-----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, EMJX8NNUHqSp1TvHPecjaxfBQjQ+zKa/z/Zpv7rYepw2tGL5cVHtw790INFv07nH Z+EnC8xZEKQrY/qJFqH1xw== 0001157523-06-010127.txt : 20061020 0001157523-06-010127.hdr.sgml : 20061020 20061019200524 ACCESSION NUMBER: 0001157523-06-010127 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20061019 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20061020 DATE AS OF CHANGE: 20061019 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: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-15081 FILM NUMBER: 061154255 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 a5253803.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: October 19, 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 October 19, 2006, the Company issued a press release concerning earnings for the third 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 October 19, 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: October 19, 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 October 19, 2006. EX-99.1 2 a5253803ex99_1.txt EXHIBIT 99.1 Exhibit 99.1 UnionBanCal Corporation Reports Third Quarter 2006 Earnings Per Share of $1.21 SAN FRANCISCO--(BUSINESS WIRE)--Oct. 19, 2006--UnionBanCal Corporation (NYSE:UB): Third Quarter 2006 Highlights: - -- Strong year-over-year organic loan growth -- Average total loans up 12 percent -- Average commercial loans up 16 percent -- Average residential mortgage loans up 11 percent - -- Annualized average all-in cost of funds of 2.11 percent - -- Average noninterest bearing deposits comprised 42 percent of average total deposits - -- Nonperforming assets were 0.09 percent of total assets at quarter-end UnionBanCal Corporation (NYSE:UB) today reported third quarter 2006 net income of $170.7 million, or $1.20 per diluted common share, compared with $1.26 per diluted common share a year earlier. Income from continuing operations was $171.9 million, or $1.21 per diluted common share, compared with $1.36 per diluted common share a year earlier. Income from continuing operations for third quarter 2005 included a $10 million, or $0.04 per diluted common share, negative loan loss provision associated with the sale of the international correspondent banking business and $9 million, or $0.06 per diluted common share, in income tax adjustments. Adjusting for these two items, income from continuing operations for third quarter 2005 was $1.26 per diluted common share. For the first nine months of 2006, net income was $527 million, or $3.65 per diluted common share, compared with $3.74 per diluted common share for the first nine months of 2005. Income from continuing operations was $536 million, or $3.71 per diluted common share, compared with $3.84 per diluted common share for the first nine months of 2005. Income from continuing operations for the first nine months of 2006 included stock option expense of $17.3 million, or $0.07 per diluted common share, versus none in the comparable period in 2005. "Third quarter results were generally in line with our expectations," stated Takashi Morimura, President and Chief Executive Officer. "We continued to generate strong loan growth, and credit quality continued to be excellent. At the same time, we continued to be adversely impacted by unfavorable deposit mix and deposit pricing trends." Added Chief Operating Officer Philip Flynn, "We are pleased with the balanced growth we are generating in the loan portfolio. However, excellent lending results for the quarter were offset by the effects of a very competitive deposit market. Short-term profitability is being negatively affected as customers shift deposit balances to higher rate products, and as deposit rates continue to increase faster than loan yields. Despite these current challenges, our deposit franchise remains healthy and profitable, and well-positioned for the long run. We continue to be among the industry leaders in noninterest bearing deposit mix, core deposit mix, average all-in cost of funds, and net interest margin. We believe our balanced business model will continue to produce solid long-term results." Summary of Third Quarter Results from Continuing Operations For third quarter 2006, income from continuing operations was $171.9 million, or $1.21 per diluted common share, compared with $1.36 per diluted common share a year earlier. Total revenue was flat, compared with third quarter 2005. A 2.4 percent increase in noninterest income was offset by a 1 percent decrease in net interest income. The decrease in net interest income was primarily due to a deposit mix shift reflecting customer decisions to shift balances from noninterest bearing and low-cost deposits into higher-cost deposits. The unfavorable deposit mix change offset strong loan growth. The total provision for credit losses was zero, compared with negative $15 million in third quarter last year. Of the negative $15 million total provision for credit losses recognized in third quarter 2005, negative $10 million was related to the sale of the international correspondent banking business, now a discontinued operation. For third quarter 2006, noninterest expense was up 5 percent from the same quarter a year ago. Adjusting for the impact of stock option expense, which commenced January 1, 2006, and a $3.2 million decline in foreclosed asset income, noninterest expense increased 3 percent. The effective tax rate was higher in third quarter 2006 due to $9 million in income tax adjustments recorded in third quarter 2005. Adjusting for the negative $10 million provision related to the discontinued operation, $3.4 million in foreclosed asset income, and the $9 million of tax adjustments, income from continuing operations was $1.25 per diluted common share for third quarter 2005. Adjusting for the $6 million of stock option expense and $0.2 million in foreclosed asset income recorded in third quarter this year, income from continuing operations was $1.23 per diluted common share for third quarter 2006. Therefore, on an adjusted basis, income from continuing operations for third quarter 2006 declined 2 cents, or 1.6 percent, compared with third quarter 2005. Third Quarter Total Revenue From Continuing Operations For third quarter 2006, total revenue (taxable-equivalent net interest income plus noninterest income) was $678 million, flat compared with third quarter 2005. Net interest income decreased 1.0 percent, and noninterest income increased 2.4 percent. Compared with second quarter 2006, total revenue decreased 1.5 percent, with net interest income decreasing 1.8 percent and noninterest income decreasing 0.9 percent. Third Quarter Net Interest Income (Taxable-equivalent) From Continuing Operations Net interest income was $461 million in third quarter 2006, down $5 million, or 1.0 percent, from the same quarter a year ago, primarily due to a deposit mix shift from noninterest bearing and low-cost deposits into higher-cost deposits, partially offset by solid growth in loans and higher yields on earning assets. Average earning assets increased $2.5 billion, or 5.7 percent, compared to last year, primarily due to a $3.8 billion, or 11.8 percent, increase in average loans. Average commercial loans increased $1.8 