425 1 a4493716.txt UNIONBANCAL 425 FILED PURSUANT TO RULE 425 Filer: UnionBanCal Corporation Issuer: UnionBanCal Corporation Commission File Number: 001-15081 UnionBanCal Corporation Reports 16% Increase in Third Quarter Net Income Per Share and 19% Increase in Operating Earnings Per Share SAN FRANCISCO--(BUSINESS WIRE)--Oct. 15, 2003--UnionBanCal Corporation (NYSE:UB) today reported third quarter 2003 net income of $155.0 million, or $1.02 per diluted common share, a 15.9 percent increase over the $0.88 per diluted common share earned in third quarter 2002. Operating earnings were the same as net income for the quarter, representing an 18.6 percent increase over operating earnings of $0.86 per diluted common share in third quarter 2002. Operating earnings for third quarter 2002 excluded the after-tax effect of a $3.2 million net reduction in income tax expense attributable to a permanent reduction in taxes associated with changes in California state tax law. For the first nine months of 2003, net income was $435.3 million, up $52.4 million, or 13.7 percent, compared with the same period last year. Net income per diluted common share was $2.87, up 18.1 percent over the first nine months of 2002, while operating earnings per diluted common share were $2.83, up 17.9 percent. "I am pleased with both our third quarter and year-to-date results," stated Norimichi Kanari, President and Chief Executive Officer. "Our 18.6 percent increase in third quarter operating earnings per share was fueled by excellent deposit growth, which led to higher net interest income and noninterest income. Total revenue was more than 7 percent higher than prior year, despite a markedly lower interest rate environment. Noninterest income grew 19 percent over last year, and represented 33 percent of total revenue for the quarter, up from 30 percent a year earlier, demonstrating the ongoing success of our strategic initiatives emphasizing fee income growth. In addition, asset quality continued to improve, resulting in a lower provision for credit losses. "During the quarter, we completed the acquisition of Monterey Bay Bank, which added eight full-service branches in the greater Monterey Bay area to Union Bank of California's existing branch network, and we announced our agreement to acquire Business Bank of California, which operates 15 branches in southern and northern California. The Business Bank acquisition is expected to close early next year and will further advance our strategy of extending and adding density to our footprint in California," continued Kanari. "In September, we announced the repurchase of 6.7 million shares of common stock from our majority shareholder, The Bank of Tokyo-Mitsubishi, for $300 million," continued Kanari. "The transaction further demonstrates our commitment to prudently manage capital and provide increased returns to our shareholders. Our recent capital management initiatives have contributed significantly to the 200 basis point increase in our third quarter operating return on equity," concluded Kanari. Total Revenue For third quarter 2003, total revenue (taxable-equivalent net interest income plus noninterest income) was $603.2 million, an increase of $ 41.5 million, or 7.4 percent, compared with third quarter 2002. Net interest income increased 2.3 percent, while noninterest income increased 19.1 percent. Compared with second quarter 2003, total revenue on an operating basis was $22.6 million, or 3.9 percent, higher with net interest income increasing 4.0 percent and noninterest income on an operating basis increasing 3.8 percent. Net Interest Income (Taxable-equivalent) Net interest income was $401.7 million in third quarter 2003, up $9.1 million from the same quarter a year ago. Volume gains in deposits and earning assets were largely offset by the effects of the lower interest rate environment and a shift in the mix of earning assets. Average earning assets grew $5.1 billion, or 15.6 percent, primarily due to a $4.0 billion, or 67.7 percent, increase in average securities, a $763 million, or 164.6 percent, increase in average money market assets, and a $361 million, or 1.4 percent, increase in average loans. Average residential mortgages increased $1.4 billion, or 24.5 percent, and average commercial mortgages increased $400 million, or 10.4 percent. Average commercial loans decreased $1.6 billion, or 14.1 percent, primarily due to weak commercial loan demand. Average noninterest bearing deposits increased $3.8 billion, or 30.6 percent, with title and escrow deposits increasing 56 percent and other business demand deposits increasing 27 percent. Average noninterest bearing deposits represented 46.8 percent of total deposits, up from 43.9 percent in the same quarter a year ago. The annualized all-in cost of funds contracted to just 0.50 percent. Due to the lower interest rate environment, the average yield on earning assets of $37.9 billion declined 92 basis points year-over-year, while the average rate on interest bearing liabilities of $20.8 billion fell 63 basis points. The net interest margin in third quarter 2003 was 4.22 percent, a decrease of 55 basis points compared with third quarter 2002. On a sequential quarter basis, net interest income increased $15.3 million, or 4.0 percent. Average earning assets grew $1.8 billion, or 4.9 percent, with average securities increasing $2.2 billion, or 29.0 percent, and average loans declining $185 million, or 0.7 percent. Average noninterest bearing deposits increased $1.3 billion, or 8.6 percent. The net interest margin decreased 7 basis points to 4.22 percent. Noninterest Income In third quarter 2003, noninterest income on an operating basis was $201.5 million, up $32.4 million, or 19.1 percent, from the same quarter a year ago. Service charges on deposit accounts increased $13.2 million, or 19.2 percent, primarily due to higher deposit volumes and higher account analysis and overdraft fees. Trust and investment management fees were flat, and insurance commissions increased $9.6 million, to $15.8 million, primarily reflecting the fourth quarter 2002 acquisition of John Burnham Insurance Services and the second quarter 2003 acquisition of Tanner Insurance Brokers. Noninterest income on an operating basis increased $7.3 million, or 3.8 percent, on a sequential quarter basis. Service charges on deposits increased $3.9 million, or 5.0 percent, and trust and investment management fees increased $2.3 million, or 6.9 percent. Noninterest Expense Noninterest expense for third quarter 2003 was $348.9 million, an increase of $31.0 million, or 9.8 percent, over third quarter 2002. Salaries and other compensation expense increased $17.6 million, or 11.6 percent, primarily due to higher employee count associated with acquisitions and de novo branch openings, and annual merit increases. Employee benefits expense increased $5.4 million, or 17.8 percent, primarily due to higher employee count associated with acquisitions and de novo branch openings, and increases in health benefits expense for both current employees and retirees. Intangible asset amortization expense was $2.6 million, an increase of $1.1 million compared with prior year, due to recent acquisitions. Compared with second quarter 2003, noninterest expense on an operating basis increased $2.1 million, or 0.6 percent. Salaries and other compensation expense increased $8.1 million, or 5.0 percent, due primarily to higher performance-related incentive expense and higher employee count associated with acquisitions. The operating efficiency ratio for third quarter 2003 was 57.8 percent, compared with 56.6 percent in third quarter 2002, and 59.7 percent in second quarter 2003. The increase in the efficiency ratio versus prior year was due primarily to the lower interest rate environment in third quarter 2003 and its adverse effect on net interest income. Year-to-Date Results For the first nine months of 2003, total revenue on an operating basis was $1.8 billion, an increase of $97 million, or 5.8 percent, compared with the same period in 2002. Net interest income increased 1.7 percent, and noninterest income on an operating basis increased 15.3 percent. Net interest income was $1.2 billion in the first nine months of 2003, a $20 million, or 1.7 percent, increase from the same period a year ago. The positive effect of higher volumes of noninterest bearing demand deposits and earning assets was substantially offset by the adverse effect of the lower interest rate environment in 2003. Compared with prior year, net interest margin for the first nine months declined 42 basis points, to 4.35 percent. Noninterest income on an operating basis in the first nine months of 2003 increased $76.9 million, or 15.3 percent, over the same period in 2002. Service charges on deposits increased $27.4 million, or 13.4 percent, primarily due to higher account analysis and overdraft fees, and higher deposit