UnionBanCal Corporation Announces Fourth Quarter Results

UnionBanCal Corporation (NYSE:UB): Fourth Quarter 2007 Highlights: Strong year-over-year organic loan growth across all major categories -- Average total loans up 9.1 percent -- Average core commercial loans up 10.5 percent Average noninterest bearing deposits comprised 30.6 percent of average total deposits Healthy growth in net interest income -- Up 3.1 percent versus third quarter Net interest margin of 3.51 percent, up 2 basis points over prior quarter Provision for loan losses of $56 million reflects significant increase in reserves against homebuilder portfolio Credit quality overall remains strong -- Nonperforming assets just 0.10 percent of total assets at quarter-end -- Net charge-offs only $3 million Noninterest expense includes a $0.05 per share charge for the Company’s proportionate share of Visa litigation costs Recognized a $61 million after-tax gain on the sale of retirement recordkeeping business 2007 Highlights: Revenue from continuing operations of $2.6 billion Income from continuing operations of $570 million Strong organic loan growth, with average total loans up 10.4 percent Strong year-end capital levels, with tangible common equity ratio at 7.73 percent UnionBanCal Corporation (NYSE:UB) today reported fourth quarter 2007 net income of $165.7 million, or $1.20 per diluted common share, compared with $226.4 million, or $1.61 per diluted common share, a year earlier. Net income for fourth quarter 2007 included income from discontinued operations of $57.0 million, or $0.42 per diluted common share, comprised primarily of a $60.6 million after-tax gain on the sale of the Company’s retirement recordkeeping business, partially offset by expenses associated with the discontinued operations. Net income in fourth quarter 2006 included a credit of $78.1 million, or $0.55 per diluted common share, for California franchise tax refunds and adjustments. These results are consistent with the Company’s financial update issued on January 11. Fourth quarter 2007 income from continuing operations was $108.7 million, or $0.78 per diluted common share, compared with $1.61 per diluted common share a year earlier. Compared to prior year, total revenue decreased slightly and total noninterest expense increased slightly, resulting in a 3 percent decrease in income before the provision for loan losses and income taxes. The provision for loan losses was $56 million, compared with $3 million a year earlier, primarily due to an increase in reserves attributable to the homebuilder segment of the loan portfolio. Income tax expense was $56 million, compared with a credit of $2 million a year earlier. As noted above, income tax expense in fourth quarter 2006 included a credit for state taxes. For the full year 2007, income from continuing operations was $570 million, or $4.10 per diluted common share, compared with income from continuing operations for the full year 2006 of $761 million, or $5.30 per diluted common share. Total revenue declined $74 million, or 2.8 percent, with net interest income decreasing 6.1 percent and noninterest income increasing 4.5 percent. Noninterest expense was up slightly compared with prior year. The provision for loan losses was $81 million for full year 2007, up $86 million compared with the negative $5 million provision for full year 2006. The effective tax rate for full year 2007 was 33.9 percent, compared with an effective tax rate of 26.2 percent for full year 2006. "2007 was a challenging year for UnionBanCal and for the entire banking industry,” said Masaaki Tanaka, President and Chief Executive Officer. "For UnionBanCal, continued deposit pricing pressures, a return to positive loan loss provisioning, and an absence of favorable income tax adjustments led to lower earnings. These factors more than offset solid loan growth and good expense control. At the same time, our conservative business model, and particularly our conservative credit culture, has enabled us to perform better than many in the industry. "While the operating environment remains challenging, we believe we are better positioned than many of our competitors as we begin a new year. We have strong competitive positions in our core lending and deposit businesses. In addition, we begin the new year with robust credit loss coverage ratios and a strong capital base. In 2008, we will strive to maintain asset quality that is well above industry averages and we remain committed to maintaining adequate loss reserves. With regard to capital, our year-end tangible common equity ratio was 7.73 percent, well above peer levels. Capital strength and the quality of our capital mix have long been hallmarks of UnionBanCal and are particularly important given the uncertainties and elevated risks in today’s operating environment. We trust that our business philosophy will help us outperform in 2008, which should lead to solid increases in shareholder value over time,” concluded Mr. Tanaka. "Asset quality overall continues to be strong,” said Vice Chairman and Chief Operating Officer Philip Flynn. "We reported just $3 million in fourth quarter net charge-offs and only a $4 million increase in nonaccrual loans compared to the end of the third quarter. Our asset quality coverage ratios improved, with the allowance for credit losses to total loans rising to 1.20 percent at year-end, compared with 1.10 percent at September 30, 2007, and the allowance for credit losses to nonaccrual loans at year-end increasing to 885 percent, from 853 percent at September 30, 2007. The one component of the portfolio experiencing significant stress currently is the homebuilder segment, which represents less than two percent of our total loans outstanding. As previously announced, we increased loss reserves significantly at the end of the fourth quarter in recognition of the continued deterioration in business conditions for the homebuilder industry. "While the remainder of the portfolio continues to perform well, we are monitoring the portfolio closely for any new signs of stress. We believe that our stringent underwriting standards in recent years will result in our continuing to outperform the industry with respect to credit quality,” concluded Mr. Flynn. Summary of Fourth Quarter Results From Continuing Operations Fourth Quarter Total Revenue For fourth quarter 2007, total revenue (taxable-equivalent net interest income plus noninterest