2012 CoRpoRate SoCIal ReSponSIBIlIty RepoRt - Union Bank

Inside the heart and soul of Union Bank

CSR 12 Corporate Social Responsibility – 2012 Report

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CONTENTS

About the Cover It is often said that the eyes are a window to the soul. At a glance, they reveal many things about us. Our personality. Our attitude. Our outlook. The eye we feature on the cover of our 2012 CSR Report symbolizes an opportunity to look inside the heart and soul of Union Bank. Our focus. Our goals. Our actions. And our commitment to doing right for our customers, communities, colleagues, and the environment. You’ll notice the sky, the earth, buildings, and windows. Like the multiple layers of this image, our commitment to corporate social responsibility is multi-dimensional. We invite you to learn more about the heart and soul of Union Bank.

Acronyms Used in this Report AHA American Heart Association BDL Business Diversity Lending CDF Community Development Finance

Table of Contents

CRA Community Reinvestment Act

CEO’s Letter 04 Letter From Julius Robinson 05 Our Business 06

CSR Corporate Social Responsibility DBE Diverse Business Enterprise FDIC Federal Deposit Insurance Corporation

Our Community Commitment 15

GHG Greenhouse gas

Strengthening Our Customers 20

GRI Global Reporting Initiative

Strengthening Our Communities 26 Investing In Our Talent 35 Environmental Stewardship 41 Union Bank GRI Content Index 53

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400 California St

CONTENTS

HVAC Heating, ventilation, and air conditioning LMI Low- and moderate-income MUFG Mitsubishi UFJ Financial Group

Union Bank – 2012 Corporate Social Responsibility Report Meaningful service. At Union Bank, it’s more than just a goal — it’s an enduring commitment. From our earliest days during California’s pioneer era, Union Bank has taken great pride in being a responsible and constructive partner to our customers, employees, neighbors, and stakeholders. While the world has changed dramatically in the nearly 150 years our bank has been in business, our commitment to service is unchanged. We set high social, environmental, and business goals, and make it an enterprise-wide priority to achieve them — always with a focus on operating sustainably. Our financial products and services enable families to strengthen and businesses to grow. Our innovative environmental efforts reduce our impact on the planet. Our business practices foster diversity and inclusion. And our philanthropy and tremendous employee volunteerism create positive change throughout our marketplace. As Union Bank continues to grow and evolve, we are dedicated to building on the success of this legacy. We recognize that the health and prosperity of our business is closely tied to that of the places where we operate. For Union Bank to flourish, so must the people and the places we touch — that’s why strengthening our communities is central to all we do.

Corporate Social Responsibility – 2012 Report

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CEO’s Letter What does it mean to be a successful bank? It means much more than solid financial performance. In our eyes, it means reflecting the values of the communities that surround us. It means responding to them with a spirit of service. It means a drive to strengthen those who sustain us. Over the course of almost 150 years, we’ve learned we can be only as strong as the families, businesses, institutions and communities that surround and support our bank. That’s why I’m so pleased to present Union Bank’s 2012 Corporate Social Responsibility report, a multidimensional accounting of our community activities and their impact. This was a dynamic year of growth and progress for our bank. Despite an uneven economic recovery and the heightened regulatory environment, we improved our community service and involvement performance in many key areas. Our 11,855 employees have every reason to be proud that in 2012, Union Bank: • Directed nearly $6.5 billion toward communityrelated loans and activities as defined by the Community Reinvestment Act — an increase of $645 million from 2011. • Along with the Union Bank Foundation, donated nearly $12.7 million to a wide variety of charitable causes, representing a $1.5 million increase from 2011. • Surpassed our previous record for employee volunteerism, dedicating a remarkable 75,262 hours to support a wide range of good causes, including our signature efforts to improve financial literacy.

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• Adopted new sustainability measures to minimize our consumption of resources and our overall environmental impact, including a lighter-weight paper for bank statements composed of 100 percent sawmill residue. • Strengthened our efforts to foster diversity and inclusion, including the appointment of our firstever Chief Diversity Executive. For these reasons and many others, I can say with confidence that when it comes to demonstrating leadership in corporate social responsibility, Union Bank is truly building on success. To be sure, we still have much work before us to become an even more responsible lender, partner, employer and neighbor. Our continued growth is sure to present challenges as well as opportunities, and our economic and regulatory future remains far from clear. But whatever lies ahead, Union Bank will keep an unwavering focus on our commitment to community and on our dedication to responsible banking. That’s how we’ve defined success from the beginning, and it’s how we’ll continue to measure our progress. It’s our stated goal — and that of our parent company, MUFG — to be the world’s most trusted financial group. Nothing is more fundamental to earning and building that trust than investing in the communities and institutions that sustain us, with an appreciative spirit of service. I hope you find this report a worthy testament to our efforts so far.

