<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------
FORM 8-K/A
(Amendment No. 3)
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): April 10, 1998
BANC ONE CORPORATION
(Exact Name of Registrant as Specified in Charter)
Ohio
(State or Other Jurisdiction of Incorporation)
1-8552 31-0738296
(Commission File Number) (IRS Employer Identification No.)
100 East Broad Street, Columbus, Ohio 43271
(Address of Principal Executive Offices)(Zip Code)
Registrant's telephone number, including area code: (614) 248-5944
N/A
(Former Name or Former Address, If Changed Since Last Report)
<PAGE> 2
The Current Report on Form 8-K dated April 10, 1998 and filed with the
Securities and Exchange Commission on April 14, 1998 is amended to add Exhibits
99.10 and 99.11 and to amend and restate Item 7 in its entirety as follows:
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS
(a) Financial Statements of Businesses Acquired.
The following consolidated financial statements of First Chicago
NBD Corporation are incorporated herein by reference to Exhibit
99.5 filed herewith:
1. Consolidated Balance Sheets as of December 31, 1997 and
1996.
2. Consolidated Statement of Income for the years ended
December 31, 1997, 1996 and 1995.
3. Consolidated Statements of Changes in Stockholders'
Equity for the years ended December 31, 1997, 1996 and
1995.
4. Consolidated Statements of Cash Flows for the years
ended December 31, 1997, 1996 and 1995.
5. Notes to the Consolidated Financial Statements.
The report of Arthur Andersen LLP, independent accountants, on
the consolidated financial statements of First Chicago NBD
Corporation as of December 31, 1997 and 1996 and for the years
ended December 31, 1997, 1996 and 1995 is filed herewith as part
of Exhibit 99.5 and the related consent is filed herewith as
Exhibit 99.6. Both the opinion and the consent are incorporated
herein by reference.
The following unaudited consolidated financial statements of
First Chicago NBD Corporation are incorporated herein by
reference to Exhibit 99.8 filed herewith:
1. Consolidated Balance Sheet as of March 31, 1998.
2. Consolidated Statement of Income for the quarters ended
March 31, 1998 and 1997.
3. Consolidated Statements of Changes in Stockholders'
Equity for the quarters ended March 31, 1998 and 1997.
4. Consolidated Statements of Cash Flows for the quarters
ended March 31, 1998 and 1997.
5. Notes to the Unaudited Consolidated Financial
Statements.
2
<PAGE> 3
The following unaudited consolidated financial statements of First
Chicago NBD Corporation are incorporated herein by reference to Exhibit
99.10 filed herewith:
1. Consolidated Balance Sheet as of June 30, 1998.
2. Consolidated Statement of Income for the three and six
months ended June 30, 1998 and 1997.
3. Consolidated Statements of Changes in Stockholders'
Equity for the six months ended June 30, 1998 and 1997.
4. Consolidated Statements of Cash Flows for the six
months ended June 30, 1998 and 1997.
5. Notes to the Consolidated Financial Statements.
(b) Pro Forma Financial Information.
The following pro forma financial statements are incorporated
herein by reference to Exhibit 99.7 filed herewith:
1. Pro Forma Condensed Combined Balance Sheet at December
31, 1997 (unaudited).
2. Pro Forma Condensed Combined Statement of Income for
the fiscal years ended December 31, 1997, 1996 and 1995
(unaudited).
3. Pro Forma Condensed Combined Statement of Income for
the year ended December 31, 1997 (unaudited).
4. Pro Forma Condensed Combined Statement of Income for
the year ended December 31, 1996 (unaudited).
5. Pro Forma Condensed Combined Statement of Income for
the year ended December 31, 1995 (unaudited).
6. Notes to the Unaudited Pro Forma Condensed Combined
Financial Information.
The following pro forma financial statements are incorporated
herein by reference to Exhibit 99.9 filed herewith:
1. Pro Forma Condensed Combined Balance Sheet at March 31,
1998 (unaudited).
2. Pro Forma Condensed Combined Statement of Income for
the three months ended March 31, 1998 and 1997
(unaudited).
3. Notes to the Unaudited Pro Forma Condensed Combined
Financial Information.
The following pro forma financial statements are incorporated
herein by reference to Exhibit 99.11 filed herewith:
1. Pro Forma Condensed Combined Balance Sheet at June 30,
1998 (unaudited).
3
<PAGE> 4
2. Pro Forma Condensed Combined Statement of Income for
the six months ended June 30, 1998 and 1997
(unaudited).
3. Notes to the Unaudited Pro Forma Condensed Combined
Financial Information.
(c) Exhibits.
