<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 JUNE 30, 1996
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 0-28118
UNIONBANCAL CORPORATION
(FORMERLY NAMED UNION BANK)
State of Incorporation: California I.R.S. Employer Id. No. 94-1234979
350 California Street
San Francisco, California 94104
Telephone: (415) 705-7350
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes _X_ No ____
Number of shares of Common Stock outstanding at July 31, 1996: 54,758,560
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
UNIONBANCAL CORPORATION AND SUBSIDIARIES
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NUMBER
-------------
<S> <C>
PART I
FINANCIAL INFORMATION
Consolidated Financial Highlights..................................................................... 2
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets............................................................... 4
Condensed Consolidated Statements of Income......................................................... 5
Condensed Consolidated Statements of Cash Flows..................................................... 6
Condensed Consolidated Statements of Shareholders' Equity........................................... 7
Notes to Condensed Consolidated Financial Statements................................................ 8
Item 2. Management's Discussion and Analysis:
Introduction........................................................................................ 11
Summary............................................................................................. 11
Table 1 -- Analysis of Earnings................................................................... 12
Net Interest Income................................................................................. 13
Table 2 -- Consolidated Average Balance Sheets, Net Interest Income
and Interest Rates.............................................................................. 14
Noninterest Income.................................................................................. 17
Table 3 -- Noninterest Income..................................................................... 17
Noninterest Expense................................................................................. 17
Table 4 -- Noninterest Expense.................................................................... 18
Merger Expenses..................................................................................... 18
Loans Outstanding................................................................................... 19
Table 5 -- Loans Outstanding...................................................................... 20
Allowance for Loan Losses........................................................................... 20
Table 6 -- Allowance for Loan Losses.............................................................. 21
Asset Quality....................................................................................... 22
Table 7 -- Nonperforming and Renegotiated Assets.................................................. 22
Table 8 -- Loans 90 Days or More Past Due and Still Accruing...................................... 23
Liquidity........................................................................................... 23
Capital............................................................................................. 23
Table 9 -- Risk-Based Capital..................................................................... 24
Table 10 -- Other Capital Measures................................................................ 24
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.............................................................. 25
Signatures............................................................................................ 26
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
UNIONBANCAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL HIGHLIGHTS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------------------------
INCREASE (DECREASE)
JUNE 30, JUNE 30, -------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 1996 1995 AMOUNT PERCENT
- -------------------------------------------------------------------------- ----------- ----------- ---------- -------
<S> <C> <C> <C> <C>
RESULTS OF OPERATIONS:
Net interest income (1)................................................. $ 290,263 $ 285,835 $ 4,428 1.55 %
Provision for loan losses............................................... 10,000 12,500 (2,500) (20.00 )
Noninterest income...................................................... 105,550 98,802 6,748 6.83
Noninterest expense, excluding merger and integration expense........... 252,518 246,772 5,746 2.33
----------- ----------- ---------- -------
Income before merger and integration expense and income taxes (1)....... 133,295 125,365 7,930 6.33
Merger and integration expense.......................................... 61,266 -- 61,266 --
----------- ----------- ---------- -------
Income before income taxes (1).......................................... 72,029 125,365 (53,336) (42.54 )
Taxable-equivalent adjustment........................................... 2,024 2,859 (835) (29.21 )
Income tax expense...................................................... 25,597 44,737 (19,140) (42.78 )
----------- ----------- ---------- -------
Net income.............................................................. $ 44,408 $ 77,769 $ (33,361) (42.90 )%
----------- ----------- ---------- -------
----------- ----------- ---------- -------
NET INCOME APPLICABLE TO:
Common stock............................................................ $ 39,096 $ 70,323 $ (31,227) (44.41 )%
----------- ----------- ---------- -------
----------- ----------- ---------- -------
Parent direct interest in bank subsidiary............................... $ 2,486 $ 4,619 $ (2,133) (46.18 )%
----------- ----------- ---------- -------
----------- ----------- ---------- -------
RECAP OF EARNINGS:
Net income.............................................................. $ 44,408 $ 77,769 $ (33,361) (42.90 )%
Merger and integration expense (after-tax).............................. 38,323 -- 38,323 --
----------- ----------- ---------- -------
Pro forma earnings, excluding merger and integration expense............ $ 82,731 $ 77,769 $ 4,962 6.38 %
----------- ----------- ---------- -------
----------- ----------- ---------- -------
Net income applicable to common stock................................... $ 39,096 $ 70,323 $ (31,227) (44.41 )%
Merger and integration expense (after-tax, applicable to common stock).. 36,036 -- 36,036 --
----------- ----------- ---------- -------
Pro forma earnings applicable to common stock, excluding merger and
integration expense.................................................... $ 75,132 $ 70,323 $ 4,809 6.84 %
----------- ----------- ---------- -------
----------- ----------- ---------- -------
PER AVERAGE COMMON SHARE:
Net income.............................................................. $ 0.71 $ 1.29 $ (0.58) (44.96 )%
Pro forma earnings, excluding merger and integration expense............ 1.37 1.29 0.08 6.20
Dividends (2)........................................................... 0.35 0.35 -- --
Book value (end of period).............................................. 39.29 37.35 1.94 5.19
Common shares outstanding (end of period)............................... 54,757,877 54,620,433 137,444 0.25
Weighted average common shares outstanding.............................. 54,752,316 54,602,379 149,937 0.27
BALANCE SHEET (END OF PERIOD):
Total assets............................................................ $28,114,916 $25,915,765 $2,199,151 8.49 %
Total loans............................................................. 20,480,678 18,863,921 1,616,757 8.57
Nonperforming and renegotiated assets................................... 228,173 340,547 (112,374) (33.00 )
Deposits................................................................ 19,965,508 18,462,301 1,503,207 8.14
Subordinated capital notes.............................................. 495,369 654,730 (159,361) (24.34 )
Shareholders' equity.................................................... 2,412,018 2,326,047 85,971 3.70
BALANCE SHEET (PERIOD AVERAGES):
Total assets............................................................ $27,798,201 $25,138,967 $2,659,234 10.58 %
Total loans (3)......................................................... 20,387,476 18,675,616 1,711,860 9.17
Shareholders' equity.................................................... 2,426,467 2,296,905 129,562 5.64
FINANCIAL RATIOS:
Return on average assets (4)............................................ 0.64% 1.24% (0.60)%
Pro forma return on average assets, excluding after-tax merger exp.
(4).................................................................... 1.20 1.24 (0.04)
Return on average common equity (5)..................................... 7.26 14.00 (6.74)
Pro forma return on average common equity, excl. after-tax merger
exp. (5)............................................................... 13.95 14.00 (0.05)
Efficiency ratio (6).................................................... 79.06 64.15 14.91
Pro forma efficiency ratio, excluding merger and integration expense
(6).................................................................... 63.58 64.15 (0.57)
Net interest margin (1)................................................. 4.77 5.11 (0.34)
Tier 1 risk-based capital ratios........................................ 8.94 9.21 (0.27)
Total risk-based capital ratios......................................... 11.24 11.92 (0.68)
Leverage ratio.......................................................... 8.33 8.71 (0.38)
Allowance for loan losses to total loans................................ 2.66 3.04 (0.38)
Allowance for loan losses to nonaccrual loans........................... 284.78 192.59 92.19
Net loans charged off to average total loans (7)........................ 0.24 0.41 (0.17)
Nonperforming and reneg. assets to total loans and foreclosed assets.... 1.11 1.80 (0.69)
Nonperforming and renegotiated assets to total assets................... 0.81 1.31 (0.50)
Average shareholders' equity to average total assets.................... 8.73 9.14 (0.41)
</TABLE>
- ------------------------------
(1) Fully taxable-equivalent.
(2) Amounts prior to merger are based on Union Bank only and do not include the
dividend of $145 million paid to Mitsubishi Bank, Limited in the first
quarter of 1996 by BanCal Tri-State Corporation and The Bank of California,
N.A.
(3) Average balances on loans outstanding include all nonperforming and
renegotiated loans.
(4) Based on annualized net income.
(5) Based on annualized net income applicable to common stock.
(6) Noninterest expense excludes foreclosed assets expense.
(7) Annualized.
2
<PAGE>
UNIONBANCAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL HIGHLIGHTS (CONTINUED)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
---------------------------------------------
INCREASE (DECREASE)
JUNE 30, JUNE 30, -------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 1996 1995 AMOUNT PERCENT
- ---------------------------------------------------------------- ----------- ----------- ---------- -------
<S> <C> <C> <C> <C>
RESULTS OF OPERATIONS:
Net interest income (1)....................................... $ 588,058 $ 565,150 $ 22,907 4.05 %
Provision for loan losses..................................... 20,000 32,500 (12,500) (38.46 )
Noninterest income............................................ 208,424 192,875 15,549 8.06
Noninterest expense, excluding merger and integration
expense...................................................... 504,542 489,602 14,940 3.05
----------- ----------- ---------- -------
Income before merger and integration expense and income taxes
(1).......................................................... 271,940 235,923 36,016 15.27
Merger and integration expense................................ 61,266 -- 61,266 --
----------- ----------- ---------- -------
Income before income taxes (1)................................ 210,674 235,923 (25,250) (10.70 )
Taxable-equivalent adjustment................................. 4,152 5,680 (1,529) (26.91 )
Income tax expense............................................ 78,848 89,537 (10,689) (11.94 )
----------- ----------- ---------- -------
Net income.................................................... $ 127,674 $ 140,706 $ (13,032) (9.26 )%
----------- ----------- ---------- -------
----------- ----------- ---------- -------
NET INCOME APPLICABLE TO:
Common stock.................................................. $ 115,864 $ 126,774 $ (10,910) (8.61 )%
----------- ----------- ---------- -------
----------- ----------- ---------- -------
Parent direct interest in bank subsidiary..................... $ 6,158 $ 8,279 $ (2,121) (25.62 )%
----------- ----------- ---------- -------
----------- ----------- ---------- -------
RECAP OF EARNINGS:
Net income.................................................... $ 127,674 $ 140,706 $ (13,032) (9.26 )%
Merger and integration expense (after-tax).................... 38,323 -- 38,323 --
----------- ----------- ---------- -------
Pro forma earnings, excluding merger and integration
expense...................................................... $ 165,997 $ 140,706 $ 25,291 17.97 %
----------- ----------- ---------- -------
----------- ----------- ---------- -------
Net income applicable to common stock......................... $ 115,864 $ 126,774 $ (10,910) (8.61 )%
Merger and integration expense (after-tax, applicable to
common stock)................................................ 36,036 -- 36,036 --
----------- ----------- ---------- -------
Pro forma earnings applicable to common stock, excluding
merger and integration expense............................... $ 151,900 $ 126,774 $ 25,126 19.82 %
----------- ----------- ---------- -------
----------- ----------- ---------- -------
PER AVERAGE COMMON SHARE:
Net income.................................................... $ 2.12 $ 2.33 $ (0.21) (9.08 )%
Pro forma earnings, excluding merger and integration
expense...................................................... 2.78 2.33 0.45 19.20
Dividends (2)................................................. 0.70 0.70 -- --
Book value (end of period).................................... 39.29 37.35 1.94 5.19
Common shares outstanding (end of period)..................... 54,757,877 54,620,433 137,444 0.25
Weighted average common shares outstanding.................... 54,721,265 54,436,297 284,968 0.52
BALANCE SHEET (END OF PERIOD):
Total assets.................................................. $28,114,916 $25,915,765 $2,199,151 8.49 %
Total loans................................................... 20,480,678 18,863,921 1,616,757 8.57
Nonperforming and renegotiated assets......................... 228,173 340,547 (112,374) (33.00 )
Deposits...................................................... 19,965,508 18,462,301 1,503,207 8.14
Subordinated capital notes.................................... 495,369 654,730 (159,361) (24.34 )
Shareholders' equity.......................................... 2,412,018 2,326,047 85,971 3.70
BALANCE SHEET (PERIOD AVERAGES):
Total assets.................................................. $27,613,461 $24,777,061 $2,836,400 11.45 %
Total loans (3)............................................... 20,290,637 18,480,608 1,810,029 9.79
Shareholders' equity.......................................... 2,465,207 2,266,216 198,991 8.78
FINANCIAL RATIOS:
Return on average assets (4).................................. 0.93% 1.15% (0.22)%
Pro forma return on average assets, excluding after-tax merger
exp. (4)..................................................... 1.21 1.15 0.06
Return on average common equity (5)........................... 10.65 12.87 (2.23)
Pro forma return on average common equity, excl. after-tax
merger
exp. (5)..................................................... 13.96 12.87 1.09
Efficiency ratio (6).......................................... 70.52 64.61 5.91
Pro forma efficiency ratio, excluding merger and integration
exp. (6)..................................................... 62.83 64.61 (1.78)
Net interest margin (1)....................................... 4.84 5.16 (0.33)
Tier 1 risk-based capital ratio............................... 8.94 9.21 (0.27)
Total risk-based capital ratio................................ 11.24 11.92 (0.68)
Leverage ratio................................................ 8.33 8.71 (0.38)
Allowance for loan losses to total loans...................... 2.66 3.04 (0.38)
Allowance for loan losses to nonaccrual loans................. 284.78 192.59 92.19
Net loans charged off to average total loans (7).............. 0.30 0.24 0.06
Nonperforming and reneg. assets to total loans and foreclosed
assets....................................................... 1.11 1.80 (0.69)
Nonperforming and renegotiated assets to total assets......... 0.81 1.31 (0.50)
Average shareholders' equity to average total assets.......... 8.93 9.15 (0.22)
</TABLE>
- ------------------------------
(1) Fully taxable-equivalent.
