MUFG Americas Holdings Corp - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - January 25, 2013

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8-K - UNIONBANCAL CORPORATION 8-K - MUFG Americas Holdings Corpa50542673.htm

Exhibit 99.1

UnionBanCal Corporation Reports Fourth Quarter Net Income of $123 Million, Full Year Net Income of $629 Million

Fourth Quarter Highlights:

  • Completed the acquisition of Pacific Capital Bancorp (PCBC) on December 1, 2012.
  • Completed the acquisition of Smartstreet on October 26, 2012.
  • Net income was $123 million, down slightly from $124 million for the prior quarter, and down from $129 million for the year-ago quarter.
  • Total provision for credit losses was a benefit of $15 million, compared with a provision of $41 million for the prior quarter, and a provision of $9 million for the year-ago quarter.
  • Solid underlying credit quality metrics, including the acquisition of PCBC. Excluding purchased credit-impaired (PCI) loans and FDIC covered other real estate owned (OREO):
    • Nonperforming assets at quarter-end were $520 million, or 0.54 percent of total assets, down from $526 million, or 0.60 percent of total assets, at September 30, 2012.
    • Net charge-offs were less than $1 million for the fourth quarter, compared with $40 million, or an annualized 0.29 percent of average total loans, for the prior quarter. The prior quarter included $17 million in residential mortgage and home equity net charge-offs due to implementation of new regulatory guidance.
  • Net interest margin was 3.23 percent, down from 3.32 percent for the prior quarter, and down from 3.29 percent for the year-ago quarter.
  • Average total loans, excluding PCI loans, were $56.5 billion, up from $54.7 billion for the prior quarter, and up from $51.3 billion for the year-ago quarter.
  • Core deposits at December 31, 2012, were $63.8 billion, up from $55.1 billion at September 30, 2012, and up from $52.8 billion at December 31, 2011.
  • Capital ratios remained strong during the quarter. Including the December 1, 2012, acquisition of PCBC:
    • Tier 1 common capital ratio, measured using Basel I risk-weighted assets, was 12.35 percent at December 31, 2012, down 142 basis points from 13.77 percent at September 30, 2012.
    • Tangible common equity ratio was 9.92 percent at December 31, 2012, down 154 basis points from 11.46 percent at September 30, 2012.
  • Full Year Highlights:
    • Net income was $629 million, down from $778 million for the prior year.
    • Total provision for credit losses was $8 million, compared with a benefit of $231 million for the prior year.
    • Excluding PCI loans, net charge-offs were $123 million, or 0.23 percent of average total loans, down from $235 million, or 0.48 percent of average total loans, for the prior year.

SAN FRANCISCO--(BUSINESS WIRE)--January 25, 2013--UnionBanCal Corporation (the Company), parent company of San Francisco-based Union Bank, N.A., today reported fourth quarter 2012 results. Net income for the fourth quarter was $123 million, down slightly from $124 million for the prior quarter, and down from $129 million for the year-ago quarter. Higher total revenue and a benefit from the provision for credit losses were offset by higher noninterest expense, which increased primarily due to merger costs related to the acquisition of PCBC.

On December 1, 2012, the Company completed the $1.5 billion purchase of PCBC, a bank holding company headquartered in Santa Barbara, California. As part of the transaction, Santa Barbara Bank & Trust, N.A., was merged with and into the Company’s primary subsidiary, Union Bank, N.A. (Union Bank), on December 3, 2012, with Union Bank continuing as the surviving entity. In the transaction, Union Bank acquired $3.8 billion in loans held for investment and $4.7 billion in deposits, as of December 1, 2012.

On October 26, 2012, the Company completed the acquisition of Smartstreet, formerly a division of PNC Bank, N.A., which provides banking services nationwide to homeowners associations (HOA) and community association management companies. In the transaction, Union Bank acquired approximately $1 billion in deposits.

Summary of Fourth Quarter Results

Fourth Quarter Total Revenue

For fourth quarter 2012, total revenue (net interest income plus noninterest income) was $889 million, up $46 million, or 5 percent, compared with third quarter 2012. Net interest income increased 2 percent, and noninterest income increased 17 percent. The net interest margin was 3.23 percent, down 9 basis points compared with 3.32 percent for the prior quarter.

Net interest income for fourth quarter 2012 was $668 million, up $14 million, or 2 percent, compared with third quarter 2012. The increase in net interest income was primarily due to an increase in loans held for investment, which included organic growth and the PCBC acquisition. The net interest margin declined primarily due to a higher level of interest bearing deposits in banks and a lower yield on securities.

Average total loans, excluding PCI loans, increased $1.9 billion, or 3 percent, compared with third quarter 2012, primarily due to organic growth in commercial and industrial loans and residential mortgage loans, and the PCBC acquisition. Deposit balances grew significantly during the quarter, primarily due to the PCBC and Smartstreet acquisitions. Average interest bearing deposits increased $2.9 billion, or 7 percent, and average noninterest bearing deposits increased $2.3 billion, or 11 percent.

For fourth quarter 2012, noninterest income was $221 million, up $32 million, or 17 percent, compared with third quarter 2012. Higher other noninterest income, which increased primarily due to a gain on the sale of Visa, Inc., Class B common shares and higher gains on the sale of private equity investments, was partially offset by lower gains on the sale of securities.

Compared to fourth quarter 2011, total revenue grew $98 million, with net interest income up 4 percent and noninterest income up 46 percent. Net interest income increased $28 million compared with the year-ago quarter, primarily due to loan growth. The net interest margin declined 6 basis points, primarily due to a higher level of interest bearing deposits in banks and a lower yield on securities.

Average total loans, excluding PCI loans, increased $5.2 billion, or 10 percent, compared with fourth quarter 2011, primarily due to organic growth in commercial and industrial loans and residential mortgage loans, as well as the PCBC acquisition. Average interest bearing deposits increased $3.0 billion, or 7 percent, and average noninterest bearing deposits increased $3.7 billion, or 19 percent.

Noninterest income increased $70 million, or 46 percent, compared with fourth quarter 2011, primarily due to higher other noninterest income and higher net gains on the sale of securities related to portfolio rebalancing activities. Other noninterest income increased primarily due to the fourth quarter 2012 gain on the sale of Visa, Inc., Class B common shares and higher gains on private equity investments.

Fourth Quarter Noninterest Expense

Noninterest expense for fourth quarter 2012 was $715 million, up $77 million, or 12 percent, compared with third quarter 2012. One-time merger costs and ongoing operating expenses related to acquisitions, primarily the PCBC acquisition, accounted for $56 million of the increase. The remaining $21 million of the increase was primarily due to higher professional and outside services expense, most of which increased due to various regulatory and compliance projects.

Noninterest expense for fourth quarter 2012 was up $96 million, or 16 percent, compared with fourth quarter 2011, primarily due to the same reasons as the sequential quarter increase.

Full Year 2012 Results

For full year 2012, net income was $629 million, compared with net income of $778 million for full year 2011. The $149 million decrease in net income was primarily due to the after-tax effect of a $239 million increase in total provision for credit losses.

