UNIONBANCAL CORP, 10-Q, 1998-08-14

UNIONBANCAL CORP
10-Q, 1998-08-14
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 JUNE 30, 1998

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

Telephone: (415) 765-2126

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

Number of shares of Common Stock outstanding at July 31, 1998: 55,002,950

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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:
Consolidated Statements of Income................................................................... 4
Consolidated Balance Sheets......................................................................... 5
Consolidated Statements of Changes in Shareholders' Equity.......................................... 6
Consolidated Statements of Cash Flows............................................................... 7
Notes to Consolidated Financial Statements.......................................................... 8

Item 2. Management's Discussion and Analysis:
Introduction........................................................................................ 13
Summary............................................................................................. 13
Net Interest Income................................................................................. 15
Noninterest Income.................................................................................. 18
Noninterest Expense................................................................................. 19
Year 2000........................................................................................... 20
Income Tax Expense.................................................................................. 23
Loans............................................................................................... 23
Cross-Border Outstandings........................................................................... 24
Allowance for Credit Losses......................................................................... 25
Nonperforming Assets................................................................................ 27
Loans 90 Days or More Past Due and Still Accruing................................................... 27
Liquidity........................................................................................... 27
Regulatory Capital.................................................................................. 28

Item 3. Market Risk................................................................................... 28

PART II
OTHER INFORMATION

Item 4. Submission of Matters to a Vote of Security Holders........................................... 29

Item 5. Other Information............................................................................. 30

Item 6. Exhibits and Reports on Form 8-K.............................................................. 30

Signatures............................................................................................ 31
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION

UNIONBANCAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL HIGHLIGHTS
(UNAUDITED)

<TABLE>
<CAPTION>
PERCENT CHANGE TO
FOR THE THREE MONTHS ENDED JUNE 30, 1998 FROM:
---------------------------------- ------------------------
JUNE 30, MARCH 31, JUNE 30, MARCH 31, JUNE 30,
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 1998 1998 1997 1998 1997
- ----------------------------------------------------- ---------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS:
Net interest income (taxable-equivalent)(1)........ $ 326,708 $ 318,646 $ 308,401 2.53% 5.94%
Provision for credit losses........................ 15,000 20,000 -- (25.00) nm
Noninterest income................................. 147,994 128,030 111,021 15.59 33.30
Noninterest expense................................ 277,325 268,475 255,753 3.30 8.43
---------- ---------- ----------
Income before income taxes(1)...................... 182,377 158,201 163,669 15.28 11.43
Taxable-equivalent adjustment...................... 1,152 1,196 1,385 (3.68) (16.82)
Income tax expense................................. 72,704 61,428 65,739 18.36 10.59
---------- ---------- ----------
Net income......................................... $ 108,521 $ 95,577 $ 96,545 13.54% 12.40%
---------- ---------- ----------
---------- ---------- ----------
NET INCOME APPLICABLE TO:
Common stock....................................... $ 102,093 $ 90,027 $ 88,097 13.40% 15.89%
---------- ---------- ----------
---------- ---------- ----------
Parent direct interest in bank subsidiary.......... $ 6,428 $ 5,550 $ 5,621 15.82% 14.36%
---------- ---------- ----------
---------- ---------- ----------
PER COMMON SHARE:
Net income--basic.................................. $ 1.86 $ 1.64 $ 1.61 13.41% 15.53%
Net income--diluted................................ 1.85 1.63 1.60 13.50 15.63
Dividends.......................................... 0.42 0.42 0.35 -- 20.00
Book value (end of period)......................... 48.79 47.32 43.15 3.11 13.07
Common shares outstanding (end of period).......... 55,001,657 54,942,323 54,866,952 0.11 0.25
Weighted average common shares
outstanding--basic............................... 54,981,777 54,932,516 54,795,625 0.09 0.34
Weighted average common shares
outstanding--diluted............................. 55,206,775 55,150,411 54,947,633 0.10 0.47

BALANCE SHEET (END OF PERIOD):
Total assets....................................... $30,922,575 $30,904,567 $30,171,952 0.06% 2.49%
Total loans........................................ 22,958,328 22,504,043 22,129,118 2.02 3.75
Nonperforming assets............................... 122,943 132,403 176,199 (7.14) (30.22)
Total deposits..................................... 23,412,519 23,411,367 22,352,919 -- 4.74
Subordinated capital notes......................... 348,000 348,000 482,000 -- (27.80)
Preferred stock.................................... -- -- 135,000 -- nm
Common equity...................................... 2,683,309 2,599,638 2,367,630 3.22 13.33

BALANCE SHEET (PERIOD AVERAGE):
Total assets....................................... $29,756,517 $29,865,256 $29,439,297 (0.36)% 1.08%
Total loans........................................ 22,698,082 22,611,092 21,689,154 0.38 4.65
Earning assets..................................... 26,724,142 26,502,646 26,006,291 0.84 2.76
Total deposits..................................... 22,154,050 22,431,446 21,707,498 (1.24) 2.06
Common equity...................................... 2,642,675 2,565,721 2,330,809 3.00 13.38

FINANCIAL RATIOS:
Return on average assets(2)........................ 1.46% 1.30% 1.32%
Return on average common equity(3)................. 15.50 14.23 15.16
Efficiency ratio(4)................................ 58.47 60.15 60.87
Net interest margin(1)............................. 4.90 4.85 4.75
Tier 1 risk-based capital ratio.................... 9.28 9.16 9.19
Total risk-based capital ratio..................... 11.34 11.23 11.59
Leverage ratio..................................... 9.27 8.94 8.68
Allowance for credit losses to total loans......... 2.08 2.07 2.27
Allowance for credit losses to nonaccrual loans.... 446.71 414.44 343.58
Net loans charged off to average total loans(5).... 0.05 0.10 0.38
Nonperforming assets to total loans and foreclosed
assets........................................... 0.54 0.59 0.80
Nonperforming assets to total assets............... 0.40 0.43 0.58
</TABLE>

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(1) Amounts are on a taxable-equivalent basis using the federal statutory tax
rate of 35 percent.
(2) Based on annualized net income.
(3) Based on annualized net income applicable to common stock.
(4) 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 $(0.2) million in the second and first quarters of 1998 and
$0.5 million in the second quarter of 1997.
(5) Annualized.
nm = not meaningful

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

<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
-----------------------------------
<S> <C> <C> <C>
JUNE 30, JUNE 30, PERCENT
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 1998 1997 CHANGE
- ------------------------------------------------------------------------------- ---------- ---------- -----------
RESULTS OF OPERATIONS:
Net interest income (taxable-equivalent)(1).................................. $ 645,354 $ 603,853 6.87%
Provision for credit losses.................................................. 35,000 -- nm
Noninterest income........................................................... 276,024 225,807 22.24
Noninterest expense.......................................................... 545,800 508,891 7.25
---------- ----------
Income before income taxes(1)................................................ 340,578 320,769 6.18
Taxable-equivalent adjustment................................................ 2,348 2,806 (16.32)
Income tax expense........................................................... 134,132 128,916 4.05
---------- ----------
Net income................................................................... $ 204,098 $ 189,047 7.96%
---------- ----------
---------- ----------
NET INCOME APPLICABLE TO:
Common stock................................................................. $ 192,120 $ 172,388 11.45%
---------- ----------
---------- ----------
Parent direct interest in bank subsidiary.................................... $ 11,978 $ 11,006 8.83%
---------- ----------
---------- ----------
PER COMMON SHARE:
Net income--basic............................................................ $ 3.50 $ 3.15 11.11%
Net income--diluted.......................................................... 3.48 3.14 10.83
Dividends.................................................................... 0.84 0.70 20.00
Book value (end of period)................................................... 48.79 43.15 13.07
Common shares outstanding (end of period).................................... 55,001,657 54,866,952 0.25
Weighted average common shares outstanding--basic............................ 54,957,282 54,780,158 0.32
Weighted average common shares outstanding--diluted.......................... 55,175,618 54,920,995 0.46

BALANCE SHEET (END OF PERIOD):
Total assets................................................................. $30,922,575 $30,171,952 2.49%
Total loans.................................................................. 22,958,328 22,129,118 3.75
Nonperforming assets......................................................... 122,943 176,199 (30.22)
Total deposits............................................................... 23,412,519 22,352,919 4.74
Subordinated capital notes................................................... 348,000 482,000 (27.80)
Preferred stock.............................................................. -- 135,000 nm
Common equity................................................................ 2,683,309 2,367,630 13.33

BALANCE SHEET (PERIOD AVERAGE):
Total assets................................................................. $29,810,472 $29,116,709 2.38%
Total loans.................................................................. 22,654,828 21,452,401 5.61
Earning assets............................................................... 26,614,007 25,728,698 3.44
Total deposits............................................................... 22,291,982 21,618,719 3.11
Common equity................................................................ 2,604,411 2,296,397 13.41

FINANCIAL RATIOS:
Return on average assets(2).................................................. 1.38% 1.31%
Return on average common equity(3)........................................... 14.88 15.14
Efficiency ratio(4).......................................................... 59.28 61.23
Net interest margin(1)....................................................... 4.88 4.72
Tier 1 risk-based capital ratio.............................................. 9.28 9.19
Total risk-based capital ratio............................................... 11.34 11.59
Leverage ratio............................................................... 9.27 8.68
Allowance for credit losses to total loans................................... 2.08 2.27
Allowance for credit losses to nonaccrual loans.............................. 446.71 343.58
Net loans charged off to average total loans(5).............................. 0.08 0.20
Nonperforming assets to total loans and foreclosed assets.................... 0.54 0.80
Nonperforming assets to total assets......................................... 0.40 0.58
</TABLE>

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(1) Amounts are on a taxable-equivalent basis using the federal statutory tax
rate of 35 percent.
(2) Based on annualized net income.
(3) Based on annualized net income applicable to common stock.
(4) 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 $(0.4) million and $0.9 million in the first six months of
1998 and 1997, respectively.
(5) Annualized.
nm = not meaningful

3
<PAGE>
ITEM 1. FINANCIAL STATEMENTS

UNIONBANCAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)

<TABLE>
<CAPTION>
FOR THE THREE FOR THE SIX
MONTHS MONTHS
ENDED JUNE 30, ENDED JUNE 30,
-------------------- --------------------
<S> <C> <C> <C> <C>
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA) 1998 1997 1998 1997
- ----------------------------------------------------------------------- --------- --------- --------- ---------
INTEREST INCOME
Loans................................................................ $ 449,037 $ 438,979 $ 897,086 $ 861,497
Securities........................................................... 48,936 40,802 91,831 78,849
Interest bearing deposits in banks................................... 3,119 16,080 11,418 27,279
Federal funds sold and securities purchased under resale
agreements......................................................... 3,568 4,683 7,710 14,523
Trading account assets............................................... 7,336 4,119 12,604 7,546
--------- --------- --------- ---------
Total interest income............................................ 511,996 504,663 1,020,649 989,694
--------- --------- --------- ---------
INTEREST EXPENSE
Domestic deposits.................................................... 113,136 125,406 234,436 251,811
Foreign deposits..................................................... 22,073 19,488 45,650 37,397
Federal funds purchased and securities sold under repurchase
agreements......................................................... 19,541 15,492 33,616 25,883
Commercial paper..................................................... 22,067 24,876 43,462 44,729
Subordinated capital notes........................................... 5,332 4,821 11,086 10,324
Other borrowed funds................................................. 4,291 7,564 9,393 18,503
--------- --------- --------- ---------
Total interest expense........................................... 186,440 197,647 377,643 388,647
--------- --------- --------- ---------
NET INTEREST INCOME.................................................... 325,556 307,016 643,006 601,047
Provision for credit losses............................................ 15,000 -- 35,000 --
--------- --------- --------- ---------
Net interest income after provision for credit losses............ 310,556 307,016 608,006 601,047
--------- --------- --------- ---------
NONINTEREST INCOME
Service charges on deposit accounts.................................. 32,553 28,307 65,579 55,428
Trust and investment management fees................................. 30,036 25,696 58,029 49,594
International commissions and fees................................... 18,934 17,306 36,565 32,385
Merchant transaction processing fees................................. 13,738 14,283 28,117 27,327
Merchant banking fees................................................ 8,366 6,445 17,988 14,825
Securities gains, net................................................ -- 81 4,926 552
Other................................................................ 44,367 18,903 64,820 45,696
--------- --------- --------- ---------
Total noninterest income......................................... 147,994 111,021 276,024 225,807
--------- --------- --------- ---------
NONINTEREST EXPENSE
Salaries and employee benefits....................................... 152,112 137,173 302,495 277,961
Net occupancy........................................................ 21,679 22,884 43,704 42,514
Equipment............................................................ 13,964 14,143 27,803 27,830
Merchant transaction processing...................................... 11,513 10,545 21,593 20,267
Communications....................................................... 10,452 10,518 21,681 20,786
Advertising and public relations..................................... 8,302 7,218 14,353 13,227
Professional services................................................ 7,190 7,882 13,318 12,601
Data processing...................................................... 6,633 6,148 13,135 12,571
Printing and office supplies......................................... 6,488 6,087 12,823 12,256
Foreclosed asset expense (income).................................... (223) 465 (421) 876
Merger and integration............................................... -- -- -- 6,037
Other................................................................ 39,215 32,690 75,316 61,965
--------- --------- --------- ---------
Total noninterest expense........................................ 277,325 255,753 545,800 508,891
--------- --------- --------- ---------
Income before income taxes............................................. 181,225 162,284 338,230 317,963
Income tax expense..................................................... 72,704 65,739 134,132 128,916
--------- --------- --------- ---------
NET INCOME............................................................. $ 108,521 $ 96,545 $ 204,098 $ 189,047
--------- --------- --------- ---------
--------- --------- --------- ---------
NET INCOME APPLICABLE TO:
Common stock......................................................... $ 102,093 $ 88,097 $ 192,120 $ 172,388
--------- --------- --------- ---------
--------- --------- --------- ---------
Parent direct interest in bank subsidiary............................ $ 6,428 $ 5,621 $ 11,978 $ 11,006
--------- --------- --------- ---------
--------- --------- --------- ---------
NET INCOME PER COMMON SHARE--BASIC..................................... $ 1.86 $ 1.61 $ 3.50 $ 3.15
--------- --------- --------- ---------
--------- --------- --------- ---------
NET INCOME PER COMMON SHARE--DILUTED................................... $ 1.85 $ 1.60 $ 3.48 $ 3.14
--------- --------- --------- ---------
--------- --------- --------- ---------
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING--BASIC...................... 54,982 54,796 54,957 54,780
--------- --------- --------- ---------
--------- --------- --------- ---------
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING--DILUTED.................... 55,207 54,948 55,176 54,921
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>

See accompanying notes to consolidated financial statements.

4
<PAGE>
UNIONBANCAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
(UNAUDITED) (UNAUDITED)
JUNE 30, DECEMBER 31, JUNE 30,
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA) 1998 1997 1997
- ----------------------------------------------------------------------- ------------ ------------ ------------
<S> <C> <C> <C>
ASSETS
Cash and due from banks................................................ $ 2,485,158 $2,541,699 $ 2,340,247
Interest bearing deposits in banks..................................... 136,182 633,421 919,040
Federal funds sold and securities purchased under resale agreements.... 57,503 24,335 262,700
------------ ------------ ------------
Total cash and cash equivalents.................................... 2,678,843 3,199,455 3,521,987
Trading account assets................................................. 748,593 394,313 402,842
Securities available for sale.......................................... 3,312,933 2,538,386 2,531,733
Securities held to maturity (market value: June 30, 1998, $167,395;
December 31, 1997, $193,115; June 30, 1997, $252,188)................ 164,353 188,775 247,809
Loans (net of allowance for credit losses: June 30, 1998, $478,133;
December 31, 1997, $451,692; June 30, 1997, $502,114)................ 22,480,195 22,289,716 21,627,004
Due from customers on acceptances...................................... 430,141 773,339 700,074
Premises and equipment, net............................................ 397,014 406,299 410,831
Other assets........................................................... 710,503 794,982 729,672
------------ ------------ ------------
Total assets....................................................... $ 30,922,575 $30,585,265 $ 30,171,952
------------ ------------ ------------
------------ ------------ ------------
LIABILITIES
Domestic deposits:
Noninterest bearing.................................................. $ 9,608,033 $8,574,515 $ 7,674,300
Interest bearing..................................................... 11,800,528 12,666,458 12,983,561
Foreign deposits:
Noninterest bearing.................................................. 268,599 275,029 296,848
Interest bearing..................................................... 1,735,359 1,780,372 1,398,210
------------ ------------ ------------
Total deposits..................................................... 23,412,519 23,296,374 22,352,919
Federal funds purchased and securities sold under repurchase
agreements........................................................... 1,566,817 1,335,884 1,114,292
Commercial paper....................................................... 1,331,000 966,575 1,756,777
Other borrowed funds................................................... 171,091 476,010 528,385
Acceptances outstanding................................................ 430,141 773,339 700,074
Other liabilities...................................................... 823,477 709,784 597,648
Subordinated capital notes............................................. 348,000 348,000 482,000
------------ ------------ ------------
Total liabilities.................................................. 28,083,045 27,905,966 27,532,095
------------ ------------ ------------
SHAREHOLDERS' EQUITY
Parent direct interest in equity of bank subsidiary.................... 156,221 147,083 137,227
Preferred stock:
Authorized 5,000,000 shares 8 3/8% Noncumulative,
Series A, issued 1,350,000 shares as of June 30, 1997.............. -- -- 135,000
Common stock--$5 stated value:
Authorized 100,000,000 shares, issued 55,001,657 as of June 30, 1998,
54,916,010 as of December 31, 1997, and 54,866,952 as of June 30,
1997............................................................... 275,008 274,580 274,334
Additional paid-in capital............................................. 1,327,384 1,320,417 1,316,973
Retained earnings...................................................... 1,071,446 929,085 766,419
Accumulated other comprehensive income................................. 9,471 8,134 9,904
------------ ------------ ------------
Total shareholders' equity......................................... 2,839,530 2,679,299 2,639,857
------------ ------------ ------------
Total liabilities and shareholders' equity......................... $ 30,922,575 $30,585,265 $ 30,171,952
------------ ------------ ------------
------------ ------------ ------------
</TABLE>

See accompanying notes to consolidated financial statements.