income) was $657 million, down 0.5 percent compared with fourth quarter 2006. Net interest income decreased 1.4 percent, and noninterest income increased 1.5 percent. Compared with third quarter 2007, total revenue was up 0.7 percent, with net interest income up 3.1 percent and noninterest income down 3.8 percent. Fourth Quarter Net Interest Income (Taxable-equivalent) Net interest income was $441.0 million in fourth quarter 2007, down $6.3 million, or 1.4 percent, from the same quarter a year ago, primarily due to a deposit mix shift from noninterest bearing and low-cost deposits into higher-cost deposits, partially offset by strong loan growth and higher yields on earning assets. Average earning assets in fourth quarter 2007 increased $3.3 billion, or 7.0 percent, compared to fourth quarter 2006, primarily due to a $3.4 billion, or 9.1 percent, increase in average loans. Average commercial loans increased $0.5 billion, or 3.3 percent, with average core commercial loans, which exclude title and escrow loans, up 10.5 percent. Title and escrow loans, which are highly rate-advantaged and more volatile than other commercial loans, decreased $0.9 billion, or 60.4 percent. Average residential mortgage loans increased $1.4 billion, or 11.8 percent; average commercial mortgage loans increased $1.0 billion, or 16.7 percent; and average construction loans increased $0.3 billion, or 11.6 percent, year over year. Virtually all of the increase in average construction loans was in income-producing properties, a segment of the portfolio that continues to perform well. Compared to fourth quarter 2006, average interest bearing deposits increased $4.7 billion, or 18.6 percent, while average noninterest bearing deposits decreased $3.0 billion, or 18.8 percent. The decline in noninterest bearing deposits was due to a $1.4 billion, or 13.6 percent, decrease in average other commercial noninterest bearing deposits; a $1.2 billion, or 47.6 percent, decrease in average title and escrow deposits; and a $0.4 billion, or 14.1 percent, decrease in average consumer noninterest bearing deposits. Average other commercial and average consumer noninterest bearing deposits both declined primarily due to changes in customer behavior in response to higher short-term interest rates, and average title and escrow deposits decreased due to reduced residential real estate activity. Average noninterest bearing deposits represented 30.6 percent of average total deposits in fourth quarter 2007. The annualized average all-in cost of funds was 2.73 percent, reflecting the Company’s strong average core deposit-to-loan ratio of 78.5 percent and the relatively high proportion of noninterest bearing deposits to total deposits. The average yield on earning assets of $50.2 billion was 6.16 percent, up 10 basis points over fourth quarter 2006, with the average loan yield increasing 7 basis points. The average rate on interest bearing liabilities of $35.6 billion was 3.74 percent, up 14 basis points compared with fourth quarter 2006, reflecting an unfavorable shift in deposit mix due to heightened competition for deposits. The net interest margin in fourth quarter 2007 was 3.51 percent, compared with 3.80 percent in fourth quarter 2006. Fourth quarter 2007 net interest income increased 3.1 percent from third quarter 2007. Average loans increased $1.4 billion, or 3.6 percent. Average commercial loans increased $376 million, or 2.6 percent, which was comprised of an increase in core commercial loans of $762 million, or 5.7 percent, offset by a decrease in title and escrow loans of $386 million, or 40.4 percent. Average residential mortgage loans increased $466 million, or 3.5 percent; average commercial mortgage loans increased $399 million, or 6.3 percent; and average construction loans increased $65 million, or 2.7 percent. Average interest bearing deposits increased $1.6 billion, or 5.6 percent, while average noninterest bearing deposits decreased $0.7 billion, or 5.0 percent. The average yield on earning assets decreased 3 basis points and the average rate on interest bearing liabilities decreased 19 basis points. The net interest margin increased 2 basis points to 3.51 percent. Fourth Quarter Noninterest Income In fourth quarter 2007, noninterest income was $215.5 million, up $3.2 million, or 1.5 percent, from the same quarter a year ago. Service charges on deposit accounts decreased $1.1 million, or 1.4 percent, primarily due to lower account analysis fees. Trust and investment management fees increased $4.4 million, or 11.9 percent, primarily due to an increase in trust assets. Gain on private capital investments, net, was $2.4 million, a decrease of $6.5 million compared with the same quarter a year earlier. Other noninterest income increased $4.9 million, or 19.5 percent, primarily due to a gain on the sale of MasterCard common stock and a net gain on the sale of syndicated loans. Fourth quarter 2007 noninterest income decreased $8.5 million, or 3.8 percent, compared with third quarter 2007, primarily due to a $9.8 million decline in gains on private capital investments, net. Merchant banking fees increased $6.2 million, or 61.6 percent, primarily due to higher secondary market and syndication fees in fourth quarter 2007. Trading account revenue decreased $6.7 million, or 30.6 percent, primarily due to downward valuation adjustments for interest rate derivatives, fewer interest rate swap transactions during fourth quarter 2007, and losses on distressed debt. Fourth Quarter Noninterest Expense Noninterest expense for fourth quarter 2007 was $433.7 million, an increase of $3.2 million, or 0.8 percent, compared with fourth quarter 2006. Salaries and employee benefits expense decreased $7.7 million, or 3.1 percent, primarily due to lower pension expense, partially offset by severance expense related to business process improvement projects. Outside services expense decreased $3.2 million, or 13.3 percent, primarily due to lower cost of services related to title and escrow balances. The provision for losses on off-balance sheet commitments was $4 million in fourth quarter 2007 compared to $2 million in fourth quarter 2006. Other noninterest expense increased $10.3 million, or 28.2 percent, primarily due to litigation expense of approximately $13 million, or $0.06 per diluted common share, primarily to establish legal reserves relative to the Company’s proportionate share of Visa litigation charges. These