<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 MARCH 31, 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 April 30, 1996: 54,743,756
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NUMBER
-------------
<S> <C>
PART I
FINANCIAL INFORMATION
Item 1. Financial Statement:
Financial Highlights................................................................................ 2
Consolidated Balance Sheets......................................................................... 3
Consolidated Statements of Earnings................................................................. 4
Consolidated Statements of Cash Flows............................................................... 5
Consolidated Statements of Shareholders' Equity..................................................... 6
Notes to Consolidated Financial Statements.......................................................... 7
Item 2. Management's Discussion and Analysis:
Financial Summary................................................................................... 9
Table 1 -- Analysis of Earnings................................................................... 10
Net Interest Income................................................................................. 10
Table 2 -- Consolidated Average Balance Sheets, Net Interest Income
and Interest Rates.............................................................................. 12
Noninterest Income.................................................................................. 14
Table 3 -- Noninterest Income..................................................................... 14
Noninterest Expense................................................................................. 14
Table 4 -- Noninterest Expense.................................................................... 15
Loans Outstanding................................................................................... 15
Table 5 -- Loans Outstanding...................................................................... 16
Allowance for Loan Losses........................................................................... 16
Table 6 -- Allowance for Loan Losses.............................................................. 17
Asset Quality....................................................................................... 18
Table 7 -- Nonperforming and Renegotiated Assets.................................................. 18
Table 8 -- Loans 90 Days or More Past Due and Still Accruing...................................... 19
Liquidity........................................................................................... 19
Capital............................................................................................. 19
Table 9 -- Risk-Based Capital..................................................................... 20
Table 10 -- Other Capital Measures................................................................ 21
New Accounting Standards............................................................................ 21
PART II
OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security-Holders........................................... 22
Item 6. Exhibits and Reports on Form 8-K.............................................................. 22
Signatures............................................................................................ 23
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
UNION BANK
FINANCIAL HIGHLIGHTS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------------------------
INCREASE (DECREASE)
MARCH 31, MARCH 31, -------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 1996 1995 AMOUNT PERCENT
- ------------------------------------------------------------------------------------ ----------- ----------- ---------- -------
<S> <C> <C> <C> <C>
RESULTS OF OPERATIONS:
Net interest income (1)........................................................... $ 219,988 $ 203,211 $ 16,777 8.26 %
Provision for loan losses......................................................... 10,000 20,000 (10,000) (50.00 )
Noninterest income................................................................ 65,897 59,302 6,595 11.12
Noninterest expense............................................................... 174,087 169,461 4,626 2.73
----------- ----------- ----------
Income before income taxes (1).................................................... 101,798 73,052 28,746 39.35
Taxable-equivalent adjustment..................................................... 1,594 2,245 (651) (29.00 )
Income tax expense................................................................ 39,675 29,516 10,159 34.42
----------- ----------- ----------
Net income........................................................................ $ 60,529 $ 41,291 $ 19,238 46.59 %
----------- ----------- ----------
----------- ----------- ----------
Net income applicable to common stock............................................. $ 57,703 $ 38,465 $ 19,238 50.01 %
----------- ----------- ----------
----------- ----------- ----------
PER COMMON SHARE:
Net income........................................................................ $ 1.58 $ 1.06 $ 0.52 49.06 %
Dividends......................................................................... 0.35 0.35 -- --
Book value........................................................................ 39.24 34.50 4.74 13.74
Dividend payout ratio............................................................. 22.17% 32.89% (10.72)%
Common shares outstanding (end of period)......................................... 36,601,182 36,152,601 448,581
Weighted average common shares outstanding........................................ 36,556,187 36,134,343 421,844
BALANCE SHEET (END OF PERIOD):
Total assets...................................................................... $20,489,473 $17,315,278 $3,174,195 18.33 %
Total loans....................................................................... 14,597,001 12,757,484 1,839,517 14.42
Nonperforming and renegotiated assets............................................. 121,487 172,616 (51,129) (29.62 )
Deposits.......................................................................... 15,608,792 13,222,565 2,386,227 18.05
Subordinated capital notes........................................................ 325,369 415,750 (90,381) (21.74 )
Common equity..................................................................... 1,436,405 1,247,292 189,113 15.16
Preferred stock................................................................... 135,000 135,000 -- --
Shareholders' equity.............................................................. 1,571,405 1,382,292 189,113 13.68
BALANCE SHEET (PERIOD AVERAGES):
Total assets...................................................................... $19,542,994 $16,898,959 $2,644,035 15.65 %
Total loans (2)................................................................... 14,441,760 12,576,218 1,865,542 14.83
Shareholders' equity.............................................................. 1,547,434 1,379,298 168,136 12.19
FINANCIAL RATIOS:
Return on average assets (3)...................................................... 1.25% 0.99% 0.26%
Return on average common equity (4)............................................... 16.43 12.54 3.89
Net interest margin (1)........................................................... 5.05 5.41 (0.36)
Efficiency ratio (5).............................................................. 60.37 64.83 (4.46)
Risk-based capital ratios:
Tier 1.......................................................................... 8.11% 8.17% (0.06)%
Total........................................................................... 10.70 11.21 (0.51)
Leverage ratio.................................................................... 7.51 7.56 (0.05)
Allowance for loan losses to total loans.......................................... 2.24 2.65 (0.41)
Allowance for loan losses to nonaccrual loans..................................... 333.20 205.74 127.46
Net loans charged off to average total loans...................................... 0.43 (0.05) 0.48
Nonperforming and renegotiated assets to total loans and foreclosed assets........ 0.83 1.35 (0.52)
Nonperforming and renegotiated assets to total assets............................. 0.59 1.00 (0.41)
Average shareholders' equity to average total assets.............................. 7.92 8.16 (0.24)
</TABLE>
- ------------------------------
(1) Fully taxable-equivalent.
(2) Average balances on loans outstanding include all nonperforming and
renegotiated loans.
(3) Based on annualized net income.
(4) Based on annualized net income applicable to common stock.
(5) Includes amortization of intangible assets, but excludes foreclosed assets
expense.
2
<PAGE>
UNION BANK
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(UNAUDITED) (UNAUDITED)
MARCH 31, DECEMBER 31, MARCH 31,
(DOLLARS IN THOUSANDS) 1996 1995 1995
- ------------------------------------------------------------------- ------------ --------------- ------------
<S> <C> <C> <C>
ASSETS
Cash and due from banks............................................ $ 1,469,077 $ 1,749,740 $ 1,083,385
Interest bearing deposits in banks................................. 430,341 505,000 790,001
Federal funds sold and securities purchased under resale
agreements........................................................ 1,416,595 293,325 410,671
------------ --------------- ------------
Total cash and cash equivalents................................ 3,316,013 2,548,065 2,284,057
Trading account securities......................................... 97,115 83,888 20,182
Investment securities available for sale........................... 1,351,017 1,377,415 712,430
Investment securities held to maturity (market value of $304,891 at
March 31, 1996, $328,699 at December 31, 1995 and $894,781 at
March 31, 1995)................................................... 295,019 314,316 888,113
Loans.............................................................. 14,597,001 14,392,363 12,757,484
Less: Allowance for loan losses.................................... 326,840 332,410 338,235
------------ --------------- ------------
Net loans...................................................... 14,270,161 14,059,953 12,419,249
Premises and equipment, net........................................ 337,977 331,979 317,259
Customers' acceptance liability.................................... 288,306 291,284 227,031
Intangible assets.................................................. 97,843 101,055 110,691
Other real estate owned (OREO)..................................... 23,396 24,958 8,215
Other assets....................................................... 412,626 385,182 328,051
------------ --------------- ------------
Total assets................................................... $ 20,489,473 $ 19,518,095 $ 17,315,278
------------ --------------- ------------
------------ --------------- ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits in domestic offices:
Demand........................................................... $ 5,236,458 $ 5,557,962 $ 4,470,841
Interest bearing................................................. 3,778,968 3,838,068 3,792,623
Savings and consumer time........................................ 2,265,762 2,238,082 2,195,887
Large time....................................................... 3,492,860 2,618,048 1,596,910
------------ --------------- ------------
Total deposits in domestic offices............................. 14,774,048 14,252,160 12,056,261
Deposits in foreign offices........................................ 834,744 614,948 1,166,304
------------ --------------- ------------
Total deposits................................................. 15,608,792 14,867,108 13,222,565
Federal funds purchased and securities sold under repurchase
agreements........................................................ 397,267 465,800 547,496
Commercial paper................................................... 734,950 757,574 737,707
Other borrowed funds............................................... 1,107,484 820,388 372,823
Acceptances outstanding............................................ 288,306 291,284 227,031
Other liabilities.................................................. 455,900 450,989 409,614
Subordinated capital notes......................................... 325,369 331,369 415,750
------------ --------------- ------------
Total liabilities.............................................. 18,918,068 17,984,512 15,932,986
------------ --------------- ------------
SHAREHOLDERS' EQUITY
Preferred stock:
8 3/8% Noncumulative, Series A, 5,400,000 depositary shares,
authorized and issued as of March 31, 1996, December 31, 1995
and March 31, 1995.............................................. 135,000 135,000 135,000
Common stock -- $5 par value, authorized 50,000,000 shares, issued
36,601,182 as of March 31, 1996, 36,536,255 as of December 31,
1995 and 36,152,601 as of March 31, 1995.......................... 183,006 182,681 180,763
Surplus............................................................ 714,609 711,455 520,149
Retained earnings.................................................. 524,469 481,279 543,507
Net unrealized gain on investment securities available for sale.... 14,321 23,168 2,873
------------ --------------- ------------
Total shareholders' equity..................................... 1,571,405 1,533,583 1,382,292
------------ --------------- ------------
Total liabilities and shareholders' equity..................... $ 20,489,473 $ 19,518,095 $ 17,315,278
------------ --------------- ------------
------------ --------------- ------------
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
UNION BANK
