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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

             |X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                  FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2004

                         COMMISSION FILE NUMBER 1-15081

                             UNIONBANCAL CORPORATION
             (Exact name of registrant as specified in its charter)


           DELAWARE                                        94-1234979
   (State of Incorporation)                             (I.R.S. Employer
                                                       Identification No.)


                              400 CALIFORNIA STREET
                      SAN FRANCISCO, CALIFORNIA 94104-1302
              (Address and zip code of principal executive offices)

                  Registrant's telephone number: (415) 765-2969

     Indicate  by check mark  whether the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes X  No
                                             ---   ---

     Indicate by check mark whether the registrant is an  accelerated  filer (as
defined in Rule 12b-2 of the Act). Yes X  No
                                      ---   ---

   Number of shares of Common Stock outstanding at July 31, 2004: 147,775,010





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<PAGE>



                    UNIONBANCAL CORPORATION AND SUBSIDIARIES

                                TABLE OF CONTENTS

                                                                           PAGE
                                                                          NUMBER
                                                                          ------
PART I
FINANCIAL INFORMATION
  Consolidated Financial Highlights........................................    2
  Item 1. Financial Statements:
    Condensed Consolidated Statements of Income............................    4
    Condensed Consolidated Balance Sheets..................................    5
    Condensed Consolidated Statements of Changes in Stockholders' Equity...    6
    Condensed Consolidated Statements of Cash Flows........................    7
    Notes to Condensed Consolidated Financial Statements...................    8
  Item 2. Management's Discussion and Analysis of Financial Condition
    and Results of Operations:
    Introduction...........................................................   23
    Executive Overview.....................................................   23
    Financial Performance..................................................   25
    Net Interest Income....................................................   29
    Noninterest Income.....................................................   32
    Noninterest Expense....................................................   33
    Income Tax Expense.....................................................   33
    Loans..................................................................   34
    Cross-Border Outstandings..............................................   36
    Provision for Credit Losses............................................   36
    Allowance for Credit Losses............................................   36
    Nonperforming Assets...................................................   42
    Loans 90 Days or More Past Due and Still Accruing......................   43
    Quantitative and Qualitative Disclosures About Market Risk.............   43
    Liquidity Risk.........................................................   46
    Regulatory Capital.....................................................   47
    Business Segments......................................................   48
    Certain Business Risk Factors..........................................   57
  Item 3. Quantitative and Qualitative Disclosures about Market Risk.......   61
  Item 4. Controls and Procedures..........................................   61
PART II
OTHER INFORMATION
  Item 1. Legal Proceedings................................................   62
  Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of
    Equity Securities......................................................   63
  Item 4. Submission of Matters to a Vote of Security Holders..............   63
  Item 6. Exhibits and Reports on Form 8-K.................................   63
  Signatures...............................................................   65






<PAGE>

                         PART I. FINANCIAL INFORMATION
                    UnionBanCal Corporation and Subsidiaries
                        Consolidated Financial Highlights
                                   (Unaudited)

<TABLE>
<CAPTION>

                                                               AS OF AND FOR THE
                                                              THREE MONTHS ENDED
                                                          --------------------------
                                                            JUNE 30,       JUNE 30,     PERCENT
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)                 2003           2004       CHANGE
--------------------------------------------------------- -----------    -----------    -------
<S>                                                       <C>            <C>               <C>
RESULTS OF OPERATIONS:
  Net interest income(1)................................. $   386,422    $   400,661       3.68%
  (Reversal of) provision for credit losses..............      25,000        (10,000)        nm
  Noninterest income.....................................     203,171        331,010      62.92
  Noninterest expense....................................     351,004        376,402       7.24
                                                          -----------    -----------
  Income before income taxes(1)..........................     213,589        365,269      71.01
  Taxable-equivalent adjustment..........................         645            803      24.50
  Income tax expense.....................................      68,186        133,369      95.60
                                                          -----------    -----------
  Net income............................................. $   144,758    $   231,097      59.64
                                                          ===========    ===========
PER COMMON SHARE:
  Net income--basic...................................... $      0.96    $      1.56      62.50%
  Net income--diluted....................................        0.96           1.54      60.42
  Dividends(2)...........................................        0.31           0.36      16.13
  Book value (end of period).............................       25.79          26.98       4.61
  Common shares outstanding (end of period)(3)........... 149,993,652    147,845,160      (1.43)
  Weighted average common shares outstanding--basic(3)... 150,046,659    147,687,350      (1.57)
  Weighted average common shares outstanding--diluted(3). 151,489,337    150,183,938      (0.86)
BALANCE SHEET (END OF PERIOD):
  Total assets........................................... $42,668,834    $46,295,831       8.50%
  Total loans............................................  25,668,660     27,594,271       7.50
  Nonaccrual loans.......................................     379,487        178,062     (53.08)
  Nonperforming assets...................................     379,758        183,913     (51.57)
  Total deposits.........................................  35,365,260     39,367,911      11.32
  Medium and long-term debt..............................     420,853        800,988      90.32
  Junior subordinated debt...............................          --         16,017         nm
  Trust preferred securities.............................     360,166             --    (100.00)
  Stockholders' equity...................................   3,868,959      3,988,676       3.09
BALANCE SHEET (PERIOD AVERAGE):
  Total assets........................................... $39,776,349    $44,611,351      12.16%
  Total loans............................................  26,517,316     26,838,622       1.21
  Earning assets.........................................  36,074,488     40,351,016      11.85
  Total deposits.........................................  32,587,173     37,810,048      16.03
  Stockholders' equity...................................   3,919,276      3,933,788       0.37
FINANCIAL RATIOS:
  Return on average assets(4)............................        1.46%          2.08%
  Return on average stockholders' equity(4)..............       14.81          23.63
  Efficiency ratio(5)....................................       59.53          51.44
  Net interest margin(1).................................        4.29           3.98
  Dividend payout ratio..................................       32.29          23.08
  Tangible equity ratio..................................        8.59           7.88
  Tier 1 risk-based capital ratio........................       11.44          10.46
  Total risk-based capital ratio.........................       13.06          13.07
  Leverage ratio.........................................        9.63           8.36
  Allowance for credit losses to total loans.............        2.17           1.82
  Allowance for credit losses to nonaccrual loans........      147.11         281.60
  Net loans charged off to average total loans(4)........        0.80           0.15
  Nonperforming assets to total loans and
    foreclosed assets....................................        1.48           0.67
  Nonperforming assets to total assets...................        0.89           0.40

----------------------------------------
<FN>

(1)  Amounts are on a  taxable-equivalent  basis using the federal statutory tax
     rate of 35 percent.

(2)  Dividends per share reflect dividends declared on UnionBanCal Corporation's
     common stock outstanding as of the declaration date.

(3)  Common  shares  outstanding  reflects  common  shares  issued less treasury
     shares.

(4)  Annualized.

(5)  The efficiency  ratio is noninterest  expense,  excluding  foreclosed asset
     expense    (income),    as   a   percentage   of   net   interest    income
     (taxable-equivalent basis) and noninterest income. Foreclosed asset expense
     (income)  was  $(0.5)  thousand  in the  second  quarter  of 2003 and $16.5
     thousand in the second quarter of 2004.

nm--not meaningful
</FN>
</TABLE>

                                       2
<PAGE>

                         PART I. FINANCIAL INFORMATION
                    UnionBanCal Corporation and Subsidiaries
                        Consolidated Financial Highlights
                                   (Unaudited)

<TABLE>
<CAPTION>

                                                              AS OF AND FOR THE
                                                               SIX MONTHS ENDED
                                                          --------------------------
                                                            JUNE 30,       JUNE 30,     PERCENT
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)                 2003           2004       CHANGE
--------------------------------------------------------- -----------    -----------    -------
<S>                                                       <C>            <C>               <C>
RESULTS OF OPERATIONS:
  Net interest income(1)................................. $   777,826    $   801,884       3.09%
  (Reversal of) provision for credit losses..............      55,000        (15,000)        nm
  Noninterest income.....................................     388,942        542,215      39.41
  Noninterest expense....................................     693,604        749,508       8.06
                                                          -----------    -----------
  Income before income taxes(1)..........................     418,164        609,591      45.78
  Taxable-equivalent adjustment..........................       1,269          1,605      26.48
  Income tax expense.....................................     136,620        219,402      60.59
                                                          -----------    -----------
  Net income............................................. $   280,275    $   388,584      38.64
                                                          ===========    ===========
PER COMMON SHARE:
  Net income--basic...................................... $      1.86    $      2.63      41.40%
  Net income--diluted....................................        1.85           2.59      40.00
  Dividends(2)...........................................        0.59           0.67      13.56
  Book value (end of period).............................       25.79          26.98       4.61
  Common shares outstanding (end of period)(3)........... 149,993,652    147,845,160      (1.43)
  Weighted average common shares outstanding--basic(3)... 150,329,939    147,543,824      (1.85)
  Weighted average common shares outstanding--diluted(3). 151,746,328    149,991,567      (1.16)
BALANCE SHEET (END OF PERIOD):
  Total assets........................................... $42,668,834    $46,295,831       8.50%
  Total loans............................................  25,668,660     27,594,271       7.50
  Nonaccrual loans.......................................     379,487        178,062     (53.08)
  Nonperforming assets...................................     379,758        183,913     (51.57)
  Total deposits.........................................  35,365,260     39,367,911      11.32
  Medium and long-term debt..............................     420,853        800,988      90.32
  Junior subordinated debt...............................          --         16,017         nm
  Trust preferred securities.............................     360,166             --    (100.00)
  Stockholders' equity...................................   3,868,959      3,988,676       3.09
BALANCE SHEET (PERIOD AVERAGE):
  Total assets........................................... $39,066,221    $43,831,266      12.20%
  Total loans............................................  26,619,618     26,490,239      (0.49)
  Earning assets.........................................  35,454,075     39,613,622      11.73
  Total deposits.........................................  31,836,948     36,874,787      15.82
  Stockholders' equity...................................   3,896,909      3,941,855       1.15
FINANCIAL RATIOS:
  Return on average assets(4)............................        1.45%          1.78%
  Return on average stockholders' equity(4)..............       14.50          19.82
  Efficiency ratio(5)....................................       59.44          55.72
  Net interest margin(1).................................        4.41           4.07
  Dividend payout ratio..................................       31.72          25.48
  Tangible equity ratio..................................        8.59           7.88
  Tier 1 risk-based capital ratio........................       11.44          10.46
  Total risk-based capital ratio.........................       13.06          13.07
  Leverage ratio.........................................        9.63           8.36
  Allowance for credit losses to total loans.............        2.17           1.82
  Allowance for credit losses to nonaccrual loans........      147.11         281.60
  Net loans charged off to average total loans(4)........        0.80           0.17
  Nonperforming assets to total loans and
    foreclosed assets....................................        1.48           0.67
  Nonperforming assets to total assets...................        0.89           0.40

----------------------------------------
<FN>

(1)  Amounts are on a  taxable-equivalent  basis using the federal statutory tax
     rate of 35 percent.

(2)  Dividends per share reflect dividends declared on UnionBanCal Corporation's
     common stock outstanding as of the declaration date.

(3)  Common  shares  outstanding  reflects  common  shares  issued less treasury
     shares.

(4)  Annualized.

(5)  The efficiency  ratio is noninterest  expense,  excluding  foreclosed asset
     expense    (income),    as   a   percentage   of   net   interest    income
     (taxable-equivalent basis) and noninterest income. Foreclosed asset expense
     was $0.1  million in the first six  months of 2003 and $0.5  million in the
     first six months of 2004.

nm--not meaningful
</FN>
</TABLE>

                                       3
<PAGE>

ITEM 1. FINANCIAL STATEMENTS

                    UnionBanCal Corporation and Subsidiaries
                   Condensed Consolidated Statements of Income
                                  (Unaudited)
<TABLE>
<CAPTION>

                                                      FOR THE THREE MONTHS      FOR THE SIX MONTHS
                                                         ENDED JUNE 30,            ENDED JUNE 30,
                                                     ----------------------   -----------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)           2003        2004         2003         2004
---------------------------------------------------- ----------  ----------   ----------   ----------
<S>                                                  <C>         <C>          <C>          <C>
INTEREST INCOME
  Loans............................................. $  354,913  $  328,372   $  717,888   $  663,701
  Securities........................................     78,036     108,064      157,899      213,910
  Interest bearing deposits in banks................      1,130       1,121        2,092        2,029
  Federal funds sold and securities purchased
    under resale agreements.........................      4,001       2,928        5,678        4,887
  Trading account assets............................        943         861        1,870        1,418
                                                     ----------  ----------   ----------   ----------
    Total interest income...........................    439,023     441,346      885,427      885,945
                                                     ----------  ----------   ----------   ----------
INTEREST EXPENSE
  Domestic deposits.................................     40,217      32,123       81,788       65,733
  Foreign deposits..................................      2,811       2,761        6,017        4,893
  Federal funds purchased and securities sold
    under repurchase agreements.....................        747         552        2,074        1,233
  Commercial paper..................................      2,946       1,051        5,674        2,186
  Medium and long-term debt.........................      1,818       3,693        3,684        6,832
  Preferred securities and trust notes..............      3,652         130        7,323        2,311
  Other borrowed funds..............................      1,055       1,178        2,310        2,478
                                                     ----------  ----------   ----------   ----------
    Total interest expense..........................     53,246      41,488      108,870       85,666
                                                     ----------  ----------   ----------   ----------
NET INTEREST INCOME.................................    385,777     399,858      776,557      800,279
  (Reversal of) provision for credit losses.........     25,000     (10,000)      55,000      (15,000)
                                                     ----------  ----------   ----------   ----------
    Net interest income after (reversal of)
      provision for credit losses...................    360,777     409,858      721,557      815,279
                                                     ----------  ----------   ----------   ----------
NONINTEREST INCOME
  Service charges on deposit accounts...............     77,942      90,031      150,229      171,127
  Trust and investment management fees..............     33,141      36,788       65,816       72,610
  Insurance commissions.............................     16,024      18,652       29,242       40,387
  International commissions and fees................     16,856      18,102       32,201       35,647
  Card processing fees, net.........................      9,340      15,456       19,022       24,248
  Foreign exchange gains, net.......................      6,958       8,294       13,892       16,638
  Brokerage commissions and fees....................      8,412       8,023       17,066       16,320
  Merchant banking fees.............................      6,191       7,714       12,209       15,181
  Securities gains (losses), net....................      9,660          (4)       9,660        1,618
  Other.............................................     18,647     127,954       39,605      148,439
                                                     ----------  ----------   ----------   ----------
    Total noninterest income........................    203,171     331,010      388,942      542,215
                                                     ----------  ----------   ----------   ----------
NONINTEREST EXPENSE
  Salaries and employee benefits....................    198,929     217,597      397,036      437,020
  Net occupancy.....................................     32,866      32,173       60,502       63,755
  Equipment.........................................     16,354      16,883       33,025       34,154
  Communications....................................     13,354      13,035       27,198       26,445
  Software..........................................     10,849      12,908       22,925       25,903
  Professional services.............................     13,566      10,290       25,580       21,593
  Foreclosed asset expense..........................         --          17           51          536
  Other.............................................     65,086      73,499      127,287      140,102
                                                     ----------  ----------   ----------   ----------
    Total noninterest expense.......................    351,004     376,402      693,604      749,508
                                                     ----------  ----------   ----------   ----------
  Income before income taxes........................    212,944     364,466      416,895      607,986
  Income tax expense................................     68,186     133,369      136,620      219,402
                                                     ----------  ----------   ----------   ----------
NET INCOME.......................................... $  144,758  $  231,097   $  280,275   $  388,584
                                                     ==========  ==========   ==========   ==========
NET INCOME PER COMMON SHARE--BASIC.................. $     0.96  $     1.56   $     1.86   $     2.63
                                                     ==========  ==========   ==========   ==========
NET INCOME PER COMMON SHARE--DILUTED................ $     0.96  $     1.54   $     1.85   $     2.59
                                                     ==========  ==========   ==========   ==========
WEIGHTED AVERAGE COMMON SHARES
  OUTSTANDING--BASIC................................    150,047     147,687      150,330      147,544
                                                     ==========  ==========   ==========   ==========
WEIGHTED AVERAGE COMMON SHARES
  OUTSTANDING--DILUTED..............................    151,489     150,184      151,746      149,992
                                                     ==========  ==========   ==========   ==========

</TABLE>

See accompanying notes to condensed consolidated financial statements.

                                       4
<PAGE>

<TABLE>
<CAPTION>

                    UnionBanCal Corporation and Subsidiaries
                      Condensed Consolidated Balance Sheets

                                                          (UNAUDITED)              (UNAUDITED)
                                                            JUNE 30,  DECEMBER 31,   JUNE 30,
(DOLLARS IN THOUSANDS)                                        2003        2003         2004
--------------------------------------------------------- ----------- ------------ -----------
<S>                                                       <C>         <C>          <C>
ASSETS
Cash and due from banks.................................. $ 3,096,509 $  2,494,127 $ 2,287,708
Interest bearing deposits in banks.......................     212,746      235,158     630,451
Federal funds sold and securities purchased under
  resale agreements......................................   1,624,552      769,720   1,156,650
                                                          ----------- ------------ -----------
Total cash and cash equivalents..........................   4,933,807    3,499,005   4,074,809
Trading account assets...................................     387,928      252,929     307,334
Securities available for sale:
  Securities pledged as collateral.......................     154,961      106,560      77,532
  Held in portfolio......................................   9,438,110   10,660,332  12,151,635
Loans (net of allowance for credit losses: June 30,
  2003, $558,282; December 31, 2003, $532,970;
  June 30, 2004, $501,419)...............................  25,110,378   25,411,658  27,092,852
Due from customers on acceptances........................      81,560       71,078      52,867
Premises and equipment, net..............................     498,708      509,734     502,204
Intangible assets........................................      46,240       49,592      56,696
Goodwill.................................................     178,591      226,556     315,356
Other assets.............................................   1,838,551    1,711,023   1,664,546
                                                          ----------- ------------ -----------
  Total assets........................................... $42,668,834 $ 42,498,467 $46,295,831
                                                          =========== ============ ===========
LIABILITIES
Domestic deposits:
  Noninterest bearing.................................... $17,198,024 $ 16,668,773 $19,255,245
  Interest bearing.......................................  16,494,167   17,146,858  17,982,340
Foreign deposits:
  Noninterest bearing....................................     490,314      619,249     733,394
  Interest bearing.......................................   1,182,755    1,097,403   1,396,932
                                                          ----------- ------------ -----------
    Total deposits.......................................  35,365,260   35,532,283  39,367,911
Federal funds purchased and securities sold under
   repurchase agreements.................................     337,785      280,968     294,597
Commercial paper.........................................     835,268      542,270     552,038
Other borrowed funds.....................................     238,239      212,088     180,426
Acceptances outstanding..................................      81,560       71,078      52,867
Other liabilities........................................   1,160,744      934,916   1,042,311
Medium and long-term debt................................     420,853      820,488     800,988
Junior subordinated debt payable to subsidiary
   grantor trust.........................................          --      363,940      16,017
UnionBanCal Corporation--obligated mandatorily
  redeemable preferred securities of subsidiary
  grantor trust..........................................     360,166           --          --
                                                          ----------- ------------ -----------
Total liabilities........................................  38,799,875   38,758,031  42,307,155
                                                          ----------- ------------ -----------
Commitments and contingencies
STOCKHOLDERS' EQUITY
Preferred stock:
  Authorized 5,000,000 shares, no shares issued or
    outstanding as of June 30, 2003, December 31, 2003,
    and June 30, 2004....................................          --           --          --
Common stock, no stated value per share at June 30,
  2003, and par value of $1 per share at December 31,
  2003 and June 30, 2004(1):
  Authorized 300,000,000 shares, issued 149,993,652
    shares as of June 30, 2003, 146,000,156 shares as
    of December 31, 2003, and 149,126,860 shares as
    of June 30, 2004.....................................     894,979      146,000     149,127
Additional paid-in capital...............................          --      555,156     712,255
Treasury stock--242,000 shares as of December 31,
  2003 and 1,281,700 shares as of June 30, 2004..........          --      (12,846)    (68,557)
Retained earnings........................................   2,783,314    2,999,884   3,289,676
Accumulated other comprehensive income (loss)............     190,666       52,242     (93,825)
                                                          ----------- ------------ -----------
Total stockholders' equity...............................   3,868,959    3,740,436   3,988,676
                                                          ----------- ------------ -----------
Total liabilities and stockholders' equity............... $42,668,834 $ 42,498,467 $46,295,831
                                                          =========== ============ ===========
------------------------------
<FN>

(1)  On  September  30,  2003,  UnionBanCal  Corporation  changed  its  state of
     incorporation  from California to Delaware,  establishing a par value of $1
     per share of common stock.
</FN>
</TABLE>

See accompanying notes to condensed consolidated financial statements.

                                       5
<PAGE>

<TABLE>
<CAPTION>

                    UnionBanCal Corporation and Subsidiaries
      Condensed Consolidated Statements of Changes in Stockholders' Equity
                                   (Unaudited)

                                                                                           ACCUMULATED      TOTAL
                                                       ADDITIONAL                             OTHER         STOCK-
                                   NUMBER    COMMON     PAID-IN    TREASURY   RETAINED    COMPREHENSIVE     HOLDERS'
(IN THOUSANDS, EXCEPT SHARES)    OF SHARES   STOCK(1)    CAPITAL     STOCK    EARNINGS    INCOME (LOSS)     EQUITY
------------------------------- -----------  --------  ----------  --------  ----------  --------------   ----------
<S>              <C> <C>        <C>          <C>       <C>         <C>       <C>         <C>              <C>
BALANCE DECEMBER 31, 2002...... 150,702,363  $926,460  $       --  $     --  $2,591,635  $      240,094   $3,758,189
                                             --------  ----------  --------  ----------  --------------   ----------
Comprehensive income
  Net income--For the six
    months ended June 30, 2003.                                                 280,275                      280,275
  Other comprehensive income,
    net of tax:
    Net change in unrealized
      gains on cash flow hedges                                                                  (7,985)      (7,985)
    Net change in unrealized
      gains on securities
      available for sale.......                                                                 (41,561)     (41,561)
    Foreign currency transla-
      tion adjustment..........                                                                     118          118
                                                                                                          ----------
Total comprehensive income.....                                                                              230,847
Dividend reinvestment plan.....       5,047        24                                                             24
Deferred compensation -
  restricted stock awards......          --        --                               111                          111
Stock options exercised........     402,078    13,324                                                         13,324
Common stock repurchased(2)....  (1,115,836)  (44,829)                                                       (44,829)
Dividends declared on common
  stock, $0.59 per share(3)....                                                 (88,707)                     (88,707)
                                             --------  ----------  --------  ----------  --------------   ----------
Net change.....................               (31,481)         --        --     191,679         (49,428)     110,770
                                -----------  --------  ----------  --------  ----------  --------------   ----------
BALANCE JUNE 30, 2003.......... 149,993,652  $894,979  $       --  $     --  $2,783,314  $      190,666   $3,868,959
                                ===========  ========  ==========  ========  ==========  ==============   ==========

BALANCE DECEMBER 31, 2003....   146,000,156  $146,000  $  555,156  $(12,846) $2,999,884  $       52,242   $3,740,436
                                             --------  ----------  --------  ----------  --------------   ----------
Comprehensive income
  Net income--For the six
    months ended June 30, 2004.                                                 388,584                      388,584
  Other comprehensive income,
    net of tax:
    Net change in unrealized
      gains on cash flow hedges                                                                 (37,753)     (37,753)
    Net change in unrealized
      losses on securities
      available for sale.......                                                                (108,834)    (108,834)
    Foreign currency transla-
      tion adjustment..........                                                                     520          520
                                                                                                          ----------
Total comprehensive income.....                                                                              242,517
Dividend reinvestment plan.....         308        --          17                                                 17
Deferred compensation -
  restricted stock awards......          --        --                               130                          130
Stock options exercised........   1,117,677     1,118      44,687                                             45,805
Stock issued in acquisitions...   2,008,719     2,009     112,569                                            114,578
Common stock repurchased(2)....          --        --       (174)   (55,711)                                 (55,885)
Dividends declared on common
  stock, $0.67 per share(3)....                                                 (98,922)                     (98,922)
                                             --------  ----------  --------  ----------  --------------   ----------
Net change.....................                 3,127     157,082   (55,711)    289,792        (146,067)     248,240
                                -----------  --------  ----------  --------  ----------  --------------   ----------
BALANCE JUNE 30, 2004.......... 149,126,860  $149,127  $  712,255  $(68,557) $3,289,676  $      (93,825)  $3,988,676
                                ===========  ========  ==========  ========  ==========  ==============   ==========
---------------------------
<FN>

(1)  On  September  30,  2003,  UnionBanCal  Corporation  changed  its  state of
     incorporation  from California to Delaware,  establishing a par value of $1
     per share of common stock.

(2)  Common  stock  repurchased   includes  commission  costs.  All  repurchases
     subsequent to September 29, 2003, are reflected in Treasury Stock.

(3)  Dividends are based on UnionBanCal  Corporation's  shares outstanding as of
     the declaration date.
</FN>
</TABLE>

See accompanying notes to condensed consolidated financial statements.

                                       6

<PAGE>

<TABLE>
<CAPTION>

                    UnionBanCal Corporation and Subsidiaries
                 Condensed Consolidated Statements of Cash Flows
                                   (Unaudited)

                                                                         FOR THE SIX MONTHS
                                                                           ENDED JUNE 30,
                                                                      -------------------------
(DOLLARS IN THOUSANDS)                                                   2003           2004
--------------------------------------------------------------------- ----------     ----------
<S>                                                                   <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income......................................................... $  280,275     $  388,584
  Adjustments to reconcile net income to net cash provided by (used
    in) operating activities:
    (Reversal of) provision for credit losses........................     55,000        (15,000)
    Depreciation, amortization and accretion.........................     61,742         66,191
    Provision for deferred income taxes..............................     44,876         36,430
    Gains on securities available for sale...........................     (9,660)        (1,618)
    Net increase in prepaid expenses.................................    (83,845)       (85,933)
    Net (increase) decrease in fees and other charges receivable.....    (94,140)        40,498
    Net increase (decrease) in accrued expenses and other liabilities     45,635         92,632
    Net (increase) decrease in other assets, net of acquisitions.....   (105,724)       255,613
    Net increase in trading account assets...........................   (111,907)       (54,405)
    Loans originated for resale......................................    (80,608)      (263,412)
    Net proceeds from sale of loans originated for resale............    127,629        227,434
    Other, net.......................................................     25,987          4,610
                                                                      ----------     ----------
    Total adjustments................................................   (125,015)       303,040
                                                                      ----------     ----------
  Net cash provided by (used in) operating activities................    155,260        691,624
                                                                      ----------     ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Proceeds from sales of securities available for sale...............     35,978          9,970
  Proceeds from matured and called securities available for sale.....  1,506,572      2,004,222
  Purchases of securities available for sale......................... (3,907,936)    (3,664,523)
  Net (increase) decrease in loans, net of acquisitions..............    598,059     (1,213,276)
  Net cash used in acquisitions......................................    (29,860)        (2,287)
  Other, net.........................................................    (46,405)       (36,533)
                                                                      ----------     ----------
    Net cash provided by (used in) investing activities.............. (1,843,592)    (2,902,427)
                                                                      ----------     ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Net increase (decrease) in deposits, net of acquisitions...........  2,524,445      3,255,271
  Net increase (decrease) in federal funds purchased and securities
    sold under repurchase agreements.................................      3,406         13,629
  Net decrease in commercial paper and other borrowed funds..........   (232,522)       (21,894)
  Repayment of junior subordinated debt..............................         --       (360,825)
  Common stock repurchased...........................................    (44,829)       (55,885)
  Payments of cash dividends.........................................    (84,413)       (90,925)
  Other, net.........................................................     13,466         46,342
                                                                      ----------     ----------
    Net cash provided by (used in) financing activities..............  2,179,553      2,785,713
Net increase (decrease) in cash and cash equivalents.................    491,221        574,910
Cash and cash equivalents at beginning of period.....................  4,442,122      3,499,005
Effect of exchange rate changes on cash and cash equivalents.........        464            894
                                                                      ----------     ----------
Cash and cash equivalents at end of period........................... $4,933,807     $4,074,809
                                                                      ==========     ==========
CASH PAID DURING THE PERIOD FOR:
  Interest........................................................... $  117,463     $   88,860
  Income taxes.......................................................     51,197         95,764
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
  Acquisitions:
    Fair value of assets acquired.................................... $   47,988     $  803,713
    Purchase price:
      Cash...........................................................    (40,300)       (21,772)
      Stock issued...................................................         --       (114,578)
                                                                      ----------     ----------
    Liabilities assumed.............................................. $    7,688     $  667,363
                                                                      ==========     ==========

</TABLE>

See accompanying notes to condensed consolidated financial statements.

                                       7

<PAGE>


                    UnionBanCal Corporation and Subsidiaries
              Notes to Condensed Consolidated Financial Statements

NOTE 1--BASIS OF PRESENTATION AND NATURE OF OPERATIONS

     The unaudited condensed  consolidated  financial  statements of UnionBanCal
Corporation and subsidiaries (the Company) have been prepared in accordance with
accounting  principles  generally accepted in the United States of America (U.S.
GAAP) for interim financial reporting and the instructions to Form 10-Q and Rule
10-01 of  Regulation  S-X of the Rules and  Regulations  of the  Securities  and
Exchange  Commission.  However,  they  do not  include  all  of the  disclosures
necessary for annual  financial  statements in conformity  with U.S.  GAAP.  The
results of  operations  for the period  ended June 30, 2004 are not  necessarily
indicative of the operating results anticipated for the full year.  Accordingly,
these unaudited condensed  consolidated  financial  statements should be read in
conjunction with the audited  consolidated  financial statements included in the
Company's  Form 10-K for the year ended  December 31, 2003.  The  preparation of
financial  statements in conformity  with U.S. GAAP also requires  management to
make estimates and  assumptions  that affect the reported  amounts of assets and
liabilities  and disclosure of contingent  assets and liabilities at the date of
the financial  statements and the reported amounts of revenue and expense during
the reporting period. Actual results could differ from those estimates.

