UB Unionbancal Corp

UnionBanCal Corporation (NYSE:UB) 2006 Highlights: � -- Record revenue from continuing operations of $2.7 billion -- Income from continuing operations of $764 million -- Strong year-end capital levels, with tangible equity ratio at 7.84 percent -- Excellent asset quality metrics, including 31 percent reduction in nonperforming assets and year-end nonperforming assets to total assets ratio of 0.08 percent � Fourth Quarter 2006 Highlights: � -- Strong year-over-year organic loan growth � -- Average total loans up 13 percent � -- Average commercial loans up 18 percent � -- Average residential mortgage loans up 10 percent � -- Annualized average all-in cost of funds of 2.31 percent -- Average noninterest bearing deposits comprised 39 percent of average total deposits UnionBanCal Corporation (NYSE:UB) today reported fourth quarter 2006 net income of $226.4 million, or $1.61 per diluted common share. Income from continuing operations was $227.7 million, or $1.61 per diluted common share, including $72.8 million, or $0.51 per diluted common share, in state income tax refunds, and $5.3 million, or $0.04 per diluted common share in tax adjustments. Excluding these items, income from continuing operations for fourth quarter was $149.6 million, or $1.06 per diluted common share. Income from continuing operations for fourth quarter 2005 was $162.2 million, or $1.10 per diluted common share, including a $22.9 million, or $0.16 per diluted common share, after-tax loss on the sale of securities related to the rebalancing of the Company�s securities portfolio. Adjusting for this item, income from continuing operations for fourth quarter 2005 was $1.26 per diluted common share. For the full year 2006, the Company reported net income of $753 million, or $5.24 per diluted common share, and income from continuing operations of $764 million, or $5.31 per diluted common share. For the full year 2005, the Company reported net income of $863 million, or $5.84 per diluted common share, and income from continuing operations of $731 million, or $4.94 per diluted common share. Income from continuing operations for 2006 included stock option expense of $22.1 million, or $0.10 per diluted common share, versus none in 2005, and $72.8 million, or $0.51 per diluted common share, in state income tax refunds. Adjusting for these items, income from continuing operations for the full year 2006 was $4.90 per diluted common share, a decline of 0.8 percent versus prior year. �While 2006 was a challenging year, we still recorded record revenue from continuing operations of $2.7 billion, and income from continuing operations of $764 million,� stated Takashi Morimura, President and Chief Executive Officer. �Loan growth was strong throughout the year and, despite a challenging interest rate environment and competitive pressures, we successfully defended our core deposit customer base. �During 2006, we increased our common stock dividend by 15 percent, and invested $452 million in the repurchase of 7.1 million shares. We returned $710 million to our shareholders in the form of dividends and buybacks, representing 94 percent of our net income. �The Company is well-positioned competitively and financially entering the new year. We begin 2007 with good momentum in our lending businesses, excellent asset quality and strong capital levels.� Added Chief Operating Officer Philip Flynn, �Core earnings per share declined from third quarter, but were consistent with the forecast we provided in October. More importantly, we are seeing signs that our deposit challenges are moderating. The migration out of noninterest bearing into interest bearing deposit products has slowed, and pricing on the interest bearing product line has moderated in our markets. Sequential quarter loan growth was excellent, with average commercial loans, excluding loans to title and escrow companies, up almost 9 percent annualized, and average residential mortgages up more than 8 percent annualized.� Summary of Fourth Quarter Results from Continuing Operations Adjusting for the tax-related items more fully described in the Income Tax Expense section, fourth quarter 2006 income from continuing operations was $149.6 million, or $1.06 per diluted common share, compared with $1.26 per diluted common share a year earlier, which reflects an adjustment for the loss on the sale of securities, described above. Total revenue increased 1 percent, compared with fourth quarter 2005. A 1.8 percent increase in noninterest income (adjusted for the loss on the sale of securities in fourth quarter 2005) was offset by a 6.9 percent decrease in net interest income. The decrease in net interest income was primarily due to a deposit mix shift, reflecting customer decisions to shift balances from noninterest bearing and low-cost deposits into higher-cost deposits. The unfavorable deposit mix change offset strong loan growth. The total provision for credit losses was $5 million, compared with negative $5 million in fourth quarter 2005. For fourth quarter 2006, noninterest expense was up 2.9 percent from the same quarter a year earlier. Adjusting for the impact of stock option expense, which commenced January 1, 2006, noninterest expense increased 1.8 percent. Fourth Quarter Total Revenue From Continuing Operations For fourth quarter 2006, total revenue (taxable-equivalent net interest income plus noninterest income) was $673 million, up 1.1 percent compared with fourth quarter 2005. Net interest income decreased 6.9 percent, and noninterest income increased 22.2 percent. Excluding a $36.8 million loss on the sale of securities related to the rebalancing of the securities portfolio executed in fourth quarter 2005, total revenue was down 4.2 percent, with net interest income decreasing 6.9 percent, and noninterest income increasing 1.8 percent. Compared with third quarter 2006, total revenue decreased 0.8 percent, with net interest income decreasing 2.6 percent and noninterest income increasing 3.2 percent. Fourth Quarter Net Interest Income (Taxable-equivalent) From Continuing Operations Net interest income was $449 million in fourth quarter 2006, down $33.2 million, or 6.9 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 $3.4 billion, or 7.8 percent, compared to 2005, primarily due to a $4.2 billion, or 12.7 percent, increase in average loans. Average commercial loans increased $2.2 billion, or 18.3 percent; average residential mortgages increased $1.1 billion, or 9.7 percent; and average construction loans increased $0.8 billion, or 54.4 percent. $746 million, or 34 percent, of the increase in average commercial loans was attributable to title and escrow loans, which are highly rate-advantaged loans and are more volatile than other commercial loans. Excluding title and escrow loans, average commercial