Exhibit 2.1 Agreement and Plan of Reorganization dated as
of April 10, 1998 by and among BANC ONE
CORPORATION, First Chicago NBD Corporation and
Hornet Reorganization Corporation. *
Exhibit 99.1 Stock Option Agreement dated as of April 10,
1998, by and between First Chicago NBD
Corporation, as issuer, and BANC ONE CORPORATION,
as grantee. *
Exhibit 99.2 Stock Option Agreement dated as of April 10,
1998, by and between BANC ONE CORPORATION, as
issuer, and First Chicago NBD Corporation, as
grantee. *
Exhibit 99.3 Joint Press Release, dated April 13, 1998. *
Exhibit 99.4 Investor Presentation, dated April 13, 1998. *
Exhibit 99.5 Consolidated Financial Statements of First
Chicago NBD Corporation as of December 31, 1997
and for the years ended December 31, 1997, 1996
and 1995, and Report of Arthur Andersen LLP. *
Exhibit 99.6 Consent of Arthur Andersen LLP. *
Exhibit 99.7 Unaudited Pro Forma Condensed Combined
Financial Information as of December 31, 1997 and
for the years ended December 31, 1997, 1996 and
1995. *
Exhibit 99.8 Unaudited Consolidated Financial Statements
of First Chicago NBD Corporation as of March 31,
1998 and for the three months ended March 31,
1998 and 1997. *
Exhibit 99.9 Unaudited Pro Forma Condensed Combined
Financial Information as of March 31, 1998 and
for the three months ended March 31, 1998 and
1997. *
4
<PAGE> 5
(c) Exhibits (continued)
Exhibit 99.10 Unaudited Consolidated Financial
Statements of First Chicago NBD Corporation
as of June 30, 1998 and for the three and
six months ended June 30, 1998 and 1997.
Exhibit 99.11 Unaudited Pro Forma Condensed Combined
Financial Information as of June 30, 1998
and for the six months ended June 30, 1998
and 1997.
- -------------
* Previously filed.
5
<PAGE> 6
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 hereunto duly authorized.
BANC ONE CORPORATION
(Registrant)
Date: August 17, 1998 By: /s/ William C. Leiter
----------------------
William C. Leiter
Senior Vice President
6
<PAGE> 1
Exhibit 99.10
<TABLE>
First Chicago NBD Corporation and Subsidiaries
Consolidated Balance Sheet
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
June 30 December 31 June 30
(Dollars in millions) 1998 1997 1997
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets
Cash and due from banks..................................................... $ 8,049 $ 7,223 $ 7,969
Interest-bearing due from banks............................................. 5,588 6,904 7,705
Federal funds sold and securities under resale agreements................... 7,982 8,501 8,185
Trading assets.............................................................. 4,128 4,198 4,752
Derivative product assets................................................... 4,250 4,547 3,761
Securities available for sale............................................... 12,604 9,330 8,265
Loans (net of unearned income--$937, $961 and $954, respectively)........... 72,563 68,724 67,510
Less allowance for credit losses......................................... (1,408) (1,408) (1,408)
------------ ------------ ------------
Loans, net............................................................... 71,155 67,316 66,102
Premises and equipment...................................................... 1,448 1,439 1,407
Customers' acceptance liability............................................. 366 708 661
Other assets................................................................ 4,211 3,930 3,788
------------ ------------ ------------
Total assets.......................................................... $ 119,781 $ 114,096 $ 112,595
============ ============ ============
- ---------------------------------------------------------------------------------------------------------------------------
Liabilities
Deposits
Demand................................................................... $ 17,038 $ 16,069 $ 17,142
Savings.................................................................. 21,432 21,437 21,154
Time..................................................................... 15,256 15,178 14,980
Foreign offices.......................................................... 15,802 15,805 14,742
------------ ------------ ------------
Total deposits........................................................ 69,528 68,489 68,018
Federal funds purchased and securities under repurchase agreements.......... 9,869 9,271 10,053
Other short-term borrowings................................................. 12,672 9,710 9,848
Long-term debt.............................................................. 9,595 9,092 8,020
Guaranteed preferred beneficial interest in the Corporation's junior 996 996 996
subordinated debt..........................................................
