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
lossesto nonaccrual loans (9) 1272.29% 1130.05% 850.01% Net loans
charged off to averagetotal loans (6) 0.20% 0.12% 0.02%
Non-performing assets to total loans andforeclosed 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 Months Ended
September 30, 2006 from September 30, September 30, September 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 operationsbefore 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
sharesoutstanding - basic 145,325,640� 142,371,445� (2.03%)
Weighted average common sharesoutstanding - 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 30, December 31,
September 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 30, June 30, September 30, September 30, June 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 andstill
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 For the Three Months Ended
September 30, 2005 September 30, 2006 Interest Average Interest
Average Average Income/ Yield/ Average Income/ Yield/ (Dollars in
thousands) Balance Expense (10) Rate (6) (10) Balance Expense (10)
Rate (6) (10) Assets Loans (11) $ 32,177,816� $ 461,892� 5.71� % $
35,965,823� $ 575,799� 6.37� % Securities - taxable 9,971,085�
96,706� 3.88� 8,548,420� 107,378� 5.02� Securities - tax-exempt
65,800� 1,350� 8.21� 59,644� 1,231� 8.26� Interest bearing deposits
in banks 57,042� 303� 2.11� 37,351� 411� 4.37� Federal funds sold
and securitiespurchased under resale agreements 770,116� 6,777�
3.49� 894,039� 12,024� 5.34� Trading account assets 329,318� 1,115�
1.34� 349,368� 1,832� 2.08� Total earning assets 43,371,177�
568,143� 5.21� 45,854,645� 698,675� 6.06� Allowance for loan losses
(392,651) (328,399) Cash and due from banks 2,232,281� 2,063,653�
Premises and equipment, net 514,156� 497,957� Other assets
2,487,066� 2,689,563� Total assets $ 48,212,029� $ 50,777,419�
Liabilities Deposits: Interest bearing $ 13,157,103� 44,318� 1.34�
$ 12,405,367� 73,826� 2.36� Savings and consumer time 4,642,782�
15,668� 1.34� 4,493,082� 25,682� 2.27� Large time 3,105,857�
22,810� 2.91� 6,692,874� 82,790� 4.91� Total interest bearing
deposits 20,905,742� 82,796� 1.57� 23,591,323� 182,298� 3.07�
Federal funds purchased and securitiessold under repurchase
agreements 630,272� 5,158� 3.25� 419,665� 5,345� 5.05� Net funding
allocated from (to)discontinued operations (12) (593,732) (4,864)
3.25� (34,738) (454) 5.18� Commercial paper 1,207,822� 9,394� 3.09�
1,645,428� 20,835� 5.02� Other borrowed funds 173,853� 1,707� 3.89�
577,533� 7,842� 5.39� Medium and long-term debt 817,602� 8,520�
4.13� 1,496,207� 21,974� 5.83� Trust notes 15,506� 239� 6.15�
15,054� 239� 6.33� Total borrowed funds 2,251,323� 20,154� 3.55�
4,119,149� 55,781� 5.37� Total interest bearing liabilities
23,157,065� 102,950� 1.76� 27,710,472� 238,079� 3.41� Noninterest
bearing deposits 19,387,786� 16,990,816� Other liabilities
1,392,056� 1,497,496� Total liabilities 43,936,907� 46,198,784�
Stockholders' Equity Common equity 4,275,122� 4,578,635� Total
stockholders' equity 4,275,122� 4,578,635� Total liabilities and
stockholders'equity $ 48,212,029� $ 50,777,419� Reported Net
Interest Income/Margin Net interest
income/margin(taxable-equivalent basis) 465,193� 4.27� % 460,596�
4.00� % Less: taxable-equivalent adjustment 1,051� 1,872� Net
interest income $ 464,142� $ 458,724� � � � � � � � � � � � �
Average Assets and Liabilities of Discontinued Operations for
Period Ended: September 30, 2005 September 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 For the Three Months Ended June 30, 2006
September 30, 2006 Interest Average Interest Average Average
Income/ Yield/ Average Income/ Yield/ (Dollars in thousands)
Balance Expense (10) Rate (6) (10) Balance Expense (10) Rate (6)
(10) Assets Loans: (11) $ 35,146,976� $ 548,017� 6.25� % $
35,965,823� $ 575,799� 6.37� % Securities - taxable 8,349,759�
102,733� 4.92� 8,548,420� 107,378� 5.02� Securities - tax-exempt
63,222� 1,275� 8.06� 59,644� 1,231� 8.26� Interest bearing deposits
in banks 34,462� 423� 4.92� 37,351� 411� 4.37� Federal funds sold
and securities purchased under resale agreements 379,412� 4,725�
4.99� 894,039� 12,024� 5.34� Trading account assets 384,763� 1,685�
1.76� 349,368� 1,832� 2.08� Total earning assets 44,358,594�
658,858� 5.95� 45,854,645� 698,675� 6.06� Allowance for loan losses
(334,556) (328,399) Cash and due from banks 2,107,846� 2,063,653�
Premises and equipment, net 506,607� 497,957� Other assets
2,690,883� 2,689,563� Total assets $ 49,329,374� $ 50,777,419�
Liabilities Deposits: Interest bearing $ 12,614,869� 65,457� 2.08�
$ 12,405,367� 73,826� 2.36� Savings and consumer time 4,470,764�
21,502� 1.93� 4,493,082� 25,682� 2.27� Large time 5,062,473�
56,718� 4.49� 6,692,874� 82,790� 4.91� Total interest bearing
deposits 22,148,106� 143,677� 2.60� 23,591,323� 182,298� 3.07�
Federal funds purchased and securities sold under repurchase
agreements 748,050� 8,902� 4.77� 419,665� 5,345� 5.05� Net funding
allocated from (to) discontinued operations (12) (36,123) (447)
4.97� (34,738) (454) 5.18� Commercial paper 1,650,266� 19,137�
4.65� 1,645,428� 20,835� 5.02� Other borrowed funds 108,095� 1,476�
5.47� 577,533� 7,842� 5.39� Medium and long-term debt 1,179,432�
16,875� 5.74� 1,496,207� 21,974� 5.83� Trust notes 15,167� 238�
6.28� 15,054� 239� 6.33� Total borrowed funds 3,664,887� 46,181�
5.05� 4,119,149� 55,781� 5.37� Total interest bearing liabilities
25,812,993� 189,858� 2.95� 27,710,472� 238,079� 3.41� Noninterest
bearing deposits 17,543,946� 16,990,816� Other liabilities
1,432,959� 1,497,496� Total liabilities 44,789,898� 46,198,784�
Stockholders' Equity Common equity 4,539,476� 4,578,635� Total
stockholders' equity 4,539,476� 4,578,635� Total liabilities and
stockholders' equity $ 49,329,374� $ 50,777,419� Reported Net
Interest Income/Margin Net interest income/margin
(taxable-equivalent basis) 469,000� 4.23� % 460,596� 4.00� % Less:
taxable-equivalent adjustment 1,358� 1,872� Net interest income $
467,642� $ 458,724� � � � � � � � � � Average Assets and
Liabilities of Discontinued Operations for Period Ended: June 30,
2006 Sept. 30, 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 For the Nine Months Ended
September 30, 2005 September 30, 2006 Interest Average Interest
Average Average Income/ Yield/ Average Income/ Yield/ (Dollars in
thousands) Balance Expense (10) Rate (6) (10) Balance Expense (10)
Rate (6) (10) Assets Loans: (11) $ 30,843,202� $ 1,305,807� 5.66� %
$ 35,100,506� $ 1,636,804� 6.23� % Securities - taxable 10,678,358�
298,317� 3.72� 8,378,496� 306,164� 4.87� Securities - tax-exempt
66,379� 4,022� 8.08� 62,670� 3,804� 8.09� Interest bearing deposits
in banks 96,961� 1,432� 1.97� 43,804� 1,570� 4.79� Federal funds
sold and securitiespurchased under resale agreements 615,967�
14,406� 3.13� 541,607� 20,594� 5.08� Trading account assets
275,087� 3,072� 1.49� 354,134� 5,047� 1.91� Total earning assets
42,575,954� 1,627,056� 5.10� 44,481,217� 1,973,983� 5.93� Allowance
for loan losses (398,404) (337,145) Cash and due from banks
2,240,948� 2,096,935� Premises and equipment, net 519,915� 510,416�
Other assets 2,404,271� 2,675,245� Total assets $ 47,342,684� $
49,426,668� Liabilities Deposits: Interest bearing $ 12,614,932�
101,752� 1.08� $ 12,757,571� 201,641� 2.11� Savings and consumer
time 4,707,515� 42,841� 1.22� 4,477,251� 65,672� 1.96� Large time
3,190,094� 61,455� 2.58� 5,133,186� 173,971� 4.53� Total interest
bearing deposits 20,512,541� 206,048� 1.34� 22,368,008� 441,284�
2.64� Federal funds purchased and securities sold under repurchase
agreements 1,021,123� 20,829� 2.73� 678,926� 23,657� 4.66� Net
funding allocated from (to) discontinued operations (12) (535,998)
(11,499) 2.87� (42,570) (1,509) 4.74� Commercial paper 1,078,558�
21,761� 2.70� 1,514,196� 52,420� 4.63� Other borrowed funds
183,997� 5,053� 3.67� 319,096� 12,233� 5.13� Medium and long-term
debt 808,686� 22,511� 3.72� 1,164,090� 49,246� 5.66� Trust notes
15,618� 715� 6.10� 15,166� 715� 6.28� Total borrowed funds
2,571,984� 59,370� 3.09� 3,648,904� 136,762� 5.01� Total interest
bearing liabilities 23,084,525� 265,418� 1.54� 26,016,912� 578,046�
2.97� Noninterest bearing deposits 18,792,219� 17,348,964� Other
liabilities 1,256,056� 1,508,382� Total liabilities 43,132,800�
44,874,258� Stockholders' Equity Common equity 4,209,884�
4,552,410� Total stockholders' equity 4,209,884� 4,552,410� Total
liabilities and stockholders' equity $ 47,342,684� $ 49,426,668�
Reported Net Interest Income/Margin Net interest income/margin
(taxable-equivalent basis) 1,361,638� 4.27� % 1,395,937� 4.19� %
Less: taxable-equivalent adjustment 3,124� 4,478� Net interest
income $ 1,358,514� $ 1,391,459� � � � � � � � � Average Assets and
Liabilities of Discontinued Operations for Period Ended: September
30, 2005 September 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 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� � 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 Ended
September 30, 2006 From September 30, September 30, September 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 For the Nine Months Ended
September 30, 2006 From September 30, September 30, September 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 commitments
(1,000) (7,000) nm 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 UnionBanCal Corporation
(NYSE:UB): -0- *T 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 *T 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. -0- *T 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. *T -0- *T
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. *T -0- *T 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. *T -0- *T 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. *T -0- *T 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. *T -0- *T 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. *T -0- *T 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. *T -0- *T 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. *T -0- *T 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. *T -0- *T 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. *T -0- *T 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 *T
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