UNIONBANCAL CORP - 10-Q Quarterly Report

Back to GetFilings.com

================================================================================

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

FORM 10-Q

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

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2002

Commission file number 1-15081

UNIONBANCAL CORPORATION

CALIFORNIA 94-1234979
State of Incorporation: I.R.S. Employer Identification No.

400 CALIFORNIA STREET
SAN FRANCISCO, CALIFORNIA 94104-1302

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
--- ---
Number of shares of Common Stock outstanding at July 31, 2002: 157,648,374

================================================================================

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 Shareholders'
Equity............................................................ 6
Condensed Consolidated Statements of Cash Flows................... 7
Notes to Condensed Consolidated Financial Statements.............. 8
Item 2. Management's Discussion and Analysis:
Introduction...................................................... 18
Summary........................................................... 18
Business Segments................................................. 20
Net Interest Income............................................... 30
Noninterest Income................................................ 33
Noninterest Expense............................................... 35
Income Tax Expense................................................ 37
Loans............................................................. 37
Cross-Border Outstandings......................................... 38
Provision for Credit Losses....................................... 38
Allowance for Credit Losses....................................... 39
Nonperforming Assets.............................................. 43
Loans 90 Days or More Past Due and Still Accruing................. 43
Quantitative and Qualitative Disclosure about Interest
Rate Risk Management.............................................. 44
Liquidity......................................................... 45
Regulatory Capital................................................ 46
Certain Business Risk Factors..................................... 47
Written Statements Under Section 906 of the Sarbanes-Oxley Act
of 2002 .......................................................... 51
Item 3. Market Risk.................................................. 51

PART II
OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.......... 52
Item 6. Exhibits and Reports on Form 8-K............................. 52
Signatures.............................................................. 53

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

AS OF AND FOR THE THREE MONTHS ENDED
______________________________________
JUNE 30, JUNE 30, PERCENT
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 2001 2002 CHANGE
_____________________________________________ ________ ________ _______

RESULTS OF OPERATIONS:
Net interest income(1)......................................$ 379,313 $ 386,298 1.84%
Provision for credit losses................................. 65,000 50,000 (23.08)
Noninterest income.......................................... 168,391 188,774 12.10
Noninterest expense......................................... 307,452 329,791 7.27
___________ ____________
Income before income taxes(1)............................... 175,252 195,281 11.43
Taxable-equivalent adjustment............................... 590 537 (8.98)
Income tax expense.......................................... 57,512 64,802 12.68
___________ ____________
Net income..................................................$ 117,150 $ 129,942 10.92%
=========== ============

PER COMMON SHARE:
Net income--basic...........................................$ 0.74 $ 0.83 12.16%
Net income--diluted......................................... 0.74 0.81 9.46
Dividends(2)................................................ 0.25 0.28 12.00
Book value (end of period).................................. 21.37 23.94 12.03
Common shares outstanding (end of period)...................157,839,218 157,718,215 (0.08)
Weighted average common shares outstanding--basic...........158,180,799 157,314,527 (0.55)
Weighted average common shares outstanding--diluted.........158,881,633 159,675,924 0.50
BALANCE SHEET (END OF PERIOD):
Total assets................................................$35,758,333 $ 36,136,725 1.06%
Total loans................................................. 25,656,247 25,592,306 (0.25)
Nonperforming assets........................................ 460,116 414,972 (9.81)
Total deposits.............................................. 27,700,624 28,833,365 4.09
Medium and long-term debt................................... 199,701 406,869 103.74
Trust preferred securities.................................. 364,269 366,265 0.55
Common equity............................................... 3,373,564 3,775,663 11.92
BALANCE SHEET (PERIOD AVERAGE):
Total assets................................................$34,589,322 $ 35,730,492 3.30%
Total loans................................................. 26,114,389 25,578,846 (2.05)
Earning assets.............................................. 31,272,909 32,674,628 4.48
Total deposits.............................................. 26,641,335 28,222,245 5.93
Common equity............................................... 3,406,324 3,749,035 10.06
FINANCIAL RATIOS:
Return on average assets(3)................................. 1.36% 1.46%
Return on average common equity(3).......................... 13.79 13.90
Efficiency ratio(4)......................................... 56.13 57.35
Net interest margin(1)...................................... 4.86 4.74
Dividend payout ratio....................................... 33.78 33.73
Tangible equity ratio....................................... 9.30 10.16
Tier 1 risk-based capital ratio............................. 10.85 11.90
Total risk-based capital ratio.............................. 12.70 13.65
Leverage ratio.............................................. 10.33 10.77
Allowance for credit losses to total loans.................. 2.44 2.44
Allowance for credit losses to nonaccrual loans............. 138.18 150.78
Net loans charged off to average total loans................ 1.24 0.90
Nonperforming assets to total loans, distressed loans
held for sale, and foreclosed assets.... ................ 1.79 1.62
Nonperforming assets to total assets........................ 1.29 1.15

__________________

(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) Annualized.

(4) The efficiency ratio is noninterest expense, excluding foreclosed asset expense (income), as a percentage
of net interest income (taxable-equivalent basis) and noninterest income.

2

UnionBanCal Corporation and Subsidiaries
Consolidated Financial Highlights (Continued)
(Unaudited)

AS OF AND FOR THE SIX MONTHS ENDED
________________________________________
JUNE 30, JUNE 30, PERCENT
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 2001 2002 CHANGE
_____________________________________________ ________ ________ _______

RESULTS OF OPERATIONS:
Net interest income(1)...................................................... $ 767,196 $ 767,271 0.01%
Provision for credit losses................................................. 165,000 105,000 (36.36)
Noninterest income.......................................................... 349,198 360,225 3.16
Noninterest expense......................................................... 614,937 653,154 6.21
____________ ____________
Income before income taxes(1)............................................... 336,457 369,342 9.77
Taxable-equivalent adjustment............................................... 1,212 1,070 (11.72)
Income tax expense.......................................................... 110,808 123,553 11.50
____________ ____________
Net income.................................................................. $ 224,437 $ 244,719 9.04%
============ ============

PER COMMON SHARE:
Net income--basic............................................................ $ 1.42 $ 1.56 9.86%
Net income--diluted.......................................................... 1.41 1.54 9.22
Dividends(2)................................................................ 0.50 0.53 6.00
Book value (end of period).................................................. 21.37 23.94 12.03
Common shares outstanding (end of period)................................... 157,839,218 157,718,215 (0.08)
Weighted average common shares outstanding--basic............................ 158,535,105 156,774,339 (1.11)
Weighted average common shares outstanding--diluted.......................... 158,975,932 158,534,791 (0.28)
BALANCE SHEET (END OF PERIOD):
Total assets................................................................ $ 35,758,333 $ 36,136,725 1.06%
Total loans................................................................. 25,656,247 25,592,306 (0.25)
Nonperforming assets........................................................ 460,116 414,972 (9.81)
Total deposits.............................................................. 27,700,624 28,833,365 4.09
Medium and long-term debt................................................... 199,701 406,869 103.74
Trust preferred securities.................................................. 364,269 366,265 0.55
Common equity............................................................... 3,373,564 3,775,663 11.92
BALANCE SHEET (PERIOD AVERAGE):
Total assets................................................................ $ 34,509,101 $ 35,408,797 2.61%
Total loans................................................................. 26,265,170 25,354,548 (3.47)
Earning assets.............................................................. 31,171,142 32,327,489 3.71
Total deposits.............................................................. 26,206,917 27,897,401 6.45
Common equity............................................................... 3,372,321 3,687,244 9.34
FINANCIAL RATIOS:
Return on average assets(3)................................................. 1.31% 1.39%
Return on average common equity(3).......................................... 13.42 13.38
Efficiency ratio(4)......................................................... 55.08 57.92
Net interest margin(1)...................................................... 4.94 4.77
Dividend payout ratio....................................................... 35.21 33.97
Tangible equity ratio....................................................... 9.30 10.16
Tier 1 risk-based capital ratio............................................. 10.85 11.90
Total risk-based capital ratio.............................................. 12.70 13.65
Leverage ratio.............................................................. 10.33 10.77
Allowance for credit losses to total loans.................................. 2.44 2.44
Allowance for credit losses to nonaccrual loans............................. 138.18 150.78
Net loans charged off to average total loans(3)............................. 1.17 0.93
Nonperforming assets to total loans, distressed loans held for sale, and
foreclosed assets........................................................ 1.79 1.62
Nonperforming assets to total assets........................................ 1.29 1.15

__________________

(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) Annualized.

(4) The efficiency ratio is noninterest expense, excluding foreclosed asset expense (income), as a percentage of net
interest income (taxable-equivalent) and noninterest income.

3

ITEM 1. FINANCIAL STATEMENTS

UnionBanCal Corporation and Subsidiaries
Condensed Consolidated Statements of Income
(Unaudited)

FOR THE THREE MONTHS FOR THE SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA) 2001 2002 2001 2002
_____________________________________________ ________ ________ __________ ________

INTEREST INCOME
Loans................................................................. $486,928 $378,572 $1,023,417 $754,370
Securities............................................................ 71,210 78,244 138,518 159,580
Interest bearing deposits in banks.................................... 661 629 1,627 1,125
Federal funds sold and securities purchased under resale agreements... 2,158 4,828 3,187 8,887
Trading account assets................................................ 2,164 930 5,064 1,621
________ ________ __________ ________
Total interest income.............................................. 563,121 463,203 1,171,813 925,583
________ ________ __________ ________
INTEREST EXPENSE
Domestic deposits..................................................... 125,426 55,411 260,543 115,346
Foreign deposits...................................................... 19,447 6,105 44,990 12,369
Federal funds purchased and securities sold under repurchase agreements 10,622 1,396 36,422 3,345
Commercial paper...................................................... 14,625 4,536 35,038 8,510
Medium and long-term debt............................................. 2,535 2,411 5,731 4,823
UnionBanCal Corporation--obligated mandatorily redeemable preferred
securities of subsidiary grantor trust............................. 5,367 3,948 11,389 7,911
Other borrowed funds.................................................. 6,376 3,635 11,716 7,078
________ ________ __________ ________
Total interest expense............................................. 184,398 77,442 405,829 159,382
________ ________ __________ ________
NET INTEREST INCOME...................................................... 378,723 385,761 765,984 766,201
Provision for credit losses........................................... 65,000 50,000 165,000 105,000
________ ________ __________ ________
Net interest income after provision for credit losses.............. 313,723 335,761 600,984 661,201
________ ________ __________ ________
NONINTEREST INCOME
Service charges on deposit accounts................................... 61,852 69,869 118,872 136,012
Trust and investment management fees.................................. 39,234 37,587 78,915 74,312
Merchant transaction processing fees.................................. 20,433 22,421 39,499 43,122
International commissions and fees.................................... 18,125 19,239 35,235 37,462
Brokerage commissions and fees........................................ 9,063 9,275 17,978 18,907
Merchant banking fees................................................. 9,681 9,081 18,929 16,026
Securities gains (losses), net........................................ 3,751 (1,297) 6,017 (3,863)
Other................................................................. 6,252 22,599 33,753 38,247
________ ________ __________ ________
Total noninterest income........................................... 168,391 188,774 349,198 360,225
________ ________ __________ ________
NONINTEREST EXPENSE
Salaries and employee benefits........................................ 164,584 186,100 329,071 364,976
Net occupancy......................................................... 23,837 25,029 46,596 48,410
Equipment............................................................. 15,469 15,967 31,267 32,307
Merchant transaction processing....................................... 13,449 14,433 26,363 27,349
Communications........................................................ 11,806 12,568 23,508 26,509
Professional services................................................. 11,349 10,936 19,173 20,439
Data processing....................................................... 9,101 7,540 18,050 16,531
Foreclosed asset expense (income)..................................... 48 (13) 61 112
Other................................................................. 57,809 57,231 120,848 116,521
________ ________ __________ ________
Total noninterest expense.......................................... 307,452 329,791 614,937 653,154
________ ________ __________ ________
Income before income taxes............................................ 174,662 194,744 335,245 368,272
Income tax expense.................................................... 57,512 64,802 110,808 123,553
________ ________ __________ ________
NET INCOME............................................................... $117,150 $129,942 $ 224,437 $244,719
======== ======== ========== ========

NET INCOME PER COMMON SHARE--BASIC........................................ $ 0.74 $ 0.83 $ 1.42 $ 1.56
======== ======== ========== ========

NET INCOME PER COMMON SHARE--DILUTED...................................... $ 0.74 $ 0.81 $ 1.41 $ 1.54
======== ======== ========== ========

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING--BASIC......................... 158,181 157,315 158,535 156,774
======== ======== ========== ========

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING--DILUTED....................... 158,882 159,676 158,976 158,535
======== ======== ========== ========

See accompanying notes to condensed consolidated financial statements.

4

UnionBanCal Corporation and Subsidiaries
Condensed Consolidated Balance Sheets

(UNAUDITED) (UNAUDITED)
JUNE 30, DECEMBER 31, JUNE 30,
(DOLLARS IN THOUSANDS) 2001 2001 2002
______________________ ___________ ___________ ___________

ASSETS
Cash and due from banks.................................................. $ 2,223,197 $ 2,682,392 $ 2,046,286
Interest bearing deposits in banks....................................... 51,510 64,162 153,423
Federal funds sold and securities purchased under resale agreements...... 1,491,000 918,400 640,500
___________ ___________ ___________
Total cash and cash equivalents....................................... 3,765,707 3,664,954 2,840,209
Trading account assets................................................... 301,744 229,697 365,784
Securities available for sale:
Securities pledged as collateral...................................... 287,881 137,922 133,219
Held in portfolio..................................................... 4,569,015 5,661,160 5,750,157
Loans (net of allowance for credit losses: June 30, 2001, $626,537;
December 31, 2001, $634,509; June 30, 2002, $624,948)................. 25,029,710 24,359,521 24,967,358
Due from customers on acceptances........................................ 167,309 182,440 119,072
Premises and equipment, net.............................................. 483,865 494,534 500,584
Intangible assets........................................................ 2,264 16,176 23,965
Goodwill................................................................. 48,900 68,623 92,924
Other assets............................................................. 1,101,938 1,223,719 1,343,453
___________ ___________ ___________
Total assets.......................................................... $35,758,333 $36,038,746 $36,136,725
=========== =========== ===========

LIABILITIES
Domestic deposits:
Noninterest bearing................................................... $11,247,828 $12,314,150 $12,938,634
Interest bearing...................................................... 14,267,659 14,160,113 14,267,606
Foreign deposits:
Noninterest bearing................................................... 342,656 404,708 315,416
Interest bearing...................................................... 1,842,481 1,677,228 1,311,709
___________ ___________ ___________
Total deposits........................................................ 27,700,624 28,556,199 28,833,365
Federal funds purchased and securities sold under repurchase agreements.. 713,056 418,814 318,365
Commercial paper......................................................... 1,416,432 830,657 955,328
Other borrowed funds..................................................... 702,511 700,403 395,826
Acceptances outstanding.................................................. 167,309 182,440 119,072
Other liabilities........................................................ 1,120,867 1,040,406 965,972
Medium and long-term debt................................................ 199,701 399,657 406,869
UnionBanCal Corporation-- obligated mandatorily redeemable preferred
securities of subsidiary grantor trust................................ 364,269 363,928 366,265
___________ ___________ ___________
Total liabilities..................................................... 32,384,769 32,492,504 32,361,062
___________ ___________ ___________
Commitments and contingencies

SHAREHOLDERS' EQUITY
Preferred stock:
Authorized 5,000,000 shares, no shares issued or outstanding as of
June 30, 2001, December 31, 2001, and June 30, 2002................ -- -- --
Common stock--no stated value:
Authorized 300,000,000 shares, issued 157,839,218 shares as of June 30, 2001,
156,483,511 shares as of December 31, 2001, and 157,718,215
shares as of June 30, 2002......................................... 1,232,759 1,181,925 1,222,571
Retained earnings........................................................ 2,052,159 2,231,384 2,393,132
Accumulated other comprehensive income................................... 88,646 132,933 159,960
___________ ___________ ___________
Total shareholders' equity............................................ 3,373,564 3,546,242 3,775,663
___________ ___________ ___________
Total liabilities and shareholders' equity............................ $35,758,333 $36,038,746 $36,136,725
=========== =========== ===========

See accompanying notes to condensed consolidated financial statements.

