Exhibit 13



BANK ONE CORPORATION

INDEX TO FINANCIAL REVIEW



|Selected Financial Information                        |  | 34 
|----------------------------------------------------- |  | ---
|Description of Business                               |  | 35 
|Application of Critical Accounting Policies           |  | 35 
|Summary of Results                                    |  | 37 
|Balance Sheet Analysis                                |  | 37 
|Business Segment Results                              |  | 38 
|Business Segment Results and Other Data               |  | 38 
|Consolidated Results                                  |  | 53 
|Risk Management                                       |  | 56 
|Credit Risk Management                                |  | 57 
|Liquidity Risk Management                             |  | 58 
|Market Risk Management                                |  | 59 
|Operational Risk Management                           |  | 62 
|Credit Portfolio Composition                          |  | 63 
|Asset Quality                                         |  | 66 
|Allowance for Credit Losses                           |  | 68 
|Derivative Financial Instruments                      |  | 72 
|Loan Securitizations and Off-Balance Sheet Activities |  | 74 
|Capital Management                                    |  | 77 
|Forward-Looking Statements                            |  | 79 
|Consolidated Financial Statements                     |  | 80 
|Notes to Consolidated Financial Statements            |  | 84 
|Report of Management                                  |  | 109
|Report of Independent Public Accountants              |  | 110
|Selected Statistical Information                      |  | 111



BANK ONE 2002 ANNUAL REPORT    33



---



SELECTED
FINANCIAL INFORMATION

BANK ONE CORPORATION and Subsidiaries



|(In millions, except per share data, ratios, and headcount)               |  | 2002(5) |         |   | 2001 |   |         | 2000 |  |   | 1999    |    |  | 1998 |        
|------------------------------------------------------------------------- |  | ------- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -- |  | ---- | -------
|                                                                         
|Income Statement Data:                                                    |  |         |         |   |      |   |         |      |  |   |         |    |  |      |        
|Total revenue, net of interest expense                                    |  | $       | 16,831  |   |      | $ | 15,861  |      |  | $ | 13,926  |    |  | $    | 17,713 
|Net interest income  fully taxable-equivalent (FTE) basis(1)             |  |         | 8,740   |   |      |   | 8,769   |      |  |   | 8,974   |    |  |      | 9,142  
|Noninterest income                                                        |  |         | 8,236   |   |      |   | 7,223   |      |  |   | 5,090   |    |  |      | 8,692  
|Provision for credit losses                                               |  |         | 2,487   |   |      |   | 2,510   |      |  |   | 3,398   |    |  |      | 1,249  
|Noninterest expense                                                       |  |         | 9,581   |   |      |   | 9,551   |      |  |   | 11,608  |    |  |      | 11,490 
|Income (loss) before cumulative effect of change in accounting principle  |  |         | 3,295   |   |      |   | 2,682   |      |  |   | (511    | )  |  |      | 3,479  
|Net income (loss)                                                         |  |         | 3,295   |   |      |   | 2,638   |      |  |   | (511    | )  |  |      | 3,479  
|                                                                         
|Per Common Share Data:                                                    |  |         |         |   |      |   |         |      |  |   |         |    |  |      |        
|Income (loss) before cumulative effect of change in accounting
principle: |  |         |         |   |      |   |         |      |  |   |         |    |  |      |        
|Basic                                                                     |  | $       | 2.83    |   |      | $ | 2.28    |      |  | $ | (0.45   | )  |  | $    | 2.97   
|Diluted(2)                                                                |  |         | 2.80    |   |      |   | 2.28    |      |  |   | (0.45   | )  |  |      | 2.95   
|Net income (loss):                                                        |  |         |         |   |      |   |         |      |  |   |         |    |  |      |        
|Basic                                                                     |  | $       | 2.83    |   |      | $ | 2.25    |      |  | $ | (0.45   | )  |  | $    | 2.97   
|Diluted(2)                                                                |  |         | 2.80    |   |      |   | 2.24    |      |  |   | (0.45   | )  |  |      | 2.95   
|Cash dividends declared                                                   |  |         | 0.84    |   |      |   | 0.84    |      |  |   | 1.26    |    |  |      | 1.68   
|Book value                                                                |  |         | 19.28   |   |      |   | 17.33   |      |  |   | 15.90   |    |  |      | 17.34  
|                                                                         
|Balance Sheet Data  Ending Balances:                                     |  |         |         |   |      |   |         |      |  |   |         |    |  |      |        
|Loans                                                                     |  | $       | 148,125 |   |      | $ | 156,733 |      |  | $ | 174,251 |    |  | $    | 163,877
|Total assets                                                              |  |         | 277,383 |   |      |   | 268,954 |      |  |   | 269,300 |    |  |      | 269,425
|Deposits                                                                  |  |         | 170,008 |   |      |   | 167,530 |      |  |   | 167,077 |    |  |      | 162,278
|Long-term debt(3)                                                         |  |         | 43,234  |   |      |   | 43,418  |      |  |   | 40,911  |    |  |      | 35,435 
|Common stockholders equity                                               |  |         | 22,440  |   |      |   | 20,226  |      |  |   | 18,445  |    |  |      | 19,900 
|Total stockholders equity                                                |  |         | 22,440  |   |      |   | 20,226  |      |  |   | 18,635  |    |  |      | 20,090 
|                                                                         
|Credit Quality Ratios:                                                    |  |         |         |   |      |   |         |      |  |   |         |    |  |      |        
|Net charge-offs to average loans                                          |  |         | 1.63    | % |      |   | 1.37    | %    |  |   | 0.81    | %  |  |      | 0.77   
|Allowance to period end loans                                             |  |         | 3.20    |   |      |   | 2.97    |      |  |   | 2.42    |    |  |      | 1.42   
|Nonperforming assets to related assets(4)                                 |  |         | 2.38    |   |      |   | 2.35    |      |  |   | 1.48    |    |  |      | 1.02   
|                                                                         
|Financial Performance Ratios:                                             |  |         |         |   |      |   |         |      |  |   |         |    |  |      |        
|Return (loss) on average assets                                           |  |         | 1.25    | % |      |   | 0.98    | %    |  |   | (0.19   | )% |  |      | 1.36   
|Return (loss) on average common equity                                    |  |         | 15.2    |   |      |   | 13.4    |      |  |   | (2.7    | )  |  |      | 17.1   
|Net interest margin                                                       |  |         | 3.78    |   |      |   | 3.69    |      |  |   | 3.72    |    |  |      | 4.09   
|Efficiency ratio                                                          |  |         | 56.4    |   |      |   | 59.7    |      |  |   | 82.5    |    |  |      | 64.4   
|                                                                         
|Capital Ratios:                                                           |  |         |         |   |      |   |         |      |  |   |         |    |  |      |        
|Risk-based capital:                                                       |  |         |         |   |      |   |         |      |  |   |         |    |  |      |        
|Tier 1                                                                    |  |         | 9.9     | % |      |   | 8.6     | %    |  |   | 7.3     | %  |  |      | 7.7    
|Total                                                                     |  |         | 13.7    |   |      |   | 12.2    |      |  |   | 10.8    |    |  |      | 10.7   
|Leverage                                                                  |  |         | 8.9     |   |      |   | 8.2     |      |  |   | 7.3     |    |  |      | 7.7    
|                                                                         
|Common Stock Data:                                                        |  |         |         |   |      |   |         |      |  |   |         |    |  |      |        
|Average shares outstanding:                                               |  |         |         |   |      |   |         |      |  |   |         |    |  |      |        
|Basic                                                                     |  |         | 1,162   |   |      |   | 1,166   |      |  |   | 1,154   |    |  |      | 1,168  
|Diluted(2)                                                                |  |         | 1,172   |   |      |   | 1,174   |      |  |   | 1,154   |    |  |      | 1,178  
|Stock price, year-end                                                     |  | $       | 36.55   |   |      | $ | 39.05   |      |  | $ | 36.63   |    |  | $    | 32.00  
|Stock dividends                                                           |  |         |        |   |      |   |        |      |  |   |        |    |  |      |       
|Headcount                                                                 |  |         | 73,685  |   |      |   | 73,519  | (6)  |  |   | 80,778  |    |  |      | 87,735 
|                                                                         

|(1) |  | Net interest income-FTE includes taxable equivalent adjustments of $145 million, $131 million, $138 million, $121 million and $122 million for the years ended
December 31, 2002, 2001, 2000, 1999 and 1998, respectively.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | Common equivalent shares and related income were excluded from the computation of diluted loss per share for the year-ended December 31, 2000 as the effect was
antidilutive.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) |  | Includes trust preferred capital securities.
|--- |  | --------------------------------------------

|(4) |  | Related assets consist of loans outstanding, including loans held for sale and other real estate owned.
|--- |  | -------------------------------------------------------------------------------------------------------

|(5) |  | Results include the effects of the consolidation of Paymentech, Inc. and Anexsys, LLC.
|--- |  | --------------------------------------------------------------------------------------

|(6) |  | Beginning in 2001, employees on long-term disability and employees of unconsolidated subsidiaries are excluded. Prior period data have not been reclassified for this
change.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



34    BANK ONE 2002 ANNUAL REPORT



---



DESCRIPTION OF BUSINESS



BANK ONE CORPORATION
and subsidiaries (Bank One or the Corporation) is a diversified financial holding company that offers a full range of financial services to consumers and commercial customers. The Corporation is:



| |  |  | A leader in retail and small business banking
| | - |  | ---------------------------------------------



| |  |  | A premier provider of lending, treasury management, and capital markets products to commercial customers
| | - |  | --------------------------------------------------------------------------------------------------------



| |  |  | The third largest credit card issuer in the United States and the largest Visa®issuer in the world
| | - |  | --------------------------------------------------------------------------------------------------



| |  |  | A leading investment management company
| | - |  | ---------------------------------------



For a description of each business segment refer to Business Segment Results and Other Data beginning on page 38.



Basis of Presentation



The Corporations financial statements are based on the application of
accounting principles generally accepted in the United States of America, which are described in the notes to the consolidated financial statements starting on page 84. The Corporations financial statements are highly dependent upon certain
judgments, assumptions and estimates made by the Corporation. Those that are most critical to the overall financial statements are described below.



Managements discussion and analysis may contain forward-looking statements provided to assist in the understanding of anticipated
future financial performance. However, such performance involves risks and uncertainties that may cause actual results to differ materially from those expressed in forward-looking statements. See page 79 for a discussion of these factors.



APPLICATION OF CRITICAL
ACCOUNTING POLICIES



Generally accepted accounting principles
are complex and require management to apply significant judgment to various accounting, reporting and disclosure matters. Management must use assumptions and estimates to apply these principles where actual measurement is not possible or practical.



For a complete discussion of the
Corporations significant accounting policies, see the footnotes to the Consolidated Financial Statements (pages 84-108) and discussion throughout this financial review document. Below is a plain-English discussion of the Corporations
critical accounting policies. These policies are critical because they are highly dependent upon subjective or complex judgments, assumptions and estimates. Changes in such estimates may have a significant impact on the financial statements.
Management has reviewed the application of these policies with the Audit and Risk Management Committee of the Corporations Board of Directors.



Allowance for Credit Losses



The allowance for credit losses represents managements estimate of probable losses inherent in the Corporations credit portfolios. In
determining an adequate allowance, management makes numerous assumptions, estimates and assessments. At the end of 2002, the allowance for credit losses was $4.5 billion, representing 3.20% of loans at year end.



The Corporations allowance consists of three components:
asset specific, expected loss and stress. The Corporations methodology for determining each component is more fully described on pages 57-58 and 71-72.



The asset specific component applies to loans evaluated individually for impairment and is based upon managements best estimate of
discounted cash repayments and proceeds from liquidating collateral. The actual timing and amount of repayments and the ultimate realizable value of the collateral may differ from managements estimates.



The expected loss component for commercial credits is based
upon internal risk ratings that are applied to individual credits based upon the probability and amount of loss in the event of a default. These expected loss estimates are sensitive to changes in the risk profile of a customer, realizable value of
collateral, other risk factors and actual loss experience.



The expected loss component of consumer credits is generally determined by applying statistical loss factors and other risk indicators to pools of loans by asset type. These expected loss estimates are sensitive to changes in
delinquency status, credit bureau scores, the realizable value of collateral, and other risk factors.



The stress component represents the effect of probable economic deterioration above and beyond what is reflected in the asset specific and
expected loss components. This amount is determined based upon the results of a series of tests that stress the credit portfolios. The Corporations stress testing methodology is more fully described on pages 71  72.



The underlying assumptions, estimates and assessments used by
management to determine these components are continually evaluated and updated to reflect managements current view of overall economic conditions and relevant factors impacting credit quality and inherent losses. Changes in such estimates
could significantly impact the allowance and provision for credit losses in each business segment. The Corporation could experience credit losses that are different from the current estimates made by management.



Securitizations



The Corporation packages primarily credit card loans into securities that are
sold to investors or retained on the balance sheet through the process of securitization. By applying detailed accounting guidelines, the Corporation determines if a securitization transaction results in a sale (as opposed to a secured borrowing),
the amount of any gain or loss on such sale, and the value of retained interests in the securitized assets. During 2002, Card Services recognized $55 million in gains from the securitization of $6.8 billion in credit card receivables. The retained
interest was approximately $28 billion at the end of 2002.



BANK ONE 2002 ANNUAL REPORT    35



---



Management
utilizes a discounted cash flow model to estimate the value of retained interests. Projected cash flows are generally based upon estimates of finance charges and fees related to the securitized assets, net credit losses, average life, the
contractual fee to service the loans, and also contractual interest paid to third party investors. See page 94 for a pretax sensitivity analysis of the assumptions used to determine the fair values assigned to the Corporations retained
interests.



Changes in the cash flow estimates
used may have a significant impact on Card Services valuation of retained interests and the initial gain or loss on sale. See the Loan Securitizations on page 74 and Note 9 Credit Card Securitizations on pages 94-95 for
further information on the Corporations securitization activities.



Valuation of Certain Financial Instruments



The majority of the Corporations financial instruments that require fair value measurements are determined based on quoted market prices. The Corporation must estimate the fair value of certain financial instruments, such as
some principal investments and credit derivatives, which are not publicly traded or are traded in limited markets. These amounts represent the estimated values at which financial instruments could be currently exchanged or settled between willing
parties.



While the fair value of a publicly
traded investment is determined using quoted market prices, the fair value of some investments must be estimated based upon the investees financial results, conditions and prospects, values of comparable public companies, market liquidity, and
sale restrictions. Other investments require the use of a discounted cash flow model or other modeling techniques utilizing the limited market information to estimate fair value. These fair value estimates are most sensitive to the timing and amount
of actual cash flows and market liquidity.



Changes in these estimates may have a significant impact on the carrying amount and the related valuation gains and losses on these financial instruments in the Commercial Banking and Corporate lines of business.



Stock Option Compensation



Prior to 2002, the Corporation did not record compensation expense for stock
option awards. In 2002, the Corporation began recognizing the expense associated with stock options granted during 2002 using the fair value method. Compensation cost is calculated based on the fair value of the award at the grant date, and is
recognized as an expense over the vesting period of the grant. The Corporation uses the Black-Scholes option pricing model to estimate the value of granted options. This model takes into account the option exercise price, the expected life, expected
forfeitures, the current price of the underlying stock, the expected volatility of the Corporations stock, expected dividends on the stock and a discount rate.



Since compensation cost is measured at the grant date, the only variable whose change would impact expected
compensation expense recognized in future periods for 2002 grants is actual forfeitures. If the Corporation experiences a 50% lower forfeiture rate than estimated, compensation expense in the period of change would increase by $4 million. See Note
19 Stock-Based Compensation on page 100 for the specific assumptions used to calculate the fair value of options granted.



Pension



The Corporation provides pension benefits to its employees. In accordance with applicable accounting rules, the Corporation does not consolidate the assets and liabilities associated with the pension
plan. (At the end of 2002, the fair value of pension plan assets was $2.5 billion and the plan was overfunded). Instead, the Corporation recognizes a prepaid asset for contributions the Corporation has made to the pension plan in excess of pension
expense. The measurement of the prepaid asset and the annual pension expense involves actuarial and economic assumptions.



The assumptions used in pension accounting relate to the expected rate of return on plan assets, the rate of increase in salaries, the
interest-crediting rate, the discount rate, and other assumptions. See Note 18 Employee Benefits on page 98 for the specific assumptions used by the Corporation.



The annual pension expense for the Corporation is currently most sensitive to the return on asset assumption.
For example, each 25 basis point reduction in the 2003 expected rate of return of 7.5% would increase the Corporations 2003 pension expense by approximately $8 million. In addition, each 25 basis point reduction in the 2003 discount rate of
6.5% would impact the Corporations 2003 pension expense by approximately $1 million.





36    BANK ONE 2002 ANNUAL REPORT



---



SUMMARY OF RESULTS



(All comparisons are to the prior year unless otherwise specified)



Net income was $3.3 billion, or $2.80 per diluted share. This is compared to net income of $2.6 billion, or $2.24 per diluted share.



Net interest income remained relatively unchanged at $8.6 billion. Decreases resulting from the intentional reduction of certain segments
of the loan portfolio were offset by increases in Retail core deposits and the benefit of lower interest rates.



Noninterest income of $8.2 billion increased $1.0 billion, and as a percentage of total revenue increased to 48.9% from 45.5%. This
increase was primarily due to growth in credit card revenue resulting from the acquisition of the Wachovia credit card business in the third quarter of 2001, and the consolidation of Paymentech, Inc. beginning January 1, 2002.



Noninterest income included numerous offsetting items,
including net investment security gains of $165 million compared to losses of $66 million. The gain included a $261 million gain on sale of the interest in the GE Monogram joint venture, partially offset by net losses in the investment portfolios.
Also included in the change in noninterest income were the $129 million increase in service charges on deposits, increases in asset-backed finance and underwriting fees in capital markets of $48 million, and $42 million in fee income related to
increased annuity and mutual fund sales. In addition, noninterest income included $42 million of mark-to-market adjustments on the credit derivatives portfolio used to hedge exposure to specific credits in the loan portfolio, compared to $6 million
in the prior year. Partially offsetting these increases were various asset writedowns. In addition, 2001 included $73 million of gains on the sales of the Corporations interests in EquiServe Limited Partnership and Star Systems, an ATM
network.



Total noninterest expenses of $9.6
billion increased by $30 million including a $414 million reduction in restructuring related charges. Excluding restructuring related charges and reversals, the change is a result of increased marketing expenditures of $192 million, $118 million for
the consolidation of Paymentech and Anexsys, $89 million for terminating and renegotiating certain vendor contracts, and increased compensation expense for incentives and stock options.



Provision for credit losses was $2.5 billion for the year ended December 31, 2002, a decrease of $23 million.
The allowance for credit losses was $4.5 billion as of December 31, 2002, unchanged from December 31, 2001. As a percentage of period end loans, the allowance increased to 3.20% from 2.97%. This is due to the reduction of the overall loan portfolio
from $156.7 billion to $148.1 billion.



BALANCE SHEET ANALYSIS



In 2002, the Corporation
took actions relating to both the asset and liability sides of the balance sheet in order to defensively position itself for a higher rate environment. On the asset side, the treasury investment portfolio was repositioned for rising rates, and the
Corporation adjusted the funding of the balance sheet to selectively lengthen maturities and fix rates.



The Corporations loan portfolio was $148.1 billion compared with $156.7 billion, a decrease of $8.6 billion, or 5%. Commercial
Banking loans totaled $61.9 billion compared to $72.5 billion, a decrease of $10.6 billion, or 15%. Reductions of $8.5 billion and $1.8 billion in commercial and industrial and commercial real estate loans, respectively, reflected the impact of risk
management initiatives to reduce aggregate risk, risk in specific credits and to be properly compensated for risks taken. Card Services loans totaled $11.6 billion compared to $6.8 billion, an increase of $4.8 billion, or 71%, reflecting lower
attrition and higher utilization. During the year, 4.9 million credit card accounts were opened, an increase of 25%. Retail loans totaled $67.7 billion compared with $69.6 billion, a decrease of $1.9 billion, due primarily to the intentional
reduction of the discontinued brokered home equity portfolios and auto lease offset by growth in the on-going home equity portfolio.



Investment securities totaled $67.6 billion compared with $60.9 billion. This increase of $6.7 billion, or 11%, was driven by an increase
of $4.2 billion, or 18%, in retained interests in securitized credit card receivables, a $1.8 billion, or 7%, increase in U.S. government agencies, an increase of $639 million, or 23%, in equity securities, and an increase of $342 million, or 8%, in
other debt securities. Partially offsetting these increases were the previously mentioned asset writedowns.



Total deposits were $170.0 billion compared to $167.5 billion, an increase of $2.5 billion, or 1%. Savings deposits totaled $88.9 billion
compared to $80.6 billion, an increase of $8.3 billion, or 10%. Demand deposits totaled $34.3 billion compared to $32.2 billion, an increase of $2.1 billion, or 7%. Offsetting these increases was a decrease in time deposits of $7.7 billion, or 20%,
to $30.5 billion from $38.2 billion.





BANK ONE 2002 ANNUAL REPORT    37



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BUSINESS SEGMENT RESULTS



The Corporation is
managed on a line of business basis. The business segments financial results presented reflect the current organization of the Corporation. The following table summarizes net income (loss) by line of business for the periods indicated.



|For the Year Ended December 31,                                            |  | 2002(1) |       |   | 2001(2) |   |       | 2000 | 
|-------------------------------------------------------------------------- |  | ------- | ----- | - | ------- | - | ----- | ---- | 
|                                                                          
|(In millions)                                                              |  |         |       |   |         |   |       |      | 
|Retail                                                                     |  | $       | 1,390 |   |         | $ | 1,181 |      | 
|Commercial Banking                                                         |  |         | 617   |   |         |   | 700   |      | 
|Card Services                                                              |  |         | 1,166 |   |         |   | 907   |      | 
|Investment Management                                                      |  |         | 411   |   |         |   | 362   |      | 
|Corporate                                                                  |  |         | (289  | ) |         |   | (468  | )    | 
|                                                                          
|Income (loss) before cumulative effect of change in accounting principle   |  |         | 3,295 |   |         |   | 2,682 |      | 
|Cumulative effect of change in accounting principle, net of taxes of
($25) |  |         |      |   |         |   | (44   | )    | 
|                                                                          
|Net income (loss)(3)                                                       |  | $       | 3,295 |   |         | $ | 2,638 |      | 
|                                                                          

|(1) |  | During 2002, the dealer commercial services business was transferred from Retail to Commercial Banking. All results for prior periods conform to the current line of
business organization.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | During 2001, the tax-oriented portfolio of corporate investments was transferred to Commercial Banking, while the principal investments and fixed income portfolios
were transferred to Corporate. All results for prior periods conform to the current line of business organization.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) |  | Net income includes restructuring-related charges (reversals) net of tax expense (benefit) of $(40) million, $222 million and $102 million for 2002, 2001, and 2000,
respectively.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Description of Methodology



The results of the business segments are intended to
reflect each segment as if it were a stand-alone business. The management reporting process that derives these results allocates income and expenses using market-based methodologies. Funds transfer pricing is used to allocate interest income and
expense to each line of business. A portion of the Corporations interest rate risk position is currently included in Corporate. The lines of business are assigned economic capital that reflects the underlying risk in that business. See the
Capital Management section on page 77 for a discussion of the economic capital framework.



Historically, the costs of certain support units were allocated to the lines of business based on factors other than usage, such as
headcount and total assets. The methodology was changed in the third quarter of 2000 to better reflect the actual cost and usage of services provided and was consistently applied to all lines of business. As a result of this methodology change,
costs allocated to Card Services decreased, while unallocated costs that are included in Corporate increased.



BUSINESS SEGMENT RESULTS AND OTHER DATA



The information provided in the line of business tables beginning with the caption entitled Financial Performance
is included herein for analytical purposes only and is based on management information systems, assumptions and methodologies that are under continual review by management.



The financial information and supplemental data presented in the tables below for the respective lines of
business are reported on an actual basis. To assist with the analysis of underlying trends, a discussion of merger and restructuring-related charges and their impact on business segment results is included for 2000 on pages 5253.



Retail



Retail provides a broad range of financial products and services, including deposits, investments, loans, insurance, and
on-line banking to nearly 6.9 million households including 489,000 small business customers. 1.4 million of total households are registered on-line users.



Products and services are delivered to customers through approximately 32,000 employees, 1,795 banking centers in 14 states, a large
network of ATMs, bankone.com, and 24-hour telephone banking. THE ONE®Card, issued by Retail, is one of
the countrys leading debit cards for individuals and small businesses, with 4.6 million cards issued.



Retail originates consumer credit nationwide through its banking centers, relationships with brokers, the Internet, and the telephone.
Retail offers real estate-secured, education, tax refund, consumer installment and auto loans and leases to individuals. Retail is also a leading lender to small businesses.





38    BANK ONE 2002 ANNUAL REPORT



---



|(Dollars in millions)                                                                 |  | 2002 |        |   | 2001 |   |        | 2000 | 
|------------------------------------------------------------------------------------- |  | ---- | ------ | - | ---- | - | ------ | ---- | 
|                                                                                     
|Income Statement Data:                                                                |  |      |        |   |      |   |        |      | 
|Net interest income-FTE(1) (2)                                                        |  | $    | 4,871  |   |      | $ | 4,961  |      | 
|Banking fees and commissions(3)                                                       |  |      | 430    |   |      |   | 455    |      | 
|Credit card revenue(4)                                                                |  |      | 177    |   |      |   | 164    |      | 
|Service charges on deposits(5)                                                        |  |      | 834    |   |      |   | 791    |      | 
|Other income (loss)                                                                   |  |      | (27    | ) |      |   | 25     |      | 
|                                                                                     
|Total noninterest income                                                              |  |      | 1,414  |   |      |   | 1,435  |      | 
|                                                                                     
|Total revenue, net of interest expense                                                |  |      | 6,285  |   |      |   | 6,396  |      | 
|Provision for credit losses                                                           |  |      | 910    |   |      |   | 1,007  |      | 
|Salaries and employee benefits                                                        |  |      | 1,449  |   |      |   | 1,476  |      | 
|Other expense                                                                         |  |      | 1,800  |   |      |   | 1,971  |      | 
|                                                                                     
|Total noninterest expense before merger and restructuring-related charges
(reversals) |  |      | 3,249  |   |      |   | 3,447  |      | 
|Merger and restructuring-related charges (reversals)(6)                               |  |      | (18    | ) |      |   | 104    |      | 
|                                                                                     
|Total noninterest expense                                                             |  |      | 3,231  |   |      |   | 3,551  |      | 
|                                                                                     
|Income before income taxes                                                            |  |      | 2,144  |   |      |   | 1,838  |      | 
|Applicable income taxes                                                               |  |      | 754    |   |      |   | 657    |      | 
|                                                                                     
|Net income                                                                            |  | $    | 1,390  |   |      | $ | 1,181  |      | 
|                                                                                     
|Memo  Revenue by source:                                                             |  |      |        |   |      |   |        |      | 
|Brokered core businesses                                                              |  | $    | 5,925  |   |      | $ | 5,838  |      | 
|Home equity discontinued/vehicle leases                                               |  |      | 360    |   |      |   | 558    |      | 
|                                                                                     
|Financial Performance:                                                                |  |      |        |   |      |   |        |      | 
|Return on equity                                                                      |  |      | 22     | % |      |   | 19     | %    | 
|Efficiency ratio                                                                      |  |      | 51     |   |      |   | 56     |      | 
|Headcountfull-time(7)                                                                |  |      | 32,244 |   |      |   | 32,904 |      | 
|                                                                                     
|Ending Balances(in billions):                                                         |  |      |        |   |      |   |        |      | 
|Small business commercial                                                             |  | $    | 9.9    |   |      | $ | 9.9    |      | 
|Home equity                                                                           |  |      | 28.5   |   |      |   | 25.1   |      | 
|Vehicle                                                                               |  |      | 14.0   |   |      |   | 13.5   |      | 
|Other personal                                                                        |  |      | 8.5    |   |      |   | 9.8    |      | 
|                                                                                     
|Core businesses                                                                       |  |      | 60.9   |   |      |   | 58.3   |      | 
|Brokered home equity discontinued                                                     |  |      | 3.2    |   |      |   | 5.1    |      | 
|Vehicle leases                                                                        |  |      | 3.6    |   |      |   | 6.2    |      | 
|                                                                                     
|Brokered home equity discontinued/vehicle leases                                      |  |      | 6.8    |   |      |   | 11.3   |      | 
|                                                                                     
|Total loans(8)                                                                        |  |      | 67.7   |   |      |   | 69.6   |      | 
|                                                                                     
|Assets                                                                                |  |      | 71.4   |   |      |   | 73.6   |      | 
|                                                                                     
|Demand deposits                                                                       |  |      | 27.7   |   |      |   | 25.5   |      | 
|Savings                                                                               |  |      | 38.8   |   |      |   | 36.1   |      | 
|Time                                                                                  |  |      | 21.8   |   |      |   | 25.6   |      | 
|                                                                                     
|Total deposits                                                                        |  |      | 88.3   |   |      |   | 87.2   |      | 
|                                                                                     
|Equity                                                                                |  |      | 6.2    |   |      |   | 6.2    |      | 
|                                                                                     
|Average Balances(in billions):                                                        |  |      |        |   |      |   |        |      | 
|Small business commercial                                                             |  | $    | 10.0   |   |      | $ | 9.6    |      | 
|Home equity                                                                           |  |      | 26.2   |   |      |   | 24.1   |      | 
|Vehicle                                                                               |  |      | 13.8   |   |      |   | 13.9   |      | 
|Other personal                                                                        |  |      | 8.8    |   |      |   | 10.5   |      | 
|                                                                                     
|Core businesses                                                                       |  |      | 58.8   |   |      |   | 58.1   |      | 
|Brokered home equity discontinued                                                     |  |      | 4.1    |   |      |   | 6.7    |      | 
|Vehicle leases                                                                        |  |      | 4.8    |   |      |   | 7.3    |      | 
|                                                                                     
|Brokered home equity discontinued/vehicle leases                                      |  |      | 8.9    |   |      |   | 14.0   |      | 
|                                                                                     
|Total loans                                                                           |  |      | 67.7   |   |      |   | 72.1   |      | 
|                                                                                     
|Assets                                                                                |  |      | 71.2   |   |      |   | 76.2   |      | 
|                                                                                     
|Demand deposits                                                                       |  |      | 26.1   |   |      |   | 23.9   |      | 
|Savings                                                                               |  |      | 37.9   |   |      |   | 34.1   |      | 
|Time                                                                                  |  |      | 24.1   |   |      |   | 29.4   |      | 
|                                                                                     
|Total deposits                                                                        |  |      | 88.1   |   |      |   | 87.4   |      | 
|                                                                                     
|Equity                                                                                |  |      | 6.2    |   |      |   | 6.1    |      | 
|                                                                                     





BANK ONE 2002 ANNUAL REPORT    39



---



|(Dollars in millions)                           |  | 2002 |       |   | 2001 |   |       | 2000 | 
|----------------------------------------------- |  | ---- | ----- | - | ---- | - | ----- | ---- | 
|                                               
|Credit Quality                                  |  |      |       |   |      |   |       |      | 
|Net charge-offs:                                |  |      |       |   |      |   |       |      | 
|Small business commercial                       |  | $    | 85    |   |      | $ | 70    |      | 
|Home equity                                     |  |      | 260   |   |      |   | 210   |      | 
|Vehicle                                         |  |      | 228   |   |      |   | 154   |      | 
|Other personal                                  |  |      | 109   |   |      |   | 122   |      | 
|                                               
|Core businesses                                 |  |      | 682   |   |      |   | 556   |      | 
|Brokered home equity discontinued               |  |      | 158   |   |      |   | 165   |      | 
|Vehicle leases                                  |  |      | 79    |   |      |   | 99    |      | 
|                                               
|Home equity discontinued/vehicle leases         |  |      | 237   |   |      |   | 264   |      | 
|                                               
|Total consumer                                  |  |      | 834   |   |      |   | 750   |      | 
|                                               
|Total net charge-offs                           |  |      | 919   |   |      |   | 820   |      | 
|                                               
|Net charge-off ratios:                          |  |      |       |   |      |   |       |      | 
|Small business commercial                       |  |      | 0.85  | % |      |   | 0.73  | %    | 
|Home equity                                     |  |      | 0.99  |   |      |   | 0.87  |      | 
|Vehicle                                         |  |      | 1.65  |   |      |   | 1.11  |      | 
|Other personal                                  |  |      | 1.24  |   |      |   | 1.16  |      | 
|                                               
|Core businesses                                 |  |      | 1.16  |   |      |   | 0.96  |      | 
|Brokered home equity discontinued               |  |      | 3.85  |   |      |   | 2.46  |      | 
|Vehicle leases                                  |  |      | 1.65  |   |      |   | 1.36  |      | 
|                                               
|Home equity discontinued/vehicle leases         |  |      | 2.66  |   |      |   | 1.89  |      | 
|                                               
|Total consumer                                  |  |      | 1.45  |   |      |   | 1.20  |      | 
|                                               
|Total net charge-offs                           |  |      | 1.36  |   |      |   | 1.14  |      | 
|                                               
|Nonperforming assets:                           |  |      |       |   |      |   |       |      | 
|Commercial                                      |  | $    | 293   |   |      | $ | 303   |      | 
|Consumer(9)                                     |  |      | 1,038 |   |      |   | 1,041 |      | 
|                                               
|Total nonperforming loans(10)                   |  |      | 1,331 |   |      |   | 1,344 |      | 
|Other, including other real estate owned (OREO) |  |      | 223   |   |      |   | 104   |      | 
|                                               
|Total nonperforming assets                      |  |      | 1,554 |   |      |   | 1,448 |      | 
|                                               
|Allowance for credit losses                     |  |      | 1,018 |   |      |   | 1,027 |      | 
|Allowance to period end loans(8)                |  |      | 1.57  | % |      |   | 1.53  | %    | 
|Allowance to nonperforming loans(10)            |  |      | 77    |   |      |   | 76    |      | 
|Nonperforming assets to related assets          |  |      | 2.29  |   |      |   | 2.08  |      | 
|                                               
|Distribution:                                   |  |      |       |   |      |   |       |      | 
|Number of:                                      |  |      |       |   |      |   |       |      | 
|Banking centers                                 |  |      | 1,795 |   |      |   | 1,802 |      | 
|ATMs                                            |  |      | 3,960 |   |      |   | 5,141 |      | 
|On-line customers (in thousands)                |  |      | 1,404 |   |      |   | 1,083 |      | 
|Households (in thousands)                       |  |      | 6,942 |   |      |   | 7,258 |      | 
|Business customers (in thousands)               |  |      | 489   |   |      |   | 508   |      | 
|Debit cards issued (in thousands)               |  |      | 4,647 |   |      |   | 4,414 |      | 
|                                               
|Investments:                                    |  |      |       |   |      |   |       |      | 
|Investment sales volume (in millions)           |  | $    | 5,407 |   |      | $ | 4,867 |      | 
|                                               

|N/A |  | Not available due to changes in segment composition.
|--- |  | ----------------------------------------------------

|N/M |  | Not meaningful.
|--- |  | ---------------

|(1) |  | Net interest income-FTE includes tax equivalent adjustments of $22 million, $21 million and $25 million for the years ended December 31, 2002, 2001 and 2000,
respectively.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | Net interest income is presented rather than gross interest income and gross interest expense because the Corporation relies primarily on net interest revenue to
assess the performance of the segment and make resource allocations.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) |  | Banking fees and commissions include insurance fees, documentary fees, commitment fees, mutual fund commissions, leasing fees, safe deposit fees, official checks
fees, ATM interchange and miscellaneous other fee revenue.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) |  | Credit card revenue includes credit card fees, debit card fees, merchant fees and interchange fees.
|--- |  | ---------------------------------------------------------------------------------------------------

|(5) |  | Service charges on deposits include deficient balance fees, non-sufficient funds/overdraft fees and other service related fees.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------

|(6) |  | Restructuring-related charges (reversals) are allocated to each line of business for management reporting purposes. Restructuring-related charges (reversals) are
discussed on pages 5253 and in Note 4 Restructuring-Related Activity on page 89. Income before restructuring-related charges (reversals) for Retail, net of $(7) million, $38 million and $14 million of income taxes (benefit) was
$1.4 billion, $1.2 billion and $392 million, for the years ended December 31, 2002, 2001 and 2000, respectively.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(7) |  | Beginning in 2001, employees on long-term disability and employees of unconsolidated subsidiaries are excluded. Prior period data has not been reclassified.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------

|(8) |  | Loans include loans held for sale of $2.7 billion, $2.3 billion and $1.8 billion at December 31, 2002, 2001 and 2000, respectively. These amounts are not included in
allowance coverage statistics. Prior periods have been recalculated to conform to current period presentation.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(9) |  | Includes consumer balances that are placed on nonaccrual status when the collection of contractual principal or interest becomes 90 days past due.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------

|(10) |  | Nonperforming loans include loans held for sale of $3 million at December 31, 2002. There were no nonperforming loans held for sale at December 31, 2001 and 2000.
These amounts are not included in allowance coverage statistics. Prior periods have been recalculated to conform to current period presentation.
|---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



40    BANK ONE 2002 ANNUAL REPORT



---



2002 compared to 2001



Retail reported net income of $1.4 billion, up $209
million, or 18%, primarily reflecting reductions in noninterest expense.



Net interest income declined to $4.9 billion for the year, down $90 million, or 2%, driven by the intentional reduction of $5.1 billion of average loan balances for the vehicle lease and discontinued brokered home equity
portfolios. This decline was partially offset by a 10% increase in core deposits, which include demand and savings products.



Noninterest income was $1.4 billion, down $21 million, or 1%, primarily as a result of lower mortgage-related revenue and lower revenue
from the reduction of non-branded ATMs, partially offset by higher deposit service charges and debit card revenue.



Noninterest expense was $3.2 billion, a decline of $320 million, or 9% including a $122 million reduction in restructuring-related
charges. Excluding restructuring costs, improvements were driven by lower staffing, the absence of goodwill amortization, lower fraud and operating losses and lower ATM expenses. The decline was partially offset by additional investments in
marketing and benefits costs.



The provision for
credit losses was $910 million, down $97 million, or 10%, due to the absence of reserve increases and reductions in net charge-offs in discontinued brokered home equity and vehicle leases offset by higher charge-offs in on-going home equity and
vehicle loans.



The allowance for credit losses
of $1.0 billion represented 1.57% of period-end loans, an increase from 1.53% in the prior year. Nonperforming assets were $1.6 billion, up $106 million, or 7%, due to increases in other real estate owned offset by nominal declines in commercial
loans and consumer loans.



2001 compared to 2000



Retail reported net income of $1.2 billion in 2001 compared
to $367 million in 2000. The 2000 net income reflected an adjustment for significant items totaling $456 million after-tax. The $358 million, or 43%, year-over-year increase, on an adjusted basis was principally driven by a $260 million reduction in
noninterest expense.



Net interest income was
$5.0 billion for the year, up $127 million, or 3%, due to improved spreads on the indirect auto loan portfolio and 11% growth in average home equity outstandings, partially offset by a narrower deposit margin. Loan balances were down $4.9 billion as
Retail managed reductions in certain segments of the loan portfolio while direct home equity loans grew.



Deposits generated a narrower margin compared to 2000, reflecting the lower rate environment and a decline in average balances. Favorable
mix changes from time to savings helped mitigate the impact of lower rates and balances. More positive trends emerged late in 2001 as average demand deposit balances posted 2% growth from the fourth quarter of 2000 to the fourth quarter of 2001.



Noninterest income was $1.4 billion, up $824
million compared to 2000. The absence of lease residual losses and higher fee revenue from deposit accounts and investment sales was partially offset by gains from the sale of miscellaneous assets in 2000. Sales of mutual funds and annuities totaled
$4.9 billion in the year, up $595 million, or 14%.



Noninterest expense was $3.6 billion, down $455 million, or 11%, driving an improvement in the efficiency ratio from 74% in 2000 to 56% in 2001. The consolidation of operating sites in 2000 and 2001 and better overall expense
management in Retail, and throughout the Corporation, drove the efficiency improvement. In addition, staffing levels were down 2,600 year-over-year leading to a 4% decrease in salaries and employee benefits expense.



The provision for credit losses was $1.0 billion, up $142
million, or 16%, from 2000. Net charge-offs were $820 million, up $278 million. Charge-offs on brokered home equity loans and auto loans and leases were the primary drivers of Retails year-over-year increase.



Nonperforming assets were $1.4 billion, up $454 million, or
46%, compared to 2000, driven primarily by an increase in brokered home equity nonperforming loans. Nonperforming assets were 2.08% of related assets in the year, up from 1.33%. The allowance for credit losses expressed as a percent of year-end
loans increased to 1.53% compared to 1.15% a year ago.



Commercial Banking



Commercial Banking
offers a broad array of products, including global cash management, treasury services, capital markets, commercial cards, lending and other noncredit products and services to corporate banking and middle market banking customers.



Corporate banking serves primarily large corporations,
financial institutions and commercial real estate entities. The Corporations capital markets business is engaged in the origination, trading, and distribution of asset-backed securities, investment grade and high yield securities, derivatives,
tax-exempt securities, foreign exchange, government bonds and tax oriented investments. Capital markets is also actively engaged in loan syndications, market research, advisory services, and private placements.



Middle market banking serves the customer segment with annual
revenues from approximately $10 million to $500 million, which includes corporations, municipalities and not-for-profit entities. These customers use a wide variety of services, with nearly one-third using the Corporation exclusively. Since
privately held companies comprise the vast majority of the middle market customer base, providing credit is fundamental to the success of this business. The loan portfolio is diversified across a broad range of industries and geographic locations.
In addition to credit, this customer segment actively uses the Corporations cash management, international, capital markets, and investment management products and services.



