<PAGE>
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- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997
Commission file number 0-28118
UNIONBANCAL CORPORATION
State of Incorporation: California I.R.S. Employer Identification No.
94-1234979
350 California Street
San Francisco, California 94104
Telephone: (415) 705-7350
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes _X_ No ____
Number of shares of Common Stock outstanding at October 31, 1997: 54,905,944
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<PAGE>
UNIONBANCAL CORPORATION AND SUBSIDIARIES
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NUMBER
-------------
<S> <C>
PART I
FINANCIAL INFORMATION
Consolidated Financial Highlights..................................................................... 2
Item 1. Financial Statements:
Condensed Consolidated Statements of Income......................................................... 4
Condensed Consolidated Balance Sheets............................................................... 5
Condensed Consolidated Statements of Cash Flows..................................................... 6
Condensed Consolidated Statements of Changes in Shareholders' Equity................................ 7
Notes to Condensed Consolidated Financial Statements................................................ 8
Item 2. Management's Discussion and Analysis:
Introduction........................................................................................ 10
Merger Accounting................................................................................... 10
Summary............................................................................................. 11
Analysis of Earnings................................................................................ 13
Net Interest Income................................................................................. 14
Noninterest Income.................................................................................. 18
Noninterest Expense................................................................................. 19
Merger and Integration Expense...................................................................... 20
Income Tax Expense.................................................................................. 20
Loans............................................................................................... 21
Allowance for Credit Losses......................................................................... 22
Nonperforming Assets................................................................................ 23
Loans 90 Days or More Past Due and Still Accruing................................................... 24
Liquidity........................................................................................... 24
Regulatory Capital.................................................................................. 25
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.............................................................. 26
Signatures............................................................................................ 26
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
UNIONBANCAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL HIGHLIGHTS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------------------------------
SEPTEMBER SEPTEMBER INCREASE (DECREASE)
30, 30, ------------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 1997 1996 AMOUNT PERCENT
- ---------------------------------------------------------------------- ----------- ----------- ------------ ---------
<S> <C> <C> <C> <C>
RESULTS OF OPERATIONS:
Net interest income (1)............................................. $ 313,555 $ 292,677 $ 20,878 7.13%
Provision for credit losses......................................... -- 10,000 (10,000) (100.00)
Noninterest income.................................................. 116,820 107,280 9,540 8.89
Noninterest expense, excluding merger and integration expense (2)... 253,317 258,523 (5,206) (2.01)
----------- ----------- ------------ ---------
Income before merger and integration expense and income
taxes (1)(2)...................................................... 177,058 131,434 45,624 34.71
Merger and integration expense...................................... -- 25,552 (25,552) (100.00)
----------- ----------- ------------ ---------
Income before income taxes (1)...................................... 177,058 105,882 71,176 67.22
Taxable-equivalent adjustment....................................... 1,301 1,089 212 19.47
Income tax expense.................................................. 45,953 42,810 3,143 7.34
----------- ----------- ------------ ---------
Net income.......................................................... $ 129,804 $ 61,983 $ 67,821 109.42%
----------- ----------- ------------ ---------
----------- ----------- ------------ ---------
NET INCOME APPLICABLE TO:
Common stock........................................................ $ 120,284 $ 55,745 $ 64,539 115.78%
----------- ----------- ------------ ---------
----------- ----------- ------------ ---------
Parent direct interest in bank subsidiary........................... $ 7,573 $ 3,411 $ 4,162 122.02%
----------- ----------- ------------ ---------
----------- ----------- ------------ ---------
PER COMMON SHARE:
Net income.......................................................... $ 2.19 $ 1.02 $ 1.17 114.71%
Pro forma earnings, excluding after-tax merger and integration
expense (2)....................................................... 2.19 1.28 0.91 71.09
Dividends........................................................... 0.42 0.35 0.07 20.00
Book value (end of period).......................................... 45.03 40.04 4.99 12.46
Common shares outstanding (end of period)........................... 54,892,939 54,758,560 134,379 0.25
Weighted average common shares outstanding.......................... 54,883,669 54,758,530 125,139 0.23
BALANCE SHEET (END OF PERIOD):
Total assets........................................................ $31,044,988 $28,679,646 $2,365,342 8.25%
Total loans......................................................... 22,147,550 20,946,765 1,200,785 5.73
Nonperforming assets................................................ 132,974 180,657 (47,683) (26.39)
Subordinated capital notes.......................................... 382,000 415,000 (33,000) (7.95)
Preferred stock..................................................... -- 135,000 (135,000) (100.00)
Common equity....................................................... 2,471,690 2,192,620 279,070 12.73
BALANCE SHEET (PERIOD AVERAGE):
Total assets........................................................ $30,113,382 $27,981,894 $2,131,488 7.62%
Total loans......................................................... 22,001,126 20,651,457 1,349,669 6.54
Common equity....................................................... 2,410,830 2,175,986 234,844 10.79
Earning assets...................................................... 26,730,417 24,655,164 2,075,253 8.42
FINANCIAL RATIOS:
Return on average assets (3)........................................ 1.71% 0.88% 0.83%
Pro forma return on average assets, excluding after-tax merger
and integration expense (2)(3).................................... 1.71 1.09 0.62
Return on average common equity (4)................................. 19.79 10.19 9.60
Pro forma return on average common equity, excluding after-tax
merger and integration expense (2)(4)............................. 19.79 12.77 7.02
Efficiency ratio (5)................................................ 59.22 71.20 (11.98)
Pro forma efficiency ratio, excluding merger and integration expense
(2)(5)............................................................ 59.22 64.81 (5.59)
Net interest margin (1)............................................. 4.66 4.72 (0.06)
Tier 1 risk-based capital ratio..................................... 8.92 9.04 (0.12)
Total risk-based capital ratio...................................... 11.02 11.16 (0.14)
Leverage ratio...................................................... 8.39 8.43 (0.04)
Allowance for credit losses to total loans.......................... 2.16 2.55 (0.39)
Allowance for credit losses to nonaccrual loans..................... 435.92 362.10 73.82
Net loans charged off to average total loans (6).................... 0.43 0.39 0.04
Nonperforming assets to total loans and foreclosed assets........... 0.60 0.86 (0.26)
Nonperforming assets to total assets................................ 0.43 0.63 (0.20)
</TABLE>
- ------------------------------
(1) Amounts are on a taxable-equivalent basis using the federal statutory tax
rate of 35 percent.
(2) See page 10, "Merger Accounting", for a description of merger accounting
and pro forma earnings presentations.
(3) Based on annualized net income.
(4) Based on annualized net income applicable to common stock.
(5) The efficiency ratio is noninterest expense, excluding foreclosed asset
expense (income), as a percentage of net interest income
(taxable-equivalent) and noninterest income. Foreclosed asset expense
(income) was $(1.6) million in the third quarter of 1997 and $(0.7) million
in the third quarter of 1996.
(6) Annualized.
2
<PAGE>
UNIONBANCAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL HIGHLIGHTS (CONTINUED)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-----------------------------------------------------
INCREASE (DECREASE)
SEPTEMBER 30, SEPTEMBER 30, ---------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 1997 1996 AMOUNT PERCENT
- -------------------------------------------------------------------------- ------------- ------------- ---------- ---------
<S> <C> <C> <C> <C>
RESULTS OF OPERATIONS:
Net interest income (1)................................................. $ 917,408 $ 880,735 $ 36,673 4.16%
Provision for credit losses............................................. -- 30,000 (30,000) (100.00)
Noninterest income...................................................... 342,627 315,704 26,923 8.53
Noninterest expense, excluding merger and integration expense (2)....... 756,171 763,065 (6,894) (0.90)
------------- ------------- ---------- ---------
Income before merger and integration expense and income
taxes (1)(2).......................................................... 503,864 403,374 100,490 24.91
Merger and integration expense.......................................... 6,037 86,818 (80,781) (93.05)
------------- ------------- ---------- ---------
Income before income taxes (1).......................................... 497,827 316,556 181,271 57.26
Taxable-equivalent adjustment........................................... 4,107 5,241 (1,134) (21.64)
Income tax expense...................................................... 174,869 121,658 53,211 43.74
------------- ------------- ---------- ---------
Net income.............................................................. $ 318,851 $ 189,657 $ 129,194 68.12%
------------- ------------- ---------- ---------
------------- ------------- ---------- ---------
NET INCOME APPLICABLE TO:
Common stock............................................................ $ 292,672 $ 171,608 $ 121,064 70.55%
------------- ------------- ---------- ---------
------------- ------------- ---------- ---------
Parent direct interest in bank subsidiary............................... $ 18,579 $ 9,569 $ 9,010 94.16%
------------- ------------- ---------- ---------
------------- ------------- ---------- ---------
PER COMMON SHARE:
Net income.............................................................. $ 5.34 $ 3.14 $ 2.20 70.06%
Pro forma earnings, excluding after-tax merger and integration expense
(2)................................................................... 5.40 4.05 1.35 33.33
Dividends (3)........................................................... 1.12 1.05 0.07 6.67
Book value (end of period).............................................. 45.03 40.04 4.99 12.46
Common shares outstanding (end of period)............................... 54,892,939 54,758,560 134,379 0.25
Weighted average common shares outstanding.............................. 54,815,040 54,733,777 81,263 0.15
BALANCE SHEET (END OF PERIOD):
Total assets............................................................ $31,044,988 $28,679,646 $2,365,342 8.25%
Total loans............................................................. 22,147,550 20,946,765 1,200,785 5.73
Nonperforming assets.................................................... 132,974 180,657 (47,683) (26.39)
Subordinated capital notes.............................................. 382,000 415,000 (33,000) (7.95)
Preferred stock......................................................... -- 135,000 (135,000) (100.00)
Common equity........................................................... 2,471,690 2,192,620 279,070 12.73
BALANCE SHEET (PERIOD AVERAGE):
Total assets............................................................ $29,451,728 $27,681,548 $1,770,180 6.39%
Total loans............................................................. 21,537,697 20,416,806 1,120,891 5.49
Common equity........................................................... 2,334,962 2,184,000 150,962 6.91
Earning assets.......................................................... 26,066,274 24,523,275 1,542,999 6.29
FINANCIAL RATIOS:
Return on average assets (4)............................................ 1.45% 0.92% 0.53%
Pro forma return on average assets, excluding after-tax merger
and integration expense (2)(4)........................................ 1.46 1.17 0.29
Return on average common equity (5)..................................... 16.76 10.50 6.26
Pro forma return on average common equity, excluding after-tax merger
and integration expense (2)(5)........................................ 16.95 13.56 3.39
Efficiency ratio (6).................................................... 60.55 70.75 (10.20)
Pro forma efficiency ratio, excluding merger and integration expense
(2)(6)................................................................ 60.07 63.49 (3.42)
Net interest margin (1)................................................. 4.70 4.76 (0.06)
Tier 1 risk-based capital ratio......................................... 8.92 9.04 (0.12)
Total risk-based capital ratio.......................................... 11.02 11.16 (0.14)
Leverage ratio.......................................................... 8.39 8.43 (0.04)
Allowance for credit losses to total loans.............................. 2.16 2.55 (0.39)
Allowance for credit losses to nonaccrual loans......................... 435.92 362.10 73.82
Net loans charged off to average total loans (7)........................ 0.28 0.33 (0.05)
Nonperforming assets to total loans and foreclosed assets............... 0.60 0.86 (0.26)
Nonperforming assets to total assets.................................... 0.43 0.63 (0.20)
</TABLE>
- ------------------------------
(1) Amounts are on a taxable-equivalent basis using the federal statutory tax
rate of 35 percent.
(2) See page 10, "Merger Accounting", for a description of merger accounting
and pro forma earnings presentations.
