UnionBanCal Corporation Reports Second Quarter EPS of $1.19; Provides Regulatory Update

UnionBanCal Corporation (NYSE:UB): Second Quarter 2007 Highlights: -- Strong year-over-year organic loan growth -- Average total loans up 11 percent -- Average core commercial loans up 9 percent -- Average residential mortgage loans up 7 percent -- Annualized average all-in cost of funds of 2.61 percent -- Average noninterest bearing deposits comprised over 35 percent of average total deposits -- Nonperforming assets just 0.06 percent of total assets at quarter-end UnionBanCal Corporation (NYSE:UB) today reported second quarter 2007 net income of $165.4 million, or $1.19 per diluted common share. Net income in the preceding quarter was $149.6 million, or $1.07 per diluted common share, while net income a year earlier was $182.9 million, or $1.26 per diluted common share. First half 2007 net income was $315.0 million, or $2.26 per diluted common share, compared with income from continuing operations for first half 2006 of $364.1 million, or $2.51 per diluted common share. Regulatory Matters As previously reported in filings with the Securities & Exchange Commission, the Company’s principal subsidiary, Union Bank of California N.A., entered into a Memorandum of Understanding (MOU) in 2005 with its principal regulator, the Office of the Comptroller of the Currency (OCC). The MOU requires the Bank to strengthen its Bank Secrecy Act/Anti-Money Laundering (BSA/AML) controls and processes. In response to the MOU, the Bank has committed significant resources to strengthen its BSA/AML controls and processes. During the course of the Bank’s efforts to resolve issues raised by its regulators, additional BSA/AML compliance issues arose, which the Bank discussed with the OCC. Recently, the Bank has been advised by the OCC that the OCC will institute a procedure for a cease and desist order against the Bank with respect to its BSA/AML controls and processes and will assess civil money penalties with respect to BSA/AML matters. The Bank also has received notice from the Financial Crimes Enforcement Network (FinCEN), a part of the U.S. Treasury Department, that it will assess civil money penalties with respect to BSA/AML matters. The Bank cannot be certain what final terms, conditions, or monetary penalties will be imposed by the agencies. However, the Company believes these pending regulatory actions will not have a material adverse effect on the Company’s business operations, earnings, capital or liquidity. Based on preliminary discussions with the OCC and FinCEN, a reserve of $10 million has been established and is included in the Company’s second quarter financial results. "These regulatory actions relate to compliance issues that occurred in the past,” said Masaaki Tanaka, President and Chief Executive Officer. "We have taken significant steps to improve our compliance program and continue to do so,” he added. "The board of directors, executive management and I take very seriously our obligation to have an effective and comprehensive BSA/AML compliance program,” Tanaka stated. "We will continue to work closely with our regulators to satisfy them as soon as possible that our enhanced BSA/AML program is effective and sustainable,” Tanaka concluded. Commenting on the second quarter results, Vice Chairman and Chief Operating Officer Philip Flynn stated, "The net interest margin declined only two basis points from first quarter, with core deposits increasing 1.4 percent and noninterest bearing balances down only slightly. Loan growth moderated, and asset quality continued to be excellent. The average annualized all-in cost of funds increased six basis points, but at 2.61 percent, remains among the lowest in the industry. In May, we increased the quarterly dividend rate 10.6 percent, to $0.52 per share, reflecting solid core profitability and strong capital. Our business outlook for the second half is unaffected by the pending regulatory actions,” Mr. Flynn concluded. Summary of Second Quarter Results Second quarter 2007 net income was $165.4 million, or $1.19 per diluted common share, compared with net income of $1.26 per diluted common share a year earlier. Total revenue compared with second quarter 2006 decreased 4 percent, primarily due to an 8 percent decrease in net interest income, which resulted from a deposit mix shift, reflecting customer decisions to shift balances from noninterest bearing and low-cost deposits into higher-cost deposits. The unfavorable deposit mix change offset strong loan growth, with average loans up 11 percent. Noninterest income grew 5 percent, primarily due to higher gains on private capital investments. The total provision for credit losses was $5 million, $10 million higher than the negative $5 million provision recorded in second quarter 2006. For second quarter 2007, noninterest expense was flat compared with the same quarter a year earlier. Second quarter 2007 net income was $1.19 per diluted common share, compared with net income of $1.07 per diluted common share in the preceding quarter. Total revenue increased 1.2 percent in sequential quarters, with net interest income flat and noninterest income increasing 3.3 percent. The total provision for credit losses was $5 million in both quarters. Noninterest expense declined 2.4 percent in sequential quarters, primarily due to annual seasonal factors that result in lower payroll taxes and 401(k) matching contributions in the second quarter, and lower compliance-related expense. Second Quarter Total Revenue For second quarter 2007, total revenue (taxable-equivalent net interest income plus noninterest income) was $661 million, down 4 percent compared with second quarter 2006. Net interest income decreased 8.1 percent, and noninterest income increased 4.8 percent. Compared with first quarter 2007, total revenue increased 1.2 percent, with net interest income flat and noninterest income increasing 3.3 percent. Second Quarter Net Interest Income (Taxable-equivalent) Net interest income was $431.1 million in second quarter 2007, down $37.9 million, or 8.1 percent, from the same quarter a year ago, primarily due to a deposit mix shift from noninterest bearing and low-cost deposits into higher-cost deposits, partially offset by strong loan growth and higher yields on earning assets. Average earning assets increased $4.1 billion, or 9.2 percent, compared