BANK ONE 2002 ANNUAL REPORT    41



---



|(Dollars in millions)                                                                 |  | 2002(12) |        |   | 2001 |   |        | 2000 | 
|------------------------------------------------------------------------------------- |  | -------- | ------ | - | ---- | - | ------ | ---- | 
|                                                                                     
|Income Statement Data:                                                                |  |          |        |   |      |   |        |      | 
|Net interest income-FTE(2) (11)                                                       |  | $        | 2,467  |   |      | $ | 2,765  |      | 
|Banking fees and commissions                                                          |  |          | 780    |   |      |   | 718    |      | 
|Credit card revenue                                                                   |  |          | 77     |   |      |   | 86     |      | 
|Service charges on deposits                                                           |  |          | 714    |   |      |   | 618    |      | 
|Fiduciary and investment management fees(13)                                          |  |          | 1      |   |      |   | 3      |      | 
|Investment securities losses                                                          |  |          | (13    | ) |      |   | (12    | )    | 
|Trading(14)                                                                           |  |          | 248    |   |      |   | 269    |      | 
|Other losses                                                                          |  |          | (163   | ) |      |   | (100   | )    | 
|                                                                                     
|Total noninterest income                                                              |  |          | 1,644  |   |      |   | 1,582  |      | 
|                                                                                     
|Total revenue, net of interest expense                                                |  |          | 4,111  |   |      |   | 4,347  |      | 
|                                                                                     
|Provision for credit losses                                                           |  |          | 994    |   |      |   | 1,073  |      | 
|Salaries and employee benefits(15)                                                    |  |          | 1,062  |   |      |   | 1,028  |      | 
|Other expense(15)                                                                     |  |          | 1,280  |   |      |   | 1,222  |      | 
|                                                                                     
|Total noninterest expense before merger and restructuring-related charges
(reversals) |  |          | 2,342  |   |      |   | 2,250  |      | 
|Merger and restructuring-related charges (reversals)(16)                              |  |          | (4     | ) |      |   | 73     |      | 
|                                                                                     
|Total noninterest expense                                                             |  |          | 2,338  |   |      |   | 2,323  |      | 
|                                                                                     
|Income (loss) before income taxes                                                     |  |          | 779    |   |      |   | 951    |      | 
|Applicable income taxes (benefit)                                                     |  |          | 162    |   |      |   | 251    |      | 
|                                                                                     
|Net income (loss)                                                                     |  | $        | 617    |   |      | $ | 700    |      | 
|                                                                                     
|MemoRevenue by activity(17):                                                         |  |          |        |   |      |   |        |      | 
|Lending-related revenue                                                               |  | $        | 1,685  |   |      | $ | 2,017  |      | 
|Credit derivative hedge portfolio                                                     |  |          | 42     |   |      |   | 6      |      | 
|Global treasury services                                                              |  |          | 1,653  |   |      |   | 1,606  |      | 
|Capital markets(18)                                                                   |  |          | 717    |   |      |   | 684    |      | 
|Other                                                                                 |  |          | 14     |   |      |   | 34     |      | 
|                                                                                     
|Financial Performance:                                                                |  |          |        |   |      |   |        |      | 
|Return (loss) on equity                                                               |  |          | 8      | % |      |   | 10     | %    | 
|Efficiency ratio                                                                      |  |          | 57     |   |      |   | 53     |      | 
|Efficiency ratio excluding Credit derivative hedge portfolio                          |  |          | 57     |   |      |   | 54     |      | 
|Headcountfull-time(19):                                                              |  |          |        |   |      |   |        |      | 
|Corporate banking (including capital markets)                                         |  |          | 2,359  |   |      |   | 2,714  |      | 
|Middle market                                                                         |  |          | 2,853  |   |      |   | 3,251  |      | 
|Global treasury services                                                              |  |          | 3,342  |   |      |   | 2,984  |      | 
|Operations, technology, and other administration                                      |  |          | 1,988  |   |      |   | 2,188  |      | 
|                                                                                     
|Total headcountfull-time                                                             |  |          | 10,542 |   |      |   | 11,137 |      | 
|                                                                                     
|                                                                                     
|Ending Balances (in billions):                                                        |  |          |        |   |      |   |        |      | 
|Loans(20)                                                                             |  | $        | 61.9   |   |      | $ | 72.5   |      | 
|Assets                                                                                |  |          | 93.7   |   |      |   | 100.7  |      | 
|Demand deposits                                                                       |  |          | 25.5   |   |      |   | 25.5   |      | 
|Savings                                                                               |  |          | 3.5    |   |      |   | 3.1    |      | 
|Time                                                                                  |  |          | 17.4   |   |      |   | 14.0   |      | 
|Foreign offices                                                                       |  |          | 10.2   |   |      |   | 8.6    |      | 
|                                                                                     
|Total deposits                                                                        |  |          | 56.6   |   |      |   | 51.2   |      | 
|Equity                                                                                |  |          | 7.4    |   |      |   | 7.3    |      | 
|                                                                                     
|Average Balances (in billions):                                                       |  |          |        |   |      |   |        |      | 
|Loans                                                                                 |  | $        | 66.0   |   |      | $ | 80.4   |      | 
|Assets                                                                                |  |          | 95.1   |   |      |   | 107.1  |      | 
|Demand deposits                                                                       |  |          | 22.4   |   |      |   | 21.4   |      | 
|Savings                                                                               |  |          | 3.0    |   |      |   | 2.7    |      | 
|Time                                                                                  |  |          | 14.0   |   |      |   | 8.9    |      | 
|Foreign offices                                                                       |  |          | 8.6    |   |      |   | 9.0    |      | 
|                                                                                     
|Total deposits                                                                        |  |          | 48.0   |   |      |   | 42.0   |      | 
|Equity                                                                                |  |          | 7.4    |   |      |   | 7.3    |      | 
|                                                                                     



42    BANK ONE 2002 ANNUAL REPORT



---



|(Dollars in millions)                  |  | 2002(12) |       |   | 2001 |   |       | 2000 | 
|-------------------------------------- |  | -------- | ----- | - | ---- | - | ----- | ---- | 
|                                      
|Credit Quality                         |  |          |       |   |      |   |       |      | 
|Net charge-offs                        |  | $        | 994   |   |      | $ | 1,042 |      | 
|Net charge-off ratio                   |  |          | 1.51  | % |      |   | 1.30  | %    | 
|Nonperforming assets:                  |  |          |       |   |      |   |       |      | 
|Nonperforming loans(21)                |  | $        | 1,874 |   |      | $ | 2,127 |      | 
|Other, including OREO                  |  |          | 21    |   |      |   | 27    |      | 
|                                      
|Total nonperforming assets             |  |          | 1,895 |   |      |   | 2,154 |      | 
|                                      
|Allowance for credit losses            |  |          | 3,071 |   |      |   | 3,079 |      | 
|Allowance to period end loans(20)      |  |          | 4.98  | % |      |   | 4.25  | %    | 
|Allowance to nonperforming loans(21)   |  |          | 166   |   |      |   | 145   |      | 
|Nonperforming assets to related assets |  |          | 3.06  |   |      |   | 2.97  |      | 
|                                      
|Corporate banking (in billions):       |  |          |       |   |      |   |       |      | 
|Loansending balance                   |  | $        | 31.6  |   |      | $ | 36.6  |      | 
|average balance                       |  |          | 33.0  |   |      |   | 43.5  |      | 
|Depositsending balance                |  |          | 32.0  |   |      |   | 28.7  |      | 
|average balance                       |  |          | 26.1  |   |      |   | 23.0  |      | 
|                                      
|Credit quality (dollars in millions):  |  |          |       |   |      |   |       |      | 
|Net charge-offs                        |  |          | 639   |   |      |   | 638   |      | 
|Net charge-off ratio                   |  |          | 1.94  | % |      |   | 1.47  | %    | 
|Nonperforming loans                    |  | $        | 873   |   |      | $ | 1,154 |      | 
|Nonperforming loans to total loans     |  |          | 2.76  | % |      |   | 3.15  | %    | 
|                                      
|Syndications:                          |  |          |       |   |      |   |       |      | 
|Lead arranger deals:                   |  |          |       |   |      |   |       |      | 
|Volume (in billions)                   |  | $        | 61.9  |   |      | $ | 54.1  |      | 
|Number of transactions                 |  |          | 271   |   |      |   | 238   |      | 
|League table standingrank             |  |          | 4     |   |      |   | 4     |      | 
|League table standingmarket share     |  |          | 6     | % |      |   | 5     | %    | 
|                                      
|Middle market banking (in billions):   |  |          |       |   |      |   |       |      | 
|Loansending balance                   |  | $        | 30.3  |   |      | $ | 35.9  |      | 
|average balance                       |  |          | 33.0  |   |      |   | 36.9  |      | 
|Depositsending balance                |  |          | 24.6  |   |      |   | 22.5  |      | 
|average balance                       |  |          | 21.9  |   |      |   | 19.0  |      | 
|                                      
|Credit quality (dollars in millions):  |  |          |       |   |      |   |       |      | 
|Net charge-offs                        |  |          | 355   |   |      |   | 404   |      | 
|Net charge-off ratio                   |  |          | 1.08  | % |      |   | 1.09  | %    | 
|Nonperforming loans                    |  | $        | 1,001 |   |      | $ | 973   |      | 
|Nonperforming loans to total loans     |  |          | 3.30  | % |      |   | 2.71  | %    | 
|                                      

For additional footnote detail see page 40

|(11) |  | Net interest income-FTE includes taxable equivalent adjustments of $91 million, $79 million and $111 million for the years ended December 31, 2002, 2001 and 2000,
respectively.
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(12) |  | Results include the effect of consolidating Anexsys, LLC which had an impact on individual line items of revenue and expense but no impact on net income for the year
ended December 31, 2002. The consolidation resulted in a $46 million increase in net interest income, a $19 million increase in noninterest income and a $65 million increase in noninterest expense.
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(13) |  | Fiduciary and investment management fees include asset management fees, personal trust fees, other trust fees and advisory fees.
|---- |  | --------------------------------------------------------------------------------------------------------------------------------

|(14) |  | Trading income primarily includes realized and unrealized mark-to-market changes from trading assets, derivative financial instruments and foreign exchange products.
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(15) |  | Prior period data has been adjusted for the transfer of the national retail lockbox operations and cash vault services business from Commercial Banking to Corporate
in 2002.
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(16) |  | Restructuring-related charges (reversals) are discussed on pages 5253 and in Note 4 Restructuring-Related Activity on page 89. Income (loss) before
restructuring-related charges (reversals) for Commercial Banking, net of $(1) million, $27 million and $(1) million of income taxes (benefit), was $614 million, $746 million and $(93) million, for the years ended December 31, 2002, 2001 and 2000,
respectively.
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(17) |  | Prior periods have been adjusted to conform to material organizational changes.
|---- |  | -------------------------------------------------------------------------------

|(18) |  | Capital markets includes trading income and underwriting, syndicated lending and advisory fees.
|---- |  | -----------------------------------------------------------------------------------------------

|(19) |  | Full-time headcount in 2000 has been reclassified to reflect the movement of support and other administrative personnel into the respective business units reported.
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(20) |  | Loans include loans held for sale of $235 million, $83 million and $488 million at December 31, 2002, 2001 and 2000, respectively. These amounts are not included in
allowance coverage statistics. Prior periods have been recalculated to conform to current period presentation.
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(21) |  | Nonperforming loans include loans held for sale of $19 million at December 31, 2002. There were no nonperforming loans held for sale at December 31, 2001, and 2000.
These amounts are not included in allowance coverage statistics. Prior periods have been recalculated to conform to current period presentation.
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



BANK ONE 2002 ANNUAL REPORT    43



---



2002 compared to 2001



Commercial Banking reported net income of $617 million for
2002, down $83 million, or 12%, from 2001, due to lower net interest income offset by lower income taxes, lower credit provision and the absence of restructuring charges in 2002.



Net interest income was $2.5 billion, down $298 million, or 11%, reflecting a reduction in average loans of
$14.4 billion or 18%. Average loans decreased $10.5 billion, or 24%, in corporate banking and $3.9 billion, or 11%, in middle market.



Mark-to-market adjustments on the credit derivatives portfolio positively impacted the current year by $42 million and the prior year by
$6 million. Given the mark-to-market accounting treatment of this portfolio, continued volatility is expected. Excluding the impact of the gain in each period, noninterest income increased $26 million, or 2%, primarily as a result of the following
items: banking fees and commissions increased $62 million, or 9%, due to growth in asset-backed finance underwriting and other capital markets products; service charges on deposits increased $96 million, or 16%, reflecting a shift in payment for
services to fees due to the lower value of customers compensating deposit balances; trading revenue decreased by $57 million, or 22%, primarily reflecting a decrease in fixed income trading revenues; and other income decreased by $63 million
primarily due to higher losses in tax-oriented investments and various asset write-downs.



Noninterest expense was $2.3 billion, up $15 million, or 1%, from 2001 including a $77 million reduction in restructuring-related charges. Excluding restructuring costs, noninterest expense increased
by $92 million, or 4%, as a result of a $65 million impact from the consolidation of Anexsys, LLC, as well as higher incentive compensation and systems conversion-related expenses.



The effective tax rate (on an FTE basis) of 20.8% in 2002 decreased from 26.4% in 2001 primarily due to an
increase in tax credits generated from tax oriented investments combined with a decrease in pre-tax income in 2002.



The provision for credit losses was $994 million, down $79 million, or 7%, from 2001. Net charge-offs were $994 million, down $48 million,
or 5%, and represented 1.51% of average loans, up from 1.30% in 2001. Corporate banking net charge-offs were $639 million, or 1.94% of average loans, up from 1.47% in 2001. Middle market net charge-offs were $355 million, or 1.08% of average loans,
down slightly from 1.09% of average loans in the prior year. For additional detail on Commercial Banking net charge-offs, see the table on page 67.



The allowance for credit losses at December 31, 2002, was $3.1 billion, down $8 million from the prior year. This represented 4.98% of
year-end loans and 166% of nonperforming loans compared with 4.25% and 145%, respectively, at December 31, 2001. Nonperforming loans were $1.9 billion, down $253 million, or 12%, from year-end 2001. Corporate banking nonperforming loans at year-end
were $873 million, down $281 million, or 24%, from the prior year. Middle market nonperforming loans were $1.0 billion at December 31, 2002, up $28 million, or 3%, from the prior year. For additional detail on Commercial Banking nonperforming assets
and the allowance for credit losses, see the tables on page 66 and page 69 respectively.



2001 compared to 2000



Commercial Banking reported net income of $700 million for 2001, up $792 million from 2000, primarily due to a significantly lower credit provision. 2001 results reflected strategic efforts to reduce corporate banking credit exposure
and improve the cross-sell of capital markets and global treasury services products.



Net interest income was $2.8 billion, down $121 million, or 4%, reflecting the earnings impact of lower average loan balances resulting from efforts to reduce credit risk exposure.



Noninterest income was $1.6 billion, up $221 million, or 16%.
Banking fees and commissions increased $110 million, or 18%, due to growth in the asset-backed and investment grade underwriting business and higher account sweep fees. Service charges on deposits increased $95 million, or 18%, reflecting
improvement in global treasury services volumes and pricing, as well as a shift in payment for services to fees due to the lower value of customers compensating deposit balances. Trading revenue increased $86 million, or 47%, primarily
reflecting improvement in fixed income trading activities. Other income decreased by $69 million mainly due to losses on the sale of loans.



The provision for credit losses was $1.1 billion, down $1.1 billion, or 52%, from 2000. In 2000, the allowance for credit losses increased
substantially as the provision exceeded net charge-offs by $1.7 billion. In 2001 net charge-offs were $1.0 billion, up $480 million, or 85%, and represented 1.30% of average loans, up from 0.64% in 2000.



Noninterest expense was $2.3 billion, up $25 million from
2000, and included $73 million of additional restructuring-related charges. Excluding restructuring costs, noninterest expense declined $50 million, or 2%, reflecting the impact of waste-reduction efforts and lower headcount. The 2001 efficiency
ratio improved to 53% from 54% in 2000.



Card Services



Card Services (previously referred to as Credit Card)
offers customers more than 1,200 co-brand, affinity and other cards. These cards include some of the leading corporations, financial institutions, universities, sports franchises and affinity organizations. All of these cards carry the respective
Visa®or MasterCard®brand names.



With 50.4 million cards in circulation, Card Services is the third largest credit card provider in the United States and the largest Visa credit card issuer in the world. Card Services is also a leader in online card marketing and
customer service, with more than 3.4 million registered users of its website.



44    BANK ONE 2002 ANNUAL REPORT



---



|(Dollars in millions)                                                                 |  | 2002(23) |         |   | 2001 |   |         | 2000 | 
|------------------------------------------------------------------------------------- |  | -------- | ------- | - | ---- | - | ------- | ---- | 
|                                                                                     
|Income Statement Data:                                                                |  |          |         |   |      |   |         |      | 
|Net interest income-FTE(2) (22)                                                       |  | $        | 1,271   |   |      | $ | 1,280   |      | 
|Banking fees and commissions                                                          |  |          | 66      |   |      |   | 96      |      | 
|Credit card revenue                                                                   |  |          | 3,560   |   |      |   | 2,525   |      | 
|Other income (loss)                                                                   |  |          | (33     | ) |      |   | 120     |      | 
|                                                                                     
|Total noninterest income                                                              |  |          | 3,593   |   |      |   | 2,741   |      | 
|                                                                                     
|Total revenue, net of interest expense                                                |  |          | 4,864   |   |      |   | 4,021   |      | 
|                                                                                     
|Provision for credit losses                                                           |  |          | 531     |   |      |   | 392     |      | 
|Salaries and employee benefits                                                        |  |          | 589     |   |      |   | 501     |      | 
|Other expense                                                                         |  |          | 1,856   |   |      |   | 1,618   |      | 
|                                                                                     
|Total noninterest expense before merger and restructuring-related charges
(reversals) |  |          | 2,445   |   |      |   | 2,119   |      | 
|Merger and restructuring-related charges (reversals)(24)                              |  |          | (19     | ) |      |   | 61      |      | 
|                                                                                     
|Total noninterest expense                                                             |  |          | 2,426   |   |      |   | 2,180   |      | 
|                                                                                     
|Income (loss) before income taxes                                                     |  |          | 1,907   |   |      |   | 1,449   |      | 
|Applicable income taxes (benefit)                                                     |  |          | 741     |   |      |   | 542     |      | 
|                                                                                     
|Net income (loss)                                                                     |  | $        | 1,166   |   |      | $ | 907     |      | 
|                                                                                     
|MemoNet securitization amortization                                                  |  | $        | (50     | ) |      | $ | (62     | )    | 
|                                                                                     
|Financial Performance:                                                                |  |          |         |   |      |   |         |      | 
|Return on equity                                                                      |  |          | 18      | % |      |   | 14      | %    | 
|Efficiency ratio                                                                      |  |          | 50      |   |      |   | 54      |      | 
|Headcountfull-time                                                                   |  |          | 10,548  |   |      |   | 9,871   |      | 
|                                                                                     
|Ending Balances (in billions):                                                        |  |          |         |   |      |   |         |      | 
|Owned loans(25)                                                                       |  | $        | 11.6    |   |      | $ | 6.8     |      | 
|Sellers interest and accrued interest receivable                                     |  |          | 28.5    |   |      |   | 24.0    |      | 
|                                                                                     
|Total                                                                                 |  |          | 40.1    |   |      |   | 30.8    |      | 
|                                                                                     
|Assets                                                                                |  |          | 45.3    |   |      |   | 35.3    |      | 
|Equity                                                                                |  |          | 6.4     |   |      |   | 6.4     |      | 
|                                                                                     
|Average Balances (in billions):                                                       |  |          |         |   |      |   |         |      | 
|Owned loans                                                                           |  | $        | 9.9     |   |      | $ | 6.8     |      | 
|Sellers interest and accrued interest receivable                                     |  |          | 23.2    |   |      |   | 18.8    |      | 
|                                                                                     
|Total                                                                                 |  |          | 33.1    |   |      |   | 25.6    |      | 
|                                                                                     
|Assets                                                                                |  |          | 37.6    |   |      |   | 28.9    |      | 
|Equity                                                                                |  |          | 6.4     |   |      |   | 6.3     |      | 
|                                                                                     
|Credit Quality (dollars in millions):                                                 |  |          |         |   |      |   |         |      | 
|Net charge-offs                                                                       |  | $        | 514     |   |      | $ | 392     |      | 
|Net charge-off ratios:                                                                |  |          |         |   |      |   |         |      | 
|Credit card  reported                                                                |  |          | 5.19    | % |      |   | 5.69    | %    | 
|Delinquency ratio:                                                                    |  |          |         |   |      |   |         |      | 
|30+ days                                                                              |  |          | 2.95    |   |      |   | 3.00    |      | 
|90+ days                                                                              |  |          | 1.38    |   |      |   | 1.41    |      | 
|Allowance for credit losses                                                           |  | $        | 396     |   |      | $ | 396     |      | 
|Allowance to period end owned loans (excluding loans held for sale)(25)               |  |          | 5.22    | % |      |   | 7.86    | %    | 
|                                                                                     
|Other Data:                                                                           |  |          |         |   |      |   |         |      | 
|Charge volume (in billions)                                                           |  | $        | 155.4   |   |      | $ | 140.4   |      | 
|New accounts opened (in thousands)                                                    |  |          | 4,911   |   |      |   | 3,925   |      | 
|Credit cards issued (in thousands)(26)                                                |  |          | 50,351  |   |      |   | 50,996  |      | 
|Number of FirstUSA.com customers (in millions)(27)                                    |  |          | 3.4     |   |      |   | 1.9     |      | 
|Paymentech:                                                                           |  |          |         |   |      |   |         |      | 
|Bank card volume (in millions)                                                        |  | $        | 124,727 |   |      | $ | 115,332 |      | 
|Total transactions (in millions)                                                      |  |          | 4,208   |   |      |   | 3,778   |      | 
|                                                                                     



BANK ONE 2002 ANNUAL REPORT    45



---



Through
securitization the Corporation transforms a substantial portion of its credit card receivables into securities, which are sold to investors. Securitization impacts the Corporations consolidated balance sheet by removing those credit card
receivables that have been sold and by reclassifying those credit card receivables whose ownership has been transformed into certificate form (referred to as Sellers Interest) from loans to investments. Gain or loss on the sale of
credit card receivables, net of amortization of transaction costs and amortization from securitization repayments, is reported as securitization income in other income. Securitization also impacts the Corporations consolidated income statement
by reclassifying interest income and fees, interchange income, credit losses and recoveries related to securitized receivables as securitization income. Credit card interest income and fees, interchange income, credit losses and recoveries related
to credit card receivables that have been converted to certificate form are reclassified as investment income in net interest income.



The Corporation evaluates its Card Services line of business trends on a managed basis, which treats the securitization as a secured
financing transaction and assumes that receivables have not been sold and are still on the balance sheet. The Corporation manages its Card Services operations on a managed basis because the receivables that are securitized are subject to
underwriting standards comparable to the owned portfolio and are serviced by operating personnel without regard to ownership. The Corporation believes that investors should be informed, and often request information, about the credit performance of
the entire managed portfolio in order to understand the quality of the Card Services originations and the related credit risks inherent in the owned portfolio and retained interests in securitizations. In addition, the Corporation funds its Card
Services operations, reviews operating results and makes decisions about allocating resources, such as employees and capital, on a managed basis. See Loan Securitizations on page 74 and Note 9 Credit Card Securitizations, on
pages 9495 for additional information related to the Corporations securitization activity.



The following table presents certain Card Services information on a managed basis.



|Card ServicesManaged Basis                           |  | 2002(23) |       |   | 2001 |   |       | 2000 | 
|----------------------------------------------------- |  | -------- | ----- | - | ---- | - | ----- | ---- | 
|                                                     
|Ending Balances (in billions):                        |  |          |       |   |      |   |       |      | 
|Owned(25)                                             |  | $        | 11.6  |   |      | $ | 6.8   |      | 
|Sellers interest and accrued interest receivable(28) |  |          | 28.5  |   |      |   | 24.0  |      | 
|                                                     
|Loans and investment securities on balance sheet      |  |          | 40.1  |   |      |   | 30.8  |      | 
|Securitized loans                                     |  |          | 33.9  |   |      |   | 37.4  |      | 
|                                                     
|Managed loans                                         |  |          | 74.0  |   |      |   | 68.2  |      | 
|Managed assets                                        |  |          | 79.2  |   |      |   | 72.7  |      | 
|                                                     
|Average Managed Assets (in billions):                 |  |          | 72.4  |   |      |   | 68.7  |      | 
|                                                     
|Credit Quality (dollars in millions):                 |  |          |       |   |      |   |       |      | 
|Managed net charge-offs                               |  |          | 3,632 |   |      |   | 3,823 |      | 
|Managed net charge-off ratios:                        |  |          |       |   |      |   |       |      | 
|For the period                                        |  |          | 5.35  | % |      |   | 5.84  | %    | 
|12-month lagged(29)                                   |  |          | 5.55  |   |      |   | 5.77  |      | 
|Managed delinquency ratio:                            |  |          |       |   |      |   |       |      | 
|30+ days                                              |  |          | 4.02  |   |      |   | 4.46  |      | 
|90+ days                                              |  |          | 1.80  |   |      |   | 1.93  |      | 
|                                                     

For additional footnote detail see pages 40 and 43.

|(22) |  | Net interest income-FTE did not have tax equivalent adjustments for the years ended December 31, 2002, 2001 and 2000.
|---- |  | ---------------------------------------------------------------------------------------------------------------------

|(23) |  | Results include the effect of consolidating Paymentech beginning in the first quarter of 2002. As a result of this consolidation net interest income included $13
million, noninterest income included $322 million and noninterest expense included $285 million. There was no impact on net income.
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(24) |  | Restructuring-related charges (reversals) are discussed on pages 5253 and in Note 4 Restructuring-Related Activity on page 89. Income (loss) before
restructuring-related charges (reversals) for Card Services, net of $(7) million, $22 million and $3 million of income taxes (benefit), was $1.1 billion, $946 million and $3 million for the years ended December 31, 2002, 2001 and 2000, respectively.
|---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(25) |  | Loans include loans held for sale of $4.0 billion, $1.7 billion and $1.9 billion at December 31, 2002, 2001 and 2000, respectively. These amounts are not included in
allowance coverage statistics. Prior periods have been recalculated to conform to current period presentation.
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(26) |  | Approximately 4.5 million previously acquired inactive accounts were purged during 2002 and prior periods have been recalculated to conform to current period
presentation.
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(27) |  | Approximately 1 million registered users were purged in late 2001 due to inactivity.
|---- |  | ------------------------------------------------------------------------------------

|(28) |  | The investor portion of accrued interest receivable was $685 million and is recorded in other assets at December 31, 2002.
|---- |  | --------------------------------------------------------------------------------------------------------------------------

|(29) |  | The current year lagged loss rate includes Wachovia net credit losses while the prior year average loans only includes five months of Wachovia balances. The prior
year lagged loss rate includes five months of Wachovia net credit losses while the 2000 average loans do not include Wachovia balances. The 2001 ratio includes Wachovia net charge-offs but excludes Wachovia loans.
|---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



46    BANK ONE 2002 ANNUAL REPORT



---



2002 compared to 2001



Card Services reported net income of $1.2 billion, up $259
million, or 29%. 2002 results reflected twelve months of earnings from the acquisition of the Wachovia credit card business while 2001 results reflected five months of Wachovia earnings.



Total reported revenue was $4.9 billion, up $843 million or 21%. Net interest income was $1.3 billion, down
$9 million, or 1%, reflecting lower spreads due to competitive pricing partially offset by higher volumes. Excluding the $322 million impact of the Paymentech consolidation effective January 1, 2002, noninterest income was $3.3 billion, an increase
of $530 million, or 19%, primarily driven by higher volume related revenue and higher income earned on securitized loans.



Excluding the $285 million impact from the consolidation of Paymentech, noninterest expense was $2.1 billion, a decrease of $39 million,
or 2%, resulting from continued expense management and the impact of restructuring-related charges (reversals) partially offset by higher marketing expense.



The reported provision for credit losses was $531 million, an increase of $139 million, or 35%, as a result of portfolio growth.



Securitization gains were $55 million resulting
from the securitization of $6.8 billion in credit card receivables. This compares with securitization gains of $28 million resulting from the securitization of $3.8 billion in credit card receivables in the previous year.



Card Services has a significant co-branding relationship with
United Airlines, the Mileage Plus®award program. In the fourth quarter of 2002, United Airlines announced their
intent to reorganize under Chapter 11 of the U.S. Bankruptcy Code. The outcome is uncertain at this time, and could have a significant impact on Card Services. If United Airlines is unsuccessful, and in the worst scenario is liquidated, Card
Services net income would be negatively impacted by the dissolution of the marketing agreement, loss of fee and interest income and increased marketing expense to encourage customers to continue card usage. Management expects the amount could
be as high as several hundred million dollars.



2001 compared
to 2000



Card Services reported net income of $907 million
in 2001, up from a net loss of $1 million. Adjusted for $522 million after-tax of significant items, 2000 net income was $521 million. Increased reported net income reflected lower expenses, the addition of the Wachovia credit card business and
higher income on securitized loans, partially offset by increased credit costs and lower spreads.



Total reported revenue was $4.0 billion, up $776 million or 24%. Net interest income was $1.3 billion, down $23 million, or 2%, reflecting
lower spreads partially offset by the addition of the Wachovia credit card business and higher fees.



Noninterest income was $2.7 billion, an increase of $799 million, or 41%. 2000 noninterest income included $467 million in significant
items. Excluding these charges, noninterest income increased $332 million, or 14%, reflecting the Wachovia credit card business, higher income on securitized loans and increased securitization activity.



The reported provision for credit losses was $392 million, an
increase of $91 million, or 30%, as a result of portfolio growth partially offset by lower provision funding.



Noninterest expense totaled $2.2 billion, a decrease of $766 million, or 26%. 2000 noninterest expense included significant items of $321
million. Excluding these charges, noninterest expense decreased $445 million, or 17%, reflecting lower fraud and operational losses, processing costs and a decrease in internally allocated costs related to a mid-year 2000 change in methodology. The
decline from 2000 also reflected the sale of international operations in the second quarter. These reductions were partially offset by the addition of the Wachovia credit card business, additional restructuring reserves and higher marketing expense.



Securitization gains were $28 million resulting
from the securitization of $3.8 billion in credit card receivables. There were no securitizations entered into in 2000.



Investment Management



The Investment Management Group (IMG) provides investment, insurance, trust and private banking services to individuals. IMG also provides investment and
investment related services, including retirement and custody services, securities lending and corporate trust to institutions.



IMGs registered investment advisory arm, Banc One Investment Advisors, ranks among the nations top asset managers with $162.0
billion in assets under management. In addition, IMG manages One Group®mutual funds, one of the largest mutual
fund complexes with over 50 funds and $101.2 billion in assets under management. Performance of the funds continues to remain strong. 89% of the assets are in funds ranked 3 stars or better and 50% of the assets are in funds ranked 4 stars or better
by Morningstar®. During 2002 the distribution function for the One Group mutual funds was brought in-house.



Private client services (PCS) helps manage and
build wealth for high net worth clients. PCS provides integrated financial advice and services such as brokerage, investments and alternative asset management, personal trust, private banking, insurance and financial planning through nearly 700
client advisors.



The retail investment services
(RIS) business serves the Corporations retail customer base by delivering high quality investment and insurance products and services through nearly 3,100 licensed bankers in 1,795 banking centers in 14 states.



The global corporate trust business ranks among the largest
providers in the country for bond trustee services. These services are provided to governmental and municipal entities, as well as a broad range of middle market and large institutions.



BANK ONE 2002 ANNUAL REPORT    47



---



|(Dollars in millions)                                                                 |  | 2002 |       |   | 2001 |   |       | 2000 | 
|------------------------------------------------------------------------------------- |  | ---- | ----- | - | ---- | - | ----- | ---- | 
|                                                                                     
|Income Statement Data:                                                                |  |      |       |   |      |   |       |      | 
|Net interest income-FTE(2) (30)                                                       |  | $    | 423   |   |      | $ | 427   |      | 
|Banking fees and commissions                                                          |  |      | 523   |   |      |   | 480   |      | 
|Service charges on deposits                                                           |  |      | 19    |   |      |   | 17    |      | 
|Fiduciary and investment management fees                                              |  |      | 739   |   |      |   | 751   |      | 
|Other income                                                                          |  |      | 14    |   |      |   | 11    |      | 
|                                                                                     
|Total noninterest income                                                              |  |      | 1,295 |   |      |   | 1,259 |      | 
|                                                                                     
|Total revenue, net of interest expense                                                |  |      | 1,718 |   |      |   | 1,686 |      | 
|Provision for credit losses                                                           |  |      | 35    |   |      |   | 38    |      | 
|Salaries and employee benefits                                                        |  |      | 565   |   |      |   | 564   |      | 
|Other expense                                                                         |  |      | 464   |   |      |   | 488   |      | 
|                                                                                     
|Total noninterest expense before merger and restructuring-related charges
(reversals) |  |      | 1,029 |   |      |   | 1,052 |      | 
|Merger and restructuring-related charges (reversals)(31)                              |  |      | (1    | ) |      |   | 19    |      | 
|                                                                                     
|Total noninterest expense                                                             |  |      | 1,028 |   |      |   | 1,071 |      | 
|                                                                                     
|Income before income taxes                                                            |  |      | 655   |   |      |   | 577   |      | 
|Applicable income taxes                                                               |  |      | 244   |   |      |   | 215   |      | 
|                                                                                     
|Net income                                                                            |  | $    | 411   |   |      | $ | 362   |      | 
|                                                                                     
|Memo  Insurance revenues                                                             |  | $    | 447   |   |      | $ | 437   |      | 
|                                                                                     
|Financial Performance:                                                                |  |      |       |   |      |   |       |      | 
|Return on equity                                                                      |  |      | 37    | % |      |   | 36    | %    | 
|Efficiency ratio                                                                      |  |      | 60    |   |      |   | 64    |      | 
|Headcountfull-time                                                                   |  |      | 5,895 |   |      |   | 6,071 |      | 
|                                                                                     
|Ending Balances(in billions):                                                         |  |      |       |   |      |   |       |      | 
|Loans                                                                                 |  | $    | 6.9   |   |      | $ | 7.2   |      | 
|Assets                                                                                |  |      | 8.7   |   |      |   | 8.6   |      | 
|Demand deposits                                                                       |  |      | 2.6   |   |      |   | 2.8   |      | 
|Savings                                                                               |  |      | 4.8   |   |      |   | 3.3   |      | 
|Time                                                                                  |  |      | 3.4   |   |      |   | 3.2   |      | 
|Foreign offices                                                                       |  |      | 0.2   |   |      |   | 0.2   |      | 
|                                                                                     
|Total deposits                                                                        |  |      | 11.0  |   |      |   | 9.5   |      | 
|                                                                                     
|Equity                                                                                |  |      | 1.1   |   |      |   | 1.1   |      | 
|                                                                                     
|Average Balances(in billions):                                                        |  |      |       |   |      |   |       |      | 
|Loans                                                                                 |  | $    | 7.0   |   |      | $ | 6.9   |      | 
|Assets                                                                                |  |      | 8.5   |   |      |   | 8.1   |      | 
|Demand deposits                                                                       |  |      | 2.1   |   |      |   | 2.0   |      | 
|Savings                                                                               |  |      | 4.0   |   |      |   | 2.8   |      | 
|Time                                                                                  |  |      | 3.3   |   |      |   | 3.3   |      | 
|Foreign offices                                                                       |  |      | 0.2   |   |      |   | 0.2   |      | 
|                                                                                     
|                                                                                     
|Total deposits                                                                        |  |      | 9.6   |   |      |   | 8.3   |      | 
|                                                                                     
|Equity                                                                                |  |      | 1.1   |   |      |   | 1.0   |      | 
|                                                                                     
|Credit Quality(dollars in millions):                                                  |  |      |       |   |      |   |       |      | 
|Net charge-offs:                                                                      |  |      |       |   |      |   |       |      | 
|Commercial                                                                            |  | $    | 15    |   |      | $ | 27    |      | 
|Consumer                                                                              |  |      | 5     |   |      |   | 7     |      | 
|                                                                                     
|Total net charge-offs                                                                 |  |      | 20    |   |      |   | 34    |      | 
|Net charge-off ratios:                                                                |  |      |       |   |      |   |       |      | 
|Commercial                                                                            |  |      | 0.45  | % |      |   | 0.81  | %    | 
|Consumer                                                                              |  |      | 0.14  |   |      |   | 0.19  |      | 
|                                                                                     
|Total net charge-off ratio                                                            |  |      | 0.29  |   |      |   | 0.49  |      | 
|Nonperforming assets:                                                                 |  |      |       |   |      |   |       |      | 
|Commercial                                                                            |  | $    | 61    |   |      | $ | 38    |      | 
|Consumer                                                                              |  |      | 10    |   |      |   | 4     |      | 
|                                                                                     
|Total nonperforming loans                                                             |  |      | 71    |   |      |   | 42    |      | 
|Other, including OREO                                                                 |  |      | 1     |   |      |   | 1     |      | 
|                                                                                     
|Total nonperforming assets                                                            |  |      | 72    |   |      |   | 43    |      | 
|Allowance for credit losses                                                           |  |      | 40    |   |      |   | 25    |      | 
|Allowance to period end loans                                                         |  |      | 0.58  | % |      |   | 0.35  | %    | 
|Allowance to nonperforming loans                                                      |  |      | 56    |   |      |   | 60    |      | 
|Nonperforming assets to related assets                                                |  |      | 1.04  |   |      |   | 0.60  |      | 
|                                                                                     





48    BANK ONE 2002 ANNUAL REPORT



---



|(In billions)                                                 |  | 2002 |         |   | 2001 |   |       | 2000 | 
|------------------------------------------------------------- |  | ---- | ------- | - | ---- | - | ----- | ---- | 
|                                                             
|Assets Under Management Ending Balances                       |  |      |         |   |      |   |       |      | 
|Mutual funds                                                  |  | $    | 101.2   |   |      | $ | 83.5  |      | 
|Other                                                         |  |      | 60.8    |   |      |   | 59.1  |      | 
|                                                             
|Total                                                         |  |      | 162.0   |   |      |   | 142.6 |      | 
|By type:                                                      |  |      |         |   |      |   |       |      | 
|Money market                                                  |  |      | 78.6    |   |      |   | 58.5  |      | 
|Equity                                                        |  |      | 37.1    |   |      |   | 47.3  |      | 
|Fixed income                                                  |  |      | 46.3    |   |      |   | 36.8  |      | 
|                                                             
|Total                                                         |  |      | 162.0   |   |      |   | 142.6 |      | 
|By channel:(17)                                               |  |      |         |   |      |   |       |      | 
|Private client services                                       |  |      | 42.7    |   |      |   | 50.6  |      | 
|Retail brokerage                                              |  |      | 7.0     |   |      |   | 7.6   |      | 
|Institutional                                                 |  |      | 77.8    |   |      |   | 62.4  |      | 
|Commercial cash sweep                                         |  |      | 9.0     |   |      |   | 9.8   |      | 
|Capital markets                                               |  |      | 4.9     |   |      |   | 1.5   |      | 
|External(32)                                                  |  |      | 10.8    |   |      |   | 3.8   |      | 
|All other direct(33)                                          |  |      | 9.8     |   |      |   | 6.9   |      | 
|                                                             
|Total                                                         |  |      | 162.0   |   |      |   | 142.6 |      | 
|Morningstar®Rankings:(34)                                     |  |      |         |   |      |   |       |      | 
|% of assets in funds ranked 4 or better                       |  |      | 50      | % |      |   | 57    | %    | 
|% of assets in funds ranked 3 or better                       |  |      | 89      |   |      |   | 88    |      | 
|Trust Assets Ending Balances (in billions):                   |  |      |         |   |      |   |       |      | 
|Trust assets under administration                             |  | $    | 342.8   |   |      | $ | 352.5 |      | 
|                                                             
|Corporate Trust Securities Ending Balances (in billions):(35) |  |      |         |   |      |   |       |      | 
|Corporate trust securities under administration               |  | $    | 1,016.0 |   |      | $ | 915.0 |      | 
|                                                             
|Retail Brokerage (in millions):                               |  |      |         |   |      |   |       |      | 
|Mutual fund sales                                             |  |      | 2,293   |   |      |   | 2,284 |      | 
|Annuity sales                                                 |  |      | 3,114   |   |      |   | 2,583 |      | 
|                                                             
|Total sales                                                   |  |      | 5,407   |   |      |   | 4,867 |      | 
|Number of customersend of period(17)(in thousands)           |  |      | 681     |   |      |   | 646   |      | 
|Market value customer assetsend of period (in billions):     |  |      |         |   |      |   |       |      | 
|Brokerage                                                     |  | $    | 16.6    |   |      | $ | 16.6  |      | 
|Annuity account value                                         |  |      | 11.3    |   |      |   | 8.7   |      | 
|                                                             
|Total market value(17)                                        |  |      | 27.9    |   |      |   | 25.3  |      | 
|Number of registered sales representatives                    |  |      | 845     |   |      |   | 724   |      | 
|Number of licensed retail bankers                             |  |      | 3,086   |   |      |   | 3,042 |      | 
|Private Client Services:                                      |  |      |         |   |      |   |       |      | 
|Number of private client advisors                             |  |      | 676     |   |      |   | 641   |      | 
|Number of private client offices(36)                          |  |      | 92      |   |      |   | 105   |      | 
|Market value customer assetsend of period(17)(in billions)   |  | $    | 61.7    |   |      | $ | 72.2  |      | 
|Ending balances (in billions):                                |  |      |         |   |      |   |       |      | 
|Loans                                                         |  |      | 6.9     |   |      |   | 7.0   |      | 
|Deposits                                                      |  |      | 9.2     |   |      |   | 7.6   |      | 
|Average balances (in billions):                               |  |      |         |   |      |   |       |      | 
|Loans                                                         |  |      | 6.9     |   |      |   | 6.9   |      | 
|Deposits                                                      |  |      | 8.3     |   |      |   | 7.0   |      | 
|                                                             

For additional foot note detail see pages 40, 43 and 46.

|(30) |  | Net interest income-FTE did not have tax equivalent adjustments for the years ended December 31, 2002, 2001 and 2000, respectively.
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------

|(31) |  | Restructuring-related charges (reversals) are discussed on pages 5253 and in Note 4 Restructuring Related Activity on page 89. Income before
restructuring-related charges (reversals) for IMG, net of $244 million and $222 million of income taxes, was $411 million and $374 million for the years ended December 31, 2002 and 2001, respectively.
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(32) |  | Includes broker/dealers, trust companies, and registered investment advisors that sell, or offer, One Group funds.
|---- |  | ------------------------------------------------------------------------------------------------------------------

|(33) |  | One Group funds invested in other One Group funds and other mutual funds sub-advised.
|---- |  | -------------------------------------------------------------------------------------

|(34) |  | Morningstar changed the rating process effective June 30, 2002 with no prior period restatements.
|---- |  | -------------------------------------------------------------------------------------------------

|(35) |  | Certain adjustments, primarily definitional in nature, were made to prior periods to conform to the current period presentation. Ending balances are estimated.
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------

|(36) |  | During 2002, PCS offices that were in close proximity were consolidated to realize operational efficiencies.
|---- |  | ------------------------------------------------------------------------------------------------------------



BANK ONE 2002 ANNUAL REPORT    49



---



2002 compared to 2001



IMG reported net income of $411 million, up $49 million from
the prior year. Net interest income decreased $4 million, or 1%, reflecting narrower spreads on deposits and an increase in other funding costs.



Noninterest income, which is principally fiduciary, investment and banking fees and commissions, increased $36 million, or 3%. The
principal driver of growth in noninterest income was an 11% increase in retail brokerage sales, partially offset by lower management fee revenue resulting from weak market conditions and a shift in assets under management from equities to money
market and fixed income assets.



Noninterest
expense was $1.0 billion, a decrease of $23 million, or 2%, excluding the impact of the restructuring charges and reversals. The principal drivers of the decrease were lower headcount and other cost savings initiatives.



The provision for credit losses was $35 million, a $3 million
decrease from the prior year. The allowance for credit losses increased $15 million to $40 million reflecting the deterioration in credit quality of certain large loans. Nonperforming assets were $72 million, a $29 million increase, reflecting the
aforementioned deterioration.



Assets under
management were $162.0 billion, an increase of $19.4 billion, or 14%, as a result of strong money market and fixed income asset growth, partially offset by a decline in equity assets, reflecting weak market conditions. One Group mutual fund assets
grew to $101.2 billion, an increase of $17.7 billion, or 21%.



2001 compared to 2000



IMG
reported net income of $362 million, up $40 million. Net interest income increased $18 million, or 4%, reflecting a 5% increase in average loans partially offset by narrower deposit spreads and a 3% decrease in average deposits.



Noninterest income, which is principally fiduciary, investment
and banking fees and commissions, increased $98 million, or 8%. Beginning in November 2000, fees associated with the administration of the One Group mutual funds were recorded as revenue, with a corresponding increase in expense. Prior to that, a
third-party administrator incurred such fees and expenses, which totaled $80 million in 2000. Excluding the impact of this change, noninterest income increased $18 million reflecting growth in retail brokerage sales offset by lower investment
advisory fees on equity assets because of overall market conditions.



Noninterest expense before restructuring-related charges increased $3 million, principally related to expenses of $80 million associated with the administration of the One Group mutual funds, offset by a decrease in expenses
related to tighter cost control, lower headcount and reduced operating losses. Excluding the expenses associated with the administration of the One Group mutual funds, noninterest expenses declined 7%.



Provision for credit losses increased $25 million, principally
related to higher net charge-offs resulting from a difficult economic climate and loan growth.



Assets under management totaled $142.6 billion, up 9% from the end of 2000. One Group mutual fund assets under management increased 19% to $83.5 billion. One Group mutual fund performance continued to
remain strong, with 88% of these funds rated three stars or higher by Morningstar. Average assets under management increased 3% compared with 2000, driven principally by a 12% increase in One Group mutual funds.



Corporate



Corporate includes treasury, fixed income and principal investment portfolios, mortgage-servicing assets, unallocated
corporate expenses, and any gains or losses from corporate transactions. The treasury group within the Corporate line of business risk manages mortgage-servicing assets on behalf of the Corporation.



|(Dollars in millions)                                                                 |  | 2002 |      |   | 2001 |   |      | 2000 | 
|------------------------------------------------------------------------------------- |  | ---- | ---- | - | ---- | - | ---- | ---- | 
|                                                                                     
|Income Statement Data:                                                                |  |      |      |   |      |   |      |      | 
|Net interest expense-FTE(2) (37) (38)                                                 |  | $    | (292 | ) |      | $ | (664 | )    | 
|Banking fees and commissions                                                          |  |      | (24  | ) |      |   | (18  | )    | 
|Credit card revenue                                                                   |  |      | 2    |   |      |   |     |      | 
|Service charges on deposits                                                           |  |      | 11   |   |      |   | 23   |      | 
|Investment securities gains (losses)                                                  |  |      | 178  |   |      |   | (54  | )    | 
|Trading losses                                                                        |  |      | (24  | ) |      |   | (49  | )    | 
|Other income                                                                          |  |      | 147  |   |      |   | 304  |      | 
|                                                                                     
|Total noninterest income(39)                                                          |  |      | 290  |   |      |   | 206  |      | 
|                                                                                     
|Total loss, net of interest expense                                                   |  |      | (2   | ) |      |   | (458 | )    | 
|Provision for credit losses                                                           |  |      | 17   |   |      |   |     |      | 
|Salaries and employee benefits                                                        |  |      | 800  |   |      |   | 629  |      | 
|Other expense                                                                         |  |      | (221 | ) |      |   | (297 | )    | 
|                                                                                     
|Total noninterest expense before merger and restructuring-related charges
(reversals) |  |      | 579  |   |      |   | 332  |      | 
|Merger and restructuring-related charges (reversals)(40)                              |  |      | (21  | ) |      |   | 94   |      | 
|                                                                                     
|Total noninterest expense(41)                                                         |  |      | 558  |   |      |   | 426  |      | 
|                                                                                     
|Loss before income benefit                                                            |  |      | (577 | ) |      |   | (884 | )    | 
|Applicable income benefit                                                             |  |      | (288 | ) |      |   | (416 | )    | 
|                                                                                     
|Net loss                                                                              |  | $    | (289 | ) |      | $ | (468 | )    | 
|                                                                                     





50    BANK ONE 2002 ANNUAL REPORT



---



|                               |  | 2002 |        | 2001 |   |        | 2000 | 
|------------------------------ |  | ---- | ------ | ---- | - | ------ | ---- | 
|                              
|Financial Performance:         |  |      |        |      |   |        |      | 
|Headcountfull-time(19)        |  |      | 14,456 |      |   | 13,536 |      | 
|Ending Balances(in billions):  |  |      |        |      |   |        |      | 
|Loans                          |  | $    |       |      | $ | 0.6    |      | 
|Assets                         |  |      | 58.3   |      |   | 50.8   |      | 
|Memo                          |  |      |        |      |   |        |      | 
|Treasury investments(42)       |  |      | 34.2   |      |   | 32.2   |      | 
|Principal investments(43)      |  |      | 2.3    |      |   | 2.7    |      | 
|Deposits                       |  |      | 14.1   |      |   | 19.6   |      | 
|Equity                         |  |      | 1.3    |      |   | (0.8   | )    | 
|Average Balances(in billions): |  |      |        |      |   |        |      | 
|Loans                          |  | $    | 0.2    |      | $ | 0.9    |      | 
|Assets                         |  |      | 50.6   |      |   | 47.3   |      | 
|Deposits                       |  |      | 14.3   |      |   | 24.1   |      | 
|Equity                         |  |      | 0.6    |      |   | (0.9   | )    | 
|                              

For additional footnote detail see pages 40, 43, 46 and 49.

|(37) |  | Net interest expense-FTE includes tax equivalent adjustments of $32 million, $25 million and $2 million for the years ended December 31, 2002, 2001 and 2000,
respectively.
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(38) |  | Net interest expense-FTE primarily includes treasury results and interest spread on investment related activities.
|---- |  | ------------------------------------------------------------------------------------------------------------------

|(39) |  | Noninterest income primarily includes the gains and losses from investment activities and other corporate transactions.
|---- |  | -----------------------------------------------------------------------------------------------------------------------

|(40) |  | Restructuring-related charges (reversals) are discussed on pages 5253 and in Note 4 Restructuring-Related Activity on page 89. Loss before merger
and restructuring-related charges (reversals) for Corporate, net of $(8) million, $35 million and $44 million in income tax expense (benefit), was $302 million, $409 million and $1.0 billion for the years ended December 31, 2002, 2001 and 2000,
respectively.
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(41) |  | Noninterest expense primarily includes corporate expenses not allocated to the lines of business.
|---- |  | -------------------------------------------------------------------------------------------------

|(42) |  | Treasury investments may include U.S. government and agency debt securities, mortgage and other asset backed securities and other fixed income investments.
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------

|(43) |  | Principal investments include primarily private equity investments and venture capital fund investments.
|---- |  | --------------------------------------------------------------------------------------------------------



2002 compared to 2001



Corporate net loss was $289 million, compared with a net loss of $468 million.
Excluding the impact of restructuring charges/reversals, net loss was $302 million in 2002 and $409 million in 2001.