loans grew 12.8 percent, year over year. The increase in construction loans is primarily related to income properties, where business fundamentals continue to be healthy. Average securities declined $0.5 billion, or 5.5 percent. Compared to fourth quarter 2005, average interest bearing deposits increased $4.2 billion, or 20.0 percent, while average noninterest bearing deposits decreased $3.1 billion, or 16.3 percent. The decline in noninterest bearing deposits was primarily due to a $2.0 billion, or 15.8 percent, decrease in average other commercial noninterest bearing deposits and a $0.7 billion, or 22.1 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 $392 million, or 12.2 percent. Average noninterest bearing deposits represented 39.0 percent of average total deposits in fourth quarter 2006. The annualized average all-in cost of funds was 2.31 percent, reflecting the Company�s strong average core deposit-to-loan ratio of 91 percent and the high proportion of noninterest bearing deposits to total deposits. The average yield on earning assets of $46.9 billion was 6.06 percent, up 55 basis points over fourth quarter 2005, with the average loan yield increasing 37 basis points. The average rate on interest bearing liabilities of $29.4 billion was 3.58 percent, up 153 basis points compared with fourth quarter 2005, reflecting higher short-term interest rates, an unfavorable change in deposit mix, and heightened competition for deposits. The net interest margin in fourth quarter 2006 was 3.81 percent, compared with 4.42 percent in fourth quarter 2005. On a sequential quarter basis, net interest income decreased $12 million, or 2.6 percent. Average loans increased $1.5 billion, or 4.3 percent. Average commercial loans increased $931 million, or 7.0 percent, with average loans to title and escrow companies increasing $655 million, or 80.5 percent. Average residential mortgages increased $251 million, or 2.1 percent, and average construction loans increased $192 million, or 9.6 percent. Average noninterest bearing deposits decreased $858 million, or 5.0 percent, with commercial noninterest bearing deposits decreasing $751 million, or 5.3 percent, and consumer noninterest bearing deposits decreasing $107 million, or 3.7 percent. Average title and escrow deposits decreased $11 million, or 0.5 percent. The average yield on earning assets was flat and the average rate on interest bearing liabilities increased 17 basis points. The net interest margin decreased 19 basis points to 3.81 percent. Fourth Quarter Noninterest Income From Continuing Operations In fourth quarter 2006, noninterest income was $224 million, up $41 million, or 22.2 percent, from the same quarter a year ago. Excluding a $36.8 million loss on the sale of securities in fourth quarter 2005, noninterest income increased 1.8 percent from the same quarter a year ago. Service charges on deposit accounts decreased $2.9 million, or 3.7 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 $2.6 million, or 5.5 percent, primarily due to an increase in trust assets. Merchant banking fees increased $5.6 million, or 68.3 percent, primarily due to a higher volume of syndications completed in fourth quarter 2006. Brokerage commissions and fees increased $2.0 million, or 27.7 percent, primarily due to higher business volumes. Securities gains (losses), net, for fourth quarter 2005 reflected a $36.8 million loss on the sale of $1 billion of agency debentures associated with the rebalancing of the Company�s securities portfolio. Compared with the preceding quarter, fourth quarter 2006 noninterest income increased $6.9 million, or 3.2 percent. Service charges on deposit accounts decreased $2.0 million, or 2.5 percent, primarily due to lower noninterest bearing deposit balances. Trust and investment management fees increased $1.5 million, or 3.1 percent, primarily due to an increase in trust assets. Merchant banking fees increased $2.3 million, or 19.3 percent, primarily due to a higher volume of syndications completed in fourth quarter. Fourth Quarter Noninterest Expense From Continuing Operations Noninterest expense for fourth quarter 2006 was $442 million, an increase of $12.5 million, or 2.9 percent, over fourth quarter 2005. Salaries and employee benefits expense increased $18.3 million, or 7.9 percent, primarily due to higher severance expense, annual merit increases, higher employee count and higher stock option expense, partially offset by lower accruals for incentive and bonus expense. Stock option expense was $4.8 million, compared with none in fourth quarter 2005. Net occupancy expense decreased $2.4 million, or 5.8 percent, primarily due to charges associated with the consolidation of offices in San Francisco incurred in fourth quarter 2005. Outside services expense decreased $14.8 million, or 36.0 percent, primarily due to lower cost of services related to title and escrow balances. Professional services expense increased $10.5 million, primarily due to higher compliance-related expense in fourth quarter 2006. There was a $2.0 million provision for losses on off-balance sheet commitments in fourth quarter 2006, compared with $5.0 million in fourth quarter 2005. Other noninterest expense increased $5.0 million, or 15.6 percent, primarily due to expense associated with low income housing tax credit projects. Excluding the effect of stock option expense, noninterest expense increased $7.7 million, or 1.8 percent, compared with prior year. Compared with third quarter 2006, noninterest expense increased $24.7 million, or 5.9 percent, which was largely due to higher expenses for severance, compliance activities, low income housing tax credit projects and off-balance sheet commitments. Severance expense was $7.9 million, up $5.5 million compared with prior quarter, due to workforce reductions implemented in the fourth quarter. Compliance-related professional services expense was $6.3 million, up $2.9 million compared with prior quarter. Expense associated with low income housing tax credit projects was $8.4 million, up $4.3 million compared with prior quarter, primarily due to the completion of a historic building preservation project. The provision for losses on off-balance sheet commitments was $2.0 million, compared with none in the prior quarter. Salaries and employee benefits expense increased $6.2 million, or 2.5 percent, primarily due to higher severance expense. Outside services expense decreased $5.7 million, or 17.9 percent, primarily due to lower cost of services related to title and escrow balances. Professional services expense increased $7.7 million, or 63.2 percent, primarily due to higher compliance-related expense. Income Tax Expense From Continuing Operations The effective tax rate for the fourth quarter 2006 was (0.7) percent, compared with an effective