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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 SEPTEMBER 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 October 29, 2004: 149,502,442





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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.........................................................  24
    Executive Overview...................................................  24
    Critical Accounting Policies.........................................  25
    Financial Performance................................................  27
    Net Interest Income..................................................  31
    Noninterest Income...................................................  34
    Noninterest Expense..................................................  35
    Income Tax Expense...................................................  35
    Loans................................................................  36
    Cross-Border Outstandings............................................  38
    Provision for Credit Losses..........................................  38
    Allowance for Credit Losses..........................................  38
    Nonperforming Assets.................................................  41
    Loans 90 Days or More Past Due and Still Accruing....................  43
    Quantitative and Qualitative Disclosures About Market Risk...........  43
    Liquidity Risk.......................................................  47
    Regulatory Capital...................................................  48
    Business Segments....................................................  49
    Regulatory Matters...................................................  57
    Certain Business Risk Factors........................................  58
  Item 3. Quantitative and Qualitative Disclosures about Market Risk.....  62
  Item 4. Controls and Procedures........................................  62
PART II
OTHER INFORMATION
  Item 1. Legal Proceedings..............................................  63
  Item 2. Unregistered Sales of Equity Securities and Use of Proceeds....  63
  Item 6. Exhibits.......................................................  64
  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
                                                    ----------------------------
                                                    SEPTEMBER 30,  SEPTEMBER 30,  PERCENT
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)            2003           2004       CHANGE
--------------------------------------------------  -------------  -------------  -------
<S>                  <C>                            <C>            <C>               <C>
RESULTS OF OPERATIONS:
  Net interest income(1)..........................  $     401,736  $     413,102     2.83%
  (Reversal of) provision for credit losses.......         20,000        (10,000)      nm
  Noninterest income..............................        201,470        215,954     7.19
  Noninterest expense.............................        348,861        372,391     6.74
                                                    -------------  -------------
  Income before income taxes(1)...................        234,345        266,665    13.79
  Taxable-equivalent adjustment...................            647          1,012    56.41
  Income tax expense..............................         78,653        102,215    29.96
                                                    -------------  -------------
  Net income......................................  $     155,045  $     163,438     5.41
                                                    =============  =============
PER COMMON SHARE:
  Net income--basic...............................  $        1.04  $        1.11     6.73%
  Net income--diluted.............................           1.02           1.09     6.86
  Dividends(2)....................................           0.31           0.36    16.13
  Book value (end of period)......................          25.32          28.04    10.74
  Common shares outstanding (end of period)(3)....    145,105,566    147,163,392     1.42
  Weighted average common shares outstanding
    --basic(3)....................................    149,528,298    147,554,853    (1.32)
  Weighted average common shares outstanding
    --diluted(3)..................................    151,561,790    150,379,127    (0.78)
BALANCE SHEET (END OF PERIOD):
  Total assets....................................  $  42,602,745  $  46,990,605    10.30%
  Total loans.....................................     26,047,376     28,625,086     9.90
  Nonaccrual loans................................        341,039        180,156   (47.17)
  Nonperforming assets............................        344,347        190,763   (44.60)
  Total deposits..................................     35,957,805     39,342,229     9.41
  Medium and long-term debt.......................        417,369        820,460    96.58
  Junior subordinated debt........................             --         15,904       nm
  Trust preferred securities......................        356,629             --       nm
  Stockholders' equity............................      3,674,107      4,126,159    12.30
BALANCE SHEET (PERIOD AVERAGE):
  Total assets....................................  $  41,913,515  $  45,713,280     9.07%
  Total loans.....................................     26,331,986     28,147,293     6.89
  Earning assets..................................     37,855,869     41,427,609     9.44
  Total deposits..................................     34,902,964     38,114,310     9.20
  Stockholders' equity............................      3,834,834      4,067,953     6.08
FINANCIAL RATIOS:
  Return on average assets(4).....................           1.47%          1.42%
  Return on average stockholders' equity(4).......          16.04          15.98
  Efficiency ratio(5).............................          57.85          59.20
  Net interest margin(1)..........................           4.22           3.98
  Dividend payout ratio...........................          29.81          32.43
  Tangible equity ratio...........................           8.05           8.03
  Tier 1 risk-based capital ratio.................          10.96           9.99
  Total risk-based capital ratio..................          12.58          12.52
  Leverage ratio..................................           8.73           8.27
  Allowance for credit losses to total loans......           2.11           1.69
  Allowance for credit losses to nonaccrual loans.         161.43         267.97
  Net loans charged off to average total loans(4).           0.58           0.12
  Nonperforming assets to total loans and
    foreclosed assets.............................           1.32           0.67
  Nonperforming assets to total assets............           0.81           0.41

---------------------------------
<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.

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
                                                        NINE MONTHS ENDED
                                                    ----------------------------
                                                    SEPTEMBER 30,  SEPTEMBER 30,  PERCENT
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)            2003           2004       CHANGE
--------------------------------------------------  -------------  -------------  -------
<S>                  <C>                            <C>            <C>               <C>
RESULTS OF OPERATIONS:
  Net interest income(1)..........................  $   1,179,562  $   1,214,986     3.00%
  (Reversal of) provision for credit losses.......         75,000        (25,000)      nm
  Noninterest income..............................        590,412        758,169    28.41
  Noninterest expense.............................      1,042,465      1,121,899     7.62
                                                    -------------  -------------
  Income before income taxes(1)...................        652,509        876,256    34.29
  Taxable-equivalent adjustment...................          1,916          2,617    36.59
  Income tax expense..............................        215,273        321,617    49.40
                                                    -------------  -------------
  Net income......................................  $     435,320  $     552,022    26.81
                                                    =============  =============
PER COMMON SHARE:
  Net income--basic...............................  $        2.90  $        3.74    28.97%
  Net income--diluted.............................           2.87           3.68    28.22
  Dividends(2)....................................           0.90           1.03    14.44
  Book value (end of period)......................          25.32          28.04    10.74
  Common shares outstanding (end of period)(3)....    145,105,566    147,163,392     1.42
  Weighted average common shares outstanding
    --basic(3)....................................    150,059,789    147,547,527    (1.67)
  Weighted average common shares outstanding
    --diluted(3)..................................    151,544,757    150,026,647    (1.00)
BALANCE SHEET (END OF PERIOD):
  Total assets....................................  $  42,602,745  $  46,990,605    10.30%
  Total loans.....................................     26,047,376     28,625,086     9.90
  Nonaccrual loans................................        341,039        180,156   (47.17)
  Nonperforming assets............................        344,347        190,763   (44.60)
  Total deposits..................................     35,957,805     39,342,229     9.41
  Medium and long-term debt.......................        417,369        820,460    96.58
  Junior subordinated debt........................             --         15,904       nm
  Trust preferred securities......................        356,629             --       nm
  Stockholders' equity............................      3,674,107      4,126,159    12.30
BALANCE SHEET (PERIOD AVERAGE):
  Total assets....................................  $  40,025,749  $  44,463,183    11.09%
  Total loans.....................................     26,522,687     27,046,262     1.97
  Earning assets..................................     36,263,471     40,222,338    10.92
  Total deposits..................................     32,870,184     37,290,976    13.45
  Stockholders' equity............................      3,875,990      3,984,194     2.79
FINANCIAL RATIOS:
  Return on average assets(4).....................           1.45%          1.66%
  Return on average stockholders' equity(4).......          15.02          18.51
  Efficiency ratio(5).............................          58.90          56.83
  Net interest margin(1)..........................           4.35           4.03
  Dividend payout ratio...........................          31.03          27.54
  Tangible equity ratio...........................           8.05           8.03
  Tier 1 risk-based capital ratio.................          10.96           9.99
  Total risk-based capital ratio..................          12.58          12.52
  Leverage ratio..................................           8.73           8.27
  Allowance for credit losses to total loans......           2.11           1.69
  Allowance for credit losses to nonaccrual loans.         161.43         267.97
  Net loans charged off to average total loans(4).           0.73           0.15
  Nonperforming assets to total loans and
    foreclosed assets.............................           1.32           0.67
  Nonperforming assets to total assets............           0.81           0.41

--------------------------------------
<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.

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 NINE MONTHS
                                                       ENDED SEPTEMBER 30,     ENDED SEPTEMBER 30,
                                                      --------------------   ----------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)           2003        2004        2003        2004
----------------------------------------------------- --------    --------   ----------  ----------
<S>                                                   <C>         <C>        <C>         <C>
INTEREST INCOME
  Loans.............................................  $349,918    $350,587   $1,067,806  $1,014,288
  Securities........................................    93,252     106,172      251,151     320,082
  Interest bearing deposits in banks................       922       2,744        3,014       4,773
  Federal funds sold and securities purchased under
    resale agreements...............................     2,532       1,616        8,210       6,503
  Trading account assets............................       870       1,140        2,740       2,558
                                                      --------    --------   ----------  ----------
    Total interest income...........................   447,494     462,259    1,332,921   1,348,204
                                                      --------    --------   ----------  ----------
INTEREST EXPENSE
  Domestic deposits.................................    34,984      34,876      116,772     100,609
  Foreign deposits..................................     1,991       5,007        8,008       9,900
  Federal funds purchased and securities sold under
    repurchase agreements...........................       689       2,861        2,763       4,094
  Commercial paper..................................     1,723       1,697        7,397       3,883
  Medium and long-term debt.........................     1,738       4,369        5,422      11,201
  Preferred securities and trust notes..............     3,607         242       10,930       2,553
  Other borrowed funds..............................     1,673       1,117        3,983       3,595
                                                      --------    --------   ----------  ----------
    Total interest expense..........................    46,405      50,169      155,275     135,835
                                                      --------    --------   ----------  ----------
NET INTEREST INCOME.................................   401,089     412,090    1,177,646   1,212,369
  (Reversal of) provision for credit losses.........    20,000     (10,000)      75,000     (25,000)
                                                      --------    --------   ----------  ----------
    Net interest income after (reversal of)
      provision for credit losses...................   381,089     422,090    1,102,646   1,237,369
                                                      --------    --------   ----------  ----------
NONINTEREST INCOME
  Service charges on deposit accounts...............    81,832      87,555      232,061     258,682
  Trust and investment management fees..............    35,429      39,089      101,245     111,699
  Insurance commissions.............................    15,814      17,463       45,056      57,850
  International commissions and fees................    17,380      18,906       49,581      54,553
  Card processing fees, net.........................    10,335       4,653       29,357      28,901
  Merchant banking fees.............................     9,312      11,682       21,521      26,863
  Foreign exchange gains, net.......................     7,574       8,548       21,466      25,186
  Brokerage commissions and fees....................     7,549       8,527       24,614      24,847
  Securities gains (losses), net....................    (2,618)         (6)       7,042       1,612
  Other.............................................    18,863      19,537       58,469     167,976
                                                      --------    --------   ----------  ----------
    Total noninterest income........................   201,470     215,954      590,412     758,169
                                                      --------    --------   ----------  ----------
NONINTEREST EXPENSE
  Salaries and employee benefits....................   205,302     216,767      602,338     653,787
  Net occupancy.....................................    31,342      33,206       91,844      96,961
  Equipment.........................................    15,680      16,289       48,705      50,443
  Software..........................................    11,996      13,560       34,921      39,463
  Communications....................................    12,661      12,850       39,859      39,295
  Professional services.............................    12,676      12,375       38,256      33,968
  Foreclosed asset expense (income).................       (79)        (10)         (28)        526
  Other.............................................    59,283      67,354      186,570     207,456
                                                      --------    --------   ----------  ----------
    Total noninterest expense.......................   348,861     372,391    1,042,465   1,121,899
                                                      --------    --------   ----------  ----------
  Income before income taxes........................   233,698     265,653      650,593     873,639
  Income tax expense................................    78,653     102,215      215,273     321,617
                                                      --------    --------   ----------  ----------
NET INCOME..........................................  $155,045    $163,438   $  435,320  $  552,022
                                                      ========    ========   ==========  ==========
NET INCOME PER COMMON SHARE--BASIC..................  $   1.04    $   1.11   $     2.90  $     3.74
                                                      ========    ========   ==========  ==========
NET INCOME PER COMMON SHARE--DILUTED................  $   1.02    $   1.09   $     2.87  $     3.68
                                                      ========    ========   ==========  ==========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING--BASIC...   149,528     147,555      150,060     147,548
                                                      ========    ========   ==========  ==========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING--DILUTED.   151,562     150,379      151,545     150,027
                                                      ========    ========   ==========  ==========
     See accompanying notes to condensed consolidated financial statements.
</TABLE>

                                       4

<PAGE>

<TABLE>
<CAPTION>

                    UNIONBANCAL CORPORATION AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS

                                                              (UNAUDITED)                    (UNAUDITED)
                                                             SEPTEMBER 30,   DECEMBER 31,   SEPTEMBER 30,
(DOLLARS IN THOUSANDS)                                            2003           2003            2004
-----------------------------------------------------------  -------------   ------------   -------------
<S>                                                          <C>             <C>            <C>
ASSETS

Cash and due from banks....................................  $   2,619,580   $  2,494,127   $   2,229,306
Interest bearing deposits in banks.........................        341,230        235,158         544,520
Federal funds sold and securities purchased under resale
  agreements...............................................      1,325,470        769,720       1,045,275
                                                             -------------   ------------   -------------
  Total cash and cash equivalents..........................      4,286,280      3,499,005       3,819,101
Trading account assets.....................................        320,199        252,929         288,814
Securities available for sale:
  Securities pledged as collateral.........................         68,440        106,560         124,896
  Held in portfolio........................................      9,930,281     10,660,332      11,868,627
Loans (net of allowance for credit losses: September 30,
  2003, $550,550; December 31, 2003, $532,970;
  September 30, 2004, $482,762)............................     25,496,826     25,411,658      28,142,324
Due from customers on acceptances..........................         52,816         71,078          64,752
Premises and equipment, net................................        506,321        509,734         501,962
Intangible assets..........................................         49,288         49,592          60,977
Goodwill...................................................        215,903        226,556         320,835
Other assets...............................................      1,676,391      1,711,023       1,798,317
                                                             -------------   ------------   -------------
  Total assets.............................................  $  42,602,745   $ 42,498,467   $  46,990,605
                                                             =============   ============   =============
LIABILITIES
Domestic deposits:
  Noninterest bearing......................................  $  16,854,483   $ 16,668,773   $  19,021,245
  Interest bearing.........................................     17,320,728     17,146,858      17,919,160
Foreign deposits:
  Noninterest bearing......................................        556,687        619,249         719,792
  Interest bearing.........................................      1,225,907      1,097,403       1,682,032
                                                             -------------   ------------   -------------
    Total deposits.........................................     35,957,805     35,532,283      39,342,229
Federal funds purchased and securities sold under
  repurchase agreements....................................        284,764        280,968         648,864
Commercial paper...........................................        678,903        542,270         615,816
Other borrowed funds.......................................        240,803        212,088         150,503
Acceptances outstanding....................................         52,816         71,078          64,752
Other liabilities..........................................        939,549        934,916       1,205,918
Medium and long-term debt..................................        417,369        820,488         820,460
Junior subordinated debt payable to subsidiary grantor
  trust....................................................             --        363,940          15,904
UnionBanCal Corporation--obligated mandatorily redeemable
  preferred securities of subsidiary grantor trust.........        356,629             --              --
                                                             -------------   ------------   -------------
  Total liabilities........................................     38,928,638     38,758,031      42,864,446
                                                             -------------   ------------   -------------
Commitments and contingencies
STOCKHOLDERS' EQUITY
Preferred stock:
  Authorized 5,000,000 shares, no shares issued or
    outstanding as of September 30, 2003, December 31,
    2003, and September 30, 2004...........................             --             --              --
Common stock, par value $1 per share at September 30,
  2003, December 31, 2003 and September 30, 2004:
  Authorized 300,000,000 shares, issued 145,105,566
    shares as of September 30, 2003, 146,000,156 shares
    as of December 31, 2003, and 149,529,292 shares as
    of September 30, 2004..................................        145,106        146,000         149,529
Additional paid-in capital.................................        520,876        555,156         728,791
Treasury stock--242,000 shares as of December 31, 2003
  and 2,365,900 shares as of September 30, 2004............             --        (12,846)       (131,464)
Retained earnings..........................................      2,893,240      2,999,884       3,400,117
Accumulated other comprehensive income (loss)..............        114,885         52,242         (20,814)
                                                             -------------   ------------   -------------
  Total stockholders' equity...............................      3,674,107      3,740,436       4,126,159
                                                             -------------   ------------   -------------
  Total liabilities and stockholders' equity...............  $  42,602,745   $ 42,498,467   $  46,990,605
                                                             =============   ============   =============
     See accompanying notes to condensed consolidated financial statements.
</TABLE>


