-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, D1YpLfvXAk8U5Op3ffpR4FxLA7RhvrCW7i7qZvvCD80MynqGGNWMFo836N2wGWyu 6URQRDnB0oNrrVLjILSqqA== 0001157523-06-003901.txt : 20060420 0001157523-06-003901.hdr.sgml : 20060420 20060420170833 ACCESSION NUMBER: 0001157523-06-003901 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20060420 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20060420 DATE AS OF CHANGE: 20060420 FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNIONBANCAL CORP CENTRAL INDEX KEY: 0001011659 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 941234979 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-15081 FILM NUMBER: 06770636 BUSINESS ADDRESS: STREET 1: 400 CALIFORNIA STREET CITY: SAN FRANCISCO STATE: CA ZIP: 94104-1476 BUSINESS PHONE: 4157652969 MAIL ADDRESS: STREET 1: 400 CALIFORNIA STREET CITY: SAN FRANCISCO STATE: CA ZIP: 94104-1476 8-K 1 a5128790.txt UNIONBANCAL CORPORATION 8-K ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934 Date of Report: April 20, 2006 UnionBanCal Corporation (Exact name of registrant as specified in its charter) Delaware 001-15081 94-1234979 (State of Incorporation) (Commission File Number) (IRS Employer Identification No.) 400 California Street San Francisco, CA 94104-1302 Tel. (415) 765-2969 Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below): [ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) ================================================================================ Item 2.02 Results of Operations and Financial Condition. On April 20, 2006, the Company issued a press release concerning earnings for the first quarter of 2006, a copy of which is furnished herewith as Exhibit 99.1. Item 9.01 Financial Statements and Exhibits (c) Exhibits: Exhibit No. Description - -------------------------------------------------------------------------------- 99.1 Press release dated April 20, 2006. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Dated: April 20, 2006 UNIONBANCAL CORPORATION By: /S/ DAVID I. MATSON ------------------------- David I. Matson Chief Financial Officer (Duly Authorized Officer) EXHIBIT INDEX Exhibit No. Description - -------------------------------------------------------------------------------- 99.1 Press release dated April 20, 2006. EX-99.1 2 a5128790ex991.txt UNIONBANCAL CORPORATION EXHIBIT 99.1 Exhibit 99.1 UnionBanCal Corporation Reports First Quarter 2006 Earnings Per Share of $1.24 SAN FRANCISCO--(BUSINESS WIRE)--April 20, 2006--UnionBanCal Corporation (NYSE:UB) First Quarter 2006 Highlights: -- Diluted earnings per share from continuing operations of $1.24, up 10 percent year-over-year, excluding a positive tax adjustment of $0.07 per diluted common share recorded in first quarter 2005 -- Net interest margin expansion of 14 basis points compared with first quarter 2005, to 4.36 percent -- Strong year-over-year organic loan growth -- Average total loans up 15 percent -- Average commercial loans up 20 percent -- Average residential mortgage loans up 16 percent -- Year-over-year revenue growth of 6.5 percent -- Return on average stockholders' equity of 16.2 percent -- Annualized average all-in cost of funds of 1.45 percent -- Average noninterest bearing deposits comprised 45 percent of average total deposits -- Nonperforming assets just 0.09 percent of total assets at quarter-end UnionBanCal Corporation (NYSE:UB) today reported first quarter 2006 net income of $172.9 million, or $1.18 per diluted common share, and income from continuing operations of $181.5 million, or $1.24 per diluted common share. Excluding a positive tax adjustment of $0.07 per diluted common share last year, first quarter 2006 income from continuing operations per diluted common share increased 9.7 percent. "We are off to a good start in 2006," stated Takashi Morimura, President and Chief Executive Officer. "Our balanced business model is evident in our first quarter results as excellent loan growth and credit quality offset mixed deposit results, reflecting an increasingly competitive deposit market. During the quarter, we returned $139 million to shareholders in the form of dividends and share repurchases, equal to 80 percent of our first quarter net income. Despite this significant return of capital, we finished the quarter with very strong capital levels, including a tangible equity ratio of 8.46 percent." "We generated good loan growth across all categories in first quarter," added Chief Operating Officer Philip Flynn. "Commercial loans increased at a double digit rate, and, though slowing appreciably due to rising rates, residential mortgages still grew at a healthy rate year-over-year. We continue to report very strong credit quality, with net charge-offs of only $5 million in the quarter and nonperforming assets declining further, to just 0.09 percent of total assets at quarter-end. While this trend is unsustainable in the long run, it is evidence of our responsible lending and monitoring practices and the overall quality of our loan portfolio. "Average noninterest bearing deposits declined 9 percent versus the fourth quarter, virtually all due to a decline in wholesale deposits," continued Flynn. "Well over half of the decline in the wholesale deposit base was in title, escrow and other real estate related balances, reflecting slower real estate activity, some of which is seasonal. In addition, demand deposit volumes were affected by disintermediation, which has accelerated due to the cumulative effect of rising short-term interest rates. Despite this more challenging deposit environment, our deposit franchise remains healthy and will continue to afford us a solid advantage in our primary markets. We have built this deposit franchise over the long term, and the inherent strength in this aspect of our business will serve the Company very well going forward. We are confident that we can defend and continue to grow our deposit base, and we took steps to do just that in the quarter by launching several new interest bearing deposit initiatives." First Quarter Total Revenue From Continuing Operations For first quarter 2006, total revenue (taxable-equivalent net interest income plus noninterest income) was $684 million, an increase of $42 million, or 6.5 percent, compared with first quarter 2005. Net