     UnionBanCal  Corporation is a commercial  bank holding  company and has, as
its major subsidiary, a banking subsidiary,  Union Bank of California, N.A. (the
Bank).  The Company  provides a wide range of financial  services to  consumers,
small businesses,  middle-market companies and major corporations,  primarily in
California, Oregon, and Washington, but also nationally and internationally.

     Since November 1999 through June 30, 2004, the Company has announced  stock
repurchase  plans totaling $700 million and as of June 30, 2004 has  repurchased
$454  million  of  common  stock  under  these  repurchase  plans.  The  Company
repurchased $58 million,  $44 million,  and $12 million of common stock in 2003,
the first quarter of 2004, and the second quarter of 2004, respectively, as part
of these  repurchase  plans.  As of June 30, 2004, $246 million of the Company's
common stock is authorized  for  repurchase.  Under  separate  stock  repurchase
agreements, the Company purchased $600 million of its common stock, $300 million
in August 2002 and $300 million in September 2003, from its majority owner,  The
Bank of  Tokyo-Mitsubishi,  Ltd.  (BTM),  which is a wholly-owned  subsidiary of
Mitsubishi Tokyo Financial Group, Inc. At June 30, 2004, BTM owned approximately
62 percent of the Company's outstanding common stock.

     Certain  amounts for prior  periods  have been  reclassified  to conform to
current financial statement presentation.

STOCK-BASED COMPENSATION

     As allowed  under the  provisions  of  Statement  of  Financial  Accounting
Standards (SFAS) No. 123, "Accounting for Stock-Based Compensation," as amended,
the Company has chosen to continue to recognize  compensation  expense using the
intrinsic  value-based  method of valuing stock options prescribed in Accounting
Principles  Board  Opinion  (APB)  No.  25,  "Accounting  for  Stock  Issued  to
Employees" and related Interpretations.  Under the intrinsic value-based method,
compensation  cost is measured as the amount by which the quoted market price of
the  Company's  stock at the date of grant  exceeds  the stock  option  exercise
price.

     At June 30, 2004,  the Company has two  stock-based  employee  compensation
plans. For further discussion  concerning our stock-based employee  compensation
plans  see  Note  14--"Management  Stock  Plan"  of the  Notes  to  Consolidated
Financial  Statements  included in the Form 10-K for the year ended December 31,
2003. The value of the  restricted  stock awards issued under the plans has been
reflected  in  compensation  expense.  Options  granted  under  the plans had an
exercise price equal to the market value of


                                       8

<PAGE>

                    UnionBanCal Corporation and Subsidiaries
        Notes to Condensed Consolidated Financial Statements (Continued)


NOTE 1--BASIS OF PRESENTATION AND NATURE OF OPERATIONS (CONTINUED)

the  underlying  common  stock  on the date of grant  and,  therefore,  were not
included in compensation expense as allowed by current U.S. GAAP.

     The following  table  illustrates the effect on net income and earnings per
share if the Company had applied the fair value  recognition  provisions of SFAS
No. 123 to stock-based employee compensation.

<TABLE>
<CAPTION>

                                                       FOR THE THREE MONTHS    FOR THE SIX MONTHS
                                                          ENDED JUNE 30,         ENDED JUNE 30,
                                                       --------------------   --------------------
(DOLLARS IN THOUSANDS)                                   2003        2004       2003        2004
-----------------------------------------------------  --------    --------   --------    --------
<S>                                                    <C>         <C>        <C>         <C>
AS REPORTED NET INCOME...............................  $144,758    $231,097   $280,275    $388,584
Stock option-based employee compensation expense
  (determined under fair value based method for
  all awards, net of taxes)..........................    (6,527)     (6,683)   (12,483)    (13,215)
                                                       --------    --------   --------    --------
Pro forma net income, after stock option-based
  employee compensation expense......................  $138,231    $224,414   $267,792    $375,369
                                                       ========    ========   ========    ========
EARNINGS PER SHARE--BASIC
As reported..........................................  $   0.96    $   1.56   $   1.86    $   2.63
Pro forma............................................  $   0.92    $   1.52   $   1.78    $   2.54
EARNINGS PER SHARE--DILUTED
As reported..........................................  $   0.96    $   1.54   $   1.85    $   2.59
Pro forma............................................  $   0.91    $   1.49   $   1.76    $   2.50

</TABLE>

     Compensation cost associated with the Company's  unvested  restricted stock
issued under the management  stock plan is measured based on the market price of
the  stock  at  the  grant  date  and  is  expensed  over  the  vesting  period.
Compensation  expense related to restricted stock awards for the second quarters
of 2003 and 2004 was not significant.

NOTE 2--RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

     ACCOUNTING FOR ASSET RETIREMENT OBLIGATIONS

     In June 2001, the Financial  Accounting  Standards Board (FASB) issued SFAS
No. 143, "Accounting for Asset Retirement Obligations." This Statement addresses
the  financial  accounting  and reporting for  obligations  associated  with the
retirement of tangible  long-lived  assets and the associated  asset  retirement
costs. It requires an entity to record a liability for an obligation  associated
with  the  retirement  of an asset at the time  the  liability  is  incurred  by
capitalizing  the cost as part of the  carrying  value of the related  asset and
depreciating it over the remaining useful life of the asset.  This Statement was
effective for the Company on January 1, 2003 and did not have a material  impact
on the Company's  financial  position or results of  operations.

     ACCOUNTING FOR COSTS ASSOCIATED WITH EXIT OR DISPOSAL ACTIVITIES

     In June  2002,  the  FASB  issued  SFAS  No.  146,  "Accounting  for  Costs
Associated  with Exit or  Disposal  Activities."  This  Statement  replaces  the
accounting and reporting  provisions of Emerging  Issues Task Force (EITF) Issue
No. 94-3,  "Liability  Recognition for Certain Employee Termination Benefits and
Other  Costs  to  Exit  an  Activity  (including  Certain  Costs  Incurred  in a
Restructuring)."  It  requires  that costs  associated  with an exit or disposal
activity be recognized  when a liability is incurred  rather than at the date


                                       9

<PAGE>

                    UnionBanCal Corporation and Subsidiaries
        Notes to Condensed Consolidated Financial Statements (Continued)

NOTE 2--RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS (CONTINUED)

an entity  commits to an exit plan.  This  Statement was effective on January 1,
2003 and did not have a material impact on the Company's  financial  position or
results of operations.

     ACCOUNTING  FOR  GUARANTORS AND  DISCLOSURE  REQUIREMENTS  FOR  GUARANTEES,
     INCLUDING INDIRECT GUARANTEES OF INDEBTEDNESS OF OTHERS

     In  November  2002,  the  FASB  issued  Interpretation  No.  45  (FIN  45),
"Guarantor's  Accounting and Disclosure  Requirements for Guarantees,  Including
Indirect Guarantees of Indebtedness of Others." The Interpretation elaborates on
the existing  disclosure  requirements  for most  guarantees  and requires  that
guarantors  recognize a liability  for the fair value of certain  guarantees  at
inception. The disclosure requirements of this Interpretation were effective for
financial statements ending after December 15, 2002. The initial recognition and
measurement  provisions  of this  Interpretation  were applied on a  prospective
basis to guarantees  issued or modified after December 31, 2002. The adoption of
this  Interpretation  did not have a material impact on the Company's  financial
position or results of operations.

     ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

     In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on
Derivative  Instruments  and  Hedging  Activities."  This  Statement  amends and
clarifies  financial  accounting  and  reporting  for  derivative   instruments,
including  certain  derivative  instruments  embedded in other contracts and for
hedging  activities under SFAS No. 133,  "Accounting for Derivative  Instruments
and Hedging  Activities."  SFAS No. 149 was effective for contracts entered into
or modified after June 30, 2003 and for hedging  relationships  designated after
June 30, 2003.  The provisions of the Statement,  with certain  exceptions,  are
required to be applied  prospectively.  The adoption of this  Statement  did not
have a  material  impact on the  Company's  financial  position  or  results  of
operations.

     ACCOUNTING FOR CERTAIN FINANCIAL  INSTRUMENTS WITH  CHARACTERISTICS OF BOTH
     LIABILITIES AND EQUITY

     In May  2003,  the  FASB  issued  SFAS No.  150,  "Accounting  for  Certain
Financial  Instruments with Characteristics of both Liabilities and Equity." The
Statement  establishes standards for how the Company should classify and measure
certain  financial  instruments  with  characteristics  of both  liabilities and
equity.  This Statement was effective for financial  instruments entered into or
modified after May 31, 2003, and to other instruments effective at the beginning
of the first  interim  period  beginning  after June 15, 2003.  Adoption of this
Statement did not have a material impact on the Company's  financial position or
results of operations.

     CONSOLIDATION OF VARIABLE INTEREST ENTITIES

     In  January  2003,  the  FASB  issued   Interpretation  No.  46  (FIN  46),
"Consolidation of Variable Interest  Entities".  FIN 46 provides guidance on how
to identify a variable interest entity (VIE), and when the assets,  liabilities,
noncontrolling  interests  and result of operations of a VIE need to be included
in a company's consolidated  financial statements.  A VIE exists when either the
total  equity  investment  at risk is not  sufficient  to permit  the  entity to
finance its  activities by itself,  or the equity  investors  lack a controlling
financial  interest or they have voting  rights  that are not  proportionate  to
their economic  interest.  A company that holds variable  interests in an entity
will need to  consolidate  that entity if the  company's  interest in the VIE is
such that the company will absorb a majority of the VIE's expected losses and/or

                                       10

<PAGE>

                    UnionBanCal Corporation and Subsidiaries
        Notes to Condensed Consolidated Financial Statements (Continued)

NOTE 2--RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS (CONTINUED)

receive a majority of the VIE's expected residual returns, if they occur. FIN 46
also  requires  additional   disclosures  by  primary  beneficiaries  and  other
significant variable interest holders.

     In  December  2003,  the FASB issued FIN 46R, a revision of FIN 46. FIN 46R
clarifies  that  only the  holder  of a  variable  interest  can ever be a VIE's
primary  beneficiary.  FIN  46R  delays  the  effective  date  of FIN 46 for all
entities created  subsequent to January 31, 2003 and non-SPE's  (special-purpose
entities)  created prior to February 1, 2003 to reporting  periods  ending after
March 15, 2004.  Entities created prior to February 1, 2004 and defined as SPE's
must apply either the  provisions of FIN 46 or early adopt the provisions of FIN
46R by the first  reporting  period ending after December 15, 2003. The adoption
of FIN 46R on January 1, 2004 did not have a  material  impact on the  Company's
financial position or results of operations.

     ACCOUNTING   FOR   EMPLOYERS'   DISCLOSURES   ABOUT   PENSIONS   AND  OTHER
     POSTRETIREMENT BENEFITS

     In December  2003,  the FASB issued SFAS No.  132R,  a revision of SFAS No.
132, "Employers'  Disclosures about Pensions and Other Postretirement  Benefits,
an amendment of FASB Statements No. 87, 88, and 106." The Statement  expands the
disclosure  requirements of SFAS No. 132 to include information describing types
of plan assets, investment strategy, measurement date(s), plan obligations, cash
flows,  and components of net period benefit costs of defined  pension plans and
other  defined  benefit  postretirement  plans.  The  Statement is effective for
financial  statements  with fiscal  years ending  after  December 15, 2003.  The
expanded  disclosures  required by SFAS No. 132R are  disclosed in Note 7 of the
Notes to Consolidated  Financial  Statements in the Form 10-K for the year ended
December 31, 2003.  Periodic  disclosures  under SFAS No. 132R are  contained in
Note 8 of this report.

     ACCOUNTING FOR CERTAIN LOANS ACQUIRED IN A TRANSFER

     In December 2003,  under  clearance of the FASB,  the Accounting  Standards
Executive  Committee  (AcSEC) of the AICPA issued  Statement  of Position  (SOP)
03-3,  "Accounting for Certain Loans or Debt Securities Acquired in a Transfer."
This SOP establishes  accounting standards for discounts on purchased loans when
the discount is attributable  to credit quality.  The SOP requires that the loan
discount,  rather than contractual amounts,  establishes the investor's estimate
of undiscounted expected future principal and interest cash flows as a benchmark
for yield and  impairment  measurements.  The SOP  prohibits  the  carryover  or
creation of a valuation  allowance  in the initial  accounting  for these loans.
This SOP is effective  for loans  acquired in years  ending  after  December 15,
2004.  Management  believes  that  adoption  of this  Statement  will not have a
material impact on the Company's  financial position or results of operations at
adoption.


     THE  MEANING OF  OTHER-THAN-TEMPORARY  IMPAIRMENT  AND ITS  APPLICATION  TO
     CERTAIN INVESTMENTS

     In March 2004, the Emerging  Issues Task Force (EITF) reached  consensus on
certain   incremental  issues  related  to  Issue  No.  03-1,  "The  Meaning  of
Other-Than-Temporary  Impairment and Its Application to Certain Investments." In
addition to disclosure  requirements that were effective for fiscal years ending
after December 15, 2003,  EITF Issue No. 03-1 requires that companies  recognize
impairment equal to the difference  between the investment's cost and fair value
if the investor does not have the ability and intent to hold the  investment for
a period of time  sufficient  for a  forecasted  recovery of fair value up to or
beyond the cost of the investment.  EITF Issue No. 03-1 is effective for interim
periods  beginning  after June 15,

                                       11

<PAGE>


                    UnionBanCal Corporation and Subsidiaries
        Notes to Condensed Consolidated Financial Statements (Continued)

NOTE 2--RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS (CONTINUED)

2004. The Company is currently  assessing the  implications of EITF No. 03-1 and
has not concluded what impact, if any, will result from its adoption.

NOTE 3--EARNINGS PER SHARE

     Basic  earnings  per share (EPS) is computed by dividing  net income by the
weighted average number of common shares outstanding during the period.  Diluted
EPS incorporates the dilutive effect of common stock equivalents  outstanding on
an average basis during the period. Stock options are a common stock equivalent.
The following table presents a  reconciliation  of basic and diluted EPS for the
three months and six months ended June 30, 2003 and 2004.

<TABLE>
<CAPTION>


                                THREE MONTHS ENDED JUNE 30,              SIX MONTHS ENDED JUNE 30,
                           -------------------------------------   ------------------------------------
                                 2003                2004                2003                2004
                           -----------------   -----------------   -----------------   -----------------
(AMOUNTS IN THOUSANDS,
 EXCEPT PER SHARE DATA)      BASIC   DILUTED     BASIC   DILUTED     BASIC   DILUTED     BASIC   DILUTED
-------------------------  -------- --------   -------- --------   -------- --------   -------- --------
<S>                        <C>      <C>        <C>      <C>        <C>      <C>        <C>      <C>
Net Income...............  $144,758 $144,758   $231,097 $231,097   $280,275 $280,275   $388,584 $388,584
                           ======== ========   ======== ========   ======== ========   ======== ========
Weighted average common
  shares outstanding.....   150,047  150,047    147,687  147,687    150,330  150,330    147,544  147,544
Additional shares due to:
Assumed conversion of
  dilutive stock options.        --    1,442         --    2,497         --    1,416         --    2,448
                           -------- --------   -------- --------   -------- --------   -------- --------
Adjusted weighted average
  common shares
  outstanding............   150,047  151,489    147,687  150,184    150,330  151,746    147,544  149,992
                           ======== ========   ======== ========   ======== ========   ======== ========
Net income per share.....  $   0.96 $   0.96   $   1.56 $   1.54   $   1.86 $   1.85   $   2.63 $   2.59
                           ======== ========   ======== ========   ======== ========   ======== ========

</TABLE>






























                                       12
<PAGE>

                    UnionBanCal Corporation and Subsidiaries
        Notes to Condensed Consolidated Financial Statements (Continued)

NOTE 4--ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

     The following table presents the components of other  comprehensive  income
(loss) and the related tax effect allocated to each component.

<TABLE>
<CAPTION>

                                                        BEFORE TAX     TAX       NET OF
(DOLLARS IN THOUSANDS)                                    AMOUNT      EFFECT       TAX
------------------------------------------------------  ----------  ---------   ---------
<S>                                                     <C>         <C>         <C>
FOR THE SIX MONTHS ENDED JUNE 30, 2003:
Cash flow hedge activities:
  Unrealized net gains on hedges......................  $   58,272  $ (22,289)  $  35,983
  Less: reclassification adjustment for net gains
    on hedges included in net income..................     (71,204)    27,236     (43,968)
                                                        ----------  ---------   ---------
Net change in unrealized gains on hedges..............     (12,932)     4,947      (7,985)
                                                        ----------  ---------   ---------
Securities available for sale:
  Unrealized holding losses arising during the
    period on securities available for sale...........     (57,645)    22,049     (35,596)
  Less: reclassification adjustment for net gains
    on securities available for sale included in
    net income........................................      (9,660)     3,695      (5,965)
                                                        ----------  ---------   ---------
Net change in unrealized gains on securities
  available for sale..................................     (67,305)    25,744     (41,561)
                                                        ----------  ---------   ---------
Foreign currency translation adjustment...............         191        (73)        118
                                                        ----------  ---------   ---------
Net change in accumulated other comprehensive
  income (loss).......................................  $  (80,046) $  30,618   $ (49,428)
                                                        ==========  =========   =========
FOR THE SIX MONTHS ENDED JUNE 30, 2004:
Cash flow hedge activities:
  Unrealized net losses on hedges.....................  $  (15,832) $   6,056   $  (9,776)
  Less: reclassification adjustment for net gains
    on hedges included in net income..................     (45,307)    17,330     (27,977)
                                                        ----------  ---------   ---------
Net change in unrealized gains on hedges..............     (61,139)    23,386     (37,753)
                                                        ----------  ---------   ---------
Securities available for sale:
  Unrealized holding losses arising during the
    period on securities available for sale...........    (174,632)    66,797    (107,835)
  Less: reclassification adjustment for net gains
    on securities available for sale included in
    net income........................................      (1,618)       619        (999)
                                                        ----------  ---------   ---------
Net change in unrealized losses on securities
  available for sale..................................    (176,250)    67,416    (108,834)
                                                        ----------  ---------   ---------
Foreign currency translation adjustment...............         842       (322)        520
                                                        ----------  ---------   ---------
Net change in accumulated other comprehensive
  income (loss).......................................  $ (236,547) $  90,480   $(146,067)
                                                        ==========  =========   =========

</TABLE>





                                       13
<PAGE>


                    UnionBanCal Corporation and Subsidiaries
        Notes to Condensed Consolidated Financial Statements (Continued)

NOTE 4--ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)(CONTINUED)

     The following table presents  accumulated other comprehensive income (loss)
balances.

<TABLE>
<CAPTION>

                                      NET             NET
                                  UNREALIZED      UNREALIZED
                                GAINS (LOSSES)  GAINS (LOSSES)    FOREIGN      MINIMUM     ACCUMULATED
                                   ON CASH       ON SECURITES     CURRENCY     PENSION        OTHER
                                     FLOW         AVAILABLE     TRANSLATION   LIABILITY   COMPREHENSIVE
(DOLLARS IN THOUSANDS)              HEDGES         FOR SALE      ADJUSTMENT   ADJUSTMENT   INCOME (LOSS)
------------------------------- -------------   -------------   -----------   ----------  -------------
<S>                             <C>             <C>             <C>           <C>         <C>
BALANCE, DECEMBER 31, 2002..... $     104,368   $     147,450   $   (10,649)  $   (1,075) $     240,094
Change during the period.......        (7,985)        (41,561)          118           --        (49,428)
                                -------------   -------------   -----------   ----------  -------------
BALANCE, JUNE 30, 2003......... $      96,383   $     105,889   $   (10,531)  $   (1,075) $     190,666
                                =============   =============   ===========   ==========  =============

BALANCE, DECEMBER 31, 2003..... $      43,786   $      22,535   $   (10,293)  $   (3,786) $      52,242
Change during the period.......       (37,753)       (108,834)          520           --       (146,067)
                                -------------   -------------   -----------   ----------  -------------
BALANCE, JUNE 30, 2004......... $       6,033   $     (86,299)  $    (9,773)  $   (3,786) $     (93,825)
                                =============   =============   ===========   ==========  =============

</TABLE>


NOTE 5--BUSINESS SEGMENTS

     The Company is organized  based on the products and services that it offers
and operates in four principal areas:

     o    The Community Banking and Investment  Services Group offers a range of
          banking  services,  primarily  to  individuals  and small  businesses,
          delivered  generally through a tri-state  (California,  Washington and
          Oregon)  network  of  branches  and  ATM's.   These  services  include
          commercial  loans,  mortgages,  home equity lines of credit,  consumer
          loans,  deposit  services and cash  management  as well as  fiduciary,
          private  banking,   investment  and  asset  management   services  for
          individuals  and  institutions,  and  risk  management  and  insurance
          products for businesses and individuals.

     o    The  Commercial  Financial  Services  Group  provides  credit and cash
          management  services to large corporate and  middle-market  companies.
          Services include  commercial and project loans, real estate financing,
          asset-based  financing,  trade  finance and  letters of credit,  lease
          financing,  customized cash management  services and selected  capital
          markets products.

     o    The  International  Banking  Group  primarily  provides  correspondent
          banking  and   trade-finance   products   and  services  to  financial
          institutions.  The group's  revenue  predominately  relates to foreign
          customers.

     o    The Global Markets Group is responsible for the Company's  market risk
          management  including  liquidity,  interest rate and price risks,  and
          offers a broad  range of risk  management  and  trading  products  and
          services to the Company's clients through the groups described above.

     The information,  set forth in the tables on the following pages,  reflects
selected  income  statement  and  balance  sheet  items by  business  unit.  The
information  presented  does  not  necessarily  represent  the  business  units'
financial  condition and results of operations were they  independent  entities.
Unlike  financial  accounting,  there is no  authoritative  body of guidance for
management  accounting equivalent to U.S. GAAP.  Consequently,  reported results
are not necessarily comparable with those presented by other companies. Included
in the total  asset  line of the  table are the  amounts  of  goodwill  for each
reporting unit



                                       14
<PAGE>

                    UnionBanCal Corporation and Subsidiaries
        Notes to Condensed Consolidated Financial Statements (Continued)

NOTE 5--BUSINESS SEGMENTS (CONTINUED)

as of June 30, 2003 and 2004. Substantially all of the goodwill reflected on the
Consolidated Balance Sheet is attributed to the Community Banking and Investment
Services Group.

     The  information  in these tables is derived  from the internal  management
reporting  system used by management to measure the  performance of the business
segments  and the Company  overall.  The  management  reporting  system  assigns
balance  sheet and income  statement  items to each  business  segment  based on
internal management  accounting  policies.  Net interest income is determined by
the Company's  internal 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.  Noninterest income and expense directly
attributable  to a business  segment  are  assigned  to that  business.  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 business
segments  based on a  predetermined  percentage  of usage.  Under the  Company's
risk-adjusted return on capital (RAROC)  methodology,  credit expense is charged
to business  segments  based upon expected  losses  arising from credit risk. In
addition,  the attribution of economic  capital is related to unexpected  losses
arising from credit, market and operational risks.

     "Other" is comprised of certain parent company non-bank  subsidiaries,  the
elimination  of the fully  taxable-equivalent  basis  amount,  the amount of the
(reversal of) provision for credit losses  over/(under)  the RAROC expected loss
for the period, the earnings  associated with the unallocated equity capital and
allowance  for credit  losses,  and the  residual  costs of support  groups.  In
addition,  it includes the Pacific Rim Corporate  Group,  which offers financial
products to  Japanese-owned  subsidiaries  located in the U.S. On an  individual
basis,  none of the items in "Other" are significant to the Company's  business.
Included  in  noninterest  income  for  the  second  quarter  of  2004  are  two
significant items: a $93.0 million gain resulting from the sale of the Company's
merchant card portfolio and an $8.5 million gain resulting from the sale of real
property.























                                       15

<PAGE>

                    UnionBanCal Corporation and Subsidiaries
        Notes to Condensed Consolidated Financial Statements (Continued)

NOTE 5--BUSINESS SEGMENTS (CONTINUED)

     The business  units'  results for the prior  periods have been  restated to
reflect  changes in the  transfer  pricing  methodology  and any  reorganization
changes that may have occurred.
<TABLE>
<CAPTION>

                                    COMMUNITY BANKING
                                      AND INVESTMENT     COMMERCIAL FINANCIAL     INTERNATIONAL
                                      SERVICES GROUP        SERVICES GROUP        BANKING GROUP
                                   ---------------------------------------------------------------
                                             AS OF AND FOR THE THREE MONTHS ENDED JUNE 30,
                                   ---------------------------------------------------------------
                                     2003       2004       2003       2004        2003       2004
--------------------------------   --------   --------   --------   --------    -------    -------
<S>                                <C>        <C>        <C>        <C>         <C>        <C>
RESULTS OF OPERATIONS (DOLLARS
  IN THOUSANDS):
Net interest income.............   $163,613   $185,829   $180,956   $191,471    $ 8,160    $ 9,222
Noninterest income..............    111,878    129,793     61,552     72,543     26,090     22,261
                                   --------   --------   --------   --------    -------    -------
Total revenue...................    275,491    315,622    242,508    264,014     34,250     31,483
Noninterest expense.............    197,289    223,645    105,097    104,003     15,398     16,957
Credit expense (income).........      8,064      7,797     42,145     26,480        547        645
                                   --------   --------   --------   --------    -------    -------
Income (loss) before income tax
  expense (benefit).............     70,138     84,180     95,266    133,531     18,305     13,881
Income tax expense (benefit)....     26,828     32,199     29,547     45,321      7,001      5,310
                                   --------   --------   --------   --------    -------    -------
Net income (loss)...............   $ 43,310   $ 51,981   $ 65,719   $ 88,210    $11,304    $ 8,571
                                   ========   ========   ========   ========    =======    =======
TOTAL ASSETS, END OF PERIOD
  (dollars in millions):........   $ 12,249   $ 14,040   $ 14,976   $ 14,852    $ 1,937    $ 2,379
                                   ========   ========   ========   ========    =======    =======

</TABLE>

<TABLE>
<CAPTION>

                                         GLOBAL                                    UNIONBANCAL
                                      MARKETS GROUP             OTHER              CORPORATION
                                   -------------------   -------------------    -------------------
                                            AS OF AND FOR THE THREE MONTHS ENDED JUNE 30,
                                   ----------------------------------------------------------------
                                     2003       2004       2003       2004        2003       2004
--------------------------------   --------   --------   --------   --------    --------   --------
<S>                                <C>        <C>        <C>        <C>         <C>        <C>
RESULTS OF OPERATIONS (DOLLARS
  IN THOUSANDS):
Net interest income.............   $ 17,139   $(15,802)  $ 15,909   $ 29,138    $385,777   $399,858
Noninterest income..............      1,882      1,394      1,769    105,019     203,171    331,010
                                   --------   --------   --------   --------    --------   --------
Total revenue...................     19,021    (14,408)    17,678    134,157     588,948    730,868
Noninterest expense.............      3,744      4,441     29,476     27,356     351,004    376,402
Credit expense (income).........         50        177    (25,806)   (45,099)     25,000    (10,000)
                                   --------   --------   --------   --------    --------   --------
Income (loss) before income tax
  expense (benefit).............     15,227    (19,026)    14,008    151,900     212,944    364,466
Income tax expense (benefit)....      5,824     (7,277)    (1,014)    57,816      68,186    133,369
                                   --------   --------   --------   --------    --------   --------
Net income (loss)...............   $  9,403   $(11,749)  $ 15,022   $ 94,084    $144,758   $231,097
                                   ========   ========   ========   ========    ========   ========
TOTAL ASSETS, END OF PERIOD
  (dollars in millions):........   $ 11,824   $ 13,957   $  1,683   $  1,068    $ 42,669   $ 46,296
                                   ========   ========   ========   ========    ========   ========

</TABLE>









                                       16

<PAGE>

                    UnionBanCal Corporation and Subsidiaries
        Notes to Condensed Consolidated Financial Statements (Continued)

NOTE 5--BUSINESS SEGMENTS (CONTINUED)

<TABLE>
<CAPTION>

                                    COMMUNITY BANKING        COMMERCIAL
                                      AND INVESTMENT          FINANCIAL           INTERNATIONAL
                                      SERVICES GROUP       SERVICES GROUP         BANKING GROUP
                                   -------------------   -------------------    ------------------
                                               AS OF AND FOR THE SIX MONTHS ENDED JUNE 30,
                                   ---------------------------------------------------------------
                                     2003       2004       2003       2004        2003       2004
--------------------------------   --------   --------   --------   --------    -------    -------
<S>                                <C>        <C>        <C>        <C>         <C>        <C>
RESULTS OF OPERATIONS (DOLLARS
  IN THOUSANDS):

Net interest income.............   $331,474   $368,496   $360,187   $374,978    $17,117    $17,030
Noninterest income..............    213,503    246,394    119,464    142,170     41,573     40,450
                                   --------   --------   --------   --------    -------    -------
Total revenue...................    544,977    614,890    479,651    517,148     58,690     57,480
Noninterest expense.............    397,179    442,629    203,856    208,645     30,333     32,640
Credit expense (income).........     15,783     15,584     84,607     57,706      1,052      1,249
                                   --------   --------   --------   --------    -------    -------
Income (loss) before income tax
  expense (benefit).............    132,015    156,677    191,188    250,797     27,305     23,591
Income tax expense (benefit)....     50,496     59,929     60,227     83,570     10,444      9,024
                                   --------   --------   --------   --------    -------    -------
Net income (loss)...............   $ 81,519   $ 96,748   $130,961   $167,227    $16,861    $14,567
                                   ========   ========   ========   ========    =======    =======
TOTAL ASSETS, END OF PERIOD
  (dollars in millions):........   $ 12,249   $ 14,040   $ 14,976   $ 14,852    $ 1,937    $ 2,379
                                   ========   ========   ========   ========    =======    =======

</TABLE>

<TABLE>
<CAPTION>

                                         GLOBAL                                      UNIONBANCAL
                                      MARKETS GROUP             OTHER                CORPORATION
                                   -------------------   -------------------    ---------------------
                                               AS OF AND FOR THE SIX MONTHS ENDED JUNE 30,
                                   ------------------------------------------------------------------
                                     2003       2004       2003       2004         2003       2004
--------------------------------   --------   --------   --------   --------    ---------- ----------
<S>                                <C>        <C>        <C>        <C>         <C>        <C>
RESULTS OF OPERATIONS (DOLLARS
  IN THOUSANDS):
Net interest income.............   $ 38,231   $(14,651)  $ 29,548   $ 54,426    $  776,557 $  800,279
Noninterest income..............      3,408      2,936     10,994    110,265       388,942    542,215
                                   --------   --------   --------   --------    ---------- ----------
Total revenue...................     41,639    (11,715)    40,542    164,691     1,165,499  1,342,494
Noninterest expense.............      8,232     10,868     54,004     54,726       693,604    749,508
Credit expense (income).........        100        227    (46,542)   (89,766)       55,000    (15,000)
                                   --------   --------   --------   --------    ---------- ----------
Income (loss) before income tax
  expense (benefit).............     33,307    (22,810)    33,080    199,731       416,895    607,986
Income tax expense (benefit)....     12,740     (8,725)     2,713     75,604       136,620    219,402
                                   --------   --------   --------   --------    ---------- ----------
Net income (loss)...............   $ 20,567   $(14,085)  $ 30,367   $124,127    $  280,275 $  388,584
                                   ========   ========   ========   ========    ========== ==========
TOTAL ASSETS, END OF PERIOD
  (dollars in millions):........   $ 11,824   $ 13,957   $  1,683   $  1,068    $   42,669 $   46,296
                                   ========   ========   ========   ========    ========== ==========

</TABLE>


NOTE 6--DERIVATIVE INSTRUMENTS AND OTHER FINANCIAL INSTRUMENTS USED FOR HEDGING

     Derivative  positions are integral  components of the Company's  designated
asset and  liability  management  activities.  The Company  uses  interest  rate
derivatives to manage the  sensitivity  of the Company's net interest  income to
changes in interest  rates.  These  instruments are used to manage interest rate
risk  relating  to  specified  groups  of  assets  and  liabilities,   primarily
LIBOR-based  commercial  loans,  certificates of deposit,  medium-term notes and
subordinated  debt.