reserves pertain to both Visa’s legal settlement with American Express, as well as other pending Visa litigation, including litigation with Discover Card. Like all Visa member banks, Union Bank of California, the Company’s primary subsidiary, is obligated to share in certain liabilities associated with Visa’s litigation. Noninterest expense increased $35.7 million, or 9.0 percent, compared with third quarter 2007. Salaries and employee benefits expense increased $6.5 million, or 2.8 percent, primarily due to higher accruals for severance costs related to business process improvement projects and higher workers compensation expense. Professional services expense increased $4.2 million, or 23.3 percent, primarily due to information technology initiatives. Advertising and public relations expense increased $2.1 million, or 20.7 percent, primarily due to timing of marketing promotions. The provision for losses on off-balance sheet commitments was $4 million, unchanged from the third quarter. Other noninterest expense increased $19.9 million, or 73.9 percent, primarily due to litigation charges. Income Tax Expense Income tax expense on continuing operations for the fourth quarter was $55.7 million. The effective tax rate for the fourth quarter 2007 was 33.9 percent, compared with an effective tax rate of (1.0) percent for the fourth quarter 2006. Fourth quarter 2006 income tax expense included a credit of $78.1 million for California franchise tax refunds and adjustments. The effective tax rate for fourth quarter 2006, excluding the credit for state taxes, was 33.8 percent. The effective tax rate for full year 2007 was 33.9 percent, compared to 26.2 percent for full year 2006. The effective tax rate for full year 2006, excluding the credit for state taxes described above, was 33.8 percent. Full Year Results From Continuing Operations Total revenue for 2007 was $2.60 billion, a decrease of $74 million, or 2.8 percent, compared with total revenue of $2.67 billion in 2006. Net interest income decreased $112 million, or 6.1 percent, and noninterest income increased $37 million, or 4.5 percent. Net interest income was $1.7 billion in 2007, a 6.1 percent decrease from prior year, primarily due to a deposit mix shift from noninterest bearing and low-cost deposits into higher-cost deposits, partially offset by strong loan growth and higher yields on earning assets. Average loans increased $3.7 billion, or 10.4 percent, while average total deposits increased $2.2 billion, or 5.5 percent. Average interest bearing deposits increased $5.0 billion, or 21.7 percent, while average noninterest bearing deposits decreased $2.8 billion, or 16.5 percent. The net interest margin was 3.53 percent, down 55 basis points. Noninterest income in 2007 was $868 million, an increase of $37.4 million, or 4.5 percent, over 2006. Service charges on deposit accounts decreased $15.3 million, or 4.8 percent, primarily due to lower account analysis fees and a $2.8 billion, or 16.5 percent, decrease in average noninterest bearing deposits. Trust and investment management fees increased $10.2 million, or 6.9 percent, primarily due to higher trust account balances. Trading account revenue increased $8.7 million, or 15.3 percent, primarily due to a higher level of interest rate swap transactions in 2007. Brokerage commissions and fees increased $4.0 million, or 11.3 percent. Gains on private capital investments, net, were $43.9 million, an increase of $20.8 million compared to prior year. Noninterest expense was flat compared with 2006. Salaries and employee benefits expense decreased $5.6 million, or 0.6 percent, primarily due to lower pension expense, partially offset by higher salaries and other compensation costs. Outside services expense decreased $33.6 million, or 30.5 percent, primarily due to lower cost of services related to title and escrow balances. Professional services expense increased $6.5 million, or 10.4 percent, primarily due to higher expense related to information technology initiatives. Foreclosed asset expense was $0.1 million, compared with income of $15.3 million in 2006, due to gains on the sale of other real estate owned recorded in 2006. The provision for off-balance sheet commitments was $9 million in 2007, compared with negative $5 million in 2006. Other noninterest expense increased $15.0 million, or 12.3 percent, primarily due to higher expense related to low income housing projects and Visa litigation charges. Credit Quality Nonperforming assets at December 31, 2007, were $57 million, or 0.10 percent of total assets. This compares with $53 million, or 0.10 percent of total assets, at September 30, 2007, and $42 million, or 0.08 percent of total assets, at December 31, 2006. In fourth quarter 2007, the total provision for credit losses was $60 million, compared with a total provision for credit losses of $20 million in third quarter 2007, and a total provision for credit losses of $5 million in fourth quarter 2006. 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. The increase in total provision expense in fourth quarter 2007 was primarily due to an increase in reserves attributable to the homebuilder segment of the loan portfolio. The need for a higher reserve reflects negative risk grade trends in the homebuilder portfolio and weakening operating conditions for the homebuilding industry. At year-end, the Company maintained approximately $100 million in reserves against the homebuilder portfolio. In the fourth quarter, there were no net charge-offs to the homebuilder portfolio and only one new nonaccrual loan. Net loans charged-off for fourth quarter 2007 were $3 million, or 0.04 percent of average total loans. This compares with net loans charged-off of $2 million, or 0.02 percent of average total loans, in third quarter 2007; and net recoveries of $1 million, or (0.01) percent of average total loans, in fourth quarter 2006. At December 31, 2007, the allowance for credit losses as a percent of total loans and as a percent of nonaccrual loans was 1.20 percent and 885 percent, respectively. These ratios were 1.10 percent and 853 percent, respectively, at September 30, 2007, and 1.12 percent and 987 percent, respectively, at December 31, 2006. Balance Sheet and Capital Ratios At December 31, 2007, the Company had total assets of $55.7 billion. Total loans were $41.2 billion and total deposits were $42.7 billion, resulting in a period-end deposit-to-loan ratio