UNIONBANCAL CORP, 10-Q, 1999-11-12

UNIONBANCAL CORP
10-Q, 1999-11-12
NATIONAL COMMERCIAL BANKS

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999

Commission file number 0-28118

UNIONBANCAL CORPORATION

<TABLE>
<S> <C>
State of Incorporation: California I.R.S. Employer Identification
No. 94-1234979
</TABLE>

350 California Street
San Francisco, California 94104-1476
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 October 29, 1999:
164,633,635

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<PAGE>
UNIONBANCAL CORPORATION AND SUBSIDIARIES

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
NUMBER
--------
<S> <C>
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............................................ 12
Summary................................................. 12
Mission Excel........................................... 15
Business Segments....................................... 15
Net Interest Income..................................... 22
Noninterest Income...................................... 25
Noninterest Expense..................................... 26
Income Tax Expense...................................... 28
Loans................................................... 28
Cross-Border Outstandings............................... 29
Provision for Credit Losses............................. 30
Allowance for Credit Losses............................. 30
Nonperforming Assets.................................... 34
Loans 90 Days or More Past Due and Still Accruing....... 35
Liquidity............................................... 35
Regulatory Capital...................................... 35
Year 2000............................................... 36
Forward-looking Statements.............................. 39

Item 3. Market Risk....................................... 42

PART II
OTHER INFORMATION

Item 4. Other Information................................. 43

Item 5. Exhibits and Reports on Form 8-K.................. 43

Signatures................................................ 44
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
UNIONBANCAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL HIGHLIGHTS
(UNAUDITED)

<TABLE>
<CAPTION>
PERCENT CHANGE TO
SEPTEMBER 30, 1999
FOR THE THREE MONTHS ENDED FROM:
---------------------------------------------- --------------------------
SEPTEMBER 30, JUNE 30, SEPTEMBER 30, SEPTEMBER 30, JUNE 30,
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 1998 1999 1999 1998 1999
- ---------------------------------------------------- -------------- ------------ -------------- -------------- ---------
<S> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS:
Net interest income(1)............................ $ 337,702 $ 348,014 $ 360,760 6.83% 3.66%
Provision for credit losses....................... 10,000 10,000 20,000 100.00% 100.00
Noninterest income................................ 123,925 144,798 148,349 19.71% 2.45
Noninterest expense, excluding restructuring
charge.......................................... 290,378 307,582 301,291 3.76% (2.05)
------------ ------------ ------------
Income before restructuring charge and income
taxes(1)........................................ 161,249 175,230 187,818 16.48% 7.18
Restructuring charge.............................. -- -- 85,000 nm nm
------------ ------------ ------------
Income before income taxes(1)..................... 161,249 175,230 102,818 (36.24)% (41.32)
Taxable-equivalent adjustment..................... 1,069 851 747 (30.12)% (12.22)
Income tax expense................................ 11,913 59,652 30,490 155.94% (48.89)
------------ ------------ ------------
Net income........................................ $ 148,267 $ 114,727 $ 71,581 (51.72)% (37.61)%
============ ============ ============
PER COMMON SHARE:
Net income--basic................................. $ 0.85 $ 0.70 $ 0.43 (49.41)% (38.57)%
Net income--diluted............................... 0.84 0.69 0.43 (48.81)% (37.68)
Pro forma earnings (basic)(2)(3).................. 0.59 0.70 0.77 30.51% 10.00
Pro forma earnings (diluted)(2)(3)................ 0.59 0.69 0.77 30.51% 11.59
Dividends(4)...................................... 0.14 0.19 0.19 35.71% --
Book value (end of period)........................ 17.04 17.50 17.72 3.99% 1.26
Common shares outstanding (end of period)......... 175,208,037 164,600,997 164,624,258 (6.04)% 0.01
Weighted average common shares
outstanding--basic.............................. 175,188,084 164,588,227 164,616,369 (6.03)% 0.02
Weighted average common shares
outstanding--diluted............................ 175,791,963 165,278,828 165,472,346 (5.87)% 0.12
BALANCE SHEET (END OF PERIOD):
Total assets...................................... $ 31,407,318 $ 32,386,153 $ 32,518,035 3.54% 0.41%
Total loans....................................... 23,497,845 24,586,658 25,185,682 7.18% 2.44
Nonperforming assets.............................. 81,399 97,449 158,257 94.42% 62.40
Total deposits.................................... 23,663,129 24,133,148 25,175,921 6.39% 4.32
Common equity..................................... 2,984,950 2,881,137 2,917,583 (2.26)% 1.26
BALANCE SHEET (PERIOD AVERAGE):
Total assets...................................... $ 30,762,880 $ 31,960,796 $ 32,038,792 4.15% 0.24%
Total loans....................................... 23,432,772 24,854,844 25,152,550 7.34% 1.20
Earning assets.................................... 27,767,944 28,867,990 29,007,215 4.46% 0.48
Total deposits.................................... 22,571,441 23,348,561 23,926,472 6.00% 2.48
Common equity..................................... 2,866,497 2,872,991 2,929,140 2.19% 1.95
FINANCIAL RATIOS:
Return on average assets(5)....................... 1.91% 1.44% 0.89%
Pro forma return on average assets(2)(3)(5)....... 1.33 1.44 1.57
Return on average common equity(5)................ 20.52 16.02 9.70
Pro forma return on average common
equity(2)(3)(5)................................. 14.32 16.02 17.17
Efficiency ratio(6)............................... 62.97 62.52 76.01
Pro forma efficiency ratio(3)(6).................. 62.97 62.52 59.32
Net interest margin(1)............................ 4.84 4.84 4.93
Dividend payout ratio............................. 16.47 27.14 44.19
Pro forma dividend payout ratio(2)(3)............. 23.73 27.14 24.68
Tangible equity ratio............................. 9.31 8.70 8.78
Tier 1 risk-based capital ratio................... 9.53 10.05 9.94
Total risk-based capital ratio.................... 11.51 12.00 11.81
Leverage ratio.................................... 9.37 9.94 10.06
Allowance for credit losses to total loans........ 2.02 1.83 1.82
Allowance for credit losses to nonaccrual loans... 697.19 495.45 295.31
Net loans charged off to average total loans(5)... 0.21 0.12 0.21
Nonperforming assets to total loans and foreclosed
assets.......................................... 0.35 0.40 0.63
Nonperforming assets to total assets.............. 0.26 0.30 0.49
</TABLE>

- ------------------------------
(1) Amounts are on a taxable-equivalent basis using the federal statutory tax
rate of 35 percent.
(2) Excludes 3rd Quarter 1998 California Franchise Tax credit of $44.816
million, net of federal tax.
(3) Excludes 3rd Quarter 1999 restructuring charge of $85 million ($55.184
million, net of tax).
(4) Dividends per share reflect dividends declared on UnionBanCal Corporation's
common stock outstanding as of the declaration date.
(5) Annualized.
(6) The efficiency ratio is noninterest expense, excluding foreclosed asset
expense (income), as a percentage of net interest income (taxable-
equivalent) and noninterest income. Foreclosed asset expense (income) was
$(0.3) million in the third quarter of 1998, $(0.2) in the second quarter of
1999, and $(0.7) million in the third quarter of 1999.

nm = not meaningful

2
<PAGE>
UNIONBANCAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL HIGHLIGHTS (CONTINUED)
(UNAUDITED)

<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
------------------------------------------
SEPTEMBER 30, SEPTEMBER 30, PERCENT
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 1998 1999 CHANGE
- ------------------------------------------------------------ -------------- -------------- --------
<S> <C> <C> <C>
RESULTS OF OPERATIONS:
Net interest income(1).................................... $ 983,056 $ 1,049,485 6.76%
Provision for credit losses............................... 45,000 35,000 (22.22)
Noninterest income........................................ 399,949 432,455 8.13
Noninterest expense, excluding restructuring charge....... 836,178 911,866 9.05
------------ ------------
Income before restructuring charge and income taxes(1).... 501,827 535,074 6.63
Restructuring charge...................................... -- 85,000 nm
------------ ------------
Income before income taxes(1)............................. 501,827 450,074 (10.31)
Taxable-equivalent adjustment............................. 3,417 2,488 (27.19)
Income tax expense........................................ 146,045 142,783 (2.23)
------------ ------------
Net income................................................ $ 352,365 $ 304,803 (13.50)%
============ ============
PER COMMON SHARE:
Net income--basic......................................... $ 2.01 $ 1.83 (8.96)%
Net income--diluted....................................... 2.01 1.82 (9.45)
Pro forma earnings (basic)(2)(3).......................... 1.76 2.16 22.73
Pro forma earnings (diluted)(2)(3)........................ 1.75 2.15 22.86
Dividends(4).............................................. 0.42 0.57 35.71
Book value (end of period)................................ 17.04 17.72 3.99
Common shares outstanding (end of period)................. 175,208,037 164,624,258 (6.04)
Weighted average common shares outstanding--basic......... 175,090,890 166,983,654 (4.63)
Weighted average common shares outstanding--diluted....... 175,728,849 167,698,656 (4.57)

BALANCE SHEET (END OF PERIOD):
Total assets.............................................. $ 31,407,318 $ 32,518,035 3.54%
Total loans............................................... 23,497,845 25,185,682 7.18
Nonperforming assets...................................... 81,399 158,257 94.42
Total deposits............................................ 23,663,129 25,175,921 6.39
Common equity............................................. 2,984,950 2,917,583 (2.26)

BALANCE SHEET (PERIOD AVERAGE):
Total assets.............................................. $ 30,130,893 $ 31,910,097 5.90%
Total loans............................................... 22,916,992 24,765,902 8.07
Earning assets............................................ 27,002,879 28,832,723 6.78
Total deposits............................................ 22,386,160 23,529,262 5.11
Common equity............................................. 2,792,727 2,931,922 4.98

FINANCIAL RATIOS:
Return on average assets(5)............................... 1.56% 1.28%
Pro forma return on average assets(2)(3)(5)............... 1.36 1.51
Return on average common equity(5)........................ 16.87 13.90
Pro forma return on average common equity(2)(3)(5)........ 14.72 16.42
Efficiency ratio(6)....................................... 60.51 67.35
Pro forma efficiency ratio(3)(6).......................... 60.51 61.62
Net interest margin(1).................................... 4.86 4.86
Dividend payout ratio..................................... 20.90 31.15
Pro forma dividend payout ratio(2)(3)..................... 23.86 26.39
Tangible equity ratio..................................... 9.31 8.78
Tier 1 risk-based capital ratio........................... 9.53 9.94
Total risk-based capital ratio............................ 11.51 11.81
Leverage ratio............................................ 9.37 10.06
Allowance for credit losses to total loans................ 2.02 1.82
Allowance for credit losses to nonaccrual loans........... 697.19 295.31
Net loans charged off to average total loans(5)........... 0.12 0.20
Nonperforming assets to total loans and foreclosed
assets.................................................. 0.35 0.63
Nonperforming assets to total assets...................... 0.26 0.49
</TABLE>

- ------------------------------
(1) Amounts are on a taxable-equivalent basis using the federal statutory tax
rate of 35 percent.
(2) Excludes 3rd Quarter 1998 California Franchise Tax credit of
$44.816 million, net of federal tax.
(3) Excludes 3rd Quarter 1999 restructuring charge of $85 million
($55.184 million, net of tax).
(4) Dividends per share reflect dividends declared on UnionBanCal Corporation's
common stock outstanding as of the declaration date.
(5) Annualized.
(6) The efficiency ratio is noninterest expense, excluding foreclosed asset
expense (income), as a percentage of net interest income (taxable-
equivalent) and noninterest income. Foreclosed asset expense (income) was
$(0.7) million and $(1.3) million for the first nine months of 1998 and
1999, respectively.

nm = not meaningful

3
<PAGE>
ITEM 1. FINANCIAL STATEMENTS

UNIONBANCAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)

<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
----------------------- ---------------------------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA) 1998 1999 1998 1999
- ------------------------------------------------------------ -------- -------- ---------- ----------
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans..................................................... $468,199 $487,968 $1,365,285 $1,404,318
Securities................................................ 53,559 50,820 145,390 161,851
Interest bearing deposits in banks........................ 2,769 2,786 14,187 9,042
Federal funds sold and securities purchased under resale
agreements.............................................. 4,074 2,345 11,784 5,237
Trading account assets.................................... 7,372 3,087 19,976 9,489
-------- -------- ---------- ----------
Total interest income................................. 535,973 547,006 1,556,622 1,589,937
-------- -------- ---------- ----------
INTEREST EXPENSE
Domestic deposits......................................... 118,847 111,074 353,283 318,740
Foreign deposits.......................................... 20,805 18,233 66,455 52,046
Federal funds purchased and securities sold under
repurchase agreements................................... 26,051 16,493 59,667 57,368
Commercial paper.......................................... 24,257 19,572 67,719 56,766
Subordinated capital notes................................ 4,797 4,240 15,883 12,385
UnionBanCal Corporation--obligated mandatorily redeemable
preferred securities of subsidiary grantor trust........ -- 7,093 -- 17,476
Other borrowed funds...................................... 4,583 10,288 13,976 28,159
-------- -------- ---------- ----------
Total interest expense................................ 199,340 186,993 576,983 542,940
-------- -------- ---------- ----------
NET INTEREST INCOME......................................... 336,633 360,013 979,639 1,046,997
Provision for credit losses............................... 10,000 20,000 45,000 35,000
-------- -------- ---------- ----------
Net interest income after provision for credit
losses.............................................. 326,633 340,013 934,639 1,011,997
-------- -------- ---------- ----------
NONINTEREST INCOME
Service charges on deposit accounts....................... 35,709 45,401 101,288 127,981
Trust and investment management fees...................... 30,777 36,353 88,806 102,607
International commissions and fees........................ 17,951 17,475 54,516 53,186
Merchant transaction processing fees...................... 14,871 18,598 42,988 51,256
Merchant banking fees..................................... 6,095 10,946 24,083 27,561
Brokerage commissions and fees............................ 4,723 7,148 14,188 18,825
Securities gains, net..................................... 653 2,004 5,579 3,899
Other..................................................... 13,146 10,424 68,501 47,140
-------- -------- ---------- ----------
Total noninterest income.............................. 123,925 148,349 399,949 432,455
-------- -------- ---------- ----------
NONINTEREST EXPENSE
Salaries and employee benefits............................ 159,680 165,458 459,592 500,140
Net occupancy............................................. 23,590 22,895 67,294 67,273
Equipment................................................. 14,039 19,389 41,842 49,405
Merchant transaction processing........................... 11,415 12,905 33,008 37,773
Professional services..................................... 9,285 8,440 25,186 29,426
Communications............................................ 9,834 10,666 31,515 31,217
Data processing........................................... 7,327 7,797 20,462 23,459
Advertising and public relations.......................... 8,066 7,845 22,419 23,341
Foreclosed asset income................................... (325) (703) (746) (1,256)
Restructuring charge...................................... -- 85,000 -- 85,000
Other..................................................... 47,467 46,599 135,606 151,088
-------- -------- ---------- ----------
Total noninterest expense............................. 290,378 386,291 836,178 996,866
-------- -------- ---------- ----------
Income before income taxes................................ 160,180 102,071 498,410 447,586
Income tax expense........................................ 11,913 30,490 146,045 142,783
-------- -------- ---------- ----------
NET INCOME.................................................. $148,267 $ 71,581 $ 352,365 $ 304,803
======== ======== ========== ==========
NET INCOME PER COMMON SHARE--BASIC.......................... $ 0.85 $ 0.43 $ 2.01 $ 1.83
======== ======== ========== ==========
NET INCOME PER COMMON SHARE--DILUTED........................ $ 0.84 $ 0.43 $ 2.01 $ 1.82
======== ======== ========== ==========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING--BASIC........... 175,188 164,616 175,091 166,984
======== ======== ========== ==========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING--DILUTED......... 175,792 165,472 175,729 167,699
======== ======== ========== ==========
</TABLE>

See accompanying notes to condensed consolidated financial statements.