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

<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED JUNE 30,
------------------------
<S> <C> <C>
(DOLLARS IN THOUSANDS) 1998 1997
- ---------------------------------------------------------------------------------------- ----------- -----------
PARENT DIRECT INTEREST IN EQUITY OF BANK SUBSIDIARY
Balance, beginning of period............................................................ $ 147,083 $ 128,689
Net income.............................................................................. 11,978 11,006
Other net comprehensive income.......................................................... 90 (34)
----------- -----------
Total net comprehensive income.......................................................... 12,068 10,972
Dividends on common stock............................................................... (2,930) (2,434)
----------- -----------
Balance, end of period................................................................ $ 156,221 $ 137,227
----------- -----------
PREFERRED STOCK
Balance, beginning of period............................................................ $ -- $ 135,000
Redemption of preferred stock........................................................... -- --
----------- -----------
Balance, end of period................................................................ $ -- $ 135,000
----------- -----------
COMMON STOCK
Balance, beginning of period............................................................ $ 274,580 $ 273,813
Dividend reinvestment plan.............................................................. 5 1
Deferred compensation--restricted stock awards.......................................... 234 287
Stock options exercised................................................................. 189 233
----------- -----------
Balance, end of period................................................................ $ 275,008 $ 274,334
----------- -----------
ADDITIONAL PAID-IN CAPITAL
Balance, beginning of period............................................................ $ 1,320,417 $ 1,310,813
Dividend reinvestment plan.............................................................. 10 (76)
Deferred compensation--restricted stock awards.......................................... 4,871 3,558
Stock options exercised................................................................. 2,086 2,678
----------- -----------
Balance, end of period................................................................ $ 1,327,384 $ 1,316,973
----------- -----------
RETAINED EARNINGS
Balance, beginning of period............................................................ $ 929,085 $ 635,180
Net income(2)........................................................................... 192,120 178,041
Dividends on common stock(1)............................................................ (46,174) (38,368)
Dividends on preferred stock............................................................ -- (5,653)
Deferred compensation--restricted stock awards.......................................... (3,585) (2,781)
----------- -----------
Balance, end of period................................................................ $ 1,071,446 $ 766,419
----------- -----------
ACCUMULATED OTHER COMPREHENSIVE INCOME
Balance, beginning of period............................................................ $ 8,134 $ 11,438
Net income(2)........................................................................... 192,120 178,041
Other net comprehensive income.......................................................... 1,337 (1,534)
----------- -----------
Total net comprehensive income.......................................................... 193,457 176,507
Less: net income included in retained earnings.......................................... (192,120) (178,041)
----------- -----------
Balance, end of period................................................................ $ 9,471 $ 9,904
----------- -----------
TOTAL SHAREHOLDERS' EQUITY.......................................................... $ 2,839,530 $ 2,639,857
----------- -----------
----------- -----------
</TABLE>

- ------------------------
(1) Dividends on common stock for the first six months of 1998 were $0.84 per
share, compared to $0.70 per share for the first six months of 1997.
(2) Includes income applicable to preferred shareholders of $5.7 million for
the first six months of 1997.

See accompanying notes to consolidated financial statements.

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

<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED JUNE 30,
------------------------
(DOLLARS IN THOUSANDS) 1998 1997
- ---------------------------------------------------------------------------------------- ----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................................................................ $ 204,098 $ 189,047
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses......................................................... 35,000 --
Depreciation, amortization and accretion............................................ 33,821 32,698
Provision for deferred income taxes................................................. 12,548 17,606
Gain on sales of securities available for sale...................................... (4,926) (552)
Merger and integration costs less than cash utilized................................ (11,004) (20,203)
Net (increase) decrease in trading account assets................................... (354,280) 69,879
Other, net.......................................................................... 242,170 82,626
----------- -----------
Total adjustments................................................................. (46,671) 182,054
----------- -----------
Net cash provided by operating activities............................................. 157,427 371,101
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of securities available for sale.................................. 317,209 989
Proceeds from matured and called securities available for sale........................ 143,737 111,123
Purchase of securities available for sale............................................. (1,247,304) (431,931)
Proceeds from matured and called securities held to maturity.......................... 24,575 20,636
Net increase in loans................................................................. (239,316) (1,117,203)
Other, net............................................................................ (17,320) (74,985)
----------- -----------
Net cash used by investing activities............................................... (1,018,419) (1,491,371)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits.............................................................. 116,145 819,959
Net increase (decrease) in federal funds purchased and securities sold under
repurchase agreements............................................................... 230,933 (208,362)
Net increase in commercial paper and other borrowed funds............................. 59,506 40,277
Proceeds from issuance of subordinated debt........................................... -- 100,000
Payment of cash dividends............................................................. (49,065) (46,424)
Other, net............................................................................ 2,261 1,766
----------- -----------
Net cash provided by financing activities........................................... 359,780 707,216
----------- -----------
Net decrease in cash and cash equivalents............................................... (501,212) (413,054)
Cash and cash equivalents at beginning of period........................................ 3,199,455 3,937,697
Effect of exchange rate changes on cash and cash equivalents............................ (19,400) (2,656)
----------- -----------
Cash and cash equivalents at end of period.............................................. $ 2,678,843 $ 3,521,987
----------- -----------
----------- -----------
CASH PAID DURING THE PERIOD FOR:
Interest.............................................................................. $ 401,959 $ 402,018
Income taxes.......................................................................... 99,817 80,080

SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Loans transferred to foreclosed assets (OREO)......................................... $ 11,032 $ 12,856
Dividends declared but unpaid......................................................... 24,567 20,416
</TABLE>

See accompanying notes to consolidated financial statements.

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

JUNE 30, 1998
(UNAUDITED)

NOTE 1--BASIS OF PRESENTATION AND NATURE OF OPERATIONS

The unaudited 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. Accordingly, they do
not include all of the footnote disclosures necessary for complete financial
statements in conformity with GAAP. 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. These unaudited 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, 1997.

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

NOTE 2--RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In June 1996, Statement of Financial Accounting Standards (SFAS) No. 125,
"Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities", was issued. This Statement establishes standards for when
transfers of financial assets, including those with continuing involvement by
the transferor, should be considered a sale. SFAS No. 125 also establishes
standards for when a liability should be considered extinguished. This Statement
is effective for transfers of assets and extinguishments of liabilities after
December 31, 1996. In December 1996, the Financial Accounting Standards Board
(FASB) reconsidered certain provisions of SFAS No. 125 and issued SFAS No. 127,
"Deferral of the Effective Date of Certain Provisions of FASB Statement No.
125", to defer for one year the effective date of implementation for
transactions related to repurchase agreements, dollar-roll repurchase
agreements, securities lending and similar transactions. Management determined
that the effect of adoption of SFAS No. 125 and SFAS No. 127 on the Company's
financial statements was not material.

In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information", which establishes annual and interim
reporting standards for an enterprise's operating segments and related
disclosures about its products, services, geographic areas, and major customers.
Adoption of this Statement will not impact the Company's consolidated financial
position, results of operations or cash flows, and any effect will be limited to
the form and content of its disclosures. This Statement is effective for fiscal
years beginning after December 15, 1997, with earlier application permitted. The
Company expects to adopt SFAS No. 131 at December 31, 1998.

In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosures
about Pensions and Other Postretirement Benefits". The Standard revises the
disclosure requirements for pensions and other postretirement benefits. Adoption
of this Statement will not impact the Company's consolidated financial position,
results of operations or cash flows, and any effect will be limited to the form
and content of its disclosures. This Statement is effective for fiscal years
beginning after December 15, 1997.

In June 1998, the FASB issued 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. Derivatives that
are not hedges must be adjusted to fair value through income. If the derivative

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

JUNE 30, 1998
(UNAUDITED)

NOTE 2--RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS (CONTINUED)
is a hedge, depending on the nature of the hedge, changes in the fair value of
derivatives will either be offset against the change in fair value of the hedged
assets, liabilities or firm commitments through earnings or recognized in other
comprehensive income until the hedged item is recognized in earnings. The
ineffective portion of the derivative's change in fair value will be immediately
recognized in earnings. This Statement is effective for fiscal years beginning
after June 15, 1999, with earlier application encouraged. The Company expects to
adopt SFAS No. 133 as of January 1, 2000. The Company is in the process of
determining the impact of SFAS No. 133 on the Company's financial statements,
which is not expected to be material.

In March 1998, the American Institute of Certified Public Accountants
(AICPA) issued Statement of Position (SOP) 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use". SOP 98-1 requires the
capitalization of eligible costs of specified activities related to computer
software developed or obtained for internal use. Management believes that the
adoption of SOP 98-1 will not have a material effect on the Company's financial
position or results of operations. The Statement is effective for fiscal years
beginning after December 15, 1998, with earlier adoption encouraged. The Company
expects to adopt SOP 98-1 on January 1, 1999.

In June 1998, the AICPA issued SOP 98-5, "Reporting on the Costs of Start-Up
Activities". SOP 98-5 requires that entities expense start-up costs and
organization costs as they are incurred. Management believes that the adoption
of SOP 98-5 will not have a material effect on the Company's financial position
or results of operations. The Statement is effective for fiscal years beginning
after December 15, 1998, with earlier adoption encouraged. The Company expects
to adopt SOP 98-5 on January 1, 1999.

NOTE 3--EARNINGS PER SHARE

Basic earnings per share (EPS) is computed by dividing net income after
preferred dividends and parent direct interest in bank subsidiary by the
weighted average number of common shares outstanding during the period. Diluted
EPS incorporates the dilutive effect of common stock equivalents outstanding on
an average basis during the period. Stock options are a common stock equivalent.
The following table

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

JUNE 30, 1998
(UNAUDITED)

NOTE 3--EARNINGS PER SHARE (CONTINUED)
presents a reconciliation of basic and diluted EPS for the three months and six
months ended June 30, 1998 and 1997 in accordance with SFAS No. 128:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED JUNE 30, FOR THE SIX MONTHS ENDED JUNE 30,
------------------------------------------ ------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1998 1997 1998 1997
-------------------- -------------------- -------------------- --------------------

<CAPTION>
(AMOUNTS IN THOUSANDS) BASIC DILUTED BASIC DILUTED BASIC DILUTED BASIC DILUTED
- ------------------------------------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net income........................... $ 108,521 $ 108,521 $ 96,545 $ 96,545 $ 204,098 $ 204,098 $ 189,047 $ 189,047
Less:
Dividends on preferred stock....... -- -- (2,827) (2,827) -- -- (5,653) (5,653)
Parent direct interest in bank
subsidiary....................... (6,428) (6,428) (5,621) (5,621) (11,978) (11,978) (11,006) (11,006)
--------- --------- --------- --------- --------- --------- --------- ---------
Income available to common
shareholders....................... $ 102,093 $ 102,093 $ 88,097 $ 88,097 $ 192,120 $ 192,120 $ 172,388 $ 172,388
--------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- ---------
Weighted average common shares
outstanding........................ 54,982 54,982 54,796 54,796 54,957 54,957 54,780 54,780
Additional shares due to:
Assumed conversion of dilutive
stock options.................... -- 225 -- 152 -- 219 -- 141
--------- --------- --------- --------- --------- --------- --------- ---------
Adjusted weighted average common
shares outstanding................. 54,982 55,207 54,796 54,948 54,957 55,176 54,780 54,921
--------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- ---------
Earnings per share................... $ 1.86 $ 1.85 $ 1.61 $ 1.60 $ 3.50 $ 3.48 $ 3.15 $ 3.14
--------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- ---------
</TABLE>

NOTE 4--COMPREHENSIVE INCOME

In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income", which requires that an enterprise report and display, by major
components and as a single total, the change in its net assets during the period
from non-owner sources. This Statement is effective for fiscal years beginning
after December 15, 1997. The adoption of this Statement in the first quarter of
1998 resulted in a change in the financial statement presentation, but did not
have an impact on the Company's consolidated financial position, results of
operations or cash flows. Certain amounts in the prior period have been
reclassified to conform to the current presentation under SFAS No. 130.

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

JUNE 30, 1998
(UNAUDITED)

NOTE 4--COMPREHENSIVE INCOME (CONTINUED)
The following is a summary of the components of accumulated other
comprehensive income:
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
JUNE 30, 1998 JUNE 30, 1997
------------------------------------- ---------------------------------------

<CAPTION>
ACCUMULATED OTHER PARENT DIRECT ACCUMULATED OTHER PARENT DIRECT
COMPREHENSIVE INTEREST IN BANK COMPREHENSIVE INTEREST IN BANK
(DOLLARS IN THOUSANDS) INCOME SUBSIDIARY INCOME SUBSIDIARY
- ---------------------------------------------- ------------------ ----------------- ------------------ -------------------
<S> <C> <C> <C> <C>
Net unrealized gain (loss) on available for
sale securities, net of reclassification
adjustment:
Beginning balance........................... $ 19,608 $ 14,190
Net unrealized gain (loss) on available for
sale securities during the first six
months, before tax........................ 7,115 $ 258 (638) $ 35
Income tax (expense) benefit................ (2,882) (104) 258 (14)
Less: reclassification adjustment for
realized gains on available for sale
securities included in net income during
the first six months, before tax.......... (4,823) (103) (549) (3)
Plus: income tax expense.................... 1,954 41 223 1
------- ------ ------- ---
Net activity................................ 1,364 92 (706) 19
------- ------ ------- ---
Ending balance.............................. 20,972 13,484
------- -------
Foreign currency translation adjustments:
Beginning balance........................... (11,474) (2,752)
Foreign currency translation adjustments
during the first six months, before tax... (45) (3) (1,392) (89)
Income tax benefit.......................... 18 1 564 36
------- ------ ------- ---
Net activity................................ (27) (2) (828) (53)
------- ------ ------- ---
Ending balance.............................. (11,501) (3,580)
------- -------
Other net comprehensive income................ $ 1,337 $ 90 $ (1,534) $ (34)
------- ------ ------- ---
------- ------ ------- ---
Accumulated other comprehensive income........ $ 9,471 $ 9,904
------- -------
------- -------
</TABLE>

NOTE 5--SUBSEQUENT EVENT

On August 10, 1998, the Company exchanged 3.4 million shares of its common
stock for The Bank of Tokyo-Mitsubishi, Ltd.'s (BTM) 6 percent direct ownership
interest in Union Bank of California, N.A. (the Bank). This share exchange will
result in the Company owning 100 percent of the Bank. In addition, it increases
BTM's ownership percentage of the Company to 82 percent from 81 percent.

The exchange of shares was accounted for as a reorganization of entities
under common control (similar to a business combination under the pooling of
interests method). Accordingly, all historical financial information will be
restated at September 30, 1998 as if the combination had been in effect for all
periods presented.

In order to provide more useful information with regard to this subsequent
event, selected unaudited pro forma consolidated financial data is presented,
giving effect to the August 10, 1998 exchange of 3.4 million shares. On a
consolidated basis, the exchange will not affect total assets, total
liabilities, total shareholders' equity, and regulatory capital ratios.

11
<PAGE>
UNIONBANCAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

JUNE 30, 1998
(UNAUDITED)

NOTE 5--SUBSEQUENT EVENT (CONTINUED)
The pro forma amounts in the table below are presented for informational
purposes and are not necessarily indicative of current or future operating
results, per share data or financial position, and do not necessarily represent
what would have occurred had the exchange been consummated as of the date or the
beginning of the period presented.

