<PAGE> 1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For The Quarterly Period Ended September 30, 1998
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
Commission File Number 333-60313
BANK ONE CORPORATION
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
Delaware 31-0738296
------------------------------------------ ------------------------------------------
(STATE OR OTHER JURISDICTION OF INCORPORATION OR (IRS EMPLOYER I.D. NUMBER)
ORGANIZATION)
</TABLE>
One First National Plaza, Chicago, Illinois 60670
------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(312) 732-4000
----------------
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No __
The number of shares outstanding of the Registrant's common stock, $.01 par
value, was 1,175,836,646 at October 31, 1998.
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BANC ONE CORPORATION AND SUBSIDIARIES
FORM 10-Q
TABLE OF CONTENTS
<TABLE>
<S> <C>
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheet...................... 3
Consolidated Statement of Income................ 4
Consolidated Condensed Statement of Cash
Flows........................................... 5
Consolidated Statement of Changes in
Stockholders' Equity............................ 6
Notes to the Consolidated Financial
Statements...................................... 7
Consolidated Quarterly Financial Data........... 10
Average Balances, Income and Expense, Yields and
Rates........................................... 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
Acquisitions and Mergers........................ 14
"Reported" vs "Managed" Analysis................ 15
Results of Operations........................... 15
Overview..................................... 15
Net Interest Income/Net Interest Margin...... 16
Noninterest Income........................... 18
Noninterest Expense.......................... 19
Income Taxes................................. 20
Year 2000 Compliance......................... 20
Line of Business Results........................ 21
Balance Sheet Analysis.......................... 21
Securities................................... 21
Loans and Leases............................. 22
Other Assets................................. 23
Deposits..................................... 23
Borrowings................................... 23
Capital...................................... 23
Credit Quality.................................. 24
Performance Analysis -- Managed Portfolio....... 26
Risk Management................................. 28
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK............................................... 30
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings................................... 31
Item 2. Changes in Securities and Use of Proceeds........... 31
Item 3. Defaults upon Senior Securities..................... 31
Item 4. Submission of Matters to a Vote of Security
Holders............................................. 31
Item 5. Other Information................................... 32
Item 6. Exhibits and Reports on Form 8-K.................... 32
Signatures.................................................. 33
</TABLE>
2
<PAGE> 3
BANC ONE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
$(MILLIONS, EXCEPT SHARE AMOUNTS) (UNAUDITED) 1998 1997
- -------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS:
Cash and due from banks..................................... $ 6,703.8 $ 8,162.3
Short-term investments...................................... 1,156.5 938.6
Loans held for sale......................................... 1,449.7 2,362.0
Securities:
Securities held to maturity............................... 671.6 785.3
Securities available for sale............................. 19,332.0 16,711.3
---------- ----------
Total securities (fair value approximates $20,013.2 and
$17,511.4 at September 30, 1998, and December 31,
1997, respectively)................................... 20,003.6 17,496.6
Loans and leases (net of unearned income of $2,454.1 and
$2,017.0 and allowance for credit losses of $1,342.9 and
$1,409.1 at September 30, 1998, and December 31, 1997,
respectively)............................................. 81,157.2 87,083.8
Other assets:
Bank premises and equipment, net.......................... 2,056.7 2,045.3
Interest earned, not collected............................ 947.1 925.8
Other real estate owned................................... 103.3 70.1
Excess of cost over net assets of affiliates purchased.... 700.5 755.2
Other..................................................... 5,871.0 5,557.7
---------- ----------
Total other assets................................... 9,678.6 9,354.1
---------- ----------
TOTAL ASSETS......................................... $120,149.4 $125,397.4
========== ==========
LIABILITIES:
Deposits:
Noninterest-bearing....................................... $ 19,490.7 $ 19,862.3
Interest-bearing.......................................... 62,361.4 65,357.6
---------- ----------
Total deposits......................................... 81,852.1 85,219.9
Federal funds purchased and repurchase agreements........... 8,443.0 11,075.0
Other short-term borrowings................................. 2,362.9 3,095.8
Long-term debt.............................................. 11,038.8 11,457.2
Accrued interest payable.................................... 489.0 544.7
Other liabilities........................................... 3,920.3 2,801.5
---------- ----------
TOTAL LIABILITIES.................................... 108,106.1 114,194.1
---------- ----------
STOCKHOLDERS' EQUITY:
Series C convertible preferred stock, 35,000,000 shares
authorized, no par value, 2,707,917 shares issued and
outstanding at December 31, 1997.......................... 135.4
Common stock, no par value, $5 stated value, 950,000,000
shares authorized; 705,384,555 and 701,207,558 shares
issued at September 30, 1998, and December 31, 1997,
respectively.............................................. 3,526.9 3,506.0
Capital in excess of aggregate stated value of common
stock..................................................... 6,780.5 6,803.9
Retained earnings........................................... 1,549.8 672.0
Accumulated change related to other nonowner transactions... 187.6 154.7
Treasury stock (26,728 and 1,421,331 shares at September 30,
1998, and December 31, 1997, respectively), at cost....... (1.5) (68.7)
---------- ----------
TOTAL STOCKHOLDERS' EQUITY........................... 12,043.3 11,203.3
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY........... $120,149.4 $125,397.4
========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
3
<PAGE> 4
BANC ONE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
-------------------- --------------------
$(MILLIONS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED) 1998 1997 1998 1997
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Loans and leases................................ $1,970.9 $2,265.3 $6,084.0 $6,505.8
Securities:
Taxable...................................... 372.2 261.3 1,000.0 870.0
Tax-exempt................................... 17.3 21.3 53.2 66.7
Loans held for sale............................. 50.8 7.9 210.7 130.4
Other........................................... 14.1 11.2 43.1 34.1
-------- -------- -------- --------
TOTAL INTEREST INCOME...................... 2,425.3 2,567.0 7,391.0 7,607.0
INTEREST EXPENSE:
Deposits:
Demand, savings and money market deposits.... 342.5 306.7 1,014.5 876.8
Time deposits................................ 339.5 409.1 1,060.0 1,226.1
Borrowings...................................... 336.1 389.7 1,062.1 1,130.3
-------- -------- -------- --------
TOTAL INTEREST EXPENSE..................... 1,018.1 1,105.5 3,136.6 3,233.2
-------- -------- -------- --------
NET INTEREST INCOME........................ 1,407.2 1,461.5 4,254.4 4,373.8
Provision for credit losses....................... 177.3 286.6 583.4 982.3
-------- -------- -------- --------
Net interest income after provision for
credit losses........................... 1,229.9 1,174.9 3,671.0 3,391.5
NONINTEREST INCOME:
Investment management and advisory activities... 96.0 88.6 283.0 250.3
Service charges on deposit accounts............. 199.5 191.6 593.8 560.7
Loan servicing income........................... 654.4 554.5 1,672.5 1,263.9
Securities gains, net........................... 20.4 11.0 85.8 44.1
Other........................................... 351.3 305.5 1,149.5 752.7
-------- -------- -------- --------
TOTAL NONINTEREST INCOME................... 1,321.6 1,151.2 3,784.6 2,871.7
NONINTEREST EXPENSE:
Salary and related costs........................ 645.3 662.7 1,990.8 1,881.9
Net occupancy and equipment..................... 114.8 95.0 330.8 264.4
Depreciation and amortization................... 119.6 122.0 353.3 355.9
Outside services and processing................. 236.1 233.7 727.7 634.4
Marketing and development....................... 236.5 250.1 611.1 588.0
Communication and transportation................ 122.0 115.1 364.6 325.4
Restructuring charges........................... 126.9 337.3
Other........................................... 159.5 140.5 517.4 429.4
-------- -------- -------- --------
TOTAL NONINTEREST EXPENSE.................. 1,633.8 1,619.1 5,022.6 4,816.7
-------- -------- -------- --------
Income before income taxes........................ 917.7 707.0 2,433.0 1,446.5
Provision for income taxes........................ 270.1 242.2 749.7 522.1
-------- -------- -------- --------
NET INCOME........................................ $ 647.6 $ 464.8 $1,683.3 $ 924.4
======== ======== ======== ========
NET INCOME PER COMMON SHARE:
NET INCOME PER COMMON SHARE, BASIC........... $ 0.92 $ 0.67 $ 2.39 $ 1.33
======== ======== ======== ========
NET INCOME PER COMMON SHARE, DILUTED......... $ 0.91 $ 0.65 $ 2.36 $ 1.30
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
4
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BANC ONE CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
----------------------
$(MILLIONS) (UNAUDITED) 1998 1997
- ------------------------------------------------------------------------------------
<S> <C> <C>
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Net income................................................ $1,683.3 $ 924.4
Depreciation expense...................................... 278.8 260.9
Amortization of other intangibles......................... 74.5 95.0
Other cash provided by (used in) operating activities..... 2,143.7 (18.6)
-------- ----------
Net cash provided by operating activities............ 4,180.3 1,261.7
-------- ----------
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES:
Securities available for sale activity:
Purchases.............................................. (6,232.1) (8,237.8)
Maturities............................................. 2,859.4 3,290.8
Sales.................................................. 6,690.5 8,839.9
Securities held to maturity activity:
Purchases.............................................. (502.5)
Maturities............................................. 104.6 644.6
Loan activity:
Net increase, excluding sales and purchases............ (5,175.6) (11,527.6)
Sales.................................................. 12,961.5 10,582.2
Purchases and related premiums......................... (6,447.9) (801.0)
Net (increase) decrease in short-term investments......... (217.9) 183.1
Additions to bank premises and equipment.................. (569.1) (395.0)
Sale of banks and branch offices.......................... (2,403.2) (22.3)
Net increase in credit card securitization activity....... (2,068.1) (750.0)
Net cash acquired in acquisitions......................... 240.7
All other investing activities, net....................... 236.7 261.6
-------- ----------
Net cash provided by (used in) investing
activities.......................................... (261.2) 1,806.7
-------- ----------
CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES:
Net increase in demand savings and money market
deposits............................................... 2,023.9 994.7
Net decrease in time deposits............................. (2,239.9) (1,593.5)
Net decrease in short-term borrowing...................... (3,364.9) (6,371.5)
Issuance of long-term borrowings.......................... 2,281.3 5,754.6
Repayment of long-term borrowings......................... (3,201.8) (719.5)
Cash dividends paid....................................... (798.0) (622.7)
Purchase of treasury stock................................ (146.3) (707.3)
All other financing activities, net....................... 68.1 56.6
-------- ----------
Net cash (used in) financing activities.............. (5,377.6) (3,208.6)
-------- ----------
Decrease in cash and cash equivalents..................... (1,458.5) (140.2)
Cash and cash equivalents at January 1.................... 8,162.3 6,967.8
-------- ----------
Cash and cash equivalents at September 30................. $6,703.8 $ 6,827.6
======== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
5
<PAGE> 6
BANC ONE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
----------------------
$(MILLIONS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED) 1998 1997
- ------------------------------------------------------------------------------------
<S> <C> <C>
BALANCE, BEGINNING OF PERIOD................................ $11,203.3 $10,608.0
Net income.................................................. 1,683.3 924.4
Changes related to other nonowner transactions:
Change in unrealized holding gains (losses) on securities
available for sale, net of tax......................... 32.9 72.1
--------- ---------
Total net income and changes related to other
nonowner transactions............................... 1,716.2 996.5
--------- ---------
Exercise of stock options, net of shares purchased.......... (1.7) (10.3)
Shares issued in acquisitions............................... 1.4 538.4
Stock transactions related to employee benefit plans and
other..................................................... 68.4 80.1
Cash dividends:
Common ($1.14 and $1.04 per share for the nine months
ended September 30, 1998 and 1997, respectively)....... (795.9) (561.3)
Series C Preferred ($1.32 and $2.63 per share for the nine
months ended September 30, 1998 and 1997,
respectively).......................................... (2.1) (9.6)
Preferred stock of pooled affiliate....................... (51.8)
Purchase of treasury stock.................................. (146.3) (707.3)
--------- ---------
BALANCE, END OF PERIOD...................................... $12,043.3 $10,882.7
========= =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
6
<PAGE> 7
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION
The consolidated financial statements presented in this document represent
the operations of BANC ONE CORPORATION ("BANC ONE") and have not been restated
to reflect the merger with First Chicago NBD Corporation ("First Chicago NBD")
which was effective on October 2, 1998 to be accounted for as a pooling of
interests. See additional discussion regarding the merger on page 9.
The accompanying consolidated financial statements are unaudited. However,
in the opinion of management, they contain the adjustments, all of which are
normal and recurring in nature, necessary to present fairly the consolidated
financial position, results of operations and changes in cash flow. The
consolidated financial statements and notes to the consolidated financial
statements contained in the Annual Report on Form 10-K for the year ended
December 31, 1997, and the Quarterly Reports on Form 10-Q for the quarters ended
March 31 and June 30, 1998, should be read in conjunction with these
consolidated financial statements. The "Corporation" is defined as the parent
company only. "BANC ONE" refers to the Corporation and all significant
majority-owned subsidiaries. Certain prior period amounts have been reclassified
to be consistent with current presentation.
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.
2. ACQUISITION
On September 30, 1998, BANC ONE purchased the credit card operation of
Chevy Chase Bank, FSB. The portfolio included $4.9 billion in managed credit
card loans and 3.1 million Visa(R) and MasterCard(R) credit card accounts. At
the purchase date, an intangible asset of $290.6 million was recognized on the
balance sheet and is being amortized over 7 years using the straight line
method.
On June 12, 1998, BANC ONE completed its acquisition of First Commerce
Corporation ("First Commerce") located in New Orleans, Louisiana, resulting in
the issuance of approximately 56 million shares of BANC ONE's common stock
valued at $3.5 billion for all the outstanding shares of First Commerce common
stock, in a tax-free exchange. First Commerce was a multi-bank holding company
with total assets of approximately $9.3 billion and stockholders' equity of
approximately $804.6 million at June 12, 1998. The acquisition was accounted for
as a pooling of interests and, therefore, the consolidated financial statements
have been restated for all prior periods presented to include the results of
operations, financial position and changes in cash flows of First Commerce.
In connection with the First Commerce merger, BANC ONE identified
restructuring and merger integration charges of $182.0 million ($127.3 million
after tax), of which $126.9 million was recorded as a restructuring charge,
$43.6 million represented integration costs, and $11.5 million was associated
with Year 2000 compliance. The restructuring charge of $126.9 million associated
with the First Commerce merger consisted of employee benefits and severance
costs, and other merger-related costs.
3. CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
Supplemental disclosures for the consolidated condensed statement of cash
flows are as follows: common stock issued and treasury stock reissued in
purchase acquisitions was $1.4 million and $538.4 million for the nine months
ended September 30, 1998 and 1997, respectively, and securities trades not
settled increased $1.3 million and decreased $381.3 million for the nine months
ended September 30, 1998 and 1997, respectively. Finally, in connection with the
First USA merger, $3.6 billion of mortgage backed securities were reclassified
from held to maturity to available for sale during the 1997 second quarter.
In addition, noncash investing activities for the nine months ended
September 30, 1998, included the following transfers of securitization-related
assets: (1) an interest-only strip, associated with credit card securitizations,
of $585.5 million was transferred from other assets to securities available for
sale and (2) certificated retained interests in credit card securitizations of
$3.2 billion were transferred from loans to securities available for sale.
7
<PAGE> 8
4. EARNINGS PER SHARE
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------- --------------------
$(MILLIONS, EXCEPT PER SHARE AMOUNTS) 1998 1997 1998 1997
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BASIC:
EARNINGS:
Net income................................. $ 647.6 $ 464.8 $1,683.3 $ 924.4
Deduct: Dividends on preferred shares...... 3.0 2.1 15.4
--------- --------- -------- --------
$ 647.6 $ 461.8 $1,681.2 $ 909.0
========= ========= ======== ========
SHARES:
Weighted average common shares
outstanding.............................. 705.0 695.9 702.3 682.8
========= ========= ======== ========
NET INCOME PER COMMON SHARE, BASIC.............. $ 0.92 $ 0.67 $ 2.39 $ 1.33
========= ========= ======== ========
DILUTED:
EARNINGS:
Net income................................. $ 647.6 $ 464.8 $1,683.3 $ 924.4
Interest expense on convertible debentures,
net of tax............................... 1.5 1.7 4.7 5.0
--------- --------- -------- --------
$ 649.1 $ 466.5 $1,688.0 $ 929.4
========= ========= ======== ========
SHARES:
Weighted average common shares
outstanding.............................. 705.0 695.9 702.3 682.8
Add: Dilutive effect of outstanding
options.................................. 5.2 11.5 7.1 11.7
Add: Conversion of preferred stock......... 7.5 1.9 15.7
Add: Other dilutive contingent share
issuances................................ 3.9 4.5 4.1 4.5
--------- --------- -------- --------
Weighted average common shares
outstanding.............................. 714.1 719.4 715.4 714.7
========= ========= ======== ========
NET INCOME PER COMMON SHARE, DILUTED............ $ 0.91 $ 0.65 $ 2.36 $ 1.30
========= ========= ======== ========
</TABLE>
5. CHANGES IN STOCKHOLDERS' EQUITY
In addition to net income, BANC ONE has identified changes related to other
nonowner transactions in the Consolidated Statement of Changes in Stockholders'
Equity. For BANC ONE, changes in other nonowner transactions consist entirely of
changes in unrealized holding gains and losses on securities available for sale.
<TABLE>
<CAPTION>
NINE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 1998 SEPTEMBER 30, 1997
---------------------------------- ----------------------------------
BEFORE- TAX BEFORE- TAX
TAX (EXPENSE) AFTER-TAX TAX (EXPENSE) AFTER-TAX
$(MILLIONS) AMOUNT OR BENEFIT AMOUNT AMOUNT OR BENEFIT AMOUNT
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
UNREALIZED GAINS ON SECURITIES:
Unrealized holding gains arising
during period.................... $133.3 $(41.0) $92.3 $156.9 $(56.7) $100.2
Less: reclassification adjustment
for gain realized in net
income........................... (85.8) 26.4 (59.4) (44.1) 16.0 (28.1)
------ ------ ----- ------ ------ ------
Change related to other nonowner
transactions....................... $ 47.5 $(14.6) $32.9 $112.8 $(40.7) $ 72.1
====== ====== ===== ====== ====== ======
</TABLE>
On January 20, 1998, the Corporation announced the election to redeem all
of the shares of BANC ONE's Series C Convertible Preferred Stock ("preferred
stock") on April 16, 1998, at the redemption price of $51.05 per share plus the
amount of any dividends accrued and unpaid.
In addition, of the approximately 56 million shares of BANC ONE stock
issued in the acquisition of First Commerce, approximately four million shares
were shares of treasury stock.
6. NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 131, "Disclosures about Segments of an Enterprise and Related Information."
This Statement establishes standards for reporting operating segments and
requires certain other disclosures about products and services, geographic areas
and
8
<PAGE> 9
major customers. The disclosure requirements are effective for the year ending
December 31, 1998. The Statement requires selected information about operating
segments in interim financial reports beginning in 1999.
In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position ("SOP") 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use." SOP 98-1 provides guidance on
accounting for the costs of computer software developed or obtained for internal
use. BANC ONE adopted SOP 98-1 effective for the first quarter 1998. These costs
will be amortized on a straight-line basis over the benefit period, not to
exceed five years, and will be periodically reviewed for possible impairment.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 establishes accounting and
reporting standards for derivative instruments, including certain instruments
embedded in other contracts, and for hedging activities. SFAS No. 133 is
effective for fiscal years beginning after June 15, 1999, and may be implemented
as of the beginning of any fiscal quarter. SFAS No. 133 may not be applied
retroactively. BANC ONE is in the process of evaluating the impact of this new
Statement.
7. SUBSEQUENT EVENT
On October 2, 1998, BANC ONE and First Chicago NBD were each merged into a
new company BANK ONE CORPORATION ("BANK ONE"). Each share of BANC ONE common
stock was converted into one share of common stock of BANK ONE. Each share of
common stock of First Chicago NBD was converted into the right to receive 1.62
shares of BANK ONE common stock. In aggregate, 291 million shares of First
Chicago NBD were converted into 471 million shares of BANK ONE. Each share of
preferred stock of First Chicago NBD outstanding immediately prior to the merger
was converted into the right to receive one share of a series of corresponding
preferred stock of BANK ONE with substantially the same terms.
The separate results of operations for BANC ONE and First Chicago NBD were
as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------- -----------------------
$(MILLIONS, EXCEPT PER SHARE AMOUNTS) 1998 1997 1998 1997
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUE:
BANC ONE.................................... $3,747.9 $3,724.5 $11,182.3 $10,498.8
First Chicago NBD........................... 2,663.4 2,582.8 8,019.4 7,499.7
NET INCOME:
BANC ONE.................................... $ 648.5 $ 465.7 $ 1,686.0 $ 927.1
First Chicago NBD........................... 405.0 384.4 1,195.7 1,142.7
EARNINGS PER SHARE (DILUTED):
BANC ONE.................................... $ .91 $ .65 $ 2.36 $ 1.30
First Chicago NBD........................... 1.38 1.26 4.06 3.63
</TABLE>
To conform with consistent methods of accounting, certain reclassifications
of certain revenue and expense items were made. In addition, the accounting
treatment for the postretirement transition obligation identified with the
implementation of SFAS No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions," has been conformed. The 1994 balance of retained
earnings was decreased by $70 million to reflect a consistent up-front
recognition of the postretirement transition obligation. Noninterest expense was
reduced by $1.4 million and $4.2 million for the three and nine months ended
September 30, 1998, respectively, and net income was increased by $.9 million
and $2.7 million for the same periods. The above balances reflect the
reclassifications of certain revenue and expenses in addition to the effect of
the change in the accounting treatment of the postretirement transition
obligation.
The transaction will be accounted for as a pooling of interests. For
further information, see BANC ONE's Current Reports on Form 8-K dated April 10,
1998 (as amended by Forms 8-K/A filed April 21, 1998 and May 19, 1998) and BANK
ONE's Current Report on Form 8-K dated October 6, 1998.
9
<PAGE> 10
CONSOLIDATED QUARTERLY FINANCIAL DATA
<TABLE>
<CAPTION>
QUARTERS
--------------------------------------------------------------
1998 1997
------------------------------------ -----------------------
$(MILLIONS, EXCEPT PER SHARE DATA) (UNAUDITED) THIRD SECOND FIRST FOURTH THIRD
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CONDENSED INCOME STATEMENT:
Total interest income (1)........... $ 2,440.7 $ 2,502.3 $ 2,493.8 $ 2,505.7 $ 2,582.0
Total interest expense.............. 1,018.1 1,057.3 1,061.2 1,074.8 1,105.5
---------- ---------- ---------- ---------- ----------
Net interest income (1).......... 1,422.6 1,445.0 1,432.6 1,430.9 1,476.5
Provision for credit losses......... 177.3 193.8 212.3 281.1 286.6
Noninterest income.................. 1,321.6 1,280.8 1,182.2 1,142.7 1,151.2
Noninterest expense................. 1,633.8 1,808.4 1,580.4 1,568.4 1,619.1
Taxable equivalent adjustment....... 15.4 16.1 14.3 15.3 15.0
---------- ---------- ---------- ---------- ----------
Income before income taxes....... 917.7 707.5 807.8 708.8 707.0
Income tax provision................ 270.1 220.2 259.4 201.9 242.2
---------- ---------- ---------- ---------- ----------
Net income....................... $ 647.6 $ 487.3 $ 548.4 $ 506.9 $ 464.8
========== ========== ========== ========== ==========
Net income available to common
stockholders..................... $ 647.6 $ 487.3 $ 546.3 $ 504.5 $ 461.8
========== ========== ========== ========== ==========
KEY AVERAGE BALANCES:
Total securities (2)................ $ 20,464.6 $ 20,695.5 $ 18,348.7 $ 16,524.0 $ 17,396.5
Total loans and leases.............. 83,157.4 86,477.2 87,792.9 89,536.2 91,577.7
Total assets........................ 120,008.0 124,090.8 123,759.3 121,781.7 122,715.3
Total deposits...................... 81,577.3 83,856.0 84,042.3 82,895.9 82,899.5
Total borrowed funds................ 22,609.3 25,123.3 25,063.8 24,595.1 26,122.2
Common stockholders' equity......... $ 11,809.7 $ 11,307.7 $ 10,920.7 $ 10,706.5 $ 10,444.9
MARGIN ANALYSIS (1)(3)(4):
Net interest income................. 5.32% 5.25% 5.30% 5.27% 5.31%
Net funds function.................. 4.66% 4.55% 4.52% 4.23% 4.28%
KEY OPERATING RATIOS:
Return on average assets (3)........ 2.14% 1.58% 1.80% 1.65% 1.50%
Return on average common
equity (3)....................... 21.76 17.29 20.29 18.69 17.54
Return on average total equity (3).. 21.76 17.28 20.13 18.54 17.36
Average common equity to average assets... 9.84 9.11 8.82 8.79 8.51
Average total equity to average assets... 9.84 9.12 8.93 8.91 8.66
Tier I capital ratio................ 9.23 9.03 8.94 8.57 8.60
Total risk adjusted capital ratio... 13.58 13.47 13.60 12.97 13.09
Tier I leverage ratio............... 9.06% 8.54% 8.18% 7.93% 7.66%
</TABLE>
- ---------------
(1) Fully taxable equivalent basis. The Federal statutory rate used was 35% for
all periods presented.
