UnionBanCal Corporation (NYSE:UB): First Quarter 2007 Highlights:
-- Strong year-over-year organic loan growth -- Average total loans
up 13 percent -- Average core commercial loans, which exclude loans
to title and escrow companies, up 14 percent -- Annualized average
all-in cost of funds of 2.55 percent -- Average noninterest bearing
deposits comprised 36.4 percent of average total deposits --
Nonperforming assets just 0.08 percent of total assets at
quarter-end UnionBanCal Corporation (NYSE:UB) today reported first
quarter 2007 net income of $149.6 million, or $1.07 per diluted
common share. Income from continuing operations for first quarter
2006 was $181.5 million, or $1.24 per diluted common share. Income
from continuing operations for fourth quarter 2006 was $227.7
million, or $1.61 per diluted common share, including $72.8
million, or $0.51 per diluted common share, in state income tax
refunds, and $5.3 million, or $0.04 per diluted common share, in
tax adjustments. Excluding these items, income from continuing
operations for fourth quarter 2006 was $149.6 million, or $1.06 per
diluted common share. �The operating environment continues to be
challenging for banks with significant commercial deposit
businesses,� stated Takashi Morimura, President and Chief Executive
Officer. �However, our first quarter results were in line with our
expectations, as strong loan growth, excellent asset quality, and
good expense control offset the expected deposit weakness. �In
February, we announced that Masaaki Tanaka will be assuming the
position of President and Chief Executive Officer in May, when I
take on a new role with our majority shareholder. I am privileged
to have served as President and Chief Executive Officer of
UnionBanCal Corporation, and I leave the Company in the capable
hands of Mr. Tanaka, our Chief Operating Officer Philip Flynn, and
the rest of the executive management team.� Commenting on the first
quarter results, Mr. Flynn stated, �We began 2007 with continued
robust growth in loans, particularly in our industry specialty
businesses. We grew core commercial and industrial loans 14 percent
over last year, while we grew commercial mortgage and construction
loans 16 percent. We expanded our high-quality residential mortgage
portfolio by 8 percent year over year, while maintaining our
stringent underwriting standards. Overall, credit quality continues
to be excellent. �Competition for deposits continues to be intense,
which has resulted in pressure on noninterest bearing deposit
balances. However, pricing on interest bearing core deposits
appears to be stabilizing. We continue to have confidence in the
strategic positioning of our commercial deposit businesses.�
Summary of First Quarter Results First quarter 2007 net income was
$149.6 million, or $1.07 per diluted common share, compared with
income from continuing operations of $1.24 per diluted common share
a year earlier. Total revenue compared with first quarter 2006
decreased 4.5 percent, due to a 2.1 percent increase in noninterest
income and a 7.7 percent decrease in net interest income. The
decrease in net interest income was primarily due to a deposit mix
shift, reflecting customer decisions to shift balances from
noninterest bearing and low-cost deposits into higher-cost
deposits. The unfavorable deposit mix change offset strong loan
growth. The total provision for credit losses was $5 million, $15
million higher than the negative $10 million provision recorded in
first quarter 2006. For first quarter 2007, noninterest expense was
up 1.8 percent from the same quarter a year earlier. First quarter
2007 net income was $1.07 per diluted common share, compared with
adjusted income from continuing operations of $1.06 per diluted
common share last quarter. Adjusted income from continuing
operations for fourth quarter 2006 excludes $0.51 per diluted
common share in state income tax refunds and $0.04 per diluted
common share in tax adjustments. Total revenue decreased 2.9
percent in sequential quarters, with net interest income decreasing
4.0 percent and noninterest income decreasing 0.7 percent. The
decrease in net interest income was primarily due to lower
noninterest bearing deposit balances and two fewer days in first
quarter 2007. The total provision for credit losses was $5 million
in both quarters. Noninterest expense declined 4.4 percent in
sequential quarters, primarily due to lower cost of services
related to title and escrow balances, lower compliance-related
expense and lower expense associated with low income housing tax
credit projects. First Quarter Total Revenue For first quarter
2007, total revenue (taxable-equivalent net interest income plus
noninterest income) was $653.2 million, down 4.5 percent compared
with first quarter 2006. Net interest income decreased 7.7 percent,
and noninterest income increased 2.1 percent. Compared with fourth
quarter 2006, total revenue decreased 2.9 percent, with net
interest income decreasing 4.0 percent and noninterest income
decreasing 0.7 percent. First Quarter Net Interest Income
(Taxable-equivalent) Net interest income was $430.6 million in
first quarter 2007, down $35.7 million, or 7.7 percent, from the
same quarter a year ago, primarily due to a deposit mix shift from
noninterest bearing and low-cost deposits into higher-cost
deposits, partially offset by solid growth in loans and higher
yields on earning assets. Average earning assets increased $5.3
billion, or 12.2 percent, compared to 2006, primarily due to a $4.4
billion, or 12.9 percent, increase in average loans. Average
commercial loans increased $2.3 billion, or 18.7 percent; and
average residential mortgages increased $0.9 billion, or 8.2
percent. $708 million, or 31 percent, of the increase in average
commercial loans was attributable to title and escrow loans, which
are highly rate-advantaged loans and are more volatile than other
commercial loans. Excluding title and escrow loans, average
commercial loans grew 14.0 percent, year over year. Compared to
first quarter 2006, average interest bearing deposits increased
$5.0 billion, or 23.7 percent, while average noninterest bearing
deposits decreased $2.4 billion, or 13.8 percent. The decline in
noninterest bearing deposits was primarily due to a $1.7 billion,
or 14.8 percent, decrease in average other commercial noninterest
bearing deposits and a $0.3 billion, or 11.6 percent, decrease in
average title and escrow deposits. Average other commercial
noninterest bearing deposits declined primarily due to changes in
customer behavior in response to rising short-term interest rates,
and average title and escrow deposits decreased due to lower
residential real estate activity. Average consumer noninterest
bearing deposits decreased $0.4 billion, or 12.0 percent. Average
