UnionBanCal Corporation (NYSE:UB): First Quarter 2008 Highlights: �
-- Net interest income up 5 percent versus fourth quarter and up 8
percent year-over-year � -- Net interest margin of 3.54 percent, up
3 basis points over prior quarter � -- Average total loans up 11
percent year-over-year � -- Average core commercial loans up 14
percent � -- Average residential mortgage loans up 13 percent � --
Average commercial real estate loans up 17 percent � -- Average
noninterest bearing deposits comprised 28.9 percent of average
total deposits � -- Average core deposits comprised 72.6 percent of
average total deposits � -- Average all-in cost of funds 2.26
percent � -- Total provision for credit losses of $80 million
primarily reflects increase in reserves against homebuilder
portfolio and robust loan growth � -- Nonperforming assets 0.23
percent of total assets at quarter-end � -- Net charge-offs of $12
million � -- Noninterest income included a $14.2 million gain on
the partial redemption of Visa Inc. common stock � -- Noninterest
expense included a goodwill impairment charge of $18.7 million
related to a write-down of goodwill for the insurance brokerage
business and a $5.1 million reversal of reserves for the Company's
proportionate share of Visa litigation costs � -- Tangible common
equity ratio of 7.42 percent at quarter-end � Other Highlights: �
-- The Company has entered into a definitive agreement to sell its
insurance brokerage business to BB&T Insurance Services;
closing expected in the second quarter � -- Earnings from
continuing operations forecast of $0.95 to $1.05 per share for
second quarter; $4.00 to $4.35 per share for full year 2008
UnionBanCal Corporation (NYSE:UB) today reported first quarter 2008
net income of $108.6 million, or $0.79 per diluted common share,
compared with $149.6 million, or $1.07 per diluted common share, a
year earlier, and $165.7 million, or $1.20 per diluted common
share, in fourth quarter 2007. Net income for first quarter 2008
included: a $14.1 million after-tax, or $0.10 per diluted common
share, write-down of goodwill related to the assessment of the
valuation of the insurance brokerage business; an $8.7 million
after-tax, or $0.06 per diluted common share, gain on the partial
redemption of Visa Inc. common stock; and a $3.1 million after-tax,
or $0.02 per diluted common share, reversal of Visa-related
litigation reserves. Net income for fourth quarter 2007 included
income from discontinued operations of $57.0 million, or $0.42 per
diluted common share. Excluding the goodwill write-down and
Visa-related credits, first quarter 2008 earnings from continuing
operations were $0.81 per diluted common share. This compares with
earnings from continuing operations of $0.78 per diluted common
share in fourth quarter 2007, and $1.06 per diluted common share in
first quarter 2007. Compared to prior quarter, total revenue
increased 2.8 percent and total noninterest expense increased 0.8
percent, resulting in a 6.8 percent increase in income before the
provision for loan losses and income taxes. The total provision for
credit losses was $80 million, an increase of $20 million compared
with fourth quarter 2007, primarily due to an increase in reserves
attributable to the homebuilder segment of the loan portfolio and
robust loan growth. �We have faced a tougher economic environment
than had been anticipated 90 days ago. Even so, during the first
quarter we generated strong, high quality loan growth, maintained
our deposit base and expanded our net interest margin over the
fourth quarter. Our growth in net interest income during the
quarter and continued focus on expense control allowed us to not
only generate positive operating leverage, but also more than 6
percent growth in core earnings over fourth quarter,� said Masaaki
Tanaka, President and Chief Executive Officer. �In these
unpredictable times, it is difficult to determine the future and we
have chosen to proceed with a cautious outlook. Our capital base
remains strong with a tangible equity ratio at the upper end of our
peers. We believe that, as the economy faces continued uncertainty,
the strength of our balance sheet and our focus on capital
preservation will continue to serve us well during 2008,� concluded
Mr. Tanaka. �Deterioration in our homebuilder portfolio was more
rapid than anticipated and we are beginning to see weakness in
related sectors. Even so, our overall credit quality remained
strong during the quarter relative to peer banks. We generated
significant growth across most of our loan categories, with
particular focus in our commercial loan and commercial mortgage
portfolios. We achieved this growth without sacrificing either
quality or yield. Our credit quality statistics were strong, with
only $12 million of net charge-offs for the period and
nonperforming assets at only 23 basis points. Our residential
mortgage portfolio of over $14 billion had only $18 million in
foreclosure. However, given our current economic outlook we have
adopted a guarded outlook for the remainder of the year,� said Vice
Chairman and Chief Operating Officer Philip Flynn. Subsequent Event
� Sale of Insurance Brokerage Business On April 22, 2008, the
Company entered into a definitive agreement to sell its insurance
subsidiary, UnionBanc Insurance Services, Inc., to Raleigh,
N.C.-based BB&T Insurance Services, a wholly-owned subsidiary
of BB&T Corporation (NYSE: BBT). The transaction has been
approved by the directors of BB&T Corporation and the Company,
and is expected to close in the second quarter. In the first
quarter, the Company recorded a $14.1 million after-tax, or $0.10
per diluted common share, write-down of goodwill related to the
assessment of the valuation of the insurance brokerage business.
Upon closing of the transaction, the Company will recognize a net
gain on the sale of the business of approximately $11 million
after-tax, or $0.08 per diluted common share. Commencing with
second quarter 2008, the results of the insurance brokerage
business will be reported in discontinued operations and all prior
periods will be restated to reflect this accounting treatment.