billion, or 15.6 percent; average residential mortgages increased $1.2 billion, or 11.2 percent; and average construction loans increased $0.7 billion, or 53.3 percent. The increase in construction loans is primarily related to income properties, where business fundamentals continue to be very healthy. Average securities declined $1.4 billion, or 14.2 percent. Compared to third quarter 2005, average interest bearing deposits increased $2.7 billion, or 12.8 percent, while average noninterest bearing deposits decreased $2.4 billion, or 12.4 percent. The decline in noninterest bearing deposits was primarily due to a $1.1 billion, or 8.2 percent, decrease in average other commercial noninterest bearing deposits and a $1.0 billion, or 29.8 percent, decrease in average title and escrow deposits. Average other commercial noninterest bearing deposits declined primarily due to changes in customer behavior in response to rising short-term interest rates, and average title and escrow deposits decreased due to lower residential real estate activity. Average consumer noninterest bearing deposits decreased $311 million, or 9.6 percent. Average noninterest bearing deposits represented 41.9 percent of average total deposits in third quarter 2006. The annualized average all-in cost of funds was 2.11 percent, reflecting the Company's strong average core deposit-to-loan ratio of 94 percent and the high proportion of noninterest bearing deposits to total deposits. The average yield on earning assets of $45.9 billion was 6.06 percent, up 85 basis points over third quarter 2005, with the average loan yield increasing 66 basis points. The average rate on interest bearing liabilities of $27.7 billion was 3.41 percent, up 165 basis points compared with third quarter 2005, reflecting higher short-term interest rates, an unfavorable change in deposit mix, and heightened competition for deposits. Average interest bearing deposits were $23.6 billion and the weighted average rate was 3.07 percent. Average core deposits funded 73.9 percent of average earning assets in the third quarter. The net interest margin in third quarter 2006 was 4.00 percent, compared with 4.27 percent in third quarter 2005. On a sequential quarter basis, net interest income decreased $8 million, or 1.8 percent. Average loans increased $0.8 billion, or 2.3 percent. Average commercial loans increased $282 million, or 2.2 percent; average residential mortgages increased $238 million, or 2.0 percent; and average construction loans increased $267 million, or 15.5 percent. Average noninterest bearing deposits decreased $553 million, or 3.2 percent, with commercial noninterest bearing deposits decreasing $316 million, partially due to a $59 million decrease in title and escrow deposits, and consumer noninterest bearing deposits decreasing $237 million, or 7.5 percent. The average yield on earning assets increased 11 basis points and the average rate on interest bearing liabilities increased 46 basis points. The net interest margin decreased 23 basis points to 4.00 percent. Third Quarter Noninterest Income From Continuing Operations In third quarter 2006, noninterest income was $217 million, up $5 million, or 2.4 percent, from the same quarter a year ago. Service charges on deposit accounts decreased $6 million, or 6.8 percent, primarily due to lower account analysis fees, stemming from an increase in the earnings credit rate on deposit balances and lower noninterest bearing deposit balances. Trust and investment management fees increased $4 million, or 9.3 percent, primarily due to an increase in trust assets. Compared with the preceding quarter, third quarter 2006 noninterest income decreased $2 million, or 0.9 percent, primarily due to declines in service charges on deposit accounts. Third Quarter Noninterest Expense From Continuing Operations Noninterest expense for third quarter 2006 was $417 million, an increase of $20 million, or 5.1 percent, over third quarter 2005. Salaries and employee benefits expense increased $8.5 million, or 3.6 percent, primarily due to higher stock option expense, annual merit increases and higher employee count, partially offset by lower incentive and bonus expense and lower accruals for workers' compensation expense. Stock option expense was $5.7 million, compared with none in third quarter 2005. Outside services expense increased $3.4 million, or 11.8 percent, primarily due to higher trust administration expenses. Advertising and public relations expense increased $2.6 million, or 28.7 percent, primarily due to increased advertising and marketing activity in response to the competitive deposit market. Foreclosed asset income was $3.2 million lower than in prior year. There was no provision for off-balance sheet commitments in third quarter 2006 or third quarter 2005. Excluding the effect of stock option expense and lower foreclosed asset income, noninterest expense increased $11.4 million, or 2.9 percent, compared with prior year. Compared with second quarter 2006, noninterest expense increased $4 million, or 1.0 percent. Salaries and employee benefits expense decreased $4.0 million, or 1.6 percent, primarily due to a $4.4 million decrease in incentive and bonus expense in the third quarter. Professional services expense decreased $4.9 million, or 28.6 percent, partially due to lower compliance-related expense. Foreclosed asset income was $7.6 million lower than in second quarter 2006. There was no provision for off-balance sheet commitments, compared with negative $4 million in second quarter 2006. Excluding the $7.6 million decrease in foreclosed asset income and the $4 million negative off-balance sheet commitment provision in second quarter, noninterest expense declined $7.6 million, or 1.8 percent, on a sequential quarter basis. Income Tax Expense From Continuing Operations The effective tax rate for third quarter 2006 was 33.6 percent, compared with an effective tax rate of 31.7 percent for third quarter 2005. Third quarter 2005 income tax expense was reduced by approximately $9 million, primarily as a result of the adjustment of California state taxes to reflect tax returns filed on the worldwide unitary method, and the recognition of California Enterprise Zone tax credits for which the Company qualified during the quarter. Year-to-Date Results From Continuing Operations Total revenue was $2.1 billion in the first nine months of 2006, an increase of $67 million, or 3.4 percent, compared with the same period of 2005. Net interest income increased 2.5 percent, and noninterest income increased 5.3 percent. Net interest income was $1.4 billion in the first nine months of 2006, a $34 million, or 2.5 percent, increase from prior year, primarily due to growth in earning assets. Average loans increased $4.3 billion, or 13.8 percent, while the net interest margin decreased 8 basis points, to 4.19 percent. Average total deposits increased $0.4 billion, or 1.1 percent, primarily due to a $1.9 billion increase in average interest bearing deposits, offset by a $1.4 billion, or 7.7 percent, decrease in average noninterest bearing deposits. This deposit mix shift was due to changes in customer behavior in response to rising short-term interest