<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 March 31, 1996.
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 1-8552
BANC ONE CORPORATION
--------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Ohio 31-0738296
---- ----------
(State or other jurisdiction of incorporation or (IRS Employer I.D. Number)
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 435,554,944 at April 30, 1996.
<PAGE> 2
FORM 10-Q
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Item 1. Financial Statements Page
----
<S> <C>
Consolidated Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Consolidated Statement of Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Consolidated Statement of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Supplemental Disclosures for Statement of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Consolidated Statement of Changes in Stockholders' Equity . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Notes to the Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Consolidated Quarterly Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Average Balances, Income and Expense, Yields and Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Item 2. Management's Discussion and Analysis
Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Net Interest Income/Net Interest Margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Non-Interest Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Non-Interest Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Balance Sheet Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Loans and Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Liquidity and Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Asset Liability Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
</TABLE>
1
<PAGE> 3
BANC ONE CORPORATION AND SUBSIDIARIES
PART I
FINANCIAL INFORMATION
BANC ONE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31, MARCH 31,
$(THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED) 1996 1995 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Cash and due from banks $5,002,275 $5,501,266 $4,730,810
Short-term investments 288,709 454,718 1,102,748
SECURITIES:
Securities held to maturity 1,080,099 1,087,654 4,857,981
Securities available for sale 16,289,926 14,620,334 10,915,170
---------- ---------- ----------
Total securities (fair value approximates $17,400,000, $15,756,000
and $15,801,000 at March 31,1996, December 31, 1995 and
March 31, 1995, respectively) 17,370,025 15,707,988 15,773,151
Loans and leases 69,207,168 65,328,665 62,495,481
Allowance for credit losses 1,005,808 938,008 885,292
--------- ------- -------
Net loans and leases 68,201,360 64,390,657 61,610,189
OTHER ASSETS:
Bank premises and equipment, net 1,657,424 1,558,676 1,501,926
Interest earned, not collected 660,529 669,709 563,543
Other real estate owned 76,584 75,483 82,080
Excess of cost over net assets of affiliates purchased 473,304 242,817 258,732
Other 1,977,972 1,852,649 2,207,279
--------- --------- ---------
Total other assets 4,845,813 4,399,334 4,613,560
--------- --------- ---------
Total assets $95,708,182 $90,453,963 $87,830,458
=========== =========== ===========
LIABILITIES
DEPOSITS:
Non-interest bearing $14,428,845 $14,767,497 $13,204,733
Interest bearing 55,788,128 52,552,653 52,203,157
---------- ---------- ----------
Total deposits 70,216,973 67,320,150 65,407,890
Federal funds purchased and repurchase agreements 7,416,144 6,261,009 6,685,235
Other short-term borrowings 4,029,182 3,516,191 3,234,449
Long-term borrowings 3,010,097 2,720,373 2,125,949
Accrued interest payable 357,686 410,946 329,011
Other liabilities 2,248,017 2,027,816 2,352,459
--------- --------- ---------
Total liabilities 87,278,099 82,256,485 80,134,993
---------- ---------- ----------
STOCKHOLDERS' EQUITY
Preferred stock, 35,000,000 shares authorized:
Series C convertible, no par value 4,908,961, 4,992,694 and
4,997,999 shares issued and outstanding, respectively 245,448 249,635 249,900
Common stock, no par value, $5 stated value, 600,000,000 shares
authorized, 435,430,889, 451,741,054 and 410,009,224 shares
issued, respectively (December 31, 1995 shares reflect the 10%
stock dividend paid March 6, 1996 to shareholders of record on
February 21, 1996) 2,177,154 2,258,705 2,050,046
Capital in excess of aggregate stated value of common stock 4,610,573 5,157,763 3,810,815
Retained earnings 1,384,532 1,100,345 2,082,213
Net unrealized holding gains (losses) on securities available for
sale, net of tax 12,376 91,804 (56,503)
Treasury stock (0, 24,090,000 and 15,630,500 shares at March
31,1996, December 31, 1995 and March 31, 1995, respectively), at
cost 0 (660,774) (441,006)
- --------- ---------
Total stockholders' equity 8,430,083 8,197,478 7,695,465
--------- --------- ---------
Total liabilities and stockholders' equity $95,708,182 $90,453,963 $87,830,458
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
2
<PAGE> 4
BANC ONE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31,
<TABLE>
<CAPTION>
$(THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED) 1996 1995
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INTEREST INCOME:
Interest and fees on loans and leases $1,704,641 $1,454,956
Interest and dividends on:
Taxable securities 249,955 208,167
Tax exempt securities 24,997 31,614
Other interest income 5,389 28,557
----- ------
Total interest income 1,984,982 1,723,294
INTEREST EXPENSE:
Interest on deposits:
Demand, savings and money market deposits 246,830 218,852
Time deposits 345,387 331,078
Interest on borrowings 197,786 163,776
------- -------
Total interest expense 790,003 713,706
------- -------
Net interest income 1,194,979 1,009,588
Provision for credit losses 162,421 66,517
------- ------
Net interest income after provision for credit losses 1,032,558 943,071
NON-INTEREST INCOME:
Income from fiduciary activities 62,511 58,582
Service charges on deposit accounts 156,816 127,111
Loan processing and servicing income 117,245 112,443
Securities gains 5,835 9,786
Other 160,168 143,832
------- -------
Total non-interest income 502,575 451,754
NON-INTEREST EXPENSE:
Salaries and related costs 502,812 442,950
Net occupancy expense, exclusive of depreciation 44,673 39,576
Equipment expense 28,099 26,907
Taxes other than income and payroll 24,062 21,972
Depreciation and amortization 86,216 74,730
Outside services and processing 125,237 103,502
Marketing and development 48,114 44,236
Communication and transportation 75,171 66,063
Other 84,694 103,661
------ -------
Total non-interest expense 1,019,078 923,597
--------- -------
Income before income taxes 516,055 471,228
INCOME TAX PROVISION:
Income excluding securities transactions 168,115 165,016
Securities transactions 2,059 3,694
----- -----
Provision for income taxes 170,174 168,710
------- -------
Net income $345,881 $302,518
======== ========
Net income per common share (amounts reflect the 10%
common stock dividend paid March 6, 1996 to
shareholders of record on February 21, 1996) $.77 $.68
==== =====
Weighted average common shares outstanding (000) 444,027 435,893
======= =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE> 5
BANC ONE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31,
<TABLE>
<CAPTION>
$(THOUSANDS) (UNAUDITED) 1996 1995
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Net income $345,881 $302,518
ADJUSTMENTS:
Provision for credit losses 162,421 66,517
Depreciation expense 65,007 60,637
Amortization of other intangibles 21,209 14,093
Amortization (accretion) of securities premiums and discounts, net 7,954 (33,864)
Amortization of mortgage servicing rights 6,031 1,699
Net decrease in trading account 47,732 41,865
Net (increase) decrease in loans held for sale (228,985) 80,667
Net increase in deferred loan fees 8,051 1,036
Securities gains (5,835) (9,786)