Acceptances outstanding..................................................... 366 708 661
Derivative product liabilities.............................................. 4,307 4,616 3,844
Other liabilities........................................................... 4,134 3,254 2,684
------------ ------------ ------------
Total liabilities..................................................... 111,467 106,136 104,124
- ---------------------------------------------------------------------------------------------------------------------------
Stockholders' Equity
Preferred stock............................................................. 190 190 290
Common stock--$1 par value.................................................. 320 320 320
</TABLE>
<TABLE>
<CAPTION>
June 30, 1998 Dec. 31, 1997 June 30, 1997
------------- ------------- -------------
<S> <C> <C> <C>
Number of shares authorized....... 750,000,000 750,000,000 750,000,000
Number of shares issued........... 319,508,976 319,509,114 319,509,163
Number of shares outstanding...... 287,743,039 289,137,449 302,064,635
</TABLE>
<TABLE>
<S> <C> <C> <C>
Surplus..................................................................... 1,948 1,966 1,985
Retained earnings........................................................... 7,977 7,446 6,933
Accumulated other adjustments to stockholders' equity....................... 66 55 24
Deferred compensation....................................................... (112) (79) (87)
Treasury stock at cost--31,765,937; 30,371,665; and 17,444,528 shares, (2,075) (1,938) (994)
respectively............................................................... ------------ ------------ ------------
Stockholders' equity.................................................. 8,314 7,960 8,471
------------ ------------ ------------
Total liabilities and stockholders' equity............................ $ 119,781 $ 114,096 $ 112,595
============ ============ ============
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
25
<PAGE> 2
<TABLE>
First Chicago NBD Corporation and Subsidiaries
Consolidated Income Statement
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Three Months Ended Six Months Ended
June 30 June 30
(In millions, except per-share data) 1998 1997 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest Income
Loans, including fees..................................................... $1,501 $1,484 $2,961 $2,885
Bank balances............................................................. 85 114 186 210
Federal funds sold and securities under resale agreements................. 99 77 188 142
Trading assets............................................................ 68 67 139 136
Securities available for sale--taxable.................................... 133 89 253 167
Securities available for sale--tax-exempt................................. 25 29 48 54
------ ------ ------ ------
Total................................................................ 1,911 1,860 3,775 3,594
- ------------------------------------------------------------------------------------------------------------------------------
Interest Expense
Deposits.................................................................. 562 544 1,120 1,043
Federal funds purchased and securities under repurchase agreements........ 141 124 283 238
Other short-term borrowings............................................... 154 121 285 223
Long-term debt............................................................ 170 146 342 289
------ ------ ------ ------
Total................................................................ 1,027 935 2,030 1,793
- ------------------------------------------------------------------------------------------------------------------------------
Net Interest Income....................................................... 884 925 1,745 1,801
Provision for credit losses............................................... 206 180 385 367
------ ------ ------ ------
Net Interest Income After Provision for Credit Losses..................... 678 745 1,360 1,434
- ------------------------------------------------------------------------------------------------------------------------------
Noninterest Income
Combined trading profits.................................................. 52 36 98 64
Equity securities gains................................................... 87 46 145 100
Investment securities gains............................................... 6 4 16 29
------ ------ ------ ------
Market-driven revenue................................................ 145 86 259 193
------ ------ ------ ------
Credit card fee revenue................................................... 234 207 468 441
Fiduciary and investment management fees.................................. 108 99 214 204
Service charges and commissions........................................... 283 227 534 440
------ ------ ------ ------
Fee-based revenue.................................................... 625 533 1,216 1,085
------ ------ ------ ------
Other income.............................................................. 72 25 106 45
------ ------ ------ ------
Total................................................................ 842 644 1,581 1,323
- ------------------------------------------------------------------------------------------------------------------------------
Noninterest Expense
Salaries and employee benefits............................................ 477 426 917 851
Net premises and equipment expense........................................ 117 115 232 235
Other..................................................................... 317 284 610 539
------ ------ ------ ------
Total................................................................ 911 825 1,759 1,625
- ------------------------------------------------------------------------------------------------------------------------------
Income Before Income Taxes................................................ 609 564 1,182 1,132
Applicable income taxes................................................... 201 186 391 374
------ ------ ------ ------
Net Income................................................................ $ 408 $ 378 $ 791 $ 758
====== ====== ====== ======
Net Income Attributable to Common Stockholders' Equity.................... $ 404 $ 373 $ 785 $ 746
====== ====== ====== ======
- ------------------------------------------------------------------------------------------------------------------------------
Earnings Per Share
Basic................................................................ $1.41 $1.22 $2.73 $2.41
Diluted.............................................................. $1.38 $1.20 $2.68 $2.37
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
26
<PAGE> 3
<TABLE>
First Chicago NBD Corporation and Subsidiaries
Consolidated Statement of Stockholders' Equity
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Six Months Ended June 30
(In millions) 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Preferred Stock
Balance, beginning of period......................................................... $ 190 $ 444
Conversion of preferred stock........................................................ - (154)
------- -------
Balance, end of period............................................................... 190 290
------- -------
Common Stock
Balance, beginning of period......................................................... 320 320
Issuance of stock.................................................................... - -
------- -------
Balance, end of period............................................................... 320 320
------- -------
Capital Surplus
Balance, beginning of period......................................................... 1,966 2,149
Issuance of treasury stock........................................................... (48) (55)
Conversion of preferred stock........................................................ - (138)
Other................................................................................ 30 29
------- -------
Balance, end of period............................................................... 1,948 1,985
------- -------
Retained Earnings
Balance, beginning of period......................................................... 7,446 6,433
Net income........................................................................... 791 758
Cash dividends declared on common stock.............................................. (254) (246)
Cash dividends declared on preferred stock........................................... (6) (12)
