<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For The Quarterly Period Ended September 30, 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)
Ohio 31-0738296
---- ----------
(State or other jurisdiction of incorporation or (IRS Employer I.D. Number)
organization)
100 East Broad Street, Columbus, Ohio 43271-0251
-------------------------------------------------
(Address of principal executive offices) (Zip Code)
(614) 248-5944
--------------
(Registrant's telephone number, including area code)
N/A
---
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
The number of shares outstanding of the registrant's common stock, no par
value, $5 stated value, was 391,284,501 at October 31, 1995.
<PAGE> 2
FORM 10-Q
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
<S> <C> <C>
Item 1. Financial Statements Page
----
Consolidated Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Consolidated Statement of Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Consolidated Statement of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Supplemental Disclosures for Statement of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Consolidated Statement of Changes in Stockholders' Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Notes to the Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Consolidated Quarterly Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Average Balances, Income and Expense, Yields and Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Item 2. Management's Discussion and Analysis
Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Net Interest Income/Net Interest Margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Non-Interest Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Non-Interest Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Balance Sheet Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Loans and Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Liquidity and Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Asset Liability Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
</TABLE>
2
<PAGE> 3
BANC ONE CORPORATION AND SUBSIDIARIES
PART I
FINANCIAL INFORMATION
3
<PAGE> 4
<TABLE>
BANC ONE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<CAPTION>
SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30,
$(THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED) 1995 1994 1994
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Cash and due from banks $5,038,540 $5,073,417 $5,070,208
Short-term investments 483,429 3,539,596 905,726
SECURITIES:
Securities held to maturity (estimated fair value 4,316,523 4,834,384 5,013,878
$4,426,282, $4,790,433, $5,049,595,
respectively)
Securities available for sale 9,723,758 10,318,030 12,141,021
----------- ----------- -----------
Total securities 14,040,281 15,152,414 17,154,899
Loans and leases 65,412,683 61,992,912 61,647,354
Allowance for credit losses 915,453 897,180 955,157
----------- ----------- -----------
Net loans and leases 64,497,230 61,095,732 60,692,197
OTHER ASSETS:
Bank premises and equipment, net 1,524,694 1,517,647 1,491,350
Interest earned, not collected 646,747 566,840 628,848
Other real estate owned 83,203 84,355 90,475
Excess of cost over net assets of affiliates 250,647 262,895 273,912
purchased
Other 1,788,542 1,629,690 1,856,108
----------- ----------- -----------
Total other assets 4,293,833 4,061,427 4,340,693
----------- ----------- -----------
Total assets $88,353,313 $88,922,586 $88,163,723
=========== =========== ===========
LIABILITIES
DEPOSITS:
Non-interest bearing $13,476,471 $14,405,707 $13,739,282
Interest bearing 52,815,217 53,684,347 52,170,419
----------- ----------- -----------
Total deposits 66,291,688 68,090,054 65,909,701
Federal funds purchased and repurchase agreements 5,653,810 5,186,527 6,737,521
Other short-term borrowings 3,925,019 4,435,242 4,589,177
Long-term borrowings 2,677,205 1,866,448 1,837,147
Accrued interest payable 386,067 351,293 292,702
Other liabilities 1,417,371 1,428,162 1,034,358
----------- ----------- -----------
Total liabilities 80,351,160 81,357,726 80,400,606
---------- ---------- ----------
STOCKHOLDERS' EQUITY
Preferred stock, 35,000,000 shares authorized:
Series C convertible, no par value 4,997,061,
4,997,999 and 4,998,000 shares issued and
outstanding, respectively 249,853 249,900 249,900
Common stock, no par value, $5 stated value, 600,000,000
shares authorized, 410,589,667, 408,985,564 and
408,631,080 shares issued, respectively 2,052,948 2,044,928 2,043,155
Capital in excess of aggregate stated value of common 3,812,517 3,796,746 3,790,432
stock
Retained earnings 2,445,499 1,921,256 1,985,178
Net unrealized holding gains (losses) on securities
available for sale, net of tax 3,115 (111,517) (207,661)
Treasury stock (19,361,000, 11,999,500, and 2,900,700
shares, respectively), at cost (561,779) (336,453) (97,887)
----------- ----------- -----------
Total stockholders' equity 8,002,153 7,564,860 7,763,117
----------- ----------- -----------
Total liabilities and stockholders' equity $88,353,313 $88,922,586 $88,163,723
=========== =========== ===========
<FN>
The accompanying notes are an integral part of the financial statements.
</TABLE>
4
<PAGE> 5
<TABLE>
BANC ONE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------------- -------------------------
$(THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED) 1995 1994 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans and leases $1,547,381 $1,368,153 $4,492,750 $3,991,885
Interest and dividends on:
Taxable securities 200,623 228,300 629,764 669,492
Tax exempt securities 28,335 33,963 90,647 103,224
Other interest income 9,619 8,326 49,778 24,113
---------- ---------- ---------- ----------
Total interest income 1,785,958 1,638,742 5,262,939 4,788,714
INTEREST EXPENSE:
Interest on deposits:
Demand and savings deposits 234,674 186,683 681,044 517,772
Time deposits 343,855 254,101 1,033,705 667,108
Interest on borrowings 169,010 165,644 496,715 411,052
---------- ---------- ---------- ----------
Total interest expense 747,539 606,428 2,211,464 1,595,932
---------- ---------- ---------- ----------
Net interest income 1,038,419 1,032,314 3,051,475 3,192,782
Provision for credit losses 132,526 75,940 291,608 206,650
---------- ---------- ---------- ----------
Net interest income after provision for credit
losses 905,893 956,374 2,759,867 2,986,132
NON-INTEREST INCOME:
Income from fiduciary activities 60,052 53,449 177,180 171,746
Service charges on deposit accounts 140,811 125,029 400,384 355,739
Loan processing and servicing income 142,586 90,689 385,277 266,991
Securities gains (losses) 7,294 (12,975) 19,865 (6,785)
Other 122,127 174,611 396,056 384,596
---------- ---------- ---------- ----------
Total non-interest income 472,870 430,803 1,378,762 1,172,287
NON-INTEREST EXPENSE:
Salaries and related costs 430,135 427,290 1,302,164 1,294,518
Net occupancy expense, exclusive of depreciation 40,965 44,849 121,157 127,094
Equipment expense 26,372 29,293 78,946 87,608
Taxes other than income and payroll 23,571 21,275 68,637 43,766
Depreciation and amortization 71,635 94,507 215,325 233,052
Outside services and processing 101,144 112,593 309,637 311,894
Marketing and development 37,210 38,936 129,789 126,576
Communication and transportation 66,955 60,811 200,898 180,147
Other 82,224 128,605 279,583 321,784
---------- ---------- ---------- ----------
Total non-interest expense 880,211 958,159 2,706,136 2,726,439
---------- ---------- ---------- ----------
Income before income taxes 498,552 429,018 1,432,493 1,431,980
INCOME TAX PROVISION (BENEFIT):
Income excluding securities transactions 165,006 150,347 484,180 493,623
Securities transactions 2,529 (4,541) 7,296 (2,375)
---------- ---------- ---------- ----------
Provision for income taxes 167,535 145,806 491,476 491,248
---------- ---------- ---------- ----------
Net income $ 331,017 $ 283,212 $ 941,017 $ 940,732
========== ========== ========== ==========
Net income per common share $.83 $.68 $2.35 $2.27
========== ========== ========== ==========
Weighted average common shares outstanding (000) 393,537 408,963 394,569 408,115
========== ========== ========== ==========
<FN>
The accompanying notes are an integral part of the financial statements.