Gain on sales of banks and branch offices (14,514) (47,247)
(Gain) loss on sales of loans and other assets (11,679) 43,256
Net (increase) decrease in other assets 88,979 (60,556)
Net increase in other liabilities 8,218 249,855
Net increase in deferred income taxes 63,097 42,638
------ ------
Net cash provided by operating activities 563,567 753,328
------- -------
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES:
Purchases of securities available for sale (1,337,656) (3,395,234)
Purchases of securities held to maturity (36,731) (381,118)
Maturities of securities available for sale 905,788 2,417,777
Maturities of securities held to maturity 90,937 347,295
Sales of securities available for sale 439,644 543,349
Net increase in loans, excluding sales and purchases (1,934,191) (1,137,676)
Sales of loans and other assets 1,794,763 172,631
Purchases of loans and related premiums (89,058) (244,799)
Net decrease in short-term investments 236,947 2,495,368
Additions to bank premises and equipment (72,827) (66,213)
Sale of banks 18,532 95,698
Net cash acquired in acquisitions 315,715 42,413
Net increase in purchased mortgage servicing rights (6,857) (35,448)
-------- --------
Net cash provided by investing activities 325,006 854,043
------- -------
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES:
Net decrease in demand deposit, money market and savings accounts (264,910) (1,481,433)
Net decrease in time deposits (952,988) (669,241)
Net increase in short-term borrowings 1,236,142 295,421
Issuance of long-term borrowings, net 507,171 320,110
Repayment of long-term borrowings (1,052,126) (60,336)
Cash dividends paid (152,293) (262,371)
Sales of branch offices:
Deposit liabilities assumed by purchasers (125,642)
Other, net 9,372
Purchase of treasury shares (592,950) (104,553)
Other, net increase 660 12,425
--- ------
Net cash used in financing activities (1,387,564) (1,949,978)
----------- -----------
Decrease in cash and cash equivalents (498,991) (342,607)
Cash and cash equivalents at January 1 5,501,266 5,073,417
--------- ---------
Cash and cash equivalents at March 31 $5,002,275 $4,730,810
========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE> 6
BANC ONE CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL DISCLOSURES FOR STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31,
<TABLE>
<CAPTION>
$(THOUSANDS) (UNAUDITED) 1996 1995
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Common stock issued and treasury stock reissued in purchase acquisitions $710,515 $3,647
======== ======
Transfer from loans to other real estate owned (OREO) 23,138 20,121
====== ======
Net increase in securities trades not settled 39,850 88,766
====== ======
Loans issued to facilitate the sale of OREO properties 759 1,179
=== =====
Additional Disclosures:
Interest paid 874,093 732,736
======= =======
Income taxes paid $3,718 $6,112
====== ======
</TABLE>
The accompanying notes are an integral part of the financial statements.
BANC ONE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
For the three months ended March 31,
<TABLE>
<CAPTION>
$(THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED) 1996 1995
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
BALANCE, BEGINNING OF PERIOD $8,197,478 $7,564,860
Net income 345,881 302,518
Exercise of stock options, net of shares purchased (3,039) (286)
Shares issued in acquisitions 710,515 3,647
Sales of stock to employee benefit plans and other 3,919 12,711
Cash dividends:
Corporation:
Common ($.34 and $.31 per share) (147,998) (134,073)
Series C Preferred ($.88 per share) (4,295) (4,373)
Change in unrealized holding gains (losses) on
securities available for sale, net of tax (79,428) 55,014
Purchase of treasury stock (592,950) (104,553)
--------- ---------
BALANCE, END OF PERIOD $8,430,083 $7,695,465
========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE> 7
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, 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. On January 2, 1996, the Corporation acquired all of the outstanding shares
of Premier Bancorp, Inc. (Premier) of Baton Rouge, Louisiana in exchange
for 24 million shares of the Corporation's treasury stock (adjusted for
the 10% common stock dividend paid March 6, 1996 to shareholders of record
on February 21, 1996) valued at $711 million. The acquisition was
accounted for as a purchase, and therefore, prior period financial
statements have not been restated to include Premier. Premier had assets
of $6.3 billion at December 31, 1995.
On March 15, 1996, the Corporation completed the sale of Bank One,
Pikeville, NA which had assets of $224 million at December 31, 1995,
resulting in a pretax gain of $8 million.
4. Mortgage loans held for sale were $747 million, $503 million and $275
million at March 31, 1996, December 31, 1995 and March 31, 1995,
respectively. Such loans are carried at the lower of cost or market
determined on an aggregate basis.
5. BANC ONE adopted Financial Accounting Standard No. 121 (SFAS 121),
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of" as of January 1, 1996. The impact on BANC ONE's
financial position and results of operations is not material.
6. On February 13, 1996, the Corporation repurchased 15 million shares of
common stock (16.5 million shares after the 10% stock dividend). The
shares were retired and subsequently reissued to pay the 10% stock
dividend.
On April 16, 1996, the Board of Directors approved the repurchase of up to
10 million shares of BANC ONE common stock to be used for general
corporate purposes.
6
<PAGE> 8
\CONSOLIDATED QUARTERLY FINANCIAL DATA
<TABLE>
<CAPTION>
QUARTERS
---------------------------------------------------------------
1996 1995
---------------------------------------------------------------
$(MILLIONS) (UNAUDITED) FIRST FOURTH THIRD SECOND FIRST
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PERIOD END BALANCES
Loans and leases (net of unearned income) $69,207.2 $65,328.7 $65,412.7 $63,335.0 $62,495.5
Earning assets 85,860.1 80,553.4 79,020.9 77,272.1 78,486.1
Total assets 95,708.2 90,454.0 88,353.3 86,783.3 87,830.5
Total deposits 70,217.0 67,320.2 66,291.7 65,612.9 65,407.9
Long-term borrowings 3,010.1 2,720.4 2,677.2 2,088.0 2,125.9
Allowance for credit losses 1,005.8 938.0 915.5 891.5 885.3
Total stockholders' equity 8,430.1 8,197.5 8,002.2 7,839.1 7,695.5
CONDENSED INCOME STATEMENT
Net interest income (1) 1,210.87 1,094.55 1,057.66 1,024.36 1,032.31
Provision for credit losses 162.42 165.90 132.52 92.56 66.51
------ ------ ------ ----- -----
Net funds function (1) 1,048.45 928.65 925.14 931.80 965.80
NON-INTEREST INCOME
Income from fiduciary activities 62.51 62.23 60.05 58.54 58.58
Service charges on deposit accounts 156.82 144.31 140.81 132.46 127.11
Loan processing and servicing income 117.24 135.53 142.59 130.24 112.44
Securities gains 5.83 7.98 7.29 2.79 9.79
Other 160.17 141.16 122.13 130.10 143.83
------ ------ ------ ------ ------
Total non-interest income 502.57 491.21 472.87 454.13 451.75
NON-INTEREST EXPENSE
Salaries and related costs 502.81 448.35 430.14 429.08 442.95
Other 516.27 477.15 450.07 473.25 480.65
------ ------ ------ ------ ------
Total non-interest expense 1,019.08 925.50 880.21 902.33 923.60
Taxable equivalent adjustment 15.89 16.57 19.25 20.89 22.72
----- ----- ----- ----- -----
Income before income taxes 516.05 477.79 498.55 462.71 471.23
Income tax provision 170.17 140.94 167.53 155.23 168.71
------ ------ ------ ------ ------
Net income $345.88 $336.85 $331.02 $307.48 $302.52
======= ======= ======= ======= =======
Net income available to common shareholders $341.59 $332.48 $326.65 $303.11 $298.15
======= ======= ======= ======= =======
<FN>
1) Fully taxable equivalent basis. The Federal statutory rate used was 35% for
all periods presented.