to 2006, primarily due to a $3.7 billion, or 10.5 percent, increase in average loans. Average commercial loans increased $1.7 billion, or 12.8 percent, with $0.6 billion of the increase attributable to title and escrow loans, which are highly rate-advantaged loans and are more volatile than other commercial loans. Average core commercial loans, which exclude title and escrow loans, grew 8.9 percent, year over year. Average residential mortgage loans increased $0.9 billion, or 7.3 percent; average construction loans increased $0.6 billion, or 33.2 percent; and average commercial mortgage loans increased $0.6 billion, or 9.7 percent, year over year. Of the $0.6 billion increase in average construction loans, virtually all of the increase year over year was in income properties. Compared to second quarter 2006, average interest bearing deposits increased $5.5 billion, or 25 percent, while average noninterest bearing deposits decreased $2.6 billion, or 14.6 percent. The decline in noninterest bearing deposits was primarily due to a $1.7 billion, or 13.9 percent, decrease in average other commercial noninterest bearing deposits and a $0.5 billion, or 19.1 percent, decrease in average title and escrow deposits. Average other commercial noninterest bearing deposits declined primarily due to changes in customer behavior in response to rising short-term interest rates, and average title and escrow deposits decreased due to lower residential real estate activity. Average consumer noninterest bearing deposits decreased $0.4 billion, or 13.4 percent. Average noninterest bearing deposits represented 35.1 percent of average total deposits in second quarter 2007. The annualized average all-in cost of funds was 2.61 percent, reflecting the Company’s strong average core deposit-to-loan ratio of 86 percent and the high proportion of noninterest bearing deposits to total deposits. The average yield on earning assets of $48.4 billion was 6.11 percent, up 16 basis points over second quarter 2006, with the average loan yield increasing 13 basis points. The average rate on interest bearing liabilities of $32.2 billion was 3.83 percent, up 88 basis points compared with second quarter 2006, reflecting higher short-term interest rates, an unfavorable change in deposit mix, and heightened competition for deposits. The net interest margin in second quarter 2007 was 3.56 percent, compared with 4.23 percent in second quarter 2006. Second quarter 2007 net interest income was flat compared with first quarter 2007. Average loans increased $382 million, or 1.0 percent. Average commercial loans decreased $71 million, or 0.5 percent, which was comprised of a decrease in core commercial loans of $122 million, offset by an increase in title and escrow loans of $51 million. Average residential mortgage loans increased $207 million, or 1.7 percent, and average commercial mortgage loans increased $149 million, or 2.5 percent. Average interest bearing deposits increased $1.3 billion, or 5.0 percent, while average noninterest bearing deposits decreased $0.1 billion, or 0.7 percent. The average yield on earning assets increased 5 basis points and the average rate on interest bearing liabilities increased 8 basis points. The net interest margin decreased 2 basis points to 3.56 percent. Second Quarter Noninterest Income In second quarter 2007, noninterest income was $229.8 million, up $10.6 million, or 4.8 percent, from the same quarter a year ago. Service charges on deposit accounts decreased $4.6 million, or 5.6 percent, primarily due to lower account analysis fees, caused by lower noninterest bearing deposit balances. Trust and investment management fees increased $3.2 million, or 6.6 percent, primarily due to an increase in trust assets. Gain on private capital investments, net, was $20.2 million, compared with $3.7 million in the same quarter a year ago. Second quarter 2007 noninterest income increased $7.3 million, or 3.3 percent, compared with first quarter 2007. Service charges on deposit accounts increased $2.3 million, or 3.0 percent, primarily due to two additional processing days in second quarter. Trust and investment management fees increased $3.0 million, or 6.2 percent, primarily due to an increase in trust assets. Insurance commissions decreased $3.7 million, or 18.5 percent, primarily due to normal seasonal factors. Gain on private capital investments, net, was $20.2 million, compared with $9.1 million in the preceding quarter. Other noninterest income decreased $6.3 million, or 18.1 percent, primarily due to a gain on the sale of property recorded in first quarter 2007. Second Quarter Noninterest Expense Noninterest expense for second quarter 2007 was $411.9 million, a decrease of $1.2 million, or 0.3 percent, compared with second quarter 2006. Salaries and employee benefits expense increased $2.8 million, or 1.1 percent, primarily due to annual merit increases, partially offset by lower pension expense. Outside services expense decreased $11.9 million, or 38.6 percent, primarily due to lower cost of services related to title and escrow balances. Professional services expense decreased $5.1 million, or 29.8 percent, primarily due to lower compliance-related expense. Foreclosed asset expense was zero, compared with income of $7.8 million a year earlier, due to a $7.8 million gain on the sale of property. The provision for losses on off-balance sheet commitments in second quarter 2007 was zero, compared with negative $4.0 million in second quarter 2006. Other noninterest expense increased $3.5 million, or 12.1 percent, primarily due to a reserve of $10.0 million for pending regulatory actions, partially offset by a $7.8 million reserve reversal, reflecting a favorable outcome in a legal dispute. Noninterest expense decreased $10.2 million, or 2.4 percent, compared with first quarter 2007. Salaries and employee benefits expense decreased $7.1 million, or 2.7 percent, primarily due to annual seasonal factors that result in lower payroll taxes and 401(k) matching contributions. Professional services expense decreased $5.1 million, or 30.0 percent, primarily due to lower compliance-related expense. The provision for losses on off-balance sheet commitments was zero, compared with $1.0 million in the prior quarter. Income Tax Expense The effective tax rate for second quarter 2007 was 31.6 percent, compared with an effective