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Form 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
(X) ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-8552
BANC ONE CORPORATION
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(Exact name of registrant as specified in its charter)
Ohio 31-0738296
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(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
100 East Broad Street, Columbus, Ohio 43271
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (614) 248-5944
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Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
New York Stock Exchange
Common Stock Cincinnati Stock Exchange
without par value Chicago Stock Exchange
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Securities registered pursuant to Section 12(g) of the Act:
Series C Convertible Preferred Stock with no par value
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(Title of Class)
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
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
As of February 28, 1997 the aggregate market value of the voting stock held by
non-affiliates of the Registrant calculated by reference to the quoted price of
the Registrant's common stock as reported on the New York Stock Exchange on
February 28, 1997 was $18,520,231,485. As of February 28, 1997 there were
outstanding 419,721,960 shares of the Registrant's common stock, no par value,
which stock is the only class of Registrant's common stock.
DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------
Portions of the Registrant's 1996 Annual Report to Shareholders are incorporated
by reference into Part I, II and IV. Portions of the Registrant's Proxy
Statement relating to the Registrant's 1997 Annual Meeting of Shareholders are
incorporated by reference into Part III.
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BANC ONE CORPORATION
1996 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
Page
PART I
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Item 1 Business................................................................................................. 1
Item 2 Properties............................................................................................... 5
Item 3 Legal Proceedings........................................................................................ 5
Item 4 Submission of Matters to a Vote of Security Holders...................................................... 5
PART II
Item 5 Market for the Registrant's Common Stock and Related Stockholder Matters................................. 8
Item 6 Selected Financial Data.................................................................................. 8
Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations.................... 8
Item 8 Financial Statements and Supplementary Data.............................................................. 8
Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure..................... 8
PART III
Item 10 Directors and Executive Officers of the Registrant....................................................... 9
Item 11 Executive Compensation................................................................................... 9
Item 12 Security Ownership of Certain Beneficial Owners and Management........................................... 9
Item 13 Certain Relationships and Related Transactions........................................................... 9
PART IV
Item 14 Exhibits, Financial Statement Schedules and Reports on Form 8-K - Index
to Financial Statements and Schedules.................................................................. 10
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PART I
ITEM 1 BUSINESS
BANC ONE CORPORATION, ("BANC ONE"), is a bank holding company which provides a
full range of consumer and commercial banking and related financial services. At
December 31, 1996, BANC ONE operated approximately 1,500 banking offices in
Arizona, Colorado, Illinois, Indiana, Kentucky, Louisiana, Ohio, Oklahoma,
Texas, Utah, West Virginia and Wisconsin. BANC ONE also engages in credit card
and merchant processing, consumer and education finance, mortgage banking,
insurance, venture capital, investment and merchant banking, trust, brokerage,
investment management, equipment leasing and data processing. BANC ONE, an Ohio
corporation, was organized in 1968 and has its principal place of business in
Columbus, Ohio.
BANC ONE believes that, at December 31, 1996, its bank subsidiaries (the
"affiliate banks") held the largest statewide share of total bank deposits in
Arizona, the second largest share of such deposits in Indiana, Ohio, West
Virginia, and Kentucky, and the third largest share of such deposits in
Colorado, Wisconsin, Texas and Louisiana. BANC ONE has smaller statewide market
shares in the other states in which it operates banks. At December 31, 1996,
except for Bank One, Texas, N.A., no single BANC ONE affiliate bank accounted
for more than 20% of BANC ONE's consolidated total assets.
ACQUISITIONS
Since its formation in 1968, BANC ONE has acquired over 100 banking
institutions and the number of banking offices of its affiliate banks has
increased from 24 to approximately 1,500. In addition to the pending
acquisitions described below, BANC ONE continues to explore opportunities to
acquire banks and nonbank companies permitted by the Bank Holding Company Act
of 1956, as amended (the "BHCA"). Discussions are continually being carried on
relating to such acquisitions. It is not presently known whether, or on what
terms, such discussions will result in further acquisitions.
For information regarding pending acquisitions, see the following portions of
the 1996 Annual Report to Shareholders which are expressly incorporated herein
by reference:
"Note 2 Acquisitions" of the Notes to Consolidated Financial Statements on
pages 62 and 63.
STRATEGIC INITIATIVES
In 1995, BANC ONE launched a series of strategic initiatives (collectively
referred to as "Project One") designed to enhance the effectiveness and
efficiency of BANC ONE operations and reduce costs and overhead by, among other
things, decreasing the number of legal entities, combining operations and
systems, standardizing products and procedures and centralizing many staff and
line functions. At completion, BANC ONE expects to have installed centralized
operating systems which support standard products across all BANC ONE markets.
As a result of Project One, BANC ONE has substantially reduced the number of
its banking charters. As recently as September 1994, BANC ONE operated 88
separately chartered banks. By December 31, 1996, that number had been reduced
to 42, with seven states operating under single charters. BANC ONE expects
that, by the end of 1997 its banking operations will be consolidated under
single charters in each of Arizona, Colorado, Illinois, Indiana, Kentucky,
Louisiana, Texas, Utah and Wisconsin, and under two charters in each of Ohio
and West Virginia. BANC ONE expects to combine its Oklahoma banking operations
under a single charter as soon as practicable following the pending acquisition
of Liberty Bancorp, Inc.
LINES OF BUSINESS
BANC ONE is currently in transition from management of its business activities
at the affiliate level to centralized management of such business activities by
line of business. The lines of business are classified as those conducted by the
National Commercial Banking Group, the Retail Banking Group, Finance One
Corporation, the Investment Management Group and Banc One Card Services
Corporation.
The National Commercial Banking Group. The National Commercial Banking Group,
which includes both bank and nonbank subsidiaries of BANC ONE, provides a broad
range of loan and alternative financing products to business customers.
Services provided by the Commercial Banking Group include treasury management,
trade banking, interest rate risk management, loan syndications and private
placements, foreign exchange, leasing, investment management and custody
accounts as well as traditional bank financing. Capital market services are
provided through Banc One Capital Corporation which specializes in providing
alternative funding sources for corporate customers.
Retail Banking Group. The Retail Banking Group provides depository and related
bank and financial services products. BANC ONE's retail banking distribution
system is believed to be the fourth largest in the United States and the
first or second largest in many of the major markets served by BANC ONE. As a
result of Project One, the Retail Banking Group is developing standardized
products, processes and systems support for use throughout the country. A
uniform product line is expected to be available in all BANC ONE markets by the
end of 1997. Retail banking customers are able to access their accounts through
two national call centers located in Houston, Texas and Tempe, Arizona, which
provide region-specific information to consumers and small business customers
and respond to most routine telephone calls previously directed to banking
centers, such as questions about loan payoffs and account balances.
Finance One Corporation. Finance One Corporation and certain nonbank
subsidiaries managed by it (collectively, "Finance One") provide specialized
lending services and alternative borrowing options for customers who may not
meet the borrowing qualifications of a commercial bank. Finance One has become
an increasingly important component of BANC ONE's efforts to provide loans and
other financial services to customers and operates in many states in which BANC
ONE banks are not presently located. Finance One oversees three lines of
business: Banc One Financial Services, Inc. ("BOFS"), the Indirect Financial
Services Division and the Commercial Financial Services Division. BOFS, a
national consumer finance company, primarily offers consumer credit in the form
of real estate-secured and unsecured consumer loans, as well as tax-related
products such as refund anticipation loans. BOFS also manages the education
finance (student loans) operations of BANC ONE. The Indirect Financial Services
Division provides services to motor vehicle, boat and other dealers, including
loans and leases to their customers and financing of their inventories. The
Commercial Financial Services Division is principally involved in the equipment
leasing business and provides leasing to middle-market customers as well as to
large corporations and municipalities.
Investment Management Group. The Investment Management Group is responsible for
the trust and investment management, securities brokerage, investment and
merchant banking and venture capital activities of BANC ONE. The Investment
Management Group, through its investment management affiliate, BANC ONE
Investment Advisors Corporation, manages The One Group family of mutual funds.
During 1996, the Investment Management Group combined the resources of various
BANC ONE subsidiaries, including those of Banc One Capital Holdings Corporation,
to create a unified national distribution capability for all investment and
investment-related services.
Banc One Card Services. Banc One Card Services is responsible for the credit
card operations of BANC ONE, which are engaged in on a nationwide basis,
principally through prescreened direct mail solicitations, telemarketing
solicitations and branch and merchant take-one applications. BANC ONE is a
member of both the Visa and MasterCard associations. At December 31, 1996, Banc
One Card Services had approximately 16 million cardholders and $12.6 billion in
managed credit card receivables. Upon consummation of the pending acquisition
of First USA, it is anticipated that BANC ONE will become the third largest
issuer of bank credit cards in the country. First USA is a financial services
company which specializes in the bank credit card business and is currently the
fourth largest among domestic Visa and MasterCard issuers with $22.4 billion in
managed receivables and 16 million cardholders. First USA also participates in
the payments processing business through its 57% interest in First USA
Paymentech, Inc.
STATISTICAL INFORMATION BY BANK HOLDING COMPANIES
The following information set forth in BANC ONE's 1996 Annual Report to
Shareholders is expressly incorporated herein by reference:
"Note 2, Acquisitions," of the Notes to Consolidated Financial Statements
on pages 62 and 63.
"Five Year Summary - Average Balances, Income and Expense, Yields and
Rates" table on pages 34 and 35 for average balance sheet amounts, related
taxable-equivalent interest earned or paid, related average yields
earned and rates paid and not interest margin.
"Rate Volume Analysis" table on page 36 for changes in the taxable
equivalent interest income and expense for each major category of interest
earning asset and interest bearing liability.
"Note 3, Securities and Off-Balance Sheet Activities" of the Notes to
Consolidated Financial Statements on pages 63 through 66 for information
on book values, market values, maturities and weighted average yields of
securities by category.
"Note 4, Loans and Leases" of the Notes to Consolidated Financial
Statements on pages 67 and 68 for the distribution of the loans of the
Registrant, along with the "Loans and Leases" section of Management's
Discussion and Analysis on page 39.
The "credit quality" section of Management's Discussion and Analysis on
pages 40 through 42 and "Note 1, Summary of Significant Accounting
Policies - Loans, Leases" of the Notes to Consolidated Financial
Statements on page 59 for information on nonaccrual, past due and
restructured loans and the Registrant's policy for placing loans on
nonaccrual status.
"Note 5, Allowance for Credit Losses" of the Notes to Consolidated
Financial Statements on pages 68 and 69, along with the "Allowance for
Credit Losses" section of Management's Discussion and Analysis on pages 42
and 43 for analysis of loss experience, the allocation of the reserve for
credit losses, and factors used by management to determine the adequacy of
the allowance.
"Deposit Analysis" section of Management's Discussion and Analysis on page
44 for the narrative comments on deposits.
The "Key Operating Ratios" section of the "Consolidated Quarterly
Financial Data" on page 52.
"Note 7, Short-Term Borrowings" of the Notes to Consolidated Financial
Statements on page 70.
COMPETITION
Active competition exists in all principal areas in which BANC ONE and its
subsidiaries are presently engaged, not only with respect to commercial banks,
but also with savings and loan associations, credit unions, finance companies,
mortgage companies, leasing companies, insurance companies, mutual funds and
brokerage houses together with other domestic and foreign financial and
non-financial institutions.
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EMPLOYEES
As of December 31, 1996 BANC ONE and its consolidated subsidiaries had
approximately 51,100 full-time equivalent employees.
REGULATORY MATTERS
The following discussion sets forth certain of the material elements of the
regulatory framework applicable to bank holding companies and their subsidiaries
and provides certain specific information relevant to BANC ONE. This regulatory
framework is intended primarily for the protection of depositors and the federal
deposit insurance funds and not for the protection of security holders. To the
extent that the following information describes statutory and regulatory
provisions, it is qualified in its entirety by reference to those provisions. A
change in the statutes, regulations or regulatory policies applicable to BANC
ONE or its subsidiaries may have a material effect on the business of BANC ONE.
General. As a bank holding company, BANC ONE is subject to regulation under the
BHCA, and to inspection, examination and supervision by the Federal Reserve.
Under the BHCA, bank holding companies generally may not acquire the ownership
or control of more than 5% of the voting shares or substantially all the assets
of any company, including a bank, without the Federal Reserve's prior approval.
In addition, bank holding companies generally may engage, directly or
indirectly, only in banking and such other activities as are determined by the
Federal Reserve to be closely related to banking.
Various governmental requirements, including Sections 23A and 23B of the Federal
Reserve Act, limit borrowings by BANC ONE and its nonbank subsidiaries from BANC
ONE's affiliate banks, and also limit various other transactions between BANC
ONE and its nonbank subsidiaries, on the one hand, and BANC ONE's affiliate
banks, on the other. For example, Section 23A limits to no more than 10% of its
total capital the aggregate outstanding amount of any bank's loans and other
"covered transactions" with any particular nonbank affiliate; and limits to no
more than 20% of its total capital the aggregate outstanding amount of any
bank's covered transactions with all of its nonbank affiliates. Section 23A also
generally requires that a bank's loans to its nonbank affiliates be secured, and
Section 23B generally requires that a bank's transactions with its nonbank
affiliates be on arms' length terms.
Most of BANC ONE's affiliate banks are national banking associations and, as
such, are subject to regulation primarily by the Office of the Comptroller of
the Currency ("OCC") and, secondarily, by the Federal Deposit Insurance
Corporation ("FDIC") and the Federal Reserve. BANC ONE's state-chartered banks
also are subject to regulation by the FDIC and the Federal Reserve and, in
addition, by their respective state banking departments. BANC ONE and its
subsidiaries also are affected by the fiscal and monetary policies of the
federal government and the Federal Reserve, and by various other governmental
requirements and regulations.
Liability for Bank Subsidiaries. The Federal Reserve has a policy to the effect
that a bank holding company is expected to act as a source of financial and
managerial strength to each of its subsidiary banks and to maintain resources
adequate to support each such subsidiary bank. This support may be required at
times when BANC ONE may not have the resources to provide it. In addition,
Section 55 of the National Bank Act permits the OCC to order the pro rata
assessment of shareholders of a national bank whose capital has become impaired.
If a shareholder fails within three months to pay such an assessment, the OCC
can order the sale of the shareholder's stock to cover the deficiency. In the
event of a bank holding company's bankruptcy, any commitment by the bank holding
company to a federal bank regulatory agency to maintain the capital of a
subsidiary bank would be assumed by the bankruptcy trustee and entitled to
priority of payment.
Any depository institution insured by the FDIC can be held liable for any loss
incurred, or reasonably expected
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to be incurred, by the FDIC in connection with (i) the default of a commonly
controlled FDIC-insured depository institution or (ii) any assistance provided
by the FDIC to a commonly controlled FDIC-insured depository institution in
danger of default. "Default" is defined generally as the appointment of a
conservator or receiver and "in danger of default" is defined generally as the
existence of certain conditions indicating that a "default" is likely to occur
in the absence of regulatory assistance. Also, in the event that such a default
occurred with respect to a bank, any loans to the bank from its parent holding
company would be subordinate in right of payment to payment of the bank's
depositors and certain of its other obligations.
Capital Requirements. BANC ONE is subject to capital ratios, requirements and
guidelines imposed by the Federal Reserve, which are substantially similar to
the ratios, requirements and guidelines imposed by the Federal Reserve, the OCC
and the FDIC on the banks within their respective jurisdictions. These capital
requirements establish higher capital standards for banks and bank holding
companies that assume greater credit risks. For this purpose, a bank's or
holding company's assets and certain specified off-balance sheet commitments are
assigned to four risk categories, each weighted differently based on the level
of credit risk that is ascribed to such assets or commitments. A bank's or
holding company's capital, in turn, is divided into two tiers: core ("Tier 1")
capital, which includes common equity, non-cumulative perpetual preferred stock
and related surplus (excluding auction rate issues), and minority interests in
equity accounts of consolidated subsidiaries, less goodwill, certain
identifiable intangible assets and certain other assets; and supplementary
("Tier 2") capital, which includes, among other items, perpetual preferred stock
not meeting the Tier 1 definition, mandatory convertible securities,
subordinated debt and allowances for loan and lease losses, subject to certain
limitations, less certain required deductions.
BANC ONE, like other bank holding companies, currently is required to maintain
Tier 1 and total capital (the sum of Tier 1 and Tier 2 capital) equal to at
least 4% and 8% of its total risk-weighted assets, respectively. At December 31,
1996, BANC ONE met both requirements, with Tier 1 and total capital equal to
9.03% and 13.12% of its total risk-weighted assets, respectively.
The Federal Reserve also requires bank holding companies to maintain a minimum
"leverage ratio" (Tier 1 capital to adjusted total assets) of 3%, if the holding
company has the highest regulatory rating and meets certain other requirements,
or of 3% plus an additional cushion of at least 100 to 200 basis points if the
holding company does not meet these requirements. At December 31, 1996, BANC
ONE's leverage ratio was 8.24%.
The Federal Reserve may set capital requirements higher than the minimums noted
above for holding companies whose circumstances warrant it. For example, holding
companies experiencing or anticipating significant growth may be expected to
maintain capital ratios including tangible capital positions well above the
minimum levels. The Federal Reserve has not, however, imposed any such special
capital requirement on BANC ONE.
The Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA"),
among other things, identifies five capital categories for insured depository
institutions (well capitalized, adequately capitalized, undercapitalized,
significantly undercapitalized and critically undercapitalized) and requires the
respective Federal regulatory agencies to implement systems for "prompt
corrective action" for insured depository institutions that do not meet minimum
capital requirements within such categories. FDICIA imposes progressively more
restrictive constraints on operations, management and capital distributions,
depending on the category in which an institution is classified. Failure to meet
the capital guidelines could also subject a banking institution to capital
raising requirements. An "undercapitalized" bank must develop a capital
restoration plan and its parent holding company must guarantee that bank's
compliance with the plan. The liability of the parent holding company under any
such guarantee is limited to the lesser of 5% of the bank's assets at the time
it became "undercapitalized" or the amount needed to comply with the plan.
Furthermore, in the event of the bankruptcy of the parent holding company, such
guarantee would take priority over the parent's general unsecured creditors. In
addition, FDICIA requires the various regulatory agencies to prescribe certain
non-capital standards for safety and soundness
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relating generally to operations and management, asset quality and executive
compensation and permits regulatory action against a financial institution that
does not meet such standards.
The Federal Reserve, the FDIC and the OCC have adopted rules to incorporate
market and interest rate risk components into their risk-based capital
standards.
Dividend Restrictions. Various federal and state statutory provisions limit the
amount of dividends BANC ONE's affiliate banks can pay to BANC ONE without
regulatory approval. The approval of the appropriate bank regulator is required
for any dividend by a national bank or by a state-chartered bank that is a
member of the Federal Reserve System (a "state member bank") if the total of all
dividends declared by the bank in any calendar year would exceed the total of
its net profits, as defined by regulatory agencies, for such year combined with
its retained net profits for the preceding two years. In addition, a national
bank or a state member bank may not pay a dividend in an amount greater than its
net profits then on hand. At December 31, 1996, $.6 billion of the total
stockholders' equity of the affiliate banks was available for payment of
dividends to BANC ONE without approval by the applicable regulatory authority.
In addition, federal bank regulatory authorities have authority to prohibit BANC
ONE's affiliate banks from engaging in an unsafe or unsound practice in
conducting their business. The payment of dividends, depending upon the
financial condition of the bank in question, could be deemed to constitute such
an unsafe or unsound practice. The ability of BANC ONE's affiliate banks to pay
dividends in the future is presently, and could be further, influenced by bank
regulatory policies and capital guidelines.
Deposit Insurance Assessments. The deposits of each of BANC ONE's affiliate
banks are insured up to regulatory limits by the FDIC and, accordingly, are
subject to deposit insurance assessments to maintain the Bank Insurance Fund
("BIF") and Savings Association Insurance Fund ("SAIF") administered by the
FDIC. The FDIC has adopted regulations establishing a permanent risk-related
deposit insurance assessment system. Under this system, the FDIC places each
insured bank in one of nine risk categories based on (a) the bank's
capitalization and (b) supervisory evaluations provided to the FDIC by the
institution's primary federal regulator. Each insured bank's insurance
assessment rate is then determined by the risk category in which it is
classified by the FDIC.
Effective January 1, 1997, the annual insurance premiums on bank deposits
insured by the BIF and SAIF vary between $0.00 per $100 of deposits for banks
classified in the highest capital and supervisory evaluation categories to $0.27
per $100 of deposits for banks classified in the lowest capital and supervisory
evaluation categories.
The Deposit Insurance Funds Act of 1996 ("DIFA") provides for assessments to be
imposed on insured depository institutions with respect to deposits insured by
the BIF and the SAIF (in addition to assessments currently imposed on depository
institutions with respect to BIF- and SAIF-insured deposits) to pay for the cost
of Financing Corporation ("FICO") funding. The FDIC established the FICO
assessment rates effective January 1, 1997 at $0.013 per $100 annually for
BIF-assessable deposits and $0.0648 per $100 annually for SAIF- assessable
deposits. BANC ONE's affiliate banks held approximately $5.3 billion of
SAIF-assessable deposits as of January 1, 1997. The FICO assessments do not vary
depending upon a depository institution's capitalization or supervisory
evaluations. BANC ONE currently estimates its FICO assessments may amount to $8
million after-tax in 1997 with similar assessments per year through 1999 (or
earlier if no savings associations exist prior to December 31, 1999) in
connection with such funding.
Depositor Preference Statute. Federal legislation has been enacted providing
that deposits and certain claims for administrative expenses and employee
compensation against an insured depository institution would be afforded a
priority over other general unsecured claims against such institution, including
federal funds and letters of credit, in the "liquidation or other resolution" of
the institution by any receiver.
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Brokered Deposits. Under FDIC regulations, no FDIC-insured bank or savings
institution can accept brokered deposits unless it (a) is well capitalized, or
(b) is adequately capitalized and receives a waiver from the FDIC. In addition,
these regulations prohibit any bank or savings institution that is not well
capitalized from (i) paying an interest rate on deposits in excess of 75 basis
points over certain prevailing market rates or (ii) offering "pass through"
deposit insurance on certain employee benefit plan accounts unless it provides
certain notice to affected depositors.
Interstate Banking. Under the Riegle-Neal Interstate Banking and Branching
Efficiency Act of 1994 ("Riegle-Neal"), subject to certain concentration
limits: (a) bank holding companies such as BANC ONE are permitted, beginning
September 29, 1995, to acquire banks and bank holding companies located in any
state; (b) any bank that is a subsidiary of a bank holding company is permitted,
again beginning September 29, 1995, to receive deposits, renew time deposits,
close loans, service loans and receive loan payments as an agent for any other
bank subsidiary of that holding company; and (c) banks are permitted, beginning
June 1, 1997, to acquire branch offices outside their home states by merging
with out-of-state banks, purchasing branches in other states, and establishing
de novo branch offices in other states, provided that, in the case of any such
purchase or opening of individual branches, the host state has adopted
legislation "opting in" to those provisions of Riegle-Neal; and provided that,
in the case of a merger with a bank located in another state, the host state has
not adopted legislation "opting out" of that provision of Riegle-Neal. BANC ONE
might use Riegle-Neal to acquire banks in additional states and to consolidate
its affiliate banks under a smaller number of separate charters.
FORWARD LOOKING STATEMENTS
Certain statements contained in this Annual Report on Form 10-K which are not
statements of historical fact constitute forward-looking statements within the
meaning of the Private Securities Litigation Reform Act (the "Act"), including,
without limitation, the statements specifically identified as forward-looking
statements within this document. In addition, certain statements in future
filings by BANC ONE with the Securities and Exchange Commission, in press
releases, and in oral and written statements made by or with the approval of
BANC ONE which are not statements of historical fact constitute forward-looking
statements within the meaning of the Act. Examples of forward-looking
statements include, but are not limited to: (i) projections of revenues, income
or loss, earnings or loss per share, the payment or non-payment of dividends,
capital structure and other financial items, (ii) statements of plans and
objectives of BANC ONE or it's management or Board of Directors, including
those relating to products or services, (iii) statements of future economic
performance and (iv) statements of assumptions underlying such statements.
Words such as "believes", "anticipates", "expects", "intends" "targeted" and
similar expressions are intended to identify forward-looking statements but are
not the exclusive means of identifying such statements.
Forward-looking statements involve risks and uncertainties which may cause
actual results to differ materially from those in such statements. Factors that
could cause actual results to differ from those discussed in the forward-looking
statements include, but are not limited to: (i) the strength of the U.S. economy
in general and the strength of the local economies in which operations are
conducted; (ii) the effects of and changes in trade, monetary and fiscal
policies and laws, including interest rate policies of the Board of Governors of
the Federal Reserve System; (iii) inflation, interest rate, market and monetary
fluctuations; (iv) the timely development of and acceptance of new products and
services and perceived overall value of these products and services by users,
(v) changes in consumer spending, borrowing and saving habits; (vi)
technological changes; (vii) acquisitions; (viii) the ability to increase market
share and control expenses; (ix) the effect of changes in laws and regulations
(including laws and regulations concerning taxes, banking, securities and
insurance) with which BANC ONE and its subsidiaries must comply, (x) the effect
of changes in accounting policies and practices, as may be adopted by the
regulatory agencies as well as the Financial Accounting Standards Board, (xi)
changes in BANC ONE's organization, compensation and benefit plans; (xii) the
costs and effects of litigation and of unexpected or adverse outcomes in such
litigation; and (xiii) the success of BANC ONE at managing the risks involved in
the foregoing.
Such forward-looking statements speak only as of the date on which such
statements are made, and BANC ONE undertakes no obligation to update any
forward-looking statement to reflect events or circumstances after the date on
which such statement is made to reflect the occurrence of unanticipated events.
ITEM 2 PROPERTIES
BANC ONE leases its principal offices in Columbus, Ohio under several long-term
leases. In an initiative to reduce the amount of leased facilities used by BANC
ONE, an 807,000 square foot facility ("Banc One Corporate Center") was built in
Columbus, Ohio to house administrative offices. Employees began moving to this
building during the fourth quarter of 1996. Banc One Corporate Center is located
at 1111 Polaris Parkway, Columbus, Ohio 43240. BANC ONE's executive offices
which are leased, are located at 100 East Broad Street, Columbus, Ohio 43271. As
of December 31, 1996 BANC ONE's affiliate banks had approximately 1,500 banking
offices located in Arizona, Colorado, Illinois, Indiana, Kentucky, Louisiana,
Ohio, Oklahoma, Texas, Utah, West Virginia and Wisconsin. BANC ONE and its
subsidiaries own or lease various office space, computer centers and warehouses.
For additional information see the following portions of the 1996 Annual Report
to Shareholders, which are expressly incorporated herein by reference:
1. "Note 6, Bank Premises, Equipment and Leases" of the Notes to Consolidated
Financial Statements on page 69.
ITEM 3 LEGAL PROCEEDINGS
Neither BANC ONE nor any of its subsidiaries is involved in any material pending
legal proceedings other than ordinary routine litigation incident to the
business. Similarly, no property owned by any of said entities is the subject of
any material pending legal proceedings other than ordinary routine litigation
incident to the business.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of 1996 no matters were submitted to a vote of
security holders.
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EXECUTIVE OFFICERS OF THE REGISTRANT
Executive officers as of January 1, 1997 are set forth below. Unless otherwise
designated, they are officers of BANC ONE. Others hold the positions indicated
in wholly owned subsidiaries. All of these executive officers, with the
exception of Messrs. Doxey, Griffin, Lehmann, Steinhart, Stevens and Winkler
have been employed by BANC ONE in various capacities during the past five
years.
<TABLE>
<CAPTION>
Year Joined
Name Age Title Banc One
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Joseph D. Barnette, Jr. 57 Chairman/CEO--Banc One Indiana Corporation 1987
Steven A. Bennett 44 Senior Vice President and General Counsel 1989
William P. Boardman 55 Senior Executive Vice President 1984
Frederick L. Cullen 49 President/COO--Banc One Ohio Corporation 1988
Bobby L. Doxey 49 Senior Vice President and Controller 1993
Roman J. Gerber 64 Executive Vice President 1966
G. Lee Griffin 58 Chairman/CEO--Banc One Louisiana Corporation 1996
Richard D. Headley 48 Chairman/CEO--Banc One Services Corporation 1975
Thomas E. Hoaglin 47 Chairman/CEO--Banc One Ohio Corporation;
Chairman--Project One 1973
David J. Kundert 55 Chairman/CEO--Bank One Investment Management
Group; President/CEO--Banc One Investment
Advisers Corporation 1971
Richard J. Lehmann 52 President/COO 1993
William C. Leiter 57 Senior Vice President 1981
Richard D. Lodge 49 Senior Vice President 1973
John B. McCoy 53 Chairman/CEO 1967
Michael J. McMennamin 51 Executive Vice President and Chief Financial Officer 1990
Jeffrey P. Neubert 54 Chairman/CEO--Banc One Credit Card Services
Company 1991
Ronald G. Steinhart 56 Chairman--Commercial Banking Group 1992
Kenneth T. Stevens 44 Chairman/CEO-- Retail Banking Group 1996
Donald A. Winkler 48 Chairman/CEO--Finance One Corporation 1993
</TABLE>
Mr. Doxey has served as Senior Vice President and Controller of BANC ONE since
May 1996. From March 1990 to May 1996, Mr. Doxey served as Chief Financial
Officer of Bank One Texas, N.A.
Mr. Griffin has served as Chairman and Chief Executive Officer of Banc One
Louisiana Corporation and Chairman, President and Chief Executive Officer of
Bank One, Louisiana, N.A. since January 1996. Prior to the acquisition of
Premier Bancorp, Inc. by BANC ONE in January 1996, Mr. Griffin served as
Chairman and Chief Executive Officer of Premier Bancorp, Inc. (now Banc One
Louisiana Corporation) and Chairman, President and Chief Executive Officer of
Premier Bank, N.A. (now Bank One, Louisiana, N.A.).
Mr. Steinhart has served as Chairman of BANC ONE's Commercial Banking Group
since January 1997. From January 1995 to January 1997, Mr. Steinhart served as
Chairman and Chief Executive Officer of Bank One, Texas, N.A. From December 1992
to January 1995, Mr. Steinhart served as President and Chief Operating Officer
of Bank One, Texas, N.A. From February 1988 until the acquisition of Team
Bancshares, Inc. by BANC
6
<PAGE> 9
ONE in November 1992, Mr. Steinhart served as Chairman and Chief Executive
Officer of Team Bancshares, Inc., a bank holding company.
Mr. Stevens has served as Chairman and Chief Executive Officer of BANC ONE's
Retail Group since May 1996. Prior to joining BANC ONE, Mr. Stevens served as
President and Chief Operating Officer (1994 - 1996) and Executive Vice President
(1993 - 1994) of Taco Bell Corp. Prior to that time, Mr. Stevens served as
Senior Vice President and Treasurer (1992 - 1993) and Senior Vice President,
Strategic Planning, of Pepsico, Inc.
Mr. Winkler has served as Chairman and Chief Executive Officer of Finance One
Corporation since April 1993. From January 1992 to April 1993, Mr. Winkler
served as Senior Vice President and Division Executive of Citicorp/Citibank.
Information regarding Mr. Lehmann's business experience during the past five
years is set forth under the caption "Election of Directors" in the proxy
statement relating to the BANC ONE's 1997 Annual Meeting of Shareholders (the
"Proxy Statement"), which information is expressly incorporated herein by
reference.
7
<PAGE> 10
PART II
ITEM 5 MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS
As of February 28,1997 there were 85,396 Common Stockholders of record.
See the following portions of the 1996 Annual Report to Shareholders which are
expressly incorporated herein by reference:
Stock Listing
Common
New York Stock Exchange: BancOne
Ticker Symbol: ONE
- - "Consolidated Quarterly Financial Data" table on page 52 for the
high and low sales prices and the amount of cash dividends declared on
common stock for each quarterly period within the two most recent fiscal
years.
- - Notes 9, 10, and 15 to the Consolidated Financial Statements on page 71
through 72 and pages 77 through 79 for discussion regarding dividend
restrictions.
ITEM 6 SELECTED FINANCIAL DATA
See the following portions of the 1996 Annual Report to Shareholders which are
expressly incorporated herein by reference:
- - "Five Year Performance Summary" on page 31 for net operating revenues,
income from continuing operations, income from continuing operations per
common share, total assets and total long term debt.
- - "Ten Year Performance Summary" on page 50 for the amount of cash
dividends declared per common share.
- - Note 2 to the Consolidated Financial Statements on pages 62 through 63.
ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
See the following portions of the 1996 Annual Report to Shareholders which are
expressly incorporated herein by reference:
- - "Management's Discussion and Analysis" on pages 30 through 49.
- - "Consolidated Quarterly Financial Data" on pages 52 through 53.
ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See the following portions of the 1996 Annual Report to Shareholders which are
expressly incorporated herein by reference:
- - "Consolidated Quarterly Financial Data" on pages 52 through 53.
- - "Consolidated Balance Sheet" on page 54.
- - "Consolidated Statement of Income" on page 55.
- - "Consolidated Statement of Changes in Stockholders' Equity" on page 56.
- - "Consolidated Statement of Cash Flows" on page 57.
- - "Notes to Consolidated Financial Statements" on pages 58 through 82.
- - "Report of Independent Accountants" on page 83.
In February, 1997, the FASB issued Statement of Financial Accounting Standards
No. 128, Earnings Per Share. The Statement is effective for years ending after
December 15, 1997, for both interim and annual periods, and replaces the
presentation of primary and fully diluted earnings per share with a
presentation of basic and diluted earnings per share. The adoption of this
Statement is not expected to have a material impact on earnings per share
reported by BANC ONE.
ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
Registrant has had no disagreement on accounting and financial disclosure
matters and has not changed accountants during the two year period ended
December 31, 1996.
8
<PAGE> 11
PART III
ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information set forth under the captions "Election of Directors" and
"Certain Reports"in the Proxy Statement is expressly incorporated herein by
reference. Refer to Part I of the Form 10-K for information as to the executive
officers of BANC ONE.
ITEM 11 EXECUTIVE COMPENSATION
The information set forth under the captions "Directors Fees and Compensation"
and "Executive Compensation" (excluding the information set forth under the
caption "Executive Compensation--Comparison of Five Year Cumulative Total
Return) and "Compensation Committee Interlocks and Insider Participation" in the
Proxy Statement is expressly incorporated herein by reference.
ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information concerning the beneficial ownership of BANC ONE Common Stock as of
January 1, 1997 by (i) each person who is known by the Registrant to own
beneficially more than 5% of BANC ONE Common Stock (ii) all BANC ONE directors
and executive officers (31 individuals) as a group as of January 1, 1997 and
(iii) by the executive officers of BANC ONE named in the Summary Compensation
Table, (except with respect to Messrs. John B. McCoy and Lehmann whose share
ownership is reported in the information on nominees for election as directors
under "Election of Directors" in the Proxy Statement) is set forth under the
caption "Ownership of Shares" in the Proxy Statement, which information is
expressly incorporated herein by reference. Information concerning the
beneficial ownership of BANC ONE Common Stock as of January 1, 1997 by each
current director and each nominee for director is set forth under the caption
"Election of Directors" in the Proxy Statement, which information is expressly
incorporated herein by reference.
No shares of BANC ONE Preferred Stock are beneficially owned by any BANC ONE
director or executive officer, except for 600 shares of BANC ONE Preferred Stock
owned by one executive officer and constituting less than 1% of the outstanding
shares of BANC ONE Preferred Stock.
ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information set forth under the captions "Compensation Committee Interlocks
and Insider Participation" and "Transactions with Management and Others" in the
Proxy Statement is expressly incorporated herein by reference.
9
<PAGE> 12
PART IV
ITEM 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
<TABLE>
<CAPTION>
BANC ONE CORPORATION AND SUBSIDIARIES
ANNUAL REPORT
TO SHAREHOLDERS
PAGE
---------------
Data incorporated by reference from the
1996 Annual Report to Shareholders:
<S> <C>
Additional financial information 50-53
Consolidated Balance Sheet, December 31, 1996 and 1995 54
Consolidated Statement of Income for the years ended
December 31, 1996, 1995 and 1994 55
Consolidated Statement of Changes in Stockholders' Equity
for the years ended December 31, 1996, 1995 and 1994 56
Consolidated Statement of Cash Flows for the years ended
December 31, 1996, 1995 and 1994 57
Notes to Consolidated Financial Statements 58-82
Report of Independent Accountants 83
</TABLE>
No schedules are included because they are not required, not applicable, or the
required information is contained elsewhere.
10
<PAGE> 13
INDEX TO EXHIBITS
-----------------
Exhibit Number
- --------------
3.1 Amended Articles of Incorporation of BANC ONE CORPORATION. (1)
3.2 Code of Regulations of BANC ONE CORPORATION (1).
10.1 BANC ONE CORPORATION Amended 1994 Key Executive
Management Incentive Compensation Plan. (4)
10.2(a) BANC ONE CORPORATION 1994 Dividend Equivalent Unit
Plan.
10.2(b) First Amendment to the BANC ONE CORPORATION 1994
Dividend Equivalent Unit Plan.
10.3(a) BANC ONE CORPORATION 1995 Dividend Equivalent Unit
Plan. (3)
10.3(b) First Amendment to the BANC ONE CORPORATION 1995
Dividend Equivalent Unit Plan.
10.4 BANC ONE CORPORATION Key Management Incentive
Compensation Plan. (3)
10.5 BANC ONE CORPORATION Compensation Deferral Plan.
10.6 BANC ONE CORPORATION Executive Life Insurance
Plan. (3)
10.7(a) Deferred Compensation Plan for Directors of BANC
ONE CORPORATION and BANC ONE CORPORATION
affiliates. (2)
10.7(b) First Amendment to the Deferred Compensation Plan
for Directors of BANC ONE CORPORATION and BANC ONE
CORPORATION affiliates.
10.8 BANC ONE CORPORATION 1989 Stock Incentive Plan. (2)
10.9(a) BANC ONE CORPORATION Supplemental Executive
Security Savings Plan. (2)
10.9(b) First Amendment to the BANC ONE CORPORATION
Supplemental Executive Security Savings Plan.
10.10 BANC ONE CORPORATION Supplemental Employees
Retirement Plan.
10.11 The Valley National Bank of Arizona Supplemental
Excess Benefit Retirement Plan. (2)
10.12 American Fletcher Corporation Deferred
Compensation Plan. (2)
10.13 Valley National Corporation 401(+) Executive
Deferred Compensation Plan. (2)
10.14 BANC ONE CORPORATION 1995 Stock Incentive Plan. (4)
10.15 Agreement dated October 2, 1995 between BANC ONE
CORPORATION and Richard J. Lehmann. (5)
11 Statement regarding computation of earnings per common share.
12 Statement regarding computation of ratio of earnings to fixed
charges.
13a Portions of BANC ONE CORPORATION's Annual Report to Shareholders
for the calendar year ended December 31, 1996.
21 Subsidiaries of BANC ONE CORPORATION.
23 Consent of Coopers & Lybrand L.L.P.
27 Financial Data Schedules.
11
<PAGE> 14
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.
- ------------------
(1) Incorporated by reference from the Registrant's Annual Report on Form
10-K for the year ended December 31, 1991.
(2) Incorporated by reference from the Registrant's Annual Report on Form
10-K for the year ended December 31, 1993.
