<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, 1997
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 (IRS Employer I.D. Number)
incorporation or organization)
100 East Broad Street, Columbus, Ohio 43271
-------------------------------------------
(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 582,821,645 at July 31, 1997.
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FORM 10-Q
TABLE OF CONTENTS
<TABLE>
<S> <C>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheet...................................... 3
Consolidated Statement of Income................................ 4
Consolidated Condensed Statement of Cash Flows.................. 5
Consolidated Statement of Changes in Stockholders' Equity....... 6
Notes to the Consolidated Financial Statements.................. 7
Consolidated Quarterly Financial Data........................... 9
Average Balance, Income and Expense, Yields and Rates........... 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
Acquisitions.................................................... 13
Results of Operations........................................... 14
Net Interest Income/Net Interest Margin....................... 14
Non-Interest Income........................................... 15
Non-Interest Expense.......................................... 16
Income Taxes ................................................. 17
Balance Sheet Analysis.......................................... 17
Securities ................................................... 17
Loans and Leases.............................................. 17
Deposits ..................................................... 18
Borrowings.................................................... 18
Treasury Stock................................................ 18
Credit Quality ................................................. 18
Interest Rate Risk Management................................... 19
PART II - OTHER INFORMATION
Item 1. Legal Proceedings................................................... 22
Item 2. Changes in Securities............................................... 22
Item 3. Defaults upon Senior Securities..................................... 22
Item 4. Submission of Matters to a Vote of Security Holders................. 22
Item 5. Other Information................................................... 23
Item 6. Exhibits and Reports on Form 8-K.................................... 23
SIGNATURES.................................................................. 24
</TABLE>
2
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BANC ONE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
$(MILLIONS, EXCEPT SHARE AMOUNTS) (UNAUDITED) 1997 1996
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS:
Cash and due from banks $6,364.7 $6,524.4
Short-term investments 1,002.1 680.7
Loans held for sale 392.9 1,473.8
Securities:
Securities held to maturity 760.1 4,397.9
Securities available for sale 14,405.5 14,733.8
-------- --------
Total securities (fair value approximates $15,179,300 and 15,165.6 19,131.7
$19,163,600, at June 30, 1997 and December 31, 1996, respectively)
Loans and leases 84,200.1 79,389.7
Allowance for credit losses (1,362.2) (1,197.7)
--------- ---------
Net loans and leases 82,837.9 78,192.0
Other assets:
Bank premises and equipment, net 1,833.1 1,799.2
Interest earned, not collected 833.8 782.1
Excess of cost over net assets of affiliates purchased 762.1 508.4
Other 6,299.4 3,061.2
------- -------
Total other assets 9,728.4 6,150.9
------- -------
Total assets $115,491.6 $112,153.5
========== ==========
LIABILITIES:
Deposits:
Non-interest bearing $18,191.6 $16,340.6
Interest bearing 58,772.3 57,882.4
-------- --------
Total deposits 76,963.9 74,223.0
Federal funds purchased and repurchase agreements 9,105.3 12,858.5
Other short-term borrowings 6,820.3 5,466.9
Long-term debt 9,972.2 6,827.8
Accrued interest payable 520.1 468.6
Other liabilities 2,260.3 2,440.7
------- -------
Total liabilities 105,642.1 102,285.5
--------- ---------
STOCKHOLDERS' EQUITY:
Preferred stock, 35,000,000 shares authorized:
Series C convertible, no par value, 3,683,614 and 4,140,314 shares
issued and outstanding at June 30, 1997 and December 31, 1996, 184.2 207.0
respectively
Preferred stock of pooled affiliate, 5,750,000 shares authorized, issued
and outstanding at December 31, 1996. 0.0 0.1
Common stock, no par value, $5 stated value, 950,000,000 and
600,000,000 shares authorized at June 30, 1997 and December 31, 1996,
respectively, 581,522,935 and 576,517,822 shares issued at June 30,
1997 and December 31, 1996, respectively 2,907.6 2,882.6
Capital in excess of aggregate stated value of common stock 4,054.3 4,346.4
Retained earnings 2,672.1 2,625.1
Net unrealized holding gains on securities available for sale, net of tax 31.3 19.9
Treasury stock (5,829,915 shares at December 31, 1996), at cost 0.0 (213.1)
--- -------
Total stockholders' equity 9,849.5 9,868.0
------- -------
Total liabilities and stockholders' equity $115,491.6 $112,153.5
========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
3
<PAGE> 4
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,
----------------------------------- -------------------------------
$(MILLIONS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED) 1997 1996 1997 1996
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Loans and leases $1,984.9 $1,773.7 $3,954.7 $3,589.1
Securities:
Taxable 264.8 285.4 541.9 580.0
Tax-exempt 20.7 24.2 42.4 49.2
Loans held for sale 78.3 13.4 122.5 24.2
Other 11.1 9.6 22.4 17.8
---- --- ---- ----
Total interest income 2,359.8 2,106.3 4,683.9 4,260.3
INTEREST EXPENSE:
Deposits:
Demand, savings and money market deposits 276.5 245.3 536.6 492.1
Time deposits 359.0 338.8 722.0 710.5
Borrowings 371.9 266.0 715.1 541.2
----- ----- ----- -----
Total interest expense 1,007.4 850.1 1,973.7 1,743.8
------- ----- ------- -------
NET INTEREST INCOME 1,352.4 1,256.2 2,710.2 2,516.5
PROVISION FOR CREDIT LOSSES 395.8 194.7 667.7 382.8
----- ----- ----- -----
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES 956.6 1,061.5 2,042.5 2,133.7
NON-INTEREST INCOME:
Investment management and advisory activities 76.2 67.7 150.4 130.3
Service charges on deposit accounts 174.8 161.2 340.8 318.0
Loan processing and servicing income 361.5 368.9 691.1 716.9
Securities gains, net 17.1 4.5 32.3 5.6
Other 200.9 169.9 423.1 357.9
----- ----- ----- -----
Total non-interest income 830.5 772.2 1,637.7 1,528.7
NON-INTEREST EXPENSE:
Salaries and related costs 565.6 547.4 1,133.3 1,091.0
Net occupancy expense, exclusive of depreciation 48.9 51.4 100.1 100.0
Depreciation and amortization 110.8 118.7 219.4 225.5
Outside services and processing 192.7 164.2 384.2 319.5
Marketing and development 200.3 100.1 330.3 195.1
Communication and transportation 104.7 93.4 199.1 181.7
Restructuring charges 337.3 0.0 337.3 0.0
Other 163.9 162.8 329.5 317.2
----- ----- ----- -----
Total non-interest expense 1,724.2 1,238.0 3,033.2 2,430.0
------- ------- ------- -------
INCOME BEFORE INCOME TAXES 62.9 595.7 647.0 1,232.4
PROVISION FOR INCOME TAXES 47.1 200.5 249.3 414.4
---- ----- ----- -----
NET INCOME $15.8 $395.2 $397.7 $818.0
===== ====== ====== ======
NET INCOME PER COMMON SHARE $.02 $.66 $.67 $1.35
==== ==== ==== =====
Weighted average common shares outstanding 583.2 595.7 585.7 598.1
===== ===== ===== =====
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
4
<PAGE> 5
BANC ONE CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30,
------------------------------------
$(millions) (unaudited) 1997 1996
----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Net income $397.7 $818.0
Depreciation expense 158.0 151.3
Amortization of other intangibles 61.4 74.2
Other cash (used in) provided by operating activities (491.3) 171.8
--------- ---------
Net cash provided by operating activities 125.8 1,215.3
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES: --------- ---------
Purchases of securities available for sale (3,099.8) (2,952.2)
Purchases of securities held to maturity (493.9) (707.8)
Maturities of securities available for sale 1,542.5 2,576.8
Maturities of securities held to maturity 607.1 568.3
Sales of securities available for sale 3,802.9 936.8
Net increase in loans, excluding sales and purchases (2,840.4) (5,923.5)
Sales of loans 736.7 4,025.4
Purchases of loans and related premiums (447.5) (163.7)
Net increase in short-term investments (150.2) (283.5)
Additions to bank premises and equipment (178.3) (197.9)
Sale of banks and branch offices (22.3) (165.7)
Net cash acquired in acquisitions 240.7 315.7
All other investing activities, net 84.0 62.6
--------- ---------
Net cash used in investing activities (218.5) (1,908.7)
CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES: --------- ---------
Net increase (decrease) in demand deposit, money market and savings
accounts 1,529.7 (535.2)
Net decrease in time deposits (1,088.2) (238.7)
Net (decrease) increase in short-term borrowings (2,701.2) 2,078.8
Issuance of long-term borrowings, net 3,789.3 1,014.3
Repayment of long-term borrowings (630.6) (1,331.9)
Cash dividends paid (350.7) (317.1)
Purchase of treasury stocks (707.3) (654.6)
Other, net increase 92.0 165.5
--------- ---------
Net cash (used in) provided by financing activities (67.0) 181.1
--------- ---------
Decrease in cash and cash equivalents (159.7) (512.3)
Cash and cash equivalents at January 1 6,524.4 5,712.3
--------- ---------
Cash and cash equivalents at June 30 $6,364.7 $5,200.0
========= =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
5
<PAGE> 6
BANC ONE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-------------------------
$(millions, except per share amounts) (unaudited) 1997 1996
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
BALANCE, BEGINNING OF PERIOD $9,868.0 $9,051.4
Net income 397.7 818.0
Exercise of stock options, net of shares purchased 15.6 (0.5)
Shares issued in acquisitions 538.4 710.5
Sales of stock to employee benefit plans and other 76.4 112.2
Cash dividends
Common ($.76 and $.68 per share for the six months ended (323.5) (295.6)
June 30, 1997 and 1996, respectively)
Series C Preferred ($1.75 per share for the six months (6.6) (8.5)
ended June 30, 1997 and 1996 respectively)
Preferred stock of pooled affiliate (20.6) (13.0)
Change in unrealized holding gains (losses) on securities
available for sale, net of tax 11.4 (131.7)
Purchase of treasury stock (707.3) (654.6)
------- -------
BALANCE, END OF PERIOD $9,849.5 $9,588.2
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
6
<PAGE> 7
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION
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 consolidated financial
position, results of operations and changes in cash flow. The notes to the
consolidated financial statements contained in the Annual Report on Form 10-K
for the year ended December 31, 1996 and the Quarterly Report on Form 10-Q for
the quarter ended March 31, 1997 should be read in conjunction with these
consolidated financial statements. The Corporation's Current Report on Form 8-K
filed July 14, 1997, as amended by Form 8-K/A filed August 13, 1997, contains
unaudited pro forma condensed combined financial information relating to
the First USA, Inc. ("First USA"), merger, as well as certain historical
consolidated financial statements of First USA. "The Corporation" is defined
as the Parent Company only. "BANC ONE" is defined as the Corporation and all
significant majority-owned subsidiaries. Certain prior period amounts have been
reclassified to be consistent with current presentation.
2. ACQUISITIONS
On June 27, 1997, the Corporation completed its acquisition of First USA located
in Dallas, Texas, resulting in the issuance of approximately 163 million shares
of the Corporation's common stock valued at $7.9 billion for all the outstanding
shares of First USA common stock, in a tax-free exchange. First USA is a
financial services company specializing in the credit card business with $24.6
billion in managed credit card receivables and 17.8 million cardholders at June
27, 1997. First USA had total assets of $10.9 billion and stockholders' equity
of $1.2 billion at June 27, 1997. The acquisition was accounted for as a pooling
of interests and therefore, these consolidated financial statements have been
restated for all periods presented to include the results of operations,
financial position and changes in cash flows of First USA. First USA had a
June 30 fiscal year end and therefore, adjustments have been made to conform
First USA's year end to BANC ONE's calendar year end. These adjustments did
not have a material impact on the consolidated financial statements.
The separate results of operations for BANC ONE and First USA were as follows
(in millions):
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
-----------------------------------------------------------------------------
1997 1996 1997 1996
---------------------------------- ----------------------------------
<S> <C> <C> <C> <C>
REVENUE:
BANC ONE $2,718.5 $2,488.2 $5,428.0 $4,975.6
First USA 471.8 390.3 893.6 813.4
----- ----- ----- -----
$3,190.3 $2,878.5 $6,321.6 $5,789.0
======== ======== ======== ========
NET INCOME:
BANC ONE $156.0 $354.9 $526.7 $700.8
First USA (140.2) 40.3 (129.0) 117.2
------- ---- ------- -----
$15.8 $395.2 $397.7 $818.0
===== ====== ====== ======
</TABLE>
On June 1, 1997, the Corporation acquired all of the outstanding shares in a tax
free exchange of Liberty Bancorp, Inc. ("Liberty"), a multi-bank holding company
headquartered in Oklahoma City, Oklahoma, resulting in the issuance of 11.9
million shares of the Corporation's common stock valued at $483.2 million. The
acquisition was accounted for as a purchase. Excess cost over net assets
purchased of $266.7 million was recorded in the second quarter of 1997 and will
be amortized over 25 years using the straight-line method. Liberty had total
assets of approximately $2.9 billion at May 31, 1997, and 29 banking offices
primarily in Oklahoma City and Tulsa. No effects of this acquisition are
included in the financial statements prior to the date of purchase and the pro
forma effect on prior periods results of operations was not material.
3. RESTRUCTURING CHARGES AND MERGER RELATED COSTS
In connection with the First USA merger and other strategic initiatives, BANC
ONE identified one-time restructuring charges and merger related costs of $467.4
million ($328.8 million after-tax), of which $337.3 million was recorded as a
restructuring charge and $130.1 million was recorded as additional provision for
credit losses.
The restructuring charge associated with the First USA merger totaled $240.9
million and consisted of: employee benefits, severance and stock option vesting
costs; professional services costs; premiums to redeem preferred securities of a
subsidiary trust; asset related write-downs and other merger related costs.
7
<PAGE> 8
The remaining $96.4 million restructuring charge related to costs associated
with the strategic initiatives to streamline the retail branch delivery
structure by consolidating approximately 200 banking centers over the next 18
months and the termination of the development of the Strategic Banking System, a
retail banking system.
The $130.1 million additional provision for credit losses primarily reflects the
reclassification of $2.0 billion of credit card loans previously classified as
held for sale to the loan and lease portfolio in connection with the effort to
consolidate the BANC ONE and First USA credit card master trusts, as well as an
additional provision to align the credit card charge-off policies of BANC ONE
and First USA.
4. COMMON AND TREASURY STOCK ACTIVITY
Effective June 26, 1997, the Corporation's Articles of Incorporation were
amended to increase the number of authorized shares of the Corporation's common
stock from 600 million to 950 million. In May 1997, the Corporation's Board of
Directors terminated the authorization to make further purchases of the
Corporation's common stock pursuant to the January 1997 and April 1996
authorizations to purchase up to 12 million and 10 million shares, respectively.
During second quarter 1997, 11.9 million shares of treasury stock were issued in
connection with the acquisition of Liberty. In addition, 8.8 million shares of
treasury stock were retired.
5. CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
Supplemental disclosure for the consolidated condensed statement of cash flows
are as follows: common stock issued and treasury stock reissued in purchase
acquisitions was $538.4 million and $710.5 million for the six months ended June
30, 1997 and 1996, respectively; and securities trades not settled decreased
$2.3 billion and $459.2 million for the six months ended June 30, 1997 and
1996, respectively. In connection with the First USA merger, $3.6 billion of
mortgage backed securities were reclassified from held to maturity to available
for sale during the 1997 second quarter.
6. NEW ACCOUNTING PRONOUNCEMENTS
BANC ONE adopted Statement of Financial Accounting Standards (SFAS) No. 125.
"Accounting for Transfers and Servicing of Financial Assets and Extinguishment
of Liabilities," effective 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 1997 second quarter and year to date
consolidated financial position and results of operations was not material.
SFAS 128 "Earnings Per Share" was issued in February 1997 and is effective for
financial statements issued for periods ending after December 15, 1997. The
statement specifies the computation, presentation and disclosure requirements
for earnings per share for entities with publicly held common stock. The impact
of the statement on BANC ONE's earnings per share is not expected to be
material.
In June 1997, the Financial Accounting Standards Board (FASB) issued SFAS No.
130 "Reporting Comprehensive Income". This Statement, which is effective for the
year ended December 31, 1998, requires the reporting of comprehensive income and
its components in an additional full set of general-purpose financial
statements. BANC ONE is reviewing the components of comprehensive income as
outlined by the Statement and plans to disclose the information as required.
In June 1997, the FASB issued SFAS No. 131 "Disclosures about Segments of an
Enterprise and Related Information." This Statement provides guidance for the
way public enterprises report information about operating segments in annual
financial statements and requires selected information about operating segments
in interim financial reports. It also requires certain related disclosures about
products and services, geographic areas and major customers. The segment and
other information disclosure are required for the year ended December 31, 1998.