</TABLE>
5
<PAGE> 6
<TABLE>
BANC ONE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
<CAPTION>
$(THOUSANDS) (UNAUDITED) 1995 1994
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Net income $ 941,017 $ 940,732
ADJUSTMENTS:
Provision for credit losses 291,608 206,650
Depreciation expense 172,541 174,201
Amortization of intangibles 42,784 58,851
Amortization (accretion) - securities (62,618) 94,909
Amortization of purchased mortgage servicing rights 7,148 8,824
Net decrease in trading account 14,015 100,140
Net decrease (increase) in mortgage loans held for sale (180,756) 967,997
Net increase in deferred loan costs (7,860) (12,818)
Securities (gains) losses (19,865) 6,785
Gain on the sale of banks and branch offices (58,546) (390)
(Gain) loss on sale of loans and other assets 17,201 (69,986)
Net increase in other assets (228,708) (370,464)
Net increase (decrease) in other liabilities 83,735 (96,933)
Net change in deferred income taxes 159,498 121,069
---------- ----------
Net cash provided by operating activities 1,171,194 2,129,567
---------- ----------
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES:
Purchases of securities available for sale (7,491,156) (7,528,764)
Purchases of securities held to maturity (599,468) (790,150)
Maturities of securities available for sale 5,840,766 1,521,421
Maturities of securities held to maturity 1,103,133 2,054,876
Sales of securities available for sale 2,179,671 5,295,836
Net increase in loans, excluding sales and purchases (5,965,727) (5,843,005)
Sales of loans and other assets 2,520,452 1,414,601
Purchases of loans and related premiums (577,828) (558,037)
Net decrease in short-term investments 3,114,687 183,589
Additions to bank premises and equipment (227,351) (223,692)
Sale of banks 95,698
Net cash acquired in acquisitions 42,413 1,180,497
Net increase in mortgage servicing rights (38,000) (7,285)
All other investing activities - net 101
---------- -----------
Net cash used in investing activities (2,609) (3,300,113)
---------- ----------
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES:
Net decrease in demand deposit, money market and savings accounts (629,424) (2,337,247)
Net increase (decrease) in time deposits (391,074) 1,839,254
Net increase (decrease) in short-term borrowings (35,205) 2,262,022
Issuance of long-term borrowings, net 954,025 55,642
Repayment of long-term borrowings (141,876) (22,942)
Cash dividends paid (537,584) (492,335)
Sales of branch offices:
Deposit liabilities assumed by purchasers (246,378) (52,318)
Other, net 32,398 25,675
Purchase of treasury stock (225,326) (97,887)
Other, net increase 16,982 51,001
---------- ----------
Net cash provided by (used in) financing activities (1,203,462) 1,230,865
---------- ----------
(Decrease) Increase in cash and cash equivalents (34,877) 60,319
Cash and cash equivalents at January 1 5,073,417 5,009,889
---------- ----------
Cash and cash equivalents at September 30 $5,038,540 $5,070,208
========== ==========
<FN>
The accompanying notes are an integral part of the financial statements.
</TABLE>
6
<PAGE> 7
<TABLE>
BANC ONE CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL DISCLOSURES FOR STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
<CAPTION>
$(THOUSANDS) (UNAUDITED) 1995 1994
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Transfer from loans to Other Real Estate Owned (OREO) $67,947 $48,915
========== ===========
Net decrease in trade date accounting entries for investment securities $293,898 $117,344
========== ===========
Loans issued to facilitate the sale of OREO properties $4,380 $22,879
========== ==========
Additional Disclosures:
Interest paid $2,173,437 $1,546,045
========== ==========
Income taxes paid $238,679 $399,537
========== ==========
<FN>
The accompanying notes are an integral part of the financial statements.
</TABLE>
BANC ONE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------------- ------------------------------
$(THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED) 1995 1994 1995 1994
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BALANCE, BEGINNING OF PERIOD $7,839,071 $7,688,899 $7,564,860 $7,433,170
Net income 331,017 283,212 941,017 940,732
Exercise of stock options, net of shares purchased (1,362) (769) (4,164) (4,558)
Shares issued in acquisitions 3,609 3,647 33,824
Pooled affiliate stock issuance, sales of stock to
employee benefit plans and other 3,190 8,032 21,146 51,948
Cash dividends:
Corporation:
Common ($.34 and $.31 per share for the three
months and $1.02 and $.93 per share for the
nine months ended September 30, 1995 and
1994, respectively) (133,111) (126,105) (400,541) (363,292)
Series C preferred ($.88 per share for the
three months and $2.63 per share for the nine
months ended September 30, 1995 and 1994,
respectively) (4,372) (4,373) (13,118) (13,119)
Pooled affiliates (10,040)
Change in unrealized holding gains (losses) on
securities available for sale, net of tax 14,463 (16,884) 114,632 (207,661)
Purchase of treasury stock (46,743) (72,504) (225,326) (97,887)
-------- -------- --------- --------
BALANCE, END OF PERIOD $8,002,153 $7,763,117 $8,002,153 $7,763,117
========== ========== ========== ==========
<FN>
The accompanying notes are an integral part of the financial statements.
</TABLE>
7
<PAGE> 8
NOTES TO THE FINANCIAL STATEMENTS
1. The accompanying financial statements are unaudited. However, in the
opinion of management, they contain the adjustments (all of which are
normal and recurring in nature) necessary to present fairly the financial
position and the results of operations. The notes to the financial
statements contained in the Annual Report on Form 10-K for the year ended
December 31, 1994 and the quarterly reports on Form 10-Q for the quarters
ended March 31, 1995 and June 30, 1995 should be read in conjunction with
these financial statements. "The Corporation" is defined as parent
company only. "BANC ONE" is defined as the Corporation and all
significant majority-owned subsidiaries. Certain prior period amounts
have been reclassified to compare with current presentation.
2. The provision for income taxes is at a rate which management believes will
approximate the effective rate for the year.
3. In 1991, the Corporation acquired an option to purchase Premier Bancorp,
Inc. (Premier) headquartered in Baton Rouge, Louisiana. In July 1995, the
Corporation signed an agreement to acquire Premier, which if approved by
its shareholders and regulators, will supersede the previous option. The
transaction is expected to close in the first quarter of 1996. The new
agreement provides for the acquisition of Premier in exchange for up to
21.9 million BANC ONE shares in a transaction to be accounted for as a
purchase. The Board of Directors has approved the purchase of up to 21.9
million shares of the Corporation's common stock for use in this
transaction. The shares purchased to date for this purpose are shown as
treasury stock on the accompanying balance sheet. Premier had assets of
$5.5 billion at September 30, 1995 and operates 150 banking offices
throughout Louisiana.
4. Mortgage loans held for sale were $537 million, $356 million and $324
million at September 30, 1995, December 31, 1994 and September 30, 1994,
respectively. Such loans are carried at the lower of cost or market
determined on an aggregate basis.
5. BANC ONE adopted Statements of Financial Accounting Standards (SFAS) 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. The adoption of SFAS 114 did not
result in additional provisions for credit losses primarily because the
majority of impaired loan valuations continue to be based on the fair
value of collateral.
In October 1995, the Financial Accounting Standards Board (FASB)
tentatively decided as part of a Special Report entitled "A Guide to
Implementation of Statement 115 on Accounting for Certain Investment in
Debt and Equity Securities", that it would allow entities to make a
one-time reclassification of their investment securities in year-end 1995
financial statements. This would allow entities to transfer securities
into either the held-to-maturity, available-for-sale or trading
categories without tainting the rest of their investment portfolio.