UNAUDITED SELECTED CONSOLIDATED FINANCIAL DATA

<TABLE>
<CAPTION>
(AS REPORTED) (PRO FORMA)
FOR THE THREE MONTHS FOR THE THREE MONTHS
ENDED JUNE 30, ENDED JUNE 30,
-------------------- --------------------
<S> <C> <C> <C> <C>
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE DATA) 1998 1997 1998 1997
- ---------------------------------------------------------------------- --------- --------- --------- ---------
Results of operations:
Net income.......................................................... $ 109 $ 97 $ 109 $ 97
Net income applicable to common stock............................... 102 88 109 94
Per common share:
Net income--basic................................................... $ 1.86 $ 1.61 $ 1.86 $ 1.61
Net income--diluted................................................. 1.85 1.60 1.85 1.61
Weighted average common shares outstanding--basic................... 54,982 54,796 58,372 58,186
Weighted average common shares outstanding--diluted................. 55,207 54,948 58,597 58,338
Balance sheet (end of period):
Parent direct interest in equity of bank subsidiary $ 156 $ 137 $ -- $ --
Common equity....................................................... 2,684 2,368 2,840 2,505
</TABLE>

<TABLE>
<CAPTION>
(AS REPORTED) (PRO FORMA)
FOR THE SIX MONTHS FOR THE SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
-------------------- --------------------
<S> <C> <C> <C> <C>
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE DATA) 1998 1997 1998 1997
- ---------------------------------------------------------------------- --------- --------- --------- ---------
Results of operations:
Net income.......................................................... $ 204 $ 189 $ 204 $ 189
Net income applicable to common stock............................... 192 172 204 183
Per common share:
Net income--basic................................................... $ 3.50 $ 3.15 $ 3.50 $ 3.15
Net income--diluted................................................. 3.48 3.14 3.48 3.15
Weighted average common shares outstanding--basic................... 54,957 54,780 58,347 58,170
Weighted average common shares outstanding--diluted................. 55,176 54,921 58,565 58,311
Balance sheet (end of period):
Parent direct interest in equity of bank subsidiary $ 156 $ 137 $ -- $ --
Common equity....................................................... 2,684 2,368 2,840 2,505
</TABLE>

12
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

INTRODUCTION

UnionBanCal Corporation (UNBC) is a San Francisco, California-based
commercial bank holding company with consolidated assets of $30.9 billion at
June 30, 1998. Based on total assets, UNBC and its consolidated subsidiaries
(the Company) was the third largest bank holding company in California and among
the 30 largest in the United States. At June 30, 1998, the Company operated 241
banking offices in California, 6 banking offices in Oregon and Washington, and
18 overseas facilities. At June 30, 1998, UNBC was 81 percent owned by The Bank
of Tokyo-Mitsubishi, Ltd. (BTM) and 19 percent owned by other shareholders.
UNBC's principal subsidiary, Union Bank of California, N.A. (the Bank), was 94
percent owned by UNBC and 6 percent owned by BTM. (See Note 5 to the Company's
Consolidated Financial Statements for subsequent developments.)

THIS DOCUMENT MAY CONTAIN 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 AND IN THE
COMPANY'S PUBLICLY AVAILABLE SECURITIES AND EXCHANGE COMMISSION FILINGS AND
PRESS RELEASES.

The interim financial information should be read in conjunction with the
Company's Form 10-K for the year ended December 31, 1997. Certain amounts for
prior periods have been reclassified to conform to current financial statement
presentation.

SUMMARY

Net income in the second quarter of 1998 was $108.5 million, compared to
$96.5 million in the second quarter of 1997. Net income applicable to common
stock was $102.1 million, or $1.85 per diluted common share, in the second
quarter of 1998, compared with $88.1 million, or $1.60 per diluted common share,
in the second quarter of 1997. Other highlights of the second quarter of 1998
include:

- Net interest income, on a taxable-equivalent basis, was $326.7 million in
the second quarter of 1998, an $18.3 million, or 6 percent, increase from
the comparable period, one year earlier. The increase in net interest
income was primarily due to a 15 basis point increase in the net interest
margin and a $717.9 million, or 3 percent, increase in average earning
assets, resulting primarily from a $1.0 billion, or 5 percent, increase in
average loans, largely funded by an $1.1 billion, or 16 percent, increase
in average noninterest bearing deposits.

- A provision for credit losses of $15.0 million was recorded in the second
quarter of 1998, compared with no provision in 1997. This resulted from
management's regular quarterly assessment of overall credit quality, loan
growth and economic conditions in relation to the level of the allowance
for credit losses. Nonperforming assets declined $53.3 million, or 30
percent, from June 30, 1997 to $122.9 million at June 30, 1998.
Nonperforming assets as a percentage of total assets declined to 0.40
percent at June 30, 1998, compared with 0.58 percent a year earlier. Total
nonaccrual loans at June 30, 1998 and 1997 were $107.0 million and $146.1
million, respectively. The ratio of nonaccrual loans to total loans
declined from 0.66 percent to 0.47 percent.

- Noninterest income was $148.0 million, an increase of $37.0 million, or 33
percent, over the second quarter of 1997. Service charges on deposit
accounts grew $4.2 million, or 15 percent, reflecting growth in average
deposits; trust and investment management fees increased $4.3 million, or
17 percent, on growth in assets under management; and other noninterest
income increased $6.7 million, or 61 percent, excluding the $17.1 million
gain from the sale of the $253 million credit card portfolio in April
1998. The increase is due primarily to a $4.8 million gain from the sale
of $123.0 million in commercial real estate loans.

- Noninterest expense was $277.3 million in the second quarter of 1998,
compared with $255.8 million in the second quarter of 1997, an increase of
$21.6 million, or 8 percent. Personnel-related expense increased $14.9
million, or 11 percent, primarily due to increases in salaries and
performance-based

13
<PAGE>
incentive compensation. Other noninterest expense increased $5.3 million,
or 29 percent, primarily attributable to additional expenses incurred to
support higher deposit and merchant credit card draft volumes.

- The effective tax rate for the second quarter of 1998 was 40 percent,
compared with 41 percent for the second quarter of 1997. The lower
effective tax rate in the second quarter of 1998 reflects the benefits
recognized from filing a California Franchise Tax return based on the
unitary concept, which incorporates the financial results of BTM.

- In the second quarter of 1998, the return on average assets increased to
1.46 percent from 1.32 percent a year earlier. The return on average
common equity was 15.50 percent at June 30, 1998, compared to 15.16
percent at June 30, 1997.

- Total loans at June 30, 1998 increased $829.2 million, or 4 percent, over
June 30, 1997, primarily due to growth in the commercial, financial and
industrial portfolio.

- The Company's Tier 1 and total risk-based capital ratios were 9.28 percent
and 11.34 percent at June 30, 1998, compared with 9.19 percent and 11.59
percent at June 30, 1997. The second quarter 1998 leverage ratio for the
Company was 9.27 percent, compared with 8.68 percent for the second
quarter of 1997.

Net income for the first six months of 1998 was $204.1 million, compared to
$189.0 million for the first six months of 1997. Net income applicable to common
stock was $192.1 million, or $3.48 per diluted common share, for the first six
months of 1998, compared with $172.4 million, or $3.14 per diluted common share,
for the first six months of 1997. Other highlights of the first half of 1998
include:

- Net interest income, on a taxable-equivalent basis, was $645.4 million for
the first six months of 1998, a $41.5 million, or 7 percent, increase from
the comparable period one year earlier. The increase in net interest
income was primarily due to a 16 basis point increase in the net interest
margin and an $885.3 million, or 3 percent, increase in average earning
assets, resulting primarily from a $1.2 billion, or 6 percent, increase in
average loans and largely funded by a $1.1 billion, or 15 percent,
increase in average noninterest bearing deposits.

- A provision for credit losses of $35.0 million was recorded for the first
six months of 1998, compared with no provision in 1997. This resulted from
management's regular quarterly assessment of overall credit quality, loan
growth and economic conditions in relation to the level of the allowance
for credit losses.

- Noninterest income was $276.0 million, an increase of $50.2 million, or 22
percent, over the first six months of 1997. This increase includes the
$17.1 million gain from the sale of the credit card portfolio in the
second quarter of 1998. Service charges on deposit accounts grew $10.2
million, or 18 percent, reflecting growth in average deposits; trust and
investment management fees increased $8.4 million, or 17 percent, on
growth in assets under management; international commissions and fees
increased $4.2 million; and securities gains, net increased $4.4 million.

- Noninterest expense was $545.8 million for the first six months of 1998,
compared with $508.9 million for the first six months of 1997, an increase
of $36.9 million, or 7 percent. Personnel-related expense increased $24.5
million, or 9 percent, primarily due to an increase in salaries, related
to merit increases and business related staff additions, and
performance-based incentive compensation. Other noninterest expense
increased $12.1 million, or 36 percent, primarily attributable to
additional expenses incurred to support higher deposit volumes.

- The effective tax rate for the first six months of 1998 was 40 percent,
compared with 41 percent for the first six months of 1997.

- The return on average assets for the first six months of 1998 increased to
1.38 percent, compared to 1.31 percent for the first six months of 1997.
The return on average common equity decreased to 14.88 percent for the
first six months of 1998, compared to 15.14 percent for the first six
months of 1997.

14
<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
--------------------------------------------------------------------------
JUNE 30, 1998 JUNE 30, 1997
------------------------------------ ------------------------------------
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.................................. $21,372,800 $ 426,957 8.01% $20,246,987 $ 417,088 8.26%
Foreign(3)................................ 1,325,282 22,274 6.74 1,442,167 22,201 6.17
Securities--taxable(4)...................... 2,981,044 47,118 6.33 2,459,386 38,641 6.29
Securities--tax-exempt(4)................... 108,247 2,712 10.02 127,403 3,236 10.16
Interest bearing deposits in banks.......... 158,259 3,119 7.90 1,099,134 16,080 5.87
Federal funds sold and securities purchased
under resale agreements................... 258,220 3,568 5.54 329,367 4,683 5.70
Trading account assets...................... 520,290 7,400 5.70 301,847 4,119 5.47
---------- ----------- ---------- -----------
Total earning assets.................... 26,724,142 513,148 7.70 26,006,291 506,048 7.80
----------- -----------
Allowance for credit losses................. (474,598) (515,546)
Cash and due from banks..................... 1,875,745 2,034,748
Premises and equipment, net................. 397,779 412,993
Other assets................................ 1,233,449 1,500,811
---------- ----------
Total assets............................ $29,756,517 $29,439,297
---------- ----------
---------- ----------
LIABILITIES
Domestic deposits:
Interest bearing.......................... $5,393,702 38,058 2.83 $5,280,831 37,074 2.82
Savings and consumer time................. 3,176,754 30,247 3.82 2,955,092 27,890 3.79
Large time................................ 3,341,502 44,831 5.38 4,479,911 60,442 5.41
Foreign deposits(3)......................... 1,730,172 22,073 5.12 1,626,865 19,488 4.80
---------- ----------- ---------- -----------
Total interest bearing deposits......... 13,642,130 135,209 3.98 14,342,699 144,894 4.05
---------- ----------- ---------- -----------
Federal funds purchased and securities sold
under repurchase agreements............... 1,454,457 19,541 5.39 1,158,540 15,492 5.36
Subordinated capital notes.................. 348,000 5,332 6.15 295,187 4,821 6.55
Commercial paper............................ 1,601,810 22,067 5.53 1,813,036 24,876 5.50
Other borrowed funds........................ 285,088 4,291 6.04 596,829 7,564 5.08
---------- ----------- ---------- -----------
Total borrowed funds.................... 3,689,355 51,231 5.57 3,863,592 52,753 5.48
---------- ----------- ---------- -----------
Total interest bearing liabilities...... 17,331,485 186,440 4.31 18,206,291 197,647 4.35
----------- -----------
Noninterest bearing deposits................ 8,511,920 7,364,799
Other liabilities........................... 1,117,398 1,268,456
---------- ----------
Total liabilities....................... 26,960,803 26,839,546
SHAREHOLDERS' EQUITY
Parent direct interest in equity of bank
subsidiary................................ 153,039 133,942
Preferred stock............................. -- 135,000
Common equity............................... 2,642,675 2,330,809
---------- ----------
Total shareholders' equity.............. 2,795,714 2,599,751
---------- ----------
Total liabilities and shareholders'
equity................................ $29,756,517 $29,439,297
---------- ----------
---------- ----------
Net interest income/margin
(taxable-equivalent basis)................ 326,708 4.90% 308,401 4.75%
Less: taxable-equivalent adjustment......... 1,152 1,385
----------- -----------
Net interest income..................... $ 325,556 $ 307,016
----------- -----------
----------- -----------
</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.

15
<PAGE>
NET INTEREST INCOME (CONTINUED)

<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
--------------------------------------------------------------------------
JUNE 30, 1998 JUNE 30, 1997
------------------------------------ ------------------------------------
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.................................. $21,283,864 $ 851,495 8.06% $20,038,430 $ 818,667 8.23%
Foreign(3)................................ 1,370,964 45,991 6.76 1,413,971 43,431 6.19
Securities--taxable(4)...................... 2,777,379 88,137 6.36 2,386,340 74,470 6.27
Securities--tax-exempt(4)................... 110,515 5,538 10.02 130,761 6,584 10.07
Interest bearing deposits in banks.......... 344,824 11,418 6.68 951,777 27,279 5.78
Federal funds sold and securities purchased
under resale agreements................... 278,144 7,710 5.59 530,317 14,523 5.52
Trading account assets...................... 448,317 12,708 5.72 277,102 7,546 5.49
---------- ----------- ---------- -----------
Total earning assets.................... 26,614,007 1,022,997 7.74 25,728,698 992,500 7.77
----------- -----------
Allowance for credit losses................. (466,723) (523,539)
Cash and due from banks..................... 1,910,050 2,033,552
Premises and equipment, net................. 400,073 414,777
Other assets................................ 1,353,065 1,463,221
---------- ----------
Total assets............................ $29,810,472 $29,116,709
---------- ----------
---------- ----------
LIABILITIES
Domestic deposits:
Interest bearing.......................... $5,420,453 76,506 2.85 $5,246,668 73,035 2.81
Savings and consumer time................. 3,128,338 59,459 3.83 2,936,900 54,915 3.77
Large time................................ 3,627,973 98,471 5.47 4,616,719 123,861 5.41
Foreign deposits(3)......................... 1,783,466 45,650 5.16 1,583,944 37,397 4.76
---------- ----------- ---------- -----------
Total interest bearing deposits......... 13,960,230 280,086 4.05 14,384,231 289,208 4.05
---------- ----------- ---------- -----------
Federal funds purchased and securities sold
under repurchase agreements............... 1,268,675 33,616 5.34 990,195 25,883 5.27
Subordinated capital notes.................. 348,552 11,086 6.41 319,017 10,324 6.53
Commercial paper............................ 1,585,374 43,462 5.53 1,663,672 44,729 5.42
Other borrowed funds........................ 324,953 9,393 5.83 687,541 18,503 5.43
---------- ----------- ---------- -----------
Total borrowed funds.................... 3,527,554 97,557 5.58 3,660,425 99,439 5.48
---------- ----------- ---------- -----------
Total interest bearing liabilities...... 17,487,784 377,643 4.35 18,044,656 388,647 4.34
----------- -----------
Noninterest bearing deposits................ 8,331,752 7,234,488
Other liabilities........................... 1,235,706 1,274,081
---------- ----------
Total liabilities....................... 27,055,242 26,553,225
SHAREHOLDERS' EQUITY
Parent direct interest in equity of bank
subsidiary................................ 150,819 132,087
Preferred stock............................. -- 135,000
Common equity............................... 2,604,411 2,296,397
---------- ----------
Total shareholders' equity.............. 2,755,230 2,563,484
---------- ----------
Total liabilities and shareholders'
equity................................ $29,810,472 $29,116,709
---------- ----------
---------- ----------
Net interest income/margin
(taxable-equivalent basis)................ 645,354 4.88% 603,853 4.72%
Less: taxable-equivalent adjustment......... 2,348 2,806
----------- -----------
Net interest income..................... $ 643,006 $ 601,047
----------- -----------
----------- -----------
</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.

16
<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.

Net interest income, on a taxable-equivalent basis, was $326.7 million for
the second quarter of 1998, compared with $308.4 million for the second quarter
of 1997. This increase of $18.3 million, or 6 percent, was primarily
attributable to a $717.9 million, or 3 percent, increase in average earning
assets largely funded by a $1.1 billion, or 16 percent, increase in average
noninterest bearing deposits. In addition, the net interest margin increased 15
basis points to 4.90 percent. Although the yield on average earning assets
declined more than the rate on average interest bearing liabilities, the
increase in the proportion of funding provided by noninterest bearing deposits,
which lowered the overall cost of funds, favorably impacted the net interest
margin.