Masashi Oka President & CEO, Union Bank

CONTENTS

Letter From Julius Robinson Union Bank’s Corporate Social Responsibility efforts continue to grow along with our business, creating positive change in our communities and deepening those connections among our employees, customers, neighbors, and partners. Our 2012 CSR report illustrates a broad crosssection of environmental, economic and social contributions that together represent the best of Union Bank and, I believe, reveal the character of our business and employees. Our dedicated CSR team works closely with the business units of Union Bank and a wide range of partners and stakeholders to coordinate and leverage our community efforts. A reflection of our commitment, creativity, and drive, Union Bank results far exceed what one might expect from a bank of our size. In 2012, we reached or exceeded goals in many key areas, including Community Reinvestment Act-related loans and activities, employee volunteer hours, donations from the Union Bank Foundation, and reducing greenhouse gas emissions per square foot of real estate. Meanwhile, we are focusing our attention and energy on those areas where more progress is still needed. Looking to the future, I am particularly enthusiastic about our Fresno Community Economic Development Initiative, a multi-faceted project to leverage the full resources and expertise of Union Bank, as well as those of our partners, to benefit the economically distressed city of Fresno, California. Organized in 2012 and launching in 2013, our three-year commitment exemplifies the innovation and heart that make Union Bank a unique institution. This is the second CSR report that adheres to the framework of the Global Reporting Initiative (GRI). Adopting this standard promotes transparency and accountability with regard to Union Bank’s community progress, which we believe will strengthen trust in our institution from the partners and stakeholders we rely on for our success. Thank you for your ongoing support and interest in our work.

Julius E. Robinson Executive Vice President/CSR Group Head


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About Union Bank Union Bank is among the largest and most storied financial institutions based on the West Coast, with roots dating to the Bank of

California’s incorporation in 1864. Headquartered in San Francisco, Union Bank provides a wide range of financial services to markets including consumer, small business, middle market, real estate, corporate, correspondent, and trade finance. The bank also offers investment and financial management, trust services, private banking, insurance services, and global custody services. As of December 31, 2012, Union Bank operated 447 branches in California, Washington, Oregon, Texas, Illinois, and New York, as well as two international offices in Canada and the Cayman Islands. The company employed 11,855 people at the end of 2012, primarily in California.

447

branches

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UnionBanCal Corporation is the holding company of Union Bank, N.A. At the end of 2012, the company had total assets of $97 billion, an 8 percent increase from the previous year. UnionBanCal is a wholly owned subsidiary of The Bank of Tokyo-Mitsubishi UFJ, Ltd., which is a subsidiary of the Mitsubishi UFJ Financial Group (MUFG, NYSE:MTU), one of the world’s largest financial organizations. UnionBanCal and Union Bank, N.A. are subject to oversight by U.S. regulatory agencies, including the Federal Reserve, the Office of the Comptroller of the Currency, the Consumer Financial Protection Bureau, and the Federal Deposit Insurance Corporation. We adhere to all local laws and regulations in effect where we operate. Union Bank also serves as North American representative of The Bank of Tokyo-

PEOPLE

11,855

Mitsubishi UFJ, Ltd. for purposes of its membership to the United Nations Environment Programme Finance Initiative. UnionBanCal is a privately held company but publicly issues quarterly earnings releases, as well as files quarterly and annual financial statements (Forms 8-K, 10-Q, 10-K) with the Securities and Exchange Commission.

$97

BILLION

in total assets

CONTENTS


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CONTENTS

Our Leadership UnionBanCal Corporation is led by nine outside, independent directors and four inside directors. In May 2012, Takashi Morimura succeeded Tatsuo Tanaka as Chairman of UnionBanCal and Union Bank, N.A. The Chairman is a non-resident, non-executive officer. All directors comply with a Directors Code of Ethics, as well as Union Bank’s Corporate Governance Guidelines. In addition, insider transactions are governed by the Federal Reserve Board’s Regulation O. Chairman of UnionBanCal and Union Bank, N.A., Takashi Morimura

UnionBanCal Corporation Board of Directors

Vice Chairman & Chief Risk Officer

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Matters related to Corporate Social Responsibility (CSR) and the Community Reinvestment Act fall within the oversight of the Risk Committee. In addition, the Board of Directors approves a Risk Vision Policy for the bank. Each year, the Audit & Finance Committee reviews a report regarding the bank’s Business Standards for Ethical Conduct. Masashi Oka has served as President and CEO of Union Bank since July 2010. Reporting to him are four Vice Chairmen: John C. Erickson, Vice Chairman and Chief Corporate Banking Officer; Mark W. Midkiff, Vice Chairman and Chief Risk Officer; Timothy H. Wennes, Vice Chairman and Chief Retail Banking Officer; and John F. Woods, Vice Chairman and Chief Financial Officer.

President & CEO

Vice Chairman & Chief Corporate Banking Officer

The Board of Directors approves an annual strategic plan for the company, and designates directors to oversee certain key subject matters, including strategic planning and community affairs. In addition, board members have roles on committees with a variety of oversight responsibilities, including a Risk Committee, an Audit & Finance Committee, an Executive Compensation & Benefits Committee, and a Nominating & Governance Committee.

Vice Chairman & Chief Retail Banking Officer

Vice Chairman & Chief Finanical Officer

CSR Executive Vice President

Community Advisory Board (CAB)

Union Bank’s executive leadership has numerous opportunities to speak with, and learn from, the broader bank employee base. These opportunities include quarterly bank-wide conference calls as well as quarterly calls held within the bank’s various business groups. Union Bank has demonstrated a strong commitment to making a positive contribution to our local communities and to the global environment. To engrain that commitment in our culture, we align executive incentive compensation with our long-term CSR goals. Metrics demonstrating CSR performance are used as a component to adjust compensation pools for each member of our Executive Committee.

CONTENTS

01

Rooted in Responsibility Since 1864

Responsible Lending

Union Bank is built on the heritage of five banking lineages, stretching back to the Bank of California’s incorporation in 1864. Through the decades, each of these businesses and their leadership played important roles in their communities.

02

The predecessor to the Union Bank & Trust Co. of Los Angeles was established by Kaspare Cohn, a Prussian immigrant who, in 1902, also founded a hospital that would become the world-famous Cedars-Sinai Medical Center. Four years later, Homer King, President of The Bank of California (the leader of another Union Bank predecessor) helped relieve the cash shortage afflicting San Francisco in the wake of the devastating 1906 earthquake.