4
<PAGE>
UNIONBANCAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
(UNAUDITED) (UNAUDITED)
SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30,
(DOLLARS IN THOUSANDS) 1998 1998 1999
- ------------------------------------------------------------ -------------- ------------- --------------
<S> <C> <C> <C>
ASSETS
Cash and due from banks..................................... $ 2,211,595 $ 2,135,380 $ 2,209,694
Interest bearing deposits in banks.......................... 133,165 209,568 194,535
Federal funds sold and securities purchased under resale
agreements................................................ 629,784 333,530 371,523
----------- ----------- -----------
Total cash and cash equivalents......................... 2,974,544 2,678,478 2,775,752
Trading account assets...................................... 357,515 267,718 245,762
Securities available for sale............................... 3,200,376 3,638,532 3,096,494
Securities held to maturity (market value: September 30,
1998, $165,807; December 31, 1998, $163,244;
September 30, 1999, $86,611).............................. 162,018 160,513 87,221
Loans (net of allowance for credit losses: September 30,
1998, $473,717; December 31, 1998, $459,328;
September 30, 1999, $457,429)............................. 23,024,128 23,836,783 24,728,253
Due from customers on acceptances........................... 464,581 489,480 272,009
Premises and equipment, net................................. 407,863 421,091 437,083
Other assets................................................ 816,293 783,721 875,461
----------- ----------- -----------
Total assets............................................ $31,407,318 $32,276,316 $32,518,035
=========== =========== ===========
LIABILITIES
Domestic deposits:
Noninterest bearing....................................... $ 9,427,080 $ 9,919,316 $ 9,484,156
Interest bearing.......................................... 12,379,167 12,609,565 13,667,733
Foreign deposits:
Noninterest bearing....................................... 247,038 260,089 270,765
Interest bearing.......................................... 1,609,844 1,718,909 1,753,267
----------- ----------- -----------
Total deposits.......................................... 23,663,129 24,507,879 25,175,921

Federal funds purchased and securities sold under repurchase
agreements................................................ 1,574,163 1,307,744 651,170
Commercial paper............................................ 1,417,077 1,444,745 1,479,939
Other borrowed funds........................................ 339,340 331,165 629,891
Acceptances outstanding..................................... 464,581 489,480 272,009
Other liabilities........................................... 666,078 839,059 743,522
Subordinated capital notes.................................. 298,000 298,000 298,000
UnionBanCal Corporation--obligated mandatorily redeemable
preferred securities of subsidiary grantor trust.......... -- -- 350,000
----------- ----------- -----------
Total liabilities....................................... 28,422,368 29,218,072 29,600,452
----------- ----------- -----------
Commitments and contingencies

SHAREHOLDERS' EQUITY
Preferred stock:
Authorized 5,000,000 shares, no shares issued or
outstanding as of September 30, 1998, December 31, 1998,
and September 30, 1999.................................. -- -- --
Common stock--no stated value:
Authorized 300,000,000 shares, issued 175,208,037 shares
as of September 30, 1998, 175,259,919 shares as of
December 31, 1998, and 164,624,258 shares as of
September 30, 1999...................................... 1,722,552 1,725,619 1,416,680
Retained earnings........................................... 1,233,068 1,314,915 1,528,546
Accumulated other comprehensive income (loss)............... 29,330 17,710 (27,643)
----------- ----------- -----------
Total shareholders' equity.............................. 2,984,950 3,058,244 2,917,583
----------- ----------- -----------
Total liabilities and shareholders' equity.............. $31,407,318 $32,276,316 $32,518,035
=========== =========== ===========
</TABLE>

See accompanying notes to condensed consolidated financial statements.

5
<PAGE>
UNIONBANCAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(UNAUDITED)

<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
---------------------------------------------
(DOLLARS IN THOUSANDS) 1998 1999
- ------------------------------------------------- --------------------- ---------------------
<S> <C> <C> <C> <C>
COMMON STOCK
Balance, beginning of period..................... $1,714,209 $1,725,619
Dividend reinvestment plan....................... 16 39
Deferred compensation--restricted stock awards... 5,498 (78)
Stock options exercised.......................... 2,829 2,638
Common stock repurchased......................... -- (311,538)
---------- ----------
Balance, end of period......................... $1,722,552 $1,416,680
---------- ----------
RETAINED EARNINGS
Balance, beginning of period..................... $ 957,662 $1,314,915
Net income....................................... 352,365 $352,365 304,803 $304,803
Dividends on common stock(1)..................... (73,632) (93,820)
Deferred compensation--restricted stock awards... (3,327) 2,648
---------- ----------
Balance, end of period......................... $1,233,068 $1,528,546
---------- ----------
ACCUMULATED OTHER COMPREHENSIVE INCOME
Balance, beginning of period..................... $ 7,428 $ 17,710
Unrealized holding gains (losses) arising during
the period on securities available for sale,
net of tax expense (benefit) of $15,766 and
$(26,878) in the first nine months of 1998 and
1999, respectively............................. 25,612 (43,391)
Less: reclassification adjustment for gains on
securities available for sale included in net
income, net of tax expense of $1,960 and $1,491
in the first nine months of 1998 and 1999,
respectively................................... (3,619) (2,408)
-------- --------
Net unrealized losses on securities available for
sale........................................... 21,993 (45,799)
Foreign currency translation adjustment, net of
tax benefit of $62 and $138 in the first nine
months of 1998 and 1999, respectively.......... (91) (223)
Minimum pension liability adjustment, net of tax
expense of $373 in the first nine months of
1999........................................... -- 669
-------- --------
Other comprehensive income (loss)................ 21,902 21,902 (45,353) (45,353)
---------- -------- ---------- --------
Total comprehensive income....................... $374,267 $259,450
======== ========
Balance, end of period......................... $ 29,330 $ (27,643)
========== ==========
TOTAL SHAREHOLDERS' EQUITY................... $2,984,950 $2,917,583
========== ==========
</TABLE>

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

(1) Dividends per share were $0.42 and $0.57 for the first nine months of 1998
and 1999, respectively. Dividends are based on UnionBanCal Corporation's
shares outstanding as of the declaration date.

See accompanying notes to condensed consolidated financial statements.

6
<PAGE>
UNIONBANCAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED SEPTEMBER 30,
------------------------
(DOLLARS IN THOUSANDS) 1998 1999
- ------------------------------------------------------------ ----------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................ $ 352,365 $ 304,803
Adjustments to reconcile net income to net cash provided
by operating activities:
Provision for credit losses............................. 45,000 35,000
Depreciation, amortization and accretion................ 50,528 58,424
Provision (benefit) for deferred income taxes........... 7,409 (17,555)
Gain on sales of securities available for sale.......... (5,579) (3,899)
Merger and integration costs less than cash utilized.... (12,350) (2,382)
Restructuring charge in excess of cash utilized......... -- 82,577
Net decrease in trading account assets.................. 36,798 21,956
Other, net.............................................. (24,839) (200,671)
----------- ----------
Total adjustments....................................... 96,967 (26,550)
----------- ----------
Net cash provided by operating activities................. 449,332 278,253
----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of securities available for sale...... 418,456 203,084
Proceeds from matured and called securities available for
sale.................................................... 196,358 636,916
Purchases of securities available for sale................ (1,253,529) (364,440)
Proceeds from matured and called securities held to
maturity................................................ 26,960 73,475
Net increase in loans..................................... (797,343) (956,464)
Other, net................................................ (42,032) (67,867)
----------- ----------
Net cash used by investing activities................... (1,451,130) (475,296)
----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits.................................. 366,755 668,042
Net increase (decrease) in federal funds purchased and
securities sold under repurchase agreements............. 238,279 (656,574)
Net increase in commercial paper and other borrowed
funds................................................... 313,832 333,920
Maturity and redemption of subordinated debt.............. (50,000) --
Common stock repurchased.................................. -- (311,538)
Proceeds from issuance of UnionBanCal
Corporation--obligated mandatorily redeemable preferred
securities of subsidiary grantor trust.................. -- 350,000
Dividends paid............................................ (73,631) (95,840)
Other, net................................................ 2,471 2,454
----------- ----------
Net cash provided by financing activities............... 797,706 290,464
----------- ----------
Net increase (decrease) in cash and cash equivalents........ (204,092) 93,421
Cash and cash equivalents at beginning of period............ 3,199,455 2,678,478
Effect of exchange rate changes on cash and cash
equivalents............................................... (20,819) 3,853
----------- ----------
Cash and cash equivalents at end of period.................. $ 2,974,544 $2,775,752
=========== ==========
CASH PAID DURING THE PERIOD FOR:
Interest.................................................. $ 588,487 $ 508,921
Income taxes.............................................. 189,411 75,180
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING
ACTIVITIES:
Loans transferred to foreclosed assets (OREO)............. $ 13,882 $ 5,039
Dividends declared but unpaid............................. 24,529 31,279
</TABLE>

See accompanying notes to condensed consolidated financial statements.

7
<PAGE>
UNIONBANCAL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 1999
(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
generally accepted accounting principles (GAAP) for interim financial reporting
and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. However,
they do not include all of the disclosures necessary for annual financial
statements in conformity with GAAP. The results of operations for the period
ended September 30, 1999 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, 1998. The preparation of financial statements in
conformity with 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.

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

NOTE 2--RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for
Derivative Instruments and Hedging Activities". The Statement will require the
Company to recognize all derivatives on the balance sheet at fair value. SFAS
No. 133 requires that derivative instruments used to hedge be identified
specifically to assets, liabilities, firm commitments or anticipated
transactions and measured as to effectiveness and ineffectiveness when hedging
changes in fair value or cash flows. Derivative instruments that do not qualify
as either a fair value or cash flow hedge will be valued at fair value with the
resultant gain or loss recognized in current earnings. Changes in the effective
portion of fair value hedges will be recognized in current earnings along with
the change in fair value of the hedged item. Changes in the effective portion of
the fair value of cash flow hedges will be recognized in other comprehensive
income until realization of the cash flows of the hedged item through current
earnings. Any ineffective portion of hedges will be recognized in current
earnings. In June 1999, the FASB issued SFAS No. 137, "Deferral of the Effective
Date of FASB Statement No. 133", to defer for one year the effective date of
implementation of SFAS No. 133. SFAS No. 133, as amended by SFAS No. 137, is
effective for fiscal years beginning after June 15, 2000, with earlier
application encouraged. Management believes that, depending upon the accumulated
net gain or loss of the effective portion of cash flow hedges at the date of
adoption, the impact of SFAS No. 133 could have a material impact on other
comprehensive income. However, management believes that any ineffective portion
of cash flow hedges or any other hedges will not have a material impact on the
Company's financial position or results of operations. The Company expects to
adopt SFAS No. 133 as of January 1, 2001.

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

8
<PAGE>
UNIONBANCAL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

SEPTEMBER 30, 1999
(UNAUDITED)

NOTE 3--EARNINGS PER SHARE (CONTINUED)

equivalent. The following table presents a reconciliation of basic and diluted
EPS for the three months and nine months ended September 30, 1998 and 1999:

<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
----------------------------------------- -----------------------------------------
1998 1999 1998 1999
------------------- ------------------- ------------------- -------------------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA) BASIC DILUTED BASIC DILUTED BASIC DILUTED BASIC DILUTED
- --------------------------------------------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Income............................. $148,267 $148,267 $ 71,581 $ 71,581 $352,365 $352,365 $304,803 $304,803
======== ======== ======== ======== ======== ======== ======== ========
Weighted average common shares outstanding... 175,188 175,188 164,616 164,616 175,091 175,091 166,984 166,984
Additional shares due to:
Assumed conversion of dilutive stock
options............................ -- 604 -- 856 -- 638 -- 715
-------- -------- -------- -------- -------- -------- -------- --------
Adjusted weighted average common shares
outstanding.......................... 175,188 175,792 164,616 165,472 175,091 175,729 166,984 167,699
======== ======== ======== ======== ======== ======== ======== ========
Net income per share................... $ 0.85 $ 0.84 $ 0.43 $ 0.43 $ 2.01 $ 2.01 $ 1.83 $ 1.82
======== ======== ======== ======== ======== ======== ======== ========
</TABLE>

NOTE 4--COMPREHENSIVE INCOME

The following table presents a summary of the components of accumulated other
comprehensive income (loss):

<TABLE>
<CAPTION>
NET
UNREALIZED GAINS
(LOSSES) ON FOREIGN ACCUMULATED
SECURITIES CURRENCY MINIMUM PENSION OTHER COMPREHENSIVE
AVAILABLE FOR SALE TRANSLATION LIABILITY ADJUSTMENT INCOME (LOSS)
--------------------- --------------------- --------------------- -----------------------
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
-----------------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS) 1998 1999 1998 1999 1998 1999 1998 1999
- ------------------------------ --------- --------- --------- --------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Beginning balance............. $19,886 $ 29,109 $(12,458) $(9,651) $ -- $(1,748) $ 7,428 $ 17,710
Change during the period...... 21,993 (45,799) (91) (223) -- 669 21,902 (45,353)
------- -------- -------- ------- ------ ------- ------- --------
Ending balance................ $41,879 $(16,690) $(12,549) $(9,874) $ -- $(1,079) $29,330 $(27,643)
======= ======== ======== ======= ====== ======= ======= ========
</TABLE>

NOTE 5--BUSINESS SEGMENTS

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

- - The Community Banking Group provides loan products and deposit services
primarily to consumers and small businesses.

- - The Commercial Financial Services Group provides a wide variety of banking
services, principally loans, to commercial customers.

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

- - The Trust and Private Financial Services Group principally provides
fiduciary, private banking, investment and asset management services for
individuals and institutions.

9
<PAGE>
UNIONBANCAL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

SEPTEMBER 30, 1999
(UNAUDITED)

NOTE 5--BUSINESS SEGMENTS (CONTINUED)

- - The Global Markets Group manages the Company's securities portfolio, trading
operations, wholesale funding needs, and interest rate and liquidity risk.

The information set forth in the tables that follow reflect selected income
statement items and a selected balance sheet item 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 GAAP. Consequently, reported
results are not necessarily comparable with those presented by other companies.

During the third quarter of 1999, the Company adopted a risk-adjusted return
on capital (RAROC) methodology. As a result, all prior periods have been
restated to reflect the change.

"Other" is comprised of goodwill, certain parent company non-bank
subsidiaries, the elimination of the fully taxable-equivalent amounts, the
unallocated allowance and related provision for credit losses, the earnings
associated with the unallocated equity capital, the residual costs of support
groups, and restructuring charges. In addition, it includes two units, the
Credit and Compliance Group, which manages nonperforming assets, and the Pacific
Rim Corporate Group, which offers financial products to Asian-owned subsidiaries
located in the U.S. On an individual basis, none of the items in "Other" are
significant to our business.

<TABLE>
<CAPTION>
TRUST AND
COMMERCIAL PRIVATE
COMMUNITY FINANCIAL INTERNATIONAL FINANCIAL
BANKING GROUP SERVICES GROUP BANKING GROUP SERVICES
------------------- ------------------- ------------------- -------------------
FOR THE THREE MONTHS ENDED SEPTEMBER 30,
-------------------------------------------------------------------------------------
1998 1999 1998 1999 1998 1999 1998 1999
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS (DOLLARS IN
THOUSANDS):
Total revenue(1).......................... $204,256 $223,154 $136,567 $173,247 $30,536 $27,557 $53,090 $60,372
Net income (loss)......................... $ 26,449 $ 33,612 $ 34,649 $ 55,926 $ 6,109 $ 4,680 $ 9,856 $11,542
Total assets at period end (dollars
in millions)............................ $ 9,913 $ 9,816 $ 12,634 $ 15,104 $ 1,616 $ 1,358 $ 634 $ 954
</TABLE>

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

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

10
<PAGE>
UNIONBANCAL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

SEPTEMBER 30, 1999
(UNAUDITED)

NOTE 5--BUSINESS SEGMENTS (CONTINUED)

<TABLE>
<CAPTION>
COMMERCIAL
COMMUNITY FINANCIAL INTERNATIONAL TRUST AND PRIVATE
BANKING GROUP SERVICES GROUP BANKING GROUP FINANCIAL SERVICES
------------------- ------------------- ------------------- -------------------
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------------------------------------------------------------
1998 1999 1998 1999 1998 1999 1998 1999
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS (DOLLARS IN
THOUSANDS):
Total revenue (1)......................... $622,423 $643,138 $413,164 $494,344 $92,490 $87,545 $150,212 $169,290
Net income (loss)......................... $ 85,059 $ 86,916 $111,387 $153,007 $18,096 $15,456 $ 25,802 $ 27,973
</TABLE>

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

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

NOTE 6--RESTRUCTURING CHARGE

A restructuring charge of $85 million was recorded in the third quarter of
1999. The restructuring charge was incurred in connection with a company-wide
project referred to as "Mission Excel". Mission Excel is an initiative to slow
the rate of growth of expenses, increase sustainable growth in revenues, and
increase productivity through elimination of unnecessary or duplicate functions.
The restructuring charge includes only direct and incremental costs associated
with the project. The table below provides details of the restructuring related
liability.