Average earning assets were $26.7 billion in the second quarter of 1998,
compared with $26.0 billion in the second quarter of 1997. Most of this increase
was attributable to growth in average loans, which increased $1.0 billion, or 5
percent, and average securities, which were $502.5 million, or 19 percent,
higher, offset by a $940.9 million decrease in average interest bearing deposits
in banks. The growth in average loans was attributable to the increase in
average commercial, financial and industrial loans of $1.3 billion and the
increase in average commercial mortgage loans of $210.7 million, partly offset
by the decrease in average consumer loans of $396.3 million, primarily related
to the sale of the credit card portfolio. See "Loans" on page 23 for additional
commentary on growth in the loan portfolio. The increase in primarily fixed rate
securities reflected interest rate risk management actions to reduce the
Company's exposure to declines in interest rates, and, secondarily, to increase
liquidity.

The $717.9 million, or 3 percent, growth in average earning assets from the
second quarter of 1997 to the second quarter of 1998 was funded primarily by a
$1.1 billion increase in average noninterest bearing deposits. The increase in
noninterest bearing deposits was partially due to an influx of new customer
relationships, arising from the recent merger and acquisition activities of
other financial institutions in the California market during the past year.

For the first six months of 1998, net interest income, on a taxable
equivalent basis, was $645.4 million, compared with $603.9 million in the
comparable period one year earlier. The increase of $41.5 million, or 7 percent,
was primarily attributable to an $885.3 million, or 3 percent, increase in
average earning assets and a $1.1 billion, or 15 percent, increase in average
noninterest bearing deposits. In addition, the net interest margin increased 16
basis points to 4.88 percent. Although the yield on average earning assets
declined by 3 basis points and the rate on interest bearing liabilities
increased by 1 basis point, the negative impact on the net interest margin of
these two factors was more than offset by the increase in the proportion of
funding provided by noninterest bearing deposits.

17
<PAGE>
NONINTEREST INCOME

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

nm = not meaningful

In the second quarter of 1998, noninterest income was $148.0 million,
compared with $111.0 million for the same period in 1997. This increase of $37.0
million, or 33 percent, includes a $17.1 million gain from the sale of the
credit card portfolio, a $4.2 million increase in service charges on deposit
accounts, reflecting a 2 percent increase in average deposits coupled with the
expansion of several products and services, and a $4.3 million increase in trust
and investment management fees, largely due to growth of assets under
management. In addition, other noninterest income increased $6.7 million, or 61
percent, due primarily to a $4.8 million gain related to the sale of $123.0
million in commercial real estate loans.

For the first six months of 1998, noninterest income was $276.0 million,
compared with $225.8 million for the same period in 1997. This increase of $50.2
million, or 22 percent, includes the second-quarter gain of $17.1 million from
the sale of the credit card portfolio, a $10.2 million increase in service
charges on deposit accounts, reflecting a 3 percent increase in average deposits
coupled with the expansion of several products and services; an $8.4 million
increase in trust and investment management fees, largely due to growth of
assets under management; a $4.2 million increase in international commissions
and fees; a $4.4 million increase in securities gains, net; and a $5.0 million
increase related to brokerage commissions and merchant banking fees. In
contrast, other noninterest income decreased $1.9 million, or 6 percent, due to
a $7.7 million gain recognized in 1997 related to a real estate joint venture,
partially offset by the $4.8 million gain in 1998 from the sale of commercial
real estate loans.

18
<PAGE>
NONINTEREST EXPENSE

<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED
--------------------------------- ---------------------------------
JUNE 30, JUNE 30, PERCENT JUNE 30, JUNE 30, PERCENT
(DOLLARS IN THOUSANDS) 1998 1997 CHANGE 1998 1997 CHANGE
- ----------------------------------------- --------- --------- ----------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Salaries and other compensation.......... $ 124,714 $ 112,714 10.65% $ 244,592 $ 221,315 10.52%
Employee benefits........................ 27,398 24,459 12.02 57,903 56,646 2.22
--------- --------- --------- ---------
Personnel-related expense.............. 152,112 137,173 10.89 302,495 277,961 8.83
Net occupancy............................ 21,679 22,884 (5.27) 43,704 42,514 2.80
Equipment................................ 13,964 14,143 (1.27) 27,803 27,830 (0.10)
Merchant transaction processing.......... 11,513 10,545 9.18 21,593 20,267 6.54
Communications........................... 10,452 10,518 (0.63) 21,681 20,786 4.31
Advertising and public relations......... 8,302 7,218 15.02 14,353 13,227 8.51
Professional services.................... 7,190 7,882 (8.78) 13,318 12,601 5.69
Data processing.......................... 6,633 6,148 7.89 13,135 12,571 4.49
Printing and office supplies............. 6,488 6,087 6.59 12,823 12,256 4.63
Software................................. 4,570 3,604 26.80 9,010 8,333 8.12
Travel................................... 4,555 4,369 4.26 8,317 7,564 9.96
Intangible asset amortization............ 3,338 3,338 -- 6,676 6,676 --
Armored car.............................. 3,012 2,956 1.89 5,871 6,069 (3.26)
Foreclosed asset expense (income)........ (223) 465 nm (421) 876 nm
Merger and integration expense........... -- -- -- -- 6,037 nm
Other.................................... 23,740 18,423 28.86 45,442 33,323 36.37
--------- --------- --------- ---------
Total noninterest expense.............. $ 277,325 $ 255,753 8.43% $ 545,800 $ 508,891 7.25%
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>

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

nm = not meaningful

Noninterest expense was $277.3 million in the second quarter of 1998,
compared with $255.8 million in the second quarter of 1997, an increase of $21.6
million, or 8 percent. Personnel-related expense increased $14.9 million, or 11
percent, primarily due to a $5.4 million increase in performance-based incentive
compensation, and an increase of $6.2 million in salaries, related to merit
increases and a 4 percent increase in workforce, to support increased revenue
growth. In addition, other noninterest expense increased $5.3 million, partially
due to $2.9 million in additional expenses incurred to support higher deposit
volumes.

Noninterest expense was $545.8 million for the first six months of 1998,
compared with $508.9 million for the first six months of 1997, an increase of
$36.9 million, or 7 percent. Personnel-related expense increased $24.5 million,
or 9 percent, primarily due to increases in performance-based incentive
compensation and salaries, reflecting a 4 percent increase in the workforce. In
addition, other noninterest expense increased $12.1 million, partially due to
$5.3 million in additional expenses incurred to support higher deposit volumes.

The combination of Union Bank and BanCal Tri-State Corporation on April 1,
1996 resulted in the recording of a total of $123.5 million in merger and
integration expense. The remaining liability balance at June 30, 1998 was $11.9
million. The balance includes amounts primarily for lease payments that are
continuing over the expected term of the leases. No merger and integration
expense was recorded for the first six months of 1998, compared with $6.0
million for the first six months of 1997.

19
<PAGE>
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 2000. An additional
issue is that 1900 was not a leap year, whereas the year 2000 is. Therefore,
some programs may not properly provide for February 29, 2000. This anomaly could
result in miscalculations when processing critical date-sensitive information
after December 31, 1999.

The following discussion of the implications of the Year 2000 problem for
the Company contains numerous forward-looking statements based on inherently
uncertain information. The cost of the project and the date on which the Company
plans to complete the internal Year 2000 modifications are based on management's
best estimates, which were derived utilizing a number of assumptions of future
events including the continued availability of internal and external resources,
third party modifications and other factors. However, there can be no guarantee
that these estimates will be achieved and actual results could differ. Moreover,
although Management believes it will be able to make the necessary modifications
in advance, there can be no guarantee that failure to modify the systems would
not have a material adverse affect on the Company.

In addition, the Company places a high degree of reliance on computer
systems of third parties, such as customers, suppliers, and other financial and
governmental institutions. Although the Company is assessing the readiness of
these third parties and preparing contingency plans, there can be no guarantee
that the failure of these third parties to modify their systems in advance of
December 31, 1999 would not have a material adverse affect on the Company.

READINESS PREPARATION

Many of the Company's critical operations are not presently ready to operate
normally in the Year 2000 and beyond, although preparations are underway to
correct this. In 1997 the Company alerted its business customers of the Year
2000 problem and is now assessing the readiness preparations of its major
customers and suppliers. Resolution of the Year 2000 problem is among the
Company's highest priorities, and a comprehensive program has been established
to address its many aspects.

The Company has prepared a project plan, identified all of its major
application and processing systems, and sought external and internal resources
to replace and test the systems. Purchased software and systems supported by
external parties will be tested as part of the formal project plan. In addition,
customers and vendors who have significant relationships with the Company will
be evaluated to determine whether they are preparing for the Year 2000. The
failure of those customers to adequately prepare will be incorporated into the
credit review process. However, there can be no guarantee that the remediation
of the systems of the Company's vendors or customers will be corrected on a
timely basis.

The Company's Year 2000 program is comprised of numerous individual projects
which 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. As of June
30, 1998, there were approximately 2,100 individual projects identified. The
projects vary in size, importance and materiality: from large undertakings, such
as remediating complicated data systems and organizing the process of assessing
the readiness of customers, to smaller, but still important, projects such as
installing compliant computer utility systems or assuring that
processor-controlled systems in individual buildings will perform properly. The
program continues to evolve as new projects are identified to keep up with
increased understanding of Year 2000 implications and evolving external
requirements. Approximately two thirds of the projects currently identified are
in process, while almost a third have been completed.

All projects are assigned a priority indicating the importance of the
function to the Company's continuing operation. This prioritization allows for
the broad classification of the projects into critical and

20
<PAGE>
non-critical categories. "Critical projects" are currently defined as those that
meet any of the following criteria:

- functions the absence of which for longer than three days could threaten
the operations of the Company;

- customer and general ledger accounting systems of record;

- functions supporting delivery of information and service to customers;

- administrative systems, which if unavailable for two weeks or longer,
could cause significant business impact; or

- functions that provide the environment and infrastructure necessary for
the above.

Of the approximately 2,100 total projects, nearly 40 percent are currently
identified as critical and 60 percent as non-critical.

The Company plans to complete all projects currently identified as critical
prior to the year 2000, although the failure to complete a critical project
would not necessarily have a material adverse effect on the Company. The most
important projects relate to the critical data processing systems upon which the
Company relies for its principal business functions. Most of these systems are
presently being renovated. The Company expects to have substantially all of
these systems renovated and tested by December 31, 1998. All critical systems
are planned to be renovated, tested and implemented prior to June 30, 1999. In
addition to testing individual systems, the Company also plans to conduct
integrated contingency testing of its principal critical systems during the
summer of 1999 in a separate computer environment where machine dates will be
set forward in order to identify and correct problems which might not otherwise
become evident until the actual end of the century.

The Company does not significantly rely on embedded technology in its
critical processes. Embedded technology does control some building security and
operations such as power management, ventilation, and elevator control. All
building facilities are presently being evaluated, and plans call for all to be
confirmed as Year 2000 ready by December 1998.

The Company is reliant on suppliers and customers, and Year 2000 issues with
both groups are being addressed. As of June 30, 1998, over 300 critical vendors
have been identified and inquiries are underway regarding their Year 2000
readiness plans and status. Written risk assessments will be completed on each
and those found to pose a significant risk will be asked to demonstrate how that
risk will be addressed. Appropriate measures to minimize risk will be undertaken
with those that appear to pose a significant risk. Risk assessments on the
critical vendors are scheduled to be completed by November 1998, and
replacements effected where necessary by June 1999. The company, however, has no
viable alternatives for some suppliers, such as power distribution and local
telephone companies. These companies are still being evaluated and the results
will be used as information for contingency planning. As with all financial
institutions, the Company places a high degree of reliance on the systems of
other institutions, including governmental agencies, to settle transactions.
Principal settlement methods associated with major payment systems will be
tested as part of their associated system projects.

The Company is also reliant on its customers to make the necessary
preparations for Year 2000 so that their business operations will not be
interrupted, thus threatening their ability to honor their financial
commitments. As of June 30, 1998, over 2,000 borrowers, capital market
counterparties, funding sources, and large depositors have been identified as
having financial volumes sufficiently large to warrant inquiry as to their Year
2000 preparation. These inquiries are presently underway and written risk
assessments will be completed on each. An initial assessment of risk based on
these assessments is expected to be substantially completed by September 30,
1998. Customers found to have a significant risk of not being ready for Year
2000 will be encouraged to make the necessary effort. Appropriate measures to
minimize risk will be undertaken with those that appear to pose a significant
risk.

21
<PAGE>
COST

Of the currently estimated total project cost of approximately $50 million,
the remaining amount to be incurred for the Year 2000 project is approximately
$43 million and will be funded by normal operating cash and staffed by external
resources as well as internal staff re-deployed from less time-sensitive
assignments. Approximately $11 million of the remaining cost is attributable to
the purchase of new hardware and software, which will be capitalized and
expensed over the useful lives of those assets. The remaining $32 million, which
will be expensed as incurred over the next two years, is not expected to have a
material effect on the results of operations, liquidity or capital resources.
During the second quarter of 1998, the Company incurred and expensed
approximately $3 million related to its assessment of the Year 2000 issue and
its efforts in implementing the Year 2000 project plan. The second-quarter
increase in the total estimated project cost relates primarily to the expanded
scope of the project such as vendor assessments and contingency planning.
Estimated total project cost could change further as analysis continues.

RISKS

The principal risks associated with the Year 2000 problem can be grouped
into three categories. The first is the risk that the Company does not
successfully ready its operations for the next century. The second is the risk
of disruption of Company operations due to operational failures of third
parties. The third is the risk of business interruption among fund providers and
obligors such that expected funding and repayment does not take place.

The only risk largely under the Company's control is preparing its internal
operations for the Year 2000. The Company, like other financial institutions, is
heavily dependent on its computer systems. The complexity of these systems and
their dependence on one another makes it impossible to switch to other systems
almost immediately as would be necessary if necessary corrections were not made
in advance. Management believes it will be able to make the necessary
corrections in advance.

Computer failure of third parties may jeopardize Company operations, but how
seriously depends on the nature and duration of such failures. The most serious
impact on Company operations from suppliers would result if basic services such
as telecommunications, electric power suppliers, and services provided by other
financial institutions and governmental agencies were disrupted. Significant
public disclosure of the state of readiness among basic infrastructure and other
suppliers has not generally been available. Although the Company's inquiries are
underway, the Company does not yet have the information to estimate the
likelihood of significant disruptions among its suppliers.

Operational failures among the Company's sources of major funding, larger
borrowers and capital market counterparties could affect their ability to
continue to provide funding or meet obligations when due. Similar to the
situation outlined above with suppliers, public information has been scant.
Although the Company's inquiries are underway, the Company does not yet have the
information to estimate the likelihood of significant disruptions among its
funding sources and obligors.

CONTINGENCY PLANS

The Company is developing remediation contingency plans and business
resumption contingency plans specific to the Year 2000. Remediation contingency
plans address the actions to be taken if the current approach to remediating a
system is falling behind schedule or otherwise appears in jeopardy of failing to
deliver a Year 2000 ready system when needed. Business resumption contingency
plans address the actions that would be taken if critical business functions can
not be carried out in the normal manner upon entering the next century due to
system or supplier failure.

Remediation contingency plans with trigger dates for review and
implementation have been developed for critical data systems. The effort to
develop business resumption contingency plans, however, is just now beginning.
The first two phases of this effort, Organizational Planning Guidelines and
Business Impact Analysis, are scheduled to be completed by September 30, 1998.
The third and fourth phases, Plan Development and Method for Validation of
Plans, are to be completed by December 31, 1998.

22
<PAGE>
INCOME TAX EXPENSE

The effective rates for the second quarter of 1998 and 1997 were 40 percent
and 41 percent, respectively. The effective tax rates for the six months ended
June 30, 1998 and 1997, were 40 percent and 41 percent, respectively. The lower
effective tax rate in the first quarter and first six months of 1998 reflects
the benefits recognized from filing a California Franchise Tax return based on
the unitary concept, which incorporates the financial results of BTM.

LOANS

The following table shows loans outstanding by loan type.