Management has not yet determined the impact of any such reclassification
but believes it would be immaterial.
In March 1995, the FASB issued SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of." BANC ONE will adopt SFAS 121 effective January 1, 1996. The impact
on BANC ONE's financial position and results of operations is not expected
to be material.
In May 1995, the FASB issued SFAS No. 122, "Accounting for Mortgage
Servicing Rights". SFAS 122 amends SFAS No. 65, "Accounting for Certain
Mortgage Banking Activities". The standard must be adopted no later than
January 1, 1996 but may be adopted early. Regardless of the period of
adoption, the impact on BANC ONE's financial position and results of
operations is not expected to be material.
In October 1995, the FASB issued SFAS No. 123 "Accounting for Stock-Based
Compensation", which defines a fair value based method of accounting for
employee stock options or similar equity instruments. However, it also
allows an entity to continue to account for these plans according to
Accounting Principles Board (APB) Opinion No. 25, provided pro forma
disclosures of net income and earnings per share are made, as if the fair
value based method of accounting defined by SFAS No. 123 had been applied.
BANC ONE anticipates electing to continue to measure compensation cost
related to employee stock options using APB Opinion 25, and will disclose
the pro forma effects of all awards granted in fiscal years beginning
after December 15, 1994 in the 1995 annual report.
8
<PAGE> 9
CONSOLIDATED QUARTERLY FINANCIAL DATA
<TABLE>
<CAPTION>
QUARTERS
------------------------------------------------------------
1995 1994
------------------------------------------------------------
$(MILLIONS) (UNAUDITED) THIRD SECOND FIRST FOURTH THIRD
- -----------------------------------------------------------------------------------------------------------------------
PERIOD END BALANCES
<S> <C> <C> <C> <C> <C>
Loans and leases (net of unearned income) $65,412.7 $63,335.0 $62,495.5 $61,992.9 $61,647.4
Earning assets 79,020.9 77,272.1 78,486.1 79,787.7 78,752.8
Total assets 88,353.3 86,783.3 87,830.5 88,922.6 88,163.7
Total deposits 66,291.7 65,612.9 65,407.9 68,090.1 65,909.7
Long-term borrowings 2,677.2 2,088.0 2,125.9 1,866.4 1,837.1
Allowance for credit losses 915.5 891.5 885.3 897.2 955.2
Total stockholders' equity 8,002.2 7,839.1 7,695.5 7,564.9 7,763.1
CONDENSED INCOME STATEMENT
Net interest income (1) 1,057.66 1,024.36 1,032.31 1,027.83 1,054.65
Provision for credit losses 132.52 92.56 66.51 35.62 75.94
------- ------- ------- ------ -------
Net funds function (1) 925.14 931.80 965.80 992.21 978.71
NON-INTEREST INCOME
Income from fiduciary activities 60.05 58.54 58.58 53.88 53.45
Service charges on deposit accounts 140.81 132.46 127.11 128.15 125.03
Loan processing and servicing income 142.59 130.24 112.44 115.50 90.69
Securities gains (losses) 7.29 2.79 9.79 (254.27) (12.98)
Other 122.13 130.10 143.83 113.98 174.61
------- ------- ------- ------ -------
Total non-interest income 472.87 454.13 451.75 157.24 430.80
NON-INTEREST EXPENSE
Salaries and related costs 430.14 429.08 442.95 459.15 427.29
Other 450.07 473.25 480.65 582.39 530.87
------- ------- ------- ------ -------
Total non-interest expense 880.21 902.33 923.60 1,041.54 958.16
Taxable equivalent adjustment 19.25 20.89 22.72 21.04 22.33
------- ------- ------- ------ -------
Income before income taxes 498.55 462.71 471.23 86.87 429.02
Income tax provision 167.53 155.23 168.71 22.49 145.81
------- ------- ------- ------ -------
Net income $331.02 $307.48 $302.52 $64.38 $283.21
======= ======= ======= ====== =======
Net income available to common shareholders $326.65 $303.11 $298.15 $60.00 $278.84
======= ======= ======= ====== =======
<FN>
1) Fully taxable equivalent basis. The Federal statutory rate used was 35% for
all periods presented.
</TABLE>
9
<PAGE> 10
CONSOLIDATED QUARTERLY FINANCIAL DATA
<TABLE>
<CAPTION>
QUARTERS
------------------------------------------------------------
1995 1994
------------------------------------------------------------
$(MILLIONS, EXCEPT PER SHARE DATA) (UNAUDITED) THIRD SECOND FIRST FOURTH THIRD
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
KEY RATIOS
Return on average assets (1) 1.51% 1.43% 1.42% .29% 1.27%
Return on average common equity (1) 17.09 16.34 16.61 3.20 14.82
Average common equity to assets 8.74 8.60 8.40 8.52 8.46
Tier I capital ratio 10.11 10.36 10.23 9.93 10.51
Total risk adjusted capital ratio 14.17 13.76 13.62 13.33 13.97
Leverage ratio 8.88 8.72 8.58 8.28 8.53
MARGIN ANALYSIS (1)(2)(3)
Interest income 9.19 9.15 9.06 8.47 8.28
Interest expense 3.80 3.86 3.70 3.29 3.02
---- ---- ---- ---- ----
Net interest income 5.39 5.29 5.36 5.18 5.26
Provision for credit losses .68 .48 .35 .18 .38
--- --- --- --- ---
Net funds function 4.71 4.81 5.01 5.00 4.88
CREDIT ANALYSIS
Net charge-offs to average loans and leases (1) .67 .56 .49 .59 .50
Ending allowance to loans and leases 1.40% 1.41% 1.42% 1.45% 1.55%
Nonperforming assets:
Total $444.7 $430.8 $449.4 $465.7 $524.2
Percent of total loans and leases .68% .68% .72% .75% .85%
Loans delinquent 90 days or more (4):
Total $212.3 $186.7 $172.9 $173.5 $195.4
Percent of total loans and leases .32% .29% .28% .28% .32%
Allowance to nonperforming loans 253.3% 249.1% 241.0% 235.3% 220.2%
PER SHARE DATA
Net income $.83 $.77 $.75 $.15 $.68
Cash dividends declared .34 .34 .34 .31 .31
Book value 19.82 19.35 18.88 18.43 18.52
Common stock price:
High 36.75 35.13 30.13 30.50 35.50
Low 30.75 28.63 25.13 24.13 29.50
Close 36.50 32.25 28.50 25.38 30.00
Preferred Series C stock price:
High 64.00 61.75 54.25 57.50 63.75
Low 55.58 52.25 49.63 49.00 57.00
Close $63.75 $58.25 $51.75 $49.63 $57.50
SHARES TRADED (000)
Common 39,873 53,708 48,353 72,342 46,939
Preferred Series C 990 1,316 1,233 1,679 892
<FN>
(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.
