<PAGE>
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 0-28118
UNIONBANCAL CORPORATION
(FORMERLY NAMED UNION BANK)
State of Incorporation: California I.R.S. Employer Id. No. 94-1234979
350 California Street
San Francisco, California 94104
Telephone: (415) 705-7350
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes _X_ No ____
Number of shares of Common Stock outstanding at October 31, 1996: 54,758,570
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<PAGE>
UNIONBANCAL CORPORATION AND SUBSIDIARIES
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NUMBER
-------------
<S> <C>
PART I
FINANCIAL INFORMATION
Consolidated Financial Highlights..................................................................... 2
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets............................................................... 4
Condensed Consolidated Statements of Income......................................................... 5
Condensed Consolidated Statements of Cash Flows..................................................... 6
Condensed Consolidated Statements of Shareholders' Equity........................................... 7
Notes to Condensed Consolidated Financial Statements................................................ 8
Item 2. Management's Discussion and Analysis:
Introduction........................................................................................ 11
Summary............................................................................................. 11
Table 1 -- Analysis of Earnings................................................................... 12
Net Interest Income................................................................................. 13
Table 2 -- Consolidated Average Balance Sheets, Net Interest Income
and Interest Rates.............................................................................. 14
Noninterest Income.................................................................................. 17
Table 3 -- Noninterest Income..................................................................... 17
Noninterest Expense................................................................................. 17
Table 4 -- Noninterest Expense.................................................................... 18
Merger Expenses..................................................................................... 19
Income Taxes........................................................................................ 19
Loans Outstanding................................................................................... 19
Table 5 -- Loans Outstanding...................................................................... 20
Allowance for Loan Losses........................................................................... 20
Table 6 -- Allowance for Loan Losses.............................................................. 21
Asset Quality....................................................................................... 22
Table 7 -- Nonperforming and Renegotiated Assets.................................................. 22
Table 8 -- Loans 90 Days or More Past Due and Still Accruing...................................... 23
Liquidity........................................................................................... 23
Capital............................................................................................. 23
Table 9 -- Risk-Based Capital..................................................................... 24
Table 10 -- Other Capital Measures................................................................ 25
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.............................................................. 26
Signatures............................................................................................ 27
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
UNIONBANCAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL HIGHLIGHTS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------------------------------
INCREASE (DECREASE)
SEPTEMBER 30, SEPTEMBER 30, ---------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 1996 1995 AMOUNT PERCENT
- -------------------------------------------------------------------------- ------------- ------------- ---------- ---------
<S> <C> <C> <C> <C>
RESULTS OF OPERATIONS:
Net interest income (1)................................................. $ 292,677 $ 288,663 $ 4,014 1.39%
Provision for loan losses............................................... 10,000 12,000 (2,000) (16.67)
Noninterest income...................................................... 107,280 98,622 8,658 8.78
Noninterest expense, excluding merger and integration expense........... 258,523 236,228 22,295 9.44
------------- ------------- ---------- ---------
Income before merger and integration expense and income
taxes (1)............................................................. 131,434 139,057 (7,623) (5.48)
Merger and integration expense.......................................... 25,552 -- 25,552 --
------------- ------------- ---------- ---------
Income before income taxes (1).......................................... 105,882 139,057 (33,175) (23.86)
Taxable-equivalent adjustment........................................... 1,089 2,529 (1,440) (56.94)
Income tax expense...................................................... 42,810 52,675 (9,865) (18.73)
------------- ------------- ---------- ---------
Net income.............................................................. $ 61,983 $ 83,853 $ (21,870) (26.08)%
------------- ------------- ---------- ---------
------------- ------------- ---------- ---------
NET INCOME APPLICABLE TO:
Common stock............................................................ $ 55,745 $ 76,686 $ (20,941) (27.31)%
------------- ------------- ---------- ---------
------------- ------------- ---------- ---------
Parent direct interest in bank subsidiary............................... $ 3,411 $ 4,341 $ (930) (21.42)%
------------- ------------- ---------- ---------
------------- ------------- ---------- ---------
RECAP OF EARNINGS:
Net income.............................................................. $ 61,983 $ 83,853 $ (21,870) (26.08)%
Merger and integration expense (after-tax).............................. 15,025 -- 15,025 --
------------- ------------- ---------- ---------
Pro forma earnings, excluding merger and integration expense............ $ 77,008 $ 83,853 $ (6,845) (8.16)%
------------- ------------- ---------- ---------
------------- ------------- ---------- ---------
Net income applicable to common stock................................... $ 55,745 $ 76,686 $ (20,941) (27.31)%
Merger and integration expense (after-tax, applicable to common
stock)................................................................ 14,128 -- 14,128 --
------------- ------------- ---------- ---------
Pro forma earnings applicable to common stock, excluding merger and
integration expense................................................... $ 69,873 $ 76,686 $ (6,813) (8.88)%
------------- ------------- ---------- ---------
------------- ------------- ---------- ---------
PER AVERAGE COMMON SHARE:
Net income.............................................................. $ 1.02 $ 1.40 $ (0.38) (27.14)%
Pro forma earnings, excluding merger and integration expense............ 1.28 1.40 (0.12) (8.57)
Dividends (2)........................................................... 0.35 0.35 -- --
Book value (end of period).............................................. 40.04 38.52 1.52 3.95
Common shares outstanding (end of period)............................... 54,758,560 54,641,415 117,145 0.21
Weighted average common shares outstanding.............................. 54,758,530 54,641,107 117,423 0.21
BALANCE SHEET (END OF PERIOD):
Total assets............................................................ $28,679,646 $27,033,151 $1,646,495 6.09%
Total loans............................................................. 20,946,765 19,408,524 1,538,241 7.93
Nonperforming and renegotiated assets................................... 180,657 270,683 (90,026) (33.26)
Deposits................................................................ 20,909,390 18,893,343 2,016,047 10.67
Subordinated capital notes.............................................. 415,000 584,624 (169,624) (29.01)
Shareholders' equity.................................................... 2,454,219 2,394,967 59,252 2.47
BALANCE SHEET (PERIOD AVERAGES):
Total assets............................................................ $27,981,894 $25,979,948 $2,001,946 7.71%
Total loans (3)......................................................... 20,651,457 19,079,020 1,572,437 8.24
Shareholders' equity.................................................... 2,435,622 2,360,664 74,958 3.18
FINANCIAL RATIOS:
Return on average assets (4)............................................ 0.88% 1.28% (0.40)%
Pro forma return on average assets, excluding after-tax merger
and integration expense (4)........................................... 1.09 1.28 (0.19)
Return on average common equity (5)..................................... 10.19 14.67 (4.48)
Pro forma return on average common equity, excluding after-tax merger
and integration expense (5)........................................... 12.77 14.67 (1.90)
Efficiency ratio (6).................................................... 71.20 61.25 9.95
Pro forma efficiency ratio, excluding merger and integration expense
(6)................................................................... 64.81 61.25 3.56
Net interest margin (1)................................................. 4.72 4.96 (0.24)
Tier 1 risk-based capital ratios........................................ 9.04 9.42 (0.38)
Total risk-based capital ratios......................................... 11.16 11.88 (0.72)
Leverage ratio.......................................................... 8.43 8.75 (0.32)
Allowance for loan losses to total loans................................ 2.55 2.92 (0.37)
Allowance for loan losses to nonaccrual loans........................... 362.10 247.01 115.09
Net loans charged off to average total loans (7)........................ 0.39 0.40 (0.01)
Nonperforming and renegotiated assets to total loans and foreclosed
assets................................................................ 0.86 1.39 (0.53)
Nonperforming and renegotiated assets to total assets................... 0.63 1.00 (0.37)
Average shareholders' equity to average total assets.................... 8.70 9.09 (0.39)
</TABLE>
- ------------------------------
(1) Fully taxable-equivalent.
(2) Amounts prior to merger are based on Union Bank only and do not include the
dividend of $145 million paid to Mitsubishi Bank, Limited in the first
quarter of 1996 by BanCal Tri-State Corporation and The Bank of California,
N.A.
(3) Average balances on loans outstanding include all nonperforming and
renegotiated loans.
(4) Based on annualized net income.
(5) Based on annualized net income applicable to common stock.
(6) Noninterest expense excludes foreclosed assets expense.
(7) Annualized.
2
<PAGE>
UNIONBANCAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL HIGHLIGHTS (CONTINUED)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-----------------------------------------------------
INCREASE (DECREASE)
SEPTEMBER 30, SEPTEMBER 30, ---------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 1996 1995 AMOUNT PERCENT
- -------------------------------------------------------------------------- ------------- ------------- ---------- ---------
<S> <C> <C> <C> <C>
RESULTS OF OPERATIONS:
Net interest income (1)................................................. $ 880,735 $ 853,813 $ 26,922 3.15%
Provision for loan losses............................................... 30,000 44,500 (14,500) (32.58)
Noninterest income...................................................... 315,704 291,497 24,207 8.30
Noninterest expense, excluding merger and integration expense........... 763,065 725,830 37,235 5.13
------------- ------------- ---------- ---------
Income before merger and integration expense and income taxes (1)....... 403,374 374,980 28,394 7.57
Merger and integration expense.......................................... 86,818 -- 86,818 --
------------- ------------- ---------- ---------
Income before income taxes (1).......................................... 316,556 374,980 (58,424) (15.58)
Taxable-equivalent adjustment........................................... 5,241 8,209 (2,968) (36.16)
Income tax expense...................................................... 121,658 142,212 (20,554) (14.45)
------------- ------------- ---------- ---------
Net income.............................................................. $ 189,657 $ 224,559 $ (34,902) (15.54)%
------------- ------------- ---------- ---------
------------- ------------- ---------- ---------
NET INCOME APPLICABLE TO:
Common stock............................................................ $ 171,608 $ 203,460 $ (31,852) (15.66)%
------------- ------------- ---------- ---------
------------- ------------- ---------- ---------
Parent direct interest in bank subsidiary............................... $ 9,569 $ 12,620 $ (3,051) (24.18)%
------------- ------------- ---------- ---------
------------- ------------- ---------- ---------
RECAP OF EARNINGS:
Net income.............................................................. $ 189,657 $ 224,559 $ (34,902) (15.54)%
Merger and integration expense (after-tax).............................. 53,348 -- 53,348 --
------------- ------------- ---------- ---------
Pro forma earnings, excluding merger and integration expense............ $ 243,005 $ 224,559 $ 18,446 8.21%
------------- ------------- ---------- ---------
------------- ------------- ---------- ---------
Net income applicable to common stock................................... $ 171,608 $ 203,460 $ (31,852) (15.66)%
Merger and integration expense (after-tax, applicable to common
stock)................................................................ 50,164 -- 50,164 --
------------- ------------- ---------- ---------
Pro forma earnings applicable to common stock, excluding merger and
integration expense................................................... $ 221,772 $ 203,460 $ 18,312 9.00%
------------- ------------- ---------- ---------
------------- ------------- ---------- ---------
PER AVERAGE COMMON SHARE:
Net income.............................................................. $ 3.14 $ 3.73 $ (0.59) (15.82)%
Pro forma earnings, excluding merger and integration expense............ 4.05 3.73 0.32 8.58
Dividends (2)........................................................... 1.05 1.05 -- --
Book value (end of period).............................................. 40.04 38.52 1.52 3.95
Common shares outstanding (end of period)............................... 54,758,560 54,641,415 117,145 0.21
Weighted average common shares outstanding.............................. 54,733,777 54,505,317 228,460 0.42
BALANCE SHEET (END OF PERIOD):
Total assets............................................................ $28,679,646 $27,033,151 $1,646,495 6.09%
Total loans............................................................. 20,946,765 19,408,524 1,538,241 7.93
Nonperforming and renegotiated assets................................... 180,657 270,683 (90,026) (33.26)
Deposits................................................................ 20,909,390 18,893,343 2,016,047 10.67
Subordinated capital notes.............................................. 415,000 584,624 (169,624) (29.01)
Shareholders' equity.................................................... 2,454,219 2,394,967 59,252 2.47
BALANCE SHEET (PERIOD AVERAGES):
Total assets............................................................ $27,681,548 $25,182,429 $2,499,119 9.92%
Total loans (3)......................................................... 20,416,806 18,682,270 1,734,536 9.28
Shareholders' equity.................................................... 2,455,227 2,298,045 157,182 6.84
FINANCIAL RATIOS:
Return on average assets (4)............................................ 0.92% 1.19% (0.27)%
Pro forma return on average assets, excluding after-tax merger
and integration expense (4)........................................... 1.17 1.19 (0.02)
Return on average common equity (5)..................................... 10.50 13.50 (3.00)
Pro forma return on average common equity, excluding after-tax merger
and integration expense (5)........................................... 13.56 13.50 0.06
Efficiency ratio (6).................................................... 70.75 63.47 7.28
Pro forma efficiency ratio, excluding merger and integration expense
(6)................................................................... 63.49 63.47 0.02
Net interest margin (1)................................................. 4.76 5.09 (0.33)
Tier 1 risk-based capital ratio......................................... 9.04 9.42 (0.38)
Total risk-based capital ratio.......................................... 11.16 11.88 (0.72)
Leverage ratio.......................................................... 8.43 8.75 (0.32)
Allowance for loan losses to total loans................................ 2.55 2.92 (0.37)
Allowance for loan losses to nonaccrual loans........................... 362.10 247.01 115.09
Net loans charged off to average total loans (7)........................ 0.33 0.29 0.04
Nonperforming and renegotiated assets to total loans and foreclosed
assets................................................................ 0.86 1.39 (0.53)
Nonperforming and renegotiated assets to total assets................... 0.63 1.00 (0.37)
Average shareholders' equity to average total assets.................... 8.87 9.13 (0.26)
</TABLE>
- ------------------------------
(1) Fully taxable-equivalent.