     CASH FLOW HEDGES

     HEDGING STRATEGIES FOR VARIABLE RATE LOANS AND CERTIFICATES OF DEPOSIT

     The Company  engages in several types of cash flow hedging  strategies  for
which the hedged transactions are forecasted future loan interest payments,  and
the  hedged  risk is the  variability  in those


                                       17

<PAGE>

                    UnionBanCal Corporation and Subsidiaries
        Notes to Condensed Consolidated Financial Statements (Continued)

NOTE 6--DERIVATIVE  INSTRUMENTS AND OTHER FINANCIAL INSTRUMENTS USED FOR HEDGING
     (CONTINUED)

payments due to changes in the designated  benchmark  rate,  e.g.,  U.S.  dollar
LIBOR. In these strategies,  the hedging  instruments are matched with groups of
variable  rate loans such that the tenor of the variable  rate loans and that of
the hedging  instrument is identical.  Cash flow hedging  strategies include the
utilization of purchased floor,  cap,  corridor options and interest rate swaps.
At June 30, 2004, the weighted average  remaining life of these cash flow hedges
was approximately 1.2 years.

     The Company uses purchased  interest rate floors to hedge the variable cash
flows  associated  with 1-month LIBOR or 3-month LIBOR indexed  loans.  Payments
received  under the floor  contract  offset the decline in loan interest  income
caused by the relevant LIBOR index falling below the floor's strike rate.

     The Company uses interest  rate floor  corridors to hedge the variable cash
flows associated with 1-month LIBOR or 3-month LIBOR indexed loans. Net payments
to be received  under the floor  corridor  contracts  offset the decline in loan
interest  income caused by the relevant LIBOR index falling below the corridor's
upper  strike  rate,  but only to the extent the index falls to the lower strike
rate.  The corridor  will not provide  protection  from declines in the relevant
LIBOR index to the extent it falls below the corridor's lower strike rate.

     The Company uses  interest  rate  collars to hedge the variable  cash flows
associated with 1-month LIBOR or 3-month LIBOR indexed loans. Net payments to be
received under the collar  contracts  offset the decline in loan interest income
caused by the relevant  LIBOR index falling below the collar's floor strike rate
while net payments to be paid will reduce the increase in loan  interest  income
caused by the LIBOR index rising above the collar's cap strike rate.

     The  Company  uses  interest  rate swaps to hedge the  variable  cash flows
associated  with 1-month LIBOR or 3-month LIBOR  indexed  loans.  Payments to be
received (or paid) under the swap contracts will offset the fluctuations in loan
interest  income caused by changes in the relevant LIBOR index.  As such,  these
instruments  hedge all  fluctuations  in the loans'  interest  income  caused by
changes in the relevant LIBOR index.

     The  Company  uses  purchased  interest  rate  caps to hedge  the  variable
interest  cash flows  associated  with the  forecasted  issuance and rollover of
short-term,  fixed rate,  negotiable  certificates  of deposit  (CDs).  In these
hedging  relationships,  the Company hedges the LIBOR component of the CD rates,
which is either 3-month LIBOR or 6-month LIBOR,  based on the CDs' original term
to  maturity,  which  reflects  their  repricing  frequency.  Net payments to be
received under the cap contract  offset the increase in interest  expense caused
by the relevant LIBOR index rising above the cap's strike rate.

     The Company uses  interest  rate cap  corridors to hedge the variable  cash
flows associated with the forecasted issuance and rollover of short-term,  fixed
rate,  negotiable  CDs. In these hedging  relationships,  the Company hedges the
LIBOR component of the CD rates, either 1-month LIBOR, 3-month LIBOR, or 6-month
LIBOR,  based on the original term to maturity of the CDs,  which reflects their
repricing  frequency.  Net  payments  to be  received  under  the  cap  corridor
contracts offset the increase in deposit interest expense caused by the relevant
LIBOR index rising  above the  corridor's  lower  strike  rate,  but only to the
extent the index rises to the upper strike rate.  The corridor  will not provide
protection  from  increases in the  relevant  LIBOR index to the extent it rises
above the corridor's upper strike rate.

     Hedging  transactions  are  structured  at  inception  so that the notional
amounts of the hedge are matched with an equal principal amount of loans or CDs,
the index and repricing  frequencies  of the hedge matches those of the loans or
CDs, and the period in which the designated hedged cash flows occurs is equal to
the term of the  hedge.  As such,  most of the  ineffectiveness  in the  hedging
relationship  results from


                                       18

<PAGE>

                    UnionBanCal Corporation and Subsidiaries
        Notes to Condensed Consolidated Financial Statements (Continued)

NOTE 6--DERIVATIVE  INSTRUMENTS AND OTHER FINANCIAL INSTRUMENTS USED FOR HEDGING
     (CONTINUED)

the mismatch  between the timing of reset dates on the hedge versus those of the
loans or CDs. In the second quarter of 2004,  the Company  recognized a net loss
of $0.3  million due to  ineffectiveness,  which is  recognized  in  noninterest
expense, compared to a net gain of $0.3 million in the second quarter of 2003.

     FAIR VALUE HEDGES

     HEDGING  STRATEGY FOR  UNIONBANCAL  CORPORATION--JUNIOR  SUBORDINATED  DEBT
PAYABLE TO SUBSIDIARY GRANTOR TRUST (TRUST NOTES)

     Prior to February  19,  2004,  when the Company  terminated  its fair value
hedge and called its Trust  Notes,  the  Company  engaged  in an  interest  rate
hedging  strategy in which an interest rate swap was associated  with a specific
interest bearing liability,  UnionBanCal  Corporation's Trust Notes, in order to
convert the  liability  from a fixed rate to a floating  rate  instrument.  This
strategy  mitigated the changes in fair value of the hedged  liability caused by
changes in the designated benchmark interest rate, U.S. dollar LIBOR.

     Fair value hedging  transactions  were  structured at inception so that the
notional amounts of the swap matched an associated principal amount of the Trust
Notes.  The interest  payment dates,  the expiration date, and the embedded call
option of the swap matched  those of the Trust Notes.  Because the interest rate
swap was terminated in the first quarter of 2004,  there was no  ineffectiveness
on the fair value  hedges  during the second  quarter of 2004  compared to a net
loss of less than $0.1 million in the second quarter of 2003.

     HEDGING STRATEGY FOR MEDIUM-TERM NOTES

     The  Company  engages in an  interest  rate  hedging  strategy  in which an
interest rate swap is associated with a specified  interest  bearing  liability,
UnionBanCal  Corporation's  five-year,  medium-term  debt issuance,  in order to
convert the  liability  from a fixed rate to a floating  rate  instrument.  This
strategy  mitigates the changes in fair value of the hedged  liability caused by
changes in the designated benchmark interest rate, U.S. dollar LIBOR.

     The fair value hedging transaction for the medium-term notes was structured
at inception to mirror all of the  provisions of the  medium-term  notes,  which
allows the Company to assume that no ineffectiveness exists.

     HEDGING STRATEGY FOR SUBORDINATED DEBT

     The  Company  engages in an  interest  rate  hedging  strategy  in which an
interest rate swap is associated with a specified  interest  bearing  liability,
UnionBanCal  Corporation's  ten-year,  subordinated  debt issuance,  in order to
convert the  liability  from a fixed rate to a floating  rate  instrument.  This
strategy  mitigates the changes in fair value of the hedged  liability caused by
changes in the designated benchmark interest rate, U.S. dollar LIBOR.

     The fair value hedging transaction for the subordinated debt was structured
at inception to mirror all of the  provisions of the  subordinated  debt,  which
allows the Company to assume that no ineffectiveness exists.


                                       19

<PAGE>

                    UnionBanCal Corporation and Subsidiaries
        Notes to Condensed Consolidated Financial Statements (Continued)

NOTE 6--DERIVATIVE  INSTRUMENTS AND OTHER FINANCIAL INSTRUMENTS USED FOR HEDGING
     (CONTINUED)

     OTHER

     The Company uses To-Be-Announced (TBA) contracts to fix the price and yield
of anticipated  purchases or sales of  mortgage-backed  securities  that will be
delivered at an agreed upon date.  This strategy  hedges the risk of variability
in the cash flows to be paid or received upon settlement of the TBA contract.

NOTE 7--GUARANTEES

     Standby and commercial letters of credit are conditional commitments issued
to guarantee the performance of a customer to a third party.  Standby letters of
credit  generally  are  contingent  upon the failure of the  customer to perform
according to the terms of the  underlying  contract with the third party,  while
commercial  letters of credit are issued  specifically to facilitate  foreign or
domestic trade  transactions.  The majority of these types of  commitments  have
terms of one year or less.  Collateral  may be  obtained  based on  management's
credit  assessment of the customer.  As of June 30, 2004, the Company's  maximum
exposure to loss for standby and  commercial  letters of credit was $2.9 billion
and $232.2  million,  respectively.  At June 30, 2004, the carrying value of the
Company's standby and commercial  letters of credit,  which is included in other
liabilities on the consolidated balance sheet, totaled $5.5 million.

     Principal  investments  include  direct  investments  in private and public
companies and indirect  investments in private equity funds.  The Company issues
commitments  to provide  equity and mezzanine  capital  financing to private and
public  companies  through either direct  investments  in specific  companies or
through   investment  funds  and   partnerships.   The  timing  of  future  cash
requirements to fund such  commitments is generally  dependent on the investment
cycle. This cycle, the period over which privately-held  companies are funded by
private equity investors and ultimately sold, merged, or taken public through an
initial  offering,  can vary based on overall  market  conditions as well as the
nature and type of industry in which the  companies  operate.  At June 30, 2004,
the Company had commitments to fund principal investments of $59.6 million.

     The  Company  has  contingent   consideration   agreements  that  guarantee
additional  payments to acquired insurance  agencies'  stockholders based on the
agencies'  future  performance in excess of established  revenue and/or earnings
before interest,  taxes,  depreciation and amortization (EBITDA) thresholds.  If
the insurance  agencies' future  performance  exceeds these thresholds  during a
three-year  period,  the Company will be liable to make payments to those former
stockholders.  As of June 30, 2004,  the Company had a maximum  exposure of $7.5
million for these agreements, the last of which expire in December 2006.

     The  Company is fund  manager for limited  liability  corporations  issuing
low-income  housing  credit (LIHC)  investments.  LIHC  investments  provide tax
benefits to investors in the form of tax deductions  from  operating  losses and
tax  credits.  To  facilitate  the sale of these LIHC  investments,  the Company
guarantees  the timely  completion  of projects  and  delivery  of tax  benefits
throughout the investment term. Guarantees may include a minimum rate of return,
the  availability  of tax  credits,  and  operating  deficit  thresholds  over a
ten-year average period.  Additionally,  the Company receives project completion
and tax credit  guarantees from the limited liability  corporations  issuing the
LIHC investments that reduce the Company's ultimate exposure to loss. As of June
30, 2004,  the Company's  maximum  exposure to loss under these  guarantees  was
limited to a return of investor capital and minimum  investment yield, or $103.6
million. The Company maintains a reserve of $4.0 million for these guarantees.


                                       20

<PAGE>

                    UnionBanCal Corporation and Subsidiaries
        Notes to Condensed Consolidated Financial Statements (Continued)

NOTE 7--GUARANTEES (CONTINUED)

     The Company has  guarantees  that obligate it to perform if its  affiliates
are unable to discharge their obligations.  These obligations  include guarantee
of trust preferred securities,  commercial paper obligations and leveraged lease
transactions.  Guarantees issued by the Bank for an affiliate's commercial paper
program are done in order to  facilitate  their sale.  As of June 30, 2004,  the
Bank had a maximum  exposure  to loss  under  these  guarantees,  which  have an
average term of less than one year, of $561.0 million.  The Bank's  guarantee is
fully collateralized by a pledged deposit.  UnionBanCal  Corporation  guarantees
its subsidiaries' leveraged lease transactions, which have terms ranging from 15
to 30 years. Following the original funding of the leveraged lease transactions,
UnionBanCal  Corporation has no material obligation to be satisfied.  As of June
30, 2004,  UnionBanCal  Corporation had no material exposure to loss under these
guarantees.

     The Company conducts  securities  lending  transactions  for  institutional
customers  as  a  fully   disclosed   agent.   At  times,   securities   lending
indemnifications  are issued to guarantee that a security  lending customer will
be made whole in the event the borrower does not return the security  subject to
the lending  agreement and collateral  held is  insufficient to cover the market
value of the security. All lending transactions are collateralized, primarily by
cash. The amount of securities  lent with  indemnifications  was $1.6 billion at
June 30, 2004. The market value of the associated collateral was $1.7 billion at
June 30, 2004.

NOTE 8--PENSION AND OTHER POSTRETIREMENT BENEFITS

     The following tables summarize the components of net periodic benefit costs
for the three months and six months ended June 30, 2003 and 2004.

<TABLE>
<CAPTION>


                                           PENSION BENEFITS          OTHER BENEFITS
                                          --------------------     --------------------
                                          FOR THE THREE MONTHS     FOR THE THREE MONTHS
                                             ENDED JUNE 30,           ENDED JUNE 30,
                                          --------------------     --------------------
(DOLLARS IN THOUSANDS)                      2003        2004        2003         2004
----------------------------------------- --------    --------     -------     --------
<S>                                       <C>         <C>          <C>         <C>
COMPONENTS OF NET PERIODIC BENEFIT COST
Service cost............................. $  8,217    $  9,511     $ 1,295     $  1,815
Interest cost............................   11,875      13,518       2,641        2,908
Expected return on plan assets...........  (18,203)    (20,778)     (1,687)      (2,370)
Amortization of prior service cost.......      267         267         (24)         (24)
Amortization of transition amount........       --          --         637          638
Recognized net actuarial loss............    1,042       4,395       1,599        1,950
                                          --------    --------     -------     --------
Total net periodic benefit cost.......... $  3,198    $  6,913     $ 4,461     $  4,917
                                          ========    ========     =======     ========

</TABLE>

<TABLE>
<CAPTION>

                                            PENSION BENEFITS         OTHER BENEFITS
                                          --------------------     --------------------
                                           FOR THE SIX MONTHS       FOR THE SIX MONTHS
                                             ENDED JUNE 30,            ENDED JUNE 30,
                                          --------------------     --------------------
(DOLLARS IN THOUSANDS)                      2003        2004        2003         2004
----------------------------------------- --------   ---------     -------     --------
<S>                                       <C>         <C>          <C>         <C>
COMPONENTS OF NET PERIODIC BENEFIT COST
Service cost............................. $ 16,434    $ 18,829     $ 2,590     $  3,383
Interest cost............................   23,750      26,120       5,281        5,680
Expected return on plan assets...........  (36,406)    (41,565)     (3,373)      (4,467)
Amortization of prior service cost.......      534         534         (48)         (48)
Amortization of transition amount........       --          --       1,275        1,275
Recognized net actuarial loss............    2,085       7,217       3,197        3,536
                                          --------    --------     -------     --------
Total net periodic benefit cost.......... $  6,396    $ 11,135     $ 8,922     $  9,359
                                          ========    ========     =======     ========

</TABLE>


                                       21

<PAGE>

                    UnionBanCal Corporation and Subsidiaries
        Notes to Condensed Consolidated Financial Statements (Continued)

NOTE 8--PENSION AND OTHER POSTRETIREMENT BENEFITS (CONTINUED)

     As previously  disclosed in its consolidated  financial  statements for the
year ended December 31, 2003, the Company  expected to make  discretionary  cash
contributions  of $80 million to its defined  benefit plan in 2004.  The Company
made cash  contributions  of $80 million and $20 million in March and June 2004,
respectively.  The Company does not expect to make any further  contributions to
the plan for the remainder of 2004.

NOTE 9--SUBSEQUENT EVENTS

     On July 1, 2004, the Bank signed a definitive  agreement to acquire Jackson
Federal Bank, a $1.9 billion-asset bank headquartered in Brea, California,  with
14 full-service  branches and approximately 250 employees.  At closing, the Bank
will pay $305 million,  comprising  $168 million in cash and $137 million in the
Company's  common  stock.  The  acquisition  is expected to be  completed in the
fourth  quarter of 2004  following the receipt of  regulatory  approvals and the
satisfaction of other closing conditions.

     On July 28, 2004,  the  Company's  Board of Directors  declared a quarterly
cash dividend of $0.36 per share of common  stock.  The dividend will be paid on
October 1, 2004 to stockholders of record as of September 3, 2004.

     On August 1, 2004, the Company's subsidiary, Union Bank of California, N.A.
(the Bank),  completed its  acquisition  of the business  portfolio of CNA Trust
Company  (CNAT),  a leading  provider of retirement  plan trust and  outsourcing
services to the  institutional  market place.  The Company acquired total assets
and assumed  liabilities of $167 million,  each, for a cash consideration of $12
million.   CNAT,  based  in  Costa  Mesa,   California,   was  a  subsidiary  of
Chicago-based CNA Financial Corporation.































                                       22

<PAGE>


ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

     THIS DOCUMENT INCLUDES FORWARD-LOOKING INFORMATION, WHICH IS SUBJECT TO THE
"SAFE HARBOR"  CREATED BY SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED,
AND SECTION 21E OF THE SECURITIES  EXCHANGE ACT OF 1934, AS AMENDED. WE MAY MAKE
FORWARD-LOOKING  STATEMENTS  IN OTHER  UNITED  STATES  SECURITIES  AND  EXCHANGE
COMMISSION (SEC) FILINGS, PRESS RELEASES,  NEWS ARTICLES,  CONFERENCE CALLS WITH
WALL STREET  ANALYSTS  AND  STOCKHOLDERS  AND WHEN WE ARE  SPEAKING ON BEHALF OF
UNIONBANCAL  CORPORATION.  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,"  "EXPECT,"  "ANTICIPATE,"  "INTEND,"  "PLAN,"
"ESTIMATE,"  "PROJECT," OR WORDS OF SIMILAR  MEANING,  OR FUTURE OR  CONDITIONAL
VERBS  SUCH  AS   "WILL,"   "WOULD,"   "SHOULD,"   "COULD,"   OR  "MAY."   THESE
FORWARD-LOOKING  STATEMENTS ARE INTENDED TO PROVIDE  INVESTORS  WITH  ADDITIONAL
INFORMATION  WITH  WHICH THEY MAY  ASSESS  OUR  FUTURE  POTENTIAL.  ALL OF THESE
FORWARD-LOOKING  STATEMENTS ARE BASED ON ASSUMPTIONS  ABOUT AN UNCERTAIN  FUTURE
AND ARE BASED ON INFORMATION  AVAILABLE AT THE DATE SUCH  STATEMENTS ARE ISSUED.
WE DO NOT  UNDERTAKE  TO UPDATE  FORWARD-LOOKING  STATEMENTS  TO REFLECT  FACTS,
CIRCUMSTANCES,   ASSUMPTIONS   OR  EVENTS   THAT   OCCUR   AFTER  THE  DATE  THE
FORWARD-LOOKING STATEMENTS ARE MADE.

     THERE ARE NUMEROUS RISKS AND UNCERTAINTIES THAT COULD AND WILL CAUSE ACTUAL
RESULTS  TO  DIFFER  MATERIALLY  FROM  THOSE  DISCUSSED  IN OUR  FORWARD-LOOKING
STATEMENTS.  MANY OF THESE  FACTORS ARE BEYOND OUR ABILITY TO CONTROL OR PREDICT
AND  COULD  HAVE A  MATERIAL  ADVERSE  EFFECT  ON  OUR  STOCK  PRICE,  FINANCIAL
CONDITION, AND RESULTS OF OPERATIONS OR PROSPECTS.  SUCH RISKS AND UNCERTAINTIES
INCLUDE,  BUT ARE NOT LIMITED TO, THE FOLLOWING  FACTORS:  ADVERSE  ECONOMIC AND
FISCAL   CONDITIONS  IN  CALIFORNIA,   GLOBAL  POLITICAL  AND  GENERAL  ECONOMIC
CONDITIONS  RELATED  TO  THE  WAR  ON  TERRORISM,  ADVERSE  ECONOMIC  CONDITIONS
AFFECTING  CERTAIN  INDUSTRIES,  FLUCTUATIONS IN INTEREST RATES, THE CONTROLLING
INTEREST  IN  US OF  THE  BANK  OF  TOKYO-MITSUBISHI,  LTD.  (BTM),  WHICH  IS A
WHOLLY-OWNED  SUBSIDIARY OF  MITSUBISHI  TOKYO  FINANCIAL  GROUP,  INC.  (MTFG),
COMPETITION  IN THE  BANKING  INDUSTRY,  STATUTORY  RESTRICTIONS  ON  DIVIDENDS,
ADVERSE   EFFECTS  OF  CURRENT  AND  FUTURE  BANKING  RULES,   REGULATIONS   AND
LEGISLATION,  AND  RISKS  ASSOCIATED  WITH  VARIOUS  STRATEGIES  WE MAY  PURSUE,
INCLUDING POTENTIAL ACQUISITIONS,  DIVESTITURES AND RESTRUCTURINGS. SEE ALSO THE
SECTION  ENTITLED  "CERTAIN  BUSINESS  RISK  FACTORS"  LOCATED  NEAR  THE END OF
"MANAGEMENT'S  DISCUSSION  AND  ANALYSIS OF FINANCIAL  CONDITION  AND RESULTS OF
OPERATIONS."

     ALL REPORTS  THAT WE FILE  ELECTRONICALLY  WITH THE SEC,  INCLUDING  ANNUAL
REPORTS ON FORM 10-K,  QUARTERLY  REPORTS ON FORM 10-Q,  AND CURRENT  REPORTS ON
FORM 8-K, AS WELL AS ANY AMENDMENTS TO THOSE REPORTS,  ARE ACCESSIBLE AT NO COST
ON OUR INTERNET WEBSITE AT WWW.UBOC.COM AS SOON AS REASONABLY  PRACTICABLE AFTER
WE  ELECTRONICALLY  FILE SUCH REPORTS WITH,  OR FURNISH THEM TO, THE SEC.  THESE
FILINGS ARE ALSO ACCESSIBLE ON THE SEC'S WEBSITE AT WWW.SEC.GOV.

INTRODUCTION

     We  are  a   California-based,   commercial   bank  holding   company  with
consolidated assets of $46.3 billion at June 30, 2004. During 2003,  UnionBanCal
Corporation changed its state of incorporation from California to Delaware.

     UnionBanCal   Corporation  and  its  banking  subsidiary,   Union  Bank  of
California,  N.A. (the Bank),  were created on April 1, 1996, by the combination
of Union Bank with BanCal Tri-State Corporation and its banking subsidiary,  The
Bank of California,  N.A. The combination was accounted for as a  reorganization
of entities under common control, similar to a pooling of interests. At June 30,
2004, BTM, our majority owner, owned approximately 62 percent of our outstanding
common stock.

EXECUTIVE OVERVIEW

     We are  providing  you with an  overview  of what we  believe  are the most
significant events that impacted our results for the second quarter of 2004. You
should  carefully  read the rest of this document for more detailed  information
that will assist your understanding of trends, events and uncertainties that may
impact us.


                                       23

<PAGE>


     Our largest subsidiary is Union Bank of California, N.A., a commercial bank
that  derives  most of its  revenues  from  lending,  deposit  taking  and trust
services to customers primarily in California.  We also service customers in the
western United States, nationally and internationally.  Interest rates, business
conditions and customer  confidence all affect our ability to generate revenues.
In addition,  the  regulatory  environment  and  competition  can  challenge our
ability to generate those revenues.

     Overall credit quality in the commercial  lending area continued to improve
in the second quarter of 2004.  The  improvements  came from positive  financial
results and outlooks of our borrowers,  payoffs,  and a slow down in net inflows
of  nonaccrual  loans.  Nonaccrual  loans totaled $178 million at June 30, 2004,
compared  with  $257  million  at March  31,  2004.  Although  commercial  loans
increased by $520 million, or 6 percent,  during the second quarter, we recorded
a reversal  of  provision  for credit  losses of $10.0  million  and reduced our
allowance  for credit  losses.  We do not  expect  our credit  quality to change
significantly  throughout  the  remainder of 2004,  unless the economic  outlook
turns negative.

     In the second quarter of 2004,  positive  economic data and the prospect of
higher  interest rates in the future  provided the impetus for the growth in our
commercial loan portfolio.

     Low levels of interest rates continued to pressure our net interest income,
as our assets reprice more quickly than our deposits. A significant  contributor
to the reduced asset yields was mortgage  refinancings  that further reduced our
net interest  income on our residential  mortgage loans and our  mortgage-backed
securities portfolio.  Derivative contracts, used to hedge the impact of falling
interest rates on our lending activities,  began to expire in late 2003, further
compressing  our net interest margin in the second quarter of 2004. A discussion
of the impact of our hedges is included in our detailed analysis of net interest
income.  Despite  these  pressures,  we have  benefited  from a higher  level of
earning  assets,  including a  significantly  higher mix of  securities,  strong
deposit growth, and changes in our capital structure, including replacing higher
cost debt with lower cost funding. We expect that if business activity continues
to pick up and interest rates rise gradually,  our net interest income will rise
as well.

     Growth in core deposits was  particularly  strong in the second  quarter of
2004,  compared to the second  quarter of 2003,  providing us with a low cost of
funding,  which is a  competitive  advantage.  Average  demand  deposits for the
second quarter of 2004 were 48 percent of average total deposits  compared to 46
percent for the second quarter of 2003,  contributing  to an average  annualized
all-in  cost of  funds  (interest  expense  divided  by total  interest  bearing
liabilities and noninterest  bearing  deposits) of 0.61 percent and 0.42 percent
in the second quarters of 2004 and 2003,  respectively.  We attract  deposits by
offering  a variety  of cash  management  products  aimed at  business  clients,
including web cash management, check imaging, remittance and depository services
and  disbursements.  In  addition,  we made two bank  acquisitions  and opened a
number of de novo  branches  in the  second  half of 2003 and the first  half of
2004, which further expanded our business locations and deposits in California.

     Noninterest income rose 63 percent in the second quarter of 2004,  compared
to the second quarter of 2003, primarily as a result of the sale of our merchant
card portfolio and the sale of real property in Southern California. The sale of
our merchant card portfolio,  which resulted in a gain of $93 million,  was part
of our strategic direction to divest ourselves of products and services that are
not competitively advantageous to us and to invest in products and services that
we believe will provide better opportunities for growing our noninterest income.
The ongoing  impact on  earnings  per share as a result of this  divestiture  is
approximately  ($0.01) per quarter,  which is expected to be partially offset by
share  repurchases  we expect to make in the second half of 2004.  Excluding the
gains from the sales  mentioned  above,  noninterest  income  rose from  service
charges on deposits, trust and investment management fees, letters of credit and
international   commissions  and  fees.  Increases  in  volumes  were  primarily
responsible for our increases.

