<PAGE> 1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For The Quarterly Period Ended March 31, 1995.
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
Commission File Number 1-8552
BANC ONE CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
OHIO 31-0738296
(State or other jurisdiction of (IRS Employer I.D. Number)
incorporation or organization)
</TABLE>
100 EAST BROAD STREET, COLUMBUS, OHIO 43271-0251
(Address of principal executive offices) (Zip Code)
(614) 248-5944
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes /X/ No / /
The number of shares outstanding of the registrant's common stock, no par value,
$5 stated value, was 394,564,400 at April 28, 1995.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
FORM 10-Q
TABLE OF CONTENTS
PART I -- FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Item 1. Financial Statements
Consolidated Balance Sheet.......................................................... 3
Consolidated Statement of Income.................................................... 4
Consolidated Statement of Cash Flows................................................ 5
Supplemental Disclosure for Statement of Cash Flows................................. 6
Consolidated Statement of Changes in Stockholders' Equity........................... 7
Notes to the Financial Statements................................................... 8
Item 2. Management's Discussion and Analysis
Highlights.......................................................................... 10
Consolidated Quarterly Financial Data............................................ 11
Results of Operations............................................................... 13
Net Interest Income/Net Interest Margin.......................................... 13
Average Balances, Income and Expense, Yields and Rates........................... 14
Non-Interest Income.............................................................. 16
Non-Interest Expense............................................................. 17
Income Taxes..................................................................... 17
Balance Sheet Analysis.............................................................. 18
Securities....................................................................... 18
Loans and Leases................................................................. 18
Other Assets..................................................................... 20
Deposits......................................................................... 20
Other Liabilities................................................................ 20
Liquidity and Capital............................................................ 21
Asset Liability Management....................................................... 21
PART II -- OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K............................................ 23
SIGNATURE........................................................................... 24
</TABLE>
i
<PAGE> 3
BANC ONE CORPORATION AND SUBSIDIARIES
PART I
FINANCIAL INFORMATION
2
<PAGE> 4
<TABLE>
BANC ONE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<CAPTION>
MARCH 31, DECEMBER 31, MARCH 31,
$(THOUSANDS, EXCEPT SHARE AMOUNTS) (UNAUDITED) 1995 1994 1994
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
ASSETS
Cash and due from banks.......................................... $ 4,730,810 $ 5,073,417 $ 4,794,917
Short-term investments........................................... 1,102,748 3,539,596 1,010,002
SECURITIES:
Securities held to maturity.................................... 4,857,981 4,834,384 5,871,144
Securities available for sale (cost $11,006,000 at March 31,
1995)....................................................... 10,915,170 10,318,030 15,072,522
----------- ------------ -----------
Total securities (fair value approximates $15,801,000
at March 31, 1995).................................. 15,773,151 15,152,414 20,943,666
Loans and leases................................................. 62,495,481 61,992,912 58,631,756
Reserve for loan and lease losses.............................. 885,292 897,180 970,910
----------- ------------ -----------
Net loans and leases................................... 61,610,189 61,095,732 57,660,846
OTHER ASSETS:
Bank premises and equipment, net............................... 1,501,926 1,517,647 1,479,082
Interest earned, not collected................................. 563,543 566,840 681,471
Other real estate owned........................................ 82,080 84,355 134,849
Excess of cost over net assets of affiliates purchased......... 258,732 262,895 261,253
Other.......................................................... 2,207,279 1,629,690 1,487,309
----------- ------------ -----------
Total other assets..................................... 4,613,560 4,061,427 4,043,964
----------- ------------ -----------
Total assets........................................... $87,830,458 $ 88,922,586 $88,453,395
=========== ============ ===========
LIABILITIES
DEPOSITS:
Non-interest bearing........................................... $13,204,733 $ 14,405,707 $13,968,731
Interest bearing............................................... 52,203,157 53,684,347 50,218,371
----------- ------------ -----------
Total deposits......................................... 65,407,890 68,090,054 64,187,102
Federal funds purchased and repurchase agreements................ 6,685,235 5,186,527 9,271,427
Other short-term borrowings...................................... 3,234,449 4,435,242 4,161,595
Long-term borrowings............................................. 2,125,949 1,866,448 1,844,334
Accrued interest payable......................................... 329,011 351,293 226,745
Other liabilities................................................ 2,352,459 1,428,162 1,148,819
----------- ------------ -----------
Total liabilities...................................... 80,134,993 81,357,726 80,840,022
----------- ------------ -----------
STOCKHOLDERS' EQUITY
Preferred stock, 35,000,000 shares authorized:
Series C convertible, no par value 4,997,999, 4,997,999 and
4,998,000 shares issued and outstanding, respectively....... 249,900 249,900 249,900
Common stock, no par value, $5 stated value, 600,000,000 shares
authorized, 410,009,224, 408,985,564 and 406,592,623 shares
issued, respectively........................................... 2,050,046 2,044,928 2,032,963
Capital in excess of aggregate stated value of common stock...... 3,810,815 3,796,746 3,765,148
Retained earnings................................................ 2,082,213 1,921,256 1,618,463
Net unrealized holding losses on securities available for sale,
net of tax..................................................... (56,503) (111,517) (44,748)
Treasury stock (15,630,500, 11,999,500, and 250,000 shares,
respectively), at cost......................................... (441,006) (336,453) (8,353)
----------- ------------ -----------
Total stockholders' equity............................. 7,695,465 7,564,860 7,613,373
----------- ------------ -----------
Total liabilities and stockholders' equity............. $87,830,458 $ 88,922,586 $88,453,395
=========== ============ ===========
<FN>
The accompanying notes are an integral part of the financial statements.
</TABLE>
3
<PAGE> 5
<TABLE>
BANC ONE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31
<CAPTION>
$(THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED) 1995 1994
<S> <C> <C>
- -----------------------------------------------------------------------------------------------
INTEREST INCOME:
Interest and fees on loans and leases........................... $1,448,967 $1,315,664
Interest and dividends on:
Taxable securities........................................... 208,167 196,343
Tax exempt securities........................................ 31,614 34,598
Other interest income........................................... 28,557 8,447
---------- ----------
Total interest income................................... 1,717,305 1,555,052
INTEREST EXPENSE:
Interest on deposits:
Demand and savings deposits.................................. 218,852 159,112
Time deposits................................................ 331,078 197,122
Interest on borrowings.......................................... 163,776 96,109
---------- ----------
Total interest expense.................................. 713,706 452,343
---------- ----------
Net interest income..................................... 1,003,599 1,102,709
Provision for loan and lease losses............................... 66,517 80,172
---------- ----------
Net interest income after provision for loan and lease
losses............................................... 937,082 1,022,537
NON-INTEREST INCOME:
Income from fiduciary activities................................ 58,582 59,013
Service charges on deposit accounts............................. 127,111 114,074
Loan processing and servicing income............................ 118,432 88,393
Securities gains................................................ 9,786 3,453
Other........................................................... 148,269 106,727
---------- ----------
Total non-interest income............................... 462,180 371,660
NON-INTEREST EXPENSE:
Salaries and related costs...................................... 442,950 441,987
Net occupancy expense, exclusive of depreciation................ 44,013 41,411
Equipment expense............................................... 26,907 29,428
Taxes other than income and payroll............................. 21,972 2,358
Depreciation and amortization................................... 74,730 67,981
Outside services and processing................................. 110,894 108,037
Marketing and development....................................... 36,844 37,490
Communication and transportation................................ 66,063 58,472
Other........................................................... 103,661 98,524
---------- ----------
Total non-interest expense.............................. 928,034 885,688
---------- ----------
Income before income taxes........................................ 471,228 508,509
INCOME TAX PROVISION:
Income excluding securities transactions........................ 165,016 180,350
Securities transactions......................................... 3,694 1,209
---------- ----------
Provision for income taxes.............................. 168,710 181,559
---------- ----------
Net income........................................................ $ 302,518 $ 326,950
========== ==========
Net income per common share....................................... $ .75 $ .79
========== ==========
Weighted average common shares outstanding (000).................. 396,266 407,390
========== ==========
<FN>
The accompanying notes are an integral part of the financial statements.