Total revenue for full year 2012 was $3.4 billion, an increase of $127 million, or 4 percent, compared with 2011. Net interest income increased $156 million, or 6 percent, primarily due to higher average earning assets and higher interest income on PCI loans. Noninterest income decreased $29 million, or 4 percent. Noninterest expense increased $151 million, or 6 percent, primarily due to a $94 million increase in salaries and employee benefits expense, which increased primarily due to higher pension expense and merger costs related to acquisitions. The effective tax rate for full year 2012 was 26.5 percent, compared with an effective tax rate of 29.4 percent for 2011. The decrease in the effective tax rate was primarily due to the impact of tax-exempt income and tax credits on lower pretax income in 2012.

Balance Sheet

At December 31, 2012, the Company had total assets of $97.0 billion, up $7.3 billion, or 8 percent, compared with December 31, 2011. Loan growth accounted for most of the increase in assets during the year. At December 31, 2012, total deposits were $74.3 billion, up $9.8 billion, or 15 percent, compared with December 31, 2011. Core deposits at December 31, 2012, were $63.8 billion, up $10.9 billion, or 21 percent, compared with December 31, 2011.

Credit Quality

Excluding PCI loans and FDIC covered OREO, nonperforming assets ended the quarter at $520 million, or 0.54 percent of total assets; down from $526 million, or 0.60 percent of total assets, at September 30, 2012; and down from $618 million, or 0.70 percent of total assets, at December 31, 2011.

Excluding PCI loans, net charge-offs were less than $1 million for fourth quarter 2012. This was down from net charge-offs of $40 million, or an annualized 0.29 percent of average total loans, for third quarter 2012, and down from net charge-offs of $29 million, or an annualized 0.21 percent of average total loans, for fourth quarter 2011. Third quarter 2012 included $17 million in residential mortgage and home equity net charge-offs resulting from the implementation of new regulatory guidance.

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. In fourth quarter 2012, the provision for loan losses was a benefit of $5 million and the reversal of provision for losses on off-balance sheet commitments was a benefit of $10 million, for a total benefit of $15 million for fourth quarter 2012. This compares with a total provision for credit losses of $41 million for third quarter 2012. The primary drivers of the lower provision were lower charge-offs in the consumer loan portfolio, higher net recoveries in the commercial loan portfolio, and improved credit quality across the entire portfolio.

The allowance for credit losses as a percent of total loans, excluding PCI loans, was 1.31 percent at December 31, 2012, compared with 1.43 percent at September 30, 2012, and 1.67 percent at December 31, 2011. The allowance for credit losses as a percent of nonaccrual loans, excluding PCI loans, was 162 percent at December 31, 2012, compared with 155 percent at September 30, 2012, and 149 percent at December 31, 2011.

Capital

At December 31, 2012, the Company’s stockholder’s equity was $12.5 billion, up $929 million, or 8 percent, since December 31, 2011, and tangible common equity was $9.3 billion, up $430 million, or 5 percent, since December 31, 2011. The Company’s tangible common equity ratio was 9.92 percent at December 31, 2012, down 28 basis points from 10.20 percent at December 31, 2011, primarily due to the PCBC acquisition. The Basel I Tier 1 common and Tier 1 risk-based capital ratios were 12.35 percent and 12.44 percent, respectively, at December 31, 2012. Additionally, the Basel I Total risk-based capital ratio was 13.93 percent at December 31, 2012.

Non-GAAP Financial Measures

This press release contains certain references to financial measures identified as excluding privatization transaction impact, foreclosed asset expense and other credit costs, (reversal of) provision for losses on off-balance sheet commitments, productivity initiative costs and gains, low income housing credit (LIHC) investment amortization expense, expenses of the LIHC consolidated variable interest entities, merger costs related to acquisitions, debt termination fees from balance sheet repositioning, or gains from securities associated with debt termination fees from balance sheet repositioning, 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 or credits. This press release identifies the specific items excluded from the comparable GAAP financial measure in the calculation of each non-GAAP financial measure. 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 business results. This press release also includes additional capital ratios (the tangible common equity and Basel I Tier 1 common capital ratios) to facilitate the understanding of the Company’s capital structure and for use in assessing and comparing the quality and composition of UnionBanCal’s capital structure to other financial institutions. 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.

Headquartered in San Francisco, UnionBanCal Corporation is a financial holding company with assets of $97.0 billion at December 31, 2012. Its primary subsidiary, Union Bank, N.A., is a full-service commercial bank providing an array of financial services to individuals, small businesses, middle-market companies, and major corporations. The bank operated 447 branches in California, Washington, Oregon, Texas, Illinois, and New York as well as two international offices, on December 31, 2012. UnionBanCal Corporation is a wholly-owned subsidiary of The Bank of Tokyo-Mitsubishi UFJ, Ltd., which is a subsidiary of Mitsubishi UFJ Financial Group, Inc. Union Bank is a proud member of the Mitsubishi UFJ Financial Group (MUFG, NYSE:MTU), one of the world’s largest financial organizations. Visit www.unionbank.com for more information.

               
UnionBanCal Corporation and Subsidiaries
Financial Highlights (Unaudited)

Exhibit 1

 
Percent Change to
As of and for the Three Months Ended December 31, 2012 from
December 31, September 30, June 30, March 31, December 31, September 30, December 31,
(Dollars in millions) 2012 2012 2012 2012 2011 2012     2011
Results of operations:
Net interest income $ 668 $ 654 $ 659 $ 653 $ 640 2 % 4
Noninterest income   221     189   175     202     151 17 46
Total revenue 889 843 834 855 791 5 12
Noninterest expense   715     638   599     614     619 12 16
Pre-tax, pre-provision income (1) 174 205 235 241 172 (15 ) 1
(Reversal of) provision for loan losses   (5 )   45   (14 )   (1 )   7 111 (171 )

Income before income taxes and including noncontrolling interests

179 160 249 242 165 12 8
Income tax expense   60     42   67     51     40 43 50

Net income including noncontrolling interests

119 118 182 191 125 1 (5 )
Deduct: Net loss from noncontrolling interests   4     6   5     4     4 (33 ) -

Net income attributable to UnionBanCal Corporation (UNBC)

$ 123   $ 124 $ 187   $ 195   $ 129 (1 ) (5 )
 
Balance sheet (end of period):
Total assets $ 96,992 $ 88,185 $ 87,939 $ 92,323 $ 89,676 10 8
Total securities 22,455 22,089 22,890 25,432 24,106 2 (7 )
Total loans held for investment 60,034 55,410 54,291 54,322 53,540 8 12
Core deposits (2) 63,769 55,141 53,378 53,125 52,840 16 21
Total deposits 74,255 65,143 63,443 65,089 64,420 14 15
Long-term debt 5,622 5,540 6,444 5,554 6,684 1 (16 )
UNBC stockholder's equity 12,491 12,437 12,076 11,821 11,562 - 8
 
