x
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QUARTERLY REPORT PURSUANT TO
SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the quarterly period ended June 30,
2011
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OR
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o
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TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware
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94-1234979 | |
(State of Incorporation)
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(I.R.S. Employer Identification No.) | |
400 California Street, San Francisco, California
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94104-1302 | |
(Address of principal executive offices)
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(Zip Code) |
Large accelerated filer
o
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Accelerated filer o | |
Non-accelerated filer
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(Do not check if a smaller
reporting company)
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Smaller reporting company o |
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EX-31.1 | ||||||||
EX-31.2 | ||||||||
EX-32.1 | ||||||||
EX-32.2 | ||||||||
EX-101 INSTANCE DOCUMENT | ||||||||
EX-101 SCHEMA DOCUMENT | ||||||||
EX-101 CALCULATION LINKBASE DOCUMENT | ||||||||
EX-101 LABELS LINKBASE DOCUMENT | ||||||||
EX-101 PRESENTATION LINKBASE DOCUMENT | ||||||||
EX-101 DEFINITION LINKBASE DOCUMENT |
2
| Our business objectives, strategies and initiatives, our organizational structure, the growth of our business, our competitive position and prospects, and the effect of competition on our business and strategies | |
| Our assessment of significant factors and developments that have affected or may affect our results | |
| Our assessment of economic conditions and trends and economic and credit cycles, and their impact on our business | |
| The economic outlook for the California, U.S. and global economy and our expectations that economic conditions may improve during the remainder of 2011 | |
| The impact of changes in interest rates and our strategy to manage our interest rate risk profile | |
| Our sensitivity to and management of market risk, including changes in interest rates, and the economic outlook within specific industries, for the U.S. in general, for particular states in the U.S. including California, Oregon, Texas and Washington, and in foreign countries (including Japan) | |
| The impact of the severe earthquake and related events in Japan earlier in 2011 on the Banks customers based or doing business in Japan and its impact on our business | |
| Pending and recent legislative and regulatory actions, and future legislative and regulatory developments, including the effects of legislation and governmental measures introduced in response to the financial crises affecting the banking system, financial markets and the U.S. economy, the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act), changes to the Federal Deposit Insurance Corporations deposit insurance assessment policies, the effect on and application of foreign laws and regulations to our business and operations, and anticipated fees, costs or other impacts on our business and operations as a result of these developments | |
| Our strategies and expectations regarding capital levels and liquidity, our funding base, core deposits, our intent and ability to implement new capital standards under the Dodd-Frank Act and the Basel Committee capital standards and the effect of the foregoing on our business |
3
| Our intent and ability to fund our operations on an independent basis from our parent company | |
| Regulatory controls and processes and their impact on our business | |
| The costs and effects of legal actions, investigations, regulatory actions, criminal proceedings or similar matters, our anticipated litigation strategies or adverse facts and developments related thereto | |
| Our allowance for credit losses, including the conditions we consider in determining the unallocated allowance and our portfolio credit quality, risk grade and credit migration trends and loss reserves for FDIC covered loans | |
| Loan portfolio composition and risk grade trends, delinquency rates compared to the industry average and our intent to sell or hold loans we originate | |
| Our intent to sell or hold, and the likelihood that we would be required to sell, or expectations regarding recovery of the amortized cost basis of, various investment securities and our hedging strategies and activities | |
| Expected rates of return, maturities, yields, loss exposure, growth rates and projected results | |
| Tax rates and taxes, the possible effect of changes in taxable profits of the U.S. operations of Mitsubishi UFJ Financial Group, Inc. (MUFG) on our state tax obligations and of expected tax credits or benefits, and tax treatment of our April 2010 FDIC-assisted acquisitions | |
| Critical accounting policies and estimates, the impact or anticipated impact of recent accounting pronouncements, guidance or changes in accounting principles and future recognition of impairments for the fair value of assets, including goodwill, financial instruments, intangible assets and other assets acquired in our April 2010 FDIC-assisted acquisitions | |
| Decisions to downsize, sell or close units, dissolve subsidiaries, expand our branch network, pursue acquisitions, purchase banking facilities and equipment, or otherwise restructure, reorganize or change our business mix, and their timing and their impact on our business | |
| Our expectations regarding the impact of acquisitions on our business and results of operations and amounts we will receive from the FDIC, or must pay to the FDIC, under loss share agreements | |
| The impact of changes in our credit rating | |
| Maintenance of casualty and liability insurance coverage appropriate for our operations | |
| The relationship between our business and that of BTMU and MUFG, the impact of their credit ratings, operations or prospects on our credit ratings and actions that may or may not be taken by BTMU and MUFG | |
| Descriptions of assumptions underlying or relating to any of the foregoing |
4
Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations |
For the |
For the |
|||||||||||||||||||||||
Three Months Ended |
Six Months Ended |
|||||||||||||||||||||||
June 30, |
Percent |
June 30, |
Percent |
|||||||||||||||||||||
(Dollars in millions) | 2011 | 2010 | Change | 2011 | 2010 | Change | ||||||||||||||||||
Results of operations:
|
||||||||||||||||||||||||
Net interest income
|
$ | 614 | $ | 601 | 2 | % | $ | 1,232 | $ | 1,175 | 5 | % | ||||||||||||
(Reversal of) provision for loan losses
|
(94 | ) | 44 | nm | (196 | ) | 214 | nm | ||||||||||||||||
Noninterest income
|
240 | 244 | (2 | ) | 480 | 454 | 6 | |||||||||||||||||
Noninterest expense
|
578 | 584 | (1 | ) | 1,193 | 1,109 | 8 | |||||||||||||||||
Income before income taxes and including noncontrolling interests
|
370 | 217 | 71 | 715 | 306 | 134 | ||||||||||||||||||
Income tax expense
|
131 | 67 | 96 | 245 | 82 | 199 | ||||||||||||||||||
Net income including noncontrolling interests
|
239 | 150 | 59 | 470 | 224 | 110 | ||||||||||||||||||
Deduct: Net loss from noncontrolling interests
|
3 | 4 | (25 | ) | 7 | 7 | | |||||||||||||||||
Net income attributable to UnionBanCal Corporation (UNBC)
|
$ | 242 | $ | 154 | 57 | $ | 477 | $ | 231 | 106 | ||||||||||||||
Balance sheet (period average):
|
||||||||||||||||||||||||
Total assets
|
$ | 80,334 | $ | 85,511 | (6 | )% | $ | 80,195 | $ | 85,162 | (6 | )% | ||||||||||||
Total securities
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20,543 | 23,089 | (11 | ) | 21,069 | 23,316 | (10 | ) | ||||||||||||||||
Total loans held for investment
|
48,849 | 47,827 | 2 | 48,568 | 47,340 | 3 | ||||||||||||||||||
Earning assets
|
71,709 | 77,412 | (7 | ) | 71,531 | 77,535 | (8 | ) | ||||||||||||||||
Total deposits
|
58,333 | 68,104 | (14 | ) | 58,899 | 67,972 | (13 | ) | ||||||||||||||||
UNBC Stockholders equity
|
10,366 | 9,631 | 8 | 10,268 | 9,582 | 7 | ||||||||||||||||||
Performance Ratios:
|
||||||||||||||||||||||||
Return on average assets(1)
|
1.21 | % | 0.72 | % | 1.20 | % | 0.55 | % | ||||||||||||||||
Return on average UNBC stockholders equity(1)
|
9.36 | 6.40 | 9.37 | 4.86 | ||||||||||||||||||||
Core efficiency ratio, excluding impact of privatization(2)
|
63.74 | 62.39 | 65.60 | 61.97 | ||||||||||||||||||||
Net interest
margin(1)(3)
|
3.44 | 3.11 | 3.46 | 3.05 | ||||||||||||||||||||
Net loans charged off to average total loans held for
investment(1)
|
0.91 | 0.78 | 0.68 | 0.91 | ||||||||||||||||||||
Net loans charged off to average total loans held for
investment, excluding FDIC covered
assets(1)(8)
|
0.92 | 0.81 | 0.69 | 0.92 | ||||||||||||||||||||
As of | ||||||||||||||||||||||||
June 30, |
December 31, |
|||||||||||||||||||||||
2011 | 2010 | |||||||||||||||||||||||
Balance sheet (end of period):
|
||||||||||||||||||||||||
Total assets
|
$ | 80,093 | $ | 79,097 | 1 | % | ||||||||||||||||||
Total securities
|
19,430 | 22,114 | (12 | ) | ||||||||||||||||||||
Total loans held for investment
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48,967 | 48,094 | 2 | |||||||||||||||||||||
Nonperforming assets
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865 | 1,142 | (24 | ) | ||||||||||||||||||||
Total deposits
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57,181 | 59,954 | (5 | ) | ||||||||||||||||||||
Long-term debt
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7,069 | 5,598 | 26 | |||||||||||||||||||||
UNBC Stockholders equity
|
10,667 | 10,125 | 5 | |||||||||||||||||||||
Capital ratios:
|
||||||||||||||||||||||||
Tier 1 risk-based capital ratio
|
13.08 | % | 12.44 | % | ||||||||||||||||||||
Total risk-based capital ratio
|
15.41 | 15.01 | ||||||||||||||||||||||
Leverage ratio
|
10.96 | 10.34 | ||||||||||||||||||||||
Tier 1 common capital ratio(4)
|
13.08 | 12.42 | ||||||||||||||||||||||
Tangible common equity ratio(5)
|
10.29 | 9.67 | ||||||||||||||||||||||
Credit Ratios:
|
||||||||||||||||||||||||
Allowance for loan losses to total loans held for investment(6)
|
1.69 | % | 2.48 | % | ||||||||||||||||||||
Allowance for loan losses to nonaccrual loans(6)
|
114.05 | 123.40 | ||||||||||||||||||||||
Allowance for credit losses to total loans held for investment(7)
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1.96 | 2.81 | ||||||||||||||||||||||
Allowance for credit losses to nonaccrual loans(7)
|
132.19 | 140.23 | ||||||||||||||||||||||
Nonperforming assets to total loans held for investment and
other real estate owned (OREO)
|
1.76 | 2.37 | ||||||||||||||||||||||
Nonperforming assets to total assets
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1.08 | 1.44 | ||||||||||||||||||||||
Nonaccrual loans to total loans held for investment
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1.48 | 2.01 | ||||||||||||||||||||||
Excluding FDIC covered assets(8):
|
||||||||||||||||||||||||
Allowance for loan losses to total loans held for investment(6)
|
1.70 | % | 2.50 | % | ||||||||||||||||||||
Allowance for loan losses to nonaccrual loans(6)
|
124.09 | 137.32 | ||||||||||||||||||||||
Allowance for credit losses to total loans held for investment(7)
|
1.97 | 2.85 | ||||||||||||||||||||||
Allowance for credit losses to nonaccrual loans(7)
|
144.23 | 156.44 | ||||||||||||||||||||||
Nonperforming assets to total loans held for investment and OREO
|
1.42 | 1.91 | ||||||||||||||||||||||
Nonperforming assets to total assets
|
0.86 | 1.15 | ||||||||||||||||||||||
Nonaccrual loans to total loans held for investment
|
1.37 | 1.82 |
5
(1) | Annualized. | |
(2) | The core efficiency ratio, excluding impact of privatization, a non-GAAP financial measure, is net noninterest expense (noninterest expense excluding privatization-related expenses and fair value amortization/accretion, foreclosed asset expense, (reversal of) provision for losses on off-balance sheet commitments, low income housing credit investment amortization expense, expenses of the consolidated Variable Interest Entities (VIEs), merger costs related to the acquisitions of certain assets and assumption of certain liabilities of Frontier Bank (Frontier) and Tamalpais Bank (Tamalpais) and asset impairment charge) as a percentage of total revenue (net interest income (taxable-equivalent basis) and noninterest income). Management discloses the core efficiency ratio as a measure of the efficiency of our operations, focusing on those costs most relevant to our core activities. Refer to Noninterest Expense in this Form 10-Q for further information. | |
(3) | Amounts are on a taxable-equivalent basis using the federal statutory tax rate of 35 percent. | |
(4) | The Tier 1 common capital ratio is the ratio of Tier 1 capital, less qualifying trust preferred securities, to risk-weighted assets. All of the trust preferred securities were paid off during the first quarter of 2011. The Tier 1 common capital ratio, a non-GAAP financial measure, has been included to facilitate the understanding of the Companys capital structure and for use in assessing and comparing the quality and composition of UNBCs capital structure to other financial institutions. Refer to Capital in this Form 10-Q for further information. | |
(5) | The tangible common equity ratio, a non-GAAP financial measure, is calculated as tangible common equity divided by tangible assets. The methodology of determining tangible common equity may differ among companies. The tangible common equity ratio has been included to facilitate the understanding of the Companys capital structure and for use in assessing and comparing the quality and composition of UNBCs capital structure to other financial institutions. Refer to Capital in this Form 10-Q for further information. | |
(6) | The allowance for loan losses ratios are calculated using the allowance for loan losses against end of period total loans held for investment or total nonaccrual loans, as appropriate. | |
(7) | The allowance for credit losses ratios are calculated using the sum of the allowances for loan losses and for losses on off-balance sheet commitments against end of period total loans held for investment or total nonaccrual loans, as appropriate. | |
(8) | These ratios exclude the impact of the acquired loans and OREO, which are covered under loss share agreements between Union Bank, N.A. and the FDIC. Such agreements are related to the April 2010 acquisitions of certain assets and assumption of certain liabilities of Frontier and Tamalpais. Management believes the exclusion of FDIC covered loans and FDIC covered OREO in certain asset quality ratios that include nonperforming loans, nonperforming assets, total loans held for investment and the allowance for loan looses or credit losses in the numerator or denominator provides a better perspective into underlying asset quality trends. |
6
7
8
9
For the Three Months Ended | Increase (Decrease) in | |||||||||||||||||||||||||||||||||||||||
June 30, 2011 | June 30, 2010 |
Interest |
||||||||||||||||||||||||||||||||||||||
Interest |
Average |
Interest |
Average |
Average |
Income/ |
|||||||||||||||||||||||||||||||||||
Average |
Income/ |
Yield/ |
Average |
Income/ |
Yield/ |
Balance | Expense(1) | |||||||||||||||||||||||||||||||||
(Dollars in millions) | Balance | Expense(1) | Rate(1)(2) | Balance | Expense(1) | Rate(1)(2) | Amount | Percent | Amount | Percent | ||||||||||||||||||||||||||||||
Assets
|
||||||||||||||||||||||||||||||||||||||||
Loans held for investment:(3)
|
||||||||||||||||||||||||||||||||||||||||
Commercial and industrial
|
$ | 15,814 | $ | 159 | 4.05 | % | $ | 14,586 | $ | 168 | 4.61 | % | $ | 1,228 | 8 | % | $ | (9 | ) | (5 | )% | |||||||||||||||||||
Commercial mortgage
|
7,726 | 84 | 4.31 | 8,180 | 86 | 4.20 | (454 | ) | (6 | ) | (2 | ) | (2 | ) | ||||||||||||||||||||||||||
Construction
|
1,116 | 11 | 4.03 | 2,145 | 15 | 2.91 | (1,029 | ) | (48 | ) | (4 | ) | (27 | ) | ||||||||||||||||||||||||||
Lease financing
|
775 | 8 | 3.99 | 641 | 6 | 3.88 | 134 | 21 | 2 | 33 | ||||||||||||||||||||||||||||||
Residential mortgage
|
18,324 | 221 | 4.83 | 16,984 | 226 | 5.34 | 1,340 | 8 | (5 | ) | (2 | ) | ||||||||||||||||||||||||||||
Home equity and other consumer loans
|
3,782 | 40 | 4.23 | 3,919 | 43 | 4.41 | (137 | ) | (3 | ) | (3 | ) | (7 | ) | ||||||||||||||||||||||||||
Total loans, excluding FDIC covered loans
|
47,537 | 523 | 4.41 | 46,455 | 544 | 4.70 | 1,082 | 2 | (21 | ) | (4 | ) | ||||||||||||||||||||||||||||
FDIC covered loans
|
1,312 | 44 | 13.33 | 1,372 | 26 | 7.54 | (60 | ) | (4 | ) | 18 | 69 | ||||||||||||||||||||||||||||
Total loans held for investment
|
48,849 | 567 | 4.65 | 47,827 | 570 | 4.78 | 1,022 | 2 | (3 | ) | (1 | ) | ||||||||||||||||||||||||||||
Securities
|
20,543 | 139 | 2.72 | 23,089 | 135 | 2.34 | (2,546 | ) | (11 | ) | 4 | 3 | ||||||||||||||||||||||||||||
Interest bearing deposits in banks
|
2,086 | 1 | 0.24 | 5,920 | 4 | 0.25 | (3,834 | ) | (65 | ) | (3 | ) | (75 | ) | ||||||||||||||||||||||||||
Federal funds sold and securities purchased under resale
agreements
|
71 | | 0.10 | 392 | | 0.15 | (321 | ) | (82 | ) | | | ||||||||||||||||||||||||||||
Trading account assets
|
137 | 1 | 0.65 | 184 | 1 | 1.33 | (47 | ) | (26 | ) | | | ||||||||||||||||||||||||||||
Other earning assets
|
23 | | 2.18 | | | | 23 | nm | | | ||||||||||||||||||||||||||||||
Total earning assets
|
71,709 | 708 | 3.95 | 77,412 | 710 | 3.67 | (5,703 | ) | (7 | ) | (2 | ) | | |||||||||||||||||||||||||||
Allowance for loan losses
|
(992 | ) | (1,459 | ) | 467 | 32 | ||||||||||||||||||||||||||||||||||
Cash and due from banks
|
1,208 | 1,202 | 6 | | ||||||||||||||||||||||||||||||||||||
Premises and equipment, net
|
692 | 672 | 20 | 3 | ||||||||||||||||||||||||||||||||||||
Other assets
|
7,717 | 7,684 | 33 | | ||||||||||||||||||||||||||||||||||||
Total assets
|
$ | 80,334 | $ | 85,511 | $ | (5,177 | ) | (6 | )% | |||||||||||||||||||||||||||||||
Liabilities
|
||||||||||||||||||||||||||||||||||||||||
Interest bearing deposits:
|
||||||||||||||||||||||||||||||||||||||||
Transaction and money market accounts
|
$ | 23,667 | $ | 14 | 0.24 | $ | 37,608 | $ | 48 | 0.51 | $ | (13,941 | ) | (37 | ) | $ | (34 | ) | (71 | ) | ||||||||||||||||||||
Savings and consumer time
|
7,898 | 14 | 0.71 | 7,421 | 15 | 0.83 | 477 | 6 | (1 | ) | (7 | ) | ||||||||||||||||||||||||||||
Large time
|
8,811 | 25 | 1.16 | 8,265 | 15 | 0.73 | 546 | 7 | 10 | 67 | ||||||||||||||||||||||||||||||
Total interest bearing deposits
|
40,376 | 53 | 0.53 | 53,294 | 78 | 0.59 | (12,918 | ) | (24 | ) | (25 | ) | (32 | ) | ||||||||||||||||||||||||||
Commercial paper and other short-term borrowings(4)
|
3,113 | 2 | 0.23 | 1,394 | 2 | 0.43 | 1,719 | 123 | | | ||||||||||||||||||||||||||||||
Long-term debt
|
6,349 | 36 | 2.22 | 4,732 | 27 | 2.33 | 1,617 | 34 | 9 | 33 | ||||||||||||||||||||||||||||||
Total borrowed funds
|
9,462 | 38 | 1.57 | 6,126 | 29 | 1.90 | 3,336 | 54 | 9 | 31 | ||||||||||||||||||||||||||||||
Total interest bearing liabilities
|
49,838 | 91 | 0.73 | 59,420 | 107 | 0.73 | (9,582 | ) | (16 | ) | (16 | ) | (15 | ) | ||||||||||||||||||||||||||
Noninterest bearing deposits
|
17,957 | 14,810 | 3,147 | 21 | ||||||||||||||||||||||||||||||||||||
Other liabilities
|
1,900 | 1,368 | 532 | 39 | ||||||||||||||||||||||||||||||||||||
Total liabilities
|
69,695 | 75,598 | (5,903 | ) | (8 | ) | ||||||||||||||||||||||||||||||||||
Equity
|
||||||||||||||||||||||||||||||||||||||||
UNBC Stockholders equity
|
10,366 | 9,631 | 735 | 8 | ||||||||||||||||||||||||||||||||||||
Noncontrolling interests
|
273 | 282 | (9 | ) | (3 | ) | ||||||||||||||||||||||||||||||||||
Total equity
|
10,639 | 9,913 | 726 | 7 | ||||||||||||||||||||||||||||||||||||
Total liabilities and equity
|
$ | 80,334 | $ | 85,511 | $ | (5,177 | ) | (6 | )% | |||||||||||||||||||||||||||||||
Net interest income/spread (taxable-equivalent basis)
|
617 | 3.22 | % | 603 | 2.94 | % | 14 | 2 | % | |||||||||||||||||||||||||||||||
Impact of noninterest bearing deposits
|
0.19 | 0.15 | ||||||||||||||||||||||||||||||||||||||
Impact of other noninterest bearing sources
|
0.03 | 0.02 | ||||||||||||||||||||||||||||||||||||||
Net interest margin
|
3.44 | 3.11 | ||||||||||||||||||||||||||||||||||||||
Less: taxable-equivalent adjustment
|
3 | 2 | 1 | 50 | ||||||||||||||||||||||||||||||||||||
Net interest income
|
$ | 614 | $ | 601 | $ | 13 | 2 | % | ||||||||||||||||||||||||||||||||
(1) | Yields and interest income are presented on a taxable-equivalent basis using the federal statutory tax rate of 35 percent. | |
(2) | Annualized. | |
(3) | Average balances on loans outstanding include all nonperforming loans. The amortized portion of net loan origination fees (costs) is included in interest income on loans, representing an adjustment to the yield. | |
(4) | Includes interest bearing trading liabilities. |
10
For the Six Months Ended | Increase (Decrease) in | |||||||||||||||||||||||||||||||||||||||
June 30, 2011 | June 30, 2010 |
Interest |
||||||||||||||||||||||||||||||||||||||
Interest |
Average |
Interest |
Average |
Average |
Income/ |
|||||||||||||||||||||||||||||||||||
Average |
Income/ |
Yield/ |
Average |
Income/ |
Yield/ |
Balance | Expense(1) | |||||||||||||||||||||||||||||||||
(Dollars in millions) | Balance | Expense(1) | Rate(1)(2) | Balance | Expense(1) | Rate(1)(2) | Amount | Percent | Amount | Percent | ||||||||||||||||||||||||||||||
Assets
|
||||||||||||||||||||||||||||||||||||||||
Loans held for investment:(3)
|
||||||||||||||||||||||||||||||||||||||||
Commercial and industrial
|
$ | 15,571 | $ | 316 | 4.09 | % | $ | 14,770 | $ | 330 | 4.50 | % | $ | 801 | 5 | % | $ | (14 | ) | (4 | )% | |||||||||||||||||||
Commercial mortgage
|
7,752 | 169 | 4.35 | 8,207 | 172 | 4.20 | (455 | ) | (6 | ) | (3 | ) | (2 | ) | ||||||||||||||||||||||||||
Construction
|
1,228 | 23 | 3.73 | 2,226 | 32 | 2.94 | (998 | ) | (45 | ) | (9 | ) | (28 | ) | ||||||||||||||||||||||||||
Lease financing
|
775 | 16 | 4.16 | 645 | 12 | 3.84 | 130 | 20 | 4 | 33 | ||||||||||||||||||||||||||||||
Residential mortgage
|
18,061 | 441 | 4.88 | 16,885 | 454 | 5.38 | 1,176 | 7 | (13 | ) | (3 | ) | ||||||||||||||||||||||||||||
Home equity and other consumer loans
|
3,802 | 80 | 4.26 | 3,917 | 86 | 4.42 | (115 | ) | (3 | ) | (6 | ) | (7 | ) | ||||||||||||||||||||||||||
Total loans, excluding FDIC covered loans
|
47,189 | 1,045 | 4.44 | 46,650 | 1,086 | 4.67 | 539 | 1 | (41 | ) | (4 | ) | ||||||||||||||||||||||||||||
FDIC covered loans
|
1,379 | 83 | 12.06 | 690 | 26 | 7.52 | 689 | 100 | 57 | 219 | ||||||||||||||||||||||||||||||
Total loans held for investment
|
48,568 | 1,128 | 4.66 | 47,340 | 1,112 | 4.72 | 1,228 | 3 | 16 | 1 | ||||||||||||||||||||||||||||||
Securities
|
21,069 | 282 | 2.68 | 23,316 | 279 | 2.39 | (2,247 | ) | (10 | ) | 3 | 1 | ||||||||||||||||||||||||||||
Interest bearing deposits in banks
|
1,645 | 2 | 0.24 | 6,257 | 8 | 0.25 | (4,612 | ) | (74 | ) | (6 | ) | (75 | ) | ||||||||||||||||||||||||||
Federal funds sold and securities purchased under resale
agreements
|
83 | | 0.15 | 426 | | 0.13 | (343 | ) | (81 | ) | | | ||||||||||||||||||||||||||||
Trading account assets
|
144 | 1 | 0.93 | 196 | 2 | 1.52 | (52 | ) | (27 | ) | (1 | ) | (50 | ) | ||||||||||||||||||||||||||
Other earning assets
|
22 | | 2.81 | | | | 22 | nm | | | ||||||||||||||||||||||||||||||
Total earning assets
|
71,531 | 1,413 | 3.96 | 77,535 | 1,401 | 3.62 | (6,004 | ) | (8 | ) | 12 | 1 | ||||||||||||||||||||||||||||
Allowance for loan losses
|
(1,087 | ) | (1,433 | ) | 346 | 24 | ||||||||||||||||||||||||||||||||||
Cash and due from banks
|
1,226 | 1,204 | 22 | 2 | ||||||||||||||||||||||||||||||||||||
Premises and equipment, net
|
702 | 673 | 29 | 4 | ||||||||||||||||||||||||||||||||||||
Other assets
|
7,823 | 7,183 | 640 | 9 | ||||||||||||||||||||||||||||||||||||
Total assets
|
$ | 80,195 | $ | 85,162 | $ | (4,967 | ) | (6 | )% | |||||||||||||||||||||||||||||||
Liabilities
|
||||||||||||||||||||||||||||||||||||||||
Interest bearing deposits:
|
||||||||||||||||||||||||||||||||||||||||
Transaction and money market accounts
|
$ | 24,573 | $ | 29 | 0.24 | $ | 38,729 | $ | 111 | 0.58 | $ | (14,156 | ) | (37 | ) | $ | (82 | ) | (74 | ) | ||||||||||||||||||||
Savings and consumer time
|
7,878 | 28 | 0.71 | 6,700 | 27 | 0.82 | 1,178 | 18 | 1 | 4 | ||||||||||||||||||||||||||||||
Large time
|
8,898 | 49 | 1.10 | 7,945 | 26 | 0.65 | 953 | 12 | 23 | 88 | ||||||||||||||||||||||||||||||
Total interest bearing deposits
|
41,349 | 106 | 0.52 | 53,374 | 164 | 0.62 | (12,025 | ) | (23 | ) | (58 | ) | (35 | ) | ||||||||||||||||||||||||||
Commercial paper and other short-term borrowings(4)
|
2,776 | 3 | 0.25 | 1,445 | 3 | 0.42 | 1,331 | 92 | | | ||||||||||||||||||||||||||||||