     Although  noninterest expense rose 7 percent in the second quarter of 2004,
compared  to the  second  quarter  of 2003,  much of that  increase  related  to
investments that we made in bank acquisitions,  de novo



                                       24

<PAGE>


branches  and  technology.   We  believe  that  these   investments  will  bring
opportunities  for growth in our business by  increasing  our customer  base and
expanding the services we can provide.


FINANCIAL PERFORMANCE

SUMMARY OF FINANCIAL PERFORMANCE

<TABLE>
<CAPTION>

                            FOR THE THREE MONTHS  INCREASE (DECREASE)   FOR THE SIX MONTHS    INCREASE (DECREASE)
                                ENDED JUNE 30,     2004 VERSUS 2003        ENDED JUNE 30,      2004 VERSUS 2003
                            --------------------  ------------------  ----------------------  ------------------
(DOLLARS IN THOUSANDS)        2003       2004      AMOUNT    PERCENT     2003        2004      AMOUNT    PERCENT
--------------------------- --------   ---------  --------   -------  ----------  ----------  --------   -------
<S>                         <C>        <C>        <C>           <C>   <C>         <C>         <C>           <C>
RESULTS OF OPERATIONS

Net interest income(1)      $385,777   $ 399,858  $ 14,081      3.7%  $  776,557  $  800,279  $ 23,722      3.1%
Noninterest income
  Service charges on
    deposit accounts.......   77,942      90,031    12,089     15.5      150,229     171,127    20,898     13.9
  Trust and investment
    management fees........   33,141      36,788     3,647     11.0       65,816      72,610     6,794     10.3
  Insurance commissions....   16,024      18,652     2,628     16.4       29,242      40,387    11,145     38.1
  International commissions
    and fees...............   16,856      18,102     1,246      7.4       32,201      35,647     3,446     10.7
  Card processing fees, net    9,340      15,456     6,116     65.5       19,022      24,248     5,226     27.5
  Gain on sale of merchant
    card portfolio.........       --      93,000    93,000      nm           --       93,000    93,000      nm
  Other noninterest income.   49,868      58,981     9,113     18.3       92,432     105,196    12,764     13.8
                            --------   ---------  --------            ----------  ----------  --------
Total noninterest income...  203,171     331,010   127,839     62.9      388,942     542,215   153,273     39.4

Total revenue..............  588,948     730,868   141,920     24.1    1,165,499   1,342,494   176,995     15.2

(Reversal of) provision for
  credit losses............   25,000     (10,000)  (35,000)  (140.0)      55,000     (15,000)  (70,000)  (127.3)

Noninterest expense
  Salaries and employee
    benefits...............  198,929     217,597    18,668      9.4      397,036     437,020    39,984     10.1
  Net occupancy............   32,866      32,173      (693)    (2.1)      60,502      63,755     3,253      5.4
  Intangible asset
    amortization...........    3,227       4,485     1,258     39.0        5,704       8,705     3,001     52.6
  Other noninterest expense  115,982     122,147     6,165      5.3      230,362     240,028     9,666      4.2
                            --------   ---------  --------            ----------  ----------  --------
Total noninterest expense..  351,004     376,402    25,398      7.2      693,604     749,508    55,904      8.1
Income before income tax...  212,944     364,466   151,522     71.2      416,895     607,986   191,091     45.8
Income tax.................   68,186     133,369    65,183     95.6      136,620     219,402    82,782     60.6
                            --------   ---------  --------            ----------  ----------  --------
Net income................. $144,758   $ 231,097  $ 86,339     59.6%  $  280,275  $  388,584  $108,309     38.6%
                            ========   =========  ========            ==========  ==========  ========

-------------------------------------------------------
<FN>

(1)      Net interest income does not include any adjustments for fully taxable equivalence.

nm--not meaningful.

</FN>
</TABLE>

     THE  PRIMARY  CONTRIBUTORS  TO OUR  FINANCIAL  PERFORMANCE  FOR THE  SECOND
QUARTER OF 2004 COMPARED TO THE SECOND QUARTER OF 2003 ARE PRESENTED BELOW.

     o    We recorded a $10.0 million reversal of provision for credit losses in
          the second quarter of 2004,  which reflects  continued  improvement in
          credit quality. Reductions in criticized and classified credits in our
          commercial   loan  portfolio   resulted  from  pay-offs,   loan  grade
          improvements,  and loan sales,  which  allowed us to lower our reserve
          for credit losses.  (See additional  discussion  under  "Allowance for
          Credit Losses.")

     o    Although net interest  income  continues to be negatively  impacted by
          the lower interest rate environment, net interest income was favorably
          influenced by higher earning asset volumes,  including a significantly
          higher mix of  securities  and an increase in the average  balances of
          our commercial  loan portfolio.  Strong deposit  growth,  including an
          attractive  mix of  average  noninterest  bearing  deposits  to  total
          deposits,  also contributed favorably to our net interest income. (See
          additional discussion under "Net Interest Income.")



                                       25

<PAGE>



     o    Our noninterest income was impacted by several factors:

          o    Service  charges on deposit  accounts rose  primarily due to a 23
               percent  increase in average  demand  deposits,  net of title and
               escrow  deposits,  in the second  quarter of 2004 over the second
               quarter of 2003 and  higher  overdraft  and  return  fees of $5.5
               million primarily associated with changes in our check processing
               introduced in April 2004;

          o    Trust and  investment  management  fees increased from the second
               quarter  of  2003   primarily  due  to  increased   assets  under
               administration.  Trust fees began  growing in the second  half of
               2003 as trust assets started to recover with the strengthening of
               the equity  markets and a strong  increase  in new sales.  In the
               second quarter of 2004, managed assets increased by 5 percent and
               non-managed  assets  increased  by 10  percent  from  the  second
               quarter of 2003. Total assets under administration increased by 9
               percent,  to $158.9  billion,  between June 30, 2003 and June 30,
               2004;

          o    Insurance  commissions  increased  primarily  as a result  of the
               December 2003 acquisition of Knight Insurance Agency;

          o    International commissions and fees grew, reflecting strong growth
               in the foreign  remittances product in almost all of our markets,
               from a combination of increased pricing, product enhancements and
               higher market penetration;

          o    Card  processing  fees,  net,  increased  primarily  due to  $6.5
               million  attributable  to the  recognition  of the last  month of
               merchant card revenue earned before the sale of the merchant card
               portfolio, resulting from merchant card revenue being recorded on
               a one month lag behind the related interchange expense;

          o    The sale of our merchant card  portfolio in the second quarter of
               2004 resulted in a gain of $93.0 million.  Our merchant  accounts
               were acquired by NOVA Information  Systems (NOVA). As a result of
               the  long-term  marketing  alliance we formed with NOVA,  we will
               receive marketing fees in the future; and

          o    In other  income,  the second  quarter of 2004  included  an $8.5
               million gain on the sale of real  property,  net gains in private
               capital  investment  sales of $4.0  million,  and a $3.7  million
               final insurance recovery settlement for our losses related to the
               World Trade Center  terrorist  attacks of September  11, 2001. In
               addition, the second quarter of 2003 included a $9.0 million gain
               on the  redemption  of a  Mexican  Brady  Bond  and net  gains in
               private capital investment sales of $1.0 million.

     o    Contributing to our higher noninterest expense were several factors:

          o    Salaries and employee  benefits  increased  primarily as a result
               of:

               o    acquisitions and new branch openings, which accounted for 39
                    percent  of  the   increase  in  our   salaries   and  other
                    compensation;

               o    higher  performance-related   incentive  expense  from  goal
                    achievements;

               o    annual merit increases; and

               o    increased employee benefits expense due to:

                    o    acquisitions and new branch  openings,  which accounted
                         for  30  percent  of  our  employee   benefits  expense
                         increase;

                    o    increasing  healthcare costs for current  employees and
                         retirees from rising  insurance  premiums and a greater
                         number of participants;


                                       26

<PAGE>



                    o    the impact of the lower  discount  rate we are using to
                         calculate our future  pension and other  postretirement
                         liabilities;

          o    Net  occupancy  costs  decreased  primarily as a result of a $4.2
               million write-off of leasehold improvements in the second quarter
               of 2003,  partially offset by increased  expenses  resulting from
               our acquisitions and new branch  openings,  capitalized  property
               improvements recorded in December 2003, and reduced rental income
               resulting from increased vacancies in bank-owned property;

               o    Intangible  asset  amortization  increased  primarily  as  a
                    result of our recent acquisitions; and

               o    Other  noninterest  expense  rose  primarily  as a result of
                    higher software expenses,  resulting from increased software
                    purchases and  development to support  strategic  technology
                    initiatives,  and  losses  attributable  to  operations  and
                    litigation.

     THE PRIMARY  CONTRIBUTORS  TO OUR FINANCIAL  PERFORMANCE  FOR THE FIRST SIX
MONTHS OF 2004 COMPARED TO THE FIRST SIX MONTHS OF 2003 ARE PRESENTED BELOW.

     o    We recorded a $15.0 million reversal of provision for credit losses in
          the first six months of 2004, which reflects continued  improvement in
          credit quality. Reductions in criticized and classified credits in our
          commercial   loan  portfolio   resulted  from  pay-offs,   loan  grade
          improvements,  and loan sales, and allowed us to lower our reserve for
          credit losses. (See additional  discussion under "Allowance for Credit
          Losses.")

     o    Although net interest  income  continues to be negatively  impacted by
          the lower  interest  rate  environment  and a decline  in the  average
          balances of our commercial  loan  portfolio,  net interest  income was
          favorably influenced by higher other earning asset volumes,  including
          a  significantly  higher mix of  securities.  Strong  deposit  growth,
          including an attractive mix of average noninterest bearing deposits to
          total deposits, also contributed favorably to our net interest income.
          (See additional discussion under "Net Interest Income.")

     o    Our noninterest income was impacted by several factors:

          o    Service  charges on deposit  accounts  rose  primarily  from a 23
               percent  increase in average  demand  deposits,  net of title and
               escrow  deposits,  in the first six months of 2004 over the first
               six months of 2003 and higher  overdraft and return fees of $10.2
               million primarily associated with charges in our check processing
               introduced in April 2004;

          o    Trust and investment management fees increased from the first six
               months  of  2003   primarily   due  to  increased   assets  under
               administration.  Trust fees began  growing in the second  half of
               2003 as trust assets started to recover with the strengthening of
               the equity markets and a strong increase in new sales;

          o    Insurance  commissions  increased  primarily  as a result  of the
               April  2003  acquisition  of  Tanner  Insurance  Brokers  and the
               December 2003 acquisition of Knight Insurance Agency;

          o    International commissions and fees grew, reflecting strong growth
               in the foreign  remittances product in almost all of our markets,
               from a combination of increased pricing, product enhancements and
               higher market penetration;

          o    Card  processing  fees,  net,  increased  primarily  due to  $6.5
               million  attributable  to the  recognition  of the last  month of
               revenue  earned before the sale of the merchant  card  portfolio,
               resulting  from  merchant  card revenue  being  recorded on a one
               month lag behind the related interchange expense;

          o    The first six months of 2004 included a $93.0 million gain on the
               sale of our merchant card portfolio; and


                                       27

<PAGE>



          o    The first six months of 2004 also  included an $8.5  million gain
               on the sale of real  property  and net gains in  private  capital
               investment  sales of $9.0  million.  In  addition,  the first six
               months of 2003 included a $9.0 million gain on the  redemption of
               a Mexican Brady Bond and net gains in private capital  investment
               sales of $0.9 million.

     o    Contributing to our higher noninterest expense were several factors:

          o    Salaries and employee  benefits  increased  primarily as a result
               of:

               o    acquisitions and new branch openings, which accounted for 42
                    percent  of  the   increase  in  our   salaries   and  other
                    compensation;

               o    higher  performance-related   incentive  expense  from  goal
                    achievements;

               o    annual merit increases; and

               o    increased employee benefits expense due to: acquisitions and
                    new branch  openings,  which accounted for 38 percent of our
                    employee  benefits expense increase;

                    o    increasing  healthcare costs for current  employees and
                         retirees from rising  insurance  premiums and a greater
                         number of participants;

                    o    the impact of the lower  discount  rate we are using to
                         calculate our future  pension and other  postretirement
                         liabilities; and


                    o    the  impact of a higher  state  unemployment  tax rate,
                         which rose from 2.0  percent in the first six months of
                         2003 to 3.7 percent in the first six months of 2004;


          o    Net  occupancy  costs  increased  primarily  as a  result  of our
               acquisitions and new branch  openings,  and reduced rental income
               resulting  from  increased  vacancies  in  bank-owned   property,
               partially  offset  by  a  $4.2  million  write-off  of  leasehold
               improvements in the second quarter of 2003;

          o    Intangible asset amortization  increased primarily as a result of
               our recent acquisitions; and

          o    Other  noninterest  expense rose  primarily as a result of higher
               software  expenses,  resulting from increased  software purchases
               and development to support strategic technology initiatives,  and
               losses attributable to operations and litigation.
















                                       28

<PAGE>


NET INTEREST INCOME

     The following  tables show the major  components of net interest income and
net interest margin.

<TABLE>
<CAPTION>


                                                   FOR THE THREE MONTHS ENDED
                             ----------------------------------------------------------------------
                                          JUNE 30, 2003                   JUNE 30, 2004
                             ---------------------------------   ----------------------------------
                                          INTEREST    AVERAGE                 INTEREST     AVERAGE
                               AVERAGE     INCOME/     YIELD/      AVERAGE     INCOME/      YIELD/
(DOLLARS IN THOUSANDS)         BALANCE    EXPENSE(1) RATE(1)(2)    BALANCE    EXPENSE(1)  RATE(1)(2)
---------------------------  -----------  ---------  ---------   -----------  ---------   ---------
<S>                          <C>          <C>             <C>    <C>          <C>              <C>
ASSETS
Loans:(3)
  Domestic.................  $24,916,936  $ 346,204       5.63%  $24,967,825  $ 319,829        5.14%
  Foreign(4)...............    1,600,380      8,995       2.28     1,870,797      8,818        1.90
Securities--taxable........    7,685,140     77,341       4.03    11,696,096    107,146        3.66
Securities--tax-exempt.....       40,984      1,016       9.91        69,654      1,424        8.18
Interest bearing deposits
  in banks.................      221,004      1,130       2.05       280,892      1,121        1.61
Federal funds sold and
  securities purchased
  under resale agreements..    1,276,224      4,001       1.26     1,143,901      2,928        1.03
Trading account assets.....      333,820        981       1.18       321,851        883        1.10
                             -----------  ---------              -----------  ---------
    Total earning assets...   36,074,488    439,668       4.88    40,351,016    442,149        4.40
                                          ---------                           ---------
Allowance for credit losses     (585,597)                           (525,435)
Cash and due from banks....    2,099,440                           2,233,586
Premises and equipment, net      509,372                             514,122
Other assets...............    1,678,646                           2,038,062
                             -----------                         -----------
    Total assets...........  $39,776,349                         $44,611,351
                             ===========                         ===========
LIABILITIES
Domestic deposits:
  Interest bearing.........   $9,928,211     18,799       0.76   $11,498,339     16,198        0.57
  Savings and consumer time    3,871,674     11,277       1.17     4,225,435      8,540        0.81
  Large time...............    2,532,971     10,141       1.61     2,298,403      7,385        1.29
Foreign deposits(4)........    1,224,201      2,811       0.92     1,476,450      2,761        0.75
                             -----------  ---------              -----------  ---------
    Total interest bearing
      deposits.............   17,557,057     43,028       0.98    19,498,627     34,884        0.72
                             -----------  ---------              -----------  ---------
Federal funds purchased and
  securities sold under
  repurchase agreements....      333,415        747       0.90       344,416        552        0.64
Commercial paper...........      995,048      2,946       1.19       517,333      1,051        0.82
Other borrowed funds.......      138,074      1,055       3.06       176,449      1,178        2.69
Medium and long-term debt..      399,745      1,818       1.82       819,595      3,693        1.81
Preferred securities and
  trust notes(5)...........      351,553      3,652       4.16        16,119        130        3.23
                             -----------  ---------              -----------  ---------
    Total borrowed funds...    2,217,835     10,218       1.85     1,873,912      6,604        1.42
                             -----------  ---------              -----------  ---------
    Total interest bearing
      liabilities..........   19,774,892     53,246       1.08    21,372,539     41,488        0.78
                                          ---------                           ---------
Noninterest bearing
  deposits.................   15,030,116                          18,311,421
Other liabilities..........    1,052,065                             993,603
                             -----------                         -----------
    Total liabilities......   35,857,073                          40,677,563
STOCKHOLDERS' EQUITY
Common equity..............    3,919,276                           3,933,788
                             -----------                         -----------
    Total stockholders'
      equity...............    3,919,276                           3,933,788
                             -----------                         -----------
    Total liabilities and
      stockholders' equity.  $39,776,349                         $44,611,351
                             ===========                         ===========
Net interest income/margin
  (taxable-equivalent basis)                386,422       4.29%                 400,661        3.98%
Less: taxable-equivalent
  adjustment...............                     645                                 803
                                          ---------                           ---------
    Net interest income....               $ 385,777                           $ 399,858
                                          =========                           =========
------------------------
<FN>

(1)  Yields and  interest  income are  presented on a  taxable-equivalent  basis
     using the federal statutory tax rate of 35 percent.

(2)  Annualized

(3)  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.

(4)  Foreign  loans and  deposits  are those loans and  deposits  originated  in
     foreign branches.

(5)  Includes  interest  expense for both trust  preferred  securities and trust
     notes.
</FN>
</TABLE>

                                       29

<PAGE>

<TABLE>
<CAPTION>


                                                   FOR THE SIX MONTHS ENDED
                             ----------------------------------------------------------------------
                                        JUNE 30, 2003                      JUNE 30, 2004
                             ---------------------------------   ----------------------------------
                                          INTEREST    AVERAGE                 INTEREST    AVERAGE
                               AVERAGE     INCOME/     YIELD/      AVERAGE     INCOME/     YIELD/
(DOLLARS IN THOUSANDS)         BALANCE    EXPENSE(1) RATE(1)(2)    BALANCE    EXPENSE(1)  RATE(1)(2)
---------------------------  -----------  ---------  ---------   -----------  ---------   ---------
<S>                          <C>          <C>             <C>    <C>          <C>              <C>
ASSETS
Loans:(3)
  Domestic.................  $25,051,062  $ 701,277       5.63%  $24,750,113  $ 647,762        5.26%
  Foreign(4)...............    1,568,556     17,161       2.21     1,740,126     16,496        1.91
Securities--taxable........    7,351,834    156,520       4.26    11,546,375    212,139        3.67
Securities--tax-exempt.....       41,461      2,030       9.79        67,733      2,759        8.15
Interest bearing deposits
  in banks.................      212,266      2,092       1.99       244,373      2,029        1.67
Federal funds sold and
  securities purchased
  under resale agreements..      908,213      5,678       1.26       965,448      4,887        1.02
Trading account assets.....      320,683      1,938       1.22       299,454      1,478        0.99
                             -----------  ---------              -----------  ---------
    Total earning assets...   35,454,075    886,696       5.03    39,613,622    887,550        4.50
                                          ---------                           ---------
Allowance for credit losses     (594,370)                           (529,803)
Cash and due from banks....    2,097,220                           2,254,820
Premises and equipment, net      508,175                             517,042
Other assets...............    1,601,121                           1,975,585
                             -----------                         -----------
    Total assets...........  $39,066,221                         $43,831,266
                             ===========                         ===========
LIABILITIES
Domestic deposits:
  Interest bearing.........  $ 9,648,251     37,608       0.79   $11,444,366     32,755        0.58
  Savings and consumer time    3,845,754     23,593       1.24     4,181,065     17,258        0.83
  Large time...............    2,473,968     20,587       1.68     2,365,502     15,720        1.34
Foreign deposits(4)........    1,303,747      6,017       0.93     1,351,837      4,893        0.73
                             -----------  ---------              -----------  ---------
    Total interest bearing
      deposits.............   17,271,720     87,805       1.03    19,342,770     70,626        0.73
                             -----------  ---------              -----------  ---------
Federal funds purchased and
  securities sold under
  repurchase agreements....      424,955      2,074       0.98       369,941      1,233        0.67
Commercial paper...........      959,386      5,674       1.19       530,093      2,186        0.83
Other borrowed funds.......      155,375      2,310       3.00       182,139      2,478        2.74
Medium and long-term debt..      399,737      3,684       1.86       812,829      6,832        1.69
Preferred securities and
  trust notes(5)...........      351,603      7,323       4.17       109,571      2,311        4.22
                             -----------  ---------              -----------  ---------
    Total borrowed funds...    2,291,056     21,065       1.85     2,004,573     15,040        1.51
                             -----------  ---------              -----------  ---------
    Total interest bearing
      liabilities..........   19,562,776    108,870       1.12    21,347,343     85,666        0.81
                                          ---------                           ---------
Noninterest bearing
  deposits.................   14,565,228                          17,532,017
Other liabilities..........    1,041,308                           1,010,051
                             -----------                         -----------
    Total liabilities......   35,169,312                          39,889,411
STOCKHOLDERS' EQUITY
Common equity..............    3,896,909                           3,941,855
                             -----------                         -----------
    Total stockholders'
      equity...............    3,896,909                           3,941,855
                             -----------                         -----------
    Total liabilities and
      stockholders' equity.  $39,066,221                         $43,831,266
                             ===========                         ===========
Net interest income/margin
  (taxable-equivalent basis)                777,826       4.41%                 801,884        4.07%
Less: taxable-equivalent
  adjustment...............                   1,269                               1,605
                                          ---------                           ---------
    Net interest income....               $ 776,557                           $ 800,279
                                          =========                           =========

-------------------------------------------
<FN>

(1)  Yields and  interest  income are  presented on a  taxable-equivalent  basis
     using the federal statutory tax rate of 35 percent.

(2)  Annualized

(3)  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.

(4)  Foreign  loans and  deposits  are those loans and  deposits  originated  in
     foreign branches.

(5)  Includes  interest  expense for both trust  preferred  securities and trust
     notes.

</FN>
</TABLE>

                                       30

<PAGE>


     Net interest income in the second quarter of 2004, on a  taxable-equivalent
basis,  increased 4 percent,  from the second  quarter of 2003. Our results were
attributable to the following factors:

     o    Average  earning assets grew 12 percent in the second quarter of 2004,
          compared to the second quarter of 2003, to $40.4 billion.  This growth
          was primarily attributable to a $4.0 billion, or 52 percent,  increase
          in average securities and a $321.3 million, or 1 percent,  increase in
          average loans. The increase in average securities, which was comprised
          primarily of fixed rate securities,  reflected  liquidity and interest
          rate risk management actions.  Securities held for Asset and Liability
          Management  (ALM) purposes were $11.7 billion at June 30, 2004 and had
          an overall  estimated  effective  duration  of 2.7.  The  increase  in
          average  loans was largely due to a $1.0  billion  increase in average
          residential mortgages, resulting from a strategic portfolio shift from
          more  volatile  commercial  loans,  which  we feel  we have  achieved,
          partially  offset by a $0.7  billion  decrease in average  commercial,
          financial and industrial loans;

     o    Deposit  growth  has  contributed  significantly  to our lower cost of
          funds in the second quarter of 2004, compared to the second quarter of
          2003.  Average  noninterest  bearing  deposits were $3.3 billion or 22
          percent higher in the second  quarter of 2004,  compared to the second
          quarter of 2003.  Average business demand  deposits,  including demand
          deposits from our title and escrow clients which grew by $0.5 billion,
          increased by $2.8 billion in the second  quarter of 2004,  compared to
          the  second  quarter  of 2003,  with the  balance  of our  noninterest
          bearing deposits  increase coming from consumer demand deposit growth.
          We  anticipate  that the growth rates in average  noninterest  bearing
          deposits  will  decline in the latter half of 2004 as rising  interest
          rates  will  cause our  customers  to divert  those  deposits  to more
          attractive  interest bearing investments and will slow the activity in
          mortgage  loan  refinancings,  which will  impact our title and escrow
          deposits;

     o    Yields on our earning  assets were  negatively  impacted by decreasing
          interest  rates for much of the period in 2003,  resulting  in a lower
          average yield of 48 basis points on average earning assets,  which was
          negatively  impacted  by lower  interest  rate  hedge  income of $14.4
          million;

     o    Market  rates  on our  interest  bearing  liabilities  were  favorably
          impacted by the decreasing  interest rate  environment  resulting in a
          lower  cost of  funds  on  interest  bearing  liabilities  of 30 basis
          points,  which  included  lower  interest  rate  hedge  income of $0.3
          million; and

     o    During 2004,  our  strategy  has been to take  advantage of our higher
          noninterest  bearing  deposit  balances  by reducing  our  balances in
          higher  interest  rate  liabilities  such  as  large  certificates  of
          deposit, foreign deposits, and other borrowed funds.

     As a result of these changes, and as long-term interest rates declined, our
net interest margin decreased by 31 basis points.

     We use derivatives to hedge expected  changes in the yields on our variable
rate loans, term certificates of deposit (CDs), and long-term borrowings. During
2004, these derivative  positions will provide less in net interest income, than
in 2003, as positions  mature and, to a lesser  extent,  as interest rates rise.
However,  we expect  the  declines  in hedge  income to be  partially  offset by
increased  yields on the underlying  variable rate loans. For the quarters ended
June 30,  2003 and 2004,  we had gross hedge  income of $41.5  million and $26.8
million, respectively.

     Net   interest   income   in  the  first   six   months   of  2004,   on  a
taxable-equivalent  basis,  increased  3  percent,  from the first six months of
2003. Our results were attributable to the following factors:

     o    Average  earning  assets  grew 12  percent  in the first six months of
          2004, compared to the first six months of 2003, to $39.6 billion. This
          growth was primarily  attributable  to a $4.2 billion,  or 57 percent,
          increase in average securities,  partly offset by a $129.4 million, or
          less than 1  percent,  decrease  in average  loans.  The  increase  in
          average  securities,  which  was  comprised  primarily  of fixed  rate
          securities,  reflected  liquidity  and interest  rate risk  management
          actions. The decrease in


                                       31

<PAGE>



          average  loans was largely due to a $1.1  billion  decrease in average
          commercial, financial and industrial loans, partially offset by a $0.9
          billion increase in average  residential  mortgages,  resulting from a
          strategic  portfolio shift from more volatile  commercial loans, which
          we feel we have achieved;

     o    Deposit  growth  has  contributed  significantly  to our lower cost of
          funds in the  first  six  months  of 2004,  compared  to the first six
          months of 2003. Average noninterest bearing deposits were $3.0 billion
          or 20 percent higher in the first six months of 2004,  compared to the
          first six months of 2003. Average business demand deposits,  including
          demand  deposits from our title and escrow  clients which grew by $0.2
          billion,  increased  by $2.5  billion in the first six months of 2004,
          compared  to the first six  months of 2003,  with the  balance  of our
          noninterest  bearing  deposits  increase  coming from consumer  demand
          deposit  growth.  We  anticipate  that the  growth  rates  in  average
          noninterest  bearing  deposits will decline in the latter half of 2004
          as rising  interest  rates will cause our  customers  to divert  those
          deposits to more attractive interest bearing investments and will slow
          the  activity in  mortgage  loan  refinancings,  which will impact our
          title and escrow deposits;

     o    Yields on our earning  assets were  negatively  impacted by decreasing
          interest  rates for much of the period,  resulting in a lower  average
          yield  of 53  basis  points  on  average  earning  assets,  which  was
          negatively  impacted  by lower  interest  rate  hedge  income of $24.2
          million;

     o    Market  rates  on our  interest  bearing  liabilities  were  favorably
          impacted by the decreasing  interest rate  environment  resulting in a
          lower  cost of  funds  on  interest  bearing  liabilities  of 31 basis
          points,  which  included  higher  interest  rate hedge  income of $1.8
          million; and

     o    During 2004,  our  strategy  has been to take  advantage of our higher
          noninterest  bearing  deposit  balances  by reducing  our  balances in
          higher  interest  rate  liabilities  such  as  large  certificates  of
          deposit, foreign deposits, and other borrowed funds.

     As a result of these changes, and as long-term interest rates declined, our
net interest margin decreased by 34 basis points.

     As  explained  previously,  derivative  hedges  will  provide  less  in net
interest  income than in 2003, as positions  mature and, to a lesser extent,  as
interest  rates rise.  For the six months  ended June 30, 2003 and 2004,  we had
gross hedge income of $81.4 million and $59.0 million, respectively.