Balance sheet (period average):
Total assets $ 92,051 $ 87,881 $ 89,479 $ 89,449 $ 87,079 5 6
Total securities 21,903 22,496 24,223 24,265 22,721 (3 ) (4 )
Total loans held for investment 57,242 55,285 54,937 54,149 52,365 4 9
Earning assets 82,776 79,137 80,625 80,503 78,007 5 6
Total deposits 69,601 64,420 64,499 64,425 62,848 8 11
UNBC stockholder's equity 12,559 12,209 11,905 11,621 11,646 3 8
 
Performance ratios:
Return on average assets (3) 0.54 % 0.56 % 0.84 % 0.88 % 0.59 %
Return on average UNBC stockholder's equity (3) 3.93 4.03 6.32 6.75 4.39

Return on average assets excluding the impact of privatization transaction and merger costs related to acquisitions (3) (4)

0.68 0.62 0.90 0.93 0.66

Return on average stockholder's equity excluding the impact of privatization transaction and merger costs related to acquisitions (3) (4)

5.93 5.38 8.22 8.73 6.03
Efficiency ratio (5) 80.45 75.61 71.83 71.86 78.27
Adjusted efficiency ratio (5) 70.29 68.37 66.18 68.76 69.12
Net interest margin (3) (6) 3.23 3.32 3.29 3.27 3.29
 
Capital ratios:
Tier 1 risk-based capital ratio (7) 12.44 % 13.77 % 13.78 % 13.73 % 13.82 %
Total risk-based capital ratio (7) 13.93 15.51 15.54 15.77 15.98
Leverage ratio (7) 11.18 12.03 11.58 11.35 11.44
Tier 1 common capital ratio (7) (8) 12.35 13.77 13.78 13.73 13.82
Tangible common equity ratio (9) 9.92 11.46 11.04 10.20 10.20
 
Refer to Exhibit 14 for footnote explanations.
 
 
UnionBanCal Corporation and Subsidiaries
Financial Highlights (Unaudited)

Exhibit 2

         
Percent Change to
As of and for the Year Ended December 31, 2012 from
December 31, December 31, December 31,
(Dollars in millions) 2012 2011 2011
Results of operations:
Net interest income $ 2,634 $ 2,478 6 %
Noninterest income   787   816   (4 )
Total revenue 3,421 3,294 4
Noninterest expense   2,566   2,415   6
Pre-tax, pre-provision income (1) 855 879 (3 )
(Reversal of) provision for loan losses   25   (202 ) 112

Income before income taxes and including noncontrolling interests

830 1,081 (23 )
Income tax expense   220   318   (31 )
Net income including noncontrolling interests 610 763 (20 )
Deduct: Net loss from noncontrolling interests   19   15   27
Net income attributable to UNBC $ 629 $ 778   (19 )
 
Balance sheet (end of period):
Total assets $ 96,992 $ 89,676 8
Total securities 22,455 24,106 (7 )
Total loans held for investment 60,034 53,540 12
Core deposits (2) 63,769 52,840 21
Total deposits 74,255 64,420 15
Long-term debt 5,622 6,684 (16 )
UNBC stockholder's equity 12,491 11,562 8
 
Balance sheet (period average):
Total assets $ 89,716 $ 82,435 9
Total securities 23,216 21,001 11
Total loans held for investment 55,407 49,939 11
Earning assets 80,761 73,610 10
Total deposits 65,743 60,066 9
UNBC stockholder's equity 12,075 10,726 13
 
Performance ratios:
Return on average assets (3) 0.70 % 0.94 %
Return on average UNBC stockholder's equity (3) 5.21 7.25

Return on average assets excluding the impact of privatization transaction and merger costs related to acquisitions(3) (4)

0.78 1.03

Return on average stockholders' equity excluding the impact of privatization transaction and merger costs related to acquisitions (3) (4)

7.02 9.85
Efficiency ratio (5) 75.01 73.32
Adjusted efficiency ratio (5) 68.43 66.31
Net interest margin (3) (6) 3.28 3.38
 
Capital ratios:
Tier 1 risk-based capital ratio (7) 12.44 % 13.82 %
Total risk-based capital ratio (7) 13.93 15.98
Leverage ratio (7) 11.18 11.44
Tier 1 common capital ratio (7) (8) 12.35 13.82
Tangible common equity ratio (9) 9.92 10.20
 
Refer to Exhibit 14 for footnote explanations.
 
 
UnionBanCal Corporation and Subsidiaries
Credit Quality (Unaudited)

Exhibit 3

 
            Percent Change to
As of and for the Three Months Ended December 31, 2012 from
December 31, September 30, June 30, March 31, December 31, September 30,   December 31,
(Dollars in millions) 2012 2012 2012 2012 2011 2012     2011
 
Credit Data:
(Reversal of) provision for loan losses, excluding FDIC covered loans $ (3 ) $ 43 $ (13 ) $ 1 $ 7 (107 ) % (143 ) %
(Reversal of) provision for FDIC covered loan losses not subject to FDIC indemnification (2 ) 2 (1 ) (2 ) - (200 ) (100 )
(Reversal of) provision for losses on off-balance sheet commitments   (10 )   (4 )   (1 )   (2 )   2 (150 ) nm
Total (reversal of) provision for credit losses $ (15 ) $ 41   $ (15 ) $ (3 ) $ 9 (137 ) (267 )
Net loans charged off $ 5 $ 42 $ 31 $ 53 $ 28 (88 ) (82 )
Nonperforming assets 616 637 658 706 782 (3 ) (21 )
Criticized loans held for investment (10) 1,277 1,520 1,443 1,620 2,007 (16 ) (36 )
- -
Credit Ratios:
Allowance for loan losses to:
Total loans held for investment 1.09 % 1.21 % 1.21 % 1.30 % 1.43 %
Nonaccrual loans 129.47 125.12 118.63 121.35 119.58
Allowance for credit losses to (11) :
Total loans held for investment 1.28 1.43 1.45 1.54 1.68
Nonaccrual loans 152.67 148.80 142.20 144.01 140.46
Net loans charged off to average total loans held for investment (3) 0.03 0.30 0.22 0.40 0.21

Nonperforming assets to total loans held for investment and Other Real Estate Owned (OREO)

1.02 1.15 1.21 1.30 1.46
Nonperforming assets to total assets 0.63 0.72 0.75 0.76 0.87
Nonaccrual loans to total loans held for investment 0.84 0.96 1.02 1.07 1.19
 
Excluding purchased credit-impaired loans and FDIC covered OREO (12):
Allowance for loan losses to:
Total loans held for investment 1.11 % 1.20 % 1.22 % 1.30 % 1.42 %
Nonaccrual loans 137.40 130.29 127.22 129.95 126.26
Allowance for credit losses to (11) :
Total loans held for investment 1.31 1.43 1.46 1.54 1.67
Nonaccrual loans 162.05 155.39 152.64 154.55 148.80
Net loans charged off to average total loans held for investment (3) 0.01 0.29 0.21 0.41 0.21