5

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

FOR THE SIX MONTHS ENDED JUNE 30,
___________________________________________________________
(DOLLARS IN THOUSANDS) 2001 2002
______________________ ___________________________ __________________________

COMMON STOCK
Balance, beginning of period.................................. $1,275,587 $1,181,925
Dividend reinvestment plan.................................... 22 72
Deferred compensation--restricted stock awards................. (17) (15)
Stock options exercised....................................... 3,841 70,564
Stock issued in acquisition of First Western Bank............. -- 23,852
Common stock repurchased(1)................................... (46,674) (53,827)
__________ __________
Balance, end of period..................................... $1,232,759 $1,222,571
__________ __________
RETAINED EARNINGS
Balance, beginning of period.................................. $1,906,093 $2,231,384
Net income.................................................... 224,437 $224,437 244,719 $244,719
Dividends on common stock(2).................................. (79,166) (83,077)
Deferred compensation--restricted stock awards................. 795 106
__________ __________
Balance, end of period..................................... $2,052,159 $2,393,132
__________ __________
ACCUMULATED OTHER COMPREHENSIVE INCOME
Balance, beginning of period.................................. $ 29,885 $ 132,933
Cumulative effect of accounting change (SFAS No.133)(3), net of
tax expense of $13,754 in 2001............................. 22,205 --
Unrealized net gains on cash flow hedges, net of tax expense of
$20,825 and $23,776 in the first six months of 2001 and
2002, respectively......................................... 33,620 38,383
Less: reclassification adjustment for net gains on cash flow
hedges included in net income, net of tax expense of $4,900
and $21,285 in the first six months of 2001 and 2002,
respectively............................................... (7,911) (34,361)
________ ________
Net unrealized gains on cash flow hedges...................... 25,709 4,022
Unrealized holding gains arising during the period on
securities available for sale, net of tax expense of $9,434
and $11,808 in the first six months of 2001 and 2002,
respectively............................................... 15,230 19,063
Less: reclassification adjustment for losses (gains) on
securities available for sale included in net income, net of
tax expense (benefit) of $2,302 and $(1,478) in the first
six months of 2001 and 2002, respectively.................. (3,715) 2,385
________ ________
Net unrealized gains on securities available for sale......... 11,515 21,448
Foreign currency translation adjustment, net of tax expense
(benefit) of $(414) and $964 in the first six months of 2001
and 2002, respectively..................................... (668) 1,557
________ ________
Other comprehensive income.................................... 58,761 58,761 27,027 27,027
__________ ________ __________ ________
Total comprehensive income.................................... $283,198 $271,746
======== ========

Balance, end of period..................................... $ 88,646 $ 159,960
__________ __________
TOTAL SHAREHOLDERS' EQUITY............................... $3,373,564 $3,775,663
========== ==========

__________________

(1) Common stock repurchased includes commission costs.

(2) Dividends per share were $0.50 and $0.53 for the first six months of 2001 and 2002, respectively. Dividends are based on
UnionBanCal Corporation's shares outstanding as of the declaration date.

(3) Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities".

See accompanying notes to condensed consolidated financial statements.

6

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

FOR THE SIX MONTHS
ENDED JUNE 30,
____________________________
(DOLLARS IN THOUSANDS) 2001 2002
______________________ ____________ __________

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.................................................................................. $ 224,437 $ 244,719
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses.............................................................. 165,000 105,000
Depreciation, amortization and accretion................................................. 40,167 39,605
Provision for deferred income taxes...................................................... 21,076 28,359
Loss (gain) on securities available for sale............................................. (6,017) 3,863
Net (increase) decrease in trading account assets........................................ 37,951 (136,087)
Other, net of acquisition................................................................ 372,303 3,245
____________ __________
Total adjustments........................................................................ 630,480 43,985
____________ __________
Net cash provided by operating activities................................................... 854,917 288,704
____________ __________
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of securities available for sale........................................ 272,827 131,499
Proceeds from matured and called securities available for sale.............................. 367,840 584,878
Purchases of securities available for sale.................................................. (1,328,816) (772,509)
Net decrease (increase) in loans, net of acquisition........................................ 205,234 (825,373)
Net cash used in acquisition of First Western Bank.......................................... -- 64,689
Other, net.................................................................................. (35,464) (40,783)
____________ __________
Net cash used in investing activities.................................................... (518,379) (857,599)
____________ __________
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits, net of acquisition................................................ 417,441 72,541
Net decrease in federal funds purchased and securities sold under repurchase agreements..... (674,611) (100,449)
Net increase (decrease) in commercial paper and other borrowed funds........................ 483,703 (179,906)
Common stock repurchased.................................................................... (46,674) (53,827)
Payments of cash dividends.................................................................. (79,502) (78,165)
Stock options exercised..................................................................... 3,841 70,564
Other, net.................................................................................. 13,623 1,629
____________ __________
Net cash provided by (used in) financing activities...................................... 117,821 (267,613)
____________ __________
Net increase (decrease) in cash and cash equivalents........................................... 454,359 (836,508)
Cash and cash equivalents at beginning of period............................................... 3,322,979 3,664,954
Effect of exchange rate changes on cash and cash equivalents................................... (11,631) 11,763
____________ __________
Cash and cash equivalents at end of period..................................................... $ 3,765,707 $2,840,209
============ ==========

CASH PAID DURING THE PERIOD FOR:
Interest.................................................................................... $ 432,648 $ 168,806
Income taxes................................................................................ 34,485 73,098
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Acquisition of First Western Bank:
Fair value of assets acquired............................................................ -- $ 256,276
____________ __________
Purchase price:
Cash................................................................................ -- (20,940)
____________ __________
Stock issued........................................................................ -- (23,852)
____________ __________

Liabilities assumed.................................................................... -- $ 211,484
============ ==========

Loans transferred to foreclosed assets (OREO) and/or distressed loans held for sale......... $ 6,242 $ 281
Securities transferred from held to maturity to available for sale at the adoption of SFAS
No. 133.................................................................................. 23,529 --

See accompanying notes to condensed consolidated financial statements.

7

UnionBanCal Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements
June 30, 2002
(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 (US 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 US
GAAP. The results of operations for the period ended June 30, 2002 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, 2001. The
preparation of financial statements in conformity with US 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.

Since November 1999, the Company has announced four stock repurchase
plans of $100 million each. The Company repurchased $35 million and $19 million
of common stock in the first and second quarters of 2002, respectively, and $22
million and $25 million of common stock in the first and second quarters of
2001, respectively. As of June 30, 2002, $91 million of common stock is
authorized for repurchase. At June 30, 2002, The Bank of Tokyo-Mitsubishi, Ltd.
(BTM), which is a wholly-owned subsidiary of Mitsubishi Tokyo Financial Group,
owned approximately 67 percent of the outstanding common stock of UnionBanCal
Corporation.

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

NOTE 2--RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

ACCOUNTING FOR GOODWILL AND OTHER INTANGIBLE ASSETS

In June 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 141, "Business
Combinations," and SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS
No. 141 requires that all business combinations be accounted for by a single
method--the purchase method. This Statement eliminates the pooling-of-interests
method but carries forward without reconsideration the guidance in Accounting
Principles Board (APB) Opinion No. 16, "Business Combinations," and SFAS No. 38,
"Accounting for Preacquisition Contingencies of Purchased Enterprises," related
to the application of the purchase method of accounting. The provisions of SFAS
No. 141 apply to all business combinations initiated after June 30, 2001, and
all business combinations accounted for using the purchase method for which the
date of acquisition is July 1, 2001, or later. Goodwill and intangible assets
acquired in transactions completed after June 30, 2001 are accounted for in
accordance with the amortization and nonamortization provisions of SFAS No. 142.
SFAS No. 142 significantly changes the accounting for goodwill and other
intangible assets subsequent to their initial recognition. This Statement
requires that goodwill and some intangible assets no longer be amortized, but
tested for impairment at least annually by comparing the fair value of those
assets with their recorded amounts. Upon adoption of SFAS No. 142, as of January
1, 2002, the amortization of existing goodwill ceased and the carrying amount of
goodwill was allocated to the applicable reporting units. The allocation

8

UnionBanCal Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
June 30, 2002
(Unaudited)

NOTE 2--RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS (Continued)

was based on the sources of previously recognized goodwill as well as the
reporting units to which the related acquired net assets were assigned.
Management's expectations of which reporting units had benefited from the
synergies of acquired businesses were considered in the allocation process. The
Company performed a transitional impairment test during May 2002, with
measurement as of the date of adoption. The fair market value of the goodwill
tested for impairment exceeded its carrying value; therefore, no impairment loss
was recognized. As of June 30, 2002, goodwill was $93 million.

Net income and earnings per share for the second quarter and six months
ended June 30, 2001 were adjusted on a proforma basis to exclude goodwill
amortization expense (net of taxes of $0.1 million for the second quarter of
2001 and $0.3 million for the six months ended June 30, 2001) as follows:

FOR THE THREE MONTHS ENDED SIX MONTHS ENDED
__________________________ _____________________
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 2001 2002 2001 2002
_____________________________________________ ________ ________ ________ ________

NET INCOME:
As reported................................................ $117,150 $129,942 $224,437 $244,719
Goodwill amortization, net of income tax................... 3,720 -- 7,345 --
As adjusted................................................ $120,870 $129,942 $231,782 $244,719
BASIC EARNINGS PER SHARE:
As reported................................................ $ 0.74 $ 0.83 $ 1.42 $ 1.56
Goodwill amortization...................................... 0.02 -- 0.05 --
As adjusted................................................ $ 0.76 $ 0.83 $ 1.47 $ 1.56
DILUTED EARNINGS PER SHARE:
As reported................................................ $ 0.74 $ 0.81 $ 1.41 $ 1.54
Goodwill amortization...................................... 0.02 -- 0.05 --
As adjusted................................................ $ 0.76 $ 0.81 $ 1.46 $ 1.54

On May 13, 2002, the Company completed its acquisition of First Western
Bank. As a result of this acquisition, the Company recorded approximately $23.8
million of goodwill and $10 million of core deposit intangible. The core deposit
intangible is being amortized on an accelerated basis over an estimated life of
12 years.

ACCOUNTING FOR ASSET RETIREMENT OBLIGATIONS

In June 2001, the 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 applies to the legal
obligations associated with the retirement of long-lived assets that result from
the acquisition, construction, development, and/or the normal operation of a
long-lived asset. A legal obligation is an obligation that a party is required
to settle as a result of an existing or enacted law, statute, ordinance, or
written or oral contract, or by legal construction of a contract under the
doctrine of promissory estoppel. This Statement is effective for fiscal years
beginning after June 15, 2002. Management believes that adopting this Statement
will not have a material impact on the Company's financial position or results
of operations.

9

UnionBanCal Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
June 30, 2002
(Unaudited)

NOTE 2--RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS (Continued)

ACCOUNTING FOR THE IMPAIRMENT OR DISPOSAL OF LONG-LIVED ASSETS

In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." This Statement supersedes SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed of," and the accounting and reporting provisions of APB
Opinion No. 30, "Reporting the Results of Operations-Reporting the Effects of
Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently
Occurring Events and Transactions," for the disposal of a segment of a business.
SFAS No. 144 establishes a single accounting model for long-lived assets to be
disposed of by sale, whether previously held and used or newly acquired. This
Statement carries over the framework established in SFAS No. 121, and was
adopted by the Company on January 1, 2002. The adoption of this Statement had no
material impact on the Company's financial position or results of operations.

RESCISSION OF SFAS NO. 4, 44, AND 64, AMENDMENT OF SFAS NO.13

In April 2002, the FASB issued SFAS No. 145, "Rescission of SFAS No. 4,
44, and 64, Amendment of SFAS No. 13, and Technical Corrections." This Statement
rescinds SFAS No. 4, "Reporting Gains and Losses from Extinguishment of Debt,"
and an amendment of SFAS No. 64, "Extinguishments of Debt Made to Satisfy
Sinking-Fund Requirements." This Statement also rescinds SFAS No. 44,
"Accounting for Intangible Assets of Motor Carriers." This Statement amends SFAS
No. 13, "Accounting for Leases," to eliminate an inconsistency between the
required accounting for sale-leaseback transactions and the required accounting
for certain lease modifications that have economic effects that are similar to
sale-leaseback transactions. This Statement requires that capital leases that
are modified so that the resulting lease agreement is classified as an operating
lease be accounted for under the sale-leaseback provisions of SFAS No. 98,
"Accounting for Leases." This Statement also amends other existing authoritative
pronouncements to make technical corrections, clarify meanings, or describe
their applicability under changed conditions. The provisions of this Statement
related to the rescission of SFAS No. 4 shall be applied in fiscal years
beginning after May 15, 2002. The provisions of this Statement related to SFAS
No. 13 are effective for transactions occurring after May 15, 2002. All other
provisions of this Statement are effective for financial statements issued on or
after May 15, 2002, with early application encouraged. Management believes that
adopting this Statement will not have a material impact on the Company's
financial position or results of operations.

ACCOUNTING FOR COSTS ASSOCIATED WITH EXIT OR DISPOSAL ACTIVITIES

In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities." This Statement replaces the
accounting and reporting provisions of Emerging Issues Task Force (EITF) Issue
No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and
Other Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring)." It requires that costs associated with an exit or disposal
activity be recognized when a liability is incurred rather than at the date an
entity commits to an exit plan. This Statement is effective after December 31,
2002. Management believes that adopting this Statement will not have a material
impact on the Company's financial position or results of operations.

10

UnionBanCal Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
June 30, 2002
(Unaudited)

NOTE 3--EARNINGS PER SHARE

Basic earnings per share (EPS) is computed by dividing net income by
the weighted average number of common shares outstanding during the period.
Diluted EPS incorporates the dilutive effect of common stock equivalents
outstanding on an average basis during the period. Stock options are a common
stock equivalent. The following table presents a reconciliation of basic and
diluted EPS for the three months and six months ended June 30, 2001 and 2002.

THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
_________________________________________________ _________________________________________________
2001 2002 2001 2002
______________________ ______________________ ______________________ _____________________
(AMOUNTS IN THOUSANDS,
EXCEPT PER SHARE
DATA) BASIC DILUTED BASIC DILUTED BASIC DILUTED BASIC DILUTED
______________________ ________ ________ ________ ________ ________ ________ ________ ________

Net Income............ $117,150 $117,150 $129,942 $129,942 $224,437 $224,437 $244,719 $244,719
======== ======== ======== ======== ======== ======== ======== ========

Weighted average
common shares
outstanding........ 158,181 158,181 157,315 157,315 158,535 158,535 156,774 156,774
Additional shares
due to:
Assumed conversion
of dilutive
stock options... -- 701 -- 2,361 -- 441 -- 1,761
________ ________ ________ ________ ________ ________ ________ ________
Adjusted weighted
average common
shares outstanding. 158,181 158,882 157,315 159,676 158,535 158,976 156,774 158,535
======== ======== ======== ======== ======== ======== ======== ========

Net income per share.. $ 0.74 $ 0.74 $ 0.83 $ 0.81 $ 1.42 $1.41 $1.56 $1.54
======== ======== ======== ======== ======== ======== ======== ========

11

UnionBanCal Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
June 30, 2002
(Unaudited)

NOTE 4--ACCUMULATED OTHER COMPREHENSIVE INCOME

The following table presents a summary of the components of accumulated
other comprehensive income.

NET UNREALIZED GAINS
ON SECURITIES FOREIGN CURRENCY NET UNREALIZED GAINS
AVAILABLE FOR SALE TRANSLATION ADJUSTMENT ON CASH FLOW HEDGES
_____________________ _______________________ ____________________
FOR THE SIX MONTHS ENDED JUNE 30,
___________________________________________________________________________
(DOLLARS IN THOUSANDS) 2001 2002 2001 2002 2001 2002
______________________ _______ ________ ________ ________ _______ _______

Beginning balance................................. $41,879 $ 83,271 $(11,191) $(12,205) $ -- $62,840
Cumulative effect of accounting change, net of tax -- -- -- -- 22,205 --
Change during the period.......................... 11,515 21,448 (668) 1,557 25,709 4,022
_______ ________ ________ ________ _______ _______
Ending balance.................................... $53,394 $104,719 $(11,859) $(10,648) $47,914 $66,862
======= ======== ======== ======== ======= =======

MINIMUM PENSION ACCUMULATED OTHER
LIABILITY ADJUSTMENT COMPREHENSIVE INCOME
____________________ ____________________
FOR THE SIX MONTHS ENDED JUNE 30,
___________________________________________
(DOLLARS IN THOUSANDS) 2001 2002 2001 2002
______________________ _____ _____ _______ ________

Beginning balance.................................................................. $(803) $(973) $29,885 $132,933
Cumulative effect of accounting
change, net of tax................................................................. -- -- 22,205 --
Change during the period........................................................... -- -- 36,556 27,027
_____ _____ _______ ________
Ending balance..................................................................... $(803) $(973) $88,646 $159,960
===== ===== ======= ========

NOTE 5--BUSINESS SEGMENTS

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

o The Community Banking and Investment Services Group offers a
range of banking services, primarily to individuals and small
businesses, delivered primarily through a tri-state 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, cash management services
and selected capital markets products.

12

UnionBanCal Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
June 30, 2002
(Unaudited)

NOTE 5--BUSINESS SEGMENTS (Continued)

o The International Banking Group provides correspondent banking
and trade-finance products and services to financial
institutions, and extends primarily short-term credit to
corporations engaged in international business. The group's
revenue predominately relates to foreign customers.

o The Global Markets Group manages the Company's wholesale
funding needs, securities portfolio, and interest rate and
liquidity risks. The group also offers a broad range of risk
management and trading products to institutional and business
clients of the Company through the businesses described above.

The information, set forth in the tables on the following page,
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 as if they were independent
entities. Unlike financial accounting, there is no authoritative body of
guidance for management accounting equivalent to US GAAP. Consequently, reported
results are not necessarily comparable with those presented by other companies.
Included in the tables are the amounts of goodwill for each reporting unit as of
June 30, 2002. Prior to January 1, 2002, most of the goodwill was reflected at
the corporate level.

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 goodwill amortization for periods prior to
January 1, 2002, certain parent company non-bank subsidiaries, the elimination
of the fully taxable-equivalent basis amounts, the amount of the 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 two units,
the Credit Management Group, which manages nonperforming assets, and the Pacific
Rim Corporate Group, which offers financial products to Asian-

13

UnionBanCal Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
June 30, 2002
(Unaudited)

NOTE 5--BUSINESS SEGMENTS (Continued)

owned subsidiaries located in the US. On an individual basis, none of the items
in "Other" are significant to the Company's business.

