<PAGE>
FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) May 19, 1998
--------------------------------
First Chicago NBD Corporation
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 1-7127 38-1984850
- --------------------------- ------------------- ----------------------------
(Name or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
One First National Plaza, Chicago, IL 60670
- --------------------------------------------------------------------------------
(Address of principal executive offices) (ZIP Code)
Registrant's telephone number, including area code 312-732-4000
------------------------------
<PAGE>
Item 7. Financial Statements and Exhibits
- ------
c) Exhibits
--------
Attached hereto or incorporated herein are the following Exhibits relating to
the previously announced merger of First Chicago NBD Corporation, a Delaware
corporation (the "Corporation"), and BANC ONE CORPORATION, an Ohio corporation
("ONE"):
Exhibit Description of
Number Exhibit
- --------- --------------
99(a) Pro forma financial information.
99(b) Certain ONE historical financial information for the three months
ended March 31, 1998.
<PAGE>
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.
First Chicago NBD Corporation
--------------------------------------
(Registrant)
Date: May 19, 1998 By: William J. Roberts
--------------------------------------
Title: Senior Vice President and Comptroller
<PAGE>
Exhibit 99(a)
BANC ONE CORPORATION
PRO FORMA FINANCIAL INFORMATION
On April 10, 1998, First Chicago NBD Corporation (the "Corporation" or "FCNBD")
and BANC ONE CORPORATION ("ONE") entered into an Agreement and Plan of
Reorganization (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 ("Newco") organized to effect the merger (such mergers,
collectively, the "Merger"). Newco will be renamed BANC ONE CORPORATION ("BANC
ONE").
In accordance with the Agreement, each share of the common stock, without par
value, of ONE ("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, without par value, of Newco
("Newco Common Stock"), and each share of the common stock, par value $1.00 per
share, of the Corporation ("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 Newco 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 Newco with substantially the same terms.
Consummation of the transactions contemplated by the Agreement is subject to the
terms and conditions contained in the Agreement, including among other things,
the receipt of approval of the Merger by the respective shareholders of the
Corporation and ONE at meetings of the shareholders of the Corporation and ONE
that are expected to take place in the third quarter of 1998.
-1-
<PAGE>
It is anticipated that the Merger will be accounted for as a pooling-of-
interests. The Corporation's stock repurchase program has been rescinded. The
following pro forma financial information giving effect to the Merger, accounted
for as a pooling-of-interests, includes: (i) the unaudited pro forma condensed
combined balance sheet as of March 31, 1998, and (ii) the unaudited pro forma
condensed combined statements of income for the three months ended March 31,
1998 and 1997. The pro forma condensed combined financial statements should be
read in conjunction with the historical consolidated financial statements and
notes thereto of the Corporation and ONE.
The pro forma financial information does not give effect to ONE's pending
acquisition of First Commerce Corporation, a multibank holding company
headquartered in New Orleans, Louisiana, as the acquisition is not material to
ONE.
The pro forma financial statements and the notes thereto included in this
Current Report on Form 8-K, and the exhibits hereto, contain certain estimates
and projections regarding the Corporation, ONE and the combined company
following the Merger, including without limitation estimates and projections
relating to the pro forma business and assets of the combined company, the cost
savings, revenue increases, and restructuring charges expected as a result of
the Merger and the expected impact of the transaction on earnings per share of
the constituent corporations. These estimates and projections constitute
forward-looking statements (within the meaning of the Private Securities
Litigation Reform Act of 1995). Forward-looking statements involve risks and
uncertainties which may cause actual results to differ materially from those in
such statements.