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED MARCH 31,
----------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 1996 1995
- --------------------------------------------------------------------------------------- ---------- ----------
<S> <C> <C>
INTEREST INCOME
Loans................................................................................ $ 303,771 $ 263,241
Investment securities -- taxable..................................................... 23,728 19,973
Investment securities -- tax exempt.................................................. 2,141 2,459
Interest bearing deposits in banks................................................... 10,665 11,644
Federal funds sold and securities purchased under resale agreements.................. 7,249 3,076
Trading account assets............................................................... 1,205 207
---------- ----------
Total interest income............................................................ 348,759 300,600
---------- ----------
INTEREST EXPENSE
Deposits in domestic offices:
Interest bearing................................................................... 22,108 20,969
Savings and consumer time.......................................................... 23,392 20,102
Large time......................................................................... 42,453 12,526
Deposits in foreign offices.......................................................... 8,215 15,676
Federal funds purchased and securities sold under repurchase agreements.............. 5,743 7,489
Commercial paper..................................................................... 11,150 10,588
Other borrowed funds................................................................. 11,603 5,048
Subordinated capital notes........................................................... 5,701 7,236
---------- ----------
Total interest expense........................................................... 130,365 99,634
---------- ----------
NET INTEREST INCOME.................................................................... 218,394 200,966
Provision for loan losses.............................................................. 10,000 20,000
---------- ----------
Net interest income after provision for loan losses.............................. 208,394 180,966
NONINTEREST INCOME
Service charges on deposit accounts.................................................. 21,236 20,632
Trust fees........................................................................... 9,550 8,256
Credit card merchant fees............................................................ 8,850 7,959
International services and foreign exchange.......................................... 7,539 8,145
Investment securities gains (losses), net............................................ 582 (1,217)
Other................................................................................ 18,140 15,527
---------- ----------
Total noninterest income......................................................... 65,897 59,302
---------- ----------
NONINTEREST EXPENSE
Salaries and employee benefits....................................................... 97,800 91,982
Net occupancy........................................................................ 15,153 15,656
Equipment............................................................................ 9,553 8,901
Other real estate owned and joint ventures........................................... 1,505 (729)
Other................................................................................ 50,076 53,651
---------- ----------
Total noninterest expense........................................................ 174,087 169,461
---------- ----------
Income before income taxes............................................................. 100,204 70,807
Income tax expense..................................................................... 39,675 29,516
---------- ----------
NET INCOME............................................................................. $ 60,529 $ 41,291
---------- ----------
---------- ----------
NET INCOME APPLICABLE TO COMMON STOCK.................................................. $ 57,703 $ 38,465
---------- ----------
---------- ----------
NET INCOME PER AVERAGE COMMON SHARE.................................................... $ 1.58 $ 1.06
---------- ----------
---------- ----------
WEIGHTED AVERAGE COMMON SHARES (IN THOUSANDS).......................................... 36,556 36,134
---------- ----------
---------- ----------
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
UNION BANK
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED MARCH 31,
------------------------
(DOLLARS IN THOUSANDS) 1996 1995
- ---------------------------------------------------------------------------------------- ----------- -----------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net Income............................................................................ $ 60,529 $ 41,291
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses........................................................... 10,000 20,000
Depreciation and amortization....................................................... 11,928 10,925
Provision for deferred income taxes................................................. 5,557 18,216
(Gain) loss on sales of investment securities available for sale.................... (582) 767
Gain on call of investment securities held to maturity.............................. -- (80)
Gain on sale of assets, net......................................................... (1,770) (1,398)
Accretion of loan fees.............................................................. (4,003) (3,919)
Deferral of loan costs.............................................................. (2,583) (1,691)
Proceeds from sale of loans held for sale........................................... 10,824 1,406
Increase in loans held for sale..................................................... (25,119) (1,328)
(Increase) decrease in trading account securities................................... (16,503) 14,420
Increase (decrease) in interest payable............................................. (3,358) 3,545
(Increase) decrease in interest receivable.......................................... 3,796 (802)
Increase (decrease) in accrued expense.............................................. (15,998) 41,126
(Increase) decrease in prepaid expenses............................................. 5,925 (3,250)
Other, net.......................................................................... (15,541) 39,568
----------- -----------
Total adjustments................................................................. (37,427) 137,505
----------- -----------
Net cash provided by operating activities............................................. 23,102 178,796
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of investment securities available for sale....................... 3,615 32,491
Proceeds from matured and called investment securities available for sale............. 114,618 67,014
Purchase of investment securities available for sale.................................. (106,869) (118,191)
Proceeds from matured and called investment securities held to maturity............... 19,425 12,334
Purchase of investment securities held to maturity.................................... -- (120,282)
Net increase in loans................................................................. (195,503) (392,999)
Purchase of premises and equipment.................................................... (15,053) (10,085)
Proceeds from sales of OREO........................................................... 4,409 12,114
----------- -----------
Net cash used by investing activities............................................... (175,358) (517,604)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits.............................................................. 741,684 387,860
Net decrease in federal funds purchased and securities sold under repurchase
agreements........................................................................... (68,533) (168,664)
Net increase in other borrowed funds.................................................. 264,472 68,991
Redemption of subordinated capital notes.............................................. (6,000) (109)
Dividend reinvestment................................................................. 745 8,484
Dividends paid........................................................................ (14,862) (6,859)
----------- -----------
Net cash provided by financing activities........................................... 917,506 289,703
----------- -----------
Net increase (decrease) in cash and cash equivalents.................................... 765,250 (49,105)
Cash and cash equivalents at beginning of period........................................ 2,548,065 2,330,193
Foreign exchange revaluation gain....................................................... 2,698 2,969
----------- -----------
Cash and cash equivalents at end of period.............................................. $ 3,316,013 $ 2,284,057
----------- -----------
----------- -----------
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Loans transferred to OREO............................................................. $ 3,841 $ 3,779
In-substance foreclosures reclassified from OREO to loans............................. -- (7,180)
CASH PAID DURING THE PERIOD FOR:
Interest.............................................................................. $ 127,007 $ 103,179
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
UNION BANK
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS) 1996 1995
- ----------------------------------------------------------------------------------- ------------ ------------
<S> <C> <C>
Balance at beginning of year....................................................... $ 1,533,583 $ 1,339,882
Change in unrealized gain (loss) on securities available for sale,
net of taxes...................................................................... (8,847) 7,707
Net income......................................................................... 60,529 41,291
Dividend reinvestment plan......................................................... 745 8,484
Dividends on common stock.......................................................... (12,795) (12,653)
Dividends on preferred stock....................................................... (2,826) (2,826)
Deferred compensation -- restricted stock awards................................... 433 348
Stock options exercised............................................................ 338 --
Other.............................................................................. 245 59
------------ ------------
Balance at March 31,............................................................... $ 1,571,405 $ 1,382,292
------------ ------------
------------ ------------
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE>
UNION BANK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
(UNAUDITED)
NOTE 1 -- BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of Union Bank
and its 12 wholly-owned subsidiaries (the "Bank") 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. These unaudited
consolidated financial statements should be read in conjunction with the audited
consolidated financial statements included in the Bank's Annual Report on the
FDIC Form F-2 for the year ended December 31, 1995, included as an exhibit to
the Bank's Form 8-K filed on April 1, 1996.
In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments (consisting of only normal
recurring accruals) considered necessary for a fair presentation of the Bank's
financial condition as of March 31, 1996 and 1995, and December 31, 1995, the
results of operations for the three months ended March 31, 1996 and 1995 and the
statements of cash flows for the three months ended March 31, 1996 and 1995.
Certain reclassifications to prior period financial statements have been made in
order to conform to the current period presentation.
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
Restricted Stock did not have a dilutive effect and are not included in the
Bank's earnings per share calculation.
NOTE 2 -- CONTINGENCIES
The Bank is subject to various pending and threatened legal actions which
arise in the normal course of business. The Bank also maintains reserves for
losses from legal actions, which are both probable and estimable. Although the
amount of the ultimate exposure, if any, cannot be determined at this time, in
management's opinion the disposition of claims currently pending will not have a
material adverse effect on the Bank's financial position and results of
operations.
NOTE 3 -- SUBSEQUENT EVENT; 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 the banking subsidiary now known
as Union Bank of California, N.A. In order to provide more useful information in
regard to this subsequent event, selected unaudited pro forma combined financial
data is being presented.
UnionBanCal Corporation is a bank holding company with consolidated assets
of approximately $28.5 billion and maintains its headquarters in San Francisco,
California. Its primary banking subsidiary is Union Bank of California, N.A.,
which has more than 240 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 owned by The Bank of Tokyo-Mitsubishi,
Ltd.
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
Bank's Form 8-K filed on April 1, 1996.
The following unaudited pro forma combined financial data for UnionBanCal
Corporation is presented giving effect to the April 1, 1996 combination of Union
Bank and BanCal Tri-State Corporation on a reorganization of entities under
common control basis of accounting (similar to pooling of interests accounting).