rates. Noninterest income in the first nine months of 2006 was $654 million, an increase of $33 million, or 5.3 percent, over the same period in 2005. Service charges on deposit accounts decreased $1 million, or 0.5 percent. Trust and investment management fees increased $19 million, or 15.0 percent, primarily due to growth in trust assets and a refinement in accrual methodology implemented in first quarter 2006. Insurance commissions decreased $5 million, or 7.8 percent, partially due to lower contingent commissions. Merchant banking fees decreased $7 million, or 20.6 percent, primarily due to a lower volume of transactions completed in 2006. Securities gains (losses), net, were $1.8 million, compared with $(13.3) million in the same period in 2005. For the first nine months of 2006, noninterest expense increased $67 million, or 5.6 percent, over the first nine months of 2005. Salaries and employee benefits expense increased $44 million, or 6.3 percent, primarily due to $17.3 million in stock option expense in the current year, merit increases, higher employee count, and higher contract labor expense, reflecting compliance-related initiatives. Outside services expense increased $15 million, or 19.6 percent, primarily due to higher trust administration expenses and higher cost of services related to title and escrow balances, stemming from a higher earnings credit rate in the first nine months of 2006. Professional services expense increased $8 million, or 21.1 percent, primarily due to higher compliance-related expense. The provision for off-balance sheet commitments was negative $7 million, compared with negative $1 million in the first nine months of 2005. Credit Quality Nonperforming assets at September 30, 2006, were $48 million, or 0.09 percent of total assets. This compares with $36 million, or 0.07 percent of total assets, at June 30, 2006, and $38 million, or 0.07 percent of total assets, at September 30, 2005. In third quarter 2006, the total provision for credit losses was zero. The total provision for credit losses was negative $5 million in second quarter 2006 and negative $15 million in third quarter 2005. In third quarter 2006, net charge-offs were $2 million, compared with net charge-offs of $10 million in second quarter 2006, and net charge-offs of $16 million in third quarter 2005. At September 30, 2006, the allowance for credit losses as a percent of total loans and as a percent of nonaccrual loans was 1.14 percent and 850 percent, respectively. These ratios were 1.17 percent and 1130 percent, respectively, at June 30, 2006, and 1.39 percent and 1272 percent, respectively, at September 30, 2005. Balance Sheet and Capital Ratios At September 30, 2006, the Company had total assets of $52 billion. Total loans were $35.7 billion and total deposits were $41.8 billion, resulting in a period-end deposit-to-loan ratio of 117 percent. Core deposits totaled $34.6 billion at quarter-end, representing 97 percent of total loans. At period-end, total stockholders' equity was $4.7 billion, the tangible equity ratio was 8.09 percent, and the ratio of tangible common equity to risk-weighted assets was 8.50 percent. Book value per share at September 30, 2006, was $33.17, up 10.3 percent from a year earlier. The Company's Tier I and total risk-based capital ratios at period-end were 8.69 percent and 11.75 percent, respectively. Stock Repurchases During third quarter 2006, the Company repurchased 2.3 million shares of common stock at a total price of $143 million, or an average of $61.04 per repurchased share. For the first nine months of 2006, the Company repurchased 5.3 million shares of common stock at a total price of $344 million, or an average of $65.29 per repurchased share. At September 30, 2006, the Company had remaining repurchase authority of $259 million. Common shares outstanding at September 30, 2006, were 140.3 million, a decrease of 4.3 million shares, or 2.9 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 to Wachovia Bank, N.A. 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 4) and the average net assets or liabilities of the discontinued operations are reflected in the analysis of net interest margin (see Exhibits 6, 7 and 8). In the third quarter of 2006, the Company recorded a net loss from discontinued operations of $1.2 million, or $0.01 per diluted common share. Fourth Quarter 2006 Earnings Per Share Forecast The Company currently estimates that fourth quarter 2006 fully diluted earnings per share from continuing operations will be in the range of $1.03 to $1.08, including estimated stock option expense of $0.02 per share and a total provision for credit losses of $5 million, or $0.02 per share. The Company currently estimates income from discontinued operations of $0.01 per fully diluted share in the fourth quarter of 2006. Therefore, net income per diluted common share is expected to be in the range of $1.04 to $1.09. Non-GAAP Financial Measures This press release contains certain references to financial measures identified as being stated on an "adjusted basis" or that adjust for or exclude stock option expense, foreclosed asset income, negative off-balance sheet commitment provision, negative loan loss provision associated with the sale of the international correspondent banking business, a discontinued operation, and tax adjustments, 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, trends in deposit rates and balances and their impact on the Company, and the Company's loan portfolio, business model, competitive positioning and earnings power. 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; deposit pricing pressures; adverse effects of current and future banking laws, rules and regulations and their enforcement, or governmental fiscal or monetary policies; legal or regulatory proceedings; 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; 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 third quarter results at 8:30 AM Pacific Time (11:30 AM Eastern Time) on October 20, 2006. Interested parties calling from locations within the United States should call 800-230-1059 (612-332-0530 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. You may access the Investor Relations section of the website via the "About Union Bank" link from the homepage. 