------- -------
Balance, end of period............................................................... 7,977 6,933
------- -------
Accumulated Other Adjustments To Stockholders' Equity
Fair Value Adjustment on Securities Available for Sale
Balance, beginning of period......................................................... 49 38
Change in fair value (net of taxes) and other........................................ 11 (20)
------- -------
Balance, end of period............................................................... 60 18
------- -------
Accumulated Translation Adjustment
Balance, beginning of period......................................................... 6 7
Translation gain (loss), net of taxes................................................ - (1)
------- -------
Balance, end of period............................................................... 6 6
------- -------
Total Accumulated Other Adjustments To Stockholders' Equity............................. 66 24
------- -------
Deferred Compensation
Balance, beginning of period......................................................... (79) (58)
Awards granted, net.................................................................. (56) (42)
Amortization of deferred compensation................................................ 29 19
Other................................................................................ (6) (6)
------- -------
Balance, end of period............................................................... (112) (87)
------- -------
Treasury Stock
Balance, beginning of period......................................................... (1,938) (326)
Purchase of common stock............................................................. (229) (1,056)
Conversion of preferred stock........................................................ - 292
Issuance of stock.................................................................... 92 96
------- -------
Balance, end of period............................................................... (2,075) (994)
------- -------
Total Stockholders' Equity, end of period............................................... $ 8,314 $ 8,471
======= =======
Total Net Income and Accumulated Other Adjustments To Stockholders' Equity.............. $ 802 $ 737
======= =======
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
27
<PAGE> 4
<TABLE>
First Chicago NBD Corporation and Subsidiaries
Consolidated Statement of Cash Flows
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Six Months Ended June 30
(In millions) 1998 1997
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash Flows from Operating Activities
Net income................................................................................. $ 791 $ 758
Adjustments to reconcile net income to net cash provided by (used in) operating
activities:
Depreciation and amortization........................................................... 95 123
Provision for credit losses............................................................. 385 367
Equity securities gains................................................................. (145) (100)
Net (increase) decrease in net derivative product balances.............................. (12) 304
Net (increase) decrease in trading assets............................................... 4 (16)
Net (increase) decrease in loans held for sale.......................................... (146) 60
Net (increase) decrease in accrued income receivable.................................... 17 (36)
Net increase (decrease) in accrued expenses payable..................................... 823 (50)
Net (increase) decrease in other assets................................................. 50 (471)
Other noncash adjustments............................................................... (34) (36)
-------- -------
Total adjustments....................................................................... 1,037 145
Net cash provided by operating activities.................................................. 1,828 903
- --------------------------------------------------------------------------------------------------------------------------
Cash Flows from Investing Activities
Net (increase) decrease in federal funds sold and securities under resale agreements....... 519 (3,988)
Purchase of investment securities--available-for-sale...................................... (10,026) (5,220)
Purchase of equity securities--fair value.................................................. (1,165) (51)
Proceeds from maturities of debt securities--available-for-sale............................ 995 639
Proceeds from sales of investment securities--available-for-sale........................... 5,945 3,478
Proceeds from sales of equity securities--fair value....................................... 1,174 126
Net (increase) in loans.................................................................... (4,362) (1,600)
Loan recoveries............................................................................ 101 92
Net proceeds from sales of assets held for accelerated disposition......................... - 1
Purchases of premises and equipment........................................................ (121) (88)
Proceeds from sales of premises and equipment.............................................. 72 9
Net cash and cash equivalents due to acquisitions and dispositions......................... (27) -
-------- -------
Net cash (used in) investing activities.................................................... (6,895) (6,602)
- --------------------------------------------------------------------------------------------------------------------------
Cash Flows from Financing Activities
Net increase in deposits................................................................... 799 4,367
Net increase in federal funds purchased and securities under repurchase
agreements.............................................................................. 597 2,193
Net increase in other short-term borrowings................................................ 2,962 2,276
Proceeds from issuance of long-term debt................................................... 9,908 5,578
Repayment of long-term debt................................................................ (9,411) (4,922)
Net (decrease) in other liabilities........................................................ (194) (47)
Dividends paid............................................................................. (271) (265)
Repurchase of common stock................................................................. (229) (1,056)
-------- -------
Net cash provided by financing activities.................................................. 4,161 8,124
- --------------------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash and cash equivalents............................... 416 (48)
- --------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents....................................... (490) 2,377
Cash and cash equivalents at beginning of period........................................... 14,127 13,297
-------- -------
Cash and cash equivalents at end of period................................................. $ 13,637 $15,674
======== =======
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
For purposes of this statement, cash and cash equivalents consist of cash and
due from banks, whether interest-bearing or not. In the first quarter of 1997,
$154 million of the Corporation's 53/4% Cumulative Convertible Preferred Stock,
Series B, was converted into common stock; such issuance was redeemed in April
1997.
28
<PAGE> 5
Notes to Consolidated Financial Statements
Note 1
- ------
The consolidated financial statements for the Corporation, including its
subsidiaries, have been prepared in conformity with generally accepted
accounting principles. Such preparation requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Although the interim amounts are unaudited, they do reflect all adjustments
that, in the opinion of management, are necessary for a fair presentation of the
results of operations for the interim periods. All such adjustments are of a
normal, recurring nature. Because the results from commercial banking
operations are so closely related and responsive to changes in economic
conditions, fiscal policy and monetary policy, and because the results for the
investment security and trading portfolios are largely market-driven, the
results for any interim period are not necessarily indicative of the results
that can be expected for the entire year.