Responsible Financial Management

Today, Union Bank continues to honor its distinguished legacy of public service through a commitment to responsibility. This principle is captured in our Five Tenets of Responsible Banking, which articulates our commitment to the highest standards in these key areas:

03

Five Tenets of Responsible Banking

Responsible Support of Communities

• Responsible Lending • Responsible Financial Management • Responsible Support of Communities • Responsible Employer • Responsible Products and Practices

04

Aligned with these tenets, Union Bank remains primarily a portfolio lender, retaining our own loans rather than selling them to third parties. We do not have a program for originating or purchasing subprime loans or other exotic loan products. We are stable and responsible in our own finances as well, with a strong balance sheet and investment-grade credit ratings at each of the four major credit ratings agencies. We maintain top-tier asset quality and healthy reserve positions, and unlike many other banks we never received bailout funds from the federal government.

Responsible Employer

05

Responsible Products and Practices

Our core values are echoed in the Union Bank Employer Manifesto, which embraces ethics, mutual understanding, and respect, and pledges that:

As we grow, we will do so in a way that achieves a harmonious balance between size, success, and stability…

In addition to these documents, Union Bank also publishes a guide to Business Standards for Ethical Conduct, and maintains a Code of Ethics for senior financial officers. Union Bank is committed to maintaining the confidentiality of our customers’ personal financial information. Our privacy policy is available for review online. We are also dedicated to providing universal access to banking services for people with disabilities, including providing printed materials in braille, large print, and other alternative formats.

Kaspare Cohn


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Our CSR Team A dedicated, experienced team oversees Union Bank’s Corporate Social Responsibility (CSR) efforts, helping us implement our CSR vision and building relationships with community stakeholders as well as bank employees. The team also measures and reports CSR-related data throughout the bank to track our progress and hold us accountable to our goals. In 2012, the CSR team was led by Executive Vice President Julius Robinson, and included Senior Vice President Carl Ballton, President of the Union Bank Foundation; Senior Vice President Susan Miller, Environmental Stewardship Manager; and Senior Vice President Jan Woolsey, Manager of CRA Strategy and Operations. Meanwhile, Union Bank receives valuable insight and guidance on community activities from our Community Advisory Board (CAB). Representing a unique “strategic consultancy” for the bank, these prominent private citizens reflect the diversity of the areas where we do business, and offer valuable insight into the needs and priorities of our communities.

OUR COMMUNITY ADVISORY BOARD Alejandro Lara – Chair

Cecily Jackson-Zapata

New Economics for Women, Los Angeles

Attorney At Law, Los Angeles

Robert Villarreal – Co-Chair CDC Small Business Finance, San Diego

Community Advisory Board Union Bank’s community commitments are shaped by our 10-member Community Advisory Board (CAB), which includes high-impact community stakeholders from both the non-profit and for-profit sectors. These individuals play prominent roles in shaping their communities — and expect that Union Bank do the same. During the course of 2012, the CAB played an essential role in shaping our Fresno Community Economic Development Initiative, creating the blueprint for the project and working closely with local government, community-based organizations, businesses, and others.

Maurilio León*

The Unity Council, Oakland

Roberta R. Sistos Attorney, Chatsworth

Laura Archuleta

Jamboree Housing Corporation, Irvine

Harold Tuck

CIO, County of San Diego

Allysunn Williams*

Ron Fong*

Asian Pacific Islander Small Business Program, Los Angeles

Fresno Housing Authority, Fresno

Junious Williams

Urban Strategies Council, Oakland *New in 2012

All locations in California.

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Why Fresno? With a population of more than 500,000, Fresno is the fifth-largest city in California and a focal point of the state’s Central Valley, a global agricultural center. The city boasts a dynamic civic leadership focused on economic development and redevelopment, at a time of great opportunity. California’s high-speed rail project is slated to run through Fresno, which currently has modest home prices and an affordable cost of living. The area is expected to double in population by 2050. The city has an incredibly diverse population, with more than 120 languages spoken in the Fresno School District. Amid all of these factors, bank leadership sought to sharpen existing commitments and partner with local leaders, community members, and others


seeking to brighten Fresno’s future. As part of the White House’s “Strong Cities, Strong Communities” initiative, the federal government is assisting the city’s efforts. Through our own Community Advisory Board and in meetings with dozens of local stakeholders, the bank honed a commitment to focus on: • Promoting equitable, affordable housing • Enhancing economic competitiveness • Supporting existing communities

Specific components include expanding, modifying, and enhanced marketing of our existing home loan programs; augmenting small business lending and technical assistance; providing additional funds to grow mid-size businesses; strengthening partnerships with community-based organizations; and expanding an educational partnership with a local high school. As the broader economy begins to rebound, Fresno has all of the pieces in place to be a leader. Union Bank is proud to be part of the solution.

• Coordinating and leveraging federal policies and investment • Valuing communities and neighborhoods • Improving educational outcomes

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FRESNO

CONTENTS

Union Bank in 2012: Growing & Strengthening Thanks to our customers, employees, and stakeholders, Union Bank enjoyed a rewarding and dynamic 2012 amid continued growth and expansion.

Santa Barbara Bank & Trust

Chicago, Houston Branches

Union Bank completed a major transaction in 2012, acquiring Pacific Capital Bancorp and its bank operating subsidiary, Santa Barbara Bank & Trust (SBB&T). The transaction included 45 branches and $4.7 billion in deposits along California’s Central Coast. With the acquisition, Union Bank became the leading bank in the Santa Barbara MSA (Metropolitan Statistical Area).