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), October 20, through 11:59 PM Pacific Time, October 27 (2:59 AM Eastern Time, October 28). The reservation number for this playback is 843391. Based in San Francisco, UnionBanCal Corporation is a bank holding company with assets of $52 billion at September 30, 2006. Its primary subsidiary, Union Bank of California, N.A., had 320 banking offices in California, Oregon and Washington, and 2 international offices at September 30, 2006. UnionBanCal Corporation and Subsidiaries Financial Highlights (Unaudited) (1) Exhibit 1 Percent Change to As of and for the Three Months Ended September 30, 2006 from -------------------------------------- ------------------- Sept. 30, June 30, Sept. 30, Sept. 30, June 30, (Dollars in thousands, except per share data) 2005 2006 2006 2005 2006 - ----------- ------------ ------------ ------------ --------- --------- Results of oper- ations: Net interest income (2) $465,193 $469,000 $460,596 (0.99%) (1.79%) Noninterest income 212,188 219,228 217,255 2.39% (0.90%) ------------ ------------ ------------ Total revenue 677,381 688,228 677,851 0.07% (1.51%) Noninterest expense 396,696 413,030 417,021 5.12% 0.97% Reversal of allowance for loan losses (15,000) (1,000) - (100.00%) (100.00%) ------------ ------------ ------------ Income from continuing operations before income taxes (2) 295,685 276,198 260,830 (11.79%) (5.56%) Taxable- equivalent adjustment 1,051 1,358 1,872 78.12% 37.85% Income tax expense 93,388 92,203 87,048 (6.79%) (5.59%) ------------ ------------ ------------ Income from continuing operations $201,246 $182,637 $171,910 (14.58%) (5.87%) Income/ (loss) from dis- continued operations (15,961) 274 (1,204) 92.46% nm ------------ ------------ ------------ Net income $185,285 $182,911 $170,706 (7.87%) (6.67%) ============ ============ ============ Per common share: Basic earnings: From continuing operations $1.39 $1.28 $1.22 (12.23%) (4.69%) Net income 1.28 1.28 1.21 (5.47%) (5.47%) Diluted earnings: From continuing operations 1.36 1.26 1.21 (11.03%) (3.97%) Net income 1.26 1.26 1.20 (4.76%) (4.76%) Dividends (3) 0.41 0.47 0.47 14.63% 0.00% Book value (end of period) 30.07 32.34 33.17 10.31% 2.57% Common shares out- standing (end of period) 144,584,972 142,533,794 140,326,737 (2.95%) (1.55%) Weighted average common shares out- standing - basic 144,459,465 142,723,271 140,941,823 (2.44%) (1.25%) Weighted average common shares outstanding - diluted 147,613,377 144,878,447 142,568,400 (3.42%) (1.59%) Balance sheet (end of period): Total assets (4) $51,298,842 $50,800,136 $52,013,256 1.39% 2.39% Total loans 32,004,747 34,747,833 35,673,469 11.46% 2.66% Non- performing assets 37,507 36,351 47,803 27.45% 31.50% Total deposits 41,648,355 40,544,251 41,820,206 0.41% 3.15% Stock- holders' equity 4,346,956 4,608,908 4,654,789 7.08% 1.00% Balance sheet (period average): Total assets $48,212,029 $49,329,374 $50,777,419 5.32% 2.94% Total loans 32,177,816 35,146,976 35,965,823 11.77% 2.33% Earning assets 43,371,177 44,358,594 45,854,645 5.73% 3.37% Total deposits 40,293,528 39,692,052 40,582,139 0.72% 2.24% Stock- holders' equity 4,275,122 4,539,476 4,578,635 7.10% 0.86% Financial ratios (5): Return on average assets (6): From continuing operations 1.66% 1.49% 1.34% Net income 1.52% 1.49% 1.33% Return on average stock- holders' equity (6): From continuing operations 18.68% 16.14% 14.90% Net income 17.19% 16.16% 14.79% Efficiency ratio (7) 59.07% 61.73% 61.55% Net interest margin (2) 4.27% 4.23% 4.00% Dividend payout ratio 29.50% 36.72% 38.52% Tangible equity ratio 7.57% 8.19% 8.09% Tier 1 risk-based capital ratio (4) (8) 8.88% 8.92% 8.69% Total risk- based capital ratio (4) (8) 10.86% 12.05% 11.75% Leverage ratio (4) (8) 7.96% 8.74% 8.47% Allowances for credit losses to total loans (9) 1.39% 1.17% 1.14% Allowances for credit losses to nonaccrual loans (9) 1272.29% 1130.05% 850.01% Net loans charged off to average total loans (6) 0.20% 0.12% 0.02% Non- performing assets to total loans and foreclosed assets 0.12% 0.10% 0.13% Non- performing assets to total assets (4) 0.07% 0.07% 0.09% - ----------- Refer to Exhibit 11 for footnote explanations. UnionBanCal Corporation and Subsidiaries Financial Highlights (Unaudited) (1) Exhibit 2 Percent Change to As of and for the Nine September Months Ended 30, 2006 from ------------------------- --------- September September September 30, 30, 30, (Dollars in thousands, except per share data) 2005 2006 2005 - ---------------------------------- ------------ ------------ --------- Results of operations: Net interest income (2) $1,361,638 $1,395,937 2.52% Noninterest income 621,367 654,393 5.32% ------------ ------------ Total revenue 1,983,005 2,050,330 3.40% Noninterest expense 1,178,048 1,244,595 5.65% Reversal of allowance for loan losses (40,683) (8,000) (80.34%) ------------ ------------ Income from continuing operations before income taxes (2) 845,640 813,735 (3.77%) Taxable-equivalent adjustment 3,124 4,478 43.34% Income tax expense 274,041 273,255 (0.29%) ------------ ------------ Income from continuing operations $568,475 $536,002 (5.71%) Income/(loss) from discontinued operations (14,031) (9,440) 32.72% ------------ ------------ Net income $554,444 $526,562 (5.03%) ============ ============ Per common share: Basic earnings: From continuing operations $3.91 $3.76 (3.84%) Net income 3.82 3.70 (3.14%) Diluted earnings: From continuing operations 3.84 3.71 (3.39%) Net income 3.74 3.65 (2.41%) Dividends (3) 1.18 1.35 14.41% Book value (end of period) 30.07 33.17 10.31% Common shares outstanding (end of period) 144,584,972 140,326,737 (2.95%) Weighted average common shares outstanding - basic 145,325,640 142,371,445 (2.03%) Weighted average common shares outstanding - diluted 148,062,139 144,451,516 (2.44%) Balance sheet (end of period): Total assets (4) $51,298,842 $52,013,256 1.39% Total loans 32,004,747 35,673,469 11.46% Nonperforming assets 37,507 47,803 27.45% Total deposits 41,648,355 41,820,206 0.41% Stockholders' equity 4,346,956 4,654,789 7.08% Balance sheet (period average): Total assets $47,342,684 $49,426,668 4.40% Total loans 30,843,202 35,100,506 13.80% Earning assets 42,575,954 44,481,217 4.48% Total deposits 39,304,760 39,716,972 1.05% Stockholders' equity 4,209,884 4,552,410 8.14% Financial ratios (5): Return on average assets (6): From continuing operations 1.61% 1.45% Net income 1.57% 1.42% Return on average stockholders' equity (6): From continuing operations 18.05% 15.74% Net income 17.61% 15.46% Efficiency ratio (7) 59.74% 61.79% Net interest margin (2) 4.27% 4.19% Dividend payout ratio 30.18% 35.90% Tangible equity ratio 7.57% 8.09% Tier 1 risk-based capital ratio (4) (8) 8.88% 8.69% Total risk-based capital ratio (4) (8) 10.86% 11.75% Leverage ratio (4) (8) 7.96% 8.47% Allowance for credit losses to total loans (9) 1.39% 1.14% Allowance for credit losses to nonaccrual loans (9) 1272.29% 850.01% Net loans charged off (recovered) to average total loans (6) (0.02%) 0.06% Nonperforming assets to total loans and foreclosed assets 0.12% 0.13% Nonperforming assets to total assets (4) 0.07% 0.09% - ---------------------------------- Refer to Exhibit 11 for footnote explanations. UnionBanCal Corporation and Subsidiaries Condensed Consolidated Statements of Income (Unaudited) (1) (Taxable-Equivalent Basis) Exhibit 3 For the Three Months Ended For the Nine Months Ended ----------------------------- ----------------------- Sept. 30, June 30, Sept. 30, September 30, (Dollars in thousands, except per share data) 2005 2006 2006 2005 2006 - ---------------- --------- --------- --------- ----------- ----------- Interest Income (2) Loans $461,892 $548,017 $575,799 $1,305,807 $1,636,804 Securities 98,056 104,008 108,609 302,339 309,968 Interest bearing deposits in banks 303 423 411 1,432 1,570 Federal funds sold and securities purchased under resale agreements 6,777 4,725 12,024 14,406 20,594 Trading account assets 1,115 1,685 1,832 3,072 5,047 --------- --------- --------- ----------- ----------- Total interest income 568,143 658,858 698,675 1,627,056 1,973,983 --------- --------- --------- ----------- ----------- Interest