Net interest expense was $292 million, an improvement of $372 million, primarily a result of lower interest rates. During the latter part
of the year the Corporation took actions to position the balance sheet more defensively for rising interest rates. These actions primarily involved raising fixed rate funding and swapping existing floating rate liabilities to fixed rate. As a
result, the Corporation significantly shifted its interest rate risk posture as further detailed in the Market Risk Management Non-Trading Activities discussion beginning on page 61.



Net investment securities gains were $178 million reflecting
the gain on the sale of the GE Monogram joint venture of $261 million, partially offset by net losses in the investment portfolios. In 2001, net investment losses were $54 million due to writedowns in the principal investments portfolio partially
offset by treasury investment portfolio gains. The valuation adjustments in principal investments in 2002 and 2001 were primarily a result of the overall decline in the value of the equity market, the interest rate environment and a decline in the
value of private investments as a result of existing economic conditions.



Other income was $147 million, compared with $304 million. The decrease of $157 million was primarily a result of mortgage related losses and valuation adjustments on other investments in 2002, and $73 million of gains
realized in 2001 on the sales of the Corporations interests in EquiServe Limited Partnership and Star Systems, an ATM network.



Corporate noninterest expenses were $558 million, compared with $426 million in the prior year. The current year increase was primarily
due to salaries and benefits, including stock options, and one-time charges of $89 million related to the in-sourcing of certain vendor contracts.



2001 compared to 2000



Corporate reported a net loss of $468 million, compared with a net loss of $1.1 billion. Excluding restructuring charges of $59 million after-tax, the net
loss in 2001 was $409 million. Excluding restructuring charges and significant items of $73 million and $778 million, after-tax, respectively, the net loss in 2000 was $256 million.



Net interest expense increased to $664 million from $458 million in 2000. These results were principally due
to changes in the treasury investment portfolio and an increase in unallocated equity.



Noninterest income was $206 million compared with $15 million in 2000. Excluding significant item charges of $436 million, noninterest income in 2000 was $451 million. The $245 million decrease from
2000 was primarily driven by higher investment security losses resulting from market conditions.



Unallocated corporate expenses were $426 million compared with $1.3 billion. Excluding restructuring charges and significant items, unallocated corporate expenses were $332 million in 2001 versus $473
million in 2000. The $141 million reduction from 2000 was principally due to increased allocations.





BANK ONE 2002 ANNUAL REPORT    51



---

Significant Items



In 2000, the Corporation initiated certain actions (e.g., decisions related to staff reductions and the use of existing real
estate and fixed assets), made certain decisions regarding its business activities (e.g., substantially reducing the vehicle lease portfolio), reacted to changes in market conditions (e.g., decline in used car market, investment portfolio
repositioning), and applied assumptions reflective of current market conditions, including current deterioration in performance, in its valuation process (e.g., interest-only strip, purchased credit card relationships). The results of these actions
were adjustments to the carrying value of related assets and liabilities. These items were identified as significant items to differentiate these actions from ongoing/routine business activities.



The Corporation determined and recorded the adjustments for
these actions (in general) as follows:



| |  | Severance costs related to staff reductions were based on the identified number of employees terminated.
|- |  | --------------------------------------------------------------------------------------------------------



| |  | Real estate and fixed asset costs were based on the estimated costs to close and consolidate facilities, including the write-off of capitalized costs.
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Due to overcapacity in the used automobile market, especially with sport utility vehicles (a major component of the Corporations lease portfolio), estimated
residual values for leased automobiles declined significantly. Accordingly, the Corporation wrote down the residual value related to these automobile leases. In addition, the Corporation planned to sell certain vehicle loans, which were written down
to fair value. The Corporations lease financing accounting policy is presented on page 85.
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | The losses on the repositioning of the investment portfolio, as part of the Corporations overall investment strategy, were based on market prices.
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------



| |  | The Corporation evaluates the fair value of its interest-only strip resulting from securitization transactions at both the date of the securitization and the balance
sheet date. In 2000, the Corporation adjusted these assumptions and estimates to reflect the change in the fair value for these types of assets and, accordingly, recorded a writedown in its interest-only strip. For a more detailed discussion of the
factors used in this process, see Note 9 Credit Card Securitizations on pages 94-95.
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | The writedown of purchased credit card relationship intangibles reflected revised assumptions in the Corporations discounted cash flow analysis reflecting
higher cost of funds assumptions, consistent with the interest rate environment, and loss trends resulting from deterioration in performance.
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



As a result of the significant items noted and the restructuring plans initiated in 2000 and 2001, the Corporations noninterest
expense, before restructuring-related reversals was $9.6 billion for 2002, which represented a reduction in annualized noninterest expense of approximately $1.2 billion and decreased headcount of approximately 9,000 employees from June 30, 2000.



Results in 2000 included the negative impact of
$2.2 billion after-tax ($3.3 billion pre-tax) of significant items. Business Segments  Table 1  summarizes these significant items by action taken within each line of business. Income Statement Line  Table 2  reflects these
same actions by income statement line. Both tables exclude merger and restructuringrelated charges.



Business Segments  Table 1  2000



|(In millions)                                               |  | Retail |     | Commercial Banking |   |     | Card Services |  | Investment Management |     |  | Corporate |    | Total
|----------------------------------------------------------- |  | ------ | --- | ------------------ | - | --- | ------------- |  | --------------------- | --- |  | --------- | -- | -----
|                                                           
|Pretax expense (income)                                     |  |        |     |                    |   |     |               |  |                       |     |  |           |    |      
|Writedown of auto lease residuals                           |  | $      | 532 |                    |   |     |               |  |                       |     |  |           |    |      
|Provision for credit losses                                 |  |        |     |                    | $ | 628 |               |  |                       |     |  |           |    |      
|Repositioning of investment securities portfolio            |  |        |     |                    |   |     |               |  |                       |     |  |           |    |      
|Operational and other(1)                                    |  |        | 2   |                    |   | (18 | )             |  | $                     | 56  |  |           |    |      
|Writedown of interest-only strip                            |  |        |     |                    |   |     |               |  |                       | 354 |  |           |    |      
|Occupancy and fixed asset related                           |  |        | 9   |                    |   | 6   |               |  |                       | 11  |  | $         | (4 | )    
|Writedown of purchased credit card relationship intangibles |  |        |     |                    |   |     |               |  |                       | 275 |  |           |    |      
|Writedowns primarily related to planned loan sales(2)       |  |        | 167 |                    |   |     |               |  |                       |     |  |           |    |      
|Increase in legal accruals                                  |  |        |     |                    |   |     |               |  |                       |     |  |           |    |      
|Writedown of marketing partnership agreements               |  |        |     |                    |   |     |               |  |                       | 121 |  |           |    |      
|Severance related                                           |  |        | 10  |                    |   | 21  |               |  |                       | 6   |  |           | 4  |      
|                                                           
|Total                                                       |  | $      | 720 |                    | $ | 637 |               |  | $                     | 823 |  | $         |   |      
|                                                           
|After-tax                                                   |  | $      | 456 |                    | $ | 404 |               |  | $                     | 522 |  | $         |   |      
|                                                           





52    BANK ONE 2002 ANNUAL REPORT



---



Income Statement Line
 Table 2  2000



|(In millions)                        |  | Retail |     | Commercial Banking |   |     | Card Services |  |   | Investment Management |   |  | Corporate |     |   | Total |  
|------------------------------------ |  | ------ | --- | ------------------ | - | --- | ------------- |  | - | --------------------- | - |  | --------- | --- | - | ----- | -
|                                    
|Net interest income                  |  | $      | 14  |                    | $ | (7  | )             |  |   |                       |   |  |           |     |   |       | $
|Noninterst income:                   |  |        |     |                    |   |     |               |  |   |                       |   |  |           |     |   |       |  
|Banking fees and commissions         |  |        |     |                    |   |     |               |  |   |                       |   |  |           |     |   |       |  
|Credit card revenue                  |  |        |     |                    |   |     |               |  | $ | 152                   |   |  |           |     |   |       |  
|Service charges on deposits          |  |        |     |                    |   | 5   |               |  |   |                       |   |  |           |     |   |       |  
|Investment securities (gains) losses |  |        |     |                    |   | (1  | )             |  |   |                       |   |  |           |     |   |       |  
|Trading                              |  |        |     |                    |   | 44  |               |  |   |                       |   |  |           |     |   |       |  
|Other income                         |  |        | 650 |                    |   | 3   |               |  |   | 315                   |   |  |           | 2   |   |       |  
|                                    
|Total noninterest income             |  |        | 650 |                    |   | 51  |               |  |   | 467                   |   |  |           | 2   |   |       |  
|Provision for credit losses          |  |        | 11  |                    |   | 628 |               |  |   | 35                    |   |  |           |     |   |       |  
|Noninterest expense:                 |  |        |     |                    |   |     |               |  |   |                       |   |  |           |     |   |       |  
|Salaries and employee benefits(1)    |  |        | 12  |                    |   | (42 | )             |  |   | (4                    | ) |  |           | (19 | ) |       |  
|Occupancy expense                    |  |        | 9   |                    |   | 6   |               |  |   | 11                    |   |  |           |     |   |       |  
|Other intagible amoritization        |  |        |     |                    |   |     |               |  |   | 275                   |   |  |           | 9   |   |       |  
|Other                                |  |        | 24  |                    |   | 1   |               |  |   | 39                    |   |  |           | 8   |   |       |  
|                                    
|Total noninterest expense            |  |        | 45  |                    |   | (35 | )             |  |   | 321                   |   |  |           | (2  | ) |       |  
|                                    
|Pretax expense                       |  | $      | 720 |                    | $ | 637 |               |  | $ | 823                   |   |  | $         |    |   |       | $
|                                    

|(1) |  | Includes $75 million of incentive accruals reversed in the fourth quarter relating to the full year in which existing plans were adjusted to a pay for performance
basis.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | At December 31, 2000, management discontinued its plan to dispose of these loans, and as such, are considered part of the general portfolio.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------



CONSOLIDATED
RESULTS



Net Interest Income



Net interest income represents the spread on interest earning assets over
interest bearing liabilities as well as items such as loan fees, cash interest collections on problem loans, dividend income, interest reversals, and income or expense on derivatives used to manage interest rate risk.





|                                     |  |         |         |   |      |   |         |      |  |   | Percent Change |  
|------------------------------------ |  | ------- | ------- | - | ---- | - | ------- | ---- |  | - | -------------- | -
|                                    
|For the Year Ended December 31,      |  | 2002(3) |         |   | 2001 |   |         | 2000 |  |   | 2002-2001      |  
|                                    
|(Dollars in millions)                |  |         |         |   |      |   |         |      |  |   |                |  
|Net interest income-FTE basis(1) (2) |  | $       | 8,740   |   |      | $ | 8,769   |      |  | $ | 8,974          |  
|Average earning assets               |  |         | 231,401 |   |      |   | 237,869 |      |  |   | 241,058        |  
|Net interest margin                  |  |         | 3.78    | % |      |   | 3.69    | %    |  |   | 3.72           | %
|                                    

|(1) |  | Net interest income-FTE includes taxable equivalent adjustments of $145 million, $131 million, and $138 million for years ended December 31, 2002, 2001 and 2000,
respectively.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | Net interest income is presented rather than gross interest income and gross interest expense because the Corporation relies primarily on net interest revenue to
assess performance.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) |  | Results include the effects of the consolidation of Paymentech, Inc. and Anexsys, LLC.
|--- |  | --------------------------------------------------------------------------------------



2002 compared to 2001



While the net interest margin increased to 3.78% from 3.69%, net interest income declined $29 million to $8.7 billion from $8.8 billion. This decrease was
primarily a result of intentionally reducing earning assets such as large corporate loans, vehicle leases and brokered home equity loans. In addition, the Corporation took actions to both the assets and liabilities sides of the balance sheet to
defensively position itself for a higher rate environment.





BANK ONE 2002 ANNUAL REPORT    53



---

2001 compared to 2000



Net interest income declined $205 million from that reported in 2000, largely due to lower earning assets. The decline in
average earning assets was attributed to efforts to reduce commercial credit exposure, discontinued brokered home equity loan and auto lease outstandings, and also reflected lower credit card receivables.



Noninterest Income



The components of noninterest income for the periods indicated are:



|                                         |  |         |       |   |      |   |       |      |  |   | Percent Change |  
|---------------------------------------- |  | ------- | ----- | - | ---- | - | ----- | ---- |  | - | -------------- | -
|                                        
|For the Year Ended December 31,          |  | 2002(1) |       |   | 2001 |   |       | 2000 |  |   | 2002-2001      |  
|                                        
|(Dollars in millions)                    |  |         |       |   |      |   |       |      |  |   |                |  
|Banking fees and commissions             |  | $       | 1,775 |   |      | $ | 1,731 |      |  | $ | 1,537          |  
|Credit card revenue                      |  |         | 3,816 |   |      |   | 2,775 |      |  |   | 2,299          |  
|Service charges on deposits              |  |         | 1,578 |   |      |   | 1,449 |      |  |   | 1,310          |  
|Fiduciary and investment management fees |  |         | 740   |   |      |   | 754   |      |  |   | 783            |  
|Investment securities gains (losses)     |  |         | 165   |   |      |   | (66   | )    |  |   | (235           | )
|Trading                                  |  |         | 224   |   |      |   | 220   |      |  |   | 134            |  
|Other income (losses)                    |  |         | (62   | ) |      |   | 360   |      |  |   | (738           | )
|                                         |  |         |       |   |      |  
|Total noninterest income                 |  | $       | 8,236 |   |      | $ | 7,223 |      |  | $ | 5,090          |  
|Noninterest income to total revenue      |  |         | 48.9  | % |      |   | 45.5  | %    |  |   | 36.6           | %
|                                        

|N/M |  | Not meaningful.
|--- |  | ---------------

|(1) |  | Results include the effects of the consolidation of Paymentech, Inc. and Anexsys, LLC.
|--- |  | --------------------------------------------------------------------------------------



Components of noninterest income that are primarily related to a single business segment are discussed within
that business segment rather than the consolidated section.



2002 compared to 2001



Banking fees and
commissions of $1.8 billion increased $44 million, or 3%. This increase was primarily the result of increased annuity and mutual fund sales, as well as from growth in asset-backed finance and other underwriting fees in capital markets, partially
offset by lower mortgage-related revenue.



Credit
card revenue of $3.8 billion increased $1.0 billion, or 38%. This increase was due to the addition of the Wachovia credit card business, consolidation of Paymentech, higher volume-related revenue and higher income earned on securitized loans.



Service charges on deposits of $1.6 billion
increased $129 million, or 9%. This increase primarily reflected improvement in global treasury services as clients shifted their payment method to fees due to the lower value of their compensating deposit balances.



Net investment gains were $165 million compared to losses of
$66 million. Included in 2002 results was the $261 million gain on sale of the GE Monogram joint venture, partially offset by net losses in the investment portfolios.



Trading produced gains of $224 million, an increase of $4 million, or 2%. This slight increase was primarily
the result of an increase in the fair value of credit derivatives used to hedge the commercial loan portfolio and limit exposures for specific credits, partially offset by lower results across multiple trading products.



Other income decreased $422 million. This decrease was
primarily due to higher losses on tax-oriented investments, mortgage-related losses, valuation adjustments on other investments, various asset write-downs and the consolidation of Paymentech and Anexsys. Gains on the sale of ownership interests in
EquiServe Limited Partnership and Star Systems recognized in the prior year also contributed to the decrease.



2001 compared to 2000



Banking fees and commissions increased $194 million, or 13%. This increase was primarily the result of increased annuity sales and fees associated with the in-house administration of the One Group mutual funds, which the Corporation
began recording as revenue in the 2000 fourth quarter. Additionally, this increase reflected growth in retail brokerage sales.



Credit card revenue increased $476 million, or 21%. This improvement was due to the third quarter 2001 addition of the Wachovia credit
card business and significant items recorded in 2000 (see table 2 on page 53).



Service charges on deposits increased $139 million, or 11%. A lower rate environment produced a shift to the payment of fees from net interest income due to the lower value ascribed to customers
compensating deposit balances.



Fiduciary and
investment management fees declined by $29 million, or 4%. This reduction was as a result of lower investment advisory fees on equity assets because of overall market conditions.



Investment securities losses were $66 million due to principal investment losses and lower market valuations,
partially offset by the gains on sale of fixed income securities. This was an improvement from 2000 when investment securities portfolio activity produced a loss of $235 million. This loss occurred when significant items were recorded in the second
quarter of 2000 (see table 2 on page 53).



Trading produced gains of $220 million, an increase of $86 million, or 64%. This improvement was due to significant items recorded in 2000 (see table 2 on page 53) and market value gains.



Other income was $360 million compared to a $738 million loss
in 2000. This improvement was predominately due to significant items recorded in 2000 (see table 2 on page 53).





54    BANK ONE 2002 ANNUAL REPORT



---



Noninterest Expense



The components of noninterest expense for the periods
indicated are as follows:



|                                                                                      |  |      |        |   |      |   |        |      |  |   | Percent Change |  
|------------------------------------------------------------------------------------- |  | ---- | ------ | - | ---- | - | ------ | ---- |  | - | -------------- | -
|                                                                                     
|For the Year Ended December 31,                                                       |  | 2002 |        |   | 2001 |   |        | 2000 |  |   | 2002-2001      |  
|                                                                                     
|(Dollars in millions)                                                                 |  |      |        |   |      |   |        |      |  |   |                |  
|Salaries and employee benefits:                                                       |  |      |        |   |      |   |        |      |  |   |                |  
|Salaries(1)                                                                           |  | $    | 3,823  |   |      | $ | 3,638  |      |  | $ | 3,949          |  
|Employee benefits                                                                     |  |      | 642    |   |      |   | 560    |      |  |   | 653            |  
|                                                                                      |  |      |        |   |      |  
|Total salaries and employee benefits                                                  |  |      | 4,465  |   |      |   | 4,198  |      |  |   | 4,602          |  
|Occupancy                                                                             |  |      | 645    |   |      |   | 686    |      |  |   | 872            |  
|Equipment                                                                             |  |      | 426    |   |      |   | 457    |      |  |   | 593            |  
|Outside service fees and processing                                                   |  |      | 1,303  |   |      |   | 1,178  |      |  |   | 1,537          |  
|Marketing and development                                                             |  |      | 1,054  |   |      |   | 862    |      |  |   | 900            |  
|Telecommunication                                                                     |  |      | 365    |   |      |   | 407    |      |  |   | 411            |  
|Other intangible amortization                                                         |  |      | 125    |   |      |   | 97     |      |  |   | 410            |  
|Goodwill amortization                                                                 |  |      |       |   |      |   | 69     |      |  |   | 70             |  
|Other expense(1)                                                                      |  |      | 1,261  |   |      |   | 1,246  |      |  |   | 2,052          |  
|                                                                                      |  |      |        |   |      |  
|Total noninterest expense before merger and restructuring-related charges
(reversals) |  |      | 9,644  |   |      |   | 9,200  |      |  |   | 11,447         |  
|Merger and restructuring-related charges (reversals)                                  |  |      | (63    | ) |      |   | 351    |      |  |   | 161            |  
|                                                                                      |  |      |        |   |      |  
|Total noninterest expense                                                             |  | $    | 9,581  |   |      | $ | 9,551  |      |  | $ | 11,608         |  
|                                                                                      |  |      |        |   |      |  
|Headcount                                                                             |  |      | 73,685 |   |      |   | 73,519 |      |  |   | 80,778         |  
|Efficiency ratio                                                                      |  |      | 56.4   | % |      |   | 59.7   | %    |  |   | 82.5           | %
|                                                                                     

|N/M |  | Not meaningful.
|--- |  | ---------------

|(1) |  | Certain expenses have been reclassified from salaries to other expenses in all periods.
|--- |  | ---------------------------------------------------------------------------------------



Components of noninterest expense that are primarily related to a single business segment are discussed
within that business segment rather than the consolidated section.



2002 compared to 2001



Salaries and
employee benefits of $4.5 billion increased $267 million, or 6%. This increase was due to insourcing activities previously performed by outside vendors, increased incentive compensation, the consolidation of Paymentech and Anexsys, and also included
$45 million related to the adoption of the fair value method of accounting for stock option and stock purchase plans.



Outside service fees and processing expense of $1.3 billion increased $125 million, or 11%, due to the increase in contract programming
charges related to the Corporations systems conversion efforts and the one-time charge of $89 million related to termination and renegotiation of certain vendor contracts.



Marketing and development expense of $1.1 billion increased $192 million, or 22%, primarily due to increased
advertising expenditures for Card Services and certain Retail products.



Telecommunication expense of $365 million decreased $42 million, or 10%, primarily due to lower servicing expenses resulting from the termination and renegotiation of certain vendor contracts.



Other intangible amortization of $125 million increased $28
million, or 29%, primarily due to the amortization of purchased credit card relationships associated with the addition of the Wachovia credit card business. In accordance with SFAS No. 142, Goodwill and Other Intangible Assets, the
Corporation no longer amortizes goodwill and thus did not incur any goodwill amortization expense during 2002.



Other expense increased by $15 million primarily due to systems conversion costs. The Corporation successfully completed the Michigan,
Florida and Illinois conversions during 2002.



As
a result of the significant items noted on pages 52-53 and restructuring plans initiated in 2000 and 2001, the Corporations noninterest expense before restructuring-related reversals was $9.6 billion for 2002, which represents a reduction in
annualized noninterest expense of $1.2 billion and decreased headcount of approximately 9,000 employees from June 30, 2000.



2001 compared to 2000



Salaries and employee benefits were $4.2 billion, down 9% from $4.6 billion. This decline was attributed to expense savings from reduced headcount and
cost reductions associated with the modification of the Corporations benefit plans.



Occupancy expense declined by $186 million, or 21%. The decrease was the result of less occupied space.



Equipment expense in 2001 decreased $136 million. Reduced furniture and equipment rental along with lower maintenance and depreciation
expense was primarily the reason for the 23% decline.



The Corporation recorded restructuring-related charges in the fourth quarter of 2001 affecting all lines of business for additional real estate and staff reductions (severance) costs to accomplish expense reductions, accelerated
systems conversions, and other consolidations. Actions under the plan were implemented. See Note 4 Restructuring-Related Activity on page 89.





BANK ONE 2002 ANNUAL REPORT    55



---



The
Corporation recorded restructuring-related charges in the second quarter of 2000 related to restructuring its indirect lending and home mortgage business as well as exit costs associated with specific decisions made to permanently abandon identified
facilities, equipment and application software (for all lines of business). Actions under this plan have been completed, with only payments of identified obligations remaining. See Note 4 Restructuring-Related Activity on page 89.



Restructuring-related charges (reversals) are
allocated to each line of business (see tables on pages 52-53) for management reporting purposes.



Outside service fees and processing expense also declined 23%, attributed to a reduction in consulting expense and the benefits from
contract renegotiations and other waste-reduction initiatives.



Marketing and development expense decreased $38 million, or 4%, as continued expense reductions in the Retail line of business more than offset increased expenditures for Card Services.



Other intangible amortization expense decreased by $313
million, or 76%, predominately due to significant items recorded in 2000 (see table 2 on page 53).



Other expense was reduced by $806 million, or 39%. This decrease was primarily due to significant items recorded in 2000 (see table 2 on
page 53). This reduction also reflects the continuation of the Corporations waste-reduction initiatives to lower expenses for such items as travel, entertainment and other miscellaneous items, which was partially offset by system conversion
costs. The Corporation successfully converted the Texas/Louisiana and the Arizona/Utah deposit systems during 2001.



Applicable Income Taxes



The Corporations income (loss) before income taxes and cumulative effect of change in accounting principle, as well as applicable income tax expense
(benefit) and effective tax rate for each of the past three years follows:



|(Dollars in millions)                                                                               |  | 2002 |       |   | 2001 |   |       | 2000 | 
|--------------------------------------------------------------------------------------------------- |  | ---- | ----- | - | ---- | - | ----- | ---- | 
|                                                                                                   
|Income (loss) before income taxes (benefit) and cumulative effect of change in
accounting principle |  | $    | 4,763 |   |      | $ | 3,800 |      | 
|Applicable income taxes (benefit)                                                                   |  |      | 1,468 |   |      |   | 1,118 |      | 
|Effective tax rate                                                                                  |  |      | 30.8  | % |      |   | 29.4  | %    | 
|                                                                                                   



Applicable income tax expense (benefit) for all three years included benefits for tax-exempt income, tax-advantaged investments and general business tax credits offset by the effect of nondeductible expenses. In the case of a loss
before income taxes and the cumulative effect of change in accounting principle, the effect of the net tax benefits described above is to increase, rather than decrease, the effective rate of tax. This is the primary reason for the difference in
effective tax rates between 2000 and the other years presented. More detail on income taxes can be found in Note 20 Income Taxes on page 101.



RISK MANAGEMENT



Risk is an inherent part of the Corporations business activities. The Corporations ability to properly and effectively
identify, measure, monitor, and report risk in its business activities is critical to its soundness and profitability. The diversity of the Corporations lines of business helps reduce the impact that volatility in any particular area has on
its operating results as a whole.



Corporate Risk Management
Governance Structure



While the lines of business are
primarily responsible for managing the risks inherent in their businesses, the Corporation has established a risk management governance structure to establish policy, monitor adherence to policy and manage the overall risk profile of the
organization.



The Corporation believes risk
management is the responsibility of every employee. However, various functional groups have specific roles and responsibilities to manage risk:



| |  | Board of Directors: determines risk appetite and risk capacity. The Audit and Risk Management Committee routinely reviews risk issues.
|- |  | --------------------------------------------------------------------------------------------------------------------------------------



| |  | Risk Committees: ensure appropriate management of aggregate risks and capital, acceptable corporate and line of business risk profiles and the integrity of
risk governance processes. Risks addressed include, but are not limited to credit, market and operational risk. The Executive Risk Committee is co-chaired by the Chief Executive Officer and Chief Risk Officer. Lines of business sub-committees are
co-chaired by the heads of the lines of business and their respective chief risk officers. Committee members represent the lines of business, corporate risk management, finance and legal functions.
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Chief Risk Officer: establishes effective risk management infrastructure (people, process and systems).
|- |  | -------------------------------------------------------------------------------------------------------



| |  | Lines of Business: manages risk exposures to approved limit structures for their applicable line of business and identifies risk linkages to other businesses.
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Investment Committee:ensure appropriate management of both new investment proposals and the existing portfolio of investments; approve new investment
proposals and divestment strategies. The committe is co-chaired by the Chief Financial Officer and Head of Financial Planning and Acquisitions.
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Principal Investments Committee:a separate investment committee exists for governing the principal investments portfolio and is chaired by the Chief
Executive Officer.
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Corporate Audit: independently assesses and recommends actions to mitigate risk.
|- |  | --------------------------------------------------------------------------------



| |  | Asset and Liability Committee (ALCO): provides governance and oversight of liquidity, structural interest rate risk and capital and is co-chaired
by the Chief Financial Officer and Treasurer.
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



56    BANK ONE 2002 ANNUAL REPORT



---



Risk Management Process



There are four critical elements to the Corporations
risk management process:



| |  | Risk Identification: The Corporation identifies risk dynamically by assessing the potential impact of internal and external factors on current businesses and
new products/programs, and by developing risk mitigation strategies to effectively manage identified risks.
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Risk Measurement: The Corporation measures risk using a variety of methodologies including: calculating expected loss, unexpected loss and value-at-risk; and
conducting stress tests and making comparisons to external benchmarks. Measurement models and underlying assumptions are routinely validated to ensure accurate risk measurement.
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Risk Monitoring/Control:The Corporation establishes risk management policies and procedures. These policies contain approved limits by customer, product and
business that are monitored weekly.
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Risk Reporting: Risk reporting covers all lines of business and is comprehensively provided to management on a weekly basis.
|- |  | ----------------------------------------------------------------------------------------------------------------------------



Risk Types



There are seven major risk types identified by the Corporation:





| |  | Credit risk is the risk to earnings or capital arising from an obligors failure to meet the terms of any contract with the lender or otherwise fail to
perform as agreed.
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Liquidity risk is the risk of loss arising from an institutions inability to meet its obligations when they come due without incurring unacceptable
losses.
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Market riskis the risk that changes in future market rates or prices will make the Corporations positions less valuable.
|- |  | -------------------------------------------------------------------------------------------------------------------------



| |  | Operational riskis the risk of loss resulting from inadequate or failed internal processes, people or systems or from external events.
|- |  | --------------------------------------------------------------------------------------------------------------------------------------



| |  | Reputation riskis the risk to earnings or capital arising from negative public opinion. This affects the institutions ability to establish new
relationships or services, or continue servicing existing relationships.
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Strategic risk is the risk to earnings or capital arising from adverse business decisions or improper implementation of those decisions.
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------



| |  | Compliance risk is the risk to earnings or capital arising from violations of, or non-conformance with, laws, rules, regulations, prescribed practices, or
ethical standards.
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



CREDIT RISK MANAGEMENT



Credit risk is a
significant risk to the Corporation. It represents risk to earnings arising from an obligors failure to meet the terms of any contract with the Corporation or otherwise fail to perform as agreed. Credit risk is found in all activities where
success depends on issuer, borrower or counterparty performance. It arises any time funds are extended, committed, invested, or otherwise exposed through actual or implied contractual agreements, whether reflected on or off the balance sheet.
On-balance sheet credit exposure includes such items as loans. Off-balance sheet credit exposure includes unfunded credit commitments and other credit-related financial instruments.



Management proactively manages the risk/reward relationship of each portfolio to achieve profitability
targets and required rates of return on investment. The Corporation uses credit derivatives (primarily single name credit swaps) and short bond positions, as protection against deterioration of credit quality on commercial loans and loan
commitments.



Risk Identification



Credit risk is the most prevalent risk associated with banking, and
encompasses more than the traditional definition associated with lending activities. Credit risk also arises in conjunction with a broad range of bank activities, including selected investment portfolio products, derivatives trading partners, or
foreign exchange counterparties. Credit risk also arises due to country or sovereign exposure, as well as indirectly through guarantor performance.



Risk Measurement



Expected and Unexpected Losses



Using statistical techniques, expected and unexpected losses are calculated for each segment of the portfolio. Expected loss is the average expected loss
over a cycle, and unexpected loss represents the potential volatility of losses relative to expected loss levels.



Expected loss calculations and related stress tests are used as a basis for evaluating allowance for credit losses adequacy. Unexpected
loss calculations are used as a basis for calculating economic capital, which is a management tool used to allocate capital for internal management purposes. Expected and unexpected loss calculations are made at the facility and portfolio levels,
and are used as a basis for pricing to ensure appropriate risk/reward balance.



The Corporation employs several methodologies for estimating expected and unexpected losses. Methodologies are determined based on a number of factors, including type of asset (e.g., consumer
installment versus commercial loan), risk measurement parameters (e.g., delinquency status and bureau score versus commercial risk rating), and risk management and collection processes (e.g., retail collection center versus centrally managed workout
units). Risk measurement is primarily based upon two methodologies: risk rating exposure and credit scoring exposure.



Risk-Rated Exposure



For portfolios that are risk-rated (generally commercial), expected and unexpected loss calculations are based on estimates of probability of default and
loss given default. Probability of default is the one-year expected default calculated on an obligor basis. Loss given default is an estimate of losses that are based upon collateral and structural support for each credit facility. Calculations and
assumptions are based on management information systems and methodologies that are under continual review.



In the second quarter 2001, the Corporation refined its measurement process for estimating expected loss by enhancing its risk rating
system to provide for discrete estimates of probability of default and loss given default. In addition, the Corporation moved from a one-tier, 12 point combined obligor and facility- based scale to estimate expected loss to a two-tiered methodology:
a 20 point obligor-based scale, which estimates probability of default, and an 8 point facility-based scale, which estimates loss



BANK ONE 2002 ANNUAL REPORT    57



---

given default. The benefit of the 20 point obligor-based scale is it enables the Corporation to benchmark
its internal measures of risk with publicly available ratings and market prices. The estimated probability of default covers a one-year time horizon. Expected loss represents the combined effect of estimates from both components. While the risk
rating system changed, estimates of expected loss were relatively unaffected and no increase to the reserve was required.



Risk ratings are reviewed on an ongoing basis by corporate risk management and revised, if needed, to reflect the borrowers current
risk profile and the related collateral position. The lower categories of credit risk are equivalent to the four bank regulatory classifications: Special Mention, Substandard, Doubtful and Loss.



Credit-Scored Exposure



For credit-scored portfolios (generally Retail and Card Services), expected
loss is based on a statistical analysis of inherent losses over discrete periods of time. Expected losses are estimated using statistical analysis, such as roll rate models, which use historical losses, and vintage forecasting models. Other risk
characteristics evaluated include: recent loss experience in the portfolios, changes in origination sources, portfolio seasoning, loss severity, and underlying credit practices, including charge-off policies. This analysis is applied to the current
portfolios in order to forecast delinquencies and severity of losses, which determines the amount of future probable losses. These factors and analysis are updated on a quarterly basis.



Risk Monitoring/Control



The Executive Risk Committee has developed policies to manage the level and composition of risk in its portfolio, and reviews the Corporations
performance relative to those policies.



The line
of business risk committees have developed policies that focus on origination, portfolio management and managed assets related activities. The policy framework establishes approval authorities and related processes, risk rating methodologies,
portfolio review parameters and management of problem loans. The objective of the credit risk management process is to quantify and manage credit risk on an aggregate portfolio basis as well as to reduce the risk of loss resulting from an individual
customer default. Corporate risk management works with lending officers and line of business personnel involved in credit decision making and is involved in the implementation, refinement, and monitoring of the Corporations credit policies and
procedures. Credit limits are approved by the Executive Risk Committee and adherence to those limits is monitored weekly.



In order to meet its credit risk management objectives, the Corporation maintains a risk profile that is diverse in terms of borrower,
product-type, and industry and geographic concentrations. Additional diversification of the Corporations exposure is accomplished through syndication of credits, participations, loan sales, securitizations, credit derivatives and other
risk-reduction techniques.



Risk Reporting



Aggregate credit exposure, credit metric forecasts, hold limit exceptions and
risk profile changes are reported weekly for all portfolios. Expected loss calculations and detailed portfolio reporting of industry, customer and geographic concentrations are reported monthly to senior management. In addition, the results of
comprehensive stress tests of expected loss for reserve establishment are presented in the quarterly reports to senior management. Through the Risk Committee governance structure, credit risk trends and limit exceptions are regularly discussed on a
comprehensive basis.



LIQUIDITY
RISK MANAGEMENT



Liquidity is managed to preserve stable,
reliable and cost-effective sources of funding to meet all current and future financial obligations.



At the Corporation, strong liquidity is provided by a variety of sources including:



| |  | A portfolio of liquid assets, comprised of federal funds sold, deposit placements and marketable securities.
|- |  | ------------------------------------------------------------------------------------------------------------



| |  | A large customer deposit base arising through the Corporations Commercial Banking and Retail business activities.
|- |  | ------------------------------------------------------------------------------------------------------------------



| |  | A diversified mix of short- and long-term funding sources from the wholesale financial markets.
|- |  | -----------------------------------------------------------------------------------------------



| |  | A substantial and growing capital position in excess of regulatory well-capitalized standards.
|- |  | ----------------------------------------------------------------------------------------------



| |  | Significant borrowing capacity at the Federal Reserve discount window.
|- |  | ----------------------------------------------------------------------



The Corporation is an active participant in the global financial markets through which it obtains a
significant amount of funding. These markets serve as a cost-effective source of funds and are a critical component of the Corporations liquidity management. Decisions to access these markets are based upon relative costs, prospective views of
balance sheet growth, and a targeted liquidity profile. A disruption in the financial markets could limit access to liquidity for the Corporation.



The Corporations ability to maintain regular access to competitively priced wholesale funds is fostered by strong debt ratings from
the major credit rating agencies. Management views the following factors as critical to retaining high credit ratings:



| |  | Strong capital ratios and credit quality
|- |  | ----------------------------------------



| |  | A stable, diverse earnings stream
|- |  | ---------------------------------



| |  | Diversity of liquidity sources
|- |  | ------------------------------



| |  | Strong liquidity monitoring procedures
|- |  | --------------------------------------



At December 31, 2002, the Corporation and its principal banks had the following long- and short-term debt ratings:



|                         |  | Short-Term Debt |  | Senior Long-Term Debt
|------------------------ |  | --------------- |  | ---------------------
|                        
|                         |  | S & P           |  | Moodys              
|                        
|The Corporation (parent) |  | A-1             |  | P-1                  
|Principal banks          |  | A-1             |  | P-1                  
|                        





58    BANK ONE 2002 ANNUAL REPORT



---



Risk Identification



Treasury is responsible for measuring and managing the
liquidity profile with oversight from the ALCO. Liquidity risks reviewed include the diversity of the Corporations sources of funding and the maturity structure of those sources, quantity of liquid assets held, contingent funding requirements
and sensitivity to changes in credit ratings. Treasury tests a series of liquidity scenarios and works with the lines of business to understand and manage the potential liquidity risks in the Corporation.



Measurement and Monitoring/Control



The Corporation has established operating guidelines around balance sheet
liquidity that include required levels of liquid assets and limits on liquidity gaps. Liquidity gaps measure balance sheet cash flow mismatches and quantify certain liability maturities in excess of liquid assets.



The Corporation monitors and manages liquidity considering
both on- and off-balance sheet exposures. On-balance sheet liquidity is impacted by balance sheet growth, level and mix of customer deposits, and access to wholesale funding. In the normal course of business, the Corporation enters into certain
forms of off-balance sheet transactions, including credit card securitizations, unfunded loan commitments and letters of credit. These transactions are managed through the Corporations various risk management processes. For example, liquidity
facilities provided to Corporation-and third party-administered specialized financing entities might require funding if the Corporations short-term rating were to fall to A-2 or P-2. Credit card securitizations may be subject to early
amortization if certain performance measures of the issuing trust were not maintained. Other events could result in additional funding requirements for the Corporation.



The parent company faces unique liquidity constraints due to legal limitations on its ability to borrow funds
from its banking subsidiaries. The parent company obtains funding to meet its obligations through bank and non-bank subsidiary dividends (within regulatory limitations) and through the issuance of debt securities. The parent company holds liquid
assets equal to at least 12 months of its upcoming debt maturities to ensure adequate liquidity is available.



Reporting



A combination of daily, weekly, monthly and periodic reports provided to senior management detail the following:



| |  | Internal liquidity risk metrics
|- |  | -------------------------------



| |  | Composition and level of the liquid asset portfolio
|- |  | ---------------------------------------------------



| |  | Timing differences in short-term cash flow obligations
|- |  | ------------------------------------------------------



| |  | Available pricing and market access to the financial markets for capital, term-debt and securitization transactions
|- |  | -------------------------------------------------------------------------------------------------------------------



| |  | Exposure to contingent draws on the Corporations liquidity
|- |  | -----------------------------------------------------------



| |  | Liquidity stress testing under systemic and Corporation specific scenarios
|- |  | --------------------------------------------------------------------------



Market Risk Management



Market risk refers to potential losses arising from changes in interest rates, foreign exchange rates, equity prices, commodity prices and credit spreads
in market risk sensitive instruments. Market risk arises in both trading and non-trading portfolios. The section on Market Risk Management-Nontrading Activities on page 61 provides an overview of our approach to managing market risks
arising from non-trading portfolios. In these asset and liability management activities, policies are in place to closely manage structural interest rate risk. Disclosures about the fair value of financial instruments, which reflect changes in
market prices and rates, can be found in Note 23 Fair Value of Financial Instruments on pages 103105.



Market Risk Management  Trading Activities



Through its trading activities, the Corporation strives to take advantage of profit opportunities due to changes in interest rates, exchange rates, equity
prices, commodity prices and credit spreads. The Corporations trading activities are primarily customer-oriented. For example, cash instruments are bought and sold to satisfy customers investment needs. Derivative contracts are initially
entered into to meet the risk management needs of customers. The Corporation enters into subsequent transactions to manage the level of risk in accordance with approved limits. In order to accommodate customers, an inventory of capital markets
instruments is carried, and access to market liquidity is maintained by making bid-offer prices to other market makers. The Corporation may also take proprietary trading positions in various capital markets cash instruments and derivatives, and
these positions are designed to profit from anticipated changes in market factors. Activity is focused in OECD (Organisation for Economic Cooperation and Development) markets, with very little activity in emerging markets.



Many trading positions are kept open for brief periods of
time, often less than one day. Other positions may be held for longer periods. Trading positions are carried at estimated fair value, with realized and unrealized gains and losses included in noninterest income as trading income.



Risk Identification



Corporate market risk management works with various lines of business
personnel to refine and monitor market risk policies and procedures, and is the primary independent oversight unit for market risk arising from line of business activities. The line of business, working in conjunction with corporate market risk
management, is responsible for comprehensive identification of market risks. These market risks include the sensitivities to such market factors as changes in prices, interest rate curves, spreads, basis, volatility, gamma, time decay and
correlations. Market risk management also conducts annual reviews of each of the trading businesses to confirm approved products and trading strategies.



Risk Measurement



The Corporation relies on a number of statistical and non-statistical measurements to monitor the level of market risk arising from interest rates,
foreign exchange, equities, commodities and credit spreads. The Corporation has developed policies and procedures to manage market risk in its trading activities through a value-at-risk measurement, stress testing and dollar trading limits. The
objective of this process is to quantify and manage market risk in order to limit single and aggregate exposures. Dollar trading limits are subject to varying levels of approval by senior line of business management, with review by corporate market
risk management. For non-trading portfolios, the primary measures of market risk are earnings at risk and the economic value of equity.



Value-At-Risk



For trading portfolios, value-at-risk measures the maximum fair value the Corporation could be reasonably expected to lose on a trading position, given a
specified confidence level and time horizon. Value-at-risk limits and exposure are monitored daily for each significant trading portfolio. Value-at-risk was not calculated for credit derivatives used to hedge specific credits in the loan portfolio.
However, stress testing is regularly performed for these credit



BANK ONE 2002 ANNUAL REPORT    59



---

derivative positions. See discussion of credit derivatives under the Trading Derivative
Instruments section on page 72. Likewise, value-at-risk calculations do not include the principal investments portfolio that is being accounted for similar to trading portfolios in that realized and unrealized gains and losses are recorded
currently in income.



The Corporation applies a
statistical model to its portfolios of cash and derivative positions, including options, to calculate value-at-risk. The variance-covariance model estimates the volatility of returns on individual assets, as well as the correlation of changes of
asset price pairs. These volatility and correlation estimates are made on the basis of one-year, equally-weighted historical observations of market variables. The model then computes the volatility of changes in the market values of the portfolios
(i.e., the value-at-risk results) by applying each portfolios statistical sensitivities to the correlations.



The Corporations value-at-risk calculation measures potential losses in fair value using a 99% confidence level and a one-day time
horizon. This equates to 2.33 standard deviations from the mean under a normal distribution. This means that, on average, daily profits and losses are expected to exceed value-at-risk one out of every 100 overnight trading days.



The value-at-risk in the Corporations trading portfolio
was as follows (excluding credit derivatives and other instruments used to hedge specific credits in the loan portfolio with a notional amount of $7.3 billion and $3.3 billion at December 31, 2002 and 2001, respectively):



|                                                                         |  | 2002       
|------------------------------------------------------------------------ |  | -----------
|                                                                        
|(In millions)                                                            |  | December 31
|                                                                        
|High Volume Capital Markets Trading Portfolios and Mortgage Pipeline (1) |  |            
|Risk type:                                                               |  |            
|Interest rate                                                            |  | $          
|Commodity price                                                          |  |            
|Currency exchange rate                                                   |  |            
|Equity                                                                   |  |            
|Diversification benefit                                                  |  |            
|                                                                         |  |            
|Other Trading Portfolios                                                 |  |            
|Risk type:                                                               |  |            
|Interest rate                                                            |  |            
|                                                                         |  |            
|Aggregate trading portfolio market risk                                  |  | $          
|                                                                        



|                                                                         |  | 2001       
|------------------------------------------------------------------------ |  | -----------
|                                                                        
|(In millions)                                                            |  | December 31
|                                                                        
|High Volume Capital Markets Trading Portfolios and Mortgage Pipeline (1) |  |            
|Risk type:                                                               |  |            
|Interest rate                                                            |  | $          
|Commodity price                                                          |  |            
|Currency exchange rate                                                   |  |            
|Equity                                                                   |  |            
|Diversification benefit                                                  |  |            
|                                                                         |  |            
|Other Trading Portfolios                                                 |  |            
|Risk type:                                                               |  |            
|Interest rate                                                            |  |            
|                                                                         |  |            
|Aggregate trading portfolio market risk                                  |  | $          
|                                                                        

|(1) |  | Subject to backtesting.
|--- |  | -----------------------



Interest rate risk was the predominant type of market risk incurred during 2002. At December 31, 2002, approximately 95% of primary market
risk exposures were related to interest rate risk. Currency exchange rate, equity and commodity risks accounted for 1%, 3% and 1%, respectively, of primary market risk exposures.



| |  | U.S. Treasury, corporate, asset-backed, municipal, and mortgage-backed securities generated 82% of the interest rate risk component. Interest rate derivatives
accounted for 15% of the interest rate risk, while the remaining 3% was derived primarily from money market and foreign exchange trading activities.
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Foreign exchange spot, forward and option trading generated 100% of the currency exchange rate risk. Of the currency exchange rate risk arising from these
activities, 43% related to major currency exposures and 57% to minor currencies.
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Equity derivatives trading and off-setting cash positions generated 100% of equity price risk.
|- |  | ----------------------------------------------------------------------------------------------



At December 31, 2002, aggregate portfolio market risk
exposures were 17% higher than at year-end 2001. The majority of this increase was due to increased market risk in various trading books.



60    BANK ONE 2002 ANNUAL REPORT



---



Value-at-risk
levels are regularly backtested to validate the model by comparing predictions with actual results. For 2002, backtesting results for the high volume capital markets portfolios and the mortgage pipeline appear in the following graph:



LOGO



These
backtesting results reflect only the higher volume trading portfolios that are actively managed and marked-to-market on a daily basis (i.e., the capital markets trading portfolios and the mortgage pipeline in the consumer lending business). Based on
a 99% confidence interval in predicting actual profit or loss, the Corporation would expect actual profit or loss to exceed value-at-risk one day for every one hundred days. As shown in the graph above, there was only one day in 2002 where the
actual loss exceeded the calculated value-at-risk. The Corporations value-at-risk measure provides a conservative measure of the level of market risk.