tax rate of 33.8 percent for fourth quarter 2005. Fourth quarter 2006 tax expense included a credit of $72.8 million, or $0.51 per diluted common share, to reflect a refund of California franchise taxes received as a result of the settlement of refund claims filed for the years 1989 through 1995. Fourth quarter 2006 tax expense also included a positive adjustment of $5.3 million, or $0.04 per diluted common share, relating to a change in the estimated current year California tax rate on the worldwide unitary method. Adjusting for these two items, the effective tax rate for fourth quarter 2006 was 33.8 percent. The effective tax rate for the full year 2006 was 26.2 percent (33.3 percent before adjusting for the California refund), compared with an effective tax rate of 32.8 percent for 2005. Full Year Results From Continuing Operations Total revenue for 2006 was a record $2.7 billion, up $75 million, or 2.8 percent, compared with 2005. Net interest income was flat, and noninterest income increased 9.2 percent. Net interest income was $1.8 billion in 2006, flat with prior year. Average loans increased $4.3 billion, or 13.5 percent, while average total deposits increased $0.6 billion, or 1.5 percent. A $2.4 billion increase in average interest bearing deposits was offset by a $1.9 billion, or 9.9 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. The net interest margin was 4.09 percent, down 22 basis points. Noninterest income in 2006 was $878 million, an increase of $74 million, or 9.2 percent, over 2005. Service charges on deposit accounts decreased $4.2 million, or 1.3 percent. Trust and investment management fees increased $21.6 million, or 12.4 percent, primarily due to growth in trust assets. Securities gains (losses), net, were $2.2 million, compared with $(50.0) million in 2005. For the full year 2006, noninterest expense increased $79 million, or 4.9 percent. Salaries and employee benefits expense increased $62.2 million, or 6.7 percent, primarily due to $22.1 million in stock option expense in 2006, merit increases, higher employee count, higher severance expense and higher contract labor expense, reflecting compliance-related initiatives, partially offset by lower accruals for incentive and bonus expense. Professional services expense increased $18.1 million, or 39.8 percent, primarily due to higher compliance-related expense. Advertising and public relations expense increased $7.2 million, or 19.6 percent, primarily due to increased advertising and marketing activity in response to the competitive deposit market. Foreclosed asset income was $9.7 million higher in the full year 2006 compared with the full year 2005. The provision for losses on off-balance sheet commitments was negative $5 million in the full year 2006, compared with $4 million in the full year 2005. Credit Quality Nonperforming assets at December 31, 2006, were $42 million, or 0.08 percent of total assets. This compares with $48 million, or 0.09 percent of total assets, at September 30, 2006, and $62 million, or 0.12 percent of total assets, at December 31, 2005. In fourth quarter 2006, the total provision for credit losses was $5 million. The total provision for credit losses was zero in third quarter 2006 and negative $5 million in fourth quarter 2005. In fourth quarter 2006, net recoveries were $1 million, compared with net charge-offs of $2 million in third quarter 2006, and net charge-offs of $2 million in fourth quarter 2005. At December 31, 2006, the allowance for credit losses as a percent of total loans and as a percent of nonaccrual loans was 1.12 percent and 987 percent, respectively. These ratios were 1.14 percent and 850 percent, respectively, at September 30, 2006, and 1.32 percent and 744 percent, respectively, at December 31, 2005. Balance Sheet and Capital Ratios At December 31, 2006, the Company had total assets of $52.6 billion. Total loans were $36.7 billion and total deposits were $42.0 billion, resulting in a period-end deposit-to-loan ratio of 114 percent. Core deposits totaled $34.6 billion at quarter-end, representing 94 percent of total loans. At period-end, total stockholders� equity was $4.6 billion, the tangible equity ratio was 7.84 percent, and the ratio of tangible common equity to risk-weighted assets was 8.19 percent. Book value per share at December 31, 2006, was $32.86, up 3.9 percent from a year earlier. The Company�s Tier I and total risk-based capital ratios at period-end were 8.68 percent and 11.71 percent, respectively. As of December 31, 2006, the Company adopted SFAS No. 158, Employers� Accounting for Defined Benefit Pension and Other Postretirement Plans. The adoption resulted in a non-cash charge to shareholders� equity in the amount of $161 million, to record an unrealized loss associated with pension and other post-retirement benefits. The effect of this non-cash charge was a reduction in shareholders� equity of 3.4 percent, a reduction in book value per share of $1.16, and a reduction in the tangible equity ratio of 31 basis points. Per bank regulatory guidance, the SFAS 158 unrecognized loss had no impact on regulatory capital ratios at December 31, 2006. Stock Repurchases During fourth quarter 2006, the Company repurchased 1.8 million shares of common stock at a total price of $108 million, or an average of $59.22 per repurchased share. For the full year 2006, the Company repurchased 7.1 million shares of common stock at a total price of $452 million, or an average of $63.73 per repurchased share. At December 31, 2006, the Company had remaining repurchase authority of $150 million. Common shares outstanding at December 31, 2006, were 139.1 million, a decrease of 5.1 million shares, or 3.5 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 fourth quarter of 2006, the Company recorded a net loss from discontinued operations of $1.3 million, or less than $0.01 per diluted common share. First Quarter and Full Year 2007 Earnings Per Share Forecast The Company currently estimates that first quarter 2007 fully diluted earnings per share will be in the range of $1.02 to $1.07, including a total provision for credit losses of approximately $5 million. For the year, the Company currently estimates that fully diluted earnings per share will be in the range of $4.50 to $4.75, including a total provision for credit losses of approximately $40 million. Non-GAAP Financial Measures This press release contains certain references to financial measures identified as being stated on an �adjusted basis� or that adjust for or exclude tax refunds and adjustments, after-tax loss on the sale of securities, and stock option expense, which are adjustments from comparable measures calculated and presented in accordance with accounting principles generally accepted in the United States of America (GAAP). These financial measures, as used herein, differ from financial measures reported under GAAP in that they exclude unusual or non-recurring charges, losses, credits or gains. This press release identifies the specific items excluded from the comparable GAAP financial measure in the calculation of each non-GAAP financial measure. Because these items and their impact on the Company�s performance are difficult to predict, management believes that financial presentations excluding the impact of these items provide useful supplemental information which is important to a proper understanding of the Company�s core business results by investors. These presentations should not be viewed as a substitute for results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP financial measures presented by other companies. Forward-Looking Statements The following appears in accordance with the Private Securities Litigation Reform Act. This press release includes forward-looking statements that involve risks and uncertainties. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. Often, they include the words �believe,� �expect,� �target,� �anticipate,� �intend,� �plan,� �estimate,� �potential,� �project,� or words of similar meaning, or future or conditional verbs such as �will,� �would,� �should,� �could,� or �may.� They may also consist of annualized amounts based on historical interim period results. Forward-looking statements in this press release include those related to earnings forecasts, provision for credit losses, trends in deposit rates and balances and competition for deposits and their impact on the Company, and the Company�s loan portfolio, business model, competitive positioning and earnings power. There are numerous risks and uncertainties that could and will cause actual results to differ materially from those discussed in the Company�s forward-looking statements. Many of these factors are beyond the Company�s ability to control or predict and could have a material adverse effect on the Company�s stock price, financial condition, and results of operations or prospects. Such risks and uncertainties include, but are not limited to, adverse economic and fiscal conditions in California; increased energy costs; global political and general economic conditions related to the war on terrorism and other hostilities; fluctuations in interest rates; the controlling interest in UnionBanCal Corporation of The Bank of Tokyo-Mitsubishi UFJ, Ltd., which is a wholly-owned subsidiary of Mitsubishi UFJ Financial Group, Inc.; competition in the banking and financial services industries; deposit pricing pressures; the levels of commercial and residential real estate activity in our market; adverse effects of current and future banking laws, rules and regulations and their enforcement, or governmental fiscal or monetary policies; legal or regulatory proceedings; declines or disruptions in the stock or bond markets which may adversely affect the Company or the Company�s borrowers or other customers; changes in accounting practices or requirements; and risks associated with various strategies the Company may pursue, including potential acquisitions, divestitures and restructurings. A complete description of the Company, including related risk factors, is discussed in the Company�s public filings with the Securities and Exchange Commission, which are available by calling (415) 765-2969 or online at http://www.sec.gov. All forward-looking statements included in this press release are based on information available at the time of the release, and the Company assumes no obligation to update any forward-looking statement. Conference Call and Webcast The Company will conduct a conference call to review fourth quarter and full year 2006 results at 8:30 AM Pacific Time (11:30 AM Eastern Time) on January 19, 2007. Interested parties calling from locations within the United States should call 888-428-4480 (612-234-9960 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), January 19, through 11:59 PM Pacific Time, January 26 (2:59 AM Eastern Time, January 27). The reservation number for this playback is 852813. Based in San Francisco, UnionBanCal Corporation is a bank holding company with assets of $52.6 billion at December 31, 2006. Its primary subsidiary, Union Bank of California, N.A., had 321 banking offices in California, Oregon and Washington, and 2 international offices at December 31, 2006. UnionBanCal Corporation and Subsidiaries Financial Highlights (Unaudited) Exhibit 1 PercentChange to As of and for theThree Months Ended Dec. 31, 2006 from Dec. 31, Sept. 30, Dec. 31, Dec. 31, Sept.30, (Dollars in thousands, except per share data) 2005� 2006� 2006� 2005� 2006� Results of operations: Net interest income (1) $ 481,828� $ 460,596� $ 448,619� (6.89%) (2.60%) Noninterest income 183,420� 217,255� 224,106� 22.18% 3.15% Total revenue 665,248� 677,851� 672,725� 1.12% (0.76%) Noninterest expense 429,198� 417,021� 441,693� 2.91% 5.92% (Reversal of) provision for loan losses (10,000) -� 3,000� nm nm Income from continuing operations before income taxes (1) 246,050� 260,830� 228,032� (7.32%) (12.57%) Taxable-equivalent adjustment 1,228� 1,872� 1,923� 56.60% 2.72% Income tax expense (benefit) 82,657� 87,048� (1,632) nm nm Income from continuing operations $ 162,165� $ 171,910� $ 227,741� 40.44% 32.48% Income (loss) from discontinued operations 146,324� (1,204) (1,307) nm (8.55%) Net income $ 308,489� $ 170,706� $ 226,434� (26.60%) 32.65% � Per common share: Basic earnings: From continuing operations $ 1.12� $ 1.22� $ 1.63� 45.54% 33.61% Net income 2.14� 1.21� 1.62� (24.30%) 33.88% Diluted earnings: From continuing operations 1.10� 1.21� 1.61� 46.36% 33.06% Net income 2.09� 1.20� 1.61� (22.97%) 34.17% Dividends (2) 0.41� 0.47� 0.47� 14.63% 0.00% Book value (end of period) 31.62� 33.17� 32.86� 3.92% (0.93%) Common shares outstanding (end of period) 144,207,072� 140,326,737� 139,107,254� (3.54%) (0.87%) Weighted average common shares outstanding - basic 144,466,374� 140,941,823� 139,390,487� (3.51%) (1.10%) Weighted average common shares outstanding - diluted 147,385,734� 142,566,089� 141,025,758� (4.32%) (1.08%) � Balance sheet (end of period): Total assets (3) $ 49,416,002� $ 52,013,256� $ 52,619,576� 6.48% 1.17% Total loans 33,095,595� 35,673,469� 36,671,723� 10.81% 2.80% Nonperforming assets 61,645� 47,803� 42,365� (31.28%) (11.38%) Total deposits 40,082,239� 41,820,206� 41,969,368� 4.71% 0.36% Stockholders' equity 4,559,700� 4,654,789� 4,571,401� 0.26% (1.79%) � Balance sheet (period average): Total assets $ 48,406,487� $ 50,777,419� $ 51,671,465� 6.74% 1.76% Total loans 33,260,944� 35,965,823� 37,495,315� 12.73% 4.25% Earning assets 43,451,686� 45,854,645� 46,860,166� 7.84% 2.19% Total deposits 40,253,861� 40,582,139� 41,320,468� 2.65% 1.82% Stockholders' equity 