 1, 1994 26,300 $263 117,000 $1,170 $2,236,458 $14,666,847
Net income 1,209,618
Cash dividends paid (65,750)
Net unrealized losses after
tax benefit of $38,182 74,118
------- --- ------- ----- --------- ----------- --------
26,300 $263 117,000 $1,170 $2,236,458 $15,810,715 $74,118
======= ==== ======= ===== ========== =========== =======
The accompanying notes are an integral
part of these financial statements.
-5-
</TABLE>
<TABLE>
AMERICAN HOLDING COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended June 30,
1994 1993
<CAPTION>
<S> <C> <C>
Cash flows from operating activities:
Interest received $ 7,423,700 $ 8,809,530
Fees and commissions received 323,597 341,981
Interest paid (5,200,488) (5,652,015)
Cash paid to suppliers and employees (2,030,380) (1,568,510)
Income taxes paid (681,792) (950,600)
------------ ----------
Net cash provided by (used in)
operating activities (165,363) 980,386
------------ ----------
Cash flows from investing activities:
Net decrease in interest bearing
deposits in other banks 98,000
Proceeds from sales of investment
securities 672,634
Proceeds from maturing investment
securities 219,793,967 257,253,260
Purchase of investment securities (221,875,981) (252,163,722)
Net decrease in loans 3,374,562 14,330,544
Capital expenditures (146,146) (49,776)
Proceeds from sale of other real
estate owned 150,993
----------- -----------
Net cash provided by investing
activities 1,395,395 20,042,940
----------- -----------
Cash flows from financing activities:
Net increase (decrease) in deposits 2,044,936 (17,059,923)
Net increase (decrease) in short-term
borrowings 6,430,266 (3,141,118)
Repayment of notes (1,200,000)
Dividends paid to minority interest (80,000)
Dividends paid to Class A common stock (65,750) (131,500)
----------- ----------
Net cash provided by (used in)
financing activities 7,129,452 (20,332,541)
----------- -----------
Net increase in cash and cash
equivalents 8,359,484 690,785
Cash and cash equivalents at beginning
of period 9,812,553 8,346,285
----------- -----------
Cash and cash
equivalents at end of period $ 18,172,037 $ 9,037,070
============= =============
The accompanying notes are an integral
part of these financial statements.
-6-
</TABLE>
<TABLE>
AMERICAN HOLDING COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Continued)
Six Months Ended June 30,
1994 1993
<CAPTION>
<S> <C> <C>
Reconciliation of net income to net cash
provided by (used in) operating activities:
Net income $ 1,209,618 $ 1,778,033
----------- -----------
Adjustments to reconcile net income to net
cash provided by (used in) operating
activities:
Provision for premium amortization 293,700 337,521
Provision for discount accretion (1,552,057) (1,568,088)
Provision for depreciation 53,839 58,193
Provision for loan losses 50,000 120,000
Amortization of excess cost 32,930 31,704
Cumulative effect of change in accounting
for income taxes (113,112)
Minority interest in income of subsidiary 85,333 122,457
Gain on sale of investment securities (103,301)
Gain on sale of other real estate owned (26,440)
Increase (decrease) in other assets (12,867) 642,260
Decrease in other liabilities (299,419) (325,281)
---------- ---------
Total adjustments (1,374,981) (797,647)
---------- ---------
Net cash provided by (used in) operating
activities $ (165,363)$ 980,386
=========== ===========
Supplemental schedule of noncash investing
and financing activities:
Loans transferred to other real estate
owned $358,834
========
Excess of note received over carrying
value of other real estate sold $41,747
=======
Net unrealized losses on available
for sale securities $(74,118)
=========
The accompanying notes are an integral
part of these financial statements.
-7-
</TABLE>
AMERICAN HOLDING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
The consolidated financial statements of American Holding Company
include the accounts of the Company and its majority owned subsidiary, First
Bank of Highland Park. Material intercompany accounts and transactions have
been eliminated.
In management's opinion all adjustments (consisting of only normal
recurring adjustments) necessary for a fair presentation of the financial
position and the results of operations for the interim periods have been made.
For a description of the significant policies of the Company, see the notes
contained in the annual financial statements for December 31, 1993.
2. ACCOUNTING CHANGE
Effective January 1, 1994, the Company adopted Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities." The statement requires that securities designated as
available for sale be reported at fair value with unrealized gains and losses
reported net of applicable income taxes as a separate component of shareholders'
equity. At June 30, 1994, the Company's equity in the net unrealized losses of
$74,118 was included as a separate component of shareholders' equity.
-8-
<TABLE>
FIRST BANK OF HIGHLAND PARK
BALANCE SHEETS
(Unaudited)
ASSETS
June 30,
1994 1993
<CAPTION>
<S> <C> <C>
Cash and due from banks $ 8,272,037 $ 8,437,070
Interest bearing deposits in other banks 98,000
Investment securities
Held to maturity, at amortized cost,
(market value 1994 $44,613,681,
1993 $52,136,965) 45,499,363 50,917,415
Available for sale, at fair value 9,588,569
Federal funds sold 9,900,000 600,000
Loans, net of unearned income 160,901,824 172,733,244
Allowance for loan losses (1,644,802) (1,534,349)
Premises and equipment 785,287 728,486
Accrued interest receivable 1,598,209 1,782,874
Other real estate owned 1,357,557 147,711
Other assets 642,951 443,449
---------- ----------
$236,900,995 $234,353,900
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Noninterest bearing $ 18,377,060 $ 20,650,815
Interest bearing 188,719,474 188,515,947
------------ ------------
Total deposits 207,096,534 209,166,762
Short-term borrowings 7,330,971 2,040,990
Other liabilities 1,396,764 1,803,985
----------- -----------
Total liabilities 215,824,269 213,011,737
Shareholders' equity
Capital stock, par value $5 per share;
authorized, issued and outstanding
350,000 shares 1,750,000 1,750,000
Surplus 18,250,000 16,250,000
Retained earnings 1,155,336 3,342,163
Net unrealized losses on available
for sale securities (78,610)
---------- ----------
Total shareholders'equity 21,076,726 21,342,163
----------- -----------
$236,900,995$234,353,900
=========== ===========
The accompanying notes are an integral
part of these financial statements.