Factors that could cause actual results to differ from those discussed in the
forward-looking statements include, but are not limited to, risks and
uncertainties related to the consummation and execution of the contemplated
transaction (including integration activities), as well as: (i) the strength of
the U.S. economy in general and the strength of
-2-
<PAGE>
the local economies in which operations are conducted; (ii) the effects of and
changes in trade, monetary and fiscal policies and laws, including interest rate
policies of the Board of Governors of the Federal Reserve System; (iii)
inflation, interest rate, market and monetary fluctuations; (iv) the timely
development of and acceptance of new products and services and perceived overall
value of these products and services by users; (v) changes in consumer spending,
borrowing and saving habits; (vi) technological changes (including "Year 2000"
data systems compliance issues); (vii) acquisitions and integration of acquired
businesses; (viii) the ability to increase market share and control expenses;
(ix) the effect of changes in laws and regulations (including laws and
regulations concerning taxes, banking, securities and insurance) with which the
Corporation, ONE and the combined company after the Merger, and their respective
subsidiaries and competitors, must comply; (x) the effect of changes in
accounting policies and practices, as may be adopted by the regulatory agencies
as well as the Financial Accounting Standards Board; (xi) changes in the
organization, compensation and benefit plans of the Corporation, ONE and the
combined company after the Merger, and their respective subsidiaries; (xii) the
costs and effects of litigation and of unexpected or adverse outcomes in such
litigation; and (xiii) the success of the Corporation, ONE and the combined
company after the Merger at managing the risks involved in the foregoing.
Such forward-looking statements speak only as of the date on which such
statements are made, and the Corporation undertakes no obligation to update any
forward-looking statement to reflect events or circumstances after the date on
which such statement is made to reflect the occurrence of unanticipated events.
-3-
<PAGE>
BANC ONE CORPORATION
PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF MARCH 31, 1998
(UNAUDITED)
The following pro forma condensed combined balance sheet as of March 31, 1998,
is presented to show the impact on the Corporation's historical financial
condition of the merger with ONE. The Merger has been reflected under the
pooling-of-interests method of accounting.
<TABLE>
<CAPTION>
=================================================================================================================
BANC ONE CORPORATION
PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF MARCH 31, 1998
(in millions) Corporation ONE Pro forma Pro forma
(as reported) (as reported) adjustments BANC ONE
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Cash and due from banks-noninterest bearing............. $ 7,907 $ 6,880 $ $ 14,787
Short-term investments.................................. 12,898 1,275 14,173
Trading account assets.................................. 3,841 1,397 5,238
Investment securities................................... 11,594 17,500 29,094
Loans, net of allowance for credit losses............... 68,182 81,035 149,217
Other assets............................................ 10,382 8,234 18,616
- -----------------------------------------------------------------------------------------------------------------
TOTAL ASSETS............................................ 114,804 116,321 231,125
- -----------------------------------------------------------------------------------------------------------------
Liabilities
Deposits:
Noninterest bearing................................... 20,007 18,880 38,887
Interest bearing...................................... 48,163 59,036 107,199
- -----------------------------------------------------------------------------------------------------------------
Total deposits.......................................... 68,170 77,916 146,086
Short term borrowings................................... 20,634 12,885 33,519
Long term debt.......................................... 10,294 11,591 21,885
Other liabilities....................................... 7,700 3,463 837 12,000
- -----------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES....................................... 106,798 105,855 837 213,490
STOCKHOLDERS' EQUITY
Preferred stock......................................... 190 100 290
Common stock............................................ 320 3,237 (320) 5,563
2,326
Surplus................................................. 1,960 6,690 (1,960) 4,542
(2,148)
Retained earnings....................................... 7,699 510 (837) 7,372
Other................................................... (61) 124 - 63
Less: Treasury stock.................................... (2,102) (195) 2,102 (195)
- -----------------------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY............................... 8,006 10,466 (837) 17,635
- -----------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY......... $114,804 $116,321 $ - $231,125
=================================================================================================================
</TABLE>
See accompanying notes to pro forma financial information.
-4-
<PAGE>
BANC ONE CORPORATION
PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME
(UNAUDITED)
The following unaudited pro forma condensed combined statements of income are
presented to show the impact on the Corporation's historical results of
operations of the proposed merger with ONE. Such statements assume that the
companies had been combined for each period presented.