(2) Average balances are based on amortized historical cost excluding SFAS No.
115 adjustments to fair value which are included in other assets.
(3) Ratios presented on an annualized basis.
(4) As a percent of average earning assets.
(5) Excludes certain smaller balance loans collectively evaluated for
impairment.
(6) Includes loans held for sale.
(7) Excluding nonperforming loans.
(8) Third quarter 1997 has not been restated for the 10% stock dividend declared
on February 12, 1998.
10
<PAGE> 11
CONSOLIDATED QUARTERLY FINANCIAL DATA (CONTINUED)
<TABLE>
<CAPTION>
QUARTERS
--------------------------------------------------------------
1998 1997
$(MILLIONS, EXCEPT PER SHARE DATA) ------------------------------------ -----------------------
(UNAUDITED) THIRD SECOND FIRST FOURTH THIRD
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CREDIT ANALYSIS:
Net charge-offs to average loans
and leases (3)............. .83% 1.07% 1.06% 1.32% 1.29%
Ending allowance to loans and
leases..................... 1.63 1.60 1.60 1.59 1.60
Nonperforming assets to loans
and leases (5)(6).......... .75 .70 .71 .57 .59
Loans delinquent 90 or more days
to loans and leases (6)(7)... .55 .60 .62 .64 .74
Allowance to nonperforming
loans...................... 253.52% 254.17% 250.96% 316.23% 307.03%
MANAGED DATA:
Total average loans and leases
(6)........................ $120,281.4 $119,965.1 $119,674.7 $117,659.6 $115,505.5
Net interest margin (1)(3).... 6.61% 6.37% 6.49% 6.22% 6.25%
Net funds function (1)(3)..... 4.75 4.46 4.54 4.36 4.39
Credit card net charge-offs to
average credit card loans
(3)........................ 5.16 5.84 5.96 5.35 5.75
Credit card loans delinquent 90
or more days to credit card
loans...................... 2.07% 2.18% 2.38% 2.28% 2.02%
COMMON STOCK:
Per common share data
Net income, basic.......... $ .92 $ .69 $ .78 $ .73 $ .67
Net income, diluted........ .91 .68 .77 .71 .65
Cash dividends declared.... .38 .38 .38 .345 .345
Book value (8)............. $ 17.07 $ 16.43 $ 16.05 $ 15.82 $ 16.74
Average shares outstanding,
basic...................... 705.0 703.5 698.4 699.3 695.9
Average shares outstanding,
diluted.................... 714.1 715.3 716.6 719.3 719.4
Shares traded, as originally
reported................... 168.5 133.9 105.5 113.3 102.8
Stock price:
High....................... $ 61.50 $ 65.63 $ 63.94 $ 54.37 $ 52.10
Low........................ 37.75 54.94 44.66 43.01 43.24
Close...................... $ 42.44 $ 55.81 $ 63.25 $ 49.37 $ 50.91
</TABLE>
11
<PAGE> 12
AVERAGE BALANCES, INCOME AND EXPENSE, YIELDS AND RATES (1)
<TABLE>
<CAPTION>
THREE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30, 1998 SEPTEMBER 30, 1997
------------------------------ ------------------------------
AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/
$(MILLIONS) (UNAUDITED) BALANCES EXPENSE RATE BALANCES EXPENSE RATE
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Short-term investments....................... $ 1,075.4 $ 14.1 5.20% $ 824.5 $ 11.2 5.39%
Loans held for sale.......................... 1,396.8 50.8 14.43 419.8 7.9 7.47
Securities: (2)
Taxable.................................... 19,266.0 373.2 7.69 15,878.6 261.9 6.54
Tax-exempt................................. 1,198.6 24.8 8.21 1,517.9 30.9 8.08
---------- -------- ---------- --------
Total securities......................... 20,464.6 398.0 7.72 17,396.5 292.8 6.68
Loans and leases: (3)
Commercial:
Commercial............................... 24,221.7 495.3 8.11 23,169.8 488.6 8.37
Commercial real estate................... 6,341.9 141.8 8.87 7,036.5 158.4 8.93
Construction real estate................. 4,190.7 101.6 9.62 4,235.4 103.3 9.68
Lease financing.......................... 2,957.7 54.8 7.35 2,540.7 48.2 7.53
Consumer:
Residential real estate.................. 6,046.9 141.6 9.29 8,422.0 193.3 9.11
Home equity.............................. 10,231.7 246.9 9.57 8,786.4 214.7 9.69
Indirect................................. 8,991.9 212.9 9.39 9,149.4 216.8 9.40
Auto lease............................... 8,340.0 179.4 8.53 6,235.1 134.2 8.54
Student.................................. 2,306.4 44.0 7.57 2,374.9 44.8 7.48
Other.................................... 4,177.5 120.6 11.45 4,656.7 133.0 11.33
Credit card................................ 5,351.0 238.9 17.71 14,970.8 534.8 14.17
---------- -------- ---------- --------
Total loans and leases................... 83,157.4 1,977.8 9.44 91,577.7 2,270.1 9.83
---------- -------- ---------- --------
Total earning assets..................... 106,094.2 2,440.7 9.13 110,218.5 2,582.0 9.29
Allowance for credit losses.................. (1,318.7) (1,445.9)
Other assets................................. 15,232.5 13,942.7
---------- ----------
TOTAL ASSETS................................. $120,008.0 $122,715.3
========== ==========
LIABILITIES:
Deposits:
Noninterest-bearing demand................. $ 18,310.5 $ 17,227.6
Interest-bearing demand.................... 2,517.0 9.8 1.54 2,653.9 12.9 1.93
Savings and money market................... 35,468.0 332.7 3.72 33,261.0 293.8 3.50
Time deposits:
CDs less than $100,000................... 17,074.5 228.2 5.30 20,204.3 278.6 5.47
CDs $100,000 and over:
Domestic............................... 5,239.0 71.3 5.40 7,066.8 96.8 5.43
Foreign................................ 2,968.3 40.0 5.35 2,485.9 33.7 5.38
---------- -------- ---------- --------
Total deposits...................... 81,577.3 682.0 3.32 82,899.5 715.8 3.43
Borrowed funds:
Short-term................................. 11,579.2 160.6 5.50 15,591.7 218.0 5.55
Long-term.................................. 11,030.1 175.5 6.31 10,530.5 171.7 6.47
---------- -------- ---------- --------
Total borrowed funds................... 22,609.3 336.1 5.90 26,122.2 389.7 5.92
---------- -------- ---------- --------
Total interest-bearing liabilities..... 85,876.1 1,018.1 4.70 91,794.1 1,105.5 4.78
Other liabilities............................ 4,011.7 3,072.5
---------- ----------
TOTAL LIABILITIES............................ 108,198.3 112,094.2
Preferred stock.............................. 176.2
Common stockholders' equity.................. 11,809.7 10,444.9
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY... $120,008.0 $122,715.3
========== ==========
Net interest rate spread..................... 4.43 4.51
NET INTEREST INCOME AND NET INTEREST
MARGIN..................................... 1,422.6 5.32 1,476.5 5.31
Provision for credit losses.................. (177.3) (.66) (286.6) (1.03)
-------- ------ -------- ------
NET FUNDS FUNCTION........................... $1,245.3 4.66% $1,189.9 4.28%
======== ====== ======== ======
</TABLE>
- ---------------
(1) Income amounts are presented on a fully taxable equivalent (FTE) basis. The
federal statutory rate was 35% for all periods presented.
(2) Average securities balances are based on amortized historical cost,
excluding SFAS 115 adjustments to fair value which are included in other
assets.
(3) Nonaccrual loans are included in loan balances. Interest income includes
related fee income.
12
<PAGE> 13
AVERAGE BALANCES, INCOME AND EXPENSE, YIELDS AND RATES (1) (CONTINUED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 1998 SEPTEMBER 30, 1997
------------------------------ ------------------------------
AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/
$(MILLIONS) (UNAUDITED) BALANCES EXPENSE RATE BALANCES EXPENSE RATE
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Short-term investments....................... $ 1,089.3 $ 43.1 5.29% $ 857.7 $ 34.1 5.32%
Loans held for sale.......................... 1,940.1 210.7 14.52 1,382.4 130.4 12.61
Securities: (2)
Taxable.................................... 18,575.4 1,001.8 7.21 17,757.6 870.8 6.56
Tax-exempt................................. 1,268.6 77.9 8.21 1,574.5 97.5 8.28
---------- -------- ---------- --------
Total securities......................... 19,844.0 1,079.7 7.27 19,332.1 968.3 6.70
Loans and leases: (3)
Commercial:
Commercial............................... 24,284.1 1,480.4 8.15 22,426.5 1,403.7 8.37
Commercial real estate................... 6,590.3 439.7 8.92 7,104.0 475.0 8.94
Construction real estate................. 4,151.0 296.6 9.55 4,094.6 295.6 9.65
Lease financing.......................... 2,844.1 156.9 7.38 2,425.9 134.1 7.39
Consumer:
Residential real estate.................. 6,990.9 483.3 9.24 8,016.3 546.9 9.12
Home equity.............................. 9,958.7 717.1 9.63 8,076.1 588.7 9.75
Indirect................................. 8,792.3 610.6 9.29 9,695.9 668.2 9.21
Auto lease............................... 7,666.2 518.5 9.04 5,555.8 357.7 8.61
Student.................................. 2,405.0 137.2 7.63 2,397.5 135.6 7.56
Other.................................... 4,377.0 402.3 12.29 4,665.1 420.6 12.05
Credit card................................ 7,732.5 860.7 14.88 13,617.7 1,495.0 14.68
---------- -------- ---------- --------
Total loans and leases................... 85,792.1 6,103.3 9.51 88,075.4 6,521.1 9.90
---------- -------- ---------- --------
Total earning assets..................... 108,665.5 7,436.8 9.15 109,647.6 7,653.9 9.33
Allowance for credit losses.................. (1,343.4) (1,344.0)
Other assets................................. 15,283.5 13,078.7
---------- ----------
TOTAL ASSETS................................. $122,605.6 $121,382.3
========== ==========
LIABILITIES:
Deposits:
Noninterest-bearing demand................. $ 18,611.1 $ 16,587.0
Interest-bearing demand.................... 2,654.2 33.7 1.70 2,902.6 41.5 1.91
Savings and money market................... 35,464.6 980.8 3.70 32,347.7 835.3 3.45
Time deposits:
CDs less than $100,000................... 18,139.9 724.0 5.34 20,269.8 836.2 5.52
CDs $100,000 and over:
Domestic............................... 5,526.3 224.9 5.44 7,145.7 291.7 5.46
Foreign................................ 2,753.4 111.1 5.39 2,424.9 98.2 5.41
---------- -------- ---------- --------
Total deposits...................... 83,149.5 2,074.5 3.34 81,677.7 2,102.9 3.44
Borrowed funds:
Short-term................................. 12,738.6 518.6 5.44 17,217.8 696.1 5.41
Long-term.................................. 11,517.9 543.5 6.31 8,978.2 434.2 6.47
---------- -------- ---------- --------
Total borrowed funds................... 24,256.5 1,062.1 5.85 26,196.0 1,130.3 5.77
---------- -------- ---------- --------
Total interest-bearing liabilities..... 88,794.9 3,136.6 4.72 91,286.7 3,233.2 4.74
Other liabilities............................ 3,807.2 2,942.3
---------- ----------
TOTAL LIABILITIES............................ 111,213.2 110,816.0
Preferred stock.............................. 43.1 188.7
Common stockholders' equity.................. 11,349.3 10,377.6
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY... $122,605.6 $121,382.3
========== ==========
Net interest rate spread..................... 4.43 4.59
NET INTEREST INCOME AND NET INTEREST
MARGIN..................................... 4,300.2 5.29 4,420.7 5.39
Provision for credit losses.................. (583.4) (.72) (982.3) (1.20)
-------- ----- -------- -----
NET FUNDS FUNCTION........................... $3,716.8 4.57% $3,438.4 4.19%
======== ===== ======== =====
</TABLE>
13
<PAGE> 14
MANAGEMENT'S DISCUSSION AND ANALYSIS
This discussion should be read in conjunction with the consolidated
financial statements, notes and tables included elsewhere in this report and in
the BANC ONE CORPORATION Annual Report on Form 10-K for the year ended December
31, 1997 (the "1997 Form 10-K") and the Quarterly Reports on Form 10-Q for the
quarters ended March 31 and June 30, 1998. For purposes of this report, the term
"the Corporation" is defined as the parent company only and "BANC ONE" refers to
the Corporation and all significant majority-owned subsidiaries.
Management's discussion and analysis may contain 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 expressed in
forward-looking statements. For a discussion of these risks and uncertainties,
see the 1997 Form 10-K.
ACQUISITIONS AND MERGERS
Effective October 2, 1998, BANC ONE and First Chicago NBD Corporation
("First Chicago NBD") were combined into a new corporation named BANK ONE
CORPORATION ("BANK ONE"). Each share of BANC ONE common stock was converted into
one share of BANK ONE common stock. Each share of First Chicago NBD common stock
was converted into the right to receive 1.62 shares of BANK ONE common stock.
BANK ONE estimates that net restructuring and merger-related charges of
approximately $1.25 billion ($837 million after-tax) will be incurred related to
the merger. Actions incorporated in the business combination and restructuring
plan are principally targeted for implementation over a 12-18 month period
following the merger.
Personnel-related items consist primarily of severance and benefits cost
for separated employees and costs associated with change in control provisions
in certain of First Chicago NBD's stock plans. The benefit package to be made
available to affected employees has been approved by management and communicated
on a corporate-wide basis. Facilities and equipment costs include the net cost
associated with the closing and divestiture of identified banking facilities,
and from the consolidation of headquarters and operational facilities. Other
merger-related transaction costs include investment banking fees, registration
and listing fees, and various accounting, legal and other related transaction
costs.
While there can be no assurances as to the achievement of such business and
financial goals, BANK ONE currently expects to achieve approximately $1.2
billion in annual pre-tax synergies as a result of the merger. It is currently
anticipated that essentially all actions necessary to generate such synergies
will be completed in a two-year timeframe. Of this total, BANK ONE expects to
realize approximately $930 million in annual expense savings and approximately
$275 million in enhanced annual revenues. The expense savings will be derived
principally from cost reductions in the credit card, retail banking, commercial
banking, capital markets and indirect lending businesses, in the operations and
technology budgets and in its general and administrative expenses, as well as
through increased purchasing leverage with certain suppliers. Increased revenues
are expected to come principally in cross-selling opportunities involving the
credit card, retail banking and commercial banking businesses. For further
information on the First Chicago NBD merger, see BANC ONE's Current Report on
Form 8-K dated April 10, 1998 (as amended by Forms 8-K/A filed April 21, 1998
and May 19, 1998), and BANK ONE's Current Report on Form 8-K dated October 6,
1998.
On September 30, 1998, BANC ONE purchased the credit card operation of
Chevy Chase Bank, FSB. The portfolio included $4.9 billion in managed credit
card loans and 3.1 million Visa(R) and MasterCard(R) credit card accounts. At
the purchase date, an intangible asset of $290.6 million was recognized on the
balance sheet and is being amortized over 7 years using the straight line
method.
On June 12, 1998, BANC ONE completed its acquisition of First Commerce
Corporation ("First Commerce"), located in New Orleans, Louisiana. The
acquisition was accounted for as a pooling of interests and, accordingly, the
information included in this report presents the combined results of BANC ONE
and First Commerce as if the two companies had operated as a combined entity for
all periods presented.
14
<PAGE> 15
First Commerce was acquired in a tax-free exchange of stock, whereby BANC
ONE issued 1.408 shares (adjusted for the 10% common stock dividend) of BANC
ONE's common stock (approximately 56 million shares in total) for each
outstanding share of First Commerce common stock. First Commerce was a
multi-bank holding company with total assets of approximately $9.3 billion and
stockholders' equity of approximately $804.6 million at June 12, 1998.
In connection with the First Commerce merger, BANC ONE identified
restructuring and merger integration charges of $182.0 million ($127.3 million
after tax), of which $126.9 million was recorded as a restructuring charge,
$43.6 million represented integration costs, and $11.5 million was associated
with Year 2000 compliance. The restructuring charge of $126.9 million associated
with the First Commerce merger consisted of employee benefits and severence
costs, and other merger-related costs.
"REPORTED" VS "MANAGED" ANALYSIS
For funding and risk management purposes, BANC ONE periodically securitizes
loans and leases, primarily in support of credit card activities. The accounting
for securitizations complicates the understanding of underlying trends in net
interest income, net interest margin and noninterest income, as well as the
underlying growth rates of reported loans and leases. For a more complete
understanding, these trends are also reviewed on a "Managed" basis, which adds
data on securitized credit card loans to "Reported" data on loans and leases and
loans held for sale. The following analysis of "Reported" results of operations
should be read in conjunction with the analysis of "Managed" performance
beginning on page 26.
RESULTS OF OPERATIONS
OVERVIEW
Net income for the third quarter of 1998 was $647.6 million, or $.91 per
common share on a diluted basis, compared with $464.8 million, or $.65 per
common share for the same quarter last year. The increase in net income
primarily reflects a decrease of $109.3 million, or 38.1%, in the provision for
credit losses and an increase of $170.4 million, or 14.8%, in noninterest
income. For the nine month periods ended September 30, 1998 and 1997,
respectively, net income was $1,683.3 million, or $2.36 per share, and $924.4
million, or $1.30 per share, reflecting the same factors as the quarterly
results, as well as a decrease in restructuring charges, discussed below.
Both the 1998 and 1997 nine-month periods were impacted by charges for
special acquisition-related items. The 1998 second quarter included $182.0
million ($127.3 million after tax) of restructuring and integration costs
associated with the acquisition of First Commerce. The $182.0 million
represented $126.9 million in restructuring charges, $43.6 million in
integration costs, as well as other merger-related costs. The 1997 second
quarter included $467.4 million ($328.8 million after tax) of costs associated
with the acquisition of First USA, Inc. ("First USA") and other strategic
initiatives. Of the $467.4 million recorded in 1997, $337.3 million was recorded
as a restructuring charge and $130.1 million was recorded as an additional
provision for credit losses. Excluding the impact of these acquisition-related
items, results for the nine-month periods ended September 30, 1998 and 1997,
respectively, were $1,810.6 million, or $2.54 per share, and $1,253.2 million,
or $1.76 per share.
The annualized return on average common equity ("ROCE") increased to 21.76%
for the third quarter of 1998 compared with 17.54% for the same quarter last
year. The annualized return on average assets ("ROA") was 2.14% and 1.50% for
the three months ended September 30, 1998 and 1997, respectively. For the
nine-month periods ended September 30, 1998 and 1997, the annualized ROCE was
19.81% and 11.71%. respectively, while the annualized ROA was 1.84% and 1.02%,
respectively.
Excluding the impact of the acquisition-related items above, for the nine
months ended September 30, 1998 and 1997, ROCE was 21.30% and 15.95%, while ROA
was 1.97% and 1.38%.
15
<PAGE> 16
NET INTEREST INCOME/NET INTEREST MARGIN
Net interest income on a fully taxable equivalent ("FTE") basis was $1.4
billion for the third quarter ended September 30, 1998, a $53.9 million decrease
from the same quarter of 1997. For the nine months ended September 30, 1998, net
interest income on an FTE basis declined $120.5 million from the same period in
1997. The decreases in net interest income for both the three and nine months in
1998 were due primarily to declines in the average balance on credit card loans,
resulting from increased securitizations, generally offset by increases in the
average balances on other loans and leases and an increase in average
securities. The effect of securitizations is further discussed in "Performance
Analysis -- Managed Portfolio" beginning on page 26.
Net interest margin was relatively flat at 5.32% for the three months ended
September 30, 1998, compared to 5.31% for the same quarter in 1997. For the nine
months ended September 30, 1998, when compared to the same period last year, the
net interest margin declined to 5.29%.
The decline in the average balance on the credit card portfolio negatively
impacted interest income by $295.9 million during the third quarter of 1998, and
by $634.3 million for the nine months ended September 30, 1998, when compared to
the same periods in 1997. The average balance of the reported credit card
portfolio decreased 64.3% and 43.2%, respectively, from the three and nine
months ended September 30, 1997. The yield on the reported credit card portfolio
increased from 14.17% to 17.71% on a quarter-to-quarter basis and from 14.68% to
14.88% on a year-to-date basis. These increases primarily resulted from higher
fee income and an improvement in credit quality.
The higher average loan and lease portfolio and generally flat yields,
excluding credit card loans, resulted in a modest increase in interest income of
$3.6 million and $216.5 million for the three and nine months ended September
30, 1998, respectively, from the same periods in 1997. Average commercial loans
increased $729.6 million, or 2.0%, and $1.8 billion, or 5.0% from the prior year
quarter and nine-month periods, respectively, mainly due to the strong economic
environment which has fueled commercial loan growth throughout the industry, as
well as the positive impact of more focused sales efforts reflecting the shift
to line of business management. Average home equity loans increased 16.4% and
23.3%, respectively, from the three and nine months ended September 30, 1997,
primarily as a result of marketing efforts, while residential real estate loans
declined as expected, due primarily to the sale of $2.6 billion in residential
mortgage loans during the first half of 1998.
For both the three and nine months ended September 30, 1998, securities
income increased due primarily to the reclassification of retained interests in
credit card securitizations from loans to securities.
16
<PAGE> 17
For further information on the changes in average balances and the impact
of rates and volume on net interest income, please see Table 1: Rate/Volume
Analysis which follows.
TABLE 1: RATE/VOLUME ANALYSIS (1)(2)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 1998 VS SEPTEMBER 30, 1997 SEPTEMBER 30, 1998 VS SEPTEMBER 30, 1997
------------------------------------------- -------------------------------------------
CHANGE IN CHANGE IN CHANGE IN CHANGE IN
AVERAGE INCOME / RATE VOLUME AVERAGE INCOME / RATE VOLUME
$(MILLIONS) (UNAUDITED) BALANCE EXPENSE EFFECT EFFECT BALANCE EXPENSE EFFECT EFFECT
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
EARNING ASSETS:
Short-term
investments........... $ 250.9 $ 2.9 $ (2.5) $ 5.4 $ 231.6 $ 9.0 $(0.3) $ 9.3
Loans held for sale..... 977.0 42.9 12.3 30.6 557.7 80.3 21.9 58.4
Securities: (3)
Taxable............... 3,387.4 111.3 50.1 61.2 817.8 131.0 89.6 41.4
Tax-exempt............ (319.3) (6.1) 3.3 (9.4) (305.9) (19.6) (0.8) (18.8)
--------- ------- ------ ------- --------- ------- ----- -------
Total
securities...... 3,068.1 105.2 53.4 51.8 511.9 111.4 88.8 22.6
--------- ------- ------ ------- --------- ------- ----- -------
Loans and leases: (4)
Commercial............ 729.6 (5.0) (73.3) 68.3 1,818.5 65.2 (72.7) 137.9
Consumer.............. 469.9 8.6 (14.5) 23.1 1,783.4 151.3 24.2 127.1
Credit card........... (9,619.8) (295.9) 680.4 (976.3) (5,885.2) (634.3) 34.1 (668.4)
--------- ------- ------ ------- --------- ------- ----- -------
Total loans and
leases.......... (8,420.3) (292.3) 592.6 (884.9) (2,283.3) (417.8) (14.4) (403.4)
--------- ------- ------ ------- --------- ------- ----- -------
TOTAL EARNING ASSETS.... $(4,124.3) (141.3) 655.8 (797.1) $ (982.1) (217.1) 96.0 (313.1)
========= =========
INTEREST-BEARING
LIABILITIES:
Deposits:
Interest-bearing
demand................ $ (136.9) (3.1) (2.5) (0.6) $ (248.4) (7.8) (4.4) (3.4)
Savings and money
market................ 2,207.0 38.9 18.8 20.1 3,116.9 145.5 61.7 83.8
Time deposits........... (4,475.2) (69.6) (9.4) (60.2) (3,420.8) (166.1) (28.4) (137.7)
--------- ------- ------ ------- --------- ------- ----- -------
Total deposits.... (2,405.1) (33.8) 6.9 (40.7) (552.3) (28.4) 28.9 (57.3)
--------- ------- ------ ------- --------- ------- ----- -------
Borrowed funds
Short-term............ (4,012.5) (57.4) (1.7) (55.7) (4,479.2) (177.5) 8.0 (185.5)
Long-term............. 499.6 3.8 (20.5) 24.3 2,539.7 109.3 (17.3) 126.6
--------- ------- ------ ------- --------- ------- ----- -------
Total borrowed
funds........... (3,512.9) (53.6) (22.2) (31.4) (1,939.5) (68.2) (9.3) (58.9)
--------- ------- ------ ------- --------- ------- ----- -------
TOTAL INTEREST-BEARING
LIABILITIES........... $(5,918.0) (87.4) (15.3) (72.1) $(2,491.8) (96.6) 19.6 (116.2)
========= ------- ------ ------- ========= ------- ----- -------
NET INTEREST
INCOME(4)............. $ (53.9) $671.1 $(725.0) $(120.5) $76.4 $(196.9)
======= ====== ======= ======= ===== =======
</TABLE>
- ---------------
(1) Income amounts are presented on a fully taxable equivalent (FTE) basis. The
federal statutory rate was 35% for all periods presented.