Note 2
- ------
In December 1997, the Corporation adopted SFAS No. 128 "Earnings Per Share," as
required, and all prior periods presented were restated. Basic EPS is computed
by dividing income available to common stockholders by the average number of
common shares outstanding for the period. The Statement also requires
presentation of EPS assuming full dilution. The diluted EPS calculation
includes net shares that may be issued under the Employee Stock Purchase and
Savings Plan, outstanding stock options, and common shares that would result
from the conversion of convertible preferred stock. In the diluted calculation,
income available to common stockholders is not reduced by preferred stock
dividend requirements related to convertible preferred stock, since such
dividends would not be paid if the preferred stock were converted to common
stock.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
Three Months Ended Six Months Ended
June 30 June 30
(Dollars in millions, except per-share data) 1998 1997 1998 1997
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Basic
Net income................................................... $ 408 $ 378 $ 791 $ 758
Preferred stock dividends.................................... (4) (5) (6) (12)
-------- -------- -------- --------
Net income attributable to common stockholders' equity....... $ 404 $ 373 $ 785 $ 746
======== ======== ======== ========
Diluted
Net income................................................... $ 408 $ 378 $ 791 $ 758
Preferred stock dividends, excluding convertible Series B,
where applicable............................................ (4) (5) (6) (10)
-------- -------- -------- --------
Diluted income available to common stockholders.............. $ 404 $ 373 $ 785 $ 748
======== ======== ======== ========
(In thousands)
Average shares outstanding.................................... 287,444 306,754 287,783 309,425
Dilutive Shares
Employee Stock Purchase and Savings Plan..................... 1,401 788 1,335 784
Stock options................................................ 3,736 3,387 3,703 3,532
Convertible preferred stock.................................. - - - 2,118
Average shares outstanding assuming full dilution............. 292,581 310,929 292,821 315,859
======== ======== ======== ========
Basic........................................................ $ 1.41 $ 1.22 $ 2.73 $ 2.41
======== ======== ======== ========
Diluted...................................................... $ 1.38 $ 1.20 $ 2.68 $ 2.37
======== ======== ======== ========
- ---------------------------------------------------------------------------------------------------------
</TABLE>
29
<PAGE> 6
Note 3
- ------
At June 30, 1998, credit card receivables aggregated $9.2 billion. These
receivables are available for sale through credit card securitization programs.
Note 4
- ------
The Corporation adopted SFAS No. 130, "Reporting Comprehensive Income," on
January 1, 1998. The Statement defines comprehensive income as including net
income and certain other items that affect stockholders' equity. The other
items include "fair value adjustment on investment securities available for
sale" and "accumulated translation adjustment," which are reported in
"Accumulated other adjustments to stockholders' equity" on the Corporation's
Consolidated Balance Sheet. The Corporation has elected to disclose these items
in its Consolidated Statement of Stockholders' Equity. Since the Statement
solely relates to display and disclosure requirements, it has no effect on the
Corporation's financial results.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This Statement establishes new accounting
and reporting standards for derivative instruments and hedging activities. It
requires that an entity recognize all derivatives as either assets or
liabilities in the balance sheet and measure those derivatives at fair value.
The accounting for the gains or losses resulting from changes in the value of
those derivatives will depend on the intended use of the derivative and whether
it qualifies for hedge accounting. This Statement will significantly change the
accounting treatment for derivatives the Corporation uses in its asset and
liability management activities. The Corporation is required to adopt this
Statement on January 1, 2000. The Corporation is in the process of evaluating
the impact of this new Statement.
Note 5
- ------
The carrying values and estimated fair values of financial instruments as of
June 30, 1998, have not materially changed on a relative basis from the carrying
values and estimated fair values of financial instruments disclosed as of
December 31, 1997, in the Corporation's Annual Report.
Note 6
- ------
Nonperforming loans are generally identified as "impaired loans". The recorded
investment in loans considered impaired was $293 million and $329 million at
June 30, 1998, and June 30, 1997, respectively. The required allowance for
credit losses related to these loans was $57 million and $46 million at June 30,
1998, and June 30, 1997, respectively. Substantially all of the impaired loans
on both dates required the establishment of an allocated reserve.
The following table summarizes additional information related to impaired loans.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
Three Months Ended Six Months Ended
(In millions) June 30 June 30
1998 1997 1998 1997
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Impaired loans average balance........................ $334 $267 $341 $262
Interest income recognized on impaired loans.......... 4 4 9 9
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
30
<PAGE> 7
Note 7
- ------
Derivative financial instruments used in trading activities are valued at
estimated fair value. Such instruments include swaps, forwards, spot, futures,
options, caps, floors and forward rate agreements in the interest rate, foreign
exchange, equity and commodity markets. The estimated fair values are based on
quoted market prices or pricing and valuation models on a present value basis
using current market information. Realized and unrealized gains and losses are
included in noninterest income as combined trading profits. Where appropriate,
compensation for credit risk and ongoing servicing is deferred and recorded as
income over the terms of the derivative financial instruments.
Derivative financial instruments used in ALM activities, principally interest
rate swaps, are required to meet specific criteria. Such interest rate swaps
are designated as ALM derivatives; are linked to and adjust the interest rate
sensitivity of a specific asset, liability, firm commitment, or anticipated
transaction or a specific pool of transactions with similar risk
characteristics; and are effective in reducing the Corporation's structural
interest rate risk at inception. Interest rate swaps that do not meet these
criteria are designated as derivatives used in trading activities and are
accounted for at estimated fair value.