8
<PAGE> 9
CONSOLIDATED QUARTERLY FINANCIAL DATA
<TABLE>
<CAPTION>
QUARTERS
---------------------------------------------------------------------
1997 1996
------------------------ --------------------------------------
$(millions) (unaudited) Second First Fourth Third Second
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PERIOD END BALANCES
Loans and leases (net of unearned income) $84,200.1 $79,051.0 $79,389.7 $76,584.3 $73,684.3
Earning assets 100,760.7 100,544.2 100,675.9 96,700.7 94,371.5
Allowance for loan and lease losses 1,362.2 1,222.4 1,197.7 1,131.5 1,100.5
Total assets 115,491.6 111,837.0 112,153.5 107,262.8 104,791.7
Total deposits 76,963.9 73,942.8 74,223.0 73,170.0 72,540.5
Long-term debt 9,972.2 7,571.0 6,827.8 5,080.2 4,847.8
Total stockholders' equity 9,849.5 9,634.3 9,868.0 9,569.3 9,588.2
CONDENSED INCOME STATEMENT
Net interest income (1) 1,366.2 1,371.6 1,360.9 1,292.2 1,272.4
Provision for credit losses 395.8 271.9 319.6 240.3 194.7
----- ----- ----- ----- -----
Net funds function (1) 970.4 1,099.7 1,041.3 1,051.9 1,077.7
Non-interest income
Investment management and advisory activities 76.2 74.2 77.1 71.8 67.7
Service charges on deposit accounts 174.8 166.0 170.3 165.8 161.2
Loan processing and servicing income 361.5 329.6 361.9 370.9 368.9
Securities gains 17.1 15.2 9.5 1.6 4.5
Other 200.9 222.2 377.7 227.7 169.9
----- ----- ----- ----- -----
Total non-interest income 830.5 807.2 996.5 837.8 772.2
Non-interest expense
Salaries and related costs 565.6 567.7 572.6 541.0 547.4
Other 1,158.6 741.3 802.4 716.0 690.6
------- ----- ----- ----- -----
Total non-interest expense 1,724.2 1,309.0 1,375.0 1,257.0 1,238.0
Taxable equivalent adjustment 13.8 13.8 15.2 15.8 16.2
---- ---- ---- ---- ----
Income before income taxes 62.9 584.1 647.6 616.9 595.7
Provision for income taxes 47.1 202.2 205.5 204.2 200.5
---- ----- ----- ----- -----
Net income $15.8 $381.9 $442.1 $412.7 $395.2
===== ====== ====== ====== ======
Net income available to common shareholders $12.6 $378.5 $438.5 $408.5 $391.0
===== ====== ====== ====== ======
<FN>
(1) Fully taxable equivalent basis.
</TABLE>
9
<PAGE> 10
CONSOLIDATED QUARTERLY FINANCIAL DATA (CONTINUED)
<TABLE>
<CAPTION>
QUARTERS
-------------------------------------------------------------------
1997 1996
----------------------- --------------------------------------
$(MILLIONS, EXCEPT PER SHARE AMOUNTS)(UNAUDITED) SECOND FIRST FOURTH THIRD SECOND
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
KEY RATIOS
Return on average assets (1) .06% 1.40% 1.63% 1.58% 1.54%
Return on average common equity (1) .51 16.30 18.49 17.49 17.17
Average common equity to assets 8.73 8.50 8.72 8.92 8.86
Tier I capital ratio 8.19 9.43 9.98 9.63 10.11
Total risk adjusted capital ratio 12.82 13.45 14.07 13.32 13.86
Leverage ratio 7.61 8.27 8.88 8.52 8.72
MARGIN ANALYSIS (1) (2) (3)
Interest income 9.40 9.42 9.37 9.22 9.07
Interest expense 3.99 3.89 3.85 3.79 3.64
---- ---- ---- ---- ----
Net interest income 5.41 5.53 5.52 5.43 5.43
Provision for credit losses (1.57) (1.10) (1.30) (1.01) (0.83)
------ ------ ------ ------ ------
Net funds function 3.84 4.43 4.22 4.42 4.60
CREDIT ANALYSIS
Net charge-offs to average loans and leases (1)(6) 1.42 1.24 1.31 1.10 .94
Ending allowance to loans and leases 1.62% 1.55% 1.51% 1.48% 1.49%
Non-performing assets: (5)
Total $450.1 $433.8 $435.4 $478.2 $458.2
Percent of total loans and leases (6) .53% .53% .54% .62% .62%
Loans delinquent 90 days or more: (4)
Total $494.2 $516.3 $483.9 $404.6 $330.8
Percent of total loans and leases (6) .58% .63% .60% .53% .45%
Allowance to non-performing loans 343.64% 326.68% 313.17% 271.70% 283.82%
PER SHARE DATA
Net income $.02 $.65 $.74 $.69 $.66
Cash dividends declared .38 .38 .34 .34 .34
Book value 16.62 16.74 16.93 16.42 16.26
Common stock price
High 50.13 49.25 47.88 41.38 37.75
Low 39.13 39.38 40.38 31.25 32.88
Close 48.44 39.75 43.00 41.00 34.00
Preferred Series C stock price:
High 96.50 94.50 91.25 80.00 72.63
Low 75.75 76.50 77.75 60.75 63.88
Close $93.00 $77.88 $83.00 $79.13 $66.75
SHARES TRADED (millions)
Common 125.6 133.4 54.3 60.7 50.7
Preferred Series C .5 .6 .9 2.1 .9
<FN>
(1) Ratios presented on an annualized basis.
(2) Fully taxable equivalent basis.
(3) As a percent of average earning assets.
(4) Excludes non-performing loans.
(5) Excludes certain smaller balance loans collectively evaluated for impairment.
(6) Includes loans held for sale.
</TABLE>
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<PAGE> 11
AVERAGE BALANCES, INCOME AND EXPENSE, YIELDS AND RATES (1)
<TABLE>
<CAPTION>
THREE MONTHS ENDED THREE MONTHS ENDED
JUNE 30, 1997 JUNE 30, 1996
---------------------------------------- ----------------------------------------
AVERAGE INCOME / YIELD / AVERAGE INCOME / YIELD /
$(MILLIONS) (UNAUDITED) BALANCES EXPENSE RATE BALANCES EXPENSE RATE
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Short-term investments $792.2 $11.2 5.67% $645.5 $9.6 5.98%
Loans held for sale 2,317.7 78.3 13.55 699.4 13.4 7.71
Securities: (3)
Taxable 16,137.3 264.8 6.58 17,865.0 286.2 6.44
Tax-exempt 1,465.9 30.3 8.29 1,729.7 35.6 8.28
------- ---- ------- ----
Total securities 17,603.2 295.1 6.72 19,594.7 321.8 6.61
Loans and leases: (2)
Commercial, financial and 21,183.5 447.5 8.47 19,386.9 399.5 8.29
agricultural
Real estate:
Commercial 6,007.2 136.6 9.12 6,098.2 135.0 8.90
Construction 3,892.8 93.9 9.68 3,093.9 76.7 9.97
Residential 14,760.7 351.4 9.55 11,206.2 258.3 9.27
Consumer, net 20,955.4 494.0 9.46 20,173.1 468.4 9.34
Credit card 11,306.6 420.6 14.92 11,297.6 402.9 14.34
Leases, net 2,421.9 45.0 7.45 1,972.0 36.9 7.53
------- ---- ------- ----
Total loans and leases 80,528.1 1,989.0 9.91 73,227.9 1,777.7 9.76
-------- ------- -------- -------
Total earning assets 101,241.2 2,373.6 9.40 94,167.5 2,122.5 9.07
Allowance for credit losses (1,217.6) (1,081.9)
Other assets 12,477.8 10,339.3
-------- --------
TOTAL ASSETS $112,501.4 $103,424.9
========== ==========
LIABILITIES:
Deposits:
Non-interest bearing demand $15,342.0 $14,073.7
Interest bearing demand 1,677.3 7.0 1.67 2,240.3 9.6 1.72
Savings and money market 30,826.6 269.6 3.51 29,197.9 235.8 3.25
Time deposits:
CDs less than $100,000 18,128.4 249.5 5.52 19,040.7 261.0 5.51
CDs $100,000 and over:
Domestic 5,817.1 80.1 5.52 5,406.6 47.8 3.56
Foreign 2,148.3 29.3 5.47 2,272.9 29.9 5.29
------- ---- ------- ----
Total deposits 73,939.7 635.5 3.45 72,232.1 584.1 3.25
Borrowed funds
Short-term 17,043.2 233.1 5.49 14,592.5 189.2 5.21
Long-term 8,776.4 138.8 6.34 4,726.1 76.8 6.54
------- ----- ------- ----
Total borrowed funds 25,819.6 371.9 5.78 19,318.6 266.0 5.54
-------- ----- -------- -----
Total interest bearing liabilities 84,417.3 1,007.4 4.79 77,477.0 850.1 4.41
Other liabilities 2,735.1 2,471.6
------- -------
TOTAL LIABILITIES 102,494.4 94,022.3
Preferred stock 188.9 243.0
Common stockholders' equity 9,818.1 9,159.6
------- -------
TOTAL LIABILITIES AND STOCKHOLDER'S $112,501.4 $103,424.9
========== ==========
EQUITY
NET INTEREST INCOME 1,366.2 5.41 1,272.4 5.43
Provision for credit losses (395.8) (1.57) (194.7) (.83)
------- ------ ------- -----
NET FUNDS FUNCTION $970.4 3.84% $1,077.7 4.60%
====== ===== ======== =====
<FN>
(1) Fully taxable equivalent basis (FTE).
(2) Non-accrual loans are included in loan balances. Interest income includes related fee income.
(3) Average securities balances are based on amortized historical cost, excluding SFAS 115 adjustments to fair value
which are included in other assets.
</TABLE>
11
<PAGE> 12
<TABLE>
<CAPTION>
SIX MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 1997 JUNE 30, 1996
- ------------------------------------------------ ------------------------------------------------------
Average Income / Yield / Average Income / Yield /
Balances Expense Rate Balances Expense Rate
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$818.4 $22.4 5.52% $618.3 $17.7 5.76%
1,871.6 122.5 13.20 644.7 24.2 7.55
16,687.8 542.0 6.55 17,960.7 580.9 6.50
1,519.8 62.2 8.25 1,731.5 72.2 8.39
------- ---- ------- ----
18,207.6 604.2 6.69 19,692.2 653.1 6.67
20,669.7 859.4 8.38 19,125.6 783.1 8.23
6,100.9 273.0 9.02 6,043.4 269.3 8.96
3,832.0 183.9 9.68 3,007.1 148.5 9.93
14,426.2 681.5 9.53 11,153.5 513.2 9.25
20,528.9 981.1 9.64 20,100.5 956.0 9.56
12,102.1 897.6 14.96 12,041.3 857.9 14.33
2,367.6 85.9 7.32 1,874.0 69.4 7.45
------- ---- ------- ----
80,027.4 3,962.4 9.98 73,345.4 3,597.4 9.86
-------- ------- -------- -------
100,925.0 4,711.5 9.41 94,300.6 4,292.4 9.15
(1,208.4) (1,080.3)
11,919.9 10,504.3
-------- --------
$111,636.5 $103,724.6
========== ==========
$14,967.4 $14,108.4
1,798.0 14.5 1.63 2,677.7 24.4 1.83
30,452.9 522.2 3.46 28,625.5 467.8 3.29
18,134.4 496.6 5.52 19,417.6 537.0 5.56
5,919.7 161.5 5.50 5,497.0 124.3 4.55
2,368.8 63.8 5.43 1,853.1 49.0 5.32
73,641.2 1,258.6 3.45 72,179.3 1,202.5 3.35
17,534.1 465.0 5.35 14,878.1 389.5 5.26
7,890.2 250.1 6.39 4,704.7 151.7 6.48
------- ----- ------- -----
25,424.3 715.1 5.67 19,582.8 541.2 5.56
-------- ----- -------- -----
84,098.1 1,973.7 4.73 77,653.7 1,743.7 4.52
2,758.0 2,499.7
101,823.5 94,261.8
194.9 245.2
9,618.1 9,217.6
------- -------
$111,636.5 $103,724.6
========== ==========
2,737.8 5.47 2,548.7 5.44
(667.7) (1.33) (382.8) (.82)
------- ------ ------- -----
$2,070.1 4.14% $2,165.9 4.62%
======== ===== ======== =====
</TABLE>
12
<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 and in the BANC
ONE CORPORATION Annual Report on Form 10-K for the year ended December 31, 1996
(the "1996 Form 10-K") and the Quarterly Report on Form 10-Q for the quarter
ended March 31, 1997. The Corporation's Current Report on Form 8-K filed July
14, 1997, as amended by Form 8-K/A filed August 13, 1997, which contains
unaudited pro forma condensed combined financial information relating to the
First USA, Inc. ("First USA") merger, as well as certain historical consolidated
financial statements of First USA, should also be reviewed in connection
herewith. For purposes of this report, the term "the Corporation" is defined as
the Parent Company only and "BANC ONE" is defined as the Corporation and all
significant majority-owned subsidiaries.
Management's discussion and analysis contains forward-looking statements that
are provided to assist in the understanding of anticipated future financial
performance. However, such performance involves risks and uncertainties which
may cause actual results to differ materially from those in such statements. For
a discussion of certain factors that may cause such forward-looking statements
to differ materially from actual results, see the 1996 Form 10-K.
On June 27, 1997, the Corporation completed its acquisition of First USA,
located in Dallas, Texas. The acquisition was accounted for as a pooling of
interests and, accordingly, the information included in this report presents the
combined results of BANC ONE and First USA as if the two companies had operated
as a combined entity for all periods presented.
ACQUISITIONS
First USA was acquired in a tax-free exchange of stock, whereby the Corporation
issued 1.1659 shares of its common stock (163 million shares in total) for each
outstanding share of First USA common stock. First USA, a financial services
company specializing in the credit card business, had $24.6 billion in managed
credit card receivables and 17.8 million card holders at June 27, 1997. First
USA had total assets of $10.9 billion and stockholders' equity of $1.2 billion
at June 27, 1997. First USA has traditionally produced high growth in earnings.
Management estimates that this transaction will be dilutive to BANC ONE's
earnings per common share in 1997, neutral in 1998 and accretive to earnings per
common share thereafter.
On June 1, 1997, the Corporation completed its tax free acquisition of Liberty
Bancorp, Inc. (Liberty), a multi-bank holding company headquartered in Oklahoma
City, Oklahoma. Liberty had approximately $2.9 billion in assets at May 31,
1997, and 29 banking offices primarily in Oklahoma City and Tulsa. Under the
terms of the agreement, the Corporation issued 1.175 shares of its common stock
(11.9 million shares in total) for each outstanding share of Liberty common
stock. The transaction was accounted for using the purchase method of
accounting.
RESTRUCTURING CHARGES AND MERGER RELATED COSTS
In connection with the First USA merger and other strategic initiatives, BANC
ONE identified one-time restructuring charges and merger related costs of $467.4
million ($328.8 million after-tax), of which $337.3 million was recorded as a
restructuring charge and $130.1 million was recorded as additional provision for
credit losses.
The restructuring charge associated with the First USA merger totaled $240.9
million and consisted of: employee benefits, severance and stock option vesting
costs; professional services costs; premiums to redeem preferred securities of a
subsidiary trust; asset related write-downs and other merger related costs.
The remaining $96.4 million restructuring charge related to costs associated
with the strategic initiatives to streamline the retail branch delivery
structure by consolidating approximately 200 banking centers over the next 18
months and the termination of the development of the Strategic Banking System,
a retail banking system.
The $130.1 million additional provision for credit losses primarily reflects the
reclassification of $2.0 billion of credit card loans previously classified as
held for sale to the loan and lease portfolio in connection with the effort to
consolidate the BANC ONE and First USA credit card master trusts, as well as an
additional provision to align the credit card charge-off policies of BANC ONE
and First USA.
As the integration of the BANC ONE and First USA credit card operations
commences, management continues to believe the synergies created by the combined
credit card operations will result in expense reductions and revenue
13
<PAGE> 14
enhancements of approximately $335 million by 1999. In addition, the benefits of
the restructuring and strategic initiatives are expected to improve pretax
income by approximately $90 million by 1999.
RESULTS OF OPERATIONS
OVERVIEW
Net income for the three and six months ended June 30, 1997 was $15.8 million
and $397.7 million, respectively, compared with $395.2 million and $818.0
million for the same 1996 periods. Both 1997 periods include the $328.8 million
after tax impact of the one-time restructuring charges and merger related costs.
Excluding these charges, net income for the three and six months ended June 30,
1997 would have been $344.6 million and $726.5 million, respectively.
Net interest income improved on both a quarter and year-to-date basis as
compared with prior-year periods primarily as a result of a 7% increase in
average earning assets. The favorable net interest income impact was offset by
increased non-interest expense, primarily related to accelerated 1997
year-to-date marketing expense and a higher provision for credit losses.
NET INTEREST INCOME / NET INTEREST MARGIN
Net interest income on a fully taxable equivalent (FTE) basis increased 7% on
both a quarter and year-to-date basis to $1.4 billion and $2.7 billion for the
three and six months ended June 30, 1997, respectively, compared with $1.3
billion and $2.5 billion for the same periods in 1996.
Average earning assets increased to $101.2 billion and $100.9 billion for
the three and six months ended June 30, 1997, respectively, compared to
$94.2 billion and $94.3 billion for the same periods in 1996. The increases
were primarily due to higher average loans and leases of $7.3 billion and
$6.7 billion for the three and six months ended June 30, 1997, respectively.
Average commercial loans increased $1.8 billion and $1.5 billion for the three
and six months ended June 30, 1997, respectively. The increase was due to the
strong economic environment which has fueled commercial loan growth throughout
the industry, along with the positive impact of more focused sales efforts
reflecting the Corporation's shift to line of business management.
Average residential real estate loans increased $3.6 billion and $3.3 billion
for the three and six month periods, respectively, primarily due to higher home
equity loan volumes as a result of marketing efforts, as well as loans purchased
through the broker network.