(2) Amounts prior to merger are based on Union Bank only and do not include the
dividend of $145 million paid to Mitsubishi Bank, Limited in the first
quarter of 1996 by BanCal Tri-State Corporation and The Bank of California,
N.A.
(3) Average balances on loans outstanding include all nonperforming and
renegotiated loans.
(4) Based on annualized net income.
(5) Based on annualized net income applicable to common stock.
(6) Noninterest expense excludes foreclosed assets expense.
(7) Annualized.
3
<PAGE>
ITEM 1. FINANCIAL STATEMENTS
UNIONBANCAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(UNAUDITED) (UNAUDITED)
JUNE 30, DECEMBER 31, JUNE 30,
(DOLLARS IN THOUSANDS) 1996 1995 1995
- ------------------------------------------------------------------- ------------ --------------- ------------
<S> <C> <C> <C>
ASSETS
Cash and due from banks............................................ $ 1,951,582 $ 2,274,088 $ 1,436,760
Interest bearing deposits in banks................................. 914,087 761,310 1,126,369
Federal funds sold and securities purchased under resale
agreements........................................................ 488,240 317,025 441,756
------------ --------------- ------------
Total cash and cash equivalents................................ 3,353,909 3,352,423 3,004,885
Trading account securities......................................... 544,551 322,283 362,960
Investment securities available for sale........................... 1,917,089 1,960,551 1,496,057
Investment securities held to maturity (market value of $314,203 at
June 30, 1996, $376,100 at December 31, 1995 and $928,171 at June
30, 1995)......................................................... 309,712 363,287 913,733
Loans.............................................................. 20,480,678 20,226,089 18,863,921
Less: Allowance for loan losses.................................... 545,345 555,149 573,971
------------ --------------- ------------
Net loans...................................................... 19,935,333 19,670,940 18,289,950
Premises and equipment, net........................................ 424,116 421,921 412,381
Customers' acceptance liability.................................... 884,162 719,681 728,191
Goodwill and intangible assets..................................... 97,827 104,529 111,229
Other real estate owned............................................ 35,662 36,453 41,260
Other assets....................................................... 612,555 594,791 555,119
------------ --------------- ------------
Total assets................................................... $ 28,114,916 $ 27,546,859 $ 25,915,765
------------ --------------- ------------
------------ --------------- ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits in domestic offices:
Noninterest bearing.............................................. $ 6,696,146 $ 7,036,969 $ 5,923,056
Interest bearing................................................. 11,565,169 10,885,810 10,025,328
Deposits in foreign offices:
Noninterest bearing.............................................. 317,082 342,430 328,488
Interest bearing................................................. 1,387,111 1,389,834 2,185,429
------------ --------------- ------------
Total deposits................................................. 19,965,508 19,655,043 18,462,301
Federal funds purchased and securities sold under repurchase
agreements........................................................ 1,130,840 1,301,358 1,413,720
Commercial paper................................................... 1,736,712 1,389,870 1,329,136
Other borrowed funds............................................... 970,848 958,758 506,000
Acceptances outstanding............................................ 884,162 719,681 728,191
Other liabilities.................................................. 519,459 536,688 495,640
Subordinated capital notes......................................... 495,369 501,369 654,730
------------ --------------- ------------
Total liabilities.............................................. 25,702,898 25,062,767 23,589,718
------------ --------------- ------------
SHAREHOLDERS' EQUITY
Parent direct interest in equity of bank subsidiary................ 125,320 159,996 150,789
Preferred stock:
8 3/8% Noncumulative, Series A, 5,400,000 depositary shares,
authorized and issued........................................... 135,000 135,000 135,000
Common stock -- $5 stated value, authorized 100,000,000 shares,
issued 54,757,877 as of June 30, 1996, 54,670,283 as of December
31, 1995 and 54,620,433 as of June 30, 1995....................... 273,789 273,351 273,102
Capital surplus.................................................... 1,312,825 1,309,094 1,304,757
Retained earnings.................................................. 561,040 583,283 453,305
Cumulative translation adjustment.................................. (2,157) (972) (163)
Net unrealized gain on investment securities available for sale.... 6,201 24,340 9,257
------------ --------------- ------------
Total shareholders' equity..................................... 2,412,018 2,484,092 2,326,047
------------ --------------- ------------
Total liabilities and shareholders' equity..................... $ 28,114,916 $ 27,546,859 $ 25,915,765
------------ --------------- ------------
------------ --------------- ------------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
UNIONBANCAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
-------------------- --------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 1996 1995 1996 1995
- --------------------------------------------------------------------- --------- --------- --------- ---------
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans.............................................................. $ 413,029 $ 399,155 $ 832,914 $ 781,822
Investment securities -- taxable................................... 32,099 29,023 64,862 54,385
Investment securities -- tax exempt................................ 2,671 3,247 5,400 6,572
Interest bearing deposits in banks................................. 11,827 15,053 26,094 29,144
Federal funds sold and securities purchased under resale
agreements........................................................ 7,396 4,238 15,815 7,680
Trading account securities......................................... 6,579 5,349 11,584 9,099
--------- --------- --------- ---------
Total interest income.......................................... 473,601 456,065 956,669 888,702
--------- --------- --------- ---------
INTEREST EXPENSE
Deposits in domestic offices....................................... 107,081 84,574 215,659 156,651
Deposits in foreign offices........................................ 17,687 26,100 35,410 51,859
Federal funds purchased and securities sold under repurchase
agreements........................................................ 12,162 23,765 30,573 43,495
Commercial paper................................................... 23,226 21,140 43,963 41,837
Other borrowed funds............................................... 17,317 5,993 31,035 12,715
Subordinated capital notes......................................... 7,889 11,517 16,124 22,675
--------- --------- --------- ---------
Total interest expense......................................... 185,362 173,089 372,764 329,232
--------- --------- --------- ---------
NET INTEREST INCOME.................................................. 288,239 282,976 583,906 559,470
Provision for loan losses............................................ 10,000 12,500 20,000 32,500
--------- --------- --------- ---------
Net interest income after provision for loan losses............ 278,239 270,476 563,906 526,970
NONINTEREST INCOME
Service charges on deposit accounts................................ 25,067 23,916 49,028 47,149
Trust fees......................................................... 23,309 22,431 45,557 42,256
International services and foreign exchange........................ 20,454 22,928 40,418 44,400
Credit card merchant fees.......................................... 12,905 11,409 24,503 21,812
Investment securities gains (losses), net.......................... 2,621 (103) 3,237 (1,320)
Other.............................................................. 21,194 18,221 45,681 38,578
--------- --------- --------- ---------
Total noninterest income....................................... 105,550 98,802 208,424 192,875
--------- --------- --------- ---------
NONINTEREST EXPENSE
Salaries and employee benefits..................................... 139,964 132,772 282,315 267,931
Net occupancy...................................................... 24,270 23,126 46,225 46,675
Equipment.......................................................... 13,336 13,937 27,149 26,659
Foreclosed asset expense (income).................................. 867 33 4,141 (132)
Merger and integration............................................. 61,266 -- 61,266 --
Other.............................................................. 74,081 76,904 144,712 148,469
--------- --------- --------- ---------
Total noninterest expense...................................... 313,784 246,772 565,808 489,602
--------- --------- --------- ---------
Income before income taxes........................................... 70,005 122,506 206,522 230,243
Income tax expense................................................... 25,597 44,737 78,848 89,537
--------- --------- --------- ---------
NET INCOME........................................................... $ 44,408 $ 77,769 $ 127,674 $ 140,706
--------- --------- --------- ---------
--------- --------- --------- ---------
NET INCOME APPLICABLE TO:
Common stock....................................................... $ 39,096 $ 70,323 $ 115,864 $ 126,774
--------- --------- --------- ---------
--------- --------- --------- ---------
Parent direct interest in bank subsidiary.......................... $ 2,486 $ 4,619 $ 6,158 $ 8,279
--------- --------- --------- ---------
--------- --------- --------- ---------
NET INCOME PER AVERAGE COMMON SHARE.................................. $ 0.71 $ 1.29 $ 2.12 $ 2.33
--------- --------- --------- ---------
--------- --------- --------- ---------
WEIGHTED AVERAGE COMMON SHARES (IN THOUSANDS)........................ 54,752 54,602 54,721 54,436
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
UNIONBANCAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
JUNE 30,
------------------------
(DOLLARS IN THOUSANDS) 1996 1995
- --------------------------------------------------------------------------------------- ----------- -----------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net Income........................................................................... $ 127,674 $ 140,706
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses.......................................................... 20,000 32,500
Depreciation and amortization...................................................... 32,196 29,245
Valuation adjustments on other real estate owned................................... 1,046 932
Provision for deferred income taxes................................................ 19,482 32,122
(Gain) loss on sales of investment securities available for sale................... (3,149) 1,410
Gain on sale of assets, net........................................................ (3,157) (1,933)
Accretion of loan fees............................................................. (11,239) (8,228)
Deferral of loan costs............................................................. (5,377) (3,735)
Proceeds from sale of loans held for sale.......................................... 53,512 7,727
Increase in loans held for sale.................................................... (27,449) (8,174)
Increase in trading account securities............................................. (210,589) (162,595)
Increase (decrease) in interest payable............................................ (25,001) 21,718
(Increase) decrease in interest receivable......................................... 12,358 (10,904)
Increase (decrease) in accrued expense............................................. (2,159) 78,091
Other, net......................................................................... (119,615) (54,800)
----------- -----------
Total adjustments................................................................ (269,141) (46,624)
----------- -----------
Net cash provided (used) by operating activities..................................... (141,467) 94,082
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of investment securities available for sale...................... 11,667 61,306
Proceeds from matured and called investment securities available for sale............ 495,606 369,056
Purchase of investment securities available for sale................................. (419,552) (790,509)
Proceeds from sales of investment securities held to maturity........................ 0 506
Proceeds from matured and called investment securities held to maturity.............. 50,687 60,312
Purchase of investment securities held to maturity................................... -- (121,882)
Net increase in loans................................................................ (292,040) (810,518)
Purchase of premises and equipment................................................... (36,948) (34,349)
Proceeds from sales of OREO and other assets......................................... 16,034 27,106
----------- -----------
Net cash used in investing activities.............................................. (174,546) (1,238,972)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits............................................................. 310,465 1,052,564
Net decrease in federal funds purchased and securities sold under repurchase
agreements.......................................................................... (170,518) (143,725)
Net increase in other borrowed funds................................................. 358,932 78,820
Maturity and redemption of subordinated capital notes and long-term debt............. (6,000) (1,133)
Dividend reinvestment................................................................ 1,193 17,075
Dividends paid....................................................................... (181,734) (13,660)
----------- -----------
Net cash provided by financing activities.......................................... 312,338 989,941
----------- -----------
Net decrease in cash and cash equivalents.............................................. (3,675) (154,949)
Cash and cash equivalents at beginning of period....................................... 3,352,423 3,153,713
Foreign exchange revaluation gain...................................................... 5,161 6,121
----------- -----------
Cash and cash equivalents at end of period............................................. $ 3,353,909 $ 3,004,885
----------- -----------
----------- -----------
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Loans transferred to OREO............................................................ $ 17,629 $ 19,104
In-substance foreclosures reclassified from OREO to loans............................ -- 7,180
CASH PAID DURING THE PERIOD FOR:
Interest............................................................................. $ 373,902 $ 334,686
Income taxes......................................................................... 43,249 57,149
</TABLE>
See accompanying notes to condensed consolidated financial statements.