tax rate of 33.5 percent for second quarter 2006. The difference in rate was primarily due to the recognition of $8.4 million of tax benefits during second quarter, partially offset by $3.8 million in additional taxes due to the non-deductibility of the reserve for pending regulatory actions. Excluding these adjustments, the second quarter tax rate would have been 33.5 percent. The effective tax rate for the first half of 2007 was 32.5 percent. Excluding the adjustments discussed above, the tax rate would have been 33.5 percent, compared with an effective tax rate of 33.8 percent for the first half of 2006. Year-to-Date Results Total revenue for the first half of 2007 was $1.31 billion, a decrease of $58 million, or 4.2 percent, compared with total revenue of $1.37 billion in the same period of 2006. Net interest income decreased $74 million, or 7.9 percent, and noninterest income increased $15 million, or 3.5 percent. Net interest income was $862 million in the first half of 2007, a $74 million decrease from prior year, primarily due to a deposit mix shift from noninterest bearing and low-cost deposits into higher-cost deposits, partially offset by strong loan growth and higher yields on earning assets. Average loans increased $4.0 billion, or 11.7 percent, while average total deposits increased $2.8 billion, or 7.2 percent. A $5.3 billion, or 24.4 percent, increase in average interest bearing deposits was partially offset by a $2.5 billion, or 14.2 percent, decrease in average noninterest bearing deposits. The net interest margin was 3.57 percent, down 72 basis points. Noninterest income in the first half of 2007 was $452 million, an increase of $15 million, or 3.5 percent, over the same period in 2006. Service charges on deposit accounts decreased $11 million, or 6.9 percent, primarily due to lower account analysis fees, caused by lower noninterest bearing deposit balances. Gain on private capital investments, net, was $29.3 million, compared with $6.5 million in the same period last year. For the first half of 2007, noninterest expense increased $6.4 million, or 0.8 percent, over the first half of 2006. Salaries and employee benefits expense increased $8.8 million, or 1.8 percent, primarily due to annual merit increases, partially offset by lower pension expense. Outside services expense decreased $21 million, or 34.8 percent, primarily due to lower cost of services related to title and escrow balances. Foreclosed asset expense was zero, compared with income of $15 million last year, due to gains on the sale of other real estate owned. The provision for off-balance sheet commitments was $1 million in the first half of 2007, compared with negative $7 million in the first half of 2006. Credit Quality Nonperforming assets at June 30, 2007, were $30 million, or 0.06 percent of total assets. This compares with $42 million, or 0.08 percent of total assets, at March 31, 2007, and $36 million, or 0.07 percent of total assets, at June 30, 2006. In second quarter 2007, the total provision for credit losses was $5 million. The total provision for credit losses was $5 million in first quarter 2007, and negative $5 million in second quarter 2006. In second quarter 2007, net charge-offs were $2 million, compared with net charge-offs of $2 million in first quarter 2007, and net charge-offs of $10 million in second quarter 2006. At June 30, 2007, the allowance for credit losses as a percent of total loans and as a percent of nonaccrual loans was 1.11 percent and 1,457 percent, respectively. These ratios were 1.11 percent and 997 percent, respectively, at March 31, 2007, and 1.17 percent and 1,130 percent, respectively, at June 30, 2006. Balance Sheet and Capital Ratios At June 30, 2007, the Company had total assets of $53.2 billion. Total loans were $37.7 billion and total deposits were $42.1 billion, resulting in a period-end deposit-to-loan ratio of 112 percent. At period-end, total stockholders’ equity was $4.6 billion, the tangible common equity ratio was 7.87 percent, and the ratio of tangible common equity to risk-weighted assets was 8.09 percent. Book value per share at June 30, 2007, was $33.45, up 3.4 percent from a year earlier. The Company’s Tier I and total risk-based capital ratios at period-end were 8.58 percent and 11.54 percent, respectively. Stock Repurchases During second quarter 2007, the Company repurchased 30,000 shares of common stock at a total price of $2 million, or an average of $63.26 per repurchased share. During the first half of 2007, the Company repurchased 1.4 million shares of common stock at a total price of $87 million, or an average of $62.74 per repurchased share. At June 30, 2007, the Company had remaining repurchase authority of $62 million. Common shares outstanding at June 30, 2007, were 138.3 million, a decrease of 4.2 million shares, or 3.0 percent, from one year earlier. Third Quarter and Full Year 2007 Earnings Per Share Forecast The Company currently estimates that third quarter 2007 fully diluted earnings per share will be in the range of $1.12 to $1.17, including a total provision for credit losses of approximately $5 million. For the year, the Company estimates that fully diluted earnings per share will be in the range of $4.50 to $4.60, including a total provision for credit losses of approximately $25 million. Non-GAAP Financial Measures This press release contains certain references to financial measures identified as being stated on an "adjusted basis” or that adjust for or exclude certain tax items, which are adjustments from comparable measures calculated and presented in accordance with accounting principles generally accepted in the United States of America (GAAP). These financial measures, as used herein, differ from financial measures reported under GAAP in that they exclude unusual or non-recurring charges, losses, credits or gains. This press release identifies the specific items excluded from the comparable GAAP financial measure in the calculation of each non-GAAP financial measure. Because these items and their impact on the Company’s performance are difficult to predict, management believes that financial presentations excluding the impact of these items provide useful supplemental information which is important to a proper understanding of the Company’s core business results by investors. These presentations should not be viewed as a substitute for results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP financial measures presented by other companies. Forward-Looking Statements The following appears in accordance with the Private Securities Litigation Reform Act. This press release includes forward-looking statements that involve risks and uncertainties. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. Often, they include the words "believe,” ”continue,” "expect,” "target,” "anticipate,” "intend,” "plan,” "estimate,” "potential,” "project,” or words of similar meaning, or future or conditional verbs such as "will,” "would,” "should,” "could,” or "may.” They may also consist of annualized amounts based on historical interim period results. Forward-looking statements in this press release include those related to earnings forecasts, provision for credit losses, trends in deposit rates and balances and competition for deposits and their impact on the Company, the Company’s loan portfolio, business model, competitive positioning and earnings power, and certain regulatory matters relating to the Company. 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; 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, or governmental fiscal or monetary policies; legal or regulatory proceedings or investigations; declines or disruptions in the stock or bond markets which may adversely affect the Company or the Company’s borrowers or other customers; changes in accounting practices or requirements; and risks associated with various strategies the Company may pursue, including potential acquisitions, divestitures and restructurings. A complete description of the Company, including related risk factors, is discussed in the Company’s public filings with the Securities and Exchange Commission, which are available by calling (415) 765-2969 or online at http://www.sec.gov. All forward-looking statements included in this press release are based on information available at the time of the release, and the Company assumes no obligation to update any forward-looking statement. Conference Call and Webcast The Company will conduct a conference call to review second quarter 2007 results at 8:30 AM Pacific Time (11:30 AM Eastern Time) on July 20, 2007. Interested parties calling from locations within the United States should call 800-230-1093 (612-234-9959 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 20, through 11:59 PM Pacific Time, July 27 (2:59 AM Eastern Time, July 28). The reservation number for this playback is 879044. Based in San Francisco, UnionBanCal Corporation is a bank holding company with assets of $53.2 billion at June 30, 2007. Its primary subsidiary, Union Bank of California, N.A., had 327 banking offices in California, Oregon and Washington, and 2 international offices at June 30, 2007. UnionBanCal Corporation and Subsidiaries Financial Highlights (Unaudited) Exhibit 1   Percent Change to June 30, 2007 from As of and for the Three Months Ended June 30, March 31, June 30, June 30, March 31, (Dollars in thousands, except per share data) 2006 2007 2007 2006   2007 Results of operations: Net interest income (1) $ 469,000 $ 430,627 $ 431,124 (8.08%) 0.12% Noninterest income 219,228 222,558 229,845 4.84% 3.27% Total revenue 688,228 653,185 660,969 (3.96%) 1.19% Noninterest expense 413,030 422,091 411,865 (0.28%) (2.42%) (Reversal of) provision for loan losses (1,000) 4,000 5,000 nm 25.00% Income from continuing operations before income taxes (1) 276,198 227,094 244,104 (11.62%) 7.49% Taxable-equivalent adjustment 1,358 2,115 2,251 65.76% 6.43% Income tax expense 92,203 75,368 76,499 (17.03%) 1.50% Income from continuing operations $ 182,637 $ 149,611 $ 165,354 (9.46%) 10.52% Income from discontinued operations 274 - - (100.00%) - Net income $ 182,911 $ 149,611 $ 165,354 (9.60%) 10.52%   Per common share: Basic earnings: From continuing operations $ 1.28 $ 1.08 $ 1.20 (6.25%) 11.11% Net income 1.28 1.08 1.20 (6.25%) 11.11% Diluted earnings: From continuing operations 1.26 1.07 1.19 (5.56%) 11.21% Net income 1.26 1.07 1.19 (5.56%) 11.21% Dividends (2) 0.47 0.47 0.52 10.64% 10.64% Book value (end of period) 32.34 32.98 33.45 3.43% 1.43% Common shares outstanding (end of period) (3) 142,533,794 138,117,370 138,314,564 (2.96%) 0.14% Weighted average common shares outstanding - basic (3) 142,723,271 137,942,320 137,476,765 (3.68%) (0.34%) Weighted average common shares outstanding - diluted (3) 144,878,447 139,729,681 139,137,955 (3.96%) (0.42%)   Balance sheet (end of period): Total assets (4) $ 50,800,136 $ 54,616,849 $ 53,173,833 4.67% (2.64%) Total loans 34,747,833 37,251,950 37,743,222 8.62% 1.32% Nonperforming assets 36,351 41,744 29,826 (17.95%) (28.55%) Total deposits 40,544,251 43,797,924 42,090,306 3.81% (3.90%) Stockholders' equity 4,608,908 4,555,439 4,627,147 0.40% 1.57%   Balance sheet (period average): Total assets $ 49,329,374 $ 52,973,203 $ 53,116,454 7.68% 0.27% Total loans 35,146,976 38,458,014 38,839,769 10.51% 0.99% Earning assets 44,358,594 48,354,950 48,443,246 9.21% 0.18% Total deposits 39,692,052 41,483,062 42,684,022 7.54% 2.90% Stockholders' equity 4,539,476 4,510,205 4,588,061 1.07% 1.73%   Financial ratios (5):   Return on average assets (6) : From continuing operations 1.49% 1.15% 1.25% Net income 1.49% 1.15% 1.25% Return on average stockholders' equity (6) : From continuing operations 16.14% 13.45% 14.46% Net income 16.16% 13.45% 14.46% Efficiency ratio (7) 61.73% 64.47% 62.31% Net interest margin (1) 4.23% 3.58% 3.56% Dividend payout ratio 36.72% 43.52% 43.33% Tangible common equity ratio 8.19% 7.53% 7.87% Tier 1 risk-based capital ratio (4) (8) 8.92% 8.42% 8.58% Total risk-based capital ratio (4) (8) 12.05% 11.38% 11.54% Leverage ratio (4) (8) 8.74% 8.12% 8.30% Allowances for credit losses to total loans (9) 1.17% 1.11% 1.11% Allowances for credit losses to nonaccrual loans (9) 1,130.05% 997.48% 1,456.97% Net loans charged off to average total loans (6) 0.12% 0.03% 0.02% Nonperforming assets to total loans and foreclosed assets 0.10% 0.11% 0.08% Nonperforming assets to total assets (4) 0.07% 0.08% 0.06%   Refer to Exhibit 11 for footnote explanations. UnionBanCal Corporation and Subsidiaries Financial Highlights (Unaudited) Exhibit 2   Percent Change toJune 30, 2007 from As of and for the Six Months Ended June 30, June 30, June 30, (Dollars in thousands, except per share data)   2006     2007   2006   