Long-term debt
|
6,127 | 67 | 2.19 | 4,653 | 54 | 2.34 | 1,474 | 32 | 13 | 24 | ||||||||||||||||||||||||||||||
Total borrowed funds
|
8,903 | 70 | 1.59 | 6,098 | 57 | 1.88 | 2,805 | 46 | 13 | 23 | ||||||||||||||||||||||||||||||
Total interest bearing liabilities
|
50,252 | 176 | 0.70 | 59,472 | 221 | 0.75 | (9,220 | ) | (16 | ) | (45 | ) | (20 | ) | ||||||||||||||||||||||||||
Noninterest bearing deposits
|
17,550 | 14,598 | 2,952 | 20 | ||||||||||||||||||||||||||||||||||||
Other liabilities
|
1,855 | 1,322 | 533 | 40 | ||||||||||||||||||||||||||||||||||||
Total liabilities
|
69,657 | 75,392 | (5,735 | ) | (8 | ) | ||||||||||||||||||||||||||||||||||
Equity
|
||||||||||||||||||||||||||||||||||||||||
UNBC Stockholders equity
|
10,268 | 9,582 | 686 | 7 | ||||||||||||||||||||||||||||||||||||
Noncontrolling interests
|
270 | 188 | 82 | 44 | ||||||||||||||||||||||||||||||||||||
Total equity
|
10,538 | 9,770 | 768 | 8 | ||||||||||||||||||||||||||||||||||||
Total liabilities and equity
|
$ | 80,195 | $ | 85,162 | $ | (4,967 | ) | (6 | )% | |||||||||||||||||||||||||||||||
Net interest income/spread (taxable-equivalent basis)
|
1,237 | 3.26 | % | 1,180 | 2.87 | % | 57 | 5 | % | |||||||||||||||||||||||||||||||
Impact of noninterest bearing deposits
|
0.18 | 0.15 | ||||||||||||||||||||||||||||||||||||||
Impact of other noninterest bearing sources
|
0.02 | 0.03 | ||||||||||||||||||||||||||||||||||||||
Net interest margin
|
3.46 | 3.05 | ||||||||||||||||||||||||||||||||||||||
Less: taxable-equivalent adjustment
|
5 | 5 | | | ||||||||||||||||||||||||||||||||||||
Net interest income
|
$ | 1,232 | $ | 1,175 | $ | 57 | 5 | % | ||||||||||||||||||||||||||||||||
(1) | Yields and interest income are presented on a taxable-equivalent basis using the federal statutory tax rate of 35 percent. | |
(2) | Annualized. | |
(3) | Average balances on loans outstanding include all nonperforming loans. The amortized portion of net loan origination fees (costs) is included in interest income on loans, representing an adjustment to the yield. | |
(4) | Includes interest bearing trading liabilities. |
11
| A decrease in our lower yielding interest bearing deposits in banks and higher yields on investment securities, partially offset by lower yields on average total loans. Yields on our average earning assets increased 28 basis points due to an improved earning assets mix. Our average interest bearing deposits in banks decreased by 65 percent, compared to the second quarter of 2010, to $2.1 billion for the second quarter of 2011. Average yields on investment securities increased 38 basis points in the second quarter of 2011 compared to the second quarter of 2010. | |
| Our average interest bearing deposit liabilities declined by $12.9 billion, or 24 percent, resulting from a planned deposit decline driven by targeted rate reductions in transaction and money market accounts, which was partially offset by an increase in large time deposits. Our noninterest bearing deposits increased by $3.1 billion, or 21 percent. Average noninterest bearing deposits funded 25 percent of average total earning assets in the second quarter of 2011 compared to 19 percent in the second quarter of 2010. |
For the Three Months Ended | For the Six Months Ended | |||||||||||||||||||||||||||||||
June 30, |
June 30, |
Increase (Decrease) |
June 30, |
June 30, |
Increase (Decrease) | |||||||||||||||||||||||||||
(Dollars in millions) | 2011 | 2010 | Amount | Percent | 2011 | 2010 | Amount | Percent | ||||||||||||||||||||||||
Service charges on deposit accounts
|
$ | 56 | $ | 64 | $ | (8 | ) | (13 | )% | $ | 113 | $ | 130 | $ | (17 | ) | (13 | )% | ||||||||||||||
Trust and investment management fees
|
34 | 35 | (1 | ) | (3 | ) | 68 | 66 | 2 | 3 | ||||||||||||||||||||||
Trading account activities
|
28 | 25 | 3 | 12 | 61 | 46 | 15 | 33 | ||||||||||||||||||||||||
Securities gains, net
|
29 | 27 | 2 | 7 | 57 | 61 | (4 | ) | (7 | ) | ||||||||||||||||||||||
Merchant banking fees
|
29 | 22 | 7 | 32 | 48 | 36 | 12 | 33 | ||||||||||||||||||||||||
Brokerage commissions and fees
|
12 | 10 | 2 | 20 | 25 | 19 | 6 | 32 | ||||||||||||||||||||||||
Card processing fees, net
|
12 | 12 | | | 22 | 21 | 1 | 5 | ||||||||||||||||||||||||
Other
|
40 | 49 | (9 | ) | (18 | ) | 86 | 75 | 11 | 15 | ||||||||||||||||||||||
Total noninterest income
|
$ | 240 | $ | 244 | $ | (4 | ) | (2 | )% | $ | 480 | $ | 454 | $ | 26 | 6 | % | |||||||||||||||
12
For the Three Months Ended | For the Six Months Ended | |||||||||||||||||||||||||||||||
June 30, |
June 30, |
Increase (Decrease) |
June 30, |
June 30, |
Increase (Decrease) | |||||||||||||||||||||||||||
(Dollars in millions) | 2011 | 2010 | Amount | Percent | 2011 | 2010 | Amount | Percent | ||||||||||||||||||||||||
Salaries and other compensation
|
$ | 280 | $ | 269 | $ | 11 | 4 | % | $ | 543 | $ | 494 | $ | 49 | 10 | % | ||||||||||||||||
Employee benefits
|
66 | 50 | 16 | 32 | 147 | 105 | 42 | 40 | ||||||||||||||||||||||||
Salaries and employee benefits
|
346 | 319 | 27 | 8 | 690 | 599 | 91 | 15 | ||||||||||||||||||||||||
Net occupancy and equipment
|
67 | 64 | 3 | 5 | 132 | 123 | 9 | 7 | ||||||||||||||||||||||||
Professional and outside services
|
55 | 50 | 5 | 10 | 99 | 89 | 10 | 11 | ||||||||||||||||||||||||
Intangible asset amortization
|
24 | 30 | (6 | ) | (20 | ) | 49 | 62 | (13 | ) | (21 | ) | ||||||||||||||||||||
Regulatory assessments
|
19 | 30 | (11 | ) | (37 | ) | 40 | 60 | (20 | ) | (33 | ) | ||||||||||||||||||||
Software
|
16 | 16 | | | 32 | 31 | 1 | 3 | ||||||||||||||||||||||||
Low income housing credit investment amortization
|
18 | 14 | 4 | 29 | 31 | 28 | 3 | 11 | ||||||||||||||||||||||||
Advertising and public relations
|
11 | 11 | | | 24 | 22 | 2 | 9 | ||||||||||||||||||||||||
Communications
|
11 | 10 | 1 | 10 | 21 | 19 | 2 | 11 | ||||||||||||||||||||||||
Data Processing
|
10 | 8 | 2 | 25 | 20 | 16 | 4 | 25 | ||||||||||||||||||||||||
(Reversal of) provision for losses on off-balance sheet
commitments
|
(18 | ) | 1 | (19 | ) | nm | (31 | ) | (4 | ) | (27 | ) | nm | |||||||||||||||||||
Other
|
19 | 31 | (12 | ) | (39 | ) | 86 | 64 | 22 | 34 | ||||||||||||||||||||||
Total noninterest expense
|
$ | 578 | $ | 584 | $ | (6 | ) | (1 | )% | $ | 1,193 | $ | 1,109 | $ | 84 | 8 | % | |||||||||||||||
| Other revenue decreased primarily due to a $12 million decrease in indemnification asset accretion, driven by better than expected covered loan performance; and | |
| Service charges on deposit accounts decreased primarily due to lower overdraft volumes resulting from changes in customer behavior and the impact of changes to fee-related regulations; partially offset by | |
| Merchant banking fees increased primarily due to a $7 million increase in fees from syndicated loan activity. |
| Reversal of provision for losses on off-balance sheet commitments increased $19 million, primarily due to improved credit quality of our unfunded commitments; and | |
| Regulatory assessments decreased mainly due to a change in the assessment rate and methodology (i.e., from a deposit-based to an asset-based model); partially offset by | |
| Salaries and employee benefits increased primarily due to higher base salaries, largely driven by the growth in the number of employees and higher costs related to employee benefit plans. |
| Trading account income increased primarily due to an $11 million increase in the value of customer accommodation interest rate derivatives and a $7 million increase in income related to market-linked certificate of deposits (CDs); |
13
| Merchant banking fees increased primarily due to a $10 million increase in fees from syndicated loan activity and a $4 million increase in referral fees; and | |
| Other revenue increased primarily due to a $15 million gain on the sale of MasterCard shares in the first quarter of 2011; partially offset by | |
| Service charges on deposit accounts decreased primarily due to lower overdraft volumes resulting from changes in customer behavior and the impact of changes to fee-related regulations. |
| Salaries and employee benefits increased primarily due to higher base salaries, largely driven by the growth in the number of employees and higher costs related to employee benefit plans; partially offset by | |
| Reversal of provision for losses on off-balance sheet commitments increased $27 million, primarily due to improved credit quality of our unfunded commitments. |
14
For the |
For the |
|||||||||||||||
Three Months |
Six Months |
|||||||||||||||
Ended | Ended | |||||||||||||||
June 30, |
June 30, |
June 30, |
June 30, |
|||||||||||||
(Dollars in millions) | 2011 | 2010 | 2011 | 2010 | ||||||||||||
Noninterest Expense
|
$ | 578 | $ | 584 | $ | 1,193 | $ | 1,109 | ||||||||
Less: Foreclosed asset expense
|
2 | 1 | 5 | 1 | ||||||||||||
Less: (Reversal of) provision for losses on off-balance sheet
commitments
|
(18 | ) | 1 | (31 | ) | (4 | ) | |||||||||
Less: Low income housing credit investment amortization expense
|
18 | 14 | 31 | 28 | ||||||||||||
Less: Expenses of the consolidated variable interest entity (VIE)
|
6 | 6 | 12 | 11 | ||||||||||||
Less: Merger costs related to acquisitions
|
10 | 13 | 23 | 13 | ||||||||||||
Net noninterest expense before privatization adjustments
|
$ | 560 | $ | 549 | $ | 1,153 | $ | 1,060 | ||||||||
Net adjustments related to privatization transaction
|
25 | 33 | 51 | 72 | ||||||||||||
Net noninterest expense, excluding privatization transaction(a)
|
$ | 535 | $ | 516 | $ | 1,102 | $ | 988 | ||||||||
Total Revenue
|
$ | 854 | $ | 845 | $ | 1,712 | $ | 1,629 | ||||||||
Add: Net interest income taxable-equivalent adjustment
|
3 | 2 | 5 | 5 | ||||||||||||
Total revenue, including taxable-equivalent adjustment
|
857 | 847 | 1,717 | 1,634 | ||||||||||||
Less: Accretion related to privatization-related fair value
adjustments
|
16 | 19 | 37 | 38 | ||||||||||||
Total revenue, excluding impact of privatization transaction(b)
|
$ | 841 | $ | 828 | $ | 1,680 | $ | 1,596 | ||||||||
Core efficiency ratio, excluding impact of privatization(a)/(b)
|
63.74 | % | 62.39 | % | 65.60 | % | 61.97 | % | ||||||||
15
Increase / (Decrease) |
||||||||||||||||
June 30, 2011 |
||||||||||||||||
From |
||||||||||||||||
June 30, |
December 31, |
December 31, 2010 | ||||||||||||||
(Dollars in millions) | 2011 | 2010 | Amount | Percent | ||||||||||||
Loans held for investment:
|
||||||||||||||||
Commercial and industrial
|
$ | 15,854 | $ | 15,162 | $ | 692 | 5 | % | ||||||||
Commercial mortgage
|
7,729 | 7,816 | (87 | ) | (1 | ) | ||||||||||
Construction
|
1,055 | 1,460 | (405 | ) | (28 | ) | ||||||||||
Lease financing
|
701 | 757 | (56 | ) | (7 | ) | ||||||||||
Total commercial portfolio
|
25,339 | 25,195 | 144 | 1 | ||||||||||||
Residential mortgage
|
18,610 | 17,531 | 1,079 | 6 | ||||||||||||
Home equity and other consumer loans
|
3,769 | 3,858 | (89 | ) | (2 | ) | ||||||||||
Total consumer portfolio
|
22,379 | 21,389 | 990 | 5 | ||||||||||||
Total loans held for investment, excluding FDIC covered loans
|
47,718 | 46,584 | 1,134 | 2 | ||||||||||||
FDIC covered loans
|
1,249 | 1,510 | (261 | ) | (17 | ) | ||||||||||
Total loans held for investment
|
$ | 48,967 | $ | 48,094 | $ | 873 | 2 | % | ||||||||
16
17
18
Increase / (Decrease) |
Increase / (Decrease) |
|||||||||||||||||||||||||||||||
For the Three Months Ended |
For the Six Months Ended |
|||||||||||||||||||||||||||||||
June 30, 2011 |
June 30, 2011 |
|||||||||||||||||||||||||||||||
For the Three Months |
From |
For the Six Months |
From |
|||||||||||||||||||||||||||||
Ended June 30, | June 30, 2010 | Ended June 30, | June 30, 2010 | |||||||||||||||||||||||||||||
(Dollars in millions) | 2011 | 2010 | Amount | Percent | 2011 | 2010 | Amount | Percent | ||||||||||||||||||||||||
Beginning balance of allowance for loan losses
|
$ | 1,034 | $ | 1,408 | $ | (374 | ) | (27 | )% | $ | 1,191 | $ | 1,357 | $ | (166 | ) | (12 | )% | ||||||||||||||
(Reversal of) provision for loan losses, excluding FDIC covered
loans
|
(92 | ) | 44 | (136 | ) | nm | (194 | ) | 214 | (408 | ) | (191 | ) | |||||||||||||||||||
(Reversal of) provision for FDIC covered loan losses not subject
to FDIC indemnification
|
(2 | ) | | (2 | ) | nm | (2 | ) | | (2 | ) | nm | ||||||||||||||||||||
Decrease in allowance covered by FDIC indemnification
|
(3 | ) | | (3 | ) | nm | (5 | ) | | (5 | ) | nm | ||||||||||||||||||||
Loans charged off:
|
||||||||||||||||||||||||||||||||
Commercial and industrial
|
11 | 30 | (19 | ) | (63 | ) | 34 | 97 | (63 | ) | (65 | ) | ||||||||||||||||||||
Commercial mortgage
|
14 | 51 | (37 | ) | (73 | ) | 38 | 83 | (45 | ) | (54 | ) | ||||||||||||||||||||
Construction
|
3 | 10 | (7 | ) | (70 | ) | 4 | 26 | (22 | ) | (85 | ) | ||||||||||||||||||||
Lease financing
|
71 | | 71 | nm | 71 | | 71 | nm | ||||||||||||||||||||||||
Total commercial portfolio
|
99 | 91 | 8 | 9 | 147 | 206 | (59 | ) | (29 | ) | ||||||||||||||||||||||
19
Increase / (Decrease) |
Increase / (Decrease) |
|||||||||||||||||||||||||||||||
For the Three Months Ended |
For the Six Months Ended |
|||||||||||||||||||||||||||||||
June 30, 2011 |
June 30, 2011 |
|||||||||||||||||||||||||||||||
For the Three Months |
From |
For the Six Months |
From |
|||||||||||||||||||||||||||||
Ended June 30, | June 30, 2010 | Ended June 30, | June 30, 2010 | |||||||||||||||||||||||||||||
(Dollars in millions) | 2011 | 2010 | Amount | Percent | 2011 | 2010 | Amount | Percent | ||||||||||||||||||||||||
Residential mortgage
|
13 | 12 | 1 | 8 | 27 | 22 | 5 | 23 | ||||||||||||||||||||||||
Home equity and other consumer loans
|
10 | 9 | 1 | 11 | 21 | 19 | 2 | 11 | ||||||||||||||||||||||||
Total consumer portfolio
|
23 | 21 | 2 | 10 | 48 | 41 | 7 | 17 | ||||||||||||||||||||||||
FDIC covered loans
|
1 | | 1 | nm | 1 | | 1 | nm | ||||||||||||||||||||||||
Total loans charged off
|
123 | 112 | 11 | 10 | 196 | 247 | (51 | ) | (21 | ) | ||||||||||||||||||||||
Recoveries of loans previously charged off:
|
||||||||||||||||||||||||||||||||
Commercial and industrial
|
8 | 8 | | | 15 | 21 | (6 | ) | (29 | ) | ||||||||||||||||||||||
Commercial mortgage
|
2 | 2 | | | 10 | 2 | 8 | 400 | ||||||||||||||||||||||||
Construction
|
2 | 8 | (6 | ) | (75 | ) | 6 | 10 | (4 | ) | (40 | ) | ||||||||||||||||||||
Total commercial portfolio
|
12 | 18 | (6 | ) | (33 | ) | 31 | 33 | (2 | ) | (6 | ) | ||||||||||||||||||||
Home equity and other consumer loans
|
| | | | 1 | 1 | | | ||||||||||||||||||||||||
Total consumer portfolio
|
| | | | 1 | 1 | | | ||||||||||||||||||||||||
Total recoveries of loans previously charged off
|
12 | 18 | (6 | ) | (33 | ) | 32 | 34 | (2 | ) | (6 | ) | ||||||||||||||||||||
Net loans charged off
|
111 | 94 | 17 | 18 | 164 | 213 | (49 | ) | (23 | ) | ||||||||||||||||||||||
Ending balance of allowance for loan losses
|
$ | 826 | $ | 1,358 | $ | (532 | ) | (39 | ) | $ | 826 | $ | 1,358 | $ | (532 | ) | (39 | ) | ||||||||||||||
Allowance for losses on off-balance sheet commitments
|
131 | 172 | (41 | ) | (24 | ) | 131 | 172 | (41 | ) | (24 | ) | ||||||||||||||||||||
Allowance for credit losses
|
$ | 957 | $ | 1,530 | $ | (573 | ) | (37 | )% | $ | 957 | $ | 1,530 | $ | (573 | ) | (37 | )% | ||||||||||||||
Components of allowance for loan losses and credit losses:
|
||||||||||||||||||||||||||||||||
Allowance for loan losses, excluding allowance on FDIC covered
loans
|
$ | 809 | $ | 1,358 | $ | (549 | ) | (40 | )% | $ | 809 | $ | 1,358 | $ | (549 | ) | (40 | )% | ||||||||||||||
Allowance for loan losses on FDIC covered loans
|
17 | | 17 | nm | 17 | | 17 | nm | ||||||||||||||||||||||||
Total allowance for loan losses
|
$ | 826 | $ | 1,358 | $ | (532 | ) | (39 | )% | $ | 826 | $ | 1,358 | $ | (532 | ) | (39 | )% | ||||||||||||||
Allowance for credit losses, excluding allowance on FDIC covered
loans
|
$ | 940 | $ | 1,530 | $ | (590 | ) | (39 | )% | $ | 940 | $ | 1,530 | $ | (590 | ) | (39 | )% | ||||||||||||||
Allowance for credit losses on FDIC covered loans
|
17 | | 17 | nm | 17 | | 17 | nm | ||||||||||||||||||||||||
Total allowance for credit losses
|
$ | 957 | $ | 1,530 | $ | (573 | ) | (37 | )% | $ | 957 | $ | 1,530 | $ | (573 | ) | (37 | )% | ||||||||||||||
Allowance for loan losses to total loans held for investment
|
1.69 | % | 2.81 | % | 1.69 | % | 2.81 | % | ||||||||||||||||||||||||
Allowance for credit losses to total loans held for investment
|
1.96 | 3.16 | 1.96 | 3.16 | ||||||||||||||||||||||||||||
Net loans charged off to average loans outstanding for the
period(2)
|
0.91 | 0.78 | 0.68 | 0.91 | ||||||||||||||||||||||||||||
Excluding FDIC covered loans (1):
|
||||||||||||||||||||||||||||||||
Allowance for loan losses to total loans held for investment
|
1.70 | % | 2.92 | % | 1.70 | % | 2.92 | % | ||||||||||||||||||||||||
Allowance for credit losses to total loans held for investment
|
1.97 | 3.29 | 1.97 | 3.29 | ||||||||||||||||||||||||||||
Net loans charged off to average loans outstanding for the
period(2)
|
0.92 | 0.81 | 0.69 | 0.92 |
(1) | These ratios exclude the impact of the FDIC covered loans, which are covered under loss share agreements between Union Bank, N.A. and the FDIC. Such agreements are related to the April 2010 acquisitions of certain assets and the assumption of certain liabilities of Frontier and Tamalpais. | |
(2) | Annualized. |
20
21
Increase / (Decrease) |
||||||||||||||||
June 30, 2011 |
||||||||||||||||
From |
||||||||||||||||
June 30, |
December 31, |
December 31, 2010 | ||||||||||||||
(Dollars in millions) | 2011 | 2010 | Amount | Percent | ||||||||||||
Commercial and industrial
|
$ | 110 | $ | 115 | $ | (5 | ) | (4 | )% | |||||||
Commercial mortgage
|
230 | 329 | (99 | ) | (30 | ) | ||||||||||
Construction
|
47 | 140 | (93 | ) | (66 | ) | ||||||||||
Total commercial portfolio
|
387 | 584 | (197 | ) | (34 | ) | ||||||||||
Residential mortgage
|
242 | 243 | (1 | ) | | |||||||||||
Home equity and other consumer loans
|
23 | 22 | 1 | 5 | ||||||||||||
Total consumer portfolio
|
265 | 265 | | | ||||||||||||
Total nonaccrual loans, excluding FDIC covered loans
|
652 | 849 | (197 | ) | (23 | ) | ||||||||||
FDIC covered loans
|
72 | 116 | (44 | ) | (38 | ) | ||||||||||
Total nonaccrual loans
|
724 | 965 | (241 | ) | (25 | ) | ||||||||||
OREO, excluding FDIC covered OREO
|
26 | 41 | (15 | ) | (37 | ) | ||||||||||
FDIC covered OREO
|
115 | 136 | (21 | ) | (15 | ) | ||||||||||
Total nonperforming assets
|
$ | 865 | $ | 1,142 | $ | (277 | ) | (24 | )% | |||||||
Total nonperforming assets, excluding FDIC covered assets
|
$ | 678 | $ | 890 | $ | (212 | ) | (24 | )% | |||||||
Restructured loans that continue to accrue interest
|
$ | 82 | $ | 22 | $ | 60 | 273 | % | ||||||||
Restructured nonaccrual loans (included in total nonaccrual
loans above)
|
$ | 184 | $ | 198 | $ | (14 | ) | (7 | )% | |||||||
Allowance for loan losses
|
$ | 826 | $ | 1,191 | $ | (365 | ) | (31 | )% | |||||||
Allowance for credit losses
|
$ | 957 | $ | 1,353 | $ | (396 | ) | (29 | )% | |||||||
Nonaccrual loans to total loans held for investment
|
1.48 | % | 2.01 | % | ||||||||||||
Allowance for loan losses to nonaccrual loans
|
114.05 | 123.40 | ||||||||||||||
Allowance for credit losses to nonaccrual loans
|
132.19 | 140.23 | ||||||||||||||
Nonperforming assets to total loans held for investment and OREO
|
1.76 | 2.37 | ||||||||||||||
Nonperforming assets to total assets
|
1.08 | 1.44 | ||||||||||||||
Excluding FDIC covered assets:(1)
|
||||||||||||||||
Nonaccrual loans to total loans held for investment
|
1.37 | % | 1.82 | % | ||||||||||||
Allowance for loan losses to nonaccrual loans
|
124.09 | 137.32 | ||||||||||||||
Allowance for credit losses to nonaccrual loans
|
144.23 | 156.44 | ||||||||||||||
Nonperforming assets to total loans held for investment and OREO
|
1.42 | 1.91 | ||||||||||||||
Nonperforming assets to total assets
|
0.86 | 1.15 |
(1) | These ratios exclude the impact of the FDIC covered loans and FDIC covered OREO, which are covered under loss share agreements between Union Bank, N.A. and the FDIC. Such agreements are related to the April 2010 acquisitions of certain assets and the assumption of certain liabilities of Frontier and Tamalpais. |
22
As a Percentage of |
||||||||||||||||||||||||
June 30, 2011 | December 31, 2010 | Ending Loan Balances | ||||||||||||||||||||||
Number of |
Number of |
June 30 |
December 31, |
|||||||||||||||||||||
(Dollars in millions) | Amount | Loans | Amount | Loans | 2011 | 2010 | ||||||||||||||||||
Commercial and industrial
|
$ | 20 | 8 | $ | 30 | 9 | 0.13 | % | 0.20 | % | ||||||||||||||
Commercial mortgage
|
140 | 18 | 111 | 15 | 1.81 | 1.41 | ||||||||||||||||||
Total commercial portfolio
|
160 | 26 | 141 | 24 | 0.63 | 0.56 | ||||||||||||||||||
Residential mortgage
|
103 | 184 | 79 | 138 | 0.55 | 0.45 | ||||||||||||||||||
Home equity and other consumer loans
|
2 | 27 | | | 0.07 | | ||||||||||||||||||
Total consumer portfolio
|
105 | 211 | 79 | 138 | 0.47 | 0.37 | ||||||||||||||||||
FDIC covered loans
|
1 | 7 | | | 0.08 | | ||||||||||||||||||
Total restructured loans
|
$ | 266 | 244 | $ | 220 | 162 | 0.54 | % | 0.47 | % | ||||||||||||||
23
Increase / (Decrease) |
||||||||||||||||
June 30, |
||||||||||||||||
2011 From |
||||||||||||||||
June 30, |
December 31, |
December 31, 2010 | ||||||||||||||
(Dollars in millions) | 2011 | 2010 | Amount | Percent | ||||||||||||
Interest checking
|
$ | 734 | $ | 931 | $ | (197 | ) | (21 | )% | |||||||
Money market
|
22,219 | 26,159 | (3,940 | ) | (15 | ) | ||||||||||
Total interest bearing transaction accounts
|
22,953 | 27,090 | (4,137 | ) | (15 | ) | ||||||||||
Savings
|
5,135 | 4,433 | 702 | 16 | ||||||||||||
Time
|
11,385 | 12,088 | (703 | ) | (6 | ) | ||||||||||
Total interest bearing
deposits(1)
|
39,473 | 43,611 | (4,138 | ) | (9 | ) | ||||||||||
Noninterest bearing deposits
|
17,708 | 16,343 | 1,365 | 8 | ||||||||||||
Total deposits
|
$ | 57,181 | $ | 59,954 | $ | (2,773 | ) | (5 | )% | |||||||
(1)Total
interest bearing deposits include:
|
||||||||||||||||
Brokered deposits:
|
||||||||||||||||
Interest bearing transaction accounts
|
$ | 2,080 | $ | 2,354 | $ | (274 | ) | (12 | )% | |||||||
Time
|
1,696 | 1,217 | 479 | 39 | ||||||||||||
Total interest bearing brokered deposits
|
3,776 | 3,571 | 205 | 6 | ||||||||||||
Nonbrokered deposits
|
35,697 | 40,040 | (4,343 | ) | (11 | ) | ||||||||||
Total interest bearing deposits
|
$ | 39,473 | $ | 43,611 | $ | (4,138 | ) | (9 | )% | |||||||
Core Deposits:
|
||||||||||||||||
Total deposits
|
$ | 57,181 | $ | 59,954 | $ | (2,773 | ) | (5 | )% | |||||||
Less: Total interest bearing brokered deposits
|
3,776 | 3,571 | 205 | 6 | ||||||||||||
Less: Total noninterest bearing brokered deposits
|
10 | | 10 | nm | ||||||||||||
Less: Total nonbrokered time deposits of $100,000 and over
|
6,952 | 7,716 | (764 | ) | (10 | ) | ||||||||||
Total core deposits
|
$ | 46,443 | $ | 48,667 | $ | (2,224 | ) | (5 | )% | |||||||
24
June 30, |
December 31, |
|||||||
(Dollars in millions) | 2011 | 2010 | ||||||
Effect on NII:
|
||||||||
increase 200 basis points
|
$ | 132.5 | $ | 108.8 | ||||
as a percentage of base case NII
|
5.74 | % | 4.75 | % | ||||
decrease 100 basis points
|
$ | (49.3 | ) | $ | (64.8 | ) | ||
as a percentage of base case NII
|
(2.14 | )% | (2.83 | )% |
25
26
Increase/(Decrease) |
||||||||||||
June 30, |
December 31, |
June 30, 2011 |
||||||||||
(Dollars in millions) | 2011 | 2010 | From December 31, 2010 | |||||||||
Total gross notional amount of positions held for purposes other
than trading:
|
||||||||||||
Interest rate swap pay fixed contracts
|
$ | 1,150 | $ | 1,500 | $ | (350 | ) | |||||
Interest rate cap purchased contracts
|
4,000 | 4,000 | | |||||||||
Total interest rate contracts
|
$ | 5,150 | $ | 5,500 | $ | (350 | ) | |||||
Fair value of positions held for purposes other than trading:
|
||||||||||||
Gross positive fair value
|
2 | 21 | (19 | ) | ||||||||
Gross negative fair value
|
4 | | 4 | |||||||||
Positive fair value of positions, net
|
$ | (2 | ) | $ | 21 | $ | (23 | ) | ||||
27
Increase/(Decrease) |
||||||||||||
June 30, |
December 31, |
June 30, 2011 |
||||||||||
(Dollars in millions) | 2011 | 2010 | From December 31, 2010 | |||||||||
Total gross notional amount of positions held for trading
purposes:
|
||||||||||||
Interest rate contracts
|
$ | 30,414 | $ | 28,820 | $ | 1,594 | ||||||
Commodity contracts
|
4,916 | 4,679 | 237 | |||||||||
Foreign exchange
contracts(1)
|
3,068 | 2,594 | 474 | |||||||||
Equity contracts
|
2,144 | 1,313 | 831 | |||||||||
Other contracts
|
60 | 60 | | |||||||||
Total
|
$ | 40,602 | $ | 37,466 | $ | 3,136 | ||||||
Fair value of positions held for trading purposes:
|
||||||||||||
Gross positive fair value
|
$ | 950 | $ | 922 | $ | 28 | ||||||
Gross negative fair value
|
902 | 897 | 5 | |||||||||
Positive fair value of positions, net
|
$ | 48 | $ | 25 | $ | 23 | ||||||