COMMUNITY BANKING
AND INVESTMENT COMMERCIAL FINANCIAL INTERNATIONAL
SERVICES GROUP SERVICES GROUP BANKING GROUP
_____________________ ______________________ ___________________
AS OF AND FOR THE THREE MONTHS ENDED JUNE 30,
_________________________________________________________________________
2001 2002 2001 2002 2001 2002
________ ________ ________ ________ _______ _______

RESULTS OF OPERATIONS (DOLLARS IN THOUSANDS) AND
ASSETS (DOLLARS IN MILLIONS)
Total revenue...................................... $279,558 $309,062 $210,928 $211,253 $22,708 $25,998
Net income......................................... $ 50,912 $ 67,331 $ 65,071 $ 52,700 $ 4,349 $ 6,343
Goodwill at period end............................. $ -- $ 79 $ -- $ 14 $ -- $ --
Total assets at period end......................... $ 9,983 $ 11,047 $ 17,169 $ 15,812 $ 1,280 $ 1,466

GLOBAL UNIONBANCAL
MARKETS GROUP OTHER CORPORATION
_____________________ ______________________ ___________________
AS OF AND FOR THE THREE MONTHS ENDED JUNE 30,
_________________________________________________________________________
2001 2002 2001 2002 2001 2002
________ ________ ________ ________ _______ _______

RESULTS OF OPERATIONS (DOLLARS IN THOUSANDS) AND ASSETS
(DOLLARS IN MILLIONS):
Total revenue......................................... $ 5,825 $ 1,430 $28,095 $26,792 $547,114 $574,535
Net income (loss)..................................... $ 2,927 $(1,622) $(6,109) $ 5,190 $117,150 $129,942
Goodwill at period end................................ $ -- $ -- $ 49 $ -- $ 49 $ 93
Total assets at period end............................ $ 6,666 $ 6,868 $ 660 $ 944 $ 35,758 $ 36,137

__________________

(1) Total revenue is comprised of net interest and noninterest income

14

UnionBanCal Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
June 30, 2002
(Unaudited)

NOTE 5--BUSINESS SEGMENTS (Continued)

COMMUNITY BANKING
AND INVESTMENT COMMERCIAL FINANCIAL INTERNATIONAL
SERVICES GROUP SERVICES GROUP BANKING GROUP
_____________________ ______________________ ___________________
AS OF AND FOR THE SIX MONTHS ENDED JUNE 30,
_________________________________________________________________________
2001 2002 2001 2002 2001 2002
________ ________ ________ ________ _______ _______

RESULTS OF OPERATIONS (DOLLARS IN THOUSANDS) AND
ASSETS (DOLLARS IN MILLIONS)
Total revenue...................................... $553,007 $597,167 $439,731 $412,663 $47,813 $51,591
Net income......................................... $101,661 $120,980 $144,268 $100,348 $10,940 $12,491
Goodwill at period end............................. $ -- $ 79 $ -- $ 14 $ -- $ --
Total assets at period end......................... $ 9,983 $ 11,047 $ 17,169 $ 15,812 $ 1,280 $ 1,466

GLOBAL UNIONBANCAL
MARKETS GROUP OTHER CORPORATION
_____________________ ______________________ ___________________
AS OF AND FOR THE SIX MONTHS ENDED JUNE 30,
_________________________________________________________________________
2001 2002 2001 2002 2001 2002
________ ________ ________ ________ _______ _______

RESULTS OF OPERATIONS (DOLLARS IN THOUSANDS)
AND ASSETS (DOLLARS IN MILLIONS):
Total revenue................................ $ 7,863 $ 12,781 $ 66,768 $ 52,224 $1,115,182 $1,126,426
Net income (loss)............................ $ (4,075) $ 2,939 $(28,357) $ 7,961 $ 224,437 $ 244,719
Goodwill at period end....................... $ -- $ -- $ 49 $ -- $ 49 $ 93
Total assets at period end................... $ 6,666 $ 6,868 $ 660 $ 944 $ 35,758 $ 36,137

__________________

(1) Total revenue is comprised of net interest and noninterest income

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

Derivative positions are integral components of the Company's
designated asset and liability management activities. The Company uses interest
rate derivative instruments as part of its management of asset and liability
positions. Derivatives are used to manage interest rate risk relating to
specified groups of assets and liabilities, primarily LIBOR-based commercial
loans, certificates of deposit, trust preferred securities and medium-term
notes.

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., US 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.

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.

15

UnionBanCal Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
June 30, 2002
(Unaudited)

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

The Company uses interest rate 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 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 CD's 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.

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 occur 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. During the second quarter of 2002, the
Company recognized a net loss of $0.1 million due to ineffectiveness, which is
recognized in noninterest expense, compared to a net gain of $0.3 million in the
second quarter of 2001.

FAIR VALUE HEDGES

HEDGING STRATEGY FOR UNIONBANCAL CORPORATION--OBLIGATED MANDATORILY
REDEEMABLE PREFERRED SECURITIES OF SUBSIDIARY GRANTOR TRUST (TRUST PREFERRED
SECURITIES)

The Company engages in an interest rate hedging strategy in which an
interest rate swap is associated with a specific interest bearing liability,
UnionBanCal Corporation's Trust Preferred Securities, 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, US dollar LIBOR.

Fair value hedging transactions are structured at inception so that the
notional amounts of the swap match an associated principal amount of the Trust
Preferred Securities. The interest payment dates, the expiration date, and the
embedded call option of the swap match those of the Trust Preferred Securities.
The ineffectiveness on the fair value hedges during the second quarter of 2002
was a net gain of $0.5 million, compared to a net loss of $0.2 million in the
second quarter of 2001.

16

UnionBanCal Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
June 30, 2002
(Unaudited)

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

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, US 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.

OTHER

The Company uses foreign currency forward contracts as a means of
managing foreign exchange rate risk associated with assets and/or liabilities
denominated in foreign currencies. The Company values the forward contracts, the
assets and/or the liabilities at fair value, with the resultant gain or loss
recognized in noninterest income.

NOTE 7--ACQUISITION

On May 13, 2002, the Company completed its acquisition of First Western
Bank based in Simi Valley, California. As a result, the Company acquired $222.6
million in total assets, $118.8 million in loans, $204.6 million in deposits,
and seven branches. The Company paid $20.9 million in cash and issued 489,676
shares of its common stock.

NOTE 8--SUBSEQUENT EVENTS

On July 24, 2002, the Board of Directors declared a quarterly cash
dividend of $0.28 per share of common stock. The dividend will be paid on
October 4, 2002 to shareholders of record as of September 6, 2002.

On August 5, 2002, the Company signed a definitive agreement to acquire
Valencia Bank and Trust, a commercial bank with $267 million in assets and five
branches. The Company will pay $31 million in cash and will issue approximately
$31 million worth of its common stock. The acquisition is expected to close in
the fourth quarter of 2002.

17

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. OUR
MANAGEMENT MAY MAKE FORWARD-LOOKING STATEMENTS IN OTHER SECURITIES AND EXCHANGE
COMMISSION FILINGS, PRESS RELEASES, NEWS ARTICLES, CONFERENCE CALLS WITH
SECURITIES ANALYSTS AND SHAREHOLDERS AND WHEN WE ARE SPEAKING ON BEHALF OF
UNIONBANCAL CORPORATION. FORWARD-LOOKING STATEMENTS CAN BE IDENTIFIED BY THE
FACT THAT THEY DO NOT RELATE STRICTLY TO HISTORICAL OR CURRENT FACTS. OFTEN,
THEY INCLUDE THE WORDS "BELIEVE," "EXPECT," "ANTICIPATE," "INTEND," "PLAN,"
"ESTIMATE," "PROJECT," OR WORDS OF SIMILAR MEANING, OR FUTURE OR CONDITIONAL
VERBS SUCH AS "WILL," "WOULD," "SHOULD," "COULD," OR "MAY." THESE
FORWARD-LOOKING STATEMENTS ARE INTENDED TO PROVIDE INVESTORS WITH ADDITIONAL
INFORMATION WITH WHICH THEY MAY ASSESS OUR FUTURE POTENTIAL. ALL OF THESE
FORWARD-LOOKING STATEMENTS ARE BASED ON ASSUMPTIONS ABOUT AN UNCERTAIN FUTURE
AND ARE BASED ON INFORMATION AVAILABLE AT THE DATE SUCH STATEMENTS ARE ISSUED.

THERE ARE NUMEROUS RISKS AND UNCERTAINTIES THAT COULD AND WILL CAUSE ACTUAL
RESULTS TO DIFFER 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, RESULTS OF
OPERATIONS OR PROSPECTS. SUCH RISKS AND UNCERTAINTIES INCLUDE, BUT ARE NOT
LIMITED TO, THE FOLLOWING FACTORS: ADVERSE ECONOMIC CONDITIONS IN CALIFORNIA,
GLOBAL POLITICAL AND GENERAL ECONOMIC CONDITIONS RELATED TO THE TERRORIST
ATTACKS ON SEPTEMBER 11, 2001 AND THEIR AFTERMATH, AND FUTURE ACTS OR THREATS OF
TERRORISM, ADVERSE ECONOMIC CONDITIONS AFFECTING CERTAIN INDUSTRIES,
FLUCTUATIONS IN INTEREST RATES, THE CONTROLLING INTEREST IN US BY THE BANK OF
TOKYO- MITSUBISHI, LTD., WHICH IS A WHOLLY-OWNED SUBSIDIARY OF MITSUBISHI TOKYO
FINANCIAL GROUP, INC., COMPETITION IN THE BANKING INDUSTRY, RESTRICTIONS ON
DIVIDENDS, ADVERSE EFFECTS OF CURRENT AND FUTURE BANKING AND OTHER RULES,
REGULATIONS AND LEGISLATION, AND RISKS ASSOCIATED WITH VARIOUS STRATEGIES WE MAY
PURSUE, INCLUDING POTENTIAL ACQUISITIONS, DIVESTITURES AND RESTRUCTURINGS. SEE
ALSO THE SECTION ENTITLED "CERTAIN BUSINESS RISK FACTORS" LOCATED NEAR THE END
OF THIS SECTION, "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS".

INTRODUCTION

We are a California-based, commercial bank holding company with
consolidated assets of $36.1 billion at June 30, 2002. At June 30, 2002, Union
Bank of California, N.A. was the third largest commercial bank in California,
based on total assets and total deposits in California.

UnionBanCal Corporation and its banking subsidiary, Union Bank of
California, N.A., was created on April 1, 1996 by the combination of Union Bank
with BanCal Tri-State Corporation and its banking subsidiary, The Bank of
California, N.A. The combination was accounted for as a reorganization of
entities under common control, similar to a pooling of interests.

Since November 1999, we announced four stock repurchase plans of $100
million each. We repurchased $35 million and $19 million of common stock in the
first and second quarters of 2002, respectively, and $22 million and $25 million
of common stock in the first and second quarters of 2001, respectively. As of
June 30, 2002, $91 million of common stock is authorized for repurchase. At June
30, 2002, The Bank of Tokyo-Mitsubishi, Ltd. owned approximately 67 percent of
our outstanding common stock.

SUMMARY

COMPARISON OF THREE MONTHS ENDED JUNE 30, 2001 AND JUNE 30, 2002

Reported net income was $129.9 million, or $0.81 per diluted common
share, in the second quarter of 2002, compared with $117.2 million, or $0.74 per
diluted common share, in the second quarter of 2001. This increase in diluted
earnings per share of $0.07, or 9 percent, above the second quarter of 2001 was
due to a $20.4 million, or 12 percent, increase in noninterest income, a $15.0
million, or 23 percent, decrease in

18

provision for credit losses, and a $7.0 million, or 2 percent, increase in net
interest income (on a taxable-equivalent basis), partly offset by a $22.3
million, or 7 percent, increase in noninterest expense. Other highlights of the
second quarter of 2002 include:

o Net interest income, on a taxable-equivalent basis, was $386.3
million in the second quarter of 2002, an increase of $7.0
million, or 2 percent, over the second quarter of 2001. Net
interest margin in the second quarter of 2002 was 4.74
percent, a decrease of 12 basis points from the second quarter
of 2001.

o A provision for credit losses of $50.0 million was recorded in
the second quarter of 2002 compared with $65.0 million in the
second quarter of 2001. This resulted from management's
regular assessment of overall credit quality, loan portfolio
composition, and business and economic conditions in relation
to the level of the allowance for credit losses. The allowance
for credit losses was $624.9 million, or 151 percent of total
nonaccrual loans, at June 30, 2002, compared with $626.5
million, or 138 percent of total nonaccrual loans, at June 30,
2001.

o Noninterest income was $188.8 million in the second
quarter of 2002, an increase of $20.4 million, or 12 percent,
from the second quarter of 2001. This growth included an $8.0
million increase in service charges on deposit accounts, $6.3
million in incremental revenues associated with our December
2001 acquisition of Armstrong/Robitaille Business and
Insurance Services ("Armstrong/Robitaille"), merchant
transaction processing fees growth of $2.0 million, and
international commissions and fees growth of $1.1 million,
partly offset by a $1.6 million decrease in trust and
investment management fees. For the quarter, securities
losses, net, were $1.3 million. In addition, we had residual
value writedowns in our auto lease portfolio of $3.0 million
in the second quarter of 2002 compared with $11.0 million in
the second quarter of 2001.

o Noninterest expense was $329.8 million in the second quarter
of 2002, an increase of $22.3 million, or 7 percent, over the
second quarter of 2001. Salaries and employee benefits
increased $21.5 million, or 13 percent, primarily due to
higher incentives of $8.6 million, higher salaries of $8.3
million, and higher employee benefits of $4.6 million.

o Income tax expense in the second quarter of 2002 was $64.8
million, a 33 percent effective income tax rate. For the
second quarter of 2001, the effective income tax rate was also
33 percent.

o Return on average assets increased to 1.46 percent in the
second quarter of 2002 compared to 1.36 percent in the second
quarter of 2001. Our return on average common equity increased
to 13.90 percent in the second quarter of 2002 compared to
13.79 percent in the second quarter of 2001.

o Total loans at June 30, 2002 were $25.6 billion, a decrease
of $63.9 million, or 0.3 percent, from June 30, 2001.

o Nonperforming assets were $415.0 million at June 30, 2002, a
decrease of $45.1 million, or 10 percent, from June 30, 2001.
Nonperforming assets as a percentage of total assets decreased
to 1.15 percent at June 30, 2002, compared with 1.29 percent
at June 30, 2001. Total nonaccrual loans were $414.5 million
at June 30, 2002, compared with $453.4 million at June 30,
2001, resulting in a decrease in the ratio of nonaccrual loans
to total loans of 1.62 percent at June 30, 2002 from 1.77
percent at June 30, 2001.

o Our Tier 1 and total risk-based capital ratios were 11.90
percent and 13.65 percent, respectively, at June 30, 2002,
compared with 10.85 percent and 12.70 percent, respectively,
at June 30, 2001. Our leverage ratio was 10.77 percent at June
30, 2002 compared with 10.33 percent at June 30, 2001.

19

COMPARISON OF SIX MONTHS ENDED JUNE 30, 2001 AND JUNE 30, 2002

Reported net income was $244.7 million, or $1.54 per diluted common
share, in the first six months of 2002 compared with $224.4 million, or $1.41
per diluted common share, in the first six months of 2001. This increase in
diluted earnings per share of $0.13, or 9 percent above the first six months of
2001 was due to a $60.0 million, or 36 percent, decrease in provision for credit
losses and a $11.0 million, or 3 percent, increase in noninterest income, partly
offset by $38.2 million, or 6 percent, increase in noninterest expense. Other
highlights of the first six months of 2002 include:

o Net interest income, on a taxable-equivalent basis, was $767.3
million in the first six months of 2002, an increase of less
than $0.1 million over the first six months of 2001. Net
interest margin in the first six months of 2002 was 4.77
percent, a decrease of 17 basis points from the first six
months of 2001.

o A provision for credit losses of $105.0 million was recorded
in the first six months of 2002, compared with $165.0 million
in the first six months of 2001. This resulted from
management's regular assessment of overall credit quality,
loan portfolio composition, and business and economic
conditions in relation to the level of the allowance for
credit losses.

o Noninterest income was $360.2 million in the first six
months of 2002, an increase of $11.0 million, or 3 percent,
from the first six months of 2001. Noninterest income,
excluding a $20.7 million gain recognized on the exchange of
our STAR System stock in the prior year, increased $31.7
million, or 10 percent. This growth was mainly attributable to
a $17.1 million increase in service charges on deposit
accounts, $13.4 million in incremental revenues associated
with our acquisition of Armstrong/Robitaille, merchant
transaction processing fees growth of $3.6 million, and
international commissions and fees growth of $2.2 million,
partly offset by a $4.6 million decrease in trust and
investment management fees, a $2.9 million decrease in
merchant banking fees, and a $9.9 million decrease in
securities gains, net. In addition, we had residual value
writedowns in our auto lease portfolio of $9.0 million in the
first six months of 2002 compared with $28.3 million in the
first six months of 2001.

o Noninterest expense was $653.2 million in the first six months
of 2002, an increase of $38.2 million, or 6 percent, over the
first six months of 2001. Salaries and employee benefits
increased $35.9 million, or 11 percent, primarily due to
higher incentives of $14.4 million, higher salaries of $14.0
million, and higher employee benefits of $7.5 million.

o Income tax expense in the first six months of 2002 was $123.6
million, a 34 percent effective income tax rate. For the first
six months of 2001, the effective income tax rate was 33
percent.

o Return on average assets increased to 1.39 percent in the
first six months of 2002 compared to 1.31 percent in the first
six months of 2001. Our return on average common equity
decreased to 13.38 percent in the first six months of 2002
compared to 13.42 percent in the first six months of 2001.