6
<PAGE>
UNIONBANCAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
NET
UNREALIZED
PARENT GAIN(LOSS)
DIRECT ON INVESTMENT
INTEREST IN CUMULATIVE SECURITIES
BANK PREFERRED COMMON CAPITAL RETAINED TRANSLATION AVAILABLE FOR
(DOLLARS IN THOUSANDS) SUBSIDIARY STOCK STOCK SURPLUS EARNINGS ADJUSTMENT SALE TOTAL
- ---------------------------- ----------- ----------- ----------- --------- --------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1994....................... $ 141,607 $ 135,000 $ 269,790 $1,288,662 $ 353,417 $ (849) $ (8,425) $2,179,202
Dividend reinvestment
plan....................... 2,964 14,111 17,075
Stock options exercised..... 13 56 69
Deferred compensation --
restricted stock........... 335 1,928 (1,463) 800
Dividends declared on
preferred stock............ (5,653) (5,653)
Dividends declared on common
stock...................... (25,423) (25,423)
Net income.................. 8,279 132,427 140,706
Change in unrealized gain
(loss) on investment
securities available for
sale, net of taxes......... 771 17,682 18,453
Change in translation
adjustment................. 132 686 818
----------- ----------- ----------- --------- --------- ----------- ------------- ---------
Balance at June 30, 1995.... $ 150,789 $ 135,000 $ 273,102 $1,304,757 $ 453,305 $ (163) $ 9,257 $2,326,047
----------- ----------- ----------- --------- --------- ----------- ------------- ---------
----------- ----------- ----------- --------- --------- ----------- ------------- ---------
Balance at December 31,
1995....................... $ 159,996 $ 135,000 $ 273,351 $1,309,094 $ 583,283 $ (972) $ 24,340 $2,484,092
Dividend reinvestment
plan....................... 116 1,077 1,193
Stock options exercised..... 110 559 669
Deferred compensation --
restricted stock........... 212 2,095 (1,147) 1,160
Dividends declared on
preferred stock............ (5,652) (5,652)
Dividends declared on common
stock...................... (39,880) (136,960) (176,840)
Net income.................. 6,158 121,516 127,674
Change in unrealized gain
(loss) on investment
securities available for
sale, net of taxes......... (865) (18,139) (19,004)
Change in translation
adjustment................. (89) (1,185) (1,274)
----------- ----------- ----------- --------- --------- ----------- ------------- ---------
Balance at June 30, 1996.... $ 125,320 $ 135,000 $ 273,789 $1,312,825 $ 561,040 $ (2,157) $ 6,201 $2,412,018
----------- ----------- ----------- --------- --------- ----------- ------------- ---------
----------- ----------- ----------- --------- --------- ----------- ------------- ---------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
7
<PAGE>
UNIONBANCAL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
(UNAUDITED)
NOTE 1 -- BASIS OF PRESENTATION
The unaudited condensed consolidated financial statements of UnionBanCal
Corporation and subsidiaries (the "Company") have been prepared in accordance
with generally accepted accounting principles ("GAAP") for interim financial
reporting and with the instructions to Form 10-Q. Accordingly, they do not
include all of the information and footnote disclosures necessary for complete
financial statements in conformity with GAAP. The preparation of financial
statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expense during the reporting period. Actual results could differ from those
estimates. These unaudited consolidated financial statements should be read in
conjunction with the audited consolidated financial statements included in Union
Bank's Annual Report on FDIC Form F-2 for the year ended December 31, 1995
included as an exhibit to the Company's Form 8-K filed on April 1, 1996.
In the opinion of management, the unaudited condensed consolidated financial
statements contain all adjustments (consisting of only normal recurring
accruals) considered necessary for a fair presentation of the Company's
financial condition as of June 30, 1996 and 1995, and December 31, 1995, the
results of operations for the three months and six months ended June 30, 1996
and 1995 and the statements of cash flows for the six months ended June 30, 1996
and 1995.
Primary and fully diluted earnings per share are computed based on the
weighted average number of common shares and equivalent common shares
outstanding during the period. Both the Stock Options and the Restricted Stock
are common stock equivalents. For the periods presented, the Stock Options and
the Restricted Stock did not have a dilutive effect and are not included in the
Company's earnings per share calculation.
NOTE 2 -- MERGER; COMBINATION OF UNION BANK AND BANCAL TRI-STATE CORPORATION
The combination of Union Bank with BanCal Tri-State Corporation and its
banking subsidiary, The Bank of California, N.A., was completed on April 1,
1996, resulting in UnionBanCal Corporation and its banking subsidiary now known
as Union Bank of California, N.A. The merger was effected by the issuance of
18,134,037 shares of Union Bank common stock in exchange for all the outstanding
common shares of BanCal Tri-State Corporation.
UnionBanCal Corporation is a bank holding company with consolidated assets
of $28.1 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.
The combination was accounted for as a reorganization of entities under
common control (similar to a pooling of interests). Accordingly, all historical
financial information has been restated as if the combination had been in effect
for all periods presented.
In connection with the merger, $61 million of merger and integration
expenses were recognized in the second quarter of 1996. These expenses included
severance, retention, and other employee related expenses ($21 million); charges
incurred in connection with the planned disposition of certain facilities ($28
million); professional fees ($6 million); and other merger and integration
related expenses ($6 million).
8
<PAGE>
UNIONBANCAL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996
(UNAUDITED)
NOTE 2 -- MERGER; COMBINATION OF UNION BANK AND BANCAL TRI-STATE
CORPORATION (CONTINUED)
It is expected that additional merger-related costs which do not qualify for
current recognition will be incurred over the next year. These costs, which are
expected to be substantially less than the second quarter amount, will also be
classified as merger and integration expense when incurred.
For additional information in regard to the combination refer to Union
Bank's Proxy Statement dated January 8, 1996, included as an exhibit to the
Company's Form 8-K filed with the Securities Exchange Commission on April 1,
1996.
The following presents certain financial data pertaining to the combination
of Union Bank with BanCal Tri-State Corporation for the first quarter of 1996:
<TABLE>
<CAPTION>
FIRST QUARTER
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA) 1996
- ---------------------------------------------------------------------- -------------
<S> <C>
Net interest income and noninterest income:
Union Bank, as originally reported.................................. $ 284.3
BanCal Tri-State Corporation........................................ $ 114.2
UnionBanCal Corporation............................................. $ 398.5
Net income:
Union Bank, as originally reported.................................. $ 60.5
BanCal Tri-State Corporation........................................ $ 22.8
UnionBanCal Corporation............................................. $ 83.3
Net income per average common share:
Union Bank, as originally reported.................................. $ 1.58
BanCal Tri-State.................................................... $ 1.05
UnionBanCal Corporation............................................. $ 1.40
</TABLE>
NOTE 3 -- RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
On January 1, 1996, the Company adopted three recently issued Statements of
Financial Accounting Standards ("SFAS"). The standards and their impact on the
Company are described below.
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of" addresses the accounting for the impairment
of long-lived assets, such as premises, furniture and equipment, certain
identifiable intangibles and goodwill related to those assets. Long-lived assets
and certain identifiable intangibles are to be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. An impairment loss is recognized when the sum of the
future cash flows (undiscounted and without interest charges expected from the
use of the asset and its eventual disposition) is less than the carrying amount
of the asset. The Statement also requires that long-lived assets and
identifiable intangibles, except for assets of a discontinued operation held for
disposal, be accounted for at the lower of cost or fair value less cost to sell.
The Company has implemented SFAS No. 121 and, except for the effects of the
writedown of certain assets and leases in connection with the recognition of
merger and integration costs, has determined that the measurement of impairment
loss is not material.
SFAS No. 122, "Accounting for Mortgage Servicing Rights," an amendment of
SFAS No. 65 requires that the Company recognize as separate assets the rights to
service mortgage loans for others, however those servicing rights are acquired.
Previously, only purchased servicing rights were capitalizable as an asset,
whereas internally originated servicing rights were expensed. The Statement also
requires that capitalized excess servicing receivables be assessed for
impairment based on fair value. This Statement did not have a material impact on
the Company's financial condition, results of operations, cash flows or related
disclosures.
9
<PAGE>
UNIONBANCAL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996
(UNAUDITED)
NOTE 3 -- RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS (CONTINUED)
SFAS No. 123, "Accounting for Stock-Based Compensation" prescribes
accounting and reporting standards for all stock-based compensation plans,
including employee stock options, restricted stock and stock appreciation
rights. The Statement defines a "fair value-based method" of accounting for
employee stock options and encourages all entities to adopt that method of
accounting for all of their employee stock compensation plans. However, it also
allows an entity to continue to measure compensation for those plans using the
"intrinsic value-based method" under Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" (Opinion No. 25).