(2) The change not solely due to volume or rate has been prorated into rate and
volume components.
(3) Average securities balances are based on amortized cost, excluding SFAS 115
adjustments to fair value which are included in other assets.
(4) Nonaccrual loans are included in loan balances. Interest income includes
related fee income.
17
<PAGE> 18
NONINTEREST INCOME
TABLE 2: NONINTEREST INCOME
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
------------------------------------------- -------------------------------------------
INCREASE (DECREASE) INCREASE (DECREASE)
SEPTEMBER 30, ------------------- SEPTEMBER 30, -------------------
-------------------- PERCENTAGE -------------------- PERCENTAGE
$(MILLIONS) 1998 1997 AMOUNT CHANGE 1998 1997 AMOUNT CHANGE
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investment management and
advisory activities...... $ 96.0 $ 88.6 $ 7.4 8.4% $ 283.0 $ 250.3 $32.7 13.1%
Service charges on deposit
accounts................. 199.5 191.6 7.9 4.1 593.8 560.7 33.1 5.9
Loan servicing income:
Credit card.............. 633.5 525.2 108.3 20.6 1,581.8 1,180.1 401.7 34.0
Other loan servicing
income................. 20.9 29.3 (8.4) (28.7) 90.7 83.8 6.9 8.2
-------- -------- ------ -------- -------- ------
Total loan servicing
income............. 654.4 554.5 99.9 18.0 1,672.5 1,263.9 408.6 32.3
Securities gains........... 20.4 11.0 9.4 85.5 85.8 44.1 41.7 94.6
Other noninterest income... 351.3 305.5 45.8 15.0 1,149.5 752.7 396.8 52.7
-------- -------- ------ -------- -------- ------
TOTAL NONINTEREST INCOME... $1,321.6 $1,151.2 $170.4 14.8% $3,784.6 $2,871.7 $912.9 31.8%
======== ======== ====== ======== ======== ======
</TABLE>
Income from investment management and advisory activities increased 8.4%
and 13.1% for the three and nine months ended September 30, 1998, respectively,
compared with the same 1997 periods. The increase was primarily due to growth of
8.8% in investment assets managed for customers to $59.5 billion at September
30, 1998 from $54.7 billion a year ago.
The increase in service charges on deposit accounts income of $7.9 million
and $33.1 million for the quarter and year-to-date periods ended September 30,
1998, respectively, as compared to the same prior year periods, reflects higher
analysis charges on commercial customer accounts.
Credit card servicing income increased $108.3 million, or 20.6% and $401.7
million, or 34% for the quarter and year-to-date periods ended September 30,
1998, respectively, compared with the same 1997 periods. This was primarily due
to an increase in the level of securitized loans as well as an increase in the
yield on these securitized loans due to higher fee income and an improvement in
credit quality. The net interest and fee income related to these securitized
loans increased $170.8 million and $592.8 million for the three and nine months
ended September 30, 1998, respectively, compared with the same 1997 periods.
Higher securities gains for the quarter and nine months ended September 30,
1998, compared with the same 1997 periods, reflects a planned increase in sales
of lower-margin government and mortgage-backed securities. Gains on the sale of
U.S. Treasury securities for the three and nine months ended September 30, 1998,
increased $34.9 million and $81.8 million, compared with the same periods last
year. This was partially offset by decreases of $25.5 million and $40.1 million
in gains on the sale of other available for sale securities for the quarter and
year ended September 30,1998, respectively.
Other noninterest income increased $45.8 million and $396.8 million for the
three and nine months ended September 30, 1998 respectively compared with the
same 1997 periods. The increased income primarily resulted from increased gains
on the sale of assets of $121.5 and $404.2 million for the three and nine months
ended September 30, 1998, respectively, offset by decreased venture capital
gains of $75.1 million and $91.4 million for the same periods ended September
30, 1998. The increased gains on asset sales are primarily the result of branch
sale gains of $69.3 million and $258.9 million for the three and nine months
ended September 30, 1998, respectively. In addition, the nine months ended
September 30, 1998 includes a $31.0 million gain on the sale of mortgage
servicing rights and a $32.4 million gain from the sale of $2.6 billion of
residential mortgage loans.
18
<PAGE> 19
NONINTEREST EXPENSE
TABLE 3: NONINTEREST EXPENSE
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
-------------------------------------------- --------------------------------------------
INCREASE (DECREASE) INCREASE (DECREASE)
SEPTEMBER 30, -------------------- SEPTEMBER 30, --------------------
-------------------- PERCENTAGE -------------------- PERCENTAGE
$(MILLIONS) 1998 1997 AMOUNT CHANGE 1998 1997 AMOUNT CHANGE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Salary and related
costs................... $ 645.3 $ 662.7 $(17.4) (2.6)% $1,990.8 $1,881.9 $108.9 5.8%
Net occupancy and
equipment............... 114.8 95.0 19.8 20.8 330.8 264.4 66.4 25.1
Taxes other than income
and payroll............. 26.7 28.5 (1.8) (6.3) 77.9 83.9 (6.0) (7.2)
Depreciation and
amortization............ 119.6 122.0 (2.4) (2.0) 353.3 355.9 (2.6) (.7)
Outside services and
processing.............. 236.1 233.7 2.4 1.0 727.7 634.4 93.3 14.7
Marketing and
development............. 236.5 250.1 (13.6) (5.4) 611.1 588.0 23.1 3.9
Communication and
transportation.......... 122.0 115.1 6.9 6.0 364.6 325.4 39.2 12.0
Restructuring charges..... 126.9 337.3 (210.4) (62.4)
Other..................... 132.8 112.0 20.8 18.6 439.5 345.5 94.0 27.2
-------- -------- ------ -------- -------- ------
TOTAL NONINTEREST
EXPENSE................. $1,633.8 $1,619.1 $14.7 .9% $5,022.6 $4,816.7 $205.9 4.3%
======== ======== ====== ======== ======== ======
</TABLE>
Total noninterest expense increased $14.7 million and $205.9 million for
the three and nine months ended September 30, 1998, respectively, compared with
the same 1997 periods. The nine month period in 1998 included $126.9 million in
restructuring costs relating to the First Commerce acquisition, compared with
$337.3 million of similar charges in the same 1997 period relating to the
acquisition of First USA. The decrease in restructuring charges was partially
offset by Year 2000 expenses, which amounted to $82.0 million for the first nine
months of 1998. Year 2000 compliant expenses were spread throughout a number of
noninterest expense categories. Additional expense for the nine months ended
September 30, 1998, resulted from increased costs relating to various systems
technology and other retail initiatives.
Salaries and related costs increased $108.9 million, or 5.8%, for the nine
months ended September 30, 1998, compared with the same 1997 period. This
increase was primarily due to business growth throughout the company as
reflected in an increase in full-time equivalent staff as well as bonuses and
incentive pay related to business development activities.
Net occupancy and equipment increased $19.8 million and $66.4 million for
the three and nine months ended September 30, 1998, respectively, compared with
the same 1997 periods. The increase was primarily the result of rental and
maintenance expense for Rapid Cash machines, the acquisition of several new
leases to meet growth needs, and increased property management fees due to the
outsourcing of this function beginning in the fourth quarter 1997, which
resulted in lower corresponding salary costs.
Outside services and processing costs increased $2.4 million and $93.3
million for the three and nine months ended September 30, 1998, respectively.
This increase was largely attributable to increased consulting fees to modify
and test software for the Year 2000 modifications and other initiatives. Credit
card processing costs also increased as a result of the growth in the number of
cardholders and higher customer transaction volume.
Marketing and development costs increased $23.1 million for the nine month
period ended September 30, 1998, compared with the same 1997 period. This
increase was primarily due to the significant activities associated with the
goal of sustaining growth in our credit card portfolio. On a quarter-to-quarter
basis, marketing and development costs declined by $13.6 million, or 5.4%.
Increases in communication and transportation expense for the quarter and
year-to-date 1998 periods, compared to the same 1997 periods, were primarily due
to additional telephone and postage expense to support growth in the credit card
business.
The increase in other expenses for the nine months ended September 30,
1998, compared to the same period in 1997, was due to First Commerce integration
costs.
19
<PAGE> 20
INCOME TAXES
The provision for income taxes was 30.8% of pretax income for the nine
months ended September 30, 1998, compared with 36.1% for the same period in
1997, but below the 33.7% effective tax rate for all of 1997. This reflected the
implementation of proactive tax planning initiatives late in 1997.
YEAR 2000 COMPLIANCE
The Year 2000 challenge involves the ability of computers to accurately
process dates in the new millennium.
STATUS
Solving the year 2000 problem is a top priority at BANC ONE. A
comprehensive program is well under way that is focused on achieving compliance
within established deadlines for the following phases of the project: inventory
and assessment, renovation, testing and implementations, and contingency
planning.
The inventory and assessment phase is complete with renovation, testing,
implementation, and contingency planning in various stages. It is anticipated
that all applications will be renovated by the end of 1998. A comprehensive test
strategy covers infrastructure, applications, interfaces, third parties and
customers. Mission-critical equipment, facilities and applications will be
tested and back in production by year end with business-vital applications in
production by March 1999. All other applications, equipment and facilities are
expected to be back in production by June 1999. Over 60% of mission-critical
applications are compliant as of September 30, 1998.
CONTINGENCY PLANS
In the event of problems caused by the year 2000, alternative plans will
allow BANC ONE to minimize impacts on customers. Existing business continuity
plans are the basis for developing Year 2000 contingency plans. Critical
business processes have been identified following an analysis of all core
business processes. The most reasonable recovery strategies have been selected.
The work necessary to implement contingency plans is being documented and the
effectiveness will be validated by year end 1998. We will continue to review and
validate the propriety of our contingency plans throughout 1999.
BANC ONE does business with a large number of key customers and outside
suppliers. Management is actively monitoring the progress of their efforts to
become Year 2000 compliant and will take actions, if necessary, to mitigate
risks. However, there is no guarantee that customers and outside suppliers will
be ready for the new millennium, or that their failure to become compliant could
have a material adverse effect on BANC ONE's operations.
BANC ONE relies, as all businesses and households do, on services and
infrastructure support provided by major utilities telecommunications and
transportation companies, and government entities. Failure of one or more of
these entities to continue uninterrupted service is beyond the control of the
company and could have a material adverse effect on the corporation's
operations.
COST
Both internal and external resources are being utilized to modify, replace
or test applications, equipment and facilities for Year 2000 readiness. The
project team consists of more than 200 individuals including representatives
from IBM Global Services and other major technology vendors. During 1997, $16.7
million of costs were incurred. Expenses for the nine months ended September 30,
1998 were $82.0 million. The total costs of the Year 2000 project are expected
to be approximately $190 million.
Year 2000 costs and the date on which Year 2000 modifications are expected
to be complete are based on management's best estimates. Management's assertions
are based on reasonable project plans and renovation and testing experiences
thus far which cause us to be confident that these due dates will be achieved.
However, there
20
<PAGE> 21
are several factors, including but not limited to the availability of personnel
trained in this area and the ability to locate all relevant computer code that
could cause some delay or disruption to our business processes.
LINE OF BUSINESS RESULTS
BANC ONE's business activities are conducted and managed through five
national lines of business. These national lines of business are segmented based
upon specific market characteristics and are referred to as: the Banc One
Commercial Banking Group, the Banc One Retail Group, First USA (Credit Cards),
the Finance One Group (Consumer and Commercial Financial Services) and the Banc
One Capital Holdings Group.
Banc One Commercial Banking Group provides a broad range of loan, deposit
and alternative financing products to real estate developers, business and
private banking customers. Services provided include treasury management, trade
financing, interest rate risk management, loan syndications and private
placements, foreign exchange, leasing, investment management and custody
accounts, as well as traditional bank financing. Banc One Retail Group provides
depository and related bank and financial services products to retail and small
business customers in 12 states through one of the nation's largest banking
center distribution networks. First USA is responsible for nationwide credit
card operations. BANC ONE is a member of both the Visa(R) and MasterCard(R)
associations. Finance One Group includes both consumer and commercial financial
services and provides indirect auto loans and leases, commercial loans and
leases and alternative borrowing options for customers. Banc One Capital
Holdings Group is responsible for trust and investment management, securities
brokerage, investment and merchant banking, and insurance services.
The following table presents selected September 30, 1998, financial
information for each line of business.
TABLE 4: LINE OF BUSINESS RESULTS
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998 (1)
---------------------------------------------------------
COMMERCIAL FIRST FINANCE CAPITAL
($ MILLIONS) BANKING RETAIL USA ONE HOLDINGS
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total revenue........ $ 416.3 $ 889.0 $ 1,396.5 $ 313.7 $208.8
Total loans.......... 27,445.6 18,407.7 48,475.6 30,646.8 278.4
Total deposits....... $19,385.2 $60,222.9 $ 42.9 $ 301.4 $652.1
<CAPTION>
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998 (1)
---------------------------------------------------
TOTAL TOTAL
($ MILLIONS) OTHER MANAGED SECURITIZATIONS REPORTED
- --------------------- ---------------------------------------------------
<S> <C> <C> <C> <C>
Total revenue........ $ (9.8) $ 3,214.5 $ (470.3) $ 2,744.2
Total loans.......... 518.2 125,772.3 $(41,822.5) 83,949.8
Total deposits....... $1,247.6 $ 81,852.1 $81,852.1
</TABLE>
- ---------------
(1) Due to the impracticality of compiling comparable data, line of business
results are not presented for the three months ended September 30, 1997.
Total revenue is fully taxable equivalent net interest income plus
noninterest income. Loans are presented on an end of period basis and include
securitized credit card loans and loans held for sale. Deposits are allocated
based on customers serviced and include trust customers in Capital Holdings and
mortgage escrow in Finance One.
The "Other" category consists principally of (1) purchased home equity and
mortgage loans managed by Funds Management, (2) Eurodollar and national market
funds managed by Funds Management, (3) investment securities portfolio and
derivatives, and (4) elimination entries including the net impact of transfer
pricing. The securitization column reverses the impact of securitizations (i.e.,
net charge-offs and loans) to arrive at the information reported in the
consolidated financial statements.
BALANCE SHEET ANALYSIS
SECURITIES
Total securities at September 30, 1998, were $20.0 billion, an increase of
$2.5 billion from December 31, 1997. This increase was due primarily to
reclassifications of securitization-related assets to securities available for
sale partially offset by increased sales of available for sale securities in the
third quarter. Certificated retained interests in credit card securitizations of
$5.1 billion were included in securities available for sale at September 30,
1998. At December 31, 1997, certificated retained interests in credit card
securitizations were included in loans. In addition, as of September 30, 1998,
$585.5 million in interest-only strips, assets established as gains are recorded
on loan securitizations, had been reclassified from other assets to securities
available for sale.
21
<PAGE> 22
TABLE 5: SECURITIES
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998 DECEMBER 31, 1997
----------------------- -----------------------
AMORTIZED ESTIMATED AMORTIZED ESTIMATED
$(MILLIONS) COST FAIR VALUE COST FAIR VALUE
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SECURITIES HELD TO MATURITY:
United States Treasury and Federal
agencies................................. $ 254.1 $ 255.4 $ 253.1 $ 255.0
Mortgage and asset-backed securities........ 47.1 39.9 48.3 40.5
Tax exempt.................................. 356.2 371.6 449.4 470.1
Other....................................... 14.2 14.3 34.5 34.5
--------- --------- --------- ---------
Total securities held to maturity... 671.6 681.2 785.3 800.1
--------- --------- --------- ---------
SECURITIES AVAILABLE FOR SALE:
United States Treasury and Federal
agencies................................. 2,504.1 2,565.4 4,940.5 5,008.7
Mortgage and asset-backed securities:
Government............................... 6,447.2 6,555.6 7,492.1 7,574.9
Other.................................... 8,038.2 8,128.7 1,807.1 1,796.9
Tax exempt.................................. 864.4 895.4 894.5 919.0
Other....................................... 1,177.0 1,186.9 1,387.4 1,411.8
--------- --------- --------- ---------
Total securities available for
sale.............................. 19,030.9 19,332.0 16,521.6 16,711.3
--------- --------- --------- ---------
Total securities.................... $19,702.5 $20,013.2 $17,306.9 $17,511.4
========= ========= ========= =========
</TABLE>
LOANS AND LEASES
At September 30, 1998, total loans and leases were $81.2 billion, a $5.9
billion decrease from December 31, 1997, which was due primarily to the
reclassification of certificated retained interests in credit card
securitizations previously discussed and sales of $2.6 billion in residential
mortgage loans during the first nine months of 1998. A summary of the components
of loans and leases at September 30, 1998, and December 31, 1997, is as follows:
TABLE 6: LOANS AND LEASES
<TABLE>
<CAPTION>
$(MILLIONS) SEPTEMBER 30, 1998 DECEMBER 31, 1997
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMERCIAL:
Commercial............................................... $24,312.6 $23,994.7
Real estate:
Construction.......................................... 4,217.0 3,995.5
Other................................................. 6,258.3 6,747.8
Lease financing.......................................... 3,085.8 2,767.3
--------- ---------
Total commercial loans........................... 37,873.7 37,505.3
CONSUMER:
Residential real estate.................................. 6,139.4 8,330.1
Home equity.............................................. 9,725.0 9,530.4
Indirect................................................. 9,054.4 8,481.1
Auto lease............................................... 8,532.0 6,748.6
Student.................................................. 2,020.0 2,269.1
Other.................................................... 4,105.3 4,477.8
--------- ---------
Total consumer loans............................. 39,576.1 39,837.1
CREDIT CARD................................................ 5,050.3 11,150.5
--------- ---------
Total loans and leases........................... 82,500.1 88,492.9
Less: Allowance for credit losses.......................... (1,342.9) (1,409.1)
--------- ---------
TOTAL LOANS AND LEASES, NET...................... $81,157.2 $87,083.8
========= =========
</TABLE>
22
<PAGE> 23
OTHER ASSETS
BANC ONE contracted with an independent third party beginning in 1997 to
originate a portion of its credit card portfolio. As a result of this agreement,
and reflecting the benefit of increased specialization and economies of scale,
both an increase in the number of accounts originated and a decrease in the
origination costs is anticipated, with desired credit quality standards being
retained. At September 30, 1998, $394.2 million in credit card relationships
purchased from this third party were included in other assets.
DEPOSITS
Total deposits at September 30, 1998, decreased $3.4 billion from December
31, 1997, primarily resulting from branch sales during the year that included
deposits of $3.2 billion.
TABLE 7: DEPOSITS
<TABLE>
<CAPTION>
$(MILLIONS) SEPTEMBER 30, 1998 DECEMBER 31, 1997
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Demand deposits:
Noninterest-bearing...................................... $19,490.7 $19,862.3
Interest-bearing......................................... 2,639.9 3,170.5
Money market and savings................................... 35,184.1 34,113.7
Time deposits:
CDs less than $100,000................................... 16,539.9 19,534.5
CDs $100,000 and over:
Domestic.............................................. 5,162.9 5,658.4
Foreign............................................... 2,834.6 2,880.5
--------- ---------
Total deposits...................................... $81,852.1 $85,219.9
========= =========
</TABLE>
BORROWINGS
Borrowings totaled $21.8 billion at September 30, 1998, compared to $25.6
billion at December 31, 1997. Short-term borrowings, primarily Federal funds
purchased and repurchase agreements, decreased $3.4 billion, while long-term
borrowings decreased $418.4 million from December 31, 1997 to September 30,
1998.
As of September 30, 1998, the Corporation had the authority to issue
approximately $2.9 billion of debt securities, warrants and preferred and common
stock under its existing shelf registration statement and the authority to issue
approximately $2.5 billion of Euro medium-term notes under its existing Euro
medium-term note program. The proceeds of any issuance of securities under the
shelf registration statement or the Euro medium-term note program will be used
for general corporate purposes.
CAPITAL
Total equity to total assets at September 30, 1998, increased to 10.02%
from 8.93% at December 31, 1997. The tangible common equity to net assets ratio
was 8.70% at September 30, 1998, compared to 7.89% at December 31, 1997. BANC
ONE's objective is to maintain, at a minimum, a capital position that meets the
Federal regulators' "well capitalized" classification. Regulatory defined Tier 1
and total risk-adjusted capital ratios were 9.23% and 13.58%, respectively, at
September 30, 1998, both significantly above regulatory capital requirements of
4% and 8%, respectively. All the Corporation's banks meet the regulatory
definition of well-capitalized banks.
23
<PAGE> 24
On January 20, 1998, the Corporation announced the election to redeem all
of the shares of BANC ONE's Series C Convertible Preferred Stock ("preferred
stock") on April 16, 1998, at the redemption price of $51.05 per share plus the
amount of any dividends accrued and unpaid. On April 16, 1998, all of the shares
of preferred stock had been redeemed or converted into common stock. Primarily
due to the conversion of preferred stock to common stock, common shares
outstanding, which have been restated for the First Commerce acquisition,
increased from 699.8 million shares at December 31, 1997, to 705.4 million
shares at September 30, 1998.
CREDIT QUALITY
The process for monitoring the level of credit risk and, accordingly, the
required level of allowance for credit losses is administered by each of the
lines of business, under the direction of the Chief Credit Officer. Subsequent
to origination, the process used to measure the level of credit risk is
dependent upon the type of loan. For commercial loan products, specific loan
reviews, which assign loan grades, are performed by both the line of business
and credit review personnel. In addition, a migration analysis of loss factors
in the individual portfolios is performed. The consumer loan products, which
include the credit card portfolio, are evaluated utilizing historically-based
migration methodologies used to estimate losses inherent in the portfolio.
Further, each loan and lease portfolio is reviewed to determine if an additional
subjective allowance is necessary. This subjective review is systematic for each
portfolio, with consideration given to the current trends in the portfolio,
projection of future results, changes in underwriting of the product, and
results of recent loan review or internal audit examinations. The aggregate loan
and lease portfolio is also monitored on a quarterly basis to identify portfolio
trends, specific industry conditions, the level of business and personal
bankruptcies and other relevant economic information used to assess the overall
level of credit risk. Management believes that its methodology for determining
the allowance for credit losses and projection of future economic and business
trends is reflected in the current level of the overall allowance.
Annualized total net charge-offs for the third quarter of 1998 decreased to
.83% of average loans from 1.29% in the third quarter of 1997, due primarily to
lower net charge-offs in the credit card portfolio. Net charge-offs for credit
card loans were 4.94% for the quarter ended September 30, 1998, compared to
5.61% for the same quarter last year. The change in charge-off rates for the
nine months ended September 30, 1998, compared to the same period in 1997, was
comparable to the quarter-to-quarter change. Annualized total net charge-offs
for the first nine months of 1998 were .99%, down from 1.29% for the same 1997
period. Net charge-offs for credit card loans were 5.14% and 5.47% for the nine
months ended September 30, 1998 and 1997, respectively.
Loans delinquent 90 days or more as a percentage of ending loans and leases
were .55% and .64% at September 30, 1998 and December 31, 1997, respectively.
Credit card loans delinquent 90 days or more increased to 2.50% at September 30,
1998, from 2.16% at December 31, 1997.
Table 8 summarizes information regarding net charge-offs and loans
delinquent 90 days or more. 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.
24
<PAGE> 25
TABLE 8: NET CHARGE-OFFS AND DELINQUENCIES
<TABLE>
<CAPTION>
LOANS DELINQUENT
NET CHARGE-OFFS (1)(3) 90 DAYS OR MORE (2) (3)
------------------------------------------- ------------------------------------------
THREE MONTHS ENDED
-------------------------------------------
$(MILLIONS) SEPTEMBER 30, 1998 SEPTEMBER 30, 1997 SEPTEMBER 30, 1998 DECEMBER 31, 1997
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
COMMERCIAL:
Commercial......... $ 6.9 .11% $ 2.4 .04% $ 43.0 .18% $ 63.9 .27%
Real estate:
Construction... (.3) (.03) .7 .07 3.7 .09 6.2 .16
Other.......... 9.9 .62 2.0 .11 13.7 .22 14.7 .22
Lease financing.... (.9) (.12) .9 .14 .3 .01 .5 .02
------ ------ ------ ------
Total
commercial.. 15.6 .16 6.0 .06 60.7 .16 85.3 .23
CONSUMER:
Residential real
estate........... 5.1 .32 3.7 .17 105.6 1.63 66.2 .75
Home equity........ 8.9 .35 6.5 .29 24.7 .25 23.1 .24
Indirect........... 24.1 1.06 28.7 1.24 20.8 .23 37.0 .44
Auto lease......... 8.7 .41 6.0 .38 16.0 .19 12.2 .18
Student............ .2 .03 .1 .02 36.7 1.82 37.4 1.65
Other.............. 34.6 3.29 37.0 3.15 43.8 1.07 41.0 .92
------ ------ ------ ------
Total
consumer.... 81.6 .80 82.0 .81 247.6 .62 216.9 .54
CREDIT CARD.......... 79.4 4.94 211.8 5.61 153.9 2.50 279.8 2.16
------ ------ ------ ------
TOTAL.......... $176.6 .83% $299.8 1.29% $462.2 .55% $582.0 .64%
====== ====== ====== ======
</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) Ratios include loans held for sale.