</TABLE>
7
<PAGE> 9
CONSOLIDATED QUARTERLY FINANCIAL DATA
<TABLE>
<CAPTION>
QUARTERS
--------------------------------------------------------------
1996 1995
--------------------------------------------------------------
$(MILLIONS, EXCEPT PER SHARE DATA) (UNAUDITED) FIRST FOURTH THIRD SECOND FIRST
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
KEY RATIOS
Return on average assets (1) 1.45% 1.51% 1.51% 1.43% 1.42%
Return on average common equity (1) 16.38 17.00 17.09 16.34 16.61
Average common equity to assets 8.77 8.80 8.74 8.60 8.40
Tier I capital ratio 9.57 10.05 10.11 10.36 10.23
Total risk adjusted capital ratio 13.44 14.05 14.17 13.76 13.62
Leverage ratio 8.24 8.87 8.88 8.72 8.58
MARGIN ANALYSIS (1)(2)(3)
Interest income 9.34 9.26 9.19 9.15 9.06
Interest expense 3.69 3.79 3.80 3.86 3.70
---- ---- ---- ---- ----
Net interest income 5.65 5.47 5.39 5.29 5.36
Provision for credit losses .76 .83 .68 .48 .35
--- --- --- --- ---
Net funds function 4.89 4.64 4.71 4.81 5.01
CREDIT ANALYSIS
Net charge-offs to average loans and leases (1) .89 .87 .67 .56 .49
Ending allowance to loans and leases 1.45% 1.44% 1.40% 1.41% 1.42%
Nonperforming assets (6):
Total $486.3 $429.8 $444.7 $430.8 $449.4
Percent of total loans and leases .70% .66% .68% .68% .72%
Loans delinquent 90 days or more (4):
Total $250.2 $254.4 $212.3 $186.7 $172.9
Percent of total loans and leases .36% .39% .32% .29% .28%
Allowance to nonperforming loans 245.5% 264.8% 253.3% 249.1% 241.0%
PER SHARE DATA (5)
Net income $.77 $.77 $.76 $.70 $.68
Cash dividends declared .34 .31 .31 .31 .31
Book value 18.80 18.58 18.02 17.59 17.16
Common stock price:
High 38.50 36.48 34.41 31.94 27.39
Low 31.94 30.35 27.95 26.03 22.85
Close 35.63 34.21 33.18 29.32 25.91
Preferred Series C stock price:
High 73.88 70.75 64.00 61.75 54.25
Low 62.00 59.38 55.58 52.25 49.63
Close $69.13 $65.63 $63.75 $58.25 $51.75
SHARES TRADED (000)
Common 62,091 37,100 39,873 53,708 48,353
Preferred Series C 1,222 1,678 990 1,316 1,233
<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.
(5) Amounts have been restated for the 10% common stock dividend paid March 6,
1996 to shareholders of record on February 21, 1996.
(6) Excludes certain smaller balance loans collectively evaluated for
impairment.
</TABLE>
8
<PAGE> 10
AVERAGE BALANCES, INCOME AND EXPENSE, YIELDS AND RATES (1)
<TABLE>
<CAPTION>
1996 1995
FIRST QUARTER FIRST QUARTER
----------------------------------------------------------------------------------
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 $392,058 $5,422 5.56% $1,898,213 $30,294 6.47%
SECURITIES: (3)
Taxable 15,474,779 250,096 6.50 13,193,528 208,735 6.42
Tax-exempt 1,733,202 36,572 8.49 2,145,188 46,746 8.84
--------- ------ --------- ------
Total securities 17,207,981 286,668 6.70 15,338,716 255,481 6.75
LOANS AND LEASES: (2)
Commercial 18,864,165 383,599 8.18 16,570,122 331,677 8.12
Real estate:
Commercial 5,988,637 134,276 9.02 5,535,898 120,596 8.83
Construction 2,920,323 71,788 9.89 2,281,247 59,470 10.57
Residential 11,690,758 265,822 9.15 11,355,325 243,958 8.71
Consumer, net 20,027,947 487,575 9.79 18,911,300 438,775 9.41
Credit card 8,289,355 333,274 16.17 5,806,591 241,036 16.83
Leases, net 1,776,069 32,451 7.35 1,354,105 24,731 7.41
Allowance for credit losses (1,008,214) (897,228)
--------- --------- --------- ---------
Net loans and leases 68,549,040 1,708,785 10.03 60,917,360 1,460,243 9.72
---------- --------- ---------- ---------
Total earning assets 86,149,079 2,000,875 9.34 78,154,289 1,746,018 9.06
Other assets (3) 9,523,446 8,491,705
--------- ---------
Total assets $95,672,525 $86,645,994
=========== ===========
LIABILITIES:
DEPOSITS:
Non-interest bearing demand $13,951,625 $12,922,201
Interest bearing demand 3,115,025 14,847 1.92 8,928,081 49,618 2.25
Savings 5,571,321 36,992 2.67 6,735,705 50,742 3.06
Money market savings 22,481,902 194,991 3.49 12,548,007 118,492 3.83
Time deposits:
CDs less than $100,000 19,794,454 276,031 5.61 19,185,642 256,111 5.41
CDs $100,000 and over:
Domestic 3,915,866 50,209 5.16 3,769,780 47,482 5.11
Foreign 1,433,338 19,147 5.37 1,959,255 27,485 5.69
--------- ------ --------- ------
Total deposits 70,263,531 592,217 3.39 66,048,671 549,930 3.38
Borrowed Funds:
Short-term 11,531,237 149,573 5.22 9,310,890 127,328 5.55
Long-term 3,018,706 48,213 6.42 2,056,018 36,448 7.19
--------- ------ --------- ------
Total borrowed funds 14,549,943 197,786 5.47 11,366,908 163,776 5.84
---------- ------- ---------- -------
Total interest bearing liabilities 70,861,849 790,003 4.48 64,493,378 713,706 4.49
Other liabilities 2,225,888 1,700,296
--------- ---------
Total liabilities 87,039,362 79,115,875
Preferred stock 247,442 249,900
Common stockholders' equity 8,385,721 7,280,219
--------- ---------
Total liabilities and stockholders' equity
$95,672,525 $86,645,994
=========== ===========
Net interest income 1,210,872 5.65 1,032,312 5.36
Provision for credit losses (162,421) (.76) (66,517) (.35)
--------- ----- -------- -----
Net funds function $1,048,451 4.89% $965,795 5.01%
========== ===== ======== =====
<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>
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 1995 BANC ONE
CORPORATION Annual Report on Form 10-K. BANC ONE cautions that any forward
looking statements contained in this report, in a report incorporated by
reference to this report or made by management of the company involve risks and
uncertainties and are subject to change based on various important factors. The
forward looking statements could cause actual results to differ materially from
those expressed or implied.
