Exhibit 99.1
UnionBanCal Corporation Reports First Quarter 2006 Earnings Per
Share of $1.24
SAN FRANCISCO--(BUSINESS WIRE)--April 20, 2006--UnionBanCal
Corporation (NYSE:UB)
First Quarter 2006 Highlights:
-- Diluted earnings per share from continuing operations of
$1.24, up 10 percent year-over-year, excluding a positive tax
adjustment of $0.07 per diluted common share recorded in first
quarter 2005
-- Net interest margin expansion of 14 basis points compared with
first quarter 2005, to 4.36 percent
-- Strong year-over-year organic loan growth
-- Average total loans up 15 percent
-- Average commercial loans up 20 percent
-- Average residential mortgage loans up 16 percent
-- Year-over-year revenue growth of 6.5 percent
-- Return on average stockholders' equity of 16.2 percent
-- Annualized average all-in cost of funds of 1.45 percent
-- Average noninterest bearing deposits comprised 45 percent of
average total deposits
-- Nonperforming assets just 0.09 percent of total assets at
quarter-end
UnionBanCal Corporation (NYSE:UB) today reported first quarter
2006 net income of $172.9 million, or $1.18 per diluted common share,
and income from continuing operations of $181.5 million, or $1.24 per
diluted common share. Excluding a positive tax adjustment of $0.07 per
diluted common share last year, first quarter 2006 income from
continuing operations per diluted common share increased 9.7 percent.
"We are off to a good start in 2006," stated Takashi Morimura,
President and Chief Executive Officer. "Our balanced business model is
evident in our first quarter results as excellent loan growth and
credit quality offset mixed deposit results, reflecting an
increasingly competitive deposit market. During the quarter, we
returned $139 million to shareholders in the form of dividends and
share repurchases, equal to 80 percent of our first quarter net
income. Despite this significant return of capital, we finished the
quarter with very strong capital levels, including a tangible equity
ratio of 8.46 percent."
"We generated good loan growth across all categories in first
quarter," added Chief Operating Officer Philip Flynn. "Commercial
loans increased at a double digit rate, and, though slowing
appreciably due to rising rates, residential mortgages still grew at a
healthy rate year-over-year. We continue to report very strong credit
quality, with net charge-offs of only $5 million in the quarter and
nonperforming assets declining further, to just 0.09 percent of total
assets at quarter-end. While this trend is unsustainable in the long
run, it is evidence of our responsible lending and monitoring
practices and the overall quality of our loan portfolio.
"Average noninterest bearing deposits declined 9 percent versus
the fourth quarter, virtually all due to a decline in wholesale
deposits," continued Flynn. "Well over half of the decline in the
wholesale deposit base was in title, escrow and other real estate
related balances, reflecting slower real estate activity, some of
which is seasonal. In addition, demand deposit volumes were affected
by disintermediation, which has accelerated due to the cumulative
effect of rising short-term interest rates. Despite this more
challenging deposit environment, our deposit franchise remains healthy
and will continue to afford us a solid advantage in our primary
markets. We have built this deposit franchise over the long term, and
the inherent strength in this aspect of our business will serve the
Company very well going forward. We are confident that we can defend
and continue to grow our deposit base, and we took steps to do just
that in the quarter by launching several new interest bearing deposit
initiatives."
First Quarter Total Revenue From Continuing Operations
For first quarter 2006, total revenue (taxable-equivalent net
interest income plus noninterest income) was $684 million, an increase
of $42 million, or 6.5 percent, compared with first quarter 2005. Net
interest income increased 6.8 percent, and noninterest income
increased 6.0 percent. Compared with fourth quarter 2005, total
revenue increased 2.9 percent, with net interest income decreasing 3.2
percent, and noninterest income increasing 18.8 percent. Excluding a
$37 million fourth quarter 2005 loss on the sale of securities, total
revenue in sequential quarters decreased $18 million, or 2.5 percent,
with net interest income decreasing 3.2 percent and noninterest income
decreasing 1.1 percent.
First Quarter Net Interest Income (Taxable-equivalent) From
Continuing Operations
Net interest income was $466 million in first quarter 2006, up $30
million, or 6.8 percent, from the same quarter a year ago, primarily
due to strong growth in loans.
Average earning assets increased $1.4 billion, or 3.4 percent,
primarily due to a $4.3 billion, or 14.6 percent, increase in average
loans, while average securities declined $2.9 billion, or 25.8
percent. Average commercial loans increased $2.0 billion, or 19.7
percent; average residential mortgages increased $1.6 billion, or 16.4
percent; average construction loans increased $0.4 billion, or 36.7
percent; and average commercial mortgages increased $0.2 billion, or
4.3 percent.
Compared to first quarter 2005, average noninterest bearing
deposits decreased $649 million, or 3.6 percent. Average title and
escrow deposits decreased $381 million, or 13.8 percent, due to lower
residential real estate activity. Average business demand deposits,
excluding title and escrow, declined $305 million, or 2.5 percent,
primarily due to disintermediation resulting from rising short-term
interest rates. Consumer deposits increased $37 million, or 1.2
percent. Average noninterest bearing deposits represented 45.1 percent
of average total deposits in first quarter 2006. The annualized
average all-in cost of funds was 1.45 percent, reflecting the
Company's strong average deposit-to-loan ratio of 114.1 percent and
the high proportion of noninterest bearing deposits to total deposits.
The average yield on earning assets of $43.1 billion was 5.77
percent, up 83 basis points over first quarter last year, with the
average loan yield increasing 58 basis points. The average rate on
interest bearing liabilities of $24.5 billion was 2.49 percent, up 118
basis points, reflecting both higher short-term interest rates and
heightened competition for deposits, compared with first quarter 2005.