Including credit card loans previously classified as held for sale, average
credit card loans were $13.2 billion and $13.6 billion for the three and six
month 1997 periods, respectively, reflecting increases of $1.9 billion and $1.5
billion from the comparable 1996 periods, primarily as a result of First USA
growth.
Funding for average earning asset growth came from increases in both average
borrowings and deposits. Average borrowings increased $6.5 billion and $5.8
billion for the three and six months ended June 30, 1997, respectively, compared
with the same 1996 periods, while average deposits increased $1.7 billion and
$1.5 billion over the same time periods.
It is management's practice to analyze its financial performance on a "managed"
portfolio basis, in addition to analyzing information as reported under
generally accepted accounting principles. The income effect of securitizing
loans results in removing these loans from the balance sheet and recording a
gain based upon the present value of net interest income and fees less estimated
credit losses and servicing fees on the securitized loans.
Managed credit card statistics include loans sold in credit card securitization
transactions and the Company's on-balance sheet portfolio. The Company's
consolidated statements of income and balance sheets are adjusted to eliminate
the effect of securitizing credit card loans to analyze the data on a "managed"
portfolio basis. "As reported" information is derived from consolidated
financial statements which have been prepared in conformity with generally
accepted accounting principles and includes loans held for sale. Managed loan
data includes loans sold in credit card securitization transactions and the
Company's on-balance sheet loan portfolio. The following table depicts the
Company's key financial data as a result of securitizing credit card loans for
the three months ended June 30, 1997 and June 30, 1996.
14
<PAGE> 15
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30,
------------------------- --- -------------------------
1997 1996
------------------------- -------------------------
AS REPORTED MANAGED AS REPORTED MANAGED
- -----------------------------------------------------------------------------------------------
$(MILLIONS)
<S> <C> <C> <C> <C>
INCOME STATEMENT STATISTICS:
Net interest income - fully $1,366.2 $1,931.9 $1,272.4 $1,736.4
taxable equivalent
Provision for credit losses 395.8 730.1 194.7 442.7
Noninterest income:
Loan Servicing income 297.5 6.1 279.1 6.1
Credit card processing income 44.5 106.4 63.7 139.6
Other 488.5 481.5 429.4 450.7
----- ----- ----- -----
Total noninterest income 830.5 594.0 772.2 596.4
Noninterest expense 1,724.2 1,726.1 1,238.0 1,256.9
Taxable equivalent adjustment 13.8 13.8 16.2 16.2
---- ---- ---- ----
Income before tax (a) $62.9 $55.9 $595.7 $617.0
===== ===== ====== ======
BALANCE SHEET AND OTHER
STATISTICS:
Average credit card loans $13,240.6 $35,123.1 $11,297.6 $30,450.2
End of period credit card loans 13,515.6 36,151.9 11,396.1 30,999.5
Earning asset yield 9.40% 10.65% 9.07% 10.20%
Cost of interest bearing 4.79% 5.05% 4.41% 4.74%
liabilities
Credit card delinquencies over
30 days as a percentage of
ending credit card balances 4.68% 4.76% 3.94% 4.25%
Net credit card charge offs as
a percentage of average credit
card balances 6.36% 6.22% 4.20% 4.83%
<FN>
(a) The difference in income before tax on a reported and managed basis
reflects the effect of the gain recognized on excess servicing when credit
card loans are securitized and the subsequent
amortization of this asset in future periods.
</TABLE>
NON-INTEREST INCOME
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
----------------------------------------- ----------------------------------------
JUNE 30, JUNE 30, INCREASE JUNE 30, JUNE 30, INCREASE
$(MILLIONS) 1997 1996 (DECREASE) 1997 1996 (DECREASE)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Investment management and advisory
activities $76.2 $67.7 $8.5 $150.4 $130.3 $20.1
Service charges on deposit accounts 174.8 161.2 13.6 340.8 318.0 22.8
Loan processing and servicing income:
Mortgage banking 19.5 26.1 (6.6) 39.8 45.9 (6.1)
Credit card and merchant processing 44.5 63.7 (19.2) 82.5 134.2 (51.7)
fees
Loan servicing income 297.5 279.1 18.4 568.8 536.8 32.0
----- ----- ---- ----- ----- ----
Total loan processing and servicing 361.5 368.9 (7.4) 691.1 716.9 (25.8)
income
Securities gains 17.1 4.5 12.6 32.3 5.6 26.7
Other 200.9 169.9 31.0 423.1 357.9 65.2
----- ----- ---- ----- ----- ----
Total non-interest income $830.5 $772.2 $58.3 $1,637.7 $1,528.7 $109.0
====== ====== ===== ======== ======== ======
</TABLE>
Investment management and advisory activities income increased 13% and 15% for
the three and six months ended June 30, 1997, respectively, compared with the
same 1996 periods, due primarily to a 21% increase in investment
15
<PAGE> 16
assets managed for customers to $ 47.4 billion, 8% of which relates to the
acquisition of Liberty. The acquisition of Liberty did not have a significant
impact on the increase in income due to the acquisition occurring late in the
second quarter.
The increase in service charges on deposit accounts of $13.6 million and $22.8
million for the quarter and year to date ending June 30, 1997, respectively, as
compared to the prior-year periods reflects an increase in commercial customers
account analysis service fees, as well as higher fees charged on overdrafts.
Credit card and merchant processing fees declined for both the three and six
months ended June 30, 1997 due to the sale by First USA in December 1996 of a
portion of its investment in a merchant processing subsidiary. As a result of
the sale, net income from this subsidiary is now recorded using the equity
accounting method and is classified as other income. This change resulted in a
decrease in fee income of $23.2 million and $45.5 million for the three and six
months ended June 30, 1997, respectively, as compared to the prior-year periods.
Loan servicing income increased by $18.4 million and $32.0 million for the
quarter and year to date periods ending June 30, 1997, respectively, compared
with the same 1996 periods. The increases reflect a growth of 13% and 18% for
the quarter and year-to-date 1997 periods in average securitized loan balances
and higher yields, partially offset by increased charge-offs on securitized
credit card loans.
The increase in securities gains for the quarter and year to date periods is
primarily due to the first and second quarter 1997 sale of government
mortgage-backed securities.
Other non-interest income increased $31.0 million in second quarter 1997 from
the 1996 second quarter as a result of a $15.4 million gain on the sale of
mortgage loan servicing rights and the income from an investment in a merchant
processing subsidiary which is now accounted for under the equity method. In
addition to the above, the increase in the six months ended June 30, 1997 income
compared with year-ago period reflects higher venture capital gains of $43.7
million.
NON-INTEREST EXPENSE
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
----------------------------------- -----------------------------------
JUNE 30 JUNE 30, INCREASE JUNE 30 JUNE 30, INCREASE
$(MILLIONS) 1997, 1996 (DECREASE) 1997, 1996 (DECREASE)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Salaries and related costs $565.6 $547.4 $18.2 $1,133.3 $1,091.0 $42.3
Net occupancy expense, exclusive of 48.9 51.4 (2.5) 100.1 100.0 .1
depreciation
Equipment expense 28.9 30.9 (2.0) 59.1 61.0 (1.9)
Taxes other than income and payroll 25.4 25.2 .2 48.5 49.8 (1.3)
Depreciation and amortization 110.8 118.7 (7.9) 219.4 225.5 (6.1)
Outside services and processing 192.7 164.2 28.5 384.2 319.5 64.7
Marketing and development 200.3 100.1 100.2 330.3 195.1 135.2
Communication and transportation 104.7 93.4 11.3 199.1 181.7 17.4
Restructuring 337.3 0.0 337.3 337.3 0.0 337.3
Other 109.6 106.7 2.9 221.9 206.4 15.5
----- ----- --- ----- ----- ----
Total non-interest expense $1,724.2 $1,238.0 $486.2 $3,033.2 $2,430.0 $603.2
======== ========= ====== ======== ======== ======
</TABLE>
Total non-interest expense increased $486.2 million and $603.2 million for three
and six months ended June 30, 1997, respectively, compared with the same 1996
periods. These increases reflect the $337.3 million restructuring charge
previously discussed as well as increased costs associated with the ongoing
consolidation and standardization initiatives (Project One) of $6.5 million and
$47.2 million for the three and six month periods, respectively. Also, the
impact of the Liberty acquisition contributed $12.2 million to both the quarter
and year to date increases.
In addition to the above items, marketing and development costs increased $100.2
million and $135.2 million for the three and six months ended June 30, 1997,
respectively, compared with the same 1996 periods. These increases reflect the
stepped-up First USA business development activities, which consisted of the
introduction of more than 45 new lifestyle programs and two major platinum card
mailings. These efforts resulted in a record 1.8 million new accounts being
opened during second quarter 1997. The level of marketing and business
development expenses during the second half of 1997 are expected to return to
more normal levels.
Increases in outside services and processing costs for the quarter and
year-to-date 1997 periods compared with the same 1996 periods were primarily the
result of higher contract labor costs, credit investigation fees, system
support, processing and statement fees in order to sustain the growth discussed
above.
16
<PAGE> 17
INCOME TAXES
The provision for income taxes was 38.5% of pretax income for the six months
ended June 30, 1997 compared with 33.6% for the same period in 1996. The
increase in the effective tax rate was a result of a $25 million income tax
provision charge related to certain nondeductible one-time restructuring charges
and merger related costs, which were expensed in second quarter 1997.
BALANCE SHEET ANALYSIS
Securities
Total securities at June 30, 1997 were $15.2 billion, a decrease of $4.0 billion
from December 31, 1996. This decrease primarily reflected the sale of $5.7
billion of securities available for sale, reflecting the ongoing strategy to
use the proceeds from the sale of lower yielding investment securities to fund
higher yielding loans and leases. Also, in connection with the First USA
merger, $3.6 billion of mortgage backed securities were reclassified from
held to maturity to available for sale. The following provides a summary of
securities at June 30, 1997 and December 31, 1996:
<TABLE>
<CAPTION>
JUNE 30, 1997 DECEMBER 31, 1996
---------------------------------- -----------------------------------
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 $129.4 $129.0 $133.5 $135.1
Mortgage and asset-backed securities: 53.6 45.7 3,555.2 3,556.5
Tax exempt 553.4 575.6 685.4 714.1
Other 23.7 23.6 23.8 23.7
---- ---- ---- ----
Total securities held to maturity $760.1 $773.9 $4,397.9 $4,429.4
====== ====== ======== ========
SECURITIES AVAILABLE FOR SALE:
United States treasury and agencies $4,237.8 $4,204.6 $4,334.7 $4,312.8
Mortgage and asset-backed securities:
Government 6,462.9 6,499.8 6,729.9 6,791.4
Other 1,807.8 1,790.3 2,074.4 2,056.3
Tax exempt 1,008.9 1,015.5 973.5 980.5
Other 894.6 895.3 591.3 592.8
----- ----- ----- -----
Total securities available for sale $14,412.0 $14,405.5 $14,703.8 $14,733.8
========= ========= ========= =========
</TABLE>
Loans and Leases
At June 30, 1997, total loans and leases were $84.2 billion, a $4.8 billion
increase from December 31, 1996. Including loans held for sale, total loans and
leases increased $3.7 billion , or 9%, on an annualized basis from December 31,
1996 levels. The reduction in loans held for sale at June 30, 1997 reflected the
second quarter 1997 reclassification of $2.0 billion credit card loans
previously classified as loans held for sale to the loan and lease portfolio in
connection with the effort to consolidate the First USA and Banc One credit card
master trusts. A summary of the components of loans and leases at June 30 ,1997
and December 31, 1996 is as follows:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
$(MILLIONS)(AS OF END OF PERIOD) 1997 1996
- -------------------------------------------------------------------------------
<S> <C> <C>
Commercial, financial and agricultural $22,115.0 $20,232.2
Real estate:
Commercial 6,028.3 6,429.4
Construction 3,968.4 3,602.0
Residential 15,484.8 13,917.0
Consumer, net 20,559.7 19,459.1
Credit card 13,515.6 13,423.5
Leases, net 2,528.3 2,326.5
------- -------
Total loans and leases, net $84,200.1 $79,389.7
========= =========
</TABLE>
17
<PAGE> 18
In addition to the growth in end-of-period loans, the managed loan portfolio
also increased from $103.4 billion at December 31, 1996 to $109.8 billion at
June 30, 1997. Managed loans represent end-of-period loans and leases, including
loans held for sale, and off-balance sheet securitized loans adjusted to
eliminate any impact from acquisitions and/or dispositions. During 1997,
end-of-period managed loans increased at an annualized rate of 12% from December
31, 1996. On this same basis wholesale loans increased 12%, consumer loans
excluding credit card loans increased 17%, and credit card loans increased 7%.
Deposits
Total deposits at June 30, 1997 were $77.0 billion, an increase of $2.7 billion
from December 31, 1996. The acquisition of Liberty contributed $2.3 billion of
this increase.
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
(MILLIONS)(AS OF END OF PERIOD) 1997 1996
- -------------------------------------------------------------------------------
<S> <C> <C>
Demand deposits:
Non-interest bearing $18,191.6 $16,340.6
Interest bearing 1,791.0 2,243.2
Money market and savings 31,049.9 29,434.6
Time 25,931.4 26,204.6
-------- --------
Total deposits $76,963.9 $74,223.0
========= =========
</TABLE>
Borrowings
Long term borrowings increased $3.1 billion from December 31, 1996 to $10.0
billion at June 30, 1997. During the first quarter of 1997 the Corporation
established a medium term note facility and issued $750 million of medium term
notes due between 2000 and 2002. In April 1997, the Corporation issued $500
million of subordinated debentures due 2027 and $400 million of subordinated
notes due 2007.
Treasury Stock
During second quarter 1997, 11.9 million shares of treasury stock were issued in
connection with the acquisition of Liberty. At June 30, 1997 the Corporation had
no treasury stock.
CREDIT QUALITY
The process for monitoring loan quality includes detailed, monthly analysis of
delinquencies, non-performing assets and potential problem loans. Management
extensively monitors credit through appraisals, assessment of the financial
condition of borrowers and avoidance of loan concentrations. In addition to
these factors, historically-based migration methodologies and methods used to
predict future losses are used to analyze the appropriate level of the
allowance for credit losses for the loan and lease portfolio. Further, each
portfolio is reviewed to determine if additional subjective reserves are
necessary. This subjective review is systematic for each portfolio, with
consideration given to the current trends in the portfolio, projection of future
results, changes in underwriting of the product, and results of recent loan
review or internal audit examinations. Management believes that its methodology
of determining the allowance for credit losses and projection of future economic
and business trends is reflected in the current level of the overall allowance.
Annualized total net charge-offs for the second quarter of 1997 were 1.42% of
average loans compared with 1.24% in the first quarter 1997. In second quarter
1997, First USA adopted a more conservative 180 day charge-off policy on credit
cards. Excluding this change and the impact of credit card accounting policy
changes made in the first quarter 1997 relating to the timing of recognition of
bankruptcy losses by BANC ONE, net charge-offs would have been 1.39% in both
first and second quarters of 1997. Loans delinquent 90 days or more as a
percentage of ending loans and leases decreased to .58% at June 30, 1997 from
.63% at March 31, 1997.
On a managed portfolio basis, credit card net charge-offs were 6.22% for the
1997 second quarter compared with 5.63% in first quarter 1997. Excluding the
above mentioned accounting changes, credit card net charge-offs would have been
6.33% and 5.95% for the 1997 second and first quarters, respectively. Also on a
managed portfolio basis, credit card loans delinquent 90 days or more decreased
to 2.11% of ending credit card loans at June 30, 1997 from 2.39% at March 31,
1997.
The following table summarizes net charge-offs expressed as an annualized
percentage of average loans and leases and loans delinquent 90 days or more
expressed as a percentage of period-end loans. Delinquency and net charge-off
trends over time are a reflection of a number of factors including credit
quality of the loan portfolio,
18
<PAGE> 19
general economic conditions and the successful results of portfolio management
techniques including collection strategies.
<TABLE>
<CAPTION>
LOANS DELINQUENT
NET CHARGE-OFFS(1)(4) 90 DAYS OR MORE (2) (4)
------------------------------------- ------------------------------------------
THREE MONTHS ENDED
-------------------------------------
JUNE 30, 1997 JUNE 30, 1996 JUNE 30, 1997 DECEMBER 31, 1996
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Wholesale (3) (.02)% .02% .28% .18%
Real estate, residential .25% .15% .19% .25%
Consumer, net 1.44% .96% .41% .49%
Credit card (5) 6.36% 4.20% 2.05% 2.21%
Leases, net .13% (.04)% .47% .07%
Total loans and leases (5) 1.42% .94% .58% .61%
<FN>
(1) Ratios are presented on an annualized basis as a percent of average balances.
(2) Ratios presented exclude non-performing loans and are expressed as a percent of ending balances.
(3) Wholesale loans include commercial, financial, agricultural, commercial real estate and construction real estate loans.
(4) Includes loans held for sale.
(5) Net charge-offs for the three months ended June 30, 1997 reflect the change relating to credit card bankruptcy charge-offs.
Without this change, net charge-offs for credit card and total loans and leases would have been 6.19% and 1.39%,
respectively.