of 104 percent. At period-end, total stockholders’ equity was $4.7 billion and the tangible common equity ratio was 7.73 percent. The Company’s Tier I and total risk-based capital ratios at period-end were 8.30 percent and 11.22 percent, respectively. Stock Repurchases During fourth quarter 2007, the Company repurchased approximately 1 million shares of common stock at a total price of $50.4 million, or an average of $51.72 per repurchased share. During 2007, the Company repurchased 2.4 million shares of common stock at a total price of $138.0 million, or an average of $58.20 per repurchased share. At December 31, 2007, the Company had remaining repurchase authority of $512 million. Common shares outstanding at December 31, 2007, were 137.8 million, a decrease of 1.3 million shares, or 0.9 percent, from one year earlier. First Quarter and Full Year 2008 Forecast The Company currently estimates that first quarter 2008 fully diluted earnings per share will be in the range of $0.94 to $0.99, including a total provision for credit losses of approximately $20 million. The Company currently estimates that full year 2008 fully diluted earnings per share will be in the range of $4.05 to $4.30, including a total provision for credit losses of $80 million to $90 million. Non-GAAP Financial Measures This press release contains certain references to financial measures identified as being stated on an "adjusted basis” or that adjust for or exclude certain tax items and provision for loan losses, 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, 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 or bond markets which may adversely affect the Company or the Company’s borrowers or other customers; changes in accounting practices or requirements; and risks associated with various strategies the Company may pursue, including potential acquisitions, divestitures and restructurings. A complete description of the Company, including related risk factors, is discussed in the Company’s public filings with the Securities and Exchange Commission, which are available by calling (415) 765-2969 or online at http://www.sec.gov. All forward-looking statements included in this press release are based on information available at the time of the release, and the Company assumes no obligation to update any forward-looking statement. Conference Call and Webcast The Company will conduct a conference call to review fourth quarter 2007 results at 8:30 AM Pacific Time (11:30 AM Eastern Time) on January 25, 2008. Interested parties calling from locations within the United States should call 800-230-1059 (612-332-0107 from outside the United States) 10 minutes prior to the beginning of the conference. A live webcast of the call will be available at http://www.unionbank.com. You may access the Investor Relations section of the website via the "About Union Bank” link from the homepage. The webcast replay will be available on the website within 24 hours after the conclusion of the call, and will remain on the website for a period of one year. A recorded playback of the conference call will be available by calling 800-475-6701, (320-365-3844 from outside the United States) from approximately 12:00 PM Pacific Time (3:00 PM Eastern Time), January 25, through 11:59 PM Pacific Time, February 1 (2:59 AM Eastern Time, February 2). The reservation number for this playback is 904864. Based in San Francisco, UnionBanCal Corporation is a bank holding company with assets of $55.7 billion at December 31, 2007. Its primary subsidiary, Union Bank of California, N.A., had 330 banking offices in California, Oregon and Washington, and 2 international offices at December 31, 2007. UnionBanCal Corporation and Subsidiaries Financial Highlights (Unaudited) Exhibit 1         Percent Change to As of and for the Three Months Ended Dec. 31, 2007 from Dec. 31, Sept. 30, Dec. 31, Dec. 31, Sept. 30, (Dollars in thousands, except per share data)   2006   2007   2007 2006 2007 Results of operations: Net interest income (1) $ 447,335 $ 427,731 $ 441,039 (1.41%) 3.11% Noninterest income   212,304   224,015   215,513 1.51% (3.80%) Total revenue 659,639 651,746 656,552 (0.47%) 0.74% Noninterest expense 430,436 397,987 433,683 0.75% 8.97% Provision for loan losses   3,000   16,000   56,000 nm nm Income from continuing operations before income taxes (1) 226,203 237,759 166,869 (26.23%) (29.82%) Taxable-equivalent adjustment 1,923 2,389 2,517 30.89% 5.36% Income tax expense   (2,313)   86,692   55,665 nm (35.79%) Income from continuing operations $ 226,593 $ 148,678 $ 108,687 (52.03%) (26.90%) Income (loss) from discontinued operations   (159)   (21,219)   56,983 nm nm Net income $ 226,434 $ 127,459 $ 165,670 (26.84%) 29.98%   Per common share: Basic earnings: From continuing operations $ 1.63 $ 1.08 $ 0.79 (51.53%) (26.85%) Net income 1.62 0.93 1.21 (25.31%) 30.11% Diluted earnings: From continuing operations 1.61 1.07 0.78 (51.55%) (27.10%) Net income 1.61 0.92 1.20 (25.47%) 30.43% Dividends (2) 0.47 0.52 0.52 10.64% 0.00% Book value (end of period) 32.86 33.71 34.37 4.60% 1.96% Common shares outstanding (end of period) (3) 139,107,254 138,523,666 137,836,068 (0.91%) (0.50%) Weighted average common shares outstanding - basic (3) 139,390,487 137,667,976 137,386,881 (1.44%) (0.20%) Weighted average common shares outstanding - diluted (3) 141,025,758 139,067,952 138,562,892 (1.75%) (0.36%)   Balance sheet (end of period): Total assets (4) $ 52,619,576 $ 54,343,045 $ 55,727,748 5.91% 2.55% Total loans 36,671,723 39,745,341 41,204,188 12.36% 3.67% Nonperforming assets 42,365 52,562 56,525 33.42% 7.54% Total deposits 41,850,682 42,242,890 42,680,191 1.98% 1.04% Medium and long-term debt 1,318,847 1,871,726 1,913,622 45.10% 2.24% Stockholders' equity 4,571,401 4,669,454 4,737,981 3.64% 1.47%   Balance sheet (period average): Total assets $ 51,659,367 $ 53,486,413 $ 54,781,708 6.04% 2.42% Total loans 37,495,315 39,484,785 40,887,376 9.05% 3.55% Earning assets 46,860,166 48,901,507 50,156,954 7.04% 2.57% Total deposits 41,202,852 41,962,726 42,835,877 3.96% 2.08% Stockholders' equity 4,638,801 4,664,229 4,647,470 0.19% (0.36%)   Financial ratios (5): Return on average assets (6): From continuing operations 1.74% 1.10% 0.79% Net income 1.74% 0.95% 1.20% Return on average stockholders' equity (6): From continuing operations 19.38% 12.65% 9.28% Net income 19.37% 10.84% 14.14% Efficiency ratio (7) 64.95% 60.45% 65.44% Net interest