The unaudited pro forma combined financial data assumes the combination was
effective as of the beginning of each of the three months ended March 31, 1995
and 1996. This pro forma financial data should be read in conjunction with and
are qualified in their entirety by the unaudited historical consolidated
financial statements of Union Bank appearing elsewhere in this document and by
Union Bank's Proxy Statement dated January 8, 1996.
The effect of certain material combination related expenses expected to be
incurred by UnionBanCal Corporation in connection with the combination have not
been reflected in the unaudited pro forma combined financial data. The pro forma
financial data does not give effect to any cost savings which might result from
the combination.
7
<PAGE>
NOTE 3 -- SUBSEQUENT EVENT; COMBINATION OF UNION BANK AND BANCAL TRI-STATE
CORPORATION (CONTINUED)
The pro forma financial data are presented for illustrative purposes only
and are not necessarily indicative of current or future operating results, per
share data or financial position and do not represent what would have occurred
had the combination been consummated as of the date or the beginning of the
periods indicated.
UNAUDITED PRO FORMA COMBINED CONSOLIDATED FINANCIAL DATA (GIVING EFFECT TO APRIL
1, 1996 COMBINATION OF UNION BANK AND BANCAL TRI-STATE CORPORATION)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------
MARCH 31, MARCH 31,
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 1996 1995
- -------------------------------------------------------------------------------------- ------------ ------------
<S> <C> <C>
RESULTS OF OPERATIONS:
Net interest income (1)............................................................. $ 297,795 $ 279,315
Provision for loan losses........................................................... 10,000 20,000
Noninterest income.................................................................. 102,874 94,073
Noninterest expense................................................................. 252,024 242,829
------------ ------------
Income before income taxes (1)...................................................... 138,645 110,559
Taxable-equivalent adjustment....................................................... 2,128 2,822
Income tax expense.................................................................. 53,251 44,800
------------ ------------
Net income.......................................................................... $ 83,266 $ 62,937
------------ ------------
------------ ------------
Net income applicable to:
Common stock...................................................................... $ 76,768 $ 56,451
------------ ------------
------------ ------------
Parent direct interest in bank subsidiary......................................... $ 3,672 $ 3,660
------------ ------------
------------ ------------
PER COMMON SHARE:
Net income.......................................................................... $ 1.40 $ 1.04
Book value.......................................................................... 39.07 36.21
Common shares outstanding (end of period) (2)....................................... 54,735,210 54,286,629
Weighted average common shares outstanding (2)...................................... 54,690,215 54,268,371
BALANCE SHEET (END OF PERIOD):
Total assets........................................................................ $ 28,463,879 $ 25,068,638
Total loans......................................................................... 20,341,335 18,543,355
Nonperforming and renegotiated assets............................................... 225,722 375,912
Deposits............................................................................ 20,179,593 17,561,243
Subordinated capital notes.......................................................... 495,369 655,750
Common equity....................................................................... 2,138,631 1,965,583
Parent direct interest in bank subsidiary........................................... 123,308 145,797
Preferred stock..................................................................... 135,000 135,000
Shareholders' equity................................................................ 2,396,939 2,246,380
BALANCE SHEET (PERIOD AVERAGES):
Total assets........................................................................ $ 27,428,721 $ 24,410,701
Total loans......................................................................... 20,193,798 18,283,506
Shareholders' equity................................................................ 2,503,947 2,235,187
FINANCIAL RATIOS:
Return on average assets............................................................ 1.22% 1.05%
Return on average common equity..................................................... 13.97 11.70
Net interest margin (1)............................................................. 4.91 5.22
Efficiency ratio (3)................................................................ 62.08 65.08
Risk-based capital ratios:
Tier 1............................................................................ 9.00 9.09
Total............................................................................. 11.32 11.85
Leverage ratio...................................................................... 8.35 8.56
Allowance for loan losses to total loans............................................ 2.69 3.13
Allowance for loan losses to nonaccrual loans....................................... 289.11 172.99
Net loans charged off to average total loans........................................ 0.35 0.06
Nonperforming and renegotiated assets to total loans and foreclosed assets.......... 1.11 2.02
Nonperforming and renegotiated assets to total assets............................... 0.79 1.50
Average shareholders' equity to average total assets................................ 9.13 9.16
</TABLE>
- ------------------------------
(1) Fully taxable-equivalent.
(2) New common shares issued at April 1, 1996, are reflected in both the end of
period and weighted average shares outstanding.
(3) Includes amortization of intangible assets, but excludes foreclosed assets
expense.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FINANCIAL SUMMARY
The following discussion and analysis pertains to Union Bank (the "Bank")
only and does not include the effect of the subsequent event discussed in Note 3
to the Bank's consolidated financial statements. The Bank recorded net income of
$61 million for the first quarter of 1996, a quarterly earnings record and an
increase of $20 million from net income of $41 million for the first quarter of
1995. Net income applicable to common stock was $58 million or $1.58 per common
share for the first quarter of 1996, compared to $38 million or $1.06 per common
share for the first quarter of 1995.
The increase in net income of $20 million for the first quarter of 1996 as
compared to the same quarter a year earlier is due primarily to increases in net
interest income, before the provision for loan losses, of $17 million and
noninterest income of $7 million and a reduction of $10 million in the provision
for loan losses. These changes were offset by increases in income tax expense of
$10 million and noninterest expense of $5 million.
The Bank's return on average assets ("ROA") was 1.25 percent for the first
quarter of 1996 and 0.99 percent for the first quarter of 1995. The increase in
ROA for the three months ended March 31, 1996 compared to the same period in
1995 is primarily due to the increase in net income between the periods. Return
on average common equity ("ROE") for the first quarter of 1996 was 16.43 percent
and for the first quarter of 1995 was 12.54 percent. The increase in ROE for the
quarter ended March 31, 1996 compared to the same period in 1995 reflects the
increase in net income applicable to common stock.
At March 31, 1996, tangible common equity to total assets was 6.53 percent
as compared with 6.56 percent at March 31, 1995. For regulatory purposes, the
Bank's capital adequacy is based upon risk-adjusted Tier 1 and total capital
guidelines, as well as a leverage ratio. The Bank's Tier 1 and total capital
ratios were 8.11 percent and 10.70 percent, respectively, at March 31, 1996, as
compared to 8.17 percent and 11.21 percent, respectively, at March 31, 1995. The
decreases in the respective ratios on a comparative basis are primarily due to
growth in assets, particularly among the higher risk-weighted categories of
loans. The Bank's leverage ratio, defined as Tier 1 capital divided by quarterly
average total assets, was 7.51 percent at March 31, 1996, as compared to 7.35
percent at December 31, 1995 and 7.56 percent at March 31, 1995. The increase
when comparing March 31, 1996 to December 31, 1995, is the result of a $50
million increase in Tier 1 capital. The decrease when comparing March 31, 1996
to March 31, 1995 is primarily a result of the increase in quarterly average
total assets.
9
<PAGE>
TABLE 1 -- ANALYSIS OF EARNINGS
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
---------------------------------------------------------------
MARCH 31, DECEMBER 31, SEPTEMBER 30, JUNE 30, MARCH 31,
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 1996 1995 1995 1995 1995
- ---------------------------------------------------------------- ---------- ------------ ------------- ---------- ----------
<S> <C> <C> <C> <C> <C>
EARNINGS SUMMARY
Interest income (1)........................................... $ 350,353 $ 352,249 $ 334,759 $ 320,708 $ 302,845
Interest expense.............................................. 130,365 132,493 124,279 113,519 99,634
---------- ------------ ------------- ---------- ----------
Net interest income........................................... 219,988 219,756 210,480 207,189 203,211
Provision for loan losses..................................... 10,000 10,000 12,000 15,000 20,000
Noninterest income............................................ 65,897 64,614 62,179 61,394 59,302
Noninterest expense, excluding OREO and joint ventures........ 172,582 173,266 164,200 172,551 170,190
OREO and joint ventures....................................... 1,505 1,474 124 121 (729)
---------- ------------ ------------- ---------- ----------
Total noninterest expense..................................... 174,087 174,740 164,324 172,672 169,461
---------- ------------ ------------- ---------- ----------
Income before income taxes.................................... 101,798 99,630 96,335 80,911 73,052
Taxable-equivalent adjustment (1)............................. 1,594 1,696 1,976 2,326 2,245
Income tax expense............................................ 39,675 38,733 36,535 29,560 29,516
---------- ------------ ------------- ---------- ----------
Net income.................................................... $ 60,529 $ 59,201 $ 57,824 $ 49,025 $ 41,291
---------- ------------ ------------- ---------- ----------
---------- ------------ ------------- ---------- ----------
Net income applicable to common stock......................... $ 57,703 $ 56,375 $ 54,998 $ 46,198 $ 38,465
---------- ------------ ------------- ---------- ----------
---------- ------------ ------------- ---------- ----------
PER COMMON SHARE
Net income (2)................................................ $ 1.58 $ 1.54 $ 1.51 $ 1.27 $ 1.06
Dividends..................................................... 0.35 0.35 0.35 0.35 0.35
Book value.................................................... 39.24 38.28 36.70 35.52 34.50
Weighted average common shares (3)............................ 36,556 36,531 36,507 36,468 36,134
</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) In thousands.
