<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 June 30, 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)
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)
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 432,865,470 at July 31, 1996.
<PAGE> 2
FORM 10-Q
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
- ------- -------------------- Page
----
<S> <C> <C>
Consolidated Balance Sheet............................................................................................3
Consolidated Statement of Income......................................................................................4
Consolidated Statement of Cash Flows..................................................................................5
Supplemental Disclosures for Statement of Cash Flows..................................................................6
Consolidated Statement of Changes in Stockholders' Equity.............................................................6
Notes to the Consolidated Financial Statements........................................................................7
Consolidated Quarterly Financial Data.................................................................................8
Average Balances, Income and Expense, Yields and Rates...............................................................10
Item 2. Management's Discussion and Analysis
Results of Operations................................................................................................12
Net Interest Income/Net Interest Margin.....................................................................12
Non-Interest Income.........................................................................................14
Non-Interest Expense........................................................................................15
Income Taxes................................................................................................15
Balance Sheet Analysis...............................................................................................16
Loans and Leases............................................................................................16
Liquidity and Capital.......................................................................................18
Asset Liability Management..................................................................................18
PART II - OTHER INFORMATION
Item 1. Legal Proceedings....................................................................................................21
Item 4. Submission of Matters to a Vote of Security Holders..................................................................21
Item 6. Exhibits and Reports on Form 8-K.....................................................................................22
SIGNATURES....................................................................................................................23
</TABLE>
1
<PAGE> 3
BANC ONE CORPORATION AND SUBSIDIARIES
PART I
FINANCIAL INFORMATION
2
<PAGE> 4
BANC ONE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
$(THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED) 1996 1995
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 4,945,403 $ 5,501,266
Short-term investments 944,914 454,718
SECURITIES:
Securities held to maturity 1,004,629 1,087,654
Securities available for sale 15,188,502 14,620,334
------------ ------------
Total securities (fair value approximates $16,225,000 and $15,756,000 at
June 30,1996 and December 31, 1995, respectively) 16,193,131 15,707,988
Loans and leases 70,627,848 65,328,665
Allowance for credit losses 1,026,318 938,008
------------ ------------
Net loans and leases 69,601,530 64,390,657
OTHER ASSETS:
Bank premises and equipment, net 1,644,464 1,558,676
Interest earned, not collected 678,899 669,709
Other real estate owned 70,507 75,483
Excess of cost over net assets of affiliates purchased 460,071 242,817
Other 2,512,141 1,852,649
------------ ------------
Total other assets 5,366,082 4,399,334
------------ ------------
Total assets $ 97,051,060 $ 90,453,963
============ ============
LIABILITIES
DEPOSITS:
Non-interest bearing $ 14,460,575 $ 14,767,497
Interest bearing 56,493,515 52,552,653
------------ ------------
Total deposits 70,954,090 67,320,150
Federal funds purchased and repurchase agreements 7,106,107 6,261,009
Other short-term borrowings 5,045,350 3,516,191
Long-term borrowings 3,020,801 2,720,373
Accrued interest payable 388,736 410,946
Other liabilities 2,018,544 2,027,816
------------ ------------
Total liabilities 88,533,628 82,256,485
------------ ------------
STOCKHOLDERS' EQUITY
Preferred stock, 35,000,000 shares authorized:
Series C convertible, no par value, 4,811,251 and 4,992,694 shares issued
and outstanding, respectively 240,563 249,635
Common stock, no par value, $5 stated value, 600,000,000 shares
authorized, 435,651,470 and 451,741,054 shares issued, respectively (December
31, 1995 shares reflect the 10% stock dividend paid March 6,
1996 to shareholders of record on February 21, 1996) 2,178,257 2,258,705
Capital in excess of aggregate stated value of common stock 4,612,559 5,157,763
Retained earnings 1,587,614 1,100,345
Net unrealized holding gains (losses) on securities available for sale, net of
tax (39,909) 91,804
Treasury stock (1,685,000 and 24,090,000 shares at June 30, 1996 and
December 31, 1995, respectively), at cost (61,652) (660,774)
------------ ------------
Total stockholders' equity 8,517,432 8,197,478
------------ ------------
Total liabilities and stockholders' equity $ 97,051,060 $ 90,453,963
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE> 5
BANC ONE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
--------------------------------------------------------
$(THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED) 1996 1995 1996 1995
- ------------------------------------------------------------------------------------------------------------ ---------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans and leases $ 1,687,142 $ 1,490,413 $ 3,391,783 $ 2,945,369
Interest and dividends on:
Taxable securities 238,265 220,974 488,220 429,141
Tax exempt securities 24,215 30,698 49,212 62,312
Other interest income 5,179 11,602 10,568 40,159
----------- ----------- ----------- -----------
Total interest income 1,954,801 1,753,687 3,939,783 3,476,981
INTEREST EXPENSE:
Interest on deposits:
Demand, savings and money market deposits 245,337 227,518 492,167 446,370
Time deposits 316,280 358,772 661,667 689,850
Interest on borrowings 195,211 163,929 392,997 327,705
----------- ----------- ----------- -----------
Total interest expense 756,828 750,219 1,546,831 1,463,925
----------- ----------- ----------- -----------
Net interest income 1,197,973 1,003,468 2,392,952 2,013,056
Provision for credit losses 171,154 92,565 333,575 159,082
----------- ----------- ----------- -----------
Net interest income after provision for credit losses 1,026,819 910,903 2,059,377 1,853,974
NON-INTEREST INCOME:
Income from fiduciary activities 67,740 58,546 130,251 117,128
Service charges on deposit accounts 161,221 132,462 318,037 259,573
Loan processing and servicing income 114,462 130,248 231,707 242,691
Securities gains 17,533 2,785 23,368 12,571
Other 172,358 130,097 332,526 273,929
----------- ----------- ----------- -----------
Total non-interest income 533,314 454,138 1,035,889 905,892
NON-INTEREST EXPENSE:
Salaries and related costs 501,552 429,079 1,004,364 872,029
Net occupancy expense, exclusive of depreciation 47,695 40,616 92,368 80,192
Equipment expense 28,877 25,667 56,976 52,574
Taxes other than income and payroll 24,462 23,094 48,524 45,066
Depreciation and amortization 96,462 68,960 182,678 143,690
Outside services and processing 128,550 104,991 253,787 208,493
Marketing and development 33,465 48,343 81,579 92,579
Communication and transportation 78,098 67,880 153,269 133,943
Other 89,219 93,698 173,913 197,359
----------- ----------- ----------- -----------
Total non-interest expense 1,028,380 902,328 2,047,458 1,825,925
----------- ----------- ----------- -----------
Income before income taxes 531,753 462,713 1,047,808 933,941
INCOME TAX PROVISION:
Income excluding securities transactions (170,158) (154,158) (338,273) (319,174)
Securities transactions (6,667) (1,073) (8,726) (4,767)
----------- ----------- ----------- -----------
Provision for income taxes (176,825) (155,231) (346,999) (323,941)
----------- ----------- ----------- -----------
Net income $ 354,928 $ 307,482 $ 700,809 $ 610,000
=========== =========== =========== ===========
Netincome per common share (amounts reflect the 10%
common stock dividend paid March 6, 1996 to
shareholders of record on February 21, 1996) $ .80 $ .70 $ 1.57 $ 1.38
=========== =========== =========== ===========
Weighted average common shares outstanding (000) 438,039 434,214 441,432 434,935
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE> 6
BANC ONE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30,
<TABLE>