Nonperforming assets to total loans held for investment and OREO

0.88 0.96 1.01 1.04 1.17
Nonperforming assets to total assets 0.54 0.60 0.62 0.61 0.70
Nonaccrual loans to total loans held for investment 0.81 0.92 0.96 1.00 1.12

 

 

As of and for the

Percent Change to

Years Ended

December 31, 2012 from
December 31, December 31, December 31,
(Dollars in millions) 2012 2011 2011
 
Credit Data:
(Reversal of) provision for loan losses, excluding FDIC covered loans $ 28 $ (200 )

 

114

%

 

(Reversal of) provision for FDIC covered loan losses not subject to FDIC indemnification (3 ) (2 )

 

(50

)

(Reversal of) provision for losses on off-balance sheet commitments   (17 )   (29 )

 

41

Total (reversal of) provision for credit losses $ 8   $ (231 )

 

103

Net loans charged off $ 131 $ 236

 

(44

)

Nonperforming assets 616 782

 

(21

)

 
Credit Ratios:
Net loans charged off to average total loans held for investment (3) 0.24 % 0.47 %
Nonperforming assets to total assets 0.63 0.87
 
Excluding purchased credit-impaired loans and FDIC covered OREO (12):
Net loans charged off to average total loans held for investment (3) 0.23 % 0.48 %
Nonperforming assets to total assets 0.54 0.70
 
Refer to Exhibit 14 for footnote explanations.
 
 
UnionBanCal Corporation and Subsidiaries
Consolidated Statements of Income (Unaudited)

Exhibit 4

                   
For the Three Months Ended
December 31, September 30, June 30, March 31, December 31,
(Dollars in millions) 2012 2012 2012 2012 2011
Interest Income
Loans $ 642 $ 621 $ 621 $ 606 $ 603
Securities 122 129 134 142 134
Other   3     1     -     2     2  
Total interest income   767     751     755     750     739  
 
Interest Expense
Deposits 62 56 57 58 57
Commercial paper and other short-term borrowings 1 2 3 3 1
Long-term debt   36     39     36     36     41  
Total interest expense   99     97     96     97     99  
 
Net Interest Income 668 654 659 653 640
(Reversal of) provision for loan losses   (5 )   45     (14 )   (1 )   7  
Net interest income after (reversal of) provision for loan losses   673     609     673     654     633  
 
Noninterest Income
Service charges on deposit accounts 51 51 52 55 53
Trust and investment management fees 33 29 27 30 31
Trading account activities 33 26 25 31 38
Merchant banking fees 23 24 19 23 22
Securities gains, net 20 41 28 19 -
Brokerage commissions and fees 12 11 11 10 10
Card processing fees, net 8 8 8 8 9
Other   41     (1 )   5     26     (12 )
Total noninterest income   221     189     175     202     151  
 
Noninterest Expense
Salaries and employee benefits 408 356 351 364 347
Net occupancy and equipment 70 65 64 68 71
Professional and outside services 81 54 47 46 55
Intangible asset amortization 19 20 21 21 32
Regulatory assessments 17 14 16 18 15

(Reversal of) provision for losses on off-balance sheet commitments

(10 ) (4 ) (1 ) (2 ) 2
Other   130     133     101     99     97  
Total noninterest expense   715     638     599     614     619  
 

Income before income taxes and including noncontrolling interests

179 160 249 242 165
Income tax expense   60     42     67     51     40  
Net Income including Noncontrolling Interests 119 118 182 191 125
Deduct: Net loss from noncontrolling interests   4     6     5     4     4  
 
Net Income attributable to UNBC $ 123   $ 124   $ 187   $ 195   $ 129  
 
 
UnionBanCal Corporation and Subsidiaries
Consolidated Statements of Income (Unaudited)

Exhibit 5

       
For the Years Ended
December 31, December 31,
(Dollars in millions) 2012 2011
Interest Income
Loans $ 2,490 $ 2,303
Securities 527 538
Other   6     8  
Total interest income   3,023     2,849  
 
Interest Expense
Deposits 233 216
Commercial paper and other short-term borrowings 9 6
Long-term debt   147     149  
Total interest expense   389     371  
 
Net Interest Income 2,634 2,478
(Reversal of) provision for loan losses   25     (202 )
Net interest income after (reversal of) provision for loan losses   2,609     2,680  
 
Noninterest Income
Service charges on deposit accounts 209 206
Trust and investment management fees 119 132
Trading account activities 115 126
Securities gains, net 108 58
Merchant banking fees 89 97
Brokerage commissions and fees 44 47
Card processing fees, net 32 59
Other   71     91  
Total noninterest income   787     816  
 
Noninterest Expense
Salaries and employee benefits 1,479 1,385
Net occupancy and equipment 267 267
Professional and outside services 228 209
Intangible asset amortization 81 106
Regulatory assessments 65 69

(Reversal of) provision for losses on off-balance sheet commitments

(17 ) (29 )
Other   463     408  
Total noninterest expense   2,566     2,415  
 

Income before income taxes and including noncontrolling interests

830 1,081
Income tax expense   220     318  
Net Income including Noncontrolling Interests 610 763
Deduct: Net loss from noncontrolling interests   19     15  
 
Net Income attributable to UNBC $ 629   $ 778  
 
 

UnionBanCal Corporation and Subsidiaries

Consolidated Balance Sheets (Unaudited)

Exhibit 6

                   
December 31, September 30, June 30, March 31, December 31,
(Dollars in millions except for per share amount) 2012 2012 2012 2012 2011
Assets
Cash and due from banks $ 1,845 $ 1,237 $ 1,396 $ 1,371 $ 1,419
Interest bearing deposits in banks 3,477 1,703 1,479 3,260 2,764
Federal funds sold and securities purchased under resale agreements   169     32     46     8     12  
Total cash and cash equivalents 5,491 2,972 2,921 4,639 4,195

Trading account assets (includes $1 at December 31, 2012; $3 at September 30, 2012; $34 at June 30, 2012; $3 at March 31, 2012; and $14 at December 31, 2011 of assets pledged as collateral)

1,208 1,236 1,237 1,177 1,135
Securities available for sale 21,352 20,907 20,545 23,366 22,833

Securities held to maturity (Fair value: December 31, 2012, $1,135; September 30, 2012, $1,224; June 30, 2012, $2,536; March 31, 2012, $2,278; and December 31, 2011, $1,429)

1,103 1,182 2,345 2,066 1,273
Loans held for investment 60,034 55,410 54,291 54,322 53,540
Allowance for loan losses   (653 )   (668 )   (656 )   (704 )   (764 )
Loans held for investment, net 59,381 54,742 53,635 53,618 52,776
Premises and equipment, net 710 637 649 663 684
Intangible assets, net 376 298 318 341 360
Goodwill 2,942 2,457 2,457 2,456 2,457
FDIC indemnification asset 338 401 449 521 598
Other assets   4,091     3,353     3,383     3,476     3,365  
Total assets $ 96,992   $ 88,185   $ 87,939   $ 92,323   $ 89,676  
 