Results of operations: Net interest income (1) $ 935,341 $ 861,751 (7.87 %) Noninterest income   437,138     452,403   3.49 % Total revenue 1,372,479 1,314,154 (4.25 %) Noninterest expense 827,574 833,956 0.77 % (Reversal of) provision for loan losses   (8,000 )   9,000   nm Income from continuing operations before income taxes (1) 552,905 471,198 (14.78 %) Taxable-equivalent adjustment 2,606 4,366 67.54 % Income tax expense   186,207     151,867   (18.44 %) Income from continuing operations $ 364,092 $ 314,965 (13.49 %) Loss from discontinued operations   (8,236 )   -   100.00 % Net income $ 355,856   $ 314,965   (11.49 %)   Per common share: Basic earnings: From continuing operations $ 2.54 $ 2.29 (9.84 %) Net income 2.49 2.29 (8.03 %) Diluted earnings: From continuing operations 2.51 2.26 (9.96 %) Net income 2.45 2.26 (7.76 %) Dividends (2) 0.88 0.99 12.50 % Book value (end of period) 32.34 33.45 3.43 % Common shares outstanding (end of period) (3) 142,533,794 138,314,564 (2.96 %) Weighted average common shares outstanding - basic (3) 143,098,104 137,708,257 (3.77 %) Weighted average common shares outstanding - diluted (3) 145,293,781 139,360,012 (4.08 %)   Balance sheet (end of period): Total assets (4) $ 50,800,136 $ 53,173,833 4.67 % Total loans 34,747,833 37,743,222 8.62 % Nonperforming assets 36,351 29,826 (17.95 %) Total deposits 40,544,251 42,090,306 3.81 % Stockholders' equity 4,608,908 4,627,147 0.40 %   Balance sheet (period average): Total assets $ 48,676,618 $ 53,045,236 8.97 % Total loans 34,602,546 38,649,947 11.70 % Earning assets 43,724,990 48,399,343 10.69 % Total deposits 39,276,352 42,086,858 7.16 % Stockholders' equity 4,539,080 4,549,348 0.23 %   Financial ratios (5): Return on average assets (6) : From continuing operations 1.51 % 1.20 % Net income 1.47 % 1.20 % Return on average stockholders' equity (6) : From continuing operations 16.18 % 13.96 % Net income 15.81 % 13.96 % Efficiency ratio (7) 61.91 % 63.38 % Net interest margin (1) 4.29 % 3.57 % Dividend payout ratio 34.65 % 43.23 % Tangible common equity ratio 8.19 % 7.87 % Tier 1 risk-based capital ratio (4) (8) 8.92 % 8.58 % Total risk-based capital ratio (4) (8) 12.05 % 11.54 % Leverage ratio (4) (8) 8.74 % 8.30 % Allowance for credit losses to total loans (9) 1.17 % 1.11 % Allowance for credit losses to nonaccrual loans (9) 1,130.05 % 1,456.97 % Net loans charged off to average total loans (6) 0.09 % 0.02 % Nonperforming assets to total loans and foreclosed assets 0.10 % 0.08 % Nonperforming assets to total assets (4) 0.07 % 0.06 %   Refer to Exhibit 11 for footnote explanations. UnionBanCal Corporation and Subsidiaries Condensed Consolidated Statements of Income (Unaudited) (Taxable-Equivalent Basis) Exhibit 3       For the Three Months Ended For the Six Months Ended June 30, March 31, June 30, June 30, (Dollars in thousands, except per share data)   2006   2007   2007   2006   2007 Interest Income (1) Loans $ 548,017 $ 603,502 $ 618,204 $ 1,061,005 $ 1,221,706 Securities 104,008 108,422 109,839 201,359 218,261 Interest bearing deposits in banks 423 1,109 1,295 1,159 2,404 Federal funds sold and securities purchased under resale agreements 4,725 11,152 7,809 8,570 18,961 Trading account assets   1,685   1,701   1,601   3,215   3,302 Total interest income   658,858   725,886   738,748   1,275,308   1,464,634   Interest Expense Deposits 143,677 222,257 246,175 258,986 468,432 Federal funds purchased and securities sold under repurchase agreements 8,455 13,524 10,120 17,257 23,644 Commercial paper 19,137 22,264 17,429 31,585 39,693 Medium and long-term debt 16,875 19,695 28,973 27,272 48,668 Trust notes 238 238 238 476 476 Other borrowed funds   1,476   17,281   4,689   4,391   21,970 Total interest expense   189,858   295,259   307,624   339,967   602,883   Net Interest Income (1) 469,000 430,627 431,124 935,341 861,751 (Reversal of) provision for loan losses   (1,000)   4,000   5,000   (8,000)   9,000 Net interest income after (reversal of) provision for loan losses   470,000   426,627   426,124   943,341   852,751   Noninterest Income Service charges on deposit accounts 81,837 74,945 77,218 163,472 152,163 Trust and investment management fees 48,380 48,560 51,585 98,495 100,145 Insurance commissions 17,752 20,250 16,501 37,270 36,751 Brokerage commissions and fees 10,330 9,660 9,533 18,125 19,193 Merchant banking fees 8,396 9,077 8,809 16,625 17,886 Foreign exchange gains, net 8,307 7,594 9,288 16,125 16,882 Card processing fees, net 7,206 7,127 7,824 13,903 14,951 Securities gains, net 1,993 1,220 230 1,779 1,450 Other   35,027   44,125   48,857   71,344   92,982 Total noninterest income   219,228   222,558   229,845   437,138   452,403   Noninterest Expense Salaries and employee benefits 248,637 258,515 251,430 501,132 509,945 Net occupancy 34,519 35,137 35,244 67,356 70,381 Outside services 30,704 19,836 18,851 59,313 38,687 Equipment 16,846 16,554 16,367 34,768 32,921 Software 15,323 14,196 15,136 31,667 29,332 Professional services 17,038 17,087 11,970 31,585 29,057 Communications 10,061 9,791 8,855 20,613 18,646 Foreclosed asset expense (income) (7,782) 9 9 (15,149) 18 (Reversal of) provision for losses on off-balance sheet commitments (4,000) 1,000 - (7,000) 1,000 Other   51,684   49,966   54,003   103,289   103,969 Total noninterest expense   413,030   422,091   411,865   827,574   833,956   Income from continuing operations before income taxes (1) 276,198 227,094 244,104 552,905 471,198 Taxable-equivalent adjustment 1,358 2,115 2,251 2,606 4,366 Income tax expense 92,203 75,368 76,499 186,207 151,867           Income from Continuing Operations   182,637   149,611   165,354   364,092   314,965   Income (loss) from discontinued operations before income taxes 431 - - (13,172) - Income tax expense (benefit)   157   -   -   (4,936)   - Income (loss) from Discontinued Operations   274   -   -   (8,236)   - Net Income $ 182,911 $ 149,611 $ 165,354 $ 355,856 $ 314,965   Income from continuing operations per common share - basic $ 1.28 $ 1.08 $ 1.20 $ 2.54 $ 2.29 Net income per common share - basic $ 1.28 $ 1.08 $ 1.20 $ 2.49 $ 2.29 Income from continuing operations per common share - diluted $ 1.26 $ 1.07 $ 1.19 $ 2.51 $ 2.26 Net income per common share - diluted $ 1.26 $ 1.07 $ 1.19 $ 2.45 $ 2.26 Weighted average common shares outstanding - basic   142,723   137,942   137,477   143,098   137,708 Weighted average