RESULTS OF OPERATIONS
NET INTEREST INCOME/NET INTEREST MARGIN
BANC ONE's interest income (FTE) increased 14.6% to $2.0 billion and interest
expense increased 10.7% to $.8 billion from first quarter 1995, resulting in a
slight increase in net interest income. These increases were primarily due to
the acquisition of Premier Bancorp, Inc. (Premier) on January 2, 1996. BANC
ONE's financial position and results of operations have not been restated to
include Premier as this acquisition was accounted for using the purchase method
of accounting.
Average earning asset balances increased 10.2% to $86.1 billion when
compared to $78.2 billion in the first quarter of 1995. Premier's first
quarter average earning assets of $5.1 billion contributed to this increase.
The increase in interest income was primarily due to a significant shift in
earning asset mix and earning asset growth. On books average loans and leases
grew 12.5% to $69.6 billion in 1996 from $61.8 billion in 1995. Excluding $3.5
billion in first quarter average loans related to the Premier acquisition, the
growth is primarily due to a $2.0 billion increase in credit card loans and
$700 million increase in real estate loans. On-balance sheet loan growth was
funded by an increase in short-term and long-term borrowings, a decrease in
short-term investments and a decrease in investment securities. Excluding the
$1.6 billion increase in first quarter 1996 of average investment securities
related to the purchase of Premier and the $1.4 billion related to mortgage
loans that were securitized and reclassified to investment securities from
loans during the fourth quarter of 1995, total investment securities decreased
$.9 billion, on average, from the first quarter of 1995. BANC ONE's net
interest margin in the first quarter of 1996 was also impacted by a lower
contribution from tax refund anticipation loan products, which increased the
margin 10 basis points in first quarter of 1996 compared with 13 basis points
for the same period in 1995. The decrease in the margin is largely offset by
higher fee income from electronic tax filing programs.
BANC ONE relies on both traditional bank funding sources and on sales of
loans with servicing retained to fund the origination of earning assets. Most
of the loan sales during 1996 and 1995 include arrangements whereby BANC ONE
continues to service the loans sold with revenue in excess of net charge-offs
and interest paid to investors recorded as servicing income. BANC ONE's net
income is not significantly affected by these loan sales; however,
classifications within the income statement have changed. Net interest income
and provision for credit losses decrease while non-interest income increases
due to these sales. While these loan sales have included both consumer loans
and credit card receivables (credit card sales) and may in the future include
other types of loans, the most significant impact on BANC ONE's income
statement classifications results from credit card sales. The following table
presents the impact of credit card sales with servicing retained on income
statement line items and certain other information pertaining to the total
credit card portfolio.
10
<PAGE> 12
<TABLE>
<CAPTION>
QUARTER ENDED MARCH 31, 1996 QUARTER ENDED MARCH 31, 1995
------------------------------------------------------------------------------
EFFECT OF EFFECT OF
CREDIT PRO-FORMA CREDIT PRO-FORMA
$(MILLIONS) REPORTED CARD SALES ADJUSTED REPORTED CARD SALES ADJUSTED
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Income statement:
Net interest income - fully taxable $1,211 $91 $1,302 $1,032 $66 $1,098
equivalent
Provision for credit losses 162 53 215 67 28 95
Non-interest income 502 (35) 467 452 (37) 415
Non-interest expense 1,019 3 1,022 924 1 925
Net income 346 346 303 303
Other Data:
Credit card balances:
Ending, at March 31, 7,278 4,440 11,718 5,850 2,680 8,530
Average for first quarter $8,289 $3,489 $11,778 $5,807 $2,680 $8,487
Net charge-offs as a percentage of
average credit cards 4.64% 6.11% 5.09% 3.23% 4.24% 3.54%
Credit card delinquencies over 90 days as
a percentage of ending credit cards 1.70 1.94 1.79 1.26 1.75 1.42
Net interest margin 5.65% 10.49% 5.84% 5.36% 9.99% 5.51%
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
BANC ONE's retail funding base continued to shift away from relatively low-cost
deposit products (including interest-bearing demand and savings accounts) into
other deposit products offering yields which enabled BANC ONE to compete
effectively against non-bank providers of retail money market investment
products. The offering of competitively priced products enabled BANC ONE to
avoid runoff of its retail funding base during the first quarter of 1996 and
ensured continued access to retail funds at rates which remained below large
liability funding cost.
BANC ONE's policy is to manage interest rate risk to a level which places
narrow limits on the sensitivity of its earnings to changes in market interest
rates. Various capital markets transactions were executed in both 1994 and
1995 to ensure that interest rate risk remains within policy limits.
Consequently, the significant changes in market interest rates which occurred
in 1995 and 1996 did not significantly impact net interest income. An
explanation of the asset-liability management process is found beginning on
page 17 and in the Annual Report on Form 10-K for the year ended December 31,
1995 beginning on page 34.
Off-balance sheet investment products, primarily interest rate swaps, decreased
interest income by $20 million in the first quarter of 1996 compared with $33
million in the first quarter of 1995. Off-balance sheet investment products
increased deposit and other borrowing costs by $.5 million in the first quarter
of 1996 and $20 million during the first quarter of 1995. In the current rate
environment, it is anticipated that these off-balance sheet products will
continue to reduce yields on interest earning assets and increase interest
rates on interest bearing liabilities in the future.