(3) Incorporated by reference from the Registrant's Annual Report on Form
10-K for the year ended December 31, 1994.
(4) Incorporated by reference from the Registrant's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1995.
(5) Incorporated by reference from the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1995.
12
<PAGE> 15
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
By: /s/ John B. McCoy March 20, 1997
---------------------------------------- --------------------------
John B. McCoy Date
its Chairman
By: /s/ Michael J. McMennamin March 20, 1997
---------------------------------------- --------------------------
Michael J. McMennamin Date
its Executive Vice President - Finance
By: /s/ Bobby L. Doxey March 20, 1997
---------------------------------------- --------------------------
Bobby L. Doxey Date
its Controller
<PAGE> 16
Pursuant to the requirements of Securities Exchange Act of 1934, this report has
been signed below by the following persons on behalf of the Registrant and in
the capacities and on the dates indicated.
By: /s/ Charles E. Exley, Jr. March 20, 1997
-------------------------------------- ------------------------------
Charles E. Exley, Jr., Director Date
By: /s/ E. Gordon Gee March 20, 1997
-------------------------------------- ------------------------------
E. Gordon Gee, Director Date
By: /s/ John R. Hall March 20, 1997
-------------------------------------- ------------------------------
John R. Hall, Director Date
By: /s/ Laban P. Jackson, Jr. March 20, 1997
-------------------------------------- ------------------------------
Laban P. Jackson, Jr., Director Date
By: /s/ John W. Kessler March 20, 1997
-------------------------------------- ------------------------------
John W. Kessler, Director Date
By: /s/ Richard J. Lehmann March 20, 1997
-------------------------------------- ------------------------------
Richard J. Lehmann, Director Date
By: /s/ John B. McCoy March 20, 1997
-------------------------------------- ------------------------------
John B. McCoy, Director Date
By: /s/ John G. McCoy March 20, 1997
-------------------------------------- ------------------------------
John G. McCoy, Director Date
By: /s/ Thekla R. Shackelford March 20, 1997
-------------------------------------- ------------------------------
Thekla R. Shackelford, Director Date
By: /s/ Alex Shumate March 20, 1997
-------------------------------------- ------------------------------
Alex Shumate, Director Date
By: /s/ Frederick P. Stratton, Jr. March 20, 1997
-------------------------------------- ------------------------------
Frederick P. Stratton, Jr., Director Date
By: /s/ Robert D. Walter March 20, 1997
-------------------------------------- ------------------------------
Robert D. Walter, Director Date
By: /s/ Bennett Dorrance March 20, 1997
-------------------------------------- ------------------------------
Bennett Dorrance, Director Date
<PAGE> 1
Exhibit 10.2(a)
BANC ONE CORPORATION
DIVIDEND EQUIVALENT UNIT PLAN
SECTION 1. Establishment, Purpose, and Effective Date of Plan
1.1 Establishment. BANC ONE CORPORATION (the CORPORATION) hereby
establishes the "Dividend Equivalent Unit Plan" (the Plan) for the Chairman and
the President of the CORPORATION.
1.2 Purpose. The purpose of the Plan is to promote the interest of the
CORPORATION and its shareholders by strengthening its ability to retain
executive key management talent who will not be granted restricted stock due to
the loss of the tax deduction of such stock under Section 162(m) of the Internal
Revenue Code of 1986 as amended from time to time.
1.3 Effective Date. The Plan is effective as of April 18, 1994, the
date the Plan was adopted by the Personnel and Compensation Committee of the
Board of Directors of the CORPORATION (the Committee). The Plan shall be in
effect only for the Dividend Equivalent Units granted by the Committee at its
meeting on April 18, 1994. No other Dividend Equivalent Units may be granted
under this Plan.
SECTION 2. Plan Administration
2.1 Plan Administration. The Plan is administered by the
Personnel and Compensation Committee of the Board of Directors of
BANC ONE CORPORATION. Its findings and determinations regarding
this Plan are official and final.
SECTION 3. Definitions
3.1 Definitions. Whenever used herein, the following terms shall have
their respective meanings set forth below:
(a) "Dividend Equivalent Unit" means the right to receive
payments equal to the dividends paid to a holder of a
share of BANC ONE CORPORATION Common
I-1
<PAGE> 2
Stock over a five (5) year period from the date of
grant of such Dividend Equivalent Units.
(b) "Dividend Equivalent Payment" means the amount of
dividend payable on one share of common stock of the
CORPORATION on each date on which regular dividend
payments are made to common shareholders of the
CORPORATION.
(c) "Committee" means the Committee appointed by the
Board of Directors of the CORPORATION to administer
the Plan. This Committee shall consist of two (2) or
more outside directors as defined by Section 16 of
the Securities and Exchange Act of 1934 as amended
from time to time.
(d) "CORPORATION" means BANC ONE CORPORATION, a bank
holding company under the Bank Holding Company Act of
1956, headquartered in Columbus, Ohio.
(e) "Disability" means disability as determined by the
Committee in good faith upon receipt of and in
reliance on sufficient competent medical advice from
one or more individuals, selected by the Committee,
who are qualified to give professional medical
advice.
(f) "Participant" means an employee of the CORPORATION
who has been selected for participation in the Plan
by the Committee.
(g) "Retirement" shall have the same meaning as defined
under the BANC ONE CORPORATION Retirement Plan.
3.2 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 4. Eligibility and Participation
I-2
<PAGE> 3
4.1 Eligibility and Participation. Participation in the Plan is limited
to the employees holding the position of Chairman or President of BANC ONE
CORPORATION. Participation may be revoked at any time by the Committee. An
employee whose participation is revoked will be notified, in writing, of such
revocation as soon as practicable following such action.
SECTION 5. Dividend Equivalent Unit Award Determination and
Payment
5.1 Dividend Equivalent Unit Award Determination. The number
of Dividend Equivalent Units to be granted to a Participant will be
determined by the Committee at its meeting on April 18, 1994.
5.2 Accrual of Dividend Equivalent Payments. Dividend Equivalent
Payments will be credited to a non-qualified deferred compensation account held
in the name of the Participant on the books of the CORPORATION. The Dividend
Equivalent Payment date will be the date dividends are paid to shareholders of
BANC ONE CORPORATION common stock.
5.3 Modification, Amendment, and Termination of the Plan. The Plan may
be modified, amended, or terminated at any time by the Board of Directors of the
CORPORATION.
5.4 Investment of Dividend Equivalent Cash Balance. The Participant
will direct the Corporation to invest the cash balance from the accumulation of
Dividend Equivalent payments into one or more of the available investment
portfolios available under the BANC ONE CORPORATION Incentive Compensation
Deferral Plan.
SECTION 6. Termination of Employment
6.1 Termination of Employment. In the event a Participant's
employment is terminated due to death or Disability, the
Participant will cease to be eligible for Plan participation and
the accumulated cash balance will be distributed to the
I-3
<PAGE> 4
Participant, or in the case of death, to the Participant's designated
beneficiary as determined under Section 6.2, within thirty (30) days after the
date of death or Disability. In the event a Participant's employment is
terminated due to Retirement at age 65, the accumulated cash balance will be
distributed in full to the Participant on the January 31 following the date of
Retirement. In the event a Participant's employment is terminated for reasons
other than Death, Disability, or Retirement at age 65, the Participant shall
forfeit all rights to the accumulated Dividend Equivalent cash balance and any
future Dividend Equivalent Payments.
6.2 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, or if for any reason such designation is
ineffective, in whole or in part, benefits remaining unpaid at the Participant's
death shall be paid to his estate.
SECTION 7. General Provisions
7.1 Tax Withholding. Any and all payments made under the Plan
shall be subject to applicable federal, state, or local taxes
required by the law to be withheld.
7.2 Benefit Plans Treatment of Dividend Equivalent Payments as
Compensation. Amounts paid under this Plan will not be considered compensation
for purposes of other BANC ONE Qualified Benefit Plans unless specifically
provided for in such plans. The treatment of these amounts under any
non-qualified benefit plans will be determined according to the provisions of
such plans.
7.3 Nontransferability. Except as specifically provided
herein or as may otherwise be required by law, no undistributed
I-4
<PAGE> 5
bonus amount payable to the Participant may be sold, transferred, or assign or
encumbered, in whole or in part, by a Participant, and any attempt to so
alienate or subject any such amount shall be void.
I-5
<PAGE> 1
Exhibit 10.2(b)
FIRST AMENDMENT TO THE
BANC ONE CORPORATION 1994 DIVIDEND EQUIVALENT UNIT PLAN
The following amendment is hereby made to the BANC ONE CORPORATION 1994
Dividend Unit Equivalent Unit Plan (the "Plan"), effective as of August 15,
1996.
1. Section 5.4 shall be deleted in its entirety and replaced with the
following new Section 5.4:
5.4 Investment Of Dividend Equivalent Cash Balance. The Participant
will direct the Corporation to invest the cash balance from the
accumulation of Dividend Equivalent payments into one or more of the
available investment portfolios available under the BANC ONE
CORPORATION Compensation Deferral Plan, with the exception that no
funds will be invested in the BANC ONE Stock Fund.
2. The remainder of the Plan shall be as stated.
BANC ONE CORPORATION
/s/ ROMAN J. GERBER
------------------------
Roman J. Gerber
Executive Vice President
and Secretary
<PAGE> 1
Exhibit 10.3(b)
FIRST AMENDMENT TO THE
BANC ONE CORPORATION 1995 DIVIDEND EQUIVALENT UNIT PLAN
The following amendment is hereby made to the BANC ONE CORPORATION 1995
Dividend Unit Equivalent Unit Plan (the "Plan"), effective as of August 15,
1996.
1. Section 5.4 shall be deleted in its entirety and replaced with the
following new Section 5.4:
5.4 Investment Of Dividend Equivalent Cash Balance. The Participant
will direct the Corporation to invest the cash balance from the
accumulation of Dividend Equivalent payments into one or more of the
available investment portfolios available under the BANC ONE
CORPORATION Compensation Deferral Plan, with the exception that no
funds will be invested in the BANC ONE Stock Fund.
2. The remainder of the Plan shall be as stated.
BANC ONE CORPORATION
/s/ ROMAN J. GERBER
-------------------------
Roman J. Gerber
Executive Vice President
and Secretary
<PAGE> 1
Exhibit 10.5
BANC ONE CORPORATION COMPENSATION
DEFERRAL PLAN
PURPOSE
-------
The purpose of the BANC ONE CORPORATION Compensation Deferral Plan (the "Plan")
is to provide a means by which eligible Participants of the BANC ONE CORPORATION
Key Management Incentive Compensation Plan or any specialized incentive
compensation plan designated by the Board of Directors or Plan Administrator may
defer incentive or base salary compensation.
Effective Date
- --------------
This Plan was originally effective as of January 1, 1982. It was restated
effective October 1, 1994. This amended and restated version of the Plan is
effective October 1, 1996 unless otherwise specifically indicated in provisions
throughout the Plan.
ARTICLE I
DEFINITIONS
When used herein, the following terms shall have the meaning stated herein,
unless the context clearly indicates otherwise
Section 1.1 - Appeals Committee
- -------------------------------
A committee consisting of three (3) or more officers of the Corporation who
shall be appointed by the Chief Executive Officer of the Corporation to hear
appeals of denied employee, Participant, or Beneficiary benefit claims under the
Plan, provided that with respect to denied claims of an executive officer who
has been identified by the Corporation as an "Insider", as defined by applicable
Securities and Exchange Commission (SEC) rules, such Appeals Committee shall be
the Personnel and Compensation Committee of the Board.
Section 1.2 - Base Salary
- -------------------------
The employee's annual base salary or wage rate with the Corporation or a Related
Corporation in effect any given point in time, prior to the application of any
salary deferrals to qualified or non-qualified plans sponsored by BANC ONE
CORPORATION or Related Corporation.
Section 1.3 - Beneficiary
- -------------------------
A person or persons designated by a Participant in accordance with provisions of
Section 3.8, to receive any death benefit which may be payable under this Plan
upon the death of said Participant.
<PAGE> 2
Section 1.4 - Board
- -------------------
The Board of Directors of BANC ONE CORPORATION or the Personnel and Compensation
Committee of said Board which shall have the authority of said Board with
respect to this Plan.
Section 1.5 - Change of Control
- -------------------------------
Any change in control of a nature that would be required to be reported in
response to Item 5(f) of Schedule 14A of Regulation 14A promulgated under the
Securities Exchange Act of 1934, as amended ("Exchange Act"); provided that,
without limitation, such a change of control shall be deemed to have occurred
if: (i) any "person" (as such term is defined in Sections 13(d) and 14(d)(2) of
the Exchange Act) other than the Corporation or an entity then directly or
indirectly controlling, controlled by or under common control with the
Corporation is, becomes or commences a tender offer to become the beneficial
owner, directly or indirectly, of securities of the Corporation representing 20%
or more of the combined voting power of the Corporation's then-outstanding
securities; (ii) the Corporation merges or consolidates with another
corporation; or (iii) a sale, lease, exchange, or other disposition of all or
substantially all of the assets of the Corporation takes place.
Section 1.6 - Corporation
- -------------------------
BANC ONE CORPORATION including all of its Related Corporations.
Section 1.7 - Incentive Compensation
- ------------------------------------
The monetary award given to an employee under the Incentive Plan.
Section 1.8 - Incentive Plan
- ----------------------------
The BANC ONE CORPORATION Key Management Incentive Compensation Plan or any
specialized incentive compensation plan designated by the Board of Directors and
as set forth on Schedule A attached hereto and made a part hereof.
Section 1.9 - Participant
- -------------------------
Any person who satisfies the eligibility and participation requirements of this
Plan and who elects or has previously elected to defer compensation under this
Plan.
Section 1.10 - Plan Administrator
- ---------------------------------
BANC ONE CORPORATION.
2
<PAGE> 3
Section 1.11 - Plan Year
- ------------------------
The twelve (12) month period commencing on January 1 and ending the following
December 31.
Section 1.12 - Related Corporation
- ----------------------------------
A subsidiary or any entity which is a member of a common controlled group with
BANC ONE CORPORATION pursuant to Internal Revenue Code Sections 414(b), (c),(m)
or (o).
ARTICLE II
PARTICIPATION
Section 2.1 - Eligibility
- -------------------------
Any officer of the Corporation (a) who is designated by the Plan Administrator
as a participant in the Incentive Plan and (b) who is awarded compensation under
an Incentive Plan. In addition, such officer must also satisfy the following
requirements for purposes of deferring Incentive Compensation and/or Base Salary
Compensation, respectively: (a) for Incentive Compensation, Base Salary as of
December 31 of the preceding calendar year which equals or exceeds One Hundred
Thousand Dollars ($100,000), and/or (b) for Base Salary Deferrals, Base Salary
as of December 31 of the preceding calendar year which equals or exceeds One
Hundred Fifty Thousand Dollars ($150,000) or such other limit as in affected an
adjusted from time to time pursuant to Internal Revenue Code Section 401(a)(17);
provided, however, that any newly employed officer who was hired after December
31, such Base Salary requirements applicable to the year of hire shall apply to
the Base Salary in effect and as of such officer's date of hire. The Plan
Administrator shall notify officers as to their eligibility to participate in
either or both of the deferral provisions under this Plan.
Section 2.2 - Conditions of Participation
- -----------------------------------------
An individual shall not become a Participant hereunder until he or she furnishes
within a reasonable time limit established by the Plan Administrator such
completed and executed elections, Beneficiary designations, consents and other
documents and information prescribed by the Plan Administrator. Each person upon
becoming a Participant shall be deemed conclusively, for all purposes, to have
assented to the terms and provisions of this Plan and shall be bound thereby.
Section 2.3 - Election To Defer
- -------------------------------
(a) Deferral of Annual Incentive Compensation. With respect to Incentive Plans
which make annual compensation awards only, a Participant may elect, on or
before December 31 of any calendar year, to authorize the Corporation to deduct
and withhold payment of any portion of his Incentive Compensation which he will
earn during the calendar year for which such election
3
<PAGE> 4
applies.
(b) DEFERRAL OF INCENTIVE COMPENSATION AWARDED MORE FREQUENTLY THAN ANNUALLY.
With respect to Incentive Plans which award compensation more frequently than
annually, a Participant may elect, on or before December 31 of any calendar
year, to authorize the Corporation to deduct and withhold payment of any portion
of his Incentive Compensation which he will earn during the calendar year for
which such election applies; provided such deferral may be limited by the
Corporation to apply only to specified (which may be less than all) payments of
Incentive Compensation earned by the Participant during the year as set forth on
the attached Schedule B which is made a part hereof.
(c) DEFERRAL OF BASE SALARY COMPENSATION. A Participant eligible to defer Base
Salary, may elect on or before December 31 of any calendar year, to authorize
the Corporation to deduct and withhold any portion of his Base Salary which he
will earn during the calendar year for which the election applies. The maximum
amount which may be deferred under this provision equals the amount by which the
Participant's rate of Base Salary pay (when annualized) exceeds $150,000 (or
such other amount as in effect from time to time pursuant to Internal Revenue
Code Section 401(a)(17)). This subparagraph (c) is effective December 31, 1996.
(d) NEWLY ELIGIBLE OFFICERS. If an officer of the Corporation first becomes
eligible to participate in the Plan during the calendar year, such officer may
elect to participate in the Plan and to defer his Incentive Compensation and
Base Salary compensation which he will receive or will earn, but has not yet
received, during the calendar year, if he makes such election within thirty (30)
days of becoming eligible to participate in the Plan.
(e) MINIMUM AMOUNTS. The minimum amount of such Compensation which may be
deferred under subparagraphs (a) and (b) is Five Thousand Dollars ($5,000).
(f) TIMELINESS OF ELECTION. Any such elections shall be made in such format
(including but not limited to approved forms or electronic data response) and in
the manner provided by the Plan Administrator. Any such election shall be
effective until the earlier of (1) December 31 of the calendar year for which
the election applies; or (2) the Participant ceases to be an employee of the
Corporation. If a Participant who is eligible to participate in this Plan fails
to file (or fails to timely file) the forms(s) or take any action required by
the Plan Administrator to participate in this Plan for each Plan year, such
person shall not be permitted to participate in this Plan until the next open
enrollment period applicable for the next calendar year.
Section 2.4 - Participant Directed Accounts
- -------------------------------------------
Incentive Compensation and Base Salary deferred at the election of a Participant
shall be held in the general funds of the Corporation and shall be credited to
an account established by the Corporation in the Participant's name to which
deferrals made in accordance with this Plan are credited. Each Participant who
chooses to participate in this Plan shall elect, on the form(s) and
4
<PAGE> 5
in the manner prescribed by the Plan Administrator, to direct the investment of
his account in any of the alternative investment funds established by the Board
from time to time. Participants may change their investment decisions in the
manner permitted by the Plan Administrator which shall be no less frequently
than quarterly. The Plan Administrator may, in its discretion, disregard the
investment directions of participants at any time and from time to time. Any
Participant, including a Participant who is required to file reports of his
beneficial ownership of BANC ONE CORPORATION capital stock with the Securities
and Exchange Commission pursuant to Section 16(a) of the Securities and Exchange
Act of 1934 (a "BANC ONE Insider"), shall be permitted to elect to invest all or
any portion of the deferral amount to which such election applies in BANC ONE
CORPORATION capital stock as one of the investment options under the Plan.
However, no previously invested Incentive Compensation, or any part thereof, may
be transferred by a BANC ONE Insider into or out of BANC ONE CORPORATION capital
stock without the express approval of BANC ONE CORPORATION or the person(s)
designated to administer the Plan pursuant to Section 4.1 hereof. Such approval
will be allowed when, in the judgment of BANC ONE CORPORATION or such appointed
person(s), such a transfer of previously allocated funds will not (i) as a
result of Discretionary Transactions elected by the Insider (as that term is
used in Rule 16b-3 of the Securities and Exchange Commission) under the Plan
and all other BANC ONE CORPORATION employee benefit plans, subject such person
to potential liability under Section 16(b) of the Securities and Exchange Act of
1934; or (ii) subject such person or BANC ONE CORPORATION to potential liability
under other Securities and Exchange Commission rules; or (iii) jeopardize or
make less likely the ability to properly account for a transaction in which BANC
ONE CORPORATION is participating and which BANC ONE CORPORATION wishes to
account for as a pooling of interests as a "pooling of interests".
Section 2.5 - Funding
- ---------------------
The Plan shall be entirely unfunded and no provision shall at any time be made
with respect to segregating any assets of the Corporation for payment of any
benefits hereunder. No Participant, Participant's spouse or any other person
shall have any interest in any particular assets of the Corporation by reason of
the right to receive a benefit under the Plan, and any such Participant,
Participant's spouse, or other person shall have only the rights of a general
unsecured creditor of the Corporation with respect to any rights under the Plan.
Nothing contained in the Plan shall constitute a guaranty by the Corporation or
other entity or person that the assets of the Corporation will be sufficient to
pay any benefit hereunder.
Section 2.6 - Statement of Accounts
- -----------------------------------
At least once annually, the Plan Administrator shall furnish each Participant
with a written statement of his account setting forth the net income or loss of
the account; any administrative expenses charged to the account; all payments
and distributions made from the account; and such further information as the
Plan Administrator deems appropriate.
5
<PAGE> 6
ARTICLE III
DISTRIBUTIONS
Section 3.1 - Timing of Distributions
- -------------------------------------
Amounts credited to a Participant under the Plan shall be distributed as
soon as administratively feasible as follows:
(a) On or after January 1st on or following the Participant's
retirement or termination of employment from the Corporation;
(b) Upon the death of the Participant, in accordance with Section
3.4; or
(c) After an acceleration of benefits under Section 3.6;
(d) After termination of this Plan in accordance with Section 5.1.
Section 3.2 - Form of Distributions
- -----------------------------------
Amounts credited to a Participant under the Plan shall be distributed in a lump
sum payment or in annual installments over a five- or ten-year period as the
Participant has elected on the form(s) and in the manner provided by the Plan
Administrator. Any such payment election shall continue in effect until the
Participant elects a different form of payment. All such elections must be made
at least one year prior to the date of distribution. The Participant's election
regarding form of payment only applies to those Participants who terminate
employment due to retirement or disability. If a Participant terminates
employment for any other reason or if a Participant fails to make such an
election with respect to the amounts credited to his account, such amount shall
be paid in a lump sum.
The first installment (or the lump sum payment if the Participant so elects)
shall be paid on the commencement date described above and subsequent
installments shall be paid as soon as administratively feasible after the first
business day of each succeeding calendar year until the entire amount credited
to the Participant's deferred account shall have been paid. During such time as
amounts credited to a Participant under the Plan continue to be held for the
Participant or the Participant's Beneficiary, such amounts shall continue to
earn interest or cash dividends in accordance with the Participant's investment
elections and shall be charged administrative expenses as provided in Section
4.2.
Section 3.3 - Cash Payments; Determination of Amount
- ----------------------------------------------------
All distributions to Participants shall be made in the form of cash. Subject to
Section 3.2, the amount to be distributed shall be determined based on the fair
market value of the balance
6
<PAGE> 7
credited to the Participant's account as of the close of business on last day of
the calendar month immediately preceding distribution or such later valuation
date immediately preceding the date of distribution if the accounts are valued
more frequently than monthly (i.e., daily).
Section 3.4 - Payments in the Event of a Participant's Death
- ------------------------------------------------------------
In the event a Participant dies before payments from the Participant's account
have commenced or after such payments have commenced but before the entire
amount credited to the Participant's account has been paid, all amounts credited
to the Participant's account at the time of the Participant's death, together
with accumulated earnings thereon net of charges for administrative expenses,
shall be paid to the Beneficiary or Beneficiaries described in Section 3.8,
below, in a lump sum payment as soon as administratively feasible after the Plan
Administrator is notified of the Participant's death unless the Participant has
indicated on any beneficiary designation forms an alternate manner of payment
which is permitted by the Plan Administrator.
Section 3.5 - Vesting
- ---------------------
Each Participant is immediately one hundred percent (100%) vested in all amounts
credited to his account and any earnings thereon.
Section 3.6 - Acceleration of Benefits for Unforeseeable Emergencies
- --------------------------------------------------------------------
The Plan Administrator may accelerate the payment of any amounts held in any
Participant's account in the case of unforeseeable emergencies. An
"unforeseeable emergency" is a severe financial hardship to the Participant or
Beneficiary resulting from a sudden and unexpected illness or accident of the
Participant or dependent of the Participant, loss of Participant's property due
to casualty, or other similar extraordinary and unforeseeable circumstances
arising as a result of events beyond the control of the Participant. The
circumstances which will constitute a "unforeseeable emergency" will depend upon
the facts of each case, but in any case, payment will not be made to the extent
that such hardship is or may be relieved: (a) Through reimbursement or
compensation by insurance or otherwise; (b) By liquidation of the Participant's
assets, to the extent the liquidation of such assets would not itself cause
severe financial hardships; or (c) By cessation of deferrals under the Plan.
"Unforeseeable emergency" will not include the need to send the Participant's
child to college or the desire to purchase a home. Any early distributions made
under this Section 3.6 will only be permitted to the extent reasonably needed to
satisfy the emergency needs.
Section 3.7 - Withholding and Deductions
- ----------------------------------------
All benefit payments made under the Plan to any Participant or Beneficiary shall
be subject to allocable withholding and to such other deductions as shall at the
time of such payment be required under any income tax or other law, whether of
the United States or any other jurisdiction, and, in the case of payments to the
Beneficiary of a Participant, the delivery to the
7
<PAGE> 8
Plan Administrator of all necessary documents. To the extent that the
Corporation is required to withhold any current taxes at the time of deferral of
Incentive Compensation, the deferral amount shall be reduced by the required
taxes. Determinations by the Plan Administrator as to withholding shall be
binding on the Participant and applicable Beneficiary(ies).
Section 3.8 - Beneficiary Designation
- -------------------------------------
Each Participant who has a deferred account hereunder may from time to time
designate a beneficiary(ies) to receive the amounts credited to the
Participant's account in the event of the Participant's death prior to the time
such account is distributed to the Participant. Such designation shall be made
pursuant to the procedures established by the Plan Administrator and in a form
satisfactory to the Plan Administrator. Each proper designation of beneficiary
will revoke all previous beneficiary designations. The revocation of a
beneficiary designation, no matter how effected, shall not require the consent
of or notice to any designated beneficiary.
If any Participant fails to designate a beneficiary in the manner provided
above, or if any Participant is not survived by such beneficiary(ies) the
Participant's account shall be paid as follows:
(1) If the Participant is married, to the Participant's spouse;
(2) If the Participant is unmarried, to the Participant's estate.
Section 3.9 - Rights to Benefits
- --------------------------------
Nothing contained in this Plan is intended to give or shall give any spouse,
former spouse or beneficiary of a Participant or any other person any right to
benefits under this Plan by virtue of Internal Revenue Code Sections 401(a)(11)
and 417 (relating to qualified pre-retirement survivor annuities) and qualified
joint and survivor annuities) or Internal Revenue Code Sections 401(a)(13)(B)
and 414(p) (relating to qualified domestic relations orders) as amended.
ARTICLE IV
ADMINISTRATION
Section 4.1 - Administrative Powers and Duties
- ----------------------------------------------
BANC ONE CORPORATION shall be responsible for the general operation and
administration of the Plan and for carrying out the provisions thereof. The
Chief Executive Officer of BANC ONE CORPORATION may, in his discretion, appoint
an employee or employees or an administrative committee in writing to administer
the provisions of this Plan. The decision of the Plan Administrator with respect
to any questions arising as to the administration or interpretation of this
Plan, including the discontinuance of any or all of the provisions thereof,
shall be final, conclusive, and binding. If the Plan is administered by a
committee, such committee may act by
8
<PAGE> 9
a majority of its members by a vote at a meeting or in writing without a meeting
signed by all the members of the committee.
Section 4.2 - Expenses
- ----------------------
Any cost or expense of administering the Plan shall be paid by BANC ONE
CORPORATION. Notwithstanding the above, the Plan Administrator may charge each
Participant's account with the amount of reasonable administrative expenses it
determines, in its sole discretion, for the cost of administering this Plan. Any
such charges shall reduce the earnings credited to the Participant's account and
shall be applied in a uniform and nondiscriminatory manner.
Section 4.3 - Records
- ---------------------
The Plan Administrator shall keep such records of such information, as shall be
proper, necessary or desirable to effectuate the purposes of the Plan, including
without in any manner limiting the generality of the foregoing, records and
information with respect to deferral elections, Participant accounts, dates of
employment and termination and determinations made hereunder. To the extent that
the Plan Administrator shall prescribe forms for use by the Participants and
their Beneficiaries in communicating with the Plan Administrator and shall
establish periods during which communications may be received, the Plan
Administrator shall be protected in disregarding any notice or communication for
which a form shall so have been prescribed and which shall not be made in such
form and any notice or communication for the receipt of which a period shall so
have been established and which shall not be received during such period. The
Corporation, the Plan Administrator and the Appeals Committee shall respectively
also be protected in acting upon any notice or other communication purporting to
be signed by any person and reasonably believed to be genuine and accurate,
including the Participant's current mailing address.
Section 4.4 - Determinations
- ----------------------------
All determinations hereunder made by the Plan Administrator or the Appeals
Committee shall be made in the sole and absolute discretion of the Plan
Administrator or Appeals Committee, as the case may be.
Section 4.5 - Claims Procedure
- ------------------------------
The Plan Administrator shall have discretion regarding benefit determinations.
If required by the Plan Administrator, any person entitled to benefits hereunder
must file a claim with the Plan Administrator upon forms furnished by the Plan
Administrator. Notwithstanding any other provision of this Plan, payment of
benefits need not be made until receipt of the claim and the expiration of the
time periods specified in this Section 4.5 for rendering a decision on the
claim. In the event a claim is denied, benefits need not be made or commence
until a final decision is reached by the Appeals Committee subject to the
provisions of Section 4.6.
9
<PAGE> 10
The Plan Administrator shall notify the claimant of its decision within ninety
(90) days after receipt of the claim. However, if special circumstances require,
the Plan Administrator may defer action on a claim for benefits for an
additional period not to exceed ninety (90) days, and in that case it shall
notify the claimant of the special circumstances involved and the time by which
it expects to render a decision.
If the Plan Administrator determines that any benefits claimed should be denied,
it shall give notice to the claimant setting forth the specific reason or
reasons for the denial and provide a specific reference to the Plan provisions
on which the denial is based. The Plan Administrator shall also describe any
additional information necessary for the claimant to perfect the claim and
explain why the information is necessary. Such claimant shall be entitled to
full and fair review by the Appeals Committee of the denial.
Section 4.6 - Appeal and Review Procedure
- -----------------------------------------
If a claim has been denied by the Plan Administrator, the claimant shall have
sixty (60) days after receipt of the denial in which to file a notice of appeal
with the Plan Administrator. A final determination by the Plan Administrator
shall be rendered within sixty (60) days after receipt of the claimant's notice
of appeal. Under special circumstances such determination may be delayed for an
additional period not to exceed sixty (60) days, in which case the claimant
shall be notified of the delay prior to the close of the initial sixty (60) day
period. The Appeals Committee's final decision shall set forth the reasons and
the references to the Plan provisions on which it is based.
Section 4.7 - Facility of Payment
- ---------------------------------
Whenever a person entitled under the Plan to receive any payment of a benefit,
or installment thereof, is under a legal disability or incapacity or is in any
way unable to manage his financial affairs, the Plan Administrator may, in its
discretion, direct payments on behalf of such person to be made to the
incapacitated person's legal representative, custodian, relative, or other such
individual(s) as is (are) known by the Plan Administrator to be assisting such
person. Such decision by the Plan Administrator shall be made after consultation
with those persons, if any, which may include legal counsel and/or medical
personnel, which the Plan Administrator in his sole discretion determines are
necessary in order to make such decision. Any payment of a benefit or
installment thereof in accordance with the provisions of this Section 4.7 shall
be a complete discharge of any liability relating to the making of or
entitlement to such payment under the provisions of the Plan.
Section 4.8 - Action by the Corporation
- ---------------------------------------
Any action by the Corporation under this Plan may be by resolution of its Board
of Directors, or by any person or persons, duly authorized by resolution of said
Board to take such action.
10
<PAGE> 11
Section 4.9 - Exemption from Liability/Indemnification
- ------------------------------------------------------
The members of the Appeals Committee and the persons acting on behalf of the
Plan Administrator, shall be free from all liability, joint or several, for
their acts, omissions, and conduct, and for the acts, omissions and conduct of
their duly appointed agents, in the administration of the Plan, except for those
acts or omissions and conduct resulting from willful misconduct or lack of good
faith.
The Corporation shall indemnify each member of the Appeals Committee, the
persons acting on behalf of the Plan Administrator and any other employee,
officer or director of the Corporation against any claims, loss, damage, expense
and liability, by insurance or otherwise, reasonably incurred by the individual
in connection with any action or failure to act by reason of membership on the
Appeals Committee or performance of an authorized duty or responsibility for or
on behalf of the Corporation pursuant to the Plan unless the same is judicially
determined to be the result of the individual's gross negligence or willful
misconduct. Such indemnification by the Corporation shall be made only to the
extent such expense or liability is not payable to or on behalf of such person
under any liability insurance coverage. The foregoing right to indemnification
shall be in addition to any other rights to which any such person may be
entitled as a matter of law.
Section 4.10 - Nonassignability
- -------------------------------
No right or benefit under the Plan shall be subject to anticipation, alienation,
sale, assignment, pledge, encumbrance or charge, and any attempt to anticipate,
alienate, assign, sell, pledge, encumber or charge the same shall be void.
The Plan shall not in any manner be liable for or subject to the debts,
contracts, liabilities, engagements or torts of any person entitled to benefits
hereunder.
ARTICLE V
AMENDMENT OR TERMINATION
Section 5.1 - Amendment or Termination
- --------------------------------------
BANC ONE CORPORATION reserves the right in its sole discretion to amend or
terminate this Plan at any time. In the event of a termination, BANC ONE
CORPORATION in its sole discretion may pay Plan benefits to those Participants
participating in the Plan on the date of such termination, to the extent such
benefits would be otherwise payable as defined in Section 3.1 determined on the
basis that each Participant's presumed termination date was the date the Plan
was terminated.
Section 5.2 - Transfer Between Related Companies
- ------------------------------------------------
In the event that a Participant's employment is transferred from one Related
Corporation to
11
<PAGE> 12
another, the transfer shall not adversely affect the administration of amounts
then credited to the Plan account(s) of such Participant on or as of the date of
transfer.
Section 5.3 - Change of Control
- -------------------------------
The Plan shall not be automatically terminated upon change of control or by a
transfer or sale of assets of the Corporation or by the merger or consolidation
of the Corporation into or with any other Corporation or other entity when the
Corporation is not the surviving or continuing Corporation, but the Plan shall
be continued after such sale, merger or consolidation only if and to the extent
that the transferee, purchaser or successor entity, shall be obligated to pay
Plan benefits to those Participants participating in the Plan on the date of
such termination, to the extent such Plan benefits would be otherwise payable as
defined in Section 3.1, determined on the basis that each Participant's presumed
termination date was the date the Plan was terminated.
ARTICLE VI
GENERAL PROVISIONS
Section 6.1 - Offset to Benefits
- --------------------------------
Notwithstanding any provisions of the Plan to the contrary, the Corporation may,
at the time of distribution in its sole and absolute discretion, enforce the
right to offset against any amounts to be paid to a Participant under the Plan
against any debt of the Participant which has been reduced to judgment in favor
of the Corporation.
Section 6.2 - Construction
- --------------------------
In the construction of the Plan, the masculine shall include the feminine and
the singular the plural where such meanings would be appropriate.
Section 6.3 - Controlling Law
- -----------------------------
The laws of the State of Ohio shall be controlling in all matters relating to
the Plan and shall be controlling state law in all matters relating to the Plan
and shall apply to the extent that it is not preempted by the laws of the United
States of America.
Section 6.4 - Effect of Invalid Provisions
- ------------------------------------------
If any provision of this Plan is held invalid or unenforceable for any reason,
such invalidity or unenforceability shall not effect any provisions hereof, and
the remaining provisions of this Plan shall be construed and enforced as if such
provisions had not been included.
12
<PAGE> 13
Section 6.5 - ERISA Status
- --------------------------
This Plan shall constitute a plan which is unfunded and which maintained
primarily for the purpose of providing deferred compensation benefits for a
select group of management or highly compensated employees within the meaning of
Section 202, 301, and 401 of ERISA and the ERISA reporting and disclosure
regulation.
IN WITNESS WHEREOF, BANC ONE CORPORATION has caused this Plan to be adopted and
effective as first set forth above.
Date: BANC ONE CORPORATION
----------------------------
Attest: By:
--------------------------- ----------------------------
Roman J. Gerber
Executive Vice President and
Secretary
13
<PAGE> 14
SCHEDULE A
BANC ONE CORPORATION COMPENSATION
DEFERRAL PLAN
1. Banc One Corporation Performance Improvement Plans (PIP) (formerly known as
the Banc One Corporation Key Management Improvement Plan).
2. Banc One Capital Corporation Annual Incentive Plan
3. Banc One Corporation EVA Plan(s)
4. Banc One Investment Management Group Institutional Asset Management
Incentive Plan
5. Banc One Investment Management Group Institutional Sales Executive
Incentive Plan
14
<PAGE> 15
SCHEDULE B
BANC ONE CORPORATION COMPENSATION
DEFERRAL PLAN
1. Banc One Capital Corporation Quarterly Incentive Plan (4th quarter payment
only)
2. Banc One Capital Corporation Semi-Annual Incentive Plan (second payment of
semi-annual award only)
15
<PAGE> 1
Exhibit 10.7(b)
FIRST AMENDMENT TO THE
DEFERRED COMPENSATION PLAN FOR DIRECTORS
OF
BANC ONE CORPORATION AND BANC ONE AFFILIATES
The following amendment is hereby made to the Deferred Compensation
Plan for Directors of BANC ONE CORPORATION and BANC ONE Affiliates (the "Plan"),
effective August 15, 1996.
1. The following definition for BANC ONE Insider shall be added
to the end of Section 2:
"(k) BANC ONE Insider means any person who is required to file
reports of his beneficial ownership of BANC ONE CORPORATION
capital stock with the Securities and Exchange Commission
pursuant to Section 16(a) of the Securities and Exchange Act
of 1934."
2. Section 8 shall be deleted in its entirety and replaced with
the following new Section 8:
"8. TRANSFERS OF PRIOR DEFERRALS: During the annual election
period, any Director who is not a BANC ONE Insider may elect
to transfer prior deferral amounts from one portfolio to
another, such transfer to be effective December 31st of the
year in which the election is made. The election to transfer
prior deferral amounts must be received by the Plan
Administrator by the last business day prior to December 31st,
in order to be effective on December 31st. Any such transfer
will be valued as of the last business day prior to December
31st. No prior deferral amounts may be transferred into or out
of the BANC ONE Stock Program by a BANC ONE Insider without
the express approval of BANC ONE CORPORATION or the person(s)
designated to administer the Plan. Such approval will be
allowed when, in the judgment of BANC ONE CORPORATION or such
appointed person(s), such transfer of previously allocated
funds will not (i) as a result of Discretionary Transactions
elected by the BANC ONE Insider (as that term is used in Rule
16b-3 of the Securities and Exchange Commission) under the
Plan and all other BANC ONE CORPORATION employee benefit
plans, subject such person to potential liability under
Section 16(b) of the Securities and Exchange Act of 1934; (ii)
subject such person or BANC ONE CORPORATION to potential
liability under other Securities and Exchange Commission
rules; or (iii) jeopardize or make less likely the ability to
properly account for a transaction in which BANC ONE
CORPORATION is participating and which BANC ONE CORPORATION
wishes to account for as a pooling of interests as a "pooling
of interests".