(1) | Excludes spot contracts with notional amounts of $0.7 billion and $0.4 billion at June 30, 2011 and December 31, 2010, respectively. |
28
| The Bank has pledged collateral under secured borrowing facilities with the FHLB and the Federal Reserve Bank (FRB). As of June 30, 2011, the Bank had $4.5 billion of borrowings outstanding with the FHLB, and the Bank had a remaining combined unused borrowing capacity from the FHLB and the FRB of $20.2 billion. | |
| Our securities portfolio provides liquidity through either securities sales or repurchase agreements. Total unpledged securities decreased by $2.3 billion from $15.2 billion at December 31, 2010 to $12.9 billion at June 30, 2011. | |
| The Bank has a $4.0 billion unsecured Bank Note Program. Available funding under the Bank Note Program was $1.2 billion at June 30, 2011, a decrease of $1.0 billion from December 31, 2010 due to our $1.0 billion debt issuance in the second quarter of 2011. We do not have any firm commitments in place to sell securities under the Bank Note Program. | |
| In addition to the funding provided by the Bank, we raise funds at the holding company level. UnionBanCal Corporation has in place a shelf registration with the SEC permitting ready access to the public debt markets. As of June 30, 2011, $1.5 billion of debt or other securities were available for issuance under this shelf registration. We do not have any firm commitments in place to sell securities under this shelf registration. |
UnionBanCal |
||||||
Union Bank, N.A. | Corporation | |||||
Standard & Poors
|
Long-term | A+ | A | |||
Short-term | A-1 | A-1 | ||||
Moodys
|
Long-term | A2 | | |||
Short-term | P-1 | | ||||
Fitch
|
Long-term | A | A | |||
Short-term | F1 | F1 | ||||
DBRS
|
Long-term | A (high) | A | |||
Short-term | R-1 (middle) | R-1 (low) |
29
June 30, |
December 31, |
|||||||
(Dollars in millions) | 2011 | 2010 | ||||||
Capital Components
|
||||||||
Tier 1 capital
|
$ | 8,535 | $ | 8,029 | ||||
Tier 2 capital
|
1,526 | 1,656 | ||||||
Total risk-based capital
|
$ | 10,061 | $ | 9,685 | ||||
Risk-weighted assets
|
$ | 65,274 | $ | 64,516 | ||||
Quarterly average assets
|
$ | 77,860 | $ | 77,659 | ||||
June 30, 2011 |
||||||||||||||||||||||||
Minimum |
||||||||||||||||||||||||
June 30, |
December 31, |
Regulatory |
||||||||||||||||||||||
2011 | 2010 | Requirement | ||||||||||||||||||||||
(Dollars in millions) | Amount | Ratio | Amount | Ratio | Amount | Ratio | ||||||||||||||||||
Capital Ratios
|
||||||||||||||||||||||||
Tier 1 capital (to risk-weighted assets)
|
$ | 8,535 | 13.08 | % | $ | 8,029 | 12.44 | % | ³$ | 2,611 | 4.0 | % | ||||||||||||
Total capital (to risk-weighted assets)
|
10,061 | 15.41 | 9,685 | 15.01 | ³ 5,222 | 8.0 | ||||||||||||||||||
Leverage(1)
|
8,535 | 10.96 | 8,029 | 10.34 | ³ 3,114 | 4.0 |
(1) | Tier 1 capital divided by quarterly average assets (excluding certain intangible assets). |
June 30, |
December 31, |
|||||||
(Dollars in millions) | 2011 | 2010 | ||||||
Capital Components
|
||||||||
Tier 1 capital
|
$ | 8,268 | $ | 7,377 | ||||
Tier 2 capital
|
1,363 | 1,489 | ||||||
Total risk-based capital
|
$ | 9,631 | $ | 8,866 | ||||
Risk-weighted assets
|
$ | 65,047 | $ | 63,993 | ||||
Quarterly average assets
|
$ | 77,786 | $ | 77,229 | ||||
June 30, 2011 |
June 30, 2011 |
|||||||||||||||||||||||||||||||
Minimum |
Well-Capitalized |
|||||||||||||||||||||||||||||||
June 30, |
December 31, |
Regulatory |
Regulatory |
|||||||||||||||||||||||||||||
2011 | 2010 | Requirement | Requirement | |||||||||||||||||||||||||||||
(Dollars in millions) | Amount | Ratio | Amount | Ratio | Amount | Ratio | Amount | Ratio | ||||||||||||||||||||||||
Capital Ratios
|
||||||||||||||||||||||||||||||||
Tier 1 capital (to risk-weighted assets)
|
$ | 8,268 | 12.71 | % | $ | 7,377 | 11.53 | % | ³$ | 2,602 | 4.0 | % | ³$ | 3,903 | 6.0 | % | ||||||||||||||||
Total capital (to risk-weighted assets)
|
9,631 | 14.81 | 8,866 | 13.85 | ³ 5,204 | 8.0 | ³ 6,505 | 10.0 | ||||||||||||||||||||||||
Leverage(1)
|
8,268 | 10.63 | 7,377 | 9.55 | ³ 3,111 | 4.0 | ³ 3,889 | 5.0 |
(1) | Tier 1 capital divided by quarterly average assets (excluding certain intangible assets). |
30
Increase/(Decrease) |
||||||||||||||||
June 30, 2011 |
||||||||||||||||
From |
||||||||||||||||
June 30, |
December 31, |
December 31, 2010 | ||||||||||||||
(Dollars in millions) | 2011 | 2010 | Amount | Percent | ||||||||||||
Total UNBC stockholders equity
|
$ | 10,667 | $ | 10,125 | $ | 542 | 5 | % | ||||||||
Goodwill
|
(2,447 | ) | (2,456 | ) | 9 | | ||||||||||
Intangible assets
|
(407 | ) | (457 | ) | 50 | (11 | ) | |||||||||
Deferred tax liabilities related to goodwill and intangible
assets
|
149 | 168 | (19 | ) | (11 | ) | ||||||||||
Tangible common equity (a)
|
$ | 7,962 | $ | 7,380 | $ | 582 | 8 | |||||||||
Tier 1 capital, determined in accordance with regulatory
requirements
|
$ | 8,535 | $ | 8,029 | $ | 506 | 6 | |||||||||
Trust preferred securities
|
| (13 | ) | 13 | (100 | ) | ||||||||||
Tier 1 common equity (b)
|
$ | 8,535 | $ | 8,016 | $ | 519 | 6 | |||||||||
Total assets
|
$ | 80,093 | $ | 79,097 | $ | 996 | 1 | |||||||||
Goodwill
|
(2,447 | ) | (2,456 | ) | 9 | | ||||||||||
Intangible assets
|
(407 | ) | (457 | ) | 50 | (11 | ) | |||||||||
Deferred tax liabilities related to goodwill and intangible
assets
|
149 | 168 | (19 | ) | (11 | ) | ||||||||||
Tangible assets (c)
|
$ | 77,388 | $ | 76,352 | $ | 1,036 | 1 | |||||||||
Risk-weighted assets, determined in accordance with regulatory
requirements (d)
|
$ | 65,274 | $ | 64,516 | $ | 758 | 1 | % | ||||||||
Tangible common equity ratio (a)/(c)
|
10.29 | % | 9.67 | % | ||||||||||||
Tier 1 common capital ratio (b)/(d)
|
13.08 | 12.42 |
31
| A funds transfer pricing system, which assigns a cost of funds or a credit for funds to assets or liabilities based on their type, maturity or repricing characteristics. During the first quarter of 2011, we refined our transfer pricing methodology for non-maturity deposits to reflect expected balance run-off and average life assumptions. | |
| An activity-based costing methodology, in which certain indirect costs, such as operations and technology expense, are allocated to the segments based on studies of billable unit costs for product or data processing. Other indirect costs, such as corporate overhead, are allocated to the segments based on a predetermined percentage of usage. | |
| A risk-adjusted return on capital (RAROC) methodology, in which credit expense is charged to an operating segment based upon expected losses arising from credit risk. In addition, the attribution of economic capital is related to unexpected losses arising from credit and operational risks and, to a lesser extent, market risk. As a result of the methodology used in the RAROC model to calculate expected losses, differences between the provision for credit losses and credit expense in any one period could be significant. However, over an economic cycle, the cumulative provision for credit losses and credit expense for expected losses should be substantially the same. |
32
Retail Banking | ||||||||||||||||||||||||||||||||
As of and for the |
Corporate Banking | |||||||||||||||||||||||||||||||
Three Months |
Increase/ |
As of and for the |
Increase/ |
|||||||||||||||||||||||||||||
Ended June 30, | (Decrease) | Three Months Ended June 30, | (Decrease) | |||||||||||||||||||||||||||||
2011 | 2010 | Amount | Percent | 2011 | 2010 | Amount | Percent | |||||||||||||||||||||||||
Results of operationsMarket View (dollars in
millions):
|
||||||||||||||||||||||||||||||||
Net interest income (expense)
|
$ | 275 | $ | 246 | $ | 29 | 12 | % | $ | 308 | $ | 304 | $ | 4 | 1 | % | ||||||||||||||||
Noninterest income (expense)
|
72 | 74 | (2 | ) | (3 | ) | 155 | 143 | 12 | 8 | ||||||||||||||||||||||
Total revenue
|
347 | 320 | 27 | 8 | 463 | 447 | 16 | 4 | ||||||||||||||||||||||||
Noninterest expense (income)
|
267 | 231 | 36 | 16 | 249 | 239 | 10 | 4 | ||||||||||||||||||||||||
Credit expense (income)
|
7 | 7 | | | 49 | 73 | (24 | ) | (33 | ) | ||||||||||||||||||||||
Income (loss) before income taxes and including noncontrolling
interests
|
73 | 82 | (9 | ) | (11 | ) | 165 | 135 | 30 | 22 | ||||||||||||||||||||||
Income tax expense (benefit)
|
29 | 32 | (3 | ) | (9 | ) | 38 | 29 | 9 | 31 | ||||||||||||||||||||||
Net income (loss) including noncontrolling interests
|
44 | 50 | (6 | ) | (12 | ) | 127 | 106 | 21 | 20 | ||||||||||||||||||||||
Deduct: Net loss from noncontrolling
interests(2)
|
| | | | | | | | ||||||||||||||||||||||||
Net income (loss) attributable to UNBC
|
$ | 44 | $ | 50 | $ | (6 | ) | (12 | )% | $ | 127 | $ | 106 | $ | 21 | 20 | % | |||||||||||||||
Average balancesMarket View (dollars in millions):
|
||||||||||||||||||||||||||||||||
Total loans held for investment
|
$ | 22,988 | $ | 21,840 | $ | 1,148 | 5 | $ | 26,566 | $ | 26,468 | $ | 98 | | ||||||||||||||||||
Total assets
|
23,997 | 22,748 | 1,249 | 5 | 30,689 | 30,334 | 355 | 1 | ||||||||||||||||||||||||
Total deposits
|
24,365 | 22,928 | 1,437 | 6 | 29,544 | 39,208 | (9,664 | ) | (25 | ) | ||||||||||||||||||||||
Financial ratiosMarket View
|
||||||||||||||||||||||||||||||||
Risk adjusted return on
capital(1)
|
28 | % | 36 | % | 16 | % | 14 | % | ||||||||||||||||||||||||
Return on average
assets(1)
|
0.74 | 0.88 | 1.66 | 1.39 | ||||||||||||||||||||||||||||
Core efficiency ratio, excluding impact of
privatization(3)
|
77.10 | 72.27 | 52.46 | 52.46 |
Other | Reconciling Items | |||||||||||||||||||||||
As of and for the |
Increase/ |
As of and for the |
||||||||||||||||||||||
Three Months Ended June 30, | (Decrease) | Three Months Ended June 30, | ||||||||||||||||||||||
2011 | 2010 | Amount | Percent | 2011 | 2010 | |||||||||||||||||||
Results of operationsMarket View (dollars in
millions):
|
||||||||||||||||||||||||
Net interest income (expense)
|
$ | 51 | $ | 64 | $ | (13 | ) | (20 | )% | $ | (20 | ) | $ | (13 | ) | |||||||||
Noninterest income (expense)
|
33 | 45 | (12 | ) | (27 | ) | (20 | ) | (18 | ) | ||||||||||||||
Total revenue
|
84 | 109 | (25 | ) | (23 | ) | (40 | ) | (31 | ) | ||||||||||||||
Noninterest expense (income)
|
77 | 128 | (51 | ) | (40 | ) | (15 | ) | (14 | ) | ||||||||||||||
Credit expense (income)
|
(150 | ) | (36 | ) | (114 | ) | (317 | ) | | | ||||||||||||||
Income (loss) before income taxes and including noncontrolling
interests
|
157 | 17 | 140 | nm | (25 | ) | (17 | ) | ||||||||||||||||
Income tax expense (benefit)
|
74 | 13 | 61 | 469 | (10 | ) | (7 | ) | ||||||||||||||||
Net income (loss) including noncontrolling interests
|
83 | 4 | 79 | nm | (15 | ) | (10 | ) | ||||||||||||||||
Deduct: Net loss from noncontrolling
interests(2)
|
3 | 4 | (1 | ) | (25 | ) | | | ||||||||||||||||
Net income (loss) attributable to UNBC
|
$ | 86 | $ | 8 | $ | 78 | nm | % | $ | (15 | ) | $ | (10 | ) | ||||||||||
Average balancesMarket View (dollars in millions):
|
||||||||||||||||||||||||
Total loans held for investment
|
$ | 1,365 | $ | 1,415 | $ | (50 | ) | (4 | ) | $ | (2,070 | ) | $ | (1,896 | ) | |||||||||
Total assets
|
27,747 | 34,346 | (6,599 | ) | (19 | ) | (2,099 | ) | (1,917 | ) | ||||||||||||||
Total deposits
|
6,578 | 7,714 | (1,136 | ) | (15 | ) | (2,154 | ) | (1,746 | ) | ||||||||||||||
Financial ratiosMarket View
|
||||||||||||||||||||||||
Risk adjusted return on
capital(1)
|
na | na | na | na | ||||||||||||||||||||
Return on average
assets(1)
|
na | na | na | na | ||||||||||||||||||||
Core efficiency ratio, excluding impact of
privatization(3)
|
na | na | na | na |
33
UnionBanCal |
||||||||||||||||
Corporation | ||||||||||||||||
As of and for the |
||||||||||||||||
Three Months Ended June 30, | Increase/(Decrease) | |||||||||||||||
2011 | 2010 | Amount | Percent | |||||||||||||
Results of operationsMarket View (dollars in
millions):
|
||||||||||||||||
Net interest income (expense)
|
$ | 614 | $ | 601 | $ | 13 | 2 | % | ||||||||
Noninterest income (expense)
|
240 | 244 | (4 | ) | (2 | ) | ||||||||||
Total revenue
|
854 | 845 | 9 | 1 | ||||||||||||
Noninterest expense (income)
|
578 | 584 | (6 | ) | (1 | ) | ||||||||||
Credit expense (income)
|
(94 | ) | 44 | (138 | ) | nm | ||||||||||
Income (loss) before income taxes and including noncontrolling
interests
|
370 | 217 | 153 | 71 | ||||||||||||
Income tax expense (benefit)
|
131 | 67 | 64 | 96 | ||||||||||||
Net income (loss) including noncontrolling interests
|
239 | 150 | 89 | 59 | ||||||||||||
Deduct: Net loss from noncontrolling
interests(2)
|
3 | 4 | (1 | ) | (25 | ) | ||||||||||
Net income (loss) attributable to UNBC
|
$ | 242 | $ | 154 | $ | 88 | 57 | % | ||||||||
Average balancesMarket View (dollars in millions):
|
||||||||||||||||
Total loans held for investment
|
$ | 48,849 | $ | 47,827 | $ | 1,022 | 2 | |||||||||
Total assets
|
80,334 | 85,511 | (5,177 | ) | (6 | ) | ||||||||||
Total deposits
|
58,333 | 68,104 | (9,771 | ) | (14 | ) | ||||||||||
Financial ratiosMarket View
|
||||||||||||||||
Risk adjusted return on
capital(1)
|
9 | % | 6 | % | ||||||||||||
Return on average
assets(1)
|
1.21 | 0.72 | ||||||||||||||
Core efficiency ratio, excluding impact of
privatization(3)
|
63.74 | 62.39 |
(1) | Annualized. | |
(2) | Reflects net loss attributed to noncontrolling interest related to our consolidated variable interest entities (VIEs). | |
(3) | The core efficiency ratio, excluding impact of privatization, a non-GAAP financial measure, is net noninterest expense (noninterest expense excluding privatization-related expenses and fair value amortization/accretion, foreclosed asset expense, (reversal of) provision for losses on off-balance sheet commitments, low income housing credit investment amortization expense, expenses of the consolidated VIEs, merger costs related to the acquisitions of certain assets and assumption of certain liabilities of Frontier and Tamalpais and asset impairment charge) as a percentage of total revenue (net interest income (taxable-equivalent basis) and noninterest income). Management discloses the core efficiency ratio as a measure of the efficiency of our operations, focusing on those costs most relevant to our core activities. |
34
Retail Banking | Corporate Banking | |||||||||||||||||||||||||||||||
As of and for the |
Increase/ |
As of and for the |
Increase/ |
|||||||||||||||||||||||||||||
Six Months Ended June 30, | (Decrease) | Six Months Ended June 30, | (Decrease) | |||||||||||||||||||||||||||||
2011 | 2010 | Amount | Percent | 2011 | 2010 | Amount | Percent | |||||||||||||||||||||||||
Results of operationsMarket View (dollars in
millions):
|
||||||||||||||||||||||||||||||||
Net interest income (expense)
|
$ | 540 | $ | 474 | $ | 66 | 14 | % | $ | 615 | $ | 599 | $ | 16 | 3 | % | ||||||||||||||||
Noninterest income (expense)
|
137 | 140 | (3 | ) | (2 | ) | 285 | 258 | 27 | 10 | ||||||||||||||||||||||
Total revenue
|
677 | 614 | 63 | 10 | 900 | 857 | 43 | 5 | ||||||||||||||||||||||||
Noninterest expense (income)
|
529 | 447 | 82 | 18 | 478 | 474 | 4 | 1 | ||||||||||||||||||||||||
Credit expense (income)
|
13 | 13 | | | 101 | 151 | (50 | ) | (33 | ) | ||||||||||||||||||||||
Income (loss) before income taxes and including noncontrolling
interests
|
135 | 154 | (19 | ) | (12 | ) | 321 | 232 | 89 | 38 | ||||||||||||||||||||||
Income tax expense (benefit)
|
53 | 60 | (7 | ) | (12 | ) | 75 | 44 | 31 | 70 | ||||||||||||||||||||||
Net income (loss) including noncontrolling interests
|
82 | 94 | (12 | ) | (13 | ) | 246 | 188 | 58 | 31 | ||||||||||||||||||||||
Deduct: Net loss from noncontrolling
interests(2)
|
| | | | | | | | ||||||||||||||||||||||||
Net income (loss) attributable to UNBC
|
$ | 82 | $ | 94 | $ | (12 | ) | (13 | )% | $ | 246 | $ | 188 | $ | 58 | 31 | % | |||||||||||||||
Average balancesMarket View (dollars in millions):
|
||||||||||||||||||||||||||||||||
Total loans held for investment
|
$ | 22,734 | $ | 21,734 | $ | 1,000 | 5 | $ | 26,438 | $ | 26,735 | $ | (297 | ) | (1 | ) | ||||||||||||||||
Total assets
|
23,747 | 22,613 | 1,134 | 5 | 30,575 | 30,449 | 126 | | ||||||||||||||||||||||||
Total deposits
|
24,380 | 21,646 | 2,734 | 13 | 29,964 | 40,178 | (10,214 | ) | (25 | ) | ||||||||||||||||||||||
Financial ratiosMarket View
|
||||||||||||||||||||||||||||||||
Risk adjusted return on
capital(1)
|
27 | % | 34 | % | 16 | % | 12 | % | ||||||||||||||||||||||||
Return on average
assets(1)
|
0.70 | 0.84 | 1.62 | 1.25 | ||||||||||||||||||||||||||||
Core efficiency ratio, excluding impact of
privatization(3)
|
78.02 | 72.60 | 49.66 | 52.09 |
Other | Reconciling Items | |||||||||||||||||||||||
As of and for the |
As of and for the |
|||||||||||||||||||||||
Six Months Ended June 30, | Increase/(Decrease) | Six Months Ended June 30, | ||||||||||||||||||||||
2011 | 2010 | Amount | Percent | 2011 | 2010 | |||||||||||||||||||
Results of operationsMarket View (dollars in
millions):
|
||||||||||||||||||||||||
Net interest income (expense)
|
$ | 114 | $ | 133 | $ | (19 | ) | (14 | )% | $ | (37 | ) | $ | (31 | ) | |||||||||
Noninterest income (expense)
|
94 | 89 | 5 | 6 | (36 | ) | (33 | ) | ||||||||||||||||
Total revenue
|
208 | 222 | (14 | ) | (6 | ) | (73 | ) | (64 | ) | ||||||||||||||
Noninterest expense (income)
|
213 | 213 | | | (27 | ) | (25 | ) | ||||||||||||||||
Credit expense (income)
|
(310 | ) | 50 | (360 | ) | nm | | | ||||||||||||||||
Income (loss) before income taxes and including noncontrolling
interests
|
305 | (41 | ) | 346 | nm | (46 | ) | (39 | ) | |||||||||||||||
Income tax expense (benefit)
|
135 | (7 | ) | 142 | nm | (18 | ) | (15 | ) | |||||||||||||||
Net income (loss) including noncontrolling interests
|
170 | (34 | ) | 204 | nm | (28 | ) | (24 | ) | |||||||||||||||
Deduct: Net loss from noncontrolling interests(2)
|
7 | 7 | | | | | ||||||||||||||||||
Net income (loss) attributable to UNBC
|
$ | 177 | $ | (27 | ) | $ | 204 | nm | % | $ | (28 | ) | $ | (24 | ) | |||||||||
Average balancesMarket View (dollars in millions):
|
||||||||||||||||||||||||
Total loans held for investment
|
$ | 1,441 | $ | 757 | $ | 684 | 90 | $ | (2,045 | ) | $ | (1,886 | ) | |||||||||||
Total assets
|
27,945 | 34,007 | (6,062 | ) | (18 | ) | (2,072 | ) | (1,907 | ) | ||||||||||||||
Total deposits
|
6,633 | 7,836 | (1,203 | ) | (15 | ) | (2,078 | ) | (1,688 | ) | ||||||||||||||
Financial ratiosMarket View
|
||||||||||||||||||||||||
Risk adjusted return on
capital(1)
|
na | na | na | na | ||||||||||||||||||||
Return on average
assets(1)
|
na | na | na | na | ||||||||||||||||||||
Core efficiency ratio, excluding impact of
privatization(3)
|
na | na | na | na |
35
UnionBanCal |
||||||||||||||||
Corporation | ||||||||||||||||
As of and for the |
||||||||||||||||
Six Months Ended June 30, | Increase/(Decrease) | |||||||||||||||
2011 | 2010 | Amount | Percent | |||||||||||||
Results of operationsMarket View (dollars in
millions):
|
||||||||||||||||
Net interest income (expense)
|
$ | 1,232 | $ | 1,175 | $ | 57 | 5 | % | ||||||||
Noninterest income (expense)
|
480 | 454 | 26 | 6 | ||||||||||||
Total revenue
|
1,712 | 1,629 | 83 | 5 | ||||||||||||
Noninterest expense (income)
|
1,193 | 1,109 | 84 | 8 | ||||||||||||
Credit expense (income)
|
(196 | ) | 214 | (410 | ) | nm | ||||||||||
Income (loss) before income taxes and including noncontrolling
interests
|
715 | 306 | 409 | 134 | ||||||||||||
Income tax expense (benefit)
|
245 | 82 | 163 | 199 | ||||||||||||
Net income (loss) including noncontrolling interests
|
470 | 224 | 246 | 110 | ||||||||||||
Deduct: Net loss from noncontrolling
interests(2)
|
7 | 7 | | | ||||||||||||
Net income (loss) attributable to UNBC
|
$ | 477 | $ | 231 | $ | 246 | 106 | % | ||||||||
Average balancesMarket View (dollars in millions):
|
||||||||||||||||
Total loans held for investment
|
$ | 48,568 | $ | 47,340 | $ | 1,228 | 3 | |||||||||
Total assets
|
80,195 | 85,162 | (4,967 | ) | (6 | ) | ||||||||||
Total deposits
|
58,899 | 67,972 | (9,073 | ) | (13 | ) | ||||||||||
Financial ratiosMarket View
|
||||||||||||||||
Risk adjusted return on
capital(1)
|
9 | % | 5 | % | ||||||||||||
Return on average
assets(1)
|
1.20 | 0.55 | ||||||||||||||
Core efficiency ratio, excluding impact of
privatization(3)
|
65.60 | 61.97 |
(1) | Annualized. | |
(2) | Reflects net loss attributed to noncontrolling interest related to our consolidated VIEs. | |
(3) | The core efficiency ratio, excluding impact of privatization, a non-GAAP financial measure, is net noninterest expense (noninterest expense excluding privatization-related expenses and fair value amortization/accretion, foreclosed asset expense, (reversal of) provision for losses on off-balance sheet commitments, low income housing credit investment amortization expense, expenses of the consolidated VIEs, merger costs related to the acquisitions of certain assets and assumption of certain liabilities of Frontier and Tamalpais and asset impairment charge) as a percentage of total revenue (net interest income (taxable-equivalent basis) and noninterest income). Management discloses the core efficiency ratio as a measure of the efficiency of our operations, focusing on those costs most relevant to our core activities. |
36
| the Community Banking Division serves its customers through 350 full-service branches in California and 52 full-service branches in Oregon and Washington. Customers may also access our services 24 hours-a-day by telephone or through our website at www.unionbank.com. In addition, the branches offer automated teller and point-of-sale merchant services. |
| through conveniently located banking branches and ATMs which serve consumers and businesses with checking and deposit products and services, as well as various types of consumer financing and investment services; | |
| through its call center and internet banking services, which augment its physical delivery channels by providing an array of customer transaction, bill payment and loan payment services; and | |
| through alliances with other financial institutions, the Community Banking Division offers additional products and services, such as credit cards and merchant services. |
| the Consumer Lending Division provides the centralized origination, underwriting, processing, servicing, collection and administration for consumer assets including residential mortgages. |
37
| the Commercial Banking Division, which includes the following operating units: |
| Commercial Banking, which provides commercial lending products and treasury management services to middle market and corporate companies primarily in California, Oregon and Washington; | |
| Power and Utilities, which provides treasury management products and commercial lending products including commercial lines of credit and project financing to independent power producers as well as regulated utility companies; | |
| Petroleum, which provides commercial lending products, including reserve-based lines of credit, commercial lines of credit as well as treasury management products to oil and gas companies; and | |
| National Banking provides commercial lending and treasury management products to corporate clients on a national basis, in states outside of California, Oregon, and Washington. National Banking also targets certain defined industries, such as healthcare, entertainment, and food and beverage. | |
| Specialized Industries provides commercial lending and treasury products to middle-market and corporate clients in specific industries on a national basis, including commercial finance, funds finance, environmental services and non-profits. |
38
| the Real Estate Industries Division serves professional real estate investors and developers with products such as construction loans, commercial mortgages and bridge financing. Additionally, through our Community Development Finance unit, we make tax credit investments in affordable housing projects, as well as provide construction and permanent financing; | |
| the Global Capital Markets Division helps to serve our customers with their foreign exchange, interest rate and energy risk management needs in addition to facilitating merchant and investment banking related transactions. The division takes market risk when buying and selling securities, interest rate derivatives and foreign exchange contracts for its own account and accepts limited market risk when providing commodity and equity derivative contracts, since a significant portion of the market risk for these products is offset with third parties. Additionally, the divisions Equipment Leasing arm provides lease financing services to corporate customers; and | |