(3) The dividend amount for the first nine months of 1996 does not include a
dividend of $145 million paid to The Mitsubishi Bank, Limited in the first
quarter of 1996 by BanCal Tri-State Corporation and The Bank of California,
N.A.
(4) Based on annualized net income.
(5) Based on annualized net income applicable to common stock.
(6) The efficiency ratio is noninterest expense, excluding foreclosed asset
expense (income), as a percentage of net interest income
(taxable-equivalent) and noninterest income. Foreclosed asset expense
(income) was $(0.7) million in the first nine months of 1997 and $3.4
million in the first nine months of 1996.
(7) Annualized.
3
<PAGE>
ITEM 1. FINANCIAL STATEMENTS
UNIONBANCAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE FOR THE NINE
MONTHS MONTHS
ENDED SEPTEMBER ENDED SEPTEMBER
30, 30,
(DOLLARS IN THOUSANDS, EXCEPT ------------------ ------------------
PER SHARE DATA) 1997 1996 1997 1996
- ------------------------------ -------- -------- -------- --------
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans, including fees....... $447,892 $420,106 $1,305,451 $1,252,902
Investment
securities--taxable....... 42,245 33,909 116,715 98,762
Investment
securities--tax-exempt.... 1,981 2,523 6,360 7,879
Interest bearing deposits in
banks..................... 16,125 12,485 43,404 38,583
Federal funds sold and
securities purchased under
resale agreements......... 4,204 6,028 18,727 21,843
Trading account
securities.................. 7,790 6,264 19,274 18,015
-------- -------- -------- --------
Total interest income... 520,237 481,315 1,509,931 1,437,984
-------- -------- -------- --------
INTEREST EXPENSE
Deposits in domestic
offices................... 134,888 116,363 386,699 331,964
Deposits in foreign
offices................... 17,759 18,244 55,156 53,717
Federal funds purchased and
securities sold under
repurchase agreements..... 18,170 10,466 44,053 38,311
Commercial paper............ 21,814 22,687 66,543 66,649
Other borrowed funds........ 8,496 14,474 26,999 48,233
Subordinated capital
notes..................... 6,856 7,493 17,180 23,616
-------- -------- -------- --------
Total interest
expense............... 207,983 189,727 596,630 562,490
-------- -------- -------- --------
NET INTEREST INCOME........... 312,254 291,588 913,301 875,494
Provision for credit losses... -- 10,000 -- 30,000
-------- -------- -------- --------
Net interest income
after provision for
credit losses......... 312,254 281,588 913,301 845,494
-------- -------- -------- --------
NONINTEREST INCOME
Service charges on deposit
accounts.................. 29,271 26,799 84,699 75,827
Trust fees.................. 27,143 24,098 76,737 69,655
International commissions
and fees.................. 17,208 16,120 49,593 49,522
Credit card merchant fees... 15,326 13,721 42,653 38,224
Merchant banking fees....... 5,074 4,729 19,899 19,211
Investment securities gains,
net....................... 1,546 628 2,098 3,865
Other....................... 21,252 21,185 66,948 59,400
-------- -------- -------- --------
Total noninterest
income................ 116,820 107,280 342,627 315,704
-------- -------- -------- --------
NONINTEREST EXPENSE
Salaries and employee
benefits.................. 141,009 138,007 418,970 420,322
Net occupancy............... 21,619 35,439 64,133 81,664
Equipment................... 13,376 14,003 41,206 41,152
Credit card processing...... 11,002 9,619 31,269 28,026
Communications.............. 10,349 8,713 31,135 26,734
Advertising and public
relations................. 7,532 5,508 20,759 19,203
Data processing............. 6,544 5,568 19,115 15,575
Professional services....... 6,461 6,144 19,062 18,605
Printing and office
supplies.................. 5,390 7,939 17,646 20,471
Foreclosed asset expense
(income).................. (1,572) (696) (696) 3,445
Merger and integration...... -- 25,552 6,037 86,818
Other....................... 31,607 28,279 93,572 87,868
-------- -------- -------- --------
Total noninterest
expense............... 253,317 284,075 762,208 849,883
-------- -------- -------- --------
Income before income taxes.... 175,757 104,793 493,720 311,315
Income tax expense............ 45,953 42,810 174,869 121,658
-------- -------- -------- --------
NET INCOME.................... $129,804 $ 61,983 $318,851 $189,657
-------- -------- -------- --------
-------- -------- -------- --------
NET INCOME APPLICABLE TO:
Common stock................ $120,284 $ 55,745 $292,672 $171,608
-------- -------- -------- --------
-------- -------- -------- --------
Parent direct interest in
bank subsidiary........... $ 7,573 $ 3,411 $ 18,579 $ 9,569
-------- -------- -------- --------
-------- -------- -------- --------
NET INCOME PER AVERAGE COMMON
SHARE........................ $ 2.19 $ 1.02 $ 5.34 $ 3.14
-------- -------- -------- --------
-------- -------- -------- --------
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING (IN THOUSANDS)... 54,884 54,759 54,815 54,734
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
UNIONBANCAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(UNAUDITED) (UNAUDITED)
SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30,
(DOLLARS IN THOUSANDS) 1997 1996 1996
- --------------------------------------------------------------------- ------------- ------------ -------------
<S> <C> <C> <C>
ASSETS
Cash and due from banks.............................................. $ 2,086,873 $2,268,771 $ 2,359,879
Interest bearing deposits in banks................................... 1,064,858 1,131,216 831,710
Federal funds sold and securities purchased under resale agreements.. 762,978 537,710 471,641
------------- ------------ -------------
Total cash and cash equivalents.................................. 3,914,709 3,937,697 3,663,230
Trading account securities........................................... 646,428 617,464 452,613
Investment securities available for sale............................. 2,625,490 2,164,197 2,007,074
Investment securities held to maturity (market value of $237,102 at
September 30, 1997, $274,405 at December 31, 1996, and $289,029 at
September 30, 1996)................................................. 232,388 268,196 283,566
Loans................................................................ 22,147,550 20,898,105 20,946,765
Less: Allowance for credit losses.................................... 478,454 523,946 535,087
------------- ------------ -------------
Net loans........................................................ 21,669,096 20,374,159 20,411,678
Customers' acceptance liability...................................... 800,109 778,378 772,893
Premises and equipment, net.......................................... 403,851 410,621 426,856
Intangible assets.................................................... 81,094 91,129 94,476
Other assets......................................................... 671,823 592,218 567,260
------------- ------------ -------------
Total assets..................................................... $31,044,988 $29,234,059 $28,679,646
------------- ------------ -------------
------------- ------------ -------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits in domestic offices:
Noninterest bearing................................................ $ 7,958,088 $7,381,078 $ 6,963,233
Interest bearing................................................... 13,297,367 12,607,691 12,316,319
Deposits in foreign offices:
Noninterest bearing................................................ 284,611 274,031 346,814
Interest bearing................................................... 1,434,122 1,270,160 1,283,024
------------- ------------ -------------
Total deposits................................................... 22,974,188 21,532,960 20,909,390
Federal funds purchased and securities sold under repurchase
agreements.......................................................... 1,294,943 1,322,654 714,998
Commercial paper..................................................... 1,593,733 1,495,463 1,674,254
Other borrowed funds................................................. 745,753 758,251 1,184,199
Acceptances outstanding.............................................. 800,109 778,378 772,893
Other liabilities.................................................... 638,935 469,420 554,693
Subordinated capital notes........................................... 382,000 382,000 415,000
------------- ------------ -------------
Total liabilities................................................ 28,429,661 26,739,126 26,225,427
------------- ------------ -------------
SHAREHOLDERS' EQUITY
Parent direct interest in equity of bank subsidiary.................. 143,637 128,689 126,599
Preferred stock:
Authorized 5,000,000 shares 8 3/8% Noncumulative, Series A, issued
1,350,000 shares as of December 31, 1996, and September 30,
1996............................................................. -- 135,000 135,000
Common stock--$5 stated value:
Authorized 100,000,000 shares, issued 54,892,939 as of September
30, 1997, 54,762,653 as of December 31, 1996, and 54,758,560 as
of September 30, 1996............................................ 274,465 273,813 273,793
Additional paid-in capital........................................... 1,318,165 1,310,813 1,310,424
Retained earnings.................................................... 864,389 635,180 600,536
Cumulative translation adjustment.................................... (4,311) (2,752) (2,393)
Net unrealized gain on securities available for sale................. 18,982 14,190 10,260
------------- ------------ -------------
Total shareholders' equity....................................... 2,615,327 2,494,933 2,454,219
------------- ------------ -------------
Total liabilities and shareholders' equity....................... $31,044,988 $29,234,059 $28,679,646
------------- ------------ -------------
------------- ------------ -------------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
UNIONBANCAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED SEPTEMBER 30,
------------------------
(DOLLARS IN THOUSANDS) 1997 1996
- --------------------------------------------------------------------------------------- ----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income........................................................................... $ 318,851 $ 189,657
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses........................................................ -- 30,000
Depreciation, amortization and accretion........................................... 49,285 48,182
Provision for deferred income taxes................................................ 38,734 16,991
Gain on sales of investment securities available for sale.......................... (2,098) (3,850)
Noncash portion of provision for merger and integration expense.................... 1,026 71,284
Other, net......................................................................... 38,256 (133,714)
----------- -----------
Total adjustments................................................................ 125,203 28,893
----------- -----------
Net cash provided by operating activities............................................ 444,054 218,550
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of investment securities available for sale....................... 3,920 12,695
Proceeds from matured and called investment securities available for sale............ 326,833 721,813
Purchase of investment securities available for sale................................. (777,281) (726,561)
Proceeds from matured and called investment securities held to maturity.............. 36,121 79,089
Net increase in loans................................................................ (1,313,749) (784,576)
Other, net........................................................................... (48,145) (18,366)
----------- -----------
Net cash used by investing activities................................................ (1,772,301) (715,906)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits............................................................. 1,441,228 1,254,347
Net decrease in federal funds purchased and securities sold under repurchase
agreements......................................................................... (27,711) (480,060)
Net increase in commercial paper and other borrowed funds............................ 85,772 403,525
Net decrease in subordinated capital notes........................................... -- (86,369)
Dividends paid....................................................................... (68,453) (199,324)
Redemption of preferred stock........................................................ (135,000) --
Repayment of borrowing to support corporate owned life insurance..................... -- (95,475)
Other, net........................................................................... (1,826) 1,862
----------- -----------
Net cash provided by financing activities.......................................... 1,294,010 798,506
----------- -----------
Net increase (decrease) in cash and cash equivalents................................... (34,237) 301,150
Cash and cash equivalents at beginning of period....................................... 3,937,697 3,352,423
Foreign exchange revaluation gain...................................................... 11,249 9,657
----------- -----------
Cash and cash equivalents at end of period............................................. $ 3,914,709 $ 3,663,230
----------- -----------
----------- -----------
CASH PAID DURING THE PERIOD FOR:
Interest............................................................................. $ 611,347 $ 536,650
Income taxes......................................................................... 47,359 120,399
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Loans transferred to foreclosed assets............................................... $ 19,033 $ 30,253
</TABLE>
See accompanying notes to condensed consolidated financial statements.
