<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 MARCH 31, 1997
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-28118
UNIONBANCAL CORPORATION
State of Incorporation: California I.R.S. Employer Id. No. 94-1234979
350 California Street
San Francisco, California 94104
Telephone: (415) 705-7350
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes _X_ No ____
Number of shares of Common Stock outstanding at April 30, 1997: 54,773,341
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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......................................................... 3
Condensed Consolidated Balance Sheets............................................................... 4
Condensed Consolidated Statements of Cash Flows..................................................... 5
Condensed Consolidated Statements of Shareholders' Equity........................................... 6
Notes to Condensed Consolidated Financial Statements................................................ 7
Item 2. Management's Discussion and Analysis:
Introduction........................................................................................ 8
Summary............................................................................................. 9
Analysis of Earnings................................................................................ 10
Net Interest Income................................................................................. 11
Noninterest Income.................................................................................. 13
Noninterest Expense................................................................................. 14
Merger and Integration Expense...................................................................... 14
Income Tax Expense.................................................................................. 15
Loans............................................................................................... 15
Allowance for Credit Losses......................................................................... 16
Nonperforming Assets................................................................................ 18
Liquidity........................................................................................... 19
Regulatory Capital.................................................................................. 20
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.............................................................. 21
Signatures............................................................................................ 21
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
UNIONBANCAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL HIGHLIGHTS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------------------------------
INCREASE (DECREASE)
MARCH 31, MARCH 31, ---------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 1997 1996 AMOUNT PERCENT
- -------------------------------------------------------------------------- ------------- ------------- ---------- ---------
<S> <C> <C> <C> <C>
RESULTS OF OPERATIONS:
Net interest income (1)................................................. $ 295,452 $ 297,795 $ (2,343) (0.79)%
Provision for credit losses............................................. -- 10,000 (10,000) (100.00)
Noninterest income...................................................... 114,786 102,874 11,912 11.58
Noninterest expense, excluding merger and integration expense (2)....... 247,101 252,024 (4,923) (1.95)
------------- ------------- ---------- ---------
Income before merger and integration expense and income
taxes (1)(2).......................................................... 163,137 138,645 24,492 17.67
Merger and integration expense.......................................... 6,037 -- 6,037 --
------------- ------------- ---------- ---------
Income before income taxes (1).......................................... 157,100 138,645 18,455 13.31
Taxable-equivalent adjustment........................................... 1,421 2,128 (707) (33.22)
Income tax expense...................................................... 63,177 53,251 9,926 18.64
------------- ------------- ---------- ---------
Net income.............................................................. $ 92,502 $ 83,266 $ 9,236 11.09%
------------- ------------- ---------- ---------
------------- ------------- ---------- ---------
NET INCOME APPLICABLE TO:
Common stock............................................................ $ 84,291 $ 76,768 $ 7,523 9.80%
------------- ------------- ---------- ---------
------------- ------------- ---------- ---------
Parent direct interest in bank subsidiary............................... $ 5,385 $ 3,672 $ 1,713 46.65%
------------- ------------- ---------- ---------
------------- ------------- ---------- ---------
PER COMMON SHARE:
Net income.............................................................. $ 1.54 $ 1.40 $ 0.14 10.00%
Pro forma earnings, excluding after-tax merger and integration expense
(2)................................................................... 1.60 1.40 0.20 14.29
Dividends (3)........................................................... 0.35 0.35 -- --
Book value (end of period).............................................. 41.76 39.07 2.69 6.89
Common shares outstanding (end of period)............................... 54,770,421 54,735,210 35,211 0.06
Weighted average common shares outstanding.............................. 54,764,518 54,690,215 74,303 0.14
BALANCE SHEET (END OF PERIOD):
Total assets............................................................ $ 29,423,537 $ 28,167,638 $1,255,899 4.46%
Total loans............................................................. 21,099,926 20,341,335 758,591 3.73
Nonperforming assets.................................................... 167,045 228,200 (61,155) (26.80)
Subordinated capital notes.............................................. 282,000 495,369 (213,369) (43.07)
Preferred stock......................................................... 135,000 135,000 -- --
Common equity........................................................... 2,287,062 2,138,631 148,431 6.94
BALANCE SHEET (PERIOD AVERAGE):
Total assets............................................................ $ 28,790,401 $ 27,428,721 $1,361,680 4.96%
Total loans............................................................. 21,068,822 20,188,426 880,396 4.36
Common equity........................................................... 2,261,603 2,209,688 51,915 2.35
Earning assets.......................................................... 25,448,021 24,394,015 1,054,006 4.32
FINANCIAL RATIOS:
Return on average assets (4)............................................ 1.30% 1.22% 0.08% pts.
Pro forma return on average assets, excluding after-tax merger
and integration expense (2)(4)........................................ 1.35 1.22 0.13
Return on average common equity (5)..................................... 15.12 13.97 1.15
Pro forma return on average common equity, excluding after-tax merger
and integration expense (2)(5)........................................ 15.71 13.97 1.74
Efficiency ratio (6).................................................... 61.60 62.08 (0.48)
Pro forma efficiency ratio, excluding merger and integration expense
(2)(6)................................................................ 60.13 62.08 (1.95)
Net interest margin (1)................................................. 4.69 4.91 (0.22)
Tier 1 risk-based capital ratio......................................... 9.15 9.00 0.15
Total risk-based capital ratio.......................................... 10.85 11.32 (0.47)
Leverage ratio.......................................................... 8.60 8.35 0.25
Allowance for credit losses to total loans.............................. 2.48 2.69 (0.21)
Allowance for credit losses to nonaccrual loans......................... 382.56 285.38 97.18
Net loans charged off to average total loans (7)........................ 0.02 0.35 (0.33)
Nonperforming assets to total loans and foreclosed assets............... 0.79 1.12 (0.33)
Nonperforming assets to total assets.................................... 0.57 0.81 (0.24)
</TABLE>
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(1) Amounts are on a taxable-equivalent basis using the federal statutory tax
rate of 35 percent.
(2) See page 8, "Introduction", for a description of merger accounting and pro
forma earnings presentations.
(3) The dividend amount for the first quarter of 1996 is based on Union Bank
only and 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, as a percentage of net interest income (taxable-equivalent) and
noninterest income. Foreclosed asset expense was $0.4 million in the first
quarter of 1997 and $3.3 million in the first quarter of 1996.
(7) Annualized.
