UnionBanCal Corporation (NYSE:UB) -0- *T Second Quarter 2006 Highlights: -- Strong year-over-year organic loan growth -- Average total loans up 15 percent -- Average commercial loans up 22 percent -- Average residential mortgage loans up 14 percent -- Return on average stockholders' equity of 16.1 percent -- Annualized average all-in cost of funds of 1.76 percent -- Average noninterest bearing deposits comprised 44 percent of average total deposits -- Nonperforming assets were 0.07 percent of total assets at quarter-end First Half 2006 Highlights: -- Diluted earnings per share from continuing operations of $2.50 -- Total revenue from continuing operations up 5 percent -- Net interest margin up 2 basis points to 4.29 percent *T

UnionBanCal Corporation (NYSE:UB) today reported second quarter 2006 net income of $182.9 million, or $1.26 per diluted common share, compared with $1.27 per diluted common share a year earlier. Income from continuing operations was $182.6 million, or $1.26 per diluted common share, compared with $1.27 per diluted common share a year earlier.

First half 2006 net income was $355.9 million, or $2.44 per diluted common share, compared with $2.49 per diluted common share for first half 2005. Income from continuing operations was $364.1 million, or $2.50 per diluted common share, compared with $2.47 per diluted common share for first half 2005.

"Second quarter results were solid and reflect our balanced business model," stated Takashi Morimura, President and Chief Executive Officer. "Strong loan growth and continued excellent credit quality offset mixed deposit results, reflecting deposit pricing pressures stemming from higher short-term interest rates and heightened competition. During the quarter, we announced a 15 percent increase in our common stock dividend and a $500 million extension of our share repurchase program. These actions underscore our commitment to enhancing shareholder value through effective capital management, and reflect both the earnings power of the franchise and the strength of our balance sheet."

"Loan growth was robust across all categories in second quarter," added Chief Operating Officer Philip Flynn. "Commercial loans increased 22 percent over prior year and almost 5 percent over first quarter, while residential mortgages grew 14 percent over prior year and 2.5 percent over first quarter. Credit quality continues to be excellent. Second quarter net charge-offs were only $10 million and nonperforming assets declined again, to just 0.07 percent of total assets at quarter-end.

"Average noninterest bearing deposits were flat in sequential quarters, while interest bearing deposits increased 3.8 percent," continued Flynn. "The current interest rate environment has created volume and pricing challenges for us and the entire industry. In response, we are taking steps to defend our customer base and market share. At the same time, our deposit franchise remains healthy and profitable, driving one of the industry's lowest average all-in cost of funds and a very solid net interest margin."

Second Quarter Total Revenue From Continuing Operations

For second quarter 2006, total revenue (taxable-equivalent net interest income plus noninterest income) was $688 million, an increase of $25 million, or 3.8 percent, compared with second quarter 2005. Net interest income increased 2.0 percent, and noninterest income increased 7.7 percent. Compared with first quarter 2006, total revenue increased 0.6 percent, with net interest income and noninterest income each increasing 0.6 percent.

Second Quarter Net Interest Income (Taxable-equivalent) From Continuing Operations

Net interest income was $469 million in second quarter 2006, up $9 million, or 2.0 percent, from the same quarter a year ago, primarily due to strong growth in loans.

Average earning assets increased $1.7 billion, or 4.0 percent, primarily due to a $4.5 billion, or 14.8 percent, increase in average loans, while average securities declined $2.6 billion, or 23.7 percent. Average commercial loans increased $2.4 billion, or 22.4 percent, and average residential mortgages increased $1.4 billion, or 14.0 percent.

Compared to second quarter 2005, average total deposits increased $0.3 billion, or 0.8 percent. Average interest bearing deposits increased $1.6 billion, or 7.6 percent. Average noninterest bearing deposits decreased $1.3 billion, or 6.7 percent, primarily due to a $733 million, or 22.5 percent, decrease in average title and escrow deposits, and a $442 million, or 3.6 percent, decrease in average other commercial noninterest bearing deposits. Average title and escrow deposits decreased due to lower residential real estate activity, and average other commercial noninterest bearing deposits declined primarily due to changes in customer behavior in response to rising short-term interest rates. Average consumer noninterest bearing deposits decreased $90 million, or 2.7 percent.

Average noninterest bearing deposits represented 44.2 percent of average total deposits in second quarter 2006. The annualized average all-in cost of funds was 1.76 percent, reflecting the Company's strong average deposit-to-loan ratio of 113 percent and the high proportion of noninterest bearing deposits to total deposits.

The average yield on earning assets of $44.4 billion was 5.95 percent, up 80 basis points over second quarter 2005, with the average loan yield increasing 51 basis points. The average rate on interest bearing liabilities of $25.8 billion was 2.95 percent, up 142 basis points compared with second quarter 2005, reflecting both higher short-term interest rates and heightened competition for deposits. Average interest bearing deposits were $22.1 billion and the weighted average rate was 2.60 percent. Average core deposits funded 70.2 percent of average total assets in the second quarter. The net interest margin in second quarter 2006 was 4.23 percent, compared with 4.32 percent in second quarter 2005.