Liabilities
Deposits:
Noninterest bearing $ 25,478 $ 21,490 $ 20,777 $ 20,488 $ 20,598
Interest bearing   48,777     43,653     42,666     44,601     43,822  
Total deposits 74,255 65,143 63,443 65,089 64,420
Commercial paper and other short-term borrowings 1,363 2,091 3,035 6,680 3,683
Long-term debt 5,622 5,540 6,444 5,554 6,684
Trading account liabilities 895 952 976 922 1,040
Other liabilities   2,102     1,763     1,712     1,996     2,019  
Total liabilities   84,237     75,489     75,610     80,241     77,846  
 
Equity
UNBC Stockholder's Equity:

Common stock, par value $1 per share:

Authorized 300,000,000 shares; 136,330,830 shares issued and outstanding as of December 31, 2012, September 30, 2012, June 30, 2012, March 31, 2012 and December 31, 2011

136 136 136 136 136
Additional paid-in capital 5,994 5,989 5,985 5,992 5,989
Retained earnings 6,875 6,752 6,628 6,441 6,246
Accumulated other comprehensive loss   (514 )   (440 )   (673 )   (748 )   (809 )
Total UNBC stockholder's equity 12,491 12,437 12,076 11,821 11,562
Noncontrolling interests   264     259     253     261     268  
Total equity   12,755     12,696     12,329     12,082     11,830  
Total liabilities and equity $ 96,992   $ 88,185   $ 87,939   $ 92,323   $ 89,676  
 
 
UnionBanCal Corporation and Subsidiaries
Net Interest Income (Unaudited)

Exhibit 7

                     
For the Three Months Ended
December 31, 2012 September 30, 2012
Interest Average Interest Average
Average Income/ Yield/ Average Income/ Yield/
(Dollars in millions) Balance Expense (6) Rate (3)(6) Balance Expense (6) Rate (3)(6)
Assets
Loans held for investment: (13)
Commercial and industrial $ 20,585 $ 195 3.78 % $ 20,389 $ 192 3.75 %
Commercial mortgage 8,814 91 4.12 8,064 81 4.02
Construction 687 8 4.24 650 6 3.76
Lease financing 987 11 4.50 982 10 4.10
Residential mortgage 21,914 220 4.01 21,022 218 4.17
Home equity and other consumer loans   3,527     33 3.79   3,557     34 3.74
Loans, before purchased credit-impaired loans 56,514 558 3.94 54,664 541 3.96
Purchased credit-impaired loans   728     85 46.39   621     80 51.23
Total loans held for investment 57,242 643 4.48 55,285 621 4.49
Securities 21,903 125 2.28 22,496 132 2.34
Interest bearing deposits in banks 3,250 2 0.26 941 - 0.24

Federal funds sold and securities purchased under resale agreements

79 - 0.20 62 - 0.19
Trading account assets 140 - 0.35 228 1 0.53
Other earning assets   162     - 0.49   125     - 0.15
Total earning assets 82,776   770 3.71 79,137   754 3.81
Allowance for loan losses (673 ) (657 )
Cash and due from banks 1,375 1,258
Premises and equipment, net 663 646
Other assets   7,910     7,497  
Total assets $ 92,051   $ 87,881  
Liabilities
Interest bearing deposits:
Transaction and money market accounts $ 28,988 18 0.25 $ 26,517 15 0.23
Savings 5,436 2 0.14 5,222 2 0.16
Time   11,571     42 1.42   11,361     39 1.39
Total interest bearing deposits   45,995     62 0.53   43,100     56 0.53
Commercial paper and other short-term borrowings (14) 1,482 1 0.28 2,541 2 0.25
Long-term debt   5,562     36 2.61   5,963     39 2.57
Total borrowed funds   7,044     37 2.12   8,504     41 1.88
Total interest bearing liabilities 53,039   99 0.74 51,604   97 0.75
Noninterest bearing deposits 23,606 21,320
Other liabilities   2,588     2,494  
Total liabilities 79,233 75,418
Equity
UNBC Stockholder's equity 12,559 12,209
Noncontrolling interests   259     254  
Total equity   12,818     12,463  
Total liabilities and equity $ 92,051   $ 87,881  
 

Net interest income/spread (taxable-equivalent basis)

671 2.97 % 657 3.06 %
Impact of noninterest bearing deposits 0.23 0.22
Impact of other noninterest bearing sources 0.03 0.04
Net interest margin 3.23 3.32
Less: taxable-equivalent adjustment   3   3
Net interest income $ 668 $ 654
   
Refer to Exhibit 14 for footnote explanations.
 
 
UnionBanCal Corporation and Subsidiaries
Net Interest Income (Unaudited)

Exhibit 8

                     
For the Three Months Ended
December 31, 2012 December 31, 2011
Interest Average Interest Average
Average Income/ Yield/ Average Income/ Yield/
(Dollars in millions) Balance Expense (6) Rate (3)(6) Balance Expense (6) Rate (3)(6)
Assets
Loans held for investment: (13)
Commercial and industrial $ 20,585 $ 195 3.78 % $ 18,268 $ 174 3.77 %
Commercial mortgage 8,814 91 4.12 8,086 84 4.12
Construction 687 8 4.24 893 9 3.77
Lease financing 987 11 4.50 1,073 14 5.45
Residential mortgage 21,914 220 4.01 19,298 223 4.61
Home equity and other consumer loans   3,527     33 3.79   3,728     38 4.03
Loans, before purchased credit-impaired loans 56,514 558 3.94 51,346 542 4.20
Purchased credit-impaired loans   728     85 46.39   1,019     63 24.88
Total loans held for investment 57,242 643 4.48 52,365 605 4.60
Securities 21,903 125 2.28 22,721 134 2.36
Interest bearing deposits in banks 3,250 2 0.26 2,591 2 0.26

Federal funds sold and securities purchased under resale agreements

79 - 0.20 61 - 0.16
Trading account assets 140 - 0.35 141 - 0.65
Other earning assets   162     - 0.49   128     - 0.33
Total earning assets 82,776   770 3.71 78,007   741 3.79
Allowance for loan losses (673 ) (780 )
Cash and due from banks 1,375 1,342
Premises and equipment, net 663 678
Other assets   7,910     7,832  
Total assets $ 92,051   $ 87,079  
Liabilities
Interest bearing deposits:
Transaction and money market accounts $ 28,988 18 0.25 $ 24,763 14 0.22
Savings 5,436 2 0.14 5,338 3 0.17
Time   11,571     42 1.42   12,863     40 1.23
Total interest bearing deposits   45,995     62 0.53   42,964     57 0.51
Commercial paper and other short-term borrowings (14) 1,482 1 0.28 2,733 1 0.23
Long-term debt   5,562     36 2.61   6,977     41 2.35
Total borrowed funds   7,044     37 2.12   9,710     42 1.75
Total interest bearing liabilities 53,039   99 0.74 52,674   99 0.74
Noninterest bearing deposits 23,606 19,884
Other liabilities   2,588     2,606  
Total liabilities 79,233 75,164
Equity
UNBC Stockholder's equity 12,559 11,646
Noncontrolling interests   259     269  
Total equity   12,818     11,915  
Total liabilities and equity $ 92,051   $ 87,079  
 

Net interest income/spread (taxable-equivalent basis)

671 2.97 % 642 3.05 %
Impact of noninterest bearing deposits 0.23 0.20
Impact of other noninterest bearing sources 0.03 0.04
Net interest margin 3.23 3.29
Less: taxable-equivalent adjustment   3   2
Net interest income $ 668 $ 640
 
Refer to Exhibit 14 for footnote explanations.
 