<TABLE>
<CAPTION>
=========================================================================================================================
BANC ONE CORPORATION
Pro Forma Condensed Combined Statement of Income
For the Three Months Ended March 31, 1998
(in millions, except per share data)
UNAUDITED Corporation ONE Pro Forma
(as reported) (as reported) BANC ONE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INTEREST INCOME
Loans (including fees)........................ $1,460 $2,028 $ 3,488
Securities, including trading................. 214 263 477
Other......................................... 190 10 200
--------------------- --------------------- ---------------------
Total......................................... 1,864 2,301 4,165
INTEREST EXPENSE
Deposits...................................... 558 630 1,188
Borrowings.................................... 445 350 795
--------------------- --------------------- ---------------------
Total......................................... 1,003 980 1,983
NET INTEREST INCOME........................... 861 1,321 2,182
Provision for credit losses................... 179 203 382
--------------------- --------------------- ---------------------
Net Interest Income After
Provision for Credit Losses.................. 682 1,118 1,800
Noninterest Income
Credit card fee revenue....................... 234 492 726
Deposit fees.................................. 108 184 292
Other......................................... 397 461 858
--------------------- --------------------- ---------------------
Total......................................... 739 1,137 1,876
NONINTEREST EXPENSE
Salaries and employee benefits................ 440 634 1,074
Other operating expense....................... 408 859 1,267
--------------------- --------------------- ---------------------
Total......................................... 848 1,493 2,341
INCOME BEFORE INCOME TAXES.................... 573 762 1,335
Applicable income taxes....................... 190 244 434
--------------------- --------------------- ---------------------
NET INCOME.................................... $ 383 $ 518 $ 901
--------------------- --------------------- ---------------------
COMMON SHARE DATA
Net income
Basic......................................... $ 1.32 $ 0.80 $ 0.81
Diluted....................................... 1.30 0.79 0.79
WEIGHTED AVERAGE SHARES
Basic......................................... 288.1 643.1 1,109.9
Diluted....................................... 293.0 655.5 1,130.2
=========================================================================================================================
</TABLE>
See accompanying notes to pro forma financial information.
-5-
<PAGE>
<TABLE>
<CAPTION>
=========================================================================================================================
BANC ONE CORPORATION
Pro Forma Condensed Combined Statement of Income
For the Three Months Ended March 31, 1997
(in millions, except per share data)
UNAUDITED Corporation ONE Pro Forma
(as reported) (as reported) BANC ONE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INTEREST INCOME
Loans (including fees)........................ $1,401 $2,014 $ 3,415
Securities, including trading................. 172 299 471
Other......................................... 161 11 172
-------------- -------------- --------------
Total......................................... 1,734 2,324 4,058
INTEREST EXPENSE
Deposits...................................... 499 623 1,122
Borrowings.................................... 359 343 702
-------------- -------------- --------------
Total......................................... 858 966 1,824
NET INTEREST INCOME........................... 876 1,358 2,234
Provision for credit losses................... 187 272 459
-------------- -------------- --------------
Net Interest Income After
Provision for Credit Losses.................. 689 1,086 1,775
NONINTEREST INCOME
Credit card fee revenue....................... 234 288 522
Deposit fees.................................. 109 166 275
Other......................................... 336 353 689
-------------- -------------- --------------
Total......................................... 679 807 1,486
NONINTEREST EXPENSE
Salaries and employee benefits................ 425 568 993
Other operating expense....................... 375 741 1,116
-------------- -------------- --------------
Total......................................... 800 1,309 2,109
INCOME BEFORE INCOME TAXES.................... 568 584 1,152
Applicable income taxes....................... 188 202 390
-------------- -------------- --------------
NET INCOME.................................... $ 380 $ 382 $ 762
-------------- -------------- --------------
COMMON SHARE DATA
Net income
Basic......................................... $ 1.19 $ 0.60 $ 0.66
Diluted....................................... 1.17 0.58 0.64
WEIGHTED AVERAGE SHARES
Basic......................................... 312.1 622.6 1,128.2
Diluted....................................... 320.8 655.6 1,175.3
=========================================================================================================================
</TABLE>
See accompanying notes to pro forma financial information.
-6-
<PAGE>
BANC ONE CORPORATION
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS
Note 1. Basis of Presentation
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. 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 Corporation is still in the process of reviewing its accounting policies in
light of those employed by ONE. As a result of this review, certain conforming
accounting adjustments may be necessary. The nature and extent of such
adjustments have not been determined but are not expected to be significant.
Note 3. Merger-Related Effects
Management estimates that the restructuring charge for costs related to or
resulting from the Merger will be approximately $1.25 billion. The pro forma
condensed combined income statement does not reflect the impact of this charge
due to its nonrecurring nature.
The pro forma condensed combined financial statements do not reflect any
benefits from potential cost savings and revenue enhancements in connection with
the Merger.