On a sequential quarter basis, net interest income increased $2.7 million, or 0.6 percent. Average loans increased $1.1 billion, or 3.2 percent. Average commercial loans increased $585 million, or 4.7 percent; average residential mortgages increased $289 million, or 2.5 percent; and average construction loans increased $201 million, or 13.2 percent. Average noninterest bearing deposits increased $26 million, or 0.1 percent, with consumer noninterest bearing deposits decreasing $22 million and commercial noninterest bearing deposits increasing $48 million, primarily due to a $138 million increase in title and escrow deposits. The average yield on earning assets increased 18 basis points and the average rate on interest bearing liabilities increased 46 basis points. The net interest margin decreased 13 basis points to 4.23 percent.

Second Quarter Noninterest Income From Continuing Operations

In second quarter 2006, noninterest income was $219 million, up $16 million, or 7.7 percent, from the same quarter a year ago. Service charges on deposit accounts increased $2 million, or 2.6 percent, and trust and investment management fees increased $7 million, or 16.3 percent, primarily due to an increase in trust assets. Merchant banking fees decreased $10 million, or 53.7 percent, primarily due to an unusually high volume of syndications completed in second quarter 2005.

Compared with the preceding quarter, second quarter 2006 noninterest income increased $1.3 million, or 0.6 percent. Service charges on deposit accounts were flat, while trust and investment management fees decreased 3.5 percent, primarily due to above-normal trust fees in first quarter 2006, when the Company implemented a refinement in accrual methodology.

Second Quarter Noninterest Expense From Continuing Operations

Noninterest expense for second quarter 2006 was $413 million, an increase of $25 million, or 6.3 percent, over second quarter 2005. Salaries and employee benefits expense increased $15 million, or 6.3 percent, primarily due to annual merit increases and higher performance-related incentive expense. Higher incentive expense included $5.4 million in stock option expense, versus none in 2005. Professional services expense increased $3.9 million, or 29.6 percent, primarily due to higher compliance-related expense. Foreclosed asset expense (income) in second quarter 2006 reflected a $7.8 million gain on the sale of property, compared with a $2.6 million gain in second quarter 2005. The provision for off-balance sheet commitments was negative $4 million in second quarter 2006, unchanged from the prior year.

Excluding the effect of stock option expense, noninterest expense increased $19.2 million, or 4.9 percent, compared with prior year.

Compared with first quarter 2006, noninterest expense decreased $1.5 million, or 0.4 percent. Salaries and employee benefits expense decreased $3.9 million, or 1.5 percent, primarily due to annual seasonal factors that result in lower payroll taxes and 401(k) matching contributions in the second quarter. The provision for off-balance sheet commitments was negative $4 million, compared with negative $3 million in first quarter 2006.

Income Tax Expense From Continuing Operations

The effective tax rate for second quarter 2006 was 33.5 percent, compared with an effective tax rate of 34.8 percent for second quarter 2005, due to higher tax credits applied in the current year.

Year-to-Date Results From Continuing Operations

Total revenue was $1.4 billion in the first six months of 2006, an increase of $67 million, or 5.1 percent, compared with total revenue of $1.3 billion in the same period of 2005. Net interest income increased 4.3 percent, and noninterest income increased 6.8 percent.

Net interest income was $935 million in the first half of 2006, a $39 million, or 4.3 percent, increase from prior year, primarily due to growth in earning assets. Average loans increased $4.4 billion, or 14.7 percent, compared with the first six months of 2005. Compared with prior year, the net interest margin increased 2 basis points, to 4.29 percent.

Noninterest income in the first half of 2006 was $437 million, an increase of $28 million, or 6.8 percent, over the same period in 2005. Service charges on deposit accounts increased $4 million, or 2.8 percent. Trust and investment management fees increased $15 million, or 17.9 percent, primarily due to growth in trust assets and a refinement in accrual methodology implemented in first quarter 2006. Insurance commissions decreased $4 million, or 9.9 percent, primarily due to lower contingent commissions.

For the first half of 2006, noninterest expense increased $46 million, or 5.9 percent, over the first half of 2005. Salaries and employee benefits expense increased $35 million, or 7.6 percent, primarily due to higher performance-related incentive expense (including stock option expense of $11.6 million), merit increases, and higher contract labor expense, reflecting compliance-related initiatives. Outside services expense increased $12 million, or 24.3 percent, primarily due to higher cost of services related to title and escrow balances, stemming from a higher earnings credit rate in the first half of 2006, as well as higher trust administration expenses. Professional services expense increased $7 million, or 26.9 percent, primarily due to higher compliance-related expense. The provision for off-balance sheet commitments was negative $7 million, compared with negative $1 million in first half 2005.

Credit Quality

Nonperforming assets at June 30, 2006, were $36 million, or 0.07 percent of total assets. This compares with $42 million, or 0.09 percent of total assets, at March 31, 2006, and $69 million, or 0.13 percent of total assets, at June 30, 2005. Nonperforming assets declined 48 percent between June 30, 2005 and June 30, 2006.

In second quarter 2006, the total provision for credit losses was negative $5.0 million. The total provision for credit losses was negative $10.0 million in first quarter 2006 and negative $17.6 million in second quarter 2005. The total provision for credit losses in second quarter 2006 consisted of a provision for loan losses of negative $1 million and a provision for off-balance sheet commitments (classified in noninterest expense) of negative $4 million. In second quarter 2006, net charge-offs were $10 million, compared with net charge-offs of $5 million in first quarter 2006, and net recoveries of $7 million in second quarter 2005.

At June 30, 2006, the allowance for credit losses as a percent of total loans and as a percent of nonaccrual loans was 1.17 percent and 1130 percent, respectively. These ratios were 1.26 percent and 1003 percent, respectively, at March 31, 2006, and 1.54 percent and 721 percent, respectively, at June 30, 2005.