</TABLE>
4
<PAGE> 6
BANC ONE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31
<TABLE>
<CAPTION>
$(THOUSANDS) (UNAUDITED) 1995 1994
<S> <C> <C>
- -----------------------------------------------------------------------------------------------
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Net Income........................................................ $ 302,518 $ 326,950
ADJUSTMENTS:
Provision for loan and lease losses.......................... 66,517 80,172
Depreciation and amortization................................ 74,730 67,981
Amortization and accretion................................... (32,165) 28,479
Net decrease in trading account.............................. 41,865 27,978
Net decrease in mortgage loans held for sale................. 80,667 427,613
Net change in deferred loan fees and costs................... (1,178) (5,172)
Securities gains............................................. (9,786) (3,453)
Gain on the sale of banks.................................... (47,247)
Loss on consumer loan mark to market......................... 51,586
Gain on sale of loans and other assets....................... (8,330) (7,206)
Net increase in other assets................................. (60,556) (75,693)
Net increase in other liabilities............................ 249,855 109,762
Net change in deferred income taxes.......................... 42,638 58,344
----------- -----------
Net cash provided by operating activities............... 751,114 1,035,755
----------- -----------
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES:
Purchases of securities available for sale...................... (3,395,234) (6,688,049)
Purchases of securities held to maturity........................ (381,118) (300,487)
Maturities of securities available for sale..................... 2,417,777 655,857
Maturities of securities held to maturity....................... 347,295 914,554
Proceeds from the sales of securities available for sale........ 543,349 2,430,097
Net increase in loans, excluding sales and purchases............ (1,135,462) (1,427,710)
Proceeds from the sales of loans and other assets............... 172,631 48,239
Purchases of loans and related premiums......................... (244,799) (206,753)
Net decrease in short-term investments.......................... 2,495,368 47,272
Additions to bank premises and equipment........................ (66,213) (77,212)
Net proceeds from the sale of banks............................. 95,698
Net cash acquired in acquisitions............................... 42,413
All other investing activities -- net........................... (35,448) (3,649)
----------- -----------
Net cash (used in) provided by investing activities..... 856,257 (4,607,841)
----------- -----------
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES:
Net decrease in demand deposit, money market and savings
accounts..................................................... (1,481,433) (31,236)
Net decrease in time deposits................................... (669,241) (698,178)
Net increase in short-term borrowings........................... 295,421 4,255,432
Proceeds from issuance of long-term borrowings.................. 320,110 50,131
Repayment of long-term borrowings............................... (60,336) (11,072)
Cash dividends paid............................................. (262,371) (233,627)
Purchase of treasury stock...................................... (104,553) (8,353)
Other, net decrease............................................. 12,425 34,017
----------- -----------
Net cash provided by (used in) financing activities..... (1,949,978) 3,357,114
----------- -----------
Decrease in cash and cash equivalents............................. (342,607) (214,972)
Cash and cash equivalents at January 1............................ 5,073,417 5,009,889
----------- -----------
Cash and cash equivalents at March 31............................. $ 4,730,810 $ 4,794,917
========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE> 7
<TABLE>
BANC ONE CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL DISCLOSURES FOR STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31
<CAPTION>
$(THOUSANDS) (UNAUDITED) 1995 1994
<S> <C> <C>
- ----------------------------------------------------------------------------------------------
Transfer from loans to other real estate owned......................... $ 20,121 $ 17,647
======== ========
Net increase in trade date accounting entries for investment
securities........................................................... $ 88,766 $138,568
======== ========
Loans issued to facilitate the sale of OREO Properties................. $ 1,179 $ 3,276
======== ========
Additional Disclosures:
Consolidated:
Interest Paid........................................................ $732,736 $464,699
======== ========
Income Taxes Paid.................................................... $ 6,112 $ 20,876
======== ========
<FN>
The accompanying notes are an integral part of the financial statements.
</TABLE>
6
<PAGE> 8
<TABLE>
BANC ONE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31
<CAPTION>
$(THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED) 1995 1994
<S> <C> <C>
- -----------------------------------------------------------------------------------------------
BALANCE, BEGINNING OF PERIOD........................................ $7,564,860 $7,433,170
Net income.......................................................... 302,518 326,950
Exercise of stock options, net of shares purchased.................. (286) (1,350)
Shares issued in acquisitions....................................... 3,647 5,794
Pooled affiliate stock issuance, sales of stock to employee benefit
plans and other................................................... 12,711 29,653
Cash dividends:
Corporation:
Common ($.34 and $.31 per share)............................... (134,073) (118,350)
Series C Preferred ($.88 per share)............................ (4,373) (4,373)
Pooled affiliates................................................. (5,020)
Change in unrealized fair value adjustment on securities available
for sale, net of tax.............................................. 55,014 (44,748)
Purchase of treasury stock.......................................... (104,553) (8,353)
---------- ----------
BALANCE, MARCH 31................................................... $7,695,465 $7,613,373
========== ==========
<FN>
The accompanying notes are an integral part of the financial statements.
</TABLE>
7
<PAGE> 9
BANC ONE CORPORATION AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
1. The accompanying financial statements are unaudited. However, in the opinion
of management, they contain the adjustments (all of which are normal and
recurring in nature) necessary to present fairly the financial position and
the results of operations. The notes to the financial statements contained in
the Annual Report for December 31, 1994 should be read in conjunction with
these financial statements. "The Corporation" is defined as parent company
only. "BANC ONE" is defined as the Corporation and all significant
majority-owned subsidiaries. Certain prior period amounts have been
reclassified to compare with current presentation.
2. The provision for income taxes is at a rate which management believes will
approximate the effective rate for the year.
3. During the first quarter of 1995, the Corporation completed the sale of its
four Michigan banks which had combined assets of $614 million as of December
31, 1994. The sale resulted in the recognition of a $47 million gain during
the first quarter.
On March 10, 1995, the Corporation acquired all of the outstanding shares of
1st*Bank of Coppell, Texas, in exchange for 500,000 shares of the
Corporation's common stock. 1st*Bank had total assets of approximately $143
million at February 28, 1995.
4. In January 1994, the Board of Directors approved the purchase of up to 18
million shares of the Corporation's common stock for use in the acquisition
of Premier Bancorp, Inc., in Baton Rouge, Louisiana. As of March 31, 1995,
the Corporation had acquired and held 15.6 million of its shares for this
purpose.
The Corporation has an option to purchase Premier Bancorp between June 30,
1995 and March 31, 1997. Premier Bancorp had assets of approximately $5.4
billion at December 31, 1994.
5. Mortgage loans held for sale were $275 million, $356 million and $818 million
at March 31, 1995, December 31, 1994 and March 31, 1994, respectively. Such
loans are carried at the lower of cost or market determined on an aggregate
basis, resulting in the recognition of a $103 thousand loss at March 31,
1995. Consumer loans of approximately $1.2 billion were held for sale at
March 31, 1995. Consumer loans held for sale were adjusted to market on the
lower of cost or market basis resulting in the recognition of a $52 million
loss at March 31, 1995.
6. BANC ONE adopted Statements of Financial Accounting Standards No.'s 114 and
118 (SFAS 114), "Accounting by Creditors for Impairment of a Loan" and
"Accounting by Creditors for Impairment of a Loan -- Income Recognition and
Disclosures" as of January 1, 1995. SFAS 114 requires that certain impaired
loans be measured based either on the present value of expected future cash
flows discounted at the loan's effective interest rate, or the loan's
observable market price, or the fair value of the collateral if the loan is
collateral dependent. The adoption of SFAS 114 did not result in additional
provisions for loan losses primarily because the majority of impaired loan
valuations continue to be based on the fair value of collateral.
The provision for loan and lease losses charged to expense is based upon each
affiliate's past loan and lease loss experience and an evaluation of
potential losses in the current loan and lease portfolio, including the
evaluation of impaired loans under SFAS 114. A loan is considered to be
impaired when, based upon current information and events, it is probable that
BANC ONE will be unable to collect all amounts due according to the
contractual terms of the loan. Impairment is primarily measured based on the
fair value of the loans' collateral. Impairment losses are included in the
provision for loan and lease losses. SFAS 114 does not apply to large groups
of smaller balance homogeneous loans that are collectively evaluated for
impairment, except for those loans restructured under a troubled debt
restructuring. Loans collectively evaluated for impairment include certain
smaller balance commercial loans, consumer loans, residential real estate
loans, and credit card loans, and are not included in the data that follows.
8
<PAGE> 10
BANC ONE CORPORATION AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
The following table summarizes impaired loan information.