Average interest bearing deposits were $21.3 billion and the weighted
average rate was 2.19 percent. The net interest margin in first
quarter 2006 was 4.36 percent, compared with 4.22 percent in first
quarter 2005, an increase of 14 basis points.
On a sequential quarter basis, net interest income decreased $15
million, or 3.2 percent, with approximately $5 million of the variance
due to two less days in the quarter. Average loans increased $791
million, or 2.4 percent, while average securities decreased $794
million, or 8.7 percent. Average commercial loans increased $389
million, or 3.3 percent; average residential mortgages increased $301
million, or 2.7 percent; and average construction loans increased $109
million, or 7.7 percent. Average noninterest bearing deposits
decreased $1.7 billion, or 9.1 percent, primarily due to a $766
million decrease in title and escrow deposits and disintermediation in
other business demand deposits caused by rising short-term interest
rates. The impact of lower title and escrow deposit volumes was
partially offset by a reduction in noninterest expense associated with
this business. The average yield on earning assets increased 26 basis
points and the average rate on interest bearing liabilities increased
44 basis points. The net interest margin decreased 6 basis points to
4.36 percent, primarily due to lower demand deposits.
First Quarter Noninterest Income From Continuing Operations
In first quarter 2006, noninterest income was $218 million, up $12
million, or 6.0 percent, from the same quarter a year ago. Service
charges on deposit accounts increased 3.0 percent, primarily due to
changes in the overdraft and NSF fee structure, partially offset by
lower account analysis fees stemming from an increase in the earnings
credit rate on deposit balances. Trust and investment management fees
increased $8.2 million, or 19.4 percent, primarily due to an increase
in trust assets and to a one-time increase in trust fees resulting
from a refinement in accrual methodology, which accounted for $3
million of the increase.
Compared with fourth quarter 2005, first quarter 2006 noninterest
income increased $34 million, or 18.8 percent. Excluding the $37
million loss on the sale of $1 billion of agency debentures associated
with the strategic rebalancing of the Company's securities portfolio
in fourth quarter 2005, noninterest income decreased $2 million, or
1.1 percent. Service charges on deposit accounts increased 2.0
percent, while trust and investment management fees increased 7.9
percent, primarily due to a refinement in accrual methodology. Other
noninterest income declined $7.4 million, or 17.0 percent, primarily
due to a decline in net gains on private equity investments of $5.5
million.
First Quarter Noninterest Expense From Continuing Operations
Noninterest expense for first quarter 2006 was $415 million, an
increase of $22 million, or 5.5 percent, over first quarter 2005.
Salaries and employee benefits expense increased $21 million, or 9.0
percent, primarily due to annual merit increases and higher
performance-related incentive expense. Higher incentive expense
included $6.2 million in stock option expense, recorded for the first
time in first quarter 2006, and a $2.9 million increase in restricted
stock expense, as the Company has moved to a heavier restricted stock
weighting in its equity-linked compensation programs. Professional
services expense increased $3 million, or 23.9 percent, primarily due
to higher compliance-related expense. Outside services expense
increased $7 million, or 34.7 percent, primarily due to higher cost of
services related to title and escrow balances, stemming from a higher
earnings credit rate in first quarter 2006. Foreclosed asset expense
(income) in first quarter 2006 reflects a $7.4 million gain on the
sale of property. The provision for off-balance sheet commitments
declined $6 million compared with first quarter 2005.
Excluding the effect of stock option expense and higher restricted
stock expense, noninterest expense increased $12 million, or 3.2
percent, compared with prior year.
Compared with fourth quarter 2005, noninterest expense decreased
$15 million, or 3.4 percent. Salaries and employee benefits expense
increased $20 million, or 8.6 percent, primarily due to annual
seasonal factors that result in higher payroll taxes and 401(k)
matching contributions, as well as the initial expensing of stock
options in the first quarter. Payroll taxes accounted for $9.5 million
of the increase, 401(k) and post-employment expense accounted for $7.3
million of the increase, and stock option expense accounted for $6.2
million of the increase. Net occupancy expense decreased $8 million,
or 20.0 percent, primarily due to charges incurred in fourth quarter
2005 associated with the consolidation of offices in San Francisco.
Professional services expense increased $5 million, or 55.3 percent,
primarily due to a recovery of legal fees recorded in fourth quarter
2005 and higher compliance-related expense in the first quarter.
Outside services expense decreased $12 million, or 30.1 percent,
primarily due to lower cost of services related to decreased title and
escrow balances. Foreclosed asset expense (income) in first quarter
2006 reflects a $7.4 million gain on the sale of property. The
provision for off-balance sheet commitments declined $8 million
compared with fourth quarter 2005.
Income Tax Expense From Continuing Operations
The effective tax rate for first quarter 2006 was 34.1 percent,
compared with an effective tax rate of 31.0 percent for first quarter
2005. First quarter 2005 income tax expense included a $10.0 million
reduction in reserves for estimated amounts owed to the Internal
Revenue Service with respect to certain leveraged leasing
transactions.
Credit Quality
Nonperforming assets at March 31, 2006, were $42 million, or 0.09
percent of total assets. This compares with $62 million, or 0.12
percent of total assets, at December 31, 2005, and $101 million, or
0.20 percent of total assets, at March 31, 2005. Nonperforming assets
declined 58 percent between March 31, 2005 and March 31, 2006.
In first quarter 2006, the total provision for credit losses was
negative $10.0 million. The total provision for credit losses was
negative $5.0 million in fourth quarter 2005 and negative $9.1 million
in first quarter 2005. The total provision for credit losses in first
quarter 2006 consisted of a provision for loan losses of negative $7.0
million and a provision for off-balance sheet commitments (classified
in noninterest expense) of negative $3.0 million. In first quarter
2006, net charge-offs were $5 million, compared with net charge-offs
of $2 million in fourth quarter 2005, and net recoveries of $15
million in first quarter 2005.