6
<PAGE>
UNIONBANCAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
NET
PARENT UNREALIZED
DIRECT GAIN
INTEREST IN ADDITIONAL CUMULATIVE ON SECURITIES
BANK PREFERRED COMMON PAID-IN RETAINED TRANSLATION AVAILABLE FOR
(DOLLARS IN THOUSANDS) SUBSIDIARY STOCK STOCK CAPITAL EARNINGS ADJUSTMENT SALE
- --------------------------------- ----------- ----------- ----------- ----------- --------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1995..... $ 159,996 $ 135,000 $ 273,351 $1,306,697 $ 585,680 $ (972) $ 24,340
Decrease in unrealized gain on
securities available for sale,
net of taxes.................... (549) (14,080)
Net income....................... 9,569 180,088
Dividend reinvestment plan....... 120 1,073
Dividends on common stock ($1.05
per share) (1).................. (2,433) (51,125)
Dividend to MBL (1)(2)........... (39,890) (105,000)
Dividends on preferred stock..... (8,480)
Deferred compensation--restricted
stock awards.................... 212 2,095 (627)
Stock options exercised.......... 110 559
Change in translation
adjustment...................... (94) (1,421)
----------- ----------- ----------- ----------- --------- ----------- -------------
BALANCE AT SEPTEMBER 30, 1996.... $ 126,599 $ 135,000 $ 273,793 $1,310,424 $ 600,536 $ (2,393) $ 10,260
----------- ----------- ----------- ----------- --------- ----------- -------------
----------- ----------- ----------- ----------- --------- ----------- -------------
BALANCE AT DECEMBER 31, 1996..... $ 128,689 $ 135,000 $ 273,813 $1,310,813 $ 635,180 $ (2,752) $ 14,190
Increase in unrealized gain on
securities available for sale,
net of taxes.................... 364 4,792
Net income....................... 18,579 300,272
Dividend reinvestment plan....... 2 (77)
Dividends on common stock ($1.12
per share)...................... (3,897) (61,423)
Dividends on preferred stock..... (7,600)
Redemption of preferred stock.... (135,000)
Deferred compensation--restricted
stock awards.................... 283 3,498 (2,040)
Stock options exercised.......... 367 3,931
Change in translation
adjustment...................... (98) (1,559)
----------- ----------- ----------- ----------- --------- ----------- -------------
BALANCE AT SEPTEMBER 30, 1997.... $ 143,637 $ 0 $ 274,465 $1,318,165 $ 864,389 $ (4,311) $ 18,982
----------- ----------- ----------- ----------- --------- ----------- -------------
----------- ----------- ----------- ----------- --------- ----------- -------------
<CAPTION>
(DOLLARS IN THOUSANDS) TOTAL
- --------------------------------- ---------
<S> <C>
BALANCE AT DECEMBER 31, 1995..... $2,484,092
Decrease in unrealized gain on
securities available for sale,
net of taxes.................... (14,629)
Net income....................... 189,657
Dividend reinvestment plan....... 1,193
Dividends on common stock ($1.05
per share) (1).................. (53,558)
Dividend to MBL (1)(2)........... (144,890)
Dividends on preferred stock..... (8,480)
Deferred compensation--restricted
stock awards.................... 1,680
Stock options exercised.......... 669
Change in translation
adjustment...................... (1,515)
---------
BALANCE AT SEPTEMBER 30, 1996.... $2,454,219
---------
---------
BALANCE AT DECEMBER 31, 1996..... $2,494,933
Increase in unrealized gain on
securities available for sale,
net of taxes.................... 5,156
Net income....................... 318,851
Dividend reinvestment plan....... (75)
Dividends on common stock ($1.12
per share)...................... (65,320)
Dividends on preferred stock..... (7,600)
Redemption of preferred stock.... (135,000)
Deferred compensation--restricted
stock awards.................... 1,741
Stock options exercised.......... 4,298
Change in translation
adjustment...................... (1,657)
---------
BALANCE AT SEPTEMBER 30, 1997.... $2,615,327
---------
---------
</TABLE>
- ------------------------------
(1) Based on historical Union Bank common cash dividends declared and does not
include a $145 million dividend paid to The Mitsubishi Bank, Limited in the
first quarter of 1996 by BanCal Tri-State Corporation and The Bank of
California, N.A.
(2) The Mitsubishi Bank, Limited.
See accompanying notes to condensed consolidated financial statements.
7
<PAGE>
UNIONBANCAL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(UNAUDITED)
NOTE 1 -- BASIS OF PRESENTATION AND NATURE OF OPERATIONS
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 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 GAAP requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expense during the reporting period. Actual
results could differ from those estimates. These unaudited condensed
consolidated financial statements should be read in conjunction with the audited
consolidated financial statements included in the Company's Form 10-K for the
year ended December 31, 1996.
In the opinion of management, all adjustments (comprised of normal accruals)
considered necessary for a fair presentation of the Company's interim financial
statements have been included.
Primary and fully diluted earnings per share are computed based on net
income after preferred dividends and parent direct interest in bank subsidiary,
and use the weighted average number of common shares and equivalent common
shares outstanding during the period. Stock options are a common stock
equivalent but, for the periods presented, did not have a dilutive effect and
are, therefore, not included in the Company's earnings per share calculations.
NOTE 2 -- RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 1996, Statement of Financial Accounting Standards ("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. In December 1996, the Financial Accounting Standards Board
("FASB") reconsidered certain provisions of SFAS No. 125 and issued SFAS No.
127, "Deferral of the Effective Date of Certain Provisions of FASB Statement No.
125" to defer for one year the effective date of implementation for transactions
related to repurchase agreements, dollar-roll repurchase agreements, securities
lending and similar transactions. Management determined that the effect of
adoption of SFAS No. 125 on the Company's financial statements was not material
and believes that the effect of adoption of SFAS No. 127 will also not be
material.
In February 1997, the FASB issued SFAS No. 128, "Earnings per Share". This
Statement simplifies the standards for computing earnings per share ("EPS") and
makes them comparable to international EPS standards. SFAS No. 128 replaces the
presentation of primary EPS with a presentation of basic EPS. In addition, all
entities with complex capital structures are required to provide a dual
disclosure of basic and diluted EPS on the face of the income statement and a
reconciliation of the numerator and denominator of the basic EPS computation to
the numerator and denominator of the diluted EPS computation. This Statement
applies to entities with publicly held common stock or potential common stock
and is effective for financial statements issued for periods ending after
December 15, 1997, including interim periods, and requires restatement of all
prior period EPS data presented.
8
<PAGE>
UNIONBANCAL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1997
(UNAUDITED)
NOTE 2 -- RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS (CONTINUED)
The following table provides pro forma disclosure of basic and diluted EPS
in accordance with SFAS No. 128:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------- --------------------
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Pro forma basic EPS..................................................... 2.19 1.02 5.34 3.14
Pro forma diluted EPS................................................... 2.18 1.02 5.32 3.13
</TABLE>
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income", which requires that an enterprise report, by major components and as a
single total, the change in its net assets during the period from non-owner
sources; and No. 131, "Disclosures about Segments of an Enterprise and Related
Information", which establishes annual and interim reporting standards for an
enterprise's operating segments and related disclosures about its products,
services, geographic areas, and major customers. Adoption of these statements
will not impact the Company's consolidated financial position, results of
operations or cash flows, and any effect will be limited to the form and content
of its disclosures. Both statements are effective for fiscal years beginning
after December 15, 1997, with earlier application permitted.
NOTE 3 -- INCOME TAX EXPENSE
During the third quarter of 1997, the Franchise Tax Board of the State of
California approved tax and interest refunds to settle litigation,
administration and audit disputes covering tax years 1975-1987. The effect was
to reduce income tax expense and, correspondingly, to increase net income by $25
million for the three and nine month periods ending September 30, 1997.
NOTE 4 -- PREFERRED STOCK
On September 3, 1997, the Company redeemed all outstanding shares of its
8 3/8% Noncumulative Preferred Stock, Series A. The redemption price was $135
million plus $2 million in accrued dividends. The redemption was funded by
proceeds from the issuance of $200 million in subordinated capital notes in June
1997.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
INTRODUCTION
UnionBanCal Corporation is a San Francisco, California-based bank holding
company with consolidated assets of $31 billion at September 30, 1997. Its
primary banking subsidiary is Union Bank of California, N.A., the third largest
commercial bank in California, and among the 30 largest banks in the United
States. Union Bank of California, N.A., had 237 banking offices in California, 5
banking offices in Oregon and Washington and 18 overseas facilities at September
30, 1997. UnionBanCal Corporation is 81 percent owned by The Bank of
Tokyo-Mitsubishi, Ltd., and 19 percent owned by other shareholders. Union Bank
of California, N.A., is 94 percent owned by UnionBanCal Corporation and 6
percent directly owned by The Bank of Tokyo-Mitsubishi, Ltd.
THIS DOCUMENT MAY CONTAIN FORWARD-LOOKING STATEMENTS THAT ARE SUBJECT TO
RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY
FROM THOSE INDICATED. FOR A DISCUSSION OF FACTORS THAT COULD CAUSE ACTUAL
RESULTS TO DIFFER, PLEASE SEE THE DISCUSSION CONTAINED HEREIN AND IN THE
COMPANY'S PUBLICLY AVAILABLE SECURITIES AND EXCHANGE COMMISSION FILINGS AND
PRESS RELEASES.
The interim financial information should be read in conjunction with the
Company's Form 10-K for the year ended December 31, 1996. Certain amounts for
prior periods have been reclassified to conform with current financial statement
presentation.
MERGER ACCOUNTING
UnionBanCal Corporation was formed from the combination of Union Bank with
BanCal Tri-State Corporation and its banking subsidiary, The Bank of California,
N.A., on April 1, 1996. The merger was effected by the issuance of 18,134,027
shares of Union Bank common stock in exchange for all the outstanding common
shares of BanCal Tri-State Corporation.
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, the Consolidated
Financial Highlights on pages 2 and 3 and the Analysis of Earnings on page 13
include certain pro forma earnings disclosures. These presentations supplement
the Condensed Consolidated Statements of Income on page 4 (which are prepared in
accordance with GAAP) with respect to the treatment of merger and integration
expense. Management believes that it is meaningful to review the operating
results and trends excluding merger and integration expense and, therefore, has
included information in the Consolidated Financial Highlights and the Analysis
of Earnings which presents earnings before and after income taxes, as well as
certain financial ratios, excluding merger and integration expense.
10
<PAGE>
SUMMARY
Net income in the third quarter of 1997 was $130 million, compared with $62
million in the third quarter of 1996. Net income applicable to common stock was
$120 million, or $2.19 per common share, in the third quarter of 1997, compared
with $56 million, or $1.02 per common share, in the third quarter of 1996. Pro
forma earnings, excluding after-tax merger and integration expense, were $130
million in the third quarter of 1997, an increase of 69 percent from $77 million
a year earlier. Pro forma earnings applicable to common stock were $120 million,
or $2.19 per common share, compared with $70 million, or $1.28 per common share,
in the third quarter of 1996. Other highlights of the third quarter of 1997
include:
- Net interest income on a taxable-equivalent basis was $314 million in the
third quarter of 1997, a $21 million, or 7 percent, increase from the
comparable period one year earlier. The increase in net interest income
was primarily due to a $2.1 billion, or 8 percent, increase in average
earning assets, which was partially funded by a higher proportion of
noninterest bearing demand deposits.
- No provision for credit losses was recorded, compared with $10 million in
the third quarter of 1996, reflecting improvement in the quality of the
loan portfolio. Nonperforming assets declined $48 million, or 26 percent,
from September 30, 1996, to $133 million at September 30, 1997.
Nonperforming assets as a percent of total assets declined to 0.43% at
September 30, 1997, compared with 0.63% a year earlier. Total nonaccrual
loans at September 30, 1997 and 1996 were $110 million and $148 million,
respectively. This decrease caused the ratio of nonaccrual and
renegotiated loans to total loans to drop from 0.71% to 0.50%.