-2-
</TABLE>
<TABLE>
FIRST BANK OF HIGHLAND PARK
STATEMENTS OF INCOME
(Unaudited)
Six Months Ended
June 30,
1994 1993
<CAPTION>
<S> <C> <C>
Interest income
Interest and fees on loans $5,679,646$6,887,553
Interest on federal funds sold 138,258 45,500
Interest on investment securities
Taxable 2,642,596 2,605,019
Exempt from federal income tax 285,133 322,428
Interest on deposits in other banks 1,182 2,242
--------- ---------
Total interest income 8,746,815 9,862,742
--------- ---------
Interest expense
Interest on deposits 3,345,729 3,581,682
Interest on short-term borrowings 1,625,717 1,692,776
--------- ---------
Total interest expense 4,971,446 5,274,458
--------- ---------
Net interest income 3,775,369 4,588,284
Provision for loan losses 50,000 120,000
--------- ---------
Net interest income after provision
for loan losses 3,725,369 4,468,284
--------- ---------
Other income
Service charges on deposit accounts 233,777 219,777
Other operating income 89,820 122,204
Investment securities gains 103,301
---------- --------
Total other income 323,597 445,282
---------- --------
Other expenses
Salaries and employee benefits 1,006,291 1,009,001
Occupancy and equipment expense 156,844 153,638
Data processing 124,938 122,913
Other 635,408 660,511
--------- ---------
Total other expenses 1,923,481 1,946,063
--------- ---------
Income before income taxes and cumulative
effect of change in accounting for
income taxes 2,125,485 2,967,503
Applicable income taxes 632,167 937,626
--------- ---------
Income before cumulative effect of change
in accounting for income taxes 1,493,318 2,029,877
Cumulative effect of change in accounting
for income taxes 113,112
--------- ---------
Net income $1,493,318$2,142,989
========= =========
Average capital shares outstanding 350,000 350,000
--------- ---------
Earnings per capital share
Income before cumulative effect of change
in accounting $4.27 $5.80
Cumulative effect of change in accounting .32
----- -----
Net income $4.27 $6.12
===== =====
The accompanying notes are an integral
part of these financial statements.
-3-
</TABLE>
<TABLE>
FIRST BANK OF HIGHLAND PARK
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(Unaudited)
Net
Unrealized
Losses on
Available
Capital Stock Retained for Sale
Shares Amount Surplus Earnings Securities
<CAPTION>
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1993 350,000 $1,750,000 $15,250,000 $ 2,199,174
Net income 2,142
Transfer to surplus 1,000,000 (1,000,000)
------- --------- ---------- ---------- ----------
Balance, June 30, 1993 350,000 $1,750,000 $16,250,000 $ 3,342,163
Balance, January 1, 1994 350,000 $1,750,000 $16,250,000 $ 3,062,018 $
Net income 1,493,318
Cash dividends paid (1,400,000)
Transfer to surplus 2,000,000 (2,000,000)
Net unrealized losses
after tax benefit of
$40,496 (78,610)
-------- --------- ---------- ---------- --------
Balance, June 30, 1994 350,000 $1,750,000 $18,250,000 $ 1,155,336 $(78,610)
======== ========= ========== ========== ========
The accompanying notes are an integral
part of these financial statements.
-4-
</TABLE>
<TABLE>
FIRST BANK OF HIGHLAND PARK
STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended June 30,
1994 1993
<CAPTION>
<S> <C> <C>
Cash flows from operating activities:
Interest received $ 7,423,700 $ 8,809,530
Fees and commissions received 323,597 341,981
Interest paid (5,035,376) (5,552,926)
Cash paid to suppliers and employees (1,916,677) (1,312,724)
Income taxes paid (751,408) (1,050,600)
----------- ----------
Net cash provided by operating
activities 43,836 1,235,261
----------- ----------
Cash flows from investing activities:
Decrease in interest bearing deposits
in other banks 98,000
Proceeds from sales of investment
securities 672,634
Proceeds from maturing investment
securities 219,793,967 257,253,260
Purchase of investment securities (221,875,981) (252,163,722)
Proceeds from sale of other real
estate owned 150,993
Net decrease in loans 3,374,562 14,330,544
Capital expenditures (146,146) (49,776)
----------- -----------
Net cash provided by investing
activities 1,395,395 20,042,940
----------- -----------
Cash flows from financing activities:
Net increase (decrease) in deposits 1,889,987 (17,446,298)
Net increase (decrease) in short-term
borrowings 6,430,266 (3,141,118)
Dividends paid (1,400,000)
----------- ----------
Net cash provided by (used in)
financing activities 6,920,253 (20,587,416)
----------- -----------
Net increase in cash and cash equivalents 8,359,484 690,785
Cash and cash equivalents at beginning
of period 9,812,553 8,346,285
----------- -----------
Cash and cash
equivalents at end of period $ 18,172,037 $ 9,037,070
============ ============
The accompanying notes are an integral
part of these financial statements.
-5-
</TABLE>
<TABLE>
FIRST BANK OF HIGHLAND PARK
STATEMENTS OF CASH FLOWS
(Unaudited)
(Continued)
Six Months Ended June 30,
1994 1993
<CAPTION>
<S> <C> <C>
Reconciliation of net income to net cash
provided by operating activities:
Net income $ 1,493,318 $ 2,142,989
---------- ----------
Adjustments to reconcile net income to
net cash provided by operating
activities:
Provision for premium amortization 293,700 337,521
Provision for discount accretion (1,552,057) (1,568,088)
Provision for depreciation 51,189 53,893
Provision for loan losses 50,000 120,000
Gain on sale of investment securities (103,301)
Gain on sale of other real estate owned (26,440)
Cumulative effect of change in accounting
for income taxes (113,112)
(Increase) decrease in other assets (52,195) 752,229
Decrease in other liabilities (213,679) (386,870)
--------- --------
Total adjustments (1,449,482) (907,728)
---------- ----------
Net cash provided by operating activities $ 43,836 $ 1,235,261
========== ==========
Supplemental schedule of noncash investing
and financing activities:
Loans transferred to other real estate
owned $358,734
=======
Excess of note received over carrying
value of other real estate sold $(41,747)
=======
Net unrealized losses on available for
sale securities $(78,610)
=======
The accompanying notes are an intergral
part of these financial statements.
-6-
</TABLE>
FIRST BANK OF HIGHLAND PARK
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
First Bank of Highland Park is a subsidiary of American Holding
Company, a bank holding company. These financial statements present the
accounts of the Bank only.
In management's opinion all adjustments (consisting of only normal
recurring adjustments) necessary for a fair presentation of the financial
position and the results of operations for the interim periods have been made.
For a description of the significant accounting policies of the Bank, see the
notes contained in the annual financial statements for December 31, 1993.
2. ACCOUNTING CHANGE
Effective January 1, 1994, the Bank adopted Statement of Financial
Acccounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities." The statement requires the securities designated as avail-
able for sale be reported at fair value with unrealized gains and losses
reported net of applicable income taxes as a separate conponent of share-
holders' equity. At June 30, 1994, the Bank's net unrealized loss of $78,610
was included as a separate component of shareholders' equity.
- 7 -
D. VOTING AND MANAGEMENT INFORMATION
BANC ONE will pay the costs of preparing and printing this Prospectus and Joint
Proxy Statement and AMERICAN and FIRST BANK will bear the cost of soliciting
proxies for the AMERICAN Special Meeting and the FIRST BANK Special Meeting.
Solicitation of proxies will be made in person, by mail, or by telephone or
telegraph by present and former directors, officers and employees of AMERICAN
and FIRST BANK for which no additional compensation will be paid. FIRST BANK
will bear the cost of solicitation of proxies from its shareholders. Copies of
the form of proxy and Notice and this Prospectus and Joint Proxy Statement will
be mailed to shareholders on or about , 1994.