Union Bank continued to expand in 2012, opening an office in Chicago — a commercial banking branch located in the same building as our parent company, The Bank of Tokyo-Mitsubishi UFJ, Ltd. We also opened a commercial branch in Houston, a hub for international trade and a major home to the nation’s energy industry. The branch accepted a $1 million customer deposit on its very first day. These new branches join our existing commercial branches in Dallas and New York. CSR continues to explore strategies to further enhance our social and economic impact on these communities.

Union Bank has pledged to continue support for many nonprofit organizations that had been funded by SBB&T, including The United Way of Santa Barbara County, Channel Islands YMCA, the Boys & Girls Club of Santa Barbara, the Old Spanish Days Fiesta, Women’s Economic Ventures (WEV) and the Cabrillo Economic Development Corporation (CEDC).

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New Union Bank Chairman Takashi Morimura became Chairman of Union Bank and UnionBanCal Corporation in 2012, succeeding Tatsuo Tanaka. Mr. Morimura previously served as President and CEO of Union Bank from 2005 to 2007, and is also Deputy President and Chief Executive of the Global Business Unit for The Bank of TokyoMitsubishi UFJ, Ltd.

CONTENTS

“We’ve made a lot of homeowners very happy and have contributed to the pride they feel in their communities. Plus, we’ve created significant revenue for the bank.”

A $20 Billion Milestone Union Bank continued its rapid growth in residential loans, celebrating the $20 billion mark at the end of the first quarter of 2012. The bank is now the 10th largest mortgage lender in the United States.

Continued Strides in Technology Union Bank continued its ongoing technological innovation to enhance the banking experience for customers. This included moving forward with smartphone-based mobile check deposits and person-to-person mobile payments. We also launched a system to allow common bank functions to be carried out by text message.

– Jim Francis Executive Vice President, Consumer Lending

Smartstreet Acquisition Union Bank completed its acquisition of Smartstreet, a Georgiabased provider of banking services to homeowners’ associations and community association management companies in 37 states. Union Bank was already a leading West Coast provider of such services, which include account management, lockbox services, and information reporting. Smartstreet retains its own brand and executive team.


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CONTENTS

Category

Actuals

(millions)

Year Over Year % Chg

(millions)

$1,409

28%

$1,500

Nonprofit Lending

$362

-44%

$600

Multi-family Affordable Housing Lending

$313

-18%

$350

Single-family Affordable Housing

$580

11%

$400

Consumer Loans to Low-Income Consumers

$461

37%

$325

Tax Credit Investments

$518

2%

$500

CRA Investments (CSR)

$33

5%

$50

$120

-3%

$121

$13

13%

$12

$3,809

4%

$3,858

$2,671

23%

$2,200

$6,480

11%

$6,058

Small Business / Farm Loans

DBE Vendor Purchasing (Supplier Diversity) Social Investing / Donations SUBTOTAL – Current Period Originations Loan Balances from a Prior Period Remaining Outstanding TOTALS

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Community Commitment Snapshot

2012

CONTENTS

2012 Goal

Our Community Beyond simply pledging to support our communities, Union Bank makes a firm commitment to do so through our Community Service Action Plan (CSAP). Under our current 10-year CSAP, Union Bank has agreed to invest at least 5.2 percent of our total annual assets in loans and activities related to the Community Reinvestment Act (CRA) through 2014. Our aspirational target is 6.5 percent of total assets. These community-related loan activities include everything from small business and farm loans to low-income consumer loans, affordable housing investments, and charitable contributions. We are dedicated to maintaining industry leadership in terms of achieving our CRA targets. In 2012, we surpassed both our agreedupon goal and our aspirational target, directing nearly $6.5 billion to CRA-related activities, or 7.9 percent of our average annual assets for 2011. This reflects an increase of $645 million over our 2011 performance. Also in 2012, Union Bank received a CRA performance rating of “satisfactory” on its three-year evaluation by the Office of the Comptroller of the Currency, a key government regulator, with “outstanding” ratings in the examination’s investment and service tests. That evaluation followed two consecutive “outstanding” ratings over the previous two evaluation periods. While a “satisfactory” rating reflects that we have successfully complied with CRA and met the needs of our customers, we are committed to achieving an “outstanding” rating in the next evaluation, scheduled for 2015. In the meantime, we are taking advantage of this rating as an opportunity to re-examine and refine the way we target our resources to ensure we have the greatest possible impact, particularly among low- and moderate-income (LMI) communities.


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$6.5 billion

7.9

%

Average annual assets directed to CRA-related activities

CONTENTS

An Engaged Partner Active and responsive engagement with our stakeholders is fundamental to the Union Bank way of banking. It starts with a commitment to listen to our stakeholders, and extends to the actions we take. We have many stakeholders, including customers, employees, suppliers, local communities, executive committees, Community Advisory Board, internal committees, outside advocacy groups, regulators, and local government, among others. Although Union Bank did not formally solicit feedback through a dedicated stakeholder engagement process in 2012, we listened carefully to our partners and audiences through a variety of channels. What follows is a sample of the extensive outreach efforts we conducted during the year.

How we engage with stakeholders

Bringing the Fresno Place-Based Initiative to Life

In order to reach the many — and varied — stakeholders noted earlier in this section, we use a variety of means to solicit input from those groups and individuals. These efforts include:

In 2012, Union Bank executives initiated an innovative program that directs the full spectrum of our resources and expertise on a single community.