NET INTEREST INCOME
The Bank'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). A primary factor affecting the
level of net interest income is the Bank's interest rate margin between the
yield earned on interest earning assets and the rate paid on interest bearing
liabilities, as well as the difference between the relative amounts 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 $220 million for the first quarter of 1996 and $203
million for the first quarter of 1995. This increase of $17 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.
Interest income on earning assets, on a fully taxable-equivalent basis,
increased to $350 million for the first quarter of 1996 from $303 million in the
first quarter of 1995. This increase of $47 million in interest income was
primarily due to an increased volume of earning assets producing higher levels
of interest income, primarily from loans, and to a lesser degree investment
securities. While there was an increase in interest income attributable to the
increase in volume of earning assets, this contribution to earnings was
partially offset by the effect of the overall decrease in the rates the Bank
charges its loan customers.
The rates the Bank charges its customers for loans are primarily adjustable
and tied to either the Bank's reference rate or a number of indices that
approximate short-term interest rates. The Bank's average reference rate, on
which approximately 21 percent of the loan portfolio is based, decreased by 49
basis points in comparing the average of 8.34 percent for the three months ended
March 31, 1996 to the average of 8.83 percent for the comparable period in 1995.
In addition, the Bank has loans in which the rates charged to
10
<PAGE>
customers approximate short-term treasury rates or the short-term London
InterBank Offered Rate. These loans total approximately 39 percent of the loan
portfolio and the indices on which they are based have decreased 292 basis
points in comparing the rates at March 31, 1996 to March 31, 1995.
Interest expense increased by $31 million in comparing the first quarter of
1996 to the comparable period in 1995. This increase is primarily due to
increased volume in interest bearing liabilities and an increase in the
corresponding cost of funds, primarily on interest bearing deposits. In
comparing the first quarter of 1996 to the same period in 1995, average interest
bearing deposits increased $1.4 billion, average demand deposits increased $622
million and average other borrowed funds increased $579 million. These increases
in volume are reflective of increases in the rate environment as depositors
chose to invest funds in higher yielding investments and the Bank repositioned
its funding needs accordingly. This repositioning, coupled with an increased
cost of funds, resulted in increased reliance on more costly funding sources as
the Bank placed more reliance on interest bearing deposits than in past periods,
resulting in higher interest expense for the quarter.
11
<PAGE>
TABLE 2 -- CONSOLIDATED AVERAGE BALANCE SHEETS, NET INTEREST INCOME AND INTEREST
RATES
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
------------------------------------------------------------------------------
MARCH 31, 1996 DECEMBER 31, 1995
-------------------------------------- --------------------------------------
INTEREST INTEREST
AVERAGE INCOME/ AVERAGE AVERAGE INCOME/ AVERAGE
(DOLLARS IN THOUSANDS) BALANCE EXPENSE RATE (1) BALANCE EXPENSE RATE (1)
- ---------------------------------------------------- ------------- ---------- ----------- ------------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Loans (2)........................................... $ 14,441,760 $ 304,287 8.43% $ 13,982,331 $ 303,032 8.59%
Investment securities:
Taxable........................................... 1,511,926 23,728 6.31 1,706,503 25,940 6.02
Tax-exempt........................................ 115,318 3,213 11.14 120,898 3,366 11.14
Interest bearing deposits in banks.................. 724,363 10,665 5.82 642,826 10,050 6.12
Federal funds sold and securities purchased under
resale agreements.................................. 522,450 7,249 5.49 575,683 8,607 5.85
Trading account assets.............................. 87,987 1,205 5.42 84,371 1,254 5.82
------------- ---------- ------------- ----------
Total earning assets............................ 17,403,804 350,347 8.05 17,112,612 352,249 8.15
---------- ----------
Allowance for loan losses........................... (332,072) (337,839)
Cash and due from banks............................. 1,439,767 1,447,543
OREO................................................ 25,554 15,668
Premises and equipment, net......................... 335,617 332,384
Other assets........................................ 670,324 713,777
------------- -------------
Total assets.................................... $ 19,542,994 $ 19,284,145
------------- -------------
------------- -------------
LIABILITIES
Deposits in domestic offices:
Interest bearing.................................. $ 3,688,231 22,108 2.40 $ 3,687,411 22,456 2.42
Savings and consumer time......................... 2,356,414 23,392 3.98 2,352,670 23,773 4.01
Large time........................................ 3,224,336 42,453 5.28 2,656,853 37,495 5.60
Deposits in foreign offices......................... 650,349 8,215 5.07 791,388 10,866 5.45
------------- ---------- ------------- ----------
Total interest bearing deposits................. 9,919,330 96,168 3.89 9,488,322 94,590 3.96
------------- ---------- ------------- ----------
Federal funds purchased and securities sold under
repurchase agreements.............................. 453,437 5,743 5.08 464,101 6,278 5.37
Subordinated capital notes.......................... 327,413 5,701 6.98 358,206 6,473 7.17
Other borrowed funds................................ 1,674,362 22,753 5.45 1,728,259 25,152 5.77
------------- ---------- ------------- ----------
Total borrowed funds............................ 2,455,212 34,197 5.59 2,550,566 37,903 5.90
------------- ---------- ------------- ----------
Total interest bearing liabilities.............. 12,374,542 130,365 4.23 12,038,888 132,493 4.37
---------- ----------
Demand deposits..................................... 4,960,725 5,021,936
Other liabilities................................... 660,293 725,435
------------- -------------
Total liabilities............................... 17,995,560 17,786,259
SHAREHOLDERS' EQUITY................................ 1,547,434 1,497,886
------------- -------------
Total liabilities and shareholders' equity...... $ 19,542,994 $ 19,284,145
------------- -------------
------------- -------------
Net interest income/margin (taxable-equivalent
basis)............................................. 219,982 5.05% 219,756 5.08%
Less taxable-equivalent adjustment.................. 1,594 1,696
---------- ----------
Net interest income............................. $ 218,388 $ 218,060
---------- ----------
---------- ----------
</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.
12
<PAGE>
TABLE 2 -- CONSOLIDATED AVERAGE BALANCE SHEETS, NET INTEREST INCOME AND INTEREST
RATES (CONTINUED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
------------------------------------------------------------------------------------------------
SEPTEMBER 30, 1995 JUNE 30, 1995 MARCH 31, 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)..................... $13,298,230 $286,943 8.55% $12,930,812 $277,452 8.59% $12,576,218 $264,201 8.49%
Investment securities:
Taxable..................... 1,700,561 25,780 6.01 1,573,070 23,288 5.90 1,428,343 19,973 5.59
Tax-exempt.................. 126,435 3,548 11.22 129,739 3,653 11.26 132,878 3,744 11.27
Interest bearing deposits in
banks........................ 878,913 13,681 6.09 739,286 11,790 6.31 748,167 11,644 6.23
Federal funds sold and
securities purchased under
resale agreements............ 273,399 4,167 5.96 233,434 3,647 6.18 203,591 3,076 6.04
Trading account assets........ 44,222 640 5.65 57,565 878 6.03 13,354 207 6.20
----------- -------- ----------- -------- ----------- --------
Total earning assets...... 16,321,760 334,759 8.13 15,663,906 320,708 8.19 15,102,551 302,845 8.09
-------- -------- --------
Allowance for loan losses..... (340,924) (340,054) (330,054)
Cash and due from banks....... 1,243,205 1,115,905 1,127,006
OREO.......................... 10,858 8,118 12,977
Premises and equipment, net... 329,161 321,882 317,113
Other assets.................. 688,536 643,620 669,366
----------- ----------- -----------
Total assets.............. $18,252,596 $17,413,377 $16,898,959
----------- ----------- -----------
----------- ----------- -----------
LIABILITIES
Deposits in domestic offices:
Interest bearing............ $ 3,596,457 21,180 2.34 $ 3,651,179 21,274 2.34 $ 3,777,323 20,969 2.25
Savings and consumer time... 2,351,517 23,430 3.95 2,325,499 22,075 3.81 2,307,277 20,102 3.53
Large time.................. 2,219,982 31,166 5.57 1,814,689 21,513 4.75 1,346,466 12,526 3.77
Deposits in foreign offices... 970,263 13,848 5.66 1,058,812 15,482 5.86 1,133,854 15,676 5.61
----------- -------- ----------- -------- ----------- --------
Total interest bearing
deposits................. 9,138,219 89,624 3.89 8,850,179 80,344 3.64 8,564,920 69,273 3.28
----------- -------- ----------- -------- ----------- --------
Federal funds purchased and
securities sold under
repurchase agreements........ 692,410 9,769 5.60 732,945 10,606 5.80 544,103 7,489 5.58
Subordinated capital notes.... 414,630 7,486 7.16 415,574 7,615 7.35 415,820 7,236 7.06
Other borrowed funds.......... 1,199,160 17,400 5.76 1,010,994 14,954 5.93 1,094,884 15,636 5.79
----------- -------- ----------- -------- ----------- --------
Total borrowed funds...... 2,306,200 34,655 5.96 2,159,513 33,175 6.16 2,054,807 30,361 5.99
----------- -------- ----------- -------- ----------- --------
Total interest bearing
liabilities.............. 11,444,419 124,279 4.31 11,009,692 113,519 4.14 10,619,727 99,634 3.80
-------- -------- --------
Demand deposits............... 4,695,593 4,371,936 4,338,570
Other liabilities............. 661,184 618,186 561,364
----------- ----------- -----------
Total liabilities......... 16,801,196 15,999,814 15,519,661
SHAREHOLDERS' EQUITY.......... 1,451,400 1,413,563 1,379,298
----------- ----------- -----------
Total liabilities and
shareholders' equity..... $18,252,596 $17,413,377 $16,898,959
----------- ----------- -----------
----------- ----------- -----------
Net interest income/margin
(taxable-equivalent basis)... 210,480 5.11% 207,189 5.28% 203,211 5.41%
Less taxable-equivalent
adjustment................... 1,976 2,326 2,245
-------- -------- --------
Net interest income....... $208,504 $204,863 $200,966
-------- -------- --------
-------- -------- --------
</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.