4,488,396� 4,578,635� 4,638,801� 3.35% 1.31% � Financial ratios (4): Return on average assets (5) : From continuing operations 1.33% 1.34% 1.75% Net income 2.53% 1.33% 1.74% Return on average stockholders' equity (5) : From continuing operations 14.33% 14.90% 19.48% Net income 27.27% 14.79% 19.37% Efficiency ratio (6) 63.77% 61.55% 65.36% Net interest margin (1) 4.42% 4.00% 3.81% Dividend payout ratio 36.61% 38.52% 28.83% Tangible equity ratio 8.31% 8.09% 7.84% Tier 1 risk-based capital ratio (3) (7) 9.17% 8.68% 8.68% Total risk-based capital ratio (3) (7) 11.10% 11.74% 11.71% Leverage ratio (3) (7) 8.39% 8.47% 8.44% Allowances for credit losses to total loans (8) 1.32% 1.14% 1.12% Allowances for credit losses to nonaccrual loans (8) 743.58% 850.01% 987.06% Net loans charged off (recovered) to average total loans (5) 0.03% 0.02% (0.01%) Nonperforming assets to total loans and foreclosed assets 0.19% 0.13% 0.12% Nonperforming assets to total assets (3) 0.12% 0.09% 0.08% � Refer to Exhibit 11 for footnote explanations. UnionBanCal Corporation and Subsidiaries Financial Highlights (Unaudited) Exhibit 2 Percent Change to As of and for the Twelve Months Ended December 31, 2006 from December 31, December 31, December 31, (Dollars in thousands, except per share data) 2005� 2006� 2005� Results of operations: Net interest income (1) $ 1,843,466� $ 1,844,556� 0.06% Noninterest income 804,787� 878,499� 9.16% Total revenue 2,648,253� 2,723,055� 2.82% Noninterest expense 1,607,246� 1,686,288� 4.92% Reversal of allowance for loan losses (50,683) (5,000) (90.13%) Income from continuing operationsbefore income taxes (1) 1,091,690� 1,041,767� (4.57%) Taxable-equivalent adjustment 4,352� 6,401� 47.08% Income tax expense 356,698� 271,623� (23.85%) Income from continuing operations $ 730,640� $ 763,743� 4.53% Income (loss) from discontinued operations 132,293� (10,747) nm Net income $ 862,933� $ 752,996� (12.74%) � Per common share: Basic earnings: From continuing operations $ 5.04� $ 5.39� 6.94% Net income 5.95� 5.32� (10.59%) Diluted earnings: From continuing operations 4.94� 5.31� 7.49% Net income 5.84� 5.24� (10.27%) Dividends (2) 1.59� 1.82� 14.47% Book value (end of period) 31.62� 32.86� 3.92% Common shares outstanding (end of period) 144,207,072� 139,107,254� (3.54%) Weighted average common sharesoutstanding - basic 145,109,058� 141,620,081� (2.40%) Weighted average common sharesoutstanding - diluted 147,791,565� 143,754,865� (2.73%) � Balance sheet (end of period): Total assets (3) $ 49,416,002� $ 52,619,576� 6.48% Total loans 33,095,595� 36,671,723� 10.81% Nonperforming assets 61,645� 42,365� (31.28%) Total deposits 40,082,239� 41,969,368� 4.71% Stockholders' equity 4,559,700� 4,571,401� 0.26% � Balance sheet (period average): Total assets $ 47,610,818� $ 49,992,481� 5.00% Total loans 31,452,606� 35,704,129� 13.52% Earning assets 42,796,688� 45,080,843� 5.34% Total deposits 39,543,986� 40,121,139� 1.46% Stockholders' equity 4,280,085� 4,574,185� 6.87% � Financial ratios (4): Return on average assets: From continuing operations 1.53% 1.53% Net income 1.81% 1.51% Return on average stockholders' equity: From continuing operations 17.07% 16.70% Net income 20.16% 16.46% Efficiency ratio (6) 60.75% 62.67% Net interest margin (1) 4.31% 4.09% Dividend payout ratio 31.55% 33.77% Tangible equity ratio 8.31% 7.84% Tier 1 risk-based capital ratio (3) (7) 9.17% 8.68% Total risk-based capital ratio (3) (7) 11.10% 11.71% Leverage ratio (3) (7) 8.39% 8.44% Allowance for credit losses to total loans (8) 1.32% 1.12% Allowance for credit losses to nonaccrual loans (8) 743.58% 987.06% Net loans charged off (recovered)to average total loans (0.01%) 0.04% Nonperforming assets to total loans and foreclosed assets 0.19% 0.12% Nonperforming assets to total assets (3) 0.12% 0.08% � Refer to Exhibit 11 for footnote explanations. UnionBanCal Corporation and Subsidiaries Condensed Consolidated Statements of Income (Unaudited) (Taxable-Equivalent Basis) Exhibit 3 � � For the Three Months Ended For the Twelve Months Ended Dec. 31, Sept. 30, Dec. 31, December 31, (Dollars in thousands, except per share data) 2005� 2006� 2006� 2005� 2006� Interest Income (1) Loans $ 497,046� $ 575,799� $ 595,225� $ 1,802,853� $ 2,232,029� Securities 95,436� 108,609� 110,916� 397,775� 420,884� Interest bearing deposits in banks 1,244� 411� 1,047� 2,676� 2,617� Federal funds sold and securities purchased under resale agreements 6,129� 12,024� 4,924� 20,535� 25,518� Trading account assets 1,422� 1,832� 1,791� 4,494� 6,838� Total interest income 601,277� 698,675� 713,903� 2,228,333� 2,687,886� � Interest Expense Deposits 97,303� 182,298� 208,423� 303,351� 649,707� Federal funds purchased and securities sold under repurchase agreements 1,042� 4,891� 9,716� 10,372� 31,864� Commercial paper 9,911� 20,835� 22,595� 31,672� 75,015� Medium and long-term debt 9,695� 21,974� 21,193� 32,206� 70,439� Trust notes 238� 239� 238� 953� 953� Other borrowed funds 1,260� 7,842� 3,119� 6,313� 15,352� Total interest expense 119,449� 238,079� 265,284� 384,867� 843,330� � Net Interest Income (1) 481,828� 460,596� 448,619� 1,843,466� 1,844,556� (Reversal of) provision for loan losses (10,000) -� 3,000� (50,683) (5,000) Net interest income after (reversal of) provision for loan losses 491,828� 460,596� 445,619� 1,894,149� 1,849,556� � Noninterest Income Service charges on deposit accounts 80,030� 79,083� 77,092� 323,865� 319,647� Trust and investment management fees 46,465� 47,555� 49,036� 173,518� 195,086� Insurance commissions 19,739� 17,301� 17,976� 78,915� 72,547� Merchant banking fees 8,261� 11,655� 13,905� 43,898� 42,185� Brokerage commissions and fees 7,171� 8,531� 9,155� 30,038� 35,811� Foreign exchange gains, net 8,332� 8,179� 7,916� 33,902� 32,220� Card processing fees, net 6,437� 7,241� 7,256� 25,105� 28,400� Securities gains (losses), net (36,750) 43� 420� (50,039) 2,242� Other 43,735� 37,667� 41,350� 145,585� 150,361� Total noninterest income 183,420� 217,255� 224,106� 804,787� 878,499� � Noninterest Expense Salaries and employee benefits 232,496� 244,613� 250,791� 934,354� 996,536� Net occupancy 41,048� 35,753� 38,662� 141,299� 141,771� Outside services 40,942� 31,890� 26,184� 117,190� 117,387� Equipment 18,042� 17,387� 17,678� 68,206� 69,833� Software 15,427� 15,334� 16,978� 58,511� 63,979� Professional services 9,369� 12,169� 19,862� 45,500� 63,616� Communications 10,959� 9,942� 9,876� 41,909� 40,431� Foreclosed asset expense (income) (29) (183) 10� (5,635) (15,322) (Reversal of) provision for losses on off-balance sheet commitments 5,000� -� 2,000� 4,000� (5,000) Other 55,944� 50,116� 59,652� 201,912� 213,057� Total noninterest expense 429,198� 417,021� 441,693� 1,607,246� 1,686,288� � Income from continuing operations before income taxes (1) 246,050� 260,830� 228,032� 1,091,690� 