UnionBanCal Corporation Announces Second Quarter Earnings from Continuing Operations of $0.97 Per Share

UnionBanCal Corporation (NYSE:UB): Second Quarter 2008 Highlights: -- Net income of $1.02 per diluted common share; earnings from continuing operations of $0.97 per diluted common share, up 9 percent from first quarter -- Net interest income up 11 percent versus first quarter and up 19 percent year-over-year -- Net interest margin of 3.74 percent, up 19 basis points over prior quarter -- Average total loans up 17 percent year-over-year -- Average core commercial loans up 25 percent -- Average residential mortgage loans up 15 percent -- Average commercial real estate loans up 26 percent -- Average noninterest bearing deposits comprised 29.8 percent of average total deposits -- Average core deposits comprised 74.7 percent of average total deposits -- Average all-in cost of funds was 1.56 percent -- Total provision for credit losses was $100 million; net charge-offs were $31 million -- Nonperforming assets were 0.37 percent of total assets at quarter-end -- Tangible common equity ratio was 7.22 percent at quarter-end   Other Highlights: -- The Company completed the sale of its insurance brokerage business to BB&T Insurance Services on June 2, 2008 -- Earnings from continuing operations forecast of $1.10 to $1.20 per share for third quarter; increasing full year forecast to $4.20 to $4.45 per share UnionBanCal Corporation (NYSE:UB) today reported second quarter 2008 net income of $141.3 million, or $1.02 per diluted common share. This compares with $165.4 million, or $1.19 per diluted common share, a year earlier, and $108.6 million, or $0.79 per diluted common share, in first quarter 2008. Net income for second quarter 2008 included an $11.5 million after-tax, or $0.08 per diluted common share, net gain on the sale of the insurance brokerage business, and a $4.4 million after-tax, or $0.03 per diluted common share, gain on the partial redemption of MasterCard Inc. common stock. Net income for first quarter 2008 included a $14.1 million after-tax, or $0.10 per diluted common share, write-down of goodwill related to the assessment of the valuation of the insurance brokerage business; an $8.7 million after-tax, or $0.06 per diluted common share, gain on the partial redemption of Visa Inc. common stock; and a $3.1 million after-tax, or $0.02 per diluted common share, reversal of Visa-related litigation reserves. Earnings from continuing operations for second quarter 2008 were $0.97 per diluted common share, compared with $1.19 per diluted common share a year earlier, and $0.89 per diluted common share in first quarter 2008. Pre-tax, pre-provision income from continuing operations for second quarter 2008 was $298 million, up 13.3 percent compared with first quarter 2008, and up 19.4 percent compared with second quarter 2007. Excluding the Visa and MasterCard items from both quarters, pre-tax, pre-provision income from continuing operations improved 19.3 percent in second quarter, as compared with first quarter. First half 2008 earnings from continuing operations were $1.86 per diluted common share. This compares with earnings from continuing operations for first half 2007 of $2.25 per diluted common share. "I am pleased with the positive financial results we posted in the second quarter,” said Masaaki Tanaka, President and Chief Executive Officer. "Our strong core earnings growth, even in this difficult operating environment, validates our balanced, lower-risk business model. I am particularly pleased with our strong organic loan growth and deposit growth. Average loans increased over 6 percent compared with first quarter, and core deposit growth was 2 percent for the same period. Net interest margin was 3.74 percent, a significant improvement of 19 basis points over prior quarter. While total revenue expanded 8.2 percent over first quarter, noninterest expense increased only 4.0 percent, providing strong operating leverage.” Mr. Tanaka continued: "Our second quarter provision for credit losses increased to $100 million, however, net charge-offs were only $31 million, or 28 basis points of total loans. While charge-offs have been relatively modest in recent quarters, our provision levels continue to reflect our cautious view regarding the economy and the global financial markets. "Our liquidity position is strong and we continue to internally generate capital at a rate sufficient to support our growing balance sheet. As a result, we have not had to issue any type of capital in more than two years. Our tangible common equity ratio at June 30 was a strong 7.22 percent. Our full-year projected dividend payout ratio remains below 50 percent, and we are confident that our dividend is secure going forward,” concluded Mr. Tanaka. "Union Bank is in an enviable position of having both the capital base and funding capacity that allows us to continue recording high quality robust loan growth across our commercial, residential and consumer portfolios. As can be seen by the relatively low level of charge-offs and nonaccruals, Union Bank’s portfolios continue to outperform others in this challenging economic environment. With charge-offs over the last three quarters totaling only $48 million, and provisioning of $240 million over the same time frame, Union Bank is well-positioned to withstand these stressful financial times,” said Philip Flynn, Chief Operating Officer. Summary of Second Quarter Results From Continuing Operations Second Quarter Total Revenue For second quarter 2008, total revenue (taxable-equivalent net interest income plus noninterest income) was $713 million, up 12.6 percent compared with second quarter 2007. Net interest income increased 19 percent and noninterest income decreased 1.0 percent. Compared with first quarter 2008, total revenue was up 8.2 percent, with net interest income up 10.8 percent and noninterest income up 2.2 percent. Second Quarter Net Interest Income (Taxable-equivalent) Net interest income was $513 million in second quarter 2008, up $82 million, or 19 percent, from the same quarter a year ago, primarily due to strong loan growth and lower rates paid on interest bearing liabilities, partially offset by lower yields on earning assets and a deposit mix shift from noninterest bearing and low-cost deposits into higher-cost deposits. Average earning assets in second quarter 2008 increased $6.5 billion, or 13.4 percent, compared to second quarter 2007, primarily due to a $6.7 billion, or 17.1 percent, increase in average loans. Average commercial loans increased $2.1 billion, or 14.5 percent, with average core commercial loans, which exclude title and escrow loans, up $3.3 billion, or 24.9 percent. Title and escrow loans, which are highly