2
<PAGE>
ITEM 1. FINANCIAL STATEMENTS
UNIONBANCAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED MARCH 31,
--------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 1997 1996
- --------------------------------------------------------------------------------------------- --------- ---------
<S> <C> <C>
INTEREST INCOME
Loans, including fees...................................................................... $ 420,472 $ 419,805
Investment securities -- taxable........................................................... 35,829 32,754
Investment securities -- tax-exempt........................................................ 2,218 2,726
Interest bearing deposits in banks......................................................... 11,199 14,277
Federal funds sold and securities purchased under resale agreements........................ 9,840 8,419
Trading account securities................................................................. 5,473 5,087
--------- ---------
Total interest income.................................................................. 485,031 483,068
--------- ---------
INTEREST EXPENSE
Deposits in domestic offices............................................................... 126,405 108,598
Deposits in foreign offices................................................................ 17,909 17,742
Federal funds purchased and securities sold under repurchase agreements.................... 10,391 15,637
Commercial paper........................................................................... 19,853 20,737
Other borrowed funds....................................................................... 10,939 16,453
Subordinated capital notes................................................................. 5,503 8,234
--------- ---------
Total interest expense................................................................. 191,000 187,401
--------- ---------
NET INTEREST INCOME.......................................................................... 294,031 295,667
Provision for credit losses.................................................................. -- 10,000
--------- ---------
Net interest income after provision for credit losses.................................. 294,031 285,667
--------- ---------
NONINTEREST INCOME
Service charges on deposit accounts........................................................ 27,121 23,961
Trust fees................................................................................. 23,898 22,248
International commissions and fees......................................................... 15,079 16,278
Credit card merchant fees.................................................................. 13,044 11,598
Merchant banking fees...................................................................... 8,380 9,248
Investment securities gains, net........................................................... 471 616
Other...................................................................................... 26,793 18,925
--------- ---------
Total noninterest income............................................................... 114,786 102,874
--------- ---------
NONINTEREST EXPENSE
Salaries and employee benefits............................................................. 140,788 142,351
Occupancy.................................................................................. 19,630 21,955
Equipment.................................................................................. 13,687 13,813
Communications............................................................................. 10,268 8,687
Credit card processing..................................................................... 9,722 8,369
Data processing............................................................................ 6,423 5,318
Printing and office supplies............................................................... 6,169 6,098
Advertising and public relations........................................................... 6,009 6,993
Foreclosed asset expense................................................................... 411 3,274
Merger and integration..................................................................... 6,037 --
Other...................................................................................... 33,994 35,166
--------- ---------
Total noninterest expense.............................................................. 253,138 252,024
--------- ---------
Income before income taxes................................................................... 155,679 136,517
Income tax expense........................................................................... 63,177 53,251
--------- ---------
NET INCOME................................................................................... $ 92,502 $ 83,266
--------- ---------
--------- ---------
NET INCOME APPLICABLE TO:
Common stock............................................................................... $ 84,291 $ 76,768
--------- ---------
--------- ---------
Parent direct interest in bank subsidiary.................................................. $ 5,385 $ 3,672
--------- ---------
--------- ---------
NET INCOME PER AVERAGE COMMON SHARE.......................................................... $ 1.54 $ 1.40
--------- ---------
--------- ---------
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING (IN THOUSANDS).................................... 54,765 54,690
--------- ---------
--------- ---------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
UNIONBANCAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(UNAUDITED) (UNAUDITED)
MARCH 31, DECEMBER 31, MARCH 31,
(DOLLARS IN THOUSANDS) 1997 1996 1996
- ----------------------------------------------------------------------- ------------ ------------ ------------
<S> <C> <C> <C>
ASSETS
Cash and due from banks................................................ $ 2,172,478 $2,268,771 $ 1,936,184
Interest bearing deposits in banks..................................... 681,308 1,131,216 696,867
Federal funds sold and securities purchased under resale agreements.... 650,790 537,710 1,475,558
------------ ------------ ------------
Total cash and cash equivalents.................................... 3,504,576 3,937,697 4,108,609
Trading account securities............................................. 642,684 617,464 409,634
Investment securities available for sale............................... 2,244,233 2,164,197 2,010,992
Investment securities held to maturity (market value of $262,568 at
March 31, 1997, $274,405 at December 31, 1996, and $304,891 at March
31, 1996)............................................................. 259,430 268,196 295,019
Loans.................................................................. 21,099,926 20,898,105 20,341,335
Less: Allowance for credit losses...................................... 522,835 523,946 547,401
------------ ------------ ------------
Net loans.......................................................... 20,577,091 20,374,159 19,793,934
Customers' acceptance liability........................................ 948,064 778,378 656,440
Premises and equipment, net............................................ 411,424 410,621 422,779
Intangible assets...................................................... 87,784 91,129 101,177
Other assets........................................................... 748,251 592,218 369,054
------------ ------------ ------------
Total assets....................................................... $ 29,423,537 $29,234,059 $ 28,167,638
------------ ------------ ------------
------------ ------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits in domestic offices:
Noninterest bearing.................................................. $ 7,612,287 $7,381,078 $ 6,526,785
Interest bearing..................................................... 12,620,106 12,607,691 11,889,671
Deposits in foreign offices:
Noninterest bearing.................................................. 296,692 274,031 301,346
Interest bearing..................................................... 1,514,840 1,270,160 1,424,896
------------ ------------ ------------
Total deposits..................................................... 22,043,925 21,532,960 20,142,698
Federal funds purchased and securities sold under repurchase
agreements............................................................ 809,846 1,322,654 1,191,997
Commercial paper....................................................... 1,427,588 1,495,463 1,406,118
Other borrowed funds................................................... 796,929 758,251 1,599,715
Acceptances outstanding................................................ 948,064 778,378 656,440
Other liabilities...................................................... 560,909 469,420 278,361
Subordinated capital notes............................................. 282,000 382,000 495,369
------------ ------------ ------------
Total liabilities.................................................. 26,869,261 26,739,126 25,770,698
------------ ------------ ------------
SHAREHOLDERS' EQUITY
Parent direct interest in equity of bank subsidiary.................... 132,214 128,689 123,309
Preferred stock:
Authorized 5,000,000 shares, issued 1,350,000 shares 8 3/8%
Noncumulative, Series A............................................ 135,000 135,000 135,000
Common stock--$5 stated value:
Authorized 100,000,000 shares, issued 54,770,421 as of March 31,
1997, 54,762,653 as of December 31, 1996, and 54,735,210 as of
March 31, 1996..................................................... 273,852 273,813 273,676
Additional paid-in capital............................................. 1,311,083 1,310,813 1,309,852
Retained earnings...................................................... 700,894 635,180 542,689
Cumulative translation adjustment...................................... (3,703) (2,752) (892)
Net unrealized gain on securities available for sale................... 4,936 14,190 13,306
------------ ------------ ------------
Total shareholders' equity......................................... 2,554,276 2,494,933 2,396,940
------------ ------------ ------------
Total liabilities and shareholders' equity......................... $ 29,423,537 $29,234,059 $ 28,167,638
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
UNIONBANCAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED MARCH 31,
------------------------
(DOLLARS IN THOUSANDS) 1997 1996
- --------------------------------------------------------------------------------------- ----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income........................................................................... $ 92,502 $ 83,266
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses........................................................ -- 10,000
Depreciation, amortization and accretion........................................... 16,288 15,938