Balance Sheet and Capital Ratios

At June 30, 2006, the Company had total assets of $50.8 billion. Total loans were $34.7 billion and total deposits were $40.5 billion, resulting in a period-end deposit-to-loan ratio of 117 percent. Core deposits totaled $34.7 billion at quarter-end, representing 68.3 percent of total assets. At period-end, total stockholders' equity was $4.6 billion, the tangible equity ratio was 8.19 percent, and the ratio of tangible common equity to risk-weighted assets was 8.58 percent. Book value per share at June 30, 2006, was $32.34, up 9.6 percent from a year earlier. The Company's Tier I and total risk-based capital ratios at period-end were 8.92 percent and 12.05 percent, respectively.

Stock Repurchases

During second quarter 2006, the Company repurchased 1.8 million shares of common stock at a total price of $120.8 million, or an average of $68.79 per repurchased share. For the first six months of 2006, the Company repurchased 2.9 million shares of common stock at a total price of $200.8 million, or an average of $68.70 per repurchased share. At June 30, 2006, the Company had remaining repurchase authority of $401.6 million.

Common shares outstanding at June 30, 2006, were 142.5 million, a decrease of 1.7 million shares, or 1.2 percent, from one year earlier.

Discontinued Operations

On September 22, 2005, the Company announced the signing of a definitive agreement to sell its international correspondent banking business to Wachovia Bank, N.A. Commencing in third quarter 2005, all results of the international correspondent banking business have been reported as a discontinued operation and all prior periods have been restated to reflect this accounting treatment. All of the assets and liabilities of the discontinued operations have been separately identified on the consolidated balance sheets (see Exhibit 4) and the average net assets or liabilities of the discontinued operations are reflected in the analysis of net interest margin (see Exhibits 6, 7 and 8).

In the second quarter of 2006, the Company recorded net income from discontinued operations of $0.3 million, which included a $4 million contingent purchase price payment. 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.

Third Quarter and Full Year 2006 Earnings Per Share Forecast

The Company currently estimates that third quarter 2006 fully diluted earnings per share from continuing operations will be in the range of $1.21 to $1.26, including estimated stock option expense of $0.02 per share and a total provision for credit losses of $5 million. The Company currently estimates a loss from discontinued operations of $0.01 per fully diluted share in the third quarter of 2006. Therefore, net income per diluted common share is expected to be in the range of $1.20 to $1.25.

For full year 2006, the Company currently estimates that fully diluted earnings per share from continuing operations will be in the range of $4.90 to $5.05, including estimated stock option expense of $0.09 per share and an estimated total provision for credit losses of negative $5 million. In addition, the Company expects to record a net loss from discontinued operations of approximately $0.07 per diluted common share. Therefore, net income per diluted common share is expected to be in the range of $4.83 to $4.98.

Non-GAAP Financial Measures

This press release contains certain references to financial measures that exclude stock option expense, which are adjustments from comparable measures calculated and presented in accordance with accounting principles generally accepted in the United States of America (GAAP). These financial measures, as used herein, differ from financial measures reported under GAAP in that they exclude unusual or non-recurring charges, losses, credits or gains. This press release identifies the specific items excluded from the comparable GAAP financial measure in the calculation of each non-GAAP financial measure. Because these items and their impact on the Company's performance are difficult to predict, management believes that financial presentations excluding the impact of these items provide useful supplemental information which is important to a proper understanding of the Company's core business results by investors. These presentations should not be viewed as a substitute for results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP financial measures presented by other companies.

Forward-Looking Statements

The following appears in accordance with the Private Securities Litigation Reform Act. This press release includes forward-looking statements that involve risks and uncertainties. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. Often, they include the words "believe," "expect," "target," "anticipate," "intend," "plan," "estimate," "potential," "project," or words of similar meaning, or future or conditional verbs such as "will," "would," "should," "could," or "may." They may also consist of annualized amounts based on historical interim period results. Forward-looking statements in this press release include those related to earnings forecasts, the Company's competitive positioning, the Company's earnings power, the Company's ability to enhance shareholder value through effective capital management, and the Company's ability to defend its customer base and market share.

There are numerous risks and uncertainties that could and will cause actual results to differ materially from those discussed in the Company's forward-looking statements. Many of these factors are beyond the Company's ability to control or predict and could have a material adverse effect on the Company's stock price, financial condition, and results of operations or prospects. Such risks and uncertainties include, but are not limited to, adverse economic and fiscal conditions in California; increased energy costs; global political and general economic conditions related to the war on terrorism and other hostilities; fluctuations in interest rates; the controlling interest in UnionBanCal Corporation of The Bank of Tokyo-Mitsubishi UFJ, Ltd., which is a wholly-owned subsidiary of Mitsubishi UFJ Financial Group, Inc.; competition in the banking and financial services industries; deposit pricing pressures; 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; 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 second quarter results at 8:30 AM Pacific Time (11:30 AM Eastern Time) on July 21, 2006. Interested parties calling from locations within the United States should call 800-762-6067 (480-629-9566 from outside the United States) 10 minutes prior to the beginning of the conference.

A live webcast of the call will be available at http://www.uboc.com. You may access the Investor Relations section of the website via the "About Union Bank" link from the homepage. The webcast replay will be available on the website within 24 hours after the conclusion of the call, and will remain on the website for a period of one year.