volumes. Trust and investment management fees decreased $8.4 million, or 7.7 percent, while insurance commissions increased $25.1 million, or 125.6 percent, due primarily to recent insurance brokerage acquisitions. In the first nine months of 2003, auto lease residual writedowns were $0.3 million, compared with $9.0 million in the first nine months of 2002. For the first nine months of 2003, noninterest expense on an operating basis increased $92.2 million, or 9.7 percent, over the same period in 2002. Salaries and other compensation expense increased $35.6 million, or 7.9 percent, primarily due to merit increases and higher employee count associated with recent acquisitions and de novo branch openings. Employee benefits expense increased $19.4 million, or 19.7 percent, primarily due to higher health benefits expense for current employees and retirees, and to higher employee count. Intangible asset amortization expense was $8.3 million, an increase of $4.6 million compared with prior year, due to recent acquisitions. The operating efficiency ratio for the first nine months of 2003 was 59.0 percent, compared with 56.8 percent in the first nine months of 2002. The increase in the efficiency ratio was due primarily to the lower interest rate environment in 2003 and its adverse effect on net interest income. Credit Quality Nonperforming assets at September 30, 2003, were $344 million, or 0.81 percent of total assets. This compares with $380 million, or 0.89 percent of total assets at June 30, 2003, and $396 million, or 1.05 percent of total assets, at September 30, 2002. For third quarter 2003, the provision for credit losses was $20 million, compared with $25 million in second quarter 2003, and $40 million in third quarter 2002. Net loans charged off in third quarter 2003 were $38 million, compared with $53 million in second quarter 2003, and $42 million in third quarter 2002. At September 30, 2003, the allowance for credit losses as a percent of total loans and as a percent of nonaccrual loans was 2.11 percent and 161.4 percent, respectively. These ratios were 2.17 percent and 147.1 percent, respectively, at June 30, 2003, and 2.40 percent and 157.7 percent, respectively, at September 30, 2002. Balance Sheet and Capital Ratios At September 30, 2003, the Company had total assets of $42.6 billion and total deposits of $36.0 billion. Total shareholders' equity was $3.7 billion and the tangible equity ratio was 8.05 percent. Book value per share was $25.32, up 4.5 percent from a year earlier. The Company's Tier I and total risk based capital ratios at September 30, 2003, were 10.96 percent and 12.58 percent, respectively. Share Repurchases As previously announced, on September 4, 2003, the Company repurchased 6.7 million shares of common stock, at a price of $45.05 per share, from its majority shareholder, The Bank of Tokyo-Mitsubishi, Limited. The Company did not repurchase any other shares during the quarter. At September 30, 2003, the Company had authority from its Board of Directors to repurchase an additional $115 million of common stock under its common stock repurchase plan. Common shares outstanding at September 30, 2003, were 145.1 million, a decrease of 5.1 million shares, or 3.4 percent, from one year earlier. Fourth Quarter 2003 Earnings Per Share Guidance The Company currently estimates that fourth quarter 2003 fully diluted earnings per share will be in the range of $0.98 to $1.03, with a provision for credit losses of approximately $15 million. Recent Event On September 26, 2003, UnionBanCal Corporation announced its intention to acquire Business Bank of California, a subsidiary of Business Bancorp. This communication is not a solicitation of a proxy from any security holder of Business Bancorp. Business Bancorp, and its directors and executive officers and other members of its management and employees, may be deemed to be participants in the solicitation of proxies from the stockholders of Business Bancorp in connection with the merger. Information about the directors and executive officers of Business Bancorp and their ownership in Business Bancorp stock is set forth in the proxy statement for Business Bancorp's 2003 annual meeting of stockholders. Employment and compensation agreements of certain potential participants, including salary continuation agreements and change of control agreements, are filed as exhibits to the Business Bancorp Form 10-K for the year ended December 31, 2002, and Form 10-Q for the quarter ended June 30, 2003. Investors may obtain additional information regarding the interests of the participants by reading the proxy statement/prospectus when it becomes available. Shareholders of Business Bancorp and other investors are urged to read the proxy statement/prospectus that will be included in the registration statement on Form S-4, which UnionBanCal and Business Bancorp will file with the SEC in connection with the proposed merger, because it will contain important information about UnionBanCal, Union Bank of California, Business Bancorp, Business Bank of California, the merger, the persons soliciting proxies in the merger and their interests in the merger, and related matters. After it is filed with the SEC, the proxy statement/prospectus will be available for free, both on the SEC website (http://www.sec.gov) and from each of Union Bank of California and Business Bank of California by contacting: John A. Rice, Jr., SVP - UnionBanCal Corporation Investor Relations, 415-765-2969 Alan J. Lane, CEO - Business Bancorp, 909-888-2265 Use of Non-GAAP Financial Measures This press release contains certain references to operating earnings, and other financial measures identified as being stated on "an operating basis" or qualified by the word "operating", that include adjustments from comparable measures calculated and presented in accordance with accounting principles generally accepted in the United States of America (GAAP). Operating earnings, as used herein, differs from net income reported under GAAP in that operating earnings excludes unusual or non-recurring charges, losses, credits or gains. Similarly, other financial measures that are identified herein as being stated on "an operating basis" or qualified by the word "operating" exclude these unusual or non-recurring charges, losses, credits or gains. This press release identifies the specific items excluded from the comparable GAAP financial measure in the calculation of each non-GAAP financial measure. Because these items and their impact on the Company's performance are difficult to predict, management believes that financial presentations excluding the impact of these items provide useful supplemental information which is important to a proper understanding of the Company's core business results by investors. These presentations should not be viewed as a substitute for results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP financial measures presented by other companies. For a detailed reconciliation of data presented on an operating basis to GAAP financial measures, please refer to Exhibits 5 and 6 accompanying this press release. Forward-Looking Statements The following appears in accordance with the Private Securities Litigation Reform Act: This press release includes forward-looking statements that involve risks and uncertainties. Forward-looking statements can be identified by looking at the fact that they do not relate strictly to historical or current facts. Often, they include the words "believe," "expect," "anticipate," "intend," "plan," "estimate," "project," or words of similar meaning, or future or conditional verbs such as "will," "would," "should," "could," or "may." They may also consist of annualized amounts based on historical interim period results. A number of important factors could cause actual results to differ materially from those in the forward-looking statements. Those factors include fluctuations in interest rates, government policies and regulations (including monetary and fiscal policies), legislation, economic conditions, credit quality of borrowers, operational factors, competition in the geographic and business areas in which the Company conducts its operations, and global political and general economic conditions. A complete description of the Company, including related risk factors, is discussed in the Company's public filings with the Securities and Exchange Commission, which are available by calling (415) 765-2969 or online at http://www.sec.gov. All forward-looking statements included in this press release are based on information available at the time of the release, and the Company assumes no obligation to update any forward-looking statement. Conference Call and Webcast The Company will conduct a conference call to review third quarter and year-to-date results at 8:30 AM PDT (11:30 AM EDT) on October 16, 2003. Interested parties calling from locations within