Income or expense on most ALM derivatives used to manage interest rate exposure
is recorded on an accrual basis, as an adjustment to the yield of the linked
exposures over the periods covered by the contracts. This matches the income
recognition treatment of that exposure, generally assets or liabilities carried
at historical cost, which are recorded on an accrual basis. If an interest rate
swap is terminated early, any resulting gain or loss is deferred and amortized
as an adjustment of the yield on the linked interest rate exposure position over
the remaining periods originally covered by the terminated swap. If all or part
of a linked position is terminated, e.g., a linked asset is sold or prepaid, or
if the amount of an anticipated transaction is likely to be less than originally
expected, the related pro rata portion of any unrecognized gain or loss on the
swap is recognized in earnings at that time, and the related pro rata portion of
the swap is subsequently accounted for at estimated fair value.
Purchased option, cap and floor contracts are reported in derivative product
assets, and written option, cap and floor contracts are reported in derivative
product liabilities. For other derivative financial instruments, an unrealized
gain is reported in derivative product assets, and an unrealized loss is
reported in derivative product liabilities. However, fair value amounts
recognized for derivative financial instruments executed with the same
counterparty under a legally enforceable master netting arrangement are reported
on a net basis. Cash flows from derivative financial instruments are reported
net as operating activities.
Note 8
- ------
The ratio of income to fixed charges for the six months ended June 30, 1998,
excluding interest on deposits, was 2.3x, and including interest on deposits,
was 1.6x. The ratio has been computed on the basis of the total enterprise (as
defined by the Securities and Exchange Commission) by dividing income before
fixed charges and income taxes by fixed charges. Fixed charges consist of
interest expense on all long- and short-term borrowings, excluding or including
interest on deposits.
31
<PAGE> 8
Note 9
- ------
On April 10, 1998, the Corporation and BANC ONE CORPORATION ("ONE") entered
into an Agreement and Plan of Reorganization (as amended, the "Agreement"),
pursuant to which, subject to the conditions and upon the terms stated therein,
the Corporation and ONE will each merge into a new company, BANK ONE CORPORATION
("BANK ONE") organized to effect the merger (such mergers, collectively, the
"Merger").
It is anticipated that the Merger will be accounted for as a pooling-of-
interests and that it will be consummated during the second half of 1998,
pending necessary approvals of the Corporation's and ONE's respective
stockholders, regulatory bodies, and other customary conditions of closing. As
a result of the pending Merger, the Corporation's stock repurchase program was
rescinded.
In accordance with the Agreement, each share of ONE's common stock, without par
value, ("ONE Common Stock") outstanding immediately prior to the effective time
of the Merger (the "Effective Time") will at the Effective Time be converted
into one share of the common stock, with par value $0.01 per share, of BANK ONE
("BANK ONE Common Stock"), and each share of the Corporation's common stock, par
value $1.00 per share, ("FCN Common Stock") outstanding immediately prior to the
Effective Time will at the Effective Time be converted into the right to receive
1.62 shares of BANK ONE Common Stock. In addition, each share of the
Corporation's Preferred Stock with Cumulative and Adjustable Dividends, Series
B, and Preferred Stock with Cumulative and Adjustable Dividends, Series C, in
each case outstanding immediately prior to the Effective Time, will be converted
into the right to receive one share of a series of corresponding preferred stock
of BANK ONE with substantially the same terms.
The Corporation and ONE have scheduled a special meeting of stockholders for
September 15, 1998, at which their respective stockholders are expected to
consider and vote on the Merger.
Note 10
- -------
The Corporation and certain of its subsidiaries are defendants in various
lawsuits, including certain class actions, arising out of the normal course of
business, and the Corporation has received certain tax deficiency assessments.
Since the Corporation and certain of its subsidiaries, which are regulated by
one or more federal and state regulatory authorities, also are the subject of
numerous examinations and reviews by such authorities, the Corporation is and
will, from time to time, normally be engaged in various disagreements with
regulators, related primarily to banking matters. In the opinion of management
and the Corporation's general counsel, the ultimate resolution of the matters
referred to in this note will not have a material effect on the consolidated
financial statements.
32
<PAGE> 1
Exhibit 99.11
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
On April 10, 1998, BANC ONE CORPORATION ("BANC ONE"), First Chicago NBD
("FCN") and Hornet Reorganization Corporation, since renamed BANK ONE
CORPORATION ("BANK ONE") entered into an Agreement and Plan of Reorganization
(the "Agreement"), as subsequently amended, pursuant to which BANC ONE and FCN
will be merged seriatim with and into BANK ONE as the surviving corporation in
each case (such mergers together, the "Merger"). Common shareholders of FCN will
receive 1.62 shares of BANK ONE common stock for each share of FCN and common
shareholders of BANC ONE will receive one share of BANK ONE common stock for
each share of BANC ONE. The Merger will be accounted for as a pooling of
interests and pending regulatory and shareholder approval is expected to be
completed during the fourth quarter of 1998.
The following unaudited pro forma condensed combined financial
information and explanatory notes are presented to show the impact on the
historical financial position and results of operations of BANC ONE of the
Merger under the "pooling of interests" method of accounting. The unaudited pro
forma condensed combined financial information combines the historical financial
information of BANC ONE and FCN as of June 30, 1998 and for the six months ended
June 30, 1998 and 1997, respectively.