Stress Testing



Stress tests are conducted regularly for all capital markets trading portfolios including credit derivatives for a standard set of forward-looking
scenarios for large, low probability changes in the market variables. Scenarios may be derived from either severe historical crises or forward assessment of developing market trends. The scenarios are continuously reviewed to reflect changing market
and economic conditions.



Risk Monitoring



The Corporation establishes limits for value-at-risk, market variable
exposures, position limits and dollar trading loss limits for all capital markets trading portfolios. Actual activity compared with these limits is monitored daily. In addition, trading limits have been established for trading portfolios within
other areas of the Corporation, including treasury and principal investments. Actual activity compared with these trading limits is regularly monitored. As a rule, all businesses are expected to maintain exposure within approved limits. Should a
risk exposure level exceed approved limit levels, business management provides a strategy for bringing risk levels down within approved levels.



Risk Reporting



Value-at-risk, market variable exposures and dollar trading loss limit exceptions are reported daily for each capital markets trading portfolio. Market
risk exposure trends, value-at-risk trends, profit and loss changes, aged asset inventories and portfolio concentrations are reported daily to business management and weekly to executive management. In addition, the results of comprehensive, weekly
stress tests are presented in the weekly reports to executive management. Market risk exposure for treasury and principal investment trading portfolios are reported regularly through the Risk Committee governance structure. Market risk trends and
limit exceptions are comprehensively and regularly discussed.



Market Risk Management  Non-Trading Activities



Interest rate risk exposure in the Corporations core non-trading business activities, (i.e., asset/liability management (ALM) position), is a result of reprice, option, and basis risks associated with on- and
off-balance sheet positions. Reprice risk represents timing mismatches in the Corporations ability to alter contractual rates earned on financial assets or paid on liabilities in response to changes in market interest rates. Basis risk refers
to the potential for change in the underlying relationship between market rates or indices, which subsequently result in a narrowing of the spread earned on a loan or investment relative to its cost of funds. Option risk arises from embedded
options present in many financial instruments such as interest rate options, loan prepayment options and deposit early withdrawal options. These provide customers and investors opportunities to take advantage of directional changes in rates,
which could have an adverse impact on the Corporations margin performance. Embedded options are complex risk positions that are difficult to predict and offset, and are a significant component of the interest rate risk exposure for the
Corporation.



Risk Identification



Interest rate risk arises through ongoing banking activities, including
traditional customer lending and deposit activities and wholesale funding and portfolio actions. The Corporation identifies interest rate risk by quantifying the impact of new programs, products and strategies on overall balance sheet sensitivity.



Responsibility for management of interest rate
risk resides with treasury under the oversight of the Corporations ALCO and is apprised weekly of newly discovered risks associated with the ALM position and the strategies to manage resultant exposure.



Risk Measurement



The ALM position is measured using sophisticated earnings simulation and
valuation tools. The primary risk measure employed is earnings-at-risk, which measures the sensitivity of pretax earnings to various interest rate movements as compared to a base-case scenario established using current rates. Earnings-at-risk
incorporates estimates of balance sheet growth, pricing and customer behavior under each scenario analyzed. The analysis is calculated over multiple time horizons.



In addition to earnings-at-risk analysis, management uses an economic value of equity sensitivity technique
to capture the risk in both short- and long-term positions. This analysis involves calculating future cash flows over the life of all current assets, liabilities and off-balance sheet positions under different rate scenarios. The discounted
present value of all cash flows represents the Corporations economic value of equity. The sensitivity of this value to shifts in the yield curve allows management to measure longer-term repricing and option risk in the portfolio.



The measurement of interest rate risk is highly dependent on
numerous assumptions. While the risk analysis incorporates managements best estimate of interest rate and balance sheet dynamics under various market rate movements, the actual behavior and resulting earnings impact will likely differ from
that projected. Sensitivities to key assumptions are tested and reviewed to provide a range of possible outcomes. For mortgage-related assets, the simulation model captures the expected prepayment behavior under changing interest rate environments.
Assumptions and methodologies regarding the interest rate or balance behavior of indeterminate maturity products, (e.g., credit card receivables, savings, money market, NOW and demand deposits), reflect managements best estimate of expected
future behavior. Sensitivity of



BANK ONE 2002 ANNUAL REPORT    61



---

service fee income to market interest rate levels, such as those related to cash management products, is
included as well.



Risk Monitoring



The Corporation has established risk measures, policy limits and internal
control mechanisms (collectively referred to as the Interest Rate Risk Policy) for managing the overall ALM position, including both on- and off-balance sheet positions. Policy limits are based on immediate parallel shocks of +/-100 basis point rate
movements.



Responsibility for the management of
interest rate risk resides with treasury under the oversight of the ALCO. Business unit management is responsible for understanding their interest rate risk, while the Corporation controls and monitors this risk centrally. ALCO is apprised weekly of
the risks associated with the ALM position, with exposures tested under multiple rate and yield curve scenarios. The Corporation balances the return potential of the ALM position against the desire to limit volatility in earnings and/or economic
value.



Risk Reporting



Based on immediate parallel shocks, the Corporations earnings-at-risk
to rising interest rates, versus base-case, has improved. The Corporations 12-month pretax earnings sensitivity profile as of year-end 2002 and 2001 is as follows:



|                  |  | Immediate Change in Rates
|----------------- |  | -------------------------
|                 
|(In millions)     |  | +200 bp                  
|                 
|December 31, 2002 |  | $165                     
|                 
|December 31, 2001 |  | $(754)                   
|                 



The
decrease in earnings-at-risk during the year largely reflects managements decision to reduce exposure to rising market interest rates and take advantage of market opportunities to secure long-term, low cost funding. These activities included
the termination of $6 billion notional value in receive fixed/pay floating swaps, execution of $15 billion pay fixed/receive floating swaps and the issuance of $5 billion in fixed rate term funding.



Numerous alternative scenarios are reviewed internally,
including more gradual and more severe rate movements and non-parallel rate shifts. These scenarios are intended to provide a more comprehensive view of the Corporations interest rate risk exposure by further detailing reprice, option, yield
curve and basis risk. The interest rate scenarios are used for analytical purposes and do not necessarily represent managements view of future market movements. Rather, they are intended to provide a measure of the degree of volatility
interest rate movements may introduce into the earnings and economic value of the Corporation.



Rates as represented by implied forward rates (or the markets expectations for rates as embedded in the current yield curve) provide an important benchmark in the evaluation of balance sheet
management strategies and the overall risk posture. The markets view of rates is embedded in the price of all financial instruments. Strategies to modify risk are therefore evaluated based on a comparison of managements and the
markets expectations about the degree and timing of the expected rate movement. At year-end, implied forward rates suggested a modest increase in interest rates in the second half of 2003. This rate scenario would not materially impact the
earnings of the Corporation.



The Corporation
generally benefits if rates increase earlier or more than expected under the implied forwards or if the general level of rate increase is sudden and severe due to actions taken over the year to minimize increases in funding costs relative to assets
repricings. The benefit of increasing short-term rates is further enhanced when rates increase more than 425 basis points and the rate earned on a portion of the credit card portfolio moves above contractual floors. The Corporation would be
negatively impacted by sudden rate increases accompanied by a flattening yield curve that would diminish the benefit of term asset repricing.



Steeper yield curves typically benefit earnings, particularly when the increase in long-term rates is not accompanied by increasing
short-term rates. Falling long-term rates negatively impact earnings and can also expose the Corporation to additional option risk. The Corporations basis risk is largely the result of corporate and consumer demand for prime-based loan
products. Declines in the prime rate relative to bank funding costs will result in decreased earnings.



OPERATIONAL RISK MANAGEMENT



The Corporation is exposed to numerous types of operational risk. Operational risk is defined as the risk of loss resulting from the inadequate or failed
internal processes, people and systems or from external events. Operational risk generally refers to the risk of loss resulting from the Corporations operations, including, but not limited to, the risk of fraud by employees or persons outside
the Corporation, the execution of unauthorized transactions by employees, errors relating to transaction processing and systems, and breaches of the internal control system and compliance requirements. This risk of loss also includes the potential
legal actions that could arise as a result of the operational deficiency or as a result of noncompliance with applicable regulatory standards.



The Corporation operates in many different businesses in diverse markets and places reliance on the ability of its employees and systems
to process a high number of transactions. In the event of a breakdown in the internal control systems, improper operation of systems or improper employee actions, the Corporation could suffer financial loss, face regulatory action and suffer damage
to its reputation. The Corporations framework for managing operational risk establishes a foundation on which to comprehensively and effectively identify, measure, mitigate, monitor and report operational risks.



The Corporation maintains systems of controls that provide
management with timely and accurate information about the operations of the Corporation. These systems have been designed to manage operational risk at appropriate levels given the Corporations financial strength, the environment in which it
operates, and considering factors such as competition and regulation. The Corporation has also established procedures that are designed to ensure that policies relating to conduct, ethics and business practices are followed on a uniform basis. In
certain cases, the Corporation has experienced losses from operational risk. Such losses have included the effects of operational errors that the Corporation has discovered and taken as charges in the income statement. While there can be no
assurance the Corporation will not suffer such losses in the future, management continually monitors and improves its internal controls, systems and corporate-wide processes and procedures. Furthermore, management believes the plans to streamline
the organization through charter consolidations and further systems integration and policies enacted to push down reporting accountabilities further in the organization, have improved the Corporations ability to identify and limit operational
risk.





62    BANK ONE 2002 ANNUAL REPORT



---



CREDIT PORTFOLIO COMPOSITION



Selected
Statistical Information



The significant components of credit
risk and the related ratios for the years indicated are as follows:



|December 31,                              |  | 2002 |         |   | 2001 |   |         | 2000 |  |   | 1999    |   |  | 1998 |        
|----------------------------------------- |  | ---- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | - |  | ---- | -------
|                                         
|(Dollars in millions)                     |  |      |         |   |      |   |         |      |  |   |         |   |  |      |        
|Loans outstanding                         |  | $    | 148,125 |   |      | $ | 156,733 |      |  | $ | 174,251 |   |  | $    | 163,877
|Average loans                             |  |      | 150,805 |   |      |   | 167,054 |      |  |   | 171,768 |   |  |      | 156,855
|Nonperforming loans(1)                    |  |      | 3,276   |   |      |   | 3,551   |      |  |   | 2,475   |   |  |      | 1,559  
|Other, including other real estate owned  |  |      | 251     |   |      |   | 137     |      |  |   | 98      |   |  |      | 106    
|                                         
|Nonperforming assets                      |  |      | 3,527   |   |      |   | 3,688   |      |  |   | 2,573   |   |  |      | 1,665  
|Allowance for credit losses               |  |      | 4,525   |   |      |   | 4,528   |      |  |   | 4,110   |   |  |      | 2,285  
|Net charge-offs                           |  |      | 2,465   |   |      |   | 2,288   |      |  |   | 1,391   |   |  |      | 1,206  
|Nonperforming assets to related assets(2) |  |      | 2.38    | % |      |   | 2.35    | %    |  |   | 1.48    | % |  |      | 1.02   
|Allowance to period end loans             |  |      | 3.20    |   |      |   | 2.97    |      |  |   | 2.42    |   |  |      | 1.42   
|Allowance to nonperforming loans          |  |      | 139     |   |      |   | 128     |      |  |   | 166     |   |  |      | 147    
|Net charge-offs to average loans          |  |      | 1.63    |   |      |   | 1.37    |      |  |   | 0.81    |   |  |      | 0.77   
|Allowance to net charge-offs              |  |      | 184     |   |      |   | 198     |      |  |   | 295     |   |  |      | 189    
|                                         

|(1) |  | Includes loans held for sale of $22 million for the year ended December 31, 2002. For December 31, 2001, 2000, 1999 and 1998 there were no nonperforming loans
included in loans held for sale. These amounts are not included in allowance coverage statistics.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | Related assets consist of loans outstanding, including loans held for sale and other real estate owned.
|--- |  | -------------------------------------------------------------------------------------------------------

|(3) |  | Includes $143 million of charge-offs required to bring the consumer portfolio into compliance with FFIEC guidelines. Excluding these incremental charge-offs, the
adjusted coverage ratio would have been 215%.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Loan Composition



In 2001, the Corporation
changed its loan composition methodology to a line of business approach, dividing the loan portfolio into Retail, Commercial Banking, Card Services, IMG and Corporate. The Corporation has presented 2000 information under both the old and
new compositions, but has not presented 1999 and 1998 under the new composition as it would be impractical to reclassify those periods using the new methodologies.



The Corporations loan portfolios at December 31 are as follows:



|                                        |  | 2002 |         |  | 2001    |   |  | 2000 |        
|--------------------------------------- |  | ---- | ------- |  | ------- | - |  | ---- | -------
|                                       
|(Dollars in millions)                   |  |      | Amount  |  | Percent |   |  |      | Amount 
|                                       
|Retail:                                 |  |      |         |  |         |   |  |      |        
|Small business commercial               |  | $    | 9,863   |  | 7       | % |  | $    | 9,947  
|Home equity                             |  |      | 28,469  |  | 19      |   |  |      | 25,143 
|Vehicle                                 |  |      | 14,012  |  | 9       |   |  |      | 13,481 
|Other personal                          |  |      | 8,491   |  | 6       |   |  |      | 9,779  
|                                       
|Core businesses                         |  |      | 60,835  |  | 41      |   |  |      | 58,350 
|Brokered home equity discontinued       |  |      | 3,242   |  | 2       |   |  |      | 5,125  
|Vehicle leases                          |  |      | 3,596   |  | 2       |   |  |      | 6,155  
|                                       
|Home equity discontinued/vehicle leases |  |      | 6,838   |  | 4       |   |  |      | 11,280 
|                                       
|Total Retail                            |  |      | 67,673  |  | 45      |   |  |      | 69,630 
|Commercial Banking:                     |  |      |         |  |         |   |  |      |        
|Corporate banking:                      |  |      |         |  |         |   |  |      |        
|Commercial and industrial               |  |      | 17,866  |  | 12      |   |  |      | 22,268 
|Commercial real estate                  |  |      | 8,321   |  | 6       |   |  |      | 8,975  
|Lease financing                         |  |      | 4,358   |  | 3       |   |  |      | 4,669  
|Other                                   |  |      | 1,014   |  |        |   |  |      | 731    
|                                       
|Total corporate banking                 |  |      | 31,559  |  | 21      |   |  |      | 36,643 
|                                       
|Middle market:                          |  |      |         |  |         |   |  |      |        
|Commercial and industrial               |  |      | 26,983  |  | 18      |   |  |      | 31,076 
|Commercial real estate                  |  |      | 2,318   |  | 2       |   |  |      | 3,472  
|Lease financing                         |  |      | 1,008   |  | 1       |   |  |      | 1,053  
|Other                                   |  |      | 27      |  |        |   |  |      | 294    
|                                       
|Total middle market                     |  |      | 30,336  |  | 21      |   |  |      | 35,895 
|                                       
|Total Commercial Banking                |  |      | 61,895  |  | 42      |   |  |      | 72,538 
|Card Services                           |  |      | 11,581  |  | 8       |   |  |      | 6,786  
|IMG and Corporate                       |  |      | 6,976   |  | 5       |   |  |      | 7,779  
|                                       
|Total                                   |  | $    | 148,125 |  | 100     | % |  | $    | 156,733
|                                       

|N/A |  | Not available due to changes in segment composition.
|--- |  | ----------------------------------------------------



BANK ONE 2002 ANNUAL REPORT    63



---



Loans held for
sale, which are classified as loans, are carried at lower of cost or fair value and totaled $6.9 billion, $4.2 billion and $4.2 billion at December 31, 2002, 2001 and 2000, respectively. At December 31, 2002, loans held for sale included Commercial
Banking loans of $235 million of which approximately $19 million were included in nonperforming loans, and Card Services and other consumer loans of $6.7 billion.



Prior to 2001, the Corporations loan portfolio was divided into commercial, consumer and credit card
loan categories as follows:



|                        |  | 2000   |         |         | 1999 |   |        | 1998 |        
|----------------------- |  | ------ | ------- | ------- | ---- | - | ------ | ---- | -------
|                       
|(Dollars in millions)   |  | Amount |         | Percent |      |   | Amount |      | Percent
|                       
|Commercial:             |  |        |         |         |      |   |        |      |        
|Domestic:               |  |        |         |         |      |   |        |      |        
|Commercial              |  | $      | 65,270  |         | 38   | % |        | $    | 59,070 
|Real estate:            |  |        |         |         |      |   |        |      |        
|Construction            |  |        | 5,757   |         | 3    |   |        |      | 5,836  
|Other                   |  |        | 16,778  |         | 10   |   |        |      | 18,817 
|Lease financing         |  |        | 5,818   |         | 3    |   |        |      | 5,562  
|Foreign                 |  |        | 6,837   |         | 4    |   |        |      | 7,067  
|                       
|Total commercial        |  |        | 100,460 |         | 58   |   |        |      | 96,352 
|                       
|Consumer:               |  |        |         |         |      |   |        |      |        
|Residential real estate |  |        | 40,596  |         | 23   |   |        |      | 32,313 
|Automotive-loans/leases |  |        | 20,741  |         | 12   |   |        |      | 23,567 
|Other                   |  |        | 7,710   |         | 4    |   |        |      | 7,608  
|                       
|Total consumer          |  |        | 69,047  |         | 39   |   |        |      | 63,488 
|Card Services           |  |        | 4,744   |         | 3    |   |        |      | 4,037  
|                       
|Total                   |  | $      | 174,251 |         | 100  | % |        | $    | 163,877
|                       



Managed Credit Card
Receivables



For analytical purposes, the Corporation
reports credit card receivables on both a reported basis and a managed basis. Reported credit card receivables include those receivables held in the portfolio and reported on the balance sheet. Managed credit card receivables include reported credit
card receivables, receivables sold to investors through securitization and retained interests (see page 74 for discussion of Loan Securitizations).



The following table shows the average managed credit card receivables and the related charge-off and delinquency rates for the years
ended:



|December 31,                                      |  | 2002 |        |   | 2001 |   |        | 2000 | 
|------------------------------------------------- |  | ---- | ------ | - | ---- | - | ------ | ---- | 
|                                                 
|(Dollars in millions)                             |  |      |        |   |      |   |        |      | 
|Average balances:                                 |  |      |        |   |      |   |        |      | 
|Credit card loans                                 |  | $    | 9,899  |   |      | $ | 6,884  |      | 
|Credit card receivables transferred to trusts     |  |      | 57,969 |   |      |   | 58,563 |      | 
|                                                 
|Total average managed credit card receivables     |  |      | 67,868 |   |      |   | 65,447 |      | 
|Total net charge-offs (including securitizations) |  | $    | 3,632  |   |      | $ | 3,823  |      | 
|                                                 
|Net charge-offs/average total receivables         |  |      | 5.35   | % |      |   | 5.84   | %    | 
|Card Services delinquency rate at period end:     |  |      |        |   |      |   |        |      | 
|30+ days                                          |  |      | 4.02   | % |      |   | 4.46   | %    | 
|90+ days                                          |  |      | 1.80   | % |      |   | 1.93   | %    | 
|                                                 



The
decrease in the managed net charge-off rate to 5.35% in 2002 from 5.84% in 2001 reflected managements continued emphasis on prudent credit risk management including disciplined underwriting and account management practices targeted to the
prime and super prime credit sectors. Nationally, consumers filed for bankruptcy in 2002 in much higher numbers than in any prior year. Credit risk management tools used to manage the level and volatility of losses for credit card accounts have been
continually updated, and, where appropriate, these tools were adjusted to reduce credit risk in 2002 and beyond. The managed credit card portfolio continues to reflect a well-seasoned portfolio that has good national geographic diversification.



Future charge-offs in the credit card portfolio
and overall credit quality are subject to uncertainties, which may cause actual results to differ from current and historic performance. This could include the direction and level of loan delinquencies, changes in consumer behavior, bankruptcy
trends, portfolio seasoning, interest rate movements, and portfolio mix, among other things. While current economic and credit data suggests that credit quality will not significantly deteriorate, significant deterioration in the general economy
could materially change these expectations.



64    BANK ONE 2002 ANNUAL REPORT



---



Retail



The retail loan portfolio primarily consists of loans secured by real estate
as well as vehicle loans and leases, and provides broad diversification of risk from both a product and geographic perspective. Average loan balances for 2002 were $67.7 billion. The Corporation continues to effectively enhance the composition of
loans in the portfolio by emphasizing loans to prime credit quality prospects. During 2002, the Corporation continued to de-emphasize vehicle leasing and significantly refocused its indirect real estate lending involving loans sourced through
brokers. New loans originated in 2002 on average reflect higher credit quality consistent with managements focus on the prime credit market segment. The net charge-off rate for retail loans in 2002, however, was 1.36%, an increase of 22 basis
points from 2001. The increase in part reflected higher loss severity on vehicle loans due to price weakness in the secondary market for used vehicles, increased consumer bankruptcies and higher losses from discontinued segments of the broker home
equity portfolio.



Future retail portfolio
charge-offs and credit quality are subject to uncertainties which may cause actual results to differ from current anticipated performance, including the direction and level of loan delinquencies, changes in consumer behavior, bankruptcy trends,
portfolio seasoning, interest rate movements and portfolio mix among other things.



The Corporation continues to proactively manage its retail credit operation even in difficult economic conditions. Ongoing efforts include continual review and enhancement of credit underwriting
criteria, rationalization of the number and quality of third-party loan originators (i.e., brokers and correspondents) and refinement of pricing and risk management models.



Commercial Banking



Commercial Banking loans decreased by $10.6 billion, or 15%, between December 31, 2001, and December 31, 2002, primarily due to a planned and managed
reduction of the corporate banking portfolio. Nonperforming Commercial Banking loans decreased by $253 million, or 12%, to $1.9 billion at December 31, 2002, as compared to $2.1 billion at December 31, 2001, primarily driven by improvement in
corporate banking. Commercial Bankings net charge-offs in 2002 were $994 million, or 1.51% of average loans, compared with $1.0 billion of net charge-offs, or 1.30% of average loans, in 2001.



Management believes that actions taken over the past two years
have led to an overall improvement in both the corporate banking and middle market credit portfolios. These actions, including the deliberate reductions in the loan portfolio, are essentially complete. The Corporation remains increasingly
comfortable with its ability to better control, manage and underwrite risk in a consistent and disciplined manner. In spite of this improvement, future charge-offs and credit quality in the Commercial Banking portfolio are subject to uncertainties
that may cause actual results to differ from historical experience or forecasted results, including the state of the economy and its impact on individual industries, commercial real estate values, interest rate movements and portfolio mix, among
other things.



Commercial and Industrial Loans



Commercial and industrial loans represent commercial loans
other than commercial real estate. At December 31, 2002, commercial and industrial loans totaled $44.8 billion, which represents 73% of the Commercial Banking portfolio.



The more significant industry concentrations of the Commercial Banking commercial and industrial portfolio
for the year ended December 31, 2002 are as follows:



|                                      |  | 2002       
|------------------------------------- |  | -----------
|                                     
|(Dollars in millions)                 |  | Outstanding
|                                     
|Motor vehicles and parts/auto related |  | $          
|Wholesale trade                       |  |            
|Oil and gas                           |  |            
|Industrial materials                  |  |            
|Business finance and leasing          |  |            
|Other(2)                              |  |            
|                                     
|Total                                 |  | $          
|                                     

|(1) |  | Total outstanding by industry concentration as a percentage of total commercial and industrial loans.
|--- |  | -----------------------------------------------------------------------------------------------------

|(2) |  | Presented for informational purposes and includes 36 industry concentrations including telephone, wireless and cable of $557 million (or 1.2% of the total
portfolio).
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------



Commercial Real Estate



Commercial real estate loans represent credit extended for
real estate-related purposes to borrowers or counterparties who are primarily in the real estate development or investment business and for which the primary source of repayment of the loan is from the sale, lease, rental, management, operations or
refinancing of the property.



Commercial real
estate lending is conducted in several lines of business with the majority of these loans originated by corporate banking primarily through its specialized National Commercial Real Estate Group. This groups focus is lending to targeted
regional and national real estate developers and homebuilders. As of December 31, 2002, National Commercial Real Estate Groups loan outstandings totaled $8.3 billion or 78% of the commercial real estate portfolio.



At December 31, 2002 and 2001, commercial real estate loans
totaled $10.6 billion and $12.4 billion, or 17% and 18% of Commercial Banking loans, respectively. During 2002 and 2001, net charge-offs in the commercial real estate portfolio segment were $46 million and $14 million, respectively. Nonperforming
commercial real estate assets, including other real estate owned, totaled $212 million, or 2.0% of related assets, at December 31, 2002. As of December 31, 2001, nonperforming commercial real estate assets, including other real estate owned, totaled
$199 million, or 1.6% of related assets.



BANK ONE 2002 ANNUAL REPORT    65



---

The commercial real estate loan portfolio by both collateral location and property type as
of December 31, 2002 are as follows:



|(Dollars in millions)                        |  | Outstanding |       
|-------------------------------------------- |  | ----------- | ------
|                                            
|By Collateral Location:                      |  | Amount      |       
|                                            
|Michigan                                     |  | $           | 1,118 
|California                                   |  |             | 1,109 
|Illinois                                     |  |             | 1,088 
|Ohio                                         |  |             | 848   
|Texas                                        |  |             | 824   
|Arizona                                      |  |             | 741   
|Louisiana                                    |  |             | 376   
|Kentucky                                     |  |             | 369   
|Indiana                                      |  |             | 363   
|Colorado                                     |  |             | 288   
|Other areas                                  |  |             | 1,563 
|Unsecured                                    |  |             | 1,341 
|Secured by other than commercial real estate |  |             | 611   
|                                            
|Total                                        |  | $           | 10,639
|                                            



|By Property Type:                         |  | Amount |        | Percent of Portfolio |    
|----------------------------------------- |  | ------ | ------ | -------------------- | ---
|                                         
|Apartment                                 |  | $      | 1,854  |                      | 17 
|Retail                                    |  |        | 1,762  |                      | 17 
|Office                                    |  |        | 1,738  |                      | 16 
|Industrial/warehouse                      |  |        | 1,161  |                      | 11 
|Single family residential development     |  |        | 1,137  |                      | 11 
|Hotels                                    |  |        | 560    |                      | 5  
|Residential lots                          |  |        | 543    |                      | 5  
|Miscellaneous commercial income producing |  |        | 1,758  |                      | 17 
|Miscellaneous residential developments    |  |        | 126    |                      | 1  
|                                         
|Total                                     |  | $      | 10,639 |                      | 100
|                                         



ASSET QUALITY



In 2001, the Corporation changed
its loan composition methodology to a line of business approach, dividing the loan portfolio into Retail, Commercial Banking, Card Services, and other lines of business. The Corporation has presented 2000 information under both the old
and new compositions, but has not presented 1999 and 1998 under the new composition as it would be impractical to reclassify those periods using the new methodologies.



Nonperforming Assets



The Corporation places loans on nonaccrual status as follows:



|· |  | Retail consumer loans are placed on nonaccrual status when the collection of contractual principal or interest becomes 90 days past due. Accrued but uncollected
interest and fee income are reversed and charged against interest income when the consumer loan is placed on nonaccrual status. Subsequent cash collections are recognized as interest income unless the consumer loan is subsequently charged-off, in
which case cash collections are recognized as recoveries.
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|· |  | Commercial Banking and Retail small business commercial loans are placed on nonaccrual status when the collection of contractual principal or interest is deemed
doubtful, or it becomes 90 days or more past due and is not both well-secured and in the process of collection. Accrued but uncollected interest and fee income are reversed and charged against interest income when placed on nonaccrual status. Cash
interest payments received are recognized either as interest income or as a reduction of principal when collection of principal is doubtful. The loan is returned to accrual status only when all of the principal and interest amounts contractually due
are reasonably assured within a reasonable time frame and when the borrower has demonstrated payment performance.
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|· |  | Credit card receivables are charged-off rather than placed on nonaccrual status.
|- |  | --------------------------------------------------------------------------------



The Corporations nonperforming assets for the years ended December 31 are as follows:



|(Dollars in millions)                                 |  | 2002 |       |   | 2001 |   |       | 2000 | 
|----------------------------------------------------- |  | ---- | ----- | - | ---- | - | ----- | ---- | 
|                                                     
|Nonperforming Loans:                                  |  |      |       |   |      |   |       |      | 
|Retail                                                |  | $    | 1,331 |   |      | $ | 1,344 |      | 
|Commercial Banking:                                   |  |      |       |   |      |   |       |      | 
|Corporate banking                                     |  |      | 873   |   |      |   | 1,154 |      | 
|Middle market banking                                 |  |      | 1,001 |   |      |   | 973   |      | 
|                                                     
|Total Commercial Banking                              |  |      | 1,874 |   |      |   | 2,127 |      | 
|IMG and Corporate                                     |  |      | 71    |   |      |   | 80    |      | 
|                                                     
|Total(1)
(2)                                          |  |      | 3,276 |   |      |   | 3,551 |      | 
|Other, including other real estate owned              |  |      | 251   |   |      |   | 137   |      | 
|                                                     
|Total nonperforming assets                            |  | $    | 3,527 |   |      | $ | 3,688 |      | 
|                                                     
|Nonperforming assets to related assets(3)             |  |      | 2.38  | % |      |   | 2.35  | %    | 
|Loans 90-days or more past due and accruing interest: |  |      |       |   |      |   |       |      | 
|Card Services                                         |  | $    | 160   |   |      | $ | 96    |      | 
|Other                                                 |  |      | 1     |   |      |   | 1     |      | 
|                                                     
|Total                                                 |  | $    | 161   |   |      | $ | 97    |      | 
|                                                     

|(1) |  | Nonperforming loans at December 31, 2002, include $22 million of loans held for sale. For December 31, 2001 and 2000, there were no nonperforming loans included in
held for sale.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | The amount of interest on nonperforming loans that was contractually due in 2002 totaled $281 million. Of this amount, $111 million was actually recorded in 2002.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) |  | Related assets consist of loans outstanding, including loans held for sale, and other real estate owned.
|--- |  | --------------------------------------------------------------------------------------------------------



66    BANK ONE 2002 ANNUAL REPORT



---



Prior to 2001,
the Corporations nonperforming assets as of December 31 were:



|(Dollars in millions)                                 |  | 2000 |       |   | 1999 |   |       | 1998 | 
|----------------------------------------------------- |  | ---- | ----- | - | ---- | - | ----- | ---- | 
|                                                     
|Nonperforming Loans:                                  |  |      |       |   |      |   |       |      | 
|Commercial                                            |  | $    | 1,761 |   |      | $ | 1,053 |      | 
|Consumer                                              |  |      | 714   |   |      |   | 506   |      | 
|                                                     
|Total                                                 |  |      | 2,475 |   |      |   | 1,559 |      | 
|Other, including other real estate owned              |  |      | 98    |   |      |   | 106   |      | 
|                                                     
|Total nonperforming assets                            |  | $    | 2,573 |   |      | $ | 1,665 |      | 
|                                                     
|Nonperforming assets to related assets(1)             |  |      | 1.48  | % |      |   | 1.02  | %    | 
|Loans 90-days or more past due and accruing interest: |  |      |       |   |      |   |       |      | 
|Card Services                                         |  | $    | 57    |   |      | $ | 76    |      | 
|Other                                                 |  |      | 5     |   |      |   | 50    |      | 
|                                                     
|Total                                                 |  | $    | 62    |   |      | $ | 126   |      | 
|                                                     

|(1) |  | Related assets consist of loans outstanding, including loans held for sale, and other real estate owned.
|--- |  | --------------------------------------------------------------------------------------------------------



Credit quality improved in 2002 as nonperforming assets
declined $161 million from the prior year. In Commercial Banking, nonperforming loans declined $253 million from the prior year. These declines are a result of risk management actions including: loan sales, distressed portfolio sales, and ongoing
review of individual credits. The Corporation has established processes for identifying potential problem areas of the portfolio, which currently include exposure to energy, auto-related, airlines and telecommunications. The Corporation will
continue to monitor and manage these potential risks, however, concerns remain due to the uncertain economic environment and the potential effect they may have on future credit quality.



Nonperforming loans within Retail at December 31, 2002, were $1.3 billion, a decrease of $13 million. This
decrease was primarily driven by discontinued segments of the brokered home equity business. Home equity loans are written down to net realizable value once a loan reaches 120 days delinquency. However, due to the time necessary to complete
foreclosure and acquire title, real estate loans remain in nonperforming status for an extended period.



Charge-offs



The Corporation records charge-offs as follows:



|· |  | Commercial loans are charged-off in the reporting period in which either an event occurs that confirms the existence of a loss or it is determined that a loan or a
portion of a loan is uncollectible.
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|· |  | A credit card loan is charged-off in the month it becomes contractually 180 days past due and remains unpaid at the end of that month, or 60 days after receipt of
bankruptcy notification. Interest on credit card loans is accrued until the loan is charged-off. All interest and fees on loans greater than 90 days delinquent are fully reserved for. At the time of charge-off, accrued but uncollected finance
charges and fee income are reversed and charged against interest income and credit card revenue, respectively. Subsequent cash collections are recorded as recoveries. Beginning in 2003, recoveries of previously reversed interest income related to
charged off loans are recorded as interest income.
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|· |  | Retail loans are generally charged-off following a delinquency period of 120 days, or within 60 days for unsecured Retail loans after receipt of notification in case
of bankruptcy. Closed-end consumer loans, such as auto loans and leases and home mortgage loans, are typically written down to the extent of loss after considering the net realizable value of the collateral.
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The timing and amount of the charge-off on consumer loans will
depend on the type of loan, giving consideration to available collateral, as well as the circumstances giving rise to the delinquency. The Corporation adheres to uniform guidelines published by the FFIEC in charging off consumer loans.



The Corporations net charge-offs for the years ended
December 31 are as follows:



|                         |  | 2002             |       |                 | 2001 |                      |  | 2000 |                 
|------------------------ |  | ---------------- | ----- | --------------- | ---- | -------------------- |  | ---- | ----------------
|                        
|(Dollars in millions)    |  | Net charge- offs |       | Average balance |      | Net charge- off rate |  |      | Net charge- offs
|                        
|Retail                   |  | $                | 919   |                 | $    | 67,671               |  | 1.36 | %               
|Commercial Banking:      |  |                  |       |                 |      |                      |  |      |                 
|Corporate banking        |  |                  | 639   |                 |      | 32,973               |  | 1.94 |                 
|Middle market banking    |  |                  | 355   |                 |      | 32,996               |  | 1.08 |                 
|                        
|Total Commercial Banking |  |                  | 994   |                 |      | 65,969               |  | 1.51 |                 
|Card Services            |  |                  | 514   |                 |      | 9,899                |  | 5.19 |                 
|IMG and Corporate        |  |                  | 38    |                 |      | 7,266                |  |     |                 
|                        
|Total                    |  | $                | 2,465 |                 | $    | 150,805              |  | 1.63 | %               
|                        



BANK ONE 2002 ANNUAL REPORT    67



---



Net charge-offs increased 8%
during 2002 to $2.5 billion from the prior year reflecting higher charge-offs in nearly all lines of business. The net charge-off rate increased to 1.63% in 2002 versus 1.37% in 2001.



Retail net charge-offs for 2002 totaled $919 million, up from $820 million in 2001. Several factors
contributed to these increased losses including: increased consumer bankruptcies; increased severity per default involving auto loans and leases tied to weaker market prices for repossessed vehicles; and high losses on discontinued brokered home
equity loans.



For a discussion of Commercial
Banking net charge-offs see Commercial Banking on page 65.



Card Services net charge-offs for 2002 totaled $514 million, up from $392 million primarily as a result of growth in the portfolio.



Loan Sales



A summary of the Corporations Commercial Banking loan sales, excluding syndications, and syndication-related activity and trade finance
transactions, for the years indicated are as follows:



|(In millions)                                                                                 |  | 2002 |       | 2001
|--------------------------------------------------------------------------------------------- |  | ---- | ----- | ----
|                                                                                             
|Loans sold and loans transferred to loans held for sale:(1)                                   |  |      |       |     
|Nonperforming loans                                                                           |  | $    | 508   |     
|Other loans with credit related losses                                                        |  |      | 670   |     
|Other loans                                                                                   |  |      | 852   |     
|                                                                                             
|Total                                                                                         |  | $    | 2,030 |     
|                                                                                             
|Impact of sales, transfers to loans held for sale and valuation adjustments on held for
sale: |  |      |       |     
|Charge-offs on loans sold and transferred to held for sale:                                   |  |      |       |     
|Nonperforming loans                                                                           |  | $    | 92    |     
|Other loans with credit related losses                                                        |  |      | 42    |     
|                                                                                             
|Total charge-offs to allowance                                                                |  |      | 134   |     
|Losses on loans sold and held for sale                                                        |  |      | 35    |     
|                                                                                             
|Total                                                                                         |  | $    | 169   |     
|                                                                                             

|(1) |  | December 31, 2002 data includes loans reclassified to loans held for sale that are not yet sold of approximately $19 million, $148 million and $68 million in
nonperforming loans, other loans with credit related losses and other loans, respectively.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The Corporation sells Commercial Banking loans in the normal course of its business activities as one alternative to manage credit risk.
These loans are subject to the Corporations overall risk management practices. When a loan is sold or transferred to held for sale, the gain or loss is evaluated to determine whether it resulted from credit deterioration or other conditions.
Based upon this evaluation, losses resulting from credit deterioration are recorded as charge-offs. Losses or gains deemed to be from other than credit deterioration are recorded as losses or gains on sale. Subsequent writedowns in fair value on
loans held for sale are reflected in other noninterest income.



Loans classified as held for sale are carried at the lower of cost or market value. Accordingly, these loans are no longer included in the evaluation of the adequacy of the allowance for credit losses.



ALLOWANCE FOR CREDIT LOSSES



The allowance for credit losses is maintained at a level that
in managements judgment is adequate to provide for estimated probable credit losses inherent in various on- and off-balance sheet financial instruments. This process includes deriving expected loss estimates that are based on historical loss
ratios, portfolio stress testing and managements judgment. The allowance is based on ranges of estimates and is intended to be adequate but not excessive. Each quarter, an allowance level is estimated by each line of business and reviewed by
corporate risk management and senior management. The allowance for credit losses also includes provisions for losses on loans considered impaired and measured pursuant to Statement of Financial Accounting Standards (SFAS) No. 114,
Accounting by Creditors for Impairment of a Loan, (see Note 8 Loans on page 92). Securitized loans and loans held for sale, including credit card receivables, are not subject to this process.



Corporate risk management recommends an allowance and
provision for credit losses that result in adequate coverage of inherent losses within the Corporations credit portfolios. Corporate risk managements assessment is based on line of business tests, portfolio-level modeling and stress
testing, as well as managements judgment. Corporate risk management also utilizes third-party benchmarks to validate internal measures of probability of default, loss given default, credit quality and allowance adequacy.





68    BANK ONE 2002 ANNUAL REPORT



---



The changes in
the Corporations allowance for credit losses for the years ended December 31 are as follows:



|(In millions)                           |  | 2002 |       |   | 2001 |   | 2000  | 
|--------------------------------------- |  | ---- | ----- | - | ---- | - | ----- | 
|                                       
|Balance, beginning of year              |  | $    | 4,528 |   |      | $ | 4,110 | 
|Charge-offs:                            |  |      |       |   |      |   |       | 
|Retail:                                 |  |      |       |   |      |   |       | 
|Small business commercial               |  |      | 105   |   |      |   | 92    | 
|Home equity                             |  |      | 292   |   |      |   | 230   | 
|Vehicle                                 |  |      | 288   |   |      |   | 220   | 
|Other personal                          |  |      | 135   |   |      |   | 151   | 
|                                       
|Core businesses                         |  |      | 820   |   |      |   | 693   | 
|Brokered home equity discontinued       |  |      | 162   |   |      |   | 172   | 
|Vehicle leases                          |  |      | 96    |   |      |   | 127   | 
|                                       
|Home equity discontinued/vehicle leases |  |      | 258   |   |      |   | 299   | 
|Total consumer                          |  |      | 973   |   |      |   | 900   | 
|                                       
|Total Retail                            |  |      | 1,078 |   |      |   | 992   | 
|                                       
|Commercial Banking:                     |  |      |       |   |      |   |       | 
|Corporate Banking:                      |  |      |       |   |      |   |       | 
|Commercial and industrial               |  |      | 541   |   |      |   | 689   | 
|Commercial real estate                  |  |      | 35    |   |      |   | 15    | 
|Lease financing                         |  |      | 135   |   |      |   | 16    | 
|                                       
|Total corporate banking                 |  |      | 711   |   |      |   | 720   | 
|Middle market:                          |  |      |       |   |      |   |       | 
|Commercial and industrial               |  |      | 377   |   |      |   | 418   | 
|Commercial real estate                  |  |      | 21    |   |      |   | 8     | 
|Lease financing                         |  |      | 30    |   |      |   | 36    | 
|                                       
|Total middle market                     |  |      | 428   |   |      |   | 462   | 
|                                       
|Total Commercial Banking                |  |      | 1,139 |   |      |   | 1,182 | 
|Card Services                           |  |      | 565   |   |      |   | 415   | 
|IMG and Corporate                       |  |      | 47    |   |      |   | 41    | 
|                                       
|Total charge-offs                       |  |      | 2,829 |   |      |   | 2,630 | 
|Recoveries:                             |  |      |       |   |      |   |       | 
|Retail:                                 |  |      |       |   |      |   |       | 
|Small business commercial               |  |      | 20    |   |      |   | 22    | 
|Home equity                             |  |      | 32    |   |      |   | 20    | 
|Vehicle                                 |  |      | 60    |   |      |   | 66    | 
|Other personal                          |  |      | 26    |   |      |   | 29    | 
|                                       
|Core businesses                         |  |      | 138   |   |      |   | 137   | 
|Brokered home equity discontinued       |  |      | 4     |   |      |   | 7     | 
|Vehicle leases                          |  |      | 17    |   |      |   | 28    | 
|                                       
|Home equity discontinued/vehicle leases |  |      | 21    |   |      |   | 35    | 
|Total consumer                          |  |      | 139   |   |      |   | 150   | 
|                                       
|Total Retail                            |  |      | 159   |   |      |   | 172   | 
|                                       
|Commercial Banking:                     |  |      |       |   |      |   |       | 
|Corporate banking:                      |  |      |       |   |      |   |       | 
|Commercial and industrial               |  |      | 66    |   |      |   | 74    | 
|Commercial real estate                  |  |      | 6     |   |      |   | 8     | 
|Lease financing                         |  |      |      |   |      |   |      | 
|                                       
|Total corporate banking                 |  |      | 72    |   |      |   | 82    | 
|Middle market:                          |  |      |       |   |      |   |       | 
|Commercial and industrial               |  |      | 65    |   |      |   | 49    | 
|Commercial real estate                  |  |      | 4     |   |      |   | 1     | 
|Lease financing                         |  |      | 4     |   |      |   | 8     | 
|                                       
|Total middle market                     |  |      | 73    |   |      |   | 58    | 
|                                       
|Total Commercial Banking                |  |      | 145   |   |      |   | 140   | 
|Card Services                           |  |      | 51    |   |      |   | 23    | 
|IMG and Corporate                       |  |      | 9     |   |      |   | 7     | 
|                                       
|Total recoveries                        |  |      | 364   |   |      |   | 342   | 
|                                       
|Net charge-offs:                        |  |      |       |   |      |   |       | 
|Retail                                  |  |      | 919   |   |      |   | 820   | 
|Commercial Banking                      |  |      | 994   |   |      |   | 1,042 | 
|Card Services                           |  |      | 514   |   |      |   | 392   | 
|IMG and Corporate                       |  |      | 38    |   |      |   | 34    | 
|                                       
|Total net charge-offs                   |  |      | 2,465 |   |      |   | 2,288 | 
|                                       
|Provision for credit losses             |  |      | 2,487 |   |      |   | 2,510 | 
|Transfers(1)                            |  |      | (25   | ) |      |   | 196   | 
|                                       
|Balance, end of year                    |  | $    | 4,525 |   |      | $ | 4,528 | 
|                                       

|N/A |  | Not available due to changes in segment composition.
|--- |  | ----------------------------------------------------

|(1) |  | Transfers to the allowance for credit losses in 2001 primarily represent the addition of the Wachovia credit card portfolio. Transfers from the allowance for credit
losses for 2000 primarily represent allocable credit allowances associated with consumer loan sale transactions, including securitization transactions.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



BANK ONE 2002 ANNUAL REPORT    69



---



For analytical
purposes, using the previous methodology for portfolio segmentation, summarized below are the changes in the allowance for credit loss for the years ended December 31:



|(In millions)               |  | 2000 |       |   | 1999 |   |       | 1998 | 
|--------------------------- |  | ---- | ----- | - | ---- | - | ----- | ---- | 
|                           
|Balance, beginning of year  |  | $    | 2,285 |   |      | $ | 2,271 |      | 
|Charge-offs:                |  |      |       |   |      |   |       |      | 
|Commercial:                 |  |      |       |   |      |   |       |      | 
|Domestic:                   |  |      |       |   |      |   |       |      | 
|Commercial                  |  |      | 618   |   |      |   | 325   |      | 
|Real estate:                |  |      |       |   |      |   |       |      | 
|Construction                |  |      | 8     |   |      |   | 5     |      | 
|Other                       |  |      | 11    |   |      |   | 27    |      | 
|Lease financing             |  |      | 7     |   |      |   | 12    |      | 
|Foreign                     |  |      | 64    |   |      |   | 41    |      | 
|                           
|Total commercial            |  |      | 708   |   |      |   | 410   |      | 
|Consumer:                   |  |      |       |   |      |   |       |      | 
|Residential real estate     |  |      | 230   |   |      |   | 189   |      | 
|Automotive:                 |  |      |       |   |      |   |       |      | 
|Loans                       |  |      | 215   |   |      |   | 256   |      | 
|Leases                      |  |      | 91    |   |      |   | 87    |      | 
|Other                       |  |      | 162   |   |      |   | 203   |      | 
|                           
|Total consumer              |  |      | 698   |   |      |   | 735   |      | 
|Card Services               |  |      | 261   |   |      |   | 386   |      | 
|                           
|Total charge-offs           |  |      | 1,667 |   |      |   | 1,531 |      | 
|Recoveries:                 |  |      |       |   |      |   |       |      | 
|Commercial:                 |  |      |       |   |      |   |       |      | 
|Domestic:                   |  |      |       |   |      |   |       |      | 
|Commercial                  |  |      | 98    |   |      |   | 70    |      | 
|Real estate:                |  |      |       |   |      |   |       |      | 
|Construction                |  |      | 1     |   |      |   | 6     |      | 
|Other                       |  |      | 4     |   |      |   | 25    |      | 
|Lease financing             |  |      | 1     |   |      |   | 2     |      | 
|Foreign                     |  |      | 7     |   |      |   | 1     |      | 
|                           
|Total commercial            |  |      | 111   |   |      |   | 104   |      | 
|Consumer:                   |  |      |       |   |      |   |       |      | 
|Residential real estate     |  |      | 17    |   |      |   | 12    |      | 
|Automotive:                 |  |      |       |   |      |   |       |      | 
|Loans                       |  |      | 69    |   |      |   | 82    |      | 
|Leases                      |  |      | 21    |   |      |   | 23    |      | 
|Other                       |  |      | 44    |   |      |   | 60    |      | 
|                           
|Total consumer              |  |      | 151   |   |      |   | 177   |      | 
|Card Services               |  |      | 14    |   |      |   | 44    |      | 
|                           
|Total recoveries            |  |      | 276   |   |      |   | 325   |      | 
|Net charge-offs:            |  |      |       |   |      |   |       |      | 
|Commerical                  |  |      | 597   |   |      |   | 306   |      | 
|Consumer                    |  |      | 547   |   |      |   | 558   |      | 
|Card Services               |  |      | 247   |   |      |   | 342   |      | 
|                           
|Total net charge-offs       |  |      | 1,391 |   |      |   | 1,206 |      | 
|                           
|Provision for credit losses |  |      | 3,398 |   |      |   | 1,249 |      | 
|Transfers(1)                |  |      | (182  | ) |      |   | (29   | )    | 
|                           
|Balance, end of year        |  | $    | 4,110 |   |      | $ | 2,285 |      | 
|                           

|(1) |  | Transfers from the allowance for credit losses primarily represent allocable credit allowances associated with consumer loan sale transactions, including
securitization transactions.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





70    BANK ONE 2002 ANNUAL REPORT



---



Composition of Allowance
for Credit Losses



While the allowance for
credit losses is available to absorb credit losses in the entire portfolio, allocations of the allowance for credit losses by line of business as of December 31 are as follows:



|                         |  | 2002   |       |         | 2001 |   |        | 2000 |        
|------------------------ |  | ------ | ----- | ------- | ---- | - | ------ | ---- | -------
|                        
|(Dollars in millions)    |  | Amount |       | Percent |      |   | Amount |      | Percent
|                        
|Retail                   |  | $      | 1,018 |         | 22   | % |        | $    | 1,027  
|Commercial Banking:      |  |        |       |         |      |   |        |      |        
|Corporate banking        |  |        | 1,706 |         | 38   |   |        |      | 1,714  
|Middle market            |  |        | 1,365 |         | 30   |   |        |      | 1,365  
|                        
|Total Commercial Banking |  |        | 3,071 |         | 68   |   |        |      | 3,079  
|Card Services            |  |        | 396   |         | 9    |   |        |      | 396    
|IMG and Corporate        |  |        | 40    |         | 1    |   |        |      | 26     
|                        
|Total                    |  | $      | 4,525 |         | 100  | % |        | $    | 4,528  
|                        



For
analytical purposes using the previous methodology for portfolio segmentation, an allocation of the allowance for credit losses by loan type as of December 31 follows:



|                      |  | 2000   |       |         | 1999 |   |        | 1998 |        
|--------------------- |  | ------ | ----- | ------- | ---- | - | ------ | ---- | -------
|                     
|(Dollars in millions) |  | Amount |       | Percent |      |   | Amount |      | Percent
|                     
|Commercial(1)         |  | $      | 3,199 |         | 78   | % |        | $    | 972    
|Consumer              |  |        | 714   |         | 17   |   |        |      | 486    
|Card Services         |  |        | 197   |         | 5    |   |        |      | 148    
|Unallocated           |  |        |      |         |     |   |        |      | 679    
|                     
|Total                 |  | $      | 4,110 |         | 100  | % |        | $    | 2,285  
|                     

|(1) |  | Includes allowance related to Business and Community Banking loans, which are included in the Retail business segment results.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------



Components of Allowance for Credit Losses



The Corporation determines allowance levels based upon the
probable losses in the credit portfolios. Several methodologies are employed for estimating probable losses. A detailed discussion of the process is presented beginning on page 57.