NONINTEREST INCOME

<TABLE>
<CAPTION>

                                 FOR THE THREE MONTHS ENDED                 FOR THE SIX MONTHS ENDED
                           --------------------------------------    --------------------------------------
                                               INCREASE (DECREASE)                       INCREASE (DECREASE)
                           JUNE 30,  JUNE 30,  ------------------    JUNE 30,  JUNE 30,  ------------------
(DOLLARS IN THOUSANDS)       2003      2004     AMOUNT    PERCENT      2003      2004     AMOUNT    PERCENT
-------------------------- --------  --------  --------   -------    --------  --------  --------   -------
<S>                        <C>       <C>       <C>         <C>       <C>       <C>       <C>         <C>
Service charges on deposit
  accounts................ $ 77,942  $ 90,031  $ 12,089    15.51%    $150,229  $171,127  $ 20,898    13.91%
Trust and investment
  management fees.........   33,141    36,788     3,647    11.00       65,816    72,610     6,794    10.32
Insurance commissions.....   16,024    18,652     2,628    16.40       29,242    40,387    11,145    38.11
International commissions
  and fees................   16,856    18,102     1,246     7.39       32,201    35,647     3,446    10.70
Card processing fees, net.    9,340    15,456     6,116    65.48       19,022    24,248     5,226    27.47
Foreign exchange gains,
  net.....................    6,958     8,294     1,336    19.20       13,892    16,638     2,746    19.77
Brokerage commissions and
  fees....................    8,412     8,023      (389)   (4.62)      17,066    16,320      (746)   (4.37)
Merchant banking fees.....    6,191     7,714     1,523    24.60       12,209    15,181     2,972    24.34
Securities gains (losses),
  net.....................    9,660        (4)   (9,664)     nm         9,660     1,618    (8,042)  (83.25)
Gain on sale of merchant
  card portfolio..........       --    93,000    93,000      nm            --    93,000    93,000      nm
Other.....................   18,647    34,954    16,307    87.45       39,605    55,439    15,834    39.98
                           --------  --------  --------              --------  --------  --------
  Total noninterest income $203,171  $331,010  $127,839    62.92%    $388,942  $542,215  $153,273    39.41%
                           ========  ========  ========              ========  ========  ========
------------------------
<FN>

nm--not meaningful
</FN>
</TABLE>

                                       32
<PAGE>


NONINTEREST EXPENSE

<TABLE>
<CAPTION>

                                 FOR THE THREE MONTHS ENDED                FOR THE SIX MONTHS ENDED
                           --------------------------------------    --------------------------------------
                                               INCREASE (DECREASE)                       INCREASE (DECREASE)
                           JUNE 30,  JUNE 30,  ------------------    JUNE 30,  JUNE 30,  ------------------
(DOLLARS IN THOUSANDS)       2003      2004     AMOUNT    PERCENT      2003      2004     AMOUNT    PERCENT
-------------------------- --------  --------  --------   -------    --------  --------  --------   -------
<S>                        <C>       <C>       <C>          <C>      <C>       <C>       <C>          <C>
Salaries and other
  compensation............ $161,567  $174,894  $ 13,327     8.25%    $314,627  $345,324  $ 30,697     9.76%
Employee benefits.........   37,362    42,703     5,341    14.30       82,409    91,696     9,287    11.27
                           --------  --------  --------              --------  --------  --------
  Salaries and employee
    benefits..............  198,929   217,597    18,668     9.38      397,036   437,020    39,984    10.07
Net occupancy.............   32,866    32,173      (693)   (2.11)      60,502    63,755     3,253     5.38
Equipment.................   16,354    16,883       529     3.23       33,025    34,154     1,129     3.42
Communications............   13,354    13,035      (319)   (2.39)      27,198    26,445      (753)   (2.77)
Software..................   10,849    12,908     2,059    18.98       22,925    25,903     2,978    12.99
Professional services.....   13,566    10,290    (3,276)  (24.15)      25,580    21,593    (3,987)  (15.59)
Advertising and public
  relations...............    9,693    10,814     1,121    11.57       19,360    19,541       181     0.93
Data processing...........    7,744     7,659       (85)   (1.10)      16,228    15,284      (944)   (5.82)
Intangible asset
  amortization............    3,227     4,485     1,258    38.98        5,704     8,705     3,001    52.61
Foreclosed asset expense..       --        17        17      nm            51       536       485      nm
Other.....................   44,422    50,541     6,119    13.77       85,995    96,572    10,577    12.30
                           --------  --------  --------              --------  --------  --------
  Total noninterest
    expense............... $351,004  $376,402  $ 25,398    7.24%     $693,604  $749,508  $ 55,904     8.06%
                           ========  ========  ========              ========  ========  ========
------------------------
<FN>
nm--not meaningful
</FN>
</TABLE>


INCOME TAX EXPENSE

     Income  tax  expense in the  second  quarter  of 2004 was  $133.4  million,
resulting in a 37 percent  effective  income tax rate compared with an effective
tax rate of 32 percent  for the  second  quarter of 2003.  The  increase  in the
effective  tax rate was due to  higher  California  state  taxes in 2004,  lower
low-income  housing tax credits in proportion to pre-tax  income in 2004,  and a
one-time  adjustment of $2.7 million in the second  quarter of 2003 for a refund
on income taxes paid in 1998,  1999, and 2000,  resulting from the settlement of
several tax issues with the Internal Revenue Service.  Income tax expense in the
first six months of 2004 was $219.4 million, resulting in a 36 percent effective
income tax rate  compared with an effective tax rate of 33 percent for the first
six months of 2003.

     The State of California  requires us to file our franchise tax returns as a
member of a unitary group that includes MTFG and either all worldwide affiliates
or only U.S.  affiliates.  Since 1996,  we have  elected to file our  California
franchise  tax returns on a worldwide  unitary  basis.  The  inclusion of MTFG's
financial results, which in some years were net losses, has partially offset our
net profits subject to California  income tax. The inclusion of MTFG's worldwide
property,  payroll and sales in the calculation of the California  apportionment
factor has also  reduced  the  percentage  of our income  subject to  California
income  tax.  As a  result,  our  effective  tax  rate for  California  has been
significantly  lower than the statutory  rate, net of federal  benefit,  of 7.05
percent.

     Changes in MTFG's  taxable  profits  affect our  California  taxes.  MTFG's
taxable  profits are impacted  most  significantly  by changes in the  worldwide
economy,  especially in Japan, and decisions that they may make about the timing
of the recognition of credit losses. When MTFG's worldwide taxable profits rise,
our  effective tax rate in  California  will rise.  We review  MTFG's  financial
information  on a  quarterly  basis in order to  determine  the rate at which to
recognize our California income taxes.  However, all of the information relevant
to determining  the effective tax rate may not be available  until after the end
of the period to which the tax  relates.  The  determination  of the  California
effective tax rate involves  management  judgment and estimates,  and can change
during the calendar year or between  calendar years,  as additional  information
becomes  available.  Our effective tax rates in the second quarter and the first
six  months of 2004,  when  compared  to the same  periods  in 2003,  are higher
partially as a result of increased  profits reported by MTFG for its most recent
reporting  period,  as  well as  projected  profit  increases  for  MTFG  due to
improving economic conditions in Japan.


                                       33

<PAGE>


LOANS

     The following table shows loans outstanding by loan type.

<TABLE>
<CAPTION>

                                                                                  PERCENT CHANGE TO
                                                                                 JUNE 30, 2004 FROM:
                                                                                ---------------------
                                          JUNE 30,   DECEMBER 31,    JUNE 30,   JUNE 30, DECEMBER 31,
(DOLLARS IN THOUSANDS)                      2003         2003          2004       2003       2003
--------------------------------------- -----------  ------------  -----------  -------- ------------
<S>                                     <C>          <C>           <C>           <C>         <C>
Domestic:
  Commercial, financial and industrial. $ 9,404,285  $  8,817,679  $ 9,237,338   (1.78)%     4.76%
  Construction.........................   1,110,794     1,101,166    1,078,630   (2.90)     (2.05)
  Mortgage:
    Residential........................   6,784,221     7,463,538    8,224,715   21.23      10.20
    Commercial.........................   4,172,864     4,195,178    4,288,867    2.78       2.23
                                        -----------  ------------  -----------
      Total mortgage...................  10,957,085    11,658,716   12,513,582   14.21       7.33
  Consumer:
    Installment........................     851,857       818,746      794,428   (6.74)     (2.97)
    Revolving lines of credit..........   1,179,961     1,222,220    1,379,751   16.93      12.89
                                        -----------  ------------  -----------
      Total consumer...................   2,031,818     2,040,966    2,174,179    7.01       6.53
  Lease financing......................     704,353       663,632      605,358  (14.05)     (8.78)
                                        -----------  ------------  -----------
    Total loans in domestic offices....  24,208,335    24,282,159   25,609,087    5.79       5.46
Loans originated in foreign branches...   1,444,672     1,650,204    1,981,815   37.18      20.10
                                        -----------  ------------  -----------
    Total loans held to maturity.......  25,653,007    25,932,363   27,590,902    7.55       6.40
    Total loans held for sale..........      15,653        12,265        3,369  (78.48)    (72.53)
                                        -----------  ------------  -----------
      Total loans...................... $25,668,660  $ 25,944,628  $27,594,271    7.50%      6.36%
                                        ===========  ============  ===========
</TABLE>


     COMMERCIAL, FINANCIAL AND INDUSTRIAL LOANS

     Commercial,  financial and  industrial  loans are extended  principally  to
corporations,  middle-market businesses, and small businesses,  with no industry
concentration  exceeding 10 percent of total loans.  This  portfolio  has a high
degree of geographic  diversification  based upon our customers'  revenue bases,
which we believe lowers our  vulnerability to changes in the economic outlook of
any particular region of the U.S.

     Our commercial market lending  originates  primarily through our commercial
banking offices. These offices, which rely extensively on  relationship-oriented
banking, provide a variety of services including cash management services, lines
of credit, accounts receivable and inventory financing. Separately, we originate
or  participate in a wide variety of financial  services to major  corporations.
These services include traditional  commercial banking and specialized financing
tailored to the needs of each customer's  specific industry.  Presently,  we are
active  in,  among  other  sectors,  the oil  and  gas,  communications,  media,
entertainment, retailing and financial services industries.

     The commercial,  financial and industrial loan portfolio  decreased  $166.9
million, or 2 percent,  at June 30, 2004,  compared to June 30, 2003,  primarily
due to economic conditions that reduced loan demand in some segments. Loan sales
and managed exits also contributed to the decline,  consistent with our strategy
to reduce  our  exposure  to  certain  commercial  loans  while  increasing  our
investment in more stable  consumer  loans  (including  residential  mortgages).
However,  at June 30, 2004  commercial  loans had increased  from June 30, 2003,
indicating that loan demand may be on the rise.







                                       34

<PAGE>


     CONSTRUCTION AND COMMERCIAL MORTGAGE LOANS

     We engage in non-residential  real estate lending that includes  commercial
mortgage loans and  construction  loans secured by deeds of trust.  Construction
loans are made  primarily to commercial  property  developers and to residential
builders.

     The construction loan portfolio decrease of $32.2 million, or 3 percent, at
June 30, 2004, compared to June 30, 2003, was primarily  attributable to slowing
growth in capital  assets and  employment and higher office vacancy rates in our
markets.  These  factors  impacted  the level of  development  and  construction
projects we financed.

     The commercial  mortgage loan portfolio consists of loans on commercial and
industrial  projects  primarily  in  California.   The  increase  in  commercial
mortgages of $116.0 million,  or 3 percent,  at June 30, 2004,  compared to June
30, 2003,  was  primarily  due to our  acquisitions  of Monterey Bay Bank in the
third  quarter of 2003 and Business  Bank of  California in the first quarter of
2004.

     RESIDENTIAL MORTGAGE LOANS

     We originate  residential  mortgage  loans,  secured by one-to-four  family
residential   properties,   through  our  multiple  channel  network  (including
branches, mortgage brokers, and loan-by-phone) throughout California, Oregon and
Washington, and we periodically purchase loans in our market area.

     The residential  mortgages increase of $1.4 billion, or 21 percent, at June
30,  2004,  compared to June 30, 2003,  was  influenced  by an active  refinance
market driven by low interest rates throughout the period. While we hold most of
the loans we originate,  we sell most of our 30-year, fixed rate,  non-Community
Reinvestment Act (CRA) residential mortgage loans.

     CONSUMER LOANS

     We originate  consumer loans,  such as auto loans and home equity loans and
lines, through our branch network. Consumer loans increased $142.4 million, or 7
percent,  from June 30, 2003 compared to June 30, 2004, primarily as a result of
an increase in home equity loans and partially offset by pay-offs related to the
run-off of the automobile  dealer  lending  business that we exited in the third
quarter of 2000. The indirect  automobile  dealer lending  portfolio at June 30,
2004 was $34.9 million.

     LEASE FINANCING

     We offer primarily two types of leases to our customers:  direct  financing
leases,  where the assets leased are acquired without additional  financing from
other  sources;  and  leveraged  leases,  where  a  substantial  portion  of the
financing  is  provided  by debt with no  recourse  to us.  The lease  financing
decrease of $99.0 million, or 14 percent, at June 30, 2004, compared to June 30,
2003,  was  attributable  to our  announced  discontinuance  of our auto leasing
activity,  effective  April 20, 2001. At June 30, 2004, our auto lease portfolio
had declined to $52.3 million and is projected to decline 60 percent by December
2004,  and fully mature by mid-year  2006.  Included in our lease  portfolio are
leveraged  leases  of $540.1  million,  which  are net of  non-recourse  debt of
approximately $1.2 billion.  We utilize a number of special purpose entities for
our leveraged  leases.  These  entities  serve legal and tax purposes and do not
function as vehicles to shift  liabilities to other parties or to  deconsolidate
affiliates for financial reporting purposes. As allowed by U.S. GAAP and by law,
the gross lease  receivable is offset by the  qualifying  non-recourse  debt. In
leveraged  lease  transactions,  the  third-party  lender  may only  look to the
collateral value of the leased assets for repayment.



                                       35

<PAGE>


     LOANS ORIGINATED IN FOREIGN BRANCHES

     Our loans originated in foreign  branches  consist  primarily of short-term
extensions of credit to financial institutions.  The loans originated in foreign
branches at June 30, 2004 increased $537.1 million,  or 37 percent,  compared to
June 30, 2003.

CROSS-BORDER OUTSTANDINGS

     Our  cross-border  outstandings  reflect  certain  additional  economic and
political  risks that are not  reflected in domestic  outstandings.  These risks
include those arising from exchange rate  fluctuations  and  restrictions on the
transfer of funds. The following table sets forth our cross-border  outstandings
as of June 30, 2003,  December 31, 2003 and June 30, 2004, for any country where
such  outstandings   exceeded  1  percent  of  total  assets.  The  cross-border
outstandings were compiled based upon category and domicile of ultimate risk and
are  comprised  of  balances  with banks,  trading  account  assets,  securities
available for sale, securities purchased under resale agreements, loans, accrued
interest  receivable,  acceptances  outstanding  and  investments  with  foreign
entities. The amounts outstanding exclude local currency  outstandings.  For any
country  shown in the table below,  we do not have  significant  local  currency
outstandings that are not hedged or are not funded by local currency borrowings.

                                           PUBLIC    CORPORATIONS
                              FINANCIAL    SECTOR      AND OTHER       TOTAL
(DOLLARS IN MILLIONS)       INSTITUTIONS  ENTITIES     BORROWERS    OUTSTANDINGS
-------------------------   ------------  --------   ------------   ------------
June 30, 2003
Korea....................       $559        $--          $73           $632
December 31, 2003
Korea....................       $630        $--          $28           $658
June 30, 2004
Korea....................       $769        $--          $ 4           $773


PROVISION FOR CREDIT LOSSES

     We recorded a reversal of provision for credit losses of $10 million in the
second quarter of 2004,  compared with a $25 million provision for credit losses
in the second  quarter of 2003.  Provisions  for  credit  losses are  charged to
income to bring our allowance for credit losses to a level deemed appropriate by
management  based on the factors  discussed under  "Allowance for Credit Losses"
below.  Reversals of provisions for credit losses increase our income and reduce
the allowance.

ALLOWANCE FOR CREDIT LOSSES

     ALLOWANCE POLICY AND METHODOLOGY

     We maintain an allowance for credit losses to absorb losses inherent in the
loan portfolio. The allowance is based on our regular,  quarterly assessments of
the probable  estimated losses inherent in the loan portfolio,  and, to a lesser
extent,  unused commitments to provide financing.  Our methodology for measuring
the  appropriate  level of the allowance  relies on several key elements,  which
include the formula allowance,  specific allowances for identified problem loans
and portfolio segments, and the unallocated allowance.

     The formula allowance is calculated by applying loss factors to outstanding
loans and certain  unused  commitments,  in each case based on the internal risk
grade of such loans,  leases and commitments.  Changes in risk grades affect the
amount of the formula  allowance.  Loss factors are based on our historical



                                       36

<PAGE>


loss  experience  and  may  be  adjusted  for   significant   factors  that,  in
management's  judgment,  affect the  collectibility  of the  portfolio as of the
evaluation date. Loss factors are developed in the following ways:

     o    loss  factors for  individually  graded  credits  are  derived  from a
          migration model that tracks historical losses over a period,  which we
          believe captures the inherent losses in our loan portfolio; and

     o    pooled loan loss factors (not individually  graded loans) are based on
          expected net charge-offs.  Pooled loans are loans that are homogeneous
          in nature,  such as consumer  installment,  home  equity,  residential
          mortgage loans and automobile leases.

     We believe  that an  economic  cycle is a period in which both  upturns and
downturns in the economy have been  reflected.  We calculate loss factors over a
time   interval   that  spans  what  we  believe   constitutes  a  complete  and
representative economic cycle.

     Loan loss factors, which are used in determining our formula allowance, are
adjusted quarterly  primarily based upon the level of historical net charge-offs
and losses  expected by management in the near term.  Prior to the quarter ended
June 30, 2004, our loan loss factors for non-criticized  graded credits captured
estimated  losses  that  were  expected  to  occur in the  next  twelve  months.
Beginning with the quarter ended June 30, 2004, we have refined our  methodology
to estimate our expected losses based on a loss  confirmation  period.  The loss
confirmation  period is the estimated  average period of time between a material
adverse event affecting the  credit-worthiness  of a borrower and the subsequent
recognition of a loss. Based upon our evaluation  process,  we believe that, for
our  risk-graded  loans,  on  average,  losses are  sustained  approximately  10
quarters after an adverse event in the creditor's  financial condition has taken
place. Similarly, for retail, pool-managed credits, the loss confirmation period
varies by product, but ranges between one and two years.

     Furthermore,  based  on  management's  judgment,  our  refined  methodology
permits  adjustments  to any loss factor used in the  computation of the formula
allowance  for  significant  factors,  which  affect the  collectibility  of the
portfolio as of the evaluation  date, but are not reflected in the loss factors.
By assessing the probable  estimated  losses inherent in the loan portfolio on a
quarterly  basis,  we are able to adjust  specific and inherent  loss  estimates
based upon the most recent information that has become available.  This includes
changing the number of periods that are included in the  calculation of the loss
factors and adjusting  qualitative  factors to be representative of the economic
cycle that we expect will impact the portfolio.

     Specific   allowances  are  established  in  cases  where   management  has
identified  significant  conditions  or  circumstances  related to a credit or a
portfolio segment that management  believes indicate the probability that a loss
has been incurred.  This amount may be determined  either by a method prescribed
by SFAS No. 114, or methods that include a range of probable outcomes based upon
certain qualitative factors.

     The unallocated allowance is based on management's evaluation of conditions
that are not directly reflected in the determination of the formula and specific
allowances.  As discussed  elsewhere,  certain losses that had  previously  been
considered  in  the  determination  of  the  unallocated   allowance  have  been
incorporated into our formula allowance, thereby eliminating the need to reflect
them in our  unallocated  allowance.  The  evaluation  of the inherent loss with
respect to these conditions is subject to a higher degree of uncertainty because
they may not be identified with specific problem credits or portfolio  segments.
The conditions  evaluated in connection with the unallocated  allowance  include
the following, which existed at the balance sheet date:

     o    general  economic and business  conditions  affecting  our key lending
          areas;

     o    credit  quality  trends  (including  trends  in  nonperforming   loans
          expected to result from existing conditions);

     o    collateral values;



                                       37

<PAGE>


     o    loan volumes and concentrations;

     o    seasoning of the loan portfolio;

     o    specific industry conditions within portfolio segments;

     o    recent loss experience in particular segments of the portfolio;

     o    duration of the current economic cycle;

     o    bank regulatory examination results; and

     o    findings of our internal credit examiners.

     Executive  management reviews these conditions quarterly in discussion with
our senior  credit  officers.  To the  extent  that any of these  conditions  is
evidenced by a specifically  identifiable problem credit or portfolio segment as
of the evaluation date,  management's  estimate of the effect of such conditions
may be reflected as a specific allowance, applicable to such credit or portfolio
segment.  Where  any of these  conditions  is not  evidenced  by a  specifically
identifiable  problem  credit or portfolio  segment as of the  evaluation  date,
management's  evaluation  of the  probable  loss  related to such  condition  is
reflected in the unallocated allowance.

     The allowance for credit losses is based upon estimates of probable  losses
inherent in the loan  portfolio.  The actual  losses can vary from the estimated
amounts.  Our methodology  includes several features that are intended to reduce
the differences  between  estimated and actual losses.  The loss migration model
that is used to establish the loan loss factors for individually graded loans is
designed to be  self-correcting  by taking into account our loss experience over
prescribed periods.  In addition,  by basing the loan loss factors over a period
reflective of an economic cycle,  recent loss data that may not be reflective of
prospective  losses  going  forward  will  not have an  undue  influence  on the
calculated loss factors.

     COMPARISON OF THE TOTAL  ALLOWANCE AND RELATED  PROVISION FOR CREDIT LOSSES
FROM DECEMBER 31, 2003

     At  December  31,  2003,  our total  allowance  for credit  losses was $533
million,  or 2.05 percent of the total loan  portfolio  and 190 percent of total
nonaccrual  loans.  At June 30, 2004, our total  allowance for credit losses was
$501  million  (consisting  of $413  million  and $88 million of  allocated  and
unallocated  allowance,  respectively),  or  1.82  percent  of  the  total  loan
portfolio and 282 percent of total nonaccrual loans. In addition,  the allowance
incorporates the results of measuring impaired loans as provided in SFAS No. 114
as amended  by SFAS No.  118,  "Accounting  by  Creditors  for  Impairment  of a
Loan--Income  Recognition and Disclosures." These accounting standards prescribe
the measurement methods,  income recognition and disclosures related to impaired
loans.  At December 31, 2003,  total impaired  loans were $230 million,  and the
associated impairment allowance was $55 million,  compared with $141 million and
$32 million,  respectively,  at June 30, 2004. On June 30, 2004 and December 31,
2003, the total allowance for credit losses for off-balance  sheet  commitments,
which is included within our total allowance for credit losses,  was $48 million
and $86  million,  respectively.  In the second  quarter  of 2004,  we made some
adjustments  on  how  we  allocate  our  allowance  for  credit  losses  between
off-balance  sheet  commitments  and  loans.  These  adjustments,  offset by the
increases in our loss  factors,  contributed  to the decline in that  allocation
from December 31, 2003.  These  adjustments  had no impact on the allowance as a
whole, since commitments and funded loans are considered together in determining
the adequacy of our allowance for credit losses.

     During  the first  quarter  of 2004,  there  were no  material  changes  in
estimation  methods or assumptions  that affected our  methodology for assessing
the  appropriateness  of the formula and specific  allowances for credit losses,
except that the period used to calculate the cumulative loss rates on criticized
loans was  expanded  from 12 to 24 quarters to better  estimate  losses over the
life of the loans. Changes in


                                       38

<PAGE>


estimates  and  assumptions  regarding  the  effects of  economic  and  business
conditions on borrowers and other factors,  which are described below,  affected
the assessment of the unallocated allowance.

     During the second quarter of 2004, as discussed above, we adjusted our pass
graded  loan loss  factors to reflect  expected  losses in the next 10  quarters
based upon an estimated loss confirmation  period.  In addition,  refinements in
our loss factors for commercial real estate and  construction  lending were made
to more accurately capture probable loss inherent in the portfolio.

     As a result of management's assessment of factors,  including the continued
improvement    in   the   U.S.    economy,    improving    conditions   in   the
communications/media,  power,  and other sectors in domestic markets in which we
operate, and growth and changes in the composition of the loan portfolio, offset
by the adverse impact of increasing  fuel costs across the whole economy,  fears
of terrorism on the airline industry;  and the fiscal and budgetary difficulties
of the State of  California,  we  recorded a reversal  of  provision  for credit
losses of $10 million in the second quarter of 2004. The  refinements we made in
the manner in which we segment our  allowance for credit losses had no impact on
the overall level of the allowance.

     CHANGES IN THE ALLOCATED (FORMULA AND SPECIFIC) ALLOWANCE

     At June 30, 2004, the formula allowance was $364 million,  compared to $280
million at December 31, 2003,  an increase of $84 million.  The increase was due
primarily to the impact of the introduction of the loss confirmation period into
the  determination  of our loan  loss  factors,  which  was  approximately  $125
million,  the  modifications to the commercial real estate and construction loss
factors,  which was approximately $18 million,  the expansion of the period used
to calculate cumulative loss rates on criticized credits,  which was $9 million,
and growth in our commercial loan portfolio,  offset by significant improvements
in the credit quality of our loan  portfolio.  Since a portion of the impact for
the use of the loss  confirmation  period had  already  been  considered  in our
attributions in the unallocated  allowance,  a reallocation  between the formula
and unallocated portions of the allowance was made.

     The specific  allowance  was $49 million at June 30, 2004,  compared to $80
million at December  31,  2003,  a decrease  of $31  million.  This  decrease is
reflective  of decreases in impaired  loans and the  renegotiation  of terms for
certain aircraft leases that are now reported as operating leases.

     CHANGES IN THE UNALLOCATED ALLOWANCE

     At June 30, 2004, the unallocated  allowance declined by $85 million to $88
million from $173 million at December  31, 2003.  The reasons for the  decrease,
and for which an unallocated allowance is warranted, are detailed below.

     In our assessment as of June 30, 2004,  management  focused, in particular,
on the factors and conditions set out below.  There can be no assurance that the
adverse  impact  of any of these  conditions  on us will not be in excess of the
ranges set forth.

     Although in certain  instances the downgrading of a loan resulting from the
effects of the  conditions  described  below has been  reflected  in the formula
allowance,   management  believes  that  the  impact  of  these  events  on  the
collectibility  of the applicable loans may not have been reflected in the level
of  nonperforming  loans or in the internal risk grading process with respect to
such loans. In addition,  our formula allowance does not take into consideration
a change in the  severity  of losses  that are  expected  to arise from  current
economic  conditions  compared  with our  historical  losses.  Accordingly,  our
evaluation  of the probable  losses  related to the impact of these  factors was
reflected in the unallocated  allowance.  The evaluations of the inherent losses
with  respect to these  factors  are  subject to higher  degrees of  uncertainty
because they are not identified  with specific  problem  credits.  As previously
mentioned, we refined our formula allowance to include certain losses based upon
a loss  confirmation  period,  which has  eliminated  the need to consider those
losses in the attributions of our unallocated allowance.


                                       39

<PAGE>



     In evaluating  the results of this  methodology  change,  we considered the
effect of underlying  conditions on expected future credit migration for each of
our lending segments. In several cases, we concluded that this experience is not
likely to be more severe than the long-run  average embedded in the loss factors
that drive the formula allowance calculation. In these cases, we determined that
our attribution,  previously established for the retail, technology and consumer
sectors, was no longer required.

     Similarly,  in certain cases, we believe that credit migration is likely to
be somewhat  more severe than the long-run  average,  but a greater share of the
inherent  probable loss associated with this credit migration is now captured in
the allocated  allowance as a result of the previously  mentioned  refinement in
methodology.  In these  cases,  it is  appropriate  to reduce the  corresponding
unallocated allowance attributions.

     o    With respect to fuel prices,  we considered  the sustained high prices
          of oil and petroleum  products,  and the impact  across  virtually all
          sectors of the economy,  and  established an attribution  for probable
          losses which could be in the range of $10 million to $35 million.

     o    With respect to the State of California,  we considered the underlying
          uncertainties confronting the administration in Sacramento,  including
          the major shortfall in the state's budgetary  position for fiscal year
          2005,  despite  the  passage  of  State  Propositions  57 and 58,  and
          established an attribution  for probable  losses which could be in the
          range of $3 million to $6 million.

     o    With  respect  to  commercial  real  estate,  we  considered  slightly
          improving   high  vacancy   rates  and  stagnant   rent  growth  being
          experienced nationally, with specific weakness in Northern California,
          and  established an attribution  for probable losses which could be in
          the range of $12 million to $24 million, a reduction from the December
          31, 2003 level of $16 million to $32 million.

     o    With respect to leasing,  we considered  the  worsening  situation for
          airlines in the wake of increased  fears of terrorism and surging fuel
          prices, and established an attribution for probable losses which could
          be in the range of $7 million to $13 million.

     o    With respect to cross-border  exposures in certain foreign  countries,
          we considered the improving economic performances in many countries of
          our key international  markets, as well as better financial results of
          our customers,  and reduced the attribution  range, which provides for
          certain weaknesses in the banking sector of some of our markets, to $8
          million to $17 million.

     o    With respect to power  companies/utilities,  we considered the effects
          of  lower  excess  capacity  and  evidence  that  a slow  recovery  is
          beginning in this industry, coupled with the refinement in the formula
          allowance  mentioned  above in reducing the  attribution  for probable
          losses from a range of $13 million to $27 million at December 31, 2003
          to a range of $4 million to $8 million at June 30, 2004.

     o    With respect to the  communications/media  industry, we considered the
          significant  improvements  seen  in the  industry,  coupled  with  the
          refinement in the formula  allowance in reducing the  attribution  for
          probable losses from a range of $10 million to $30 million at December
          31, 2003 to a range of $2 million to $4 million at June 30, 2004.

     Although in certain  instances the  downgrading  of a loan  resulting  from
these effects was reflected in the allocated allowance, management believes that
in most  instances  the  impact  of these  events on the  collectibility  of the
applicable loans may not have been reflected in the level of nonperforming loans
or in the internal risk grading process with respect to such loans. Accordingly,
our evaluation of the probable losses related to the impact of these factors was
reflected in the unallocated  allowance.  The evaluations of the inherent losses
with  respect to these  factors were  subject to higher  degrees of  uncertainty
because they were not identified with specific problem credits.