                                       5
<PAGE>



                    UNIONBANCAL CORPORATION AND SUBSIDIARIES
      CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                                   (UNAUDITED)
<TABLE>
<CAPTION>

                                                                                             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>
BALANCE DECEMBER 31, 2002........ 150,702,363  $926,460  $       --  $      --  $2,591,635  $     240,094  $3,758,189
                                               --------  ----------  ---------  ----------  -------------  ----------
Comprehensive income
  Net income--For the nine months
    ended September 30, 2003.....                                                  435,320                    435,320
  Other comprehensive income, net
    of tax:
    Net change in unrealized
      gains on cash flow hedges..                                                                 (37,889)    (37,889)
    Net change in unrealized
      gains on securities
      available for sale........                                                                  (88,167)    (88,167)
    Foreign currency translation
      adjustment.................                                                                     847         847
                                                                                                           ----------
Total comprehensive income                                                                                    310,111
Reincorporation(1)...............              (520,876)    520,876                                                --
Dividend reinvestment plan.......       5,289        34                                                            34
Deferred compensation--restricted
  stock awards...................       6,000       282                               (112)                       170
Stock options exercised..........   1,018,175    35,792                                                        35,792
Stock issued in acquisitions.....   1,149,106    48,254                                                        48,254
Common stock repurchased(2)......  (7,775,367) (344,840)                                                     (344,840)
Dividends declared on common
  stock, $0.90 per share(3)......                                                 (133,603)                  (133,603)
                                               --------  ----------  ---------  ----------  -------------  ----------
Net change.......................              (781,354)    520,876         --     301,605       (125,209)    (84,082)
                                  -----------  --------  ----------  ---------  ----------  -------------  ----------
BALANCE SEPTEMBER 30, 2003....... 145,105,566  $145,106  $  520,876  $      --  $2,893,240  $     114,885  $3,674,107
                                  ===========  ========  ==========  =========  ==========  =============  ==========

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 nine months
    ended September 30, 2004.....                                                  552,022                    552,022
Other comprehensive income, net
  of tax:
    Net change in unrealized
      gains on cash flow hedges..                                                                 (30,285)    (30,285)
    Net change in unrealized
      losses on securities
      available for sale.........                                                                 (43,404)    (43,404)
    Foreign currency translation
      adjustment.................                                                                     633         633
                                                                                                           ----------
Total comprehensive income.......                                                                             478,966
Dividend reinvestment plan.......         308                    17                                                17
Deferred compensation--restricted
  stock awards...................                                                      185                        185
Stock options exercised..........   1,520,109     1,520      61,223                                            62,743
Stock issued in acquisitions.....   2,008,719     2,009     112,569                                           114,578
Common stock repurchased(2)......                              (174)  (118,618)                              (118,792)
Dividends declared on common
  stock, $1.03 per share(3)......                                                 (151,974)                  (151,974)
                                               --------  ----------  ---------  ----------  -------------  ----------
Net change.......................                 3,529     173,618   (118,618)    400,233        (73,056)    385,723
                                  -----------  --------  ----------  ---------  ----------  -------------  ----------
BALANCE SEPTEMBER 30, 2004....... 149,529,292  $149,529  $  728,791  $(131,464) $3,400,117  $     (20,814) $4,126,159
                                  ===========  ========  ==========  =========  ==========  =============  ==========
-----------------------------
<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>


                    UNIONBANCAL CORPORATION AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
<TABLE>
<CAPTION>

                                                                            FOR THE NINE MONTHS
                                                                            ENDED SEPTEMBER 30,
                                                                         -------------------------
(DOLLARS IN THOUSANDS)                                                       2003          2004
----------------------------------------------------------------------   -----------    ----------
<S>                                                                      <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income..........................................................   $   435,320    $  552,022
  Adjustments to reconcile net income to net cash provided by
    (used in) operating activities:
    (Reversal of) provision for credit losses.........................        75,000       (25,000)
    Depreciation, amortization and accretion..........................        87,332       100,631
    Provision for deferred income taxes...............................        60,425        29,411
    Gains on securities available for sale............................        (7,042)       (1,612)
    Net increase in prepaid expenses..................................       (89,272)      (96,009)
    Net increase (decrease) in accrued expenses and other liabilities.      (189,413)      230,364
    Net (increase) decrease in other assets, net of acquisitions......      (101,842)      183,393
    Net increase in trading account assets............................       (44,178)      (35,885)
    Loans originated for resale.......................................      (269,186)     (661,342)
    Net proceeds from sale of loans originated for resale.............       291,198       518,739
    Other, net........................................................        27,716        19,606
                                                                         -----------    ----------
    Total adjustments.................................................      (159,262)      262,296
                                                                         -----------    ----------
  Net cash provided by (used in) operating activities.................       276,058       814,318
                                                                         -----------    ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Proceeds from sales of securities available for sale................       308,051        13,479
  Proceeds from matured and called securities available for sale......     2,689,120     3,177,262
  Purchases of securities available for sale, net of acquisitions.....    (5,849,353)   (4,386,300)
  Net (increase) decrease in loans, net of acquisitions...............       758,743    (2,152,469)
  Net cash provided by (paid in) acquisitions.........................       (60,920)       28,086
  Purchases of premises and equipment.................................       (70,192)      (58,064)
  Other, net..........................................................           823         1,866
                                                                         -----------    ----------
    Net cash provided by (used in) investing activities...............    (2,223,728)   (3,376,140)
                                                                         -----------    ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Net increase (decrease) in deposits, net of acquisitions............     2,650,264     3,066,571
  Net increase (decrease) in federal funds purchased and securities
    sold under repurchase agreements..................................       (49,615)      367,896
  Net increase (decrease) in commercial paper and other borrowed funds      (386,323)       11,961
  Repayment of junior subordinated debt...............................            --      (360,825)
  Common stock repurchased............................................      (344,840)     (118,792)
  Payments of cash dividends..........................................      (130,896)     (144,146)
  Stock options exercised.............................................        35,792        62,743
  Other, net..........................................................           881           650
                                                                         -----------    ----------
    Net cash provided by (used in) financing activities...............     1,775,263     2,886,058
                                                                         -----------    ----------
Net increase (decrease) in cash and cash equivalents..................      (172,407)      324,236
Cash and cash equivalents at beginning of period......................     4,442,122     3,499,005
Effect of exchange rate changes on cash and cash equivalents..........        16,565        (4,140)
                                                                         -----------    ----------
Cash and cash equivalents at end of period............................   $ 4,286,280    $3,819,101
                                                                         ===========    ==========
CASH PAID DURING THE PERIOD FOR:
  Interest............................................................   $   155,469    $  122,236
  Income taxes........................................................       187,723       230,094
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
  Acquisitions:
    Fair value of assets acquired.....................................   $   721,749    $  991,887
    Purchase price:
      Cash............................................................       (83,597)      (33,772)
      Stock issued....................................................       (48,254)     (114,578)
                                                                         -----------    ----------
    Liabilities assumed...............................................   $   589,898    $  843,537
                                                                         ===========    ==========
</TABLE>

     See accompanying notes to condensed consolidated financial statement.

                                       7

<PAGE>

                    UNIONBANCAL CORPORATION AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

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  September  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  September 30, 2004, the Company has announced
stock  repurchase  plans  totaling $700 million and as of September 30, 2004 has
repurchased  $517  million of common  stock under these  repurchase  plans.  The
Company  repurchased  $58 million,  $44 million,  $12 million and $63 million of
common stock in 2003, the first quarter of 2004, the second quarter of 2004, and
the third quarter of 2004,  respectively,  as part of these repurchase plans. As
of September 30, 2004, $183 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 September 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  September  30,  2004,   the  Company  has  two   stock-based   employee
compensation plans. For further discussion  concerning our stock-based  employee
compensation plans see Note 14 of the Notes to Consolidated Financial Statements
included in the Form 10-K for the year ended December 31, 2003. The


                                       8

<PAGE>

                    UNIONBANCAL CORPORATION AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                   (UNAUDITED)

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

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 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 NINE MONTHS
                                               ENDED SEPTEMBER 30,    ENDED SEPTEMBER 30,
                                               --------------------   -------------------
(DOLLARS IN THOUSANDS)                           2003        2004       2003       2004
---------------------------------------------  --------    --------   --------  ---------
<S>                                            <C>         <C>        <C>        <C>
AS REPORTED NET INCOME.......................  $155,045    $163,438   $435,320   $552,022
Stock option-based employee compensation
  expense (determined under fair value
  based method for all awards, net of
  taxes).....................................    (6,479)     (6,710)   (18,962)   (19,925)
                                               --------    --------   --------  ---------
Pro forma net income, after stock option-
  based employee compensation expense........  $148,566    $156,728   $416,358   $532,097
                                               ========    ========   ========  =========
EARNINGS PER SHARE--BASIC
As reported..................................  $   1.04    $   1.11   $   2.90  $    3.74
Pro forma....................................  $   0.99    $   1.06   $   2.77  $    3.61
EARNINGS PER SHARE--DILUTED
As reported..................................  $   1.02    $   1.09   $   2.87  $    3.68
Pro forma....................................  $   0.98    $   1.04   $   2.75  $    3.55

</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 three and nine
months ended September 30, 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

                                       9
<PAGE>

                    UNIONBANCAL CORPORATION AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                   (UNAUDITED)

NOTE 2--RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS (CONTINUED)

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 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 results 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


                                       10

<PAGE>

                    UNIONBANCAL CORPORATION AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                   (UNAUDITED)

NOTE 2--RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS (CONTINUED)

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  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.  For  further  information  on the impact of  adoption  and
disclosure  required  under SFAS No. 132R, see Note 10 of the Notes to Condensed
Consolidated Financial Statements included in this Form 10-Q.

     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 reached  consensus on certain
incremental    issues   related   to   Issue   No.   03-1,   "The   Meaning   of
Other-Than-Temporary  Impairment and Its Application to

                                       11

<PAGE>

                    UNIONBANCAL CORPORATION AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                   (UNAUDITED)

NOTE 2--RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS (CONTINUED)

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,  2004.
However,  certain guidance  contained in the EITF has been delayed by FASB Staff
Position  (FSP)  EITF  Issue  03-1-1,   "The  Meaning  of   Other-Than-Temporary
Impairment and its Application to Certain  Investments." The Company adopted the
disclosure provisions of EITF Issue No. 03-1 on December 31, 2003 and any impact
arising from the reissuance of EITF No. 03-1 with respect to the  recognition of
other-than-temporary impairment will be assessed at that time.

     PRESCRIPTION DRUG BENEFITS

     In May 2004, the FASB issued FSP Financial  Accounting  Standards (FAS) No.
106-2,   "Accounting  and  Disclosure   Requirements  Related  to  the  Medicare
Prescription Drug, Improvement and Modernization Act of 2003." This FSP provides
guidance on the  accounting  for the effects of the Medicare  prescription  drug
benefit and the federal subsidy to sponsors of retiree  healthcare benefit plans
that offer prescription drug coverage to retirees that is actuarially equivalent
to the Medicare benefit. In accordance with the FSP,  sponsoring  companies must
recognize  the  subsidy  in  the   measurement   of  their  plan's   accumulated
postretirement  benefit obligation (APBO) and net  postretirement  benefit cost.
The Company  adopted FSP FAS No. 106-2 on July 1, 2004. For further  information
on the impact of adoption and disclosure  required under FSP FAS No. 106-2,  see
Note 10 of the Notes to Condensed  Consolidated Financial Statements included in
this Form 10-Q.

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 nine months ended September 30, 2003 and 2004.

<TABLE>
<CAPTION>


                                THREE MONTHS ENDED SEPTEMBER 30,         NINE MONTHS ENDED SEPTEMBER 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.................  $155,045 $ 155,045 $163,438 $ 163,438    $435,320 $ 435,320 $552,022 $ 552,022
                             ======== ========= ======== =========    ======== ========= ======== =========
Weighted average common
  shares outstanding.......   149,528   149,528  147,555   147,555     150,060   150,060  147,548   147,548
Additional shares due to:
Assumed conversion of
  dilutive stock options...        --     2,034       --     2,824          --     1,485       --     2,479
                             -------- --------- -------- ---------    -------- --------- -------- ---------
Adjusted weighted average
  common shares outstanding   149,528   151,562  147,555   150,379     150,060   151,545  147,548   150,027
                             ======== ========= ======== =========    ======== ========= ======== =========
Net income per share.......  $   1.04 $    1.02 $   1.11 $    1.09    $   2.90 $    2.87 $   3.74 $    3.68
                             ======== ========= ======== =========    ======== ========= ======== =========
</TABLE>


                                       12

<PAGE>


                    UNIONBANCAL CORPORATION AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                   (UNAUDITED)

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 NINE MONTHS ENDED SEPTEMBER 30, 2003:
Cash flow hedge activities:
  Unrealized net gains on hedges arising during the
    period.............................................   $  48,126   $(18,408)  $  29,718
  Less: reclassification adjustment for net gains on
        hedges included in net income..................    (109,485)    41,878     (67,607)
                                                          ---------   --------   ---------
Net change in unrealized gains on hedges...............     (61,359)    23,470     (37,889)
                                                          ---------   --------  ----------
Securities available for sale:
  Unrealized holding losses arising during the period
    on securities available for sale...................    (135,739)    51,920     (83,819)
  Less: reclassification adjustment for net gains on
        securities available for sale included in net
        income.........................................      (7,042)     2,694      (4,348)
                                                          ---------   --------   ---------
Net change in unrealized gains on securities available
  for sale.............................................    (142,781)    54,614     (88,167)
                                                          ---------   --------   ---------
Foreign currency translation adjustment................       1,372       (525)        847
                                                          ---------   --------   ---------
Net change in accumulated other comprehensive
  income (loss)........................................   $(202,768)  $ 77,559   $(125,209)
                                                          =========   ========   =========
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004:
Cash flow hedge activities:
  Unrealized net gains on hedges arising during the
    period.............................................   $  12,680   $ (4,850)  $   7,830
  Less: reclassification adjustment for net gains on
        hedges included in net income..................     (61,725)    23,610     (38,115)
                                                          ---------   --------   ---------
Net change in unrealized gains on hedges...............     (49,045)    18,760     (30,285)
                                                          ---------   --------   ---------
Securities available for sale:
  Unrealized holding losses arising during the period
    on securities available for sale...................     (68,679)    26,270     (42,409)
  Less: reclassification adjustment for net gains on
        securities available for sale included in
        net income.....................................      (1,612)       617        (995)
                                                          ---------   --------   ---------
Net change in unrealized losses on securities
  available for sale...................................     (70,291)    26,887     (43,404)
                                                          ---------   --------   ---------
Foreign currency translation adjustment................       1,025       (392)        633
                                                          ---------   --------   ---------
Net change in accumulated other comprehensive
  income (loss)........................................   $(118,311)  $ 45,255   $ (73,056)
                                                          =========   ========   =========
</TABLE>



                                       13

<PAGE>


                    UNIONBANCAL CORPORATION AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                   (UNAUDITED)

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>          <C>          <C>
BALANCE, DECEMBER 31, 2002...    $104,368        $147,450        $(10,649)    $(1,075)     $240,094
Change during the period.....     (37,889)        (88,167)            847          --      (125,209)
                                 --------        --------        --------     -------      --------
BALANCE, SEPTEMBER 30, 2003..    $ 66,479        $ 59,283        $ (9,802)    $(1,075)     $114,885
                                 --------        --------        --------     -------      --------
BALANCE, DECEMBER 31, 2003...    $ 43,786        $ 22,535        $(10,293)    $(3,786)     $ 52,242
Change during the period.....     (30,285)        (43,404)            633          --       (73,056)
                                 --------        --------        --------     -------      --------
BALANCE, SEPTEMBER 30, 2004..    $ 13,501        $(20,869)       $ (9,660)    $(3,786)     $(20,814)
                                 ========        ========        ========     =======      ========

</TABLE>


NOTE 5--BUSINESS COMBINATIONS

     The  Company  has  regularly  sought  opportunities  to  acquire  financial
services companies and businesses. Generally, the Company does not make a public
announcement about an acquisition  opportunity until a definitive  agreement has
been signed.

     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 core  deposit
intangibles  are being  amortized on an  accelerated  basis over their  economic
useful life of a weighted average 6 years.

     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).  The Company  acquired total assets and assumed  liabilities of
$173 million,  each, for a cash  consideration  of $12 million.  CNAT,  based in
Costa  Mesa,  California,  was  a  subsidiary  of  Chicago-based  CNA  Financial
Corporation.  The identifiable intangibles are being amortized on an accelerated
basis over their economic useful life of a weighted average 7 years.