-7-
<PAGE>
Note 4. Pro Forma Adjustments
Pro forma adjustments to common shares and surplus at March 31, 1998, reflect
the Merger accounted for as a pooling-of-interests, through the exchange of
465.2 million shares of BANC ONE common stock (using the common exchange ratio
of 1.62) for the 287.2 million outstanding common shares of the Corporation.
The pro forma entry is displayed below (in millions):
Dr. Common Stock (FCNBD) $ 320
Dr. Surplus (FCNBD) 1,960
Cr. Treasury Stock (FCNBD) $2,102
Cr. Common Stock (ONE) 2,326
Dr. Surplus (ONE) 2,148
Based on management's current estimate of merger- and restructure-related
charges, the following adjustment was made to the pro forma condensed combined
balance sheet as of March 31, 1998.
Dr. Retained Earnings $837
Dr. Other Liabilities-Taxes Payable 413
Cr. Other Liabilities-Merger Reserve $1,250
Note 5. Additional Transaction
The pro forma financial statements do not give effect to ONE's pending
acquisition of First Commerce Corporation as the acquisition is not material to
ONE.
-8-
<PAGE>
EXHIBIT 99(b)
BANC ONE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
$(MILLIONS, EXCEPT SHARE AMOUNTS) (UNAUDITED) 1998 1997
- -------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS:
Cash and due from banks..................................... $ 6,880.4 $ 7,727.4
Short-term investments...................................... 1,274.8 838.3
Loans held for sale......................................... 2,064.9 2,362.0
Securities:
Securities held to maturity............................... 711.3 785.3
Securities available for sale............................. 18,185.3 14,467.9
---------- ----------
Total securities (fair value approximates $18,907.8 and
$15,268.0 at March 31, 1998, and December 31, 1997,
respectively).......................................... 18,896.6 15,253.2
Loans and leases (net of unearned income of $2,097.3 and
$2,013.7 and allowance for credit losses of $1,304.3 and
$1,325.9 at March 31, 1998, and December 31, 1997,
respectively)........................................... 78,970.4 80,726.9
Other assets:
Bank premises and equipment, net.......................... 1,891.2 1,882.2
Interest earned, not collected............................ 865.1 821.3
Other real estate owned................................... 74.4 66.6
Excess of cost over net assets of affiliates purchased.... 724.6 741.8
Other..................................................... 4,678.5 5,481.6
---------- ----------
Total other assets.................................... 8,233.8 8,993.5
---------- ----------
TOTAL ASSETS.......................................... $116,320.9 $115,901.3
========== ==========
LIABILITIES:
Deposits:
Noninterest-bearing....................................... $ 18,880.1 $ 18,444.2
Interest-bearing.......................................... 59,036.2 58,970.1
---------- ----------
Total deposits........................................ 77,916.3 77,414.3
Federal funds purchased and repurchase agreements........... 9,265.1 10,708.2
Other short-term borrowings................................. 3,619.9 3,095.7
Long-term debt.............................................. 11,591.2 11,066.4
Accrued interest payable.................................... 467.7 489.7
Other liabilities........................................... 2,994.9 2,751.0
---------- ----------
TOTAL LIABILITIES..................................... 105,855.1 105,525.3
---------- ----------
STOCKHOLDERS' EQUITY:
Series C convertible preferred stock, 35,000,000 shares
authorized, no par value, 1,992,931 and 2,707,917 shares
issued and outstanding at March 31, 1998, and December 31,
1997, respectively........................................ 99.6 135.4
Common stock, no par value, $5 stated value, 950,000,000
shares authorized; 647,576,189 and 645,956,436 shares
issued at March 31, 1998, and December 31, 1997,
respectively.............................................. 3,237.9 3,229.8
Capital in excess of aggregate stated value of common
stock..................................................... 6,690.0 6,718.7
Retained earnings........................................... 509.5 239.8
Accumulated change related to other nonowner transactions... 123.9 121.0
Treasury stock (3,742,299 and 1,421,331 shares at March 31,
1998, and December 31, 1997, respectively), at cost....... (195.1) (68.7)
---------- ----------
TOTAL STOCKHOLDERS' EQUITY............................ 10,465.8 10,376.0
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY............ $116,320.9 $115,901.3
========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
1
<PAGE>
BANC ONE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED MARCH 31,
--------------------------
$(MILLIONS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED) 1998 1997
- ----------------------------------------------------------------------------------------
<S> <C> <C>
INTEREST INCOME:
Loans and leases.......................................... $1,944.5 $1,969.8
Securities:
Taxable.............................................. 245.5 277.2