Provision for deferred income taxes................................................ 8,401 5,557
Gain on sale or call of investment securities available for sale, net.............. (471) (616)
Other, net......................................................................... (93,827) (86,328)
----------- -----------
Total adjustments................................................................ (69,609) (55,449)
----------- -----------
Net cash provided by operating activities............................................ 22,893 27,817
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of investment securities available for sale....................... 594 3,649
Proceeds from matured and called investment securities available for sale............ 45,840 114,618
Purchase of investment securities available for sale................................. (138,044) (183,708)
Proceeds from matured and called investment securities held to maturity.............. 8,871 68,396
Net increase in loans................................................................ (214,495) (159,063)
Other, net........................................................................... (8,830) 11,047
----------- -----------
Net cash used by investing activities.............................................. (306,064) (145,061)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits............................................................. 510,965 487,655
Net decrease in federal funds purchased and securities sold under repurchase
agreements......................................................................... (512,808) (3,061)
Net increase (decrease) in commercial paper and other borrowed funds................. (29,197) 646,380
Maturity and redemption of subordinated capital notes................................ (100,000) (6,000)
Dividends paid....................................................................... (23,089) (160,494)
Repayment of borrowing to support corporate owned life insurance..................... -- (95,475)
Other, net........................................................................... 710 739
----------- -----------
Net cash provided (used) by financing activities................................... (153,419) 869,744
----------- -----------
Net increase (decrease) in cash and cash equivalents................................... (436,590) 752,500
Cash and cash equivalents at beginning of period....................................... 3,937,697 3,352,423
Foreign exchange revaluation gain...................................................... 3,469 3,686
----------- -----------
Cash and cash equivalents at end of period............................................. $ 3,504,576 $ 4,108,609
----------- -----------
----------- -----------
CASH PAID DURING THE PERIOD FOR:
Interest............................................................................. $ 191,870 $ 199,713
Income taxes......................................................................... 502 15,110
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Loans transferred to foreclosed assets............................................... $ 7,821 $ 8,058
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
UNIONBANCAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF 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.................... (447) (11,034)
Net income....................... 3,672 79,594
Dividend reinvestment plan....... 72 673
Dividends on common stock ($0.35
per share)(1)................... (12,795)
Dividends on preferred stock..... (2,826)
Dividend to MBL(2)............... (39,890) (105,000)
Deferred compensation--restricted
stock awards.................... 215 2,182 (1,964)
Stock options exercised.......... 38 300
Change in translation
adjustment...................... (22) 80
----------- ----------- ----------- ----------- --------- ----------- -------------
BALANCE AT MARCH 31, 1996........ $ 123,309 $ 135,000 $ 273,676 $1,309,852 $ 542,689 $ (892) $ 13,306
----------- ----------- ----------- ----------- --------- ----------- -------------
----------- ----------- ----------- ----------- --------- ----------- -------------
BALANCE AT DECEMBER 31, 1996..... $ 128,689 $ 135,000 $ 273,813 $1,310,813 $ 635,180 $ (2,752) $ 14,190
Decrease in unrealized gain on
securities available for sale,
net of taxes.................... (584) (9,254)
Net income....................... 5,385 87,117
Dividend reinvestment plan....... 1 (35)
Dividends on common stock ($0.35
per share)...................... (1,217) (19,169)
Dividends on preferred stock..... (2,826)
Deferred compensation--restricted
stock awards.................... (5) (34) 592
Stock options exercised.......... 43 339
Change in translation
adjustment...................... (59) (951)
----------- ----------- ----------- ----------- --------- ----------- -------------
BALANCE AT MARCH 31, 1997........ $ 132,214 $ 135,000 $ 273,852 $1,311,083 $ 700,894 $ (3,703) $ 4,936
----------- ----------- ----------- ----------- --------- ----------- -------------
----------- ----------- ----------- ----------- --------- ----------- -------------
<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.................... (11,481)
Net income....................... 83,266
Dividend reinvestment plan....... 745
Dividends on common stock ($0.35
per share)(1)................... (12,795)
Dividends on preferred stock..... (2,826)
Dividend to MBL(2)............... (144,890)
Deferred compensation--restricted
stock awards.................... 433
Stock options exercised.......... 338
Change in translation
adjustment...................... 58
---------
BALANCE AT MARCH 31, 1996........ $2,396,940
---------
---------
BALANCE AT DECEMBER 31, 1996..... $2,494,933
Decrease in unrealized gain on
securities available for sale,
net of taxes.................... (9,838)
Net income....................... 92,502
Dividend reinvestment plan....... (34)
Dividends on common stock ($0.35
per share)...................... (20,386)
Dividends on preferred stock..... (2,826)
Deferred compensation--restricted
stock awards.................... 553
Stock options exercised.......... 382
Change in translation
adjustment...................... (1,010)
---------
BALANCE AT MARCH 31, 1997........ $2,554,276
---------
---------
</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.
6
<PAGE>
UNIONBANCAL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 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.
The following table provides pro forma disclosure of basic and diluted EPS
in accordance with SFAS No. 128:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------
1997 1996
--------- ---------
<S> <C> <C>
Pro forma basic EPS....................................................................... 1.54 1.40
Pro forma diluted EPS..................................................................... 1.53 1.40
</TABLE>
7
<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 $29.4 billion at March 31, 1997. Its primary
banking subsidiary is Union Bank of California, N.A., which had 237 banking
offices in California, 5 banking offices in Oregon and Washington and 18
overseas facilities at March 31, 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 page 2 and the Analysis of Earnings on page 10 include
certain pro forma earnings disclosures. These presentations supplement the
Condensed Consolidated Statements of Income on page 3 (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 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.
8
<PAGE>
SUMMARY
Net income in the first quarter of 1997 was $93 million, after $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
applicable to common stock was $84 million, or $1.54 per common share, in the
first quarter of 1997, compared with $77 million, or $1.40 per common share, in
the first quarter of 1996. Pro forma earnings, excluding after-tax merger and
integration expense, were $96 million, an increase of 14 percent from a year
earlier. Pro forma earnings applicable to common stock were $88 million, or
$1.60 per common share, an increase of 14 percent over the first quarter of
1996. Other comparisons of the first quarter of 1997 with the first quarter of
1996 are as follows:
- Net interest income on a taxable-equivalent basis was $295 million in the
first quarter of 1997, a $2 million, or 1 percent, decrease from one year
earlier. The net interest margin declined 22 basis points to 4.69 percent,
largely due to lower loan yields.
- No provision for credit losses was recorded, compared with $10 million in
the first quarter of 1996, reflecting improvement in the quality of the
loan portfolio. Nonperforming assets were $167 million at March 31, 1997,
a decrease of $61 million, or 27 percent, from March 31, 1996. Total
nonaccrual loans at March 31, 1997 and 1996, were $137 million and $192
million, respectively. This decrease caused a drop in the ratio of
nonaccrual and renegotiated loans to total loans from 0.95% to 0.65%. The
allowance for credit losses was $523 million, or 383 percent of total
nonaccrual loans, at March 31, 1997, compared with an allowance of $547
million, or 285 percent of total nonaccrual loans, at March 31, 1996. Net
loans charged off in the first quarter of 1997 were $1 million, or 0.02%
of average loans outstanding, compared with $18 million, or 0.35% of
average loans outstanding, in the same period a year ago.
- Noninterest income was $115 million, an increase of $12 million over the
first quarter of 1996, due primarily to an $8 million gain from a real
estate joint venture.
- Noninterest expense, excluding $6 million of merger and integration
expense, was $247 million, a $5 million, or 2 percent, decrease from the
first quarter of 1996. A decrease of $4 million in personnel-related and
occupancy expense was the result of consolidations stemming from the
merger. In addition, foreclosed asset expense declined $3 million. These
decreases were partially offset by increases in credit card and data
processing expense.
- The return on average assets increased to 1.30% from 1.22%. The return on
average common equity increased to 15.12% from 13.97%. Excluding the
after-tax effect of merger and integration expense, the pro forma return
on average assets increased to 1.35% from 1.22%, while the pro forma
return on average common equity increased to 15.71% from 13.97%.
- Total loans at March 31, 1997, were $21.1 billion, an increase of $759
million, or 4 percent, over March 31, 1996, due primarily to growth in the
commercial mortgage portfolio.
- The Tier 1 and Total risk-based capital ratios were 9.15% and 10.85% at
March 31, 1997, compared with 9.00% and 11.32% at March 31, 1996. The
decrease in the Total risk-based capital ratio was due to the redemption
of subordinated debt in the first quarter of 1997. The first quarter 1997
leverage ratio was 8.60%, compared with 8.35% for the first quarter of
1996.