- Noninterest income was $117 million, an increase of $10 million over the
third quarter of 1996, due primarily to increases in service charges on
deposits of $2 million, in trust fees of $3 million, and in credit card
merchant fees of $2 million.
- Noninterest expense, excluding merger and integration expense, was $253
million for the third quarter of 1997, compared with $259 million for the
third quarter of 1996, a decrease of 2 percent. Net occupancy expense
declined $14 million, $12 million of which was attributable to a charge
recorded in the third quarter of 1996 relating to former banking
facilities. Excluding the $12 million charge and merger and integration
expense, noninterest expense increased $6 million compared to third
quarter 1996. No merger and integration expense was recorded in the third
quarter of 1997, compared with $26 million in the third quarter of 1996.
- The effective tax rate for the third quarter of 1997 was 26 percent,
compared with 41 percent for the same period of 1996. The lower effective
tax rate in the third quarter of 1997 was the result of a $25 million
after-tax refund from the State of California Franchise Tax Board.
Excluding the Franchise Tax Board refund, the effective tax rate in the
third quarter of 1997 was 40 percent.
- In the third quarter of 1997, the return on average assets increased to
1.71% from 0.88% a year earlier. The return on average common equity
increased to 19.79% from 10.19%. Excluding the after-tax effect of merger
and integration expense, the pro forma return on average assets increased
to 1.71% from 1.09%, while the pro forma return on average common equity
increased to 19.79% from 12.77%.
- Total loans at September 30, 1997, increased $1.2 billion, or 6 percent,
over September 30, 1996, primarily due to growth in the commercial,
financial and industrial and the commercial mortgage portfolios. At $22.1
billion, total loans were 1 percent higher at September 30, 1997 than at
June 30, 1997.
- The Company's Tier 1 and total risk-based capital ratios were 8.92% and
11.02% at September 30, 1997, compared with 9.04% and 11.16% at September
30, 1996. The third quarter 1997 leverage ratio for the Company was 8.39%,
compared with 8.43% for the third quarter of 1996. The decrease in the
capital ratios was primarily attributable to the redemption of $135
million in preferred stock.
11
<PAGE>
SUMMARY (CONTINUED)
Net income in the first nine months of 1997 was $319 million, including $4
million of after-tax merger and integration expense recorded in connection with
the April 1, 1996, combination of Union Bank and BanCal Tri-State Corporation.
Net income for the first nine months of 1996 was $190 million, including $53
million of after-tax merger and integration expense. Net income applicable to
common stock was $293 million, or $5.34 per common share, in the first nine
months of 1997, compared with $172 million, or $3.14 per common share, in the
first nine months of 1996. Pro forma earnings, excluding after-tax merger and
integration expense, were $323 million, an increase of 33 percent from a year
earlier. Pro forma earnings applicable to common stock, excluding after-tax
merger and integration expense, were $296 million, or $5.40 per common share,
compared with $222 million, or $4.05 per common share, in the first nine months
of 1996. Other highlights of the first nine months of 1997 include:
- Net interest income on a taxable-equivalent basis was $917 million in the
first nine months of 1997, a $37 million, or 4 percent, increase from the
comparable period one year earlier. Although the net interest margin
declined 6 basis points to 4.70 percent, largely due to a drop in the
average domestic loan yield of 11 basis points, net interest income
increased, primarily due to average loan growth of 5 percent.
- No provision for credit losses was recorded, compared with $30 million in
the first nine months of 1996, reflecting improvement in the quality of
the loan portfolio, as well as a 26 percent reduction in non-performing
assets from $181 million at September 30, 1996 to $133 million at
September 30, 1997.
- Noninterest income was $343 million, an increase of $27 million over the
first nine months of 1996, due primarily to a $9 million increase in
service charges on deposits, a $7 million increase in trust fees, and a $4
million increase in credit card merchant fees.
- Noninterest expense, excluding merger and integration expense, was $756
million in the first nine months of 1997, compared with $763 million in
the first nine months of 1996. Excluding the third quarter 1996 occupancy
charge of $12 million, noninterest expense increased $5 million, due
primarily to increases in data processing expense. Excluding the $12
million one-time charge, a decrease in net occupancy expense of $6 million
as a result of merger consolidations and a decrease in foreclosed asset
expense of $4 million were offset by increases in most other noninterest
expense categories.
- The effective tax rate for the first nine months of 1997 was 35 percent,
compared with 39 percent for the same period of 1996. Excluding the $25
million after-tax refund from the California Franchise Tax Board, the
effective tax rate in the first nine months of 1997 was 40 percent.
Excluding a $5 million tax benefit reflecting the settlement of a unitary
tax issue with the California Franchise Tax Board, the effective tax rate
in the first nine months of 1996 was 41 percent.
- The return on average assets increased to 1.45% from 0.92%. Excluding the
after-tax effect of merger and integration expense, the pro forma return
on average assets increased to 1.46% from 1.17%. The 29 basis point
increase in pro forma return on average assets was attributable to a 33
percent increase in pro forma earnings combined with a 6 percent increase
in average assets.
- The return on average common equity increased to 16.76% from 10.50%. The
pro forma return on average common equity increased to 16.95% from 13.56%.
The 339 basis point increase in pro forma return on average common equity
was due to a 33 percent increase in pro forma earnings applicable to
common stock combined with a 7 percent increase in average common equity.
12
<PAGE>
ANALYSIS OF EARNINGS
<TABLE>
<CAPTION>
FOR THE
NINE
MONTHS
FOR THE THREE MONTHS ENDED ENDED
----------------------------------------------------- -----------
SEPT. 30, JUNE 30, MAR. 31, DEC. 31, SEPT. 30, SEPT. 30,
(IN THOUSANDS, EXCEPT PER SHARE DATA) 1997 1997 1997 1996 1996 1997
- ----------------------------------------------------- --------- --------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
EARNINGS SUMMARY
Interest income (1)................................ $ 521,538 $ 506,048 $ 486,452 $ 490,803 $ 482,404 $ 1,514,038
Interest expense................................... 207,983 197,647 191,000 196,236 189,727 596,630
--------- --------- --------- --------- --------- -----------
Net interest income (1)............................ 313,555 308,401 295,452 294,567 292,677 917,408
Provision for credit losses........................ -- -- -- 10,000 10,000 --
Noninterest income................................. 116,820 111,021 114,786 102,972 107,280 342,627
Noninterest expense, excluding merger and
integration expense (2).......................... 253,317 255,753 247,101 254,375 258,523 756,171
--------- --------- --------- --------- --------- -----------
Income before merger and integration expense and
income taxes (1)(2).............................. 177,058 163,669 163,137 133,164 131,434 503,864
Merger and integration expense (2)................. -- -- 6,037 30,646 25,552 6,037
--------- --------- --------- --------- --------- -----------
Income before income taxes (1)..................... 177,058 163,669 157,100 102,518 105,882 497,827
Taxable-equivalent adjustment...................... 1,301 1,385 1,421 1,483 1,089 4,107
Income tax expense................................. 45,953 65,739 63,177 41,234 42,810 174,869
--------- --------- --------- --------- --------- -----------
Net income......................................... $ 129,804 $ 96,545 $ 92,502 $ 59,801 $ 61,983 $ 318,851
--------- --------- --------- --------- --------- -----------
--------- --------- --------- --------- --------- -----------
Net income applicable to:
Common stock..................................... $ 120,284 $ 88,097 $ 84,291 $ 53,472 $ 55,745 $ 292,672
--------- --------- --------- --------- --------- -----------
--------- --------- --------- --------- --------- -----------
Parent direct interest in bank subsidiary........ $ 7,573 $ 5,621 $ 5,385 $ 3,503 $ 3,411 $ 18,579
--------- --------- --------- --------- --------- -----------
--------- --------- --------- --------- --------- -----------
RECAP OF EARNINGS
Net income......................................... $ 129,804 $ 96,545 $ 92,502 $ 59,801 $ 61,983 $ 318,851
Merger and integration expense (after-tax) (2)..... -- -- 3,550 18,570 15,025 3,550
--------- --------- --------- --------- --------- -----------
Pro forma earnings, excluding merger and
integration expense (2).......................... $ 129,804 $ 96,545 $ 96,052 $ 78,371 $ 77,008 $ 322,401
--------- --------- --------- --------- --------- -----------
--------- --------- --------- --------- --------- -----------
Net income applicable to common stock.............. $ 120,284 $ 88,097 $ 84,291 $ 53,472 $ 55,745 $ 292,672
Merger and integration expense (after-tax)
applicable to common stock (2)................... -- -- 3,338 17,460 14,128 3,338
--------- --------- --------- --------- --------- -----------
Pro forma earnings applicable to common stock,
excluding merger and integration expense (2)..... $ 120,284 $ 88,097 $ 87,629 $ 70,932 $ 69,873 $ 296,010
--------- --------- --------- --------- --------- -----------
--------- --------- --------- --------- --------- -----------
PER COMMON SHARE
Net income......................................... $ 2.19 $ 1.61 $ 1.54 $ 0.98 $ 1.02 $ 5.34
Merger and integration expense (after-tax) (2)..... -- -- 0.06 0.32 0.26 0.06
--------- --------- --------- --------- --------- -----------
Pro forma earnings, excluding merger and
integration expense (2).......................... $ 2.19 $ 1.61 $ 1.60 $ 1.30 $ 1.28 $ 5.40
--------- --------- --------- --------- --------- -----------
--------- --------- --------- --------- --------- -----------
Dividends (3)...................................... $ 0.42 $ 0.35 $ 0.35 $ 0.35 $ 0.35 $ 1.12
Book value (end of period)......................... 45.03 43.15 41.76 40.74 40.04 45.03
Weighted average common shares outstanding (in
thousands)....................................... 54,884 54,796 54,765 54,760 54,759 54,815
<CAPTION>
SEPT. 30,
(IN THOUSANDS, EXCEPT PER SHARE DATA) 1996
- ----------------------------------------------------- -----------
<S> <C>
EARNINGS SUMMARY
Interest income (1)................................ $ 1,443,225
Interest expense................................... 562,490
-----------
Net interest income (1)............................ 880,735
Provision for credit losses........................ 30,000
Noninterest income................................. 315,704
Noninterest expense, excluding merger and
integration expense (2).......................... 763,065
-----------
Income before merger and integration expense and
income taxes (1)(2).............................. 403,374
Merger and integration expense (2)................. 86,818
-----------
Income before income taxes (1)..................... 316,556
Taxable-equivalent adjustment...................... 5,241
Income tax expense................................. 121,658
-----------
Net income......................................... $ 189,657
-----------
-----------
Net income applicable to:
Common stock..................................... $ 171,608
-----------
-----------
Parent direct interest in bank subsidiary........ $ 9,569
-----------
-----------
RECAP OF EARNINGS
Net income......................................... $ 189,657
Merger and integration expense (after-tax) (2)..... 53,348
-----------
Pro forma earnings, excluding merger and
integration expense (2).......................... $ 243,005
-----------
-----------
Net income applicable to common stock.............. $ 171,608
Merger and integration expense (after-tax)
applicable to common stock (2)................... 50,164
-----------
Pro forma earnings applicable to common stock,
excluding merger and integration expense (2)..... $ 221,772
-----------
-----------
PER COMMON SHARE
Net income......................................... $ 3.14
Merger and integration expense (after-tax) (2)..... 0.91
-----------
Pro forma earnings, excluding merger and
integration expense (2).......................... $ 4.05
-----------
-----------
Dividends (3)...................................... $ 1.05
Book value (end of period)......................... 40.04
Weighted average common shares outstanding (in
thousands)....................................... 54,734
</TABLE>
- ------------------------------
(1) Amounts are on a taxable-equivalent basis using the federal statutory tax
rate of 35 percent.