common shares outstanding - diluted   144,878   139,730   139,138   145,294   139,360         Refer to Exhibit 11 for footnote explanations. UnionBanCal Corporation and Subsidiaries Consolidated Balance Sheets Exhibit 4     (Unaudited) (Unaudited) June 30, December 31, June 30, (Dollars in thousands)   2006   2006   2007 Assets Cash and due from banks $ 2,192,483 $ 2,213,782 $ 1,863,482 Interest bearing deposits in banks 31,691 824,456 100,800 Federal funds sold and securities purchased under resale agreements   1,252,514   943,200   1,400,875 Total cash and cash equivalents 3,476,688 3,981,438 3,365,157 Trading account assets 405,728 376,321 307,012 Securities available for sale: Securities pledged as collateral 83,229 89,184 112,974 Held in portfolio 8,573,909 8,667,038 8,742,740 Loans (net of allowance for loan losses: June 30, 2006, $328,338; December 31, 2006, $331,077; June 30, 2007, $335,952) 34,419,495 36,340,646 37,407,270 Due from customers on acceptances 21,850 17,834 18,969 Premises and equipment, net 498,555 495,302 488,719 Intangible assets 35,759 28,930 24,444 Goodwill 453,489 453,489 453,489 Other assets 2,787,288 2,148,954 2,253,059 Assets of discontinued operations to be disposed or sold   44,146   20,440   - Total assets $ 50,800,136 $ 52,619,576 $ 53,173,833   Liabilities Noninterest bearing $ 18,154,751 $ 17,113,890 $ 14,938,233 Interest bearing   22,389,500   24,855,478   27,152,073 Total deposits 40,544,251 41,969,368 42,090,306 Federal funds purchased and securities sold under repurchase agreements 281,593 1,083,927 1,281,162 Commercial paper 1,645,107 1,661,163 1,167,437 Other borrowed funds 320,837 432,401 606,896 Acceptances outstanding 21,850 17,834 18,969 Other liabilities 1,876,307 1,545,165 1,531,762 Medium and long-term debt 1,473,924 1,318,847 1,835,495 Junior subordinated debt payable to subsidiary grantor trust 15,111 14,885 14,659 Liabilities of discontinued operations to be extinguished or assumed   12,248   4,585   - Total liabilities   46,191,228   48,048,175   48,546,686       Stockholders' Equity Preferred stock: Authorized 5,000,000 shares; no shares issued or outstanding as of June 30, 2006, December 31, 2006 and June 30, 2007 - - - Common stock, par value $1 per share: Authorized 300,000,000 shares; issued 155,719,517 shares as of June 30, 2006, 156,460,057 shares as of December 31, 2006 and 157,060,102 shares as of June 30, 2007     155,720 156,460 157,060 Additional paid-in capital 1,048,419 1,083,649 1,127,607 Treasury stock - 13,185,723 shares as of June 30, 2006, 17,352,803 shares as of December 31, 2006 and 18,745,538 shares as of June 30, 2007 (813,571) (1,064,606) (1,151,985) Retained earnings 4,390,188 4,655,272 4,763,031 Accumulated other comprehensive loss   (171,848)   (259,374)   (268,566) Total stockholders' equity   4,608,908   4,571,401   4,627,147 Total liabilities and stockholders' equity $ 50,800,136 $ 52,619,576 $ 53,173,833 UnionBanCal Corporation and Subsidiaries Loans (Unaudited) Exhibit 5   Percent Change to Three Months Ended June 30, 2007 from June 30, March 31, June 30, June 30, March 31, (Dollars in millions)       2006     2007     2007   2006 2007   Loans (period average) Commercial, financial and industrial $ 12,955 $ 14,681 $ 14,610 12.77 % (0.48 %) Construction 1,724 2,233 2,296 33.18 % 2.82 % Mortgage - Commercial 5,662 6,064 6,213 9.73 % 2.46 % Mortgage - Residential 11,733 12,384 12,591 7.31 % 1.67 % Consumer 2,505 2,542 2,557 2.08 % 0.59 % Lease financing   564     548     569   0.89 % 3.83 %   Total loans held to maturity $ 35,143 $ 38,452 $ 38,836 10.51 % 1.00 % Total loans held for sale   4     6     4   0.00 % (33.33 %)   Total loans $ 35,147   $ 38,458   $ 38,840   10.51 % 0.99 %   Nonperforming Assets (period end) Nonaccrual loans: Commercial, financial and industrial $ 4 $ 5 $ 19 nm nm Mortgage - Commercial 17 22 10 (41.18 %) (54.55 %) Lease financing   15     15     -   (100.00 %) (100.00 %)   Total nonaccrual loans 36 42 29 (19.44 %) (30.95 %) Foreclosed assets   -     -     1   nm nm   Total nonperforming assets $ 36   $ 42   $ 30   (16.67 %) (28.57 %)   Loans 90 days or more past due and still accruing $ 3   $ 6   $ 10   nm 66.67 %   Analysis of Allowances for Credit Losses Beginning balance $ 340 $ 331 $ 333   (Reversal of) provision for loan losses (1 ) 4 5   Loans charged off: Commercial, financial and industrial (18 ) (3 ) (3 ) Consumer   (1 )   (1 )   (1 ) Total loans charged off   (19 )   (4 )   (4 )   Loans recovered: Commercial, financial and industrial   9     2     2   Total loans recovered   9     2     2   Net loans charged off   (10 )   (2 )   (2 )   Ending balance of allowance for loan losses $ 329 $ 333 $ 336 Allowance for off-balance sheet commitment losses   79     82     82       Allowances for credit losses $ 408   $ 415   $ 418   UnionBanCal Corporation and Subsidiaries Net Interest Income (Unaudited) Exhibit 6   For the Three Months Ended For the Three Months Ended June 30, 2006 June 30, 2007 Interest Average Interest Average Average Income/ Yield/ Average Income/ Yield/ (Dollars in thousands) Balance Expense (10) Rate (6) (10)   Balance Expense (10) Rate (6) (10)   Assets Loans (11) Commercial, financial and industrial $ 12,957,301 $ 214,068 6.63 % $ 14,610,728 $ 238,175 6.54 % Construction 1,723,868 33,061 7.69 2,296,098 44,047 7.69 Residential mortgage 11,734,930 149,869 5.11 12,594,065 167,342 5.31 Commercial mortgage 5,661,541 100,238 7.10 6,213,092 111,720 7.21 Consumer 2,505,651 47,576 7.62 2,557,085 49,579 7.78 Lease financing   563,685     3,205   2.27   568,701     7,341 5.16 Total loans 35,146,976 548,017 6.25 38,839,769 618,204 6.38 Securities - taxable 8,349,759 102,733 4.92 8,548,063 108,675 5.09 Securities - tax-exempt 63,222 1,275 8.06 56,084 1,164 8.30 Interest bearing deposits in banks 34,462 423 4.92 88,592 1,295 5.86 Federal funds sold and securities purchased under resale agreements 379,412 4,725 4.99 593,718 7,809 5.28 Trading account assets   384,763     1,685   1.76   317,020     1,601 2.03 Total earning assets 44,358,594   658,858   5.95 48,443,246   738,748 6.11 Allowance for loan losses (334,556 ) (331,820 ) Cash and due from banks 2,107,846 2,000,691 Premises and equipment, net 506,607 486,776 Other assets   2,690,883     2,517,561   Total assets $ 49,329,374   $ 53,116,454   Liabilities Deposits: Transaction accounts $ 12,614,869 65,457 2.08 $ 14,075,542 