The pro forma condensed combined financial information as of June 30,
1998 and for the six months ended June 30, 1998 and 1997, is based on and
derived from, and should be read in conjunction with, (a) the historical
consolidated financial statements and the related notes thereto of BANC ONE,
which are incorporated by reference herein, and (b) the historical consolidated
financial statements and the related notes thereto of FCN, which are
incorporated by reference herein.
The pro forma financial information is presented for comparative
purposes only and is not necessarily indicative of the future financial position
or results of operations of the combined company or of the combined financial
position or the results of operations that would have been realized had the
merger been consummated during the periods or as of the dates for which the pro
forma financial information is presented.
The pro forma financial information noted above gives effect to BANC
ONE's acquisition of First Commerce Corporation ("FCC") which was consummated on
June 12, 1998. Previously presented unaudited pro forma financial information
for the years ended December 31, 1997, 1996 and 1995 have not been restated to
give effect to BANC ONE's acquisition of FCC as the acquisition is not material
to BANC ONE.
<PAGE> 2
BANK ONE CORPORATION & SUBSIDIARIES (CONSOLIDATED)
PRO FORMA CONDENSED COMBINED BALANCE SHEET AS OF JUNE 30, 1998 (UNAUDITED)
(IN MILLIONS)
The following unaudited pro forma condensed combined balance sheet as of June
30, 1998 is presented to show the impact on BANC ONE's historical financial
condition of the proposed Merger with FCN. The Merger has been reflected under
the "pooling of interests" method of accounting.
<TABLE>
<CAPTION>
PROFORMA
BANC ONE FCN ADJUSTMENTS COMBINED
--------- --------- ----------- ---------
<S> <C> <C> <C>
ASSETS
Total cash and due from banks $ 8,174 $ 8,049 $ 16,223
Short-term investments 765 13,570 14,335
Trading assets 1,214 4,128 5,342
Investment securities:
Securities held to maturity 691 691
Securities available for sale 18,357 12,604 30,961
--------- --------- --------- ---------
Total securities 19,048 12,604 31,652
Loans and leases (net of unearned income and
allowance for credit losses) 82,683 70,191 152,874
Other assets 12,135 11,239 23,374
--------- --------- --------- ---------
TOTAL ASSETS $ 124,019 $ 119,781 $ 243,800
========= ========= ========= =========
LIABILITIES
Deposits:
Non-interest bearing $ 21,482 $ 19,800 $ 41,282
Interest bearing 63,472 49,728 113,200
--------- --------- --------- ---------
Total deposits 84,954 69,528 154,482
Short-term borrowings 11,807 22,541 34,348
Long-term borrowings 11,656 10,591 22,247
Other liabilities 4,028 8,807 $ 837 13,672
--------- --------- --------- ---------
TOTAL LIABILITIES 112,445 111,467 837 224,749
--------- --------- --------- ---------
STOCKHOLDERS' EQUITY
Preferred stock 190 190
Common stock 3,521 320 2,011 5,852
Capital in excess of aggregrate stated value 6,772 1,948 (4,086) 4,634
Retained earnings 1,170 7,977 (837) 8,310
Other shareholders' equity 111 (46) 65
Less: Treasury stock (2,075) 2,075
--------- --------- --------- ---------
Total stockholders' equity 11,574 8,314 (837) 19,051
--------- --------- --------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 124,019 $ 119,781 $ 0 $ 243,800
========= ========= ========= =========
</TABLE>
See accompanying notes to the pro forma financial information.
<PAGE> 3
BANK ONE CORPORATION & SUBSIDIARIES (CONSOLIDATED)
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME FOR THE SIX MONTHS ENDED
JUNE 30, 1998 (UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE DATA)
The following unaudited pro forma condensed combined statements of income are
presented to show the impact on BANC ONE's historical results of operations of
the proposed merger with FCN. Such statements assume that the companies had been
combined for each period presented.
<TABLE>
<CAPTION>
PROFORMA
BANC ONE FCN COMBINED
-------- ------ --------
<S> <C> <C> <C>
INTEREST INCOME
Loans and leases $4,273 $2,961 $7,234
Securities, including trading 664 440 1,104
Other interest income 29 374 403
------ ------ ------
Total 4,966 3,775 8,741
INTEREST EXPENSE
Deposits 1,393 1,120 2,513
Borrowings 726 910 1,636
------ ------ ------
Total 2,119 2,030 4,149
NET INTEREST INCOME 2,847 1,745 4,592
Provision for credit losses 406 385 791
------ ------ ------
Net interest income after provision for credit losses 2,441 1,360 3,801
NONINTEREST INCOME
Credit card revenue 948 468 1,416
Deposit fees 394 231 625
Other noninterest income 1,121 882 2,003
------ ------ ------
Total 2,463 1,581 4,044
NONINTEREST EXPENSE
Salaries and employee benefits 1,346 917 2,263
Other operating expense 2,043 842 2,885
------ ------ ------
Total 3,389 1,759 5,148
INCOME BEFORE INCOME TAXES 1,515 1,182 2,697
Income taxes 479 391 870
------ ------ ------
NET INCOME $1,036 $ 791 $1,827
====== ====== ======
NET INCOME PER COMMON SHARE
Basic $ 1.47 $ 2.73 $ 1.56
Diluted 1.45 2.68 1.53
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic 701.1 287.8 1,167.3
Diluted 716.0 292.8 1,190.4
</TABLE>
See accompanying notes to the pro forma financial information.