Substantially all of the Company's stock options have no intrinsic value at
grant date, and under Opinion No. 25 no compensation cost is recognized for
them. Compensation cost is recognized for other types of stock-based
compensation plans under Opinion No. 25, including plans with variable, usually
performance-based, features. SFAS No. 123 requires that an employer's financial
statements include certain disclosures about stock-based compensation
arrangements regardless of the method used to account for them. An employer that
continues to apply the accounting provisions of Opinion No. 25 will disclose pro
forma amounts that reflect the difference between compensation cost, if any,
included in net income and the related cost measured by the fair value-based
method, including tax effects, that would have been recognized in the income
statement if the fair value-based method had been used. The Company will
continue to apply Opinion No. 25 in accounting for stock-based compensation
plans.
In June of 1996, SFAS No. 125, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities" was issued. This statement
establishes standards for when transfers of financial assets, including those
with continuing involvement by the transferor, should be considered a sale. SFAS
No. 125 also establishes standards for when a liability should be considered
extinguished. This statement is effective for transfers of assets and
extinguishments of liabilities after December 31, 1996, applied prospectively.
Earlier adoption or retroactive application of this statement is not permitted.
Management will be reviewing this statement during the remainder of 1996 to
determine its effect on the Company's financial statements.
NOTE 4 -- INCOME TAXES
During the second quarter of 1996, a reduction of $5 million was recorded in
income tax expense reflecting a favorable settlement of a unitary tax issue with
the State of California.
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
INTRODUCTION
The combination of Union Bank with BanCal Tri-State Corporation and its
banking subsidiary, The Bank of California, N.A., was completed on April 1,
1996, resulting in UnionBanCal Corporation and its banking subsidiary now known
as Union Bank of California, N.A.
The combination was accounted for as a reorganization of entities under
common control (similar to a pooling of interests). Accordingly, all historical
financial information has been restated as if the combination had been in effect
for all periods presented.
To facilitate the discussion of the results of operations, Table 1 --
Analysis of Earnings is included on page 12. This analysis supplements the
Condensed Consolidated Statements of Income on Page 5 (which are prepared in
accordance with GAAP) primarily with respect to the treatment of merger and
integration expense. Management believes that it is meaningful to understand the
operating results and trends excluding these expenses and, therefore, has
included this table which presents income before merger and integration expense
and income taxes. In addition, the Table includes net income, net income
applicable to common stock, and net income per average common share including
the merger and integration expenses and on a proforma basis excluding the merger
and integration expenses (after-tax).
SUMMARY
For the second quarter of 1996, net income was $44 million after $38 million
of merger and integration related expenses (after-tax) recorded in connection
with the April 1, 1996 combination of Union Bank and BanCal Tri-State
Corporation. This compared with $78 million in the second quarter of 1995. Pro
forma earnings excluding merger and integration expense was $83 million, a 6
percent increase over the comparable quarter a year ago. Other highlights
comparing the second quarter of 1996 with the comparable quarter a year ago are
as follows:
Pro forma earnings per average common share excluding after-tax
merger and integration expense increased from $1.29 to $1.37.
Income before merger and integration expense and income taxes was
$133 million, an $8 million, or 6 percent, increase.
Gross revenue (on a taxable-equivalent basis) was $396 million, an
$11 million, or 3 percent, increase.
Noninterest expense (excluding merger and integration expense) was
$253 million, a $6 million, or 2 percent, increase.
Excluding the after-tax effect of merger and integration expense,
the pro forma return on average assets decreased slightly to 1.20
percent from 1.24 percent, while the pro forma return on average
common equity decreased to 13.95 percent from 14.00 percent.
Period-end loans increased by 9 percent.
Total nonperforming and renegotiated assets dropped by $112
million and the ratio to total assets decreased to 0.81 percent
from 1.31 percent.
The Tier 1 and Total risk-based capital ratios were 8.94 percent
and 11.24 percent, respectively, compared with 9.21 percent and
11.92 percent.
For the six months ended June 30, 1996, net income was $128 million,
compared with $141 million in the first half of 1995. Pro forma earnings,
excluding the after-tax effect of merger and integration expense, were $166
million, an 18 percent increase over the first six months of 1995. Other
highlights comparing these two time periods include:
Pro forma earnings per average common share excluding after tax
merger and integration expense increased from $2.33 to $2.78.
Income before merger and integration expense and income taxes was
$272 million, a $36 million, or 15 percent, increase.
Gross revenue (on a taxable-equivalent basis) was $796 million, a
$38 million, or 5 percent, increase.
Noninterest expense (excluding merger and integration expense) was
$505 million, a $15 million, or 3 percent, increase.
Excluding after-tax merger and integration expense, the pro forma
return on average assets improved to 1.21 percent from 1.15
percent, while the pro forma return on average common equity
increased to 13.96 percent from 12.87 percent.
11
<PAGE>
TABLE 1 -- ANALYSIS OF EARNINGS
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
FOR THE THREE MONTHS ENDED ENDED
-------------------------------------------------------------- --------------------
JUNE 30, MARCH 31, DECEMBER 31, SEPTEMBER 30, JUNE 30, JUNE 30, JUNE 30,
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 1996 1996 1995 1995 1995 1996 1995
- --------------------------------------------- --------- ----------- ------------ ------------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
EARNINGS SUMMARY
Interest income (1)........................ $ 475,625 $ 485,196 $ 494,399 $ 471,057 $ 458,924 $ 960,821 $ 894,382
Interest expense........................... 185,362 187,401 193,127 182,394 173,089 372,763 329,232
--------- ----------- ------------ ------------- --------- --------- ---------
Net interest income (1).................... 290,263 297,795 301,272 288,663 285,835 588,058 565,150
Provision for loan losses.................. 10,000 10,000 8,750 12,000 12,500 20,000 32,500
Noninterest income......................... 105,550 102,874 100,981 98,622 98,802 208,424 192,875
Noninterest expense, excluding merger and
integration expense....................... 252,518 252,024 251,737 236,228 246,772 504,542 489,602
--------- ----------- ------------ ------------- --------- --------- ---------
Income before merger and integration
expense and income taxes (1).............. 133,295 138,645 141,766 139,057 125,365 271,940 235,923
Merger and integration expense............. 61,266 -- -- -- -- 61,266 --
--------- ----------- ------------ ------------- --------- --------- ---------
Income before income taxes (1)............. 72,029 138,645 141,766 139,057 125,365 210,674 235,923
Taxable-equivalent adjustment.............. 2,024 2,128 2,234 2,529 2,859 4,152 5,680
Income tax expense......................... 25,597 53,251 51,149 52,675 44,737 78,848 89,537
--------- ----------- ------------ ------------- --------- --------- ---------
Net income................................. $ 44,408 $ 83,266 $ 88,383 $ 83,853 $ 77,769 $ 127,674 $ 140,706
--------- ----------- ------------ ------------- --------- --------- ---------
--------- ----------- ------------ ------------- --------- --------- ---------
Net income applicable to:..................
Common stock............................. $ 39,096 $ 76,768 $ 80,736 $ 76,686 $ 70,323 $ 115,864 $ 126,774
--------- ----------- ------------ ------------- --------- --------- ---------
--------- ----------- ------------ ------------- --------- --------- ---------
Parent direct interest in bank
subsidiary.............................. $ 2,486 $ 3,672 $ 4,821 $ 4,341 $ 4,619 $ 6,158 $ 8,279
--------- ----------- ------------ ------------- --------- --------- ---------
--------- ----------- ------------ ------------- --------- --------- ---------
RECAP OF EARNINGS
Net income................................. $ 44,408 $ 83,266 $ 88,383 $ 83,853 $ 77,769 $ 127,674 $ 140,706
Merger and integration expense (after-
tax)...................................... 38,323 -- -- -- -- 38,323 --
--------- ----------- ------------ ------------- --------- --------- ---------
Pro forma earnings, excluding merger and
integration expense....................... $ 82,731 $ 83,266 $ 88,383 $ 83,853 $ 77,769 $ 165,997 $ 140,706
--------- ----------- ------------ ------------- --------- --------- ---------
--------- ----------- ------------ ------------- --------- --------- ---------
Net income applicable to common stock...... $ 39,096 $ 76,768 $ 80,736 $ 76,686 $ 70,323 $ 115,864 $ 126,774
Merger and integration expense (after-tax),
applicable to common stock................ 36,036 -- -- -- -- 36,036 --
--------- ----------- ------------ ------------- --------- --------- ---------
Pro forma earnings applicable to common
stock, excluding merger and integration
expense................................... $ 75,132 $ 76,768 $ 80,736 $ 76,686 $ 70,323 $ 151,900 $ 126,774
--------- ----------- ------------ ------------- --------- --------- ---------
--------- ----------- ------------ ------------- --------- --------- ---------
PER AVERAGE COMMON SHARE
Net income (2)............................. $ 0.71 $ 1.40 $ 1.48 $ 1.40 $ 1.29 $ 2.12 $ 2.33
Merger and integration expense (after-tax)
(2)....................................... 0.66 -- -- -- -- 0.66 --
--------- ----------- ------------ ------------- --------- --------- ---------
Pro forma earnings, excluding merger and
integration expense (2)................... $ 1.37 $ 1.40 $ 1.48 $ 1.40 $ 1.29 $ 2.78 $ 2.33
--------- ----------- ------------ ------------- --------- --------- ---------
--------- ----------- ------------ ------------- --------- --------- ---------
Dividends (3).............................. $ 0.35 $ 0.35 $ 0.35 $ 0.35 $ 0.35 $ 0.70 $ 0.70
Book value (end of period)................. $ 39.29 $ 39.07 $ 40.04 $ 38.52 $ 37.35 $ 39.29 $ 37.35
Weighted average common shares outstanding
(4)....................................... 54,752 54,690 54,665 54,641 54,602 54,721 54,436
</TABLE>
- ------------------------------
(1) Includes amounts to convert tax-exempt income, primarily municipal
securities income, to a taxable-equivalent basis.
(2) Based on net income applicable to common stock.
(3) Amounts prior to merger are based on Union Bank only and do not include the
dividend of $145 million paid to Mitsubishi Bank, Limited in the first
quarter of 1996 by BanCal Tri-State Corporation and The Bank of California,
N.A.
(4) In thousands.
12
<PAGE>
NET INTEREST INCOME
The Company's operating results depend primarily on net interest income (the
difference between the interest earned on loans and investments less interest
expense on deposit accounts and borrowings). Primary factors affecting the level
of net interest income include the Company's interest rate margin between the
yield earned on interest earning assets and the rate paid on interest bearing
liabilities, as well as the volume and composition of average interest earning
assets and interest bearing liabilities.
Net interest income before the provision for loan losses, on a fully
taxable-equivalent basis was $290 million for the second quarter of 1996 and
$286 million for the second quarter of 1995. This increase of $4 million was
primarily attributable to an increase in the volume of loans the Bank has
originated and a reduction in the level of nonperforming and renegotiated assets
in comparison to a year ago, partly offset by the effect of a decrease in the
net interest margin from 5.11 percent to 4.77 percent. This decrease was
primarily attributable to a decrease in the proportion of funding provided by
noninterest bearing and lower cost (interest bearing, savings and consumer time)
sources of funds and to an increase in the cost of such funding sources while
other rates declined. The proportion of funding of earning assets provided by
noninterest bearing and other lower cost sources of funds decreased from 63
percent in the second quarter of 1995 to 60 percent in the second quarter of
1996 primarily due to loan growth.