</TABLE>
Allowance for Credit Losses
The following table summarizes activity in the allowance for credit losses:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
----------------------------------
$(MILLIONS) 1997 1996
- ------------------------------------------------------------------------------------------
<S> <C> <C>
BALANCE, BEGINNING OF PERIOD $1,197.7 $1,008.0
Allowance associated with acquisitions and other 37.9 60.1
Provision for credit losses 667.7 382.8
Total charge-offs (697.8) (474.3)
Recoveries 156.7 123.9
----- -----
Net charge-offs (541.1) (350.4)
------- -------
BALANCE, END OF PERIOD $1,362.2 $1,100.5
======== ========
</TABLE>
The allowance for credit losses at June 30, 1997 totaled $1.4 billion and
represented 1.62% of ending loans and leases, compared with 1.51% at December
31, 1996. As previously discussed, a $130.1 million additional provision for
credit losses was taken during the 1997 second quarter as a result of the
reclassification of credit card loans and to align the credit card charge-off
policies of BANC ONE and First USA. The allowance for credit losses expressed as
a percentage of non-performing loans is another measure of the adequacy of the
allowance for credit losses. The June 30, 1997 allowance for credit losses
represented 344% of non-performing loans, up from 313% at December 31, 1996. It
is management's view that the allowance for credit losses at June 30, 1997 was
adequate and consistent with the composition of the portfolio and credit quality
trends.
INTEREST RATE RISK MANAGEMENT
BANC ONE employs two methodologies to measure interest rate risk sensitivity:
(1) the Earnings at Risk (EAR) method is used to measure the change in
forecasted after tax net income; and (2) the Value at Risk (VAR) method is used
to measure the change in market value of equity (defined as the present value of
all future expected cash flows of currently held assets, liabilities and
off-balance sheet items). The impact of actual historical rate volatility and/or
scenario rate movement analysis can be depicted through both of these
measurements.
To measure EAR and VAR risks, BANC ONE analyzes the 24 month trailing movement
(volatility) of market rates to calculate how much rates would have to move over
the next 90 days to capture in excess of 99% of statistically probable
movements. As a result, the probability of the measured risk positions being
realized or exceeded are
19
<PAGE> 20
statistically less than 1%. BANC ONE then compares this statistically calculated
rate change to a minimum benchmark change of an immediate and parallel 100 basis
points. EAR and VAR is measured using the larger of the statistically calculated
rate change or the minimum immediate and parallel 100 basis point benchmark
change.
As of June 30, 1997, based on the minimum benchmark change of an immediate and
parallel 100 basis points, earnings for the next 12 months are modeled to
decrease 2.0% in the up rate scenario while earnings are modeled to increase
2.5% in the down rate scenario. Given the same assumption of the minimum
benchmark change of an immediate and parallel 100 basis points, the market value
of equity would decline 1.6% in the up rate scenario while market value would
increase 1.0% in the down rate scenario.
In addition, a forecasted earnings impact is also modeled assuming a gradual 100
basis point change in interest rates over the coming 12-month period (25 basis
points each quarter). On this basis, at June 30, 1997, earnings over the next
12-month period were estimated to decrease 1.4% if rates rose and increase 1.3%
if rates declined, as compared on the same basis at March 31, 1997 to a decrease
of 2.1% if rates rise and an increase of 2.3% if rates declined.
Trading Risk:
Trading risk is measured according to the maximum adverse change in value of all
trading positions within a 10 day period based on three standard deviations of
historical market volatility. As of June 30, 1997, the Trading Value at Risk was
$5.1 million.
Liquidity Risk
Due to BANC ONE's capital, size and high credit quality ratings, the Corporation
has access to substantial and diverse sources of liquidity. Core deposits,
representing approximately 55% of funding, remain the primary source of
liquidity, and are generated by a geographically diverse retail network of
affiliate banks in 12 states. Approximately 26% of funding is supported through
a variety of wholesale markets. Additionally, 19% of funding is generated by
asset securitizations, which is viewed as a growing source of reliable and
efficient funding.
Credit Risk for Capital Markets Activities
There were no past due amounts or reserves for possible credit losses at June
30, 1997 related to off-balance sheet investment product transactions, nor were
there any charge-offs during the three months ended June 30, 1997. Customer cap
and swap agreements are created to accommodate the needs of commercial loan
customers. BANC ONE enters into offsetting transactions with third parties and
has prudent controls on transaction size, term and customer disclosure
guidelines. Customer contracts outstanding, excluding offsetting transactions,
had notional amounts of $2.2 billion at June 30, 1997.
Following are the estimated maturities and weighted average fixed rates of
off-balance sheet investment products by type. A key assumption in the maturity
information below is that future variable rates move as indicated by the forward
interest rate curve in existence at June 30, 1997. To the extent that interest
rates move in a fashion other than indicated in the forward interest rate curve
at June 30, 1997, the maturity information will change.
20
<PAGE> 21
<TABLE>
<CAPTION>
MATURITIES OF OFF-BALANCE SHEET INVESTMENT
PRODUCTS AT JUNE 30, 1997 (1) (2) ENDING BALANCE AT
------------------------------------------------------------ --------------------------
2002- JUNE 30, DECEMBER 31,
$(MILLIONS) 1997 1998 1999 2000 2001 2006 2007+ 1997 1996
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Receive fixed swaps:
Notional value $3,833 $2,323 $3,175 $1,710 $1,050 $2,466 $1,700 $16,257 $12,727
Weighted average receive rate 5.32% 5.97% 6.48% 6.32% 6.08% 6.76% 7.18 6.21% 5.90%
Receive fixed amortizing swaps:
Notional value 355 492 76 150 1,073 2,056
Weighted average receive rate 4.94% 5.31% 7.26% 5.54% 5.36% 5.35%
Pay fixed swaps:
Notional value (87) (1,322) (368) (508) (1) (19) (2,305) (2,108)
Weighted average pay rate 8.62% 6.13% 6.46% 6.54% 6.75% 6.75% 6.37% 6.36%
Net receive fixed position $4,101 $1,493 $2,883 $1,352 $1,049 $2,447 $1,700 $15,025 $12,675
Notional value of basis swaps 1,640 754 248 50 126 2,818 4,729
Notional value of purchased caps 440 1,004 16 1 3 9 1,473 1,973
Notional value-other (3) $1,575 $300 $600 $2,475 2,056
<FN>
(1) Maturities are based on estimated future interest rates from the forward interest curve at June 30, 1997.
(2) Variable receive and pay interest rates, which are based primarily on three month LIBOR or prime, are not
included in the table.
(3) Other off-balance sheet investment products include forward - starting
contracts, floors, options and futures. Customer transactions of $2.2
billion and $1.6 billion at June 30, 1997 and December 31, 1996,
respectively, have been excluded.
</TABLE>
<TABLE>
<CAPTION>
NET UNREALIZED
GAIN (LOSS)
------------------------------------
JUNE 30 DECEMBER 31,
$(MILLIONS) 1997, 1996
- ---------------------------------------------------------------------------------
<S> <C> <C>
Receive fixed swaps ($19) ($28)
Receive fixed amortizing swaps (4) (6)
Pay fixed swaps (3) (13)
Purchased caps (6) (8)
Basis swaps 0 (6)
Other (1) 10
--- --
Total ($33) ($51)
===== =====
</TABLE>
The 1996 Form 10-K provided certain fair value information based on interest
rates at December 31, 1996. While the net unrealized 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 fixed rate liabilities has
increased.
Off-balance sheet investment products are used to manage interest rate risk and
the impact on net interest income reflects the cost or benefit as a result of
these products. The net impact of off-balance sheet investment products was a
decrease in net interest income of $1.3 million and 3.1 million for the three
and six months ended June 30, 1997 compared with a reduction of $13.4 million
and $35.7 million for the three and six months ended June 30, 1996. However,
these amounts alone are not an indication of the effectiveness of such
instruments, as the on balance sheet instruments hedged move in the opposite
direction. In addition, the cost or benefit from hedging transactions is
significantly impacted by customer preferences, the historical interest rate
environment in which the instruments were acquired and current market rates.
21
<PAGE> 22
BANC ONE CORPORATION AND SUBSIDIARIES
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Inapplicable.
ITEM 2. CHANGE IN SECURITIES
a. Effective June 26, 1997, the Registrant's Articles of
Incorporation were amended to increase the number of
authorized shares of the Registrant's common stock, no par
value ($5 stated value) per share ("Common Stock"), from
600,000,000 to 950,000,000,
b. Inapplicable.
c. On June 27, 1997, Banc One Capital Corporation, an indirect
wholly owned subsidiary of the Registrant, acquired certain
assets and the business of Venture Marketing Corporation in
exchange for 84,220 shares of Common Stock. The issuance of
the Common Stock in this transaction was deemed to be exempt
from registration under the Securities Act of 1933, as amended
(the "Securities Act"), in reliance on Section 4(2) of the
Securities Act and Regulation D promulgated thereunder as a
transaction by an issuer not involving any public offering.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Inapplicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Annual Meeting of Shareholders held on April 15, 1997
-----------------------------------------------------
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 15, 1997.
b. Inapplicable.
c. Election of Directors
<TABLE>
<CAPTION>
Shares Voted
-----------------------------------------------------
Name For Withheld
---- --- --------
<S> <C> <C>
Bennett Dorrance 340,893,801 2,683,287
Charles E. Exley, Jr. 340,910,022 2,667,067
E. Gordon Gee 340,646,437 2,930,652
John R. Hall 340,967,507 2,609,581
Laban P. Jackson, Jr. 340,821,134 2,755,955
John W. Kessler 340,749,120 2,827,969
Richard J. Lehmann 340,998,995 2,578,094
John B. McCoy 340,864,065 2,713,024
John G. McCoy 340,834,967 2,742,121
Thekla R. Shackelford 340,993,472 2,583,616
Alex Shumate 340,934,130 2,642,958
Frederick P. Stratton, Jr. 341,009,585 2,567,504
Robert D. Walter 341,016,342 2,560,747
</TABLE>
d. Inapplicable.
22
<PAGE> 23
Special Meeting of shareholders held on June 27, 1997
-----------------------------------------------------
a. The matters discussed in paragraph (c) below were submitted to
a vote of security holders at the Special Meeting of
Shareholders of the Registrant held on June 27, 1997.
b. Inapplicable.
c. (1) Approval of an agreement and plan of merger between the
Registrant and First USA, Inc., pursuant to which First USA,
Inc. will be merged with and into the Registrant, and the
transactions contemplated thereby, including the issuance of
up to 162,246,644 shares of Common Stock.:
<TABLE>
<CAPTION>
Shares Voted
----------------------------------------------------------------
Against/ Abstentions/
For Withheld Broker Non-votes
--- -------- ---------------
<S> <C> <C>
298,570,535 5,923,923 5,371,808
</TABLE>
(2) Approval of Amendment of the Registrant's Amended Articles
of Incorporation to increase the number of shares of Common
Stock authorized to 950,000,000 shares:
<TABLE>
<CAPTION>
Shares Voted
----------------------------------------------------------------
Against/ Abstentions/
For Withheld Broker Non-votes
--- -------- ---------------
<S> <C> <C>
299,280,635 6,946,034 3,639,597
</TABLE>
d. Inapplicable
ITEM 5. OTHER INFORMATION
Inapplicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits.
Exhibit 10.8 Revised and Restated BANC ONE CORPORATION 1989
Stock Incentive Plan
Exhibit 10.14 Revised and Restated BANC ONE CORPORATION 1995
Stock Incentive Plan
Exhibit 11 Statement Regarding Computation of Earnings
per Common Share
Exhibit 12 Statement Regarding Computation of Ratio of
Earnings to Fixed Charges
Exhibit 27 Financial Data Schedules
b. Reports on Form 8-K
The following reports on Form 8-K were filed by BANC ONE
during the quarter ended June 30, 1997:
Current Report on Form 8-K filed April 17, 1997 (Items 5
and 7).
Current Report on Form 8-K filed April 24, 1997 (Items 5
and 7).
There are no agreements with respect to long-term debt of the Registrant to
authorize securities in an amount which exceeds 10% of the total assets of the
Registrant and its subsidiaries on a consolidated basis. The Registrant agrees
to furnish a copy of any agreement with respect to long-term debt of the
Registrant to the Securities and Exchange Commission upon request.
23
<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
August 14, 1997 /s/ Bobby L. Doxey
- ------------------------------------ ---------------------------------
Date Bobby L. Doxey
Chief Accounting Officer
24
<PAGE> 1
Exhibit 10.8
REVISED AND RESTATED
BANC ONE CORPORATION
1989 STOCK INCENTIVE PLAN
SECTION 1. Establishment, Purpose, and Effective Date of Plan
1.1 Establishment. BANC ONE CORPORATION, a Delaware corporation,
(the "Corporation") hereby establishes the "1989 STOCK INCENTIVE PLAN" (the
"Plan") for key employees of the Corporation and its subsidiaries and for
directors of the Corporation who are not employees of the Corporation or any of
its subsidiaries. The Plan permits the grant of Director Stock Options to such
directors and the grant of Stock-Options, Stock Appreciation Rights, Restricted
Stock Awards, Performance Shares, and Performance Awards to such employees.
1.2 Purpose. The purpose of the Plan is to advance the interests of
the Corporation by encouraging and providing for the acquisition of an equity
interest in the Corporation by directors of the Corporation and key employees
of the Corporation and its subsidiaries and by enabling the Corporation to
attract and retain the services of such directors and key employees upon whose
judgment, interest, and special effort the successful conduct of its operations
is largely dependent.
1.3 Effective Date. The Plan shall become effective as of January
18, 1989, the date of its adoption by the Board of Directors of the
Corporation, subject to ratification by the shareholders of the Corporation
within twelve months of the adoption date.
SECTION 2. Definitions
2.1 Definitions. Whenever used herein, the following terms shall
have their respective meanings set forth below:
(a) "Award" means any Option, Stock Appreciation Right, Restricted
Stock Awards, Performance Share, or Performance Award.
(b) "Board" means the Board of Directors of the Corporation.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Committee" means the Committee of the Corporation's Board of
Directors which shall consist of two or more non- employee directors, within
the meaning set forth in Rule 16b-3 of the Securities Exchange Act of 1934,
appointed by the Board.
(e) "Corporation" means BANC ONE CORPORATION, a bank holding company
under the Bank Holding Company Act of 1956 headquartered in Columbus, Ohio.
(f) "Disability" means disability as determined by the Committee.
(g) "Director Stock Option" means an Option granted to an Eligible
Director. Each Director Stock Option shall be a nonqualified stock option
whose grant is not intended to fall under the provisions of Section 422A of the
Code.
(h) "Eligible Director" means any statutory director of the
Corporation who is not an employee of the Corporation or any of its
subsidiaries.
I-1
<PAGE> 2
(i) "Fair Market Value" means the closing price of the Stock as
reported by the New York Stock Exchange on a particular date. In the event
that there are no Stock transactions on such date, the Fair Market Value shall
be determined as of the immediately preceding date on which there were Stock
transactions.
(j) "Option" means the right to purchase Stock at a stated price for a
specified period of time. For purposes of the Plan an Option, other than a
Director Stock Option, may be either (i) an incentive stock option within the
meaning of Section 422A of the Code or (ii) a nonqualified stock option whose
grant is intended not to fall under the provisions of Section 422A.
(k) "Option Agreement" means an agreement entered into between the
Corporation and an employee or an Eligible Director in the form prescribed by
the Committee.
(l) "Option Price" means the price at which each share of Stock
subject to an Option may be purchased, determined in accordance with Section
8.4 herein.
(m) "Participant" means any individual, other than an Eligible
Director, designated by the Committee to participate in the Plan pursuant to
Section 3.1 herein.
(n) "Period of Restriction" means the period during which the transfer
of shares of Restricted Stock and/or Performance Shares is restricted pursuant
to Section 10 and/or Section 11 of the Plan.
(o) "Performance Awards" means awards of cash granted to a Participant
pursuant to Section 12 of the Plan.
(p) "Performance Objective" shall mean the performance measure(s) and
the achievement goals of the Corporation or one or more of its subsidiaries set
by the Committee.
(q) "Performance Period" shall mean two or more successive fiscal
years of the Corporation with respect to which a Performance Share or
Performance Award may be earned pursuant to this Plan. Performance Periods
shall begin with the first day of the fiscal year in which a Performance Share
or Performance Award is granted. The length of a Performance Period shall be
at the discretion of the Committee. For each Performance Share and Performance
Award, no more than one Performance Period shall begin in any one fiscal year
of the Corporation.
(r) "Performance Shares" means Stock granted to a Participant pursuant
to Section 11 of the Plan. Each Performance Share shall be the equivalent of
one share of Stock.
(s) "Restricted Stock" means Stock granted to a Participant pursuant
to Section 10 of the Plan.
(t) "Restricted Stock Agreement" means an agreement entered into
between the Corporation and the Employee in the form prescribed by the
Committee.
(u) "Retirement," "Normal Retirement," and "Early Retirement" means
termination of employment as defined in the BANC ONE CORPORATION Retirement
Plan.
(v) "Stock" means the common stock of the Corporation, without par
value.
(w) "Stock Appreciation Right" and "SAR" means the right to receive a
cash payment from the Corporation equal to the excess of the Fair Market Value
of a share of Stock at the date of exercise over a specified price fixed by the
Committee which shall not be less than 100% of the Fair Market Value of the
Stock on the date of grant. In the case of a Stock Appreciation Right which is
granted in conjunction with an Option, the specified price shall be the Option
exercise price.