11
<PAGE> 13
NON-INTEREST INCOME
<TABLE>
<CAPTION>
QUARTER ENDED
---------------------------
MARCH 31, MARCH 31, INCREASE
$(THOUSANDS) 1996 1995 (DECREASE)
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income from fiduciary activities $62,511 $58,582 $3,929
Service charges on deposit accounts 156,816 127,111 29,705
Loan processing and servicing income:
Mortgage banking 19,862 15,716 4,146
Credit card and merchant processing fees 39,738 41,743 (2,005)
Loan servicing income 57,645 54,984 2,661
------ ------ -----
TOTAL LOAN PROCESSING AND SERVICING INCOME 117,245 112,443 4,802
Other income:
Insurance 26,215 18,672 7,543
Securities related activities 17,587 11,462 6,125
Investment banking 8,387 4,570 3,817
Other 107,979 109,128 (1,149)
------- ------- -------
Total other income 160,168 143,832 16,336
------- ------- ------
Non-interest income before securities gains 496,740 441,968 54,772
------- ------- ------
Securities gains 5,835 9,786 (3,951)
----- ----- -------
TOTAL NON-INTEREST INCOME $502,575 $451,754 $50,821
======== ======== =======
</TABLE>
The increase in service charges on deposit accounts for the three months ended
March 31, 1996 is due mainly to a $13 million increase related to the
acquisition of Premier, an $11 million increase in overdraft fees due to an
increase in the per occurrence fee in second quarter 1995 and an overall
increase in demand deposit account volume.
The majority of the increase in mortgage banking income for the three months
ended March 31, 1996 is a result of higher origination volume due to higher
loan demand generated by lower interest rates.
The shift from credit card and merchant processing fees to loan servicing
income in first quarter 1996 is primarily attributable to sales of credit card
loans with servicing retained in second and third quarter 1995 totalling $.8
billion. Also contributing to the increase in loan servicing income was a
consumer loan sale of $1.2 billion in April 1995. The increase in insurance
income for the three months ended March 31, 1996 is primarily due to $7 million
of commissions earned in first quarter 1996 as a result of an annuity product
sales campaign which began in fourth quarter 1995.
The increase in income from securities-related activities for the three months
ended March 31, 1996 is primarily attributable to increased mutual fund sales
volume as a result of a sales campaign which began in fourth quarter 1995.
Other non-interest income decreased $1 million in the first quarter of 1996,
compared to the same quarter in 1995. The decrease is attributable to $29
million of gains recognized in 1995, while only $28 million was recognized in
1996. This $28 million is composed of an $8 million gain recognized on the sale
of Bank One Pikeville, NA, a $14 million gain on sale of loans, branches, and
other assets, a $3 million joint venture gain, and a $3 million increase
related to the acquisition of Premier and other transactions.
12
<PAGE> 14
NON-INTEREST EXPENSE
<TABLE>
<CAPTION>
QUARTER ENDED
-----------------------------
MARCH 31, MARCH 31, INCREASE
$(THOUSANDS) 1996 1995 (DECREASE)
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Salary and related costs $502,812 $442,950 $59,862
Net occupancy expense, exclusive of depreciation 44,673 39,576 5,097
Equipment expense 28,099 26,907 1,192
Taxes other than income and payroll 24,062 21,972 2,090
Depreciation and amortization 86,216 74,730 11,486
Outside services and processing 125,237 103,502 21,735
Marketing and development 48,114 44,236 3,878
Communication and transportation 75,171 66,063 9,108
FDIC Insurance 4,246 35,915 (31,669)
Other 80,448 67,746 12,702
------ ------ ------
TOTAL NON-INTEREST EXPENSE $1,019,078 $923,597 $95,481
========== ======== =======
</TABLE>
Salaries and related costs increased for the three months ended March 31,
1996 due primarily to $26 million related to the acquisition of Premier,
$7 million related to headcount resulting from growth in non-bank
businesses and data processing support personnel, $10 million related to
new incentive programs started in 1996, $5 million in benefit accruals in
1996 due to higher company matching contributions based on expected higher
earnings and higher pension costs due to lower interest rates, and $4
million in commission expense resulting from increased securities-related
and investment banking activities in 1996.
As a result of the Premier acquisition, $238 million of goodwill and $58
million of other intangibles were recorded during first quarter 1996. This
resulted in an increase in amortization expense of $7 million.
Amortization expense for the full year of 1996 is expected to increase $28
million due to these new intangible assets. The Premier acquisition also
resulted in an increase in depreciation of bank premises and equipment of
$4 million.
Outside services and processing increased for the three months ended March
31, 1996 due to $3 million of expense related to the Premier acquisition,
an increase in consulting of $7 million primarily related to the
consolidation and standardization efforts across BANC ONE in 1996, a $5
million increase in temporary employees as a result of consolidation and
standardization efforts, and an increase in outside legal fees of $2
million. The scope of the consolidation and standardization project has
been expanded which has resulted in costs being higher in 1996 than
originally anticipated. It is anticipated that expenses related to the
consolidation and standardization efforts will continue to be incurred
before the benefits of this effort are realized.
Communication and transportation increased for the three months ended March
31, 1996 due to $3 million of expense related to the Premier acquisition,
$3 million of expense incurred in 1996 related to consolidation and
standardization efforts, a $1 million increase in general telephone
charges, and a $3 million increase in general business travel to support
the emerging national line of business management. The increases above are
offset by a reduction in credit card solicitation expense of $3 million in
1996. The remaining increase is a result of increased usage of data
transmission and computer/communications technology.
FDIC insurance expense decreased $32 million for the three months ended
March 31, 1996 as a result of the FDIC's decision to lower deposit
insurance premiums from $.23 per $100 in Bank Insurance Fund (BIF) deposits
to a $2,000 per bank minimum assessment for well capitalized and well
managed banks. At March 31, 1996, BANC ONE's affiliate banks held
approximately $6 billion of deposits insured by the Savings Association
Insurance Fund (SAIF). Deposit insurance premiums continue to be charged
on SAIF insured deposits at $.23 per $100 in deposits.
Other non-interest expense increased $13 million for the three months ended
March 31, 1996. Contributing to the increase were $4 million related to
the Premier acquisition and a $2 million overall increase in supplies.
INCOME TAXES
The provision for income taxes was 33.0% of pretax income for the three
months ended March 31, 1996 as compared to 35.8% of pretax income for the
same period in 1995. The effective tax rate for the three months ended
March 31, 1996 approximates the anticipated effective tax rate for the
year. The decrease in the effective rate from first quarter 1995 is a
result of BANC ONE's reorganization efforts which resulted in a reduction
of state income taxes in 1996 and a reduction in federal income tax
reserves relating to agreements reached with the Internal Revenue Service
in 1996.