(2) Amounts prior to merger are based on Union Bank only and do not include the
dividend of $145 million paid to Mitsubishi Bank, Limited in the first
quarter of 1996 by BanCal Tri-State Corporation and The Bank of California,
N.A.
(3) Average balances on loans outstanding include all nonperforming and
renegotiated loans.
(4) Based on annualized net income.
(5) Based on annualized net income applicable to common stock.
(6) Noninterest expense excludes foreclosed assets expense.
(7) Annualized.
3
<PAGE>
ITEM 1. FINANCIAL STATEMENTS
UNIONBANCAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(UNAUDITED) (UNAUDITED)
SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30,
(DOLLARS IN THOUSANDS) 1996 1995 1995
- --------------------------------------------------------------------- ------------- ------------ -------------
<S> <C> <C> <C>
ASSETS
Cash and due from banks.............................................. $ 2,359,879 $ 2,274,088 $ 1,769,317
Interest bearing deposits in banks................................... 831,710 761,310 1,032,757
Federal funds sold and securities purchased under resale
agreements.......................................................... 471,641 317,025 818,670
------------- ------------ -------------
Total cash and cash equivalents.................................. 3,663,230 3,352,423 3,620,744
Trading account securities........................................... 452,613 322,283 379,073
Investment securities available for sale............................. 2,007,074 1,960,551 1,525,838
Investment securities held to maturity (market value of $289,029 at
September 30, 1996, $376,100 at December 31, 1995 and $896,373 at
September 30, 1995)................................................. 283,566 363,287 880,444
Loans................................................................ 20,946,765 20,226,089 19,408,524
Less: Allowance for loan losses...................................... 535,087 555,149 566,812
------------- ------------ -------------
Net loans........................................................ 20,411,678 19,670,940 18,841,712
Premises and equipment, net.......................................... 426,856 421,921 419,569
Customers' acceptance liability...................................... 772,893 719,681 638,417
Goodwill and intangible assets....................................... 94,476 104,529 107,878
Other real estate owned.............................................. 32,882 36,453 39,754
Other assets......................................................... 534,378 594,791 579,722
------------- ------------ -------------
Total assets..................................................... $28,679,646 $ 27,546,859 $27,033,151
------------- ------------ -------------
------------- ------------ -------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits in domestic offices:
Noninterest bearing................................................ $ 6,963,233 $ 7,036,969 $ 6,344,758
Interest bearing................................................... 12,316,319 10,885,810 10,620,385
Deposits in foreign offices:
Noninterest bearing................................................ 346,814 342,430 313,022
Interest bearing................................................... 1,283,024 1,389,834 1,615,178
------------- ------------ -------------
Total deposits................................................... 20,909,390 19,655,043 18,893,343
Federal funds purchased and securities sold under repurchase
agreements.......................................................... 714,998 1,195,058 1,302,835
Commercial paper..................................................... 1,674,254 1,389,870 1,569,752
Other borrowed funds................................................. 1,184,199 1,065,058 1,039,422
Acceptances outstanding.............................................. 772,893 719,681 638,417
Other liabilities.................................................... 554,693 536,688 609,791
Subordinated capital notes........................................... 415,000 501,369 584,624
------------- ------------ -------------
Total liabilities................................................ 26,225,427 25,062,767 24,638,184
------------- ------------ -------------
SHAREHOLDERS' EQUITY
Parent direct interest in equity of bank subsidiary.................. 126,599 159,996 154,981
Preferred stock:
8 3/8% Noncumulative, Series A, 5,400,000 depositary shares,
authorized and issued............................................ 135,000 135,000 135,000
Common stock -- $5 stated value, authorized 100,000,000 shares,
issued 54,758,560 as of September 30, 1996, 54,670,283 as of
December 31, 1995 and 54,641,415 as of September 30, 1995........... 273,793 273,351 273,207
Additional paid-in capital........................................... 1,312,821 1,309,094 1,305,525
Retained earnings.................................................... 598,139 583,283 517,357
Cumulative translation adjustment.................................... (2,393) (972) (760)
Net unrealized gain on investment securities available for sale...... 10,260 24,340 9,657
------------- ------------ -------------
Total shareholders' equity....................................... 2,454,219 2,484,092 2,394,967
------------- ------------ -------------
Total liabilities and shareholders' equity....................... $28,679,646 $ 27,546,859 $27,033,151
------------- ------------ -------------
------------- ------------ -------------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
UNIONBANCAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
-------------------- ------------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 1996 1995 1996 1995
- ----------------------------------------------------------------- --------- --------- ----------- -----------
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans, including fees.......................................... $ 419,988 $ 407,489 $ 1,252,902 $ 1,189,311
Investment securities -- taxable............................... 33,900 32,433 98,762 86,818
Investment securities -- tax exempt............................ 2,479 3,034 7,879 9,606
Interest bearing deposits in banks............................. 12,489 15,993 38,583 45,137
Federal funds sold and securities purchased under resale
agreements................................................... 6,028 4,731 21,843 12,411
Trading account securities..................................... 6,431 4,848 18,015 13,947
--------- --------- ----------- -----------
Total interest income...................................... 481,315 468,528 1,437,984 1,357,230
--------- --------- ----------- -----------
INTEREST EXPENSE
Deposits in domestic offices................................... 116,273 96,080 331,932 252,731
Deposits in foreign offices.................................... 18,339 23,206 53,749 75,065
Federal funds purchased and securities sold under repurchase
agreements................................................... 10,419 22,047 38,310 60,972
Commercial paper............................................... 22,687 21,890 66,650 63,727
Other borrowed funds........................................... 14,517 8,488 48,233 25,773
Subordinated capital notes..................................... 7,492 10,683 23,616 33,358
--------- --------- ----------- -----------
Total interest expense..................................... 189,727 182,394 562,490 511,626
--------- --------- ----------- -----------
NET INTEREST INCOME.............................................. 291,588 286,134 875,494 845,604
Provision for loan losses........................................ 10,000 12,000 30,000 44,500
--------- --------- ----------- -----------
Net interest income after provision for loan losses........ 281,588 274,134 845,494 801,104
NONINTEREST INCOME
Service charges on deposit accounts............................ 26,799 23,835 75,827 70,984
Trust fees..................................................... 24,098 21,529 69,655 63,785
International services and foreign exchange.................... 18,761 22,515 59,179 66,915
Credit card merchant fees...................................... 13,721 12,461 38,224 34,273
Investment securities gains (losses), net...................... 628 (348) 3,865 (1,668)
Other.......................................................... 23,273 18,630 68,954 57,208
--------- --------- ----------- -----------
Total noninterest income................................... 107,280 98,622 315,704 291,497
--------- --------- ----------- -----------
NONINTEREST EXPENSE
Salaries and employee benefits................................. 138,007 133,011 420,322 400,942
Net occupancy.................................................. 35,439 22,877 81,664 69,552
Equipment...................................................... 14,003 13,803 41,152 40,462
Foreclosed asset expense (income).............................. (696) (995) 3,445 (1,127)
Merger and integration......................................... 25,552 -- 86,818 --
Other.......................................................... 71,770 67,532 216,482 216,001
--------- --------- ----------- -----------
Total noninterest expense.................................. 284,075 236,228 849,883 725,830
--------- --------- ----------- -----------
Income before income taxes....................................... 104,793 136,528 311,315 366,771
Income tax expense............................................... 42,810 52,675 121,658 142,212
--------- --------- ----------- -----------
NET INCOME....................................................... $ 61,983 $ 83,853 $ 189,657 $ 224,559
--------- --------- ----------- -----------
--------- --------- ----------- -----------
NET INCOME APPLICABLE TO:
Common stock................................................... $ 55,745 $ 76,686 $ 171,608 $ 203,460
--------- --------- ----------- -----------
--------- --------- ----------- -----------
Parent direct interest in bank subsidiary...................... $ 3,411 $ 4,341 $ 9,569 $ 12,620
--------- --------- ----------- -----------
--------- --------- ----------- -----------
NET INCOME PER AVERAGE COMMON SHARE.............................. $ 1.02 $ 1.40 $ 3.14 $ 3.73
--------- --------- ----------- -----------
--------- --------- ----------- -----------
WEIGHTED AVERAGE COMMON SHARES (IN THOUSANDS).................... 54,759 54,641 54,734 54,505
--------- --------- ----------- -----------
--------- --------- ----------- -----------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
UNIONBANCAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED SEPTEMBER 30,
------------------------
(DOLLARS IN THOUSANDS) 1996 1995
- --------------------------------------------------------------------------------------- ----------- -----------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net Income........................................................................... $ 189,657 $ 224,559
Adjustments to reconcile net income to net cash:
Provision for loan losses.......................................................... 30,000 44,500
Depreciation and amortization...................................................... 48,182 44,993
Provision for deferred income taxes................................................ 16,991 39,618
(Gain) loss on sales of investment securities available for sale................... (3,702) 1,789
Gain on sale of assets, net........................................................ (4,591) (180)
Accretion of loan fees............................................................. (18,649) (14,121)
Deferral of loan costs............................................................. (8,353) (6,227)
Proceeds from sale of loans held for sale.......................................... 66,196 48,548
Increase in loans held for sale.................................................... (37,999) (35,597)
Increase in trading account securities............................................. (47,762) (123,760)
Increase (decrease) in interest payable............................................ (25,840) 24,228
(Increase) decrease in interest receivable......................................... 24,513 (16,832)
Increase (decrease) in accrued expense............................................. (115,729) 129,161
Other, net......................................................................... 15,228 (116,963)
----------- -----------
Total adjustments................................................................ (61,515) 19,157
----------- -----------
Net cash provided by operating activities............................................ 128,142 243,716
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of investment securities available for sale...................... 12,695 159,120
Proceeds from matured and called investment securities available for sale............ 721,813 558,208
Purchase of investment securities available for sale................................. (726,561) (1,089,432)
Proceeds from sales of investment securities held to maturity........................ -- 506
Proceeds from matured and called investment securities held to maturity.............. 79,089 96,683
Purchase of investment securities held to maturity................................... -- (123,886)
Net increase in loans................................................................ (784,576) (1,374,107)
Purchase of premises and equipment................................................... (43,284) (54,829)
Proceeds from sales of OREO and other assets......................................... 24,918 36,408
----------- -----------
Net cash used in investing activities.............................................. (715,906) (1,791,329)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits............................................................. 1,254,347 1,483,606
Net decrease in federal funds purchased and securities sold under repurchase
agreements......................................................................... (1,112,356) (179,610)
Net increase in other borrowed funds................................................. 1,035,821 777,858
Maturity and redemption of subordinated capital notes and long-term debt............. (86,369) (71,239)
Dividend reinvestment................................................................ 1,193 17,564
Dividends paid....................................................................... (203,722) (28,674)
----------- -----------
Net cash provided by financing activities.......................................... 888,914 1,999,505
----------- -----------
Net increase in cash and cash equivalents.............................................. 301,150 451,892
Cash and cash equivalents at beginning of period....................................... 3,352,423 3,153,713
Foreign exchange revaluation gain...................................................... 9,657 15,139
----------- -----------
Cash and cash equivalents at end of period............................................. $ 3,663,230 $ 3,620,744
----------- -----------
----------- -----------
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Loans transferred to OREO............................................................ $ 30,253 $ 28,401
In-substance foreclosures reclassified from OREO to loans............................ -- 7,180
CASH PAID DURING THE PERIOD FOR:
Interest............................................................................. $ 536,650 $ 519,575
Income taxes......................................................................... 120,399 79,228
</TABLE>
See accompanying notes to condensed consolidated financial statements.