At March 31, 2006, the allowance for credit losses as a percent of
total loans and as a percent of nonaccrual loans was 1.26 percent and
1003 percent, respectively. These ratios were 1.32 percent and 744
percent, respectively, at December 31, 2005, and 1.63 percent and 507
percent, respectively, at March 31, 2005.
Balance Sheet and Capital Ratios
At March 31, 2006, the Company had total assets of $48.8 billion.
Total loans were $33.5 billion and total deposits were $39.2 billion,
resulting in a period-end deposit-to-loan ratio of 117 percent. At
period-end, total stockholders' equity was $4.6 billion, the tangible
equity ratio was 8.46 percent, and the ratio of tangible common equity
to risk-weighted assets was 8.68 percent. Book value per share at
March 31, 2006, was $31.94, up 12.4 percent from a year earlier. The
Company's Tier I and total risk-based capital ratios at period-end
were 9.01 percent and 10.84 percent, respectively.
Stock Repurchases
During first quarter 2006, the Company repurchased 1,167,700
shares of common stock at a total price of $80.0 million, or an
average of $68.52 per repurchased share. At March 31, 2006, the
Company was authorized by its Board of Directors to repurchase an
additional $22 million of common stock.
Common shares outstanding at March 31, 2006, were 143.4 million, a
decrease of 1.2 million shares, or 0.8 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 (the Business) to Wachovia Bank, N.A. The principal legal
closing of the transaction took place on October 6, 2005, with the
Company receiving $245 million in cash from Wachovia. The Company is
continuing to operate the Business over a transition period which will
extend into the second quarter of 2006, during which time it is
expected that the majority of the Company's international
correspondent bank customers will have transferred to Wachovia. The
Company expects its exit from international correspondent banking to
be complete in the second quarter of 2006.
As customers have transferred to Wachovia, the Company's
international correspondent banking revenue has declined.
International correspondent banking expenses have also declined,
though at a slower rate than revenue. 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
3) and the average net assets or liabilities of the discontinued
operations are reflected in the analysis of net interest margin (see
Exhibits 5 and 6).
In the first quarter of 2006, the Company recorded a net loss from
discontinued operations of $8.5 million, or $0.06 per fully diluted
common share. In the fourth quarter of 2005, the Company recorded an
after-tax gain on the transaction of approximately $147.4 million, or
$1.00 per fully diluted share, and a net loss from discontinued
operations of $1.1 million, or $0.01 per fully diluted common share.
Second Quarter and Full Year 2006 Earnings Per Share Forecast
The Company currently estimates that second quarter 2006 fully
diluted earnings per share from continuing operations will be in the
range of $1.26 to $1.31, including estimated stock option expense of
$0.02 per share and a total provision for credit losses of
approximately zero. In addition, the Company expects to record a net
loss from discontinued operations of approximately $0.05 per diluted
common share. Therefore, net income per diluted common share is
expected to be in the range of $1.21 to $1.26.
For full year 2006, the Company currently estimates that fully
diluted earnings per share from continuing operations will be in the
range of $5.30 to $5.50, including estimated stock option expense of
$0.10 per share and an estimated total provision for credit losses of
$10 million. In addition, the Company expects to record a net loss
from discontinued operations of approximately $0.11 per diluted common
share. Therefore, net income per diluted common share is expected to
be in the range of $5.19 to $5.39.
Non-GAAP Financial Measures
This press release contains certain references to financial
measures that exclude a loss on the sale of securities related to the
rebalancing of the Company's securities portfolio or stock option
expense and higher restricted stock 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, the
Company's strategic initiatives, the Company's competitive
positioning, the Company's ability to defend and continue to grow its
deposit base, and the transition and financial impact of the sale of
the international correspondent banking business.
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;
adverse effects of current and future banking laws, rules and
regulations and their enforcement, or governmental fiscal or monetary
policies; 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; the
Company's ability to transition international correspondent bank
customers; 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
results at 8:30 AM Pacific Time (11:30 AM Eastern Time) on April 21,
2006. Interested parties calling from locations within the United
States should call 800-700-7133 (612-332-0802 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. Simply follow the links to the Investor Relations
section of the website. 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
21, through 11:59 PM Pacific Time, April 28 (2:59 AM Eastern Time,
April 29). The reservation number for this playback is 822803.
Based in San Francisco, UnionBanCal Corporation is a bank holding
company with assets of $48.8 billion at March 31, 2006. Its primary
subsidiary, Union Bank of California, N.A., had 321 banking offices in
California, Oregon and Washington, and 18 international facilities, at
March 31, 2006.