| the Global Treasury Management Division targets numerous industry relationship markets with deep industry and product expertise. The Global Treasury Management Division provides working capital solutions to meet deposit, investment and global treasury management services to businesses of all sizes. This division manages Union Banks web strategies for retail, small business, wealth management and commercial clients, as well as commercial product development. Additionally, this division includes the Institutional Services operating unit, which provides custody, corporate trust, and retirement plan services. The client base of this operating unit includes financial institutions, corporations, government agencies, unions, insurance companies, mutual funds, investment managers and non-profit organizations. Custody Services provides both domestic and international safekeeping/settlement services in addition to securities lending. Corporate Trust acts as trustee for corporate and municipal debt issues, and provides escrow services and trustee services for project finance. Retirement Plan Services provides defined benefit services, including trustee services and investment management. | |
| the Wealth Markets Division consists of the following operating units: |
| The Private Bank focuses primarily on delivering financial services to high net worth individuals with sophisticated financial needs as well as to professional service firms, foundations and endowments. Specific products and services include trust and estate services, financial planning, investment account management services, and deposit and credit products; | |
| UnionBanc Investment Services LLC (UBIS) is a subsidiary of Union Bank and is our registered broker-dealer and registered investment advisor. UBIS provides services to retail and institutional clients in several core products areas, including annuities, mutual funds, and fixed income products. Retail services are delivered through dedicated investment specialists located throughout the Banks geographical footprint. Institutional services are delivered through a dedicated trading desk and sales force specializing in fixed income products; and | |
| Asset Management, which consists of HighMark Capital Management, Inc., a subsidiary of Union Bank and a registered investment advisor, provides investment management and advisory services to institutional clients as well as investment advisory, administration and support services to our proprietary mutual funds, the affiliated HighMark Funds. It also provides investment management services to Union Bank with respect to most of its trust and agency clients, including corporations, pension funds and individuals. HighMark Capital Management, Inc.s strategy is to expand distribution, to broaden its client base and to increase its assets under management. |
39
| The Pacific Rim Corporate Group, which offers a range of credit, deposit, and investment management products and services to companies headquartered in either Japan or the U.S.; | |
| the funds transfer pricing results for our entire company, which allocates to the business segments their cost of funds on all asset categories and credit for funds on all liability categories; | |
| Corporate Treasury, which is responsible for our ALM, wholesale funding and the ALM investment and derivatives hedging portfolios. These Treasury management activities are carried out to manage the net interest rate and liquidity risks of our balance sheet and to manage those risks within the guidelines established by ALCO. For additional discussion regarding these risk management activities, see Quantitative and Qualitative Disclosures About Market Risk in Part I, Item 2 of this Form 10-Q; | |
| the adjustment between the credit expense (income) under RAROC and (reversal of) provision for credit losses under US GAAP; | |
| the residual costs of support groups; | |
| corporate activities that are not directly attributable to one of the two business segments. Included in this category are certain other items such as the results of operations of certain non-bank subsidiaries of UnionBanCal and the elimination of the fully taxable-equivalent basis amount; | |
| goodwill, intangible assets, and related amortization/accretion associated with our privatization transaction; and | |
| the adjustment between the tax expense calculated using the adjusted statutory tax rate of 39.1 percent and our consolidated effective tax rate. |
| an increase in credit income of $360 million, which reflects the improvement in credit quality of our loan portfolio. Credit income of $310 million for the first half of 2011 was due to the difference between the $196 million reversal of provision for loan losses calculated under our US GAAP methodology and the $114 million in expected losses for the reportable business segments, which utilizes the RAROC methodology. This compares to a credit expense of $50 million in the first half of 2010; and | |
| noninterest income increased $5 million in the first half of 2011 compared to the first half of 2010. This increase includes a $15 million gain on the sale of MasterCard shares, partially offset by lower gain on the sale of ALM investment securities and a decrease in indemnification asset accretion, driven by better than expected covered loan performance. |
Item 3. | Quantitative and Qualitative Disclosures About Market Risk |
Item 4. | Controls and Procedures |
40
41
Item 1. | Financial Statements |
For the Three |
For the Six |
|||||||||||||||
Months Ended |
Months Ended |
|||||||||||||||
June 30, | June 30, | |||||||||||||||
(Dollars in millions) | 2011 | 2010 | 2011 | 2010 | ||||||||||||
Interest Income
|
||||||||||||||||
Loans
|
$ | 565 | $ | 568 | $ | 1,124 | $ | 1,108 | ||||||||
Securities
|
138 | 135 | 281 | 278 | ||||||||||||
Other
|
2 | 5 | 3 | 10 | ||||||||||||
Total interest income
|
705 | 708 | 1,408 | 1,396 | ||||||||||||
Interest Expense
|
||||||||||||||||
Deposits
|
53 | 78 | 106 | 164 | ||||||||||||
Commercial paper and other short-term borrowings
|
2 | 2 | 3 | 3 | ||||||||||||
Long-term debt
|
36 | 27 | 67 | 54 | ||||||||||||
Total interest expense
|
91 | 107 | 176 | 221 | ||||||||||||
Net Interest Income
|
614 | 601 | 1,232 | 1,175 | ||||||||||||
(Reversal of) provision for loan losses
|
(94 | ) | 44 | (196 | ) | 214 | ||||||||||
Net interest income after (reversal of) provision for loan losses
|
708 | 557 | 1,428 | 961 | ||||||||||||
Noninterest Income
|
||||||||||||||||
Service charges on deposit accounts
|
56 | 64 | 113 | 130 | ||||||||||||
Trust and investment management fees
|
34 | 35 | 68 | 66 | ||||||||||||
Trading account activities
|
28 | 25 | 61 | 46 | ||||||||||||
Securities gains, net
|
29 | 27 | 57 | 61 | ||||||||||||
Merchant banking fees
|
29 | 22 | 48 | 36 | ||||||||||||
Brokerage commissions and fees
|
12 | 10 | 25 | 19 | ||||||||||||
Card processing fees, net
|
12 | 12 | 22 | 21 | ||||||||||||
Other
|
40 | 49 | 86 | 75 | ||||||||||||
Total noninterest income
|
240 | 244 | 480 | 454 | ||||||||||||
Noninterest Expense
|
||||||||||||||||
Salaries and employee benefits
|
346 | 319 | 690 | 599 | ||||||||||||
Net occupancy and equipment
|
67 | 64 | 132 | 123 | ||||||||||||
Professional and outside services
|
55 | 50 | 99 | 89 | ||||||||||||
Intangible asset amortization
|
24 | 30 | 49 | 62 | ||||||||||||
Regulatory assessments
|
19 | 30 | 40 | 60 | ||||||||||||
(Reversal of) provision for losses on off-balance sheet
commitments
|
(18 | ) | 1 | (31 | ) | (4 | ) | |||||||||
Other
|
85 | 90 | 214 | 180 | ||||||||||||
Total noninterest expense
|
578 | 584 | 1,193 | 1,109 | ||||||||||||
Income before income taxes and including noncontrolling interests
|
370 | 217 | 715 | 306 | ||||||||||||
Income tax expense
|
131 | 67 | 245 | 82 | ||||||||||||
Net Income including Noncontrolling Interests
|
239 | 150 | 470 | 224 | ||||||||||||
Deduct: Net loss from noncontrolling interests
|
3 | 4 | 7 | 7 | ||||||||||||
Net Income attributable to UnionBanCal Corporation (UNBC)
|
$ | 242 | $ | 154 | $ | 477 | $ | 231 | ||||||||
42
June 30, |
December 31, |
|||||||
(Dollars in millions) | 2011 | 2010 | ||||||
Assets
|
||||||||
Cash and due from banks
|
$ | 1,233 | $ | 946 | ||||
Interest bearing deposits in banks (includes $24 at
June 30, 2011 and $11 at December 31, 2010 related to
consolidated variable interest entities (VIEs))
|
2,477 | 217 | ||||||
Federal funds sold and securities purchased under resale
agreements
|
78 | 11 | ||||||
Total cash and cash equivalents
|
3,788 | 1,174 | ||||||
Trading account assets:
|
||||||||
Pledged as collateral
|
1 | 43 | ||||||
Held in portfolio
|
897 | 956 | ||||||
Securities available for sale:
|
||||||||
Pledged as collateral
|
340 | 10 | ||||||
Held in portfolio
|
17,758 | 20,781 | ||||||
Securities held to maturity (Fair value: June 30, 2011,
$1,610; December 31, 2010, $1,560)
|
1,332 | 1,323 | ||||||
Loans:
|
||||||||
Loans, excluding Federal Deposit Insurance Corporation (FDIC)
covered loans
|
47,718 | 46,584 | ||||||
FDIC covered loans
|
1,249 | 1,510 | ||||||
Total loans held for investment
|
48,967 | 48,094 | ||||||
Allowance for loan losses
|
(826 | ) | (1,191 | ) | ||||
Loans net
|
48,141 | 46,903 | ||||||
Premises and equipment, net
|
686 | 712 | ||||||
Intangible assets
|
407 | 457 | ||||||
Goodwill
|
2,447 | 2,456 | ||||||
FDIC indemnification asset
|
650 | 783 | ||||||
Other assets (includes $272 at June 30, 2011 and $283 at
December 31, 2010 related to consolidated VIEs)
|
3,646 | 3,499 | ||||||
Total assets
|
$ | 80,093 | $ | 79,097 | ||||
Liabilities
|
||||||||
Deposits:
|
||||||||
Noninterest bearing
|
$ | 17,708 | $ | 16,343 | ||||
Interest bearing
|
39,473 | 43,611 | ||||||
Total deposits
|
57,181 | 59,954 | ||||||
Commercial paper and other short-term borrowings
|
2,838 | 1,356 | ||||||
Long-term debt (includes $8 at June 30, 2011 and
December 31, 2010 related to consolidated VIEs)
|
7,069 | 5,598 | ||||||
Trading account liabilities
|
730 | 774 | ||||||
Other liabilities (includes $2 at June 30, 2011 and
December 31, 2010 related to consolidated VIEs)
|
1,338 | 1,024 | ||||||
Total liabilities
|
69,156 | 68,706 | ||||||
Commitments, contingencies and guarantees See
Note 13
|
||||||||
Equity
|
||||||||
UNBC Stockholders Equity:
|
||||||||
Preferred stock:
|
||||||||
Authorized 5,000,000 shares; no shares issued or outstanding
|
| | ||||||
Common stock, par value $1 per share:
|
||||||||
Authorized 300,000,000 shares; 136,330,829 shares
issued
|
136 | 136 | ||||||
Additional paid-in capital
|
5,199 | 5,198 | ||||||
Retained earnings
|
5,945 | 5,468 | ||||||
Accumulated other comprehensive loss
|
(613 | ) | (677 | ) | ||||
Total UNBC stockholders equity
|
10,667 | 10,125 | ||||||
Noncontrolling interests
|
270 | 266 | ||||||
Total equity
|
10,937 | 10,391 | ||||||
Total liabilities and equity
|
$ | 80,093 | $ | 79,097 | ||||
43
UNBC Stockholders Equity | ||||||||||||||||||||||||
Accumulated |
||||||||||||||||||||||||
Additional |
other |
Total |
||||||||||||||||||||||
Common |
paid-in |
Retained |
comprehensive |
Noncontrolling |
stockholders |
|||||||||||||||||||
(Dollars in millions) | stock | capital | earnings | income (loss) | interests | equity | ||||||||||||||||||
BALANCE DECEMBER 31, 2009
|
$ | 136 | $ | 5,195 | $ | 4,900 | $ | (651 | ) | $ | | $ | 9,580 | |||||||||||
Cumulative effect from change in accounting for VIEs
|
272 | 272 | ||||||||||||||||||||||
Comprehensive income:
|
||||||||||||||||||||||||
Net income (loss) For the six months ended
June 30, 2010
|
231 | (7 | ) | 224 | ||||||||||||||||||||
Other comprehensive income (loss), net of tax:
|
||||||||||||||||||||||||
Net change in unrealized gains on cash flow hedges
|
(32 | ) | (32 | ) | ||||||||||||||||||||
Net change in unrealized losses on securities
|
155 | 155 | ||||||||||||||||||||||
Net change in pension and other benefits
|
8 | 8 | ||||||||||||||||||||||
Total comprehensive income, net of tax
|
355 | |||||||||||||||||||||||
Other
|
13 | 13 | ||||||||||||||||||||||
Net change
|
| | 231 | 131 | 278 | 640 | ||||||||||||||||||
BALANCE JUNE 30, 2010
|
$ | 136 | $ | 5,195 | $ | 5,131 | $ | (520 | ) | $ | 278 | $ | 10,220 | |||||||||||
BALANCE DECEMBER 31, 2010
|
$ | 136 | $ | 5,198 | $ | 5,468 | $ | (677 | ) | $ | 266 | $ | 10,391 | |||||||||||
Comprehensive income:
|
||||||||||||||||||||||||
Net income (loss) For the six months ended
June 30, 2011
|
477 | (7 | ) | 470 | ||||||||||||||||||||
Other comprehensive income (loss), net of tax:
|
||||||||||||||||||||||||
Net change in unrealized losses on securities
|
42 | 42 | ||||||||||||||||||||||
Foreign currency translation adjustment
|
1 | 1 | ||||||||||||||||||||||
Net change in pension and other benefits
|
21 | 21 | ||||||||||||||||||||||
Total comprehensive income, net of tax
|
534 | |||||||||||||||||||||||
Compensation expense restricted stock units
|
1 | 1 | ||||||||||||||||||||||
Other
|
11 | 11 | ||||||||||||||||||||||
Net change
|
| 1 | 477 | 64 | 4 | 546 | ||||||||||||||||||
BALANCE JUNE 30, 2011
|
$ | 136 | $ | 5,199 | $ | 5,945 | $ | (613 | ) | $ | 270 | $ | 10,937 | |||||||||||
44
For the Six Months |
||||||||
Ended June 30, | ||||||||
(Dollars in millions) | 2011 | 2010 | ||||||
Cash Flows from Operating Activities:
|
||||||||
Net income including noncontrolling interests
|
$ | 470 | $ | 224 | ||||
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
|
||||||||
(Reversal of) provision for loan losses
|
(196 | ) | 214 | |||||
(Reversal of) provision for losses on off-balance sheet
commitments
|
(31 | ) | (4 | ) | ||||
Depreciation, amortization and accretion, net
|
84 | 130 | ||||||
Stock-based compensation-restricted stock units
|
1 | | ||||||
Deferred income taxes
|
169 | 10 | ||||||
Net gains on sales of securities
|
(57 | ) | (61 | ) | ||||
Net decrease (increase) in trading account assets
|
101 | (394 | ) | |||||
Net decrease (increase) in prepaid expenses
|
(221 | ) | (37 | ) | ||||
Net decrease (increase) in fees and other receivable
|
(216 | ) | (176 | ) | ||||
Net decrease (increase) in other assets
|
301 | (220 | ) | |||||
Net increase (decrease) in accrued expenses
|
(31 | ) | 26 | |||||
Net increase (decrease) in trading account liabilities
|
(44 | ) | 276 | |||||
Net increase (decrease) in other liabilities
|
314 | 11 | ||||||
Loans originated for resale
|
(14 | ) | | |||||
Net proceeds from sale of loans originated for resale
|
15 | | ||||||
Other, net
|
(14 | ) | (4 | ) | ||||
Total adjustments
|
161 | (229 | ) | |||||
Net cash provided by (used in) operating activities
|
631 | (5 | ) | |||||
Cash Flows from Investing Activities:
|
||||||||
Proceeds from sales of securities available for sale
|
3,831 | 2,090 | ||||||
Proceeds from matured and called securities available for sale
|
2,447 | 2,852 | ||||||
Purchases of securities available for sale
|
(3,481 | ) | (3,812 | ) | ||||
Proceeds from matured securities held to maturity
|
46 | 2 | ||||||
Purchases of premises and equipment, net
|
(12 | ) | (40 | ) | ||||
Proceeds from sales of loans
|
140 | 271 | ||||||
Net decrease (increase) in loans
|
(1,289 | ) | 305 | |||||
Proceeds from FDIC loss share agreements
|
96 | | ||||||
Net cash acquired from acquisitions
|
| 272 | ||||||
Other, net
|
(3 | ) | (3 | ) | ||||
Net cash provided by (used in) investing activities
|
1,775 | 1,937 | ||||||
Cash Flows from Financing Activities:
|
||||||||
Net increase (decrease) in deposits
|
(2,773 | ) | (5,135 | ) | ||||
Net increase (decrease) in commercial paper and other short-term
borrowings
|
1,482 | (636 | ) | |||||
Proceeds from issuance of long-term debt
|
2,000 | 1,000 | ||||||
Repayment of long-term debt
|
(513 | ) | (1,019 | ) | ||||
Other, net
|
1 | | ||||||
Change in noncontrolling interests
|
11 | 13 | ||||||
Net cash provided by (used in) financing activities
|
208 | (5,777 | ) | |||||
Net change in cash and cash equivalents
|
2,614 | (3,845 | ) | |||||
Cash and cash equivalents at beginning of period
|
1,174 | 8,226 | ||||||
Effect of exchange rate changes on cash and cash equivalents
|
| 1 | ||||||
Cash and cash equivalents at end of period
|
$ | 3,788 | $ | 4,382 | ||||
Cash Paid During the Period For:
|
||||||||
Interest
|
$ | 173 | $ | 223 | ||||
Income taxes, net
|
84 | 62 | ||||||
Supplemental Schedule of Noncash Investing and Financing
Activities:
|
||||||||
Acquisitions:
|
||||||||
Fair value of assets acquired
|
$ | | $ | 3,226 | ||||
Fair value of liabilities assumed
|
| 3,498 | ||||||
Net transfer of loans held for investment to loans held for sale
|
168 | 277 | ||||||
Transfer of loans held for investment to other real estate owned
assets (OREO)
|
76 | 54 |
45
Note 1 | Basis of Presentation and Nature of Operations |
Note 2 | Recently Issued Accounting Pronouncements That Are Not Yet Adopted |
46
Note 2 | Recently Issued Accounting Pronouncements That Are Not Yet Adopted (Continued) |
Note 3 | Business Combinations |
47
Note 4 | Securities |
June 30, 2011 | ||||||||||||||||
Gross |
Gross |
|||||||||||||||
Amortized |
Unrealized |
Unrealized |
Fair |
|||||||||||||
(Dollars in millions) | Cost | Gains | Losses | Value | ||||||||||||
U.S. government sponsored agencies
|
$ | 5,052 | $ | 50 | $ | | $ | 5,102 | ||||||||
Residential mortgage-backed securities:
|
||||||||||||||||
U.S. government and government sponsored agencies
|
11,063 | 138 | 57 | 11,144 | ||||||||||||
Privately issued
|
893 | 1 | 40 | 854 | ||||||||||||
Commercial mortgage-backed securities
|
488 | 2 | 4 | 486 | ||||||||||||
Asset-backed securities
|
300 | 1 | | 301 | ||||||||||||
Other debt securities
|
186 | 6 | 1 | 191 | ||||||||||||
Equity securities
|
20 | | | 20 | ||||||||||||
Total securities available for sale
|
$ | 18,002 | $ | 198 | $ | 102 | $ | 18,098 | ||||||||
December 31, 2010 | ||||||||||||||||
Gross |
Gross |
|||||||||||||||
Amortized |
Unrealized |
Unrealized |
Fair |
|||||||||||||
(Dollars in millions) | Cost | Gains | Losses | Value | ||||||||||||
U.S. Treasury
|
$ | 150 | $ | | $ | | $ | 150 | ||||||||
U.S. government sponsored agencies
|
6,689 | 75 | | 6,764 | ||||||||||||
Residential mortgage-backed securities:
|
||||||||||||||||
U.S. government and government sponsored agencies
|
12,743 | 138 | 125 | 12,756 | ||||||||||||
Privately issued
|
710 | 4 | 32 | 682 | ||||||||||||
Commercial mortgage-backed securities
|
3 | | 1 | 2 | ||||||||||||
Asset-backed securities
|
240 | | | 240 | ||||||||||||
Other debt securities
|
151 | 6 | | 157 | ||||||||||||
Equity securities
|
40 | 1 | 1 | 40 | ||||||||||||
Total securities available for sale
|
$ | 20,726 | $ | 224 | $ | 159 | $ | 20,791 | ||||||||
June 30, 2011 | ||||||||||||||||||||||||||||
Recognized in Other |
||||||||||||||||||||||||||||
Comprehensive |
Not Recognized in |
|||||||||||||||||||||||||||
Income (OCI) | OCI | |||||||||||||||||||||||||||
Gross |
Gross |
Gross |
Gross |
|||||||||||||||||||||||||
Amortized |
Unrealized |
Unrealized |
Carrying |
Unrealized |
Unrealized |
Fair |
||||||||||||||||||||||
(Dollars in millions) | Cost | Gains | Losses | Value | Gains | Losses | Value | |||||||||||||||||||||
Collateralized loan
obligations (CLOs) |
$ | 1,749 | $ | | $ | 417 | $ | 1,332 | $ | 280 | $ | 2 | $ | 1,610 | ||||||||||||||
48
Note 4 | Securities (Continued) |
December 31, 2010 | ||||||||||||||||||||||||||||
Recognized in |
Not Recognized in |
|||||||||||||||||||||||||||
OCI | OCI | |||||||||||||||||||||||||||
Gross |
Gross |
Gross |
Gross |
|||||||||||||||||||||||||
Amortized |
Unrealized |
Unrealized |
Carrying |
Unrealized |
Unrealized |
Fair |
||||||||||||||||||||||
(Dollars in millions) | Cost | Gains | Losses | Value | Gains | Losses | Value | |||||||||||||||||||||
CLOs
|
$ | 1,778 | $ | | $ | 455 | $ | 1,323 | $ | 238 | $ | 1 | $ | 1,560 | ||||||||||||||
June 30, 2011 | ||||||||
Amortized |
Fair |
|||||||
(Dollars in millions) | Cost | Value | ||||||
Due in one year or less
|
$ | 2,540 | $ | 2,552 | ||||
Due after one year through five years
|
2,981 | 3,030 | ||||||
Due after five years through ten years
|
822 | 851 | ||||||
Due after ten years
|
11,639 | 11,645 | ||||||
No stated maturityequity securities
|
20 | 20 | ||||||
Total securities available for sale
|
$ | 18,002 | $ | 18,098 | ||||
June 30, 2011 | ||||||||||||
Amortized |
Carrying |
Fair |
||||||||||
(Dollars in millions) | Cost | Value | Value | |||||||||
Due after one year through five years
|
$ | 278 | $ | 229 | $ | 276 | ||||||
Due after five years through ten years
|
1,385 | 1,045 | 1,262 | |||||||||
Due after ten years
|
86 | 58 | 72 | |||||||||
Total securities held to maturity
|
$ | 1,749 | $ | 1,332 | $ | 1,610 | ||||||
49
Note 4 | Securities (Continued) |
For the Three Months |
For the Six Months |
|||||||||||||||
Ended June 30, | Ended June 30, | |||||||||||||||
(Dollars in millions) | 2011 | 2010 | 2011 | 2010 | ||||||||||||
Proceeds from sales
|
$ | 1,918 | $ | 1,043 | $ | 3,831 | $ | 2,090 | ||||||||
Gross realized gains
|
29 | 30 | 58 | 65 |
June 30, 2011 | ||||||||||||||||||||||||
Less than 12 months | 12 months or more | Total | ||||||||||||||||||||||
Fair |
Unrealized |
Fair |
Unrealized |
Fair |
Unrealized |
|||||||||||||||||||
(Dollars in millions) | Value | Losses | Value | Losses | Value | Losses | ||||||||||||||||||
Residential mortgage-backed securities:
|
||||||||||||||||||||||||
U.S. government and government sponsored agencies
|
$ | 4,157 | $ | 57 | $ | 65 | $ | | $ | 4,222 | $ | 57 | ||||||||||||
Privately issued
|
494 | 11 | 92 | 29 | 586 | 40 | ||||||||||||||||||
Commercial mortgage-backed securities
|
276 | 3 | 2 | 1 | 278 | 4 | ||||||||||||||||||
Asset-backed securities
|
23 | | | | 23 | | ||||||||||||||||||
Other debt securities
|
25 | 1 | 3 | | 28 | 1 | ||||||||||||||||||
Equity securities
|
4 | | | | 4 | | ||||||||||||||||||
Total securities available for sale
|
$ | 4,979 | $ | 72 | $ | 162 | $ | 30 | $ | 5,141 | $ | 102 | ||||||||||||
December 31, 2010 | ||||||||||||||||||||||||
Less than 12 months | 12 months or more | Total | ||||||||||||||||||||||
Fair |
Unrealized |
Fair |
Unrealized |
Fair |
Unrealized |
|||||||||||||||||||
(Dollars in millions) | Value | Losses | Value | Losses | Value | Losses | ||||||||||||||||||
U.S. government sponsored agencies
|
$ | 240 | $ | | $ | | $ | | $ | 240 | $ | | ||||||||||||
Residential mortgage-backed securities:
|
||||||||||||||||||||||||
U.S. government and government sponsored agencies
|
6,320 | 125 | 35 | | 6,355 | 125 | ||||||||||||||||||
Privately issued
|
140 | 1 | 165 | 31 | 305 | 32 | ||||||||||||||||||
Commercial mortgage-backed securities
|
| | 2 | 1 | 2 | 1 | ||||||||||||||||||
Asset-backed securities
|
110 | | | | 110 | | ||||||||||||||||||
Other debt securities
|
1 | | 20 | | 21 | | ||||||||||||||||||
Equity securities
|
5 | 1 | | | 5 | 1 | ||||||||||||||||||
Total securities available for sale
|
$ | 6,816 | $ | 127 | $ | 222 | $ | 32 | $ | 7,038 | $ | 159 | ||||||||||||
50
Note 4 | Securities (Continued) |
June 30, 2011 | ||||||||||||||||||||||||||||||||||||
Less than 12 months | 12 months or more | Total | ||||||||||||||||||||||||||||||||||
Unrealized Losses | Unrealized Losses | Unrealized Losses | ||||||||||||||||||||||||||||||||||
Fair |
Recognized |
Not Recognized |
Fair |
Recognized |
Not Recognized |
Fair |
Recognized |
Not Recognized |
||||||||||||||||||||||||||||
(Dollars in millions) | Value | in OCI | in OCI | Value | in OCI | in OCI | Value | in OCI | in OCI | |||||||||||||||||||||||||||
CLOs
|
$ | 58 | $ | | $ | 2 | $ | 1,542 | $ | 417 | $ | | $ | 1,600 | $ | 417 | $ | 2 | ||||||||||||||||||
December 31, 2010 | ||||||||||||||||||||||||||||||||||||
Less than 12 months | 12 months or more | Total | ||||||||||||||||||||||||||||||||||
Unrealized Losses | Unrealized Losses | Unrealized Losses | ||||||||||||||||||||||||||||||||||
Fair |
Recognized |
Not Recognized |
Fair |
Recognized |
Not Recognized |
Fair |
Recognized |
Not Recognized |
||||||||||||||||||||||||||||
(Dollars in millions) | Value | in OCI | in OCI | Value | in OCI | in OCI | Value | in OCI | in OCI | |||||||||||||||||||||||||||
CLOs
|
$ | | $ | | $ | | $ | 1,558 | $ | 455 | $ | 1 | $ | 1,558 | $ | 455 | $ | 1 | ||||||||||||||||||
51
Note 4 | Securities (Continued) |
52
Note 5 | Loans and Allowance for Loan Losses |
June 30, |
December 31, |
|||||||
(Dollars in millions) | 2011 | 2010 | ||||||
Loans held for investment, excluding FDIC covered loans:
|
||||||||
Commercial and industrial
|
$ | 15,854 | $ | 15,162 | ||||
Commercial mortgage
|
7,729 | 7,816 | ||||||
Construction
|
1,055 | 1,460 | ||||||
Lease financing
|
701 | 757 | ||||||
Total commercial portfolio
|
25,339 | 25,195 | ||||||
Residential mortgage
|
18,610 | 17,531 | ||||||
Home equity and other consumer loans
|
3,769 | 3,858 | ||||||
Total consumer portfolio
|
22,379 | 21,389 | ||||||
Total loans held for investment, excluding FDIC covered loans
|
47,718 | 46,584 | ||||||
FDIC covered loans
|
1,249 | 1,510 | ||||||
Total loans held for investment
|
48,967 | 48,094 | ||||||
Allowance for loan losses
|
(826 | ) | (1,191 | ) | ||||
Loans held for investment, net
|
$ | 48,141 | $ | 46,903 | ||||
June 30, 2011 | ||||||||||||
Purchased |
Other |
|||||||||||