Summary of First Quarter Results From Continuing Operations First
Quarter Total Revenue For first quarter 2008, total revenue
(taxable-equivalent net interest income plus noninterest income)
was $675 million, up 5.4 percent compared with first quarter 2007.
Net interest income increased 7.7 percent, and noninterest income
increased 0.8 percent. Compared with fourth quarter 2007, total
revenue was up 2.8 percent, with net interest income up 4.8 percent
and noninterest income down 1.3 percent. First Quarter Net Interest
Income (Taxable-equivalent) Net interest income was $462 million in
first quarter 2008, up $33 million, or 7.7 percent, from the same
quarter a year ago, primarily due to strong loan growth, lower
rates paid on interest bearing liabilities and one more day in the
quarter, partially offset by lower yields on earning assets and a
deposit mix shift from noninterest bearing and low-cost deposits
into higher-cost deposits. Average earning assets in first quarter
2008 increased $3.8 billion, or 7.9 percent, compared to first
quarter 2007, primarily due to a $4.2 billion, or 11 percent,
increase in average loans. Average commercial loans increased $0.9
billion, or 6.1 percent, with average core commercial loans, which
exclude title and escrow loans, up $1.9 billion, or 13.9 percent.
Title and escrow loans, which are highly rate-advantaged to the
borrower and more volatile than other commercial loans, decreased
$1.0 billion, or 65.7 percent. Average residential mortgage loans
increased $1.6 billion, or 13.0 percent; average commercial
mortgage loans increased $1.2 billion, or 19.6 percent; and average
construction loans increased $0.2 billion, or 10.8 percent, year
over year. Compared to first quarter 2007, average interest bearing
deposits increased $4.7 billion, or 18.0 percent, while average
noninterest bearing deposits decreased $2.5 billion, or 16.5
percent. The decline in noninterest bearing deposits was due to a
$1.1 billion, or 10.5 percent, decrease in average other commercial
noninterest bearing deposits; a $1.1 billion, or 50.1 percent,
decrease in average title and escrow deposits; and a $0.3 billion,
or 13.0 percent, decrease in average consumer noninterest bearing
deposits. Average other commercial and average consumer noninterest
bearing deposits both declined primarily due to a mix shift toward
interest-paying deposit accounts, and average title and escrow
deposits decreased due to reduced residential real estate activity.
Average noninterest bearing deposits represented 28.9 percent of
average total deposits in first quarter 2008. The annualized
average all-in cost of funds improved to 2.26 percent, compared
with 2.56 percent in first quarter 2007, and 2.73 percent in fourth
quarter 2007. The Company�s average core deposit-to-loan ratio was
74.1 percent. The average yield on earning assets of $52.2 billion
was 5.72 percent, down 34 basis points from first quarter 2007,
with the average loan yield decreasing 39 basis points. The average
rate on interest bearing liabilities of $37.7 billion was 3.02
percent, down 75 basis points compared with first quarter 2007,
reflecting recent decreases in short-term interest rates. The net
interest margin in first quarter 2008 was 3.54 percent, compared
with 3.57 percent in first quarter 2007. First quarter 2008 net
interest income increased 4.8 percent from fourth quarter 2007.
Average loans increased $1.8 billion, or 4.4 percent. Average
commercial loans increased $0.9 billion, or 6.4 percent, which was
comprised of an increase in core commercial loans of $1.0 billion,
or 7.3 percent, offset by a decrease in title and escrow loans of
$84 million, or 14.5 percent. Average commercial mortgage loans
increased $465 million, or 6.9 percent; average residential
mortgage loans increased $330 million, or 2.4 percent; and average
construction loans increased $37 million, or 1.5 percent. Average
interest bearing deposits increased $1.3 billion, or 4.2 percent,
while average noninterest bearing deposits decreased $0.5 billion,
or 3.7 percent. The average yield on earning assets decreased 44
basis points and the average rate on interest bearing liabilities
decreased 72 basis points. The net interest margin increased 3
basis points to 3.54 percent. First Quarter Noninterest Income In
first quarter 2008, noninterest income was $213 million, up $1.8
million, or 0.8 percent, from the same quarter a year ago. Service
charges on deposit accounts were flat. Trust and investment
management fees increased $6.5 million, or 17.7 percent, primarily
due to an increase in trust assets. Gain on private capital
investments, net, was $1.1 million, a decrease of $8.0 million
compared with the same quarter a year earlier. The Company recorded
a $14.2 million pre-tax gain on the partial redemption of Visa Inc.
common stock in first quarter 2008. Other noninterest income
declined $6.4 million, or 23 percent, primarily due to a gain on
the sale of real property recorded in first quarter 2007. First
quarter 2008 noninterest income decreased $2.9 million, or 1.3
percent, compared with fourth quarter 2007. Service charges on
deposit accounts were $75 million, down $1.3 million, or 1.7
percent. Merchant banking fees decreased $4.4 million, or 27.2
percent, primarily due to lower syndication fees in first quarter
2008. Trading account revenue decreased $4.1 million, or 27.2
percent, primarily due to downward valuation adjustments for
interest rate derivatives and losses on distressed debt. The
Company recorded a $14.2 million pre-tax gain on the partial
redemption of Visa Inc. common stock in first quarter 2008. Other
noninterest income declined $8.4 million, or 28.2 percent,
primarily due to a gain on the partial redemption of MasterCard
common stock and a net gain on the sale of syndicated loans, both
recorded in fourth quarter 2007. First Quarter Noninterest Expense
Noninterest expense for first quarter 2008 was $437 million, an
increase of $26.1 million, or 6.4 percent, compared with first
quarter 2007. Excluding the impairment charge of $18.7 million
related to the write-down of goodwill for the insurance brokerage
business, noninterest expense increased 1.8 percent. Salaries and
employee benefits expense was flat. The provision for losses on
off-balance sheet commitments was $8 million in first quarter 2008,
compared to $1 million in first quarter 2007. Other noninterest
expense included a $5.1 million reversal of prior reserves for the
Company�s proportionate share of Visa litigation costs. Noninterest
expense increased $3.3 million, or 0.8 percent, compared with
fourth quarter 2007. Excluding the impairment charge of $18.7
million related to the write-down of goodwill for the insurance
brokerage business, noninterest expense decreased 3.5 percent.