(2) See page 10, "Merger Accounting", for a description of merger accounting
and pro forma earnings presentations.
(3) The dividend amount for the first nine months of 1996 does not include a
dividend of $145 million paid to The Mitsubishi Bank, Limited in the second
quarter of 1996 by BanCal Tri-State Corporation and The Bank of California,
N.A.
13
<PAGE>
NET INTEREST INCOME
The table below shows the major components of net interest income and net
interest margin.
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
------------------------------------------------------------------------------------
SEPTEMBER 30, 1997 JUNE 30, 1997
----------------------------------------- -----------------------------------------
INTEREST AVERAGE INTEREST AVERAGE
AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/
(DOLLARS IN THOUSANDS) BALANCE EXPENSE (1) RATE (1) BALANCE EXPENSE (1) RATE (1)
- ---------------------------------------- -------------- ------------ ----------- -------------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Loans: (2)
Domestic.............................. $ 20,565,541 $ 426,860 8.25% $ 20,239,615 $ 416,966 8.26%
Foreign............................... 1,435,585 21,331 5.90 1,293,283 20,431 6.34
Investment securities--taxable (3)...... 2,655,275 42,245 6.34 2,459,386 38,641 6.29
Investment securities--tax-exempt (3)... 118,514 2,983 10.07 127,403 3,236 10.16
Interest bearing deposits in banks...... 1,085,110 16,125 5.90 1,099,134 16,080 5.87
Federal funds sold and securities
purchased under resale agreements..... 293,775 4,204 5.68 329,367 4,683 5.70
Trading account securities.............. 576,617 7,790 5.36 458,103 6,011 5.26
-------------- ------------ -------------- ------------
Total earning assets................ 26,730,417 521,538 7.75 26,006,291 506,048 7.80
------------ ------------
Allowance for credit losses............. (495,361) (515,546)
Cash and due from banks................. 1,951,891 2,034,748
Premises and equipment, net............. 409,574 412,993
Other assets............................ 1,516,861 1,500,811
-------------- --------------
Total assets........................ $ 30,113,382 $ 29,439,297
-------------- --------------
-------------- --------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits in domestic offices:
Interest bearing...................... $ 5,328,180 38,422 2.86 $ 5,280,831 37,074 2.82
Savings and consumer time............. 2,995,038 28,780 3.81 2,955,092 27,890 3.79
Large time............................ 4,838,640 67,686 5.55 4,479,911 60,442 5.41
Deposits in foreign offices............. 1,513,336 17,759 4.66 1,626,865 19,488 4.80
-------------- ------------ -------------- ------------
Total interest bearing deposits..... 14,675,194 152,647 4.13 14,342,699 144,894 4.05
-------------- ------------ -------------- ------------
Federal funds purchased and securities
sold under repurchase agreements...... 1,334,367 18,170 5.40 1,158,540 15,492 5.36
Subordinated capital notes.............. 421,130 6,856 6.46 295,187 4,821 6.55
Other borrowed funds.................... 2,214,890 30,310 5.43 2,409,865 32,440 5.40
-------------- ------------ -------------- ------------
Total borrowed funds................ 3,970,387 55,336 5.53 3,863,592 52,753 5.48
-------------- ------------ -------------- ------------
Total interest bearing
liabilities....................... 18,645,581 207,983 4.43 18,206,291 197,647 4.35
------------ ------------
Demand deposits......................... 7,551,259 7,364,799
Other liabilities....................... 1,273,842 1,268,456
-------------- --------------
Total liabilities................... 27,470,682 26,839,546
SHAREHOLDERS' EQUITY.................... 2,642,700 2,599,751
-------------- --------------
Total liabilities and shareholders'
equity............................ $ 30,113,382 $ 29,439,297
-------------- --------------
-------------- --------------
Net interest income/margin
(taxable-equivalent basis)............ 313,555 4.66% 308,401 4.75%
Less: taxable-equivalent adjustment..... 1,301 1,385
------------ ------------
Net interest income................. $ 312,254 $ 307,016
------------ ------------
------------ ------------
<CAPTION>
MARCH 31, 1997
-----------------------------------------
INTEREST AVERAGE
AVERAGE INCOME/ YIELD/
(DOLLARS IN THOUSANDS) BALANCE EXPENSE (1) RATE (1)
- ---------------------------------------- -------------- ------------ -----------
<S> <C> <C> <C>
ASSETS
Loans: (2)
Domestic.............................. $ 19,818,799 $ 401,456 8.19%
Foreign............................... 1,250,023 19,307 6.26
Investment securities--taxable (3)...... 2,312,482 35,829 6.24
Investment securities--tax-exempt (3)... 134,157 3,348 9.98
Interest bearing deposits in banks...... 802,784 11,199 5.66
Federal funds sold and securities
purchased under resale agreements..... 733,499 9,840 5.44
Trading account securities.............. 396,277 5,473 5.60
-------------- ------------
Total earning assets................ 25,448,021 486,452 7.73
------------
Allowance for credit losses............. (531,621)
Cash and due from banks................. 2,032,209
Premises and equipment, net............. 416,582
Other assets............................ 1,425,210
--------------
Total assets........................ $ 28,790,401
--------------
--------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits in domestic offices:
Interest bearing...................... $ 5,212,126 35,961 2.80
Savings and consumer time............. 2,918,508 27,025 3.76
Large time............................ 4,755,047 63,419 5.41
Deposits in foreign offices............. 1,540,546 17,909 4.71
-------------- ------------
Total interest bearing deposits..... 14,426,227 144,314 4.06
-------------- ------------
Federal funds purchased and securities
sold under repurchase agreements...... 819,980 10,391 5.14
Subordinated capital notes.............. 343,111 5,503 6.51
Other borrowed funds.................... 2,291,772 30,792 5.45
-------------- ------------
Total borrowed funds................ 3,454,863 46,686 5.48
-------------- ------------
Total interest bearing
liabilities....................... 17,881,090 191,000 4.33
------------
Demand deposits......................... 7,102,730
Other liabilities....................... 1,279,767
--------------
Total liabilities................... 26,263,587
SHAREHOLDERS' EQUITY.................... 2,526,814
--------------
Total liabilities and shareholders'
equity............................ $ 28,790,401
--------------
--------------
Net interest income/margin
(taxable-equivalent basis)............ 295,452 4.69%
Less: taxable-equivalent adjustment..... 1,421
------------
Net interest income................. $ 294,031
------------
------------
</TABLE>
- ------------------------------
(1) Yields and interest income are presented on a taxable-equivalent basis
using the federal statutory tax rate of 35 percent.
(2) The amortized portion of net loan origination fees (costs) is included in
interest income on loans.
(3) Yields on investment securities available for sale were based on fair
value. The difference between these yields and those based on amortized
cost was not significant.
14
<PAGE>
NET INTEREST INCOME (CONTINUED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
------------------------------------------------------------------
DECEMBER 31, 1996 SEPTEMBER 30, 1996
------------------------------ ---------------------------------
INTEREST AVERAGE AVERAGE
INCOME/ YIELD/ INTEREST YIELD/
AVERAGE EXPENSE RATE AVERAGE INCOME/ RATE
(DOLLARS IN THOUSANDS) BALANCE (1) (1) BALANCE EXPENSE (1) (1)
- -------------------------------------------------------------- ----------- -------- ------- ----------- ----------- -------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Loans: (2)
Domestic.................................................... $19,632,870 $404,481 8.20% $19,453,079 $ 402,143 8.22%
Foreign..................................................... 1,210,820 18,864 6.20 1,198,378 17,847 5.92
Investment securities--taxable (3)............................ 2,234,788 34,408 6.14 2,119,276 33,909 6.38
Investment securities--tax-exempt (3)......................... 142,155 3,568 10.04 147,623 3,735 10.12
Interest bearing deposits in banks............................ 980,076 14,126 5.73 864,087 12,485 5.75
Federal funds sold and securities purchased under resale
agreements................................................... 606,687 8,403 5.51 433,494 6,028 5.53
Trading account securities.................................... 488,505 6,953 5.66 439,227 6,257 5.67
----------- -------- ----------- -----------
Total earning assets...................................... 25,295,901 490,803 7.72 24,655,164 482,404 7.78
-------- -----------
Allowance for credit losses................................... (534,247) (543,646)
Cash and due from banks....................................... 2,020,856 1,918,643
Premises and equipment, net................................... 430,765 425,019
Other assets.................................................. 1,378,108 1,526,714
----------- -----------
Total assets.............................................. $28,591,383 $27,981,894
----------- -----------
----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits in domestic offices:
Interest bearing............................................ $ 5,121,292 35,806 2.78 $ 5,037,400 34,137 2.70
Savings and consumer time................................... 2,892,147 27,342 3.76 2,854,894 26,294 3.66
Large time.................................................. 4,759,405 65,018 5.43 4,137,305 55,932 5.38
Deposits in foreign offices................................... 1,486,542 17,720 4.74 1,512,042 18,244 4.80
----------- -------- ----------- -----------
Total interest bearing deposits........................... 14,259,386 145,886 4.07 13,541,641 134,607 3.95
----------- -------- ----------- -----------
Federal funds purchased and securities sold under repurchase
agreements................................................... 692,535 8,784 5.05 817,236 10,466 5.09
Subordinated capital notes.................................... 391,685 6,489 6.59 452,211 7,493 6.59
Other borrowed funds.......................................... 2,521,206 35,077 5.53 2,759,849 37,161 5.36
----------- -------- ----------- -----------
Total borrowed funds...................................... 3,605,426 50,350 5.56 4,029,296 55,120 5.44
----------- -------- ----------- -----------
Total interest bearing liabilities........................ 17,864,812 196,236 4.37 17,570,937 189,727 4.30
-------- -----------
Demand deposits............................................... 7,030,556 6,640,131
Other liabilities............................................. 1,220,071 1,335,204
----------- -----------
Total liabilities......................................... 26,115,439 25,546,272
SHAREHOLDERS' EQUITY.......................................... 2,475,944 2,435,622
----------- -----------
Total liabilities and shareholders' equity................ $28,591,383 $27,981,894
----------- -----------
----------- -----------
Net interest income/margin (taxable-equivalent basis)......... 294,567 4.63% 292,677 4.72%
Less: taxable-equivalent adjustment........................... 1,483 1,089
-------- -----------
Net interest income....................................... $293,084 $ 291,588
-------- -----------
-------- -----------
</TABLE>
- ------------------------------
(1) Yields and interest income are presented on a taxable-equivalent basis
using the federal statutory tax rate of 35 percent.
(2) The amortized portion of net loan origination fees (costs) is included in
interest income on loans.
(3) Yields on investment securities available for sale were based on fair
value. The difference between these yields and those based on amortized
cost was not significant.