<TABLE>
<CAPTION>
PERCENT CHANGE TO
JUNE 30, 1998 FROM:
-----------------------
<S> <C> <C> <C> <C> <C>
JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31, JUNE 30,
(DOLLARS IN THOUSANDS) 1998 1997 1997 1997 1997
- --------------------------------------- ------------- ------------- ------------- ------------ ---------
Domestic:
Commercial, financial and
industrial......................... $ 11,580,416 $ 10,747,179 $ 10,401,333 7.75% 11.34%
Construction......................... 377,467 293,333 319,355 28.68 18.20
Mortgage:
Residential........................ 2,844,391 2,961,233 2,960,502 (3.95) (3.92)
Commercial......................... 2,872,705 2,951,807 2,804,061 (2.68) 2.45
------------- ------------- -------------
Total mortgage................... 5,717,096 5,913,040 5,764,563 (3.31) (0.82)
Consumer:
Installment........................ 2,043,933 2,090,752 2,054,050 (2.24) (0.49)
Home equity........................ 893,572 992,916 1,058,937 (10.01) (15.62)
Credit card and other lines of
credit........................... -- 270,097 279,163 nm nm
------------- ------------- -------------
Total consumer................... 2,937,505 3,353,765 3,392,150 (12.41) (13.40)
Lease financing...................... 941,729 874,860 857,935 7.64 9.77
------------- ------------- -------------
Total loans in domestic
offices........................ 21,554,213 21,182,177 20,735,336 1.76 3.95
Loans originated in foreign branches... 1,404,115 1,559,231 1,393,782 (9.95) 0.74
------------- ------------- -------------
Total loans...................... $ 22,958,328 $ 22,741,408 $ 22,129,118 0.95% 3.75%
------------- ------------- -------------
------------- ------------- -------------
</TABLE>

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

nm = not meaningful

The Company's lending activities are predominantly domestic, with such loans
and leases comprising 94 percent of the portfolio at June 30, 1998. Total loans
at June 30, 1998 were $23.0 billion, an increase of $829.2 million, or 4
percent, from June 30, 1997. The increase was primarily attributable to growth
in the commercial, financial and industrial loan portfolio, which increased $1.2
billion from June 30, 1997, partly offset by the consumer loan portfolio, which
decreased $454.6 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
June 30, 1998 and 1997, the commercial, financial and industrial loan portfolio
was $11.6 billion, or 50 percent of total loans, and $10.4 billion, or 47
percent of total loans, respectively. The increase of $1.2 billion, or 11
percent, from June 30, 1997 was primarily attributable to continued growth in
loans extended to large corporations.

23
<PAGE>
The construction loan portfolio totaled $377.5 million, or 2 percent of
total loans, at June 30, 1998, compared with $319.4 million, or 1 percent of
total loans, at June 30, 1997.

Mortgage loans were $5.7 billion, or 25 percent of total loans, at June 30,
1998, compared with $5.8 billion, or 26 percent of total loans, at June 30,
1997. The mortgage loan portfolio consists of loans on commercial and industrial
projects and loans secured by one to four family residential properties,
primarily in California. Despite the sale of $123.0 million in commercial real
estate mortgages, commercial mortgage loans increased $68.6 million from June
30, 1997 to June 30, 1998, primarily attributable to the favorable California
real estate market coupled with the continuing improvement in the West Coast
economy. Residential mortgage loans decreased $116.1 million due to prepayments
and to loan sales into the secondary market.

Consumer loans totaled $2.9 billion, or 13 percent of total loans, at June
30, 1998, compared with $3.4 billion, or 15 percent of total loans, at June 30,
1997. The decrease of $454.6 million was attributable to the sale of the $253.0
million credit card loan portfolio in April 1998, and to a reduction in home
equity loans as customers refinanced to take advantage of favorable long-term,
fixed rate mortgages.

Lease financing totaled $941.7 million, or 4 percent of total loans, at June
30, 1998, compared with $857.9 million, or 4 percent of total loans, at June 30,
1997.

Loans originated in foreign branches totaled $1.4 billion, or 6 percent of
total loans, at June 30, 1998 and $1.4 billion, or 6 percent of total loans, at
June 30, 1997.

CROSS-BORDER OUTSTANDINGS

The Company's 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 the Company's cross-border
outstandings as of June 30, 1998, December 31, 1997, and June 30, 1997 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 exclude local
currency outstandings. The Corporation does not have significant local currency
outstandings to the individual countries listed in the following table that are
not hedged or are not funded by local currency borrowings.

<TABLE>
<CAPTION>
PUBLIC CORPORATIONS
FINANCIAL SECTOR AND OTHER TOTAL
(DOLLARS IN MILLIONS) INSTITUTIONS ENTITIES BORROWERS OUTSTANDINGS
- -------------------------------------------------------------- ------------- ----------- --------------- -------------
<S> <C> <C> <C> <C>
June 30, 1998
Japan......................................................... $ 88 $ -- $ 418 $ 506
Korea......................................................... 374 -- 138 512

December 31, 1997
Japan......................................................... 401 -- 438 839
Korea......................................................... 561 10 257 828
Thailand...................................................... 320 -- -- 320

June 30, 1997
Japan......................................................... 543 -- 527 1,070
Korea......................................................... 722 33 334 1,089
Thailand...................................................... 296 -- -- 296
</TABLE>

24
<PAGE>
The economic condition and the ability of some countries, to which the
Company has cross-border exposure, to manage their external debt obligations
have been impacted by the Asian economic crisis which began in the second half
of 1997. Total outstandings as of June 30, 1998 in Japan, Korea and Thailand
were $506 million, $512 million, and $192 million, respectively. The Company's
outstandings in Indonesia, a country which continues to be affected by economic
and political turmoil, were $17 million. In light of events since year-end,
Management believes these short-term exposures can be characterized as low to
moderate risk, depending on the obligor and country.

Since Japan is the second largest trading nation in the world, its
political, economic and financial markets situation is being closely monitored.
Management is also aware that the potential impact of the Asian crisis and the
depressed conditions in Japan on the American economy and Asian companies doing
business with and in the USA, particularly California, are not yet fully
understood. Accordingly, the Company will continue to evaluate the impact that
these conditions may have on the overall portfolio throughout 1998.

Although management cannot predict the ultimate impact of the crisis on the
Company's financial position and results of operations since much depends on the
effect of the stabilizing activities already under way, management believes that
the continuation of internal supervision, monitoring and portfolio risk
management practices will be effective in minimizing the impact over and above
that already identified. Increases in nonaccrual loans, together with some
related increases in charge-off activity, may occur as events unfold.

ALLOWANCE FOR CREDIT LOSSES

The allowance for credit losses is maintained at a level considered
appropriate by management and is based on an ongoing assessment of risk in the
credit and lease portfolio, including commitments to provide financing. The
allowance is increased by the provision for credit losses, which is charged
against current period operating results, and is decreased by the amount of net
loans charged off during the period. In evaluating the adequacy of the allowance
for credit losses, management incorporates such factors as collateral value,
portfolio composition and concentration, and trends in local, national, and
international economic conditions and the related impact on the financial
strength of the Company's borrowers. While the allowance is segmented by broad
portfolio categories to analyze its adequacy, the allowance is general in nature
and is available for the portfolio in its entirety. Although management believes
that the allowance for credit losses is adequate in the second quarter of 1998,
future provisions will be subject to continuing evaluation of risk in the credit
and lease portfolio.

25
<PAGE>
The table below sets forth a reconciliation of changes in the allowance for
credit losses.

<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
---------------------- ----------------------
<S> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS) 1998 1997 1998 1997
- ----------------------------------------------------------------- ---------- ---------- ---------- ----------
Balance, beginning of period..................................... $ 466,043 $ 522,835 $ 451,692 $ 523,946
Loans charged off:
Commercial, financial and industrial........................... 7,213 12,628 11,201 17,803
Construction................................................... -- 120 3 120
Mortgage....................................................... 181 1,549 995 3,437
Consumer....................................................... 6,595 13,466 19,033 26,005
Lease financing................................................ 674 709 1,331 1,678
---------- ---------- ---------- ----------
Total loans charged off...................................... 14,663 28,472 32,563 49,043
Recoveries of loans previously charged off:
Commercial, financial and industrial........................... 6,856 3,644 14,601 11,184
Construction................................................... -- -- 3 6,891
Mortgage....................................................... 1,129 610 1,657 2,084
Consumer....................................................... 3,777 3,402 7,672 6,883
Lease financing................................................ 101 129 178 203
---------- ---------- ---------- ----------
Total recoveries of loans previously charged off............. 11,863 7,785 24,111 27,245
---------- ---------- ---------- ----------
Net loans charged off...................................... 2,800 20,687 8,452 21,798
Provision for credit losses...................................... 15,000 -- 35,000 --
Foreign translation adjustment and other net deductions.......... (110) (34) (107) (34)
---------- ---------- ---------- ----------
Balance, end of period........................................... $ 478,133 $ 502,114 $ 478,133 $ 502,114
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Allowance for credit losses to total loans....................... 2.08% 2.27% 2.08% 2.27%
Provision for credit losses to net loans charged off............. 535.71 nm 414.10 nm
Net loans charged off to average loans outstanding for the
period(1)...................................................... 0.05 0.38 0.08 0.20
</TABLE>

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

(1) Annualized.

(nm) = not meaningful

At June 30, 1998, the Company's allowance for credit losses was $478.1
million, or 2.08 percent of total loans, and 446.7 percent of total nonaccrual
loans, compared with an allowance for credit losses at June 30, 1997 of $502.1
million, or 2.27 percent of total loans, and 343.6 percent of total nonaccrual
loans.

During the second quarter of 1998, the Company recorded a $15.0 million
provision for credit losses, compared with no provision for credit losses in the
second quarter of 1997. This resulted from management's regular quarterly
assessment of overall credit quality, loan growth and economic conditions in
relation to the level of the allowance for credit losses. Future quarterly
provisions will be subject to the same evaluation process.

During the second quarter of 1998, net loans charged off were $2.8 million,
compared with $20.7 million in the second quarter of 1997. Loans charged off in
the second quarter of 1998 decreased by $13.8 million primarily due to a $5.4
million decrease in commercial, financial and industrial loans charged off and a
$6.9 million decrease in consumer loans charged off primarily due to the sale of
the credit card portfolio in April of 1998. Recoveries of loans previously
charged off increased by $4.1 million, and the percentage of loans charged off
to average loans decreased from 0.38 percent in the second quarter of 1997 to
0.05 percent in the second quarter of 1998.

26
<PAGE>
The Company evaluates its loan portfolio for impairment as defined by SFAS
No. 114, "Accounting by Creditors for Impairment of a Loan", as amended. At June
30, 1998, total impaired loans were $107.0 million and the associated impairment
allowance was $15.1 million, compared with total impaired loans of $145.0
million and an associated impairment allowance of $10.0 million at June 30,
1997.

NONPERFORMING ASSETS

<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31, JUNE 30,
(DOLLARS IN THOUSANDS) 1998 1997 1997
- --------------------------------------------------------------------------- ---------- ------------ ----------
<S> <C> <C> <C>
Commercial, financial and industrial....................................... $ 69,235 $ 46,392 $ 87,415
Construction............................................................... 4,389 4,071 8,804
Mortgage:
Residential.............................................................. -- 954 1,134
Commercial............................................................... 33,410 57,921 48,787
---------- ------------ ----------
Total mortgage......................................................... 33,410 58,875 49,921
---------- ------------ ----------
Total nonaccrual loans................................................. 107,034 109,338 146,140
Foreclosed assets.......................................................... 15,909 20,471 30,059
---------- ------------ ----------
Total nonperforming assets............................................. $ 122,943 $ 129,809 $ 176,199
---------- ------------ ----------
---------- ------------ ----------
Allowance for credit losses................................................ $ 478,133 $ 451,692 $ 502,114
---------- ------------ ----------
---------- ------------ ----------
Nonaccrual loans to total loans............................................ 0.47% 0.48% 0.66%
Allowance for credit losses to nonaccrual loans............................ 446.71 413.12 343.58
Nonperforming assets to total loans and foreclosed assets.................. 0.54 0.57 0.80
Nonperforming assets to total assets....................................... 0.40 0.42 0.58
</TABLE>

At June 30, 1998, nonperforming assets totaled $122.9 million, a decrease of
$53.3 million, or 30 percent, from a year earlier. The decrease was primarily
the result of reductions of $18.2 million in nonaccrual commercial, financial
and industrial loans, mostly from loans to large corporate borrowers; $15.4
million in nonaccrual commercial mortgage loans due to a combination of note
sales, repayments and restorations to accrual; $14.2 million in foreclosed
assets due to sales of individual assets; and $4.4 million in nonaccrual
construction loans.

Nonaccrual loans as a percentage of total loans were 0.47 percent at June
30, 1998, compared with 0.66 percent at June 30, 1997. Nonperforming assets as a
percentage of total loans and foreclosed assets were 0.54 percent at June 30,
1998, compared with 0.80 percent at June 30, 1997.

LOANS 90 DAYS OR MORE PAST DUE AND STILL ACCRUING

LIQUIDITY

Liquidity refers to the Company's ability to adjust its future cash flows to
meet the needs of depositors and borrowers and to fund operations on a timely
and cost-effective basis. The Company's liquidity

27
<PAGE>
management draws upon the strengths of its extensive retail and commercial
market business franchise, coupled with its ability to obtain funds for various
terms in a variety of domestic and international money markets.

Core deposits provide the Company with a sizable source of relatively stable
and low-cost funds. In the second quarter of 1998, lower cost sources of funds,
which include noninterest bearing deposits and interest bearing core deposits,
funded 64 percent of average earning assets. Most of the remaining funding was
provided by short-term borrowing 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 risk-based capital, risk-weighted assets, and
risk-based capital ratios for the Company.

<TABLE>
<CAPTION>
MINIMUM
JUNE 30, DECEMBER 31, JUNE 30, REGULATORY
(DOLLARS IN THOUSANDS) 1998 1997 1997 REQUIREMENT
- ------------------------------------------------------ ------------- ------------- ------------- -----------------
<S> <C> <C> <C> <C>
CAPITAL COMPONENTS
Tier 1 capital........................................ $ 2,752,209 $ 2,587,071 $ 2,547,481
Tier 2 capital........................................ 611,241 601,102 667,395
------------- ------------- -------------
Total risk-based capital.............................. $ 3,363,450 $ 3,188,173 $ 3,214,876
------------- ------------- -------------
------------- ------------- -------------
Risk-weighted assets.................................. $ 29,657,202 $ 28,862,340 $ 27,734,101
------------- ------------- -------------
------------- ------------- -------------
Quarterly average assets.............................. $ 29,690,168 $ 30,334,507 $ 29,360,405
------------- ------------- -------------
------------- ------------- -------------
CAPITAL RATIOS
Total risk-based capital.............................. 11.34% 11.05% 11.59% 8.0%
Tier 1 risk-based capital............................. 9.28 8.96 9.19 4.0
Leverage ratio(1)..................................... 9.27 8.53 8.68 4.0
</TABLE>

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

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

The Company and the Bank are subject to various regulations issued by
Federal banking agencies, including minimum capital requirements. The Company
and the Bank are required to maintain minimum ratios of total and Tier 1 capital
to risk-weighted assets and of Tier 1 capital to average assets (the leverage
ratio).

Compared with one year earlier, the Company's Tier 1 risk-based capital
ratio at June 30, 1998 increased 9 basis points to 9.28 percent, the total
risk-based capital ratio decreased 25 basis points to 11.34 percent, and the
leverage ratio increased 59 basis points to 9.27 percent. The increase in the
Tier 1 risk-based capital ratio was primarily attributable to retained earnings
growing faster than risk-weighted assets, partly offset by the redemption of
$135.0 million of preferred stock in the third quarter of 1997. The decline in
the total risk-based capital ratio was primarily attributable to the reduction
of $134.0 million in subordinated capital notes.

As of June 30, 1998, management believes the capital ratios of the Bank met
all regulatory minimums of a "well-capitalized" institution.

ITEM 3. MARKET RISK

The Company's exposure to market risk is discussed on pages 46-49 of the
December 31, 1997 annual report to shareholders.

28
<PAGE>
PART II. OTHER INFORMATION

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

Set forth below is information concerning each matter submitted to a vote at
the Annual Meeting of Shareholders on May 28, 1998 ("Annual Meeting"):

DIRECTORS: Each of the following persons was elected as a director to hold
office until the 1999 Annual Meeting of Shareholders or until earlier
retirement, resignation or removal.

<TABLE>
<CAPTION>
DIRECTOR'S NAME FOR WITHHELD
- ----------------------------------------------------------------------------------------- ------------ -----------
<S> <C> <C>
Richard D. Farman........................................................................ 52,847,378 84,117
Stanley F. Farrar........................................................................ 52,847,072 84,422
Herman E. Gallegos....................................................................... 52,847,082 84,412
Jack L. Hancock.......................................................................... 52,847,882 83,612
Richard C. Hartnack...................................................................... 52,847,377 84,112
Harry W. Low............................................................................. 52,847,882 83,612
Mary S. Metz............................................................................. 52,847,082 84,412
Raymond E. Miles......................................................................... 52,847,382 84,112
Takahiro Moriguchi....................................................................... 52,847,382 84,112
J. Fernando Niebla....................................................................... 52,846,447 84,606
Minoru Noda.............................................................................. 52,847,372 84,122
Sidney R. Petersen....................................................................... 52,847,882 83,612
Carl W. Robertson........................................................................ 52,847,382 84,112
Tetsuo Shimura........................................................................... 52,847,372 84,122
Henry T. Swigert......................................................................... 52,847,882 83,612
Tsuneo Wakai............................................................................. 52,846,608 84,446
Robert M. Walker......................................................................... 52,847,382 84,112
Blenda J. Wilson......................................................................... 52,847,539 84,956
Tamotsu Yamaguchi........................................................................ 52,847,039 84,456
Kenji Yoshizawa.......................................................................... 52,846,791 84,262
</TABLE>

ARTICLES OF INCORPORATION: Proposal No. 2 to approve the amended and
restated Articles of Incorporation of UnionBanCal Corporation received the
following votes.