BUSINESS SEGMENTS

We segregate our operations into four primary business units for the
purpose of management reporting, as shown in the tables on the following pages.
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 volatilities.
Operational risk is the potential loss due to failures in internal control,
system failures, or external events.

20

The following tables 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. Also, the tables have been expanded to include
performance center earnings. A performance center is a special unit of the bank
whose income generating activities, unlike typical profit centers, are based on
other business segment units' customer base. A performance center has direct
interactions with customers, and its purpose is to foster cross selling with a
total profitability view of the product and services it manages. For example,
the Global 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. However 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. Unlike financial accounting, there is no
authoritative body of guidance for management accounting equivalent to US GAAP.
Consequently, reported results are not necessarily comparable with those
presented by other companies.

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.

21

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

COMMUNITY BANKING
AND INVESTMENT COMMERCIAL FINANCIAL INTERNATIONAL
SERVICES GROUP SERVICES GROUP BANKING GROUP
______________________ ______________________ _____________________
AS OF AND FOR THE THREE MONTHS ENDED JUNE 30,
____________________________________________________________________________
2001 2002 2001 2002 2001 2002
________ ________ ________ _________ ________ _________

RESULTS OF OPERATIONS AFTER PERFORMANCE CENTER
EARNINGS (DOLLARS IN THOUSANDS):
Net interest income........................... $174,274 $197,882 $176,994 $ 159,600 $ 8,627 $ 9,366
Noninterest income............................ 105,284 111,180 33,934 51,653 14,081 16,632
________ ________ ________ _________ ________ _________
Total revenue................................. 279,558 309,062 210,928 211,253 22,708 25,998
Noninterest expense........................... 186,355 190,952 77,684 87,130 14,473 15,266
Credit expense (income)....................... 10,754 9,072 33,902 47,341 1,192 460
________ ________ ________ _________ ________ _________
Income before income tax expense (benefit).... 82,449 109,038 99,342 76,782 7,043 10,272
Income tax expense (benefit).................. 31,537 41,707 34,271 24,082 2,694 3,929
________ ________ ________ _________ ________ _________
Net income.................................... $ 50,912 $ 67,331 $ 65,071 $ 52,700 $ 4,349 $ 6,343
======== ======== ======== ========= ======== =========

PERFORMANCE CENTER EARNINGS (DOLLARS IN THOUSANDS):
Net interest income........................... $ 917 $ 682 $ 5,567 $ 9,488 $ -- $ --
Noninterest income............................ (381) (10,995) 4,927 13,252 84 1,157
Noninterest expense........................... (1,099) (8,227) 5,002 11,300 109 861
Total loans (dollars in millions)............. 98 116 811 1,045 -- --
AVERAGE BALANCES (DOLLARS IN MILLIONS):
Total loans(1)................................ $ 8,787 $ 9,991 $ 15,927 $ 14,144 $ 967 $ 1,047
Total assets.................................. 9,730 10,871 17,739 15,772 1,301 1,403
Total deposits(1)............................. 14,159 15,549 7,037 8,121 1,351 1,567
FINANCIAL RATIOS:
Return on risk adjusted capital(2)............ 36% 46% 14% 14% 19% 40%
Return on average assets(2)................... 2.10 2.48 1.47 1.34 1.34 1.81
Efficiency ratio(3)........................... 66.64 61.78 36.82 41.21 63.74 58.72

GLOBAL UNIONBANCAL
MARKETS GROUP OTHER CORPORATION
______________________ ______________________ _____________________
AS OF AND FOR THE THREE MONTHS ENDED JUNE 30,
____________________________________________________________________________
2001 2002 2001 2002 2001 2002
________ ________ ________ _________ ________ _________

RESULTS OF OPERATIONS AFTER PERFORMANCE CENTER
EARNINGS (DOLLARS IN THOUSANDS):
Net interest income........................... $ 3,488 $ (3,278) $ 15,340 $ 22,191 $378,723 $385,761
Noninterest income............................ 2,337 4,708 12,755 4,601 168,391 188,774
________ ________ ________ _________ ________ ________
Total revenue................................. 5,825 1,430 28,095 26,792 547,114 574,535
Noninterest expense........................... 1,085 4,007 27,855 32,436 307,452 329,791
Credit expense (income)....................... -- 50 19,152 (6,923) 65,000 50,000
________ ________ ________ _________ ________ ________
Income before income tax expense (benefit).... 4,740 (2,627) (18,912) 1,279 174,662 194,744
Income tax expense (benefit).................. 1,813 (1,005) (12,803) (3,911) 57,512 64,802
________ ________ ________ _________ ________ ________
Net income (loss)............................. $ 2,927 $ (1,622) $ (6,109) $ 5,190 $117,150 $129,942
======== ======== ======== ========= ======== ========

PERFORMANCE CENTER EARNINGS (DOLLARS IN THOUSANDS):
Net interest income........................... $ -- $ -- $ (6,484) $ (10,170) $ -- $ --
Noninterest income............................ (5,824) (6,934) 1,194 3,520 -- --
Noninterest expense........................... (938) (1,217) (3,074) (2,717) -- --
Total loans (dollars in millions)............. -- -- (909) (1,161) -- --
AVERAGE BALANCES (DOLLARS IN MILLIONS):
Total loans(1)................................ $ 71 $ 70 $ 362 $ 327 $ 26,114 $ 25,579
Total assets.................................. 5,020 6,902 799 782 34,589 35,730
Total deposits(1)............................. 3,401 2,070 693 915 26,641 28,222
FINANCIAL RATIOS:
Return on risk adjusted capital(2)............ 4% (1)% na na na na
Return on average assets(2)................... 0.23 (0.09) na na 1.36% 1.46%
Efficiency ratio(3)........................... 17.05 225.30 na na 56.13 57.35

__________________

(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 (taxable-equivalent basis) and noninterest income. Foreclosed asset expense (income) was $48 thousand in
the first quarter of 2001 and ($13) thousand in the first quarter of 2002.

na=not applicable

22

COMMUNITY BANKING
AND INVESTMENT COMMERCIAL FINANCIAL INTERNATIONAL
SERVICES GROUP SERVICES GROUP BANKING GROUP
______________________ ______________________ _____________________
AS OF AND FOR THE SIX MONTHS ENDED JUNE 30,
____________________________________________________________________________
2001 2002 2001 2002 2001 2002
________ ________ ________ _________ ________ _________

RESULTS OF OPERATIONS AFTER PERFORMANCE CENTER
EARNINGS (DOLLARS IN THOUSANDS):
Net interest income........................... $352,118 $381,220 $362,434 $ 315,306 $ 18,635 $ 18,871
Noninterest income............................ 200,889 215,947 77,297 97,357 29,178 32,720
________ ________ ________ _________ ________ ________
Total revenue................................. 553,007 597,167 439,731 412,663 47,813 51,591
Noninterest expense........................... 364,947 383,189 152,378 171,118 27,731 30,409
Credit expense (income)....................... 23,428 18,058 66,330 94,246 2,365 954
________ ________ ________ _________ ________ ________
Income before income tax expense (benefit).... 164,632 195,920 221,023 147,299 17,717 20,228
Income tax expense (benefit).................. 62,971 74,940 76,755 46,951 6,777 7,737
________ ________ ________ _________ ________ ________
Net income.................................... $101,661 $120,980 $144,268 $ 100,348 $ 10,940 $ 12,491
======== ======== ======== ========= ======== ========

PERFORMANCE CENTER EARNINGS (DOLLARS IN THOUSANDS):
Net interest income........................... $ 2,106 $ 1,092 $ 8,224 $ 18,066 $ -- $ --
Noninterest income............................ (2,295) (21,836) 11,103 27,321 150 2,041
Noninterest expense........................... (2,156) (16,018) 9,364 20,987 329 1,626
Total loans (dollars in millions)............. 88 119 728 1,045 -- --
AVERAGE BALANCES (DOLLARS IN MILLIONS):
Total loans(1)................................ $ 8,629 $ 9,768 $ 16,224 $ 14,133 $ 967 $ 1,032
Total assets.................................. 9,596 10,645 18,049 15,763 1,361 1,357
Total deposits(1)............................. 14,081 15,172 6,920 8,014 1,381 1,562
FINANCIAL RATIOS:
Return on risk adjusted capital(2)............ 36% 43% 16% 13% 24% 39%
Return on average assets(2)................... 2.14 2.29 1.61 1.28 1.62 1.86
Efficiency ratio(3)........................... 65.99 64.16 34.64 41.41 58.00 58.94

GLOBAL UNIONBANCAL
MARKETS GROUP OTHER CORPORATION
______________________ ______________________ _____________________
AS OF AND FOR THE SIX MONTHS ENDED JUNE 30,
____________________________________________________________________________
2001 2002 2001 2002 2001 2002
________ ________ ________ _________ ________ _________

RESULTS OF OPERATIONS AFTER PERFORMANCE
CENTER EARNINGS (DOLLARS IN THOUSANDS):
Net interest income..................... $ 1,567 $ 6,554 $ 31,230 $ 44,250 $765,984 $ 766,201
Noninterest income...................... 6,296 6,227 35,538 7,974 349,198 360,225
________ ________ ________ _________ ________ _________
Total revenue........................... 7,863 12,781 66,768 52,224 1,115,182 1,126,426
Noninterest expense..................... 14,461 7,921 55,420 60,517 614,937 653,154
Credit expense (income)................. -- 100 72,877 (8,358) 165,000 105,000
________ ________ ________ _________ ________ _________
Income before income tax expense (benefit) (6,598) 4,760 (61,529) 65 335,245 368,272
Income tax expense (benefit)............ (2,523) 1,821 (33,172) (7,896) 110,808 123,553
________ ________ ________ _________ ________ _________
Net income (loss)....................... $ (4,075) $ 2,939 $(28,357) $ 7,961 $224,437 $ 244,719
======== ======== ======== ========= ======== =========

PERFORMANCE CENTER EARNINGS (DOLLARS IN
THOUSANDS):
Net interest income..................... $ -- $ -- $(10,330) $ (19,158) $ -- $ --
Noninterest income...................... (10,986) (13,569) 2,028 6,043 -- --
Noninterest expense..................... (1,995) (2,231) (5,542) (4,364) -- --
Total loans (dollars in millions)....... -- -- (816) (1,164) -- --
AVERAGE BALANCES (DOLLARS IN MILLIONS):
Total loans(1).......................... $ 55 $ 85 $ 390 $ 337 $ 26,265 $ 25,355
Total assets............................ 4,747 6,814 756 830 34,509 35,409
Total deposits(1)....................... 3,085 2,242 740 907 26,207 27,897
FINANCIAL RATIOS:
Return on risk adjusted capital(2)...... (4)% 1% na na na na
Return on average assets(2)............. (0.17) 0.09 na na 1.31% 1.39%
Efficiency ratio(3)..................... 161.3 58.77 na na 55.08 57.92

__________________

(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 (taxable-equivalent basis) and noninterest income. Foreclosed asset expense was $61 thousand in the
first six months of 2001 and $112 thousand in the first six months of 2002.

na=not applicable

23

COMMUNITY BANKING AND INVESTMENT SERVICES GROUP

The Community Banking and Investment Services Group provides the best
possible financial products to individuals and small businesses including a set
of credit, deposit, trust, risk management, and insurance products delivered
through branches, relationship managers, private bankers, trust administrators,
and insurance agents.

In second quarter of 2002, net income increased $16.4 million, or 32
percent, compared to the prior year. Total revenue increased $29.5 million, or
11 percent, compared to a year earlier. Increased asset and deposit volumes
offset the effect of a significantly lower interest rate environment leading to
an increase of $23.6 million, or 14 percent, in net interest income over the
prior year quarter. Noninterest income was $5.9 million, or 6 percent, higher
than the prior year quarter primarily due to our acquisition of
Armstrong/Robitaille. Excluding residual value writedowns in our auto lease
portfolio of $3.0 million and $11.0 million, in 2002 and 2001, respectively, and
the impact of performance center earnings, noninterest income increased $8.5
million, or 7 percent, compared to a year earlier. Noninterest expense increased
$4.6 million, or 3 percent, compared to a year earlier with the majority of that
increase being attributable to higher salaries and employee benefits mainly
related to deposit gathering, small business growth, and residential loan growth
over the second quarter of 2001.

In 2002, the Community Banking and Investment Services Group has been
emphasizing growth in 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 focuses on mortgage and home
equity products, that may be originated through the branch network, as well as
through channels such as wholesalers, correspondents, and whole loan purchases.
As of June 30, 2002, residential loans have grown by $1.5 billion, or 35
percent, from the same period last year. 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, offering 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. Expansion of the distribution network will be
achieved through acquisitions and de novo branching. On May 13, 2002, we
completed the acquisition of First Western Bank.

The Community Banking and Investment Services Group is comprised of
five major divisions: Community Banking, Wealth Management, Institutional
Services and Asset Management, Government and Not-For-Profit Markets, and
Insurance Services.

COMMUNITY BANKING serves its customers through 254 full-service
branches in California, 6 full-service branches in Oregon and Washington, and a
network of 505 proprietary ATMs. Customers may also access our services 24 hours
a day by telephone or through our BANK@HOME product at www.UBOC.com. In
addition, the division offers automated teller and point-of-sale debit 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 financing;

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, which also serve consumers and
businesses.

24

WEALTH MANAGEMENT provides private banking services to our affluent
clientele as well as brokerage products and services.

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. The Private Bank's strategy is to expand
its business by leveraging existing Bank client relationships.
Through 12 existing locations, the Private Bank relationship
managers offer all of our available products and services.

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

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 affiliated
domestic and offshore mutual funds, including the HighMark
Funds. It also provides advisory services to Union Bank of
California trust clients, including corporations, pension
funds and individuals. HighMark Capital Management also
provides mutual fund support services. HighMark Capital
Management's strategy is to increase assets under management
by broadening its client base and helping to expand the
distribution of shares of its mutual fund clients.

o Institutional Services provides custody, corporate trust, and
retirement plan services. Custody Services provides both
domestic and international safekeeping/settlement services in
addition to securities lending. Corporate Trust acts as
trustee for corporate and municipal debt issues. Retirement
Services provides a full range of defined benefit and defined
contribution administrative services, including trustee
services, administration, investment management, and 401(k)
valuation services. The client base of Institutional Services
includes financial institutions, corporations, government
agencies, unions, insurance companies, mutual funds,
investment managers, and non-profit organizations.
Institutional Services' strategy is to continue to leverage
and expand our position in our target markets. As we announced
on April 30, 2002, we acquired a substantial portion of the
trust and institutional custody business of a bank located in
Southern California.

GOVERNMENT AND NOT-FOR-PROFIT MARKETS provides a full range of treasury
management, investment, and trust services to government entities and
not-for-profit organizations.

o The group, which primarily focuses on local, state, and
federal agencies, includes an expanding product offering to
the Native American government market. Niche markets have been
developed that service colleges, universities, trade
associations, cultural institutions, and religious non-profit
organizations. The group's strategy is to expand its market
presence by continued delivery of cash management products,
internet based technology solutions, and expanding its
tax-exempt lending capabilities to meet existing clients'
needs.

INSURANCE SERVICES provides a range of risk management services and
insurance products to business and retail customers.

o The group, which includes our fourth quarter 2001 acquisition
of Armstrong/Robitaille, a regional insurance broker, offers
its risk management and insurance products through offices in
California and Oregon.

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.

25

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. We also offer 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, California
Federal, 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.

In the second quarter of 2002, net income decreased $12.4 million, or
19 percent, compared to the prior year. Net interest income decreased $17.4
million, or 10 percent, primarily due to the lower interest rate environment,
wherein our wholesale liabilities are closely tied to the effects of the lower
treasury bill rates. The impact on earnings of decreasing earning asset balances
was mitigated by a significantly lower cost of funds resulting from this lower
interest rate environment. Noninterest income increased $17.7 million, or 52
percent, including a net loss of $2.7 million in the private equity portfolio
compared with net loss of $7.1 million in the second quarter of 2001, mainly
attributable to a 32 percent growth in all other noninterest income. This 32
percent growth was primarily due to higher deposit-related service fees.
Noninterest expense increased $9.4 million, or 12 percent, compared to a year
earlier due to higher expenses to support increased product sales and deposit
volume. Credit expense increased $13.4 million due to a refinement in the RAROC
credit metrics that were implemented in late 2001 and not reflected in our
second quarter of 2001 results.

The group's initiatives during 2002 include expanding wholesale deposit
activities and increasing domestic trade financing. Loan growth 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, front-end item processing, cash vault services and
digital imaging. The combination of expanded products and an emphasis on core
competencies are expected to contribute to growth in operating earnings in 2002.