6
<PAGE>
UNIONBANCAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
NET
UNREALIZED
PARENT GAIN(LOSS)
DIRECT ON INVESTMENT
INTEREST IN ADDITIONAL CUMULATIVE SECURITIES
BANK PREFERRED COMMON PAID-IN RETAINED TRANSLATION AVAILABLE FOR
(DOLLARS IN THOUSANDS) SUBSIDIARY STOCK STOCK CAPITAL EARNINGS ADJUSTMENT SALE
- -------------------------------- ----------- ----------- ----------- ----------- --------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1994.... $ 141,607 $ 135,000 $ 269,790 $1,288,662 $ 353,417 $ (849) $ (8,425)
Dividend reinvestment plan...... 3,025 14,539
Stock options exercised......... 13 56
Deferred compensation --
restricted stock............... 379 2,268 (1,318)
Dividends declared on preferred
stock.......................... (8,480)
Dividends declared on common
stock.......................... (38,201)
Net income...................... 12,620 211,939
Change in unrealized net losses,
after taxes.................... 744 18,082
Change in translation
adjustment..................... 10 89
----------- ----------- ----------- ----------- --------- ----------- -------------
Balance at September 30, 1995... $ 154,981 $ 135,000 $ 273,207 $1,305,525 $ 517,357 $ (760) $ 9,657
----------- ----------- ----------- ----------- --------- ----------- -------------
----------- ----------- ----------- ----------- --------- ----------- -------------
Balance at December 31, 1995.... $ 159,996 $ 135,000 $ 273,351 $1,309,094 $ 583,283 $ (972) $ 24,340
Dividend reinvestment plan...... 120 1,073
Stock options exercised......... 110 559
Deferred compensation --
restricted stock............... 212 2,095 (627)
Dividends declared on preferred
stock.......................... (8,480)
Dividends declared on common
stock.......................... (42,313) (156,125)
Net income...................... 9,569 180,088
Change in unrealized net gains,
after taxes.................... (549) (14,080)
Change in translation
adjustment..................... (104) (1,421)
----------- ----------- ----------- ----------- --------- ----------- -------------
Balance at September 30, 1996... $ 126,599 $ 135,000 $ 273,793 $1,312,821 $ 598,139 $ (2,393) $ 10,260
----------- ----------- ----------- ----------- --------- ----------- -------------
----------- ----------- ----------- ----------- --------- ----------- -------------
<CAPTION>
(DOLLARS IN THOUSANDS) TOTAL
- -------------------------------- ---------
<S> <C>
Balance at December 31, 1994.... $2,179,202
Dividend reinvestment plan...... 17,564
Stock options exercised......... 69
Deferred compensation --
restricted stock............... 1,329
Dividends declared on preferred
stock.......................... (8,480)
Dividends declared on common
stock.......................... (38,201)
Net income...................... 224,559
Change in unrealized net losses,
after taxes.................... 18,826
Change in translation
adjustment..................... 99
---------
Balance at September 30, 1995... $2,394,967
---------
---------
Balance at December 31, 1995.... $2,484,092
Dividend reinvestment plan...... 1,193
Stock options exercised......... 669
Deferred compensation --
restricted stock............... 1,680
Dividends declared on preferred
stock.......................... (8,480)
Dividends declared on common
stock.......................... (198,438)
Net income...................... 189,657
Change in unrealized net gains,
after taxes.................... (14,629)
Change in translation
adjustment..................... (1,525)
---------
Balance at September 30, 1996... $2,454,219
---------
---------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
7
<PAGE>
UNIONBANCAL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(UNAUDITED)
NOTE 1 -- BASIS OF PRESENTATION
The unaudited condensed consolidated financial statements of UnionBanCal
Corporation and subsidiaries (the "Company") have been prepared in accordance
with generally accepted accounting principles ("GAAP") for interim financial
reporting and with the instructions to Form 10-Q. Accordingly, they do not
include all of the information and footnote disclosures necessary for complete
financial statements in conformity with GAAP. The preparation of financial
statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenue and
expense during the reporting period. Actual results could differ from those
estimates. These unaudited consolidated financial statements should be read in
conjunction with the audited consolidated financial statements included in Union
Bank's Annual Report on FDIC Form F-2 for the year ended December 31, 1995
included as an exhibit to the Company's Form 8-K filed on April 1, 1996.
In the opinion of management, the unaudited condensed consolidated financial
statements contain all adjustments considered necessary for a fair presentation
of the Company's financial condition as of September 30, 1996 and 1995, and
December 31, 1995, the results of operations for the three months and nine
months ended September 30, 1996 and 1995 and the statements of cash flows for
the nine months ended September 30, 1996 and 1995.
Primary and fully diluted earnings per share are computed based on the
weighted average number of common shares and equivalent common shares
outstanding during the period. Both the Stock Options and the Restricted Stock
are common stock equivalents. For the periods presented, the Stock Options and
the Restricted Stock did not have a dilutive effect and are not included in the
Company's earnings per share calculation.
NOTE 2 -- MERGER; COMBINATION OF UNION BANK AND BANCAL TRI-STATE CORPORATION
The combination of Union Bank with BanCal Tri-State Corporation and its
banking subsidiary, The Bank of California, N.A., was completed on April 1,
1996, resulting in UnionBanCal Corporation and its banking subsidiary now known
as Union Bank of California, N.A. The merger was effected by the issuance of
18,134,027 shares of Union Bank common stock in exchange for all the outstanding
common shares of BanCal Tri-State Corporation.
UnionBanCal Corporation is a bank holding company with consolidated assets
of $28.7 billion at September 30, 1996 and maintains its headquarters in San
Francisco, California. Its primary banking subsidiary is Union Bank of
California, N.A., which has more than 235 banking offices in California, 5
banking offices in Oregon and Washington and 16 overseas facilities. UnionBanCal
Corporation is 81 percent owned by The Bank of Tokyo-Mitsubishi, Ltd., and 19
percent owned by other shareholders. Union Bank of California, N.A., is 94
percent owned by UnionBanCal Corporation and 6 percent directly owned by The
Bank of Tokyo-Mitsubishi, Ltd.
The combination was accounted for as a reorganization of entities under
common control (similar to a pooling of interests). Accordingly, all historical
financial information has been restated as if the combination had been in effect
for all periods presented.
In connection with the merger, $26 million of merger and integration
expenses were recognized in the third quarter of 1996. These expenses included
severance, retention, and other employee related expenses ($9 million); charges
incurred in connection with the planned disposition of certain facilities ($9
million); professional fees ($1 million); and other merger and integration
related expenses ($7 million). For the nine
8
<PAGE>
UNIONBANCAL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1996
(UNAUDITED)
NOTE 2 -- MERGER; COMBINATION OF UNION BANK AND BANCAL TRI-STATE
CORPORATION (CONTINUED)
months ended September 30, 1996, $87 million of merger and integration expenses
were recognized. These expenses included severance, retention, and other
employee related expenses ($30 million), charges incurred in connection with the
planned disposition of certain facilities ($37 million), professional fees ($7
million), and other merger and integration related expenses ($13 million).
It is expected that additional merger-related costs which do not qualify for
current recognition will be incurred over the next two quarters. These costs
will also be classified as merger and integration expense when incurred.
For additional information in regard to the combination refer to Union
Bank's Proxy Statement dated January 8, 1996, included as an exhibit to the
Company's Form 8-K filed with the Securities and Exchange Commission on April 1,
1996.
The following presents certain financial data pertaining to the combination
of Union Bank with BanCal Tri-State Corporation for the first quarter of 1996:
<TABLE>
<CAPTION>
FIRST QUARTER
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA) 1996
- ---------------------------------------------------------------------- -------------
<S> <C>
Net interest income and noninterest income:
Union Bank, as originally reported.................................. $ 284.3
BanCal Tri-State Corporation........................................ $ 114.2
UnionBanCal Corporation............................................. $ 398.5
Net income:
Union Bank, as originally reported.................................. $ 60.5
BanCal Tri-State Corporation........................................ $ 22.8
UnionBanCal Corporation............................................. $ 83.3
Net income per average common share:
Union Bank, as originally reported.................................. $ 1.58
BanCal Tri-State.................................................... $ 1.05
UnionBanCal Corporation............................................. $ 1.40
</TABLE>
NOTE 3 -- RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
On January 1, 1996, the Company adopted three recently issued Statements of
Financial Accounting Standards ("SFAS"). The standards and their impact on the
Company are described below.
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of" addresses the accounting for the impairment
of long-lived assets, such as premises, furniture and equipment, certain
identifiable intangibles and goodwill related to those assets. Long-lived assets
and certain identifiable intangibles are to be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. An impairment loss is recognized when the sum of the
future cash flows expected from the use of the asset and its eventual
disposition (undiscounted and without interest charges) is less than the
carrying amount of the asset. The Statement also requires that long-lived assets
and identifiable intangibles, except for assets of a discontinued operation held
for disposal, be accounted for at the lower of cost or fair value less cost to
sell. The Company has implemented SFAS No. 121 and, except for the effects of
the writedown of certain assets and leases in connection with the recognition of
merger and integration costs, has determined that the measurement of impairment
loss is not material.
9
<PAGE>
UNIONBANCAL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1996
(UNAUDITED)
NOTE 3 -- RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS (CONTINUED)
SFAS No. 122, "Accounting for Mortgage Servicing Rights," an amendment of
SFAS No. 65, requires that the Company recognize as separate assets the rights
to service mortgage loans for others, however those servicing rights are
acquired. Previously, only purchased servicing rights were capitalizable as an
asset, whereas internally originated servicing rights were expensed. The
Statement also requires that capitalized excess servicing receivables be
assessed for impairment based on fair value. This Statement did not have a
material impact on the Company's financial condition, results of operations,
cash flows or related disclosures.