13
<PAGE> 15
BALANCE SHEET ANALYSIS
LOANS AND LEASES
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31, MARCH 31,
$(THOUSANDS)(as of end of period) 1996 1995 1995
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Commercial, financial and agricultural $19,304,204 $17,903,692 $17,316,409
Real Estate:
Commercial 6,032,762 5,667,826 5,540,730
Construction 3,004,064 2,692,587 2,375,130
Residential 11,835,885 11,259,495 11,483,772
Consumer, net 19,839,140 18,407,595 18,529,994
Credit card 7,278,083 7,665,274 5,849,644
Leases, net 1,913,030 1,732,196 1,399,802
--------- --------- ---------
Total loans and leases $69,207,168 $65,328,665 $62,495,481
=========== =========== ===========
</TABLE>
The $3.9 billion increase in ending loans and leases from December 31, 1995 is
primarily due to a $3.3 billion increase related to the acquisition of
Premier. For a more detailed analysis refer to the Average Balances, Income
and Expense, Yields and Rates found on page 9. Also, refer to the table
on page 11 which provides certain information on managed credit card loans.
BANC ONE experienced loan growth primarily in credit card and consumer loans.
Significant origination activity is not fully reflected in ending loan balances
due to the following sales and securitizations of loans during the first
quarter of 1996:
- - Consumer loan sales of $ .5 billion
- - Credit card loan sales of $1 billion
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 credit, including
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
quarter ended March 31, 1996.
<TABLE>
<CAPTION>
$(THOUSANDS)
- ------------------------------------------------------------------------------------------
<S> <C>
NONACCRUAL LOANS:
Balance, beginning of period $349,084
Premier acquisition 30,516
Nonaccrual additions 123,620
Loans returned to accrual and payments received (64,475)
Reductions due to transfers to OREO (8,341)
Charge-offs (22,994)
Other, net 195
---
Balance, end of period $407,605
========
OREO:
Balance, beginning of period $75,483
Premier acquisition 3,982
Additions 19,156
Write-downs (6,566)
Sales (13,784)
Customer Payments (204)
Other (1,483)
-------
Balance, end of period $76,584
=======
</TABLE>
14
<PAGE> 16
The following tables summarize charge-offs and recoveries as percentages of
average loans and leases for the periods indicated and loans delinquent 90 days
or more as a percentage of loans at the dates indicated.
<TABLE>
<CAPTION>
NET
GROSS CHARGE-OFFS
CHARGE-OFFS RECOVERIES (RECOVERIES)
FOR THE THREE MONTHS ENDED: (1) (1) (1)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MARCH 31, 1996
Commercial, financial and agricultural .32% .16% .16%
Real estate .16 .08 .08
Consumer, net 1.58 .66 .92
Credit card 5.25 .61 4.64
Leases, net .54 .15 .39
TOTAL LOANS AND LEASES 1.23% .34% .89%
MARCH 31, 1995
Commercial, financial and agricultural .22% .30% (.08)%
Real estate .08 .08 0
Consumer, net 1.12 .47 .65
Credit card 4.01 .78 3.23
Leases, net .55 .27 .28
TOTAL LOANS AND LEASES .81% .32% .49%
<FN>
(1) Ratios are presented on an annualized basis.
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31, MARCH 31,
LOANS DELINQUENT 90 DAYS OR MORE (1) 1996 1995 1995
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Wholesale (2) .10% .15% .14%
Real estate, residential .23 .25 .15
Consumer, net .31 .34 .23
Credit card 1.70 1.54 1.26
Leases, net .03 .03 .15
TOTAL LOANS AND LEASES .36 .39 .28
<FN>
(1) Ratios presented are expressed as a percent of ending balances excluding
nonperforming loans.
(2) Includes commercial, financial, agricultural; commercial real estate and
construction real estate loans.
</TABLE>
Excluding $46 million related to Premier, total nonperforming assets at March
31, 1996 have increased slightly from December 31, 1995. This increase is
primarily in non-accrual loans. Loans delinquent 90 days or more have
decreased slightly for the same period. The increase in net charge-offs has
been driven by the deterioration of consumer credit experienced by BANC ONE and
the banking industry as well as the decline in commercial loan recoveries. The
consumer credit deterioration is evident in the statistics shown above for
consumer loans and credit cards and is expected to continue throughout 1996.
15
<PAGE> 17
The following summarizes activity in the allowance for credit losses.
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
--------------------------------------
$(THOUSANDS) 1996 1995
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
BALANCE, BEGINNING OF PERIOD $938,008 $897,180
Allowance associated with loans acquired
(sold) and other 60,065 (4,052)
Provision for credit losses 162,421 66,517
Losses charged to the allowance (212,372) (124,016)
Recoveries 57,686 49,663
------ ------
Net losses charged to the allowance (154,686) (74,353)
--------- --------
BALANCE, END OF PERIOD $1,005,808 $885,292
========== ========
</TABLE>
The increase in the provision for credit losses is primarily due to loan growth
as well as an increase to provide coverage of increasing net charge-offs.
LIQUIDITY AND CAPITAL
At March 31, 1996, large liability dependence was 18.58%, an increase from
17.30% at December 31, 1995. BANC ONE's policy is that the large liabilities
position be no greater than 30% of net 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) 1996 1995 1995
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Earning assets, net of short term investments $85,571 $80,099 $77,383
Large liabilities:
Net national market liabilities $3,388 $3,209 $ 3,107
As a percent of net earning assets 3.96% 4.01% 4.02%
Total net large liabilities $15,898 $13,857 $13,766
As a percent of net earning assets 18.58% 17.30% 17.79%
</TABLE>
Competition from non-bank investment providers continues to impact BANC ONE's
deposit gathering and retention efforts. During the first quarter of 1996,
deposit runoff was minimal, but the deposit mix continued to shift to more
costly market priced products. This mix change is expected to continue for the
foreseeable future. The competitive environment for retail and commercial bank
deposits continues to cause BANC ONE to look to non-traditional bank sources to
fund its earning asset growth. BANC ONE's large liability dependence increased
due to an increase in repurchase agreements and other short-term borrowings
which were used to fund loan growth. During the first quarter 1996, $ 500
million of auto loans and $1 billion of credit card receivables were sold.
Loan sales such as these are expected to continue to generate funding for loan
growth and to mitigate the need to increase large liabilities.
During the first quarter of 1996, the Corporation repurchased 15 million common
shares (16.5 million after the 10% stock split) for $593 million. In the
second quarter of 1996, the Board of Directors authorized the repurchase of up
to 10 million common shares to be used for general corporate purposes. Stock
repurchase transactions may increase BANC ONE's reliance on large liabilities.