interest income increased 6.8 percent, and noninterest income increased 6.0 percent. Compared with fourth quarter 2005, total revenue increased 2.9 percent, with net interest income decreasing 3.2 percent, and noninterest income increasing 18.8 percent. Excluding a $37 million fourth quarter 2005 loss on the sale of securities, total revenue in sequential quarters decreased $18 million, or 2.5 percent, with net interest income decreasing 3.2 percent and noninterest income decreasing 1.1 percent. First Quarter Net Interest Income (Taxable-equivalent) From Continuing Operations Net interest income was $466 million in first quarter 2006, up $30 million, or 6.8 percent, from the same quarter a year ago, primarily due to strong growth in loans. Average earning assets increased $1.4 billion, or 3.4 percent, primarily due to a $4.3 billion, or 14.6 percent, increase in average loans, while average securities declined $2.9 billion, or 25.8 percent. Average commercial loans increased $2.0 billion, or 19.7 percent; average residential mortgages increased $1.6 billion, or 16.4 percent; average construction loans increased $0.4 billion, or 36.7 percent; and average commercial mortgages increased $0.2 billion, or 4.3 percent. Compared to first quarter 2005, average noninterest bearing deposits decreased $649 million, or 3.6 percent. Average title and escrow deposits decreased $381 million, or 13.8 percent, due to lower residential real estate activity. Average business demand deposits, excluding title and escrow, declined $305 million, or 2.5 percent, primarily due to disintermediation resulting from rising short-term interest rates. Consumer deposits increased $37 million, or 1.2 percent. Average noninterest bearing deposits represented 45.1 percent of average total deposits in first quarter 2006. The annualized average all-in cost of funds was 1.45 percent, reflecting the Company's strong average deposit-to-loan ratio of 114.1 percent and the high proportion of noninterest bearing deposits to total deposits. The average yield on earning assets of $43.1 billion was 5.77 percent, up 83 basis points over first quarter last year, with the average loan yield increasing 58 basis points. The average rate on interest bearing liabilities of $24.5 billion was 2.49 percent, up 118 basis points, reflecting both higher short-term interest rates and heightened competition for deposits, compared with first quarter 2005. Average interest bearing deposits were $21.3 billion and the weighted average rate was 2.19 percent. The net interest margin in first quarter 2006 was 4.36 percent, compared with 4.22 percent in first quarter 2005, an increase of 14 basis points. On a sequential quarter basis, net interest income decreased $15 million, or 3.2 percent, with approximately $5 million of the variance due to two less days in the quarter. Average loans increased $791 million, or 2.4 percent, while average securities decreased $794 million, or 8.7 percent. Average commercial loans increased $389 million, or 3.3 percent; average residential mortgages increased $301 million, or 2.7 percent; and average construction loans increased $109 million, or 7.7 percent. Average noninterest bearing deposits decreased $1.7 billion, or 9.1 percent, primarily due to a $766 million decrease in title and escrow deposits and disintermediation in other business demand deposits caused by rising short-term interest rates. The impact of lower title and escrow deposit volumes was partially offset by a reduction in noninterest expense associated with this business. The average yield on earning assets increased 26 basis points and the average rate on interest bearing liabilities increased 44 basis points. The net interest margin decreased 6 basis points to 4.36 percent, primarily due to lower demand deposits. First Quarter Noninterest Income From Continuing Operations In first quarter 2006, noninterest income was $218 million, up $12 million, or 6.0 percent, from the same quarter a year ago. Service charges on deposit accounts increased 3.0 percent, primarily due to changes in the overdraft and NSF fee structure, partially offset by lower account analysis fees stemming from an increase in the earnings credit rate on deposit balances. Trust and investment management fees increased $8.2 million, or 19.4 percent, primarily due to an increase in trust assets and to a one-time increase in trust fees resulting from a refinement in accrual methodology, which accounted for $3 million of the increase. Compared with fourth quarter 2005, first quarter 2006 noninterest income increased $34 million, or 18.8 percent. Excluding the $37 million loss on the sale of $1 billion of agency debentures associated with the strategic rebalancing of the Company's securities portfolio in fourth quarter 2005, noninterest income decreased $2 million, or 1.1 percent. Service charges on deposit accounts increased 2.0 percent, while trust and investment management fees increased 7.9 percent, primarily due to a refinement in accrual methodology. Other noninterest income declined $7.4 million, or 17.0 percent, primarily due to a decline in net gains on private equity investments of $5.5 million. First Quarter Noninterest Expense From Continuing Operations Noninterest expense for first quarter 2006 was $415 million, an increase of $22 million, or 5.5 percent, over first quarter 2005. Salaries and employee benefits expense increased $21 million, or 9.0 percent, primarily due to annual merit increases and higher performance-related incentive expense. Higher incentive expense included $6.2 million in stock option expense, recorded for the first time in first quarter 2006, and a $2.9 million increase in restricted stock expense, as the Company has moved to a heavier restricted stock weighting in its equity-linked compensation programs. Professional services expense increased $3 million, or 23.9 percent, primarily due to higher compliance-related expense. Outside services expense increased $7 million, or 34.7 percent, primarily due to higher cost of services related to title and escrow balances, stemming from a higher earnings credit rate in first quarter 2006. Foreclosed asset expense (income) in first quarter 2006 reflects a $7.4 million gain on the sale of property. The provision