9
<PAGE>
ANALYSIS OF EARNINGS
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
--------------------------------------------------------------
MARCH 31, DECEMBER 31, SEPTEMBER 30, JUNE 30, MARCH 31,
(IN THOUSANDS, EXCEPT PER SHARE DATA) 1997 1996 1996 1996 1996
- ---------------------------------------------------- ----------- ------------ ------------- -------- ---------
<S> <C> <C> <C> <C> <C>
EARNINGS SUMMARY
Interest income (1)............................... $ 486,452 $ 490,803 $482,404 $475,625 $485,196
Interest expense.................................. 191,000 196,236 189,727 185,362 187,401
----------- ------------ ------------- -------- ---------
Net interest income (1)........................... 295,452 294,567 292,677 290,263 297,795
Provision for credit losses....................... -- 10,000 10,000 10,000 10,000
Noninterest income................................ 114,786 102,972 107,280 105,550 102,874
Noninterest expense, excluding merger and
integration expense(2).......................... 247,101 254,375 258,523 252,518 252,024
----------- ------------ ------------- -------- ---------
Income before merger and integration expense and
income taxes (1)(2)............................. 163,137 133,164 131,434 133,295 138,645
Merger and integration expense(2)................. 6,037 30,646 25,552 61,266 --
----------- ------------ ------------- -------- ---------
Income before income taxes (1).................... 157,100 102,518 105,882 72,029 138,645
Taxable-equivalent adjustment..................... 1,421 1,483 1,089 2,024 2,128
Income tax expense................................ 63,177 41,234 42,810 25,597 53,251
----------- ------------ ------------- -------- ---------
Net income........................................ $ 92,502 $ 59,801 $ 61,983 $ 44,408 $ 83,266
----------- ------------ ------------- -------- ---------
----------- ------------ ------------- -------- ---------
Net income applicable to:.........................
Common stock.................................... $ 84,291 $ 53,472 $ 55,745 $ 39,096 $ 76,768
----------- ------------ ------------- -------- ---------
----------- ------------ ------------- -------- ---------
Parent direct interest in bank subsidiary....... $ 5,385 $ 3,503 $ 3,411 $ 2,486 $ 3,672
----------- ------------ ------------- -------- ---------
----------- ------------ ------------- -------- ---------
RECAP OF EARNINGS
Net income........................................ $ 92,502 $ 59,801 $ 61,983 $ 44,408 $ 83,266
Merger and integration expense (after-tax)(2)..... 3,550 18,570 15,025 38,323 --
----------- ------------ ------------- -------- ---------
Pro forma earnings, excluding merger and
integration expense(2).......................... $ 96,052 $ 78,371 $ 77,008 $ 82,731 $ 83,266
----------- ------------ ------------- -------- ---------
----------- ------------ ------------- -------- ---------
Net income applicable to common stock............. $ 84,291 $ 53,472 $ 55,745 $ 39,096 $ 76,768
Merger and integration expense (after-tax)
applicable to common stock(2)................... 3,338 17,460 14,128 36,036 --
----------- ------------ ------------- -------- ---------
Pro forma earnings applicable to common stock,
excluding merger and integration expense(2)..... $ 87,629 $ 70,932 $ 69,873 $ 75,132 $ 76,768
----------- ------------ ------------- -------- ---------
----------- ------------ ------------- -------- ---------
PER COMMON SHARE
Net income........................................ $ 1.54 $ 0.98 $ 1.02 $ 0.71 $ 1.40
Merger and integration expense (after-tax) (2).... 0.06 0.32 0.26 0.66 --
----------- ------------ ------------- -------- ---------
Pro forma earnings, excluding merger and
integration expense (2)......................... $ 1.60 $ 1.30 $ 1.28 $ 1.37 $ 1.40
----------- ------------ ------------- -------- ---------
----------- ------------ ------------- -------- ---------
Dividends (3)..................................... $ 0.35 $ 0.35 $ 0.35 $ 0.35 $ 0.35
Book value (end of period)........................ 41.76 40.74 40.04 39.29 39.07
Weighted average common shares outstanding (in
thousands)...................................... 54,765 54,760 54,759 54,752 54,690
</TABLE>
- --------------------------
(1) Amounts are on a taxable-equivalent basis using the federal statutory tax
rate of 35 percent.
(2) See page 8, "Introduction", for a description of merger accounting and pro
forma earnings presentations.
(3) The dividend amount for the first quarter of 1996 is based on Union Bank
only and 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.
10
<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
---------------------------------------------------------------
MARCH 31, 1997 DECEMBER 31, 1996
------------------------------ ------------------------------
INTEREST AVERAGE INTEREST AVERAGE
INCOME/ YIELD/ INCOME/ YIELD/
AVERAGE EXPENSE RATE AVERAGE EXPENSE RATE
(DOLLARS IN THOUSANDS) BALANCE (1) (1) BALANCE (1) (1)
- ----------------------------------------------------- ----------- -------- ------- ----------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Loans: (2)
Domestic........................................... $19,818,799 $401,456 8.19% $19,632,870 $404,481 8.20%
Foreign............................................ 1,250,023 19,307 6.26 1,210,820 18,864 6.20
Investment securities--taxable (3)................... 2,312,482 35,829 6.24 2,234,788 34,408 6.14
Investment securities--tax-exempt (3)................ 134,157 3,348 9.98 142,155 3,568 10.04
Interest bearing deposits in banks................... 802,784 11,199 5.66 980,076 14,126 5.73
Federal funds sold and securities purchased under
resale agreements.................................. 733,499 9,840 5.44 606,687 8,403 5.51
Trading account securities........................... 396,277 5,473 5.60 488,505 6,953 5.66
----------- -------- ----------- --------
Total earning assets............................. 25,448,021 486,452 7.73 25,295,901 490,803 7.72
-------- --------
Allowance for credit losses.......................... (531,621) (534,247)
Cash and due from banks.............................. 2,032,209 2,020,856
Premises and equipment, net.......................... 416,582 430,765
Other assets......................................... 1,425,210 1,378,108
----------- -----------
Total assets..................................... $28,790,401 $28,591,383
----------- -----------
----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits in domestic offices:
Interest bearing................................... $ 5,212,126 35,961 2.80 $ 5,121,292 35,806 2.78
Savings and consumer time.......................... 2,918,508 27,025 3.76 2,892,147 27,342 3.76
Large time......................................... 4,755,047 63,419 5.41 4,759,405 65,018 5.43
Deposits in foreign offices.......................... 1,540,546 17,909 4.71 1,486,542 17,720 4.74
----------- -------- ----------- --------
Total interest bearing deposits.................. 14,426,227 144,314 4.06 14,259,386 145,886 4.07
----------- -------- ----------- --------
Federal funds purchased and securities sold under
repurchase agreements.............................. 819,980 10,391 5.14 692,535 8,784 5.05
Subordinated capital notes........................... 343,111 5,503 6.51 391,685 6,489 6.59
Other borrowed funds................................. 2,291,772 30,792 5.45 2,521,206 35,077 5.53
----------- -------- ----------- --------
Total borrowed funds............................. 3,454,863 46,686 5.48 3,605,426 50,350 5.56
----------- -------- ----------- --------
Total interest bearing liabilities............... 17,881,090 191,000 4.33 17,864,812 196,236 4.37
-------- --------
Demand deposits...................................... 7,102,730 7,030,556
Other liabilities.................................... 1,279,767 1,220,071
----------- -----------
Total liabilities................................ 26,263,587 26,115,439
SHAREHOLDERS' EQUITY................................. 2,526,814 2,475,944
----------- -----------
Total liabilities and shareholders' equity....... $28,790,401 $28,591,383
----------- -----------
----------- -----------
Net interest income/margin (taxable-equivalent
basis)............................................. 295,452 4.69% 294,567 4.63%
Less: taxable-equivalent adjustment.................. 1,421 1,483
-------- --------
Net interest income.............................. $294,031 $293,084
-------- --------
-------- --------
</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.