<TABLE>
<CAPTION>
MARCH 31,
$(THOUSANDS) 1995
<S> <C>
-------------------------------------------------------------------------------
Impaired loans............................................. $219,001
Impaired loans with related reserve for loan losses
calculated under SFAS 114................................ 177,745
Impaired loans with no related reserve for loan losses
calculated under SFAS 114................................ 41,256
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, 1995
<S> <C>
-------------------------------------------------------------------------------
Average impaired loans..................................... $214,934
Interest income recognized on impaired loans............... 1,563
Cash basis interest income recognized on impaired loans.... 1,115
</TABLE>
Interest payments on impaired loans are typically applied to principal unless
collectability of the principal amount is fully assured, in which case
interest is recognized on the cash basis. Interest may be recognized on the
accrual basis for certain troubled debt restructurings which are included in
the impaired loan data above.
Commercial loans are placed on nonaccrual at the time the loan is 90 days
delinquent unless the credit is well secured and in the process of
collection. Commercial loans are charged off at the time the loan becomes 180
days delinquent unless the loan is well secured and in the process of
collection, or other extenuating circumstances support collection.
Residential real estate loans are typically placed on nonaccrual at the time
the loan is 120 days delinquent. Credit card loans and other unsecured
personal credit lines are typically charged off no later than 180 days
delinquent. Other consumer loans are typically charged off at 120 days
delinquent. In all cases, loans must be placed on nonaccrual or charged off
at an earlier date if collection of principal or interest is considered
doubtful.
All interest accrued but not collected for loans that are placed on
nonaccrual or charged off is reversed to interest income. The interest on
these loans is accounted for on the cash basis or cost recovery method, until
qualifying for return to accrual. Loans are returned to accrual status when
all the principal and interest amounts contractually due are reasonably
assured of repayment within a reasonable time frame and when the borrower has
demonstrated payment performance of cash or cash equivalents for a minimum of
six months.
A loan is considered restructured when BANC ONE allows certain concessions to
a financially troubled debtor that would not normally be considered.
7. In May 1995, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standard No. 122, "Accounting for Mortgage Servicing
Rights" (SFAS 122). SFAS 122 amends Statement of Financial Accounting
Standard No. 65, "Accounting for Certain Mortgage Banking Activities," to
require that mortgage banking enterprises recognize as separate assets rights
to service mortgage loans for others, however those mortgage servicing rights
are acquired. SFAS 122 also requires that mortgage banking enterprises assess
capitalized mortgage servicing rights based on the fair value of those rights
on a disaggregated basis. SFAS 122 applies to fiscal years beginning after
December 15, 1995 however, earlier application is encouraged. BANC ONE has
yet to determine whether to adopt SFAS 122 early; however, if adopted during
1995 the impact on BANC ONE's financial results is not expected to be
material.
9
<PAGE> 11
MANAGEMENT'S DISCUSSION AND ANALYSIS
This discussion should be read in conjunction with the financial
statements, notes and tables included elsewhere in this report and in the 1994
BANC ONE CORPORATION Annual Report on Form 10-K.
HIGHLIGHTS
- - Net income for the first quarter of 1995 was $303 million, or $.75 per share.
Net income for the first quarter of 1994 was $327 million, or $.79 per share.
- - Taxable equivalent net interest income decreased to $1.03 billion in the first
quarter 1995 from $1.12 billion in the first quarter of 1994. The net interest
margin of 5.33% for the first quarter of 1995 decreased from 6.05% for the
first quarter of 1994. Excluding the contribution from the seasonal refund tax
anticipation loans, the net interest margin was 5.20% for the first quarter of
1995 as compared to 5.85% for the first quarter of 1994.
- - Off-balance sheet investment products reduced net interest income by $53
million for the quarter ended March 31, 1995. Off-balance sheet investment
products increased net interest income by $100 million for the same period in
1994. Off-balance sheet investment products reduced net interest income by $40
million for the quarter ended December 31, 1994. The net unrealized loss on
off-balance sheet investment products declined to $718 million at March 31,
1995 from $1.3 billion at December 31, 1994.
- - Return on average assets was 1.42% and the return on average common equity was
16.61% for the first quarter 1995. Return on average assets was 1.57% and the
return on average common equity was 17.81% for the first quarter 1994.
- - BANC ONE maintained generally high credit quality during the first quarter of
1995. Non-performing assets were $450 million at March 31, 1995, a decrease of
$151 million from a year ago.
- - BANC ONE recorded a gain of $47 million on the sale of its four Michigan banks
which had combined assets of $614 million at December 31, 1994.
- - Based on the decision to sell $1.2 billion of low yielding consumer loans
during the second quarter of 1995, BANC ONE recognized a mark to market loss
of $52 million. A reduction of the loan loss reserve of $10 million was also
recognized related to the sale of the loans. BANC ONE expects to benefit from
the reinvestment of the loan sale proceeds in higher yielding assets.
10
<PAGE> 12
BANC ONE CORPORATION AND SUBSIDIARIES
CONSOLIDATED QUARTERLY FINANCIAL DATA
<TABLE>
<CAPTION>
QUARTERS
-----------------------------------------------------------------
1995 1994
--------- ---------------------------------------------------
$(MILLIONS) (UNAUDITED) FIRST FOURTH THIRD SECOND FIRST
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
PERIOD END BALANCES
Loans and leases (net of
unearned income)............. $62,495.5 $61,992.9 $61,647.4 $60,512.5 $58,631.8
Earning assets.................. 78,486.1 79,787.7 78,752.8 80,334.2 79,614.5
Total assets.................... 87,830.5 88,922.6 88,163.7 89,812.7 88,453.4
Total deposits.................. 65,407.9 68,090.1 65,909.7 66,218.5 64,187.1
Long-term borrowings............ 2,125.9 1,866.4 1,837.1 1,844.4 1,844.3
Reserve for loan and lease
losses....................... 885.3 897.2 955.2 955.1 970.9
Total stockholders' equity...... 7,695.5 7,564.9 7,763.1 7,688.9 7,613.4
CONDENSED INCOME STATEMENT
Net interest income(1).......... 1,028.00 1,022.32 1,052.28 1,077.52 1,124.70
Provision for loan and lease
losses....................... 66.52 35.62 75.94 50.54 80.17
--------- --------- --------- --------- ---------
Net funds function(1)........... 961.48 986.70 976.34 1,026.98 1,044.53
NON-INTEREST INCOME
Income from fiduciary
activities................. 58.58 53.88 53.45 59.28 59.01
Service charges on
deposits................... 127.11 128.15 125.03 116.63 114.08
Loan processing and servicing
income..................... 118.43 121.01 93.06 90.96 88.39
Securities transactions...... 9.79 (254.27) (12.98) 2.74 3.45
Other non-interest income.... 148.27 113.98 174.61 103.26 106.73
--------- --------- --------- --------- ---------
Total non-interest
income................ 462.18 162.75 433.17 372.87 371.66
NON-INTEREST EXPENSE
Salaries and related costs... 442.95 459.15 427.29 425.24 441.99
Other non-interest expense... 485.08 582.39 530.87 457.35 443.70
--------- --------- --------- --------- ---------
Total non-interest
expense............... 928.03 1,041.54 958.16 882.59 885.69
Taxable equivalent adjustment... 24.40 21.04 22.33 22.81 21.99
--------- --------- --------- --------- ---------
Income before income taxes...... 471.23 86.87 429.02 494.45 508.51
Income tax provision............ (168.71) (22.49) (145.81) (163.88) (181.56)
--------- --------- --------- --------- ---------
Net income...................... $ 302.52 $ 64.38 $ 283.21 $ 330.57 $ 326.95
======== ======== ======== ======== ========
Net income available to common
shareholders.................... $ 298.15 $ 60.00 $ 278.84 $ 326.20 $ 322.58
======== ======== ======== ======== ========
</TABLE>
- ---------------
(1) Fully taxable equivalent basis. The Federal statutory rate used was 35% for
all periods presented.