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

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

o the Corporate Deposit Services Division, which provides
deposit and cash management expertise to clients in the middle
market, large corporate market and specialized industries;

o the Institutional and Deposit Services Division, which
provides deposit and cash management expertise to clients in
specific deposit-intensive industries;

26

o the Corporate Capital Markets Division, which provides
limited merchant and investment banking related products and
services;

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, in California and Texas;
and

o the Communications, Media and Entertainment Division, which
provides custom financing to middle market and large corporate
clients in their defined industries.

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'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 a variety of other financial services
companies. Competitors include other major California banks, as well as
regional, national and international banks. In addition, we compete with
investment banks, commercial finance companies, leasing companies, and insurance
companies.

INTERNATIONAL BANKING GROUP

The International Banking Group focuses on providing correspondent
banking and trade finance related products and services to international
financial institutions worldwide, primarily in Asia. This focus includes
products and services such as letters of credit, international payments,
collections and financing of mostly short-term transactions. The group also
serves certain foreign firms and US corporate clients in selected countries
where we have branches, including Hong Kong, Japan, Korea, the Philippines and
Taiwan. In the US, the group serves subsidiaries and affiliates of non-Japanese
Asian companies and US branches/agencies of foreign banks. The majority of the
revenue generated by the International Banking Group is from customers domiciled
outside of the US.

In the second quarter of 2002, net income increased $2.0 million, or 46
percent, compared to the prior year. Total revenue in the second quarter of 2002
increased $3.3 million, or 15 percent, compared to a year earlier. Net interest
income increased $0.7 million, or 9 percent, over the prior year, mainly due to
higher deposit volumes. Noninterest income was $2.6 million, or 18 percent,
higher than the prior year mainly attributable to higher foreign remittance
commissions reflecting a strategic focus on this business and merchant card
activity in the current quarter. Noninterest expense increased $0.8 million, or
6 percent, compared to a year earlier with the majority of that increase being
attributable to merchant card activity. And lastly, contributing to the group's
overall increase in net income was lower portfolio exposure resulting in a $0.7
million, or 61 percent, reduction in credit expense compared to the second
quarter of 2001. The nature of the International Banking Group's business
revolves around short-term, trade financing mostly to banks and service-related
income, which we believe tends to result in significantly lower credit risk when
compared to other lending activities.

The group has a long and stable history of providing correspondent
banking and trade-related products and services to international financial
institutions. We believe the group continues to be a market leader, achieving
strong customer loyalty in the correspondent banking market by providing high
quality products and services at competitive prices. The International Banking
Group, headquartered in San Francisco, also maintains representative offices in
Asia and Latin America and an international banking subsidiary in New York.

27

GLOBAL MARKETS GROUP

The Global Markets Group conducts business activities primarily to
support the previously described business groups and their customers. This group
offers a broad range of risk management products, such as foreign exchange
contracts and interest rate swaps and options. It trades money market,
government, agency, and other securities to meet investment needs of
institutional and business clients of UnionBanCal Corporation. Another primary
area of the group is treasury management for UnionBanCal Corporation, which
encompasses wholesale funding, liquidity management, interest rate risk
management, including securities portfolio management, and hedging activities.

In the second quarter of 2002, net loss was $1.6 million compared to
net income of $2.9 million in the prior year. Total revenue in the second
quarter of 2002 decreased $4.4 million, or 76 percent, compared to a year
earlier primarily resulting from a $6.8 million decrease in net interest income,
partly offset by a $2.4 million increase in noninterest income. The decrease in
net interest income from the prior year was mainly attributed to a declining
interest rate environment, offset in part by reduced volume and costs of
wholesale funding and increased income from hedged positions. Noninterest income
increased $2.4 million compared to the second quarter of 2001. This increase was
mainly due to higher trading product sales and higher net gains on the sale of
securities in our securities available for sale portfolio in the current year,
partly offset by higher distribution of performance center earnings to other
business segments of the bank in the current year. Noninterest expense increased
$2.9 million, or 269 percent, compared to a year earlier, primarily as a result
of a corporate decision to allocate $2.2 million of expenses recorded in first
quarter 2001, relating to SFAS No. 133 transition expense, from the Global
Markets Group to corporate activities (reported in "Other') in the second
quarter of 2001.

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 goodwill amortization for periods prior to January 1, 2002
and certain other nonrecurring items such as merger and
integration expense, certain parent company non-bank
subsidiaries, and the elimination of the fully
taxable-equivalent basis amounts;

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

o the Credit Management Group, containing the Special Assets
Division, which includes $460 million and $415 million of
nonperforming assets as of June 30, 2001 and 2002,
respectively;

o the Pacific Rim Corporate Group, which offers a range of
credit, deposit, and investment management products and
services to companies in the US, which are affiliated with
companies headquartered outside the US, mostly in Japan; and

o the residual costs of support groups.

Net income for "Other" in the second quarter of 2002 was $5.2 million.
The results were impacted by the following factors:

o credit expense (income) of ($6.9) million was due to the
difference between the $50.0 million in provision for credit
losses calculated under our US GAAP methodology and the $56.9
million in expected losses for the reportable business
segments, which utilizes the RAROC methodology;

o net interest income of $22.2 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 demand deposits in
the Pacific Rim Corporate Group;

o noninterest income of $4.6 million; and

28

o noninterest expense of $32.4 million.

Net loss for "Other" in the second quarter of 2001 was $6.1 million.
The results were impacted by the following factors:

o credit expense of $19.2 million due to the difference between
the $65.0 million in provision for credit losses calculated
under our US GAAP methodology and the $45.8 million in
expected losses for the reportable business segments, which
utilizes the RAROC methodology; offset by

o net interest income of $15.3 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 demand deposits in
the Pacific Rim Corporate Group;

o noninterest income of $12.8 million, which included a $9.5
million gain recognized when we sold our stock holding in
Concord EFS, and

o noninterest expense of $27.9 million.

29

NET INTEREST INCOME

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

FOR THE THREE MONTHS ENDED
___________________________________________________________________________________________
JUNE 30, 2001 JUNE 30, 2002
___________________________________________ ___________________________________________
INTEREST AVERAGE INTEREST AVERAGE
AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/
(DOLLARS IN THOUSANDS) BALANCE EXPENSE(1) RATE(1) BALANCE EXPENSE(1) RATE(1)
______________________ ___________ __________ _______ ___________ __________ _______

ASSETS
Loans:(2)
Domestic............... $25,080,509 $472,070 7.55% $24,538,646 $371,173 6.06%
Foreign(3)............. 1,033,880 14,909 5.78 1,040,200 7,587 2.93
Securities--taxable........ 4,488,401 70,114 6.25 5,570,242 77,553 5.57
Securities--tax-exempt..... 64,319 1,605 9.98 36,946 998 10.81
Interest bearing deposits
in banks............... 65,781 661 4.03 120,411 629 2.09
Federal funds sold and
securities purchased
under resale agreements 189,973 2,158 4.56 1,090,306 4,828 1.78
Trading account assets.... 350,046 2,194 2.51 277,877 972 1.40
___________ ________ ___________ ________
Total earning
assets......... 31,272,909 563,711 7.23 32,674,628 463,740 5.69
________ ________
Allowance for credit losses (630,939) (630,120)
Cash and due from banks... 2,228,293 1,833,950
Premises and equipment, net 484,049 498,683
Other assets.............. 1,235,010 1,353,351
___________ ___________
Total assets...... $34,589,322 $35,730,492
=========== ===========

LIABILITIES
Domestic deposits:
Interest bearing....... $ 5,920,157 35,470 2.40 $ 7,883,320 22,551 1.15
Savings and consumer
time................ 3,379,890 28,361 3.37 3,599,305 15,267 1.70
Large time............. 5,029,502 61,595 4.91 3,218,788 17,593 2.19
Foreign deposits(3)....... 1,937,288 19,447 4.03 1,614,335 6,105 1.52
___________ ________ ___________ ________
Total interest
bearing deposits 16,266,837 144,873 3.57 16,315,748 61,516 1.51
___________ ________ ___________ ________
Federal funds purchased
and securities sold
under repurchase
agreements............. 1,021,062 10,622 4.17 361,412 1,396 1.55
Commercial paper.......... 1,344,106 14,625 4.36 1,033,358 4,536 1.76
Other borrowed funds...... 567,553 6,376 4.51 667,234 3,635 2.19
Medium and long-term debt. 200,000 2,535 5.08 399,681 2,411 2.42
UnionBanCal
Corporation--obligated
mandatorily redeemable
preferred securities of
subsidiary grantor trust 352,148 5,367 6.09 352,375 3,948 4.47
___________ ________ ___________ ________
Total borrowed
funds.......... 3,484,869 39,525 4.55 2,814,060 15,926 2.27
___________ ________ ___________ ________
Total interest
bearing
liabilities.... 19,751,706 184,398 3.74 19,129,808 77,442 1.62
________ ________
Noninterest bearing
deposits............... 10,374,498 11,906,497
Other liabilities......... 1,056,794 945,152
___________ ___________
Total liabilities... 31,182,998 31,981,457
SHAREHOLDERS' EQUITY
Common equity............. 3,406,324 3,749,035
___________ ___________
Total
shareholders'
equity......... 3,406,324 3,749,035
___________ ___________
Total liabilities
and
shareholders'equity $34,589,322 $35,730,492
=========== ===========

Net interest income/margin
(taxable-equivalent
basis)................. 379,313 4.86% 386,298 4.74%
Less: taxable-equivalent
adjustment............. 590 537
________ ________
Net interest income $378,723 $385,761
======== ========

__________________

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

(2) 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.

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

30

FOR THE SIX MONTHS ENDED
___________________________________________________________________________________________
JUNE 30, 2001 JUNE 30, 2002
___________________________________________ ___________________________________________
INTEREST AVERAGE INTEREST AVERAGE
AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/
(DOLLARS IN THOUSANDS) BALANCE EXPENSE(1) RATE(1) BALANCE EXPENSE(1) RATE(1)
______________________ ___________ __________ _______ ___________ __________ _______

ASSETS
Loans:(2)
Domestic............... $25,229,819 $991,104 7.91% $24,314,639 $739,235 6.12%
Foreign(3)............. 1,035,351 32,423 6.32 1,039,909 15,509 3.01
Securities--taxable........ 4,286,712 136,302 6.36 5,561,342 158,216 5.69
Securities--tax-exempt..... 65,791 3,256 9.90 37,586 1,989 10.59
Interest bearing deposits
in banks............... 72,473 1,627 4.53 102,509 1,125 2.21
Federal funds sold and
securities purchased
under resale agreements 131,828 3,187 4.88 1,013,769 8,887 1.77
Trading account assets.... 349,168 5,126 2.96 257,735 1,692 1.32
___________ _________ ___________ ________
Total earning
assets......... 31,171,142 1,173,025 7.57 32,327,489 926,653 5.76
_________ ________
Allowance for credit losses (632,940) (637,210)
Cash and due from banks... 2,211,250 1,887,985
Premises and equipment, net 482,396 497,483
Other assets.............. 1,277,253 1,333,050
___________ ___________
Total assets...... $34,509,101 $35,408,797
=========== ===========

LIABILITIES
Domestic deposits:
Interest bearing....... $ 6,029,529 76,812 2.57 $ 7,672,584 45,709 1.20
Savings and consumer
time................ 3,350,591 58,273 3.51 3,574,422 32,237 1.82
Large time............. 4,729,912 125,458 5.35 3,351,398 37,400 2.25
Foreign deposits(3)....... 1,985,220 44,990 4.57 1,681,420 12,369 1.48
___________ _________ ___________ ________
Total interest
bearing deposits 16,095,252 305,533 3.83 16,279,824 127,715 1.58
___________ _________ ___________ ________
Federal funds purchased
and securities sold
under repurchase
agreements............. 1,422,984 36,422 5.16 450,800 3,345 1.50
Commercial paper.......... 1,410,964 35,038 5.01 976,624 8,510 1.76
Other borrowed funds...... 482,405 11,716 4.90 682,558 7,078 2.09
Medium and long-term debt. 200,000 5,731 5.78 399,834 4,823 2.43
UnionBanCal
Corporation--obligated
mandatorily redeemable
preferred securities of
subsidiary grantor trust 352,139 11,389 6.46 352,337 7,911 4.47
___________ _________ ___________ ________
Total borrowed
funds.......... 3,868,492 100,296 5.22 2,862,153 31,667 2.23
___________ _________ ___________ ________
Total interest
bearing
liabilities.... 19,963,744 405,829 4.10 19,141,977 159,382 1.68
_________ ________
Noninterest bearing
deposits............... 10,111,665 11,617,577
Other liabilities......... 1,061,371 961,999
___________ ___________
Total liabilities... 31,136,780 31,721,553
SHAREHOLDERS' EQUITY
Common equity............. 3,372,321 3,687,244
___________ ___________
Total
shareholders'
equity......... 3,372,321 3,687,244
___________ ___________
Total liabilities
and
shareholders'
equity......... $34,509,101 $35,408,797
=========== ===========

Net interest income/margin
(taxable-equivalent
basis)................. 767,196 4.94% 767,271 4.77%
Less: taxable-equivalent
adjustment............. 1,212 1,070
_________ ________
Net interest income $ 765,984 $766,201
========= ========

__________________

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

(2) 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.

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

31

Net interest income is interest earned on loans and investments less
interest expense on deposit accounts and borrowings. Primary factors affecting
the level of net interest income include the margin between the yield earned on
interest earning assets and the rate paid on interest bearing liabilities, as
well as the volume and composition of average interest earning assets and
average interest bearing liabilities.

THREE MONTHS ENDED JUNE 30, 2001 AND JUNE 30, 2002

Net interest income, on a taxable-equivalent basis, was $386.3 million
in the second quarter of 2002, compared with $379.3 million in the second
quarter of 2001. This increase of $7.0 million, or 2 percent, was attributable
primarily to the impact of the decreasing interest rate environment throughout
the prior year on interest bearing liabilities, increasing average noninterest
bearing deposits, and higher earning assets, partly offset by significantly
lower yields on our earning assets. Decreasing market rates resulted in a lower
average yield of 154 basis points on average earning assets of $32.7 billion,
which were partly offset by lower cost of fund rates on our interest bearing
liabilities of 212 basis points on average balances of $19.1 billion. Mitigating
the impact of this lower interest rate environment on our net interest margin
was an increase in average earning assets of $1.4 billion, primarily in
securities, funded by a $1.5 billion, or 15 percent, increase in average
noninterest bearing deposits. The resulting impact of these changes on our net
interest margin was a decrease of 12 basis points to 4.74 percent.

Average earning assets were $32.7 billion in the second quarter of
2002, compared with $31.3 billion in the second quarter of 2001. This growth was
attributable to a $1.1 billion, or 23 percent, increase in average securities,
offset by a $535.5 million, or 2 percent, decrease in average loans. The
increase in average securities, which were comprised primarily of fixed rate
available for sale securities, reflected liquidity and interest rate risk
management actions. The decline in average loans was mostly due to a $2.3
billion decrease in average commercial loans mainly attributable to slower loan
growth due to economic conditions, loan sales, and a reduction in our exposure
in nonrelationship syndicated loans. The decrease in commercial loans was partly
offset by an increase in average residential mortgages of $1.7 billion, which
was a result of a strategic portfolio shift from more volatile commercial loans.
Other loan categories included an increase in average commercial mortgages of
$407.0 million and a decrease in average consumer loans and lease financing of
$276.5 million and $156.0 million, respectively.

SIX MONTHS ENDED JUNE 30, 2001 AND JUNE 30, 2002

Net interest income, on a taxable-equivalent basis, was $767.3 million
in the first six months of 2002, compared with $767.2 million in the first six
months of 2001. This slight increase of less than $0.1 million was attributable
primarily to the decreasing interest rate environment throughout the prior year
on interest bearing liabilities, increasing average noninterest bearing
deposits, and higher earning assets, partly offset by significantly lower yields
on our earning assets. Decreasing market rates resulted in a lower average yield
of 181 basis points on average earning assets of $32.3 billion, which were
partly offset by lower cost of fund rates on our interest bearing liabilities of
242 basis points on average balances of $19.1 billion. Mitigating the impact of
this lower interest rate environment on our net interest margin was an increase
in average earning assets of $1.2 billion, primarily in securities, funded by a
$1.5 billion, or 15 percent, increase in average noninterest bearing deposits.
The resulting impact of these changes on our net interest margin was a decrease
of 17 basis points to 4.77 percent.

Average earning assets were $32.3 billion in the first six months of
2002, compared with $31.2 billion in the first six months of 2001. This growth
was attributable to a $1.2 billion, or 29 percent, increase in average
securities, offset by a $910.6 million, or 4 percent, decrease in average loans.
The increase in average securities, which were comprised primarily of fixed rate
available for sale securities, reflected liquidity and interest rate risk
management actions. The decline in average loans was mostly due to a $2.6
billion decrease in average commercial loans mainly attributable to slower loan
growth due to economic conditions, loan sales, and a reduction in our exposure
in nonrelationship syndicated loans. The decrease in commercial loans was partly
offset by an increase in average residential mortgages of $1.7 billion, which
was a result of a strategic portfolio shift from more volatile commercial loans.
Other

32

loan categories included an increase in average commercial mortgages of $357.0
million and a decrease in average consumer loans and lease financing of $307.1
million and $156.8 million, respectively.