<CAPTION>
$(THOUSANDS) (UNAUDITED) 1996 1995
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Net income $ 700,809 $ 610,000
ADJUSTMENTS:
Provision for credit losses 333,575 159,082
Depreciation expense 136,565 114,446
Amortization of mortgage servicing rights 10,877 4,823
Amortization of other intangibles 46,113 29,244
Amortization (accretion) of securities premiums and discounts, net 17,696 (53,740)
Net (increase) decrease in trading account (73,758) 32,152
Net increase in loans held for sale (6,104) (82,106)
Net increase (decrease) in deferred loan fees 3,115 (1,407)
Securities gains (23,368) (12,571)
Gain on sales of banks and branch offices (19,059) (47,247)
(Gain) loss on sales of loans and other assets (32,804) 24,721
Net increase in other assets (74,870) (263,220)
Net (decrease) increase in other liabilities (122,648) 82,068
Net increase in deferred income taxes 100,365 78,852
----------- -----------
Net cash provided by operating activities 996,504 675,097
----------- -----------
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES:
Purchases of securities available for sale (2,852,739) (5,029,390)
Purchases of securities held to maturity (52,403) (542,264)
Maturities of securities available for sale 2,576,815 4,418,807
Maturities of securities held to maturity 179,058 692,353
Sales of securities available for sale 936,798 1,564,442
Net increase in loans, excluding sales and purchases (4,451,184) (3,402,981)
Sales of loans and other assets 2,647,535 1,968,285
Purchases of loans and related premiums (163,710) (501,516)
Net (increase) decrease in short-term investments (419,258) 2,665,610
Additions to bank premises and equipment (151,915) (150,941)
Sale of banks and branch offices (165,742) 30,581
Net cash acquired in acquisitions 315,715 42,413
Net (increase) decrease in purchased mortgage servicing rights 7,765 (36,061)
All other investing activities, net 101
----------- -----------
Net cash provided by (used in) investing activities (1,593,265) 1,719,439
----------- -----------
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES:
Net decrease in demand deposit, money market and savings accounts (491,529) (665,743)
Net increase (decrease) in time deposits 84,622 (1,206,259)
Net increase (decrease) in short-term borrowings 1,942,273 (61,555)
Issuance of long-term borrowings, net 604,349 359,202
Repayment of long-term borrowings (1,138,940) (137,508)
Cash dividends paid (304,139) (400,101)
Purchase of treasury stock (654,602) (178,583)
Other, net (decrease) increase (1,136) 15,154
----------- -----------
Net cash provided by (used in) financing activities 40,898 (2,275,393)
----------- -----------
(Decrease) increase in cash and cash equivalents (555,863) 119,143
Cash and cash equivalents at January 1 5,501,266 5,073,417
----------- -----------
Cash and cash equivalents at June 30 $ 4,945,403 $ 5,192,560
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE> 7
BANC ONE CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL DISCLOSURES FOR STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30,
<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) $ 42,258 $ 38,967
=========== ===========
Net decrease in securities trades not settled $ (459,214) $ (309,287)
=========== ===========
Loans issued to facilitate the sale of OREO properties $ 954 $ 3,397
=========== ===========
Additional Disclosures:
Interest paid $ 1,599,871 $ 1,437,395
=========== ===========
Income taxes paid $ 295,504 $ 181,946
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
BANC ONE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED JUNE 30,
-------------------
$(THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED) 1996 1995
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
BALANCE, BEGINNING OF PERIOD $ 8,197,478 $ 7,564,860
Net income 700,809 610,000
Exercise of stock options, net of shares purchased (5,032) (2,802)
Shares issued in acquisitions 710,515 3,647
Sales of stock to employee benefit plans and other 4,116 17,956
Cash dividends:
Corporation:
Common ($.68 and $.62 per share for the six months ended
June 30, 1996 and 1995, respectively) (295,600) (267,430)
Series C Preferred ($1.75 per share for the six months ended
June 30, 1996 and 1995, respectively) (8,539) (8,746)
Change in unrealized holding gains (losses) on securities available
for sale, net of tax (131,713) 100,169
Purchase of treasury stock (654,602) (178,583)
----------- -----------
BALANCE, END OF PERIOD $ 8,517,432 $ 7,839,071
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE> 8
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. The accompanying consolidated financial statements are unaudited. However,
in the opinion of management, they contain the adjustments (all of which
are normal and recurring in nature) necessary to present fairly the
financial position and the results of operations. The notes to the
consolidated financial statements contained in the Annual Report on Form
10-K for the year ended December 31, 1995 and the quarterly report on Form
10-Q for the quarter ended March 31, 1996 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 Banc One Louisiana Corporation (BOLC) formerly known as Premier
Bancorp, Inc. of Baton Rouge, Louisiana in exchange for 24 million shares
of the Corporation's treasury stock (adjusted for the 10% common stock
dividend) valued at $711 million. The acquisition was accounted for as a
purchase, and therefore, prior period financial statements have not been
restated to include BOLC. BOLC had assets of $6.3 billion at December 31,
1995.
4. 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 the Corporation's common stock to
be used for general corporate purposes. As of June 30, 1996, the
Corporation had acquired 1.7 million shares.
5. Residential loans held for sale were $508 million and $503 million at June
30, 1996 and December 31, 1995, respectively. Such loans are carried at
the lower of cost or market determined on an aggregate basis.
6. BANC ONE will adopt Financial Accounting Standard No. 125 (SFAS 125),
"Accounting for Transfers and Servicing of Financial Assets and
Extinguishment of Liabilities", as of January 1, 1997. SFAS 125 requires
that after a transfer of financial assets, an entity must recognize the
financial and servicing assets controlled and liabilities incurred and
derecognize financial assets and liabilities in which control is
surrendered or when debt is extinguished. The impact on BANC ONE's
financial position and results of operations will not be material.
7
<PAGE> 9
CONSOLIDATED QUARTERLY FINANCIAL DATA
<TABLE>
<CAPTION>
QUARTERS
----------------------------------------------------------------
1996 1995
------------------------- ------------------------------------
$(MILLIONS) (UNAUDITED) SECOND FIRST FOURTH THIRD SECOND
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PERIOD END BALANCES
Loans and leases (net of unearned income) $ 70,627.8 $ 69,207.2 $ 65,328.7 $ 65,412.7 $ 63,335.0
Earning assets 86,739.6 85,860.1 80,553.4 79,020.9 77,272.1
Total assets 97,051.1 95,708.2 90,454.0 88,353.3 86,783.3
Total deposits 70,954.1 70,217.0 67,320.2 66,291.7 65,612.9
Long-term borrowings 3,020.8 3,010.1 2,720.4 2,677.2 2,088.0
Allowance for credit losses 1,026.3 1,005.8 938.0 915.5 891.5
Total stockholders' equity 8,517.4 8,430.1 8,197.5 8,002.2 7,839.1
CONDENSED INCOME STATEMENT
Net interest income (1) 1,214.22 1,210.87 1,094.55 1,057.66 1,024.36
Provision for credit losses 171.15 162.42 165.90 132.52 92.56
------------- ------------- ------------- ------------- -------------
Net funds function (1) 1,043.07 1,048.45 928.65 925.14 931.80
NON-INTEREST INCOME
Income from fiduciary activities 67.74 62.51 62.23 60.05 58.54
Service charges on deposit accounts 161.22 156.82 144.31 140.81 132.46
Loan processing and servicing income 114.46 117.24 135.53 142.59 130.24
Securities gains 17.53 5.83 7.98 7.29 2.79
Other 172.36 160.17 141.16 122.13 130.10
------------- ------------- ------------- ------------- -------------
Total non-interest income 533.31 502.57 491.21 472.87 454.13
NON-INTEREST EXPENSE
Salaries and related costs 501.55 502.81 448.35 430.14 429.08
Other 526.83 516.27 477.15 450.07 473.25
------------- ------------- ------------- ------------- -------------
Total non-interest expense 1,028.38 1,019.08 925.50 880.21 902.33
Taxable equivalent adjustment 16.25 15.89 16.57 19.25 20.89
------------- ------------- ------------- ------------- -------------
Income before income taxes 531.75 516.05 477.79 498.55 462.71
Provision for income taxes 176.82 170.17 140.94 167.53 155.23
------------- ------------- ------------- ------------- -------------
Net income $ 354.93 $ 345.88 $ 336.85 $ 331.02 $ 307.48
============= ============= ============= ============= =============
Net income available to common shareholders $ 350.68 $ 341.59 $ 332.48 $ 326.65 $ 303.11
============= ============= ============= ============= =============
<FN>
1) Fully taxable equivalent basis. The Federal statutory rate used was 35% for all periods presented.