Expense Deposits 82,796 143,677 182,298 206,048 441,284 Federal funds purchased and securities sold under repurchase agreements 294 8,455 4,891 9,330 22,148 Commercial paper 9,394 19,137 20,835 21,761 52,420 Medium and long-term debt 8,520 16,875 21,974 22,511 49,246 Trust notes 239 238 239 715 715 Other borrowed funds 1,707 1,476 7,842 5,053 12,233 --------- --------- --------- ----------- ----------- Total interest expense 102,950 189,858 238,079 265,418 578,046 --------- --------- --------- ----------- ----------- Net Interest Income (2) 465,193 469,000 460,596 1,361,638 1,395,937 Reversal of allowance for loan losses (15,000) (1,000) - (40,683) (8,000) --------- --------- --------- ----------- ----------- Net interest income after reversal of allowance for loan losses 480,193 470,000 460,596 1,402,321 1,403,937 --------- --------- --------- ----------- ----------- Noninterest Income Service charges on deposit accounts 84,822 81,837 79,083 243,835 242,555 Trust and investment management fees 43,500 48,380 47,555 127,053 146,050 Insurance commissions 17,819 17,752 17,301 59,176 54,571 Merchant banking fees 11,257 8,396 11,655 35,637 28,280 Brokerage commissions and fees 5,290 10,330 8,531 22,867 26,656 Foreign exchange gains, net 8,849 8,307 8,179 25,570 24,304 Card processing fees, net 6,597 7,206 7,241 18,668 21,144 Securities gains (losses), net (320) 1,993 43 (13,289) 1,822 Other 34,374 35,027 37,667 101,850 109,011 --------- --------- --------- ----------- ----------- Total noninterest income 212,188 219,228 217,255 621,367 654,393 --------- --------- --------- ----------- ----------- Noninterest Expense Salaries and employee benefits 236,124 248,637 244,613 701,858 745,745 Net occupancy 34,336 34,519 35,753 100,251 103,109 Outside services 28,533 30,704 31,890 76,248 91,203 Equipment 15,828 16,846 17,387 50,164 52,155 Software 14,378 15,323 15,334 43,084 47,001 Professional services 11,240 17,038 12,169 36,131 43,754 Communications 10,808 10,061 9,942 30,950 30,555 Foreclosed asset income (3,435) (7,782) (183) (5,606) (15,332) Reversal of allowance for losses on off-balance sheet commitments - (4,000) - (1,000) (7,000) Other 48,884 51,684 50,116 145,968 153,405 --------- --------- --------- ----------- ----------- Total noninterest expense 396,696 413,030 417,021 1,178,048 1,244,595 --------- --------- --------- ----------- ----------- Income from continuing operations before income taxes (2) 295,685 276,198 260,830 845,640 813,735 Taxable- equivalent adjustment 1,051 1,358 1,872 3,124 4,478 Income tax expense 93,388 92,203 87,048 274,041 273,255 --------- --------- --------- ----------- ----------- Income from Continuing Operations 201,246 182,637 171,910 568,475 536,002 --------- --------- --------- ----------- ----------- Income (loss) from discontinued operations before income taxes (25,612) 431 (2,061) (22,385) (15,233) Income tax expense (benefit) (9,651) 157 (857) (8,354) (5,793) --------- --------- --------- ----------- ----------- Income (Loss) from Discontinued Operations (15,961) 274 (1,204) (14,031) (9,440) --------- --------- --------- ----------- ----------- Net Income $185,285 $182,911 $170,706 $554,444 $526,562 ========= ========= ========= =========== =========== Income from continuing operations per common share - basic $1.39 $1.28 $1.22 $3.91 $3.76 Net income per common share - basic $1.28 $1.28 $1.21 $3.82 $3.70 ========= ========= ========= =========== =========== Income from continuing operations per common share - diluted $1.36 $1.26 $1.21 $3.84 $3.71 Net income per common share - diluted $1.26 $1.26 $1.20 $3.74 $3.65 ========= ========= ========= =========== =========== Weighted average common shares outstanding - basic 144,459 142,723 140,942 145,326 142,371 ========= ========= ========= =========== =========== Weighted average common shares outstanding - diluted 147,613 144,878 142,568 148,062 144,452 ========= ========= ========= =========== =========== - ---------------- Refer to Exhibit 11 for footnote explanations. UnionBanCal Corporation and Subsidiaries Consolidated Balance Sheets (1) Exhibit 4 (Unaudited) (Unaudited) September December 31, September 30, 30, (Dollars in thousands) 2005 2005 2006 - ------------------------------- ------------ ------------ ------------ Assets Cash and due from banks $2,163,149 $2,402,212 $2,168,245 Interest bearing deposits in banks 471,340 771,164 26,700 Federal funds sold and securities purchased under resale agreements 1,454,193 796,500 1,827,000 ------------ ------------ ------------ Total cash and cash equivalents 4,088,682 3,969,876 4,021,945 Trading account assets 371,551 312,655 360,267 Securities available for sale: Securities pledged as collateral 158,878 96,994 58,877 Held in portfolio 9,647,093 8,072,286 8,582,667 Loans (net of allowance for loan losses: September 30, 2005, $363,671; December 31, 2005, $351,532; September 30, 2006, $326,955) 31,641,076 32,744,063 35,346,514 Due from customers on acceptances 47,167 19,252 25,851 Premises and equipment, net 509,922 536,074 499,702 Intangible assets 46,781 42,616 32,331 Goodwill 452,617 454,015 453,489 Other assets 2,318,507 2,113,577 2,594,084 Assets of discontinued operations to be disposed or sold 2,016,568 1,054,594 37,529 ------------ ------------ ------------ Total assets $51,298,842 $49,416,002 $52,013,256 ============ ============ ============ Liabilities Noninterest bearing $20,541,706 $19,489,377 $17,446,321 Interest bearing 21,106,649 20,592,862 24,373,885 ------------ ------------ ------------ Total deposits 41,648,355 40,082,239 41,820,206 Federal funds purchased and securities sold under repurchase agreements 357,725 651,529 265,596 Commercial paper 859,515 680,027 1,859,747 Other borrowed funds 114,324 134,485 308,080 Acceptances outstanding 47,167 19,252 25,851 Other liabilities 1,616,174 1,466,478 1,542,719 Medium and long-term debt 806,353 801,095 1,517,977 Junior subordinated debt payable to subsidiary grantor trust 15,451 15,338 14,998 Liabilities of discontinued operations to be extinguished or assumed 1,486,822 1,005,859 3,293 ------------ ------------ ------------ Total liabilities 46,951,886 44,856,302 47,358,467 ------------ ------------ ------------ Commitments and contingencies Stockholders' Equity Preferred stock: Authorized 5,000,000 shares; no shares issued or outstanding as of September 30, 2005, December 31, 2005 and September 30, 2006 - - - Common stock, par value $1 per share at September 30, 2005, December 31, 2005 and September 30, 2006: Authorized 300,000,000 shares; issued 153,960,915 shares as of September 30, 2005, 154,469,215 shares as of December 31, 2005 and 155,854,756 shares as of September 30, 2006 153,961 154,469 155,855 Additional paid-in capital 967,242 994,956 1,064,993 Treasury stock - 9,375,943 shares as of September 30, 2005, 10,262,143 shares as of December 31, 2005 and 15,528,019 shares as of September 30, 2006 (552,786) (612,732) (956,545) Retained earnings 3,901,625 4,141,400 4,494,698 Accumulated other comprehensive loss (123,086) (118,393) (104,212) ------------ ------------ ------------ Total stockholders' equity 4,346,956 4,559,700 4,654,789 ------------ ------------ ------------ Total liabilities and stockholders' equity $51,298,842 $49,416,002 $52,013,256 ============ ============ ============ - ------------------------------- Refer to Exhibit 11 for footnote explanations. UnionBanCal Corporation and Subsidiaries Loans (Unaudited) (1) Exhibit 5 Percent Change to Three Months Ended September 30, 2006 from ---------------------------- ---------------- September June 30, September September June 30, 30, 30, 30, (Dollars in millions) 2005 2006 2006 2005 2006 - ------------------------ --------- -------- --------- --------- ------ Loans (period average) Commercial, financial and industrial $11,453 $12,955 $13,237 15.58% 2.18% Construction 1,299 1,724 1,991 53.27% 15.49% Mortgage - Commercial 5,589 5,662 5,681 1.65% 0.34% Mortgage - Residential 10,763 11,733 11,971 11.22% 2.03% Consumer 2,478 2,505 2,507 1.17% 0.08% Lease financing 593 564 570 (3.88%) 1.06% --------- -------- --------- Total loans held to maturity $32,175 $35,143 $35,957 11.75% 2.32% Total loans held for sale 3 4 9 nm nm --------- -------- --------- Total loans $32,178 $35,147 $35,966 11.77% 2.33% ========= ======== ========= Nonperforming assets (period end) Nonaccrual loans: Commercial, financial and industrial $25 $4 $14 (44.00%) nm Mortgage - Commercial 10 17 19 90.00% 11.76% Lease - 15 15 nm 0.00% --------- -------- --------- Total nonaccrual loans 35 36 48 37.14% 33.33% Foreclosed assets 3 - - (100.00%) - --------- -------- --------- Total nonperforming assets $38 $36 $48 26.32% 33.33% ========= ======== ========= Loans 90 days or more past due and still accruing $5 $3 $4 (20.00%) 33.33% Analysis of Allowances for Credit Losses Beginning balance $395 $340 $329 Reversal of allowance for loan losses (15) (1) - Loans charged off: Commercial, financial and industrial (9) (18) (4) Consumer (1) (1) (1) Lease financing (19) - - --------- -------- --------- Total loans charged off (29) (19) (5) --------- -------- --------- Loans recovered: Commercial, financial and industrial 13 9 3 --------- -------- --------- Total loans recovered 13 9 3 --------- -------- --------- Net loans charged off (16) (10) (2) --------- -------- --------- Ending balance of allowance for loan losses $364 $329 $327 Allowance for off- balance sheet commitment losses 82 79 79 --------- -------- --------- $- Allowances for credit losses $446 $408 $406 ========= ======== ========= - ------------------------ Refer to Exhibit 11 for footnote explanations. UnionBanCal Corporation and Subsidiaries Net Interest Income (Unaudited) (1) Exhibit 6 For the Three Months Ended -------------------------------- September 30, 2005 -------------------------------- Interest Average Average Income/ Yield/ (Dollars in thousands) Balance Expense Rate (6) (10) (10) - ------------------------------------- ------------ ------------------- Assets Loans (11) $32,177,816 $461,892 5.71 % Securities - taxable 9,971,085 96,706 3.88 Securities - tax-exempt 65,800 1,350 8.21 Interest bearing deposits in banks 57,042 303 2.11 Federal funds sold and securities purchased under resale agreements 770,116 6,777 3.49 Trading account assets 329,318 1,115 1.34 ------------ --------- Total earning assets 43,371,177 568,143 5.21 --------- Allowance for loan losses (392,651) Cash and due from banks 2,232,281 Premises and equipment, net 514,156 Other assets 2,487,066 ------------ Total assets $48,212,029 ============ Liabilities Deposits: Interest bearing $13,157,103 44,318 1.34 Savings and consumer time 4,642,782 15,668 1.34 Large time 3,105,857 22,810 2.91 ------------ --------- Total interest bearing deposits 20,905,742 82,796 1.57 ------------ --------- Federal funds purchased and securities sold under repurchase agreements 630,272 5,158 3.25 Net funding allocated from (to) discontinued operations (12) (593,732) (4,864) 3.25 Commercial paper 1,207,822 9,394 3.09 Other borrowed funds 173,853 1,707 3.89 Medium and long-term debt 817,602 8,520 4.13 Trust notes 15,506 239 6.15 ------------ --------- Total borrowed funds 2,251,323 20,154 3.55 ------------ --------- Total interest bearing liabilities 23,157,065 102,950 1.76 --------- Noninterest bearing deposits 19,387,786 Other liabilities 1,392,056 ------------ Total liabilities 43,936,907 Stockholders' Equity Common equity 4,275,122 ------------ Total stockholders' equity 4,275,122 ------------ Total liabilities and stockholders' equity $48,212,029 Reported Net Interest Income/Margin Net interest income/margin (taxable-equivalent basis) 465,193 4.27 % Less: taxable-equivalent adjustment 1,051 --------- Net interest income $464,142 ========= ----------------------------------------------------------------- For the Three Months Ended ------------------------------- September 30, 2006 ------------------------------- Interest Average Average Income/ Yield/ (Dollars in thousands) Balance Expense Rate (6) (10) (10) - ---------------------------------------------------------------------- Assets Loans (11) $35,965,823 $575,799 6.37 % Securities - taxable 8,548,420 107,378 5.02 Securities - tax-exempt 59,644 1,231 8.26 Interest bearing deposits in banks 37,351 411 4.37 Federal funds sold and securities purchased under resale agreements 894,039 12,024 5.34 Trading account assets 349,368 1,832 2.08 ---------------------- Total earning assets 45,854,645 698,675 6.06 ---------- Allowance for loan losses (328,399) Cash and due from banks 2,063,653 Premises and equipment, net 497,957 Other assets 2,689,563 ------------ Total assets $50,777,419 ============ Liabilities Deposits: Interest bearing $12,405,367 73,826 2.36 Savings and consumer time 4,493,082 25,682 2.27 Large time 6,692,874 82,790 4.91 ---------------------- Total interest bearing deposits 23,591,323 182,298 3.07 ---------------------- Federal funds purchased and securities sold under repurchase agreements 419,665 5,345 5.05 Net funding allocated from (to) discontinued operations (12) (34,738) (454) 5.18 Commercial paper 1,645,428 20,835 5.02 Other borrowed funds 577,533 7,842 5.39 Medium and long-term debt 1,496,207 21,974 5.83 Trust notes 15,054 239 6.33 ---------------------- Total borrowed funds 4,119,149 55,781 5.37 ---------------------- Total interest bearing liabilities 27,710,472 238,079 3.41 ---------- Noninterest bearing deposits 16,990,816 Other liabilities 1,497,496 ------------ Total liabilities 46,198,784 Stockholders' Equity Common equity 4,578,635 ------------ Total stockholders' equity 4,578,635 ------------ Total liabilities and stockholders' equity $50,777,419 Reported Net Interest Income/Margin Net interest income/margin (taxable-equivalent basis) 460,596 4.00 % Less: taxable-equivalent adjustment 1,872 ---------- Net interest income $458,724 ========== ------------------------------------------------------------------ Average Assets and Liabilities of Discontinued Operations for Period Ended: September September 30, 2005 30, 2006 ------------ ----------- Assets $1,978,255 $41,135 Liabilities $1,384,523 $6,397 Net Asset $593,732 $34,738 -------------------------------------------------------------------- - --------------------------------------- Refer to Exhibit 11 for footnote explanations. UnionBanCal Corporation and Subsidiaries Net Interest Income (Unaudited) (1) Exhibit 7 For the Three Months Ended ------------------------------ June 