ALLOWANCE FOR CREDIT LOSSES
TABLE 9: ALLOWANCE FOR CREDIT LOSSES
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------
$(MILLIONS) 1998 1997
- ----------------------------------------------------------------------------------
<S> <C> <C>
BALANCE, BEGINNING OF PERIOD................................ $1,409.1 $1,279.3
Allowance associated with acquisitions and other............ (1.1) 29.1
Provision for credit losses................................. 583.4 982.3
Total charge-offs........................................... (876.0) (1,106.7)
Recoveries.................................................. 227.5 244.0
-------- --------
Net charge-offs............................................. (648.5) (862.7)
-------- --------
BALANCE, END OF PERIOD...................................... $1,342.9 $1,428.0
======== ========
</TABLE>
The allowance for credit losses at September 30, 1998, represented 1.63% of
ending loans and leases, compared to 1.59% of ending loans and leases for
December 31, 1997. The allowance for credit losses expressed as a percentage of
nonperforming loans is another measure of the adequacy of the allowance for
credit losses. The September 30, 1998, allowance for credit losses represented
254% of nonperforming loans, down from 316% at December 31, 1997. It is
management's view that the allowance for credit losses at September 30, 1998,
was adequate and consistent with the composition of the portfolio and credit
quality trends.
25
<PAGE> 26
PERFORMANCE ANALYSIS -- MANAGED PORTFOLIO
For funding and risk management purposes, loans and leases are periodically
securitized, primarily in support of credit card activities. Since BANC ONE
continues to service the securitized loans, its role becomes one of loan
servicer rather than lender. When loans are securitized, an initial gain on the
sale of the receivables is recorded, the loan and the related allowance for
credit losses are removed from the balance sheet, and amounts that would
previously have been reported as net interest income and provision for credit
losses are instead netted and reported as noninterest income in loan processing
and servicing income.
This accounting for securitizations complicates the understanding of
underlying trends in net interest income, net interest margins and noninterest
income, as well as growth in loans. As a result, it is more helpful to analyze
financial performance of these items on a "Managed" portfolio basis, in addition
to analyzing information as "Reported." "Reported" information is derived from
consolidated financial statements which have been prepared in conformity with
generally accepted accounting principles and includes loans held for sale.
"Managed" information treats loans sold in credit card securitization
transactions as if they had not been sold. As such, "Managed" information in the
following table includes both these securitized loans and the on-balance sheet
portfolio, including loans held for sale.
Table 10 presents a reconciliation of the loan portfolio between "Reported"
and "Managed" at September 30, 1998 and December 31, 1997.
TABLE 10: MANAGED LOAN PORTFOLIO (END OF PERIOD)
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998 DECEMBER 31, 1997
----------------------------------------------- -----------------------------------------------
HELD FOR HELD FOR
REPORTED SALE SECURITIZED MANAGED REPORTED SALE SECURITIZED MANAGED
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
COMMERCIAL:
Commercial.................. $24,312.6 $ 24,312.6 $23,994.7 $ 23,994.7
Real estate:
Construction.............. 4,217.0 4,217.0 3,995.5 3,995.5
Other..................... 6,258.3 6,258.3 6,747.8 6,747.8
Lease financing............. 3,085.8 3,085.8 2,767.3 2,767.3
--------- -------- --------- ---------- --------- -------- --------- ----------
Total commercial
loans................. 37,873.7 37,873.7 37,505.3 37,505.3
CONSUMER:
Real estate residential..... 6,139.4 $ 339.0 6,478.4 8,330.1 $ 540.0 8,870.1
Home equity................. 9,725.0 9,725.0 9,530.4 9,530.4
Indirect.................... 9,054.4 9,054.4 8,481.1 8,481.1
Auto lease.................. 8,532.0 8,532.0 6,748.6 6,748.6
Student..................... 2,020.0 2,020.0 2,269.1 2,269.1
Other....................... 4,105.3 4,105.3 4,477.8 4,477.8
--------- -------- --------- ---------- --------- -------- --------- ----------
Total consumer loans.... 39,576.1 339.0 39,915.1 39,837.1 540.0 40,377.1
Credit card................... 5,050.3 1,110.7 $41,822.5 47,983.5 11,150.5 1,822.0 $28,775.0 41,747.5
--------- -------- --------- ---------- --------- -------- --------- ----------
Total loans and
leases................ $82,500.1 $1,449.7 $41,822.5 $125,772.3 $88,492.9 $2,362.0 $28,775.0 $119,629.9
========= ======== ========= ========== ========= ======== ========= ==========
</TABLE>
Table 11 depicts key financial data on a managed basis, reflecting the
impact of securitizing credit card loans for the three months ended September
30, 1998 and September 30, 1997. In Table 11, the increase in net interest
income on a "Managed" basis reflects the impact on the net interest margin had
the loans not been securitized. The change represents the interest income on
securitized loans less the coupon rate on the securitizations. The increase in
the provision for credit losses on a managed basis is equal to the net
charge-offs on securitized loans. The decrease in "Managed" loan processing and
servicing income reflects these reclassifications, with the remaining amounts
relating primarily to fee-based interchange income and gains recognized on
securitized loans.
26
<PAGE> 27
TABLE 11: KEY STATISTICS -- MANAGED
<TABLE>
<CAPTION>
THREE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30, 1998 SEPTEMBER 30, 1997
------------------------------------------ ------------------------------------------
CREDIT CARD CREDIT CARD
$(MILLIONS) AS REPORTED SECURITIZATIONS MANAGED AS REPORTED SECURITIZATIONS MANAGED
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT
STATISTICS:
Net interest
income -- fully taxable
equivalent............... $ 1,422.6 $ 869.4 $ 2,292.0 $ 1,476.5 $ 648.2 $ 2,124.7
Provision for credit
losses................... 177.3 468.6 645.9 286.6 345.7 632.3
---------- --------- ---------- ---------- --------- ----------
Net interest income after
provision for credit
losses................... 1,245.3 400.8 1,646.1 1,189.9 302.5 1,492.4
Noninterest income:
Loan servicing income.... 654.4 (399.1) 255.3 554.5 (301.3) 253.2
Other.................... 667.2 667.2 596.7 596.7
---------- --------- ---------- ---------- --------- ----------
Total noninterest
income............ 1,321.6 (399.1) 922.5 1,151.2 (301.3) 849.9
Noninterest expense........ 1,633.8 1.7 1,635.5 1,619.1 1.2 1,620.3
Taxable equivalent
adjustment............... 15.4 15.4 15.0 15.0
---------- --------- ---------- ---------- --------- ----------
Income before tax.......... $ 917.7 $ -- $ 917.7 $ 707.0 $ -- $ 707.0
========== ========= ========== ========== ========= ==========
BALANCE SHEET AND OTHER
STATISTICS:
Total average loans (1).... $ 84,554.2 $35,727.2 $120,281.4 $ 91,997.5 $23,508.0 $115,505.5
Total average earning
assets................... $106,094.2 $31,407.9 $137,502.1 $110,218.5 $24,750.8 $134,969.3
Earning asset yield........ 9.13% 16.86% 10.89% 9.29% 16.22% 10.56%
Cost of interest-bearing
liabilities.............. 4.70 5.97 5.04 4.78 6.14 5.05
Net interest margin........ 5.32 10.98 6.61 5.31 10.39 6.25
Net funds function......... 4.66 5.06 4.75 4.28 4.85 4.39
Net charge-offs as a
percentage of average
loans.................... .83% 5.20% 2.13% 1.29% 5.83% 2.22%
CREDIT CARD STATISTICS:
Average credit card loans
(1)...................... $ 6,372.8 $35,727.2 $ 42,100.0 $ 14,970.8 $23,508.0 $ 38,478.8
End of period credit card
loans (1)................ $ 6,161.0 $41,822.5 $ 47,983.5 $ 12,031.0 $27,776.9 $ 39,807.9
Credit card delinquencies
over 30 days as a
percentage of ending
credit card balances..... 5.68% 4.55% 4.70% 5.38% 4.61% 4.85%
Net credit card charge-offs
as a percentage of
average credit card
balances................. 4.94% 5.20% 5.16% 5.61% 5.83% 5.75%
</TABLE>
- ---------------
(1) Includes loans held for sale.
The managed net interest margin in the third quarter of 1998 increased to
6.61% from 6.25% in the third quarter of 1997, an increase of 36 basis points
which compares favorably to industry trends. This increase primarily reflects
the positive impact of the generation and repricing of higher-margin managed
credit card loans.
The average managed loan portfolio increased 4.1% to $120.3 billion for the
quarter ended September 30, 1998, from $115.5 billion for the same quarter last
year, due primarily to a 9.4% growth in average credit card loans partially
offset by minimal growth in other consumer and commercial loans.
On a managed portfolio basis, credit card charge-offs decreased to 5.16%
for the quarter ended September 30, 1998, down from 5.75% for the same quarter
last year. Also on a managed portfolio basis, credit card loans delinquent 30
days or more as a percentage of ending loans and leases were 4.70% for the
quarter ended September 30, 1998, down from 4.85% for the same quarter last
year.
27
<PAGE> 28
The generation of new credit card business during the 1998 third quarter
remained very strong, with over 2.0 million new credit card accounts being
opened for the sixth consecutive quarter. An additional 3.1 million Visa(R) and
MasterCard(R) credit card accounts were acquired as a result of the purchased
credit card operation previously discussed, increasing cardmembers to 47 million
at September 30, 1998.
RISK MANAGEMENT
INTEREST RATE RISK
BANC ONE employs two methodologies to measure interest rate risk
sensitivity:
X EARNINGS AT RISK (EAR) measures the impact of interest rate changes on
forecasted earnings over the next two years (i.e., short-term).
X VALUE AT RISK (VAR) measures the impact of interest rate changes on the
market value of equity, as represented by the present value of future
cash flows from current assets, liabilities and off-balance sheet
instruments (i.e., long-term). Thus, changes in VAR represent the total
changes in future earnings streams associated with current assets and
liabilities discounted back to today's present value.
EAR and VAR are measured based on the more restrictive of two interest rate
scenarios: (1) +/- 100 basis point immediate and parallel shift of the yield
curve or (2) the 99% statistically probable maximum interest rate move based on
the preceding two years of rate volatility.
The current EAR and VAR values relating to financial assets and liabilities
as of September 30, 1998, shown in Table 12, are within the Asset Liability
Committee's current risk limits.
TABLE 12: EARNINGS AT RISK AND VALUE AT RISK
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998
----------------------------
EARNINGS AT RISK
INTEREST RATE CHANGE ---------------- VALUE AT
IN BASIS POINTS YEAR 1 YEAR 2 RISK
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
+100 Shock.................................................. (2.3) .8 (1.0)
- -100 Shock.................................................. 2.1 (1.5) .5
+100 Gradual................................................ (1.1) .3 n/a(1)
- -100 Gradual................................................ .9 (1.2) n/a(1)
</TABLE>
- ---------------
(1) Not applicable.
TRADING RISK
Trading risk is measured according to the maximum adverse change in value
of all trading positions within a 10 day period based on three standard
deviations of historical market volatility. As of September 30, 1998, the
Trading Value at Risk was $4.4 million.
LIQUIDITY RISK
Due to BANC ONE's capital, size and high credit quality ratings, the
Corporation has access to substantial and diverse sources of liquidity. Core
deposits, representing approximately 57% of total funding, remain the primary
source of liquidity, and are generated by a geographically diverse retail
network of affiliate banks in 12 states. In addition to retail deposits,
approximately 18% of funding is supported through a variety of wholesale
markets.
CREDIT RISK FOR CAPITAL MARKETS ACTIVITIES
There were no past due amounts or required reserves for possible credit
losses at September 30, 1998, related to off-balance sheet financial
instruments, nor were there any charge-offs during the three months ended
September 30, 1998. Customer cap and swap agreements are created to accommodate
the needs of commercial
28
<PAGE> 29
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 $4.6 billion at September 30, 1998.
Table 13 presents the estimated maturities and weighted average fixed rates
of off-balance sheet financial instruments by type. A key assumption in the
maturity information below is that future variable rates move as indicated by
the forward interest rate curve in existence at September 30, 1998. To the
extent that interest rates move in a fashion other than indicated in the forward
interest rate curve at September 30, 1998, the maturity information will change.
TABLE 13: MATURITIES OF OFF-BALANCE SHEET FINANCIAL INSTRUMENTS
<TABLE>
<CAPTION>
MATURITIES OF OFF-BALANCE SHEET FINANCIAL INSTRUMENTS
AT SEPTEMBER 30, 1998 (1)(2)(3)(4)
---------------------------------------------------------------------------
2003-- SEPTEMBER 30,
$(MILLIONS) 1998 1999 2000 2001 2002 2007 2008+ 1998
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Receive fixed swaps:
Notional value.......... $ 125.0 $ 5,235.0 $ 2,200.0 $2,345.0 $2,130.5 $4,404.5 $2,150.0 $18,590.0
Weighted average fixed
rate received.......... 6.04% 6.21% 6.30% 6.21% 6.79% 6.39% 6.72% 6.39%
Weighted average
variable rate paid..... 5.69% 5.61% 5.56% 5.47% 5.64% 5.49% 5.70% 5.57%
Receive fixed amortizing
swaps:
Notional value.......... $ 18.9 $ 19.0 $ 150.0 $ 187.9
Weighted average fixed
rate received.......... 7.26% 7.27% 5.54% 5.89%
Weighted average
variable rate paid..... 5.79% 5.79% 5.59% 5.63%
Pay fixed swaps:
Notional value.......... $(620.8) $(1,397.3) $(1,307.6) $ (259.2) $ (350.8) $ (725.3) $ (632.3) ($5,293.3)
Weighted average fixed
rate paid.............. 5.92% 6.06% 6.02% 6.04% 6.13% 6.23% 6.06% 6.06%
Weighted average
variable rate
received............... 5.63% 5.60% 5.68% 5.51% 5.68% 5.67% 5.62% 5.63%
Net receive fixed
position............... $(476.9) $ 3,856.7 $ 1,042.4 $2,085.8 $1,779.7 $3,679.2 $1,517.7 $13,484.6
Purchased caps
Notional value......... $ 0.2 $ 0.7 $ 0.7 $ 3.3 $ 0.6 $ 8.3 $ 13.8
Basis swaps
Notional value......... $ 200.0 $ 400.0 $ 50.0 $ 169.9 $ 819.9
Floors
Notional value......... $ 500.0 $ 500.0
Other (5)
Notional value......... $ 667.0 $ 310.0 $ 430.0 $ 200.0 $ 1,607.0
<CAPTION>
DECEMBER 31,
$(MILLIONS) 1997
- ------------------------ ------------
<S> <C>
Receive fixed swaps:
Notional value.......... $17,288.0
Weighted average fixed
rate received.......... 6.44%
Weighted average
variable rate paid..... 5.86%
Receive fixed amortizing
swaps:
Notional value.......... $ 592.3
Weighted average fixed
rate received.......... 5.63%
Weighted average
variable rate paid..... 5.87%
Pay fixed swaps:
Notional value.......... ($5,343.1)
Weighted average fixed
rate paid.............. 6.24%
Weighted average
variable rate
received............... 5.84%
Net receive fixed
position............... $12,537.2
Purchased caps
Notional value......... $ 1,017.7
Basis swaps
Notional value......... $ 1,653.5
Floors
Notional value......... $ 500.0
Other (5)
Notional value......... $ 2,499.0
</TABLE>
- ---------------
(1) Maturities are based on estimated future interest rates from the forward
interest curve at September 30, 1998.
(2) Variable receive and pay interest rates are based primarily on three month
LIBOR or prime.
(3) Includes trading off-balance sheet financial instruments; however, customer
transactions with notional amounts of $4.6 billion and $2.7 billion at
September 30, 1998 and December 31, 1997, respectively, have been excluded.
(4) 1997 data has been restated to include First Commerce's activity.
(5) Other off-balance sheet financial instruments include forward-starting swaps
($900 million at September 30, 1998, and December 31, 1997), futures,
forwards and options.
29
<PAGE> 30
TABLE 14: NET UNREALIZED GAINS (LOSSES) ON OFF-BALANCE SHEET FINANCIAL
INSTRUMENTS
<TABLE>
<CAPTION>
NET UNREALIZED GAIN (LOSS)
------------------------------
SEPTEMBER 30, DECEMBER 31,
$(MILLIONS) 1998 1997
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Receive fixed swaps......................................... $782.6 $288.7
Receive fixed amortizing swaps.............................. 1.6 (.3)
Pay fixed swaps............................................. (121.7) (31.6)
Purchased caps.............................................. (0.2) (3.4)
Basis swaps................................................. (1.5) (2.8)
Floor....................................................... (0.1)
Forward-starting and other.................................. 30.4 11.8
------ ------
Total....................................................... $691.1 $262.4
====== ======
</TABLE>
Off-balance sheet financial instruments are used to manage interest rate
risk and the impact on net interest income reflects the cost or benefit as a
result of these products. The net impact of off-balance sheet financial
instruments was an increase in net interest income of $18.5 million and $50.5
million for the three months and nine months ended September 30, 1998, compared
with an increase of $13.8 million and $11.6 million for the three months and
nine months ended September 30, 1997. However, these amounts alone are not an
indication of the effectiveness of such instruments, as the on-balance sheet
instruments hedged move in the opposite direction. In addition, the cost or
benefit from hedging transactions is significantly impacted by customer
preferences, the historical interest rate environment in which the instruments
were acquired and current market rates.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
No material changes.
30
<PAGE> 31
BANC ONE CORPORATION AND SUBSIDIARIES
PART II
OTHER INFORMATION
<TABLE>
<S> <C> <C>
Item 1. Legal Proceedings
Inapplicable.
Item 2. Change in Securities and Use of Proceeds
(a) Although the constituent instruments defining the rights of the
holders of registered securities of BANK ONE CORPORATION ("the
Registrant") were not materially modified during the third
quarter of 1998, on September 15, 1998 the shareholders of BANC
ONE CORPORATION ("BANC ONE") and the shareholders of First
Chicago NBD Corporation ("First Chicago NBD") each approved a
transaction (the "Merger") wherein both BANC ONE and First
Chicago NBD would merge into the Registrant, a Delaware
corporation, then a wholly owned subsidiary of BANC ONE.
Pursuant to the Merger, which became effective on October 2,
1998, each share of BANC ONE's common stock automatically
converted into one share of the Registrant's common stock and
each share of First Chicago NBD's common stock converted into
the right to receive 1.62 shares of the Registrant's common
stock. The terms and provisions of BANC ONE common stock and
differences in the rights of holders of BANC ONE common stock as
compared with the rights of holders of the Registrant's common
stock are set forth in the Registrant's Registration Statement
on Form S-4 (No. 333-60313) (the "Registration Statement") filed
with the Securities and Exchange Commission.
(b) Although no rights of any class of the Registrant's registered
securities were materially limited or qualified by the issuance
or modification of any other class of securities during the
third quarter of 1998, as a result of the Merger, referenced
above, when the Merger became effective the Registrant exchanged
shares of preferred stock for shares of the preferred stock of
First Chicago NBD. The terms and provisions with respect to such
BANK ONE preferred stock are set forth in the Registration
Statement.
(c) Inapplicable.
Item 3. Defaults Upon Senior Securities
Inapplicable.
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Merger, as described in Item 2(a), above, and in paragraph
(c), below, was submitted to a vote of BANC ONE's security
holders at a Special Meeting of Shareholders held on September
15, 1998.
(b) Inapplicable.
Approval of an Agreement and Plan of Reorganization, dated as of
(c) April 10, 1998, as amended, by and among First Chicago NBD, the
Registrant and BANC ONE, pursuant to which, among other things,
BANC ONE and First Chicago NBD would each merge with and into
the Registrant and shares of BANC ONE's common stock would
automatically be converted into shares of the Registrant's
common stock.
</TABLE>
<TABLE>
<CAPTION>
SHARES VOTED
---------------------------------------------------- ABSTENTIONS/BROKER
FOR AGAINST/WITHHELD NON-VOTES
---------------------- ---------------------- ----------------------
<S> <C> <C>
521,745,757 9,534,992 994,210
</TABLE>
<TABLE>
<S> <C> <C>
(d) Inapplicable.
</TABLE>
31
<PAGE> 32
<TABLE>
<S> <C> <C> <C>
Item 5. Other Information
Inapplicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
Exhibit 10.1 Amended and Restated Banc One Corporation
Directors Deferred Compensation Plan
Exhibit 10.2 Revised and Restated Banc One Corporation 1995
Stock Incentive Plan
Exhibit 10.3 Banc One Corporation Investment Option Plan
Exhibit 10.4 Banc One Corporation Amended and Restated Dividend
Equivalent Unit Plan
Exhibit 10.5 Amended and Restated Banc One Corporation
Compensation Deferral Plan
Exhibit 11 Statement Regarding Computation of Earnings per
Common Share
Exhibit 12 Statement Regarding Computation of Ratio of
Earnings to Fixed Charges
Exhibit 27 Financial Data Schedules
(b) Reports on Form 8-K
The following reports on Form 8-K were filed by BANC ONE during
the quarter ended September 30, 1998:
Current Report on Form 8-K dated July 21, 1998 (filed July 21,
1998) (Item 5)
Current Report on Form 8-K dated July 22, 1998 (filed July 21,
1998) (Items 5 and 7)
Current Report on Form 8-K dated July 24, 1998 (filed July 24,
1998) (Items 4 and 7), as amended by Form 8-K/A dated August 6,
1998 (filed August 11, 1998) (Items 4 and 7)
Current Report on Form 8-K dated July 24, 1998 (filed July 24,
1998) (Items 5 and 7)
Current Report on Form 8-K dated August 28, 1998 (filed August
29, 1998) (Item 5)
Current Report on Form 8-K dated September 11, 1998 (filed
September 11, 1998) (Item 5)
Current Report on Form 8-K dated September 17, 1998 (filed
September 17, 1998) (Item 5)
</TABLE>
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.
32
<PAGE> 33
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
<TABLE>
<CAPTION>
BANK ONE CORPORATION
<S> <C>
November 13, 1998 /s/ JOHN B. MCCOY
- ------------------------------------ -----------------------------------------------------
Date John B. McCoy
President and Chief Executive Officer
November 13, 1998 /s/ WILLIAM J. ROBERTS
- ------------------------------------ -----------------------------------------------------
Date William J. Roberts
Principal Accounting Officer
</TABLE>
33
<PAGE> 1
EXHIBIT 10.1
------------
AMENDED AND RESTATED
BANC ONE CORPORATION
DIRECTORS DEFERRED COMPENSATION PLAN
PURPOSE
- -------
The purpose of the BANC ONE CORPORATION Directors Deferred Compensation Plan
(the "Plan") is to provide a means by which a member of the Board of Directors
of either BANC ONE CORPORATION or a Related Company may defer the payment of all
(but not less than all) of the Fees payable to the Director for services
rendered by the Director.
Effective Date
- --------------
This Plan was originally effective as of January 1, 1984 and was restated and
amended effective January 1, 1994 and October 1, 1997. This amended and restated
version of the Plan is effective May 1, 1998 unless otherwise specifically
herein indicated.
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 Company who shall be
appointed by the Chief Executive Officer of the Company to hear appeals of
denied Director or Beneficiary benefit claims under the Plan, provided that with
respect to denied claims of a Director who has been identified by the Company as
an Insider, such Appeals Committee shall be the Personnel and Compensation
Committee of the Board.
Section 1.2 - Assignee
- ----------------------
Any person, trust, organization, charity, association or other entity designated
by a Participant, who is or was a Statutory Director, in accordance with the
provisions of Section 3.10 of this Plan to receive (i) distributions in lieu of
that Participant and/or (ii) any death benefit which may be payable under this
Plan upon the death of said Participant.
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.
1
<PAGE> 2
Section 1.4 - Board
- -------------------
The Board of Directors of the Company.