rate-advantaged to the borrower and more volatile than other commercial loans, decreased $1.1 billion, or 76.6 percent. Average residential mortgage loans increased $1.9 billion, or 15.1 percent; average commercial mortgage loans increased $1.6 billion, or 25.9 percent; and average construction loans increased $0.3 billion, or 11.8 percent, year over year. Compared to second quarter 2007, average interest bearing deposits increased $2.8 billion, or 10.0 percent, while average noninterest bearing deposits decreased $2.1 billion, or 14.1 percent. The decline in noninterest bearing deposits was due to a $1.1 billion, or 52.8 percent, decrease in average title and escrow deposits; a $0.8 billion, or 8.0 percent, decrease in average other commercial noninterest bearing deposits; and a $0.2 billion, or 8.1 percent, decrease in average consumer noninterest bearing deposits. Average other commercial and average consumer noninterest bearing deposits both declined primarily due to a mix shift toward interest-paying deposit accounts, and average title and escrow deposits decreased due to reduced residential real estate activity. Average noninterest bearing deposits represented 29.8 percent of average total deposits in second quarter 2008. The annualized average all-in cost of funds improved to 1.56 percent, compared with 2.62 percent in second quarter 2007, and 2.26 percent in first quarter 2008. The Company’s average core deposit-to-loan ratio was 70.9 percent. The average yield on earning assets of $54.9 billion was 5.24 percent, down 87 basis points from second quarter 2007, with the average loan yield decreasing 94 basis points. The average rate on interest bearing liabilities of $40.2 billion was 2.06 percent, down 178 basis points compared with second quarter 2007, primarily reflecting decreases in short-term interest rates. The net interest margin in second quarter 2008 was 3.74 percent, an increase of 18 basis points compared with second quarter 2007. Second quarter 2008 net interest income increased 10.8 percent from first quarter 2008. Average loans increased $2.8 billion, or 6.5 percent. Average commercial loans increased $1.2 billion, or 7.5 percent, which was comprised of an increase in core commercial loans of $1.3 billion, or 8.7 percent, offset by a decrease in title and escrow loans of $146 million, or 29.4 percent. Average commercial mortgage loans increased $571 million, or 7.9 percent; average residential mortgage loans increased $502 million, or 3.6 percent; and average construction loans increased $92 million, or 3.7 percent. Average noninterest bearing deposits increased $0.3 billion, or 2.1 percent, while average interest bearing deposits decreased $0.7 billion, or 2.2 percent. The average yield on earning assets decreased 48 basis points and the average rate on interest bearing liabilities decreased 95 basis points. The net interest margin increased 19 basis points to 3.74 percent. Second Quarter Noninterest Income In second quarter 2008, noninterest income was $199.6 million, down $2.0 million, or 1.0 percent, from the same quarter a year ago. Service charges on deposit accounts were flat with higher account analysis fees offset by lower overdraft fees. Trust and investment management fees increased $4.1 million, or 10.5 percent, primarily due to an increase in trust assets. Trading account revenue increased $2.8 million, or 20.6 percent, primarily due to higher foreign exchange and securities trading income. Gains on private capital investments, net, were $1.3 million, compared with $20.2 million in the same quarter a year ago. The Company recorded a $7.1 million pre-tax gain on the redemption of approximately 23,000 shares of MasterCard Inc. common stock in second quarter 2008. The Company held approximately 59,000 shares of MasterCard Inc. common stock at June 30, 2008. Excluding gains on private capital investments, which were unusually large a year ago, and the gain on the redemption of MasterCard stock, noninterest income increased 5.4 percent from the same quarter a year ago. Second quarter 2008 noninterest income increased $4.2 million, or 2.2 percent, compared with first quarter 2008. Service charges on deposit accounts were $77.7 million, up $3.0 million, or 4.0 percent, primarily due to higher account analysis fees resulting from a decrease in the earnings credit rate. Trading account revenue increased $5.7 million, or 51.5 percent, primarily due to higher foreign exchange trading income and downward valuation adjustments for interest rate derivatives and losses on distressed debt recorded in first quarter 2008. The Company recorded a $7.1 million pre-tax gain on the redemption of MasterCard Inc. common stock in second quarter 2008. In first quarter 2008, the Company recorded a $14.2 million pre-tax gain on the redemption of approximately 332,000 shares of Visa Inc. common stock. The Company held approximately 527,000 shares of Visa Inc. common stock at June 30, 2008. Second Quarter Noninterest Expense Noninterest expense for second quarter 2008 was $419.3 million, an increase of $36.3 million, or 9.5 percent, compared with second quarter 2007. Salaries and employee benefits expense increased $11.4 million, or 4.9 percent, primarily due to annual merit increases and higher accruals for performance-related incentive expense, partially offset by lower pension expense. The provision for losses on off-balance sheet commitments was $5 million in second quarter 2008, compared to zero in second quarter 2007. Other noninterest expense increased $5.4 million, or 17.2 percent, primarily due to higher regulatory agency fees in second quarter 2008 as credits available from prior quarters were exhausted. Noninterest expense increased $16.1 million, or 4.0 percent, compared with first quarter 2008. Salaries and other compensation expense increased $12.1 million, or 6.3 percent, primarily due to annual merit increases and higher accruals for performance-related incentive expense. Employee benefits expense decreased $10.4 million, or 21.0 percent, primarily due to annual seasonal factors that result in lower payroll taxes and 401(k) matching contributions. Advertising and public relations expense increased $4.8 million, or 58.8 percent, primarily due to timing of marketing promotions. The provision for losses on off-balance sheet commitments was $5 million, compared to $8 million in first quarter 2008. Other noninterest expense increased $6.2 million, or 20.6 percent, primarily due to the reversal of a portion of legal reserves relative to the Company’s proportionate share of Visa litigation charges recorded in first quarter 2008, and higher regulatory agency fees in second quarter 2008 as credits available from prior quarters were exhausted. Income Tax