margin (1) 3.80% 3.49% 3.51% Dividend payout ratio 28.83% 48.15% 65.82% Tangible common equity ratio 7.85% 7.79% 7.73% Tier 1 risk-based capital ratio (4) (8) 8.68% 8.40% 8.30% Total risk-based capital ratio (4) (8) 11.71% 11.28% 11.22% Leverage ratio (4) (8) 8.44% 8.39% 8.27% Allowance for loan losses to: Total loans 0.90% 0.88% 0.98% Nonaccrual loans 792.32% 683.96% 722.64% Allowances for credit losses to (9) : Total loans 1.12% 1.10% 1.20% Nonaccrual loans 987.06% 852.52% 884.80% Net loans charged off (recovered) to average total loans (6) (0.01%) 0.02% 0.04% Nonperforming assets to total loans and foreclosed assets 0.12% 0.13% 0.14% Nonperforming assets to total assets (4) 0.08% 0.10% 0.10%   Refer to Exhibit 11 for footnote explanations. UnionBanCal Corporation and Subsidiaries Financial Highlights (Unaudited) Exhibit 2       Percent Change to As of and for the Twelve Months Ended Dec. 31, 2007 from Dec. 31, Dec. 31, Dec. 31, (Dollars in thousands, except per share data)     2006     2007   2006 Results of operations: Net interest income (1) $ 1,839,743 $ 1,727,924 (6.08 %) Noninterest income   830,943     868,302   4.50 % Total revenue 2,670,686 2,596,226 (2.79 %) Noninterest expense 1,637,849 1,643,405 0.34 % (Reversal of) provision for loan losses   (5,000 )   81,000   nm Income from continuing operations before income taxes (1) 1,037,837 871,821 (16.00 %) Taxable-equivalent adjustment 6,401 9,272 44.85 % Income tax expense   270,121     292,683   8.35 % Income from continuing operations $ 761,315 $ 569,866 (25.15 %) Income (loss) from discontinued operations   (8,319 )   38,228   nm Net income $ 752,996   $ 608,094   (19.24 %)   Per common share: Basic earnings: From continuing operations $ 5.38 $ 4.14 (23.05 %) Net income 5.32 4.42 (16.92 %) Diluted earnings: From continuing operations 5.30 4.10 (22.64 %) Net income 5.24 4.37 (16.60 %) Dividends (2) 1.82 2.03 11.54 % Book value (end of period) 32.86 34.37 4.60 % Common shares outstanding (end of period) (3) 139,107,254 137,836,068 (0.91 %) Weighted average common shares outstanding - basic (3) 141,620,081 137,617,100 (2.83 %) Weighted average common shares outstanding - diluted (3) 143,754,865 139,052,436 (3.27 %)   Balance sheet (end of period): Total assets (4) $ 52,619,576 $ 55,727,748 5.91 % Total loans 36,671,723 41,204,188 12.36 % Nonperforming assets 42,365 56,525 33.42 % Total deposits 41,850,682 42,680,191 1.98 % Medium and long-term debt 1,318,847 1,913,622 45.10 % Stockholders' equity 4,571,401 4,737,981 3.64 %   Balance sheet (period average): Total assets $ 49,979,342 $ 53,588,623 7.22 % Total loans 35,704,129 39,424,327 10.42 % Earning assets 45,080,843 48,968,930 8.62 % Total deposits 40,000,434 42,185,536 5.46 % Stockholders' equity 4,574,185 4,603,022 0.63 %   Financial ratios (5): Return on average assets: From continuing operations 1.52 % 1.06 % Net income 1.51 % 1.13 % Return on average stockholders' equity: From continuing operations 16.64 % 12.38 % Net income 16.46 % 13.21 % Efficiency ratio (7) 62.09 % 62.95 % Net interest margin (1) 4.08 % 3.53 % Dividend payout ratio 33.83 % 49.03 % Tangible common equity ratio 7.85 % 7.73 % Tier 1 risk-based capital ratio (4) (8) 8.68 % 8.30 % Total risk-based capital ratio (4) (8) 11.71 % 11.22 % Leverage ratio (4) (8) 8.44 % 8.27 % Allowance for loan losses to: Total loans 0.90 % 0.98 % Nonaccrual loans 792.32 % 722.64 % Allowances for credit losses to (9) : Total loans 1.12 % 1.20 % Nonaccrual loans 987.06 % 884.80 % Net loans charged off to average total loans 0.04 % 0.03 % Nonperforming assets to total loans and foreclosed assets 0.12 % 0.14 % Nonperforming assets to total assets (4) 0.08 % 0.10 %   Refer to Exhibit 11 for footnote explanations. UnionBanCal Corporation and Subsidiaries Condensed Consolidated Statements of Income (Unaudited) (Taxable-Equivalent Basis) Exhibit 3               For the Three Months Ended For the Twelve Months Ended Dec. 31, Sept. 30, Dec. 31, Dec. 31, (Amounts in thousands, except per share data)   2006   2007   2007   2006   2007 Interest Income (1) Loans $ 595,225 $ 640,511 $ 655,933 $ 2,232,029 $ 2,518,150 Securities 110,916 113,084 114,022 420,884 445,367 Interest bearing deposits in banks 1,047 709 163 2,617 3,276 Federal funds sold and securities purchased under resale agreements 4,924 4,683 2,603 25,518 26,247 Trading account assets   1,791   1,898   3,448   6,838   8,648 Total interest income   713,903   760,885   776,169   2,687,886   3,001,688   Interest Expense Deposits 208,319 259,406 263,508 649,296 991,140 Federal funds purchased and securities sold under repurchase agreements 11,104 15,478 19,465 37,088 61,390 Commercial paper 22,595 19,753 16,838 75,015 76,284 Medium and long-term debt 21,193 26,957 25,471 70,439 101,096 Trust notes 238 239 238 953 953 Other borrowed funds   3,119   11,321   9,610   15,352   42,901 Total interest expense   266,568   333,154   335,130   848,143   1,273,764   Net Interest Income (1) 447,335 427,731 441,039 1,839,743 1,727,924 (Reversal of) provision for loan losses   3,000   16,000   56,000   (5,000)   81,000 Net interest income after (reversal of) provision for loan losses   444,335   411,731   385,039   1,844,743   1,646,924   Noninterest Income Service charges on deposit accounts 77,092 76,210 75,989 319,647 304,362 Trust and investment management fees 37,239 39,546 41,672 147,539 157,734 Insurance commissions 17,976 15,988 16,557 72,547 69,296 Trading account activities 15,421 21,795 15,135 56,916 65,608 Merchant banking fees 13,905 10,031 16,206 42,185 44,123 Brokerage commissions and fees 9,155 10,476 10,170 35,811 39,839 Card processing fees, net 7,256 7,785 7,571 28,400 30,307 Securities gains, net 420 171 - 2,242 1,621 Other   33,840   42,013   32,213   125,656   155,412 Total noninterest income   212,304   224,015   215,513   830,943   868,302   Noninterest Expense Salaries and employee benefits 244,514 230,305 236,835 969,614 964,024 Net occupancy 38,173 38,334 37,467 139,152 144,824 Outside services 24,315 19,978 21,071 110,102 76,499 Professional services 19,771 18,073 22,281 62,597 69,118 Equipment 17,435 15,771 16,677 68,751 64,940 Software 16,236 14,590 15,965 60,960 58,413 Communications 9,340 9,596 9,847 38,518 37,216 Foreclosed asset expense (income) 10 37 55 (15,322) 110 (Reversal of) provision for losses on off-balance sheet commitments 2,000 4,000 4,000 (5,000) 9,000 Other   58,642   47,303   69,485   208,477   219,261 Total noninterest