<TABLE>
<S> <C>
FOR: 49,826,387
AGAINST: 1,249,454
ABSTAIN: 1,855,587
</TABLE>

The proposal to approve the amendments to the Bylaws of UnionBanCal
Corporation to eliminate cumulative voting, which conforms with the amendments
to the Articles of Incorporation under Proposal No. 2 above, received the
required majority vote of the proxies and individual shareholders present,
including the proxy for BTM, the majority shareholder.

AUDITORS: Proposal No. 3 to ratify the selection of Deloitte & Touche LLP
as independent auditors of UnionBanCal Corporation received the following votes:

<TABLE>
<S> <C>
FOR: 52,899,619
AGAINST: 21,894
ABSTAIN: 9,914
</TABLE>

29
<PAGE>
ITEM 5. OTHER INFORMATION

SHAREHOLDER PROPOSALS: Shareholders who expect to present an oral proposal
at the 1999 Annual Meeting of Shareholders should notify the Secretary of the
Company at 400 California Street, Mail Code 1-001-18, San Francisco, CA 94104 by
March 15, 1999. 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 6. 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
3.2 By-laws of the Registrant, as amended
27 Financial Data Schedule
</TABLE>

(b) Reports on Form 8-K: The Company filed a report on Form 8-K on August
10, 1998 under Item 5, containing a press release that announced the
exchange of shares of the Company's common stock for BTM's direct
ownership interest in the Bank.

30
<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: /s/ DAVID I. MATSON
-----------------------------------------
David I. Matson
EXECUTIVE VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER

By: /s/ DAVID A. ANDERSON
-----------------------------------------
David A. Anderson
SENIOR VICE PRESIDENT AND CONTROLLER

Dated: August 14, 1998
</TABLE>

<PAGE>

[LETTERHEAD]

SECRETARY OF STATE

I, BILL JONES, Secretary of State of the State of California, hereby
certify:

That the attached transcript has been compared with the record on file
in the office, of which it purports to be a copy, and that it is full, true
and correct.

IN WITNESS WHEREOF, I execute this
certificate and affix the Great Seal
of the State of California this

JUN 04 1998
-------------------------------------

[SEAL]

/s/ BILL JONES

Secretary of State

<PAGE>

CERTIFICATE OF AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
UNIONBANCAL CORPORATION

The undersigned certify that:

1. They are the President and Corporate Secretary, respectively, of
UnionBanCal Corporation, a California corporation.

2. The Articles of Incorporation of this corporation are amended and restated
to read as follows:

AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
UNIONBANCAL CORPORATION

ARTICLE I
NAME

The name of the corporation is: UnionBanCal Corporation

ARTICLE II
PURPOSE

The purpose of the corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law
of California other than the banking business, the trust company business or
the practice of a profession permitted to be incorporated by the California
Corporations Code.

<PAGE>

ARTICLE III
AUTHORIZED STOCK

A. This corporation is authorized to issue two classes of stock
designated "Preferred Stock" and "Common Stock". The number of shares of
Preferred Stock authorized to be issued is 5,000,000 and the number of shares
of Common Stock authorized to be issued is 100,000,000.

B. The Preferred Stock may be divided into such number of series as the
Board of Directors may determine. The Board of Directors is authorized
to determine and alter the rights, preferences, privileges and restrictions
granted to or imposed upon any wholly unissued series of Preferred Stock and to
fix the number of shares of any series of Preferred Stock and the designation
of any such series of Preferred Stock. The Board of Directors, within the
limits and restrictions stated in any resolution or resolutions of the Board of
Directors originally fixing the number of shares constituting any series, may
increase or decrease (but not below the number of shares of such series then
outstanding) the number of shares of any series subsequent to the issue of
shares of that series. In case the number of shares of any series shall be so
decreased, the shares constituting such decrease shall resume the status which
they had prior to the adoption of the resolution originally fixing the number
of shares of such series.

ARTICLE IV
CUMULATIVE VOTING

No shareholder of this corporation shall be entitled to cumulate votes at
any election of directors of this corporation.

ARTICLE V
DIRECTORS

The number of directors of this corporation shall not be less than sixteen
(16) nor more than thirty (30) until changed by an amendment of the Articles of
Incorporation. The exact number of directors within these limits shall be
fixed from time to time by a resolution duly adopted by the shareholders or by
the Board of Directors of this corporation. Said Directors shall have the
right and duty to conduct the affairs of this corporation and to otherwise
regulate the business and affairs of this corporation and the powers of the
Directors and shareholders in a manner not in conflict with law.

<PAGE>

ARTICLE VI
ELECTION

This corporation elects to be governed by all of the provisions of the
California General Corporation Law of 1977 not otherwise applicable to it under
Chapter 23 thereof.

ARTICLE VII
DIRECTORS LIABILITY

The liability of the directors of this corporation for monetary damages shall
be eliminated to the fullest extent permissible under California law. Any
repeal or modification of this Article VII, or the adoption of any provision
of the Articles of Incorporation inconsistent with this Article VII shall
only be prospective and shall not adversely affect the rights under this
Article VII in effect at the time of the alleged occurrence of any action or
omission to act giving rise to liability.

ARTICLE VIII
INDEMNIFICATION

This corporation is authorized to indemnify its agents (as defined in
Section 317 of the California Corporations Code) through Bylaw provisions,
agreements with agents, vote of shareholders or disinterested directors, or
otherwise, in excess of the indemnification otherwise permitted by Section 317
of the California Corporations Code, subject only to the applicable limits on
indemnification of directors and agents of the corporation set forth in Section
204 of the California Corporations Code with respect to actions for breach of a
duty to the corporation and its shareholders. Any repeal or modification of
this Article VIII, or the adoption of any provision of the Articles of
Incorporation inconsistent with this Article VIII, shall only be prospective
and shall not adversely affect the rights under this Article VIII in effect at
the time of the alleged occurrence of any action or omission to act giving rise
to indemnification.

3. The Company's common stock is designated as qualified for trading on the
Nasdaq National Market, and the Company has 2,117 shareholders of its
common stock as of April 10, 1998, the record date of the Company's most
recent annual meeting of shareholders.

4. The foregoing amendment and restatement of Articles of Incorporation has
been duly approved by the Board of Directors.

<PAGE>

5. The foregoing amendment and restatement of Articles of Incorporation has
been duly approved by the required vote of shareholders in accordance with
Section 902, California Corporations Code. The total number of
outstanding shares of the corporation is 54,945,321. The number of
shares voting in favor of the amendment equaled or exceeded the vote
required. The percentage vote required was more than 50%.

We further declare under penalty of perjury under the laws of the State of
California that the matters set forth in this certificate are true and correct
of our knowledge.

/s/ Takahiro Moriguchi
DATE: May 27, 1998 ----------------------------------
Takahiro Moriguchi, President
and Chief Executive Officer

/s/ Jean C. Nomura
----------------------------------
Jean C. Nomura, Vice President
and Corporate Secretary

[SEAL]

<PAGE>

[LOGO]

CERTIFICATE

I, Jean C. Nomura, certify:

1. I am the Corporate Secretary of UnionBanCal Corporation, a corporation

created and existing under the laws of the State of California.

2. The attached document is a true and correct copy of the Bylaws of

UnionBanCal Corporation.

Dated: June 9, 1998

/s/ Jean C. Nomura
----------------------------------
Corporate Secretary

<PAGE>

BYLAWS

UNIONBANCAL CORPORATION

MAY 28, 1998TABLE OF CONTENTS

<PAGE>

TABLE OF CONTENTS

<TABLE>
<S> <C> <C>
ARTICLE I OFFICES

Section 1. Principal Office 1

Section 2. Other Offices 1

ARTICLE II MEETINGS OF SHAREHOLDERS

Section 3. Place of Meetings 1

Section 4. Annual Meetings 1

Section 5. Special Meetings 1

Section 6. Notice of Shareholders' Meetings 2

Section 7. Quorum 4

Section 8. Adjourned Meetings 4

Section 9. Waiver or Consent by Shareholders 4

Section 10. Action Without Meeting 5

Section 11. Voting Rights 6

Section 12. Proxies 7

Section 13. Voting by Joint Holders or Proxies 7

Section 14. Inspectors of Election 8

ARTICLE III DIRECTORS; MANAGEMENT

Section 15. Powers 8

Section 16. Number and Qualification of Directors 9

Section 17. Election and Term of Office 10

Section 18. Director Emeritus 10

Section 19. Removal of Directors 10

Section 20. Vacancies 11

<PAGE>

Section 21. Place, Date and Time of Regular
Meetings 11

Section 22. Organizational Meetings 12

Section 23. Special Meetings 12

Section 24. Quorum 12

Section 25. Contents of Notice and Waiver of Notice 13

Section 26. Adjournment 13

Section 27. Notice of Adjournment 13

Section 28. Participation by Communications
Equipment 13

Section 29. Action Without Meeting 14

Section 30. Committees of the Board of Directors 14

Section 31. Fees and Compensation 15

ARTICLE IV OFFICERS

Section 32. Elective Officers 15

Section 33. Election 15

Section 34. Appointive Officers 15

Section 35. Removal and Resignation 16

Section 36. Vacancies 16

Section 37. Chairman of the Board 16

Section 38. Deputy Chairman 16

Section 39. President 17

Section 40. Chief Executive Officer 17

Section 41. Vice Chairmen of the Board 18

Section 42. Vice Presidents 18

<PAGE>

Section 43. Secretary 18

Section 44. Assistant Secretaries 19

Section 45. Chief Financial Officer 19

ARTICLE V GENERAL CORPORATE MATTERS

Section 46. Record Date and Closing of Stockbooks 19

Section 47. Corporate Records and Inspection by
Shareholders and Directors 20

Section 48. Checks, Drafts, Evidences
of Indebtedness 21

Section 49. Corporate Contracts and Instruments;
How Executed 21

Section 50. Stock Certificates 21

Section 51. Lost Certificates 22

Section 52. Transfer Agent Regulations 22

Section 53. Transfer of Stock 22

Section 54. Reports to Shareholders 23

Section 55. Director Liability and Indemnity of
Agents 24

ARTICLE VI AMENDMENTS

Section 56. Amendments by Shareholders 30

Section 57. Amendments by Directors 30

ARTICLE VII EMERGENCY PROCEDURES

Section 58. Emergency Defined 30

Section 59. Conduct of Affairs 31

iii

<PAGE>

Section 60. Quorum and Power of Board of Directors 31

Section 61. Power of Emergency Managing Committee 31
</TABLE>

<PAGE>

BYLAWS OF

UnionBanCal Corporation

(A California Corporation)

ARTICLE I

OFFICES

SECTION 1. PRINCIPAL OFFICE. The principal executive office of the
corporation (the "Head Office") is hereby fixed and located at 350 California
Street, San Francisco, California. The Board of Directors shall have the
authority to change the location of the Head Office by amending this Section 1
of the Bylaws.

SECTION 2. OTHER OFFICES. Upon appropriate regulatory approvals, if
necessary, one or more branches, subordinate offices, extensions thereof, or
other places of business may from time to time be established by the Board of
Directors at such place or places within or without the State of California as
it deems appropriate.

ARTICLE II

MEETINGS OF SHAREHOLDERS

SECTION 3. PLACE OF MEETINGS. All meetings of shareholders shall be
held at the Head Office or at any other place that may be designated by the
Board of Directors.

SECTION 4. ANNUAL MEETINGS. The annual meeting of the shareholders
shall be held each year on the date and at the time specified by the Board of
Directors. At each annual meeting the shareholders shall elect directors and
transact such other business as may properly be brought before the meeting.

SECTION 5. SPECIAL MEETINGS. Special meetings of the shareholders,
for the purpose of taking any action permitted by the shareholders under the
California Corporations Code and the Articles of Incorporation of this
corporation, may be called at any time by the Board of Directors,

<PAGE>

the Chairman of the Board of Directors, the President, or by the holders of
shares entitled to cast not less than ten percent (10%) of the votes at the
meeting.

If a special meeting is called by any person or persons other than the
Board of Directors, the request shall be in writing, specifying the time of
such meeting and the general nature of the business proposed to be transacted,
and shall be delivered personally or sent by registered mail or by telegraphic
or other facsimile transmission to the Chairman of the Board or the President,
and the Secretary of the corporation. The officer receiving the request shall
cause notice to be promptly given to the shareholders entitled to vote, in
accordance with the provisions of Section 6 of this Article II, that a meeting
will be held at the time requested by the person or persons calling the
meeting, not less than thirty-five (35) nor more than sixty (60) days after the
receipt of the request. If the notice is not given within twenty (20) days
after the receipt of the request, the person or persons requesting the meeting
may give the notice. Nothing contained in this paragraph of this Section 5
shall be construed as limiting, fixing or affecting the time when a meeting of
shareholders called by action of the Board of Directors may be held.

SECTION 6. NOTICE OF SHAREHOLDERS' MEETING. All notices of meetings
of shareholders shall be sent or otherwise given not less than ten (10) [or, if
sent by third-class mail, thirty (30)], nor more than sixty (60) days before
the date of the meeting to each shareholder entitled to vote thereat. The
notice shall state the place, date and hour of the meeting and (1) in the case
of a special meeting, the general nature of the business to be transacted, and
no other business may be transacted at such meeting, or (2) in the case of the
annual meeting, those matters which the Board of Directors, at the time of the
mailing of the notice, intends to present for action by the shareholders, but
subject to the provision of Section 601(f) of the California Corporations Code,
any proper matter may be presented at the meeting for such action. The notice
of any meeting at which

<PAGE>

directors are to be elected shall include the names of nominees intended at
the time of the notice to be presented by management for election.

Notice of a shareholders' meeting shall be given either personally or by
first-class mail or, if the corporation has outstanding shares held of record
by 500 or more persons (determined as provided in Section 605 of the California
Corporations Code) on the record date for the shareholders' meeting, notice may
be sent third-class mail, or by other means of written communication, addressed
to the shareholder at the address of such shareholder appearing on the books of
the corporation or given by the shareholder to the corporation for the purpose
of notice; or if no such address appears or is given, at the place where the
Head Office of the corporation is located or by publication at least once in a
newspaper of general circulation in the county where the Head Office is
located. The notice shall be deemed to have been given at the time when
delivered personally or deposited in the mail or sent by other means of written
communication or published in the newspaper of general circulation.

If any notice or report addressed to the shareholder at the address of
such shareholder appearing on the books of the corporation is returned to the
corporation by the United States Postal Service marked to indicate that the
United States Postal Service is unable to deliver the notice or report to the
shareholder at such address, all future notices or reports shall be deemed to
have been duly given without further mailing if the same shall be available for
the shareholder at the Head Office of the corporation for a period of one year
from the date of the giving of the notice or report to all other shareholders.

An affidavit of the mailing or other means of giving any notice of any
shareholders' meeting in accordance with the provisions of this Bylaw may be
executed by the Secretary, Assistant Secretary, or any transfer agent of the
corporation giving the notice, and shall be prima facie evidence of the giving
of such notice.

<PAGE>

SECTION 7. QUORUM. Unless otherwise provided in the Articles of
Incorporation, a majority of the shares entitled to vote, represented in person
or by proxy, shall constitute a quorum at a meeting of shareholders. Except as
provided in this Bylaw, the affirmative vote of a majority of the shares
represented and voting at a duly held meeting at which a quorum is present
(which shares voting affirmatively also constitute at least a majority of the
required quorum) shall be the act of the shareholders, unless the vote of a
greater number or voting by classes is required by applicable law or the
Articles of Incorporation. Shareholders present at a valid meeting at which a
quorum is initially present may continue to transact business until adjournment
notwithstanding the withdrawal of enough shareholders to leave less than a
quorum, if any action taken (other than adjournment) is approved by at least a
majority of the shares required to constitute a quorum.

SECTION 8. ADJOURNED MEETINGS. Any annual or special shareholders'
meeting may be adjourned from time to time, even though a quorum is not
present, by the vote of the holders of a majority of the voting shares present
at the meeting either in person or by proxy, provided that in the absence of a
quorum, no other business may be transacted at the meeting except as provided
in Section 7 of these Bylaws.