</TABLE>
10
<PAGE> 11
<TABLE>
AVERAGE BALANCES, INCOME AND EXPENSE, YIELDS AND RATES (1)
<CAPTION>
THREE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30, 1995 SEPTEMBER 30, 1994
-------------------------------------------------------------------------------
AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/
$(THOUSANDS)(UNAUDITED) BALANCE EXPENSE RATE BALANCE EXPENSE RATE
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Short-term investments $672,794 $10,542 6.22% $725,473 $9,114 4.98%
SECURITIES: (3)
Taxable 12,153,543 200,865 6.56 16,533,740 228,440 5.48
Tax-exempt 1,905,319 41,841 8.71 2,350,704 50,274 8.48
----------- --------- ----------- ---------
Total securities 14,058,862 242,706 6.85 18,884,444 278,714 5.86
LOANS AND LEASES: (2)
Commercial 17,685,598 364,821 8.18 15,576,172 294,848 7.51
Real estate 20,425,804 464,420 9.02 18,240,188 388,841 8.46
Consumer, net 17,904,488 422,874 9.37 19,353,980 406,106 8.32
Credit card 6,542,512 273,369 16.58 6,569,145 261,983 15.82
Leases, net 1,506,962 26,471 6.97 1,183,974 21,471 7.19
Allowance for credit losses (894,091) (959,563)
----------- --------- ----------- ---------
Net loans and leases 63,171,273 1,551,955 9.75 59,963,896 1,373,249 9.09
----------- --------- ----------- ---------
Total earning assets 77,902,929 1,805,203 9.19 79,573,813 1,661,077 8.28
Other assets (3) 8,877,451 8,680,130
----------- -----------
Total assets $86,780,380 $88,253,943
=========== ===========
LIABILITIES:
DEPOSITS:
Non-interest bearing demand $12,977,594 $13,396,649
Interest bearing demand 8,416,543 43,245 2.04 9,221,459 43,028 1.85
Savings 5,914,183 43,417 2.91 7,719,171 50,136 2.58
Money market savings accounts 14,079,479 148,012 4.17 12,342,637 93,519 3.01
Time deposits:
CDs less than $100,000 19,295,119 280,284 5.76 18,126,913 201,933 4.42
CDs $100,000 and over:
Domestic 3,626,943 44,589 4.88 3,593,945 38,314 4.23
Foreign 1,307,358 18,982 5.76 1,260,777 13,854 4.36
----------- --------- ----------- -------
Total deposits 65,617,219 578,529 3.50 65,661,551 440,784 2.66
Borrowed Funds:
Short-term 8,917,697 124,718 5.55 11,603,887 128,415 4.39
Long-term 2,523,602 44,292 6.96 1,839,595 37,229 8.03
----------- --------- ----------- -------
Total borrowed funds 11,441,299 169,010 5.86 13,443,482 165,644 4.89
----------- --------- ----------- -------
Total interest bearing liabilities 64,080,924 747,539 4.63 65,708,384 606,428 3.66
Other liabilities 1,890,147 1,433,934
----------- -----------
Total liabilities 78,948,665 80,538,967
Preferred stock 249,859 249,900
Common stockholders' equity 7,581,856 7,465,076
----------- -----------
Total liabilities and stockholders'
equity $86,780,380 $88,253,943
=========== ===========
Net interest income 1,057,664 5.39 1,054,649 5.26
Provision for credit losses (132,526) (.68) (75,940) (.38)
--------- ------ --------- -----
Net funds function $925,138 4.71% $978,709 4.88%
========= ====== ========= =====
<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 securities balances are based on amortized historical cost, excluding SFAS 115
adjustments to fair value which are included in other assets.
</TABLE>
11
<PAGE> 12
<TABLE>
<CAPTION>
NINE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 1995 SEPTEMBER 30, 1994
------------------------------------------------------------------------------------
AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/
BALANCE EXPENSE RATE BALANCE EXPENSE RATE
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$1,117,674 $53,356 6.38% $856,578 $26,760 4.18%
12,911,743 630,718 6.53 16,661,721 669,886 5.38
2,030,379 133,819 8.81 2,360,001 153,151 8.68
----------- --------- ----------- ---------
14,942,122 764,537 6.84 19,021,722 823,037 5.78
17,279,432 1,057,292 8.18 15,346,615 871,747 7.59
19,769,622 1,332,137 9.01 17,821,533 1,126,466 8.45
18,149,937 1,271,535 9.37 18,672,312 1,202,061 8.61
6,148,266 770,167 16.75 6,282,648 742,237 15.80
1,427,164 76,776 7.19 1,146,965 63,543 7.41
(894,065) (969,584)
----------- --------- ----------- ---------
61,880,356 4,507,907 9.74 58,300,489 4,006,054 9.19
----------- --------- ----------- ---------
77,940,152 5,325,800 9.14 78,178,789 4,855,851 8.30
8,712,056 8,850,000
----------- -----------
$86,652,208 $87,028,789
=========== ===========
$12,863,222 $13,389,072
8,672,072 140,382 2.16 9,322,920 122,233 1.75
6,300,243 141,395 3.00 7,836,672 139,633 2.38
13,195,352 399,267 4.05 12,293,060 255,906 2.78
19,303,042 814,514 5.64 17,404,799 526,214 4.04
3,839,184 148,811 5.18 3,674,612 107,016 3.89
1,629,862 70,380 5.77 1,150,110 33,878 3.94
----------- --------- ----------- ---------
65,802,977 1,714,749 3.48 65,071,245 1,184,880 2.43
9,110,440 381,042 5.59 11,042,464 318,341 3.85
2,225,556 115,673 6.95 1,831,671 92,711 6.77
----------- --------- ----------- ---------
11,335,996 496,715 5.86 12,874,135 411,052 4.27
----------- --------- ----------- ---------
64,275,751 2,211,464 4.60 64,556,308 1,595,932 3.31
1,827,644 1,446,442
----------- -----------
78,966,617 79,391,822
249,880 249,900
7,435,711 7,387,067
----------- -----------
$86,652,208 $87,028,789
=========== ===========
3,114,336 5.34 3,259,919 5.58
(291,608) (.50) (206,650) (.36)
---------- ------ ---------- -----
$2,822,728 4.84% $3,053,269 5.22%
========== ====== ========== =====
<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>
12
<PAGE> 13
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 and quarterly reports on Form 10-Q for
the quarters ended March 31, 1995 and June 30, 1995.
RESULTS OF OPERATIONS
NET INTEREST INCOME / NET INTEREST MARGIN
BANC ONE's net interest income on a fully taxable equivalent basis (FTE) was
$1.1 billion and $3.1 billion for the three and nine months ended September 30,
1995, compared with $1.1 billion and $3.3 billion for the same periods in 1994.
Net interest margin (FTE) was 5.39% and 5.34% for the three and nine months
ended September 30, 1995, compared with 5.26% and 5.58% for the same periods in
1994.
Net interest income is affected by the growth, pricing, mix and maturity of
interest earning assets and interest bearing liabilities, as well as other
factors including loan quality. Individual components of net interest income
and net interest margin are presented in the Summary of Average Balances,
Income and Expense, Yields and Rates presented in the table on pages 11 and 12.
Despite competitive pricing on interest earning assets and interest bearing
liabilities, BANC ONE's net interest margin (FTE) increased 13 basis points
compared to the three months ended September 30, 1994. This increase is
primarily due to the sale of lower yielding loans and investment securities to
fund growth in higher yielding loans. The increase was offset somewhat by a
continued change in the retail deposit mix as customers shift funds into
products offering higher yields, as well as the impact of off-balance sheet
investment products as described below. Quarterly average loans, primarily
commercial and real estate loans, increased approximately $3.2 billion from
the third quarter of 1994, despite the impact of loan sales and the sale of
four Michigan banks noted in the Balance Sheet Analysis on page 16. The
average balance of investment securities decreased $4.8 billion for third
quarter 1995 compared to third quarter 1994. This decrease is due primarily to
sales of approximately $8.1 billion of investment securities during the second
half of 1994 as part of BANC ONE's overall effort to reduce sensitivity of
earnings to increases in interest rates as well as to fund loan growth, offset
in part by various purchases of investment securities. During the third
quarter of 1995, BANC ONE issued $600 million in subordinated notes to take
advantage of favorable long term interest rates, the proceeds of which were
used primarily to reduce commercial paper outstandings.