Salaries and employee benefits expense increased $16.6 million, or
7.0 percent, primarily due to annual seasonal factors that result
in higher payroll taxes and 401(k) matching contributions. Outside
services expense decreased $3.9 million, or 18.7 percent, primarily
due to lower cost of services related to title and escrow balances.
Professional services expense decreased $7.4 million, or 33.2
percent, primarily due to lower information technology and
risk-management project costs. Advertising and public relations
expense decreased $4.2 million, or 34.0 percent, primarily due to
timing of marketing promotions. The provision for losses on
off-balance sheet commitments was $8 million, compared to $4
million in fourth quarter 2007. Other noninterest expense decreased
$16.1 million, or 34.3 percent, primarily due to the establishment
of legal reserves relative to the Company�s proportionate share of
Visa litigation charges, recorded in fourth quarter 2007, plus a
reversal of a portion of those reserves recorded in first quarter
2008. Income Tax Expense Income tax expense for the first quarter
was $54.7 million. The effective tax rate for first quarter 2008
was 33.5 percent, unchanged from prior year. The effective tax rate
for fourth quarter 2007 was 33.9 percent. Credit Quality
Nonperforming assets at March 31, 2008, were $132 million, or 0.23
percent of total assets. This compares with $57 million, or 0.10
percent of total assets, at December 31, 2007, and $42 million, or
0.08 percent of total assets, at March 31, 2007. The increase in
nonperforming assets versus year-end was due primarily to a $55
million increase in nonperforming loans in the construction
portfolio, virtually all attributable to the homebuilder sector,
and an $18 million increase in commercial and industrial
nonperforming loans. In first quarter 2008, the total provision for
credit losses was $80 million, compared with a total provision for
credit losses of $60 million in fourth quarter 2007, and a total
provision for credit losses of $5 million in first quarter 2007.
The total provision for credit losses is comprised of the provision
for loan losses and the provision for losses on off-balance sheet
commitments, which is classified in noninterest expense. Provision
expense in first quarter 2008 was primarily due to an increase in
reserves attributable to the homebuilder segment of the loan
portfolio and robust loan growth. At quarter-end, the Company
maintained approximately $133 million in identified reserves
against the homebuilder portfolio, which had approximately $815
million outstanding at March 31, 2008. In first quarter 2008, there
were no net charge-offs for the homebuilder portfolio. Net loans
charged-off for first quarter 2008 were $12 million, or 0.11
percent of average total loans. This compares with net loans
charged-off of $3 million, or 0.04 percent of average total loans,
in fourth quarter 2007, and net loans charged-off of $2 million, or
0.03 percent of average total loans, in first quarter 2007. At
March 31, 2008, the allowance for credit losses as a percent of
total loans and as a percent of nonaccrual loans was 1.29 percent
and 445 percent, respectively. These ratios were 1.20 percent and
885 percent, respectively, at December 31, 2007, and 1.11 percent
and 997 percent, respectively, at March 31, 2007. Balance Sheet and
Capital Ratios At March 31, 2008, the Company had total assets of
$57.9 billion. Total loans were $43.5 billion and total deposits
were $45.2 billion, resulting in a period-end deposit-to-loan ratio
of 104 percent. Core deposits at period-end were $33.4 billion,
resulting in a core deposit-to-loan ratio of 77 percent. At
period-end, total stockholders� equity was $4.7 billion and the
tangible common equity ratio was 7.42 percent. The Company�s Tier I
and total risk-based capital ratios at period-end were 8.07 percent
and 10.98 percent, respectively. Stock Repurchases During first
quarter 2008, the Company spent less than $1 million on the
repurchase of common stock. At March 31, 2008, the Company had
remaining repurchase authority of $512 million. Common shares
outstanding at March 31, 2008, were 137.9 million, a decrease of
0.2 million shares, or 0.1 percent, from one year earlier. Second
Quarter and Full Year 2008 Forecast The Company currently estimates
that second quarter 2008 earnings from continuing operations will
be in the range of $0.95 to $1.05 per diluted common share,
including a total provision for credit losses of $60 million to $80
million. The Company currently estimates that full year 2008
earnings from continuing operations will be in the range of $4.00
to $4.35 per diluted common share, including a total provision for
credit losses of $225 million to $300 million. Commencing with
second quarter 2008, the results of the insurance brokerage
business will be reported in discontinued operations and all prior
periods will be restated to reflect this accounting treatment. On
such a basis, first quarter 2008 earnings from continuing
operations were $0.89 per diluted common share. 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 a goodwill write-down and
Visa-related credits or that reflect the accounting treatment for
discontinued operations for the sale of the insurance brokerage
business, 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 pricing,
deposit mix, and net interest margin and their impact on the
Company and its future performance, the Company�s loan portfolio,
credit quality, 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.; the effects of filing taxes
on the worldwide unitary basis; 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, including the previously
disclosed agreements with regulatory and governmental authorities
related to the Company�s Bank Secrecy Act/Anti-Money Laundering
compliance program; effects of governmental fiscal or monetary
policies; legal or regulatory proceedings or investigations;
declines or disruptions in the stock, bond, or credit 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 2008 results at 8:30 AM
Pacific Time (11:30 AM Eastern Time) on April 24, 2008. Interested
parties calling from locations within the United States should call
800-230-1074 (612-332-0345 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 24, through 11:59 PM Pacific Time, May 1 (2:59 AM Eastern
Time, May 2). The reservation number for this playback is 918373.