the United States should call 888-428-4480 (651-291-0900 from outside the United States) 10 minutes prior to the beginning of the conference. A live webcast of the call will be available at http://www.uboc.com. Simply follow the links to the Investor Relations section of the website. The webcast replay will be available on the website within 24 hours after the conclusion of the call, and will remain on the website for a period of one year. A recorded playback of the conference call will be available by calling 800-475-6701, (320-365-3844 from outside the United States) from approximately 12:00 PM PDT (3:00 PM EDT), October 16, through 11:59 PM PDT, October 23 (2:59 AM EDT, October 24). The reservation number for this playback is 699420. Based in San Francisco, UnionBanCal Corporation is a bank holding company with assets of $42.6 billion at September 30, 2003. Its primary subsidiary, Union Bank of California, N.A., has 278 banking offices in California, 4 banking offices in Oregon and Washington and 20 international facilities. UnionBanCal Corporation and Subsidiaries Financial Highlights (Unaudited) As of and for the Percent Change to Three Months Ended Sept. 30, 2003 from -------------------------------- ------------------ On a Reported Earnings Basis: (Dollars in thousands, except per Sept. 30, June 30, Sept. 30, Sept. 30, June 30, share data) 2002 2003 2003 2002 2003 -------------- --------- --------- -------- -------- ------- Results of operations: Net interest income (1) $392,636 $386,422 $401,736 2.32% 3.96% Noninterest income 169,116 203,171 201,470 19.13% (0.84%) -------- --------- --------- Total revenue 561,752 589,593 603,206 7.38% 2.31% Noninterest expense 317,824 351,004 348,861 9.77% (0.61%) Provision for credit losses 40,000 25,000 20,000 (50.00%)(20.00%) -------- --------- --------- Income before income taxes (1) 203,928 213,589 234,345 14.92% 9.72% Taxable- equivalent adjustment 534 645 647 21.16% 0.31% Income tax expense 65,163 68,186 78,653 20.70% 15.35% --------- --------- --------- - Net income $138,231 $144,758 $155,045 12.16% 7.11% ========= ========= ========= Per common share: Net income- basic $0.89 $0.96 $1.04 16.85% 8.33% Net income- diluted 0.88 0.96 1.02 15.91% 6.25% Dividends (2) 0.28 0.31 0.31 10.71% 0.00% Book value (end of period) 24.22 25.79 25.32 4.54% (1.82%) Common shares outstanding (end of period) 150,220,119 149,993,652 145,105,566 (3.40%) (3.26%) Weighted average common shares outstanding - basic 154,889,552 150,046,659 149,528,298 (3.46%) (0.35%) Weighted average common shares outstanding - diluted 156,709,715 151,489,337 151,561,790 (3.29%) 0.05% Balance sheet (end of period): Total assets $37,608,001 $42,668,834 $42,602,745 13.28% (0.15%) Total loans 25,962,159 25,668,660 26,047,376 0.33% 1.48% Nonaccrual loans 395,212 379,487 341,039 (13.71%)(10.13%) Nonperforming assets 395,521 379,758 344,347 (12.94%) (9.32%) Total deposits 30,588,080 35,365,260 35,957,805 17.55% 1.68% Trust preferred securities 370,286 360,166 356,629 (3.69%) (0.98%) Shareholders' equity 3,637,945 3,868,959 3,674,107 0.99% (5.04%) Balance sheet (period average): Total assets $35,803,475 $39,776,349 $41,913,515 17.07% 5.37% Total loans 25,971,483 26,517,316 26,331,986 1.39% (0.70%) Earning assets 32,757,523 36,074,488 37,855,869 15.56% 4.94% Total deposits 28,455,452 32,587,173 34,902,964 22.66% 7.11% Shareholders' equity 3,814,927 3,919,276 3,834,834 0.52% (2.15%) Financial ratios: Return on average assets (3) 1.53% 1.46% 1.47% Return on average shareholders' equity (3) 14.38% 14.81% 16.04% Efficiency ratio (4) 56.57% 59.53% 57.85% Net interest margin (1) 4.77% 4.29% 4.22% Dividend payout ratio 31.46% 32.29% 29.81% Tangible equity ratio 9.38% 8.59% 8.05% Tier 1 risk- based capital ratio (5) 11.14% 11.44% 10.96% Total risk- based capital ratio (5) 12.89% 13.06% 12.58% Leverage ratio (5) 10.13% 9.63% 8.72% Allowance for credit losses to total loans 2.40% 2.17% 2.11% Allowance for credit losses to nonaccrual loans 157.66% 147.11% 161.43% Net loans charged off to average total loans (3) 0.64% 0.80% 0.58% Nonperforming assets to total loans, foreclosed assets, and distressed loans held for sale 1.52% 1.48% 1.32% Nonperforming assets to total assets 1.05% 0.89% 0.81% On an Operating Earnings Basis: Selected financial data on an operating earnings basis (see bottom of exhibit 5 for non-recurring items): Operating earnings per common share - basic $0.87 $0.93 $1.04 Operating earnings per common share - diluted $0.86 $0.92 $1.02 Operating return on average assets (3) 1.50% 1.40% 1.47% Operating return on average shareholders' equity (3) 14.04% 14.23% 16.04% Operating efficiency ratio (4) 56.57% 59.73% 57.85% Operating dividend payout ratio 32.18% 33.33% 29.81% (1) Taxable-equivalent basis. (2) Dividends per share reflect dividends declared on UnionBanCal Corporation's common stock outstanding as of the declaration date. (3) Annualized. (4) Noninterest expense excludes foreclosed asset expense (income). (5) Estimated as of September 30, 2003. UnionBanCal Corporation and Subsidiaries Financial Highlights (Unaudited) Percent Change to On a Reported As of and for the Nine Sept. 30, Earnings Basis: Months Ended 2003 from ------------------------ -------- (Dollars in thousands, except per Sept. 30, Sept. 30, Sept. 30, share data) 2002 2003 2002 --------------------------------- ------------ ------------ -------- Results of operations: Net interest income (1) $1,159,907 $1,179,562 1.69% Noninterest income 504,465 590,412 17.04% ------------ ------------ Total revenue 1,664,372 1,769,974 6.34% Noninterest expense 946,102 1,042,465 10.19% Provision for credit losses 145,000 75,000 (48.28%) ------------ ------------ Income before income taxes (1) 573,270 652,509 13.82% Taxable-equivalent adjustment 1,604 1,916 19.45% Income tax expense 188,716 215,273 14.07% ------------ ------------ Net income $382,950 $435,320 13.68% ============ ============ Per common share: Net income-basic $2.45 $2.90 18.37% Net income-diluted 2.43 2.87 18.11% Dividends (2) 0.81 0.90 11.11% Book value (end of period) 24.22 25.32 4.54% Common shares outstanding (end of period) 150,220,119 145,105,566 (3.40%) Weighted average common shares outstanding - basic 156,139,173 150,059,789 (3.89%) Weighted average common shares outstanding - diluted 157,892,168 151,544,757 (4.02%) Balance sheet (end of period): Total assets $37,608,001 $42,602,745 13.28% Total loans 25,962,159 26,047,376 0.33% Nonaccrual loans 395,212 341,039 (13.71%) Nonperforming assets 395,521 344,347 (12.94%) Total deposits 30,588,080 35,957,805 17.55% Trust preferred securities 370,286 356,629 (3.69%) Shareholders' equity 3,637,945 3,674,107 0.99% Balance sheet (period average): Total assets $35,541,802 $40,025,749 12.62% Total loans 25,562,452 26,522,687 3.76% Earning assets 32,472,409 36,263,471 11.67% Total deposits 28,085,461 32,870,184 17.04% Shareholders' equity 3,730,273 3,875,990 3.91% Financial ratios: Return on average assets (3) 1.44% 1.45% Return on average shareholders' equity (3) 13.73% 15.02% Efficiency ratio (4) 56.84% 58.90% Net interest margin (1) 4.77% 4.35% Dividend payout ratio 33.06% 31.03% Tangible equity ratio 9.38% 8.05% Tier 1 risk-based capital ratio (5) 11.14% 10.96% Total risk-based capital ratio (5) 12.89% 12.58% Leverage ratio (5) 10.13% 8.72% Allowance for credit losses to total loans 2.40% 2.11% Allowance for credit losses to nonaccrual loans 157.66% 161.43% Net loans charged off to average total loans (3) 0.83% 0.73% Nonperforming assets to total loans, foreclosed assets, and distressed loans held for sale 1.52% 1.32% Nonperforming assets to total assets 1.05% 0.81% On an Operating Earnings Basis: --------------------------------- Selected financial data on an operating earnings basis (see bottom of exhibit 6 for non-recurring items): Operating earnings per common share (basic) $2.43 $2.86 Operating earnings per common share (diluted) $2.40 $2.83 Operating return on average assets 1.43% 1.44% Operating return on average shareholders' equity (3) 13.61% 14.82% Operating efficiency ratio (4) 56.84% 58.96% Operating dividend payout ratio 33.33% 31.47% ------------------------------------------------------------ (1) Taxable-equivalent basis. (2) Dividends per share reflect dividends declared on UnionBanCal Corporation's common stock outstanding as of the declaration date. (3) Annualized. (4) Noninterest expense excludes foreclosed asset expense (income). (5) Estimated as of September 30, 2003. UnionBanCal Corporation and Subsidiaries Condensed Consolidated Statements of Income (Unaudited) (Taxable-Equivalent Basis) On a Reported Earnings Basis For the Three Months Ended For the Nine Months Ended ----------------------------- ----------------------- Sept. 30, June 30, Sept. 30, September 30, (Amounts in thousands, except per share data) 2002 2003 2003 2002 2003 ---------------- --------- --------- --------- ----------- ----------- Interest