credit-impaired |
acquired |
|||||||||||
(Dollars in millions) | loans | loans | Total | |||||||||
Commercial and industrial
|
$ | 293 | $ | 39 | $ | 332 | ||||||
Commercial mortgage
|
650 | 12 | 662 | |||||||||
Construction
|
155 | | 155 | |||||||||
Total commercial portfolio
|
1,098 | 51 | 1,149 | |||||||||
Residential mortgage
|
70 | | 70 | |||||||||
Home equity and other consumer loans
|
9 | 21 | 30 | |||||||||
Total consumer portfolio
|
79 | 21 | 100 | |||||||||
Total FDIC covered loans
|
$ | 1,177 | $ | 72 | $ | 1,249 | ||||||
53
Note 5 | Loans and Allowance for Loan Losses (Continued) |
December 31, 2010 | ||||||||||||
Purchased |
Other |
|||||||||||
credit-impaired |
acquired |
|||||||||||
(Dollars in millions) | loans | loans | Total | |||||||||
Commercial and industrial
|
$ | 356 | $ | 77 | $ | 433 | ||||||
Commercial mortgage
|
717 | 16 | 733 | |||||||||
Construction
|
220 | 2 | 222 | |||||||||
Total commercial portfolio
|
1,293 | 95 | 1,388 | |||||||||
Residential mortgage
|
81 | | 81 | |||||||||
Home equity and other consumer loans
|
20 | 21 | 41 | |||||||||
Total consumer portfolio
|
101 | 21 | 122 | |||||||||
Total FDIC covered loans
|
$ | 1,394 | $ | 116 | $ | 1,510 | ||||||
For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||
(Dollars in millions) | 2011 | 2010 | 2011 | 2010 | ||||||||||||
Accretable yield, beginning of period
|
$ | 298 | $ | | $ | 231 | $ | | ||||||||
Additions
|
| 335 | | 335 | ||||||||||||
Accretion
|
(41 | ) | (22 | ) | (78 | ) | (22 | ) | ||||||||
Reclassifications from nonaccretable difference during the period
|
93 | | 197 | | ||||||||||||
Accretable yield, end of period
|
$ | 350 | $ | 313 | $ | 350 | $ | 313 | ||||||||
June 30, |
December 31, |
Acquisition |
||||||||||
(Dollars in millions) | 2011 | 2010 | Date | |||||||||
Total outstanding balance
|
$ | 2,525 | $ | 2,829 | $ | 3,153 | ||||||
Carrying value
|
$ | 1,177 | $ | 1,394 | $ | 1,725 | ||||||
54
Note 5 | Loans and Allowance for Loan Losses (Continued) |
For the Three |
||||||||||||||||||||||||
Months Ended |
||||||||||||||||||||||||
For the Three Months Ended June 30, 2011 | June 30, 2010 | |||||||||||||||||||||||
FDIC |
||||||||||||||||||||||||
covered |
||||||||||||||||||||||||
(Dollars in millions) | Commercial | Consumer | loans | Unallocated | Total | Total | ||||||||||||||||||
Allowance for loan losses, beginning of period
|
$ | 586 | $ | 174 | $ | 23 | $ | 251 | $ | 1,034 | $ | 1,408 | ||||||||||||
(Reversal of) provision for loan losses
|
(24 | ) | | | (68 | ) | (92 | ) | 44 | |||||||||||||||
(Reversal of) provision for FDIC covered loan losses not subject
to FDIC indemnification
|
| | (2 | ) | | (2 | ) | | ||||||||||||||||
Decrease in allowance covered by FDIC indemnification
|
| | (3 | ) | | (3 | ) | | ||||||||||||||||
Loans charged off
|
99 | 23 | 1 | | 123 | 112 | ||||||||||||||||||
Recoveries of loans previously charged off
|
12 | | | | 12 | 18 | ||||||||||||||||||
Allowance for loan losses, end of period
|
$ | 475 | $ | 151 | $ | 17 | $ | 183 | $ | 826 | $ | 1,358 | ||||||||||||
For the Six |
||||||||||||||||||||||||
Months Ended |
||||||||||||||||||||||||
For the Six Months Ended June 30, 2011 | June 30, 2010 | |||||||||||||||||||||||
FDIC |
||||||||||||||||||||||||
covered |
||||||||||||||||||||||||
(Dollars in millions) | Commercial | Consumer | loans | Unallocated | Total | Total | ||||||||||||||||||
Allowance for loan losses, beginning of period
|
$ | 683 | $ | 185 | $ | 25 | $ | 298 | $ | 1,191 | $ | 1,357 | ||||||||||||
(Reversal of) provision for loan losses
|
(92 | ) | 13 | | (115 | ) | (194 | ) | 214 | |||||||||||||||
(Reversal of) provision for FDIC covered loan losses not subject
to FDIC indemnification
|
| | (2 | ) | | (2 | ) | | ||||||||||||||||
Decrease in allowance covered by FDIC indemnification
|
| | (5 | ) | | (5 | ) | | ||||||||||||||||
Loans charged off
|
147 | 48 | 1 | | 196 | 247 | ||||||||||||||||||
Recoveries of loans previously charged off
|
31 | 1 | | | 32 | 34 | ||||||||||||||||||
Allowance for loan losses, end of period
|
$ | 475 | $ | 151 | $ | 17 | $ | 183 | $ | 826 | $ | 1,358 | ||||||||||||
55
Note 5 | Loans and Allowance for Loan Losses (Continued) |
June 30, 2011 | ||||||||||||||||||||
FDIC |
||||||||||||||||||||
covered |
||||||||||||||||||||
(Dollars in millions) | Commercial | Consumer | loans | Unallocated | Total | |||||||||||||||
Allowance for loan losses:
|
||||||||||||||||||||
Individually evaluated for impairment
|
$ | 35 | $ | 9 | $ | 1 | $ | | $ | 45 | ||||||||||
Collectively evaluated for impairment
|
440 | 142 | | 183 | 765 | |||||||||||||||
Purchased credit-impaired loans
|
| | 16 | | 16 | |||||||||||||||
Total allowance for loan losses
|
$ | 475 | $ | 151 | $ | 17 | $ | 183 | $ | 826 | ||||||||||
Loans held for investment:
|
||||||||||||||||||||
Individually evaluated for impairment
|
$ | 355 | $ | 105 | $ | 17 | $ | | $ | 477 | ||||||||||
Collectively evaluated for impairment
|
24,984 | 22,274 | 55 | | 47,313 | |||||||||||||||
Purchased credit-impaired loans
|
| | 1,177 | | 1,177 | |||||||||||||||
Total loans held for investment
|
$ | 25,339 | $ | 22,379 | $ | 1,249 | $ | | $ | 48,967 | ||||||||||
December 31, 2010 | ||||||||||||||||||||
FDIC |
||||||||||||||||||||
covered |
||||||||||||||||||||
(Dollars in millions) | Commercial | Consumer | loans | Unallocated | Total | |||||||||||||||
Allowance for loan losses:
|
||||||||||||||||||||
Individually evaluated for impairment
|
$ | 112 | $ | 8 | $ | | $ | | $ | 120 | ||||||||||
Collectively evaluated for impairment
|
571 | 177 | | 298 | 1,046 | |||||||||||||||
Purchased credit-impaired loans
|
| | 25 | | 25 | |||||||||||||||
Total allowance for loan losses
|
$ | 683 | $ | 185 | $ | 25 | $ | 298 | $ | 1,191 | ||||||||||
Loans held for investment:
|
||||||||||||||||||||
Individually evaluated for impairment
|
$ | 572 | $ | 79 | $ | 26 | $ | | $ | 677 | ||||||||||
Collectively evaluated for impairment
|
24,623 | 21,310 | 90 | | 46,023 | |||||||||||||||
Purchased credit-impaired loans
|
| | 1,394 | | 1,394 | |||||||||||||||
Total loans held for investment
|
$ | 25,195 | $ | 21,389 | $ | 1,510 | $ | | $ | 48,094 | ||||||||||
56
Note 5 | Loans and Allowance for Loan Losses (Continued) |
June 30, |
December 31, |
|||||||
(Dollars in millions) | 2011 | 2010 | ||||||
Commercial and industrial
|
$ | 110 | $ | 115 | ||||
Commercial mortgage
|
230 | 329 | ||||||
Construction
|
47 | 140 | ||||||
Total commercial portfolio
|
387 | 584 | ||||||
Residential mortgage
|
242 | 243 | ||||||
Home equity and other consumer loans
|
23 | 22 | ||||||
Total consumer portfolio
|
265 | 265 | ||||||
Total nonaccrual loans, excluding FDIC covered loans
|
652 | 849 | ||||||
FDIC covered loans
|
72 | 116 | ||||||
Total nonaccrual loans
|
$ | 724 | $ | 965 | ||||
Troubled debt restructured loans that continue to accrue interest
|
$ | 82 | $ | 22 | ||||
Troubled debt restructured nonaccrual loans (included in the
total nonaccrual loans above)
|
$ | 184 | $ | 198 | ||||
June 30 |
December 31, |
|||||||
(Dollars in millions) | 2011 | 2010 | ||||||
Commercial and industrial
|
$ | 20 | $ | 30 | ||||
Commercial mortgage
|
140 | 111 | ||||||
Total commercial portfolio
|
160 | 141 | ||||||
Residential mortgage
|
103 | 79 | ||||||
Home equity and other consumer loans
|
2 | | ||||||
Total consumer portfolio
|
105 | 79 | ||||||
FDIC covered loans
|
1 | | ||||||
Total troubled debt restructured loans
|
$ | 266 | $ | 220 | ||||
57
Note 5 | Loans and Allowance for Loan Losses (Continued) |
June 30, 2011 | ||||||||||||||||||||||||
90 days or |
||||||||||||||||||||||||
Aging Analysis of Loans |
more |
|||||||||||||||||||||||
30 to 89 |
90 days or |
past due |
||||||||||||||||||||||
days past |
more past |
Total past |
and still |
|||||||||||||||||||||
(Dollars in millions) | Current | due | due | due | Total | accruing(1) | ||||||||||||||||||
Commercial and industrial
|
$ | 16,524 | $ | 22 | $ | 9 | $ | 31 | $ | 16,555 | $ | 2 | ||||||||||||
Commercial mortgage
|
7,591 | 83 | 55 | 138 | 7,729 | | ||||||||||||||||||
Construction
|
1,042 | 8 | 5 | 13 | 1,055 | | ||||||||||||||||||
Total commercial portfolio
|
25,157 | 113 | 69 | 182 | 25,339 | 2 | ||||||||||||||||||
Residential mortgage
|
18,258 | 152 | 200 | 352 | 18,610 | | ||||||||||||||||||
Home equity and other consumer loans
|
3,728 | 23 | 18 | 41 | 3,769 | | ||||||||||||||||||
Total consumer portfolio
|
21,986 | 175 | 218 | 393 | 22,379 | | ||||||||||||||||||
Total loans held for investment, excluding FDIC covered loans
|
$ | 47,143 | $ | 288 | $ | 287 | $ | 575 | $ | 47,718 | $ | 2 | ||||||||||||
(1) | Excludes loans totaling $251 million that were 90 days or more past due and still accruing, which consist of FDIC covered loans accounted for in accordance with accounting standards for purchased credit-impaired loans. |
December 31, 2010 | ||||||||||||||||||||||||
90 days or |
||||||||||||||||||||||||
Aging Analysis of Loans |
more |
|||||||||||||||||||||||
30 to 89 |
90 days or |
past due |
||||||||||||||||||||||
days past |
more past |
Total past |
and still |
|||||||||||||||||||||
(Dollars in millions) | Current | due | due | due | Total | accruing(1) | ||||||||||||||||||
Commercial and industrial
|
$ | 15,866 | $ | 22 | $ | 31 | $ | 53 | $ | 15,919 | $ | 2 | ||||||||||||
Commercial mortgage
|
7,695 | 71 | 50 | 121 | 7,816 | | ||||||||||||||||||
Construction
|
1,378 | 41 | 41 | 82 | 1,460 | | ||||||||||||||||||
Total commercial portfolio
|
24,939 | 134 | 122 | 256 | 25,195 | 2 | ||||||||||||||||||
Residential mortgage
|
17,181 | 148 | 202 | 350 | 17,531 | | ||||||||||||||||||
Home equity and other consumer loans
|
3,819 | 20 | 19 | 39 | 3,858 | | ||||||||||||||||||
Total consumer portfolio
|
21,000 | 168 | 221 | 389 | 21,389 | | ||||||||||||||||||
Total loans held for investment, excluding FDIC covered loans
|
$ | 45,939 | $ | 302 | $ | 343 | $ | 645 | $ | 46,584 | $ | 2 | ||||||||||||
(1) | Excludes loans totaling $312 million that were 90 days or more past due and still accruing, which consist of FDIC covered loans accounted for in accordance with accounting standards for purchased credit-impaired loans. |
58
Note 5 | Loans and Allowance for Loan Losses (Continued) |
June 30, 2011 | ||||||||||||||||
Commercial |
Commercial |
|||||||||||||||
(Dollars in millions) | and industrial | Construction | mortgage | Total | ||||||||||||
Pass
|
$ | 14,989 | $ | 761 | $ | 6,351 | $ | 22,101 | ||||||||
Criticized
|
928 | 327 | 1,293 | 2,548 | ||||||||||||
Total
|
$ | 15,917 | $ | 1,088 | $ | 7,644 | $ | 24,649 | ||||||||
December 31, 2010 | ||||||||||||||||
Commercial |
Commercial |
|||||||||||||||
(Dollars in millions) | and industrial | Construction | mortgage | Total | ||||||||||||
Pass
|
$ | 13,982 | $ | 902 | $ | 6,205 | $ | 21,089 | ||||||||
Criticized
|
1,235 | 623 | 1,526 | 3,384 | ||||||||||||
Total
|
$ | 15,217 | $ | 1,525 | $ | 7,731 | $ | 24,473 | ||||||||
June 30, 2011 | ||||||||||||
(Dollars in millions) | Accrual | Nonaccrual | Total | |||||||||
Residential mortgage
|
$ | 18,368 | $ | 242 | $ | 18,610 | ||||||
Home equity and other consumer loans
|
3,746 | 23 | 3,769 | |||||||||
Total consumer portfolio
|
$ | 22,114 | $ | 265 | $ | 22,379 |
December 31, 2010 | ||||||||||||
(Dollars in millions) | Accrual | Nonaccrual | Total | |||||||||
Residential mortgage
|
$ | 17,288 | $ | 243 | $ | 17,531 | ||||||
Home equity and other consumer loans
|
3,836 | 22 | 3,858 | |||||||||
Total consumer portfolio
|
$ | 21,124 | $ | 265 | $ | 21,389 | ||||||
59
Note 5 | Loans and Allowance for Loan Losses (Continued) |
June 30, 2011 | ||||||||||||||||
Home equity and other |
Percentage of |
|||||||||||||||
(Dollars in millions) | Residential mortgage | consumer loans | Total | total | ||||||||||||
FICO scores:
|
||||||||||||||||
720 and above
|
$ | 14,185 | $ | 2,646 | $ | 16,831 | 77 | % | ||||||||
Below 720
|
3,774 | 993 | 4,767 | 21 | ||||||||||||
No FICO
available(1)
|
274 | 77 | 351 | 2 | ||||||||||||
Total
|
$ | 18,233 | $ | 3,716 | $ | 21,949 | 100 | % | ||||||||
(1) | Represents loans for which management was not able to obtain an updated FICO score (e.g., due to recent profile changes). |
June 30, 2011 | ||||||||||||||||||||||||||||
Recorded Investment |
Allowance |
Unpaid principal balance | ||||||||||||||||||||||||||
With an |
Without an |
impaired for |
Average |
With an |
Without an |
|||||||||||||||||||||||
(Dollars in millions) | allowance | allowance | Total | loans | balance | allowance | allowance | |||||||||||||||||||||
Commercial and industrial
|
$ | 104 | $ | 7 | $ | 111 | $ | 21 | $ | 135 | $ | 114 | $ | 50 | ||||||||||||||
Commercial mortgage
|
118 | 103 | 221 | 13 | 251 | 143 | 135 | |||||||||||||||||||||
Construction
|
23 | | 23 | 1 | 77 | 28 | | |||||||||||||||||||||
Total commercial portfolio
|
245 | 110 | 355 | 35 | 463 | 285 | 185 | |||||||||||||||||||||
Residential mortgage
|
103 | | 103 | 8 | 94 | 103 | | |||||||||||||||||||||
Home equity and other consumer loans
|
2 | | 2 | 1 | 1 | 2 | | |||||||||||||||||||||
Total consumer portfolio
|
105 | | 105 | 9 | 95 | 105 | | |||||||||||||||||||||
Total, excluding FDIC covered loans
|
350 | 110 | 460 | 44 | 558 | $ | 390 | 185 | ||||||||||||||||||||
FDIC covered loans
|
2 | 15 | 17 | 1 | 21 | 1 | 26 | |||||||||||||||||||||
Total
|
$ | 352 | $ | 125 | $ | 477 | $ | 45 | $ | 579 | $ | 391 | $ | 211 | ||||||||||||||
60
Note 5 | Loans and Allowance for Loan Losses (Continued) |
December 31, 2010 | ||||||||||||||||||||||||||||
Recorded Investment |
Allowance |
Unpaid principal balance | ||||||||||||||||||||||||||
With an |
Without an |
impaired for |
Average |
With an |
Without an |
|||||||||||||||||||||||
(Dollars in millions) | allowance | allowance | Total | loans | balance | allowance | allowance | |||||||||||||||||||||
Commercial and industrial
|
$ | 110 | $ | 3 | $ | 113 | $ | 31 | $ | 210 | $ | 138 | $ | 10 | ||||||||||||||
Commercial mortgage
|
308 | 12 | 320 | 66 | 434 | 371 | 18 | |||||||||||||||||||||
Construction
|
134 | 5 | 139 | 15 | 301 | 162 | 6 | |||||||||||||||||||||
Total commercial portfolio
|
552 | 20 | 572 | 112 | 945 | 671 | 34 | |||||||||||||||||||||
Residential mortgage
|
79 | | 79 | 8 | 40 | 79 | | |||||||||||||||||||||
Total consumer portfolio
|
79 | | 79 | 8 | 40 | 79 | | |||||||||||||||||||||
Total, excluding FDIC covered loans
|
631 | 20 | 651 | 120 | 985 | $ | 750 | 34 | ||||||||||||||||||||
FDIC covered loans
|
1 | 25 | 26 | | 5 | 11 | 45 | |||||||||||||||||||||
Total
|
$ | 632 | $ | 45 | $ | 677 | $ | 120 | $ | 990 | $ | 761 | $ | 79 | ||||||||||||||
Note 6 | Variable Interest Entities, Private Capital and Other Investments |
61
Note 6 | Variable Interest Entities, Private Capital and Other Investments (Continued) |
June 30, 2011 | ||||||||||||
Maximum |
||||||||||||
Total |
Total |
Exposure to |
||||||||||
(Dollars in millions) | Assets | Liabilities | Loss | |||||||||
LIHC investments
|
$ | 518 | $ | 24 | $ | 681 | ||||||
Renewable energy investments
|
297 | | 297 | |||||||||
Private capital investments
|
123 | | 186 | |||||||||
Total unconsolidated VIEs
|
$ | 938 | $ | 24 | $ | 1,164 | ||||||
June 30, |
December 31, |
|||||||
(Dollars in millions) | 2011 | 2010 | ||||||
Private capital and other investments:
|
||||||||
Renewable energy investments
|
$ | 297 | $ | 300 | ||||
Consolidated VIEs
|
272 | 283 | ||||||
LIHC investmentsunguaranteed
|
341 | 316 | ||||||
LIHC investmentsguaranteed
|
179 | 157 | ||||||
Private capital investmentscost basis
|
89 | 85 | ||||||
Private capital investmentsequity method
|
46 | 40 | ||||||
Total private capital and other investments
|
$ | 1,224 | $ | 1,181 | ||||
62
Note 7 | Employee Pension and Other Postretirement Benefits |
Superannuation, |
||||||||||||||||||||||||
Pension Benefits |
Other Benefits |
SERP (1) and ESBP (2) |
||||||||||||||||||||||
For the Three Months |
For the Three Months |
For the Three Months |
||||||||||||||||||||||
Ended June 30, | Ended June 30, | Ended June 30, | ||||||||||||||||||||||
(Dollars in millions) | 2011 | 2010 | 2011 | 2010 | 2011 | 2010 | ||||||||||||||||||
Components of net periodic benefit cost:
|
||||||||||||||||||||||||
Service tost
|
$ | 15 | $ | 13 | $ | 3 | $ | 2 | $ | 1 | $ | 1 | ||||||||||||
Interest cost
|
25 | 23 | 3 | 3 | 1 | 1 | ||||||||||||||||||
Expected return on plan assets
|
(36 | ) | (36 | ) | (3 | ) | (3 | ) | | | ||||||||||||||
Amortization of transition amount
|
| | | 1 | | | ||||||||||||||||||
Recognized net actuarial loss
|
12 | 4 | 1 | 2 | | | ||||||||||||||||||
Total net periodic benefit cost
|
$ | 16 | $ | 4 | $ | 4 | $ | 5 | $ | 2 | $ | 2 | ||||||||||||
Superannuation, |
||||||||||||||||||||||||
Pension Benefits |
Other Benefits |
SERP (1) and ESBP (2) |
||||||||||||||||||||||
For the Six Months |
For the Six Months |
For the Six Months |
||||||||||||||||||||||
Ended June 30, | Ended June 30, | Ended June 30, | ||||||||||||||||||||||
(Dollars in millions) | 2011 | 2010 | 2011 | 2010 | 2011 | 2010 | ||||||||||||||||||
Components of net periodic benefit cost:
|
||||||||||||||||||||||||
Service cost
|
$ | 29 | $ | 25 | $ | 6 | $ | 5 | $ | 1 | $ | 1 | ||||||||||||
Interest cost
|
49 | 45 | 6 | 6 | 2 | 2 | ||||||||||||||||||
Expected return on plan assets
|
(73 | ) | (72 | ) | (6 | ) | (6 | ) | | | ||||||||||||||
Amortization of transition amount
|
| | | 1 | | | ||||||||||||||||||
Recognized net actuarial loss
|
22 | 7 | 3 | 3 | | | ||||||||||||||||||
Total net periodic benefit cost
|
$ | 27 | $ | 5 | $ | 9 | $ | 9 | $ | 3 | $ | 3 | ||||||||||||
(1) | Supplemental Executives Retirement Plan (SERP) | |
(2) | Executive Supplemental Benefit Plans (ESBP) |
63
Note 8 | Commercial Paper and Other Short-Term Borrowings |
June 30, |
December 31, |
|||||||
(Dollars in millions) | 2011 | 2010 | ||||||
Federal funds purchased and securities sold under repurchase
agreements, with weighted average interest rates of 0.15% at
June 30, 2011 and December 31, 2010
|
$ | 387 | $ | 170 | ||||
Commercial paper, with weighted average interest rates of 0.19%
and 0.22% at June 30, 2011 and December 31, 2010,
respectively
|
1,497 | 745 | ||||||
Other borrowed funds:
|
||||||||
Term federal funds purchased, with weighted average interest
rates of 0.20% and 0.28% at June 30, 2011 and
December 31, 2010, respectively
|
348 | 335 | ||||||
Federal Home Loan Bank advances with a weighted average interest
rate of 0.16% at June 30, 2011
|
500 | | ||||||
All other borrowed funds, with weighted average interest rates
of 0.36% and 1.20% at June 30, 2011 and December 31,
2010, respectively
|
106 | 106 | ||||||
Total commercial paper and other short-term borrowings
|
$ | 2,838 | $ | 1,356 | ||||
64
Note 9 | Long-Term Debt |
June 30, |
December 31, |
|||||||
(Dollars in millions) | 2011 | 2010 | ||||||
Senior debt:
|
||||||||
Fixed and floating rate Federal Home Loan Bank advances with
maturities ranging from December 2011 to February 2016. These
notes bear a combined weighted-average rate of 1.79% at
June 30, 2011 and 1.72% at December 31, 2010
|
$ | 4,000 | $ | 3,000 | ||||
Floating rate notes due March 2011. These notes, which bear
interest at 0.08% above
3-month
LIBOR, had a rate of 0.38% at December 31, 2010
|
| 500 | ||||||
Floating rate notes due March 2012. These notes, which bear
interest at 0.20% above
3-month
LIBOR, had a rate of 0.45% at June 30, 2011 and 0.50% at
December 31, 2010
|
500 | 500 | ||||||
Floating rate notes due June 2014. These notes, which bear
interest at 0.95% above
3-month
LIBOR, had a rate of 1.20% at June 30, 2011
|
300 | | ||||||
Fixed rate 2.125% notes due December 2013
|
399 | 399 | ||||||
Fixed rate 3.0% notes due June 2016
|
698 | | ||||||
Note payable:
|
||||||||
Fixed rate 6.03% notes due July 2014 (related to
consolidated VIE)
|
8 | 8 | ||||||
Subordinated debt:
|
||||||||
Fixed rate 5.25% notes due December 2013
|
417 | 422 | ||||||
Fixed rate 5.95% notes due May 2016
|
747 | 756 | ||||||
Junior subordinated debt payable to subsidiary grantor trust:
|
||||||||
Fixed rate 10.875% notes due March 2030
|
| 10 | ||||||
Fixed rate 10.60% notes due September 2030
|
| 3 | ||||||
Total long-term debt
|
$ | 7,069 | $ | 5,598 | ||||
65
Note 9 | Long-Term Debt (Continued) |
Note 10 | Fair Value Measurement and Fair Value of Financial Instruments |
66
Note 10 | Fair Value Measurement and Fair Value of Financial Instruments (Continued) |
June 30, 2011 | ||||||||||||||||||||
Netting |
Fair |
|||||||||||||||||||
(Dollars in millions) | Level 1 | Level 2 | Level 3 | Adjustment(1) | Value | |||||||||||||||
Assets
|
||||||||||||||||||||
Trading account assets:
|
||||||||||||||||||||
U.S. Treasury
|
$ | 1 | $ | | $ | | $ | | $ | 1 | ||||||||||
U.S. government sponsored agencies
|
110 | | | | 110 | |||||||||||||||
State and municipal
|
| 62 | | | 62 | |||||||||||||||
Commercial paper
|
| 10 | | | 10 | |||||||||||||||
Foreign exchange derivative contracts
|
1 | 40 | | (16 | ) | 25 | ||||||||||||||
Commodity derivative contracts
|
| 238 | | (136 | ) | 102 | ||||||||||||||
Interest rate derivative contracts
|
| 595 | | (84 | ) | 511 | ||||||||||||||
Equity derivative contracts
|
| 77 | | | 77 | |||||||||||||||
Total trading account assets
|
112 | 1,022 | | (236 | ) | 898 | ||||||||||||||
Securities available for sale:
|
||||||||||||||||||||
U.S. government sponsored agencies
|
5,102 | | | | 5,102 | |||||||||||||||
Residential mortgage-backed securities:
|
||||||||||||||||||||
U.S government and government sponsored agencies
|
| 11,144 | | | 11,144 | |||||||||||||||
Privately issued
|
| 854 | | | 854 | |||||||||||||||
Commercial mortgage-backed securities
|
| 486 | | | 486 | |||||||||||||||
Asset-backed securities
|
| 301 | | | 301 | |||||||||||||||
Other debt securities
|
| 144 | 47 | | 191 | |||||||||||||||
Equity securities
|
19 | | 1 | | 20 | |||||||||||||||
Total securities available for sale
|
5,121 | 12,929 | 48 | | 18,098 | |||||||||||||||
Other assets:
|
||||||||||||||||||||
Interest rate hedging contracts
|
| 2 | | (2 | ) | | ||||||||||||||
Total other assets
|
| 2 | | (2 | ) | | ||||||||||||||
Total assets
|
$ | 5,233 | $ | 13,953 | $ | 48 | $ | (238 | ) | $ | 18,996 | |||||||||
Percentage of Total
|
28 | % | 73 | % | | (1 | )% | 100 | % | |||||||||||
Percentage of Total Company Assets
|
7 | % | 17 | % | | | 24 | % | ||||||||||||
Liabilities
|
||||||||||||||||||||
Trading account liabilities:
|
||||||||||||||||||||
Foreign exchange derivative contracts
|
$ | 1 | $ | 43 | $ | | $ | (7 | ) | $ | 37 | |||||||||
Commodity derivative contracts
|
| 229 | | (56 | ) | 173 | ||||||||||||||
Interest rate derivative contracts
|
5 | 540 | | (173 | ) | 372 | ||||||||||||||
Equity derivative contracts
|
| 77 | | | 77 | |||||||||||||||
Other derivative contracts
|
| | 8 | | 8 | |||||||||||||||
Securities sold, not yet purchased
|
63 | | | | 63 | |||||||||||||||
Total trading account liabilities
|
69 | 889 | 8 | (236 | ) | 730 | ||||||||||||||
Other liabilities
|
| 4 | 41 | (1 | ) | 44 | ||||||||||||||
Total liabilities
|
$ | 69 | $ | 893 | $ | 49 | $ | (237 | ) | $ | 774 | |||||||||
Percentage of Total
|
9 | % | 116 | % | 6 | % | (31 | )% | 100 | % | ||||||||||
Percentage of Total Company Liabilities
|
| 1 | % | | | 1 | % |
(1) | Amounts represent the impact of legally enforceable master netting agreements between the same counterparties that allow the Company to net settle all contracts. |
67
Note 10 | Fair Value Measurement and Fair Value of Financial Instruments (Continued) |
December 31, 2010 | ||||||||||||||||||||
Netting |
Fair |
|||||||||||||||||||
(Dollars in millions) | Level 1 | Level 2 | Level 3 | Adjustment(1) | Value | |||||||||||||||
Assets
|
||||||||||||||||||||
Trading account assets:
|
||||||||||||||||||||
U.S. Treasury
|
$ | 43 | $ | | $ | | $ | | $ | 43 | ||||||||||
U.S. government sponsored agencies
|
68 | | | | 68 | |||||||||||||||
State and municipal
|
| 42 | | | 42 | |||||||||||||||
Commercial paper
|
| 34 | | | 34 | |||||||||||||||
Foreign exchange derivative contracts
|
1 | 42 | | (10 | ) | 33 | ||||||||||||||
Commodity derivative contracts
|
| 234 | | (58 | ) | 176 | ||||||||||||||
Interest rate derivative contracts
|
3 | 593 | | (42 | ) | 554 | ||||||||||||||
Equity derivative contracts
|
| 50 | | (1 | ) | 49 | ||||||||||||||
Total trading account assets
|
115 | 995 | | (111 | ) | 999 | ||||||||||||||
Securities available for sale:
|
||||||||||||||||||||
U.S. Treasury
|
150 | | | | 150 | |||||||||||||||
U.S. government sponsored agencies
|
6,764 | | | | 6,764 | |||||||||||||||
Residential mortgage-backed securities:
|
||||||||||||||||||||
U.S government and government sponsored agencies
|
| 12,756 | | | 12,756 | |||||||||||||||
Privately issued
|
| 682 | | | 682 | |||||||||||||||
Commercial mortgage-backed securities
|
| 2 | | | 2 | |||||||||||||||
Asset-backed securities
|
| 240 | | | 240 | |||||||||||||||
Other debt securities
|
150 | 7 | 157 | |||||||||||||||||