Tax-exempt........................................... 17.2 21.7
Loans held for sale....................................... 83.4 44.2
Other..................................................... 10.4 11.2
-------- --------
TOTAL INTEREST INCOME................................ 2,301.0 2,324.1
INTEREST EXPENSE:
Deposits:
Demand, savings and money market deposits............ 311.1 260.1
Time deposits........................................ 319.4 363.0
Borrowings................................................ 349.6 343.2
-------- --------
TOTAL INTEREST EXPENSE............................... 980.1 966.3
-------- --------
NET INTEREST INCOME.................................. 1,320.9 1,357.8
Provision for credit losses............................... 202.8 271.9
-------- --------
Net interest income after provision for credit
losses.............................................. 1,118.1 1,085.9
NONINTEREST INCOME:
Investment management and advisory activities............. 85.9 74.2
Service charges on deposit accounts....................... 183.9 166.0
Loan servicing income..................................... 524.6 315.1
Securities gains, net..................................... 23.0 15.2
Other..................................................... 319.7 236.7
-------- --------
TOTAL NONINTEREST INCOME............................. 1,137.1 807.2
NONINTEREST EXPENSE:
Salary and related costs.................................. 634.2 567.7
Net occupancy and equipment............................... 99.3 81.4
Depreciation and amortization............................. 110.3 108.6
Outside services and processing........................... 212.9 191.5
Marketing and development................................. 178.7 130.0
Communication and transportation.......................... 112.6 94.4
Other..................................................... 145.0 135.4
-------- --------
TOTAL NONINTEREST EXPENSE............................ 1,493.0 1,309.0
-------- --------
Income before income taxes.................................. 762.2 584.1
Provision for income taxes.................................. 244.6 202.2
-------- --------
NET INCOME.................................................. $ 517.6 $ 381.9
======== ========
NET INCOME PER COMMON SHARE:
NET INCOME PER COMMON SHARE, BASIC................... $ .80 $ .60
======== ========
NET INCOME PER COMMON SHARE, DILUTED................. $ .79 $ .58
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
2
<PAGE>
BANC ONE CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------------
$(MILLIONS) (UNAUDITED) 1998 1997
- ----------------------------------------------------------------------------------------
<S> <C> <C>
CASH PROVIDED BY OPERATING ACTIVITIES:
Net income................................................ $ 517.6 $ 381.9
Depreciation expense...................................... 85.7 78.7
Amortization of other intangibles......................... 24.6 29.8
Other cash provided by operating activities............... 1,246.5 522.6
--------- ---------
Net cash provided by operating activities............ 1,874.4 1,013.0
--------- ---------
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES:
Securities available for sale activity:
Purchases............................................ (3,653.2) (1,676.9)
Maturities........................................... 327.6 580.3
Sales................................................ 2,646.6 1,241.2
Securities held to maturity activity:
Purchases............................................ (293.2)
Maturities........................................... 75.7 278.5
Loan activity:
Net increase, excluding sales and purchases.......... (1,640.1) (2,009.4)
Sales................................................ 2,109.2 1,104.3
Purchases and related premiums....................... (407.8) (165.7)
Net (increase) decrease in short-term investments......... (436.5) 62.1
Additions to bank premises and equipment.................. (109.2) (94.6)
Sale of banks and branch offices.......................... (616.8) (22.2)
Credit card securitization activity....................... (1,200.2) (890.2)
All other investing activities, net....................... 16.0 157.8
--------- ---------
Net cash used in investing activities................ (2,888.7) (1,728.0)
--------- ---------
CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES:
Net increase in demand savings and money market
deposits............................................... 2,320.1 295.2
Net decrease in time deposits............................. (1,091.3) (549.9)
Net decrease in short-term borrowings..................... (918.9) (330.7)
Issuance of long-term borrowings, net..................... 1,031.6 1,329.2
Repayment of long-term borrowings......................... (743.5) (586.9)
Cash dividends paid....................................... (246.2) (173.1)
Purchase of treasury stock................................ (146.3) (356.7)
All other financing activities, net....................... (38.2) (1.4)
--------- ---------