</TABLE>
8
<PAGE> 10
CONSOLIDATED QUARTERLY FINANCIAL DATA (CONTINUED)
<TABLE>
<CAPTION>
QUARTERS
-------------------------------------------------------
1996 1995
----------------------- -------------------------------
$(MILLIONS, EXCEPT PER SHARE DATA) (UNAUDITED) SECOND FIRST FOURTH THIRD SECOND
- ---------------------------------------------------------------------------------------------------------------------
KEY RATIOS
<S> <C> <C> <C> <C> <C>
Return on average assets (1) 1.50% 1.45% 1.51% 1.51% 1.43%
Return on average common equity (1) 17.37 16.38 17.00 17.09 16.34
Average common equity to assets 8.51 8.77 8.80 8.74 8.60
Tier I capital ratio 9.52 9.57 10.05 10.11 10.36
Total risk adjusted capital ratio 13.23 13.44 14.05 14.17 13.76
Leverage ratio 8.43 8.24 8.87 8.88 8.72
MARGIN ANALYSIS (1)(2)(3)
Interest income 9.19 9.34 9.26 9.19 9.15
Interest expense 3.53 3.69 3.79 3.80 3.86
---- ---- ---- ---- ----
Net interest income 5.66 5.65 5.47 5.39 5.29
Provision for credit losses .80 .76 .83 .68 .48
---- ---- ---- ---- ----
Net funds function 4.86 4.89 4.64 4.71 4.81
CREDIT ANALYSIS
Net charge-offs to average loans and leases (1) .86 .89 .87 .67 .56
Ending allowance to loans and leases 1.45% 1.45% 1.44% 1.40% 1.41%
Nonperforming assets(6):
Total $ 458.2 $ 486.3 $ 429.8 $ 444.7 $ 430.8
Percent of total loans and leases .65% .70% .66% .68% .68%
Loans delinquent 90 days or more (4):
Total $ 280.3 $ 250.2 $ 254.4 $ 212.3 $ 186.7
Percent of total loans and leases .40% .36% .39% .32% .29%
Allowance to nonperforming loans 264.7% 245.5% 264.8% 253.3% 249.1%
PER SHARE DATA (5)
Net income $ .80 $ .77 $ .77 $ .76 $ .70
Cash dividends declared .34 .34 .31 .31 .31
Book value 19.07 18.80 18.58 18.02 17.59
Common stock price:
High 37.75 38.50 36.48 34.41 31.94
Low 32.88 31.94 30.35 27.95 26.03
Close 34.00 35.63 34.21 33.18 29.32
Preferred Series C stock price:
High 72.63 73.88 70.75 64.00 61.75
Low 63.88 62.00 59.38 55.58 52.25
Close $ 66.75 $ 69.13 $ 65.63 $ 63.75 $ 58.25
SHARES TRADED (000)
Common 50,688 62,091 37,100 39,873 53,708
Preferred Series C 880 1,222 1,678 990 1,316
<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) Applicable amounts per common share 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>
9
<PAGE> 11
AVERAGE BALANCES, INCOME AND EXPENSE, YIELDS AND RATES (1)
<TABLE>
<CAPTION>
THREE MONTHS ENDED THREE MONTHS ENDED
JUNE 30, 1996 JUNE 30, 1995
--------------------------------------- --------------------------------------
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 $ 400,036 $ 5,179 5.21% $ 795,482 $ 12,520 6.31%
SECURITIES: (3)
Taxable 15,012,806 238,988 6.40 13,399,586 221,118 6.62
Tax-exempt 1,729,708 35,640 8.29 2,043,265 45,232 8.88
------------ ------------ ------------ ------------
Total securities 16,742,514 274,628 6.60 15,442,851 266,350 6.92
LOANS AND LEASES: (2)
Commercial 19,386,935 399,549 8.29 17,570,318 360,794 8.24
Real estate:
Commercial 6,098,237 135,033 8.91 5,601,954 126,371 9.05
Construction 3,093,874 76,717 9.97 2,375,418 59,690 10.08
Residential 11,905,609 271,616 9.18 11,719,446 257,632 8.82
Consumer, net 20,173,124 468,445 9.34 17,645,086 409,886 9.32
Credit card 7,478,519 303,014 16.30 6,087,609 255,762 16.85
Leases, net 1,972,030 36,865 7.52 1,418,744 25,574 7.23
Allowance for credit losses (1,009,481) (890,911)
------------ ------------ ------------ ------------
Net loans and leases 69,098,847 1,691,239 9.84 61,527,664 1,495,709 9.75
------------ ------------ ------------ ------------
Total earning assets 86,241,397 1,971,046 9.19 77,765,997 1,774,579 9.15
Other assets (3) 9,176,532 8,762,773
------------ ------------
Total assets $ 95,417,929 $ 86,528,770
============ ============
LIABILITIES:
DEPOSITS:
Non-interest bearing demand $ 13,937,335 $ 12,689,263
Interest bearing demand 2,240,299 9,563 1.72 8,677,213 47,519 2.20
Savings 5,321,492 33,386 2.52 6,259,868 47,236 3.03
Money market savings 23,876,379 202,388 3.41 12,941,740 132,763 4.11
Time deposits:
CDs less than $100,000 19,040,715 261,011 5.51 19,427,161 278,119 5.74
CDs $100,000 and over:
Domestic 3,871,201 25,342 2.63 4,122,398 56,740 5.52
Foreign 2,272,890 29,927 5.30 1,630,137 23,913 5.88
------------ ----------- ------------- -----------
Total deposits 70,560,311 561,617 3.20 65,747,780 586,290 3.58
BORROWED FUNDS:
Short-term 11,416,898 145,695 5.13 9,107,053 128,996 5.68
Long-term 2,980,892 49,516 6.68 2,091,910 34,933 6.70
------------ ----------- ------------- -----------
Total borrowed funds 14,397,790 195,211 5.45 11,198,963 163,929 5.87
------------ ----------- ------------- -----------
Total interest bearing liabilities 71,020,766 756,828 4.29 64,257,480 750,219 4.68
Other liabilities 2,098,015 1,890,402
------------ ------------
Total liabilities 87,056,116 78,837,145
Preferred stock 242,956 249,882
Common stockholders' equity 8,118,857 7,441,743
------------ ------------
Total liabilities and stockholders' equity $ 95,417,929 $ 86,528,770
============ ============
Net interest income 1,214,218 5.66 1,024,360 5.29
Provision for credit losses (171,154) (0.80) (92,565) (0.48)
----------- ---- ----------- ----
Net funds function $ 1,043,064 4.86% $ 931,795 4.81%
=========== ==== =========== ====
<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 air value which are included in other assets.
