EX-99.1 2 a5381767ex991.txt EXHIBIT 99.1 Exhibit 99.1 UnionBanCal Corporation Reports First Quarter Earnings Per Share of $1.07 SAN FRANCISCO--(BUSINESS WIRE)--April 19, 2007--UnionBanCal Corporation (NYSE:UB): First Quarter 2007 Highlights: -- Strong year-over-year organic loan growth -- Average total loans up 13 percent -- Average core commercial loans, which exclude loans to title and escrow companies, up 14 percent -- Annualized average all-in cost of funds of 2.55 percent -- Average noninterest bearing deposits comprised 36.4 percent of average total deposits -- Nonperforming assets just 0.08 percent of total assets at quarter-end UnionBanCal Corporation (NYSE:UB) today reported first quarter 2007 net income of $149.6 million, or $1.07 per diluted common share. Income from continuing operations for first quarter 2006 was $181.5 million, or $1.24 per diluted common share. Income from continuing operations for fourth quarter 2006 was $227.7 million, or $1.61 per diluted common share, including $72.8 million, or $0.51 per diluted common share, in state income tax refunds, and $5.3 million, or $0.04 per diluted common share, in tax adjustments. Excluding these items, income from continuing operations for fourth quarter 2006 was $149.6 million, or $1.06 per diluted common share. "The operating environment continues to be challenging for banks with significant commercial deposit businesses," stated Takashi Morimura, President and Chief Executive Officer. "However, our first quarter results were in line with our expectations, as strong loan growth, excellent asset quality, and good expense control offset the expected deposit weakness. "In February, we announced that Masaaki Tanaka will be assuming the position of President and Chief Executive Officer in May, when I take on a new role with our majority shareholder. I am privileged to have served as President and Chief Executive Officer of UnionBanCal Corporation, and I leave the Company in the capable hands of Mr. Tanaka, our Chief Operating Officer Philip Flynn, and the rest of the executive management team." Commenting on the first quarter results, Mr. Flynn stated, "We began 2007 with continued robust growth in loans, particularly in our industry specialty businesses. We grew core commercial and industrial loans 14 percent over last year, while we grew commercial mortgage and construction loans 16 percent. We expanded our high-quality residential mortgage portfolio by 8 percent year over year, while maintaining our stringent underwriting standards. Overall, credit quality continues to be excellent. "Competition for deposits continues to be intense, which has resulted in pressure on noninterest bearing deposit balances. However, pricing on interest bearing core deposits appears to be stabilizing. We continue to have confidence in the strategic positioning of our commercial deposit businesses." Summary of First Quarter Results First quarter 2007 net income was $149.6 million, or $1.07 per diluted common share, compared with income from continuing operations of $1.24 per diluted common share a year earlier. Total revenue compared with first quarter 2006 decreased 4.5 percent, due to a 2.1 percent increase in noninterest income and a 7.7 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 $5 million, $15 million higher than the negative $10 million provision recorded in first quarter 2006. For first quarter 2007, noninterest expense was up 1.8 percent from the same quarter a year earlier. First quarter 2007 net income was $1.07 per diluted common share, compared with adjusted income from continuing operations of $1.06 per diluted common share last quarter. Adjusted income from continuing operations for fourth quarter 2006 excludes $0.51 per diluted common share in state income tax refunds and $0.04 per diluted common share in tax adjustments. Total revenue decreased 2.9 percent in sequential quarters, with net interest income decreasing 4.0 percent and noninterest income decreasing 0.7 percent. The decrease in net interest income was primarily due to lower noninterest bearing deposit balances and two fewer days in first quarter 2007. The total provision for credit losses was $5 million in both quarters. Noninterest expense declined 4.4 percent in sequential quarters, primarily due to lower cost of services related to title and escrow balances, lower compliance-related expense and lower expense associated with low income housing tax credit projects. First Quarter Total Revenue For first quarter 2007, total revenue (taxable-equivalent net interest income plus noninterest income) was $653.2 million, down 4.5 percent compared with first quarter 2006. Net interest income decreased 7.7 percent, and noninterest income increased 2.1 percent. Compared with fourth quarter 2006, total revenue decreased 2.9 percent, with net interest income decreasing 4.0 percent and noninterest income decreasing 0.7 percent. First Quarter Net Interest Income (Taxable-equivalent) Net interest income was $430.6 million in first quarter 2007, down $35.7 million, or 7.7 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 $5.3 billion, or 12.2 percent, compared to 2006, primarily