• Customer focus groups to better understand the needs and wishes of our most important stakeholders • Regular meetings with community groups and nonprofits to inform our thinking about critical community issues and to guide our investments and lending • Employee surveys to ensure we are providing the best possible workplace and incorporating the insights and ideas of our talented workforce • Engagement with our Community Advisory Board, where opinion leaders from throughout California weigh in on essential issues affecting the bank and the places where we do business

Fresno, California, was selected as the initial location for an unprecedented “place-based initiative” — a comprehensive and sustained program that will bring focus to the bank’s community investments and build on existing community efforts. Through the three-year Fresno Community Economic Development Initiative, Union Bank will invest $7.5 million annually in the form of grants, loans, marketing, and research, all geared to increase housing opportunities, enhance economic competitiveness, support the environment, and recognize the unique characteristics of neighborhoods throughout the city.

• Responsiveness to outside advocacy groups in the wake of major events such as bank acquisitions

At a community meeting convened by Fresno Mayor Ashley Swearengin, more than two dozen bank executives, board members and CAB members joined 40 local stakeholders to discuss mutually beneficial priorities and opportunities presented by the initiative. That meeting was an essential step leading to the bank’s three-year action plan and overall commitment of $7.5 million per year, which includes grants, loans, and technical assistance. Each year, the bank will evaluate its performance against published benchmarks, and will continue its dialogue with community leaders to ensure that dollars are being used in the best manner possible. The bank welcomes other corporate partners to the table to enable our efforts to spread even wider.

• Ongoing efforts to listen to – and be responsive to – all of the groups noted above

The place-based initiative will gain momentum in 2013, and Union Bank and our CAB have great expectations from this novel initiative.

• A biennial Corporate Reputation Survey, whereby we survey employees, customers, community-based organizations and others to determine their view of Union Bank’s reputation in their community • A robust social media presence that has grown tremendously as we seek dynamic ways to engage audiences where they spend their time

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CONTENTS

“Union Bank’s efforts should be an example to all banks considering mergers and acquisitions. Regulators should also work to uphold Union Bank’s standards of community dialogue.” – Orson Aguilar, Preeti Vissa & Sasha Werblin, The Greenlining Institute

Santa Barbara Acquisition: Robust Dialogue Leads to Renewed Community Commitment When Union Bank announced plans to acquire Pacific Capital Bancorp and its bank subsidiary Santa Barbara Bank & Trust (SBB&T), a bank serving California’s Central Coast, members of the local community naturally wondered what kind of corporate partner Union Bank would be. And a number of broad-based advocacy groups, in particular the Greenlining Institute and California Reinvestment Coalition, were paying close attention. In fact, these groups both wrote letters to federal regulators outlining concerns about the acquisition — only later to write to those same regulators commending the bank’s responsiveness to their requests.

While this dialogue originated with outside groups who initially raised probing questions to Union Bank and our plans for SBB&T’s marketplace, its outcome shows the value of meeting face-to-face with those who may hold a differing viewpoint, working to bridge gaps in understanding, and then forging a solution that leaves all parties feeling understood and respected.

As a result of a dialogue that included multiple face-to-face meetings with several stakeholder coalition groups, Union Bank agreed to provide as much philanthropic funding on its own as the two banks had provided together prior to the merger. Union Bank also made significant, targeted commitments in the areas of small business lending, affordable housing lending, branch and deposit products, minority marketing, supplier diversity, and community outreach. These commitments are laid out in detail as a supplement to the bank’s 10-year Community Reinvestment Commitment.

While the Fresno economic development initiative and SBB&T acquisition counted among the most noteworthy examples of stakeholder engagement in 2012, they were by no means the only examples. Union Bank is at our best when we remain closely connected and aligned with our customers, our workforce, and our communities. We use numerous tools and communication methods to remain an engaged and responsive partner.


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Other Forms of Engagement

CONTENTS

Enhanced Social Media Presence

A Closer Look at CSR

We believe authentic engagement requires interaction in the places where people spend their time. Increasingly, that means Facebook, Twitter, and other social media. With the help of some outside experts, we dramatically increased our social media connections in 2012: • Facebook “likes” grew from 1,300 to more than 21,000 over the course of the year, more than a 16-fold increase • Our followers on Twitter grew from 540 to 6,714 (a 12-fold increase) • YouTube channel subscribers grew as well Over the course of the year, our Facebook page shared hundreds of updates spotlighting community activities and employees, sharing financial tips, and asking customers to offer their own bankingrelated ideas and experiences. Over time, a strong community has emerged.

As more of our customers have migrated to social media as their communication tool of choice, our Customer Advocacy team has moved right along with them. Representatives read and respond to every concern published online, and work swiftly to address them to ensure a great client experience. Meanwhile on YouTube, our most popular video addresses Union Bank’s 20-year support for the American Heart Association, with employees sharing compelling stories about overcoming health challenges and the motivation it gives them to participate in the AHA’s annual Heart Walk fundraiser. The five-minute video has attracted more than 150,000 views. Videos from our popular Local Heroes series celebrating highimpact community leaders are also posted online, and have been “liked” and shared extensively by customers and our online friends.