noninterest bearing deposits represented 36.4 percent of average
total deposits in first quarter 2007. The annualized average all-in
cost of funds was 2.55 percent, reflecting the Company�s strong
average core deposit-to-loan ratio of 86 percent and the high
proportion of noninterest bearing deposits to total deposits. The
average yield on earning assets of $48.4 billion was 6.06 percent,
up 29 basis points over first quarter 2006, with the average loan
yield increasing 25 basis points. The average rate on interest
bearing liabilities of $31.9 billion was 3.75 percent, up 126 basis
points compared with first quarter 2006, reflecting higher
short-term interest rates, an unfavorable change in deposit mix,
and heightened competition for deposits. The net interest margin in
first quarter 2007 was 3.58 percent, compared with 4.36 percent in
first quarter 2006. First quarter 2007 net interest income
decreased $18 million, or 4.0 percent, compared with fourth quarter
2006, with approximately $3.8 million of the decline attributable
to two fewer days in first quarter 2007. Average loans increased
$1.0 billion, or 2.6 percent. Average commercial loans increased
$511 million, or 3.6 percent, average commercial mortgage loans
increased $249 million, or 4.3 percent, and average residential
mortgages increased $162 million, or 1.3 percent. Average interest
bearing deposits increased $1.2 billion, or 4.8 percent, while
average noninterest bearing deposits decreased $1.0 billion, or 6.4
percent. The decline in noninterest bearing deposits was due to a
$677 million, or 6.2 percent, decrease in average other commercial
noninterest bearing deposits and a $347 million, or 14.1 percent,
decrease in average title and escrow deposits. Average consumer
noninterest bearing deposits decreased $10 million, or 0.4 percent.
The average yield on earning assets was flat and the average rate
on interest bearing liabilities increased 17 basis points. The net
interest margin decreased 23 basis points to 3.58 percent. First
Quarter Noninterest Income In first quarter 2007, noninterest
income was $222.6 million, up $4.6 million, or 2.1 percent, from
the same quarter a year ago. Service charges on deposit accounts
decreased $6.7 million, or 8.2 percent, primarily due to lower
account analysis fees, stemming from an increase in the earnings
credit rate on deposit balances and lower noninterest bearing
deposit balances. Gain on private capital investments, net, was
$9.1 million, compared with $2.8 million in the same quarter a year
ago. First quarter 2007 noninterest income decreased $1.5 million,
or 0.7 percent, compared with fourth quarter 2006. Service charges
on deposit accounts decreased $2.1 million, or 2.8 percent,
primarily due to lower noninterest bearing deposit balances.
Insurance commissions increased $2.3 million, or 12.7 percent,
primarily due to normal seasonal factors. Merchant banking fees
decreased $4.8 million, or 34.7 percent, primarily due to a lower
volume of syndications completed in first quarter. First Quarter
Noninterest Expense Noninterest expense for first quarter 2007 was
$422.1 million, an increase of $7.5 million, or 1.8 percent, over
noninterest expense for first quarter 2006. Salaries and employee
benefits expense increased $6.0 million, or 2.4 percent, primarily
due to annual merit increases and higher accruals for
performance-related incentive expense, partially offset by lower
pension expense. Outside services expense decreased $8.8 million,
or 30.7 percent, primarily due to lower cost of services related to
title and escrow balances. Professional services expense increased
$2.5 million, or 17.5 percent, primarily due to higher
compliance-related expense compared with first quarter last year.
Advertising and public relations expense decreased $1.8 million, or
18.0 percent, primarily due to timing of marketing promotions.
Foreclosed asset expense (income) decreased $7.4 million,
reflecting a $7.4 million gain on the sale of property recorded in
first quarter 2006. Provision for losses on off-balance sheet
commitments in first quarter 2007 was $1.0 million, compared with
negative $3.0 million in first quarter 2006. Noninterest expense
decreased $19.6 million, or 4.4 percent, compared with fourth
quarter 2006. Salaries and employee benefits expense increased $7.7
million, or 3.1 percent, primarily due to annual seasonal factors
that result in higher payroll taxes and 401(k) matching
contributions, and higher accruals for performance-related
incentive expense, partially offset by lower pension expense and
lower severance expense. Outside services expense declined $6.3
million, or 24.2 percent, primarily due to lower cost of services
related to title and escrow balances. Professional services expense
decreased $2.8 million, or 14.0 percent, partially due to lower
compliance-related expense. Provision for losses on off-balance
sheet commitments was $1.0 million, compared with $2.0 million in
the prior quarter. Income Tax Expense The effective tax rate for
first quarter 2007 was 33.5 percent, compared with an effective tax
rate of 34.1 percent for first quarter 2006. The difference in rate
was primarily due to higher tax credits in 2007. Significant
Accounting Policies On January 1, 2007, the Company adopted Staff
Position (FSP) FAS 13-2, "Accounting for a Change or Projected
Change in the Timing of Cash Flows Related to Income Taxes
Generated by a Leveraged Lease Transaction", which resulted in a
reduction to retained earnings of $20.8 million. On January 1,
2007, the Company adopted FIN No. 48, "Accounting for Uncertainty
in Income Taxes - An Interpretation of FASB Statement No. 109". The
cumulative effect of applying the provisions of this interpretation
was recognized as a reduction to retained earnings of $49.3
million. Credit Quality Nonperforming assets at March 31, 2007,
were $42 million, or 0.08 percent of total assets. This compares
with $42 million, or 0.08 percent of total assets, at December 31,
2006, and $42 million, or 0.09 percent of total assets, at March
31, 2006. In first quarter 2007, the total provision for credit
losses was $5 million. The total provision for credit losses was $5
million in fourth quarter 2006 and negative $10 million in first
quarter 2006. In first quarter 2007, net charge-offs were $2
million, compared with net recoveries of $1 million in fourth
quarter 2006, and net charge-offs of $5 million in first quarter
2006. At March 31, 2007, the allowance for credit losses as a
percent of total loans and as a percent of nonaccrual loans was
1.11 percent and 997 percent, respectively. These ratios were 1.12
percent and 987 percent, respectively, at December 31, 2006, and
1.26 percent and 1003 percent, respectively, at March 31, 2006.