due to a $4.4 billion, or 12.9 percent, increase in average loans. Average commercial loans increased $2.3 billion, or 18.7 percent; and average residential mortgages increased $0.9 billion, or 8.2 percent. $708 million, or 31 percent, of the increase in average commercial loans was attributable to title and escrow loans, which are highly rate-advantaged loans and are more volatile than other commercial loans. Excluding title and escrow loans, average commercial loans grew 14.0 percent, year over year. Compared to first quarter 2006, average interest bearing deposits increased $5.0 billion, or 23.7 percent, while average noninterest bearing deposits decreased $2.4 billion, or 13.8 percent. The decline in noninterest bearing deposits was primarily due to a $1.7 billion, or 14.8 percent, decrease in average other commercial noninterest bearing deposits and a $0.3 billion, or 11.6 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 $0.4 billion, or 12.0 percent. Average noninterest bearing deposits represented 36.4 percent of average total deposits in first quarter 2007. The annualized average all-in cost of funds was 2.55 percent, reflecting the Company's strong average core deposit-to-loan ratio of 86 percent and the high proportion of noninterest bearing deposits to total deposits. The average yield on earning assets of $48.4 billion was 6.06 percent, up 29 basis points over first quarter 2006, with the average loan yield increasing 25 basis points. The average rate on interest bearing liabilities of $31.9 billion was 3.75 percent, up 126 basis points compared with first quarter 2006, reflecting higher short-term interest rates, an unfavorable change in deposit mix, and heightened competition for deposits. The net interest margin in first quarter 2007 was 3.58 percent, compared with 4.36 percent in first quarter 2006. First quarter 2007 net interest income decreased $18 million, or 4.0 percent, compared with fourth quarter 2006, with approximately $3.8 million of the decline attributable to two fewer days in first quarter 2007. Average loans increased $1.0 billion, or 2.6 percent. Average commercial loans increased $511 million, or 3.6 percent, average commercial mortgage loans increased $249 million, or 4.3 percent, and average residential mortgages increased $162 million, or 1.3 percent. Average interest bearing deposits increased $1.2 billion, or 4.8 percent, while average noninterest bearing deposits decreased $1.0 billion, or 6.4 percent. The decline in noninterest bearing deposits was due to a $677 million, or 6.2 percent, decrease in average other commercial noninterest bearing deposits and a $347 million, or 14.1 percent, decrease in average title and escrow deposits. Average consumer noninterest bearing deposits decreased $10 million, or 0.4 percent. The average yield on earning assets was flat and the average rate on interest bearing liabilities increased 17 basis points. The net interest margin decreased 23 basis points to 3.58 percent. First Quarter Noninterest Income In first quarter 2007, noninterest income was $222.6 million, up $4.6 million, or 2.1 percent, from the same quarter a year ago. Service charges on deposit accounts decreased $6.7 million, or 8.2 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. Gain on private capital investments, net, was $9.1 million, compared with $2.8 million in the same quarter a year ago. First quarter 2007 noninterest income decreased $1.5 million, or 0.7 percent, compared with fourth quarter 2006. Service charges on deposit accounts decreased $2.1 million, or 2.8 percent, primarily due to lower noninterest bearing deposit balances. Insurance commissions increased $2.3 million, or 12.7 percent, primarily due to normal seasonal factors. Merchant banking fees decreased $4.8 million, or 34.7 percent, primarily due to a lower volume of syndications completed in first quarter. First Quarter Noninterest Expense Noninterest expense for first quarter 2007 was $422.1 million, an increase of $7.5 million, or 1.8 percent, over noninterest expense for first quarter 2006. Salaries and employee benefits expense increased $6.0 million, or 2.4 percent, primarily due to annual merit increases and higher accruals for performance-related incentive expense, partially offset by lower pension expense. Outside services expense decreased $8.8 million, or 30.7 percent, primarily due to lower cost of services related to title and escrow balances. Professional services expense increased $2.5 million, or 17.5 percent, primarily due to higher compliance-related expense compared with first quarter last year. Advertising and public relations expense decreased $1.8 million, or 18.0 percent, primarily due to timing of marketing promotions. Foreclosed asset expense (income) decreased $7.4 million, reflecting a $7.4 million gain on the sale of property recorded in first quarter 2006. Provision for losses on off-balance sheet commitments in first quarter 2007 was $1.0 million, compared with negative $3.0 million in first quarter 2006. Noninterest expense decreased $19.6 million, or 4.4 percent, compared with fourth quarter 2006. Salaries and employee benefits