Business Segments

6 Months Ended

Jun. 30, 2012

Business Segments [Abstract]

Business Segments

Note 12—Business Segments

The Company has three operating segments: Retail Banking Group, Corporate Banking Group and Pacific Rim Corporate Group. The Pacific Rim Corporate Group is included in “Other.” The Company has two reportable business segments: Retail Banking and Corporate Banking.

• Retail Banking offers a range of banking products and services, primarily to individuals and small businesses, delivered generally through a network of branches and ATMs located in the western U.S. and telephone and internet access 24-hours-a-day. These products offered include mortgages, home equity lines of credit, consumer and commercial loans, and deposit accounts.

• Corporate Banking provides credit, depository and cash management services, investment and risk management products to businesses, individuals and target specialty niches. Services include commercial and project finance loans, real estate financing, asset-based financing, trade finance and letters of credit, lease financing, customized cash management services and capital markets products, as well as trust, private banking, investment and asset management services for individuals and institutions.

“Other” is comprised of certain subsidiaries of UnionBanCal Corporation; the transfer pricing center; the amount of the provision for credit losses over/(under) the expected loss for the period; the residual costs of support groups; goodwill, intangible assets, and the related amortization/accretion associated with the Company’s privatization transaction; the elimination of the fully taxable-equivalent basis amount; and the difference between the marginal tax rate and the consolidated effective tax rate. In addition, “Other” includes Pacific Rim Corporate Group, which offers a range of credit, deposit, and investment management products and services to companies headquartered in either Japan or the U.S., Corporate Treasury, which is responsible for Asset-Liability Management (ALM), wholesale funding, the ALM investment securities and derivatives hedging portfolios, and the FDIC covered assets.

The information, set forth in the tables that follow, is prepared using various management accounting methodologies to measure the performance of the individual segments. Unlike financial accounting, there is no authoritative body of guidance for management accounting equivalent to US GAAP. Consequently, reported results are not necessarily comparable with those presented by other companies, and they are not necessarily indicative of the results that would be reported by our business units if they were unique economic entities. The management reporting accounting methodologies, which are enhanced from time to time, measure segment profitability by assigning balance sheet and income statement items to each operating segment. Methodologies that are applied to the measurement of segment profitability include:

• A funds transfer pricing system, which assigns a cost of funds or a credit for funds to assets or liabilities based on their type, maturity or repricing characteristics. During the six months ended June 30, 2012, the Company refined our transfer pricing methodology for non-maturity deposits to reflect expected balance run-off and average life assumptions as well as for rate repricing expectations.

• An activity-based costing methodology, in which certain indirect costs, such as operations and technology expense, are allocated to the segments based on studies of billable unit costs for product or data processing. Other indirect costs, such as corporate overhead, are allocated to the segments based on internal surveys and metrics that serve as proxies for estimated usage.

• An expected credit loss allocation methodology, in which credit expense is charged to an operating segment based upon expected losses arising from credit risk. As a result of the methodology used in this model, differences between the provision for credit losses and credit expense in any one period could be significant. However, over an economic cycle, the cumulative provision for credit losses and credit expense for expected losses should be substantially the same.

The Company reflects a “market view” perspective in measuring the business segments. The market view is a measurement of customer markets aggregated to show all revenues generated and expenses incurred from all products and services sold to those customers regardless of where product areas organizationally report. Therefore, revenues and expenses are included in both the business segment that provides the service and the business segment that manages the customer relationship. The duplicative results from this internal management accounting view are eliminated in “Reconciling Items.”

The reportable business segment results for prior periods have been adjusted to reflect changes in the transfer pricing and overhead methodologies that have occurred.

	Retail Banking				Corporate Banking
	As of and for the Three Months Ended June 30,				As of and for the Three Months Ended June 30,
	2012		2011		2012		2011
Results of operations—Market View (dollars in millions):
Net interest income (expense)	$	272	$	276	$	337	$	314
Noninterest income (expense)		58		71		138		153
Total revenue		330		347		475		467
Noninterest expense (income)		263		274		243		243
Credit expense (income)		6		7		38		49
Income (loss) before income taxes and including noncontrolling interests		61		66		194		175
Income tax expense (benefit)		24		26		50		43
Net income (loss) including noncontrolling interests		37		40		144		132
Deduct: Net loss from noncontrolling interests		—		—		—		—
Net income (loss) attributable to UNBC	$	37	$	40	$	144	$	132
Total assets, end of period—Market View (dollars in millions):	$	26,448	$	24,478	$	36,378	$	30,778