Voting
The proxy accompanying this Prospectus and Proxy Statement is solicited by the
Boards of Directors of AMERICAN and FIRST BANK and, if properly executed and
returned, will be voted in accordance with the instructions given therein. IF
NO INSTRUCTIONS ARE GIVEN, THE PROXY WILL BE VOTED IN FAVOR OF THE PROPOSAL TO
APPROVE THE MERGER AGREEMENT OR THE CONSOLIDATION AGREEMENT. Any proxy may be
revoked at any time before it is voted by furnishing, AMERICAN or FIRST BANK,
as the case may be, with either written notice of revocation or a subsequently
dated proxy or appearing at the Special Meeting and electing to vote in person.
The AMERICAN and FIRST BANK Boards have fixed the close of business on
, 1994, as the record date for the determination of shareholders
entitled to notice of and to vote at the AMERICAN Special Meeting. As of the
record date, shares of FIRST BANK Common Stock were outstanding, each
of which entitled its holder to one vote at the FIRST BANK Special Meeting.
The affirmative vote a majority of the outstanding shares of FIRST BANK Common
Stock entitled to vote thereon is required for ratification and confirmation of
the Consolidation Agreement.
The Directors of AMERICAN and FIRST BANK have unanimously approved the Merger
Agreement. Each director of AMERICAN and FIRST BANK has indicated an intention
to vote all of his shares in favor of the Merger Agreement or the Consolidation
Agreement, as the case may be, and AMERICAN intends to vote its shares of FIRST
BANK in favor of the Consolidation Agreement.
Rights of Dissenting AMERICAN Shareholders
IT IS SUGGESTED THAT ANY AMERICAN SHAREHOLDER WHO DESIRES TO EXERCISE HIS OR
HER DISSENTERS' RIGHTS SHOULD CAREFULLY REVIEW EXHIBIT A AND CONSULT A LEGAL
ADVISOR BEFORE ELECTING OR ATTEMPTING TO EXERCISE SUCH RIGHTS.
Any shareholder of AMERICAN is entitled to dissent from the Merger and may
demand dissenters' rights pursuant to Sections 11.65 and 11.70 of the Illinois
Business Corporation Act of 1983, as amended, a copy of which Sections is
attached as Exhibit A hereto. However, a shareholder who is entitled to
dissent and obtain payment for his or her shares under Sections 11.65 and 11.70
may not challenge the corporate action creating his or her entitlement unless
the action is fraudulent with respect to the shareholder or the corporation or
constitutes a breach of a fiduciary duty owed to the shareholder.
Any shareholder contemplating the exercise of dissenters' rights is urged to
review carefully the provisions of Sections 11.65 and 11.70, particularly with
respect to the procedural steps required to exercise such rights. Dissenters'
rights may be lost if the procedural requirements of Sections 11.65 and 11.70
are not followed exactly. If dissenters' rights are lost, an AMERICAN
shareholder will receive the consideration to be received pursuant to the
Merger Agreement. A shareholder who makes a written demand for payment retains
all other rights of a shareholder until those rights are cancelled or modified
by the consummation of the Merger. Upon consummation of the Merger, a
shareholder who has made demand for payment in accordance with Sections 11.65
and 11.70 is no longer entitled to vote or exercise any other rights of a
shareholder.
Set forth below, to be read in conjunction with the full text of Sections 11.65
and 11.70 attached as Exhibit A hereto, is a summary of the procedures relating
to the exercise of dissenters' rights. The following summary does not purport
to be a complete statement of Sections 11.65 and 11.70 and is qualified in its
entirety by reference to Exhibit A.
Each shareholder electing to assert dissenters' rights under Sections 11.65 and
11.70 of the Illinois Business Corporation Act must, prior to the time the vote
on the approval of the Merger Agreement is taken, deliver to AMERICAN
(Attention: Secretary, 75 Aspen Lane, Glencoe, Illinois 60022) a written
demand for payment. Also, the shareholder must not vote "FOR" approval of the
Merger Agreement.
The return of a proxy with instructions to vote the shares represented thereby
"AGAINST" approval of the Merger Agreement will not, by itself, satisfy the
requirements of a written demand. It will, however, satisfy the provision
which states that a shareholder seeking to assert dissenter's rights cannot
vote in favor of the Merger. This requirement is also met if no proxy is
returned and such shares are not represented at the meeting or any adjournments
thereof. However, if a proxy is returned unmarked, the shares represented will
be voted "FOR" approval of the Merger Agreement and the shareholder owning such
shares will not be entitled to dissenters' rights.
Within 10 days after the date on which the Merger becomes effective, or 30 days
after the shareholder delivers the written demand for payment, whichever is
later, AMERICAN shall deliver to such shareholder the following:
(1) AMERICAN's opinion as to the estimated fair value of the shares of
AMERICAN Common Stock held by such shareholder (fair value, with respect
to a dissenter's shares, is the value of the shares immediately before
the consummation of the corporate action to which the dissenter objects
excluding any appreciation or depreciation in anticipation of the
corporation action, unless exclusion would be inequitable); and
(2) AMERICAN's latest balance sheet as of the end of a fiscal year ending
not earlier than 16 months before delivery of the statement, together
with the statement of income for that year and the latest available
interim financial statements; and
(3) A commitment to pay for the shares of the dissenting shareholder at the
estimated fair value thereof upon transmittal to AMERICAN of the
shareholders' certificate(s) or other evidence of ownership with respect
to the shares.
Upon consummation of the Merger, AMERICAN shall pay to each dissenter who
transmits to AMERICAN the certificate or other evidence of ownership of the
shares the amount AMERICAN estimates to be the fair value of the shares, plus
accrued interest, accompanied by a written explanation of how the interest was
calculated.
If the shareholder does not agree with the opinion of AMERICAN as to the
estimated fair value of the shares or the amount of interest due, the
shareholder, within 30 days from delivery of the statement of value described
above, shall notify AMERICAN in writing of the shareholder's estimate of fair
value and amount of interest due and demand payment of the difference between
the shareholder's estimate and the amount of the payment of AMERICAN.
If, within 60 days from delivery to AMERICAN of the shareholder's estimate of
fair value of the shares and interest due, AMERICAN and the dissenting
shareholder have not agreed in writing upon the fair value of the shares and
interest due, AMERICAN shall either pay the difference in value demanded by the
shareholder, with interest, or file a petition in the Circuit Court of Cook
County, Illinois requesting that the court determine the fair value of the
shares and interest due.
Each dissenter whose claim remains unsettled shall be made a party to the
proceeding and shall be served with a copy of the petition. Failure of
AMERICAN to commence an action pursuant to this procedure shall not limit or
affect the right of the dissenting shareholders to otherwise commence an action
as permitted by law.