 
UnionBanCal Corporation and Subsidiaries
Net Interest Income (Unaudited)

Exhibit 9

                     
For the Years Ended
December 31, 2012 December 31, 2011
Interest Average Interest Average
Average Income/ Yield/ Average Income/ Yield/
(Dollars in millions) Balance Expense (6) Rate (3)(6) Balance Expense (6) Rate (3)(6)
Assets
Loans held for investment: (13)
Commercial and industrial $ 20,196 $ 768 3.80 % $ 16,598 $ 650 3.92 %
Commercial mortgage 8,357 339 4.06 7,858 335 4.26
Construction 712 30 4.15 1,084 44 4.04
Lease financing 1,001 43 4.30 830 38 4.60
Residential mortgage 20,778 874 4.21 18,562 885 4.77
Home equity and other consumer loans   3,602     138 3.83   3,771     158 4.20
Loans, before purchased credit-impaired loans 54,646 2,192 4.01 48,703 2,110 4.33
Purchased credit-impaired loans   761     304 39.92   1,236     201 16.29
Total loans held for investment 55,407 2,496 4.50 49,939 2,311 4.63
Securities 23,216 534 2.30 21,001 539 2.57
Interest bearing deposits in banks 1,756 4 0.26 2,373 7 0.25

Federal funds sold and securities purchased under resale agreements

67 - 0.21 72 - 0.12
Trading account assets 173 1 0.52 149 1 0.80
Other earning assets   142     - 0.25   76     - 0.73
Total earning assets 80,761   3,035 3.76 73,610   2,858 3.88
Allowance for loan losses (701 ) (933 )
Cash and due from banks 1,318 1,263
Premises and equipment, net 660 689
Other assets   7,678     7,806  
Total assets $ 89,716   $ 82,435  
Liabilities
Interest bearing deposits:
Transaction and money market accounts $ 26,696 61 0.23 $ 24,434 57 0.23
Savings 5,312 8 0.15 5,226 12 0.23
Time   12,368     164 1.32   11,994     147 1.22
Total interest bearing deposits   44,376     233 0.53   41,654     216 0.52
Commercial paper and other short-term borrowings (14) 3,256 9 0.27 2,663 6 0.23
Long-term debt   5,820     147 2.53   6,578     149 2.27
Total borrowed funds   9,076     156 1.72   9,241     155 1.68
Total interest bearing liabilities 53,452   389 0.73 50,895   371 0.73
Noninterest bearing deposits 21,367 18,412
Other liabilities   2,562     2,133  
Total liabilities 77,381 71,440
Equity
UNBC Stockholder's equity 12,075 10,726
Noncontrolling interests   260     269  
Total equity   12,335     10,995  
Total liabilities and equity $ 89,716   $ 82,435  
 

Net interest income/spread (taxable-equivalent basis)

2,646 3.03 % 2,487 3.15 %
Impact of noninterest bearing deposits 0.21 0.19
Impact of other noninterest bearing sources 0.04 0.04
Net interest margin 3.28 3.38
Less: taxable-equivalent adjustment   12   9
Net interest income $ 2,634 $ 2,478
   
Refer to Exhibit 14 for footnote explanations.
 
 
UnionBanCal Corporation and Subsidiaries
Loans and Nonperforming Assets (Unaudited)

Exhibit 10

                   
December 31, September 30, June 30, March 31, December 31,
(Dollars in millions) 2012 2012 2012 2012 2011
 
Loans held for investment (period end)
Loans held for investment:
Commercial and industrial $ 20,827 $ 20,124 $ 19,465 $ 19,429 $ 19,226
Commercial mortgage 9,939 8,293 8,188 8,510 8,175
Construction 627 678 613 776 870
Lease financing   1,104   962   994   1,023   965
Total commercial portfolio 32,497 30,057 29,260 29,738 29,236
Residential mortgage 22,705 21,335 20,729 20,081 19,625
Home equity and other consumer loans   3,647   3,494   3,604   3,654   3,730
Total consumer portfolio   26,352   24,829   24,333   23,735   23,355
Loans held for investment, before purchased credit-impaired loans   58,849   54,886   53,593   53,473   52,591
Purchased credit-impaired loans   1,185   524   698   849   949
Total loans held for investment $ 60,034 $ 55,410 $ 54,291 $ 54,322 $ 53,540
 
Nonperforming Assets (period end)
Nonaccrual loans:
Commercial and industrial $ 48 $ 36 $ 75 $ 71 $ 127
Commercial mortgage 65 91 101 120 139
Construction   -   -   -   16   16
Total commercial portfolio 113 127 176 207 282
Residential mortgage 306 325 293 301 285
Home equity and other consumer loans   56   52   44   26   24
Total consumer portfolio   362   377   337   327   309
Nonaccrual loans, before purchased credit-impaired loans 475 504 513 534 591
Purchased credit-impaired loans   30   30   40   46   47
Total nonaccrual loans 505 534 553 580 638
 
OREO 45 22 26 24 27
FDIC covered OREO   66   81   79   102   117
 
Total nonperforming assets $ 616 $ 637 $ 658 $ 706 $ 782
 

Total nonperforming assets, excluding purchased credit-impaired loans and FDIC covered OREO

$ 520 $ 526 $ 539 $ 558 $ 618
 
Loans 90 days or more past due and still accruing (15) $ 1 $ 1 $ 1 $ 2 $ 1
 
Refer to Exhibit 14 for footnote explanations.
 