Personnel expense consists of severance and related benefits to be paid
under the Company's enhanced severance plans. At the completion of Mission
Excel, the Company expects to terminate 1,400 employees. As of September 30,
1999, 247 employees were terminated under the separation plan. Occupancy and
other consists of lease termination costs and professional services costs
incurred during the assessment phase of the project.

<TABLE>
<CAPTION>
PERSONNEL OCCUPANCY
EXPENSE AND OTHER TOTAL
--------- --------- --------
<S> <C> <C> <C>
Balances at June 30, 1999................................... $ -- $ -- $ --
Restructuring charge........................................ 70,000 15,000 85,000
Utilization................................................. 2,404 76 2,480
Balances at September 30, 1999.............................. $67,596 $14,924 $82,520
</TABLE>

11
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

THIS DOCUMENT CONTAINS FORWARD-LOOKING STATEMENTS THAT ARE SUBJECT TO RISKS
AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM
THOSE INDICATED. FOR A DISCUSSION OF FACTORS THAT COULD CAUSE ACTUAL RESULTS TO
DIFFER, PLEASE SEE THE DISCUSSION CONTAINED HEREIN ON PAGE 39 AND IN OUR
PUBLICLY AVAILABLE SECURITIES AND EXCHANGE COMMISSION FILINGS AND PRESS
RELEASES.

INTRODUCTION

We are a California-based commercial bank holding company with consolidated
assets of $32.5 billion at September 30, 1999. Our wholly-owned subsidiary,
Union Bank of California, N.A., is the third largest commercial bank in
California, based on total assets and total deposits in California, and one of
the 30 largest commercial banks in the United States. At September 30, 1999, we
operated 241 banking offices in California, 6 banking offices in Oregon and
Washington, and 18 overseas facilities. At September 30, 1999, we were
64 percent owned by The Bank of Tokyo-Mitsubishi, Ltd. and 36 percent owned by
other shareholders.

Our interim financial information should be read in conjunction with our
Form 10-K for the year ended December 31, 1998. Certain amounts for prior
periods have been reclassified to conform to current financial statement
presentation.

To facilitate the discussion of the results of operations, the Consolidated
Financial Highlights on pages 2 and 3 include certain pro forma earnings
disclosures and ratios. These presentations supplement the Consolidated
Statements of Income on page 4, which are prepared in accordance with generally
accepted accounting principles (GAAP), primarily with respect to the treatment
of the restructuring charge recorded in the third quarter of 1999 and the
reduction in California Franchise Tax liability recognized in the third quarter
of 1998. We believe that it is meaningful to understand the operating results
and trends excluding these expenses and, therefore in the discussions that
follow, we have presented our income before restructuring charge and income
taxes and related pro form ratios and per share calculations.

SUMMARY

COMPARISON OF THREE MONTHS ENDED SEPTEMBER 30, 1998 AND SEPTEMBER 30, 1999

Reported net income was $148.3 million, or $0.84 per diluted common share,
in the third quarter of 1998, compared with $71.6 million, or $0.43 per diluted
common share, in the third quarter of 1999. Excluding the effects of the
$85 million restructuring charge ($55.2 million net of tax), which was recorded
in the third quarter of 1999, and the effects of the $44.8 million in reduced
California Franchise Tax liabilities, which was recorded in the third quarter of
1998, pro forma net earnings were $103.5 million, or $0.59 per diluted common
share, in the third quarter of 1998, compared to $126.8 million, or $0.77 per
diluted common share, in the third quarter of 1999. This increase in pro forma
diluted earnings per share of 31 percent over the third quarter of 1998 was due
to a $24.4 million, or 20 percent, increase in noninterest income, a
$23.1 million, or 7 percent, increase in net interest income (on a
taxable-equivalent basis), and a 3 percentage point decrease in the effective
tax rate, partially offset by a $10.0 million increase in provision for credit
losses and a $10.9 million, or 4 percent, increase in noninterest expense. Other
highlights of the third quarter of 1999 include:

- Net interest income, on a taxable-equivalent basis, was $360.8 million in
the third quarter of 1999, an increase of $23.1 million, or 7 percent,
over the third quarter of 1998. Net interest margin in the third quarter
of 1999 was 4.93 percent, an increase of 9 basis points from the third
quarter of 1998.

- Noninterest income was $148.3 million in the third quarter of 1999, an
increase of $24.4 million, or 20 percent, from the third quarter of 1998.
Service charges on deposit accounts grew

12
<PAGE>
$9.7 million, or 27 percent, trust and investment management fees rose
$5.6 million, or 18 percent, merchant transaction processing fees
increased $3.7 million, or 25 percent, and brokerage commissions and fees
increased $2.4 million, or 51 percent. These increases were partially
offset by a decrease in other noninterest income of $2.7 million, or
21 percent.

- A provision for credit losses of $10.0 million was recorded in the third
quarter of 1998, compared with $20.0 million in the third quarter of
1999. This resulted from management's regular assessment of overall
credit quality, loan portfolio composition and growth and economic
conditions in relation to the level of the allowance for credit losses.
The allowance for credit losses was $473.7 million, or 697 percent of
total nonaccrual loans, at September 30, 1998, compared with
$457.4 million, or 295 percent of total nonaccrual loans, at
September 30, 1999.

- Noninterest expense (excluding the restructuring charge) was
$301.3 million in the third quarter of 1999, an increase of
$10.9 million, or 4 percent, over the third quarter of 1998. Personnel-
related expense increased $5.8 million, or 4 percent, equipment expense
increased $5.4 million, or 38 percent, merchant transaction processing
fees increased $1.5 million, or 13 percent, communications expense
increased $0.8 million, or 8 percent, partially offset by decreased
printing and office supplies expense of $1.2 million, or 19 percent,
lower professional services expense of $0.8 million, or 9 percent and
lower net occupancy expense of $0.7 million, or 3 percent.

- Our pro forma effective tax rate for the third quarter of 1998 was 35%,
(7% including the effect of the tax adjustment discussed above), compared
with 32% (30% excluding the effect of the restructuring charge) for the
third quarter of 1999. The 1998 third quarter adjustment reflected a
$44.8 million reduction in our California Franchise Tax liability for tax
years 1997 and 1998 arising from the filing of a tax return on a
worldwide unitary reporting basis that incorporates the results of our
majority shareholder, The Bank of Tokyo-Mitsubishi, Ltd. and its
worldwide affiliates. The effective tax rate in the third quarter of
1999, compared to the pro forma 1998 rate for the same period is lower
due to a $4.4 million tax benefit resulting from a California Franchise
Tax Board audit settlement.

- Reported return on average assets was .89 percent and return on average
common equity was 9.70 percent for the quarter ending September 30, 1999.
In the third quarter of 1999, our pro forma return on average assets
increased to 1.57 percent from 1.33 percent a year earlier, and our pro
forma return on average common equity increased to 17.17 percent from
14.32 percent a year earlier.

- Total loans at September 30, 1999 were $25.2 billion, an increase of
$1.7 billion, or 7 percent, over September 30, 1998.

- Nonperforming assets increased $76.9 million, or 94 percent, from
September 30, 1998 to $158.3 million at September 30, 1999. Nonperforming
assets as a percentage of total assets increased to 0.49 percent at
September 30, 1999, compared with 0.26 percent one year earlier. Total
nonaccrual loans were $67.9 million at September 30, 1998, compared with
$154.9 million at September 30, 1999, resulting in an increase in the
ratio of nonaccrual loans to total loans from 0.29 percent at
September 30, 1998 to 0.62 percent at September 30, 1999.

- Our Tier 1 and total risk-based capital ratios were 9.53 percent and
11.51 percent, respectively, at September 30, 1998, compared with
9.94 percent and 11.81 percent, respectively, at September 30, 1999. Our
leverage ratio was 9.37 percent at September 30, 1998 compared with
10.06 percent at September 30, 1999.

13
<PAGE>
COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 1998 AND SEPTEMBER 30, 1999

Reported net income was $352.4 million, or $2.01 per diluted common share,
for the first nine months of 1998, compared with $304.8 million, or $1.82 per
diluted common share, for the first nine months of 1999. Excluding the
previously discussed effects of the $85 million restructuring charge
($55.2 million net of tax), which was recorded in the third quarter of 1999, and
the effects of the $44.8 million in reduced California Franchise Tax liabilities
(related to tax years 1997 and 1998, $29.2 million and $15.6 million,
respectively), which was recorded in the third quarter of 1998, pro forma net
earnings were $307.5 million, or $1.75 per diluted common share, for the first
nine months of 1998, compared to $360.0 million, or $2.15 per diluted common
share, for the first nine months of 1999. This increase in pro forma diluted
earnings per share of 23 percent over the first nine months of 1998 was due to a
$66.4 million, or 7 percent, increase in net interest income, a $32.5 million,
or 8 percent, increase in noninterest income, a $10.0 million, or 22 percent,
decrease in the provision for credit losses, and a 2.8 percentage point decrease
in the pro forma effective income tax rate, partially offset by a
$75.7 million, or 9 percent, increase in noninterest expense. Other highlights
from the first nine months of 1999 include:

- Net interest income, on a taxable-equivalent basis, was $1,049.5 million
for the first nine months of 1999, an increase of $66.4 million, or
7 percent, over the first nine months of 1998. Net interest margin for
the first nine months of 1999 was 4.86 percent, consistent with the first
nine months of 1998.

- Noninterest income was $432.5 million for the first nine months of 1999,
an increase of $32.5 million, or 8 percent, over the first nine months of
1998. Excluding a $17.1 million pre-tax gain ($10.3 million after tax)
from the sale of our $253 million credit card portfolio in April 1998,
noninterest income increased $49.6 million, or 13 percent, over the first
nine months of 1998. Service charges on deposit accounts grew
$26.7 million, or 26 percent, trust and investment management fees
increased $13.8 million, or 16 percent, merchant transaction processing
fees increased $8.3 million, or 19 percent, and brokerage commissions and
fees increased $4.6 million, or 33 percent. These increases were
partially offset by a decrease in other noninterest income (excluding the
$17.1 million impact of the credit card portfolio sale) of $4.3 million,
or 8 percent, and a decrease in net securities gain of $1.7 million, or
30 percent.

- A provision for credit losses of $35.0 million was recorded for the first
nine months of 1999, compared with $45.0 million for the first nine
months of 1998. This resulted from management's regular assessment of
overall credit quality, loan portfolio composition and growth and
economic conditions in relation to the level of the allowance for credit
losses.

- Noninterest expense, excluding the restructuring charge, was
$911.9 million for the first nine months of 1999, an increase of
$75.7 million, or 9 percent, over the first nine months of 1998.
Personnel-related expense increased $40.5 million, or 9 percent,
equipment expense increased $7.6 million, or 18 percent, merchant
transaction processing fees increased $4.8 million, or 14 percent, data
processing expense increased $3.0 million, or 15 percent, advertising and
public relations expenses increased $0.9 million, or 4 percent, and other
noninterest expense increased $15.5 million, or 11 percent.

- Our pro forma effective tax rate for the first nine months of 1998 was
35 percent (excluding the effects of California Franchise Tax liability
reduction discussed above), compared with 32 percent for the first nine
months of 1999. In March of 1999, we recognized a tax benefit of
$6.3 million as the result of an Internal Revenue Service (IRS)
settlement of refund claims we filed for the years 1992 through 1994 and
in September 1999, we recognized a tax benefit of $4.4 million as the
result of the California Franchise Tax board audit settlement discussed
above. Excluding the combined $10.7 million in tax benefits, our
effective tax rate would have been 34 percent for the first nine months
of 1999.

14
<PAGE>
- Reported return on average assets for the first nine months of 1999 was
1.28%, while reported return on average common equity for the same period
was 13.90%. Our pro forma return on average assets for the first nine
months of 1999 increased to 1.51 percent, compared to 1.36 percent for
the first nine months of 1998. Our pro forma return on average common
equity for the first nine months of 1999 increased to 16.42 percent,
compared to 14.72 percent for the first nine months of 1998.

MISSION EXCEL

During the second quarter of 1999 we began a project, which we refer to as
"Mission Excel." Mission Excel is a company-wide initiative to slow the rate of
growth of our expenses, increase sustainable growth in our revenues, and
increase productivity through elimination of unnecessary or duplicate functions.
The goal of this project is to help us achieve an efficiency ratio of 54% to 56%
by the fourth quarter 2000. Project Mission Excel has been a full-time effort on
the part of many of our most senior staff who solicited and reviewed all ideas
submitted.

The first phase of the Mission Excel project was the development of an
implementation plan. The implementation plan was finalized and approved by our
Board of Directors on August 13, 1999. Implementation of the Mission Excel
project, which will be overseen by dedicated senior staff, is expected to be
complete in the first quarter of 2001.

In connection with Mission Excel, we incurred an $85 million restructuring
charge in the third quarter of 1999. The charge consists of $70 million in
personnel expense for an estimated 1,400 employees to be terminated under the
plan. The remaining $15 million relates to lease termination costs for eight
facilities that will be vacated and professional services cost incurred in
connection with Mission Excel. The projected annualized financial impact
(pre-tax) of Mission Excel is expected to be $225 million, which is comprised of
$90 million of additional revenues and $135 million of reduced expenses.

At the completion of the plan, we expect to terminate approximately 1,400
employees. During the period from August 16, 1999 to September 30, 1999, 247
employees were terminated under our separation plan.

The following table presents the restructuring liability for the period, the
cash and noncash utilization of the liability, and the resulting balance as of
September 30, 1999.

<TABLE>
<CAPTION>
TOTAL
--------
<S> <C>
Balance at June 30, 1999.................................... $ --
Restructuring charge........................................ 85,000
Utilization for the period:
Cash...................................................... 2,423
Noncash................................................... 57
-------
Balance at September 30, 1999............................... $82,520
</TABLE>

BUSINESS SEGMENTS

We segregate our operations into five primary business units for the purpose
of management reporting: Community Banking Group, Commercial Financial Services
Group, International Banking Group, Trust and Private Financial Services Group
and Global Markets Group.

During 1999, we introduced a new method for measuring the contribution
provided by each of our business units. The Risk Adjusted Return on Capital
(RAROC) methodology 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

15
<PAGE>
interest rates, currency rates and volatilities. Operational risk is the
potential loss due to failures in internal controls, system failures, or
external events.

The following table reflects the condensed income statements, selected
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. Unlike financial accounting, there is no authoritative
body of guidance for management accounting equivalent to GAAP. Consequently,
reported results are not necessarily comparable with those presented by other
companies.

The significant changes in the RAROC measurement methodology concern the
recognition of credit expense for expected losses arising from credit risk and
the attribution of economic capital related to unexpected losses arising from
credit, market and operational risks. Business unit results are based on an
internal management reporting system used by management to measure the
performance of the units and UnionBanCal as a whole. The 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.

We have restated the business units' results for the prior periods to
reflect the new RAROC methodology, as well as any reorganizational changes that
have occurred.