Balance Sheet and Capital Ratios At March 31, 2007, the Company had
total assets of $54.6 billion. Total loans were $37.3 billion and
total deposits were $43.8 billion, resulting in a period-end
deposit-to-loan ratio of 118 percent. At period-end, total
stockholders� equity was $4.6 billion, the tangible equity ratio
was 7.53 percent, and the ratio of tangible common equity to
risk-weighted assets was 7.99 percent. Book value per share at
March 31, 2007, was $32.98, up 3.3 percent from a year earlier. The
Company�s Tier I and total risk-based capital ratios at period-end
were 8.41 percent and 11.38 percent, respectively. Stock
Repurchases During first quarter 2007, the Company repurchased 1.4
million shares of common stock at a total price of $85.5 million,
or an average of $62.73 per repurchased share. At March 31, 2007,
the Company had remaining repurchase authority of $64 million.
Common shares outstanding at March 31, 2007, were 138.1 million, a
decrease of 5.3 million shares, or 3.7 percent, from one year
earlier. Common Stock Dividend The next meeting of the Board of
Directors of the Company is scheduled for May 24, 2007. At this
meeting, the Board will consider and declare the second quarter
2007 common stock dividend. Second Quarter and Full Year 2007
Earnings Per Share Forecast The Company currently estimates that
second quarter 2007 fully diluted earnings per share will be in the
range of $1.07 to $1.12, including a total provision for credit
losses of approximately $5 million. For the year, the Company
currently estimates that fully diluted earnings per share will be
in the range of $4.50 to $4.75, including a total provision for
credit losses of approximately $35 million. Non-GAAP Financial
Measures This press release contains certain references to
financial measures identified as being stated on an �adjusted
basis� or that adjust for or exclude tax refunds and adjustments,
which are adjustments from comparable measures calculated and
presented in accordance with accounting principles generally
accepted in the United States of America (GAAP). These financial
measures, as used herein, differ from financial measures reported
under GAAP in that they exclude unusual or non-recurring charges,
losses, credits or gains. This press release identifies the
specific items excluded from the comparable GAAP financial measure
in the calculation of each non-GAAP financial measure. Because
these items and their impact on the Company�s performance are
difficult to predict, management believes that financial
presentations excluding the impact of these items provide useful
supplemental information which is important to a proper
understanding of the Company�s core business results by investors.
These presentations should not be viewed as a substitute for
results determined in accordance with GAAP, nor are they
necessarily comparable to non-GAAP financial measures presented by
other companies. Forward-Looking Statements The following appears
in accordance with the Private Securities Litigation Reform Act.
This press release includes forward-looking statements that involve
risks and uncertainties. Forward-looking statements can be
identified by the fact that they do not relate strictly to
historical or current facts. Often, they include the words
�believe,� �continue,� �expect,� �target,� �anticipate,� �intend,�
�plan,� �estimate,� �potential,� �project,� or words of similar
meaning, or future or conditional verbs such as �will,� �would,�
�should,� �could,� or �may.� They may also consist of annualized
amounts based on historical interim period results. Forward-looking
statements in this press release include those related to earnings
forecasts, provision for credit losses, trends in deposit rates and
balances and competition for deposits and their impact on the
Company, and the Company�s loan portfolio, business model,
competitive positioning and earnings power. There are numerous
risks and uncertainties that could and will cause actual results to
differ materially from those discussed in the Company�s
forward-looking statements. Many of these factors are beyond the
Company�s ability to control or predict and could have a material
adverse effect on the Company�s stock price, financial condition,
and results of operations or prospects. Such risks and
uncertainties include, but are not limited to, adverse economic and
fiscal conditions in California; increased energy costs; global
political and general economic conditions related to the war on
terrorism and other hostilities; fluctuations in interest rates;
the controlling interest in UnionBanCal Corporation of The Bank of
Tokyo-Mitsubishi UFJ, Ltd., which is a wholly-owned subsidiary of
Mitsubishi UFJ Financial Group, Inc.; competition in the banking
and financial services industries; deposit pricing pressures; the
levels of commercial and residential real estate activity in our
market; adverse effects of current and future banking laws, rules
and regulations and their enforcement, or governmental fiscal or
monetary policies; legal or regulatory proceedings; declines or
disruptions in the stock or bond markets which may adversely affect
the Company or the Company�s borrowers or other customers; changes
in accounting practices or requirements; and risks associated with
various strategies the Company may pursue, including potential
acquisitions, divestitures and restructurings. A complete
description of the Company, including related risk factors, is
discussed in the Company�s public filings with the Securities and
Exchange Commission, which are available by calling (415) 765-2969
or online at http://www.sec.gov. All forward-looking statements
included in this press release are based on information available
at the time of the release, and the Company assumes no obligation
to update any forward-looking statement. Conference Call and
Webcast The Company will conduct a conference call to review first
quarter 2007 results at 8:30 AM Pacific Time (11:30 AM Eastern
Time) on April 20, 2007. Interested parties calling from locations
within the United States should call 800-230-1951 (612-332-0107
from outside the United States) 10 minutes prior to the beginning
of the conference. A live webcast of the call will be available at
http://www.unionbank.com. You may access the Investor Relations
section of the website via the �About Union Bank� link from the
homepage. The webcast replay will be available on the website
within 24 hours after the conclusion of the call, and will remain
on the website for a period of one year. A recorded playback of the
conference call will be available by calling 800-475-6701,
(320-365-3844 from outside the United States) from approximately
12:00 PM Pacific Time (3:00 PM Eastern Time), April 20, through
11:59 PM Pacific Time, April 27 (2:59 AM Eastern Time, April 28).
