UnionBanCal Corporation 2008 Annual Report

Transcription

1 UnionBanCal Corporation 2008 Annual Report Invest in you

2 UnionBanCal Corporation Financial Highlights FOR YEAR ENDED: (Amounts in thousands, except percentage data) Income from continuing operations $ 573,364 $ 283,940 Net income 608, ,885 Return on average assets From continuing operations Net income 1.07% 1.14% 0.47% 0.44% Return on average stockholder s equity From continuing operations Net income 12.46% 13.21% 5.49% 5.20% Net interest margin % 3.71% AT YEAR END: Total loans (gross) $ 41,204,188 $ 49,585,550 Allowance for credit losses 2 493, ,141 Total assets 55,727,748 70,121,390 Total deposits 42,680,191 46,049,769 Stockholders equity 4,737,981 7,484,305 Risk-based capital ratios Tier 1 Total 8.30% 11.21% 8.78% 11.63% Tangible common equity to total assets 7.73% 6.96% Nonperforming assets to total assets 0.10% 0.62% 1 Taxable-equivalent 2 Includes allowance for losses related to off-balance sheet commitments

3 To our Valued Customers & Employees 2008 was a year that produced economic and financial turmoil of unprecedented proportions, defying even the most thoughtful predictions. Developments during the year exerted a stunning impact on financial markets in the U.S. and around the world. Despite this turbulence, however, the company produced solid results and remained stable and strong. We generated significant year-over-year loan growth in all categories, including commercial loans and residential and commercial real estate, due to increased loan demand and weakened competition. We also generated growth in total revenue, up 12 percent year-over-year, and a rise in net interest income, up 19 percent year-over-year, while maintaining a stable deposit base. In the face of deteriorating market conditions, we kept a close eye on credit quality in 2008, and took appropriate steps to protect our balance sheet. We provided $550 million for credit losses, compared to $90 million in We expect a continued recessionary environment throughout this year and we will continue to emphasize prudence in new lending and careful risk management of the loan portfolio, being especially vigilant where new and emerging risks are concerned. Despite these challenges, we continue to move the company forward on many fronts. Thanks to the hard work and dedication of hundreds of employees, we enjoy a close working relationship with the Office of the Comptroller of the Currency (OCC), having proved that we are a well-run bank that understands the importance of compliance. UnionBanCal Corporation 2008 Annual Report 1

4 In 2008, we invested in building a foundation for the future with the introduction of new and enhanced products and services for our customers. With a constant focus on how to best serve our customers today and beyond, we expect to achieve a clear competitive advantage in the marketplace. We also approved an initiative to build a next-generation data center by the end of 2009 to accommodate future business growth, achieve savings by providing more computing power at less cost per square foot, and improve the overall efficiency of our data operations. At the end of last year, we changed our name from Union Bank of California to Union Bank, reflecting our goals for expansion beyond the borders of California. As I write this letter, we have chosen a new logo to complement our new name and we are planning for a public roll-out in July. Our new look is important, but we will still remain the same customer-focused and service-oriented bank that you have come to count on for more than a century, in good economic times and bad. Last November, we became a wholly owned subsidiary of The Bank of Tokyo-Mitsubishi UFJ, Ltd. (BTMU), which had been the company s majority stockholder. Going from a publicly traded company on the New York Stock Exchange to a privately owned entity was an enormously complicated effort for the Special Committee of the Board of Directors, and for our employees. Most importantly, this effort was accomplished with no compromise or interruption of service to our customers. Our new ownership structure allows us to fully benefit from the financial strength of one of the world s largest banks and will allow us to pursue our expansion goals, as well as provide new opportunities for our employees. Shortly after going private, we, along with BTMU, were granted financial holding company status by federal regulators, enabling us to offer a much wider range of products and services to our customers. This is another affirmation of our business stability and strength also brought about a number of changes in management and the board of directors. Sadly, we mourned the loss of our General Counsel, John H. McGuckin, Jr., who served our institution with distinction for 27 years. He was a good friend and mentor to me and an exceptionally gifted attorney. It is hard to envision Union Bank without him. We are delighted that Morris Hirsch, the company s Deputy General Counsel, has moved into the General Counsel position. Morris experience and banking expertise will serve the company well. 2 UnionBanCal Corporation 2008 Annual Report