The court has the power to appoint one or more persons as appraisers to receive
evidence and make recommendations on the question of fair value. Each
dissenter made a party to the proceeding is entitled to judgment for the
amount, if any, by which the court finds that the fair value of the dissenter's
shares, plus interest, exceeds the amount paid by AMERICAN. The judgment shall
include an allowance for interest at the average rate currently paid by
AMERICAN on its principal bank loans or, if none, at a rate the court finds to
be fair and equitable under all the circumstances, from the consummation of the
Merger to the date of payment.
All or part of the expenses for such court proceedings, exclusive of fees and
expenses of counsel and experts for the respective parties may be assessed
against AMERICAN if the fair value determined by the court materially exceeds
the amount which AMERICAN estimated to be the fair value of the shares. If the
amount which any dissenter estimated to be the fair value of the shares
materially exceeds the fair value of the shares as determined by the court,
then all or any part of the costs may be assessed against that dissenter.
The court may also assess the fees and expenses of counsel and experts for the
respective parties, in amounts the court finds equitable, as follows:
(1) Against AMERICAN and in favor of any or all dissenters if the court
finds that AMERICAN did not substantially comply with the requirements
of Section 11.70.
(2) Against either AMERICAN or a dissenter and in favor of any other party
if the court finds that the party against whom the fees and expenses are
assessed acted arbitrarily, vexatiously, or not in good faith with
respect to the rights provided by Section 11.70.
If the court finds that the services of counsel for any dissenter were of
substantial benefit to other dissenters similarly situated and that the fees
for those services should not be assessed against AMERICAN, the court may award
to that counsel reasonable fees to be paid out of the amounts awarded to the
dissenters who are benefited. Except as otherwise provided in Section 11.70,
the practice, procedure, judgment and costs shall be governed by the Illinois
Code of Civil Procedure.
A record owner of shares may assert dissenters' rights as to fewer than all the
shares recorded in such person's name only if such person dissents with respect
to all shares beneficially owned by any one person and notifies AMERICAN in
writing of the name and address of each person on whose behalf the record owner
asserts dissenters' rights. A beneficial owner of shares who is not the record
owner may assert dissenters' rights as to shares held on such person's behalf
only if the beneficial owner submits to AMERICAN the record owner's written
consent to the dissent before or at the same time the beneficial owner asserts
dissenters' rights.
Rights of Dissenting FIRST BANK Shareholders
The following summary does not purport to be a complete statement of the
procedures to be followed by FIRST BANK shareholders desiring to exercise
dissenters' rights and is qualified in its entirety by reference to the
provisions of Title 12, Section 215a of the United States Code ("Section
215a"), the full text of which is attached hereto as Exhibit B. Because the
preservation and exercise of dissenters' rights requires strict adherence to
these provisions, FIRST BANK shareholders who might desire to exercise such
rights should review these provisions carefully, timely consult their own legal
advisors and strictly adhere to the provisions' requirements.
Under the provisions of Section 215a, each FIRST BANK shareholder who objects
to the Consolidation has the right to demand that he be paid in cash the value
of his shares (as of the time the Merger becomes effective), if and when the
Merger is consummated, subject to the following conditions:
(1) A shareholder will have the right to such payment only if he either
votes against the Merger at the Special Meeting or gives written notice
to FIRST BANK at or before the Special Meeting that he dissents from the
Merger, which notice may be addressed to First Bank, Secretary, 1835
First Street, Highland Park, Illinois 60035;
(2) Any shareholder seeking to exercise dissenters' rights must, within 30
days after the effective date of the Merger, make a written request
for payment to BANK ONE ILLINOIS, the surviving entity in the Merger,
which request may be addressed to FIRST BANK's Secretary (FIRST BANK's
shareholders will be notified of the effective date of the Merger); and
(3) The written request for payment must be accompanied by surrender of
the certificate(s) representing the FIRST BANK shares in question.
Thus a FIRST BANK shareholder who does not either (a) vote against the Merger
at the Special Meeting or (b) give FIRST BANK written notice at or before the
Special Meeting that he dissents from the Consolidation, and who does not
within 30 days after the effective date of the Consolidation send Bank One
Chicago a written request for payment accompanied by the certificate(s) for the
FIRST BANK shares in question, will be deemed to have waived his right to
demand payment in cash for his FIRST BANK shares.
The value of dissenting shares will be determined by three appraisers, one to
be selected by majority vote of the owners of the shares involved, one to be
selected by the Board of Directors of BANK ONE ILLINOIS, and the third to be
chosen by the other two. The evaluation agreed upon by any two appraisers will
govern. If the appraisal is not completed within 90 days after the Merger
becomes effective, the OCC will, upon request, cause an appraisal to be made.
If the value fixed by the appraisers is not satisfactory to any dissenting
shareholder who has requested payment, the shareholder may, within five days
after being notified of such value, appeal to the OCC which will cause a
reappraisal to be made. Such reappraisal will be final and binding as to the
value of the shares of the person so appealing. The OCC's expenses in making
any such appraisal or reappraisal, as the case may be, will be borne by BANK
ONE CHICAGO. Failure to comply with any of the foregoing conditions will
result in the loss of the rights described above.
The shares of BANC ONE Common Stock which would have been delivered to any
dissenting shareholders had they not requested payment will be sold by BANK ONE
CHICAGO at an advertised public auction and, if such shares are sold at a price
greater than the amount paid to such dissenting shareholders, based on the
appraisal, the excess in such sale price will be paid to such dissenting
shareholders. The OCC has issued a Bulletin describing its appraisal methods,
a copy of which is attached hereto as Exhibit C.
The full text of Section 215a is set forth as Exhibit B to this Prospectus and
Proxy Statement. Since the foregoing description is not a complete summary of
its provisions, any shareholder who may be considering exercising his rights as
a dissenter is urged to refer to such text. The provisions of Section 215a
require strict compliance, and any FIRST BANK shareholder who wishes to object
to the Merger and demand payment for his shares should consider consulting his
own advisor.
If a shareholder fails to perfect his dissenter's rights by failing strictly to
comply with the applicable statutory requirements, he will be bound by the
terms of the Merger Agreement. An executed proxy on which no voting direction
is made will be voted FOR approval of the Consolidation, so a dissenting
shareholder who wishes to have his shares represented by a proxy at the Special
Meeting but preserve his dissenters' rights must mark his proxy card either to
vote against the Merger or to abstain from voting thereon, in addition to
complying with the other requirements as described herein.
Management and Principal Shareholders of BANC ONE
Information concerning the directors and executive officers of BANC ONE,
compensation of directors and executive officers of BANC ONE and any related
transactions in which they have an interest, together with information related
to principal shareholders of BANC ONE, is set forth in BANC ONE's Proxy
Statement dated March 11, 1994, incorporated herein by reference to BANC ONE's
Annual Report on Form 10-K for the year ended December 31, 1993. See
"Incorporation by Reference."