The table below presents the components of the probable loss estimate as of December 31:



|(In millions)  |  | 2002 |       | 2001
|-------------- |  | ---- | ----- | ----
|              
|Asset specific |  | $    | 678   |     
|Expected loss  |  |      | 2,810 |     
|Stress         |  |      | 1,037 |     
|              
|Total(1)       |  | $    | 4,525 |     
|              

|(1) |  | The underlying assumptions, estimates and assessments made by management to determine the components of the allowance for credit losses are continually evaluated by
management and updated to reflect managements judgments regarding economic conditions and various relevant factors impacting credit quality and inherent losses.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The December 31, 2002 allowance for credit losses remained relatively unchanged; however, due to decreases in
nonperforming loans and asset levels, coverage ratios improved. The allowance for credit losses at December 31, 2002 represented 3.20% of period-end loans and 139% of nonperforming loans, compared to 2.97% and 128%, respectively, at December 31,
2001. The asset-specific and expected loss components of the allowance for credit losses decreased from prior year reflecting some improvement in credit quality. However, this was offset by an increase in the stress component of the allowance for
credit losses reflecting managements ongoing assessment and outlook of the probable losses inherent in the portfolio resulting from the overall economic environment. The allowance for credit losses established for specifically identified
off-balance sheet lending exposures was not material at December 31, 2002.



As a result of significant deterioration in certain components of the commercial loan portfolio, the allowance for credit losses was increased to $4.1 billion at December 31, 2000. The majority of the
increase in the allowance occurred in the fourth quarter of 2000 as the Corporation identified an increase in the losses inherent in the portfolio not yet realized. During 2001, increases in both charge-offs and nonperforming loans occurred as net
charge-offs increased from $1.4 billion in 2000 to $2.3 billion in 2001, and nonperforming loans increased from $2.5 billion at December 31, 2000 to $3.6 billion at December 31, 2001. While credit deterioration occurred during 2000, necessitating
the increase in the allowance for credit losses, its impact on delinquencies and charge-offs on the commercial loan portfolio was realized in subsequent periods. While the calculated coverage ratios for 2001 declined in comparison to 2000, the
decline was a result of the lagging nature of charge-offs.



Portfolio Stress-Tests



Stress testing is
performed on all significant portfolios to simulate the effect of economic deterioration on credit performance. Stress testing the portfolios provides management with a range of loss estimates that incorporates the Corporations historical loss
experience and the reserve impact of events that have occurred, but that have not been reflected in either the historical expected loss factors or the currently assigned risk ratings.



Stress testing of the commercial portfolio is accomplished using a framework developed to test expected
default factors and loss given default estimates and to test the effect of downgrades to exposures in identified high-risk industries. This process includes: establishing a base case scenario using three alternative market probability sets and an
estimated loss given default probability to measure the impact on reserves; determining the effect of apply-



BANK ONE 2002 ANNUAL REPORT    71



---

ing a higher loss given default probability to the base case to take into consideration the variability of
historical loss rates over the business cycle; and estimating trend-based reserves in high-risk industries that may not be fully reflected in the historically based loss factors, using market-based tools and information as well as sanctioned
macroeconomic forecasts.



Stress testing the
consumer portfolios, including credit card, is accomplished in part by analyzing the 5-year historical loss experience for each major product segment. Management analyzes the range of credit loss experienced for each major portfolio segment taking
into account economic cycles, portfolio seasoning, underwriting criteria, and then formulates a stress test range that incorporates relevant risk factors that can impact overall credit performance.



DERIVATIVE FINANCIAL INSTRUMENTS



In the normal course of business, the Corporation uses a
variety of derivative financial instruments in its trading activity and asset and liability management, and to a lesser extent, in its mortgage operations and to manage certain currency translation exposures of foreign entities.



Effective January 1, 2001, the Corporation adopted SFAS No.
133, Accounting for Derivative Instruments and Hedging Activities (SFAS No. 133), as amended. This standard significantly changed the accounting treatment for interest rate and foreign exchange derivatives the Corporation
uses in its derivative activity. As required by SFAS No. 133, all derivative instruments are carried at fair value irrespective of the purpose for entering into the contracts (i.e., trading, hedging, etc). Purchased option contracts are reported in
derivative product assets, and written option contracts are reported in derivative product liabilities. For other derivative financial instruments, unrealized gains are reported in derivative product assets, and unrealized losses are 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 in the statement of cash flows.



Trading Derivative Instruments



Derivative financial instruments used in trading activities include swaps, forwards, futures, options, and other conditional or exchange contracts in the interest rate, foreign exchange, equity and commodity markets. The
estimated fair values are based on quoted market prices or valuation models using current market information. Realized and unrealized gains and losses, including any interest income or expense on derivative instruments, are recorded in noninterest
income as trading.



The Corporation uses credit
derivatives (primarily single name credit default swaps) and short bond positions, as protection against the deterioration of credit quality on commercial loans and loan commitments. The change in fair value of credit derivative instruments is
included in trading results in the Corporations financial statements, while any credit assessment change in the identified commercial credit exposure is reflected as a change in the allocated credit reserves. At December 31, 2002, the notional
amount of credit derivatives economically hedging commercial credit exposure totaled $7.3 billion, and related trading income was $42 million.



Asset and Liability Management Hedging Derivative Instruments



Derivatives are an integral component of the Corporations asset/liability management activities and associated
management of interest rate risk. In general, the assets and liabilities generated through the ordinary course of business activities do not naturally create offsetting positions with respect to repricing, basis or maturity characteristics. Using
derivative instruments, principally plain vanilla interest rate swaps (ALM swaps), interest rate sensitivity is adjusted to maintain the desired interest rate risk profile. Interest rate swaps used to adjust the interest rate sensitivity of certain
interest-bearing assets and liabilities will not need to be replaced at maturity, since the corresponding asset or liability will mature along with the interest rate swap.



Derivative financial instruments used in hedging activities are designated as fair value hedges, cash flow
hedges, or hedges of net investments in foreign operations, and are required to meet specific criteria. The instruments used in fair value hedges and cash flow hedges are principally interest rate swaps. Such interest rate swaps are designated as a
hedge, and adjust effectively the interest rate sensitivity of specific assets and liabilities. Interest rate swaps not designated as a qualified hedge are treated as trading derivative instruments.



Interest rate swaps designated as an interest rate related
hedge of an existing fixed rate asset or liability are fair value type hedges. Conversely, interest rate swaps designated as an interest rate hedge of an existing variable rate asset or liability are cash flow type hedges. The risk characteristics
of the item being hedged generally determine the type of hedge for accounting purposes. Maximizing hedge effectiveness is the primary consideration in choosing the specific asset, liability or forecasted transaction to be hedged.



Fair Value Hedges



Fair value hedges primarily represent hedges of fixed rate interest-bearing
instruments. The change in fair value of both the hedging derivative and hedged item is recorded in current earnings. If a hedge is dedesignated prior to maturity, previous adjustments to the carrying value of the hedged item are recognized in
earnings to match the earnings recognition pattern of the hedged item (e.g., level yield amortization if hedging an interest-bearing instrument that has not been sold or extinguished).



72    BANK ONE 2002 ANNUAL REPORT



---



Cash Flow Hedges



Cash flow hedges primarily represent hedges of variable
rate interest-bearing instruments. The effective portion of the change in fair value of the hedging derivative is recorded in Accumulated Other Adjustments to Stockholders Equity (AOASE), which is reclassified into earnings in a
manner consistent with the earnings pattern of the underlying hedged instrument or transaction. At December 31, 2002, the total amount of such reclassification into earnings is projected to be a decrease in net interest income of $323 million
after-tax ($510 million pre-tax) over the next twelve months. This decrease, along with the contractual interest on the underlying variable rate debt, achieves the overall intended result of converting the variable rate to a specified fixed rate and
is included in our analysis of interest rate exposure. These projections involve the use of currently forecasted interest rates over the next twelve months. These rates, and the resulting reclassifications into earnings, are subject to change. The
maximum length of time is 27 months for which exposure to the variability of future cash flows for forecasted transactions is hedged. No events occurred in 2002 that impacted earnings from the discontinuance of cash flow hedges due to the
determination that a forecasted transaction is no longer likely to occur.



Interest income or expense on most hedging derivatives used to manage interest rate exposure is recorded on an accrual basis as an adjustment to the yield of the designated hedged 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, with interest recorded on an accrual basis. If all or part of a designated hedged position is terminated (e.g., a
hedged asset is sold or prepaid), or if the amount of an anticipated transaction is likely to be less than originally expected, then the related pro rata portion of any unrecognized gain or loss on the derivative is recognized in earnings at that
time, and the related pro rata portion of the derivative is subsequently accounted for as a trading instrument.



Hedges entered into by the Corporation are regularly monitored to verify that the hedge continues to be effective in offsetting changes in
fair value or cash flows of the risk being hedged. In the event that hedges cease to be effective, hedge accounting is discontinued. Amounts previously recognized as adjustments to the carrying value of the hedged item (in a fair value hedge), and
accumulated in AOASE (in a cash flow hedge) are subsequently recognized in earnings when the previously hedged item affects earnings.



The amount of hedge ineffectiveness recognized for cash flow and fair value hedges for the twelve months ended December 31, 2002 and 2001,
was a gain of $2 million and $14 million, respectively, recognized in noninterest income. No component of a hedging derivative instruments gain or loss is excluded from the assessment of hedge effectiveness. The Corporation has no
non-derivative instruments designated as a hedge.



Asset and
Liability Management Swaps 

Maturities and Rates



The notional amounts, maturity, and weighted-average pay and receive rates for the ALM swap position at
December 31, 2002, are summarized as follows:



|(Dollars in millions)                |  | 2003 |       |   | 2004 |   |       | 2005 |  |   | 2006  |   |  | 2007 |       |   | Thereafter |   |       | Total | 
|------------------------------------ |  | ---- | ----- | - | ---- | - | ----- | ---- |  | - | ----- | - |  | ---- | ----- | - | ---------- | - | ----- | ----- | 
|                                    
|Receive fixed/pay floating swaps:(1) |  |      |       |   |      |   |       |      |  |   |       |   |  |      |       |   |            |   |       |       | 
|Notional amount                      |  | $    | 225   |   |      | $ |      |      |  | $ |      |   |  | $    |      |   |            | $ |      |       | 
|Weighted average:                    |  |      |       |   |      |   |       |      |  |   |       |   |  |      |       |   |            |   |       |       | 
|Receive rate                         |  |      | 3.13  | % |      |   |      | %    |  |   |      | % |  |      |      | % |            |   |      | %     | 
|Pay rate                             |  |      | 1.43  |   |      |   |      |      |  |   |      |   |  |      |      |   |            |   |      |       | 
|Pay fixed/receive floating swaps:(1) |  |      |       |   |      |   |       |      |  |   |       |   |  |      |       |   |            |   |       |       | 
|Notional amount                      |  | $    | 1,310 |   |      | $ | 2,970 |      |  | $ | 9,582 |   |  | $    | 2,895 |   |            | $ | 1,821 |       | 
|Weighted average:                    |  |      |       |   |      |   |       |      |  |   |       |   |  |      |       |   |            |   |       |       | 
|Receive rate                         |  |      | 1.67  | % |      |   | 1.63  | %    |  |   | 1.36  | % |  |      | 1.46  | % |            |   | 1.53  | %     | 
|Pay rate                             |  |      | 6.93  |   |      |   | 3.67  |      |  |   | 4.19  |   |  |      | 4.77  |   |            |   | 3.69  |       | 
|                                    
|Total notional amount                |  | $    | 1,535 |   |      | $ | 2,970 |      |  | $ | 9,582 |   |  | $    | 2,895 |   |            | $ | 1,821 |       | 
|                                    

|(1) |  | Variable interest rates  which generally are the one-month, three-month and six-month London interbank offered rates (LIBOR) in effect on the date
of repricing.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------



Mortgage Banking Hedging Activity



The Corporation uses derivatives, primarily mortgage backed
security forward sale agreements, to hedge exposure to changes in interest rates in its mortgage loan origination and sale activity. Changes in fair value of mortgage loan interest rate lock commitments granted to customers and the related
derivative contracts used to economically hedge this exposure are recorded in other noninterest income. In contrast, fair value hedge accounting, as described above, is used to account for the derivatives entered into to hedge the 15 and 30 year
closed loan warehouse that is held for sale. Changes in fair value of derivatives used to economically hedge the adjustable rate closed loan warehouse are also recorded in other noninterest income.



Hedges of Non-U.S Dollar Net Investment in Foreign Operations



In order to minimize the capital impact of translation
gains or losses measured on an after-tax basis, the Corporation uses forward foreign exchange contracts to hedge the exposure relating to non-U.S. dollar net investments in foreign operations. The effective portion of the change in fair value of the
hedging derivatives is recorded in AOASE as part of the cumulative translation adjustment. The amount of after-tax gains included in the cumulative translation adjustment during the years ended December 31, 2002 and 2001, related to hedges of the
foreign currency exposures of net investments in foreign operations, totaled $9 million and $6 million, respectively.



BANK ONE 2002 ANNUAL REPORT    73



---



Credit Exposure Resulting
from Derivative Financial Instruments



The credit risk
associated with exchange-traded derivative financial instruments is limited to the relevant clearinghouse. Written options do not expose the Corporation to credit risk, except to the extent of the underlying risk in a financial instrument that the
Corporation may be obligated to acquire under certain written put options. Written caps and floors do not expose the Corporation to credit risk.



Credit exposure from derivative financial instruments arises from the risk of a counterparty default on the derivative contract. The
amount of loss created by the default is the replacement cost or current positive fair value of the defaulted contract. The Corporation utilizes master netting agreements whenever possible to reduce its credit exposure from counterparty defaults.
These agreements allow the netting of contracts with unrealized losses against contracts with unrealized gains to the same counterparty, in the event of a counterparty default.



The impact of these master netting agreements at December 31 follows:



|(In millions)                                     |  | 2002 |        | 2001
|------------------------------------------------- |  | ---- | ------ | ----
|                                                 
|Gross replacement cost                            |  | $    | 22,066 |     
|Less: Adjustment due to master netting agreements |  |      | 17,793 |     
|                                                 
|Balance sheet credit exposure                     |  | $    | 4,273  |     
|                                                 



LOAN SECURITIZATIONS AND OFF-BALANCE SHEET ACTIVITIES



Loan Securitizations



The Corporation
transforms loans into securities that are sold to investors through the process of securitization. The Corporation primarily securitizes credit card receivables and home equity loans and consumer assets. In a credit card securitization, a designated
pool of credit card receivables is removed from the balance sheet and transferred to a QSPE, that in turn sells securities to investors entitling them to receive specified cash flows during the life of the security. The proceeds from the issuance of
securities are then distributed by the QSPE to the Corporation as consideration for the loans transferred. Following a securitization, the Corporation receives fees for servicing the receivables and any excess finance charges, yield-related and
other fees, and interchange revenue on the receivables over and above the interest paid to the investors, net credit losses and servicing fees (collectively termed the excess spread). At the date of sale an interest-only strip is
recorded on the balance sheet representing the estimated discounted excess spread earned on the assets sold over the life of underlying receivables.



The Corporations continued involvement in the securitized assets includes the process of managing and servicing the transferred
receivables, as well as maintaining an undivided, pro rata interest in all credit card receivables that have been securitized, referred to as sellers interest, which is generally equal to the pool of assets included in the securitization less
the investors portion of those assets. The Corporations sellers interest ranks pari-passu with the investors interests in the trusts. As the amount of the loans in the securitized pool fluctuates due to customer payments,
purchases, cash advances, and credit losses, the carrying amount of the sellers interest will vary. However, the sellers interest is required to be maintained at a minimum level to ensure receivables are available for allocation to the
investors interest. This minimum level is generally between 4% and 7% of the QSPEs principal receivables. The Corporations credit card sellers interests were in aggregate 45% and 38% of the QSPEs principal receivables at December
31, 2002, and 2001, respectively. Average credit card sellers interests were approximately 40% and 30% of the QSPEs average principal receivables for the years ended December 31, 2002, and 2001, respectively.



Investors in the beneficial interests of the securitized loans
have no recourse against the Corporation if cash flows generated from the securitized loans are inadequate to service the obligations of the QSPE. To help ensure that adequate funds are available in the event of a shortfall, the Corporation is
required to deposit funds into cash spread accounts if excess spread falls below certain minimum levels. Spread accounts are funded from excess spread that would normally be returned to the Corporation. In addition, various forms of other credit
enhancements are provided to protect more senior investor interests from loss. Credit enhancements associated with credit card securitizations, such as cash collateral or spread accounts, totaled $145 million and $165 million at December 31, 2002,
and 2001, respectively, and are classified on the balance sheet as other assets at amounts approximating fair value.



74    BANK ONE 2002 ANNUAL REPORT



---



The following
comprised the Corporations managed credit card loans at December 31:



|(In millions)                                                          |  | 2002 |        | 2001
|---------------------------------------------------------------------- |  | ---- | ------ | ----
|                                                                      
|Owned credit card loans  held in portfolio                            |  | $    | 7,592  |     
|Owned credit card loans  held for future securitization               |  |      | 3,989  |     
|Sellers interest in credit card loans and accrued interest
receivable |  |      | 28,526 |     
|                                                                      
|Total credit card loans reflected on balance sheet                     |  |      | 40,107 |     
|Securities sold to investors and removed from balance sheet            |  |      | 33,889 |     
|                                                                      
|Managed credit card loans                                              |  | $    | 73,996 |     
|                                                                      



Off-Balance Sheet
Activities



In the normal course of business, the
Corporation is a party to a number of activities that contain credit, market and operational risk that are not reflected in whole or in part in the Corporations consolidated financial statements. Such activities include: traditional
off-balance sheet credit-related financial instruments; commitments under capital and operating leases and long-term debt; credit enhancement and liquidity facilities associated with the commercial paper conduit program; joint venture activities;
and other contractual obligations.



Credit-Related Financial
Instruments



The Corporation provides customers with
off-balance sheet credit support through loan commitments, standby letters of credit and guarantees, as well as commercial letters of credit. Summarized credit-related financial instruments at December 31, 2002, are as follows:



|                                                        |  | Amount of Commitment Expiration Per Period
|------------------------------------------------------- |  | ------------------------------------------
|                                                       
|(In billions)                                           |  | Total                                     
|                                                       
|Unused credit card lines                                |  | $                                         
|Unused loan commitments                                 |  |                                           
|Standby letters of credit and foreign office guarantees |  |                                           
|Commercial letters of credit                            |  |                                           
|                                                       



Since
many of the unused commitments are expected to expire unused or be only partially used, the total amount of unused commitments in the preceding table does not necessarily represent future cash requirements.



Lease Commitments, Long-Term Debt and Other



The Corporation has entered into a number of long-term leasing arrangements
of banking facilities to support the ongoing activities of the Corporation. The required payments under such commitments and long-term debt at December 31, 2002 are as follows:



|(In millions)                            |  | 2003 |       | 2004 |   | 2005  |  | 2006 |       | 2007 |   | 2008 and After |  | Total
|---------------------------------------- |  | ---- | ----- | ---- | - | ----- |  | ---- | ----- | ---- | - | -------------- |  | -----
|                                        
|Long-term debt, including capital leases |  | $    | 7,846 |      | $ | 6,291 |  | $    | 6,622 |      | $ | 6,896          |  | $    
|Trust preferred capital securities       |  |      |      |      |   |      |  |      |      |      |   |               |  |      
|Operating leases                         |  |      | 239   |      |   | 228   |  |      | 205   |      |   | 187            |  |      
|                                        
|Total                                    |  | $    | 8,085 |      | $ | 6,519 |  | $    | 6,827 |      | $ | 7,083          |  | $    
|                                        



Asset Backed Finance
Programs



The Corporation is an active participant in the
asset-backed securities business where it helps meet customers financing needs by providing access to the commercial paper markets through special purpose entities, known as multi-seller conduits. These entities are separate bankruptcy-remote
corporations in the business of purchasing interests in, and making loans secured by, receivable pools and other financial assets pursuant to agreements with customers. The entities fund their purchases and loans through the issuance of highly rated
commercial paper. The primary source of repayment of the commercial paper is the cash flow from the pools of assets. Investors in the commercial paper have no recourse to the general assets of the Corporation. Customers benefit from such structured
financing transactions as these transactions provide an ongoing source of asset liquidity, access to the capital markets, and a potentially favorable cost of financing.



As of December 31, 2002, the Corporation administered multi-seller conduits with a total program limit of
$70.0 billion and with $39.3 billion in commercial paper outstanding. The multi-seller conduits were rated A-1 by S & P, P-1 by Moodys and F1 or higher by Fitch.



BANK ONE 2002 ANNUAL REPORT    75



---



These
multi-seller conduits are a type of variable interest entity (VIE), as defined by Financial Accounting Standards Board (FASB) Interpretation No. 46, Consolidation of Variable Interest Entities (FIN No.
46). From the Corporations perspective, these entities have historically met all of the requirements to be treated as independent entities, which have not been required to be consolidated. See pages 8788 for additional discussion.
Each of the multi-seller conduits administered by the Corporation has stand-alone financial statements, which are independently audited on an annual basis.



As administrator of the multi-seller conduits, the Corporation provides deal origination services, asset portfolio monitoring, treasury
and financial administration services for these entities. The Corporation structures financing transactions for customers such that the receivables and other financial instruments financed through the multi-seller conduits are appropriately
diversified and credit enhanced to support the conduits commercial paper issuances. The Corporation does not service these assets and does not transfer its own receivables or other financial instruments into the multi-seller conduits it
administers. Each conduit has program documents and investment policies, which govern the types of assets and structures permitted by the conduit. The mix of assets is principally trade receivables, auto loans and leases and credit card receivables.
Under the program document, one conduit has publicly rated marketable investment securities.



The commercial paper issued by the conduits is supported by deal specific credit enhancement, which is generally structured to cover more than the expected losses on the pool of assets. The deal
specific credit enhancement is typically in the form of overcollateralization, but may also include any combination of the following: recourse to the seller or originator, cash collateral accounts, letters of credit, excess spread, retention of
subordinated interests or third-party guarantees. In a limited number of cases, the Corporation provides the deal specific credit enhancement as a financial arrangement for the customer. As of December 31, 2002 and 2001, the Corporation provided
such deal specific credit enhancement to customers in the form of subordinated interests totaling $203 million and $132 million, respectively. These subordinated interest positions are included in loans on the Corporations balance sheet.



In general, the commercial paper investors have
access to a second loss credit protection in the form of program-wide credit enhancement. The program-wide credit enhancement consists of a subordinated term loan from the Corporation and a surety bond from an AAA rated monoline insurance company.
The subordinated term loans from the Corporation to these entities totaled $1.0 billion and $1.1 billion as of December 31, 2002 and 2001, respectively. However, one conduit has only deal specific credit enhancements provided by other financial
institutions.



As a means of ensuring timely
repayment of the commercial paper, each asset pool financed by the conduits has a minimum of 100% deal specific liquidity facility associated with it. In the unlikely event of a disruption in the commercial paper market or in the event an asset pool
is removed from the conduit, the administrator can draw on the liquidity facility to repay the maturing commercial paper. The liquidity facilities are typically in the form of asset purchase agreements and are generally structured such that the bank
liquidity provider is purchasing, or lending against, a pool of non-defaulted, performing assets. Additionally, programwide liquidity facilities and lines of credit are provided by the Corporation to the multi-seller conduits to facilitate access to
the commercial paper markets.



The following
table summarizes the total amount of deal specific and programwide liquidity facilities, as well as the share of these facilities provided by the Corporation, for each of the multi-seller conduits as of December 31, 2002 and 2001:



|                            |  | 2002                     |      |                                                | 2001 |        
|--------------------------- |  | ------------------------ | ---- | ---------------------------------------------- | ---- | -------
|                           
|(Dollars in billions)       |  | Total Liquidity Facility |      | Liquidity Facility provided by the Corporation |      | Percent
|                           
|Total multi-seller conduits |  | $                        | 50.6 |                                                | $    | 41.3   
|                           



76    BANK ONE 2002 ANNUAL REPORT



---



The
Corporation also provides deal specific and program-wide liquidity facilities to conduits administered by other financial institutions totaling approximately $6.3 billion and $2.1 billion as of December 31, 2002 and 2001, respectively.



With the January 2003 issuance of FIN No. 46, the Corporation
is currently in the process of evaluating what entities will be required to be consolidated. The Corporation believes it is reasonably possible that the multi-seller conduits and an investment vehicle as currently structured, for which it is the
administrator will be consolidated. Investors in the multi-seller conduits have no recourse to the general assets of the Corporation.



Based on information as of December 31, 2002, the expected impact of FIN No. 46 to the Corporations balance sheet would be to
increase both assets and liabilities by approximately $42.8 billion for the multi-seller conduits and an investment vehicle. Management has estimated its maximum loss exposure to be $130 million. Based on capital ratios as of December 31, 2002,
consolidation of these entities would affect regulatory risk-based capital by reducing the Tier 1 risked-based capital ratio from 9.9% to 8.6% and total risked-based capital ratio from 13.7% to 12.1%. The Corporations actual capital ratios as
of the date of adoption will depend on the actual level of risk based capital, which is subject to change from that of December 31, 2002.



Principal Investments and Joint Ventures



In the normal course of business, the Corporation invests in principal investments, comprised of indirect investments in private equity, venture capital,
and other equity and debt assets. The investment strategy for the portfolio, primarily executed by One Equity Partners (a wholly-owned consolidated subsidiary), is to focus on direct investments in high potential entities. Investments made in the
past year include stakes in Howaldtswekre-Deutsche Werft (HDW), the global leader in the design and manufacture of non-nuclear submarines, and Polaroid, a leader in the instant imaging industry. Commitments to fund such investments at December 31,
2002 totaled $1.1 billion.



Beginning January 1,
2002, Paymentech, Inc. and Anexsys, LLC were consolidated. At December 31, 2002, the Corporation is not party to any material joint venture arrangements which are not consolidated.



Loans Sold with Recourse



The Corporation occasionally sells or securitizes loans with limited recourse. The amount of outstanding loans sold with recourse totaled $4.7 billion and
$8.3 billion at December 31, 2002, and 2001, respectively. The recourse provisions require the Corporation to repurchase loans at par plus accrued interest upon a credit-related triggering event. Exposure to credit losses from these arrangements has
been reduced with the purchase of credit insurance contracts that cover the majority of expected losses.



CAPITAL MANAGEMENT



The capital position of the Corporation is managed to achieve managements external debt rating objectives, comply with regulatory requirements and
reflect the underlying risks of the Corporations business activities. The Corporation employs an economic capital framework (described further on page 79) to facilitate a standard measure of risk and return across all business units, as well
as to provide a measure of capital adequacy consistent with internal risk evaluation practices. This serves as the basis for capital planning and related management activities.



BANK ONE 2002 ANNUAL REPORT    77



---



Selected Capital Ratios



The Corporation aims to maintain regulatory capital ratios,
including those of the principal banking subsidiaries, in excess of the well-capitalized guidelines under federal banking regulations. The Corporation maintains a well-capitalized regulatory position.



The Corporations capital ratios are as follows:



|                                                |  | 2002 |   |  | 2001 |   |  | 2000 |   |  | 1999 |   |  | 1998 |   |  | Well- Capitalized Regulatory Guidelines |  
|----------------------------------------------- |  | ---- | - |  | ---- | - |  | ---- | - |  | ---- | - |  | ---- | - |  | --------------------------------------- | -
|                                               
|Risk-based capital ratios:                      |  |      |   |  |      |   |  |      |   |  |      |   |  |      |   |  |                                         |  
|Tier 1                                          |  | 9.9  | % |  | 8.6  | % |  | 7.3  | % |  | 7.7  | % |  | 7.9  | % |  | 6.0                                     | %
|Total                                           |  | 13.7 |   |  | 12.2 |   |  | 10.8 |   |  | 10.7 |   |  | 11.3 |   |  | 10.0                                    |  
|Leverage ratio(1)                               |  | 8.9  |   |  | 8.2  |   |  | 7.3  |   |  | 7.7  |   |  | 8.0  |   |  | N/A                                     |  
|Common equity/assets                            |  | 8.1  |   |  | 7.5  |   |  | 6.8  |   |  | 7.4  |   |  | 7.8  |   |  |                                        |  
|Tangible common equity/tangible reported assets |  | 7.2  |   |  | 6.8  |   |  | 6.3  |   |  | 6.6  |   |  | 6.8  |   |  |                                        |  
|Tangible common equity/tangible managed assets  |  | 6.4  |   |  | 5.9  |   |  | 5.5  |   |  | 5.7  |   |  | 5.8  |   |  |                                        |  
|Double leverage ratio                           |  | 103  |   |  | 103  |   |  | 108  |   |  | 112  |   |  | 108  |   |  |                                        |  
|Dividend payout ratio                           |  | 30   |   |  | 38   |   |  | N/M  |   |  | 57   |   |  | 58   |   |  |                                        |  
|                                               

|N/A |  | Not applicable
|--- |  | --------------

|(1) |  | The minimum regulatory guideline is 3%.
|--- |  | ---------------------------------------



The components of the Corporations regulatory risk-based capital and risk-weighted assets are as follows at December 31:



|(In millions)                  |  | 2002 |         | 2001 |   | 2000    |  | 1999 |         | 1998
|------------------------------ |  | ---- | ------- | ---- | - | ------- |  | ---- | ------- | ----
|                              
|Regulatory risk-based capital: |  |      |         |      |   |         |  |      |         |     
|Tier 1 capital                 |  | $    | 23,918  |      | $ | 21,749  |  | $    | 19,824  |     
|Tier 2 capital                 |  |      | 9,201   |      |   | 9,091   |  |      | 9,316   |     
|                              
|Total capital                  |  |      | 33,119  |      |   | 30,840  |  |      | 29,140  |     
|                              
|Total risk-weighted assets     |  | $    | 241,468 |      | $ | 253,330 |  | $    | 270,182 |     
|                              



In
deriving Tier 1 and total capital, goodwill and other nonqualifying intangible assets are deducted as indicated for the years ended December 31:



|(In millions)                   |  | 2002 |       | 2001 |   | 2000  |  | 1999 |       | 1998
|------------------------------- |  | ---- | ----- | ---- | - | ----- |  | ---- | ----- | ----
|                               
|Goodwill                        |  | $    | 1,882 |      | $ | 1,560 |  | $    | 858   |     
|Other nonqualifying intangibles |  |      | 256   |      |   | 207   |  |      | 375   |     
|                               
|Subtotal                        |  |      | 2,138 |      |   | 1,767 |  |      | 1,233 |     
|Qualifying intangibles          |  |      | 415   |      |   | 414   |  |      | 214   |     
|                               
|Total intangibles               |  | $    | 2,553 |      | $ | 2,181 |  | $    | 1,447 |     
|                               



See page
77 for a discussion of the possible impact of consolidation of certain multi-seller conduits to the Corporations risk-based capital ratios under FIN No. 46.



78    BANK ONE 2002 ANNUAL REPORT



---



Dividend Policy



The Corporations common stock dividend policy reflects
its earnings outlook, desired payout ratios, the need to maintain an adequate capital level, and alternative investment opportunities. The common stock dividend payout ratio is currently targeted in the range of 25%  30% of earnings over time.
Common stock dividends declared for 2002 and 2001 were $0.84 per share. On January 21, 2003, the Corporation declared its quarterly common cash dividend of $0.21 per share, payable on April 1, 2003.



Double Leverage



Double leverage is the extent to which the Corporations resources are
used to finance investments in subsidiaries. Double leverage was 103% at December 31, 2002, and 2001. Trust Preferred Capital Securities of $3.3 billion in 2002 and 2001 were included in capital for purposes of this calculation.



Stock Repurchase Program and Other Capital Activities



On July 16, 2002, the Corporations Board of Directors approved the
repurchase of up to $2 billion of the Corporations common stock, replacing the two previous buyback programs announced in September 2001 and May 1999. The timing of the purchases and the exact number of shares to be repurchased will depend on
market conditions. The share repurchase program does not include specific price targets or timetables and may be suspended at any time. In 2002, the Corporation purchased 16 million shares of common stock at an average price of $37.54 per share.
There remains available $1.6 billion of common stock that may be repurchased under the Board authorization.



On November 1, 2001, the Corporation redeemed all outstanding preferred stock with cumulative and adjustable dividends, Series B and C,
totaling $190 million. The redemption price for both of the Series B and C preferred stock was $100.00 per share, plus accrued and unpaid dividends totaling $1.00 per share and $1.083 per share, respectively.



During 2001, the Corporation added to its Tier 1 capital
through the sponsorship of two trusts that issued $825 million in aggregate principal amount of trust preferred securities.



During 2001 the Corporation strengthened its capital position through the issuance of $750 million of subordinated debt.



Economic Capital



An important aspect of risk management and performance measurement is the
ability to evaluate the risk and return of a business unit, product or customer consistently across all lines of business. The Corporations economic capital framework facilitates this standard measure of risk and return. Business units are
assigned capital consistent with the underlying risks of their product set, customer base and delivery channels.



The following principles are inherent in the capital allocation methodology employed:



|· |  | An equal amount of capital is assigned for each measured unit of risk.
|- |  | ----------------------------------------------------------------------



|· |  | Risk is defined in terms of unexpected losses over the life of the exposure, measured at a confidence interval consistent with that level of
capitalization necessary to achieve a targeted AA solvency standard. Unexpected losses are in excess of those normally incurred and for which reserves are maintained.
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|· |  | Business units are assessed a uniform charge against allotted capital, representing a target hurdle rate on equity investments. Returns on capital in excess of the
hurdle rate contribute to increases in shareholder value.
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Four forms of risk are measured  credit, market, operational and lease residual. Credit risk capital is determined through an analysis of both historical loss experience and market expectations. Market risk capital is
set consistent with value-at-risk limits established by the Corporations risk oversight committees. Operational risk capital incorporates event and technology risks. The operational risk evaluation process involves an examination of various
risk factors that contribute to a greater likelihood of loss due to such things as fraud or processing error. Finally, lease residual risk capital covers the potential for losses arising from the disposition of assets returned at the end of lease
contracts. This price risk is analyzed based upon historical loss experiences and market factors, as well as by reviewing event-specific scenarios.



The economic capital process provides a valuable analytical tool that is critical to the understanding of business segment performance
trends. The methodologies employed are subject to ongoing development and review. Over time, the Corporations view of individual risks and associated capital will likely change given improvements in the Corporations ability to quantify
risks inherent in various business activities.



FORWARD-LOOKING STATEMENTS



This discussion of
financial results contains forward-looking statements about the Corporation, including descriptions of plans or objectives of its management for future operations, products or services, and forecasts of its revenues, earnings or other measures of
economic performance. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. They often include the words believe, expect, anticipate,
intend, plan, estimate or words of similar meaning, or future or conditional verbs such as will, would, should, could or may.



Forward-looking statements, by their nature, are subject to
risks and uncertainties. A number of factors  many of which are beyond the Corporations control  could cause actual conditions, events or results to differ significantly from those described in the forward-looking statements. Some
of these factors include certain credit, market, operational, liquidity and interest rate risks associated with the Corporations business and operations. Other factors described in the Corporations Form 10-K include changes in business
and economic conditions, competition, fiscal and monetary policies and legislation.



Forward-looking statements speak only as of the date they are made. The Corporation does not undertake to update forward-looking statements to reflect circumstances or events that occur after the date
the forward-looking statements are made or to reflect the occurrence of unanticipated events, such as further market deterioration that adversely affects credit quality, auto lease residuals and credit card asset values.



BANK ONE 2002 ANNUAL REPORT    79



---



CONSOLIDATED
BALANCE SHEETS

BANK ONE CORPORATION and Subsidiaries



|At December 31,                                                                        |  | 2002 |         |   | 2001 |  
|-------------------------------------------------------------------------------------- |  | ---- | ------- | - | ---- | -
|                                                                                      
|(Dollars in millions)                                                                  |  |      |         |   |      |  
|Assets                                                                                 |  |      |         |   |      |  
|Cash and due from banks                                                                |  | $    | 17,920  |   |      | $
|Interest-bearing due from banks                                                        |  |      | 1,503   |   |      |  
|Federal funds sold and securities purchased under resale agreements                    |  |      | 17,356  |   |      |  
|Trading assets                                                                         |  |      | 7,190   |   |      |  
|Derivative product assets                                                              |  |      | 4,273   |   |      |  
|Investment securities                                                                  |  |      | 67,643  |   |      |  
|Loans(1)                                                                               |  |      | 148,125 |   |      |  
|Allowance for credit losses                                                            |  |      | (4,525  | ) |      |  
|                                                                                      
|Loans, net                                                                             |  |      | 143,600 |   |      |  
|Other assets                                                                           |  |      | 17,898  |   |      |  
|                                                                                      
|Total assets                                                                           |  | $    | 277,383 |   |      | $
|                                                                                      
|Liabilities                                                                            |  |      |         |   |      |  
|Deposits:                                                                              |  |      |         |   |      |  
|Demand                                                                                 |  | $    | 34,325  |   |      | $
|Savings                                                                                |  |      | 88,934  |   |      |  
|Time:                                                                                  |  |      |         |   |      |  
|Under $100,000                                                                         |  |      | 16,767  |   |      |  
|$100,000 and over                                                                      |  |      | 13,745  |   |      |  
|Foreign offices                                                                        |  |      | 16,237  |   |      |  
|                                                                                      
|Total deposits                                                                         |  |      | 170,008 |   |      |  
|Federal funds purchased and securities sold under repurchase agreements                |  |      | 14,578  |   |      |  
|Other short-term borrowings                                                            |  |      | 12,306  |   |      |  
|Long-term debt                                                                         |  |      | 39,919  |   |      |  
|Guaranteed preferred beneficial interest in the Corporations junior subordinated
debt |  |      | 3,315   |   |      |  
|Derivative product liabilities                                                         |  |      | 3,838   |   |      |  
|Other liabilities                                                                      |  |      | 10,979  |   |      |  
|                                                                                      
|Total liabilities                                                                      |  |      | 254,943 |   |      |  
|Stockholders Equity                                                                   |  |      |         |   |      |  
|Common stock ($0.01 par value; authorized 4,000,000,000; issued
1,181,382,304)         |  |      | 12      |   |      |  
|Surplus                                                                                |  |      | 10,239  |   |      |  
|Retained earnings                                                                      |  |      | 13,020  |   |      |  
|Accumulated other adjustments to stockholders equity                                  |  |      | (8      | ) |      |  
|Deferred compensation                                                                  |  |      | (157    | ) |      |  
|Treasury stock, at cost (17,340,948 and 14,415,873 shares, respectively)               |  |      | (666    | ) |      |  
|                                                                                      
|Total stockholders equity                                                             |  |      | 22,440  |   |      |  
|                                                                                      
|Total liabilities and stockholders equity                                             |  | $    | 277,383 |   |      | $
|                                                                                      

|(1) |  | Includes loans held for sale of $6.9 billion and $4.2 billion at December 31, 2002 and 2001, respectively.
|--- |  | ----------------------------------------------------------------------------------------------------------



The accompanying notes are an integral part
of this statement.



80    BANK ONE 2002 ANNUAL REPORT



---



CONSOLIDATED
INCOME STATEMENTS

BANK ONE CORPORATION and Subsidiaries



|For The Year Ended December 31,                                                                     |  | 2002 |        |   | 2001 |   |        | 2000 | 
|--------------------------------------------------------------------------------------------------- |  | ---- | ------ | - | ---- | - | ------ | ---- | 
|                                                                                                   
|(In millions, except per share data)                                                                |  |      |        |   |      |   |        |      | 
|Net Interest Income:                                                                                |  |      |        |   |      |   |        |      | 
|Interest income                                                                                     |  | $    | 13,935 |   |      | $ | 17,304 |      | 
|Interest expense                                                                                    |  |      | 5,340  |   |      |   | 8,666  |      | 
|                                                                                                   
|Total net interest income                                                                           |  |      | 8,595  |   |      |   | 8,638  |      | 
|                                                                                                   
|Noninterest Income:                                                                                 |  |      |        |   |      |   |        |      | 
|Banking fees and commissions                                                                        |  |      | 1,775  |   |      |   | 1,731  |      | 
|Credit card revenue                                                                                 |  |      | 3,816  |   |      |   | 2,775  |      | 
|Service charges on deposits                                                                         |  |      | 1,578  |   |      |   | 1,449  |      | 
|Fiduciary and investment management fees                                                            |  |      | 740    |   |      |   | 754    |      | 
|Investment securities gains (losses)                                                                |  |      | 165    |   |      |   | (66    | )    | 
|Trading                                                                                             |  |      | 224    |   |      |   | 220    |      | 
|Other income (losses)                                                                               |  |      | (62    | ) |      |   | 360    |      | 
|                                                                                                   
|Total noninterest income                                                                            |  |      | 8,236  |   |      |   | 7,223  |      | 
|                                                                                                   
|Total revenue, net of interest expense                                                              |  |      | 16,831 |   |      |   | 15,861 |      | 
|Provision for credit losses                                                                         |  |      | 2,487  |   |      |   | 2,510  |      | 
|                                                                                                   
|Noninterest Expense:                                                                                |  |      |        |   |      |   |        |      | 
|Salaries and employee benefits                                                                      |  |      | 4,465  |   |      |   | 4,198  |      | 
|Occupancy                                                                                           |  |      | 645    |   |      |   | 686    |      | 
|Equipment                                                                                           |  |      | 426    |   |      |   | 457    |      | 
|Outside service fees and processing                                                                 |  |      | 1,303  |   |      |   | 1,178  |      | 
|Marketing and development                                                                           |  |      | 1,054  |   |      |   | 862    |      | 
|Telecommunication                                                                                   |  |      | 365    |   |      |   | 407    |      | 
|Other intangible amortization                                                                       |  |      | 125    |   |      |   | 97     |      | 
|Goodwill amortization                                                                               |  |      |       |   |      |   | 69     |      | 
|Other expense                                                                                       |  |      | 1,261  |   |      |   | 1,246  |      | 
|                                                                                                   
|Total noninterest expense before merger and restructuring-related charges
(reversals)               |  |      | 9,644  |   |      |   | 9,200  |      | 
|                                                                                                   
|Merger and restructuring-related charges (reversals)                                                |  |      | (63    | ) |      |   | 351    |      | 
|                                                                                                   
|Total noninterest expense                                                                           |  |      | 9,581  |   |      |   | 9,551  |      | 
|                                                                                                   
|Income (loss) before income taxes (benefit) and cumulative effect of change in
accounting principle |  |      | 4,763  |   |      |   | 3,800  |      | 
|Applicable income taxes (benefit)                                                                   |  |      | 1,468  |   |      |   | 1,118  |      | 
|                                                                                                   
|Income (loss) before cumulative effect of change in accounting
principle                            |  |      | 3,295  |   |      |   | 2,682  |      | 
|Cumulative effect of change in accounting principle, net of taxes of
($25)                          |  |      |       |   |      |   | (44    | )    | 
|                                                                                                   
|Net income (loss)                                                                                   |  | $    | 3,295  |   |      | $ | 2,638  |      | 
|                                                                                                   
|Net income (loss) attributable to common stockholders
equity                                       |  |      | 3,295  |   |      |   | 2,628  |      | 
|                                                                                                   
|Earnings (loss) per share before cumulative effect of change in accounting
principle:               |  |      |        |   |      |   |        |      | 
|Basic                                                                                               |  | $    | 2.83   |   |      | $ | 2.28   |      | 
|Diluted                                                                                             |  |      | 2.80   |   |      |   | 2.28   |      | 
|                                                                                                   
|Earnings (loss) per share:                                                                          |  |      |        |   |      |   |        |      | 
|Basic                                                                                               |  | $    | 2.83   |   |      | $ | 2.25   |      | 
|Diluted                                                                                             |  |      | 2.80   |   |      |   | 2.24   |      | 
|                                                                                                   



The accompanying notes are an integral part of this statement.