The reservation number for this playback is 868035. Based in San
Francisco, UnionBanCal Corporation is a bank holding company with
assets of $54.6 billion at March 31, 2007. Its primary subsidiary,
Union Bank of California, N.A., had 321 banking offices in
California, Oregon and Washington, and 2 international offices at
March 31, 2007. � UnionBanCal Corporation and Subsidiaries
Financial Highlights (Unaudited) Exhibit 1 Percent Change to As of
and for the Three Months Ended March 31, 2007 from March 31, Dec.
31, March 31, March 31, Dec. 31, (Dollars in thousands, except per
share data) 2006� 2006� 2007� 2006� � 2006� Results of operations:
Net interest income (1) $ 466,341� $ 448,619� $ 430,627� (7.66%)
(4.01%) Noninterest income 217,910� 224,106� 222,558� 2.13% (0.69%)
Total revenue 684,251� 672,725� 653,185� (4.54%) (2.90%)
Noninterest expense 414,544� 441,693� 422,091� 1.82% (4.44%)
(Reversal of) provision for loan losses (7,000) 3,000� 4,000� nm
33.33% Income from continuing operations before income taxes (1)
276,707� 228,032� 227,094� (17.93%) (0.41%) Taxable-equivalent
adjustment 1,248� 1,923� 2,115� 69.47% 9.98% Income tax expense
(benefit) 94,004� (1,632) 75,368� (19.82%) nm Income from
continuing operations $ 181,455� $ 227,741� $ 149,611� (17.55%)
(34.31%) Loss from discontinued operations (8,510) (1,307) -�
100.00% 100.00% Net income $ 172,945� $ 226,434� $ 149,611�
(13.49%) (33.93%) � Per common share: Basic earnings: From
continuing operations $ 1.26� $ 1.63� $ 1.08� (14.29%) (33.74%) Net
income 1.20� 1.62� 1.08� (10.00%) (33.33%) Diluted earnings: From
continuing operations 1.24� 1.61� 1.07� (13.71%) (33.54%) Net
income 1.18� 1.61� 1.07� (9.32%) (33.54%) Dividends (2) 0.41� 0.47�
0.47� 14.63% 0.00% Book value (end of period) 31.94� 32.86� 32.98�
3.26% 0.37% Common shares outstanding (end of period) (3) (4)
143,402,332� 139,107,254� 138,117,370� (3.69%) (0.71%) Weighted
average common shares outstanding - basic (3) (4) 143,878,106�
139,390,487� 137,942,320� (4.13%) (1.04%) Weighted average common
shares outstanding - diluted (3) (4) 146,026,188� 141,025,758�
139,729,681� (4.31%) (0.92%) � Balance sheet (end of period): Total
assets (5) $ 48,800,945� $ 52,619,576� $ 54,616,849� 11.92% 3.80%
Total loans 33,528,868� 36,671,723� 37,251,950� 11.10% 1.58%
Nonperforming assets 42,392� 42,365� 41,744� (1.53%) (1.47%) Total
deposits 39,155,904� 41,969,368� 43,797,924� 11.86% 4.36%
Stockholders' equity 4,579,878� 4,571,401� 4,555,439� (0.53%)
(0.35%) � Balance sheet (period average): Total assets $
48,016,643� $ 51,671,465� $ 52,973,203� 10.32% 2.52% Total loans
34,052,067� 37,495,315� 38,458,014� 12.94% 2.57% Earning assets
43,084,349� 46,860,166� 48,354,950� 12.23% 3.19% Total deposits
38,856,033� 41,320,468� 41,483,062� 6.76% 0.39% Stockholders'
equity 4,538,679� 4,638,801� 4,510,205� (0.63%) (2.77%) � Financial
ratios (6): Return on average assets (7) : From continuing
operations 1.53% 1.75% 1.15% Net income 1.46% 1.74% 1.15% Return on
average stock-holders' equity (7) : From continuing operations
16.21% 19.48% 13.45% Net income 15.45% 19.37% 13.45% Efficiency
ratio (8) 62.10% 65.36% 64.47% Net interest margin (1) 4.36% 3.81%
3.58% Dividend payout ratio 32.54% 28.83% 43.52% Tangible equity
ratio 8.46% 7.84% 7.53% Tier 1 risk-based capital ratio (5) (9)
9.09% 8.68% 8.41% Total risk-based capital ratio (5) (9) 10.94%
11.71% 11.38% Leverage ratio (5) (9) 8.80% 8.44% 8.12% Allowances
for credit losses to total loans (10) 1.26% 1.12% 1.11% Allowances
for credit losses to nonaccrual loans (10) 1003.48% 987.06% 997.48%
Net loans charged off (recovered) to average total loans (7) 0.06%
(0.01%) 0.03% Nonperforming assets to total loans and foreclosed
assets 0.13% 0.12% 0.11% Nonperforming assets to total assets (5)
0.09% 0.08% 0.08% � Refer to Exhibit 8 for footnote explanations.