Expense Income tax expense for second quarter 2008 was $61.6 million. The effective tax rate for second quarter 2008 was 31.4 percent, compared with an effective tax rate of 31.6 percent for second quarter 2007. The effective tax rate for first quarter 2008 was 32.3 percent. The effective tax rate for the first half of 2008 was 31.8 percent, compared with an effective tax rate of 32.5 percent for the first half of 2007. Year-to-Date Results Total revenue for the first half of 2008 was $1.37 billion, an increase of $117 million, or 9.3 percent, compared with total revenue of $1.25 billion in the same period of 2007. Net interest income increased $114 million, or 13.3 percent, and noninterest income increased $3 million, or 0.7 percent. Net interest income was $976 million in the first half of 2008, a $114 million increase from prior year, primarily due to strong loan growth and lower rates paid on interest bearing liabilities, partially offset by lower yields on earning assets and a deposit mix shift from noninterest bearing and low-cost deposits into higher-cost deposits. Average loans increased $5.4 billion, or 14.1 percent, while average total deposits increased $1.4 billion, or 3.4 percent. A $3.7 billion, or 13.9 percent, increase in average interest bearing deposits was partially offset by a $2.3 billion, or 15.3 percent, decrease in average noninterest bearing deposits. The net interest margin was 3.65 percent, up 9 basis points. Noninterest income in the first half of 2008 was $395 million, an increase of $3 million, or 0.7 percent, over the same period in 2007. Service charges on deposit accounts were flat, with higher account analysis fees related to lower earnings credit rates offset by lower overdraft fees on lower deposit balances. Trust and investment management fees increased $11 million, or 13.9 percent, primarily due to higher assets under management. Merchant banking fees increased $5 million, or 27.9 percent, primarily due to higher referral fees. Gains on private capital investments, net, were $2.4 million, compared with $29.3 million in the same period last year. The Company recorded a $14.2 million pre-tax gain on the partial redemption of Visa Inc. common stock and a $7.1 million pre-tax gain on the partial redemption of MasterCard Inc. common stock in first half 2008. For the first half of 2008, noninterest expense increased $46.8 million, or 6.0 percent, over the first half of 2007. Salaries and other compensation expense increased $15 million, or 4.0 percent, primarily due to annual merit increases and higher accruals for performance-related incentive expense. Employee benefits expense was flat. The provision for off-balance sheet commitments was $13 million in the first half of 2008, compared with $1 million in the first half of 2007. Credit Quality Nonperforming assets at June 30, 2008, were $225 million, or 0.37 percent of total assets. This compares with $132 million, or 0.23 percent of total assets, at March 31, 2008, and $30 million, or 0.06 percent of total assets, at June 30, 2007. In second quarter 2008, the total provision for credit losses was $100 million, compared with a total provision for credit losses of $80 million in first quarter 2008, and a total provision for credit losses of $5 million in second quarter 2007. The total provision for credit losses is comprised of the provision for loan losses and the provision for losses on off-balance sheet commitments, which is classified in noninterest expense. The increase in provision expense in second quarter was primarily due to increased criticized assets, charge-offs and loan growth. At quarter-end, the Company maintained approximately $115 million in reserves against the homebuilder portfolio, which had approximately $700 million outstanding at June 30, 2008. In second quarter 2008, there were $13 million in net charge-offs for the homebuilder portfolio. Net loans charged-off for second quarter 2008 were $31 million, or 0.28 percent of average total loans. This compares with net loans charged-off of $12 million, or 0.11 percent of average total loans, in first quarter 2008, and net loans charged-off of $2 million, or 0.02 percent of average total loans, in second quarter 2007. At June 30, 2008, the allowance for credit losses as a percent of total loans and as a percent of nonaccrual loans was 1.37 percent and 291 percent, respectively. These ratios were 1.29 percent and 445 percent, respectively, at March 31, 2008, and 1.11 percent and 1457 percent, respectively, at June 30, 2007. Balance Sheet and Capital Ratios At June 30, 2008, the Company had total assets of $60.6 billion. Total loans were $46.0 billion and total deposits were $42.6 billion, resulting in a period-end deposit-to-loan ratio of 92.5 percent. Core deposits at period-end were $32.4 billion, resulting in a core deposit-to-loan ratio of 70.4 percent. At period-end, total stockholders’ equity was $4.7 billion and the tangible common equity ratio was 7.22 percent. The Company’s Tier I and total risk-based capital ratios at period-end were 7.96 percent and 10.84 percent, respectively. Stock Repurchases During second quarter 2008, the Company repurchased approximately 35,000 shares of common stock at a total price of $1.8 million, or an average of $50.85 per repurchased share. During the first half of 2008, the Company repurchased approximately 37,000 shares of common stock at a total price of $1.9 million, or an average of $50.73 per repurchased share. All first half repurchases were in conjunction with the vesting of restricted stock grants. At June 30, 2008, the Company had remaining repurchase authority of $510 million. Common shares outstanding at June 30, 2008, were 138 million, a decrease of 0.3 million shares, or 0.2 percent, from one year earlier. Third Quarter and Full Year 2008 Forecast The Company currently estimates that third quarter 2008 earnings from continuing operations will be in the range of $1.10 to $1.20 per diluted common share, including a total provision for credit losses of $65 million to $85 million. The Company currently estimates that full year 2008 earnings from continuing operations will be in the range of $4.20 to $4.45 per diluted common share, including a total provision for credit losses of $290 million to $340 million. Discontinued Operations Commencing with second quarter 2008, the results of the insurance brokerage business have been reported in discontinued operations and all prior periods have been restated to reflect this accounting treatment. Commencing with fourth quarter 2007, the results of the retirement recordkeeping business have been reported in discontinued operations and all prior periods have been restated to reflect this accounting treatment. Income from discontinued operations in second quarter was $7 million, primarily due to an after-tax gain of $11.5 million on the sale of the insurance brokerage business. 