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,
1996, risk based tier I capital, total risk adjusted capital and leverage
ratios were 9.57%, 13.44% and 8.24%, respectively. All of these ratios are
significantly above regulatory minimum capital requirements.
16
<PAGE> 18
ASSET/LIABILITY MANAGEMENT
BANC ONE uses a unified approach to management of liquidity, capital and
interest rate risk through its Asset and Liability Management (ALM) process.
The key elements of the ALM process are discussed in further detail on pages 34
through 39 of BANC ONE CORPORATION's 1995 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 economic
value at risk (EVAR).
ESR is defined as the percentage change in forecasted earnings over a 12 month
period for a specified gradual change in forecasted interest rates. BANC ONE
measures ESR by determining how earnings from existing assets and liabilities
would change if interest rates changed. The following table reflects ESR at
March 31, 1996 for gradual rate changes (i.e. .25% per quarter for a 1% annual
rate movement).
<TABLE>
<CAPTION>
Gradual Rate Change ESR
- ---------------------------- ---
<S> <C>
+3% (6.00)%
+2% (3.50)%
+1% (1.30)%
-1% ( .50)%
-2% (1.90)%
</TABLE>
Basis risk is the risk of changing spreads between certain categories of
indexed assets and liabilities. The primary risk faced by BANC ONE is the risk
that the spread between Prime loan rates and short-term funding rates will
narrow. An immediate decline of 10 basis points in the spread between Prime
and Fed Funds and Prime and LIBOR, lasting a full year would cause projected
earnings to decline by .7%.
EVAR is defined as the percentage change in economic value of future earnings
for a specified immediate change in rates. EVAR is an indicator of the
sensitivity of longer term earnings to interest rates. BANC ONE measures EVAR
by determining a baseline gauge of the economic value of future earnings to be
derived from the current balance sheet and then calculates the percentage
change in that value for given changes in rates. The following table reflects
EVAR at March 31, 1996 for 1% and 2% immediate changes in rates.
<TABLE>
<CAPTION>
Immediate Rate Change EVAR
- --------------------- ----
<S> <C>
+2% (1.70)%
+1% ( .50)%
-1% (3.10)%
-2% (8.30)%
</TABLE>
Major assumptions used in measuring interest rate risk include the behavior of
loan and deposit repricings and volumes, prepayments on various fixed rate
assets, and spread and volume elasticity of interest and non-interest bearing
deposit accounts which may not have contractually defined maturities. A
significant portion of consumer deposits do not reprice or mature on a
contractual basis.
Banc One uses both on-balance and off-balance sheet investments 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.
Following are the estimated 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 March 31, 1996. 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.
17
<PAGE> 19
<TABLE>
<CAPTION>
MARCH 31, 1996 DECEMBER 31, 1995 MARCH 31, 1995
-------------------------- --------------------------- ----------------------------
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 $125 $125 $91 $91 $490 $482
Mortgage and asset-backed
securities:
Government 58 61 58 62 1,572 1,572
Other 1 1 6 6 536 535
Tax exempt 850 884 909 953 2,050 2,073
Other 46 39 24 24 210 224
-- -- -- -- --- ---
Total securities held to maturity 1,080 1,110 1,088 1,136 4,858 4,886
----- ----- ----- ----- ----- -----
SECURITIES AVAILABLE FOR SALE:
United States treasury and agencies 4,058 4,042 3,029 3,060 4,615 4,614
Mortgage and asset-backed
securities:
Government 6,999 7,050 6,553 6,660 3,489 3,438
Other 3,762 3,740 3,595 3,587 2,672 2,629
Tax exempt 900 903 813 825 7 7
Other 554 555 486 488 223 227
--- --- --- --- --- ---
Total securities available for sale 16,273 16,290 14,476 14,620 11,006 10,915
------ ------ ------ ------ ------ ------
TOTAL SECURITIES $17,353 $17,400 $15,564 $15,756 $15,864 $15,801
======= ======= ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
MATURITIES OF OFF-BALANCE SHEET INVESTMENT
PRODUCTS AT MARCH 31, 1996(1)(2) ENDING BALANCES AT
------------------------------------------------------- ---------------------------------------
2001- March 31, December 31, March 31,
$(MILLIONS) 1996 1997 1998 1999 2000 2005 2006+ 1996 1995 1995
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Receive fixed swaps:
Notional value $1,255 $3,753 $1,500 $545 $1,160 $1,596 $300 $10,109 $9,789 $8,134
Weighted average 6.20% 5.22% 5.82% 6.20% 6.29% 6.43% 7.23% 5.86% 5.85% 5.50%
receive rate
Receive fixed amortizing swaps:
Notional value $4,297 $1,283 $517 $13 $129 $6,239 $7,946 $11,780
Weighted average 5.26% 5.26% 5.56% 7.27% 5.54% 5.29% 5.29% 5.36%
receive rate
Pay fixed swaps:
Notional value $359 $95 $100 $6 $6 $566 $2,673 $4,358
Weighted average pay 7.53% 8.54% 6.15% 8.69% 8.17% 7.47% 5.76% 5.94%
rate
Purchased caps:
Notional value $2,502 $503 $4 $4 $4 $26 $3,043 $5,253 $4,754
------ ---- -- -- -- --- ---- ------ ------ ------
Net receive fixed position $2,691 $4,438 $1,913 $548 $1,279 $1,570 $300 $12,739 $9,809 $10,802
Basis swaps:
Notional value 2,475 3,730 405 74 6,684 8,304 8,528
Other(3)
Notional value $1,916 $440 $1,000 $3,356 $4,052 $4,485
<FN>
(1)Maturities are based on estimated future interest rates from the forward
interest curve at March 31, 1996.
(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 forward starting
contracts ($1.4 billion at March 31, 1996), floors, options, swaptions, forward
rate agreements, currency swaps, and anticipatory hedges. Customer
transactions of $1.3 billion, $1.2 billion and $600 million at March 31, 1996,
December 31, 1995 and March 31, 1995, respectively, have been excluded.
</TABLE>
18
<PAGE> 20
<TABLE>
<CAPTION>
DECEMBER 31,
MARCH 31, 1996 1995
----------------------------------------------------------------------- -----------------
TOTAL NET NET
$(MILLIONS) NOTIONAL UNREALIZED UNREALIZED UNREALIZED UNREALIZED
AMOUNT GAINS LOSSES LOSS GAIN (LOSS)
---------------------------------------------------------------------- ----------------------------------- -----------------
<S> <C> <C> <C> <C> <C>
Receive fixed swaps $10,109 $29 $(58) $(29) $136
Receive fixed amortizing swaps 6,239 10 (35) (25) (13)
Pay fixed swaps 566 1 (10) (9) (13)
Purchased caps 3,043 0 (10) (10) (18)
Basis swaps 6,684 0 (37) (37) (37)
Other 3,356 1 (7) (6) (8)
----------------------------------- ----------------------------------- -----------------
Total $29,997 $41 ($157) ($116) $47
=================================== =================================== =================
</TABLE>
BANC ONE CORPORATION's 1995 Annual Report on Form 10K provided certain fair
value information based on interest rates at December 31, 1995. Since that date,
long-term market interest rates have increased and, as a result, the fair value
of fixed rate liabilities has become more favorable and the value of certain
loan products less favorable. The net change is not material.