NONINTEREST INCOME

FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED
___________________________________ ________________________________________
JUNE 30, JUNE 30, PERCENT JUNE 30, JUNE 30, PERCENT
(DOLLARS IN THOUSANDS) 2001 2002 CHANGE 2001 2002 CHANGE
______________________ ________ ________ _______ ________ ________ ________

Service charges on deposit accounts... $ 61,852 $ 69,869 12.96% $118,872 $136,012 14.42%
Trust and investment management fees.. 39,234 37,587 (4.20) 78,915 74,312 (5.83)
Merchant transaction processing fees.. 20,433 22,421 9.73 39,499 43,122 9.17
International commissions and fees.... 18,125 19,239 6.15 35,235 37,462 6.32
Gain on exchange of STAR System stock. -- -- -- 20,700 -- (100.00)
Brokerage commissions and fees........ 9,063 9,275 2.34 17,978 18,907 5.17
Merchant banking fees................. 9,681 9,081 (6.20) 18,929 16,026 (15.34)
Foreign exchange trading gains, net... 6,900 7,011 1.61 13,120 13,459 2.58
Insurance commissions................. -- 6,252 nm -- 13,405 nm
Securities gains (losses), net........ 3,751 (1,297) nm 6,017 (3,863) nm
Other................................. (648) 9,336 nm (67) 11,383 nm
________ ________ ________ ________
Total noninterest income.............. $168,391 $188,774 12.10% $349,198 $360,225 3.16%
======== ======== ======== ========

__________________

nm = not meaningful

THREE MONTHS ENDED JUNE 30, 2001 AND JUNE 30, 2002

In the second quarter of 2002, noninterest income was $188.8 million,
an increase of $20.3 million, or 12 percent, over the second quarter of 2001.
This increase was mainly attributable to an $8.0 million increase in service
charges on deposit accounts, lower residual value writedowns in our auto lease
portfolio of $8.0 million, a $6.3 million increase in insurance commissions
related to the acquisition of Armstrong/Robitaille, a $2.0 million increase in
merchant transaction processing fees, and a $1.1 million increase in
international commissions and fees, partly offset by a $1.6 million decrease in
trust and investment management fees. In addition, securities losses, net, were
$1.3 million.

Revenue from service charges on deposit accounts was $69.9 million, an
increase of 13 percent over the second quarter of 2001. This increase was
primarily attributable to a 15 percent increase in quarterly average demand
deposits and reductions in the earnings credit rates, caused by the lower
interest rate environment on analyzed deposit accounts, which resulted in
customers paying fees for services rather than increasing required deposit
balances.

Trust and investment management fees were $37.6 million, a decrease of
4 percent over the second quarter of 2001. This decrease is primarily
attributable to declining market conditions and their impact on transaction and
asset-based fees.

Merchant transaction processing fees were $22.4 million, an increase of
10 percent over the second quarter of 2001. This increase was primarily due to
an increase in the volume of credit card drafts deposited by merchants and the
July 2001 introduction of our enhanced Gold and Platinum version of our standard
MasterMoney Card (debit card) aimed at stimulating consumer usage for higher
dollar purchases.

Insurance commissions were $6.3 million reflecting the incremental
revenues associated with our acquisition of Armstrong/Robitaille.

Securities losses, net, were $1.3 million compared to securities gains,
net, of $3.8 million in the prior year. In the second quarter of 2001, we
realized net gains of $10.5 million on the sale of securities

33

(including a $9.5 million realized gain on the sale of our Concord EFS holdings,
which we received in exchange for our stock holdings of STAR System), partly
offset by permanent writedowns on private capital securities of $6.8 million. In
the current quarter, we realized gains of $4.6 million on the sale of
securities, offset by permanent writedowns on private capital securities of $5.9
million.

Other noninterest income was $9.3 million, an increase of $10.0 million
over the second quarter of 2001. This increase was mainly attributable to lower
residual value writedowns in our auto lease portfolio of $3.0 million in the
second quarter of 2002 compared to $11.0 million in the second quarter of 2001.

SIX MONTHS ENDED JUNE 30, 2001 AND JUNE 30, 2002

In the first six months of 2002, noninterest income was $360.2 million,
an increase of $11.0 million, or 3 percent, over the first six months of 2001.
In the prior year, we recognized a $20.7 million gain when our stock holding in
STAR System was exchanged for Concord EFS stock. Excluding the gain on the
exchange of our STAR System holdings, noninterest income increased $31.7
million, or 10 percent. This increase was mainly attributable to lower residual
value writedowns in our auto lease portfolio of $19.3 million, a $17.1 million
increase in service charges on deposit accounts, a $13.4 million increase in
insurance commissions related to our acquisition of Armstrong/Robitaille, a $3.6
million increase in merchant transaction processing fees, and a $2.2 million
increase in international commissions and fees, partly offset by a $4.6 million
decrease in trust and investment management fees, a $2.9 million decrease in
merchant banking fees, and a $9.9 million decrease in securities gains, net.

Revenue from service charges on deposit accounts was $136.0 million, an
increase of 14 percent over the first six months of 2001. This increase was
primarily attributable to a 15 percent increase in average demand deposits and
reductions in the earnings credit rates, caused by the lower interest rate
environment on analyzed deposit accounts, which resulted in customers paying
fees for services rather than increasing required deposit balances.

Trust and investment management fees were $74.3 million, a decrease of
6 percent over the first six months of 2001. This decrease is attributable to
declining market conditions and their impact on transaction and asset-based
fees. Total assets under administration decreased by $2.7 billion, or 2 percent,
from June 30, 2001.

Merchant transaction processing fees were $43.1 million, an increase of
9 percent over the first six months of 2001. This increase was primarily due to
an increase in the volume of credit card drafts deposited by merchants and the
July 2001 introduction of our enhanced Gold and Platinum version of our standard
MasterMoney Card (debit card) aimed at stimulating consumer usage for higher
dollar purchases.

Merchant banking fees were $16.0 million, a decrease of 15 percent from
the first six months of 2001. This decrease was primarily attributable to fewer
and smaller syndication and investment banking transactions as a result of the
current market situation.

Insurance commissions were $13.4 million reflecting the incremental
revenues associated with our acquisition of Armstrong/Robitaille.

Securities losses, net, were $3.9 million compared to securities gains,
net, of $6.0 million in the prior year. In the first six months of 2001, we
realized net gains of $16.2 million on the sale of securities, including a $9.5
million gain on the sale of Concord EFS shares, partly offset by permanent
writedowns on private capital securities of $10.1 million. In the first six
months of 2002, we realized gains of $5.1 million on the sale of securities,
partly offset by permanent writedowns on private capital securities of $8.9
million.

Other noninterest income was $11.4 million, an increase of $11.5
million over the first six months of 2001. This increase was mainly attributable
to lower residual value writedowns in our auto lease portfolio of $9.0 million
in the first six months of 2002 compared to $28.3 million in the first six
months of 2001. This increase was partly offset by higher unrealized losses on
other non-publicly traded securities of $3.8 million

34

in the current year (compared to $1.1 million in the first six months of 2001)
and a $3.1 million gain on the sale of leased equipment in the prior year.

NONINTEREST EXPENSE

FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED
___________________________________ ________________________________________
JUNE 30, JUNE 30, PERCENT JUNE 30, JUNE 30, PERCENT
(DOLLARS IN THOUSANDS) 2001 2002 CHANGE 2001 2002 CHANGE
______________________ ________ ________ _______ ________ ________ ________

Salaries and other compensation...... $137,294 $154,209 12.32% $268,266 $296,633 10.57%
Employee benefits.................... 27,290 31,891 16.86 60,805 68,343 12.40

Salaries and employee benefits.... 164,584 186,100 13.07 329,071 364,976 10.91
Net occupancy........................ 23,837 25,029 5.00 46,596 48,410 3.89
Equipment............................ 15,469 15,967 3.22 31,267 32,307 3.33
Merchant transaction processing...... 13,449 14,433 7.32 26,363 27,349 3.74
Communications....................... 11,806 12,568 6.45 23,508 26,509 12.77
Software............................. 6,832 10,039 46.94 14,363 21,549 50.03
Professional services................ 11,349 10,936 (3.64) 19,173 20,439 6.60
Advertising and public relations..... 11,444 8,621 (24.67) 18,049 18,629 3.21
Data processing...................... 9,101 7,540 (17.15) 18,050 16,531 (8.42)
Intangible asset amortization........ 3,633 1,280 (64.77) 7,171 2,164 (69.82)
Foreclosed asset expense (income).... 48 (13) nm 61 112 83.61
Other................................ 35,900 37,291 3.87 81,265 74,179 (8.72)
________ ________ ________ ________
Total noninterest expense......... $307,452 $329,791 7.27% $614,937 $653,154 6.21%
======== ======== ======== ========

__________________

nm = not meaningful

THREE MONTHS ENDED JUNE 30, 2001 AND JUNE 30, 2002

In the second quarter of 2002, noninterest expense was $329.8 million,
an increase of $22.3 million, or 7 percent, over the same period in 2001. This
increase was mostly due to a $21.5 million increase in salaries and employee
benefits, a $3.2 million increase in software expense, a $1.4 million increase
in other noninterest expense, a $1.2 million increase in net occupancy expense,
and a $1.0 million increase in merchant transaction processing expense. These
increases were partly offset by a $2.8 million decrease in advertising and
public relations expense, a $2.4 million decrease in intangible asset expense
mostly attributable to the adoption of SFAS No. 142, "Goodwill and Other
Intangible Assets," in the first quarter of 2002, which eliminated the
amortization of goodwill, and a $1.6 million decrease in data processing
expense.

Salaries and employee benefits were $186.1 million, an increase of 13
percent over the second quarter of 2001. This increase was primarily due to
salary expense increases necessary to achieve our strategic goals to expand key
businesses, to annual merit increases, to higher incentive expense, to higher
other benefit expenses including higher pension and medical costs and lower COLI
(company-owned life insurance) income.

Net occupancy expense was $25.0 million, an increase of 5 percent over
the second quarter of 2001. This increase was primarily attributable to higher
building rent, depreciation, and leasehold amortization expense mainly
associated with new branches and the Armstrong/Robitaille and First Western Bank
acquisitions.

Merchant transaction processing expense was $14.4 million, an increase
of 7 percent over the second quarter of 2001. This increase was primarily
attributable to an increase in the volume of credit card drafts deposited by
merchants.

35

Software expense was $10.0 million, an increase of 47 percent over the
second quarter of 2001. This increase was primarily attributable to increased
software purchases and development to support strategic technology initiatives.

Advertising and public relations expenses were $8.6 million, a decrease
of 25 percent from the second quarter of 2001. This decrease was mainly
attributable to a new year-round approach to advertising for certain market
segments, which reduced the seasonality of these expenses.

Data processing expense was $7.5 million, a decrease of 17 percent from
the second quarter of 2001. This decrease was primarily attributable to the
impact of reductions in the earnings credit rates, caused by the lower interest
rate environment, on analyzed deposit accounts used to offset vendor expenses.

Intangible asset amortization expense was $1.3 million, a decrease of
65 percent from the second quarter of 2001. This decrease was primarily
attributable to lower goodwill amortization related to the adoption of SFAS No.
142 in the first quarter of 2002.

Other noninterest expense was $37.3 million, an increase of 4 percent
over the second quarter of 2001. This increase was primarily attributable to
higher stationery and supply expenses.

SIX MONTHS ENDED JUNE 30, 2001 AND JUNE 30, 2002

In the first six months of 2002, noninterest expense was $653.2
million, an increase of $38.2 million, or 6 percent, over the same period in
2001. This increase was mostly due to a $35.9 million increase in salaries and
employee benefits, a $7.2 million increase in software expense, and a $3.0
million increase in communications expense. These increases were partly offset
by a $5.0 million decrease in intangible asset expense mostly attributable to
the adoption of SFAS No. 142 in the first quarter of 2002, which eliminated the
amortization of goodwill, and a $7.1 million decrease in other noninterest
expense.

Salaries and employee benefits were $365.0 million, an increase of 11
percent over the first six months of 2001. This increase was primarily due to
increases in staff necessary to achieve our strategic goals to expand key
businesses, to annual merit increases, to higher incentive expense, and to
higher other benefit expenses including higher pension and medical costs.

Communications expense was $26.5 million, an increase of 13 percent
over the first six months of 2001. This increase was primarily attributable to
higher costs associated with increased rates and usage for data and voice
communication.

Software expense was $21.5 million, an increase of 50 percent over the
first six months of 2001. This increase was primarily attributable to increased
software purchases and development to support strategic technology initiatives.

Intangible asset amortization expense was $2.2 million, a decrease of
70 percent from the second quarter of 2001. This decrease reflects the adoption
of SFAS No. 142 in the first quarter of 2002.

Other noninterest expense was $74.2 million, a decrease of 9 percent
from the first six months of 2001. This decrease was due to the recognition of a
$6.2 million loss at the adoption of SFAS No.133, "Accounting for Derivative
Instruments and Hedging Activities", and higher derivative-related expenses of
$3.5 million due to changes in the value of a portion of the interest rate
options that were excluded from hedge accounting under SFAS No. 133, both in the
prior year.

36

INCOME TAX EXPENSE

Income tax expense in the second quarter of 2002 was $64.8 million. For
both second quarter 2002 and 2001, the effective income tax rate was 33 percent.

Income tax expense in the first six months of 2002 was $123.6 million,
a 34 percent effective income tax rate. For the first six months of 2001, the
effective income tax rate was 33 percent.

LOANS

The following table shows loans outstanding by loan type.

PERCENT CHANGE TO
JUNE 30, 2002 FROM:
_________________________
JUNE 30, DECEMBER 31, JUNE 30, JUNE 30, DECEMBER 31,
(DOLLARS IN THOUSANDS) 2001 2001 2002 2001 2001
______________________ ___________ ___________ ___________ ________ ____________

Domestic:
Commercial, financial and industrial.... $12,632,541 $11,476,361 $11,006,283 (12.87)% (4.10)%
Construction............................ 1,094,524 1,059,847 1,163,530 6.30 9.78
Mortgage:
Residential.......................... 4,196,899 4,788,219 5,673,529 35.18 18.49
Commercial........................... 3,399,316 3,590,318 3,769,068 10.88 4.98
___________ ___________ ___________
Total mortgage..................... 7,596,215 8,378,537 9,442,597 24.31 12.70
Consumer:
Installment.......................... 1,446,219 1,200,047 997,973 (30.99) (16.84)
Revolving lines of credit............ 767,199 859,021 988,996 28.91 15.13
___________ ___________ ___________
Total consumer..................... 2,213,418 2,059,068 1,986,969 (10.23) (3.50)
Lease financing......................... 1,031,358 979,242 880,892 (14.59) (10.04)
___________ ___________ ___________
Total loans in domestic offices.... 24,568,056 23,953,055 24,480,271 (0.36) 2.20
Loans originated in foreign branches....... 1,088,191 1,040,975 1,112,035 2.19 6.83
___________ ___________ ___________
Total loans........................ $25,656,247 $24,994,030 $25,592,306 (0.25)% 2.39%
=========== =========== ===========

Our lending activities are predominantly domestic, with such loans
comprising 96 percent of the total loan portfolio at June 30, 2002. Total loans
at June 30, 2002 were $25.6 billion, a decrease of 0.3 percent, from June 30,
2001. The decrease was mainly attributable to a decline in the commercial,
financial and industrial loan portfolio of $1.6 billion and a decline in the
consumer loan portfolio of $226.4 million, partly offset by an increase in the
residential mortgage portfolio of $1.5 billion and an increase in the commercial
mortgage portfolio of $369.8 million.

Commercial, financial and industrial loans represent the largest
category in the loan portfolio. These loans are extended principally to
corporations, middle market businesses, and small businesses, with no industry
concentration exceeding 10 percent of total commercial, financial and industrial
loans. The commercial, financial and industrial loan portfolio was $11.0
billion, or 43 percent of total loans, at June 30, 2002, compared with $12.6
billion, or 49 percent of total loans, at June 30, 2001. The decrease of $1.6
billion, or 13 percent, from the prior year was primarily attributable to
current economic conditions, loan sales, and reductions in our exposure in
nonrelationship syndicated loans. The reduction in commercial, financial, and
industrial loans is consistent with our strategy to reduce our exposure in more
volatile commercial loans and increase the percentage of more stable consumer
loans.

The construction loan portfolio totaled $1.2 billion, or 5 percent of
total loans, at June 30, 2002, compared with $1.1 billion, or 4 percent of total
loans, at June 30, 2001. This growth of $69.0 million, or 6 percent, from the
prior year was primarily attributable to a reasonably stable Southern California
housing market during 2001 and 2002, despite the slowdown in the economy.

37

Commercial mortgages were $3.8 billion, or 15 percent of total loans,
at June 30, 2002, compared with $3.4 billion, or 13 percent of total loans, at
June 30, 2001. The mortgage loan portfolio consists of loans on commercial and
industrial projects primarily in California. The increase in commercial
mortgages of $369.8 million, or 11 percent, from June 30, 2001, was primarily
due to demand in the Southern California real estate market.

Residential mortgages were $5.7 billion, or 22 percent of total loans,
at June 30, 2002, compared with $4.2 billion, or 16 percent of total loans, at
June 30, 2001. The residential mortgage portfolio consists of residential loans
secured by one-to-four family residential properties primarily in California.
The increase in residential mortgages of $1.5 billion, or 35 percent, from June
30, 2001, continues to be influenced by our strategic decision to increase our
residential mortgage portfolio through increased in-house production and
additional wholesale and correspondent channels.