 
UnionBanCal Corporation and Subsidiaries
Allowance for Credit Losses (Unaudited)

Exhibit 11

                   
As of and for the Three Months Ended
December 31, September 30, June 30, March 31, December 31,
(Dollars in millions) 2012 2012 2012 2012 2011
 
Analysis of Allowance for Credit Losses
Balance, beginning of period $ 668 $ 656 $ 704 $ 764 $ 768
 
(Reversal of) provision for loan losses, excluding FDIC covered loans (3 ) 43 (13 ) 1 7
(Reversal of) provision for FDIC covered loan losses not subject to
FDIC indemnification (2 ) 2 (1 ) (2 ) -
Increase (decrease) in allowance covered by FDIC indemnification (4 ) 8 (3 ) (6 ) -
Other (16) (1 ) 1 - - 17
 
Loans charged off:
Commercial and industrial (6 ) (12 ) (10 ) (34 ) (7 )
Commercial mortgage (3 ) (1 ) (5 ) (6 ) (14 )
Construction - - (11 ) - -
Lease financing   -     -     -     -     (14 )
Total commercial portfolio (9 ) (13 ) (26 ) (40 ) (35 )
Residential mortgage (6 ) (22 ) (9 ) (12 ) (9 )
Home equity and other consumer loans   (9 )   (19 )   (7 )   (11 )   (10 )
Total consumer portfolio (15 ) (41 ) (16 ) (23 ) (19 )
FDIC covered loans   (8 )   (3 )   (2 )   -     -  
Total loans charged off (32 ) (57 ) (44 ) (63 ) (54 )
 
Recoveries of loans previously charged off:
Commercial and industrial 6 7 8 4 8
Commercial mortgage 10 5 - 3 15
Construction 2 1 5 1 2
Lease financing   5     -     -     -     -  
Total commercial portfolio 23 13 13 8 25
Home equity and other consumer loans   1     1     -     1     -  
Total consumer portfolio   1     1     -     1     -  
FDIC covered loans   3     1     -     1     1  
Total recoveries of loans previously charged off   27     15     13     10     26  
Net loans charged off   (5 )   (42 )   (31 )   (53 )   (28 )
 
Ending balance of allowance for loan losses 653 668 656 704 764
Allowance for losses on off-balance sheet commitments   117     126     130     131     133  
Total allowance for credit losses $ 770   $ 794   $ 786   $ 835   $ 897  
 
Components of allowance for loan losses:

Allowance for loan losses, excluding allowance on purchased credit-impaired loans

$ 652 $ 656 $ 652 $ 694 $ 747
Allowance for loan losses on purchased credit-impaired loans 1 12 4 10 17
         
Total allowance for loan losses $ 653   $ 668   $ 656   $ 704   $ 764  
 
Refer to Exhibit 14 for footnote explanations.
 
 
UnionBanCal Corporation and Subsidiaries
Securities Available for Sale (Unaudited)

Exhibit 12

                       
Fair Value Fair Value
December 31, 2012 September 30, 2012 Amount Change from % Change from
Amortized Fair Amortized Fair September 30, September 30,
(Dollars in millions) Cost Value Cost Value 2012 2012
 
U.S. government sponsored agencies $ 866 $ 885 $ 2,599 $ 2,629 $ (1,744 ) (66 ) %
Residential mortgage-backed securities:
U.S. government and government sponsored agencies 13,104 13,333 11,687 11,970 1,363 11
Privately issued 445 443 505 498 (55 ) (11 )
Commercial mortgage-backed securities 2,863 2,971 2,251 2,361 610 26
Collateralized loan obligations 1,996 1,959 1,652 1,590 369 23
Other debt securities 1,783 1,742 1,804 1,755 (13 ) (1 )
Equity securities   19   19   104   104   (85 ) (82 )
Total securities available for sale $ 21,076 $ 21,352 $ 20,602 $ 20,907 $ 445   2 %
 
 
UnionBanCal Corporation and Subsidiaries
Reconciliation of Non-GAAP Measures (Unaudited)

Exhibit 13

               
The following table presents a reconciliation between certain Generally Accepted Accounting Principles (GAAP) amounts and specific non-GAAP measures as used to compute selected non-GAAP financial ratios.
 
As of and for the Three Months Ended For the Years Ended
December 31, September 30, June 30, March 31, December 31, December 31, December 31,
(Dollars in millions) 2012 2012 2012 2012 2011 2012 2011
 
Net income attributable to UNBC $ 123 $ 124 $ 187 $ 195 $ 129 $ 629 $ 778
Adjustments for merger costs related to acquisitions, net of tax 26 3 2 1 - 32 14
Net adjustments for privatization transaction, net of tax   2     5     7     6     10     20     29  

Net income attributable to UNBC, excluding impact of privatization transaction and merger costs related to acquisitions

$ 151   $ 132   $ 196   $ 202   $ 139   $ 681   $ 821  
 
Average total assets $ 92,051 $ 87,881 $ 89,479 $ 89,449 $ 87,079 $ 89,716 $ 82,435
Net adjustments related to privatization transaction   2,345     2,359     2,377     2,394     2,419     2,368     2,448  
Average total assets, excluding impact of privatization transaction $ 89,706   $ 85,522   $ 87,102   $ 87,055   $ 84,660   $ 87,348   $ 79,987  
Return on average assets (3) 0.54 % 0.56 % 0.84 % 0.88 % 0.59 % 0.70 % 0.94 %

Return on average assets, excluding impact of privatization transaction and merger costs related to acquisitions (3) (4)

0.68 0.62 0.90 0.93 0.66 0.78 1.03
 
Average UNBC stockholder's equity $ 12,559 $ 12,209 $ 11,905 $ 11,621 $ 11,646 $ 12,075 $ 10,726
Adjustments for merger costs related to acquisitions (15 ) (5 ) (2 ) - - (6 ) -
Net adjustments for privatization transaction   2,360     2,366     2,371     2,375     2,380     2,368     2,388  

Average UNBC stockholder's equity, excluding impact of privatization transaction and merger costs related to acquisitions

$ 10,214   $ 9,848   $ 9,536   $ 9,246   $ 9,266   $ 9,713   $ 8,338  
Return on average UNBC stockholder's equity (3) 3.93 % 4.03 % 6.32 % 6.75 % 4.39 % 5.21 % 7.25 %

Return on average UNBC stockholder's equity, excluding impact of privatization transaction and merger costs related to acquisitions(3) (4)

5.93 5.38 8.22 8.73 6.03 7.02 9.85
 
Noninterest expense $ 715 $ 638 $ 599 $ 614 $ 619 $ 2,566 $ 2,415
Less: Foreclosed asset expense and other credit costs 6 - 1 1 3 8 12
Less: (Reversal of) provision for losses on off-balance sheet commitments (10 ) (4 ) (1 ) (2 ) 2 (17 ) (29 )
Less: Productivity initiative costs 19 10 2 6 14 37 56
Less: Low income housing credit (LIHC) investment amortization expense 17 15 18 13 23 63 69
Less: Expenses of the LIHC consolidated VIEs 6 10 8 7 6 31 24
Less: Merger costs related to acquisitions 43 6 3 1 - 53 24
Less: Net adjustments related to privatization transaction 17 21 21 22 32 81 109
Less: Debt termination fees from balance sheet repositioning   -     30     -     -     -     30     -  
Noninterest expense, as adjusted (a) $ 617   $ 550   $ 547   $ 566   $ 539   $ 2,280   $ 2,150  
 
Total revenue $ 889 $ 843 $ 834 $ 855 $ 791 $ 3,421 $ 3,294
Add: Net interest income taxable-equivalent adjustment 3 3 3 3 2 12 9
Less: Productivity initiative gains - - - 23 - 23 -
Less: Accretion related to privatization-related fair value adjustments 15 12 10 11 15 48 62

Less: Gains from securities associated with debt termination fees from balance sheet repositioning