11
<PAGE> 13
BANC ONE CORPORATION AND SUBSIDIARIES
CONSOLIDATED QUARTERLY FINANCIAL DATA
<TABLE>
<CAPTION>
QUARTERS
--------------------------------------------------
1995 1994
$(MILLIONS, EXCEPT PER SHARE DATA) ------ ---------------------------------------
(UNAUDITED) FIRST FOURTH THIRD SECOND FIRST
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------
KEY RATIOS
Return on average assets(1)................. 1.42% .29% 1.27% 1.50% 1.57%
Return on average common equity(1).......... 16.61 3.20 14.82 17.80 17.81
Average common equity to assets............. 8.40 8.52 8.46 8.32 8.70
Tier I capital ratio........................ 10.23 9.93 10.51 10.36 10.59
Total risk adjusted capital ratio........... 13.62 13.33 13.97 13.81 14.17
Leverage ratio.............................. 8.58 8.28 8.53 8.44 8.61
MARGIN ANALYSIS(1)(2)(3)
Interest income............................. 9.04 8.44 8.27 8.15 8.48
Interest expense............................ 3.71 3.29 3.02 2.72 2.43
------ ------ ------ ------ ------
Net interest income......................... 5.33 5.15 5.25 5.43 6.05
Provision for loan and lease losses......... .34 .18 .38 .25 .43
------ ------ ------ ------ ------
Net funds function.......................... 4.99 4.97 4.87 5.18 5.62
CREDIT ANALYSIS
Net charge-offs to average loans and
leases(1)................................ .49 .59 .50 .49 .54
Ending reserves to loans and leases......... 1.42 1.45 1.55 1.58 1.66
Nonperforming assets:
Total.................................... $449.6 $465.7 $524.2 $523.7 $600.2
Percent of total loans and leases........ .72% .75% .85% .87% 1.02%
Loans delinquent 90 days or more(4):
Total.................................... $172.9 $173.5 $195.4 $211.9 $189.0
Percent of total loans and leases........ .28% .28% .32% .35% .32%
PER SHARE DATA
Net income.................................. $ .75 $ .15 $ .68 $ .80 $ .79
Cash dividends declared..................... .34 .31 .31 .31 .31
Book value.................................. $18.88 $18.43 $18.52 $18.25 $18.12
Common stock price:
High..................................... $30.13 $30.50 $35.50 $38.00 $35.47
Low...................................... 25.13 24.13 29.50 30.75 31.88
Close.................................... $28.50 $25.38 $30.00 $34.25 $33.00
Preferred Series C stock price:
High..................................... $54.25 $57.50 $63.75 $68.25 $68.75
Low...................................... 49.63 49.00 57.00 57.50 60.50
Close.................................... $51.75 $49.63 $57.50 $62.50 $61.00
SHARES TRADED (000)
Common...................................... 48,353 72,342 46,939 55,251 68,124
Preferred Series C.......................... 1,233 1,679 892 1,200 2,851
</TABLE>
- ---------------
(1) Ratios presented on an annualized basis.
(2) Fully taxable equivalent basis. The Federal statutory rate used was 35% for
all periods presented.
(3) As a percent of average earning assets.
(4) Excluding nonperforming loans.
12
<PAGE> 14
RESULTS OF OPERATIONS
NET INTEREST INCOME/NET INTEREST MARGIN
BANC ONE's net interest income on a taxable equivalent basis was $1.03
billion in the first quarter of 1995, compared with $1.12 billion in the first
quarter of 1994. Net interest margin was 5.33% for the first quarter of 1995,
compared with 6.05% for the first quarter of 1994. The decrease was
substantially due to three items: 1) a lower contribution from the refund
anticipation loan (RAL) program as compared to the first quarter 1994, 2) a
negative contribution from off-balance sheet investment products as compared to
a positive contribution in the first quarter of 1994, and 3) the effects of the
sale of loans with servicing retained.
Net interest income is also affected by the growth, pricing, mix and
maturity of interest earning assets and interest bearing liabilities, as well as
other factors including loan quality. Total deposits decreased from December 31,
1994, and the retail deposit mix continues to change as consumers shift funds
into products offering higher yields. BANC ONE continues to use other short-term
borrowings to fund growth in loans and other interest earning assets. Despite
competitive pricing on interest earning assets and interest bearing liabilities,
and excluding the effects of off-balance sheet investment products and the RAL
program, BANC ONE achieved a 17 basis point increase in the margin compared to
the quarter ended March 31, 1994. Individual components of net interest income
and net interest margin are presented in the Summary of Average Balances, Income
and Expenses, Yields and Rates presented in Table 1 on pages 14 and 15.
During 1995 the Internal Revenue Service made program changes resulting in
the reduced availability of information used by BANC ONE to underwrite RAL
transactions. As a result, BANC ONE altered its RAL program during the first
quarter of 1995 to shift the emphasis from making loans to receiving fee income
for transmitting tax returns electronically. As a result, fee income related to
transmitting tax returns electronically increased $10 million during the first
quarter of 1995 (see Non-interest Income discussion that follows). During the
first quarter of 1995, BANC ONE originated $382 million of these very short
term, high-yielding loans as compared to originations of $2.2 billion in the
first quarter of 1994. The loans made under the RAL program generated average
balances during the first quarter of 1995 and 1994 of $47 million and $271
million, respectively. The new program for RAL's and transmitting tax returns
electronically for 1995 produced net income for the three months ended March 31,
1995 comparable to the RAL program for the same period in 1994.
BANC ONE manages its interest rate sensitivity using both on-balance sheet
and off-balance sheet investment products. Off-balance sheet investment products
are generally used to modify the interest rate characteristics of on-balance
sheet assets or liabilities in order to manage sensitivity to interest rate
movements. These off-balance sheet investment products, primarily interest rate
swaps, reduced net interest income by $53 million for the first quarter of 1995
as compared to increasing net interest income by $100 million for the same
period in 1994. Off-balance sheet investment products reduced net interest
income $40 million for the quarter ended December 31, 1994. The net unrealized
loss on the off-balance sheet investment portfolio declined to $718 million at
March 31, 1995 from $1.3 billion at December 31, 1994. These products
effectively alter on-balance sheet yields and costs. In the current interest
rate environment, it is anticipated that these off-balance sheet investment
products will continue to reduce yields on interest earning assets and increase
interest rates on interest bearing liabilities during 1995. See page 21 and the
1994 Annual Report for a more complete discussion of asset/liability management.
In the future, interest income should be enhanced from the reinvestment of
the proceeds from the sale of $486 million in low yielding mortgage and asset
backed securities during March of 1995 and the sale of $1.2 billion in low
yielding consumer loans during the second quarter of 1995 into higher yielding
investments. Additionally, increases in loan processing and servicing income is
expected to partially offset decreases in net interest income from the
anticipated sale of $375 million in credit card receivables during the second
quarter of 1995 due to servicing retained on loans sold. Loan sale transactions
typically result in the elimination of loan loss reserve and charge-offs related
to the loans sold.