Net interest income before the provision for loan losses, on a fully
taxable-equivalent basis was $588 million for the first half of 1996 and $565
million for the first half of 1995. The same factors discussed above accounted
for this increase. The increase of $23 million was primarily attributable to an
increase in the volume of loans the Bank has originated and a reduction in the
level of nonperforming and renegotiated assets in comparison to a year ago,
partly offset by the effect of a decrease in the net interest margin from 5.16
percent to 4.84 percent. This decrease was primarily attributable to a decrease
in the proportion of funding provided by noninterest bearing and lower cost
(interest bearing, savings and consumer time) sources of funds and to an
increase in the cost of such funding sources while other rates declined. The
proportion of funding provided by noninterest bearing and other lower cost
sources of funds decreased from 64 percent in the first half of 1995 to 60
percent in the first half of 1996 primarily due to loan growth.
13
<PAGE>
TABLE 2 -- CONSOLIDATED AVERAGE BALANCE SHEETS, NET INTEREST INCOME AND INTEREST
RATES
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
----------------------------------------------------------------
JUNE 30, 1996 MARCH 31, 1996
------------------------------------ --------------------------
INTEREST INTEREST
AVERAGE INCOME/ AVERAGE AVERAGE INCOME/
(DOLLARS IN THOUSANDS) BALANCE EXPENSE RATE (1) BALANCE EXPENSE
- -------------------------------------------------------------- ------------ --------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Loans: (2)
Domestic.................................................... $ 19,273,264 $ 396,804 8.28% $ 18,993,197 $ 401,441
Foreign..................................................... 1,114,212 16,850 6.08 1,200,601 19,173
Investment securities:
Taxable..................................................... 2,082,598 32,099 6.20 2,114,805 32,754
Tax-exempt.................................................. 157,246 4,065 10.40 161,818 4,136
Interest bearing deposits in banks............................ 834,149 11,827 5.70 968,414 14,267
Federal funds sold and securities purchased under resale
agreements................................................... 547,527 7,396 5.43 603,083 8,419
Trading account securities.................................... 483,769 6,584 5.47 352,097 5,006
------------ --------- ------------ ------------
Total earning assets...................................... 24,492,765 475,625 7.81 24,394,015 485,196
--------- ------------
Allowance for loan losses..................................... (546,744) (554,717)
Cash and due from banks....................................... 1,920,112 1,859,210
OREO.......................................................... 32,641 38,354
Premises and equipment, net................................... 431,592 424,530
Other assets.................................................. 1,467,835 1,267,329
------------ ------------
Total assets.............................................. $ 27,798,201 $ 27,428,721
------------ ------------
------------ ------------
LIABILITIES
Deposits in domestic offices:
Interest bearing............................................ $ 4,809,139 32,135 2.69% $ 4,797,823 31,863
Savings and consumer time................................... 2,945,632 26,773 3.66 2,916,873 26,897
Large time.................................................. 3,724,593 48,173 5.20 3,753,599 49,818
Deposits in foreign offices................................... 1,488,980 17,687 4.78 1,497,434 17,723
------------ --------- ------------ ------------
Total interest bearing deposits........................... 12,968,344 124,768 3.87 12,965,729 126,301
------------ --------- ------------ ------------
Federal funds purchased and securities sold under repurchase
agreements................................................... 1,187,722 12,162 4.12 1,353,185 18,411
Subordinated capital notes.................................... 495,369 7,889 6.41 497,413 8,235
Other borrowed funds.......................................... 2,867,807 40,543 5.69 2,511,897 34,454
------------ --------- ------------ ------------
Total borrowed funds...................................... 4,550,898 60,594 5.36 4,362,495 61,100
------------ --------- ------------ ------------
Total interest bearing liabilities........................ 17,519,242 185,362 4.26 17,328,224 187,401
--------- ------------
Demand deposits............................................... 6,599,174 6,462,654
Other liabilities............................................. 1,253,318 1,133,896
------------ ------------
Total liabilities......................................... 25,371,734 24,924,774
SHAREHOLDERS' EQUITY.......................................... 2,426,467 2,503,947
------------ ------------
Total liabilities and shareholders' equity................ $ 27,798,201 $ 27,428,721
------------ ------------
------------ ------------
Net interest income/margin (3)................................ 290,263 4.77 297,795
Less taxable-equivalent adjustment............................ 2,024 2,128
--------- ------------
Net interest income....................................... $ 288,239 $ 295,667
--------- ------------
--------- ------------
<CAPTION>
AVERAGE
(DOLLARS IN THOUSANDS) RATE (1)
- -------------------------------------------------------------- -----------
<S> <C>
ASSETS
Loans: (2)
Domestic.................................................... 8.50%
Foreign..................................................... 6.42
Investment securities:
Taxable..................................................... 6.23
Tax-exempt.................................................. 10.28
Interest bearing deposits in banks............................ 5.93
Federal funds sold and securities purchased under resale
agreements................................................... 5.61
Trading account securities.................................... 5.72
Total earning assets...................................... 8.00
Allowance for loan losses.....................................
Cash and due from banks.......................................
OREO..........................................................
Premises and equipment, net...................................
Other assets..................................................
Total assets..............................................
LIABILITIES
Deposits in domestic offices:
Interest bearing............................................ 2.67%
Savings and consumer time................................... 3.71
Large time.................................................. 5.34
Deposits in foreign offices................................... 4.76
Total interest bearing deposits........................... 3.92
Federal funds purchased and securities sold under repurchase
agreements................................................... 5.47
Subordinated capital notes.................................... 6.66
Other borrowed funds.......................................... 5.52
Total borrowed funds...................................... 5.63
Total interest bearing liabilities........................ 4.35
Demand deposits...............................................
Other liabilities.............................................
Total liabilities.........................................
SHAREHOLDERS' EQUITY..........................................
Total liabilities and shareholders' equity................
Net interest income/margin (3)................................ 4.91
Less taxable-equivalent adjustment............................
Net interest income.......................................
</TABLE>
- ------------------------------
(1) Yields on loans, tax-exempt securities, net interest income and net yield
on earning assets are presented on a fully taxable-equivalent basis using
the federal statutory tax rate of 35 percent.
(2) Average balances on loans outstanding include all nonperforming and
renegotiated loans. Included in interest income on loans is the amortized
portion of net loan origination fees (costs), representing an adjustment to
the yield.
(3) Fully taxable-equivalent basis.
14
<PAGE>
TABLE 2 -- CONSOLIDATED AVERAGE BALANCE SHEETS, NET INTEREST INCOME AND INTEREST
RATES (CONTINUED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
------------------------------------------------------------------------------------------------
DECEMBER 31, 1995 SEPTEMBER 30, 1995 JUNE 30, 1995
------------------------------ ------------------------------ ------------------------------
INTEREST AVERAGE INTEREST AVERAGE INTEREST AVERAGE
AVERAGE INCOME/ RATE AVERAGE INCOME/ RATE AVERAGE INCOME/ RATE
(DOLLARS IN THOUSANDS) BALANCE EXPENSE (1) BALANCE EXPENSE (1) BALANCE EXPENSE (1)
- ------------------------------ ----------- -------- ------- ----------- -------- ------- ----------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Loans: (2)
Domestic.................... $18,586,389 $407,763 8.70% $17,940,324 $390,656 8.64% $17,537,030 $381,614 8.73%
Foreign..................... 1,219,905 19,553 6.36 1,138,696 17,784 6.20 1,138,586 18,757 6.61
Investment securities:
Taxable..................... 2,213,092 33,517 6.01 2,162,511 32,399 5.94 1,992,559 28,977 5.83
Tax-exempt.................. 169,879 4,348 10.15 182,245 4,642 10.11 198,274 4,937 9.99
Interest bearing deposits in
banks........................ 838,765 13,064 6.18 1,031,802 15,993 6.15 948,674 15,053 6.36
Federal funds sold and
securities purchased under
resale agreements............ 657,534 9,836 5.93 310,897 4,731 6.04 272,193 4,238 6.25
Trading account securities.... 414,307 6,318 6.05 318,644 4,852 6.04 343,656 5,349 6.24
----------- -------- ----------- -------- ----------- --------
Total earning assets...... 24,099,871 494,399 8.14 23,085,119 471,057 8.10 22,430,972 458,924 8.21
-------- -------- --------
Allowance for loan losses..... (562,656) (574,509) (581,008)
Cash and due from banks....... 1,867,042 1,642,240 1,489,950
OREO.......................... 39,044 40,556 39,400
Premises and equipment, net... 421,470 419,591 411,338
Other assets.................. 1,314,033 1,366,951 1,348,315
----------- ----------- -----------
Total assets.............. $27,178,804 $25,979,948 $25,138,967
----------- ----------- -----------
----------- ----------- -----------
LIABILITIES
Deposits in domestic offices:
Interest bearing............ $ 4,865,000 33,245 2.71% $ 4,782,958 31,772 2.64% $ 4,822,166 31,556 2.62%
Savings and consumer time... 2,884,856 27,174 3.74 2,880,631 26,780 3.69 2,846,821 25,189 3.55
Large time.................. 3,175,021 45,033 5.63 2,656,523 37,528 5.60 2,261,144 27,829 4.94
Deposits in foreign offices... 1,624,207 20,782 5.08 1,753,074 23,206 5.25 1,889,588 26,100 5.54
----------- -------- ----------- -------- ----------- --------
Total interest bearing
deposits................. 12,549,084 126,234 3.99 12,073,186 119,286 3.92 11,819,719 110,674 3.76
----------- -------- ----------- -------- ----------- --------
Federal funds purchased and
securities sold under
repurchase agreements........ 1,401,609 20,247 5.73 1,582,804 22,806 5.72 1,612,108 23,765 5.91
Subordinated capital notes.... 528,206 9,180 6.90 614,521 10,683 6.90 655,574 11,517 7.05
Other borrowed funds.......... 2,552,228 37,466 5.82 2,017,725 29,619 5.82 1,807,363 27,133 6.02
----------- -------- ----------- -------- ----------- --------
Total borrowed funds...... 4,482,043 66,893 5.92 4,215,050 63,108 5.94 4,075,045 62,415 6.14
----------- -------- ----------- -------- ----------- --------
Total interest bearing
liabilities.............. 17,031,127 193,127 4.50 16,288,236 182,394 4.44 15,894,764 173,089 4.37
-------- -------- --------
Demand deposits............... 6,516,502 6,137,218 5,770,138
Other liabilities............. 1,196,528 1,193,830 1,177,160
----------- ----------- -----------
Total liabilities......... 24,744,157 23,619,284 22,842,062
SHAREHOLDERS' EQUITY.......... 2,434,647 2,360,664 2,296,905
----------- ----------- -----------
Total liabilities and
shareholders' equity..... $27,178,804 $25,979,948 $25,138,967
----------- ----------- -----------
----------- ----------- -----------
Net interest income/margin
(3).......................... 301,272 4.96 288,663 4.96 285,835 5.11
Less taxable-equivalent
adjustment................... 2,234 2,529 2,859
-------- -------- --------
Net interest income....... $299,038 $286,134 $282,976
-------- -------- --------
-------- -------- --------
</TABLE>
- ------------------------------
(1) Yields on loans, tax-exempt securities, net interest income and net yield
on earning assets are presented on a fully taxable-equivalent basis using
the federal statutory tax rate of 35 percent.
(2) Average balances on loans outstanding include all nonperforming and
renegotiated loans. Included in interest income on loans is the amortized
portion of net loan origination fees (costs), representing an adjustment to
the yield.
(3) Fully taxable-equivalent basis.