  -     30     -     -     -     30     -  
Total revenue, as adjusted (b) $ 877   $ 804   $ 827   $ 824   $ 778   $ 3,332   $ 3,241  
Adjusted efficiency ratio (a)/(b) (5) 70.29 68.37 66.18 68.76 69.12 68.43 66.31
 
Total UNBC stockholder's equity $ 12,491 $ 12,437 $ 12,076 $ 11,821 $ 11,562
Less: Goodwill 2,942 2,457 2,457 2,456 2,457
Less: Intangible assets, except mortgage servicing rights (MSRs) 373 298 318 341 360
Less: Deferred tax liabilities related to goodwill and intangible assets   (129 )   (117 )   (115 )   (123 )   (130 )
Tangible common equity (c) $ 9,305   $ 9,799   $ 9,416   $ 9,147   $ 8,875  
Tier 1 capital, determined in accordance with regulatory requirements $ 9,864 $ 10,196 $ 10,049 $ 9,853 $ 9,641
Less: Trust preferred securities   66     -     -     -     -  
Tier 1 common equity (d) $ 9,798   $ 10,196   $ 10,049   $ 9,853   $ 9,641  
Total assets $ 96,992 $ 88,185 $ 87,939 $ 92,323 $ 89,676
Less: Goodwill 2,942 2,457 2,457 2,456 2,457
Less: Intangible assets, except MSRs 373 298 318 341 360
Less: Deferred tax liabilities related to goodwill and intangible assets   (129 )   (117 )   (115 )   (123 )   (130 )
Tangible assets (e) $ 93,806   $ 85,547   $ 85,279   $ 89,649   $ 86,989  
Risk-weighted assets, determined in accordance with regulatory requirements (f) (7) $ 79,321   $ 74,065   $ 72,905   $ 71,752   $ 69,738  
Tangible common equity ratio (c)/(e) (9) 9.92 % 11.46 % 11.04 % 10.20 % 10.20 %
Tier 1 common capital ratio (d)/(f) (7) (8) 12.35 13.77 13.78 13.73 13.82
 
Refer to Exhibit 14 for footnote explanations.
 
 
UnionBanCal Corporation and Subsidiaries
 
Footnotes

Exhibit 14

     
 
(1) Pre-tax, pre-provision income is total revenue less noninterest expense. Management believes that this is a useful financial measure because it enables investors and others to assess the Company's ability to generate capital to cover loan losses through a credit cycle.
 
(2) Core deposits exclude brokered deposits, foreign time deposits and domestic time deposits greater than $250,000.
 
(3) Annualized.
 
(4) These ratios exclude the impact of the privatization transaction and merger costs related to acquisitions. Management believes that these ratios provide useful supplemental information regarding UnionBanCal's business results. Please refer to Exhibit 13 for a reconciliation between certain GAAP amounts and these non-GAAP measures.
 
(5) The efficiency ratio is total noninterest expense as a percentage of total revenue (net interest income and noninterest income). The adjusted efficiency ratio, a non-GAAP financial measure, is adjusted noninterest expense (noninterest expense excluding privatization-related expenses and fair value amortization/accretion, foreclosed asset expense and other credit costs, (reversal of) provision for losses on off-balance sheet commitments, low income housing credit (LIHC) investment amortization expense, expenses of the LIHC consolidated VIEs, merger costs related to acquisitions, certain costs related to productivity initiatives and debt termination fees from balance sheet repositioning) as a percentage of adjusted total revenue (net interest income (taxable-equivalent basis) and noninterest income), excluding impact of privatization, gains from productivity initiatives related to the sale of certain business units in 2012 and gains from securities associated with debt termination fees from balance sheet repositioning. Management discloses the adjusted efficiency ratio as a measure of the efficiency of our operations, focusing on those costs most relevant to our business activities. Please refer to Exhibit 13 for a reconciliation between certain GAAP amounts and these non-GAAP measures.
 
(6) Yields, interest income and net interest margin are presented on a taxable-equivalent basis using the federal statutory tax rate of 35 percent.
 
(7) Estimated as of December 31, 2012.
 
(8) The Tier 1 common capital ratio is the ratio of Tier 1 capital, less qualifying trust preferred securities, if any, to risk-weighted assets. The Tier 1 common capital ratio, a non-GAAP financial measure, facilitates the understanding of UnionBanCal's capital structure and is used to assess and compare the quality and composition of UnionBanCal's capital structure to other financial institutions. Please refer to Exhibit 13 for a reconciliation between certain GAAP amounts and these non-GAAP measures.
 
(9) The tangible common equity ratio, a non-GAAP financial measure, is calculated as tangible common equity divided by tangible assets. The methodology for determining tangible common equity may differ among companies. The tangible common equity ratio facilitates the understanding of UnionBanCal's capital structure and is used to assess and compare the quality and composition of UnionBanCal's capital structure to other financial institutions. Please refer to Exhibit 13 for a reconciliation between certain GAAP amounts and these non-GAAP measures.
 
(10) Criticized loans held for investment reflect loans in the commercial portfolio segment that are monitored for credit quality based on internal ratings. Amounts exclude small business loans, which are monitored by business credit score and delinquency status.
 
(11) The allowance for credit losses ratios include the allowances for loan losses and losses on off-balance sheet commitments.
 
(12) These ratios exclude the impact of all purchased credit-impaired loans and FDIC covered OREO. Purchased credit-impaired loans and OREO related to the April 2010 acquisitions of certain assets and assumption of certain liabilities of Frontier Bank and Tamalpais Bank are covered under loss share agreements between Union Bank, N.A. and the Federal Deposit Insurance Corporation. Management believes the exclusion of purchased credit-impaired loans and FDIC covered OREO from certain asset quality ratios that include nonperforming loans, nonperforming assets, net loans charged off, total loans held for investment and the allowance for loan losses or credit losses in the numerator or denominator provides a better perspective into underlying asset quality trends.
 
(13) Average balances on loans outstanding include all nonperforming loans. The amortized portion of net loan origination fees (costs) is included in interest income on loans, representing an adjustment to the yield.
 
(14) Includes interest bearing trading liabilities.
 
(15) Excludes loans totaling $124 million, $88 million, $124 million, $144 million, and $165 million that are 90 days or more past due and still accruing at December 31, 2012, September 30, 2012, June 30, 2012, March 31, 2012, and December 31, 2011 respectively, which consist of loans accounted for in accordance with the accounting standards for purchased credit-impaired loans. The past due status of individual loans within the pools is not a meaningful indicator of credit quality, as potential credit losses are measured at the loan pool level.
 
(16) "Other" includes a $16 million allowance for loan losses transfer attributed to an internal reorganization on October 1, 2011 in which The Bank of Tokyo-Mitsubishi UFJ transferred its trust company, The Bank of Tokyo-Mitsubishi UFJ Trust Company (BTMUT) to UnionBanCal.
 
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CONTACT:
UnionBanCal Corporation
Thomas Taggart, 415-765-2249
Corporate Communications
Michelle Crandall, 415-765-2780
Investor Relations

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