Notice need not be given of the adjourned meeting if the time and place
thereof are announced at the meeting at which the adjournment is taken. At the
adjourned meeting, any business may be transacted which might have been
transacted at the original meeting. If the adjournment is for more than forty
five (45) days or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
shareholder of record entitled to vote at the meeting.

SECTION 9. WAIVER OR CONSENT BY SHAREHOLDERS. The transactions of any
meeting of shareholders, however called and noticed, and wherever held, are as
valid as though had at a meeting duly held after regular call and notice, if a
quorum is present either in person or by proxy,

<PAGE>

and if, either before or after the meeting, each of the persons entitled to
vote, not present in person or by proxy, signs a written waiver of notice or
a consent to the holding of the meeting or an approval of the minutes
thereof. All such waivers, consents and approvals shall be filed with the
corporate records or made a part of the minutes of the meeting. Attendance
of a person at a meeting shall constitute a waiver of notice of and presence
at such meeting, except when the person objects, at the beginning of the
meeting, to the transaction of any business because the meeting is not
lawfully called or convened and except that attendance at a meeting is not a
waiver of any right to object to the consideration of matters required by
Section 6 of these Bylaws or Section 601(f) of the California Corporations
Code to be included in the notice but not so included, if such objection is
expressly made at the meeting. Neither the business to be transacted at nor
the purpose of any regular or special meeting of shareholders need be
specified in any written waiver of notice, consent to the holding of the
meeting or approval of the minutes thereof, except as provided in Section
601(f) of the California Corporations Code.

SECTION 10. ACTION WITHOUT MEETING. Unless otherwise specified in the
Articles of Incorporation, an action which may be taken at any annual or
special meeting of shareholders may be taken without a meeting and without
prior notice, if a consent in writing, setting forth the action so taken, shall
be signed by the holders of outstanding shares having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted,
except that unanimous written consent of all shares entitled to vote for the
election of directors shall be required for election of directors to fill
vacancies created by removal.

Unless the consents of all shareholders entitled to vote have been
solicited or received in writing, notice shall be given to non-consenting
shareholders to the extent required by Section 603(b) of the California
Corporations Code.

<PAGE>

Any shareholder giving a written consent, or the shareholder's
proxyholders, or a transferee of the shares or a personal representative of the
shareholder or their respective proxyholders, may revoke the consent by a
writing received by the corporation prior to the time that written consents of
the number of shares required to authorize the proposed action have been filed
with the Secretary of the corporation, but may not do so thereafter. Such
revocation is effective upon its receipt by the Secretary of the corporation.

SECTION 11. VOTING RIGHTS. Only persons in whose names shares
entitled to vote stand on the stock records of the corporation at the close of
business on the record date fixed by the Board of Directors as provided in
Section 49 of these Bylaws for the determination of shareholders of record
shall be entitled to notice of and to vote at such meeting of shareholders. If
no record date is fixed: (1) the record date for determining shareholders
entitled to notice of or to vote at a meeting of shareholders shall be at the
close of business on the business day next preceding the day on which notice is
given or, if notice is waived, at the close of business on the business day
next preceding the day on which the meeting is held; (2) the record date for
determining shareholders entitled to give consent to corporate action in
writing without a meeting, when no prior action by the Board has been taken,
shall be the day on which the first written consent is given; (3) the record
date for determining shareholders for any other purpose shall be at the close
of business on the day on which the Board adopts the resolution relating
thereto, or the 60th day prior to the date of such other action, whichever is
later.

Except as may be otherwise provided in the Articles of Incorporation, each
outstanding share shall be entitled to one vote on each matter submitted to a
vote of shareholders.

<PAGE>

In any election of directors, the candidates receiving the highest number
of affirmative votes of the shares entitled to be voted for them, up to the
number of directors to be elected by such shares, are elected.

Voting may be by voice or ballot, provided that any election of directors
must be by ballot upon the demand of any shareholder made at the meeting and
before the voting begins.

SECTION 12. PROXIES. Every person entitled to vote shares may
authorize another person or persons to act by proxy with respect to such
shares. All proxies must be in writing and must be signed by the shareholder
or his attorney-in-fact confirming the proxy. No proxy shall be valid after
the expiration of eleven (11) months from the date thereof unless otherwise
provided in the proxy. Every proxy continues in full force and effect until
revoked by the person executing it prior to the vote pursuant thereto, except
as otherwise provided in Section 705 of the California Corporations Code. Such
revocation may be effected by a writing delivered to the corporation stating
that the proxy is revoked or by a subsequent proxy executed by the person
executing the prior proxy and presented to the meeting, or as to any meeting by
attendance at such meeting and voting in person by the person executing the
proxy. The dates contained on the forms of proxy presumptively determine the
order of execution, regardless of the postmark dates on the envelopes in which
they are mailed.

SECTION 13. VOTING BY JOINT HOLDERS OR PROXIES. Shares or proxies
standing in the names of two or more persons shall be voted or represented in
accordance with the vote or consent of the majority of such persons. If only
one of such persons is present in person or by proxy, that person shall have
the right to vote all such shares, and all of the shares standing in the names
of such persons shall be deemed to be represented for the purpose of
determining a quorum. If more than one vote, but the vote is evenly split on
any particular matter, each faction may vote the shares in question
proportionately. This section shall apply to the voting of shares by two or
more

<PAGE>

administrators, executors, trustees or other fiduciaries, or joint
proxyholders, unless the instrument or order of court appointing them shall
otherwise direct.

SECTION 14. INSPECTORS OF ELECTION. In advance of any meeting of
shareholders, the Board may appoint inspectors of election to act at the
meeting and any adjournment thereof. If inspectors of election are not so
appointed, or if any persons so appointed fail to appear or refuse to act, the
chairman of any meeting of shareholders may, and on the request of any
shareholder or a shareholder's proxy shall, appoint inspectors of election (or
persons to replace those who so fail or refuse) at the meeting. The number of
inspectors shall be either one or three. If appointed at a meeting on the
request of one or more shareholders or proxies, the majority of shares
represented in person or by proxy shall determine whether one or three
inspectors are to be appointed. If there are three inspectors of election, the
decision, act or certificate of majority is effective in all respects as the
decision, act or certificate of all.

The inspectors of election shall determine the number of shares
outstanding and the voting power of each, the shares represented at the
meeting, the existence of a quorum and the authenticity, validity and effect of
proxies, receive votes, ballots or consents, hear and determine all challenges
and questions in any way arising in connection with the right to vote, count
and tabulate all votes or consents, determine when the polls shall close,
determine the result and do such acts as may be proper to conduct the election
or vote with fairness to all shareholders.

ARTICLE III

DIRECTORS; MANAGEMENT

SECTION 15. POWERS. Subject to any provisions of the Articles of
Incorporation, of the Bylaws and of law limiting the powers of the Board of
Directors or reserving powers to the

<PAGE>

shareholders, the Board of Directors shall, directly or by delegation, manage
the business and affairs of the corporation and exercise all corporate powers
permitted by law.

SECTION 16. NUMBER AND QUALIFICATION OF DIRECTORS. The authorized
number of directors shall be not less than sixteen (16) nor more than thirty
(30), until changed by amendment of the Articles of Incorporation. The exact
number of directors within these limits shall be fixed from time to time by
resolution adopted by the Board of Directors or the shareholders. Directors
need not be shareholders of the corporation.

Nomination for election of members of the Board of Directors may be made
by the Board of Directors or by any shareholder of any outstanding capital
stock of the corporation entitled to vote for the election of directors at the
Annual Meeting of Shareholders. Notice of intention to make any nominations by
a shareholder shall be made in writing and shall be delivered or mailed to the
Secretary at the Head Office of the corporation not less than ten (10) days nor
more than sixty (60) days prior to any meeting of shareholders called for the
election of directors; provided however, that if less than ten (10) days notice
of the meeting is given to shareholders, such notice of intention to nominate
shall be mailed or delivered to the Secretary at the Head Office of the
corporation not less than the close of business on the day prior to the
meeting. Such notification shall contain the following information to the
extent known to the notifying shareholder: (a) the name and address of each
proposed nominee; (b) the principal occupation of each proposed nominee; (c)
the number of shares of capital stock of the corporation owned by each proposed
nominee; (d) the name and residence address of the notifying shareholder; (e)
the number of shares of capital stock of the corporation owned by the notifying
shareholder. Nominations not made in accordance herewith may, in the
discretion of the chairman of the meeting, be disregarded and upon the
chairman's instructions, the inspectors of election can disregard all votes
cast for

<PAGE>

each such nominee. A copy of this paragraph shall be set forth in the
notice to shareholders of any meeting at which directors are to be elected.

SECTION 17. ELECTION AND TERM OF OFFICE. The directors shall be
elected annually by the shareholders at the Annual Meeting of Shareholders;
provided, that if for any reason, said annual meeting or an adjournment thereof
is not held or the directors are not elected thereat, then the directors may be
elected at any special meeting of the shareholders called and held for that
purpose. The term of office of the directors shall, except as provided in
Section 20 of these Bylaws, begin immediately after their election and shall
continue until their respective successors are elected and qualified.

SECTION 18. DIRECTOR EMERITUS. The Board of Directors may appoint any
person who has served as a director of the corporation to the position of
Director Emeritus. Persons appointed Director Emeritus shall have such rights
and privileges as the Board of Directors may approve from time to time; except,
that they may only attend meetings of the Board of Directors by express
invitation and they shall have no vote.

SECTION 19. REMOVAL OF DIRECTORS. A director may be removed from
office by the Board of Directors if he is declared of unsound mind by an order
of court or convicted of a felony. Any or all of the directors may be removed
from office without cause by a vote of shareholders holding a majority of the
outstanding shares entitled to vote at an election of directors; however,
unless the entire Board of Directors is removed, an individual director shall
not be removed if the votes cast against removal, or not consenting in writing
to such removal, would be sufficient to elect such director if voted
cumulatively at an election at which the same total number of votes were cast,
or, if such action is taken by written consent, all shares entitled to vote
were voted, and the entire number of directors authorized at the time of the
director's most recent election were then being elected. A director may also
be removed from office by the Superior Court of the county in which

<PAGE>

the Head Office is located, at the request of shareholders holding at least
ten percent (10%) of the number of outstanding shares of any class, in case
of fraudulent or dishonest acts or gross abuse of authority or discretion
with reference to the corporation, in the manner provided by law.

No reduction of the authorized number of directors shall have the effect
of removing any director before his term expires.

SECTION 20. VACANCIES. A vacancy or vacancies on the Board of
Directors shall exist on the death, resignation, or removal of any director, or
if the authorized number of directors is increased or the shareholders fail to
elect the full authorized number of directors.

Except for a vacancy created by the removal of a director, vacancies on
the Board of Directors may be filled by a majority of the remaining directors
then in office, whether or not less than a quorum, or by a sole remaining
director, and each director elected in this manner shall hold office until his
successor is elected at an annual or special shareholders' meeting.

The shareholders may elect a director at any time to fill any vacancy not
filled by the directors. Any such election by written consent other than to
fill a vacancy created by removal requires the consent of a majority of the
outstanding shares entitled to vote.

Any director may resign effective upon giving written notice to the
Chairman of the Board of Directors, the Deputy Chairman, the President, the
Secretary or the Board of Directors of the corporation, unless the notice
specifies a later time for the effectiveness of such resignation. If the
resignation is effective at a future time, a successor may be elected to take
office when the resignation becomes effective.

SECTION 21. PLACE, DATE AND TIME OF REGULAR MEETINGS. Regular meetings
of the Board of Directors may be held without notice at such places within or
without the State of California and on such dates and at such times as the
Board may from time to time determine by resolution or written consent.

<PAGE>

SECTION 22. ORGANIZATIONAL MEETINGS. Immediately following each annual
shareholders' meeting, the Board of Directors shall hold an organizational
meeting to organize and transact other business. Notice of this meeting shall
not be required. The regular meeting of the Board of Directors may be held
jointly with this organizational meeting.

SECTION 23. SPECIAL MEETINGS. Special meetings of the Board of
Directors for any purpose may be called at any time by the Chairman of the
Board of Directors, the Deputy Chairman, or the President, or the Secretary, or
any two directors.

Special meetings of the Board shall be held upon four days notice by mail
or twenty-four (24) hours notice delivered personally or by telephone,
including a voice messaging system or other system or technology designed to
record and communicate messages, telegraph, telecopier, electronic mail, or
other electronic means. If notice is by telephone, it shall be complete when
the person calling the meeting believes in good faith that the notified person
has heard and acknowledged the notice. If the notice is by mail or telegraph,
it shall be complete when deposited in the United States mail or delivered to
the telegraph office at the place where the corporation's Head Office is
located, charges prepaid and addressed to the notified person at such person's
address appearing on the corporate records or, if it is not on these records or
is not readily ascertainable, at the Head Office. If notice is by telecopier,
it shall be complete when confirmation is received by printed receipt or
telephone that the complete notice has been sent to the telecopier number
provided to the corporation for such purposes by the board member.

SECTION 24. QUORUM. One-third of the exact number of directors shall
constitute a quorum for the transaction of business, except to adjourn a
meeting under Section 27 of these Bylaws. Every act done or decision made by a
majority of the directors present at a meeting at which a quorum is present
shall be regarded as the act of the Board of Directors, unless the vote of a
greater number is required by law, the Articles of Incorporation, or these
Bylaws. A meeting

<PAGE>

at which a quorum is initially present may continue to transact business
notwithstanding the withdrawal of directors, if any action taken is approved
by a majority of the required quorum for such meeting.

SECTION 25. CONTENTS OF NOTICE AND WAIVER OF NOTICE. Neither the
business to be transacted at, nor the purpose of, any regular or special Board
meeting need be specified in the notice or waiver of notice of the meeting.
Notice of a meeting need not be given to any director who signs a waiver of
notice or a consent to holding the meeting or an approval of the minutes
thereof, either before or after the meeting, or who attends the meeting without
protesting, prior thereto or at its commencement, the lack of notice to said
director. All such waivers, consents, and approvals shall be filed with the
corporate records or made a part of the minutes of the meeting.

SECTION 26. ADJOURNMENT. A majority of the directors present, whether
or not a quorum is present, may adjourn any meeting to another time and place.

SECTION 27. NOTICE OF ADJOURNMENT. Notice of the time and place of
holding an adjourned meeting need not be given to absent directors if the time
and place are fixed at the meeting being adjourned, except that if the meeting
is adjourned for more than twenty-four (24) hours such notice shall be given
prior to the adjourned meeting to the directors who were not present at the
time of the adjournment.

SECTION 28. PARTICIPATION BY COMMUNICATIONS EQUIPMENT. Members of the
Board may participate in a meeting through use of conference telephone,
electronic video screen communication or other communications equipment, so
long as all members participating in such meetings can communicate with all of
the other members concurrently and are provided the means of participating in
all matters before the Board, and the corporation confirms that the person
communicating by telephone, electronic video screen or other communications
equipment is a

<PAGE>

director entitled to participate in the Board meeting and that all
statements, actions and votes were made by such director. Such participation
constitutes presence in person at such meeting.

SECTION 29. ACTION WITHOUT MEETING. The Board of Directors may take
any action without a meeting that may be required or permitted to be taken by
the Board at a meeting, if all members of the Board individually or
collectively consent in writing to the action. The written consent or consents
shall be filed in the minutes of the proceedings of the Board of Directors.
Such action by written consent shall have the same effect as a unanimous vote
of directors.

SECTION 30. COMMITTEES OF THE BOARD OF DIRECTORS. The Board of
Directors may, by resolution adopted by a majority of the authorized number of
directors designate one or more committees from time to time, each consisting
of two or more directors to serve at the pleasure of the Board. The Board of
Directors may designate one or more directors as alternate members of any
committee, who may replace any absent member at any meeting of the committee.
The appointment of members or alternate members of a committee requires the
vote of a majority of the authorized number of directors. Any such committee,
to the extent provided in the resolution of the Board of Directors shall have
all the authority of the Board, except with respect to:

(1) The approval of any action for which shareholder approval is also
required.

(2) The filling of vacancies on the Board or ON any committee.

(3) The fixing of compensation of the directors for serving on the Board
or on any committee.

(4) The amendment or repeal of Bylaws or the adoption of new Bylaws.

(5) The amendment or repeal of any resolution of the Board which by its
express terms is not so amendable or repealable.

<PAGE>

(6) A distribution to the shareholders of the corporation as defined in
Section 166 of the California Corporations Code, except at a rate or
in a periodic amount or within a price range set forth in the
Articles of Incorporation or determined by the Board.

(7) The appointment of other committees of the Board or the members
thereof.

(8) The approval of any action for which the entire Board is required.

SECTION 31. FEES AND COMPENSATION. Directors and members of committees
shall receive neither compensation for their services nor reimbursement for
their expenses unless these payments are fixed by resolution of the Board.