15
<PAGE>
TABLE 2 -- CONSOLIDATED AVERAGE BALANCE SHEETS, NET INTEREST INCOME AND INTEREST
RATES (CONTINUED)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
---------------------------------------------------------------
JUNE 30, 1996 JUNE 30, 1995
------------------------------ ------------------------------
INTEREST AVERAGE INTEREST AVERAGE
AVERAGE INCOME/ RATE AVERAGE INCOME/ RATE
(DOLLARS IN THOUSANDS) BALANCE EXPENSE (1) BALANCE EXPENSE (1)
- ------------------------------ ----------- -------- ------- ----------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Loans: (2)
Domestic.................... $19,133,231 $798,245 8.39% $17,336,735 $746,327 8.68%
Foreign..................... 1,157,406 36,023 6.26 1,143,873 37,841 6.67
Investment securities:
Taxable..................... 2,098,702 64,853 6.21 1,916,468 54,293 5.71
Tax-exempt.................. 159,532 8,201 10.34 200,517 9,995 10.05
Interest bearing deposits in
banks........................ 901,282 26,094 5.82 926,644 29,144 6.34
Federal funds sold and
securities purchased under
resale agreements............ 575,305 15,815 5.53 251,237 7,680 6.16
Trading account securities.... 417,933 11,590 5.58 291,369 9,102 6.30
----------- -------- ----------- --------
Total earning assets...... 24,443,391 960,821 7.90 22,066,843 894,382 8.17
-------- --------
Allowance for loan losses..... (550,731) (578,797)
Cash and due from banks....... 1,889,661 1,492,902
OREO.......................... 35,497 42,164
Premises and equipment, net... 428,061 408,356
Other assets.................. 1,367,582 1,345,593
----------- -----------
Total assets.............. $27,613,461 $24,777,061
----------- -----------
----------- -----------
LIABILITIES
Deposits in domestic offices:
Interest bearing............ $ 4,803,480 63,998 2.68% $ 4,879,392 61,876 2.56%
Savings and consumer time... 2,931,253 53,670 3.68 2,834,764 48,339 3.44
Large time.................. 3,739,096 97,991 5.27 2,026,673 46,436 4.62
Deposits in foreign offices... 1,493,207 35,410 4.77 1,893,232 51,859 5.52
----------- -------- ----------- --------
Total interest bearing
deposits................. 12,967,036 251,069 3.89 11,634,061 208,510 3.61
----------- -------- ----------- --------
Federal funds purchased and
securities sold under
repurchase agreements........ 1,270,454 30,573 4.84 1,511,862 43,495 5.80
Subordinated capital notes.... 496,391 16,124 6.53 655,696 22,675 6.97
Other borrowed funds.......... 2,689,852 74,997 5.61 1,842,276 54,552 5.97
----------- -------- ----------- --------
Total borrowed funds...... 4,456,697 121,694 5.49 4,009,834 120,722 6.07
----------- -------- ----------- --------
Total interest bearing
liabilities.............. 17,423,733 372,763 4.30 15,643,895 329,232 4.24
-------- --------
Demand deposits............... 6,530,914 5,736,876
Other liabilities............. 1,193,607 1,130,074
----------- -----------
Total liabilities......... 25,148,254 22,510,845
SHAREHOLDERS' EQUITY.......... 2,465,207 2,266,216
----------- -----------
Total liabilities and
shareholders' equity..... $27,613,461 $24,777,061
----------- -----------
----------- -----------
Net interest income/margin
(3).......................... 588,058 4.84 565,150 5.16
Less taxable-equivalent
adjustment................... 4,152 5,680
-------- --------
Net interest income....... $583,906 $559,470
-------- --------
-------- --------
</TABLE>
- ------------------------------
(1) Yields on loans, tax-exempt securities, net interest income and net yield
on earning assets are presented on a fully taxable-equivalent basis using
the federal statutory tax rate of 35 percent.
(2) Average balances on loans outstanding include all nonperforming and
renegotiated loans. Included in interest income on loans is the amortized
portion of net loan origination fees (costs), representing an adjustment to
the yield.
(3) Fully taxable-equivalent basis.
16
<PAGE>
NONINTEREST INCOME
During the second quarter of 1996, the Company had noninterest income of
$106 million compared with $99 million for the same period during 1995. This
increase of $7 million was primarily due to a $3 million increase in net gains
on the sale of investment securities and a $3 million increase in other non-
interest income.
For the six months ended June 30, 1996, noninterest income increased to $208
million from $193 million for the same period in 1995. This increase of $15
million was primarily due to a $3 million increase in trust fees, a $3 million
increase in credit card merchant fees, a $5 million increase in net gains on the
sale of investment securities and a $4 million increase in other noninterest
income.
TABLE 3 -- NONINTEREST INCOME
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
FOR THE THREE MONTHS ENDED ENDED
---------------------------------------------------------------- --------------------
JUNE 30, MARCH 31, DECEMBER 31, SEPTEMBER 30, JUNE 30, JUNE 30, JUNE 30,
(DOLLARS IN THOUSANDS) 1996 1996 1995 1995 1995 1996 1995
- -------------------------------------- --------- ----------- ------------ ------------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Service charges on deposit accounts... $ 25,067 $ 23,961 $ 23,957 $ 23,835 $ 23,916 $ 49,028 $ 47,149
Trust fees............................ 23,309 22,248 23,315 21,529 22,431 45,557 42,256
International commissions and fees.... 17,124 16,278 17,422 17,017 17,737 33,402 34,759
Credit card merchant fees............. 12,905 11,598 11,494 12,461 11,409 24,503 21,812
Merchant banking fees................. 4,244 7,910 4,735 4,545 4,506 12,154 9,740
Investment services................... 4,714 4,259 4,491 3,693 4,058 8,973 8,657
Foreign exchange...................... 3,330 3,686 3,904 5,498 5,191 7,016 9,641
Investment securities gains (losses),
net.................................. 2,621 616 966 (348) (103) 3,237 (1,320)
Other................................. 12,236 12,318 10,697 10,392 9,657 24,554 20,181
--------- ----------- ------------ ------------- ----------- --------- ---------
Total noninterest income............ $ 105,550 $ 102,874 $ 100,981 $ 98,622 $ 98,802 $ 208,424 $ 192,875
--------- ----------- ------------ ------------- ----------- --------- ---------
--------- ----------- ------------ ------------- ----------- --------- ---------
</TABLE>
NONINTEREST EXPENSE
Noninterest expense, excluding merger and integration expense of $61,266,
was $253 million for the second quarter of 1996, compared with $247 million for
the comparable quarter in 1995. This increase of $6 million or 2 percent
reflected significant expansion in our community banking business and included
increases of $8 million in salaries and $2 million in credit card processing as
well as smaller increases in a number of categories. These increases were
largely offset by a decrease in regulatory authority assessment expense
(primarily the FDIC deposit assessment) of $10 million.
Total noninterest expense, excluding $61 million of merger and integration
expenses, increased to $505 million for the six months ended June 30, 1996 from
$490 million for the same period in 1995. The same factors discussed above in
the quarterly comparison accounted for this increase. Increases of $17 million
in salaries, $3 million in credit card processing and smaller increases in other
categories reflecting an expansion in the community banking business were partly
offset by a $19 million decrease in regulatory assessments. In addition,
foreclosed asset expense increased by $4 million.
17
<PAGE>
TABLE 4 -- NONINTEREST EXPENSE
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
FOR THE THREE MONTHS ENDED ENDED
--------------------------------------------------------------- ----------------------
JUNE 30, MARCH 31, DECEMBER 31, SEPTEMBER 30, JUNE 30, JUNE 30, JUNE 30,
(DOLLARS IN THOUSANDS) 1996 1996 1995 1995 1995 1996 1995
- --------------------------------- ---------- ---------- ------------ ------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Salaries......................... $ 117,725 $ 115,178 $ 115,885 $ 111,400 $ 109,719 $ 232,903 $ 215,774
Employee benefits................ 22,239 27,173 19,036 21,611 23,053 49,412 52,157
---------- ---------- ------------ ------------- ---------- ---------- ----------
Salaries and employee
benefits...................... 139,964 142,351 134,921 133,011 132,772 282,315 267,931
Net occupancy.................... 24,270 21,955 23,390 22,877 23,126 46,225 46,675
Equipment........................ 13,336 13,813 14,540 13,803 13,937 27,149 26,659
Credit card processing........... 10,038 8,369 8,187 8,401 7,871 18,407 15,162
Communications................... 8,309 7,726 8,139 7,616 7,328 16,035 14,763
Advertising and public
relations....................... 6,702 6,993 5,628 5,240 5,922 13,695 11,256
Printing and office supplies..... 6,434 6,098 6,242 5,765 5,474 12,532 10,624
Professional services............ 6,592 5,869 5,608 7,129 7,061 12,461 12,628
Armored car...................... 5,196 5,046 4,987 4,952 4,770 10,242 9,532
Data processing.................. 4,689 5,318 4,963 4,380 4,867 10,007 9.214
Software......................... 3,678 3,676 4,335 3,628 3,203 7,354 5,875
Intangible asset
amortization.................... 3,338 3,338 3,338 3,338 3,338 6,676 6,676
Travel........................... 3,822 3,074 3,342 3,192 3,392 6,896 5,624
Net operating reserves........... 2,148 2,330 9,089 3,533 2,179 4,478 3,596
Foreclosed asset expense
(income)........................ 867 3,274 (2,035) (995) 33 4,141 (132)
Regulatory authority
assessments..................... 312 959 2,579 179 10,123 1,271 20,673
Other............................ 12,823 11,835 14,484 10,179 11,376 24,658 22,846
---------- ---------- ------------ ------------- ---------- ---------- ----------
Noninterest expense, excluding
merger and integration
expense....................... 252,518 252,024 251,737 236,228 246,772 504,542 489,602
Merger and integration expense... 61,266 -- -- -- -- 61,266 --
---------- ---------- ------------ ------------- ---------- ---------- ----------
Total noninterest expense...... $ 313,784 $ 252,024 $ 251,737 $ 236,228 $ 246,772 $ 565,808 $ 489,602
---------- ---------- ------------ ------------- ---------- ---------- ----------
---------- ---------- ------------ ------------- ---------- ---------- ----------
</TABLE>
MERGER EXPENSES
In connection with the merger, $61 million of merger and integration
expenses were recognized in the results of the second quarter of 1996. These
costs included severance, retention, and other employee related costs ($21
million); costs incurred in connection with the planned disposition of certain
facilities ($28 million); professional fees ($6 million); and other merger and
integration related expenses ($6 million).
<TABLE>
<CAPTION>
SEVERANCE,
RETENTION AND
OTHER EMPLOYEE FACILITIES PROFESSIONAL
RELATED COSTS COSTS FEES OTHER TOTAL
--------------- --------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C>
Provision for merger and integration costs......... $ 21,484 $ 27,500 $ 6,314 $ 5,968 $ 61,266
Utilization for the period......................... 540 600 6,314 2,735 10,189
------- --------- ----------- --------- ---------
Accrued Liability at June 30, 1996................. $ 20,944 $ 26,900 $ -- $ 3,233 $ 51,077
------- --------- ----------- --------- ---------
------- --------- ----------- --------- ---------
</TABLE>
It is expected that additional merger-related expenses which do not qualify
for current recognition will be incurred over the next year. These expenses
which are expected to be substantially less than the second quarter amount will
also be classified as merger and integration expense when incurred.