11
<PAGE>
NET INTEREST INCOME (CONTINUED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
-----------------------------------------------------------------------------------------------------
SEPTEMBER 30, 1996 JUNE 30, 1996 MARCH 31, 1996
------------------------------ --------------------------------- --------------------------------
INTEREST AVERAGE AVERAGE INTEREST AVERAGE
INCOME/ YIELD/ INTEREST YIELD/ INCOME/ YIELD/
AVERAGE EXPENSE RATE AVERAGE INCOME/ RATE AVERAGE EXPENSE RATE
(DOLLARS IN THOUSANDS) BALANCE (1) (1) BALANCE EXPENSE (1) (1) BALANCE (1) (1)
- ---------------------------- ----------- -------- ------- ----------- ----------- ------- ----------- ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Loans: (2)
Domestic.................. $19,453,079 $402,143 8.22% $19,235,527 $ 396,344 8.29% $18,952,230 $ 401,462 8.52%
Foreign................... 1,198,378 17,847 5.92 1,146,364 17,272 6.06 1,236,196 19,071 6.20
Investment securities--
taxable (3)................ 2,119,276 33,909 6.38 2,082,706 32,099 6.18 2,115,504 32,754 6.21
Investment securities--
tax-exempt (3)............. 147,623 3,735 10.12 157,139 4,024 10.24 161,118 4,124 10.24
Interest bearing deposits in
banks...................... 864,087 12,485 5.75 833,804 11,821 5.70 968,391 14,277 5.93
Federal funds sold and
securities purchased under
resale agreements.......... 433,494 6,028 5.53 547,527 7,396 5.43 603,083 8,419 5.61
Trading account securities.. 439,227 6,257 5.67 489,698 6,669 5.48 357,493 5,089 5.73
----------- -------- ----------- ----------- ------- ----------- ----------
Total earning assets.... 24,655,164 482,404 7.78 24,492,765 475,625 7.81 24,394,015 485,196 8.00
-------- ----------- ----------
Allowance for credit
losses..................... (543,646) (546,744) (554,716)
Cash and due from banks..... 1,918,643 1,911,415 1,852,328
Premises and equipment,
net........................ 425,019 427,181 420,765
Other assets................ 1,526,714 1,513,584 1,316,329
----------- ----------- -----------
Total assets............ $27,981,894 $27,798,201 $27,428,721
----------- ----------- -----------
----------- ----------- -----------
LIABILITIES AND
SHAREHOLDERS' EQUITY
Deposits in domestic
offices:
Interest bearing.......... $ 5,037,400 34,137 2.70 $ 4,924,269 33,148 2.71 $ 4,919,560 32,730 2.68
Savings and consumer
time.................... 2,854,894 26,294 3.66 2,816,501 25,695 3.67 2,784,453 26,019 3.76
Large time................ 4,137,305 55,932 5.38 3,724,302 48,160 5.20 3,752,113 49,849 5.34
Deposits in foreign
offices.................... 1,512,042 18,244 4.80 1,504,478 17,731 4.74 1,513,311 17,742 4.72
----------- -------- ----------- ----------- ----------- ----------
Total interest bearing
deposits.............. 13,541,641 134,607 3.95 12,969,550 124,734 3.87 12,969,437 126,340 3.92
----------- -------- ----------- ----------- ----------- ----------
Federal funds purchased and
securities sold under
repurchase agreements...... 817,236 10,466 5.09 1,022,271 12,208 4.80 1,205,613 15,637 5.22
Subordinated capital
notes...................... 452,211 7,492 6.59 495,369 7,889 6.40 497,413 8,235 6.66
Other borrowed funds........ 2,759,849 37,162 5.36 3,032,052 40,531 5.38 2,655,761 37,189 5.63
----------- -------- ----------- ----------- ----------- ----------
Total borrowed funds.... 4,029,296 55,120 5.44 4,549,692 60,628 5.36 4,358,787 61,061 5.63
----------- -------- ----------- ----------- ----------- ----------
Total interest bearing
liabilities........... 17,570,937 189,727 4.30 17,519,242 185,362 4.26 17,328,224 187,401 4.35
-------- ----------- ----------
Demand deposits............. 6,640,131 6,560,900 6,420,636
Other liabilities........... 1,335,204 1,291,592 1,175,914
----------- ----------- -----------
Total liabilities....... 25,546,272 25,371,734 24,924,774
SHAREHOLDERS' EQUITY........ 2,435,622 2,426,467 2,503,947
----------- ----------- -----------
Total liabilities and
shareholders' equity.. $27,981,894 $27,798,201 $27,428,721
----------- ----------- -----------
----------- ----------- -----------
Net interest income/margin
(taxable-equivalent
basis)..................... 292,677 4.72% 290,263 4.77% 297,795 4.91%
Less: taxable-equivalent
adjustment................. 1,089 2,024 2,128
-------- ----------- ----------
Net interest income..... $291,588 $ 288,239 $ 295,667
-------- ----------- ----------
-------- ----------- ----------
</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.
12
<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 $295 million for the
first quarter of 1997 and $298 million for the first quarter of 1996. This
decrease of $3 million was primarily attributable to a decrease in the net
interest margin from 4.91% to 4.69%, largely offset by growth in earning assets.
The decline in the net interest margin resulted from an increase in the cost of
lower cost sources of funds and a decrease in the average yield on assets. The
cost of domestic interest bearing core deposits (excluding large time) increased
by 7 basis points, while the yield on domestic loans dropped by 33 basis points.
The negative effect of these factors on the net interest margin was partly
offset by an increase in the proportion of funding provided by demand deposits
and interest bearing core deposits.
Average earning assets were $25.4 billion in the first quarter of 1997,
compared with $24.4 billion in the first quarter of 1996. Average loans were up
$880 million, or 4 percent, while average investment securities were $170
million higher. See "Loans" for additional commentary on growth in the loan
portfolio. The increase in investment securities reflected interest rate risk
management actions to reduce the Company's exposure to declines in interest
rates.
The $1.0 billion, or 4 percent, growth in average earning assets from the
first quarter of 1996 to the first quarter of 1997 was funded primarily by
increases in demand deposits and interest bearing core deposits. Increases in
these categories were: demand deposits $682 million, or 11 percent; interest
bearing deposits $293 million, or 6 percent; and savings and consumer time
deposits $134 million, or 5 percent. Since these categories of deposits all grew
faster than earning assets, the average proportion of funding provided by
non-interest bearing and interest bearing core deposits increased from 61
percent in the first quarter of 1996 to 62 percent in the same period of 1997.