I-2
<PAGE> 3
2.2 Gender and Number. Except when otherwise indicated by the
context, words in the masculine gender when used in the Plan shall include the
feminine gender, the singular shall include the plural, and the plural shall
include the singular.
SECTION 3. Eligibility and Participation
3.1 Eligibility and Participation. Participants in the Plan shall be
selected by the Committee from among those employees of the Corporation and its
subsidiaries who are recommended for participation by the Chief Executive
Officer of the Corporation and who, in the opinion of the Committee, are in a
position to contribute materially to the Corporation's continued growth,
development, and long-term financial success. Persons serving on the Committee
shall not be eligible to be a Participant.
3.2 Eligible Directors. Eligible Directors are entitled to
participate in the Plan solely with respect to the grant of Director Stock
Options and may not receive any other Award under the Plan. The selection of
Eligible Directors is not subject to the discretion of the Committee. Persons
serving on the Committee who are Eligible Directors may receive grants of
Director Stock Options.
SECTION 4. Administration
4.1 Administration. The Committee shall be responsible for the
administration of the Plan. The Committee, by majority action thereof, is
authorized to interpret the Plan, to prescribe, amend, and rescind rules and
regulations relating to the Plan, to provide for conditions and assurances
deemed necessary or advisable to protect the interests of the Corporation, and
to make all other determinations necessary or advisable for the administration
of the Plan, but only to the extent not contrary to the explicit provisions of
the Plan. Determinations, interpretations, or other actions made or taken by
the Committee pursuant to the provisions of the Plan shall be final and binding
and conclusive for all purposes and upon all persons whomsoever.
SECTION 5. Stock Subject to Plan
5.1 Number. The total number of shares of Stock subject to issuance
under the Plan may not exceed six million three hundred thousand (6,300,000)
subject to adjustment upon occurrence of any of the events indicated in
Subsection 5.3. Of this total number, up to six million (6,000,000) shares of
Stock may be granted in Restricted Stock or in common stock as a payout medium
to Participants under the Plan and up to three hundred thousand (300,000)
shares may be issued pursuant to the exercise of Director Stock Options. The
shares to be delivered under the Plan may consist, in whole or in part, of
authorized but unissued Stock or issued stock reacquired and held as treasury
Stock not reserved for any other purpose.
5.2 Unused Stock. In the event any shares of Stock that are subject
to an Option which, for any reason, expires or is terminated unexercised as to
such shares, or any shares of Stock subject to a Restricted Stock or
Performance Share grant made under the Plan are reacquired by the Corporation
pursuant to the Plan, such shares again shall become available for issuance
under the Plan except as provided in Section 9.4.
5.3 Adjustment in Capitalization. In the event that subsequent to
the date of adoption of the Plan by the Board the shares of Stock should as a
result of a stock split, stock dividend, combination or exchange of shares,
exchange for other securities, reclassification, reorganization, redesignation,
merger, consolidation, recapitalization or other such change, be increased or
decreased or changed into or exchanged for a different number or kind of shares
of Stock or other securities of the Corporation or of another corporation, then
(a) there shall automatically be substituted for each share of Stock subject to
an unexercised Option (in whole or in part) granted under the Plan and each
share of Stock available for additional grants of Options under the Plan the
number and kind of shares of Stock or other securities into which each
outstanding share of Stock shall be changed or for which each such shares shall
be exchanged, (b) the Option Price shall be increased or decreased
proportionately so that the aggregate purchase price for the securities subject
to the Option shall remain the same as immediately prior to such event and (c)
the Board shall make such other adjustments to the securities subject to
Options and the provisions of the Plan and Option Agreements as may be
appropriate and equitable.
I-3
<PAGE> 4
Any such adjustment may provide for the elimination of fractional shares. In
such event, the Committee also shall have discretion to make appropriate
adjustments in the number and type of shares subject to Restricted and
Performance Share grants then outstanding under the Plan pursuant to the terms
of such grants or otherwise.
SECTION 6. Stock Appreciation Rights Subject to Plan
6.1 Unexercised Rights. In the event any Stock Appreciation Rights
expire unexercised, such Stock Appreciation Rights again shall become available
for issuance under the Plan.
6.2 Adjustment in Capitalization. In the event of any change in the
outstanding shares of Stock that occurs after ratification of the Plan by the
shareholders of the Corporation by reason of a Stock dividend or split,
recapitalization, merger, consolidation, combination, exchange of shares, or
other similar corporate change, the Committee shall make appropriate
adjustments in the number of outstanding Stock Appreciation Rights and the
related grant values.
SECTION 7. Duration of Plan
The Plan shall remain in effect, subject to the Board's right to
earlier terminate the Plan pursuant to Section 16 hereof, until all Stock
subject to it shall have been purchased or acquired pursuant to the provisions
hereof. Notwithstanding the foregoing, no Option, Stock Appreciation Right,
Restricted Stock, Performance Share or Performance Award may be granted under
the Plan on or after the tenth (10th) anniversary of the Plan's effective date.
SECTION 8. Stock Options
8.1 Grant of Options Other than Director Stock Options. Subject to
the provisions of Sections 5 and 7, Options other than Director Stock Options
may be granted to Participants at any time and from time to time as shall be
determined by the Committee. The Committee shall have complete discretion in
determining the number of Options granted to each Participant. The Committee
also shall determine, whether an Option is to be an incentive stock option
within the meaning of Code Section 422A, or a nonqualified stock option whose
grant is intended not to fall within the provisions of Section 422A. However,
in no event shall the aggregate Fair Market Value (determined at the date of
grant) of the stock for which incentive stock options are first exercisable in
a particular calendar year exceed $100,000, computed in accordance with Section
422A(b)(7) of the Code. An incentive stock option shall not be granted to any
person who owns, directly or indirectly, Stock possessing more than 10% of the
total combined voting power of all classes of Stock of the Corporation.
Nothing in this Section 8 shall be deemed to prevent the grant of nonqualified
stock options in excess of the maximum established by Section 422A of the Code.
8.2 Grant of Director Stock Options. Subject to the provisions of
Sections 5 and 7, Director Stock Options shall be granted to Eligible Directors
as provided in this Section 8.2 and the Committee shall have no discretion with
respect to any matters set forth in this Section 8.2.
(a) Vesting. Each Director Stock Option shall become exercisable on
and after the first anniversary of the date of the grant.
(b) Number of Shares. Director Stock Options shall be granted as
follows:
(i) Each Eligible Director on the effective date of the Plan
shall automatically be granted a Director Stock Option for 3,000
shares of Stock.
(ii) Each other person who is elected or appointed to serve as
a director of the Corporation after the effective date of the Plan and
who is an Eligible Director shall, upon his initial appointment or
election as an Eligible Director, automatically be granted a Director
Stock Option for 3,000 shares of Stock;
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<PAGE> 5
(iii) Commencing immediately after the adjournment of the
Corporation's annual meeting of shareholders (an "Annual Meeting") in
1990 and immediately after the adjournment of the Annual Meeting each
year thereafter, each Eligible Director who was an Eligible Director
immediately preceding such Annual Meeting and who has been elected as
a director at such Annual Meeting shall automatically be granted a
Director Stock Option for 1,000 shares of Stock if, but only if, the
return on common equity of the Corporation as set forth in the
Corporation's annual report to shareholders for the immediately
preceding fiscal year is equal to or greater than 10%.
8.3 Option Agreement. Each Option shall be evidenced by an Option
Agreement that shall specify the type of Option granted, the Option Price, the
duration of the Option, the number of shares of Stock to which the Option
pertains, and such other provisions as the Committee shall determine.
8.4 Option Price. No Option granted pursuant to the Plan shall have
an Option Price that is less than the Fair Market Value of the Stock on
the date the Option is granted.
8.5 Duration of Options. Each Option, other than Director Stock
Options, shall expire at such time as the Committee shall determine at the time
it is granted; provided, however, that no Option, other than incentive stock
options within the meaning of Section 422A of the Code, shall be exercisable
later than twenty years and one day from the date of its grant and no such
incentive stock option shall be exercisable more than ten years and one day
from the date of grant. No Director Stock Option may be exercisable later than
twenty years and one day from the date of its grant.
8.6 Exercise of Options. Options granted under the Plan other than
Director Stock Options shall be exercisable at such times and be subject to
such restrictions and conditions as the Committee shall in each instance
approve, which need not be the same for all Participants.
8.7 Payment. The Option Price upon exercise of any Option shall be
payable to the Corporation in full either (i) in cash or its equivalent, or
(ii) by tendering shares of previously acquired Stock having a Fair Market
Value at the time of exercise equal to the total Option Price, or (iii) by a
combination of (i) and (ii). The proceeds from such a payment shall be added
to the general funds of the Corporation and shall be used for general corporate
purposes. As soon as practicable after receipt of full payment (including the
necessary tax withholding), the Corporation shall deliver to the Participant or
the Eligible Director, as the case may be, Stock certificates in an appropriate
amount based upon the number of Options exercised, issued in the name of the
Participant or the Eligible Director, as the case may be.
8.8 Restrictions on Stock Transferability. The Committee shall
impose such restrictions on any shares of Stock acquired pursuant to the
exercise of an Option under the Plan as it may deem advisable, including,
without limitation, restrictions under applicable Federal securities law, under
the requirements of any stock exchange upon which such shares of Stock are then
listed and under any blue sky or state securities laws applicable to such
shares.
8.9 Termination of Employment. If the employment of a Participant
terminates, other than pursuant to paragraphs (a) through (d) of this Section,
all non-vested awards shall be canceled immediately, unless the Award Agreement
provides otherwise. Vested awards shall remain subject to the terms of the
Award Agreement, except to the extent modified by the provisions of paragraphs
(a) through (d) of this Section.
(a) Retirement Under the Retirement Plan. When a Participant's
employment terminates as a result of Retirement with management approval in
accordance with the terms of the BANC ONE CORPORATION Retirement Plan, the
Committee (in the form of an amended Award Agreement or otherwise) may permit
awards to continue in effect beyond the date of Retirement in accordance with
the applicable Award Agreement and the exercisability and vesting of any award
may be accelerated.
(b) Resignation in the Best Interest of the Corporation. When a
Participant resigns from the Corporation and, in the judgment of the chief
executive officer or other senior officer designated by the Committee, the
acceleration and/or continuation of outstanding awards would be in the best
interest of the Corporation, the Committee may (i) authorize, where
appropriate, the acceleration and/or continuation of all or any part of awards
granted prior to such
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termination, and (ii) permit the exercise, vesting and payment of such awards
for such period as may be set forth in the applicable Award Agreement, subject
to earlier cancelation pursuant to Section 8.10 or at such time as the
Committee shall deem the continuation of all or any of the Participant's awards
to be not in the Corporation's best interest.
(c) Death or Disability of a Participant.
(i) In the event of a Participant's death, the
Participant's estate or beneficiaries shall have a period specified in
the Award Agreement within which to receive or exercise any
outstanding award held by the Participant under such terms as may be
specified in the applicable Award Agreement.
(ii) In the event a participant is deemed by the Corporation
to be disabled and eligible for benefits pursuant to the terms of the
Corporation's Long-Term Disability Plan, any successor plan, or any
predecessor plan, awards and rights to any such awards may be paid to
or exercised by the Participant, if legally competent, or a committee
or other legally designated guardian or representative if the
Participant is legally incompetent by virtue of such disability.
(iii) After the death or disability of a Participant, the
Committee may in its sole discretion at any time (1) terminate
restrictions in Award Agreements; (2) accelerate any or all
installments and rights; and (3) instruct the Corporation to pay the
total of any accelerated payments in a lump sum to the Participant,
the Participant's estate, beneficiaries or representative -
notwithstanding that, in the absence of such termination of
restrictions or acceleration of payments, any or all of the payments
due under the awards may ultimately have become payable to other
beneficiaries.
(iv) In the event of uncertainty as to interpretation of or
controversies concerning this paragraph (c) of this Section 8.9, the
Committee's determination shall be binding and conclusive.
(d) Sale of a Subsidiary. In the event of the sale of a subsidiary,
or any portion thereof, the Committee may in its sole discretion at any time
(1) terminate restrictions in Award Agreements; (2) accelerate any or all
installments and rights; and (3) instruct the Corporation to pay the total of
accelerated payments in a lump sum to affected Participants.
8.10 Cancellation and Rescission of Awards. Unless the Award
Agreement specifies otherwise, the Committee may cancel any unexpired, unpaid,
or deferred awards at any time if the Participant is in violation of or not in
compliance with all other applicable provisions of the Plan, or the applicable
Award Agreement.
8.11 Termination of Eligible Director Shares. In the event that an
Eligible Director ceases to be an Eligible Director for any reason, the rights
under any then outstanding Director Stock Option granted pursuant to the Plan
which are exercisable as of the date he ceases to be an Eligible Director shall
terminate upon the date determined as provided in Section 8.5, above, or three
months after such cessation date, whichever first occurs; provided, however,
that if he ceases to be an Eligible Director by reason of death, the
three-month period shall be extended to the sooner of twelve (12) months and
five (5) days or the expiration date of the Director Stock Option.
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8.12 Nontransferability of Options. No Option granted under the Plan
may be sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated, otherwise than by will or by the laws of descent and
distribution. All Options granted to a Participant or an Eligible Director
under the Plan shall be exercisable during his lifetime only by such
Participant or Eligible Director.
SECTION 9. Stock Appreciation Rights
9.1 Grant of Stock Appreciation Rights. Subject to the provisions
of Sections 6 and 7, Stock Appreciation Rights may be granted to Participants
at any time and from time to time as shall be determined by the Committee. An
SAR may be granted, in the discretion of the Committee, in any of the following
forms:
(a) In lieu of Options,
(b) In addition to Options,
(c) Upon lapse of Options, or
(d) Independent of Options.
9.2 Exercise of SARs in Lieu of Options. SARs granted in lieu of
Options may be exercised for all or part of the shares of Stock subject to the
related Option upon the surrender of the right to exercise an equivalent number
of Options. The SAR may be exercised only with respect to the shares of Stock
for which its related Option is then exercisable. SARs granted in lieu of
Options will lapse in the event and to the extent that the related Option is
exercised.
9.3 Exercise of SARs in Addition to Options. SARs granted in addition
to Options shall be deemed to be exercised upon the exercise of the related
Options.
9.4 Exercise of SARs Upon Lapse of Options. SARs granted upon lapse
of Options shall be deemed to have been exercised upon the lapse of the related
Options as to the number of shares of Stock subject to the Options.
9.5 Exercise of SARs Independent of Options. SARs granted
independent of Options may be exercised upon whatever terms and conditions the
Committee, in its sole discretion, imposes upon the SARs.
9.6 Payment of SAR Amount. Upon exercise of the SAR, the holder
shall be entitled to receive payment of an amount (subject to Section 9.8
below) determined by multiplying:
(a) The difference between the Fair Market Value of a share of
Stock at the date of exercise over the price fixed by the Committee at
the date of grant, by
(b) The number of shares with respect to which the SAR is
exercised.
9.7 Form and Timing of Payment. At the discretion of the Committee,
payment for SARs may be made in cash or stock, or in a combination thereof. If
payment is made in Stock, the value of such Stock shall be the Fair Market
Value determined as of the date of exercise.
9.8 Limit on Appreciation. At the time of grant, the Committee may
establish, in its sole discretion, a maximum amount per share which will be
payable upon exercise of an SAR.
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9.9 Rule 16b-3 Requirements. Notwithstanding any other provision of
the Plan, the Committee may impose such conditions on exercise of an SAR
(including, without limitation, the right of the Committee to limit the time of
exercise to specified periods) as may be required to satisfy the requirements
of Rule 16b-3 (or any successor rule), under the Securities Exchange Act of
1934.
9.10 Term of SAR. The term of an SAR granted under the Plan shall
not exceed ten years and one day.
9.11 Termination of Employment. In the event the employment of a
Participant is terminated by reason of Death, Disability, Retirement, or any
other reason, any SARs outstanding shall terminate in the same manner as
specified for Options under Sections 8.9 and 8.10 herein.
9.12 Nontransferability of SARs. No SAR granted under the Plan may
be sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated, otherwise than by will or by the laws of descent and
distribution. Further, all SARs granted to a Participant under the Plan shall
be exercisable during his lifetime only by such Participant.
SECTION 10. Restricted Stock Awards.
10.1 Grant of Restricted Stock. Subject to the provisions of
Sections 5 and 7, the Committee, at any time and from time to time, may award
shares of Restricted Stock under the Plan to such Participants and in such
amounts as it shall determine. Each Restricted Stock Award shall be evidenced
by a Restricted Stock Agreement that shall specify the Period or Periods of
Restriction, the number of Restricted Stock shares awarded, and such other
provisions as the Committee shall determine.
10.2 Transferability. Except as provided in this Section 10, the
shares of Restricted Stock awarded hereunder may not be sold, transferred,
pledged, assigned, or otherwise alienated or hypothecated for such period of
time as shall be determined by the Committee and shall be specified in the
Restricted Stock Agreement, or upon earlier satisfaction of other conditions as
specified by the Committee in its sole discretion and set forth in the
Restricted Stock Agreement.
10.3 Other Restrictions. The Committee shall impose such other
restrictions on any shares of Restricted Stock awarded pursuant to the Plan as
it may deem advisable including, without limitation, restrictions under
applicable federal or state securities or tax laws, and may legend the
certificates representing Restricted Stock to give appropriate notice of such
restrictions.