expense increased $7.7 million, or 3.1 percent, primarily due to annual seasonal factors that result in higher payroll taxes and 401(k) matching contributions, and higher accruals for performance-related incentive expense, partially offset by lower pension expense and lower severance expense. Outside services expense declined $6.3 million, or 24.2 percent, primarily due to lower cost of services related to title and escrow balances. Professional services expense decreased $2.8 million, or 14.0 percent, partially due to lower compliance-related expense. Provision for losses on off-balance sheet commitments was $1.0 million, compared with $2.0 million in the prior quarter. Income Tax Expense The effective tax rate for first quarter 2007 was 33.5 percent, compared with an effective tax rate of 34.1 percent for first quarter 2006. The difference in rate was primarily due to higher tax credits in 2007. Significant Accounting Policies On January 1, 2007, the Company adopted Staff Position (FSP) FAS 13-2, "Accounting for a Change or Projected Change in the Timing of Cash Flows Related to Income Taxes Generated by a Leveraged Lease Transaction", which resulted in a reduction to retained earnings of $20.8 million. On January 1, 2007, the Company adopted FIN No. 48, "Accounting for Uncertainty in Income Taxes - An Interpretation of FASB Statement No. 109". The cumulative effect of applying the provisions of this interpretation was recognized as a reduction to retained earnings of $49.3 million. Credit Quality Nonperforming assets at March 31, 2007, were $42 million, or 0.08 percent of total assets. This compares with $42 million, or 0.08 percent of total assets, at December 31, 2006, and $42 million, or 0.09 percent of total assets, at March 31, 2006. In first quarter 2007, the total provision for credit losses was $5 million. The total provision for credit losses was $5 million in fourth quarter 2006 and negative $10 million in first quarter 2006. In first quarter 2007, net charge-offs were $2 million, compared with net recoveries of $1 million in fourth quarter 2006, and net charge-offs of $5 million in first quarter 2006. At March 31, 2007, the allowance for credit losses as a percent of total loans and as a percent of nonaccrual loans was 1.11 percent and 997 percent, respectively. These ratios were 1.12 percent and 987 percent, respectively, at December 31, 2006, and 1.26 percent and 1003 percent, respectively, at March 31, 2006. Balance Sheet and Capital Ratios At March 31, 2007, the Company had total assets of $54.6 billion. Total loans were $37.3 billion and total deposits were $43.8 billion, resulting in a period-end deposit-to-loan ratio of 118 percent. At period-end, total stockholders' equity was $4.6 billion, the tangible equity ratio was 7.53 percent, and the ratio of tangible common equity to risk-weighted assets was 7.99 percent. Book value per share at March 31, 2007, was $32.98, up 3.3 percent from a year earlier. The Company's Tier I and total risk-based capital ratios at period-end were 8.41 percent and 11.38 percent, respectively. Stock Repurchases During first quarter 2007, the Company repurchased 1.4 million shares of common stock at a total price of $85.5 million, or an average of $62.73 per repurchased share. At March 31, 2007, the Company had remaining repurchase authority of $64 million. Common shares outstanding at March 31, 2007, were 138.1 million, a decrease of 5.3 million shares, or 3.7 percent, from one year earlier. Common Stock Dividend The next meeting of the Board of Directors of the Company is scheduled for May 24, 2007. At this meeting, the Board will consider and declare the second quarter 2007 common stock dividend. Second Quarter and Full Year 2007 Earnings Per Share Forecast The Company currently estimates that second quarter 2007 fully diluted earnings per share will be in the range of $1.07 to $1.12, including a total provision for credit losses of approximately $5 million. For the year, the Company currently estimates that fully diluted earnings per share will be in the range of $4.50 to $4.75, including a total provision for credit losses of approximately $35 million. 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 tax refunds and 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," "continue," "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, provision for credit losses, trends in deposit rates and balances and competition for deposits 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; the levels of commercial and residential real estate activity in our market; 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 first quarter 2007 results at 8:30 AM Pacific Time (11:30 AM Eastern Time) on April 20, 2007. Interested parties calling from locations within the United States should call 800-230-1951 (612-332-0107 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.unionbank.