15
<PAGE>
NET INTEREST INCOME (CONTINUED)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
------------------------------------------------------------------
SEPTEMBER 30, 1997 SEPTEMBER 30, 1996
------------------------------ ---------------------------------
INTEREST AVERAGE AVERAGE
INCOME/ YIELD/ INTEREST YIELD/
AVERAGE EXPENSE RATE AVERAGE INCOME/ RATE
(DOLLARS IN THOUSANDS) BALANCE (1) (1) BALANCE EXPENSE (1) (1)
- -------------------------------------------------------------- ----------- -------- ------- ----------- ----------- -------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Loans: (2)
Domestic.................................................... $20,210,720 $1,245,282 8.23% $19,219,114 $1,199,949 8.34%
Foreign..................................................... 1,326,977 61,069 6.15 1,197,692 54,190 6.04
Investment securities--taxable (3)............................ 2,476,970 116,715 6.29 2,105,877 98,762 6.26
Investment securities--tax-exempt (3)......................... 126,634 9,567 10.07 155,265 11,883 10.20
Interest bearing deposits in banks............................ 996,710 43,404 5.82 888,793 38,583 5.80
Federal funds sold and securities purchased under resale
agreements................................................... 450,603 18,727 5.56 527,690 21,843 5.53
Trading account securities.................................... 477,660 19,274 5.40 428,844 18,015 5.61
----------- -------- ----------- -----------
Total earning assets...................................... 26,066,274 1,514,038 7.76 24,523,275 1,443,225 7.82
-------- -----------
Allowance for credit losses................................... (514,043) (548,351)
Cash and due from banks....................................... 2,005,177 1,894,218
Premises and equipment, net................................... 413,024 424,324
Other assets.................................................. 1,481,296 1,388,082
----------- -----------
Total assets.............................................. $29,451,728 $27,681,548
----------- -----------
----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits in domestic offices:
Interest bearing............................................ $ 5,274,137 111,457 2.83 $ 4,960,691 100,015 2.69
Savings and consumer time................................... 2,956,493 83,695 3.78 2,818,749 78,008 3.70
Large time.................................................. 4,691,506 191,547 5.46 3,872,211 153,941 5.31
Deposits in foreign offices................................... 1,560,149 55,156 4.73 1,509,951 53,717 4.75
----------- -------- ----------- -----------
Total interest bearing deposits........................... 14,482,285 441,855 4.08 13,161,602 385,681 3.91
----------- -------- ----------- -----------
Federal funds purchased and securities sold under repurchase
agreements................................................... 1,106,180 44,053 5.32 1,014,318 38,311 5.05
Subordinated capital notes.................................... 353,429 17,180 6.50 481,556 23,616 6.55
Other borrowed funds.......................................... 2,304,415 93,542 5.43 2,818,693 114,882 5.44
----------- -------- ----------- -----------
Total borrowed funds...................................... 3,764,024 154,775 5.50 4,314,567 176,809 5.47
----------- -------- ----------- -----------
Total interest bearing liabilities........................ 18,246,309 596,630 4.37 17,476,169 562,490 4.29
-------- -----------
Demand deposits............................................... 7,341,239 6,540,919
Other liabilities............................................. 1,274,000 1,209,233
----------- -----------
Total liabilities......................................... 26,861,548 25,226,321
SHAREHOLDERS' EQUITY.......................................... 2,590,180 2,455,227
----------- -----------
Total liabilities and shareholders' equity................ $29,451,728 $27,681,548
----------- -----------
----------- -----------
Net interest income/margin (taxable-equivalent basis)......... 917,408 4.70% 880,735 4.76%
Less: taxable-equivalent adjustment........................... 4,107 5,241
-------- -----------
Net interest income....................................... $913,301 $ 875,494
-------- -----------
-------- -----------
</TABLE>
- ------------------------------
(1) Yields and interest income are presented on a taxable-equivalent basis
using the federal statutory tax rate of 35 percent.
(2) The amortized portion of net loan origination fees (costs) is included in
interest income on loans.
(3) Yields on investment securities available for sale were based on fair
value. The difference between these yields and those based on amortized
cost was not significant.
16
<PAGE>
NET INTEREST INCOME (CONTINUED)
Net interest income is interest earned on loans and investments less
interest expense on deposit accounts and borrowings. Primary factors affecting
the level of net interest income include the margin between the yield earned on
interest earning assets and the rate paid on interest bearing liabilities, as
well as the composition of average interest earning assets and average interest
bearing liabilities.
Net interest income on a taxable-equivalent basis was $314 million for the
third quarter of 1997 and $293 million for the third quarter of 1996. This
increase of $21 million, or 7 percent, was primarily attributable to a $2.1
billion, or 8 percent, increase in average earning assets and a $911 million, or
14 percent, increase in average demand deposits. The net interest margin
declined 6 basis points to 4.66%, primarily as a result of a 13 basis point
increase in the cost of interest bearing liabilities, which largely reflected a
combination of rising rates and a shift to higher cost, longer term deposits.
The increase in the cost of interest bearing liabilities was partly offset by an
increase in the proportion of funding provided by demand deposits, while yields
on earning assets remained largely stable.
Average earning assets were $26.7 billion in the third quarter of 1997,
compared with $24.7 billion in the third quarter of 1996. Most of this increase
was attributable to growth in average loans, which increased $1.3 billion, or 7
percent, and average investment securities, which were $507 million higher.
Average commercial, financial and industrial loans, which increased $837
million, and average commercial real estate loans, which increased $424 million,
contributed most of the loan growth. See "Loans" for additional commentary on
growth in the loan portfolio. The increase in primarily fixed rate investment
securities reflected interest rate risk management actions to reduce the
Company's exposure to declines in interest rates, and, secondarily, to increase
liquidity.
The $2.1 billion, or 8 percent, growth in average earning assets from the
third quarter of 1996 to the third quarter of 1997 was funded primarily by
increases in demand deposits and interest bearing core deposits. Increases in
these categories were: demand deposits $911 million, or 14 percent; interest
bearing domestic deposits $291 million, or 6 percent; and savings and consumer
time deposits $140 million, or 5 percent. The increase in demand deposits was
partially due to an influx of new customer relationships, arising from recent
merger and acquisition activities of other financial institutions in the
California market.
For the first nine months of 1997, net interest income on a
taxable-equivalent basis was $917 million, compared with $881 million in the
comparable period one year earlier. The increase of $36 million, or 4 percent,
was primarily attributable to a $1.5 billion, or 6 percent, increase in average
earning assets, which was largely funded by an $800 million, or 12 percent,
increase in noninterest bearing demand deposits. Most of this growth was
attributable to a $1.1 billion, or 5 percent, increase in average loans.
Partially offsetting the positive impact of the growth in earning assets and
demand deposits on net interest income was a 6 basis point decline in the net
interest margin to 4.70%. The decline in the net interest margin resulted from
both an increase in the cost of lower cost sources of funds and a decrease in
the average yield on domestic loans. The cost of interest bearing core deposits
(excluding large time) increased by 9 basis points, while the yield on domestic
loans dropped by 11 basis points. The negative impact of these two factors on
the net interest margin was partially offset by an increase in the proportion of
funding provided by demand deposits.
17
<PAGE>
NONINTEREST INCOME
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
FOR THE THREE MONTHS ENDED ENDED
------------------------------------------------------------------ ----------------------------
SEPTEMBER 30, JUNE 30, MARCH 31, DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
(DOLLARS IN THOUSANDS) 1997 1997 1997 1996 1996 1997 1996
- ------------------------------ ------------- ---------- ---------- ------------ ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Service charges on deposit
accounts..................... $ 29,271 $ 28,307 $ 27,121 $ 26,148 $ 26,799 $ 84,699 $ 75,827
Trust fees.................... 27,143 25,696 23,898 23,824 24,098 76,737 69,655
International commissions and
fees......................... 17,208 17,306 15,079 16,586 16,120 49,593 49,522
Credit card merchant fees..... 15,326 14,283 13,044 11,554 13,721 42,653 38,224
Merchant banking fees......... 5,074 6,445 8,380 4,718 4,729 19,899 19,211
Investment services........... 5,857 6,096 4,979 5,182 5,225 16,932 14,198
Foreign exchange.............. 3,927 3,853 3,469 3,598 2,641 11,249 9,657
Investment securities gains,
net.......................... 1,546 81 471 637 628 2,098 3,865
Other......................... 11,468 8,954 18,345 10,725 13,319 38,767 35,545
------------- ---------- ---------- ------------ ------------- ------------- -------------
Total noninterest income.... $ 116,820 $ 111,021 $ 114,786 $ 102,972 $ 107,280 $ 342,627 $ 315,704
------------- ---------- ---------- ------------ ------------- ------------- -------------
------------- ---------- ---------- ------------ ------------- ------------- -------------
</TABLE>
In the third quarter of 1997, noninterest income was $117 million, compared
with $107 million for the same period in 1996. This increase of $10 million
includes a $2 million increase in service charges on deposits, a $3 million
increase in trust fees, largely due to growth of mutual fund assets, a $2
million increase in credit card merchant fees, as well as increases in most
other categories. These increases were partly offset by a $2 million decrease in
"Other", primarily attributable to a non-recurring insurance refund of $2
million in third quarter 1996.
For the nine months ended September 30, 1997, noninterest income increased
to $343 million from $316 million for the same period in 1996. This increase of
$27 million was primarily due to a $9 million increase in service charges on
deposits, a $7 million increase in trust fees, a $4 million increase in credit
card merchant fees, and a $3 million increase in "Other". Included in "Other" in
1997 was an $8 million gain related to a real estate joint venture; included in
"Other" in 1996 were gains of $2 million related to a real estate joint venture
and a $2 million insurance refund.
18
<PAGE>
NONINTEREST EXPENSE
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
FOR THE THREE MONTHS ENDED ENDED
------------------------------------------------------------------ ----------------------------
SEPTEMBER 30, JUNE 30, MARCH 31, DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
(DOLLARS IN THOUSANDS) 1997 1997 1997 1996 1996 1997 1996
- ------------------------------ ------------- ---------- ---------- ------------ ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Salaries and other
compensation................. $ 116,086 $ 112,714 $ 108,601 $ 109,201 $ 113,416 $ 337,401 $ 339,592
Employee benefits............. 24,923 24,459 32,187 27,724 24,591 81,569 80,730
------------- ---------- ---------- ------------ ------------- ------------- -------------
Personnel-related expense... 141,009 137,173 140,788 136,925 138,007 418,970 420,322
Net occupancy................. 21,619 22,884 19,630 21,671 35,439 64,133 81,664
Equipment..................... 13,376 14,143 13,687 14,790 14,003 41,206 41,152
Credit card processing........ 11,002 10,545 9,722 9,065 9,619 31,269 28,026
Communications................ 10,349 10,518 10,268 9,203 8,713 31,135 26,734
Advertising and public
relations.................... 7,532 7,218 6,009 9,585 5,508 20,759 19,203
Data processing............... 6,544 6,148 6,423 6,565 5,568 19,115 15,575
Professional services......... 6,461 7,882 4,719 5,737 6,144 19,062 18,605
Printing and office
supplies..................... 5,390 6,087 6,169 6,614 7,939 17,646 20,471
Software...................... 4,025 3,604 4,729 4,575 3,966 12,358 11,320
Travel........................ 3,757 4,369 3,195 4,487 3,553 11,321 10,449
Intangible asset
amortization................. 3,338 3,338 3,338 3,321 3,338 10,014 10,014
Armored car................... 3,091 2,956 3,113 4,778 4,458 9,160 12,714
Foreclosed asset expense
(income)..................... (1,572) 465 411 (556) (696) (696) 3,445
Other......................... 17,396 18,423 14,900 17,615 12,964 50,719 43,371
------------- ---------- ---------- ------------ ------------- ------------- -------------
Noninterest expense,
excluding merger and
integration expense....... 253,317 255,753 247,101 254,375 258,523 756,171 763,065
Merger and integration
expense...................... -- -- 6,037 30,646 25,552 6,037 86,818
------------- ---------- ---------- ------------ ------------- ------------- -------------
Total noninterest expense... $ 253,317 $ 255,753 $ 253,138 $ 285,021 $ 284,075 $ 762,208 $ 849,883
------------- ---------- ---------- ------------ ------------- ------------- -------------
------------- ---------- ---------- ------------ ------------- ------------- -------------
</TABLE>
Noninterest expense, excluding merger and integration expense, was $253
million for the third quarter of 1997, compared with $259 million for the third
quarter of 1996, a decrease of $6 million, or 2 percent. Excluding the third
quarter 1996 occupancy charge of $12 million related to former banking
facilities, noninterest expense increased $6 million. Personnel-related expense
increased $3 million, or 2 percent, due partially to increased contract labor
used to augment staffing requirements as a residual effect of the merger. In
addition, advertising increased $2 million partly due to an auto loan promotion.