18
<PAGE>
LOANS OUTSTANDING
The Company's lending activities are predominantly domestic, with such loans
comprising approximately 95 percent of the portfolio at June 30, 1996 and
December 31, 1995. Overall the Company's loan portfolio at June 30, 1996
increased by $255 million compared to December 31, 1995 and $1.6 billion in
comparison to June 30, 1995. The increase from December 31, 1995, was primarily
attributable to the residential mortgage portfolio which grew by $469 million.
This growth was partly offset by a $219 million decrease in commercial,
financial and industrial loans. The increase from June 30, 1995, was primarily
in the commercial, financial and industrial portfolio which grew by $573 million
and the residential portfolio which grew by $852 million. The Company attributes
this growth to the continuing improvement in the California economy which is the
Company's principal market, and improvement in other specialized domestic
markets the Company 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 exceeding ten
percent in any one business segment. At June 30, 1996, December 31, 1995 and
June 30, 1995, the commercial, financial and industrial loan portfolio comprised
$9.4 billion or 46 percent of the total loan portfolio, $9.6 billion or 48
percent and $8.8 billion or 47 percent, respectively.
The Company's construction portfolio totaled $387 million or 2 percent of
total loans at June 30, 1996 as compared to $394 million or 2 percent at
December 31, 1995 and $449 million or 2 percent at June 30, 1995.
Mortgage loans represented $5.8 billion or 28 percent of total loans at June
30, 1996, $5.3 billion or 26 percent at December 31, 1995 and $4.9 billion or 26
percent at June 30, 1995. The mortgage portfolio consists of loans on commercial
and industrial projects and loans secured by one to four family residential
properties, primarily in California.
Consumer loans totaled $2.9 billion or 14 percent at June 30, 1996 as
compared to $2.9 billion or 14 percent at December 31, 1995 and $2.8 billion or
15 percent at June 30, 1995. This portfolio is primarily comprised of
installment loans and home equity loans.
Lease financing totaled $831 million or 4 percent of total loans at June 30,
1996 as compared to $845 million or 4 percent at December 31, 1995 and $806
million or 4 percent at June 30, 1995.
Foreign loans totaled $1.1 billion or 5 percent of total loans at June 30,
1996 as compared to $1.2 billion or 6 percent at December 31, 1995 and $1.1
billion or 6 percent at June 30, 1995.
19
<PAGE>
TABLE 5 -- LOANS OUTSTANDING
<TABLE>
<CAPTION>
JUNE 30, MARCH 31, DECEMBER 31, SEPTEMBER 30, JUNE 30,
(DOLLARS IN THOUSANDS) 1996 1996 1995 1995 1995
- ------------------------------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
DOMESTIC:
Commercial, financial and
industrial........................ $ 9,395,499 $ 9,456,070 $ 9,614,069 $ 9,111,128 $ 8,822,314
Construction....................... 387,309 410,608 394,472 435,139 448,739
Mortgage:
Residential...................... 3,876,344 3,726,642 3,406,873 3,202,832 3,024,277
Commercial....................... 1,951,957 1,870,576 1,871,489 1,785,764 1,830,586
------------- ------------- ------------- ------------- -------------
Total mortgage................. 5,828,301 5,597,218 5,278,362 4,988,596 4,854,863
Consumer:
Installment...................... 1,502,731 1,421,179 1,393,859 1,356,699 1,276,608
Home equity...................... 1,011,937 1,031,199 1,064,972 1,086,805 1,118,169
Credit card and other lines of
credit.......................... 416,286 412,385 427,680 409,728 391,739
------------- ------------- ------------- ------------- -------------
Total consumer................. 2,930,954 2,864,763 2,886,511 2,853,232 2,786,516
Lease financing.................... 830,888 830,098 845,170 820,677 805,643
------------- ------------- ------------- ------------- -------------
Total domestic loans........... 19,372,951 19,158,757 19,018,584 18,208,772 17,718,075
Loans originated in foreign
offices............................. 1,107,727 1,182,578 1,207,505 1,199,752 1,145,846
------------- ------------- ------------- ------------- -------------
Total loans.................... 20,480,678 20,341,335 20,226,089 19,408,524 18,863,921
Allowance for loan losses............ 545,345 547,401 555,149 566,812 573,971
------------- ------------- ------------- ------------- -------------
Net loans outstanding.......... $ 19,935,333 $ 19,793,934 $ 19,670,940 $ 18,841,712 $ 18,289,950
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
</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 June 30, 1996, the Company's allowance for loan losses was $545 million
or 2.66 percent of the total loan portfolio. This compares with an allowance for
loan losses of $555 million or 2.74 percent of the total loan portfolio at
December 31, 1995. During the second quarter of 1996, the Company recorded a
provision for loan losses of $10 million compared with $9 million for the fourth
quarter of 1995 and $13 million for the second quarter of 1995.
20
<PAGE>
The decline in the provision for loan losses in comparing the second quarter
of 1996 to the second quarter of 1995 reflects the improvement in the quality of
the Company's loan portfolio.
During the second quarter of 1996, the Company had net charge offs of $12
million, compared to net charge offs of $19 million for the quarter ended June
30, 1995. The reduction is primarily attributable to lower mortgage loan charge
offs.
The Company continues to evaluate its loan portfolio for impairment as
defined by Statement of Financial Accounting Standard No. 114, as amended. At
June 30, 1996, total impaired loans were $158 million and the associated
impairment allowance was $11 million. This compares to impaired loans of $173
million and an associated impairment allowance of $16 million at December 31,
1995.
TABLE 6 -- ALLOWANCE FOR LOAN LOSSES
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
---------------------------------------------------------------
JUNE 30, MARCH 31, DECEMBER 31, SEPTEMBER 30, JUNE 30,
(DOLLARS IN THOUSANDS) 1996 1996 1995 1995 1995
- ----------------------------------------------- ---------- ---------- ------------ ------------- ----------
<S> <C> <C> <C> <C> <C>
Balance, beginning of period................... $ 547,401 $ 555,149 $ 566,812 $ 573,971 $ 580,561
Loans charged off:
Domestic:
Commercial, financial and industrial....... 6,628 11,937 18,658 7,130 10,945
Construction............................... 806 67 4 3,610 5,097
Mortgage................................... 2,621 4,070 5,932 12,854 8,036
Consumer................................... 12,162 13,823 12,694 13,620 9,664
Lease financing............................ 577 647 1,005 277 620
Foreign...................................... 61 58 36 259 45
---------- ---------- ------------ ------------- ----------
Total loans charged off.................. 22,855 30,602 38,329 37,750 34,407
Loan loss recoveries:
Domestic:
Commercial, financial and industrial....... 4,271 6,153 6,296 10,754 10,319
Construction............................... 129 1 38 6 5
Mortgage................................... 3,097 2,640 7,746 4,897 2,571
Consumer................................... 3,147 3,946 3,759 2,846 2,189
Lease financing............................ 143 86 70 62 111
Foreign...................................... 12 28 7 26 122
---------- ---------- ------------ ------------- ----------
Total loan loss recoveries............... 10,799 12,854 17,916 18,591 15,317
---------- ---------- ------------ ------------- ----------
Net loans charged off.................. 12,056 17,748 20,413 19,159 19,090
Provision for loan losses...................... 10,000 10,000 8,750 12,000 12,500
---------- ---------- ------------ ------------- ----------
Balance, end of period......................... 545,345 $ 547,401 $ 555,149 $ 566,812 $ 573,971
---------- ---------- ------------ ------------- ----------
---------- ---------- ------------ ------------- ----------
Allowance for loan losses to total loans....... 2.66% 2.69% 2.74% 2.92% 3.04%
Provision for loan losses to net loan charge
offs.......................................... 82.95 56.34 42.86 62.63 65.48
Recoveries of loans to loans charged off in the
previous period............................... 35.29 33.54 47.46 54.03 66.14
Net loans charged off to average loans
outstanding for the
period (1).................................... 0.24 0.38 0.44 0.42 0.41
</TABLE>
- ------------------------------
(1) Annualized.
21
<PAGE>
ASSET QUALITY
At June 30, 1996, total nonperforming and renegotiated loans were $192
million or 0.94 percent of total loans outstanding compared with $210 million or
1.04 percent and $299 million or 1.58 percent at December 31, 1995 and June 30,
1995, respectively. The decrease of $106 million from June 30, 1995 to June 30,
1996, was a net result of an increase of $18 million in the commercial,
financial and industrial portfolio offset by decreases of $45 million in the
construction portfolio and $80 million in the mortgage portfolio.
TABLE 7 -- NONPERFORMING AND RENEGOTIATED ASSETS
<TABLE>
<CAPTION>
JUNE 30, MARCH 31, DECEMBER 31, SEPTEMBER 30, JUNE 30,
(DOLLARS IN THOUSANDS) 1996 1996 1995 1995 1995
- ----------------------------------------------- ---------- ---------- ------------ ------------- ----------
<S> <C> <C> <C> <C> <C>
NONACCRUAL LOANS:
Domestic:
Commercial, financial and industrial....... $ 94,303 $ 81,028 $ 84,336 $ 77,276 $ 76,172
Construction............................... 10,974 30,630 40,026 50,976 56,272
Mortgage:
Residential (1).......................... 16,083 17,961 19,220 18,228 39,518
Commercial............................... 66,911 61,108 63,836 80,879 123,751
---------- ---------- ------------ ------------- ----------
Total mortgage......................... 82,994 79,069 83,056 99,107 163,269
Other.................................... 3,223 1,089 849 2,111 2,310
---------- ---------- ------------ ------------- ----------
Total nonaccrual loans................. 191,494 191,816 208,267 229,470 298,023
Renegotiated loans............................. 681 1,385 1,612 1,459 519
---------- ---------- ------------ ------------- ----------
Total nonperforming and renegotiated
loans................................. 192,175 193,201 209,879 230,929 298,542
---------- ---------- ------------ ------------- ----------
Foreclosed assets.............................. 35,998 34,999 36,992 39,754 42,005
---------- ---------- ------------ ------------- ----------
Total nonperforming and renegotiated
assets.................................. 228,173 $ 228,200 $ 246,871 $ 270,683 $ 340,547
---------- ---------- ------------ ------------- ----------
---------- ---------- ------------ ------------- ----------
Nonperforming and renegotiated loans to total
loans......................................... 0.94% 0.95% 1.04% 1.19% 1.58%
Nonperforming and renegotiated assets to total
loans and foreclosed assets................... 1.11 1.12 1.22 1.39 1.80
Nonperforming and renegotiated assets to total
assets........................................ 0.81 0.80 0.90 1.00 1.31
</TABLE>
- ------------------------------
(1) These loans primarily consist of loans secured by single family residential
development projects and apartment buildings.
Since foreclosed assets remained relatively constant over the past five
quarters, the changes in total nonperforming and renegotiated assets were
primarily the result of the changes in nonaccrual loans discussed above. The
total nonperforming and renegotiated assets of $228 million at June 30, 1996
reflected a 33 percent decrease from a year earlier.