Consumer loans totaled $2.0 billion, or 8 percent of total loans, at
June 30, 2002, compared with $2.2 billion, or 9 percent of total loans, at June
30, 2001. The decrease of $226.4 million, or 10 percent, was attributable to the
impact of our decision to exit the indirect auto lending business in the third
quarter of 2000, partly offset by an increase in home equity loans.

Lease financing totaled $880.9 million, or 3 percent of total loans, at
June 30, 2002, compared with $1.0 billion, or 4 percent of total loans, at June
30, 2001. As we previously announced, effective April 20, 2001, we discontinued
our auto leasing activity.

Loans originated in foreign branches totaled $1.1 billion, or 4 percent
of total loans, at June 30, 2002, unchanged from June 30, 2001.

CROSS-BORDER OUTSTANDINGS

Our cross-border outstandings reflect certain additional economic and
political risks that are not reflected in domestic outstandings. These risks
include those arising from exchange rate fluctuations and restrictions on the
transfer of funds. The following table sets forth our cross-border outstandings
as of June 30, 2001, December 31, 2001 and June 30, 2002 for any country where
such outstandings exceeded 1 percent of total assets. The cross-border
outstandings were compiled based upon category and domicile of ultimate risk and
are comprised of balances with banks, trading account assets, securities
available for sale, securities purchased under resale agreements, loans, accrued
interest receivable, acceptances outstanding and investments with foreign
entities. The amounts outstanding exclude local currency outstandings. For any
country shown in the table below, we do not have significant local currency
outstandings that are not hedged or are not funded by local currency borrowings.

PUBLIC CORPORATIONS
FINANCIAL SECTOR AND OTHER TOTAL
(DOLLARS IN MILLIONS) INSTITUTIONS ENTITIES BORROWERS OUTSTANDINGS
_____________________ ____________ ________ ____________ ____________

June 30, 2001
Korea............................................... $378 $ - $46 $424
December 31, 2001
Korea............................................... $468 $ - $46 $514
June 30, 2002
Korea............................................... $483 $ - $38 $521

PROVISION FOR CREDIT LOSSES

We recorded a $50 million provision for credit losses in the second
quarter of 2002, compared with a $65 million provision for credit losses for the
same period in the prior year. The provision for credit losses in the first six
months of 2002 was $105 million, compared with a $165 million provision for
credit losses for the same period in the prior year. Provisions for credit
losses are charged to income to bring our allowance

38

for credit losses to a level deemed appropriate by management based on the
factors discussed under "Allowance for Credit Losses" below.

Our provision for the second quarter and first six months of 2002,
reflects our application of strict standards to the definitions of potential and
well-defined weaknesses in our loan portfolio, which impact the level of our
criticized assets.

ALLOWANCE FOR CREDIT LOSSES

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

The formula allowance is calculated by applying loss factors to
outstanding loans and certain unused commitments, in each case based on the
internal risk grade of such loans, leases and commitments. Changes in risk
grades affect the amount of the formula allowance. Loss factors are based on our
historical loss experience and may be adjusted for significant factors that, in
management's judgment, affect the collectibility of the portfolio as of the
evaluation date. Loss factors are developed in the following ways:

o pass graded, for commercial, financial, and industrial loans,
as well as all problem graded loan loss factors are derived
from a migration model that tracks historical losses over a
period, which we believe captures the inherent losses in our
loan portfolio;

o pass graded loan loss factors for commercial real estate loans
and construction loans are based on the average annual net
charge-off rate over a period reflective of a full economic
cycle; and

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

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

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

The unallocated allowance contains amounts that are based on
management's evaluation of conditions that are not directly measured in the
determination of the formula and specific allowances. The evaluation of the
inherent loss with respect to these conditions is subject to a higher degree of
uncertainty because they may not be identified with specific problem credits or
portfolio segments. The conditions evaluated in connection with the unallocated
allowance include the following, which existed at the balance sheet date:

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

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

o collateral values;

39

o loan volumes and concentrations;

o seasoning of the loan portfolio;

o specific industry conditions within portfolio segments;

o recent loss experience in particular segments of the
portfolio;

o duration of the current economic cycle;

o bank regulatory examination results; and

o findings of our internal credit examiners.

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

The allowance for credit losses is based upon estimates of probable
losses inherent in the loan portfolio. The actual losses can vary from the
estimated amounts. Our methodology includes several features that are intended
to reduce the differences between estimated and actual losses. The loss
migration model that is used to establish the loan loss factors for problem
graded loans and pass graded commercial, financial, and industrial loans is
designed to be self-correcting by taking into account our loss experience over
prescribed periods. Similarly, by basing the pass graded loan loss factors over
a period reflective of an economic cycle, the methodology is designed to take
our recent loss experience for commercial real estate mortgages and construction
loans into account. Pooled loan loss factors are adjusted quarterly based upon
the level of net charge-offs expected by management in the next twelve months.
Furthermore, based on management's judgement, our methodology permits
adjustments to any loss factor used in the computation of the formula allowance
for significant factors, which affect the collectibility of the portfolio as of
the evaluation date, but are not reflected in the loss factors. By assessing the
probable estimated losses inherent in the loan portfolio on a quarterly basis,
we are able to adjust specific and inherent loss estimates based upon the most
recent information that has become available.

COMPARISON OF THE TOTAL ALLOWANCE AND RELATED PROVISION FOR CREDIT LOSSES FROM
DECEMBER 31, 2001

During the second quarter of 2002, there were no 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 a refinement of our allowance estimations for impaired loans. Changes in
estimates and assumptions regarding the effects of economic and business
conditions on borrowers and other factors, which are described below, affected
the assessment of the unallocated allowance.

At December 31, 2001, our total allowance for credit losses was $635
million or 2.54 percent of the total loan portfolio and 129 percent of total
nonaccrual loans. At June 30, 2002, our total allowance for credit losses was
$625 million or 2.44 percent of the total loan portfolio and 151 percent of
total nonaccrual loans. In addition, the allowance incorporates the results of
measuring impaired loans as provided in SFAS No. 114 and 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,
2001, total impaired loans were $492 million and the associated impairment
allowance was $98 million compared with $414 million and $37 million,
respectively, at June 30, 2002.

40

We recorded a $50 million provision in the second quarter of 2002 as a
result of management's assessment of factors, including the continued slow US
economy, uncertainty in the communication/media, power, real estate, and other
sectors in domestic markets in which we operate, and growth and changes in the
composition of the loan portfolio. Losses inherent in large commercial loans are
more difficult to assess because historically these have been more volatile than
losses from other credits.

CHANGES IN THE FORMULA AND SPECIFIC ALLOWANCES

At June 30, 2002, the formula allowance remained relatively unchanged
at $334 million, compared to $325 million at December 31, 2001, an increase of
$9 million.

At June 30, 2002, the specific allowance was $101 million compared to
$138 million at December 31, 2001, a decrease of $37 million. This was primarily
due to charge-offs recognized during the quarter as well as a refinement in our
estimated losses for impaired loans and a decline in nonaccrual loans.

CHANGES IN THE UNALLOCATED ALLOWANCE

At June 30, 2002, the unallocated allowance was $190 million, compared
to $172 million at December 31, 2001, an increase of $18 million. In evaluating
the appropriateness of the unallocated allowance, we considered the following
factors as well as more general factors such as the interest rate environment
and the impact of the economic downturn on those borrowers who have a more
leveraged financial profile:

o the adverse effects of declining debt ratings and weak equity
prices on borrowers in the power industry, which could be in
the range of $20 million to $40 million;

o the adverse effects of changes in the economic, regulatory,
and technology environments on borrowers in the
communications/media industry, which could be in the range of
$18 million to $40 million;

o the adverse effects of the general weakening in commercial
real estate markets, as well as the specific deterioration in
Northern California, which could be in the range of $16
million to $32 million;

o the adverse effects of continued soft consumer confidence
on borrowers in the retailing industry, which could be in the
range of $10 million to $25 million; and

o the adverse effects of the continued weak economic conditions
in certain Asia/Pacific Rim countries and the reduced strength
of the Japanese corporate parents of our Pacific Rim
borrowers, which could be in the range of $7 million to $13
million.

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 above. See
"Certain Business Risks Factors".

41

CHANGE IN THE TOTAL ALLOWANCE FOR CREDIT LOSSES

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

FOR THE THREE MONTHS FOR THE SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA) 2001 2002 2001 2002
_____________________________________________ ________ ________ ________ ________

Balance, beginning of period.......................................... $642,334 $629,367 $613,902 $634,509
Loans charged off:
Commercial, financial and industrial............................... 90,151 67,952 164,706 130,178
Mortgage........................................................... 28 248 58 428
Consumer........................................................... 2,897 2,228 6,234 4,827
Lease financing.................................................... 1,007 674 1,788 1,507
________ ________ ________ ________
Total loans charged off......................................... 94,083 71,102 172,786 136,940
Recoveries of loans previously charged off:
Commercial, financial and industrial............................... 12,073 12,822 18,010 17,339
Construction....................................................... -- 40 -- 40
Mortgage........................................................... -- 44 24 139
Consumer........................................................... 1,125 873 2,252 1,781
Lease financing.................................................... 171 182 319 383
Foreign(1)......................................................... -- -- 14 --
________ ________ ________ ________
Total recoveries of loans previously charged off................ 13,369 13,961 20,619 19,682
________ ________ ________ ________
Net loans charged off......................................... 80,714 57,141 152,167 117,258
Provision for credit losses........................................... 65,000 50,000 165,000 105,000
Foreign translation adjustment and other net additions (deductions)(2) (83) 2,722 (198) 2,697
________ ________ ________ ________
Balance, end of period................................................ $626,537 $624,948 $626,537 $624,948
======== ======== ======== ========

Allowance for credit losses to total loans............................ 2.44% 2.44% 2.44% 2.44%
Provision for credit losses to net loans charged off.................. 80.53 87.50 108.43 89.55
Net loans charged off to average loans outstanding for the period(3).. 1.24 0.90 1.17 0.93

__________________

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

(2) Includes a second quarter 2002 transfer of $2.4 million related to the First Western Bank acquisition.

(3) Annualized.

Total loans charged off in the second quarter of 2002 decreased by
$23.0 million from the second quarter of 2001, primarily due to a $22.2 million
decrease in commercial, financial and industrial loans charged off. Charge-offs
reflect the realization of losses in the portfolio that were recognized
previously through provisions for credit losses.

Second quarter 2002 recoveries of loans previously charged off
increased by $0.6 million from the second quarter of 2001. The percentage of net
loans charged off to average loans outstanding for the second quarter of 2002
decreased by 34 basis points from the same period in 2001. At June 30, 2002, the
allowance for credit losses exceeded the annualized net loans charged off during
the second quarter of 2002, 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.

42

NONPERFORMING ASSETS

JUNE 30, DECEMBER 31, JUNE 30,
(DOLLARS IN THOUSANDS) 2001 2001 2002
______________________ ________ __________ ________

Commercial, financial and industrial........................................... $432,756 $471,509 $386,912
Construction................................................................... 3,967 -- --
Commercial mortgage............................................................ 16,699 17,430 24,201
Lease financing................................................................ -- 2,946 3,369
________ __________ ________
Total nonaccrual loans...................................................... 453,422 491,885 414,482
Foreclosed assets.............................................................. 1,345 597 490
Distressed loans held for sale................................................. 5,349 -- --
________ __________ ________
Total nonperforming assets.................................................. $460,116 $492,482 $414,972
======== ========== ========

Allowance for credit losses.................................................... $626,537 $634,509 $624,948
======== ========== ========

Nonaccrual loans to total loans................................................ 1.77% 1.97% 1.62%
Allowance for credit losses to nonaccrual loans................................ 138.18 129.00 150.78
Nonperforming assets to total loans, distressed loans held for sale and
foreclosed assets........................................................... 1.79 1.97 1.62
Nonperforming assets to total assets........................................... 1.29 1.37 1.15

At June 30, 2002, nonperforming assets totaled $415.0 million, a
decrease of $45.1 million, or 10 percent, from June 30, 2001. The decrease was
primarily due to moderate inflows of nonaccrual loans, coupled with continuing
higher levels of pay-downs and charge-offs.

Nonaccrual loans as a percentage of total loans were 1.62 percent at
June 30, 2002, compared with 1.77 percent at June 30, 2001. Nonperforming assets
as a percentage of total loans, distressed loans held for sale, and foreclosed
assets were 1.62 percent at June 30, 2002, compared to 1.79 percent at June 30,
2001.

LOANS 90 DAYS OR MORE PAST DUE AND STILL ACCRUING

JUNE 30, DECEMBER 31, JUNE 30,
(DOLLARS IN THOUSANDS) 2001 2001 2002
______________________ ________ ____________ ________

Commercial, financial and industrial................................................ $ 12,812 $ 26,571 $11,096
Mortgage:
Residential...................................................................... 3,376 4,854 5,104
Commercial....................................................................... 1,087 2,356 523
________ ____________ ________
Total mortgage................................................................ 4,463 7,210 5,627
Consumer and other.................................................................. 3,286 2,579 1,513
________ ____________ ________
Total loans 90 days or more past due and still accruing.......................... $ 20,561 $ 36,360 $18,236
======== ============ ========

43

QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT INTEREST RATE RISK MANAGEMENT
(OTHER THAN TRADING)

THE FOLLOWING INFORMATION ON MARKET RISK ASSOCIATED WITH INTEREST RATE
RISK IS BEING PROVIDED IN ORDER TO EXPAND THE INFORMATION ON THE ASSUMPTIONS
USED IN OUR SIMULATION MODELS, WHICH QUANTIFY OUR SENSITIVITY TO CHANGES IN
INTEREST RATES.

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 of Directors (Board) and
maintaining a risk profile that is consistent with management's strategic
objectives.

The Asset & Liability Management (ALM) policy approved by the Board
requires monthly monitoring of interest rate risk by the Asset & Liability
Management Committee (ALCO), which is composed of UnionBanCal Corporation
executives. As part of the management of our interest rate risk, ALCO may direct
changes in the composition of the balance sheet and the extent to which we
utilize investment securities and derivative instruments such as interest rate
swaps, floors, and caps to hedge the our interest rate exposures. Traditionally,
we have entered into swaps and floors to offset the adverse impact that
declining interest rates would have on the interest income generated by our
variable rate commercial loans. For a further discussion of derivative
instruments see Note 6--"Derivative Instruments and Other Financial Instruments
Used For Hedging" of the Notes to Consolidated Financial Statements.

We use two types of simulation models to quantify the sensitivity of
NII to changes in interest rates: a shock simulation model and a Monte Carlo
simulation model. In both approaches, NII is adjusted to incorporate the effect
of certain noninterest expense items related to demand deposit accounts that are
nevertheless sensitive to changes in interest rates.

Our primary simulation tool involves a shock analysis in which we
estimate the impact that immediate and sustained parallel shifts in the yield
curve would have on NII over a 12-month horizon. Under policy limits established
by the Board, the negative change in simulated NII in either up or down 200
basis point shock scenarios may not exceed 8 percent of NII as measured in the
flat rate, or no change, scenario. The following table sets forth the shock
sensitivity results in both the up and down 200 basis point scenarios as of
March 31, 2002 and June 30, 2002.

MARCH 31, JUNE 30,
(DOLLARS IN MILLIONS) 2002 2002
_____________________ _________ ________

+200 basis points................................... $ 12.6 $ 48.3
as a percentage of mean NII......................... 0.83% 3.24%
- -200 basis points................................... $(56.3) $(66.5)
as a percentage of mean NII......................... 3.72% 4.47%

Asset sensitivity increased in the second quarter of 2002 following the
implementation of ALCO's decision to unwind longer-term swap hedges. Other
contributing factors included a flattening in the Treasury yield curve, which
caused modeled prepayment levels in our mortgage-related portfolios to increase
in the lower rate scenarios, and continued strong growth in our core deposit
businesses. However, the increase in asset sensitivity was substantially offset
in the down 200 basis point simulation by the purchase of $1 billion in LIBOR
floors. This reflected management's decision to adjust the rate sensitivity
profile. These activities allow us to benefit if interest rates should rise in
the next 12 months, while maintaining a prudent level of hedge protection if the
economy unexpectedly weakens and the Federal Reserve finds it necessary to lower
interest rates.

With federal funds and LIBOR rates at the end of the second quarter of
2002 already below two percent, a downward shock scenario of 200 basis points
would result in short-term rate levels below zero percent. As a result, we
believe that a downward shock scenario of 100 basis points provides a more
reasonable measure of asset sensitivity in a falling rate environment. As of
June 30, 2002, the difference between flat rate NII and NII after a 100 basis
point downward shock was ($22.5) million, or (1.5) percent of a flat rate NII.

44

In the Monte Carlo simulation analysis, we randomly sample up to 300
paths that short-term interest rates could take over the next 12 months and
calculate the NII associated with each path. The result is a probability
distribution of 12-month NII outcomes. Earnings-at risk (EaR), defined as the
potential negative change in NII, is measured at a 97.5% confidence level and is
managed within the limit established by the Board's ALM policy at 5 percent of
mean NII. The following table summarizes our EaR as a percentage of mean NII as
of March 31, 2002 and June 30, 2002.