Net occupancy expense, excluding the $12 million one-time charge, decreased $2
million, and a decrease in printing and office supplies of $3 million offset an
increase in "Other" of $4 million. No merger and integration expense was
recorded in the third quarter of 1997, compared with $26 million in the same
quarter in 1996.
Noninterest expense for the third quarter of 1997 included charges incurred
in connection with making changes to the Company's computer systems with respect
to Year 2000 compliance. Expenses to date have not materially affected results
from operations. The Company expects to continue incurring charges related to
this project through its completion in the Year 1999.
19
<PAGE>
NONINTEREST EXPENSE (CONTINUED)
For the nine months ended September 30, 1997, noninterest expense, excluding
merger and integration expense was $756 million, compared with $763 million, for
the first nine months of 1996. Excluding the third quarter 1996 occupancy charge
of $12 million, noninterest expense increased $5 million. The largest component
of the increase was a $4 million increase in data processing expense, which
supported an increase in fees earned on deposits. Increases in several other
categories were offset by a decrease of $6 million in net occupancy expense due
to the consolidation of offices and a decrease of $4 million in foreclosed asset
expense due primarily to lower writedowns and maintenance and selling expenses,
primarily reflecting a 29 percent reduction in the portfolio of foreclosed
assets.
MERGER AND INTEGRATION EXPENSE
In the third quarter of 1997, no merger and integration expense was
recorded, compared with $26 million in the third quarter of 1996. The
combination of Union Bank and BanCal Tri-State Corporation on April 1, 1996,
resulted in the recording of a total of $124 million in merger and integration
expense.
The table that follows presents merger and integration expense provisions in
1996 and the first nine months of 1997, the cash and noncash utilization of
those expense provisions during the periods, and the resulting liability
balances as of September 30, 1997, and December 31, 1996.
<TABLE>
<CAPTION>
NINE MONTHS ENDED TWELVE MONTHS ENDED
(DOLLARS IN THOUSANDS) SEPTEMBER 30, 1997 DECEMBER 31, 1996
- ------------------------------------------------------------------------ ------------------ --------------------
<S> <C> <C>
Balance, accrued merger and integration expense, beginning of period.... $ 54,344 $ --
Provision for merger and integration costs.............................. 6,037 117,464
Utilization:
Cash.................................................................. 32,351 40,155
Noncash............................................................... 886 22,965
-------- -------
Total utilization................................................... 33,237 63,120
-------- -------
Balance, accrued merger and integration expense, end of period.......... $ 27,144 $ 54,344
-------- -------
-------- -------
</TABLE>
The Company's liquidity has not been significantly affected by these cash
outlays, and future cash outlays are not expected to significantly affect
liquidity.
INCOME TAX EXPENSE
The effective tax rates for the third quarter of 1997 and 1996 were 26
percent and 41 percent, respectively. The lower third quarter 1997 effective tax
rate was the result of an after-tax refund from the State of California
Franchise Tax Board (the "FTB") of approximately $25 million to settle
litigation, administration and audit disputes covering the years 1975-1987.
Excluding the FTB refund, the effective tax rate for third quarter 1997 was 40
percent.
The effective tax rates for the nine months ended September 30, 1997 and
1996, were 35 percent and 39 percent, respectively. Excluding the FTB refund in
1997, the effective tax rate for the first nine months of 1997 was 40 percent.
Excluding a $5 million benefit recognized in the second quarter of 1996 from a
settlement with the FTB for 1985 and 1986, the effective tax rate for the first
nine months of 1996 was 41 percent.
20
<PAGE>
LOANS
<TABLE>
<CAPTION>
SEPTEMBER 30, JUNE 30, MARCH 31, DECEMBER 31, SEPTEMBER 30,
(DOLLARS IN THOUSANDS) 1997 1997 1997 1996 1996
- ------------------------------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Domestic:
Commercial, financial and
industrial....................... $ 10,403,528 $ 10,385,050 $ 9,676,131 $ 9,492,255 $ 9,603,845
Construction....................... 312,318 319,355 331,149 357,817 362,324
Mortgage:
Residential...................... 2,966,326 2,960,502 2,973,411 2,960,908 3,005,167
Commercial....................... 2,851,838 2,804,061 2,650,511 2,597,616 2,485,963
------------- ------------- ------------- ------------- -------------
Total mortgage................. 5,818,164 5,764,563 5,623,922 5,558,524 5,491,130
Consumer:
Installment...................... 2,075,065 2,054,050 2,061,883 2,063,434 2,038,849
Home equity...................... 1,027,147 1,058,937 1,064,357 1,113,269 1,137,454
Credit card and other lines of
credit......................... 275,258 279,163 284,009 303,235 296,131
------------- ------------- ------------- ------------- -------------
Total consumer................. 3,377,470 3,392,150 3,410,249 3,479,938 3,472,434
Lease financing.................... 863,745 857,935 824,325 800,048 823,082
------------- ------------- ------------- ------------- -------------
Total loans in domestic
offices...................... 20,775,225 20,719,053 19,865,776 19,688,582 19,752,815
Loans originated in foreign
branches............................ 1,372,325 1,232,506 1,234,150 1,209,523 1,193,950
------------- ------------- ------------- ------------- -------------
Total loans.................... $ 22,147,550 $ 21,951,559 $ 21,099,926 $ 20,898,105 $ 20,946,765
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
</TABLE>
The Company's lending activities are predominantly domestic, with such loans
comprising 94 percent of the portfolio at September 30, 1997. Total loans at
September 30, 1997, were $22.1 billion, an increase of $1.2 billion, or 6
percent, from September 30, 1996. The increase was primarily attributable to
growth in the commercial, financial and industrial loan portfolio, which
increased $800 million from September 30, 1996, and to the commercial real
estate mortgage loan portfolio, which increased $366 million.
Commercial, financial and industrial loans represent the largest category in
the loan portfolio. These loans are principally to major corporations, middle
market businesses, and small businesses, with no industry concentration
exceeding ten percent of the total. At September 30, 1997 and 1996, the
commercial, financial and industrial loan portfolio was $10.4 billion, or 47
percent of total loans, and $9.6 billion, or 46 percent of total loans,
respectively. The increase of $800 million from September 30, 1996 was primarily
attributable to a $709 million increase during the second quarter of 1997 in
loans principally to large corporations in industries in which the bank has
specialized lending expertise.
The construction loan portfolio totaled $312 million, or 1 percent of total
loans, at September 30, 1997, compared with $362 million, or 2 percent of total
loans, at September 30, 1996.
Mortgage loans were $5.8 billion, or 26 percent of total loans, at September
30, 1997, and $5.5 billion, or 26 percent of total loans, at September 30, 1996.
The mortgage loan portfolio consists of loans on commercial and industrial
projects and loans secured by one to four family residential properties,
primarily in California. Commercial mortgages increased $366 million from
September 30, 1996 to September 30, 1997, primarily due to an increase in mini
perm loans.
Consumer loans totaled $3.4 billion, or 15 percent of total loans, at
September 30, 1997, compared with $3.5 billion, or 17 percent of total loans, at
September 30, 1996. This portfolio is primarily comprised of installment loans
and home equity loans.
Lease financing totaled $864 million, or 4 percent of total loans, at
September 30, 1997, compared with $823 million, or 4 percent of total loans, at
September 30, 1996.
Loans originated in foreign branches totaled $1.4 billion, or 6 percent of
total loans, at September 30, 1997, and $1.2 billion, or 6 percent of total
loans, at September 30, 1996.
21
<PAGE>
ALLOWANCE FOR CREDIT LOSSES
The allowance for credit losses is maintained at a level considered
appropriate by management and is based on an ongoing assessment of risk in the
credit and lease portfolio, including commitments to provide financing. The
allowance is increased by the provision for credit losses, which is charged
against current period operating results, and is decreased by the amount of net
loans charged off during the period. In evaluating the adequacy of the allowance
for credit losses, management incorporates such factors as collateral value,
portfolio composition and concentration, and trends in local and national
economic conditions and the related impact on the financial strength of the
Company's borrowers. While the allowance is segmented by broad portfolio
categories to analyze its adequacy, the allowance is general in nature and is
available for the portfolio in its entirety. Although management believes that
the allowance for credit losses is adequate without any provision for credit
losses in the third quarter of 1997, future provisions will be subject to
continuing evaluation of risk in the credit and lease portfolio.
The table below sets forth a reconciliation of changes in the allowance for
credit losses.
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
------------------------------------------------------------------- ----------------------------
SEPTEMBER 30, JUNE 30, MARCH 31, DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
(DOLLARS IN THOUSANDS) 1997 1997 1997 1996 1996 1997 1996
- ------------------------------ ------------- --------- ----------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, beginning of
period....................... $ 502,114 $ 522,835 $ 523,946 $ 535,087 $ 545,345 $ 523,946 $ 555,149
Loans charged off:
Commercial, financial and
industrial.............. 22,815 12,628 5,175 13,280 10,289 40,618 28,854
Construction.............. -- 120 -- 2,376 -- 120 873
Mortgage.................. 1,044 1,549 1,888 1,706 5,086 4,481 11,777
Consumer.................. 12,859 13,466 12,539 18,083 12,293 38,864 38,278
Lease financing........... 824 709 969 683 716 2,502 1,940
Loans originated in
foreign branches........ 92 34 -- 42 1,256 126 1,335
------------- --------- ----------- ------------- ------------- ------------- -------------
Total loans charged
off................... 37,634 28,506 20,571 36,170 29,640 86,711 83,057
Recoveries of loans previously
charged off:
Commercial, financial and
industrial.............. 7,289 3,644 7,540 7,887 4,030 18,473 14,454
Construction.............. 2,163 -- 6,891 2 -- 9,054 130
Mortgage.................. 749 610 1,474 4,310 2,230 2,833 7,967
Consumer.................. 3,692 3,402 3,481 2,786 3,027 10,575 10,120
Lease financing........... 81 129 74 44 95 284 324
------------- --------- ----------- ------------- ------------- ------------- -------------
Total recoveries of
loans previously
charged off........... 13,974 7,785 19,460 15,029 9,382 41,219 32,995
------------- --------- ----------- ------------- ------------- ------------- -------------
Net loans charged
off................. 23,660 20,721 1,111 21,141 20,258 45,492 50,062
Provision for credit losses... -- -- -- 10,000 10,000 -- 30,000
------------- --------- ----------- ------------- ------------- ------------- -------------
Balance, end of period........ $ 478,454 $ 502,114 $ 522,835 $ 523,946 $ 535,087 $ 478,454 $ 535,087
------------- --------- ----------- ------------- ------------- ------------- -------------
------------- --------- ----------- ------------- ------------- ------------- -------------
Allowance for credit losses to
total loans.................. 2.16% 2.29% 2.48% 2.51% 2.55% 2.16% 2.55%
Provision for credit losses to
net loans charged off........ -- -- -- 47.30 49.36 -- 59.93
Recoveries of loans to loans
charged off in the previous
period....................... 49.02 37.84 53.80 50.71 41.07 46.49 29.86
Net loans charged off to
average loans outstanding for
the period(1)................ 0.43 0.39 0.02 0.40 0.39 0.28 0.33
</TABLE>
- ------------------------------
(1) Annualized.