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 provision for credit losses, gains on the partial redemption of MasterCard Inc. common stock and Visa Inc. common stock, and Visa-related credits and reversals, 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 the Company's earnings forecasts, provision for credit losses, dividends, liquidity position, capital, loan portfolio, credit quality, competitive positioning, future performance and earnings power. There are numerous risks and uncertainties that could and will cause actual results to differ materially from those discussed in the Company’s forward-looking statements. Many of these factors are beyond the Company’s ability to control or predict and could have a material adverse effect on the Company’s stock price, financial condition, and results of operations or prospects. Such risks and uncertainties include, but are not limited to, adverse economic and fiscal conditions in California; increased energy costs; global political and general economic conditions related to the war on terrorism and other hostilities; fluctuations in interest rates; the controlling interest in UnionBanCal Corporation of The Bank of Tokyo-Mitsubishi UFJ, Ltd., which is a wholly-owned subsidiary of Mitsubishi UFJ Financial Group, Inc.; the effects of filing taxes on the worldwide unitary basis; competition in the banking and financial services industries; deposit pricing pressures; the levels of commercial and residential real estate activity in our market; adverse effects of current and future banking laws, rules and regulations and their enforcement, including the previously disclosed agreements with regulatory and governmental authorities related to the Company’s Bank Secrecy Act/Anti-Money Laundering compliance program; effects of governmental fiscal or monetary policies; legal or regulatory proceedings or investigations; declines or disruptions in the stock, bond, or credit markets which may adversely affect the Company or the Company’s borrowers or other customers; changes in accounting practices or requirements; and risks associated with various strategies the Company may pursue, including potential acquisitions, divestitures and restructurings. A complete description of the Company, including related risk factors, is discussed in the Company’s public filings with the Securities and Exchange Commission, which are available by calling (415) 765-2969 or online at http://www.sec.gov. All forward-looking statements included in this press release are based on information available at the time of the release, and the Company assumes no obligation to update any forward-looking statement. Conference Call and Webcast The Company will conduct a conference call to review second quarter 2008 results at 8:30 AM Pacific Time (11:30 AM Eastern Time) on July 21, 2008. Interested parties calling from locations within the United States should call 888-428-4480 (651-291-0900 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), July 21, 2008, through 11:59 PM Pacific Time, July 28, 2008 (2:59 AM Eastern Time, July 29, 2008). The reservation number for this playback is 952997. Based in San Francisco, UnionBanCal Corporation is a bank holding company with assets of $60.6 billion at June 30, 2008. Its primary subsidiary, Union Bank of California, N.A., had 337 banking offices in California, Oregon and Washington, and 2 international offices at June 30, 2008. UnionBanCal Corporation and Subsidiaries Financial Highlights (Unaudited)         Percent Change to As of and for the Three Months Ended June 30, 2008 from June 30, March 31, June 30, June 30,   March 31, (Dollars in thousands, except per share data)   2007     2008     2008   2007     2008   Results of operations: Net interest income (1) $ 431,039 $ 463,104 $ 512,887 18.99 % 10.75 % Noninterest income   201,661     195,396     199,626   (1.01 %) 2.16 % Total revenue 632,700 658,500 712,513 12.61 % 8.20 % Noninterest expense 383,051 403,206 419,312 9.47 % 3.99 % Provision for loan losses   5,000     72,000     95,000   nm 31.94 % Income from continuing operations before income taxes (1) 244,649 183,294 198,201 (18.99 %) 8.13 % Taxable-equivalent adjustment 2,251 2,526 2,329 3.47 % (7.80 %) Income tax expense   76,658     58,370     61,574   (19.68 %) 5.49 % Income from continuing operations 165,740 122,398 134,298 (18.97 %) 9.72 % Income (loss) from discontinued operations   (386 )   (13,808 )   7,047   nm nm Net income $ 165,354   $ 108,590   $ 141,345   (14.52 %) 30.16 %   Per common share: Basic earnings: From continuing operations $ 1.21 $ 0.89 $ 0.98 (19.01 %) 10.11 % Net income 1.20 0.79 1.03 (14.17 %) 30.38 % Diluted earnings: From continuing operations 1.19 0.89 0.97 (18.49 %) 8.99 % Net income 1.19 0.79 1.02 (14.29 %) 29.11 % Dividends (2) 0.52 0.52 0.52 0.00 % 0.00 % Book value (end of period) 33.45 34.17 34.11 1.97 % (0.18 %) Common shares outstanding (end of period) (3) 138,314,564 137,944,897 138,050,671 (0.19 %) 0.08 % Weighted average common shares outstanding - basic (3) 137,476,765 137,005,702 137,208,620 (0.20 %) 0.15 % Weighted average common shares outstanding - diluted (3) 139,137,955 137,609,383 137,899,057 (0.89 %) 0.21 %   Balance sheet (end of period): Total assets (4) $ 53,173,833 $ 57,933,325 $ 60,593,921 13.95 % 4.59 % Total loans 37,743,222 43,499,968 46,041,358 21.99 % 5.84 % Nonperforming assets 29,826 131,687 224,944 nm 70.82 % Total deposits 41,980,999 45,240,821 42,604,419 1.49 % (5.83 %) Medium and long-term debt 1,835,495 1,963,952 2,809,329 53.06 % 43.04 % Stockholders' equity 4,627,147 4,713,206 4,708,790 1.76 % (0.09 %)   Balance sheet (period average): Total assets $ 52,986,633 $ 56,632,995 $ 59,269,965 11.86 % 4.66 % Total loans 38,839,769 42,701,453 45,494,161 17.13 % 6.54 % Earning assets 48,443,233 52,188,085 54,935,058 13.40 % 5.26 % Total deposits 42,564,891 43,613,754 43,203,180 1.50 % (0.94 %) Stockholders' equity 4,588,061 4,718,409 4,616,596 0.62 % (2.16 %)   Financial ratios (5): Return on average assets (6): From continuing operations 1.25 % 0.87 % 0.91 % Net income 1.25 % 0.77 % 0.96 % Return on average stockholders' equity (6): From continuing operations 14.49 % 10.43 % 11.70 % Net income 14.46 % 9.26 % 12.31 % Efficiency ratio (7) 60.54 % 60.00 % 58.14 % Net interest margin (1) 3.56 % 3.55 % 3.74 % Dividend payout ratio 42.98 % 58.43 % 53.06 % Tangible common equity ratio 7.87 % 7.42 % 7.22 % Tier 1 risk-based capital ratio (4) (8) 8.59 % 8.07 % 7.96 % Total risk-based capital ratio (4) (8) 11.54 % 10.97 % 10.84 % Leverage ratio (4) (8) 8.30 % 8.09 % 7.95 % Allowance for