expense   430,436   397,987   433,683   1,637,849   1,643,405   Income from continuing operations before income taxes (1) 226,203 237,759 166,869 1,037,837 871,821 Taxable-equivalent adjustment 1,923 2,389 2,517 6,401 9,272 Income tax expense (benefit) (2,313) 86,692 55,665 270,121 292,683           Income from Continuing Operations   226,593   148,678   108,687   761,315   569,866   Income (loss) from discontinued operations before income taxes 5 (20,910) 88,827 (13,127) 71,922 Income tax expense (benefit)   164   309   31,844   (4,808)   33,694 Income (Loss) from Discontinued Operations   (159)   (21,219)   56,983   (8,319)   38,228 Net Income $ 226,434 $ 127,459 $ 165,670 $ 752,996 $ 608,094   Income from continuing operations per common share - basic $ 1.63 $ 1.08 $ 0.79 $ 5.38 $ 4.14 Net income per common share - basic $ 1.62 $ 0.93 $ 1.21 $ 5.32 $ 4.42 Income from continuing operations per common share - diluted $ 1.61 $ 1.07 $ 0.78 $ 5.30 $ 4.10 Net income per common share - diluted $ 1.61 $ 0.92 $ 1.20 $ 5.24 $ 4.37 Weighted average common shares outstanding - basic   139,390   137,668   137,387   141,620   137,617 Weighted average common shares outstanding - diluted   141,026   139,068   138,563   143,755   139,052         Refer to Exhibit 11 for footnote explanations. UnionBanCal Corporation and Subsidiaries Consolidated Balance Sheets Exhibit 4         December 31, December 31, (Dollars in thousands)   2006     2007   Assets Cash and due from banks $ 2,213,782 $ 2,106,930 Interest bearing deposits in banks 824,456 104,528 Federal funds sold and securities purchased under resale agreements   943,200     310,178   Total cash and cash equivalents 3,981,438 2,521,636 Trading account assets 376,321 603,333 Securities available for sale: Securities pledged as collateral 89,184 685,123 Held in portfolio 8,667,038 7,770,048 Loans (net of allowance for loan losses: 2006, $331,077; 2007, $402,726) 36,340,646 40,801,462 Due from customers on acceptances 17,834 16,482 Premises and equipment, net 493,653 490,197 Intangible assets 26,247 18,568 Goodwill 453,489 448,718 Other assets 2,141,402 2,364,577 Assets of discontinued operations to be disposed or sold   32,324     7,604   Total assets $ 52,619,576   $ 55,727,748     Liabilities Noninterest bearing $ 17,113,890 $ 13,802,640 Interest bearing   24,736,792     28,877,551   Total deposits 41,850,682 42,680,191 Federal funds purchased and securities sold under repurchase agreements 1,083,927 1,631,602 Commercial paper 1,661,163 1,266,656 Other borrowed funds 432,401 1,875,623 Trading account liabilities 258,136 351,057 Acceptances outstanding 17,834 16,482 Other liabilities 1,286,575 1,132,103 Medium and long-term debt 1,318,847 1,913,622 Junior subordinated debt payable to subsidiary grantor trust 14,885 14,432 Liabilities of discontinued operations to be extinguished or assumed   123,725     107,999   Total liabilities   48,048,175     50,989,767         Stockholders' Equity Preferred stock: Authorized 5,000,000 shares, no shares issued or outstanding at December 31, 2006 or 2007 - - Common stock, par value $1 per share: Authorized 300,000,000 shares, issued 156,460,057 shares in 2006 and 157,559,521 shares in 2007 156,460 157,559 Additional paid-in capital 1,083,649 1,153,737 Treasury stock - 17,352,803 shares in 2006 and 19,723,453 shares in 2007 (1,064,606 ) (1,202,584 ) Retained earnings 4,655,272 4,912,392 Accumulated other comprehensive loss   (259,374 )   (283,123 ) Total stockholders' equity   4,571,401     4,737,981   Total liabilities and stockholders' equity $ 52,619,576   $ 55,727,748   UnionBanCal Corporation and Subsidiaries Loans (Unaudited) Exhibit 5     Percent Change to Three Months Ended December 31, 2007 from Dec. 31, Sept. 30, Dec. 31, Dec. 31, Sept. 30, (Dollars in millions)     2006 2007 2007 2006 2007   Loans (period average) Commercial, financial and industrial $ 14,168 $ 14,258 $ 14,633 3.28 % 2.63 % Construction 2,183 2,372 2,437 11.64 % 2.74 % Mortgage - Commercial 5,815 6,387 6,786 16.70 % 6.25 % Mortgage - Residential 12,222 13,193 13,658 11.75 % 3.52 % Consumer 2,520 2,570 2,618 3.89 % 1.87 % Lease financing   580     617     638   10.00 % 3.40 %   Total loans held to maturity 37,488 39,397 40,770 8.75 % 3.49 % Total loans held for sale   7     88     117   nm 32.95 %   Total loans $ 37,495   $ 39,485   $ 40,887   9.05 % 3.55 %   Nonperforming Assets (period end) Nonaccrual loans: Commercial, financial and industrial $ 7 $ 37 $ 29 nm (21.62 %) Construction - - 14 nm nm Mortgage - Commercial 19 15 13 (31.58 %) (13.33 %) Lease financing   15     -     -   (100.00 %) -   Total nonaccrual loans 41 52 56 36.59 % 7.69 % Foreclosed assets   1     1     1   0.00 % 0.00 %   Total nonperforming assets $ 42   $ 53   $ 57   35.71 % 7.55 %   Loans 90 days or more past due and still accruing $ 9   $ 18   $ 22   nm 22.22 %   Analysis of Allowances for Credit Losses Beginning balance $ 327 $ 336 $ 350   Provision for loan losses 3 16 56   Loans charged off: Commercial, financial and industrial (3 ) (3 ) (4 ) Consumer   (1 )   (2 )   (2 ) Total loans charged off   (4 )   (5 )   (6 )   Loans recovered: Commercial, financial and industrial 5 2 2 Consumer   -     1     1   Total loans recovered   5     3     3   Net loans recovered (charged off)   1     (2 )   (3 )   Ending balance of allowance for loan losses 331 350 403 Allowance for off-balance sheet commitment losses   81     86     90   $ - Allowances for credit losses $ 412   $ 436   $ 493                   Refer to Exhibit 11 for footnote explanations. UnionBanCal Corporation and Subsidiaries Net Interest Income (Unaudited) Exhibit 6   For the Three Months Ended For the Three Months Ended December 31, 2006 December 31, 2007 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 $ 14,173,007 $ 234,687 6.57 % $ 14,745,251 $ 250,542 6.74 % Construction 2,183,227 42,865 7.79 2,436,921 44,393 7.23 Residential mortgage 12,223,931 159,785 5.23 13,663,048 187,372 5.49 Commercial mortgage 5,815,299 104,633 7.14 6,786,416 116,974 6.84 Consumer 2,520,250 49,813 7.84 2,617,949 50,202 7.61 Lease financing   579,601     3,442   2.38   637,791     6,450   4.05 Total loans 37,495,315 595,225 6.31 40,887,376 655,933 6.38 Securities - taxable 8,535,024 109,738 5.14 8,443,508 112,924 5.35 Securities - tax-exempt 58,938 1,178 8.00 54,155 1,098 8.11 Interest bearing deposits in banks 74,471 1,047 5.58 4,505 163 14.29 Federal funds sold and securities