UnionBanCal Corporation and Subsidiaries
Financial Highlights (Unaudited) (1)
Exhibit 1
Percent Change
to
As of and for the Three Months Ended March 31, 2006
from
------------------------------------- -----------------
March 31, Dec. 31, March 31, March 31, Dec. 31,
(Dollars in
thousands,
except per
share data) 2005 2005 2006 2005 2005
- -------------------------- ------------ ----------- -------- --------
Results of
operations:
Net interest
income (2) $436,717 $481,828 $466,341 6.78% (3.21%)
Noninterest
income 205,625 183,420 217,910 5.97% 18.80%
------------ ------------ ------------
Total revenue 642,342 665,248 684,251 6.52% 2.86%
Noninterest
expense 392,952 429,198 414,544 5.49% (3.41%)
Reversal of
allowance
for loan
losses (12,119) (10,000) (7,000) (42.24%) (30.00%)
------------ ------------ ------------
Income from
continuing
operations
before
income
taxes (2) 261,509 246,050 276,707 5.81% 12.46%
Taxable-
equivalent
adjustment 1,055 1,228 1,248 18.29% 1.63%
Income tax
expense 80,703 82,657 94,004 16.48% 13.73%
------------ ------------ ------------
Income from
continuing
operations $179,751 $162,165 $181,455 0.95% 11.90%
(Loss)/Income
from
discontinued
operations 2,226 146,324 (8,510) nm nm
------------ ------------ ------------
Net income $181,977 $308,489 $172,945 (4.96%) (43.94%)
============ ============ ============
Per common share:
Basic earnings:
From continuing
operations $1.22 $1.12 $1.26 3.28% 12.50%
Net income 1.24 2.14 1.20 (3.23%) (43.93%)
Diluted earnings:
From continuing
operations 1.20 1.10 1.24 3.33% 12.73%
Net income 1.21 2.09 1.18 (2.48%) (43.54%)
Dividends (3) 0.36 0.41 0.41 13.89% 0.00%
Book value
(end of period) 28.41 31.62 31.94 12.43% 1.01%
Common shares
outstanding
(end of
period) 144,575,615 144,207,072 143,402,332 (0.81%) (0.56%)
Weighted
average
common
shares
outstanding
- basic 146,997,649 144,466,374 143,878,106 (2.12%) (0.41%)
Weighted
average
common
shares
outstanding
- diluted 149,915,503 147,385,734 146,026,188 (2.59%) (0.92%)
Balance sheet
(end of
period):
Total assets
(4) $49,432,871 $49,416,002 $48,800,945 (1.28%) (1.24%)
Total loans 29,778,461 33,095,595 33,528,868 12.59% 1.31%
Nonperforming
assets 101,226 61,645 42,392 (58.12%) (31.23%)
Total
deposits 40,414,979 40,082,239 39,155,904 (3.12%) (2.31%)
Stockholders'
equity 4,107,223 4,559,700 4,579,878 11.51% 0.44%
Balance sheet
(period
average):
Total assets $46,313,053 $48,406,487 $48,016,643 3.68% (0.81%)
Total loans 29,714,206 33,260,944 34,052,067 14.60% 2.38%
Earning
assets 41,667,831 43,451,686 43,084,349 3.40% (0.85%)
Total
deposits 38,199,718 40,253,861 38,856,033 1.72% (3.47%)
Stockholders'
equity 4,208,650 4,488,396 4,538,679 7.84% 1.12%
Financial
ratios (5):
Return on
average
assets (6):
From
continuing
operations 1.57% 1.33% 1.53%
Net income 1.59% 2.53% 1.46%
Return on
average
stockholders'
equity (6):
From continuing
operations 17.32% 14.33% 16.21%
Net income 17.54% 27.27% 15.45%
Efficiency
ratio (7) 60.64% 63.77% 62.10%
Net interest
margin (2) 4.22% 4.42% 4.36%
Dividend
payout ratio 29.51% 36.61% 32.54%
Tangible
equity ratio 7.36% 8.31% 8.46%
Tier 1 risk-
based capital
ratio (4)(8) 9.06% 9.17% 9.01%
Total risk-
based capital
ratio (4)(8) 11.41% 11.10% 10.84%
Leverage
ratio (4)(8) 7.79% 8.39% 8.80%
Allowances for
credit losses
to total
loans (9) 1.63% 1.32% 1.26%
Allowances
for credit
losses to
nonaccrual
loans (9) 506.96% 743.58% 1003.48%
Net loans
charged off
(recovered)
to average
total
loans (6) (0.19%) 0.03% 0.06%
Nonperforming
assets to
total loans,
foreclosed
assets, and
distressed
loans held
for sale 0.34% 0.19% 0.13%
Nonperforming
assets to
total assets (4) 0.20% 0.12% 0.09%
Refer to Exhibit 8 for footnote explanations.
UnionBanCal Corporation and Subsidiaries
Condensed Consolidated Statements of Income (Unaudited) (1)
(Taxable-Equivalent Basis)
Exhibit 2
For the Three Months Ended
-----------------------------
March 31, Dec. 31, March 31,
(Dollars in thousands, except per share
data) 2005 2005 2006
- ---------------------------------------- --------- --------- ---------
Interest Income (2)
Loans $405,124 $497,046 $512,988
Securities 101,264 95,436 97,351
Interest bearing deposits in banks 733 1,244 736
Federal funds sold and securities
purchased under resale agreements 2,373 6,129 3,845
Trading account assets 908 1,422 1,530
--------- --------- ---------
Total interest income 510,402 601,277 616,450
--------- --------- ---------
Interest Expense
Deposits 55,828 97,303 115,309
Federal funds purchased and securities
sold under repurchase agreements 4,998 1,042 8,802
Commercial paper 4,560 9,911 12,448
Medium and long-term debt 6,532 9,695 10,397
Trust notes 238 238 238
Other borrowed funds 1,529 1,260 2,915
--------- --------- ---------
Total interest expense 73,685 119,449 150,109
--------- --------- ---------
Net Interest Income (2) 436,717 481,828 466,341
Reversal of allowance for loan losses (12,119) (10,000) (7,000)
--------- --------- ---------
Net interest income after reversal
of allowance for loan losses 448,836 491,828 473,341
--------- --------- ---------
Noninterest Income
Service charges on deposit accounts 79,267 80,030 81,635
Trust and investment management fees 41,963 46,465 50,115
Insurance commissions 22,017 19,739 19,518
Merchant banking fees 6,266 8,261 8,229
Foreign exchange gains, net 8,170 8,332 7,818