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. Off-balance sheet investment products, primarily interest rate
swaps, reduced net interest income by $50 million and $162 million for the
three and nine months ended September 30, 1995 as compared to decreasing net
interest income by $5 million and increasing net interest income by $133
million for the three and nine months ended September 30, 1994. 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 19 for a more complete discussion of asset/liability management.
Loan sales have impacted interest income, servicing income and charge-offs as
follows:
- The reinvestment of the proceeds, in the second quarter of 1995
from the sale of $1.2 billion in low yielding consumer loans
with servicing retained will continue to enhance interest
income.
- $1.0 billion in student loans were sold for a gain in the third
quarter of 1994 resulting in a reduction in interest income in
subsequent periods.
- $2.8 billion in credit card receivables were sold since the
third quarter of 1994 with servicing retained resulting in an
increase in non-interest income and decreases in interest
income and charge-offs.
A shift from net interest income to loan processing and servicing income can be
expected for the foreseeable future as additional loans are sold with servicing
retained.
13
<PAGE> 14
NON-INTEREST INCOME
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
------------------------- -----------------------------
SEPTEMBER 30, SEPTEMBER 30, INCREASE SEPTEMBER 30, SEPTEMBER 30, INCREASE
$(THOUSANDS) 1995 1994 (DECREASE) 1995 1994 (DECREASE)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Income from fiduciary activities $60,052 $53,449 $6,603 $177,180 $171,746 $5,434
Service charges on deposit accounts 140,811 125,029 15,782 400,384 355,739 44,645
Loan processing and servicing income:
Mortgage banking 18,998 15,118 3,880 52,607 56,952 (4,345)
Credit card and merchant processing
fees 52,394 55,033 (2,639) 146,460 145,230 1,230
Loan servicing income 71,194 20,538 50,656 186,210 64,809 121,401
-------- -------- ------- ---------- ---------- --------
TOTAL LOAN PROCESSING AND SERVICING 142,586 90,689 51,897 385,277 266,991 118,286
INCOME
Other income:
Insurance 21,525 18,156 3,369 62,137 52,212 9,925
Securities 11,755 12,987 (1,232) 34,724 42,485 (7,761)
Investment banking 6,829 6,784 45 21,471 20,535 936
Income from management of collection
pools 3,589 6,272 (2,683) 20,038 16,218 3,820
Other 78,429 130,412 (51,983) 257,686 253,146 4,540
-------- -------- ------- ---------- ---------- --------
Total other income 122,127 174,611 (52,484) 396,056 384,596 11,460
Securities gains (losses) 7,294 (12,975) 20,269 19,865 (6,785) 26,650
-------- -------- ------- ---------- ---------- --------
TOTAL NON-INTEREST INCOME $472,870 $430,803 $42,067 $1,378,762 $1,172,287 $206,475
======== ======== ======= ========== ========== ========
</TABLE>
The increase in SERVICE CHARGES ON DEPOSIT ACCOUNTS for the three and nine
months ended September 30, 1995, primarily resulted from increases of $11 and
$37 million, respectively, in overdraft fees due to a change in the method of
check processing and an increase in per occurrence fees.
The increase in LOAN PROCESSING AND SERVICING INCOME is primarily due to
increased service fee income of $43 million for the quarter and $108 million
year to date relating to $2.8 billion in credit card receivables sold since the
third quarter of 1994.
The growth in INSURANCE INCOME for the three and nine months ended September
30, 1995 is primarily due to increases of $3 and $11 million, respectively, due
to deeper penetration of insurance product sales within the affiliate bank
network during 1995.
The decrease in OTHER non-interest income for the three months ended September
30, 1995 is primarily due to a $49 million gain on the sale of $1 billion of
student loans and a $13 million gain on the sale of mortgage loan servicing
rights during the third quarter of 1994, offset by gains in 1995 of $6 million
on sales of loans and $9 million on sales of branches.
In addition to the quarterly items discussed above, other non-interest income
increased for the nine months ended September 30, 1995 due to the following: 1)
a gain of $47 million related to the February 1995 sale of four Michigan banks
which had combined assets of $614 million at December 31, 1994, 2) income of $17
million on the March 1995 sale of a credit card processing software license, 3)
a $13 million gain on the sale of servicing related to $992 million in mortgage
loans, 4) an increase of $10 million in fees resulting from a shift in 1995 from
originating income tax refund anticipation loans to receiving fees for
transmitting tax returns electronically, and 5) gains of $19 million on the
sale of loans and other assets. These increases were partially offset by a $52
million loss in the first quarter of 1995 related to the sale of $1.2 billion of
low yielding consumer loans.
14
<PAGE> 15
<TABLE>
NON-INTEREST EXPENSE
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30, INCREASE SEPTEMBER 30, SEPTEMBER 30, INCREASE
$(THOUSANDS) 1995 1994 (DECREASE) 1995 1994 (DECREASE)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Salary and related costs $430,135 $427,290 $2,845 $1,302,164 $1,294,518 $7,646
Net occupancy expense,
exclusive of depreciation 40,965 44,849 (3,884) 121,157 127,094 (5,937)
Equipment expense 26,372 29,293 (2,921) 78,946 87,608 (8,662)
Taxes other than income and
payroll 23,571 21,275 2,296 68,637 43,766 24,871
Depreciation and amortization 71,635 94,507 (22,872) 215,325 233,052 (17,727)
Outside services and processing 101,144 112,593 (11,449) 309,637 311,894 (2,257)
Marketing and development 37,210 38,936 (1,726) 129,789 126,576 3,213
Communication and
transportation 66,955 60,811 6,144 200,898 180,147 20,751
Other:
Foreclosed property expense 1,506 (2,378) 3,884 (2,824) (3,134) 310
FDIC Insurance 163 35,698 (35,535) 71,898 106,372 (34,474)
Other 80,555 95,285 (14,730) 210,509 218,546 (8,037)
-------- -------- -------- ---------- ---------- --------
Total other expense 82,224 128,605 (46,381) 279,583 321,784 (42,201)
-------- -------- -------- ---------- ---------- --------
TOTAL NON-INTEREST EXPENSE $880,211 $958,159 $(77,948) $2,706,136 $2,726,439 $(20,303)
======== ======== ======== ========== ========== ========
</TABLE>
SALARIES AND RELATED COSTS increased for the nine months ended September 30,
1995 primarily due to a $7 million increase related to headcount within non
bank affiliates resulting from increased volume.
TAXES OTHER THAN INCOME AND PAYROLL expense increased for the nine months ended
September 30, 1995 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.
DEPRECIATION AND AMORTIZATION expense decreased primarily due to $21 million of
merger-related expenses recognized during the third quarter of 1994.
OUTSIDE SERVICES AND PROCESSING expense decreased for the three months ended
September 30, 1995 primarily due to $6 million of merger-related expenses
recognized during the third quarter of 1994. Increased consulting expense of
$5 million during the nine months ended September 30, 1995 offset the decrease
above. Such increase in consulting expense during 1995 relates to retail and
business banking initiatives.
COMMUNICATION AND TRANSPORTATION expense 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.