<PAGE> 2
3. The remainder of said Plan shall be as stated.
BANC ONE CORPORATION
/s/ Roman J. Gerber
-------------------------------
Roman Gerber
Title: Executive Vice President
and Secretary
-------------------------
<PAGE> 1
Exhibit 10.9(b)
FIRST AMENDMENT TO THE
BANC ONE
SUPPLEMENTAL EXECUTIVE SECURITY SAVINGS PLAN
The following amendment is hereby made to the BANC ONE Supplemental
Executive Savings Plan (the "Plan"), effective August 15, 1996.
1. Section 2.4(a) shall be amended to delete the phrase: "Except
within the 30-day period following the date the Supplemental
Plan is initially extended to a Participant" so that the
Section, as amended, shall read as follows:
"The election to defer 1%-6% of Compensation must be made
before the beginning of the period of service for which the
Compensation is earned."
2. Section 3.2 shall be deleted in its entirety and replaced with
the following new Section 3.2:
"SECTION 3.2 - ACCELERATION OF BENEFIT PAYMENTS. The
Corporation, with the approval of the Personnel and
Compensation Committee of the Board, may accelerate the
payment of any amounts held in any Participant's account in
the case of unforeseeable emergencies. An "unforeseeable
emergency" is a severe financial hardship to the Participant
or Beneficiary resulting from a sudden and unexpected illness
or accident of the Participant or dependent of the
Participant, loss of Participant's property due to casualty,
or other similar extraordinary and unforeseeable circumstances
arising as a result of events beyond the control of the
Participant. The circumstances which will constitute a
"unforeseeable emergency" will depend upon the facts of each
case, but in any case, payment will not be made to the extent
that such hardship is or may be relieved: (a) Through
reimbursement or compensation by insurance or otherwise; (b)
By liquidation of the Participant's assets, to the extent the
liquidation of such assets would not itself cause severe
financial hardships; or (c) By cessation of deferrals under
the Plan. "Unforeseeable emergency" will not include the need
to send the Participant's child to college or the desire to
purchase a home. Any early distributions made under this
Section 3.2."
3. The remainder of said Plan shall be as stated.
BANC ONE CORPORATION
/s/ Roman J. Gerber
------------------------------
Roman Gerber
Title: Ex VP & Sec
------------------------------
<PAGE> 1
Exhibit 10.10
BANC ONE CORPORATION
SUPPLEMENTAL EMPLOYEES RETIREMENT PLAN
As Amended and Restated
Effective as of January 1, 1995
in accordance with the Policy Guidelines
adopted by the Board of Directors on October 17, 1994
<PAGE> 2
BANC ONE CORPORATION
SUPPLEMENTAL EMPLOYEES RETIREMENT PLAN
PURPOSE
- -------
The purpose of the BANC ONE CORPORATION Supplemental Employees Retirement Plan
(the "Supplemental Plan") which was originally known as the Benefits
Equalization Plan of First Banc Group of Ohio, Inc. and Its Subsidiaries adopted
by the Board of Directors of BANC ONE CORPORATION on October 24, 1977 and
amended as of October 21, 1986, January 1, 1989 and April 20, 1992, January 1,
1993, and hereby further amended and restated as of January 1, 1995 is solely to
provide retirement benefits, for employees of BANC ONE CORPORATION and its
Related Corporations, who participate in the BANC ONE CORPORATION Retirement
Plan (the "Basic Retirement Plan"), in excess of the limitations on qualified
retirement plan benefits imposed be provisions of Sections 415, 401(a)(17) and
404(l) of the Internal Revenue Code.
The Supplemental Plan is a non-funded, supplemental deferred compensation plan
structured to benefit Participants in a manner which provides incentive to
improve the profitability, competitiveness and growth of BANC ONE and its
Related Corporations.
Effective Date
- --------------
The effective Date of this amended Supplemental Plan is January 1, 1995.
-2-
<PAGE> 3
ARTICLE I
DEFINITIONS
For the purpose of the Supplemental Plan, the following terms shall have the
meanings hereinafter set forth unless the context clearly indicates otherwise:
Section 1.1 - Basic Retirement Plan
- -----------------------------------
"Basic Retirement Plan" means the BANC ONE CORPORATION Retirement Plan
established effective January 1, 1947 and amended as of January 1, 1969, January
1, 1989, January 1, 1995 and various dates subsequent thereto, and hereafter
amended from time to time, or any successor thereto.
Section 1.2 - Basic Retirement Plan Benefit
- -------------------------------------------
"Basic Retirement Plan Benefit" means the benefit payable to a Participant
pursuant to the Basic Retirement Plan based on Credited Service recognized by
said plan for benefit accrual, by reason of his termination of employment with
the Corporation and its related Corporations.
Section 1.3 - Basic Retirement Plan Surviving Spouse Benefit
- ------------------------------------------------------------
"Basic Retirement Plan Surviving Spouse Benefit" means the pre-retirement
survivor's benefit determined pursuant to Article V of the Basic Retirement
Plan.
Section 1.4 - Benefit Commencement Date
- ---------------------------------------
"Benefit Commencement Date" means the first day of the second month following
the termination of employment, or such later date as the Supplemental Retirement
Benefit can be determined, on which the participant shall receive payments under
the Supplemental Plan.
Section 1.5 - Board
- -------------------
"Board" means the Board of Directors of BANC ONE CORPORATION or the Personnel
and Compensation Committee of said Board which shall have the authority of said
Board with respect to this Plan.
Section 1.6 - Change of Control
- -------------------------------
Any change in control of a nature would be required to be reported in response
to Item 5(f) of Schedule 14A of Regulation 14A promulgated under the Securities
Exchange Act of 1934, as amended ("Exchange Act"); provided that, without
limitation, such a change of control shall be deemed to have occurred if: (i)
any "person" (as such term is defined in Sections 13(d) and 14(d)(2) of The
Exchange Act) other than the Corporation or an entity then directly or
indirectly controlling, controlled by or under common control with the
Corporation is, becomes or commences a tender
-3-
<PAGE> 4
offer to become the beneficial owner, directly or indirectly, of securities of
the Corporation representing 20% or more of the combined voting power of the
Corporation's then-outstanding securities; (ii) the Corporation merges or
consolidates with another corporation; or (ii) a sale, lease, exchange, or other
disposition of all or substantially of the assets of the Corporation takes
place.
Section 1.7 - Code
- ------------------
"Code" means the Internal Revenue Code of 1986, as amended from time to time,
and any regulations relating thereto.
Section 1.8 - Corporation
- -------------------------
"Corporation" means BANC ONE CORPORATION, including all of its Related
Corporations and, to the extent provided in Section 6.5 below, and any successor
corporation or other entity resulting from a merger or consolidation into or
with the Corporation or a transfer or sale of substantially all of the assets of
the Corporation.
Section 1.9 -Credited Service
- -----------------------------
"Credited Service" for benefit accrual shall mean the same as defined as defined
in Article III of the Basic Retirement Plan.
Section 1.10 - Early Retirement Date
- ------------------------------------
"Early Retirement Date" for a Participant who at termination of employment had
attained age fifty-five (55) and completed ten (10) or more years of Service,
shall be the first day of any month following termination of employment and
prior to his Normal Retirement Date.
Section 1.11 - Final Average Compensation
- -----------------------------------------
One-twelfth (1/12) of the average of the highest consecutive five (5) years'
annual Compensation of the last ten (10) Plan Years worked immediately preceding
the Participant's Retirement or termination of employment whichever first
occurs. For a Participant who incurs an Approved Absence or who is rehired after
a Break in Service with his Pre-break Service restored, the Plan Years prior to
and following his Approved Absence or Break in Service shall be considered
consecutive Plan Years even though they were not contiguous. For purposes of
this Supplemental Plan, Compensation shall mean an employee's basic salary or
wage paid by the Corporation plus fifty percent (50%) of overtime, commissions,
shift and other differential pay, accrued bonuses, and compensation received as
a result of periodic special incentive programs. Compensation shall not include
grants, awards or benefits received under or attributable to incentive plans
such as stock options, stock appreciation rights, stock awards, or performance
shares. Compensation shall not include life insurance, club memberships, or
other benefits which are provided by the Corporation to the Participant and
which, for purposes of income or social security tax, constitute imputed income
to the Participant. With respect to an Employee who transferred directly into
the employ of
-4-
<PAGE> 5
the Corporation or a Related Corporation from a Related Corporation, applicable
earnings for services rendered to the Related Corporation shall be treated as
Compensation for the Corporation for purposes of this Supplemental Plan.
Compensation shall also include any salary deferral amounts under any employer
plan qualified under Sections 125 or 401(k) of the Internal Revenue Code.
Compensation shall also include 100% of any base salary deferral amounts made by
a Participant under the BANC ONE Supplemental Executive Security Savings Plan or
the BANC ONE CORPORATION Compensation Deferral Plan and 50% of bonus deferral
amounts under the BANC ONE CORPORATION Compensation Deferral Plan.
Section 1.12 - Late Retirement Date
- -----------------------------------
"Late Retirement Date" means the first day of the month next following the later
of the Participant's Normal Retirement Date or actual termination of employment
with BANC ONE CORPORATION or its Subsidiaries.
Section 1.13 - Normal Retirement Date
- -------------------------------------
"Normal Retirement Date" means the first day of the month next following the
Participant's sixty-fifth (65th) birthday.
Section 1.14 - Participant
- --------------------------
"Participant" means a salaried employee of the Corporation: (a) who is in a
select group of management or highly compensated employees: (b) who is a
participant under the Basic Retirement Plan (or any successor to or replacement
of the Basic Retirement Plan); and (c) who is eligible to receive a Basic
Retirement Plan retirement, the amount of which is reduced by reason of any
limitations on benefits by the application of Sections 415, 401(a)(17) and
404(l) of the Code.
Section 1.15 - Related Corporation
- ----------------------------------
A subsidiary or any entity which is a member of a common controlled group with
BANC ONE CORPORATION pursuant to Internal Revenue Code Sections 414(b), (c),
(m), or (o).
Section 1.16 - Plan Administrator
- ---------------------------------
BANC ONE CORPORATION.
Section 1.17 - Service
- ----------------------
One year of "Service" is granted for each calendar year of employment during
which the Participant
-5-
<PAGE> 6
is compensated for one thousand (1000) or more hours, pursuant to Article III of
the Basic Retirement Plan.
Section 1.18 - Supplemental Plan
- --------------------------------
"Supplemental Plan" means the BANC ONE CORPORATION Supplemental Employees
Retirement Plan as described herein.
Section 1.19 - Supplemental Retirement Benefit
- ----------------------------------------------
"Supplemental Retirement Benefit" means that benefit, if any, payable to a
Participant pursuant to this Supplemental Plan by reason of his termination of
employment with the Corporation.
Section 1.20 - Supplemental Surviving Spouse Benefit
- ----------------------------------------------------
"Supplemental Surviving Spouse Benefit" means the benefit payable to a Surviving
Spouse pursuant to this Supplemental Plan.
Section 1.21 - Surviving Spouse
- -------------------------------
"Surviving Spouse" means a person who is married to a Participant at the date of
his death.
-6-
<PAGE> 7
ARTICLE II
SUPPLEMENTAL RETIREMENT BENEFITS
Section 2.1 - Eligibility
- -------------------------
To receive a benefit under this Supplemental Plan a Participant must qualify for
a benefit under the Basic Retirement Plan, have attained the age of fifty-five
(55) while in active service, completed ten (10) years of Credited Service and
have terminated his employment relationship with the Corporation. In no event
shall an employee who is not entitled to benefits under the Basic retirement
Plan be eligible for a benefit under this Supplemental Plan.
Section 2.2 - Incorporation of the Basic Retirement Plan
- --------------------------------------------------------
The Basic Retirement Plan, with any amendments thereto in effect, shall be
attached hereto and is hereby incorporated by reference into and shall be a part
of this Supplemental Plan as if set forth herein. Any amendment made to the
Basic Retirement Plan shall also be incorporated by reference into and form a
part of the Supplemental Plan, effective as of the effective date of such
amendment. The Basic Retirement Plan, whenever referred to in this Supplemental
Plan, shall mean the Basic Retirement Plan as it exists on the date any
determination is made of benefits payable under this Supplemental Plan. All
terms used herein shall have the meanings assigned to them under the provisions
of the Basic Retirement Plan unless otherwise qualified by this Supplemental
Plan.
Section 2.3 - Amount of Benefit
- -------------------------------
A Participant who has met the eligibility requirements of Section 2.1 above
shall be entitled to receive a Supplemental Retirement Benefit payable on the
Benefit Commencement Date, in an amount equal to:
(a) the actuarial equivalent of the straight life annuity amount of the
Basic Retirement Plan Benefit to which the Participant would have been
entitled under the BANC ONE formula based on Credited Service under
the Basic Retirement Plan if such benefit were computed using the
Final Average Compensation without any limitations on benefits imposed
by application of Section 415, 401(a)(17) or 404(l) of the Code:
MINUS
(b) the actuarial equivalent of the straight life annuity amount of the
respective Basic Retirement Benefit actually payable to the eligible
Participant under the Basic Retirement Plan.
The amounts described herein shall be determined by the same actuarial
adjustments as those specified in the Basic Retirement Plan and computed as of
the date of termination of employment of the Participant with the Corporation.
-7-
<PAGE> 8
Section 2.4 - Vesting
- ---------------------
In the event that Participant remains an employee of the Corporation after
having attained the age of fifty-five (55) and completed ten (10) years of
Credited Service, his right to Supplemental Benefits shall thereafter be vested,
but no Supplemental Benefits shall be payable hereunder to or in respect to him
until the Benefit Commencement Date.
Section 2.5 - Benefit Election
- ------------------------------
Participant may elect a Normal Retirement Date, Late Retirement Date, or Early
Retirement Date as defined in the Basic Retirement Plan. Subject to the
provisions of the Basic Retirement Plan, benefits commencing prior to the Normal
Retirement Date shall be actuarially reduced in accordance with provisions of
the Basic Retirement Plan.
Section 2.6 - Form of Distribution
- ----------------------------------
The Supplemental Retirement Benefit payable to an eligible Participant shall
generally be paid in a lump sum, which shall be the actuarial equivalent of the
straight life annuity amount calculated in accordance with Section 2.3 herein.
The Participant may elect to have his Supplemental Retirement Benefit paid as a
monthly annuity. The available payment forms shall consist of Life only, Life
and 60 months certain or Life and 120 months certain, or a 50%, 668%, or 100%
Survivor Annuitant, all as described in the Basic Retirement Plan. The form of
payment request by Participant shall, in any event, be the same method of
payment elected under the Basic Retirement Plan and shall be equal to the
actuarial equivalent of the straight life annuity amount calculated in
accordance with Section 2.3 herein. Such election will only be effective if the
election to receive an annuity payable on a monthly basis is made at least
twelve months prior to the effective date of retirement.
Section 2.7 - Commencement of Benefit
- -------------------------------------
Payment of the Supplemental Retirement Benefit to a Participant shall commence
on the same date as payment of the Basic Retirement Plan Benefit to the
Participant commences with the exception that the lump sum form of payment is
elected pursuant to Section 2.6, payment will commence on the Benefit
Commencement Date. Benefits payable in a monthly annuity to recipients under
this Supplemental Plan shall cease to be payable, at the same time as benefits
payable under the Basic Retirement Plan to such recipient shall cease, or at
such earlier time as the limitations under Section 415 of the Code are no longer
applicable.
-8-
<PAGE> 9
ARTICLE III
SUPPLEMENTAL SURVIVING SPOUSE BENEFIT
Section 3.1 - Eligibility for Supplemental Surviving Spouse Benefit
- -------------------------------------------------------------------
A Supplemental Surviving Spouse Benefit will be paid to the Surviving Spouse
under the terms of this Article, if:
a.) the Participant has attained the age of fifty-five (55)
while actively employed with the Corporation,
b.) the participant has at least ten (10) years of Credited
Service, and
c.) the Participant dies while actively employed by the
Corporation.
Section 3.2 - Amount of Benefit
- -------------------------------
The amount of the Basic Retirement Plan Surviving Spouse Benefit payable to a
Surviving Spouse shall be equal to:
(a) the amount of the Basic Retirement Plan Surviving Spouse
Benefit to which the Surviving Spouse would have been
entitled under the BANC ONE formula based on Credited
Service under the Basic Retirement Plan if such benefit were
computed using the Final Average Compensation without giving
effect to any limitation on benefits imposed by application
of Section 415, 401(a)(17) or 404(l) of the Code;
MINUS
(b) the amount of the Basic Retirement Plan Surviving Spouse
Benefit actually payable to the Surviving Spouse under the
Basic Retirement Plan.
Section 3.3 - Form and Commencement of Benefit
- ----------------------------------------------
The Supplemental Surviving Spouse Benefit shall be computed as of the date of
Participant's death and payable in the form elected by the Participant. If no
election has been made in accordance with procedures set forth by the Plan
Administrator, the Supplemental Surviving Spouse Benefit shall be payable in a
lump sum. The amount of the payment shall be determined by the same actuarial
adjustments as specified in the Basic Retirement Plan concerning calculation of
the Surviving Spouse Benefit.
Section 3.4 - Rights to Benefits
- --------------------------------
Nothing contained in this Supplemental Plan is intended to give or shall give
any spouse or former spouse of a Participant or any other person any right to
benefits under this Supplemental Plan by virtue of Code Sections 401(a)(11) and
417 (relating to qualified pre-retirement survivor annuities and qualified joint
and survivor annuities) or Code Sections 401(a)(13)(B) and 414(p) (relating to
qualified domestic relations orders) as amended.
-9-
<PAGE> 10
ARTICLE IV
ADMINISTRATION
Section 4.1 - Administrative Powers and Duties
- ----------------------------------------------
BANC ONE CORPORATION shall be responsible for the general operation and
administration of the Plan and for carrying out the provisions thereof. The
Chief Executive Officer of BANC ONE CORPORATION may, in his discretion, appoint
an employee employees or an administrative committee in writing to administer
the provisions of this Plan. The decision of the Plan Administrator with respect
to any questions arising as to the administration or interpretation of this
Plan, including the discontinuance of any or all of the provisions thereof,
shall be final, conclusive, and binding. If the Plan is administered by a
committee, such committee may act by a majority of its members by a vote at a
meeting or in writing without a meeting signed by all the members of the
committee.
All provisions set forth in the Basic Retirement Plan with respect to the
administrative powers and duties of the Corporation, expenses of administration,
and procedures for filing claims shall also be applicable with respect to the
Supplemental Plan. The Corporation shall be entitled to rely conclusively upon
all tables, valuations, certificates, opinions and reports furnished by any
actuary, accountant, controller, counsel or other person employed or engaged by
the Corporation with respect to the Supplemental Plan.
Section 4.2 - Records
- ---------------------
The Plan Administrator shall keep such records of such information, necessary or
desirable to effectuate the purpose of the Plan including without in any manner
limiting the generality of the foregoing, records and information with respect
dates of employment and termination and determinations made hereunder. To the
extent that the Plan Administrator shall prescribe forms for use by the
Participants and their Surviving Spouse in communication with the Plan
Administrator and shall establish periods during which communications must be
received, the Plan Administrator shall be protected in disregarding any notice
or communication for which a form shall so have been prescribed and which shall
not be made in such form and any notice or communication for the receipt of
which a period shall so have been established and which shall not be received
during such period. The Corporation, the Plan Administrator and the Appeals
Committee shall respectively also be protected in acting upon any notice or
other communication purporting to be signed by any person and reasonably
believed to be genuine and accurate, including the Participant's current mailing
address.
Section 4.3 - Determinations
- ----------------------------
All determinations hereunder made by the Plan Administrator or the Appeals
Committee shall be made in the sole and absolute discretion of the Plan
Administrator or the Appeals Committee, as the case maybe.
In the event that any disputed matter shall arise hereunder, including, without
in any manner limiting the generality of the foregoing, any matter relating to
the eligibility of any person to participate under the supplemental Plan, the
participation of any person under the Supplemental Plan and, the amounts payable
to
-10-
<PAGE> 11
any person under the Supplemental Plan and the applicability and the
interpretation of the previsions of the Supplemental Plan, the decision of the
Corporation upon such matter shall be binding and conclusive upon all persons,
including, without in any manner limiting the generality of the foregoing, the
Corporation, the Participants and their Surviving Spouses and upon the
respective successors, assigns, executors, administrators, heirs, next-of-kin
and distributees of all the foregoing.
Section 4.4 - Claims Procedure
- ------------------------------
The Plan Administrator shall have discretion regarding benefit determinations.
If required by the Plan Administrator, any person entitled to benefits hereunder
must file a claim with the Plan Administrator upon forms furnished by the Plan
Administrator. Notwithstanding any other provision of the Plan, payment of
benefits need not be made until receipt of the claim and the expiration of the
time periods specified in the Section 4.4 for rendering a decision on the claim.
In the event a claim is denied, benefits need not be made or commence until a
final decision is reached by the Appeals Committee subject to the provisions of
Section 4.5.
The Plan Administrator shall notify the claimant of its decision within ninety
(90) days after receipt of the claim. However, if special circumstances require,
the Plan Administrator may defer action on a claim for benefits for an
additional period not to exceed ninety (90) days, and in that case if shall
notify the claimant of the special circumstances involved and time by which it
expects to render a decision.
If the Plan Administrator determines that any benefits claimed should be denied,
it shall give notice to the claimant setting the specific reason or reasons for
the denial and provide a specific reference to the Plan provisions on which the
denial is based. The Plan Administrator shall also describe any additional
information necessary for the claimant to perfect the claim and explain why the
Appeals Committee of the denial.
Section 4.5 - Appeal and Review Procedure
- -----------------------------------------
If a claim has been denied by the Plan Administrator, the claimant shall have
sixty (60) days after receipt of the denial in which to file a notice of appeal
with the Plan Administrator. A final determination by the Plan Administrator
shall be rendered within the Plan Administrator shall be rendered within sixty
(60) days after receipt of the claimant's notice of appeal. Under special
circumstances such determination may be delayed for an additional period not to
exceed sixty (60) days, in which case the claimant shall be notified of the
delay prior to the close of the initial sixty (60) day period. The Appeals
Committee's final decision shall set forth the reasons and the references to the
Plan provisions on which it is based.
Section 4.6 - Facility of Payment
- ---------------------------------
Whenever a person entitled under the Plan to receive any payment of a benefit is
under a legal disability or incapacity or is in any way unable to manage his
financial affairs, the Plan Administrator may, in its discretion, direct
payments on behalf of such person to be made to the incapacitated person's legal
representative, custodian, relative, or other such individual(s) as is (are)
known by the Plan Administrator to be assisting such person. Such decision by
the Plan Administrator shall be made after consultation with those
-11-
<PAGE> 12
persons, if any, which may include legal counsel and/or medical personnel, which
the Plan Administrator in his sole discretion determines are necessary in order
to make such decision. Any payment of benefit or installment thereof in
accordance with the provisions of this Section 4.6 shall be a complete discharge
of any liability relating to the making of or entitlement to such payment under
the provisions of the Plan.
Section 4.7 - Acceleration of Benefit Payments
- ----------------------------------------------
The Corporation hereby reserves the right to accelerate the payment of
Supplemental Plan distributions without the consent of the Participant or the
Participant's Surviving Spouse, estate or any other person or persons claiming
through or under the Participant. In making such determination, due
consideration may be given to the health, financial circumstances and family
obligations of the Participant. In this regard, the Participant may be
consulted, however, he shall have no voice in the decision reached nor any right
to an accelerated payment. The Corporation's determination shall be final and
conclusive upon the Participant and the Surviving Spouse.
Section 4.8 - Action by the Corporation
- ---------------------------------------
Any action by the Corporation under this Supplemental Plan may be by resolution
of its Board of Directors, or by any person, persons, duly authorized by
resolution of aid Board to take such action.
Section 4.9 - Exemption from Liability/Indemnification
- ------------------------------------------------------
The members of the Appeals Committee and the persons acting on behalf of the
Plan Administrator, shall be free from all liability, joint or several, for
their acts, omissions, and conduct, and for the acts, omissions and conduct of
their appointed agents, in administration of the Plan, except for those acts or
omissions and conduct resulting from willful misconduct or lack of good faith.
The Corporation shall indemnify each member of the Appeals Committee, the
persons acting on behalf of the Plan Administrator and other employee, officer
or director of the Corporation against any claims, loss, damage, expense and
liability, by insurance or otherwise, reasonably incurred by the individual in
connection with any action or failure to act by reason of membership on the
Appeals Committee or performance of an authorized duty or responsibility for or
on behalf of the Corporation pursuant to the Plan unless the same is judicially
determined to be the result of the individual's gross negligence or willful
misconduct. Such indemnification by the Corporation shall be made only to the
extent such expense or liability is not payable to or on behalf of such person
under any liability insurance coverage. The foregoing right to indemnification
shall be in addition to any other rights to which any such person may be
entitled as a matter of law.
Section 4.10 - Non-assignability
- --------------------------------
No right or benefit under the Plan shall be subject to anticipation, alienation,
sale, assignment, pledge, encumbrance or charge, and any attempt to anticipate,
alienate, assign, sell pledge, encumber or charge the same shall be void.
-12-
<PAGE> 13
The Supplemental Plan shall not in any manner be liable for or subject to the
debts, contracts, liabilities, engagement or torts of any person entitled to
benefits hereunder.
In event that any Participant's benefits are garnished or attached by order of
any court, the Corporation may elect to bring an action for a declaratory
judgment in a court of competent jurisdiction to determine the proper recipient
of the benefits to be paid by the Supplemental Plan. During the pendency of said
action, any benefits that become payable may be paid into the court as they
become payable, to be distributed by the court to the recipient as it deems
proper at the close of said action.
-13-
<PAGE> 14
ARTICLE V
AMENDMENT OR TERMINATION
Section 5.1 - Amendment and Termination
- ---------------------------------------
BANC ONE CORPORATION reserves the right in its sole discretion to amend or
terminate this Supplemental Plan at any time. In the event of a termination,
BANC ONE CORPORATION in its sole discretion may accelerate payment of
Supplemental Retirement benefits pursuant to Section 4.7 to those Participants
participating in the Supplemental Plan on the date of such termination, to the
extent such Supplemental Retirement Benefits would be otherwise payable as
defined in Article II, determined on the basis that each Participant's presumed
retirement date was the date the Supplemental Plan was terminated. However, no
amendment or termination shall affect any supplemental Retirement Benefit then
being paid to Participants or Surviving Spouses under this Supplemental Plan as
determined prior to such effective date of the amendment or termination.
Section 5.2 - Change of Control
- -------------------------------
The Plan shall not be automatically terminated upon change of control or by a
transfer or sale of assets of the Corporation or by the merger or consolidation
of the Corporation into or with any other Corporation or other entity when the
Corporation is not the surviving or continuing Corporation, but the Plan shall
be continued after such sale, merger or consolidation only if and to the extent
that the transferee, purchaser or successor entity, shall be obligated to pay
Plan benefits to those Participants participating in the Plan on the date of
such termination, to the extent such Plan benefits would be otherwise payable as
defined in Articles II and III, determined on the basis that each Participant's
presumed termination date was the date the Plan was terminated.
-14-
<PAGE> 15
ARTICLE VI
GENERAL PROVISIONS
Section 6.1 - General Conditions
- --------------------------------
Except as otherwise expressly provided herein, all terms and conditions of the
Basic Retirement Plan applicable to a Basic Retirement Plan Benefit or a Basic
Retirement Plan Surviving Spouse Benefit shall also be applicable to a
Supplemental Retirement Benefit or a Supplemental Surviving Spouse Benefit
payable hereunder. Any Basic Retirement Plan Benefit or Basic Retirement Plan
Surviving Spouse Benefit or any other benefit payable under the Basic Retirement
Plan shall be paid solely in accordance with the terms and conditions of the
Basic Retirement Plan and nothing in this Supplement Plan shall operate or be
construed in any way to modify, amend or affect the terms and provisions of the
Basic Retirement Plan.
Section 6.2 - Rights to Benefits
- --------------------------------
No Participant or Surviving Spouse shall have any right to a benefit under the
Supplemental Plan except in accordance with the terms of the Supplemental Plan.
No Participant, Surviving Spouse or any other person shall have any interest in
any particular assets of the Corporation by reason of the right to receive a
benefit under the Supplemental Plan and any such Participant, Surviving Spouse
or other person shall have only the rights of a general unsecured creditor of
the Corporation with respect to any rights under the Supplemental Plan.
Nothing contained in the Supplemental Plan Shall constitute a guaranty by the
Corporation or any other entity or person that the assets of the Corporation
will be sufficient to pay any benefit hereunder.
Section 6.3 - Offsets to Benefits
- ---------------------------------
Notwithstanding any provisions of this Supplemental Plan to the contrary, the
Corporation may at the time of distribution, in its sole and absolute
discretion, enforce the right of offset against any amounts paid to a
Participant under the Supplemental Plan against any debt of the Participant
which has been reduced to judgment in favor of BANC ONE CORPORATION or any of
its Related Corporations.
Section 6.4 - Forfeiture of Benefits
- ------------------------------------
Notwithstanding any provisions of this Supplemental Plan to the contrary,
benefits under the Supplemental Plan shall be forfeited upon:
-15-
<PAGE> 16
(a) termination of employment prior to: attaining the age of 55, having 10
years of Credited Service, and vesting under Basic Retirement Plan; or
(b) death of a Participant who is not survived by a Surviving Spouse; or
(c) the benefit is unclaimed pursuant to Section 6.6 below.
Section 6.5 - Limitations on Liability
- --------------------------------------
Notwithstanding any of the preceding provisions of the Supplemental Plan,
neither the Corporation nor any individual acting as an employee or agent of the
Corporation shall be liable to any Participant, former Participant, Surviving
Spouse or any other person for any claim, loss, liability or expense incurred in
connection with this Supplemental Plan.
Section 6.6 - Unclaimed Benefit
- -------------------------------
Each Participant and Surviving Spouse of the Participant shall keep the
Corporation informed of his current address and the current address of his
spouse. The Corporation shall not obligated to search for the whereabouts of any
person. If the location of a Participant is not made known to the Corporation
within three (3) years from the date on which payment of the Participant's
Supplemental Retirement Benefit may be made, payment may be made as though the
Participant had died at the end of the three-year period. If, within one
additional year after such three-year period has elapsed, or, within three years
after the actual death of a Participant, the Corporation unable to locate any
Surviving Spouse of the Participant then the Corporation shall have no further
obligation to pay any benefit hereunder to such Participant or Surviving Spouse
or any other person and such benefit shall be irrevocably forfeited.
Section 6.7 -ERISA Status
- -------------------------
This Supplemental Plan shall constitute a plan which unfunded and which is
maintained solely for the purpose of providing benefits in excess of the limits
imposed by Code Sections 415, 401(a)(17) and 404(l) to a select group of
Employees within the meaning of Section 202, 301 and 401 of ERISA and the ERISA
reporting and disclosure regulations.
Section 6.8 - Construction
- --------------------------
In the Construction of the Supplemental Plan, the masculine shall include the
feminine and the singular the plural in all cases unless qualified by the
context. Any headings used herein are included for ease reference only and are
not to be construed so as to alter the terms hereof.
Section 6.9 - Controlling Law
- -----------------------------
The laws of the State of Ohio shall be controlling in all matters relating to
the Supplemental Plan and shall be the controlling state law in all matters
relating to the Supplemental Plan and shall apply to the extent that it is not
preempted by the laws of the United States of America.
-16-
<PAGE> 17
Section 6.10 - Effect of Invalidity of Provision
- ------------------------------------------------
If any provision of this Supplemental Plan is held invalid or unenforceable for
any reason, such invalidity or unenforceability shall not affect any other
provisions hereof, and this Supplemental Plan shall be construed and enforced as
if such provision had not been included.
Section 6.11 - Continued Employment
- -----------------------------------
Nothing contained in this Supplemental Plan shall be construed as a contract of
employment between the Corporation or and Subsidiary and any Participant, or as
a right of any Participant to be continued in employment of the Corporation or
any Subsidiary or as a limitation on the right of the Corporation or any
Subsidiary as a limitation on the right of the Corporation or any Subsidiary to
discharge any of its employees, with or without cause.
Section 6.12 - Status of Plan
- -----------------------------
Nothing contained herein shall be construed as providing for assets to be held
in trust or escrow or any other form of asset segregation for the Participant or
for any other person or persons to whom benefits are to be paid pursuant to the
terms of this Supplemental Plan, the Participant's only interest hereunder being
the right to receive the benefits set forth herein. To the extent the
Participant or any other person acquires a right to receive benefits under this
Supplemental Plan, such right shall be no greater than the right of unsecured
general creditor of the Corporation.
Section 6.13 - Payments and Expenses
- ------------------------------------
Supplemental Retirement Benefits and Supplemental Surviving Spouse Benefits
("Benefits") shall be payable by the Corporation from its general assets. The
cost of the Benefits shall be incurred by each BANC ONE CORPORATION Employer,
who has employees participating in this Supplemental Plan. Each such BANC ONE
CORPORATION Employer will be regularly assessed and obligated to remit to the
Corporation the actuarially determined amount for the Benefits. Such assessments
shall be accumulated and shall be maintained as general assets of the
Corporation. The Corporation shall maintain appropriate accountings and records
for this Supplemental Plan. The expenses of administrating this Supplemental
Plan shall be borne by Corporation.
-17-
<PAGE> 18
IN WITNESS WHEREOF, this amended and restated Supplemental Plan shall
be effective as of January 1, 1995 and has been executed on behalf of the
Corporation by its duly appointed officer as of this 1st day of January, 1995.
BANC ONE CORPORATION
By
--------------------------------------
Roman J. Gerber
Executive Vice President and Secretary
CORPORATE SEAL
-18-
<PAGE> 1
EXHIBIT 11
BANC ONE CORPORATION AND SUBSIDIARIES
STATEMENT REGARDING COMPUTATION OF EARNINGS PER COMMON SHARE
(000'S, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
----------------------------------------------------
1996 1995 1994
----------------------------------------------------
<S> <C> <C> <C>
PRIMARY:
EARNINGS:
Net income $ 1,426,533 $ 1,277,863 $ 1,005,109
Deduct: Dividends on preferred shares 16,364 17,487 17,492
----------- ----------- -----------
$ 1,410,169 $ 1,260,376 $ 987,617
=========== =========== ===========
SHARES:
Weighted average common shares outstanding 433,959 432,093 446,645
Add: Dilutive effect of outstanding options,
as determined by the application of the
treasury stock method 2,968 1,230 1,473
----------- ----------- -----------
Weighted average common shares outstanding,
as adjusted 436,927 433,323 448,118
=========== =========== ===========
PRIMARY EARNINGS PER COMMON SHARE $ 3.23 $ 2.91 $ 2.20
=========== =========== ===========
FULLY DILUTED:
EARNINGS:
Net income $ 1,426,533 $ 1,277,863 $ 1,005,109
=========== =========== ===========
SHARES:
Weighted average common shares outstanding 433,959 432,093 446,645
Add: Dilutive effect of outstanding options,
as determined by the application of the
treasury stock method 3,734 1,945 1,473
Add: Conversion of preferred stock 9,106 9,639 9,642
=========== =========== ===========
Weighted average common shares outstanding,
as adjusted 446,799 443,677 457,760
=========== =========== ===========
FULLY DILUTED EARNINGS PER COMMON SHARE $ 3.19 $ 2.88 $ 2.20
=========== =========== ===========
</TABLE>
<PAGE> 1
<TABLE>
<CAPTION>
BANC ONE CORPORATION and Subsidiaries
STATEMENT REGARDING COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
$(thousands) EXHIBIT 12
Years Ended December 31,
---------- ---------- ---------- -------------------------------------
1996 1995 1994 1993 1992 1991
---------- ---------- ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Calculation excluding interest on deposits:
Earnings:
Income before income taxes and change in
accounting principle and equity in earnings of
of Bank One, Texas, NA (1) $ 2,110,712 $ 1,910,282 $ 1,518,852 $ 1,770,712 $ 1,341,249 $ 928,947
Fixed charges 881,675 736,249 633,569 348,327 321,402 419,274
Less: Capitalized interest (4,926) (1,671) (1,000) (652) (1,199) (1,732)
----------- ----------- ----------- ------------ ----------- -----------
Earnings $ 2,987,461 $ 2,644,860 $ 2,151,421 $ 2,118,387 $ 1,661,452 $ 1,346,489
=========== =========== =========== ============ =========== ===========
Fixed charges:
Interest expense, including interest factor
of capitalized leases and amortization of
deferred debt expense $ 826,984 $ 683,372 $ 575,734 $ 298,857 $ 278,615 $ 379,708
Portion of rental payments under operating
leases deemed to be interest 54,691 52,877 57,835 49,470 42,787 39,566
----------- ----------- ----------- ------------ ----------- -----------
Fixed charges $ 881,675 $ 736,249 $ 633,569 $ 348,327 $ 321,402 $ 419,274
=========== =========== =========== ============ =========== ===========
Ratio of earnings to fixed charges excluding
interest on deposits 3.39 x 3.59 x 3.40 x 6.08 x 5.17 x 3.21 x
Calculation including interest on deposits:
Earnings:
Income before income taxes and change in
accounting principle and equity in earnings of
of Bank One, Texas, NA (1) $ 2,110,712 $ 1,910,282 $ 1,518,852 $ 1,770,712 $ 1,341,249 $ 928,947
Fixed charges 3,249,015 3,026,343 2,307,832 1,826,018 2,318,274 2,955,918
Less: Capitalized interest (4,926) (1,671) (1,000) (652) (1,199) (1,732)
----------- ----------- ----------- ------------ ----------- -----------
Earnings $ 5,354,801 $ 4,934,954 $ 3,825,684 $ 3,596,078 $ 3,658,324 $ 3,883,133
=========== =========== =========== ============ =========== ===========
Fixed charges:
As detailed above $ 881,675 $ 736,249 $ 633,569 $ 348,327 $ 321,402 $ 419,274
Interest on deposits 2,367,340 2,290,094 1,674,263 1,477,691 1,996,872 2,536,644
----------- ----------- ----------- ------------ ----------- -----------
Fixed charges $ 3,249,015 $ 3,026,343 $ 2,307,832 $ 1,826,018 $ 2,318,274 $ 2,955,918
=========== =========== =========== ============ =========== ===========
Ratio of earnings to fixed charges including
interest on deposits 1.65 x 1.63 x 1.66 x 1.97 x 1.58 x 1.31 x
(1) Results of Bank One, Texas, NA are consolidated beginning October 1, 1991
</TABLE>
<PAGE> 1
Exhibit 13a
MANAGEMENT'S DISCUSSION AND ANALYSIS
(UNAUDITED)
- --------------------------------------------------------------------------------
I. INTRODUCTION
This discussion should be read in conjunction with the
consolidated financial statements, notes and tables
included elsewhere in this report. "The Corporation" is
defined as parent company only. "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 BANC
ONE's actual results see BANC ONE's Annual Report on Form
10-K for the year ended December 31, 1996.