for off-balance sheet commitments declined $6 million compared with first quarter 2005. Excluding the effect of stock option expense and higher restricted stock expense, noninterest expense increased $12 million, or 3.2 percent, compared with prior year. Compared with fourth quarter 2005, noninterest expense decreased $15 million, or 3.4 percent. Salaries and employee benefits expense increased $20 million, or 8.6 percent, primarily due to annual seasonal factors that result in higher payroll taxes and 401(k) matching contributions, as well as the initial expensing of stock options in the first quarter. Payroll taxes accounted for $9.5 million of the increase, 401(k) and post-employment expense accounted for $7.3 million of the increase, and stock option expense accounted for $6.2 million of the increase. Net occupancy expense decreased $8 million, or 20.0 percent, primarily due to charges incurred in fourth quarter 2005 associated with the consolidation of offices in San Francisco. Professional services expense increased $5 million, or 55.3 percent, primarily due to a recovery of legal fees recorded in fourth quarter 2005 and higher compliance-related expense in the first quarter. Outside services expense decreased $12 million, or 30.1 percent, primarily due to lower cost of services related to decreased title and escrow balances. Foreclosed asset expense (income) in first quarter 2006 reflects a $7.4 million gain on the sale of property. The provision for off-balance sheet commitments declined $8 million compared with fourth quarter 2005. Income Tax Expense From Continuing Operations The effective tax rate for first quarter 2006 was 34.1 percent, compared with an effective tax rate of 31.0 percent for first quarter 2005. First quarter 2005 income tax expense included a $10.0 million reduction in reserves for estimated amounts owed to the Internal Revenue Service with respect to certain leveraged leasing transactions. Credit Quality Nonperforming assets at March 31, 2006, were $42 million, or 0.09 percent of total assets. This compares with $62 million, or 0.12 percent of total assets, at December 31, 2005, and $101 million, or 0.20 percent of total assets, at March 31, 2005. Nonperforming assets declined 58 percent between March 31, 2005 and March 31, 2006. In first quarter 2006, the total provision for credit losses was negative $10.0 million. The total provision for credit losses was negative $5.0 million in fourth quarter 2005 and negative $9.1 million in first quarter 2005. The total provision for credit losses in first quarter 2006 consisted of a provision for loan losses of negative $7.0 million and a provision for off-balance sheet commitments (classified in noninterest expense) of negative $3.0 million. In first quarter 2006, net charge-offs were $5 million, compared with net charge-offs of $2 million in fourth quarter 2005, and net recoveries of $15 million in first quarter 2005. At March 31, 2006, the allowance for credit losses as a percent of total loans and as a percent of nonaccrual loans was 1.26 percent and 1003 percent, respectively. These ratios were 1.32 percent and 744 percent, respectively, at December 31, 2005, and 1.63 percent and 507 percent, respectively, at March 31, 2005. Balance Sheet and Capital Ratios At March 31, 2006, the Company had total assets of $48.8 billion. Total loans were $33.5 billion and total deposits were $39.2 billion, resulting in a period-end deposit-to-loan ratio of 117 percent. At period-end, total stockholders' equity was $4.6 billion, the tangible equity ratio was 8.46 percent, and the ratio of tangible common equity to risk-weighted assets was 8.68 percent. Book value per share at March 31, 2006, was $31.94, up 12.4 percent from a year earlier. The Company's Tier I and total risk-based capital ratios at period-end were 9.01 percent and 10.84 percent, respectively. Stock Repurchases During first quarter 2006, the Company repurchased 1,167,700 shares of common stock at a total price of $80.0 million, or an average of $68.52 per repurchased share. At March 31, 2006, the Company was authorized by its Board of Directors to repurchase an additional $22 million of common stock. Common shares outstanding at March 31, 2006, were 143.4 million, a decrease of 1.2 million shares, or 0.8 percent, from one year earlier. Discontinued Operations On September 22, 2005, the Company announced the signing of a definitive agreement to sell its international correspondent banking business (the Business) to Wachovia Bank, N.A. The principal legal closing of the transaction took place on October 6, 2005, with the Company receiving $245 million in cash from Wachovia. The Company is continuing to operate the Business over a transition period which will extend into the second quarter of 2006, during which time it is expected that the majority of the Company's international correspondent bank customers will have transferred to Wachovia. The Company expects its exit from international correspondent banking to be complete in the second quarter of 2006. As customers have transferred to Wachovia, the Company's international correspondent banking revenue has declined. International correspondent banking expenses have also declined, though at a slower rate than revenue. Commencing in third quarter 2005, all results of the international correspondent banking business have been reported as a discontinued operation and all prior periods have been restated to reflect this accounting treatment. All of the assets and liabilities of the discontinued operations have been separately identified on the consolidated balance sheets (see Exhibit 3) and the average net assets or liabilities of the discontinued operations are reflected in the analysis of net interest margin (see Exhibits 5 and 6). In the first quarter of 2006, the Company recorded a net loss from discontinued operations of $8.5 million, or $0.06 per fully diluted common share. In the fourth quarter of 2005, the Company recorded an after-tax gain on the transaction of approximately $147.4 million, or $1.00 per fully diluted share, and a net loss from discontinued operations of $1.1 million, or $0.01 per fully diluted common share. Second Quarter and Full Year 2006 Earnings Per Share Forecast The Company currently