13
<PAGE>
NONINTEREST INCOME
During the first quarter of 1996, the Bank recognized noninterest income of
$66 million as compared to $59 million for the same period during 1995. This
increase of $7 million in comparing the first quarter of 1996 to 1995 was
primarily due to increases of $3 million in merchant banking fees, $2 million in
net gains (losses) on sale of investment securities and $1 million in trust
fees.
Merchant banking fees increased from $5 million for the first quarter of
1995 to $8 million for the same period in 1996. This increase of $3 million is
primarily a result of the Bank participating, through its specialized lending
area, in more loan syndications during the first three months of 1996 compared
to the same period in 1995.
Net gains (losses) on sale of investment securities increased from a net
loss of $1 million for the first quarter of 1995 to a net gain of $582,000 for
the first quarter of 1996. This increase is due to a loss on sale of agency
collateralized mortgage obligations recognized in the first quarter of 1995
compared with various gains recognized on sales of such assets during the first
quarter of 1996. All such activity was the result of sales transactions from the
Bank's available for sale portfolio.
Trust fees increased by $1 million to $10 million for the first quarter of
1996. This increase in comparing the first quarter of 1996 to the same period in
1995 is due to a higher volume of trust assets held by the Bank in comparing the
two periods.
TABLE 3 -- NONINTEREST INCOME
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
----------------------------------------------------------------
MARCH 31, DECEMBER 31, SEPTEMBER 30, JUNE 30, MARCH 31,
(DOLLARS IN THOUSANDS) 1996 1995 1995 1995 1995
- ------------------------------------------------- ----------- ------------ ------------- --------- -----------
<S> <C> <C> <C> <C> <C>
Service charges on deposit accounts.............. $ 21,236 $ 21,151 $ 21,113 $ 21,260 $ 20,632
Trust fees....................................... 9,550 10,439 9,243 8,903 8,256
Credit card merchant fees........................ 8,850 8,818 9,394 8,664 7,959
International commissions and fees............... 4,841 6,049 5,179 5,378 5,176
Foreign exchange................................. 2,698 2,803 3,532 3,152 2,969
Miscellaneous fees............................... 3,095 2,413 2,612 2,559 2,036
Investment services.............................. 2,496 2,223 1,817 1,931 2,653
Gain (loss) on sale of assets, net............... 197 242 (36) 856 780
Merchant banking fees............................ 7,910 4,730 4,544 4,505 5,233
Investment securities gains (losses), net........ 582 966 (348) (103) (1,217)
Other............................................ 4,442 4,780 5,129 4,289 4,825
----------- ------------ ------------- --------- -----------
Total noninterest income....................... $ 65,897 $ 64,614 $ 62,179 $ 61,394 $ 59,302
----------- ------------ ------------- --------- -----------
----------- ------------ ------------- --------- -----------
</TABLE>
NONINTEREST EXPENSE
Noninterest expense was $174 million for the first quarter of 1996, as
compared to $169 million for the comparable quarter in 1995. This increase of $5
million or 3 percent in comparing quarter to quarter is primarily the result of
an increase in salary and employee benefit expense of $6 million, operating
costs and writedowns on other real estate owned ("OREO") and joint ventures of
$2 million and an increase of $4 million in a variety of other expenses. These
other expenses include equipment, credit card processing, processing,
advertising and public relations and travel. These increases were offset by a
decrease of $8 million in regulatory authority assessment expense.
Salary and employee benefit expense for the first quarter of 1996 increased
by $6 million over the comparable period in 1995. This increase was due to
increased staff levels.
OREO and joint venture expense increased $2 million when comparing the
quarters ended March 31, 1996 and 1995. This increase is primarily due to an
increase in the level of OREO and the associated costs to carry such assets from
March 31, 1995 to March 31, 1996. For a further discussion of OREO, see the
"Asset Quality" section of the Bank's Management's Discussion and Analysis
("MD&A").
14
<PAGE>
Regulatory authority assessments decreased $8 million when comparing the
first quarter of 1996 to the same period in 1995. This decrease is primarily a
result of the Federal Deposit Insurance Corporation ("FDIC") reducing the
deposit assessment rate charged from $0.04 per $100 of deposits to a total
annual premium of $2,000 for well capitalized banks.
TABLE 4 -- NONINTEREST EXPENSE
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
---------------------------------------------------------------
MARCH 31, DECEMBER 31, SEPTEMBER 30, JUNE 30, MARCH 31,
(DOLLARS IN THOUSANDS) 1996 1995 1995 1995 1995
- ----------------------------------------------- ---------- ------------ ------------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Salaries....................................... $ 76,434 $ 77,804 $ 73,658 $ 72,918 $ 70,132
Employee benefits.............................. 21,366 15,702 16,365 17,432 21,850
---------- ------------ ------------- ---------- ----------
Salaries and employee benefits............... 97,800 93,506 90,023 90,350 91,982
Net occupancy.................................. 15,153 15,412 15,415 15,316 15,656
Equipment...................................... 9,553 10,630 9,975 9,898 8,901
Regulatory authority assessments............... 273 1,708 (147) 7,879 7,866
Professional services.......................... 3,518 3,364 4,631 4,772 4,511
Communications................................. 5,825 6,186 5,729 5,383 5,463
Credit card processing......................... 6,351 6,191 6,336 6,069 5,524
Printing and office supplies................... 4,615 4,623 4,472 4,049 4,001
Processing..................................... 4,017 3,725 3,267 3,556 3,271
Advertising and public relations............... 5,534 4,336 4,006 4,432 4,544
Intangible asset amortization.................. 3,212 3,212 3,212 3,212 3,212
Armored car.................................... 2,892 2,871 2,813 2,717 2,828
Net operating reserves......................... 1,171 869 786 1,956 649
Miscellaneous fees............................. 3,357 3,979 3,733 3,206 3,190
Software....................................... 2,357 2,920 2,638 2,233 1,839
Travel......................................... 2,067 2,203 1,955 2,095 1,419
Other.......................................... 4,887 7,531 5,356 5,428 5,334
---------- ------------ ------------- ---------- ----------
Noninterest expense, excluding OREO and joint
ventures.................................... 172,582 173,266 164,200 172,551 170,190
Operating costs and writedowns on OREO and
joint ventures................................ 1,505 1,474 124 121 (729)
---------- ------------ ------------- ---------- ----------
Total noninterest expense.................... $ 174,087 $ 174,740 $ 164,324 $ 172,672 $ 169,461
---------- ------------ ------------- ---------- ----------
---------- ------------ ------------- ---------- ----------
</TABLE>
LOANS OUTSTANDING
The Bank's lending activities are predominantly domestic, with such loans
comprising in excess of 98 percent of the portfolio at March 31, 1996 and
December 31, 1995. Overall the Bank's loan portfolio at March 31, 1996 increased
by $205 million compared to December 31, 1995 and $1.8 billion in comparison to
March 31, 1995. The increase from December 31, 1995, was primarily in the
residential mortgage portfolio which grew by $298 million and consumer
installment loans which increased by $28 million. The increase from March 31,
1995, was primarily in the commercial, financial and industrial portfolio which
grew by $749 million and the residential portfolio which grew by $732 million.
The Bank attributes this growth to the continuing improvement in the California
economy which is the Bank's principal market, and improvement in other
specialized domestic markets the Bank serves.
Commercial, financial and industrial loans represent the largest category in
the loan portfolio. Principally, these loans are to major corporations, middle
market businesses, and small businesses, with no concentration in any one
business segment. At March 31, 1996, December 31, 1995 and March 31, 1995, the
commercial, financial and industrial loan portfolio comprised $6.3 billion or 43
percent of the total loan portfolio, $6.3 billion or 44 percent and $5.5 billion
or 43 percent, respectively.
Mortgage loans represented $4.4 billion or 30 percent of total loans at
March 31, 1996, $4.1 billion or 29 percent at December 31, 1995 and $3.5 billion
or 28 percent at March 31, 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. The residential mortgage
segment of this portfolio provides an additional source of liquidity as the Bank
may sell or securitize a substantial portion of these type of loans.
15
<PAGE>
Consumer loans totaled $2.5 billion or 17 percent at March 31, 1996 as
compared to $2.5 billion or 17 percent at December 31, 1995 and $2.4 billion or
19 percent at March 31, 1995. This portfolio is primarily comprised of
installment loans and home equity loans.
The Bank's construction portfolio totaled $342 million or 2 percent of total
loans at March 31, 1996 as compared to $324 million or 2 percent at December 31,
1995 and $318 million or 2 percent at March 31, 1995. This portfolio is
primarily residential project related.
Lease financing and foreign loans totaled $823 million or 6 percent of total
loans and $197 million or 1 percent of total loans, respectively, at March 31,
1996.