Income Loans $382,177 $355,199 $350,210 $1,136,921 $1,068,648 Securities 77,815 78,357 93,568 238,020 252,118 Interest bearing deposits in banks 773 1,130 922 1,898 3,014 Federal funds sold and securities purchased under resale agreements 1,467 4,001 2,532 10,354 8,210 Trading account assets 1,415 981 909 3,107 2,847 --------- --------- --------- ----------- ----------- Total interest income 463,647 439,668 448,141 1,390,300 1,334,837 --------- --------- --------- ----------- ----------- Interest Expense Domestic deposits 52,049 40,217 34,984 167,395 116,772 Foreign deposits 4,727 2,811 1,991 17,096 8,008 Federal funds purchased and securities sold under repurchase agreements 1,789 747 689 5,134 2,763 Commercial paper 4,488 2,946 1,723 12,998 7,397 Medium and long- term debt 2,375 1,818 1,738 7,198 5,422 UnionBanCal Corporation - obligated mandatorily redeemable preferred securities of subsidiary grantor trust 3,921 3,652 3,607 11,832 10,930 Other borrowed funds 1,662 1,055 1,673 8,740 3,983 --------- --------- --------- ----------- ----------- Total interest expense 71,011 53,246 46,405 230,393 155,275 --------- --------- --------- ----------- ----------- Net Interest Income 392,636 386,422 401,736 1,159,907 1,179,562 Provision for credit losses 40,000 25,000 20,000 145,000 75,000 --------- --------- --------- ----------- ----------- Net interest income after provision for credit losses 352,636 361,422 381,736 1,014,907 1,104,562 --------- --------- --------- ----------- ----------- Noninterest Income Service charges on deposit accounts 68,629 77,942 81,832 204,641 232,061 Trust and investment management fees 35,368 33,141 35,429 109,680 101,245 International commissions and fees 20,131 21,276 22,223 57,593 63,112 Insurance commissions 6,259 16,024 15,814 19,969 45,056 Card processing fees, net 9,068 9,340 10,335 26,343 29,357 Brokerage commissions and fees 9,034 8,412 7,549 27,614 24,614 Merchant banking fees 6,819 6,191 9,312 22,845 21,521 Foreign exchange trading gains, net 8,193 6,958 7,574 21,653 21,466 Securities gains (losses), net 1,017 9,660 (2,618) 2,986 7,042 Other 4,598 14,227 14,020 11,141 44,938 --------- --------- --------- ----------- ----------- Total noninterest income 169,116 203,171 201,470 504,465 590,412 --------- --------- --------- ----------- ----------- Noninterest Expense Salaries and employee benefits 182,275 198,929 205,302 547,251 602,338 Net occupancy 27,340 32,866 31,342 75,750 91,844 Equipment 16,343 16,354 15,680 48,650 48,705 Communications 13,186 13,354 12,661 39,695 39,859 Professional services 10,350 13,566 12,676 30,789 38,256 Data processing 7,944 7,744 7,659 24,475 23,887 Foreclosed asset expense (income) 18 - (79) 130 (28) Other 60,368 68,191 63,620 179,362 197,604 --------- --------- --------- ----------- ----------- Total noninterest expense 317,824 351,004 348,861 946,102 1,042,465 --------- --------- --------- ----------- ----------- Income before income taxes 203,928 213,589 234,345 573,270 652,509 Taxable- equivalent adjustment 534 645 647 1,604 1,916 Income tax expense 65,163 68,186 78,653 188,716 215,273 --------- --------- --------- ----------- ----------- Net Income $138,231 $144,758 $155,045 $382,950 $435,320 ========= ========= ========= =========== =========== Net income per common share - basic $0.89 $0.96 $1.04 $2.45 $2.90 ========= ========= ========= =========== =========== Net income per common share - diluted $0.88 $0.96 $1.02 $2.43 $2.87 ========= ========= ========= =========== =========== Weighted average common shares outstanding - basic 154,890 150,047 149,528 156,139 150,060 ========= ========= ========= =========== =========== Weighted average common shares outstanding - diluted 156,710 151,489 151,562 157,892 151,545 ========= ========= ========= =========== =========== UnionBanCal Corporation and Subsidiaries Condensed Consolidated Statements of Income (Unaudited) (Taxable-Equivalent Basis) On an Operating Earnings Basis (1) For the Three Months For the Nine Months Ended Ended ------------------------------ ---------------------- (Amounts in Sept. 30, June 30, Sept. 30, September 30, thousands, except per share data) 2002 2003 2003 2002 2003 --------- --------- --------- ---------- ----------- Interest Income Loans $382,177 $355,199 $350,210 $1,136,921 $1,068,648 Securities 77,815 78,357 93,568 238,020 252,118 Interest bearing deposits in banks 773 1,130 922 1,898 3,014 Federal funds sold and securities purchased under resale agreements 1,467 4,001 2,532 10,354 8,210 Trading account assets 1,415 981 909 3,107 2,847 --------- --------- --------- ----------- ----------- Total interest income 463,647 439,668 448,141 1,390,300 1,334,837 --------- --------- --------- ----------- ----------- Interest Expense Domestic deposits 52,049 40,217 34,984 167,395 116,772 Foreign deposits 4,727 2,811 1,991 17,096 8,008 Federal funds purchased and securities sold under repurchase agreements 1,789 747 689 5,134 2,763 Commercial paper 4,488 2,946 1,723 12,998 7,397 Medium and long-term debt 2,375 1,818 1,738 7,198 5,422 UnionBanCal Corporation - obligated mandatorily redeemable preferred securities of subsidiary grantor trust 3,921 3,652 3,607 11,832 10,930 Other borrowed funds 1,662 1,055 1,673 8,740 3,983 --------- --------- --------- ----------- ----------- Total interest expense 71,011 53,246 46,405 230,393 155,275 --------- --------- --------- ----------- ----------- Net Interest Income 392,636 386,422 401,736 1,159,907 1,179,562 Provision for credit losses 40,000 25,000 20,000 145,000 75,000 --------- --------- --------- ----------- ----------- Net interest income after provision for credit losses 352,636 361,422 381,736 1,014,907 1,104,562 --------- --------- --------- ----------- ----------- Noninterest Income Service charges on deposit accounts 68,629 77,942 81,832 204,641 232,061 Trust and investment management fees 35,368 33,141 35,429 109,680 101,245 International commissions and fees 20,131 21,276 22,223 57,593 63,112 Insurance commissions 6,259 16,024 15,814 19,969 45,056 Card processing fees, net 9,068 9,340 10,335 26,343 29,357 Brokerage commissions and fees 9,034 8,412 7,549 27,614 24,614 Merchant banking fees 6,819 6,191 9,312 22,845 21,521 Foreign exchange trading gains, net 8,193 6,958 7,574 21,653 21,466 Securities gains (losses), net 1,017 647 (2,618) 2,986 (1,971) Other 4,598 14,227 14,020 11,141 44,938 --------- --------- --------- ----------- ----------- Total noninterest income 169,116 194,158 201,470 504,465 581,399 --------- --------- --------- ----------- ----------- Noninterest Expense Salaries and employee benefits 182,275 198,929 205,302 547,251 602,338 Net occupancy 27,340 28,666 31,342 75,750 87,644 Equipment 16,343 16,354 15,680 48,650 48,705 Communications 13,186 13,354 12,661 39,695 39,859 Professional services 10,350 13,566 12,676 30,789 38,256 Data processing 7,944 7,744 7,659 24,475 23,887 Foreclosed asset expense (income) 18 - (79) 130 (28) Other 60,368 68,191 63,620 179,362 197,604 --------- --------- --------- ----------- ----------- Total noninterest expense 317,824 346,804 348,861 946,102 1,038,265 --------- --------- --------- ----------- ----------- Income before income taxes 203,928 208,776 234,345 573,270 647,696 Taxable- equivalent adjustment 534 645 647 1,604 1,916 Income tax expense 68,413 69,072 78,653 191,966 216,159 --------- --------- --------- ----------- ----------- Net operating earnings $134,981 $139,059 $155,045 $379,700 $429,621 ========= ========= ========= =========== =========== Net operating earnings per common share - basic $0.87 $0.93 $1.04 $2.43 $2.86 ========= ========= ========= =========== =========== Net operating earnings per common share - diluted $0.86 $0.92 $1.02 $2.40 $2.83 ========= ========= ========= =========== =========== Weighted average common shares outstanding - basic 154,890 150,047 149,528 156,139 150,060 ========= ========= ========= =========== =========== Weighted average common shares outstanding - diluted 156,710 151,489 151,562 157,892 151,545 ========= ========= ========= =========== =========== (1) See exhibits 5 and 6 for reconciliation of 'reported earnings' to 'operating earnings' UnionBanCal Corporation and Subsidiaries Condensed Consolidated Statements of Income (Unaudited) Reconciliations (Taxable-Equivalent Basis) Reported Earnings Reconciliation to Operating Earnings For the Three Months Ended September 30, 2002 ---------------------------- Non-recurring (Amounts in thousands, except per Reported Items Operating share data) --------------------------------- --------- -------- ---------- Net Interest Income $392,636 $- $392,636 Provision for credit losses 40,000 - 40,000 --------- -------- --------- Net interest income after provision for credit losses 352,636 - 352,636 --------- -------- --------- Noninterest Income Securities gains (losses), net (1) 1,017 - 1,017 All other (no adjustments) 168,099 - 168,099 --------- -------- --------- Total noninterest income 169,116 - 169,116 --------- -------- --------- Noninterest Expense Net occupancy (2) 27,340 - 27,340 All other (no adjustments) 290,484 - 290,484 --------- -------- --------- Total noninterest expense 317,824 - 317,824 --------- -------- --------- Income/Operating earnings before income taxes 203,928 - 203,928 Taxable-equivalent adjustment 534 - 534 Income tax expense (benefit) (3) (4) (5) 65,163 3,250 68,413 --------- -------- --------- Net Income/Operating Earnings $138,231 $(3,250) $134,981 ========= ======== ========= Net income/Operating earnings per common share - basic $0.89 $(0.02) $0.87 ========= ======== ========= Net income/Operating earnings per common share - diluted $0.88 $(0.02) $0.86 ========= ======== ========= Weighted average common shares outstanding - basic 154,890 154,890 ========= ========= Weighted average common shares outstanding - diluted 156,710 156,710 ========= ========= Reported Net Income $138,231 ----------------------------- Non-recurring Items (1) Gain on the early call of a Mexican Brady bond (2nd quarter 2003) - (2) Write-off of leasehold improvements (2nd quarter 2003) - (3) Tax impact of items listed above (1) and (2) - (4) Reduction in income tax due to change in CA tax law (3rd quarter 2002) (3,250) (5) Reduction in income tax due to IRS Audit wrap up (2nd quarter 2003) - ----------------------------- Net Operating Earnings $134,981 ============================= For the Three Months Ended June 30, 2003 ---------------------------- Non-recurring (Amounts in thousands, except per Reported Items Operating share data) --------------------------------- -------- --------- --------- Net Interest Income $386,422 $- $386,422 Provision for credit losses 25,000 - 25,000 --------- -------- --------- Net interest income after provision for credit losses 361,422 - 361,422 --------- -------- --------- Noninterest Income Securities gains (losses), net (1) 9,660 (9,013) 647 All other (no adjustments) 193,511 - 193,511 --------- -------- --------- Total noninterest income 203,171 (9,013) 194,158 --------- -------- --------- Noninterest Expense Net occupancy (2) 32,866 (4,200) 28,666 All other (no adjustments) 318,138 - 318,138 --------- -------- --------- Total noninterest expense 351,004 (4,200) 346,804 --------- -------- --------- Income/Operating earnings before income taxes 213,589 (4,813) 208,776 Taxable-equivalent adjustment 645 - 645 Income tax expense (benefit) (3) (4) (5) 68,186 886 69,072 --------- -------- --------- Net Income/Operating Earnings $144,758 $(5,699) $139,059 ========= ======== ========= Net income/Operating earnings per common share - basic $0.96 $(0.03) $0.93 ========= ======== ========= Net income/Operating earnings per common share - diluted $0.96 $(0.04) $0.92 ========= ======== ========= Weighted average common shares outstanding - basic 150,047 150,047 ========= ========= Weighted average common shares outstanding - diluted 151,489 151,489 ========= ========= Reported Net Income $144,758 ----------------------------- Non-recurring Items (1) Gain on the early call of a Mexican Brady bond (2nd quarter 2003) (9,013) (2) Write-off of leasehold improvements (2nd quarter 2003) 4,200 (3) Tax impact of items listed above (1) and (2) 1,766 (4) Reduction in income tax due to change in CA tax law (3rd quarter 2002) - (5) Reduction in income tax due to IRS Audit wrap up (2nd quarter 2003) (2,652) ----------------------------- Net Operating Earnings $139,059 ============================= For the Three Months Ended September 30, 2003 -------------------------------- Non-recurring (Amounts in thousands, except per Reported Items Operating share data) ----------------------------------- ---------- ------ -------------- Net Interest Income $401,736 $- $401,736 Provision for credit losses 20,000 - 20,000 ---------- ------ -------------- Net interest income after provision for credit losses 381,736 - 381,736 ---------- ------ -------------- Noninterest Income Securities gains (losses), net (1) (2,618) - (2,618) All other (no adjustments) 204,088 - 204,088 ---------- ------ -------------- Total noninterest income 201,470 - 201,470 ---------- ------ -------------- Noninterest Expense Net occupancy (2) 31,342 - 31,342 All other (no adjustments) 317,519 - 317,519 ---------- ------ -------------- Total noninterest expense 348,861 - 348,861 ---------- ------ -------------- Income/Operating earnings before income taxes 234,345 - 234,345 Taxable-equivalent adjustment 647 - 647 Income tax expense (benefit) (3) (4) (5) 78,653 - 78,653 ---------- ------ -------------- Net Income/Operating Earnings $155,045 $- $155,045 ========== ====== ============== Net income/Operating earnings per common share - basic $1.04 $- $1.04 ========== ====== ============== Net income/Operating earnings per common share - diluted $1.02 $- $1.02 ========== ====== ============== Weighted average common shares outstanding - basic 149,528 149,528 ========== ============== Weighted average common shares outstanding - diluted 151,562 151,562 ========== ============== Reported Net Income $155,045 ---------- ------ -------------- Non-recurring Items (1) Gain on the early call of a Mexican Brady bond (2nd quarter 2003) - (2) Write-off of leasehold improvements (2nd quarter 2003) - (3) Tax impact of items listed above (1) and (2) - (4) Reduction in income tax due to change in CA tax law (3rd quarter 2002) - (5) Reduction in income tax due to IRS Audit wrap up (2nd quarter 2003) - ---------- ------ -------------- Net Operating Earnings $155,045 ========== ====== ============== UnionBanCal Corporation and Subsidiaries Condensed Consolidated Statements of Income (Unaudited) Reconciliations (Taxable-Equivalent Basis) Reported Earnings Reconciliation to Operating Earnings For the Nine Months Ended --------------------------------- September 30, 2002 --------------------------------- Non-recurring (Amounts in thousands, except per Reported Items Operating share data) --------------------------------- ----------- -------- ----------- Net Interest Income $1,159,907 $- $1,159,907 Provision for credit losses 145,000 - 145,000 ----------- -------- ----------- Net interest income after provision for credit losses 1,014,907 - 1,014,907 ----------- -------- ----------- Noninterest Income Securities gains (losses), net (1) 2,986 - 2,986 All other (no adjustments) 501,479 - 501,479 ----------- -------- ----------- Total noninterest income 504,465 - 504,465 ----------- -------- ----------- Noninterest Expense Net occupancy (2) 75,750 - 75,750 All other (no adjustments) 870,352 - 870,352 ----------- -------- ----------- Total noninterest expense 946,102 - 946,102 ----------- -------- ----------- Income/Operating earnings before income taxes 573,270 - 573,270 Taxable-equivalent adjustment 1,604 - 1,604 Income tax expense (benefit) (3) (4) (5) 188,716 3,250 191,966 ----------- -------- ----------- Net Income/Operating Earnings $382,950 $(3,250) $379,700 =========== ======== =========== Net income/Operating earnings per common share - basic $2.45 $(0.02) $2.43 =========== ======== =========== Net income/Operating earnings per common share - diluted $2.43 $(0.03) $2.40 =========== ======== =========== Weighted average common shares outstanding - basic 156,139 156,139 =========== =========== Weighted average common shares outstanding - diluted 157,892 157,892 =========== =========== Reported Net Income $382,950 --------------------------------- Non-recurring Items (1) Gain on the early call of a Mexican Brady bond (2nd quarter 2003) - (2) Write-off of leasehold improvements (2nd quarter 2003) - (3) Tax impact of items listed above (1) and (2) - (4) Reduction in income tax due to change in CA tax law (3rd quarter 2002) (3,250) (5) Reduction in income tax due to IRS Audit wrap up (2nd quarter 2003) - --------------------------------- Net Operating Earnings $379,700 ================================= For the Nine Months Ended September 30, 2003 -------------------------------- Non-recurring (Amounts in thousands, except per Reported Items Operating share data) ---------------------------------- ----------- -------- ----------- Net Interest Income $1,179,562 $- $1,179,562 Provision for credit losses 75,000 - 75,000 ----------- -------- ----------- Net interest income after provision for credit losses 1,104,562 - 1,104,562 ----------- -------- ----------- Noninterest Income Securities gains (losses), net (1) 7,042 (9,013) (1,971) All other (no adjustments) 583,370 - 583,370 ----------- -------- ----------- Total noninterest income 590,412 (9,013) 581,399 ----------- -------- ----------- Noninterest Expense Net occupancy (2) 91,844 (4,200) 87,644 All other (no adjustments) 950,621 - 950,621 ----------- -------- ----------- Total noninterest expense 1,042,465 (4,200) 1,038,265 ----------- -------- ----------- Income/Operating earnings before income taxes 652,509 (4,813) 647,696 