ACQUISITIONS:
First USA, Inc. -- On January 19, 1997, the Corporation
entered into an agreement providing for the merger of
First USA, Inc., (First USA). Terms of the agreement call
for First USA shareholders to receive 1.1659 shares of the
Corporation's common stock for each outstanding share of
First USA common stock. First USA is a financial services
company specializing in the credit card business with
$22.4 billion in managed credit card receivables and 16
million card holders at December 31, 1996. As reported,
First USA had total assets of $10.2 billion and
stockholders' equity of $1.2 billion at December 31, 1996.
Even though 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. Further, given the
operational overlap of credit card operations between BANC
ONE and First USA, and the incurrence of certain costs
resulting from this transaction, management estimates a
charge to earnings of $150 million at acquisition,
however, the actual charge could be substantially greater.
The acquisition is subject to regulatory and shareholder
approval and is expected to be completed in the second
quarter of 1997. The transaction will be accounted for as
a pooling of interests.
Liberty Bancorp, Inc. -- On December 28, 1996, the
Corporation entered into an agreement providing for the
merger of Liberty Bancorp, Inc. (Liberty), a multi-bank
holding company headquartered in Oklahoma City, Oklahoma,
with 29 banking offices primarily in Oklahoma City and
Tulsa. Terms of the agreement call for Liberty
shareholders to receive 1.175 shares of the Corporation's
common stock for each outstanding share of Liberty common
stock. Liberty had total assets of approximately $2.9
billion at December 31, 1996. The transaction is expected
to be completed in the second quarter of 1997 and will be
accounted for using the purchase method of accounting.
While having no impact on performance comparisons
between 1996 and prior periods, the pending acquisition of
both First USA and Liberty will impact 1997 financial
performance and future comparisons of financial results to
prior periods.
Premier Bancorp, Inc. -- BANC ONE's financial position
and results of operations for periods prior to 1996 have
not been restated to include Banc One Louisiana
Corporation (BOLC), formerly known as Premier Bancorp,
Inc., which was acquired on January 2, 1996, as this
acquisition was accounted for using the purchase method of
accounting. The acquisition of BOLC significantly impacts
performance comparisons between 1996 and prior periods.
Throughout the following discussion, the impact of BOLC
will be addressed.
30 BANC ONE CORPORATION and Subsidiaries
<PAGE> 2
STRATEGIC INITIATIVES:
In 1995, BANC ONE launched a series of strategic
initiatives collectively referred to as Project One. These
efforts are designed to enhance the effectiveness and
efficiency of certain operations by, among other things,
decreasing the number of legal entities, combining
operations and systems and centralizing many staff and
line functions. During 1996, BANC ONE incurred Project One
expenses of $150 million. It is management's view that
Project One will continue to result in higher expense
levels during the first half of 1997, with anticipated
expense reduction benefits realized thereafter. In
addition, BANC ONE has initiated a review of certain of
its lines of business. This review is anticipated to be
completed during the second quarter of 1997. While the
exact impact of the review is not yet known, the outcome
may include a variety of initiatives, possibly including
consolidation of functions, installations or operations.
These initiatives could result in a charge to earnings,
the magnitude of which cannot presently be determined.
- --------------------------------------------------------------------------------
II. OVERVIEW OF OPERATIONS
Net income for 1996 was a record $1.4 billion, or $3.23
per common share, up 11.7% and 11.0%, respectively, from
$1.3 billion, or $2.91 per common share in 1995. This
reflected a 17.6% increase in net interest income and a
19.1% increase in non-interest income, partially offset by
a 15.2% increase in non-interest expense and a higher
provision for credit losses.
Contributing to the 1996 increase in income was an
11.1% increase in average earning assets, reflecting
strong loan growth, as well as a higher fully taxable
equivalent (FTE) net interest margin of 5.59%, up from
5.31% in 1995. The higher provision for credit losses
reflected both loan growth and higher levels of net
charge-offs, particularly in credit card and consumer
loans. Key performance measures continued to be strong
during 1996.
The five year performance summary below and the ten
year performance summary on Pages 50-51 provide additional
operating statistics.
FIVE YEAR PERFORMANCE SUMMARY
<TABLE>
<CAPTION>
$(MILLIONS, EXCEPT FOR PER SHARE
DATA) 1996 1995 1994 1993 1992
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net income........................ $ 1,427 $ 1,278 $ 1,005 $ 1,192 $ 922
Total revenue..................... 10,272 8,971 7,778 7,547 7,741
Net income per common share....... $ 3.23 $ 2.91 $ 2.20 $ 2.66 $ 2.06
Return on average assets.......... 1.48% 1.47% 1.15% 1.50% 1.20%
Return on average common equity... 17.11 16.77 13.35 17.58 15.14
Average common equity to average
assets.......................... 8.55% 8.64% 8.50% 8.40% 7.74%
At year end:
-----------
Total assets...................... $ 101,848 $ 90,454 $ 88,923 $ 84,835 $ 81,305
Long-term borrowings.............. $ 4,190 $ 2,720 $ 1,866 $ 1,805 $ 1,397
</TABLE>
BANC ONE CORPORATION and Subsidiaries 31
<PAGE> 3
- --------------------------------------------------------------------------------
III NET INTEREST INCOME
Net interest income (FTE) was $4.9 billion in 1996, up
$710 million, or 16.9% from the prior year reflecting both
an increase in average earning assets and higher net
interest margin. For 1996, average earning assets totaled
$88.0 billion, up $8.8 billion or 11.1% from 1995. This
increase primarily reflected a $5.0 billion average
positive impact from the BOLC acquisition complemented by
strong underlying loan growth, as average securities and
other earning assets increased only slightly.
Average loans and leases, excluding loans held for
sale, totaled $70.9 billion, a $7.8 billion or 12.4%
increase over 1995 levels. Excluding the impact of the
BOLC acquisition, average loans increased $4.5 billion or
7.1%. Contributing to this increase was a $1.8 billion
increase in credit card loans, and a $1.3 billion increase
in commercial loans and leases. These increases are net of
loan sales and securitizations.
Average investment securities totaled $16.1 billion in
1996, up $1.4 billion, or 9.4% from 1995, primarily
attributable to the acquisition of BOLC. The lack of
growth in investment securities reflected a decision to
reduce the amount of lower yielding securities, primarily
through maturity run-off and to use the proceeds to fund
higher yielding loans. This strategy improved the overall
earning asset yield and net interest margin given the
investment securities' typically lower yield as compared
to loans.
Earning asset growth is funded by traditional bank
funding sources, primarily retail deposits and the
issuance of short and long-term debt. During 1996, average
total deposits increased $4.9 billion or 7.5% to $70.7
billion, primarily due to the inclusion of BOLC. Average
short-term borrowed funds in 1996 totaled $11.9 billion,
up $2.6 billion from the prior year. Average long-term
borrowed funds totaled $3.2 billion, up $.8 billion from
1995.
Also affecting the net interest margin, but not net
income, was the securitization of consumer and credit card
loans. The impact to the financial statements of
securitizing loans is to remove these loans from the
balance sheet and to record the excess yield as loan
servicing income. Excess yield is the interest and fee
income of the credit card assets, less the sum of the
securitized coupon rate, charge-offs, and costs of
servicing. Because credit losses are charged against loan
servicing income over the life of these transactions, loan
servicing income may vary depending upon the credit
performance of the loans securitized. However, exposure to
credit losses on securitized loans is limited to future
servicing income and certain receivables which are
classified as other assets. While securitized loans have
included both consumer loans and credit card receivables,
the most significant impact on BANC ONE's income statement
classifications results from income relating to credit
card securitizations. The following table presents the
impact of credit card securitizations on income statement
line items and certain other information pertaining to the
managed credit card portfolio.
32 BANC ONE CORPORATION AND Subsidiaries
<PAGE> 4
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1996 DECEMBER 31, 1995
------------------------------- -------------------------------
IMPACT OF IMPACT OF
CREDIT CREDIT
CARD PRO CARD PRO
SECURI- FORMA SECURI- FORMA
$ (MILLIONS) REPORTED TIZATIONS ADJUSTED REPORTED TIZATIONS ADJUSTED
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Income statement:
----------------
Net interest income -- fully
taxable equivalent............ $4,919 $ 396 $ 5,315 $4,209 $ 308 $ 4,517
Provision for credit losses..... 788 277 1,065 457 139 596
Non-interest income............. 2,228 (107) 2,121 1,870 (163) 1,707
Non-interest expense............ 4,184 12 4,196 3,632 6 3,638
Net income...................... $1,427 $ 1,427 $1,278 $ 1,278
Net interest margin............. 5.59% 10.11% 5.78% 5.31% 10.30% 5.49%
Other data:
----------
Credit card balances:
Ending, at December 31,......... $9,301 $3,340 $12,641 $7,665 $3,440 $11,105
Average for year................ 8,361 3,921 12,282 6,438 2,990 9,428
Net charge-offs as a percentage
of average credit cards....... 5.46% 7.08% 5.98% 3.75% 4.65% 4.03%
Credit card delinquencies over
30 days as a percentage of
ending credit cards........... 5.53% 6.56% 5.80% 4.40% 4.86% 4.54%
Credit card delinquencies over
90 days as a percentage of
ending credit cards........... 2.25% 2.77% 2.39% 1.54% 1.86% 1.64%
----------------------------------------------------------
</TABLE>
In 1996, off-balance sheet investment products
decreased interest income by $49 million and increased
deposit and other borrowing costs by $6 million. This
compares with a reduction in 1995 interest income of $145
million and increased deposit and other borrowing costs of
$59 million. Off-balance sheet investment product impact
on net interest income reflects the cost or benefit of the
use of these products to manage interest rate risk. The
dollar amounts stated above are not an indication of the
effectiveness of the use of these instruments as the on
balance sheet instruments hedged move in the opposite
direction. 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.
BANC ONE CORPORATION and Subsidiaries 33
<PAGE> 5
FIVE YEAR SUMMARY -- AVERAGE BALANCES, INCOME AND
EXPENSE, YIELDS AND RATES(1,4)
<TABLE>
<CAPTION>
1996 1995
---------------------------------- ----------------------------------
AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/
$(THOUSANDS) BALANCE EXPENSE RATE BALANCE EXPENSE RATE
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Short-term investments.............................. $ 408,173 $ 21,747 5.33% $ 950,833 $ 59,862 6.30%
Loans held for sale................................. 549,370 39,544 7.20 418,540 32,925 7.87
SECURITIES:(3)
Taxable........................................... 14,451,132 933,640 6.46 12,791,932 834,808 6.53
Tax-exempt........................................ 1,694,224 139,391 8.23 1,964,544 171,626 8.74
----------- ---------- ----------- ----------
TOTAL SECURITIES.................................. 16,145,356 1,073,031 6.65 14,756,476 1,006,434 6.82
LOANS AND LEASES:(2)
Commercial, financial and agricultural............ 19,366,928 1,600,332 8.26 17,439,240 1,426,070 8.18
Real estate:
Commercial...................................... 6,162,566 553,122 8.98 5,589,638 501,614 8.97
Construction.................................... 3,214,428 316,406 9.84 2,441,833 250,116 10.24
Residential..................................... 11,898,026 1,104,160 9.28 11,491,299 1,011,832 8.81
Consumer, net..................................... 19,896,158 1,875,265 9.43 18,209,617 1,710,328 9.39
Credit card....................................... 8,360,610 1,373,853 16.43 6,437,512 1,074,026 16.68
Leases, net....................................... 2,025,861 150,547 7.43 1,479,726 107,143 7.24
----------- ---------- ----------- ----------
TOTAL LOANS AND LEASES.............................. 70,924,577 6,973,685 9.83 63,088,865 6,081,129 9.64
----------- ---------- ----------- ----------
Total earning assets................................ 88,027,476 8,108,007 9.21 79,214,714 7,180,350 9.06
ALLOWANCE FOR CREDIT LOSSES......................... (1,027,931) (900,061)
Other assets (3).................................... 9,398,834 8,736,993
----------- -----------
TOTAL ASSETS........................................ $96,398,379 $87,051,646
=========== ===========
LIABILITIES:
DEPOSITS:
Non-interest bearing demand....................... $14,029,775 $12,968,315
Interest bearing demand........................... 2,386,378 42,883 1.80 8,263,124 175,734 2.13
Savings and money market.......................... 29,008,134 963,311 3.32 20,095,413 746,564 3.72
Time deposits:
CDs less than $100,000.......................... 18,928,796 1,053,236 5.56 19,181,386 1,089,761 5.68
CDs $100,000 and over:
Domestic...................................... 3,895,007 177,877 4.57 3,724,043 190,453 5.11
Foreign....................................... 2,428,889 130,033 5.35 1,531,360 87,582 5.72
----------- ---------- ----------- ----------
TOTAL DEPOSITS.................................... 70,676,979 2,367,340 3.35 65,763,641 2,290,094 3.48
BORROWED FUNDS:
Short-term........................................ 11,886,849 608,982 5.12 9,302,237 518,682 5.58
Long-term......................................... 3,172,562 213,076 6.72 2,339,092 162,692 6.96
----------- ---------- ----------- ----------
TOTAL BORROWED FUNDS................................ 15,059,411 822,058 5.46 11,641,329 681,374 5.85
----------- ---------- ----------- ----------
TOTAL INTEREST BEARING LIABILITIES.................. 71,706,615 3,189,398 4.45 64,436,655 2,971,468 4.61
Other liabilities................................... 2,182,066 1,879,174
----------- -----------
TOTAL LIABILITIES................................... 87,918,456 79,284,144
Preferred stock..................................... 236,044 249,855
Common stockholders' equity......................... 8,243,879 7,517,647
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.......... $96,398,379 $87,051,646
=========== ===========
NET INTEREST INCOME................................. 4,918,609 5.59 4,208,882 5.31
Provision for credit losses......................... (788,087) (.90) (457,499) (.57)
---------- ----- ---------- -----
NET FUNDS FUNCTION.................................. $4,130,522 4.69% $3,751,383 4.74%
========== ===== ========== =====
</TABLE>
(1) Income amounts are presented on a fully taxable equivalent basis (FTE),
which is defined as income on earning assets that is subject to either a
reduced rate or zero rate of income tax, adjusted to give effect to the
appropriate incremental federal income tax rate and adjusted for
non-deductible carrying costs, where applicable. Where appropriate, yield
calculations include these adjustments. The federal statutory tax rate was
35% for 1996, 1995, 1994 and 1993 and 34% for 1992.
(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.
(4) All average balances are calculated on the basis of daily averages.
34 BANC ONE CORPORATION and Subsidiaries
<PAGE> 6
<TABLE>
<CAPTION>
COMPOUND ANNUAL
1994 1993 1992 GROWTH 1991-1996
- -------------------------------- --------------------------------- --------------------------------- ------------------
AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/ AVERAGE INCOME/
BALANCE EXPENSE RATE BALANCE EXPENSE RATE BALANCE EXPENSE RATE BALANCE EXPENSE
- ------------------------------------------------------------------------------------------------------------- ------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 1,113,465 $ 53,388 4.79% $ 1,319,605 $ 44,892 3.40% $ 3,216,327 $ 127,345 3.96% (33.69)% (35.27)%
562,168 40,822 7.26 839,611 58,128 6.92 427,462 33,684 7.88 26.29 20.42
16,010,679 876,420 5.47 15,004,127 846,403 5.64 15,041,378 1,032,202 6.86 5.68 .32
2,331,794 202,042 8.66 2,042,759 194,441 9.52 2,065,168 216,009 10.46 (6.02) (11.41)
- ----------- ---------- ----------- ---------- ----------- ----------
18,342,473 1,078,462 5.88 17,046,886 1,040,844 6.11 17,106,546 1,248,211 7.30 3.99 (1.79)
15,533,301 1,174,391 7.56 14,598,413 1,176,101 8.06 15,545,313 1,267,719 8.15 5.49 2.24
5,228,036 442,323 8.46 4,728,069 404,625 8.56 4,337,654 393,168 9.06 10.98 8.63
1,960,218 184,118 9.39 1,625,081 138,124 8.50 1,569,215 132,386 8.44 12.26 13.68
10,335,934 871,283 8.43 9,579,529 871,444 9.10 8,896,087 851,766 9.57 12.31 9.34
18,768,362 1,614,093 8.60 15,657,193 1,479,106 9.45 13,201,395 1,414,312 10.71 15.29 9.94
6,253,282 989,165 15.82 5,128,076 848,978 16.56 4,537,506 786,934 17.34 20.62 17.74
1,174,142 88,549 7.54 1,020,028 83,882 8.22 991,395 87,740 8.85 17.19 8.94
- ----------- ----------- ----------- ---------- ----------- ----------
59,253,275 5,363,922 9.05 52,336,389 5,002,260 9.56 49,078,565 4,934,025 10.05 11.64 8.94
- ----------- ----------- ----------- ---------- ----------- ----------
79,271,381 6,536,594 8.25 71,542,491 6,146,124 8.59 69,828,900 6,343,265 9.08 8.80 6.40
(958,989) (975,743) (952,868) 5.91
8,777,863 8,878,172 8,197,518 5.90
- ----------- ----------- -----------
$87,090,255 $79,444,920 $77,073,550 8.53
=========== =========== ===========
$13,460,795 $12,779,430 $11,662,949 10.75
9,277,460 168,959 1.82 8,757,283 141,064 1.61 8,145,956 183,521 2.25 (15.81) (29.02)
20,011,114 551,567 2.76 19,385,667 501,974 2.59 18,261,233 604,514 3.31 15.71 6.58
17,718,121 753,590 4.25 17,826,413 676,142 3.79 19,968,163 993,774 4.98 .55 (3.64)
3,575,446 144,464 4.04 3,555,761 135,002 3.80 4,386,790 192,715 4.39 (4.08) (10.27)
1,298,988 55,683 4.29 694,585 23,509 3.38 560,578 22,348 3.99 41.83 39.41
- ----------- ----------- ----------- ---------- ----------- ----------
65,341,924 1,674,263 2.56 62,999,139 1,477,691 2.35 62,985,669 1,996,872 3.17 6.46 (1.37)
10,811,619 442,767 4.10 6,480,247 196,845 3.04 5,558,597 196,177 3.53 18.48 15.83
1,834,439 131,811 7.19 1,630,343 101,215 6.21 1,073,515 80,777 7.52 28.37 19.94
- ----------- ----------- ----------- ---------- ----------- ----------
12,646,058 574,578 4.54 8,110,590 298,060 3.67 6,632,112 276,954 4.18 20.20 16.81
- ----------- ----------- ----------- ---------- ----------- ----------
64,527,187 2,248,841 3.49 58,330,299 1,775,751 3.04 57,954,832 2,273,826 3.92 7.80 1.82
1,451,990 1,404,471 1,223,979 15.62
- ----------- ----------- -----------
79,439,972 72,514,200 70,841,760 8.40
249,900 253,385 264,811 3.09
7,400,383 6,677,335 5,966,979 10.14
- ----------- ----------- -----------
$87,090,255 $79,444,920 $77,073,550 8.53%
=========== =========== ===========
4,287,753 5.41 4,370,373 6.11 4,069,439 5.83 10.17
(242,269) (.31) (388,261) (.54) (630,731) (.91) 5.19
----------- ----- ---------- ----- ---------- ----- 11.30%
$4,045,484 5.10% $3,982,112 5.57% $3,438,708 4.92%
=========== ===== ========== ===== ========== =====
</TABLE>
BANC ONE CORPORATION and Subsidiaries 35
<PAGE> 7
RATE-VOLUME ANALYSIS (1, 2)
<TABLE>
<CAPTION>
1996-95 1995-94
--------------------------------------- --------------------------------------
CHANGE IN CHANGE IN
INCOME/ RATE VOLUME INCOME/ RATE VOLUME
$(THOUSANDS) EXPENSE EFFECT EFFECT EXPENSE EFFECT EFFECT
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------
EARNING ASSETS:
Short-term investments................... $ (38,115) $ (8,088) $ (30,027) $ 6,474 $ 15,048 $ (8,574)
Loans held for sale...................... 6,619 (2,985) 9,604 (7,897) 3,188 (11,085)
Securities: (5)
Taxable................................ 98,832 (8,441) 107,273 (41,612) 151,894 (193,506)
Tax exempt............................. (32,235) (9,586) (22,649) (30,416) 1,655 (32,071)
---------- ----------- ----------- ---------- ----------- ----------
Total securities....................... 66,597 (18,027) 84,624 (72,028) 153,549 (225,577)
Loans and leases: (3)(4)
Commercial, financial and
agricultural......................... 174,262 15,116 159,146 251,679 100,519 151,160
Real estate:
Commercial........................... 51,508 85 51,423 59,291 27,708 31,583
Construction......................... 66,290 (10,098) 76,388 65,998 17,769 48,229
Residential.......................... 92,328 55,749 36,579 140,549 40,053 100,496
Consumer, net.......................... 164,937 5,996 158,941 96,235 145,369 (49,134)
Credit card............................ 299,827 (16,417) 316,244 84,861 55,161 29,700
Leases, net............................ 43,404 2,889 40,515 18,594 (3,655) 22,249
---------- ----------- ----------- ---------- ----------- ----------
TOTAL LOANS AND LEASES................... 892,556 53,320 839,236 717,207 382,924 334,283
TOTAL EARNING ASSETS..................... 927,657 24,220 903,437 643,756 554,709 89,047
Interest bearing liabilities:
Interest bearing demand................ (132,851) (23,778) (109,073) 6,775 26,471 (19,696)
Savings and money market............... 216,747 (86,014) 302,761 194,997 192,664 2,333
Time deposits:
CD's less than $100,000................ (36,525) (22,290) (14,235) 336,171 269,810 66,361
CD's $100,000 and over:
Domestic............................. (12,576) (21,038) 8,462 45,989 39,769 6,220
Foreign.............................. 42,451 (5,922) 48,373 31,899 20,777 11,122
---------- ----------- ----------- ---------- ----------- ----------
Total deposits......................... 77,246 (159,042) 236,288 615,831 549,491 66,340
Borrowed funds:
Short-term............................. 90,300 (44,760) 135,060 75,915 143,954 (68,039)
Long-term.............................. 50,384 (5,769) 56,153 30,881 (4,340) 35,221
---------- ----------- ----------- ---------- ----------- ----------
Total borrowed funds................... 140,684 (50,529) 191,213 106,796 139,614 (32,818)
---------- ----------- ----------- ---------- ----------- ----------
TOTAL INTEREST BEARING LIABILITIES....... 217,930 (209,571) 427,501 722,627 689,105 33,522
---------- ----------- ----------- ---------- ----------- ----------
NET INTEREST INCOME...................... $ 709,727 $ 233,791 $ 475,936 $ (78,871) $ (134,396) $ 55,525
========== =========== =========== ========== =========== ==========
</TABLE>
(1) Fully taxable equivalent basis using the federal statutory rate of 35% for
all years presented.
(2) The change not solely due to volume or rate has been prorated into rate and
volume components.
(3) Interest income on loans and leases includes $199 million, $131 million and
$156 million of credit card fees in 1996, 1995 and 1994, respectively.
Other fees included in interest income are not material.
(4) Non-accrual loans and related income are included in their respective loan
categories.
(5) Average securities balances are based on amortized historical cost,
excluding SFAS 115 adjustments to fair value, which are included in other
assets.
36 BANC ONE CORPORATION and Subsidiaries
<PAGE> 8
- --------------------------------------------------------------------------------
IV NON-INTEREST INCOME AND NON-INTEREST EXPENSE
NON-INTEREST INCOME
<TABLE>
<CAPTION>
INCREASE
$(MILLIONS) 1996 1995 (DECREASE)
-----------------------------------------------------------------------------------
<S> <C> <C> <C>
Income from fiduciary activities................. $ 279 $ 239 $ 40
Service charges on deposit accounts.............. 654 545 109
Loan processing and servicing income:
Mortgage banking............................... 89 78 11
Credit card and merchant processing fees....... 158 194 (36)
Loan servicing income.......................... 205 249 (44)
------ ------ -----
Total loan processing and servicing income....... 452 521 (69)
Other income:
Insurance...................................... 118 85 33
Securities related activities.................. 71 50 21
Investment banking............................. 39 31 8
Gain on sale of assets......................... 176 65 111
Other.......................................... 346 306 40
------ ------ -----
Total other income............................... 750 537 213
------ ------ -----
Non-interest income before securities
transactions................................... 2,135 1,842 293
Securities gains, net............................ 93 28 65
------ ------ -----
TOTAL NON-INTEREST INCOME........................ $2,228 $1,870 $358
====== ====== =====
</TABLE>
----------------------------------------------------------
Non-interest income in 1996 totaled $2.2 billion, an
increase of $358 million, or 19.1% from 1995. Excluding
the impact of the BOLC acquisition, non-interest income
increased $261 million, or 13.9%. The $97 million increase
related to BOLC includes $54 million in service charges on
deposit accounts, $16 million in other-other non-interest
income and $11 million in fiduciary income. The following
discussion of individual non-interest income categories
excludes the impact of BOLC.
Income from fiduciary activities for 1996 increased $29
million, or 12.1%, primarily reflecting an increase in
investment management fees resulting from continued growth
in funds under management and an increase in fees per
account. Funds under management at year end 1996 were $40
billion, up 12.8% from December 31, 1995.
Service charges on deposit accounts increased $55
million or 10.1% in 1996 primarily reflecting a $36
million increase in fees on overdrafts, personal savings
and checking accounts as well as an overall increase in
demand deposit account volume.
The decline in credit card and merchant processing fees
resulted primarily from a reclassification of income due
to a joint venture arrangement entered into with a third
party in 1996. Through this arrangement, merchant
processing fees of $49 million and salary and other
expense of $27 million were included in net earnings from
the joint venture and classified as other-income. The
decrease in loan servicing income compared with 1995,
primarily resulted from a reduction in the excess yield on
credit card loan securitizations due to a $138 million
increase in net charge-offs which is partially offset by a
favorable $94 million increase in servicing income due to
higher volume of serviced loans.
BANC ONE CORPORATION and Subsidiaries 37
<PAGE> 9
Insurance income and income from securities related
activities increased $28 million and $18 million,
respectively, resulting from higher commissions related to
increased sales volumes resulting from 1996 national sales
programs.
Gains on sale of assets increased $111 million in 1996
primarily reflecting gains on the sales of credit card
portfolios in September and December of 1996. In December
1996, BANC ONE sold $734 million, or approximately 61%, of
an affinity credit card portfolio, with servicing
released, which resulted in a pretax gain of $97 million.
The 1996 increase in securities gains was primarily due
to the recognition of a $52 million increase in the fair
value of the venture capital portfolio in 1996.
NON-INTEREST EXPENSE
<TABLE>
<CAPTION>
INCREASE
$(MILLIONS) 1996 1995 (DECREASE)
------------------------------------------------------------------------------------
<S> <C> <C> <C>
Salaries and related costs........................ $ 2,018 $ 1,751 $267
Net occupancy expense, exclusive of
depreciation.................................... 175 164 11
Equipment expense................................. 116 104 12
Taxes other than income and payroll............... 88 88 0
Depreciation and amortization..................... 353 293 60
Outside services and processing................... 528 427 101
Marketing and development......................... 168 171 (3)
Communication and transportation.................. 320 275 45
FDIC Insurance.................................... 48 81 (33)
Other............................................. 370 278 92
------- ------- -----
TOTAL NON-INTEREST EXPENSE........................ $ 4,184 $ 3,632 $552
======= ======= =====
</TABLE>
----------------------------------------------------------
Non-interest expense in 1996 totaled $4.2 billion, up
$552 million or 15.2% from the prior year. As mentioned
previously, the BOLC acquisition and the ongoing Project
One expenses significantly impacted 1996 expense levels.
BOLC added $227 million in non-interest expenses during
1996 of which $99 million were in salaries and related
costs, $44 million in depreciation and amortization, $27
million in outside services and processing, $11 million in
communication and transportation and $16 million in other
non-interest expense. Project One expenses totaled $150
million primarily related to $56 million in salaries and
related costs, $70 million in outside services and
processing and $10 million in communication and
transportation expense. The net benefits from this
initiative are expected to begin to be realized in the
second half of 1997. Excluding the $227 million in BOLC
expenses and $150 million in Project One expenses, 1996
non-interest expense totaled $3.8 billion, up $175 million
or 4.8% from the prior year. The following discussion of
individual non-interest expense categories excludes both
BOLC and Project One.
The increase in salaries and related costs was due
primarily to increased staffing, increased bonuses and
incentive pay resulting from the growth in securities and
investment banking activities, as well as, annual salary
increases.
Depreciation and amortization was up $16 million, or
5.5% primarily due to the second quarter 1996 write-off of
$12 million in software and goodwill related to a non-bank
subsidiary.
Communication and transportation expense increased $24
million, or 8.7% reflecting an increase in the number of
employees in bank-related businesses and $6 million
related to communication systems.
38 BANC ONE CORPORATION and Subsidiaries
<PAGE> 10
The $33 million decline in deposit insurance expense
resulted from lower deposit insurance premium rates, which
provided a $67 million reduction in 1996 expense, offset
in part by a one-time $34 million special assessment in
1996 on Savings Association Insurance Fund (SAIF)
deposits.
Other non-interest expense increased approximately 27%
primarily due to 1996 amounts related to: (1) $12 million
in additional expenses related to servicing deposit
accounts; (2) a $9 million interest charge due to
settlement of an IRS audit; (3) a $5 million loss on the
sale of a subsidiary; and, (4) a $4 million prepayment
penalty related to the early extinguishment of long-term
debt. These increases were partially offset by a $9
million decrease in litigation expenses. The comparison
between 1996 and 1995 also includes reductions in 1995
expenses due to a $10 million benefit from the reversal of
an interest charge as a result of a favorable IRS ruling.
Income Taxes
The provision for income taxes was 32.4% of pretax income
for 1996 as compared with 33.1% for 1995. The decrease in
the effective tax rate is a result of state tax
strategies. In addition, the federal effective rate is
lower due to the resolution of certain open issues with
taxing authorities. A similar reduction in the effective
tax rates is not expected to occur in 1997.
- --------------------------------------------------------------------------------
V BALANCE SHEET ANALYSIS
Loans and Leases
Ending loans and leases, excluding loans held for sale,
increased $9.4 billion, or 14.5%, from December 31, 1995
to December 31,1996. The increase was due to $3.3 billion
related to the inclusion of BOLC and loan growth in
substantially all categories. Loans held for sale at
December 31, 1996 increased to $1.5 billion as compared to
$.5 billion at December 31, 1995. This increase reflected
$1 billion of credit card loans classified as held for
sale in December, 1996. BANC ONE had $.5 billion of
mortgage loans held for sale at both December 31, 1996 and
1995.
LOAN PORTFOLIO COMPOSITION
<TABLE>
<CAPTION>
$(MILLIONS) 1996 1995 1994 1993 1992
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Ending loans and leases:
Commercial, financial and
agricultural...................... $ 20,232 $ 17,904 $ 16,619 $ 15,208 $ 15,086
Real estate:
Commercial........................ 6,429 5,668 5,571 4,886 4,746
Construction...................... 3,602 2,692 2,195 1,709 1,516
Residential....................... 13,917 10,756 10,918 9,958 9,559
Consumer, net....................... 19,386 18,408 19,070 17,312 14,063
Credit card......................... 8,301 7,665 5,925 6,113 5,087
Leases, net......................... 2,327 1,732 1,339 1,107 1,000
--------- --------- --------- --------- --------
TOTAL LOANS AND LEASES.............. $ 74,194 $ 64,825 $ 61,637 $ 56,293 $ 51,057
========= ========= ========= ========= ========
</TABLE>
BANC ONE CORPORATION and Subsidiaries 39
<PAGE> 11
Significant loan origination activity is not fully
reflected in ending loan balances due to securitizations
and sales of $3.8 billion and $5.5 billion in loans during
1996 and 1995, respectively. In addition, loans held for
sale are excluded.
The following table depicts the maturities of certain
loans at December 31, 1996. Demand loans having no stated
maturity are classified as due within one year. Loans that
have adjustable rates are shown in their maturity category
by their scheduled principal repayment dates rather than
the dates at which they are repriced. The repricing
characteristics of certain of the loans included below
have been synthetically altered by the use of off-balance
sheet investment products, however classifications below
are based on the contractual terms of the loans.
<TABLE>
<CAPTION>
COMMERCIAL,
FINANCIAL REAL ESTATE,
AND AGRICULTURAL CONSTRUCTION
-------------------- -------------------
$(MILLIONS) FIXED VARIABLE FIXED VARIABLE
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1997............................................... $ 1,532 $ 8,955 $ 137 $ 1,913
1998 through 2001.................................. 2,162 5,483 182 1,212
After 2001......................................... 719 1,381 66 92
------ ------- ------ -------
$ 4,413 $ 15,819 $ 385 $ 3,217
====== ======= ====== =======
</TABLE>
----------------------------------------------------------
Credit Quality
The process for monitoring loan quality includes detailed,
monthly analysis of delinquencies, nonperforming assets
and potential problem loans. Management extensively
monitors credit through appraisals, assessment of the
financial condition of borrowers and avoidance of loan
concentrations.
As new markets are entered, a standardized
loan-monitoring system and credit policies, including
underwriting standards, are implemented immediately.
Centralized management of problem assets with active
programs for resolution and disposition of foreclosed
properties, as well as implementation of internal loan
monitoring systems at newly acquired affiliates, have
aided in the reduction of the level of nonperforming
assets. Excluding the impact of BOLC, non-accrual loans
decreased $16 million from December 31, 1995. At year end
1996, other real estate owned (OREO) decreased $23 million
from December 31, 1995.
The loan portfolio continued to reflect the policy of
minimizing concentrations in any one industry. There was
no significant loan concentration with any single borrower
or area of the country. The commercial loan portfolio
consists primarily of numerous small balance loans in
diverse businesses located throughout the markets served.
The largest concentration of lending was to real estate
operators managers and developers and construction
contractors which represented 10.33% and 9.55% of total
loans and leases at December 31, 1996 and 1995,
respectively. Foreign loans totaled less than 1% of total
loans at December 31, 1996 and 1995. The merger with First
USA will result in the pro forma combined entity having
approximately $14 billion in on-books and $35 billion of
managed credit card receivables at December 31, 1996.
40 BANC ONE CORPORATION and Subsidiaries
<PAGE> 12
NONPERFORMING ASSETS AND PAST DUE LOANS
<TABLE>
<CAPTION>
$(THOUSANDS) 1996 1995 1994 1993 1992
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Non-accrual loans.............. $374,245 $349,084 $377,409 $482,331 $680,408
Renegotiated loans............. 8,199 5,211 3,910 7,567 28,361
-------- -------- -------- -------- --------
Total nonperforming loans.......... 382,444 354,295 381,319 489,898 708,769
Other Real Estate Owned
(OREO)....................... 52,970 75,483 84,355 153,260 191,665
-------- -------- -------- -------- --------
Total nonperforming assets......... $435,414 $429,778 $465,674 $643,158 $900,434
======== ======== ======== ======== ========
Nonperforming loans as a percent of
total loans(1)................... .51% .54% .62% .85% 1.37%
Nonperforming assets as a percent
of total loans and OREO(1)....... .58% .66% .75% 1.12% 1.74%
Allowance for credit losses as a
percent of nonperforming loans... 281.11% 264.75% 235.28% 197.44% 134.34%
Allowance for credit losses as a
percent of nonperforming
assets........................... 246.91% 218.25% 192.66% 150.39% 105.75%
Loans delinquent 90 days or more
and accruing interest............ $396,577 $254,417 $173,456 $207,816 $211,832
Loans delinquent 90 days or more
and accruing interest to total
loans(1)......................... .52% .39% .28% .36% .41%
Interest foregone on nonperforming
loans (after tax)(2)............. $ 18,148 $ 27,540 $ 18,584 $ 26,727 $ 35,483
</TABLE>
(1) Includes loans held for sale.
(2) The amount of gross interest on nonperforming loans
that would have been recorded during 1996 if the loans
had been current throughout the year totaled $42
million. Of this amount, $14 million of interest was
actually recorded on nonperforming loans during 1996.
----------------------------------------------------------
Delinquency and net charge-off trends over time are a
reflection of a number of factors including credit quality
of the loan portfolio, general economic conditions and the
successful results of portfolio management techniques
including collection strategies. The unfavorable
conditions experienced during 1996 in the consumer
portfolios, specifically the credit card portfolio, have
been a result of increased competition for loans, the
seasoning of loans in the portfolios and a general
increase in personal bankruptcy filings. These trends are
expected to
BANC ONE CORPORATION and Subsidiaries 41
<PAGE> 13
continue and the level of net charge-offs are anticipated
to grow through the first half of 1997. To mitigate these
trends, BANC ONE has tightened and refined the consumer
credit underwriting criteria. In addition, BANK ONE's
overall portfolio management strategy has included
enhancing the collection efforts resulting in earlier
contact with delinquent customers which has an impact on
managing future delinquencies and net charge-offs. For the
remaining non-consumer loan portfolio, management expects
to experience a gradual increase in nonperforming assets,
delinquencies and net charge-offs to more normal
historical levels.
The following shows net charge-offs and delinquent
loans by loan type:
<TABLE>
<CAPTION>
LOANS DELINQUENT
NET CHARGE-OFFS(1)(4) 90 DAYS OR MORE(2)(4)
DECEMBER 31, DECEMBER 31,
---------------------- ----------------------
1996 1995 1996 1995
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Wholesale(3)............................. .05% .08% .18% .15%
Real estate, residential................. .16 .07 .24 .25
Consumer................................. 1.12 .74 .49 .34
Credit card.............................. 5.46 3.75 2.25 1.54
Leases................................... .27 .53 .08 .03
Total loans and leases................... 1.00 .65 .52 .39
</TABLE>
(1) Ratios presented are expressed as a percent of average
balances.
(2) Ratios presented exclude nonperforming 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.
----------------------------------------------------------
The increase in the net charge-off ratio for total loans
and leases reflected deteriorating consumer credit
quality, primarily in credit cards for the reasons noted
above. Personal bankruptcies accounted for 49% of managed
credit card net charge-offs in 1996, up from 44% in 1995.
The net charge-off ratio for other consumer loans reflects
the overall trend in consumer credit quality deterioration
experienced by the financial services industry.
Allowance for Credit Losses
The allowance for credit losses at December 31, 1996
totaled $1.1 billion and represented 1.45% of total loans
and leases outstanding at December 31, 1996 compared to
$.9 billion which also represented 1.45% at December 31,
1995. To maintain an adequate level of allowance for
credit losses and allow for loan growth and increased
charge-offs, the loan loss provision continued to exceed
net charge-offs. In 1996, the provision for credit losses
totaled $788 million, $70 million higher than related net
charge-offs. This compares with 1995 experience where the
total provision for credit losses totaled $457 million,
$45 million higher than related net charge-offs.
42 BANC ONE CORPORATION and Subsidiaries
<PAGE> 14
The allowance for credit losses as a percentage of
ending loans and leases represents one measure of
adequacy. The allowance for credit losses expressed as a
percentage of nonperforming loans is another. On this
basis, the December 31, 1996 allowance for credit losses
represented 281% of nonperforming loans, up from 265% at
December 31, 1995. It is management's view that the
allowance for credit losses at year end 1996 was adequate
and consistent with the composition of the portfolio and
credit quality trends. Refer to the following two tables
for more detail.