Brokerage commissions and fees 8,972 7,171 7,795
Card processing fees, net 5,607 6,437 6,697
Securities gains (losses), net 344 (36,750) (214)
Other 33,019 43,735 36,317
--------- --------- ---------
Total noninterest income 205,625 183,420 217,910
--------- --------- ---------
Noninterest Expense
Salaries and employee benefits 231,758 232,496 252,495
Net occupancy 32,362 41,048 32,837
Outside services 21,247 40,942 28,609
Equipment 17,403 18,042 17,922
Software 13,975 15,427 16,344
Professional services 11,741 9,369 14,547
Communications 10,380 10,959 10,552
Foreclosed asset expense (income) 406 (29) (7,367)
(Reversal of) provision for losses on
off-balance sheet commitments 3,000 5,000 (3,000)
Other 50,680 55,944 51,605
--------- --------- ---------
Total noninterest expense 392,952 429,198 414,544
--------- --------- ---------
Income from continuing operations
before income taxes (2) 261,509 246,050 276,707
Taxable-equivalent adjustment 1,055 1,228 1,248
Income tax expense 80,703 82,657 94,004
--------- --------- ---------
Income from Continuing Operations 179,751 162,165 181,455
--------- --------- ---------
Income (loss) from discontinued
operations before income taxes 3,639 227,967 (13,603)
Income tax expense (benefit) 1,413 81,643 (5,093)
--------- --------- ---------
Income (loss) from Discontinued
Operations 2,226 146,324 (8,510)
--------- --------- ---------
Net Income $181,977 $308,489 $172,945
========= ========= =========
Income from continuing operations per
common share - basic $1.22 $1.12 $1.26
Net Income per common share - basic $1.24 $2.14 $1.20
========= ========= =========
Income from continuing operations per
common share - diluted $1.20 $1.10 $1.24
Net income per common share - diluted $1.21 $2.09 $1.18
========= ========= =========
Weighted average common shares
outstanding - basic 146,998 144,466 143,878
========= ========= =========
Weighted average common shares
outstanding - diluted 149,916 147,386 146,026
========= ========= =========
Refer to Exhibit 8 for footnote explanations.
UnionBanCal Corporation and Subsidiaries
Consolidated Balance Sheets (1)
Exhibit 3
(Unaudited) (Unaudited)
March 31, December 31, March 31,
(Dollars in thousands) 2005 2005 2006
- ------------------------------- ------------ ------------ ------------
Assets
Cash and due from banks $1,870,367 $2,402,212 $2,035,544
Interest bearing deposits in
banks 73,667 771,164 170,187
Federal funds sold and
securities purchased under
resale agreements 1,695,835 796,500 513,777
------------ ------------ ------------
Total cash and cash
equivalents 3,639,869 3,969,876 2,719,508
Trading account assets 234,791 312,655 329,703
Securities available for sale:
Securities pledged as
collateral 251,657 96,994 88,152
Held in portfolio 10,975,242 8,072,286 8,394,318
Loans (net of allowance for
loan losses: March 31, 2005,
$401,275; December 31, 2005,
$351,532; March 31, 2006,
$339,443) 29,377,186 32,744,063 33,189,425
Due from customers on
acceptances 21,158 19,252 20,541
Premises and equipment, net 520,286 536,074 511,095
Intangible assets 56,751 42,616 39,186
Goodwill 450,125 454,015 453,489
Other assets 1,929,837 2,113,577 2,814,603
Assets of discontinued
operations to be disposed or
sold 1,975,969 1,054,594 240,925
------------ ------------ ------------
Total assets $49,432,871 $49,416,002 $48,800,945
============ ============ ============
Liabilities
Noninterest bearing $20,421,830 $19,489,377 $18,118,506
Interest bearing 19,993,149 20,592,862 21,037,398
------------ ------------ ------------
Total deposits 40,414,979 40,082,239 39,155,904
Federal funds purchased and
securities sold under
repurchase agreements 400,570 651,529 292,758
Commercial paper 1,042,795 680,027 1,420,276
Other borrowed funds 126,662 134,485 66,472
Acceptances outstanding 21,158 19,252 20,541
Other liabilities 1,128,383 1,466,478 2,259,464
Medium and long-term debt 803,233 801,095 788,763
Junior subordinated debt
payable to subsidiary grantor
trust 15,677 15,338 15,225
Liabilities of discontinued
operations to be extinguished
or assumed 1,372,191 1,005,859 201,664
------------ ------------ ------------
Total liabilities 45,325,648 44,856,302 44,221,067
------------ ------------ ------------
Commitments and contingencies
Stockholders' Equity
Preferred stock:
Authorized 5,000,000 shares,
no shares issued or
outstanding as of
March 31, 2005, December
31, 2005, and March 31,
2006 - - -
Common stock, par value $1 per
share at March 31, 2005,
December 31, 2005 and March
31, 2006: Authorized
300,000,000 shares, issued
152,530,458 shares as of
March 31, 2005, 154,469,215
shares as of December 31, 2005,
and 154,832,175 shares as of
March 31, 2006 152,530 154,469 154,832
Additional paid-in capital 896,855 994,956 1,018,943
Treasury stock - 7,954,843
shares as of March 31, 2005,
10,262,143 shares
as of December 31, 2005 and
11,429,843 shares as of
March 31, 2006 (463,527) (612,732) (692,783)
Retained earnings 3,656,187 4,141,400 4,258,533
Accumulated other comprehensive
loss (134,822) (118,393) (159,647)
------------ ------------ ------------
Total stockholders'
equity 4,107,223 4,559,700 4,579,878
------------ ------------ ------------
Total liabilities and
stockholders' equity $49,432,871 $49,416,002 $48,800,945
============ ============ ============
Refer to Exhibit 8 for footnote explanations.