SFAS No. 123, "Accounting for Stock-Based Compensation" prescribes
accounting and reporting standards for all stock-based compensation plans,
including employee stock options, restricted stock and stock appreciation
rights. The Statement defines a "fair value-based method" of accounting for
employee stock options and encourages all entities to adopt that method of
accounting for all of their employee stock compensation plans. However, it also
allows an entity to continue to measure compensation for those plans using the
"intrinsic value-based method" under Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" (Opinion No. 25).
Substantially all of the Company's stock options have no intrinsic value at
grant date, and under Opinion No. 25 no compensation cost is recognized for
them. Compensation cost is recognized for other types of stock-based
compensation plans under Opinion No. 25, including plans with variable, usually
performance-based, features. SFAS No. 123 requires that an employer's financial
statements include certain disclosures about stock-based compensation
arrangements regardless of the method used to account for them. An employer that
continues to apply the accounting provisions of Opinion No. 25 will disclose pro
forma amounts that reflect the difference between compensation cost, if any,
included in net income and the related cost measured by the fair value-based
method, including tax effects, that would have been recognized in the income
statement if the fair value-based method had been used. The Company will
continue to apply Opinion No. 25 in accounting for stock-based compensation
plans.
In June 1996, SFAS No. 125, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities" was issued. This Statement
establishes standards for when transfers of financial assets, including those
with continuing involvement by the transferor, should be considered a sale. SFAS
No. 125 also establishes standards for when a liability should be considered
extinguished. This statement is effective for transfers of assets and
extinguishments of liabilities after December 31, 1996, applied prospectively.
Earlier adoption or retroactive application of this statement is not permitted.
Management will be considering this statement during the remainder of 1996 to
determine its effect on the Company's financial statements.
NOTE 4 -- INCOME TAXES
During the second quarter of 1996, a reduction of $5 million was recorded in
income tax expense reflecting a favorable settlement of a unitary tax issue with
the State of California.
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
INTRODUCTION
The combination of Union Bank with BanCal Tri-State Corporation and its
banking subsidiary, The Bank of California, N.A., was completed on April 1,
1996, resulting in UnionBanCal Corporation and its banking subsidiary now known
as Union Bank of California, N.A.
The combination was accounted for as a reorganization of entities under
common control (similar to a pooling of interests). Accordingly, all historical
financial information has been restated as if the combination had been in effect
for all periods presented.
To facilitate the discussion of the results of operations, Table 1 --
Analysis of Earnings is included on page 12. This analysis supplements the
Condensed Consolidated Statements of Income on Page 5 (which are prepared in
accordance with GAAP) primarily with respect to the treatment of merger and
integration expense. Management believes that it is meaningful to understand the
operating results and trends excluding these expenses and, therefore, has
included this table which presents income before merger and integration expense
and income taxes. In addition, the Table includes net income, net income
applicable to common stock, and net income per average common share including
merger and integration expenses and on a proforma basis excluding merger and
integration expenses (after-tax).
SUMMARY
For the third quarter of 1996, net income was $62 million after $15 million
of merger and integration related expenses (after-tax) recorded in connection
with the April 1, 1996 combination of Union Bank and BanCal Tri-State
Corporation. This compared with net income of $84 million in the third quarter
of 1995. Pro forma earnings, excluding merger and integration expense
(after-tax), was $77 million, an 8 percent decrease from the comparable quarter
a year ago. Other comparisons between the third quarter of 1996 and the
comparable quarter a year ago are as follows:
Pro forma earnings per average common share, excluding after-tax
merger and integration expense, decreased from $1.40 to $1.28.
Income before merger and integration expense and income taxes was
$131 million, an $8 million, or 5 percent, decrease.
Gross revenue (on a taxable-equivalent basis) was $400 million, a
$13 million, or 3 percent, increase.
Noninterest expense, excluding merger and integration expense, was
$259 million, a $22 million, or 9 percent, increase. More than
half the increase ($12 million) resulted from a charge related to
former banking facilities.
Excluding the after-tax effect of merger and integration expense,
the pro forma return on average assets decreased to 1.09 percent
from 1.28 percent, while the pro forma return on average common
equity decreased to 12.77 percent from 14.67 percent.
Period-end loans increased by 8 percent.
Total nonperforming and renegotiated assets dropped by $90 million
and the ratio to total assets decreased to 0.63 percent from 1.00
percent.
The Tier 1 and Total risk-based capital ratios were 9.04 percent
and 11.16 percent, respectively, compared with 9.42 percent and
11.88 percent, respectively.
For the nine months ended September 30, 1996, net income was $190 million,
compared with $225 million in the first nine months of 1995. Pro forma earnings,
excluding the after-tax effect of merger and integration expense, was $243
million, an 8 percent increase over the first nine months of 1995. Other
comparisons between the two periods include:
Pro forma earnings per average common share, excluding after-tax
merger and integration expense, increased from $3.73 to $4.05.
Income before merger and integration expense and income taxes was
$403 million, a $28 million, or 8 percent, increase.
Gross revenue (on a taxable-equivalent basis) was $1.20 billion, a
$51 million, or 4 percent, increase.
Noninterest expense, excluding merger and integration expense, was
$763 million, a $37 million, or 5 percent, increase. Approximately
one-third of this increase ($12 million) resulted from a charge
related to former banking facilities.
Excluding after-tax merger and integration expense, the pro forma
return on average assets declined to 1.17 percent from 1.19
percent, while the pro forma return on average common equity
increased to 13.56 percent from 13.50 percent.
11
<PAGE>
TABLE 1 -- ANALYSIS OF EARNINGS
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
------------------------------------------------------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE SEPTEMBER 30, JUNE 30, MARCH 31, DECEMBER 31, SEPTEMBER 30,
DATA) 1996 1996 1996 1995 1995
- ---------------------------------------- ------------- -------- --------- ------------ -------------
<S> <C> <C> <C> <C> <C>
EARNINGS SUMMARY
Interest income (1)................... $482,404 $475,625 $485,196 $494,399 $471,057
Interest expense...................... 189,727 185,362 187,401 193,127 182,394
------------- -------- --------- ------------ -------------
Net interest income (1)............... 292,677 290,263 297,795 301,272 288,663
Provision for loan losses............. 10,000 10,000 10,000 8,750 12,000
Noninterest income.................... 107,280 105,550 102,874 100,981 98,622
Noninterest expense, excluding merger
and integration expense............. 258,523 252,518 252,024 251,737 236,228
------------- -------- --------- ------------ -------------
Income before merger and integration
expense and income taxes (1)........ 131,434 133,295 138,645 141,766 139,057
Merger and integration expense........ 25,552 61,266 -- -- --
------------- -------- --------- ------------ -------------
Income before income taxes (1)........ 105,882 72,029 138,645 141,766 139,057
Taxable-equivalent adjustment......... 1,089 2,024 2,128 2,234 2,529
Income tax expense.................... 42,810 25,597 53,251 51,149 52,675
------------- -------- --------- ------------ -------------
Net income............................ $ 61,983 $ 44,408 $ 83,266 $ 88,383 $ 83,853
------------- -------- --------- ------------ -------------
------------- -------- --------- ------------ -------------
Net income applicable to:.............
Common stock........................ $ 55,745 $ 39,096 $ 76,768 $ 80,736 $ 76,686
------------- -------- --------- ------------ -------------
------------- -------- --------- ------------ -------------
Parent direct interest in bank
subsidiary........................ $ 3,411 $ 2,486 $ 3,672 $ 4,821 $ 4,341
------------- -------- --------- ------------ -------------
------------- -------- --------- ------------ -------------
RECAP OF EARNINGS
Net income............................ $ 61,983 $ 44,408 $ 83,266 $ 88,383 $ 83,853
Merger and integration expense
(after-tax)......................... 15,025 38,323 -- -- --
------------- -------- --------- ------------ -------------
Pro forma earnings, excluding merger
and integration expense............. $ 77,008 $ 82,731 $ 83,266 $ 88,383 $ 83,853
------------- -------- --------- ------------ -------------
------------- -------- --------- ------------ -------------
Net income applicable to common
stock............................... $ 55,745 $ 39,096 $ 76,768 $ 80,736 $ 76,686
Merger and integration expense
(after-tax), applicable to common
stock............................... 14,128 36,036 -- -- --
------------- -------- --------- ------------ -------------
Pro forma earnings applicable to
common stock, excluding merger and
integration expense................. $ 69,873 $ 75,132 $ 76,768 $ 80,736 $ 76,686
------------- -------- --------- ------------ -------------
------------- -------- --------- ------------ -------------
PER AVERAGE COMMON SHARE
Net income (2)........................ $ 1.02 $ 0.71 $ 1.40 $ 1.48 $ 1.40
Merger and integration expense
(after-tax) (2)..................... 0.26 0.66 -- -- --
------------- -------- --------- ------------ -------------
Pro forma earnings, excluding merger
and integration expense (2)......... $ 1.28 $ 1.37 $ 1.40 $ 1.48 $ 1.40
------------- -------- --------- ------------ -------------
------------- -------- --------- ------------ -------------
Dividends (3)......................... $ 0.35 $ 0.35 $ 0.35 $ 0.35 $ 0.35
Book value (end of period)............ 40.04 39.29 39.07 40.04 38.52
Weighted average common shares
outstanding (4)..................... 54,759 54,752 54,690 54,665 54,641
<CAPTION>
FOR THE NINE MONTHS ENDED
-----------------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE SEPTEMBER 30, SEPTEMBER 30,
DATA) 1996 1995
- ---------------------------------------- ------------- -------------
<S> <C> <C>
EARNINGS SUMMARY
Interest income (1)................... $1,443,225 $1,365,439
Interest expense...................... 562,490 511,626
------------- -------------
Net interest income (1)............... 880,735 853,813
Provision for loan losses............. 30,000 44,500
Noninterest income.................... 315,704 291,497
Noninterest expense, excluding merger
and integration expense............. 763,065 725,830
------------- -------------
Income before merger and integration
expense and income taxes (1)........ 403,374 374,980
Merger and integration expense........ 86,818 --
------------- -------------
Income before income taxes (1)........ 316,556 374,980
Taxable-equivalent adjustment......... 5,241 8,209
Income tax expense.................... 121,658 142,212
------------- -------------
Net income............................ $ 189,657 $ 224,559
------------- -------------
------------- -------------
Net income applicable to:.............
Common stock........................ $ 171,608 $ 203,460
------------- -------------
------------- -------------
Parent direct interest in bank
subsidiary........................ $ 9,569 $ 12,620
------------- -------------
------------- -------------
RECAP OF EARNINGS
Net income............................ $ 189,657 $ 224,559
Merger and integration expense
(after-tax)......................... 53,348 --
------------- -------------
Pro forma earnings, excluding merger
and integration expense............. $ 243,005 $ 224,559
------------- -------------
------------- -------------
Net income applicable to common
stock............................... $ 171,608 $ 203,460
Merger and integration expense
(after-tax), applicable to common
stock............................... 50,164 --
------------- -------------
Pro forma earnings applicable to
common stock, excluding merger and
integration expense................. $ 221,772 $ 203,460
------------- -------------
------------- -------------
PER AVERAGE COMMON SHARE
Net income (2)........................ $ 3.14 $ 3.73
Merger and integration expense
(after-tax) (2)..................... 0.91 --
------------- -------------
Pro forma earnings, excluding merger
and integration expense (2)......... $ 4.05 $ 3.73
------------- -------------
------------- -------------
Dividends (3)......................... $ 1.05 $ 1.05
Book value (end of period)............ 40.04 38.52
Weighted average common shares
outstanding (4)..................... 54,734 54,505
</TABLE>
- ------------------------------
(1) Includes amounts to convert tax-exempt income, primarily municipal
securities income, to a taxable-equivalent basis.
(2) Based on net income applicable to common stock.
(3) Amounts prior to merger are based on Union Bank only and do not include the
dividend of $145 million paid to Mitsubishi Bank, Limited in the first
quarter of 1996 by BanCal Tri-State Corporation and The Bank of California,
N.A.