Net cash provided by (used in) financing
activities.......................................... 167.3 (374.3)
--------- ---------
Decrease in cash and cash equivalents....................... (847.0) (1,089.3)
Cash and cash equivalents at January 1...................... 7,727.4 6,524.4
--------- ---------
Cash and cash equivalents at March 31....................... $ 6,880.4 $ 5,435.1
========= =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
3
<PAGE>
BANC ONE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------
$(MILLIONS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED) 1998 1997
- ------------------------------------------------------------------------------------
<S> <C> <C>
BALANCE, BEGINNING OF PERIOD................................ $10,376.0 $ 9,868.0
Net income.................................................. 517.6 381.9
Changes related to other nonowner transactions:
Change in unrealized holding gains (losses) on securities
available for sale, net of tax......................... 2.9 (97.4)
--------- ---------
Total net income and changes related to other
nonowner transactions............................... 520.5 284.5
--------- ---------
Exercise of stock options, net of shares purchased.......... (44.3) (0.3)
Shares issued in acquisitions............................... 1.4
Stock transactions related to employee benefit plans and
other..................................................... 4.7 11.9
Cash dividends:
Common ($.38 and $.345 per share for the three months
ended March 31, 1998 and 1997, respectively)........... (244.1) (159.4)
Series C Preferred ($.88 per share)....................... (2.1) (3.4)
Preferred stock of pooled affiliate....................... (10.3)
Purchase of treasury stock.................................. (146.3) (356.7)
--------- ---------
BALANCE, END OF PERIOD...................................... $10,465.8 $ 9,634.3
========= =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
4
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying consolidated financial statements are unaudited. However,
in the opinion of management, they contain the adjustments, all of which are
normal and recurring in nature, necessary to present fairly the consolidated
financial position, results of operations and changes in cash flow. The
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, 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.
BANC ONE adopted Statement of Financial Accounting Standards ("SFAS") No.
128, "Earnings Per Share," which modified the calculation of previously reported
earnings per share and is effective for all financial statements issued for
periods ending after December 15, 1997. In accordance with SFAS No. 128, all
prior period amounts have been restated. Unless specified otherwise, all
earnings per share amounts are presented under the new diluted basis in
accordance with SFAS No. 128.
All per share and average share information has been restated for the 10%
common stock dividend payable February 26, 1998, to shareholders of record as of
February 12, 1998.
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. PENDING ACQUISITION
On October 20, 1997, the Corporation entered into an agreement providing
for the acquisition of First Commerce Corporation ("First Commerce"), a
multi-bank holding company headquartered in New Orleans, Louisiana, with
approximately $9.4 billion in assets at March 31, 1998. Terms of the agreement
call for First Commerce shareholders to receive 1.408 shares (adjusted for the
Corporation's 10% common stock dividend) of the Corporation's common stock for
each share of First Commerce common stock. The value of the transaction is
approximately $3.5 billion based on the Corporation's closing share price on
March 31, 1998. The transaction, subject to regulatory and First Commerce
shareholder approval, is expected to be completed during the second quarter of
1998 and will be accounted for as a pooling of interests.
Also see Note 8 for information regarding the pending merger between the
Corporation and First Chicago NBD Corporation ("First Chicago").
3. COMMON AND TREASURY STOCK ACTIVITY
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. At March
31, 1998, approximately 2 million shares of preferred stock remained which could
be converted to 4.2 million shares of common stock. In addition, as a result of
employee stock transactions, 2.5 million shares of treasury stock were acquired.
4. 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 for the three months ended March 31,
1998; and securities trades not settled increased $1.2 million and decreased
$337.0 million for the three months ended March 31, 1998 and 1997, respectively.
In addition, noncash investing activities included the following transfers
of securitization-related assets: (1) an interest-only strip of $455.0 million
was transferred from other assets to securities available for sale and
5
<PAGE>
(2) retained interests in credit card securitizations of $1.1 billion were
transferred from loans to securities available for sale.