NONINTEREST INCOME
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
---------------------------------------------------------------
MARCH 31, DECEMBER 31, SEPTEMBER 30, JUNE 30, MARCH 31,
(DOLLARS IN THOUSANDS) 1997 1996 1996 1996 1996
- -------------------------------------------------- ---------- ------------ ------------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Service charges on deposit accounts............... $ 27,121 $ 26,148 $ 26,799 $ 25,067 $ 23,961
Trust fees........................................ 23,898 23,824 24,098 23,309 22,248
International commissions and fees................ 15,079 16,586 16,120 17,124 16,278
Credit card merchant fees......................... 13,044 11,554 13,721 12,905 11,598
Merchant banking fees............................. 8,380 4,718 4,729 5,234 9,248
Investment services............................... 4,979 5,182 5,225 4,714 4,259
Foreign exchange.................................. 3,469 3,598 2,641 3,330 3,686
Investment securities gains, net.................. 471 637 628 2,621 616
Other............................................. 18,345 10,725 13,319 11,246 10,980
---------- ------------ ------------- ---------- ----------
Total noninterest income........................ $ 114,786 $ 102,972 $ 107,280 $ 105,550 $ 102,874
---------- ------------ ------------- ---------- ----------
---------- ------------ ------------- ---------- ----------
</TABLE>
In the first quarter of 1997, the Company had noninterest income of $115
million, compared with $103 million for the same period in 1996. This increase
of $12 million was primarily due to $8 million of gains from a real
estate-related joint venture (included in "Other"), a $3 million increase in
service charges on deposits arising from an increase in the volume of non-credit
services provided, a $2 million increase in trust fees due to growth in the
Company's proprietary mutual funds, and a $1 million increase in credit card
fees, resulting from increased merchant volume.
13
<PAGE>
NONINTEREST EXPENSE
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
---------------------------------------------------------------
MARCH 31, DECEMBER 31, SEPTEMBER 30, JUNE 30, MARCH 31,
(DOLLARS IN THOUSANDS) 1997 1996 1996 1996 1996
- -------------------------------------------------- ---------- ------------ ------------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Salaries and other compensation................... $ 108,601 $ 109,201 $ 113,416 $ 114,281 $ 111,895
Employee benefits................................. 32,187 27,724 24,591 25,683 30,456
---------- ------------ ------------- ---------- ----------
Personnel-related expense....................... 140,788 136,925 138,007 139,964 142,351
Occupancy......................................... 19,630 21,671 35,439 24,270 21,955
Equipment......................................... 13,687 14,790 14,003 13,336 13,813
Communications.................................... 10,268 9,203 8,713 9,334 8,687
Credit card processing............................ 9,722 9,065 9,619 10,038 8,369
Data processing................................... 6,423 6,565 5,568 4,689 5,318
Printing and office supplies...................... 6,169 6,614 7,939 6,434 6,098
Advertising and public relations.................. 6,009 9,585 5,508 6,702 6,993
Software.......................................... 4,729 4,575 3,966 3,678 3,676
Professional services............................. 4,719 5,737 6,144 6,592 5,869
Intangible asset amortization..................... 3,338 3,321 3,338 3,338 3,338
Travel............................................ 3,195 4,487 3,553 3,822 3,074
Armored car....................................... 3,113 4,778 4,458 4,171 4,085
Foreclosed asset expense (income)................. 411 (556) (696) 867 3,274
Other............................................. 14,900 17,615 12,964 15,283 15,124
---------- ------------ ------------- ---------- ----------
Noninterest expense, excluding merger and
integration expense........................... 247,101 254,375 258,523 252,518 252,024
Merger and integration expense.................... 6,037 30,646 25,552 61,266 --
---------- ------------ ------------- ---------- ----------
Total noninterest expense....................... $ 253,138 $ 285,021 $ 284,075 $ 313,784 $ 252,024
---------- ------------ ------------- ---------- ----------
---------- ------------ ------------- ---------- ----------
</TABLE>
Noninterest expense, excluding merger and integration expense of $6 million,
was $247 million for the first quarter of 1997, compared with $252 million for
the first quarter of 1996. This decrease of $5 million, or 2 percent, resulted
principally from a $2 million decrease in personnel-related expense (due to a
decline in full-time equivalent employees from 10,002 to 9,444 during the last
twelve months and a reduction in contract labor), a decrease in occupancy
expense of $2 million resulting from consolidation of administrative functions
and closure of 20 banking offices, and a decrease of $3 million in foreclosed
asset expense. These expense reductions were partly offset by an increase of $3
million in outside credit card and data processing services, which directly
supported a $4 million increase in revenue from non-credit services.
MERGER AND INTEGRATION EXPENSE
In connection with the merger, $6 million of merger and integration expense
was recognized in the first quarter of 1997. These costs included severance,
retention, and other employee-related costs ($1 million); professional fees ($1
million); and other merger and integration related expenses ($4 million). Since
the combination of Union Bank and BanCal Tri-State Corporation on April 1, 1996,
merger and integration expense totaling $124 million has been recorded. No
further merger and integration charges are expected in connection with the
merger.
14
<PAGE>
MERGER AND INTEGRATION EXPENSE (CONTINUED)
The table that follows presents merger and integration expense provisions in
1996 and the first quarter of 1997, the cash and noncash utilization of those
expense provisions during the periods, and the resulting liability balances as
of March 31, 1997, and December 31, 1996.
<TABLE>
<CAPTION>
THREE MONTHS ENDED TWELVE MONTHS ENDED
(DOLLARS IN THOUSANDS) MARCH 31, 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................................................................. 15,360 40,155
Noncash.............................................................. -- 22,965
------- -------
Total utilization.................................................. 15,360 63,120
------- -------
Balance, accrued merger and integration expense, end of period......... $ 45,021 $ 54,344
------- -------
------- -------
</TABLE>
The Company's liquidity has not been significantly affected by these cash
outlays, and future cash outlays are not expected to impact liquidity.
INCOME TAX EXPENSE
The effective tax rates for the three months ended March 31, 1997 and 1996,
were 40.6 percent and 39.0 percent, respectively. The increase in the effective
tax rate was primarily attributable to an increase in the effective state tax
rates as a result of the combination of Union Bank with BanCal Tri-State
Corporation and of their parents, The Bank of Tokyo, Ltd. and The Mitsubishi
Bank, Limited, on April 1, 1996.
LOANS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31, SEPTEMBER 30, JUNE 30, MARCH 31,
(DOLLARS IN THOUSANDS) 1997 1996 1996 1996 1996
- ------------------------------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Domestic:
Commercial, financial and
industrial....................... $ 9,676,131 $ 9,492,255 $ 9,603,845 $ 9,439,260 $ 9,538,015
Construction....................... 331,149 357,817 362,324 365,946 384,792
Mortgage:
Residential...................... 2,973,411 2,960,908 3,005,167 3,026,548 2,881,026
Commercial....................... 2,650,511 2,597,616 2,485,963 2,301,144 2,204,438
------------- ------------- ------------- ------------- -------------
Total mortgage................. 5,623,922 5,558,524 5,491,130 5,327,692 5,085,464
Consumer:
Installment...................... 2,061,883 2,063,434 2,038,849 1,943,889 1,840,078
Home equity...................... 1,064,357 1,113,269 1,137,454 1,166,428 1,185,188
Credit card and other lines of
credit......................... 284,009 303,235 296,131 298,798 295,112
------------- ------------- ------------- ------------- -------------
Total consumer................. 3,410,249 3,479,938 3,472,434 3,409,115 3,320,378
Lease financing.................... 824,325 800,048 823,082 830,889 830,098
------------- ------------- ------------- ------------- -------------
Total loans in domestic
offices...................... 19,865,776 19,688,582 19,752,815 19,372,902 19,158,747
Loans originated in foreign
branches............................ 1,234,150 1,209,523 1,193,950 1,107,776 1,182,588
------------- ------------- ------------- ------------- -------------
Total loans.................... $ 21,099,926 $ 20,898,105 $ 20,946,765 $ 20,480,678 $ 20,341,335
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
</TABLE>
15
<PAGE>
LOANS (CONTINUED)
The Company's lending activities are predominantly domestic, with such loans
comprising approximately 94 percent of the portfolio at March 31, 1997. Total
loans at March 31, 1997, were $21.1 billion, an increase of $759 million, or 4
percent, from March 31, 1996. The increase was primarily attributable to growth
in the residential and commercial mortgage portfolio, which increased $538
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 March 31, 1997 and 1996, the commercial,
financial and industrial loan portfolio was $9.7 billion, or 46 percent of total
loans, and $9.5 billion, or 47 percent of total loans, respectively.