purchased under resale agreements 365,894 4,924 5.34 236,411 2,603 4.37 Trading account assets   330,524     1,791   2.15   530,999     3,448   2.58 Total earning assets 46,860,166   713,903   6.06 50,156,954   776,169   6.16 Allowance for loan losses (327,525 ) (349,409 ) Cash and due from banks 1,963,658 1,818,633 Premises and equipment, net 502,633 483,751 Other assets   2,660,435     2,671,779   Total assets $ 51,659,367   $ 54,781,708   Liabilities Deposits: Transaction accounts $ 13,475,864 91,258 2.69 $ 14,605,230 106,517 2.89 Savings and consumer time 4,385,344 27,806 2.52 4,411,122 30,469 2.74 Large time   7,208,863     89,255   4.91   10,727,470     126,522   4.68 Total interest bearing deposits   25,070,071     208,319   3.30   29,743,822     263,508   3.51 Federal funds purchased and securities sold under repurchase agreements 768,941 10,054 5.19 1,605,100 18,371 4.54 Net funding allocated from (to) discontinued operations (12) 83,192 1,050 5.01 95,570 1,094 4.54 Commercial paper 1,784,097 22,595 5.02 1,469,372 16,838 4.55 Other borrowed funds (13) 223,406 3,119 5.54 788,853 9,610 4.83 Medium and long-term debt 1,428,937 21,193 5.88 1,846,780 25,471 5.47 Trust notes   14,940     238   6.38   14,487     238   6.58 Total borrowed funds   4,303,513     58,249   5.37   5,820,162     71,622   4.88 Total interest bearing liabilities 29,373,584   266,568   3.60 35,563,984   335,130   3.74 Noninterest bearing deposits 16,132,781 13,092,055 Other liabilities   1,514,201     1,478,199   Total liabilities 47,020,566 50,134,238 Stockholders' Equity Common equity   4,638,801     4,647,470   Total stockholders' equity   4,638,801     4,647,470   Total liabilities and stockholders' equity $ 51,659,367   $ 54,781,708   Reported Net Interest Income/Margin Net interest income/margin (taxable-equivalent basis) 447,335 3.80 % 441,039 3.51 % Less: taxable-equivalent adjustment   1,923     2,517   Net interest income $ 445,412   $ 438,522                   Average Assets and Liabilities of Discontinued Operations for Period Ended: December 31, 2006 December 31, 2007 Assets $ 38,762 $ 8,311 Liabilities $ 121,954 $ 103,881 Net Liabilities $ (83,192 ) $ (95,570 )                   Refer to Exhibit 11 for footnote explanations. UnionBanCal Corporation and Subsidiaries Net Interest Income (Unaudited) Exhibit 7             For the Three Months Ended For the Three Months Ended September 30, 2007 December 31, 2007 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 $ 14,342,095 $ 246,275 6.81 % $ 14,745,251 $ 250,542 6.74 % Construction 2,371,833 46,043 7.70 2,436,921 44,393 7.23 Residential mortgage 13,196,677 178,589 5.41 13,663,048 187,372 5.49 Commercial mortgage 6,386,963 112,743 7.00 6,786,416 116,974 6.84 Consumer 2,570,234 50,601 7.81 2,617,949 50,202 7.61 Lease financing   616,983     6,260   4.06   637,791     6,450   4.05 Total loans 39,484,785 640,511 6.45 40,887,376 655,933 6.38 Securities - taxable 8,593,958 111,934 5.21 8,443,508 112,924 5.35 Securities - tax-exempt 55,236 1,150 8.32 54,155 1,098 8.11 Interest bearing deposits in banks 44,185 709 6.37 4,505 163 14.29 Federal funds sold and securities purchased under resale agreements 355,111 4,683 5.23 236,411 2,603 4.37 Trading account assets   368,232     1,898   2.04   530,999     3,448   2.58 Total earning assets 48,901,507   760,885   6.19 50,156,954   776,169   6.16 Allowance for loan losses (335,932 ) (349,409 ) Cash and due from banks 1,845,331 1,818,633 Premises and equipment, net 484,542 483,751 Other assets   2,590,965     2,671,779   Total assets $ 53,486,413   $ 54,781,708   Liabilities Deposits: Transaction accounts $ 14,288,967 108,653 3.02 $ 14,605,230 106,517 2.89 Savings and consumer time 4,371,913 30,362 2.76 4,411,122 30,469 2.74 Large time   9,515,315     120,391   5.02   10,727,470     126,522   4.68 Total interest bearing deposits   28,176,195     259,406   3.65   29,743,822     263,508   3.51 Federal funds purchased and securities sold under repurchase agreements 1,130,404 14,284 5.01 1,605,100 18,371 4.54 Net funding allocated from (to) discontinued operations (12) 94,606 1,194 5.01 95,570 1,094 4.54 Commercial paper 1,559,098 19,753 5.03 1,469,372 16,838 4.55 Other borrowed funds (13) 828,655 11,321 5.42 788,853 9,610 4.83 Medium and long-term debt 1,846,674 26,957 5.79 1,846,780 25,471 5.47 Trust notes   14,601     239   6.53   14,487     238   6.58 Total borrowed funds   5,474,038     73,748   5.34   5,820,162     71,622   4.88 Total interest bearing liabilities 33,650,233   333,154   3.93 35,563,984   335,130   3.74 Noninterest bearing deposits 13,786,531 13,092,055 Other liabilities   1,385,420     1,478,199   Total liabilities 48,822,184 50,134,238 Stockholders' Equity Common equity   4,664,229     4,647,470   Total stockholders' equity   4,664,229     4,647,470   Total liabilities and stockholders' equity $ 53,486,413   $ 54,781,708   Reported Net Interest Income/Margin Net interest income/margin (taxable-equivalent basis) 427,731 3.49 % 441,039 3.51 % Less: taxable-equivalent adjustment   2,389     2,517   Net interest income $ 425,342   $ 438,522                               Average Assets and Liabilities of Discontinued Operations for Period Ended: September 30,2007 December 31,2007 Assets $ 9,271 $ 8,311 Liabilities $ 103,877 $ 103,881 Net Liabilities $ (94,606 ) $ (95,570 )                                   Refer to Exhibit 11 for footnote explanations. UnionBanCal Corporation and Subsidiaries Net Interest Income (Unaudited) Exhibit 8   For the Twelve Months Ended For the Twelve Months Ended December 31, 2006 December 31, 2007 Interest Average Interest Average Average Income/ Yield/ Average Income/ Yield/ (Dollars in thousands) Balance Expense (10) Rate (10) Balance Expense (10) Rate (10) Assets Loans: (11) Commercial, financial and industrial $ 13,220,633 $ 869,884 6.58 % $ 14,595,016 $ 972,270 6.66 % Construction 1,857,404 142,031 7.65 2,335,157 177,258 7.59 Residential mortgage 11,846,908 607,977 5.13 12,964,171 697,069 5.38 Commercial mortgage 5,702,858 404,749 7.10 6,364,705 448,403 7.05 Consumer 2,505,770 192,156 7.67 2,572,146 199,361 7.75 Lease financing   570,556     15,232   2.67   593,132     23,789   4.01 Total loans 35,704,129 2,232,029 6.25 39,424,327 2,518,150 6.39 Securities - taxable 8,417,950 415,902 4.94 8,541,230 440,801 5.16 Securities - tax-exempt 61,729 4,982 8.07 55,771 4,566 8.19 Interest bearing deposits in banks 51,534 2,617 5.08 53,978 