(4) In thousands.
12
<PAGE>
NET INTEREST INCOME
The Company's operating results depend primarily on net interest income (the
difference between the interest earned on loans and investments less interest
expense on deposit accounts and borrowings). Primary factors affecting the level
of net interest income include the margin between the yield earned on interest
earning assets and the rate paid on interest bearing liabilities, as well as the
volume and composition of average interest earning assets and interest bearing
liabilities.
Net interest income before the provision for loan losses on a fully
taxable-equivalent basis was $293 million for the third quarter of 1996 and $289
million for the third quarter of 1995. This increase of $4 million was primarily
attributable to an increase in the volume of loans the Bank has originated and a
reduction in the level of nonperforming and renegotiated assets in comparison to
a year ago, partly offset by the effect of a decrease in the net interest margin
from 4.96 percent to 4.72 percent. This net interest margin decrease was
primarily attributable to a decrease in the proportion of funding provided by
noninterest bearing and lower cost (interest bearing, savings and consumer time)
sources of funds and to an increase in the cost of such funding sources while
other rates declined. The proportion of funding of earning assets provided by
noninterest bearing and other lower cost sources of funds decreased from 63
percent in the third quarter of 1995 to 61 percent in the third quarter of 1996,
primarily due to a higher growth rate for loans than for noninterest bearing and
other lower cost sources of funds.
Net interest income before the provision for loan losses on a fully
taxable-equivalent basis was $881 million for the first nine months of 1996 and
$854 million for the first nine months of 1995. The increase of $27 million was
primarily attributable to an increase in the volume of loans the Bank has
originated and a reduction in the level of nonperforming and renegotiated assets
in comparison to a year ago, partly offset by the effect of a decrease in the
net interest margin from 5.09 percent to 4.76 percent. This decrease was
primarily attributable to a decrease in the proportion of funding provided by
noninterest bearing and lower cost (interest bearing, savings and consumer time)
sources of funds and to an increase in the cost of such funding sources while
other rates declined. The proportion of funding provided by noninterest bearing
and other lower cost sources of funds decreased from 64 percent in the first
nine months of 1995 to 60 percent in the first nine months of 1996, primarily
due to a higher growth rate for loans than for noninterest bearing and other
lower cost sources of funds.
13
<PAGE>
TABLE 2 -- CONSOLIDATED AVERAGE BALANCE SHEETS, NET INTEREST INCOME AND INTEREST
RATES
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
---------------------------------------------------------
SEPTEMBER 30, 1996 JUNE 30, 1996
------------------------------ ------------------------
INTEREST AVERAGE INTEREST
AVERAGE INCOME/ RATE AVERAGE INCOME/
(DOLLARS IN THOUSANDS) BALANCE EXPENSE (1) BALANCE EXPENSE
- ----------------------------------------------------------------- ----------- -------- ------- ----------- -----------
<S> <C> <C> <C> <C> <C>
ASSETS
Loans: (2)
Domestic....................................................... $19,508,311 $401,481 8.19% $19,273,264 $ 396,804
Foreign........................................................ 1,143,146 18,390 6.40 1,114,212 16,850
Investment securities:
Taxable........................................................ 2,119,276 33,909 6.37 2,082,598 32,099
Tax-exempt..................................................... 147,623 3,682 9.92 157,246 4,065
Interest bearing deposits in banks............................... 864,087 12,489 5.75 834,149 11,827
Federal funds sold and securities purchased under resale
agreements...................................................... 433,494 6,028 5.53 547,527 7,396
Trading account securities....................................... 439,227 6,425 5.82 483,769 6,584
----------- -------- ----------- -----------
Total earning assets......................................... 24,655,164 482,404 7.78 24,492,765 475,625
-------- -----------
Allowance for loan losses........................................ (543,646) (546,744)
Cash and due from banks.......................................... 1,937,016 1,920,112
OREO............................................................. 35,046 32,641
Premises and equipment, net...................................... 425,019 431,592
Other assets..................................................... 1,473,295 1,467,835
----------- -----------
Total assets................................................. $27,981,894 $27,798,201
----------- -----------
----------- -----------
LIABILITIES
Deposits in domestic offices:
Interest bearing............................................... $ 5,038,546 34,143 2.70 $ 4,809,139 32,135
Savings and consumer time...................................... 2,851,566 23,828 3.32 2,945,632 26,773
Large time..................................................... 4,252,826 58,302 5.45 3,724,593 48,173
Deposits in foreign offices...................................... 1,398,989 18,339 5.22 1,488,980 17,687
----------- -------- ----------- -----------
Total interest bearing deposits.............................. 13,541,927 134,612 3.95 12,968,344 124,768
----------- -------- ----------- -----------
Federal funds purchased and securities sold under repurchase
agreements...................................................... 817,236 10,419 5.07 1,016,997 11,544
Subordinated capital notes....................................... 452,211 7,492 6.59 495,369 7,889
Other borrowed funds............................................. 2,759,563 37,204 5.36 3,038,532 41,161
----------- -------- ----------- -----------
Total borrowed funds......................................... 4,029,010 55,115 5.44 4,550,898 60,594
----------- -------- ----------- -----------
Total interest bearing liabilities........................... 17,570,937 189,727 4.30 17,519,242 185,362
-------- -----------
Demand deposits.................................................. 6,640,131 6,599,174
Other liabilities................................................ 1,335,204 1,253,318
----------- -----------
Total liabilities............................................ 25,546,272 25,371,734
SHAREHOLDERS' EQUITY............................................. 2,435,622 2,426,467
----------- -----------
Total liabilities and shareholders' equity................... $27,981,894 $27,798,201
----------- -----------
----------- -----------
Net interest income/margin (3)................................... 292,677 4.72% 290,263
Less taxable-equivalent adjustment............................... 1,089 2,024
-------- -----------
Net interest income.......................................... $291,588 $ 288,239
-------- -----------
-------- -----------
<CAPTION>
AVERAGE
RATE
(DOLLARS IN THOUSANDS) (1)
- ----------------------------------------------------------------- -------
<S> <C>
ASSETS
Loans: (2)
Domestic....................................................... 8.28%
Foreign........................................................ 6.08
Investment securities:
Taxable........................................................ 6.20
Tax-exempt..................................................... 10.40
Interest bearing deposits in banks............................... 5.70
Federal funds sold and securities purchased under resale
agreements...................................................... 5.43
Trading account securities....................................... 5.47
Total earning assets......................................... 7.81
Allowance for loan losses........................................
Cash and due from banks..........................................
OREO.............................................................
Premises and equipment, net......................................
Other assets.....................................................
Total assets.................................................
LIABILITIES
Deposits in domestic offices:
Interest bearing............................................... 2.69
Savings and consumer time...................................... 3.66
Large time..................................................... 5.20
Deposits in foreign offices...................................... 4.78
Total interest bearing deposits.............................. 3.87
Federal funds purchased and securities sold under repurchase
agreements...................................................... 4.57
Subordinated capital notes....................................... 6.41
Other borrowed funds............................................. 5.45
Total borrowed funds......................................... 5.36
Total interest bearing liabilities........................... 4.26
Demand deposits..................................................
Other liabilities................................................
Total liabilities............................................
SHAREHOLDERS' EQUITY.............................................
Total liabilities and shareholders' equity...................
Net interest income/margin (3)................................... 4.77%
Less taxable-equivalent adjustment...............................
Net interest income..........................................
</TABLE>
- ------------------------------
(1) Yields on loans, tax-exempt securities, net interest income and net yield
on earning assets are presented on a fully taxable-equivalent basis using
the federal statutory tax rate of 35 percent.
(2) Average balances on loans outstanding include all nonperforming and
renegotiated loans. Included in interest income on loans is the amortized
portion of net loan origination fees (costs), representing an adjustment to
the yield.
(3) Fully taxable-equivalent basis.
14
<PAGE>
TABLE 2 -- CONSOLIDATED AVERAGE BALANCE SHEETS, NET INTEREST INCOME AND INTEREST
RATES (CONTINUED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
--------------------------------------------------------------------------------------------------
MARCH 31, 1996 DECEMBER 31, 1995 SEPTEMBER 30, 1995
-------------------------------- ------------------------------ ------------------------------
INTEREST AVERAGE INTEREST AVERAGE INTEREST AVERAGE
AVERAGE INCOME/ RATE AVERAGE INCOME/ RATE AVERAGE INCOME/ RATE
(DOLLARS IN THOUSANDS) BALANCE EXPENSE (1) BALANCE EXPENSE (1) BALANCE EXPENSE (1)
- ------------------------------ ----------- ---------- ------- ----------- -------- ------- ----------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Loans: (2)
Domestic.................... $18,993,197 $ 401,441 8.50% $18,586,389 $407,763 8.70% $17,940,324 $390,656 8.64%
Foreign..................... 1,200,601 19,173 6.42 1,219,905 19,553 6.36 1,138,696 17,784 6.20
Investment securities:
Taxable..................... 2,114,805 32,754 6.23 2,213,092 33,517 6.01 2,162,511 32,399 5.94
Tax-exempt.................. 161,818 4,136 10.28 169,879 4,348 10.15 182,245 4,642 10.11
Interest bearing deposits in
banks........................ 968,414 14,267 5.93 838,765 13,064 6.18 1,031,802 15,993 6.15
Federal funds sold and
securities purchased under
resale agreements............ 603,083 8,419 5.61 657,534 9,836 5.93 310,897 4,731 6.04
Trading account securities.... 352,097 5,006 5.72 414,307 6,318 6.05 318,644 4,852 6.04
----------- ---------- ----------- -------- ----------- --------
Total earning assets...... 24,394,015 485,196 8.00 24,099,871 494,399 8.14 23,085,119 471,057 8.10
---------- -------- --------
Allowance for loan losses..... (554,717) (562,656) (574,509)
Cash and due from banks....... 1,859,210 1,867,042 1,642,240
OREO.......................... 38,354 39,044 40,556
Premises and equipment, net... 424,530 421,470 419,591
Other assets.................. 1,267,329 1,314,033 1,366,951
----------- ----------- -----------
Total assets.............. $27,428,721 $27,178,804 $25,979,948
----------- ----------- -----------
----------- ----------- -----------
LIABILITIES
Deposits in domestic offices:
Interest bearing............ $ 4,797,823 31,863 2.67 $ 4,865,000 33,245 2.71 $ 4,782,958 31,772 2.64
Savings and consumer time... 2,916,873 26,897 3.71 2,884,856 27,174 3.74 2,880,631 26,780 3.69
Large time.................. 3,753,599 49,818 5.34 3,175,021 45,033 5.63 2,656,523 37,528 5.60
Deposits in foreign offices... 1,497,434 17,723 4.76 1,624,207 20,782 5.08 1,753,074 23,206 5.25
----------- ---------- ----------- -------- ----------- --------
Total interest bearing
deposits................ 12,965,729 126,301 3.92 12,549,084 126,234 3.99 12,073,186 119,286 3.92
----------- ---------- ----------- -------- ----------- --------
Federal funds purchased and
securities sold under
repurchase agreements........ 1,205,614 16,347 5.45 1,276,551 18,385 5.71 1,534,413 22,047 5.70
Subordinated capital notes.... 497,413 8,235 6.66 528,206 9,180 6.90 614,521 10,683 6.90
Other borrowed funds.......... 2,659,468 36,518 5.52 2,677,286 39,328 5.83 2,066,116 30,378 5.83
----------- ---------- ----------- -------- ----------- --------
Total borrowed funds...... 4,362,495 61,100 5.63 4,482,043 66,893 5.92 4,215,050 63,108 5.94
----------- ---------- ----------- -------- ----------- --------
Total interest bearing
liabilities............. 17,328,224 187,401 4.35 17,031,127 193,127 4.50 16,288,236 182,394 4.44
---------- -------- --------
Demand deposits............... 6,462,654 6,516,502 6,137,218
Other liabilities............. 1,133,896 1,196,528 1,193,830
----------- ----------- -----------
Total liabilities......... 24,924,774 24,744,157 23,619,284
SHAREHOLDERS' EQUITY.......... 2,503,947 2,434,647 2,360,664
----------- ----------- -----------
Total liabilities and
shareholders' equity.... $27,428,721 $27,178,804 $25,979,948
----------- ----------- -----------
----------- ----------- -----------
Net interest income/margin
(3).......................... 297,795 4.91% 301,272 4.96% 288,663 4.96%
Less taxable-equivalent
adjustment................... 2,128 2,234 2,529
---------- -------- --------
Net interest income....... $ 295,667 $299,038 $286,134
---------- -------- --------
---------- -------- --------
</TABLE>
- ------------------------------
(1) Yields on loans, tax-exempt securities, net interest income and net yield
on earning assets are presented on a fully taxable-equivalent basis using
the federal statutory tax rate of 35 percent.