Principal Shareholders of AMERICAN
The following table sets forth certain information regarding the beneficial
ownership of AMERICAN Common Stock as of August 31, 1994, (i) by each person
who is known by AMERICAN to own beneficially more than 5% of any class of
AMERICAN Common Stock (ii) by each of AMERICAN'S directors and executive
officers and (iii) by all of AMERICAN's directors and executive officers as a
group. Except as indicated in the footnotes to the table, each shareholder
identified in the table possesses sole voting and investment power with respect
to all shares of AMERICAN Common Stock shown as beneficially owned by such
shareholder. The amounts and percents shown reflect duplicative beneficial
ownership of AMERICAN Common Stock.
AMERICAN
Class A
Class B Aggregate
Name of Common
Common Capital
Beneficial Owner
Number Percent
Number Percent
Percent
Bruno Bertucci 2,167 8.2% -- -- 1.5%
891 Half Day Road
Highland Park, IL 60035
Gail A. Ehrlich, Trustee 8,125 30.8 -- -- 5.7%
of the Gail A. Ehrlich
Trust dated 9/3/93
336 Sheridan road
Kenilworth, IL 60043
Norman A. Shubert 2,167 8.2 -- -- 1.5%
154 Indian Tree Drive
Highland Park, IL 60035
Donald H. Spidal 1,350 5.1 -- -- *
1111 Church Stree
Apt 205
Evanston, IL 60201
Joel Sprayregen 2,666 1 10.1 -- -- 1.9%
775 Sheridan Road
Glencoe, IL 60022
Sanford Takiff 100 * 117,000 2 100% 81.7%
75 Aspen Lane
Glencoe, IL 60022
Bobette Takiff -- -- --3 --
75 Aspen Lane
Glencoe, IL 60022
Brian Buxton -- -- 117,000 4 100% 81.7%
301 Belcher Road
Largo, Florida
All Executive Officers
and Directors as a
Group 2,267 8.6 117,000 100% 83.2%
(3 persons)
* Less than 1%
1. Includes 100 shares owned by Mr. Sprayregen's spouse.
2. As set forth in the lead-in to the foregoing table, Statutory Beneficial
Ownership is calculated in accordance with Section 13(d) of the Exchange
Act and the published rules promulgated thereunder. Mr. Takiff has the
power to appoint successor trustees ("Trustees") of a number of trusts
("Trusts") established by certain members of Mr. Takiff's and his spouse's
families for the benefit of Mr. Takiff, his spouse and certain members of
his family. The Trusts own of record all of the 117,000 shares of Class B
Common Stock. Although Mr. Takiff, by virtue of his power to appoint
successor Trustees may be deemed to possess Statutory Beneficial Ownership
of the aforementioned 117,000 shares of Class B Common Stock for purposes
of Section 13(d) of the Exchange Act, he disclaims beneficial ownership of
all such shares.
3. Mrs. Takiff is the spouse of Mr. Takiff and disclaims beneficial ownership
of the 117,000 shares of Class B Common Stock referred to in note (2) above.
4. Mr. Brian Buxton is the Trustee of the Trusts referenced in footnote 2
above. Under the terms of each of the Trusts, Mr. Buxton, as Trustee,
possesses sole voting and investment power. Mr. Buxton disclaims
beneficial ownership of all such shares.
No director or executive officer of AMERICAN will serve as a director or
executive officer of BANC ONE, Banc One Illinois or Bank One Chicago following
the Merger.
Principal Shareholders of FIRST BANK
The following table sets forth certain information regarding the beneficial
ownership of FIRST BANK Common Stock as of August 31, 1994 (i) by each person
who is known by FIRST BANK to own beneficially more than 5% of any class of
FIRST BANK Common Stock (ii) by all of AMERICAN's directors and executive
officers as a group. Except as indicated in the footnotes to the table, each
shareholder identified in the table possesses sole voting and investment power
with respect to all shares of FIRST BANK Common Stock shown as beneficially
owned by such shareholder. [The amounts and percents shown reflect duplicative
beneficial ownership of FIRST BANK Common Stock.]
FIRST BANK OF HIGHLAND PARK
Name of
Amount and Nature
Percent of Shares
Beneficial Owner
of Beneficial Ownership
Beneficially Owned
American Holding Co. 330,300 94.29%
Bruno Bertucci -- --
John Cortesi 1,614 *
J. I. Donnenberg 30 *
Randy Green 500 *
Lillian Herter 60 *
Howard Levy 500 *
Robert Schrayer -- --
Norman A. Shubert 358 *
Joel Sprayregen 358 *
Sanford Takiff 7,116 2 2
Gabriel Viti -- --
Ruth Wander -- --
Directors and Executive
Officers as a Group 10,536 3
(12 persons)
*Less than 1%
1. Excludes 333,000 shares of Common Stock owned by American Holding Co.
2. Excludes 3,600 shares of Common Stock owned by Mr. Takiff's spouse, his
children and certain members of his family.
No director or executive officer of FIRST BANK will serve as a director or
executive officer of BANC ONE, Banc One Illinois or Bank One Chicago following
the Consolidation.
AMERICAN HOLDING COMPANY
(parent company only)
BALANCE SHEET
as of June 30, 1994 and 1993
INSERT
EXHIBIT A
ILLINOIS COMPILED STATUTES ANNOTATED
Copyright (c) 1993, 1994 by The Michie Company
All rights reserved.
*** THIS SECTION IS CURRENT THROUGH PUBLIC ACT 88-535 ***
*** (1993 REGULAR SESSION) ***
CHAPTER 805. BUSINESS ORGANIZATIONS
CORPORATIONS
BUSINESS CORPORATION ACT OF 1983
ARTICLE 11. MERGER AND CONSOLIDATION -- DISSENTERS' RIGHTS
805 ILCS 5/11.65 (1994)
@ 805 ILCS 5/11.65. Right to dissent
Sec. 11.65. Right to dissent. (a) A shareholder of a corporation is entitled
to dissent from, and obtain payment for his or her shares in the event of any
of the following corporate actions:
(1) consummation of a plan of merger or consolidation or a plan of share
exchange to which the corporation is a party if (i) shareholder authorization
is required for the merger or consolidation or the share exchange by Section
11.20 [805 ILCS 5/11.20] or the articles of incorporation or (ii) the
corporation is a subsidiary that is merged with its parent or another
subsidiary under Section 11.30 [805 ILCS 5/11.30];
(2) consummation of a sale, lease or exchange of all, or substantially all,
of the property and assets of the corporation other than in the usual and
regular course of business;
(3) an amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it:
(i) alters or abolishes a preferential right of such shares;
(ii) alters or abolishes a right in respect of redemption, including a
provision respecting a sinking fund for the redemption or repurchase, of such
shares;
(iii) in the case of a corporation incorporated prior to January 1, 1982,
limits or eliminates cumulative voting rights with respect to such shares; or
(4) any other corporate action taken pursuant to a shareholder vote if the
articles of incorporation, by-laws, or a resolution of the board of directors
provide that shareholders are entitled to dissent and obtain payment for their
shares in accordance with the procedures set forth in Section 11.70 [805 ILCS
5/11.70] or as may be otherwise provided in the articles, by-laws or resolution.