3,276 6.07 Federal funds sold and securities purchased under resale agreements 497,318 25,518 5.13 505,732 26,247 5.19 Trading account assets   348,183     6,838   1.96   387,892     8,648   2.23 Total earning assets 45,080,843   2,687,886   5.96 48,968,930   3,001,688   6.13 Allowance for loan losses (334,720 ) (336,871 ) Cash and due from banks 2,063,341 1,902,955 Premises and equipment, net 507,093 486,232 Other assets   2,662,785     2,567,377   Total assets $ 49,979,342   $ 53,588,623   Liabilities Deposits: Transaction accounts $ 12,938,620 292,899 2.26 $ 14,129,408 409,508 2.90 Savings and consumer time 4,363,032 93,171 2.14 4,351,961 116,544 2.68 Large time   5,656,370     263,226   4.65   9,469,386     465,088   4.91 Total interest bearing deposits   22,958,022     649,296   2.83   27,950,755     991,140   3.55 Federal funds purchased and securities sold under repurchase agreements 701,614 33,711 4.80 1,142,487 56,299 4.93 Net funding allocated from (to) discontinued operations (12) 70,410 3,377 4.80 101,738 5,091 5.00 Commercial paper 1,582,226 75,015 4.74 1,549,681 76,284 4.92 Other borrowed funds (13) 294,977 15,352 5.20 813,578 42,901 5.27 Medium and long-term debt 1,230,846 70,439 5.72 1,776,069 101,096 5.69 Trust notes   15,109     953   6.31   14,656     953   6.50 Total borrowed funds   3,895,182     198,847   5.10   5,398,209     282,624   5.24 Total interest bearing liabilities 26,853,204   848,143   3.16 33,348,964   1,273,764   3.82 Noninterest bearing deposits 17,042,412 14,234,781 Other liabilities   1,509,541     1,401,856   Total liabilities 45,405,157 48,985,601 Stockholders' Equity Common equity   4,574,185     4,603,022   Total stockholders' equity   4,574,185     4,603,022   Total liabilities and stockholders' equity $ 49,979,342   $ 53,588,623   Reported Net Interest Income/Margin Net interest income/margin (taxable-equivalent basis) 1,839,743 4.08 % 1,727,924 3.53 % Less: taxable-equivalent adjustment   6,401     9,272   Net interest income $ 1,833,342   $ 1,718,652                     Average Assets and Liabilities of Discontinued Operations for Period Ended: December 31, 2006 December 31, 2007 Assets $ 202,516 $ 9,636 Liabilities $ 272,926 $ 111,374 Net Liabilities $ (70,410 ) $ (101,738 )                     Refer to Exhibit 11 for footnote explanations. UnionBanCal Corporation and Subsidiaries             Exhibit 9   Noninterest income (Unaudited)   Percentage Change to For the Three Months Ended December 31, 2007 from Dec. 31, Sept. 30, Dec. 31, Dec. 31, Sept. 30, (Dollars in thousands) 2006 2007 2007 2006   2007 Service charges on deposit accounts $ 77,092 $ 76,210 $ 75,989 (1.43 ) % (0.29 ) % Trust and investment management fees 37,239 39,546 41,672 11.90 5.38 Insurance commissions 17,976 15,988 16,557 (7.89 ) 3.56 Merchant banking fees 13,905 10,031 16,206 16.55 61.56 Trading account activities 15,421 21,795 15,135 (1.85 ) (30.56 ) Brokerage commissions and fees 9,155 10,476 10,170 11.09 (2.92 ) Card processing fees, net 7,256 7,785 7,571 4.34 (2.75 ) Securities gains, net 420 171 - (100.00 ) (100.00 ) Gains on private capital investments, net 8,902 12,203 2,412 (72.91 ) (80.23 ) Other   24,938   29,810   29,801 19.50 (0.03 ) Total noninterest income $ 212,304 $ 224,015 $ 215,513 1.51 % (3.80 ) %     Noninterest expense (Unaudited)   Percentage Change to For the Three Months Ended December 31, 2007 from Dec. 31, Sept. 30, Dec. 31, Dec. 31, Sept. 30, (Dollars in thousands) 2006 2007 2007 2006   2007 Salaries and other compensation $ 197,641 $ 198,814 $ 198,804 0.59 % (0.01 ) % Employee benefits   46,873   31,491   38,031 (18.86 ) 20.77 Salaries and employee benefits 244,514 230,305 236,835 (3.14 ) 2.84 Net occupancy 38,173 38,334 37,467 (1.85 ) (2.26 ) Professional services 19,771 18,073 22,281 12.70 23.28 Outside services 24,315 19,978 21,071 (13.34 ) 5.47 Equipment 17,435 15,771 16,677 (4.35 ) 5.74 Software 16,236 14,590 15,965 (1.67 ) 9.42 Advertising and public relations 10,743 10,342 12,487 16.23 20.74 Communications 9,340 9,596 9,847 5.43 2.62 Data processing 8,464 8,086 8,221 (2.87 ) 1.67 Intangible asset amortization 2,877 1,926 1,901 (33.92 ) (1.30 ) Foreclosed asset expense 10 37 55 nm 48.65 Provision for losses on off-balance sheet commitments 2,000 4,000 4,000 100.00 0.00 Other   36,558   26,949   46,876 28.22 73.94 Total noninterest expense $ 430,436 $ 397,987 $ 433,683 0.75 % 8.97 %         Refer to Exhibit 11 for footnote explanations. UnionBanCal Corporation and Subsidiaries           Exhibit 10   Noninterest income (Unaudited)   Percentage Change to For the Twelve Months Ended December 31, 2007 from December 31, December 31, December 31, (Dollars in thousands) 2006 2007 2006 Service charges on deposit accounts $ 319,647 $ 304,362 (4.78 ) % Trust and investment management fees 147,539 157,734 6.91 Insurance commissions 72,547 69,296 (4.48 ) Trading account activities 56,916 65,608 15.27 Merchant banking fees 42,185 44,123 4.59 Brokerage commissions and fees 35,811 39,839 11.25 Card processing fees, net 28,400 30,307 6.71 Securities gains, net 2,242 1,621 (27.70 ) Gains on private capital investments, net 23,112 43,881 89.86 Other   102,544     111,531 8.76 Total noninterest income $ 830,943   $ 868,302 4.50 %     Noninterest expense (Unaudited)   Percentage Change to For the Twelve Months Ended December 31, 2007 from December 31, December 31, December 31, (Dollars in thousands) 2006 2007 2006 Salaries and other compensation $ 777,978 $ 801,049 2.97 % Employee benefits   191,636     162,975 (14.96 ) Salaries and employee benefits 969,614 964,024 (0.58 ) Net occupancy 139,152 144,824 4.08 Outside services 110,102 76,499 (30.52 ) Professional services 62,597 69,118 10.42 Equipment 68,751 64,940 (5.54 ) Software 60,960 58,413 (4.18 ) Advertising and public relations 43,920 41,627 (5.22 ) Communications 38,518 37,216 (3.38 ) Data processing 31,041 33,053 6.48 Intangible asset amortization 11,591 7,679 (33.75 ) Foreclosed asset expense (income) (15,322 ) 110 nm (Reversal of) provision for allowance for losses on off-balance sheet commitments (5,000 ) 9,000 nm Other   121,925     136,902 12.28 Total noninterest expense $ 1,637,849   $ 1,643,405 0.34 %         Refer to Exhibit 11 for footnote explanations. UnionBanCal Corporation and Subsidiaries   Exhibit 11   Footnotes         (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 December 31, 2007. 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