(2) Average balances on loans outstanding include all nonperforming and
renegotiated loans. Included in interest income on loans is the amortized
portion of net loan origination fees (costs), representing an adjustment to
the yield.
(3) Fully taxable-equivalent basis.
15
<PAGE>
TABLE 2 -- CONSOLIDATED AVERAGE BALANCE SHEETS, NET INTEREST INCOME AND INTEREST
RATES (CONTINUED)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
-------------------------------------------------------------------
SEPTEMBER 30, 1996 SEPTEMBER 30, 1995
-------------------------------- --------------------------------
INTEREST AVERAGE INTEREST AVERAGE
AVERAGE INCOME/ RATE AVERAGE INCOME/ RATE
(DOLLARS IN THOUSANDS) BALANCE EXPENSE (1) BALANCE EXPENSE (1)
- ---------------------------------------- ----------- ---------- ------- ----------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Loans: (2)
Domestic.............................. $19,259,531 $1,199,726 8.30% $17,540,142 $1,136,983 8.67%
Foreign............................... 1,157,275 54,413 6.26 1,142,128 55,625 6.51
Investment securities:
Taxable............................... 2,105,609 98,762 6.25 1,999,383 86,693 5.80
Tax-exempt............................ 155,533 11,883 10.19 194,359 14,637 10.07
Interest bearing deposits in banks...... 888,793 38,583 5.70 962,082 45,137 6.27
Federal funds sold and securities
purchased under resale agreements...... 527,690 21,843 5.44 271,342 12,411 6.12
Trading account securities.............. 428,844 18,015 5.52 300,562 13,953 6.21
----------- ---------- ----------- ----------
Total earning assets................ 24,523,275 1,443,225 7.82 22,409,998 1,365,439 8.15
---------- ----------
Allowance for loan losses............... (548,351) (577,352)
Cash and due from banks................. 1,900,179 1,543,228
OREO.................................... 35,368 41,622
Premises and equipment, net............. 424,324 412,142
Other assets............................ 1,346,753 1,352,791
----------- -----------
Total assets........................ $27,681,548 $25,182,429
----------- -----------
----------- -----------
LIABILITIES
Deposits in domestic offices:
Interest bearing...................... $ 4,882,407 98,141 2.69 $ 4,846,894 93,648 2.58
Savings and consumer time............. 2,904,497 77,498 3.56 2,850,221 75,119 3.52
Large time............................ 3,913,343 156,293 5.33 2,238,930 83,964 5.01
Deposits in foreign offices............. 1,461,572 53,749 4.91 1,845,999 75,065 5.44
----------- ---------- ----------- ----------
Total interest bearing deposits..... 13,161,819 385,681 3.90 11,782,044 327,796 3.72
----------- ---------- ----------- ----------
Federal funds purchased and securities
sold under repurchase agreements....... 1,012,567 38,310 5.04 1,421,229 60,972 5.74
Subordinated capital notes.............. 481,556 23,616 6.53 641,820 33,358 6.95
Other borrowed funds.................... 2,820,227 114,883 5.43 2,015,942 89,500 5.94
----------- ---------- ----------- ----------
Total borrowed funds................ 4,314,350 176,809 5.47 4,078,991 183,830 6.03
----------- ---------- ----------- ----------
Total interest bearing
liabilities....................... 17,476,169 562,490 4.29 15,861,035 511,626 4.31
---------- ----------
Demand deposits......................... 6,540,717 5,871,790
Other liabilities....................... 1,209,435 1,151,559
----------- -----------
Total liabilities................... 25,226,321 22,884,384
SHAREHOLDERS' EQUITY.................... 2,455,227 2,298,045
----------- -----------
Total liabilities and shareholders'
equity............................ $27,681,548 $25,182,429
----------- -----------
----------- -----------
Net interest income/margin (3).......... 880,735 4.76% 853,813 5.09%
Less taxable-equivalent adjustment...... 5,241 8,209
---------- ----------
Net interest income................. $ 875,494 $ 845,604
---------- ----------
---------- ----------
</TABLE>
- ------------------------------
(1) Yields on loans, tax-exempt securities, net interest income and net yield
on earning assets are presented on a fully taxable-equivalent basis using
the federal statutory tax rate of 35 percent.
(2) Average balances on loans outstanding include all nonperforming and
renegotiated loans. Included in interest income on loans is the amortized
portion of net loan origination fees (costs), representing an adjustment to
the yield.
(3) Fully taxable-equivalent basis.
16
<PAGE>
NONINTEREST INCOME
During the third quarter of 1996, the Company had noninterest income of $107
million compared with $99 million for the same period in 1995. This increase of
$9 million was primarily due to $4 million of non-recurring gains (in other) in
the third quarter of 1996 and a $3 million increase in service charges on
deposit accounts, a $3 million increase in trust fees, a $2 million increase in
fees from investment services, partially offset by a $3 million decrease in
foreign exchange income.
For the nine months ended September 30, 1996, noninterest income increased
to $316 million from $291 million for the same period in 1995. This increase of
$24 million was primarily due to a $6 million increase in trust fees, a $5
million increase in service charges on deposit accounts, a $6 million increase
in net gains on the sale of investment securities and a $9 million increase in
other noninterest income, (including $4 million of non-recurring gains in the
third quarter of 1996) partially offset by a $5 million decrease in foreign
exchange income.
TABLE 3 -- NONINTEREST INCOME
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
------------------------------------------------------------------ ----------------------------
SEPTEMBER 30, JUNE 30, MARCH 31, DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
(DOLLARS IN THOUSANDS) 1996 1996 1996 1995 1995 1996 1995
- ------------------------- ------------- --------- ----------- ------------ ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Service charges on
deposit accounts........ $ 26,799 $ 25,067 $ 23,961 $ 23,957 $ 23,835 $ 75,827 $ 70,984
Trust fees............... 24,098 23,309 22,248 23,315 21,529 69,655 63,785
International commissions
and fees................ 16,120 17,124 16,278 17,422 17,017 49,522 51,776
Credit card merchant
fees.................... 13,721 12,905 11,598 11,494 12,461 38,224 34,273
Merchant banking fees.... 4,729 5,234 9,248 6,665 5,631 19,211 17,818
Investment services...... 5,225 4,714 4,259 4,491 3,693 14,198 12,350
Foreign exchange......... 2,641 3,330 3,686 3,904 5,498 9,657 15,139
Investment securities
gains (losses), net..... 628 2,621 616 966 (348) 3,865 (1,668)
Other.................... 13,319 11,246 10,980 8,767 9,306 35,545 27,040
------------- --------- ----------- ------------ ------------- ------------- -------------
Total noninterest
income............... $ 107,280 $ 105,550 $ 102,874 $ 100,981 $ 98,622 $ 315,704 $ 291,497
------------- --------- ----------- ------------ ------------- ------------- -------------
------------- --------- ----------- ------------ ------------- ------------- -------------
</TABLE>
NONINTEREST EXPENSE
Noninterest expense, excluding merger and integration expense of $26
million, was $259 million for the third quarter of 1996, compared with $236
million for the comparable quarter in 1995. This increase of $22 million or 9
percent, included a $12 million charge related to former banking facilities.
Other expense increases primarily reflected expansion of the community banking
business, including the opening of 6 new offices and 11 new in-store locations
in the past year, as well as regular increases in salaries. Since the
merger-related consolidation of 20 branches occurred in September 1996, savings
related to this action are not reflected in third quarter 1996 results.
Total noninterest expense, excluding $87 million of merger and integration
expense, increased to $763 million for the nine months ended September 30, 1996
from $726 million for the same period in 1995. The same factors discussed above
in the quarterly comparison accounted for most of this increase. In addition,
there were increases of $4 million in credit card processing expense (roughly
offset by non-interest revenue from the growth in activity) and $5 million in
foreclosed asset expense (due primarily to write-downs and expenses in the first
quarter of 1996), offset by a $19 million decrease in regulatory authority
assessment expense (principally FDIC deposit assessment expense).
17
<PAGE>
TABLE 4 -- NONINTEREST EXPENSE
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
------------------------------------------------------------------ ----------------------------
SEPTEMBER 30, JUNE 30, MARCH 31, DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
(DOLLARS IN THOUSANDS) 1996 1996 1996 1995 1995 1996 1995
- ------------------------ ------------- ---------- ---------- ------------ ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Salaries................ $ 116,146 $ 117,725 $ 115,178 $ 115,885 $ 111,400 $ 349,049 $ 327,174
Employee benefits....... 21,861 22,239 27,173 19,036 21,611 71,273 73,768
------------- ---------- ---------- ------------ ------------- ------------- -------------
Salaries and employee
benefits............ 138,007 139,964 142,351 134,921 133,011 420,322 400,942
Net occupancy........... 35,439 24,270 21,955 23,390 22,877 81,664 69,552
Equipment............... 14,003 13,336 13,813 14,540 13,803 41,152 40,462
Credit card
processing............. 9,619 10,038 8,369 8,187 8,401 28,026 23,563
Communications.......... 7,684 8,309 7,726 8,139 7,616 23,719 22,379
Advertising and public
relations.............. 5,508 6,702 6,993 5,628 5,240 19,203 16,496
Printing and office
supplies............... 7,939 6,434 6,098 6,242 5,765 20,471 16,389
Professional services... 6,144 6,592 5,869 5,608 7,129 18,605 19,757
Armored car............. 5,487 5,196 5,046 4,987 4,952 15,729 14,484
Data processing......... 5,568 4,689 5,318 4,963 4,380 15,575 13,594
Software................ 3,966 3,678 3,676 4,335 3,628 11,320 9,503
Intangible asset
amortization........... 3,338 3,338 3,338 3,338 3,338 10,014 10,014
Travel.................. 3,553 3,822 3,074 3,342 3,192 10,449 8,816
Net operating
reserves............... 1,979 2,148 2,330 9,089 3,533 6,457 7,129
Foreclosed asset expense
(income)............... (696) 867 3,274 (2,035) (995) 3,445 (1,127)
Regulatory authority
assessments............ 956 312 959 2,579 179 2,227 20,852
Other................... 10,029 12,823 11,835 14,484 10,179 34,687 33,025
------------- ---------- ---------- ------------ ------------- ------------- -------------
Noninterest expense,
excluding merger and
integration
expense............. 258,523 252,518 252,024 251,737 236,228 763,065 725,830
Merger and integration
expense................ 25,552 61,266 -- -- -- 86,818 --
------------- ---------- ---------- ------------ ------------- ------------- -------------
Total noninterest
expense............. $ 284,075 $ 313,784 $ 252,024 $ 251,737 $ 236,228 $ 849,883 $ 725,830
------------- ---------- ---------- ------------ ------------- ------------- -------------
------------- ---------- ---------- ------------ ------------- ------------- -------------
</TABLE>
18
<PAGE>
MERGER EXPENSES
In connection with the merger, $26 million of merger and integration
expenses were recognized in the results of the third quarter of 1996. These
costs included severance, retention, and other employee related costs ($9
million); costs incurred in connection with the planned disposition of certain
facilities ($9 million); professional fees ($1 million); and other merger and
integration related expenses ($7 million).