Section 1.5 - Change of Control
- -------------------------------
(a) The acquisition by any individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a "Person") of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act)
of 20% or more of either (i) the then outstanding Shares or (ii) the combined
voting power of the then outstanding voting securities of the Company entitled
to vote generally in the election of directors (the "Outstanding Company Voting
Securities"); provided, however, that for purposes of this subsection (a), the
following acquisitions shall not constitute a Change of Control: (i) any
acquisition directly from the Company, (ii) any acquisition by the Company,
(iii) any acquisition by any employee benefit plan (or related trust) sponsored
or maintained by the Company or a Related Company or (iv) any acquisition by any
corporation pursuant to a transaction which complies with clauses (i), (ii) and
(iii) of Subsection (C) of this Section 1.5; or
(b) Individuals who, as of October 1, 1997, constitute the Board (the "Incumbent
Board") cease for any reason to constitute at least a majority of the Board;
provided, however, that any individual becoming a director subsequent to the
date hereof whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or
(c) Consummation of a reorganization, merger or consolidation or sale or other
disposition of all or substantially all of the assets of the Company (a
"Business Combination"), in which case, unless, following such Business
Combination, (i) all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly, more than 50% of,
respectively, the then outstanding Shares and the combined voting power of the
then outstanding voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation which as a result of
such transaction owns the Company or all or substantially all of the Company's
assets either directly or through one or more subsidiaries) in substantially the
same proportions as their ownership, immediately prior to such Business
Combination of the Outstanding Company Common Stock and Outstanding Company
Voting Securities, as the case may be, (ii) no Person (excluding any employee
benefit plan (or related trust) of the Company or such corporation resulting
from such Business Combination) beneficially owns, directly or indirectly, 20%
or more of, respectively, the then outstanding shares of common stock of the
corporation resulting from such Business Combination or the combined voting
power of the then outstanding voting securities of such corporation except to
the extent that such ownership existed prior to the Business Combination and
(iii) at least a majority of the members of the board of directors of the
corporation resulting from such Business Combination were members of the
Incumbent Board at the time of the execution of the initial agreement, or of the
action of the Board, providing for such Business Combination; or
2
<PAGE> 3
(d) Approval by the shareholders of the Company of a complete liquidation or
dissolution of the Company.
Section 1.6 - Committee
- -----------------------
The Personnel and Compensation Committee of the Board which is comprised of two
or more non-employee Directors and which shall have the authority of said Board
with respect to this Plan.
Section 1.7 - Company
- ---------------------
BANC ONE CORPORATION.
Section 1.8 - Director
- ----------------------
A statutory director, an emeritus director, an advisory board member, or an
honorary director of the Company or a participating Related Company who is not
an officer or employee of the Company or a Related Company and who receives Fees
for services rendered.
Section 1.9 - Exchange Act
- --------------------------
The Securities Exchange Act of 1934, as amended.
Section 1.10 - Fees
- -------------------
Amounts payable by the Company or a Related Company to a Director for services
rendered by the Director to the Company or Related Company, including retainer,
meeting, and committee fees.
Section 1.11 - Insider
- ----------------------
Any person who is required to file reports of his beneficial ownership of Shares
with the Securities Exchange Commission pursuant to Section 16(a) of the
Exchange Act.
Section 1.12 - Participant
- --------------------------
(a) Any Director who satisfies the eligibility and participation requirements of
this Plan and who elects or has previously elected to defer Fees under this
Plan, or
(b) A participant under any Prior Plan from and after the effective date of
merger of said Prior Plan with and into the Plan.
Section 1.13 - Plan Administrator
- ---------------------------------
BANC ONE CORPORATION.
Section 1.14 - Prior Plan
- -------------------------
Any director deferred fee plan of the Company, a Related Company, or a
predecessor or successor thereof, which has been merged with and into this Plan
as set forth from time to time on the attached Schedule A which is made a part
hereof.
3
<PAGE> 4
Section 1.15 - Related Company
- ------------------------------
A subsidiary or any entity which is a member of a common controlled group with
BANC ONE CORPORATION pursuant to Internal Revenue Code Section 1563(a)(1).
Section 1.16 - Share(s)
- -----------------------
Common shares of the Company, or any successor thereto.
Section 1.17 - Statutory Director
- ---------------------------------
A person who is serving or who at any time has served as a statutory director of
the Company.
ARTICLE II
PARTICIPATION
Section 2.1 - Eligibility
- -------------------------
Any Director who receives Fees is eligible to become a participant in this Plan.
Any participant in a Prior Plan shall become a Participant in the Plan as of the
effective date of merger of said Prior Plan into the Plan.
Section 2.2 - Conditions of Participation
- -----------------------------------------
A Director 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 Director
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) Current Directors. A Director may elect, on or before December 31 of any
year, to defer payment of all (but not less than all) of the Fees earned during
the calendar year following such election and all succeeding calendar years. Any
such elections shall remain in effect until the earlier of the following events:
(i) the Director terminates his election pursuant to Subsection 2.3(d) of this
Plan, or (ii) the participant ceases to be a Director.
(b) Newly Eligible Directors. Any person who becomes a Director during any
calendar year, and who was not a Director on the preceding December 31, may
elect, before such Director attends a meeting, to defer payment of all (but not
less than all) of the Fees earned by the Director for the remainder of such
calendar year and all succeeding calendar years, pursuant to Section 2.3(a) of
this Plan.
(c) Timeliness of Elections. 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. If a Director who is eligible to
participate in this Plan fails to file (or fails to timely file) the form(s) or
take any action required by the Plan Administrator to participate in the Plan,
such Director will not be
4
<PAGE> 5
permitted to participate in the Plan until the next open enrollment period
applicable for the following calendar year.
(d) Termination of Election. A Director may terminate the election to defer
payment of Fees under the Plan by written notice delivered to the Plan
Administrator. Such election shall become effective as of the end of the
calendar year in which said notice is given with respect to Fees payable as a
Director for subsequent calendar years; provided, however, that if such election
is made in conjunction with a request for distribution pursuant to Section
3.1(d), such election shall become effective immediately. Amounts credited to
the Participant's account prior to the effective date of deferral cessation
shall not be affected thereby and shall be distributed pursuant to Section 3.1
of the Plan.
Section 2.4 - Participant Accounts
- ----------------------------------
Fees deferred at the election of a Participant shall be held in the general
funds of the Company and shall be credited to an account established by the
Company in the Participant's name to which deferrals made in accordance with
this Plan are credited. The Fees deposited in the Participant's deferred account
shall be invested under the Interest Program or the Stock Program, or both, as
elected by the Participant. All deferred fees not specifically designated by a
Participant to be credited to the Interest Program shall be credited to the
Stock Program. Effective with the first day of any next succeeding quarter, any
Participant may prospectively change his or her election to participate in the
Interest Program and/or the Stock Program by delivering a new election form to
the Plan Administrator. Such designation shall affect the deferral of future
Fees and shall have no affect on former Fees which shall remain in the Interest
Program or the Stock Program as previously designated unless an election is made
pursuant to Section 2.7 of this Plan.
Section 2.5 - Interest Program
- ------------------------------
(a) If the Participant elects to participate in the Interest Program, the
Participant's deferred account shall be invested in units of The One Group Prime
Money Market Fund, or any successor thereto, and cash or cash equivalent
securities as determined by the Plan Administrator or its agent from time to
time.
(b) Interest which is paid on the units in the Interest Program shall be
automatically reinvested in additional units of the Interest Program within a
reasonable time following the crediting of said interest.
Section 2.6 - Stock Program
- ---------------------------
(a) If the Participant elects to participate in the Stock Program, the
Participant's deferred account shall be invested in Shares of the Company and
cash or cash equivalent securities as determined by the Plan Administrator or
its agent from time to time.
(b) The cash dividends which are paid on the Shares in the Stock Program shall
be automatically reinvested in additional Shares of the Company within a
reasonable time following payment of such dividends.
5
<PAGE> 6
Section 2.7 - Transfers of Prior Deferrals
- ------------------------------------------
During the annual election period, any Participant who is not an Insider may
elect to transfer prior deferral amounts from one investment program to the
other, 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 said date. Any such transfer will be valued as
of the last business day prior to January 1st. No prior deferral amounts may be
transferred into or out of the Stock Program by an Insider without the express
approval of the Plan Administrator or the person(s) designated to approve such
Insider transactions. Such approval will be allowed when, in the judgment of the
Plan Administrator or such appointed person(s), such 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 employee benefit plans of the
Company and Related Companies, subject such person to potential liability under
Section 16(b) of the Exchange Act; or (ii) jeopardize or make less likely the
ability to properly account for a transaction in which the Company is
participating and which the Company wishes to account for as a pooling of
interests as a "pooling of interests".
Section 2.8 - Funding
- ---------------------
The Plan shall be entirely unfunded and no provision shall at any time be made
with respect to segregating any assets of the Company or a Related Company for
payment of any benefit hereunder. No Participant, Participant's spouse or any
other person shall have any interest in any particular assets of the Company or
any Related Company 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 Company with respect to any
rights under the Plan. Nothing contained in the Plan shall constitute a guaranty
by the Company or other entity or person that the assets of the Company will be
sufficient to pay any benefit hereunder.
Section 2.9 - 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.
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 date the Plan Administrator is
notified that the Participant is neither a Director nor an employee of the
Company or a Related Company;
6
<PAGE> 7
(b) Upon the death of the Participant, in accordance with Section 3.4;
(c) After an acceleration of benefits under Section 3.6;
(d) Upon the receipt by the Plan Administrator of the Participant's written
request to receive all of his account; or
(e) After termination of this Plan in accordance with Section 5.1;
provided, however, that no distribution or payment shall be allowed hereunder
unless, in the judgment of the Plan Administrator or its appointees, such
distribution or payment will not constitute a Discretionary Transaction under
Securities and Exchange Commission Rule 16b-3 which will subject the Participant
to potential liability under Section 16(b) of the Exchange Act or jeopardize or
make less likely the ability to properly account for a transaction in which the
Company is participating and which the Company wishes to account for as a
"pooling of interests"; and
provided, further, that (i) any distribution made pursuant to Section 3.1(d)
shall be in a single lump sum which amount shall be 10% less than the total
amount attributed to such Participant's account, which 10% shall be withheld by
and forfeited to the Company, and (ii) the Participant making such request shall
not be eligible to defer Fees payable after the date of such election until on
or after January 1 of the second calendar year following the year in which such
Participant made such election for distribution.
Section 3.2 - Form of Distribution
- ----------------------------------
(a) 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 election shall continue until the Participant elects a
different form of payment. All such elections must be made at least six months
prior to the date of distribution. If a Participant fails to make such an
election, the amounts credited to a Participant under the Plan shall be paid in
annual installments of cash over a five-year period. All distributions under
this Plan shall be calculated on the basis of the value of the Participant's
account balance as of the last business day of the calendar quarter preceding
the commencement date described above, or in the case of an installment payment,
the account balance as of the last business day of the calendar quarter
preceding the installment payment. 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 within sixty days
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 share in appreciation and/or depreciation in accordance with the
Participant's investment elections and may be charged administrative expenses as
provided in Section 4.2.
(b) The form and frequency of distribution being made from a Prior Plan at the
effective date of Plan merger will continue in effect provided that such
distribution is administratively feasible under the Plan and further provided
that the payment amount is determined in a manner approved by the Plan
Administrator pursuant to Section 3.3 of this Plan.
7
<PAGE> 8
Section 3.3 - Cash Payments; Determination of Amount
- ----------------------------------------------------
All distributions 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 credited to the Participant's account as of the close of business on
the 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), or in such other
manner as is approved by the Plan Administrator for Prior Plan payments.
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 either to (i) the Beneficiary or Beneficiaries described in
Section 3.8 or (ii) the Assignee as described in Section 3.10, 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 or Assignee 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 or her account and any earnings thereon.
Section 3.6 - Acceleration of Benefits for Unforeseen Emergencies
- ----------------------------------------------------------------
The Plan Administrator, with the approval of the Chief Executive Officer of the
Company, 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 an "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: (i) through reimbursement or compensation by insurance or
otherwise; (ii) by liquidation of the Participant's assets, to the extent the
liquidation of such assets would not itself cause severe financial hardships; or
(iii) 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.
No distribution or payment shall be allowed hereunder unless, in the judgment of
the Plan Administrator or its appointees, such distribution or payment will not
constitute a Discretionary Transaction under Securities and Exchange Commission
Rule 16b-3 which will subject the Participant to potential liability under
Section 16(b) of the Exchange Act or jeopardize or make less likely the ability
to properly account for a transaction in which the Company is participating and
which the Company wishes to account for as a "pooling of interests."
8
<PAGE> 9
Section 3.7 - Withholding and Deductions
- ----------------------------------------
All benefit payments made under the Plan to any Participant or Beneficiary shall
be subject to such withholding and 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 delivery to the Plan Administrator of all
necessary documents. To the extent that the Company is required to withhold any
current taxes at the time of deferral of Director's Fees, the deferral amount
shall be reduced by the required taxes. Determination by the Plan Administrator
as to withholding shall be binding on the Participant and applicable Assignee or
Beneficiary(ies).
Section 3.8 - Beneficiary Designation
- -------------------------------------
Each Participant who has a deferred account hereunder and who has not assigned
benefits 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 the 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 a Beneficiary shall 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, pursuant to Section 3.4, to the
Participant's estate.
If any Participant who designates an Assignee also designates a Beneficiary or
Beneficiaries in the manner provided above, such designation of an Assignee
shall be null and void and shall have no effect until such time as the
designation of Beneficiary or Beneficiaries is revoked and such revocation is
accepted and acknowledged in writing by the Plan Administrator. A determination
to accept or reject such revocation shall be at the sole discretion of the Plan
Administrator and the Plan Administrator shall not be obligated to accept such
revocation of Beneficiary(ies).
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.
Section 3.10 - Assignment of Benefits
- -------------------------------------
Each Participant who is or was a Statutory Director who has a deferred account
hereunder may designate an Assignee as the party entitled to receive (i)
distributions in lieu of that Participant and/or (ii) any death benefit which
may be payable under this Plan upon the death of said Participant. Such
designation of Assignee shall be made pursuant to the procedures established by
the Plan Administrator and in a
9
<PAGE> 10
form satisfactory to the Plan Administrator. Each proper designation of an
Assignee shall revoke all previous Assignee designations. The revocation of an
Assignee, no matter how effected, shall not require the consent of or notice to
any previously designated Assignee.
ARTICLE IV
ADMINISTRATION
Section 4.1 - Administrative Powers and Duties
- ----------------------------------------------
The Plan Administrator shall be responsible for the general operation and
administration of the Plan and for carrying out the provisions thereof. The
Chief Executive Officer of the Company 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 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 the Company
and/or participating Related Companies. 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 the Plan. Any such charges shall reduce the earnings
credited to the Participant's account and shall be applied in a uniform and
non-discriminatory 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 or Assignee 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
Company, 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.
10
<PAGE> 11
Section 4.5 - Claims Procedures
- -------------------------------
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.
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 Appeals Committee
shall be rendered within sixty (60) days after the 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 its sole discretion determines are
necessary in order to make such decision. Any payment of a benefit or
installment thereof in accordance with the provision 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.
11
<PAGE> 12
Section 4.8 - Action by the Company
- -----------------------------------
Any action by the Company under this Plan may be by resolution of its Board, or
alternatively, by the Committee, or by any person or persons, duly authorized by
resolution of said 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, 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 Company 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 Company or Related Company 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 Company 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 Company 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 such person
may be entitled as a matter of law.
Section 4.10 - Nonassignability
- -------------------------------
Except as set forth at Section 3.10 with respect to Participants who are
Statutory Directors, 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
- --------------------------------------
The Company, through action of the Board, or alternatively, the Committee, may
amend or terminate this Plan at any time. In the event of a termination, the
Company in its sole discretion may accelerate payment of Plan benefits to those
Participants participating in the Plan on the date of such termination, to the
extent such benefits would otherwise be 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.
12
<PAGE> 13
Section 5.2 - Change of Control
- -------------------------------
The Plan shall not be automatically terminated upon a Change of Control if,
following the Change of Control, the Company, its successor or purchaser is
obligated to pay, or continue to pay, Plan benefits to those Participants
participating in the Plan on the date of such Change of Control, to the extent
such benefits would be otherwise payable as defined in Section 3.1.
ARTICLE VI
GENERAL PROVISIONS
Section 6.1 - Offset to Benefits
- --------------------------------
Notwithstanding any provisions of the Plan to the contrary, the Company 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
Company.
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 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 provision hereof, and
the remaining provisions of this Plan shall be construed and enforced as if such
provisions had not been included.
13
<PAGE> 14
<TABLE>
SCHEDULE A
BANC ONE CORPORATION
DIRECTORS DEFERRED COMPENSATION PLAN
SPECIAL PROVISIONS RELATING TO PRIOR PLAN MERGERS
<CAPTION>
MERGER DATE PLAN NAME/SPONSOR SPECIAL PROVISIONS
- ----------- ----------------- ------------------
<S> <C> <C>
November 1, 1997 Deferred Compensation Plan - Board Of Directors None
The Metropolitan Bank of Lima, Ohio
December 2, 1997 Euclid National Bank Directors Deferred None
Compensation Plan
</TABLE>
14
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EXHIBIT 10.2
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REVISED AND RESTATED
BANC ONE CORPORATION
1995 STOCK INCENTIVE PLAN
1. PURPOSE
The purpose of the Revised and Restated BANC ONE CORPORATION 1995 Stock
Incentive Plan is to provide incentives and rewards for Employees and Eligible
Directors of the Corporation and its Subsidiaries (i) to support the execution
of the Corporation's business and human resource strategies and the achievement
of its goals and (ii) to associate the interests of Employees and Eligible
Directors with those of the Corporation's shareholders.
2. DEFINITIONS
"Award" includes, without limitation, stock options (including incentive
stock options under Section 422 of the Code and Director Stock Options), stock
appreciation rights, restricted and performance shares, restricted and
performance share units, Performance Stock Awards, dividend or equivalent
rights, or other awards that are valued in whole or in part by reference to, or
are otherwise based on, the Common Stock ("other Common Stock-based Awards"),
all on a stand alone, combination or tandem basis, as described in or granted
under this Plan.
"Award Agreement" means a written agreement entered into between the
Corporation and a Participant setting forth the terms and conditions of an Award
made to such Participant under this Plan, in the form prescribed by the
Committee.
"Board" means the Board of Directors of the Corporation.
"Change of Control" shall have the meaning specified in Section 12(b).
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Committee" means the Committee appointed by the Board, each member of
which shall be a "non-employee director" within the meaning of Rule 16b-3 under
the Exchange Act and shall be an "outside director" within the meaning of
Section 162(m) of the Code. The Committee shall be composed of no fewer than the
minimum number of disinterested persons as may be required by Rule 16b-3.
"Common Stock" means the common stock of the Corporation, without par
value.
"Corporation" means BANC ONE CORPORATION, a bank holding company under the
Bank Holding Company Act of 1956 headquartered in Columbus, Ohio.
"Director Stock Option" means the right, granted to an Eligible Director,
to purchase Common Stock at a stated price for a specified period of time. Each
Director Stock Option shall be a nonqualified stock option whose grant is not
intended to comply with the requirements of Section 422 of the Code or any
successor Section as it may be amended from time to time.
"Eligible Director" means any statutory director of the Corporation who is
not an employee of the Corporation or any Subsidiary.
"Employee" means an employee of the Corporation or a Subsidiary.
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"Employee Award" means an Award (other than a Director Stock Option) to an
Employee under this Plan.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fair Market Value" means the closing price of the Common Stock as
reported on the New York Stock Exchange Composite Transactions Tape on the
relevant valuation date or, if there were no Common Stock transactions on the
valuation date, on the next preceding date on which there were Common Stock
transactions; provided, however, that the Committee may specify some other
definition of Fair Market Value with respect to any particular Employee Award.
"Negative Discretion" means other factors to be applied by the Committee
in reducing the number of restricted shares to be issued pursuant to a
Performance Stock Award if the Performance Goals have been met or exceeded if,
in the Committee's sole judgment, such application is appropriate in order to
act in the best interest of the Corporation and its shareholders. The Negative
Discretion factors include, but are not limited to, the achievement of
measurable individual performance objectives established by the Committee and
communicated to the Employee in advance of the Performance Period, and
competitive pay practices.
"Participant" means an Employee or an Eligible Director who has been
granted an Award under this Plan.
"Performance Goals" means, with respect to any Performance Period,
performance goals based on any of the following criteria and established by the
Committee prior to the beginning of such Performance Period or performance goals
based on any of the following criteria and established by the Committee after
the beginning of such Performance Period that meet the requirements to be
considered pre-established performance goals under Section 162(m) of the Code:
earnings or earnings growth; return on equity, assets or investment; revenues;
expenses; stock price; market share; charge-offs; or reductions in
non-performing assets. Such Performance Goals may be particular to an Employee
or the division, department, branch, line of business, Subsidiary or other Unit
in which the Employee works, or may be based on the performance of the
Corporation generally.
"Performance Period" means the period of time designated by the Committee
applicable to a Performance Stock Award during which the Performance Goals shall
be measured.
"Performance Stock Award" shall have the meaning specified in Section
6(g).
"Plan" means this Revised and Restated BANC ONE CORPORATION 1995 Stock
Incentive Plan.
"Plan Year" means a twelve-month period beginning with January 1 of each
year.
"Reporting Person" means an officer or director of the Corporation subject
to the reporting requirements of Section 16 of the Exchange Act.
"Subsidiary" means any corporation or other entity, whether domestic or
foreign, in which the Corporation has or obtains, directly or indirectly, a
proprietary interest of more than 50% by reason of stock ownership or otherwise.
3. ELIGIBILITY
(a) Any Employee selected by the Committee is eligible to receive an
Employee Award.
(b) Eligible Directors are entitled to participate in this Plan solely
with respect to the grant of Director Stock Options and may not receive any
other Awards under this Plan. The selection of Eligible Directors is not subject
to the discretion of the Committee. Persons serving on the Committee who are
Eligible Directors may receive grants of Director Stock Options.
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4. PLAN ADMINISTRATION
(a) This Plan shall be administered by the Committee. The Committee shall
periodically make determinations with respect to the participation of Employees
in this Plan and, except as otherwise required by law or this Plan, the grant
terms of Awards including vesting schedules, price, performance standards
(including Performance Goals), length of relevant performance, restriction or
option period, dividend rights, post-retirement and termination rights, payment
alternatives such as cash, stock, contingent awards or other means of payment
consistent with the purposes of this Plan, and such other terms and conditions
as the Committee deems appropriate. Except as otherwise required by this Plan,
the Committee shall have authority to interpret and construe the provisions of
this Plan and the Award Agreements and make determinations pursuant to any Plan
provision or Award Agreement which shall be final and binding on all persons.
(b) The Committee may designate persons other than its members to carry
out its responsibilities under such conditions or limitations as it may set,
other than its authority with regard to Awards granted to Reporting Persons.
5. STOCK SUBJECT TO THE PROVISIONS OF THIS PLAN
(a) The stock subject to the provisions of this Plan shall either be
shares of authorized but unissued Common Stock, shares of Common Stock held as
treasury stock or previously issued shares of Common Stock reacquired by the
Corporation, including shares purchased on the open market. Subject to
adjustment in accordance with the provisions of Section 11, and subject to
Section 5(d), (i) the total number of shares of Common Stock available for
grants of Awards (including, without limitation, Awards of restricted and
performance shares) in any Plan Year shall not exceed one percent of the
outstanding Common Stock as reported in the Corporation's Annual Report on Form
10-K for the fiscal year ending immediately prior to such Plan Year and (ii) the
total number of shares of Common Stock available for grants of restricted and
performance shares (including restricted shares to be issued pursuant to
Performance Stock Awards) in any Plan Year shall not exceed one fourth of one
percent of the outstanding Common Stock as reported in the Corporation's Annual
Report on form 10-K for the fiscal year ending immediately prior to such Plan
Year.
(b) Subject to adjustment in accordance with Section 11, and subject to
Section 5(a), (i) the total number of shares of Common Stock available for
grants of Awards in any Plan Year to any Participant shall not exceed one half
of one percent of the outstanding Common Stock as reported in the Corporation's
Annual Report on Form 10-K for the fiscal year ending immediately prior to such
Plan Year and (ii) the total number of shares of Common Stock available for
grants of restricted shares to be issued pursuant to Performance Stock Awards in
any Plan Year to any Employee shall not exceed one eighth of one percent of the
outstanding Common Stock as reported in the Corporation's Annual Report on form
10-K for the fiscal year ending immediately prior to such Plan Year.
(c) For purposes of calculating the total number of shares of Common Stock
available for grants of Awards, (i) the grant of a performance or restricted
share unit Award shall be deemed to be equal to the maximum number of shares of
Common Stock which may be issued under the Award and (ii) where the value of an
Award is variable on the date it is granted, the value shall be deemed to be the
maximum limitation of the Award. Awards payable solely in cash will not reduce
the number of shares of Common Stock available for Awards granted under this
Plan.