A recorded playback of the conference call will be available by calling 800-475-6701, (320-365-3844 from outside the United States) from approximately 12:00 PM Pacific Time (3:00 PM Eastern Time), July 21, through 11:59 PM Pacific Time, July 28 (2:59 AM Eastern Time, July 29). The reservation number for this playback is 835025.

Based in San Francisco, UnionBanCal Corporation is a bank holding company with assets of $50.8 billion at June 30, 2006. Its primary subsidiary, Union Bank of California, N.A., had 321 banking offices in California, Oregon and Washington, and 2 international offices at June 30, 2006. -0- *T UnionBanCal Corporation and Subsidiaries Financial Highlights (Unaudited) (1) Exhibit 1 Percent Change to As of and for the Three Months Ended June 30, 2006 from -------------------------------------- ----------------- June 30, March 31, June 30 , June 30, March 31, (Dollars in thousands, except per share data) 2005 2006 2006 2005 2006 -------------------------- ------------ ------------ -------- -------- Results of operations: Net interest income (2) $459,728 $466,341 $469,000 2.02% 0.57% Noninterest income 203,554 217,910 219,228 7.70% 0.60% ------------ ------------ ------------ Total revenue 663,282 684,251 688,228 3.76% 0.58% Noninterest expense 388,400 414,544 413,030 6.34% (0.37%) Reversal of allowance for loan losses (13,564) (7,000) (1,000) (92.63%) (85.71%) ------------ ------------ ------------ Income from continuing operations before income taxes (2) 288,446 276,707 276,198 (4.25%) (0.18%) Taxable- equivalent adjustment 1,018 1,248 1,358 33.40% 8.81% Income tax expense 99,950 94,004 92,203 (7.75%) (1.92%) ------------ ------------ ------------ Income from continuing operations $187,478 $181,455 $182,637 (2.58%) 0.65% (Loss)/Income from discontinued operations (296) (8,510) 274 nm nm ------------ ------------ ------------ Net income $187,182 $172,945 $182,911 (2.28%) 5.76% ============ ============ ============ Per common share: Basic earnings: From continuing operations $1.30 $1.26 $1.27 (2.31%) 0.79% Net income 1.29 1.20 1.28 (0.78%) 6.67% Diluted earnings: From continuing operations 1.27 1.24 1.26 (0.79%) 1.61% Net income 1.27 1.18 1.26 (0.79%) 6.78% Dividends (3) 0.41 0.41 0.47 14.63% 14.63% Book value (end of period) 29.51 31.94 32.34 9.59% 1.25% Common shares outstanding (end of period) 144,205,458 143,402,332 142,533,794 (1.16%) (0.61%) Weighted average common shares outstanding - basic 144,547,697 143,878,106 143,258,333 (0.89%) (0.43%) Weighted average common shares outstanding - diluted 147,222,390 146,026,188 145,184,483 (1.38%) (0.58%) Balance sheet (end of period): Total assets (4) $51,178,058 $48,800,945 $50,800,136 (0.74%) 4.10% Total loans 30,861,235 33,528,868 34,747,833 12.59% 3.64% Nonperforming assets 68,945 42,392 36,351 (47.28%) (14.25%) Total deposits 41,255,737 39,155,904 40,544,251 (1.72%) 3.55% Stockholders' equity 4,254,991 4,579,878 4,608,908 8.32% 0.63% Balance sheet (period average): Total assets $47,482,810 $48,016,643 $49,329,374 3.89% 2.73% Total loans 30,610,512 34,052,067 35,146,976 14.82% 3.22% Earning assets 42,668,069 43,084,349 44,358,594 3.96% 2.96% Total deposits 39,398,023 38,856,033 39,692,052 0.75% 2.15% Stockholders' equity 4,145,150 4,538,679 4,539,476 9.51% 0.02% Financial ratios (5): Return on average assets (6) : From continuing operations 1.58% 1.53% 1.49% Net income 1.58% 1.46% 1.49% Return on average stockholders' equity (6) : From continuing operations 18.14% 16.21% 16.14% Net income 18.11% 15.45% 16.16% Efficiency ratio (7) 59.55% 62.10% 61.73% Net interest margin (2) 4.32% 4.36% 4.23% Dividend payout ratio 31.54% 32.54% 37.01% Tangible equity ratio 7.41% 8.46% 8.19% Tier 1 risk- based capital ratio (4)(8) 8.88% 9.09% 8.92% Total risk- based capital ratio (4)(8) 11.01% 10.94% 12.05% Leverage ratio (4)(8) 7.77% 8.80% 8.74% Allowances for credit losses to total loans (9) 1.54% 1.26% 1.17% Allowances for credit losses to nonaccrual loans (9) 721.05% 1003.48% 1130.05% Net loans charged off (recovered) to average total loans (6) (0.10%) 0.06% 0.12% Nonperforming assets to total loans and foreclosed assets 0.22% 0.13% 0.10% Nonperforming assets to total assets (4) 0.13% 0.09% 0.07% ------------- Refer to Exhibit 11 for footnote explanations. UnionBanCal Corporation and Subsidiaries Financial Highlights (Unaudited) (1) Exhibit 2 Percent Change to As of and for the Six June 30, Months Ended 2006 from ------------------------- -------- (Dollars in thousands, except per June 30, June 30, June 30, share data) 2005 2006 2005 ----------------------------------- ------------ ------------ -------- Results of operations: Net interest income (2) $896,445 $935,341 4.34% Noninterest income 409,179 437,138 6.83% ------------ ------------ Total revenue 1,305,624 1,372,479 5.12% Noninterest expense 781,352 827,574 5.92% Reversal of allowance for loan losses (25,683) (8,000) (68.85%) ------------ ------------ Income from continuing operations before income taxes (2) 