13
<PAGE> 15
<TABLE>
AVERAGE BALANCES, INCOME AND EXPENSE, YIELDS AND RATES(1)
<CAPTION>
1995 1994
FIRST QUARTER FOURTH QUARTER
--------------------------------- --------------------------------
AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/
$(THOUSANDS) BALANCE EXPENSE RATE BALANCE EXPENSE RATE
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------
ASSETS:
Short-term investments........... $ 1,898,213 $ 30,294 6.47% $ 1,875,752 $ 26,628 5.63%
SECURITIES:(3)
Taxable........................ 13,193,528 208,735 6.42 14,078,784 206,534 5.82
Tax-exempt..................... 2,145,188 47,745 9.03 2,248,092 48,891 8.63
----------- ---------- ----------- ----------
Total securities....... 15,338,716 256,480 6.78 16,326,876 255,425 6.21
LOANS AND LEASES:(2)
Commercial..................... 16,570,122 332,355 8.13 16,087,269 302,644 7.46
Real estate.................... 19,172,470 424,024 8.97 18,872,192 412,080 8.66
Consumer, net.................. 18,911,300 438,775 9.41 19,053,380 412,032 8.58
Credit card.................... 5,806,591 235,047 16.42 6,166,139 241,415 15.53
Leases, net.................... 1,354,105 24,731 7.41 1,254,787 25,006 7.91
Reserve for loan and lease
losses...................... (897,228) (927,549)
----------- ---------- ----------- ----------
Net loans and leases............. 60,917,360 1,454,932 9.69 60,506,218 1,393,177 9.14
----------- ---------- ----------- ----------
Total earning assets............. 78,154,289 1,741,706 9.04 78,708,846 1,675,230 8.44
Other assets(3).................. 8,491,705 8,563,804
----------- -----------
Total assets..................... $86,645,994 $87,272,650
=========== ===========
LIABILITIES:
DEPOSITS:
Non-interest bearing demand.... $12,922,201 $13,673,625
Interest bearing demand........ 8,928,081 49,618 2.25 9,142,563 46,726 2.03
Savings........................ 6,735,705 50,742 3.06 7,309,707 51,620 2.80
Money market savings
accounts.................... 12,548,007 118,492 3.83 12,349,423 104,408 3.35
Time deposits:
CDs less than $100,000...... 19,185,642 256,111 5.41 18,647,867 227,376 4.84
CDs $100,000 and over:
Domestic.................. 3,769,780 47,482 5.11 3,281,183 37,448 4.53
Foreign................... 1,959,255 27,485 5.69 1,740,769 21,805 4.97
----------- ---------- ----------- ----------
Total deposits......... 66,048,671 549,930 3.38 66,145,137 489,383 2.94
Borrowed Funds:
Short-term..................... 9,310,890 127,328 5.55 10,126,610 124,426 4.87
Long-term...................... 2,056,018 36,448 7.19 1,842,654 39,100 8.42
----------- ---------- ----------- ----------
Total borrowed funds........... 11,366,908 163,776 5.84 11,969,264 163,526 5.42
----------- ---------- ----------- ----------
Total interest bearing
liabilities.................... 64,493,378 713,706 4.49 64,440,776 652,909 4.02
Other liabilities................ 1,700,296 1,468,452
----------- -----------
Total liabilities................ 79,115,875 79,582,853
Preferred stock.................. 249,900 249,900
Common stockholders' equity...... 7,280,219 7,439,897
----------- -----------
Total liabilities and
stockholders' equity........... $86,645,994 $87,272,650
=========== ===========
Net interest income.............. 1,028,000 5.33 1,022,321 5.15
Provision for loan and lease
losses......................... (66,517) (0.34) (35,619) (0.18)
---------- ------ ---------- -----
Net funds function............... $ 961,483 4.99% $ 986,702 4.97%
========== ====== ========== =====
</TABLE>
14
<PAGE> 16
<TABLE>
AVERAGE BALANCES, INCOME AND EXPENSE, YIELDS AND RATES(1)
<CAPTION>
1994
FIRST QUARTER
-------------------------------------
AVERAGE INCOME/ YIELD/
$(THOUSANDS) BALANCE EXPENSE RATE
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------
ASSETS:
Short-term investments.................................... $ 1,062,206 $ 9,386 3.58%
SECURITIES:(3)
Taxable................................................. 15,316,104 196,458 5.20
Tax exempt.............................................. 2,345,403 51,547 8.91
----------- ----------
Total securities................................ 17,661,507 248,005 5.69
LOANS AND LEASES:(2)
Commercial.............................................. 15,014,691 288,171 7.78
Real estate............................................. 17,542,980 365,481 8.45
Consumer, net........................................... 17,901,530 409,930 9.29
Credit card............................................. 6,081,136 235,239 15.69
Leases, net............................................. 1,113,538 20,835 7.59
Reserve for loan and lease losses....................... (973,954)
----------- ----------
Net loans and leases...................................... 56,679,921 1,319,656 9.44
----------- ----------
Total earning assets...................................... 75,403,634 1,577,047 8.48
Other assets(3)........................................... 9,038,031
-----------
Total assets $84,441,665
===========
LIABILITIES:
DEPOSITS:
Non-interest bearing demand............................. $13,433,100
Interest bearing demand................................. 9,356,794 38,649 1.68
Savings................................................. 7,796,079 42,580 2.22
Money market savings accounts........................... 12,215,832 77,883 2.59
Time deposits:
CD's less than $100,000................................. 16,903,025 154,940 3.72
CD's $100,000 and over:
Domestic............................................. 3,884,504 34,320 3.58
Foreign.............................................. 954,627 7,862 3.34
----------- ----------
Total deposits.................................. 64,543,961 356,234 2.24
Borrowed funds:
Short-term.............................................. 9,016,547 69,697 3.13
Long-term............................................... 1,811,111 26,412 5.91
Total borrowed funds.................................... 10,827,658 96,109 3.60
----------- ----------
Total interest bearing liabilities........................ 61,938,519 452,343 2.96
Other liabilities 1,476,229
-----------
Total liabilities......................................... 76,847,848
Preferred stock 249,900
Common stockholders' equity............................... 7,343,917
-----------
Total liabilities and stockholders' equity................ $84,441,665
===========
Net interest income....................................... 1,124,704 6.05
Provision for loan and lease losses....................... (80,172) (0.43)
---------- ------
Net funds function........................................ $1,044,532 5.62%
========== ======
<FN>
- ---------------
(1) Fully taxable equivalent basis. The Federal statutory rate used was 35% for
all periods presented.
(2) Nonaccrual loans are included in loan balances. Interest income includes
related fee income.
(3) Average balance is based on amortized historical cost (excluding SFAS 115
adjustments to fair value)
</TABLE>
15
<PAGE> 17
<TABLE>
NON-INTEREST INCOME
<CAPTION>
QUARTER ENDED
-----------------------
MARCH 31, MARCH 31, INCREASE
$(THOUSANDS) 1995 1994 (DECREASE)
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------
Income from fiduciary activities........................... $ 58,582 $ 59,013 $ (431)
Service charges on deposit accounts........................ 127,111 114,074 13,037
Loan processing and servicing income:
Mortgage banking......................................... 15,716 23,778 (8,062)
Credit card processing and related fees.................. 33,090 32,262 828
Merchant processing...................................... 14,642 8,779 5,863
Loan servicing income.................................... 54,984 23,574 31,410
--------- --------- ----------
Total loan processing and servicing income....... 118,432 88,393 30,039
Other income:
Insurance................................................ 18,672 15,941 2,731
Securities............................................... 11,462 15,017 (3,555)
Investment banking....................................... 4,570 6,446 (1,876)
Income from management of collection pools............... 13,124 5,339 7,785
Other.................................................... 100,441 63,984 36,457
--------- --------- ----------
Total other income......................................... 148,269 106,727 41,542
Securities gains........................................... 9,786 3,453 6,333
--------- --------- ----------
Total non-interest income........................ $ 462,180 $ 371,660 $ 90,520
========= ========= =========
</TABLE>
The growth in service charges on deposit accounts is primarily due to a
change in check processing which resulted in an increase in fees from
overdrafts.
The decrease in mortgage banking income is primarily due to a 67% decrease
in mortgage loan originations compared to the previous year as a result of
higher interest rates.
The increase in loan servicing income is substantially due to $32 million
of income from servicing retained on $2 billion in credit card receivables sold
in November 1994.
The increase in income from management of collection pools relates
primarily to a $7 million incentive bonus earned upon completion of a collection
contract.
The increase in the other item in other income resulted primarily from five
transactions: 1) the gain of $47 million related to the February 1995 sale of
the four Michigan banks which had combined assets of $614 million at December
31, 1994, 2) the decision to sell $1.2 billion in low-yielding consumer loans
during the first quarter which resulted in a mark to market loss of $52 million,
3) income of $17 million on the March 1995 sale of a credit card processing
software license, 4) an increase of $10 million in fees resulting from a shift
from originating RAL's to receiving fees for transmitting tax returns
electronically (as discussed in Net Interest Income/Net Interest Margin on page
13), and 5) an $8 million gain on the March 1995 sale of servicing rights on
$541 million in mortgage loans.
The increase in securities gains relates to a $21 million gain on the sale
of venture capital investments during the first quarter of 1995. These gains
were offset by a $12 million loss on the March 1995 sale of $486 million in
mortgage and asset backed securities. The proceeds from the sale of the mortgage
and asset backed securities were re-invested in mortgage and asset backed
securities with higher yields and longer maturities.
16
<PAGE> 18
<TABLE>
NON-INTEREST EXPENSE
<CAPTION>
QUARTER ENDED
-----------------------
MARCH 31, MARCH 31, INCREASE
$(THOUSANDS) 1995 1994 (DECREASE)
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------
Salary and related costs................................... $ 442,950 $ 441,987 $ 963
Net occupancy expense...................................... 44,013 41,411 2,602
Equipment expense.......................................... 26,907 29,428 (2,521)
Taxes other than income and payroll........................ 21,972 2,358 19,614
Depreciation and amortization.............................. 74,730 67,981 6,749
Outside services and processing............................ 110,894 108,037 2,857
Marketing and development.................................. 36,844 37,490 (646)
Communication and transportation........................... 66,063 58,472 7,591
Other:
Foreclosed property expense.............................. (679) 248 (927)
FDIC Insurance........................................... 35,915 35,337 578
Other.................................................... 68,425 62,939 5,486
--------- --------- ----------
Total other expense........................................ 103,661 98,524 5,137
--------- --------- ----------
Total non-interest expense....................... $ 928,034 $ 885,688 $ 42,346
========= ========= =========
</TABLE>
Taxes other than income and payroll increased primarily due to $19 million
in franchise and intangible tax reductions recorded during the first quarter of
1994 resulting from the settlement of certain audit issues from previous years.