5. EARNINGS PER SHARE
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31,
-----------------
$(MILLIONS, EXCEPT PER SHARE AMOUNTS) 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C>
BASIC:
EARNINGS:
Net income............................................. $517.6 $381.9
Deduct: Dividends on preferred shares.................. (2.1) (6.3)
------ ------
$515.5 $375.6
====== ======
SHARES:
Weighted average common shares outstanding............. 643.1 622.6
====== ======
NET INCOME PER COMMON SHARE, BASIC.......................... $ .80 $ .60
====== ======
DILUTED:
EARNINGS:
Net income............................................. $517.6 $381.9
====== ======
SHARES:
Weighted average common shares outstanding............. 643.1 622.6
Add: Dilutive effect of outstanding options............ 7.0 12.2
Add: Conversion of preferred stock..................... 5.4 20.8
------ ------
Weighted average common shares outstanding............. 655.5 655.6
====== ======
NET INCOME PER COMMON SHARE, DILUTED........................ $ .79 $ .58
====== ======
</TABLE>
6. COMPREHENSIVE INCOME
BANC ONE adopted SFAS No. 130, "Reporting Comprehensive Income," effective
January 1, 1998. SFAS No. 130 establishes standards for reporting and display of
comprehensive income and its components (revenues, gains and losses) in a full
set of general-purpose financial statements.
The purpose of reporting comprehensive income is to report a measure of all
changes in the equity of an enterprise that result from recognized transactions
and other economic events of the period other than transactions with owners in
their capacity as owners. Accordingly, 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>
THREE MONTHS ENDED THREE MONTHS ENDED
MARCH 31, 1998 MARCH 31, 1997
----------------------------------- -----------------------------------
TAX TAX
BEFORE-TAX (EXPENSE) AFTER-TAX BEFORE-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.................. $ 36.6 $(11.8) $ 24.8 $(133.9) $46.4 $(87.5)
Less: reclassification adjustment
for gain realized in net
income......................... (32.3) 10.4 (21.9) (15.1) 5.2 (9.9)
------ ------ ------ ------- ----- ------
Change related to other nonowner
transactions..................... $ 4.3 $ (1.4) $ 2.9 $(149.0) $51.6 $(97.4)
====== ====== ====== ======= ===== ======
</TABLE>
6
<PAGE>
7. 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."
SFAS No. 131 establishes standards for reporting operating segments and requires
certain other disclosures about products and services, geographic areas and
major customers. The disclosure requirements are effective for the year ended
December 31, 1998. SFAS No. 131 requires selected information about operating
segments in interim financial reports beginning in 1999. BANC ONE expects to
report the following lines of business in its segment disclosures for the year
ended December 31, 1998: the Banc One Commercial Banking Group, the Banc One
Retail Banking Group, First USA, the Finance One Group and the Banc One Capital
Holdings Group. These segments may change as a result of the merger with First
Chicago.
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 of 1998. In the
first quarter 1998, $11.0 million of such software costs were capitalized. These
costs will be amortized on a straight-line basis over the period of benefit and
will be periodically reviewed for possible impairment.
8. SUBSEQUENT EVENTS
On April 10, 1998, the Corporation entered into an agreement to merge with
First Chicago, a multi-bank holding company headquartered in Chicago with
approximately $114.8 billion in assets at March 31, 1998. The new company will
operate under the BANC ONE name. Terms of the agreement call for First Chicago
shareholders to receive 1.62 shares of the new company in exchange for each
share of First Chicago stock. BANC ONE shareholders will receive one share of
the new company for each share of current BANC ONE stock. The value of the
transaction is approximately $29.4 billion based on BANC ONE's closing share
price on March 31, 1998. The transaction, subject to regulatory and shareholder
approval, is expected to be completed during the fourth quarter of 1998, and
will be accounted for as a pooling of interests. For further information, see
BANC ONE's Current Report on Form 8-K dated April 10, 1998 (as amended by Form
8-K/A filed April 21, 1998), which is incorporated herein by reference.
On April 1, 1998, the Corporation entered into a strategic alliance with
National Australia Bank ("National"). Under the agreement, BANC ONE will sell a
significant portion of its residential mortgage loan servicing to Homeside
Lending, National's international mortgage subsidiary, over the next five years.
BANC ONE will continue to originate, underwrite and close mortgage loans. The
transaction, which is subject to regulatory approvals, is expected to close in
second quarter 1998 and is anticipated to result in an overall gain.
7