30, 2006 ------------------------------ Interest Average Average Income/ Yield/ (Dollars in thousands) Balance Expense Rate (6) (10) (10) - ---------------------------------------------------------------------- Assets Loans: (11) $35,146,976 $548,017 6.25 % Securities - taxable 8,349,759 102,733 4.92 Securities - tax-exempt 63,222 1,275 8.06 Interest bearing deposits in banks 34,462 423 4.92 Federal funds sold and securities purchased under resale agreements 379,412 4,725 4.99 Trading account assets 384,763 1,685 1.76 --------------------- Total earning assets 44,358,594 658,858 5.95 --------- Allowance for loan losses (334,556) Cash and due from banks 2,107,846 Premises and equipment, net 506,607 Other assets 2,690,883 ------------ Total assets $49,329,374 ============ Liabilities Deposits: Interest bearing $12,614,869 65,457 2.08 Savings and consumer time 4,470,764 21,502 1.93 Large time 5,062,473 56,718 4.49 --------------------- Total interest bearing deposits 22,148,106 143,677 2.60 --------------------- Federal funds purchased and securities sold under repurchase agreements 748,050 8,902 4.77 Net funding allocated from (to) discontinued operations (12) (36,123) (447) 4.97 Commercial paper 1,650,266 19,137 4.65 Other borrowed funds 108,095 1,476 5.47 Medium and long-term debt 1,179,432 16,875 5.74 Trust notes 15,167 238 6.28 --------------------- Total borrowed funds 3,664,887 46,181 5.05 --------------------- Total interest bearing liabilities 25,812,993 189,858 2.95 --------- Noninterest bearing deposits 17,543,946 Other liabilities 1,432,959 ------------ Total liabilities 44,789,898 Stockholders' Equity Common equity 4,539,476 ------------ Total stockholders' equity 4,539,476 ------------ Total liabilities and stockholders' equity $49,329,374 ============ Reported Net Interest Income/Margin Net interest income/margin (taxable-equivalent basis) 469,000 4.23 % Less: taxable-equivalent adjustment 1,358 --------- Net interest income $467,642 ========= - ---------------------------------------------------------------------- For the Three Months Ended ----------------------------- September 30, 2006 ----------------------------- Interest Average Average Income/ Yield/ (Dollars in thousands) Balance Expense Rate (6) (10) (10) - ---------------------------------------------------------------------- Assets Loans: (11) $35,965,823 $575,799 6.37 % Securities - taxable 8,548,420 107,378 5.02 Securities - tax-exempt 59,644 1,231 8.26 Interest bearing deposits in banks 37,351 411 4.37 Federal funds sold and securities purchased under resale agreements 894,039 12,024 5.34 Trading account assets 349,368 1,832 2.08 --------------------- Total earning assets 45,854,645 698,675 6.06 --------- Allowance for loan losses (328,399) Cash and due from banks 2,063,653 Premises and equipment, net 497,957 Other assets 2,689,563 ------------ Total assets $50,777,419 ============ Liabilities Deposits: Interest bearing $12,405,367 73,826 2.36 Savings and consumer time 4,493,082 25,682 2.27 Large time 6,692,874 82,790 4.91 --------------------- Total interest bearing deposits 23,591,323 182,298 3.07 --------------------- Federal funds purchased and securities sold under repurchase agreements 419,665 5,345 5.05 Net funding allocated from (to) discontinued operations (12) (34,738) (454) 5.18 Commercial paper 1,645,428 20,835 5.02 Other borrowed funds 577,533 7,842 5.39 Medium and long-term debt 1,496,207 21,974 5.83 Trust notes 15,054 239 6.33 --------------------- Total borrowed funds 4,119,149 55,781 5.37 --------------------- Total interest bearing liabilities 27,710,472 238,079 3.41 --------- Noninterest bearing deposits 16,990,816 Other liabilities 1,497,496 ------------ Total liabilities 46,198,784 Stockholders' Equity Common equity 4,578,635 ------------ Total stockholders' equity 4,578,635 ------------ Total liabilities and stockholders' equity $50,777,419 ============ Reported Net Interest Income/Margin Net interest income/margin (taxable-equivalent basis) 460,596 4.00 % Less: taxable-equivalent adjustment 1,872 --------- Net interest income $458,724 ========= - --------------------------------------------------------------------- Average Assets and Liabilities of Discontinued Operations for Period Ended: June 30, Sept. 30, 2006 2006 -------- --------- Assets $79,188 $41,135 Liabilities $43,065 $6,397 Net Asset $36,123 $34,738 - --------------------------------------------------------------------- - ---------------------------------------------- Refer to Exhibit 11 for footnote explanations. UnionBanCal Corporation and Subsidiaries Net Interest Income (Unaudited) (1) Exhibit 8 For the Nine Months Ended ----------------------------------- September 30, 2005 ----------------------------------- Interest Average Average Income/ Yield/ (Dollars in thousands) Balance Expense (10)Rate (6) (10) - ---------------------------------------------------------------------- Assets Loans: (11) $30,843,202 $1,305,807 5.66 % Securities - taxable 10,678,358 298,317 3.72 Securities - tax-exempt 66,379 4,022 8.08 Interest bearing deposits in banks 96,961 1,432 1.97 Federal funds sold and securities purchased under resale agreements 615,967 14,406 3.13 Trading account assets 275,087 3,072 1.49 ------------------------- Total earning assets 42,575,954 1,627,056 5.10 ------------ Allowance for loan losses (398,404) Cash and due from banks 2,240,948 Premises and equipment, net 519,915 Other assets 2,404,271 ------------- Total assets $47,342,684 ============= Liabilities Deposits: Interest bearing $12,614,932 101,752 1.08 Savings and consumer time 4,707,515 42,841 1.22 Large time 3,190,094 61,455 2.58 ------------------------- Total interest bearing deposits 20,512,541 206,048 1.34 ------------------------- Federal funds purchased and securities sold under repurchase agreements 1,021,123 20,829 2.73 Net funding allocated from (to) discontinued operations (12) (535,998) (11,499) 2.87 Commercial paper 1,078,558 21,761 2.70 Other borrowed funds 183,997 5,053 3.67 Medium and long-term debt 808,686 22,511 3.72 Trust notes 15,618 715 6.10 ------------------------- Total borrowed funds 2,571,984 59,370 3.09 ------------------------- Total interest bearing liabilities 23,084,525 265,418 1.54 ------------ Noninterest bearing deposits 18,792,219 Other liabilities 1,256,056 ------------- Total liabilities 43,132,800 Stockholders' Equity Common equity 4,209,884 ------------- Total stockholders' equity 4,209,884 ------------- Total liabilities and stockholders' equity $47,342,684 ============= Reported Net Interest Income/Margin Net interest income/margin (taxable-equivalent basis) 1,361,638 4.27 % Less: taxable-equivalent adjustment 3,124 ------------ Net interest income $1,358,514 ============ - ---------------------------------------------------------------------- For the Nine Months Ended --------------------------------- September 30, 2006 --------------------------------- Interest Average Average Income/ Yield/ (Dollars in thousands) Balance Expense (10)Rate (6) (10) - ---------------------------------------------------------------------- Assets Loans: (11) $35,100,506 $1,636,804 6.23 % Securities - taxable 8,378,496 306,164 4.87 Securities - tax-exempt 62,670 3,804 