5 We also experienced changes in our roster of directors. Ronald Havner, a member of the board since 2004, announced his resignation effective January In addition, Lead Director Richard Farman, who has served the company as a director since 1988, and Mary Metz, a board member since 1988, will retire in April Richard will be succeeded as Lead Director by David Andrews, who provides continuity as a board member since 2000 and outstanding leadership, as demonstrated by his tremendous record of service in both the private and public sectors. We thank Ron, Mary, and Richard for their exceptional service to the company and wish them all the best in the future. The board was also honored to welcome two new members last year. In December, Nobuo Kuroyanagi, Chief Executive Officer of Mitsubishi UFJ Financial Group, Inc. (MUFG), succeeded Shigemitsu Miki, Senior Advisor for BTMU. Yoshiaki Kawamata also joined the board last December, following his appointment to Resident Managing Officer for the United States of MUFG in April Kyota Omori, Deputy President and Chief Compliance Officer of MUFG, replaced Norimichi Kanari as the board s chairman after Mr. Kanari retired as Deputy President of BTMU. We thank Mr. Miki and Mr. Kanari for their contributions and strategic guidance during their tenure. 2009, like 2008, will be a difficult year for everyone in the banking industry, regardless of how sound or secure they may be. The Obama Administration has proposed a number of measures to help turn the economy around, but seeing results from these efforts will take time. Even then, we cannot accurately predict what the outcome will be, or exactly how our economic landscape will emerge from this recession. Here at Union Bank, we are committed to moving forward through these troubling times with confidence and prudence as our watchwords. We firmly believe that we operate on a secure foundation and with sound principles that have served us well in the past. We will continue to be effective stewards of our own, as well as our customers, resources. In closing, I express my appreciation to our employees, who so ably contributed to our positive performance last year, and I express my gratitude to our customers, to whom we pledge the highest levels of personal service and banking expertise. Masaaki Tanaka President and Chief Executive OfFicer March 23, 2009 UnionBanCal Corporation 2008 Annual Report 3

6 About Union Bank For nearly 150 years, our company has been a steadfast presence in the state of California. The bank s earliest roots trace back to The Bank of California, which was one of the first banks founded after the Gold Rush in the late 19th century. Union Bank has grown steadily and substantially over the years, establishing a deep footprint in communities across California, as well as Washington and Oregon. Union Bank, N.A., is the primary subsidiary of UnionBanCal Corporation, a financial holding company with assets of $70.1 billion as of December 31, We are a full-service commercial bank providing an array of financial services to individuals, small businesses, middle-market companies, and major corporations. Headquartered in San Francisco, with more than 10,000 full- and part-time employees, Union Bank has 335 banking offices in the United States and two international offices. We are the fifth-largest bank in California by deposits. In November of 2008, we completed another significant milestone in our forward-thinking growth strategy by becoming a private, wholly owned subsidiary of The Bank of Tokyo-Mitsubishi UFJ, Ltd. The Bank of Tokyo-Mitsubishi UFJ, Ltd., is the commercial banking subsidiary of Mitsubishi UFJ Financial Group, Inc., one of the world s leading financial companies with consolidated total assets of approximately $2.2 trillion as of December 31, Union Bank s heritage is one driven by a culture of stability, strength, and discipline. Having carefully and prudently avoided many of the major missteps made by other banks in recent years, Union Bank is uniquely positioned for growth in 2009 and beyond. Across each of the bank s four major business lines, we stand ready to embrace the opportunities for organic growth and geographic expansion in the years ahead. 4 UnionBanCal Corporation 2008 Annual Report