22
<PAGE>
TABLE 8 -- LOANS 90 DAYS OR MORE PAST DUE AND STILL ACCRUING
<TABLE>
<CAPTION>
JUNE 30, MARCH 31, DECEMBER 31, SEPTEMBER 30, JUNE 30,
(DOLLARS IN THOUSANDS) 1996 1996 1995 1995 1995
- -------------------------------------------------- --------- ----------- ------------ ------------- ---------
<S> <C> <C> <C> <C> <C>
Domestic:
Commercial, financial and industrial............ $ 1,800 $ 3,756 $ 3,752 $ 1,170 $ 286
Construction.................................... 188 1,716 1,063 2,577 4,338
Mortgage:
Residential................................... 7,110 12,208 8,479 3,157 2,885
Commercial.................................... 117 2,949 3,592 12,664 24,864
--------- ----------- ------------ ------------- ---------
Total mortgage.............................. 7,227 15,157 12,071 15,821 27,749
Consumer and other.............................. 6,867 7,786 8,854 7,736 9,906
--------- ----------- ------------ ------------- ---------
Total loans 90 days or more past due and
still accruing............................. $ 16,082 $ 28,415 $ 25,740 $ 27,304 $ 42,279
--------- ----------- ------------ ------------- ---------
--------- ----------- ------------ ------------- ---------
</TABLE>
The Company's level of loans 90 days or more past due and still accruing was
$16 million at June 30, 1996, compared with $26 million at December 31, 1995 and
$42 million at June 30, 1995.
LIQUIDITY
Liquidity refers to the Company's ability and financial flexibility to
adjust its future cash flows to meet the needs of depositors and borrowers and
to fund operations on a timely and cost-effective basis. The Company's liquidity
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 (demand deposits, interest bearing savings, and consumer time
deposits) have provided the Company with a sizable source of relatively stable
and low-cost funds. In the second quarter of 1996 these sources, together with
other noninterest bearing funds (primarily common shareholders' equity) funded
60 percent of average earning assets.
CAPITAL
Total shareholders' equity decreased $72 million in comparing June 30, 1996
to December 31, 1995. This change was primarily a result of $128 million of net
income for the first six months of 1996, offset by dividends on common stock of
$177 million (including $145 million paid to Mistubishi Bank, Limited in the
first quarter of 1996 by BanCal Tri-State Corporation and The Bank of
California, N.A.).
For regulatory purposes, the Company's capital adequacy is based on
risk-adjusted Tier 1 and Total capital guidelines, as well as a leverage ratio.
Under these guidelines the Company's Tier 1 and Total risk-based capital ratios
were 8.94 percent and 11.24 percent, respectively, at June 30, 1996, as compared
to 9.35 percent and 11.70 percent, and 9.21 percent and 11.92 percent at
December 31, 1995 and June 30, 1995, respectively. The decreases in the ratios
from December 31, 1995 are primarily attributable to the $145 million dividend
paid in the first quarter of 1996. As of June 30, 1996 the Company's subsidiary
bank, Union Bank of California, N.A., met all regulatory minimums of a well
capitalized bank.
23
<PAGE>
TABLE 9 -- RISK-BASED CAPITAL
<TABLE>
<CAPTION>
JUNE 30, MARCH 31, DECEMBER 31, SEPTEMBER 30, JUNE 30,
(DOLLARS IN THOUSANDS) 1996 1996 1995 1995 1995
- ----------------------------------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
CAPITAL COMPONENTS:
Common shareholders' equity.............. $ 2,145,496 $ 2,125,532 $ 2,164,516 $ 2,095,318 $ 2,030,964
Parent direct interest in bank
subsidiary.............................. 125,320 123,308 159,996 154,981 150,789
8 3/8% Noncumulative preferred stock,
Series A................................ 135,000 135,000 135,000 135,000 135,000
Less: Core deposit intangible (1)........ 6,343 6,546 6,748 6,950 7,153
Goodwill............................. 91,435 94,632 97,707 100,928 104,077
Disallowed deferred tax
assets.............................. -- -- -- 13,981 27,724
------------- ------------- ------------- ------------- -------------
Tier 1 capital................... 2,308,038 2,282,662 2,355,057 2,263,440 2,177,799
------------- ------------- ------------- ------------- -------------
Eligible portion of the allowance for
loan losses (2)......................... 324,503 319,973 317,712 303,565 299,031
Subordinated capital notes (3)........... 270,874 270,874 274,200 287,600 341,200
------------- ------------- ------------- ------------- -------------
Tier 2 capital................... 595,377 590,847 591,912 591,165 640,231
Less: Unconsolidated subsidiary.......... 466 585 646 145 159
------------- ------------- ------------- ------------- -------------
Total risk-based capital......... $ 2,902,949 $ 2,872,924 $ 2,946,323 $ 2,854,460 $ 2,817,871
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
Risk-weighted balance sheet and
off-balance sheet assets................ $ 26,048,566 $ 25,597,852 $ 25,416,926 $ 24,299,214 $ 23,950,233
Less: Disallowed deferred tax
assets.............................. -- -- -- 13,981 27,724
Allowance for loan losses
not included in Tier 2
capital............................. 220,842 227,428 237,437 263,247 274,940
------------- ------------- ------------- ------------- -------------
Risk-weighted assets............. $ 25,827,724 $ 25,370,424 $ 25,179,489 $ 24,021,986 $ 23,647,569
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
CAPITAL RATIOS
Tier 1 risk-based capital................ 8.94% 9.00% 9.35% 9.42% 9.21%
Total risk-based capital................. 11.24 11.32 11.70 11.88 11.92
</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.
TABLE 10 -- OTHER CAPITAL MEASURES
<TABLE>
<CAPTION>
JUNE 30, MARCH 31, DECEMBER 31, SEPTEMBER 30, JUNE 30,
1996 1996 1995 1995 1995
----------- ------------- --------------- ----------------- -----------
<S> <C> <C> <C> <C> <C>
LEVERAGE RATIO (1).................................. 8.33% 8.35% 8.70% 8.75% 8.71%
OTHER CAPITAL RATIOS (END OF PERIOD):
Tangible common equity to total assets............ 7.31 7.16 7.57 7.39 7.44
Total equity to total assets...................... 8.58 8.42 9.02 8.86 8.98
Tangible common equity to average total assets.... 7.39 7.43 7.67 7.69 7.67
Total equity to average total assets.............. 8.68 8.74 9.14 9.22 9.25
</TABLE>
- ------------------------------
(1) Tier 1 capital divided by quarterly average total assets.
24
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits: None
(b) Reports on Form 8-K: During the second quarter of 1996 UnionBanCal
Corporation filed a report on Form 8-K dated May
22, 1996. The report filed pursuant to Item 4.(b)
Changes in Registrant's Certifying Accountant,
noted the selection of Deloitte & Touche LLP as
the new independent public accountant for the
registrant.
25
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereto duly authorized.
UNIONBANCAL CORPORATION
(Registrant)
By /s/ TAKAHIRO MORIGUCHI
------------------------------------
Takahiro Moriguchi
VICE CHAIRMAN OF THE BOARD AND
CHIEF FINANCIAL OFFICER
By /s/ DAVID W. EHLERS
------------------------------------
David W. Ehlers
EXECUTIVE VICE PRESIDENT AND
DIRECTOR OF FINANCE
Dated: August 13, 1996
26
<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.
30
<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
31
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEET AND STATEMENT OF INCOME AND THE
ACCOMPANYING TABLES OF FORM 10-Q. INFORMATION HEREIN IS QUALIFIED BY REFERENCE
TO SUCH STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 1,951,582
<INT-BEARING-DEPOSITS> 914,087
<FED-FUNDS-SOLD> 488,240
<TRADING-ASSETS> 544,551
<INVESTMENTS-HELD-FOR-SALE> 1,917,089
<INVESTMENTS-CARRYING> 309,712
<INVESTMENTS-MARKET> 314,203
<LOANS> 20,480,678
<ALLOWANCE> 545,345
<TOTAL-ASSETS> 28,114,916
<DEPOSITS> 19,965,508
<SHORT-TERM> 3,838,400
<LIABILITIES-OTHER> 519,459
<LONG-TERM> 495,369
0
135,000
<COMMON> 273,789
<OTHER-SE> 2,003,229
<TOTAL-LIABILITIES-AND-EQUITY> 28,114,916
<INTEREST-LOAN> 832,914
<INTEREST-INVEST> 70,262
<INTEREST-OTHER> 53,493
<INTEREST-TOTAL> 956,669
<INTEREST-DEPOSIT> 251,069
<INTEREST-EXPENSE> 372,764
<INTEREST-INCOME-NET> 583,906
<LOAN-LOSSES> 20,000
<SECURITIES-GAINS> 3,237
<EXPENSE-OTHER> 565,808
<INCOME-PRETAX> 206,522
<INCOME-PRE-EXTRAORDINARY> 127,674
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 127,674
<EPS-PRIMARY> 2.12
<EPS-DILUTED> 2.12
<YIELD-ACTUAL> 4.84
<LOANS-NON> 191,494
<LOANS-PAST> 16,082
<LOANS-TROUBLED> 681
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 555,149
<CHARGE-OFFS> 53,457
<RECOVERIES> 23,653
<ALLOWANCE-CLOSE> 545,345
<ALLOWANCE-DOMESTIC> 265,271
<ALLOWANCE-FOREIGN> 14,083
<ALLOWANCE-UNALLOCATED> 265,991
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY RESTATED FINANCIAL INFORMATION EXTRACTED FROM
THE CONDENSED CONSOLIDATED BALANCE SHEET AND STATEMENT OF INCOME AND THE
ACCOMPANYING TABLES OF FORM 10-Q. INFORMATION HEREIN IS QUALIFIED BY REFERENCE
TO SUCH STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 1,939,425
<INT-BEARING-DEPOSITS> 697,209
<FED-FUNDS-SOLD> 1,475,558
<TRADING-ASSETS> 401,158
<INVESTMENTS-HELD-FOR-SALE> 1,964,517
<INVESTMENTS-CARRYING> 341,494
<INVESTMENTS-MARKET> 349,133
<LOANS> 20,341,335
<ALLOWANCE> 547,401
<TOTAL-ASSETS> 28,463,879
<DEPOSITS> 20,179,593
<SHORT-TERM> 4,198,269
<LIABILITIES-OTHER> 528,794
<LONG-TERM> 495,369
0
135,000
<COMMON> 273,676
<OTHER-SE> 1,988,263
<TOTAL-LIABILITIES-AND-EQUITY> 28,463,879
<INTEREST-LOAN> 419,885
<INTEREST-INVEST> 35,492
<INTEREST-OTHER> 27,691
<INTEREST-TOTAL> 483,068
<INTEREST-DEPOSIT> 126,301
<INTEREST-EXPENSE> 187,402
<INTEREST-INCOME-NET> 295,667
<LOAN-LOSSES> 10,000
<SECURITIES-GAINS> 616
<EXPENSE-OTHER> 252,024
<INCOME-PRETAX> 136,517
<INCOME-PRE-EXTRAORDINARY> 83,266
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 83,266
<EPS-PRIMARY> 1.40
<EPS-DILUTED> 1.40
<YIELD-ACTUAL> 4.91
<LOANS-NON> 191,816
<LOANS-PAST> 28,415
<LOANS-TROUBLED> 1,385
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 555,149
<CHARGE-OFFS> 30,602
<RECOVERIES> 12,854
<ALLOWANCE-CLOSE> 547,401
<ALLOWANCE-DOMESTIC> 273,584
<ALLOWANCE-FOREIGN> 13,372
<ALLOWANCE-UNALLOCATED> 260,445
</TABLE>