8.09 Interest bearing deposits in banks 43,804 1,570 4.79 Federal funds sold and securities purchased under resale agreements 541,607 20,594 5.08 Trading account assets 354,134 5,047 1.91 ------------------------ Total earning assets 44,481,217 1,973,983 5.93 ------------ Allowance for loan losses (337,145) Cash and due from banks 2,096,935 Premises and equipment, net 510,416 Other assets 2,675,245 ------------ Total assets $49,426,668 ============ Liabilities Deposits: Interest bearing $12,757,571 201,641 2.11 Savings and consumer time 4,477,251 65,672 1.96 Large time 5,133,186 173,971 4.53 ------------------------ Total interest bearing deposits 22,368,008 441,284 2.64 ------------------------ Federal funds purchased and securities sold under repurchase agreements 678,926 23,657 4.66 Net funding allocated from (to) discontinued operations (12) (42,570) (1,509) 4.74 Commercial paper 1,514,196 52,420 4.63 Other borrowed funds 319,096 12,233 5.13 Medium and long-term debt 1,164,090 49,246 5.66 Trust notes 15,166 715 6.28 ------------------------ Total borrowed funds 3,648,904 136,762 5.01 ------------------------ Total interest bearing liabilities 26,016,912 578,046 2.97 ------------ Noninterest bearing deposits 17,348,964 Other liabilities 1,508,382 ------------ Total liabilities 44,874,258 Stockholders' Equity Common equity 4,552,410 ------------ Total stockholders' equity 4,552,410 ------------ Total liabilities and stockholders' equity $49,426,668 ============ Reported Net Interest Income/Margin Net interest income/margin (taxable- equivalent basis) 1,395,937 4.19 % Less: taxable-equivalent adjustment 4,478 ------------ Net interest income $1,391,459 ============ - --------------------------------------------------------------------- Average Assets and Liabilities of Discontinued Operations for Period Ended: September September 30, 2005 30, 2006 ----------- --------- Assets $1,974,884 $244,210 Liabilities $1,438,886 $201,640 Net Asset $535,998 $42,570 ------------------------- Refer to Exhibit 11 for footnote explanations. UnionBanCal Corporation and Subsidiaries Noninterest income (Unaudited) (1) Exhibit 9 Percentage Change to For the Three Months Ended September 30, 2006 From ---------------------------- ------------------- Sept. 30,June 30, Sept. 30, Sept. 30, June 30, (Dollars in thousands) 2005 2006 2006 2005 2006 --------------------------------------- --------- ------------------- Service charges on deposit accounts $84,822 $81,837 $79,083 (6.77)% (3.37)% Trust and investment management fees 43,500 48,380 47,555 9.32 (1.71) Insurance commissions 17,819 17,752 17,301 (2.91) (2.54) Merchant banking fees 11,257 8,396 11,655 3.54 38.82 Brokerage commissions and fees 5,290 10,330 8,531 61.27 (17.42) Foreign exchange gains, net 8,849 8,307 8,179 (7.57) (1.54) Card processing fees, net 6,597 7,206 7,241 9.76 0.49 Securities gains (losses), net (320) 1,993 43 nm (97.84) Gain on private capital investments, net 5,692 3,702 7,681 34.94 107.48 Other 28,682 31,325 29,986 4.55 (4.27) ------------------ --------- Total noninterest income $212,188 $219,228 $217,255 2.39 % (0.90)% ================== ========= Noninterest expense (Unaudited) (1) Percentage Change to September 30, 2006 For the Three Months Ended From ---------------------------- ------------------- Sept. 30,June 30, Sept. 30, Sept. 30, June 30, (Dollars in thousands) 2005 2006 2006 2005 2006 --------------------------------------- --------- ------------------- Salaries and other compensation $190,293 $201,689 $200,591 5.41 % (0.54)% Employee benefits 45,831 46,948 44,022 (3.95) (6.23) ------------------ --------- Salaries and employee benefits 236,124 248,637 244,613 3.60 (1.62) Net occupancy 34,336 34,519 35,753 4.13 3.57 Outside services 28,533 30,704 31,890 11.77 3.86 Equipment 15,828 16,846 17,387 9.85 3.21 Software 14,378 15,323 15,334 6.65 0.07 Professional services 11,240 17,038 12,169 8.27 (28.58) Advertising and public relations 9,114 11,270 11,726 28.66 4.05 Communications 10,808 10,061 9,942 (8.01) (1.18) Data processing 7,406 7,845 7,933 7.12 1.12 Intangible asset amortization 4,985 3,427 3,427 (31.25) 0.00 Foreclosed asset income (3,435) (7,782) (183) (94.67) (97.65) Reversal of allowance for losses on off-balance sheet commitments - (4,000) - 0.00 (100.00) Other 27,379 29,142 27,030 (1.27) (7.25) ------------------ --------- Total noninterest expense $396,696 $413,030 $417,021 5.12 % 0.97 % ================== ========= - ---------------------- Refer to Exhibit 11 for footnote explanations. UnionBanCal Corporation and Subsidiaries Noninterest income (Unaudited) (1) Exhibit 10 Percentage Change to For the Nine Months September Ended 30, 2006 From ------------------- ----------- September September September 30, 30, 30, (Dollars in thousands) 2005 2006 2005 ------------------------------------ --------- --------- ---------- Service charges on deposit accounts $243,835 $242,555 (0.52)% Trust and investment management fees 127,053 146,050 14.95 Insurance commissions 59,176 54,571 (7.78) Merchant banking fees 35,637 28,280 (20.64) Brokerage commissions and fees 22,867 26,656 16.57 Foreign exchange gains, net 25,570 24,304 (4.95) Card processing fees, net 18,668 21,144 13.26 Securities gains (losses), net (13,289) 1,822 nm Gain on private capital investments, net 18,888 14,210 (24.77) Other 82,962 94,801 14.27 --------- --------- Total noninterest income $621,367 $654,393 5.32 % ========= ========= Noninterest expense (Unaudited) (1) Percentage Change to September 30, 2006 For the Nine Months Ended From ------------------------- ---------- September 30, September September 30, 30, (Dollars in thousands) 2005 2006 2005 ------------------------------ ------------- ----------- ---------- Salaries and other compensation $556,249 $596,539 7.24 % Employee benefits 145,609 149,206 2.47 ------------- ----------- Salaries and employee benefits 701,858 745,745 6.25 Net occupancy 100,251 103,109 2.85 Outside services 76,248 91,203 19.61 Equipment 50,164 52,155 3.97 Software 43,084 47,001 9.09 Professional services 36,131 43,754 21.10 Advertising and public relations 25,657 33,228 29.51 Communications 30,950 30,555 (1.28) Data processing 24,703 23,175 (6.19) Intangible asset amortization 14,956 10,284 (31.24) Foreclosed asset income (5,606) (15,332) nm Reversal of allowance for losses on off-balance sheet nm commitments (1,000) (7,000) Other 80,652 86,718 7.52 ------------- ----------- Total noninterest expense $1,178,048 $1,244,595 5.65 % ============= =========== - -------------------------------- Refer to Exhibit 11 for footnote explanations. UnionBanCal Corporation and Subsidiaries Footnotes Exhibit 11 - ---------------------------------------------------------------------- (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 reflect the 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 calculated for continuing operations only. (8) Estimated as of September 30, 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 balance and applying an earnings rate or a cost of funds equivalent to the corresponding period's Federal funds purchased rate. nm = not meaningful 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) -----END PRIVACY-ENHANCED MESSAGE-----