                                       40

<PAGE>


     CHANGE IN THE TOTAL ALLOWANCE FOR CREDIT LOSSES

     The following table sets forth a reconciliation of changes in our allowance
for credit losses:

<TABLE>
<CAPTION>

                                             FOR THE THREE MONTHS    FOR THE SIX MONTHS
                                                 ENDED JUNE 30,         ENDED JUNE 30,
                                             --------------------   --------------------
(DOLLARS IN THOUSANDS)                         2003        2004       2003        2004
-------------------------------------------- --------    --------   --------    --------
<S>                                          <C>         <C>        <C>         <C>
Balance, beginning of period................ $586,197    $521,111   $609,190    $532,970
Loans charged off:
  Commercial, financial and industrial......   51,130      20,721     88,956      40,510
  Mortgage..................................       --          43         --          43
  Consumer..................................    2,429       1,460      5,085       3,275
  Lease financing...........................   13,190       1,666     32,208       2,024
                                             --------    --------   --------    --------
    Total loans charged off.................   66,749      23,890    126,249      45,852
Recoveries of loans previously charged off:
  Commercial, financial and industrial......   13,008      12,091     18,587      20,911
  Mortgage..................................       44       1,571        150       1,571
  Consumer..................................      697         456      1,420         891
  Lease financing...........................       50          77        168         150
                                             --------    --------   --------    --------
    Total recoveries of loans previously
      charged off...........................   13,799      14,195     20,325      23,523
                                             --------    --------   --------    --------
      Net loans charged off.................   52,950       9,695    105,924      22,329
(Reversal of) provision for credit losses...   25,000     (10,000)    55,000     (15,000)
Foreign translation adjustment and other
  net additions (deductions)(1).............       35           3         16       5,778
                                             --------    --------   --------    --------
Balance, end of period...................... $558,282    $501,419   $558,282    $501,419
                                             ========    ========   ========    ========
Allowance for credit losses to total loans..     2.17%       1.82%      2.17%       1.82%
(Reversal of) provision for credit losses
  to net loans charged off..................    47.21          nm      51.92          nm
Net loans charged off to average loans
  outstanding for the period(2).............     0.80        0.15       0.80        0.17

--------------------------------
<FN>

(1)  Includes  a  transfer  of $5.7  million  related  to the  Business  Bank of
     California acquisition in the first quarter of 2004.

(2)  Annualized.

nm--not meaningful
</FN>
</TABLE>

     Total loans  charged off in the second  quarter of 2004  decreased by $42.9
million  from the  second  quarter  of 2003,  primarily  due to a $30.4  million
decrease in commercial,  financial and industrial loans charged off and an $11.5
million  decrease in lease  financing  charge-offs  reflecting  the  charge-offs
related to several  airline  losses in the second  quarter of 2003.  Charge-offs
reflect  the  realization  of  losses  in the  portfolio  that  were  recognized
previously through provisions for credit losses.

     Second quarter 2004 recoveries of loans previously charged off increased by
$0.4  million  from the second  quarter  of 2003.  The  percentage  of net loans
charged  off to  average  loans  outstanding  for  the  second  quarter  of 2004
decreased by 65 basis points from the same period in 2003. At June 30, 2004, the
allowance for credit losses exceeded the annualized net loans charged off during
the  second  quarter  of  2004,  reflecting  management's  belief,  based on the
foregoing analysis, that there are additional losses inherent in the portfolio.

     Historical net charge-offs are not necessarily  indicative of the amount of
net charge-offs that we will realize in the future.


                                       41

<PAGE>


NONPERFORMING ASSETS

     Nonperforming  assets consist of nonaccrual  loans and  foreclosed  assets.
Nonaccrual  loans are those for which  management  has  discontinued  accrual of
interest because there exists significant  uncertainty as to the full and timely
collection   of  either   principal  or  interest  or  such  loans  have  become
contractually past due 90 days with respect to principal or interest. For a more
detailed  discussion of the accounting for nonaccrual  loans,  see Note 1 to our
Consolidated  Financial  Statements included in the Form 10-K for the year ended
December 31, 2003.

     Foreclosed   assets  include  property  where  we  acquired  title  through
foreclosure or "deed in lieu" of foreclosure.

     The following table sets forth an analysis of nonperforming assets.

<TABLE>
<CAPTION>

                                              JUNE 30,   DECEMBER 31,   JUNE 30,
(DOLLARS IN THOUSANDS)                          2003         2003         2004
--------------------------------------------  --------   ------------   --------
<S>                                           <C>        <C>            <C>
Commercial, financial and industrial........  $273,896   $    190,404   $111,015
Construction................................     1,559             --      5,401
Commercial mortgage.........................    48,479         38,354     22,717
Lease financing.............................    52,568         51,603     36,719
Loan originated in foreign branches.........     2,985            840      2,210
                                              --------   ------------   --------
  Total nonaccrual loans....................   379,487        281,201    178,062
Foreclosed assets...........................       271          5,689      5,851
                                              --------   ------------   --------
  Total nonperforming assets................  $379,758   $    286,890   $183,913
                                              ========   ============   ========
Allowance for credit losses.................  $558,282   $    532,970   $501,419
                                              ========   ============   ========
Nonaccrual loans to total loans.............      1.48%          1.08%      0.65%
Allowance for credit losses to nonaccrual
  loans.....................................    147.11         189.53     281.60
Nonperforming assets to total loans and
  foreclosed assets.........................      1.48           1.11       0.67
Nonperforming assets to total assets........      0.89           0.68       0.40

</TABLE>


     At June 30, 2004, nonaccrual loans totaled $178 million, a decrease of $201
million,  or 53  percent,  from June 30,  2003.  Our  nonperforming  assets  are
concentrated in our non-agented  syndicated loan portfolio and  approximately 41
percent  of our  total  nonaccrual  loans are  syndicated  loans.  In  addition,
nonaccrual  loans  include  $37  million in  aircraft  leases.  The  decrease in
nonaccrual  loans was primarily due to pay-downs,  charge-offs,  and loan sales,
coupled with significantly  reduced inflows.  During the second quarters of 2004
and 2003,  respectively,  we sold  approximately  $9 million and $206 million of
loan  commitments  to reduce our credit  exposures.  Losses from these sales are
reflected in our charge-offs.

     Nonaccrual  loans as a percentage  of total loans were 0.65 percent at June
30, 2004, compared with 1.48 percent at June 30, 2003. Nonperforming assets as a
percentage  of total loans and  foreclosed  assets  decreased to 0.67 percent at
June  30,  2004,  from  1.48  percent  at  June  30,  2003.  At June  30,  2004,
approximately  62  percent of  nonaccrual  loans  were  related  to  commercial,
financial and industrial credits, compared to 72 percent at June 30, 2003.










                                       42

<PAGE>


LOANS 90 DAYS OR MORE PAST DUE AND STILL ACCRUING

                                              JUNE 30,   DECEMBER 31,   JUNE 30,
(DOLLARS IN THOUSANDS)                          2003         2003         2004
--------------------------------------------  --------   ------------   --------
Commercial, financial and industrial........  $  1,728      $  893      $    798
Construction................................     2,311          --         2,919
Mortgage:
Residential.................................     3,915       1,878         4,588
Commercial..................................       540          --            --
                                              --------   ------------   --------
  Total mortgage............................     4,455       1,878         4,588
Consumer and other..........................     1,879       1,123         1,535
                                              --------   ------------   --------
Total loans 90 days or more past due
  and still accruing........................  $ 10,373      $3,894      $  9,840
                                              ========   ============   ========

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     Market risk is the risk of loss to future earnings,  to fair values,  or to
future  cash  flows  that may result  from  changes in the price of a  financial
instrument.  The  value of a  financial  instrument  may  change  as a result of
changes in interest rates,  foreign currency  exchange rates,  commodity prices,
equity  prices,  and other  market  changes  that affect  market risk  sensitive
instruments.  Market risk is attributable to all market risk sensitive financial
instruments,  including securities,  loans, deposits, and borrowings, as well as
derivative  instruments.  Our exposure to market risk is a function of our asset
and liability management activities, our trading activities for our own account,
and our role as a financial intermediary in customer-related  transactions.  The
objective of market risk  management is to mitigate an undue  adverse  impact on
earnings  and  capital  arising  from  changes in  interest  rates and prices of
financial  instruments.  This  risk  management  objective  supports  our  broad
objective of preserving  shareholder  value,  which encompasses  earnings growth
over time and capital stability.

     The  Board  of  Directors,  through  its  Finance  and  Capital  Committee,
establishes the Bank's ALM Policy,  which governs the management of market risk.
In the  administration  of market risk management,  the Chief Executive  Officer
(CEO)  Forum  provides  broad and  strategic  guidance  to the Asset & Liability
Management Committee (ALCO). ALCO is a committee comprised of senior executives,
with the chairman designated by the Chief Executive Officer. ALCO is responsible
for management of liquidity, interest rate and price risks in the implementation
of ALM Policy,  including formulation of risk management strategies,  guidelines
and trading policy limits,  in accordance with the CEO Forum's  directives.  The
Treasurer of the Bank is primarily  responsible for the  implementation  of risk
management  strategies  approved by ALCO and for operating  management of market
risk through the funding, investment, derivatives hedging, and trading functions
of the Bank's Global Markets Group.

     The Market Risk Monitoring  (MRM) unit is structured as an independent unit
responsible  for the  measurement  and monitoring of market risk,  including the
preparation  of reports in  sufficient  detail to ensure  that ALCO,  the Bank's
senior management, and the Board are kept fully informed as to the Bank's market
risk profile and compliance with applicable limits, guidelines and policies. MRM
functions  independently  of all  operating  and  management  units and  reports
directly to the ALCO Chairman.

     We have  separate  and  distinct  methods  for  managing  the  market  risk
associated  with our trading  activities and our asset and liability  management
activities, as described below.

     INTEREST RATE RISK MANAGEMENT (OTHER THAN TRADING)

     We engage in asset and  liability  management  activities  with the primary
purposes of managing the  sensitivity of net interest income (NII) to changes in
interest  rates within limits  established  by the Board and  maintaining a risk
profile that is consistent with management's strategic objectives.


                                       43

<PAGE>


     The ALM Policy  approved  by our  Board's  Finance  and  Capital  Committee
requires  monthly  monitoring of interest rate risk by ALCO through a variety of
modeling  techniques that are used to quantify the sensitivity of NII to changes
in interest rates. As directed by ALCO, and in  consideration  of the importance
of our demand  deposit  accounts  as a funding  source,  NII is  adjusted in the
official  policy risk measure to incorporate  the effect of certain  noninterest
expense  items  related to these  deposits  that are  nevertheless  sensitive to
changes in interest  rates.  In managing  interest rate risk,  ALCO monitors NII
sensitivity on both an adjusted and unadjusted basis over various time horizons.

     Our unhedged NII remains asset sensitive, meaning that our assets generally
reprice more quickly than our liabilities, particularly our core deposits. Since
the NII associated with an asset sensitive  balance sheet tends to decrease when
interest rates decline and increase when interest rates rise,  derivative hedges
and the investment portfolio are used to manage this risk. In the second quarter
of 2004, we modestly increased the size of our securities portfolio, principally
through  purchases  of  intermediate  term  mortgage-backed  and  agency  issued
securities, adding approximately $300 million in average balances over the first
quarter of 2004, while maintaining a relatively short effective  duration of 2.7
(see further  discussion of this on page 45). In addition,  we entered into $300
million of interest rate cap corridors to offset the  potential  adverse  impact
that rising short-term interest rates could have on our cost of deposit funding.
We also entered  into $400 million of interest  rate floors to hedge some of our
variable rate loans. For a further discussion of derivative  instruments and our
hedging strategies,  see Note 6 to our Notes to Condensed Consolidated Financial
Statements included in this Form 10-Q.

     Together,  our hedging and investment activities resulted in an essentially
neutral  interest rate risk profile for the hedged balance sheet with respect to
parallel  yield curve shifts in terms of simulated NII versus the no rate change
base case scenario. However, our NII is also sensitive to non-parallel shifts in
the yield curve.  In general,  our adjusted NII  increases  when the yield curve
steepens  (specifically  when short rates,  under one year, drop and long rates,
beyond one year,  rise),  while a flattening curve tends to depress our adjusted
NII. In this respect,  our adjusted NII is asset sensitive when measured against
changes in long rates and slightly  liability  sensitive  when measured  against
changes in short rates.

     In the  current  low  rate  environment,  run  off of  fixed  rate  assets,
including  prepayments,  depresses  NII even if  interest  rates  do not  change
because  the cash flows from the repaid and  prepaid  assets that were booked at
higher rates must be reinvested at lower prevailing rates.

     Our official NII policy measure involves a simulation of "Earnings-at-Risk"
(EaR) in which we estimate the impact that gradual, ramped-on parallel shifts in
the yield  curve  would have on NII over a 12-month  horizon.  Under the Board's
policy limits, the negative change in simulated NII in either the up or down 200
basis point shock  scenarios  may not exceed 4 percent of NII as measured in the
base case, or no change, scenario. The following table sets forth the simulation
results in both the up and down 200 basis  point ramp  scenarios  as of December
31, 2003 and June 30, 2004(1):

<TABLE>
<CAPTION>

                                             DECEMBER 31,     JUNE 30,
(DOLLARS IN MILLIONS)                            2003           2004
------------------------------------------   ------------     --------
<S>                                             <C>            <C>
+200 basis points.........................      $ 17.2         $ 17.2
as a percentage of base case NII..........        1.20%          1.13%
-200 basis points.........................      $(19.8)        $(23.1)
as a percentage of base case NII..........        1.38%          1.52%

---------------------------
<FN>

(1)  For these policy simulations,  NII is adjusted to incorporate the effect of
     certain  noninterest  expense  items  related to demand  deposits  that are
     nevertheless sensitive to changes in interest rates.
</FN>
</TABLE>

     EaR in the down 200 basis point scenario was a negative  $23.1 million,  or
1.52 percent of adjusted NII in the base case scenario,  well within the Board's
guidelines.

     However,  with Federal Funds and LIBOR rates currently below two percent, a
downward  ramp  scenario of 200 basis  points would  result in  short-term  rate
levels below zero. As a result,  we believe that a


                                       44

<PAGE>


downward ramp scenario of 100 basis points provides a more reasonable measure of
asset sensitivity in a falling interest rate  environment.  As of June 30, 2004,
the  difference  between  adjusted NII in the base case and adjusted NII after a
gradual 100 basis  point  downward  ramp was a negative  $4.7  million,  or 0.31
percent of the base case scenario.

     Management's goal in the NII simulations is to capture the risk embedded in
the balance sheet. As a result,  asset and liability  balances are kept constant
throughout the analysis horizon. Two exceptions are non-maturity deposits, which
vary with levels of interest rates  according to  statistically  derived balance
equations,  and  discretionary  derivative  hedges and fixed income  portfolios,
which are allowed to mature without replacement.

     Additional  assumptions  are made to model the future  behavior  of deposit
rates and loan spreads based on statistical analysis,  management's outlook, and
historical  experience.  The prepayment  risks related to residential  loans and
mortgage-backed  securities are measured using industry  estimates of prepayment
speeds. The sensitivity of the simulation results to the underlying  assumptions
is  tested  as a  regular  part  of the  risk  measurement  process  by  running
simulations with different assumptions. In addition,  management supplements the
official  risk measures  based on the constant  balance  sheet  assumption  with
volume-based   simulations  of  NII  based  on  forecasted   balances  and  with
value-based simulations that measure the sensitivity of economic-value-of-equity
(EVE) to changes in interest rates. We believe that, together, these simulations
provide  management with a reasonably  comprehensive  view of the sensitivity of
our  operating  results  to  changes  in  interest  rates,  at  least  over  the
measurement  horizon.  However,  as with any  financial  model,  the  underlying
assumptions  are  inherently  uncertain  and subject to  refinement  as modeling
techniques  and  theory  improve  and  historical   data  becomes  more  readily
accessible.  Consequently,  our simulation  models cannot predict with certainty
how rising or falling  interest rates might impact net interest  income.  Actual
and  simulated  NII  results  will  differ to the extent  there are  differences
between actual and assumed  interest rate changes,  balance sheet  volumes,  and
management strategies, among other factors.

     At December 31, 2003 and June 30, 2004, our  securities  available for sale
portfolio included $10.4 billion and $11.7 billion,  respectively, of securities
for ALM purposes with an expected weighted average maturity of 2.9 years and 3.1
years,  respectively.  In  addition,  this  portfolio  had an overall  estimated
effective  duration of 2.7 compared to 2.5 at December  31, 2003.  Duration is a
measure  of price  sensitivity  of a bond  portfolio  to  immediate  changes  in
interest rates.  An effective  duration of 2.7 suggests an expected price change
of  approximately  2.7 percent for an immediate  one percent  change in interest
rates. This portfolio included $6.4 billion in  mortgage-backed  securities with
an estimated duration of 3.2. This securities portfolio duration, in the context
of our total balance sheet, after giving consideration to the composition of our
core  deposits,  contributes  to the  maintenance  of our  current,  essentially
neutral, interest rate risk profile.

     TRADING ACTIVITIES

     We  enter  into  trading  account  activities   primarily  as  a  financial
intermediary  for  customers,  and, to a minor extent,  for our own account.  By
acting as a financial  intermediary,  we are able to provide our customers  with
access to a wide range of products from the securities,  foreign  exchange,  and
derivatives  markets.  In acting for our own account,  we may take  positions in
some of these  instruments  with the  objective of generating  trading  profits.
These  activities  expose us to two primary types of market risk:  interest rate
and foreign currency exchange risk.

     In  order to  manage  interest  rate and  foreign  currency  exchange  risk
associated with the securities and foreign exchange  trading  activities for our
own account, we utilize a variety of non-statistical methods including: position
limits for each  trading  activity,  daily  marking of all  positions to market,
daily profit and loss statements, position reports, and independent verification
of all inventory  pricing.  Additionally,  MRM reports positions and profits and
losses  daily to the  Treasurer  and  trading  managers  and  weekly to the


                                       45

<PAGE>


ALCO  Chairman.  ALCO is provided  reports on a monthly  basis.  We believe that
these  procedures,  which  stress  timely  communication  between MRM and senior
management, are the most important elements of the risk management process.

     We use a form of Value at Risk (VaR)  methodology  to measure  the  overall
market risk inherent in our trading account activities.  Under this methodology,
management statistically calculates, with 97.5 percent confidence, the potential
loss in fair value that we might experience if an adverse shift in market prices
were to occur within a period of 5 business  days.  The amount of VaR is managed
within  limits well below the maximum limit  established  by Board policy at 0.5
percent of  stockholders'  equity.  The VaR model  incorporates  a number of key
assumptions, including assumed holding period and historical volatility based on
3 years of historical market data updated quarterly.

     The  following  table  sets  forth  the  average,  high and low VaR for our
trading  activities  for the year ended  December 31, 2003 and the quarter ended
June 30, 2004.

                                  DECEMBER 31, 2003          JUNE 30, 2004
                                --------------------    ---------------------
                                AVERAGE   HIGH   LOW    AVERAGE   HIGH    LOW
(DOLLARS IN THOUSANDS)            VAR      VAR   VAR      VAR      VAR    VAR
------------------------------  -------   ----   ---    -------   ----    ---
Foreign exchange..............     $143   $428   $57       $119   $293    $49
Securities....................      206    463    97        269    339    138



     Consistent  with our  business  strategy of focusing on the sale of capital
markets  products  to  customers,  we  manage  our  trading  risk  exposures  at
conservative  levels,  well below the trading risk policy limits  established by
the  Finance  and  Capital  Committee  of the Board.  As a result,  our  foreign
exchange   business   continues   to  derive  the  bulk  of  its  revenue   from
customer-related  transactions.  We take inter-bank  trading positions only on a
limited basis and we do not take any large or long-term  strategic  positions in
the market  for our own  portfolio.  We  continue  to grow our  customer-related
foreign exchange business while maintaining an essentially  unchanged inter-bank
trading risk profile as measured under our VaR methodology.

     The Securities Trading and Institutional  Sales department serves the fixed
income  needs  of  our  institutional  clients  and  acts  as the  fixed  income
wholesaler for our broker/dealer  subsidiary,  UBOC Investment Services, Inc. As
with our foreign exchange business, we continue to generate the vast majority of
our securities trading income from customer-related transactions.

     Our interest rate derivative contracts included,  as of June 30, 2004, $4.1
billion notional amount of derivative contracts entered into as an accommodation
for customers.  We act as an intermediary and match these contracts, at a credit
spread,  to contracts with major dealers,  thus  neutralizing the related market
risk.

LIQUIDITY RISK

     Liquidity risk represents the potential for loss as a result of limitations
on our ability to adjust our future  cash flows to meet the needs of  depositors
and borrowers and to fund operations on a timely and  cost-effective  basis. The
ALM Policy  approved by the Finance and Capital  Committee of the Board requires
regular reviews of our liquidity by ALCO.  Additionally,  ALCO conducts  monthly
ongoing  reviews of our liquidity  situation.  Liquidity is managed through this
ALCO  coordination  process  on a  company-wide  basis,  encompassing  all major
business units. The operating management of liquidity is implemented through the
funding and  investment  functions of the Global  Markets  Group.  Our liquidity
management  draws upon the strengths of our extensive retail and commercial core
deposit franchise, coupled with the ability to obtain funds for various terms in
a variety of domestic and international money markets.  Our securities portfolio
represents a significant source of additional liquidity.

     Core deposits  provide us with a sizable  source of  relatively  stable and
low-cost funds. Our average core deposits,  which include demand deposits, money
market demand  accounts,  and savings and consumer


                                       46

<PAGE>


time deposits,  combined with average  common  stockholders'  equity,  funded 85
percent of average total assets of $44.6 billion in the second  quarter of 2004.
Most of the remaining funding was provided by short-term  borrowings in the form
of negotiable  certificates of deposit,  large time deposits,  foreign deposits,
federal funds purchased, securities sold under repurchase agreements, commercial
paper,  and other  borrowings.  In the fourth  quarter of 2003,  we issued  $400
million in long-term  subordinated  debt. In February 2004, we used a portion of
the net proceeds  (approximately $350 million) from the sale of these securities
to redeem our Trust  Notes that were  outstanding  at  December  31,  2003.  The
remainder  of the net  proceeds  from this  offering  is for  general  corporate
purposes,  which may include  extending credit to or funding  investments in our
subsidiaries,  repurchasing  shares of our common  stock,  reducing our existing
indebtedness or financing possible acquisitions.

     The securities  portfolio provides additional  enhancement to our liquidity
position, which may be created through repurchase agreements.  At June 30, 2004,
a liquidity need could have been met by transferring under repurchase agreements
approximately $9.4 billion of our available for sale securities, with no portion
of this  balance  being  encumbered  at June  30,  2004.  Liquidity  may also be
provided  by the sale or  maturity  of  other  assets  such as  interest-bearing
deposits in banks,  federal  funds sold,  and trading  account  securities.  The
aggregate  balance of these assets  averaged  approximately  $1.7 billion in the
second  quarter of 2004.  Additional  liquidity  may be  provided  through  loan
maturities  and sales.  In the third quarter of 2003, we terminated the issuance
of commercial paper under  UnionBanCal  Corporation's  commercial paper program.
UnionBanCal   Commercial   Funding   Corporation  (a   UnionBanCal   Corporation
subsidiary)  continues to issue commercial paper under another  commercial paper
program.  The proceeds of this  commercial  paper program are deposited in Union
Bank of California, N.A. and used to fund our Bank operations.

REGULATORY CAPITAL

     The  following  tables  summarize  our  risk-based  capital,  risk-weighted
assets, and risk-based capital ratios.
<TABLE>
<CAPTION>

UNIONBANCAL CORPORATION

                                                                                    MINIMUM
                             JUNE 30,        DECEMBER 31,         JUNE 30,         REGULATORY
(DOLLARS IN THOUSANDS)         2003              2003               2004           REQUIREMENT
------------------------ ----------------  ----------------  ----------------   ----------------

CAPITAL COMPONENTS
<S>                        <C>               <C>                <C>
Tier 1 capital..........   $ 3,791,651       $ 3,747,884        $ 3,706,202
Tier 2 capital..........       538,163           936,189            922,122
                           -----------       -----------        -----------
Total risk-based capital   $ 4,329,814       $ 4,684,073        $ 4,628,324
                           ===========       ===========        ===========
Risk-weighted assets....   $33,142,588       $33,133,407        $35,422,904
                           ===========       ===========        ===========
Quarterly average assets   $39,366,344       $41,506,828        $44,339,052
                           ===========       ===========        ===========
</TABLE>

<TABLE>
<CAPTION>

CAPITAL RATIOS             AMOUNT   RATIO    AMOUNT   RATIO     AMOUNT  RATIO     AMOUNT   RATIO
------------------------ ---------- -----  ---------- -----     ------  -----   ---------- -----
<S>                      <C>        <C>    <C>        <C>    <C>        <C>     <C>         <C>
Total capital (to risk-
  weighted assets)...... $4,329,814 13.06% $4,684,073 14.14% $4,628,324 13.07% >$2,833,832  8.0%
                                                                               -
Tier 1 capital (to risk-
  weighted assets)......  3,791,651 11.44   3,747,884 11.31   3,706,202 10.46  > 1,416,916  4.0
                                                                               -
Leverage(1).............  3,791,651  9.63   3,747,884  9.03   3,706,202  8.36  > 1,773,562  4.0
                                                                               -
------------------
<FN>

(1)      Tier 1 capital divided by quarterly average assets (excluding certain intangible assets).
</FN>
</TABLE>








                                       47

<PAGE>

<TABLE>
<CAPTION>

UNION BANK OF CALIFORNIA, N.A.

                                                                                    MINIMUM       "WELL-CAPITALIZED"
                             JUNE 30,        DECEMBER 31,        JUNE 30,          REGULATORY         REGULATORY
(DOLLARS IN THOUSANDS)         2003              2003              2004           REQUIREMENT        REQUIREMENT
------------------------ ----------------  ----------------  ----------------   ----------------  ------------------
<S>                        <C>               <C>                <C>
CAPITAL COMPONENTS
Tier 1 capital..........   $ 3,490,596       $ 3,395,519        $ 3,695,565
Tier 2 capital..........       467,613           467,619            476,900
                           -----------       -----------        -----------
Total risk-based capital   $ 3,958,209       $ 3,863,138        $ 4,172,465
                           ===========       ===========        ===========
Risk-weighted assets....   $32,492,833       $32,526,017        $34,925,361
                           ===========       ===========        ===========
Quarterly average assets   $38,811,257       $40,921,517        $43,688,650
                           ===========       ===========        ===========
</TABLE>

<TABLE>
<CAPTION>

CAPITAL RATIOS             AMOUNT   RATIO    AMOUNT   RATIO    AMOUNT   RATIO     AMOUNT   RATIO     AMOUNT    RATIO
------------------------ ---------- -----  ---------- -----  ---------- -----   ---------- -----   ----------  -----
<S>                      <C>        <C>    <C>        <C>    <C>        <C>     <C>          <C>   <C>         <C>
Total capital (to risk-
  weighted assets)...... $3,958,209 12.18% $3,863,138 11.88% $4,172,465 11.95% >$2,794,029   8.0% >$3,492,536  10.0%
                                                                               -                  -
Tier 1 capital (to risk-
  weighted assets)......  3,490,596 10.74   3,395,519 10.44   3,695,565 10.58  > 1,397,014   4.0  > 2,095,522   6.0
                                                                               -                  -
Leverage(1).............  3,490,596  8.99   3,395,519  8.30   3,695,565  8.46  > 1,747,546   4.0  > 2,184,433   5.0
                                                                               -                  -
------------------
<FN>

(1)  Tier 1 capital  divided by  quarterly  average  assets  (excluding  certain
     intangible assets).
</FN>
</TABLE>

     We and Union Bank of California, N.A. are subject to various regulations of
the federal banking agencies,  including minimum capital  requirements.  We both
are  required  to  maintain  minimum  ratios  of  Total  and Tier 1  capital  to
risk-weighted  assets and of Tier 1 capital to  quarterly  average  assets  (the
leverage ratio).

     Included  in Tier 1 capital  at  year-end  2003 was $350  million  in Trust
Preferred  Securities,  which we redeemed on February  19, 2004  resulting  in a
decrease in our capital  ratios at June 30, 2004 compared with June 30, 2003 and
December  31,  2003.  In December of 2003,  we issued $400  million of long-term
subordinated  debt,  which is included in Tier 2 capital as of December 31, 2003
(further  discussion  of our  subordinated  debt  can be found in Note 11 of the
Notes to  Consolidated  Financial  Statements  included in the Form 10-K for the
year ended December 31, 2003).

     Compared  with June 30,  2003,  in  addition  to the changes to our capital
structure mentioned in the above paragraph,  the decrease in our capital ratios,
with the exception of our total capital ratio,  was also  attributable to higher
risk-weighted  assets.  Our total capital ratio increased slightly mainly due to
higher equity.  Our leverage ratio decrease was primarily  attributable  to a $5
billion,  or 13  percent,  increase  in  quarterly  average  assets,  which  was
substantially the result of an increase in our securities portfolio.

     As of June 30, 2004,  management  believes the capital ratios of Union Bank
of  California,  N.A.  met all  regulatory  requirements  of  "well-capitalized"
institutions,  which are 10 percent for the Total  risk-based  capital  ratio, 6
percent for the Tier 1 risk-based  capital  ratio and 5 percent for the leverage
ratio.

BUSINESS SEGMENTS

     We  segregate  our  operations  into four  primary  business  units for the
purpose of management reporting, as shown in the table that follows. The results
show the financial performance of our major business units.

     The  risk-adjusted  return on  capital  (RAROC)  methodology  used seeks to
attribute  economic  capital to business units consistent with the level of risk
they assume.  These risks are primarily credit risk, market risk and operational
risk.  Credit risk is the potential loss in economic value due to the likelihood
that the obligor will not perform as agreed.  Market risk is the potential  loss
in fair  value due to  changes  in  interest  rates,  currency  rates and equity
prices.  Operational  risk is the  potential  loss due to  failures  in internal
control, system failures, or external events.