estimates that second quarter 2006 fully diluted earnings per share from continuing operations will be in the range of $1.26 to $1.31, including estimated stock option expense of $0.02 per share and a total provision for credit losses of approximately zero. In addition, the Company expects to record a net loss from discontinued operations of approximately $0.05 per diluted common share. Therefore, net income per diluted common share is expected to be in the range of $1.21 to $1.26. For full year 2006, the Company currently estimates that fully diluted earnings per share from continuing operations will be in the range of $5.30 to $5.50, including estimated stock option expense of $0.10 per share and an estimated total provision for credit losses of $10 million. In addition, the Company expects to record a net loss from discontinued operations of approximately $0.11 per diluted common share. Therefore, net income per diluted common share is expected to be in the range of $5.19 to $5.39. Non-GAAP Financial Measures This press release contains certain references to financial measures that exclude a loss on the sale of securities related to the rebalancing of the Company's securities portfolio or stock option expense and higher restricted stock expense, which are adjustments from comparable measures calculated and presented in accordance with accounting principles generally accepted in the United States of America (GAAP). These financial measures, as used herein, differ from financial measures reported under GAAP in that they exclude 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. 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 the fact that they do not relate strictly to historical or current facts. Often, they include the words "believe," "expect," "target," "anticipate," "intend," "plan," "estimate," "potential," "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. Forward-looking statements in this press release include those related to earnings forecasts, the Company's strategic initiatives, the Company's competitive positioning, the Company's ability to defend and continue to grow its deposit base, and the transition and financial impact of the sale of the international correspondent banking business. There are numerous risks and uncertainties that could and will cause actual results to differ materially from those discussed in the Company's forward-looking statements. Many of these factors are beyond the Company's ability to control or predict and could have a material adverse effect on the Company's stock price, financial condition, and results of operations or prospects. Such risks and uncertainties include, but are not limited to, adverse economic and fiscal conditions in California; increased energy costs; global political and general economic conditions related to the war on terrorism and other hostilities; fluctuations in interest rates; the controlling interest in UnionBanCal Corporation of The Bank of Tokyo-Mitsubishi UFJ, Ltd., which is a wholly-owned subsidiary of Mitsubishi UFJ Financial Group, Inc.; competition in the banking and financial services industries; adverse effects of current and future banking laws, rules and regulations and their enforcement, or governmental fiscal or monetary policies; declines or disruptions in the stock or bond markets which may adversely affect the Company or the Company's borrowers or other customers; changes in accounting practices or requirements; the Company's ability to transition international correspondent bank customers; and risks associated with various strategies the Company may pursue, including potential acquisitions, divestitures and restructurings. 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 first quarter results at 8:30 AM Pacific Time (11:30 AM Eastern Time) on April 21, 2006. Interested parties calling from locations within the United States should call 800-700-7133 (612-332-0802 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 Pacific Time (3:00 PM Eastern Time), April 21, through 11:59 PM Pacific Time, April 28 (2:59 AM Eastern Time, April 29). The reservation number for this playback is 822803. Based in San Francisco, UnionBanCal Corporation is a bank holding company with assets of $48.8 billion at March 31, 2006. Its primary subsidiary, Union Bank of California, N.A., had 321 banking offices in California, Oregon and Washington, and 18 international facilities, at March 31, 2006. UnionBanCal Corporation and Subsidiaries Financial Highlights (Unaudited) (1) Exhibit 1 Percent Change to As of and for the Three Months Ended March 31, 2006 from ------------------------------------- ----------------- March 31, Dec. 31, March 31, March 31, Dec. 31, (Dollars in thousands, except per share data) 2005 2005 2006 2005 2005 - -------------------------- ------------ ----------- -------- -------- Results of operations: Net interest income (2) $436,717 $481,828 $466,341 6.78% (3.21%) Noninterest income 205,625 183,420 217,910 5.97% 18.80% ------------ ------------ ------------ Total revenue 642,342 665,248 684,251 6.52% 2.86% Noninterest expense 392,952 429,198 414,544 5.49% (3.41%) Reversal of allowance for loan losses (12,119) (10,000) (7,000) (42.24%) (30.00%) ------------ ------------ ------------ Income from continuing operations before income taxes (2) 261,509 246,050 276,707 5.81% 12.46% Taxable- equivalent adjustment 1,055 1,228 1,248 18.29% 1.63% Income tax expense 80,703 82,657 94,004 16.48% 13.73% ------------ ------------ ------------ Income from continuing operations $179,751 $162,165 $181,455 0.95% 11.90% (Loss)/Income from discontinued operations 2,226 146,324 (8,510) nm nm ------------ ------------ ------------ Net income $181,977 $308,489 $172,945 (4.96%) (43.94%) ============ ============ ============ Per common share: Basic earnings: From continuing operations $1.22 $1.12 $1.26 3.28% 12.50% Net income 1.24 2.14 1.20 (3.23%) (43.93%) Diluted earnings: From continuing operations 1.20 1.10 1.24 3.33% 12.73% Net income 1.21 2.09 1.18 (2.48%) (43.54%) Dividends (3) 0.36 0.41 0.41 13.89% 0.00% Book value (end of period) 28.41 31.62 31.94 12.43% 1.01% Common shares outstanding (end of period) 144,575,615 144,207,072 143,402,332 (0.81%) (0.56%) Weighted average common shares outstanding - basic 