(d) There shall be carried forward and be available for Awards under this
Plan in each succeeding Plan Year, in addition to shares of Common Stock
available for grant under paragraph (a) of this Section 5, all of the following:
(i) any unused portion of the limit set forth in paragraph (a) of this Section 5
for the two immediately preceding Plan Years; (ii) shares of Common Stock
represented by Awards which have been canceled, forfeited, surrendered,
terminated or expire unexercised during that Plan Year or the two immediately
preceding Plan Years; (iii) the excess amount of variable Awards which become
fixed at less than their maximum limitations; (iv) authorized shares of Common
Stock as to which stock options, stock appreciation rights, restricted stock
awards, performance shares or performance awards were not granted under the BANC
ONE CORPORATION 1989 Stock Incentive Plan; and (v)
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shares of Common Stock under the BANC ONE CORPORATION 1989 Stock Incentive Plan
subject to stock options, stock appreciation rights, restricted stock awards,
performance shares or performance awards which have been canceled, forfeited,
surrendered, terminated or expire unexercised during that Plan Year or the two
immediately preceding Plan Years.
6. EMPLOYEE AWARDS UNDER THIS PLAN
As the Committee may determine, the following types of Employee Awards may
be granted under this Plan to Employees on a stand alone, combination or tandem
basis:
(a) Stock Option. A right to buy a specified number of shares of Common
Stock at a fixed exercise price during a specified time, all as the Committee
may determine; provided that the exercise price of any option shall not be less
than 100% of the Fair Market Value of the Common Stock on the date of grant of
the Award.
(b) Incentive Stock Option. An award in the form of a stock option which
shall comply with the requirements of Section 422 of the Code or any successor
Section as it may be amended from time to time.
(c) Stock Appreciation Right. A right to receive the excess of the Fair
Market Value of a share of Common Stock on the date the stock appreciation right
is exercised over the Fair Market Value of a share of Common Stock on the date
the stock appreciation right was granted.
(d) Restricted and Performance Shares. A transfer of shares of Common
Stock to a Participant, subject to such restrictions on transfer or other
incidents of ownership, or subject to specified performance standards, for such
periods of time as the Committee may determine.
(e) Restricted and Performance Share Unit. A fixed or variable share or
dollar denominated unit subject to conditions of vesting, performance and time
of payment as the Committee may determine, which may be paid in shares of Common
Stock, cash or a combination of both.
(f) Dividend or Equivalent Right. A right to receive dividends or their
equivalent in value in shares of Common Stock, cash or in a combination of both
with respect to any new or previously existing Employee Award.
(g) Performance Stock Awards. A right, granted to an Employee, to receive
restricted shares (as defined in Section 6(d) hereof) that are not to be issued
to the Employee until after the end of the related Performance Period, subject
to satisfaction of the Performance Goals for such Performance Period.
(h) Other Common Stock-Based Awards. Other Common Stock-based Awards which
are related to or serve a similar function to those Employee Awards set forth in
this Section 6.
In addition to granting Employee Awards for purposes of incentive
compensation, Employee Awards may also be made in tandem with or in lieu of
current or deferred Employee compensation.
7. PERFORMANCE STOCK AWARDS.
(a) Administration. Performance Stock Awards may be granted to Employees
either alone or in addition to other Employee Awards granted under this Plan.
The Committee shall determine the Employees to whom Performance Stock Awards
shall be awarded for any Performance Period, the duration of the applicable
Performance Period, the number of restricted shares to be awarded at the end of
a Performance Period to Employees if the Performance Goals are met or exceeded
and the terms and conditions of the Performance Stock Award in addition to those
contained in this Section 7.
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(b) Payment of Award. After the end of a Performance Period, the financial
performance of the Corporation during such Performance Period shall be measured
against the Performance Goals. If the Performance Goals are not met, no
restricted shares shall be issued pursuant to the Performance Stock Award. If
the Performance Goals are met or exceeded, the Committee shall certify that fact
in writing in the Committee minutes or elsewhere and certify the number of
restricted shares to be issued under each Performance Stock Award in accordance
with the related Award Agreement. The Committee may, in its sole discretion,
apply Negative Discretion to reduce the number of restricted shares to be issued
under a Performance Stock Award.
(c) Requirement of Employment. To be entitled to receive a Performance
Stock Award, an Employee must remain in the employment of the Corporation
through the end of the Performance Period, except that the Committee may provide
for partial or complete exceptions to this requirement as it deems equitable in
its sole discretion.
8. DIRECTOR STOCK OPTIONS
Subject to the provisions of Section 5, Director Stock Options shall be
granted to Eligible Directors as provided in this Section 8 and the Committee
shall have no discretion with respect to any matters set forth in this Section
8.
(a) Vesting. Each Director Stock Option shall become exercisable on and
after the first anniversary of the date of the grant.
(b) Number of Shares. Director Stock Options shall be granted as follows:
(i) Each person who is first elected or appointed to serve as a
director of the Corporation after the effective date of this Plan and who
is an Eligible Director shall, upon such person's initial appointment or
election as an Eligible Director, automatically be granted Director Stock
Options for that number of shares of Common Stock having a Fair Market
Value of $100,000 on the date the Director Stock Options are granted; and
(ii) Commencing immediately after the adjournment of the
Corporation's annual meeting of shareholders (an "Annual Meeting") in 1995
and immediately after the adjournment of the Annual Meeting each year
thereafter, each Eligible Director who was an Eligible Director
immediately preceding such Annual Meeting and who has been elected as a
director at such Annual Meeting shall automatically be granted Director
Stock Options for that number of shares of Common Stock having a Fair
Market Value of $60,000 on the date the Director Stock Options are granted
if, but only if, the return on common equity of the Corporation as set
forth in the Corporation's annual report to shareholders for the
immediately preceding fiscal year is equal to or greater than 10%.
(c) Option Price. Each Director Stock Option shall have an option price
("Option Price") that is equal to the Fair Market Value of the Common Stock on
the date the Director Stock Option is granted.
(d) Duration of Options. No Director Stock Option may be exercisable later
than twenty years and one day from the date of its grant.
(e) Payment. The Option Price upon exercise of any Director Stock Option
shall be payable to the Corporation in full either (i) in U.S. dollars by
personal check, bank draft or money order payable to the order of the
Corporation, by money transfers or direct account debits, (ii) through the
delivery or deemed delivery based on attestation of ownership of shares of
Common Stock with a Fair Market Value at the time of exercise equal to the total
Option Price or (iii) by a combination of the methods described in items (i) and
(ii) above.
(f) Termination of Director Stock Options. If an Eligible Director ceases
to be an Eligible Director for any reason, the rights under any then outstanding
Director Stock Option granted pursuant to this Plan which are exercisable as of
the date such person ceases to be an Eligible Director shall terminate upon the
date determined as provided in Section 8(d), above, or three years after such
cessation date, whichever first occurs. Any then outstanding Director Stock
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Option granted to such Eligible Director which is not exercisable as of the date
such person ceases to be an Eligible Director shall terminate on and as of such
date.
9. OTHER TERMS AND CONDITIONS
(a) Assignability. Except to the extent, if any, as may be permitted by
the Code and rules promulgated under Section 16 of the Exchange Act, (i) no
Award shall be assignable or transferable except by will, by the laws of descent
and distribution, pursuant to a qualified domestic relations order as defined by
the Code and as determined or established by the Committee, and (ii) during the
lifetime of a Participant, an Award shall be exercisable only by such
Participant, such Participant's guardian, legal representative or assignee
pursuant to a qualified domestic relations order or as determined or established
by the Committee. An Award shall not otherwise be assignable.
(b) Award Agreement. Each Award under this Plan shall be evidenced by an
Award Agreement.
(c) Rights As A Shareholder. Except as otherwise provided herein or in any
Award Agreement, a Participant shall have no rights as a shareholder with
respect to shares of Common Stock covered by an Award until the date the
Participant or his nominee (which, for purposes of this Plan, shall include any
third party agent selected by the Committee to hold such shares on behalf of a
Participant), guardian or legal representative is the holder of record of such
shares.
(d) No Obligation to Exercise. The grant of an Award shall impose no
obligation upon the Participant to exercise the Award.
(e) Payments by Participants. The Committee may determine that Employee
Awards for which a payment is due from a Participant may be payable: (i) in U.S.
dollars by personal check, bank draft or money order payable to the order of the
Corporation, by money transfers or direct account debits; (ii) through the
delivery or deemed delivery based on attestation to the ownership of shares of
Common Stock with a Fair Market Value equal to the total payment due from the
Participant; (iii) by a combination of the methods described in (i) and (ii)
above; or (iv) by such other methods as the Committee may deem appropriate.
(f) Tax Withholding. The Corporation shall have the right to withhold from
any payments made under this Plan, or to collect as a condition of payment, any
taxes required by law to be withheld. At any time when a Participant is required
to pay to the Corporation an amount required to be withheld under applicable
income tax laws in connection with a distribution of shares of Common Stock
pursuant to this Plan, the Participant may satisfy this obligation in whole or
in part by electing to have the Corporation withhold from such distribution
shares of Common Stock having a value equal to the amount required to be
withheld. The value of the shares of Common Stock to be withheld shall be based
on the Fair Market Value of the Common Stock on the date that the amount of tax
to be withheld shall be determined (the "Tax Date"). Any such election is
subject to the following restrictions: (i) the election must be made on or prior
to the Tax Date and (ii) the election must be subject to the disapproval of the
Committee.
(g) Restrictions On Sale and Exercise. With respect to Reporting Persons,
and if required to comply with rules promulgated under Section 16 of the
Exchange Act, (i) no Award providing for exercise, a vesting period, a
restriction period or the attainment of performance standards shall permit
unrestricted ownership of shares of Common Stock by the Participant for at least
six months from the date of grant, and (ii) shares of Common Stock acquired
pursuant to this Plan (other than shares of Common Stock acquired as a result of
the granting of a "derivative security") may not be sold or otherwise disposed
of for at least six months after acquisition.
(h) Requirements of Law. The granting of Awards and the issuance of shares
of Common Stock upon the exercise of Awards shall be subject to all applicable
requirements imposed by federal and state securities and other laws, rules and
regulations and by any regulatory agencies having jurisdiction, and by any stock
exchanges upon which the Common Stock may be listed. As a condition precedent to
the issuer of shares of Common Stock pursuant to the grant
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or exercise of an Award, the Corporation may require the Participant to take any
reasonable action to meet such requirements.
10. AMENDMENTS
(a) Except as otherwise provided in this Plan, the Board may at any time
terminate and, from time to time, may amend or modify this Plan. Any such action
of the Board may be taken without the approval of the Corporation's
shareholders, but only to the extent that such shareholder approval is not
required by applicable law or regulation, including specifically Rule 16b-3
under the Exchange Act.
(b) No amendment, modification or termination of this Plan shall in any
manner adversely affect any Awards theretofore granted to a Participant under
this Plan without the consent of such Participant.
11. RECAPITALIZATION
The aggregate number of shares of Common Stock as to which Awards may be
granted to Participants, the number of shares thereof covered by each
outstanding Award, and the price per share thereof in each such Award, shall all
be proportionately adjusted for any increase or decrease in the number of issued
shares of Common Stock resulting from a stock split, stock dividend, combination
or exchange of shares, exchange for other securities, reclassification,
reorganization, redesignation, merger, consolidation, recapitalization or other
such change. Any such adjustment may provide for the elimination of fractional
shares.
12. NO RIGHT TO EMPLOYMENT
No person shall have any claim or right to be granted an Award, and the
grant of an Award shall not be construed as giving a Participant the right to be
retained in the employ of the Corporation or a Subsidiary. Nothing in this Plan
shall interfere with or limit in any way the right of the Corporation or any
Subsidiary to terminate any Participant's employment at any time, nor confer
upon any Participant any right to continue in the employ of the Corporation or
any Subsidiary.
13. CHANGE OF CONTROL
(a) Subject to the provisions of Section 13(c) below, notwithstanding
anything contained in this Plan, the provisions of Section 13(a)(iii) below or
any Award Agreement to the contrary, in the event of a Change of Control, as
defined below, the following (x) may, in the sole discretion of the Committee,
occur with respect to any and all Employee Awards outstanding as of such Change
of Control and (y) shall occur with respect to any and all Director Stock
Options outstanding as of such Change of Control:
(i) automatic maximization of performance standards, lapse of all
restrictions and acceleration of any time periods relating to the
exercise, realization or vesting of such Awards so that such Awards may be
immediately exercised, realized or vested in full on or before the
relevant date fixed in the Award Agreement;
(ii) performance shares or performance units shall be paid
entirely in cash;
(iii) upon exercise of a stock option or an incentive stock option
(collectively, an "Option") during the 60-day period from and after the
date of a Change of Control, the Participant exercising the Option may in
lieu of the receipt of Common Stock upon the exercise of the Option, elect
by written notice to the Corporation to receive an amount in cash equal to
the excess of the aggregate Value (as defined below) of the shares of
Common Stock covered by the Option or portion thereof surrendered
determined on the date the Option is exercised, over the aggregate
exercise price of the Option (such excess is referred to herein as the
"Aggregate Spread"); provided, however, and notwithstanding any other
provision of this Plan, if the end of such 60-day period from and after
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the date of a Change of Control is within six months of the date of grant
of an Option held by a Participant who is a Reporting Person, such Option
shall be canceled in exchange for a cash payment to the Participant equal
to the Aggregate Spread on the day which is six months and one day after
the date of grant of such Option. As used in this Section 13(a)(iii) the
term "Value" means the higher of (i) the highest Fair Market Value during
the 60-day period from and after the date of a Change of Control and (ii)
if the Change of Control is the result of a transaction or series of
transactions described in paragraphs (i) or (iii) of the definition of
Change of Control, the highest price per share of the Common Stock paid in
such transaction or series of transactions (which in the case of paragraph
(i) shall be the highest price per share of the Common Stock as reflected
in a Schedule 13D filed by the person having made the acquisition);
(iv) if a Participant's employment terminates for any reason other
than retirement or death following a Change of Control, any Options held
by such Participant may be exercised by such Participant until the earlier
of three months after the termination of employment or the expiration date
of such Options; and
(v) all Awards become non-cancelable.
(b) A "Change of Control" of the Corporation shall be deemed to have
occurred upon the happening of any of the following events:
(i) the acquisition, other than from the Corporation, by any
individual, entity or group (within the meaning of Section 13(d)(3) or
14(d)(2) of the Exchange Act) of beneficial ownership of 20% or more of
either the then outstanding shares of Common Stock of the Corporation or
the combined voting power of the then outstanding voting securities of the
Corporation entitled to vote generally in the election of directors;
provided, however, that any acquisition by the Corporation or any of its
Subsidiaries, or any employee benefit plan (or related trust) of the
Corporation or its Subsidiaries, or any corporation with respect to which,
following such acquisition, more than 50% of, respectively, the then
outstanding shares of common stock of such corporation and the combined
voting power of the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors is then
beneficially owned, directly or indirectly, by all or substantially all of
the individuals and entities who were the beneficial owners, respectively,
of the Common Stock and voting securities of the Corporation immediately
prior to such acquisition in substantially the same proportion as their
ownership, immediately prior to such acquisition, of the then outstanding
shares of Common Stock of the Corporation or the combined voting power of
the then outstanding voting securities of the Corporation entitled to vote
generally in the election of directors, as the case may be, shall not
constitute a Change of Control;
(ii) individuals who, as of January 1, 1995, constitute the Board
as of the date hereof (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board, provided that any individual
becoming a director subsequent to such date whose election, or nomination
for election by the Corporation's shareholders, was approved by a vote of
at least a majority of the directors then comprising the Incumbent Board
shall be considered as though such individual were a member of the
Incumbent Board, but excluding, for this purpose, any such individual
whose initial assumption of office is in connection with an actual or
threatened election contest relating to the election of the directors of
the Corporation (as such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act); or
(iii) approval by the shareholders of the Corporation of a
reorganization, merger or consolidation of the Corporation, in each case,
with respect to which the individuals and entities who were the respective
beneficial owners of the Common Stock and voting securities of the
Corporation immediately prior to such reorganization, merger or
consolidation do not, following such reorganization, merger or
consolidation, beneficially own, directly or indirectly, more than 50% of,
respectively, the then outstanding shares of Common Stock and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the
corporation resulting from such reorganization, merger or consolidation,
or a complete liquidation or dissolution of the Corporation or of the sale
or other disposition of all or substantially all of the assets of the
Corporation.
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(c) If any right granted pursuant to Section 13(a) would make a Change of
Control transaction ineligible for pooling of interests accounting that but for
Section 13(a) would otherwise be eligible for such accounting treatment, the
Committee shall have the ability to substitute the cash payable pursuant to
Section 13(a) with Common Stock with a Fair Market Value equal to the cash that
would otherwise be payable thereunder.
14. GOVERNING LAW
To the extent that federal laws do not otherwise control, this Plan shall
be construed in accordance with and governed by the law of the State of Ohio.
15. INDEMNIFICATION
Each person who is or shall have been a member of the Committee or of the
Board shall be indemnified and held harmless by the Corporation against and from
any loss, cost, liability or expense that may be imposed upon or reasonably
incurred by him in connection with or resulting from any claim, action, suit or
proceeding to which he may be a party or in which he may be involved by reason
of any action taken or failure to act under this Plan and against and from any
and all amounts paid by him in settlement thereof, with the Corporation's
approval, or paid by him in satisfaction of any judgment in any such action,
suit or proceeding against him, provided he shall give the Corporation an
opportunity, at its own expense, to handle and defend the same before he
undertakes to handle and defend it on his own behalf. The foregoing right of
indemnification shall not be exclusive of any other rights of indemnification to
which such persons may be entitled under the Corporation's Articles of
Incorporation or Code of Regulations, as a matter of law, or otherwise, or any
power that the Corporation may have to indemnify them or hold them harmless.
16. DEFERRAL OF AWARD SHARES
The Committee may from time to time establish procedures pursuant to which
a Participant may elect to defer receipt of all or a portion of the Shares
subject to such Award and/or to receive cash at such later time or times in lieu
of such deferred Shares, all on such terms and conditions as the Committee shall
determine. If any such deferrals are permitted, then notwithstanding Section 9
above, a Participant who elects such deferral shall not have any rights as a
stockholder with respect to such deferred Shares unless and until Shares are
actually delivered to the Participant with respect thereto, except to the extent
otherwise determined by the Committee.
17. SAVINGS CLAUSE
This Plan is intended to comply in all aspects with applicable law and
regulation, including, with respect to those Employees who are Reporting
Persons, Rule 16b-3 under the Exchange Act. In case any one or more of the
provisions of this Plan shall be held invalid, illegal or unenforceable in any
respect under applicable law and regulation (including Rule 16b-3), the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby and the invalid, illegal or
unenforceable provision shall be deemed null and void; however, to the extent
permissible by laws, any provision which could be deemed null and void shall
first be construed, interpreted or revised retroactively to permit this Plan to
be construed in compliance with all applicable laws (including Rule 16b-3) so as
to foster the intent of this Plan. Notwithstanding anything in this Plan to the
contrary, the Committee, in its sole and absolute discretion, may bifurcate this
Plan so as to restrict, limit or condition the use of any provision of this Plan
to Participants who are Reporting Persons without so restricting, limiting or
conditioning this Plan with respect to other Participants.
18. EFFECTIVE DATE AND TERM
The effective date of this Plan is April 17, 1995 subject to its approval
by the Corporation's shareholders at their next annual meeting or at any
adjournment thereof, within twelve months following the date of its adoption by
the Board. This Plan shall remain in effect until terminated by the Board.
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EXHIBIT 10.3
------------
BANC ONE CORPORATION
INVESTMENT OPTION PLAN
PREAMBLE
--------
BANC ONE CORPORATION (the "Company") hereby establishes the BANC ONE
CORPORATION Investment Option Plan (the "Plan"), effective as of the date
specified herein.
The purpose of the Plan is to provide a vehicle for the payment of
compensation, otherwise payable to participating Employees, with options. The
Plan is intended to be a nonqualified option plan within the meaning of Section
83 of the Internal Revenue Code, as amended, and is not intended to be covered
by the provisions of the Employee Retirement Income Security Act of 1974, as
amended.
ARTICLE I
DEFINITIONS
As used in this Plan, the following capitalized words and phrases have
the meanings indicated, unless the context requires a different meaning:
1.1 "BENEFICIARY" means the person or persons who, pursuant to the
Plan, are entitled to exercise Options after a Participant's death.
1.2 "BOARD OF DIRECTORS" OR "BOARD" means the Board of Directors of the
Company.
1.3 "CODE" means the Internal Revenue Code of 1986, any amendments
thereto, and any regulations on rulings issued thereunder.
1.4 "COMMITTEE" means the Personnel and Compensation Committee of the
Board, which is comprised of two or more non-Employee Directors, and which shall
have the authority of said Board with respect to this Plan.
1.5 "COMPANY" means BANC ONE CORPORATION, or any successor thereto.
1.6 "DESIGNATED PROPERTY" means shares of regulated investment
companies or any other property, except for cash, cash equivalents, or
securities of the Company or its affiliates, designated by the Committee as
subject to purchase through the exercise of an Option.
1.7 "EFFECTIVE DATE" means August 1, 1998.
1.8 "EMPLOYEE" means any individual who is employed by the Employer.
1.9 "EMPLOYER" means BANC ONE CORPORATION, including all of its Related
Companies and any successor corporation or other entity resulting from a merger
or consolidation into or with the Company or a transfer or sale of substantially
all of the assets of the Employer.
<PAGE> 2
1.10 "EXERCISE DATE" means, with respect to any Option, the date
determined under Section 3.2.
1.11 "EXERCISE PRICE" means the price that a Participant must pay in
order to exercise an Option.
1.12 "FAIR MARKET VALUE" means the closing price of the Designated
Property reflected in The Wall Street Journal, or other recognized market
source, as determined by the Committee, on the applicable date of reference
hereunder, or if there is no sale on such date, then the closing price on the
last previous day on which a sale is reported.
1.13 "GRANT DATE" means, with respect to any Option, the date on which
an Option first becomes effective, which date will not be earlier than the date
on which the Committee takes action to award the Option.
1.14 "OPTION" means the right of a Participant, granted by the Company
in accordance with the terms of this Plan, to purchase Designated Property from
the Company at the Exercise Price established under Section 2.3.
1.15 "OPTION AGREEMENT" means an agreement, the form of which has been
approved by the Committee, acknowledging the issuance of the Option(s) and
setting forth any terms that are not specified in this Plan.
1.16 "PARTICIPANT" means any individual who has received an award of
Options in accordance with Section 2.2 that has not either expired or been
exercised.
1.17 "PLAN" means the BANC ONE CORPORATION Investment Option Plan, as
set forth herein and as from time to time amended.
1.18 "RELATED COMPANY" means a subsidiary or any entity, which, on the
Grant Date of an Option, is a member of a common controlled group with BANC ONE
CORPORATION pursuant to Code Section 1563 (a)(1).
1.19 "SEVERANCE OF EMPLOYMENT" means a Participant whose resignation
has been requested by an executive or officer of the Employer under threat of
discharge due to reorganization, change of control, or merger of the Company as
designated by the Company.
1.20 "SHARE" means shares of any publicly traded mutual fund underlying
an Option.
1.21 "SPREAD" means the difference between the Exercise Price and the
Fair Market Value of the Designated Property underlying an Option.
1.22 "TERMINATION FOR CAUSE" means a Participant who resigns or
involuntarily terminates due to employee misconduct as determined by the Company
pursuant to established employment guidelines.
1.23 "TERMINATION OF EMPLOYMENT" means a Participant separation from
the service of the Employer for any reason other than death, Disability or
Retirement. For purposes of this Section: 1)
2
<PAGE> 3
"Disability" shall mean eligibility for benefits under BANC ONE CORPORATION's
Long Term Disability Plan or any other long term disability plans sponsored by
the Company; 2) "Retirement" shall mean termination of employment with
eligibility for immediate retirement benefits under the BANC ONE CORPORATION
Cash Balance Pension Plan or any other qualified defined benefit plan sponsored
by the Company.
1.24 "VOLUNTARY TERMINATION OF EMPLOYMENT" means a Participant who
resigns from employment either by written resignation with
notice or by simply abandoning employment at some point with or
without notice.
1.25 RULES OF CONSTRUCTION
1.25.1 GOVERNING LAW. The construction and operation of this Plan are
governed by the laws of the state of Ohio.
1.25.2 HEADINGS. The headings of Articles, Sections and Subsections
are for reference only and are not to be utilized in
construing the Plan.
1.25.3 GENDER. Unless clearly inappropriate, all pronouns of whatever
gender refer indifferently to persons or objects of any
gender.
1.25.4 SINGULAR AND PLURAL. Unless clearly inappropriate, singular
terms refer also to the plural number and vice versa.
1.25.5 SEVERABILITY. If any provision of this Plan is held to be
illegal or invalid for any reason, the remaining provisions
are to remain in full force and effect and to be construed and
enforced in accordance with the purposes of the Plan as if the
illegal or invalid provision did not exist.
ARTICLE II
AWARD OF OPTIONS
2.1 ELIGIBILITY FOR AWARDS. Awards of Options may be made to any
Employee selected by the Committee. In making this selection, and in determining
the form and amount of Options, the Committee will consider any factors it deems
relevant.