Union Bank continually strives to better understand the views of our customers and the public at large in the areas where we do business. To measure and assess impressions of our Corporate Social Responsibility (CSR) work, we held six dedicated focus groups in 2012 with a diverse sample of 57 people, customers and non-customers alike. The two-hour sessions were held in San Francisco, Los Angeles, and Seattle. While participants acknowledged they knew little of Union Bank’s CSR initiatives, they generally responded positively to the bank’s community commitment and were receptive to learning more. In particular, participants encouraged the bank to pursue CSR initiatives that: Demonstrate support and pride for specific, local communities Showcase the bank’s commitment to its employees and initiatives to invest in their success

21,000+

Facebook “likes” grew from 1,300 to more than 21,000 over the course of the year, more than a 16-fold increase YouTube channel subscribers grew as well

6,714+

Highlight green programs that clearly and visibly illustrate the bank’s commitment to sustainability Other values important to our focus group audiences included honesty, transparency, being a good neighbor, providing great customer service, and pursuing more than just profit in our business operations. These insights will help shape our CSR efforts as they continue to grow and evolve.

Our followers on Twitter grew from 540 to 6,714 (a 12-fold increase)

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CONTENTS

Celebrating Black History Online Union Bank used a contemporary tool to share some classic African-American cultural contributions during Black History Month this year. Visitors to our Facebook page enjoyed gospel, jazz, opera, and blues tracks from such musical greats as Duke Ellington and opera singer Hope Foye, as well as classic AfricanAmerican storytelling. The tracks were taken from a Union Bank CD compilation previously distributed to our customers, titled “Celebrate the Sounds of the Black Experience.”

Listening to Our Talent

Listening to Small Businesses

Our annual “Voice of Our Talent” Employee Engagement Survey provides valuable insight into the concerns and priorities of our workforce. These survey results allowed the bank to identify areas needing attention, and then deliver the necessary improvements. (Our 2012 response rate of 79 percent fell slightly from the previous year.) Recent enhancements stemming from our survey results include new techniques to streamline loan application processing times, as well as revamping training for customer service associates to ensure they have the tools and information to respond effectively to our clients.

Being engaged also means listening to small businesses, in order to better understand and anticipate their needs. In 2012, Union Bank released results of our 12th annual Small Business Economic Survey. While previous surveys focused on California and Washington, the 2012 survey included 700 small business owners from around the United States. While most believed that the economy was heading in the wrong direction, the vast majority voiced confidence in the direction of their own companies. Ninety-four percent of respondents said they did not anticipate making any layoffs during the year, with 11 percent saying they planned to increase staffing levels.

Responding to a request for additional professional growth tools, this year Union Bank introduced Talent Profile, an online database allowing employees to share information about their professional qualifications and aspirations. This data can then be accessed by managers and Human Resources personnel to help identify candidates for open positions within the bank.


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CONTENTS

Strengthening From our earliest days, providing top-quality financial services to our customers has been the lifeblood of Union Bank. Whether we’re helping a family buy their first home or send a child to college, allowing a small business to invest and grow, or supporting the vital work of affordable housing developers, doing right by our customers in a fair and transparent manner is a fundamental Union Bank commitment. This commitment helps explain why we’ve always steered clear of originating subprime loans and other risky financial practices, and why we remain a trusted banking partner throughout the United States.

Expanding Homeownership Opportunities One of our most important customer initiatives in 2012 was a comprehensive, multi-pronged effort to expand homeownership opportunities in low- and moderate-income (LMI) and multicultural communities. This included a substantial expansion of our Economic Opportunity Mortgage (EOM) program, which provides special assistance to those looking to buy or refinance a home located in a census tract with income no greater than 80 percent of the area median income (AMI); otherwise the applicant’s income may not exceed 120% of the AMI*. The EOM is a 95 percent loanto-value portfolio loan product that does not require costly private mortgage insurance and considers alternate credit histories such as rent and utility payments for applicants who do not have an established traditional credit history. These are just a few of the key features of our affordable lending product. In 2012, we originated 1,553 EOM loans, totaling $324 million – a steep rise from 2011, when we originated 889 loans totaling $183 million. The increase was fueled in part by the ongoing expansion of the EOM program from a base of just two select markets. This expansion process began in 2012 and will continue in 2013. We have also increased our marketing efforts to boost awareness of this offering.

*The AMI is established by the Department of Housing and Urban Development (HUD) and adjusted annually.

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CONTENTS

Meanwhile, to support multicultural lending, Union Bank formed relationships with a variety of “trusted intermediaries” in Hispanic, Asian, African-American, and other communities. These relationships also included nonprofit community-based organizations and minority real estate trade organizations such as the Asian Real Estate Association of America (AREAA), the National Association of Hispanic Real Estate Professionals (NAHREP), and the National Association of Real Estate Brokers (NAREB). To help coordinate our LMI and multicultural lending efforts, we created a new senior position in our Consumer Lending group, Head of Community Lending and Industry Relations, occupied by a senior vice president with decades of banking experience. Union Bank also doubled our number of Community Loan Officers, who work in LMI and multicultural communities, with plans to continue that expansion in 2013.

First-Time Homebuyers Make a WISH Low-income individuals and families are receiving a helping hand in buying their first home, thanks to a pair of assistance programs administered with help from Union Bank. The Workforce Initiative Subsidy for Homeownership (WISH) allows eligible borrowers to receive up to $15,000 for down payment and closing costs, matched at $3 for every $1 the borrower contributes. Both programs are managed by the Federal Home Loan Bank of San Francisco. After a successful pilot program, Union Bank expanded its involvement with these programs in 2012, joining nonprofit partners such as Habitat for Humanity and Cabrillo Economic Development Corporation (CEDC), which help prepare the program application and provide financial education for participating homebuyers. (The Ventura, California-based CEDC was originally a partner of Santa Barbara Bank & Trust; when Union Bank acquired the bank with the purchase of its parent company Pacific Capital Bancorp, it continued honoring the partnership.) Union Bank and Santa Barbara Bank & Trust supported 78 borrowers in 2012, helping them secure $1.1 million in WISH down payment assistance in 2012. This represents a considerable increase from 2011, when the two banks combined helped 49 borrowers secure $716,000 in assistance.