146,997,649 144,466,374 143,878,106 (2.12%) (0.41%) Weighted average common shares outstanding - diluted 149,915,503 147,385,734 146,026,188 (2.59%) (0.92%) Balance sheet (end of period): Total assets (4) $49,432,871 $49,416,002 $48,800,945 (1.28%) (1.24%) Total loans 29,778,461 33,095,595 33,528,868 12.59% 1.31% Nonperforming assets 101,226 61,645 42,392 (58.12%) (31.23%) Total deposits 40,414,979 40,082,239 39,155,904 (3.12%) (2.31%) Stockholders' equity 4,107,223 4,559,700 4,579,878 11.51% 0.44% Balance sheet (period average): Total assets $46,313,053 $48,406,487 $48,016,643 3.68% (0.81%) Total loans 29,714,206 33,260,944 34,052,067 14.60% 2.38% Earning assets 41,667,831 43,451,686 43,084,349 3.40% (0.85%) Total deposits 38,199,718 40,253,861 38,856,033 1.72% (3.47%) Stockholders' equity 4,208,650 4,488,396 4,538,679 7.84% 1.12% Financial ratios (5): Return on average assets (6): From continuing operations 1.57% 1.33% 1.53% Net income 1.59% 2.53% 1.46% Return on average stockholders' equity (6): From continuing operations 17.32% 14.33% 16.21% Net income 17.54% 27.27% 15.45% Efficiency ratio (7) 60.64% 63.77% 62.10% Net interest margin (2) 4.22% 4.42% 4.36% Dividend payout ratio 29.51% 36.61% 32.54% Tangible equity ratio 7.36% 8.31% 8.46% Tier 1 risk- based capital ratio (4)(8) 9.06% 9.17% 9.01% Total risk- based capital ratio (4)(8) 11.41% 11.10% 10.84% Leverage ratio (4)(8) 7.79% 8.39% 8.80% Allowances for credit losses to total loans (9) 1.63% 1.32% 1.26% Allowances for credit losses to nonaccrual loans (9) 506.96% 743.58% 1003.48% Net loans charged off (recovered) to average total loans (6) (0.19%) 0.03% 0.06% Nonperforming assets to total loans, foreclosed assets, and distressed loans held for sale 0.34% 0.19% 0.13% Nonperforming assets to total assets (4) 0.20% 0.12% 0.09% Refer to Exhibit 8 for footnote explanations. UnionBanCal Corporation and Subsidiaries Condensed Consolidated Statements of Income (Unaudited) (1) (Taxable-Equivalent Basis) Exhibit 2 For the Three Months Ended ----------------------------- March 31, Dec. 31, March 31, (Dollars in thousands, except per share data) 2005 2005 2006 - ---------------------------------------- --------- --------- --------- Interest Income (2) Loans $405,124 $497,046 $512,988 Securities 101,264 95,436 97,351 Interest bearing deposits in banks 733 1,244 736 Federal funds sold and securities purchased under resale agreements 2,373 6,129 3,845 Trading account assets 908 1,422 1,530 --------- --------- --------- Total interest income 510,402 601,277 616,450 --------- --------- --------- Interest Expense Deposits 55,828 97,303 115,309 Federal funds purchased and securities sold under repurchase agreements 4,998 1,042 8,802 Commercial paper 4,560 9,911 12,448 Medium and long-term debt 6,532 9,695 10,397 Trust notes 238 238 238 Other borrowed funds 1,529 1,260 2,915 --------- --------- --------- Total interest expense 73,685 119,449 150,109 --------- --------- --------- Net Interest Income (2) 436,717 481,828 466,341 Reversal of allowance for loan losses (12,119) (10,000) (7,000) --------- --------- --------- Net interest income after reversal of allowance for loan losses 448,836 491,828 473,341 --------- --------- --------- Noninterest Income Service charges on deposit accounts 79,267 80,030 81,635 Trust and investment management fees 41,963 46,465 50,115 Insurance commissions 22,017 19,739 19,518 Merchant banking fees 6,266 8,261 8,229 Foreign exchange gains, net 8,170 8,332 7,818 Brokerage commissions and fees 8,972 7,171 7,795 Card processing fees, net 5,607 6,437 6,697 Securities gains (losses), net 344 (36,750) (214) Other 33,019 43,735 36,317 --------- --------- --------- Total noninterest income 205,625 183,420 217,910 --------- --------- --------- Noninterest Expense Salaries and employee benefits 231,758 232,496 252,495 Net occupancy 32,362 41,048 32,837 Outside services 21,247 40,942 28,609 Equipment 17,403 18,042 17,922 Software 13,975 15,427 16,344 Professional services 11,741 9,369 14,547 Communications 10,380 10,959 10,552 Foreclosed asset expense (income) 406 (29) (7,367) (Reversal of) provision for losses on off-balance sheet commitments 3,000 5,000 (3,000) Other 50,680 55,944 51,605 --------- --------- --------- Total noninterest expense 392,952 429,198 414,544 --------- --------- --------- Income from continuing operations before income taxes (2) 261,509 246,050 276,707 Taxable-equivalent adjustment 1,055 1,228 1,248 Income tax expense 80,703 82,657 94,004 --------- --------- --------- Income from Continuing Operations 179,751 162,165 181,455 --------- --------- --------- Income (loss) from discontinued operations before income taxes 3,639 227,967 (13,603) Income tax expense (benefit) 1,413 81,643 (5,093) --------- --------- --------- Income (loss) from Discontinued Operations 2,226 146,324 (8,510) --------- --------- --------- Net Income $181,977 $308,489 $172,945 ========= ========= ========= Income from continuing operations per common share - basic $1.22 $1.12 $1.26 Net Income per common share - basic $1.24 $2.14 $1.20 ========= ========= ========= Income from continuing operations per common share - diluted $1.20 $1.10 $1.24 Net income per common share - diluted $1.21 $2.09 $1.18 ========= ========= ========= Weighted average common shares outstanding - basic 146,998 144,466 143,878 ========= ========= ========= Weighted average common shares outstanding - diluted 149,916 147,386 146,026 ========= ========= ========= Refer to Exhibit 8 for footnote explanations. UnionBanCal Corporation and Subsidiaries Consolidated Balance Sheets (1) Exhibit 3 (Unaudited) (Unaudited) March 31, December 31, March 31, (Dollars in thousands) 2005 2005 2006 - ------------------------------- ------------ ------------ ------------ Assets Cash and due from banks $1,870,367 $2,402,212 $2,035,544 Interest bearing deposits in banks 73,667 771,164 170,187 Federal funds sold and securities purchased under resale agreements 1,695,835 796,500 513,777 ------------ ------------ ------------ Total cash and cash equivalents 3,639,869 3,969,876 2,719,508 Trading account assets 234,791 312,655 329,703 Securities available for sale: Securities pledged as collateral 251,657 96,994 88,152 Held in portfolio 10,975,242 8,072,286 8,394,318 Loans (net of allowance