FDIC INSURANCE expense decreased for the three months ended September 30, 1995
as a result of the Federal Deposit Insurance Corporation decision to lower
deposit insurance premiums from $.23 to $.04 per $100 in Bank Insurance Fund
(BIF) deposits for well capitalized and well managed banks. The premium change
resulted in a refund of $35 million which was received in September 1995. The
effect of the premium decrease on future periods will be offset by an
undetermined reduction in certain customer fees. Congress is considering
various proposals for fully capitalizing the Savings Association Insurance Fund
(SAIF). The proposals include a special assessment on SAIF insured deposits
of which BANC ONE has $6 billion. It is uncertain whether or when this pending
legislation will become law.
OTHER non-interest expense decreased primarily due to the following: 1)
litigation settlements of $13 million recognized during third quarter 1994, 2)
merger-related expenses of $5 million recognized during third quarter 1994 and
3) the operations consolidation expense accrual of $4 million recorded in third
quarter 1994. The decrease was partially offset by litigation expense of $19
million recognized during the third quarter of 1995.
INCOME TAXES
The provision for income taxes was 34.3% of pretax income for the nine months
ended September 30, 1995 as compared to 34.3% of pretax income for the same
period in 1994. The effective tax rate for the nine months ended September 30,
1995 approximates the anticipated effective tax rate for the year.
15
<PAGE> 16
<TABLE>
BALANCE SHEET ANALYSIS
LOANS AND LEASES
<CAPTION>
SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30,
$(THOUSANDS) 1995 1994 1994
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Commercial, financial and agricultural $18,138,042 $16,619,186 $15,855,959
Real Estate:
Commercial 5,600,036 5,571,296 5,461,460
Construction 2,573,373 2,195,003 2,112,223
Residential 12,500,483 11,273,689 11,093,661
Consumer, net 18,243,992 19,070,286 18,973,605
Credit card 6,809,021 5,924,383 6,936,239
Leases, net 1,547,736 1,339,069 1,214,207
----------- ----------- -----------
Total loans and leases $65,412,683 $61,992,912 $61,647,354
=========== =========== ===========
</TABLE>
Total loans and leases increased $3.4 billion from December 31, 1994. Adjusted
for $2 billion in credit card loans sold during the fourth quarter 1994, $1.2
billion of consumer loans sold during the second quarter of 1995, $905 million
in credit card and student loans sold in the first three quarters of 1995 and
the sale of four Michigan banks, the third quarter 1995 total average loan
balances increased 9.6% from the quarter ended December 31, 1994, on an
annualized basis. This growth was primarily the result of increases in
commercial, financial and agricultural loans of 10.2% and increases in credit
card loans of 29.7%, annualized and adjusted for loan and bank sales. BANC
ONE's managed credit card portfolio was $10.0 billion at September 30, 1995 as
compared to $7.4 billion at September 30, 1994.
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.
The following summarizes the activity in nonaccrual loans and OREO for the
periods indicated.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
$(THOUSANDS) SEPTEMBER 30, 1995 SEPTEMBER 30, 1995
----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
NONACCRUAL LOANS:
Balance, beginning of period $353,443 $377,409
Nonaccrual additions 89,622 267,350
Loans returned to accrual and payments received (49,625) (206,859)
Reductions due to transfers to OREO (11,389) (20,213)
Charge-offs (24,532) (59,699)
Other, net (880) (1,349)
-------- --------
Balance, end of period $356,639 $356,639
======== ========
OREO
Balance, beginning of period $72,904 $84,355
Additions 28,980 67,947
Write-downs (4,206) (13,117)
Sales and other, net (14,475) (55,982)
------- --------
Balance, end of period $83,203 $83,203
======= ========
</TABLE>
16
<PAGE> 17
The following summarize charge-offs and recoveries as percentages of average
loans and leases for the periods indicated.
<TABLE>
<CAPTION> NET
GROSS CHARGE-OFFS
CHARGE-OFFS RECOVERIES (RECOVERIES)
FOR THE THREE MONTHS ENDED: (1) (1) (1)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SEPTEMBER 30, 1995
Commercial, financial and agricultural .32% .18% .14%
Real estate .13 .07 .06
Consumer, net 1.18 .42 .76
Credit card 4.45 .72 3.73
Leases, net 1.17 .19 .98
TOTAL LOANS AND LEASES .94% .27% .67%
SEPTEMBER 30, 1994
Commercial, financial and agricultural .23% .42% (.19)%
Real estate .15 .10 .05
Consumer, net .89 .38 .51
Credit card 3.98 .59 3.39
Leases, net .42 .20 .22
TOTAL LOANS AND LEASES .83% .33% .50%
<FN>
(1) Ratios are presented on an annualized basis.
</TABLE>
<TABLE>
<CAPTION>
LOANS DELINQUENT 90 DAYS OR MORE (1) SEPTEMBER 30, SEPTEMBER 30,
1995 1994
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Wholesale (2) .15% .17%
Real estate, residential .17 .11
Consumer, net .30 .30
Credit card 1.35 1.19
Leases, net .06 .04
TOTAL LOANS AND LEASES .32 .32
<FN>
(1) Ratios presented exclude nonperforming loans and are expressed as a percent
of ending balances.
(2) Includes commercial, financial and agricultural;
commercial real estate and construction real estate loans.
</TABLE>
At September 30, 1995 total non-performing assets, primarily nonaccrual loans,
have decreased 15.2% from September 30, 1994 and loans delinquent 90 days or
more have increased 8.7% for the same period. The increase in net charge-offs
has been driven by an increase in loans outstanding and commercial loans no
longer being in a net recovery position. In addition, the industry is currently
experiencing an increase in delinquencies and charge-offs due mainly to the
deterioration of consumer credit.
17
<PAGE> 18
The following summarizes activity in the allowance for credit losses.
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------------- -----------------------------
$(THOUSANDS) 1995 1994 1995 1994
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BALANCE, BEGINNING OF PERIOD $891,546 $955,078 $897,180 $967,254
(Sold) acquired allowances and other 34 349 (3,888) 6,381
Provision for credit losses 132,526 75,940 291,608 206,650
Losses charged to the allowance (151,973) (126,470) (410,445) (379,359)
Recoveries 43,320 50,260 140,998 154,231
-------- -------- -------- --------
Net losses charged to the allowance (108,653) (76,210) (269,447) (225,128)
-------- -------- -------- --------
BALANCE, END OF PERIOD $915,453 $955,157 $915,453 $955,157
======== ======== ======== ========
</TABLE>
The provision for credit losses is net of a $9.2 million decrease related to
$380 million of credit card receivables sold during the third quarter of 1995;
the $8.5 million decrease related to the second quarter 1995 sale of $380
million of credit card receivables and the $9.9 million decrease in the first
quarter of 1995 related to the sale of consumer loans. Despite these decreases
the total provision for credit losses increased $85 million for the nine month
period and $56 million for the three month period ended September 30, 1995. This
increase in the provision is primarily due to loan growth as well as an increase
to provide coverage of increasing net charge-offs.
DEPOSITS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30,
$(THOUSANDS) 1995 1994 1994
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Non-interest bearing $13,476,471 $14,405,707 $13,739,282
Interest bearing:
Demand 8,203,190 9,296,774 9,079,990
Savings 5,746,332 7,033,573 7,535,898
Money market accounts 14,549,359 12,336,737 12,290,234
Time deposits less than $100,000 19,085,773 18,906,855 18,354,422
Time deposits greater than $100,000 5,230,563 6,110,408 4,909,875
----------- ----------- -----------
Total interest bearing deposits 52,815,217 53,684,347 52,170,419
----------- ----------- -----------
Total deposits $66,291,688 $68,090,054 $65,909,701
=========== =========== ===========
</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
borrowings, 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. Total deposits remained constant compared to September
30, 1994; however, the retail deposit mix continues to change as consumers
shift funds out of low rate core deposits into higher yielding market indexed
products.