<PAGE> 4
BANK ONE CORPORATION & SUBSIDIARIES (CONSOLIDATED)
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME FOR THE SIX MONTHS ENDED
JUNE 30, 1997 (UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PROFORMA
BANC ONE FCN COMBINED
-------- --- --------
<S> <C> <C> <C>
INTEREST INCOME
Loans and leases $4,363 $2,885 $7,248
Securities, including trading 654 357 1,011
Other interest income 23 352 375
------ ------ ------
Total 5,040 3,594 8,634
INTEREST EXPENSE
Deposits 1,387 1,043 2,430
Borrowings 741 750 1,491
------ ------ ------
Total 2,128 1,793 3,921
NET INTEREST INCOME 2,912 1,801 4,713
Provision for credit losses 696 367 1,063
------ ------ ------
Net interest income after provision for credit losses 2,216 1,434 3,650
NONINTEREST INCOME
Credit card revenue 655 441 1,096
Deposit fees 369 221 590
Other noninterest income 697 661 1,358
------ ------ ------
Total 1,721 1,323 3,044
NONINTEREST EXPENSE
Salaries and employee benefits 1,219 851 2,070
Other operating expense 1,978 774 2,752
------ ------ ------
Total 3,197 1,625 4,822
INCOME BEFORE INCOME TAXES 740 1,132 1,872
Income taxes 280 374 654
------ ------ ------
NET INCOME $ 460 $ 758 $1,218
====== ====== ======
NET INCOME PER COMMON SHARE
Basic $ 0.66 $ 2.41 $ 1.01
Diluted 0.65 2.37 0.99
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic 676.2 309.4 1,177.5
Diluted 712.4 315.9 1,224.1
</TABLE>
See accompanying notes to the pro forma financial information.
<PAGE> 5
BANK ONE CORPORATION
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL INFORMATION
NOTE 1. BASIS OF PRESENTATION
The pro forma condensed combined financial information reflects the Merger
using the pooling of interests method of accounting. The pro forma information
presented is not necessarily indicative of the results of operations or the
combined financial position that would have resulted had the Merger been
consummated at the beginning of the periods indicated, nor is it necessarily
indicative of the results of operations in future periods or the future
financial position of the combined entities. It is anticipated that the Merger
will be consummated in the fourth quarter of 1998, subject to shareholder and
regulatory approval.
Certain reclassifications have been included in the unaudited pro forma
condensed combined balance sheet and statements of income to conform statement
presentations.
NOTE 2. ACCOUNTING POLICIES
The accounting policies of both companies are in the process of being
reviewed. As a result of this review, certain conforming accounting adjustments
may be necessary. The nature and extent of such adjustments have not been
determined and are not expected to be significant.
NOTE 3. MERGER-RELATED EFFECTS
In connection with the Merger, the managements of BANC ONE and FCN
estimate that a one-time restructuring charge of approximately $1.25 billion
($837 million after-tax) will be incurred at the time of the consummation of the
Merger. The estimated details of this overall charge have been summarized into
the following components: $800 million in personnel-related items, $350 million
related to facilities and equipment costs and $100 million on other
merger-related transaction costs. Actions incorporated in the business
combination and restructuring plan are principally targeted for implementation
over a 12-18 month period following the effective date of the Merger, currently
contemplated for the fourth quarter of 1998. There can be no assurance that the
actual restructuring charge and the details thereof will not differ materially
from the foregoing estimates.
Personnel-related items consist primarily of severance and benefits cost
for separated employees and costs associated with change in control provisions
of FCN's stock plans (currently estimated at $200 million). The benefit
package to be made available to certain 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 costs.
<PAGE> 6
These amounts, including the related tax effects, have been reflected in the
Unaudited Pro Forma Condensed Combined Balance Sheet as of June 30, 1998 and are
not reflected in the Unaudited Pro Forma Condensed Combined Statements of Income
due to their nonrecurring nature.
NOTE 4. PRO FORMA ADJUSTMENTS
The following pro forma adjustments have been reflected in the pro
forma condensed combined financial information:
a) Common stock and capital in excess of aggregate stated value
were adjusted by $2.011 billion to reflect the Merger
accounted for as a pooling of interests through the exchange
of 466.1 million shares of BANC ONE common stock for 287.7
million shares of FCN common stock using an exchange ratio of
1.62.
b) Treasury stock and capital in excess of aggregate stated value
were adjusted by $2.075 billion to reflect the retirement of
FCN treasury stock.
c) Other liabilities and retained earnings were adjusted by $1.25
billion to reflect the recording of the merger-related charge.
d) Other liabilities and retained earnings were adjusted by $413
million to reflect the tax benefit associated with the merger
related charge.