SUMMARY OF ALLOWANCE FOR CREDIT LOSSES AND SELECTED
STATISTICS
<TABLE>
<CAPTION>
$ (THOUSANDS) 1996 1995 1994 1993 1992
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ALLOWANCE FOR CREDIT LOSSES,
BEGINNING OF YEAR........... $ 938,008 $ 897,180 $ 967,254 $ 952,174 $ 908,403
Charge-offs
Commercial, financial and
agricultural............ (57,605) (50,335) (49,504) (95,136) (187,375)
Real estate............... (35,875) (36,016) (29,373) (64,956) (97,098)
Consumer.................. (340,880) (218,763) (176,045) (167,096) (219,552)
Credit card............... (513,709) (287,546) (260,510) (251,492) (242,459)
Leases.................... (8,518) (11,334) (5,737) (11,878) (15,007)
--------- -------- -------- -------- --------
Total charge-offs............. (956,587) (603,994) (521,169) (590,558) (761,491)
--------- -------- -------- -------- --------
Recoveries of loans previously
charged off
Commercial, financial and
agricultural............ 37,994 41,057 60,088 70,917 51,015
Real estate............... 22,494 16,696 19,806 13,454 12,424
Consumer.................. 118,363 83,580 80,662 77,252 68,995
Credit card............... 57,028 46,379 40,386 34,495 29,103
Leases.................... 3,118 3,499 3,358 4,970 6,175
--------- -------- -------- -------- --------
Total recoveries of loans
previously charged off...... 238,997 191,211 204,300 201,088 167,712
--------- -------- -------- -------- --------
Net charge-offs............... (717,590) (412,783) (316,869) (389,470) (593,779)
Provision for credit losses... 788,087 457,499 242,269 388,261 630,731
Allowance for assets
acquired/other.............. 66,587 (3,888) 4,526 16,289 6,819
--------- -------- -------- -------- --------
ALLOWANCE FOR CREDIT LOSSES,
END OF YEAR................. $1,075,092 $ 938,008 $ 897,180 $ 967,254 $ 952,174
========= ======== ======== ======== ========
ALLOWANCE AND LOSS RATIOS:
Net charge-offs to average
total loans................. 1.00% .65% .53% .73% 1.20%
Ending allowance to ending
loans....................... 1.45% 1.45% 1.46% 1.72% 1.86%
</TABLE>
ALLOCATION OF ALLOWANCE FOR CREDIT LOSSES(1)
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
-------------------- ----------------------- ---------------------- ---------------------- --------------------
PERCENT OF PERCENT OF PERCENT OF PERCENT OF PERCENT OF
LOANS TO LOANS TO LOANS TO LOANS TO LOANS TO
$(THOUSANDS) AMOUNT TOTAL LOANS AMOUNT TOTAL LOANS AMOUNT TOTAL LOANS AMOUNT TOTAL LOANS AMOUNT TOTAL LOANS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial,
financial and
agricultural... $ 196,281 27% $213,911 28% $246,561 27% $284,994 27% $360,165 30%
Real estate..... 103,743 33 133,035 29 172,411 30 204,864 29 157,956 31
Consumer, net... 272,320 26 211,874 28 209,554 31 215,742 31 210,234 27
Credit card..... 479,977 11 362,964 12 251,641 10 245,125 11 204,806 10
Leases, net..... 22,771 3 16,224 3 17,013 2 16,529 2 19,013 2
--------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Total allowance
for credit
losses... $1,075,092 100% $938,008 100% $897,180 100% $967,254 100% $952,174 100%
========== ====== ======= ===== ======== ====== ======== ====== ======= ======
</TABLE>
(1) Allowance for potential losses not specifically
identified has been allocated on a pro rata basis to
all loan categories.
BANC ONE CORPORATION and Subsidiaries 43
<PAGE> 15
Deposit Analysis
Total deposits at December 31, 1996 increased $5.1
billion, or 7.5%, when compared to December 31, 1995. The
increase was primarily due to the inclusion of BOLC, which
had deposits of $4 billion at December 31, 1996. The
retail deposit mix continues to change as consumers
shifted funds out of lower rate savings and demand
accounts into higher yielding market rate accounts,
primarily money market savings and time deposits. The
repricing characteristics of certain of the deposits
included in the following table have been synthetically
altered with the use of off-balance sheet investment
products, however, classifications shown are based on the
contractual terms of the deposits.
The following represents the contractual time remaining
until maturity of time deposits (including all foreign
deposits) greater than $100,000:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
$(MILLIONS) 1996 1995
----------------------------------------------------------------------------------------
<S> <C> <C>
0-3 months............................................... $3,410 $2,782
4-6 months............................................... 595 527
7-12 months.............................................. 593 524
Over 1 year.............................................. 1,659 700
------ ------
Total.................................................... $6,257 $4,533
====== ======
</TABLE>
----------------------------------------------------------
Short and Long-Term Borrowings
Short-term borrowings increased $4.3 billion to $14.1
billion at December 31, 1996 from $9.8 billion at December
31, 1995. Long-term borrowings increased $1.5 billion, to
$4.2 billion at December 31, 1996 from $2.7 billion at
December 31, 1995. Both short-term and long-term funding
needs increased in 1996 primarily due to the faster rate
of growth in the loan portfolio compared with the growth
rate of core deposits. In October 1996, $500 million of
7 5/8% subordinated debentures due in 2026 were issued. In
addition, during 1996 long-term fixed and variable rate
bank notes increased $.9 billion at December 31, 1996 from
$.5 billion at December 31, 1995.
The Corporation expects to issue an additional $800
million of subordinated debt during the first quarter of
1997, the proceeds will be used to repay existing
short-term borrowings. In addition, the Corporation
expects to establish a medium-term note facility during
1997, pursuant to which senior or subordinated debt may be
issued, which will provide additional sources of funds
which will be used for general corporate purposes.
- --------------------------------------------------------------------------------
VI RISK MANAGEMENT
BANC ONE has assigned the responsibility for measuring,
monitoring and reporting certain risks related to capital
markets activities to an independent and centralized risk
management function. This function oversees the
establishment of measurement principles, limits,
monitoring and reporting requirements for all capital
markets risks, which include: interest rate risk,
liquidity risk, trading risks, and credit risks. These
policies and risk positions are regularly reviewed by the
Corporation's Asset Liability Committee (ALCO) and
approved by the Corporation's Board of Directors.
44 BANC ONE CORPORATION and Subsidiaries
<PAGE> 16
Market Risk Management
Market risk is the risk of loss arising from adverse
changes in market prices and rates. BANC ONE's market risk
is comprised primarily of interest rate risk created by
its core banking activities of lending and deposit taking.
Additionally, and to a much less significant extent,
interest rate and foreign exchange risks are generated
from certain trading activities. Management continually
develops and applies cost effective strategies to mitigate
these risks. Market risk limits are established based on
the Corporation's tolerance for risk.
Interest Rate Risk Management -- BANC ONE's primary
purpose in managing interest rate risk is to effectively
invest the Corporation's capital and to manage and
preserve the value created by its core banking businesses.
BANC ONE utilizes an investment portfolio as well as
off-balance sheet instruments to manage the interest rate
risk naturally created through its business activities.
The components of interest rate risk which are actively
measured and managed include: repricing risk, basis risk,
option risk, and the risk of non-parallel shifts in the
yield curve.
Interest rate risk is measured in two ways to capture
both near-term and long-term effects of rate volatility:
(1) Earnings At Risk (EAR), a measure of forecasted
earnings volatility over each of the next five years, and;
(2) Value At Risk (VAR), which is a measure of the
volatility of market value of equity. Market value of
equity is defined as the present value of all future
expected cash flows of currently held assets, liabilities,
and off-balance sheet items.
To measure these risks, BANC ONE incorporates
historical movements (volatility) of market rates to
calculate 99% of statistically probable future rate
movements over the next 90 days. As a result, the
probability of the measured risk positions being realized
or exceeded should be less than 1%.
The Corporation's EAR and VAR, as of December 31, 1996,
are summarized in the table below. Currently, historical
volatilities suggest rates could move up by no more than
85 basis points or down by 74 basis points over the next
90 days. Given these potential rate movements, the first
line in the table indicates BANC ONE's projected earnings
next year would decline by 4.0% in the up rate scenario,
and increase by 2.7% in the down rate scenario. The last
line of the table indicates the Corporation's market value
of equity would decline by 1.9% in the up rate scenario.
<TABLE>
<CAPTION>
RISK DUE TO AN RISK DUE TO A
INCREASE IN RATES DECREASE IN RATES
OF 85 BASIS POINTS OF 74 BASIS POINTS
-----------------------------------------------------------------------------------------------
<S> <C> <C>
Earnings at Risk (EAR)
1997........................................ (4.0)% 2.7 %
1998........................................ (1.0) (1.8)
1999........................................ 3.2 (3.4)
2000........................................ 5.7 (5.7)
2001........................................ 9.0 (6.5)
Value at Risk (VAR)............................... (1.9)% .8 %
</TABLE>
BANC ONE CORPORATION and Subsidiaries 45
<PAGE> 17
Trading Risk Management -- Trading risk is the potential
for financial loss as the result of changes in the market
value of positions held for proprietary trading or for
market making purposes. The primary purpose of maintaining
trading portfolios is either to provide an inventory for
purposes of customer dealings or to capitalize on
perceived market opportunities. BANC ONE is primarily
engaged in the former. In order to manage trading risk,
policies limit the degree to which the value of aggregate
trading assets can be adversely affected by probable
changes in the marketplace (interest rates, currencies,
etc.). Using historical market volatilities for each asset
and the expected time needed to liquidate the position
(generally 10 trading days), the maximum adverse value
change (using three standard deviations of historical
volatility) is calculated. As of December 31, 1996, the
value at risk of all trading assets was $4 million.
Liquidity Risk Management
Liquidity is managed in order to preserve stable, reliable
and cost effective sources of cash to fund loan growth as
well as expected and unexpected outflows of deposits and
other liabilities. In addition, liquidity management seeks
to avoid over-concentrations on a limited number of
liability sources and to minimize reliance on potentially
volatile wholesale funds and large liabilities. BANC ONE's
funding profile at December 31, 1996 is summarized in the
table below:
PRODUCT TYPE
<TABLE>
<CAPTION>
PERCENT OF
TOTAL FUNDING
---------------------------------------------------------------------------------
<S> <C>
RETAIL:
Transaction deposits.............................................. 51
Time deposits..................................................... 22
WHOLESALE:
Short-term:
Federal funds purchased and repurchase agreements.............. 7
Commercial paper and bank notes................................ 4
Eurodollar certificates of deposit............................. 3
Other.......................................................... 1
Long-term:
Long-term borrowings........................................... 3
Bank notes..................................................... 2
Securitizations..................................................... 7
----
Total............................................................. 100%
====
</TABLE>
----------------------------------------------------------
Due to BANC ONE's capital, size and high credit quality
ratings, the Corporation has access to substantial sources
of diverse liquidity. Core deposits, representing
approximately 73% of the Corporation's funding, remain
BANC ONE's primary source of liquidity, and are generated
by a geographically diverse retail network of affiliate
banks in 12 states. Approximately 20% of funding is
supported through a variety of wholesale markets.
Additionally, 7% of funding is generated by asset
securitizations, which BANC ONE views as a growing source
of reliable and efficient funding.
46 BANC ONE CORPORATION and Subsidiaries
<PAGE> 18
Credit Risk Management for Capital Markets Activities
As an inherent part of its business, BANC ONE holds and
trades various financial instruments (e.g., securities and
derivatives) for itself and for customers. These dealings
in the capital markets create credit risk with transaction
counterparties and securities issuers. On- and off-balance
sheet credit risk is managed by limiting the amount of
exposure to a counterparty based on its current financial
condition and reputation, by diversifying exposures and by
cost-effectively using available risk mitigation tools
(e.g., collateralizations, netting agreements, and credit
enhancements).
There were no past due amounts or reserves for possible
credit losses at December 31, 1996, related to off-balance
sheet investment product transactions, nor were there any
charge-offs during the three years ended December 31,
1996. Customer cap and swap agreements are created to
accommodate the needs of BANC ONE's 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 $1.6 billion at December 31, 1996.
- --------------------------------------------------------------------------------
VII CAPITAL
Capital levels are determined based on many factors,
including regulatory requirements, costs of alternative
sources of capital, prevailing interest rates, perceived
credit risks and liquidity needs.
BANC ONE is continuing the implementation of the
economic value added (EVA(TM)) concept, which measures the
individual return on capital for each line of business.
Under this concept, capital is deployed to each of the
lines of business, based on risks incurred, in order to
measure the economic value added or residual income
provided to shareholders. Residual income or economic
value added is the return over and above the required
return on capital. The objectives of introducing this
concept are to ensure lines of business are continually
improving the return on existing capital, making
investments which will create value for the shareholder,
and maintaining optimal capital levels.
Total equity to total assets at December 31, 1996 was
8.49% compared to 9.06% at December 31, 1995. Further,
BANC ONE's tangible common equity to net assets ratio was
7.66% and 8.31% at December 31, 1996 and 1995,
respectively. This change has been achieved by increasing
loans outstanding and purchasing stock. This decrease in
tangible capital is in line with the Corporation's stated
objective to gradually reduce this ratio to a level which
would continue to ensure adequate capital levels while
increasing the returns to shareholders. Additionally, BANC
ONE's objective is to maintain, at a minimum, a capital
position that meets the federal regulators "well
capitalized" classification. Regulatory defined Tier I and
total risk adjusted capital ratios were 9.03% and 13.12%
respectively at December 31, 1996, both significantly
above regulatory capital requirements of 4% and 8%,
respectively. All the Corporation's banks meet the
regulatory definition of well capitalized banks.
Common shares outstanding decreased from 427.7 million
at December 31, 1995 to 427.3 million at December 31,
1996. This change reflects the purchase of treasury stock
offset by the issuance of stock related to the acquisition
of BOLC. The common stock dividend payout ratio was 42%
and 43% in 1996 and 1995, respectively. Payout ratios
based on historical net income per common share are
presented in the Ten Year Performance Summary.
BANC ONE CORPORATION and Subsidiaries 47
<PAGE> 19
- --------------------------------------------------------------------------------
VIII FOURTH QUARTER REVIEW
Net income for the fourth quarter of 1996 was $370 million
or $.85 per common share as compared to the 1995 fourth
quarter results of $337 million or $.77 per common share.
This $33 million increase primarily results from the
improvement in the net interest margin, as well as the
following significant pre-tax items affecting non-interest
income and expense:
- The inclusion of BOLC in 1996 operations affected the
comparability of non-interest income and expense by
$27 million and $55 million, respectively.
- A $97 million gain on the sale of a $734 million
affinity credit card portfolio was included in 1996.
- Project One expenses of $61 million were included in
various non-interest expense categories for 1996.
- A $36 million increase in salaries and related costs
was included in 1996.
- Settlement of IRS examinations affected both 1996 and
1995 through a $9 million interest charge in 1996 and
a reversal of a $10 million interest charge in 1995.
- --------------------------------------------------------------------------------
IX COMPARISON OF 1995 VERSUS 1994
Overview of Operations -- Net income for 1995 was $1.3
billion or $2.91 per common share, increasing from $1.0
billion or $2.20 per common share in 1994. Results for
1994 were significantly impacted by securities losses,
merger and litigation expense and operations consolidation
charges (a total of $271 million after tax). Results for
1995 were favorably impacted by significant earning asset
generation in 1995 and 1994.
Return on average assets increased to 1.47% in 1995
from 1.15% in 1994. Return on average common equity
increased to 16.77% in 1995 from 13.35% in 1994. The
ending ratio of average common equity to average assets
increased to 8.64% in 1995 from 8.50% in 1994.
Net Interest Income -- Interest income increased 10.1%
to $7.1 billion and interest expense increased 32.1% to
$3.0 billion from 1994 to 1995, resulting in a slight
decline in net interest income. Net interest margin
decreased to 5.31% in 1995 from 5.41% in 1994. This was
due primarily to the impact of credit card sales with
servicing retained. Net income was essentially unaffected
by these loan sales; however, classifications within the
income statement changed. Net interest income and
provision for credit losses decreased while non-interest
income (loan servicing income) increased due to these
sales. Adjusting for the effect of credit card sales
resulted in an increase in net interest income in 1995
compared to 1994 and the net interest margin changed to
5.49% for both 1995 and 1994.
Average earning asset balances were essentially
unchanged compared to 1994. The increase in interest
income was primarily due to a significant change in asset
mix and the higher level of market interest rates.
Interest income on loans (FTE) increased by $717 million
in 1995 over 1994. The average balance of loans and leases
grew 6.5% in 1995 and the overall yield on loans and
leases increased from 9.1% in 1994 to 9.6% in 1995.
Margins in some loan portfolios and product lines were
negatively impacted by competitive pricing pressure and
marketing efforts which utilized introductory pricing to
achieve growth in balances.
Deposits and Borrowed Funds -- Total average
interest-bearing liabilities remained essentially
unchanged, however, the average rate paid on these
liabilities increased from 3.49% in 1994 to 4.61% in 1995.
The increase in the rate paid was attributable to higher
market interest rates and a shift in the retail funding
base from relatively low-cost deposit products to higher
yielding deposit products in order to compete effectively
against non-bank providers of retail money market
investment products.
48 BANC ONE CORPORATION and Subsidiaries
<PAGE> 20
Various capital market transactions were executed in
both 1995 and 1994 to help minimize the sensitivity of
earnings to changes in market interest rates. As a result,
the significant changes in market interest rates which
occurred in 1995 did not significantly impact net interest
income.
Off-Balance Sheet Investment Products -- The use of
off-balance sheet investment products, primarily interest
rate swaps, decreased interest income by $145 million in
1995 compared with increasing interest income by $22
million in 1994. The use of these investment products
increased deposit and other borrowing costs by $59 million
in 1995 and decreased such costs by $72 million in 1994.
Non-Interest Income and Non-Interest Expense -- Total
non-interest income increased $540 million in 1995
compared to 1994 and total non-interest expense decreased
$136 million in 1995 from 1994.
Service charges on deposit accounts increased $61
million due to an increase in fees on overdrafts, an
overall increase in fees per transaction and improved
service fee collection.
Loan servicing income increased $146 million during
1995 due to an increase in servicing fee income related to
sales of loans with servicing retained. Securities gains
in 1995 were $28 million compared to a loss of $261
million in 1994. The change was due to the sale of U.S.
Treasury and Agency securities during 1994 to reduce
liability sensitivity which resulted in an aggregate
pretax loss of $285 million.
Salaries and related costs decreased $3 million in 1995
as a result of the recognition of $36 million in severance
costs in 1994 related to operations consolidation, offset
by merit and other pay increases and a continued shift to
incentive compensation in 1995. Net occupancy expense,
equipment expense and depreciation and amortization
decreased $18 million, $15 million and $64 million,
respectively, in 1995. These decreases were primarily due
to expenses recognized during 1994 related to operations
consolidation. Taxes other than income and payroll
increased $31 million as a result of the resolution of
franchise and intangible tax matters which resulted in a
refund in 1994. FDIC insurance expense decreased $61
million during 1995 due to the FDIC's decision to lower
deposit insurance premiums from $.23 to $.04 per $100 in
Bank Insurance Fund deposits for "well capitalized" and
"well managed" banks.
Loan Quality -- The allowance for credit losses
increased to $938 million at December 31, 1995 from $897
million at December 31, 1994. This increase was due to an
increase in the consumer loan and credit card provisions
due to the growth in these portfolios and the cyclical
deterioration in consumer credit quality offsetting
improvement in wholesale credit quality. The allowance for
credit losses as a percentage of ending loans remained
essentially constant from 1994 to 1995.
BANC ONE CORPORATION and Subsidiaries 49
<PAGE> 21
TEN YEAR PERFORMANCE SUMMARY
(UNAUDITED)
NOT RESTATED FOR ACQUISITIONS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEARLY AVERAGE BALANCES YEAR-END BALANCES
BALANCE ------------------------------------- ------------------------------------------------------
SHEET TOTAL COMMON EARNING LOANS AND LONG-TERM TOTAL
$(MILLIONS) YEAR ASSETS EQUITY ASSETS LEASES DEPOSITS BORROWINGS ASSETS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
1996 $96,398 $8,244 $88,027 $74,194 $72,373 $4,190 $101,848
1995 87,052 7,518 79,215 64,825 67,320 2,720 90,454
1994 87,090 7,400 79,271 61,637 68,090 1,866 88,923
1993 74,716 6,301 67,255 52,618 60,943 1,702 79,919
1992 58,249 4,685 52,830 38,208 48,465 1,198 61,417
1991 33,861 3,103 30,573 29,923 37,057 703 46,293
1990 27,654 2,590 24,841 20,363 22,316 581 30,336
1989 25,518 2,145 23,188 17,909 20,952 372 26,552
1988 23,484 1,906 21,275 17,325 19,502 379 25,274
1987 17,538 1,372 15,842 12,934 14,478 266 18,730
1986 16,299 1,178 14,620 11,549 13,371 170 17,372
Annual Growth:
1996/95 10.74% 9.66% 11.12% 14.45% 7.51% 54.04% 12.60%
Compound Growth:
5 Years 23.27 21.58 23.55 19.91 14.33 42.91 17.08
10 Years 19.45 21.48 19.66 20.44 18.40 37.78 19.35
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NET TOTAL
INCOME BEFORE CASH MARKET
DATA PER NET SECURITIES DIVIDENDS BOOK STOCK CAPITAL
COMMON SHARE YEAR INCOME TRANSACTIONS DECLARED VALUE PRICE $(MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
1996 $3.23 $3.09 $1.36 $19.75 $43.00 $18,372
1995 2.91 2.87 1.24 18.58 34.21 14,630
1994 2.20 2.57 1.13 16.75 23.07 10,076
1993 2.71 2.68 .97 16.20 32.34 13,542
1992 2.16 2.14 .81 14.12 35.13 12,331
1991 1.93 1.93 .69 12.69 31.64 8,833
1990 1.66 1.67 .63 10.88 16.68 4,408
1989 1.51 1.52 .57 9.41 17.69 4,239
1988 1.42 1.40 .50 8.52 12.15 2,876
1987 1.08 1.05 .45 7.52 11.93 2,360
1986 1.05 .97 .41 6.83 11.36 2,082
Annual Growth:
1996/95 11.00% 7.67% 9.68% 6.30% 25.69% 25.58%
Compound Growth
5 Years 10.85 9.87 14.53 9.25 6.33 15.77
10 Years 11.89 12.28 12.74 11.20 14.24 24.33
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AVERAGE COMMON
SHARES SHARES STOCK DIVIDEND YEAR-END
COMMON OUTSTANDING TRADED COMMON SPLITS AND PAYOUT PRICE/
STOCK DATA YEAR (000) (000)(1) SHAREHOLDERS DIVIDENDS RATIO EARNINGS
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1996 436,927 227,764 97,074 10% 42% 13.3x
1995 433,323 179,034 87,632 43 11.8
1994 448,118 242,656 82,253 10% 51 10.5
1993 414,511 163,327 71,384 5:4 36 11.9
1992 351,146 113,186 58,114 10% 37 16.2
1991 242,905 69,241 43,935 36 16.4
1990 230,292 63,717 44,572 10% 38 10.1
1989 196,804 54,155 43,437 37 11.7
1988 195,733 42,347 43,892 10% 35 8.5
1987 158,826 38,297 37,693 42 11.0
1986 151,611 21,457 36,855 10% 39 10.7
</TABLE>
50 BANC ONE CORPORATION and Subsidiaries
<PAGE> 22
$(MILLIONS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NET INCOME
NET BEFORE
INCOME AND TOTAL INTEREST NON-INTEREST NON-INTEREST SECURITIES NET
EXPENSES YEAR REVENUE INCOME(2) INCOME (3) EXPENSE TRANSACTIONS INCOME
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1996 $10,272.4 $4,918.6 $2,134.7 $4,184.2 $1,367.4 $1,426.5
1995 8,970.9 4,208.9 1,842.1 3,631.6 1,260.4 1,277.9
1994 7,777.9 4,287.8 1,590.6 3,768.0 1,168.9 1,005.1
1993 7,163.3 4,169.6 1,412.1 3,450.6 1,129.6 1,140.0
1992 5,999.0 3,240.1 1,156.9 2,663.6 772.7 781.3
1991 4,154.1 1,838.5 844.3 1,486.2 529.3 529.5
1990 3,506.9 1,309.3 706.7 1,102.7 424.3 423.4
1989 3,163.0 1,193.7 513.5 967.4 365.3 362.9
1988 2,734.5 1,142.0 452.3 893.1 332.9 340.2
1987 1,959.6 907.3 284.0 666.5 203.5 208.9
1986 1,847.4 830.4 250.8 608.5 185.3 199.8
Annual Growth:
1996/95 14.51% 16.86% 15.88% 15.22% 8.49% 11.63%
Compound Growth:
5 Years 19.85 21.75 20.38 23.00 20.90 21.92
10 Years 18.72 19.47 23.88 21.26 22.12 21.72
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EMPLOYEES
(FT EQUIV.) NET INCOME
RETURN ON NET NON-INTEREST PER $MILLION PER FT
OPERATING AVERAGE INTEREST INCOME TO EFFICIENCY OF EQUIV.
RATIOS YEAR ASSETS MARGIN(2) EXPENSE(3) RATIO(4) ASSETS EMPLOYEE(5)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1996 1.48% 5.59% 51.0% 59.3% .50 $27,916
1995 1.47 5.31 50.7 60.0 .53 26,622
1994 1.15 5.41 42.2 64.1 .55 20,596
1993 1.53 6.20 40.9 61.8 .57 25,165
1992 1.34 6.13 43.4 60.6 .53 23,912
1991 1.56 6.01 56.8 55.4 .59 21,449
1990 1.53 5.27 64.1 54.7 .63 19,871
1989 1.42 5.15 53.1 56.7 .67 20,388
1988 1.45 5.37 50.6 56.0 .67 20,166
1987 1.19 5.73 42.6 55.9 .74 15,064
1986 1.23 5.68 41.2 56.3 .73 15,790
Average:
5 Years 1.39% 5.73% 45.64% 61.16% .54% 24,842
10 Years 1.41 5.62 49.54 58.45 .60 22,115
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RETURN ON AVERAGE LONG-TERM MARKET
AVERAGE COMMON EQUITY BORROWINGS TO TO TOTAL
EQUITY COMMON TO AVERAGE COMMON BOOK RETURN TO
RATIOS YEAR EQUITY ASSETS EQUITY VALUE INVESTORS(6)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1996 17.11% 8.55% 49.6% 217.7% 30.3%
1995 16.77 8.64 34.2 184.1 54.4
1994 13.35 8.50 25.5 137.7 (25.7)
1993 17.81 8.43 25.1 199.6 (5.4)
1992 16.26 8.04 24.2 248.9 13.9
1991 16.58 9.16 19.8 249.2 95.0
1990 16.24 9.36 20.2 153.3 (2.0)
1989 16.79 8.41 16.5 187.9 50.5
1988 17.69 8.12 18.8 142.7 5.8
1987 15.12 7.82 17.9 158.5 8.6
1986 16.49 7.23 13.6 166.4 .8
Average:
5 Years 16.26% 8.43% 31.72% 197.60% 10.02%(7)
10 Years 16.37 8.50 25.18 187.96 18.20(7)
</TABLE>
(1) Amounts do not reflect stock dividends and stock splits.
(2) Fully taxable equivalent basis (FTE).
(3) Excluding securities transactions.
(4) Non-interest expense divided by net interest income (FTE) plus
non-interest income excluding securities transactions.
(5) 1990 and 1991 net income excludes equity in earnings of Bank One,
Texas, NA.
(6) Market change year to year with dividends reinvested.
(7) Calculation is 5- and 10-year compound growth.
BANC ONE CORPORATION and Subsidiaries 51
<PAGE> 23
CONSOLIDATED QUARTERLY FINANCIAL DATA
(UNAUDITED)
<TABLE>
<CAPTION>
QUARTERS
------------------------------------------------------------------------------------
1996 1995
---------------------------------------- ----------------------------------------
$(MILLIONS, EXCEPT PER SHARE DATA) FOURTH THIRD SECOND FIRST FOURTH THIRD SECOND FIRST
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
SELECTED AVERAGE BALANCES
Loans held for sale....................... $ 453 $ 457 $ 699 $ 590 $ 513 $ 518 $ 344 $ 295
Taxable securities(1)................... 13,344 13,990 15,013 15,475 12,436 12,154 13,400 13,194
Tax exempt securities(1)................ 1,664 1,651 1,730 1,733 1,769 1,905 2,043 2,145
------- ------- ------- ------- ------- ------- ------ -------
TOTAL SECURITIES.......................... 15,008 15,641 16,743 17,208 14,205 14,059 15,443 15,339
Commercial financial and agricultural... 19,918 19,294 19,387 18,864 17,913 17,686 17,570 16,570
Real estate:
Commercial............................ 6,322 6,238 6,098 5,989 5,611 5,609 5,602 5,536
Construction.......................... 3,518 3,321 3,094 2,920 2,657 2,450 2,376 2,281
Residential........................... 13,659 11,610 11,206 11,101 11,670 11,849 11,375 11,060
Consumer, net........................... 19,137 20,251 20,173 20,028 18,387 17,904 17,645 18,911
Credit card............................. 9,266 8,398 7,479 8,289 7,296 6,542 6,088 5,807
Leases, net............................. 2,210 2,142 1,972 1,776 1,636 1,507 1,419 1,354
------- ------- ------- ------- ------- ------- ------ -------
NET LOANS AND LEASES...................... 74,030 71,254 69,409 68,967 65,170 63,547 62,075 61,519
Other earning assets.................... 453 387 400 392 456 673 795 1,898
TOTAL EARNING ASSETS...................... 89,944 87,739 87,251 87,157 80,344 78,797 78,657 79,051
Allowance for credit losses............... (1,053) (1,040) (1,009) (1,008) (918) (894) (891) (897)
------- ------- ------- ------- ------- ------- ------ -------
TOTAL ASSETS.............................. 98,558 95,926 95,418 95,673 88,237 86,780 86,529 86,646
Demand deposits:
Non-interest bearing.................. 14,408 13,821 13,937 13,952 13,280 12,978 12,689 12,922
Interest bearing...................... 2,065 2,131 2,240 3,115 7,050 8,416 8,677 8,928
Savings and money market deposits....... 29,431 29,343 29,198 28,053 21,875 19,994 19,202 19,284
Time deposits........................... 25,408 25,272 25,185 25,144 23,442 24,229 25,180 24,915
------- ------- ------- ------- ------- ------- ------ -------
TOTAL DEPOSITS............................ 71,312 70,567 70,560 70,264 65,647 65,617 65,748 66,049
Borrowed funds:
Short-term............................ 12,799 11,792 11,417 11,531 9,871 8,918 9,107 9,310
Long-term............................. 3,667 3,019 2,981 3,019 2,676 2,524 2,091 2,056
------- ------- ------- ------- ------- ------- ------ -------
TOTAL BORROWED FUNDS...................... 16,466 14,811 14,398 14,550 12,547 11,442 11,198 11,366
TOTAL INTEREST BEARING LIABILITIES........ 73,370 71,557 71,021 70,862 64,914 64,081 64,257 64,493
Preferred stock........................... 214 240 243 247 250 250 250 250
Common stockholders' equity............... $ 8,275 $ 8,196 $8,119 $ 8,386 $ 7,761 $ 7,582 $7,442 $ 7,280
MARGIN ANALYSIS(2)(5)(6)
Net interest margin................... 5.66% 5.51% 5.60% 5.59% 5.40% 5.33% 5.22% 5.30%
Net funds function.................... 4.58% 4.55% 4.81% 4.84% 4.59% 4.66% 4.75% 4.95%
KEY OPERATING RATIOS
Return on average assets(5)............. 1.49% 1.48% 1.50% 1.45% 1.51% 1.51% 1.43% 1.42%
Return on average common equity(5)...... 17.60 17.07 17.37 16.38 17.00 17.09 16.34 16.61
Return on average total equity(5)....... 17.33 16.78 17.07 16.11 16.68 16.77 16.03 16.29
Average common equity to average
assets................................ 8.40 8.54 8.51 8.77 8.80 8.74 8.60 8.40
Average total equity to average
assets................................ 8.61 8.79 8.76 9.02 9.08 9.02 8.89 8.69
Tier I capital ratio.................... 9.03 9.18 9.52 9.57 10.05 10.11 10.36 10.23
Total risk adjusted capital ratio....... 13.12 12.83 13.23 13.44 14.05 14.17 13.76 13.62
Tier I leverage ratio................... 8.24% 8.31% 8.43% 8.24% 8.87% 8.88% 8.72% 8.58%
CREDIT ANALYSIS:
Net charge-offs to average loans and
leases(5)............................. 1.23% 1.01% .86% .89% .87% .67% .56% .49%
Ending allowance to loans and leases.... 1.45 1.45 1.46 1.47 1.45 1.41 1.42 1.42
Nonperforming assets(3):
Total................................. $ 435 $ 478 $ 458 $ 486 $ 430 $ 445 $ 431 $ 449
Percent of total loans and
leases(7)........................... .58% .65% .65% .70% .66% .68% .68% .72%
Loans delinquent 90 or more days(4):
Total................................. $ 397 $ 345 $ 280 $ 250 $ 254 $ 212 $ 187 $ 173
Percent of total loans and
leases(7)........................... .52% .47% .40% .36% .39% .32% .29% .28%
Allowance to nonperforming loans........ 281% 253% 265% 245% 265% 253% 249% 241%
COMMON STOCK:
Average shares outstanding(000)......... 430,992 434,773 438,039 444,027 431,746 432,891 434,214 435,893
Shares traded(000)...................... 54,261 60,724 50,688 62,091 37,100 39,873 53,708 48,353
Per share data:
Net income............................ $ .85 $ .81 $ .80 $ .77 $ .77 $ .76 $ .70 $ .68
Cash dividends declared............... .34 .34 .34 .34 .31 .31 .31 .31
Book value............................ 19.75 19.24 19.07 18.80 18.58 18.02 17.59 17.16
Stock price:
High................................ 47.88 41.38 37.75 38.50 36.48 33.41 31.94 27.39
Low................................. 40.38 31.25 32.88 31.94 30.35 27.95 26.03 22.85
Close............................... $ 43.00 $ 41.00 $34.00 $ 35.63 $ 34.21 $ 33.18 $29.32 $ 25.91
PREFERRED STOCK, SERIES C:
Shares traded(000)...................... 926 2,056 880 1,222 1,678 990 1,316 1,233
Stock price:
High.................................. $ 91.25 $ 80.00 $72.63 $ 73.88 $ 70.75 $ 64.00 $61.75 $ 54.25
Low................................... 77.75 60.75 63.88 62.00 59.38 55.58 52.25 49.63
Close................................. $ 83.00 $ 79.13 $66.75 $ 69.13 $ 65.63 $ 63.75 $58.25 $ 51.75
</TABLE>
52 BANC ONE CORPORATION and Subsidiaries
<PAGE> 24
CONSOLIDATED QUARTERLY FINANCIAL DATA
(UNAUDITED)
<TABLE>
<CAPTION>
QUARTERS
----------------------------------------------------------------------------
1996 1995
------------------------------------ ------------------------------------
$(MILLIONS) FOURTH THIRD SECOND FIRST FOURTH THIRD SECOND FIRST
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT:
Interest income(2)
Loans held for sale............................... $ 7 $ 9 $ 13 $ 11 $ 10 $ 10 $ 7 $ 6
Taxable securities.............................. 217 228 239 250 204 201 221 209
Tax-exempt securities........................... 33 34 36 36 38 42 45 47
----- ------ ----- ------ ----- ------ ----- ------
Total interest on securities...................... 250 262 275 286 242 243 266 256
Commercial financial and agricultural........... 413 404 400 384 369 365 361 331
Real estate:
Commercial.................................... 143 141 135 134 128 126 126 121
Construction.................................. 87 81 77 72 68 63 60 59
Residential................................... 322 269 258 255 258 265 251 238
Consumer........................................ 452 467 468 488 439 423 410 439
Credit card..................................... 394 344 303 333 304 273 256 241
Leases.......................................... 41 40 37 32 30 26 25 25
----- ------ ----- ------ ----- ------ ----- ------
Total interest on loans and leases................ 1,852 1,746 1,678 1,698 1,596 1,541 1,489 1,454
Total interest on other earning assets.......... 6 5 5 5 7 11 13 30
TOTAL INTEREST INCOME............................. 2,115 2,022 1,971 2,000 1,855 1,805 1,775 1,746
Interest expense:
Demand deposits................................. 9 10 10 15 35 43 47 50
Savings and money market deposits............... 250 245 236 232 206 191 180 169
Time deposits:
CDs under $100,000............................ 258 259 261 276 275 280 278 256
CDs $100,000 and over......................... 94 89 55 69 59 64 81 75
----- ------ ----- ------ ----- ------ ----- ------
TOTAL INTEREST ON DEPOSITS........................ 611 603 562 592 575 578 586 550
Borrowed funds:
Short-term.................................... 161 153 146 150 138 125 129 127
Long-term..................................... 64 51 49 48 47 44 35 37
----- ------ ----- ------ ----- ------ ----- ------
TOTAL INTEREST ON BORROWED FUNDS.................. 225 204 195 198 185 169 164 164
----- ------ ----- ------ ----- ------ ----- ------
TOTAL INTEREST EXPENSE............................ 836 807 757 790 760 747 750 714
----- ------ ----- ------ ----- ------ ----- ------
Net interest income(2)............................ 1,279 1,215 1,214 1,210 1,095 1,058 1,025 1,032
Provision for credit losses....................... 244 211 171 162 166 133 93 66
----- ------ ----- ------ ----- ------ ----- ------
Net funds function(2)............................. 1,035 1,004 1,043 1,048 929 925 932 966
NON-INTEREST INCOME:
Income from fiduciary activities................ 77 72 68 63 62 60 59 59
Service charges on deposit accounts............. 170 166 161 157 144 141 132 127
Loan processing and servicing income............ 106 114 114 117 136 143 130 112
Securities gains................................ 13 56 18 6 8 7 3 10
Other........................................... 256 161 172 160 141 122 130 144
----- ------ ----- ------ ----- ------ ----- ------
TOTAL NON-INTEREST INCOME......................... 622 569 533 503 491 473 454 452
NON-INTEREST EXPENSE:
Salaries and related costs...................... 523 491 501 503 448 430 429 443
Other........................................... 584 539 527 516 477 450 473 481
----- ------ ----- ------ ----- ------ ----- ------
TOTAL NON-INTEREST EXPENSE........................ 1,107 1,030 1,028 1,019 925 880 902 924
Taxable equivalent adjustment..................... 15 15 16 16 17 19 21 23
----- ------ ----- ------ ----- ------ ----- ------
Income before income taxes........................ 535 528 532 516 478 499 463 471
Income tax (provision) benefit:
Income excluding securities transactions.......... (161) (152) (170) (168) (138) (165) (154) (165)
Securities transactions........................... (4) (20) (7) (2) (3) (3) (1) (4)
----- ------ ----- ------ ----- ------ ----- ------
Net income........................................ $ 370 $ 356 $ 355 $ 346 $ 337 $ 331 $ 308 $ 302
===== ====== ===== ====== ===== ====== ===== ======
Net income available to common stockholders....... $ 366 $ 351 $ 351 $ 342 $ 332 $ 327 $ 303 $ 298
===== ====== ===== ====== ===== ====== ===== ======
</TABLE>
(1) Average balances are based on amortized historical cost excluding SFAS 115
adjustments to fair value which are included in other assets.