<TABLE>
<CAPTION>
SEVERANCE,
RETENTION AND
OTHER EMPLOYEE FACILITIES PROFESSIONAL
(DOLLARS IN THOUSANDS) RELATED COSTS COSTS FEES OTHER TOTAL
- -------------------------------------------------- --------------- --------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C>
Provision for merger and integration costs........ $ 30,500 $ 36,929 $ 6,876 $ 12,513 $ 86,818
Utilization for the period
Cash............................................ 5,880 1,095 6,876 9,496 23,347
Noncash......................................... -- 5,000 -- 1,690 6,690
------- --------- ----------- --------- ---------
Total......................................... 5,880 6,095 6,876 11,186 30,037
------- --------- ----------- --------- ---------
Liability balance, September 30, 1996............. $ 24,620 $ 30,834 $ 0 $ 1,327 $ 56,781
------- --------- ----------- --------- ---------
------- --------- ----------- --------- ---------
</TABLE>
It is expected that additional merger-related expenses which do not qualify
for current recognition will be incurred over the next two quarters. These
expenses will also be classified as merger and integration expense when
incurred.
INCOME TAXES
The effective tax rates for the three months ended September 30, 1996 and
1995 were 41.1 percent and 38.6 percent respectively. The increase in the
effective tax rate was primarily attributable to an increase in the effective
California tax rate as a result of the combination of Union Bank with BanCal
Tri-State Corporation and of their parents, The Bank of Tokyo, Ltd. and The
Mitsubishi Bank, Limited.
LOANS OUTSTANDING
The Company's lending activities are predominantly domestic, with such loans
comprising approximately 94 percent of the portfolio at September 30, 1996 and
December 31, 1995. Overall the Company's loan portfolio at September 30, 1996
increased by $721 million compared to December 31, 1995 and $1.54 billion in
comparison to September 30, 1995. The increase from September 30, 1995, was
primarily attributable to the commercial and residential mortgage portfolio,
which grew by $1.22 billion. The Company attributes this growth to the
continuing improvement in the California economy, particularly in the real
estate sector.
Commercial, financial and industrial loans represent the largest category in
the loan portfolio. These loans are principally to major corporations, middle
market businesses, and small businesses, with no concentration exceeding ten
percent in any one business segment. At September 30, 1996, December 31, 1995
and September 30, 1995, the commercial, financial and industrial loan portfolio
was $9.3 billion or 44 percent of the total loan portfolio, $9.6 billion or 48
percent and $9.1 billion or 47 percent, respectively.
The Company's construction portfolio totaled $364 million or 2 percent of
total loans at September 30, 1996 as compared to $394 million or 2 percent at
December 31, 1995 and $435 million or 2 percent at September 30, 1995.
Mortgage loans represented $6.2 billion or 30 percent of total loans at
September 30, 1996, $5.3 billion or 26 percent at December 31, 1995 and $5.0
billion or 26 percent at September 30, 1995. The mortgage portfolio consists of
loans on commercial and industrial projects and loans secured by one to four
family residential properties, primarily in California.
Consumer loans totaled $3.0 billion or 14 percent of total loans at
September 30, 1996 as compared to $2.9 billion or 14 percent at December 31,
1995 and $2.9 billion or 15 percent at September 30, 1995. This portfolio is
primarily comprised of installment loans and home equity loans.
19
<PAGE>
Lease financing totaled $840 million or 4 percent of total loans at
September 30, 1996 as compared to $845 million or 4 percent at December 31, 1995
and $821 million or 4 percent at September 30, 1995.
Foreign loans totaled $1.3 billion or 6 percent of total loans at September
30, 1996 as compared to $1.2 billion or 6 percent at December 31, 1995 and $1.2
billion or 6 percent at September 30, 1995.
TABLE 5 -- LOANS OUTSTANDING
<TABLE>
<CAPTION>
SEPTEMBER 30, JUNE 30, MARCH 31, DECEMBER 31, SEPTEMBER 30,
(DOLLARS IN THOUSANDS) 1996 1996 1996 1995 1995
- ------------------------------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
DOMESTIC:
Commercial, financial and
industrial....................... $ 9,292,972 $ 9,395,499 $ 9,456,070 $ 9,614,069 $ 9,111,128
Construction....................... 364,497 387,309 410,608 394,472 435,139
Mortgage:
Residential...................... 3,931,255 3,876,344 3,726,642 3,406,873 3,202,832
Commercial....................... 2,274,726 1,951,957 1,870,576 1,871,489 1,785,764
------------- ------------- ------------- ------------- -------------
Total mortgage................. 6,205,981 5,828,301 5,597,218 5,278,362 4,988,596
Consumer:
Installment...................... 1,639,034 1,502,731 1,421,179 1,393,859 1,356,699
Home equity...................... 982,657 1,011,937 1,031,199 1,064,972 1,086,805
Credit card and other lines of
credit......................... 364,275 416,286 412,385 427,680 409,728
------------- ------------- ------------- ------------- -------------
Total consumer................. 2,985,966 2,930,954 2,864,763 2,886,511 2,853,232
Lease financing.................... 839,868 830,888 830,098 845,170 820,677
------------- ------------- ------------- ------------- -------------
Total domestic loans........... 19,689,284 19,372,951 19,158,757 19,018,584 18,208,772
Loans originated in foreign
offices............................. 1,257,481 1,107,727 1,182,578 1,207,505 1,199,752
------------- ------------- ------------- ------------- -------------
Total loans.................... 20,946,765 20,480,678 20,341,335 20,226,089 19,408,524
Allowance for loan losses............ 535,087 545,345 547,401 555,149 566,812
------------- ------------- ------------- ------------- -------------
Net loans outstanding.......... $ 20,411,678 $ 19,935,333 $ 19,793,934 $ 19,670,940 $ 18,841,712
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
</TABLE>
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is maintained at a level considered
appropriate by management and is based on an ongoing assessment of the risks
inherent in the loan and lease portfolio, both disbursed and undisbursed. The
allowance is increased by the provision for loan losses, which is charged
against current period operating results, and is decreased by the amount of net
loan charge-offs during the period. In evaluating the adequacy of the allowance
for loan losses, management incorporates such factors as collateral value,
portfolio composition and concentrations, trends in local and national economic
conditions and the impact of such trends on the financial strength of its
borrowers. Allocation of the allowance for loan losses by loan category is based
on management's assessment of past loan loss experience for particular loan
categories adjusted to take into account current and prospective economic
conditions. While reserves are segmented by broad portfolio categories to
analyze the adequacy of the allowance for loan losses, the allowance is general
in nature and is available for the portfolio in its entirety. Although
management believes that the allowance for loan losses is adequate, future
provisions will be subject to continuing evaluation of inherent risk in the loan
portfolio.
At September 30, 1996, the Company's allowance for loan losses was $535
million or 2.55 percent of the total loan portfolio. This compares with an
allowance for loan losses of $555 million or 2.74 percent of the total loan
portfolio at December 31, 1995. During the first nine months of 1996, the
Company recorded a provision for loan losses of $10 million in each quarter
compared with $9 million for the fourth quarter of 1995 and $12 million for the
third quarter of 1995.
20
<PAGE>
The decline in the provision for loan losses in comparing the third quarter
of 1996 to the third quarter of 1995 reflects the improvement in the quality of
the Company's loan portfolio.
During the third quarter of 1996, the Company had net loan charge offs of
$20 million, compared to net loan charge offs of $19 million for the quarter
ended September 30, 1995. An $8 million reduction in total loans charged off was
offset by a $9 million reduction in total loan loss recoveries.
The Company continues to evaluate its loan portfolio for impairment as
defined by Statement of Financial Accounting Standard No. 114, as amended. At
September 30, 1996, total impaired loans were $123 million and the associated
impairment allowance was $10 million. This compares to impaired loans of $173
million and an associated impairment allowance of $16 million at December 31,
1995.
TABLE 6 -- ALLOWANCE FOR LOAN LOSSES
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
------------------------------------------------------------------
SEPTEMBER 30, JUNE 30, MARCH 31, DECEMBER 31, SEPTEMBER 30,
(DOLLARS IN THOUSANDS) 1996 1996 1996 1995 1995
- ------------------------------------------------- ------------- ---------- ---------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Balance, beginning of period..................... $ 545,345 $ 547,401 $ 555,149 $ 566,812 $ 573,971
Loans charged off:
Domestic:
Commercial, financial and industrial......... 10,289 6,628 11,937 18,658 7,130
Construction................................. -- 806 67 4 3,610
Mortgage..................................... 5,086 2,621 4,070 5,932 12,854
Consumer..................................... 12,293 12,162 13,823 12,694 13,620
Lease financing.............................. 716 577 647 1,005 277
Foreign........................................ 1,256 61 58 36 259
------------- ---------- ---------- ------------ -------------
Total loans charged off.................... 29,640 22,855 30,602 38,329 37,750
Loan loss recoveries:
Domestic:
Commercial, financial and industrial......... 4,030 4,271 6,153 6,296 10,754
Construction................................. -- 129 1 38 6
Mortgage..................................... 2,230 3,097 2,640 7,746 4,897
Consumer..................................... 3,027 3,147 3,946 3,759 2,846
Lease financing.............................. 95 143 86 70 62
Foreign........................................ -- 12 28 7 26
------------- ---------- ---------- ------------ -------------
Total loan loss recoveries................. 9,382 10,799 12,854 17,916 18,591
------------- ---------- ---------- ------------ -------------
Net loans charged off.................... 20,258 12,056 17,748 20,413 19,159
Provision for loan losses........................ 10,000 10,000 10,000 8,750 12,000
------------- ---------- ---------- ------------ -------------
Balance, end of period........................... $ 535,087 $ 545,345 $ 547,401 $ 555,149 $ 566,812
------------- ---------- ---------- ------------ -------------
------------- ---------- ---------- ------------ -------------
Allowance for loan losses to total loans......... 2.55% 2.66% 2.69% 2.74% 2.92%
Provision for loan losses to net loans charged
off............................................. 49.36 82.95 56.34 42.86 62.63
Recoveries of loans to loans charged off in the
previous period................................. 41.05 35.29 33.54 47.46 54.03
Net loans charged off to average loans
outstanding for the period (1).................. 0.39 0.24 0.35 0.41 0.40
</TABLE>
- ------------------------------
(1) Annualized.
21
<PAGE>
ASSET QUALITY
At September 30, 1996, total nonperforming and renegotiated loans were $148
million or 0.71 percent of total loans outstanding compared with $210 million or
1.04 percent and $231 million or 1.19 percent at December 31, 1995 and September
30, 1995, respectively. The decrease of $83 million from September 30, 1995 to
September 30, 1996, was primarily the result of decreases of $40 million in the
construction portfolio and $34 million in the mortgage portfolio.