The construction loan portfolio totaled $331 million, or 2 percent of total
loans, at March 31, 1997, compared with $385 million, or 2 percent of total
loans, at March 31, 1996.
Mortgage loans were $5.6 billion, or 27 percent of total loans, at March 31,
1997, and $5.1 billion, or 25 percent of total loans, at March 31, 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 $446 million from March 31, 1996,
primarily due to originations of mini perm loans ranging from $1 million to $10
million.
Consumer loans totaled $3.4 billion, or 16 percent of total loans, at March
31, 1997, compared with $3.3 billion, or 16 percent of total loans, at March 31,
1996. This portfolio is primarily comprised of installment loans and home equity
loans. Installment loans increased $222 million from March 31, 1996, due to
increases in automobile lending.
Lease financing totaled $824 million, or 4 percent of total loans, at March
31, 1997, compared with $830 million, or 4 percent of total loans, at March 31,
1996.
Loans originated in foreign branches totaled $1.2 billion, or 6 percent of
total loans, at March 31, 1997 and 1996.
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 the risks
inherent 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 first quarter of 1997, future provisions will be subject to
continuing evaluation of inherent risk in the loan portfolio.
16
<PAGE>
ALLOWANCE FOR CREDIT LOSSES (CONTINUED)
The table below sets forth a reconciliation of changes in the allowance for
credit losses.
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
---------------------------------------------------------------
MARCH 31, DECEMBER 31, SEPTEMBER 30, JUNE 30, MARCH 31,
(DOLLARS IN THOUSANDS) 1997 1996 1996 1996 1996
- ----------------------------------------------- ---------- ------------ ------------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Balance, beginning of period................... $ 523,946 $ 535,087 $ 545,345 $ 547,401 $ 555,149
Loans charged off:
Commercial, financial and industrial....... 5,175 13,280 10,289 6,628 11,937
Construction............................... -- 2,376 -- 806 67
Mortgage................................... 1,888 1,706 5,086 2,621 4,070
Consumer................................... 12,539 18,083 12,293 12,162 13,823
Lease financing............................ 969 683 716 577 647
Loans originated in foreign branches....... -- 42 1,256 49 30
---------- ------------ ------------- ---------- ----------
Total loans charged off.................. 20,571 36,170 29,640 22,843 30,574
Recoveries of loans previously charged off:
Commercial, financial and industrial....... 7,540 7,887 4,030 4,271 6,153
Construction............................... 6,891 2 -- 129 1
Mortgage................................... 1,474 4,310 2,230 3,097 2,640
Consumer................................... 3,481 2,786 3,027 3,147 3,946
Lease financing............................ 74 44 95 143 86
Loans originated in foreign branches....... -- -- -- -- --
---------- ------------ ------------- ---------- ----------
Total recoveries of loans previously
charged off............................ 19,460 15,029 9,382 10,787 12,826
---------- ------------ ------------- ---------- ----------
Net loans charged off.................. 1,111 21,141 20,258 12,056 17,748
Provision for credit losses.................... -- 10,000 10,000 10,000 10,000
---------- ------------ ------------- ---------- ----------
Balance, end of period......................... $ 522,835 $ 523,946 $ 535,087 $ 545,345 $ 547,401
---------- ------------ ------------- ---------- ----------
---------- ------------ ------------- ---------- ----------
Allowance for credit losses to total loans..... 2.48% 2.51% 2.55% 2.66% 2.69%
Provision for credit losses to net loans
charged off................................... -- 47.30 49.36 82.95 56.34
Recoveries of loans to loans charged off in the
previous period............................... 53.80 50.71 41.07 35.28 33.46
Net loans charged off to average loans
outstanding for the period (1)................ 0.02 0.40 0.39 0.24 0.35
</TABLE>
- ------------------------------
(1) Annualized.
At March 31, 1997, the Company's allowance for credit losses was $523
million, or 2.48 percent of total loans, and 383 percent of total nonaccrual
loans, compared with an allowance for credit losses of $547 million, or 2.69
percent of total loans, and 285 percent of total nonaccrual loans at March 31,
1996.
During the first three months of 1997, the Company recorded no provision for
credit losses. 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 first quarter of 1997, the Company had net loans charged off of
$1 million, compared with $18 million in the first quarter of 1996. Loans
charged off in the first quarter of 1997 were lower than in any quarter in 1996.
In addition, there were $19 million in recoveries during the first quarter of
1997, including a recovery of $7 million on one construction loan. Net loans
charged off as a percentage of average total loans for the first quarter of 1997
dropped to 0.02%, compared with 0.35% for the same quarter a year ago.
17
<PAGE>
ALLOWANCE FOR CREDIT LOSSES (CONTINUED)
The Company evaluates its loan portfolio for impairment as defined by
Statement of Financial Accounting Standard No. 114, as amended. At March 31,
1997, total impaired loans were $125 million, and the associated impairment
allowance was $15 million, compared with total impaired loans of $158 million
and an associated impairment allowance of $13 million, at March 31, 1996.
NONPERFORMING ASSETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31, SEPTEMBER 30, JUNE 30, MARCH 31,
(DOLLARS IN THOUSANDS) 1997 1996 1996 1996 1996
- ----------------------------------------------- ---------- ------------ ------------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Nonaccrual loans:
Commercial, financial and industrial....... $ 70,778 $ 56,864 $ 70,920 $ 94,303 $ 81,028
Construction............................... 5,009 7,349 10,670 10,974 30,630
Mortgage:
Residential.............................. 3,244 11,214 10,577 16,083 17,961
Commercial............................... 57,636 52,593 54,904 66,911 61,108
---------- ------------ ------------- ---------- ----------
Total mortgage......................... 60,880 63,807 65,481 82,994 79,069
Other...................................... -- 247 704 3,223 1,089
---------- ------------ ------------- ---------- ----------
Total nonaccrual loans................. 136,667 128,267 147,775 191,494 191,816
Renegotiated loans............................. -- -- -- 681 1,385
Foreclosed assets.............................. 30,378 28,517 32,882 35,998 34,999
---------- ------------ ------------- ---------- ----------
Total nonperforming assets............... $ 167,045 $ 156,784 $ 180,657 $ 228,173 $ 228,200
---------- ------------ ------------- ---------- ----------
---------- ------------ ------------- ---------- ----------
Allowance for credit losses.................... $ 522,835 $ 523,946 $ 535,087 $ 545,345 $ 547,401
---------- ------------ ------------- ---------- ----------
---------- ------------ ------------- ---------- ----------
Nonaccrual and renegotiated loans to total
loans ........................................ 0.65% 0.61% 0.71% 0.94% 0.95%
Nonaccrual loans to allowance for credit losses
.............................................. 26.14 24.48 27.62 35.11 35.04
Nonperforming assets to total loans and
foreclosed assets ............................ 0.79 0.75 0.86 1.11 1.12
Nonperforming assets to total assets .......... 0.57 0.54 0.63 0.81 0.81
</TABLE>
At March 31, 1997, nonaccrual and renegotiated loans totaled $137 million, a
decrease of $57 million, or 29 percent, from a year earlier. The decrease was
primarily the result of reductions of $26 million in nonaccrual construction
loans, $15 million in nonaccrual residential mortgage loans, and $10 million in
nonaccrual commercial, financial and industrial loans. Foreclosed assets
declined $5 million due to sales of individual assets. Nonperforming assets
increased $10 million from December 31, 1996, primarily due to the addition of a
single nonaccrual commercial, financial and industrial loan of $17 million.