loan losses to: Total loans 0.89 % 1.06 % 1.14 % Nonaccrual loans 1,170.08 % 367.17 % 243.59 % Allowances for credit losses to (9) : Total loans 1.11 % 1.29 % 1.37 % Nonaccrual loans 1,456.97 % 445.20 % 291.42 % Net loans charged off to average total loans (6) 0.02 % 0.11 % 0.28 % Nonperforming assets to total loans and foreclosed assets 0.08 % 0.30 % 0.49 % Nonperforming assets to total assets (4) 0.06 % 0.23 % 0.37 %   Refer to Exhibit 11 for footnote explanations. UnionBanCal Corporation and Subsidiaries Financial Highlights (Unaudited)         As of and for the Six Months Ended Percent Change toJune 30, 2008 from June 30, June 30, June 30, (Dollars in thousands, except per share data)   2007     2008   2007 Results of operations: Net interest income (1) $ 861,583 $ 975,991 13.28 % Noninterest income   392,403     395,022   0.67 % Total revenue 1,253,986 1,371,013 9.33 % Noninterest expense 775,670 822,518 6.04 % (Reversal of) provision for loan losses   9,000     167,000   nm Income from continuing operations before income taxes (1) 469,316 381,495 (18.71 %) Taxable-equivalent adjustment 4,366 4,855 11.20 % Income tax expense   151,063     119,944   (20.60 %) Income from continuing operations 313,887 256,696 (18.22 %) Income (loss) from discontinued operations   1,078     (6,761 ) nm Net income $ 314,965   $ 249,935   (20.65 %)   Per common share: Basic earnings: From continuing operations $ 2.28 $ 1.87 (17.98 %) Net income 2.29 1.82 (20.52 %) Diluted earnings: From continuing operations 2.25 1.86 (17.33 %) Net income 2.26 1.82 (19.47 %) Dividends (2) 0.99 1.04 5.05 % Book value (end of period) 33.45 34.11 1.97 % Common shares outstanding (end of period) (3) 138,314,564 138,050,671 (0.19 %) Weighted average common shares outstanding - basic (3) 137,708,257 137,107,161 (0.44 %) Weighted average common shares outstanding - diluted (3) 139,360,012 137,674,584 (1.21 %)   Balance sheet (end of period): Total assets (4) $ 53,173,833 $ 60,593,921 13.95 % Total loans 37,743,222 46,041,358 21.99 % Nonperforming assets 29,826 224,944 nm Total deposits 41,980,999 42,604,419 1.49 % Medium and long-term debt 1,835,495 2,809,329 53.06 % Stockholders' equity 4,627,147 4,708,790 1.76 %   Balance sheet (period average): Total assets $ 52,913,455 $ 57,951,110 9.52 % Total loans 38,649,947 44,097,805 14.10 % Earning assets 48,399,330 53,561,569 10.67 % Total deposits 41,968,353 43,408,469 3.43 % Stockholders' equity 4,549,348 4,667,429 2.60 %   Financial ratios (5): Return on average assets (6): From continuing operations 1.20 % 0.89 % Net income 1.20 % 0.87 % Return on average stockholders' equity (6): From continuing operations 13.91 % 11.06 % Net income 13.96 % 10.77 % Efficiency ratio (7) 61.78 % 59.03 % Net interest margin (1) 3.56 % 3.65 % Dividend payout ratio 43.42 % 55.61 % Tangible common equity ratio 7.87 % 7.22 % Tier 1 risk-based capital ratio (4) (8) 8.59 % 7.96 % Total risk-based capital ratio (4) (8) 11.54 % 10.84 % Leverage ratio (4) (8) 8.30 % 7.95 % Allowance for loan losses to: Total loans 0.89 % 1.14 % Nonaccrual loans 1,170.08 % 243.59 % Allowances for credit losses to (9) : Total loans 1.11 % 1.37 % Nonaccrual loans 1,456.97 % 291.42 % Net loans charged off to average total loans (6) 0.02 % 0.20 % Nonperforming assets to total loans and foreclosed assets 0.08 % 0.49 % Nonperforming assets to total assets (4) 0.06 % 0.37 %   Refer to Exhibit 11 for footnote explanations. UnionBanCal Corporation and Subsidiaries Condensed Consolidated Statements of Income (Unaudited) (Taxable-Equivalent Basis)             For the Three Months Ended For the Six Months Ended June 30, March 31, June 30, June 30, (Amounts in thousands, except per share data)   2007     2008     2008     2007   2008   Interest Income (1) Loans $ 618,204 $ 633,362 $ 617,508 $ 1,221,706 $ 1,250,870 Securities 109,838 106,045 98,338 218,259 204,383 Interest bearing deposits in banks 1,295 128 228 2,404 356 Federal funds sold and securities purchased under resale agreements 7,809 2,693 1,093 18,961 3,786 Trading account assets   1,601     2,804     1,119     3,302   3,923   Total interest income   738,747     745,032     718,286     1,464,632   1,463,318     Interest Expense Deposits 246,071 220,660 144,509 468,226 365,169 Federal funds purchased and securities sold under repurchase agreements 10,312 15,715 13,057 24,031 28,772 Commercial paper 17,429 9,792 8,279 39,693 18,071 Medium and long-term debt 28,973 19,457 19,692 48,668 39,149 Trust notes 238 238 238 476 476 Other borrowed funds   4,685     16,066     19,624     21,955   35,690   Total interest expense   307,708     281,928     205,399     603,049   487,327     Net Interest Income (1) 431,039 463,104 512,887 861,583 975,991 Provision for loan losses   5,000     72,000     95,000     9,000   167,000   Net interest income after provision for loan losses   426,039     391,104     417,887     852,583   808,991     Noninterest Income Service charges on deposit accounts 77,218 74,736 77,706 152,163 152,442 Trust and investment management fees 39,656 43,388 43,802 76,516 87,190 Trading account activities 13,838 11,012 16,687 28,678 27,699 Merchant banking fees 8,809 11,793 11,085 17,886 22,878 Brokerage commissions and fees 9,533 9,859 10,635 19,193 20,494 Card processing fees, net 7,824 7,764 8,167 14,951 15,931 Securities gains (losses), net 230 (2 ) - 1,450 (2 ) Other   44,553     36,846     31,544     81,566   68,390   Total noninterest income   201,661     195,396     199,626     392,403   395,022     Noninterest Expense Salaries and employee benefits 231,939 241,670 243,299 469,363 484,969 Net occupancy 33,718 36,202 38,232 67,385 74,434 Outside services 17,150 17,009 20,295 35,119 37,304 Professional services 11,144 14,597 15,931 27,494 30,528 Equipment 15,804 15,347 15,141 31,814 30,488 Software 13,959 14,795 14,409 27,273 29,204 Communications 8,278 9,375 9,111 17,413 18,486 Foreclosed asset expense 9 89 83 18 172 Provision for losses on off-balance sheet commitments - 8,000 5,000 1,000 13,000 Other   51,050     46,122     57,811     98,791   103,933   Total noninterest expense   383,051     403,206     419,312     775,670   822,518     Income from continuing operations before income taxes (1) 244,649 183,294 198,201 469,316 381,495 Taxable-equivalent adjustment 2,251 2,526 2,329 4,366 4,855 Income tax expense 76,658 58,370 61,574 151,063 119,944           Income from Continuing Operations   165,740     122,398     134,298     313,887   256,696     Income (loss) from discontinued operations before income taxes (545 ) (17,585 ) 3,068 1,882 (14,517 ) Income tax expense (benefit)   (159 )   (3,777 )   (3,979 )   804   (7,756 ) Income (Loss) from Discontinued Operations   (386 )   (13,808 )   7,047     1,078   (6,761 ) Net Income $ 165,354   $ 108,590   $ 141,345   $ 314,965 $ 249,935     Income from continuing operations per common share - basic $ 1.21   $ 0.89   $ 0.98   $ 2.28 $ 1.87   Net income per common share - basic $ 1.20   $ 0.79   $ 1.03   $ 2.29 $ 1.82   Income from continuing operations per common share - diluted $ 1.19   $ 0.89   $ 0.97   $ 2.25 $ 1.86   Net income per common share - diluted $ 1.19   $ 0.79   $ 1.02   $ 2.26 $ 1.82   Weighted average common shares outstanding - basic   137,477     137,006     137,209     137,708   137,107   Weighted average common shares outstanding - diluted   139,138     137,609     137,899     139,360   137,675           Refer to Exhibit11 for footnote explanations. UnionBanCal Corporation and Subsidiaries Consolidated Balance Sheets       (Unaudited)   (Unaudited) June 30, December 31, June 30, (Dollars in thousands)   2007     2007     2008   Assets Cash and due from banks $ 1,863,479 $ 2,106,927 $ 1,800,313 Interest bearing deposits in banks 100,800 104,528 65,788 Federal funds sold and securities purchased under resale agreements   1,400,875     310,178     172,345   Total cash and cash equivalents 3,365,154 2,521,633 2,038,446 Trading account assets 307,012 603,333 1,136,416 Securities available for sale: Securities pledged as collateral 112,974 685,123 1,079,491 Held in portfolio 8,742,728 7,770,037 7,396,824 Loans (net of allowance for loan losses: June 30, 2007, $335,952;December 31, 2007, $402,726; June 30, 2008, $526,401) 37,407,270 40,801,462 45,514,957 Due from customers on acceptances 18,969 16,482 21,272 Premises and equipment, net 482,702 486,034 480,366 Intangible assets 8,708 6,458 5,117 Goodwill 360,058 355,287 355,287 Other assets 2,236,037 2,358,915 2,559,694 Assets of discontinued operations to be disposed or sold   132,221     122,984     6,051   Total assets $ 53,173,833   $ 55,727,748   $ 60,593,921     Liabilities Noninterest bearing $ 14,938,229 $ 13,802,640 $ 13,440,290 Interest bearing   27,042,770     28,877,551     29,164,129   Total deposits 41,980,999 42,680,191 42,604,419 Federal funds purchased and securities sold under repurchase agreements 1,281,162 1,631,602 2,296,587 Commercial paper 1,167,437 1,266,656 1,397,159 Other borrowed funds 606,572 1,875,619 4,719,809 Trading account liabilities 188,437 351,057 892,240 Acceptances outstanding 18,969 16,482 21,272 Other liabilities 1,318,212 1,108,585 1,012,403 Medium and long-term debt 1,835,495 1,913,622 2,809,329 Junior subordinated debt payable to subsidiary grantor trust 14,659 14,432 14,206 Liabilities of discontinued operations to be extinguished or assumed   134,744     131,521     117,707   Total liabilities   48,546,686     50,989,767     55,885,131     Stockholders' Equity Preferred stock: Authorized 5,000,000 shares; no shares issued or outstanding as of June 30, 2007, December 31, 2007 and June 30, 2008 - - - Common stock, par value $1 per share: Authorized 300,000,000 shares; issued 157,060,102 shares as of June 30, 2007, 157,559,521 shares as of December 31, 2007 and 157,811,268 shares as of June 30, 2008 157,060 157,559 157,811 Additional paid-in capital 1,127,607 1,153,737 1,182,978 Treasury stock - 18,745,538 shares as of June 30, 2007, 19,723,453 shares as of December 31, 2007 and 19,760,597 shares as of June 30, 2008 (1,151,985 ) (1,202,584 ) (1,204,469 ) Retained earnings 4,763,031 4,912,392 5,018,601 Accumulated other comprehensive loss   (268,566 )   (283,123 )   (446,131 ) Total stockholders' equity   4,627,147     4,737,981     4,708,790   Total liabilities and stockholders' equity $ 53,173,833   $ 55,727,748   $ 60,593,921   UnionBanCal Corporation and Subsidiaries Loans (Unaudited)                 Percent Change toJune 30, 2008 from Three Months Ended June 30, March 31, June 30, June 30,   March 31, (Dollars in millions)       2007     2008     2008   2007   2008     Loans (period average) Commercial, financial and industrial $ 14,610 $ 15,569 $ 16,729 14.50 % 7.45 % Construction 2,296 2,474 2,566 11.76 % 3.72 % Mortgage - Commercial 6,213 7,251 7,822 25.90 % 7.87 % Mortgage - Residential 12,591 13,988 14,490 15.08 % 3.59 % Consumer 2,557 2,686 2,978 16.46 % 10.87 % Lease financing   569     650     645   13.36 % (0.77 %)   Total loans held to maturity 38,836 42,618 45,230 16.46 % 6.13 % Total loans held for sale   4     83     264   nm nm   Total loans $ 38,840   $ 42,701   $ 45,494   17.13 % 6.54 %   Nonperforming Assets (period end) Nonaccrual loans: Commercial, financial and industrial $ 19 $ 47 $ 82 nm 74.47 % Construction - 55 95 nm 72.73 % Mortgage - Commercial 10 24 39 nm 62.50 %       Total nonaccrual loans 29 126 216 nm 71.43 % Restructured loans Mortgage - Residential - 1 2 nm 100.00 % Foreclosed assets   1     5     7   nm 40.00 %   Total nonperforming assets $ 30   $ 132   $ 225   nm 70.45 % Loans 90 days or more past due and still accruing $ 10   $ 30   $ 51   nm 70.00 %   Analysis of Allowances for Credit Losses Beginning balance $ 333 $ 403 $ 463   Provision for loan losses 5 72 95   Loans charged off: Commercial, financial and industrial (3 ) (10 ) (18 ) Construction - - (10 ) Mortgage - Residential - - (2 ) Consumer   (1 )   (3 )   (3 ) Total loans charged off   (4 )   (13 )   (33 )   Loans recovered: Commercial, financial and industrial 2 1 1 Consumer   -     -     1   Total loans recovered   2     1     2   Net loans recovered (charged off)   (2 )   (12 )   (31 )   Ending balance of allowance for loan losses 336 463 527 Allowance for off-balance sheetcommitment losses   82     98     103   Allowances for credit losses $ 418   $ 561   $ 630   UnionBanCal Corporation and Subsidiaries Net Interest Income (Unaudited)                 For the Three Months Ended June 30, 2007 June 30, 2008 Interest Average Interest Average Average Income/ Yield/ Average Income/ Yield/ (Dollars in thousands) Balance Expense (10) Rate (6)(10) Balance Expense (10) Rate (6)(10) Assets Loans (11) Commercial, financial and industrial $ 14,610,728 $ 238,175 6.54 % $ 16,987,504 $ 229,612 5.44 %   Construction 2,296,098 44,047 7.69 2,566,207 30,794 4.83 Residential mortgage 12,594,065 167,342 5.31 14,495,754 199,756 5.51 Commercial mortgage 6,213,092 111,720 7.21 7,822,056 111,722 5.71 Consumer 2,557,085 49,579 7.78 2,977,852 44,453 6.00 Lease financing   568,701     7,341   5.16   644,788     1,171   0.73   Total loans 38,839,769 618,204 6.38 45,494,161 617,508 5.44   Securities - taxable 8,548,050 108,674 5.09 8,293,036 97,233 4.69   Securities - tax-exempt 56,084 1,164 8.30 52,742 1,105 8.38 Interest bearing deposits in banks 88,592 1,295 5.86 67,553 228 1.36 Federal funds sold and securities purchased under resale agreements 593,718 7,809 5.28 213,292 1,093 2.06 Trading account assets   317,020     1,601   2.03   814,274     1,119   0.55   Total