UnionBanCal Corporation and Subsidiaries
Loans (Unaudited) (1)
Exhibit 4
Percent Change to
Three Months Ended March 31, 2006
from
-------------------------- -------------------
March December March March December
31, 31, 31, 31, 31,
(Dollars in
millions) 2005 2005 2006 2005 2005
- ----------------------- -------- -------- -------- --------- ---------
Loans (period average)
Commercial, financial
and industrial $10,333 $11,981 $12,370 19.71% 3.25%
Construction 1,114 1,414 1,523 36.71% 7.71%
Mortgage -
Commercial 5,420 5,653 5,652 4.28% (0.02%)
Mortgage -
Residential 9,829 11,143 11,444 16.43% 2.70%
Consumer 2,372 2,490 2,489 4.93% (0.04%)
Lease financing 603 576 569 (5.64%) (1.22%)
-------- -------- --------
Total loans held to
maturity $29,671 $33,257 $34,047 14.75% 2.38%
Total loans
held for sale 43 4 5 (88.37%) 25.00%
-------- -------- --------
Total loans $29,714 $33,261 $34,052 14.60% 2.38%
======== ======== ========
Nonperforming assets
(period end)
Nonaccrual loans:
Commercial, financial
and industrial $30 $50 $19 (36.67%) (62.00%)
Construction 1 - - (100.00%) nm
Mortgage - Commercial 10 9 8 (20.00%) (11.11%)
Lease 55 - 15 (72.73%) nm
-------- -------- --------
Total nonaccrual
loans 96 59 42 (56.25%) (28.81%)
Foreclosed assets 5 3 - (100.00%) (100.00%)
-------- -------- --------
Total nonperforming
assets $101 $62 $42 (58.42%) (32.26%)
======== ======== ========
Loans 90 days or more
past due and still
accruing $4 $5 $5 25.00% 0.00%
======== ======== ========
Analysis of Allowances
for Credit Losses
Beginning balance $399 $364 $352
Reversal of allowance
for loan losses (12) (10) (7)
Loans charged off:
Commercial, financial
and industrial (4) (4) (11)
Real estate (1) (1) -
Consumer (1) (1) (1)
-------- -------- --------
Total loans
charged off (6) (6) (12)
-------- -------- --------
Loans recovered:
Commercial, financial
and industrial 20 3 2
Consumer 1 1 1
Lease financing - - 4
-------- -------- --------
Total loans
recovered 21 4 7
-------- -------- --------
Net loans (charged-
off) recovered 15 (2) (5)
-------- -------- --------
Ending balance of
allowance for loan
losses $402 $352 $340
Allowance for off-
balance sheet
commitment losses 85 86 83
-------- -------- --------
Allowances for
credit losses $487 $438 $423
======== ======== ========
Refer to Exhibit 8 for footnote explanations.
UnionBanCal Corporation and Subsidiaries
Net Interest Income (Unaudited) (1)
Exhibit 5
For the Three Months Ended
March 31, 2005
--------------------------------
Interest Average
Average Income/ Yield/
(Dollars in thousands) Balance Expense Rate (6)
(10) (10)
- ------------------------------------- ------------ --------- ---------
Assets
Loans (11) $29,714,206 $405,124 5.51 %
Securities - taxable 11,117,365 99,939 3.60
Securities - tax-exempt 67,144 1,325 7.89
Interest bearing deposits in banks 160,782 733 1.85
Federal funds sold and securities
purchased under resale agreements 377,291 2,373 2.55
Trading account assets 231,043 908 1.59
------------ ---------
Total earning assets 41,667,831 510,402 4.94
---------
Allowance for loan losses (403,435)
Cash and due from banks 2,182,658
Premises and equipment, net 524,339
Other assets 2,341,660
------------
Total assets $46,313,053
============
Liabilities
Deposits:
Interest bearing $12,232,585 25,416 0.84
Savings and consumer time 4,778,029 13,045 1.11
Large time 3,021,684 17,367 2.33
------------ ---------
Total interest bearing deposits 20,032,298 55,828 1.13
------------ ---------
Federal funds purchased and
securities
sold under repurchase agreements 1,279,862 7,455 2.36
Net funding allocated from (to)
discontinued operations (12) (422,117) (2,457) 2.36
Commercial paper 865,460 4,560 2.14
Other borrowed funds 180,519 1,529 3.44
Medium and long-term debt 808,846 6,532 3.27
Trust notes 15,733 238 6.06
------------ ---------
Total borrowed funds 2,728,303 17,857 2.65
------------ ---------
Total interest bearing liabilities 22,760,601 73,685 1.31
---------
Noninterest bearing deposits 18,167,420
Other liabilities 1,176,382
------------
Total liabilities 42,104,403
Stockholders' Equity
Common equity 4,208,650
------------
Total stockholders' equity 4,208,650
------------
Total liabilities and stockholders'
equity $46,313,053
============
Reported Net Interest Income/Margin
Net interest income/margin
(taxable-equivalent basis) 436,717 4.22 %
Less: taxable-equivalent adjustment 1,055
---------
Net interest income $435,662
=========
For the Three Months Ended
March 31, 2006
-------------------------------
Interest Average
Average Income/ Yield/
(Dollars in thousands) Balance Expense Rate (6)
(10) (10)
- --------------------------------------------------- --------- --------
Assets
Loans (11) $34,052,067 $512,988 6.09 %
Securities - taxable 8,233,854 96,053 4.67
Securities - tax-exempt 65,204 1,298 7.96
Interest bearing deposits in banks 59,847 736 4.99
Federal funds sold and securities
purchased under resale agreements 345,342 3,845 4.52
Trading account assets 328,035 1,530 1.89
------------ ---------
Total earning assets 43,084,349 616,450 5.77
---------
Allowance for loan losses (348,626)
Cash and due from banks 2,119,926
Premises and equipment, net 527,001
Other assets 2,633,993
------------
Total assets $48,016,643
============
Liabilities
Deposits:
Interest bearing $13,261,888 62,358 1.91
Savings and consumer time 4,467,627 18,487 1.68
Large time 3,608,597 34,464 3.87
------------ ---------
Total interest bearing deposits 21,338,112 115,309 2.19
------------ ---------
Federal funds purchased and securities
sold under repurchase agreements 874,055 9,410 4.37
Net funding allocated from (to)
discontinued operations (12) (57,088) (608) 4.32
Commercial paper 1,242,465 12,448 4.06
Other borrowed funds 268,262 2,915 4.41
Medium and long-term debt 800,014 10,397 5.27
Trust notes 15,280 238 6.24
------------ ---------
Total borrowed funds 3,142,988 34,800 4.49
------------ ---------
Total interest bearing liabilities 24,481,100 150,109 2.49
---------
Noninterest bearing deposits 17,517,921
Other liabilities 1,478,943
------------
Total liabilities 43,477,964
Stockholders' Equity
Common equity 4,538,679
------------
Total stockholders' equity 4,538,679
------------
Total liabilities and stockholders'
equity $48,016,643
============
Reported Net Interest Income/Margin
Net interest income/margin
(taxable-equivalent basis) 466,341 4.36 %
Less: taxable-equivalent adjustment 1,248
---------
Net interest income $465,093
=========
- ----------------------------------------------------------------------
Average Assets and Liabilities of Discontinued
Operations for Period Ended:
March 31, 2005 March 31, 2006
-------------------------------------
Assets $1,964,673 $618,653
Liabilities $1,542,556 $561,565
Net Asset (Liabilities) $422,117 $57,088
- ----------------------------------------------------------------------
Refer to Exhibit 8 for footnote explanations.