Based in San Francisco, UnionBanCal Corporation is a bank holding
company with assets of $57.9 billion at March 31, 2008. Its primary
subsidiary, Union Bank of California, N.A., had 334 banking offices
in California, Oregon and Washington, and 2 international offices
at March 31, 2008. UnionBanCal Corporation and Subsidiaries
Financial Highlights (Unaudited) Exhibit 1 � � � � Percent Change
to As of and for the Three Months Ended December 31, 2007 from
March 31, December 31, March 31, March 31, � December 31, (Dollars
in thousands, except per share data) � 2007 2007 2008 2007 � 2007
Results of operations: Net interest income (1) $ 429,337 $ 441,039
$ 462,324 7.68% 4.83% Noninterest income 210,858 215,513 212,618
0.83% (1.34%) Total revenue 640,195 656,552 674,942 5.43% 2.80%
Noninterest expense 410,866 433,683 437,002 6.36% 0.77% Provision
for loan losses 4,000 56,000 72,000 nm 28.57% Income from
continuing operations before income taxes (1) 225,329 166,869
165,940 (26.36%) (0.56%) Taxable-equivalent adjustment 2,115 2,517
2,526 19.43% 0.36% Income tax expense 74,693 55,665 54,662 (26.82%)
(1.80%) Income from continuing operations $ 148,521 $ 108,687 $
108,752 (26.78%) 0.06% Income (loss) from discontinued operations
1,090 56,983 (162) nm nm Net income $ 149,611 $ 165,670 $ 108,590
(27.42%) (34.45%) � Per common share: Basic earnings: From
continuing operations $ 1.08 $ 0.79 $ 0.79 (26.85%) 0.00% Net
income 1.08 1.21 0.79 (26.85%) (34.71%) Diluted earnings: From
continuing operations 1.06 0.78 0.79 (25.47%) 1.28% Net income 1.07
1.20 0.79 (26.17%) (34.17%) Dividends (2) 0.47 0.52 0.52 10.64%
0.00% Book value (end of period) 32.98 34.37 34.17 3.61% (0.58%)
Common shares outstanding (end of period) (3) 138,117,370
137,836,068 137,944,897 (0.12%) 0.08% Weighted average common
shares outstanding - basic (3) 137,942,320 137,386,881 137,005,702
(0.68%) (0.28%) Weighted average common shares outstanding -
diluted (3) 139,729,681 138,562,892 137,609,383 (1.52%) (0.69%) �
Balance sheet (end of period): Total assets (4) $ 54,616,849 $
55,727,748 $ 57,933,325 6.07% 3.96% Total loans 37,251,950
41,204,188 43,499,968 16.77% 5.57% Nonperforming assets 41,744
56,525 131,687 nm nm Total deposits 43,685,706 42,680,191
45,240,821 3.56% 6.00% Medium and long-term debt 2,071,263
1,913,622 1,963,952 (5.18%) 2.63% Stockholders' equity 4,555,439
4,737,981 4,713,206 3.46% (0.52%) � Balance sheet (period average):
Total assets $ 52,962,611 $ 54,781,708 $ 56,748,724 7.15% 3.59%
Total loans 38,458,014 40,887,376 42,701,453 11.03% 4.44% Earning
assets 48,354,950 50,156,954 52,188,096 7.93% 4.05% Total deposits
41,365,182 42,835,877 43,613,754 5.44% 1.82% Stockholders' equity
4,510,205 4,647,470 4,718,409 4.62% 1.53% � Financial ratios (5):
Return on average assets (6): From continuing operations 1.14%
0.79% 0.77% Net income 1.15% 1.20% 0.77% Return on average
stockholders' equity (6): From continuing operations 13.35% 9.28%
9.27% Net income 13.45% 14.14% 9.26% Efficiency ratio (7) 64.02%
65.44% 63.55% Net interest margin (1) 3.57% 3.51% 3.54% Dividend
payout ratio 43.52% 65.82% 65.82% Tangible common equity ratio
7.53% 7.73% 7.42% Tier 1 risk-based capital ratio (4) (8) 8.42%
8.30% 8.07% Total risk-based capital ratio (4) (8) 11.38% 11.21%
10.98% Leverage ratio (4) (8) 8.12% 8.27% 8.09% Allowance for loan
losses to: Total loans 0.89% 0.98% 1.06% Nonaccrual loans 799.52%
722.64% 367.17% Allowances for credit losses to (9) : Total loans
1.11% 1.20% 1.29% Nonaccrual loans 997.48% 884.80% 445.20% Net
loans charged off (recovered) to average total loans (6) 0.03%
0.04% 0.11% Nonperforming assets to total loans and foreclosed
assets 0.11% 0.14% 0.30% Nonperforming assets to total assets (4)
0.08% 0.10% 0.23% � 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, December 31,
March 31, (Amounts in thousands, except per share data) � 2007 �
2007 � 2008 � Interest Income (1) Loans $ 603,502 $ 655,933 $
633,362 Securities 108,422 114,022 106,046 Interest bearing
deposits in banks 1,109 163 128 Federal funds sold and securities
purchased under resale agreements 11,152 2,603 2,693 Trading
account assets � 1,701 � 3,448 � 2,804 � Total interest income �
725,886 � 776,169 � 745,033 � � Interest Expense Deposits 222,155
263,508 220,660 Federal funds purchased and securities sold under
repurchase agreements 14,916 19,465 16,496 Commercial paper 22,264