TABLE 5 -- LOANS OUTSTANDING
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31, SEPTEMBER 30, JUNE 30, MARCH 31,
(DOLLARS IN THOUSANDS) 1996 1995 1995 1995 1995
- ------------------------------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
DOMESTIC:
Commercial, financial and
industrial........................ $ 6,295,530 $ 6,345,990 $ 5,810,081 $ 5,655,333 $ 5,546,471
Construction....................... 342,448 324,221 332,644 339,143 317,965
Mortgage:
Residential...................... 3,103,832 2,805,480 2,631,009 2,481,978 2,371,802
Commercial....................... 1,333,972 1,330,085 1,220,084 1,202,544 1,149,483
------------- ------------- ------------- ------------- -------------
Total mortgage................. 4,437,804 4,135,565 3,851,093 3,684,522 3,521,285
Consumer:
Installment...................... 1,369,508 1,341,058 1,301,538 1,219,928 1,200,951
Home equity...................... 834,494 862,433 884,565 910,526 919,059
Credit card and other lines of
credit.......................... 297,682 308,890 291,951 273,836 241,361
------------- ------------- ------------- ------------- -------------
Total consumer................. 2,501,684 2,512,381 2,478,054 2,404,290 2,361,371
Lease financing.................... 822,816 838,039 810,829 793,992 802,308
------------- ------------- ------------- ------------- -------------
Total domestic loans........... 14,400,282 14,156,196 13,282,701 12,877,280 12,549,400
Loans originated in foreign
offices............................. 196,719 236,167 227,256 212,304 208,084
------------- ------------- ------------- ------------- -------------
Total loans.................... $ 14,597,001 $ 14,392,363 $ 13,509,957 13,089,584 12,757,484
Allowance for loan losses............ 326,840 332,410 342,148 340,020 338,235
------------- ------------- ------------- ------------- -------------
Net loans outstanding.......... $ 14,270,161 $ 14,059,953 $ 13,167,809 $ 12,749,564 $ 12,419,249
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
</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 the 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 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
possible loan losses is adequate, future provisions will be subject to
continuing evaluation of inherent risk in the loan portfolio.
At March 31, 1996, the Bank's allowance for loan losses was $327 million or
2.24 percent of the total loan portfolio. This compares with an allowance for
loan losses of $332 million or 2.31 percent of the total loan portfolio at
December 31, 1995. During the first quarter of 1996, the Bank recorded a
provision for loan losses of $10 million as compared to $10 million for the
fourth quarter of 1995 and $20 million for the first quarter of 1995.
16
<PAGE>
The decline in the provision for loan losses in comparing the first quarter
of 1996 to the first of 1995 is primarily due to the improvement in the quality
of the Bank's loan portfolio and the reduction in classified assets as discussed
in the "Asset Quality" section of MD&A.
During the first quarter of 1996, the Bank had net charge-offs of $16
million, compared to net charge-offs of $20 million for the quarter ended
December 31, 1995 and net recoveries of $1 million for the quarter ended March
31, 1995. Commercial, financial and industrial loans had net charge-offs of $6
million in the first quarter of 1996 compared to net charge-offs of $12 million
in the fourth quarter of 1995 and net recoveries of $3 million in the first
quarter of 1995. In addition, consumer loans had net charge-offs of $9 million
in the first quarter of 1996 as compared to $8 million in the fourth quarter of
1995 and $5 million in the first quarter of 1995.
The Bank continues to evaluate its loan portfolio for impairment as defined
by Statement of Financial Accounting Standard ("SFAS") No. 114, as amended. At
March 31, 1996, the Bank's total recorded investment in impaired loans was $72
million and the associated impairment allowance was $6 million. This compares to
a recorded investment in impaired loans of $92 million and the associated
impairment allowance of $10 million at December 31, 1995.
TABLE 6 -- ALLOWANCE FOR LOAN LOSSES
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
---------------------------------------------------------------
MARCH 31, DECEMBER 31, SEPTEMBER 30, JUNE 30, MARCH 31,
(DOLLARS IN THOUSANDS) 1996 1995 1995 1995 1995
- ----------------------------------------------- ---------- ------------ ------------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Balance, beginning of period................... $ 332,410 $ 342,148 $ 340,020 $ 338,235 $ 316,802
Loans charged off:
Domestic:
Commercial, financial and industrial....... 11,355 15,197 6,559 9,777 6,903
Construction............................... 67 4 180 -- 690
Mortgage................................... 1,908 2,359 2,581 7,545 619
Consumer................................... 11,802 11,172 11,850 7,883 6,345
Lease financing............................ 647 1,005 277 620 520
---------- ------------ ------------- ---------- ----------
Total loans charged off.................. 25,779 29,737 21,447 25,825 15,077
Loan loss recoveries:
Domestic:
Commercial, financial and industrial....... 5,298 2,928 7,267 8,111 10,279
Construction............................... 1 1 3 -- 1,234
Mortgage................................... 2,075 3,594 1,605 2,490 3,104
Consumer................................... 2,754 3,413 2,650 1,911 1,793
Lease financing............................ 81 63 50 98 100
---------- ------------ ------------- ---------- ----------
Total loan loss recoveries............... 10,209 9,999 11,575 12,610 16,510
---------- ------------ ------------- ---------- ----------
Net loans charged off (recovered)...... 15,570 19,738 9,872 13,215 (1,433)
Provision for loan losses...................... 10,000 10,000 12,000 15,000 20,000
---------- ------------ ------------- ---------- ----------
Balance, end of period......................... $ 326,840 $ 332,410 $ 342,148 $ 340,020 $ 338,235
---------- ------------ ------------- ---------- ----------
---------- ------------ ------------- ---------- ----------
Allowance for loan losses to total loans....... 2.24% 2.31% 2.53% 2.60% 2.65%
Provision for loan losses to net loan
charge-offs................................... 64.23 50.66 121.56 113.51 --
Recoveries of loans to loans charged off in the
previous period............................... 34.33 46.62 44.82 83.64 53.40
Net loans charged off (recovered) to average
loans outstanding for the
period (1).................................... 0.43 0.56 0.29 0.41 (0.05)
</TABLE>
- ------------------------------
(1) Annualized.
17
<PAGE>
ASSET QUALITY
At March 31, 1996, total nonperforming and renegotiated loans were $98
million or 0.67 percent of total loans outstanding compared to $119 million or
0.83 percent and $164 million or 1.29 percent at December 31, 1995 and March 31,
1995, respectively. The decrease of $21 million in comparing March 31, 1996 to
December 31, 1995, is a result of decreases of $8 million in the commercial,
financial and industrial portfolio, $7 million in the construction portfolio and
$6 million in the mortgage portfolio.
At March 31, 1996, OREO was $23 million, down from $25 million at December
31, 1995 and up from $8 million at March 31, 1995. The decrease of $2 million in
OREO from year end 1995 to first quarter 1996 was the result of the Bank's
continuing effort to dispose of OREO, coupled with an improved real estate
market to dispose of such assets. The increase from first quarter 1995 is
reflective of lower levels of OREO in the first quarter of 1995. The low level
of OREO at March 31, 1995 was the result of workout efforts in early 1995.
TABLE 7 -- NONPERFORMING AND RENEGOTIATED ASSETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31, SEPTEMBER 30, JUNE 30, MARCH 31,
(DOLLARS IN THOUSANDS) 1996 1995 1995 1995 1995
- ----------------------------------------------- ---------- ------------ ------------- ---------- ----------
<S> <C> <C> <C> <C> <C>
NONACCRUAL LOANS:
Domestic:
Commercial, financial and industrial....... $ 58,673 $ 67,143 $ 53,036 $ 57,530 $ 57,333
Construction............................... 5,382 12,277 20,140 20,367 14,772
Mortgage:
Residential (1).......................... 11,007 12,134 11,251 28,458 31,760
Commercial............................... 22,660 27,453 35,022 43,201 58,302
---------- ------------ ------------- ---------- ----------
Total mortgage......................... 33,667 39,587 46,273 71,659 90,062
Other.................................... 369 365 1,207 1,691 2,234
---------- ------------ ------------- ---------- ----------
Total nonaccrual loans................. 98,091 119,372 120,656 151,247 164,401
Renegotiated loans............................. -- -- -- -- --
---------- ------------ ------------- ---------- ----------
Total nonperforming and renegotiated
loans................................. 98,091 119,372 120,656 151,247 164,401
Nonperforming real estate ventures............. -- -- -- -- --
---------- ------------ ------------- ---------- ----------
Total nonperforming and renegotiated
loans and real estate ventures.......... 98,091 119,372 120,656 151,247 164,401
OREO......................................... 23,396 24,958 12,641 10,652 8,215
---------- ------------ ------------- ---------- ----------
Total nonperforming and renegotiated
assets.................................. $ 121,487 $ 144,330 $ 133,297 $ 161,899 $ 172,616
---------- ------------ ------------- ---------- ----------
---------- ------------ ------------- ---------- ----------
Nonperforming and renegotiated loans to total
loans......................................... 0.67% 0.83% 0.89% 1.16% 1.29
Nonperforming and renegotiated assets to total
loans, real estate ventures and OREO.......... 0.83 1.00 0.99 1.24 1.35
Nonperforming and renegotiated assets to total
assets........................................ 0.59 0.74 0.70 0.90 1.00
</TABLE>
- ------------------------------
(1) These loans primarily consist of loans secured by single family residential
development projects and apartment buildings.