<TABLE>
<CAPTION>
TRUST AND
COMMERCIAL PRIVATE
COMMUNITY FINANCIAL INTERNATIONAL FINANCIAL
BANKING GROUP SERVICES GROUP BANKING GROUP SERVICES GROUP
------------------- ------------------- ------------------- -------------------
FOR THE THREE MONTHS ENDED SEPTEMBER 30,
-------------------------------------------------------------------------------------
1998 1999 1998 1999 1998 1999 1998 1999
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS (DOLLARS IN
THOUSANDS):
Net interest income..................... $161,003 $171,976 $116,911 $143,059 $14,170 $11,644 $13,310 $15,296
Noninterest income...................... 43,253 51,178 19,656 30,188 16,366 15,913 39,780 45,076
-------- -------- -------- -------- ------- ------- ------- -------
Total revenue........................... 204,256 223,154 136,567 173,247 30,536 27,557 53,090 60,372

Noninterest expense(3).................. 146,294 153,928 62,317 63,309 15,905 16,323 36,581 40,840
Credit expense (income)................. 15,523 15,403 18,823 24,300 3,631 3,338 542 676
-------- -------- -------- -------- ------- ------- ------- -------
Income (loss) before income tax expense
(benefit) and performance center
earnings (expense).................... 42,439 53,823 55,427 85,638 11,000 7,896 15,967 18,856
Performance center earnings
(expense)(1).......................... 2,215 1,276 700 381 (653) (246) 70 37
-------- -------- -------- -------- ------- ------- ------- -------
Income (loss) before income tax expense
(benefit)............................. 44,654 55,099 56,127 86,019 10,347 7,650 16,037 18,893
Income tax expense (benefit)............ 18,205 21,487 21,478 30,093 4,238 2,970 6,181 7,351
-------- -------- -------- -------- ------- ------- ------- -------
Net income (loss)....................... $ 26,449 $ 33,612 $ 34,649 $ 55,926 $ 6,109 $ 4,680 $ 9,856 $11,542
======== ======== ======== ======== ======= ======= ======= =======
AVERAGE BALANCES (DOLLARS IN MILLIONS):
Total loans before performance
centers(2)............................ $ 8,990 $ 8,814 $ 11,502 $ 13,920 $ 1,340 $ 1,017 $ 514 $ 644
Total assets............................ 9,911 9,789 12,708 15,240 1,990 1,540 602 787
Total deposits before performance
centers(2)............................ 12,522 13,412 5,506 5,567 835 840 1,156 1,255
FINANCIAL RATIOS:
Return on risk adjusted capital......... 20% 25% 15% 18% 17% 16% 38% 34%

Return on average assets................ 1.06 1.36 1.08 1.46 1.22 1.21 6.50 5.82
Efficiency ratio before performance
centers............................... 71.62 68.98 45.63 36.54 52.09 59.23 68.90 67.65
</TABLE>

16
<PAGE>

<TABLE>
<CAPTION>
GLOBAL UNIONBANCAL
MARKETS GROUP OTHER CORPORATION
------------------- ------------------- -------------------
FOR THE THREE MONTHS ENDED SEPTEMBER 30,
---------------------------------------------------------------
1998 1999 1998 1999 1998 1999
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS (DOLLARS IN THOUSANDS):
Net interest income....................................... $10,316 $ 9,545 $ 20,923 $ 8,493 $336,633 $360,013
Noninterest income........................................ 7,662 6,324 (2,792) (330) 123,925 148,349
------- ------- -------- -------- -------- --------
Total revenue............................................. 17,978 15,869 18,131 8,163 460,558 508,362
Noninterest expense(3).................................... 6,259 5,224 23,022 106,667 290,378 386,291
Credit expense (income)................................... -- -- (28,519) (23,717) 10,000 20,000
------- ------- -------- -------- -------- --------
Income (loss) before income tax expense (benefit) and
performance center earnings (expense)................... 11,719 10,645 23,628 (74,787) 160,180 102,071
Performance center earnings (expense)(1).................. (2,574) (1,903) 242 455 -- --
------- ------- -------- -------- -------- --------
Income (loss) before income tax expense (benefit)......... 9,145 8,742 23,870 (74,332) 160,180 102,071
Income tax expense (benefit).............................. 3,677 3,391 (41,866) (34,802) 11,913 30,490
------- ------- -------- -------- -------- --------
Net income (loss)......................................... $ 5,468 $ 5,351 $ 65,736 $(39,530) $148,267 $ 71,581
======= ======= ======== ======== ======== ========
AVERAGE BALANCES (DOLLARS IN MILLIONS):
Total loans before performance centers(2)................. $ -- $ -- $ 1,087 $ 758 $ 23,433 $ 25,153
Total assets.............................................. 4,249 3,615 1,303 1,068 30,763 32,039
Total deposits before performance centers(2).............. 2,524 2,823 28 29 22,571 23,926
FINANCIAL RATIOS:
Return on risk adjusted capital........................... 14% 15% na na na na
Return on average assets.................................. 0.51 0.59 na na 1.91% 0.89%
Efficiency ratio before performance centers............... 34.81 32.92 na na 62.97 76.01
</TABLE>

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

(1) Performance center earnings (expense) represent the allocation of net
interest income, noninterest income and noninterest expense between the
business segments for products and services originated in one segment but
managed by another segment.

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

(3) "Other" includes 3rd quarter 1999 restructuring charge of $85.0 million
($55.2 million, net of tax).

na = not applicable

<TABLE>
<CAPTION>
COMMERCIAL TRUST AND PRIVATE
COMMUNITY FINANCIAL INTERNATIONAL FINANCIAL SERVICES
BANKING GROUP SERVICES GROUP BANKING GROUP GROUP
------------------- ------------------- ------------------- -------------------
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------------------------------------------------------------
1998 1999 1998 1999 1998 1999 1998 1999
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS (DOLLARS IN
THOUSANDS):
Net interest income..................... $483,614 $500,026 $333,519 $408,582 $42,732 $36,834 $ 40,134 $ 43,580
Noninterest income...................... 138,809 143,112 79,645 85,762 49,758 50,711 110,078 125,710
-------- -------- -------- -------- ------- ------- -------- --------
Total revenue........................... 622,423 643,138 413,164 494,344 92,490 87,545 150,212 169,290
Noninterest expense(3).................. 437,000 460,513 180,324 194,444 48,765 50,826 106,932 121,993
Credit expense (income)................. 49,911 45,182 52,395 64,517 11,214 9,247 1,152 1,916
-------- -------- -------- -------- ------- ------- -------- --------
Income (loss) before income tax expense
(benefit) and performance center
earnings (expense).................... 135,512 137,443 180,445 235,383 32,511 27,472 42,128 45,381
Performance center earnings
(expense)(1).......................... 6,280 4,008 2,039 1,859 (2,394) (2,336) 229 143
-------- -------- -------- -------- ------- ------- -------- --------
Income (loss) before income tax expense
(benefit)............................. 141,792 141,451 182,484 237,242 30,117 25,136 42,357 45,524
Income tax expense (benefit)............ 56,733 54,535 71,097 84,235 12,021 9,680 16,555 17,551
-------- -------- -------- -------- ------- ------- -------- --------
Net income (loss)....................... $ 85,059 $ 86,916 $111,387 $153,007 $18,096 $15,456 $ 25,802 $ 27,973
======== ======== ======== ======== ======= ======= ======== ========
AVERAGE BALANCES (DOLLARS IN MILLIONS):
Total loans before performance
centers(2)............................ $ 9,161 $ 8,805 $ 10,781 $ 13,393 $ 1,385 $ 1,066 $ 474 $ 614
Total assets............................ 10,115 9,774 11,953 14,656 2,123 1,634 563 745
Total deposits before performance
centers(2)............................ 12,390 13,169 5,239 5,506 864 803 1,216 1,227
FINANCIAL RATIOS:
Return on risk adjusted capital......... 21% 22% 17% 19% 17% 18% 31% 28%
Return on average assets................ 1.12 1.19 1.25 1.40 1.14 1.26 6.13 5.02
Efficiency ratio before performance
centers............................... 70.21 71.60 43.64 39.33 52.72 58.06 71.19 72.06
</TABLE>

17
<PAGE>

<TABLE>
<CAPTION>
GLOBAL UNIONBANCAL
MARKETS GROUP OTHER CORPORATION
------------------- ------------------- -----------------------
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------------------------------------------
1998 1999 1998 1999 1998 1999
-------- -------- -------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS (DOLLARS IN THOUSANDS):
Net interest income....................................... $28,913 $33,925 $ 50,727 $ 24,050 $ 979,639 $1,046,997
Noninterest income........................................ 21,817 19,079 (158) 8,081 399,949 432,455
------- ------- -------- -------- ---------- ----------
Total revenue............................................. 50,730 53,004 50,569 32,131 1,379,588 1,479,452
Noninterest expense(3).................................... 19,621 18,121 43,536 150,969 836,178 996,866
Credit expense (income)................................... -- -- (69,672) (85,862) 45,000 35,000
------- ------- -------- -------- ---------- ----------
Income (loss) before income tax expense (benefit) and
performance center earnings (expense)................... 31,109 34,883 76,705 (32,976) 498,410 447,586
Performance center earnings (expense)(1).................. (7,081) (5,224) 927 1,550 -- --
------- ------- -------- -------- ---------- ----------
Income (loss) before income tax expense (benefit)......... 24,028 29,659 77,632 (31,426) 498,410 447,586
Income tax expense (benefit).............................. 9,544 11,434 (19,905) (34,652) 146,045 142,783
------- ------- -------- -------- ---------- ----------
Net income (loss)......................................... $14,484 $18,225 $ 97,537 $ 3,226 $ 352,365 $ 304,803
======= ======= ======== ======== ========== ==========
AVERAGE BALANCES (DOLLARS IN MILLIONS):
Total loans before performance centers(2)................. $ -- $ -- $ 1,116 $ 888 $ 22,917 $ 24,766
Total assets.............................................. 4,019 3,841 1,358 1,260 30,131 31,910
Total deposits before performance centers(2).............. 2,631 2,821 46 3 22,386 23,529
FINANCIAL RATIOS:
Return on risk adjusted capital........................... 13% 14% na na na na
Return on average assets.................................. 0.48 0.63 na na 1.56% 1.28%
Efficiency ratio before performance centers............... 38.68 34.19 na na 60.51 67.35
</TABLE>

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

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

(3) "Other" includes 3rd quarter 1999 restructuring charge of $85.0 million
($55.2 million, net of tax).

na = not applicable

COMMUNITY BANKING GROUP

The Community Banking Group provides its customers with a full line of
checking and savings, investment, loan and fee-based banking products. The group
focuses on four major markets:

- consumers,

- businesses with sales under $3 million,

- businesses with sales between $3 million and $20 million, and

- middle market companies, including agricultural firms in central
California and in selected parts of Oregon and Washington.

The group serves over one million consumer households and businesses through
its 241 branches in California, six branches in Oregon and Washington and its
extensive network of proprietary ATMs. Customers may also access our services
24 hours a day by telephone or personal computer. In addition, the group offers
automated teller and point-of-sale debit services through our founding
membership in the Star System, the largest shared ATM network in the Western
United States.

For the three-month period ending September 30, 1999, net income increased
$7.2 million compared to the three-month period ending September 30, 1998. Total
revenue increased $18.9 million in third quarter 1999 compared to the third
quarter 1998 as a result of increases in both net interest income and
noninterest income. Noninterest expense increased $7.6 million in the third
quarter 1999 compared to third quarter 1998 reflecting the higher revenue
increases. Credit expense remained relatively flat from the same period a year
ago.

18
<PAGE>
For the nine months ended September 30, 1999, net income increased
$1.9 million compared to the nine-month period ended September 30, 1998. Total
revenue increased $20.7 million for the period ending September 30, 1999
compared to the same period a year ago. Excluding the $17.1 million gain on the
sale of the credit card portfolio in the second quarter 1998, total revenue
increased $37.8 million, or 6 percent from the same period a year ago. The
growth in average deposits by $0.8 billion also contributed to the year over
year increase. Noninterest expense increased $23.5 million from the prior year
primarily reflecting the higher revenue increases. Credit expense for the nine
months ended September 30, 1999 decreased $4.7 million from a year ago primarily
due to the sale of the credit card portfolio.

COMMERCIAL FINANCIAL SERVICES GROUP

The Commercial Financial Services Group offers a variety of commercial
financial services including:

- commercial and project loans,

- real estate financing,

- commercial financing based on accounts receivable, inventory, or other
short-term assets,

- trade financing, which is the short-term extension of credit to support
export/import transactions, including letters of credit,

- lease financing,

- customized cash management services, and

- selected capital markets products.

For the three-month period ended September 30, 1999, net income increased
$21.3 million compared to the three-month period ended September 30, 1998. Total
revenue increased $36.7 million, due primarily to the $2.4 billion growth in
averge loans and leases from a year ago, which contributed to the significant
increase in net interest income accompanied by increases in fee income.
Noninterest expense increased slightly from a year ago. Credit expense for the
three months ended September 30, 1999, increased $5.5 million from the same
period a year ago, due primarily to the loan growth mentioned above.

For the nine months ended September 30, 1999, net income increased
$41.6 million compared to the nine-month period ended September 30, 1998. Total
revenue increased $81.2 million, due to the $2.6 billion growth in average loans
and leases year over year, which contributed to the significant increase in net
interest income accompanied by increases in fee income. Noninterest expense
increased $14.1 million primarily due to an increase in salaries and employee
benefits, as well as additional expenses incurred to support higher deposit
volumes. Credit expense for the nine months ended September 30, 1999, increased
$12.1 million from a year ago, due to the loan growth mentioned above.

INTERNATIONAL BANKING GROUP

The International Banking Group primarily provides correspondent banking and
trade finance-related products and services to financial institutions worldwide,
primarily in Asia. This includes the delivery of products and services that
facilitate trade finance transactions, including payments, collection and the
extension of short-term credit. The group also serves selected foreign firms and
U.S. corporate clients in selected countries worldwide, particularly in Asia. In
the U.S., the group serves subsidiaries and affiliates of non-Japanese Asian
companies and U.S. branches and agencies of foreign banks. The group also
provides international services to domestic corporate clients along the West
Coast. The group's revenue predominately relates to foreign customers.

For the three-month period ended September 30, 1999, net income decreased
$1.4 million compared to the three-month period ended September 30, 1998. Total
revenue decreased $3.0 million from a year ago due to the reduction in
international exposures, narrower credit spreads and lower market pricings on
those exposures. Noninterest expense remained relatively flat. Credit expense
for the three months ended

19
<PAGE>
September 30, 1999, decreased $0.3 million from the same period a year ago, due
to reductions in credit exposures.

For the nine-months ended September 30, 1999, net income decreased
$2.6 million compared to the nine-month period ending September 30, 1998. Total
revenue decreased $4.9 million due to continuing reductions in credit exposures,
narrower credit spreads and lower market pricings on those exposures.
Noninterest expense increased $2.1 million primarily due to personnel expenses.
Credit expense for the nine months ended September 30, 1999, decreased
$2.0 million from a year ago, due to the reduction in credit exposures.

TRUST AND PRIVATE FINANCIAL SERVICES GROUP

The Trust and Private Financial Services Group offers investment management
and administration services for a broad range of individuals and institutions.
The group:

- services individual client needs through its trust and private banking,
investment management and brokerage products and services,

- services institutional client needs through traditional employee benefit
and 401(k) programs, global and domestic securities custody programs,
securities lending programs and corporate trust products, and

- provides investment management services for both individual and
institutional clients through HighMark Capital Management, Inc. and its
family of proprietary HighMark mutual funds.

For the three-month period ended September 30, 1999, net income increased
$1.7 million compared to the three-month period ended September 30, 1998. Total
revenue increased $7.3 million due to increases in assets under management, a
portion of which arose from the purchase of approximately $10 billion in trust
assets from Imperial Trust Company. Noninterest expense increased $4.3 million
primarily due to the costs related to the increase in assets under management.

For the nine months ended September 30, 1999, net income increased
$2.2 million compared to the nine-month period ended September 30, 1998. Total
revenue increased $19.1 million predominantly due to higher earnings from
investment management services and from the purchase of trust assets from
Imperial Trust Company. Noninterest expense increased $15.1 million primarily in
personnel expense and other costs related to the increase in assets under
management.

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 and interest
rate swaps, caps and floors. Additionally, it trades money market and other
securities in the secondary market, including the placement of Union Bank of
California, N.A.'s own liabilities with institutional investors. This group also
manages our market-related risks as part of its responsibilities for
asset/liability management, and is responsible for maintaining Union Bank of
California, N.A.'s investment securities portfolio.

For the three-month period ended September 30, 1999, net income decreased
$0.1 million compared to the three-month period ended September 30, 1998. Total
revenue decreased $2.1 million due primarily to management's decision to exit
the municipal underwriting and certain capital markets activities, which
occurred in the first quarter of 1999. Noninterest expense decreased
$1.0 million due to the reduction in personnel expense for the exited
businesses.

For the nine-months ended September 30, 1999, net income increased
$3.7 million compared to the nine-month period ended September 30, 1998. Total
revenue increased $2.3 million due to higher earnings from the investment
securities portfolio. Noninterest expense decreased $1.5 million largely due to
the personnel expense reduction referred to above.

20
<PAGE>
OTHER

"Other" includes the following items, none of which, on an individual basis,
are significant to our business:

- Corporate activities that are not directly attributable to one of the
five major business units. Included in this category are goodwill,
restructuring charges, certain parent company non-bank subsidiaries, and
the elimination of the fully taxable-equivalent amounts.

- The allowance and provision for credit losses, the net impact of transfer
pricing, and earnings associated with unallocated equity capital.

- The Credit and Compliance Group, which includes $106.0 million of average
nonperforming assets for the first nine months of 1999.

- The Pacific Rim Corporate Group, which offers a range of credit, deposit,
and investment management products and services to companies in the U.S.,
which are affiliated with companies headquartered outside the U.S.,
mostly in Japan.

- The residual costs of support groups.

21
<PAGE>
NET INTEREST INCOME

The table below shows the major components of net interest income and net
interest margin.