                                       14

<PAGE>


                    UNIONBANCAL CORPORATION AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                   (UNAUDITED)

NOTE 6--GOODWILL AND INTANGIBLE ASSETS

     The changes in the carrying  amount of goodwill and  intangible  assets for
the nine months ended September 30, 2004 are as follows:

<TABLE>
<CAPTION>


                                                                      IDENTIFIABLE INTANGIBLE ASSETS
                                                               --------------------------------------------
                                                               CORE DEPOSIT  RIGHTS-TO-  TOTAL IDENTIFIABLE
                                                     GOODWILL   INTANGIBLES  EXPIRATION   INTANGIBLE ASSETS
                                                     --------  ------------  ----------  ------------------
<S>                                                  <C>          <C>          <C>             <C>
Balance, December 31, 2003.........................  $226,556     $22,117      $27,475         $49,592
  Amounts recorded during the year.................    94,279      25,167            0          25,167
  Amortization expense.............................         0     (10,077)      (3,706)        (13,782)
                                                     --------     -------      -------         -------
Balance, September 30, 2004........................  $320,835     $37,207      $23,769         $60,977
                                                     ========     =======      =======         =======
Estimated amortization expense for the years
  ending:
Remaining 2004.....................................               $ 4,104      $ 1,236         $ 5,340
2005...............................................                13,540        4,311          17,851
2006...............................................                 8,201        3,672          11,873
2007...............................................                 4,775        3,113           7,888
2008...............................................                 2,821        2,622           5,443
thereafter.........................................                 3,767        8,815          12,582
                                                                  -------      -------         -------
Total amortization expense after September 30, 2004               $37,208      $23,769         $60,977
                                                                  =======      =======         =======
</TABLE>


NOTE 7--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.



                                       15
<PAGE>

                    UNIONBANCAL CORPORATION AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                   (UNAUDITED)

NOTE 7--BUSINESS SEGMENTS (CONTINUED)

     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 as of  September  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 first  nine  months of 2004 is a $93.0
million gain resulting from the sale of the Company's  merchant card  portfolio,
which  has not  been  included  in the  results  of the  Community  Banking  and
Investment Services Group.

     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.


                                       16

<PAGE>

                    UNIONBANCAL CORPORATION AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                   (UNAUDITED)

NOTE 7--BUSINESS SEGMENTS (CONTINUED)

<TABLE>
<CAPTION>

                                              COMMUNITY BANKING
                                                AND INVESTMENT    COMMERCIAL FINANCIAL   INTERNATIONAL
                                                SERVICES GROUP       SERVICES GROUP      BANKING GROUP
                                              ------------------  -------------------  ------------------
                                                    AS OF AND FOR THE THREE MONTHS ENDED SEPTEMBER 30,
                                              -----------------------------------------------------------
                                                2003      2004      2003       2004      2003       2004
--------------------------------------------  --------  --------  --------   --------  -------    -------
<S>                                           <C>       <C>       <C>        <C>       <C>        <C>
RESULTS OF OPERATIONS (DOLLARS IN THOUSANDS):
Net interest income.........................  $173,733  $203,040  $186,249   $203,288  $ 8,537    $ 9,802
Noninterest income..........................   110,912   125,042    67,591     64,317   18,117     19,069
                                              --------  --------  --------   --------  -------    -------
Total revenue...............................   284,645   328,082   253,840    267,605   26,654     28,871
Noninterest expense.........................   202,283   235,883   103,277    108,519   15,323     16,728
Credit expense (income).....................     7,996     8,400    39,397     24,781      511        566
                                              --------  --------  --------   --------  -------    -------
Income (loss) before income tax expense
  (benefit).................................    74,366    83,799   111,166    134,305   10,820     11,577
                                              --------  --------  --------   --------  -------    -------
Income tax expense (benefit)................    28,445    32,053    36,128     44,414    4,139      4,428
Net income (loss)...........................  $ 45,921  $ 51,746  $ 75,038  $  89,891  $ 6,681    $ 7,149
                                              ========  ========  ========  =========  =======    =======
TOTAL ASSETS, END OF PERIOD (dollars in
  millions):................................  $ 12,958  $ 14,697  $ 14,255  $  15,750  $ 2,012    $ 2,224
                                              ========  ========  ========  =========  =======    =======

                                                    GLOBAL                                UNIONBANCAL
                                                 MARKETS GROUP           OTHER            CORPORATION
                                              ------------------  -------------------  -------------------
                                                   AS OF AND FOR THE THREE MONTHS ENDED SEPTEMBER 30,
                                              ------------------------------------------------------------
                                                2003      2004      2003       2004      2003       2004
--------------------------------------------  --------  --------  --------  ---------  --------   --------
RESULTS OF OPERATIONS (DOLLARS IN THOUSANDS):
Net interest income.........................   $18,140  $(35,642) $ 14,430  $  31,602  $401,089   $412,090
Noninterest income..........................    (1,097)    1,561     5,947      5,965   201,470    215,954
                                              --------  --------  --------  ---------  --------   --------
Total revenue...............................    17,043   (34,081)   20,377     37,567   602,559    628,044
Noninterest expense.........................     3,926     5,225    24,052      6,036   348,861    372,391
Credit expense (income).....................        50        54   (27,954)   (43,801)   20,000    (10,000)
                                              --------  --------  --------  ---------  --------   --------
Income (loss) before income tax expense
  (benefit).................................    13,067   (39,360)   24,279     75,332   233,698    265,653
Income tax expense (benefit)................     4,998   (15,055)    4,943     36,375    78,653    102,215
                                              --------  --------  --------  ---------  --------   --------
Net income (loss)...........................  $  8,069  $(24,305) $ 19,336  $  38,957  $155,045   $163,438
                                              ========  ========  ========  =========  ========   ========
TOTAL ASSETS, END OF PERIOD (dollars in
  millions):................................  $ 12,046  $ 13,139  $  1,332  $   1,181  $ 42,603   $ 46,991
                                              ========  ========  ========  =========  ========   ========

                                              COMMUNITY BANKING
                                               AND INVESTMENT     COMMERCIAL FINANCIAL   INTERNATIONAL
                                               SERVICES GROUP        SERVICES GROUP      BANKING GROUP
                                              ------------------  -------------------  -------------------
                                                    AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30,
                                              ------------------------------------------------------------
                                                2003      2004      2003      2004       2003       2004
--------------------------------------------  --------  --------  --------  ---------  --------   --------
RESULTS OF OPERATIONS (DOLLARS IN THOUSANDS):
Net interest income.........................  $505,206  $571,536  $546,437  $ 578,265  $ 25,654   $ 26,832
Noninterest income..........................   324,416   371,436   187,055    206,483    59,690     59,519
                                              --------  --------  --------  ---------  --------   --------
Total revenue...............................   829,622   942,972   733,492    784,748    85,344     86,351
Noninterest expense.........................   599,400   678,512   307,132    317,208    45,656     49,368
Credit expense (income).....................    23,840    23,984   124,006     82,443     1,563      1,815
                                              --------  --------  --------  ---------  --------   --------
Income (loss) before income tax expense
  (benefit).................................   206,382   240,476   302,354    385,097    38,125     35,168
Income tax expense (benefit)................    78,941    91,982    96,355    127,983    14,583     13,451
                                              --------  --------  --------  ---------  --------   --------
Net income (loss)...........................  $127,441  $148,494  $205,999  $ 257,114  $ 23,542   $ 21,717
                                              ========  ========  ========  =========  ========   ========
TOTAL ASSETS, END OF PERIOD (dollars in
  millions):................................  $ 12,958  $ 14,697  $ 14,255  $  15,750  $  2,012   $  2,224
                                              ========  ========  ========  =========  ========   ========

                                                     GLOBAL                               UNIONBANCAL
                                                 MARKETS GROUP          OTHER             CORPORATION
                                              ------------------  -------------------  ---------------------
                                                    AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30,
                                              --------------------------------------------------------------
                                                2003      2004      2003      2004        2003       2004
--------------------------------------------  --------  --------  --------  ---------  ---------- ----------
RESULTS OF OPERATIONS (DOLLARS IN THOUSANDS):
Net interest income.........................  $ 56,371  $(50,293) $ 43,978  $  86,029  $1,177,646 $1,212,369
Noninterest income..........................     2,311     4,497    16,940    116,234     590,412    758,169
                                              --------  --------  --------  ---------  ---------- ----------
Total revenue...............................    58,682   (45,796)   60,918    202,263   1,768,058  1,970,538
Noninterest expense.........................    12,158    16,093    78,119     60,718   1,042,465  1,121,899
Credit expense (income).....................       150       280   (74,559)  (133,522)     75,000    (25,000)
                                              --------  --------  --------  ---------  ---------- ----------
Income (loss) before income tax expense
  (benefit).................................    46,374   (62,169)   57,358    275,067     650,593    873,639
Income tax expense (benefit)................    17,738   (23,780)    7,656    111,981     215,273    321,617
                                              --------  --------  --------  ---------  ---------- ----------
Net income (loss)...........................  $ 28,636  $(38,389) $ 49,702  $ 163,086  $  435,320 $  552,022
                                              ========  ========  ========  =========  ========== ==========
TOTAL ASSETS, END OF PERIOD (dollars in
  millions):................................  $ 12,046  $ 13,139  $  1,332  $   1,181  $   42,603 $   46,991
                                              ========  ========  ========  =========  ========== ==========

</TABLE>

                                       17

<PAGE>

                    UNIONBANCAL CORPORATION AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                   (UNAUDITED)

NOTE 8--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  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 September 30, 2004, the
weighted average  remaining life of the currently active  (excluding any forward
positions) cash flow hedges was approximately 1.0 year.

     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.


                                       18

<PAGE>

                    UNIONBANCAL CORPORATION AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                   (UNAUDITED)

NOTE 8--DERIVATIVE INSTRUMENTS AND OTHER FINANCIAL INSTRUMENTS USED FOR HEDGING

     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 the mismatch between the timing of reset dates on the
hedge  versus  those of the loans or CDs.  In the  third  quarter  of 2004,  the
Company recognized a net gain of $0.1 million due to  ineffectiveness,  which is
recognized  in  noninterest  expense,  compared  to a net gain of less than $0.1
million in the third 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.

     The fair value hedging  transaction was structured at inception so that the
notional amount 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 hedge during the third  quarter of 2004 compared to a net gain
of less than $0.1 million in the third 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.


                                       19

<PAGE>

                    UNIONBANCAL CORPORATION AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                   (UNAUDITED)

NOTE 8--DERIVATIVE INSTRUMENTS AND OTHER FINANCIAL INSTRUMENTS USED FOR HEDGING

     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.

     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 9--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 September  30, 2004,  the Company's
maximum  exposure to loss for standby and commercial  letters of credit was $3.0
billion and $297.8  million,  respectively.  At September 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 $5.3
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 September  30,
2004,  the  Company  had  commitments  to fund  principal  investments  of $66.8
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 September 30, 2004,  the Company had a maximum  exposure of
$7.4 million for these agreements, the last of which expire in December 2006.


                                       20

<PAGE>

                    UNIONBANCAL CORPORATION AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                   (UNAUDITED)

NOTE 9--GUARANTEES (CONTINUED)

     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
September  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.

     The Company has  guarantees  that obligate it to perform if its  affiliates
are unable to discharge their obligations.  These obligations  include guarantee
of 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 September  30,  2004,  the Bank had a maximum
exposure to loss under these guarantees, which have an average term of less than
one year, of $627.5 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  September  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 $1.7 billion at
September  30, 2004.  The market  value of the  associated  collateral  was $1.8
billion at September 30, 2004.




















                                       21
<PAGE>


                    UNIONBANCAL CORPORATION AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                   (UNAUDITED)

NOTE 10--PENSION AND OTHER POSTRETIREMENT BENEFITS

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

<TABLE>
<CAPTION>


                                               PENSION BENEFITS         OTHER BENEFITS
                                             --------------------    --------------------
                                             FOR THE THREE MONTHS    FOR THE THREE MONTHS
                                              ENDED SEPTEMBER 30,     ENDED SEPTEMBER 30,
                                             --------------------    --------------------
(DOLLARS IN THOUSANDS)                         2003        2004        2003        2004
-------------------------------------------- --------    --------    -------     --------
<S>                                          <C>         <C>         <C>         <C>
COMPONENTS OF NET PERIODIC BENEFIT COST
Service cost................................ $  8,217    $  9,415    $ 1,295     $    849
Interest cost...............................   11,875      13,059      2,641        1,399
Expected return on plan assets.............. (18,203)     (20,782)    (1,687)      (2,292)
Amortization of prior service cost..........      267         266       (24)          (24)
Amortization of transition amount...........       --          --        637          637
Recognized net actuarial loss (gain)........    1,042       3,609      1,599         (539)
                                             --------    --------    -------     --------
Total net periodic benefit cost............. $  3,198    $  5,567    $ 4,461     $     30
                                             ========    ========    =======     ========

                                               PENSION BENEFITS        OTHER BENEFITS
                                             --------------------    --------------------
                                              FOR THE NINE MONTHS    FOR THE NINE MONTHS
                                              ENDED SEPTEMBER 30,    ENDED SEPTEMBER 30,
                                             --------------------    --------------------
(DOLLARS IN THOUSANDS)                         2003        2004       2003         2004
-------------------------------------------- --------    --------    -------     --------
COMPONENTS OF NET PERIODIC BENEFIT COST
Service cost................................ $ 24,650    $ 28,244    $ 3,885     $  4,232
Interest cost...............................   35,625      39,179      7,921        7,079
Expected return on plan assets..............  (54,608)    (62,347)    (5,060)      (6,759)
Amortization of prior service cost..........      800         800        (72)         (72)
Amortization of transition amount...........       --          --      1,912        1,912
Recognized net actuarial loss...............    3,127      10,826      4,796        2,997
                                             --------    --------    -------     --------
Total net periodic benefit cost............. $  9,594    $ 16,702    $13,382     $  9,389
                                             ========    ========    =======     ========
</TABLE>


     In the third quarter of 2004, the Company recorded a $4.7 million reduction
in  employee   benefit  expense   associated  with  the   remeasurement  of  our
postretirement   benefits  as  a  result  of  the  Medicare  Prescription  Drug,
Improvement  and  Modernization  Act of  2003  ("The  Act").  The  reduction  is
attributable to a federal subsidy  provided by The Act to employers that sponsor
retiree  health  care  plans with drug  benefits  that are  equivalent  to those
offered under  Medicare Part D. The effect of the subsidy on the  measurement of
net periodic  postretirement  benefit cost for the  year-to-date  period  ending
September 30, 2004  includes a $2.3 million  actuarial  experience  gain, a $0.9
million reduction in service cost, and a $1.5 million reduction in interest cost
on the accumulated  postretirement  benefit obligation (APBO). The effect of the
subsidy  related  to  benefits  attributed  to past  service  in  measuring  the
Company's  January  1, 2004 APBO was a  reduction  of $30.8  million  related to
benefits attributed to past service.

     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  did not make any  contributions  to the plan in the
third quarter of 2004 and does not expect to make any further  contributions for
the remainder of 2004.


                                       22

<PAGE>

                    UNIONBANCAL CORPORATION AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                   (UNAUDITED)

NOTE 11--SUBSEQUENT EVENTS

     On October 27, 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
January 7, 2005 to stockholders of record as of December 10, 2004.

     On October 28, 2004,  the Company's  subsidiary,  Union Bank of California,
N.A.,  completed  its  acquisition  of  Jackson  Federal  Bank,  a savings  bank
headquartered  in Brea,  California.  The Company  acquired  approximately  $1.4
billion in total assets and fourteen  branches.  The Company paid  approximately
$305  million,  consisting  of $168  million  in cash  and $137  million  in the
Company's common stock.






