18
<PAGE>
TABLE 8 -- LOANS 90 DAYS OR MORE PAST DUE AND STILL ACCRUING
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31, SEPTEMBER 30, JUNE 30, MARCH 31,
(DOLLARS IN THOUSANDS) 1996 1995 1995 1995 1995
- ------------------------------------------------- ----------- ------------ ------------- --------- -----------
<S> <C> <C> <C> <C> <C>
Domestic:
Commercial, financial and industrial........... $ 35 $ 370 $ 1,170 $ 277 $ 418
Construction................................... 1,716 1,063 2,577 4,338 1,116
Mortgage:
Residential.................................. 12,147 7,917 3,157 2,885 3,795
Commercial................................... 2,949 3,592 11,592 9,799 16,478
----------- ------------ ------------- --------- -----------
Total mortgage............................. 15,096 11,509 14,749 12,684 20,273
Consumer and other............................. 7,612 8,624 7,562 9,584 9,603
----------- ------------ ------------- --------- -----------
Total loans 90 days or more past due and
still accruing............................ $ 24,459 $ 21,566 $ 26,058 $ 26,883 $ 31,410
----------- ------------ ------------- --------- -----------
----------- ------------ ------------- --------- -----------
</TABLE>
The Bank's level of loans 90 days or more past due and still accruing was
$24 million at March 31, 1996, compared to $22 million at December 31, 1995 and
$31 million at March 31, 1995. Management anticipates the level of loans 90 days
or more past due and still accruing to be comparable to the March 31, 1996
levels through the remainder of the year.
LIQUIDITY
Liquidity refers to the Bank'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 Bank's liquidity policy, as
managed by the Asset and Liability Management Committee, is to draw upon its
strengths, which include an extensive retail and middle market business banking
franchise, coupled with its ability to obtain funds for various terms in a
variety of domestic and international money markets.
Core deposits have provided the Bank with a sizable source of relatively
stable and low-cost funds. The Bank's average core deposits and average common
shareholders' equity funded 64 percent of average total assets of $19.5 billion
during the first quarter of 1996 and 70 percent of average total assets of $16.9
billion during the first quarter of 1995. The decrease in funding percentage
between these two periods is the result of an increase in average total assets,
primarily as a result of growth in average total loans. Most of the remaining
funding was provided by short-term borrowings in the form of negotiable
certificates of deposit, federal funds purchased and collateralized borrowings.
CAPITAL
Total shareholders' equity increased $38 million in comparing March 31, 1996
to December 31, 1995. This change was primarily a result of $61 million of net
income, offset by dividends on common stock of $13 million, dividends on
preferred stock of $3 million and a $9 million change in the unrealized gain
(loss) on investment securities available for sale.
For regulatory purposes, the Bank's capital adequacy is based on
risk-adjusted Tier 1 and total capital guidelines, as well as a leverage ratio.
Under these guidelines the Bank's Tier 1 and total capital ratios were 8.11
percent and 10.70 percent, respectively, at March 31, 1996, as compared to 7.93
percent and 10.57 percent, and 8.17 percent and 11.21 percent at December 31,
1995 and March 31, 1995, respectively. The decreases in the respective ratios on
a comparative basis are primarily due to growth in assets, particularly among
the higher risk-weighted categories of loans.
In addition to the above risk-based ratios, the Bank has a leverage ratio,
which is defined as Tier 1 capital divided by quarterly average total assets, of
7.51 percent at March 31, 1996, as compared to 7.35 percent at December 31, 1995
and 7.56 percent at March 31, 1995. The increase when comparing March 31, 1996
to December 31, 1995, is the result of a $50 million increase in Tier 1 capital.
The decrease when comparing March 31, 1996 to March 31, 1995 is primarily a
result of the increase in quarterly average total assets.
19
<PAGE>
TABLE 9 -- RISK-BASED CAPITAL
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31, SEPTEMBER 30, JUNE 30, MARCH 31,
(DOLLARS IN THOUSANDS) 1996 1995 1995 1995 1995
- ----------------------------------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
CAPITAL COMPONENTS:
Common shareholders' equity.............. $ 1,422,084 $ 1,375,415 $ 1,330,177 $ 1,286,941 $ 1,244,419
8 3/8% Noncumulative preferred stock,
Series A................................ 135,000 135,000 135,000 135,000 135,000
Less: Core deposit intangible (1)........ 6,546 6,748 6,950 7,153 7,355
Goodwill............................. 91,297 94,307 97,316 100,326 103,336
------------- ------------- ------------- ------------- -------------
Tier 1 capital................... 1,459,241 1,409,360 1,360,911 1,314,462 1,268,728
------------- ------------- ------------- ------------- -------------
Eligible portion of the allowance for
loan losses (2)......................... 226,304 223,435 209,482 204,344 195,972
Subordinated capital notes (3)........... 240,874 244,200 257,600 277,200 277,200
------------- ------------- ------------- ------------- -------------
Tier 2 capital................... 467,178 467,635 467,082 481,544 473,172
------------- ------------- ------------- ------------- -------------
Total risk-based capital......... $ 1,926,419 $ 1,876,995 $ 1,827,993 $ 1,796,006 $ 1,741,900
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
Risk-weighted balance sheet and
off-balance sheet assets................ $ 18,104,295 $ 17,874,778 $ 16,758,560 $ 16,347,528 $ 15,677,745
Less: Allowance for loan losses
not included in Tier 2
capital............................. 100,536 108,975 132,666 135,676 142,263
------------- ------------- ------------- ------------- -------------
Risk-weighted assets............. $ 18,003,759 $ 17,765,803 $ 16,625,894 $ 16,211,852 $ 15,535,482
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
CAPITAL RATIOS
Tier 1 capital (regulatory minimum --
4.0%) (4)............................... 8.11% 7.93% 8.19% 8.11% 8.17%
Total risk-based capital
(regulatory minimum -- 8.0%) (4)........ 10.70 10.57 10.99 11.08 11.21
</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.
(4) The regulatory minimum prescribed by the Federal Deposit Insurance
Corporation Improvement Act for well capitalized banks is 6% for Tier 1 and
10% for total risk-based capital.
20
<PAGE>
TABLE 10 -- OTHER CAPITAL MEASURES
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31, SEPTEMBER 30, JUNE 30, MARCH 31,
1996 1995 1995 1995 1995
------------- --------------- ----------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
LEVERAGE RATIO (1).................... 7.51% 7.35% 7.50% 7.60% 7.56%
OTHER CAPITAL RATIOS (END OF PERIOD):
Tangible common equity to total
assets............................. 6.53% 6.65% 6.45% 6.58% 6.56%
Total equity to total assets........ 7.67 7.86 7.70 7.93 7.98
Tangible common equity to average
total assets....................... 6.85 6.73 6.77 6.83 6.73
Total equity to average total
assets............................. 8.04 7.95 8.08 8.22 8.18
</TABLE>
- ------------------------------
(1) Tier 1 capital divided by quarterly average total assets. The regulatory
minimum prescribed by FDICIA for well capitalized banks is 5%.
NEW ACCOUNTING STANDARDS
As of January 1, 1996, the Bank adopted SFAS No. 122, "Accounting for
Mortgage Servicing Rights." This statement requires a mortgage banking
enterprise to recognize the rights to service mortgage loans for others as
separate assets. There was no material impact on the financial statements of the
Bank as a result of adoption of this statement.
As of January 1, 1996, the Bank adopted SFAS No. 123, "Accounting for
Stock-Based Compensation." This statement establishes accounting and reporting
standards for stock-based employee compensation plans. The statement encourages
an entity to adopt the fair value based method of accounting for all stock
compensation plans. However, the statement also allows an entity to continue to
account for stock compensation under plans under APB No. 25, "Accounting for
Stock Issued to Employees." Entities that elect to continue to account for
stock-based compensation using APB No. 25 must present in year end financial
statements pro forma disclosure of net income, and if presented, earnings per
share, as if the fair value based method of accounting had been applied. The
Bank has elected to continue to account for stock-based compensation using APB
No. 25. There was no material impact on the financial statements of the Bank as
a result of adoption of this statement.
21
<PAGE>
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.
(a) On January 31, 1996, Union Bank held a special meeting of its common
stock shareholders.
(c) Information regarding matters submitted to a vote of shareholders of the
registrant during the period covered by this report is incorporated by
reference to (i) Item 5 (Other Events) of the registrant's Current Report
on Form 8-K filed on April 1, 1996, at sequential page number 2, and (ii)
the Notice of Special Meeting filed as part of the registrant's proxy
statement as Exhibit No. 19.1 of the Form 8-K, at sequential page number
641.
As to the matters voted upon at the Special Meeting the following votes were
cast:
PROPOSAL 1:
To approve the Agreement and Plan of Reorganization, the Agreement and Plan
of Merger and the Purchase and Assumption Agreement, each dated September 27,
1995, received the following votes:
<TABLE>
<CAPTION>
VOTES PERCENTAGE
------------ -------------
<S> <C> <C>
FOR................................................................. 34,126,703 93.4
AGAINST............................................................. 33,840 .1
ABSTAINING.......................................................... 30,416 .1
NON-VOTES........................................................... 440,912 1.2
</TABLE>
PROPOSAL 2:
To amend the Restated Articles of Incorporation of Union Bank, received the
following votes:
<TABLE>
<CAPTION>
VOTES PERCENTAGE
------------ -------------
<S> <C> <C>
FOR................................................................. 34,508,570 94.5
AGAINST............................................................. 91,613 .3
ABSTAINING.......................................................... 27,994 .1
NON-VOTES........................................................... 3,693 0
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) The exhibits required by Item 601 of Regulation S-K are listed in the
Exhibit Index included elsewhere herein.