16,838 9,792 Medium and long-term debt 19,695 25,471 19,457 Trust
notes 238 238 238 Other borrowed funds � 17,281 � 9,610 � 16,066 �
Total interest expense � 296,549 � 335,130 � 282,709 � � Net
Interest Income (1) 429,337 441,039 462,324 Provision for loan
losses � 4,000 � 56,000 � 72,000 � Net interest income after
provision for loan losses � 425,337 � 385,039 � 390,324 � �
Noninterest Income Service charges on deposit accounts 74,945
75,989 74,736 Trust and investment management fees 36,860 41,672
43,388 Insurance commissions 20,250 16,557 17,393 Merchant banking
fees 9,077 16,206 11,793 Trading account activities 14,840 15,135
11,012 Brokerage commissions and fees 9,660 10,170 9,859 Card
processing fees, net 7,127 7,571 7,764 Securities gains (losses),
net 1,220 - (2 ) Other � 36,879 � 32,213 � 36,675 � Total
noninterest income � 210,858 � 215,513 � 212,618 � � Noninterest
Expense Salaries and employee benefits 251,835 236,835 253,429 Net
occupancy 34,459 37,467 37,011 Outside services 18,170 21,071
17,138 Equipment 16,333 16,677 15,637 Software 13,599 15,965 15,125
Professional services 16,927 22,281 14,889 Communications 9,306
9,847 9,517 Foreclosed asset expense 9 55 89 Provision for losses
on off-balance sheet commitments 1,000 4,000 8,000 Other � 49,228 �
69,485 � 66,167 � Total noninterest expense � 410,866 � 433,683 �
437,002 � � Income from continuing operations before income taxes
(1) 225,329 166,869 165,940 Taxable-equivalent adjustment 2,115
2,517 2,526 Income tax expense 74,693 55,665 54,662 � � � Income
from Continuing Operations � 148,521 � 108,687 � 108,752 � � Income
(loss) from discontinued operations before income taxes 1,765
88,827 (231 ) Income tax expense (benefit) � 675 � 31,844 � (69 )
Income (Loss) from Discontinued Operations � 1,090 � 56,983 � (162
) Net Income $ 149,611 $ 165,670 $ 108,590 � � Income from
continuing operations per common share - basic $ 1.08 $ 0.79 $ 0.79
� Net income per common share - basic $ 1.08 $ 1.21 $ 0.79 � Income
from continuing operations per common share - diluted $ 1.06 $ 0.78
$ 0.79 � Net income per common share - diluted $ 1.07 $ 1.20 $ 0.79
� Weighted average common shares outstanding - basic � 137,942 �
137,387 � 137,006 � Weighted average common shares outstanding -
diluted � 139,730 � 138,563 � 137,609 � � Refer to Exhibit 8 for
footnote explanations. UnionBanCal Corporation and Subsidiaries
Consolidated Balance Sheets Exhibit 3 � � � � (Unaudited) � �
(Unaudited) March 31, December 31, March 31, (Dollars in thousands)
� 2007 � � 2007 � � 2008 � Assets Cash and due from banks $
1,913,937 $ 2,106,930 $ 2,071,971 Interest bearing deposits in
banks 1,008,327 104,528 1,000 Federal funds sold and securities
purchased under resale agreements � 2,747,300 � � 310,178 � �
125,940 � Total cash and cash equivalents 5,669,564 2,521,636
2,198,911 Trading account assets 297,998 603,333 811,509 Securities
available for sale: Securities pledged as collateral 62,026 685,123
642,346 Held in portfolio 8,524,615 7,770,048 7,667,970 Loans (net
of allowance for loan losses: March 31, 2007, $332,679; December
31, 2007, $402,726; March 31, 2008, $462,943) 36,919,271 40,801,462
43,037,025 Due from customers on acceptances 18,099 16,482 15,984
Premises and equipment, net 489,553 490,197 490,419 Intangible
assets 24,321 18,568 17,221 Goodwill 453,489 448,718 429,987 Other
assets 2,146,638 2,364,577 2,611,140 Assets of discontinued
operations to be disposed or sold � 11,275 � � 7,604 � � 10,813 �
Total assets $ 54,616,849 � $ 55,727,748 � $ 57,933,325 � �
Liabilities Noninterest bearing 16,175,360 13,802,640 13,997,843
Interest bearing � 27,510,346 � � 28,877,551 � � 31,242,978 � Total
deposits 43,685,706 42,680,191 45,240,821 Federal funds purchased
and securities sold under repurchase agreements 549,545 1,631,602
1,785,044 Commercial paper 1,424,401 1,266,656 1,299,930 Other
borrowed funds 892,349 1,875,623 921,519 Trading account
liabilities 162,613 351,057 629,166 Acceptances outstanding 18,099
16,482 15,984 Other liabilities 1,130,090 1,132,103 1,230,985
Medium and long-term debt 2,071,263 1,913,622 1,963,952 Junior
subordinated debt payable to subsidiary grantor trust 14,772 14,432
14,319 Liabilities of discontinued operations to be extinguished or
assumed � 112,572 � � 107,999 � � 118,399 � Total liabilities �
50,061,410 � � 50,989,767 � � 53,220,119 � � � � Stockholders'