BANK ONE 2002 ANNUAL REPORT    81



---



CONSOLIDATED
STATEMENTS OF STOCKHOLDERS EQUITY

BANK ONE CORPORATION and Subsidiaries



|(In millions)                                                                   |  | Preferred Stock |      |   | Common Stock |   | Surplus |  |   | Retained Earnings |   |  | Accumulated Other Adjustments to Stockholders Equity |        |   | Deferred Compensation |   |      | Treasury Stock |  |   | Total Stockholders Equity |  
|------------------------------------------------------------------------------- |  | --------------- | ---- | - | ------------ | - | ------- |  | - | ----------------- | - |  | ----------------------------------------------------- | ------ | - | --------------------- | - | ---- | -------------- |  | - | -------------------------- | -
|                                                                               
|Balance-December 31, 1999                                                       |  | $               | 190  |   |              | $ | 12      |  | $ | 10,799            |   |  | $                                                     | 11,037 |   |                       | $ | (263 | )              |  | $ | (118                       | )
|                                                                               
|Net loss                                                                        |  |                 |      |   |              |   |         |  |   |                   |   |  |                                                       | (511   | ) |                       |   |      |                |  |   |                            |  
|Change in fair value, investment securities-available for sale, net of
taxes    |  |                 |      |   |              |   |         |  |   |                   |   |  |                                                       |        |   |                       |   | 256  |                |  |   |                            |  
|Translation gain, net of hedge results and taxes                                |  |                 |      |   |              |   |         |  |   |                   |   |  |                                                       |        |   |                       |   | 2    |                |  |   |                            |  
|                                                                                |  |                 |      |   |              |   |         |  |   |                   |   |  |                                                       |        |   |                       |   |      |                |  |   |                            |  
|Net loss and changes in accumulated other adjustments to stockholders
equity   |  |                 |      |   |              |   |         |  |   |                   |   |  |                                                       | (511   | ) |                       |   | 258  |                |  |   |                            |  
|Cash dividends declared:                                                        |  |                 |      |   |              |   |         |  |   |                   |   |  |                                                       |        |   |                       |   |      |                |  |   |                            |  
|Common stock                                                                    |  |                 |      |   |              |   |         |  |   |                   |   |  |                                                       | (1,454 | ) |                       |   |      |                |  |   |                            |  
|Preferred stock                                                                 |  |                 |      |   |              |   |         |  |   |                   |   |  |                                                       | (12    | ) |                       |   |      |                |  |   |                            |  
|Net issuance of common stock                                                    |  |                 |      |   |              |   |         |  |   | (302              | ) |  |                                                       |        |   |                       |   |      |                |  |   |                            |  
|Purchase of common stock                                                        |  |                 |      |   |              |   |         |  |   |                   |   |  |                                                       |        |   |                       |   |      |                |  |   |                            |  
|Restricted stock awards granted, net of forfeitures and amortization            |  |                 |      |   |              |   |         |  |   |                   |   |  |                                                       |        |   |                       |   |      |                |  |   | (34                        | )
|Other                                                                           |  |                 |      |   |              |   |         |  |   | (10               | ) |  |                                                       |        |   |                       |   |      |                |  |   | 31                         |  
|                                                                               
|Balance-December 31, 2000                                                       |  | $               | 190  |   |              | $ | 12      |  | $ | 10,487            |   |  | $                                                     | 9,060  |   |                       | $ | (5   | )              |  | $ | (121                       | )
|                                                                               
|Net income                                                                      |  |                 |      |   |              |   |         |  |   |                   |   |  |                                                       | 2,638  |   |                       |   |      |                |  |   |                            |  
|Change in fair value, investment securities-available for sale, net of
taxes    |  |                 |      |   |              |   |         |  |   |                   |   |  |                                                       |        |   |                       |   | 93   |                |  |   |                            |  
|Change in fair value of cash-flow hedge derivative securities, net of
taxes     |  |                 |      |   |              |   |         |  |   |                   |   |  |                                                       |        |   |                       |   | (146 | )              |  |   |                            |  
|Translation loss, net of hedge results and taxes                                |  |                 |      |   |              |   |         |  |   |                   |   |  |                                                       |        |   |                       |   | (7   | )              |  |   |                            |  
|                                                                                |  |                 |      |   |              |   |         |  |   |                   |   |  |                                                       |        |   |                       |   |      |                |  |   |                            |  
|Net income and changes in accumulated other adjustments to stockholders
equity |  |                 |      |   |              |   |         |  |   |                   |   |  |                                                       | 2,638  |   |                       |   | (60  | )              |  |   |                            |  
|Cash dividends declared:                                                        |  |                 |      |   |              |   |         |  |   |                   |   |  |                                                       |        |   |                       |   |      |                |  |   |                            |  
|Common stock                                                                    |  |                 |      |   |              |   |         |  |   |                   |   |  |                                                       | (981   | ) |                       |   |      |                |  |   |                            |  
|Preferred stock                                                                 |  |                 |      |   |              |   |         |  |   |                   |   |  |                                                       | (10    | ) |                       |   |      |                |  |   |                            |  
|Net issuance of common stock                                                    |  |                 |      |   |              |   |         |  |   | (179              | ) |  |                                                       |        |   |                       |   |      |                |  |   |                            |  
|Redemption of stock                                                             |  |                 | (190 | ) |              |   |         |  |   |                   |   |  |                                                       |        |   |                       |   |      |                |  |   |                            |  
|Purchase of common stock                                                        |  |                 |      |   |              |   |         |  |   |                   |   |  |                                                       |        |   |                       |   |      |                |  |   |                            |  
|Other                                                                           |  |                 |      |   |              |   |         |  |   | 3                 |   |  |                                                       |        |   |                       |   |      |                |  |   |                            |  
|                                                                               
|Balance-December 31, 2001                                                       |  | $               |     |   |              | $ | 12      |  | $ | 10,311            |   |  | $                                                     | 10,707 |   |                       | $ | (65  | )              |  | $ | (121                       | )
|                                                                               
|Net income                                                                      |  |                 |      |   |              |   |         |  |   |                   |   |  |                                                       | 3,295  |   |                       |   |      |                |  |   |                            |  
|Change in fair value, investment securities-available for sale, net of
taxes    |  |                 |      |   |              |   |         |  |   |                   |   |  |                                                       |        |   |                       |   | 474  |                |  |   |                            |  
|Change in fair value of cash-flow hedge derivative securities, net of
taxes     |  |                 |      |   |              |   |         |  |   |                   |   |  |                                                       |        |   |                       |   | (414 | )              |  |   |                            |  
|Translation loss, net of hedge results and taxes                                |  |                 |      |   |              |   |         |  |   |                   |   |  |                                                       |        |   |                       |   | (3   | )              |  |   |                            |  
|                                                                                |  |                 |      |   |              |   |         |  |   |                   |   |  |                                                       |        |   |                       |   |      |                |  |   |                            |  
|Net income and changes in accumulated other adjustments to stockholders
equity |  |                 |      |   |              |   |         |  |   |                   |   |  |                                                       | 3,295  |   |                       |   | 57   |                |  |   |                            |  
|Common stock cash dividends declared                                            |  |                 |      |   |              |   |         |  |   |                   |   |  |                                                       | (982   | ) |                       |   |      |                |  |   |                            |  
|Net issuance of common stock                                                    |  |                 |      |   |              |   |         |  |   | (134              | ) |  |                                                       |        |   |                       |   |      |                |  |   |                            |  
|Restricted stock awards granted, net of forfeitures and amortization            |  |                 |      |   |              |   |         |  |   |                   |   |  |                                                       |        |   |                       |   |      |                |  |   | (36                        | )
|Stock option grants                                                             |  |                 |      |   |              |   |         |  |   | 45                |   |  |                                                       |        |   |                       |   |      |                |  |   |                            |  
|Other                                                                           |  |                 |      |   |              |   |         |  |   | 17                |   |  |                                                       |        |   |                       |   |      |                |  |   |                            |  
|                                                                               
|Balance-December 31, 2002                                                       |  | $               |     |   |              | $ | 12      |  | $ | 10,239            |   |  | $                                                     | 13,020 |   |                       | $ | (8   | )              |  | $ | (157                       | )
|                                                                               

The accompanying notes are an integral part of this statement.



82    BANK ONE 2002 ANNUAL REPORT



---



CONSOLIDATED
STATEMENTS OF CASH FLOWS

BANK ONE CORPORATION and Subsidiaries



|For The Year Ended December 31,                                                                    |  | 2002 |         |   | 2001 |   |         | 2000 | 
|-------------------------------------------------------------------------------------------------- |  | ---- | ------- | - | ---- | - | ------- | ---- | 
|                                                                                                  
|(In millions)                                                                                      |  |      |         |   |      |   |         |      | 
|Cash Flows from Operating Activities:                                                              |  |      |         |   |      |   |         |      | 
|Net income (loss)                                                                                  |  | $    | 3,295   |   |      | $ | 2,638   |      | 
|Adjustments to reconcile net income (loss) to net cash provided by operating
activities:           |  |      |         |   |      |   |         |      | 
|Depreciation and amortization                                                                      |  |      | 524     |   |      |   | 571     |      | 
|Cumulative effect of accounting change                                                             |  |      |        |   |      |   | 69      |      | 
|Provision for credit losses                                                                        |  |      | 2,487   |   |      |   | 2,510   |      | 
|Investment securities (gains) losses, net                                                          |  |      | (165    | ) |      |   | 66      |      | 
|Net increase in net derivative product assets and liabilities                                      |  |      | (504    | ) |      |   | (198    | )    | 
|Net (increase) decrease in trading assets                                                          |  |      | (1,021  | ) |      |   | (3,456  | )    | 
|Net decrease (increase) in other assets                                                            |  |      | 1,229   |   |      |   | 213     |      | 
|Net (decrease) increase in other liabilities                                                       |  |      | (867    | ) |      |   | 375     |      | 
|Merger-related and restructuring (reversals) charges                                               |  |      | (63     | ) |      |   | 351     |      | 
|Other operating adjustments                                                                        |  |      | 523     |   |      |   | (764    | )    | 
|                                                                                                  
|Net cash provided by operating activities                                                          |  |      | 5,438   |   |      |   | 2,375   |      | 
|                                                                                                  
|Cash Flows from Investing Activities:                                                              |  |      |         |   |      |   |         |      | 
|Net (increase) decrease in federal funds sold and securities purchased under resale
agreements     |  |      | (8,010  | ) |      |   | (4,610  | )    | 
|Securities available for sale:                                                                     |  |      |         |   |      |   |         |      | 
|Purchases                                                                                          |  |      | (57,304 | ) |      |   | (56,088 | )    | 
|Maturities                                                                                         |  |      | 7,193   |   |      |   | 23,579  |      | 
|Sales                                                                                              |  |      | 48,340  |   |      |   | 23,393  |      | 
|Credit card receivables securitized                                                                |  |      | 6,775   |   |      |   | 3,845   |      | 
|Net (increase) decrease in loans                                                                   |  |      | (4,677  | ) |      |   | 13,425  |      | 
|Purchase of Wachovia credit card business                                                          |  |      |        |   |      |   | (5,776  | )    | 
|Loan recoveries                                                                                    |  |      | 364     |   |      |   | 342     |      | 
|Additions to premises and equipment                                                                |  |      | (488    | ) |      |   | (169    | )    | 
|Proceeds from sales of premises and equipment                                                      |  |      | 53      |   |      |   | 55      |      | 
|All other investing activities, net                                                                |  |      | (257    | ) |      |   | 383     |      | 
|                                                                                                  
|Net cash used in investing activities                                                              |  |      | (8,011  | ) |      |   | (1,621  | )    | 
|                                                                                                  
|Cash Flows from Financing Activities:                                                              |  |      |         |   |      |   |         |      | 
|Net increase in deposits                                                                           |  |      | 2,590   |   |      |   | 373     |      | 
|Net increase (decrease) in federal funds purchased and securities sold under repurchase
agreements |  |      | 850     |   |      |   | 1,607   |      | 
|Net increase (decrease) in other short-term borrowings                                             |  |      | 2,061   |   |      |   | (7,757  | )    | 
|Proceeds from issuance of long-term debt                                                           |  |      | 8,293   |   |      |   | 12,466  |      | 
|Repayment of long-term debt                                                                        |  |      | (8,945  | ) |      |   | (11,341 | )    | 
|Repurchase of treasury stock                                                                       |  |      | (617    | ) |      |   | (78     | )    | 
|Cash dividends paid                                                                                |  |      | (983    | ) |      |   | (991    | )    | 
|Proceeds from issuance of trust preferred capital securities                                       |  |      |        |   |      |   | 825     |      | 
|Proceeds from issuance of common and treasury stock                                                |  |      | 292     |   |      |   | 191     |      | 
|Redemption of preferred stock                                                                      |  |      |        |   |      |   | (190    | )    | 
|All other financing activities, net                                                                |  |      | 69      |   |      |   | 19      |      | 
|                                                                                                  
|Net cash provided by (used in) financing activities                                                |  |      | 3,610   |   |      |   | (4,876  | )    | 
|Effect of exchange rate changes on cash and cash equivalents                                       |  |      | (27     | ) |      |   | 34      |      | 
|                                                                                                  
|Net increase (decrease) in cash and cash equivalents                                               |  |      | 1,010   |   |      |   | (4,088  | )    | 
|Cash and cash equivalents at beginning of year                                                     |  |      | 18,413  |   |      |   | 22,501  |      | 
|                                                                                                  
|Cash and cash equivalents at end of year                                                           |  | $    | 19,423  |   |      | $ | 18,413  |      | 
|                                                                                                  
|Other cash flow disclosures:                                                                       |  |      |         |   |      |   |         |      | 
|Interest paid                                                                                      |  | $    | 5,684   |   |      | $ | 9,221   |      | 
|Income taxes paid                                                                                  |  |      | 1,111   |   |      |   | 506     |      | 
|                                                                                                  



The accompanying notes are an integral part of this statement.



BANK ONE 2002 ANNUAL REPORT    83



---



NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS



Note 1  Summary
of Significant Accounting Policies



BANK ONE CORPORATION,
along with its subsidiaries (Bank One or the Corporation), is a financial holding company that offers a full range of financial services to commercial and business customers and consumers.



(a) Basis of Presentation



The consolidated financial statements have been prepared in conformity with
generally accepted accounting principles in the United States of America. Certain prior-year financial statement information has been reclassified to conform to the current years presentation. The preparation of the consolidated financial
statements requires management to make estimates and assumptions that affect the amounts reported and disclosures of contingent assets and liabilities. Actual results could differ from those estimates.



Certain assets and liabilities, primarily derivative assets
and liabilities as well as resale and repurchase agreements, are reported on a net basis by counterparty if legally enforceable master netting arrangements are in place.



(b) Principles of Consolidation



The Corporations consolidated financial statements include all accounts of BANK ONE CORPORATION (the Parent
Company) and all significant majority-owned subsidiaries with principal investment subsidiaries following specialized industry accounting as described below. All significant intercompany accounts and transactions have been eliminated. Results
of operations of acquired entities are included from the acquisition date, and assets and liabilities are stated at their estimated fair values at the acquisition date.



The Corporation is involved with Special Purpose Entities (SPEs) as either a transferor or an
administrator. The Corporation considers the underlying facts and circumstances of individual transactions when assessing the appropriateness of consolidating SPEs. The Corporations assessment focuses on its ability to influence or control a
SPE as well as the dispersion of risk and rewards attributable to a SPE. In cases where the Corporation transfers financial assets to a SPE, the SPE must represent a qualifying SPE (QSPE) or the Corporation consolidates the transferred
financial assets. QSPE status is achieved when all conditions specified in SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities (SFAS No. 140) are met. Those conditions
focus on whether the SPE is demonstrably distinct from the Corporation, limited to only permitted activities, limited on what assets the QSPE may hold, and limited on sales or other dispositions of assets. The Corporation has determined that its
credit card trusts are QSPEs, and has obtained supporting legal opinions as applicable.



As discussed on pages 75-77 the Corporation serves as an administrator of commercial paper multi-seller conduits. In determining whether to consolidate the financial assets held by these SPEs, the
Corporation considered qualitative and quantitative factors of the SPEs that were deemed appropriate prior to the issuance of new and pending accounting pronouncements. Such factors included the purpose and nature of the SPE, the Corporations
continuing involvement, any fee arrangements, credit facilities and other relevant factors. Based on its evaluation of these factors, the Corporation has determined that none of these SPEs require consolidation. However, as described in Note 1(r)
New and Pending Accounting Pronouncements it is reasonably possible that these SPEs will be consolidated effective July 1, 2003 under new accounting guidance.



The Corporations principal investment subsidiaries, separate legal entities, have majority equity
ownership in investees that are not consolidated because of specialized industry accounting for investment companies which requires fair value accounting.



(c) Resale and Repurchase Agreements



Securities purchased under resale agreements and securities sold under repurchase agreements are treated as collateralized financing transactions and
carried at the amount at which the securities will be subsequently resold or repurchased, plus accrued interest.



(d) Trading Activities



The Corporations trading activities are primarily customer oriented. Securities bought and sold and held principally for short-term appreciation or other trading purposes and to protect credit deterioration in the loan
portfolio are classified as trading assets and other short-term borrowings and recorded on a trade date basis at fair value. Derivative contracts entered into for trading and economic hedging purposes which do not qualify for hedge accounting are
classified as derivative product assets and derivative product liabilities, as appropriate. Trading income includes realized and unrealized gains and losses from trading positions, including interest income or expense on derivative instruments.
Estimated fair values are based on quoted market prices or valuation models, which use current market information. Trading activities involve instruments with interest rate, exchange rate, equity price, credit and commodity price risk.



(e) Hedging Activities



Hedging derivatives that qualify for hedge accounting are recognized on the
balance sheet at fair value as either derivative product assets or liabilities. Hedge ineffectiveness, if any, is calculated and recorded in current earnings. See Derivative Financial Instruments beginning on page 72 for detailed
information on the Corporations strategy in using derivative instruments in its asset and liability management and trading activities, as well as the accounting principles and disclosures for these instruments.



(f) Investment Securities



Debt and equity investment securities designated as available for sale are
carried at fair value, with unrealized gains and losses, net of taxes, included in accumulated other adjustments to stockholders equity. The estimated fair value of a security is determined based on market quotations when available or, if not
available, by using a discounted cash flow approach. Realized gains and losses, including other than temporary impairments, are included in noninterest income as investment securities gains (losses). The specific identification method is used to
calculate realized gains or losses.



84    BANK ONE 2002 ANNUAL REPORT



---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



In accordance with Emerging Issues Task Force (EITF) No.
99-20, Recognition of Interest Income and Impairment on Purchased and Retained Beneficial Interests in Securitized Financial Assets, impairment of certain beneficial interests in securitized financial assets must be recognized when there
has been an adverse change in estimated cash flows and the assets fair value is below its carrying value. The Corporation recognizes interest income based on the amount of the excess of estimated cash flows over the recorded investment in the
securitized financial assets. Changes in estimated cash flows are recognized on a prospective basis. The Corporation adopted EITF No. 99-20 effective April 1, 2001. The effect of adoption was a one-time, non-cash charge to earnings of $44 million
after-tax ($69 million pre-tax).



Principal
investments are carried at fair value, with unrealized and realized gains and losses included in noninterest income as investment securities gains (losses). The fair value of a publicly traded principal investment is determined using quoted market
prices when the investment is unrestricted; otherwise fair value is estimated using quoted market prices adjusted for market liquidity, position size and sale restrictions other than time. The fair value of principal investments that are not
publicly traded is estimated based on the investees financial results, conditions and prospects, values of comparable public companies, market liquidity and sales restrictions.



(g) Equity and Cost Method Investments



The equity method of accounting is applied to investments that the Corporation has significant influence over, excluding
principal investments, which typically represents ownership interests between 20-50% for investments in common stock or when ownership interests equals or exceeds 3% for investments in limited partnerships. The equity method of accounting results in
recognition of the Corporations pro-rata share of investment income or loss in other noninterest income.



The cost method of accounting is applied to investments that the Corporation does not have a significant influence over, excluding
principal investments, which typically represent ownership interests less than 20% for investments in common stock or when ownership interests is less than 3% for investments in limited partnerships. The cost method recognizes income when dividends
are received.



(h) Loans



Loans are recognized at the principal amount outstanding, net of unearned
income and amounts charged off. The recorded investment in credit card loans also includes unpaid interest and fees. Unearned income includes deferred loan origination fees reduced by loan origination costs. Unearned income on loans, excluding
credit card loans, is amortized to interest income over the life of the related loan using methods which approximate the effective interest rate method. Unearned income on credit card loans is typically amortized over one year using a straight-line
method to noninterest income as credit card revenue.



Fees received for providing loan commitments and letters of credit that result in loans are typically deferred and amortized to interest income over the life of the related loan, beginning with the initial borrowing. Fees on
commitments and letters of credit are amortized to noninterest income as banking fees and commissions over the commitment period when funding is not expected.



Other credit-related fees, including syndication management fees, are recorded to noninterest income as banking fees and commissions when
received or over time to match the earnings process.



(i)
Lease Financing Receivables



The Corporation typically
provides lease financing to its customers through direct financing leases. Leveraged leases, which represent direct financing leases involving nonrecourse debt, also are provided to customers. Unearned income on a direct financing lease is amortized
to income over the lease term so as to yield a constant rate of return on the net investment in the lease. Periodic recognition of lease income on leveraged leases is based on an analysis of cash flows using the original investment less deferred
taxes arising from the difference between the pretax financial accounting income and taxable income. Residual values of leased assets are reviewed at least annually with periodic reviews performed as warranted by the underlying circumstances. In the
case of automobiles, valuations are based upon various assumptions and estimates including the probability of the automobile being returned to the Corporation, estimated costs incurred to reduce the number of returned automobiles from the customer,
estimated collectable fees for mileage and other wear and tear, reconditioning costs, and estimated used car sales prices. Declines in estimated residual values that are other than temporary are recognized in the period such determination is made in
other noninterest income.



(j) Loan Sales and Securitizations



Loans held for sale are carried at the lower of cost or
market value. When a loan is sold or transferred to held for sale, the loans carrying value is compared to its fair value and any shortfall in value that is determined to be credit related is recorded as a charge-off, reducing the allowance
for credit losses. Any shortfall in fair value other than credit related is recorded as a charge to other noninterest income. All subsequent net declines in market value of loans held for sale are recorded to other noninterest income.



With consumer loan portfolio sales, the allocable portion of
the allowance for credit losses adjusts the carrying value of the loan portfolio and is treated as a transfer out of the allowance for credit losses. The difference between the portfolios carrying value adjusted for the allocable credit
reserves and the net sales proceeds is recorded as a component of other noninterest income.



The Corporation records a transfer of financial assets as a sale when it surrenders control over those financial assets to the extent that consideration other than beneficial interests in the
transferred assets is received in exchange. The Corporation considers control surrendered when all conditions prescribed by SFAS No. 140 are met. Those conditions focus on whether the transferred financial assets are isolated beyond the reach of the
Corporation and its creditors, the constraints on the transferee or beneficial interest holders, and the Corporations rights or obligations to reacquire transferred financial assets. As appropriate, the Corporation obtains legal opinions
supporting the conclusion that transferred financial assets are isolated beyond the reach of the Corporation and its creditors.



BANK ONE 2002 ANNUAL REPORT    85



---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



(k) Nonperforming Loans



A loan is considered nonperforming when placed on nonaccrual status, or when
renegotiated at terms that represent an economic concession to the borrower because of a decline in the borrowers financial condition. For a more detailed discussion, see the Nonperforming Assets section beginning on page 66. The
Corporations charge-off policies are presented on page 67.



(l) Allowance for Credit Losses



Management maintains the allowance for credit losses at a level it believes is adequate to provide for estimated probable credit losses inherent in on- and off-balance sheet credit exposure. For a more detailed discussion, see the
Allowance for Credit Losses section beginning on page 68.



(m) Premises and Equipment



Premises and
equipment are carried at cost less accumulated depreciation and amortization. Depreciation and amortization is computed using the straight-line method over the estimated useful life of the owned asset and, for leasehold improvements, over the lesser
of the remaining term of the leased facility or the estimated economic life of the improvement. For owned and capitalized assets, estimated useful lives range from three to 30 years. Maintenance and repairs are charged to expense as incurred, while
major improvements are capitalized and amortized to operating expense over the identified useful life.



(n) Other Real Estate Owned (OREO)



OREO includes real estate assets that have been received in satisfaction of debt. OREO is initially recorded and subsequently carried at the lower of cost or fair value less estimated selling costs.
Any valuation adjustments required at the date of transfer are charged to the allowance for credit losses. Subsequently, unrealized losses and realized gains and losses on sale are included in other noninterest income. Operating results from OREO
are recorded in other noninterest expense.



(o) Credit Card
Award Programs



Costs associated with credit card award
programs are accounted for on an accrual basis, and are charged against credit card revenue in the period in which the related benefits are earned by customers. See page 47 for a discussion of risks and uncertainty associated with an award program.



(p) Income Taxes



Deferred tax assets and liabilities are determined based on temporary
differences between the carrying amounts of assets and liabilities in the consolidated financial statements and their related tax bases and are measured using the enacted tax rates and laws that are in effect. The effect on deferred tax assets and
liabilities of a change in rates is recognized as income or expense in the period in which the change occurs.



(q) Cash Flow Reporting



Cash and cash equivalents consist of cash and due from banks, whether interest-bearing or not. Net reporting of cash transactions has been used when the balance sheet items consist predominantly of maturities of three months or less,
or where otherwise permitted. Other items are reported on a gross basis.



(r) New and Pending Accounting Pronouncements



The Corporation adopted in 2002 the following new accounting pronouncements and will adopt in 2003 the following pending accounting pronouncements.



Goodwill and Other Intangible Assets



Effective January 1, 2002, the Corporation adopted SFAS No. 142, Goodwill and Other Intangible Assets (SFAS
No. 142). Under SFAS No. 142, goodwill and intangible assets with indefinite lives are no longer amortized, but are subject to impairment tests at least annually. Intangible assets with finite lives continue to be amortized over the period the
Corporation expects to benefit from such assets and are periodically reviewed for other than temporary impairment.



The impact of adopting SFAS No. 142 on net income and earnings per share adjusted to exclude amortization expense (net of taxes) related
to goodwill is as follows:



|(In millions, except per share data)                                    |  | 2002 |       | 2001 |   | 2000  | 
|----------------------------------------------------------------------- |  | ---- | ----- | ---- | - | ----- | 
|                                                                       
|Net income (loss) attributable to common stockholders equity(1)        |  | $    | 3,295 |      | $ | 2,628 | 
|                                                                       
|Goodwill amortization                                                   |  |      |      |      |   | 44    | 
|                                                                       
|Pro forma net income (loss) attributable to common stockholders
equity |  | $    | 3,295 |      | $ | 2,672 | 
|                                                                       
|Basic earnings (loss) per share:                                        |  |      |       |      |   |       | 
|Reported earnings (loss) per share                                      |  | $    | 2.83  |      | $ | 2.25  | 
|Goodwill amortization                                                   |  |      |      |      |   | 0.04  | 
|                                                                       
|Pro forma basic earnings (loss) per share                               |  | $    | 2.83  |      | $ | 2.29  | 
|                                                                       
|Diluted earnings (loss) per share:                                      |  |      |       |      |   |       | 
|Reported earnings (loss) per share                                      |  | $    | 2.80  |      | $ | 2.24  | 
|Goodwill amortization                                                   |  |      |      |      |   | 0.04  | 
|                                                                       
|Pro forma diluted earnings (loss) per share                             |  | $    | 2.80  |      | $ | 2.28  | 
|                                                                       

|(1) |  | Includes the impact of preferred stock dividends of $10 million and $12 million in 2001 and 2000, respectively.
|--- |  | ---------------------------------------------------------------------------------------------------------------



86    BANK ONE 2002 ANNUAL REPORT



---



NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS



Stock Options



Effective January 1, 2002, the Corporation adopted the fair
value recognition provisions of SFAS No. 123, Accounting for Stock-based Compensation (SFAS No. 123), as amended by SFAS No. 148, Accounting for Stock-Based Compensation Transition and Disclosure, an amendment to
FASB Statement No. 123 (SFAS No. 148), and selected the prospective method of transition and began recognizing compensation expense based on the fair value method on newly granted stock awards. Under this method, compensation cost
is measured at the grant date based on the fair value of the award and is recognized as expense over the vesting period of the grant. Pursuant to the requirements of SFAS No. 123, as amended by SFAS No. 148, options granted prior to January 1, 2002,
continue to be accounted for under APB Opinion No. 25, Accounting for Stock Issued to Employees (APB No. 25). Under APB No. 25, no compensation expense is recognized when the exercise price is greater than or equal to the
market price of the underlying common stock on the date of grant.



Awards under the Corporations stock compensation plans vest over periods ranging from two to five years. Therefore, the expense related to stock option compensation included in the determination of net income for 2002
is less than that which would have been recognized if the fair value method had been applied to all awards since the original effective date of SFAS No. 123. The net income and earnings per share implications if the fair value method had been
applied to all awards which vested during the years ended December 31, 2002, 2001 and 2000 would have been as follows:



|(In millions, except per share data)                                                                                                                                 |  | 2002 |       | 2001(1) |   | 2000(1) | 
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ----- | ------- | - | ------- | 
|                                                                                                                                                                    
|Net income (loss) attributable to common stockholders equity(2)                                                                                                     |  | $    | 3,295 |         | $ | 2,628   | 
|Add: Stock option employee compensation expense included in reported net income, net of
related tax effects                                                          |  |      | 29    |         |   |        | 
|Deduct: Total stock option employee compensation expense determined under the fair value
method for all awards vested during the year, net of related tax effects(3) |  |      | 92    |         |   | 222     | 
|                                                                                                                                                                    
|Pro forma net income (loss) attributable to common stockholders
equity                                                                                              |  | $    | 3,232 |         | $ | 2,406   | 
|Earnings (loss) per share:                                                                                                                                           |  |      |       |         |   |         | 
|Basic  as reported                                                                                                                                                  |  | $    | 2.83  |         | $ | 2.25    | 
|Basic  pro forma                                                                                                                                                    |  |      | 2.78  |         |   | 2.06    | 
|Diluted  as reported                                                                                                                                                |  |      | 2.80  |         |   | 2.24    | 
|Diluted  pro forma                                                                                                                                                  |  |      | 2.76  |         |   | 2.05    | 
|                                                                                                                                                                    

|(1) |  | In 2002, management refined its methodology in estimating pro forma compensation cost. Accordingly, the 2001 and 2000 pro forma compensation cost has been adjusted
for comparability purposes.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | Includes the impact of preferred stock dividends of $10 million and $12 million in 2001 and 2000, respectively.
|--- |  | ---------------------------------------------------------------------------------------------------------------

|(3) |  | Stock option awards granted in 1999 and 2000 were fully vested by early 2002.
|--- |  | -----------------------------------------------------------------------------



Costs Associated with Exit or Disposal Activities



In 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities
(SFAS No. 146) which supercedes EITF No. 94-3, Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring). SFAS No. 146 requires
that a liability for costs associated with an exit or disposal activity be recognized when the liability is incurred rather than when a company commits to such an activity and also establishes fair value as the objective for initial measurement of
the liability. The Corporation will adopt SFAS No. 146 for exit or disposal activities that are initiated after December 31, 2002, and the impact of adoption is not expected to have a material impact on the Corporations results of operations,
financial position or cash flows.



Accounting and Disclosure
Requirements for Guarantees



In 2002, the FASB issued
Interpretation No. 45, Guarantors Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others (FIN No. 45) which requires additional disclosures by a guarantor about
its obligations under certain guarantees that it has issued. FIN No. 45 also clarifies that a guarantor is required to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee.
The most significant instruments impacted for the Corporation are financial and performance standby letters of credit. The required FIN No. 45 disclosures for 2002 have been incorporated into Note 22 Financial Instruments with Off-Balance
Sheet Risk that appears on pages 102103. The accounting requirements of FIN No. 45 are effective for the Corporation on January 1, 2003, on a prospective basis. The impact of adoption is not expected to have a material impact on the
Corporations results of operations, financial position or cash flows.



Consolidation of Variable Interest Entities



In 2003, the FASB issued Interpretation No. 46, Consolidation of Variable Interest Entities (FIN No. 46) which provides new accounting guidance on when to consolidate a variable interest entity. A variable
interest entity exists when either the total equity investment at risk is not sufficient to permit the entity to finance its activities by itself, or the equity investors lack one of three characteristics associated with owning a controlling
financial interest. Those characteristics include the direct or indirect ability to make decisions about an entitys activities through voting rights or similar rights, the obligation to absorb the expected losses of an entity if they occur,
and the right to receive the expected residual returns of the entity if they occur.



FIN No. 46 is effective immediately for new entities that were created or acquired after January 31, 2003, and will become effective on July 1, 2003, for entities in which the Corporation had a
variable interest prior to February 1, 2003. The Corporation plans to adopt FIN No. 46 on a prospective basis and, accordingly, will not restate prior periods. FIN No. 46 affects the Corporations accounting and reporting for certain SPEs in
which the Corporation is involved.



BANK ONE 2002 ANNUAL REPORT    87



---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





The
Corporations retained interest in its credit card securitizations and its investments in commercial mortgage backed securities will not be consolidated since both transaction structures are exempt from the requirements of FIN No. 46.



As discussed on pages 75  77, the
Corporation is an active participant in the asset-backed securities business where it helps meet customers financing needs by providing access to the commercial paper markets through SPEs, known as multi-seller conduits. These multi-seller
conduits are a type of variable interest entity (VIE), as defined by FIN No. 46. These entities have historically met the requirements to be treated as independent entities, which have not been required to be consolidated. With the
January 2003 issuance of FIN No. 46, the Corporation believes it is reasonably possible that the multi-seller conduits and an investment vehicle as currently structured, for which it is the administrator, will be consolidated. Investors in the
multi-seller conduits have no recourse to the general assets of the Corporation. The Corporation is currently evaluating all variable interests in variable interest entities.



Based on information as of December 31, 2002, the expected impact of FIN No. 46 to the Corporations
balance sheet would be to increase both assets and liabilities by approximately $42.8 billion. Any difference between the net amount added to the balance sheet and the amount of any previously recognized interest in the newly consolidated entities
would be recognized as a cumulative effect of an accounting change. The Corporation is assessing the impact of adoption, if any. See page 77 for loss exposure and the potential impact on risk-based capital ratios.



Note 2  Earnings Per Share



Basic EPS is computed by dividing income available to common stockholders by
the average number of common shares outstanding for the period. Except when the effect would be antidilutive, the diluted EPS calculation includes shares that could be issued under outstanding stock options and the employee stock purchase plans. In
addition, interest on convertible debentures (net of tax) is added to net income, since this interest would not be paid if the debentures were converted to common stock.



The computation of basic and diluted earnings per share follows:



|For The Year Ended December 31,                                                       |  | 2002 |       | 2001 |   |       | 2000 | 
|------------------------------------------------------------------------------------- |  | ---- | ----- | ---- | - | ----- | ---- | 
|                                                                                     
|(In millions, except per share data)                                                  |  |      |       |      |   |       |      | 
|Income (loss) before cumulative effect of change in accounting principle              |  | $    | 3,295 |      | $ | 2,682 |      | 
|Cumulative effect of change in accounting principle, net of taxes of
($25)            |  |      |      |      |   | (44   | )    | 
|                                                                                     
|Net income (loss)                                                                     |  |      | 3,295 |      |   | 2,638 |      | 
|Preferred stock dividends                                                             |  |      |      |      |   | (10   | )    | 
|                                                                                     
|Net income (loss) available to common stockholders for basic and diluted
EPS          |  | $    | 3,295 |      | $ | 2,628 |      | 
|                                                                                     
|Average shares outstanding                                                            |  |      | 1,162 |      |   | 1,166 |      | 
|Stock options                                                                         |  |      | 10    |      |   | 8     |      | 
|                                                                                     
|Average shares outstanding assuming full dilution                                     |  |      | 1,172 |      |   | 1,174 |      | 
|                                                                                     
|Earnings (loss) per share before cumulative effect of change in accounting
principle: |  |      |       |      |   |       |      | 
|Basic                                                                                 |  | $    | 2.83  |      | $ | 2.28  |      | 
|Diluted                                                                               |  |      | 2.80  |      |   | 2.28  |      | 
|Earnings (loss) per share:                                                            |  |      |       |      |   |       |      | 
|Basic                                                                                 |  |      | 2.83  |      |   | 2.25  |      | 
|Diluted                                                                               |  |      | 2.80  |      |   | 2.24  |      | 
|                                                                                     



88    BANK ONE 2002 ANNUAL REPORT



---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





Note 3 
Acquisitions



On July 27, 2001, the Corporation completed
its acquisition of the Wachovia credit card business, including a credit card portfolio of approximately $7.5 billion consumer credit card receivables. The acquisition was accounted for under the provisions of SFAS No. 141 and SFAS No. 142. The
first component of the transaction was the primary portfolio of $6.2 billion in receivables of credit card holders who are not customers of Wachovias retail bank. The second component was the agent bank portfolio comprised of credit card
holders that were Retail customers of Wachovia of $1.3 billion. Wachovia retained the right to purchase the agent bank receivables under certain conditions.



On September 7, 2001, the Corporation announced its agreement with Wachovia to end the agent bank relationship and sell back to Wachovia
the approximately $1.3 billion of consumer credit card receivables of customers who also have a Wachovia retail banking relationship. Under the terms of the agreement, Wachovia paid a $350 million termination fee and reimbursed the Corporation for
the premium paid on the repurchased receivables and conversion costs related to the repurchase. The Corporation accounted for these amounts received from Wachovia as a reduction of acquisition intangibles.



Note 4  Restructuring-Related Activity



a) Fourth Quarter 2001 Restructuring-Related Charges



The Corporation recorded restructuring-related charges in the fourth quarter
of 2001 for additional real estate and severance costs to accomplish more rapid expense reductions, accelerated systems conversions and other consolidations. Summarized below are the details of these restructuring-related charges:



|(In millions)                     |  | Personnel-Related Costs |     |   | Contractual Obligations and Asset Writedowns |   |      | Total | 
|--------------------------------- |  | ----------------------- | --- | - | -------------------------------------------- | - | ---- | ----- | 
|                                 
|December 31, 2001 Reserve balance |  | $                       | 76  |   |                                              | $ | 278  |       | 
|Amounts utilized                  |  |                         | (36 | ) |                                              |   | (168 | )     | 
|Reserve adjustments               |  |                         | (21 | ) |                                              |   | (21  | )     | 
|                                 
|December 31, 2002 Reserve balance |  | $                       | 19  |   |                                              | $ | 89   |       | 
|                                 



Personnel-related costs initially recorded consisted primarily of severance costs related to identified staff reductions in the lines of business totaling approximately 6,900 positions for: the consolidation of various telephone
banking and related sites and loan processing locations for Retail; the consolidation of call centers by Card Services; the closing of certain international locations; the consolidation of credit processing activities to one primary loan system for
middle market banking; and certain other consolidations. At December 31, 2002, approximately 2,700 of these identified employees have been terminated under these programs, including 600 of which have future payment obligations of approximately $10
million. During the 2002 second quarter, the reserve was adjusted for approximately 3,100 employees, primarily in the Retail and Card Services lines of business, due to changes in attrition and circumstances for elimination under these programs.



Contractual obligations included the estimated
costs associated with lease and other contract termination costs incorporated in the business restructuring plans. Asset writedowns included leasehold improvement write-offs related to leased properties following the decision to abandon such
facilities, as well as in the case of fixed assets and capitalized software for which similar decisions were made.



Actions remaining under this overall restructuring plan are expected to be completed within approximately six months or less. Certain
contractual payments associated with these actions, as required, will extend beyond this six month time frame.



b) Second Quarter 2000 Restructuring-Related Activity



Actions under this restructuring plan have been completed, with only payments of identified obligations remaining, which consist primarily of lease obligations. Unpaid amounts totaled $41 million as of
December 31, 2002, and will be paid as required over the remaining contractual periods.



BANK ONE 2002 ANNUAL REPORT    89



---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





Note 5  Business
Segments



In 2002, certain organizational changes were made
involving the Corporate, Commercial Banking, and Retail lines of business. The dealer commercial services business was transferred from Retail to Commercial Banking. National retail lockbox operations and cash vault services were transferred from
Commercial Banking to Corporate. Results for the prior periods have been adjusted to reflect these and other insignificant changes to conform to the current line of business structure.



The information below is consistent with the content of business segment data provided to the
Corporations management, which does not use product group revenues to assess consolidated results. Aside from investment management and insurance products, product offerings are tailored to specific customer segments. As a result, the
aggregation of product revenues and related profit measures across lines of business is not available.



Aside from the United States of America, no single country or geographic region generates a significant portion of the Corporations
revenues or assets. In addition, there are no single customer concentrations of revenue or profitability.



For additional disclosures regarding the Corporations segments see the Business Segment Results section beginning on
page 38.



The following table summarizes certain
financial information by line of business for the years indicated:



|                                                                           |  | Total Revenues-FTE (1) |        |   | Provision for Income Taxes (1) |   |        | Net Income (Loss) |  |   | Identifiable Assets at Period-End
|-------------------------------------------------------------------------- |  | ---------------------- | ------ | - | ------------------------------ | - | ------ | ----------------- |  | - | ---------------------------------
|                                                                          
|For The Year Ended December 31,                                            |  | 2002                   |        |   | 2001                           |   |        | 2000              |  |   | 2002                             
|                                                                          
|(In millions, except identifiable assets in billions)                      |  |                        |        |   |                                |   |        |                   |  |   |                                  
|Retail                                                                     |  | $                      | 6,285  |   |                                | $ | 6,396  |                   |  | $ | 5,445                            
|Commercial Banking                                                         |  |                        | 4,111  |   |                                |   | 4,347  |                   |  |   | 4,247                            
|Card Services                                                              |  |                        | 4,864  |   |                                |   | 4,021  |                   |  |   | 3,245                            
|Investment Management                                                      |  |                        | 1,718  |   |                                |   | 1,686  |                   |  |   | 1,570                            
|Corporate                                                                  |  |                        | (2     | ) |                                |   | (458   | )                 |  |   | (442                             
|                                                                          
|Total before cumulative effect of change in accounting principle           |  |                        | 16,976 |   |                                |   | 15,992 |                   |  |   | 14,065                           
|Cumulative effect of change in accounting principle, net of taxes of
($25) |  |                        |        |   |                                |   |        |                   |  |   |                                  
|                                                                          
|Total                                                                      |  | $                      | 16,976 |   |                                | $ | 15,992 |                   |  | $ | 14,065                           
|                                                                          

|(1) |  | Revenue and provision for income tax includes taxable equivalent adjustments of $145 million, $131 million and $138 million for the years ended December 31, 2002,
2001 and 2000, respectively.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



90    BANK ONE 2002 ANNUAL REPORT



---



NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS



Note 6  Interest
Income and Interest Expense



Details of interest income and expense are as follows:



|For The Year Ended December 31,                                         |  | 2002 |        | 2001 |   | 2000  
|----------------------------------------------------------------------- |  | ---- | ------ | ---- | - | ------
|                                                                       
|(In millions)                                                           |  |      |        |      |   |       
|Interest Income                                                         |  |      |        |      |   |       
|Loans, including fees                                                   |  | $    | 9,947  |      | $ | 13,213
|Bank balances                                                           |  |      | 58     |      |   | 145   
|Federal funds sold and securities purchased under resale agreements     |  |      | 159    |      |   | 418   
|Trading assets                                                          |  |      | 256    |      |   | 309   
|Investment securities                                                   |  |      | 3,515  |      |   | 3,219 
|                                                                       
|Total interest income                                                   |  |      | 13,935 |      |   | 17,304
|Interest Expense                                                        |  |      |        |      |   |       
|Deposits                                                                |  |      | 2,719  |      |   | 4,895 
|Federal funds purchased and securities sold under repurchase agreements |  |      | 271    |      |   | 633   
|Other short-term borrowings                                             |  |      | 262    |      |   | 659   
|Long-term debt                                                          |  |      | 2,088  |      |   | 2,479 
|                                                                       
|Total interest expense                                                  |  |      | 5,340  |      |   | 8,666 
|Net Interest Income                                                     |  |      | 8,595  |      |   | 8,638 
|Provision for credit losses                                             |  |      | 2,487  |      |   | 2,510 
|                                                                       
|Net Interest Income After Provision for Credit Losses                   |  | $    | 6,108  |      | $ | 6,128 
|                                                                       



Note 7 
Investment Securities



A
summary of the Corporations investment portfolio follows:



|At December 31, 2002                             |  | Amortized Cost |        | Gross Unrealized Gains |   | Gross Unrealized Losses |  | Fair Value (Book Value)
|------------------------------------------------ |  | -------------- | ------ | ---------------------- | - | ----------------------- |  | -----------------------
|                                                
|(In millions)                                    |  |                |        |                        |   |                         |  |                        
|U.S. Treasury                                    |  | $              | 1,310  |                        | $ | 25                      |  | $                      
|U.S. government agencies                         |  |                | 26,419 |                        |   | 635                     |  |                        
|States and political subdivisions                |  |                | 1,116  |                        |   | 54                      |  |                        
|Interests in credit card securitized receivables |  |                | 28,202 |                        |   | 147                     |  |                        
|Other debt securities                            |  |                | 4,719  |                        |   | 40                      |  |                        
|Equity securities(1)                             |  |                | 3,406  |                        |   | 4                       |  |                        
|                                                
|Total available for sale securities              |  | $              | 65,172 |                        | $ | 905                     |  | $                      
|                                                
|Principal and other investments(2)               |  |                |        |                        |   |                         |  |                        
|Total investment securities                      |  |                |        |                        |   |                         |  |                        
|                                                
|At December 31, 2001                             |  |                |        |                        |   |                         |  |                        
|                                                
|(In millions)                                    |  |                |        |                        |   |                         |  |                        
|U.S. Treasury                                    |  | $              | 1,424  |                        | $ | 30                      |  | $                      
|U.S. government agencies                         |  |                | 25,265 |                        |   | 113                     |  |                        
|States and political subdivisions                |  |                | 1,310  |                        |   | 28                      |  |                        
|Interests in credit card securitized receivables |  |                | 23,998 |                        |   | 107                     |  |                        
|Other debt securities                            |  |                | 4,397  |                        |   | 24                      |  |                        
|Equity securities(1)                             |  |                | 2,775  |                        |   | 10                      |  |                        
|                                                
|Total available for sale securities              |  | $              | 59,169 |                        | $ | 312                     |  | $                      
|                                                
|Principal and other investments(2)               |  |                |        |                        |   |                         |  |                        
|Total investment securities                      |  |                |        |                        |   |                         |  |                        
|                                                



|(1) |  | The fair values of certain securities for which market quotations were not available were estimated.
|--- |  | ----------------------------------------------------------------------------------------------------

|(2) |  | The fair values of certain securities reflect liquidity adjustments and other market-related factors, and include investments accounted for at fair value consistent
with specialized industry practice.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



BANK ONE 2002 ANNUAL REPORT    91



---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



For the year ended December 31, 2002, gross recognized gains
and losses on the sale of investment securities were $1.3 billion and $1.1 billion, respectively. For the year ended December 31, 2001, gross recognized gains and losses on investment securities were $1.0 billion and $1.1 billion, respectively.