TABLE 7 -- NONPERFORMING AND RENEGOTIATED ASSETS
<TABLE>
<CAPTION>
SEPTEMBER 30, JUNE 30, MARCH 31, DECEMBER 31, SEPTEMBER 30,
(DOLLARS IN THOUSANDS) 1996 1996 1996 1995 1995
- -------------------------------------------- ------------- ---------- ---------- ------------ -------------
<S> <C> <C> <C> <C> <C>
NONACCRUAL LOANS:
Domestic:
Commercial, financial and industrial.... $ 70,920 $ 94,303 $ 81,028 $ 84,336 $ 77,276
Construction............................ 10,670 10,974 30,630 40,026 50,976
Mortgage:
Residential (1)....................... 10,577 16,083 17,961 19,220 18,228
Commercial............................ 54,904 66,911 61,108 63,836 80,879
------------- ---------- ---------- ------------ -------------
Total mortgage...................... 65,481 82,994 79,069 83,056 99,107
Other................................. 704 3,223 1,089 849 2,111
------------- ---------- ---------- ------------ -------------
Total nonaccrual loans.............. 147,775 191,494 191,816 208,267 229,470
Renegotiated loans.......................... -- 681 1,385 1,612 1,459
------------- ---------- ---------- ------------ -------------
Total nonperforming and renegotiated
loans............................. 147,775 192,175 193,201 209,879 230,929
Foreclosed assets........................... 32,882 35,998 34,999 36,992 39,754
------------- ---------- ---------- ------------ -------------
Total nonperforming and renegotiated
assets.............................. $ 180,657 $ 228,173 $ 228,200 $ 246,871 $ 270,683
------------- ---------- ---------- ------------ -------------
------------- ---------- ---------- ------------ -------------
Nonperforming and renegotiated loans to
total loans................................ 0.71% 0.94% 0.95% 1.04% 1.19%
Nonperforming and renegotiated assets to
total loans and foreclosed assets.......... 0.86 1.11 1.12 1.22 1.39
Nonperforming and renegotiated assets to
total assets............................... 0.63 0.81 0.80 0.90 1.00
</TABLE>
- ------------------------------
(1) These loans primarily consist of loans secured by single family residential
development projects and apartment buildings.
Since foreclosed assets remained relatively constant over the past five
quarters, the changes in total nonperforming and renegotiated assets were
primarily the result of the changes in nonaccrual loans discussed above. Total
nonperforming and renegotiated assets of $181 million at September 30, 1996
reflected a 33 percent decrease from a year earlier.
22
<PAGE>
TABLE 8 -- LOANS 90 DAYS OR MORE PAST DUE AND STILL ACCRUING
<TABLE>
<CAPTION>
SEPTEMBER 30, JUNE 30, MARCH 31, DECEMBER 31, SEPTEMBER 30,
(DOLLARS IN THOUSANDS) 1996 1996 1996 1995 1995
- ---------------------------------------------- ------------- --------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Domestic:
Commercial, financial and industrial........ $ 521 $ 1,800 $ 3,756 $ 3,752 $ 1,170
Construction................................ 2,325 188 1,716 1,063 2,577
Mortgage:
Residential............................... 9,838 7,110 12,208 8,479 3,157
Commercial................................ 16,372 117 2,949 3,592 12,664
------------- --------- ----------- ------------ -------------
Total mortgage.......................... 26,210 7,227 15,157 12,071 15,821
Consumer and other.......................... 13,643 6,867 7,786 8,854 7,736
------------- --------- ----------- ------------ -------------
Total loans 90 days or more past due and
still accruing........................ $ 42,699 $ 16,082 $ 28,415 $ 25,740 $ 27,304
------------- --------- ----------- ------------ -------------
------------- --------- ----------- ------------ -------------
</TABLE>
The Company's level of loans 90 days or more past due and still accruing was
$43 million at September 30, 1996, compared with $26 million at December 31,
1995 and $27 million at September 30, 1995.
LIQUIDITY
Liquidity refers to the Company's ability and financial flexibility to
adjust its future cash flows to meet the needs of depositors and borrowers and
to fund operations on a timely and cost-effective basis. The Company's liquidity
management draws upon its strengths, which include an extensive retail and
middle market business banking franchise and an ability to obtain funds for
various terms in a variety of domestic and international money markets.
Core deposits (demand, interest bearing savings, and consumer time deposits)
have provided the Company with a sizable source of relatively stable and
low-cost funds. In the third quarter of 1996 these sources, together with other
noninterest bearing funds (primarily common shareholders' equity) funded 61
percent of average earning assets.
CAPITAL
Total shareholders' equity decreased $30 million from December 31, 1995 to
September 30, 1996. This change was primarily a result of $190 million of net
income for the first nine months of 1996, offset by dividends on common stock of
$198 million (including $145 million paid to The Mitsubishi Bank, Limited in the
first quarter of 1996 by BanCal Tri-State Corporation and The Bank of
California, N.A.).
For regulatory purposes, the Company's capital adequacy is based on
risk-adjusted Tier 1 and Total capital guidelines, as well as a leverage ratio.
Under these guidelines the Company's Tier 1 and Total risk-based capital ratios
were 9.04 percent and 11.16 percent, respectively, at September 30, 1996, as
compared to 9.35 percent and 11.70 percent, and 9.42 percent and 11.88 percent
at December 31, 1995 and September 30, 1995, respectively. The decreases in the
ratios from December 31, 1995 are primarily attributable to the $145 million
dividend paid to The Mitsubishi Bank, Limited in the first quarter of 1996. As
of September 30, 1996 the Company's subsidiary bank, Union Bank of California,
N.A., met all regulatory minimums of a well-capitalized bank.
23
<PAGE>
TABLE 9 -- RISK-BASED CAPITAL
<TABLE>
<CAPTION>
SEPTEMBER 30, JUNE 30, MARCH 31, DECEMBER 31, SEPTEMBER 30,
(DOLLARS IN THOUSANDS) 1996 1996 1996 1995 1995
- ----------------------------------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
CAPITAL COMPONENTS:
Common shareholders' equity.............. $ 2,182,360 $ 2,145,496 $ 2,125,532 $ 2,164,516 $ 2,095,318
Parent direct interest in bank
subsidiary.............................. 126,599 125,320 123,308 159,996 154,981
8 3/8% Noncumulative preferred stock,
Series A................................ 135,000 135,000 135,000 135,000 135,000
Less: Core deposit intangible (1)........ 6,177 6,343 6,546 6,748 6,950
Goodwill............................. 88,299 91,435 94,632 97,707 100,928
Disallowed deferred tax
assets.............................. -- -- -- -- 13,981
------------- ------------- ------------- ------------- -------------
Tier 1 capital................... 2,349,483 2,308,038 2,282,662 2,355,057 2,263,440
------------- ------------- ------------- ------------- -------------
Eligible portion of the allowance for
loan losses (2)......................... 327,523 324,503 319,973 317,712 303,565
Subordinated capital notes (3)........... 225,600 270,874 270,874 274,200 287,600
------------- ------------- ------------- ------------- -------------
Tier 2 capital................... 553,123 595,377 590,847 591,912 591,165
Less: Unconsolidated subsidiary.......... 355 466 585 646 145
------------- ------------- ------------- ------------- -------------
Total risk-based capital......... $ 2,902,251 $ 2,902,949 $ 2,872,924 $ 2,946,323 $ 2,854,460
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
Risk-weighted balance sheet and
off-balance sheet assets................ $ 26,201,833 $ 26,048,566 $ 25,597,852 $ 25,416,926 $ 24,299,214
Less: Disallowed deferred tax
assets.............................. -- -- -- -- 13,981
Allowance for loan losses
not included in Tier 2
capital............................. 207,564 220,842 227,428 237,437 263,247
------------- ------------- ------------- ------------- -------------
Risk-weighted assets............. $ 25,994,269 $ 25,827,724 $ 25,370,424 $ 25,179,489 $ 24,021,986
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
CAPITAL RATIOS
Tier 1 risk-based capital................ 9.04% 8.94% 9.00% 9.35% 9.42%
Total risk-based capital................. 11.16 11.24 11.32 11.70 11.88
</TABLE>
- ------------------------------
(1) The amount of core deposit intangible deducted in Tier 1 capital is the
unamortized portion of a premium paid for the assumption of core deposits
resulting from the purchase of retail banking offices.
(2) The allowance for loan losses included in Tier 2 capital is limited to
1.25% of risk-weighted balance sheet and off-balance sheet assets.
(3) The amount of term subordinated debt included in Tier 2 capital is limited
to 50% of Tier 1 capital.
24
<PAGE>
TABLE 10 -- OTHER CAPITAL MEASURES
<TABLE>
<CAPTION>
SEPTEMBER 30, JUNE 30, MARCH 31, DECEMBER 31, SEPTEMBER 30,
1996 1996 1996 1995 1995
----------------- ----------- ------------- --------------- -----------------
<S> <C> <C> <C> <C> <C>
LEVERAGE RATIO (1)............................. 8.43% 8.33% 8.35% 8.70% 8.75%
OTHER CAPITAL RATIOS (END OF PERIOD):
Tangible common equity to total assets....... 7.32% 7.31% 7.16% 7.57% 7.39%
Total equity to total assets................. 8.56 8.58 8.42 9.02 8.86
Tangible common equity to average total
assets...................................... 7.50 7.39 7.43 7.67 7.69
Total equity to average total assets......... 8.77 8.68 8.74 9.14 9.22
</TABLE>
- ------------------------------
(1) Tier 1 capital divided by quarterly average total assets.
25
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits: None
(b) Reports on Form 8-K: There were no reports on Form 8-K filed during
the 3rd quarter.
26
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereto duly authorized.
UNIONBANCAL CORPORATION
(Registrant)
By /s/ TAKAHIRO MORIGUCHI
------------------------------------
Takahiro Moriguchi
VICE CHAIRMAN OF THE BOARD AND
CHIEF FINANCIAL OFFICER
By /s/ DAVID W. EHLERS
------------------------------------
David W. Ehlers
EXECUTIVE VICE PRESIDENT AND
DIRECTOR OF FINANCE
By /s/ DAVID W. DOBON
------------------------------------
David W. Dobon
SENIOR VICE PRESIDENT AND CONTROLLER
Dated: November 13, 1996
27
<PAGE>
(THIS PAGE INTENTIONALLY LEFT BLANK)
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS RESTATED SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEET AND STATEMENT OF INCOME AND THE
ACCOMPANYING TABLES OF FORM 10-Q. INFORMATION HEREIN IS QUALIFIED BY REFERENCE
TO SUCH STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 2,359,879
<INT-BEARING-DEPOSITS> 831,710
<FED-FUNDS-SOLD> 471,641
<TRADING-ASSETS> 452,613
<INVESTMENTS-HELD-FOR-SALE> 2,007,074
<INVESTMENTS-CARRYING> 283,566
<INVESTMENTS-MARKET> 289,029
<LOANS> 20,946,765
<ALLOWANCE> 535,087
<TOTAL-ASSETS> 28,679,646
<DEPOSITS> 20,909,390
<SHORT-TERM> 3,573,451
<LIABILITIES-OTHER> 554,693
<LONG-TERM> 415,000
0
135,000
<COMMON> 273,793
<OTHER-SE> 2,045,426
<TOTAL-LIABILITIES-AND-EQUITY> 28,679,646
<INTEREST-LOAN> 1,252,902
<INTEREST-INVEST> 106,641
<INTEREST-OTHER> 78,441
<INTEREST-TOTAL> 1,437,984
<INTEREST-DEPOSIT> 385,681
<INTEREST-EXPENSE> 562,490
<INTEREST-INCOME-NET> 875,494
<LOAN-LOSSES> 30,000
<SECURITIES-GAINS> 3,865
<EXPENSE-OTHER> 849,883
<INCOME-PRETAX> 311,315
<INCOME-PRE-EXTRAORDINARY> 189,657
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 189,657
<EPS-PRIMARY> 3.14
<EPS-DILUTED> 3.14
<YIELD-ACTUAL> 4.76
<LOANS-NON> 147,776
<LOANS-PAST> 42,699
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 555,149
<CHARGE-OFFS> 83,097
<RECOVERIES> 33,035
<ALLOWANCE-CLOSE> 535,087
<ALLOWANCE-DOMESTIC> 259,462
<ALLOWANCE-FOREIGN> 14,154
<ALLOWANCE-UNALLOCATED> 261,471
</TABLE>