10.4 Certificate Legend. In addition to any legends placed on
certificates pursuant to Section 10.3 hereof, each certificate representing
shares of Restricted Stock granted pursuant to the Plan shall bear a legend
which is comparable to the following:
"The sale or other transfer of this certificate or the shares of stock
represented by this certificate, whether voluntary, involuntary, or by
operation of law, is subject to certain restrictions on transfer and
other terms and conditions set forth in the BANC ONE CORPORATION 1989
Stock Incentive Plan and a Restricted Stock Agreement dated
, 19 . A copy of the Plan and such Restricted Stock
Agreement may be obtained from the Secretary of BANC ONE CORPORATION,
100 East Broad Street, Columbus, Ohio 43271-0261."
10.5 Removal of Restrictions. Except as otherwise provided in this
Section 10, shares of Restricted Stock covered by each Restricted Stock Award
made under the Plan shall become freely transferable by the Participant after
the last day of the Period of Restriction. Once the shares are released from
the restrtictions, the Participant shall be entitled to have the legend
required by Section 10.4 removed from his Stock certificates.
10.6 Voting Rights. During the Period of Restriction, Participants
holding shares of Restricted Stock awarded hereunder may exercise full voting
rights with respect to those shares.
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10.7 Dividends and Other Distributions. During the Period of
Restriction, Participants holding shares of Restricted Stock awarded hereunder
shall be entitled to receive all dividends and other distributions paid with
respect to those shares while they are so held. If any such dividends or
distributions are paid in shares of Stock, the shares shall be subject to the
same restrictions on transferability as the shares of Restricted Stock with
respect to which they were paid.
10.8 Termination of Employment. If the employment of a Participant
terminates other than pursuant to paragraphs (a) through (d) of this Section,
all non-vested awards shall be canceled immediately, unless the Award Agreement
provides otherwise. Vested awards shall remain subject to the terms of the
Award Agreement, except to the extent modified by the provisions of paragraphs
(a) through (d) of this Section.
(a) Retirement Under the Retirement Plan. When a participant's
employment terminates as a result of Retirement with management approval in
accordance with the terms of the BANC ONE CORPORATION Retirement Plan, the
Committee (in the form of an amended Award Agreement or otherwise) may permit
awards to continue in effect beyond the date of Retirement in accordance with
the applicable Award Agreement and the exercisability and vesting of any Award
may be accelerated.
(b) Resignation in the Best Interest of the Corporation. When a
Participant resigns from the Corporation and, in the judgment of the chief
executive officer or other senior officer designated by the Committee, the
acceleration and/or continuation of outstanding awards would be in the best
interest of the Corporation, the Committee may (i) authorize, where
appropriate, the acceleration and/or continuation of all or any part of awards
granted prior to such termination, and (ii) permit the exercise, vesting and
payment of such awards for such period as may be set forth in the applicable
Award Agreement, subject to earlier cancelation pursuant to Section 10.9 or at
such time as the Committee shall deem the continuation of all or any of the
Participant's awards to be not in the Corporation's best interest.
(c) Death or Disability of a Participant.
(i) In the event of a Participant's death, the
Participant's estate or beneficiaries shall have a period specified in
the Award Agreement within which to receive or exercise any
outstanding award held by the Participant under such terms as may be
specified in the applicable Award Agreement.
(ii) In the event a participant is deemed by the Corporation
to be disabled and eligible for benefits pursuant to the terms of the
Corporation's Long-Term Disability Plan, any successor plan, or any
predecessor plan, awards and rights to any such awards may be paid to
or exercised by the Participant, if legally competent, or a committee
or other legally designated guardian or representative if the
Participant is legally incompetent by virtue of such disability.
(iii) After the death or disability of a Participant, the
Committee may in its sole discretion at any time (1) terminate
restrictions in Award Agreements; (2) accelerate any or all
installments and rights; and (3) instruct the Corporation to pay the
total of any accelerated payments in a lump sum to the Participant,
the Participant's estate, beneficiaries or representative -
notwithstanding that, in the absence of such termination of
restrictions or acceleration of payments, any or all of the payments
due under the awards may ultimately have become payable to other
beneficiaries.
(iv) In the event of uncertainty as to interpretation of or
controversies concerning this paragraph (c) of this Section 10.8, the
Committee's determination shall be binding and conclusive.
(d) Sale of a Subsidiary. In the event of the sale of a subsidiary,
or any portion thereof, the Committee may in its sole discretion at any time
(1) terminate restrictions in Award Agreements; (2) accelerate any or all
installments and rights; and (3) instruct the Corporation to pay the total of
accelerated payments in a lump sum to affected Participants.
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10.9 Cancellation and Rescission of Awards. Unless the Award
Agreement specifies otherwise, the Committee may cancel any unexpired, unpaid,
or deferred awards at any time if the Participant is in violation of or not in
compliance with all other applicable provisions of the Plan, or the applicable
Award Agreement.
SECTION 11. Performance Shares
11.1 Grant of Performance Shares. Subject to the provisions of
Sections 5 and 7, the Committee, at any time and from time to time, may grant
Performance Shares to such Participants and in such amounts as it shall
determine. Each grant of Performance Shares shall be in writing.
11.2 Performance Period. The period over which Performance Shares
may be earned shall begin on the first day of the fiscal year in which a grant
occurs. The length of the Performance Period for each grant shall be
determined by the Committee, in its sole discretion, but shall not be less than
two years.
11.3 Performance Measurement. At the beginning of each Performance
Period, Performance Objectives shall be established by the Chief Executive
Officer of the Corporation subject to Committee approval. The degree of
attainment of such Performance Objectives shall determine the number of the
Performance Shares payable at the end of the Performance Period, in accordance
with a schedule established by the Chief Executive Officer and approved by the
Committee at the beginning of the Performance Period.
The Committee may adjust the Performance Objectives during the
Performance Period if it is determined that changes in business conditions have
materially and unduly influenced the Corporation's ability to meet the
Performance Objectives.
11.4 Payment of Awards. All payments pursuant to Performance Share
grants shall be made as soon as practicable following the end of the applicable
Performance Period based upon the degree of attainment of the Performance
Objectives. Payments shall be made in Stock. The Committee shall review all
calculations of actual Performance Objective accomplishments and shall make any
adjustments in the computations to recognize material extraordinary or
nonrecurring items if, in the judgment of the Committee, the effect of such
adjustments is equitable and in conformity with the purposes of the Plan.
11.5 Termination of Employment Due to Retirement. In the event that
a Participant terminates his employment with the Corporation because of Normal
Retirement during the Performance Period, the Participant shall be entitled to
a prorated award of Performance Shares as of the most recently completed full
fiscal year of the Performance Period. Payments of Performance Shares
determined in this manner shall be multiplied by a fraction, the numerator of
which is the number of full months which have elapsed since the commencement of
the Performance Period, and the denominator of which is the number of full
months in the particular Performance Period. Payment of Performance Shares in
this case shall be made as soon as practicable following the end of the fiscal
year of termination.
In the event that a Participant terminates his employment with the
Corporation because of Early Retirement, any Performance Shares outstanding at
the date of such Early Retirement automatically shall be forfeited; provided,
however, that the Committee may, in its sole discretion, determine a prorated
value for the Participant's then outstanding Performance Shares as it deems
appropriate. Payment of Performance Shares in this case shall be made as soon
as practicable following the end of the fiscal year of termination.
11.6 Termination of Employment Due to Death or Disability. In the
event a Participant terminates his employment with the Corporation because of
Death or Disability during the Performance Period, the Participant shall be
entitled to a prorated award of Performance Shares as of the most recently
completed full fiscal year of the Performance Period. Payments of Performance
Shares determined in this manner shall be multiplied by a fraction, the
numerator of which is the number of full months which have elapsed since the
commencement of the Performance Period, and the denominator of which is the
number of full months in the particular Performance Period. Payment of
Performance Shares in this case shall be made as soon as practicable following
the end of the fiscal year of termination.
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11.7 Termination of Employment for Reasons Other Than
Death,Disability or Retirement. In the event that a Participant terminates his
employment with the Corporation for any reason other than those set forth in
Sections 1 1.5 and 11.6 hereof during the Performance Period, then any
Performance Shares still outstanding at the date of such termination
automatically shall be forfeited; provided, however, that, in the event of an
involuntary termination of the employment of a Participant by the Corporation
the Committee may, in its sole discretion, waive the automatic forfeiture of
any or all such Performance Shares as it deems appropriate, and pay a prorated
award.
11.8 Nontransferability of Performance Shares. No Performance Shares
granted under the Plan may be sold, transferred, pledged, assigned, or
otherwise alienated or hypothecated, otherwise than by will or by the laws of
descent and distribution until the termination of the applicable Performance
Period. All rights with respect to Performance Shares granted to a Participant
under the Plan shall be exercisable during his lifetime only by such
Participant.
SECTION 12. Performance Awards
12.1 Grant of Performance Awards. Subject to the provisions of
Sections 5 and 7, the Committee, at any time and from time to time, may grant
Performance Awards under the Plan to Such Participants and in such amounts as
it shall determine. Each grant of Performance Awards shall be in writing.
12.2 Performance Period. The period over which Performance Awards
may be earned shall begin on the first day of the fiscal year in which a grant
occurs. The length of the Performance Period for each grant shall be
determined by the Committee in its sole discretion but shall not be less than
two years.
12.3 Performance Measurement. At the beginning of each Performance
Period, Performance Objectives shall be established by the Chief Executive
Officer of the Corporation subject to Committee approval. The degree of
attainment of such Performance Objectives shall determine the value of the
Performance Awards at the end of the Performance Period, in accordance with a
schedule established by the Chief Executive Officer and approved by the
Committee at the beginning of the Performance Period.
The Committee may adjust the Performance Objectives during the
Performance Period if it is determined that changes in business conditions have
materially and unduly influenced the Corporation's ability to meet the
Performance Objectives.
12.4 Payment of Awards. All payments pursuant to Performance Award
grants shall be made as soon as practicable following the end of the applicable
Performance Period based upon the degree of attainment of the Performance
Objectives. Payments shall be made in cash. The Committee shall review all
calculations of actual Performance Objective accomplishments and shall make any
adjustments in the computations to recognize material extraordinary or
nonrecurring items if, in the judgment of the Committee, the effect of such
adjustments is equitable and in conformity with the purposes of the Plan.
12.5 Termination of Employment Due to Retirement. In the event that
a Participant terminates his employment with the Corporation because of Normal
Retirement during the Performance Period, the Participant shall be entitled to
a prorated award of Performance Awards as of the most recently completed full
fiscal year of the Performance Period. Payment of Performance Awards
determined in this manner shall be multiplied by a fraction, the numerator of
which is the number of full months which have elapsed since the commencement of
the Performance Period, and the denominator of which is the number of full
months in the particular Performance Period. Payment of Performance Awards in
this case shall be made as soon as practicable following the end of the fiscal
year of termination.
In the event that a Participant terminates his employment with the Corporation
because of Early Retirement, the Committee may, in its sole discretion,
determine a prorated value for the Participant's then outstanding Performance
Awards as it deems appropriate. Payment of Performance Awards in this case
shall be made as soon as practicable following the end of the fiscal year of
termination.
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12.6 Termination of Employment Due to Death or Disability. In the
event a Participant terminates his employment with the Corporation because of
Death or Disability during the Performance Period, the Participant shall be
entitled to a prorated award of Performance Awards as of the most recently
completed full fiscal year of the Performance Period. Payments of Performance
Awards determined in this manner shall be multiplied by a fraction, the
numerator of which is the number of full months which have elapsed since the
commencement of the Performance Period, and the denominator of which is the
number of full months in the particular Performance Period. Payment of
Performance Awards in this case shall be made as soon as practicable following
the end of the fiscal year of termination.
12.7 Termination of Employment for Reasons Other Than Death,
Disability, or Retirement. In the event that a Participant terminates his
employment with the Corporation for any reason other than those set forth in
Sections 12.5 and 12.6 hereof during the Performance Period, then any
Performance Awards still outstanding at the date of such termination
automatically shall be forfeited; provided, however, that in the event of an
involuntary termination of the employment of a Participant by the Corporation
the Committee may, in its sole discretion, waive the automatic forfeiture of
any or all such Performance Awards as it deems appropriate and pay a prorated
award.
12.8 Nontransferability of Performance Awards. No Performance Awards
granted under the Plan may be sold, transferred, pledged, assigned, or
otherwise alienated or hypothecated, otherwise than by will or by the laws of
descent and distribution until the termination of the applicable Performance
Period. All rights with respect to Performance Awards granted to a Participant
under the Plan shall be exercisable during his lifetime only by such
Participant.
SECTION 13. Beneficiary Designation
Each Participant under the Plan may, from time to time, name any
beneficiary or beneficiaries (who may be named contingently or successively) to
whom any benefit under the Plan is to be paid in case of his death before he
receives any or all of such benefit. Each designation will revoke all prior
designations by the same Participant, shall be in a form prescribed by the
Committee, and will be effective only when filed by the Participant in writing
with the Committee during his lifetime. In the absence of any such
designation, benefits remaining unpaid at the Participant's death shall be paid
to his estate.
SECTION 14. Rights of Employees
14.1 Employment. Nothing in the Plan shall interfere with or limit
in any way the right of the Corporation to terminate any Participant's
employment at any time, nor confer upon any Participant any right to continue
in the employ of the Corporation.
14.2 Participation. No employee shall have a right to be selected as
a Participant, or, having been so selected, to be selected again as a
Participant.
SECTION 15. Change in Control
15.1 In General. In the event that (a) the Corporation is a party
to a merger or consolidation agreement, (b) the Corporation is a party to an
agreement to sell substantially all of its assets, or (c) there is a change in
control of the Corporation as defined in Section 15.3 below, the Committee may,
in its sole discretion, provide that all outstanding Awards shall become 100%
vested, that all outstanding Options and SARs shall become immediately
exercisable and that any Period of Restriction shall immediately lapse.
Performance Share and Performance Award values shall be computed as if the most
recently completed full fiscal year was the end of the Performance Period,
except that no Performance Share or Performance Award payable under this
Section, except as limited by Section 15.2 hereof, may be less than would have
been paid had the Corporation achieved 100% of its Performance Objectives.
15.2 Limitation on Payments. If the receipt of any payment under
this Section by any Participant shall, in the opinion of independent tax
counsel of recognized standing selected by the Corporation, result in the
payment by such Participant of any excise tax provided for in Section 280G and
Section 4999 of the Code, then the amount of such
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payment shall be reduced to the extent required, in the opinion of
independent tax counsel, to prevent the imposition of such excise tax.
15.3 Definition. For purposes of the Plan, a "change in control"
shall mean any of the following events:
(i) The acquisition of "beneficial ownership", as defined in
Rule 13d-3 promulgated under the Securities Exchange Act of 1934 (the
"Exchange Act"), of twenty percent (20%) or more of the total voting
capital Stock of the Corporation then issued and outstanding, by any
person, or "group", as defined in Section 13(d)(3) of the Exchange
Act, or
(ii) Individuals who were members of the Board of the
Corporation immediately prior to a meeting of the shareholders of the
Corporation involving a contest for the election of directors do not
constitute a majority of the Board immediately following such
election, unless the election of such new directors was recommended to
the shareholders by management of the Corporation.
The Board has final authority to determine the exact date on which a
change in control has been deemed to have occurred under (i) and (ii) above.
SECTION 16. Amendment, Modification, and Termination of Plan
The Board may at any time terminate and, from time to time, may amend
or modify the Plan, provided, however, that no such action of the Board,
without approval of the shareholders, may:
(a) Increase the total amount of Stock which may be issued under the
Plan, except as provided in Subsections 5.1 and 5.3 of the Plan.
(b) Change the provisions of the Plan regarding the Option Price
except as permitted by Subsection 5.3.
(c) Materially increase the cost of the Plan or materially increase
the benefits to Participants.
(d) Extend the period during which Options, Stock Appreciation
Rights, Restricted Stock, Performance Shares, or Performance Awards
may be granted.
(e) Extend the maximum period after the date of grant during which
Options may be exercised.
No amendment, modification, or termination of the Plan shall in any
manner adversely affect any Options, Stock Appreciation Rights, Restricted
Stock, Performance Shares, or Performance Awards theretofore granted under the
Plan, without the consent of the Participant or the Eligible Director, as the
case may be.
SECTION 17. Tax Withholding
(a) The Corporation shall have the right to withhold from any
payments made under the Plan or to collect as a condition of payment,
any taxes required by law to be withheld. At any time when a
Participant or an Eligible Director, as the case may be, is required
to pay to the Corporation an amount required to be withheld under
applicable income tax laws In connection with a distribution of common
stock or upon exercise of an Option or SAR, the Participant or an
Eligible Director, as the case may be, may satisfy this obligation in
whole or in part by electing (the "Election") to have the Corporation
withhold from the distribution shares of common stock having a value
equal to the amount required to be withheld. The value of the shares
to be withheld shall be based on the Fair Market Value of the common
stock on the date that the amount of tax to be withheld shall be
determined ("Tax Date").
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(b) Each Election must be made prior to the Tax Date. The
Committee may disapprove of any Election, may suspend or terminate the
right to make Elections, or may provide with respect to any grant that
the right to make Elections shall not apply to such Grant. An Election
is irrevocable.