                                       23

<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 LOOKING
AT THE FACT THAT THEY DO NOT RELATE  STRICTLY TO  HISTORICAL  OR CURRENT  FACTS.
OFTEN,  THEY  INCLUDE THE WORDS  "BELIEVE,"  "EXPECT,"  "ANTICIPATE,"  "INTEND,"
"PLAN,"  "ESTIMATE,"  "POTENTIAL,"  "PROJECT," OR WORDS OF SIMILAR  MEANING,  OR
FUTURE OR  CONDITIONAL  VERBS SUCH AS "WILL,"  "WOULD,"  "SHOULD,"  "COULD,"  OR
"MAY." THEY MAY ALSO CONSIST OF ANNUALIZED  AMOUNTS BASED ON HISTORICAL  INTERIM
PERIOD  RESULTS.  IN  THIS  DOCUMENT,   FOR  EXAMPLE,  WE  MAKE  FORWARD-LOOKING
STATEMENTS   DISCUSSING  OUR  EXPECTATIONS   ABOUT  THE  IMPACT  ON  UNIONBANCAL
CORPORATION  OF:  RECENTLY  ISSUED  ACCOUNTING   PRONOUNCEMENTS;   BANK  SECRECY
ACT-RELATED  MATTERS;   INCREASES  IN  BUSINESS  ACTIVITY  AND  INTEREST  RATES;
INVESTMENTS  IN BANK  ACQUISITIONS,  DE NOVO BRANCHES AND  TECHNOLOGY;  MATURING
DERIVATIVE  HEDGES;  CHANGES IN OUR  CALIFORNIA  EFFECTIVE  TAX RATE  RELATED TO
PROJECTED  PROFIT  INCREASES  FOR   MITSUBISHI TOKYO   FINANCIAL  GROUP,   INC.;
CREDIT-RELATED  TRENDS REFLECTED IN THE UNALLOCATED PORTION OF OUR ALLOWANCE FOR
CREDIT  LOSSES;  CHANGES IN OUR NET INTEREST  INCOME DUE TO POSSIBLE  CHANGES IN
INTEREST  RATES AND OTHER  FACTORS;  AND CERTAIN  PENDING LEGAL  ACTIONS.  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: FLUCTUATIONS IN INTEREST
RATES,  GOVERNMENT  POLICIES,  REGULATIONS,  AND  THEIR  ENFORCEMENT  (INCLUDING
MONETARY AND FISCAL POLICIES AND BANK SECRECY ACT-RELATED MATTERS), LEGISLATION,
ECONOMIC   CONDITIONS,   CREDIT  QUALITY  OF  BORROWERS,   OPERATIONAL  FACTORS,
COMPETITION IN THE  GEOGRAPHIC AND BUSINESS AREAS IN WHICH THE COMPANY  CONDUCTS
ITS OPERATIONS,  GLOBAL POLITICAL CONDITIONS,  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), 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 $47.0  billion  at  September  30,  2004.  During  2003,
UnionBanCal  Corporation  changed its state of incorporation  from California to
Delaware.  Our  majority  owner,  BTM,  owned  approximately  62  percent of our
outstanding common stock at September 30, 2004.

EXECUTIVE OVERVIEW

     We are  providing  you with an  overview  of what we  believe  are the most
significant  events that impacted our results for the third quarter of 2004. You
should  carefully  read the rest of this document for


                                       24

<PAGE>


more detailed information that will assist your understanding of trends,  events
and uncertainties that may impact us.

     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 third quarter of 2004.  The  improvements  came from  positive  financial
results and economic  outlooks of our borrowers,  as well as payoffs,  partially
offset  by a slight  increase  in our  nonperforming  assets.  Nonaccrual  loans
increased  slightly  from  June 30,  2004 to $180  million,  but  have  declined
significantly from December 31, 2003. With credit quality improvements partially
offset by growth in commercial  lending, we recorded a reversal of provision for
credit losses of $10.0 million for the quarter.

     Continuing  low  levels  of  interest  rates  have  hampered  growth in net
interest  income,  as our assets have  continued  to reprice at  relatively  low
levels.  Significant  contributors  to the reduced  asset  yields were  mortgage
refinancings,  which 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 third 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 amount 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 third  quarter of
2004,  compared to the third  quarter of 2003,  providing  us with a low cost of
funding, which is a competitive advantage. Average demand deposits for the third
quarter of 2004 were 48 percent of average total deposits compared to 47 percent
for the third 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 0.49  percent and 0.50  percent in the third
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  acquisitions  during  the first nine
months of 2004 and opened a number of de novo branches,  which further  expanded
our business locations and deposits in California. A third acquisition,  Jackson
Federal Bank, closed in October 2004.

     Noninterest income rose in the third quarter of 2004, compared to the third
quarter of 2003,  primarily as a result of higher  service  charges on deposits,
trust and  investment  management  fees,  letters  of credit  and  international
commissions and fees.  Increases in volumes,  as well as our acquisitions,  were
primarily responsible for the increases in our noninterest income.

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

CRITICAL ACCOUNTING POLICIES

     UnionBanCal Corporation's consolidated financial statements are prepared in
accordance with accounting principles generally accepted in the United States of
America (US GAAP) and the general practices of the banking industry.


                                       25

<PAGE>


     The  financial  information  contained  within  our  statements  is,  to  a
significant extent,  financial information that is based on approximate measures
of the financial  effects of transactions and events that have already occurred.
A variety of factors  could  affect the ultimate  value that is obtained  either
when earning income, recognizing an expense,  recovering an asset or relieving a
liability.  In many instances, we use a discount factor to determine the present
value of assets and liabilities.  A change in the discount factor could increase
or decrease the values of those assets and  liabilities  and such a change would
result in either a beneficial or adverse impact to our financial results. We use
historical  loss  factors,  adjusted for current  conditions,  to determine  the
inherent loss that may be present in our loan and lease portfolio. Actual losses
could differ  significantly  from the loss factors that we use. Other  estimates
that we use are employee turnover factors for pension purposes,  residual values
in our leasing portfolio, fair value of our derivatives and securities, expected
useful lives of our depreciable  assets and assumptions  regarding our effective
income  tax  rates.  We enter  into  derivative  contracts  to  accommodate  our
customers and for our own risk management purposes. The derivative contracts are
generally  foreign  exchange,  interest  rate  swap  and  interest  rate  option
contracts,  and we plan to offer  energy-related  derivatives to accommodate our
customers in the oil and gas industry.  We value these  contracts at fair value,
using either readily  available,  market quoted prices or from  information that
can be  extrapolated  to  approximate a market price.  We have not  historically
entered into  derivative  contracts  for our customers or for  ourselves,  which
relate to credit,  commodity or  weather-related  indices.  We are subject to US
GAAP that may change from one previously  acceptable  method to another  method.
Although the  economics  of our  transactions  would be the same,  the timing of
events that would impact our  transactions  could change.  Our most  significant
estimates  are approved by our Chief  Executive  Officer  (CEO) Forum,  which is
comprised of our most senior executives.  At each financial  reporting period, a
review of these  estimates is then presented to the Audit Committee of our Board
of Directors.

     Understanding  our accounting  policies is fundamental to understanding our
consolidated   financial  position  and  consolidated   results  of  operations.
Accordingly, our significant accounting policies are discussed in detail in Note
1 in the "Notes to Consolidated  Financial Statements" in our 2003 Annual Report
on Form 10-K filed with the Securities and Exchange Commission.



















                                       26

<PAGE>



FINANCIAL PERFORMANCE

SUMMARY OF FINANCIAL PERFORMANCE

<TABLE>
<CAPTION>

                                  FOR THE THREE MONTHS INCREASE (DECREASE)   FOR THE NINE MONTHS    INCREASE (DECREASE)
                                  -------------------- ------------------   ----------------------  ------------------
                                   ENDED SEPTEMBER 30,  2004 VERSUS 2003      ENDED SEPTEMBER 30,    2004 VERSUS 2003
                                  -------------------- ------------------   ----------------------  ------------------
(DOLLARS IN THOUSANDS)              2003        2004    AMOUNT    PERCENT      2003        2004      AMOUNT    PERCENT
--------------------------------  --------    -------- -------    -------   ----------  ----------  --------   -------
<S>                <C>            <C>         <C>      <C>          <C>     <C>         <C>          <C>          <C>
RESULTS OF OPERATIONS
Net interest income(1)..........  $401,089    $412,090 $11,001      2.7%    $1,177,646  $1,212,369   $34,723      2.9%
Noninterest income
  Service charges on deposit
    accounts....................    81,832      87,555   5,723      7.0        232,061     258,682    26,621     11.5
  Trust and investment
    management fees.............    35,429      39,089   3,660     10.3        101,245     111,699    10,454     10.3
  Insurance commissions.........    15,814      17,463   1,649     10.4         45,056      57,850    12,794     28.4
  International commissions and
    fees........................    17,380      18,906   1,526      8.8         49,581      54,553     4,972     10.0
  Card processing fees, net.....    10,335       4,653  (5,682)   (55.0)        29,357      28,901     (456)     (1.6)
  Gain on sale of merchant card
    portfolio...................        --          --      --       nm             --      93,000    93,000       nm
  Other noninterest income......    40,680      48,288   7,608     18.7        133,112     153,484    20,372     15.3
                                  --------    -------- -------              ----------  ----------  --------
Total noninterest income........   201,470     215,954  14,484      7.2        590,412     758,169   167,757     28.4
Total revenue...................   602,559     628,044  25,485      4.2      1,768,058   1,970,538   202,480     11.5
(Reversal of) provision for
  credit losses.................    20,000     (10,000)(30,000)      nm         75,000     (25,000) (100,000)      nm
Noninterest expense
  Salaries and employee benefits   205,302     216,767  11,465      5.6        602,338     653,787    51,449      8.5
  Net occupancy.................    31,342      33,206   1,864      5.9         91,844      96,961     5,117      5.6
  Intangible asset amortization.     2,587       5,077   2,490     96.3          8,291      13,783     5,492     66.2
  Other noninterest expense.....   109,630     117,341   7,711      7.0        339,992     357,368    17,376      5.1
                                  --------    -------- -------              ----------  ----------  --------
Total noninterest expense.......   348,861     372,391  23,530      6.7      1,042,465   1,121,899    79,434      7.6
Income before income tax........   233,698     265,653  31,955     13.7        650,593     873,639   223,046     34.3
Income tax......................    78,653     102,215  23,562     30.0        215,273     321,617   106,344     49.4
                                  --------    -------- -------              ----------  ----------  --------
Net income......................  $155,045    $163,438 $ 8,393      5.4%    $  435,320  $  552,022  $116,702     26.8%
                                  ========    ======== =======              ==========  ==========  ========
---------------------------------
<FN>

(1)  Net  interest  income does not include any  adjustments  for fully  taxable
     equivalence.
</FN>
</TABLE>


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

     o    We recorded a reversal  of  provision  for credit  losses in the third
          quarter  of 2004,  which  reflects  continued  improvement  in  credit
          quality  as  discussed  earlier  in  our  executive   overview.   (See
          additional discussion under "Allowance for Credit Losses.")

     o    Our net interest  income was favorably  influenced  by higher  earning
          asset volumes,  including a significantly  higher amount of securities
          and an  increase in the average  balances of our  commercial  loan and
          residential  real  estate  loan  portfolios.  Strong  deposit  growth,
          including an attractive mix of average noninterest bearing deposits to
          total deposits, also contributed favorably to our net interest income.
          (See our discussion under "Net Interest Income.")

     o    Our noninterest income was attributable to several factors:

          o    Service  charges  on deposit  accounts  rose due to an 18 percent
               increase in average  retail demand  deposits in the third quarter
               of 2004 over the third  quarter of 2003 and higher  overdraft and
               return fees of $5.2 million, primarily associated with changes in
               our check processing introduced in April 2004;

          o    Trust and  investment  management  fees  increased from the third
               quarter  of  2003   primarily  due  to  increased   assets  under
               administration  due to continued strong sales and the addition of


                                       27

<PAGE>


               $3.7 billion from our  acquisition  of the business  portfolio of
               CNA Trust  Company  (CNAT).  Year-to-date,  trust fees have grown
               approximately  10  percent  from the first  nine  months of 2003.
               Managed  assets   increased  by   approximately   9  percent  and
               non-managed assets increased by approximately 13 percent from the
               third quarter of 2003 to the third quarter of 2004.  Total assets
               under  administration  increased by approximately 13 percent,  to
               $165.8 billion, for the same period;

          o    Insurance  commissions  increased  primarily  as a result  of our
               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, decreased primarily due to the sale of
               our merchant card portfolio to NOVA Information Systems (NOVA) in
               the second quarter of 2004;

          o    In other  income,  the  third  quarter  of 2004  included  higher
               merchant banking fees related to loan syndications.

     o    Our higher noninterest expense was attributable to several factors:

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

               o    acquisitions and new branch openings, which accounted for 35
                    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    decreased employee benefits expense due to:

                    o    a $4.7 million  reduction  associated with the Medicare
                         Prescription  Drug and  Improvement  Act of 2003. For a
                         further discussion  regarding this reduction,  see Note
                         10 of the  Notes to  Condensed  Consolidated  Financial
                         Statements included in this Form 10-Q; partly offset by

                    o    increased  employee  benefits  expense of approximately
                         $1.4 million  associated with our  acquisitions and new
                         branch openings;

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

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

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

               o    Other  noninterest  expense  rose  primarily  as a result of
                    higher operational losses and litigation.


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

     o    We recorded a reversal of provision for credit losses,  which reflects
          continued  improvement in credit quality.  (See additional  discussion
          under "Allowance for Credit Losses.")


                                       28

<PAGE>


     o    Our net interest  income was favorably  influenced  by higher  earning
          asset volumes,  including a significantly higher amount 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 our discussion under "Net
          Interest Income.")

     o    Our noninterest income was attributable to several factors:

          o    Service  charges on deposit  accounts rose  primarily due to a 20
               percent  increase in average retail demand  deposits in the first
               nine months of 2004 over the first nine months of 2003 and higher
               overdraft and return fees of $15.3 million  primarily  associated
               with changes in check processing introduced in April 2004;

          o    Trust and  investment  management  fees  increased from the first
               nine  months of 2003  primarily  due to  increased  assets  under
               administration from continued strong sales and our acquisition of
               the business  portfolio of CNAT.  Trust fees have grown  steadily
               since mid-2003 as the equity markets and the economy continued to
               stabilize;

          o    Insurance  commissions  increased  primarily  as a result  of our
               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    The first nine months of 2004  included a $93.0  million  gain on
               the sale of our merchant  card  portfolio,  which was acquired by
               NOVA.  The  sale of our  merchant  card  portfolio  reflects  our
               ongoing  effort to sharpen our  strategic  focus.  The  long-term
               marketing  alliance  we formed  with NOVA  will  provide  us with
               marketing fees in the future;

          o    The first nine months of 2004 also  included net gains in private
               capital investment sales of $9.4 million, an $8.5 million gain on
               the sale of real property,  higher merchant  banking fees of $5.3
               million,  and higher foreign  exchange  currency  profits of $3.7
               million.  In addition,  the first nine 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 $1.5 million.

     o    Our higher noninterest expense was attributable to several factors:

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

               o    acquisitions and new branch openings, which accounted for 40
                    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    increased  employee  benefits  expense of approximately
                         $4.9 million  associated  with our recent  acquisitions
                         and new branch openings;

                    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


                                       29

<PAGE>


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

                    o    a $4.7 million  reduction  associated with the Medicare
                         Prescription  Drug and  Improvement  Act of 2003. For a
                         further discussion  regarding this reduction,  see Note
                         10 of the  Notes to  Condensed  Consolidated  Financial
                         Statements included in this Form 10-Q;

               o    Net occupancy costs  increased  primarily as a result of our
                    acquisitions  and new branch  openings,  and reduced  rental
                    income   as   we   relocate    personnel    to    previously
                    tenant-occupied premises, partially offset by a $4.2 million
                    write-off of leasehold  improvements in the third quarter of
                    2003;

               o    Intangible asset amortization expense 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 operational losses and litigation.
