The increase in depreciation and amortization is primarily the result of $2
million of expense recorded related to the sale of a credit card processing
license during February 1995 and increased depreciation related to enhancements
made to the credit card processing system and the purchase of additional data
processing equipment.
Communication and transportation increased substantially as a result of
increased postage expense related to three items: 1) an increase in statement
mailings related to the increase in the number of credit card accounts, 2) an
increase in the volume of mailings related to credit card solicitations, and 3)
an increase in postage rates at the beginning of the first quarter of 1995.
The increase in the other item in other expense resulted primarily from an
increase of $3.4 million in credit card fraud losses related to the increase in
the number of credit card accounts.
The benefits of the operations consolidation and standardization of back
office functions will be minimal during 1995 as significant parts of the plan
will not be completed until late in the year. Moreover, any potential 1995
savings will likely be offset by on-going consulting and staff expenses, moving,
training and other costs associated with the plan. Accordingly, significant
benefits are not expected until 1996. At March 31, 1995, BANC ONE's accrued
liability related to operations consolidations recorded during the fourth
quarter of 1994 was $64 million, a reduction of $7 million related to severance
related payments and a reduction of $3 million related to other items as
compared to the quarter ended December 31, 1994.
BANC ONE could benefit from a FDIC proposal to lower premiums on deposit
insurance.
INCOME TAXES
The provision for income taxes was 35.8% of pretax income for the first
quarter of 1995 as compared to 35.7% of pretax income for the same period in
1994. The tax rate for the first quarter 1995 approximates the anticipated
effective tax rate for the year.
17
<PAGE> 19
BALANCE SHEET ANALYSIS
Total assets decreased $1.1 billion to $87.8 billion at March 31, 1995 from
$88.9 billion at December 31, 1994. The decrease is primarily the result of the
February 1995 sale of the four Michigan banks with assets at December 31, 1994
of $614 million and decreases in short-term investments and related liabilities,
offset by loan growth and other balance sheet mix changes as discussed below.
SECURITIES
<TABLE>
<CAPTION>
MARCH 31, 1995 DECEMBER 31, 1994 MARCH 31, 1994
------------------------ ------------------------ ------------------------
AMORTIZED ESTIMATED AMORTIZED ESTIMATED AMORTIZED ESTIMATED
$(MILLIONS) COST FAIR VALUE COST FAIR VALUE COST FAIR VALUE
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
SECURITIES HELD TO MATURITY:
United States treasury and
agencies.................... $ 490 $ 482 $ 546 $ 532 $ 1,032 $ 1,030
Mortgage and asset-backed
securities:
Government.................. 1,572 1,572 1,405 1,378 1,704 1,740
Other....................... 536 535 492 485 617 625
Tax exempt.................... 2,050 2,073 2,182 2,167 2,403 2,461
Other......................... 210 224 209 228 115 133
--------- ---------- --------- ---------- --------- ----------
Total securities held to
maturity...................... 4,858 4,886 4,834 4,790 5,871 5,989
--------- ---------- --------- ---------- --------- ----------
SECURITIES AVAILABLE FOR SALE:
United States treasury and
agencies.................... 4,615 4,614 3,700 3,693 8,653 8,606
Mortgage and asset-backed
securities:
Government.................. 3,489 3,438 3,312 3,206 3,116 3,085
Other....................... 2,672 2,629 3,144 3,072 3,087 3,070
Tax exempt.................... 7 7 34 34 36 36
Other......................... 223 227 306 313 257 276
--------- ---------- --------- ---------- --------- ----------
Total securities available for
sale.......................... 11,006 10,915 10,496 10,318 15,149 15,073
--------- ---------- --------- ---------- --------- ----------
Total securities................ $15,864 $ 15,801 $15,330 $ 15,108 $21,020 $ 21,062
========= ========= ========= ========= ========= =========
</TABLE>
See page 21 for a discussion of the asset and liability management process.
LOANS AND LEASES
The composition of the loan and lease portfolio is summarized as follows:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31, MARCH 31,
$(THOUSANDS) 1995 1994 1994
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------
Commercial, financial and agricultural.............. $ 17,316,409 $ 16,619,186 $ 15,523,244
Real Estate:
Commerical........................................ 5,540,730 5,571,296 5,092,147
Construction...................................... 2,375,130 2,195,003 1,760,598
Residential....................................... 11,483,772 11,273,689 10,728,530
Consumer, net....................................... 18,529,994 19,070,286 18,268,692
Credit card......................................... 5,849,644 5,924,383 6,131,736
Leases, net......................................... 1,399,802 1,339,069 1,126,809
------------ ------------ ------------
Total loans and leases.............................. $ 62,495,481 $ 61,992,912 $ 58,631,756
============ ============ ============
</TABLE>
Total average loans and leases were $61.8 billion for the first quarter of
1995 as compared to $61.4 billion for the fourth quarter of 1994. Adjusted for
the $2 billion in credit card loans sold during fourth quarter 1994 and the sale
of the Michigan banks, first quarter 1995 total average loan balances increased
10.6% from the
18
<PAGE> 20
quarter ended December 31, 1994, on an annualized basis. This growth was
primarily the result of increases in commercial loans and leases of 12.4% and
increases in credit card loans of 51.8%, annualized and adjusted for loan and
bank sales.
BANC ONE's process for monitoring loan quality includes detailed, monthly
analysis of delinquencies, nonperforming assets and potential problem loans from
each affiliate bank. Management extensively monitors and improves credit
policies, including policies related to appraisals, assessing the financial
condition of borrowers, restrictions on out-of-area lending and avoidance of
loan concentrations.
BANC ONE maintained generally high loan quality during the first quarter of
1995. The following summarizes the activity in the nonaccrual loans and OREO for
the quarter ended March 31, 1995:
<TABLE>
<CAPTION>
$(THOUSANDS) 1995
<S> <C>
------------------------------------------------------------------------------
NONACCRUAL LOANS:
Balance, beginning of period.................................... $377,409
Nonaccrual additions............................................ 70,199
Loans returned to accrual and payments received................. (64,815)
Reductions due to transfers to OREO............................. (4,351)
Charge-offs..................................................... (13,013)
Other, net...................................................... (3,968)
----------
Balance, March 31............................................... $361,461
==========
OREO
Balance, beginning of period.................................... $ 84,355
Additions....................................................... 20,121
Write-downs..................................................... (5,153)
Sales and other, net............................................ (17,243)
----------
Balance, March 31............................................... $ 82,080
==========
</TABLE>
The reserve for loan and lease losses decreased $12 million to $885 million
at March 31, 1995 from $897 million at December 31, 1994. This includes a $10
million decrease due to the decision to sell $1.2 billion in consumer loans.
The following summarizes activity in the reserve for loan and lease losses.
<TABLE>
<CAPTION>
MARCH 31, MARCH 31,
$(THOUSANDS) 1995 1994
<S> <C> <C>
--------------------------------------------------------------------------------------
Balance, beginning of period................................. $ 897,180 $ 967,254
(Sold) acquired reserves..................................... (4,052) 322
Provision for loan and lease losses.......................... 66,517 80,172
Losses charged to the reserve................................ (124,016) (129,160)
Recoveries................................................... 49,663 52,322
--------- ---------
Net losses charged to the reserve............................ (74,353) (76,838)
--------- ---------
Balance, March 31............................................ $ 885,292 $ 970,910
========= =========
</TABLE>
At March 31, 1995, the reserve for loan and lease losses included $55
million for loan loss reserves calculated under SFAS 114.
At March 31, 1995, renegotiated loans, loans delinquent over 90 days, and
doubtful loans were $6 million, $173 million, and $49 million, respectively. At
December 31, 1994, renegotiated loans, loans delinquent over 90 days and
doubtful loans were $4 million, $173 million and $33 million, respectively. The
following summarizes net charge-offs and delinquent loans by loan type.
19
<PAGE> 21
<TABLE>
<CAPTION>
NET CHARGE-OFFS LOANS DELINQUENT
TO AVERAGE 90 DAYS OR
MARCH 31, 1995 BALANCES(1) MORE(2)(3)
<S> <C> <C>
---------------------------------------------------------------------------------------------
Commercial, financial and agricultural................. (.08)% .14%
Real estate............................................ .15
Consumer, net.......................................... .65 .23
Credit card............................................ 3.23 1.24
Leases, net............................................ .28 .15
Total loans and leases................................. .49 .28
<FN>
- ---------------
(1) Ratios presented on an annualized basis.