(b) A shareholder entitled to dissent and obtain payment for his or her
shares under this Section may not challenge the corporate action creating his
or her entitlement unless the action is fraudulent with respect to the
shareholder or the corporation or constitutes a breach of a fiduciary duty owed
to the shareholder.
(c) A record owner of shares may assert dissenters' rights as to fewer than
all the shares recorded in such person's name only if such person dissents with
respect to all shares beneficially owned by any one person and notifies the
corporation in writing of the name and address of each person on whose behalf
the record owner asserts dissenters' rights. The rights of a partial dissenter
are determined as if the shares as to which dissent is made and the other
shares were recorded in the names of different shareholders. A beneficial
owner of shares who is not the record owner may assert dissenters' rights as
to shares held on such person's behalf only if the beneficial owner submits
to the corporation the record owner's written consent to the dissent before or
at the same time the beneficial owner asserts dissenters' rights.
ILLINOIS COMPILED STATUTES ANNOTATED
Copyright (c) 1993, 1994 by The Michie Company
All rights reserved.
*** THIS SECTION IS CURRENT THROUGH PUBLIC ACT 88-535 ***
*** (1993 REGULAR SESSION) ***
CHAPTER 805. BUSINESS ORGANIZATIONS
CORPORATIONS
BUSINESS CORPORATION ACT OF 1983
ARTICLE 11. MERGER AND CONSOLIDATION -- DISSENTERS' RIGHTS
805 ILCS 5/11.70 (1994)
@ 805 ILCS 5/11.70. Procedure to Dissent
Sec. 11.70. Procedure to Dissent. (a) If the corporate action giving rise to
the right to dissent is to be approved at a meeting of shareholders, the notice
of meeting shall inform the shareholders of their right to dissent and the
procedure to dissent. If, prior to the meeting, the corporation furnishes to
the shareholders material information with respect to the transaction that will
objectively enable a shareholder to vote on the transaction and to determine
whether or not to exercise dissenters' rights, a shareholder may assert
dissenters' rights only if the shareholder delivers to the corporation before
the vote is taken a written demand for payment for his or her shares if the
proposed action is consummated, and the shareholder does not vote in favor of
the proposed action.
(b) If the corporate action giving rise to the right to dissent is not to be
approved at a meeting of shareholders, the notice to shareholders describing the
action taken under Section 11.30 or Section 7.10 [80 5/7.10]
shall inform the shareholders of their right to dissent and the
procedure to dissent. If, prior to or concurrently with the notice, the
corporation furnishes to the shareholders material information with respect to
the transaction that will objectively enable a shareholder to determine whether
or not to exercise dissenters' rights, a shareholder may assert dissenter's
rights only if he or she delivers to the corporation within 30 days from the
date of mailing the notice a written demand for payment for his or her shares.
(c) Within 10 days after the date on which the corporate action giving rise
to the right to dissent is effective or 30 days after the shareholder delivers
to the corporation the written demand for payment, whichever is later, the
corporation shall send each shareholder who has delivered a written demand for
payment a statement setting forth the opinion of the corporation as to the
estimated fair value of the shares, the corporation's latest balance sheet as of
the end of a fiscal year ending not earlier than 16 months before the delivery
of the statement, together with the statement of income for that year and the
latest available interim financial statements, and either a commitment to pay
for the shares of the dissenting shareholder at the estimated fair value thereof
upon transmittal to the corporation of the certificate or certificates, or
other evidence of ownership, with respect to the shares, or instructions to the
dissenting shareholder to sell his or her shares within 10 days after delivery
of the corporation's statement to the shareholder. The corporation may
instruct the shareholder to sell only if there is a public market for the
shares at which the shares may be readily sold. If the shareholder does
not sell within that 10 day period after being so instructed by the
corporation, for purposes of
this Section the shareholder shall be deemed to have sold his or her shares at
the average closing price of the shares, if listed on a national exchange, or
the average of the bid and asked price with respect to the shares quoted by a
principal market maker, if not listed on a national exchange, during that
10 day period.
(d) A shareholder who makes written demand for payment under this Section
retains all other rights of a shareholder until those rights are cancelled or
modified by the consummation of the proposed corporate action. Upon consumma-
tion of that action, the corporation shall pay to each dissenter who trans-
mits to the corporation the certificate or other evidence of ownership of
the shares the amount the corporation estimates to be the fair value
of the shares, plus accrued interest, accompanied by a written explanation
of how the interest was calculated.
(e) If the shareholder does not agree with the opinion of the corporation as
to the estimated fair value of the shares or the amount of interest due, the
shareholder, within 30 days from the delivery of the corporation's statement of
value, shall notify the corporation in writing of the shareholder's estimated
fair value and amount of interest due and demand payment for the difference
between the shareholder's estimate of fair value and interest due and the amount
of the payment by the corporation or the proceeds of sale by the shareholder,
whichever is applicable because of the procedure for which the corporation opted
pursuant to subsection (c).
(f) If, within 60 days from delivery to the corporation of the shareholder
notification of estimate of fair value of the shares and interest due, the
corporation and the dissenting shareholder have not agreed in writing upon the
fair value of the shares and interest due, the corporation shall either pay the
difference in value demanded by the shareholder, with interest, or file a
petition in the circuit court of the county in which either the registered
office or the principal office of the corporation is located, requesting the
court to determine the fair value of the shares and interest due. The
corporation shall make all dissenters, whether or not residents of this State,
whose demands remain unsettled parties to the proceeding as an action against
their shares and all parties shall be served with a copy of the petition.
Nonresidents may be served by registered or certified mail or by publication as
provided by law. Failure of the corporation to commence an action pursuant to
this Section shall not limit or affect the right of the dissenting shareholders
to otherwise commence an action as permitted by law.
(g) The jurisdiction of the court in which the proceeding is commenced under
subsection (f) by a corporation is plenary and exclusive. The court may appoint
one or more persons as appraisers to receive evidence and recommend decision on
the question of fair value. The appraisers have the power described in the
order appointing them, or in any amendment to it.
(h) Each dissenter made a party to the proceeding is entitled to judgment for
the amount, if any, by which the court finds that the fair value of his or her
shares, plus interest, exceeds the amount paid by the corporation or the
proceeds of sale by the shareholder, whichever amount is applicable.
(i) The court, in a proceeding commenced under subsection (f), shall
determine all costs of the proceeding, including the reasonable compensation
and expenses of the appraisers, if any, appointed by the court under sub-
section (g),
but shall exclude the fees and expenses of counsel and experts for the
respective parties. If the fair value of the shares as determined by the court
materially exceeds the amount which the corporation estimated to be the fair
value of the shares or if no estimate was made in accordance with subsection
(c), then all or any part of the costs may be assessed against the corporation.
If the amount which any dissenter estimated to be the fair value of the shares
materially exceeds the fair value of the shares as determined by the court,
then all or any part of the costs may be assessed against that dissenter.