$324 million 1,553 EOM loans Corporate Social Responsibility – 2012 Report

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Community Development Finance Union Bank believes that an adequate supply of affordable housing is an essential component of healthy communities. However, affordable housing in California suffered a significant setback recently with the elimination of the state’s redevelopment agencies, which had served as a major funding source for the development of new units. That challenge has led Union Bank’s Community Development Finance (CDF) group to work even harder and more creatively to help its partners provide as many people as possible with access to a home they can afford. CDF serves as a financial partner and trusted advisor to nonprofit and for-profit developers, public housing agencies, and other groups to develop housing for low-income individuals and families as well as senior citizens, the formerly homeless, those living with disabilities or HIV/AIDS, survivors of domestic violence, and others who may face challenges in securing stable and safe housing. CDF’s products include conventional and tax-exempt loans, direct tax credit and syndicated tax credit investments, and Federal Home Loan Bank Affordable Housing Program grant sponsorships. In 2012, the CDF group provided $438 million in financing for 37 projects, primarily in California and Washington.

$438 million 2012

Together, this financing served a total of 4,541 residents.

4,541 TOTAL RESIDENTS

That dollar amount represents a slight rise from 2011, when CDF provided $434 million in financing.

$434 million 2011

Given the stability and vibrancy that affordable housing brings to a community, the Union Bank Foundation considers improving the supply and accessibility of affordable housing to be among its four strategic priorities, especially in light of California’s high housing prices and damaging foreclosure crisis. In 2012, the Foundation donated more than $1.8 million to support groups working to increase the stock and availability of affordable housing, up from just over $1.7 million in 2011. Grant recipients included Mercy Housing Northwest and Housing California.

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A Hollywood Site, Reborn As Housing A historic Los Angeles hospital site seen by millions of film and TV viewers now has a new role —providing affordable housing for senior citizens. Union Bank’s Community Development Finance group financed a project to create 23 senior apartments on the grounds of the former Linda Vista Community Hospital, the first phase of a larger project to develop as many as 120 apartments on the property. The distinctive white building in L.A.’s Boyle Heights neighborhood served patients from 1924 until 1991. It then became a popular filming site for productions such as Pearl Harbor and Outbreak, as well as the pilot episode of ER and other TV programs.

CONTENTS

Supporting Small Business Small businesses are the engines of our economy, creating the majority of jobs in the United States and much of the ingenuity that drives our country forward. Recognizing this, Union Bank has made it a priority to expand our small business lending. In fiscal year 2012, we were one of the top 10 originators of loans guaranteed by the Small Business Administration (SBA) in our California, Washington, and Oregon service areas as measured by loan count, after being ranked 23rd in fiscal year 2011. Our total small business and farms lending as recorded in our Community Service Action Plan — that is, business loans up to $1 million and farm loans up to $500,000, plus SBA loans of any size — rose by 28 percent in 2012, climbing to $1.4 billion from $1.1 billion in 2011.

Helping a Dream Take Flight Union Bank helped turn a small-business dream into a reality this year for two friends in the state of Washington. Aerospace engineer Robert Peha and corporate controller Dean Handaly had long wanted to go into business together. Union Bank helped the two secure an SBA loan to acquire IDL Precision Machining, an aerospace manufacturing business in Mukilteo, Washington. The bank’s guidance helped the two successfully structure the deal to secure a smooth ownership transition, and now provides a range of other banking services to keep the company operating smoothly. “Union Bank has been a valuable partner right from the beginning,” Peha said. “We’re looking forward to continuing a successful relationship.”

“Union Bank has been a valuable partner right from the beginning.” – Robert Peha, IDL Precision Machining

The Business Banking Group also offers an array of services to help ensure smooth ownership transitions, as a growing number of owners anticipate selling their businesses and retiring in the near future.


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A Commitment to Supplier Diversity

Supporting Diverse Business Enterprises Strong, vibrant businesses are cornerstones of our communities. Union Bank takes advantage of a variety of tools to support and nurture businesses that reflect the rich diversity of our growing marketplace. Our Business Diversity Lending (BDL) program provides lending products to small- and mid-sized diverse business enterprises — those that are majority-owned by women, racial, or ethnic minorities, or service-disabled veterans. Ranging from $10,000 to $2.5 million per business, our BDL loans and credit lines offer flexible underwriting standards and competitive interest rates, and can be used for expansion, new equipment, real estate loans, working capital, and other needs. In 2012, we provided $170.4 million in loans to qualifying businesses under our BDL program, an increase over the $155 million we provided in 2011.

We make sure that diverse business enterprises (DBEs) benefit from our own purchasing power, as well. We are currently eight years into a 10-year CRA supplier diversity commitment, which sets a goal of directing 20 percent of our discretionary spending to DBEs by 2015. In 2012, we directed more than $120 million in spending toward DBEs, an increase over our 2011 performance. Our supplier diversity commitment extends beyond our own spending dollars. Union Bank’s Supplier Diversity & Development Office provides professional mentoring, networking assistance, and technical help to DBEs, helping them build capacity and connect to potential business partners both within and outside the bank. For the past 12 years, we have also supported a unique executive training program for small business owners, Management Development for Entrepreneurs (MDE). Based at the UCLA Anderson School of Management in Los Angeles, with a similar program offered at the University of Washington, this certificate program extends a meaningful opportunity for DBE owners to expand their skills and take their businesses to the next level. Our Supplier Diversity & Development Office works alongside nonprofits to nominate businesses for the program, and provides scholarships through the Union Bank Foundation for selected participants.