Equity securities
|
39 | | 1 | | 40 | |||||||||||||||
Total securities available for sale
|
6,953 | 13,830 | 8 | | 20,791 | |||||||||||||||
Other assets:
|
||||||||||||||||||||
Interest rate hedging contracts
|
| 21 | | (2 | ) | 19 | ||||||||||||||
Total other assets
|
| 21 | | (2 | ) | 19 | ||||||||||||||
Total assets
|
$ | 7,068 | $ | 14,846 | $ | 8 | $ | (113 | ) | $ | 21,809 | |||||||||
Percentage of Total
|
33 | % | 68 | % | | (1 | )% | 100 | % | |||||||||||
Percentage of Total Company Assets
|
9 | % | 19 | % | | | 28 | % | ||||||||||||
Liabilities
|
||||||||||||||||||||
Trading account liabilities:
|
||||||||||||||||||||
Foreign exchange derivative contracts
|
$ | 1 | $ | 48 | $ | | $ | (13 | ) | $ | 36 | |||||||||
Commodity derivative contracts
|
| 233 | | (51 | ) | 182 | ||||||||||||||
Interest rate derivative contracts
|
| 551 | | (60 | ) | 491 | ||||||||||||||
Equity derivative contracts
|
| 50 | | | 50 | |||||||||||||||
Other derivative contracts
|
| | 14 | | 14 | |||||||||||||||
Securities sold, not yet purchased
|
1 | | | | 1 | |||||||||||||||
Total trading account liabilities
|
2 | 882 | 14 | (124 | ) | 774 | ||||||||||||||
Other liabilities
|
| | 36 | 36 | ||||||||||||||||
Total liabilities
|
$ | 2 | $ | 882 | $ | 50 | $ | (124 | ) | $ | 810 | |||||||||
Percentage of Total
|
| 109 | % | 6 | % | (15 | )% | 100 | % | |||||||||||
Percentage of Total Company Liabilities
|
| 1 | % | | | 1 | % |
(1) | Amounts represent the impact of legally enforceable master netting agreements between the same counterparties that allow the Company to net settle all contracts. |
68
Note 10 | Fair Value Measurement and Fair Value of Financial Instruments (Continued) |
For the Three Months Ended | ||||||||||||||||||||
June 30, 2011 | June 30, 2010 | |||||||||||||||||||
Securities |
Securities |
|||||||||||||||||||
Available for |
Trading |
Other |
Available for |
Other |
||||||||||||||||
(Dollars in millions) | Sale | Liabilities | Liabilities | Sale | Liabilities | |||||||||||||||
Asset (liability) balance, beginning of period
|
$ | 49 | $ | (10 | ) | $ | (47 | ) | $ | 8 | $ | | ||||||||
Total gains (losses) (realized/unrealized):
|
||||||||||||||||||||
Included in income before taxes
|
| 2 | 6 | | | |||||||||||||||
Included in other comprehensive income
|
(1 | ) | | | | | ||||||||||||||
Purchases/additions
|
| | | 1 | (42 | ) | ||||||||||||||
Sales
|
| | | | | |||||||||||||||
Asset (liability) balance, end of period
|
$ | 48 | $ | (8 | ) | $ | (41 | ) | $ | 9 | $ | (42 | ) | |||||||
Changes in unrealized losses included in income before taxes for
assets and liabilities still held at end of period
|
$ | | $ | (2 | ) | $ | (6 | ) | $ | | $ | |
For the Six Months Ended | ||||||||||||||||||||
June 30, 2011 | June 30, 2010 | |||||||||||||||||||
Securities |
Securities |
|||||||||||||||||||
Available for |
Trading |
Other |
Available for |
Other |
||||||||||||||||
(Dollars in millions) | Sale | Liabilities | Liabilities | Sale | Liabilities | |||||||||||||||
Asset (liability) balance, beginning of period
|
$ | 8 | $ | (14 | ) | $ | (36 | ) | $ | 7 | $ | | ||||||||
Total gains (losses) (realized/unrealized):
|
||||||||||||||||||||
Included in income before taxes
|
| 6 | (5 | ) | | | ||||||||||||||
Included in other comprehensive income
|
(1 | ) | | | | | ||||||||||||||
Purchases/additions
|
42 | | | 2 | (42 | ) | ||||||||||||||
Sales
|
(1 | ) | | | | | ||||||||||||||
Asset (liability) balance, end of period
|
$ | 48 | $ | (8 | ) | $ | (41 | ) | $ | 9 | $ | (42 | ) | |||||||
Changes in unrealized losses included in income before taxes for
assets and liabilities still held at end of period
|
$ | | $ | (6 | ) | $ | 5 | $ | | $ | |
69
Note 10 | Fair Value Measurement and Fair Value of Financial Instruments (Continued) |
Loss for the |
Loss for the |
|||||||||||||||||||||||
June 30, 2011 |
Three Months Ended |
Six Months Ended |
||||||||||||||||||||||
Carrying |
June 30, |
June 30, |
||||||||||||||||||||||
(Dollars in millions) | Value | Level 1 | Level 2 | Level 3 | 2011 | 2011 | ||||||||||||||||||
Loans:
|
||||||||||||||||||||||||
Impaired loans
|
$ | 254 | $ | | $ | | $ | 254 | $ | (5 | ) | $ | (51 | ) | ||||||||||
Other assets:
|
||||||||||||||||||||||||
OREO
|
103 | | | 103 | (9 | ) | (19 | ) | ||||||||||||||||
Total
|
$ | 357 | $ | | $ | | $ | 357 | $ | (14 | ) | $ | (70 | ) | ||||||||||
Loss for the |
Loss for the |
|||||||||||||||||||||||
June 30, 2010 |
Three Months Ended |
Six Months Ended |
||||||||||||||||||||||
Carrying |
June 30, |
June 30, |
||||||||||||||||||||||
(Dollars in millions) | Value | Level 1 | Level 2 | Level 3 | 2010 | 2010 | ||||||||||||||||||
Loans:
|
||||||||||||||||||||||||
Impaired loans
|
$ | 662 | $ | | $ | | $ | 662 | $ | (9 | ) | $ | (24 | ) | ||||||||||
Other assets:
|
||||||||||||||||||||||||
OREO
|
35 | | | 35 | (1 | ) | (2 | ) | ||||||||||||||||
Private equity investments
|
10 | | | 10 | (2 | ) | (4 | ) | ||||||||||||||||
Total
|
$ | 707 | $ | | $ | | $ | 707 | $ | (12 | ) | $ | (30 | ) | ||||||||||
70
Note 10 | Fair Value Measurement and Fair Value of Financial Instruments (Continued) |
June 30, 2011 | December 31, 2010 | |||||||||||||||
Carrying |
Fair |
Carrying |
Fair |
|||||||||||||
(Dollars in millions) | Value | Value | Value | Value | ||||||||||||
Assets
|
||||||||||||||||
Securities held to maturity
|
$ | 1,332 | $ | 1,610 | $ | 1,323 | $ | 1,560 | ||||||||
Loans held for investment, net of allowance for loan
losses(1)
|
47,447 | 47,626 | 46,164 | 46,231 | ||||||||||||
FDIC indemnification asset
|
650 | 551 | 783 | 750 | ||||||||||||
Liabilities
|
||||||||||||||||
Interest bearing deposits
|
39,473 | 39,643 | 43,611 | 43,610 | ||||||||||||
Commercial paper and other short-term borrowings
|
2,838 | 2,838 | 1,356 | 1,356 | ||||||||||||
Long-term debt
|
7,069 | 7,211 | 5,598 | 5,669 |
(1) | Excludes lease financing, net of related allowance. |
Note 11 | Derivative Instruments and Other Financial Instruments Used For Hedging |
71
June 30, 2011 | ||||||||||||||||
Asset Derivatives | Liability Derivatives | |||||||||||||||
Notional |
Balance Sheet |
Fair |
Balance Sheet |
Fair |
||||||||||||
(Dollars in millions) | Amount | Location | Value | Location | Value | |||||||||||
Total derivatives designated as hedging instruments:
|
||||||||||||||||
Interest rate contracts
|
$ | 5,150 | Other assets | $ | 2 | Other liabilities | $ | 4 | ||||||||
Derivatives not designated as hedging instruments:
|
||||||||||||||||
Interest rate contracts
|
$ | 30,414 | Trading account assets | $ | 595 | Trading account liabilities | $ | 545 | ||||||||
Commodity contracts
|
4,916 | Trading account assets | 238 | Trading account liabilities | 229 | |||||||||||
Foreign exchange contracts
|
3,776 | Trading account assets | 41 | Trading account liabilities | 44 | |||||||||||
Equity contracts
|
2,144 | Trading account assets | 77 | Trading account liabilities | 77 | |||||||||||
Other contracts
|
60 | | Trading account liabilities | 8 | ||||||||||||
Total derivatives not designated as hedging instruments
|
$ | 41,310 | $ | 951 | $ | 903 | ||||||||||
Total derivative instruments
|
$ | 46,460 | $ | 953 | $ | 907 | ||||||||||
December 31, 2010 | ||||||||||||||||
Asset Derivatives | Liability Derivatives | |||||||||||||||
Notional |
Balance Sheet |
Fair |
Balance Sheet |
Fair |
||||||||||||
(Dollars in millions) | Amount | Location | Value | Location | Value | |||||||||||
Total derivatives designated as hedging instruments:
|
||||||||||||||||
Interest rate contracts
|
$ | 5,500 | Other assets | $ | 21 | Other liabilities | $ | | ||||||||
Derivatives not designated as hedging instruments:
|
||||||||||||||||
Interest rate contracts
|
$ | 28,820 | Trading account assets | $ | 596 | Trading account liabilities | $ | 551 | ||||||||
Commodity contracts
|
4,679 | Trading account assets | 234 | Trading account liabilities | 233 | |||||||||||
Foreign exchange contracts
|
3,011 | Trading account assets | 43 | Trading account liabilities | 49 | |||||||||||
Equity contracts
|
1,313 | Trading account assets | 50 | Trading account liabilities | 50 | |||||||||||
Other contracts
|
60 | | Trading account liabilities | 14 | ||||||||||||
Total derivatives not designated as hedging instruments
|
$ | 37,883 | $ | 923 | $ | 897 | ||||||||||
Total derivative instruments
|
$ | 43,383 | $ | 944 | $ | 897 | ||||||||||
72
73
Amount of Gain or |
Gain or (Loss) Recognized in |
|||||||||||||||||||||||||||
(Loss) Recognized in |
Income on Derivative |
|||||||||||||||||||||||||||
OCI on Derivative |
Gain or (Loss) Reclassified |
Instruments (Ineffective |
||||||||||||||||||||||||||
Instruments |
from Accumulated OCI |
Portion and Amount Excluded |
||||||||||||||||||||||||||
(Effective Portion) | into Income (Effective Portion) | from Effectiveness Testing) | ||||||||||||||||||||||||||
For the Three Months |
For the Three Months |
For the Three Months |
||||||||||||||||||||||||||
Ended June 30, | Ended June 30, | Ended June 30, | ||||||||||||||||||||||||||
(Dollars in millions) | 2011 | 2010 | Location | 2011 | 2010 | Location | 2011 | 2010 | ||||||||||||||||||||
Derivatives in cash flow hedging relationships
|
||||||||||||||||||||||||||||
Interest income | $ | (3 | ) | $ | 17 | |||||||||||||||||||||||
Interest rate contracts
|
$ | (12 | ) | $ | (13 | ) | Interest expense | (1 | ) | | Noninterest expense(1) | $ | | $ | | |||||||||||||
Total
|
$ | (12 | ) | $ | (13 | ) | $ | (4 | ) | $ | 17 | $ | | $ | | |||||||||||||
Amount of Gain or |
Gain or (Loss) Recognized in |
|||||||||||||||||||||||||||
(Loss) Recognized in |
Income on Derivative |
|||||||||||||||||||||||||||
OCI on Derivative |
Gain or (Loss) Reclassified |
Instruments (Ineffective |
||||||||||||||||||||||||||
Instruments |
from Accumulated OCI |
Portion and Amount Excluded |
||||||||||||||||||||||||||
(Effective Portion) | into Income (Effective Portion) | from Effectiveness Testing) | ||||||||||||||||||||||||||
For the Six Months |
For the Six Months |
For the Six Months |
||||||||||||||||||||||||||
Ended June 30, | Ended June 30, | Ended June 30, | ||||||||||||||||||||||||||
(Dollars in millions) | 2011 | 2010 | Location | 2011 | 2010 | Location | 2011 | 2010 | ||||||||||||||||||||
Derivatives in cash flow hedging relationships
|
||||||||||||||||||||||||||||
Interest income | $ | (4 | ) | $ | 37 | |||||||||||||||||||||||
Interest rate contracts
|
$ | (7 | ) | $ | (15 | ) | Interest expense | (2 | ) | | Noninterest expense(1) | $ | | $ | | |||||||||||||
Total
|
$ | (7 | ) | $ | (15 | ) | $ | (6 | ) | $ | 37 | $ | | $ | | |||||||||||||
(1) | Amounts recognized were less than $1 million. |
74
Gain or (Loss) Recognized in Income on Derivative Instruments | ||||||||||||||||||
For the Three Months Ended | For the Six Months Ended | |||||||||||||||||
June 30, |
June 30, |
June 30, |
June 30, |
|||||||||||||||
(Dollars in millions) | Location | 2011 | 2010 | 2011 | 2010 | |||||||||||||
Trading Derivatives:
|
||||||||||||||||||
Interest rate contracts
|
Trading account activities | $ | 8 | $ | 5 | $ | 19 | $ | 8 | |||||||||
Equity contracts
|
Trading account activities | 5 | 3 | 13 | 6 | |||||||||||||
Foreign exchange contracts
|
Trading account activities | 7 | 8 | 13 | 17 | |||||||||||||
Commodity contracts
|
Trading account activities | 3 | 3 | 2 | 5 | |||||||||||||
Other contracts
|
Trading account activities | 2 | | 6 | | |||||||||||||
Total
|
$ | 25 | $ | 19 | $ | 53 | $ | 36 | ||||||||||
75
Note 12 | Accumulated Other Comprehensive Loss |
Before |
||||||||||||
Tax |
Tax |
Net of |
||||||||||
(Dollars in millions) | Amount | Effect | Tax | |||||||||
For the Six Months Ended June 30, 2010:
|
||||||||||||
Cash flow hedge activities:
|
||||||||||||
Unrealized net losses on hedges arising during the period
|
$ | (15 | ) | $ | 6 | $ | (9 | ) | ||||
Less: accretion of fair value adjustment
|
2 | (1 | ) | 1 | ||||||||
Less: reclassification adjustment for net gains on hedges
included in net income
|
(39 | ) | 15 | (24 | ) | |||||||
Net change in unrealized gains on hedges
|
(52 | ) | 20 | (32 | ) | |||||||
Securities:
|
||||||||||||
Unrealized holding gains arising during the period on securities
available for sale
|
285 | (112 | ) | 173 | ||||||||
Reclassification adjustment for net gains on securities
available for sale included in net income
|
(61 | ) | 24 | (37 | ) | |||||||
Less: accretion of fair value adjustment on securities available
for sale
|
(1 | ) | | (1 | ) | |||||||
Less: accretion of fair value adjustment on
held-to-maturity
securities
|
(13 | ) | 5 | (8 | ) | |||||||
Less: accretion of net unrealized losses on held to maturity
securities
|
45 | (17 | ) | 28 | ||||||||
Net change in unrealized losses on securities
|
255 | (100 | ) | 155 | ||||||||
Reclassification adjustment for pension and other benefits
included in net income:
|
||||||||||||
Amortization of transition amount
|
1 | | 1 | |||||||||
Recognized net actuarial loss
|
10 | (3 | ) | 7 | ||||||||
Net change in pension and other benefits
|
11 | (3 | ) | 8 | ||||||||
Net change in accumulated other comprehensive loss
|
$ | 214 | $ | (83 | ) | $ | 131 | |||||
For the Six Months Ended June 30, 2011:
|
||||||||||||
Cash flow hedge activities:
|
||||||||||||
Unrealized net losses on hedges arising during the period
|
$ | (7 | ) | $ | 3 | $ | (4 | ) | ||||
Less: reclassification adjustment for net losses on hedges
included in net income
|
6 | (2 | ) | 4 | ||||||||
Net change in unrealized losses on hedges
|
(1 | ) | 1 | | ||||||||
Securities:
|
||||||||||||
Unrealized holding gains arising during the period on securities
available for sale
|
92 | (36 | ) | 56 | ||||||||
Reclassification adjustment for net gains on securities
available for sale included in net income
|
(57 | ) | 22 | (35 | ) | |||||||
Less: accretion of fair value adjustment on securities available
for sale
|
(4 | ) | 1 | (3 | ) | |||||||
Less: accretion of fair value adjustment on held to maturity
securities
|
(14 | ) | 6 | (8 | ) | |||||||
Less: accretion of net unrealized losses on held to maturity
securities
|
52 | (20 | ) | 32 | ||||||||
Net change in unrealized losses on securities
|
69 | (27 | ) | 42 | ||||||||
Foreign currency translation adjustment
|
2 | (1 | ) | 1 | ||||||||
Reclassification adjustment for pension and other benefits
included in net income:
|
||||||||||||
Amortization of transition amount
|
1 | | 1 | |||||||||
Recognized net actuarial loss
|
25 | (10 | ) | 15 | ||||||||
Pension and other benefits
|
9 | (4 | ) | 5 | ||||||||
Net change in pension and other benefits
|
35 | (14 | ) | 21 | ||||||||
Net change in accumulated other comprehensive loss
|
$ | 105 | $ | (41 | ) | $ | 64 | |||||
76
Note 12 | Accumulated Other Comprehensive Loss (Continued) |
Net |
||||||||||||||||||||
Unrealized |
||||||||||||||||||||
Gains (Losses) |
Net |
Foreign |
Pension |
Accumulated |
||||||||||||||||
on Cash |
Unrealized |
Currency |
and Other |
Other |
||||||||||||||||
Flow |
Gains (Losses) |
Translation |
Benefits |
Comprehensive |
||||||||||||||||
(Dollars in millions) | Hedges | on Securities | Adjustment | Adjustment | Loss | |||||||||||||||
Balance, December 31, 2009
|
$ | 19 | $ | (296 | ) | $ | | $ | (374 | ) | $ | (651 | ) | |||||||
Change during the period
|
(32 | ) | 155 | | 8 | 131 | ||||||||||||||
Balance, June 30, 2010
|
$ | (13 | ) | $ | (141 | ) | $ | | $ | (366 | ) | $ | (520 | ) | ||||||
Balance, December 31, 2010
|
$ | (21 | ) | $ | (238 | ) | $ | 1 | $ | (419 | ) | $ | (677 | ) | ||||||
Change during the period
|
| 42 | 1 | 21 | 64 | |||||||||||||||
Balance, June 30, 2011
|
$ | (21 | ) | $ | (196 | ) | $ | 2 | $ | (398 | ) | $ | (613 | ) | ||||||
Note 13 | Commitments, Contingencies and Guarantees |
June 30, |
||||
(Dollars in millions) | 2011 | |||
Commitments to extend credit
|
$ | 23,394 | ||
Standby letters of credit
|
5,362 | |||
Commercial letters of credit
|
64 | |||
Commitments to fund principal investments
|
63 | |||
Commitments to fund LIHC investments
|
164 | |||
Commitments to fund CLO securities
|
14 |
77
Note 13 | Commitments, Contingencies and Guarantees (Continued) |
78
Note 13 | Commitments, Contingencies and Guarantees (Continued) |
Note 14 | Business Segments |
| Retail Banking offers a range of banking products and services, primarily to individuals and small businesses, delivered generally through a network of branches and ATMs located in the western U.S. and telephone and internet access 24-hours-a-day. These products offered include mortgages, home equity lines of credit, consumer and commercial loans, and deposit accounts. | |
| Corporate Banking provides credit, depository and cash management services, investment and risk management products to businesses, individuals and target specialty niches. Services include commercial and project loans, real estate financing, asset-based financing, trade finance and letters of credit, lease financing, customized cash management services and capital markets products, as well as trust, private banking, investment and asset management services for individuals and institutions. |
| A funds transfer pricing system, which assigns a cost of funds or a credit for funds to assets or liabilities based on their type, maturity or repricing characteristics. During the first quarter of 2011, the Company refined its transfer pricing methodology for non-maturity deposits to reflect expected balance run-off and average life assumptions. |
79
Note 14 | Business Segments (Continued) |
| An activity-based costing methodology, in which certain indirect costs, such as operations and technology expense, are allocated to the segments based on studies of billable unit costs for product or data processing. Other indirect costs, such as corporate overhead, are allocated to the segments based on a predetermined percentage of usage. | |
| A RAROC methodology, in which credit expense is charged to an operating segment based upon expected losses arising from credit risk. In addition, the attribution of economic capital is related to unexpected losses arising from credit and operational risks and, to a lesser extent, market risk. As a result of the methodology used in the RAROC model to calculate expected losses, differences between the provision for credit losses and credit expense in any one period could be significant. However, over an economic cycle, the cumulative provision for credit losses and credit expense for expected losses should be substantially the same. |
Retail Banking | Corporate Banking | |||||||||||||||
As of and For the |
As of and for the |
|||||||||||||||
Three Months Ended June 30, | Three Months Ended June 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Results of operationsMarket View (dollars in
millions):
|
||||||||||||||||
Net interest income (expense)
|
$ | 275 | $ | 246 | $ | 308 | $ | 304 | ||||||||
Noninterest income (expense)
|
72 | 74 | 155 | 143 | ||||||||||||
Total revenue
|
347 | 320 | 463 | 447 | ||||||||||||
Noninterest expense (income)
|
267 | 231 | 249 | 239 | ||||||||||||
Credit expense (income)
|
7 | 7 | 49 | 73 | ||||||||||||
Income (loss) before income taxes and including noncontrolling
interests
|
73 | 82 | 165 | 135 | ||||||||||||
Income tax expense (benefit)
|
29 | 32 | 38 | 29 | ||||||||||||
Net income (loss) including noncontrolling interests
|
44 | 50 | 127 | 106 | ||||||||||||
Deduct: Net loss from noncontrolling interests
|
| | | | ||||||||||||
Net income (loss) attributable to UNBC
|
$ | 44 | $ | 50 | $ | 127 | $ | 106 | ||||||||
Total assets, end of periodMarket View (dollars in
millions):
|
$ | 24,266 | $ | 22,989 | $ | 30,724 | $ | 30,974 | ||||||||
80
Note 14 | Business Segments (Continued) |
Other | Reconciling Items | |||||||||||||||
As of and For the |
As of and For the |
|||||||||||||||
Three Months Ended June 30, | Three Months Ended June 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Results of operationsMarket View (dollars in
millions):
|
||||||||||||||||
Net interest income (expense)
|
$ | 51 | $ | 64 | $ | (20 | ) | $ | (13 | ) | ||||||
Noninterest income (expense)
|
33 | 45 | (20 | ) | (18 | ) | ||||||||||
Total revenue
|
84 | 109 | (40 | ) | (31 | ) | ||||||||||
Noninterest expense (income)
|
77 | 128 | (15 | ) | (14 | ) | ||||||||||
Credit expense (income)
|
(150 | ) | (36 | ) | | | ||||||||||
Income (loss) before income taxes and including noncontrolling
interests
|
157 | 17 | (25 | ) | (17 | ) | ||||||||||
Income tax expense (benefit)
|
74 | 13 | (10 | ) | (7 | ) | ||||||||||
Net income (loss) including noncontrolling interests
|
83 | 4 | (15 | ) | (10 | ) | ||||||||||
Deduct: Net loss from noncontrolling interests
|
3 | 4 | | | ||||||||||||
Net income (loss) attributable to UNBC
|
$ | 86 | $ | 8 | $ | (15 | ) | $ | (10 | ) | ||||||
Total assets, end of periodMarket View (dollars in
millions):
|
$ | 27,234 | $ | 32,285 | $ | (2,131 | ) | $ | (1,938 | ) | ||||||
UnionBanCal |
||||||||
Corporation | ||||||||
As of and For the |
||||||||
Three Months Ended June 30, | ||||||||
2011 | 2010 | |||||||
Results of operationsMarket View (dollars in
millions):
|
||||||||
Net interest income (expense)
|
$ | 614 | $ | 601 | ||||
Noninterest income (expense)
|
240 | 244 | ||||||
Total revenue
|
854 | 845 | ||||||
Noninterest expense (income)
|
578 | 584 | ||||||
Credit expense (income)
|
(94 | ) | 44 | |||||
Income (loss) before income taxes and including noncontrolling
interests
|
370 | 217 | ||||||
Income tax expense (benefit)
|
131 | 67 | ||||||
Net income (loss) including noncontrolling interests
|
239 | 150 | ||||||
Deduct: Net loss from noncontrolling interests
|
3 | 4 | ||||||
Net income (loss) attributable to UNBC
|
$ | 242 | $ | 154 | ||||
Total assets, end of periodMarket View (dollars in
millions):
|
$ | 80,093 | $ | 84,310 | ||||
81
Note 14 | Business Segments (Continued) |
Retail Banking | Corporate Banking | |||||||||||||||
As of and For the |
As of and For the |
|||||||||||||||
Six Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Results of operations Market View (dollars in
millions):
|
||||||||||||||||
Net interest income (expense)
|
$ | 540 | $ | 474 | $ | 615 | $ | 599 | ||||||||
Noninterest income (expense)
|
137 | 140 | 285 | 258 | ||||||||||||
Total revenue
|
677 | 614 | 900 | 857 | ||||||||||||
Noninterest expense (income)
|
529 | 447 | 478 | 474 | ||||||||||||
Credit expense (income)
|
13 | 13 | 101 | 151 | ||||||||||||
Income (loss) before income taxes and including noncontrolling
interests
|
135 | 154 | 321 | 232 | ||||||||||||
Income tax expense (benefit)
|
53 | 60 | 75 | 44 | ||||||||||||
Net income (loss) including noncontrolling interests
|
82 | 94 | 246 | 188 | ||||||||||||
Deduct: Net loss from noncontrolling interests
|
| | | | ||||||||||||
Net income (loss) attributable to UNBC
|
$ | 82 | $ | 94 | $ | 246 | $ | 188 | ||||||||
Total assets, end of period Market View (dollars
in millions):
|
$ | 24,266 | $ | 22,989 | $ | 30,724 | $ | 30,974 | ||||||||
Other | Reconciling Items | |||||||||||||||
As of and For the |
As of and For the |
|||||||||||||||
Six Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Results of operations Market View (dollars in
millions):
|
||||||||||||||||
Net interest income (expense)
|
$ | 114 | $ | 133 | $ | (37 | ) | $ | (31 | ) | ||||||
Noninterest income (expense)
|
94 | 89 | (36 | ) | (33 | ) | ||||||||||
Total revenue
|
208 | 222 | (73 | ) | (64 | ) | ||||||||||
Noninterest expense (income)
|
213 | 213 | (27 | ) | (25 | ) | ||||||||||
Credit expense (income)
|
(310 | ) | 50 | | | |||||||||||
Income (loss) before income taxes and including noncontrolling
interests
|
305 | (41 | ) | (46 | ) | (39 | ) | |||||||||
Income tax expense (benefit)
|
135 | (7 | ) | (18 | ) | (15 | ) | |||||||||
Net income (loss) including noncontrolling interests
|
170 | (34 | ) | (28 | ) | (24 | ) | |||||||||
Deduct: Net loss from noncontrolling interests
|
7 | 7 | | | ||||||||||||
Net income (loss) attributable to UNBC
|
$ | 177 | $ | (27 | ) | $ | (28 | ) | $ | (24 | ) | |||||
Total assets, end of period Market View (dollars
in millions):
|
$ | 27,234 | $ | 32,285 | $ | (2,131 | ) | $ | (1,938 | ) | ||||||
82
Note 14 | Business Segments (Continued) |
UnionBanCal |
||||||||
Corporation | ||||||||
As of and For the |
||||||||
Six Months Ended June 30, | ||||||||
2011 | 2010 | |||||||
Results of operations Market View (dollars in
millions):
|
||||||||
Net interest income (expense)
|
$ | 1,232 | $ | 1,175 | ||||
Noninterest income (expense)
|
480 | 454 | ||||||
Total revenue
|
1,712 | 1,629 | ||||||
Noninterest expense (income)
|
1,193 | 1,109 | ||||||
Credit expense (income)
|
(196 | ) | 214 | |||||
Income (loss) before income taxes and including noncontrolling
interests
|
715 | 306 | ||||||
Income tax expense (benefit)
|
245 | 82 | ||||||
Net income (loss) including noncontrolling interests
|
470 | 224 | ||||||
Deduct: Net loss from noncontrolling interests