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), April 20, through 11:59 PM Pacific Time, April 27 (2:59 AM Eastern Time, April 28). The reservation number for this playback is 868035. Based in San Francisco, UnionBanCal Corporation is a bank holding company with assets of $54.6 billion at March 31, 2007. Its primary subsidiary, Union Bank of California, N.A., had 321 banking offices in California, Oregon and Washington, and 2 international offices at March 31, 2007. UnionBanCal Corporation and Subsidiaries Financial Highlights (Unaudited) Exhibit 1 Percent Change to As of and for the Three Months Ended March 31, 2007 from -------------------------------------------------------- March 31, Dec. 31, March 31, March 31, Dec. 31, (Dollars in thousands, except per share data) 2006 2006 2007 2006 2006 ------------- ------------ ------------ ------------------------------ Results of operations: Net interest income (1) $466,341 $448,619 $430,627 (7.66%) (4.01%) Noninterest income 217,910 224,106 222,558 2.13% (0.69%) ------------ ------------ ------------ Total revenue 684,251 672,725 653,185 (4.54%) (2.90%) Noninterest expense 414,544 441,693 422,091 1.82% (4.44%) (Reversal of) provision for loan losses (7,000) 3,000 4,000 nm 33.33% ------------ ------------ ------------ Income from continuing operations before income taxes (1) 276,707 228,032 227,094 (17.93%) (0.41%) Taxable- equivalent adjustment 1,248 1,923 2,115 69.47% 9.98% Income tax expense (benefit) 94,004 (1,632) 75,368 (19.82%) nm ------------ ------------ ------------ Income from continuing operations $181,455 $227,741 $149,611 (17.55%) (34.31%) Loss from discontinued operations (8,510) (1,307) - 100.00% 100.00% ------------ ------------ ------------ Net income $172,945 $226,434 $149,611 (13.49%) (33.93%) ============ ============ ============ Per common share: Basic earnings: From continuing operations $1.26 $1.63 $1.08 (14.29%) (33.74%) Net income 1.20 1.62 1.08 (10.00%) (33.33%) Diluted earnings: From continuing operations 1.24 1.61 1.07 (13.71%) (33.54%) Net income 1.18 1.61 1.07 (9.32%) (33.54%) Dividends (2) 0.41 0.47 0.47 14.63% 0.00% Book value (end of period) 31.94 32.86 32.98 3.26% 0.37% Common shares outstanding (end of period) (3) (4) 143,402,332 139,107,254 138,117,370 (3.69%) (0.71%) Weighted average common shares outstanding - basic (3) (4) 143,878,106 139,390,487 137,942,320 (4.13%) (1.04%) Weighted average common shares outstanding - diluted (3) (4) 146,026,188 141,025,758 139,729,681 (4.31%) (0.92%) Balance sheet (end of period): Total assets (5) $48,800,945 $52,619,576 $54,616,849 11.92% 3.80% Total loans 33,528,868 36,671,723 37,251,950 11.10% 1.58% Nonperforming assets 42,392 42,365 41,744 (1.53%) (1.47%) Total deposits 39,155,904 41,969,368 43,797,924 11.86% 4.36% Stockholders' equity 4,579,878 4,571,401 4,555,439 (0.53%) (0.35%) Balance sheet (period average): Total assets $48,016,643 $51,671,465 $52,973,203 10.32% 2.52% Total loans 34,052,067 37,495,315 38,458,014 12.94% 2.57% Earning assets 43,084,349 46,860,166 48,354,950 12.23% 3.19% Total deposits 38,856,033 41,320,468 41,483,062 6.76% 0.39% Stockholders' equity 4,538,679 4,638,801 4,510,205 (0.63%) (2.77%) Financial ratios (6): Return on average assets (7) : From continuing operations 1.53% 1.75% 1.15% Net income 1.46% 1.74% 1.15% Return on average stock- holders' equity (7) : From continuing operations 16.21% 19.48% 13.45% Net income 15.45% 19.37% 13.45% Efficiency ratio (8) 62.10% 65.36% 64.47% Net interest margin (1) 4.36% 3.81% 3.58% Dividend payout ratio 32.54% 28.83% 43.52% Tangible equity ratio 8.46% 7.84% 7.53% Tier 1 risk- based capital ratio (5) (9) 9.09% 8.68% 8.41% Total risk- based capital ratio (5) (9) 10.94% 11.71% 11.38% Leverage ratio (5) (9) 8.80% 8.44% 8.12% Allowances for credit losses to total loans (10) 1.26% 1.12% 1.11% Allowances for credit losses to nonaccrual loans (10) 1003.48% 987.06% 997.48% Net loans charged off (recovered) to average total loans (7) 0.06% (0.01%) 0.03% Nonperforming assets to total loans and foreclosed assets 0.13% 0.12% 0.11% Nonperforming assets to total assets (5) 0.09% 0.08% 0.08% ------------- Refer to Exhibit 8 for footnote explanations. UnionBanCal Corporation and Subsidiaries Condensed Consolidated Statements of Income (Unaudited) (Taxable-Equivalent Basis) Exhibit 2 For the Three Months Ended ----------------------------- March 31, Dec. 31, March 31, (Dollars in thousands, except per share data) 2006 2006 2007 ---------------------------------------- --------- --------- --------- Interest Income (1) Loans $512,988 $595,225 $603,502 Securities 97,351 110,916 108,422 Interest bearing deposits in banks 736 1,047 1,109 Federal funds sold and securities purchased under resale agreements 3,845 4,924 11,152 Trading account assets 1,530 1,791 1,701 --------- --------- --------- Total interest income 616,450 713,903 725,886 --------- --------- --------- Interest Expense Deposits 115,309 208,423 222,257 Federal funds purchased and securities sold under repurchase agreements 8,802 9,716 13,524 Commercial paper 12,448 22,595 22,264 Medium and long-term debt 10,397 21,193 19,695 Trust notes 238 238 238 Other borrowed funds 2,915 3,119 17,281 --------- --------- --------- Total interest expense 150,109 265,284 295,259 --------- --------- --------- Net Interest Income (1) 466,341 448,619 430,627 (Reversal of) provision for loan losses (7,000) 3,000 4,000 --------- --------- --------- Net