SECTION 18. Indemnification
Each person who is or shall have been a member of the Committee or of
the Board shall be indemnified and held harmless by the Corporation against and
from any loss, cost, liability, or expense that may be imposed upon or
reasonably incurred by him in connection with or resulting from any claim,
action, Suit, or proceeding to which he may be a party or in which he may be
involved by reason of any action taken or failure to act under the plan and
against and from any and all amounts paid by him in settlement thereof, with
the Corporation's approval, or paid by him in satisfaction of any judgment in
any such action, suit, or proceeding against him, provided he shall give the
Corporation an opportunity, at its own expense, to handle and defend the same
before he undertakes to handle and defend it on his own behalf. The foregoing
right of Indemnification, shall not be exclusive of any other rights of
Indemnification to which such persons may be entitled under the Corporation's
Articles of Incorporation or Code of Regulations, as a matter of law, or
otherwise, or any power that the Corporation may have to indemnify them or hold
them harmless.
SECTION 19. Requirements of Law
19.1 Requirements of Law. The granting of Options, Stock
Appreciation Rights, Restricted Stock, Performance Shares, or performance
Awards, and the issuance of shares of Stock upon the exercise of an Option
shall be subject to all applicable laws, rules, and regulations, and to such
approvals by any governmental agencies or national securities exchanges as may
be required.
19.2 Governing Law. The Plan, and all agreements hereunder, shall be
construed in accordance with and be governed by the laws of the State of Ohio.
Amended:
Oct., 1996 - Section 2 - Definition of Committee
Section Section 8.9, 8.10 & 10.8 -
Matters re: Termination of Employment
Section 17(c) Deleted
Apr., 1992 - Section 5.1 Stock Subject to Plan Increased
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Exhibit 10.14
REVISED AND RESTATED
BANC ONE CORPORATION
1995 STOCK INCENTIVE PLAN
1. PURPOSE
The purpose of the BANC ONE CORPORATION 1995 Stock Incentive Plan is to
provide incentives and rewards for Employees and Eligible Directors of the
Corporation and its Subsidiaries (i) to support the execution of the
Corporation's business and human resource strategies and the achievement of its
goals and (ii) to associate the interests of Employees and Eligible Directors
with those of the Corporation's shareholders.
2. DEFINITIONS
"Award" includes, without limitation, stock options (including incentive
stock options under Section 422 of the Code and Director Stock Options), stock
appreciation rights, restricted and performance shares, restricted and
performance share units, Performance Stock Awards, dividend or equivalent
rights, or other awards that are valued in whole or in part by reference to, or
are otherwise based on, the Common Stock ("other Common Stock-based Awards"),
all on a stand alone, combination or tandem basis, as described in or granted
under this Plan.
"Award Agreement" means a written agreement entered into between the
Corporation and a Participant setting forth the terms and conditions of an
Award made to such Participant under this Plan, in the form prescribed by the
Committee.
"Board" means the Board of Directors of the Corporation.
"Change of Control" shall have the meaning specified in Section 12(b).
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Committee" means the Committee appointed by the Board, each member of
which shall be a "non-employee director" within the meaning of Rule 16b-3 under
the Exchange Act and shall be an "outside director" within the meaning of
Section 162(m) of the Code. The Committee shall be composed of no fewer than
the minimum number of disinterested persons as may be required by Rule 16b-3.
"Common Stock" means the common stock of the Corporation, without par
value.
"Corporation" means BANC ONE CORPORATION, a bank holding company under
the Bank Holding Company Act of 1956 headquartered in Columbus, Ohio.
"Director Stock Option" means the right, granted to an Eligible Director,
to purchase Common Stock at a stated price for a specified period of time.
Each Director Stock Option shall be a nonqualified stock option whose grant is
not intended to comply with the requirements of Section 422 of the Code or any
successor Section as it may be amended from time to time.
"Eligible Director" means any statutory director of the Corporation who
is not an employee of the Corporation or any Subsidiary.
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"Employee" means an employee of the Corporation or a Subsidiary.
"Employee Award" means an Award (other than a Director Stock Option) to
an Employee under this Plan.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fair Market Value" means the closing price of the Common Stock as
reported on the New York Stock Exchange Composite Transactions Tape on the
relevant valuation date or, if there were no Common Stock transactions on the
valuation date, on the next preceding date on which there were Common Stock
transactions; provided, however, that the Committee may specify some other
definition of Fair Market Value with respect to any particular Employee Award.
"Negative Discretion" means other factors to be applied by the Committee
in reducing the number of restricted shares to be issued pursuant to a
Performance Stock Award if the Performance Goals have been met or exceeded if,
in the Committee's sole judgment, such application is appropriate in order to
act in the best interest of the Corporation and its shareholders. The Negative
Discretion factors include, but are not limited to, the achievement of
measurable individual performance objectives established by the Committee and
communicated to the Employee in advance of the Performance Period, and
competitive pay practices.
"Participant" means an Employee or an Eligible Director who has been
granted an Award under this Plan.
"Performance Goals" means, with respect to any Performance Period,
performance goals based on any of the following criteria and established by the
Committee prior to the beginning of such Performance Period or performance
goals based on any of the following criteria and established by the Committee
after the beginning of such Performance Period that meet the requirements to be
considered pre-established performance goals under Section 162(m) of the Code:
earnings or earnings growth; return on equity, assets or investment; revenues;
expenses; stock price; market share; charge-offs; or reductions in
non-performing assets. Such Performance Goals may be particular to an Employee
or the division, department, branch, line of business, Subsidiary or other Unit
in which the Employee works, or may be based on the performance of the
Corporation generally.
"Performance Period" means the period of time designated by the Committee
applicable to a Performance Stock Award during which the Performance Goals
shall be measured.
"Performance Stock Award" shall have the meaning specified in Section
6(g).
"Plan" means this BANC ONE CORPORATION 1995 Stock Incentive Plan.
"Plan Year" means a twelve-month period beginning with January 1 of each
year.
"Reporting Person" means an officer or director of the Corporation
subject to the reporting requirements of Section 16 of the Exchange Act.
"Subsidiary" means any corporation or other entity, whether domestic or
foreign, in which the Corporation has or obtains, directly or indirectly, a
proprietary interest of more than 50% by reason of stock ownership or
otherwise.
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3. ELIGIBILITY
(a) Any Employee selected by the Committee is eligible to receive an
Employee Award.
(b) Eligible Directors are entitled to participate in this Plan solely
with respect to the grant of Director Stock Options and may not receive any
other Awards under this Plan. The selection of Eligible Directors is not
subject to the discretion of the Committee. Persons serving on the Committee
who are Eligible Directors may receive grants of Director Stock Options.
4. PLAN ADMINISTRATION
(a) This Plan shall be administered by the Committee. The Committee
shall periodically make determinations with respect to the participation of
Employees in this Plan and, except as otherwise required by law or this Plan,
the grant terms of Awards including vesting schedules, price, performance
standards (including Performance Goals), length of relevant performance,
restriction or option period, dividend rights, post-retirement and termination
rights, payment alternatives such as cash, stock, contingent awards or other
means of payment consistent with the purposes of this Plan, and such other
terms and conditions as the Committee deems appropriate. Except as otherwise
required by this Plan, the Committee shall have authority to interpret and
construe the provisions of this Plan and the Award Agreements and make
determinations pursuant to any Plan provision or Award Agreement which shall be
final and binding on all persons.
(b) The Committee may designate persons other than its members to
carry out its responsibilities under such conditions or limitations as it may
set, other than its authority with regard to Awards granted to Reporting
Persons.
5. STOCK SUBJECT TO THE PROVISIONS OF THIS PLAN
(a) The stock subject to the provisions of this Plan shall either be
shares of authorized but unissued Common Stock, shares of Common Stock held as
treasury stock or previously issued shares of Common Stock reacquired by the
Corporation, including shares purchased on the open market. Subject to
adjustment in accordance with the provisions of Section 11, and subject to
Section 5(d), (i) the total number of shares of Common Stock available for
grants of Awards (including, without limitation, Awards of restricted and
performance shares) in any Plan Year shall not exceed one percent of the
outstanding Common Stock as reported in the Corporation's Annual Report on Form
10-K for the fiscal year ending immediately prior to such Plan Year and (ii)
the total number of shares of Common Stock available for grants of restricted
and performance shares (including restricted shares to be issued pursuant to
Performance Stock Awards) in any Plan Year shall not exceed one fourth of one
percent of the outstanding Common Stock as reported in the Corporation's Annual
Report on form 10-K for the fiscal year ending immediately prior to such Plan
Year.
(b) Subject to adjustment in accordance with Section 11, and subject
to Section 5(a), (i) the total number of shares of Common Stock available for
grants of Awards in any Plan Year to any Participant shall not exceed one half
of one percent of the outstanding Common Stock as reported in the Corporation's
Annual Report on Form 10-K for the fiscal year ending immediately prior to such
Plan Year and (ii) the total number of shares of Common Stock available for
grants of restricted shares to be issued pursuant to Performance Stock Awards
in any Plan Year to any Employee shall not exceed one eighth of one percent of
the outstanding Common Stock as reported in the Corporation's Annual Report on
form 10-K for the fiscal year ending immediately prior to such Plan Year.
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(c) For purposes of calculating the total number of shares of Common
Stock available for grants of Awards, (i) the grant of a performance or
restricted share unit Award shall be deemed to be equal to the maximum number
of shares of Common Stock which may be issued under the Award and (ii) where
the value of an Award is variable on the date it is granted, the value shall be
deemed to be the maximum limitation of the Award. Awards payable solely in
cash will not reduce the number of shares of Common Stock available for Awards
granted under this Plan.
(d) There shall be carried forward and be available for Awards under
this Plan in each succeeding Plan Year, in addition to shares of Common Stock
available for grant under paragraph (a) of this Section 5, all of the
following: (i) any unused portion of the limit set forth in paragraph (a) of
this Section 5 for the two immediately preceding Plan Years; (ii) shares of
Common Stock represented by Awards which have been canceled, forfeited,
surrendered, terminated or expire unexercised during that Plan Year or the two
immediately preceding Plan Years; (iii) the excess amount of variable Awards
which become fixed at less than their maximum limitations; (iv) authorized
shares of Common Stock as to which stock options, stock appreciation rights,
restricted stock awards, performance shares or performance awards were not
granted under the BANC ONE CORPORATION 1989 Stock Incentive Plan; and (v)
shares of Common Stock under the BANC ONE CORPORATION 1989 Stock Incentive Plan
subject to stock options, stock appreciation rights, restricted stock awards,
performance shares or performance awards which have been canceled, forfeited,
surrendered, terminated or expire unexercised during that Plan Year or the two
immediately preceding Plan Years.
6. EMPLOYEE AWARDS UNDER THIS PLAN
As the Committee may determine, the following types of Employee Awards
may be granted under this Plan to Employees on a stand alone, combination or
tandem basis:
(a) Stock Option. A right to buy a specified number of shares of
Common Stock at a fixed exercise price during a specified time, all as the
Committee may determine; provided that the exercise price of any option shall
not be less than 100% of the Fair Market Value of the Common Stock on the date
of grant of the Award.
(b) Incentive Stock Option. An award in the form of a stock option
which shall comply with the requirements of Section 422 of the Code or any
successor Section as it may be amended from time to time.
(c) Stock Appreciation Right. A right to receive the excess of the
Fair Market Value of a share of Common Stock on the date the stock appreciation
right is exercised over the Fair Market Value of a share of Common Stock on the
date the stock appreciation right was granted.
(d) Restricted and Performance Shares. A transfer of shares of Common
Stock to a Participant, subject to such restrictions on transfer or other
incidents of ownership, or subject to specified performance standards, for such
periods of time as the Committee may determine.
(e) Restricted and Performance Share Unit. A fixed or variable share
or dollar denominated unit subject to conditions of vesting, performance and
time of payment as the Committee may determine, which may be paid in shares of
Common Stock, cash or a combination of both.
(f) Dividend or Equivalent Right. A right to receive dividends or
their equivalent in value in shares of Common Stock, cash or in a combination
of both with respect to any new or previously existing Employee Award.
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(g) Performance Stock Awards. A right, granted to an Employee, to
receive restricted shares (as defined in Section 6(d) hereof) that are not to
be issued to the Employee until after the end of the related Performance
Period, subject to satisfaction of the Performance Goals for such Performance
Period.
(h) Other Common Stock-Based Awards. Other Common Stock-based Awards
which are related to or serve a similar function to those Employee Awards set
forth in this Section 6.
In addition to granting Employee Awards for purposes of incentive
compensation, Employee Awards may also be made in tandem with or in lieu of
current or deferred Employee compensation.
7. PERFORMANCE STOCK AWARDS.
(a) Administration. Performance Stock Awards may be granted to
Employees either alone or in addition to other Employee Awards granted under
this Plan. The Committee shall determine the Employees to whom Performance
Stock Awards shall be awarded for any Performance Period, the duration of the
applicable Performance Period, the number of restricted shares to be awarded at
the end of a Performance Period to Employees if the Performance Goals are met
or exceeded and the terms and conditions of the Performance Stock Award in
addition to those contained in this Section 7.
(b) Payment of Award. After the end of a Performance Period, the
financial performance of the Corporation during such Performance Period shall
be measured against the Performance Goals. If the Performance Goals are not
met, no restricted shares shall be issued pursuant to the Performance Stock
Award. If the Performance Goals are met or exceeded, the Committee shall
certify that fact in writing in the Committee minutes or elsewhere and certify
the number of restricted shares to be issued under each Performance Stock Award
in accordance with the related Award Agreement. The Committee may, in its sole
discretion, apply Negative Discretion to reduce the number of restricted shares
to be issued under a Performance Stock Award.
(c) Requirement of Employment. To be entitled to receive a
Performance Stock Award, an Employee must remain in the employment of the
Corporation through the end of the Performance Period, except that the
Committee may provide for partial or complete exceptions to this requirement as
it deems equitable in its sole discretion.
8. DIRECTOR STOCK OPTIONS
Subject to the provisions of Section 5, Director Stock Options shall be
granted to Eligible Directors as provided in this Section 8 and the Committee
shall have no discretion with respect to any matters set forth in this Section
8.
(a) Vesting. Each Director Stock Option shall become exercisable on
and after the first anniversary of the date of the grant.
(b) Number of Shares. Director Stock Options shall be granted as
follows:
(i) Each person who is first elected or appointed to serve as a
director of the Corporation after the effective date of this Plan and who
is an Eligible Director shall, upon such person's initial appointment or
election as an Eligible Director, automatically be granted Director Stock
Options for that number of shares of Common Stock having a Fair Market
Value of $100,000 on the date the Director Stock Options are granted; and
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(ii) Commencing immediately after the adjournment of the
Corporation's annual meeting of shareholders (an "Annual Meeting") in
1995 and immediately after the adjournment of the Annual Meeting each
year thereafter, each Eligible Director who was an Eligible Director
immediately preceding such Annual Meeting and who has been elected as a
director at such Annual Meeting shall automatically be granted Director
Stock Options for that number of shares of Common Stock having a Fair
Market Value of $60,000 on the date the Director Stock Options are
granted if, but only if, the return on common equity of the Corporation
as set forth in the Corporation's annual report to shareholders for the
immediately preceding fiscal year is equal to or greater than 10%.
(c) Option Price. Each Director Stock Option shall have an option
price ("Option Price") that is equal to the Fair Market Value of the Common
Stock on the date the Director Stock Option is granted.
(d) Duration of Options. No Director Stock Option may be exercisable
later than twenty years and one day from the date of its grant.
(e) Payment. The Option Price upon exercise of any Director Stock
Option shall be payable to the Corporation in full either (i) in U.S. dollars
by personal check, bank draft or money order payable to the order of the
Corporation, by money transfers or direct account debits, (ii) through the
delivery or deemed delivery based on attestation of ownership of shares of
Common Stock with a Fair Market Value at the time of exercise equal to the
total Option Price or (iii) by a combination of the methods described in items
(i) and (ii) above.
(f) Termination of Director Stock Options. If an Eligible Director
ceases to be an Eligible Director for any reason, the rights under any then
outstanding Director Stock Option granted pursuant to this Plan which are
exercisable as of the date such person ceases to be an Eligible Director shall
terminate upon the date determined as provided in Section 8(d), above, or three
years after such cessation date, whichever first occurs. Any then outstanding
Director Stock Option granted to such Eligible Director which is not
exercisable as of the date such person ceases to be an Eligible Director shall
terminate on and as of such date.
9. OTHER TERMS AND CONDITIONS
(a) Assignability. Except to the extent, if any, as may be permitted
by the Code and rules promulgated under Section 16 of the Exchange Act, (i) no
Award shall be assignable or transferable except by will, by the laws of
descent and distribution, pursuant to a qualified domestic relations order as
defined by the Code and as determined or established by the Committee, and (ii)
during the lifetime of a Participant, an Award shall be exercisable only by
such Participant, such Participant's guardian, legal representative or assignee
pursuant to a qualified domestic relations order or as determined or
established by the Committee. An Award shall not otherwise be assignable.
(b) Award Agreement. Each Award under this Plan shall be evidenced
by an Award Agreement.
(c) Rights As A Shareholder. Except as otherwise provided herein or
in any Award Agreement, a Participant shall have no rights as a shareholder
with respect to shares of Common Stock covered by an Award until the date the
Participant or his nominee (which, for purposes of this Plan, shall include
any third party agent selected by the Committee to hold such shares on behalf
of a Participant), guardian or legal representative is the holder of record of
such shares.
(d) No Obligation to Exercise. The grant of an Award shall impose no
obligation upon the Participant to exercise the Award.