(b) Reports on Form 8-K. No reports on Form 8-K were filed during the
quarter for which this report is filed.
22
<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
--------------------------------------
Takahiro Moriguchi
VICE CHAIRMAN OF THE BOARD AND
CHIEF FINANCIAL OFFICER
By
--------------------------------------
Donald A. Brunell, Jr.
EXECUTIVE VICE PRESIDENT AND
DEPUTY DIRECTOR OF FINANCE
Dated: May 13, 1996
23
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
PAGE NUMBER IN
SEQUENTIALLY
EXHIBIT NO. DESCRIPTION NUMBERED REPORT
- ------------- -------------------------------------------------------- ---------------------------
<C> <S> <C>
2.1 Agreement and Plan of Reorganization, dated as of 833
September 27, 1995, among Union, BankCal and Tri-State.
Incorporated by reference to the registrant's Current
Report on Form 8-K dated April 1, 1996 as Exhibit No.
2.1.
2.2 Agreement and Plan of Merger, dated as of September 27, 853
1995, between Union and Tri-State. Incorporated by
Reference to the registrant's Current Report on Form
8-K dated April 1, 1996 as Exhibit No. 2.2.
2.3 Purchase and Assumption Agreement, dated as of September 863
27, 1995, between Union and BankCal. Incorporated by
reference to the registrant's Current Report on Form
8-K dated April 1, 1996 on Exhibit No. 2.3.
22.1 Item 5. Other Events, of the registrant's Current Report 2
on Form 8-K dated April 1, 1996.
22.2 Notice of Special Meeting filed as part of the 641
registrant's proxy statement as Exhibit 19.1 of the
registrant's Current Report on Form 8-K dated April 1,
1996.
</TABLE>
24
<PAGE>
EXHIBIT 22.1
ITEM 5. OTHER EVENTS.
The Registrant, formerly known as Union Bank, a California corporation
("Union"), was a California state-chartered bank which since October 1, 1965,
reported to the Federal Deposit Insurance Corporation ("FDIC") pursuant to the
provisions of 12 CFR Part 335 issued by the FDIC under Section 12(i) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). The Registrant
has two classes of securities registered pursuant to Section 12(g) of the
Exchange Act: common stock, no par value (the "Common Stock") and 8 3/8%
Noncumulative Preferred Stock, Series A (the "Preferred Stock").
On April 1, 1996, Union combined with The Bank of California, N.A., a
national banking association ("BankCal") and its Delaware holding company,
BanCal Tri-State Corporation ("Tri-State"), pursuant to provisions of the
following agreements (the "Transaction"): (i) the Agreement and Plan of
Reorganization, dated as of September 27, 1995 (the "Reorganization Agreement"),
among Union, BankCal and Tri-State, (ii) the Agreement and Plan of Merger, dated
as of September 27, 1995 (the "Merger Agreement"), between Union and Tri-State
pursuant to which Tri-State merged into Union, with Union remaining as the
surviving corporation (the "Merger"), and (iii) the Purchase and Assumption
Agreement, dated as of September 27, 1995 (the "Purchase and Assumption
Agreement"), between Union and BankCal, pursuant to which following the Merger
Union transferred substantially all of its banking business and its assets to
BankCal in exchange for BankCal's assumption of substantially all liabilities of
Union and the issuance by BankCal to Union of shares of BankCal's common stock.
As a result of the Merger, Union owns approximately 94% of BankCal, which
operates the combined banking businesses of Union and BankCal under the name
Union Bank of California, N.A. Effective as of April 1, 1996, Union has amended
its Restated Articles of Incorporation to (i) change its name to UnionBanCal
Corporation, (ii) change the par value of the Common Stock from five dollars
($5.00) par value to no par value, and (iii) remove the assessability of the
Common Stock.
As a result of the Transaction, the Registrant has ceased to be subject to
the regulatory supervision of the FDIC and the Registrant will take appropriate
steps to terminate filing its Exchange Act reports with the FDIC. This Current
Report both reports this change and incorporates the Registrant's current
Exchange Act reports (as filed with the FDIC), together with the documents
required to be included as exhibits thereto.
25
<PAGE>
EXHIBIT 22.2
UNION BANK
350 CALIFORNIA STREET
SAN FRANCISCO, CALIFORNIA 94104-1476
(415) 705-7350
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS OF COMMON STOCK
TO BE HELD JANUARY 31, 1996
------------------------
NOTICE IS HEREBY GIVEN that, pursuant to call of its Board of Directors, a
Special Meeting of the shareholders of Common Stock, $5.00 par value ("Union
Common Stock"), of Union Bank, a California corporation ("Union"), will be held
on Wednesday, January 31, 1996 at 10:30 a.m. (California time) at the Park Hyatt
Hotel, Mercantile Room, Level B, 333 Battery Street, San Francisco, California
(the "Special Meeting"), for the following purposes, all of which are more fully
described in the accompanying Proxy Statement:
PROPOSAL 1:
To consider and vote upon a proposal to adopt and approve (i) the Agreement
and Plan of Reorganization, dated as of September 27, 1995 (the
"Reorganization Agreement"), among Union, BanCal TriState Corporation, a
Delaware bank holding company ("Tri-State"), and The Bank of California,
N.A., a national banking association ("BankCal"), (ii) the Agreement and
Plan of Merger, dated as of September 27, 1995 (the "Merger Agreement"),
between Union and Tri-State pursuant to which Tri-State will merge into
Union, with Union being the surviving corporation (the "Merger") and (iii) a
Purchase and Assumption Agreement, dated as of September 27, 1995 (the
"Purchase and Assumption Agreement"), between Union and BankCal, pursuant to
which following the Merger Union will transfer substantially all of its
banking business and its assets to BankCal in exchange for BankCal's
assumption of substantially all of the liabilities of Union and the issuance
by BankCal to Union of 26,117,714 shares of Common Stock, $15.00 par value
("BankCal Common Stock"), of BankCal (collectively, the "Transactions"). The
Reorganization Agreement, the Merger Agreement and the Purchase and
Assumption Agreement are set forth in Appendices A, B and C, respectively,
to the accompanying Proxy Statement.
PROPOSAL 2:
To consider and vote upon a proposal to amend the Restated Articles of
Incorporation of Union to change (i) the name of Union to UnionBanCal
Corporation, (ii) the purpose clause to allow Union to give up its banking
and trust powers and operate as a bank holding company, (iii) the number of
authorized shares of Union Common Stock from 50,000,000 to 100,000,000 and
remove the provision regarding the assessability of the Union Common Stock
and (iv) the number of directors to a range from sixteen (16) to thirty
(30).
No other business will be transacted at the Special Meeting other than
matters incidental to the conduct of the Special Meeting.
Only those shareholders of record of Union Common Stock at the close of
business on December 22, 1995, shall be entitled to notice of and to vote at the
Special Meeting or any adjournments or postponements thereof. A summary of
certain provisions of Chapter 13 of the California General Corporation Law (the
"CGCL") pertaining to the rights of dissenting shareholders in connection with
the Transactions is included in the Proxy Statement in the section entitled
"Proposal 1: The Agreements and The Transactions -- Dissenters' Rights." The
complete text of Chapter 13 of the CGCL is set forth as Appendix E to the Proxy
Statement.
By Order of the Board of Directors,
/s/ ALEXANDER D. CALHOUN
ALEXANDER D. CALHOUN
Secretary
San Francisco, California
Dated: January 8, 1996
26
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1996
<CASH> 1,469,077
<INT-BEARING-DEPOSITS> 430,341
<FED-FUNDS-SOLD> 1,416,595
<TRADING-ASSETS> 97,115
<INVESTMENTS-HELD-FOR-SALE> 1,351,017
<INVESTMENTS-CARRYING> 295,019
<INVESTMENTS-MARKET> 304,891
<LOANS> 14,597,001
<ALLOWANCE> 326,840
<TOTAL-ASSETS> 20,489,473
<DEPOSITS> 15,608,792
<SHORT-TERM> 2,228,991
<LIABILITIES-OTHER> 455,900
<LONG-TERM> 336,079
0
135,000
<COMMON> 183,006
<OTHER-SE> 1,253,399
<TOTAL-LIABILITIES-AND-EQUITY> 20,489,473
<INTEREST-LOAN> 303,771
<INTEREST-INVEST> 19,119
<INTEREST-OTHER> 25,869
<INTEREST-TOTAL> 348,759
<INTEREST-DEPOSIT> 96,168
<INTEREST-EXPENSE> 130,365
<INTEREST-INCOME-NET> 218,394
<LOAN-LOSSES> 10,000
<SECURITIES-GAINS> 582
<EXPENSE-OTHER> 174,087
<INCOME-PRETAX> 100,204
<INCOME-PRE-EXTRAORDINARY> 100,204
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 60,529
<EPS-PRIMARY> 1.58
<EPS-DILUTED> 1.58
<YIELD-ACTUAL> 5.05
<LOANS-NON> 98,091
<LOANS-PAST> 24,459
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 332,410
<CHARGE-OFFS> 25,779
<RECOVERIES> 10,209
<ALLOWANCE-CLOSE> 326,840
<ALLOWANCE-DOMESTIC> 184,540
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 142,300
</TABLE>