7 Personal Banking From your most basic financial needs to your most complex, Union Bank has a broad selection of banking products and services to meet your unique goals. At Union Bank, we understand the value of your time and that properly managing your banking needs for today is as important as planning for your future. We will work with you to understand your financial objectives and customize solutions for you and your family at every step. We also believe that banking should be made easy. We offer a one-stop banking approach, providing you with a complete range of solutions, including home and auto loans, home equity lines of credit, credit cards, as well as estate, business, and personal insurance protection. Additionally, you can bank in person at one of our 335 full-service banking offices in the United States, or you can bank online or by telephone. When you require more sophisticated banking solutions, our Priority Banking program gives you access to a suite of specialized services that are geared toward the distinct needs of affluent consumers and entrepreneurs. Also, you will work closely with your own priority banker, who will help you create innovative and advanced solutions that are individually tailored to your specific personal or business goals. As you look to your future, Union Bank can provide you with specialized services and investment expertise to help you achieve your financial goals. Working with one of our registered financial advisors at UnionBanc Investment Services, the bank s brokerage subsidiary, you can receive qualified advice on investment and retirement strategies that help you plan for a financially secure future. Wealth Management Successful individuals and professional service firms turn to Union Bank for comprehensive wealth management solutions and the personalized attention of dedicated relationship managers. Using a team-based approach, our relationship managers and private bankers collaborate with specialized professionals to deliver advice across banking and financing services, investment and brokerage services, trust and estate services, and business services for professional firms. Our wealth management teams can provide you with loans, deposits, cash management services, foreign exchange, interest rate hedges, and a wide range of other banking solutions. Trust specialists can administer your wealth for future generations through the use of personal and philanthropic trust structures, estate settlement services, and specialized asset management. Objective wealth planners will analyze your current and future income and cash requirements, expenditures, and risk tolerance, and construct a long-term approach for your wealth, as well as respond quickly to your immediate needs. Our portfolio management specialists with HighMark Capital Management, a subsidiary of Union Bank, will work closely with you to build an investment strategy and customized portfolio that helps you meet your near- and long-term financial goals. UnionBanc Investment Services, the bank s brokerage subsidiary, has a team of financial advisors who combine personalized service with comprehensive tools to deliver a full range of brokerage services. Whether you are growing or preserving your assets, building or selling a business, or creating a lasting legacy, Union Bank can help you manage your wealth and achieve your goals. UnionBanCal Corporation 2008 Annual Report 5

8 Small Business Banking Committed to small business growth in our communities, Union Bank combines innovative business financing, merchant, payroll, and other services with the expertise of banking professionals who are committed to helping small business owners succeed. As a small business, you know the importance of having a bank on your side. At Union Bank, you are backed by a highly qualified banking professional at every stage of your business. Our team of professionals specializes in solutions and relationship-driven banking tailored to meet the financial needs of attorneys, doctors, CPAs, wholesalers, manufacturers, and other small business professionals. We understand that small businesses need financing to grow and stay competitive. As your business grows, we will work with you to develop a business financing program that will address your specific goals and needs and, ultimately, help you take your business to the next level. Union Bank offers loans to meet all of your business needs, such as traditional loans, lines of credit, commercial real estate financing, and financing options for businesses owned by ethnically diverse individuals, women, and service-disabled veterans. If your business focus is global, we can help you increase your international sales and purchasing opportunities with our customized global trade and foreign exchange services. Our advisors will develop business solutions that structure and streamline financing to help you effectively mitigate risk and enhance profitability. Whatever your focus, Union Bank has the products, services, and expertise to customize a plan for you that will help you run your business successfully. Commercial Banking Recent market events have proven the importance of working with a bank you can count on. For nearly 150 years, Union Bank s conservative, consistent lending policies have kept us stable and strong through difficult market cycles, and we move forward well-capitalized for growth. Whether you need a business loan or financing, global treasury management services, global trade and foreign exchange services, or investment management, you are paired with relationship managers who are experts in their field and committed to understanding your business. At Union Bank, we also specialize in serving select industries, including energy, entertainment, real estate, retail, and government. Our relationship managers are experts in their industries, and they combine their in-depth knowledge of your business with the ample resources of Union Bank to structure or underwrite customized transactions. Being able to manage your funds quickly and effectively in today s environment is more important then ever. Our global treasury management services blend highly personalized service along with the speed and security of innovative technology. Market conditions will change and evolve, and so will your business objectives over time. Our relationship managers will work with you at every step to minimize your exposure through risk and liquidity management. When it s time for you to increase your international sales and purchasing opportunities, our global trade and foreign exchange advisors will provide solutions fitting your specific needs. 6 UnionBanCal Corporation 2008 Annual Report

9 Credit Quality Nonperforming Assets to Total Loans UnionBanCal Corporation Median Top 50 Banks * 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% * Median top 50 banks by asset size at 12/31/08. Source: SNL Financial Loan Portfolio Distribution As of December 31, 2008 c o m m e rc i a l loans 37% residential mortgage loans 32% c o m m e rc i a l mortgage loans 17% consumer loans 7% construction loans 6% leases 1% UnionBanCal Corporation 2008 Annual Report 7