2.2 AWARDING OF OPTIONS. Recipients of Options are determined from time
to time by the Committee. The Committee may condition the award of any Option on
the surrender by the Participant of right to receive salary, bonus or other cash
compensation otherwise payable in the future by the Employer to the Participant.
The Committee may also award other options at its discretion. Awards become
effective on the Grant Date. Awards may be made at any time on or after the
Effective Date and prior to the termination of the Plan.
2.3 SELECTION OF DESIGNATED PROPERTY; EXERCISE PRICE; OTHER TERMS. When
an Option is awarded, the Committee will specify the Designated Property that
may be purchased by exercise of the Option, the Grant Date, and will fix any
terms of the Option not specified in the Plan. On the day the Option is awarded,
the Designated Property that may be purchased by exercising the Option must be
3
<PAGE> 4
readily tradable on an established market or consist wholly of interests readily
tradable on an established market. Unless otherwise specified in a particular
Option Agreement, the Exercise Price will equal the greater of twenty-five
percent (25%) of the Fair Market Value of the Designated Property on the Grant
Date or on the Exercise Date.
2.4 ACQUISITION OF DESIGNATED PROPERTY. If the Company acquires
Designated Property purchasable upon the exercise of an Option, such Designated
Property must:
(a) not be subject to any security interest, whether perfected or
not, or to any option or contract under which any other person
may acquire any interest in it; and
(b) be readily tradable on an established market or consist wholly
of interests in property that is readily tradable on an
established market.
2.5 EFFECT OF DIVIDENDS AND DISTRIBUTIONS WITH RESPECT TO DESIGNATED
PROPERTY UNDER OPTION. All dividends and distributions with respect to
Designated Property will be treated as if reinvested in additional property of
the same kind (or as nearly the same kind as feasible, if the property of the
same kind is not available), and will immediately be subject to the Option
related to the Designated Property. However, the Exercise Price of an Option to
purchase Designated Property will be adjusted to include the greater of
twenty-five percent (25%) of the fair market value of the reinvestment on the
date of the reinvestment or the date of exercise of the Option. The reinvestment
of dividends and distributions does not extend or modify the term or other
conditions of the Option, other than adjusting the Exercise Price and amount of
Designated Property.
2.6 SUBSTITUTION OF OTHER PROPERTY FOR DESIGNATED PROPERTY. At any time
after the grant of an Option, the Committee may, in its discretion, substitute
other property of equal value for Designated Property subject to that Option.
After substitution, such Option shall not be exercisable for six months or the
period specified in the Option Agreement, whichever is less.
ARTICLE III
EXERCISE OF OPTIONS
3.1 PERIOD FOR EXERCISE OF OPTIONS. Except as otherwise provided in the
Plan, Options may be exercised by a Participant at any time during the period
beginning six months after the Grant Date and ending on the earliest of:
(a) nine (9) months after the Grant Date, or if later, sixty (60)
days following the end of the calendar year in which
Termination of Employment occurs as a result of the
Participant's Voluntary Termination of Employment or
Termination for Cause,
(b) one (1) year after the Participant's Termination of Employment
as a result of the Participant's death,
(c) three (3) years after Severance of Employment pursuant to
Company programs not designated under (d) below,
4
<PAGE> 5
(d) ten (10) years after the Participant's Termination of
Employment, if such Participant terminates due to retirement,
disability, designated Severance of Employment, or other
situations designated by the Company, or
(e) twenty (20) years after the Grant Date.
If the Company has a Change of Control, as defined in the Amended and Restated
BANC ONE CORPORATION Compensation Deferral Plan, all Awards of Options hereunder
may be exercised by the Participant as of the first business day following the
change of control.
If the Participant is or may be an employee whose remuneration from the Company
is subject to Code Section 162(m), as determined by the Committee, the Committee
may condition, limit and/or delay the exercise of such Participant's Options in
such manner as the Committee may in good faith determine to be necessary, or
desirable, in order to prevent disallowance of the Company's deductions by
reason of Code Section 162(m) with respect to the exercise of such Options.
An Option may not be exercised during the a Participant's lifetime except by the
Participant or, in the event of the Participant's legal incapacity, by his
guardian or legal representative acting in a fiduciary capacity on behalf of the
Participant under state law and court supervision. If a Participant dies before
all of the Options have been exercised, any Options that remain outstanding may
be exercised by the Beneficiary, subject to all of the terms, conditions, and
restrictions applicable to the Options had death not occurred.
Any Option that has not been exercised by the close of business on the last day
provided for under the Plan or in the Option Agreement for exercise thereof (or
under any extension thereof) will expire automatically and will not thereafter
be exercisable.
3.2 PROCEDURE FOR EXERCISING AN OPTION. A Participant may exercise an
Option by giving written notice to the Committee. Such written notice of
exercise must be in such a form as the Committee may require, must be properly
completed, and must be mailed or delivered to the Committee, or to such other
person(s) designated pursuant to Section 5.1. Options may be exercised, in any
combinations or amounts subject to the restrictions set for in the Plan, except
that the Committee may from time to time require a minimum number of Options to
be exercised at one time, but such minimum number will not be designed to impose
any substantial restriction on a Participant's ability to exercise Options.
Except as otherwise provided in the Plan or in any Option Agreement, the
"Exercise Date" of an Option will be the first Business Day on which the
Committee is in actual receipt of the written notice of exercise. Upon exercise
of an Option, the Participant must pay the Exercise Price of the Option to the
Company. The consideration to be paid in satisfaction of the Exercise Price will
be cash in the form of currency, check, or other cash equivalent, in each case
acceptable to the Company. The Exercise Price must be paid in full before the
delivery of the Designated Property will be made in accordance with Section 3.4.
3.3 TAX WITHHOLDING. Whenever Designated Property is to be delivered
upon exercise of an Option under the Plan, the Company will require as a
condition of such delivery (a) a cash payment by the Participant of an amount
sufficient to satisfy all federal, state, local, foreign or other tax
withholding requirements related thereto, (b) the withholding of such amount
from any Designated Property to be delivered to the Participant, (c) the
withholding of such amount from compensation
5
<PAGE> 6
otherwise due to the Participant, or (d) any combination of the foregoing, at
the election of the Participant with the consent of the Company. As soon as
practicable following receipt by the Company of a properly completed notice of
exercise of an Option from a Participant, the Company will notify the
Participant of the withholding amount determined by the Company.
3.4 DELIVERY OF DESIGNATED PROPERTY. Following the Exercise Date and
receipt by the Company of both the Exercise Price and tax withholding or
authorization to withhold, the Company will use its reasonable best efforts to
deliver the Designated Property to the Participant, or cause such delivery of
the Designated Property to the Participant to occur within ten business days.
The Company will not, however, be required to issue any fractional shares of
Designated Property, and the Committee may provide for the elimination of
fractions or for the settlement thereof in cash. In the event that the listing,
registration or qualification of the Option or the Designated Property on any
securities exchange or under any state or federal law, or the consent or
approval of any governmental regulatory body, is necessary as a condition of, or
in connection with, the exercise of the Option, then the Option will not be
exercised in whole or in part until such listing, registration, qualification,
consent or approval has been effected or obtained.
3.5 VESTING OF OPTIONS. Participants shall at all times be 100% vested
in Options granted by the Committee under this Plan unless otherwise provided in
the Option Agreement.
3.6 INALIENABILITY OF OPTIONS. No Option granted under this Plan may be
transferred, assigned or alienated, except as provided herein, and no Option
shall be subject to execution, attachment or similar process, and any attempt to
transfer, assign, alienate, execute upon attach, or subject to process any
Option will be void.
3.7 BENEFICIARY. The Committee may permit a Participant to designate a
Beneficiary on a form therefor prescribed by the Committee on which the
Participant may designate a Beneficiary (and change a previous designation) by
filing the prescribed form with the Committee. If so prescribed by the
Committee, such form may allow the designation of multiple Beneficiaries and/or
successor Beneficiary or successor Beneficiaries. The consent of the
Participant's current Beneficiary is not required for a change of Beneficiary,
and no Beneficiary has any rights under this Plan except as are provided by its
terms. The rights of a Beneficiary who predeceases the Participant immediately
terminate. Unless a Beneficiary has been designated in accordance with this
Section 3.7 and such Beneficiary survives the Participant, the Beneficiary of
any Participant is the estate.
ARTICLE IV
AMENDMENT OR TERMINATION OF THE PLAN
4.1 COMPANY'S RIGHT TO AMEND OR TERMINATE PLAN. The Board may, in its
sole discretion, at any time and from time to time, amend, in whole or in part,
any of the provisions of this Plan or may terminate it as a whole or with
respect to any Participant or group of Participants. Any such amendment is
binding upon all Participants and Beneficiaries, the Committee, the Company, the
Employer, and all other affected parties. Any action of the Board amending or
terminating the Plan becomes effective as of the date specified therein. Any
action of the Board amending or terminating the Plan will not affect adversely
any Option awarded prior to such action of the Board, except for amendments that
would be permissible amendments if made by the Committee to an Option Agreement
under Section 4.2(a), Section 4.2(b), or Section 4.2(d). The Board will provide
written
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<PAGE> 7
notice of any such amendment or termination of the Plan to the Committee, the
Company, the Employer, and any other affected parties, including Participants
and Beneficiaries. as soon as practicable following the adoption of such
amendment or termination.
4.2 AMENDMENT OF OPTIONS. An Option Agreement may be amended by the
Committee at any time if the Committee determines that an amendment is necessary
or advisable as a result of:
(a) any addition to or change in the Code, a federal or state
securities law or any other law or regulation, which occurs
after the Grant Date and by its terms applies to the Option,
(b) any substitutions of Designated Property pursuant to Section
2.6,
(c) any Plan amendment or termination pursuant to Section 4.1,
provided that the amendment does not materially affect the
terms, conditions and restrictions applicable to the Option,
or
(d) any circumstances not specified in Paragraphs (a), (b), (c),
with the consent of the Participant.
Any such amendment by the Committee is binding upon the affected Participant,
any Beneficiary of the Participant, and all other parties in interest. The
Committee will provide written notice to the affected Participant as soon as
practicable after the Committee action amending the Option Agreement.
ARTICLE V
ADMINISTRATION
5.1 PLAN ADMINISTRATION. This Plan shall be administered by the
Committee. The Committee shall periodically make determinations with respect to
participation of Employees in this Plan and, except as otherwise required by law
or this Plan, the Option Agreement terms including vesting schedules, price,
restriction or option period, dividend rights, post-retirement and termination
rights, payment alternatives such as cash or mutual fund units, or other means
of payment consistent with the purpose of this Plan, and such other terms and
conditions as the Committee deems appropriate. Except as otherwise required by
this Plan, the Committee shall have authority to make determinations pursuant to
any Plan provision or Option Agreement which shall be final and binding on all
persons. The Committee may designate persons other than its members to carry out
its responsibilities under such conditions or limitations as it may set, other
that its authority with regard to Options granted to Reporting Persons.
5.2 POWERS OF THE COMMITTEE. For purposes of the Plan, the Committee
will have, in addition to any other powers conferred by the Plan, by law or in
Section 5.1, the following powers:
(a) to substitute Designated Property as provided in Section 2.6;
(b) to maintain all records necessary for the administration of
the Plan;
(c) to prescribe, amend, and rescind rules for the administration
of the Plan to the extent that they are not inconsistent with
the terms thereof;
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<PAGE> 8
(d) to appoint such individuals and subcommittees as it deems
desirable for the conduct of its affairs and the
administration of the Plan;
(e) to employ counsel, accountants and other consultants to aid in
exercising its powers and carrying out its duties under the
Plan; and
(f) to perform any other acts necessary and proper for the conduct
of its affairs and the administration of the Plan, except
those reserved by the Board.
5.3 DETERMINATIONS BY THE COMMITTEE. The Committee will interpret and
construe the Plan and the Option Agreements, and its interpretations
determinations will be conclusive and binding on all Participants, Beneficiaries
and any other persons claiming an interest under the Plan or any Option
Agreement.
5.4 INDEMNIFICATION. The Company will indemnify and hold harmless each
member of the Committee and any persons acting on behalf of the Committee
against any and all expenses and liabilities arising out of such member's action
or failure to act in such capacity, excepting only expenses and liabilities
arising out of such member's own willful misconduct or gross negligence.
(a) Expenses and liabilities against which a member of the
Committee or any persons acting on behalf of the Committee is
indemnified hereunder will include, without limitation, the
amount of any settlement or judgment, costs, counsel fees and
related charges reasonably incurred in connection with a claim
asserted or a proceeding brought against them or the
settlement thereof.
(b) This right of indemnification will be in addition to any other
rights to which any member of the Committee or any persons
acting on behalf of the Committee may be entitled.
(c) The Company may, at its own expense, settle any claim asserted
or proceeding brought against any member of the Committee or
any persons acting on behalf of the Committee when such
settlement appears to be in the best interests of the Company,
with such member's consent which will not be unreasonably
withheld.
ARTICLE VI
MISCELLANEOUS PROVISIONS
6.1 NO RIGHTS TO DESIGNATED PROPERTY. Neither the Participant, a
Beneficiary nor any assignee will be, or will have any of the rights and
privileges of a shareholder or owner with respect to any Designated Property
purchasable or issuable upon the exercise of an Option, prior to the date of
exercise of such Option.
6.2 PRIORITY TO DESIGNATED PROPERTY. Designated Property shall be the
property of the Company and subject to the claims of the Company's creditors in
the event of the Company's bankruptcy or insolvency. No Participant will have
any priority claim to, security interest in, or any other right to Designated
Property superior to the rights of a general creditor of the Company.
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<PAGE> 9
6.3 NO RIGHT TO CONTINUED EMPLOYMENT. Nothing contained in the Plan
will be deemed to give any person the right to be retained in the employ of the
Company or any Related Company, or to interfere with the right of the Company to
discharge any person at any time without regard to the effect that such
discharge will have upon such person's rights or potential rights, if any, under
the Plan. The provisions of the Plan are in addition to, and not a limitation
on, any rights that a Participant may have against the Company by reason of any
employment or other agreement with the Company.
6.4 RELATION TO OTHER BENEFITS. Any economic or other benefit to the
Participant under the Plan or any Option will not be taken into account in
determining any benefits under any profit-sharing, retirement, or other benefit
or compensation plan or arrangement maintained by the Company or the Employer,
and will not affect the amount of any life insurance coverage available under
any life insurance plan or arrangement covering employees of the Employer,
except to the extent provided under such plan or arrangement.
6.5 NOTICES. Unless otherwise specified in an Option Agreement, any
notice to be provided under the Plan to the Committee will be mailed (by
certified mail, postage prepaid) or delivered to the Committee in care of the
Company at its executive offices, and any notice to the Participant will be
mailed (by certified mail, postage prepaid) or delivered to the Participant at
the current address shown on the payroll records of the Company. No notice will
be binding on the Committee until received by the Committee, and no notice will
be binding on the Participant until received by the Participant.
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<PAGE> 1
EXHIBIT 10.4
------------
BANC ONE CORPORATION
AMENDED AND RESTATED DIVIDEND EQUIVALENT UNIT PLAN
PURPOSE
-------
BANC ONE CORPORATION ("the Corporation") hereby establishes the "Dividend
Equivalent Unit Plan" ("the Plan") for the Chairman and the President of the
Corporation. 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. The Plan shall constitute an
unfunded "top-hat" arrangement under Title I of the Employee Retirement Income
Security Act of 1974, as amended.
Effective Date
- --------------
The Plan was originally effective as of April 18, 1994. It was restated
effective as of April 17, 1995 and further amended on August 15, 1996. This
amended and restated version of the Plan is effective as of August 1, 1998,
unless specifically indicated in provisions throughout the Plan. The Plan shall
be in effect only for the Dividend Equivalent Units granted by the Committee at
its meetings on April 18, 1994 and April 17, 1995. No other Dividend Equivalent
Units shall be granted under this 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 - Committee
- -----------------------
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 Exchange Act of 1934, as
amended.
Section 1.2 - Company
- ---------------------
BANC ONE CORPORATION, a bank holding company under the Bank Holding Company Act
of 1956, or any successor thereto.
Section 1.3 - Disability
- ------------------------
The inability of the Participant to perform the requirements of his position
with the Company by reason of a medically determinable physical or mental
impairment that can be expected to result in death or can be expected to last
for a continuous period of not less than twelve (12) months, as
<PAGE> 2
supported by medical evidence acceptable to the Committee. With respect to any
period which the Participant qualifies for Social Security Disability benefits
based on his physical or mental impairment, he shall automatically be deemed to
meet the requirements of this Section 1.3.
Section 1.4 - Dividend Equivalent Unit
- --------------------------------------
The right to receive payments equal to the dividends paid to a holder of a share
of common stock of the Corporation over a five (5) year period from the date of
grant of such Dividend Equivalent Units.
Section 1.5 - Dividend Equivalent Payment
- -----------------------------------------
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.
Section 1.5 - Participant
- -------------------------
Any Chairman or President of the Corporation who has been selected for
participation in the Plan by the Committee.
Section 1.6 - Related Company
- -----------------------------
A subsidiary or any entity which is a member of a common controlled group with
BANC ONE CORPORATION pursuant to Section 1563(a)(1) of the Internal Revenue
Code.
Section 1.7 - Retirement
- ------------------------
Early or Normal Retirement as defined under the BANC ONE CORPORATION Cash
Balance Pension Plan, or any successor plan thereto.
ARTICLE II
PARTICIPATION
Section 2.1 - Eligibility
- -------------------------
Participation in the Plan is limited to the employees holding the position of
Chairman or President of the Corporation. Participation may be revoked at any
time by the Committee. An employee whose participation is revoked shall be
notified, in writing, of such revocation as soon as practicable following such
action.
Section 2.2 - Dividend Equivalent Unit Award Determination
- ----------------------------------------------------------
The number of Dividend Equivalent Units granted to a Participant will be those
determined by the Committee at its meetings on April 18, 1994 and April 17,
1995.
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<PAGE> 3
Section 2.3 - Accrual of Dividend Equivalent Payments
- -----------------------------------------------------
Dividend Equivalent Payments will be credited to a non-qualified deferred
compensation account, established by the Company in the name of the Participant,
to which Dividend Equivalent Payments made in accordance with this Plan are
credited. The Dividend Equivalent Payment date will be the date dividends are
paid to shareholders of the Corporation. The Dividend Equivalent Payment amount
will be reduced for any taxes due at the time of crediting the account.
Section 2.4 - Participant Directed Accounts
- -------------------------------------------
The Participant will direct the Corporation to invest the cash balance from the
accumulation of Dividend Equivalent payments into one or more of the alternative
investment portfolios available under the BANC ONE CORPORATION Compensation
Deferral Plan, or any successor plan thereto, with the exception that from and
after August 15, 1996, no funds will be invested in the BANC ONE Stock Fund, or
any successor fund thereto. In the absence of an investment election made by the
Participant, all new deferrals and previously deferred funds will be invested in
a money market account.
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 Company or a Related Company for
payment of any benefit hereunder. No Participant, Participant's spouse or any
other person shall have any interest in any particular assets of the Company or
any Related Company 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 Company with respect to any
rights under the Plan. Nothing contained in the Plan shall constitute a guaranty
by the Company or other entity or person that the assets of the Company will be
sufficient to pay any benefit hereunder.
Section 2.6 - Statement of Accounts
- -----------------------------------
At least once annually, the Company 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 Company
deems appropriate.
ARTICLE III
DISTRIBUTIONS
Section 3.1 - Timing of Distributions
- -------------------------------------
In the event a Participant's employment is terminated for any reason, the
Participant will cease to be eligible for Plan participation and the accumulated
account balance will be distributed in a lump sum payment to the Participant as
soon as administratively feasible on or after January 1st coincident with or
next following the later of: (i) the Participant's termination of employment
from the Company or (ii) the date the Participant is no longer a statutory
director, an emeritus director, an advisory board member, or an honorary
director of the Company or a Related Company.
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<PAGE> 4
In the event a Participant's employment is terminated for reasons of Death or
Disability, the accumulated balance will be distributed in a lump sum payment to
his designated beneficiary as soon as administratively feasible following the
date of Death or termination of employment due to Disability.
Section 3.2 - Cash Payments; Determination of Amount
- ----------------------------------------------------
All distributions to Participants shall be made in the form of cash, with
exception of those portions of the Participant's account which are invested in
common stock of the Company and which can or must be distributed in kind as
provided in Schedule C. The amount to be distributed shall be determined based
on the fair market value of the balance eligible for distribution 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 3.5 - 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 Company, with the approval of the Committee, may accelerate the payment of
any amounts eligible for distribution 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.
No distribution or payment shall be allowed hereunder unless, in the judgment of
the Company, the Committee or its appointees, such distribution or payment will
not constitute a Discretionary Transaction under Securities and Exchange
Commission Rule 16b-3 which will subject the Participant to potential liability
under Section 16(b) of the Exchange Act or jeopardize or make less likely the
ability to properly account for a transaction in which the Company is
participating and which the Company wishes to account for as a "pooling of
interests".
4
<PAGE> 5
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 delivery to the Company of all
necessary documents. To the extent that the Company is required to withhold any
current taxes at the time of deferral, the deferral amount shall be reduced by
the required taxes. Determinations by the Company as to withholding shall be
binding on the Participant and applicable Beneficiary(ies).
Section 3.8 - Benefit Plans Treatment of Dividend Equivalent Payments as
- ------------------------------------------------------------------------
Compensation.
- -------------
Amounts paid under this Plan will not be considered compensation for purposes of
other Company qualified benefit plans unless specifically provided for in such
plans. The treatment of these amounts under any Company non-qualified benefit
plans will be determined according to the provisions of such plans.
Section 3.9 - 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, and
acknowledged by, 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
the Participant's estate.
Section 3.10 - 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 Sections 401(a)(11) and 417 of the
Internal Revenue Code (relating to qualified pre-retirement survivor annuities)
and qualified joint and survivor annuities) or Sections 401(a)(13)(B) and 414(p)
of the Internal Revenue Code (relating to qualified domestic relations orders)
as amended.
ARTICLE IV
ADMINISTRATION
Section 4.1 - Administrative Powers and Duties
- ----------------------------------------------
The Company shall be responsible for the general operation and administration of
the Plan and for carrying out the provisions thereof. The Committee may, in its
discretion, appoint an employee or employees or an administrative committee in
writing to administer the provisions of this Plan. The decision of the Committee
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
5
<PAGE> 6
act by a majority of its members by 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 the Company
and/or participating Related Companies. Notwithstanding the above, the Company
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 Company 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
Company shall prescribe forms for use by the Participants and their
beneficiaries in communicating with the Company and shall establish periods
during which communications may be received, the Company 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 Company and the
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 Company or Committee shall be made in
the sole and absolute discretion of the Company or Committee, as the case may
be.
Section 4.5 - Claims Procedure
- ------------------------------
If required by the Company, any person entitled to benefits hereunder must file
a claim with the Company upon forms furnished by the Company. 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 Committee subject to the provisions of Section 4.6.
The Company shall notify the claimant of its decision within ninety (90) days
after receipt of the claim. However, if special circumstances require, the
Company 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.
6
<PAGE> 7
If the Company 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 Company 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
Committee of the denial.
Section 4.6 - Appeal and Review Procedure
- -----------------------------------------
If a claim has been denied by the Company, the claimant shall have sixty (60)
days after receipt of the denial in which to file a notice of appeal with the
Company. A final determination by the Committee 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 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 Company 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 Company to be assisting such person. Such decision by
the Company shall be made after consultation with those persons, if any, which
may include legal counsel and/or medical personnel, which the Company 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 Company
- -----------------------------------
Any action by the Company under this Plan may be by resolution of its Board, or
alternatively, by the Committee, or by any person or persons, duly authorized by
resolution of said Board to take such action.
Section 4.9 - Exemption from Liability/Indemnification
- ------------------------------------------------------
The members of the Committee and the persons acting on behalf of the Company,
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 Company shall indemnify each member of the Committee, the persons acting on
behalf of the Company and any other employee, officer or director of the Company
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 Committee or performance of an
authorized duty or responsibility for or on behalf of the Company pursuant to
the
7
<PAGE> 8
Plan unless the same is judicially determined to be the result of the
individual's gross negligence or willful misconduct. Such indemnification by the
Company 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.
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
- --------------------------------------
The Company, through action of its Board of Directors, may amend or terminate
this Plan at any time. In the event of a termination, the Company in its sole
discretion may accelerate payment of 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 the Company or
a Related Company to another Related Company or from a Related Company to the
Company, 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 a Change of Control if,
following the Change of Control, the Company, its successor or purchaser is
obligated to pay, or continue to pay, Plan benefits to those Participants
participating in the Plan on the date of such Change of Control, to the extent
such benefits would be otherwise payable as defined in Section 3.1.
8
<PAGE> 9
ARTICLE VI
GENERAL PROVISIONS
Section 6.1 - Offset to Benefits
- --------------------------------
Notwithstanding any provisions of the Plan to the contrary, the Company 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
Company.
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.
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
Sections 202, 301, and 401 of ERISA and the ERISA reporting and disclosure
regulations.