UnionBanCal Corporation and Subsidiaries
Net Interest Income (Unaudited) (1)
Exhibit 6
For the Three Months Ended
December 31, 2005
--------------------------------------
Interest Average
Average Income/ Yield/
(Dollars in thousands) Balance Expense (10) Rate (6)
(10)
- ------------------------------- ------------ -------------- ----------
Assets
Loans: (11) $33,260,944 $497,046 5.94 %
Securities - taxable 9,027,589 94,135 4.17
Securities - tax-exempt 65,582 1,301 7.93
Interest bearing deposits in
banks 157,604 1,244 3.13
Federal funds sold and
securities
purchased under resale
agreements 595,208 6,129 4.09
Trading account assets 344,759 1,422 1.64
------------ --------------
Total earning assets 43,451,686 601,277 5.51
--------------
Allowance for loan losses (362,676)
Cash and due from banks 2,268,566
Premises and equipment, net 520,586
Other assets 2,528,325
------------
Total assets $48,406,487
============
Liabilities
Deposits:
Interest bearing $13,523,357 57,469 1.69
Savings and consumer time 4,550,219 17,407 1.52
Large time 2,916,187 22,427 3.05
------------ --------------
Total interest bearing
deposits 20,989,763 97,303 1.84
------------ --------------
Federal funds purchased and
securities
sold under repurchase
agreements 533,068 5,025 3.74
Net funding allocated from (to)
discontinued operations (12) (422,508) (3,983) 3.74
Commercial paper 1,108,434 9,911 3.55
Other borrowed funds 121,401 1,260 4.12
Medium and long-term debt 804,346 9,695 4.78
Trust notes 15,393 238 6.19
------------ --------------
Total borrowed funds 2,160,134 22,146 4.07
------------ --------------
Total interest bearing
liabilities 23,149,897 119,449 2.05
--------------
Noninterest bearing deposits 19,264,098
Other liabilities 1,504,096
------------
Total liabilities 43,918,091
Stockholders' Equity
Common equity 4,488,396
------------
Total stockholders' equity 4,488,396
------------
Total liabilities and
stockholders'
equity $48,406,487
============
Reported Net Interest
Income/Margin
Net interest income/margin
(taxable-equivalent basis) 481,828 4.42 %
Less: taxable-equivalent
adjustment 1,228
--------------
Net interest income $480,600
==============
For the Three Months Ended
March 31, 2006
--------------------------------------
Interest Average
Average Income/ Yield/
(Dollars in thousands) Balance Expense (10) Rate (6)
(10)
- -------------------------------------------- -------------- ----------
Assets
Loans: (11) $34,052,067 $512,988 6.09 %
Securities - taxable 8,233,854 96,053 4.67
Securities - tax-exempt 65,204 1,298 7.96
Interest bearing deposits in
banks 59,847 736 4.99
Federal funds sold and
securities
purchased under resale
agreements 345,342 3,845 4.52
Trading account assets 328,035 1,530 1.89
------------ --------------
Total earning assets 43,084,349 616,450 5.77
--------------
Allowance for loan losses (348,626)
Cash and due from banks 2,119,926
Premises and equipment, net 527,001
Other assets 2,633,993
------------
Total assets $48,016,643
============
Liabilities
Deposits:
Interest bearing $13,261,888 62,358 1.91
Savings and consumer time 4,467,627 18,487 1.68
Large time 3,608,597 34,464 3.87
------------ --------------
Total interest bearing
deposits 21,338,112 115,309 2.19
------------ --------------
Federal funds purchased and
securities sold under
repurchase agreements 874,055 9,410 4.37
Net funding allocated from (to)
discontinued operations (12) (57,088) (608) 4.32
Commercial paper 1,242,465 12,448 4.06
Other borrowed funds 268,262 2,915 4.41
Medium and long-term debt 800,014 10,397 5.27
Trust notes 15,280 238 6.24
------------ --------------
Total borrowed funds 3,142,988 34,800 4.49
------------ --------------
Total interest bearing
liabilities 24,481,100 150,109 2.49
--------------
Noninterest bearing deposits 17,517,921
Other liabilities 1,478,943
------------
Total liabilities 43,477,964
Stockholders' Equity
Common equity 4,538,679
------------
Total stockholders' equity 4,538,679
------------
Total liabilities and
stockholders'
equity $48,016,643
============
Reported Net Interest
Income/Margin
Net interest income/margin
(taxable-equivalent basis) 466,341 4.36 %
Less: taxable-equivalent
adjustment 1,248
--------------
Net interest income $465,093
==============
- ----------------------------------------------------------------------
Average Assets and Liabilities of Discontinued
Operations for Period Ended:
December 31, 2005 March 31, 2006
-----------------------------------
Assets $1,668,335 $618,653
Liabilities $1,245,827 $561,565
Net Asset (Liabilities) $422,508 $57,088
- ----------------------------------------------------------------------
Refer to Exhibit 8 for footnote explanations.