</TABLE>
10
<PAGE> 12
<TABLE>
<CAPTION>
SIX MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 1996 JUNE 30, 1995
---------------------------------------- -------------------------------------
AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/
BALANCE EXPENSE RATE BALANCE EXPENSE RATE
---------------------------------------- -------------------------------------
<S> <C> <C> <C> <C> <C>
$ 396,047 $ 10,601 5.38% $ 1,343,801 $ 42,814 6.42%
15,243,793 489,084 6.45 13,297,126 429,853 6.52
1,731,455 72,212 8.39 2,093,945 91,978 8.86
------------ ------------ ------------ -----------
16,975,248 561,296 6.65 15,391,071 521,831 6.84
19,125,551 783,148 8.23 17,072,984 692,471 8.18
6,043,437 269,309 8.96 5,569,108 246,967 8.94
3,007,099 148,505 9.93 2,328,593 119,160 10.32
11,798,184 537,438 9.16 11,538,391 501,590 8.77
20,100,536 956,020 9.56 18,274,695 848,661 9.36
7,883,937 636,288 16.23 5,947,876 496,798 16.84
1,874,050 69,316 7.44 1,386,603 50,305 7.32
(1,008,848) (894,052)
------------ ------------ ------------ -----------
68,823,946 3,400,024 9.93 61,224,198 2,955,952 9.74
------------ ------------ ------------ -----------
86,195,241 3,971,921 9.27 77,959,070 3,520,597 9.11
9,349,989 8,627,988
------------ ------------
$ 95,545,230 $ 86,587,058
============ ============
$ 13,944,480 $ 12,805,089
2,677,662 24,410 1.83 8,801,954 97,137 2.23
5,446,407 70,378 2.60 6,496,472 97,978 3.04
23,179,141 397,379 3.45 12,745,961 251,255 3.98
19,417,585 537,042 5.56 19,307,069 534,230 5.58
3,893,534 75,551 3.90 3,947,063 104,222 5.32
1,853,114 49,074 5.33 1,793,787 51,398 5.78
------------ ------------ -------------- -----------
70,411,923 1,153,834 3.30 65,897,395 1,136,220 3.48
11,474,068 295,268 5.17 9,208,408 256,324 5.61
2,999,799 97,729 6.55 2,074,063 71,381 6.94
------------ ------------ -------------- -----------
14,473,867 392,997 5.46 11,282,471 327,705 5.86
------------ ------------ -------------- -----------
70,941,310 1,546,831 4.38 64,374,777 1,463,925 4.59
2,161,952 1,795,874
------------ --------------
87,047,742 78,975,740
245,199 249,891
8,252,289 7,361,427
------------ --------------
$ 95,545,230 $ 86,587,058
============ ==============
2,425,090 5.66 2,056,672 5.32
(333,575) (0.78) (159,082) (0.41)
============ ==== =========== ====
$ 2,091,515 4.88% $ 1,897,590 4.91%
============ ==== =========== ====
</TABLE>
11
<PAGE> 13
MANAGEMENT'S DISCUSSION AND ANALYSIS
This discussion should be read in conjunction with the consolidated financial
statements, notes and tables included elsewhere in this report, the 1995 BANC
ONE CORPORATION Annual Report on Form 10-K and quarterly report on Form 10-Q for
the quarter ended March 31, 1996. BANC ONE's financial position and results of
operations have not been restated to include Banc One Louisiana Corporation,
(BOLC) formerly known as Premier Bancorp, Inc., which was acquired on January 2,
1996, as this acquisition was accounted for using the purchase method of
accounting. 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 BANC ONE involve risks and uncertainties and are subject to change
based on various factors. Actual results could differ materially from those
expressed or implied.
RESULTS OF OPERATIONS
NET INTEREST INCOME/NET INTEREST MARGIN
BANC ONE's interest income, on a fully taxable equivalent (FTE) basis, was
$2.0 billion and $4.0 billion for the three and six months ended June 30, 1996,
compared with $1.8 billion and $3.5 billion for the same periods in 1995. The
net interest margin was 5.66% for the three and six months ended June 30, 1996,
compared with 5.29% and 5.32% for the same periods in 1995.
The increase in interest income was due primarily to earning asset growth
and the acquisition of BOLC. Average earning asset balances increased to $86.2
billion for the three and six months ended June 30, 1996 as compared to $77.8
and $78.0 billion for the for the same periods in 1995. BOLC's June 30,
1996 quarter-to-date and year-to-date average earning assets of $5.0 billion
contributed to the increase.
Average loans and leases grew to $70.1 billion for the three months ended
June 30, 1996, compared to $62.4 billion for the same period in 1995. The growth
of $7.7 billion for the three months ended June 30, 1996 as compared to the same
period for 1995 was due to an increase of $1.3 billion in credit card loans,
$1.2 billion in consumer loans and $1.2 billion in wholesale loans (primarily
commercial loans and leases) net of loan sales and the mortgage reclassification
discussed below. The inclusion of BOLC in second quarter 1996 contributed $3.3
billion in average loan growth.
Average loans and leases grew to $69.8 billion for the six months ended
June 30, 1996, compared to $62.1 billion for the same period in 1995. The growth
of $7.7 billion for the six months ended June 30, 1996 as compared to the same
period in 1995 was due to an increase of $1.7 billion in credit card loans and
$1.4 billion in wholesale loans, net of loan sales and the mortgage
reclassification discussed below. The inclusion of BOLC in 1996 contributed $3.4
billion in average loan growth.
Average investment securities increased $1.3 billion and $1.6 billion for
both the three and six months ended June 30, 1996 as compared to the same
periods in 1995. Net investing activities (purchases, sales and maturities)
resulted in a decrease in the investment portfolio of $1.6 billion and $1.3
billion for the same periods which was more than offset by an increase of $1.5
billion in securities as a result of the inclusion of BOLC in 1996 and an
increase of $1.4 billion in securities related to the securitization of mortgage
loans and the resulting reclassification of investment securities from mortgage
loans during the fourth quarter of 1995.
BANC ONE relies on both traditional bank funding sources, including retail
deposit gathering and issuance of short and long term debt, as well as
securitizations and sales of loans to fund the origination of earning assets.
Most of the loan securitizations and sales during 1996 and 1995 include
arrangements whereby BANC ONE continues to service the loans. The servicing
income represents revenue earned on loans in excess of net charge-offs and
interest paid to investors. BANC ONE's net income was not significantly affected
by these loan securitizations and sales; however, classifications within the
income statement have changed. Amounts that would previously have been reported
as interest income, interest expense, and provision for loan losses are instead
included in non-interest income as servicing income. Because credit losses are
charged against servicing income over the life of these transactions such income
may vary depending upon the credit performance of the loans securitized and
sold. However, exposure to credit losses on the securitized and sold loans is
limited to future servicing income and certain on-balance sheet receivables.
While these loan securitizations and sales have included both consumer loans and
credit card receivables 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 activity. The following table presents the impact of credit
card securitizations and sales on income statement line items and certain other
information pertaining to the total credit card portfolio.