Equity Preferred stock: Authorized 5,000,000 shares; no shares
issued or outstanding as of March 31, 2007, December 31, 2007 and
March 31, 2008 - - - Common stock, par value $1 per share:
Authorized 300,000,000 shares; issued 156,832,956 shares as of
March 31, 2007, 157,559,521 shares as of December 31, 2007 and
157,670,426 shares as of March 31, 2008 � 156,833 157,559 157,670
Additional paid-in capital 1,109,817 1,153,737 1,167,391 Treasury
stock - 18,715,586 shares as of March 31, 2007, 19,723,453 shares
as of December 31, 2007 and 19,725,529 shares as of March 31, 2008
(1,150,090 ) (1,202,584 ) (1,202,685 ) Retained earnings 4,669,590
4,912,392 4,949,040 Accumulated other comprehensive loss � (230,711
) � (283,123 ) � (358,210 ) Total stockholders' equity � 4,555,439
� � 4,737,981 � � 4,713,206 � Total liabilities and stockholders'
equity $ 54,616,849 � $ 55,727,748 � $ 57,933,325 � UnionBanCal
Corporation and Subsidiaries Loans (Unaudited) Exhibit 4 � � � � �
� � � � Percent Change to Three Months Ended December 31, 2007 from
March 31, December 31, March 31, March 31, December 31, (Dollars in
millions) � � 2007 2007 2008 2007 2007 � Loans (period average)
Commercial, financial and industrial $ 14,681 $ 14,633 $ 15,569
6.05% 6.40% Construction 2,233 2,437 2,474 10.79% 1.52% Mortgage -
Commercial 6,064 6,786 7,251 19.57% 6.85% Mortgage - Residential
12,384 13,658 13,988 12.95% 2.42% Consumer 2,542 2,618 2,686 5.66%
2.60% Lease financing � 548 � 638 � 650 18.61% 1.88% � Total loans
held to maturity 38,452 40,770 42,618 10.83% 4.53% Total loans held
for sale � 6 � 117 � 83 nm (29.06%) � Total loans $ 38,458 $ 40,887
$ 42,701 11.03% 4.44% � Nonperforming Assets (period end)
Nonaccrual loans: Commercial, financial and industrial $ 5 $ 29 $
47 nm 62.07% Construction - - 55 nm nm Mortgage - Commercial 22 14
24 9.09% 71.43% Lease financing � 15 � 13 � - (100.00%) (100.00%) �
Total nonaccrual loans 42 56 126 nm nm Restructured loans Mortgage
- Residential - - 1 nm nm Foreclosed assets � - � 1 � 5 nm nm �
Total nonperforming assets $ 42 $ 57 $ 132 nm nm Loans 90 days or
more past due and still accruing $ 6 $ 22 $ 30 nm 36.36% � Analysis
of Allowances for Credit Losses Beginning balance $ 331 $ 350 $ 403
� Provision for loan losses 4 56 72 � Loans charged off:
Commercial, financial and industrial (3) (4) (10) Consumer � (1) �
(2) � (3) Total loans charged off � (4) � (6) � (13) � Loans
recovered: Commercial, financial and industrial 2 2 1 Consumer � -
� 1 � - Total loans recovered � 2 � 3 � 1 Net loans recovered
(charged off) � (2) � (3) � (12) � Ending balance of allowance for
loan losses 333 403 463 Allowance for off-balance sheet commitment
losses � 82 � 90 � 98 $ - Allowances for credit losses $ 415 $ 493
$ 561 � Refer to Exhibit 8 for footnote explanations. UnionBanCal
Corporation and Subsidiaries Net Interest Income (Unaudited)
Exhibit 5 � � � � � � � � For the Three Months Ended � For the
Three Months Ended March 31, 2007 March 31, 2008 Interest Average
Interest Average Average Income/ Yield/ Average Income/ Yield/
(Dollars in thousands) Balance Expense (10) Rate (6)(10) � Balance
Expense (10) Rate (6)(10) Assets Loans (11) Commercial, financial
and industrial $ 14,684,098 $ 237,278 6.55 % $ 15,647,162 $ 238,303
6.13 % Construction 2,233,131 42,775 7.77 2,474,323 36,617 5.95
Residential mortgage 12,386,306 163,766 5.29 13,992,743 192,785
5.51 Commercial mortgage 6,064,169 106,966 7.15 7,250,747 112,970
6.23 Consumer 2,542,507 48,979 7.81 2,686,635 46,390 6.94 Lease
financing � 547,803 � � 3,738 � 2.73 � 649,843 � � 6,297 � 3.88
Total loans 38,458,014 603,502 6.34 42,701,453 633,362 5.95
Securities - taxable 8,580,315 107,268 5.00 8,355,954 104,964 5.02
Securities - tax-exempt 57,654 1,154 8.01 53,359 1,082 8.11
Interest bearing deposits in banks 79,562 1,109 5.65 29,869 128
1.72 Federal funds sold and securities purchased under resale
agreements 846,042 11,152 5.35 328,145 2,693 3.30 Trading account
assets � 333,363 � � 1,701 � 2.07 � 719,316 � � 2,804 � 1.57 Total
earning assets 48,354,950 � 725,886 � 6.06 52,188,096 � 745,033 �
5.72 Allowance for loan losses (330,277 ) (399,280 ) Cash and due
from banks 1,949,232 1,757,365 Premises and equipment, net 491,449
487,928 Other assets � 2,497,257 � � 2,714,615 � Total assets $
52,962,611 � $ 56,748,724 � Liabilities Deposits: Transaction
accounts $ 13,534,373 91,505 2.74 $ 14,864,561 82,915 2.24 Savings