UnionBanCal Corporation and Subsidiaries
Noninterest income (Unaudited) (1)
Exhibit 7
Percentage Change
to
For the Three Months Ended March 31, 2006
From
----------------------------- ------------------
March Dec. March March Dec.
31, 31, 31, 31, 31,
(Dollars in
thousands) 2005 2005 2006 2005 2005
-------------------- --------- --------- --------- ------------------
Service charges on
deposit accounts $79,267 $80,030 $81,635 2.99 2.01
Trust and investment
management fees 41,963 46,465 50,115 19.43 7.86
Insurance
commissions 22,017 19,739 19,518 (11.35) (1.12)
Merchant banking
fees 6,266 8,261 8,229 31.33 (0.39)
Foreign exchange
gains, net 8,170 8,332 7,818 (4.31) (6.17)
Brokerage commissions
and fees 8,972 7,171 7,795 (13.12) 8.70
Card processing
fees, net 5,607 6,437 6,697 19.44 4.04
Securities gains
(losses), net 344 (36,750) (214) nm (99.42)
Gain on private
capital investments,
net 7,935 8,299 2,827 (64.37) (65.94)
Other 25,084 35,436 33,490 33.51 (5.49)
--------- --------- ---------
Total noninterest
income $205,625 $183,420 $217,910 5.97 18.80
========= ========= =========
Noninterest expense (Unaudited) (1)
Percentage Change
to
March 31, 2006
For the Three Months Ended From
----------------------------- -----------------
March 31, Dec. 31, March 31, March 31, Dec. 31,
(Dollars in
thousands) 2005 2005 2006 2005 2005
--------------------- --------- --------- --------- -----------------
Salaries and other
compensation $178,957 $191,797 $194,259 8.55 1.28
Employee benefits 52,801 40,699 58,236 10.29 43.09
--------- --------- ---------
Salaries and
employee benefits 231,758 232,496 252,495 8.95 8.60
Net occupancy 32,362 41,048 32,837 1.47 (20.00)
Outside services 21,247 40,942 28,609 34.65 (30.12)
Equipment 17,403 18,042 17,922 2.98 (0.67)
Software 13,975 15,427 16,344 16.95 5.94
Professional services 11,741 9,369 14,547 23.90 55.27
Communications 10,380 10,959 10,552 1.66 (3.71)
Advertising and
public relations 7,640 11,145 10,231 33.91 (8.20)
Data processing 8,870 7,985 7,398 (16.60) (7.35)
Intangible asset
amortization 4,985 4,965 3,430 (31.19) (30.92)
Foreclosed asset
expense (income) 406 (29) (7,367) nm nm
(Reversal of)
provision for losses
on off-balance sheet
commitments 3,000 5,000 (3,000) nm nm
Other 29,185 31,849 30,546 4.66 (4.09)
--------- --------- ---------
Total noninterest
expense $392,952 $429,198 $414,544 5.49 (3.41)
========= ========= =========
Refer to Exhibit 8 for footnote explanations.
UnionBanCal Corporation and Subsidiaries
Footnotes
Exhibit 8
(1) In September 2005, Union Bank of California, N.A. committed to a
plan for disposal of its international correspondent banking business.
All periods presented have been restated to reflect discontinued
operations.
(2) Taxable-equivalent basis.
(3) Dividends per share reflect dividends declared on UnionBanCal
Corporation's common stock outstanding as of the declaration date.
(4) End of period total assets and assets used in calculating these
ratios include those of discontinued operations.
(5) Average balances used to calculate our financial ratios are based
on continuing operations data only, unless otherwise indicated.
(6) Annualized.
(7) The efficiency ratio is noninterest expense, excluding foreclosed
asset expense (income) and the (reversal of) provision for losses on
off-balance sheet commitments, as a percentage of net interest income
(taxable-equivalent basis) and noninterest income and is a percentage
of net interest income (taxable-equivalent basis) and noninterest
income and is calculated for continuing operations only.calculated for
continuing operations only.
(8) Estimated as of March 31, 2006. The regulatory capital and
leverage ratios were not restated and therefore include discontinued
operations.
(9) The allowance for credit losses ratios include the allowances
for loan losses and losses on off-balance sheet commitments. These
ratios relate to continuing operations only.
(10) Yields and interest income are presented on a taxable-equivalent
basis using the federal statutory tax rate of 35 percent.
(11) Average balances on loans outstanding include all nonperforming
loans. The amortized portion of net loan origination fees (costs) is
included in interest income on loans, representing an adjustment to
the yield.
(12) Net funding allocated from (to) discontinued operations
represents the shortage (excess) of assets over liabilities of
discontinued operations. The expense (earning) on funds allocated from
(to) discontinued operations is calculated by taking the net average
balance of discontinued operations for each quarter and applying an
earnings rate or a cost of funds equivalent to the corresponding
period's fed funds purchased rate.
nm = not meaningful
CONTACT: UnionBanCal Corporation
John A. Rice, Jr., 415-765-2998 (Investor Relations)
Michelle R. Crandall, 415-765-2780 (Investor Relations)
Stephen L. Johnson, 415-765-3252 (Public Relations)