(2) Excluding nonperforming loans.
(3) As a percent of ending balances.
</TABLE>
On January 1, 1995, BANC ONE adopted Statements of Financial Accounting
Standards Nos. 114 and 118 (SFAS 114), "Accounting by Creditors for Impairment
of a Loan" and "Accounting by Creditors for Impairment of a Loan -- Income
Recognition and Disclosures." The adoption of SFAS 114 did not result in
additional provision for losses primarily because of BANC ONE's policy of
measuring loan impairment based upon the fair value of collateral. See the Notes
to the Financial Statements for further discussion and related disclosures.
OTHER ASSETS
Other assets increased from December 31, 1994 primarily as a result of the
following three items: 1) an increase of $474 million related to securities
trades not yet settled, 2) an increase of $27 million in regulatory deposit
insurance premiums prepaid during the first quarter, and 3) an increase of $35
million related to the purchase of the rights to service $2 billion in mortgage
loans.
DEPOSITS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31, MARCH 31,
$(THOUSANDS) 1995 1994 1994
<S> <C> <C> <C>
------------------------------------------------------------------------------------------
Non-interest bearing........................ $13,204,733 $ 14,405,707 $13,968,731
Interest bearing:
Demand.................................... 8,766,323 9,296,774 9,309,756
Savings................................... 6,494,103 7,033,573 7,984,780
Money market accounts..................... 12,757,131 12,336,737 12,270,088
Time deposits less than $100,000.......... 19,239,204 18,906,855 16,780,718
Time deposits greater than $100,000....... 4,946,396 6,110,408 3,873,029
----------- ------------ -----------
Total interest bearing deposits............. 52,203,157 53,684,347 50,218,371
----------- ------------ -----------
Total deposits.............................. $65,407,890 $ 68,090,054 $64,187,102
=========== ============ ===========
</TABLE>
The decrease in deposits from December 31, 1994 is primarily due to the
replacement of $1.3 billion in Eurodollar deposits with less expensive fed
funds, a $539 million decrease in deposits from the sale of the four Michigan
banks during the first quarter of 1995 and seasonal reductions in transaction
accounts. The deposit mix continues to change as consumers shift funds to
products offering higher yields.
OTHER LIABILITIES
Other liabilities increased from December 31, 1994 primarily as a result of
an increase of $575 million in the accrual for securities trades not yet settled
at March 31, 1995.
20
<PAGE> 22
LIQUIDITY AND CAPITAL
At March 31, 1995, large liability dependence was 17.79%, an increase of
1.8% from December 31, 1994. The increase was primarily due to additional
short-term borrowings in the first quarter to fund increased loan growth and
seasonal fluctuations. BANC ONE's policy is that the large liabilities position
be no greater than 30 percent of earning assets. In practice, BANC ONE manages
the position at much lower levels as summarized below.
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31, MARCH 31,
$(MILLIONS) 1995 1994 1994
<S> <C> <C> <C>
--------------------------------------------------------------------------------------------
Earning assets, net of short term investments..... $77,383 $ 76,248 $78,605
Large liabilities:
Net national market liabilities................. $ 3,107 $ 1,954 $ 3,107
As a percent of net earning assets.............. 4.02% 2.56% 3.95%
Total net large liabilities..................... $13,766 $ 12,195 $15,859
As a percent of net earning assets.............. 17.79% 15.99% 20.18%
</TABLE>
In 1994, the Board of Directors approved the purchase of up to 18 million
shares of BANC ONE common stock to be used specifically for the acquisition of
Premier Bancorp, Inc. (Premier), in Baton Rouge, Louisiana. BANC ONE has an
option to purchase Premier between June 30, 1995 and March 31, 1997 for a
purchase price of 125% of the common stock book value (subject to certain
adjustments) of Premier. No decision has been made as to the exercise of the
option.
BANC ONE has long had a policy of maintaining superior capital ratios. BANC
ONE's policies require it to maintain, at a minimum, a capital position that
meets the federal regulators "well capitalized" classification. At March 31,
1995, risk based tier I capital, total risk adjusted capital and leverage ratios
were 10.23%, 13.62% and 8.58%, respectively. All of these ratios are
significantly above regulatory minimum capital requirements.
ASSET LIABILITY MANAGEMENT
BANC ONE takes a unified approach to management of liquidity, capital and
interest rate risk through its Asset Liability Management (ALM) process.
Management remains committed to maintaining risk to changes in interest rates at
approximately 1 percent of projected annualized after-tax earnings. At March 31,
1995, modeled interest rate risk for BANC ONE ranged from approximately 1.2 to
1.6 percent of annual after-tax earnings for interest rate movements ranging
from up 200 basis points to down 100 basis points. The up 200 basis points
interest rate scenario used in this determination is considered by management to
be a conservative measure of risk at March 31, 1995, as it is above the
estimated forward interest rate curve for the period.
The off-balance sheet investment products BANC ONE utilizes are primarily
interest rate swaps. Interest rate swap agreements generally involve the
exchange of interest payments without the exchange of the underlying notional
amount on which the interest payments are calculated. BANC ONE has entered into
interest rate swap agreements that synthetically alter assets and liabilities as
part of its ALM process to manage the impact of fluctuating interest rates.
Following are the estimated maturities and weighted average fixed rates of
off-balance sheet investment products by type. A key assumption in the maturity
information below is that future variable rates move as indicated by the forward
interest rate curve in existence at March 31, 1995. To the extent that the
interest rates move in a fashion other than indicated in the forward interest
rate curve the maturity information will change.
21
<PAGE> 23
<TABLE>
<CAPTION>
MATURITIES OF OFF-BALANCE SHEET INVESTMENT
PRODUCTS AT MARCH 31, 1995(1)(2) ENDING BALANCES AT
-------------------------------------------------------------- ----------------------------------
2000- MARCH 31, DECEMBER 31, MARCH 31,
$(MILLIONS) 1995 1996 1997 1998 1999 2004 2005+ 1995 1994 1994
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
Receive fixed generic swaps
Notional value............ $2,610 $1,045 $2,583 $1,000 $746 $150 $ 8,134 $ 6,995 $ 7,091
Weighted average receive
rate.................... 5.53% 5.78% 4.84% 5.64% 6.97 % 5.82 % 5.50% 5.37% 5.35%
Receive fixed amortizing
swaps
Notional value............ $1,116 $3,642 $5,241 $1,738 $ 23 $ 20 $11,780 $ 15,442 $15,450
Weighted average receive
rate.................... 6.04% 5.35% 5.19% 5.36% 7.65% 8.82 % 5.36% 5.24% 5.36%
Pay fixed swaps
Notional value............ $1,563 $2,505 $ 222 $ 55 $ 6 $ 7 $ 4,358 $ 5,548 $ 4,828
Weighted average pay
rate.................... 6.41% 5.60% 6.29% 5.56% 8.70% 8.17 % 5.94% 5.51% 5.34%
Purchased caps
Notional value............ $ 1 $4,710 $ 1 $ 1 $ 1 $ 33 $ 7 $ 4,754 $ 6,186 $ 3,672
------ ------ ------ ------ ---- ----- ----- --------- ------------ ---------
Net receive fixed
position.................. 2,162 (2,528) 7,601 2,682 16 726 143 10,802 10,703 14,041
Basis swaps
Notional value............ 321 4,211 3,649 322 25 8,528 8,102 7,854
Forward starting swaps(3)
Notional value............ 500 5,450
Other(4)
Notional value............ 2,090 1,490 597 137 87 82 2 4,485 2,846 3,121
<FN>
- ---------------
(1) Based on future variable rates from the forward interest curve at March 31,
1995.
(2) Variable receive and pay interest rates, which are based primarily on three
month LIBOR or prime, are not included in the table above.
(3) Forward starting swaps at March 31, 1994 include both generic and amortizing
receive fixed swaps.
(4) Other off-balance sheet investment products include customer transactions,
floors, futures, options, swap options, caps, forward rate agreements, and
currency swaps. The other category also includes $1.85 billion of interest
rate swap transactions accounted for as anticipatory hedges of the $1.2
billion sale of consumer loans and a portion of the related reinvestment of
the proceeds from the loan sale. The maturity information for these
transactions is based on expected, rather than contractual terms. All other
maturity information reflects contractual terms using future variable rates
from the forward interest curve at March 31, 1995.