     The tables on the following pages reflect the condensed income  statements,
selected  average balance sheet items and selected  financial ratios for each of
our primary  business  units.  The  information  presented does not  necessarily
represent the business units'  financial  condition and results of operations as
if they were independent entities.  In addition,  the tables include performance
center earnings.  A performance center is a special unit whose income generating
activities,  unlike typical profit centers,  are based on other


                                       48

<PAGE>


business  segment  units'  customer  base.  The revenues  generated and expenses
incurred for those  transactions  entered into to accommodate  our customers are
allocated to other business segments where the customer  relationships reside. A
performance   center's  purpose  is  to  foster   cross-selling   with  a  total
profitability  view of the products and  services it manages.  For example,  the
Global Markets  Trading and Sales unit,  within the Global  Markets Group,  is a
performance  center that manages the foreign  exchange,  derivatives,  and fixed
income  securities  activities  within the Global Markets  organization.  Unlike
financial accounting,  there is no authoritative body of guidance for management
accounting  equivalent  to U.S.  GAAP.  Consequently,  reported  results are not
necessarily comparable with those presented by other companies.

     The RAROC  measurement  methodology  recognizes credit expense for expected
losses  arising  from credit risk and  attributes  economic  capital  related to
unexpected losses arising from credit, market and operational risks. As a result
of the  methodology  used by the  RAROC  model  to  calculate  expected  losses,
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.  Business  unit  results  are  based  on  an  internal
management reporting system used by management to measure the performance of the
units and UnionBanCal  Corporation as a whole.  Our management  reporting system
identifies  balance sheet and income statement items to each business unit based
on internal management  accounting  policies.  Net interest income is determined
using our internal funds transfer pricing system,  which assigns a cost of funds
to assets or a credit for funds to liabilities and capital, based on their type,
maturity or repricing  characteristics.  Noninterest income and expense directly
or indirectly attributable to a business unit are assigned to that business. The
business  units  are  assigned  the  costs of  products  and  services  directly
attributable to their business  activity  through  standard unit cost accounting
based on volume of usage. All other corporate  expenses  (overhead) are assigned
to the business units based on a predetermined percentage of usage.


























                                       49

<PAGE>


     We have restated  certain  business units' results for the prior periods to
reflect certain transfer pricing changes and any reorganization changes that may
have occurred.

<TABLE>
<CAPTION>

                                            COMMUNITY BANKING        COMMERCIAL
                                              AND INVESTMENT          FINANCIAL          INTERNATIONAL
                                              SERVICES GROUP       SERVICES GROUP        BANKING GROUP
                                           -------------------   -------------------   -----------------
                                                   AS OF AND FOR THE THREE MONTHS ENDED JUNE 30,
                                           -------------------------------------------------------------
                                             2003       2004       2003       2004       2003     2004
                                           --------   --------   --------   --------   -------   -------
<S>                                        <C>        <C>        <C>        <C>         <C>      <C>
RESULTS OF OPERATIONS AFTER PERFORMANCE
  CENTER EARNINGS (DOLLARS IN THOUSANDS):
  Net interest income....................  $163,613   $185,829   $180,956   $191,471    $8,160   $ 9,222
  Noninterest income.....................   111,878    129,793     61,552     72,543    26,090    22,261
                                           --------   --------   --------   --------   -------   -------
  Total revenue..........................   275,491    315,622    242,508    264,014    34,250    31,483
  Noninterest expense....................   197,289    223,645    105,097    104,003    15,398    16,957
  Credit expense (income)................     8,064      7,797     42,145     26,480       547       645
                                           --------   --------   --------   --------   -------   -------
  Income (loss) before income tax expense
    (benefit)............................    70,138     84,180     95,266    133,531    18,305    13,881
  Income tax expense (benefit)...........    26,828     32,199     29,547     45,321     7,001     5,310
                                           --------   --------   --------   --------   -------   -------
  Net income (loss)......................  $ 43,310   $ 51,981   $ 65,719   $ 88,210   $11,304   $ 8,571
                                           ========   ========   ========   ========   =======   =======
PERFORMANCE CENTER EARNINGS (DOLLARS IN
THOUSANDS):
  Net interest income....................  $    201   $    149   $   (194)  $    (87)  $    10   $    26
  Noninterest income.....................    (8,046)    (9,621)    14,566     15,271       253       343
  Noninterest expense....................    (8,353)    (7,308)     8,886      8,015        82        22
  Net income (loss)......................       294     (1,354)     3,430      4,464       110       215
  Total loans (dollars in millions)......        25         28        (45)       (46)       --        --
AVERAGE BALANCES (DOLLARS IN MILLIONS):
  Total loans(1).........................  $ 11,229   $ 12,256   $ 13,071   $ 12,140   $ 1,606   $ 1,820
  Total assets...........................    12,236     13,463     15,161     14,467     2,009     2,254
  Total deposits(1)......................    16,432     19,291     12,236     14,379     1,471     2,042
FINANCIAL RATIOS:
  Risk adjusted return on capital(2).....        26%        30%        15%        24%       67%       55%
  Return on average assets(2)............      1.42       1.55       1.74       2.45      2.26      1.53
  Efficiency ratio(3)....................      71.6       70.9       43.3       39.4      45.0      53.9


                                                  GLOBAL                                 UNIONBANCAL
                                              MARKETS GROUP            OTHER             CORPORATION
                                           -------------------   -------------------   ------------------
                                                      AS OF AND FOR THE THREE MONTHS ENDED JUNE 30,
                                           --------------------------------------------------------------
                                             2003       2004       2003       2004       2003      2004
                                           --------   --------   --------   --------   --------  --------
RESULTS OF OPERATIONS AFTER PERFORMANCE
CENTER EARNINGS (DOLLARS IN THOUSANDS):
  Net interest income....................  $ 17,139   $(15,802)  $ 15,909   $ 29,138   $385,777  $399,858
  Noninterest income.....................     1,882      1,394      1,769    105,019    203,171   331,010
                                           --------   --------   --------   --------   --------  --------
  Total revenue..........................    19,021    (14,408)    17,678    134,157    588,948   730,868
  Noninterest expense....................     3,744      4,441     29,476     27,356    351,004   376,402
  Credit expense (income)................        50        177    (25,806)   (45,099)    25,000   (10,000)
                                           --------   --------   --------   --------   --------  --------
  Income (loss) before income tax expense
    (benefit)............................    15,227    (19,026)    14,008    151,900    212,944   364,466
  Income tax expense (benefit)...........     5,824     (7,277)    (1,014)    57,816     68,186   133,369
                                           --------   --------   --------   --------   --------  --------
  Net income (loss)......................  $  9,403   $(11,749)  $ 15,022   $ 94,084   $144,758  $231,097
                                           ========   ========   ========   ========   ========  ========
PERFORMANCE CENTER EARNINGS (DOLLARS IN
THOUSANDS):
Net interest income......................  $   (128)  $   (191)  $    111   $    103   $     --  $     --
Noninterest income.......................    (9,876)    (9,523)     3,103      3,530         --        --
Noninterest expense......................    (2,025)    (1,847)     1,410      1,118         --        --
Net income (loss)........................    (4,927)    (4,858)     1,093      1,533         --        --
Total loans (dollars in millions)........        --         --         20         18         --        --
AVERAGE BALANCES (DOLLARS IN MILLIONS):
Total loans(1)...........................  $    287   $    366   $    324   $    257   $ 26,517  $ 26,839
Total assets.............................     9,454     13,272        916      1,155     39,776    44,611
Total deposits(1)........................     1,071        680      1,377      1,418     32,587    37,810
FINANCIAL RATIOS:
Risk adjusted return on capital(2).......         4%        (5)%       na         na         na        na
Return on average assets(2)..............      0.40      (0.36)        na         na       1.46%     2.08%
Efficiency ratio(3)......................      19.7      (30.8)        na         na       59.5      51.4

-------------------------------
<FN>

(1)  Represents  loans and deposits for each business  segment after  allocation
     between the  segments of loans and deposits  originated  in one segment but
     managed by another segment.

(2)  Annualized.

(3)  The efficiency  ratio is noninterest  expense,  excluding  foreclosed asset
     expense  (income),  as a percentage of net interest  income and noninterest
     income.  Foreclosed  asset expense (income) was less than ($1 thousand) and
     $17 thousand in the second quarters of 2003 and 2004, respectively.

na = not applicable

</FN>
</TABLE>

                                       50

<PAGE>

<TABLE>
<CAPTION>


                                             COMMUNITY BANKING       COMMERCIAL
                                               AND INVESTMENT         FINANCIAL          INTERNATIONAL
                                             SERVICES GROUP         SERVICES GROUP       BANKING GROUP
                                           -------------------   -------------------   ------------------
                                                        AS OF AND FOR THE SIX MONTHS ENDED JUNE 30,
                                           --------------------------------------------------------------
                                             2003       2004       2003       2004       2003      2004
                                           --------   --------   --------   --------   --------  --------
<S>                                        <C>        <C>        <C>        <C>        <C>       <C>
RESULTS OF OPERATIONS AFTER PERFORMANCE
  CENTER EARNINGS (DOLLARS IN THOUSANDS):
  Net interest income....................  $331,474   $368,496   $360,187   $374,978   $ 17,117  $ 17,030
  Noninterest income.....................   213,503    246,394    119,464    142,170     41,573    40,450
                                           --------   --------   --------   --------   --------  --------
  Total revenue..........................   544,977    614,890    479,651    517,148     58,690    57,480
  Noninterest expense....................   397,179    442,629    203,856    208,645     30,333    32,640
  Credit expense (income)................    15,783     15,584     84,607     57,706      1,052     1,249
                                           --------   --------   --------   --------   --------  --------
  Income (loss) before income tax expense
    (benefit)............................   132,015    156,677    191,188    250,797     27,305    23,591
  Income tax expense (benefit)...........    50,496     59,929     60,227     83,570     10,444     9,024
                                           --------   --------   --------   --------   --------  --------
  Net income (loss)......................  $ 81,519   $ 96,748   $130,961   $167,227   $ 16,861  $ 14,567
                                           ========   ========   ========   ========   ========  ========
PERFORMANCE CENTER EARNINGS (DOLLARS IN
THOUSANDS):
  Net interest income....................  $    403   $    322   $   (401)  $   (204)  $     14  $     35
  Noninterest income.....................   (18,410)   (20,173)    29,415     31,889        582       616
  Noninterest expense....................   (16,554)   (16,503)    17,193     17,591        334        65
  Net income (loss)......................      (937)    (2,103)     7,387      8,776        162       362
  Total loans (dollars in millions)......        26         27        (46)       (45)        --        --
AVERAGE BALANCES (DOLLARS IN MILLIONS):
  Total loans(1).........................  $ 11,171   $ 12,174   $ 13,301   $ 12,112   $  1,566  $  1,692
  Total assets...........................    12,132     13,387     15,375     14,330      1,966     2,129
  Total deposits(1)......................    16,113     18,978     11,797     13,859      1,494     1,853
FINANCIAL RATIOS:
  Risk adjusted return on capital(2).....        25%        28%        15%        23%        54%       48%
  Return on average assets(2)............      1.36       1.45       1.72       2.35       1.73      1.38
  Efficiency ratio(3)....................      72.9       72.0       42.5       40.3       51.7      56.8


                                                  GLOBAL                                    UNIONBANCAL
                                               MARKETS GROUP            OTHER               CORPORATION
                                           -------------------   -------------------   ----------------------
                                                        AS OF AND FOR THE SIX MONTHS ENDED JUNE 30,
                                           ------------------------------------------------------------------
                                             2003       2004       2003       2004        2003        2004
                                           --------   --------   --------   --------   ----------  ----------
RESULTS OF OPERATIONS AFTER PERFORMANCE
CENTER EARNINGS (DOLLARS IN THOUSANDS):
Net interest income.....................   $ 38,231   $(14,651)  $ 29,548   $ 54,426   $  776,557  $  800,279
Noninterest income......................      3,408      2,936     10,994    110,265      388,942     542,215
                                           --------   --------   --------   --------   ----------  ----------
Total revenue...........................     41,639    (11,715)    40,542    164,691    1,165,499   1,342,494
Noninterest expense.....................      8,232     10,868     54,004     54,726      693,604     749,508
Credit expense (income).................        100        227    (46,542)   (89,766)      55,000     (15,000)
                                           --------   --------   --------   --------   ----------  ----------
Income (loss) before income tax expense
  (benefit).............................     33,307    (22,810)    33,080    199,731      416,895     607,986
Income tax expense (benefit)............     12,740     (8,725)     2,713     75,604      136,620     219,402
                                           --------   --------   --------   --------   ----------  ----------
Net income (loss).......................   $ 20,567   $(14,085)  $ 30,367   $124,127   $  280,275  $  388,584
                                           ========   ========   ========   ========   ==========  ==========
PERFORMANCE CENTER EARNINGS (DOLLARS IN
THOUSANDS):
Net interest income.....................   $   (230)  $   (355)  $    214   $    202   $       --  $       --
Noninterest income......................    (17,949)   (19,719)     6,362      7,387           --          --
Noninterest expense.....................     (3,653)    (3,752)     2,680      2,599           --          --
Net income (loss).......................     (8,970)   (10,079)     2,358      3,044           --          --
Total loans (dollars in millions).......         --         --         20         18           --          --
AVERAGE BALANCES (DOLLARS IN MILLIONS):
Total loans(1)..........................   $    251   $    246   $    331   $    266   $   26,620  $   26,490
Total assets............................      8,714     12,827        879      1,158       39,066      43,831
Total deposits(1).......................      1,139        890      1,294      1,295       31,837      36,875
FINANCIAL RATIOS:
Risk adjusted return on capital(2)......          4%        (3)%       na         na           na          na
Return on average assets(2).............       0.48      (0.22)        na         na         1.45%       1.78%
Efficiency ratio(3).....................       19.8      (92.8)        na         na         59.4        55.7

-------------------------------
<FN>

(1)  Represents  loans and deposits for each business  segment after  allocation
     between the  segments of loans and deposits  originated  in one segment but
     managed by another segment.

(2)  Annualized.

(3)  The efficiency  ratio is noninterest  expense,  excluding  foreclosed asset
     expense  (income),  as a percentage of net interest  income and noninterest
     income.  Foreclosed asset and noninterest income.  Foreclosed asset expense
     was $51  thousand  and $536  thousand  in the first six  months of 2003 and
     2004, respectively.

na = not applicable

</FN>
</TABLE>

                                       51

<PAGE>


     COMMUNITY BANKING AND INVESTMENT SERVICES GROUP

     In the second  quarter of 2004, net income  increased  $8.7 million,  or 20
percent,  compared to the second quarter of 2003. In the second quarter of 2004,
total revenue  increased  $40.1 million,  or 15 percent,  compared to the second
quarter of 2003.  Increased  asset and  deposit  volumes  offset the effect of a
lower interest rate environment  leading to an increase of $22.2 million,  or 14
percent,  in net interest  income over the second quarter of 2003. In the second
quarter of 2004,  noninterest  income was $17.9 million,  or 16 percent,  higher
than the second quarter of 2003 primarily due to higher deposit fees,  increased
card processing fees and increased  insurance  commissions.  Noninterest expense
increased $26.4 million,  or 13 percent,  in the second quarter of 2004 compared
to the  second  quarter  of  2003,  with the  majority  of that  increase  being
attributable to higher staff expenses  related to our  acquisitions  and de novo
branches, as well as increased deposit volumes and residential loan growth.

     In 2004, the Community  Banking and Investment  Services Group continues to
emphasize  growing the consumer asset  portfolio,  expanding  wealth  management
services, extending the small business franchise,  expanding the branch network,
and expanding  cross selling  activities  throughout  the Bank. The strategy for
growing the  consumer  asset  portfolio  primarily  focused on mortgage and home
equity products that may be originated  through the branch  network,  as well as
through channels such as wholesalers,  correspondents, and whole loan purchases.
As of June 30, 2004,  residential mortgages grew by $1.4 billion, or 21 percent,
from June 30,  2003.  The Wealth  Management  division  is focused on becoming a
growing provider of banking and investment products for affluent  individuals in
geographic  areas  already  served by us.  We seek to  provide  quality  service
superior  to that of our  competitors  and offer  our  customers  an  attractive
product  suite.  Core elements of the  initiative  to extend our small  business
franchise include improving our sales force,  increasing  marketing  activities,
adding new locations,  and developing online capabilities to complement physical
distribution.  It is anticipated that expansion of the distribution network will
be achieved through  acquisitions  and new branch openings.  On July 1, 2003, we
completed the acquisition of Monterey Bay Bank, a $632 million asset savings and
loan   association   headquartered  in  Watsonville,   California,   with  eight
full-service  branches in the Greater Monterey Bay area. On January 16, 2004, we
completed our  acquisition  of Business Bank of  California,  a commercial  bank
headquartered  in San  Bernardino,  California,  with $704 million in assets and
fifteen  full-service  branches in the Southern California Inland Empire and the
San Francisco Bay Area.

     The Community  Banking and  Investment  Services  Group is comprised of six
major divisions:  Community Banking,  Wealth Management,  Institutional Services
and Asset  Management,  Consumer  Asset  Management,  UBOC Markets and Insurance
Services.

     COMMUNITY BANKING serves its customers through 297 full-service branches in
California, and a network of 567 proprietary ATMs. Customers may also access our
services 24 hours a day by telephone or through our WEBSITE at www.uboc.com.  In
addition, the division offers automated teller services.

     This division is organized by service  delivery  method,  by markets and by
geography. We serve our customers in the following ways:

     o    through  community   banking  branches,   which  serve  consumers  and
          businesses  with  checking  and deposit  services,  as well as various
          types of consumer  and  business  financing,  brokerage  products  and
          services, and insurance services;

     o    through on-line access to our internet banking services, which augment
          our  physical  delivery  channels  by  providing  an array of customer
          transaction, bill payment and loan payment services;

     o    through branches and business banking centers,  which serve businesses
          with annual sales up to $5 million; and

     o    through in-store branches in supermarkets,  which also serve consumers
          and businesses.



                                       52

<PAGE>


     WEALTH  MANAGEMENT  provides  private  banking  services  to  our  affluent
clientele.

     o    The Private Bank focuses primarily on delivering financial services to
          high net worth individuals with sophisticated  financial needs as well
          as to  professional  service  firms.  Specific  products  and services
          include  trust and  estate  services,  investment  account  management
          services,  and  deposit  and credit  products.  A key  strategy of The
          Private Bank is to expand its  business by  leveraging  existing  Bank
          client  relationships.  Through 14 existing  locations in  California,
          Oregon, and Washington,  The Private Bank relationship  managers offer
          all of our available products and services.

     INSTITUTIONAL  SERVICES AND ASSET MANAGEMENT provides investment management
and administration services for a broad range of individuals and institutions.

     o    HighMark Capital  Management,  Inc., a registered  investment advisor,
          provides investment advisory services to institutional clients and its
          proprietary  mutual funds,  the  affiliated  HighMark  Funds.  It also
          provides advisory services to Union Bank of California, N.A. trust and
          agency clients, including corporations, pension funds and individuals.
          HighMark  Capital  Management,  Inc. also provides mutual fund support
          services. HighMark Capital Management,  Inc.'s strategy is to increase
          assets under  management by  broadening  its client base and expanding
          the distribution of shares of its mutual fund clients.

     o    Institutional   Services  provides   custody,   corporate  trust,  and
          retirement plan services.  Custody Services provides both domestic and
          international   safekeeping/settlement   services   in   addition   to
          securities lending.  Corporate Trust acts as trustee for corporate and
          municipal debt issues.  Retirement  Services  provides a full range of
          defined  benefit and  defined  contribution  administrative  services,
          including trustee services, administration, investment management, and
          401(k) valuation services.  The client base of Institutional  Services
          includes financial  institutions,  corporations,  government agencies,
          unions,  insurance companies,  mutual funds,  investment managers, and
          non-profit  organizations.  Institutional  Services'  strategy  is  to
          continue to leverage and expand its position in our target markets.

     On May 17,  2004,  Union  Bank of  California,  N.A.,  signed a  definitive
agreement to acquire the  business  portfolio  of CNA Trust  Company.  With this
acquisition  we  expect  that we will be  better  positioned  to  provide a more
complete range of retirement  services to our business clients.  The transaction
was completed on August 1, 2004.

     CONSUMER   ASSET   MANAGEMENT   provides  the   centralized   underwriting,
processing,   servicing,  collection  and  administration  for  consumer  assets
including  residential  loans.  On May 31, 2004,  we  completed  the sale of our
merchant  card  portfolio  and formed a long-term  marketing  alliance with NOVA
Information Systems (NOVA). NOVA acquired our merchant accounts and will provide
processing  services,  customer service and support  operations to our more than
10,000 merchant  locations.  We will market merchant services through our branch
network in California, Oregon and Washington.

     o    Consumer Asset Management is centralized in two California  sites, one
          in San Diego and one in Brea, and

     o    provides  customer and credit  management  services for consumer  loan
          products.

     UBOC  MARKETS.In  May 2004,  the Bank announced a strategic move to realign
the Bank's wholly owned brokerage subsidiary, UBOC Investment Services, Inc. and
Personal  Trust Sales with  Securities  Trading  and  Institutional  Sales.  The
realignment  advances our goals of leveraging and anchoring client relationships
by enhancing the Bank's cross sell culture.

     o    Our  brokerage   products  and  services  are  provided  through  UBOC
          Investment  Services,   Inc.,  a  registered   broker/dealer  offering
          investment  products to individuals and institutional  clients,  whose
          primary strategy is to further penetrate our existing client base.


                                       53

<PAGE>


     INSURANCE  SERVICES  provides  a range  of  risk  management  services  and
insurance  products to business and retail customers.  The group, which includes
our 2001 acquisition of Armstrong/Robitaille, Inc., our 2002 acquisition of John
Burnham and Company, and our 2003 acquisitions of Tanner Insurance Brokers, Inc.
and Knight Insurance Agency,  offers its risk management and insurance  products
through offices in California and Oregon.

     OTHER SERVICES

     Through alliances with other financial institutions,  the Community Banking
and Investment Services Group offers additional  products and services,  such as
credit cards, leasing, and asset-based and leveraged financing.

     The group  competes  with larger  banks by  attempting  to provide  service
quality superior to that of its major competitors.  The group's primary means of
competing with community  banks include its branch network and its technology to
deliver  banking  services.  The group also offers  convenient  banking hours to
consumers through our drive-through banking locations and selected branches that
are open seven days a week.

     The group  competes  with a number of  commercial  banks,  internet  banks,
savings  associations and credit unions,  as well as more specialized  financial
service  providers  such as investment  brokerage  companies,  consumer  finance
companies,  and residential real estate lenders. The group's primary competitors
are other  major  depository  institutions  such as Bank of  America,  Citibank,
Washington  Mutual and Wells Fargo,  as well as smaller  community  banks in the
markets in which we operate.

     COMMERCIAL FINANCIAL SERVICES GROUP

     The  Commercial   Financial   Services  Group  offers  financing  and  cash
management  services to middle-market and large corporate  businesses  primarily
headquartered in the western United States.  The Commercial  Financial  Services
Group  has  continued  to focus  specialized  financing  expertise  to  specific
geographic markets and industry segments such as energy, entertainment, and real
estate. Relationship managers in the Commercial Financial Services Group provide
credit services,  including commercial loans,  accounts receivable and inventory
financing,  project financing,  lease financing, trade financing and real estate
financing. In addition to credit services, the group offers its customers access
to cash management  services  delivered through deposit managers with experience
in cash management solutions for businesses and government entities.

     In the second quarter of 2004, net income  increased  $22.5 million,  or 34
percent,  compared to the second quarter of 2003. In the second quarter of 2004,
net interest  income  increased  $10.5  million,  or 6 percent,  compared to the
second  quarter of 2003,  partially  attributable  to the  impact of  increasing
deposit  balances and a lower cost of funds  resulting  from the lower  interest
rate  environment.  Excluding  higher income in the private equity  portfolio of
$3.0 million,  mainly related to higher net gains on private capital investments
in  the  second  quarter  of  2004  compared  to the  second  quarter  of  2003,
noninterest  income  increased  $8.0  million,  or 13  percent.  This 13 percent
increase was mainly attributable to higher deposit-related  service fees. In the
second  quarter  of 2004,  noninterest  expense  decreased  $1.1  million,  or 1
percent.  Credit  expense  decreased  $15.7  million  mainly  as a  result  of a
refinement in the RAROC allocation of capital and expected losses and lower loan
balances year-over-year.

     The group's initiatives during 2004 continue to include expanding wholesale
deposit  activities and increasing  domestic trade  financing.  Loan  strategies
include  originating,  underwriting  and  syndicating  loans in core  competency
markets, such as the California  middle-market,  commercial real estate, energy,
entertainment,   equipment  leasing  and  commercial  finance.   The  Commercial
Financial Services Group provides strong processing services, including services
such as check processing and cash vault services.


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     The  Commercial  Financial  Services  Group is comprised  of the  following
business units:

     o    the Commercial Banking Division, which serves California middle-market
          and  large  corporate   companies  with  commercial   lending,   trade
          financing, and asset- based loans;

     o    the Corporate Deposit and Treasury Management Division, which provides
          deposit  and cash  management  expertise  to  middle-market  and large
          corporate clients, government agencies and specialized industries;

     o    the Real  Estate  Industries  Division,  which  provides  real  estate
          lending products such as construction loans,  commercial mortgages and
          bridge financing;

     o    the Energy Capital Services Division,  which provides custom financing
          and project  financing to oil and gas companies,  as well as power and
          utility companies, nationwide and internationally; and

     o    the  Corporate  Capital  Markets   Division,   which  provides  custom
          financing  to  middle-market  and  large  corporate  clients  in their
          defined  industries  and  geographic  markets,  together  with limited
          merchant and investment banking related products and services.

     The group's main strategy is to target  industries  and companies for which
the  group  can  reasonably  expect  to be one of a  customer's  primary  banks.
Consistent  with its strategy,  the group  attempts to serve a large part of its
targeted  customers'  credit and depository needs. The group competes with other
banks primarily on the basis of the quality of its  relationship  managers,  the
delivery of quality customer  service,  and its reputation as a "business bank."
The group also competes with a variety of other  financial  services  companies.
Competitors include other major California banks, as well as regional,  national
and international banks. In addition,  the group competes with investment banks,
commercial finance companies, leasing companies, and insurance companies.

     The Check  Clearing for the 21st Century Act (Check 21) was signed into law
on October 28, 2003, and will become  effective on October 28, 2004. Check 21 is
designed  to  foster  innovation  in the  payments  system  and to  enhance  its
efficiency by reducing some of the legal  impediments to check  truncation (that
is, the banking process by which  cancelled  original checks are not returned to
the customer with the customer's  regular bank  statement).  The law facilitates
check  truncation by creating a new  negotiable  instrument  called a substitute
check,  which would permit banks to truncate  original checks,  to process check
information electronically,  and to deliver substitute checks to banks that want
to  continue  receiving  paper  checks.  A  substitute  check  will be the legal
equivalent of the original check and will include all the information  contained
on the  original  check.  The law does not  require  banks to  accept  checks in
electronic  form nor does it require banks to use the new  authority  granted by
Check 21 to create substitute checks.  The final regulations  regarding Check 21
were  published in July 2004.  In order to manage and control the changes  which
may be  necessitated  by Check 21, we have  established  a "Check 21  Initiative
Project  Management  Structure,"  composed of  representatives  from many of our
operating and support units.  The objective of this initiative is to allow us to
prioritize  and  allocate  our  resources  and  mitigate  risk  to  our  ongoing
operations.  It is not possible at this time to predict the long-term  financial
impact of Check 21, and regulations thereunder,  on our business.

     INTERNATIONAL BANKING GROUP

     The   International   Banking   Group   primarily   focuses  on   providing
correspondent  banking  and trade  finance  related  products  and  services  to
international financial institutions worldwide. This focus includes products and
services  such as letters of credit,  international  payments,  collections  and
providing  short-term  financing.  The majority of the revenue  generated by the
International Banking Group is from financial  institutions domiciled outside of
the U.S.

     In the second  quarter of 2004, net income  decreased  $2.7 million,  or 24
percent,  compared to the second quarter of 2003.  Total revenue  decreased $2.7
million  or 8 percent,  compared  to the second  quarter


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<PAGE>


of 2003. Net interest income increased $1.1 million, or 13 percent,  compared to
the  second  quarter  of 2003  mainly  attributable  to  higher  demand  deposit
balances.  Noninterest income was $3.8 million, or 15 percent, lower compared to
the second quarter of 2003 primarily  attributable  to a $9.0 million gain on an
early  call of a Mexican  Brady Bond in the  second  quarter  of 2003  partially
offset  by a $3.7  million  insurance  recovery  and  higher  payment  and trade
activities in the current quarter.  Noninterest  expense increased $1.6 million,
or 10 percent,  compared to the second quarter of 2003. In the second quarter of
2004,  credit expense of $0.6 million was slightly higher compared to the second
quarter of 2003. The  International  Banking  Group's  business  revolves around
short-term financing, mostly to banks, which provides service-related income, as
well  as  significantly  lower  credit  risk  when  compared  to  other  lending
activities.

     The  group  has a long  history  of  providing  correspondent  banking  and
trade-related products and services to international financial institutions.  We
believe  the  group  continues  to  achieve  strong  customer   loyalty  in  the
correspondent banking market. The International Banking Group,  headquartered in
San Francisco,  also maintains offices in Asia, Latin America and Europe; and an
international banking subsidiary in New York.