earning assets 48,443,233   738,747   6.11 54,935,058   718,286   5.24 Allowance for loan losses (331,820 ) (456,191 ) Cash and due from banks 2,000,688 1,662,638 Premises and equipment, net 480,578 482,950 Other assets   2,393,954     2,645,510   Total assets $ 52,986,633   $ 59,269,965   Liabilities Deposits: Transaction accounts $ 14,075,542 102,833 2.93 $ 15,550,970 59,513 1.54 Savings and consumer time 4,326,199 28,858 2.68 3,846,404 13,918 1.46 Large time   9,173,928     114,380   5.00   10,929,983     71,078   2.62   Total interest bearing deposits   27,575,669     246,071   3.58   30,327,357     144,509   1.92 Federal funds purchased and securities sold under repurchase agreements 782,000 10,120 5.19 2,428,357 12,697 2.10 Net funding allocated from (to) discontinued operations (12) 14,777 192 5.21 64,945 360 2.23 Commercial paper 1,389,847 17,429 5.03 1,487,032 8,279 2.24 Other borrowed funds (13) 333,000 4,685 5.64 3,201,612 19,624 2.47 Medium and long-term debt 2,033,377 28,973 5.72 2,629,308 19,692 3.01 Trust notes   14,714     238   6.48   14,261     238   6.68 Total borrowed funds   4,567,715     61,637   5.41   9,825,515     60,890   2.49   Total interest bearing liabilities 32,143,384   307,708   3.84 40,152,872   205,399   2.06   Noninterest bearing deposits 14,989,222 12,875,823 Other liabilities   1,265,966     1,624,674   Total liabilities 48,398,572 54,653,369 Stockholders' Equity Common equity   4,588,061     4,616,596   Total stockholders' equity   4,588,061     4,616,596   Total liabilities and stockholders' equity $ 52,986,633   $ 59,269,965   Reported Net Interest Income/Margin Net interest income/margin   (taxable-equivalent basis) 431,039 3.56 % 512,887 3.74 %   Less: taxable-equivalent adjustment   2,251     2,329   Net interest income $ 428,788   $ 510,558     Average Assets and Liabilities of Discontinued Operations for Period Ended: June 30, 2007 June 30, 2008 Assets $ 129,821 $ 95,415 Liabilities $ 144,598 $ 160,360 Net Liabilities $ (14,777 ) $ (64,945 )     Refer to Exhibit 11 for footnote explanations. UnionBanCal Corporation and Subsidiaries Net Interest Income (Unaudited)             For the Three Months Ended March 31, 2008 June 30, 2008 Interest Average Interest Average Average Income/ Yield/ Average Income/ Yield/ (Dollars in thousands) Balance Expense (10) Rate (6)(10) Balance Expense (10) Rate (6)(10) Assets Loans: (11) Commercial, financial and industrial $ 15,647,162 $ 238,303 6.13 % $ 16,987,504 $ 229,612 5.44 %   Construction 2,474,323 36,617 5.95 2,566,207 30,794 4.83 Residential mortgage 13,992,743 192,785 5.51 14,495,754 199,756 5.51 Commercial mortgage 7,250,747 112,970 6.23 7,822,056 111,722 5.71 Consumer 2,686,635 46,390 6.94 2,977,852 44,453 6.00 Lease financing   649,843     6,297   3.88   644,788     1,171   0.73 Total loans 42,701,453 633,362 5.95 45,494,161 617,508 5.44 Securities - taxable 8,355,943 104,963 5.02 8,293,036 97,233 4.69 Securities - tax-exempt 53,359 1,082 8.11 52,742 1,105 8.38 Interest bearing deposits in banks 29,869 128 1.72 67,553 228 1.36 Federal funds sold and securities purchased under resale agreements 328,145 2,693 3.30 213,292 1,093 2.06 Trading account assets   719,316     2,804   1.57   814,274     1,119   0.55 Total earning assets 52,188,085   745,032   5.72 54,935,058   718,286   5.24 Allowance for loan losses (399,280 ) (456,191 ) Cash and due from banks 1,757,362 1,662,638 Premises and equipment, net 483,815 482,950 Other assets   2,603,013     2,645,510   Total assets $ 56,632,995   $ 59,269,965   Liabilities Deposits: Transaction accounts $ 14,864,561 82,915 2.24 $ 15,550,970 59,513 1.54 Savings and consumer time 4,179,663 23,529 2.26 3,846,404 13,918 1.46 Large time   11,962,678     114,216   3.84   10,929,983     71,078   2.62 Total interest bearing deposits   31,006,902     220,660   2.86   30,327,357     144,509   1.92 Federal funds purchased and securities sold under repurchase agreements 1,950,692 15,566 3.21 2,428,357 12,697 2.10 Net funding allocated from (to) discontinued operations (12) 16,992 149 3.53 64,945 360 2.23 Commercial paper 1,207,510 9,792 3.26 1,487,032 8,279 2.24 Other borrowed funds (13) 1,566,297 16,066 4.13 3,201,612 19,624 2.47 Medium and long-term debt 1,846,885 19,457 4.24 2,629,308 19,692 3.01 Trust notes   14,374     238   6.63   14,261     238   6.68 Total borrowed funds   6,602,750     61,268   3.73   9,825,515     60,890   2.49 Total interest bearing liabilities 37,609,652   281,928   3.01 40,152,872   205,399   2.06 Noninterest bearing deposits 12,606,852 12,875,823 Other liabilities   1,698,082     1,624,674   Total liabilities 51,914,586 54,653,369 Stockholders' Equity Common equity   4,718,409     4,616,596   Total stockholders' equity   4,718,409     4,616,596   Total liabilities and stockholders' equity $ 56,632,995   $ 59,269,965   Reported Net Interest Income/Margin Net interest income/margin (taxable-equivalent basis) 463,104 3.55 % 512,887 3.74 %   Less: taxable-equivalent adjustment   2,526     2,329   Net interest income $ 460,578   $ 510,558     Average Assets and Liabilities of Discontinued Operations for Period Ended: March 31, 2008 June 30, 2008 Assets $ 123,169 $ 95,415 Liabilities $ 140,161 $ 160,360 Net Liabilities $ (16,992 ) $ (64,945 )           Refer to Exhibit 11 for footnote explanations. UnionBanCal Corporation and Subsidiaries Net Interest Income (Unaudited)               For the Six Months Ended June 30, 2007 June 30, 2008 Interest Average Interest Average Average Income/ Yield/ Average Income/ Yield/ (Dollars in thousands) Balance Expense (10) Rate (6)(10)   Balance Expense (10) Rate (6)(10)   Assets Loans: (11) Commercial, financial and industrial $ 14,647,210 $ 475,453 6.55 % $ 16,317,333 $ 467,915 5.77 % Construction 2,264,789 86,822 7.73 2,520,265 67,411 5.38 Residential mortgage 12,490,760 331,108 5.30 14,244,248 392,541 5.51 Commercial mortgage 6,139,042 218,686 7.18 7,536,401 224,692 5.96 Consumer 2,549,836 98,558 7.79 2,832,243 90,843 6.45 Lease financing   558,310     11,079   3.97   647,315     7,468   2.31 Total loans 38,649,947 1,221,706 6.36 44,097,805 1,250,870 5.69 Securities - taxable 8,564,087 215,941 5.04 8,324,489 202,196 4.86 Securities - tax-exempt 56,865 2,318 8.15 53,051 2,187 8.24 Interest bearing deposits in banks 84,102 2,404 5.76 48,711 356 1.47 Federal funds sold and securities purchased under resale agreements 719,183 18,961 5.32 270,718 3,786 2.81 Trading account assets   325,146     3,302   2.05   766,795     3,923   1.03 Total earning assets 48,399,330   1,464,632   6.08 53,561,569   1,463,318   5.48 Allowance for loan losses (331,042 ) (427,801 ) Cash and due from banks 1,975,101 1,710,000 Premises and equipment, net 483,551 483,383 Other assets   2,386,515     2,623,959   Total