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1995 DECEMBER 31, 1994
--------------------------------------------------------- -----------------
TOTAL NOTIONAL UNREALIZED UNREALIZED NET UNREALIZED NET UNREALIZED
$(MILLIONS) AMOUNT GAINS LOSSES GAIN (LOSS) GAIN (LOSS)
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------
Generic receive fixed............ $ 8,134 $ 3 $ (238) $ (235) $ (153)
Amortizing receive fixed......... 11,780 2 (384) (382) (988)
Pay fixed........................ 4,358 40 (11) 29 86
Purchased caps................... 4,754 22 (6) 16 81
Basis............................ 8,528 (201) (201) (342)
Forward starting................. (34)
Other............................ 4,485 63 (8) 55 44
-------------- ---------- ---------- ------- -----------------
Total.................. $ 42,039 $130 $ (848) $ (718) $(1,306)
=========== ======== ======== =========== =============
</TABLE>
22
<PAGE> 24
BANC ONE CORPORATION AND SUBSIDIARIES
PART II
OTHER INFORMATION
Item 1 -- Inapplicable
Item 2 -- Inapplicable
Item 3 -- Inapplicable
Item 4 -- Inapplicable
Item 5 -- Inapplicable
Item 6 -- EXHIBITS AND REPORTS ON FORM 8-K
a. In compliance with Part I Financial Information the following
exhibits are incorporated by reference:
Exhibit 11 Statement Regarding Computation of Earnings per Common
Share
Exhibit 12 Statement Regarding Computation of Ratio of Earnings to
Fixed Charges
Exhibit 27 Financial Data Schedules
23
<PAGE> 25
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BANC ONE CORPORATION
<TABLE>
<S> <C>
- -------------------------------------------- --------------------------------------------
Date William C. Leiter
Controller and
Chief Accounting Officer
</TABLE>
24
<PAGE> 26
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Number
- --------------
<S> <C>
11 Statement Regarding Computation of Earnings per Common Share
12 Statement Regarding Computation of Ratio of Earnings to Fixed Charges
27 Financial Data Schedules
</TABLE>
<PAGE> 1
BANC ONE CORPORATION and Subsidiaries EXHIBIT 11
STATEMENT REGARDING COMPUTATION OF EARNINGS PER COMMON SHARE
(000's, except per share amounts)
For the three months ended March 31,
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
PRIMARY:
Earnings:
Net income $302,518 $326,950
Deduct: Dividends on preferred shares 4,373 4,373
-------- --------
Net income available to common shareholders $298,145 $322,577
Shares: ======== ========
Weighted average common shares outstanding 395,120 406,118
Add: Dilutive effect of outstanding options, as determined by the
application of the treasury stock method 1,146 1,272
-------- --------
Weighted average common shares outstanding, as adjusted 396,266 407,390
======== ========
PRIMARY EARNINGS PER COMMON SHARE $0.75 $0.79
======== ========
FULLY DILUTED:
Earnings:
Net income $302,518 $326,950
Shares:
Weighted average common shares outstanding 395,120 406,118
Add: Dilutive effect of outstanding options, as determined by the
application of the treasury stock method 1,171 1,272
Add: Conversion of preferred stock 8,765 8,765
-------- --------
Weighted average common shares outstanding, as adjusted 405,056 416,155
======== ========
FULLY DILUTED EARNINGS PER COMMON SHARE $0.75 $0.79
======== ========
</TABLE>
<PAGE> 1
BANC ONE CORPORATION and Subsidiaries EXHIBIT 12
Statement Regarding Computation of Ratio of Earnings to Fixed Charges
$(thousands)
<TABLE>
<CAPTION>
Three Months Ended Years Ended
March 31, December 31,
--------------------------------------------------------------------------------------
1995 1994 | 1994 1993 1992 1991 1990
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Calculation excluding interest on deposits:
Earnings
Income before income taxes and change
in accounting principle and equity in
earnings of Bank One, Texas, NA (1) $ 471,228 $508,509 $1,518,852 $1,770,712 $1,341,249 $ 928,947 $ 727,310
Fixed charges 177,384 109,591 633,569 348,327 321,402 419,274 467,263
Less: Capitalized interest (341) (249) (1,000) (652) (1,199) (1,732) (2,181)
---------- -------- ---------- ---------- ---------- ---------- ----------
Earnings $ 648,271 $617,851 $2,151,421 $2,118,387 $1,661,452 $1,346,489 $1,192,392
========== ======== ========== ========== ========== ========== ==========
Fixed Charges:
Interest expense, including interest
factor of capitalized leases and
amortization of deferred debt
expenses $164,164 $ 96,405 $ 575,734 $ 298,857 $ 278,615 $ 379,708 $ 433,953
Portion of rental payments under
operating leases deemed to be
interest 13,220 13,186 57,835 49,470 42,787 39,566 33,310
---------- -------- ---------- ---------- ---------- ---------- ----------
Fixed charges $ 177,384 $109,591 $ 633,569 $ 348,327 $ 321,402 $ 419,274 $ 467,263
========== ======== ========== ========== ========== ========== ==========
Ratio of earnings to fixed charges
excluding interest on deposits: 3.65% 5.64% 3.40% 6.08% 5.17% 3.21% 2.55%
Calculation including interest on deposits:
Earnings:
Income before income taxes and change
in accounting principle and equity in
earnings of Bank One, Texas, NA (1) $ 471,228 $508,509 $1,518,852 $1,770,712 $1,341,249 $ 928,947 $ 727,310
Fixed charges 727,314 465,825 2,307,832 1,826,018 2,318,274 2,955,918 3,115,412
Less: Capitalized interest (341) (249) (1,000) (652) (1,199) (1,732) (2,181)
---------- -------- ---------- ---------- ---------- ---------- ----------
Earnings $1,198,201 $974,085 $3,825,684 $3,596,078 $3,658,324 $3,883,133 $3,840,541
========== ======== ========== ========== ========== ========== ==========
Fixed charges:
As detailed above $ 177,384 $109,591 $ 633,569 $ 348,327 $ 321,402 $ 419,274 467,263
Interest on deposits 549,930 356,234 1,674,263 1,477,691 1,996,872 2,536,644 2,648,149
---------- -------- ---------- ---------- ---------- ---------- ----------
Fixed charges $ 727,314 $465,825 $2,307,832 $1,826,018 $2,318,274 $2,955,918 $3,115,412
========== ======== ========== ========== ========== ========== ==========
Ratio of earnings to fixed charges
including interest on deposits 1.65% 2.09% 1.66% 1.97% 1.58% 1.31% 1.23%
</TABLE>
(1)Results of Bank One, Texas, NA are consolidated beginning October 1, 1991.
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 4,730,810
<INT-BEARING-DEPOSITS> 21,401
<FED-FUNDS-SOLD> 791,061
<TRADING-ASSETS> 793,565
<INVESTMENTS-HELD-FOR-SALE> 10,915,170
<INVESTMENTS-CARRYING> 4,857,981
<INVESTMENTS-MARKET> 4,886,324
<LOANS> 62,495,481
<ALLOWANCE> 885,292
<TOTAL-ASSETS> 87,830,458
<DEPOSITS> 65,407,890
<SHORT-TERM> 9,919,684
<LIABILITIES-OTHER> 2,681,470
<LONG-TERM> 2,125,949
<COMMON> 2,050,046
0
249,900
<OTHER-SE> 5,395,519
<TOTAL-LIABILITIES-AND-EQUITY> 87,830,458
<INTEREST-LOAN> 1,448,967
<INTEREST-INVEST> 239,781
<INTEREST-OTHER> 28,557
<INTEREST-TOTAL> 1,717,305
<INTEREST-DEPOSIT> 549,930
<INTEREST-EXPENSE> 713,706
<INTEREST-INCOME-NET> 1,003,599
<LOAN-LOSSES> 66,517
<SECURITIES-GAINS> 9,786
<EXPENSE-OTHER> 928,034
<INCOME-PRETAX> 471,228
<INCOME-PRE-EXTRAORDINARY> 302,518
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 302,518
<EPS-PRIMARY> 0.75
<EPS-DILUTED> 0.75
<YIELD-ACTUAL> 5.33
<LOANS-NON> 361,461
<LOANS-PAST> 172,921
<LOANS-TROUBLED> 5,832
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 897,180
<CHARGE-OFFS> 124,016
<RECOVERIES> 49,663
<ALLOWANCE-CLOSE> 885,292
<ALLOWANCE-DOMESTIC> 652,890
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 232,402
</TABLE>