102,833 2.93 Savings and consumer time 4,470,764 21,502 1.93 4,445,326 28,962 2.61 Large time   5,062,473     56,718   4.49   9,173,928     114,380 5.00 Total interest bearing deposits   22,148,106     143,677   2.60   27,694,796     246,175 3.57 Federal funds purchased and securities sold under repurchase agreements 748,050 8,902 4.77 782,000 10,120 5.19 Net funding allocated from (to) discontinued operations (12) (36,123 ) (447 ) 4.97 - - - Commercial paper 1,650,266 19,137 4.65 1,389,847 17,429 5.03 Other borrowed funds 108,095 1,476 5.47 333,252 4,689 5.64 Medium and long-term debt 1,179,432 16,875 5.74 2,033,377 28,973 5.72 Trust notes   15,167     238   6.28   14,714     238 6.48 Total borrowed funds   3,664,887     46,181   5.05   4,553,190     61,449 5.41 Total interest bearing liabilities 25,812,993   189,858   2.95 32,247,986   307,624 3.83 Noninterest bearing deposits 17,543,946 14,989,226 Other liabilities   1,432,959     1,291,181   Total liabilities 44,789,898 48,528,393 Stockholders' Equity Common equity   4,539,476     4,588,061   Total stockholders' equity   4,539,476     4,588,061   Total liabilities and stockholders' equity $ 49,329,374   $ 53,116,454   Reported Net Interest Income/Margin Net interest income/margin (taxable-equivalent basis) 469,000 4.23 % 431,124 3.56 % Less: taxable-equivalent adjustment   1,358     2,251 Net interest income $ 467,642   $ 428,873   Average Assets and Liabilities of Discontinued Operations for Period Ended: June 30, 2006 Assets $ 79,188 Liabilities $ 43,065 Net Asset $ 36,123   Refer to Exhibit 11 for footnote explanations. UnionBanCal Corporation and Subsidiaries Net Interest Income (Unaudited) Exhibit 7   For the Three Months Ended     For the Three Months Ended March 31, 2007 June 30, 2007 Interest Average Interest Average Average Income/ Yield/ Average Income/ Yield/ (Dollars in thousands) Balance Expense (10) Rate (6) (10)     Balance Expense (10) Rate (6) (10)   Assets Loans: (11) Commercial, financial and industrial $ 14,684,098 $ 237,278 6.55 % $ 14,610,728 $ 238,175 6.54 % Construction 2,233,131 42,775 7.77 2,296,098 44,047 7.69 Residential mortgage 12,386,306 163,766 5.29 12,594,065 167,342 5.31 Commercial mortgage 6,064,169 106,966 7.15 6,213,092 111,720 7.21 Consumer 2,542,507 48,979 7.81 2,557,085 49,579 7.78 Lease financing   547,803     3,738 2.73   568,701     7,341 5.16 Total loans 38,458,014 603,502 6.34 38,839,769 618,204 6.38 Securities - taxable 8,580,315 107,268 5.00 8,548,063 108,675 5.09 Securities - tax-exempt 57,654 1,154 8.01 56,084 1,164 8.30 Interest bearing deposits in banks 79,562 1,109 5.65 88,592 1,295 5.86 Federal funds sold and securities purchased under resale agreements 846,042 11,152 5.35 593,718 7,809 5.28 Trading account assets   333,363     1,701 2.07   317,020     1,601 2.03 Total earning assets 48,354,950   725,886 6.06 48,443,246   738,748 6.11 Allowance for loan losses (330,277 ) (331,820 ) Cash and due from banks 1,949,232 2,000,691 Premises and equipment, net 493,055 486,776 Other assets   2,506,243     2,517,561   Total assets $ 52,973,203   $ 53,116,454   Liabilities Deposits: Transaction accounts $ 13,534,373 91,505 2.74 $ 14,075,542 102,833 2.93 Savings and consumer time 4,415,261 26,957 2.48 4,445,326 28,962 2.61 Large time   8,435,137     103,795 4.99   9,173,928     114,380 5.00 Total interest bearing deposits   26,384,771     222,257 3.42   27,694,796     246,175 3.57 Federal funds purchased and securities sold under repurchase agreements 1,046,439 13,524 5.24 782,000 10,120 5.19 Net funding allocated from (to) discontinued operations (12) - - - - - - Commercial paper 1,783,758 22,264 5.06 1,389,847 17,429 5.03 Other borrowed funds 1,309,102 17,281 5.35 333,252 4,689 5.64 Medium and long-term debt 1,371,446 19,695 5.82 2,033,377 28,973 5.72 Trust notes   14,827     238 6.43   14,714     238 6.48 Total borrowed funds   5,525,572     73,002 5.36   4,553,190     61,449 5.41 Total interest bearing liabilities 31,910,343   295,259 3.75 32,247,986   307,624 3.83 Noninterest bearing deposits 15,098,291 14,989,226 Other liabilities   1,454,364     1,291,181   Total liabilities 48,462,998 48,528,393 Stockholders' Equity Common equity   4,510,205     4,588,061   Total stockholders' equity   4,510,205     4,588,061   Total liabilities and stockholders' equity $ 52,973,203   $ 53,116,454   Reported Net Interest Income/Margin Net interest income/margin (taxable-equivalent basis) 430,627 3.58 % 431,124 3.56 % Less: taxable-equivalent adjustment   2,115   2,251 Net interest income $ 428,512 $ 428,873         Refer to Exhibit 11 for footnote explanations. UnionBanCal Corporation and Subsidiaries Net Interest Income (Unaudited) Exhibit 8   For the Six Months Ended For the Six Months Ended June 30, 2006 June 30, 2007 Interest Average Interest Average Average Income/ Yield/ Average Income/ Yield/ (Dollars in thousands) Balance Expense (10) Rate (6) (10) Balance Expense (10) Rate (6) (10)   Assets Loans: (11) Commercial, financial and industrial $ 12,666,066 $ 410,020 6.53% $ 14,647,210 $ 475,453 6.55 % Construction 1,624,123 60,019 7.45 2,264,789 86,822 7.73 Residential mortgage 11,591,676 293,209 5.06 12,490,760 331,108 5.30 Commercial mortgage 5,657,018 197,539 7.04 6,139,042 218,686 7.18 Consumer 2,497,519 92,671 7.48 2,549,836 98,558 7.79 Lease financing   566,144     7,547   2.67   558,310     11,079 3.97 Total loans 34,602,546 1,061,005 6.17 38,649,947 1,221,706 6.36 Securities - taxable 8,292,126 198,787 4.79 8,564,100 215,943 5.04 Securities - tax-exempt 64,207 2,572 8.01 56,865 2,318 8.15 Interest bearing deposits in banks 47,084 1,159 4.96 84,102 2,404 5.76 Federal funds sold and securities purchased under resale agreements 362,471 8,570 4.77 719,183 18,961 5.32 Trading account assets   356,556     3,215   1.82   325,146     3,302 2.05 Total earning assets 43,724,990   1,275,308   5.86 48,399,343   1,464,634 6.08 Allowance for loan losses (341,568 ) (331,042 ) Cash and due from banks 2,113,853 1,975,104 Premises and equipment, net 516,748 489,898 Other assets   2,662,595     2,511,933   Total assets $ 48,676,618   $ 53,045,236   Liabilities Deposits: Transaction accounts $ 12,936,591 127,815 1.99 $ 13,806,452 194,338 2.84 Savings and consumer time 4,469,204 39,990 1.80 4,430,376 55,919 2.55 Large time   4,339,551     91,181   4.24   8,806,573     218,175 5.00 Total interest bearing deposits   