(2) Fully taxable equivalent basis. The federal statutory rate used was 35% for
all periods presented.
(3) Excludes certain smaller balance loans collectively evaluated for
impairment.
(4) Excluding nonperforming loans.
(5) Ratios presented on an annualized basis.
(6) As a percent of average earning assets.
(7) Includes loans held for sale.
BANC ONE CORPORATION and Subsidiaries 53
<PAGE> 25
CONSOLIDATED BALANCE SHEET
AT DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------
$(THOUSANDS, EXCEPT SHARE AMOUNTS) 1996 1995
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
ASSETS:
Cash and due from banks................................................................. $ 6,350,803 $ 5,501,266
Short-term investments.................................................................. 348,717 454,718
Loans held for sale..................................................................... 1,473,756 503,326
SECURITIES:
Securities held to maturity........................................................... 887,431 1,087,654
Securities available for sale......................................................... 14,635,199 14,620,334
------------- -----------
Total securities (fair value approximates $15,552,000 and $15,756,000,
at December 31, 1996 and 1995, respectively)................................... 15,522,630 15,707,988
LOANS AND LEASES (net of unearned income of $1,383,311 and $978,831 at
December 31, 1996 and 1995, respectively)............................................. 74,193,936 64,825,339
Allowance for credit losses............................................................. 1,075,092 938,008
------------- -----------
NET LOANS AND LEASES.............................................................. 73,118,844 63,887,331
OTHER ASSETS:
Bank premises and equipment, net...................................................... 1,673,384 1,558,676
Interest earned, not collected........................................................ 710,255 669,709
Other real estate owned............................................................... 52,970 75,483
Excess of cost over net assets of affiliates purchased................................ 471,559 242,817
Other................................................................................. 2,125,169 1,852,649
------------- -----------
Total other assets................................................................ 5,033,337 4,399,334
------------- -----------
TOTAL ASSETS...................................................................... $ 101,848,087 $90,453,963
============= ===========
LIABILITIES:
DEPOSITS:
Non-interest bearing.................................................................. $ 16,195,105 $14,767,497
Interest bearing...................................................................... 56,178,022 52,552,653
------------- -----------
TOTAL DEPOSITS.................................................................... 72,373,127 67,320,150
Federal funds purchased and repurchase agreements....................................... 8,740,867 6,261,009
Other short-term borrowings............................................................. 5,364,709 3,516,191
Long-term borrowings.................................................................... 4,189,513 2,720,373
Accrued interest payable................................................................ 399,652 410,946
Other liabilities....................................................................... 2,133,259 2,027,816
------------- -----------
TOTAL LIABILITIES................................................................. 93,201,127 82,256,485
------------- -----------
Commitments and contingencies (Notes 4, 6, and 13)
STOCKHOLDERS' EQUITY:
Preferred stock, 35,000,000 shares authorized:
Series C convertible, no par value, 4,140,314 and 4,992,694 shares issued
and outstanding, respectively....................................................... 207,016 249,635
Common stock, no par value, $5 stated value, 600,000,000 shares authorized,
433,093,188 and 451,741,054 shares issued, respectively............................... 2,165,466 2,258,705
Capital in excess of aggregate stated value of common stock............................. 4,453,330 5,157,763
Retained earnings....................................................................... 2,013,930 1,100,345
Net unrealized holding gains on securities available for sale, net of tax............... 20,286 91,804
Treasury stock (5,829,915 and 24,090,000 shares, respectively), at cost................. (213,068) (660,774)
------------- -----------
TOTAL STOCKHOLDERS' EQUITY........................................................ 8,646,960 8,197,478
------------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY........................................ $ 101,848,087 $90,453,963
============= ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
54 BANC ONE CORPORATION and Subsidiaries
<PAGE> 26
CONSOLIDATED STATEMENT OF INCOME
FOR THE THREE YEARS ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
$(THOUSANDS, EXCEPT PER SHARE AMOUNTS) 1996 1995 1994
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
INTEREST INCOME:
Interest and fees on loans and leases...................................... $6,956,281 $6,061,410 $5,345,317
Interest income on loans held for sale..................................... 39,544 32,925 40,822
Interest and dividends on:
Taxable securities....................................................... 932,434 833,715 875,846
Tax-exempt securities.................................................... 94,879 116,737 136,841
Other interest income...................................................... 21,714 56,131 49,590
---------- ---------- ----------
TOTAL INTEREST INCOME...................................................... 8,044,852 7,100,918 6,448,416
INTEREST EXPENSE:
Interest on deposits:
Demand, savings and money market deposits................................ 1,006,194 922,298 720,526
Time deposits............................................................ 1,361,146 1,367,796 953,737
Interest on borrowings..................................................... 822,058 681,374 574,578
---------- ---------- ----------
TOTAL INTEREST EXPENSE................................................... 3,189,398 2,971,468 2,248,841
---------- ---------- ----------
NET INTEREST INCOME...................................................... 4,855,454 4,129,450 4,199,575
Provision for credit losses.................................................. 788,087 457,499 242,269
---------- ---------- ----------
Net interest income after provision for credit losses...................... 4,067,367 3,671,951 3,957,306
NON-INTEREST INCOME:
Income from fiduciary activities........................................... 279,153 239,411 232,700
Service charges on deposit accounts........................................ 654,140 544,697 483,884
Loan processing and servicing income....................................... 451,454 520,801 382,492
Securities gains (losses).................................................. 92,781 27,847 (261,052)
Other...................................................................... 749,976 537,214 491,501
---------- ---------- ----------
TOTAL NON-INTEREST INCOME................................................ 2,227,504 1,869,970 1,329,525
NON-INTEREST EXPENSE:
Salaries and related costs................................................. 2,018,327 1,750,517 1,753,672
Net occupancy expense, exclusive of depreciation........................... 174,473 164,456 182,223
Equipment expense.......................................................... 116,129 104,030 119,270
Taxes other than income and payroll........................................ 88,086 87,805 56,628
Depreciation and amortization.............................................. 353,331 292,522 356,762
Outside services and processing............................................ 528,335 426,897 424,559
Marketing and development.................................................. 167,590 171,163 178,905
Communication and transportation........................................... 319,554 274,694 245,455
Other...................................................................... 418,334 359,555 450,505
---------- ---------- ----------
TOTAL NON-INTEREST EXPENSE............................................... 4,184,159 3,631,639 3,767,979
---------- ---------- ----------
INCOME BEFORE INCOME TAXES................................................... 2,110,712 1,910,282 1,518,852
INCOME TAX PROVISION (BENEFIT):
Income excluding securities transactions................................... 650,545 622,039 610,970
Securities transactions.................................................... 33,634 10,380 (97,227)
---------- ---------- ----------
Provision for income taxes............................................... 684,179 632,419 513,743
---------- ---------- ----------
NET INCOME................................................................... $1,426,533 $1,277,863 $1,005,109
========== ========== ==========
NET INCOME PER COMMON SHARE.................................................. $ 3.23 $ 2.91 $ 2.20
========== ========== ==========
Weighted average common shares outstanding (000)............................. 436,927 433,323 448,118
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
BANC ONE CORPORATION and Subsidiaries 55
<PAGE> 27
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE THREE YEARS ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
CAPITAL IN NET UNREALIZED
EXCESS OF HOLDING GAINS
AGGREGATE (LOSSES) ON TOTAL
$(THOUSANDS, STATED VALUE SECURITIES TREASURY STOCK-
EXCEPT PER PREFERRED COMMON OF COMMON RETAINED AVAILABLE STOCK, HOLDERS'
SHARE AMOUNTS) STOCK STOCK STOCK EARNINGS FOR SALE AT COST EQUITY
<S> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER
31, 1993........ $ 249,900 $ 2,027,158 $3,836,443 $ 1,319,669 $7,433,170
Accounting change
adjustment for
unrealized gains
on securities
available for
sale at January
1, 1994......... $ 84,105 84,105
Net income........ 1,005,109 1,005,109
Cash dividends:
Corporation:
Common ($1.13
per
share)...... (487,218) (487,218)
Series C
Preferred
($3.50 per
share)...... (17,492) (17,492)
Pooled
affiliates.... (10,040) (10,040)
Shares issued in
acquisitions.... 8,342 11,166 14,316 (316) 33,508
Exercise of stock
options, net of
shares
purchased....... 193 (5,852) (5,659)
Pooled affiliate
stock issuance,
sales of stock
to employee
benefit plans
and other....... 9,235 (45,011) 96,912 61,136
Purchase of
treasury
stock........... $ (336,453) (336,453)
Change in
unrealized
holding gains
(losses) on
securities
available for
sale, net of
tax............. (195,306) (195,306)
-------- ---------- ---------- ---------- ---------- ---------- ----------
BALANCE, DECEMBER
31, 1994........ 249,900 2,044,928 3,796,746 1,921,256 (111,517) (336,453) 7,564,860
Net income........ 1,277,863 1,277,863
Cash dividends:
Common ($1.24
per share).... (532,807) (532,807)
Series C
Preferred
($3.50 per
share)........ (17,487) (17,487)
Shares issued in
acquisitions.... 2,500 4,262 (3,115) 3,647
Conversion of
preferred into
common.......... (265) 46 219
Exercise of stock
options, net of
shares
purchased....... 1,998 (7,458) (5,460)
Sales of stock to
employee benefit
plans and
other........... 3,896 23,966 27,862
Purchase of
treasury
stock........... (324,321) (324,321)
Change in
unrealized
holding gains
(losses) on
securities
available for
sale, net of
tax............. 203,321 203,321
10% common stock
dividend at fair
market value.... 205,337 1,340,028 (1,545,365)
-------- ---------- ---------- ---------- ---------- ---------- ----------
BALANCE, DECEMBER
31, 1995........ 249,635 2,258,705 5,157,763 1,100,345 91,804 (660,774) 8,197,478
Net income........ 1,426,533 1,426,533
Cash dividends:
Common ($1.36
per share).... (587,184) (587,184)
Series C
Preferred
($3.50 per
share)........ (16,363) (16,363)
Shares issued in
acquisitions.... 53,415 657,100 710,515
Conversion of
preferred into
common.......... (42,619) 8,221 34,398
Exercise of stock
options, net of
shares
purchased....... 656 (15,541) (14,885)
Sales of stock to
employee benefit
plans and
other........... (116) (88,698) 90,599 3,674 5,459
Purchase of
treasury
stock........... (1,003,075) (1,003,075)
Retirement of
treasury
stock........... (102,000) (688,007) 790,007
Change in
unrealized
holding gains
(losses) on
securities
available for
sale, net of
tax............. (71,518) (71,518)
-------- ---------- ---------- ---------- ---------- ---------- ----------
BALANCE, DECEMBER
31, 1996........ $ 207,016 $ 2,165,466 $4,453,330 $ 2,013,930 $ 20,286 $ (213,068) $8,646,960
======== ========== ========== ========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
56 BANC ONE CORPORATION and Subsidiaries
<PAGE> 28
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE YEARS ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
$(THOUSANDS) 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES:
NET INCOME........................................................ $ 1,426,533 $ 1,277,863 $ 1,005,109
Adjustments:
Provision for credit losses................................... 788,087 457,499 242,269
Depreciation.................................................. 267,968 236,287 271,928
Amortization of other intangibles............................. 85,363 56,235 84,834
Amortization (accretion) of securities premium and discounts,
net........................................................ 29,857 (57,118) 97,945
Amortization of mortgage servicing rights..................... 19,657 12,939 10,948
Net (increase) decrease in trading account.................... (305,407) (30,199) 92,549
Net (increase) decrease in loans held for sale................ (970,430) (187,758) 869,482
Net decrease (increase) in deferred loan fees and costs....... 34,343 (4,178) (13,416)
Securities (gains) losses..................................... (92,781) (27,847) 261,052
Gain on the sale of banks and branch offices.................. (19,399) (68,297) (390)
Gain on sale of loans and other assets........................ (162,068) (5,995) (71,898)
Net increase in other assets.................................. (206,633) (323,381) (145,441)
Net (decrease) increase in other liabilities.................. (41,859) 161,828 2,355
Net increase in deferred income taxes......................... 223,298 172,034 173,090
---------- ---------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES..................... 1,076,529 1,669,912 2,880,416
---------- ---------- -----------
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES:
Purchases of securities available for sale........................ (5,307,420) (8,110,473) (11,739,005)
Purchases of securities held to maturity.......................... (162,682) (630,407) (1,090,779)
Maturities of securities available for sale....................... 4,169,201 6,712,867 2,142,467
Maturities of securities held to maturity......................... 404,707 1,474,813 2,501,689
Sales of securities available for sale............................ 3,056,509 2,544,358 10,900,079
Net increase in loans, excluding sales and purchases.............. (9,884,899) (9,038,907) (8,283,794)
Sales of loans and other assets................................... 4,087,328 3,694,661 3,620,460
Purchases of loans and related premiums........................... (519,665) (667,442) (641,556)
Net decrease (increase) in short-term investments................. 176,939 3,143,398 (2,450,281)
Additions to bank premises and equipment.......................... (330,187) (340,606) (325,291)
Sale of banks and branch offices.................................. (186,773) (236,041) (26,643)
Net cash acquired in acquisitions................................. 315,715 42,413 1,180,497
Net (increase) decrease in purchased mortgage servicing rights.... 8,078 (44,153) (8,186)
---------- ---------- -----------
NET CASH USED IN INVESTING ACTIVITIES........................... (4,173,149) (1,455,519) (4,220,343)
---------- ---------- -----------
CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES:
Net increase (decrease) in demand, savings and money market
deposits........................................................ 1,556,371 1,639,689 (1,385,486)
Net increase (decrease) in time deposits.......................... (519,192) (1,472,921) 2,943,921
Net increase in short-term borrowings............................. 3,896,392 163,166 557,093
Issuance of long-term borrowings, net............................. 1,875,879 1,081,389 94,536
Repayment of long-term borrowings................................. (1,247,025) (221,729) (32,535)
Cash dividends paid............................................... (603,547) (674,219) (496,708)
Purchase of treasury stock........................................ (1,003,075) (324,321) (336,453)
All other financing activities, net............................... (9,646) 22,402 59,087
---------- ---------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES....................... 3,946,157 213,456 1,403,455
---------- ---------- -----------
Increase in cash and cash equivalents............................. 849,537 427,849 63,528
Cash and cash equivalents at January 1............................ 5,501,266 5,073,417 5,009,889
---------- ---------- -----------
CASH AND CASH EQUIVALENTS AT DECEMBER 31.......................... $ 6,350,803 $ 5,501,266 $ 5,073,417
========== ========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
BANC ONE CORPORATION and Subsidiaries 57
<PAGE> 29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Note I SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BANC ONE is a bank holding company offering a full range
of financial services through operating offices in
Arizona, Colorado, Illinois, Indiana, Kentucky, Louisiana,
Ohio, Oklahoma, Texas, Utah, West Virginia and Wisconsin.
BANC ONE also engages in credit card and merchant
processing, consumer and education finance, mortgage
banking, insurance, trust and investment management,
brokerage, venture capital, investment and merchant
banking, equipment leasing and data processing activities.
"The Corporation" is defined as the parent company
only. "BANC ONE" is defined as the Corporation and all
significant majority-owned subsidiaries. The consolidated
financial statements include the accounts of the
Corporation and all significant majority-owned
subsidiaries (affiliates). See Note 2 for information
relative to acquisitions. Significant intercompany
transactions have been eliminated.
For purposes of comparability, certain prior period
amounts have been reclassified to conform with current
year presentation. The following is a summary of
significant accounting policies followed in the
preparation of the consolidated financial statements.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires
management to make estimates and assumptions that affect
the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those
estimates.
Loans Held for Sale
Certain loan receivables are classified as held for sale
because management does not intend to hold such loans
until maturity or sales of the loans are pending. Such
loans are carried at the lower of aggregate cost or market
value by type of loan. Losses, if any, are recorded in
non-interest income, based on the difference between the
market value (estimated sales proceeds) and aggregate
cost.
Securities
Securities that management has both the positive intent
and ability to hold to maturity are classified as
securities held to maturity and are carried at cost,
adjusted for amortization of premium or accretion of
discount using the interest method. Securities that may be
sold prior to maturity for asset/liability management
purposes, or that may be sold in response to changes in
interest rates, changes in prepayment risk, to increase
regulatory capital or other similar factors, are
classified as securities available for sale and carried at
fair value with any adjustments to fair value, after tax,
reported as a separate component of stockholders' equity.
Securities purchased for trading purposes are held in the
trading portfolio at market value, with market adjustments
included in non-interest income.
Venture capital investments held by qualifying
investment companies are carried at fair value with
changes in fair value recognized in non-interest income or
expense. The fair value of publicly traded investments
takes into account their quoted market prices with
adjustments made for market liquidity or sale
restrictions. For securities that are not publicly traded,
estimates of fair value are further adjusted based upon
review of the investee's financial results, condition and
prospects.
Interest and dividends on securities, including the
amortization of premiums and the accretion of discounts,
are reported in interest and dividends on securities using
the interest method. Gains and losses on securities are
recorded on the trade date and are calculated based on the
security with the highest cost unless specific securities
are identified.
58 BANC ONE CORPORATION and Subsidiaries
<PAGE> 30
Loans
Loans are reported at the principal amount outstanding,
net of unearned income. Income earned is recognized
principally on the accrual method of accounting. Unearned
income, which includes deferred fees, net of deferred
direct incremental loan origination costs, is amortized to
interest income over the contractual life of the loan
using the interest method or the straight-line method if
not materially different. Loan origination fees and costs
on demand loans are deferred and amortized into interest
income on a straight-line basis over a period which is
consistent with the understanding between BANC ONE and the
borrower or, if no understanding exists, over the
estimated loan term. Loan origination fees and costs on
credit card and other revolving loans are deferred and
amortized into interest income using a straight-line
method over one year.
Commercial loans are placed on non-accrual at the time
the loan is 90 days delinquent unless the credit is well
secured and in process of collection. Residential real
estate loans are placed on non-accrual at the time the
loan is 120 days delinquent. Credit card loans, other
unsecured personal credit lines and certain consumer
finance loans are charged-off no later than 180 days
delinquent. Other consumer loans are charged-off at 120
days delinquent. In all cases, loans must be placed on
non-accrual or charged-off at an earlier date if
collection of principal or interest is considered
doubtful.
All interest accrued but not collected for loans that
are placed on non-accrual or charged-off is reversed
against interest income. The interest on these loans is
accounted for on the cash basis or cost recovery method,
until qualifying for return to accrual. Loans are returned
to accrual status when all the principal and interest
amounts contractually due are reasonably assured of
repayment within a reasonable time frame and when the
borrower has demonstrated payment performance of cash or
cash equivalents for a minimum of six months.
Leases
The leasing operations consist of the leasing of
automobiles (carried in consumer loans) and various types
of equipment under leases principally classified as direct
financing leases. Interest, net of initial direct costs,
is deferred and reported as income in decreasing amounts
over the term of the lease so as to provide a constant
yield on the outstanding principal balance. Leases are
charged-off at the earlier of 120 days delinquent or when
collection of principal or interest is in doubt.
Provision for Credit Losses
The provision for credit losses charged to expense is
based upon management assessment of current and historical
loss experience, loan portfolio trends, prevailing
economic and business conditions, specific loan review and
other relevant factors. In management's opinion, the
provision is sufficient to maintain the allowance for
credit losses at a level that adequately provides for
potential losses.
Loan Securitizations
BANC ONE actively packages and sells loan receivables as
securities to investors. In such transactions BANC ONE
receives a fee for servicing the loans, and receives net
interest revenues generated by the loans removed from the
balance sheet which are in excess of the interest due
investors and net credit losses. The excess interest
revenues are recognized as servicing income.
BANC ONE CORPORATION and Subsidiaries 59
<PAGE> 31
During 1996, the Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting Standards
(SFAS) No. 125, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishment of Liabilities." This
statement is effective January 1, 1997, and provides
accounting and reporting standards for loan
securitizations based on control of the underlying
financial assets. It also provides accounting and
implementation guidance for other transfers, including
partial transfers of loans, servicing of financial assets,
repurchase agreements, securities lending and
extinguishments of liabilities. The effective date
relative to certain provisions, including those related to
repurchase agreements and securities lending, has been
deferred by the FASB until 1998. The impact of this
statement on the consolidated financial statements is not
expected to be material.
Mortgage Banking Activities
Mortgage servicing assets are recognized as separate
assets when servicing rights are acquired through purchase
or loan originations, when there is a definitive plan to
sell the underlying loan. Capitalized mortgage servicing
rights are reported in other assets and are amortized into
non-interest income in proportion to, and over the period
of, the estimated future net servicing income of the
underlying mortgage loans. Capitalized mortgage servicing
rights are evaluated for impairment based on the fair
value of those rights.
Bank Premises and Equipment
Bank premises and equipment are stated at cost less
accumulated depreciation. Depreciation is provided
principally using the straight-line method over the
estimated useful lives of the assets. Upon the sale or
other disposal of assets, the cost and related accumulated
depreciation are retired and the resulting gain or loss is
recognized. Maintenance and repairs are charged to expense
as incurred, while renewals and betterments are
capitalized. Software costs for internally developed
systems are expensed as incurred. Software costs related
to externally developed systems are capitalized and
include systems intended for internal and external use.
On January 1, 1996, BANC ONE adopted SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed Of." The impact on
the consolidated financial statements for the year ended
December 31, 1996, was not material.
Other Real Estate Owned
Other real estate owned primarily represents properties
acquired by the Corporation's affiliates through customer
loan default and owned properties no longer used in the
banking business. The real estate acquired through
foreclosure is stated at an amount equal to the lesser of
the loan balance prior to foreclosure, plus certain costs
incurred for improvements to the property, or fair value
less estimated selling costs of the property.
Purchase Method of Accounting
Net assets of organizations acquired in purchase
transactions are recorded at fair value at date of
acquisition. The excess of cost over net assets of
affiliates purchased (goodwill) is amortized using the
straight-line and accelerated methods over the estimated
periods benefitted with terms ranging from five to 40
years. Core deposits and other identifiable intangible
assets are typically amortized on an accelerated basis.
Off-Balance Sheet Activities
BANC ONE uses a variety of off-balance sheet investment
products as part of its interest rate risk management
strategy and in its customer service and trading
activities. The most frequently used off-balance sheet
investment products are various types of interest rate
swaps. However, interest rate floors, options, swap
options, caps, forward rate agreements and currency swaps
are also utilized. Off-balance sheet investment products
are typically classified as synthetic alterations,
anticipatory hedges or matched book agreements. The
criteria that must be satisfied for each of these methods
is as follows: Synthetic Alteration -- (1) the asset or
liability to be converted creates exposure to interest
rate risk, and (2) the off-balance sheet investment
product is designated and effective as a synthetic
alteration of the balance sheet item. Anticipatory Hedge
-- (1) the transaction to be hedged creates exposure to
interest
60 BANC ONE CORPORATION and Subsidiaries
<PAGE> 32
rate risk; (2) the off-balance sheet investment product
acts to reduce the interest rate risk by moving closer to
being insensitive to interest rate changes; (3) the
off-balance sheet investment product is designated and
effective as a hedge of the transaction; (4) the
significant characteristics and expected terms of the
anticipated transaction are identified; and (5) it is
probable that the anticipated transaction will occur.
Matched Book -- there must be separate agreements that
have offsetting payment streams with the same maturity,
repricing dates and notional amounts.
In order for off-balance sheet investment products with
forward-start dates to be accounted for as a synthetic
alteration, they must satisfy the appropriate criteria
above as well as the following additional criteria: (1)
the start date of the off-balance sheet investment product
does not extend beyond that point in time at which it is
believed that modeling systems produce reliable interest
rate sensitivity information; and (2) the related balance
sheet item, from trade date to final maturity, has
sufficient balances for alteration. If the initial
assignment is changed, or should sufficient balances not
be available, the excess portion of the off-balance sheet
investment product must be marked to market.
Accrual accounting is applied for off-balance sheet
investment products classified as described above and
income and expense are recorded in the same category as
that of the related balance sheet item. The related
balance sheet item is generally a pool of similar
products. For matched book transactions, income and
expense are recorded in non-interest income. Fees related
to these off-balance sheet investment products are
amortized on the interest method over the life of the
off-balance sheet investment products. If the balance of
the related balance sheet item falls below that of the
related off-balance sheet investment product, the excess
portion of the off-balance sheet investment product is
marked to market and the resulting gain or loss included
in income, as applicable. If an off-balance sheet
investment product is terminated, the gain or loss is
deferred and amortized over the remaining life of the
off-balance sheet investment product.
Off-balance sheet investment products that do not
satisfy the criteria above, including those used in
trading activities, are carried at market value. Any
changes in market value are recognized in non-interest
income.
In June 1996, the FASB issued an Exposure Draft,
"Accounting for Derivative and Similar Financial
Instruments and for Hedging Activities" (the Exposure
Draft), which, if adopted as issued, would significantly
change the accounting for derivative and hedging
activities. The Exposure Draft would require that all
derivative financial instruments be recognized and
recorded at fair value. However, key aspects of the
exposure draft continue to be discussed and are subject to
change; accordingly the impact, if any, to BANC ONE is not
presently known. The date for issuance of the final
statement has not yet been determined.
Investment in Majority-Owned Affiliates (Parent Company
Only)
The Corporation's investment in affiliates represents the
total equity of majority-owned consolidated subsidiaries,
using the equity method of accounting.
Statement of Cash Flows
For purposes of reporting cash flows, cash and cash
equivalents include cash and due from banks.
Net Income Per Common Share
Net income per common share is calculated by dividing net
income available to common stockholders (net income less
preferred dividends) by the average number of common
shares outstanding (total shares issued less treasury
stock) and any dilutive common stock equivalents for the
period.
BANC ONE CORPORATION and Subsidiaries 61
<PAGE> 33
Stock-Based Compensation
BANC ONE applies APB Opinion No. 25, "Accounting for Stock
Issued to Employees" (APB 25) and related interpretations
in accounting for its stock-based compensation plans. In
1995, the FASB issued SFAS No. 123, "Accounting for
Stock-Based Compensation" (SFAS 123) which is effective
for fiscal years beginning after December 15, 1995. Under
SFAS 123, the Corporation may elect to recognize
stock-based compensation expense based on the fair value
of the awards or continue to account for stock-based
compensation under APB 25. The Corporation has elected to
continue to apply the provisions of APB 25.
- --------------------------------------------------------------------------------
Note 2 ACQUISITIONS
On January 19, 1997, the Corporation entered into an
agreement to merge with First USA, Inc. ("First USA"),
located in Dallas, Texas. Terms of the agreement call for
First USA shareholders to receive 1.1659 shares of the
Corporation's common stock for each outstanding share of
First USA common stock in exchange for approximately 163
million shares of the Corporation's common stock. First
USA had total assets of $10.2 billion and stockholders'
equity of $1.2 billion at December 31, 1996 and net income
of $143 million for the six months ended December 31,
1996. First USA is a financial services company
specializing in the credit card business with $22.4
billion in managed receivables and 16 million cardholders
at December 31, 1996. The transaction is subject to
regulatory and shareholder approvals. This transaction is
expected to be completed in the second quarter of 1997 and
will be accounted for as a pooling of interests.
First USA reported net income of $247 million, $178
million, and $93 million for its fiscal years ended June
30, 1996, 1995 and 1994, respectively. The following
represents the unaudited pro forma condensed, combined
balance sheet for BANC ONE and First USA for the year
ended December 31, 1996:
PRO FORMA CONDENSED, COMBINED BALANCE SHEET
<TABLE>
<CAPTION>
$(MILLIONS)(UNAUDITED)
<S> <C>
-------------------------------------------------------------------------------
ASSETS:
Cash and due from banks............................................ $ 6,857
Securities......................................................... 19,479
Net loans and leases............................................... 79,666
Other assets....................................................... 6,052
--------
TOTAL ASSETS.................................................... $112,054
========
LIABILITIES:
Deposits........................................................... $ 74,078
Borrowings......................................................... 25,153
Other liabilities.................................................. 2,945
--------
Total liabilities............................................... 102,176
Stockholders' equity............................................... 9,878
--------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY...................... $112,054
========
</TABLE>
----------------------------------------------------------
On December 28, 1996, the Corporation entered into an
agreement to merge with Liberty Bancorp, Inc. ("Liberty"),
a multi-bank holding company headquartered in Oklahoma
City, Oklahoma, with 29 banking offices in Oklahoma City
and Tulsa. Terms of the merger agreement call for an
exchange of 1.175 shares of BANC ONE common stock for each
share of Liberty common stock. This transaction is
expected to close during the second quarter of 1997, and
will be accounted for as a purchase. Liberty had assets of
approximately $2.9 billion at December 31, 1996.
62 BANC ONE CORPORATION and Subsidiaries
<PAGE> 34
On January 2, 1996, the Corporation acquired all of the
outstanding shares of Premier Bancorp, Inc. (Premier) of
Baton Rouge, Louisiana, in exchange for 24 million shares
of the Corporation's common stock valued at $711 million.
The acquisition was accounted for as a purchase. Goodwill
of $263 million was recognized and will be amortized over
25 years using the straight-line method. Premier had
assets of $6.3 billion at December 31, 1995. No effects of
this acquisition are included in the financial statements
prior to the date of purchase. To reflect the purchase of
Premier as if the acquisition occurred on January 1, 1995,
BANC ONE's consolidated pro forma total revenue, net
income and net income per common share would have been
$9.5 billion, $1.3 billion and $2.82, respectively.
- --------------------------------------------------------------------------------
Note 3 SECURITIES AND OFF-BALANCE SHEET ACTIVITIES
Following are the estimated maturities, fair value,
amortized cost and weighted average yields of securities
by type:
<TABLE>
<CAPTION>
MATURITIES OF SECURITIES AT DECEMBER 31, 1996(1)
------------------------------------------------------------------ DECEMBER 31,
2002- ------------------
$(MILLIONS) 1997 1998 1999 2000 2001 2006 2007+ 1996 1995
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
SECURITIES HELD TO MATURITY(2)(3)
Tax-exempt
Amortized cost.................. $ 213 $ 123 $ 76 $ 87 $ 59 $ 89 $ 38 $ 685 $ 909
Fair value...................... 216 127 81 91 63 95 41 714 953
Weighted average yield.......... 6.86% 6.82% 6.54% 7.08% 6.65% 6.50% 5.58% 6.71% 6.63%
All other
Amortized cost.................. 43 35 26 9 9 80 202 179
Fair value...................... 43 36 27 9 9 79 203 183
Weighted average yield.......... 6.09% 6.67% 6.88% 6.51% 6.83% 7.42% 6.87% 6.38%
Total amortized cost.............. $ 256 $ 158 $ 102 $ 96 $ 68 $ 169 $ 38 $ 887 $ 1,088
====== ====== ====== ====== ====== ====== ===== ======= =======
Total fair value.................. $ 259 $ 163 $ 108 $ 100 $ 72 $ 174 $ 41 $ 917 $ 1,136
====== ====== ====== ====== ====== ====== ===== ======= =======
SECURITIES AVAILABLE FOR
SALE(2)(3)(4)
United States treasury and
agencies
Amortized cost.................. $ 882 $1,245 $ 351 $ 392 $ 452 $ 911 $ 3 $ 4,236 $ 3,029
Fair value...................... 883 1,246 349 392 437 904 3 4,214 3,060
Weighted average yield.......... 5.94% 5.89% 5.73% 6.24% 5.41% 6.33% 7.47% 5.97% 6.06%
Mortgage and asset-backed
securities:
Government
Amortized cost................ 543 441 955 1,905 959 1,763 164 6,730 6,553
Fair value.................... 548 449 967 1,934 972 1,757 165 6,792 6,660
Weighted average yield........ 5.66% 7.40% 6.66% 6.92% 7.19% 6.95% 7.66% 6.88% 7.05%
Other
Amortized cost................ 341 551 328 457 260 110 27 2,074 3,595
Fair value.................... 340 555 326 453 245 110 27 2,056 3,587
Weighted average yield........ 5.53% 6.58% 6.12% 6.42% 6.07% 6.61% 11.85% 6.30% 6.43%
Tax-exempt
Amortized cost.................. 236 103 97 119 119 294 5 973 813
Fair value...................... 237 104 98 120 120 296 5 980 825
Weighted average yield(2)....... 4.53% 4.75% 4.78% 4.75% 4.81% 4.91% 7.54% 4.77% 5.02%
Other
Amortized cost.................. 264 37 9 121 11 57 92 591 486
Fair value...................... 264 37 10 121 11 57 93 593 488
Weighted average yield.......... 5.92% 6.20% 6.47% 6.06% 8.03% 7.48% 6.67% 6.28% 7.93%
Total amortized cost.............. $2,266 $2,377 $1,740 $2,994 $1,801 $3,135 $ 291 $14,604 $14,476
====== ====== ====== ====== ====== ====== ===== ======= =======
Total fair value.................. $2,272 $2,391 $1,750 $3,020 $1,785 $3,124 $ 293 $14,635 $14,620
====== ====== ====== ====== ====== ====== ===== ======= =======
</TABLE>
(1) Reflects estimated maturity.
(2) Weighted average yields on tax-exempt securities are not reflected on a tax
equivalent basis.
(3) Weighted average yields for both held to maturity and available-for-sale
securities are based on amortized historical cost.
(4) Includes trading securities carried at fair value of $549 million and $243
million at December 31, 1996 and 1995, respectively.
BANC ONE CORPORATION and Subsidiaries 63
<PAGE> 35
The following are net realized gains and losses on
securities sold or called and unrealized gains and losses
on securities held:
<TABLE>
<CAPTION>
UNREALIZED GAIN (LOSS) AS OF
REALIZED GAIN (LOSS) DURING 1996 DECEMBER 31, 1996
------------------------------------------------------------- -----------------------------------------
NET NET
REALIZED UNREALIZED
AMORTIZED REALIZED REALIZED GAIN UNREALIZED UNREALIZED GAIN
$(MILLIONS) COST PROCEEDS GAINS LOSSES (LOSS) GAINS LOSSES (LOSS)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Securities held to
maturity:
Tax-exempt....... $38 $ 40 $ 2 $ 2 $ 35 $ (6) $ 29
All other........ 3 (1) 2
Securities
available for
sale:
United States
treasury and
federal
agencies....... 381 381 8 (30) (22)
Mortgage and
asset-backed
securities:
Government..... 1,728 1,737 21 $ (12) 9 83 (21) 62
Other.......... 903 907 7 (3) 4 11 (29) (18)
Tax-exempt and
other.......... 166 244 89 (11) 78 13 (5) 8
------ ------- ---- ----- ----- ---- ----- -----
Total.............. $3,216 $ 3,309 $119 $ (26) $ 93 $153 $ (92) $ 61
====== ======= ==== ===== ===== ==== ===== =====
</TABLE>
<TABLE>
<CAPTION>
UNREALIZED GAIN (LOSS) AS OF
REALIZED GAIN (LOSS) DURING 1995 DECEMBER 31, 1995
------------------------------------------------------------- -----------------------------------------
NET NET
REALIZED UNREALIZED
AMORTIZED REALIZED REALIZED GAIN UNREALIZED UNREALIZED GAIN
$(MILLIONS) COST PROCEEDS GAINS LOSSES (LOSS) GAINS LOSSES (LOSS)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Securities held to
maturity:
Tax-exempt....... $ 95 $ 96 $ 1 $ 1 $ 51 $ (7) $ 44
All other........ 24 28 6 $ (2) 4 6 (2) 4
Securities
available for
sale:
United States
treasury and
federal
agencies....... 635 636 7 (6) 1 33 (2) 31
Mortgage and
asset-backed
securities:
Government..... 591 585 1 (7) (6) 117 (10) 107
Other.......... 1,209 1,204 3 (8) (5) 25 (33) (8)
Tax-exempt and
other.......... 108 141 33 0 33 19 (5) 14
------ ------- ---- ----- ----- ---- ----- -----
Total.............. $2,662 $ 2,690 $ 51 $ (23) $ 28 $251 $ (59) $ 192
====== ======= ==== ===== ===== ==== ===== =====
</TABLE>
<TABLE>
<CAPTION>
UNREALIZED GAIN (LOSS) AS OF
REALIZED GAIN (LOSS) DURING 1994 DECEMBER 31, 1994
------------------------------------------------------------- -----------------------------------------
NET NET
REALIZED UNREALIZED
AMORTIZED REALIZED REALIZED GAIN UNREALIZED UNREALIZED GAIN
$(MILLIONS) COST PROCEEDS GAINS LOSSES (LOSS) GAINS LOSSES (LOSS)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Securities held to
maturity:
Tax-exempt....... $ 55 $ 56 $ 2 $ (1) $ 1 $ 51 $ (66) $ (15)
All other........ 45 46 4 (3) 1 31 (60) (29)
Securities
available for
sale:
United States
treasury and
federal
agencies....... 10,556 10,271 140 (425) (285) 5 (12)) (7
Mortgage and
asset-backed
securities:
Government..... 104 103 (1) (1) (106) (106)
Other.......... 563 562 1 (2) (1) 26 (98) (72)
Tax-exempt and
other.......... 64 88 27 (3) 24 8 (1) 7
------- ------- ---- ----- ----- ---- ----- -----
Total.............. $11,387 $11,126 $174 $(435) $(261) $121 $(343) $(222)
======= ======= ==== ===== ===== ==== ===== =====
</TABLE>
64 BANC ONE CORPORATION and Subsidiaries
<PAGE> 36
Off-Balance Sheet Activities
The off-balance sheet investment products BANC ONE
utilizes are primarily interest rate swaps. Interest rate
swap agreements generally involve the exchange of fixed
and floating rate interest payments without the exchange
of the underlying notional amount on which interest
payments are calculated. Interest rate swap agreements
that synthetically alter assets and liabilities are
entered into as part of a program to manage the impact of
fluctuating interest rates.
The notional amounts of generic swaps do not change
during the life of the swap contract. The notional amounts
and lives of amortizing swaps change based on certain
interest rate indices. Generally, as rates fall the
notional amounts of receive fixed amortizing swaps decline
more rapidly and as rates increase notional amounts
decline more slowly. A key assumption in the maturity
information in the following table is that future variable
rates move as indicated by the forward interest rate curve
in existence at December 31, 1996. To the extent that
rates move in a fashion other than indicated by the
forward interest rate curve the maturity information will
change. Basis swaps are contracts under which amounts are
generally received based on LIBOR, typically subject to
certain defined caps, and paid based on prime. Accrual of
interest on forward starting swaps commences at
predetermined future dates.
Purchased caps require the payment of a fee for the
right to receive interest payments on the contract
notional amount when a floating rate (typically LIBOR)
rises above a strike rate. The impact on net interest
income is the excess of the floating rate over the strike
rate less the periodic amortization of the premium paid.
The notional amounts shown in the following table
represent agreed upon amounts on which calculations of
interest payments to be exchanged are based. Notional
amounts do not represent direct credit exposures. Direct
credit exposure is limited to the net difference between
the calculated pay and receive amounts on each
transaction, which is generally netted and paid or
received quarterly and the ability of the counterparty to
perform its payment obligation under the agreement. BANC
ONE has very stringent policies governing off-balance
sheet investment product activities and collateral is
typically exchanged with the counterparties to further
minimize credit risk. The methods used to determine
counterparty and credit lines are formally reviewed and
approved annually.