1,041,767� Taxable-equivalent adjustment 1,228� 1,872� 1,923� 4,352� 6,401� Income tax expense (benefit) 82,657� 87,048� (1,632) 356,698� 271,623� � � � � � Income from Continuing Operations 162,165� 171,910� 227,741� 730,640� 763,743� � Income (loss) from discontinued operations before income taxes 227,967� (2,061) (1,824) 205,582� (17,057) Income tax expense (benefit) 81,643� (857) (517) 73,289� (6,310) Income (Loss) from Discontinued Operations 146,324� (1,204) (1,307) 132,293� (10,747) Net Income $ 308,489� $ 170,706� $ 226,434� $ 862,933� $ 752,996� � Income from continuing operations per common share - basic $ 1.12� $ 1.22� $ 1.63� $ 5.04� $ 5.39� Net income per common share - basic $ 2.14� $ 1.21� $ 1.62� $ 5.95� $ 5.32� Income from continuing operations per common share - diluted $ 1.10� $ 1.21� $ 1.61� $ 4.94� $ 5.31� Net income per common share - diluted $ 2.09� $ 1.20� $ 1.61� $ 5.84� $ 5.24� Weighted average common shares outstanding - basic 144,466� 140,942� 139,390� 145,109� 141,620� Weighted average common shares outstanding - diluted 147,386� 142,566� 141,026� 147,792� 143,755� � � � � Refer to Exhibit 11 for footnote explanations. UnionBanCal Corporation and Subsidiaries Consolidated Balance Sheets (Unaudited) Exhibit 4 December 31, (Dollars in thousands) 2005� 2006� Assets Cash and due from banks $ 2,402,212� $ 2,213,782� Interest bearing deposits in banks 771,164� 824,456� Federal funds sold and securities purchased under resale agreements 796,500� 943,200� Total cash and cash equivalents 3,969,876� 3,981,438� Trading account assets 312,655� 376,321� Securities available for sale: Securities pledged as collateral 96,994� 89,184� Held in portfolio 8,072,286� 8,667,038� Loans (net of allowance for loan losses: 2005, $351,532; 2006, $331,077) 32,744,063� 36,340,646� Due from customers on acceptances 19,252� 17,834� Premises and equipment, net 536,074� 495,302� Intangible assets 42,616� 28,930� Goodwill 454,015� 453,489� Other assets 2,113,577� 2,148,954� Assets of discontinued operations to be disposed or sold 1,054,594� 20,440� Total assets $ 49,416,002� $ 52,619,576� � Liabilities Noninterest bearing $ 19,489,377� $ 17,078,332� Interest bearing 20,592,862� 24,891,036� Total deposits 40,082,239� 41,969,368� Federal funds purchased and securities sold under repurchase agreements 651,529� 1,083,927� Commercial paper 680,027� 1,661,163� Other borrowed funds 134,485� 432,401� Acceptances outstanding 19,252� 17,834� Other liabilities 1,466,478� 1,545,165� Medium and long-term debt 801,095� 1,318,847� Junior subordinated debt payable to subsidiary grantor trust 15,338� 14,885� Liabilities of discontinued operations to be extinguished or assumed 1,005,859� 4,585� Total liabilities 44,856,302� 48,048,175� � � � Stockholders' Equity Preferred stock: Authorized 5,000,000 shares; no shares issued or outstanding as of December 31, 2005 or 2006 -� -� Common stock, par value $1 per share: Authorized 300,000,000 shares; issued 154,469,215 shares in 2005 and 156,460,057 shares in 2006 154,469� 156,460� Additional paid-in capital 994,956� 1,083,649� Treasury stock - 10,262,143 shares in 2005 and 17,352,803 in 2006 (612,732) (1,064,606) Retained earnings 4,141,400� 4,655,272� Accumulated other comprehensive loss (118,393) (259,374) Total stockholders' equity 4,559,700� 4,571,401� Total liabilities and stockholders' equity $ 49,416,002� $ 52,619,576� � � � � � Refer to Exhibit 11 for footnote explanations. UnionBanCal Corporation and Subsidiaries Loans (Unaudited) Exhibit 5 � Percent Change to Three Months Ended December 31, 2006 from Dec. 31, Sept. 30, Dec. 31, Dec. 31, Sept. 30, (Dollars in millions) � � 2005� 2006� 2006� 2005� 2006� � Loans (period average) Commercial, financial and industrial $ 11,981� $ 13,237� $ 14,168� 18.25% 7.03% Construction 1,414� 1,991� 2,183� 54.38% 9.64% Mortgage - Commercial 5,653� 5,681� 5,815� 2.87% 2.36% Mortgage - Residential 11,143� 11,971� 12,222� 9.68% 2.10% Consumer 2,490� 2,507� 2,520� 1.20% 0.52% Lease financing 576� 570� 580� 0.69% 1.75% � Total loans held to maturity $ 33,257� $ 35,957� $ 37,488� 12.72% 4.26% Total loans held for sale 4� 9� 7� 75.00% (22.22%) � Total loans $ 33,261� $ 35,966� $ 37,495� 12.73% 4.25% � Nonperforming assets (period end) Nonaccrual loans: Commercial, financial and industrial $ 50� $ 14� $ 7� (86.00%) (50.00%) Mortgage - Commercial 9� 19� 19� nm 0.00% Lease -� 15� 15� nm 0.00% � Total nonaccrual loans 59� 48� 41� (30.51%) (14.58%) Foreclosed assets 3� -� 1� (66.67%) nm � Total nonperforming assets $ 62� $ 48� $ 42� (32.26%) (12.50%) � Loans 90 days or more past due and still accruing $ 5� $ 4� $ 9� 80.00% nm � Analysis of Allowances for Credit Losses Beginning balance $ 364� $ 329� $ 327� � (Reversal of) provision for loan losses (10) -� 3� � Loans charged off: Commercial, financial and industrial (4) (4) (3) Real estate (1) -� -� Consumer (1) (1) (1) Total loans charged off (6) (5) (4) � Loans recovered: Commercial, financial and industrial 3� 3� 5� Consumer 1� -� -� Total loans recovered 4� 3� 5� Net loans (charged off) recovered (2) (2) 1� � Ending balance of allowance for loan losses $ 352� $ 327� $ 331� Allowance for off-balance sheet commitment losses 86� 79� 81� � Allowances for credit losses $ 438� $ 406� $ 412� � � � � � � � � Refer to Exhibit 11 for footnote explanations. UnionBanCal Corporation and Subsidiaries Net Interest Income (Unaudited) Exhibit 6 � For the Three Months Ended � � For the Three Months Ended December 31, 2005 December 31, 2006 Interest Average Interest Average Average Income/ Yield/ Average Income/ Yield/ (Dollars in thousands) Balance Expense (9) Rate (5) (9) � � Balance Expense (9) Rate (5) (9) � Assets Loans (10) Commercial, financial and industrial $ 11,981,953� $ 189,085� 6.26� % $ 14,173,007� $ 234,687� 6.57� % Construction 1,413,658� 24,249� 6.81� 2,183,227� 42,865� 7.79� Residential mortgage 11,145,906� 139,513� 5.01� 12,223,931� 159,785� 5.23� Commercial mortgage 5,653,091� 94,632� 6.64� 5,815,299� 104,633� 7.14� Consumer 2,490,315� 44,064� 7.02� 2,520,250� 49,813� 7.84� Lease financing 576,021� 5,503� 3.82� 579,601� 3,442� 2.38� Total loans 33,260,944� 497,046� 5.94� 37,495,315� 595,225� 6.31� Securities - taxable 9,027,589� 94,135� 4.17� 8,535,024� 109,738� 5.14� Securities - tax-exempt 65,582� 1,301� 7.93� 58,938� 1,178� 8.00� Interest bearing deposits in banks 157,604� 1,244� 3.13� 74,471� 1,047� 5.58� Federal funds sold and securities purchased under resale agreements 595,208� 6,129� 4.09� 365,894� 4,924� 5.34� Trading account assets 344,759� 1,422� 1.64� 330,524� 1,791� 2.15� Total earning assets 43,451,686� 601,277� 5.51� 46,860,166� 713,903� 6.06� Allowance for loan losses (362,676) (327,525) Cash and due from banks 2,268,566� 1,963,658� Premises and equipment, net 520,586� 504,358� Other assets 2,528,325� 2,670,808� Total