Nonaccrual loans as a percentage of total loans were 0.65% at March 31,
1997, compared with 0.95% at March 31, 1996. Nonperforming assets as a
percentage of total loans and foreclosed assets were 0.79% at March 31, 1997,
compared with 1.12% at March 31, 1996.
18
<PAGE>
LOANS 90 DAYS OR MORE PAST DUE AND STILL ACCRUING
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31, SEPTEMBER 30, JUNE 30, MARCH 31,
(DOLLARS IN THOUSANDS) 1997 1996 1996 1996 1996
- ------------------------------------------------- ----------- ------------ ------------- --------- -----------
<S> <C> <C> <C> <C> <C>
Commercial, financial and industrial............ $ 4,419 $ 4,527 $ 521 $ 1,800 $ 3,756
Construction................................... 5,081 -- 2,325 188 1,716
Mortgage:
Residential.................................. 10,952 8,969 9,838 7,110 12,208
Commercial................................... 13,742 168 16,372 117 2,949
----------- ------------ ------------- --------- -----------
Total mortgage............................. 24,694 9,137 26,210 7,227 15,157
Consumer and other............................. 11,865 10,028 13,643 6,867 7,786
----------- ------------ ------------- --------- -----------
Total loans 90 days or more past due and
still accruing........................... $ 46,059 $ 23,692 $ 42,699 $ 16,082 $ 28,415
----------- ------------ ------------- --------- -----------
----------- ------------ ------------- --------- -----------
</TABLE>
Total loans 90 days or more past due and still accruing were $46 million at
March 31, 1997, compared with $28 million at March 31, 1996. Included in the
March 31, 1997, balance was a single commercial mortgage loan of $11 million,
which was repaid in April 1997, and a single construction loan of $5 million,
which was placed on nonaccrual status in April 1997.
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 first quarter of 1997, lower cost sources of funds,
which include demand deposits and interest bearing core deposits, funded 62
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.
19
<PAGE>
REGULATORY CAPITAL
<TABLE>
<CAPTION>
MINIMUM
MARCH 31, DECEMBER 31, SEPTEMBER 30, JUNE 30, MARCH 31, REGULATORY
(DOLLARS IN THOUSANDS) 1997 1996 1996 1996 1996 REQUIREMENT
- ----------------------- ------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
CAPITAL COMPONENTS
Tier 1 capital......... $ 2,467,312 $ 2,395,580 $ 2,349,483 $ 2,308,038 $ 2,282,662
Tier 2 capital......... 458,135 551,074 552,768 594,911 590,262
------------- ------------- ------------- ------------- -------------
Total risk-based
capital............... $ 2,925,447 $ 2,946,654 $ 2,902,251 $ 2,902,949 $ 2,872,924
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
Risk-weighted assets... $ 26,963,265 $ 26,390,288 $ 25,994,269 $ 25,827,724 $ 25,370,424
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
Quarterly average
assets................ $ 28,702,616 $ 28,496,355 $ 27,885,645 $ 27,699,256 $ 27,326,426
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
CAPITAL RATIOS
Tier 1 risk-based
capital............... 9.15% 9.08% 9.04% 8.94% 9.00% 4.0%
Total risk-based
capital............... 10.85 11.17 11.16 11.24 11.32 8.0
Leverage ratio (1)..... 8.60 8.41 8.43 8.33 8.35 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 amounts and 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 March 31, 1997, increased 15 basis points to 9.15%, the total
risk-based capital ratio declined 47 basis points to 10.85%, and the leverage
ratio increased 25 basis points to 8.60%. The increase in the Tier 1 risk-based
capital and leverage ratios was due to retained earnings growing faster than
risk-weighted assets and average assets, respectively. The decline in the total
capital ratio was primarily due to the redemption of $100 million of
subordinated debt in the first quarter of 1997, which had the positive effect of
increasing net interest income. As of March 31, 1997, management believes the
capital ratios of the Bank met all regulatory minimums of a well-capitalized
bank.
20
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits Index:
<TABLE>
<CAPTION>
NO. DESCRIPTION
- --------- ---------------------------
<C> <S>
27 Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K: There were no reports on Form 8-K filed during
the first quarter of 1997.
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/ TAKAHIRO MORIGUCHI
------------------------------------
Takahiro Moriguchi
VICE CHAIRMAN OF THE BOARD AND
CHIEF FINANCIAL OFFICER
By /s/ DAVID W. EHLERS
------------------------------------
David W. Ehlers
EXECUTIVE VICE PRESIDENT AND
DIRECTOR OF FINANCE
By /s/ DAVID W. DOBON
------------------------------------
David W. Dobon
SENIOR VICE PRESIDENT AND CONTROLLER
Dated: May 13, 1997
21
<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 STATEMETS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 2,172,478
<INT-BEARING-DEPOSITS> 681,308
<FED-FUNDS-SOLD> 650,790
<TRADING-ASSETS> 642,684
<INVESTMENTS-HELD-FOR-SALE> 2,244,233
<INVESTMENTS-CARRYING> 259,430
<INVESTMENTS-MARKET> 262,568
<LOANS> 21,099,926
<ALLOWANCE> 522,835
<TOTAL-ASSETS> 29,423,537
<DEPOSITS> 22,043,925
<SHORT-TERM> 3,033,637
<LIABILITIES-OTHER> 560,909
<LONG-TERM> 282,726
0
135,000
<COMMON> 273,852
<OTHER-SE> 2,145,424
<TOTAL-LIABILITIES-AND-EQUITY> 29,423,537
<INTEREST-LOAN> 420,472
<INTEREST-INVEST> 38,047
<INTEREST-OTHER> 26,512
<INTEREST-TOTAL> 485,031
<INTEREST-DEPOSIT> 144,314
<INTEREST-EXPENSE> 191,000
<INTEREST-INCOME-NET> 294,031
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 471
<EXPENSE-OTHER> 253,138
<INCOME-PRETAX> 155,679
<INCOME-PRE-EXTRAORDINARY> 92,502
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 92,502
<EPS-PRIMARY> 1.54
<EPS-DILUTED> 1.54
<YIELD-ACTUAL> 4.69
<LOANS-NON> 136,667
<LOANS-PAST> 46,059
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 523,946
<CHARGE-OFFS> 20,571
<RECOVERIES> 19,460
<ALLOWANCE-CLOSE> 522,835
<ALLOWANCE-DOMESTIC> 283,059
<ALLOWANCE-FOREIGN> 9,429
<ALLOWANCE-UNALLOCATED> 230,347
</TABLE>