As of December 31, 2002, debt investment
securities had the following maturity and yield characteristics:



|                                  |  | Due in less than 1 year |        |       | Due in 1 year through 5 years |   |                | Due in 5 years through 10 years |       |  | Due after 10 years |                |  | Total |       |  |               
|--------------------------------- |  | ----------------------- | ------ | ----- | ----------------------------- | - | -------------- | ------------------------------- | ----- |  | ------------------ | -------------- |  | ----- | ----- |  | --------------
|                                 
|                                  |  | Amortized Cost          |        | Yield |                               |   | Amortized Cost |                                 | Yield |  |                    | Amortized Cost |  | Yield |       |  | Amortized Cost
|                                 
|(Dollars in millions)             |  |                         |        |       |                               |   |                |                                 |       |  |                    |                |  |       |       |  |               
|U.S. Treasury                     |  | $                       | 822    |       | 4.13                          | % |                | $                               | 460   |  | 3.69               | %              |  | $     | 25    |  | 8.11          
|U.S. government agencies          |  |                         | 23     |       | 6.61                          |   |                |                                 | 1,190 |  | 2.81               |                |  |       | 93    |  | 5.11          
|States and political subdivisions |  |                         | 124    |       | 4.88                          |   |                |                                 | 253   |  | 5.12               |                |  |       | 280   |  | 4.40          
|Other debt securities             |  |                         | 25,443 |       | 10.93                         |   |                |                                 | 5,353 |  | 7.44               |                |  |       | 1,347 |  | 3.49          
|Total debt securities             |  |                         |        |       |                               |   |                |                                 |       |  |                    |                |  |       |       |  |               
|-at amortized cost                |  | $                       | 26,412 |       | 10.69                         | % |                | $                               | 7,256 |  | 6.36               | %              |  | $     | 1,745 |  | 3.79          
|Total debt securities            |  |                         |        |       |                               |   |                |                                 |       |  |                    |                |  |       |       |  |               
|-at fair value                    |  | $                       | 26,557 |       |                               |   |                | $                               | 7,309 |  |                    |                |  | $     | 1,785 |  |               
|                                 



The
distribution of mortgage-backed securities and collateralized mortgage obligations is based on average expected maturities. Actual maturities could differ as issuers may have the right to call or prepay obligations.



Note 8  Loans



Loan composition by line of business is as follows:



|At December 31,                         |  | 2002 |         | 2001
|--------------------------------------- |  | ---- | ------- | ----
|                                       
|(In millions)                           |  |      |         |     
|Retail:                                 |  |      |         |     
|Small business commercial               |  | $    | 9,863   |     
|Home equity                             |  |      | 28,469  |     
|Vehicles                                |  |      | 14,012  |     
|Other personal                          |  |      | 8,491   |     
|                                       
|Core businesses                         |  |      | 60,835  |     
|Brokered home equity discontinued       |  |      | 3,242   |     
|Vehicle leases                          |  |      | 3,596   |     
|                                       
|Home equity discontinued/vehicle leases |  |      | 6,838   |     
|Total consumer                          |  |      | 57,810  |     
|                                       
|Total Retail                            |  |      | 67,673  |     
|                                       
|Commercial Banking:                     |  |      |         |     
|Corporate banking:                      |  |      |         |     
|Commercial and industrial               |  |      | 17,866  |     
|Commercial real estate                  |  |      | 8,321   |     
|Lease financing                         |  |      | 4,358   |     
|Other                                   |  |      | 1,014   |     
|                                       
|Total corporate banking                 |  |      | 31,559  |     
|Middle market:                          |  |      |         |     
|Commercial and industrial               |  |      | 26,983  |     
|Commercial real estate                  |  |      | 2,318   |     
|Lease financing                         |  |      | 1,008   |     
|Other                                   |  |      | 27      |     
|                                       
|Total middle market                     |  |      | 30,336  |     
|                                       
|Total Commercial Banking                |  |      | 61,895  |     
|                                       
|Card Services                           |  |      | 11,581  |     
|IMG and Corporate                       |  |      | 6,976   |     
|                                       
|Total loans                             |  |      | 148,125 |     
|Less: Allowance for credit losses       |  |      | 4,525   |     
|                                       
|Total loans, net                        |  | $    | 143,600 |     
|                                       



Loans
are net of unearned income of $2.3 billion and $2.7 billion as of December 31, 2002, and 2001, respectively. Loans held for sale, which are carried at the lower of cost or market value, totaled $6.9 billion and $4.2 billion at December 31, 2002, and
2001, respectively.



The Corporations
primary goal in managing credit risk is to minimize the impact of default by an individual borrower or group of borrowers. As a result, the Corporation strives to maintain a loan portfolio that is diverse in terms of loan type, industry, borrower
and geographic concentrations. As of December 31, 2002, and 2001, there were no significant loan concentrations with any single borrower, industry or geographic segment (see Credit Portfolio Composition on pages 63-66).



A loan is considered impaired when it is probable that all
principal and interest amounts due will not be collected in accordance with the loans contractual terms. Certain loans, such as loans carried at the lower of cost or fair value or small-balance homogeneous loans (e.g., credit card, home
mortgages and installment credit) are exempt from impairment determinations for disclosure purposes. Impaired loans, accordingly, exclude commercial nonaccrual loans that are held for sale and consumer loans classified as nonaccrual. These loans
totaled $1.1 billion at December 31, 2002 and 2001.



Impairment is recognized to the extent that the recorded investment of an impaired loan or pool of loans exceeds its value either based on the loans underlying collateral or the calculated present value of projected cash flows
discounted at the contractual interest rate. Loans having a significant recorded investment are measured on an individual basis, while loans not having a significant recorded investment are grouped and measured on a pool basis.



92    BANK ONE 2002 ANNUAL REPORT



---



NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS



The
Corporations impaired loan information is as follows:



|At December 31,                             |  | 2002 |       | 2001
|------------------------------------------- |  | ---- | ----- | ----
|                                           
|(In millions)                               |  |      |       |     
|Impaired loans with related allowance       |  | $    | 2,183 |     
|Impaired loans with no related allowance(1) |  |      | 11    |     
|                                           
|Total impaired loans                        |  | $    | 2,194 |     
|Allowance on impaired loans(2)              |  |      | 678   |     
|                                           



|At December 31,                              |  | 2002 |       | 2001 |   | 2000 
|-------------------------------------------- |  | ---- | ----- | ---- | - | -----
|                                            
|(In millions)                                |  |      |       |      |   |      
|Average balance of impaired loans            |  | $    | 2,462 |      | $ | 2,047
|Interest income recognized on impaired loans |  |      | 40    |      |   | 41   
|                                            



|(1) |  | Impaired loans for which the discounted cash flows, collateral value or market price equals or exceeds the carrying value of the loan do not require an allowance
under SFAS No. 114, Accounting by Creditors for Impairement of a loan  an amendment of FASB Statements No. 5 and 15.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | The allowance for impaired loans is included in the Corporations overall allowance for credit losses.
|--- |  | ------------------------------------------------------------------------------------------------------



Maturity Distribution and Interest Rate Sensitivity of Loans



A distribution of the maturity of loans by
line of business and, for those loans due after one year, a breakdown between those loans that have floating interest rates and those that have predetermined interest rates at December 31, 2002, follows:



|(In millions)                                    |  | One Year or Less |        | One to Five Years |   | Over Five Years |  | Total
|------------------------------------------------ |  | ---------------- | ------ | ----------------- | - | --------------- |  | -----
|                                                
|Retail:                                          |  |                  |        |                   |   |                 |  |      
|Small business commercial                        |  | $                | 2,865  |                   | $ | 4,337           |  | $    
|Home equity                                      |  |                  | 449    |                   |   | 827             |  |      
|Vehicle                                          |  |                  | 301    |                   |   | 9,267           |  |      
|Other personal                                   |  |                  | 3,016  |                   |   | 1,168           |  |      
|                                                
|Core businesses                                  |  |                  | 6,631  |                   |   | 15,599          |  |      
|Brokered home equity discontinued                |  |                  | 348    |                   |   | 9               |  |      
|Vehicle leases                                   |  |                  | 1,215  |                   |   | 2,381           |  |      
|                                                
|Brokered home equity discontinued/vehicle leases |  |                  | 1,563  |                   |   | 2,390           |  |      
|Total Retail                                     |  |                  | 8,194  |                   |   | 17,989          |  |      
|Commercial Banking:                              |  |                  |        |                   |   |                 |  |      
|Corporate banking:                               |  |                  |        |                   |   |                 |  |      
|Commercial and industrial                        |  |                  | 5,167  |                   |   | 11,660          |  |      
|Commercial real estate                           |  |                  | 3,920  |                   |   | 4,271           |  |      
|Lease financing                                  |  |                  | 217    |                   |   | 443             |  |      
|Other                                            |  |                  | 1,014  |                   |   |                |  |      
|Middle market:                                   |  |                  |        |                   |   |                 |  |      
|Commercial and industrial                        |  |                  | 13,345 |                   |   | 11,685          |  |      
|Commercial real estate                           |  |                  | 848    |                   |   | 1,283           |  |      
|Lease financing                                  |  |                  | 73     |                   |   | 591             |  |      
|Other                                            |  |                  | 27     |                   |   |                |  |      
|                                                
|Total Commercial Banking                         |  |                  | 24,611 |                   |   | 29,933          |  |      
|                                                
|Total(1)                                         |  | $                | 32,805 |                   | $ | 47,922          |  | $    
|                                                
|Loans with floating interest rates               |  |                  |        |                   | $ | 24,612          |  | $    
|Loans with predetermined interest rates          |  |                  |        |                   |   | 23,310          |  |      
|                                                
|Total                                            |  |                  |        |                   | $ | 47,922          |  | $    
|                                                



|(1) |  | Excludes Card Services, Investment Management Group and Corporate lines of business.
|--- |  | ------------------------------------------------------------------------------------



Foreign Outstandings



Foreign outstandings include loans, balances with banks, acceptances, securities, equity investments, accrued interest, other monetary assets and current
credit exposure on derivative contracts. At year-end 2002, 2001 and 2000, there were no countries for which cross-border and net local country claims exceeded 1.0% of total assets.



At December 31, 2002, Japan and Germany were the only countries for which cross-border claims totaled between
0.75% and 1.0% of total assets. These outstandings totaled $4.5 billion in aggregate. At December 31, 2001, there were no countries for which cross-border and net local country claims totaled between 0.75% and 1.0% of total assets. At December 31,
2000, Germany was the only country for which cross-border and net local country claims totaled between 0.75% and 1.0% of total assets. These outstandings amounted to $2.5 billion.



BANK ONE 2002 ANNUAL REPORT    93



---



NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS



Note 9  Credit Card
Securitizations



The Corporation transforms a substantial
portion of its credit card receivables into securities, which are sold to investors  a process referred to as securitization. Securitization impacts the Corporations consolidated balance sheet by removing those credit card receivables
that have been sold and by reclassifying those credit card receivables whose nature has been transformed but retained in certificate form (referred to as sellers interest) from loans to investments. Gain or loss on the sale of the
credit card receivable depends in part on the previous carrying amount of the financial assets involved in the transfer, allocated between the assets sold and the retained interests based on their relative fair value at the date of transfer. Gain or
loss on the sale of the credit card receivables, net of amortization of transaction costs and amortization from securitization repayments, is reported in securitization income. Securitization also impacts the Corporations consolidated income
statement by reclassifying interest income and fees, interchange income, credit losses and recoveries related to securitized receivables as securitization income. Credit card interest income and fees, interchange income, credit losses and recoveries
related to credit card receivables whose nature has been retained but converted to certificate form (sellers interest) are reclassified as investment income.



During 2002, the Corporation securitized approximately $6.8 billion in credit card receivables. Maturities of
credit card securitizations during 2002 were $10.2 billion, with an additional $8.2 billion scheduled for 2003. During 2002 and 2001, the Corporation recognized $50 million and $62 million, respectively, in net securitization amortization in the
consolidated income statement, including amortization of transaction costs, as the gain on securitization from new transactions was offset by amortization as investors in individual series were repaid.



A servicing asset or liability is not recognized in a credit
card securitization (and thus not considered in the gain or loss computation) since the Corporation receives adequate compensation relative to current market servicing prices to service the receivables sold. Transaction costs in credit card
securitizations are deferred and amortized over the life of the security as a reduction of noninterest income.



At December 31, 2002, and 2001, the estimated fair value of the interest-only strip associated with credit card securitizations was $205
million and $219 million, respectively, and the estimated fair value of the sellers interest was $28.1 billion and $23.9 billion, respectively. The interest-only strip and sellers interest are both recorded as investment securities. The
investor portion of accrued interest receivable is recorded in other assets in 2002 and was $685 million and $810 million at December 31, 2002 and 2001, respectively.



Certain estimates are used in determining the fair value of the interest-only strip at both the date of
securitization and the balance sheet date, including the excess spread, average receivable lives and the discount rate. The components of excess spread, which are estimated, include finance charge and fee revenue (excluding interchange income)
generated by the securitized loans in excess of interest paid to investors, related net credit losses and contractual servicing fees. The resulting expected cash flows over the average lives of the receivables are discounted at a rate commensurate
with the risk of the cash flows to determine the fair value. Such estimates and assumptions are subject to change, and accordingly, the Corporation may not recover all of the recorded investment of the interest-only strip (and thus be measured for
impairment). The receivables in each trust have unique attributes and therefore the interest-only strip related to each trust is evaluated separately. The sellers interest resulting from credit card securitizations is recorded at fair value
using a present value approach, with assumptions that are consistent with the valuation of the interest-only strip



The following represents the Corporations key weighted-average assumptions used to estimate the fair value of the retained interests
relating to credit card securitizations at December 31, 2002, and the pretax sensitivity of the fair values to immediate 10% and 20% adverse changes in these assumptions:



|(Dollars in millions)          |  | Interest- Only Strip(1) |       | Sellers Interest(2) |   | Total Retained Interests | 
|------------------------------ |  | ----------------------- | ----- | ------------------- | - | ------------------------ | 
|                              
|Receivable Lives:              |  |                         |       |                     |   |                          | 
|10% Adverse Change             |  | $                       | 22.1  |                     | $ | 14.3                     | 
|20% Adverse Change             |  |                         | 44.2  |                     |   | 28.8                     | 
|Excess Spread:                 |  |                         |       |                     |   |                          | 
|10% Adverse Change             |  |                         | 22.6  |                     |   | 14.7                     | 
|20% Adverse Change             |  |                         | 45.2  |                     |   | 29.4                     | 
|Expected Net Credit Losses:(3) |  |                         |       |                     |   |                          | 
|10% Adverse Change             |  |                         | 93.3  |                     |   | 67.5                     | 
|20% Adverse Change             |  |                         | 183.9 |                     |   | 119.3                    | 
|Discount Rate:                 |  |                         |       |                     |   |                          | 
|10% Adverse Change             |  |                         | 0.7   |                     |   | 0.4                      | 
|20% Adverse Change             |  |                         | 1.4   |                     |   | 0.9                      | 
|                              



|(1) |  | The effect of adverse changes in key assumptions on the fair value of the interest-only strip would be recorded in noninterest income.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | The effect of adverse changes in key assumptions on the fair value of the sellers interest is recorded in accumulated other adjustments to stockholders
equity, net of tax, unless the decline in value is deemed to be other than temporary, which would result in a charge to noninterest income upon recognition.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) |  | Certain trust legal documents include finance charge and fee revenue reversals in the definition of net credit losses, resulting in a higher net credit loss rate for
Trust purposes.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The sensitivity
analysis illustrates the potential magnitude of significant adverse changes in key assumptions used in valuing the retained interests, and thus the potential impact to the Corporations financial position and results of operations. However, the
sensitivities of the fair values of the retained interests to changes in each key assumption may not be linear. Furthermore, the sensitivities for each key variable are calculated independently of changes in the other key variables. Therefore, the
sensitivity analysis does not purport to present the maximum impairment loss that would result from 10% and 20% adverse changes in these assumptions. Actual experience observed may result in changes in multiple key assumptions concurrently, the
magnitude of which on the fair value of the retained interests would be dependent on the relative change and the direction of change. In addition, the sensitivity analysis does not give effect to corrective action that management could and would
take to mitigate the impact of adverse changes in key assumptions. The asset values of the retained interests are periodically reviewed for other-than-temporary impairment.



The key weighted-average economic assumptions and ranges of assumptions used to estimate the fair value of
retained interests at the date of securitization (including transfer of new balances



94    BANK ONE 2002 ANNUAL REPORT



---



NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS





under revolving structures) for credit card securitizations occurring during 2002 were approximately the same as those used to value the retained
interests at December 31, 2002.



Cash flows
received from credit card securitization master trusts (i.e., QSPEs) during the years ended December 31 are as follows:



|(In millions)                                           |  | 2002 |        | 2001 |   | 2000   | 
|------------------------------------------------------- |  | ---- | ------ | ---- | - | ------ | 
|                                                       
|Proceeds from reinvestment in revolving securitizations |  | $    | 60,633 |      | $ | 72,206 | 
|Proceeds from new securitizations                       |  |      | 6,775  |      |   | 3,845  | 
|Servicing fees received                                 |  |      | 505    |      |   | 598    | 
|Cash flows received on retained interests(1)            |  |      | 2,586  |      |   | 2,577  | 
|Cash released from (used to fund) spread accounts       |  |      | 13     |      |   | 146    | 
|                                                       



|(1) |  | Includes cash flows from interest-only strips as well as interchange fees received from securitized accounts.
|--- |  | -------------------------------------------------------------------------------------------------------------



For a detailed discussion of the Corporations loan
securitization process for credit card loans, see the Loan Securitizations section beginning on page 74.



Note 10  Allowance for Credit Losses



Changes in the allowance for credit losses for the years ended December 31 are as follows:



|(In millions)               |  | 2002 |        |   | 2001 |   |        | 2000 | 
|--------------------------- |  | ---- | ------ | - | ---- | - | ------ | ---- | 
|                           
|Balance, beginning of year  |  | $    | 4,528  |   |      | $ | 4,110  |      | 
|Additions (deductions):     |  |      |        |   |      |   |        |      | 
|Charge-offs                 |  |      | (2,829 | ) |      |   | (2,630 | )    | 
|Recoveries                  |  |      | 364    |   |      |   | 342    |      | 
|                           
|Net charge-offs             |  |      | (2,465 | ) |      |   | (2,288 | )    | 
|Provision for credit losses |  |      | 2,487  |   |      |   | 2,510  |      | 
|Transfers(1)                |  |      | (25    | ) |      |   | 196    |      | 
|                           
|Balance, end of year        |  | $    | 4,525  |   |      | $ | 4,528  |      | 
|                           



|(1) |  | Transfers to the allowance for credit losses in 2001 primarily represent the addition of the Wachovia credit card portfolio. Transfers from the allowance for credit
losses for 2000 primarily represent allocable credit allowances associated with consumer loan sale transactions, including securitization transactions.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Note 11  Long-Term Debt



Long-term debt consists of borrowings having an original maturity of greater than one year. Original issue discount and
deferred issuance costs are amortized into interest expense over the terms of the related notes. Long-term debt at December 31, 2002 and 2001 is as follows:



|(Dollars in millions)           |  | Interest Rate |   |  | Maturities |  | 2002 |        | 2001
|------------------------------- |  | ------------- | - |  | ---------- |  | ---- | ------ | ----
|                               
|Parent Company                  |  |               |   |  |            |  |      |        |     
|Senior debt:                    |  |               |   |  |            |  |      |        |     
|Medium-term notes               |  | 1.497.63     | % |  | 20032008  |  | $    | 11,973 |     
|Other                           |  |              |   |  |           |  |      | 6      |     
|Subordinated debt:              |  |               |   |  |            |  |      |        |     
|Notes                           |  | 5.2510.00    | % |  | 20032027  |  |      | 7,270  |     
|Floating rate notes             |  | Various       |   |  | 2003       |  |      | 150    |     
|Subsidiaries                    |  |               |   |  |            |  |      |        |     
|Bank notes                      |  | 1.407.93     | % |  | 20032007  |  |      | 13,866 |     
|Subordinated notes              |  | 6.008.25     | % |  | 20032008  |  |      | 1,590  |     
|Capital leases                  |  | 4.2712.60    | % |  | 20032011  |  |      | 73     |     
|Federal Home Loan Bank Advances |  | 1.354.57     | % |  | 20052007  |  |      | 3,715  |     
|Other                           |  | 1.0015.93    | % |  | 20032018  |  |      | 1,276  |     
|                               
|Total long-term debt            |  |               |   |  |            |  | $    | 39,919 |     
|                               



Aggregate annual scheduled repayments of long-term debt at December 31, 2002 are as follows:



|(In millions) |  | Total
|------------- |  | -----
|             
|2003          |  | $    
|2004          |  |      
|2005          |  |      
|2006          |  |      
|2007          |  |      
|Thereafter    |  |      
|             
|Total         |  | $    
|             



Note 12 
Deposits and Short-Term Borrowings



Deposits



The maturity distribution of domestic time certificates of deposit of $100,000
and over and deposits in foreign offices, predominantly in amounts in excess of $100,000, at December 31, 2002 is as follows:



|(Dollars in millions)                                       |  | Amount |        | Percent |    
|----------------------------------------------------------- |  | ------ | ------ | ------- | ---
|                                                           
|Domestic Time Certificates of Deposit of $100,000 and Over: |  |        |        |         |    
|Three months or less                                        |  | $      | 3,556  |         | 26 
|Over three months to six months                             |  |        | 2,317  |         | 18 
|Over six months to twelve months                            |  |        | 1,352  |         | 10 
|Over twelve months                                          |  |        | 6,265  |         | 46 
|                                                           
|Total                                                       |  | $      | 13,490 |         | 100
|                                                           
|Foreign Offices:                                            |  |        |        |         |    
|Three months or less                                        |  | $      | 16,061 |         | 99 
|Over three months to six months                             |  |        | 63     |         |   
|Over six months to twelve months                            |  |        | 82     |         | 1  
|Over twelve months                                          |  |        | 31     |         |   
|                                                           
|Total                                                       |  | $      | 16,237 |         | 100
|                                                           



The
Corporation has an aggregate amount of domestic other time deposits of $100,000 and over of $255 million at December 31, 2002, which primarily mature within three months.



BANK ONE 2002 ANNUAL REPORT    95



---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





Short-Term Borrowings



Borrowings with original maturities of one year or less are
classified as short-term. The following is a summary of short-term borrowings for the years ended December 31:



|                                            |  | At Year-End |        | For the Year          
|------------------------------------------- |  | ----------- | ------ | ----------------------
|                                           
|(Dollars in millions)                       |  | Outstanding |        | Weighted- Average Rate
|                                           
|2002:                                       |  |             |        |                       
|Federal funds purchased                     |  | $           | 3,833  |                       
|Securities sold under repurchase agreements |  |             | 10,745 |                       
|Bank notes                                  |  |             | 8,519  |                       
|Commercial paper                            |  |             | 567    |                       
|Other short-term borrowings                 |  |             | 3,220  |                       
|                                            |  |             |       
|Total short-term borrowings                 |  | $           | 26,884 |                       
|                                           
|2001:                                       |  |             |        |                       
|Federal funds purchased                     |  | $           | 3,171  |                       
|Securities sold under repurchase agreements |  |             | 10,557 |                       
|Bank notes                                  |  |             | 4,529  |                       
|Commercial paper                            |  |             | 828    |                       
|Other short-term borrowings                 |  |             | 4,898  |                       
|                                            |  |             |       
|Total short-term borrowings                 |  | $           | 23,983 |                       
|                                           
|2000:                                       |  |             |        |                       
|Federal funds purchased                     |  | $           | 5,253  |                       
|Securities sold under repurchase agreements |  |             | 6,867  |                       
|Bank notes                                  |  |             | 12,426 |                       
|Commercial paper                            |  |             | 3,048  |                       
|Other short-term borrowings                 |  |             | 2,529  |                       
|                                            |  |             |       
|Total short-term borrowings                 |  | $           | 30,123 |                       
|                                           

|(1) |  | The Corporation uses interest rate swaps to hedge certain short-term borrowings in its asset and liability management activities. The overall weighted average rate,
including the effects of derivative contracts was 2.24%, 4.28% and 6.26% at December 31, 2002, 2001 and 2000, respectively.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Note 13  Guaranteed Preferred Beneficial Interest in the Corporations Junior Subordinated Debt



The Corporation has sponsored ten trusts with a total aggregate issuance
outstanding of $3.3 billion at December 31, 2002, in trust preferred securities as follows:



|                                          |  | Trust Preferred    |  | Junior Subordinated Debt Owned by Trust
|----------------------------------------- |  | ------------------ |  | ---------------------------------------
|                                         
|(Dollars in millions)                     |  | Issuance Date      |  | Initial Liquidation Value              
|                                         
|Capital VI                                |  | September 28, 2001 |  | $                                      
|Capital V                                 |  | January 30, 2001   |  |                                        
|Capital IV                                |  | August 30, 2000    |  |                                        
|Capital III                               |  | August 30, 2000    |  |                                        
|Capital II                                |  | August 8, 2000     |  |                                        
|Capital I                                 |  | September 20, 1999 |  |                                        
|First Chicago NBD Capital 1               |  | January 31, 1997   |  |                                        
|                                          |  |                    |  |                                        
|First USA Capital Trust I(2)              |  | December 20, 1996  |  |                                        
|First Chicago NBD Institutional Capital A |  | December 3, 1996   |  |                                        
|First Chicago NBD Institutional Capital B |  | December 5, 1996   |  |                                        
|                                         



|(1) |  | Redeemable at any time subject to approval by the Federal Reserve Board.
|--- |  | ------------------------------------------------------------------------

|(2) |  | The Corporation paid a premium of $36 million to repurchase $193 million of these securities in 1997.
|--- |  | -----------------------------------------------------------------------------------------------------



96    BANK ONE 2002 ANNUAL REPORT



---



NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS





These trust preferred securities are tax-advantaged issues that qualify for Tier 1 capital treatment. Distributions on these securities
are included in interest expense on long-term debt. Each of the trusts is a statutory business trust organized for the sole purpose of issuing trust securities and investing the proceeds thereof in junior subordinated debentures of the Corporation,
the sole asset of each trust. The preferred trust securities of each trust represent preferred beneficial interests in the assets of the respective trusts and are subject to mandatory redemption upon payment of the junior subordinated debentures
held by the trust. The common securities of each trust are wholly-owned by the Corporation. Each trusts ability to pay amounts due on the trust preferred securities is solely dependent upon the Corporation making payment on the related junior
subordinated debentures. The Corporations obligations under the junior subordinated securities and other relevant trust agreements, in aggregate, constitute a full and unconditional guarantee by the Corporation of each respective trusts
obligations under the trust securities issued by each respective trust. See Note 15 Dividends and Capital Restrictions for discussion of the restrictions on the ability of the Corporation to obtain funds from its subsidiaries.



Note 14  Stock Dividends and Preferred Stock



The Corporation is authorized to issue 50 million shares of
preferred stock with a par value of $0.01 per share. On November 1, 2001, the Corporation redeemed all outstanding preferred stock with cumulative and adjustable dividends, Series B and C, totaling $190 million. The redemption price for both the
Series B and C preferred stock was $100 per share, plus accrued and unpaid dividends totaling $1.00 per share and $1.083 per share, respectively. At December 31, 2000, the Corporation had outstanding 1,191,000 and 713,800 shares of Series B and C
preferred stock with a stated value of $100 per share and a carrying value of $119 million and $71 million, respectively. The dividend rate on each of the cumulative adjustable rate series was based on a stated value and adjusted quarterly, based on
a formula that considers the interest rates for selected short- and long-term U.S. Treasury securities prevailing at the time the rate is set.



Note 15  Dividends and Capital Restrictions



The Corporations national bank subsidiaries are subject to statutory limitations on their ability to pay dividends. Dividends cannot exceed the
level of undivided profits. In addition, a national bank cannot declare a dividend, without regulatory approval, in an amount in excess of its net income for the current year and the combined net profits for the preceding two years. State bank
subsidiaries may also be subject to limitations on dividend payments.



Based on these statutory requirements, the bank affiliates could have declared aggregate additional dividends of up to approximately $4.0 billion without regulatory approval at January 1, 2003. The payment of dividends by
any bank may also be affected by other factors, such as the maintenance of adequate capital.



The bank affiliates are subject to various regulatory capital requirements that require them to maintain minimum ratios of total and Tier 1 capital to risk-weighted assets and of Tier 1 capital to
average assets. Failure to meet minimum capital requirements results in certain regulatory actions that could have a direct material effect on the bank affiliates financial statements. As of December 31, 2002, management believed that each of
the bank affiliates met all applicable capital adequacy requirements and are correctly categorized as well capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since that
categorization that management believes have changed the institutions category.



The actual and required capital amounts and ratios for the Corporation and its principal banking subsidiaries are presented as follows:







|(Dollars in millions)          |  | Tier 1 Capital |        | Total Capital |   | Risk- Weighted Assets |  | Adjusted Average Assets |         | Tier 1 Capital(1) Ratio |   |         | Total Capital(1) Ratio |      |   | Tier 1 Leverage(2) Ratio |     
|------------------------------ |  | -------------- | ------ | ------------- | - | --------------------- |  | ----------------------- | ------- | ----------------------- | - | ------- | ---------------------- | ---- | - | ------------------------ | ----
|                              
|December 31, 2002              |  |                |        |               |   |                       |  |                         |         |                         |   |         |                        |      |   |                          |     
|The Corporation (consolidated) |  | $              | 23,918 |               | $ | 33,119                |  | $                       | 241,468 |                         | $ | 267,321 |                        | 9.9  | % |                          | 13.7
|Bank One, N.A. (Chicago)       |  |                | 16,888 |               |   | 23,360                |  |                         | 173,725 |                         |   | 211,067 |                        | 9.7  |   |                          | 13.4
|Bank One, N.A. (Columbus)      |  |                | 3,164  |               |   | 5,162                 |  |                         | 42,193  |                         |   | 57,244  |                        | 7.5  |   |                          | 12.2
|Bank One, Delaware N.A.(3)     |  |                | 2,630  |               |   | 2,756                 |  |                         | 17,748  |                         |   | 16,213  |                        | 14.8 |   |                          | 15.5
|                              
|December 31, 2001              |  |                |        |               |   |                       |  |                         |         |                         |   |         |                        |      |   |                          |     
|The Corporation (consolidated) |  | $              | 21,749 |               | $ | 30,840                |  | $                       | 253,330 |                         | $ | 264,720 |                        | 8.6  | % |                          | 12.2
|Bank One, N.A. (Chicago)(4)    |  |                | 15,407 |               |   | 22,971                |  |                         | 181,450 |                         |   | 207,017 |                        | 8.5  |   |                          | 12.7
|Bank One, N.A. (Columbus)      |  |                | 2,915  |               |   | 4,594                 |  |                         | 42,165  |                         |   | 45,286  |                        | 6.9  |   |                          | 10.9
|Bank One, Delaware N.A.(3)     |  |                | 2,099  |               |   | 2,253                 |  |                         | 13,645  |                         |   | 14,737  |                        | 15.4 |   |                          | 16.5
|                              
|Well capitalized ratios(5)     |  |                |        |               |   |                       |  |                         |         |                         |   |         |                        | 6.0  | % |                          | 10.0
|Minimum capital ratios(5)      |  |                |        |               |   |                       |  |                         |         |                         |   |         |                        | 4.0  |   |                          | 8.0 
|                              

|(1) |  | Tier 1 Capital or Total Capital, as applicable, divided by risk-weighted assets. Risk-weighted assets include assets and off-balance sheet positions, weighted by the
type of instruments and the risk weight of the counterparty, collateral, or guarantor.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) |  | Tier 1 Capital divided by adjusted average quarterly assets (net of allowance for loan losses, goodwill and certain intangible assets).
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------



|(3) |  | Formerly First USA Bank, N.A.
|--- |  | -----------------------------



|(4) |  | Restated to show the effect of the 2002 mergers with Bank One, Michigan, Bank One, Indiana, N.A., Bank One, Wisconsin, Bank One, Colorado, N.A., Bank One, Illinois,
N.A. and American National Bank & Trust.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(5) |  | As defined by the regulations issued by the Federal Reserve Board, the FDIC and the OCC.
|--- |  | ----------------------------------------------------------------------------------------



|(6) |  | Represents requirements for bank subsidiaries pursuant to regulations issued under the Federal Deposit Insurance Corporation Improvement Act. There is no Tier 1
Leverage component in the definition of a well-capitalized bank holding company.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Federal banking law restricts each bank subsidiary from extending credit to the Corporation in excess of 10% of the subsidiarys capital stock and surplus, as defined. Any such extensions of
credit are subject to strict collateral requirements.



BANK ONE 2002 ANNUAL REPORT    97



---



NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS





Note 16  Supplemental Disclosures for Statements of Cash Flows



During 2000, the Corporation transferred $6.5 billion of investment securities available for sale to trading securities. This
transfer was for capital management purposes.



Loans transferred to other real estate owned totaled $414 million, $162 million, and $131 million in 2002, 2001, and 2000, respectively. During 2000, the Corporation recognized several non-cash charges to earnings for significant
items. Several of these items will not result in future cash outflows while other items represent future uses of cash. See tables 1 and 2 on pages 5253 for a detailed listing of significant items.



Note 17  Supplemental Disclosures for Accumulated Other Adjustments
to Stockholders Equity



Accumulated other adjustments
to stockholders equity are as follows:



|(In millions)                                                                                                                                                               |  | 2002 |      |   | 2001 |   |      | 2000 | 
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ---- | - | ---- | - | ---- | ---- | 
|                                                                                                                                                                           
|Fair value adjustment on investment securitiesavailable for sale:                                                                                                          |  |      |      |   |      |   |      |      | 
|Balance, beginning of year                                                                                                                                                  |  | $    | 78   |   |      | $ | (15  | )    | 
|Change in fair value, net of taxes of $323, $86 and $(6) for the year ended December 31,
2002, 2001 and 2000, respectively                                                  |  |      | 560  |   |      |   | 158  |      | 
|Reclassification adjustment, net of taxes of $(50), $(38) and $151 for the year ended
December 31, 2002, 2001 and 2000, respectively                                        |  |      | (86  | ) |      |   | (65  | )    | 
|                                                                                                                                                                           
|Balance, end of year                                                                                                                                                        |  |      | 552  |   |      |   | 78   |      | 
|Fair value adjustment on derivative instrumentscash flow type
hedges:                                                                                                      |  |      |      |   |      |   |      |      | 
|Balance, beginning of period                                                                                                                                                |  |      | (146 | ) |      |   |     |      | 
|Transition adjustment at January 1, 2001, net of tax benefit of $56                                                                                                         |  |      |     |   |      |   | (98  | )    | 
|Net change in fair value associated with current period hedging activities, net of tax
benefits of $425 and $70 for the year ended December 31, 2002 and 2001, respectively |  |      | (711 | ) |      |   | (139 | )    | 
|Net reclassification into earnings, net of taxes of $178 and $49 for the year ended
December 31, 2002 and 2001, respectively(1)                                             |  |      | 297  |   |      |   | 91   |      | 
|                                                                                                                                                                           
|Balance, end of year                                                                                                                                                        |  |      | (560 | ) |      |   | (146 | )    | 
|Accumulated translation adjustment:                                                                                                                                         |  |      |      |   |      |   |      |      | 
|Balance, beginning of period                                                                                                                                                |  |      | 3    |   |      |   | 10   |      | 
|Translation gain (loss), net of hedge results and taxes                                                                                                                     |  |      | (3   | ) |      |   | (7   | )    | 
|                                                                                                                                                                           
|Balance, end of year                                                                                                                                                        |  |      |     |   |      |   | 3    |      | 
|                                                                                                                                                                           
|Total accumulated other adjustments to stockholders equity                                                                                                                 |  | $    | (8   | ) |      | $ | (65  | )    | 
|                                                                                                                                                                           

|(1) |  | During 2001, $89 million after-tax of the transition adjustment recorded at January 1, 2001, was reclassified into earnings.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------



Note 18  Employee Benefits



(a) Pension Plans



The Corporations qualified plans change in benefit obligation,
change in plan assets and funded status are as follows:



|(In millions)                          |  | 2002 |       |   | 2001 |  
|-------------------------------------- |  | ---- | ----- | - | ---- | -
|                                      
|Change in benefit obligation:          |  |      |       |   |      |  
|Benefit obligation, January 1          |  | $    | 2,297 |   |      | $
|Service cost                           |  |      | 101   |   |      |  
|Interest cost                          |  |      | 166   |   |      |  
|EGTRRA adjustment(1)                   |  |      |      |   |      |  
|Actuarial loss                         |  |      | 182   |   |      |  
|Benefits paid                          |  |      | (327  | ) |      |  
|                                      
|Benefit obligation, December 31        |  | $    | 2,419 |   |      | $
|                                      
|Change in plan assets:                 |  |      |       |   |      |  
|Fair value of plan assets, January 1   |  | $    | 2,747 |   |      | $
|Actual loss on plan assets             |  |      | (219  | ) |      |  
|Corporation contribution               |  |      | 280   |   |      |  
|Benefits paid                          |  |      | (327  | ) |      |  
|                                      
|Fair value of plan assets, December 31 |  | $    | 2,481 |   |      | $
|                                      
|Funded status                          |  | $    | 62    |   |      | $
|Unrecognized net actuarial loss        |  |      | 829   |   |      |  
|Unrecognized prior service cost        |  |      | 20    |   |      |  
|                                      
|Prepaid pension costs, December 31     |  | $    | 911   |   |      | $
|                                      

|(1) |  | The Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) contained various provisions relating to the operations of qualified pension plans. Increases
to the benefit limits and the limit on pensionable earnings caused a shift in pension obligation from the non-qualified to the qualified plan.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



98    BANK ONE 2002 ANNUAL REPORT



---



NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS





Plan assets include approximately 1.0 million shares of the Corporations common stock with a fair value of approximately $38 million
and $40 million at December 31, 2002, and 2001, respectively.



The net periodic pension expense (benefit) for 2002, 2001 and 2000 for the Corporations qualified and nonqualified pension plans is as follows:



|(In millions)                                  |  | 2002 |      |   | 2001 |   |      | 2000 | 
|---------------------------------------------- |  | ---- | ---- | - | ---- | - | ---- | ---- | 
|                                              
|Service cost-benefits earned during the period |  | $    | 104  |   |      | $ | 96   |      | 
|Interest cost on benefit obligation            |  |      | 173  |   |      |   | 177  |      | 
|Expected return on plan assets                 |  |      | (272 | ) |      |   | (287 | )    | 
|Amortization of prior service costs            |  |      | 9    |   |      |   | 8    |      | 
|Recognized actuarial (gain) loss               |  |      | 5    |   |      |   | (1   | )    | 
|Amortization of transition assets              |  |      |     |   |      |   | (7   | )    | 
|                                              
|Net periodic pension expense (benefit)         |  | $    | 19   |   |      | $ | (14  | )    | 
|                                              



The
accrued pension cost for the Corporations nonqualified supplemental pension plans was $44 million and $39 million at December 31, 2002, and 2001, respectively. Such plans are unfunded.



The assumptions used in determining the Corporations
benefit obligation and net periodic pension cost for both qualified and nonqualified supplemental pension plans are as follows:



|For The Year Ended December 31,                       |  | 2003 |      |  | 2002 |   |  | 2001 |   |  | 2000 |  
|----------------------------------------------------- |  | ---- | ---- |  | ---- | - |  | ---- | - |  | ---- | -
|                                                     
|Actuarial assumptions:                                |  |      |      |  |      |   |  |      |   |  |      |  
|Weighted-average discount rate for benefit obligation |  | 6.50 | %(1) |  | 6.50 | % |  | 7.00 | % |  | 7.50 | %
|Weighted-average rate of compensation increase        |  | 4.25 | %    |  | 4.25 | % |  | 4.25 | % |  | 4.25 | %
|Expected long-term rate of return on plan assets      |  | 7.50 | %    |  | 8.50 | % |  | 9.50 | % |  | 9.50 | %
|                                                     

|(1) |  | Rate currently expected at December 31, 2003.
|--- |  | ---------------------------------------------



(b) Postretirement Benefits Other Than Pensions



The Corporation sponsors postretirement life insurance plans and provides health care benefits for certain retirees and grandfathered employees when they
retire. The postretirement life insurance benefit is noncontributory, while the health care benefits are contributory.



The Corporations postretirement benefit plans change in benefit obligation, change in plan assets and funded status are as
follows:



|(In millions)                             |  | 2002 |      |   | 2001 |  
|----------------------------------------- |  | ---- | ---- | - | ---- | -
|                                         
|Change in benefit obligation:             |  |      |      |   |      |  
|Benefit obligation, January 1             |  | $    | 233  |   |      | $
|Interest cost                             |  |      | 15   |   |      |  
|Actuarial loss                            |  |      | 24   |   |      |  
|Benefits paid                             |  |      | (20  | ) |      |  
|                                         
|Benefit obligation, December 31           |  | $    | 252  |   |      | $
|                                         
|Change in plan assets:                    |  |      |      |   |      |  
|Fair value of plan assets, January 1      |  | $    |     |   |      | $
|Implementation of retiree VEBA            |  |      | 76   |   |      |  
|Actual return on plan assets              |  |      | 6    |   |      |  
|Employer contribution                     |  |      | 18   |   |      |  
|Benefits paid                             |  |      | (20  | ) |      |  
|                                         
|Fair value of plan assets, December 31    |  | $    | 80   |   |      | $
|                                         
|Funded status                             |  | $    | (172 | ) |      | $
|Unrecognized net actuarial loss           |  |      | 85   |   |      |  
|Unrecognized prior service cost           |  |      | (12  | ) |      |  
|                                         
|Accrued postretirement costs, December 31 |  | $    | (99  | ) |      | $
|                                         



Net
periodic cost for postretirement health care and life insurance benefits during 2002, 2001 and 2000 includes the following:



|(In millions)                                                  |  | 2002 |     |   | 2001 |   |     | 2000 | 
|-------------------------------------------------------------- |  | ---- | --- | - | ---- | - | --- | ---- | 
|                                                              
|Interest cost on accumulated postretirement benefit obligation |  | $    | 15  |   |      | $ | 14  |      | 
|Amortization of prior service costs                            |  |      | (12 | ) |      |   | (12 | )    | 
|Expected return on plan assets                                 |  |      | (3  | ) |      |   |    |      | 
|Recognized actuarial loss                                      |  |      | 3   |   |      |   |    |      | 
|Curtailment                                                    |  |      |    |   |      |   |    |      | 
|                                                              
|Net periodic postretirement cost                               |  | $    | 3   |   |      | $ | 2   |      | 
|                                                              



The
weighted average discount rate used in determining the accumulated postretirement benefit obligation was 6.50% at December 31, 2002, and 7.00% at December 31, 2001.



The expected long-term rate of return on plan assets was 5.40% in 2002. For measurement purposes, an annual
rate of increase of 10.00% was assumed for 2002 in the cost of covered health care benefits; this range was assumed to decrease to 5.00% in the years 2010 and thereafter. These assumptions have a significant effect on the amounts reported.
Accordingly, the effect of a 1.00% change in the assumed health care cost trend rates is as follows:



|(In millions)                                                              |  | 1% increase |      | 1% decrease |  
|-------------------------------------------------------------------------- |  | ----------- | ---- | ----------- | -
|                                                                          
|Effect on 2002 service and interest cost components                        |  | $           | 1.0  |             | $
|Effect on December 31, 2002, accumulated postretirement benefit
obligation |  | $           | 16.7 |             | $
|                                                                          



BANK ONE 2002 ANNUAL REPORT    99



---



NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS





(c) 401(k) Plan



The Corporation sponsored a 401(k) plan that covered substantially all of its employees. The expense related to this plan was $98 million in 2002, $95
million in 2001 and $137 million in 2000.



Note 19 
Stock-Based Compensation



The Corporation utilizes several
types of stock-based awards as part of its overall compensation program. In addition, the Corporation provides employees the opportunity to purchase its shares through its Employee Stock Purchase Plan. The Corporations stock-based compensation
plans provide for granting of awards to purchase or receive common shares and include limits as to the aggregate number of shares available for grants and the total number of shares available for grants of stock awards in any one year. Compensation
cost charged against income for the Corporations stock-based compensation plans was $118 million for 2002, $70 million for 2001 and $59 million for 2000.



(a) Restricted Shares



Restricted shares granted to key officers of the Corporation require them to continue employment for a stated number of years from the grant date before
restrictions on the shares lapse. The market value of the restricted shares as of the date of grant is amortized to compensation expense as earned over the restriction period. Holders of restricted stock receive dividends and have the right to vote
the shares.