549,955 552,905 0.54% Taxable-equivalent adjustment 2,073 2,606 25.71% Income tax expense 180,653 186,207 3.07% ------------ ------------ Income from continuing operations $367,229 $364,092 (0.85%) (Loss)/Income from discontinued operations 1,930 (8,236) nm ------------ ------------ Net income $369,159 $355,856 (3.60%) ============ ============ Per common share: Basic earnings: From continuing operations $2.52 $2.54 0.79% Net income 2.53 2.48 (1.98%) Diluted earnings: From continuing operations 2.47 2.50 1.21% Net income 2.49 2.44 (2.01%) Dividends (3) 0.77 0.88 14.29% Book value (end of period) 29.51 32.34 9.59% Common shares outstanding (end of period) 144,205,458 142,533,794 (1.16%) Weighted average common shares outstanding - basic 145,765,905 143,566,507 (1.51%) Weighted average common shares outstanding - diluted 148,412,390 145,555,369 (1.93%) Balance sheet (end of period): Total assets (4) $51,178,058 $50,800,136 (0.74%) Total loans 30,861,235 34,747,833 12.59% Nonperforming assets 68,945 36,351 (47.28%) Total deposits 41,255,737 40,544,251 (1.72%) Stockholders' equity 4,254,991 4,608,908 8.32% Balance sheet (period average): Total assets $46,900,808 $48,676,618 3.79% Total loans 30,164,834 34,602,546 14.71% Earning assets 42,167,574 43,724,990 3.69% Total deposits 38,802,180 39,276,352 1.22% Stockholders' equity 4,176,724 4,539,080 8.68% Financial ratios (5): Return on average assets (6) : From continuing operations 1.58% 1.51% Net income 1.59% 1.47% Return on average stockholders' equity (6) : From continuing operations 17.73% 16.18% Net income 17.82% 15.81% Efficiency ratio (7) 60.09% 61.91% Net interest margin (2) 4.27% 4.29% Dividend payout ratio 30.56% 34.65% Tangible equity ratio 7.41% 8.19% Tier 1 risk-based capital ratio (4)(8) 8.88% 8.92% Total risk-based capital ratio (4)(8) 11.01% 12.05% Leverage ratio (4) (8) 7.77% 8.74% Allowance for credit losses to total loans (9) 1.54% 1.17% Allowance for credit losses to nonaccrual loans (9) 721.05% 1130.05% Net loans charged off (recovered) to average total loans (6) (0.14%) 0.09% Nonperforming assets to total loans and foreclosed assets 0.22% 0.10% Nonperforming assets to total assets (4) 0.13% 0.07% ----------------------------------- Refer to Exhibit 11 for footnote explanations. UnionBanCal Corporation and Subsidiaries Condensed Consolidated Statements of Income (Unaudited)(1) (Taxable-Equivalent Basis) Exhibit 3 For the Three Months For the Six Months Ended Ended ----------------------------- ---------------------- (Dollars in thousands, except per June 30, March 31, June 30, June 30, share data) 2005 2006 2006 2005 2006 ----------------- --------- --------- --------- ---------- ----------- Interest Income (2) Loans $438,791 $512,988 $548,017 $843,915 $1,061,005 Securities 103,019 97,351 104,008 204,283 201,359 Interest bearing deposits in banks 396 736 423 1,129 1,159 Federal funds sold and securities purchased under resale agreements 5,256 3,845 4,725 7,629 8,570 Trading account assets 1,049 1,530 1,685 1,957 3,215 --------- --------- --------- ---------- ----------- Total interest income 548,511 616,450 658,858 1,058,913 1,275,308 --------- --------- --------- ---------- ----------- Interest Expense Deposits 67,424 115,309 143,677 123,252 258,986 Federal funds purchased and securities sold under repurchase agreements 4,038 8,802 8,455 9,036 17,257 Commercial paper 7,807 12,448 19,137 12,367 31,585 Medium and long-term debt 7,459 10,397 16,875 13,991 27,272 Trust notes 238 238 238 476 476 Other borrowed funds 1,817 2,915 1,476 3,346 4,391 --------- --------- --------- ---------- ----------- Total interest expense 88,783 150,109 189,858 162,468 339,967 --------- --------- --------- ---------- ----------- Net Interest Income (2) 459,728 466,341 469,000 896,445 935,341 Reversal of allowance for loan losses (13,564) (7,000) (1,000) (25,683) (8,000) --------- --------- --------- ---------- ----------- Net interest income after reversal of allowance for loan losses 473,292 473,341 470,000 922,128 943,341 --------- --------- --------- ---------- ----------- Noninterest Income Service charges on deposit accounts 79,746 81,635 81,837 159,013 163,472 Trust and investment management fees 41,590 50,115 48,380 83,553 98,495 Insurance commissions 19,340 19,518 17,752 41,357 37,270 Brokerage commissions and fees 8,605 7,795 10,330 17,577 18,125 Merchant banking fees 18,114 8,229 8,396 24,380 16,625 Foreign exchange gains, net 8,551 7,818 8,307 16,721 16,125 Card processing fees, net 6,464 6,697 7,206 12,071 13,903 Securities gains (losses), net (13,313) (214) 1,993 (12,969) 1,779 Other 34,457 36,317 35,027 67,476 71,344 --------- --------- --------- ---------- ----------- Total noninterest income 203,554 217,910 219,228 409,179 437,138 --------- --------- --------- ---------- ----------- Noninterest Expense Salaries and employee benefits 233,976 252,495 248,637 465,734 501,132 Net occupancy 33,553 32,837 34,519 65,915 67,356 Outside services 26,468 28,609 30,704 