18
<PAGE> 19
LIQUIDITY AND CAPITAL
At September 30, 1995, large liability dependence was 18.24%, an increase of
2.25% from December 31, 1994. BANC ONE's policy is that the large liabilities
position be no greater than 30 percent of net earning assets. In practice,
BANC ONE manages the position at much lower levels as summarized below.
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30,
$(MILLIONS) 1995 1994 1994
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Earning assets, net of short term investments $78,538 $76,248 $77,847
Large liabilities:
Net national market liabilities $2,633 $1,954 $2,521
As a percent of net earning assets 3.35% 2.56% 3.24%
Total net large liabilities $14,328 $12,195 $15,353
As a percent of net earning assets 18.24% 15.99% 19.72%
</TABLE>
In July 1995, BANC ONE issued $600 million of subordinated notes to take
advantage of favorable long term interest rates, $300 million with a 10 year
maturity and $300 million with a 30 year maturity. During the fourth quarter
1995, BANC ONE expects to increase liquidity by converting approximately $1.5
billion in mortgage loans into Federal Home Loan Mortgage Corporation
participation certificates.
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 September
30, 1995, risk based tier I capital, total risk based capital and leverage
ratios were 10.11%, 14.17% and 8.88%, respectively. All of these ratios are
significantly above regulatory minimum capital requirements.
ASSET/LIABILITY MANAGEMENT
Asset/Liability Management (ALM) at BANC ONE is an ongoing process used to
manage liquidity, capital and interest rate risk. The key elements of the ALM
process are discussed in further detail on pages 68 through 72 of BANC ONE
CORPORATION's 1994 Annual Report on Form 10-K.
The management of interest rate risk in the ALM process can be broken down into
three components; earnings sensitivity risk (ESR), basis risk, and long-term
risk. ESR is the risk that as interest rates change, BANC ONE's earnings will
change. ESR is defined as the percentage change in BANC ONE's forecasted
earnings over a 12 month period for a specific change in forecasted market
interest rates. Current BANC ONE strategy is to manage ESR such that changes
in market interest rates result in a reduction no greater than approximately
one percent of projected annualized after-tax earnings for gradual increases
and decreases of 100 basis points. At September 30, 1995, BANC ONE's modeled
interest rate risk simulation indicated projected after-tax earnings would
decline 1.7 percent for an up 100 basis point change and decline 0.4 percent
for a down 100 basis point change. At September 30, 1995, BANC ONE's modeled
interest rate risk simulation indicated projected after-tax earnings would
decline 4.4 percent for an up 200 basis point change and decline 1.2 percent
for a down 200 basis point change.
BANC ONE uses both on-balance and off-balance sheet investment products to
manage interest rate risk. The off-balance sheet investment products utilized
are primarily interest rate swaps. Interest rate swap agreements involve the
exchange of interest payments without the exchange of the underlying notional
amount on which the interest payments are calculated. BANC ONE has entered
into interest rate swap agreements that synthetically alter assets and
liabilities as part of its ALM process to manage the impact of fluctuating
interest rates.
19
<PAGE> 20
Following are the fair value and amortized cost of securities by type
and the estimated maturities and weighted average fixed rates of
off-balance sheet investment products by type. A key assumption in
the maturity information below is that future variable rates move as
indicated by the forward interest rate curve in existence at
September 30, 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.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1995 DECEMBER 31, 1994 SEPTEMBER 30, 1994
------------------------ ------------------------- --------------------------
Amortized Estimated Amortized Estimated Amortized Estimated Fair
$ (MILLIONS) Cost Fair Value Cost Fair Value Cost Value
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SECURITIES HELD TO MATURITY:
United States treasury and
agencies $386 $389 $546 $532 $560 $554
Mortgage and asset-backed
securities:
Government 1,456 1,492 1,405 1,378 1,499 1,501
Other 447 452 492 485 488 487
Tax exempt 1,811 1,855 2,182 2,167 2,280 2,305
Other 217 238 209 228 187 203
------- ------- ------- ------- ------- -------
Total securities held to maturity 4,317 4,426 4,834 4,790 5,014 5,050
------- ------- ------- ------- ------- -------
SECURITIES AVAILABLE FOR SALE:
United States treasury and
agencies 3,186 3,190 3,700 3,693 6,405 6,185
Mortgage and asset-backed
securities:
Government 3,514 3,532 3,312 3,206 3,304 3,238
Other 2,729 2,705 3,144 3,072 2,531 2,480
Tax exempt 44 44 34 34 27 27
Other 247 253 306 313 204 211
------- ------- ------- ------- ------- -------
Total securities available for sale 9,720 9,724 10,496 10,318 12,471 12,141
------- ------- ------- ------- ------- -------
TOTAL SECURITIES $14,037 $14,150 $15,330 $15,108 $17,485 $17,191
======= ======= ======= ======= ======= =======
</TABLE>
20
<PAGE> 21
<TABLE>
<CAPTION>
MATURITIES OF OFF-BALANCE SHEET INVESTMENT
PRODUCTS AT SEPTEMBER 30, 1995 (1)(2) ENDING BALANCES AT
------------------------------------------------------------------------------------------------------
2000 - September 30, December 31, September 30,
$(MILLIONS) 1995 1996 1997 1998 1999 2004 2005+ 1995 1994 1994
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Receive fixed swaps
Notional value $575 $2,045 $3,553 $1,500 $1,506 $750 $9,929 $6,995 $7,284
Weighted average 6.11% 5.97% 5.20% 5.82% 6.64% 6.78% 5.84% 5.37% 5.35%
receive rate
Receive fixed amortizing swaps
Notional value $1,005 $5,836 $1,534 $615 $24 $17 $9,031 $15,442 $16,237
Weighted average 5.37% 5.29% 5.24% 5.51% 7.57% 8.82% 5.32% 5.24% 5.29%
receive rate
Pay fixed swaps
Notional value $464 $2,506 $95 $110 $6 $7 $3,188 $5,548 $4,545
Weighted average pay 6.42% 5.60% 8.54% 6.22% 8.76% 8.16% 5.84% 5.51% 5.17%
rate
Purchased caps
Notional value $4,712 $3 $4 $4 $22 $7 $4,752 $6,186 $5,672
--- ------ -- -- -- --- -- ------ ------ ------
Net receive fixed position $1,116 $663 $4,989 $2,001 $14 $1,494 $743 $11,020 $10,703 $13,304
Basis swaps
Notional value 6 4,211 3,649 321 24 8,211 8,102 8,103
Other(3)
Notional value $369 $1,925 $1,000 $3,294 $2,191 $4,063
<FN>
(1)Maturities are based on estimated future interest rates from the forward interest curve at September 30, 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)Other off-balance sheet investment products include floors ($1.3 billion at September 30, 1995), futures, options,
swap options, caps, forward rate agreements, currency swaps, anticipatory hedges and forward starting contracts.
Customer transactions of $2.0 billion, $1.2 billion and $722 million at September 30, 1995, December 31, 1994 and
September 30, 1994, respectively, have been excluded.