for loan losses: March 31, 2005, $401,275; December 31, 2005, $351,532; March 31, 2006, $339,443) 29,377,186 32,744,063 33,189,425 Due from customers on acceptances 21,158 19,252 20,541 Premises and equipment, net 520,286 536,074 511,095 Intangible assets 56,751 42,616 39,186 Goodwill 450,125 454,015 453,489 Other assets 1,929,837 2,113,577 2,814,603 Assets of discontinued operations to be disposed or sold 1,975,969 1,054,594 240,925 ------------ ------------ ------------ Total assets $49,432,871 $49,416,002 $48,800,945 ============ ============ ============ Liabilities Noninterest bearing $20,421,830 $19,489,377 $18,118,506 Interest bearing 19,993,149 20,592,862 21,037,398 ------------ ------------ ------------ Total deposits 40,414,979 40,082,239 39,155,904 Federal funds purchased and securities sold under repurchase agreements 400,570 651,529 292,758 Commercial paper 1,042,795 680,027 1,420,276 Other borrowed funds 126,662 134,485 66,472 Acceptances outstanding 21,158 19,252 20,541 Other liabilities 1,128,383 1,466,478 2,259,464 Medium and long-term debt 803,233 801,095 788,763 Junior subordinated debt payable to subsidiary grantor trust 15,677 15,338 15,225 Liabilities of discontinued operations to be extinguished or assumed 1,372,191 1,005,859 201,664 ------------ ------------ ------------ Total liabilities 45,325,648 44,856,302 44,221,067 ------------ ------------ ------------ Commitments and contingencies Stockholders' Equity Preferred stock: Authorized 5,000,000 shares, no shares issued or outstanding as of March 31, 2005, December 31, 2005, and March 31, 2006 - - - Common stock, par value $1 per share at March 31, 2005, December 31, 2005 and March 31, 2006: Authorized 300,000,000 shares, issued 152,530,458 shares as of March 31, 2005, 154,469,215 shares as of December 31, 2005, and 154,832,175 shares as of March 31, 2006 152,530 154,469 154,832 Additional paid-in capital 896,855 994,956 1,018,943 Treasury stock - 7,954,843 shares as of March 31, 2005, 10,262,143 shares as of December 31, 2005 and 11,429,843 shares as of March 31, 2006 (463,527) (612,732) (692,783) Retained earnings 3,656,187 4,141,400 4,258,533 Accumulated other comprehensive loss (134,822) (118,393) (159,647) ------------ ------------ ------------ Total stockholders' equity 4,107,223 4,559,700 4,579,878 ------------ ------------ ------------ Total liabilities and stockholders' equity $49,432,871 $49,416,002 $48,800,945 ============ ============ ============ Refer to Exhibit 8 for footnote explanations. UnionBanCal Corporation and Subsidiaries Loans (Unaudited) (1) Exhibit 4 Percent Change to Three Months Ended March 31, 2006 from -------------------------- ------------------- March December March March December 31, 31, 31, 31, 31, (Dollars in millions) 2005 2005 2006 2005 2005 - ----------------------- -------- -------- -------- --------- --------- Loans (period average) Commercial, financial and industrial $10,333 $11,981 $12,370 19.71% 3.25% Construction 1,114 1,414 1,523 36.71% 7.71% Mortgage - Commercial 5,420 5,653 5,652 4.28% (0.02%) Mortgage - Residential 9,829 11,143 11,444 16.43% 2.70% Consumer 2,372 2,490 2,489 4.93% (0.04%) Lease financing 603 576 569 (5.64%) (1.22%) -------- -------- -------- Total loans held to maturity $29,671 $33,257 $34,047 14.75% 2.38% Total loans held for sale 43 4 5 (88.37%) 25.00% -------- -------- -------- Total loans $29,714 $33,261 $34,052 14.60% 2.38% ======== ======== ======== Nonperforming assets (period end) Nonaccrual loans: Commercial, financial and industrial $30 $50 $19 (36.67%) (62.00%) Construction 1 - - (100.00%) nm Mortgage - Commercial 10 9 8 (20.00%) (11.11%) Lease 55 - 15 (72.73%) nm -------- -------- -------- Total nonaccrual loans 96 59 42 (56.25%) (28.81%) Foreclosed assets 5 3 - (100.00%) (100.00%) -------- -------- -------- Total nonperforming assets $101 $62 $42 (58.42%) (32.26%) ======== ======== ======== Loans 90 days or more past due and still accruing $4 $5 $5 25.00% 0.00% ======== ======== ======== Analysis of Allowances for Credit Losses Beginning balance $399 $364 $352 Reversal of allowance for loan losses (12) (10) (7) Loans charged off: Commercial, financial and industrial (4) (4) (11) Real estate (1) (1) - Consumer (1) (1) (1) -------- -------- -------- Total loans charged off (6) (6) (12) -------- -------- -------- Loans recovered: Commercial, financial and industrial 20 3 2 Consumer 1 1 1 Lease financing - - 4 -------- -------- -------- Total loans recovered 21 4 7 -------- -------- -------- Net loans (charged- off) recovered 15 (2) (5) -------- -------- -------- Ending balance of allowance for loan losses $402 $352 $340 Allowance for off- balance sheet commitment losses 85 86 83 -------- -------- -------- Allowances for credit losses $487 $438 $423 ======== ======== ======== Refer to Exhibit 8 for footnote explanations. UnionBanCal Corporation and Subsidiaries Net Interest Income (Unaudited) (1) Exhibit 5 For the Three Months Ended March 31, 2005 -------------------------------- Interest Average Average Income/ Yield/ (Dollars in thousands) Balance Expense Rate (6) (10) (10) - ------------------------------------- ------------ --------- --------- Assets Loans (11) $29,714,206 $405,124 5.51 % Securities - taxable 11,117,365 99,939 3.60 Securities - tax-exempt 67,144 1,325 7.89 Interest bearing deposits in banks 160,782 733 1.85 Federal funds sold and securities purchased under resale agreements 377,291 2,373 2.55 Trading account assets 231,043 908 1.59 ------------ --------- Total earning assets 41,667,831 510,402 4.94 --------- Allowance for loan losses (403,435) Cash and due from banks 2,182,658 Premises and equipment, net 524,339 Other assets 2,341,660 ------------ Total assets $46,313,053 ============ Liabilities Deposits: Interest bearing $12,232,585 25,416 0.84 Savings and consumer time 4,778,029 13,045 1.11 Large time 3,021,684 17,367 2.33 ------------ --------- Total interest bearing deposits 20,032,298 55,828 1.13 ------------ --------- Federal funds purchased and securities sold under repurchase agreements 1,279,862 7,455 2.36 Net funding allocated from (to) discontinued operations (12) (422,117) (2,457) 2.36 Commercial paper 865,460 4,560 2.14 Other borrowed funds 180,519 1,529 3.44 Medium and long-term debt 808,846 6,532 3.27 