12
<PAGE> 14
<TABLE>
<CAPTION>
QUARTER ENDED JUNE 30, 1996 QUARTER ENDED JUNE 30, 1995
-------------------------------------------------------------------------------------
EFFECT OF EFFECT OF
CREDIT CARD PRO-FORMA CREDIT CARD PRO-FORMA
$(MILLIONS) REPORTED SECURITIZATIONS ADJUSTED REPORTED SECURITIZATIONS ADJUSTED
AND SALES AND SALES
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Income statement:
Net interest income - fully taxable
equivalent $1,214 $ 107 $ 1,321 $1,024 $ 71 $1,095
Provision for credit losses 171 77 248 93 32 125
Non-interest income 533 (26) 507 454 (38) 416
Non-interest expense 1,028 4 1,032 902 1 903
Net income $ 355 $ 0 $ 355 $ 307 $ 0 $ 307
Net interest margin 5.66% 9.69% 5.86% 5.29% 10.46% 5.46%
Other Data:
Ending credit card balances $7,832 $4,440 $12,272 $6,228 $3,060 $9,288
Average credit card balances $7,479 $4,440 $11,919 $6,088 $2,722 $8,810
Net credit card charge-offs as a percentage
of average credit card balances 5.20% 6.98% 5.86% 3.69% 4.72% 4.01%
Credit card delinquencies over 90 days as a
percentage of ending credit card
balances 1.76% 1.93% 1.82% 1.28% 1.54% 1.36%
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
As the revolving period ends for certain credit card securitizations, new
credit card receivables are recorded and funded on BANC ONE's balance sheet and
become available for securitization. Approximately $1.1 billion of credit card
securitizations are scheduled to be funded during the remainder of 1996.
Interest expense remained constant at $.8 billion and $1.5 billion for the
three and six months ended June 30, 1996 and 1995. In 1996, the inclusion of
BOLC increased interest expense $37 million and $77 million for the respective
periods. Further, a $24 million reduction of interest on deposits in the second
quarter of 1996 resulted from the reversal of premiums on depository balances
(domestic CD's over $100,000) acquired in previous years.
BANC ONE's retail funding base increased $5 billion for the three and
six months ended June 30, 1996 primarily related to the inclusion of BOLC. The
retail funding base continued to shift away from relatively low-cost deposit
products (including interest-bearing demand and savings accounts) into deposit
products offering higher yields. This enabled BANC ONE to avoid runoff of its
retail funding base and provided 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
limits on the sensitivity of its earnings to changes in market interest rates.
An explanation of the asset/liability management process is found beginning on
page 18 and in the Annual Report on Form 10-K for the year ended December 31,
1995 beginning on page 34. Interest rate risk management at BANC ONE is executed
primarily by the use of on and off-balance sheet investment products.
The income statement impact of off-balance sheet investment products is
primarily in the net interest margin. Off-balance sheet investment products
decreased interest income by $12 million and $32 million for the three and six
months ended June 30, 1996, and decreased interest income by $42 million and $75
million for the three and six months ended June 30, 1995. Off-balance sheet
investment products increased deposit and other borrowing costs by $.5 million
and $1.0 million for the three and six months ended June 30, 1996, as compared
to $17.3 million and $37.7 million for the same periods in 1995. The interest
rate swap impact in isolation on the net interest margin bears no relationship
to the effectiveness of the use of these instruments. The above amounts are
simply the interest payments received or paid on interest rate swap agreements
without consideration of the impact of interest from assets and liabilities
associated with such agreements.
13
<PAGE> 15
NON-INTEREST INCOME
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
---------------------------------------------------------------
JUNE 30, JUNE 30, INCREASE JUNE 30, JUNE 30, INCREASE
$(THOUSANDS) 1996 1995 (DECREASE) 1996 1995 (DECREASE)
- ---------------------------------------------------------------- ----------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Income from fiduciary activities $67,740 $58,546 $9,194 $130,251 $117,128 $13,123
Service charges on deposit accounts 161,221 132,462 28,759 318,037 259,573 58,464
Loan processing and servicing income:
Mortgage banking 26,073 17,893 8,180 45,935 33,609 12,326
Credit card and merchant processing fees 35,803 52,323 (16,520) 75,541 94,066 (18,525)
Loan servicing income 52,586 60,032 (7,446) 110,231 115,016 (4,785)
------ ------ ------- ------- ------- -------
TOTAL LOAN PROCESSING AND SERVICING INCOME 114,462 130,248 (15,786) 231,707 242,691 (10,984)
Other income:
Insurance 31,844 21,940 9,904 58,059 40,612 17,447
Securities related activities 19,766 11,507 8,259 37,353 22,969 14,384
Investment banking 11,280 10,072 1,208 19,667 14,642 5,025
Other 109,468 86,578 22,890 217,447 195,706 21,741
------- ------ ------ ------- ------- ------
Total other income 172,358 130,097 42,261 332,526 273,929 58,597
------- ------- ------ ------- ------- ------
Non-interest income before securities gains 515,781 451,353 64,428 1,012,521 893,321 119,200
------- ------- ------ --------- ------- -------
Securities gains 17,533 2,785 14,748 23,368 12,571 10,797
------ ----- ------ ------ ------ ------
TOTAL NON-INTEREST INCOME $533,314 $454,138 $79,176 $1,035,889 $905,892 $129,997
======== ======== ======= ========== ======== ========
</TABLE>
Of the $79 million and $130 million increases in total non-interest income for
the three and six months ended June 30, 1996 compared to the same periods in
1995, $23 million and $47 million are due to the inclusion of BOLC. The
following discussion excludes amounts related to BOLC.
The increase in income from fiduciary activities for the three and six months
ended June 30, 1996 compared to the same periods in 1995 is due mainly to the
continued increase in investment management fees resulting from growth in funds
under management. Funds under management increased 8% from June 30, 1995 to June
30, 1996.
The increase in service charges on deposit accounts is due to an increase in
overdraft and personal checking and savings account fees of $9 million for the
three months and $21 million for the six months ended June 30, 1996 as compared
to June 30, 1995.
The increase in mortgage banking income is the result of gains of $8 million and
$12 million on sales of mortgage loans for the three and six months ended June
30, 1996 and an increase in the fair value of servicing rights resulting in
reversals of valuation reserves of $3 million.
The decrease in credit card and merchant processing fees for the three and six
months ended June 30, 1996 compared to the same periods in 1995 is primarily due
to BANC ONE entering into a joint venture arrangement with a third party.
Through this arrangement merchant processing fees of $12 million and $23 million
and salary and other expense of $7 million and $13 million are classified as
other-other income.
The decrease in loan servicing income is due to increased charge-offs of $10
million and $15 million related to credit card loan sales for the three and six
months ended June 30, 1996. This decrease is partially offset by the continued
increase in the credit card servicing portfolio.
The increase in both insurance and securities income is due to commissions on
increased sales volume resulting from national sales programs.
The increase in other-other income for the three months ended June 30, 1996 is
due to a gain of $8 million on the sale of $230 million in residential real
estate (home equity) loans in June of 1996 and an $8 million increase related to
corporate owned life insurance . In addition to these increases, other-other
income increased for the six months ended June 30, 1996 due to a $14 million
gain on the sale of bank branches. The following transactions in 1995 also
affected the increase: a $52 million loss in the first quarter of 1995 related
to the sale of $1.2 billion of low yielding consumer loans, a $47 million gain
in February 1995 on the sale of four Michigan banks and $17 million in income
from March 1995 on the sale of credit card processing software license. The
increase in securities gains is primarily due to $10 million in gains related to
the sale of venture capital securities.
14
<PAGE> 16
NON-INTEREST EXPENSE
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
--------------------------------------------------------------------------
JUNE 30, JUNE 30, INCREASE JUNE 30, JUNE 30, INCREASE
$(THOUSANDS) 1996 1995 (DECREASE) 1996 1995 (DECREASE)
- ------------------------------------------------------ ------------------------ ------------------------ ------------------------
<S> <C> <C> <C> <C> <C> <C.