47,715 59,313 Equipment 16,933 17,922 16,846 34,336 34,768 Software 14,731 16,344 15,323 28,706 31,667 Professional services 13,150 14,547 17,038 24,891 31,585 Communications 9,762 10,552 10,061 20,142 20,613 Foreclosed asset income (2,577) (7,367) (7,782) (2,171) (15,149) Reversal of allowance for losses on off-balance sheet commitments (4,000) (3,000) (4,000) (1,000) (7,000) Other 46,404 51,605 51,684 97,084 103,289 --------- --------- --------- ---------- ----------- Total noninterest expense 388,400 414,544 413,030 781,352 827,574 --------- --------- --------- ---------- ----------- Income from continuing operations before income taxes (2) 288,446 276,707 276,198 549,955 552,905 Taxable- equivalent adjustment 1,018 1,248 1,358 2,073 2,606 Income tax expense 99,950 94,004 92,203 180,653 186,207 --------- --------- --------- ---------- ----------- Income from Continuing Operations 187,478 181,455 182,637 367,229 364,092 --------- --------- --------- ---------- ----------- Income (loss) from discontinued operations before income taxes (412) (13,603) 431 3,227 (13,172) Income tax expense (benefit) (116) (5,093) 157 1,297 (4,936) --------- --------- --------- ---------- ----------- Income (Loss) from Discontinued Operations (296) (8,510) 274 1,930 (8,236) --------- --------- --------- ---------- ----------- Net Income $187,182 $172,945 $182,911 $369,159 $355,856 ========= ========= ========= ========== =========== Income from continuing operations per common share - basic $1.30 $1.26 $1.27 $2.52 $2.54 Net income per common share - basic $1.29 $1.20 $1.28 $2.53 $2.48 ========= ========= ========= ========== =========== Income from continuing operations per common share - diluted $1.27 $1.24 $1.26 $2.47 $2.50 Net income per common share - diluted $1.27 $1.18 $1.26 $2.49 $2.44 ========= ========= ========= ========== =========== Weighted average common shares outstanding - basic 144,548 143,878 143,258 145,766 143,567 ========= ========= ========= ========== =========== Weighted average common shares outstanding - diluted 147,222 146,026 145,184 148,412 145,555 ========= ========= ========= ========== =========== ----------------- Refer to Exhibit 11 for footnote explanations. UnionBanCal Corporation and Subsidiaries Consolidated Balance Sheets (1) Exhibit 4 (Unaudited) (Unaudited) June 30, December 31, June 30, (Dollars in thousands) 2005 2005 2006 ------------------------------- ------------ ------------ ------------ Assets Cash and due from banks $2,268,654 $2,402,212 $2,192,483 Interest bearing deposits in banks 96,051 771,164 31,691 Federal funds sold and securities purchased under resale agreements 2,782,105 796,500 1,252,514 ------------ ------------ ------------ Total cash and cash equivalents 5,146,810 3,969,876 3,476,688 Trading account assets 320,533 312,655 405,728 Securities available for sale: Securities pledged as collateral 443,717 96,994 83,229 Held in portfolio 9,899,802 8,072,286 8,573,909 Loans (net of allowance for loan losses: June 30, 2005, $394,972; December 31, 2005, $351,532; June 30, 2006, $328,338) 30,466,263 32,744,063 34,419,495 Due from customers on acceptances 25,981 19,252 21,850 Premises and equipment, net 517,073 536,074 498,555 Intangible assets 51,766 42,616 35,759 Goodwill 450,669 454,015 453,489 Other assets 1,899,573 2,113,577 2,787,288 Assets of discontinued operations to be disposed or sold 1,955,871 1,054,594 44,146 ------------ ------------ ------------ Total assets $51,178,058 $49,416,002 $50,800,136 ============ ============ ============ Liabilities Noninterest bearing $20,584,028 $19,489,377 $18,154,751 Interest bearing 20,671,709 20,592,862 22,389,500 ------------ ------------ ------------ Total deposits 41,255,737 40,082,239 40,544,251 Federal funds purchased and securities sold under repurchase agreements 611,233 651,529 281,593 Commercial paper 1,102,042 680,027 1,645,107 Other borrowed funds 132,368 134,485 320,837 Acceptances outstanding 25,981 19,252 21,850 Other liabilities 1,415,463 1,466,478 1,876,307 Medium and long-term debt 821,664 801,095 1,473,924 Junior subordinated debt payable to subsidiary grantor trust 15,564 15,338 15,111 Liabilities of discontinued operations to be extinguished or assumed 1,543,015 1,005,859 12,248 ------------ ------------ ------------ Total liabilities 46,923,067 44,856,302 46,191,228 ------------ ------------ ------------ Commitments and contingencies Stockholders' Equity Preferred stock: Authorized 5,000,000 shares; no shares issued or outstanding as of June 30, 2005, December 31, 2005 and June 30, 2006 - - - Common stock, par value $1 per share at June 30, 2005, December 31, 2005 and June 30, 2006: Authorized 300,000,000 shares; issued 153,581,401 shares as of June 30, 2005, 154,469,215 shares as of December 31, 2005 and 155,719,517 shares as of June 30, 2006 153,581 154,469 155,720 Additional paid-in capital 948,611 994,956 1,074,253 Treasury stock - 9,375,943 shares as of June 30, 2005, 10,262,143 shares as of December 31, 2005 and 