UNION BANK SUPPLIER DIVERSITY SPEND DBE (ACTUAL vs. TARGET) Year

2005

2006

2007

2008

2009

2010

2011

2012

Total Bank Spend

$616,090,851

$624,933,194

$619,557,923

$715,404,695

$705,214,682

$805,657,542

$810,294,391

$838,844,786

Total Discretionary Purchases (excludes utilities, water, taxes, US postage, other financial institutions, and private households)

$590,262,105

$597,427,401

$595,466,593

$685,851,077

$678,348,449

$773,395,580

$768,110,079

$712,336,703

$111,301,757

$136,111,619

$123,551,021

$120,057,611

Total DBE Spend

Actual $81,604,477

$84,531,780

$86,777,266

$96,291,517

Year-end DBE Percentage - Actual (Percentage of Total DBE Spend vs. Total Discretionary Purchases)

13.8%

14.1%

14.6%

14.0%

16.4%

17.6%

16.1%

16.9%

Year-end DBE Percentage - Target

12.0%

12.5%

13.0%

13.5%

14.0%

15.0%

16.0%

17.0%

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Target

CONTENTS

Gaining Customer Insights New advances in technology are helping Union Bank provide even more timely and personalized service to our customers. Our recently launched Customer Insights program rapidly analyzes client data to offer helpful information to customers when they visit our branches or reach our call centers. This information might include targeted suggestions of bank services, such as recommending that a large accountholder switch to an account with lower fees, or alerting a customer that their phone line has been disconnected or their email account isn’t accepting messages. Or it could mean simply saying “thank you” when a customer reaches a five- or ten-year anniversary of banking with us. We believe that the more we know about our customers, the better we’re able to serve them. Based on its early success, we’re working to expand the Customer Insights program to include all customer touch points, including mobile, online, and ATM banking.

“The instructors helped open my eyes to the vision and strategy of a true entrepreneur, and the business network stemming from the MDE program has been a great support for me.” – Henry Alcon, President of American Contractor Services and Management Development for Entrepreneurs program participant. During the two-week program, faculty members work with owners to analyze their entire business strategies, from marketing to finances to IT, and help them develop detailed business improvement plans. Following graduation, MDE participants receive ongoing support from university faculty as needed. A recent survey showed the MDE program is delivering real results: 37 of 40 responding business owners reported that they had doubled their revenue since participating in the program. The remaining three had seen revenue increases of 80 to 90 percent.


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The Union Bank Foundation

Strengthening Union Bank believes in giving back to the communities that make our success possible. Through targeted philanthropic investments, strategic business expenditures, and the overwhelming generosity of our workforce, Union Bank aspires to fuel progress in the areas where we do business. Union Bank directed nearly $6.5 billion to community-serving loans and other activities in 2012 as defined by the Community Reinvestment Act (CRA). These investments generally benefit low- and moderate-income (LMI) communities, and include such items as loans to small businesses and farms; loans to LMI consumers; affordable housing investments; purchasing from diverse business enterprises; and philanthropic donations.

Our primary philanthropic arm is the Union Bank Foundation, a nonprofit public benefit corporation that has helped serve the needs of our marketplaces since 1953. By partnering with innovative nonprofit organizations and contributing our own financial muscle, the Union Bank Foundation measurably enhances the health of our communities, particularly LMI households. For maximum impact, the Union Bank Foundation targets grants to four strategic categories that are critical to create and sustain healthy communities: affordable housing, community economic development, education, and the environment. Our investments are each intended to address the root causes of societal problems, rather than simply relieve their symptoms. Our philosophy of giving is presented in more detail in the Union Bank Foundation Theory of Change. Despite a challenging economic environment in 2012, the Union Bank Charitable Contributions Program donated a total of $12.7 million in 2012, approving a total of 1,642 grants. We succeeded in honoring our pledge to direct 2 percent of after-tax profits to charitable giving. In 2011, our Charitable Contributions Program donated $11.2 million, approving 1,705 grants. Other philanthropic categories include health and human services, culture and arts, and emergency services. Across all our giving, we aim to direct a minimum of 60 percent of our donations to benefit LMI populations. In 2012, that figure totaled 74 percent.

$1.8

million Affordable Housing

$3.4 million

Community Economic Development

Supports organizations that increase the supply and availability of housing for LMI individuals and families. 184 grants and direct contributions in 2012, up from 161 in 2011.

Supports programs that stimulate job creation, business formation, and ownership, as well as renewed economic activity in LMI communities. 424 grants and direct contributions in 2012, up from 420 in 2011.

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$3.5

million Education

Supports programs and institutions that deliver highquality educational experiences to youth and adults. 707 grants and direct contributions in 2012, up from 667 in 2011.

$753,000 Environment

Supports organizations engaged in environmental education, green job training and placement, recycling, and wildlife preservation. 86 grants and direct contributions in 2012, up from 57 in 2011.

CONTENTS

14%

17%

33%

33% LA/OC/Ventura $4,174,957.91 26% Northern/Central CA $3,269,703.50 6% Pacific NW $705,650.00 17% San Diego/Riv/SB/Imp* $2,197,116.00

26%

14% Bankwide $1,776,322.59