<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
-------------------------------------------------------------------------
SEPTEMBER 30, 1998 SEPTEMBER 30, 1999
----------------------------------- -----------------------------------
INTEREST AVERAGE INTEREST AVERAGE
AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/
(DOLLARS IN THOUSANDS) BALANCE EXPENSE(1) RATE(1) BALANCE EXPENSE(1) RATE(1)
- ------------------------------------------------------ ----------- ---------- -------- ----------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Loans:(2)
Domestic............................................ $22,132,617 $445,989 8.00% $24,073,361 $471,189 7.77%
Foreign(3).......................................... 1,300,155 22,388 6.83 1,079,189 16,886 6.21
Securities--taxable(4)................................ 3,287,094 51,584 6.26 3,142,864 49,554 6.31
Securities--tax-exempt(4)............................. 99,440 2,809 11.30 75,489 1,880 9.96
Interest bearing deposits in banks.................... 152,283 2,769 7.21 207,291 2,786 5.33
Federal funds sold and securities purchased under
resale agreements................................... 288,295 4,074 5.61 178,509 2,345 5.21
Trading account assets................................ 508,060 7,429 5.80 250,512 3,113 4.93
----------- -------- ----------- --------
Total earning assets.............................. 27,767,944 537,042 7.69 29,007,215 547,753 7.49
-------- --------
Allowance for credit losses........................... (480,555) (448,924)
Cash and due from banks............................... 1,889,831 1,944,556
Premises and equipment, net........................... 406,375 440,323
Other assets.......................................... 1,179,285 1,095,622
----------- -----------
Total assets...................................... $30,762,880 $32,038,792
=========== ===========
LIABILITIES
Domestic deposits:
Interest bearing.................................... $ 5,501,340 39,120 2.82 $ 5,782,867 36,292 2.49
Savings and consumer time........................... 3,272,432 31,253 3.79 3,382,731 26,681 3.13
Large time.......................................... 3,563,309 48,474 5.40 4,109,821 48,101 4.64
Foreign deposits(3)................................... 1,604,878 20,805 5.14 1,552,769 18,233 4.66
----------- -------- ----------- --------
Total interest bearing deposits................... 13,941,959 139,652 3.97 14,828,188 129,307 3.46
----------- -------- ----------- --------
Federal funds purchased and securities sold under
repurchase agreements............................... 1,901,127 26,051 5.44 1,319,426 16,493 4.96
Commercial paper...................................... 1,751,697 24,257 5.49 1,514,326 19,572 5.13
Other borrowed funds.................................. 319,642 4,583 5.69 774,975 10,288 5.27
Subordinated capital notes............................ 308,870 4,797 6.16 298,000 4,240 5.64
UnionBanCal Corporation--obligated mandatorily
redeemable preferred securities of subsidiary
grantor trust....................................... -- -- -- 350,000 7,093 7.92
----------- -------- ----------- --------
Total borrowed funds.............................. 4,281,336 59,688 5.53 4,256,727 57,686 5.38
----------- -------- ----------- --------
Total interest bearing liabilities................ 18,223,295 199,340 4.34 19,084,915 186,993 3.89
-------- --------
Noninterest bearing deposits.......................... 8,629,482 9,098,284
Other liabilities..................................... 1,043,606 926,453
----------- -----------
Total liabilities................................. 27,896,383 29,109,652
SHAREHOLDERS' EQUITY
Common equity......................................... 2,866,497 2,929,140
----------- -----------
Total shareholders' equity........................ 2,866,497 2,929,140
----------- -----------
Total liabilities and shareholders' equity........ $30,762,880 $32,038,792
=========== ===========
Net interest income/margin (taxable-equivalent
basis).............................................. 337,702 4.84% 360,760 4.93%
Less: taxable-equivalent adjustment................... 1,069 747
-------- --------
Net interest income............................... $336,633 $360,013
======== ========
</TABLE>

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

(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 and
renegotiated 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.

(4) Yields on securities available for sale are based on fair value. The
difference between these yields and those based on amortized cost was not
significant.

22
<PAGE>
NET INTEREST INCOME (CONTINUED)

<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
-------------------------------------------------------------------------
SEPTEMBER 30, 1998 SEPTEMBER 30, 1999
----------------------------------- -----------------------------------
INTEREST AVERAGE INTEREST AVERAGE
AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/
(DOLLARS IN THOUSANDS) BALANCE EXPENSE(1) RATE(1) BALANCE EXPENSE(1) RATE(1)
- ------------------------------------------------------ ----------- ---------- -------- ----------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Loans:(2)
Domestic............................................ $21,569,891 $1,297,483 8.04% $23,674,469 $1,353,006 7.64%
Foreign(3).......................................... 1,347,101 68,380 6.79 1,091,433 51,700 6.33
Securities--taxable(4)................................ 2,949,151 139,720 6.32 3,352,827 157,739 6.27
Securities--tax-exempt(4)............................. 106,783 8,348 10.42 80,216 6,086 10.11
Interest bearing deposits in banks.................... 279,938 14,187 6.78 209,184 9,042 5.78
Federal funds sold and securities purchased under
resale agreements................................... 281,565 11,784 5.60 138,396 5,238 5.06
Trading account assets................................ 468,450 20,137 5.75 286,198 9,614 4.49
----------- ---------- ----------- ----------
Total earning assets.............................. 27,002,879 1,560,039 7.72 28,832,723 1,592,425 7.38
---------- ----------
Allowance for credit losses........................... (471,384) (450,295)
Cash and due from banks............................... 1,903,155 1,972,792
Premises and equipment, net........................... 402,197 434,327
Other assets.......................................... 1,294,046 1,120,550
----------- -----------
Total assets...................................... $30,130,893 $31,910,097
=========== ===========
LIABILITIES
Domestic deposits:
Interest bearing.................................... $ 5,447,712 115,626 2.84 $ 5,645,828 106,064 2.51
Savings and consumer time........................... 3,176,898 90,713 3.82 3,356,224 80,365 3.20
Large time.......................................... 3,606,182 146,945 5.45 3,963,288 132,311 4.46
Foreign deposits(3)................................... 1,723,282 66,454 5.16 1,554,221 52,046 4.48
----------- ---------- ----------- ----------
Total interest bearing deposits................... 13,954,074 419,738 4.02 14,519,561 370,786 3.41
----------- ---------- ----------- ----------
Federal funds purchased and securities sold under
repurchase agreements............................... 1,481,809 59,667 5.38 1,609,826 57,369 4.76
Commercial paper...................................... 1,641,425 67,720 5.52 1,541,151 56,766 4.92
Other borrowed funds.................................. 323,082 13,975 5.78 740,933 28,159 5.08
Subordinated capital notes............................ 335,179 15,883 6.34 298,000 12,385 5.56
UnionBanCal Corporation--obligated mandatorily
redeemable preferred securities of subsidiary
grantor trust....................................... -- -- -- 287,179 17,475 8.03
----------- ---------- ----------- ----------
Total borrowed funds.............................. 3,781,495 157,245 5.56 4,477,089 172,154 5.14
----------- ---------- ----------- ----------
Total interest bearing liabilities................ 17,735,569 576,983 4.35 18,996,650 542,940 3.82
---------- ----------
Noninterest bearing deposits.......................... 8,432,086 9,009,701
Other liabilities..................................... 1,170,511 971,824
----------- -----------
Total liabilities................................. 27,338,166 28,978,175
SHAREHOLDERS' EQUITY
Common equity......................................... 2,792,727 2,931,922
----------- -----------
Total shareholders' equity........................ 2,792,727 2,931,922
----------- -----------
Total liabilities and shareholders' equity........ $30,130,893 $31,910,097
=========== ===========
Net interest income/margin (taxable-equivalent
basis).............................................. 983,056 4.86% 1,049,485 4.86%
Less: taxable-equivalent adjustment................... 3,417 2,488
---------- ----------
Net interest income............................... $ 979,639 $1,046,997
========== ==========
</TABLE>

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

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

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

(4) Yields on securities available for sale are based on fair value. The
difference between these yields and those based on amortized cost was not
significant.

23
<PAGE>
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 SEPTEMBER 30, 1998 AND SEPTEMBER 30, 1999

Net interest income, on a taxable-equivalent basis, was $337.7 million in
the third quarter of 1998, compared with $360.8 million in the third quarter of
1999. This increase of $23.1 million, or 7 percent, was attributable primarily
to a $1.2 billion, or 4 percent, increase in average earning assets, partially
funded by a $468.8 million, or 5 percent, increase in average noninterest
bearing deposits. In addition, the net interest margin was favorably impacted by
the interest rate environment that contributed lower rates on deposits and other
average interest bearing liabilities, as well as a lower effective cost of
funding the increased assets, partially offset by lower yields on loans and
other interest bearing assets. The net interest margin increased 9 basis points
to 4.93.

Average earning assets were $27.8 billion in the third quarter of 1998,
compared with $29.0 billion in the third quarter of 1999. This growth was
attributable to a $1.7 billion, or 7 percent, increase in average loans,
partially offset by a $257.6 million, or 51 percent, decrease in average trading
account assets and $168.2 million, or 5 percent decrease in average securities.
The growth in average loans was mostly due to the increase in average
commercial, financial and industrial loans of $1.5 billion. Lower average
trading account assets primarily resulted from the discontinuance of our
municipal underwriting activity in April 1999. The decrease in average
securities, which comprised primarily fixed rate available for sale securities,
reflected liquidity and interest rate risk management actions.

The favorable rate environment resulted in a decline in the rate paid on
average interest bearing liabilities of 45 basis points, partially offset by
lower yields on average earning assets of 20 basis points. The $861.6 million,
or 5 percent, increase in average interest bearing liabilities over the third
quarter of 1998 was due to an increase in average interest bearing deposits of
$886.2 million, primarily large time deposits. The increase in average
noninterest bearing deposits was primarily due to the efforts of our
institutional and deposit markets group coupled with an influx of new customer
relationships, arising from the merger and acquisition activities of other
financial institutions in the California market during the past year.

NINE MONTHS ENDED SEPTEMBER 30, 1998 AND SEPTEMBER 30, 1999

For the first nine months of 1998, net interest income, on a
taxable-equivalent basis, was $983.1 million, compared with $1,049.5 million for
the first nine months of 1999. The increase of $66.4 million, or 7 percent, was
mostly attributable to a $1.8 billion, or 7 percent, increase in average earning
assets partially funded by a $577.6 million, or 7 percent, increase in average
noninterest bearing deposits. Net interest margin remained unchanged. The
favorable impact of the lower interest rate environment that contributed to
lower rates on interest bearing deposits was mostly offset by lower yields on
loans and other average earning assets.

Average earning assets were $27.0 billion for the first nine months of 1998,
compared with $28.8 billion for the first nine months of 1999. Most of this
growth was attributable to a $1.8 billion, or 8 percent, increase in average
loans and a $377.1 million, or 12 percent, increase in average securities,
partially offset by a $182.3 million, or 39 percent, decrease in average trading
account assets. The growth in average loans was mostly due to the increase in
average commercial, financial and industrial loans of $2.0 billion. See "Loans"
on page 28 for additional commentary on growth in the loan portfolio. The
increase in primarily fixed rate securities reflected liquidity and interest
rate risk management actions.

24
<PAGE>
NONINTEREST INCOME

<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
------------------------------------------ ------------------------------------------
SEPTEMBER 30, SEPTEMBER 30, PERCENT SEPTEMBER 30, SEPTEMBER 30, PERCENT
(DOLLARS IN THOUSANDS) 1998 1999 CHANGE 1998 1999 CHANGE
- --------------------------------- -------------- -------------- -------- -------------- -------------- --------
<S> <C> <C> <C> <C> <C> <C>
Service charges on deposit
accounts....................... $ 35,709 $ 45,401 27.14% $101,288 $127,981 26.35%
Trust and investment management
fees........................... 30,777 36,353 18.12 88,806 102,607 15.54
International commissions and
fees........................... 17,951 17,475 (2.65) 54,516 53,186 (2.44)
Merchant transaction processing
fees........................... 14,871 18,598 25.06 42,988 51,256 19.23
Merchant banking fees............ 6,095 10,946 79.59 24,083 27,561 14.44
Brokerage commissions and fees... 4,723 7,148 51.34 14,188 18,825 32.68
Foreign exchange trading gains,
net............................ 4,708 5,267 11.87 14,159 14,873 5.04
Securities gains, net............ 653 2,004 206.89 5,579 3,899 (30.11)
Gain on sale of credit card
portfolio...................... -- -- -- 17,056 -- (100.00)
Other............................ 8,438 5,157 (38.88) 37,286 32,267 (13.46)
-------- -------- -------- --------
Total noninterest income....... $123,925 $148,349 19.71% $399,949 $432,455 8.13%
======== ======== ======== ========
</TABLE>

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

nm = not meaningful

THREE MONTHS ENDED SEPTEMBER 30, 1998 AND SEPTEMBER 30, 1999

In the third quarter of 1999, noninterest income was $148.3 million, an
increase of $24.4 million, or 20 percent, over the same period in 1998. This
increase was primarily due to a $9.7 million increase in service charges on
deposit accounts, a $5.6 million increase in trust and investment management
fees, a $4.9 million increase in merchant banking fees, a $3.7 million increase
in merchant transaction processing fees, and a $2.4 million increase in
brokerage commissions and fees, partially offset by a $3.3 million decrease in
other noninterest income.

Revenue from service charges on deposit accounts was $45.4 million, an
increase of 27 percent over the third quarter of 1998. The increase was
primarily attributable to a 6 percent increase in average deposits, higher
overdraft fees due to a change in fee structure, higher ATM surcharges, and the
expansion of several products and services.

Trust and investment management fees were $36.4 million, an increase of
18 percent over the third quarter of 1998. The increase was due to growth in
trust accounts and assets under management, which resulted in higher mutual fund
management fees and higher institutional account fees.

Merchant banking fees were $10.9 million, an increase of 80 percent over the
third quarter of 1998. The increase was primarily due to higher syndication
fees.

Merchant transaction processing fees were $18.6 million, an increase of
25 percent over the third quarter of 1998. The increase was primarily due to an
increase in the volume of credit card drafts deposited by merchants, coupled
with a higher merchant discount rate.

Brokerage commissions and fees were $7.1 million, an increase of 51 percent
over the third quarter of 1998. The increase was primarily due to brokerage
commissions on sales of non-proprietary mutual funds, annuities, and insurance
products and growth in corporate sweep products.

Other noninterest income was $5.2 million, a decrease of 39 percent from the
third quarter of 1998. The decrease was due to a $6.3 million charge related to
auto lease residual valuation adjustments, partially offset by higher other
investment income and miscellaneous fees.

NINE MONTHS ENDED SEPTEMBER 30, 1998 AND SEPTEMBER 30, 1999

For the first nine months of 1999, noninterest income was $432.5 million, an
increase of $32.5 million, or 8 percent, over the same period in 1998. Excluding
the previously discussed $17.1 million pre-tax gain

25
<PAGE>
from the sale of the credit card portfolio in April 1998, noninterest income
increased $49.6 million, or 13 percent, over the same period in 1998. This
increase was primarily due to a $26.7 million increase in service charges on
deposit accounts, a $13.8 million increase in trust and investment management
fees, an $8.3 million increase in merchant transaction processing fees, and a
$4.6 million increase in brokerage commissions and fees, partially offset by a
$5.0 million decrease in other noninterest income.

Revenue from service charges on deposit accounts was $128.0 million, an
increase of 26 percent over the first nine months of 1998. The increase was
primarily attributable to a 5 percent increase in average deposits, higher ATM
surcharges, higher overdraft fees due to a change in fee structure, and the
expansion of several products and services.

Trust and investment management fees were $102.6 million, an increase of
16 percent over the first nine months of 1998. The increase was due to growth in
trust accounts and assets under management, which resulted in higher mutual fund
management fees and higher institutional account fees.

Merchant transaction processing fees were $51.3 million, an increase of
19 percent over the first nine months of 1998. The increase was primarily due to
an increase in the volume of credit card drafts deposited by merchants coupled
with a higher merchant discount rate.

Brokerage commissions and fees were $18.8 million, an increase of
33 percent over the first nine months of 1998. The increase was due to brokerage
commissions on sales of non-proprietary mutual funds, annuities, and insurance
products, as well as growth in corporate sweep products.

Other noninterest income was $32.3 million, a decrease of 13 percent from
the first nine months of 1998. The decrease was mostly due to a $6.3 million
charge related to auto lease residual valuation adjustments.