                                       30

<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
                                 ----------------------------------------------------------------        INCREASE (DECREASE) IN
                                        SEPTEMBER 30, 2003             SEPTEMBER 30, 2004         ----------------------------------
                                 ------------------------------- --------------------------------        AVERAGE       INCOME/
                                             INTEREST  AVERAGE                INTEREST   AVERAGE          BALANCE       EXPENSE(1)
                                   AVERAGE    INCOME/   YIELD/      AVERAGE   INCOME/   YIELD/    ------------------ ---------------
(DOLLARS IN THOUSANDS)             BALANCE   EXPENSE(1)RATE(1)(2)   BALANCE  EXPENSE(1) RATE(1)(2)  AMOUNT   PERCENT  AMOUNT PERCENT
-------------------------------- ----------- --------- --------- ----------- ---------  --------- ---------- ------- ------- -------
<S>                              <C>         <C>          <C>    <C>         <C>           <C>    <C>           <C>  <C>      <C>
ASSETS
Loans:(3)
  Domestic...................... $24,858,766 $342,629     5.48%  $26,169,937 $ 340,401     5.18%  $1,311,171    5.3% $(2,228) (0.7)%
  Foreign(4)....................   1,473,220    7,581     2.04     1,977,356    10,588     2.13      504,136   34.2    3,007  39.7
Securities--taxable.............   9,928,708   92,553     3.73    11,912,985   105,256     3.53    1,984,277   20.0   12,703  13.7
Securities--tax-exempt..........      40,592    1,015    10.00        68,884     1,416     8.22       28,292   69.7      401  39.5
Interest bearing deposits in
  banks.........................     246,897      922     1.48       568,071     2,744     1.92      321,174  130.1    1,822 197.6
Federal funds sold and
  securities purchased under
  resale agreements.............     980,271    2,532     1.02       431,138     1,616     1.49     (549,133) (56.0)     (916)(36.2)
Trading account assets..........     327,415      909     1.10       299,238     1,250     1.66      (28,177)   (8.6)     341  37.5
                                 ----------- --------            ----------- ---------            ----------         --------
      Total earning assets......  37,855,869  448,141     4.71    41,427,609   463,271     4.46    3,571,740     9.4 $ 15,130   3.4%
                                             --------                        ---------            ----------         --------
Allowance for credit losses.....    (570,773)                       (501,259)                         69,514  (12.2)
Cash and due from banks.........   2,324,389                       2,229,980                         (94,409)  (4.1)
Premises and equipment, net.....     510,205                         504,348                          (5,857)  (1.1)
Other assets....................   1,793,825                       2,052,602                         258,777   14.4
                                 -----------                     -----------                      ----------
      Total assets.............. $41,913,515                     $45,713,280                      $3,799,765   9.1%
                                 ===========                     ===========                      ==========
LIABILITIES
Domestic deposits:
  Interest bearing.............. $10,952,652   16,586     0.60   $11,807,430    18,603     0.63   $  854,778    7.8% $  2,017 12.2%
  Savings and consumer time.....   4,116,669    9,990     0.96     4,383,745     9,029     0.82      267,076    6.5      (961 (9.6)
  Large time....................   2,303,754    8,408     1.45     1,986,815     7,244     1.45     (316,939) (13.8)   (1,164)(13.8)
Foreign deposits(4).............   1,200,668    1,991     0.66     1,729,290     5,007     1.15      528,622   44.0     3,016 151.5
                                 ----------- --------            ----------- ---------            ----------         --------
      Total interest bearing
        deposits................  18,573,743   36,975     0.79    19,907,280    39,883     0.80    1,333,537    7.2     2,908  7.9
                                 ----------- --------            ----------- ---------            ----------         --------
Federal funds purchased and
  securities sold under
  repurchase agreements.........     393,772      689     0.69       867,988     2,861     1.31      474,216  120.4     2,172 315.2
Commercial paper................     781,552    1,723     0.87       639,345     1,697     1.06     (142,207) (18.2)      (26) (1.5)
Other borrowed funds............     262,512    1,673     2.53       161,504     1,117     2.75     (101,008) (38.5)     (556)(33.2)
Medium and long-term debt.......     399,761    1,738     1.73       792,083     4,369     2.19      392,322   98.1     2,631 151.4
Preferred securities and trust
  notes(5)......................     351,575    3,607     4.10        15,959       242     6.07     (335,616) (95.5)   (3,365)(93.3)
                                 ----------- --------            ----------- ---------            ----------         --------
      Total borrowed funds......   2,189,172    9,430     1.71     2,476,879    10,286     1.65      287,707   13.1       856   9.1

      Total interest bearing
        liabilities.............  20,762,915   46,405     0.89    22,384,159    50,169     0.89    1,621,244    7.8  $  3,764   8.1%
                                             --------            ----------- ---------            ----------         --------
Noninterest bearing deposits....  16,329,221                      18,207,030                       1,877,809   11.5
Other liabilities...............     986,545                       1,054,138                          67,593    6.9
                                 -----------                     -----------                      ----------
      Total liabilities.........  38,078,681                      41,645,327                       3,566,646    9.4
                                 -----------                     -----------                      ----------
STOCKHOLDERS' EQUITY
      Total stockholders' equity   3,834,834                       4,067,953                         233,119    6.1
                                 -----------                     -----------                      ----------
      Total liabilities and
        stockholders' equity.... $41,913,515                     $45,713,280                      $3,799,765    9.1%
                                 ===========                     ===========                      ==========
Net interest income/margin
  (taxable-equivalent basis)....              401,736     4.22%                413,102     3.98%
Less: taxable-equivalent
  adjustment....................                  647                            1,012
                                             --------                        ---------
      Net interest income.......             $401,089                        $ 412,090
                                             ========                        =========
----------------------
<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>

                                       31

<PAGE>

<TABLE>
<CAPTION>


                                                  FOR THE NINE MONTHS ENDED
                                -----------------------------------------------------------------        INCREASE (DECREASE) IN
                                     SEPTEMBER 30, 2003               SEPTEMBER 30, 2004          ----------------------------------
                                -------------------------------- --------------------------------        AVERAGE        INCOME/
                                             INTEREST   AVERAGE              INTEREST    AVERAGE         BALANCE       EXPENSE(1)
                                  AVERAGE    INCOME/    YIELD/     AVERAGE    INCOME/    YIELD/   ------------------ ---------------
(DOLLARS IN THOUSANDS)            BALANCE   EXPENSE(1) RATE(1)(2)  BALANCE   EXPENSE(1) RATE(1)(2)  AMOUNT   PERCENT  AMOUNT PERCENT
------------------------------- ----------- ---------- --------- ----------- ---------- --------- ---------  ------- ------- -------
<S>                             <C>         <C>           <C>    <C>         <C>            <C>   <C>          <C>  <C>       <C>
ASSETS
Loans:(3)

  Domestic..................... $24,986,259 $1,043,906    5.58%  $25,226,482 $  988,164     5.23% $ 240,223    1.0% $(55,742) (5.3)%
  Foreign(4)...................   1,536,428     24,742    2.15     1,819,780     27,083     1.99    283,352   18.4     2,341   9.5
Securities--taxable............   8,220,231    249,073    4.04    11,669,470    317,395     3.63  3,449,239   42.0    68,322  27.4
Securities--tax-exempt.........      41,168      3,045    9.86        68,120      4,175     8.17     26,952   65.5     1,130  37.1
Interest bearing deposits in
  banks........................     223,937      3,014    1.80       353,060      4,773     1.81    129,123   57.7     1,759  58.4
Federal funds sold and
  securities purchased under
  resale agreements............     932,496      8,210    1.18       786,045      6,503     1.11   (146,451) (15.7)   (1,707) (20.8)
Trading account assets.........     322,952      2,847    1.18       299,381      2,728     1.22    (23,571)  (7.3)     (119)  (4.2)
                                ----------- ----------           ----------- ----------           ---------          -------
      Total earning assets.....  36,263,471  1,334,837    4.92    40,222,338  1,350,821     4.49  3,958,867   10.9   $15,984    1.2%
                                            ----------                       ----------           ---------          -------
Allowance for credit losses....    (586,418)                        (520,219)                        66,199  (11.3)
Cash and due from banks........   2,173,775                        2,246,479                         72,704    3.3
Premises and equipment, net....     508,859                          512,780                          3,921    0.8
Other assets...................   1,666,062                        2,001,805                        335,743   20.2
                                -----------                      -----------                     ----------
      Total assets............. $40,025,749                      $44,463,183                     $4,437,434   11.1%
                                ===========                      ===========                     ==========
LIABILITIES
Domestic deposits:
  Interest bearing............. $10,087,830     54,194    0.72   $11,566,270     51,357     0.59 $1,478,440   14.7%  $(2,837) (5.2)%
  Savings and consumer time....   3,937,051     33,583    1.14     4,249,118     26,288     0.83    312,067    7.9    (7,295) (21.7)
  Large time...................   2,416,606     28,995    1.60     2,238,352     22,964     1.37   (178,254)  (7.4)   (6,031) (20.8)
Foreign deposits(4)............   1,269,010      8,008    0.84     1,478,573      9,900     0.89    209,563   16.5     1,892   23.6
                                ----------- ----------           ----------- ----------           ---------          -------
      Total interest bearing
        deposits...............  17,710,497    124,780    0.94    19,532,313    110,509     0.76  1,821,816   10.3   (14,271) (11.4)
                                ----------- ----------           ----------- ----------           ---------          -------
Federal funds purchased and
  securities sold under
  repurchase agreements........     414,446      2,763    0.89       537,169      4,094     1.02    122,723   29.6     1,331   48.2
Commercial paper...............     899,456      7,397    1.10       566,776      3,883     0.92   (332,680) (37.0)   (3,514) (47.5)
Other borrowed funds...........     191,480      3,983    2.78       175,211      3,595     2.74    (16,269)  (8.5)     (388)  (9.7)
Medium and long-term debt......     399,745      5,422    1.81       805,863     11,201     1.86    406,118  101.6     5,779  106.6
Preferred securities and trust
  notes(5).....................     351,594     10,930    4.15        78,139      2,553     4.36   (273,455) (77.8)   (8,377) (76.6)
                                ----------- ----------           ----------- ----------           ---------          -------
      Total borrowed funds.....   2,256,721     30,495    1.80     2,163,158     25,326     1.56    (93,563)  (4.1)   (5,169) (17.0)
                                ----------- ----------           ----------- ----------           ---------          -------
      Total interest bearing
        liabilities............  19,967,218    155,275    1.04    21,695,471    135,835     0.84  1,728,253    8.7  $(19,440)(12.5)%
                                            ----------                       ----------           ---------         --------
Noninterest bearing deposits...  15,159,687                       17,758,663                      2,598,976   17.1
Other liabilities..............   1,022,854                        1,024,855                          2,001    0.2
                                -----------                      -----------                      ---------
      Total liabilities........  36,149,759                       40,478,989                      4,329,230   12.0
                                -----------                      -----------                      ---------
STOCKHOLDERS' EQUITY
Common equity..................   3,875,990                        3,984,194                        108,204    2.8
                                -----------                      -----------                      ---------
      Total stockholders'
        equity.................   3,875,990                        3,984,194                        108,204    2.8
                                -----------                      -----------                      ---------
      Total liabilities and
        stockholders' equity... $40,025,749                      $44,463,183                     $4,437,434   11.1%
                                ===========                      ===========                     ==========
Net interest income/margin
  (taxable-equivalent basis)...              1,179,562    4.35%               1,214,986    4.03%
Less: taxable-equivalent
  adjustment...................                  1,916                            2,617
                                            ----------                       ----------
      Net interest income......             $1,177,646                       $1,212,369
                                            ==========                       ==========
---------------------
<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>

                                       32

<PAGE>


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

     o    The growth in average earning assets was primarily  attributable to an
          increase in average  securities and 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 $11.1  billion at September 30, 2004,  compared to $10.4
          billion at December 30, 2003.  For further  information  on securities
          held for ALM purposes, see the section,  "Quantitative and Qualitative
          Disclosures  About  Market  Risk"  included  in this  Form  10-Q.  The
          increase in average  loans was largely due to a $1.4 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 third  quarter of 2004,  compared to the third quarter of
          2003.  Average  noninterest  bearing deposits were higher in the third
          quarter  of 2004,  compared  to the  third  quarter  of  2003,  mainly
          attributable  to  higher  average  business  demand  deposits  of $1.5
          billion, despite declines in demand deposits from our title and escrow
          clients,  which decreased by $0.4 billion,  and higher consumer demand
          deposit  growth.  We  anticipate  that the  growth  rates  in  average
          noninterest  bearing  deposits will decline in 2005 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  the
          generally, lower level of interest rates, resulting in a lower average
          yield of 25 basis  points on average  earning  assets,  which was also
          negatively impacted by lower hedge income of $21.9 million;

     o    Although   market  rates  on  our  interest   bearing   deposits  were
          unfavorably  impacted  by  increasing  interest  rates and lower hedge
          income of $0.9 million,  the  redemption of our higher  yielding trust
          preferred  securities in February 2004 contributed to our market rates
          on interest bearing liabilities remaining relatively unchanged; 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, commercial paper and other borrowed funds.

     As a result of these changes and as long-term interest rates declined,  our
net interest margin decreased by 24 basis points.

     We use derivatives to hedge expected  changes in the yields on our variable
rate loans and term certificates of deposit (CDs), and to convert our long-term,
fixed-rate  borrowings to floating rate. 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 September 30, 2003 and 2004, we had
hedge income of $43.2 million and $20.4 million, respectively.

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

     o    The growth in average earning assets was primarily  attributable to an
          increase in average  securities and 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  increase  in average  loans was  largely  due to a $1.1
          billion  increase in average  residential  mortgages and a decrease of
          $0.6 billion in average commercial loans;


                                       33

<PAGE>


     o    Deposit  growth  has  contributed  significantly  to our lower cost of
          funds in the first  nine  months of 2004,  compared  to the first nine
          months of 2003.  Average  noninterest  bearing deposits were higher in
          the first nine  months of 2004,  compared  to the first nine months of
          2003,  mainly  attributable to higher average business demand deposits
          of $6.5 billion,  including  demand deposits from our title and escrow
          clients which  increased less than $0.1 billion,  and higher  consumer
          demand deposit growth;

     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 43 basis  points on average  earning  assets,  which was also
          negatively impacted by lower hedge income of $46.2 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 20 basis
          points, which included higher hedge income of $1.0 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, commercial paper and other borrowed funds.

     As a result of these changes and as long-term interest rates declined,  our
net interest margin decreased by 32 basis points.

     As explained  previously,  derivative hedges will provide less net interest
income than in 2003, as positions  mature and, to a lesser  extent,  as interest
rates rise. For the nine months ended  September 30, 2003 and 2004, we had hedge
income of $124.6 million and $79.4 million, respectively.

NONINTEREST INCOME

<TABLE>
<CAPTION>

                                          FOR THE THREE MONTHS ENDED                     FOR THE NINE MONTHS ENDED
                                ---------------------------------------------  ---------------------------------------------
                                                                 INCREASE                                       INCREASE
                                                                (DECREASE)                                     (DECREASE)
                                SEPTEMBER 30,  SEPTEMBER 30, ----------------  SEPTEMBER 30,  SEPTEMBER 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.....................    $ 81,832       $87,555    $ 5,723    7.0%     $232,061       $258,682    $ 26,621  11.5%
Trust and investment management
  fees.........................      35,429        39,089      3,660   10.3       101,245        111,699      10,454  10.3
Insurance commissions..........      15,814        17,463      1,649   10.4        45,056         57,850      12,794  28.4
International commissions and
  fees.........................      17,380        18,906      1,526    8.8        49,581         54,553       4,972  10.0
Card processing fees, net......      10,335         4,653     (5,682) (55.0)       29,357         28,901        (456) (1.6)
Merchant banking fees..........       9,312        11,682      2,370   25.5        21,521         26,863       5,342  24.8
Foreign exchange gains, net....       7,574         8,548        974   12.9        21,466         25,186       3,720  17.3
Brokerage commissions and fees.       7,549         8,527        978   13.0        24,614         24,847         233   0.9
Securities gains (losses), net.      (2,618)           (6)     2,612  (99.8)        7,042          1,612      (5,430)(77.1)
Gain on sale of merchant card
  portfolio....................          --            --         --     --            --         93,000      93,000    nm
Other..........................      18,863        19,537        674    3.6        58,469         74,976      16,507  28.2
                                   --------      --------    -------             --------       --------    --------
  Total noninterest income.....    $201,470      $215,954    $14,484    7.2%     $590,412       $758,169    $167,757  28.4%
                                   ========      ========    =======             ========       ========    ========
--------------------
<FN>
nm--not meaningful
</FN>
</TABLE>


                                       34
<PAGE>


NONINTEREST EXPENSE

<TABLE>
<CAPTION>

                                        FOR THE THREE MONTHS ENDED                        FOR THE NINE MONTHS ENDED
                                ---------------------------------------------    ---------------------------------------------
                                                                 INCREASE                                         INCREASE
                                                                (DECREASE)                                       (DECREASE)
                                SEPTEMBER 30,  SEPTEMBER 30, ----------------    SEPTEMBER 30,  SEPTEMBER 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   $169,705        $181,497   $11,792     6.9%     $ 484,333     $  526,821     $42,488    8.8%
Employee benefits..............     35,597          35,270      (327)   (0.9)       118,005        126,966       8,961    7.6
Salaries and employee benefits     205,302         216,767    11,465     5.6        602,338        653,787      51,449    8.5
Net occupancy..................     31,342          33,206     1,864     5.9         91,844         96,961       5,117    5.6
Equipment......................     15,680          16,289       609     3.9         48,705         50,443       1,738    3.6
Software.......................     11,996          13,560     1,564    13.0         34,921         39,463       4,542   13.0
Communications.................     12,661          12,850       189     1.5         39,859         39,295        (564)  (1.4)
Professional services..........     12,676          12,375      (301)   (2.4)        38,256         33,968      (4,288) (11.2)
Advertising and public relations     9,227           7,954    (1,273)  (13.8)        28,587         27,495      (1,092)  (3.8)
Data processing................      7,659           8,364       705     9.2         23,887         23,648        (239)  (1.0)
Intangible asset amortization..      2,587           5,077     2,490    96.3          8,291         13,783       5,492   66.2
Foreclosed asset expense.......        (79)            (10)       69      nm            (28)           526         554     nm
Other..........................     39,810          45,959     6,149    15.4        125,805        142,530      16,725   13.3
                                  --------        --------   -------             ----------     ----------     -------
  Total noninterest expense....   $348,861        $372,391   $23,530     6.7%    $1,042,465     $1,121,899     $79,434   7.6%
                                  ========        ========   =======             ==========     ==========     =======
---------------------
<FN>

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

INCOME TAX EXPENSE

     Income tax  expense in the third  quarter of 2004  resulted in a 38 percent
effective  income tax rate compared with an effective tax rate of 34 percent for
the third  quarter of 2003.  The increase in the  effective  tax rate was due to
higher  California  state taxes in 2004 and an adjustment of $7.8 million in the
third quarter of 2004 for 2003 state taxes.  The adjustment was due primarily to
the  difference  between our estimate of  California  state tax expense for last
year and the taxes  reported in our 2003 tax  return.  Income tax expense in the
first nine  months of 2004  resulted in a 37 percent  effective  income tax rate
compared  with an effective  tax rate of 33 percent for the first nine 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.  The  unitary  method  of  taxation  requires  us to
incorporate MTFG's financial  results,  adjusted to reflect income tax reporting
standards,  in determining our California tax.  Changes between MTFG's estimated
and actual  income for the fiscal year ended March 31, 2004, as reported in Form
20-F,  filed with the SEC on September 28, 2004,  affected our California  taxes
for the 2003 tax year.