interest income after (reversal of) provision for loan losses 473,341 445,619 426,627 --------- --------- --------- Noninterest Income Service charges on deposit accounts 81,635 77,092 74,945 Trust and investment management fees 50,115 49,036 48,560 Insurance commissions 19,518 17,976 20,250 Brokerage commissions and fees 7,795 9,155 9,660 Merchant banking fees 8,229 13,905 9,077 Foreign exchange gains, net 7,818 7,916 7,594 Card processing fees, net 6,697 7,256 7,127 Securities gains (losses), net (214) 420 1,220 Other 36,317 41,350 44,125 --------- --------- --------- Total noninterest income 217,910 224,106 222,558 --------- --------- --------- Noninterest Expense Salaries and employee benefits 252,495 250,791 258,515 Net occupancy 32,837 38,662 35,137 Outside services 28,609 26,184 19,836 Professional services 14,547 19,862 17,087 Equipment 17,922 17,678 16,554 Software 16,344 16,978 14,196 Communications 10,552 9,876 9,791 Foreclosed asset expense (income) (7,367) 10 9 (Reversal of) provision for losses on off-balance sheet commitments (3,000) 2,000 1,000 Other 51,605 59,652 49,966 --------- --------- --------- Total noninterest expense 414,544 441,693 422,091 --------- --------- --------- Income from continuing operations before income taxes (1) 276,707 228,032 227,094 Taxable-equivalent adjustment 1,248 1,923 2,115 Income tax expense (benefit) 94,004 (1,632) 75,368 --------- --------- --------- Income from Continuing Operations 181,455 227,741 149,611 --------- --------- --------- Loss from discontinued operations before income taxes (13,603) (1,824) - Income tax benefit (5,093) (517) - --------- --------- --------- Loss from Discontinued Operations (8,510) (1,307) - --------- --------- --------- Net Income $172,945 $226,434 $149,611 ========= ========= ========= Income from continuing operations per common share - basic $1.26 $1.63 $1.08 ========= ========= ========= Net income per common share - basic $1.20 $1.62 $1.08 ========= ========= ========= Income from continuing operations per common share - diluted $1.24 $1.61 $1.07 ========= ========= ========= Net income per common share - diluted $1.18 $1.61 $1.07 ========= ========= ========= Weighted average common shares outstanding - basic 143,878 139,390 137,942 ========= ========= ========= Weighted average common shares outstanding - diluted 146,026 141,026 139,730 ========= ========= ========= ---------------------------------------- Refer to Exhibit 8 for footnote explanations. UnionBanCal Corporation and Subsidiares Consolidated Balance Sheets Exhibit 3 (Unaudited) (Unaudited) March 31, December 31, March 31, (Dollars in thousands) 2006 2006 2007 ------------------------------- ------------ ------------ ------------ Assets Cash and due from banks $2,035,544 $2,213,782 $1,913,937 Interest bearing deposits in banks 170,187 824,456 1,008,327 Federal funds sold and securities purchased under resale agreements 513,777 943,200 2,747,300 ------------ ------------ ------------ Total cash and cash equivalents 2,719,508 3,981,438 5,669,564 Trading account assets 329,703 376,321 297,998 Securities available for sale: Securities pledged as collateral 88,152 89,184 62,026 Held in portfolio 8,394,318 8,667,038 8,524,615 Loans (net of allowance for loan losses: March 31, 2006, $339,443; December 31, 2006, $331,077; March 31, 2007, $332,679) 33,189,425 36,340,646 36,919,271 Due from customers on acceptances 20,541 17,834 18,099 Premises and equipment, net 511,095 495,302 491,088 Intangible assets 39,186 28,930 26,687 Goodwill 453,489 453,489 453,489 Other assets 2,814,603 2,148,954 2,154,012 Assets of discontinued operations to be disposed or sold 240,925 20,440 - ------------ ------------ ------------ Total assets $48,800,945 $52,619,576 $54,616,849 ============ ============ ============ Liabilities Noninterest bearing $18,118,506 $17,113,890 $16,175,362 Interest bearing 21,037,398 24,855,478 27,622,562 ------------ ------------ ------------ Total deposits 39,155,904 41,969,368 43,797,924 Federal funds purchased and securities sold under repurchase agreements 292,758 1,083,927 549,545 Commercial paper 1,420,276 1,661,163 1,424,401 Other borrowed funds 66,472 432,401 892,852 Acceptances outstanding 20,541 17,834 18,099 Other liabilities 2,259,464 1,545,165 1,292,554 Medium and long-term debt 788,763 1,318,847 2,071,263 Junior subordinated debt payable to subsidiary grantor trust 15,225 14,885 14,772 Liabilities of discontinued operations to be extinguished or assumed 201,664 4,585 - ------------ ------------ ------------ Total liabilities 44,221,067 48,048,175 50,061,410 ------------ ------------ ------------ Stockholders' Equity Preferred stock: Authorized 5,000,000 shares; no shares issued or outstanding as of March 31, 2006, December 31, 2006 and March 31, 2007 - - - Common stock, par value $1 per share: Authorized 300,000,000 shares; issued 154,832,175 shares as of March 31, 2006, 156,460,057 shares as of December 31, 2006 and 156,832,956 shares as of March 31, 2007 154,832 156,460 156,833 Additional paid-in capital 1,018,943 1,083,649 1,109,817 Treasury stock - 11,429,843 shares as of March 31, 2006, 17,352,803 shares as