There were $4 million and $23 million of net deferred
items primarily representing premiums paid at December 31,
1996 and 1995, respectively. There were no past due
payments, nor were there any reserves for credit losses on
off-balance-sheet investment products, as of these dates.
Trading and dealer activities are not material and thus
not separately disclosed. The following table reflects the
estimated maturities and weighted average fixed rates of
off-balance-sheet investment products by type at December
31, 1996.
BANC ONE CORPORATION and Subsidiaries 65
<PAGE> 37
<TABLE>
<CAPTION>
MATURITIES OF OFF-BALANCE SHEET INVESTMENT BALANCES AT
PRODUCTS AT DECEMBER 31, 1996(1)(2) DECEMBER 31,
-------------------------------------------------------------------------- ---------------------
$(MILLIONS) 1997 1998 1999 2000 2001 2002-2006 2007+ 1996 1995
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Receive fixed swaps
Notional value........... $4,053 $ 1,800 $ 545 $ 1,160 $ 750 $1,416 $800 $ 10,524 $ 9,789
Weighted average receive
rate................... 5.25% 5.94% 6.20% 6.29% 6.12% 6.55% 6.97% 5.90% 5.85%
Receive fixed amortizing
swaps
Notional value........... $1,453 $ 434 $ 19 $ 150 $ 2,056 $ 7,946
Weighted average receive
rate................... 5.23% 5.58% 7.27% 5.54% 5.35% 5.29%
Pay fixed swaps
Notional value........... $ (95) $ (1,500) $ (6) $ (507) $ (2,108) $ (2,673)
Weighted average pay
rate................... 8.54% 6.16% 8.68% 6.54% 6.36% 5.76%
Net receive fixed
position................. $5,411 $ 734 $ 558 $ 803 $ 750 $1,416 $800 $ 10,472 $ 15,062
Purchased caps
Notional value........... 941 1,004 16 1 2 9 1,973 5,253
Basis swaps
Notional value........... 3,730 754 58 $ 50 137 4,729 8,304
Other(3)
Notional value........... $1,040 $1,000 $ 16 $ 2,056 $ 4,052
</TABLE>
(1) Maturities are based on estimated future interest rates from the forward
interest rate curve at December 31, 1996.
(2) Variable receive and pay interest rates, which are based primarily on three
month LIBOR or prime, are not included in the table.
(3) Other off-balance sheet investment products include forward-starting
contracts ($1.0 billion and $1.4 billion at December 31, 1996 and 1995,
respectively), floors, futures, options, swap options and forward rate
agreements. Customer transactions of $1.6 billion and $1.2 billion at
December 31, 1996 and December 31, 1995, respectively, have been excluded.
- --------------------------------------------------------------------------------
Unrealized gains and losses in off-balance sheet
investments products at December 31, 1996 and 1995 are
summarized as follows:
<TABLE>
<CAPTION>
NET UNREALIZED GAIN
(LOSS) AS OF
DECEMBER 31,
-------------------
$(MILLIONS) 1996 1995
<S> <C> <C>
------------------------------------------------------------
Receive fixed swaps......................................... $ (15) $ 136
Receive fixed amortizing swaps.............................. (6) (13)
Pay fixed swaps............................................. (13) (13)
Purchased caps.............................................. (8) (18)
Basis swaps................................................. (6) (37)
Forward starting and other.................................. 10 (8)
---- ---
Total....................................................... $ (38) $ 47
==== ===
</TABLE>
66 BANC ONE CORPORATION and Subsidiaries
<PAGE> 38
- --------------------------------------------------------------------------------
Note 4 LOANS AND LEASES
The composition of the loan and lease portfolio at
December 31, 1996 and 1995 is summarized as follows:
<TABLE>
<CAPTION>
$(THOUSANDS) 1996 1995
<S> <C> <C>
-----------------------------------------------------------------------------------------
Commercial, financial and agricultural....................... $20,232,193 $17,903,692
Real estate:
Commercial................................................. 6,429,409 5,667,826
Construction............................................... 3,601,958 2,692,587
Residential................................................ 13,917,037 10,756,169
Consumer (net of unearned income of $725,476 and $487,147 at
December 31, 1996 and 1995, respectively).................. 19,385,425 18,407,595
Credit card.................................................. 8,301,406 7,665,274
Leases (net of unearned income of $657,835 and $491,684 at
December 31, 1996 and 1995, respectively).................. 2,326,508 1,732,196
------------ ------------
Total loans and leases....................................... $74,193,936 $64,825,339
============ ============
</TABLE>
----------------------------------------------------------
In the normal course of business, BANC ONE issues
commitments to extend credit, standby letters of credit,
and commercial and other letters of credit to meet the
financing needs of its customers. These instruments
involve, to varying degrees, elements of credit and
interest rate risk in excess of the amount recognized in
the balance sheet. The contract amounts of these
instruments are shown below.
<TABLE>
<CAPTION>
$(MILLIONS) 1996 1995
<S> <C> <C>
-----------------------------------------------------------------------------------------
Commitments to extend credit......................................... $74,856 $79,436
Standby letters of credit............................................ 3,140 3,493
Commercial and other letters of credit............................... 163 278
</TABLE>
----------------------------------------------------------
Commitments to extend credit are agreements to lend to
a customer provided there is not a violation of any
condition established in the contract. Non-credit card
commitments generally have fixed expiration dates, may
require payment of a fee and contain termination and other
clauses that provide for relief from funding in the event
that there is a significant deterioration in the credit
quality of the customer. Since many of the commitments are
expected to or typically expire without being drawn upon,
the total commitment amount does not necessarily represent
future cash requirements. The exposure to credit loss in
the event of nonperformance by the other party to these
commitments is represented by the contractual amount. The
same credit policies are applied in making commitments for
on-balance sheet instruments, mainly by evaluating each
customer's creditworthiness on a case-by-case basis. The
amount of collateral obtained, if deemed necessary upon
extension of credit, is based on management's credit
evaluation of the borrower. The collateral varies, but may
include residential real estate, accounts receivable,
inventories, investments, property, plant and equipment
and income-producing commercial properties.
Letters of credit are conditional commitments
guaranteeing payment on drafts drawn in accordance with
the terms of the documents. Commercial letters of credit
are used to facilitate trade or commerce with the drafts
being drawn when the underlying transaction is
BANC ONE CORPORATION and Subsidiaries 67
<PAGE> 39
consummated. Standby letters of credit guarantee the
performance of a customer to a third party. These
guarantees are primarily issued to support public and
private borrowing arrangements, including commercial
paper, bond financing and similar transactions. The credit
risk involved in issuing letters of credit is essentially
the same as that involved in making loan commitments to
customers. The same credit policies are used in providing
these conditional obligations as it does for on-balance
sheet instruments. Collateral for those commitments when
deemed necessary varies, but may include accounts
receivable, inventories, investments and real estate.
BANC ONE has entered into several loan securitizations.
The risk associated with these transactions is limited to
certain on-balance sheet receivables (approximately $356
million at December 31, 1996). The remaining market and
credit risks are transferred to the investors and the
third-party institutions providing credit enhancement.
At December 31, 1996 and 1995, respectively, there were
$7.7 billion and $6.2 billion of loans to real estate
operators, managers and developers and construction
contractors which represented 10.33% and 9.55% of total
loans and leases. There were no other significant
concentrations. Real estate loans and loan commitments are
primarily for properties located throughout the Midwest
and Southwest. Repayment of these loans is dependent in
part upon the economic conditions in those regions. Each
customer's creditworthiness is evaluated on an individual
basis. Collateral is required on real estate loans
consisting primarily of residential and income-producing
properties.
Credit card loans, consumer loans and related loan
commitments are located throughout the United States.
Repayment of these loans is dependent in part upon
regional and national economic factors. Collateral is not
required on credit card loans because of the low average
balance of each loan.
Mortgage loans serviced for others approximated $22.5
billion and $19.9 billion at December 31, 1996 and 1995,
respectively.
- --------------------------------------------------------------------------------
Note 5 ALLOWANCE FOR CREDIT LOSSES
The following summarizes activity in the allowance for
credit losses for 1996, 1995 and 1994.
<TABLE>
<CAPTION>
$(THOUSANDS) 1996 1995 1994
<S> <C> <C> <C>
-----------------------------------------------------------------------------------------
BALANCE, BEGINNING OF PERIOD....................... $ 938,008 $ 897,180 $ 967,254
Allowances associated with acquisitions and
other............................................ 66,587 (3,888) 4,526
Provision for credit losses........................ 788,087 457,499 242,269
Losses charged to the allowance.................... (956,587) (603,994) (521,169)
Recoveries......................................... 238,997 191,211 204,300
---------- -------- --------
Net losses charged to the allowance................ (717,590) (412,783) (316,869)
---------- -------- --------
BALANCE, END OF PERIOD............................. $1,075,092 $ 938,008 $ 897,180
========== ======== ========
</TABLE>
----------------------------------------------------------
The provision for credit losses charged to expense is
based upon credit loss experience and an evaluation of
potential losses in the current loan and lease portfolio,
including the evaluation of impaired loans under SFAS
No.'s 114 and 118 (collectively, SFAS 114), "Accounting by
Creditors for Impairment of a Loan" and "Accounting by
Creditors for Impairment of a Loan -- Income Recognition
and Disclosures". All nonaccrual loans on which a specific
reserve calculation is required and significant troubled
debt restructurings are considered impaired. Impairment is
primarily measured based on the fair value of the loan's
collateral. Impairment losses are included in the
provision for credit losses. Loans collectively evaluated
for impairment
68 BANC ONE CORPORATION and Subsidiaries
<PAGE> 40
include certain smaller balance commercial loans, consumer
loans, residential real estate loans and credit card
loans. SFAS 114 does not apply to large groups of smaller
balance homogeneous loans that are collectively evaluated
for impairment, except for those loans restructured under
a troubled debt restructuring. A loan is considered
restructured when certain concessions are made to a
financially troubled debtor that are not normally
considered.
The following table summarizes impaired loan information
at December 31, 1996 and 1995.
<TABLE>
<CAPTION>
$(THOUSANDS) 1996 1995
<S> <C> <C>
-----------------------------------------------------------------------------------------
Impaired loans with related allowance.............................. $109,781 $141,467
Impaired loans with no related allowance........................... 161,579 75,694
-------- --------
Total impaired loans............................................... $271,360 $217,161
======== ========
Allowance on impaired loans........................................ $ 33,101 $ 41,119
======== ========
</TABLE>
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
----------------------
$(THOUSANDS) 1996 1995
<S> <C> <C>
-----------------------------------------------------------------------------------------
Average impaired loans........................................... $274,545 $219,962
Interest income recognized on impaired loans..................... 7,764 6,706
Cash basis interest income recognized on impaired loans.......... 2,737 3,698
</TABLE>
----------------------------------------------------------
Interest payments on impaired loans are typically
applied to principal unless collectability of the
principal amount is fully assured, in which case interest
is recognized on the cash basis. Interest may be
recognized on the accrual basis for certain troubled debt
restructurings which are included in the impaired loan
data above.
- --------------------------------------------------------------------------------
Note 6 BANK PREMISES, EQUIPMENT AND LEASES
The major categories of bank premises and equipment and
accumulated depreciation at December 31, 1996 and 1995,
are summarized as follows:
<TABLE>
<CAPTION>
$(THOUSANDS) 1996 1995
------------------------------------------------------------------------------------------
<S> <C> <C>
Land........................................................... $ 220,211 $ 208,164
Building....................................................... 1,252,757 1,040,104
Equipment...................................................... 1,744,186 1,498,789
Leasehold improvements......................................... 283,647 274,618
--------- ---------
3,500,801 3,021,675
Less accumulated depreciation and amortization................. 1,827,417 1,462,999
--------- ---------
Bank premises and equipment, net............................... $ 1,673,384 $ 1,558,676
========= =========
</TABLE>
----------------------------------------------------------
As of December 31, 1996, the future minimum rental
payments required under noncancelable operating leases
with initial terms in excess of one year are $115 million,
$104 million, $86 million, $68 million, and $58 million
for each of the years 1997 through 2001, respectively, and
$330 million thereafter. Rental expense under operating
leases approximated $166 million in 1996, $160 million in
1995 and $175 million in 1994.
BANC ONE CORPORATION and Subsidiaries 69
<PAGE> 41
- --------------------------------------------------------------------------------
Note 7 SHORT-TERM BORROWINGS
Information pertaining to short-term borrowings for 1996,
1995 and 1994, is summarized below:
<TABLE>
<CAPTION>
FEDERAL FUNDS REPURCHASE COMMERCIAL BANK
$(THOUSANDS) PURCHASED(1) AGREEMENTS(1) PAPER(2) NOTES(3) OTHER(4)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1996:
Balance end of year.......................... $ 4,199,726 $4,541,141 $1,683,790 $2,684,914 $ 996,005
Highest month-end balance.................... 4,199,726 4,541,141 1,754,113 3,084,832 1,657,418
Average daily balance........................ 3,543,050 4,005,940 1,281,410 2,475,044 581,405
Weighted average interest rate:
As of year-end............................. 6.27% 4.88% 5.40% 5.44% 5.13%
Paid during year........................... 5.39 4.65 5.32 5.40 5.15
1995:
Balance end of year.......................... $ 3,229,938 $3,031,071 $ 652,801 $2,359,642 $ 503,748
Highest month-end balance.................... 3,229,938 3,883,409 1,469,476 2,359,642 1,488,626
Average daily balance........................ 2,767,037 3,012,345 1,278,631 1,660,990 583,234
Weighted average interest rate:
As of year-end............................. 5.43% 4.91% 5.72% 5.81% 5.37%
Paid during year........................... 5.93 4.94 6.16 5.70 5.56
1994:
Balance end of year.......................... $ 2,114,015 $3,072,512 $1,272,660 $2,409,821 $ 752,761
Highest month-end balance.................... 3,522,126 6,199,725 1,272,660 2,498,925 1,563,387
Average daily balance........................ 2,836,104 4,359,420 1,047,795 1,906,236 662,064
Weighted average interest rate:
As of year-end............................. 6.01% 4.62% 5.61% 4.90% 5.40%
Paid during year........................... 4.46 3.55 4.61 4.55 4.03
</TABLE>
(1) Federal funds purchased and repurchase agreements represent primarily
overnight borrowings.
(2) The commercial paper of the Corporation and certain affiliates is supported
by a $2 billion line of credit to the Corporation maturing in the year 2000
with unaffiliated banks carrying an annual commitment fee of .08%.
(3) Bank Notes have both fixed and variable interest rates with maturities of
approximately one year.
(4) Other includes demand notes payable -- U.S. Treasury and other notes.
- --------------------------------------------------------------------------------
Note 8 LONG-TERM BORROWINGS
Long-term borrowings are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
STATED EFFECTIVE -------------------------
$(THOUSANDS) MATURITY RATE RATE(1) 1996 1995
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Corporation: Subordinated notes(2)....... 2002 7.25% 6.66% $ 348,454 $ 346,337
Subordinated notes(2)....... 2003 8.74 7.80 170,000 169,881
Subordinated notes(2)....... 2005 7.00 6.26 298,370 296,155
Subordinated notes(2)....... 2009 9.88 10.11 196,471 196,012
Subordinated notes(2)....... 2010 10.00 10.25 197,668 197,369
Subordinated notes(2)....... 2025 7.75 6.59 297,122 294,272
Subordinated notes(2)....... 2026 7.63 6.40 495,977
Affiliates: Subordinated notes(3)....... Various Various Various 602,179 598,580
Bank notes(4)............... Various Various Various 1,419,338 522,006
Capital leases and other.... Various Various Various 163,934 99,761
---------- ----------
Total....................... $4,189,513 $2,720,373
========== ==========
</TABLE>
(1) The effective rate includes amortization of premium or discount. Interest
rate swap agreements have been entered into that have altered the stated
interest rate for certain of the borrowings to variable interest rates. The
effective rates include the impact of these swap agreements at December 31,
1996. The terms to maturity of the swaps are shorter than or equal to the
altered borrowings.
(2) These notes are not subject to redemption and impose certain limitations
relating to funded debt, liens and the sale or issuance of capital stock of
significant bank subsidiaries.
(3) These notes have stated rates ranging from 6.0% to 7.38%. The effective
rates range from 5.19% to 6.77%. The notes mature between 2002 and 2005, and
are not subject to early redemption.
(4) Notes have stated or variable rates ranging from 5.26% to 6.54%, effective
rates ranging from 5.33% to 5.78% ,and mature between 1997 and 2006.
- --------------------------------------------------------------------------------
At December 31, 1996, the aggregate annual repayments of long-term borrowings
for BANC ONE affiliates (excluding the Corporation) are $374 million, $709
million, $173 million, $18 million and $211 million for each of the years 1997
through 2001, respectively and $700 million thereafter. All long-term borrowings
of the Corporation are due after the year 2001.
70 BANC ONE CORPORATION and Subsidiaries
<PAGE> 42
- --------------------------------------------------------------------------------
Note 9 STOCK DIVIDENDS AND CONVERTIBLE PREFERRED STOCK
On January 23, 1996 and January 25, 1994, the Corporation
declared 10% common stock dividends to stockholders of
record on February 21, 1996 and February 10, 1994,
respectively. Accordingly, certain common stock share data
have been adjusted to include the effect of the stock
dividends.
Each of the Series C preferred shares can be converted
into 1.928982 shares of the Corporation's common stock and
provides for cumulative quarterly dividends at an annual
rate of $3.50 per share. The Series C preferred shares
have a stated liquidation value of $50 per share plus an
amount per share equal to all dividends cumulating or
accrued and unpaid thereon to the date of such
liquidation. The Series C preferred shares were redeemable
by BANC ONE beginning April 15, 1995 at an initial call
price of $52.10 per share, declining to $50.00 per share
on and after March 31, 2001. The redemption price was
$51.95 for 1996.
- --------------------------------------------------------------------------------
Note 10 DIVIDEND AND CAPITAL RESTRICTIONS
Payment of dividends by bank affiliates and certain other
non-bank affiliates is subject to various national and/or
state regulatory restrictions. The amount of dividends
available from non-bank affiliates that are subject to
dividend restrictions is regulated by the governing agency
to which they report. At December 31, 1996, $.6 billion of
the total stockholders' equity of banking affiliates was
available for payment of dividends without approval by the
applicable regulatory authority.
BANC ONE and its affiliated banks are subject to
various regulatory capital requirements administered by
the federal banking agencies. Pursuant to federal holding
company and bank regulations, BANC ONE and each bank
affiliate is assigned to a capital category. The assigned
capital category is largely determined by the three ratios
that are calculated in accordance with specific
instructions included in the regulations: total risk
adjusted capital, Tier 1 capital, and Tier 1 leverage
ratios. The ratios are intended to measure capital
relative to assets and credit risk associated with those
assets and off-balance sheet exposures of the entity. To
be categorized as well capitalized each entity must
maintain total risk adjusted capital, Tier 1 capital, and
Tier 1 leverage ratios of 10.0%, 6.0%, and 5.0%,
respectively. However, the capital category assigned to an
entity can also be affected by qualitative judgements made
by such entity's primary regulatory agency about the risks
inherent in that entity's activities that are not
reflected in the calculated ratios.
There are five capital categories defined in the
regulations: well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized and
critically undercapitalized. Classification of an
affiliate bank in any of the undercapitalized categories
can result in certain mandatory and possibly additional
discretionary actions by regulators that could have a
material effect on a bank's operations. As of December 31,
1996, BANC ONE and each of its affiliate banks are
categorized as well capitalized and met all capital
adequacy requirements to which each respective entity is
subject. There are no conditions or events since December
31, 1996 that management believes have changed any
entity's category.
BANC ONE CORPORATION and Subsidiaries 71
<PAGE> 43
The actual and required capital amounts and ratios for
BANC ONE and certain significant banking affiliates are
presented in the table as follows:
<TABLE>
<CAPTION>
TO BE CATEGORIZED
ADEQUATELY
ACTUAL CAPITALIZED
---------------------- ----------------------
AS OF DECEMBER 31, 1996 CAPITAL CAPITAL CAPITAL CAPITAL
$ (THOUSANDS) AMOUNT RATIO AMOUNT RATIO
<S> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------
TOTAL RISK ADJUSTED CAPITAL (TO RISK
WEIGHTED ASSETS):
BANC ONE CORPORATION (consolidated)......... $11,730,876 13.12% $7,154,427 8.00%
Bank One, Arizona, N.A...................... 1,297,110 10.76 964,750 8.00
Bank One, Texas, N.A........................ 1,645,923 10.46 1,259,213 8.00
TIER 1 CAPITAL (TO RISK WEIGHTED ASSETS):
BANC ONE CORPORATION (consolidated)......... 8,078,202 9.03 3,577,213 4.00
Bank One, Arizona, N.A...................... 999,699 8.29 482,375 4.00
Bank One, Texas, N.A........................ 1,502,008 9.54 629,606 4.00
TIER 1 LEVERAGE (TO AVERAGE ASSETS):
BANC ONE CORPORATION (consolidated)......... 8,078,202 8.24 3,919,986 4.00
Bank One, Arizona, N.A...................... 999,699 7.25 551,578 4.00
Bank One, Texas, N.A........................ $ 1,502,008 7.37% $ 815,231 4.00%
</TABLE>
- --------------------------------------------------------------------------------
Note 11 INCOME TAXES
The Corporation and its affiliates file a consolidated
federal income tax return and income tax expense is
apportioned among all affiliates based upon their taxable
income or loss and tax credits. The effective income tax
rate is below the statutory rate due to the following:
<TABLE>
<CAPTION>
$(THOUSANDS) 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
-------------------------------------------------------------------------------------------
Statutory tax rate............ $738,749 35.0% $668,599 35.0% $531,598 35.0%
Increase (reduction) in tax
rate resulting from:
State income taxes, net of
federal income tax
benefit................... 29,149 1.4 50,844 2.7 49,155 3.2
Tax exempt interest......... (54,620) (2.6) (50,853) (2.7) (59,273) (3.9)
Issuance of IRS regulations
relating to acquisition of
troubled financial
Institutions.............. (22,265) (1.2)
Tax credits................. (14,296) (.7) (8,154) (.4) (7,151) (.5)
Other, net.................. (14,803) (.7) (5,752) (.3) (586) (.0)
-------- ---- -------- ---- -------- ----
Actual tax rate............... $684,179 32.4% $632,419 33.1% $513,743 33.8%
======== ==== ======== ==== ======== ====
</TABLE>
Components of provision for income taxes follows:
<TABLE>
<CAPTION>
$(THOUSANDS) 1996 1995 1994
<S> <C> <C> <C>
-------------------------------------------------------
Deferred federal tax................................... $213,996 $154,409 $146,287
Federal amount currently payable....................... 425,339 399,788 290,722
Deferred state tax..................................... 9,237 17,625 26,803
State amount currently payable......................... 35,607 60,597 49,931
-------- -------- --------
Total provision for income taxes....................... $684,179 $632,419 $513,743
======== ======== ========
</TABLE>
72 BANC ONE CORPORATION and Subsidiaries
<PAGE> 44
Deferred tax assets and liabilities at December 31, 1996
and 1995 consisted of the following:
<TABLE>
<CAPTION>
$(THOUSANDS) 1996 1995
<S> <C> <C>
------------------------------------------------------------------------------------------
Deferred tax assets
Allowance for credit losses.............................. $ 383,313 $ 341,080
Accrued liabilities...................................... 82,917 93,426
Other.................................................... 59,422 54,901
------------ ----------
525,652 489,407
============ ==========
Deferred tax liabilities:
Leased assets and depreciation........................... (955,260) (646,894)
Unrealized holding gain on securities available for
sale................................................... (10,039) (52,289)
Other.................................................... (111,422) (160,245)
------------ ----------
(1,076,721) (859,428)
------------ ----------
Net deferred tax liability................................. $ (551,069) $ (370,021)
============ ==========
</TABLE>
Deferred income taxes are determined separately for
each taxable entity of BANC ONE in each tax jurisdiction.
For each separate tax paying component, all deferred tax
assets and liabilities are netted and presented in a
single amount, which is included in other assets or other
liabilities on the balance sheet, as follows:
<TABLE>
<CAPTION>
$(THOUSANDS) 1996 1995
<S> <C> <C>
-----------------------------------------------------------------------------------------
Other liabilities:
Federal deferred tax liabilities.......................... $ (488,716) $ (313,328)
State deferred tax liabilities............................ (62,353) (56,693)
------------ ----------
Net deferred tax liability.................................. $ (551,069) $ (370,021)
============ ==========
</TABLE>
- --------------------------------------------------------------------------------
Note 12 FAIR VALUE OF FINANCIAL INSTRUMENTS
The table below summarizes the estimated fair value of
financial instruments.
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------------------
1996 1995
----------------------- -----------------------
CARRYING ESTIMATED CARRYING ESTIMATED
$(MILLIONS) AMOUNT FAIR VALUE AMOUNT FAIR VALUE
<S> <C> <C> <C> <C>
--------------------------------------------------------------------------------------------------
Financial assets:
Cash and short-term investments........... $ 6,700 $ 6,700 $ 5,956 $ 5,956
Securities -- held to maturity........... 887 917 1,088 1,136
Securities -- available for sale(1)...... 14,643 14,643 14,622 14,622
Loans, net (2)............................ 67,983 69,306 60,025 62,453
Financial liabilities:
Deposits.................................. 72,373 72,404 67,320 67,400
Short-term borrowings..................... 14,106 14,106 9,777 9,777
Long-term borrowings...................... 4,190 4,179 2,720 3,002
Off-balance sheet investment products....... 6 (32) 35 82
</TABLE>
(1) The carrying amount and fair value of securities
available for sale do not include the related fair
value of off-balance sheet investment products, a $8
million loss and a $2 million loss at December 31,
1996 and 1995, respectively.
(2) Excludes net leases with a carrying amount of $6,610
million and $4,366 million at December 31, 1996 and
1995, respectively and include loans held for sale.
BANC ONE CORPORATION and Subsidiaries 73
<PAGE> 45
Fair value amounts represent estimates of value at a
point in time. Significant assumptions regarding economic
conditions, loss experience, risk characteristics
associated with particular financial instruments and other
factors were used for the purposes of this disclosure.
These assumptions are subjective and involve matters of
judgment. Therefore, they cannot be determined with
precision. Changes in the assumptions could have a
material impact on the amounts estimated. While these
estimated fair value amounts are designed to represent
estimates of the amounts at which these instruments could
be exchanged in a current transaction between willing
parties (excluding the value of customer relationships),
many of BANC ONE's financial instruments lack an available
trading market as characterized by willing parties engaged
in an exchange transaction. In addition, it is BANC ONE's
intent to hold most of its financial instruments to
maturity, therefore, it is not probable that the fair
values shown will be realized in a current transaction.
The estimated fair values disclosed do not reflect the
value of assets and liabilities that are not considered
financial instruments. In addition, the value of long-term
relationships with depositors (core deposit intangibles)
and other customers (e.g. credit card intangibles) are not
reflected. The value of these items is significant.
Because of the wide range of valuation techniques and
the numerous estimates which must be made, it may be
difficult to make reasonable comparisons of BANC ONE's
fair value information to that of other financial
institutions. It is important that the many uncertainties
discussed above be considered when using the estimated
fair value disclosures and to realize that because of
these uncertainties, the aggregate fair value amount
should in no way be construed as representative of the
underlying value of BANC ONE.
The following describes the methodology and assumptions
used to estimate fair value of financial instruments.
CASH AND SHORT-TERM INVESTMENTS. Cash and short-term
investments are by definition short-term and do not
present any unanticipated market risk. Therefore, the
carrying amount is a reasonable estimate of fair value.
SECURITIES. The estimated fair values of securities by
type are provided in Note 3 to the financial statements.
These are based on quoted market prices, when available.
If a quoted market price is not available, fair value is
estimated using quoted market prices for similar
securities.
LOANS. The loan portfolio was segmented based on loan
type, credit quality and repricing characteristics. For
certain variable rate loans with no significant credit
concerns and frequent repricing, estimated fair values are
based on the carrying values. The fair values of other
loans are estimated using discounted cash flow analyses.
The discount rates used in these analyses are generally
based on BANC ONE's funding cost plus a spread. The spread
incorporates the impact of credit quality, servicing costs
and the cost of embedded options such as prepayments and
caps. Maturity estimates are based on historical
experience with prepayments and current economic and
lending conditions. The estimated fair value of credit
card receivables is based on the present value of cash
flows arising from receivables outstanding and does not
include the value associated with the relationships BANC
ONE has with its credit card customers.
74 BANC ONE CORPORATION and Subsidiaries
<PAGE> 46
DEPOSITS. Under SFAS 107, the fair value of deposits
with no stated maturity is equal to the amount payable on
demand. The estimated fair value of fixed rate time
deposits are based on discounted cash flow. The discount
rates used in these analyses are based on market rates of
alternative funding sources currently available for
similar remaining maturities, adjusted for servicing and
deposit insurance costs.
SHORT-TERM BORROWINGS. Short-term borrowings reprice
frequently, therefore, the carrying amount is a reasonable
estimate of fair value.
LONG-TERM BORROWINGS. For publicly traded debt,
estimated fair values are based on quoted market prices.
Where such prices are not available, fair value is
estimated using quoted market prices for similar
instruments or by discounted cash flow analysis.
OFF-BALANCE SHEET INVESTMENT PRODUCTS. Carrying values
for off-balance sheet investment products represent
deferred amounts arising from these financial instruments.
Where possible, the fair values are based upon quoted
market prices. Where such prices do not exist, these
values are based on dealer quotes.
COMMITMENTS TO EXTEND CREDIT, STANDBY LETTERS OF CREDIT
AND LETTERS OF CREDIT. The carrying amounts are reasonable
estimates of the fair value of these financial
instruments. Carrying amounts which are comprised of the
unamortized fee income and, where necessary, reserves for
any expected credit losses from these financial
instruments, are immaterial.
- --------------------------------------------------------------------------------
Note 13 PLEDGED SECURITIES AND CONTINGENT LIABILITIES
As of December 31, 1996, securities having a book value of
$9.8 billion were pledged as collateral for repurchase
agreements, off-balance sheet investment products and as
collateral for governmental and trust department deposits
in accordance with federal and state requirements.
The Corporation's bank affiliates are required to
maintain average balances with the Federal Reserve Bank.
The average required reserve balances were $.5 billion and
$.8 billion for 1996 and 1995, respectively.
The Corporation and certain of its affiliates have been
named as defendants in various legal proceedings.
Management believes that liabilities arising from these
proceedings, if any, will not have a material adverse
effect on the consolidated financial position, liquidity
or results of operations of BANC ONE.
- --------------------------------------------------------------------------------
Note 14 EMPLOYEE BENEFIT PLANS
BANC ONE has various non-contributory pension plans
covering substantially all employees. The retirement
benefits are based on length of service and the employee's
highest five years of compensation during the last 10
years of service. BANC ONE's funding policy is to
contribute amounts necessary to meet the funding
requirements set forth in the Employee Retirement Income
Security Act of 1974.
The following table sets forth the plans' funded
status. Accrued pension cost at December 31, 1996 and 1995
includes $32 million and $23 million, respectively, for
BANC ONE's non-qualified, unfunded supplemental pension
plans.
BANC ONE CORPORATION and Subsidiaries 75
<PAGE> 47
<TABLE>
<CAPTION>
$(THOUSANDS) 1996 1995
<S> <C> <C>
------------------------------------------------------------------------------------
Accumulated benefit obligation, including vested
benefits of $550,270 and $469,995 in 1996 and 1995,
respectively......................................... $ (579,119) $ (492,522)
---------- ----------
Projected benefit obligation for service rendered to
date................................................. $ (761,801) $ (711,900)
Plan assets at fair value.............................. 837,828 678,811
---------- ----------
Excess/(shortfall) of plan assets over projected
benefit obligation................................... 76,027 (33,089)
Unrecognized net loss/(gain) from past experience
difference from that assumed and effects of changes
in assumptions....................................... (86,408) 24,248
Unrecognized prior service cost........................ 11,076 11,605
Unrecognized net transition asset...................... (11,289) (13,969)
---------- ----------
Accrued pension cost................................... $ (10,594) $ (11,205)
========== ==========
</TABLE>
- --------------------------------------------------------------------------------
The plan assets primarily consist of U.S. Treasury and
Federal Agency securities, and mutual funds. Plan assets
include 927,401 shares of the Corporation's common stock
at December 31, 1996 and 927,836 shares at December 31,
1995 as adjusted for the 10% common stock dividend payable
March 6, 1996. The fair value of the Corporation's common
stock held as plan assets was $40 million and $32 million
at December 31, 1996 and 1995, respectively. Dividends
received by the plans on the Corporation's common stock
totaled $1 million in 1996 and 1995.
Net periodic pension cost for 1996, 1995 and 1994
included the following:
<TABLE>
<CAPTION>
$(THOUSANDS) 1996 1995 1994
<S> <C> <C> <C>
---------------------------------------------------------------------------------------------
Service cost -- benefits earned during the
period................................... $ 54,461 $ 41,641 $45,921
Interest cost on projected benefit
obligation............................... 54,769 46,367 43,284
Actual (return)/loss on plan assets........ (105,712) (101,875) 29,024
Net amortization and deferral.............. 36,809 43,810 (82,897)
--------- --------- --------
Net periodic pension costs................. $ 40,327 $ 29,943 $35,332
========= ========= ========
Actuarial assumptions:
Weighted average discount rate for
projected benefit obligation............. 7.50% 7.50% 7.90% to 8.50%
Weighted average rate of compensation
increase................................. 5.00% 6.00% 4.50% to 6.25%
Expected long-term rate of return on plan
assets................................... 9.00% 9.00% 9.50% to 9.75%
</TABLE>
- --------------------------------------------------------------------------------
Postretirement Benefits Other Than Pension
BANC ONE currently sponsors a defined benefit
postretirement plan that covers salaried employees. The
plan provides medical, dental and life insurance benefits.
Benefits are available to retired employees with more than
10 years of service who retire under the normal or early
retirement provisions of the BANC ONE Retirement Plan. The
medical and dental benefits are contributory, while the
life insurance is non-contributory.
Prior to 1993, BANC ONE accounted for postretirement
benefits other than pensions on the cash basis. BANC ONE
is amortizing the unrecognized transition obligation
existing at January 1, 1993, when the accrual method of
accounting for these benefits was adopted over a 20-year
period. BANC ONE funds retiree medical benefits to the
extent such benefits are deductible for federal income tax
purposes; however, these assets are not restricted as to
use for such benefits and therefore do not meet the
definition of plan assets.
76 BANC ONE CORPORATION and Subsidiaries
<PAGE> 48
The following table sets forth the status of BANC ONE's
postretirement benefit obligation at December 31, 1996 and
1995.
<TABLE>
<CAPTION>
$(THOUSANDS) 1996 1995
<S> <C> <C>
-----------------------------------------------------------------------------------
Accumulated postretirement benefit obligation:
Retirees............................................. $ (87,413) $ (64,149)
Fully eligible active plan participants.............. (29,008) (19,323)
Other active plan participants....................... (38,929) (33,900)
--------- ---------
Accumulated postretirement benefit obligation in excess
of plan assets....................................... (155,350) (117,372)
Unrecognized net (gain)/loss........................... 5,375 (20,137)
Unrecognized transition obligation..................... 90,053 95,681
--------- ---------
Accrued postretirement benefit cost.................... $ (59,922) $ (41,828)
========= =========
</TABLE>
- --------------------------------------------------------------------------------
Net periodic cost for postretirement health care and
life insurance benefits during 1996, 1995 and 1994 include
the following:
<TABLE>
<CAPTION>
$(THOUSANDS) 1996 1995 1994
<S> <C> <C> <C>
--------------------------------------------------------------------------------------------
Service cost -- benefits earned during the period...... $ 3,678 $ 2,954 $ 3,591
Interest cost on accumulated postretirement benefit
obligation........................................... 8,486 8,595 8,602
Amortization of unrecognized transition obligation..... 5,628 5,628 5,629
Amortization of unrecognized net gain.................. (420) (1,097)
------- --------- -------
Net periodic postretirement benefit cost............... $17,372 $ 16,080 $17,822
======= ========= =======
</TABLE>
- --------------------------------------------------------------------------------
The weighted average discount rates used in determining
the accumulated postretirement benefit obligation at
December 31, 1996, 1995 and 1994 were 7.50%, 7.50% and
8.75%, respectively.
For measurement purposes, a 8.0% annual rate of
increase in the cost of covered health care benefits was
assumed for 1997; the rate was assumed to decrease
gradually to 5.0% in the year 2000 and thereafter. A
one-percentage point increase in the health care cost
trend rate in each year would increase the accumulated
postretirement benefit obligation as of December 31, 1996
by $16.0 million, or 10.3%, and would increase the
aggregate of the service cost and interest cost components
of net periodic postretirement benefit cost for 1996 by
$1.1 million or 9.2%.
BANC ONE sponsors various 401(k) plans which include
substantially all of its employees. BANC ONE is required
to make contributions to the plans in varying amounts. For
1996, 1995 and 1994, the expense related to these plans
was $18 million, $8 million and $12 million, respectively.
- --------------------------------------------------------------------------------
Note 15 STOCK-BASED COMPENSATION PLANS
Directors and certain key employees have been granted
options to purchase common shares under the 1995 Stock
Incentive Plan (the "Plan"). The Plan provides for the
granting of incentive and non-qualified stock options and
stock awards for up to an aggregate of one percent of the
outstanding common stock of the Corporation as reported in
BANC ONE's Annual Report on Form 10-K for the year ending
immediately prior to such years plus carry over of certain
shares not granted in prior years as defined by the Plan.
Further, the total number of shares available for grants
of stock awards in any year shall not exceed one fourth of
one percent of the Corporation's outstanding common stock
as so reported. Based on December 31, 1995 outstanding
shares, 7,732,610 shares of the Corporation's common stock
were available for grant in 1996. In 1996, 474,501 shares
were granted as stock awards.
BANC ONE CORPORATION and Subsidiaries 77
<PAGE> 49
BANC ONE applies APB 25 and related interpretations in
accounting for its stock-based compensation plans. In
accordance with SFAS 123, BANC ONE elected to continue to
apply the provisions of APB 25. However, pro forma
disclosures as if BANC ONE adopted the cost recognition
provisions of SFAS 123 in 1995 are required and are
presented below along with a summary of the plan and
awards.
The Plan provides that the exercise price of any stock
option may not be less than the fair market value of the
common stock on the date of grant. No balance sheet
recognition is made of options until such options are
exercised and no amounts applicable thereto are reflected
in net income. Under the Plan, the awards vest over a
period of years and expense is recognized over the vesting
period. Options are not exercisable for at least one year
from the date of grant and are thereafter exercisable for
such periods as the Board of Directors, or a committee
thereof, specify (which may not exceed 10 years for
incentive stock options or 20 years for non-qualified
stock options), provided that the optionee has remained in
the employment of the Corporation or its affiliates. The
Board or the committee may accelerate the exercise period
for an option upon the optionee's disability, retirement,
or death. All options expire at the end of the exercise
period. Options of acquired entities are converted to BANC
ONE options at the time of acquisition.