19
<PAGE> 21
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
20
<PAGE> 22
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
May 15, 1996 /s/ William C. Leiter
- ---------------------------- ----------------------------------------
Date William C. Leiter
Chief Accounting Officer
21
<PAGE> 23
INDEX TO EXHIBITS
Exhibit Number
- --------------
11 Statement Regarding Computation of Earnings per Common Share
12 Statement Regarding Computation of Ratio of Earnings to Fixed
Charges
27 Financial Data Schedules
22
<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
MARCH 31,
----------------------------------
1996 1995
----------------------------------
<S> <C> <C>
PRIMARY:
Earnings:
Net income $345,881 $302,518
Deduct: Dividends on preferred shares 4,295 4,373
----- -----
Net income available to common shareholders $341,586 $298,145
======== ========
Shares:
Weighted average common shares outstanding 441,994 434,632
Add: Dilutive effect of outstanding options, as
determined by the application of the
treasury stock method 2,033 1,261
----- -----
Weighted average common shares outstanding,
as adjusted 444,027 435,893
======= =======
PRIMARY EARNINGS PER COMMON SHARE $.77 $.68
==== ====
FULLY DILUTED:
Earnings:
Net income $345,881 $302,518
======== ========
Shares:
Weighted average common shares outstanding 441,994 434,632
Add: Dilutive effect of outstanding options, as
determined by the application of the
treasury stock method 2,165 1,288
Add: Conversion of preferred stock 9,546 9,642
----- -----
Weighted average common shares outstanding, as
adjusted 453,705 445,562
======= =======
FULLY DILUTED EARNINGS PER COMMON SHARE $.76 $.68
==== ====
</TABLE>
23
<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,
----------------------------------------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
------------------------ ---------------------------------------------------------------
<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) $516,055 $471,228 $1,910,282 $1,518,852 $1,770,712 $1,341,249 $928,947
Fixed charges 211,903 177,384 736,249 633,569 348,327 321,402 419,274
Less: Capitalized interest (343) (341) (1,671) (1,000) (652) (1,199) (1,732)
----- ----- ------- ------- ----- ------- -------
Earnings $727,615 $648,271 $2,644,860 $2,151,421 $2,118,387 $1,661,452 $1,346,489
======== ======== ========== ========== ========== ========== ==========
Fixed Charges:
Interest expense, including interest
factor of capitalized leases and
amortization of deferred debt
expenses $198,129 $164,164 $683,372 $575,734 $298,857 $278,615 $379,708
Portion of rental payments under
operating leases deemed to be
interest 13,774 13,220 52,877 57,835 49,470 42,787 39,566
------ ------ ------ ------ ------ ------ ------
Fixed charges $211,903 $177,384 $736,249 $633,569 $348,327 $321,402 $419,274
======== ======== ======= ======= ======= ======= =======
Ratio of earnings to fixed charges
excluding interest on deposits: 3.43X 3.65x 3.59x 3.40x 6.08x 5.17x 3.21x
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) $516,055 $471,228 $1,910,282 $1,518,852 $1,770,712 $1,341,249 $928,947
Fixed charges 804,120 727,314 3,026,343 2,307,832 1,826,018 2,318,274 2,955,918
Less: Capitalized interest (343) (341) (1,671) (1,000) (652) (1,199) (1,732)
----- ----- ------- ------- ----- ------- -------
Earnings $1,319,832 $1,198,201 $4,934,954 $3,825,684 $3,596,078 $3,658,324 $3,883,133
========== ========== ========= ========= ========= ========= =========
Fixed charges:
As detailed above $211,903 $177,384 $736,249 $633,569 $348,327 $321,402 $419,274
Interest on deposits 592,217 549,930 2,290,094 1,674,263 1,477,691 1,996,872 2,536,644
------- ------- --------- --------- --------- --------- ---------
Fixed charges $804,120 $727,314 $3,026,343 $2,307,832 $1,826,018 $2,318,274 $2,955,918
======== ======== ========= ========= ========= ========= =========
Ratio of earnings to fixed charges
including interest on deposits 1.64X 1.65x 1.63x 1.66x 1.97x 1.58x 1.31x
<FN>
(1)Results of Bank One, Texas, NA are consolidated beginning October 1, 1991.
</TABLE>
24
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 5,002,275
<INT-BEARING-DEPOSITS> 2,108
<FED-FUNDS-SOLD> 266,096
<TRADING-ASSETS> 195,668
<INVESTMENTS-HELD-FOR-SALE> 16,289,926
<INVESTMENTS-CARRYING> 1,080,099
<INVESTMENTS-MARKET> 1,109,908
<LOANS> 69,207,168
<ALLOWANCE> 1,005,808
<TOTAL-ASSETS> 95,708,182
<DEPOSITS> 70,216,973
<SHORT-TERM> 11,445,326
<LIABILITIES-OTHER> 2,605,703
<LONG-TERM> 3,010,097
<COMMON> 2,177,154
0
245,448
<OTHER-SE> 6,007,481
<TOTAL-LIABILITIES-AND-EQUITY> 95,708,182
<INTEREST-LOAN> 1,704,641
<INTEREST-INVEST> 274,952
<INTEREST-OTHER> 5,389
<INTEREST-TOTAL> 1,984,982
<INTEREST-DEPOSIT> 592,217
<INTEREST-EXPENSE> 790,003
<INTEREST-INCOME-NET> 1,194,979
<LOAN-LOSSES> 162,421
<SECURITIES-GAINS> 5,835
<EXPENSE-OTHER> 1,019,078
<INCOME-PRETAX> 516,055
<INCOME-PRE-EXTRAORDINARY> 3435,881
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 345,881
<EPS-PRIMARY> .77
<EPS-DILUTED> .76
<YIELD-ACTUAL> 5.65
<LOANS-NON> 407,605
<LOANS-PAST> 250,179
<LOANS-TROUBLED> 2,126
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 938,008
<CHARGE-OFFS> 212,372
<RECOVERIES> 57,686
<ALLOWANCE-CLOSE> 1,005,808
<ALLOWANCE-DOMESTIC> 812,582
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 193,226
</TABLE>