Taxable-equivalent adjustment 1,916 - 1,916 Income tax expense (benefit) (3) (4) (5) 215,273 886 216,159 ----------- -------- ----------- Net Income/Operating Earnings $435,320 $(5,699) $429,621 =========== ======== =========== Net income/Operating earnings per common share - basic $2.90 $(0.04) $2.86 =========== ======== =========== Net income/Operating earnings per common share - diluted $2.87 $(0.04) $2.83 =========== ======== =========== Weighted average common shares outstanding - basic 150,060 150,060 =========== =========== Weighted average common shares outstanding - diluted 151,545 151,545 =========== =========== Reported Net Income $435,320 -------------------------------- Non-recurring Items (1) Gain on the early call of a Mexican Brady bond (2nd quarter 2003) (9,013) (2) Write-off of leasehold improvements (2nd quarter 2003) 4,200 (3) Tax impact of items listed above (1) and (2) 1,766 (4) Reduction in income tax due to change in CA tax law (3rd quarter 2002) - (5) Reduction in income tax due to IRS Audit wrap up (2nd quarter 2003) (2,652) -------------------------------- Net Operating Earnings $429,621 ================================ UnionBanCal Corporation and Subsidiaries Consolidated Balance Sheets (Unaudited) (Unaudited) Sept. 30, Dec. 31, Sept. 30, (Dollars in thousands) 2002 2002 2003 ------------------------------- ------------ ------------ ------------ Assets Cash and due from banks $2,184,714 $2,823,573 $2,619,580 Interest bearing deposits in banks 139,323 278,849 341,230 Federal funds sold and securities purchased under resale agreements 1,137,550 1,339,700 1,325,470 ------------ ------------ ------------ Total cash and cash equivalents 3,461,587 4,442,122 4,286,280 Trading account assets 383,749 276,021 320,199 Securities available for sale: Securities pledged as collateral 132,974 157,823 68,440 Held in portfolio 6,061,875 7,109,498 9,930,281 Loans (net of allowance for credit losses: September 30, 2002, $623,078; December 31, 2002, $609,190; September 30, 2003, $550,550) 25,339,081 25,828,893 25,496,826 Due from customers on acceptances 68,605 62,469 52,816 Premises and equipment, net 492,687 504,666 506,321 Intangible assets 23,119 38,518 49,288 Goodwill 93,279 150,542 215,903 Other assets 1,551,045 1,599,221 1,676,391 ------------ ------------ ------------ Total assets $37,608,001 $40,169,773 $42,602,745 ============ ============ ============ Liabilities Domestic deposits: Noninterest bearing $14,125,497 $15,537,906 $16,854,483 Interest bearing 14,701,824 15,258,479 17,320,728 Foreign deposits: Noninterest bearing 401,202 583,836 556,687 Interest bearing 1,359,557 1,460,594 1,225,907 ------------ ------------ ------------ Total deposits 30,588,080 32,840,815 35,957,805 Federal funds purchased and securities sold under repurchase agreements 303,307 334,379 284,764 Commercial paper 880,170 1,038,982 678,903 Other borrowed funds 218,282 267,047 240,803 Acceptances outstanding 68,605 62,469 52,816 Other liabilities 1,122,957 1,083,836 939,549 Medium and long-term debt 418,369 418,360 417,369 UnionBanCal Corporation- obligated mandatorily redeemable preferred securities of subsidiary grantor trust 370,286 365,696 356,629 ------------ ------------ ------------ Total liabilities 33,970,056 36,411,584 38,928,638 ------------ ------------ ------------ Commitments and contingencies Shareholders' Equity Preferred stock: Authorized 5,000,000 shares, no shares issued or outstanding as of September 30, 2002, December 31, 2002, and September 30, 2003 - - - Common stock, par value $1 per share at September 30, 2003, and no stated value at September 30, 2002, and December 31, 2002 (1): Authorized 300,000,000 shares, issued 150,220,119 shares as of September 30, 2002, 150,702,363 shares as of December 31, 2002, and 145,105,566 shares as of September 30, 2003 907,088 926,460 145,106 Additional paid-in capital - - 520,876 Retained earnings 2,488,873 2,591,635 2,893,240 Accumulated other comprehensive income 241,984 240,094 114,885 ------------ ------------ ------------ Total shareholders' equity 3,637,945 3,758,189 3,674,107 ------------ ------------ ------------ Total liabilities and shareholders' equity $37,608,001 $40,169,773 $42,602,745 ============ ============ ============ (1) On September 30, 2003, UnionBanCal Corporation reincorporated in the state of Delaware, establishing a common stock $1 per share par value. UnionBanCal Corporation and Subsidiaries Loans (Unaudited) Percent Change to Sept. 30, 2003 Three Months Ended from -------------------------- ----------------- Sept. 30, June 30, Sept. 30, Sept. 30, June 30, (Dollars in millions) 2002 2003 2003 2002 2003 ------------------------- -------- -------- -------- -------- -------- Loans (period average) Commercial, financial and industrial $11,172 $10,047 $9,600 (14.07%) (4.45%) Construction 1,198 1,192 1,172 (2.17%) (1.68%) Mortgage - Commercial 3,839 4,180 4,239 10.42% 1.41% Mortgage - Residential 5,732 6,735 7,136 24.49% 5.95% Consumer 1,972 2,032 2,028 2.84% (0.20%) Lease financing 857 731 684 (20.19%) (6.43%) Loans originated in foreign branches 1,201 1,600 1,473 22.65% (7.94%) -------- -------- -------- Total loans $25,971 $26,517 $26,332 1.39% (0.70%) ======== ======== ======== Nonperforming assets (period end) Nonaccrual loans: Commercial, financial and industrial $368 $274 $244 (33.70%) (10.95%) Construction 1 - 1 0.00% nm Mortgage - Commercial 24 50 43 79.17% (14.00%) Lease 2 53 52 nm (1.89%) Foreign - 3 1 nm (66.67%) -------- -------- -------- Total nonaccrual loans 395 380 341 (13.67%) (10.26%) Foreclosed assets 1 - 3 200.00% nm -------- -------- -------- Total nonperforming assets $396 $380 $344 (13.13%) (9.47%) ======== ======== ======== Loans 90 days or more past due and still accruing $7 $10 $26 271.43% 160.00% ======== ======== ======== Analysis of Allowance for Credit Losses Beginning balance $625 $586 $558 Provision for credit losses 40 25 20 Foreign translation adjustment and other net additions (deductions)(1) - - 11 Loans charged off: Commercial, financial and industrial (48) (51) (41) Real estate (2) - (7) Consumer (2) (3) (2) Lease financing (1) (13) (1) Loans originated in foreign branches - - (2) -------- -------- -------- Total loans charged off (53) (67) (53) -------- -------- -------- Loans recovered: Commercial, financial and industrial 9 13 14 Consumer 2 1 1 -------- -------- -------- Total loans recovered 11 14 15 -------- -------- -------- Net loans charged-off (42) (53) (38) -------- -------- -------- Ending balance $623 $558 $551 ======== ======== ======== (1) Includes a transfer of $10.3 million related to the Monterey Bay Bank acquisition in the third quarter of 2003. nm = not meaningful UnionBanCal Corporation and Subsidiaries Net Interest Income (Unaudited) For the Three Months Ended ---------------------------------------------------------------------- September 30, 2002 ------------------------------ Interest Average Average Income/ Yield/ (Dollars in thousands) Balance Expense(1) Rate(1) ------------------ ------------ ------------------ Assets Loans:(2) Domestic $24,770,565 $374,043 6.00 % Foreign(3) 1,200,918 8,134 2.69 Securities - taxable 5,907,792 76,825 5.20 Securities - tax-exempt 35,761 990 11.08 Interest bearing deposits in banks 135,952 773 2.26 Federal funds sold and securities purchased under resale agreements 327,820 1,467 1.78 Trading account assets 378,715 1,415 1.48 ------------ --------- Total earning assets 32,757,523 463,647 5.63 --------- Allowance for credit losses (631,581) Cash and due from banks 1,860,183 Premises and equipment, net 497,542 Other assets 1,319,808 ------------ Total assets $35,803,475 ============ Liabilities Domestic deposits: Interest bearing $8,292,080 22,855 1.09 Savings and consumer time 3,614,192 14,593 1.60 Large time 2,679,594 14,601 2.16 Foreign deposits(3) 1,369,123 4,727 1.37 ------------ --------- Total interest bearing deposits 15,954,989 56,776 1.41 ------------ --------- Federal funds purchased and securities sold under repurchase agreements 487,201 1,789 1.46 Commercial paper 1,043,111 4,488 1.71 Other borrowed funds 270,795 1,662 2.44 Medium and long-term debt 399,697 2,375 2.36 UnionBanCal Corporation - obligated mandatorily redeemable preferred securities of subsidiary grantor trust 351,879 3,921 4.48 ------------ --------- Total borrowed funds 2,552,683 14,235 2.22 ------------ --------- Total interest bearing liabilities 18,507,672 71,011 1.52 --------- Noninterest bearing deposits 12,500,463 Other liabilities 980,413 ------------ Total liabilities 31,988,548 Shareholders' Equity Common equity 3,814,927 ------------ Total shareholders' equity 3,814,927 ------------ Total liabilities and shareholders' equity $35,803,475 ============ Net interest income/margin (taxable-equivalent basis) 392,636 4.77 % Less: taxable-equivalent adjustment 534 --------- Net interest income $392,102 ========= June 30, 2003 ------------------------------ Interest Average Average Income/ Yield/ (Dollars in thousands) Balance Expense(1) Rate(1) ------------------ ------------ ------------------ Assets Loans:(2) Domestic $24,916,936 $346,204 5.63 % Foreign(3) 1,600,380 8,995 2.28 Securities - taxable 7,685,140 77,341 4.03 Securities - tax-exempt 40,984 1,016 9.91 Interest bearing deposits in banks 221,004 1,130 2.05 Federal funds sold and securities purchased under resale agreements 1,276,224 4,001 1.26 Trading account assets 333,820 981 1.18 ------------ --------- Total earning assets 36,074,488 439,668 4.88 --------- Allowance for credit losses (585,597) Cash and due from banks 2,099,440 Premises and equipment, net 509,372 Other assets 1,678,646 ------------ Total assets $39,776,349 ============ Liabilities Domestic deposits: Interest bearing $9,928,211 18,799 0.76 Savings and consumer time 3,871,674 11,277 1.17 Large time 2,532,971 10,141 1.61 Foreign deposits(3) 1,224,201 2,811 0.92 ------------ --------- Total interest bearing deposits 17,557,057 43,028 0.98 ------------ --------- Federal funds purchased and securities sold under repurchase agreements 333,415 747 0.90 Commercial paper 995,048 2,946 1.19 Other borrowed funds 138,074 1,055 3.06 Medium and long-term debt 399,745 1,818 1.82 UnionBanCal Corporation - obligated mandatorily redeemable preferred securities of subsidiary grantor trust 351,553 3,652 4.16 ------------ --------- Total borrowed funds 2,217,835 10,218 1.85 ------------ --------- Total interest bearing liabilities 19,774,892 53,246 1.08 --------- Noninterest bearing deposits 15,030,116 Other liabilities 1,052,065 ------------ Total liabilities 35,857,073 Shareholders' Equity Common equity 3,919,276 ------------ Total shareholders' equity 3,919,276 ------------ Total liabilities and shareholders' equity $39,776,349 ============ Net interest income/margin (taxable-equivalent basis) 386,422 4.29 % Less: taxable-equivalent adjustment 645 --------- Net interest income $385,777 ========= September 30, 2003 ------------------------------ Interest Average Average Income/ Yield/ (Dollars in thousands) Balance Expense(1) Rate(1) ------------------ ------------ ------------------ Assets Loans:(2) Domestic $24,858,766 $342,629 5.48 % Foreign(3) 1,473,220 7,581 2.04 Securities - taxable 9,928,708 92,553 3.73 Securities - tax-exempt 40,592 1,015 10.00 Interest bearing deposits in banks 246,897 922 1.48 Federal funds sold and securities purchased under resale agreements 980,271 2,532 1.02 Trading account assets 327,415 909 1.10 ------------ --------- Total earning assets 37,855,869 448,141 4.71 --------- Allowance for credit losses (570,773) Cash and due from banks 2,324,389 Premises and equipment, net 510,205 Other assets 1,793,825 ------------ Total assets $41,913,515 ============ Liabilities Domestic deposits: Interest bearing $10,952,652 16,586 0.60 Savings and consumer time 4,116,669 9,990 0.96 Large time 2,303,754 8,408 1.45 Foreign deposits(3) 1,200,668 1,991 0.66 ------------ --------- Total interest bearing deposits 18,573,743 36,975 0.79 ------------ --------- Federal funds purchased and securities sold under repurchase agreements 393,772 689 0.69 Commercial paper 781,552 1,723 0.87 Other borrowed funds 262,512 1,673 2.53 Medium and long-term debt 399,761 1,738 1.73 UnionBanCal Corporation - obligated mandatorily redeemable preferred securities of subsidiary grantor trust 351,575 3,607 4.10 ------------ --------- Total borrowed funds 2,189,172 9,430 1.71 ------------ --------- Total interest bearing liabilities 20,762,915 46,405 0.89 --------- Noninterest bearing deposits 16,329,221 Other liabilities 986,545 ------------ Total liabilities 38,078,681 Shareholders' Equity Common equity 3,834,834 ------------ Total shareholders' equity 3,834,834 ------------ Total liabilities and shareholders' equity $41,913,515 ============ Net interest income/margin (taxable-equivalent basis) 401,736 4.22 % Less: taxable-equivalent adjustment 647 --------- Net interest income $401,089 ========= (1) Yields and interest income are presented on a taxable-equivalent basis using the federal statutory tax rate of 35 percent. (2) 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. (3) Foreign loans and deposits are those loans and deposits originated in foreign branches. UnionBanCal Corporation and Subsidiaries Net Interest Income (Unaudited) For the Nine Months Ended ---------------------------------------------------------------------- September 30, 2002 -------------------------------- Interest Average Average Income/ Yield/ (Dollars in thousands) Balance Expense(1) Rate(1) ------------------ ------------ ----------- ------- Assets Loans:(2) Domestic $24,468,284 $1,113,279 6.08 % Foreign(3) 1,094,168 23,642 2.89 Securities - taxable 5,678,095 235,041 5.52 Securities - tax-exempt 36,971 2,979 10.75 Interest bearing deposits in banks 113,779 1,898 2.23 Federal funds sold and securities purchased under resale agreements 782,607 10,354 1.77 Trading account assets 298,505 3,107 1.39 ------------ ----------- Total earning assets 32,472,409 1,390,300 5.72 ----------- Allowance for credit losses (635,313) Cash and due from banks 1,878,616 Premises and equipment, net 497,503 Other assets 1,328,587 ------------ Total assets $35,541,802 ============ Liabilities Domestic deposits: Interest bearing $7,881,352 68,564 1.16 Savings and consumer time 3,587,824 46,830 1.75 Large time 3,125,003 52,001 2.22 Foreign deposits(3) 1,576,176 17,096 1.45 ------------ ----------- Total interest bearing deposits 16,170,355 184,491 1.53 ------------ ----------- Federal funds purchased and securities sold under repurchase agreements 463,067 5,134 1.48 Commercial paper 999,030 12,998 1.74 Other borrowed funds 543,796 8,740 2.15 Medium and long-term debt 399,788 7,198 2.41 UnionBanCal Corporation - obligated mandatorily redeemable preferred securities of subsidiary grantor trust 352,183 11,832 4.47 ------------ ----------- Total borrowed funds 2,757,864 45,902 2.22 ------------ ----------- Total interest bearing liabilities 18,928,219 230,393 1.63 ----------- Noninterest bearing deposits 11,915,106 Other liabilities 968,204 ------------ Total liabilities 31,811,529 Shareholders' Equity Common equity 3,730,273 ------------ Total shareholders' equity 3,730,273 ------------ Total liabilities and shareholders' equity $35,541,802 ============ Net interest income/margin (taxable-equivalent basis) 1,159,907 4.77 % Less: taxable-equivalent adjustment 1,604 ----------- Net interest income $1,158,303 =========== September 30, 2003 -------------------------------- Interest Average Average Income/ Yield/ (Dollars in thousands) Balance Expense(1) Rate(1) ------------------ ------------ ----------- ------- Assets Loans:(2) Domestic $24,986,259 $1,043,906 5.58 % Foreign(3) 1,536,428 24,742 2.15 Securities - taxable 8,220,231 249,073 4.04 Securities - tax-exempt 41,168 3,045 9.86 Interest bearing deposits in banks 223,937 3,014 1.80 Federal funds sold and securities purchased under resale agreements 932,496 8,210 1.18 Trading account assets 322,952 2,847 1.18 ------------ ----------- Total earning assets 36,263,471 1,334,837 4.92 ----------- Allowance for credit losses (586,418) Cash and due from banks 2,173,775 Premises and equipment, net 508,859 Other assets 1,666,062 ------------ Total assets $40,025,749 ============ Liabilities Domestic deposits: Interest bearing $10,087,830 54,194 0.72 Savings and consumer time 3,937,051 33,583 1.14 Large time 2,416,606 28,995 1.60 Foreign deposits(3) 1,269,010 8,008 0.84 ------------ ----------- Total interest bearing deposits 17,710,497 124,780 0.94 ------------ ----------- Federal funds purchased and securities sold under repurchase agreements 414,446 2,763 0.89 Commercial paper 899,456 7,397 1.10 Other borrowed funds 191,480 3,983 2.78 Medium and long-term debt 399,745 5,422 1.81 UnionBanCal Corporation - obligated mandatorily redeemable preferred securities of subsidiary grantor trust 351,594 10,930 4.15 ------------ ----------- Total borrowed funds 2,256,721 30,495 1.80 ------------ ----------- Total interest bearing liabilities 19,967,218 155,275 1.04 ----------- Noninterest bearing deposits 15,159,687 Other liabilities 1,022,854 ------------ Total liabilities 36,149,759 Shareholders' Equity Common equity 3,875,990 ------------ Total shareholders' equity 3,875,990 ------------ Total liabilities and shareholders' equity $40,025,749 ============ Net interest income/margin (taxable-equivalent basis) 1,179,562 4.35 % Less: taxable-equivalent adjustment 1,916 ----------- Net interest income $1,177,646 =========== (1) Yields and interest income are presented on a taxable-equivalent basis using the federal statutory tax rate of 35 percent. (2) 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. (3) Foreign loans and deposits are those loans and deposits originated in foreign branches. UnionBanCal Corporation and Subsidiaries On a Reported