13,185,723 shares as of June 30, 2006 (552,786) (612,732) (813,571) Retained earnings 3,774,097 4,141,400 4,364,354 Accumulated other comprehensive loss (68,512) (118,393) (171,848) ------------ ------------ ------------ Total stockholders' equity 4,254,991 4,559,700 4,608,908 ------------ ------------ ------------ Total liabilities and stockholders' equity $51,178,058 $49,416,002 $50,800,136 ============ ============ ============ ------------------------------- Refer to Exhibit 11 for footnote explanations. UnionBanCal Corporation and Subsidiaries Loans (Unaudited) (1) Exhibit 5 Percent Change to Three Months Ended June 30, 2006 from -------------------------- ------------------ June 30, March 31, June 30, June 30, March 31, (Dollars in millions) 2005 2006 2006 2005 2006 ------------------------ -------- -------- -------- --------- -------- Loans (period average) Commercial, financial and industrial $10,581 $12,370 $12,955 22.44% 4.73% Construction 1,244 1,523 1,724 38.59% 13.20% Mortgage - Commercial 5,451 5,652 5,662 3.87% 0.18% Mortgage - Residential 10,290 11,444 11,733 14.02% 2.53% Consumer 2,434 2,489 2,505 2.92% 0.64% Lease financing 594 569 564 (5.05%) (0.88%) -------- -------- -------- Total loans held to maturity $30,594 $34,047 $35,143 14.87% 3.22% Total loans held for sale 17 5 4 (76.47%) (20.00%) -------- -------- -------- Total loans $30,611 $34,052 $35,147 14.82% 3.22% ======== ======== ======== Nonperforming assets (period end) Nonaccrual loans: Commercial, financial and industrial $36 $19 $4 (88.89%) (78.95%) Construction 1 - - (100.00%) nm Mortgage - Commercial 11 8 17 54.55% 112.50% Lease 18 15 15 (16.67%) 0.00% -------- -------- -------- Total nonaccrual loans 66 42 36 (45.45%) (14.29%) Foreclosed assets 3 - - (100.00%) nm -------- -------- -------- Total nonperforming assets $69 $42 $36 (47.83%) (14.29%) ======== ======== ======== Loans 90 days or more past due and still accruing $4 $5 $3 (25.00%) (40.00%) ======== ======== ======== Analysis of Allowances for Credit Losses Beginning balance $402 $352 $340 Reversal of allowance for loan losses (14) (7) (1) Loans charged off: Commercial, financial and industrial (4) (11) (18) Consumer (1) (1) (1) -------- -------- -------- Total loans charged off (5) (12) (19) -------- -------- -------- Loans recovered: Commercial, financial and industrial 12 2 9 Consumer - 1 - Lease financing - 4 - -------- -------- -------- Total loans recovered 12 7 9 -------- -------- -------- Net loans (charged off) recovered 7 (5) (10) -------- -------- -------- Ending balance of allowance for loan losses $395 $340 $329 Allowance for off- balance sheet commitment losses 81 83 79 -------- -------- -------- $- Allowances for credit losses $476 $423 $408 ======== ======== ======== ------------------------ Refer to Exhibit 11 for footnote explanations. UnionBanCal Corporation and Subsidiaries Net Interest Income (Unaudited) (1) Exhibit 6 For the Three Months Ended -------------------------------- June 30, 2005 ------------------------------- Interest Average Average Income/ Yield/ (Dollars in thousands) Balance Expense Rate (6) (10) (10) ------------------------------------- ------------ --------- --------- Assets Loans (11) $30,610,512 $438,791 5.74 % Securities - taxable 10,959,220 101,672 3.71 Securities - tax-exempt 66,207 1,347 8.14 Interest bearing deposits in banks 74,200 396 2.14 Federal funds sold and securities purchased under resale agreements 696,177 5,256 3.03 Trading account assets 261,753 1,049 1.61 ------------ --------- Total earning assets 42,668,069 548,511 5.15 --------- Allowance for loan losses (399,243) Cash and due from banks 2,307,361 Premises and equipment, net 521,362 Other assets 2,385,261 ------------ Total assets $47,482,810 ============ Liabilities Deposits: Interest bearing $12,444,947 32,017 1.03 Savings and consumer time 4,703,221 14,129 1.20 Large time 3,441,815 21,278 2.48 ------------ --------- Total interest bearing deposits 20,589,983 67,424 1.31 ------------ --------- Federal funds purchased and securities sold under repurchase agreements 1,160,373 8,217 2.84 Net funding allocated from (to) discontinued operations (12) (590,255) (4,179) 2.84 Commercial paper 1,158,629 7,807 2.70 Other borrowed funds 197,694 1,817 3.69 Medium and long-term debt 799,514 7,459 3.74 Trust notes 15,619 238 6.10 ------------ --------- Total borrowed funds 2,741,574 21,359 3.12 ------------ --------- Total interest bearing liabilities 23,331,557 88,783 1.53 --------- Noninterest bearing deposits 18,808,040 Other liabilities 1,198,063 ------------ Total liabilities 43,337,660 Stockholders' Equity Common equity 4,145,150 ------------ Total stockholders' equity 4,145,150 ------------ Total liabilities and stockholders' equity $47,482,810 ============ Reported Net Interest Income/Margin Net interest income/margin (taxable-equivalent basis) 459,728 4.32 % Less: taxable-equivalent adjustment 1,018 --------- Net interest income $458,710 ========= For the Three Months Ended ------------------------------ June 30, 2006 ------------------------------- Interest Average Average Income/ Yield/ (Dollars in thousands) Balance Expense Rate (6) (10) (10) --------------------------------------------------- --------- -------- Assets Loans (11) $35,146,976 $548,017 6.25 % Securities - taxable 8,349,759 102,733 4.92 Securities - tax-exempt 63,222 1,275 8.06 Interest bearing deposits in banks 34,462 423 4.92 Federal funds sold and securities purchased under resale agreements 379,412 4,725 4.99 Trading account assets 384,763 1,685 1.76 ------------ --------- Total earning assets 44,358,594 658,858 5.95 --------- Allowance for loan losses (334,556) Cash and due from banks 2,107,846 Premises and equipment, net 506,607 Other assets 2,690,883 ------------ Total assets $49,329,374 ============ Liabilities Deposits: Interest bearing $12,614,869 65,457 2.08 Savings and consumer time 4,470,764 21,502 1.93 Large time 5,062,473 56,718 4.49 ------------ --------- Total interest bearing deposits 22,148,106 143,677 2.60 ------------ --------- Federal funds purchased and securities sold under repurchase agreements 748,050 8,902 4.77 Net funding allocated from (to) discontinued operations (12) (36,123) (447) 4.97 Commercial paper 1,650,266 19,137 4.65 Other borrowed funds 108,095 1,476 5.47 Medium and long-term debt 1,179,432 16,875 5.74 Trust notes 15,167 238 6.28 ------------ --------- Total borrowed funds 3,664,887 46,181 5.05 ------------ --------- Total interest bearing liabilities 25,812,993 189,858 2.95 --------- Noninterest bearing deposits 17,543,946 Other liabilities 1,432,959 ------------ Total liabilities 44,789,898 Stockholders' Equity Common equity 4,539,476 ------------ Total stockholders' equity 4,539,476 ------------ Total liabilities and stockholders' equity $49,329,374 ============ Reported Net Interest Income/Margin Net interest income/margin (taxable-equivalent basis) 469,000 4.23 % Less: taxable-equivalent adjustment 1,358 --------- Net interest income $467,642 ========= Average Assets and Liabilities of Discontinued Operations for Period Ended: June 30, June 30, 2005 2006 ----------- -------- Assets $1,981,576 $79,188 Liabilities $1,391,321 $43,065 Net Asset $590,255 $36,123 -------------------------------------------------------------------- Refer to Exhibit 11 for footnote explanations. UnionBanCal Corporation and Subsidiaries Net Interest Income (Unaudited) (1) Exhibit 7 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 ========= For the Three Months Ended ------------------------------- June 30, 2006 ------------------------------- Interest Average Average Income/ Yield/ (Dollars in thousands) Balance Expense Rate (6) (10) (10) ----------------------------- ------------- --------- -------- Assets Loans: (11) $35,146,976 $548,017 6.25 % Securities - taxable 8,349,759 102,733 4.92 Securities - tax-exempt 63,222 1,275 8.06 Interest bearing deposits in banks 34,462 423 4.92 Federal funds sold and securities purchased under resale agreements 379,412 4,725 4.99 Trading account assets 384,763 1,685 1.76 ------------- --------- Total earning assets 44,358,594 658,858 5.95 --------- Allowance for loan losses (334,556) Cash and due from banks 2,107,846 Premises and equipment, net 506,607 Other assets 2,690,883 ------------- Total assets $49,329,374 ============= Liabilities Deposits: Interest bearing $12,614,869 65,457 2.08 Savings and consumer time 4,470,764 21,502 1.93 Large time 5,062,473 56,718 4.49 ------------- --------- Total interest bearing deposits 22,148,106 143,677 2.60 ------------- --------- Federal funds purchased and securities sold under repurchase agreements 748,050 8,902 4.77 Net funding allocated from (to) discontinued operations (12) (36,123) (447) 4.97 Commercial paper 1,650,266 19,137 4.65 Other borrowed funds 108,095 1,476 5.47 Medium and long-term debt 1,179,432 16,875 5.74 Trust notes 15,167 238 6.28 ------------- --------- Total borrowed funds 3,664,887 46,181 5.05 ------------- --------- Total interest bearing liabilities 25,812,993 189,858 2.95 --------- Noninterest bearing deposits 17,543,946 Other liabilities 1,432,959 ------------- Total liabilities 44,789,898 Stockholders' Equity Common equity 4,539,476 ------------- Total stockholders' equity 4,539,476 ------------- Total liabilities and stockholders' equity $49,329,374 ============= Reported Net Interest Income/Margin Net interest income/margin (taxable-equivalent basis) 469,000 4.23 % Less: taxable-equivalent adjustment 1,358 --------- Net interest income $467,642 ========= Average Assets and Liabilities of Discontinued Operations for Period Ended: March 31, June 30, 2006 2006 --------- -------- Assets $618,653 $79,188 Liabilities $561,565 $43,065 Net Asset $57,088 $36,123 ----------------------------------------- Refer to Exhibit 11 for footnote explanations. UnionBanCal Corporation and Subsidiaries Net Interest Income (Unaudited) (1) Exhibit 8 For the Six Months Ended ----------------------------------------