The court may also assess the fees and expenses of counsel and experts for the
respective parties, in amounts the court finds equitable, as follows:
(1) Against the corporation and in favor of any or all dissenters if the
court finds that the corporation did not substantially comply with the
requirements of subsections (a), (b), (c), (d), or (f).
(2) Against either the corporation or a dissenter and in favor of any other
party if the court finds that the party against whom the fees and expenses are
assessed acted arbitrarily, vexatiously, or not in good faith with respect to
the rights provided by this Section.
If the court finds that the services of counsel for any dissenter were of
substantial benefit to other dissenters similarly situated and that the fees
for those services should not be assessed against the corporation, the court
may award to that counsel reasonable fees to be paid out of the amounts
awarded to the dissenters who are benefited. Except as otherwise provided in
this Section, the practice, procedure, judgment and costs shall be governed by
the Code of Civil Procedure [735 ILCS 5/1-101 et seq.].
(j) As used in this Section:
(1) "Fair value", with respect to a dissenter's shares, means the value of
the shares immediately before the consummation of the corporate action to which
the dissenter objects excluding any appreciation or depreciation in anticipa-
tion of the corporate action, unless exclusion would be inequitable.
(2) "Interest" means interest from the effective date of the corporate
action until the date of payment, at the average rate currently paid by the
corporation on its principal bank loans or, if none, at a rate that is fair
and equitable under all the circumstances.
EXHIBIT B
Section 215a of Title 12, United States Code
(a) One or more national banking associations or one or more State banks, with
the approval of the Comptroller, under an agreement not inconsistent with
sections 215-2150 of this title, may merge into a national banking association
located within the same State, under the charter of the receiving association.
The merger agreement shall --
(1) be agreed upon in writing by a majority of the board of directors of
each association or State bank participation in the plan of merger;
(2) be ratified and confirmed by the affirmative vote of the shareholders
of each such association or State bank owning at least two-thirds of
its capital stock outstanding, or by a greater proportion of such
capital stock in the case of a State bank if
the laws of the State where it is organized so require, at a
meeting to be held on the call of the
directors, after publishing notice of the time,
place, and object of the
meeting for four consecutive weeks in a newspaper
of general circulation
published in the place where the association or State bank is located,
or, if there is no such newspaper, then in the newspaper of general
circulation published nearest thereto, and after sending such notice to
each shareholder of record by certified or registered mail at least ten
days prior to the meeting, except to those
shareholders who specifically
waive notice, but any additional notice shall be given to the
shareholders of such State bank which may be
required by the laws of the
State where it is organized. Publication of notice may be waived, in
cases where the Comptroller determines that an emergency exists
justifying such waiver, by unanimous action of the shareholders of the
association or State bank;
(3) specify the amount of the capital stock of the receiving association,
which shall not be less than that required under existing law for the
organization of a national bank in the place in which it is located and
which will be outstanding upon completion of the merger, the amount of
stock (if any) to be allocated, and cash (if any) to be paid, to the
shareholders of the association or State bank being merged into the
deceiving association; and
(4) provide that the receiving association shall be liable for all
liabilities of the association or State bank being merged into the
receiving association.
(b) If a merger shall be voted for at the called meetings by the necessary
majorities of the shareholders of each association or State bank
participating in the plan of merger, and thereafter the merger shall be
approved by the Comptroller, any shareholder of any association or State
bank to be merged into the receiving association
who has voted against such
merger at the meeting of the association or bank of which he is a
stockholder, or has given notice in writing at or prior to such meeting to
the presiding officer that he dissents from the plan of merger, shall be
entitled to receive the value of the shares so held by him which such
merger shall be approved by the Comptroller upon written request made to
the receiving association at any time before thirty days after the date of
consummation of the merger, accompanied by the surrender of his stock
certificates.
(c) The value of the shares of any dissenting shareholders shall be
ascertained, as of the effective date of the merger, by an appraisal made
by a committee of three persons, composed of (1) one selected by the vote
of the holders of the majority of the stock, the owners of which are
entitled to payment in cash; (2) one selected by the directors of the
receiving association; and (3) one selected by the two so selected. The
valuation agreed upon by any two of the three appraisers shall govern. If
the value so fixed shall not be satisfactory to any dissenting shareholder
who has requested payment, that shareholder may, within five days after
being notified of the appraised value of his shares, appeal to the
Comptroller, who shall cause a reappraisal to be made which shall be final
and binding as to the value of the shares of the appellant.
(d) If, within ninety days from the date of consummation of the merger, for any
reason one or more of the appraisers is not selected as herein provided, or
the appraisers fail to determine the value of such shares, the Comptroller
shall upon written request of any interested party cause an appraisal to be
made which shall be final and binding on all parties. The expenses of the
Comptroller in making the reappraisal or the appraisal, as the case may be,
shall be paid by the receiving association. The value of the shares
ascertained shall be promptly paid to the dissenting shareholders by the
receiving association. The shares of stock of the receiving association
which would have been delivered to such dissenting shareholders had they
not requested payment shall be sold by the receiving association at an
advertised public auction, and the receiving association shall have the
right to purchase any of such shares at such public auction, if it is the
highest bidder therefor, for the purpose of reselling such shares within
thirty days thereafter to such person or persons and at such price not less
than par as its board of directors by resolution may determine. If the
shares are sold at public auction at a price greater than the amount paid
to the dissenting shareholders,the excess in such sale price shall be paid
to such dissenting shareholders. The appraisal of such shares of stock in
any of State bank shall be determined in the manner prescribed by the law
of the State in such cases, rather than as provided in this section, if
such provision is made in the State law; and no such merger shall be in
contravention of the law of the State under which such bank is
incorporated. The provisions of this subsection shall apply only to
shareholders of (and stock owned by them in) a bank or association being
merged into the receiving association.
(e) The corporate existence of each of the merging banks or banking
associations participating in such merger shall be merged into and
continued in the receiving association and such receiving association shall
be deemed to be the same corporation as each bank or banking association
participating in the merger. All rights, franchises, and interests of the
individual merging banks or banking associations in and to every type of
property (real, personal, and mixed) and choses in action shall be
transferred to and vested in the receiving association by virtue of such
merger without any deed or other transfer. The receiving association, upon
the merger and without any order or other action on the part of the court
or otherwise, shall hold and enjoy all rights of property, franchises, and
interests, including appointments, designations, and nominations, and all
other rights and interest as trustee, executor,administrator, registrar of
stocks and bonds, guardian of estates, assignee,receiver, and committee of
estates of lunatics, and in every other fiduciary capacity, in the same
manner and to the same extent as such rights, franchises, and interests
were held or enjoyed by any one of the merging banks or banking
associations at the time of the merger, subject to the conditions
hereinafter provided.