22
<PAGE>
ALLOWANCE FOR CREDIT LOSSES (CONTINUED)
At September 30, 1997, the Company's allowance for credit losses was $478
million, or 2.16 percent of total loans, and 436 percent of total nonaccrual
loans, compared with an allowance for credit losses at September 30, 1996, of
$535 million, or 2.55 percent of total loans, and 362 percent of total
nonaccrual loans.
During the third quarter of 1997, the Company recorded no provision for
credit losses, compared with a provision of $10 million in the third quarter of
1996. This resulted from management's regular quarterly assessment of overall
credit quality and economic conditions in relation to the level of the allowance
for credit losses. Future quarterly provisions will be subject to the same
evaluation process.
During the third quarter of 1997, net loans charged off were $24 million,
compared with $20 million in the third quarter of 1996. Net loans charged off as
a percentage of average total loans for the third quarter of 1997 increased to
0.43%, compared with 0.39% for the same quarter last year. These increases were
primarily attributable to a $13 million increase in commercial loans charged
off, as a result of a $13 million charge-off of a single commercial loan. In
addition, there was $14 million in recoveries during the third quarter of 1997
compared with $9 million in recoveries for the same period in 1996.
The Company evaluates its loan portfolio for impairment as defined by SFAS
No. 114, as amended. At September 30, 1997, total impaired loans were $109
million, and the associated impairment allowance was $16 million, compared with
total impaired loans of $123 million and an associated impairment allowance of
$10 million, at September 30, 1996.
NONPERFORMING ASSETS
<TABLE>
<CAPTION>
SEPTEMBER 30, JUNE 30, MARCH 31, DECEMBER 31, SEPTEMBER 30,
(DOLLARS IN THOUSANDS) 1997 1997 1997 1996 1996
- -------------------------------------------------- ------------- ---------- ---------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Nonaccrual loans:
Commercial, financial and industrial.......... $ 54,087 $ 87,415 $ 70,778 $ 56,864 $ 70,920
Construction.................................. 4,579 8,804 5,009 7,349 10,670
Mortgage:
Residential................................. 1,133 1,134 3,244 11,214 10,577
Commercial.................................. 49,959 48,787 57,636 52,593 54,904
------------- ---------- ---------- ------------ -------------
Total mortgage............................ 51,092 49,921 60,880 63,807 65,481
Other......................................... -- -- -- 247 704
------------- ---------- ---------- ------------ -------------
Total nonaccrual loans.................... 109,758 146,140 136,667 128,267 147,775
Renegotiated loans................................ -- -- -- -- --
Foreclosed assets................................. 23,216 30,059 30,378 28,517 32,882
------------- ---------- ---------- ------------ -------------
Total nonperforming assets.................. $ 132,974 $ 176,199 $ 167,045 $ 156,784 $ 180,657
------------- ---------- ---------- ------------ -------------
------------- ---------- ---------- ------------ -------------
Allowance for credit losses....................... $ 478,454 $ 502,114 $ 522,835 $ 523,946 $ 535,087
------------- ---------- ---------- ------------ -------------
------------- ---------- ---------- ------------ -------------
Nonaccrual and renegotiated loans to
total loans...................................... 0.50% 0.67% 0.65% 0.61% 0.71%
Nonaccrual loans to allowance for
credit losses.................................... 22.94 29.10 26.14 24.48 27.62
Nonperforming assets to total loans
and foreclosed assets............................ 0.60 0.80 0.79 0.75 0.86
Nonperforming assets to total assets.............. 0.43 0.58 0.57 0.54 0.63
</TABLE>
At September 30, 1997, nonperforming assets totaled $133 million, a decrease
of $48 million, or 26 percent, from a year earlier. The decrease was the result
of reductions of $17 million in nonaccrual
23
<PAGE>
NONPERFORMING ASSETS (CONTINUED)
commercial, financial and industrial loans, mostly from loans to large corporate
borrowers, $9 million in nonaccrual residential mortgage loans, $6 million in
nonaccrual construction loans, $5 million in nonaccrual commercial mortgage
loans and $10 million in foreclosed assets. The $10 million reduction in
residential mortgage loans was primarily due to a change in methodology in 1997.
Nonaccrual and renegotiated loans as a percentage of total loans were 0.50%
at September 30, 1997, compared with 0.71% at September 30, 1996. Nonperforming
assets as a percentage of total loans and foreclosed assets were 0.60% at
September 30, 1997, compared with 0.86% at September 30, 1996.
LOANS 90 DAYS OR MORE PAST DUE AND STILL ACCRUING
<TABLE>
<CAPTION>
SEPTEMBER 30, JUNE 30, MARCH 31, DECEMBER 31, SEPTEMBER 30,
(DOLLARS IN THOUSANDS) 1997 1997 1997 1996 1996
- ---------------------------------------------- ------------- --------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Commercial, financial and industrial......... $ 3,682 $ 2,085 $ 4,419 $ 4,527 $ 521
Construction................................ -- -- 5,081 -- 2,325
Mortgage:
Residential............................... 9,606 11,155 10,952 8,969 9,838
Commercial................................ 2,284 2,190 13,742 168 16,372
------------- --------- ----------- ------------ -------------
Total mortgage.......................... 11,890 13,345 24,694 9,137 26,210
Consumer and other.......................... 10,010 11,922 11,865 10,028 13,643
------------- --------- ----------- ------------ -------------
Total loans 90 days or more past due and
still accruing........................ $ 25,582 $ 27,352 $ 46,059 $ 23,692 $ 42,699
------------- --------- ----------- ------------ -------------
------------- --------- ----------- ------------ -------------
</TABLE>
LIQUIDITY
Liquidity refers to the Company's ability to adjust its future cash flows to
meet the needs of depositors and borrowers and to fund operations on a timely
and cost-effective basis. The Company's liquidity management draws upon the
strengths of its extensive retail and commercial market business franchise,
coupled with its ability to obtain funds for various terms in a variety of
domestic and international money markets.
Core deposits provide the Company with a sizable source of relatively stable
and low-cost funds. In the third quarter of 1997, lower cost sources of funds,
which include demand deposits and interest bearing core deposits, funded 65
percent of average earning assets. Most of the remaining funding was provided by
short-term borrowing in the form of negotiable certificates of deposit, foreign
deposits, federal funds purchased and securities sold under repurchase
agreements, commercial paper, and other borrowings.
24
<PAGE>
REGULATORY CAPITAL
<TABLE>
<CAPTION>
MINIMUM
SEPTEMBER 30, JUNE 30, MARCH 31, DECEMBER 31, SEPTEMBER 30, REGULATORY
(DOLLARS IN THOUSANDS) 1997 1997 1997 1996 1996 REQUIREMENT
- --------------------------------------- ------------- ------------ ---------- ------------ ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
CAPITAL COMPONENTS FOR THE COMPANY
Tier 1 capital......................... $ 2,520,589 $ 2,547,481 $2,467,312 $2,395,580 $ 2,349,483
Tier 2 capital......................... 593,865 667,395 458,135 551,074 552,768
------------- ------------ ---------- ------------ -------------
Total risk-based capital............... $ 3,114,454 $ 3,214,876 $2,925,447 $2,946,654 $ 2,902,251
------------- ------------ ---------- ------------ -------------
------------- ------------ ---------- ------------ -------------
Risk-weighted assets................... $28,249,379 $ 27,734,101 $26,963,265 $26,390,288 $25,994,269
------------- ------------ ---------- ------------ -------------
------------- ------------ ---------- ------------ -------------
Quarterly average assets............... $30,037,626 $ 29,360,405 $28,702,616 $28,496,355 $27,885,645
------------- ------------ ---------- ------------ -------------
------------- ------------ ---------- ------------ -------------
CAPITAL RATIOS FOR THE COMPANY
Tier 1 risk-based capital.............. 8.92% 9.19% 9.15% 9.08% 9.04% 4.0%
Total risk-based capital............... 11.02 11.59 10.85 11.17 11.16 8.0
Leverage ratio (1)..................... 8.39 8.68 8.60 8.41 8.43 4.0
</TABLE>
- ------------------------------
(1) Tier 1 capital divided by quarterly average assets.
The Company and the Company's subsidiary bank, Union Bank of California,
N.A. (the "Bank"), are subject to various regulations issued by Federal banking
agencies, including minimum capital requirements. The Company and the Bank are
required to maintain minimum ratios of total and Tier 1 capital to risk-weighted
assets and of Tier 1 capital to average assets (the "leverage ratio").
Compared with one year earlier, the Company's Tier 1 risk-based capital
ratio at September 30, 1997, decreased 12 basis points to 8.92%, the total
risk-based capital ratio decreased 14 basis points to 11.02%, and the leverage
ratio decreased 4 basis points to 8.39%. The decrease in the capital ratios was
attributable to the redemption of $135 million of preferred stock in the third
quarter of 1997, partly offset by retained earnings growing faster than both
risk-weighted assets and average assets.
As of September 30, 1997, management believes the capital ratios of the Bank
met all regulatory minimums of a well-capitalized bank.
25
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits Index:
NO. DESCRIPTION
- --- -----------------------
27 Financial Data Schedule
(b) Reports on Form 8-K: None
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, thereunto duly authorized.
UNIONBANCAL CORPORATION
(Registrant)
By /s/ MINORU NODA
------------------------------------
Minoru Noda
DEPUTY CHAIRMAN,
CHIEF FINANCIAL OFFICER AND
CHIEF CREDIT OFFICER
By /s/ DAVID I. MATSON
------------------------------------
David I. Matson
EXECUTIVE VICE PRESIDENT AND
DIRECTOR OF FINANCE
By /s/ DAVID A. ANDERSON
------------------------------------
David A. Anderson
SENIOR VICE PRESIDENT AND CONTROLLER
Dated: November 14, 1997
26
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEETS AND STATEMENTS OF INCOME AND THE
ACCOMPANYING TABLES OF FORM 10-Q. INFORMATION HEREIN IS QUALIFIED BY REFERENCE
TO SUCH STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 2,086,873
<INT-BEARING-DEPOSITS> 1,064,858
<FED-FUNDS-SOLD> 762,978
<TRADING-ASSETS> 646,428
<INVESTMENTS-HELD-FOR-SALE> 2,625,490
<INVESTMENTS-CARRYING> 232,388
<INVESTMENTS-MARKET> 237,102
<LOANS> 22,147,550
<ALLOWANCE> (478,454)
<TOTAL-ASSETS> 31,044,988
<DEPOSITS> 22,974,188
<SHORT-TERM> 3,633,721
<LIABILITIES-OTHER> 638,935
<LONG-TERM> 708
0
0
<COMMON> 274,465
<OTHER-SE> 2,340,862
<TOTAL-LIABILITIES-AND-EQUITY> 31,044,988
<INTEREST-LOAN> 1,305,451
<INTEREST-INVEST> 123,075
<INTEREST-OTHER> 81,405
<INTEREST-TOTAL> 1,509,931
<INTEREST-DEPOSIT> 441,855
<INTEREST-EXPENSE> 596,630
<INTEREST-INCOME-NET> 913,301
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 2,098
<EXPENSE-OTHER> 762,208
<INCOME-PRETAX> 493,720
<INCOME-PRE-EXTRAORDINARY> 318,851
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 318,851
<EPS-PRIMARY> 5.34
<EPS-DILUTED> 5.34
<YIELD-ACTUAL> 4.70
<LOANS-NON> 109,758
<LOANS-PAST> 25,582
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 523,946
<CHARGE-OFFS> 86,711
<RECOVERIES> 41,219
<ALLOWANCE-CLOSE> 478,454
<ALLOWANCE-DOMESTIC> 275,335
<ALLOWANCE-FOREIGN> 8,866
<ALLOWANCE-UNALLOCATED> 194,253
</TABLE>