(b) Stock Options



The Corporations stock option plans generally provide that the exercise
price of any stock option may not be less than the closing price of the common stock on the trading day preceding the date of grant of the common stock.



Options granted under the Corporations stock-based compensation program generally vest ratably over a five-year period and have a
term of ten years. Certain option grants include the right to receive additional option grants (reload or restorative options) in an amount equal to the number of common shares used to satisfy the exercise price and
applicable withholding taxes. Upon grant, reload options assume the same remaining term as the related original option and vest six months from the date of grant.



Summarized stock option activity for 2002, 2001 and 2000, respectively, and details of the Corporations
stock options outstanding at December 31, 2002, follows:



|                           |  | 2002    |   | 2001 |                          | 2000 
|-------------------------- |  | ------- | - | ---- | ------------------------ | -----
|                          
|(Shares in thousands)      |  | Shares  |   |      | Wtd. Avg. Exercise Price |      
|                          
|Outstanding at January 1   |  | 90,482  |   |      | $                        | 35.72
|Granted                    |  | 20,063  |   |      |                          | 40.95
|Exercised                  |  | (10,223 | ) |      |                          | 26.60
|Forfeited                  |  | (4,210  | ) |      |                          | 41.16
|                          
|Outstanding at December 31 |  | 96,112  |   |      | $                        | 37.57
|                          
|Exercisable at December 31 |  | 58,037  |   |      | $                        | 36.84
|                          



|                                               |  | Options Outstanding              |  | Options Exercisable     
|---------------------------------------------- |  | -------------------------------- |  | ------------------------
|                                              
|(Shares in thousands) Range of Exercise Prices |  | Number Outstanding Dec. 31, 2002 |  | Wtd. Avg. Exercise Price
|                                              
|Less than $20.00                               |  | 1,220                            |  | $                       
|$20.01  $25.00                                |  | 2,597                            |  |                         
|$25.01  $30.00                                |  | 23,932                           |  |                         
|$30.01  $35.00                                |  | 4,785                            |  |                         
|$35.01  $40.00                                |  | 26,151                           |  |                         
|$40.01  $45.00                                |  | 18,385                           |  |                         
|$45.01  $55.00                                |  | 15,236                           |  |                         
|Greater than $55.00                            |  | 3,806                            |  |                         
|                                              
|Total                                          |  | 96,112                           |  | $                       
|                                              





100    BANK ONE 2002 ANNUAL REPORT



---



NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS





(c) Employee Stock Purchase Plan



The Corporation sponsors an Employee Stock Purchase Plan designed to encourage employee stock ownership. This plan generally allows eligible employees to
purchase shares of the Corporations common stock at a 15% discount from the market price at the beginning of an offering or the market price at the end of such offering, whichever is lower. During the current two-year offering period, an
employee is allowed to make deposits of up to 20% of their earnings (up to a designated maximum) on an annual basis to an interest-bearing savings account to purchase the number of shares permissible under the plan. The maximum number of shares each
participant may purchase cannot exceed the contribution limit divided by the applicable purchase price on the offering date.



Shares purchased by the participant are subject to a one-year holding period and cannot be sold or transferred for one year after the
purchase date. Upon adoption of SFAS No. 123 in 2002, the Corporation prospectively recognizes compensation expense over the offering period equal to the estimated fair value of the projected shares to be purchased by the employee.



(d) Fair Value of Stock-Based Compensation



The grant date fair values of stock options granted under the
Corporations various stock option plans and the Employee Stock Purchase Plan were estimated using the Black-Scholes option-pricing model. This model was developed to estimate the fair value of traded options, which have different
characteristics than employee stock options. In addition, changes to the subjective input assumptions can result in materially different fair market value estimates. Therefore, the Black-Scholes model may not necessarily provide a reliable single
measure of the fair value of employee stock options and purchase rights.



Summarized stock-based compensation grants and their related weighted-average grant-date fair values for the years ended December 31 follows:



|                             |  | 2002             |     | 2001 |                                           | 2000 
|---------------------------- |  | ---------------- | --- | ---- | ----------------------------------------- | -----
|                            
|(Shares in thousands)        |  | Number of Shares |     |      | Wtd. Avg. Grant Date Fair Value Per Share |      
|                            
|Stock option plans           |  | 20,063           |     |      | $                                         | 12.68
|Restricted shares            |  | 3,488            |     |      |                                           | 37.68
|Employee Stock Purchase Plan |  | 3,300            | (1) |      |                                           | 11.48
|                            

|(1) |  | Estimated number of shares that employees would purchase under the 2002 plan.
|--- |  | -----------------------------------------------------------------------------



The following assumptions were used to determine the Black-Scholes weighted-average grant date fair value of
options granted during 2002, 2001 and 2000:



|                              |  | Stock Option Plans |   |  | Employee Stock Purchase Plans |  
|----------------------------- |  | ------------------ | - |  | ----------------------------- | -
|                             
|Weighted-Average Assumptions: |  | 2002               |   |  | 2001                          |  
|                             
|Expected dividend yield       |  | 1.97               | % |  | 2.29                          | %
|Expected volatility           |  | 35.84              |   |  | 36.85                         |  
|Risk-free interest rate       |  | 4.34               |   |  | 5.02                          |  
|Expected life (in years)      |  | 4.88               |   |  | 4.64                          |  
|                             



Note 20  Income
Taxes



The components of total applicable income tax expense
(benefit) in the consolidated income statement for the years ended December 31 follows:



|(In millions)                     |  | 2002 |       |   | 2001 |   |       | 2000 | 
|--------------------------------- |  | ---- | ----- | - | ---- | - | ----- | ---- | 
|                                 
|Income tax expense:               |  |      |       |   |      |   |       |      | 
|Current:                          |  |      |       |   |      |   |       |      | 
|Federal                           |  | $    | 1,208 |   |      | $ | 797   |      | 
|Foreign                           |  |      | 7     |   |      |   | 11    |      | 
|State                             |  |      | 144   |   |      |   | 115   |      | 
|                                 
|Total                             |  |      | 1,359 |   |      |   | 923   |      | 
|Deferred:                         |  |      |       |   |      |   |       |      | 
|Federal                           |  |      | 138   |   |      |   | 194   |      | 
|Foreign                           |  |      | 1     |   |      |   | 5     |      | 
|State                             |  |      | (30   | ) |      |   | (4    | )    | 
|                                 
|Total                             |  |      | 109   |   |      |   | 195   |      | 
|                                 
|Applicable income taxes (benefit) |  | $    | 1,468 |   |      | $ | 1,118 |      | 
|                                 



The tax
effects of fair value adjustments on securities available for sale, foreign currency translation adjustments and certain tax benefits related to stock options are recorded directly to stockholders equity. The net tax (benefit) charge recorded
directly to stockholders equity was $(28) million in 2002, $(47) million in 2001 and $107 million in 2000.



BANK ONE 2002 ANNUAL REPORT    101



---



NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS



A
reconciliation of expected income tax expense at the federal statutory rate of 35% to the Corporations applicable income tax expense (benefit) and effective tax rate follows:



|(Dollars in millions)                                 |  | 2002 |       |   | 2001 |      |   | 2000 |  
|----------------------------------------------------- |  | ---- | ----- | - | ---- | ---- | - | ---- | -
|                                                     
|Statutory tax rate                                    |  | $    | 1,667 |   |      | 35.0 | % |      | $
|Increase (decrease) resulting from:                   |  |      |       |   |      |      |   |      |  
|State income taxes, net of federal income tax benefit |  |      | 74    |   |      | 1.6  |   |      |  
|Tax-exempt interest                                   |  |      | (50   | ) |      | (1.1 | ) |      |  
|Tax credits                                           |  |      | (287  | ) |      | (6.1 | ) |      |  
|Goodwill                                              |  |      |      |   |      |     |   |      |  
|Cash surrender value of life insurance                |  |      | (54   | ) |      | (1.1 | ) |      |  
|Other, net                                            |  |      | 118   |   |      | 2.5  |   |      |  
|                                                     
|Applicable income taxes (benefit)                     |  | $    | 1,468 |   |      | 30.8 | % |      | $
|                                                     



A net
deferred tax liability is included in other liabilities in the consolidated balance sheet as a result of temporary differences between the carrying amounts of assets and liabilities in the consolidated financial statements and their related tax
bases. The components of the net deferred tax liability for the years ended December 31 follows:



|(In millions)                      |  | 2002 |       | 2001
|---------------------------------- |  | ---- | ----- | ----
|                                  
|Deferred tax liabilities:          |  |      |       |     
|Deferred income on lease financing |  | $    | 4,042 |     
|Prepaid pension costs              |  |      | 315   |     
|Deferred fee income                |  |      | 461   |     
|Other                              |  |      | 176   |     
|                                  
|Gross deferred tax liabilities     |  |      | 4,994 |     
|Deferred tax assets:               |  |      |       |     
|Allowance for credit losses        |  |      | 1,691 |     
|Purchased intangibles              |  |      | 289   |     
|Deferred compensation              |  |      | 257   |     
|Other                              |  |      | 678   |     
|                                  
|Gross deferred tax assets          |  |      | 2,915 |     
|                                  
|Net deferred tax liability         |  | $    | 2,079 |     
|                                  



As of
December 31, 2002, the Corporation has foreign tax credit carryforwards totaling $33 million. These credits will expire after 2005 if not used. Management believes that it is more likely than not that these credits will be used within the
carryforward period.



Note 21  Lease Commitments



The Corporation has entered into a number of operating
lease agreements for premises and equipment. The minimum annual rental commitments under these leases are as follows:



|(In millions)       |  |  
|------------------- |  | -
|                   
|2003                |  | $
|2004                |  |  
|2005                |  |  
|2006                |  |  
|2007                |  |  
|2008 and thereafter |  |  
|                   
|Total               |  | $
|                   



Rental
income from premises leased to others in the amount of $78 million in 2002, $77 million in 2001, and $80 million in 2000 has reduced occupancy expense. Rental expense under operating leases approximated $328 million in 2002, $332 million in 2001,
and $384 million in 2000.



Note 22  Financial
Instruments with Off-Balance Sheet Risk



In the normal
course of business, the Corporation is a party to financial instruments containing credit and/or market risks that are not required to be reflected in the balance sheet. These financial instruments are primarily credit-related instruments. The
Corporation has risk management policies to identify, monitor and limit exposure to credit, liquidity and market risks.



The following disclosures represent the Corporations credit exposure, assuming that every counterparty to financial instruments with
off-balance sheet credit risk fails to perform completely according to the terms of the contracts, and that the collateral and other security, if any, proves to be of no value to the Corporation.



This note does not address the amount of market losses the
Corporation would incur if future changes in market prices make financial instruments with off-balance sheet market risk less valuable or more onerous. For a more detailed discussion of off-balance sheet activities see the Off-Balance Sheet
Activities section beginning on page 75.



(a) Collateral
and Other Security Arrangements



The credit risk of both on-
and off-balance sheet financial instruments varies based on many factors, including the value of collateral held and other security arrangements. To mitigate credit risk, the Corporation generally determines the need for specific covenant, guarantee
and collateral requirements on a case-by-case basis, depending on the nature of the financial instrument and the customers creditworthiness. The Corporation may also receive comfort letters and oral assurances. The amount and type of
collateral held to reduce credit risk varies but may include real estate, machinery, equipment, inventory and accounts receivable, as well as cash on deposit, stocks, bonds and other marketable securities that are generally held in the
Corporations possession or at another appropriate custodian or depository. This collateral is valued and inspected on a regular basis to ensure both its existence and adequacy. Additional collateral is requested when appropriate. Credit
derivatives and credit insurance have also been purchased to further reduce the credit risk inherent in these contracts.



102    BANK ONE 2002 ANNUAL REPORT



---



NOTES TO
CONSOLIDATE FINANCIAL STATEMENTS



(b) Credit-Related
Financial Instruments



Summarized credit-related financial
instruments, including both commitments to extend credit and letters of credit are as follows:



|For The Year Ended December 31, |  | 2002 |       | 2001
|------------------------------- |  | ---- | ----- | ----
|                               
|(In billions)                   |  |      |       |     
|Unused credit card lines        |  | $    | 337.5 |     
|Unused loan commitments         |  |      | 134.8 |     
|Commercial letters of credit    |  |      | 0.5   |     
|                               



Since
many of the unused commitments are expected to expire unused or be only partially used, the total amount of unused commitments in the preceding table does not necessarily represent future cash requirements.



Credit card lines allow customers to use a credit card to buy
goods or services and to obtain cash advances. However, the Corporation has the right to change or terminate any terms or conditions of a customers credit card account, upon notification to the customer. Loan commitments are agreements to make
or acquire a loan or lease as long as the agreed-upon terms (e.g., expiry, covenants or notice) are met. The Corporations commitments to purchase or extend loans help its customers meet their liquidity needs.



Commercial letters of credit are issued or confirmed to ensure
payment of customers payables or receivables in short-term international trade transactions. Generally, drafts will be drawn when the underlying transaction is consummated as intended. However, the short-term nature of this instrument serves
to mitigate the risk associated with these contracts.



(c)
Financial Guarantees



The following is a summary of
instruments that are considered financial guarantees in accordance with FIN No. 45:



|At December 31,                                                |  | 2002            |      | 2001             
|-------------------------------------------------------------- |  | --------------- | ---- | -----------------
|                                                              
|(In billions)                                                  |  | Contract Amount |      | Carrying Value(3)
|                                                              
|Standby letters of credit and foreign office guarantees(1) (2) |  | $               | 24.0 |                  
|Loans sold with recourse                                       |  |                 | 4.7  |                  
|Swap guarantees                                                |  |                 | 0.2  |                  
|Asset purchase agreements(4)                                   |  |                 | 2.5  |                  
|                                                              



|(1) |  | The contract amount of financial standby letters of credit and foreign office guarantees and performance standby letters of credit and foreign office guarantees
totaled $20.4 billion and $3.6 billion and $15.6 billion and $3.8 billion at December 31, 2002 and 2001, respectively.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) |  | Includes $7.1 billion at December 31, 2002, and $3.4 billion at December 31, 2001, participated to other institutions.
|--- |  | ----------------------------------------------------------------------------------------------------------------------



|(3) |  | The carrying value of financial guarantees includes amounts deferred and recognized in income over the life of the contract and amounts accrued for inherent losses
in accordance with FASB Statement No. 5, Accounting for Contingencies (FAS No. 5). These amounts are generally reported in other liabilities, except the FAS No. 5 component related to standby letters of credit that is
reported in the allowance for credit losses. See page 68, Allowance for Credit Losses, for more information.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(4) |  | Certain asset purchase agreements entered into in conjunction with the Corporations asset backed finance conduit programs qualify as financial guarantees under
this new accounting guidance due to the specific structure of certain of these agreements. For additional discussion of the asset purchase agreements and the related off-balance sheet exposures, see pages 7577.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Standby letters of credit and foreign office guarantees are
issued in connection with agreements made by customers to counterparties. If the customer fails to comply with the agreement, the counterparty may enforce the standby letter of credit or foreign office guarantee as a remedy. Credit risk arises from
the possibility that the customer may not be able to repay the Corporation for standby letters of credit or foreign office guarantees.



The Corporation occasionally sells or securitizes loans with limited recourse. The recourse provisions require the Corporation to
repurchase loans at par plus accrued interest upon a credit-related triggering event. Exposure to credit losses from these arrangements has been reduced with the purchase of credit insurance contracts that cover the majority of expected losses.
Although expected losses are covered by insurance, the maximum exposure to credit losses is approximately the contract amount stated above.



The Corporation also sells put options that are considered a form of financial guarantee when the counterparties that purchase the
contracts actually own the reference financial instrument (generally loans, commodities and equities). A put option sold by the Corporation provides the counterparty the right to sell (i.e., put) the reference asset to the Corporation at
a pre-determined price. The following table summarizes the Corporations inventory of sold put options as of December 31, 2002, in which it is probable that the counterparty owns the reference financial instrument:



|(In millions) |  | Contract Amount |       | Carrying Value
|------------- |  | --------------- | ----- | --------------
|             
|Loans         |  | $               | 1,371 |               
|Commodities   |  |                 | 351   |               
|Equities      |  |                 | 50    |               
|Other         |  |                 | 23    |               
|             



In the
ordinary course of its business, the Corporation enters into contracts that contain indemnification provisions. These provisions require the Corporation to make payments to another party in the event that certain events occur. Many of these
provisions call for the Corporation to indemnify the other party against loss in the event that the Corporation fails to perform its own obligations under the contract. These performance guarantees are not subject to disclosure. Other types of
indemnification agreements that function as financial guarantees are considered to have remote risk of loss, historical loss experience is negligible and maximum exposure to loss is not possible to estimate due to the pervasive, yet low risk, nature
of these agreements.



Note 23  Fair Value of Financial
Instruments



The Corporation is required to disclose the
estimated fair value of its financial instruments in accordance with SFAS No. 107, Disclosures about Fair Value of Financial Instruments. These disclosures do not attempt to estimate or represent the Corporations fair value as a
whole. The disclosure excludes assets



BANK ONE 2002 ANNUAL REPORT    103



---



NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS



and liabilities that are
not financial instruments as well as the significant unrecognized value associated with core deposits and credit card relationships.



Fair value amounts disclosed represent point-in-time estimates that may change in subsequent reporting periods due to market conditions or
other factors. Estimated fair value amounts in theory represent the amounts at which financial instruments could be exchanged or settled in a current transaction between willing parties. In practice, however, this may not be the case due to inherent
limitations in the methodologies and assumptions used to estimate fair value. For example, quoted market prices may not be realized because the financial instrument may be traded in a market that lacks liquidity; or a fair value derived using a
discounted cash flow approach may not be the amount realized because of the subjectivity involved in selecting the underlying assumptions, such as projecting cash flows or selecting a discount rate. The fair value amount also may not be realized
because it ignores transaction costs and does not include potential tax effects. The Corporation does not plan to dispose of, either through sale or settlement, the majority of its financial instruments at these estimated fair values.



|                                                    |  | 2002           |         | 2001
|--------------------------------------------------- |  | -------------- | ------- | ----
|                                                   
|(In millions)                                       |  | Carrying Value |         |     
|                                                   
|Financial assets:                                   |  |                |         |     
|Cash and other short-term financial instruments (a) |  | $              | 37,001  |     
|Trading assets (a)                                  |  |                | 7,190   |     
|Investment securities (b)                           |  |                | 67,643  |     
|Loans (c)                                           |  |                | 148,125 |     
|Allowance for credit losses                         |  |                | (4,525  | )   
|                                                   
|Loans, net                                          |  |                | 143,600 |     
|Derivative product assets (f)                       |  |                | 4,273   |     
|Financial instruments in other assets (a)           |  |                | 1,315   |     
|Financial liabilities:                              |  |                |         |     
|Deposits (d)                                        |  |                | 170,008 |     
|Securities sold not yet purchased (a)               |  |                | 1,957   |     
|Other short-term financial instruments (a)          |  |                | 25,149  |     
|Long-term debt(1)(e)                                |  |                | 43,234  |     
|Derivative product liabilities (f)                  |  |                | 3,838   |     
|Financial instruments in other liabilities (a)      |  |                | 930     |     
|                                                   



|(1) |  | Includes trust preferred capital securities.
|--- |  | --------------------------------------------



Estimated fair values are determined as follows:



(a) Financial Instruments Whose Carrying Value Approximates Fair Value



A financial instruments carrying value approximates its fair value when the financial instrument has an immediate or
short-term maturity (generally one year or less), or is carried at fair value. Quoted market prices or dealer quotes typically are used to estimate fair values of trading securities and securities sold under repurchase agreements.



(b) Investment Securities



Quoted market prices typically are used to estimate the fair value of debt
investment securities. Quoted market prices for similar securities are used to estimate fair value when a quoted market price is not available for a specific debt investment security. See Note 1(f) Investment Securities on pages
8485 for the methodologies used to determine the fair value of equity investment securities.



(c) Loans



The loan portfolio was segmented based on loan type, credit quality and repricing characteristics. Carrying values are used to estimate fair values of certain variable rate loans with no significant credit concerns and frequent
repricing. A discounted cash flow method was used to estimate the fair value of other loans. Discounting was based on the contractual cash flows, and discount rates typically are based on the year-end yield curve plus a spread that reflects pricing
on loans with similar characteristics. If applicable, prepayment assumptions are factored into the fair value determination based on historical experience and current economic and lending conditions.



Commitments to extend credit and letters of credit typically
result in loans with a market interest rate when funded. The recorded book value of deferred fee income approximates the fair value.



104    BANK ONE 2002 ANNUAL REPORT



---



NOTES TO
CONSOLIDATED FIANCIAL STATEMENTS



(d) Deposits



The amount payable on demand at the report date is used to
estimate the fair value of demand and savings deposits with no defined maturity. A discounted cash flow method is used to estimate the fair value of fixed-rate time deposits. Discounting was based on the contractual cash flows and the current rates
at which similar deposits with similar remaining maturities would be issued, adjusted for servicing costs. Typically, the carrying value is used to estimate the fair value of floating-rate time deposits.



(e) Long-Term Debt



Quoted market prices or the discounted cash flow method was used to estimate
the fair value of the Corporations fixed-rate long-term debt. Discounting was based on the contractual cash flows and the current rates at which debt with similar terms could be issued. Typically, the carrying value is used to estimate the
fair value of floating-rate long-term debt.



(f) Derivative
Product Assets and Liabilities



Quoted market prices or
valuation models that incorporate current market data inputs are used to estimate the fair value of derivative product assets and liabilities.



Note 24  Related Party Transactions



Certain executive officers, directors and their related interests are loan customers of the Corporation. These loans in the aggregate were less than 5% of
stockholders equity at December 31, 2002, and 2001.



Note 25  Pledged Assets



Assets
having a book value of $56.9 billion as of December 31, 2002, and $70.3 billion as of December 31, 2001, were pledged as collateral for repurchase agreements, certain derivative instrument transactions, governmental and trust department deposits in
accordance with federal and state requirements, and for other purposes required by law. The assets pledged generally were comprised of investment securities and loans. Of the total collateral pledged as of December 31, 2002, $3.2 billion of
collateral, which was comprised of securities posted as collateral for repurchase agreements, were permitted to be sold or repledged by the secured party. The Corporation does not issue equity puts.



The Corporations bank affiliates are required to
maintain average noninterest-bearing cash balances, in accordance with Federal Reserve Board regulations. The average required reserve balances were $2.5 billion in 2002 and $2.3 billion in 2001.



Note 26  Collateral Policy Related to Certain Asset Transfer Activity



It is the Corporations policy to take possession of
securities purchased under agreements to resell in order to secure the risk of counterparty nonperformance on a transaction. The Corporation monitors the fair value of the underlying securities as compared to the related receivable, including
accrued interest, and adjusts the level of collateral as necessary. With respect to securities lent, the Corporation receives collateral to secure the risk of counterparty nonperformance in the form of cash or other collateral, in an amount
generally in excess of the fair value of the lent securities. The Corporation monitors the fair value of the securities lent on a daily basis, and additional cash or securities are obtained as necessary. At December 31, 2002, and 2001, the fair
value of collateral accepted by the Corporation in connection with these activities was $7.0 billion and $6.3 billion, respectively, of which, $6.6 billion and $5.9 billion, respectively, had been sold or repledged as of the balance sheet date.



The maximum outstanding amount of securities
under resale agreements at any month end during 2002 and 2001, was $8.1 billion and $8.5 billion, respectively. The average oustanding amount of securities under resale agreements during 2002 and 2001 was $6.5 billion and $7.1 billion, respectively.



Note 27  Contingent Liabilities



The Corporation and certain of its subsidiaries have been named as defendants
in various legal proceedings, including certain class actions, arising out of the normal course of business or operations. In certain of these proceedings, which are based on alleged violations of consumer protection, securities, banking, insurance
and other laws, rules or principles, substantial money damages are asserted against the Corporation and its subsidiaries. Since the Corporation and certain of its subsidiaries, which are regulated by one or more federal and state regulatory
authorities, are the subject of numerous examinations and reviews by such authorities, the Corporation also is and will be, from time to time, normally engaged in various disagreements with regulators, related primarily to its financial services
businesses. The Corporation has also received certain tax deficiency assessments. In view of the inherent difficulty of predicting the outcome of such matters, the Corporation cannot state what the eventual outcome of pending matters will be;
however, based on current knowledge and after consultation with counsel, management does not believe that liabilities arising from these matters, if any, will have a material adverse effect on the consolidated financial position or results of
operations of the Corporation.



BANK ONE 2002 ANNUAL REPORT    105



---



NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS



Note 28  Parent
Company Only Condensed Financial Statements

Condensed Balance Sheets

|At December 31,                              |  | 2002 |        | 2001
|-------------------------------------------- |  | ---- | ------ | ----
|                                            
|(In millions)                                |  |      |        |     
|Assets                                       |  |      |        |     
|Cash and due from banks:                     |  |      |        |     
|Bank subsidiaries                            |  | $    | 6      |     
|Interest-bearing due from banks:             |  |      |        |     
|Bank subsidiaries                            |  |      | 7,128  |     
|Securities purchased under resale agreements |  |      | 50     |     
|Trading assets                               |  |      |       |     
|Investment securities                        |  |      | 20     |     
|Loans and receivablessubsidiaries:          |  |      |        |     
|Bank subsidiaries                            |  |      | 5,304  |     
|Nonbank subsidiaries                         |  |      | 7,096  |     
|Investment in subsidiaries:                  |  |      |        |     
|Bank subsidiaries                            |  |      | 24,943 |     
|Nonbank subsidiaries                         |  |      | 1,630  |     
|Other assets                                 |  |      | 834    |     
|                                            
|Total assets                                 |  | $    | 47,011 |     
|                                            
|Liabilities and Stockholders Equity         |  |      |        |     
|Short-term borrowings:                       |  |      |        |     
|Nonbank subsidiaries                         |  | $    | 63     |     
|Other                                        |  |      | 457    |     
|Long-term debt:                              |  |      |        |     
|Nonbank subsidiaries                         |  |      | 3,411  |     
|Other                                        |  |      | 19,407 |     
|Other liabilities                            |  |      | 1,233  |     
|Total liabilities                            |  |      | 24,571 |     
|Stockholders equity                         |  |      | 22,440 |     
|                                            
|Total liabilities and stockholders equity   |  | $    | 47,011 |     
|                                            



Condensed Income Statements

|For the Year Ended December 31,                                                                                                                  |  | 2002 |       |   | 2001 |   |       | 2000 | 
|------------------------------------------------------------------------------------------------------------------------------------------------ |  | ---- | ----- | - | ---- | - | ----- | ---- | 
|                                                                                                                                                
|(In millions)                                                                                                                                    |  |      |       |   |      |   |       |      | 
|Operating Income                                                                                                                                 |  |      |       |   |      |   |       |      | 
|Dividends:                                                                                                                                       |  |      |       |   |      |   |       |      | 
|Bank subsidiaries                                                                                                                                |  | $    | 1,634 |   |      | $ | 1,645 |      | 
|Nonbank subsidiaries                                                                                                                             |  |      | 57    |   |      |   | 209   |      | 
|Interest income:                                                                                                                                 |  |      |       |   |      |   |       |      | 
|Bank subsidiaries                                                                                                                                |  |      | 289   |   |      |   | 655   |      | 
|Nonbank subsidiaries                                                                                                                             |  |      | 316   |   |      |   | 381   |      | 
|Other                                                                                                                                            |  |      | 1     |   |      |   | 3     |      | 
|Other income (loss):                                                                                                                             |  |      |       |   |      |   |       |      | 
|Bank subsidiaries                                                                                                                                |  |      | 1     |   |      |   | 5     |      | 
|Other                                                                                                                                            |  |      | (11   | ) |      |   | (2    | )    | 
|                                                                                                                                                
|Total operating income                                                                                                                           |  |      | 2,287 |   |      |   | 2,896 |      | 
|                                                                                                                                                
|Operating Expense                                                                                                                                |  |      |       |   |      |   |       |      | 
|Interest Expense:                                                                                                                                |  |      |       |   |      |   |       |      | 
|Nonbank subsidiaries                                                                                                                             |  |      | 253   |   |      |   | 234   |      | 
|Other                                                                                                                                            |  |      | 943   |   |      |   | 1,308 |      | 
|Merger and restructuring-related charges (reversals)                                                                                             |  |      | (12   | ) |      |   | (12   | )    | 
|Salaries and employee benefits                                                                                                                   |  |      |      |   |      |   | (1    | )    | 
|Professional fees and services                                                                                                                   |  |      |      |   |      |   | 2     |      | 
|Other expense                                                                                                                                    |  |      | 5     |   |      |   | 34    |      | 
|                                                                                                                                                
|Total operating expense                                                                                                                          |  |      | 1,189 |   |      |   | 1,565 |      | 
|Income before income taxes and cumulative effect of change in
accounting principle and equity in undistributed net income (loss) of subsidiaries |  |      | 1,098 |   |      |   | 1,331 |      | 
|Applicable income tax benefit                                                                                                                    |  |      | (224  | ) |      |   | (202  | )    | 
|                                                                                                                                                
|                                                                                                                                                 |  |      |       |   |      |   |       |      | 
|Income before cumulative effect of change in accounting principle and equity in
    undistributed net income (loss) of subsidiaries              |  |      | 1,322 |   |      |   | 1,533 |      | 
|Equity in undistributed net income (loss) of subsidiaries:                                                                                       |  |      |       |   |      |   |       |      | 
|Bank subsidiaries                                                                                                                                |  |      | 2,181 |   |      |   | 1,300 |      | 
|Nonbank subsidiaries                                                                                                                             |  |      | (208  | ) |      |   | (151  | )    | 
|                                                                                                                                                
|Income (loss) before cumulative effect of change in accounting principle                                                                         |  |      | 3,295 |   |      |   | 2,682 |      | 
|Cumulative effect of change in accounting principle, net of taxes of ($25)                                                                       |  |      |      |   |      |   | (44   | )    | 
|                                                                                                                                                
|Net income (loss)                                                                                                                                |  | $    | 3,295 |   |      | $ | 2,638 |      | 
|                                                                                                                                                



106    BANK ONE 2002 ANNUAL REPORT



---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Note 29  ContinuedParent Company Only Condensed Financial
Statements

Condensed Statements of Cash Flows

|For The Year Ended December 31,                                                          |  | 2002 |        |   | 2001 |   |        | 2000 | 
|---------------------------------------------------------------------------------------- |  | ---- | ------ | - | ---- | - | ------ | ---- | 
|                                                                                        
|(In millions)                                                                            |  |      |        |   |      |   |        |      | 
|Cash Flows from Operating Activities:                                                    |  |      |        |   |      |   |        |      | 
|Net income (loss)                                                                        |  | $    | 3,295  |   |      | $ | 2,638  |      | 
|Adjustments to reconcile net income (loss) to net cash provided by operating
activities: |  |      |        |   |      |   |        |      | 
|Equity in net income of subsidiaries                                                     |  |      | (3,664 | ) |      |   | (3,003 | )    | 
|Cumulative effect of accounting change of subsidiaries                                   |  |      |       |   |      |   | 69     |      | 
|Dividends received from subsidiaries                                                     |  |      | 1,691  |   |      |   | 1,854  |      | 
|Other operating adjustments                                                              |  |      | 1,123  |   |      |   | 68     |      | 
|                                                                                        
|Net cash provided by operating activities                                                |  |      | 2,445  |   |      |   | 1,626  |      | 
|                                                                                        
|Cash Flows from Investing Activities:                                                    |  |      |        |   |      |   |        |      | 
|Net decrease (increase) in loans to subsidiaries                                         |  |      | 1,550  |   |      |   | (435   | )    | 
|Net increase in capital investments in subsidiaries                                      |  |      | (262   | ) |      |   | (412   | )    | 
|Purchase of investment securitiesavailable for sale                                     |  |      | (15    | ) |      |   | (79    | )    | 
|Proceeds from sales and maturities of investment securitiesavailable for
sale           |  |      | 16     |   |      |   | 189    |      | 
|Other, net                                                                               |  |      | (19    | ) |      |   | (30    | )    | 
|                                                                                        
|Net cash provided by (used in) investing activities                                      |  |      | 1,270  |   |      |   | (767   | )    | 
|                                                                                        
|Cash Flows from Financing Activities:                                                    |  |      |        |   |      |   |        |      | 
|Net decrease in commercial paper and short-term borrowings                               |  |      | (100   | ) |      |   | (624   | )    | 
|Proceeds from issuance of long-term debt                                                 |  |      | 1,854  |   |      |   | 6,414  |      | 
|Redemption and repayment of long-term debt                                               |  |      | (4,375 | ) |      |   | (5,495 | )    | 
|Dividends paid                                                                           |  |      | (982   | ) |      |   | (991   | )    | 
|Proceeds from issuance of common and treasury stock                                      |  |      | 292    |   |      |   | 191    |      | 
|Purchase of treasury stock                                                               |  |      | (617   | ) |      |   | (78    | )    | 
|Payment for redemption of preferred stock                                                |  |      |       |   |      |   | (190   | )    | 
|                                                                                        
|Net cash (used in) provided by financing activities                                      |  |      | (3,928 | ) |      |   | (773   | )    | 
|                                                                                        
|Net (decrease) increase in cash and cash equivalents                                     |  |      | (213   | ) |      |   | 86     |      | 
|Cash and cash equivalents at beginning of year                                           |  |      | 7,347  |   |      |   | 7,261  |      | 
|                                                                                        
|Cash and cash equivalents at end of year                                                 |  | $    | 7,134  |   |      | $ | 7,347  |      | 
|                                                                                        
|Other cash-flow disclosures:                                                             |  |      |        |   |      |   |        |      | 
|Interest paid                                                                            |  | $    | 1,246  |   |      | $ | 1,501  |      | 
|Income tax received                                                                      |  |      | (539   | ) |      |   | (374   | )    | 
|                                                                                        



Overnight money market loans, short-term investments and other sources of liquid assets exceeded the amount of commercial paper issued at December 31, 2001.



BANK ONE 2002 ANNUAL REPORT    107



---



NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS





Note 30  Quarterly Financial Data (Unaudited)



|                                                                   |  | 2002(4)(5) |         |   | 2001  |  
|------------------------------------------------------------------ |  | ---------- | ------- | - | ----- | -
|                                                                  
|                                                                   |  | Fourth     |         |   | Third |  
|                                                                  
|(In millions, except per share data, ratios, and headcount)        |  |            |         |   |       |  
|Income Statement Data:                                             |  |            |         |   |       |  
|Total revenue, net of interest expense                             |  | $          | 4,225   |   |       | $
|Net interest incomefully taxable-equivalent (FTE) basis(1)      |  |            | 2,192   |   |       |  
|Noninterest income                                                 |  |            | 2,069   |   |       |  
|Provision for credit losses                                        |  |            | 628     |   |       |  
|Noninterest expense                                                |  |            | 2,383   |   |       |  
|Income before cumulative effect of change in accounting principle  |  |            | 842     |   |       |  
|Net income                                                         |  |            | 842     |   |       |  
|                                                                  
|Per Common Share Data:                                             |  |            |         |   |       |  
|Income before cumulative effect of change in accounting principle: |  |            |         |   |       |  
|Basic                                                              |  | $          | 0.73    |   |       | $
|Diluted                                                            |  |            | 0.72    |   |       |  
|Net income:                                                        |  |            |         |   |       |  
|Basic                                                              |  | $          | 0.73    |   |       | $
|Diluted                                                            |  |            | 0.72    |   |       |  
|Cash dividends declared                                            |  |            | 0.21    |   |       |  
|Book value                                                         |  |            | 19.28   |   |       |  
|                                                                  
|Balance Sheet Data  Ending Balances:                              |  |            |         |   |       |  
|Loans                                                              |  | $          | 148,125 |   |       | $
|Total assets                                                       |  |            | 277,383 |   |       |  
|Deposits                                                           |  |            | 170,008 |   |       |  
|Long-term debt(2)                                                  |  |            | 43,234  |   |       |  
|Common stockholders equity                                        |  |            | 22,440  |   |       |  
|Total stockholders equity                                         |  |            | 22,440  |   |       |  
|                                                                  
|Credit Quality Ratios:                                             |  |            |         |   |       |  
|Net charge-offs to average loans                                   |  |            | 1.65    | % |       |  
|Allowance to period end loans                                      |  |            | 3.20    |   |       |  
|Nonperforming assets to related assets(3)                          |  |            | 2.38    |   |       |  
|                                                                  
|Financial Performance Ratios:                                      |  |            |         |   |       |  
|Return on average assets                                           |  |            | 1.24    | % |       |  
|Return on average common equity                                    |  |            | 15.0    |   |       |  
|Net interest margin                                                |  |            | 3.67    |   |       |  
|Efficiency ratio                                                   |  |            | 55.9    |   |       |  
|Capital Ratios:                                                    |  |            |         |   |       |  
|Risk-based capital:                                                |  |            |         |   |       |  
|Tier 1                                                             |  |            | 9.9     | % |       |  
|Total                                                              |  |            | 13.7    |   |       |  
|Leverage                                                           |  |            | 8.9     |   |       |  
|                                                                  
|Common Stock Data:                                                 |  |            |         |   |       |  
|Average shares outstanding:                                        |  |            |         |   |       |  
|Basic                                                              |  |            | 1,157   |   |       |  
|Diluted                                                            |  |            | 1,166   |   |       |  
|Stock price:                                                       |  |            |         |   |       |  
|High                                                               |  | $          | 40.05   |   |       | $
|Low                                                                |  |            | 32.59   |   |       |  
|Close                                                              |  |            | 36.55   |   |       |  
|Headcount                                                          |  |            | 73,685  |   |       |  



|(1) |  | Net interest income-FTE includes taxable equivalent adjustments of $36 million, $38 million, $36 million and $35 million for quarters ended December 31, 2002,
September 30, 2002, June 30, 2002 and March 31, 2002, respectively. Net interest income-FTE includes taxable equivalent adjustments of $38 million, $30 million, $30 million and $33 million for quarters ended December 31, 2001, September 30, 2001,
June 30, 2001 and March 31, 2001, respectively.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) |  | Includes trust preferred capital securities.
|--- |  | --------------------------------------------



|(3) |  | Related assets consist of loans outstanding, including loans held for sale, and other real estate owned.
|--- |  | --------------------------------------------------------------------------------------------------------



|(4) |  | 2002 includes the addition of employees due to the consolidation of Paymentech, Inc. and Anexsys, LLC.
|--- |  | ------------------------------------------------------------------------------------------------------



|(5) |  | Results include the effect of the consolidation of Paymentech, Inc. and Anexsys, LLC.
|--- |  | -------------------------------------------------------------------------------------



108    BANK ONE 2002 ANNUAL REPORT



---



REPORT OF
MANAGEMENT



Management of BANK ONE CORPORATION and its
subsidiaries (the Corporation) is responsible for the preparation, integrity and fair presentation of its published financial reports. These reports include consolidated financial statements that have been prepared in accordance with
generally accepted accounting principles in the United States of America, using managements best judgment and all information available.



The consolidated financial statements of the Corporation have been audited by KPMG LLP, independent public accountants. Their accompanying
report is based upon an audit conducted in accordance with standards established by the American Institute of Certified Public Accountants, including the related review of internal accounting controls and financial reporting matters. The Audit and
Risk Management Committee of the Board of Directors, which consists solely of outside directors, meets at least quarterly with the independent auditors, Corporate Audit and representatives of management to discuss, among other things, accounting and
financial reporting matters.



Management of the
Corporation is responsible for establishing and maintaining disclosure controls and procedures to ensure that information required to be disclosed in reports filed or submitted under Securities Exchange Act of 1934 (the Exchange Act) is
recorded, processed, summarized and reported, within the time periods specified in the Commissions rules and forms. In addition to disclosure controls and procedures, management of the Corporation is responsible for establishing and
maintaining an effective internal control structure, which provides reasonable, but not absolute, assurance of the safeguarding of assets against unauthorized acquisition, use or disposition. The Corporation maintains systems of controls that it
believes are reasonably designed to provide management with timely and accurate information about the operations of the Corporation. This process is supported by an internal audit function along with the ongoing appraisal of controls by the Audit
and Risk Management Committee. Both the Corporations independent auditors and the internal audit function directly provide reports on significant matters to the Audit and Risk Management Committee. The Corporations independent auditors,
the internal audit function and the Audit and Risk Management Committee have free access to each other. Disclosure controls and procedures, internal controls, systems and corporate-wide processes and procedures are continually evaluated and
enhanced.



Management of the Corporation
evaluated its disclosure controls and procedures as of December 31, 2002. Based on this evaluation, the Principal Executive Officer and Principal Financial Officer each concludes that as of December 31, 2002, the Corporation maintained effective
disclosure controls and procedures in all material respects, including those to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time
periods specified in the Commissions rules and forms, and is accumulated and communicated to management, including the Principal Executive Officer and the Principal Financial Officer, as appropriate to allow for timely disclosure. There have
been no significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to our most recent evaluation.



The Corporation is dedicated to maintaining a culture that reflects the highest standards of integrity and
ethical conduct when engaging in its business activities. Management of the Corporation is responsible for compliance with various federal and state laws and regulations, and the Corporation has established procedures that are designed to ensure
that managements policies relating to conduct, ethics and business practices are followed on a uniform basis.



BANK ONE CORPORATION



/s/  James Dimon

James
Dimon

Chairman and Chief Executive Officer



/s/  Heidi Miller

Heidi
Miller

Executive Vice President and Chief Financial Officer



Chicago, Illinois

January 16, 2003



BANK ONE 2002 ANNUAL REPORT    109



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REPORT OF
INDEPENDENT PUBLIC ACCOUNTANTS



The Board of Directors and Stockholders

BANK ONE CORPORATION:



We have audited the accompanying consolidated balance sheets of Bank One
Corporation and subsidiaries (the Corporation) as of December 31, 2002 and 2001, and the related consolidated statements of income, stockholders equity, and cash flows for the years then ended. These consolidated financial
statements are the responsibility of the Corporations management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. The accompanying consolidated statements of income,
stockholders equity, and cash flows of the Corporation for the year ended December 31, 2000 have been audited by the Corporations predecessor auditors, who have ceased operations. Those auditors expressed an unqualified opinion on those
consolidated financial statements in their report dated January 17, 2001.



We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.



In our opinion, the consolidated financial statements referred to above present fairly, in all material
respects, the financial position of the Corporation as of December 31, 2002 and 2001, and the results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States
of America.



/s/ KPMG LLP

Chicago, Illinois

January 16, 2003



110    BANK ONE 2002 ANNUAL REPORT



---

SELECTED STATISTICAL INFORMATION

BANK ONE CORPORATION and Subsidiaries



|Common Stock and Stockholder Data:(1) (2)            |  | 2002 |       |   | 2001 |   |       | 2000 |  |   | 1999  |    |  | 1998 |      
|---------------------------------------------------- |  | ---- | ----- | - | ---- | - | ----- | ---- |  | - | ----- | -- |  | ---- | -----
|                                                    
|Market price:                                        |  |      |       |   |      |   |       |      |  |   |       |    |  |      |      
|High for the year                                    |  | $    | 42.53 |   |      | $ | 39.85 |      |  | $ | 38.81 |    |  | $    | 63.13
|Low for the year                                     |  |      | 32.59 |   |      |   | 28.00 |      |  |   | 24.25 |    |  |      | 29.98
|At year-end                                          |  |      | 36.55 |   |      |   | 39.05 |      |  |   | 36.63 |    |  |      | 32.00
|Book value (at year-end)                             |  |      | 19.28 |   |      |   | 17.33 |      |  |   | 15.90 |    |  |      | 17.34
|Dividend payout ratio                                |  |      | 30    | % |      |   | 38    | %    |  |   | N/M   |    |  |      | 57   
|                                                    
|Financial Ratios:                                    |  |      |       |   |      |   |       |      |  |   |       |    |  |      |      
|Net income (loss) as a percentage of:(3)             |  |      |       |   |      |   |       |      |  |   |       |    |  |      |      
|Average stockholders equity                         |  |      | 15.2  | % |      |   | 13.4  | %    |  |   | (2.6  | )% |  |      | 17.0 
|Average common stockholders equity                  |  |      | 15.2  |   |      |   | 13.5  |      |  |   | (2.6  | )  |  |      | 17.2 
|Average total assets                                 |  |      | 1.3   |   |      |   | 1.0   |      |  |   | (0.2  | )  |  |      | 1.4  
|Average earning assets                               |  |      | 1.4   |   |      |   | 1.1   |      |  |   | (0.2  | )  |  |      | 1.6  
|Stockholders equity at year-end as a percentage of: |  |      |       |   |      |   |       |      |  |   |       |    |  |      |      
|Total assets at year-end                             |  |      | 8.1   |   |      |   | 7.5   |      |  |   | 6.9   |    |  |      | 7.5  
|Total loans at year-end                              |  |      | 15.1  |   |      |   | 12.9  |      |  |   | 10.7  |    |  |      | 12.3 
|Total deposits at year-end                           |  |      | 13.2  |   |      |   | 12.1  |      |  |   | 11.2  |    |  |      | 12.4 
|Average stockholders equity as a percentage of:     |  |      |       |   |      |   |       |      |  |   |       |    |  |      |      
|Average total assets                                 |  |      | 8.2   |   |      |   | 7.3   |      |  |   | 7.2   |    |  |      | 8.0  
|Average loans                                        |  |      | 14.4  |   |      |   | 11.6  |      |  |   | 11.4  |    |  |      | 13.0 
|Average deposits                                     |  |      | 13.6  |   |      |   | 12.0  |      |  |   | 12.0  |    |  |      | 13.2 
|Income to fixed charges:(4)                          |  |      |       |   |      |   |       |      |  |   |       |    |  |      |      
|Excluding interest on deposits                       |  |      | 2.8x  |   |      |   | 2.0x  |      |  |   | 0.8x  |    |  |      | 2.3x 
|Including interest on deposits                       |  |      | 1.9x  |   |      |   | 1.4x  |      |  |   | 0.9x  |    |  |      | 1.6x 
|                                                    



N/M Not meaningful.



|(1) |  | There were 103,589 registered common stockholders of record as of December 31, 2002.
|--- |  | ------------------------------------------------------------------------------------

|(2) |  | The principal market for the Corporations common stock is the New York Stock Exchange. The Corporations common stock is also listed on the Chicago Stock
Exchange.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) |  | Does not include a deduction for preferred dividends.
|--- |  | -----------------------------------------------------

|(4) |  | Results for the year ended December 31, 2000, were insufficient to cover fixed charges. The coverage deficiency was approximately $1.2 billion.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------



BANK ONE 2002 ANNUAL REPORT    111