|
7 | 7 | ||||||
Net income (loss) attributable to UNBC
|
$ | 477 | $ | 231 | ||||
Total assets, end of period Market View (dollars
in millions):
|
$ | 80,093 | $ | 84,310 | ||||
83
Item 1. | Legal Proceedings |
Item 1A. | Risk Factors |
84
85
86
87
88
89
90
91
92
Item 6. | Exhibits |
No. | Description | |
31.1
|
Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002(1) | |
31.2
|
Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002(1) | |
32.1
|
Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002(1) | |
32.2
|
Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002(1) | |
101
|
Pursuant to Rule 405 of Regulation S-T, the following financial information from the Companys Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2011, is formatted in XBRL interactive data files:(i) Consolidated Statements of Income; (ii) Consolidated Balance Sheets; (iii) Consolidated Statements of Changes in Stockholders Equity; (iv) Consolidated Statements of Cash Flows; and (v) Notes to Financial Statements.(2) |
(1) | Filed herewith. | |
(2) | As provided in Rule 406T of Regulation S-T, this information is furnished and not filed for purposes of Sections 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934 and is not otherwise subject to liability under those sections. |
93
UNIONBANCAL CORPORATION (Registrant) | ||||
Date: August 12, 2011
|
By: |
/s/ Masashi
Oka |
||
Date: August 12, 2011
|
By: |
/s/ John
F.
Woods |
||
Date: August 12, 2011
|
By: |
/s/ David
A.
Anderson |
94
No. | Description | |
31.1
|
Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002(1) | |
31.2
|
Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002(1) | |
32.1
|
Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002(1) | |
32.2
|
Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002(1) | |
101
|
Pursuant to Rule 405 of Regulation S-T, the following financial information from the Companys Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2011, is formatted in XBRL interactive data files:(i) Consolidated Statements of Income; (ii) Consolidated Balance Sheets; (iii) Consolidated Statements of Changes in Stockholders Equity; (iv) Consolidated Statements of Cash Flows; and (v) Notes to Financial Statements.(2) |
(1) | Filed herewith | |
(2) | As provided in Rule 406T of Regulation S-T, this information is furnished and not filed for purposes of Sections 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934 and is not otherwise subject to liability under those sections. |
95
1. | I have reviewed this quarterly report on Form 10-Q of UnionBanCal Corporation (the Registrant); | |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report; | |
4. | The Registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a15(e) and 15d15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have: |
a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | evaluated the effectiveness of the Registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | disclosed in this report any change in the Registrants internal control over financial reporting that occurred during the Registrants most recent fiscal quarter (the Registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrants internal control over financial reporting; |
5. | The Registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrants auditors and the audit committee of the Registrants board of directors (or persons performing the equivalent functions): |
a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrants ability to record, process, summarize and report financial information; and |
b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrants internal control over financial reporting. |
By: |
/s/MASASHI
OKA
|
96
1. | I have reviewed this quarterly report on Form 10-Q of UnionBanCal Corporation (the Registrant); | |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report; | |
4. | The Registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a15(e) and 15d15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have: |
a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | evaluated the effectiveness of the Registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | disclosed in this report any change in the Registrants internal control over financial reporting that occurred during the Registrants most recent fiscal quarter (the Registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrants internal control over financial reporting; |
5. | The Registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrants auditors and the audit committee of the Registrants board of directors (or persons performing the equivalent functions): |
a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrants ability to record, process, summarize and report financial information; and |
b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrants internal control over financial reporting. |
By: |
/s/JOHN
F. WOODS
|
97
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and | |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
By: |
/s/MASASHI
OKA
|
98
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and | |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
By: |
/s/JOHN
F. WOODS
|
99
Consolidated Balance Sheets (Unaudited) (Parenthetical) (USD $)
In Millions, except Share data |
Jun. 30, 2011
|
Dec. 31, 2010
|
---|---|---|
Assets | Â | Â |
Interest bearing deposits in banks | $ 2,477 | $ 217 |
Fair Value of Securities held to maturity | 1,610 | 1,560 |
Other asset | 3,646 | 3,499 |
Liabilities | Â | Â |
Long-term debt | 7,069 | 5,598 |
Other liabilities | 1,338 | 1,024 |
UNBC Stockholder's Equity: | Â | Â |
Preferred Stock, Shares Authorized | 5,000,000 | 5,000,000 |
Preferred Stock, Shares Issued | 0 | 0 |
Preferred Stock, Shares Outstanding | 0 | 0 |
Common Stock: | Â | Â |
Common Stock, Shares Authorized | 300,000,000 | 300,000,000 |
Common Stock, Par or Stated Value Per Share | $ 1 | $ 1 |
Common Stock, Shares, Issued | 136,330,829 | 136,330,829 |
Variable Interest Entity, Not Primary Beneficiary [Member]
|
 |  |
Assets | Â | Â |
Interest bearing deposits in banks | 24 | 11 |
Other asset | 272 | 283 |
Liabilities | Â | Â |
Long-term debt | 8 | 8 |
Other liabilities | $ 2 | $ 2 |
Document and Entity Information
|
6 Months Ended | |
---|---|---|
Jun. 30, 2011
|
Jul. 31, 2011
|
|
Document and Entity Information [Abstract] | Â | Â |
Entity Registrant Name | UNIONBANCAL CORP | Â |
Entity Central Index Key | 0001011659 | Â |
Document Type | 10-Q | Â |
Document Period End Date | Jun. 30, 2011 | |
Amendment Flag | false | Â |
Document Fiscal Year Focus | 2011 | Â |
Document Fiscal Period Focus | Q2 | Â |
Current Fiscal Year End Date | --12-31 | Â |
Entity Well-known Seasoned Issuer | No | Â |
Entity Voluntary Filers | No | Â |
Entity Current Reporting Status | Yes | Â |
Entity Filer Category | Non-accelerated Filer | Â |
Entity Common Stock, Shares Outstanding | Â | 136,330,829 |
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Variable Interest Entities, Private Capital and Other Investments
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2011
|
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Variable Interest Entities, Private Capital and Other Investments [Abstract] | Â | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Variable Interest Entities, Private Capital and Other Investments |
The Company is involved in various structures that are
considered to be VIEs. Generally, a VIE is a corporation,
partnership, trust or any other legal structure that has equity
investors that: 1) do not have sufficient equity at risk
for the entity to independently finance its activities;
2) lack the power to direct the activities that
significantly impact the entity’s economic success;
and/or
3) do not have an obligation to absorb the entity’s
losses or the right to receive the entity’s returns. The
Company’s investments in VIEs primarily consist of equity
investments in low income housing credit (LIHC) structures and
renewable energy projects, which are designed to generate a
return primarily through the realization of federal tax credits,
and private capital investments. For further information related
to the Company’s consolidated VIEs and those that were not
consolidated, see Note 7 to the consolidated financial
statements in the Company’s 2010
Form 10-K.
Consolidated
VIEs
At June 30, 2011, assets of $296 million and
liabilities of $10 million were consolidated by the Company
on its consolidated balance sheet related to two LIHC investment
fund structures because the Company sponsors, manages and
syndicates the funds. The assets are included in other assets as
well as interest bearing deposits in banks, the liabilities are
primarily included in long-term debt, and third-party investor
interests are included in stockholder’s equity as
noncontrolling interests. Neither creditors nor equity investors
in the LIHC investments have any recourse to the general credit
of the Company, and the Company’s creditors do not have any
recourse to the assets of the consolidated LIHC investments.
For the three months and six months ended June 30, 2011,
the Company recorded $6 million and $12 million of
expenses related to its consolidated VIEs, respectively. For the
three months and six months ended June 30, 2010, the
Company recorded $6 million and $11 million of
expenses related to its consolidated VIEs, respectively. These
expenses are included in other noninterest expense on the
Company’s consolidated statements of income.
Unconsolidated
VIEs in which the Company has a Variable Interest
The following table presents the Company’s carrying amounts
related to the unconsolidated VIEs and location on the
consolidated balance sheet at June 30, 2011. The table also
presents the Company’s maximum exposure to loss resulting
from its involvement with these VIEs. The maximum exposure to
loss represents the carrying value of the Company’s
involvement plus any legally binding unfunded commitments in the
unlikely event that all of the assets in the VIEs become
worthless.
Private Capital
and Other Investments
The following table shows the balances of private capital and
other investments as of June 30, 2011 and December 31,
2010.
The Company evaluates these investments periodically for
other-than-temporary
impairment. During the first half of 2011, the Company did not
record any impairment related to these investments. For further
information on the Company’s private capital and other
investments, see Note 8 to the consolidated financial
statements in the Company’s 2010
Form 10-K.
|
Derivative Instruments and Other Financial Instruments Used For Hedging
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2011
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Derivative Instruments and Other Financial Instruments Used For Hedging [Abstract] | Â | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments and Other Financial Instruments Used For Hedging |
The Company is a party to certain derivative and other financial
instruments that are entered into for the purpose of trading,
meeting the needs of customers, and changing the impact on the
Company’s operating results due to market fluctuations in
currency rates, interest rates or commodity prices.
Credit and market risks are inherent in derivative instruments.
Credit risk is defined as the possibility that a loss may occur
from the failure of another party to perform in accordance with
the terms of the contract, which exceeds the value of the
existing collateral, if any. The Company utilizes master netting
and collateral support annex (CSA) agreements in order to reduce
its exposure to credit risk. Additionally, the Company considers
the potential loss in the event of counterparty default in
estimating the fair value amount of the derivative instrument.
Market risk is the possibility that future changes in market
conditions may make the financial instrument less valuable.
Derivatives are used to manage exposure to interest rate,
commodity and foreign currency risk, generate profits from
proprietary trading and to assist customers with their risk
management objectives. The Company designates derivative
instruments as those used for hedge accounting purposes, and
those for trading or economic hedge purposes. All derivative
instruments are recognized as assets or liabilities on the
consolidated balance sheet at fair value.
The tables below present the notional amounts, and the location
and fair value amounts of the Company’s derivative
instruments reported on the consolidated balance sheet,
segregated between derivative instruments designated and
qualifying as hedging instruments and all other derivative
instruments as of June 30, 2011 and December 31, 2010.
Asset and liability values are presented gross, excluding the
impact of legally enforceable master netting and CSA agreements.
Certain of the Company’s derivative instruments contain
provisions that require the Company to maintain a specified
credit rating. If the Company’s credit rating was to fall
below the specified rating, the counterparties to these
derivative instruments could terminate the contract and demand
immediate payment or demand immediate and ongoing full overnight
collateralization for those derivative instruments in net
liability positions. At June 30, 2011, the aggregate fair
value (including net interest payable/receivable) of all
derivative instruments with credit-risk mitigated contingent
features that are in a liability position was
$11.4 million. At June 30, 2011, the Company had not
pledged any collateral to secure these obligations. If all of
the credit-
risk-related contingent features underlying these agreements had
been triggered on June 30, 2011, the Company would have
been required to provide collateral of $11.4 million to
settle these contracts.
Derivatives Used
in Asset and Liability Management
The Company uses interest rate derivatives to manage the
financial impact on the Company from changes in market interest
rates. These instruments are used to manage interest rate risk
relating to specified groups of assets and liabilities,
primarily LIBOR-based commercial loans, certificates of deposit,
borrowings, and future debt issuances. The following describes
the significant hedging strategies of the Company.
Cash Flow
Hedges
Hedging Strategies for Variable Rate Loans, Borrowings and
Certificates of Deposit and Other Time Deposits
The Company engages in several types of cash flow hedging
strategies related to forecasted future interest payments, with
the hedged risk being the changes in cash flows attributable to
changes in the designated benchmark rate (i.e., U.S. dollar
LIBOR). In these strategies, the hedging instruments are matched
with groups of similar variable rate instruments such that the
reset tenor of the variable rate instruments and that of the
hedging instrument are identical at inception. Cash flow hedging
instruments currently being utilized include purchased caps and
interest rate swaps. At June 30, 2011, the weighted average
remaining life of the currently active cash flow hedges was
approximately 1.9 years.
In the first quarter of 2011, the Company terminated
$1.0 billion notional amount of interest rate swaps
concurrent with the issuance of $1.0 billion of fixed rate
debt. The swaps were accounted for as a cash flow hedge and were
used to mitigate the changes in cash flows on the forecasted
fixed rate debt. At termination, the Company had a related
unrealized gain of $14 million, which will be amortized
into interest expense over the life of the debt. The Company
realized minimal ineffectiveness as result of the termination.
The Company used purchased interest rate caps with a notional
amount of $1.0 billion to hedge the risk of changes in cash
flows attributable to changes in the designated benchmark
interest rate on LIBOR indexed borrowings. Payments received
under the cap contract offset the increase in borrowing interest
expense if the relevant LIBOR index rises above the cap’s
strike rate.
The Company used interest rate swaps with a notional amount of
$1.2 billion to hedge the risk of changes in cash flows
attributable to changes in the designated benchmark interest
rate on LIBOR indexed borrowings. Payments received (or paid)
under the swap contract offset fluctuations in borrowing
interest expense caused by changes in the relevant LIBOR index.
The Company used purchased interest rate caps with a notional
amount of $3.0 billion to hedge the risk of changes in cash
flows attributable to changes in the designated benchmark
interest rate component of forecasted issuances of short-term,
fixed rate certificates of deposit (CDs). Net payments to be
received under the cap contract offset increases in interest
expense if the relevant LIBOR index rises above the cap’s
strike rate.
Hedging transactions are structured at inception so that the
notional amounts of the hedging instruments are matched to an
equal principal amount of loans, CDs, or borrowings, the index
and repricing frequencies of the hedging instruments match those
of the loans, CDs, or borrowings and the period in which the
designated hedged cash flows occurs is equal to the term of the
hedge instruments. As such, most of the ineffectiveness in the
hedging relationship results from the mismatch between the
timing of reset dates on the hedging instruments versus those of
the loans, CDs or borrowings.
For cash flow hedges, the effective portion of the gain or loss
on the hedging instruments is reported as a component of other
comprehensive income and reclassified into earnings in the same
period or periods during which the hedged cash flows are
recognized in net interest income. Gains and losses representing
hedge ineffectiveness and any non qualifying hedge components
are recognized in noninterest expense in the period in which
they arise. At June 30, 2011, the Company expects to
reclassify approximately $8.4 million of net losses from
accumulated other comprehensive income to net interest income
during the twelve months ending June 30, 2012. This amount
could differ from amounts actually realized due to changes in
interest rates and the addition of other hedges subsequent to
June 30, 2011.
The following table presents the amount and location of the net
gains and losses recorded in the Company’s consolidated
statements of income and changes in stockholder’s equity
for derivatives designated as cash flow hedges for the three and
six months ended June 30, 2011 and 2010.
Trading
Derivatives
Derivative instruments classified as trading include both
derivatives entered into for the Company’s own account and
as an accommodation for customers. Trading derivatives are
included in trading assets or trading liabilities with changes
in fair value reflected in income from trading account
activities. The majority of the Company’s derivative
transactions for customers were essentially offset by contracts
with third parties that reduce or eliminate market risk
exposures.
The Company offers market-linked certificates of deposit, which
allow the client to earn the higher of either a minimum fixed
rate of interest or a return tied to either equity, commodity or
currency indices. The Company hedges its exposure to the
embedded derivative contained in market-linked CDs with a
perfectly matched
over-the-counter
option. Both the embedded derivative and hedge options are
recorded at fair value with the realized and unrealized changes
in fair value recorded in noninterest income within trading
account activities.
The following table presents the amount and location of the net
gains and losses reported in the consolidated statement of
income for derivative instruments classified as trading for the
three and six months ended June 30, 2011 and 2010.
|
Recently Issued Accounting Pronouncements That Are Not Yet Adopted
|
6 Months Ended | ||||||||
---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2011
|
|||||||||
Recently Issued Accounting Pronouncements That Are Not Yet Adopted [Abstract] | Â | ||||||||
Recently Issued Accounting Pronouncements That Are Not Yet Adopted |
Determination of
Whether a Restructuring is a Troubled Debt
Restructuring
In April 2011, the Financial Accounting Standards Board (FASB)
issued Accounting Standard Update (ASU)
2011-02,
Receivables (Topic 310): A Creditor’s Determination of
Whether a Restructuring Is a Troubled Debt Restructuring.
This update provides additional guidance to creditors on
evaluating whether a modification or restructuring of a
receivable is a troubled debt restructuring (TDR) and clarifies
the existing guidance on whether (1) the creditor has
granted a concession and (2) whether the debtor is
experiencing financial difficulties, which are the two criteria
used to determine whether a modification or restructuring is a
TDR. This guidance is effective for interim or annual periods
beginning on or after June 15, 2011 and should be applied
retrospectively to the beginning of the annual period of
adoption. Management is currently assessing the impact of this
guidance on the Company’s financial position and results of
operations.
Presentation of
Comprehensive Income
In June 2011, the FASB issued ASU
2011-05,
Comprehensive Income (Topic 220): Presentation of
Comprehensive Income (ASU
2011-05),
which removes the option of presenting comprehensive income in
the Consolidated Statements of Changes in Stockholder’s
Equity. ASU
2011-05
provides entities with an option to present the total of
comprehensive income, the components of net income, and the
components of other comprehensive income (OCI) either in a
single continuous statement of comprehensive income or in two
separate but consecutive statements. Under either method,
entities must display adjustments for items that are
reclassified from OCI to net income in both net income and OCI.
This guidance does not change the items that must be reported in
OCI or when an item of OCI must be reclassified to net income.
This guidance, related only to disclosures, is effective for
fiscal years, and interim periods within those years, beginning
after December 15, 2011 and should be applied
retrospectively. Early adoption is permitted.
Fair Value
Measurement and Disclosures
In May 2011, the FASB issued ASU
2011-04,
Fair Value Measurement (Topic 820): Amendments to Achieve
Common Fair Value Measurement and Disclosure Requirements in US
GAAP and IFRSs. The new guidance results in a consistent
definition of fair value and common requirements for measurement
of and disclosure about fair value between US GAAP and
International Financial Reporting Standards. While many of the
amendments to US GAAP are not expected to have a significant
effect on practice, the new guidance changes some fair value
measurement principles and disclosure requirements. This
guidance is effective prospectively for interim and annual
periods beginning after December 15, 2011. Early adoption
is not permitted. Management is currently assessing the impact
of this guidance on the Company’s financial position and
results of operations.
Reconsideration
of Effective Control for Repurchase Agreements
In April 2011, the FASB issued ASU
2011-03,
Transfers and Servicing (Topic 860): Reconsideration of
Effective Control for Repurchase Agreements. The update
removes from the assessment of effective control (1) the
criterion requiring the transferor to have the ability to
repurchase or redeem the financial assets on substantially the
agreed terms, even in the event of default by the transferee,
and (2) the collateral maintenance implementation guidance
related to that criterion. This guidance is effective
prospectively for transactions, or modifications of existing
transactions, that occur on or after the first interim or annual
period beginning on or after December 15, 2011. Management
is currently assessing the impact of this guidance on the
Company’s financial position and results of operations.
|
Commercial Paper and Other Short-Term Borrowings
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6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2011
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Commercial Paper and Other Short-Term Borrowings [Abstract] | Â | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commercial Paper and Other Short-Term Borrowings |
The following is a summary of the Company’s commercial
paper and other short-term borrowings:
|
Commitments, Contingencies and Guarantees
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2011
|
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Commitments, Contingencies and Guarantees [Abstract] | Â | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments, Contingencies and Guarantees |
The following table summarizes the Company’s commitments.