Salaries and related costs $501,552 $429,079 $72,473 $1,004,364 $872,029 $132,335
Net occupancy expense, exclusive of depreciation 47,695 40,616 7,079 92,368 80,192 12,176
Equipment expense 28,877 25,667 3,210 56,976 52,574 4,402
Taxes other than income and payroll 24,462 23,094 1,368 48,524 45,066 3,458
Depreciation and amortization 96,462 68,960 27,502 182,678 143,690 38,988
Outside services and processing 128,550 104,991 23,559 253,787 208,493 45,294
Marketing and development 33,465 48,343 (14,878) 81,579 92,579 (11,000)
Communication and transportation 78,098 67,880 10,218 153,269 133,943 19,326
FDIC Insurance 4,202 35,820 (31,618) 8,448 71,735 (63,287)
Other 85,017 57,878 27,139 165,465 125,624 39,841
------ ------ ------ ------- ------- ------
TOTAL NON-INTEREST EXPENSE $1,028,380 $902,328 $126,052 $2,047,458 $1,825,925 $221,533
========== ======== ======== ========== ========== ========
</TABLE>
As expected, BANC ONE's ongoing consolidation and standardization
initiatives have resulted in certain costs being higher than 1995 levels.
These costs increased by $23 million and $30 million for the three and six
months ended June 30, 1996, primarily in salaries, occupancy and outside
services and processing. It is anticipated that expenses related to this
initiative will continue to be incurred before the benefits of additional
increased revenues and decreased expense are realized. In addition, the
inclusion of BOLC has increased total non-interest expense $55 million and
$115 million for the three and six months ended June 30, 1996.
In addition to the items noted above, the increase in salaries and related
costs is due to $14 million and $43 million increase in bonuses and
incentive pay and $11 million and $14 million primarily due to anticipated
higher company matching of 401k contributions based on expected higher
earnings and increased pension costs due to higher interest rates for the
three and six months ended June 30, 1996.
Depreciation and amortization for the three and six months ended June 30,
1996 increased primarily due to the second quarter 1996 write-off of $12
million in software and goodwill related to a non-bank subsidiary and an
increase in goodwill and intangible amortization related to the
acquisition of BOLC of $7 million and $14 million.
Outside services and processing increased for the three and six months
ended June 30, 1996 due to increased consulting related to national
programs and a $3 million and $4 million increase in appraisal fees
related to an increase in loan originations. Marketing and development
expense decreased for the three and six month periods ended June 30, 1996
due to a reduction in credit card solicitations.
FDIC insurance decreased for the three and six months ended June 30, 1996
due to the Federal Deposit Insurance Corporation's decision to lower
deposit insurance premiums. Congress is considering legislation that would
result in a one time assessment on deposits insured by Savings Association
Insurance Fund (SAIF). At June 30, 1996, BANC ONE's affiliate banks held
approximately $6 billion of deposits subject to premiums insured by the
SAIF.
Other non-interest expense increased for the three and six month periods
ending June 30,1996 due to a $4 million prepayment charge on the early
retirement of $79.5 million in long term debt during the second quarter of
1996 and a $10 million and $13 million increase in expenses related to
savings and checking accounts and automated teller machines.
INCOME TAXES
The provision for income taxes was 33.1% of pretax income for the six
months ended June 30, 1996 as compared to 34.7% of pretax income for the
same period in 1995. The effective tax rate for the six months ended June
30, 1996 approximates the anticipated effective tax rate for the year. The
decrease in the effective rate from second quarter 1995 is a result of BANC
ONE's state tax management which results in a reduction of state income
taxes for 1996 and a reduction in federal income tax reserves relating to
agreements reached with the Internal Revenue Service in 1996.
15
<PAGE> 17
BALANCE SHEET ANALYSIS
LOANS AND LEASES
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
$(THOUSANDS)(AS OF END OF PERIOD) 1996 1995
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Commercial, financial and agricultural $19,445,903 $17,903,692
Real Estate:
Commercial 6,183,933 5,667,826
Construction 3,166,697 2,692,587
Residential 11,819,657 11,259,495
Consumer, net 20,133,524 18,407,595
Credit card 7,831,639 7,665,274
Leases, net 2,046,495 1,732,196
--------- ---------
Total loans and leases $70,627,848 $65,328,665
=========== ===========
</TABLE>
The $5.3 billion increase in ending loans and leases from December 31, 1995 is
due to $3.3 billion related to the inclusion of BOLC and continued loan growth
in all categories. Significant loan origination activity is not fully reflected
in ending loan balances due to the following sales of loans during the first
half of 1996:
- - Consumer loan sales of $.5 billion in March 1996
- - Credit card loan sales of $1 billion in March 1996
- - Consumer loan sales of $.3 billion in June 1996
- - Residential real estate (home equity) loan sales of $.2 billion in June
1996
For an additional analysis of loans refer to the Average Balances, Income and
Expense, Yields and Rates found on page 10. Also, refer to the table on page 13
which provides certain information on managed credit card loans.
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 through appraisals,
assessment of 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 other real estate
owned (OREO).
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
$(THOUSANDS) JUNE 30, 1996 JUNE 30, 1996
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
NONACCRUAL LOANS:
Balance, beginning of period $407,605 $349,084
BOLC acquisition 30,516
Nonaccrual additions 87,085 210,705
Loans returned to accrual and payments received (63,829) (128,304)
Reductions due to transfers to OREO (10,289) (18,630)
Charge-offs (26,156) (49,150)
Other, net (8,844) (8,649)
------- -------
Balance, end of period $385,572 $385,572
======== ========
OREO:
Balance, beginning of period $76,584 $75,483
BOLC acquisition 3,982
Additions 23,102 42,258
Write-downs (6,231) (12,797)
Sales (20,901) (34,685)
Customer Payments and other (2,045) (3,732)
------- -------
Balance, end of period $70,509 $70,509
======= =======
</TABLE>
16
<PAGE> 18
The following tables summarize net charge-offs 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>
FOR THE THREE
MONTHS ENDED
NET CHARGE-OFFS (RECOVERIES) (1) JUNE 30,
- -------------------------------------------------------------------------------------------------------------------------
1996 1995
------------------ ------------------
<S> <C> <C>
Commercial, financial and agricultural .07% (.08)%
Real estate .05 .13
Consumer, net .96 .59
Credit card 5.20 3.69
Leases, net (.04) .41
TOTAL LOANS AND LEASES .86% .56%
<FN>
(1) Ratios are presented on an annualized basis.
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31, JUNE 30,
LOANS DELINQUENT 90 DAYS OR MORE (1) 1996 1995 1995
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Wholesale (2) .11% .15% .15%
Real estate, residential .24 .25 .13
Consumer, net .36 .34 .28
Credit card 1.76 1.54 1.28
Leases, net .04 .03 .02
TOTAL LOANS AND LEASES .40% .39% .29%
<FN>
(1) Ratios presented are expressed as a percent of ending balances.
Delinquencies exclude nonperforming loans.
(2) Includes commercial, financial, agricultural, commercial real estate and
construction real estate loans.
</TABLE>
Total nonperforming assets at June 30, 1996 have increased to $458 million from
$430 million at December 31, 1995 primarily due to the inclusion of BOLC.
Annualized net charge-offs for the second quarter of 1996 increased to .86
percent of average loans from .56 percent in the second quarter of 1995. The
increase in net charge-offs and loans delinquent 90 days or more since June 30,
1995 has been driven by the deterioration of consumer credit experienced by BANC
ONE and parallelling that experienced by the banking industry.
The following summarizes activity in the allowance for credit losses. The
increase in the provision for credit losses is primarily due to loan growth.