and consumer time 4,297,383 26,855 2.53 4,179,663 23,529 2.26 Large
time � 8,435,137 � � 103,795 � 4.99 � 11,962,678 � � 114,216 � 3.84
Total interest bearing deposits � 26,266,893 � � 222,155 � 3.43 �
31,006,902 � � 220,660 � 2.86 Federal funds purchased and
securities sold under repurchase agreements 1,046,439 13,524 5.24
1,950,692 15,566 3.21 Net funding allocated from (to) discontinued
operations (12) 107,715 1,392 5.24 109,356 930 3.42 Commercial
paper 1,783,758 22,264 5.06 1,207,510 9,792 3.26 Other borrowed
funds (13) 1,309,102 17,281 5.35 1,566,301 16,066 4.13 Medium and
long-term debt 1,371,446 19,695 5.82 1,846,885 19,457 4.24 Trust
notes � 14,827 � � 238 � 6.43 � 14,374 � � 238 � 6.63 Total
borrowed funds � 5,633,287 � � 74,394 � 5.36 � 6,695,118 � � 62,049
� 3.73 Total interest bearing liabilities 31,900,180 � 296,549 �
3.77 37,702,020 � 282,709 � 3.02 Noninterest bearing deposits
15,098,289 12,606,852 Other liabilities � 1,453,937 � � 1,721,443 �
Total liabilities 48,452,406 52,030,315 Stockholders' Equity Common
equity � 4,510,205 � � 4,718,409 � Total stockholders' equity �
4,510,205 � � 4,718,409 � Total liabilities and stockholders'
equity $ 52,962,611 � $ 56,748,724 � Reported Net Interest
Income/Margin Net interest income/margin (taxable-equivalent basis)
429,337 3.57 % 462,324 3.54 % Less: taxable-equivalent adjustment �
2,115 � � 2,526 � Net interest income $ 427,222 � $ 459,798 � �
Average Assets and Liabilities of Discontinued Operations for
Period Ended: March 31, 2007 March 31, 2008 Assets $ 10,592 $ 7,440
Liabilities $ 118,307 $ 116,796 Net Liabilities $ (107,715 ) $
(109,356 ) � 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, 2007 March 31, 2008
Interest Average Interest Average Average Income/ Yield/ Average
Income/ Yield/ (Dollars in thousands) Balance Expense (10) Rate
(6)(10) � Balance Expense (10) Rate (6)(10) Assets Loans: (11)
Commercial, financial and industrial $ 14,745,251 $ 250,542 6.74 %
$ 15,647,162 $ 238,303 6.13 % Construction 2,436,921 44,393 7.23
2,474,323 36,617 5.95 Residential mortgage 13,663,048 187,372 5.49
13,992,743 192,785 5.51 Commercial mortgage 6,786,416 116,974 6.84
7,250,747 112,970 6.23 Consumer 2,617,949 50,202 7.61 2,686,635
46,390 6.94 Lease financing � 637,791 � � 6,450 � 4.05 � 649,843 �
� 6,297 � 3.88 Total loans 40,887,376 655,933 6.38 42,701,453
633,362 5.95 Securities - taxable 8,443,508 112,924 5.35 8,355,954
104,964 5.02 Securities - tax-exempt 54,155 1,098 8.11 53,359 1,082
8.11 Interest bearing deposits in banks 4,505 163 14.29 29,869 128
1.72 Federal funds sold and securities purchased under resale
agreements 236,411 2,603 4.37 328,145 2,693 3.30 Trading account
assets � 530,999 � � 3,448 � 2.58 � 719,316 � � 2,804 � 1.57 Total
earning assets 50,156,954 � 776,169 � 6.16 52,188,096 � 745,033 �
5.72 Allowance for loan losses (349,409 ) (399,280 ) Cash and due
from banks 1,818,633 1,757,365 Premises and equipment, net 483,751
487,928 Other assets � 2,671,779 � � 2,714,615 � Total assets $
54,781,708 � $ 56,748,724 � Liabilities Deposits: Transaction
accounts $ 14,605,230 106,517 2.89 $ 14,864,561 82,915 2.24 Savings
and consumer time 4,411,122 30,469 2.74 4,179,663 23,529 2.26 Large
time � 10,727,470 � � 126,522 � 4.68 � 11,962,678 � � 114,216 �
3.84 Total interest bearing deposits � 29,743,822 � � 263,508 �
3.51 � 31,006,902 � � 220,660 � 2.86 Federal funds purchased and
securities sold under repurchase agreements 1,605,100 18,371 4.54
1,950,692 15,566 3.21 Net funding allocated from (to) discontinued
operations (12) 95,570 1,094 4.54 109,356 930 3.42 Commercial paper
1,469,372 16,838 4.55 1,207,510 9,792 3.26 Other borrowed funds
(13) 788,853 9,610 4.83 1,566,301 16,066 4.13 Medium and long-term
debt 1,846,780 25,471 5.47 1,846,885 19,457 4.24 Trust notes �
14,487 � � 238 � 6.58 � 14,374 � � 238 � 6.63 Total borrowed funds
� 5,820,162 � � 71,622 � 4.88 � 6,695,118 � � 62,049 � 3.73 Total
interest bearing liabilities 35,563,984 � 335,130 � 3.74 37,702,020
� 282,709 � 3.02 Noninterest bearing deposits 13,092,055 12,606,852
Other liabilities � 1,478,199 � � 1,721,443 � Total liabilities
50,134,238 52,030,315 Stockholders' Equity Common equity �
4,647,470 � � 4,718,409 � Total stockholders' equity � 4,647,470 �
� 4,718,409 � Total liabilities and stockholders' equity $
54,781,708 � $ 56,748,724 � Reported Net Interest Income/Margin Net