     GLOBAL MARKETS GROUP

     The Global Markets Group  conducts  business to support all of our business
groups  and  their  customers.  This  group  is  responsible  for  our  treasury
management, which encompasses wholesale funding, liquidity management,  interest
rate risk  management,  including the ALM  securities  portfolio  management and
derivatives  hedging  activities.  Associated  with this function,  this group's
results  include the transfer  pricing  activity for us, which  allocates to the
other business  segments their cost of funds on all asset  categories and credit
for funds on all liability categories.  Another important function of the Global
Markets Group is the offering of a broad range of risk management products, such
as foreign  exchange  contracts and interest rate derivative  hedge products for
our client's risk management  needs.  It also trades fixed income  securities to
meet investment needs of our institutional  and business  clients.  In May 2004,
with a  strategic  realignment  of the market and  investment  product  offering
functions,  the UBOC Markets unit was formed,  encompassing  the risk management
and  fixed  income  products  offerings  of the  Global  Markets  Group and UBOC
Investment Services, Inc., the Bank's brokerage subsidiary.  The UBOC Investment
Services'  management  dually  reports  to the  Global  Markets  Group  and  the
Community   Banking  and  Investment   Services  Group.   UBOC  Markets'  income
attributable  to business  with our clients is  allocated,  through  performance
centers, to the business units.

     In the second quarter of 2004,  net loss was $11.7 million  compared to net
income of $9.4  million in the  second  quarter  of 2003.  Total  revenue in the
second  quarter  of 2004  decreased  by $33.4  million,  compared  to the second
quarter of 2003, resulting from a $32.9 million decrease in net interest income.
The  decrease in net  interest  income was  primarily  attributable  to a higher
transfer  pricing  residual  in the second  quarter of 2004  resulting  from the
continuing  growth in core deposits,  which are priced on longer-term  liability
rates,  compared to our portfolio of relatively short-term loans and securities,
which  are  priced  at their  shorter-term  lending  rates.  Noninterest  income
decreased  $0.5  million  compared  to the second  quarter of 2003.  Noninterest
expense in the second  quarter of 2004  increased  $0.7 million,  or 19 percent,
compared  to  the  second   quarter  of  2003,   mainly   attributable   to  the
ineffectiveness  on our cash flow hedges,  which is  recognized  in  noninterest
expense.

     OTHER

     "Other" includes the following items:

     o    corporate activities that are not directly  attributable to one of the
          four major business units. Included in this category are certain other
          nonrecurring items such as the results of operations of certain parent
          company  non-bank  subsidiaries  and  the  elimination  of  the  fully
          taxable-equivalent basis amount;


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<PAGE>


     o    the  adjustment  between  the  credit  expense  under  RAROC  and  the
          provision for credit  losses under U.S.  GAAP and earnings  associated
          with unallocated equity capital;

     o    the  adjustment  between the tax expense  reported under RAROC using a
          tax rate of 38.25 percent and the Company's effective tax rates;

     o    the Pacific Rim Corporate  Group,  with assets of $293 million at June
          30, 2004,  which  offers a range of credit,  deposit,  and  investment
          management  products and  services to companies in the U.S.  which are
          affiliated with companies headquartered in Japan; and

     o    the residual costs of support groups.

     Net income for "Other" in the second quarter of 2004 was $94.1 million. The
results were impacted by the following factors:

     o    Credit expense  (income) of ($45.1)  million was due to the difference
          between the $10.0  million  reversal of  provision  for credit  losses
          calculated  under our U.S. GAAP  methodology  and the $35.1 million in
          expected losses for the reportable  business segments,  which utilizes
          the RAROC methodology;

     o    Net  interest  income  of  $29.1  million,  which  resulted  from  the
          differences  between the credit for equity for the reportable segments
          under  RAROC  and  the  net  interest  income  earned  by  UnionBanCal
          Corporation,  and a credit for  deposits in the Pacific Rim  Corporate
          Group;

     o    Noninterest  income of $105.0 million,  which included a $93.0 million
          gain on the sale of our merchant  card  portfolio  and an $8.5 million
          gain on the sale of real property; and

     o    Noninterest expense of $27.4 million.

     Net income for "Other" in the second quarter of 2003 was $15.0 million. The
results were impacted by the following factors:

     o    Credit expense  (income) of ($25.8)  million was due to the difference
          between the $25.0 million provision for credit losses calculated under
          our U.S. GAAP methodology and the $50.8 million in expected losses for
          the   reportable   business   segments,   which   utilizes  the  RAROC
          methodology;

     o    Net  interest  income  of  $15.9  million,  which  resulted  from  the
          differences  between the credit for equity for the reportable segments
          under  RAROC  and  the  net  interest  income  earned  by  UnionBanCal
          Corporation,  and a credit for  deposits in the Pacific Rim  Corporate
          Group;

     o    Noninterest income of $1.8 million; and

     o    Noninterest expense of $29.5 million.

CERTAIN BUSINESS RISK FACTORS

     ADVERSE CALIFORNIA ECONOMIC CONDITIONS COULD ADVERSELY AFFECT OUR BUSINESS

     A substantial majority of our assets, deposits and fee income are generated
in California.  As a result, poor economic conditions in California may cause us
to incur losses  associated  with higher default rates and decreased  collateral
values in our loan portfolio.  Economic  conditions in California are subject to
various  uncertainties  at this time,  including  the decline in the  technology
sector, the California state government's  budgetary difficulties and continuing
fiscal difficulties.  We have various banking  relationships with the California
State government,  including credit and deposit relationships and funds transfer
arrangements.  If economic  conditions in California decline, we expect that our
level of problem  assets could  increase and our  prospects  for growth could be
impaired.  On March 2, 2004, the California  electorate  approved certain ballot
measures, including a one-time economic recovery bond issue of up to $15 billion
to pay off the State's  accumulated  general fund deficit.  While these measures
are  expected  to


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provide near-term relief for the State government's fiscal situation,  the State
of  California  continues to face fiscal  challenges,  the  long-term  impact of
which, on the State's economy, cannot be predicted with any certainty.

     THE  CONTINUING  WAR ON  TERRORISM  COULD  ADVERSELY  AFFECT U.S.  ECONOMIC
       CONDITIONS

     Acts or  threats  of  terrorism  and  actions  taken by the  U.S.  or other
governments as a result of such acts or threats may result in a downturn in U.S.
economic  conditions and could adversely affect business and economic conditions
in the U.S. generally and in our principal markets.

     ADVERSE  ECONOMIC  FACTORS  AFFECTING  CERTAIN  INDUSTRIES  COULD ADVERSELY
       AFFECT OUR BUSINESS

     We are subject to certain industry-specific  economic factors. For example,
a significant  and increasing  portion of our total loan portfolio is related to
residential real estate.  Accordingly, a downturn in the real estate and housing
industries  in  California  could  have an  adverse  effect  on our  operations.
Increases in residential mortgage loan interest rates could also have an adverse
effect on our  operations  by  depressing  new mortgage  loan  originations.  We
provide  financing to  businesses  in a number of other  industries  that may be
particularly  vulnerable to  industry-specific  economic factors,  including the
communications / media industry,  the retail industry, the airline industry, the
power  industry and the  technology  industry.  Recent  increases in fuel prices
could   adversely   affect   businesses   in   several   of  these   industries.
Industry-specific  risks are beyond our control and could  adversely  affect our
portfolio of loans,  potentially resulting in an increase in nonperforming loans
or  charge-offs.

     FLUCTUATIONS IN INTEREST RATES COULD ADVERSELY AFFECT OUR BUSINESS

     Significant  increases in market  interest rates, or the perception that an
increase may occur,  could  adversely  affect both our ability to originate  new
loans and our ability to grow.  Conversely,  decreases  in interest  rates could
result in an  acceleration  in the  prepayment  of loans.  An increase in market
interest  rates could also  adversely  affect the  ability of our  floating-rate
borrowers to meet their higher payment obligations.  If this occurred,  it could
cause an increase in nonperforming assets and charge-offs, which could adversely
affect our business.

     FLUCTUATIONS IN INTEREST RATES COULD ADVERSELY AFFECT OUR MARGIN SPREAD

     Changes in market interest  rates,  including  changes in the  relationship
between  short-term and long-term  market  interest  rates or between  different
interest rate indices,  can impact our margin  spread,  that is, the  difference
between the interest rates we charge on interest earning assets,  such as loans,
and the interest rates we pay on interest bearing liabilities,  such as deposits
or other  borrowings.  The  impact,  particularly  in a  falling  interest  rate
environment,  could  result in a decrease  in our  interest  income  relative to
interest expense.

     STOCKHOLDER VOTES ARE CONTROLLED BY THE BANK OF TOKYO-MITSUBISHI, LTD.; OUR
       INTERESTS  MAY NOT BE THE  SAME AS THE BANK OF  TOKYO-MITSUBISHI,  LTD.'S
       INTERESTS

     The Bank of Tokyo-Mitsubishi, Ltd., a wholly owned subsidiary of Mitsubishi
Tokyo Financial  Group,  Inc., owns a majority  (approximately  62 percent as of
June 30, 2004) of the outstanding  shares of our common stock. As a result,  The
Bank of  Tokyo-Mitsubishi,  Ltd. can elect all of our  directors and can control
the vote on all matters,  including  determinations such as: approval of mergers
or other business combinations; sales of all or substantially all of our assets;
any matters submitted to a vote of our stockholders;  issuance of any additional
common stock or other equity  securities;  incurrence  of debt other than in the
ordinary  course of business;  the selection  and tenure of our Chief  Executive
Officer;  payment of  dividends  with  respect to common  stock or other  equity
securities;   and  other  matters  that  might  be  favorable  to  The  Bank  of
Tokyo-Mitsubishi, Ltd.


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<PAGE>


     A   majority   of  our   directors   are   independent   of  The   Bank  of
Tokyo-Mitsubishi,  Ltd.  and  are  not  officers  or  employees  of  UnionBanCal
Corporation or any of our  affiliates,  including The Bank of  Tokyo-Mitsubishi,
Ltd. However,  because of The Bank of Tokyo-Mitsubishi,  Ltd.'s control over the
election  of our  directors,  we  could  designate  ourselves  as a  "controlled
company"  under  the  New  York  Stock  Exchange  Rules  and  could  change  the
composition  of our  Board of  Directors  so that  the  Board  would  not have a
majority of independent directors. The Bank of Tokyo-Mitsubishi,  Ltd.'s ability
to prevent an  unsolicited  bid for us or any other change in control could have
an adverse  effect on the market  price for our common  stock.

     POSSIBLE FUTURE SALES OF SHARES BY THE BANK OF TOKYO-MITSUBISHI, LTD. COULD
       ADVERSELY AFFECT THE MARKET FOR OUR STOCK

     The Bank of  Tokyo-Mitsubishi,  Ltd. may sell shares of our common stock in
compliance  with  the  federal  securities  laws.  By  virtue  of  The  Bank  of
Tokyo-Mitsubishi,  Ltd.'s current  control of us, The Bank of  Tokyo-Mitsubishi,
Ltd.  could  sell large  amounts of shares of our common  stock by causing us to
file a registration  statement that would allow them to sell shares more easily.
In addition, The Bank of Tokyo-Mitsubishi,  Ltd. could sell shares of our common
stock without registration. Although we can make no prediction as to the effect,
if any,  that such sales  would have on the  market  price of our common  stock,
sales of substantial  amounts of our common stock,  or the perception  that such
sales could occur,  could adversely affect the market price of our common stock.
If The Bank of  Tokyo-Mitsubishi,  Ltd. sells or transfers  shares of our common
stock  as a block,  another  person  or  entity  could  become  our  controlling
stockholder.

     THE BANK OF  TOKYO-MITSUBISHI,  LTD.'S FINANCIAL  CONDITION COULD ADVERSELY
       AFFECT OUR OPERATIONS

     We fund our operations independently of The Bank of Tokyo-Mitsubishi,  Ltd.
and  believe  our  business is not  necessarily  closely  related to The Bank of
Tokyo-Mitsubishi, Ltd.'s business or outlook, including the proposed merger with
UFJ Holdings, Inc. However, The Bank of Tokyo-Mitsubishi,  Ltd.'s credit ratings
may  affect our  credit  ratings.  The Bank of  Tokyo-Mitsubishi,  Ltd.  is also
subject  to  regulatory  oversight  and  review by  Japanese  and US  regulatory
authorities.  Our business  operations  and expansion  plans could be negatively
affected by regulatory concerns related to the Japanese financial system and The
Bank of Tokyo-Mitsubishi, Ltd., including the proposed merger with UFJ Holdings,
Inc.

     POTENTIAL  CONFLICTS OF INTEREST  WITH THE BANK OF  TOKYO-MITSUBISHI,  LTD.
       COULD ADVERSELY AFFECT US

     The Bank of  Tokyo-Mitsubishi,  Ltd.'s  view of  possible  new  businesses,
strategies,  acquisitions,  divestitures  or other  initiatives  may differ from
ours. This may delay or hinder us from pursuing such initiatives.

     Also,  as  part  of  The  Bank  of  Tokyo-Mitsubishi,  Ltd.'s  normal  risk
management processes,  The Bank of Tokyo-Mitsubishi,  Ltd. manages global credit
exposures  and  concentrations  on an  aggregate  basis,  including  UnionBanCal
Corporation.  Therefore,  at  certain  levels or in certain  circumstances,  our
ability to approve certain credits or other banking  transactions and categories
of customers is subject to the concurrence of The Bank of Tokyo-Mitsubishi, Ltd.
We may wish to extend  credit or  furnish  other  banking  services  to the same
customers  as The Bank of  Tokyo-Mitsubishi,  Ltd.  Our  ability to do so may be
limited for various  reasons,  including  The Bank of  Tokyo-Mitsubishi,  Ltd.'s
aggregate credit exposure and marketing policies.

     Certain  directors'  and  officers'  ownership  interests  in The  Bank  of
Tokyo-Mitsubishi,  Ltd.'s  common  stock or service as a director  or officer or
other employee of both us and The Bank of Tokyo-Mitsubishi, Ltd. could create or
appear to create  potential  conflicts of interest,  especially since both of us
compete in the U.S. banking industry.


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<PAGE>


     SUBSTANTIAL  COMPETITION IN THE CALIFORNIA  BANKING MARKET COULD  ADVERSELY
AFFECT US

     Banking is a highly  competitive  business.  We compete  actively for loan,
deposit,  and  other  financial  services  business  in  California,  as well as
nationally and internationally.  Our competitors include a large number of state
and  national  banks,  thrift  institutions,  credit  unions and major  foreign-
affiliated or foreign banks,  as well as many financial and  nonfinancial  firms
that offer services  similar to those offered by us. Some of our competitors are
community  banks that have strong  local  market  positions.  Other  competitors
include large financial  institutions that have substantial capital,  technology
and marketing  resources.  Such large  financial  institutions  may have greater
access to  capital  at a lower  cost than us,  which may  adversely  affect  our
ability to compete effectively.

     Banks,  securities  firms,  and  insurance  companies  can now combine as a
"financial holding company." Financial holding companies can offer virtually any
type of financial service, including banking, securities underwriting, insurance
(both agency and  underwriting),  and merchant  banking.  Recently,  a number of
foreign banks have acquired  financial  services  companies in the U.S., further
increasing competition in the U.S. market.

     RESTRICTIONS  ON  DIVIDENDS  AND OTHER  DISTRIBUTIONS  COULD LIMIT  AMOUNTS
       PAYABLE TO US

     As a holding  company,  a  substantial  portion of our cash flow  typically
comes  from  dividends  our bank and  nonbank  subsidiaries  pay to us.  Various
statutory  provisions  restrict the amount of dividends our subsidiaries can pay
to us without  regulatory  approval.  In  addition,  if any of our  subsidiaries
liquidate, that subsidiary's creditors will be entitled to receive distributions
from the assets of that subsidiary to satisfy their claims against it before we,
as a holder of an equity interest in the subsidiary, will be entitled to receive
any of the assets of the subsidiary.

     ADVERSE EFFECTS OF, OR CHANGES IN, BANKING OR OTHER LAWS AND REGULATIONS OR
       GOVERNMENTAL FISCAL OR MONETARY POLICIES COULD ADVERSELY AFFECT US

     We are subject to significant federal and state regulation and supervision,
which is primarily  for the benefit and  protection of our customers and not for
the benefit of investors. In the past, our business has been materially affected
by these  regulations.  This trend is likely to continue  in the  future.  Laws,
regulations  or policies,  including  accounting  standards and  interpretations
currently  affecting us and our subsidiaries may change at any time.  Regulatory
authorities  may  also  change  their   interpretation  of  these  statutes  and
regulations.  Therefore,  our business  may be adversely  affected by any future
changes  in  laws,  regulations,   policies  or  interpretations  or  regulatory
approaches to compliance and enforcement,  including  legislative and regulatory
reactions  to the  terrorist  attack on September  11, 2001,  and future acts of
terrorism,  and the Enron  Corporation,  WorldCom,  Inc.  and other  major  U.S.
corporate  bankruptcies and reports of accounting  irregularities at U.S. public
companies, including various large and publicly traded companies.  Additionally,
our  international  activities may be subject to the laws and regulations of the
jurisdiction where business is being conducted.  International laws, regulations
and policies affecting us and our subsidiaries may change at any time and affect
our business  opportunities and competitiveness in these  jurisdictions.  Due to
The  Bank  of  Tokyo-Mitsubishi,  Ltd.'s  controlling  ownership  of  us,  laws,
regulations  and  policies  adopted or enforced by the  Government  of Japan may
adversely affect our activities and investments and those of our subsidiaries in
the future.

     In addition,  our business model relies, in part, upon  cross-marketing the
services  offered  by  UnionBanCal  Corporation  and  our  subsidiaries  to  our
customers.  Laws that restrict our ability to share  information about customers
within our corporate  organization could adversely affect our business,  results
of operations and financial condition.

     Additionally,  our  business  is affected  significantly  by the fiscal and
monetary  policies  of  the  federal   government  and  its  agencies.   We  are
particularly  affected  by the  policies  of the Federal  Reserve  Board,  which
regulates the supply of money and credit in the U.S. Under long-standing  policy
of the Federal


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Reserve  Board,  a bank  holding  company  is  expected  to act as a  source  of
financial  strength for its subsidiary banks. As a result of that policy, we may
be required to commit  financial and other  resources to our subsidiary  bank in
circumstances  where we might not  otherwise  do so.  Among the  instruments  of
monetary  policy  available to the Federal Reserve Board are (a) conducting open
market operations in U.S. government securities, (b) changing the discount rates
of borrowings by depository  institutions,  and (c) imposing or changing reserve
requirements  against certain  borrowings by banks and their  affiliates.  These
methods are used in varying  degrees  and  combinations  to directly  affect the
availability  of bank loans and deposits,  as well as the interest rates charged
on loans and paid on  deposits.  The policies of the Federal  Reserve  Board may
have a material  effect on our  business,  results of  operations  and financial
condition.

     RISKS   ASSOCIATED   WITH  POTENTIAL   ACQUISITIONS   OR   DIVESTITURES  OR
       RESTRUCTURINGS MAY ADVERSELY AFFECT US

     We may seek to acquire or invest in financial and non-financial  companies,
technologies, services or products that complement our business. There can be no
assurance  that we will be  successful  in completing  any such  acquisition  or
investment  as this  will  depend  on the  availability  of  prospective  target
opportunities  at valuation  levels we find  attractive and the  competition for
such opportunities from other bidders. In addition,  we continue to evaluate the
performance  of all of our businesses and business lines and may sell a business
or business line. Any acquisitions, divestitures or restructurings may result in
the issuance of potentially dilutive equity securities,  significant write-offs,
including  those  related to goodwill and other  intangible  assets,  and/or the
incurrence  of debt,  any of which could have a material  adverse  effect on our
business,   results  of  operations  and  financial   condition.   Acquisitions,
divestitures or restructurings could involve numerous additional risks including
difficulties  in  obtaining  any  required  regulatory   approvals  and  in  the
assimilation or separation of operations,  services, products and personnel, the
diversion of management's  attention from other business  concerns,  higher than
expected  deposit  attrition  (run-off),  divestitures  required  by  regulatory
authorities,  the  disruption  of our business,  and the  potential  loss of key
employees.  There can be no assurance  that we will be  successful in addressing
these or any other significant risks encountered.

     SIGNIFICANT  LEGAL  ACTIONS  COULD  SUBJECT  US  TO  SUBSTANTIAL  UNINSURED
       LIABILITIES

     We may be subject to claims related to our  operations.  Such legal actions
could involve large claims and significant  defense costs. To protect  ourselves
from the cost of these  claims,  we maintain  insurance  coverage in amounts and
with  deductibles  that we believe are appropriate for our operations.  However,
our  insurance  coverage  may not cover all claims  against us or continue to be
available  to us at a  reasonable  cost.  As a  result,  we  may be  exposed  to
substantial  uninsured  liabilities,  which could adversely affect our business,
results of operations and financial condition.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     A complete explanation  concerning our market risk exposure is incorporated
by reference to Part I, Item 2 of this document under the captions "Quantitative
and Qualitative  Disclosures  about Market Risk," "Liquidity Risk," and "Certain
Business Risk Factors."

ITEM 4. CONTROLS AND PROCEDURES

     Our  Chief  Executive  Officer  (principal  executive  officer)  and  Chief
Financial Officer  (principal  financial officer) have concluded that the design
and operation of our disclosure controls and procedures are effective as of June
30,  2004.  This  conclusion  is  based on an  evaluation  conducted  under  the
supervision and with the  participation of management.  Disclosure  controls and
procedures  are those  controls and  procedures  which  ensure that  information
required to be  disclosed  in this filing is  accumulated  and  communicated  to
management  and is  recorded,  processed,  summarized  and  reported in a timely
manner and in  accordance  with  Securities  and Exchange  Commission  rules and
regulations.

     During  the  quarter  ended  June 30,  2004,  there  were no changes in our
internal  controls over financial  reporting that  materially  affected,  or are
reasonably  likely to materially  affect,  our internal  controls over financial
reporting.


                                       61

<PAGE>



                           PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

     We are subject to various  pending and threatened  legal actions that arise
in the normal  course of  business.  We maintain  reserves for losses from legal
actions that are both probable and estimable.

     Union Bank of California,  N.A., our major subsidiary (the Bank), was named
in a suit pending in the United States  District Court for the Central  District
of  California,  Neilson v. Union Bank of California  et al (filed  September 4,
2002).  The plaintiffs in this suit sought in excess of $250 million,  which was
alleged  to have been lost by those who  invested  money in  various  investment
arrangements  conducted by an  individual  named Reed  Slatkin.  Mr.  Slatkin is
alleged to have been operating a fraudulent  investment scheme commonly referred
to as a "Ponzi"  scheme.  The  plaintiffs  in the  Neilson  case  included  both
investors in the  arrangements  conducted by Mr.  Slatkin and the trustee of Mr.
Slatkin's  bankruptcy estate. A substantial  majority of those who invested with
Mr. Slatkin had no relationship with the Bank. A small minority, comprising less
than five percent of the  investors,  had custodial  accounts with the Bank. The
Neilson  case seeks to impose  liability  upon the Bank and two other  financial
institutions  for both the losses suffered by those custodial  customers as well
as investors who had no relationship with the Bank. We have reached an agreement
in  principle  to resolve the Nielson  matter,  which calls for a payment by the
Company  of $10  million,  $6  million  of which  will be paid by the  Company's
insurance  carrier.  This  agreement  in  principle  is in the  process of being
documented and will thereafter  require court approval.  The disposition of this
claim, on the basis described above,  assuming that the settlement becomes final
and approved,  will not have a material adverse effect on our financial position
or results of operations, since a reserve has been established for the loss.

     Two other suits naming the Bank,  Christensen  v. Union Bank of  California
(formerly captioned as Rockoff v. Union Bank of California et al.) (filed in the
United States District Court for the Central  District of California on December
21, 2001) and Kilpatrick v. Orrick Herrington & Sutcliffe,  et al. (filed in Los
Angeles  County  Superior Court on April 22, 2003 as to the Bank) related to the
allegedly  fraudulent  investment scheme conducted by Mr. Slatkin. The dismissal
of the Christensen  case and the settlement of the Kilpatrick case were reported
in the Company's  Quarterly  Report on Form 10-Q for the quarter ended March 31,
2004.

     Another suit,  Grafton Partners LP v. Union Bank of California,  is pending
in Alameda County  Superior Court (filed March 12, 2003).  That suit concerns an
unrelated  "Ponzi" scheme  perpetrated by PinnFund,  USA,  located in San Diego,
California.  The victims of this scheme seek $235  million  from the Bank.  They
assert that the Bank improperly opened and administered a deposit account, which
was used by PinnFund in furtherance of the fraud.

     The Bank has  numerous  legal  defenses to the Grafton  case.  Based on our
evaluation to date of this claim,  management believes that this matter will not
result in a material  adverse  effect on our  financial  position  or results of
operations.












                                       62

<PAGE>



ITEM 2. CHANGES IN  SECURITIES,  USE OF PROCEEDS AND ISSUER  PURCHASES OF EQUITY
        SECURITIES

     Repurchases of equity securities are presented in the table below.

<TABLE>
<CAPTION>


                                                        TOTAL NUMBER OF         MAXIMUM NUMBER (OR
                       TOTAL NUMBER                    SHARES (OR UNITS)     APPROXIMATE DOLLAR VALUE)
                         OF SHARES   AVERAGE PRICE   PURCHASED AS PART OF    OF SHARES (OR UNITS) THAT
                        (OR UNITS)   PAID PER SHARE   PUBLICLY ANNOUNCED     MAY YET BE PURCHASED UNDER
PERIOD                   PURCHASED     (OR UNIT)      PLANS OR PROGRAMS        THE PLANS OR PROGRAMS
-------                ------------  --------------   -----------------      --------------------------
<S>                      <C>              <C>              <C>                       <C>
APRIL 2004

(April 28, 2004).......        --         $   --                  --                 $257,764,104
MAY 2004
(May 7 - 28, 2004).....   115,000         $54.10             115,000                 $251,542,697
JUNE 2004
(June 1 - 4, 2004).....    95,000         $56.77              95,000                 $246,149,446(1)
                        ---------         ------           ---------
TOTAL.................. 1,039,700         $53.54           1,039,700
                        =========         ======           =========

---------------------------------------
<FN>

(1)  $200 million is available from a $200 million  repurchase program announced
     on April 28,  2004.  $46  million  remains  available  from a $200  million
     repurchase program announced on April 22, 2003.
</FN>

</TABLE>


ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     For information regarding matters submitted to a vote at the Annual Meeting
of  Shareholders  on April 28,  2004,  see Part II, Item 4 of our Report on Form
10-Q for the quarter ended March 31, 2004, incorporated by reference herein.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

(A)  EXHIBITS:

 NO.                               DESCRIPTION
---- ---------------------------------------------------------------------------
2.1  Agreement and Plan of Merger by and among  UnionBanCal  Corporation,  Union
     Bank of California,  N.A.,  Jackson National  Insurance Company and Jackson
     Federal Bank dated as of July 1, 2004(1)

10.1 Philip B. Flynn Employment Agreement (Effective April 1, 2004)(2)*

10.2 Robert M. Walker Separation Agreement (Effective April 16, 2004)(3)*

31.1 Certification   of  the   Chief   Executive   Officer   pursuant   to  Rule
     13a-14a/15d-14(a)  of the Exchange Act, as adopted  pursuant to Section 302
     of the Sarbanes-Oxley Act of 2002(3)

31.2 Certification   of  the   Chief   Financial   Officer   pursuant   to  Rule
     13a-14a/15d-14(a)  of the Exchange Act, as adopted  pursuant to Section 302
     of the Sarbanes-Oxley Act of 2002(3)

32.1 Certification of the Chief Executive Officer pursuant to 18 U.S.C.  Section
     1350,  as adopted  pursuant  to Section  906 of the  Sarbanes-Oxley  Act of
     2002(3)

32.2 Certification of the Chief Financial Officer pursuant to 18 U.S.C.  Section
     1350,  as adopted  pursuant  to Section  906 of the  Sarbanes-Oxley  Act of
     2002(3)

------------------------------------

(1)  Incorporated by reference to the UnionBanCal  Corporation current report on
     Form 8-K, dated July 1, 2004

(2)  Incorporated by reference to the UnionBanCal  Corporation  Quarterly Report
     on Form 10-Q for the quarter ended March 31, 2004 (SEC File No. 1-15081).

(3)  Filed herewith

*    Management contract or compensatory plan, contract or arrangement

                                       63

<PAGE>



(B)  REPORTS ON FORM 8-K

     We furnished a report on Form 8-K dated April 20, 2004 reporting under Item
12  thereof  that  UnionBanCal  Corporation  issued a press  release  concerning
earnings for the first quarter of 2004.













































                                       64

<PAGE>



                                   SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, UnionBanCal  Corporation has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.



                                          UNIONBANCAL CORPORATION
                                               (Registrant)


                                      By:       /S/ NORIMICHI KANARI
                                         ---------------------------------------
                                                    Norimichi Kanari
                                          PRESIDENT AND CHIEF EXECUTIVE OFFICER
                                             (Principal Executive Officer)

                                      By:       /S/ DAVID I. MATSON
                                         ---------------------------------------
                                                    David I. Matson
                                              EXECUTIVE VICE PRESIDENT AND
                                                CHIEF FINANCIAL OFFICER
                                             (Principal Financial Officer)

                                      By:       /S/ DAVID A. ANDERSON
                                         ---------------------------------------
                                                    David A. Anderson
                                           SENIOR VICE PRESIDENT AND CONTROLLER
                                            (Principal Accounting Officer)


                                      Date:  August 6, 2004


















                                       65

<PAGE>