10 Officers and Directors As of December 31, 2008 Board of Directors Aida M. Alvarez Former Administrator, U.S. Small Business Administration David R. Andrews Founder and Co-Chair, MetaJure, Inc. Nicholas B. Binkley General Partner, Forrest Binkley & Brown L. Dale Crandall President, Piedmont Corporate Advisors, Inc. Murray H. Dashe Retired Chairman, President, and Chief Executive Officer, Cost Plus, Inc. Richard D. Farman Chairman Emeritus, Sempra Energy Philip B. Flynn Vice Chairman and Chief Operating Officer, UnionBanCal and Union Bank Christine Garvey Real Estate Consultant Michael J. Gillfillan Partner, Meriturn Partners, LLC Mohan S. Gyani Vice Chairman, Roamware, Inc. Ronald L. Havner, Jr. Vice Chair, Chief Executive Officer, and President, Public Storage, Inc. Yoshiaki Kawamata Senior Managing Executive Officer and Chief Executive Officer for the Americas of The Bank of Tokyo-Mitsubishi UFJ, Ltd., and Resident Managing Officer for the United States of Mitsubishi UFJ Financial Group, Inc. Nobuo Kuroyanagi* Chairman of The Bank of Tokyo-Mitsubishi UFJ, Ltd., and President and Chief Executive Officer of Mitsubishi UFJ Financial Group, Inc. Mary S. Metz Retired President, S.H. Cowell Foundation J. Fernando Niebla President, International Technology Partners, LLC Kyota Omori Chairman of UnionBanCal and Union Bank and Deputy President and Chief Compliance Officer of the Mitsubishi UFJ Financial Group, Inc. Barbara L. Rambo Vice Chair, Nietech Corporation Masaaki Tanaka President and Chief Executive Officer, UnionBanCal and Union Bank Dean A. Yoost Retired Partner, PricewaterhouseCoopers *UNBC Director only Executive Management Committee Masaaki Tanaka President and Chief Executive Officer Philip B. Flynn Vice Chairman and Chief Operating Officer David I. Matson Vice Chairman and Chief Financial Officer John C. Erickson Vice Chairman and Chief Risk Officer Grant K. Ahearn Specialized Financial Services 8 UnionBanCal Corporation 2008 Annual Report JoAnn M. Bourne Commercial Deposits and Treasury Management Bruce H. Cabral Senior Executive Vice President and Chief Credit Officer Robert C. Dawson Commercial Banking Paul E. Fearer Senior Executive Vice President and Director of Human Resources Morris W. Hirsch General Counsel, and Secretary J. Michael Stedman Real Estate Industries Timothy H. Wennes Retail Banking John M. Wied Independent Risk Monitoring Group Johannes H. Worsoe Global and Wealth Markets James Yee Senior Executive Vice President and Chief Information Officer Design: ARGUS, LLC, San Francisco / ARGUSSF.com. Photography: Alain McLaughlin

11 UnionBanCal Corporation is a financial holding company. 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. As of December 31, 2008, UnionBanCal Corporation had assets of $70.1 billion. Union Bank is the fifth-largest bank in California by deposits. The bank has 335 banking offices in California, Oregon, and Washington, and two international offices. Effective November 4, 2008, UnionBanCal Corporation became a wholly owned subsidiary of The Bank of Tokyo-Mitsubishi UFJ, Ltd. The Bank of Tokyo-Mitsubishi UFJ, Ltd., is the commercial banking subsidiary of Mitsubishi UFJ Financial Group, Inc., one of the world s leading financial companies, with consolidated total assets of approximately $2.2 trillion as of December 31, CAUTIONARY NOTE REGARDING FORWARD-LOOKING INFORMATION This publication includes forward-looking statements, which include statements regarding the economic environment, the company s vision and strategies, and the expected benefits of its strategies, the company s competitive position, expected benefits of the company s ownership structure, the company s loan portfolio, plans and expectations for the company s operations and business, and assumptions for those expectations. Do not rely unduly on forward-looking statements. Actual results might differ significantly from the company s expectations. Please refer to item 1A, Risk Factors, in the Form 10-K for a discussion of some factors that may cause results to differ. All forward-looking information is based on information available as of the date of this report. UnionBanCal Corporation assumes no obligation to update any forward-looking information.

12 A Member of MUFG 400 California Street San Francisco, CA UnionBanCal Corporation Printed on Recycled Paper