interest income/margin (taxable-equivalent basis) 441,039 3.51 %
462,324 3.54 % Less: taxable-equivalent adjustment � 2,517 � �
2,526 � Net interest income $ 438,522 � $ 459,798 � � Average
Assets and Liabilities of Discontinued Operations for Period Ended:
December 31, 2007 March 31, 2008 Assets $ 8,311 $ 7,440 Liabilities
$ 103,881 $ 116,796 Net Liabilities $ (95,570 ) $ (109,356 ) �
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, 2008 from March 31, December 31, March 31, March
31, � December 31, (Dollars in thousands) � 2007 � 2007 � 2008 �
2007 � � 2007 Service charges on deposit accounts $ 74,945 $ 75,989
$ 74,736 (0.28 ) % (1.65 ) % Trust and investment management fees
36,860 41,672 43,388 17.71 4.12 Insurance commissions 20,250 16,557
17,393 (14.11 ) 5.05 Merchant banking fees 9,077 16,206 11,793
29.92 (27.23 ) Trading account activities 14,840 15,135 11,012
(25.80 ) (27.24 ) Brokerage commissions and fees 9,660 10,170 9,859
2.06 (3.06 ) Card processing fees, net 7,127 7,571 7,764 8.94 2.55
Securities gains (losses), net 1,220 - (2 ) nm nm Gains on private
capital investments, net 9,095 2,412 1,070 (88.24 ) (55.64 ) Gain
on the VISA IPO redemption - - 14,211 nm nm Other � 27,784 � 29,801
� 21,394 � (23.00 ) (28.21 ) Total noninterest income $ 210,858 $
215,513 $ 212,618 � 0.83 % (1.34 ) % � � Noninterest expense
(Unaudited) � Percentage Change to For the Three Months Ended March
31, 2008 from March 31, December 31, March 31, March 31, December
31, (Dollars in thousands) � 2007 � 2007 � 2008 � 2007 � � � 2007 �
� Salaries and other compensation $ 202,494 $ 198,804 $ 201,498
(0.49 ) % 1.36 % Employee benefits � 49,341 � 38,031 � 51,931 �
5.25 36.55 Salaries and employee benefits 251,835 236,835 253,429
0.63 7.01 Net occupancy 34,459 37,467 37,011 7.41 (1.22 )
Intangible asset amortization 1,926 1,901 20,078 nm nm Outside
services 18,170 21,071 17,138 (5.68 ) (18.67 ) Equipment 16,333
16,677 15,637 (4.26 ) (6.24 ) Software 13,599 15,965 15,125 11.22
(5.26 ) Professional services 16,927 22,281 14,889 (12.04 ) (33.18
) Communications 9,306 9,847 9,517 2.27 (3.35 ) Advertising and
public relations 8,367 12,487 8,239 (1.53 ) (34.02 ) Data
processing 8,184 8,221 7,076 (13.54 ) (13.93 ) Foreclosed asset
expense 9 55 89 nm 61.82 Provision for losses on off-balance sheet
commitments 1,000 4,000 8,000 nm 100.00 Other � 30,751 � 46,876 �
30,774 � 0.07 (34.35 ) Total noninterest expense $ 410,866 $
433,683 $ 437,002 � 6.36 % 0.77 % � Refer to Exhibit 8 for footnote
explanations. 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.
Weighted average common shares outstanding (basic) excludes
nonvested restricted shares but includes the impact of those shares
in the calculation of diluted shares. � (4) End of period total
assets and assets used in calculating these ratios include those of
discontinued operations. � (5) Average balances used to calculate
our financial ratios are based on continuing operations data only,
unless otherwise indicated. � (6) Annualized. � (7) The efficiency
ratio is noninterest expense, excluding foreclosed asset expense
(income) and the (reversal of) provision for losses on off-balance
sheet commitments, as a percentage of net interest income
(taxable-equivalent basis) and noninterest income, and is
calculated for continuing operations only. � � (8) Estimated as of
March 31, 2008. The regulatory capital and leverage ratios include
discontinued operations. � (9) The allowance for credit losses
ratios include the allowances for loan losses and losses on
off-balance sheet commitments. These ratios relate to continuing
operations only. � (10) Yields and interest income are presented on
a taxable-equivalent basis using the federal statutory tax rate of
35 percent. � (11) Average balances on loans outstanding include
all nonperforming loans 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.
� (12) Net funding allocated from (to) discontinued operations
represents the shortage (excess) of assets over liabilities of
discontinued operations. The expense (earning) on funds allocated
from (to) discontinued operations is calculated by taking the net
balance and applying an earnings rate or a cost of funds equivalent
to the corresponding period's Federal funds purchased rate. � (13)
Includes interest bearing trading liabilities. � nm = not
meaningful
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