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
---------------------------------- -----------------------------------
$(THOUSANDS) 1996 1995 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BALANCE, BEGINNING OF PERIOD $1,005,808 $885,292 $938,008 $897,180
Allowance associated with acquisitions and
other 130 60,065 (3,922)
Provision for credit losses 171,154 92,565 333,575 159,082
Losses charged to the allowance (213,721) (134,456) (426,093) (258,472)
Recoveries 63,077 48,015 120,763 97,678
------ ------ ------- ------
Net losses charged to the allowance (150,644) (86,441) (305,330) (160,794)
--------- -------- --------- ---------
BALANCE, END OF PERIOD $1,026,318 $891,546 $1,026,318 $891,546
========== ======== ========== ========
</TABLE>
17
<PAGE> 19
LIQUIDITY AND CAPITAL
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31, JUNE 30,
$(MILLIONS) (AS OF END OF PERIOD) 1996 1995 1995
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Earning assets, net of short term investments $85,795 $80,099 $76,340
Large liabilities:
Net national market liabilities $2,292 $3,209 $2,565
As a percent of net earning assets 2.67% 4.01% 3.36%
Total net large liabilities $17,551 $13,857 $12,863
As a percent of net earning assets 20.46% 17.30% 16.85%
</TABLE>
At June 30, 1996, large liability dependence was 20.46%, an increase from 17.30%
at December 31, 1995. Competition from non-bank investment providers continues
to impact BANC ONE's deposit gathering and retention efforts. During the second
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 short term borrowings and Eurodollar
deposits which were used to fund loan growth. During the second quarter of 1996,
$300 million of consumer loans and $230 million of residential real estate (home
equity) loans were sold. Loan sales such as these are expected to continue to
generate funding for earning asset growth and to mitigate the need to increase
large liabilities.
At June 30, 1996, risk based tier I capital, total risk adjusted capital and
leverage ratios were 9.52%, 13.23% and 8.43%, respectively. All of these
ratios are significantly above regulatory minimum capital requirements.
ASSET/LIABILITY MANAGEMENT
BANC ONE uses a unified approach to the 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 June
30, 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% (5.9)%
+2% (3.5)%
+1% (1.4)%
-1% ( .3)%
-2% (1.3)%
</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
June 30, 1996 for 1% and 2% immediate changes in rates.
18
<PAGE> 20
<TABLE>
<CAPTION>
Immediate Rate Change EVAR
- --------------------- ----
<S> <C>
+2% (2.2)%
+1% (1.3)%
-1% (1.8)%
-2% (5.9)%
</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 investment products,
primarily interest rate swaps, to manage interest rate risk. 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 the
maturity of assets and liabilities as part of its ALM process to manage the
impact of fluctuating interest rates on the Corporation's net income.
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 June 30, 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.
<TABLE>
<CAPTION>
JUNE 30, 1996 DECEMBER 31, 1995
---------------------------- ---------------------------
Amortized Estimated Amortized Estimated
$ (MILLIONS) Cost Fair Value Cost Fair Value
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SECURITIES HELD TO MATURITY:
United States treasury and agencies $122 $123 $91 $91
Mortgage and asset-backed
securities:
Government 47 46 58 62
Other 1 1 6 6
Tax exempt 789 818 909 953
Other 46 49 24 24
-- -- -- --
Total securities held to maturity 1,005 1,037 1,088 1,136
----- ----- ----- -----
SECURITIES AVAILABLE FOR SALE:
United States treasury and agencies 3,662 3,627 3,029 3,060
Mortgage and asset-backed
securities:
Government 6,964 6,980 6,553 6,660
Other 3,144 3,104 3,595 3,587
Tax exempt 922 917 813 825
Other 560 560 486 488
--- --- --- ---
Total securities available for sale 15,252 15,188 14,476 14,620
------ ------ ------ ------
TOTAL SECURITIES $16,257 $16,225 $15,564 $15,756
======= ======= ======= =======
</TABLE>
19
<PAGE> 21
<TABLE>
<CAPTION>
MATURITIES OF OFF-BALANCE SHEET INVESTMENT
PRODUCTS AT JUNE 30, 1996(1)(2) ENDING BALANCES AT
-------------------------------------------------------------------- ------------------------
2001 - June 30, December 31,
$(MILLIONS) 1996 1997 1998 1999 2000 2005 2006+ 1996 1995
- ------------------------------------------------------------------------------------------------------ ------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Receive fixed swaps:
Notional value $ 1,200 $ 3,753 $ 1,800 $ 545 $ 1,160 $ 1,596 $ 300 $10,354 $ 9,789
Weighted average receive rate 6.27% 5.22% 5.94% 6.20% 6.29% 6.43% 7.23% 5.88% 5.85%
Receive fixed amortizing swaps:
Notional value $ 2,786 $ 1,390 $ 645 $ 19 $ 150 $4,990 $ 7,946
Weighted average receive rate 5.20% 5.22% 5.47% 7.26% 5.54% 5.26% 5.29%
Pay fixed swaps:
Notional value $ 277 $ 95 $ 356 $ 6 $ 6 $ 740 $ 2,673
Weighted average pay rate 8.06% 8.54% 6.41% 8.69% 8.17% 7.33% 5.76%
Purchased caps:
Notional value $ 2,501 $ 503 $ 7 $ 19 $ 4 $ 27 $ 3,061 $ 5,253
------- ------- ------- ------- ------- ------- ------- -------
Net receive fixed position $ 1,208 $ 4,545 $ 2,082 $ 539 $ 1,300 $ 1,569 $ 300 $11,543 $ 9,809
Basis swaps:
Notional value 275 3,730 405 68 50 150 4,678 8,304
Other(3)
Notional value $ 1,945 $ 790 $ 1,000 $ 1,000 $ 4,735 $ 4,052
<FN>
(1)Maturities are based on estimated future interest rates from the forward
interest curve at June 30, 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 ($2.4 billion at June 30, 1996), floors, options, swaptions, forward
rate agreements, currency swaps, and anticipatory hedges. Customer transactions
of $1.3 billion and $1.2 billion at June 30, 1996 and December 31, 1995,
respectively, have been excluded.
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
JUNE 30, 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 $10,354 $12 ($100) ($88) $136
Receive fixed amortizing swaps 4,990 5 (33) (28) (13)
Pay fixed swaps 740 1 (8) (7) (13)
Purchased caps 3,061 0 (4) (4) (18)
Basis swaps 4,678 0 (28) (28) (37)
Other 4,735 2 (7) (5) (8)
---------------------------- ---------------------------------------- -----------------
Total $28,558 $20 ($180) ($160) $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. While the net
unrelated value of the off-balance sheet investment product portfolio has
decreased, due to an increase in long-term market interest rates, the fair
value of the fixed rate liabilities has increased.
20
<PAGE> 22
BANC ONE CORPORATION AND SUBSIDIARIES
PART II
OTHER INFORMATION
Item 1. Legal Proceedings.
In 1992, Bank One, Columbus, N.A. ("Columbus") was named a
defendant in a purported class action lawsuit in Pennsylvania
challenging whether Columbus can impose various types of fees,
allowed by the state of Ohio, on credit cardholders residing in
Pennsylvania (the "Suit"). The Suit sought unquantified
compensatory and triple damages and other equitable relief. The
Suit was one of many similar class action lawsuits brought
against credit card issuing banks throughout the United States.
The dismissal of the Suit by the Court of Common Pleas of
Philadelphia County, Pennsylvania, which had been upheld by a
panel of the Pennsylvania Superior Court, was reversed by the
entire Pennsylvania Superior Court in December 1994. Columbus
appealed the decision to the Pennsylvania Supreme Court, which on
July 29, 1996 entered an order reversing the judgment of the
entire Pennsylvania Superior Court and upholding the trial
court's dismissal of the Suit, pursuant to the decision of the
United States Supreme Court in Smiley v. Citibank (South Dakota),
N.A.