Earnings Basis (reference to exhibit 3) ----------------------------------------------------- Noninterest Income (Unaudited) Percentage Change to For the Three Months Ended Sept. 30, 2003 from ------------------------------- ------------------- (Dollars in Sept. 30, June 30, Sept. 30, Sept. 30, June 30, thousands) 2002 2003 2003 2002 2003 -------------- --------- --------- --------- ---------- ------- Service charges on deposit accounts $68,629 $77,942 $81,832 19.24 % 4.99 % Trust and investment management fees 35,368 33,141 35,429 0.17 6.90 International commissions and fees 20,131 21,276 22,223 10.39 4.45 Insurance commissions 6,259 16,024 15,814 152.66 (1.31) Card processing fees, net 9,068 9,340 10,335 13.97 10.65 Merchant banking fees 6,819 6,191 9,312 36.56 50.41 Foreign exchange trading gains, net 8,193 6,958 7,574 (7.56) 8.85 Brokerage commissions and fees 9,034 8,412 7,549 (16.44) (10.26) Securities gains (losses), net 1,017 9,660 (2,618) nm nm Other 4,598 14,227 14,020 204.92 (1.46) --------- --------- --------- Total noninterest income $169,116 $203,171 $201,470 19.13 % (0.84)% ========= ========= ========= Noninterest Expense (Unaudited) Percentage Change to For the Three Months Ended Sept. 30, 2003 from ------------------------------- ------------------- (Dollars in Sept. 30, June 30, Sept. 30, Sept. 30, June 30, thousands) 2002 2003 2003 2002 2003 -------------- --------- --------- --------- ---------- ------- Salaries and other compensation $152,057 $161,567 $169,705 11.61 % 5.04 % Employee benefits 30,218 37,362 35,597 17.80 (4.72) --------- --------- --------- Salaries and employee benefits 182,275 198,929 205,302 12.63 3.20 Net occupancy 27,340 32,866 31,342 14.64 (4.64) Equipment 16,343 16,354 15,680 (4.06) (4.12) Professional services 10,350 13,566 12,676 22.47 (6.56) Communications 13,186 13,354 12,661 (3.98) (5.19) Software 10,061 10,849 11,996 19.23 10.57 Advertising and public relations 9,145 9,693 9,227 0.90 (4.81) Data processing 7,944 7,744 7,659 (3.59) (1.10) Intangible asset amortization 1,497 3,227 2,587 72.81 (19.83) Foreclosed asset expense (income) 18 - (79) nm nm Other 39,665 44,422 39,810 0.37 (10.38) --------- --------- --------- Total noninterest expense $317,824 $351,004 $348,861 9.77 % (0.61)% ========= ========= ========= nm = not meaningful UnionBanCal Corporation and Subsidiaries On an Operating Earnings Basis (reference to exhibit 4) (1) ----------------------------------------------------------- Noninterest Income (Unaudited) Percentage Change to For the Three Months Ended Sept. 30, 2003 from ------------------------------- ------------------- (Dollars in Sept. 30, June 30, Sept. 30, Sept. 30, June 30, thousands) 2002 2003 2003 2002 2003 -------------- --------- --------- --------- ---------- ------- Service charges on deposit accounts $68,629 $77,942 $81,832 19.24 % 4.99 % Trust and investment management fees 35,368 33,141 35,429 0.17 6.90 International commissions and fees 20,131 21,276 22,223 10.39 4.45 Insurance commissions 6,259 16,024 15,814 152.66 (1.31) Card processing fees, net 9,068 9,340 10,335 13.97 10.65 Merchant banking fees 6,819 6,191 9,312 36.56 50.41 Foreign exchange trading gains, net 8,193 6,958 7,574 (7.56) 8.85 Brokerage commissions and fees 9,034 8,412 7,549 (16.44) (10.26) Securities gains (losses), net 1,017 647 (2,618) nm nm Other 4,598 14,227 14,020 204.92 (1.46) --------- --------- --------- Total noninterest income $169,116 $194,158 $201,470 19.13 % 3.77 % ========= ========= ========= Noninterest Expense (Unaudited) Percentage Change to For the Three Months Ended Sept. 30, 2003 from ------------------------------- ------------------- (Dollars in Sept. 30, June 30, Sept. 30, Sept. 30, June 30, thousands) 2002 2003 2003 2002 2003 -------------- --------- --------- --------- ---------- ------- Salaries and other compensation $152,057 $161,567 $169,705 11.61 % 5.04 % Employee benefits 30,218 37,362 35,597 17.80 (4.72) --------- --------- --------- Salaries and employee benefits 182,275 198,929 205,302 12.63 3.20 Net occupancy 27,340 28,666 31,342 14.64 9.34 Equipment 16,343 16,354 15,680 (4.06) (4.12) Professional services 10,350 13,566 12,676 22.47 (6.56) Communications 13,186 13,354 12,661 (3.98) (5.19) Software 10,061 10,849 11,996 19.23 10.57 Advertising and public relations 9,145 9,693 9,227 0.90 (4.81) Data processing 7,944 7,744 7,659 (3.59) (1.10) Intangible asset amortization 1,497 3,227 2,587 72.81 (19.83) Foreclosed asset expense (income) 18 - (79) nm nm Other 39,665 44,422 39,810 0.37 (10.38) --------- --------- --------- Total noninterest expense $317,824 $346,804 $348,861 9.77 % 0.59 % ========= ========= ========= nm = not meaningful (1) See exhibit 5 for reconciliation of 'reported earnings' to 'operating earnings'. UnionBanCal Corporation and Subsidiaries On a Reported Earnings Basis (reference to exhibit 3) ----------------------------------------------------- Noninterest Income (Unaudited) Percentage Change to For the Nine Months Sept. 30, Ended 2003 from --------------------- ---------- Sept. 30, Sept. 30, Sept. 30, (Dollars in thousands) 2002 2003 2002 ---------------------------------- --------- ----------- --------- Service charges on deposit accounts $204,641 $232,061 13.40 % Trust and investment management fees 109,680 101,245 (7.69) International commissions and fees 57,593 63,112 9.58 Insurance commissions 19,969 45,056 125.63 Card processing fees, net 26,343 29,357 11.44 Brokerage commissions and fees 27,614 24,614 (10.86) Merchant banking fees 22,845 21,521 (5.80) Foreign exchange trading gains, net 21,653 21,466 (0.86) Securities gains (losses), net 2,986 7,042 135.83 Other 11,141 44,938 303.36 --------- ----------- Total noninterest income $504,465 $590,412 17.04 % ========= =========== Noninterest Expense (Unaudited) Percentage Change to For the Nine Months Sept. 30, Ended 2003 from --------------------- ---------- Sept. 30, Sept. 30, Sept. 30, (Dollars in thousands) 2002 2003 2002 ---------------------------------- --------- ----------- --------- Salaries and other compensation $448,690 $484,333 7.94 Employee benefits 98,561 118,005 19.73 % --------- ----------- Salaries and employee benefits 547,251 602,338 10.07 Net occupancy 75,750 91,844 21.25 Equipment 48,650 48,705 0.11 Communications 39,695 39,859 0.41 Professional services 30,789 38,256 24.25 Software 31,610 34,921 10.47 Advertising and public relations 27,774 28,587 2.93 Data processing 24,475 23,887 (2.40) Intangible asset amortization 3,661 8,291 126.47 Foreclosed asset expense (income) 130 (28) nm Other 116,317 125,805 8.16 --------- ----------- Total noninterest expense $946,102 $1,042,465 10.19 % ========= =========== nm = not meaningful UnionBanCal Corporation and Subsidiaries On an Operating Earnings Basis (reference to exhibit 4) (1) ----------------------------------------------------------- Noninterest Income (Unaudited) Percentage Change to For the Nine Months Sept. 30, Ended 2003 from --------------------- ---------- Sept. 30, Sept. 30, Sept. 30, (Dollars in thousands) 2002 2003 2002 ---------------------------------- --------- ----------- --------- Service charges on deposit accounts $204,641 $232,061 13.40 % Trust and investment management fees 109,680 101,245 (7.69) International commissions and fees 57,593 63,112 9.58 Insurance commissions 19,969 45,056 125.63 Card processing fees, net 26,343 29,357 11.44 Brokerage commissions and fees 27,614 24,614 (10.86) Merchant banking fees 22,845 21,521 (5.80) Foreign exchange trading gains, net 21,653 21,466 (0.86) Securities gains (losses), net 2,986 (1,971) nm Other 11,141 44,938 303.36 --------- ----------- Total noninterest income $504,465 $581,399 15.25 % ========= =========== Noninterest Expense (Unaudited) Percentage Change to For the Nine Months Sept. 30, Ended 2003 from --------------------- ---------- Sept. 30, Sept. 30, Sept. 30, (Dollars in thousands) 2002 2003 2002 ---------------------------------- --------- ----------- --------- Salaries and other compensation $448,690 $484,333 7.94 % Employee benefits 98,561 118,005 19.73 --------- ----------- Salaries and employee benefits 547,251 602,338 10.07 Net occupancy 75,750 87,644 15.70 Equipment 48,650 48,705 0.11 Communications 39,695 39,859 0.41 Professional services 30,789 38,256 24.25 Software 31,610 34,921 10.47 Advertising and public relations 27,774 28,587 2.93 Data processing 24,475 23,887 (2.40) Intangible asset amortization 3,661 8,291 126.47 Foreclosed asset expense (income) 130 (28) nm Other 116,317 125,805 8.16 --------- ----------- Total noninterest expense $946,102 $1,038,265 9.74 % ========= =========== nm = not meaningful (1) See exhibit 6 for reconciliation of 'reported earnings' to 'operating earnings'. CONTACT: UnionBanCal Corporation John A. Rice, Jr., 415-765-2998 (Investor Relations) Stephen L. Johnson, 415-765-3252 (Public Relations) Michelle R. Crandall, 415-765-2780 (Investor Relations)