Commitments to extend credit are legally binding agreements to
lend to a customer provided there are no violations of any
condition established in the contract. Commitments have fixed
expiration dates or other termination clauses and may require
maintenance of compensatory balances. Since many of the
commitments to extend credit may expire without being drawn
upon, the total commitment amounts do not necessarily represent
future cash flow requirements.
Standby and commercial letters of credit are conditional
commitments issued to guarantee the performance of a customer to
a third party. Standby letters of credit generally are
contingent upon the failure of the customer to perform according
to the terms of the underlying contract with the third party,
while commercial letters of credit are issued specifically to
facilitate foreign or domestic trade transactions. Additionally,
the Company enters into risk participations in bankers’
acceptances wherein a fee is received to guarantee a portion of
the credit risk on an acceptance of another bank. The majority
of these types of commitments have terms of one year or less. At
June 30, 2011, the carrying value of the Company’s
risk participations in bankers’ acceptances and standby and
commercial letters of credit totaled $5 million. Estimated
exposure to loss related to these commitments is covered by the
allowance for losses on off-balance sheet commitments. The
carrying value of the standby and commercial letters of credit
and the allowance for losses on off-balance sheet commitments
are included in other liabilities on the consolidated balance
sheet.
The credit risk involved in issuing loan commitments and standby
and commercial letters of credit is essentially the same as that
involved in extending loans to customers and is represented by
the contractual
amount of these instruments. Collateral may be obtained based on
management’s credit assessment of the customer.
Principal investments include direct investments in private and
public companies and indirect investments in private equity
funds. The Company issues commitments to provide equity and
mezzanine capital financing to private and public companies
through either direct investments in specific companies or
through investment funds and partnerships. The timing of future
cash requirements to fund such commitments is generally
dependent on the investment cycle. This cycle, the period over
which privately-held companies are funded by private equity
investors and ultimately sold, merged, or taken public through
an initial offering, can vary based on overall market conditions
as well as the nature and type of industry in which the
companies operate.
The Company invests in either guaranteed or unguaranteed LIHC
investments. The guaranteed LIHC investments carry a minimum
rate of return guarantee by a creditworthy entity. The
unguaranteed LIHC investments carry partial guarantees covering
the timely completion of projects, availability of tax credits
and operating deficit thresholds from the issuer. For these LIHC
investments, the Company has committed to provide additional
funding as stipulated by its investment participation.
The Company is a fund manager for limited liability companies
issuing LIHC investments. LIHC investments provide tax benefits
to investors in the form of tax deductions from operating losses
and tax credits. To facilitate the sale of these LIHC
investments, the Company guarantees a minimum rate of return
throughout the investment term of over a twelve-year weighted
average period. Additionally, the Company receives guarantees,
which include the timely completion of projects, availability of
tax credits and operating deficit thresholds, from the limited
liability partnerships/corporations issuing the LIHC investments
that reduce the Company’s ultimate exposure to loss. As of
June 30, 2011, the Company’s maximum exposure to loss
under these guarantees was limited to a return of investor
capital and minimum investment yield, or $193 million. The
risk that the Company would be required to pay investors for a
yield deficiency is low, based on the continued satisfactory
performance of the underlying properties. At June 30, 2011,
the Company had a reserve of $7 million recorded related to
these guarantees, which represents the remaining unamortized
fair value of the guarantee fees that were recognized at
inception. For information on the Company’s LIHC
investments that were consolidated, refer to Note 6 to
these consolidated financial statements.
The Company guarantees its subsidiaries’ leveraged lease
transactions with terms ranging from fifteen to thirty years.
Following the original funding of these leveraged lease
transactions, the Company does not have any material obligation
to be satisfied. As of June 30, 2011, we had no exposure to
loss for these agreements.
The Company conducts securities lending transactions for
institutional customers as a fully disclosed agent. At times,
securities lending indemnifications are issued to guarantee that
a security lending customer will be made whole in the event the
borrower does not return the security subject to the lending
agreement and collateral held is insufficient to cover the
market value of the security. All lending transactions are
collateralized, primarily by cash. The amount of securities lent
with indemnifications was $1.5 billion at June 30,
2011 and the market value of the associated collateral was
$1.6 billion. As of June 30, 2011, the Company had no
exposure that would require it to pay under this securities
lending indemnification, since the collateral market value
exceeded the securities lent.
The Company occasionally enters into financial guarantee
contracts where a premium is received from another financial
institution counterparty to guarantee a portion of the credit
risk on interest rate swap contracts entered into between the
financial institution and its customer. The Company becomes
liable to pay the financial institution only if the financial
institution is unable to collect amounts owed to them by their
customer. As of June 30, 2011, the current exposure to loss
under these contracts totaled $19 million, and the maximum
potential exposure to loss in the future was estimated at
$26 million.
The Company is subject to various pending and threatened legal
actions that arise in the normal course of business. Liabilities
for losses from legal actions are recorded when they are
determined to be both probable in their occurrence and can be
reasonably estimated. Management believes that the disposition
of all claims currently pending, including potential losses from
claims that may exceed the liabilities recorded, and claims for
loss contingencies that are considered reasonably possible to
occur, will not have a material adverse effect, either
individually or in the aggregate, on the Company’s
consolidated financial condition, operating results or liquidity.
|
Long-Term Debt
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6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2011
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Commercial Paper and Other Short-Term Borrowings [Abstract] | Â | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Long-Term Debt |
The following is a summary of the Company’s long-term debt:
Senior
Debt
On June 6, 2011, the Bank issued $300 million in
aggregate principal amount of Senior Floating Rate Notes due
2014 (2014 Notes). The 2014 Notes were issued at par and bear
interest at a rate equal to three-month LIBOR plus
0.95 percent per annum and will mature on June 6,
2014. Interest payments are due on the 6th of March, June,
September and December of each year, with the first interest
payment on September 6, 2011.
On June 6, 2011, the Bank also issued $700 million in
aggregate principal amount of 3.00 percent Senior Bank
Notes due 2016 (2016 Notes). The 2016 Notes were issued to
purchasers at a price of 99.733 percent, resulting in
proceeds to the Bank, after dealer discount, of
$698 million. The 2016 Notes bear interest of
3.00 percent per annum payable on the 6th of June and
December of each year, with the first interest payment on
December 6, 2011. These notes mature on June 6, 2016.
Both the 2014 Notes and 2016 Notes are not redeemable at the
option of the Bank prior to maturity or subject to repayment at
the option of the holders prior to maturity. The net proceeds
from the sale of these notes will be used by the Bank for
general corporate purposes in the ordinary course of its
business. These notes were issued as part of a $4 billion
Bank note program under which the Bank may issue, from time to
time, senior
unsecured debt obligations with maturities of more than one year
from their respective dates of issue and subordinated debt
obligations with maturities of five years or more from their
respective dates of issue. After issuing these notes, there was
$1.2 billion available for issuance under the program at
June 30, 2011.
|
Employee Pension and Other Postretirement Benefits
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Jun. 30, 2011
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Employee Pension and Other Postretirement Benefits [Abstract] | Â | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Employee Pension and Other Postretirement Benefits |
The following table summarizes the components of net periodic
benefit cost for the three and six months ended June 30,
2011 and 2010.
|
Business Combinations
|
6 Months Ended | ||||
---|---|---|---|---|---|
Jun. 30, 2011
|
|||||
Business Combinations [Abstract] | Â | ||||
Business Combinations |
On April 30, 2010, the Bank entered into a purchase and
assumption agreement with the FDIC to acquire certain assets and
assume certain liabilities of Frontier Bank, a Washington
state-chartered commercial bank headquartered in Everett,
Washington (Frontier). Additionally, on April 16, 2010, the
Bank entered into a purchase and assumption agreement with the
FDIC to acquire certain assets and assume certain liabilities of
Tamalpais Bank of San Rafael, California (Tamalpais). For
further information related to the Tamalpais and Frontier
acquisitions, see Note 2 to the consolidated financial
statements in the Company’s 2010
Form 10-K.
In the first quarter of 2011, the Company recorded an
adjustment, which reduced goodwill by $9 million, related
to the value of expected interest income on the acquired loans
and FDIC indemnification assets. For further information related
to goodwill and intangibles, see Note 5 to the consolidated
financial statements in the Company’s 2010
Form 10-K.
|
Securities
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6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2011
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Securities [Abstract] | Â | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Securities |
The amortized cost, gross unrealized gains, gross unrealized
losses, and fair values of securities are presented below.
Securities
Available for Sale
Securities Held
to Maturity
For securities held to maturity, the amount recognized in OCI
reflects the unrealized loss at date of transfer to the held to
maturity classification, net of amortization, while the amount
not recognized in OCI reflects the incremental change in value
after such transfer. Amortized cost is defined as the original
purchase cost, plus or minus any accretion or amortization of a
purchase discount or premium, less principal payments and any
impairment previously recognized in earnings.
The amortized cost, fair value and carrying value of securities,
by contractual maturity, are shown below. Expected maturities
may differ from contractual maturities because of prepayments.
Maturity Schedule
of Securities
Securities
Available for Sale
Securities Held
to Maturity
The proceeds from sales of securities available for sale and
gross realized gains for the three and six months ended
June 30, 2011 and 2010 are shown below. There were no gross
realized losses for the same periods. The specific
identification method is used to calculate realized gains and
losses on sales. The table below excludes losses from
other-than-temporary
impairment.
Sales of
Securities Available for Sale
Analysis of
Unrealized Losses on Securities
At June 30, 2011 and December 31, 2010, the
Company’s securities with a continuous unrealized loss
position are shown below, separately for periods less than
12 months and 12 months or more.
Securities
Available for Sale
Securities Held
to Maturity
At June 30, 2011, the Company did not have the intent to
sell temporarily impaired securities until a recovery of the
amortized cost, which may be at maturity. The Company also
believes it is more likely than not that it will not have to
sell the securities prior to recovery of amortized cost.
The following describes the nature of the Company’s
investments, the causes of impairment, the severity and duration
of the impairment, if applicable, and the conclusions reached on
the temporary or
other-than-temporary
status of the unrealized losses.
Residential
Mortgage-Backed Securities—U.S. Government and Government
Sponsored Agencies
Agency residential mortgage-backed securities consist of
securities guaranteed by the U.S. government or government
sponsored agencies such as Fannie Mae and Freddie Mac. These
securities are collateralized by residential mortgage loans and
may be prepaid at par prior to maturity. The unrealized losses
on agency residential mortgage-backed securities resulted from
changes in interest rates and not credit quality. As a result,
the securities were not
other-than-temporarily
impaired at June 30, 2011.
Residential
Mortgage-Backed Securities—Privately Issued
Non-agency residential mortgage-backed securities are privately
issued by financial institutions with no guarantee from
government sponsored entities. These securities are
collateralized by residential mortgage loans and may be prepaid
at par prior to maturity. The securities are primarily rated
investment grade. The unrealized losses on non-agency
residential mortgage-backed securities resulted from declining
credit quality of underlying collateral and additional credit
spread widening since purchase. The Company estimated loss
projections for each security by assessing the loans
collateralizing each security. The Company estimates the portion
of loss attributable to credit based on the expected cash flows
of the underlying collateral using industry consensus estimates
of current key assumptions, such as default rates, loss severity
and prepayment rates. Based on this assessment of expected
credit losses of each security, impairment recognized during the
first half of 2011 was not significant. With respect to the
remaining portfolio at June 30, 2011, the Company expects
to recover the entire amortized cost basis of these securities.
Collateralized
Loan Obligations
The Company’s CLOs primarily consist of Cash Flow CLOs. A
Cash Flow CLO is a structured finance product that securitizes a
diversified pool of loan assets into multiple classes of notes.
Cash Flow CLOs pay the note holders through the receipt of
interest and principal repayments from the underlying loans
unlike other
types of CLOs that pay note holders through the trading and sale
of underlying collateral. Certain of these CLOs are illiquid
securities for which fair values are difficult to obtain.
Unrealized losses arise from widening credit spreads, credit
quality of the underlying collateral, uncertainty regarding the
valuation of such securities and the market’s opinion of
the performance of the fund managers. Cash flow analysis of the
underlying collateral provides an estimate of
other-than-temporary
impairment, which is performed quarterly when the fair value of
a security is lower than its amortized cost. Based on the
analysis performed as of June 30, 2011, no
other-than-temporary
impairment was recorded.
Securities
Pledged as Collateral
Transactions involving purchases of securities under agreements
to resell (reverse repurchase agreements or reverse repos) or
sales of securities under agreements to repurchase (repurchase
agreements or repos) are accounted for as collateralized
financings except where the Company does not have an agreement
to sell (or purchase) the same or substantially the same
securities before maturity at a fixed or determinable price. The
Company’s policy is to obtain possession of collateral with
a market value equal to or in excess of the principal amount
loaned under resale agreements. Collateral is valued daily, and
the Company may require counterparties to deposit additional
collateral or return collateral pledged, when appropriate.
The Company separately identifies in the consolidated balance
sheets, securities pledged as collateral in secured borrowings
and other arrangements when the secured party can sell or
repledge the securities. If the secured party cannot resell or
repledge the securities that have been placed as collateral,
those securities are not separately identified. At June 30,
2011, the Company had $4.7 billion of securities available
for sale pledged as collateral where the secured party cannot
resell or repledge such securities. These available for sale
securities have been pledged to secure borrowings
($1.3 billion), to support unrealized losses on derivative
transactions reported in trading liabilities ($0.5 billion)
and to secure public and trust department deposits
($2.9 billion).
At June 30, 2011 and December 31, 2010, the Company
accepted securities as collateral that it is permitted by
contract to sell or repledge of $74 million
($63 million of which has been repledged to cover short
sales) and $12 million ($1 million of which has been
repledged to secure public agency or bankruptcy deposits and to
cover short sales), respectively. These securities were received
as collateral for secured lending and to obtain qualified
securities to meet the Company’s collateral needs.
|
Accumulated Other Comprehensive Loss
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6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2011
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Accumulated Other Comprehensive Loss [Abstract] | Â | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accumulated Other Comprehensive Loss |
The following table presents the change in each of the
components of accumulated other comprehensive income (loss) and
the related tax effect of the change allocated to each component.
The following table presents the change in accumulated other
comprehensive income (loss) balances.
|
Loans and Allowance for Loan Losses
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6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2011
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Loans and Allowance for Loan Losses [Abstract] | Â | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Loans and Allowance for Loan Losses |
A summary of loans, net of unearned discount/premiums and
deferred fees of $59 million and $70 million at
June 30, 2011 and December 31, 2010, respectively, is
as follows:
Loans Acquired in
Business Combinations
The Company evaluated loans acquired in the Frontier and
Tamalpais transactions in accordance with accounting guidance
related to loans acquired with deteriorated credit quality as of
the acquisition date. Management elected to account for all
acquired loans, except for revolving lines of credit, within the
scope of the accounting guidance using the same methodology. The
following table reflects the carrying value of loans, pursuant
to accounting standards for purchased credit-impaired loans and
other acquired loans, as of June 30, 2011 and
December 31, 2010:
The acquired loans are referred to as “covered loans”
as the Bank will be reimbursed for a substantial portion of any
future losses on them under the terms of the FDIC loss share
agreements. As of acquisition dates, the estimated fair value of
the purchased credit-impaired loan portfolios of Frontier and
Tamalpais subject to the loss share agreements represents the
present value of expected cash flows from the portfolio. The
difference between the undiscounted contractual cash flows and
the undiscounted expected cash flows is the nonaccretable
difference. The nonaccretable difference represents the
estimated credit losses in the acquired loan portfolios at the
acquisition date.
The accretable yield for purchased credit-impaired loans for the
three and six months ended June 30, 2011 was as follows:
The carrying value and outstanding balance for the purchased
credit-impaired loans as of June 30, 2011,
December 31, 2010 and as of the respective acquisition
dates were as follows:
Acquired loans were recorded at fair value at acquisition date,
factoring in credit losses expected to be incurred over the life
of the loan. Accordingly, an allowance for loan losses was not
carried over or recorded as of the respective acquisition dates.
The acquired loans are subject to the Bank’s internal
credit review. When credit deterioration is noted subsequent to
the respective acquisition dates, a provision for loan losses is
charged to earnings, with a partial offset reflecting the
increase to the FDIC indemnification asset for FDIC covered
loans.
Allowance for
Loan Losses
The following table shows the allowance for loan losses and
related loan balances by portfolio segment as of June 30,
2011 and December 31, 2010.
The Company maintains an allowance for credit losses (defined as
both the allowance for loan losses and the allowance for
off-balance sheet commitment losses) to absorb losses inherent
in the loan portfolio as well as for leases and off-balance
sheet commitments. The allowances are based on our regular,
quarterly assessments of the probable estimated losses inherent
in the loan portfolio and unused commitments to provide
financing. The Company’s methodology for measuring the
appropriate level of the allowances relies on several key
elements, which include the formula allowance, the specific
allowance for impaired loans, the unallocated allowance and the
allowance for off-balance sheet commitments.
Nonaccrual and
Past Due Loans
Nonaccrual loans, excluding FDIC covered loans, totaled
$0.7 billion and $0.8 billion at June 30, 2011
and December 31, 2010, respectively. There were
$266 million and $220 million of TDR loans at
June 30, 2011 and December 31, 2010, respectively.
Loans 90 days or more past due and still accruing totaled
$2 million at both June 30, 2011 and December 31,
2010.
The following table presents nonaccrual loans as of
June 30, 2011 and December 31, 2010.
The following table provides a summary of total TDRs, which
include those that are on nonaccrual status and those that
continue to accrue interest, as of June 30, 2011 and
December 31, 2010.
The following table shows an aging of the balance of loans held
for investment by class as of June 30, 2011 and
December 31, 2010.
Credit Quality
Indicators
Management analyzes the Company’s loan portfolios by
applying specific monitoring policies and procedures that vary
according to the relative risk profile and other characteristics
within the various loan portfolios. For further information
related to the credit quality indicators the Company uses to
monitor the portfolio, see Note 4 to the consolidated
financial statements in the Company’s 2010
Form 10-K.
The following tables summarize the loans in the commercial
portfolio segment monitored for credit quality based on internal
ratings, excluding $1.2 billion and $1.5 billion
covered by FDIC loss share agreements, at June 30, 2011 and
December 31, 2010, respectively. Amounts also exclude
$568 million and $635 million at June 30, 2011
and December 31, 2010, respectively, of small business
loans, which are monitored by business credit score and
delinquency status; unamortized nonrefundable loan fees; and
related direct loan origination costs.
The Company monitors the credit quality of its consumer segment
based primarily on payment status. The following tables
summarize the loans in the consumer portfolio segment, which
excludes $100 million and $122 million of loans
covered by FDIC loss share agreements, at June 30, 2011 and
December 31, 2010, respectively.
The Company also monitors the credit quality for substantially
all of its consumer portfolio segment using the credit score
provided by Fair Isaacs Corporation (FICO). FICO credit scores
are refreshed at least on a
quarterly basis to monitor the quality of the portfolio. The
following table summarizes the loans in the consumer portfolio
segment monitored for credit quality based on refreshed FICO
scores at June 30, 2011, excluding loans serviced by
third-party service providers and loans covered by FDIC loss
share agreements, as discussed above. Amounts also exclude
unamortized nonrefundable loan fees, related direct loan
origination costs and the Company’s privatization
adjustments.
Loan
Impairment
The Company’s impaired loans generally include larger
commercial and industrial, construction, commercial mortgage,
and TDRs where it is probable that the Company will be unable to
collect all amounts due according to the contractual terms of
the loan agreement. When the value of an impaired loan is less
than the recorded investment in the loan, the Company records an
impairment allowance.
The following tables show information about impaired loans by
class as of June 30, 2011 and December 31, 2010.
Interest income recognized for impaired loans during the second
quarter of 2011 for the commercial, consumer and FDIC covered
loan portfolio segments were $0.7 million,
$1.2 million and $0.3 million, respectively. Interest
income recognized for impaired loans during the first half of
2011 for the commercial, consumer and FDIC covered loan
portfolio segments were $1.2 million, $2.2 million and
$0.5 million, respectively.
The Company transferred $168 million of loans from held for
investment to held for sale and sold $142 million in loans
during the first half of 2011.
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Basis of Presentation and Nature of Operations
|
6 Months Ended | ||||
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Jun. 30, 2011
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Basis of Presentation and Nature of Operations [Abstract] | Â | ||||
Basis of Presentation and Nature of Operations |
The unaudited consolidated financial statements of UnionBanCal
Corporation, its subsidiaries, and its consolidated VIEs (the
Company) have been prepared in accordance with accounting
principles generally accepted in the United States of America
(US GAAP) for interim financial reporting and the instructions
to
Form 10-Q
and
Rule 10-01
of
Regulation S-X
of the Rules and Regulations of the Securities and Exchange
Commission (SEC). However, they do not include all of the
disclosures necessary for annual financial statements in
conformity with US GAAP. In the opinion of management, all
adjustments, consisting of normal recurring accruals, considered
necessary for a fair presentation have been included. The
results of operations for the first half of 2011 are not
necessarily indicative of the operating results anticipated for
the full year. These unaudited consolidated financial statements
should be read in conjunction with the audited consolidated
financial statements included in UnionBanCal Corporation’s
Annual Report on
Form 10-K
for the year ended December 31, 2010 (2010
Form 10-K).
The preparation of financial statements in conformity with US
GAAP also requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and
the 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. Although such estimates
contemplate current conditions and management’s
expectations of how they may change in the future, it is
reasonably possible that actual results could differ
significantly from those estimates. This could materially affect
the Company’s results of operations and financial condition
in the near term. Significant estimates made by management in
the preparation of the Company’s financial statements
include, but are not limited to, the evaluation of
other-than-temporary
impairment on investment securities (Note 4), allowance for
credit losses (Note 5), purchased credit-impaired loans
(Note 5), annual goodwill impairment analysis, pension
accounting (Note 7), valuing financial instruments
(Note 10), and income taxes.
UnionBanCal Corporation is a financial holding company and
commercial bank holding company whose major subsidiary, Union
Bank, N.A. (the Bank), is a commercial bank. The Company
provides a wide range of financial services to consumers, small
businesses, middle-market companies and major corporations,
primarily in California, Oregon, Washington, and Texas, as well
as nationally and internationally.
Effective in the first half of 2011, payments received of
$96 million related to the loss share agreements with the
Federal Deposit Insurance Corporation (FDIC) in conjunction with
the Company’s FDIC-assisted acquisitions are disclosed
separately as proceeds from FDIC loss share agreements and are
classified within cash flows from investing activities. These
proceeds were previously classified under cash flows from
operating activities and totaled $95 million and
$165 million in the third quarter and full year 2010,
respectively.
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Fair Value Measurement and Fair Value of Financial Instruments
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Jun. 30, 2011
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Fair Value Measurement and Fair Value of Financial Instruments [Abstract] | Â | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurement and Fair Value of Financial Instruments |
Valuation
Methodologies
Fair value is defined as the price that would be received to
sell an asset or paid to transfer a liability (i.e., an exit
price) in an orderly transaction between willing market
participants at the measurement date. The Company has an
established and documented process for determining fair value
for financial assets and financial liabilities that are measured
at fair value on either a recurring or nonrecurring basis. When
available, quoted market prices are used to determine fair
value. If quoted market prices are not available, fair value is
based upon valuation techniques that use, where possible,
current market-based or independently sourced parameters, such
as interest rates, yield curves, foreign exchange rates,
commodity prices, volatilities and credit curves. Valuation
adjustments may be made to ensure the financial instruments are
recorded at fair value. These adjustments include amounts that
reflect counterparty credit quality and that consider the
Company’s creditworthiness in determining the fair value of
its trading liabilities. For further information related to the
valuation methodologies used for certain financial assets and
financial liabilities measured at fair value, see Note 17
to the consolidated financial statements in the Company’s
2010
Form 10-K.
Fair Value
Hierarchy
In determining fair value, the Company maximizes the use of
observable market inputs and minimizes the use of unobservable
inputs. Observable inputs reflect market-derived or market-based
information obtained from independent sources, while
unobservable inputs reflect the Company’s estimate about
market data. Based on the observability of the significant
inputs used, the Company classifies its fair value measurements
in accordance with the three-level hierarchy as defined by US
GAAP. This hierarchy is based on the quality and reliability of
the information used to determine fair value. For further
information related to the fair value hierarchy, see
Note 17 to the consolidated financial statements in the
Company’s 2010
Form 10-K.
Fair Value
Measurements on a Recurring Basis
The following tables present financial assets and financial
liabilities measured at fair value on a recurring basis as of
June 30, 2011 and December 31, 2010, by major category
and by valuation hierarchy level.
The following tables present a reconciliation of the assets and
liabilities measured at fair value on a recurring basis using
significant unobservable inputs (Level 3) for the
three and six months ended June 30, 2011 and 2010.
Level 3 available for sale securities at June 30, 2011
and 2010 primarily consist of tax
exempt community development bonds. There were no transfers in
(out) of Level 1, 2, and 3 during the first half of 2011.
Fair Value
Measurement on a Nonrecurring Basis
Certain assets may be measured at fair value on a nonrecurring
basis. These assets are subject to fair value adjustments that
result from the application of the lower of cost or fair value
accounting or write-downs of individual assets. For assets
measured at fair value on a nonrecurring basis during the first
halves of 2011 and 2010 that were still held on the consolidated
balance sheet as of the respective periods ended, the following
tables present the carrying value of such financial instruments
by the level of valuation assumptions used to determine each
fair value adjustment.
Loans include individually impaired loans that are measured
based on the fair value of the underlying collateral or the fair
value of the loan. The fair value of impaired loans was
determined based on appraised values of the underlying
collateral or market pricing for the loan, adjusted for
management judgment.
Other assets consist of private equity investments, and OREO
that was measured at the lower of cost or fair value, net of
cost of disposal. The fair value of OREO was primarily based on
independent appraisals. The fair value of private equity
investments was estimated using net asset value.
Fair Value of
Financial Instruments Disclosures
In addition to financial instruments recorded at fair value in
the Company’s financial statements, the disclosure of the
estimated fair value of financial instruments that are not
carried at fair value is also required. Excluded from this
disclosure requirement are lease financing arrangements,
investments accounted for under the equity method, employee
pension and other postretirement obligations and all
nonfinancial assets and liabilities, including goodwill and
other intangible assets such as long-term customer
relationships. The fair values presented are estimates for
certain individual financial instruments and do not represent an
estimate of the fair value of the Company as a whole.
Certain financial instruments that are not recognized at fair
value on the consolidated balance sheet are carried at amounts
that approximate fair value due to their short-term nature.
These financial instruments include cash and due from banks,
interest bearing deposits in banks, federal funds sold and
purchased, securities purchased under resale agreements,
securities sold under repurchase agreements and commercial
paper. In addition, the fair value of deposits with no stated
maturity, such as noninterest bearing demand
deposits, interest bearing checking, and market rate and other
savings are deemed to equal their carrying values. For further
information on methodologies for approximating fair values, see
Note 17 to the consolidated financial statements in the
Company’s 2010
Form 10-K.
The table below presents the carrying value and estimated fair
value of certain financial instruments held by the Company as of
June 30, 2011 and December 31, 2010.
Off-balance sheet commitments, which include commitments to
extend credit and standby and commercial letters of credit, are
excluded from the above table. These instruments generate
ongoing fees, which are recognized over the term of the
commitment period. In situations where the credit quality of the
counterparty to a commitment has declined, the Company records a
reserve. A reasonable estimate of the fair value of these
instruments is the carrying value of deferred fees plus the
related reserve. This estimate totaled $266 million and
$298 million at June 30, 2011 and December 31,
2010, respectively.
|
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