of December 31, 2006 and 18,715,586 shares as of March 31, 2007 (692,783) (1,064,606) (1,150,090) Retained earnings 4,258,533 4,655,272 4,669,590 Accumulated other comprehensive loss (159,647) (259,374) (230,711) ------------ ------------ ------------ Total stockholders' equity 4,579,878 4,571,401 4,555,439 ------------ ------------ ------------ Total liabilities and stockholders' equity $48,800,945 $52,619,576 $54,616,849 ============ ============ ============ UnionBanCal Corporation and Subsidiaries Loans (Unaudited) Exhibit 4 Percent Change to Three Months Ended March 31, 2007 from -------------------------- ------------------ March December March March December 31, 31, 31, 31, 31, (Dollars in millions) 2006 2006 2007 2006 2006 ------------------------ -------- -------- -------- -------- --------- Loans (period average) Commercial, financial and industrial $12,370 $14,168 $14,681 18.68% 3.62% Construction 1,523 2,183 2,233 46.62% 2.29% Mortgage - Commercial 5,652 5,815 6,064 7.29% 4.28% Mortgage - Residential 11,444 12,222 12,384 8.21% 1.33% Consumer 2,489 2,520 2,542 2.13% 0.87% Lease financing 569 580 548 (3.69%) (5.52%) -------- -------- -------- Total loans held to maturity $34,047 $37,488 $38,452 12.94% 2.57% Total loans held for sale 5 7 6 20.00% (14.29%) -------- -------- -------- Total loans $34,052 $37,495 $38,458 12.94% 2.57% ======== ======== ======== Nonperforming assets (period end) Nonaccrual loans: Commercial, financial and industrial $19 $7 $5 (73.68%) (28.57%) Mortgage - Commercial 8 19 22 nm 15.79% Lease 15 15 15 0.00% 0.00% -------- -------- -------- Total nonaccrual loans 42 41 42 0.00% 2.44% Foreclosed assets - 1 - - (100.00%) -------- -------- -------- Total nonperforming assets $42 $42 $42 0.00% 0.00% ======== ======== ======== Loans 90 days or more past due and still accruing $5 $9 $6 20.00% (33.33%) ======== ======== ======== Analysis of Allowances for Credit Losses Beginning balance $352 $327 $331 (Reversal of) provision for loan losses (7) 3 4 Loans charged off: Commercial, financial and industrial (11) (3) (3) Consumer (1) (1) (1) -------- -------- -------- Total loans charged off (12) (4) (4) -------- -------- -------- Loans recovered: Commercial, financial and industrial 2 5 2 Consumer 1 - - Lease financing 4 - - -------- -------- -------- Total loans recovered 7 5 2 -------- -------- -------- Net loans (charged off) recovered (5) 1 (2) -------- -------- -------- Ending balance of allowance for loan losses $340 $331 $333 Allowance for off- balance sheet commitment losses 83 81 82 -------- -------- -------- $- Allowances for credit losses $423 $412 $415 ======== ======== ======== UnionBanCal Corporation and Subsidiaries Net Interest Income (Unaudited) Exhibit 5 For the Three Months Ended -------------------------------- March 31, 2006 ------------------------------ Interest Average Average Income/ Yield/ (Dollars in thousands) Balance Expense Rate (7) (11) (11) ------------------------------------- ------------ --------- --------- Assets Loans (12) Commercial, financial and industrial $12,371,594 $195,952 6.42 % Construction 1,523,270 26,958 7.18 Residential mortgage 11,446,831 143,340 5.01 Commercial mortgage 5,652,445 97,301 6.98 Consumer 2,489,296 45,095 7.35 Lease financing 568,631 4,342 3.05 ------------ --------- Total loans 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: Transaction accounts $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 (13) (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 ========= -------------------------------------------------------------------- For the Three Months Ended ------------------------------- March 31, 2007 ------------------------------- Interest Average Average Income/ Yield/ (Dollars in thousands) Balance Expense Rate (7) (11) (11) -------------------------------------- ------------ --------- -------- Assets Loans (12) Commercial, financial and industrial $14,684,098 $237,278 6.55 % Construction 2,233,131 42,775 7.77 Residential mortgage 12,386,306 163,766 5.29 Commercial mortgage 6,064,169 106,966 7.15 Consumer 2,542,507 48,979 7.81 Lease financing 547,803 3,738 2.73 ------------ --------- Total loans 38,458,014 603,502 6.34 Securities - taxable 8,580,315 107,268 5.00 Securities - tax-exempt 57,654 1,154 8.01 Interest bearing deposits in banks 79,562 1,109 5.65 Federal funds sold and securities purchased under resale agreements 846,042 11,152 5.35 Trading account assets 333,363 1,701 2.07 ------------ --------- Total earning assets 48,354,950 725,886 6.06 --------- Allowance for loan losses (330,277) Cash and due from banks 1,949,232 Premises and equipment, net 493,055 Other assets 2,506,243 ------------ Total assets $52,973,203 ============ Liabilities Deposits: Transaction accounts $13,534,373 91,505 2.74 Savings and consumer time 4,415,261 26,957 2.48 Large time 8,435,137 103,795 4.99 ------------ --------- Total interest bearing deposits 26,384,771 222,257 3.42 ------------ --------- Federal funds purchased and securities sold under repurchase agreements 1,046,439 13,524 5.24 Net funding allocated from (to) discontinued operations (13) - - - Commercial paper 1,783,758 22,264 5.06 Other