9
<PAGE> 1
EXHIBIT 10.5
------------
AMENDED AND RESTATED
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
Performance Improvement 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 and October 1, 1996 and October 1, 1997. This amended
and restated version of the Plan is effective May 1, 1998 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 Company who shall be
appointed by the Chief Executive Officer of the Company 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 Company as an Insider, such Appeals Committee shall be the
Personnel and Compensation Committee of the Board.
Section 1.2 - Automatic Deferral Award
- --------------------------------------
An award, specified as a deferred award, made from time to time under the Plan
by the Company and set forth in Schedule C, as annexed hereto and made a part
hereof, which will be payable to the Participant in future years upon the
satisfaction of conditions and requirements with respect thereto. The terms and
conditions of each such award shall be annexed hereto and made a part of
Schedule C.
Section 1.3 - Base Salary
- -------------------------
The employee's annual base salary or wage rate with the Company or a Related
Company in effect any given point in time, prior to the application of any
salary deferrals to qualified or non-qualified plans sponsored by the Company or
a Related Company.
1
<PAGE> 2
Section 1.4 - 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.
Section 1.5 - Board
- -------------------
The Board of Directors of the Company.
Section 1.6 - Change of Control
- -------------------------------
(a) The acquisition by any individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a "Person") of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act)
of 20% or more of either (i) the then outstanding Shares or (ii) the combined
voting power of the then outstanding voting securities of the Company entitled
to vote generally in the election of directors (the "Outstanding Company Voting
Securities"); provided, however, that for purposes of this subsection (a), the
following acquisitions shall not constitute a Change of Control: (i) any
acquisition directly from the Company, (ii) any acquisition by the Company,
(iii) any acquisition by any employee benefit plan (or related trust) sponsored
or maintained by the Company or a Related Company or (iv) any acquisition by any
corporation pursuant to a transaction which complies with clauses (i), (ii) and
(iii) of Subsection (c) of this Section 1.6; or
(b) Individuals who, as of October 1, 1997, constitute the Board (the "Incumbent
Board") cease for any reason to constitute at least a majority of the Board;
provided, however, that any individual becoming a director subsequent to the
date hereof whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or
(c) Consummation of a reorganization, merger or consolidation or sale or other
disposition of all or substantially all of the assets of the Company (a
"Business Combination"), in which case, unless, following such Business
Combination, (i) all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly, more than 50% of,
respectively, the then outstanding Shares and the combined voting power of the
then outstanding voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation which as a result of
such transaction owns the Company or all or substantially all of the Company's
assets either directly or through one or more subsidiaries) in substantially the
same proportions as their ownership, immediately prior to such Business
Combination of the Outstanding Company Common Stock and Outstanding Company
Voting Securities, as the case may be, (ii) no Person (excluding any employee
benefit plan (or related trust) of the Company or such corporation resulting
from such Business
2
<PAGE> 3
Combination) beneficially owns, directly or indirectly, 20% or more of,
respectively, the then outstanding shares of common stock of the corporation
resulting from such Business Combination or the combined voting power of the
then outstanding voting securities of such corporation except to the extent that
such ownership existed prior to the Business Combination and (iii) at least a
majority of the members of the board of directors of the corporation resulting
from such Business Combination were members of the Incumbent Board at the time
of the execution of the initial agreement, or of the action of the Board,
providing for such Business Combination; or
(d) Approval by the shareholders of the Company of a complete liquidation or
dissolution of the Company.
Section 1.7 - Committee
- -----------------------
The Personnel and Compensation Committee of the Board which is comprised of two
or more non-employee Directors and which shall have the authority of said Board
with respect to this Plan.
Section 1.8 - Company
- ---------------------
BANC ONE CORPORATION.
Section 1.9 - Exchange Act
- --------------------------
The Securities Exchange Act of 1934, as amended.
Section 1.10 - Incentive Compensation
- -------------------------------------
The monetary award given to an employee under an Incentive Plan.
Section 1.11 - Incentive Plan
- -----------------------------
The BANC ONE CORPORATION Performance Improvement Plan(s) 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 1.12 - Insider
- ----------------------
Any person who is required to file reports of his beneficial ownership of Shares
with the Securities Exchange Commission pursuant to Section 16(a) of the
Exchange Act.
Section 1.13 - Participant
- --------------------------
(a) 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, or
(b) An officer who receives or has received an Automatic Deferral Award, or
(c) A participant under any Prior Plan from and after the effective date of
merger of said Prior Plan with and into the Plan.
3
<PAGE> 4
Section 1.14 - Plan Administrator
- ---------------------------------
BANC ONE CORPORATION.
Section 1.15 - Plan Year
- ------------------------
The twelve (12) month period commencing on January 1 and ending the following
December 31.
Section 1.16 - Prior Plan
- -------------------------
Any base salary or incentive compensation deferral plan of the Company, a
Related Company, or a predecessor or successor thereof, which has been merged
with and into this Plan as set forth from time to time on the attached Schedule
D which is made a part hereof.
Section 1.17 - Related Company
- ------------------------------
A subsidiary or any entity which is a member of a common controlled group with
BANC ONE CORPORATION pursuant to Internal Revenue Code Section 1563(a)(1).
Section 1.18 - Shares
- ---------------------
Common shares of BANC ONE CORPORATION, or any successor thereto.
ARTICLE II
PARTICIPATION
Section 2.1 - Eligibility
- -------------------------
Any officer of the Company (a) who is designated by the Plan Administrator as a
participant in one or more Incentive Plans and (b) who is awarded compensation
under one or more Incentive Plans, or (c) who receives an Automatic Deferral
Award. 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
Twenty Five Thousand Dollars ($125,000), as indexed from time to time by the
Company 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 is in effect and adjusted from time to
time pursuant to Internal Revenue Code Section 401(a)(17); provided, however,
that with respect to 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.
4
<PAGE> 5
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 and Automatic Deferral Awards
- -------------------------------------------------------------
(a) Deferral of Annual Incentive Compensation. With respect to elections made
for calendar years prior to 1999 under Incentive Plans which make compensation
awards annually or less frequently than annually, a Participant may elect, on or
before December 31 of any calendar year, to authorize the Company 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 and for all succeeding
calendar years. Commencing for calendar years after 1998, such election must be
made on or before the date such award amount is determined, as provided by the
Plan Administrator, but not later than August 1st of the calendar year preceding
the year in which the award is made. Any such election shall remain in effect
until the earlier of the following events: (i) the Participant terminates his
election pursuant to Subsection 2.3(g) of this Plan, or (ii) the Participant
ceases to be an employee of the Company or a Related Company.
(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 Company 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 and for all succeeding calendar years; provided such
deferral may be limited by the Company 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. Commencing for calendar years after 1998, such election must be made on
or before the date such award amount is determined, as provided by the Plan
Administrator, but not later than August 1st of the calendar year preceding the
year in which the award is made. Any such election shall remain in effect until
the earlier of the following events: (i) the Participant terminates his election
pursuant to Subsection 2.3(g) of this Plan, or (ii) the Participant ceases to be
an employee of the Company or a Related Company.
(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 Company to deduct and withhold any portion of his Base Salary which he will
earn during the calendar year for which the election applies and for all
succeeding calendar years. 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. Any such election shall remain in effect
until the earlier of the following events: (1) the Participant terminates his
election pursuant to Subsection 2.3(g) of this Plan, or (ii) the Participant
ceases to be an employee of the Company or a Related Company.
(d) Deferrals Pursuant to Company Stock Incentive Plan(s). To the extent that
the Committee has approved deferral of restricted stock or proceeds from stock
option exercises, an employee who has elected such deferral pursuant to the
terms and conditions established for such deferrals under long term stock
incentive plan(s) designated by the Company, will become a Participant upon the
5
<PAGE> 6
effective date of the deferral and such deferral will automatically be held
pursuant to the terms of this Plan.
(e) Newly Eligible Officers. If an officer of the Company first becomes eligible
to participate in the Plan during a given 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 remainder of such calendar year and for all succeeding
calendar years, if he makes such election within thirty (30) days of becoming
eligible to participate in the Plan. Such election shall be made in accordance
with Subsections 2.2(a), (b) and (c) as applicable.
(f) Minimum Amounts. The minimum amount of such Compensation which may be
deferred under subparagraphs (a) and (b) is Five Thousand Dollars ($5,000).
(g) 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. 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 a given 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.
(h) Termination of Election. A Participant may terminate the election to defer
payment of Base Salary or Incentive Compensation under the Plan by written
notice delivered to the Plan Administrator. Such election shall become effective
as of the end of the calendar year in which said notice is given with respect to
compensation payable for subsequent calendar years. Amounts credited to the
Participant's account prior to the effective date of deferral cessation shall
not be affected thereby and shall be distributed pursuant to Section 3.1 of the
Plan.
(i) Automatic Deferral Awards. If a Participant is awarded an Automatic Deferral
Award, no election of or approval by the Participant shall be required with
respect thereto and such award will automatically be held pursuant to the terms
of this Plan and such award.
Section 2.4 - Participant Directed Accounts
- -------------------------------------------
Incentive Compensation and Base Salary deferred at the election of a Participant
and Automatic Deferrals shall be held in the general funds of the Company and
shall be credited to an account established by the Company in the Participant's
name to which deferrals made in accordance with this Plan are credited. Except
with respect to any award for which Participant election is not applicable, each
Participant who chooses to participate in this Plan shall elect, on the form(s)
and 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. With the exception of Automatic Deferral Awards which
specify the investment method, in the absence of an investment election made by
the Participant, all new deferrals and previously deferred funds for which the
selected investment fund has been eliminated by the Committee will be invested a
money market account. 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.
6
<PAGE> 7
Any Participant, including an 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 prior deferral amounts, or any part thereof, may be transferred by
an Insider into or out of capital stock of the Company without the express
approval of the Plan Administrator 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 the Plan Administrator 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 employee
benefit plans of the Company and Related Companies, subject such person to
potential liability under Section 16(b) of the Securities and Exchange Act of
1934; or (ii) subject such person or the Company 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 the Company is
participating and which the Company 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 Company or a Related Company for
payment of any benefit hereunder. No Participant, Participant's spouse or any
other person shall have any interest in any particular assets of the Company or
any Related Company 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 Company with respect to any
rights under the Plan. Nothing contained in the Plan shall constitute a guaranty
by the Company or other entity or person that the assets of the Company 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.
Section 2.7 - Exchange of Accounts for Options
- ----------------------------------------------
Subject to Committee approval, a Participant may be provided the opportunity to
surrender any or all of his accounts under the Plan in exchange for options
under the BANC ONE CORPORATION Investment Option Plan. The Participant's
account(s) shall be valued for such purpose as of the day before the effective
date of the exchange. The opportunity to make such surrender and exchange shall
be made pursuant to the terms and conditions set forth by the Plan Administrator
and as approved by the Committee.
7
<PAGE> 8
ARTICLE III
DISTRIBUTIONS
Section 3.1 - Timing of Distributions
- -------------------------------------
Amounts credited to a Participant under the Plan and which are eligible for
distribution shall be distributed as soon as administratively feasible as
follows:
(a) On or after January 1st on or following the later of (i) the Participant's
retirement or termination of employment from the Company and (ii) the date the
Participant is no longer a statutory director, an emeritus director, an advisory
board member, or an honorary director of the Company or a Related Company;
(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) Upon receipt by the Plan Administrator of the Participant's written request
to receive all of his account; or
(e) After termination of this Plan in accordance with Section 5.1;
provided, however, that no distribution or payment shall be allowed hereunder
unless, in the judgment of the Plan Administrator or its appointees, such
distribution or payment will not constitute a Discretionary Transaction under
Securities and Exchange Commission Rule 16b-3 which will subject the Participant
to potential liability under Section 16(b) of the Exchange Act or jeopardize or
make less likely the ability to properly account for a transaction in which the
Company is participating and which the Company wishes to account for as a
"pooling of interests"; and
provided, further, that (i) any distribution made pursuant to Section 3.1(d)
shall be in a single lump sum which amount shall be 10% less than the total
amount attributed to such Participant's account, which 10% shall be withheld by
and forfeited to the Company, and (ii) the Participant making such request shall
not be eligible to defer Fees payable after the date of such election until on
or after January 1 of the second calendar year following the year in which such
Participant made such election for distribution.
Section 3.2 - Form of Distributions
- -----------------------------------
(a) Amounts credited to a Participant under the Plan which are eligible for
distribution 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 six (6)
months prior to the date of distribution. All distributions shall be made in
cash, except to the extent that amounts credited to the Plan
8
<PAGE> 9
pursuant to Sections 2.3(e) and (i) are required to be distributed as shares of
Company common stock. 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.
(b) 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
share in appreciation and/or depreciation in accordance with the Participant's
investment elections and shall be charged administrative expenses as provided in
Section 4.2.
(c) Any Automatic Deferral Award or other special or incentive compensation held
under the Plan which, pursuant to the terms of such award, is subject to vesting
or the satisfaction of other conditions or requirements as specified in Schedule
C, shall not be eligible for distribution to the Participant pursuant to the
terms of this Article III until such vesting or other conditions have been
satisfied. Until such vesting or other conditions or requirements have been
satisfied pursuant to the terms of the applicable award, such award or the
proceeds thereof, in whatever form or fund invested, shall be subject to
forfeiture to the Company.
(d) The form and frequency of distribution being made from a Prior Plan at the
effective date of Plan merger will continue in effect provided that such
distribution is, in the sole discretion of the Plan Administrator, deemed to be
reasonably administratively feasible under the Plan and further provided that
the payment amount is determined in a manner approved by the Plan Administrator
pursuant to Section 3.3 of this Plan.
Section 3.3 - Cash Payments; Determination of Amount
- ----------------------------------------------------
All distributions to Participants shall be made in the form of cash, with
exception of those portions of the Participant's account which are invested in
common stock of the Company and which can or must be distributed in kind as
provided in Schedule C. Subject to Section 3.2, the amount to be distributed
shall be determined based on the fair market value of the balance eligible for
distribution 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), or in such other
manner as is approved by the Plan Administrator for Prior Plan payments..
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 which are eligible for distribution at the time of
the Participant's death, together with accumulated earnings thereon net of
9
<PAGE> 10
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, except for those portions
which remain subject to the satisfaction of vesting or other requirements.
Section 3.6 - Acceleration of Benefits for Unforeseeable Emergencies
- --------------------------------------------------------------------
The Plan Administrator, with the approval of the Chief Executive Officer of the
Company, may accelerate the payment of any vested amounts eligible for
distribution 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.
No distribution or payment shall be allowed hereunder unless, in the judgment of
the Plan Administrator or its appointees, such distribution or payment will not
constitute a Discretionary Transaction under Securities and Exchange Commission
Rule 16b-3 which will subject the Participant to potential liability under
Section 16(b) of the Exchange Act or jeopardize or make less likely the ability
to properly account for a transaction in which the Company is participating and
which the Company wishes to account for as a "pooling of interests".
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 delivery to the Plan
Administrator of all necessary documents. To the extent that the Company 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).
10
<PAGE> 11
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 and eligible for distribution 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), that part
of the Participant's account eligible for distribution shall be paid as follows:
(a) If the Participant is married, to the Participant's spouse;
(b) 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
- ----------------------------------------------
The Plan Administrator shall be responsible for the general operation and
administration of the Plan and for carrying out the provisions thereof. The
Chief Executive Officer of the Company 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 a majority of its members by 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 the Company
and/or participating Related Companies. 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
11
<PAGE> 12
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
Company, 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.
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.
12
<PAGE> 13
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 Company
- -----------------------------------
Any action by the Company under this Plan may be by resolution of its Board, or
alternatively, by the Committee, or by any person or persons, duly authorized by
resolution of said 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 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 Company 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 Company 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 Company 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 Company 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.
13
<PAGE> 14
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.
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
- --------------------------------------
The Company, through action of the Board, or alternatively, the Committee, may
amend or terminate this Plan at any time. In the event of a termination, the
Company in its sole discretion may accelerate payment of 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 the Company or
a Related Company to another Related Company or from a Related Company to the
Company, 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 a Change of Control if,
following the Change of Control, the Company, its successor or purchaser is
obligated to pay, or continue to pay, Plan benefits to those Participants
participating in the Plan on the date of such Change of Control, to the extent
such benefits would be otherwise payable as defined in Section 3.1.
ARTICLE VI
GENERAL PROVISIONS
Section 6.1 - Offset to Benefits
- --------------------------------
Notwithstanding any provisions of the Plan to the contrary, the Company 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
Company.
14
<PAGE> 15
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.
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
Sections 202, 301, and 401 of ERISA and the ERISA reporting and disclosure
regulations.
15
<PAGE> 16
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 Incentive Compensation
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
6. Revised and Restated BANC ONE CORPORATION 1995 Stock Incentive Plan
16
<PAGE> 17
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 portion
of semi-annual payment only)
17
<PAGE> 18
SCHEDULE C
BANC ONE CORPORATION COMPENSATION
DEFERRAL PLAN
SPECIAL PROVISIONS RELATING TO AUTOMATIC DEFERRAL AWARDS
SECTION 1 - SPECIAL RECOGNITION AWARDS GRANTED OCTOBER 22, 1997
- ---------------------------------------------------------------
On October 22, 1997, BANC ONE CORPORATION ("BANC ONE") granted "Special
Recognition Awards" ("Awards") to 11 executive officers to recognize the role
and contribution of BANC ONE's line-of-business CEOs and to reward extraordinary
contributions made to BANC ONE's restructuring efforts. The amount of each Award
was determined in accordance with criteria approved by BANC ONE's Board of
Directors. The Awards, based upon initial cash amounts, were made in the form of
BANC ONE stock units and are held in the recipient's account in the BANC ONE
CORPORATION Compensation Deferral Plan (the "Plan"). The value of the stock
units will reflect both changes in the price of BANC ONE common stock and
accrued dividends thereon. All Awards shall vest on the earlier of October 22,
2000 or the death or disability of the participant (assuming, in each case, that
the participant is employed by BANC ONE on such date), except in the case of an
Award granted to one participant which was fully vested as of the date it was
granted. Upon vesting, a participant may exchange his BANC ONE stock units into
any of the other investment options available to such participant under the
Plan. A participant will be entitled to a distribution of the cash value of his
vested Award under the terms and conditions set forth in the Plan.
SECTION 2 - SPECIAL RECOGNITION AWARDS GRANTED APRIL 21, 1998
- -------------------------------------------------------------
On April 21, 1998, BANC ONE CORPORATION ("BANC ONE") granted "Special
Recognition Awards" ("Awards") to 2 executive officers to reward extraordinary
contributions made to BANC ONE's restructuring efforts and to provide
competitive compensation while maximizing shareholder return by minimizing
corporate tax expense under Internal Revenue Code Section 162(m). The amount of
each Award was determined in accordance with criteria approved by BANC ONE's
Board of Directors. The Awards, based upon initial cash amounts, are held in the
recipient's account in the BANC ONE CORPORATION Compensation Deferral Plan (the
"Plan") and invested in accordance with the participant's elections made
pursuant to the Plan, with the exception that the Awards may not be invested in
the BANC ONE Stock Fund. The Awards shall vest on the earlier of April 21, 2001
or upon termination of employment due to the death or total and permanent
disability of the participant (assuming, in each case, that the participant is
employed by BANC ONE on such date). A participant will be entitled to a
distribution of the cash value of his vested Award under the terms and
conditions set forth in the Plan.
18
<PAGE> 19
SCHEDULE D
<TABLE>
BANC ONE CORPORATION COMPENSATION
DEFERRAL PLAN
SPECIAL PROVISIONS RELATING TO PRIOR PLAN MERGERS
<CAPTION>
MERGER DATE PLAN NAME/SPONSOR SPECIAL PROVISIONS
- ----------- ----------------- ------------------
<S> <C> <C>
March 13, 1998 Metropolitan Bancorp Deferred Incentive Participants terminating
Incentive Compensation Plan employment prior to the merger
date may elect installment
payments under the Plan.
March 13, 1998 Metropolitan Bancorp, Inc. Excess Savings Plan None
March 13, 1998 Metropolitan Bancorp, Inc. Special None
Deferral Agreement
March 13, 1998 Liberty National Bancorp, Inc. Amended and None
Restated Management Compensation Plan.
</TABLE>
19
<PAGE> 1
EXHIBIT 11
----------
BANC ONE CORPORATION AND SUBSIDIARIES
STATEMENT REGARDING COMPUTATION OF EARNINGS PER COMMON SHARE
For the statement regarding computation of earnings per common share, see "Note
4: Earnings Per Share" of the Notes to Consolidated Financial Statements, which
is expressly incorporated herein by reference.
<PAGE> 1
EXHIBIT 12
----------
<TABLE>
BANC ONE CORPORATION AND SUBSIDIARIES
STATEMENT REGARDING COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
--------------------- ------------------------------------------------------------
$(MILLIONS) 1998 1997 1997 1996 1995 1994 1993
- ----------------------------------------------------------------- ------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
CALCULATION INCLUDING INTEREST ON DEPOSITS:
EARNINGS:
Income before income taxes and change
in accounting principle $2,433.0 $1,446.5 $2,155.3 $2,674.2 $2,288.9 $1,925.0 $2,077.2
Fixed charges 1,123.6 1,182.8 1,568.6 1,253.8 1,016.1 761.9 424.6
Less: Capitalized interest (0.7) (2.0) (1.9) (4.9) (1.7) (1.0) (0.7)
-------- -------- -------- -------- -------- -------- --------
Earnings $3,555.9 $2,627.3 $3,722.0 $3,923.1 $3,303.3 $2,685.9 $2,501.1
======== ======== ======== ======== ======== ======== ========
FIXED CHARGES:
Interest expense, including interest
factor of capitalized leases and
amortization of deferred debt expense $1,063.9 $1,132.4 $1,501.5 $1,190.6 $ 956.6 $ 701.7 $ 373.0
Portion of rental payments under
operating leases deemed to be interest 59.7 50.4 67.1 63.2 59.5 60.2 51.6
-------- -------- -------- -------- -------- -------- --------
Fixed charges $1,123.6 $1,182.8 $1,568.6 $1,253.8 $1,016.1 $ 761.9 $ 424.6
======== ======== ======== ======== ======== ======== ========
RATIO OF EARNINGS TO FIXED CHARGES
EXCLUDING INTEREST ON DEPOSITS 3.16x 2.22x 2.37x 3.13x 3.25x 3.53x 5.89x
CALCULATION INCLUDING INTEREST ON DEPOSITS:
EARNINGS:
Income before income taxes and change
in accounting principle $2,433.0 $1,446.5 $2,155.3 $2,674.2 $2,288.9 $1,925.0 $2,077.2
Fixed charges 3,198.1 3,285.7 4,377.4 3,937.2 3,653.4 2,744.0 2,177.4
Less: capitalized interest (0.7) (2.0) (1.9) (4.9) (1.7) (1.0) (0.7)
-------- -------- -------- -------- -------- -------- --------
Earnings $5,630.4 $4,730.2 $6,530.8 $6,606.5 $5,940.6 $4,668.0 $4,253.9
======== ======== ======== ======== ======== ======== ========
FIXED CHARGES:
As detailed above $1,123.6 $1,182.8 $1,568.6 $1,253.8 $1,016.1 $ 761.9 $ 424.6
Interest on deposits 2,074.5 2,102.9 2,808.8 2,683.4 2,637.3 1,982.1 1,752.8
-------- -------- -------- -------- -------- -------- --------
Fixed charges $3,198.1 $3,285.7 $4,377.4 $3,937.2 $3,653.4 $2,744.0 $2,177.4
======== ======== ======== ======== ======== ======== ========
RATIO OF EARNINGS TO FIXED CHARGES
INCLUDING INTEREST ON DEPOSITS 1.76x 1.44x 1.49x 1.68x 1.63x 1.70x 1.95x
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 6,703,858
<INT-BEARING-DEPOSITS> 6,401
<FED-FUNDS-SOLD> 813,984
<TRADING-ASSETS> 1,074,419
<INVESTMENTS-HELD-FOR-SALE> 18,257,617
<INVESTMENTS-CARRYING> 671,569
<INVESTMENTS-MARKET> 681,100
<LOANS> 82,500,065
<ALLOWANCE> 1,342,870
<TOTAL-ASSETS> 120,149,393
<DEPOSITS> 81,852,068
<SHORT-TERM> 10,805,927
<LIABILITIES-OTHER> 4,409,381
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0
0
<COMMON> 3,526,923
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<INTEREST-DEPOSIT> 2,074,566
<INTEREST-EXPENSE> 3,136,613
<INTEREST-INCOME-NET> 4,254,419
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<INCOME-PRETAX> 2,433,090
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<NET-INCOME> 1,683,349
<EPS-PRIMARY> 2.39
<EPS-DILUTED> 2.36
<YIELD-ACTUAL> 5.29
<LOANS-NON> 529,531
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<ALLOWANCE-CLOSE> 1,342,870
<ALLOWANCE-DOMESTIC> 1,342,870
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</TABLE>