Item 2 - Inapplicable
Item 3 - Inapplicable
Item 4. Submission of Matters to a Vote of Security Holders
a. The matters discussed in paragraph (c) below were
submitted to a vote of security holders at the Annual
Meeting of Shareholders of the Registrant held on April
16, 1996.
b. Inapplicable.
c. Election of Directors:
<TABLE>
<CAPTION>
Shares Voted
---------------------------------------------------
Against/
Name For Withheld
---- --- --------
<S> <C> <C>
Charles E. Exley, Jr. 322,966,872 1,665,657
E. Gordon Gee 322,900,868 1,761,661
John R. Hall 323,118,775 1,543,754
Laban P. Jackson, Jr. 322,991,671 1,670,858
John W. Kessler 322,920,253 1,742,276
Richard J. Lehmann 323,156,848 1,505,681
John B. McCoy 323,072,516 1,590,013
John G. McCoy 322,991,341 1,671,188
Richard L. Scott 322,745,065 1,917,464
Thekla R. Shackelford 323,140,831 1,521,898
Alex Shumate 322,971,098 1,691,431
Frederick P. Stratton, Jr. 323,140,633 1,521,896
Robert D. Walter 323,140,589 1,521,940
</TABLE>
d. Inapplicable.
Item 5 - Inapplicable
21
<PAGE> 23
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
22
<PAGE> 24
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
8/14/96 /s/ William C. Leiter
---------------------- -------------------------------
William C. Leiter
Date Chief Accounting Officer
23
<PAGE> 25
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
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 Six Months Ended
June 30, June 30,
------------------------------- ----------------------------
1996 1995 1996 1995
------------------------------- ----------------------------
<S> <C> <C> <C> <C>
PRIMARY:
Earnings:
Net income $354,928 $307,482 $700,809 $610,000
Deduct: Dividends on preferred shares 4,244 4,373 8,539 8,746
----- ----- ----- -----
Net income available to common shareholders $350,684 $303,109 $692,270 $601,254
======== ======== ======== ========
Shares:
Weighted average common shares outstanding 435,115 432,737 438,555 433,678
Add: Dilutive effect of outstanding options, as
determined by the application of the
treasury stock method 2,924 1,477 2,877 1,257
----- ----- ----- -----
Weighted average common shares outstanding,
as adjusted 438,039 434,214 441,432 434,935
======= ======= ======= =======
PRIMARY EARNINGS PER COMMON SHARE $.80 $.70 $1.57 $1.38
==== ==== ===== =====
FULLY DILUTED:
Earnings:
Net income $354,928 $307,482 $700,809 $610,000
======== ======== ======== ========
Shares:
Weighted average common shares outstanding 435,115 432,737 438,555 433,678
Add: Dilutive effect of outstanding options, as
determined by the application of the
treasury stock method 2,924 1,517 2,877 1,458
Add: Conversion of preferred stock 9,373 9,640 9,460 9,640
----- ----- ----- -----
Weighted average common shares outstanding, as
adjusted 447,412 443,894 450,892 444,776
======= ======= ======= =======
FULLY DILUTED EARNINGS PER COMMON SHARE $.79 $.69 $1.55 $1.37
==== ==== ===== =====
</TABLE>
25
<PAGE> 1
BANC ONE CORPORATION and Subsidiaries EXHIBIT 12
Statement Regarding Computation of Ratio of Earnings to Fixed Charges
$(thousands)
<TABLE>
<CAPTION>
Six Months Ended Years Ended
June 30, 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) $1,047,808 $ 933,941 $1,910,282 $1,518,852 $1,770,712 $1,341,249 $ 928,947
Fixed charges 423,081 355,022 736,249 633,569 348,327 321,402 419,274
Less: Capitalized interest (668) (726) (1,671) (1,000) (652) (1,199) (1,732)
----- ----- ------- ------- ----- ------- -------
Earnings $1,470,221 $1,288,237 $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 $ 393,665 $ 328,497 $ 683,372 $ 575,734 $ 298,857 $ 278,615 $ 379,708
Portion of rental payments under
operating leases deemed to be
interest 29,416 26,525 52,877 57,835 49,470 42,787 39,566
------ ------ ------ ------ ------ ------ ------
Fixed charges $ 423,081 $ 355,022 $ 736,249 $ 633,569 $ 348,327 $ 321,402 $ 419,274
========== ========== ========== ========== ========== ========== ==========
Ratio of earnings to fixed charges
excluding interest on deposits: 3.48X 3.63x 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) $1,047,808 $ 933,941 $1,910,282 $1,518,852 $1,770,712 $1,341,249 $ 928,947
Fixed charges 1,576,915 1,491,242 3,026,343 2,307,832 1,826,018 2,318,274 2,955,918
Less: Capitalized interest (668) (726) (1,671) (1,000) (652) (1,199) (1,732)
----- ----- ------- ------- ----- ------- -------
Earnings $2,624,055 $2,424,457 $4,934,954 $3,825,684 $3,596,078 $3,658,324 $3,883,133
========== ========== ========== ========== ========== ========== ==========
Fixed charges:
As detailed above $ 423,081 $ 355,022 $ 736,249 $ 633,569 $ 348,327 $ 321,402 $ 419,274
Interest on deposits 1,153,834 1,136,220 2,290,094 1,674,263 1,477,691 1,996,872 2,536,644
--------- --------- --------- --------- ---------- ---------- ---------
Fixed charges $1,576,915 $1,491,242 $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 1.66X 1.63x 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>
26
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 4,945,403
<INT-BEARING-DEPOSITS> 2,015
<FED-FUNDS-SOLD> 934,740
<TRADING-ASSETS> 317,158
<INVESTMENTS-HELD-FOR-SALE> 14,871,344
<INVESTMENTS-CARRYING> 1,004,629
<INVESTMENTS-MARKET> 1,036,650
<LOANS> 70,627,848
<ALLOWANCE> 1,026,318
<TOTAL-ASSETS> 97,051,060
<DEPOSITS> 70,954,090
<SHORT-TERM> 12,151,457
<LIABILITIES-OTHER> 2,407,280
<LONG-TERM> 3,020,801
<COMMON> 2,178,257
0
240,563
<OTHER-SE> 6,098,612
<TOTAL-LIABILITIES-AND-EQUITY> 97,051,060
<INTEREST-LOAN> 3,391,783
<INTEREST-INVEST> 537,432
<INTEREST-OTHER> 10,568
<INTEREST-TOTAL> 3,939,783
<INTEREST-DEPOSIT> 1,153,834
<INTEREST-EXPENSE> 1,546,831
<INTEREST-INCOME-NET> 2,392,952
<LOAN-LOSSES> 333,575
<SECURITIES-GAINS> 23,368
<EXPENSE-OTHER> 2,047,458
<INCOME-PRETAX> 1,047,808
<INCOME-PRE-EXTRAORDINARY> 700,809
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 700,809
<EPS-PRIMARY> 1.57
<EPS-DILUTED> 1.55
<YIELD-ACTUAL> 5.66
<LOANS-NON> 385,572
<LOANS-PAST> 280,291
<LOANS-TROUBLED> 2,171
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 938,008
<CHARGE-OFFS> 426,093
<RECOVERIES> 120,763
<ALLOWANCE-CLOSE> 1,026,318
<ALLOWANCE-DOMESTIC> 809,491
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 216,827
</TABLE>