NONINTEREST EXPENSE

<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
------------------------------------------ ------------------------------------------
SEPTEMBER 30, SEPTEMBER 30, PERCENT SEPTEMBER 30, SEPTEMBER 30, PERCENT
(DOLLARS IN THOUSANDS) 1998 1999 CHANGE 1998 1999 CHANGE
- --------------------------------- -------------- -------------- -------- -------------- -------------- --------
<S> <C> <C> <C> <C> <C> <C>
Salaries and other
compensation................... $127,706 $135,697 6.26% $369,715 $401,973 8.73%
Employee benefits................ 31,974 29,761 (6.92) 89,877 98,167 9.22
-------- -------- -------- --------
Personnel-related expense...... 159,680 165,458 3.62 459,592 500,140 8.82
Net occupancy.................... 23,590 22,895 (2.95) 67,294 67,273 (0.03)
Equipment........................ 14,039 19,389 38.11 41,842 49,405 18.08
Merchant transaction
processing..................... 11,415 12,905 13.05 33,008 37,773 14.44
Professional services............ 9,285 8,440 (9.10) 25,186 29,426 16.83
Communications................... 9,834 10,666 8.46 31,515 31,217 (0.95)
Data processing.................. 7,327 7,797 6.41 20,462 23,459 14.65
Advertising and public
relations...................... 8,066 7,845 (2.74) 22,419 23,341 4.11
Printing and office supplies..... 6,289 5,103 (18.86) 19,112 17,800 (6.86)
Software......................... 5,526 6,113 10.62 14,536 18,790 29.27
Travel........................... 4,724 4,335 (8.23) 13,041 14,236 9.16
Intangible asset amortization.... 3,393 3,509 3.42 10,069 10,527 4.55
Armored car...................... 3,118 3,180 1.99 8,989 9,648 7.33
Foreclosed asset expense
(income)....................... (325) (703) 116.31 (746) (1,256) 68.36
Other (excluding restructuring
charge)........................ 24,417 24,359 (0.24) 69,859 80,087 14.64
-------- -------- -------- --------
290,378 301,291 3.76 836,178 911,866 9.05
Restructuring charge............. -- 85,000 nm -- 85,000 nm
-------- -------- -------- --------
Total noninterest expense...... $290,378 $386,291 33.03 $836,178 $996,866 19.22
======== ======== ======== ========
</TABLE>

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

nm = not meaningful

26
<PAGE>
THREE MONTHS ENDED SEPTEMBER 30, 1998 AND SEPTEMBER 30, 1999

In the third quarter of 1999, noninterest expense, excluding the
restructuring charge, was $301.3 million, an increase of $10.9 million, or
4 percent, over the same period in 1998. This increase was mostly due to a
$5.8 million increase in personnel-related expense, a $5.4 million increase in
equipment expense, and a $1.5 million increase in merchant transaction
processing expense.

Personnel-related expense was $165.5 million, an increase of 4 percent over
the third quarter of 1998. This increase was primarily due to increased
performance-based incentive compensation reflecting improved business unit
performance, achievements in the year 2000 effort, and the expected achievement
through Mission Excel of the efficiency ratio targets by the end of 2000.
Benefits expense was lower primarily due to the large unrealized losses
sustained in the fair value of assets underlying our postretirement benefit
plans in 1998.

Equipment expense was $19.4 million, an increase of 38 percent over the
third quarter of 1998. This increase was primarily due to higher depreciation
expense from the write-down of personal computers that were replaced during a
recent company-wide intranet upgrade.

Merchant transaction processing expense was $12.9 million, an increase of
13 percent over the third quarter of 1998 due to higher merchant volumes.

NINE MONTHS ENDED SEPTEMBER 30, 1998 AND SEPTEMBER 30, 1999

For the first nine months of 1999, noninterest expense, excluding the
restructuring charge, was $911.9 million, an increase of $75.7 million, or
9 percent, over the same period in 1998. This increase was primarily
attributable to a $40.5 million increase in personnel-related expense, a
$7.6 million increase in equipment expense, a $4.8 million increase in merchant
transaction processing expense, a $4.2 million increase in professional services
expense, a $3.0 million increase in data processing expense, a $4.3 million
increase in software expense, and a $10.2 million increase in other noninterest
expense.

Personnel-related expense was $500.1 million, an increase of 9 percent over
the first nine months of 1998. Performance-based incentive compensation and
related benefits increased $15.1 million due to achievements in the year 2000
effort and the expected achievement through Mission Excel of the efficiency
ratio targets by the end of 2000. The remaining increase was due to higher merit
increases, changes to our standard costing associated with loan originations,
and changes in employee benefits expense related to higher health care and
pension costs.

Equipment expense was $49.4 million, an increase of 18 percent over the
first nine months of 1998. This increase was due mainly to higher depreciation
expense on personal computers related to our intranet upgrade, discussed above.

Merchant transaction processing expense was $37.8 million, an increase of
14 percent over the first nine months of 1998 due to higher merchant volumes.

Professional services expense was $29.4 million, an increase of 17 percent
over the first nine months of 1998, a significant portion of which relates to
the year 2000 effort.

Data processing expense was $23.5 million, an increase of 15 percent over
the first nine months of 1998 due to increased activity in data processing
systems supporting the growth in deposits.

Software expense was $18.8 million, an increase of 29 percent over the first
nine months of 1998. This increase was primarily due to increased purchases of
computer software products related to system and intranet upgrades and increased
software maintenance contracts.

Travel expense was $14.2 million, an increase of 9 percent over the first
nine months of 1998 due primarily to the Mission Excel effort.

Other noninterest expense, excluding the restructuring charge, was
$80.1 million, an increase of 15 percent over the first nine months of 1998.
This increase was primarily attributable to amortization expense of
$6.4 million related to several low income housing investments, an increase of
$4.7 million in miscellaneous outside service fees, and a $1.9 million increase
in charitable contributions.

27
<PAGE>
YEAR 2000 EXPENSES

We continue to make preparations for the year 2000. (See "Year 2000" on
page 36 for a detailed discussion of the year 2000 program.) We continue to
estimate that the total cost of the year 2000 project will be approximately
$50.0 million, including capital expenditures, which we will capitalize and
depreciate over their useful lives. As of September 30, 1999, we have spent
$37.0 million on the year 2000 project, $2.2 million in 1997, $21.6 million in
1998 and $13.3 million in the first nine months of 1999. Of the $37.0 million
spent as of September 30, 1999, $6.8 million related to capital expenditures,
$0.8 million in 1997, $5.2 million in 1998, and $0.8 million in the first nine
months of 1999. We do not anticipate any additional capital expenditures related
to this project. The remaining budget of $13.0 million includes $8.0 million for
staff and professional services expenses, and also $3.6 million for contingency
planning. We are funding the cost of the year 2000 project with normal operating
cash and are staffing it with external resources as well as internal staff
re-deployed from less time-sensitive assignments.

INCOME TAX EXPENSE

The effective tax rates for the third quarter of 1998 and 1999 were
7 percent and 30 percent, respectively. The effective tax rates for the nine
months ended September 30, 1998 and 1999 were 29 percent and 32 percent,
respectively. During the first quarter of 1999, we recognized a tax benefit as
the result of an IRS settlement of $6.3 million for refund claims we filed for
the years 1992 through 1994, and in the third quarter of 1999 we recognized a
tax benefit arising from a California Franchise Tax Board audit settlement of
$4.4 million. In the third quarter of 1998, we recorded a $44.8 million
reduction in the Company's California Franchise Tax liability, of which
$29.2 million was related to tax year 1997 and the remaining was related to the
first half of 1998. This reduction was the result of the tax return we filed on
a worldwide unitary reporting basis, which incorporates the financial results of
our majority shareholder, The Bank of Tokyo-Mitsubishi, Ltd and its worldwide
affiliates. Excluding the various tax benefits, our effective tax rates for the
third quarter and the nine months ended September 30, 1999 would have been
35 percent and 34 percent, respectively compared to 35 percent for both the
third quarter and the nine months ended September 30, 1998.

LOANS

The following table shows loans outstanding by loan type.

<TABLE>
<CAPTION>
PERCENT CHANGE TO
SEPTEMBER 30, 1999 FROM:
------------------------------
SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31,
(DOLLARS IN THOUSANDS) 1998 1998 1999 1998 1998
- ------------------------------ -------------- ------------- -------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Domestic:
Commercial, financial and
industrial................ $12,151,210 $13,119,534 $13,774,886 13.36% 5.00%
Construction................ 420,267 439,806 644,980 53.47 46.65
Mortgage:
Residential............... 2,742,451 2,627,668 2,579,526 (5.94) (1.83)
Commercial................ 2,980,371 2,975,484 3,242,516 8.80 8.97
----------- ----------- -----------
Total mortgage.......... 5,722,822 5,603,152 5,822,042 1.73 3.91
Consumer:
Installment............... 2,026,441 1,984,941 1,969,518 (2.81) (0.78)
Home equity............... 844,256 818,199 714,189 (15.41) (12.71)
----------- ----------- -----------
Total consumer.......... 2,870,697 2,803,140 2,683,707 (6.51) (4.26)
Lease financing............. 1,013,772 1,032,148 1,155,415 13.97 11.94
----------- ----------- -----------
Total loans in domestic
offices............... 22,178,768 22,997,780 24,081,030 8.58 4.71
Loans originated in foreign
branches.................... 1,319,077 1,298,331 1,104,652 (16.26) (14.92)
----------- ----------- -----------
Total loans............. $23,497,845 $24,296,111 $25,185,682 7.18% 3.66%
=========== =========== ===========
</TABLE>

28
<PAGE>
Our lending activities are predominantly domestic, with such loans
comprising 96 percent of the total loan portfolio at September 30, 1999. Total
loans at September 30, 1999 were $25.2 billion, an increase of $1.7 billion, or
7 percent, over September 30, 1998. The increase was attributable to growth in
the commercial, financial and industrial loan portfolio, which increased
$1.6 billion, the construction loan portfolio, which increased $224.7 million,
the commercial mortgage loan portfolio, which increased $262.1 million, and the
lease financing loan portfolio, which increased $141.6 million, partially offset
by the residential mortgage loan portfolio, which decreased $162.9 million, the
consumer loan portfolio, which decreased $187.0 million, and the loans
originated in foreign branches, which decreased $214.4 million.

Commercial, financial and industrial loans represent the largest category in
the loan portfolio. These loans are extended principally to major corporations,
middle market businesses, and small businesses, with no industry concentration
exceeding 10 percent of total commercial, financial and industrial loans. At
September 30, 1998 and 1999, the commercial, financial and industrial loan
portfolio was $12.2 billion, or 52 percent of total loans, and $13.8 billion, or
55 percent of total loans, respectively. The increase of $1.6 billion, or
13 percent, from September 30, 1998 was primarily attributable to loans extended
to businesses with revenues exceeding $20 million. The growth continued to
reflect the results of initiatives to increase participation in larger
syndicated loan positions as lead manager and as agent, especially in the
communications, media, and entertainment and energy capital services industries
in which we have developed specialized lending expertise.

The construction loan portfolio totaled $420.3 million, or 2 percent of
total loans, at September 30, 1998, compared with $645.0 million, or 3 percent
of total loans, at September 30, 1999. This growth of $224.7 million, or
53 percent, from September 30, 1998 was primarily attributable to the favorable
California real estate market coupled with the continuing improvement in the
West Coast economy.

Mortgage loans were $5.7 billion, or 24 percent of total loans, at
September 30, 1998, compared with $5.8 billion, or 23 percent of total loans, at
September 30, 1999. The mortgage loan portfolio consists of loans on commercial
and industrial projects and residential loans, secured by one-to-four family
residential properties, primarily in California. The increase in commercial
mortgage loans of $262.1 million, or 9 percent, from September 30, 1998,
reflected both the favorable California real estate market and the continued
improvement in the West Coast economy. Residential mortgage loans decreased
$162.9 million, or 6 percent, principally due to prepayments arising from the
lower interest rate environment.

Consumer loans totaled $2.9 billion, or 12 percent of total loans, at
September 30, 1998, compared with $2.7 billion, or 11 percent of total loans, at
September 30, 1999. The decrease of $187.0 million, or 7 percent, was
attributable to a reduction in home equity loans as customers refinanced to take
advantage of favorable long-term, fixed mortgage rates.

Lease financing totaled $1.0 billion, or 4 percent of total loans, at
September 30, 1998, compared with $1.2 billion, or 5 percent of total loans, at
September 30, 1999. During 1998, management created new initiatives for lending,
especially in the lease financing segment. This continued refocus on leasing
resulted in a $141.6 million, or 14 percent, increase in lease financing over
the first nine months of 1998.

Loans originated in foreign branches totaled $1.3 billion, or 6 percent of
total loans, at September 30, 1998 and $1.1 billion, or 4 percent of total
loans, at September 30, 1999. The decrease of $214.4 million, or 16 percent, was
attributable to the reduction of our exposures in certain Asian markets,
primarily Japan, Korea, Indonesia and Thailand, in response to the continuing
uncertainty that exists in those markets.

CROSS-BORDER OUTSTANDINGS

Our cross-border outstandings reflect certain additional economic and
political risks that are not reflected in domestic outstandings. These risks
include those arising from exchange rate fluctuations and restrictions on the
transfer of funds. The following table sets forth our cross-border outstandings
as of September 30, 1998, December 31, 1998, and September 30, 1999 for each
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 for each country

29
<PAGE>
exclude local currency outstandings. For those individual countries shown in the
table below, most of our local currency outstandings are hedged or are funded by
local currency borrowings.

<TABLE>
<CAPTION>
PUBLIC CORPORATIONS
FINANCIAL SECTOR AND OTHER TOTAL
(DOLLARS IN MILLIONS) INSTITUTIONS ENTITIES BORROWERS OUTSTANDINGS
- -------------------------------------------------- ------------ -------- ------------ ------------
<S> <C> <C> <C> <C>
September 30, 1998
Japan........................................... $115 $ -- $469 584
Korea........................................... 376 -- 139 515
December 31, 1998
Japan........................................... 173 -- 464 637
Korea........................................... 448 1 117 566
September 30, 1999
Japan........................................... 127 -- 361 488
Korea........................................... 459 1 57 517
</TABLE>

The economic condition and the ability of some countries, to which we have
cross-border exposure, to manage their external debt obligations have been
impacted by the Asian economic crisis that began in the second half of 1997. The
Asian economic crisis appears to have stabilized somewhat, though the timing of
full recovery is still uncertain. Our exposure in all affected countries
continues to be primarily short-term in nature and substantially related to the
finance of trade and, in the case of Japan, the provisions of short term working
capital facilities to subsidiaries of Japanese companies operating in the United
States. For further discussion on the actions taken by management to reduce our
credit exposure in Asia and Latin America, see "Allowance for Credit Losses"
below.

PROVISION FOR CREDIT LOSSES

We recorded a $10.0 million provision for credit losses in the third quarter
of 1998, compared with a $20.0 million provision for credit losses in the third
quarter of 1999. For the nine months ended September 30, 1998, we recorded a
$45.0 million provision for credit losses compared with a $35.0 million
provision for the same period in 1999.

Provisions for credit losses are charged to income to bring our allowance
for credit losses to a level deemed appropriate by management based on the
factors discussed under "Allowance for Credit Losses" below.

ALLOWANCE FOR CREDIT LOSSES

ALLOWANCE POLICY AND METHODOLOGY

We maintain an allowance for credit losses to absorb losses inherent in the
loan portfolio. The allowance is based on 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, pools of loans, leases or commitments. Changes in risk
grades of both performing and nonperforming loans 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:

- Problem graded loan loss factors are derived from a migration model that
tracks historical loss experience over what we believe is reflective of a
full business cycle.

30
<PAGE>
- Pass graded loan loss factors are based on the average annual net
charge-off rate over an eight-year period.

- 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 and residential
mortgage loans and automobile leases.

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 Statement of Financial Accounting
Standards (SFAS) No. 114, "Accounting by Creditors for Impairment of a Loan", or
by a qualitative method, which is in excess of the amount determined by the
application of the formula allowance.