assets $ 48,406,487� $ 51,671,465� Liabilities Deposits: Transaction accounts $ 13,523,357� 57,469� 1.69� $ 13,475,864� 91,258� 2.69� Savings and consumer time 4,550,219� 17,407� 1.52� 4,502,954� 27,910� 2.46� Large time 2,916,187� 22,427� 3.05� 7,208,863� 89,255� 4.91� Total interest bearing deposits 20,989,763� 97,303� 1.84� 25,187,681� 208,423� 3.28� Federal funds purchased and securities sold under repurchase agreements 533,068� 5,025� 3.74� 768,941� 10,054� 5.19� Net funding allocated from (to) discontinued operations (11) (422,508) (3,983) 3.74� (22,913) (338) 5.85� Commercial paper 1,108,434� 9,911� 3.55� 1,784,097� 22,595� 5.02� Other borrowed funds 121,401� 1,260� 4.12� 223,406� 3,119� 5.54� Medium and long-term debt 804,346� 9,695� 4.78� 1,428,937� 21,193� 5.88� Trust notes 15,393� 238� 6.19� 14,940� 238� 6.38� Total borrowed funds 2,160,134� 22,146� 4.07� 4,197,408� 56,861� 5.37� Total interest bearing liabilities 23,149,897� 119,449� 2.05� 29,385,089� 265,284� 3.58� Noninterest bearing deposits 19,264,098� 16,132,787� Other liabilities 1,504,096� 1,514,788� Total liabilities 43,918,091� 47,032,664� Stockholders' Equity Common equity 4,488,396� 4,638,801� Total stockholders' equity 4,488,396� 4,638,801� Total liabilities and stockholders' equity $ 48,406,487� $ 51,671,465� Reported Net Interest Income/Margin Net interest income/margin (taxable-equivalent basis) 481,828� 4.42� % 448,619� 3.81� % Less: taxable-equivalent adjustment 1,228� 1,923� Net interest income $ 480,600� $ 446,696� � � � � � � � � � � � Average Assets and Liabilities of Discontinued Operations for Period Ended: Dec. 31, 2005 Dec. 31, 2006 Assets $ 1,668,335� $ 26,664� Liabilities $ 1,245,827� $ 3,751� Net Asset $ 422,508� $ 22,913� � � � � � � � � � � � � � Refer to Exhibit 11 for footnote explanations. UnionBanCal Corporation and Subsidiaries Net Interest Income (Unaudited) Exhibit 7 � For the Three Months Ended � For the Three Months Ended September 30, 2006 December 31, 2006 Interest Average Interest Average Average Income/ Yield/ Average Income/ Yield/ (Dollars in thousands) Balance Expense (9) Rate (5) (9) � Balance Expense (9) Rate (5) (9) � Assets Loans: (10) Commercial, financial and industrial $ 13,244,947� $ 225,177� 6.74� % $ 14,173,007� $ 234,687� 6.57� % Construction 1,990,535� 39,147� 7.80� 2,183,227� 42,865� 7.79� Residential mortgage 11,972,024� 154,983� 5.18� 12,223,931� 159,785� 5.23� Commercial mortgage 5,680,603� 102,577� 7.16� 5,815,299� 104,633� 7.14� Consumer 2,507,524� 49,672� 7.86� 2,520,250� 49,813� 7.84� Lease financing 570,190� 4,243� 2.98� 579,601� 3,442� 2.38� Total loans 35,965,823� 575,799� 6.37� 37,495,315� 595,225� 6.31� Securities - taxable 8,548,420� 107,378� 5.02� 8,535,024� 109,738� 5.14� Securities - tax-exempt 59,644� 1,231� 8.26� 58,938� 1,178� 8.00� Interest bearing deposits in banks 37,351� 411� 4.37� 74,471� 1,047� 5.58� Federal funds sold and securities purchased under resale agreements 894,039� 12,024� 5.34� 365,894� 4,924� 5.34� Trading account assets 349,368� 1,832� 2.08� 330,524� 1,791� 2.15� Total earning assets 45,854,645� 698,675� 6.06� 46,860,166� 713,903� 6.06� Allowance for loan losses (328,399) (327,525) Cash and due from banks 2,063,653� 1,963,658� Premises and equipment, net 497,957� 504,358� Other assets 2,689,563� 2,670,808� Total assets $ 50,777,419� $ 51,671,465� Liabilities Deposits: Transaction accounts $ 12,405,367� 73,826� 2.36� $ 13,475,864� 91,258� 2.69� Savings and consumer time 4,493,082� 25,682� 2.27� 4,502,954� 27,910� 2.46� Large time 6,692,874� 82,790� 4.91� 7,208,863� 89,255� 4.91� Total interest bearing deposits 23,591,323� 182,298� 3.07� 25,187,681� 208,423� 3.28� Federal funds purchased and securities sold under repurchase agreements 419,665� 5,345� 5.05� 768,941� 10,054� 5.19� Net funding allocated from (to) discontinued operations (11) (34,738) (454) 5.18� (22,913) (338) 5.85� Commercial paper 1,645,428� 20,835� 5.02� 1,784,097� 22,595� 5.02� Other borrowed funds 577,533� 7,842� 5.39� 223,406� 3,119� 5.54� Medium and long-term debt 1,496,207� 21,974� 5.83� 1,428,937� 21,193� 5.88� Trust notes 15,054� 239� 6.33� 14,940� 238� 6.38� Total borrowed funds 4,119,149� 55,781� 5.37� 4,197,408� 56,861� 5.37� Total interest bearing liabilities 27,710,472� 238,079� 3.41� 29,385,089� 265,284� 3.58� Noninterest bearing deposits 16,990,816� 16,132,787� Other liabilities 1,497,496� 1,514,788� Total liabilities 46,198,784� 47,032,664� Stockholders' Equity Common equity 4,578,635� 4,638,801� Total stockholders' equity 4,578,635� 4,638,801� Total liabilities and stockholders' equity $ 50,777,419� $ 51,671,465� Reported Net Interest Income/Margin Net interest income/margin(taxable-equivalent basis) 460,596� 4.00� % 448,619� 3.81� % Less: taxable-equivalent adjustment 1,872� 1,923� Net interest income $ 458,724� $ 446,696� � � � � � � � � � � � � Average Assets and Liabilities of Discontinued Operations for Period Ended: Sept. 30, 2006 Dec. 31, 2006 Assets $ 41,135� $ 26,664� Liabilities $ 6,397� $ 3,751� Net Asset $ 34,738� $ 22,913� � � � � � � � � � � � � � � Refer to Exhibit 11 for footnote explanations. UnionBanCal Corporation and Subsidiaries Net Interest Income (Unaudited) Exhibit 8 � For the Twelve Months Ended � � For the Twelve Months Ended December 31, 2005 December 31, 2006 Interest Average Interest Average Average Income/ Yield/ Average Income/ Yield/ (Dollars in thousands) Balance Expense (9) Rate (9) � Balance Expense (9) Rate (9) � Assets Loans: (10) Commercial, financial and industrial $ 11,105,948� $ 677,590� 6.10� % $ 13,220,633� $ 869,884� 6.58� % Construction 1,268,448� 77,844� 6.14� 1,857,404� 142,031� 7.65� Residential mortgage 10,513,671� 515,485� 4.90� 11,846,908� 607,977� 5.13� Commercial mortgage 5,529,222� 348,788� 6.31� 5,702,858� 404,749� 7.10� Consumer 2,444,011� 159,493� 6.53� 2,505,770� 192,156� 7.67� Lease financing 591,306� 23,653� 4.00� 570,556� 15,232� 2.67� Total loans 31,452,606� 1,802,853� 5.73� 35,704,129� 2,232,029� 6.25� Securities - taxable 10,262,274� 392,452� 3.82� 8,417,950� 415,902� 4.94� Securities - tax-exempt 66,178� 5,323� 8.04� 61,729� 4,982� 8.07� Interest bearing deposits in banks 112,247� 2,676� 2.38� 51,534� 2,617� 5.08� Federal funds sold and securities purchased under resale agreements 610,735� 20,535� 3.36� 497,318� 25,518� 5.13� Trading account assets 292,648� 4,494� 1.54� 348,183� 6,838� 1.96� Total earning assets 42,796,688� 2,228,333� 5.21� 45,080,843� 2,687,886� 5.96� Allowance for loan losses (389,398) (334,720) Cash and due from banks 2,247,905� 2,063,342� Premises and equipment, net 520,084� 508,889� Other assets 2,435,539� 2,674,127� Total assets $ 47,610,818� $ 49,992,481� Liabilities Deposits: Transaction accounts $ 12,843,905� 159,221� 1.24� $ 12,938,620� 292,899� 2.26� Savings and consumer time 4,667,868� 