     We have filed our  California  tax returns on the  worldwide  unitary basis
since 1996. 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.

     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, including
MTFG's results on a U.S. GAAP basis, 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 third quarter and the first
nine

                                       35

<PAGE>



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.

LOANS

     The following table shows loans outstanding by loan type.

<TABLE>
<CAPTION>

                                                                                             INCREASE (DECREASE)
                                                                                           SEPTEMBER 30, 2004 FROM:
                                                                                 --------------------------------------
                                     SEPTEMBER 30,  DECEMBER 31,  SEPTEMBER 30,     SEPTEMBER 30,         DECEMBER 31,
                                          2003          2003          2004              2003                 2003
                                                                                 ------------------  ------------------
(DOLLARS IN THOUSANDS)               -------------  ------------  -------------    AMOUNT   PERCENT    AMOUNT   PERCENT
------------------------------------                                             ---------- -------  ---------- -------
<S>                                    <C>            <C>            <C>           <C>         <C>   <C>           <C>
Domestic:
  Commercial, financial and
    industrial......................   $ 9,277,969    $8,817,679     $9,555,618    $277,649    3.0%  $  737,939    8.4%
  Construction......................     1,127,915     1,101,166      1,103,970     (23,945)  (2.1)       2,804    0.3
  Mortgage:
    Residential.....................     7,095,436     7,463,538      8,821,566   1,726,130   24.3    1,358,028   18.2
    Commercial......................     4,310,957     4,195,178      4,356,052      45,095    1.0      160,874    3.8
                                     -------------  ------------  -------------  ----------          ----------
      Total mortgage................    11,406,393    11,658,716     13,177,618   1,771,225   15.5    1,518,902   13.0
 Consumer:
    Installment.....................       867,133       818,746        779,857     (87,276) (10.1)     (38,889)  (4.7)
    Revolving lines of credit.......     1,168,374     1,222,220      1,496,584     328,210   28.1      274,364   22.4
                                     -------------  ------------  -------------  ----------          ----------
      Total consumer................     2,035,507     2,040,966      2,276,441     240,934   11.8      235,475   11.5
  Lease financing...................       668,074       663,632        612,054     (56,020)  (8.4)     (51,578)  (7.8)
                                     -------------  ------------  -------------  ----------          ----------
      Total loans in domestic
        offices.....................    24,515,858    24,282,159     26,725,701   2,209,843    9.0    2,443,542   10.1
Loans originated in foreign branches     1,520,856     1,650,204      1,897,091     376,235   24.7      246,887   15.0
                                     -------------  ------------  -------------  ----------          ----------
      Total loans held to maturity..    26,036,714    25,932,363     28,622,792   2,586,078    9.9    2,690,429   10.4
      Total loans held for sale.....        10,662        12,265          2,294      (8,368) (78.5)      (9,971) (81.3)
                                     -------------  ------------  -------------  ----------          ----------
        Total loans.................   $26,047,376   $25,944,628    $28,625,086  $2,577,710    9.9%  $2,680,458   10.3%
                                     =============  ============  =============  ==========          ==========

</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.

     As of September  30, 2004,  the increase in the  commercial,  financial and
industrial  loan  portfolio  compared  to  September  30,  2003,  was  primarily
attributable  to an increase in loan demand in the third quarter of 2004 much of
which was in our energy portfolio.

     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.


                                       36

<PAGE>



     As of September 30, 2004, the  construction  loan portfolio  increased from
December 31, 2003,  mainly reflecting growth in the demand for new single family
homes,  and decreased  from  September 30, 2003. The growth in new single family
homes has been offset by slowing  growth in capital  assets and  employment  and
higher office vacancy rates in our markets, which were factors that 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.  As of September  30, 2004,  the
increase in the commercial mortgage portfolio compared to September 30, 2003 was
primarily  attributable to our acquisition of 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.

     As of  September  30,  2004,  the  increase  in  the  residential  mortgage
portfolio  compared to September  30, 2003,  was  primarily  attributable  to 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.  Third
quarter 2004 growth was driven by our broker channel contributing  approximately
two-thirds  of the  growth  and the  remaining  growth  attributable  to retail,
loan-by-phone  and internet  channels.  Purchase  money loans  accounted  for 50
percent of this third quarter 2004 growth with the remaining growth attributable
to refinancings.

     CONSUMER LOANS

     We originate  consumer loans,  such as auto loans and home equity loans and
lines,  through our branch network.  As of September 30, 2004, the consumer loan
portfolio increased compared to September 30, 2003,  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 September
30, 2004 was $23.7 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. As of September  30, 2004,
the decrease in the lease  financing  portfolio  compared to September 30, 2003,
was primarily  attributable to our announced  discontinuance of our auto leasing
activity,  effective  April 20,  2001.  At September  30,  2004,  our auto lease
portfolio  had declined to $32.9  million.  Included in our lease  portfolio are
leveraged  leases  of $566.7  million,  which  are net of  non-recourse  debt of
approximately $1.3 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.

     LOANS ORIGINATED IN FOREIGN BRANCHES

     Our loans originated in foreign  branches  consist  primarily of short-term
extensions of credit to financial  institutions.  As of September 30, 2004,  the
increase in loans  originated  in foreign  branches,  compared to September  30,
2003,  was  primarily  borrowings  from  financial  institutions  related  to an
increase in trade  financing  activity and increased  energy-related  lending in
Canada.


                                       37
<PAGE>



     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 September  30, 2003,  December 31, 2003 and  September  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.

<TABLE>
<CAPTION>

                                                        PUBLIC     CORPORATIONS
                                        FINANCIAL       SECTOR       AND OTHER         TOTAL
(DOLLARS IN MILLIONS)                 INSTITUTIONS     ENTITIES      BORROWERS      OUSTANDINGS
------------------------------------ -------------     --------    ------------     -----------
<S>                                       <C>            <C>            <C>            <C>
September 30, 2003
Korea...............................      $636           $--            $42            $678
December 31, 2003
Korea...............................      $630           $--            $28            $658
September 30, 2004
Korea...............................      $623           $--             $4            $627

</TABLE>

PROVISION FOR CREDIT LOSSES

     We recorded a reversal of provision for credit losses of $10 million in the
third quarter of 2004,  compared with a $20 million  provision for credit losses
in the third 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.  Understanding  our policies on allowance  for credit losses is
fundamental  to   understanding   our   consolidated   financial   position  and
consolidated  results of operations.  Accordingly,  our significant policies and
methodology  on allowance for credit losses are discussed in detail in Note 1 in
the "Notes to Consolidated  Financial  Statements" and in the section "Allowance
for Credit  Losses"  included in our  "Management's  Discussion  and Analysis of
Financial Conditions and Results of Operation" in our 2003 Annual Report on Form
10-K, which was filed with the Securities and Exchange Commission.

     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 September 30, 2004, our total allowance for credit losses
was $483 million  (consisting  of $407 million and $76 million of allocated  and
unallocated  allowance,  respectively),  or  1.69  percent  of  the  total  loan
portfolio and 268 percent of total nonaccrual loans. In addition,  the allowance
incorporates  the results of  measuring  impaired  loans as provided in SFAS No.
114,  "Accounting  by Creditors for Impairment of a Loan" 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


                                       38

<PAGE>


allowance  was  $55  million,  compared  with  $126  million  and  $29  million,
respectively,  at  September  30, 2004.  On September  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 $50 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  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 for the following
refinements:  we  refined  our loss  factors  for  commercial  real  estate  and
construction  lending in order to more accurately capture probable loss inherent
in the portfolio,  we adjusted the period used to calculate the cumulative  loss
rates on criticized  loans from 12 to 24 quarters to better estimate losses over
the life of the loans and we  revised  our  method of  estimating  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.

     During 2004, changes in estimates and assumptions  regarding the effects of
economic and business  conditions  on borrowers  and other factors also affected
the  assessment  of the  unallocated  allowance.  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,  we recorded a reversal of provision for credit losses
of $10  million in the third  quarter of 2004.  The  refinements  we made in the
manner in which we segment  our  allowance  for  credit  losses,  as  previously
described, had no impact on the overall level of the allowance.

     CHANGES IN THE ALLOCATED (FORMULA AND SPECIFIC) ALLOWANCE

     At September  30, 2004,  the formula  allowance  increased to $354 million,
compared to $280 million at December 31, 2003. The increase was due primarily to
the  impact  of the  introduction  in the  second  quarter  of 2004 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  decreased  to $53 million at  September  30, 2004,
compared to $80 million at December 31, 2003.  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 September 30, 2004, the unallocated  allowance  decreased to $76 million
from $173 million at December 31, 2003.  The reasons for the  decrease,  and for
which an unallocated allowance is warranted, are detailed below.


                                       39

<PAGE>


     In  our  assessment  as of  September  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  sector-specific  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.

     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,  we have  reduced  certain  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  commercial  real  estate,  we  considered  slightly
          improving  vacancy  rates and stagnant  rent growth being  experienced
          nationally, with specific weakness in Northern California, which could
          be in the range of $10 million to $20  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
          some electric service  providers,  combined with continued weakness in
          the airline  industry in the wake of surging fuel prices,  which could
          be in the range of $10 million to $20  million,  an increase  from the
          December 31, 2003 level of $5 million to $11 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 $4
          million to $8 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.  We reduced 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 September 30, 2004.

     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 NINE MONTHS
                         ENDED SEPTEMBER 30,  INCREASE (DECREASE)  ENDED SEPTEMBER 30,  INCREASE (DECREASE)
                        --------------------  ------------------   -------------------  ------------------
(DOLLARS IN THOUSANDS)    2003        2004     AMOUNT    PERCENT     2003       2004     AMOUNT   PERCENT
----------------------  --------    --------  --------  --------   --------   --------  --------  --------
<S>                     <C>         <C>       <C>        <C>       <C>        <C>       <C>        <C>
Balance, beginning of
  period..............  $558,282    $501,419  $(56,863)  (10.2)%   $609,190   $532,970  $(76,220)  (12.5)%
Loans charged off:
  Commercial,
    financial and
    industrial........    41,457      15,358   (26,099)  (63.0)     130,413     55,868   (74,545)  (57.2)
  Construction........        --         200       200      nm           --        200       200      nm
  Commercial mortgage.     7,286          --    (7,286)  100.0)       7,286         43    (7,243)  (99.4)
  Consumer............     2,058       1,520      (538)  (26.1)       7,143      4,795    (2,348)  (32.9)
  Lease financing.....       518         183      (335)  (64.7)      32,726      2,207   (30,519)  (93.3)
  Foreign(1)..........     2,220          --    (2,220) (100.0)       2,220         --    (2,220) (100.0)
                        --------    --------  --------             --------   --------  --------
    Total loans
      charged off.....    53,539      17,261   (36,278)  (67.8)     179,788     63,113  (116,675)  (64.9)
Recoveries of loans
  previously charged
  off:
  Commercial,
    financial and
    industrial........    13,845       8,216    (5,629)  (40.7)      32,432     29,127    (3,305)  (10.2)
  Commercial mortgage         --          --        --      nm          150      1,571     1,421      nm
  Consumer............     1,276         350      (926)  (72.6)       2,695      1,241    (1,454)  (54.0)
  Lease financing.....       183          41      (142)  (77.6)         352        191      (161)  (45.7)
                        --------    --------  --------             --------   --------  --------
    Total recoveries
      of loans
      previously
      charged off.....    15,304       8,607    (6,697)  (43.8)      35,629     32,130    (3,499)   (9.8)
                        --------    --------  --------             --------   --------  --------
      Net loans
        charged off...    38,235       8,654   (29,581)  (77.4)     144,159     30,983  (113,176)  (78.5)
(Reversal of)
  provision for
  credit losses.......    20,000     (10,000)  (30,000) (150.0)      75,000    (25,000) (100,000) (133.3)
Foreign translation
  adjustment and
  other net additions
  (deductions)(2).....    10,503          (3)  (10,506) (100.0)      10,519      5,775    (4,744)  (45.1)
                        --------    --------  --------             --------   --------  --------
Balance, end of period  $550,550    $482,762  $(67,788)  (12.3)%   $550,550   $482,762  $(67,788)  (12.3)%
                        ========    ========  ========             ========   ========  ========
Allowance for credit
  losses to total
  loans...............      2.11%       1.69%                          2.11%      1.69%
(Reversal of) provision
  for credit losses to
  net loans charged off    52.31          nm                          52.03         nm
Net loans charged off
  to average loans
  outstanding for the
  period(3)...........      0.58        0.12                           0.73       0.15
---------------
<FN>

(1)  Foreign loans are those loans originated in foreign branches.

(2)  Includes $10.3 million related to the Monterey Bay Bank  acquisition in the
     third  quarter of 2003 and $5.7  million  related to the  Business  Bank of
     California acquisition in the first quarter of 2004.

(3)  Annualized.
</FN>
</TABLE>

     Total loans  charged off in the third  quarter of 2004  decreased  from the
third  quarter  of 2003,  as  problem  loans in the  commercial,  financial  and
industrial industries declined. Charge offs reflect the realization of losses in
the portfolio  that were  recognized  previously  through  provisions for credit
losses. In addition,  third quarter 2004 recoveries of loans previously  charged
off decreased from the third quarter of 2003.

     At  September  30,  2004,  the  allowance  for credit  losses  exceeded the
annualized  net loans charged off during the third  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.

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


                                       41

<PAGE>


due 90  days  with  respect  to  principal  or  interest.  For a  more  detailed
discussion of the accounting for nonaccrual  loans,  see Note 1 in the "Notes to
Consolidated  Financial  Statements"  included in our 2003 Annual Report on Form
10-K.

     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>

                                                                                       INCREASE (DECREASE)
                                                                                    SEPTEMBER 30, 2004 FROM:
                                                                            -------------------------------------
                                                                                SEPTEMBER 30,      DECEMBER 31,
                                                                                    2004              2003
                                SEPTEMBER 30,  DECEMBER 31,  SEPTEMBER 30,  ------------------  -----------------
(DOLLARS IN THOUSANDS)               2003          2003           2004       AMOUNT    PERCENT   AMOUNT   PERCENT
------------------------------  -------------  ------------  -------------  ---------  -------  --------  -------
<S>                                  <C>           <C>             <C>      <C>        <C>      <C>       <C>
Commercial, financial and
  industrial..................       $243,877      $190,404        $91,612  $(152,265) (62.4)%  $(98,792) (51.9)%
Construction..................          1,554            --          6,180      4,626   297.7      6,180     na
Commercial mortgage...........         42,758        38,354         28,396    (14,362)  (33.6)    (9,958) (26.0)
Lease financing...............         52,085        51,603         53,758      1,673     3.2      2,155    4.2
Loan originated in foreign
  branches....................            765           840            210       (555)  (72.5)      (630) (75.0)
                                -------------  ------------  -------------  ---------           --------
    Total nonaccrual loans....        341,039       281,201        180,156   (160,883)  (47.2)  (101,045) (35.9)
Foreclosed assets.............          3,308         5,689         10,607      7,299   220.6      4,918   86.4
                                -------------  ------------  -------------  ---------           --------
    Total nonperforming assets       $344,347      $286,890       $190,763  $(153,584)  (44.6)  $(96,127) (33.5)
                                =============  ============  =============  =========           ========
Allowance for credit losses...       $550,550      $532,970       $482,762   $(67,788) (12.3)%  $(50,208)  (9.4)%
                                =============  ============  =============  =========           ========
Nonaccrual loans to total
  loans.......................           1.31%         1.08%          0.63%
Allowance for credit losses
  to nonaccrual loans.........         161.43        189.53         267.97
Nonperforming assets to total.
  loans and foreclosed assets.           1.32          1.11           0.67
Nonperforming assets to total
  assets......................           0.81          0.68           0.41

</TABLE>

     As of September 30, 2004, our nonperforming  assets included  approximately
$55.1 million in aircraft leases and $52.4 million in acquired syndicated loans.
The decrease in nonaccrual  loans was  primarily due to pay-downs,  charge-offs,
and loan sales,  coupled with  significantly  reduced inflows.  During the third
quarter of 2004, we had no sales of nonperforming  loans compared to $67 million
of loan  commitments sold in the third quarter of 2003, which reduced our credit
exposures. Losses from these sales were reflected in our charge-offs.