MARCH 31, JUNE 30,
(DOLLARS IN MILLIONS) 2002 2002
_____________________ _________ ________

EaR....................................................... $19.0 $25.8
EaR as a percentage of mean NII........................... 1.32% 1.78%

Management's goal in the NII simulations is to capture the risk
embedded in the balance sheet. As a result, asset and liability balances are
kept constant throughout the analysis horizon. Two exceptions are non-maturity
deposits, which vary with levels of interest rates according to statistically
derived balance equations, and discretionary derivative hedges and fixed income
portfolios, which are allowed to run off. Additional assumptions are made to
model the future behavior of deposit rates and loan spreads based on statistical
analysis, management's outlook, and historical experience. The prepayment risks
related to residential loans and mortgage-backed securities are measured using
industry estimates of prepayment speeds. The sensitivity of the simulation
results to the underlying assumptions is tested as a regular part of the risk
measurement process by running simulations with different assumptions. In
addition, management supplements the official risk measures based on the
constant balance sheet assumption with volume-based simulations based on
forecasted balances. We believe that together, these simulations provide
management with a reasonably comprehensive view of the sensitivity of our
operating results to changes in interest rates, at least over the measurement
horizon. However, as with any financial model, the underlying assumptions are
inherently uncertain and subject to refinement as modeling techniques and theory
improve and historical data becomes more readily accessible. Consequently, our
simulation models cannot predict with certainty how rising or falling interest
rates might impact net interest income. Actual and simulated NII results will
differ to the extent there are differences between actual and assumed interest
rate changes, balance sheet volumes, and management strategies, among other
factors.

A third measure that ALCO uses to monitor our risk profile is Economic
Value of Equity (EVE). EVE is an estimate of the net present value of the future
cash flows associated with all of our assets, liabilities and derivatives.
EVE-at-Risk is defined as the negative change in the value of these cash flows
resulting from either a +200 basis point or a !200 basis point shock scenario.
Although ALCO has identified prototype guidelines for measuring EVE-at-Risk, the
Board has not established official policy limits for EVE. We will continue to
improve and refine the EVE methodology in the coming months with the goal of
proposing an official EVE risk measure in 2003.

LIQUIDITY

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 Board requires quarterly reviews of our
liquidity by ALCO. Our liquidity management draws upon the strengths of our
extensive retail and commercial market business franchise, coupled with the
ability to obtain funds for various terms in a variety of domestic and
international money markets. Liquidity is managed through the funding and
investment functions of the Global Markets Group.

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 shareholders' equity, funded 76 percent of average total assets
of $35.7 billion for the second quarter ended June 30, 2002. Most of the
remaining funding was

45

provided by short-term borrowings in the form of negotiable certificates of
deposit, foreign deposits, federal funds purchased and securities sold under
repurchase agreements, commercial paper and other borrowings. In the fourth
quarter of 2001, we issued $200 million in medium-term notes, the proceeds of
which were utilized for general corporate purposes.

Liquidity may also be provided by the sale or maturity of assets. Such
assets include interest bearing deposits in banks, federal funds sold and
securities purchased under resale agreements, and trading account securities.
The aggregate of these assets averaged $1.5 billion during the second quarter of
2002. Additional liquidity may be provided by investment securities available
for sale and by loan maturities.

REGULATORY CAPITAL

The following table summarizes our risk-based capital, risk-weighted
assets, and risk-based capital ratios.

UNIONBANCAL CORPORATION

MINIMUM
JUNE 30, DECEMBER 31, JUNE 30, REGULATORY
(DOLLARS IN THOUSANDS) 2001 2001 2002 REQUIREMENT
______________________ ___________ ___________ ___________ ___________

CAPITAL COMPONENTS
Tier 1 capital............... $ 3,570,022 $ 3,661,231 $ 3,834,103
Tier 2 capital............... 607,791 598,812 562,165
___________ ___________ ___________
Total risk-based capital..... $ 4,177,813 $ 4,260,043 $ 4,396,268
=========== =========== ===========

Risk-weighted assets......... $32,908,813 $31,906,438 $32,213,352
=========== =========== ===========

Quarterly average assets..... $34,568,113 $34,760,203 $35,613,957
=========== =========== ===========

CAPITAL RATIOS AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
______________ __________ _____ __________ _____ __________ _____ __________ _____

Total capital (to
risk-weighted assets).. $4,177,813 12.70% $4,260,043 13.35% $4,396,268 13.65% $2,577,068 8.0%
Tier 1 capital (to
risk-weighted assets).. 3,570,022 10.85 3,661,231 11.47 3,834,103 11.90 1,288,534 4.0
Leverage(1)............... 3,570,022 10.33 3,661,231 10.53 3,834,103 10.77 1,424,558 4.0

__________________

(1) Tier 1 capital divided by quarterly average assets (excluding certain intangible assets).

UNION BANK OF CALIFORNIA, N.A.

MINIMUM "WELL-CAPITALIZED"
JUNE 30, DECEMBER 31, JUNE 30, REGULATORY REGULATORY
(DOLLARS IN THOUSANDS) 2001 2001 2002 REQUIREMENT REQUIREMENT
______________________ ___________ ___________ ___________ ___________ __________________

CAPITAL COMPONENTS
Tier 1 capital............... $ 3,187,528 $ 3,323,096 $ 3,473,828
Tier 2 capital............... 500,739 487,640 471,258
___________ ___________ ___________
Total risk-based capital..... $ 3,688,267 $ 3,810,736 $ 3,945,086
=========== =========== ===========

Risk-weighted assets......... $32,344,858 $31,271,268 $31,581,189
=========== =========== ===========

Quarterly average assets..... $34,179,220 $34,282,625 $35,113,945
=========== =========== ===========

CAPITAL RATIOS AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
______________ __________ _____ __________ _____ __________ _____ __________ _____ __________ _____

Total capital (to
risk-weighted assets).. $3,688,267 11.40% $3,810,736 12.19% $3,945,086 12.49% $2,526,495 8.0% $3,158,119 10.0%
Tier 1 capital (to
risk-weighted assets).. 3,187,528 9.85 3,323,096 10.63 3,473,828 11.00 1,263,248 4.0 1,894,871 6.0
Leverage(1)............... 3,187,528 9.33 3,323,096 9.69 3,473,828 9.89 1,404,558 4.0 1,755,697 5.0

__________________

(1) Tier 1 capital divided by quarterly average assets (excluding certain intangible assets).

46

We and Union Bank of California, N.A. are subject to various
regulations issued by federal banking agencies, including minimum capital
requirements. We and Union Bank of California, N.A. 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).

Compared with December 31, 2001, our Tier 1 risk-based capital ratio at
June 30, 2002 increased 43 basis points to 11.90 percent, our total risk-based
capital ratio increased 30 basis points to 13.65 percent, and our leverage ratio
increased 24 basis points to 10.77 percent. The increases in the capital ratios
were primarily attributable to higher shareholder equity, partly offset by
slightly higher risk-weighted assets. Shareholder equity was higher mainly due
to increased retained earnings driven by net income in the first and second
quarters of 2002 as well as higher unrealized gains on securities available for
sale and on cash flow hedges as recognized in other comprehensive income.

As of June 30, 2002, management believes the capital ratios of Union
Bank of California, N.A. met all regulatory requirements of a "well-capitalized"
institution, 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.

CERTAIN BUSINESS RISK FACTORS

ADVERSE CALIFORNIA ECONOMIC CONDITIONS COULD ADVERSELY AFFECT OUR BUSINESS

A substantial majority of our assets and deposits 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 long-term impact of the
California energy crisis and the decline in the technology sector. If economic
conditions in California continue to decline, we expect that our level of
problem assets could increase accordingly.

THE TRAGIC EVENTS OF SEPTEMBER 11 AND THE ENSUING WAR ON TERRORISM CONTRIBUTED
TO THE CONTINUING DOWNTURN IN US ECONOMIC CONDITIONS

The terrorist attacks on the World Trade Center and the Pentagon on
September 11, 2001, as well as the threat of further terrorist attacks, have
contributed to the continuing downturn in the US economic conditions. Further
acts or threats of terrorism, and actions taken by the US or other governments
as a result of such acts or threats, could further adversely affect business and
economic conditions in the US generally and in our principal markets. For
example, the events of September 11, 2001, caused a decrease in air travel in
the US which adversely affected the airline industry and many other
travel-related industries, including those operating in California.

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 real estate. Accordingly, a downturn in the real estate industry in
California could have an adverse effect on our operations. Similarly, a portion
of our total loan portfolio is to borrowers in the agricultural industry.
Adverse weather conditions, combined with low commodity prices, may adversely
affect the agricultural industry and, consequently, may impact our business
negatively. In addition, auto leases comprise a declining portion of our total
loan portfolio. We ceased originating auto leases in April 2001; however,
continued deterioration in the used car market may result in additional losses
on the valuation of auto lease residuals on our remaining auto leases. We
provide loans to businesses in a number of other industries that may be
particularly vulnerable to industry-specific economic factors, including the
communications/media industry, the retailing industry, and the technology
industry. 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.

47

RISKS ASSOCIATED WITH CURTAILED MARKET ACCESS OF POWER COMPANIES COULD AFFECT
OUR PORTFOLIO CREDIT QUALITY

The recent failure of Enron, coupled with continued turbulence in
energy markets, has significantly impacted debt ratings and equity valuations of
a broad spectrum of power companies, particularly those involved in energy
trading and deregulated or non-regulated markets. These developments have
sharply reduced these companies' ability to access public debt and equity
markets, contributing to heightened liquidity pressures. Should these negative
trends continue and/or intensify, the credit quality of certain of our borrowers
could be adversely effected.

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, a decrease in interest rates could
result in an acceleration in the prepayment of loans. An increase in market
interest rates could also adversely affect the ability of our floating-rate
borrowers to meet their higher payment obligations. If this occurred, it could
cause an increase in nonperforming assets and charge-offs, which could adversely
affect our business.

FLUCTUATIONS IN INTEREST RATES COULD ADVERSELY AFFECT OUR MARGIN SPREAD

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

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

The Bank of Tokyo-Mitsubishi, Ltd., a wholly owned subsidiary of
Mitsubishi Tokyo Financial Group, Inc., owns a majority (approximately 67
percent as of June 30, 2002) of the outstanding shares of our common stock. As a
result, The Bank of Tokyo-Mitsubishi, Ltd. can elect all of our directors and as
a result 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
shareholders; 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 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, The Bank of Tokyo- Mitsubishi, Ltd.
could change the composition of our Board of Directors so that the Board would
not have a majority of outside 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.

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

Although 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, The Bank of
Tokyo-Mitsubishi, Ltd.'s credit ratings may affect our credit ratings.
Deterioration in The Bank of Tokyo-Mitsubishi, Ltd.'s credit ratings or
financial condition could result in an increase in our borrowing costs and could
impair our access to the public and private capital markets. The Bank of
Tokyo-

48

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.

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

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, our ability to approve certain credits and
categories of customers is subject to concurrence by The Bank of
Tokyo-Mitsubishi, Ltd. We may wish to extend credit to the same customer 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 US 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 and major foreign-affiliated or foreign
banks, as well as many financial and non-financial 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 (such as Bank of America, California Federal, Washington Mutual,
and Wells Fargo) 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 in a
new type of financial services company called 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 US, further increasing competition
in the US market.

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

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

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

We are subject to significant federal and state regulation and
supervision, which is primarily for the benefit and protection of our customers
and not for the benefit of investors. In the past, our business has been
materially affected by these regulations. This trend is likely to continue in
the future. Laws, regulations or policies 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, including

49

legislative and regulatory reactions to the terrorist attack on September 11,
2001, and future acts of terrorism, and the Enron Corporation and WorldCom Inc.
bankruptcies and recent reports of accounting irregularities at public
companies, including various large and seemingly well regarded 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. Under long-standing policy of the Federal Reserve
Board (FRB), 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.

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 FRB, which regulates the supply of
money and credit in the US. Among the instruments of monetary policy available
to the FRB are (a) conducting open market operations in US government
securities, (b) changing the discount rates of borrowings of depository
institutions, (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 FRB may have a material effect on our business, results of
operations and financial condition.

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

Although The Bank of Tokyo-Mitsubishi, Ltd. has announced it has no
plan to sell its majority ownership in us, 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 shareholder.

WE MAY NOT BE ABLE TO SUCCESSFULLY IMPLEMENT OUR OPERATING STRATEGIES

From time to time, we develop long-term financial performance goals to
guide and measure the success of our operating strategies. We cannot assure you
that we will be successful in achieving these long-term goals or that our
operating strategies will be successful. Achieving success in these areas is
dependent on a number of factors, many of which are beyond our direct control.
Factors that may adversely affect our ability to attain our long-term financial
performance goals include:

o deterioration of our asset quality;

o our inability to control noninterest expense, including,
but not limited to, rising employee and healthcare costs;

o our inability to increase noninterest income;

o our inability to decrease reliance on revenues generated from
assets;

50

o our ability to sustain loan growth;

o our ability to find acquisition targets at valuation levels we
find attractive;

o regulatory and other impediments associated with making
acquisitions;

o deterioration in general economic conditions, especially in
our core markets;

o decreases in our net interest margin;

o increases in competition;

o adverse regulatory or legislative developments; and

o unexpected increases in costs related to acquisitions.

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

We may seek to acquire or invest in 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 investments as this will
depend on the availability of prospective target companies 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 lines. Any
acquisitions, divestitures or restructuring may result in the potentially
dilutive issuance of 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, financial
condition and results of operations. Acquisitions, divestitures or restructuring
could involve numerous additional risks including difficulties in obtaining any
required regulatory approvals and in the assimilation or separation of
operations, services, products and personnel, the diversion of management's
attention from other business concerns, higher than expected deposit attrition
(run-off), divestitures required by regulatory authorities, the disruption of
our business, and the potential loss of key employees. There can be no assurance
that we will be successful in overcoming these or any other significant risks
encountered.

WRITTEN STATEMENTS UNDER SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

The written statements of our chief executive officer and chief
financial officer with respect to this report on Form 10-Q, as required by
section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. section 1350), have
been submitted to the Securities and Exchange Commission as additional
correspondence accompanying this report.

ITEM 3. MARKET RISK.

A more inclusive explanation concerning our market risk exposure is
incorporated by reference from the text under the caption "Quantitative and
Qualitative Disclosures About Market Risk" in the Form 10-K for the year ended
December 31, 2001 and by reference to the previous text in this document under
the caption "Quantitative and Qualitative Disclosure about Interest Rate Risk
Management (Other Than Trading)".

51

PART II. OTHER INFORMATION

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

For information regarding matters submitted to shareholders at the
Annual Meeting of Shareholders on April 24, 2002, see Part II, Item 4 of Form
10-Q for the quarter ended March 31, 2002, incorporated herein.

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

(a) Exhibits:

NO. DESCRIPTION

3.1 Restated Articles of Incorporation of the Registrant, as amended(1)
3.2 By-laws of the Registrant, as amended January 27, 1999(2)
10.1 UnionBanCal Corporation Management Stock Plan. (As restated effective
June 1, 1997)*(3)
10.2 Union Bank of California Deferred Compensation Plan. (January 1, 1997,
Restatement, as amended November 21, 1996)*(4)
10.3 Union Bank of California Senior Management Bonus Plan. (Effective
January 1, 2000)*(5)
10.4 Richard C. Hartnack Employment Agreement.(Effective January 1, 1998)*(6)
10.5 Robert M. Walker Employment Agreement. (Effective January 1, 1998)*(6)
10.6 Union Bank of California, N.A. Supplemental Executive Retirement Plan.
(Effective January 1, 1988)(Amended and restated as of January 1, 1997)*
(3)
10.7 Union Bank Financial Services Reimbursement Program. (Effective January
1, 1996)*(7)
10.8 1997 UnionBanCal Corporation Performance Share Plan, as amended. (As
amended, effective January 1, 2001)*(5)
10.9 Service Agreement Between Union Bank of California and The Bank of
Tokyo-Mitsubishi Ltd. (Effective October 1, 1997)*(3)
10.10 Year 2000 UnionBanCal Corporation Management Stock Plan. (As restated
effective January 1, 2000)*(8)
10.11 Union Bank of California, N.A. Supplemental Retirement Plan for Policy
Making Officers (Effective November 1, 1999)(9)
10.12 Philip B. Flynn Employment Agreement (Effective September 21, 2000)(10)

__________________

(1) Incorporated by reference to Form 10-K for the year ended December 31,
1998.

(2) Incorporated by reference to Form 10-Q for the quarter ended March 31,
1999.

(3) Incorporated by reference to Form 10-K for the year ended December 31,
1997.

(4) Incorporated by reference to Form 10-K for the year ended December 31,
1996.

(5) Incorporated by reference to Form DEF-14A dated March 28, 2001.

(6) Incorporated by reference to Form 10-Q for the quarter ended September
30, 1998.

(7) Incorporated by reference to Form 8-K dated April 1, 1996.

(8) Incorporated by reference to form 10-Q for the quarter ended June 30,
1999.

(9) Incorporated by reference to form 10-Q for the quarter ended June 30,
2000.

(10) Incorporated by reference to form 10-K for the year ended December 31,
2001.

* Management contract or compensatory plan, contract or arrangement.

(b) Reports on Form 8-K

We filed a report on Form 8-K on April 17, 2002 to report that UnionBanCal
Corporation issued a press release concerning earnings for first quarter 2002.

52

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

UNIONBANCAL CORPORATION
(Registrant)

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

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

Dated: August 14, 2002

53