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, 1995 1994
------------------------------------------------------------------------ ----------------------
TOTAL UNREALIZED UNREALIZED NET NET UNREALIZED
$(MILLIONS) NOTIONAL GAINS LOSSES UNREALIZED GAIN (LOSS)
AMOUNT GAIN (LOSS)
- --------------------------------------------------------------------------------------------------------- ----------------------
<S> <C> <C> <C> <C> <C>
Receive fixed $9,929 $42 $(87) $(45) $(153)
Receive fixed amortizing 9,031 14 (93) (79) (988)
Pay fixed 3,188 8 (14) (6) 86
Purchased caps 4,752 (21) (21) 81
Basis 8,211 (80) (80) (342)
Other 3,294 48 (5) 43 10
----------------------------------------------------------------------- ----------------------
Total $38,405 $112 $(300) $(188) $(1,306)
======================================================================= ======================
</TABLE>
BANC ONE CORPORATION's 1994 Annual Report on Form 10K provided certain fair
value information based on interest rates at December 31, 1994. Since that
date, market interest rates have decreased and, as a result, the fair value of
fixed rate liabilities has become less favorable and the value of certain loan
products more favorable. The net change is not material.
21
<PAGE> 22
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
b. Report on Form 8-K dated July 19, 1995 announcing an
agreement for the merger of Premier Bancorp, Inc.
with BANC ONE CORPORATION.
Report on Form 8-K dated July 29, 1995 announcing
that BANC ONE CORPORATION has advised the board of
directors of the Bank of Boston Corporation that the
$45 per share offer made on July 21, 1995 has been
withdrawn.
22
<PAGE> 23
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
November 14, 1995 /s/ William C. Leiter
- -------------------------- ------------------------------------
William C. Leiter
Date Controller and
Chief Accounting Officer
23
<PAGE> 24
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>
24
<PAGE> 1
BANC ONE CORPORATION and Subsidiaries EXHIBIT 11
STATEMENT REGARDING COMPUTATION OF EARNINGS PER COMMON SHARE
$(thousands, except per share amounts)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------- -------------------------
1995 1994 1995 1994
---------------------------------------------------------
<S> <C> <C> <C> <C>
PRIMARY:
Earnings:
Net income $331,017 $283,212 $941,017 $940,732
Deduct: Dividends on preferred shares 4,372 4,373 13,118 13,119
----- ----- ------ ------
Net income available to common shareholders $326,645 $278,839 $927,899 $927,613
======== ======== ======== ========
Shares:
Weighted average common shares outstanding 392,154 407,220 393,546 406,706
Add: Dilutive effect of outstanding options,
as determined by the application of the
treasury stock method 1,383 1,743 1,023 1,409
----- ----- ----- -----
Weighted average common shares outstanding,
as adjusted 393,537 408,963 394,569 408,115
======= ======= ======= =======
PRIMARY EARNINGS PER COMMON SHARE $.83 $.68 $2.35 $2.27
==== ==== ===== =====
FULLY DILUTED:
Earnings:
Net income $331,017 $283,212 $941,017 $940,732
Shares:
Weighted average common shares outstanding 392,154 407,220 393,546 406,706
Add: Dilutive effect of outstanding options,
as determined by the application of the
treasury stock method 1,881 1,743 1,709 1,433
Add: Conversion of preferred stock 8,763 8,765 8,764 8,765
----- ----- ----- -----
Weighted average common shares outstanding, as
adjusted 402,798 417,728 404,019 416,904
======= ======= ======= =======
FULLY DILUTED EARNINGS PER COMMON SHARE $.82 $.68 $2.33 $2.26
==== ==== ===== =====
</TABLE>
25
<PAGE> 1
BANC ONE CORPORATION and Subsidiaries EXHIBIT 12
Statement Regarding Computation of Ratio of Earnings to Fixed Charges
$(thousands)
<TABLE>
<CAPTION>
NINE MONTHS ENDED Years Ended
SEPTEMBER 30, 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) $1,432,493 $1,431,980 $1,518,852 $1,770,712 $1,341,249 $928,947 $727,310
Fixed charges 537,287 452,190 633,569 348,327 321,402 419,274 467,263
Less: Capitalized interest (1,183) (740) (1,000) (652) (1,199) (1,732) (2,181)
------- ----- ------- ----- ------- ------- -------
Earnings $1,968,597 $1,883,430 $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 $497,983 $411,903 $575,734 $298,857 $278,615 $379,708 $433,953
Portion of rental payments under
operating leases deemed to be
interest 39,304 40,287 57,835 49,470 42,787 39,566 33,310
------ ------ ------ ------ ------ ------ ------
Fixed charges $537,287 $452,190 $633,569 $348,327 $321,402 $419,274 $467,263
======== ======== ======= ======= ======= ======= =======
Ratio of earnings to fixed charges
excluding interest on deposits: 3.66x 4.17x 3.40x 6.08x 5.17x 3.21x 2.55x
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) $1,432,493 $1,431,980 $1,518,852 $1,770,712 $1,341,249 $928,947 $727,310
Fixed charges 2,252,036 1,637,070 2,307,832 1,826,018 2,318,274 2,955,918 3,115,412
Less: Capitalized interest (1,183) (740) (1,000) (652) (1,199) (1,732) (2,181)
------- ----- ------- ----- ------- ------- -------
Earnings $3,683,346 $3,068,310 $3,825,684 $3,596,078 $3,658,324 $3,883,133 $3,840,541
========== ========== ========= ========= ========= ========= =========
Fixed charges:
As detailed above $537,287 $452,190 $633,569 $348,327 $321,402 $419,274 $467,263
Interest on deposits 1,714,749 1,184,880 1,674,263 1,477,691 1,996,872 2,536,644 2,648,149
--------- --------- --------- --------- --------- --------- ---------
Fixed charges $2,252,036 $1,637,070 $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 1.64x 1.87x 1.66x 1.97x 1.58x 1.31x 1.23x
<FN>
(1)Results of Bank One, Texas, NA are consolidated beginning October 1, 1991.
</TABLE>
26
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 5,038,540
<INT-BEARING-DEPOSITS> 16,501
<FED-FUNDS-SOLD> 296,490
<TRADING-ASSETS> 199,184
<INVESTMENTS-HELD-FOR-SALE> 9,723,758
<INVESTMENTS-CARRYING> 4,316,523
<INVESTMENTS-MARKET> 4,426,282
<LOANS> 65,412,683
<ALLOWANCE> 915,453
<TOTAL-ASSETS> 88,353,313
<DEPOSITS> 66,291,688
<SHORT-TERM> 9,578,829
<LIABILITIES-OTHER> 1,803,438
<LONG-TERM> 2,677,205
<COMMON> 2,052,948
0
249,853
<OTHER-SE> 5,699,352
<TOTAL-LIABILITIES-AND-EQUITY> 88,353,313
<INTEREST-LOAN> 4,492,750
<INTEREST-INVEST> 720,411
<INTEREST-OTHER> 49,778
<INTEREST-TOTAL> 5,262,939
<INTEREST-DEPOSIT> 1,714,749
<INTEREST-EXPENSE> 2,211,464
<INTEREST-INCOME-NET> 3,051,475
<LOAN-LOSSES> 291,608
<SECURITIES-GAINS> 19,865
<EXPENSE-OTHER> 2,706,136
<INCOME-PRETAX> 1,432,493
<INCOME-PRE-EXTRAORDINARY> 941,017
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 941,017
<EPS-PRIMARY> 2.35
<EPS-DILUTED> 2.33
<YIELD-ACTUAL> 5.34
<LOANS-NON> 356,639
<LOANS-PAST> 212,301
<LOANS-TROUBLED> 4,818
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 897,180
<CHARGE-OFFS> 410,445
<RECOVERIES> 140,998
<ALLOWANCE-CLOSE> 915,453
<ALLOWANCE-DOMESTIC> 664,719
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 250,734
</TABLE>