borrowed funds 1,309,102 17,281 5.35 Medium and long-term debt 1,371,446 19,695 5.82 Trust notes 14,827 238 6.43 ------------ --------- Total borrowed funds 5,525,572 73,002 5.36 ------------ --------- Total interest bearing liabilities 31,910,343 295,259 3.75 --------- Noninterest bearing deposits 15,098,291 Other liabilities 1,454,364 ------------ Total liabilities 48,462,998 Stockholders' Equity Common equity 4,510,205 ------------ Total stockholders' equity 4,510,205 ------------ Total liabilities and stockholders'equity $52,973,203 ============ Reported Net Interest Income/Margin Net interest income/margin (taxable- equivalent basis) 430,627 3.58 % Less: taxable-equivalent adjustment 2,115 --------- Net interest income $428,512 ========= ------------------------------------------------------------------- Average Assets and Liabilities of Discontinued Operations for Period Ended: March 31, 2006 March 31, 2007 --------------------- ---------------------- Assets $618,653 $7 Liabilities $561,565 $7 Net Asset $57,088 $- -------------------------------------------------------------------- ----------------- Refer to Exhibit 8 for footnote explanations. UnionBanCal Corporation and Subsidiaries Net Interest Income (Unaudited) Exhibit 6 For the Three Months Ended -------------------------------- December 31, 2006 -------------------------------- Interest Average Average Income/ Yield/ (Dollars in thousands) Balance Expense Rate (7) (11) (11) ------------------------------------- ------------ --------- --------- Assets Loans: (12) Commercial, financial and industrial $14,173,007 $234,687 6.57 % Construction 2,183,227 42,865 7.79 Residential mortgage 12,223,931 159,785 5.23 Commercial mortgage 5,815,299 104,633 7.14 Consumer 2,520,250 49,813 7.84 Lease financing 579,601 3,442 2.38 ------------ --------- Total loans 37,495,315 595,225 6.31 Securities - taxable 8,535,024 109,738 5.14 Securities - tax-exempt 58,938 1,178 8.00 Interest bearing deposits in banks 74,471 1,047 5.58 Federal funds sold and securities purchased under resale agreements 365,894 4,924 5.34 Trading account assets 330,524 1,791 2.15 ------------ --------- Total earning assets 46,860,166 713,903 6.06 --------- Allowance for loan losses (327,525) Cash and due from banks 1,963,658 Premises and equipment, net 504,358 Other assets 2,670,808 ------------ Total assets $51,671,465 ============ Liabilities Deposits: Transaction accounts $13,475,864 91,258 2.69 Savings and consumer time 4,502,954 27,910 2.46 Large time 7,208,863 89,255 4.91 ------------ --------- Total interest bearing deposits 25,187,681 208,423 3.28 ------------ --------- Federal funds purchased and securities sold under repurchase agreements 768,941 10,054 5.19 Net funding allocated from (to) discontinued operations (13) (22,913) (338) 5.85 Commercial paper 1,784,097 22,595 5.02 Other borrowed funds 223,406 3,119 5.54 Medium and long-term debt 1,428,937 21,193 5.88 Trust notes 14,940 238 6.38 ------------ --------- Total borrowed funds 4,197,408 56,861 5.37 ------------ --------- Total interest bearing liabilities 29,385,089 265,284 3.58 --------- Noninterest bearing deposits 16,132,787 Other liabilities 1,514,788 ------------ Total liabilities 47,032,664 Stockholders' Equity Common equity 4,638,801 ------------ Total stockholders' equity 4,638,801 ------------ Total liabilities and stockholders' equity $51,671,465 ============ Reported Net Interest Income/Margin Net interest income/margin (taxable- equivalent basis) 448,619 3.81 % Less: taxable-equivalent adjustment 1,923 --------- Net interest income $446,696 ========= -------------------------------------------------------------------- For the Three Months Ended ------------------------------ March 31, 2007 ------------------------------ Interest Average Average Income/ Yield/ (Dollars in thousands) Balance Expense Rate (7) (11) (11) --------------------------------------------------- --------- -------- Assets Loans: (12) Commercial, financial and industrial $14,684,098 $237,278 6.55 % Construction 2,233,131 42,775 7.77 Residential mortgage 12,386,306 163,766 5.29 Commercial mortgage 6,064,169 106,966 7.15 Consumer 2,542,507 48,979 7.81 Lease financing 547,803 3,738 2.73 ------------ --------- Total loans 38,458,014 603,502 6.34 Securities - taxable 8,580,315 107,268 5.00 Securities - tax-exempt 57,654 1,154 8.01 Interest bearing deposits in banks 79,562 1,109 5.65 Federal funds sold and securities purchased under resale agreements 846,042 11,152 5.35 Trading account assets 333,363 1,701 2.07 ------------ --------- Total earning assets 48,354,950 725,886 6.06 --------- Allowance for loan losses (330,277) Cash and due from banks 1,949,232 Premises and equipment, net 493,055 Other assets 2,506,243 ------------ Total assets $52,973,203 ============ Liabilities Deposits: Transaction accounts $13,534,373 91,505 2.74 Savings and consumer time 4,415,261 26,957 2.48 Large time 8,435,137 103,795 4.99 ------------ --------- Total interest bearing deposits 26,384,771 222,257 3.42 ------------ --------- Federal funds purchased and securities sold under repurchase agreements 1,046,439 13,524 5.24 Net funding allocated from (to) discontinued operations (13) - - - Commercial paper 1,783,758 22,264 5.06 Other borrowed funds 1,309,102 17,281 5.35 Medium and long-term debt 1,371,446 19,695 5.82 Trust notes 14,827 238 6.43 ------------ --------- Total borrowed funds 5,525,572 73,002 5.36 ------------ --------- Total interest bearing liabilities 31,910,343 295,259 3.75 --------- Noninterest bearing deposits 15,098,291 Other liabilities 1,454,364 ------------ Total liabilities 48,462,998 Stockholders' Equity Common equity 4,510,205 ------------ Total stockholders' equity 4,510,205 ------------ Total liabilities and stockholders' equity $52,973,203 ============ Reported Net Interest Income/Margin Net interest income/margin (taxable- equivalent basis) 430,627 3.58 % Less: taxable-equivalent adjustment 2,115 --------- Net interest income $428,512 ========= ------------------------------------------------------------------- Average Assets and Liabilities of Discontinued Operations for Period Ended: December 31, 2006 March 31, 2007 ------------------- -------------------- Assets $26,664 $7 Liabilities $3,751 $7 Net Asset $22,913 $- -------------------------------------------------------------------- --------------- Refer to Exhibit 8 for footnote explanations. UnionBanCal Corporation and Subsidiaries Noninterest income (Unaudited) Exhibit 7 Percentage Change to For the Three Months Ended March 31, 2007 From ----------------------------- ------------------ March 31, Dec. 31, March 31, March 31, Dec. 31, (Dollars in thousands) 2006 2006 2007 2006 2006 -------------------- --------- --------- --------- ------------------ Service charges on deposit accounts $81,635 $77,092 $74,945 (8.20)% (2.79)% Trust and investment management fees 50,115 49,036 48,560 (3.10) (0.97) Insurance commissions 19,518 17,976 20,250 3.75 12.65 Brokerage commissions and fees 7,795 9,155 9,660 23.93 5.52 Merchant banking fees 8,229 13,905 9,077 10.31 (34.72) Foreign exchange gains, net 7,818 7,916 7,594 (2.87) (4.07) Card processing fees, net 6,697 7,256 7,127 6.42 (1.78) Securities gains (losses), net (214) 420 1,220 nm nm Gain on private capital investments, net 2,827 8,902 9,095 nm 2.17 Other 33,490 32,448 35,030 4.60 7.96 --------- --------- --------- Total noninterest income $217,910 $224,106 $222,558 2.13 % (0.69)% ========= ========= ========= Noninterest expense (Unaudited) Percentage Change to March 31, 2007 For the Three Months Ended From ----------------------------- ------------------ March 31, Dec. 31, March 31, March 31, Dec. 31, (Dollars in thousands) 2006 2006 2007 2006 2006 -------------------- --------- --------- --------- ------------------ Salaries and other compensation $194,259 $202,511 $207,657 6.90 % 2.54 % Employee benefits 58,236 48,280 50,858 (12.67) 5.34 --------- --------- --------- Salaries and employee benefits 252,495 250,791 258,515 2.38 3.08 Net occupancy 32,837 38,662 35,137 7.00 (9.12) Outside services 28,609 26,184 19,836 (30.67) (24.24) Professional services 14,547 19,862 17,087 17.46 (13.97) Equipment 17,922 17,678 16,554 (7.63) (6.36) Software 16,344 16,978 14,196 (13.14) (16.39) Communications 10,552 9,876 9,791 (7.21) (0.86) Advertising and public relations 10,231 10,780 8,389 (18.00) (22.18) Data processing 7,398 8,668 8,241 11.40 (4.93) Intangible asset amortization 3,430 3,402 2,243 (34.61) (34.07) Foreclosed asset expense (income) (7,367) 10 9 nm (10.00) (Reversal of) provision for losses on off-balance sheet commitments (3,000) 2,000 1,000 nm (50.00) Other 30,546 36,802 31,093 1.79 (15.51) --------- --------- --------- Total noninterest expense $414,544 $441,693 $422,091 1.82 % (4.44)% ========= ========= ========= UnionBanCal Corporation and Subsidiaries Footnotes Exhibit 8 (1) Taxable-equivalent basis. (2) Dividends per share reflect dividends declared on UnionBanCal Corporation's common stock outstanding as of the declaration date. (3) Common shares outstanding reflect common shares issued less treasury shares. (4) For the periods ended December 31, 2006 and March 31, 2007, weighted average common shares outstanding (basic) excludes nonvested restricted shares but includes the impact of those shares in the calculation of diluted shares. The impact of this change on the previous period was not material. (5) End of period total assets and assets used in calculating these ratios include those of discontinued operations. (6) Average balances used to calculate our financial ratios are based on continuing operations data only, unless otherwise indicated. (7) Annualized. (8) 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. (9) Estimated as of March 31, 2007. The regulatory capital and leverage ratios include discontinued operations. (10) 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. (11) Yields and interest income are presented on a taxable-equivalent basis using the federal statutory tax rate of 35 percent. (12) Average balances on loans outstanding include all nonperforming loans and loans held for sale. The amortized portion of net loan origination fees (costs) is included in interest income on loans, representing an adjustment to the yield. (13) 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)