Trust notes 15,733 238 6.06 ------------ --------- Total borrowed funds 2,728,303 17,857 2.65 ------------ --------- Total interest bearing liabilities 22,760,601 73,685 1.31 --------- Noninterest bearing deposits 18,167,420 Other liabilities 1,176,382 ------------ Total liabilities 42,104,403 Stockholders' Equity Common equity 4,208,650 ------------ Total stockholders' equity 4,208,650 ------------ Total liabilities and stockholders' equity $46,313,053 ============ Reported Net Interest Income/Margin Net interest income/margin (taxable-equivalent basis) 436,717 4.22 % Less: taxable-equivalent adjustment 1,055 --------- Net interest income $435,662 ========= For the Three Months Ended March 31, 2006 ------------------------------- Interest Average Average Income/ Yield/ (Dollars in thousands) Balance Expense Rate (6) (10) (10) - --------------------------------------------------- --------- -------- Assets Loans (11) $34,052,067 $512,988 6.09 % Securities - taxable 8,233,854 96,053 4.67 Securities - tax-exempt 65,204 1,298 7.96 Interest bearing deposits in banks 59,847 736 4.99 Federal funds sold and securities purchased under resale agreements 345,342 3,845 4.52 Trading account assets 328,035 1,530 1.89 ------------ --------- Total earning assets 43,084,349 616,450 5.77 --------- Allowance for loan losses (348,626) Cash and due from banks 2,119,926 Premises and equipment, net 527,001 Other assets 2,633,993 ------------ Total assets $48,016,643 ============ Liabilities Deposits: Interest bearing $13,261,888 62,358 1.91 Savings and consumer time 4,467,627 18,487 1.68 Large time 3,608,597 34,464 3.87 ------------ --------- Total interest bearing deposits 21,338,112 115,309 2.19 ------------ --------- Federal funds purchased and securities sold under repurchase agreements 874,055 9,410 4.37 Net funding allocated from (to) discontinued operations (12) (57,088) (608) 4.32 Commercial paper 1,242,465 12,448 4.06 Other borrowed funds 268,262 2,915 4.41 Medium and long-term debt 800,014 10,397 5.27 Trust notes 15,280 238 6.24 ------------ --------- Total borrowed funds 3,142,988 34,800 4.49 ------------ --------- Total interest bearing liabilities 24,481,100 150,109 2.49 --------- Noninterest bearing deposits 17,517,921 Other liabilities 1,478,943 ------------ Total liabilities 43,477,964 Stockholders' Equity Common equity 4,538,679 ------------ Total stockholders' equity 4,538,679 ------------ Total liabilities and stockholders' equity $48,016,643 ============ Reported Net Interest Income/Margin Net interest income/margin (taxable-equivalent basis) 466,341 4.36 % Less: taxable-equivalent adjustment 1,248 --------- Net interest income $465,093 ========= - ---------------------------------------------------------------------- Average Assets and Liabilities of Discontinued Operations for Period Ended: March 31, 2005 March 31, 2006 ------------------------------------- Assets $1,964,673 $618,653 Liabilities $1,542,556 $561,565 Net Asset (Liabilities) $422,117 $57,088 - ---------------------------------------------------------------------- Refer to Exhibit 8 for footnote explanations. UnionBanCal Corporation and Subsidiaries Net Interest Income (Unaudited) (1) Exhibit 6 For the Three Months Ended December 31, 2005 -------------------------------------- Interest Average Average Income/ Yield/ (Dollars in thousands) Balance Expense (10) Rate (6) (10) - ------------------------------- ------------ -------------- ---------- Assets Loans: (11) $33,260,944 $497,046 5.94 % Securities - taxable 9,027,589 94,135 4.17 Securities - tax-exempt 65,582 1,301 7.93 Interest bearing deposits in banks 157,604 1,244 3.13 Federal funds sold and securities purchased under resale agreements 595,208 6,129 4.09 Trading account assets 344,759 1,422 1.64 ------------ -------------- Total earning assets 43,451,686 601,277 5.51 -------------- Allowance for loan losses (362,676) Cash and due from banks 2,268,566 Premises and equipment, net 520,586 Other assets 2,528,325 ------------ Total assets $48,406,487 ============ Liabilities Deposits: Interest bearing $13,523,357 57,469 1.69 Savings and consumer time 4,550,219 17,407 1.52 Large time 2,916,187 22,427 3.05 ------------ -------------- Total interest bearing deposits 20,989,763 97,303 1.84 ------------ -------------- Federal funds purchased and securities sold under repurchase agreements 533,068 5,025 3.74 Net funding allocated from (to) discontinued operations (12) (422,508) (3,983) 3.74 Commercial paper 1,108,434 9,911 3.55 Other borrowed funds 121,401 1,260 4.12 Medium and long-term debt 804,346 9,695 4.78 Trust notes 15,393 238 6.19 ------------ -------------- Total borrowed funds 2,160,134 22,146 4.07 ------------ -------------- Total interest bearing liabilities 23,149,897 119,449 2.05 -------------- Noninterest bearing deposits 19,264,098 Other liabilities 1,504,096 ------------ Total liabilities 43,918,091 Stockholders' Equity Common equity 4,488,396 ------------ Total stockholders' equity 4,488,396 ------------ Total liabilities and stockholders' equity $48,406,487 ============ Reported Net Interest Income/Margin Net interest income/margin (taxable-equivalent basis) 481,828 4.42 % Less: taxable-equivalent adjustment 1,228 -------------- Net interest income $480,600 ============== For the Three Months Ended March 31, 2006 -------------------------------------- Interest Average Average Income/ Yield/ (Dollars in thousands) Balance Expense (10) Rate (6) (10) - -------------------------------------------- -------------- ---------- Assets Loans: (11) $34,052,067 $512,988 6.09 % Securities - taxable 8,233,854 96,053 4.67 Securities - tax-exempt 65,204 1,298 7.96 Interest bearing deposits in banks 59,847 736 4.99 Federal funds sold and securities purchased under resale agreements 345,342 3,845 4.52 Trading account assets 328,035 1,530 1.89 ------------ -------------- Total earning assets 43,084,349 616,450 5.77 -------------- Allowance for loan losses (348,626) Cash and due from banks 2,119,926 Premises and equipment, net 527,001 Other assets 2,633,993 ------------ Total assets $48,016,643 ============ Liabilities Deposits: Interest bearing $13,261,888 62,358 1.91 Savings and consumer time 4,467,627 18,487 1.68 Large time 3,608,597 34,464 3.87 ------------ -------------- Total