The 1989 Stock Incentive Plan (the "1989 Plan")
provided incentive and non-qualified options and stock
awards to BANC ONE's directors and certain key employees
for up to 6,930,000 common shares of the Corporation. The
1989 Plan was terminated by the Corporation's Board of
Directors effective April 17, 1995. Outstanding awards
under the 1989 Plan remain in effect under the terms of
their respective awards. Cumulatively, 1,751,815 shares
were granted as stock awards under the plan. The awards
vest over a period of years and expense is recognized over
the vesting period in accordance with APB 25.
The following summarizes the Corporation's stock
options as of December 31, 1996 and 1995, and the changes
for the years then ended:
<TABLE>
<CAPTION>
1996
------------------------------
NUMBER OF WGTD. AVG.
SHARES EXERCISE PRICE
------------------------------------------------------------------------------------------
<S> <C> <C>
Outstanding at beginning of the year.................... 8,102,516 $25.63
Granted................................................. 2,185,391 34.87
Exercised............................................... 895,907 16.10
Forfeited............................................... 565,571 30.01
Expired................................................. 4,695 9.80
---------
Outstanding at the end of the year...................... 8,821,734 28.61
=========
Exercisable at the end of the year...................... 1,617,891 18.40
=========
1995
------------------------------
NUMBER OF WGTD. AVG.
SHARES EXERCISE PRICE
-------------------------------------------------------------------------------------------
<S> <C> <C>
Outstanding at beginning of the year.................... 7,230,741 $23.64
Granted................................................. 2,522,770 26.85
Exercised............................................... 1,167,008 14.65
Forfeited............................................... 477,248 28.62
Expired................................................. 6,739 33.54
---------
Outstanding at the end of the year...................... 8,102,516 25.63
=========
Exercisable at the end of the year...................... 1,838,186 15.41
=========
</TABLE>
78 BANC ONE CORPORATION and Subsidiaries
<PAGE> 50
The following summarizes information about the
Corporation's stock options outstanding at December 31,
1996.
<TABLE>
<CAPTION>
SHARES SUBJECT TO OUTSTANDING OPTIONS
---------------------------------------------------------------------
OPTION WGTD. AVG.
RANGE OF SHARES REMAINING WGTD. AVG.
EXERCISE PRICE OUTSTANDING LIFE EXERCISE PRICE
--------------------------------------------------------------------------
<S> <C> <C> <C>
$ 5.65 3,630 4.13 yrs $ 5.65
$ 8.51-$12.42 317,255 2.26 11.48
$12.95-$18.44 524,609 3.66 16.11
$19.25-$28.43 3,333,638 11.04 26.10
Greater than $28.59 4,642,602 12.53 33.02
<CAPTION>
EXERCISABLE
-----------
NUMBER WGTD. AVG.
EXERCISABLE EXERCISE PRICE
-----------
<S> <C>
3,630 $ 5.65
317,225 11.48
524,609 16.11
726,816 22.21
45,581 33.26
</TABLE>
- --------------------------------------------------------------------------------
The fair value of each stock option granted is
estimated on the date of grant using the Black-Scholes
option-pricing model with the following assumptions for
grants in 1996 and 1995: 1) expected dividend yields
ranged from 4.03% to 5.55%, 2) risk-free interest rates
ranged from 6.06% to 7.92%, 3) expected volatility ranged
from 20.21% to 20.79%, and 4) expected life of options
ranged from six to nine years.The weighted average fair
value at date of grant for options granted during 1996 and
1995 was $7.53 and $4.94 per option, respectively.
Had the compensation cost for the Corporation's
stock-based compensation plans been determined in
accordance with the fair value based accounting method
provided by SFAS 123, the net income and net income per
common share for the years ended December 31, 1996 and
1995 would have been as follows:
<TABLE>
<CAPTION>
$(MILLIONS, EXCEPT PER SHARE AMOUNTS) PRO FORMA(1) AS REPORTED
--------------------------------------------------------------------------------------------
<S> <C> <C>
1996 Net income............................................ $ 1,423 $ 1,427
1996 Net income per common share........................... 3.22 3.23
1995 Net income............................................ 1,277 1,278
1995 Net income per common share........................... $ 2.91 $ 2.91
</TABLE>
(1) Due to the inclusion of only 1996 and 1995 option
grants, the effect of applying SFAS 123 in 1996 and
1995 may not be representative of the pro forma impact
in future years.
- --------------------------------------------------------------------------------
Note 16 RELATED PARTY TRANSACTIONS
Certain executive officers, directors and their related
interests are loan customers of the Corporation's
affiliates. The Securities and Exchange Commission (SEC)
has determined with respect to the Corporation and
significant subsidiaries (as defined by the SEC)
disclosure of borrowings by directors and executive
officers and certain of their related interests should be
made, if the loans are greater than 5% of stockholders'
equity, in the aggregate. These loans in aggregate were
not greater than 5% of stockholders' equity at December
31, 1996 or 1995.
BANC ONE CORPORATION and Subsidiares 79
<PAGE> 51
- --------------------------------------------------------------------------------
Note 17 SUPPLEMENTAL DISCLOSURES FOR STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
$(THOUSANDS) 1996 1995 1994
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common stock issued in purchase acquisitions..... $ 710,515 $ 3,647 $ 33,508
======== ========== ==========
Transfer from loans to Other Real Estate Owned
(OREO)......................................... $ 82,028 $ 91,163 $ 68,806
======== ========== ==========
Securitized mortgage loans....................... $ 1,426,766
==========
Reclassification of private placements from loans
to securities.................................. $ 533,057
==========
Reclassification of held to maturity securities
to available for sale at amortized cost (fair
value $2,934,526).............................. $ 2,883,654
==========
Net increase in securities trades not settled.... $ (140,382) $ 185,009 $ 139,346
======== ========== ==========
Loans issued to facilitate the sale of OREO
properties..................................... $ 2,453 $ 7,220 $ 26,287
======== ========== ==========
Additional disclosures:
Interest paid.................................... $ 3,231,521 $ 2,908,562 $ 2,140,363
======== ========== ==========
Income taxes paid................................ $ 480,188 $ 351,392 $ 412,727
======== ========== ==========
Dividends declared but not paid at year end...... $ 123,925
==========
</TABLE>
- --------------------------------------------------------------------------------
Note 18 PARENT COMPANY FINANCIAL STATEMENTS
The condensed financial statements of the Corporation,
prepared on a parent company unconsolidated basis, are
presented as follows:
BALANCE SHEET
at December 31, 1996 and 1995
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
$(THOUSANDS) 1996 1995
----------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS:
Investment in majority-owned affiliates:
Banking................................................... $ 9,073,521 $ 7,791,232
Non-banking............................................... 549,820 483,615
Advances due from affiliates:
Banking................................................... 125,000
Non-banking............................................... 2,254,062 1,689,104
Other assets................................................ 494,618 480,386
----------- -----------
Total assets......................................... $ 12,497,021 $ 10,444,337
=========== ===========
LIABILITIES:
Commercial paper and other short-term borrowings............ $ 1,616,294 $ 560,360
Notes payable to non-banking affiliates..................... 58,477 53,896
Long-term borrowings........................................ 2,004,062 1,500,026
Other liabilities........................................... 171,228 132,577
----------- -----------
Total liabilities.................................... 3,850,061 2,246,859
----------- -----------
Total stockholders' equity........................... 8,646,960 8,197,478
----------- -----------
Total liabilities and stockholders' equity........... $ 12,497,021 $ 10,444,337
=========== ===========
</TABLE>
80 BANC ONE CORPORATION and Subsidiaries
<PAGE> 52
STATEMENT OF INCOME
for the three years ended December 31,
<TABLE>
<CAPTION>
$(THOUSANDS, EXCEPT PER SHARE AMOUNTS) 1996 1995 1994
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
INCOME:
Dividends from affiliates:
Banking................................................................. $ 1,108,122 $ 1,129,400 $ 614,617
Non-banking............................................................. 65,050 12,086
Management and other fees from affiliates................................. 180,733 116,623 118,577
Interest.................................................................. 137,372 128,155 100,063
Other..................................................................... 5,518 8,917 28,285
--------- --------- ---------
Total income....................................................... 1,496,795 1,383,095 873,628
--------- --------- ---------
EXPENSE:
Interest.................................................................. 207,113 183,452 129,302
Other..................................................................... 391,460 211,388 187,884
--------- --------- ---------
Total expense...................................................... 598,573 394,840 317,186
--------- --------- ---------
Income before income taxes and equity in undistributed earnings
of consolidated affiliates................................................ 898,222 988,255 556,442
Income tax benefit.......................................................... 132,550 55,022 31,629
--------- --------- ---------
Income before equity in undistributed earnings of consolidated affiliates... 1,030,772 1,043,277 588,071
Equity in undistributed earnings of consolidated affiliates................. 395,761 234,586 417,038
--------- --------- ---------
NET INCOME......................................................... $ 1,426,533 $ 1,277,863 $ 1,005,109
========= ========= =========
NET INCOME PER COMMON SHARE................................................. $ 3.23 $ 2.91 $ 2.20
========= ========= =========
Weighted average shares outstanding (000)................................... 436,927 433,323 448,118
========= ========= =========
</TABLE>
BANC ONE CORPORATION and Subsidiaries 81
<PAGE> 53
STATEMENT OF CASH FLOWS
for the three years ended December 31,
<TABLE>
<CAPTION>
$(THOUSANDS) 1996 1995 1994
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Net income............................................................... $ 1,426,533 $ 1,277,863 $ 1,005,109
Adjustments:
Equity in undistributed earnings of consolidated affiliates............ (395,761) (234,586) (417,038)
Noncash dividends received............................................. (62,645) (54,649) (10,160)
Other.................................................................. 3,536 (11,708) (53,446)
---------- ---------- ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES.............................. 971,663 976,920 524,465
---------- ---------- ----------
CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES:
Net (increase) decrease in short-term investments........................ 38,559 464,320 (208,988)
Net (increase) decrease in advances...................................... (672,743) (498,366) 768,948
Net increase in investment in majority-owned affiliates.................. (193,178) (12,145) (19,321)
All other investing activities, net...................................... (71,539) (82,747) 14,882
---------- ---------- ----------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES.................... (898,901) (128,938) 555,521
---------- ---------- ----------
CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES:
Net (decrease) increase in commercial paper.............................. 1,055,934 (623,432) 151,722
Net increase (decrease) in short-term borrowings......................... 9,105 52,545 (437,681)
Proceeds from the issuance of long-term borrowings....................... 495,955 590,179
Cash dividends paid...................................................... (603,547) (550,294) (504,710)
Purchase of treasury stock............................................... (1,003,075) (324,321) (336,453)
Exercise of stock options, net of shares purchased....................... (14,885) (5,460) (5,659)
All other financing activities, net...................................... 5,459 27,862 60,627
---------- ---------- ----------
NET CASH (USED IN) FINANCING ACTIVITIES................................ (55,054) (832,921) (1,072,154)
---------- ---------- ----------
Increase in cash and cash equivalents.................................. 17,708 15,061 7,832
Cash and cash equivalents at January 1,.................................. 25,002 9,941 2,109
---------- ---------- ----------
CASH AND CASH EQUIVALENTS AT DECEMBER 31,................................ $ 42,710 $ 25,002 $ 9,941
========== ========== ==========
</TABLE>
82 BANC ONE CORPORATION and Subsidiaries
<PAGE> 54
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and the Board of Directors
BANC ONE CORPORATION
We have audited the accompanying consolidated balance
sheets of BANC ONE CORPORATION and Subsidiaries as of
December 31, 1996 and 1995, and the related statements of
income, changes in stockholders' equity and cash flows for
each of the three years in the period ended December 31,
1996. These financial statements are the responsibility of
management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also
includes assessing the accounting principles used and
significant estimates made by management, as well as
evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements referred to
above present fairly, in all material respects, the
consolidated financial position of BANC ONE CORPORATION
and Subsidiaries at December 31, 1996 and 1995 and the
results of operations, changes in stockholders equity and
cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted
accounting principles.
Columbus, Ohio
February 21, 1997
BANC ONE CORPORATION and Subsidiaries 83
<PAGE> 1
<TABLE>
<CAPTION>
S SUBSIDIARIES OF BANC ONE CORPORATION AS OF 12/31/96* EXHIBIT 21
(100% Ownership Unless Otherwise Indicated)
- ---------------------------------------------------------------------------------------------------
Jurisdiction of Name in Which
Incorporation Business is
NAME OF SUBSIDIARY or Organization Conducted
===================================================================================================
<S> <C> <C>
BANC ONE ABS CORPORATION Ohio Corporation SAME
- ---------------------------------------------------------------------------------------------------
BANC ONE ADS, INC. Ohio Corporation " "
- ---------------------------------------------------------------------------------------------------
BANC ONE ARIZONA CORPORATION Arizona Corporation " "
BANC ONE ARIZONA INVESTMENT CORPORATION Arizona Corporation " "
BANK ONE, ARIZONA, NATIONAL ASSOCIATION National Bank " "
ARIZONA TRUST DEED CORPORATION (Unknown) " "
AZ IHC, INC. Nevada Corp. " "
AZ REIT, INC. Nevada Corp. " "
BANC ONE ARIZONA LEASING CORPORATION Arizona Corporation " "
BANC ONE OPERATIONS SERVICES CORPORATION Arizona Corporation " "
SUN COUNTRY LEASING CORPORATION Arizona Corporation " "
VALLEY BANK BUILDING, INC. Arizona Corporation " "
VALLEY NATIONAL FINANCIAL SERVICES COMPANY Arizona Corporation " "
VALLEY NATIONAL INVESTORS, INC. Arizona Corporation " "
WASHINGTON STREET FOODS, INC. Arizona Corporation " "
BANK ONE, UTAH, NATIONAL ASSOCIATION National Bank " "
50 WEST BROADWAY ASSOCIATES (50%) Utah Corporation " "
- ---------------------------------------------------------------------------------------------------
BANC ONE BETA CORPORATION Ohio Corporation " "
- ---------------------------------------------------------------------------------------------------
BANC ONE BUILDING MANAGEMENT CORPORATION Wisconsin Corporation " "
- ---------------------------------------------------------------------------------------------------
BANC ONE CAPITAL HOLDINGS CORPORATION Ohio Corporation " "
AFFILIATED BANKSHARES INSURANCE AGENCY, INC. Colorado Corporation " "
AMERICAN INSURANCE AGENCY, INC. Arizona Corporation " "
BANC ONE CAPITAL CORPORATION Ohio Corporation " "
BANC ONE CAPITAL SERVICES CORPORATION Ohio Corporation " "
BANC ONE LIFE INSURANCE COMPANY Arizona Corporation " "
BANC ONE SECURITIES CORPORATION Ohio Corporation " "
BOCP HOLDINGS CORPORATION Ohio Corporation " "
BOCP CORPORATION Ohio Corporation " "
BANC ONE CAPITAL PARTNERS L.P. Ohio L.P. " "
BOCP II LIMITED LIABILITY COMPANY Ohio L.L.C. " "
BANC ONE CAPITAL PARTNERS, L.P. Ohio L.P. " "
BANC ONE CAPITAL PARTNERS II, LTD. Ohio L.L.C. " "
BANC ONE CAPITAL PARTNERS III, LTD. Ohio L.L.C. " "
BANC ONE CAPITAL PARTNERS IV, LTD. Ohio L.L.C. " "
BANC ONE CAPITAL PARTNERS V, LTD. Ohio Partnership " "
BANC ONE CAPITAL PARTNERS VI, LTD. Ohio L.L.C. " "
BANC ONE CAPITAL FUNDING CORPORATION Ohio Corporation " "
</TABLE>
Page 1, PREPARED 3/13/97
<PAGE> 2
<TABLE>
<CAPTION>
S SUBSIDIARIES OF BANC ONE CORPORATION AS OF 12/31/96* EXHIBIT 21
(100% Ownership Unless Otherwise Indicated)
- ---------------------------------------------------------------------------------------------------
Jurisdiction of Name in Which
Incorporation Business is
NAME OF SUBSIDIARY or Organization Conducted
===================================================================================================
<S> <C> <C>
BANC ONE COMMERCIAL LOAN ORIGINATION CORPORATION Ohio Corporation " "
BANC ONE KENTUCKY LIFE INSURANCE Kentucky Corporation " "
- ---------------------------------------------------------------------------------------------------
BANC ONE CARD SERVICES CORPORATION Texas Corporation " "
- ---------------------------------------------------------------------------------------------------
BANC ONE COLORADO CORPORATION Colorado Corporation " "
AFFILIATED BANKS BUILDING CO. Colorado Corporation " "
BANK ONE, COLORADO, NATIONAL ASSOCIATION National Bank " "
BANC ONE BOULDER LEASING SERVICES CORPORATION Colorado Corporation " "
BANC ONE COLORADO SPRINGS LEASING SERVICES CORPORATION Colorado Corporation " "
BANC ONE DENVER LEASING SERVICES CORPORATION Colorado Corporation " "
- ---------------------------------------------------------------------------------------------------
BANC ONE COMMUNITY DEVELOPMENT CORPORATION Ohio Corporation " "
BANC ONE COMMUNITY DEVELOPMENT/WISCONSIN CORPORATION Ohio Corporation " "
OHIO MEZZANINE FUND, LIMITED Ohio L.L.C. " "
- ---------------------------------------------------------------------------------------------------
BANC ONE ILLINOIS CORPORATION Illinois Corporation " "
BANK ONE, BLOOMINGTON-NORMAL Illinois Bank " "
BANK ONE, CHICAGO, NATIONAL ASSOCIATION National Bank " "
LAZARUS PROPERTIES, INC. Illinois Corporation " "
BANK ONE, PEORIA Illinois Bank " "
BANK ONE, QUAD CITIES, NATIONAL ASSOCIATION National Bank " "
BANK ONE, ROCKFORD, NATIONAL ASSOCIATION National Bank " "
FIRST ROCKFORD COMMUNITY DEVELOPMENT CORPORATION Illinois Corporation " "
NORTHERN ILLINOIS DEVELOPMENT CORPORATION (30%) Illinois Corporation " "
BANK ONE, SPRINGFIELD Illinois Bank " "
BANK ONE, CHAMPAIGN-URBANA Illinois Bank " "
- ---------------------------------------------------------------------------------------------------
BANC ONE INDIANA CORPORATION Indiana Corporation " "
AMERICAN FLETCHER REALTY CORPORATION Indiana Corporation " "
BANK ONE, BLOOMINGTON, NATIONAL ASSOCIATION National Bank " "
BANK ONE, CRAWFORDSVILLE, NATIONAL ASSOCIATION National Bank " "
BANK ONE, INDIANAPOLIS, NATIONAL ASSOCIATION National Bank " "
BANC ONE EQUIPMENT FINANCE, INC. Indiana Corporation " "
BANC ONE INDIANAPOLIS AUTO LEASE, INC. Indiana Corporation " "
BANK SERVICE CORPORATION OF INDIANA (33-1/3%) Indiana Corporation " "
BIL INTERNATIONAL HOLDINGS, INC. Indiana Corporation " "
BO-UA FSC, INC. Indiana Corporation " "
BO-FE FSC, INC. Indiana Corporation " "
</TABLE>
Page 2, PREPARED 3/13/97
<PAGE> 3
<TABLE>
<CAPTION>
S SUBSIDIARIES OF BANC ONE CORPORATION AS OF 12/31/96* EXHIBIT 21
(100% Ownership Unless Otherwise Indicated)
- ---------------------------------------------------------------------------------------------------
Jurisdiction of Name in Which
Incorporation Business is
NAME OF SUBSIDIARY or Organization Conducted
===================================================================================================
<S> <C> <C>
BO-LKEUA, INC. Virgin Islands Corporation " "
INDIANA LLC 1 Indiana L.L.C. " "
BANK ONE, LAFAYETTE, NATIONAL ASSOCIATION National Bank " "
INDIANA LLC 2 Indiana L.L.C. " "
BANK ONE, MARION, INDIANA, NATIONAL ASSOCIATION National Bank " "
BANK ONE, MERRILLVILLE, NATIONAL ASSOCIATION National Bank " "
BANK ONE, RENSSELAER, NATIONAL ASSOCIATION National Bank " "
BANK ONE, RICHMOND, NATIONAL ASSOCIATION National Bank " "
BOI LEASING CORPORATION Indiana Corporation " "
- -----------------------------------------------------------------------------------------------
BANC ONE INTERNATIONAL SERVICES CORPORATION Wisconsin Corporation " "
- -----------------------------------------------------------------------------------------------
BANC ONE KENTUCKY CORPORATION Kentucky Corporation " "
BANK ONE, KENTUCKY, NATIONAL ASSOCIATION National Bank " "
BOK PROPERTIES, INC. Kentucky Corporation " "
BANC ONE KENTUCKY LEASING COMPANY Kentucky Corporation " "
LIBERTY PAYMENT SERVICES, INC. Kentucky Corporation " "
LIBERTY PROPERTIES INCORPORATED Kentucky Corporation " "
BANC ONE KENTUCKY VEHICLE LEASING COMPANY Kentucky Corporation " "
FIRST PROPERTY DEVELOPMENT COMPANY Kentucky Corporation " "
FS FINANCIAL SERVICES CORPORATION OF KENTUCKY Kentucky Corporation " "
SECURITY PROPERTY DEVELOPMENT COMPANY Kentucky Corporation " "
FIRST B.C. REALTY CORPORATION Indiana Corporation " "
LIBERTY FINANCIAL SERVICES, INCORPORATED Kentucky Corporation " "
- ---------------------------------------------------------------------------------------------------
BANC ONE LOUISIANA CORPORATION Ohio Corporation " "
TERRE AGENCY, INCORPORATION Louisiana Corporation " "
BANK ONE, LOUISIANA, NATIONAL ASSOCIATION National Bank " "
ASSET ONE, LOUISIANA, INC. Louisiana Corporation " "
BANK ONE EQUITY INVESTORS, INC. Louisiana Corporation " "
BANC ONE LOUISIANA LEASING CORPORATION Louisiana Corporation " "
KSS, INC. Louisiana Corporation " "
LOUISIANA CREDIT LIFE AGENCY, INC. Louisiana Corporation " "
LOUISIANA CREDIT LIFE INSURANCE, CO., INC. Arizona Corporation " "
PREMIER INVESTMENT ADVISORS, L.L.C. * Louisiana L.L.C. " "
PREMIER LLC, INC. Louisiana Corporation " "
TRI-STATE MINERALS, INC. Louisiana Corporation " "
*99% owned by Bank One, Louisiana, N.A. and 1% owned by Premier LLC, Inc.
- ---------------------------------------------------------------------------------------------------
BANC ONE MANAGEMENT AND CONSULTING CORPORATION Ohio Corporation " "
</TABLE>
Page 3, PREPARED 3/13/97
<PAGE> 4
<TABLE>
<CAPTION>
S SUBSIDIARIES OF BANC ONE CORPORATION AS OF 12/31/96* EXHIBIT 21
(100% Ownership Unless Otherwise Indicated)
- ---------------------------------------------------------------------------------------------------
Jurisdiction of Name in Which
Incorporation Business is
NAME OF SUBSIDIARY or Organization Conducted
===================================================================================================
<S> <C> <C>
BANC ONE BETA ASSET MANAGEMENT CORPORATION Ohio Corporation " "
BANC ONE NEW HAMPSHIRE ASSET MANAGEMENT CORPORATION Ohio Corporation " "
BONNET RESOURCES CORPORATION Ohio Corporation " "
FAMCO SERVICES, INC. Texas Corporation " "
FAMCO SERVICES II, INC. Texas Corporation " "
FAMCO SERVICES III, INC. Texas Corporation " "
SUBSIDIARY CONSULTANTS, INC. Texas Corporation " "
- ---------------------------------------------------------------------------------------------------
BANC ONE MORTGAGE CORPORATION Delaware Corporation " "
- ---------------------------------------------------------------------------------------------------
BANC ONE OHIO CORPORATION Ohio Corporation " "
BANK ONE, AKRON, NATIONAL ASSOCIATION National Bank " "
BANC ONE AKRON SERVICE CORPORATION Ohio Corporation " "
BANK ONE, ATHENS, NATIONAL ASSOCIATION National Bank " "
ATHENS SERVICE CORPORATION West Virginia Corporation " "
BANK ONE, CAMBRIDGE, NATIONAL ASSOCIATION National Bank " "
BANK ONE, CINCINNATI, NATIONAL ASSOCIATION National Bank " "
BANC ONE CINCINNATI AUTOLEASE CORPORATION Ohio Corporation " "
BANK ONE, CLEVELAND, NATIONAL ASSOCIATION National Bank " "
BANC ONE CLEVELAND FINANCIAL SERVICES CORPORATION Ohio Corporation " "
BANK ONE, COLUMBUS, NATIONAL ASSOCIATION National Bank " "
BANC ONE ACCEPTANCE CORPORATION Ohio Corporation " "
BOX LEASING CORPORATION Ohio Corporation " "
BANC ONE COMPENSATION SERVICES CORPORATION Ohio Corporation " "
BANC ONE INVESTMENT ADVISORS CORPORATION Ohio Corporation " "
BANC ONE VEHICLE FINANCE CORPORATION Ohio Corporation " "
BOC REALTY, INC. Ohio Corporation " "
BOC AFFILIATES, INC. Ohio Corporation " "
BOC FLORIDA, INC. Ohio Corporation " "
BOC MIDWEST, INC. Ohio Corporation " "
BOC SOUTHERN, INC. Ohio Corporation " "
BOC TOLEDO, INC. Ohio Corporation " "
GULF SHORES CONDOMINIUMS, INC. Ohio Corporation " "
ICF INVESTMENT CORPORATION Ohio Corporation " "
MARIETTA HOTEL COMPANY Ohio Corporation " "
MAUMEE RIVER HOTEL CORPORATION Ohio Corporation " "
29160 CENTER RIDGE COMPANY, INC. Ohio Corporation " "
OHIO IHC, INC. Nevada Corporation " "
OHIO REIT, INC. Nevada Corporation " "
BANC ONE INTERACTIVE DELIVERY CORPORATION Ohio Corporation " "
</TABLE>
Page 4, PREPARED 3/13/97
<PAGE> 5
<TABLE>
<CAPTION>
S SUBSIDIARIES OF BANC ONE CORPORATION AS OF 12/31/96* EXHIBIT 21
(100% Ownership Unless Otherwise Indicated)
- ---------------------------------------------------------------------------------------------------
Jurisdiction of Name in Which
Incorporation Business is
NAME OF SUBSIDIARY or Organization Conducted
===================================================================================================
<S> <C> <C>
INTEGRION FINANCIAL NETWORK, L.L.C. (5.88%) Delaware L.L.C. " "
BANK ONE, COSHOCTON, NATIONAL ASSOCIATION National Bank " "
BANK ONE, DAYTON, NATIONAL ASSOCIATION National Bank " "
BANC ONE DAYTON SERVICE CORPORATION Ohio Corporation " "
BANK ONE, DOVER, NATIONAL ASSOCIATION National Bank " "
BANK ONE, FREMONT, NATIONAL ASSOCIATION National Bank " "
BANK ONE LIMA, NATIONAL ASSOCIATION National Bank " "
BANC ONE WAPAKONETA SERVICE CORPORATION Indiana Corporation " "
BANK ONE, MANSFIELD Ohio Bank " "
BANC ONE TRAVEL CORPORATION Ohio Corporation " "
BANK ONE, MARIETTA, NATIONAL ASSOCIATION National Bank " "
BANK ONE, MARION Ohio Bank " "
BANK ONE, PORTSMOUTH, NATIONAL ASSOCIATION National Bank " "
BANK ONE, SIDNEY, NATIONAL ASSOCIATION National Bank " "
BANK ONE TRUST COMPANY, NATIONAL ASSOCIATION National Bank " "
BANK ONE, YOUNGSTOWN, NATIONAL ASSOCIATION National Bank " "
BANC ONE, YOUNGSTOWN FINANCIAL SERVICES CORPORATION Pennsylvania Corporation " "
- ---------------------------------------------------------------------------------------------------
BANC ONE OKLAHOMA CORPORATION Oklahoma Corporation " "
BANK ONE, OKLAHOMA CITY Oklahoma Bank " "
- ---------------------------------------------------------------------------------------------------
BANC ONE POS SERVICES CORPORATION* Ohio Corporation " "
BANC ONE PAYMENT SERVICES, L.L.C. Delaware L.L.C. " "
* This bank service corporation is 100% owned by BANC ONE subsidiary banks with Bank One, Arizona,
N.A. owning 20.49%; Bank One, Louisiana, N.A. 5.41%; Bank One Columbus, N.A. 6.43%; Bank One Dayton,
N.A. 11.04%; Bank One, West Virginia, N.A. 7.45%; Bank One, Kentucky, N.A. 8.38%; Bank One Texas,
N.A. 7.27% and Bank One, Wisconsin 7.33%. All other BANC ONE banks own less than 5%.
- ---------------------------------------------------------------------------------------------------
BANC ONE REALTY COLUMBUS CORPORATION Ohio Corporation " "
- ---------------------------------------------------------------------------------------------------
BANC ONE SERVICES CORPORATION Ohio Corporation " "
BANC ONE FINANCIAL CARD SERVICES CORPORATION Ohio Corporation " "
BANC ONE SERVICES FSC-I, INC. Virgin Islands Corporation " "
ELECTRONIC PAYMENT SERVICES, INC. (20%) Delaware Corporation " "
ELECTRONIC PAYMENT SERVICE CORPORATION Delaware Corporation " "
BUYPASS CORPORATION Georgia Corporation " "
BUYPASS ELECTRONIC TRANSACTION SYSTEM, INC. Georgia Corporation " "
BUYPASS INCO CORP Georgia Corporation " "
BUYPASS PETROLEUM SYSTEMS, INC. Delaware Corporation " "
</TABLE>
Page 5, PREPARED 3/13/97
<PAGE> 6
<TABLE>
<CAPTION>
S SUBSIDIARIES OF BANC ONE CORPORATION AS OF 12/31/96* EXHIBIT 21
(100% Ownership Unless Otherwise Indicated)
- ---------------------------------------------------------------------------------------------------
Jurisdiction of Name in Which
Incorporation Business is
NAME OF SUBSIDIARY or Organization Conducted
===================================================================================================
<S> <C> <C>
EPS NETWORK CORPORATION Georgia Corporation " "
MONEY ACCESS SERVICE, INC. Delaware Corporation " "
MAS INCO CORPORATION Delaware Corporation " "
METROTELLER SECURITY CORPORATION Delaware Corporation " "
MONEY ACCESS SERVICE CORP. Delaware Corporation " "
- ---------------------------------------------------------------------------------------------------
BANC ONE STUDENT LOAN FUNDING CORPORATION Ohio Corporation " "
- ---------------------------------------------------------------------------------------------------
BANC ONE TEXAS CORPORATION Ohio Corporation " "
BANC ONE TEXAS SERVICE CORPORATION Ohio Corporation " "
BANK ONE, TEXAS, NATIONAL ASSOCIATION National Bank " "
12603 SOUTHWEST FREEWAY, INC. Texas Corporation " "
BANC ONE TEXAS LEASING CORPORATION Texas Corporation " "
BAY OPERATING COMPANY, INC. Texas Corporation " "
FREER PROPERTIES, INC. Texas Corporation " "
GP HOLDER, INC. Texas Corporation " "
INDIAN PRODUCTION COMPANY, INC. Texas Corporation " "
METROPOLITAN HOLDINGS, INC. Texas Corporation " "
POST OAK OPERATING, INC. Texas Corporation " "
PSB LAND COMPANY, INC. Texas Corporation " "
SOUTHMORE-TATAR CORPORATION Texas Corporation " "
TAB ASSETS CORPORATION Texas Corporation " "
TEAM BANK SERVICES, INC. Texas Corporation " "
TEAM BROKERAGE, INC. Delaware Corporation " "
TEAM LIFE INSURANCE COMPANY Texas Corporation " "
TEAMVEST, INC. Delaware Corporation " "
TEXAS ASSET ACQUISITION CORPORATION Nevada Corporation " "
TEXAS INVESTMENT HOLDING CORPORATION Nevada Corporation " "
TX REIT, INC. Nevada Corporation " "
TEXAS LYRIC CORPORATION Texas Corporation " "
WEST U21, INC. Texas Corporation " "
BANC ONE INTERNATIONAL CORPORATION Federal Law " "
- ---------------------------------------------------------------------------------------------------
BANC ONE WEST VIRGINIA CORPORATION
BANK ONE, WEST VIRGINIA, NATIONAL ASSOCIATION West Virginia Corporation " "
CHARLESTON NATIONAL PLAZA COMPANY National Bank " "
WV IHC, INC. Nevada Corporation " "
WV REIT, INC. Nevada Corporation " "
BANK ONE WHEELING-STEUBENVILLE, NATIONAL ASSOCIATION National Bank " "
BANC ONE LOAN SERVICES CORPORATION Pennsylvania Corporation " "
- ---------------------------------------------------------------------------------------------------
</TABLE>
Page 6, PREPARED 3/13/97
<PAGE> 7
<TABLE>
<CAPTION>
S SUBSIDIARIES OF BANC ONE CORPORATION AS OF 12/31/96* EXHIBIT 21
(100% Ownership Unless Otherwise Indicated)
- ---------------------------------------------------------------------------------------------------
Jurisdiction of Name in Which
Incorporation Business is
NAME OF SUBSIDIARY or Organization Conducted
===================================================================================================
<S> <C> <C>
BANK ONE, WISCONSIN National Bank " "
BANC ONE VENTURE CORPORATION Wisconsin Corporation " "
BANC ONE WISCONSIN BANKCARD CORPORATION Wisconsin Corporation " "
BANC ONE WISCONSIN INVESTMENT SERVICES CORPORATION Wisconsin Corporation " "
BANC ONE WISCONSIN LEASING CORPORATION Wisconsin Corporation " "
BOMOREO, INC. Wisconsin Corporation " "
WI IHC, INC. Nevada Corporation " "
WI REIT, INC. Nevada Corporation " "
BANC ONE INSURANCE SERVICES CORPORATION Wisconsin Corporation " "
STRATEGIC PLANNING INTERNATIONAL, INC. Wisconsin Corporation " "
HIGHWAY "P" MOTEL, INC. Wisconsin Corporation " "
MILWAUKEE INVESTMENT HOLDING COMPANY Nevada Corporation " "
- ---------------------------------------------------------------------------------------------------
BANK ONE WISCONSIN TRUST COMPANY, NATIONAL ASSOCIATION National Bank " "
WITRUST INVESTMENT HOLDING COMPANY Wisconsin Corporation " "
- ---------------------------------------------------------------------------------------------------
FINANCE ONE CORPORATION Ohio Corporation " "
BANC ONE FINANCIAL SERVICES, INC. Indiana Corporation " "
BANC ONE CONSUMER DISCOUNT COMPANY, A NON-BANKING
AFFILIATE OF BANC ONE CORPORATION Indiana Corporation " "
BANC ONE FINANCIAL SERVICES OF MINNESOTA, INC. Minnesota Corporation " "
BANC ONE FINANCIAL SERVICES OF TENNESSEE, INC. Tennessee Corporation " "
BANC ONE FINANCIAL SERVICES OF WEST VIRGINIA, INC. West Virginia Corporation " "
GUARDIAN AGENCY, INC. Indiana Corporation " "
BENEFICIAL INSURANCE AGENCY, INC. Indiana Corporation " "
GUARDIAN AGENCY OF BLOOMINGTON, INC. Indiana Corporation " "
GUARDIAN AGENCY OF DELPHI, INC. Indiana Corporation " "
GUARDIAN AGENCY OF FORT WAYNE, INC. Indiana Corporation " "
GUARDIAN AGENCY OF GREENCASTLE, INC. Indiana Corporation " "
GUARDIAN AGENCY OF LEBANON, INC. Indiana Corporation " "
GUARDIAN AGENCY OF RUSHVILLE, INC. Indiana Corporation " "
GUARDIAN AGENCY OF VALPARAISO, INC. Indiana Corporation " "
BANC ONE LEASING CORPORATION Ohio Corporation " "
BANC ONE FLORIDA CORPORATION Ohio Corporation " "
BANC ONE LEASING COMPANY OF FLORIDA Ohio Corporation " "
FM LEASING CORPORATION Colorado Corporation " "
- ---------------------------------------------------------------------------------------------------
STERLING ASSURANCE COMPANY Ohio Corporation " "
- ---------------------------------------------------------------------------------------------------
</TABLE>
Page 7, PREPARED 3/13/97
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements
listed below of BANC ONE CORPORATION of our report dated February 21, 1997 on
our audits of the consolidated financial statements of BANC ONE CORPORATION and
Subsidiaries, as of December 31, 1996 and 1995 and for the years ended December
31, 1996, 1995, and 1994, included in BANC ONE CORPORATION's Annual Report on
Form 10-K for the year ended December 31, 1996.
Registration Statements on Form S-8
Registration Numbers:
..33-14475 ..33-55172
..33-10822 ..33-55174
..33-18277 ..33-54100
..33-27849 ..33-61760
..33-34294 ..33-61758
..33-37400 ..33-60424
..33-20890 ..33-50117
..33-20990 ..33-55149
..33-40041 ..33-55315
..33-45473 ..33-58923
..33-46189 ..333-00445
..33-53752
Registration Statements on Form S-3
Registration Number:
..33-64195 ..333-21981
..333-22413
COOPERS & LYBRAND L.L.P.
Columbus, Ohio
March 20, 1997
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 6,350,803
<INT-BEARING-DEPOSITS> 955
<FED-FUNDS-SOLD> 329,208
<TRADING-ASSETS> 548,807
<INVESTMENTS-HELD-FOR-SALE> 14,086,392
<INVESTMENTS-CARRYING> 887,431
<INVESTMENTS-MARKET> 917,430
<LOANS> 74,193,936
<ALLOWANCE> 1,075,092
<TOTAL-ASSETS> 101,848,087
<DEPOSITS> 72,373,127
<SHORT-TERM> 14,105,576
<LIABILITIES-OTHER> 2,532,911
<LONG-TERM> 4,189,513
<COMMON> 2,165,466
0
207,016
<OTHER-SE> 6,274,478
<TOTAL-LIABILITIES-AND-EQUITY> 101,848,087
<INTEREST-LOAN> 6,956,281
<INTEREST-INVEST> 1,027,313
<INTEREST-OTHER> 61,258
<INTEREST-TOTAL> 8,044,852
<INTEREST-DEPOSIT> 2,367,340
<INTEREST-EXPENSE> 3,189,398
<INTEREST-INCOME-NET> 4,855,454
<LOAN-LOSSES> 788,087
<SECURITIES-GAINS> 92,781
<EXPENSE-OTHER> 4,184,159
<INCOME-PRETAX> 2,110,712
<INCOME-PRE-EXTRAORDINARY> 1,426,533
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,426,533
<EPS-PRIMARY> 3.23
<EPS-DILUTED> 3.19
<YIELD-ACTUAL> 5.59
<LOANS-NON> 374,245
<LOANS-PAST> 396,577
<LOANS-TROUBLED> 8,199
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 938,008
<CHARGE-OFFS> 956,587
<RECOVERIES> 238,997
<ALLOWANCE-CLOSE> 1,075,092
<ALLOWANCE-DOMESTIC> 1,075,092
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>