UnionBanCal Corporation and Subsidiaries Condensed Consolidated
Statements of Income (Unaudited) (Taxable-Equivalent Basis) Exhibit
2 � � � For the Three Months Ended March 31, Dec. 31, March 31,
(Dollars in thousands, except per share data) 2006� 2006� 2007�
Interest Income (1) Loans $ 512,988� $ 595,225� $ 603,502�
Securities 97,351� 110,916� 108,422� Interest bearing deposits in
banks 736� 1,047� 1,109� Federal funds sold and securities
purchased under resale agreements 3,845� 4,924� 11,152� Trading
account assets 1,530� 1,791� 1,701� Total interest income 616,450�
713,903� 725,886� � Interest Expense Deposits 115,309� 208,423�
222,257� Federal funds purchased and securities sold under
repurchase agreements 8,802� 9,716� 13,524� Commercial paper
12,448� 22,595� 22,264� Medium and long-term debt 10,397� 21,193�
19,695� Trust notes 238� 238� 238� Other borrowed funds 2,915�
3,119� 17,281� Total interest expense 150,109� 265,284� 295,259� �
Net Interest Income (1) 466,341� 448,619� 430,627� (Reversal of)
provision for loan losses (7,000) 3,000� 4,000� Net interest income
after (reversal of) provision for loan losses 473,341� 445,619�
426,627� � Noninterest Income Service charges on deposit accounts
81,635� 77,092� 74,945� Trust and investment management fees
50,115� 49,036� 48,560� Insurance commissions 19,518� 17,976�
20,250� Brokerage commissions and fees 7,795� 9,155� 9,660�
Merchant banking fees 8,229� 13,905� 9,077� Foreign exchange gains,
net 7,818� 7,916� 7,594� Card processing fees, net 6,697� 7,256�
7,127� Securities gains (losses), net (214) 420� 1,220� Other
36,317� 41,350� 44,125� Total noninterest income 217,910� 224,106�
222,558� � Noninterest Expense Salaries and employee benefits
252,495� 250,791� 258,515� Net occupancy 32,837� 38,662� 35,137�
Outside services 28,609� 26,184� 19,836� Professional services
14,547� 19,862� 17,087� Equipment 17,922� 17,678� 16,554� Software
16,344� 16,978� 14,196� Communications 10,552� 9,876� 9,791�
Foreclosed asset expense (income) (7,367) 10� 9� (Reversal of)
provision for losses on off-balance sheet commitments (3,000)
2,000� 1,000� Other 51,605� 59,652� 49,966� Total noninterest
expense 414,544� 441,693� 422,091� � Income from continuing
operations before income taxes (1) 276,707� 228,032� 227,094�
Taxable-equivalent adjustment 1,248� 1,923� 2,115� Income tax
expense (benefit) 94,004� (1,632) 75,368� � � � Income from
Continuing Operations 181,455� 227,741� 149,611� � Loss from
discontinued operations before income taxes (13,603) (1,824) -�
Income tax benefit (5,093) (517) -� Loss from Discontinued
Operations (8,510) (1,307) -� Net Income $ 172,945� $ 226,434� $
149,611� � Income from continuing operations per common share -
basic $ 1.26� $ 1.63� $ 1.08� Net income per common share - basic $
1.20� $ 1.62� $ 1.08� Income from continuing operations per common
share - diluted $ 1.24� $ 1.61� $ 1.07� Net income per common share
- diluted $ 1.18� $ 1.61� $ 1.07� Weighted average common shares
outstanding - basic 143,878� 139,390� 137,942� Weighted average
common shares outstanding - diluted 146,026� 141,026� 139,730� � �
� � Refer to Exhibit 8 for footnote explanations. UnionBanCal
Corporation and Subsidiares Consolidated Balance Sheets Exhibit 3 �
� (Unaudited) (Unaudited) March 31, December 31, March 31, (Dollars
in thousands) 2006� 2006� 2007� Assets Cash and due from banks $
2,035,544� $ 2,213,782� $ 1,913,937� Interest bearing deposits in
banks 170,187� 824,456� 1,008,327� Federal funds sold and
securities purchased under resale agreements 513,777� 943,200�
2,747,300� Total cash and cash equivalents 2,719,508� 3,981,438�
5,669,564� Trading account assets 329,703� 376,321� 297,998�
Securities available for sale: Securities pledged as collateral
88,152� 89,184� 62,026� Held in portfolio 8,394,318� 8,667,038�
8,524,615� Loans (net of allowance for loan losses: March 31, 2006,
$339,443; December 31, 2006, $331,077; March 31, 2007, $332,679)
33,189,425� 36,340,646� 36,919,271� Due from customers on
acceptances 20,541� 17,834� 18,099� Premises and equipment, net
511,095� 495,302� 491,088� Intangible assets 39,186� 28,930�
26,687� Goodwill 453,489� 453,489� 453,489� Other assets 2,814,603�
2,148,954� 2,154,012� Assets of discontinued operations to be
disposed or sold 240,925� 20,440� -� Total assets $ 48,800,945� $
52,619,576� $ 54,616,849� � Liabilities Noninterest bearing $
18,118,506� $ 17,113,890� $ 16,175,362� Interest bearing
21,037,398� 24,855,478� 27,622,562� Total deposits 39,155,904�
41,969,368� 43,797,924� Federal funds purchased and securities sold
under repurchase agreements 292,758� 1,083,927� 549,545� Commercial
paper 1,420,276� 1,661,163� 1,424,401� Other borrowed funds 66,472�
432,401� 892,852� Acceptances outstanding 20,541� 17,834� 18,099�
Other liabilities 2,259,464� 1,545,165� 1,292,554� Medium and
long-term debt 788,763� 1,318,847� 2,071,263� Junior subordinated
debt payable to subsidiary grantor trust 15,225� 14,885� 14,772�
Liabilities of discontinued operations to be extinguished or
assumed 201,664� 4,585� -� Total liabilities 44,221,067�
48,048,175� 50,061,410� � � � Stockholders' Equity Preferred stock:
Authorized 5,000,000 shares; no shares issued or outstanding as of
March 31, 2006, December 31, 2006 and March 31, 2007 -� -� -�
Common stock, par value $1 per share: Authorized 300,000,000
shares; issued 154,832,175 shares as of March 31, 2006, 156,460,057
shares as of December 31, 2006 and 156,832,956 shares as of March
31, 2007 � 154,832� 156,460� 156,833� Additional paid-in capital
1,018,943� 1,083,649� 1,109,817� Treasury stock - 11,429,843 shares
as of March 31, 2006, 17,352,803 shares as of December 31, 2006 and
18,715,586 shares as of March 31, 2007 (692,783) (1,064,606)
(1,150,090) Retained earnings 4,258,533� 4,655,272� 4,669,590�
Accumulated other comprehensive loss (159,647) (259,374) (230,711)
Total stockholders' equity 4,579,878� 4,571,401� 4,555,439� Total
liabilities and stockholders' equity $ 48,800,945� $ 52,619,576� $
54,616,849� UnionBanCal Corporation and Subsidiaries Loans
(Unaudited) Exhibit 4 � Percent Change to Three Months Ended March
31, 2007 from March 31, December 31, March 31, March 31, December
31, (Dollars in millions) � � � 2006� 2006� 2007� 2006� 2006� �
Loans (period average) Commercial, financial and industrial $
12,370� $ 14,168� $ 14,681� 18.68% 3.62% Construction 1,523� 2,183�
2,233� 46.62% 2.29% Mortgage - Commercial 5,652� 5,815� 6,064�
7.29% 4.28% Mortgage - Residential 11,444� 12,222� 12,384� 8.21%
1.33% Consumer 2,489� 2,520� 2,542� 2.13% 0.87% Lease financing
569� 580� 548� (3.69%) (5.52%) � Total loans held to maturity $
34,047� $ 37,488� $ 38,452� 12.94% 2.57% Total loans held for sale
5� 7� 6� 20.00% (14.29%) � Total loans $ 34,052� $ 37,495� $
38,458� 12.94% 2.57% � Nonperforming assets (period end) Nonaccrual
loans: Commercial, financial and industrial $ 19� $ 7� $ 5�
(73.68%) (28.57%) Mortgage - Commercial 8� 19� 22� nm 15.79% Lease
15� 15� 15� 0.00% 0.00% � Total nonaccrual loans 42� 41� 42� 0.00%
2.44% Foreclosed assets -� 1� -� -� (100.00%) � Total nonperforming
assets $ 42� $ 42� $ 42� 0.00% 0.00% � Loans 90 days or more past
due and still accruing $ 5� $ 9� $ 6� 20.00% (33.33%) � Analysis of
Allowances for Credit Losses Beginning balance $ 352� $ 327� $ 331�
� (Reversal of) provision for loan losses (7) 3� 4� � Loans charged
off: Commercial, financial and industrial (11) (3) (3) Consumer (1)
(1) (1) Total loans charged off (12) (4) (4) � Loans recovered:
Commercial, financial and industrial 2� 5� 2� Consumer 1� -� -�
Lease financing 4� -� -� Total loans recovered 7� 5� 2� Net loans
(charged off) recovered (5) 1� (2) � Ending balance of allowance
for loan losses $ 340� $ 331� $ 333� Allowance for off-balance
sheet commitment losses 83� 81� 82� $ -� Allowances for credit
losses $ 423� $ 412� $ 415� UnionBanCal Corporation and
Subsidiaries Net Interest Income (Unaudited) Exhibit 5 � For the
Three Months Ended � � For the Three Months Ended March 31, 2006
March 31, 2007 Interest Average Interest Average Average Income/
Yield/ Average Income/ Yield/ (Dollars in thousands) Balance
Expense (11) Rate (7) (11) Balance Expense (11) Rate (7) (11)
Assets Loans (12) Commercial, financial andindustrial $ 12,371,594�
$ 195,952� 6.42� % $ 14,684,098� $ 237,278� 6.55� % Construction
1,523,270� 26,958� 7.18� 2,233,131� 42,775� 7.77� Residential
mortgage 11,446,831� 143,340� 5.01� 12,386,306� 163,766� 5.29�
Commercial mortgage 5,652,445� 97,301� 6.98� 6,064,169� 106,966�
7.15� Consumer 2,489,296� 45,095� 7.35� 2,542,507� 48,979� 7.81�
Lease financing 568,631� 4,342� 3.05� 547,803� 3,738� 2.73� Total
loans 34,052,067� 512,988� 6.09� 38,458,014� 603,502� 6.34�
Securities - taxable 8,233,854� 96,053� 4.67� 8,580,315� 107,268�
5.00� Securities - tax-exempt 65,204� 1,298� 7.96� 57,654� 1,154�
8.01� Interest bearing deposits in banks Federal funds sold and
securities 59,847� 736� 4.99� 79,562� 1,109� 5.65� � purchased
under resale agreements 345,342� 3,845� 4.52� 846,042� 11,152�
5.35� Trading account assets 328,035� 1,530� 1.89� 333,363� 1,701�
2.07� Total earning assets 43,084,349� 616,450� 5.77� 48,354,950�
725,886� 6.06� Allowance for loan losses (348,626) (330,277) Cash
and due from banks 2,119,926� 1,949,232� Premises and equipment,
net 527,001� 493,055� Other assets 2,633,993� 2,506,243� Total
assets $ 48,016,643� $ 52,973,203� Liabilities Deposits:
Transaction accounts $ 13,261,888� 62,358� 1.91� $ 13,534,373�
91,505� 2.74� Savings and consumer time 4,467,627� 18,487� 1.68�
4,415,261� 26,957� 2.48� Large time 3,608,597� 34,464� 3.87�
8,435,137� 103,795� 4.99� Total interest bearing deposits
21,338,112� 115,309� 2.19� 26,384,771� 222,257� 3.42� Federal funds
purchased and securities sold under repurchase agreements 874,055�
9,410� 4.37� 1,046,439� 13,524� 5.24� Net funding allocated from
(to) discontinued operations (13) (57,088) (608) 4.32� -� -� -�
Commercial paper 1,242,465� 12,448� 4.06� 1,783,758� 22,264� 5.06�
Other borrowed funds 268,262� 2,915� 4.41� 1,309,102� 17,281� 5.35�
Medium and long-term debt 800,014� 10,397� 5.27� 1,371,446� 19,695�
5.82� Trust notes 15,280� 238� 6.24� 14,827� 238� 6.43� Total
borrowed funds 3,142,988� 34,800� 4.49� 5,525,572� 73,002� 5.36�
Total interest bearing liabilities 24,481,100� 150,109� 2.49�
31,910,343� 295,259� 3.75� Noninterest bearing deposits 17,517,921�
15,098,291� Other liabilities 1,478,943� 1,454,364� Total
liabilities 43,477,964� 48,462,998� Stockholders' Equity Common
equity 4,538,679� 4,510,205� Total stockholders' equity 4,538,679�
4,510,205� � Total liabilities and stockholders'equity $
48,016,643� $ 52,973,203� Reported Net Interest Income/Margin Net
interest income/margin (taxable-equivalent basis) 466,341� 4.36� %
430,627� 3.58� % Less: taxable-equivalent adjustment 1,248� 2,115�
Net interest income $ 465,093� $ 428,512� � � � � � � � � � � � � �
� � Average Assets and Liabilities of Discontinued Operations for
Period Ended: March 31, 2006 March 31, 2007 Assets $ 618,653� $ 7�
Liabilities $ 561,565� $ 7� Net Asset $ 57,088� $ -� � � � � � � �
� � � � � � � � � � � � Refer to Exhibit 8 for footnote
explanations. UnionBanCal Corporation and Subsidiaries Net Interest
Income (Unaudited) Exhibit 6 � For the Three Months Ended For the
Three Months Ended December 31, 2006 March 31, 2007 Interest
Average Interest Average Average Income/ Yield/ Average Income/
Yield/ (Dollars in thousands) Balance Expense (11) Rate (7) (11)
Balance Expense (11) Rate (7) (11) Assets Loans: (12) Commercial,
financial and industrial $ 14,173,007� $ 234,687� 6.57� % $
14,684,098� $ 237,278� 6.55� % Construction 2,183,227� 42,865�
7.79� 2,233,131� 42,775� 7.77� Residential mortgage 12,223,931�
159,785� 5.23� 12,386,306� 163,766� 5.29� Commercial mortgage
5,815,299� 104,633� 7.14� 6,064,169� 106,966� 7.15� Consumer
2,520,250� 49,813� 7.84� 2,542,507� 48,979� 7.81� Lease financing
579,601� 3,442� 2.38� 547,803� 3,738� 2.73� Total loans 37,495,315�
595,225� 6.31� 38,458,014� 603,502� 6.34� Securities - taxable
8,535,024� 109,738� 5.14� 8,580,315� 107,268� 5.00� Securities -
tax-exempt 58,938� 1,178� 8.00� 57,654� 1,154� 8.01� Interest
bearing deposits in banks 74,471� 1,047� 5.58� 79,562� 1,109� 5.65�
Federal funds sold and securities purchased under resale agreements
365,894� 4,924� 5.34� 846,042� 11,152� 5.35� Trading account assets
330,524� 1,791� 2.15� 333,363� 1,701� 2.07� Total earning assets
46,860,166� 713,903� 6.06� 48,354,950� 725,886� 6.06� Allowance for
loan losses (327,525) (330,277) Cash and due from banks 1,963,658�
1,949,232� Premises and equipment, net 504,358� 493,055� Other
assets 2,670,808� 2,506,243� Total assets $ 51,671,465� $
52,973,203� Liabilities Deposits: Transaction accounts $
13,475,864� 91,258� 2.69� $ 13,534,373� 91,505� 2.74� Savings and
consumer time 4,502,954� 27,910� 2.46� 4,415,261� 26,957� 2.48�
Large time 7,208,863� 89,255� 4.91� 8,435,137� 103,795� 4.99� Total
interest bearing deposits 25,187,681� 208,423� 3.28� 26,384,771�
222,257� 3.42� Federal funds purchased and securities sold under
repurchase agreements 768,941� 10,054� 5.19� 1,046,439� 13,524�
5.24� Net funding allocated from (to) discontinued operations (13)
(22,913) (338) 5.85� -� -� -� Commercial paper 1,784,097� 22,595�
5.02� 1,783,758� 22,264� 5.06� Other borrowed funds 223,406� 3,119�
5.54� 1,309,102� 17,281� 5.35� Medium and long-term debt 1,428,937�
21,193� 5.88� 1,371,446� 19,695� 5.82� Trust notes 14,940� 238�
6.38� 14,827� 238� 6.43� Total borrowed funds 4,197,408� 56,861�
5.37� 5,525,572� 73,002� 5.36� Total interest bearing liabilities
29,385,089� 265,284� 3.58� 31,910,343� 295,259� 3.75� Noninterest
bearing deposits 16,132,787� 15,098,291� Other liabilities
1,514,788� 1,454,364� Total liabilities 47,032,664� 48,462,998�
Stockholders' Equity Common equity 4,638,801� 4,510,205� Total
stockholders' equity 4,638,801� 4,510,205� Total liabilities and
stockholders' equity $ 51,671,465� $ 52,973,203� Reported Net
Interest Income/Margin Net interest income/margin
(taxable-equivalent basis) 448,619� 3.81� % 430,627� 3.58� % Less:
taxable-equivalent adjustment 1,923� 2,115� Net interest income $
446,696� $ 428,512� � � � � � � � � � � � � � � � Average Assets