	Other						Reconciling Items
	As of and for the Three Months Ended June 30,						As of and for the Three Months Ended June 30,
	2012			2011			2012			2011
Results of operations—Market View (dollars in millions):
Net interest income (expense)	$	71		$	44		$	(21	)	$	(20	)
Noninterest income (expense)		(6	)		36			(15	)		(20	)
Total revenue		65			80			(36	)		(40	)
Noninterest expense (income)		104			76			(11	)		(15	)
Credit expense (income)		(58	)		(150	)		—			—
Income (loss) before income taxes and including noncontrolling interests		19			154			(25	)		(25	)
Income tax expense (benefit)		2			72			(9	)		(10	)
Net income (loss) including noncontrolling interests		17			82			(16	)		(15	)
Deduct: Net loss from noncontrolling interests		5			3			—			—
Net income (loss) attributable to UNBC	$	22		$	85		$	(16	)	$	(15	)
Total assets, end of period—Market View (dollars in millions):	$	27,356		$	26,968		$	(2,243	)	$	(2,131	)

	UnionBanCal Corporation
	As of and for the Three Months Ended June 30,
	2012			2011
Results of operations—Market View (dollars in millions):
Net interest income (expense)	$	659		$	614
Noninterest income (expense)		175			240
Total revenue		834			854
Noninterest expense (income)		599			578
Credit expense (income)		(14	)		(94	)
Income (loss) before income taxes and including noncontrolling interests		249			370
Income tax expense (benefit)		67			131
Net income (loss) including noncontrolling interests		182			239
Deduct: Net loss from noncontrolling interests		5			3
Net income (loss) attributable to UNBC	$	187		$	242
Total assets, end of period—Market View (dollars in millions):	$	87,939		$	80,093

	Retail Banking				Corporate Banking
	As of and for the Six Months Ended June 30,				As of and for the Six Months Ended June 30,
	2012		2011		2012		2011
Results of operations—Market View (dollars in millions):
Net interest income (expense)	$	540	$	543	$	672	$	629
Noninterest income (expense)		114		136		275		279
Total revenue		654		679		947		908
Noninterest expense (income)		527		542		483		473
Credit expense (income)		12		13		77		101
Income (loss) before income taxes and including noncontrolling interests		115		124		387		334
Income tax expense (benefit)		45		49		102		81
Net income (loss) including noncontrolling interests		70		75		285		253
Deduct: Net loss from noncontrolling interests		—		—		—		—
Net income (loss) attributable to UNBC	$	70	$	75	$	285	$	253
Total assets, end of period—Market View (dollars in millions):	$	26,448	$	24,478	$	36,378	$	30,778

	Other						Reconciling Items
	As of and for the Six Months Ended June 30,						As of and for the Six Months Ended June 30,
	2012			2011			2012			2011
Results of operations—Market View (dollars in millions):
Net interest income (expense)	$	141		$	97		$	(41	)	$	(37	)
Noninterest income (expense)		18			101			(30	)		(36	)
Total revenue		159			198			(71	)		(73	)
Noninterest expense (income)		226			205			(23	)		(27	)
Credit expense (income)		(104	)		(310	)		—			—
Income (loss) before income taxes and including noncontrolling interests		37			303			(48	)		(46	)
Income tax expense (benefit)		(11	)		133			(18	)		(18	)
Net income (loss) including noncontrolling interests		48			170			(30	)		(28	)
Deduct: Net loss from noncontrolling interests		9			7			—			—
Net income (loss) attributable to UNBC	$	57		$	177		$	(30	)	$	(28	)
Total assets, end of period—Market View (dollars in millions):	$	27,356		$	26,968		$	(2,243	)	$	(2,131	)

	UnionBanCal Corporation
	As of and for the Six Months Ended June 30,
	2012			2011
Results of operations—Market View (dollars in millions):
Net interest income (expense)	$	1,312		$	1,232
Noninterest income (expense)		377			480
Total revenue		1,689			1,712
Noninterest expense (income)		1,213			1,193
Credit expense (income)		(15	)		(196	)
Income (loss) before income taxes and including noncontrolling interests		491			715
Income tax expense (benefit)		118			245
Net income (loss) including noncontrolling interests		373			470
Deduct: Net loss from noncontrolling interests		9			7
Net income (loss) attributable to UNBC	$	382		$	477
Total assets, end of period—Market View (dollars in millions):	$	87,939		$	80,093