The unallocated allowance is composed of two elements. The first element,
which is based on our credit policy, consists of an amount that is at least
20 percent to 25 percent of the formula allowance and the specific allowance.
This element recognizes the model and estimation risk associated with the
formula and specific allowances. The second element is based upon management's
evaluation of various conditions, the effects of which 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 are not identified with specific problem credits or
portfolio segments. The conditions evaluated in connection with the unallocated
allowance include the following conditions that existed as of the balance sheet
date:

- general economic and business conditions affecting our key lending areas,

- credit quality trends (including trends in nonperforming loans expected
to result from existing conditions),

- collateral values,

- loan volumes and concentrations,

- seasoning of the loan portfolio,

- specific industry conditions within portfolio segments,

- recent loss experience in particular segments of the portfolio,

- duration of the current business cycle,

- bank regulatory examination results, and

- 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 amount actually observed for these losses
can vary significantly 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 is designed to be self-correcting by
taking into account our recent loss experience. Similarly, by basing the pass
graded loan loss factors on loss experience over the last eight years, the
methodology is designed to take our recent loss experience into account. Pooled
loan loss factors are adjusted quarterly

31
<PAGE>
based upon the level of net charge-offs expected by management in the next
twelve months. Furthermore, our methodology permits adjustments to any loss
factor used in the computation of the formula allowance in the event that, in
management's judgment, significant factors, which affect the collectibility of
the portfolio as of the evaluation date, 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 any more recent information that has become available.

COMPARISON OF THE TOTAL ALLOWANCE AND RELATED PROVISION FOR CREDIT LOSSES
FROM DECEMBER 31, 1998

At December 31, 1998, our allowance for credit losses was $459.3 million, or
1.89 percent of total loans, and 586 percent of total nonaccrual loans, compared
with an allowance for credit losses at September 30, 1999 of $457.4 million, or
1.82 percent of total loans, and 295 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, 1998, total impaired loans were
$78.5 million and the associated impairment allowance was $11.2 million,
compared with $154.9 million and $33.4 million, respectively, at September 30,
1999.

During the third quarter of 1999, there were no changes in estimation
methods or assumptions that affected our methodology for assessing the
appropriateness of the allowance for credit losses. Changes in 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.

In our assessment as of September 30, 1999, management focused, in
particular, on factors affecting elements of the health care, agriculture and
technology industries, and the continuing instability on companies and financial
institutions in domestic and foreign markets in which we operate and the growth
in, and changes in the composition of, the loan portfolio.

CHANGES IN THE FORMULA, SPECIFIC AND UNALLOCATED ALLOWANCES FROM
DECEMBER 31, 1998

At September 30, 1999, the formula allowance was $249 million compared to
$206 million at December 31, 1998, an increase of $43 million. This was
primarily due to adverse changes in the risk grades of criticized loans as well
as higher levels of criticized assets.

At September 30, 1999, the specific allowance was $41 million compared to
$38 million at December 31, 1998, an increase of $3 million. During 1999, we
eliminated the $26 million specific allowance on Asian country exposures, which
has been incorporated into the formula allowance, while increasing the specific
allowance for impaired loans.

At September 30, 1999, the unallocated allowance was $167 million compared
to $215 million at December 31, 1998, a decrease of $48 million. Management
believes that the inherent losses related to certain conditions considered in
its evaluation of the unallocated allowance have improved moderately or have
been recognized in the formula allowance during the nine months ended
September 30, 1999, except for the $14.1 million charge-off related to a single
Taiwanese credit, which was recognized in the first quarter of 1999.

At September 30, 1999, we had a $167 million unallocated allowance in our
allowance for credit losses. In evaluating the appropriateness of the
unallocated allowance, we considered the following factors:

- the approximately $58 million to $73 million margin for model and
estimation risk prescribed by our credit policy,

- the effects of abnormal weather conditions and export market conditions
on agricultural borrowers, which could be in the range of $6 million to
$12 million,

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<PAGE>
- the effects of export market conditions and cyclical overcapacity on
borrowers in the technology industry, which could be in the range of
$17 million to $25 million,

- the continued effects of the instability in certain Asian countries on
borrowers, which could be in the range of $25 million to $51 million,

- the adverse effects on the health care industry from reduced
reimbursements from government medical insurance programs, which could be
in the range of $10 million to $15 million, and

- the continued effects of the global financial turmoil on borrowers in
Brazil, which could be in the range of $3 million to $7 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 forward-looking
statements on page 39.

CHANGE IN THE TOTAL ALLOWANCE FOR CREDIT LOSSES

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

<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
---------------------- ----------------------
(DOLLARS IN THOUSANDS) 1998 1999 1998 1999
- -------------------------------------------------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
Balance, beginning of period...................... $478,133 $450,403 $451,692 $459,328
Loans charged off:
Commercial, financial and industrial............ 10,765 15,080 21,966 27,570
Construction.................................... -- -- 3 --
Mortgage........................................ 3,997 84 4,992 724
Consumer........................................ 5,173 2,978 24,206 10,790
Lease financing................................. 640 785 1,971 2,559
Foreign(1)...................................... -- -- -- 14,127
-------- -------- -------- --------
Total loans charged off....................... 20,575 18,927 53,138 55,770
Recoveries of loans previously charged off:
Commercial, financial and industrial............ 3,187 3,909 17,788 11,479
Construction.................................... -- -- 3 --
Mortgage........................................ 1,048 49 2,705 452
Consumer........................................ 3,717 1,605 11,389 6,242
Lease financing................................. 95 238 273 581
-------- -------- -------- --------
Total recoveries of loans previously charged
off......................................... 8,047 5,801 32,158 18,754
-------- -------- -------- --------
Net loans charged off....................... 12,528 13,126 20,980 37,016
Provision for credit losses....................... 10,000 20,000 45,000 35,000
Foreign translation adjustment and other net
additions (deductions)(2)....................... (1,888) 152 (1,995) 117
-------- -------- -------- --------
Balance, end of period............................ $473,717 $457,429 $473,717 $457,429
======== ======== ======== ========
Allowance for credit losses to total loans........ 2.02% 1.82% 2.02% 1.82%
Provision for credit losses to net loans charged
off............................................. 79.82 152.37 214.49 94.55
Recoveries of loans to loans charged off in the
previous period................................. 54.88 43.66 98.76 50.90
Net loans charged off to average loans outstanding
for the period(3)............................... 0.21 0.21 0.12 0.20
</TABLE>

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

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

(2) Include transfer of reserve for trading account assets of $1.9 million in
September 1998.

(3) Annualized.

Total loans charged off in the third quarter of 1999 decreased by
$1.6 million from the third quarter of 1998, primarily due to decreases in
mortgage and consumer loans charged off of $3.9 million and $2.2 million,
respectively, as portfolio quality improved, partially offset by a $4.3 million
increase in

33
<PAGE>
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.

The third quarter's recoveries of loans previously charged off decreased by
$2.2 million from the same period in 1998. However, the percentage of net loans
charged off to average loans remained constant at 0.21 percent. At
September 30, 1999, the allowance for credit losses exceeded the net loans
charged off during the third quarter of 1999, reflecting management's belief,
based on the foregoing analysis, that there are additional losses inherent in
the portfolio.

Total loans charged off in the first nine months of 1999 increased by
$2.6 million over the first nine months of 1998, primarily due to a
$14.1 million charge-off of a loan from a single foreign relationship as
previously described and an increase in commercial, financial and industrial
loan charge-offs of $5.6 million, partially offset by a $13.4 million decrease
in consumer loans charged off (related to the sale of the credit card portfolio
in 1998) and a $4.3 million decrease in mortgage loans charged off, reflecting
improvements in portfolio quality. Recoveries of loans previously charged off
decreased by $13.4 million while the percentage of net loans charged off to
average loans increased from 0.12 percent to 0.20 percent for the nine months
ended September 30, 1998 and 1999, respectively. Historical net charge-offs are
not necessarily indicative of the amount of net charge-offs that we will realize
in the future.

NONPERFORMING ASSETS

<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30,
(DOLLARS IN THOUSANDS) 1998 1998 1999
- ------------------------------------------------------- -------------- ------------- --------------
<S> <C> <C> <C>
Commercial, financial and industrial................... $ 55,407 $ 60,703 $146,521
Construction........................................... 4,377 4,359 4,334
Commercial mortgage.................................... 8,163 8,254 4,045
Other.................................................. -- 5,134 --
-------- -------- --------
Total nonaccrual loans............................. 67,947 78,450 154,900
Foreclosed assets...................................... 13,452 11,400 3,357
-------- -------- --------
Total nonperforming assets......................... $ 81,399 $ 89,850 $158,257
======== ======== ========
Allowance for credit losses............................ $473,717 $459,328 $457,429
======== ======== ========
Nonaccrual loans to total loans........................ 0.29% 0.32% 0.62%
Allowance for credit losses to nonaccrual loans........ 697.19 585.50 295.31
Nonperforming assets to total loans and foreclosed
assets............................................... 0.35 0.37 0.63
Nonperforming assets to total assets................... 0.26 0.28 0.49
</TABLE>

At September 30, 1999, nonperforming assets totaled $158.3 million, an
increase of $76.9 million, or 94 percent, from a year earlier. The increase was
concentrated among several large credits in different industry sectors. Although
the percentage increase is significant, the actual amount of nonperforming
assets remains relatively low. We do not believe that the magnitude of this
increase is indicative of an ongoing trend.

Nonaccrual loans as a percentage of total loans were 0.29 percent at
September 30, 1998, compared with 0.62 percent at September 30, 1999.
Nonperforming assets as a percentage of total loans and foreclosed assets
increased to 0.63 percent at September 30, 1999 from 0.35 percent at
September 30, 1998.

34
<PAGE>
LOANS 90 DAYS OR MORE PAST DUE AND STILL ACCRUING

LIQUIDITY

Liquidity refers to 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. 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.

Core deposits provide us with a sizable source of relatively stable and
low-cost funds. In the third quarter of 1999, lower cost sources of funds, which
include noninterest bearing deposits and interest bearing core deposits, funded
63 percent of average earning assets. Most of the remaining funding was 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.

REGULATORY CAPITAL

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

<TABLE>
<CAPTION>
MINIMUM
SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30, REGULATORY
(DOLLARS IN THOUSANDS) 1998 1998 1999 REQUIREMENT
- ------------------------------------------- -------------- ------------- -------------- -----------
<S> <C> <C> <C> <C>
CAPITAL COMPONENTS
Tier 1 capital............................. $ 2,876,605 $ 2,965,865 $ 3,216,976
Tier 2 capital............................. 598,027 604,938 605,381
----------- ----------- -----------
Total risk-based capital................... $ 3,474,632 $ 3,570,803 $ 3,822,357
=========== =========== ===========
Risk-weighted assets....................... $30,176,967 $30,753,030 $32,378,472
=========== =========== ===========
Quarterly average assets................... $30,696,414 $31,627,022 $31,969,687
=========== =========== ===========
CAPITAL RATIOS
Total risk-based capital................... 11.51% 11.61% 11.81% 8.0%
Tier 1 risk-based capital.................. 9.53 9.64 9.94 4.0
Leverage ratio(1).......................... 9.37 9.38 10.06 4.0
</TABLE>

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

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

35
<PAGE>
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, 1998, our Tier 1 risk-based capital ratio at
September 30, 1999 increased 30 basis points to 9.94 percent, our total
risk-based capital ratio increased 20 basis points to 11.81 percent, and our
leverage ratio increased 68 basis points to 10.06 percent. The increases in the
capital ratios were primarily attributable to the issuance of $350 million in
redeemable preferred securities offset by the share repurchase, which occurred
in the first quarter, 1999.

As of September 30, 1999, management believes the capital ratios of Union
Bank of California, N.A. met all regulatory minimums of a "well-capitalized"
institution.

YEAR 2000

The year 2000 problem exists because many computer programs use only the
last two digits to refer to a year. This convention could affect date-sensitive
calculations that treat "00" as the year 1900, rather than as the year 2000.
Another issue is that the year 2000 is a leap year and some programs may not
properly provide for February 29, 2000.

This discussion of the implications of the year 2000 problem for us contains
numerous forward-looking statements based on inherently uncertain information.
The cost of the project and the date on which we plan to complete the internal
year 2000 modifications are based on management's best estimates of future
events. See details with respect to costs for year 2000 on page 28. The material
assumptions underlying the estimated cost are the expenses incurred to date, the
cost and continued availability of internal and external resources and the time
required to accomplish remaining tasks. We cannot guarantee, however, these
estimates, and actual results could differ. Moreover, although management
believes preparations will be adequate, situations may occur that could have a
material adverse effect on us. For example, we place a high degree of reliance
on third parties, such as customers, vendors, utilities and other financial and
governmental institutions. Although we are assessing the readiness of these
third parties and preparing contingency plans, their performance may affect us
adversely.

READINESS

Preparation for year 2000 has been, and continues to be, among our highest
priorities, and we are preparing for the century change with a comprehensive
enterprise-wide year 2000 program. We have largely completed the activities
necessary to ensure our products and services are year 2000 ready. We expect our
products and services and their associated computer systems to operate in year
2000 just as they do today.

Although our work has been focused on assuring that our products and
services are year 2000 ready, we cannot guarantee that all systems and services
used by us and our customers will function without error before, at, or after
January 1, 2000. Service delivery may still be affected by the performance of
third parties with whom we exchange data, or by disruption in services not under
our control, including, but not limited to, utility services, telecommunication
facilities, funds transfer systems and networks, and other third party
providers. While the nature of computer systems, programming and
interdependencies make it impossible for us to guarantee that disruptions will
not occur, we believe our year 2000 efforts will avoid significant problems and
will enable us to rapidly address and correct any problems that do arise.

We have focused our efforts on identifying all major systems and we have
sought external and internal resources to renovate and test these systems. We
have tested purchased software, internally developed systems and systems
supported by external parties as part of the program. We are continuing to
evaluate customers and vendors that have significant relationships with us to
determine whether they are adequately preparing for the year 2000. In addition,
we have developed contingency plans to reduce the impact of some potential
events that may occur. We cannot guarantee, however, that the systems of

36
<PAGE>
vendors or customers with whom we do business will be completed on a timely
basis, or that contingency plans will shield operations from failures that may
occur.

Our year 2000 program is comprised of numerous individual projects that
address the following broad areas:

- data processing systems,

- telecommunications and data networks,

- building facilities and security systems,

- vendor risk,

- customer risk,

- contingency planning, and

- communications.

In addition to testing individual systems, we have conducted integrated
contingency testing of our systems identified as vital to the continuance of a
broad core business activity. Contingency testing of these vital systems and
many other systems occurred in a separate computer environment where dates are
set forward in order to identify and correct problems that might not otherwise
become evident until processing in the new century begins. This testing,
referred to as "Time Machine Integrated Contingency Testing", has been completed
for the year-end and February "leap day" periods. It will be conducted again for
the year-end period in the fourth quarter 1999.

Virtually all projects involving system testing have been completed, and
based on these results we believe that our products and services are year 2000
ready. We do not significantly rely on "embedded technology" in our critical
processes. "Embedded technology", which means microprocessor-controlled devices
as opposed to multi-purpose computers, does control some building security and
operations, such as power management, ventilation, and building access. All
building facilities have been evaluated, and important systems in key buildings
are expected to operate properly.

Our attention is now concentrated on preparing for the millennium change
period itself, and we are identifying projects to accomplish this. Even though
our computer systems have been modified and tested to operate properly after the
century date change, we recognize that the millennium change itself will be an
event and in the weeks around year-end we may be subject to special demands.
These potential demands could include higher volumes of customer inquiries and
transactions, increased requests for currency and operational disruptions caused
by external events. We are preparing for the event period and reconfirming the
readiness of key systems and suppliers.

We rely on vendors and customers, and we are addressing year 2000 issues
with both groups. We have performed risk assessments and we have taken
appropriate measures to minimize risk as much as possible for those vendors that
we have assigned a risk rating of medium or high. Presently, approximately
4 percent are rated as medium or high risk, and risk mitigation planning is
complete. We have, however, no viable alternatives for some suppliers, such as
power distribution and local telephone companies. As with all financial
institutions, we place a high degree of reliance on the systems of other
institutions, including governmental agencies, to settle transactions. We have
successfully tested principal settlement methods associated with major payment
systems.

We also rely on our customers to make necessary preparations for the year
2000 so that their business operations will not be interrupted, thus threatening
their ability to honor their financial commitments. We have identified over
2,700 borrowers, capital market counterparties, funding sources, and large
depositors that constitute our customers as having financial volumes
sufficiently large to warrant our inquiry and assessment of their year 2000
preparation. The financial volumes included loans and unused commitments,
collected deposit balances, automated clearinghouse transactions, foreign
exchange, and derivatives. We have completed initial and follow-up inquiries and
written assessments of customers representing approximately 99 percent of the
identified financial volume.