interest bearing deposits 21,338,112 115,309 2.19 ------------ -------------- Federal funds purchased and securities sold under repurchase agreements 874,055 9,410 4.37 Net funding allocated from (to) discontinued operations (12) (57,088) (608) 4.32 Commercial paper 1,242,465 12,448 4.06 Other borrowed funds 268,262 2,915 4.41 Medium and long-term debt 800,014 10,397 5.27 Trust notes 15,280 238 6.24 ------------ -------------- Total borrowed funds 3,142,988 34,800 4.49 ------------ -------------- Total interest bearing liabilities 24,481,100 150,109 2.49 -------------- Noninterest bearing deposits 17,517,921 Other liabilities 1,478,943 ------------ Total liabilities 43,477,964 Stockholders' Equity Common equity 4,538,679 ------------ Total stockholders' equity 4,538,679 ------------ Total liabilities and stockholders' equity $48,016,643 ============ Reported Net Interest Income/Margin Net interest income/margin (taxable-equivalent basis) 466,341 4.36 % Less: taxable-equivalent adjustment 1,248 -------------- Net interest income $465,093 ============== - ---------------------------------------------------------------------- Average Assets and Liabilities of Discontinued Operations for Period Ended: December 31, 2005 March 31, 2006 ----------------------------------- Assets $1,668,335 $618,653 Liabilities $1,245,827 $561,565 Net Asset (Liabilities) $422,508 $57,088 - ---------------------------------------------------------------------- Refer to Exhibit 8 for footnote explanations. UnionBanCal Corporation and Subsidiaries Noninterest income (Unaudited) (1) Exhibit 7 Percentage Change to For the Three Months Ended March 31, 2006 From ----------------------------- ------------------ March Dec. March March Dec. 31, 31, 31, 31, 31, (Dollars in thousands) 2005 2005 2006 2005 2005 -------------------- --------- --------- --------- ------------------ Service charges on deposit accounts $79,267 $80,030 $81,635 2.99 2.01 Trust and investment management fees 41,963 46,465 50,115 19.43 7.86 Insurance commissions 22,017 19,739 19,518 (11.35) (1.12) Merchant banking fees 6,266 8,261 8,229 31.33 (0.39) Foreign exchange gains, net 8,170 8,332 7,818 (4.31) (6.17) Brokerage commissions and fees 8,972 7,171 7,795 (13.12) 8.70 Card processing fees, net 5,607 6,437 6,697 19.44 4.04 Securities gains (losses), net 344 (36,750) (214) nm (99.42) Gain on private capital investments, net 7,935 8,299 2,827 (64.37) (65.94) Other 25,084 35,436 33,490 33.51 (5.49) --------- --------- --------- Total noninterest income $205,625 $183,420 $217,910 5.97 18.80 ========= ========= ========= Noninterest expense (Unaudited) (1) Percentage Change to March 31, 2006 For the Three Months Ended From ----------------------------- ----------------- March 31, Dec. 31, March 31, March 31, Dec. 31, (Dollars in thousands) 2005 2005 2006 2005 2005 --------------------- --------- --------- --------- ----------------- Salaries and other compensation $178,957 $191,797 $194,259 8.55 1.28 Employee benefits 52,801 40,699 58,236 10.29 43.09 --------- --------- --------- Salaries and employee benefits 231,758 232,496 252,495 8.95 8.60 Net occupancy 32,362 41,048 32,837 1.47 (20.00) Outside services 21,247 40,942 28,609 34.65 (30.12) Equipment 17,403 18,042 17,922 2.98 (0.67) Software 13,975 15,427 16,344 16.95 5.94 Professional services 11,741 9,369 14,547 23.90 55.27 Communications 10,380 10,959 10,552 1.66 (3.71) Advertising and public relations 7,640 11,145 10,231 33.91 (8.20) Data processing 8,870 7,985 7,398 (16.60) (7.35) Intangible asset amortization 4,985 4,965 3,430 (31.19) (30.92) Foreclosed asset expense (income) 406 (29) (7,367) nm nm (Reversal of) provision for losses on off-balance sheet commitments 3,000 5,000 (3,000) nm nm Other 29,185 31,849 30,546 4.66 (4.09) --------- --------- --------- Total noninterest expense $392,952 $429,198 $414,544 5.49 (3.41) ========= ========= ========= Refer to Exhibit 8 for footnote explanations. UnionBanCal Corporation and Subsidiaries Footnotes Exhibit 8 (1) In September 2005, Union Bank of California, N.A. committed to a plan for disposal of its international correspondent banking business. All periods presented have been restated to reflect discontinued operations. (2) Taxable-equivalent basis. (3) Dividends per share reflect dividends declared on UnionBanCal Corporation's common stock outstanding as of the declaration date. (4) End of period total assets and assets used in calculating these ratios include those of discontinued operations. (5) Average balances used to calculate our financial ratios are based on continuing operations data only, unless otherwise indicated. (6) Annualized. (7) The efficiency ratio is noninterest expense, excluding foreclosed asset expense (income) and the (reversal of) provision for losses on off-balance sheet commitments, as a percentage of net interest income (taxable-equivalent basis) and noninterest income and is a percentage of net interest income (taxable-equivalent basis) and noninterest income and is calculated for continuing operations only.calculated for continuing operations only. (8) Estimated as of March 31, 2006. The regulatory capital and leverage ratios were not restated and therefore include discontinued operations. (9) The allowance for credit losses ratios include the allowances for loan losses and losses on off-balance sheet commitments. These ratios relate to continuing operations only. (10) Yields and interest income are presented on a taxable-equivalent basis using the federal statutory tax rate of 35 percent. (11) 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. (12) Net funding allocated from (to) discontinued operations represents the shortage (excess) of assets over liabilities of discontinued operations. The expense (earning) on funds allocated from (to) discontinued operations is calculated by taking the net average balance of discontinued operations for each quarter and applying an earnings rate or a cost of funds equivalent to the corresponding period's fed funds purchased rate. nm = not meaningful CONTACT: UnionBanCal Corporation John A. Rice, Jr., 415-765-2998 (Investor Relations) Michelle R. Crandall, 415-765-2780 (Investor Relations) Stephen L. Johnson, 415-765-3252 (Public Relations) -----END PRIVACY-ENHANCED MESSAGE-----