and Liabilities of Discontinued Operations for Period Ended:
December 31, 2006 March 31, 2007 Assets $ 26,664� $ 7� Liabilities
$ 3,751� $ 7� Net Asset $ 22,913� $ -� � � � � � � � � � � � � � �
� � � � Refer to Exhibit 8 for footnote explanations. UnionBanCal
Corporation and Subsidiaries � Noninterest income (Unaudited)
Exhibit 7 � Percentage Change to For the Three Months Ended March
31, 2007 From March 31, Dec. 31, March 31, March 31, Dec. 31,
(Dollars in thousands) 2006� 2006� 2007� 2006� � 2006� � Service
charges on deposit accounts $ 81,635� $ 77,092� $ 74,945� (8.20) %
(2.79) % Trust and investment management fees 50,115� 49,036�
48,560� (3.10) (0.97) Insurance commissions 19,518� 17,976� 20,250�
3.75� 12.65� Brokerage commissions and fees 7,795� 9,155� 9,660�
23.93� 5.52� Merchant banking fees 8,229� 13,905� 9,077� 10.31�
(34.72) Foreign exchange gains, net 7,818� 7,916� 7,594� (2.87)
(4.07) Card processing fees, net 6,697� 7,256� 7,127� 6.42� (1.78)
Securities gains (losses), net (214) 420� 1,220� nm nm Gain on
private capital investments, net 2,827� 8,902� 9,095� nm 2.17�
Other 33,490� 32,448� 35,030� 4.60� 7.96� Total noninterest income
$ 217,910� $ 224,106� $ 222,558� 2.13� % (0.69) % � � Noninterest
expense (Unaudited) � Percentage Change to For the Three Months
Ended March 31, 2007 From March 31, Dec. 31, March 31, March 31,
Dec. 31, (Dollars in thousands) 2006� 2006� 2007� 2006� � 2006� �
Salaries and other compensation $ 194,259� $ 202,511� $ 207,657�
6.90� % 2.54� % Employee benefits 58,236� 48,280� 50,858� (12.67)
5.34� Salaries and employee benefits 252,495� 250,791� 258,515�
2.38� 3.08� Net occupancy 32,837� 38,662� 35,137� 7.00� (9.12)
Outside services 28,609� 26,184� 19,836� (30.67) (24.24)
Professional services 14,547� 19,862� 17,087� 17.46� (13.97)
Equipment 17,922� 17,678� 16,554� (7.63) (6.36) Software 16,344�
16,978� 14,196� (13.14) (16.39) Communications 10,552� 9,876�
9,791� (7.21) (0.86) Advertising and public relations 10,231�
10,780� 8,389� (18.00) (22.18) Data processing 7,398� 8,668� 8,241�
11.40� (4.93) Intangible asset amortization 3,430� 3,402� 2,243�
(34.61) (34.07) Foreclosed asset expense (income) (7,367) 10� 9� nm
(10.00) (Reversal of) provision for losses on off-balance sheet
commitments (3,000) 2,000� 1,000� nm (50.00) Other 30,546� 36,802�
31,093� 1.79� (15.51) Total noninterest expense $ 414,544� $
441,693� $ 422,091� 1.82� % (4.44) % UnionBanCal Corporation and
Subsidiaries � Footnotes Exhibit 8 � (1) Taxable-equivalent basis.
(2) Dividends per share reflect dividends declared on UnionBanCal
Corporation's common stock outstanding as of the declaration date.
(3) Common shares outstanding reflect common shares issued less
treasury shares. (4) For the periods ended December 31, 2006 and
March 31, 2007, weighted average common shares outstanding (basic)
excludes nonvested restricted shares but includes the impact of
those shares in the calculation of diluted shares. The impact of
this change on the previous period was not material. (5) End of
period total assets and assets used in calculating these ratios
include those of discontinued operations. (6) Average balances used
to calculate our financial ratios are based on continuing
operations data only, unless otherwise indicated. (7) Annualized.
(8) The efficiency ratio is noninterest expense, excluding
foreclosed asset expense (income) and the (reversal of) provision
for losses on off-balance sheet commitments, as a percentage of net
interest income (taxable-equivalent basis) and noninterest income,
and is calculated for continuing operations only. (9) Estimated as
of March 31, 2007. The regulatory capital and leverage ratios
include discontinued operations. (10) The allowance for credit
losses ratios include the allowances for loan losses and losses on
off-balance sheet commitments. These ratios relate to continuing
operations only. (11) Yields and interest income are presented on a
taxable-equivalent basis using the federal statutory tax rate of 35
percent. (12) Average balances on loans outstanding include all
nonperforming loans and loans held for sale. The amortized portion
of net loan origination fees (costs) is included in interest income
on loans, representing an adjustment to the yield. (13) Net funding
allocated from (to) discontinued operations represents the shortage
(excess) of assets over liabilities of discontinued operations. The
expense (earning) on funds allocated from (to) discontinued
operations is calculated by taking the net balance and applying an
earnings rate or a cost of funds equivalent to the corresponding
period's Federal funds purchased rate. nm = not meaningful
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