60,248� 1.29� 4,483,729� 93,582� 2.09� Large time 3,121,055� 83,882� 2.69� 5,656,370� 263,226� 4.65� Total interest bearing deposits 20,632,828� 303,351� 1.47� 23,078,719� 649,707� 2.82� Federal funds purchased and securities sold under repurchase agreements 898,107� 25,854� 2.88� 701,614� 33,711� 4.80� Net funding allocated from (to) discontinued operations (11) (507,397) (15,482) 3.05� (37,770) (1,847) 4.89� Commercial paper 1,086,088� 31,672� 2.92� 1,582,226� 75,015� 4.74� Other borrowed funds 168,220� 6,313� 3.75� 294,977� 15,352� 5.20� Medium and long-term debt 807,592� 32,206� 3.99� 1,230,846� 70,439� 5.72� Trust notes 15,562� 953� 6.12� 15,109� 953� 6.31� Total borrowed funds 2,468,172� 81,516� 3.30� 3,787,002� 193,623� 5.11� Total interest bearing liabilities 23,101,000� 384,867� 1.67� 26,865,721� 843,330� 3.14� Noninterest bearing deposits 18,911,158� 17,042,420� Other liabilities 1,318,575� 1,510,155� Total liabilities 43,330,733� 45,418,296� Stockholders' Equity Common equity 4,280,085� 4,574,185� Total stockholders' equity 4,280,085� 4,574,185� Total liabilities and stockholders' equity $ 47,610,818� $ 49,992,481� Reported Net Interest Income/Margin Net interest income/margin(taxable-equivalent basis) 1,843,466� 4.31� % 1,844,556� 4.09� % Less: taxable-equivalent adjustment 4,352� 6,401� Net interest income $ 1,839,114� $ 1,838,155� � � � � � � � � � � � � Average Assets and Liabilities of Discontinued Operations for Period Ended: Dec. 31, 2005 Dec. 31, 2006 Assets $ 1,897,622� $ 189,376� Liabilities $ 1,390,225� $ 151,606� Net Asset $ 507,397� $ 37,770� � � � � � � � � � � � � � Refer to Exhibit 11 for footnote explanations. UnionBanCal Corporation and Subsidiaries � Noninterest income (Unaudited) Exhibit 9 � Percentage Change to For the Three Months Ended December 31, 2006 From Dec. 31, Sept. 30, Dec. 31, Dec. 31, Sept. 30, (Dollars in thousands) 2005� 2006� 2006� 2005� � � 2006� � Service charges on deposit accounts $ 80,030� $ 79,083� $ 77,092� (3.67) % (2.52) % Trust and investment management fees 46,465� 47,555� 49,036� 5.53� 3.11� Insurance commissions 19,739� 17,301� 17,976� (8.93) 3.90� Merchant banking fees 8,261� 11,655� 13,905� 68.32� 19.31� Brokerage commissions and fees 7,171� 8,531� 9,155� 27.67� 7.31� Foreign exchange gains, net 8,332� 8,179� 7,916� (4.99) (3.22) Card processing fees, net 6,437� 7,241� 7,256� 12.72� 0.21� Securities gains (losses), net (36,750) 43� 420� nm nm Gain on private capital investments, net 8,299� 7,681� 8,902� 7.27� 15.90� Other 35,436� 29,986� 32,448� (8.43) 8.21� Total noninterest income $ 183,420� $ 217,255� $ 224,106� 22.18� % 3.15� % � � Noninterest expense (Unaudited) � Percentage Change to For the Three Months Ended December 31, 2006 From Dec. 31, Sept. 30, Dec. 31, Dec. 31, Sept. 30, (Dollars in thousands) 2005� 2006� 2006� 2005� � � 2006� � Salaries and other compensation $ 191,797� $ 200,591� $ 202,511� 5.59� % 0.96� % Employee benefits 40,699� 44,022� 48,280� 18.63� 9.67� Salaries and employee benefits 232,496� 244,613� 250,791� 7.87� 2.53� Net occupancy 41,048� 35,753� 38,662� (5.81) 8.14� Outside services 40,942� 31,890� 26,184� (36.05) (17.89) Professional services 9,369� 12,169� 19,862� nm 63.22� Equipment 18,042� 17,387� 17,678� (2.02) 1.67� Software 15,427� 15,334� 16,978� 10.05� 10.72� Advertising and public relations 11,145� 11,726� 10,780� (3.28) (8.07) Communications 10,959� 9,942� 9,876� (9.88) (0.66) Data processing 7,985� 7,933� 8,668� 8.55� 9.27� Intangible asset amortization 4,965� 3,427� 3,401� (31.50) (0.76) Foreclosed asset expense (income) (29) (183) 10� nm nm Provision for losses on off-balance sheet commitments 5,000� -� 2,000� (60.00) nm Other 31,849� 27,030� 36,803� 15.55� 36.16� Total noninterest expense $ 429,198� $ 417,021� $ 441,693� 2.91� % 5.92� % � � � � Refer to Exhibit 11 for footnote explanations. UnionBanCal Corporation and Subsidiaries Noninterest income (Unaudited) Exhibit 10 � Percentage Change to For the Twelve Months Ended December 31, 2006 From Dec. 31, Dec. 31, Dec. 31, (Dollars in thousands) 2005� 2006� 2005� Service charges on deposit accounts $ 323,865� $ 319,647� (1.30) % Trust and investment management fees 173,518� 195,086� 12.43� Insurance commissions 78,915� 72,547� (8.07) Merchant banking fees 43,898� 42,185� (3.90) Brokerage commissions and fees 30,038� 35,811� 19.22� Foreign exchange gains, net 33,902� 32,220� (4.96) Card processing fees, net 25,105� 28,400� 13.12� Securities gains (losses), net (50,039) 2,242� nm Gain on private capital investments, net 27,187� 23,112� (14.99) Other 118,398� 127,249� 7.48� Total noninterest income $ 804,787� $ 878,499� 9.16� % � � Noninterest expense (Unaudited) � Percentage Change to For the Twelve Months Ended December 31, 2006 From Dec. 31, Dec. 31, Dec. 31, (Dollars in thousands) 2005� 2006� 2005� Salaries and other compensation $ 748,046� $ 799,050� 6.82� % Employee benefits 186,308� 197,486� 6.00� Salaries and employee benefits 934,354� 996,536� 6.66� Net occupancy 141,299� 141,771� 0.33� Outside services 117,190� 117,387� 0.17� Equipment 68,206� 69,833� 2.39� Software 58,511� 63,979� 9.35� Professional services 45,500� 63,616� 39.82� Advertising and public relations 36,803� 44,007� 19.57� Communications 41,909� 40,431� (3.53) Data processing 32,687� 31,844� (2.58) Intangible asset amortization 19,921� 13,685� (31.30) Foreclosed asset income (5,635) (15,322) nm (Reversal of) provision for allowance for losses on off-balance sheet commitments 4,000� (5,000) nm Other 112,501� 123,521� 9.80� Total noninterest expense $ 1,607,246� $ 1,686,288� 4.92� % � � � � Refer to Exhibit 11 for footnote explanations. UnionBanCal Corporation and Subsidiaries � Footnotes Exhibit 11 (1) Taxable-equivalent basis. (2) Dividends per share reflect dividends declared on UnionBanCal Corporation's common stock outstanding as of the declaration date. (3) End of period total assets and assets used in calculating these ratios include those of discontinued operations. (4) Average balances used to calculate our financial ratios are based on continuing operations data only, unless otherwise indicated. (5) Annualized. (6) 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. (7) Estimated as of December 31, 2006. The regulatory capital and leverage ratios were not restated and therefore include discontinued operations. (8) 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. (9) Yields and interest income are presented on a taxable-equivalent basis using the federal statutory tax rate of 35 percent. (10) Average balances on loans outstanding include all nonperforming loans and loans held for sale. The amortized portion of net loan origination fees (costs) is included in interest income on loans, representing an adjustment to the yield. (11) 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