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(e) Payments by Participants. The Committee may determine that
Employee Awards for which a payment is due from a Participant may be payable:
(i) in U.S. dollars by personal check, bank draft or money order payable to the
order of the Corporation, by money transfers or direct account debits; (ii)
through the delivery or deemed delivery based on attestation to the ownership
of shares of Common Stock with a Fair Market Value equal to the total payment
due from the Participant; (iii) by a combination of the methods described in
(i) and (ii) above; or (iv) by such other methods as the Committee may deem
appropriate.
(f) Tax Withholding. The Corporation shall have the right to withhold
from any payments made under this Plan, or to collect as a condition of
payment, any taxes required by law to be withheld. At any time when a
Participant is required to pay to the Corporation an amount required to be
withheld under applicable income tax laws in connection with a distribution of
shares of Common Stock pursuant to this Plan, the Participant may satisfy this
obligation in whole or in part by electing to have the Corporation withhold
from such distribution shares of Common Stock having a value equal to the
amount required to be withheld. The value of the shares of Common Stock to be
withheld shall be based on the Fair Market Value of the Common Stock on the
date that the amount of tax to be withheld shall be determined (the "Tax
Date"). Any such election is subject to the following restrictions: (i) the
election must be made on or prior to the Tax Date and (ii) the election must be
subject to the disapproval of the Committee.
(g) Restrictions On Sale and Exercise. With respect to Reporting
Persons, and if required to comply with rules promulgated under Section 16 of
the Exchange Act, (i) no Award providing for exercise, a vesting period, a
restriction period or the attainment of performance standards shall permit
unrestricted ownership of shares of Common Stock by the Participant for at
least six months from the date of grant, and (ii) shares of Common Stock
acquired pursuant to this Plan (other than shares of Common Stock acquired as a
result of the granting of a "derivative security") may not be sold or otherwise
disposed of for at least six months after acquisition.
(h) Requirements of Law. The granting of Awards and the issuance of
shares of Common Stock upon the exercise of Awards shall be subject to all
applicable requirements imposed by federal and state securities and other laws,
rules and regulations and by any regulatory agencies having jurisdiction, and
by any stock exchanges upon which the Common Stock may be listed. As a
condition precedent to the issuer of shares of Common Stock pursuant to the
grant or exercise of an Award, the Corporation may require the Participant to
take any reasonable action to meet such requirements.
10. AMENDMENTS
(a) Except as otherwise provided in this Plan, the Board may at any
time terminate and, from time to time, may amend or modify this Plan. Any such
action of the Board may be taken without the approval of the Corporation's
shareholders, but only to the extent that such shareholder approval is not
required by applicable law or regulation, including specifically Rule 16b-3
under the Exchange Act.
(b) Except to the extent, if any, as may be permitted by rules
promulgated under Section 16 of the Exchange Act, the provisions of this Plan
relating to the amount, price and timing of Director Stock Options may not be
amended more than once every six months, other than to comport with changes in
the Code, ERISA or the rules thereunder.
(c) No amendment, modification or termination of this Plan shall in
any manner adversely affect any Awards theretofore granted to a Participant
under this Plan without the consent of such Participant.
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11. RECAPITALIZATION
The aggregate number of shares of Common Stock as to which Awards may be
granted to Participants, the number of shares thereof covered by each
outstanding Award, and the price per share thereof in each such Award, shall
all be proportionately adjusted for any increase or decrease in the number of
issued shares of Common Stock resulting from a stock split, stock dividend,
combination or exchange of shares, exchange for other securities,
reclassification, reorganization, redesignation, merger, consolidation,
recapitalization or other such change. Any such adjustment may provide for the
elimination of fractional shares.
12. NO RIGHT TO EMPLOYMENT
No person shall have any claim or right to be granted an Award, and the
grant of an Award shall not be construed as giving a Participant the right to
be retained in the employ of the Corporation or a Subsidiary. Nothing in this
Plan shall interfere with or limit in any way the right of the Corporation or
any Subsidiary to terminate any Participant's employment at any time, nor
confer upon any Participant any right to continue in the employ of the
Corporation or any Subsidiary.
13. CHANGE OF CONTROL
(a) Notwithstanding anything contained in this Plan or any Award
Agreement to the contrary, in the event of a Change of Control, as defined
below, the following (i) may, in the sole discretion of the Committee, occur
with respect to any and all Employee Awards outstanding as of such Change of
Control and (ii) shall occur with respect to any and all Director Stock Options
outstanding as of such Change of Control:
(i) automatic maximization of performance standards, lapse of
all restrictions and acceleration of any time periods relating to the
exercise, realization or vesting of such Awards so that such Awards may
be immediately exercised, realized or vested in full on or before the
relevant date fixed in the Award Agreement;
(ii) performance shares or performance units shall be paid
entirely in cash;
(iii) upon exercise of a stock option or an incentive stock option
(collectively, an "Option") during the 60-day period from and after the
date of a Change of Control, the Participant exercising the Option may in
lieu of the receipt of Common Stock upon the exercise of the Option,
elect by written notice to the Corporation to receive an amount in cash
equal to the excess of the aggregate Value (as defined below) of the
shares of Common Stock covered by the Option or portion thereof
surrendered determined on the date the Option is exercised, over the
aggregate exercise price of the Option (such excess is referred to herein
as the "Aggregate Spread"); provided, however, and notwithstanding any
other provision of this Plan, if the end of such 60-day period from and
after the date of a Change of Control is within six months of the date of
grant of an Option held by a Participant who is a Reporting Person, such
Option shall be canceled in exchange for a cash payment to the
Participant equal to the Aggregate Spread on the day which is six months
and one day after the date of grant of such Option. As used in this
Section 13(a)(iii) the term "Value" means the higher of (i) the highest
Fair Market Value during the 60-day period from and after the date of a
Change of Control and (ii) if the Change of Control is the result of a
transaction or series of transactions described in paragraphs (i) or
(iii) of the definition of Change of Control, the highest price per share
of the Common Stock paid in such transaction or series of transactions
(which in the case of paragraph (i) shall be the highest price per share
of the Common Stock as reflected in a Schedule 13D filed by the person
having made the acquisition);
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(iv) if a Participant's employment terminates for any reason
other than retirement or death following a Change of Control, any Options
held by such Participant may be exercised by such Participant until the
earlier of three months after the termination of employment or the
expiration date of such Options; and
(v) all Awards become non-cancelable.
(b) A "Change of Control" of the Corporation shall be deemed to have
occurred upon the happening of any of the following events:
(i) the acquisition, other than from the Corporation, by any
individual, entity or group (within the meaning of Section 13(d)(3) or
14(d)(2) of the Exchange Act) of beneficial ownership of 20% or more of
either the then outstanding shares of Common Stock of the Corporation or
the combined voting power of the then outstanding voting securities of
the Corporation entitled to vote generally in the election of directors;
provided, however, that any acquisition by the Corporation or any of its
Subsidiaries, or any employee benefit plan (or related trust) of the
Corporation or its Subsidiaries, or any corporation with respect to
which, following such acquisition, more than 50% of, respectively, the
then outstanding shares of common stock of such corporation and the
combined voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of directors is
then beneficially owned, directly or indirectly, by all or substantially
all of the individuals and entities who were the beneficial owners,
respectively, of the Common Stock and voting securities of the
Corporation immediately prior to such acquisition in substantially the
same proportion as their ownership, immediately prior to such
acquisition, of the then outstanding shares of Common Stock of the
Corporation or the combined voting power of the then outstanding voting
securities of the Corporation entitled to vote generally in the election
of directors, as the case may be, shall not constitute a Change of
Control;
(ii) individuals who, as of January 1, 1995, constitute the Board
as of the date hereof the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board, provided that any individual
becoming a director subsequent to such date whose election, or nomination
for election by the Corporation's shareholders, was approved by a vote of
at least a majority of the directors then comprising the Incumbent Board
shall be considered as though such individual were a member of the
Incumbent Board, but excluding, for this purpose, any such individual
whose initial assumption of office is in connection with an actual or
threatened election contest relating to the election of the directors of
the Corporation (as such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act); or
(iii) approval by the shareholders of the Corporation of a
reorganization, merger or consolidation of the Corporation, in each case,
with respect to which the individuals and entities who were the
respective beneficial owners of the Common Stock and voting securities of
the Corporation immediately prior to such reorganization, merger or
consolidation do not, following such reorganization, merger or
consolidation, beneficially own, directly or indirectly, more than 50%
of, respectively, the then outstanding shares of Common Stock and the
combined voting power of the then outstanding voting securities entitled
to vote generally in the election of directors, as the case may be, of
the corporation resulting from such reorganization, merger or
consolidation, or a complete liquidation or dissolution of the
Corporation or of the sale or other disposition of all or substantially
all of the assets of the Corporation.
14. GOVERNING LAW
To the extent that federal laws do not otherwise control, this Plan shall
be construed in accordance with and governed by the law of the State of Ohio.
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15. INDEMNIFICATION
Each person who is or shall have been a member of the Committee or of the
Board shall be indemnified and held harmless by the Corporation against and
from any loss, cost, liability or expense that may be imposed upon or
reasonably incurred by him in connection with or resulting from any claim,
action, suit or proceeding to which he may be a party or in which he may be
involved by reason of any action taken or failure to act under this Plan and
against and from any and all amounts paid by him in settlement thereof, with
the Corporation's approval, or paid by him in satisfaction of any judgment in
any such action, suit or proceeding against him, provided he shall give the
Corporation an opportunity, at its own expense, to handle and defend the same
before he undertakes to handle and defend it on his own behalf. The foregoing
right of indemnification shall not be exclusive of any other rights of
indemnification to which such persons may be entitled under the Corporation's
Articles of Incorporation or Code of Regulations, as a matter of law, or
otherwise, or any power that the Corporation may have to indemnify them or hold
them harmless.
16. SAVINGS CLAUSE
This Plan is intended to comply in all aspects with applicable law and
regulation, including, with respect to those Employees who are Reporting
Persons, Rule 16b-3 under the Exchange Act. In case any one or more of the
provisions of this Plan shall be held invalid, illegal or unenforceable in any
respect under applicable law and regulation (including Rule 16b-3), the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby and the invalid, illegal or
unenforceable provision shall be deemed null and void; however, to the extent
permissible by laws, any provision which could be deemed null and void shall
first be construed, interpreted or revised retroactively to permit this Plan to
be construed in compliance with all applicable laws (including Rule 16b-3) so
as to foster the intent of this Plan. Notwithstanding anything in this Plan to
the contrary, the Committee, in its sole and absolute discretion, may bifurcate
this Plan so as to restrict, limit or condition the use of any provision of
this Plan to Participants who are Reporting Persons without so restricting,
limiting or conditioning this Plan with respect to other Participants.
17. EFFECTIVE DATE AND TERM
The effective date of this Plan is April 17, 1995 subject to its approval
by the Corporation's shareholders at their next annual meeting or at any
adjournment thereof, within twelve months following the date of its adoption by
the Board. This Plan shall remain in effect until terminated by the Board.
Amended:
Oct. 1996 - Section 2 - Definition of Committee
Section 9(f) - Tax Withholding
Jan. 1997 - Section 9(a) - Assignability
-10-
<PAGE> 1
EXHIBIT 11
BANC ONE CORPORATION AND SUBSIDIARIES
STATEMENT REGARDING COMPUTATION OF EARNINGS PER COMMON SHARE
$(MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------------- -------------------------
1997 1996 1997 1996
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PRIMARY:
Earnings:
Net income $ 15.8 $395.2 $397.7 $818.0
Deduct: Dividends on series C preferred shares 3.2 4.2 6.6 8.5
------ ------ ------ ------
Net income available to common shareholders $ 12.6 $391.0 $391.1 $809.5
====== ====== ====== ======
Shares:
Weighted average common shares outstanding 564.2 575.6 565.1 578.4
Add: Dilutive effect of outstanding options, as
determined by the application of the treasury stock
method 19.0 20.1 20.6 19.6
------ ------ ----- -----
Weighted average common shares outstanding, as adjusted
583.2 595.7 585.7 598.0
====== ====== ====== ======
PRIMARY EARNINGS PER COMMON SHARE $.02 $.66 $.67 $1.35
==== ==== ==== =====
FULLY DILUTED:
Earnings:
Net income $ 15.8 $395.2 $397.7 $818.0
====== ====== ====== ======
Shares:
Weighted average common shares outstanding 564.2 575.6 565.1 578.4
Add: Dilutive effect of outstanding options, as
determined by the application of the treasury stock
method 19.7 20.0 21.0 19.9
Add: Conversion of preferred stock 7.3 9.4 7.5 9.5
----- ----- ----- -----
Weighted average common shares outstanding, as adjusted 591.2 605.0 593.6 607.8
====== ====== ====== ======
FULLY DILUTED EARNINGS PER COMMON SHARE $.03 $.65 $.67 $1.35
==== ==== ==== =====
</TABLE>
25
<PAGE> 1
EXHIBIT 12
BANC ONE CORPORATION AND SUBSIDIARIES
STATEMENT REGARDING COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
$(MILLIONS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30 YEARS ENDED DECEMBER 31,
--------------------- --------------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Calculation excluding interest on
deposits
Earnings
Income before income taxes and change
in accounting principle $ 647.0 $1,232.4 $2,496.9 $2,173.5 $1,806.2 $1,914.7 $1,381.0
Fixed charges 748.8 573.6 1,202.3 968.7 727.0 397.0 385.5
Less: Capitalized interest (2.6) (.0.7) (4.9) (1.7) (1.0) (0.7) (1.2)
-------- -------- -------- -------- -------- -------- --------
Earnings $1,393.2 $1,805.3 $3,694.3 $3,140.5 $2,532.2 $2,311.0 $1,765.3
======== ======== ======== ======== ======== ======== ========
Fixed Charges:
Interest expense, including interest
factor of capitalized leases and
amortization of deferred debt expense $ 717.7 $ 541.9 $1,142.3 $ 912.4 $ 666.8 $ 345.4 $ 340.5
Portion of rental payments under
operating leases deemed to be interest 31.1 31.7 60.0 56.3 60.2 51.6 45.0
-------- -------- -------- -------- -------- -------- --------
Fixed charges $ 748.8 $ 573.6 $1,202.3 $ 968.7 $ 727.0 $ 397.0 $ 385.5
======== ======== ======== ======== ======== ======== ========
Ratio of earnings to fixed charges
excluding interest on deposits 1.86x 3.15x 3.07x 3.24x 3.48x 5.82x 4.58x
Calculation including interest on
deposits:
Earnings:
Income before income taxes and change
in accounting principle $ 647.0 $1,232.4 $2,496.9 $2,173.5 $1,806.2 $1,914.7 $1,381.0
Fixed Charges 2,007.4 1,776.2 3,662.5 3,395.0 2,560.2 2,001.9 2,474.8
Less: Capitalized interest (2.6) (0.7) (4.9) (1.7) (1.0) (0.7) (1.2)
-------- -------- -------- -------- -------- -------- --------
Earnings $2,651.8 $3,007.9 $6,154.5 $5,566.8 $4,365.4 $3,915.9 $3,854.6
======== ======== ======== ======== ======== ======== ========
Fixed charges:
As detailed above $ 748.8 $ 573.6 $1,202.3 $ 968.6 $ 727.0 $ 397.0 385.5
Interest on deposits 1,258.6 1,202.6 2,460.2 $2,426.4 1,833.2 1,604.9 $2,089.3
-------- -------- -------- -------- -------- -------- --------
Fixed charges $2,007.4 $1,776.2 $3,662.5 $3,395.0 $2,560.2 $2,001.9 $2,474.8
======== ======== ======== ======== ======== ======== ========
Ratio of earnings to fixed charges
including interest on deposits 1.32X 1.69x 1.68x 1.64x 1.71x 1.96x 1.56x
</TABLE>
26
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 6,365
<INT-BEARING-DEPOSITS> 32
<FED-FUNDS-SOLD> 867
<TRADING-ASSETS> 696
<INVESTMENTS-HELD-FOR-SALE> 13,709
<INVESTMENTS-CARRYING> 760
<INVESTMENTS-MARKET> 745
<LOANS> 84,200
<ALLOWANCE> 1,362
<TOTAL-ASSETS> 115,492
<DEPOSITS> 76,964
<SHORT-TERM> 15,926
<LIABILITIES-OTHER> 2,780
<LONG-TERM> 9,972
<COMMON> 184
2,908
0
<OTHER-SE> 6,758
<TOTAL-LIABILITIES-AND-EQUITY> 115,492
<INTEREST-LOAN> 3,955
<INTEREST-INVEST> 584
<INTEREST-OTHER> 145
<INTEREST-TOTAL> 4,684
<INTEREST-DEPOSIT> 1,259
<INTEREST-EXPENSE> 1,974
<INTEREST-INCOME-NET> 2,710
<LOAN-LOSSES> 668
<SECURITIES-GAINS> 32
<EXPENSE-OTHER> 3,033
<INCOME-PRETAX> 647
<INCOME-PRE-EXTRAORDINARY> 398
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 398
<EPS-PRIMARY> 0.67
<EPS-DILUTED> 0.67
<YIELD-ACTUAL> 5.47
<LOANS-NON> 396
<LOANS-PAST> 494
<LOANS-TROUBLED> 1
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,198
<CHARGE-OFFS> 698
<RECOVERIES> 157
<ALLOWANCE-CLOSE> 1,362
<ALLOWANCE-DOMESTIC> 1,362
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