21,745,346     258,986   2.40   27,043,401     468,432 3.49 Federal funds purchased and securities sold under repurchase agreements 810,704 18,312 4.55 913,489 23,644 5.22 Net funding allocated from (to) discontinued operations (12) (46,548 ) (1,055 ) 4.57 - - - Commercial paper 1,447,492 31,585 4.40 1,585,714 39,693 5.05 Other borrowed funds 187,736 4,391 4.72 818,481 21,970 5.41 Medium and long-term debt 990,771 27,272 5.55 1,704,240 48,668 5.76 Trust notes   15,223     476   6.26   14,770     476 6.45 Total borrowed funds   3,405,378     80,981   4.80   5,036,694     134,451 5.38 Total interest bearing liabilities 25,150,724   339,967   2.73 32,080,095   602,883 3.79 Noninterest bearing deposits 17,531,006 15,043,457 Other liabilities   1,455,808     1,372,336   Total liabilities 44,137,538 48,495,888 Stockholders' Equity Common equity   4,539,080     4,549,348   Total stockholders' equity   4,539,080     4,549,348   Total liabilities and stockholders' equity $ 48,676,618   $ 53,045,236   Reported Net Interest Income/Margin Net interest income/margin (taxable-equivalent basis) 935,341 4.29% 861,751 3.57 % Less: taxable-equivalent adjustment   2,606     4,366 Net interest income $ 932,735   $ 857,385                           Average Assets and Liabilities of Discontinued Operations for Period Ended: June 30, 2006 Assets $ 347,431 Liabilities $ 300,883 Net Asset $ 46,548                           Refer to Exhibit 11 for footnote explanations. UnionBanCal Corporation and Subsidiaries   Noninterest income (Unaudited) Exhibit 9   Percentage Change to June 30, 2007 from For the Three Months Ended June 30, March 31, June 30, June 30, March 31, (Dollars in thousands) 2006   2007 2007 2006       2007     Service charges on deposit accounts $ 81,837 $ 74,945 $ 77,218 (5.64 ) % 3.03 % Trust and investment management fees 48,380 48,560 51,585 6.62 6.23 Insurance commissions 17,752 20,250 16,501 (7.05 ) (18.51 ) Brokerage commissions and fees 10,330 9,660 9,533 (7.72 ) (1.31 ) Foreign exchange gains, net 8,307 7,594 9,288 11.81 22.31 Merchant banking fees 8,396 9,077 8,809 4.92 (2.95 ) Card processing fees, net 7,206 7,127 7,824 8.58 9.78 Securities gains, net 1,993 1,220 230 (88.46 ) (81.15 ) Gain on private capital investments, net 3,702 9,095 20,171 nm nm Other 31,325   35,030 28,686 (8.42 ) (18.11 ) Total noninterest income $ 219,228   $ 222,558 $ 229,845 4.84 % 3.27 %     Noninterest expense (Unaudited)   Percentage Change to June 30, 2007 from For the Three Months Ended   June 30, March 31, June 30, June 30, March 31, (Dollars in thousands) 2006   2007 2007 2006       2007     Salaries and other compensation $ 201,689 $ 207,657 $ 206,110 2.19 % (0.75 ) % Employee benefits 46,948   50,858 45,320 (3.47 ) (10.89 ) Salaries and employee benefits 248,637 258,515 251,430 1.12 (2.74 ) Net occupancy 34,519 35,137 35,244 2.10 0.30 Outside services 30,704 19,836 18,851 (38.60 ) (4.97 ) Equipment 16,846 16,554 16,367 (2.84 ) (1.13 ) Software 15,323 14,196 15,136 (1.22 ) 6.62 Professional services 17,038 17,087 11,970 (29.75 ) (29.95 ) Advertising and public relations 11,270 8,389 10,476 (7.05 ) 24.88 Communications 10,061 9,791 8,855 (11.99 ) (9.56 ) Data processing 7,845 8,241 8,626 9.96 4.67 Intangible asset amortization 3,427 2,243 2,243 (34.55 ) 0.00 Foreclosed asset expense (income) (7,782 ) 9 9 nm 0.00 (Reversal of) provision for losses on off-balance sheet commitments (4,000 ) 1,000 - 100.00 (100.00 ) Other 29,142   31,093 32,658 12.07 5.03 Total noninterest expense $ 413,030   $ 422,091 $ 411,865 (0.28 ) % (2.42 ) % UnionBanCal Corporation and Subsidiaries   Noninterest income (Unaudited) Exhibit 10   Percentage Change to June 30, 2007 from For the Six Months Ended June 30, June 30, June 30, (Dollars in thousands)   2006     2007 2006 Service charges on deposit accounts $ 163,472 $ 152,163 (6.92 ) % Trust and investment management fees 98,495 100,145 1.68 Insurance commissions 37,270 36,751 (1.39 ) Brokerage commissions and fees 18,125 19,193 5.89 Merchant banking fees 16,625 17,886 7.59 Foreign exchange gains, net 16,125 16,882 4.69 Card processing fees, net 13,903 14,951 7.54 Securities gains, net 1,779 1,450 (18.49 ) Gain on private capital investments, net 6,529 29,266 nm Other   64,815     63,716 (1.70 ) Total noninterest income $ 437,138   $ 452,403 3.49 %     Noninterest expense (Unaudited)   Percentage Change to June 30, 2007 from For the Six Months Ended   June 30, June 30, June 30, (Dollars in thousands)   2006     2007 2006 Salaries and other compensation $ 395,948 $ 413,767 4.50 % Employee benefits   105,184     96,178 (8.56 ) Salaries and employee benefits 501,132 509,945 1.76 Net occupancy 67,356 70,381 4.49 Outside services 59,313 38,687 (34.77 ) Equipment 34,768 32,921 (5.31 ) Software 31,667 29,332 (7.37 ) Professional services 31,585 29,057 (8.00 ) Advertising and public relations 21,501 18,865 (12.26 ) Communications 20,613 18,646 (9.54 ) Data processing 15,243 16,867 10.65 Intangible asset amortization 6,857 4,486 (34.58 ) Foreclosed asset expense (income) (15,149 ) 18 nm (Reversal of) provision for allowance for losses on off-balance sheet commitments (7,000 ) 1,000 nm Other   59,688     63,751 6.81 Total noninterest expense $ 827,574   $ 833,956 0.77 % UnionBanCal Corporation and Subsidiaries   Footnotes Exhibit 11   (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, 2007. The regulatory capital and leverage ratios include discontinued operations. (9) The allowance for credit losses ratios include the allowances for loan losses and losses on off-balance sheet commitments. These ratios relate to continuing operations only. (10) Yields and interest income are presented on a taxable-equivalent basis using the federal statutory tax rate of 35 percent. (11) Average balances on loans outstanding include all nonperforming loans and loans held for sale. The amortized portion of net loan origination fees (costs) is included in interest income on loans, representing an adjustment to the yield. (12) Net funding allocated from (to) discontinued operations represents the shortage (excess) of assets over liabilities of discontinued operations. The expense (earning) on funds allocated from (to) discontinued operations is calculated by taking the net balance and applying an earnings rate or a cost of funds equivalent to the corresponding period's Federal funds purchased rate.   nm = not meaningful