                                       42
<PAGE>


LOANS 90 DAYS OR MORE PAST DUE AND STILL ACCRUING

<TABLE>
<CAPTION>

                                                                             INCREASE (DECREASE)
                                                                           SEPTEMBER 30, 2004 FROM:
                                                                    -----------------------------------
                       SEPTEMBER 30,  DECEMBER 31,  SEPTEMBER 30,     SEPTEMBER 30,      DECEMBER 31,
                            2003          2003           2004             2003               2003
                       -------------  ------------  -------------   -----------------  ----------------
(DOLLARS IN THOUSANDS)                                               AMOUNT   PERCENT   AMOUNT  PERCENT
---------------------                                               --------  -------  -------  -------
<S>                       <C>             <C>           <C>         <C>        <C>     <C>       <C>
Commercial, financial
  and industrial.....     $21,598         $893          $1,892      $(19,706)  (91.2)% $   999   111.9%
Construction.........          --           --           2,137         2,137      na     2,137      na
Mortgage:
  Residential........       1,777        1,878           3,353         1,576    88.7     1,475    78.5
  Commercial.........         982           --              --          (982) (100.0)       --      na
                          -------       ------          ------      --------           -------
    Total mortgage...       2,759        1,878           3,353           594    21.5     1,475    78.5
Consumer and other...       1,706        1,123           1,249          (457)  (26.8)      126    11.2
                          -------       ------          ------      --------           -------
Total loans 90 days
  or more past due
  and still accruing.     $26,063       $3,894          $8,631      $(17,432) (66.9)%  $ 4,737   121.6%
                          =======       ======          ======      ========           =======

</TABLE>

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 (GMG).

     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.



                                       43

<PAGE>


     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.

     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  non-interest
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 third quarter
of 2004, we modestly  decreased the size of our  securities  portfolio from June
30, 2004, due to run-off of maturing  securities combined with slower purchases,
reducing average balances by approximately  $105 million from the second quarter
of 2004.  Effective  duration  was  reduced  from 2.7 to 2.4,  both of which are
relatively  short. In addition during the third quarter of 2004, 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 $200 million of interest  rate floors  during the
third  quarter of 2004 to hedge some of our variable  rate loans.  For a further
discussion of derivative  instruments and our hedging strategies,  see Note 8 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,  still 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


                                       44
<PAGE>



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
September 30, 2004(1):

                                              DECEMBER 31,    SEPTEMBER 30,
(DOLLARS IN MILLIONS)                             2003             2004
----------------------                        ------------    -------------
+ 200 basis points........................       $ 17.2           $ 13.1
as a percentage of base case NII..........          1.20%            0.81%
- 200 basis points........................       $(19.8)          $(27.6)
as a percentage of base case NII..........          1.38%            1.70%
------------------

(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.


     EaR in the down 200 basis point scenario was a negative  $27.6 million,  or
1.70 percent of adjusted NII in the base case scenario,  well within the Board's
guidelines.

     However, with Federal Funds and LIBOR rates currently close to two percent,
a downward  ramp  scenario of 200 basis points would result in  short-term  rate
levels near zero.  As a result,  we believe that a downward ramp scenario of 100
basis  points  provides  a more  reasonable  measure of asset  sensitivity  in a
falling  interest rate  environment.  As of September 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  $3.7  million,  or 0.23 percent of the base
case scenario.

     In order to reflect more fully and accurately the anticipated NII impact of
interest rate shocks at a specified  future point in time, we have over the past
quarter made a transition  from a constant to a projected  balance  sheet as the
basis for our EaR  simulations.  Such an approach  aligns our interest rate risk
analysis with the Bank's management goals and processes. 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.  This
includes alternate scenarios for volume growth for key balance sheet items.

     In addition to EaR, we measure the  sensitivity of Economic Value of Equity
(EVE)  to  interest  rate  shocks.  Limits  on  EVE-at-Risk  are set by ALCO and
monitored monthly for compliance.

     We believe that,  together,  our NII and EVE simulations provide management
with a reasonably comprehensive view of the sensitivity of our operating results
and value profile 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 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 September 30, 2004, our  securities  available for
sale  portfolio  included  $10.4  billion and $11.1  billion,  respectively,  of
securities  for  ALM  purposes  with an  estimated  effective  duration  of 2.4,
compared to 2.5 at December 31, 2003.  Effective  duration is a measure of price
sensitivity  of a bond  portfolio to  immediate  changes in interest  rates.  An
effective duration of 2.4 suggests an expected price change of approximately 2.4
percent for an immediate one percent change in interest  rates. At September 30,
2004, the ALM portfolio included $6.1 billion in mortgage-backed securities with
an estimated effective duration of 2.8. The ALM portfolio's  effective duration,
in the context of our total


                                       45
<PAGE>


balance  sheet,  after  giving  consideration  to the  composition  of our  core
deposits,  contributes  to the  maintenance of our interest rate risk profile as
near-neutral for NII over the next 12 months.

     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 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
September 30, 2004.

                              DECEMBER 31, 2003          SEPTEMBER 30, 2004
                            ---------------------      ---------------------
                            AVERAGE   HIGH    LOW      AVERAGE   HIGH    LOW
(DOLLARS IN THOUSANDS)        VAR     VAR     VAR        VAR     VAR     VAR
--------------------------- -------   ----    ---      -------   ----    ---
Foreign exchange...........   $143    $428    $57        $119    $173    $64
Securities.................    206     463     97         407     484    322

     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,  UnionBanc Investment Services LLC.
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 September 30, 2004,
$4.1  billion  notional  amount  of  derivative  contracts  entered  into  as an
accommodation  for  customers.  We  act  as  an  intermediary  and


                                       46

<PAGE>


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 time deposits,  combined with
average common stockholders'  equity,  funded 84 percent of average total assets
of $45.7 billion in the third 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 as of 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 September 30,
2004,  a liquidity  need could have been met by  transferring  under  repurchase
agreements  a  substantial  portion  of  our  unencumbered  available  for  sale
securities,  which totaled  approximately  $8.8  billion.  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  $1.3 billion in the
third  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.








                                       47

<PAGE>


REGULATORY CAPITAL

     The  following  tables  summarize  our  risk-based  capital,  risk-weighted
assets, and risk-based capital ratios.

UNIONBANCAL CORPORATION
<TABLE>
<CAPTION>

                                                                                  MINIMUM
                          SEPTEMBER 30,    DECEMBER 31,       SEPTEMBER 30,      REGULATORY
(DOLLARS IN THOUSANDS)         2003            2003               2004           REQUIREMENT
----------------------- ----------------  ----------------  ----------------  -----------------
<S>                        <C>              <C>               <C>
CAPITAL COMPONENTS
Tier 1 capital.........    $ 3,632,898      $ 3,747,884       $ 3,760,291
Tier 2 capital.........        537,737          936,189           949,091
                        ----------------  ----------------  ----------------
Total risk-based
  capital..............    $ 4,170,635      $ 4,684,073       $ 4,709,382
                        ================  ================  ================
Risk-weighted assets...    $33,144,336      $33,133,407       $37,622,266
                        ================  ================  ================
Quarterly average
  assets...............    $41,624,946      $41,506,828       $45,444,623
                        ================  ================  ================
</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)..... $4,170,635 12.58% $4,684,073 14.14% $4,709,382 12.52% >$3,009,781   8.0%
Tier 1 capital (to                                                            -
  risk-weighted assets)  3,632,898 10.96   3,747,884 11.31   3,760,291  9.99  >1,504,891    4.0
                                                                              -
Leverage(1)............  3,632,898  8.73   3,747,884  9.03   3,760,291  8.27  >1,817,785    4.0
                                                                              -
--------------
<FN>

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

UNION BANK OF CALIFORNIA, N.A.

<TABLE>
<CAPTION>
                                                                                   MINIMUM        "WELL-CAPITALIZED"
                          SEPTEMBER 30,     DECEMBER 31,      SEPTEMBER 30,       REGULATORY          REGULATORY
(DOLLARS IN THOUSANDS)         2003             2003               2004           REQUIREMENT        REQUIREMENT
----------------------- ----------------  ----------------  ----------------  -----------------  -------------------
<S>                       <C>               <C>               <C>
CAPITAL COMPONENTS

Tier 1 capital.........   $ 3,306,884       $ 3,395,519       $ 3,791,489
Tier 2 capital.........       467,814           467,619           487,480
                        ----------------  ----------------  ----------------
Total risk-based
  capital..............   $ 3,774,698       $ 3,863,138       $ 4,278,969
                        ================  ================  ================
Risk-weighted assets...   $32,520,713       $32,526,017       $36,919,037
                        ================  ================  ================
Quarterly average
  assets...............   $41,044,744       $40,921,517       $44,943,543
                        ================  ================  ================
</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...... $3,774,698 11.61% $3,863,138 11.88% $4,278,969 11.59% >$2,953,523   8.0% >$3,691,904  10.0
Tier 1 capital (to                                                            -                  -
  risk-weighted
  assets)..............  3,306,884 10.17   3,395,519 10.44   3,791,489 10.27  > 1,476,761   4.0  > 2,215,142   6.0
                                                                              -                  -
Leverage(1)............  3,306,884  8.06   3,395,519  8.30   3,791,489  8.44  > 1,797,742   4.0  > 2,247,177   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 Tier 1 capital  ratio at  September  30,  2004,  compared  with
September  30, 2003 and  December  31, 2003.  In December  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 in the "Notes to Consolidated  Financial  Statements" included in our
2003 Annual Report on Form 10-K).

     Compared with September 30, 2003, in addition to the changes to our capital
structure  mentioned in the above paragraph,  the decrease in our capital ratios
was also  attributable  to  higher  risk-weighted  assets.  Our  leverage  ratio
decrease was primarily  attributable to a $4 billion, or 9 percent,  increase in
quarterly  average assets,  which was  substantially  the result of increases in
both our securities and residential mortgage loan portfolios.


                                       48
<PAGE>


     As of September 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 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 SERVICES     INTERNATIONAL
                                                     SERVICES GROUP       SERVICES GROUP        BANKING GROUP
                                                  ------------------    ------------------    -----------------
                                                        AS OF AND FOR THE THREE MONTHS ENDED SEPTEMBER 30,
                                                  -------------------------------------------------------------
                                                    2003      2004        2003      2004        2003      2004
                                                  --------  --------    --------  --------    -------   -------
RESULTS OF OPERATIONS AFTER PERFORMANCE
  CENTER EARNINGS (DOLLARS IN THOUSANDS):
<S>                                               <C>       <C>         <C>       <C>         <C>       <C>
  Net interest income............................ $173,733  $203,040    $186,249  $203,288    $ 8,537   $ 9,802
  Noninterest income.............................  110,912   125,042      67,591    64,317     18,117    19,069
                                                  --------  --------    --------  --------    -------   -------
  Total revenue..................................  284,645   328,082     253,840   267,605     26,654    28,871
  Noninterest expense............................  202,283   235,883     103,277   108,519     15,323    16,728
  Credit expense (income)........................    7,996     8,400      39,397    24,781        511       566
                                                  --------  --------    --------  --------    -------   -------
  Income (loss) before income tax
    expense (benefit)............................   74,366    83,799     111,166   134,305     10,820    11,577
  Income tax expense (benefit)...................   28,445    32,053      36,128    44,414      4,139     4,428
                                                  --------  --------    --------  --------    -------   -------
  Net income (loss).............................. $ 45,921  $ 51,746    $ 75,038  $ 89,891    $ 6,681   $ 7,149
                                                  ========  ========    ========  ========    =======   =======
PERFORMANCE CENTER EARNINGS (DOLLARS
  IN THOUSANDS):
  Net interest income............................ $    186  $     67    $    (99) $    (26)   $    10   $    17
  Noninterest income.............................   (9,835)   (2,631)     16,697    10,383        305       258
  Noninterest expense............................   (8,904)   (2,760)      9,513     4,063         59         2
  Net income (loss)..............................     (477)      103       4,412     3,961        158       169
  Total loans (dollars in millions)..............       24        21         (43)      (42)        --        --
AVERAGE BALANCES (DOLLARS IN MILLIONS):
  Total loans(1)................................. $ 11,801  $ 13,105    $ 12,483  $ 12,712    $ 1,457   $ 1,883
  Total assets...................................   12,904    14,386      14,347    15,381      1,913     2,281
  Total deposits(1)..............................   17,463    19,355      13,767    14,344      1,555     2,259
FINANCIAL RATIOS:
  Risk adjusted return on capital(2).............       25%       30%         19%       24%        43%       44%
  Return on average assets(2)....................     1.41      1.43        2.08      2.33       1.39      1.25
  Efficiency ratio(3)............................     71.1      71.9        40.7      40.6       57.5      57.9


                                                         GLOBAL                                  UNIONBANCAL
                                                      MARKETS GROUP            OTHER             CORPORATION
                                                  ------------------    ------------------    ------------------
                                                         AS OF AND FOR THE THREE MONTHS ENDED SEPTEMBER 30,
                                                  --------------------------------------------------------------
                                                    2003      2004        2003      2004        2003      2004
                                                  --------  --------    --------  --------    --------  --------
RESULTS OF OPERATIONS AFTER PERFORMANCE
  CENTER EARNINGS (DOLLARS IN THOUSANDS):
  Net interest income............................ $ 18,140  $(35,642)   $ 14,430  $ 31,602    $401,089  $412,090
  Noninterest income.............................   (1,097)    1,561       5,947     5,965     201,470   215,954
                                                  --------  --------    --------  --------    --------  --------
  Total revenue..................................   17,043   (34,081)     20,377    37,567     602,559   628,044
  Noninterest expense............................    3,926     5,225      24,052     6,036     348,861   372,391
                                                  --------  --------    --------  --------    --------  --------
  Credit expense (income)........................       50        54     (27,954)  (43,801)     20,000   (10,000)
  Income (loss) before income tax
    expense (benefit)............................   13,067   (39,360)     24,279    75,332     233,698   265,653
  Income tax expense (benefit)...................    4,998   (15,055)      4,943    36,375      78,653   102,215
                                                  --------  --------    --------  --------    --------  --------
  Net income (loss).............................. $  8,069  $(24,305)   $ 19,336  $ 38,957    $155,045  $163,438
                                                  ========  ========    ========  ========    ========  ========
PERFORMANCE CENTER EARNINGS (DOLLARS
  IN THOUSANDS):
  Net interest income............................ $   (203) $   (176)   $    106  $    118    $     --       $--
  Noninterest income.............................  (10,605)  (11,294)      3,438     3,284          --        --
  Noninterest expense............................   (2,123)   (1,989)      1,455       684          --        --
  Net income (loss)..............................   (5,362)   (5,854)      1,269     1,621          --        --
  Total loans (dollars in millions)..............       --        --          19        21          --        --
AVERAGE BALANCES (DOLLARS IN MILLIONS):
  Total loans(1)................................. $    333  $    192    $    258  $    255    $ 26,332  $ 28,147
  Total assets...................................   11,506    12,544       1,244     1,121      41,914    45,713
  Total deposits(1)..............................      837       737       1,281     1,419      34,903    38,114
FINANCIAL RATIOS:
  Risk adjusted return on capital(2).............        3%     (15)%         na        na          na        na
  Return on average assets(2)....................     0.28    (0.77)          na        na        1.47%     1.42%
  Efficiency ratio(3)............................     23.0    (15.3)          na        na        57.9      59.2
--------------------------
<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 ($79  thousand)  and ($10
     thousand) in the third quarters of 2003 and 2004, respectively.