assets $ 52,913,455   $ 57,951,110   Liabilities Deposits: Transaction accounts $ 13,806,452 194,338 2.84 $ 15,207,766 142,428 1.88 Savings and consumer time 4,311,874 55,713 2.61 4,013,034 37,447 1.88 Large time   8,806,573     218,175   5.00   11,446,331     185,294   3.26 Total interest bearing deposits   26,924,899     468,226   3.51   30,667,131     365,169   2.39 Federal funds purchased and securities sold under repurchase agreements 913,489 23,644 5.22 2,189,525 28,263 2.60 Net funding allocated from (to) discontinued operations (12) 14,930 387 5.23 40,667 509 2.52 Commercial paper 1,585,714 39,693 5.05 1,347,271 18,071 2.70 Other borrowed funds (13) 817,620 21,955 5.41 2,383,954 35,690 3.01 Medium and long-term debt 1,704,240 48,668 5.76 2,238,097 39,149 3.52 Trust notes   14,770     476   6.45   14,318     476   6.66 Total borrowed funds   5,050,763     134,823   5.38   8,213,832     122,158   2.99 Total interest bearing liabilities 31,975,662   603,049   3.80 38,880,963   487,327   2.52 Noninterest bearing deposits 15,043,454 12,741,338 Other liabilities   1,344,991     1,661,380   Total liabilities 48,364,107 53,283,681 Stockholders' Equity Common equity   4,549,348     4,667,429   Total stockholders' equity   4,549,348     4,667,429   Total liabilities and stockholders' equity $ 52,913,455   $ 57,951,110   Reported Net Interest Income/Margin Net interest income/margin (taxable-equivalent basis) 861,583 3.56 % 975,991 3.65 % Less: taxable-equivalent adjustment   4,366     4,855   Net interest income $ 857,217   $ 971,136     Average Assets and Liabilities of Discontinued Operations for Period Ended: June 30, 2007 June 30, 2008 Assets $ 131,783 $ 109,594 Liabilities $ 146,713 $ 150,261 Net Liabilities $ (14,930 ) $ (40,667 )     Refer to Exhibit 11 for footnote explanations. UnionBanCal Corporation and Subsidiaries               Noninterest income (Unaudited)     For the Three Months Ended     Percentage Change to June 30, 2008 from June 30, March 31, June 30, June 30, March 31, (Dollars in thousands) 2007   2008     2008 2007       2008       Service charges on deposit accounts $ 77,218 $ 74,736 $ 77,706 0.63 % 3.97 %   Trust and investment management fees 39,656 43,388 43,802 10.45 0.95   Trading account activities 13,838 11,012 16,687 20.59 51.53   Merchant banking fees 8,809 11,793 11,085 25.84 (6.00 )   Brokerage commissions and fees 9,533 9,859 10,635 11.56 7.87   Card processing fees, net 7,824 7,764 8,167 4.38 5.19   Securities gains (losses), net 230 (2 ) - (100.00 ) (100.00 )   Gains on private capital investments, net 20,171 1,070 1,282 (93.64 ) 19.81 Gain on the VISA IPO redemption - 14,211 - 0.00 (100.00 ) Other   24,382   21,565     30,262 24.12 40.33   Total noninterest income $ 201,661 $ 195,396   $ 199,626 (1.01 ) % 2.16 %     Noninterest expense (Unaudited)     For the Three Months Ended       Percentage Change to June 30, 2008 from June 30, March 31, June 30, June 30, March 31, (Dollars in thousands)   2007   2008     2008 2007       2008     Salaries and other compensation $ 189,910 $ 192,011 $ 204,077 7.46 % 6.28 % Employee benefits   42,029   49,659     39,222 (6.68 ) (21.02 )   Salaries and employee benefits 231,939 241,670 243,299 4.90 0.67   Net occupancy 33,718 36,202 38,232 13.39 5.61   Outside services 17,150 17,009 20,295 18.34 19.32   Professional services 11,144 14,597 15,931 42.96 9.14   Equipment 15,804 15,347 15,141 (4.20 ) (1.34 )   Software 13,959 14,795 14,409 3.22 (2.61 )   Advertising and public relations 10,226 8,099 12,857 25.73 58.75   Communications 8,278 9,375 9,111 10.06 (2.82 )   Data processing 8,562 7,076 7,784 (9.09 ) 10.01   Intangible asset amortization 1,125 670 670 (40.44 ) 0.00   Foreclosed asset expense 9 89 83 nm (6.74 )   Provision for losses on off-balance sheet commitments   - 8,000 5,000 nm (37.50 ) Other   31,137   30,277     36,500 17.22 20.55   Total noninterest expense $ 383,051 $ 403,206   $ 419,312 9.47 % 3.99 % UnionBanCal Corporation and Subsidiaries   Noninterest income (Unaudited)         For the Six Months Ended Percentage Change to June 30, 2008 from June 30, June 30, June 30, (Dollars in thousands) 2007   2008   2007 Service charges on deposit accounts $ 152,163 $ 152,442 0.18 % Trust and investment management fees 76,516 87,190 13.95 Trading account activities 28,678 27,699 (3.41 ) Merchant banking fees 17,886 22,878 27.91 Brokerage commissions and fees 19,193 20,494 6.78 Card processing fees, net 14,951 15,931 6.55 Securities gains (losses), net 1,450 (2 ) nm Gains on private capital investments, net 29,266 2,352 (91.96 ) Gain on the VISA IPO redemption - 14,211 nm Other   52,300   51,827   (0.90 ) Total noninterest income $ 392,403 $ 395,022   0.67 %   Noninterest expense (Unaudited)   For the Six Months Ended       Percentage Change to June 30, 2008 from   June 30, June 30, June 30, (Dollars in thousands) 2007   2008   2007 Salaries and other compensation $ 380,887 $ 396,089 3.99 % Employee benefits   88,476   88,880   0.46 Salaries and employee benefits 469,363 484,969 3.32 Net occupancy 67,385 74,434 10.46 Outside services 35,119 37,304 6.22 Professional services 27,494 30,528 11.04 Equipment 31,814 30,488 (4.17 ) Software 27,273 29,204 7.08 Advertising and public relations 18,391 20,956 13.95 Communications 17,413 18,486 6.16 Data processing 16,745 14,860 (11.26 ) Intangible asset amortization 2,251 1,340 (40.47 ) Foreclosed asset expense 18 172 nm Provision for losses on off-balance sheet commitments 1,000 13,000 nm Other   61,404   66,777   8.75 Total noninterest expense $ 775,670 $ 822,518   6.04 % UnionBanCal Corporation and Subsidiaries   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 June 30, 2008. The regulatory capital and leverage ratios include discontinued operations. (9) The allowance for credit losses ratios include the allowances for loan losses and losses on off-balance sheet commitments. These ratios relate to continuing operations only. (10) Yields and interest income are presented on a taxable-equivalent basis using the federal statutory tax rate of 35 percent. (11) Average balances on loans outstanding include all nonperforming loans and loans held for sale. The amortized portion of net loan origination fees (costs) is included in interest income on loans, representing an adjustment to the yield. (12) Net funding allocated from (to) discontinued operations represents the shortage (excess) of assets over liabilities of discontinued operations. The expense (earning) on funds allocated from (to) discontinued operations is calculated by taking the net balance and applying an earnings rate or a cost of funds equivalent to the corresponding period's Federal funds purchased rate. (13) Includes interest bearing trading liabilities. nm = not meaningful