(f) Where any merging bank or banking association, at the time of the merger,
was acting under appointment of any court as trustee, executor,
administrator, registrar of stocks and bonds, guardian of estates,
assignee, receiver, or committee of estates of lunatics, or in any other
fiduciary capacity, the receiving association shall be subject to removal
by a court of competent jurisdiction in the same manner and to the same
extent as was such merging bank or banking association prior to the
merger. Nothing contained in this section shall be considered to impair
in any manner the right of any court to remove the receiving association
and to appoint in lieu thereof a substitute trustee, executor, or other
fiduciary, except that such right shall not be exercised in such a manner
as to discriminate against national banking associations, nor shall any
receiving association be removed solely because of the fact that it is a
national banking association.
(g) Stock of the receiving association may be issued as provided by the terms
of the merger agreement, free from any preemptive rights of the
shareholders of the respective merging banks.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Officers and Directors.
Section 1701.13(E) of the Ohio General Corporation Law sets forth provisions
which define the extent to which a corporation may indemnify directors,
officers, and employees. Those provisions have been adopted by the Registrant
in Article V of Registrant's Code of Regulations. Article V provides for the
indemnification or the purchase of insurance for the benefit of the directors,
officers, employees and agents of the Registrant in the event such persons are
subject to legal action as a result of actionsin their capacities as directors,
officers, employees or agents of the Registrant. Registrant has entered into
indemnification agreements with its directors and executive officers that
provide for indemnification unless the indemnitee's conduct is finally adjudged
by a court to be knowingly fraudulent, deliberately dishonest or willful
misconduct. Registrant indemnifies other officers, employees or agents provided
such persons acted in good faith and in a manner which they reasonably believed
to be in or not opposed to the best interest of the Registrant or, with respect
to criminal actions, had no reason to believe was unlawful.
Item 21. Exhibits and Financial Statement Schedules.
The following exhibits are filed herewith except those indicated which have
been filed previously as shown below and which are incorporated herein by
reference.
2.1 Agreement and Plan of Merger Agreement dated February 4, 1994, by and
among American Holding Co., Banc One Illinois Corporation and BANC ONE
CORPORATION. *
2.2 Bank Merger Agreement dated April 19, 1994, as amended on August 1, 1994,
by and among Bank One, Chicago, National Association and FIRST BANK of
Highland Park. *
2.3 Form of Proxy to be used by American Holding Co. *
2.4 Form of Proxy to be used by FIRST BANK of Highland Park.*
3.1 Amended Articles of Incorporation of the Registrant (incorporated by
reference from Exhibit 3-1 of the Annual Report of the Registrant on
Form 10-K for the year ended December 31, 1991.)
3.2 Code of Regulations of the Registrant (incorporated by reference from
Exhibit 3-2 of the Annual Report of the Registrant on Form 10-K for the
year ended December 31, 1991).
4.1 Form of Common Stock Certificate of the Registrant (incorporated by
reference from Exhibit 4.1 to the Annual Report of the Registrant on
Form 10-K for the year ended December 31, 1989).
* To be filed by Amendment
5 Opinion of Steven Alan Bennett, General Counsel for BANC ONE CORPORATION,
regarding the legality of securities being offered, including consent. *
8 Opinion of Squire, Sanders & Dempsey regarding the Federal income tax
consequences of the Merger, including consent. *
23.1 Consent of Coopers & Lybrand. *
23.2 Consent of Hutton Nelson & McDonald. *
23.3 Consent of Steven Alan Bennett, General Counsel for BANC ONE CORPORATION
(included in Exhibit 5 hereto). *
23.4 Consent of Squire, Sanders & Dempsey (included in Exhibit 8 hereto). *
24 Power of attorney is included elsewhere in Part II of this Registration
Statement.
* To be filed by Amendment
Item 22. Undertakings.
(a) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing
of the Registrant's annual report pursuant to section 13(a) or section
15(d) of the Securities Exchange Act of 1934 that is incorporated by
reference in the Registration Statement shall be deemed to be a new
registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(b) The undersigned Registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use
of a prospectus which is a part of this Registration Statement, by any
person or party who is deemed to be an underwriter within the meaning of
Rule 145(c), the issuer undertakes that such reoffering prospectus will
contain the information called for by the applicable registration form
with respect to reofferings by persons who may be deemed underwriters, in
addition to the information called for by the other Items of the
applicable form.
(c) The Registrant hereby undertakes that every prospectus (i) that is filed
pursuant to paragraph (b) above, or (ii) that purports to meet the
requirements of Section 10(a)(3) of the Securities Act of 1933 and is
used in connection with an offering of securities subject to Rule 415,
will be filed as a part of an amendment to the Registration Statement and
will not be used until such amendment has become effective, and that for
the purpose of determining liabilities under the Securities Act of 1933,
each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(d) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act of 1933 and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in connection
with the securities being registered, the Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as expressed
in the Act and will be governed by the final adjudication of such issue.
(e) The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the Prospectus
pursuant to Items 4, 10(b), 11 or 13 of this Form, within one business
day of receipt of such request, and to send the incorporated documents by
first class mail or other equally prompt means. This includes
information contained in documents filed subsequent to the effective date
of the registration statement through the date of responding to the
request.
(f) The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and
the company being acquired involved therein, that was not the subject of
and included in the registration statement when it became effective.
(g) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the
information set forth in the registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement:
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the
termination of the offering.
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Columbus, State of Ohio,
on October 7, 1994.
BANC ONE CORPORATION
By: /s/ROMAN J. GERBER
Roman J. Gerber
Executive Vice President
POWER OF ATTORNEY
We, the undersigned officers and directors of BANC ONE CORPORATION, hereby
severally constitute and appoint Roman J. Gerber, George R. L. Meiling and
William C. Leiter, our true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for us and in our stead, in any and
all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement and all documents relating thereto,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission granting unto
said attorneys-in-fact and agents, and each of them, full power and authority
to do and perform each and every act and thing necessary or advisable to be
done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
WITNESS our hands and common seal on the dates set forth below.
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated:
Signature Title Date
/s/JOHN B. MCCOY Chairman of the Board
John B. McCoy (Principal Executive Officer
& Director)
/s/DONALD L. MCWHORTER President and Director
Donald L. McWhorter
/s/FREDERICK L. CULLEN Senior Vice President
Frederick L. Cullen (Principal Financial Officer)
/s/WILLIAM C. LEITER Controller (Principal
William C. Leiter Accounting Officer)
/s/CHARLES E. EXLEY Director
Charles E. Exley
/s/E. GORDON GEE Director
E. Gordon Gee
/s/JOHN R. HALL Director
John R. Hall
/s/LABAN P. JACKSON, JR. Director
Laban P. Jackson, Jr.
/s/JOHN G. MCCOY Director
John G. McCoy
/s/RENE C. MCPHERSON Director
Rene C. McPherson
/s/THEKLA R. SHACKELFORD Director
Thekla R. Shackelford
/s/ALEX SHUMATE Director
Alex Shumate
/s/FREDERICK P. STRATTON, JR. Director
Frederick P. Stratton, Jr.
/s/ROMEO J. VENTRES Director
Romeo J. Ventres
/s/ROBERT D. WALTER Director
Robert D. Walter