na = not applicable
</FN>
</TABLE>

                                       50

<PAGE>

<TABLE>
<CAPTION>


                                                   COMMUNITY BANKING        COMMERCIAL
                                                    AND INVESTMENT      FINANCIAL SERVICES      INTERNATIONAL
                                                    SERVICES GROUP            GROUP             BANKING GROUP

                                                           AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30,
                                                  -------------------------------------------------------------
                                                    2003      2004        2003      2004        2003      2004
                                                  --------  --------    --------  --------    -------   -------
RESULTS OF OPERATIONS AFTER PERFORMANCE CENTER
  EARNINGS (DOLLARS IN THOUSANDS):
<S>                                               <C>       <C>         <C>       <C>         <C>       <C>
  Net interest income............................ $505,206  $571,536    $546,437  $578,265    $25,654   $26,832
  Noninterest income.............................  324,416   371,436     187,055   206,483     59,690    59,519
                                                  --------  --------    --------  --------    -------   -------
  Total revenue..................................  829,622   942,972     733,492   784,748     85,344    86,351
  Noninterest expense............................  599,400   678,512     307,132   317,208     45,656    49,368
  Credit expense (income)........................   23,840    23,984     124,006    82,443      1,563     1,815
                                                  --------  --------    --------  --------    -------   -------
  Income (loss) before income tax
    expense (benefit)............................  206,382   240,476     302,354   385,097     38,125    35,168
  Income tax expense (benefit)...................   78,941    91,982      96,355   127,983     14,583    13,451
                                                  --------  --------    --------  --------    -------   -------
  Net income (loss).............................. $127,441  $148,494    $205,999  $257,114    $23,542   $21,717
                                                  ========  ========    ========  ========    =======   =======
PERFORMANCE CENTER EARNINGS (DOLLARS
  IN THOUSANDS):
  Net interest income............................ $    589  $    388    $   (500)    $(231)   $    24       $52
  Noninterest income.............................  (28,245)  (22,804)     46,112    42,273        887       874
  Noninterest expense............................  (25,458)  (19,262)     26,706    21,654        393        67
  Net income (loss)..............................   (1,414)   (2,000)     11,799    12,737        320       531
  Total loans (dollars in millions)..............       25        25         (45)      (44)        --        --
AVERAGE BALANCES (DOLLARS IN MILLIONS):
  Total loans(1)................................. $ 11,383  $ 12,486    $ 13,025  $ 12,314    $ 1,529    $1,757
  Total assets...................................   12,392    13,722      15,028    14,683      1,948     2,180
  Total deposits(1)..............................   16,568    19,105      12,461    14,022      1,515     1,989
FINANCIAL RATIOS:
  Risk adjusted return on capital(2).............       25%       29%         16%       23%        50%       47%
  Return on average assets(2)....................     1.37      1.45        1.83      2.34       1.62      1.33
  Efficiency ratio(3)............................     72.2      72.0        41.9      40.4       53.5      57.2

</TABLE>

<TABLE>
<CAPTION>

                                                        GLOBAL                                     UNIONBANCAL
                                                    MARKETS GROUP             OTHER                CORPORATION
                                                  ------------------    ------------------    ----------------------
                                                            AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30,
                                                  ------------------------------------------------------------------
                                                    2003      2004         2003     2004         2003        2004
                                                  --------  --------    --------  --------    ----------  ----------
RESULTS OF OPERATIONS AFTER PERFORMANCE
  CENTER EARNINGS (DOLLARS IN THOUSANDS):
<S>                                               <C>       <C>         <C>       <C>         <C>         <C>
  Net interest income............................ $ 56,371  $(50,293)   $ 43,978  $ 86,029    $1,177,646  $1,212,369
  Noninterest income.............................    2,311     4,497      16,940   116,234       590,412     758,169
  Total revenue..................................   58,682   (45,796)     60,918   202,263     1,768,058   1,970,538
  Noninterest expense............................   12,158    16,093      78,119    60,718     1,042,465   1,121,899
  Credit expense (income)........................      150       280     (74,559) (133,522)       75,000    (25,000)
  Income (loss) before income tax expense
    (benefit)....................................   46,374   (62,169)     57,358   275,067       650,593     873,639
  Income tax expense (benefit)...................   17,738   (23,780)      7,656   111,981       215,273     321,617
  Net income (loss).............................. $ 28,636  $(38,389)   $ 49,702  $163,086    $  435,320  $  552,022
PERFORMANCE CENTER EARNINGS (DOLLARS IN
  THOUSANDS):
  Net interest income............................ $   (433) $   (531)   $    320  $    322    $       --  $       --
  Noninterest income.............................  (28,553)  (31,012)      9,799    10,669            --          --
  Noninterest expense............................   (5,776)   (5,741)      4,135     3,282            --          --
  Net income (loss)..............................  (14,332)  (15,933)      3,627     4,665            --          --
  Total loans (dollars in millions)..............       --        --          20        19            --          --
AVERAGE BALANCES (DOLLARS IN MILLIONS):
  Total loans(1)................................. $    279  $    228    $    307  $    261    $   26,523  $   27,046
  Total assets...................................    9,655    12,732       1,003     1,146        40,026      44,463
  Total deposits(1)..............................    1,037       838       1,289     1,337        32,870      37,291
FINANCIAL RATIOS:
  Risk adjusted return on capital(2).............        4%      (6)%         na        na            na          na
  Return on average assets(2)....................     0.40     (0.40)         na        na          1.45%       1.66%
  Efficiency ratio(3)............................     20.7     (35.1)         na        na          58.9        56.8
--------------------------
<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
     (income) was ($28  thousand)  and $526 thousand in the first nine months of
     2003 and 2004, respectively.

na = not applicable
</FN>
</TABLE>

                                       51

<PAGE>



     COMMUNITY BANKING AND INVESTMENT SERVICES GROUP

     In the third quarter of 2004,  net income  increased  $5.8  million,  or 13
percent,  compared to the third  quarter of 2003.  In the third quarter of 2004,
total revenue  increased  $43.4  million,  or 15 percent,  compared to the third
quarter of 2003.  Increased  asset and  deposit  volumes,  partly  offset by the
effect of a lower interest rate environment led to an increase of $29.3 million,
or 17 percent,  in net interest  income over the third  quarter of 2003.  In the
third  quarter of 2004,  noninterest  income was $14.1  million,  or 13 percent,
higher than the third quarter of 2003  primarily due to higher  deposit fees and
trust fees.  Noninterest  expense increased $33.6 million, or 17 percent, in the
third quarter of 2004  compared to the third 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 September 30, 2004,  residential  mortgages  grew by $1.7  billion,  or 24
percent,  from September 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.  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. On October 28, 2004, we completed our acquisition of Jackson Federal Bank,
a savings bank  headquartered in Brea,  California,  with $1.4 billion in assets
and fourteen full-service branches in Southern California.

     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 301 full-service branches in
California,  Washington  and  Oregon  and a  network  of 571  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.



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<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 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.  Our recent  acquisition  of the business
          portfolio  of CNAT,  which was  completed  on August  1,  2004,  added
          outsourcing  capability for direct distributors of retirement products
          and strengthened capacity to support smaller plans. The newly acquired
          products  and  services  of  CNAT  will be  marketed  under  the  name
          "TruSource."  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.

     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 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,  UnionBanc Investment Services LLC
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  UnionBanc
          Investment   Services   LLC,  a  registered   broker/dealer   offering
          investment  products to individuals and institutional  clients,  whose
          primary strategy is to further penetrate our existing client base.

     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


                                       53

<PAGE>


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 third quarter of 2004, net income  increased  $14.9  million,  or 20
percent,  compared to the third  quarter of 2003.  In the third quarter of 2004,
net interest income increased $17.0 million, or 9 percent, compared to the third
quarter of 2003,  partially  attributable  to the impact of  increasing  deposit
balances.  Noninterest  income  decreased  $3.3  million,  or 5 percent,  mainly
attributable to lower  deposit-related  service fees related to a higher earning
credit rates in the current quarter on customer deposits used to pay for banking
services.  In the third  quarter of 2004,  noninterest  expense  increased  $5.2
million,  or 5 percent,  mainly  attributed higher expenses to support increased
product sales and deposit volumes. Credit expense decreased $14.6 million mainly
as a result of improving credit quality.

     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.

     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;


                                       54
<PAGE>


     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 became  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 third  quarter of 2004,  net income  increased  $0.5  million,  or 7
percent,  compared to the third quarter of 2003.  Total revenue  increased  $2.2
million or 8 percent, compared to the third quarter of 2003. Net interest income
increased  $1.3  million,  or 15 percent,  compared to the third quarter of 2003
mainly  attributable to higher demand deposit balances.  Noninterest  income was
$1.0  million,  or 5  percent,  higher  compared  to the third  quarter  of 2003
primarily  attributable  to higher  payment and trade  activities in the current
quarter.  Noninterest expense increased $1.4 million, or 9 percent,  compared to
the third quarter of


                                       55
<PAGE>


2003 primarily due to incremental  costs associated with  strengthening our Bank
Secrecy  Act   controls  and   processes  in  our  Union  Bank  of   California,
International--New York subsidiary. In the third quarter of 2004, credit expense
of $0.1 million was slightly  higher  compared to the third 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 UnionBanc
Investment  Services  LLC,  the  Bank's  brokerage  subsidiary.   The  UnionBanc
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 third quarter of 2004,  net loss was $24.3  million  compared to net
income of $8.1 million in the third quarter of 2003.  Total revenue in the third
quarter of 2004  decreased by $51.1  million,  compared to the third  quarter of
2003,  resulting  from a $53.8  million  decrease in net  interest  income.  The
decrease in net interest income was primarily  attributable to a higher transfer
pricing  residual in the third  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 credited at shorter-term  lending and investment rates.  Noninterest  income
increased  $2.7  million  compared  to the third  quarter  of 2003.  Noninterest
expense in the third  quarter of 2004  increased  $1.3  million,  or 33 percent,
compared to the  previous  year's  quarter as we incurred  costs for  technology
improvements and added to our staff.

     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;

     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;



                                       56
<PAGE>


     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 $279  million at
          September  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 third quarter of 2004 was $39.0 million.  The
results were impacted by the following factors:

     o    Credit expense  (income) of ($43.8)  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 $33.8 million in
          expected losses for the reportable  business segments,  which utilizes
          the RAROC methodology;

     o    Net  interest  income  of  $31.6  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 $6.0 million; and

     o    Noninterest  expense of $6.0 million  compared  with $24.1 million for
          the quarter  ending  September  30, 2003.  The decline  resulted  from
          decreases   in   post-retirement   healthcare   expense,   technology,
          consulting, and marketing expenses.

     Net income for "Other" in the third quarter of 2003 was $19.3 million.  The
results were impacted by the following factors:

     o    Credit expense  (income) of ($28.0)  million was due to the difference
          between the $20.0 million provision for credit losses calculated under
          our U.S. GAAP methodology and the $48.0 million in expected losses for
          the   reportable   business   segments,   which   utilizes  the  RAROC
          methodology;

     o    Net  interest  income  of  $14.4  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 $5.9 million; and

     o    Noninterest expense of $24.1 million.

REGULATORY MATTERS

     Union Bank of California International has entered into a written agreement
with the Federal  Reserve Bank of New York  relating to Union Bank of California
International's  Bank  Secrecy  Act  controls  and  processes.   Union  Bank  of
California  International  is wholly  owned by Union Bank of  California,  N.A.,
which is wholly  owned by  UnionBanCal  Corporation.  Union  Bank of  California
International  is headquartered in New York City and, as an Edge Act subsidiary,
is  limited to  engaging  in  international  banking  activities.  Union Bank of
California  International  is implementing a plan to strengthen its Bank Secrecy
Act controls and processes.  UnionBanCal Corporation filed a Form 8-K containing
Union Bank of California International's agreement with the Federal Reserve Bank
of New York.

     The banking industry,  including Union Bank of California, N.A., is subject
to significantly  increased  regulatory scrutiny and enforcement  regarding Bank
Secrecy Act matters. Union Bank of California International's agreement with the
Federal  Reserve  Bank of New York  and  this  general  increase  in  regulatory
scrutiny and enforcement of Bank Secrecy Act matters have resulted in Union Bank
of California,  N.A.  initiating enhanced efforts to strengthen its Bank Secrecy
Act controls and processes.


                                       57

<PAGE>


     The  increased  regulatory  scrutiny  and  enforcement  of Bank Secrecy Act
matters and Union Bank of California  International's agreement with the Federal
Reserve  Bank of New  York  will  adversely  affect  Union  Bank  of  California
International's,  and may adversely affect  UnionBanCal  Corporation's and Union
Bank of California,  N.A.'s,  ability to obtain regulatory  approvals for future
initiatives  requiring regulatory  approval,  including  acquisitions.  However,
neither this effect,  nor the terms of Union Bank of California  International's
agreement with the Federal Reserve Bank of New York, nor the financial impact of
enhanced  Bank  Secrecy  Act  controls  and  processes,  are  expected to have a
material  adverse impact on the financial  condition or results of operations of
Union Bank of California, N.A. or UnionBanCal Corporation.

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 pace and scope of the recovery
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 have provided  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 and the
quality of our real estate loan  portfolio.  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 have adversely  affected
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


                                       58
<PAGE>


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 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.

     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 of
Mitsubishi Tokyo Financial Group, Inc. with UFJ Holdings, Inc. However, The Bank
of  Tokyo-Mitsubishi,  Ltd.'s credit ratings may affect our credit ratings.  The
Bank of


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<PAGE>


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.,  and other
developments  concerning  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.

     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.



                                       60
<PAGE>


     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  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),


                                       61
<PAGE>


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
September 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  September 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.

















                                       62
<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.  We have reached an
agreement  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 has been submitted to the court for approval.
The  disposition  of this claim will not have a material  adverse  effect on our
financial  position  or  results  of  operations,   since  a  reserve  has  been
established for the loss.

     Another suit,  Grafton Partners LP v. Union Bank of California,  is pending
in Alameda County  Superior  Court (filed March 12, 2003).  That suit concerns a
"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.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

     Repurchases of equity securities are presented in the table below.

<TABLE>
<CAPTION>

                                                                       TOTAL NUMBER OF        MAXIMUM NUMBER (OR
                                                                      SHARES (OR UNITS)    APPROXIMATE DOLLAR VALUE)
                              TOTAL NUMBER OF                        PURCHASED AS PART OF   OF SHARES (OR UNITS) THAT
                             SHARES (OR UNITS)  AVERAGE PRICE PAID    PUBLICLY ANNOUNCED   MAY YET BE PURCHASED UNDER
PERIOD                           PURCHASED      PER SHARE (OR UNIT)    PLANS OR PROGRAMS      THE PLANS OR PROGRAMS
---------------------------  -----------------  -------------------  --------------------  --------------------------
<S>                               <C>                 <C>                   <C>                     <C>
JULY 2004
(July 23 - 30, 2004).......       274,200             $57.28                274,200                 $230,443,532
AUGUST 2004
(August 2 - 31, 2004)......       530,000             $58.09                530,000                 $199,653,218
SEPTEMBER 2004
(September 1 - 30, 2004)...       280,000             $58.42                280,000                 $183,294,679(1)
                                ---------                                 ---------
Total......................     1,084,200             $57.97              1,084,200
                                =========                                 =========
--------------------
<FN>

(1)  In the third  quarter of 2004,  we used the  remaining $46 million from the
     $200 million  repurchase  program announced on April 22, 2003. In addition,
     $183 million is available from a $200 million  repurchase program announced
     on April 28, 2004.
</FN>
</TABLE>














                                       63
<PAGE>


ITEM 6. EXHIBITS

<TABLE>
<CAPTION>

     NO.                              DESCRIPTION
     ---  ----------------------------------------------------------------------
     <S>  <C>
     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)

     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

     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

     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

     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

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

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


























                                       64
<PAGE>


                                   SIGNATURES

     Pursuant  to the  requirements  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)


Date:  November 5, 2004             By:         /S/ NORIMICHI KANARI
                                        ----------------------------------------
                                                    Norimichi Kanari
                                          PRESIDENT AND CHIEF EXECUTIVE OFFICER
                                              (Principal Executive Officer)



Date:  November 5, 2004             By:       /S/ DAVID I. MATSON
                                       -----------------------------------------
                                                  David I. Matson
                                           EXECUTIVE VICE PRESIDENT AND
                                              CHIEF FINANCIAL OFFICER
                                           (Principal Financial Officer)



Date:  November 5, 2004             By:         /S/ DAVID A. ANDERSON
                                       -----------------------------------------
                                                    David A. Anderson
                                          SENIOR VICE PRESIDENT AND CONTROLLER
                                             (Principal Accounting Officer)

























                                       65