37
<PAGE>
Our borrowers, the population of customers with loans and unused commitments
outstanding, pose the highest level of potential concern. As of September 30,
1999, our ongoing assessment of these borrowers resulted in the following
assignments of risk: 97 percent low risk, 3 percent medium risk and less than
1 percent high risk. We have established individual risk mitigation plans for
all customers rated as high risk. The risk mitigation plans further evaluate
whether year 2000 issues will materially affect the customer's cash flow, asset
values, and collateral pledged to us. We seek to implement specific actions that
will keep the borrowers focused on corrective measures to reduce potential
credit risk. The risk mitigation plans use the normal credit process that we
employ to manage credit risk and require the concurrence of a credit
administrator.

RISKS

The principal risks associated with the year 2000 problem can be grouped
into three categories:

- incomplete preparation of our operations for the next century,

- disruption of our operations due to operational failures of third
parties, and

- business interruption among fund providers and obligors such that
expected funding and repayment does not take place.

The only risk largely under our control is preparing our internal operations
for the year 2000. We, like other financial institutions, are heavily dependent
on our computer systems. The complexity of these systems and their
interdependence make it impractical to convert to alternative systems without
interruptions if necessary modifications are not completed on schedule.
Management believes the necessary modifications have been made and adequately
tested.

Operational failures among our customers could affect their ability to
continue to provide funding or meet obligations when due. The information we
develop in the customer assessments described earlier allows us to identify
those customers that exhibit a risk of not making adequate preparations for the
century change. We are taking appropriate actions to manage these risks.

Failure of third parties may jeopardize our operations, but the seriousness
of this risk depends on the nature and duration of the failures. The most
serious impact on our operations from vendors would result if basic services
such as telecommunications, electric power, and services provided by other
financial institutions and governmental agencies were disrupted. Some public
disclosure about readiness preparation among basic infrastructure and other
suppliers is now available. We are unable, however, to estimate the likelihood
of significant disruptions among our basic infrastructure suppliers. In view of
the unknown probability of occurrence and impact on operations, we consider the
loss of basic infrastructure services to be the most reasonably likely worst
case year 2000 scenario.

PROGRAM ASSESSMENT

The Year 2000 Program Office reports on progress monthly to our Executive
Management Committee and quarterly to the Audit and Examining Committee of the
Board. The Internal Audit Division and the National Bank Examiners regularly
assess our year 2000 preparations and report quarterly to the Audit and
Examining Committee.

CONTINGENCY PLANS

Our business units have contingency plans that have been completed and
tested. These plans anticipate various types of communication and operational
problems, and document alternatives that allow continued service and ensure the
business unit is recoverable following a disaster. As a result of review
procedures, business resumption contingency plans for over 90 individual
critical business units have been modified to include the following year 2000
considerations:

- Absenteeism

- Inaccessible physical site

- Local telecommunications and network failure

38
<PAGE>
- Desktop workstation and office equipment failure

- Support system failure

- Operational disruptions

- Vendors and service provider failure

We are making preparations to meet the unusual demands expected around the
millennium change event such as increased levels of customer visits, higher call
volumes and increased demand for currency. Plans have been developed so that we
are prepared to respond to any interruptions that may occur and so that we can
provide satisfactory service to our customers.

OTHER RELATED DISCLOSURES

HighMark Capital Management, Inc. is a registered investment advisor and
Union Bank of California Investment Services, Inc. is a broker-dealer. Each of
these subsidiaries makes publicly available separate year 2000 reports. You can
find additional year 2000 information in those reports.

FORWARD-LOOKING STATEMENTS

Our management frequently makes forward-looking statements in Securities and
Exchange Commission filings, such as this one, press releases, news articles,
conference calls with Wall Street analysts and when we are speaking on behalf of
UnionBanCal. The forward-looking statements we make 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. There are numerous factors 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 position, or
results of operations. Some, but not all, of these factors are discussed below.

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. In the early 1990's, the California economy
experienced an economic recession that resulted in increases in the level of
delinquencies and losses for us and many of the state's other financial
institutions. If California were to experience another recession, it is expected
that our level of problem assets would increase accordingly. The current
economic crisis in Asia is expected to continue to negatively impact the
economic conditions in California, which could adversely affect our business.

ADVERSE ECONOMIC FACTORS AFFECTING CERTAIN INDUSTRIES COULD HAVE AN ADVERSE
EFFECT ON OUR CUSTOMERS AND THEIR ABILITY TO MAKE PAYMENTS TO US. We are also
subject to certain industry-specific economic factors. For example, a portion of
our total loan portfolio is related to real estate obligations, and a portion of
our recent growth has been fueled by the general real estate recovery in
California. 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. The weather
effects such as those of "El Nino," combined with low commodity prices, may
adversely affect the agricultural industry and, consequently, may impact our
business negatively.

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. In addition, changes
in market interest rates, or changes in the relationships between short-term and
long-term market interest rates, or changes in the relationships between
different interest rate indices, could affect the interest rates charged on
interest earning assets differently than the interest rates paid on interest
bearing liabilities. This difference could result in an increase in interest
expense relative to interest income. An increase in market interest rates also
could

39
<PAGE>
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.

SHAREHOLDER VOTES ARE CONTROLLED BY THE BANK OF TOKYO-MITSUBISHI, LTD. The
Bank of Tokyo-Mitsubishi, Ltd. owns a majority of the outstanding shares of our
common stock. As a result, The Bank of Tokyo-Mitsubishi can elect all of our
directors and can control the vote on all matters, including determinations such
as: approval of mergers or other business combinations; sales of all or
substantially all of our assets; any matters submitted to a vote of our
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 matters that might
be favorable to The Bank of Tokyo-Mitsubishi. The Bank of Tokyo-Mitsubishi'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. A
majority of our directors are not officers or employees of UnionBanCal
Corporation or any of our affiliates, including The Bank of Tokyo-Mitsubishi.
However, because of The Bank of Tokyo-Mitsubishi's control over the election of
our directors, The Bank of Tokyo-Mitsubishi 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'S FINANCIAL CONDITION COULD ADVERSELY AFFECT
OUR OPERATIONS. Although we fund our operations independently of The Bank of
Tokyo-Mitsubishi and believe our business is not necessarily closely related to
The Bank of Tokyo-Mitsubishi's business or outlook, The Bank of
Tokyo-Mitsubishi's credit ratings may affect our credit ratings. The Bank of
Tokyo-Mitsubishi's credit ratings were downgraded in October 1998 by Standard
and Poor's Corporation and are currently on Moody's Investors Service, Inc.'s
credit watch with negative implications. Any future downgrading of The Bank of
Tokyo-Mitsubishi's credit rating could adversely affect our credit ratings.
Therefore, as long as The Bank of Tokyo-Mitsubishi maintains a majority interest
in us, deterioration in The Bank of Tokyo-Mitsubishi's 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-Mitsubishi is also subject
to regulatory oversight and review. 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.

POTENTIAL CONFLICTS OF INTEREST WITH THE BANK OF TOKYO-MITSUBISHI, LTD.
COULD ADVERSELY AFFECT US. As part of The Bank of Tokyo-Mitsubishi's normal
risk management processes, The Bank of Tokyo-Mitsubishi manages global credit
exposures and concentrations on an aggregate basis, including us. Therefore, at
certain levels, our ability to approve certain credits and categories of
customers is subject to concurrence by The Bank of Tokyo-Mitsubishi. We may wish
to extend credit to the same customer as The Bank of Tokyo-Mitsubishi. Our
ability to do so may be limited for various reasons, including The Bank of
Tokyo-Mitsubishi's aggregate credit exposure and marketing policies. Our
directors' and officers' ownership interests in The Bank of Tokyo-Mitsubishi's
common stock or service as a director or officer or other employee of both us
and The Bank of Tokyo-Mitsubishi could create or appear to create potential
conflicts of interest, especially since both of us compete in the United States
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. In

40
<PAGE>
addition, there have been a number of recent mergers involving financial
institutions located in California. Some of the merged banks, such as
Norwest/Wells Fargo, employ a strong community-based banking model of doing
business that may increase competition with our distinctive combination of
traditional community bank service coupled with a large branch network.

RESTRICTIONS ON DIVIDENDS AND OTHER DISTRIBUTIONS COULD LIMIT AMOUNTS
PAYABLE TO US. 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 liquidates,
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. If, however, we are a creditor of the
subsidiary with recognized claims against it, we would be in the same position.

ADVERSE EFFECTS OF BANKING REGULATIONS OR CHANGES IN BANKING REGULATIONS
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. 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'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 Board
of Governors of the Federal Reserve System, 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.

POSSIBLE DISRUPTION OF BUSINESS DUE TO THE YEAR 2000 PROBLEM. The year 2000
problem results from an inability of computer systems to accurately recognize
dates on and after the year 2000. The year 2000 problem is a broad business
issue that extends beyond computer failures to possible failures of entire
infrastructures, such as telecommunications and data networks, building
facilities and security systems and systems of other institutions, including
governmental agencies, to settle transactions. Virtually all of our projects
involving system testing have been completed, and based on these results we
believe that our projects and services are year 2000 ready. We are preparing for
the century change with an enterprise-wide year 2000 program. We have identified
all of the major application and processing systems, and sought external and
internal resources to replace and test the systems. We are testing purchased
software, internally developed systems and systems supported by external parties
as part of the program. We are evaluating customers and vendors that have
significant relationships with us to determine whether they are adequately
preparing for the year 2000. In addition, we are developing contingency plans to
reduce the impact of some potential events that may occur. However, we cannot
guarantee that the systems of vendors or customers with which we do business
will be completed on a timely basis, or that contingency plans will shield
operations from failures that may occur. The year 2000 problem poses the
following principal risks to our business: disruption of our business due to our
failure to achieve year 2000 readiness; disruption of our business due to
failure of third parties to achieve year 2000 readiness; and disruption in our
funding and repayment operations due to failure of fund providers and obligors
to achieve year 2000 readiness. We estimate that the total cost of the year 2000
project will be approximately $50 million. We are funding the cost of the year
2000 project with normal operating cash flow. We are staffing our year 2000
project with external people as well as internal staff re-deployed from less
time-sensitive assignments. Our estimated

41
<PAGE>
total cost could change further as we approach the millennium. Because of the
range of possible issues and the large number of variables involved, however, we
cannot definitively quantify the potential costs. For example, our remediation
efforts or the efforts of third parties may be unsuccessful. Any failure of such
remediation efforts could result in a loss of business, damage to our reputation
or legal liability. Consequently, such failures could have a material adverse
effect on our business.

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 has announced its intention to maintain its majority ownership
in us, The Bank of Tokyo-Mitsubishi may sell shares of our common stock in
compliance with the federal securities laws. By virtue of The Bank of
Tokyo-Mitsubishi's current control of us, The Bank of Tokyo-Mitsubishi 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 could sell shares of our common stock
without registration pursuant to Rule 144 under the Securities Act. 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 our
market price. If The Bank of Tokyo-Mitsubishi sells or transfers shares of our
common stock as a block, another person or entity could become our controlling
shareholder.

STRATEGIES. In connection with our strategic repositioning, we have
developed long-term financial performance goals, which we expect to result from
successful implementation 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:

- deterioration of our asset quality,

- our inability to reduce noninterest expenses,

- our inability to increase noninterest income,

- our inability to decrease reliance on asset revenues,

- regulatory and other impediments associated with making acquisitions,

- deterioration in general economic conditions, especially in our core
markets,

- decreases in net interest margins,

- increases in competition,

- adverse regulatory developments,

- unexpected increases in costs related to potential acquisitions, and

- unexpected increased costs associated with implementation of our
efficiency improvement project.

RISKS ASSOCIATED WITH POTENTIAL ACQUISITIONS OR DIVESTITURES OR
RESTRUCTURING. We may acquire or invest in companies, technologies, services or
products that complement our business. In addition, we continue to evaluate
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
potentially dilutive issuance of equity securities, significant write-offs, the
amortization of expenses 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 would involve numerous additional risks including
difficulties in the assimilation or separation of operations, services, products
and personnel, the diversion of management's attention from other business
concerns, the disruption of our business, the entry into markets in which we
have little or no direct prior experience and the potential loss of key
employees. There can be no assurance that we would be successful in overcoming
these or any other significant risks encountered.

ITEM 3. MARKET RISK.

Information concerning our exposure to market risk, which has remained
relatively unchanged from December 31, 1998, 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, 1998.

42
<PAGE>
PART II. OTHER INFORMATION

ITEM 4. OTHER INFORMATION

ANNUAL MEETING OF SHAREHOLDERS: The Annual Meeting of Shareholders has been
set by the Board of Directors to be held on Wednesday, April 26, 2000, at
11:00 a.m. Shareholders who expect to present a proposal at the 2000 Annual
Meeting of Shareholders for publication in the Company's proxy statement and
action on the proxy form or otherwise for such meeting must submit their
proposal by December 31, 1999. The proposal must be mailed to the Corporate
Secretary of the Company at 400 California Street, Mail Code 1-001-18, San
Francisco, CA 94104. Without such notice, proxy holders appointed by the Board
of Directors of the Company will be entitled to exercise their discretionary
voting authority when the proposal is raised at the annual meeting, without any
discussion of the proposal in the proxy statement.

ITEM 5. EXHIBITS AND REPORTS ON FORM 8-K.

(a) Exhibits Index:

<TABLE>
<CAPTION>
NO. DESCRIPTION
- --------------------- ------------------------------------------------------------
<C> <S>
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 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, 1999)*(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 Supplemental Executive Retirement
Plan. (Effective January 1, 1988) (Amended and restated as
of January 1, 1997)*(3)
10.7 Union Bank Executive Wellness Plan. (Effective January 1,
1994)*(7)
10.8 Union Bank Financial Services Reimbursement Program.
(Effective January 1, 1996)*(8)
10.9 Performance Share Plan. (Effective January 1, 1997)*(3)
10.10 Service Agreement Between Union Bank of California and The
Bank of Tokyo-Mitsubishi Ltd. (Effective October 1,
1997)*(3)
10.11 Management Stock Plan. (As restated effective January 1,
2000)*(5)
27 Financial Data Schedule(9)
</TABLE>

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

(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 10-Q for the quarter ended June 30, 1999.

(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 (filed as
exhibit 10.12).

(8) Incorporated by reference to Form 8-K dated April 1, 1996 (filed as
exhibit 10.14).

(9) Filed herewith.

* Management contract or compensatory plan, contract or arrangement.

(b) Reports on Form 8-K: None

43
<PAGE>
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.

<TABLE>
<S> <C> <C>
UNIONBANCAL CORPORATION
(Registrant)

By:
-----------------------------------------
David I. Matson
EXECUTIVE VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER

By:
-----------------------------------------
David A. Anderson
SENIOR VICE PRESIDENT AND CONTROLLER

Dated: November 12, 1999
</TABLE>

<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND STATEMENTS OF INCOME AND THE ACCOMPANYING TABLES
OF FORM 10-Q. INFORMATION HEREIN IS QUALIFIED BY REFERENCE TO SUCH STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 2,209,694
<INT-BEARING-DEPOSITS> 194,535
<FED-FUNDS-SOLD> 371,523
<TRADING-ASSETS> 245,762
<INVESTMENTS-HELD-FOR-SALE> 3,096,494
<INVESTMENTS-CARRYING> 87,221
<INVESTMENTS-MARKET> 86,611
<LOANS> 25,185,682
<ALLOWANCE> 457,429
<TOTAL-ASSETS> 32,518,035
<DEPOSITS> 25,175,921
<SHORT-TERM> 2,761,000
<LIABILITIES-OTHER> 743,522
<LONG-TERM> 648,000
0
0
<COMMON> 1,416,680
<OTHER-SE> 1,500,903
<TOTAL-LIABILITIES-AND-EQUITY> 32,518,035
<INTEREST-LOAN> 1,404,318
<INTEREST-INVEST> 161,851
<INTEREST-OTHER> 23,768
<INTEREST-TOTAL> 1,589,937
<INTEREST-DEPOSIT> 370,786
<INTEREST-EXPENSE> 542,940
<INTEREST-INCOME-NET> 1,046,997
<LOAN-LOSSES> 35,000
<SECURITIES-GAINS> 3,899
<EXPENSE-OTHER> 996,866
<INCOME-PRETAX> 447,586
<INCOME-PRE-EXTRAORDINARY> 447,586
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 304,803
<EPS-BASIC> 1.83
<EPS-DILUTED> 1.82
<YIELD-ACTUAL> 4.86
<LOANS-NON> 154,900
<LOANS-PAST> 10,722
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 459,328
<CHARGE-OFFS> 55,770
<RECOVERIES> 18,754
<ALLOWANCE-CLOSE> 457,429
<ALLOWANCE-DOMESTIC> 273,300
<ALLOWANCE-FOREIGN> 16,600
<ALLOWANCE-UNALLOCATED> 167,500

</TABLE>