ARTICLE IV

OFFICERS

SECTION 32. ELECTIVE OFFICERS. The elective officers of the corporation
shall be a Chairman of the Board, a Deputy Chairman of the Board, a President, a
Chief Executive Officer, a Chief Operating Officer, one or more Vice Chairmen
of the Board, one or more Executive Vice Presidents, one or more Senior Vice
Presidents, one or more Vice Presidents, a Secretary, one or more Assistant
Secretaries, a Chief Financial Officer, a Chief Credit Officer, an Auditor, and
such other elective officers as the Board of Directors may by resolution create,
and such officers shall have such powers and perform such duties as are
prescribed in these Bylaws or as may be prescribed by the Board of Directors.

SECTION 33. ELECTION. The elective officers of the corporation shall
be chosen by the Board of Directors at any meeting of the Board, and each shall
hold his office until he resigns or is removed or otherwise disqualified to
serve, or his successor is elected and qualified.

SECTION 34. APPOINTIVE OFFICERS. The Board of Directors may appoint or
create, and may authorize the Chief Executive Officer or any officer or
committee whom the Chief Executive Officer may authorize to appoint or create,
any other subordinate officers that the business of the

<PAGE>

corporation may require, each of whom shall have such authority and perform
such duties as specified in these Bylaws or as the Board of Directors or its
delegates may from time to time determine.

SECTION 35. REMOVAL AND RESIGNATION. Any elective officer may be
removed with or without cause either by the Board of Directors at any regular
or special directors' meeting or by the Chief Executive Officer. Any
appointive officer may be removed with or without cause by the Board of
Directors, the Chief Executive Officer, or the officer or committee having the
authority to appoint such officer.

Any officer may resign at any time by giving written notice to the Board
of Directors, the Chief Executive Officer, the President or the Secretary of
the corporation. An officer's resignation shall take effect when it is
received or at any later time specified in the resignation. Unless the
resignation specifies otherwise, its acceptance by the corporation shall not be
necessary to make it effective.

SECTION 36. VACANCIES. A vacancy in any office because of death,
resignation, removal, disqualification, or any other cause shall be filled in
the manner prescribed in these Bylaws for regular appointments to the office.

SECTION 37. CHAIRMAN OF THE BOARD. The Board of Directors may in its
discretion elect a Chairman of the Board, who shall preside at all meetings of
the Board of Directors at which the Chairman is present and shall exercise and
perform any other powers and duties assigned to the Chairman by the Board or
prescribed by these Bylaws. The Chairman of the Board shall preside as
chairman at all shareholders' meetings, unless he delegates this duty to the
Deputy Chairman or the President.

SECTION 38. DEPUTY CHAIRMAN. The Deputy Chairman of the Board shall
perform the duties imposed upon him by these Bylaws, the Board of Directors,
and the Chief Executive Officer.

<PAGE>

SECTION 39. PRESIDENT. The President shall, subject to the control of
the Board of Directors, exercise and perform the powers and duties assigned to
him by the Board or prescribed by these Bylaws. The President shall preside as
chairman at all shareholders' meetings and at all directors' meetings not
presided over by the Chairman or the Deputy Chairman of the Board.

In case of absence or disability of the President, the Chairman of the
Board shall take his place and perform his duties, and in case of absence or
disability of both the President and the Chairman of the Board, the Deputy
Chairman and, in the event of his absence or disability, the Vice Chairmen of
the Board shall take the President's place in the order directed by the Board
of Directors, and in case of absence or disability of the President, the
Chairman and the Deputy Chairman of the Board, and the Vice Chairmen of the
Board, the Executive Vice Presidents, in the order directed by the Chief
Executive Officer, shall take the President's place and perform his duties.

SECTION 40. CHIEF EXECUTIVE OFFICER. The Chief Executive Officer shall
be vested with full and complete authority to conduct the business of the
corporation between meetings of the Board of Directors. The Chief Executive
Officer shall, subject to the control of the Board of Directors, have general
supervision, direction and control of the business and officers of the
corporation with authority to veto or overrule the action of any committee of
the corporation and to take such action as he deems in the best interest of the
corporation, including, but not limited to, the approval of extensions of
credit up to the legal limit and leasing transactions, and appointment or
dismissal of any employee or officer. He shall have authority to approve the
acquisition or disposal of any asset, and shall have the authority to execute
any and all documents required in connection with his powers.

<PAGE>

The Chief Executive Officer may delegate any of his powers to any person
or persons, including, but not limited to, any officer or any committee of the
corporation, with the power of further delegation.

The President shall be the Chief Executive Officer of the corporation.

SECTION 41. VICE CHAIRMEN OF THE BOARD. The Vice Chairmen of the Board
shall perform the duties imposed upon them by these Bylaws, the Board of
Directors, and the Chief Executive Officer.

SECTION 42. VICE PRESIDENTS. The Vice Presidents shall perform the
duties imposed upon them by these Bylaws and the Board of Directors. The
Executive Vice Presidents shall be senior in rank to the Senior Vice
Presidents, both of whom shall be senior to the Vice Presidents and Assistant
Vice Presidents.

SECTION 43. SECRETARY. The Secretary shall keep or cause to be kept,
and be available at the Head Office and any other place that the Board of
Directors specifies, a book of minutes of all directors' and shareholders'
meetings. The minutes of each meeting shall state the time and place that it
was held; whether it was regular or special; if a special meeting, how it was
authorized; the notice given; the names of those present or represented at
shareholders' meetings; and the proceedings of the meetings. A similar minute
book shall be kept for each committee of the Board.

The Secretary shall keep, or cause to be kept, at the Head Office or at
the office of the corporation's transfer agent, a share register, or duplicate
share register, showing the shareholders' names and addresses, the number of
shares held by each, the number and date of each certificate issued for these
shares, and the number and date of cancellation of each certificate surrendered
for cancellation.

The Secretary shall give, or cause to be given, notice of all directors'
and shareholders' meetings required to be given under these Bylaws or by law,
shall keep the corporate seal in safe

<PAGE>

custody, and shall have any other powers and perform any other duties that
are prescribed by the Board of Directors or these Bylaws.

SECTION 44. ASSISTANT SECRETARIES. The Assistant Secretaries shall
assist the Secretary in the performance of his duties and shall attend to such
other matters as may be required of them and in the case of the absence or
inability of the Secretary to act, an Assistant Secretary shall act in his
stead.

SECTION 45. CHIEF FINANCIAL OFFICER. The Chief Financial Officer shall
be the principal financial officer of the corporation and shall perform the
duties imposed upon him by these Bylaws or the Board of Directors. He shall
supervise the Treasurer.

ARTICLE V

GENERAL CORPORATE MATTERS

SECTION 46. RECORD DATE AND CLOSING OF STOCKBOOKS. The Board of
Directors may fix a time in the future as a record date for determining
shareholders entitled to notice of and to vote at any shareholders' meeting; to
receive any dividend, distribution, or allotment of rights; or to exercise
rights in respect of any other lawful action, including change, conversion, or
exchange of shares. The record date shall not, however, be more than sixty
(60) nor less than ten (10) days prior to the date of such meeting nor more
than sixty (60) days prior to any other action. If a record date is fixed for
a particular meeting or event, only shareholders of record on that date are
entitled to notice and to vote and to receive the dividend, distribution, or
allotment of rights or to exercise the rights, as the case may be,
notwithstanding any transfer of any shares on the books of the corporation
after the record date.

A determination of shareholders of record entitled to notice of or to vote
at a meeting of shareholders shall apply to any adjournment of the meeting
unless the Board fixes a new record

<PAGE>

date for the adjourned meeting, but the Board shall fix a new record date if
the meeting is adjourned for more than forty-five (45) days from the date set
for the original meeting.

SECTION 47. CORPORATE RECORDS AND INSPECTION BY SHAREHOLDERS AND
DIRECTORS. Books and records of account and minutes of the proceedings of the
shareholders, Board, and committees of the Board and a record of the
shareholders, giving the names and addresses of all shareholders and the number
of shares held by each, shall be kept at the Head Office or at the office of
the corporation's transfer agent and shall be open to inspection upon the
written demand on the corporation of any shareholder at any reasonable time
during usual business hours, for a purpose reasonably related to such holder's
interests as a shareholder.

A shareholder or shareholders holding at least five percent (5%) in the
aggregate of the outstanding voting shares of the corporation or who hold at
least one percent (1%) of such voting shares and have filed a Schedule 14B with
the United States Securities and Exchange Commission relating to the election
of directors of the corporation shall have an absolute right to do either or
both of the following: (1) inspect and copy the record of shareholders' names
and addresses and shareholdings during usual business hours upon five (5)
business days prior written demand upon the corporation, or (2) obtain from the
transfer agent for the corporation, upon written demand and upon the tender of
its usual charges for such a list (the amount of which charges shall be stated
to the shareholder by the transfer agent upon request), a list of the
shareholders' names and addresses, who are entitled to vote for the election of
directors, and their shareholdings, as of the most recent record date for which
it has been compiled or as of a date specified by the shareholder subsequent to
the date of demand. The list shall be made available on or before the later of
five (5) business days after the demand is received or the date specified
therein as the date as of which the list is to be compiled. Inspection and
copying may be made in person or by agent or attorney.

<PAGE>

Every director shall have the absolute right at any reasonable time to
inspect and copy all books, records and documents of every kind and to inspect
the physical properties of the corporation and its subsidiary corporations,
domestic or foreign. Such inspection by a director may be made in person or by
agent or attorney and includes the right to copy and make extracts.

SECTION 48. CHECKS, DRAFTS, EVIDENCES OF INDEBTEDNESS. All checks,
drafts, or other orders for payment of money, notes, and all mortgages, or
other evidences of indebtedness, issued in the name of or payable to the
corporation, and all assignments and endorsements of the foregoing, shall be
signed or endorsed by the person or persons and in the manner specified by the
Board of Directors.

SECTION 49. CORPORATE CONTRACTS AND INSTRUMENTS; HOW EXECUTED. Except
as otherwise provided by law or in the Bylaws, officers, agents, or employees
must be authorized by the Board of Directors to enter into any contract or
execute any instrument in the corporation's name and on its behalf. This
authority may be general or confined to specific instances.

SECTION 50. STOCK CERTIFICATES. Subject to the adoption (pursuant to
Section 416(b) of the California Corporations Code) by the corporation of a
system of issuance, recordation and transfer of its shares by electronic or
other means not involving any issuance of certificates, every holder of shares
in the corporation shall be entitlted to have a certificate signed in the name
of the corporation by the Chairman or Vice Chairmen of the Board or the
President or a vice president and by the Chief Financial Officer or an
assistant treasurer or the Secretary or any assistant secretary, certifying the
number of shares and the class or series of shares owned by the shareholder.
Such facsimile signatures shall continue to be effective as an act of the
corporation notwithstanding the fact that at the time a certificate is issued
and delivered, an officer whose facsimile signature appears thereon has ceased
to be an officer of the corporation.

<PAGE>

SECTION 51. LOST CERTIFICATES. The holder of any stock of the
corporation shall immediately notify the corporation of any loss, destruction
or mutilation of the certificate therefor, and the Board of Directors or a
committee or an officer designated thereby, with power so to act may, in its or
his discretion, cause to be issued to him a new certificate, or, in case of
loss or destruction of the certificate, upon satisfactory proof of such loss or
destruction, and the Board of Directors or such committee or officer may, in
its or his discretion, require the owner of the lost or destroyed certificate
or his legal representative to give the corporation a bond (or other adequate
security) in such sum and with such surety or sureties, as it or he may direct,
to indemnify the corporation against any claim that may be made against it
(including any expense or liability) on account of the alleged loss or
destruction of any such certificate or the issuance of such new certificate.

SECTION 52. TRANSFER AGENT REGULATIONS. The corporation shall, if and
whenever the Board of Directors or a committee designated thereby with power so
to act shall so determine, maintain one or more transfer offices or agencies,
each in charge of a transfer agent designated by the Board of Directors or by
such committee, at which the shares of the capital stock of the corporation
shall be transferable, and no certificate for shares of the capital stock of
the corporation in respect of which a transfer agent shall have been
designated, shall be valid unless countersigned by such transfer agent. The
Board of Directors or such committee may also make such additional rules and
regulations as it may deem expedient concerning the issue and transfer of
certificates for shares of the capital stock of the corporation.

SECTION 53. TRANSFER OF STOCK. Transfers of the stock of the
corporation shall be made only on the books of the corporation by the holder
thereof or by his attorney thereunto authorized by a power of attorney duly
executed and filed with the Secretary at the Head Office of the corporation or
a transfer agent of the corporation, if any, and on surrender of the
certificate or

<PAGE>

certificates for such shares properly endorsed. The person in whose name
shares of stock stand on the books of the corporation shall be deemed the
owner thereof for all purposes as regards the corporation, and upon any
transfer of stock the person or persons into whose name or names such stock
shall be transferred on the books of the corporation shall be substituted for
the person or persons out of whose name or names such shares shall have been
transferred with respect to all rights, privileges and obligations of holders
of stock of the corporation and as against the corporation or any other
person or persons.

The term "person" or "persons" wherever used herein shall be deemed to
include any firm or firms, corporation or corporations, association or
associations.

SECTION 54. REPORTS TO SHAREHOLDERS. An annual report complying with
Section 1501 of the California Corporations Code shall be sent to the
shareholders not later than one hundred twenty (120) days after the close of
the fiscal year and at least fifteen (15) or, if sent by third-class mail,
thirty-five (35) days prior to the Annual Meeting of Shareholders to be held
during the next fiscal year. The foregoing requirement of an annual report
shall be waived so long as the shares of the corporation are held by fewer than
one hundred (100) holders of record.

If no annual report for the last fiscal year has been sent to
shareholders, the corporation shall, upon the written request of any
shareholder made more than one hundred twenty (120) days after the close of
that fiscal year, deliver or mail to the person making the request within
thirty (30) days thereafter the financial statements requried by Section
1501(a) of the California Corporations Code for that year.

A shareholder or shareholders holding at least five percent (5%) of the
outstanding shares of any class of the corporation may make a written request
to the corporation for an income statement of the corporation for the three-
month, six-month, or nine-month period of the current fiscal year ended more
than thirty (30) days prior to the date of the request and a balance sheet of
the corporation as of the end of such period and, in addition, if no annual
report for the last fiscal

<PAGE>

year has been sent to shareholders, the statements referred to in Section
1501(a) of the California Corporations Code for the last fiscal year. The
statements shall be delivered or mailed to the person making the request
within thirty (30) days thereafter. A copy of the statements shall be kept
on file at the Head Office of the corporation for twelve (12) months and they
shall be exhibited at all reasonable times to any shareholder demanding an
examination of them or a copy shall be mailed to such shareholder. The income
statements and balance sheets referred to shall be accompanied by the report
thereon, if any, of any independent accountants engaged by the corporation or
the certificate of an authorized officer of the corporation that such
financial statements were prepared without audit from the books and records
of the corporation.

SECTION 55. DIRECTOR LIABILITY AND INDEMNITY OF AGENTS.

1. DIRECTOR LIABILITY. The liability of the directors of this corporation
for monetary damages shall be eliminated to the fullest extent permissible
under California law.

2. INDEMNITY OF AGENTS.

(a) For the purposes of this Section 55, "agent" means any person who is
or was a director, officer, employee or other agent of the corporation, or is
or was serving at the request of the corporation as a director, officer,
employee or agent of another foreign or domestic corporation, partnership,
joint venture, trust or other enterprise or was a director, officer, employee
or agent of a foreign or domestic corporation which was a predecessor
corporation of the corporation or of another enterprise at the request of the
predecessor corporation; "proceeding" means any threatened, pending or
completed action or proceeding, whether civil, criminal, administrative or
investigative; and "expenses" includes without limitation attorneys' fees and
any expenses of establishing a right to indemnification under this
Section 55.

(b) The corporation may indemnify any person who was or is a party or
is threatened to be made a party to any proceeding (other than an action by
or in the right of the corporation to procure

<PAGE>

a judgment in its favor) by reason of the fact that the person is or was an
agent of the corporation, against expenses, judgments, fines, settlements and
other amounts actually and reasonably incurred in connection with the
proceeding if that person acted in good faith and in a manner the person
reasonably believed to be in the best interest of the corporation and, in the
case of a criminal proceeding, had no reasonable cause to believe the conduct
of the person was unlawful. The termination of any proceeding, by judgment,
order, settlement, conviction or upon a plea of nolo contendere or its
equivalent shall not, of itself, create a presumption that the person did not
act in good faith and in a manner which the person reasonably believed to be
in the best interests of the corporation or that the person had reasonable
cause to believe that the person's conduct was unlawful.

(c) The corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action by
or in the right of the corporation to procure a judgment in its favor by reason
of the fact that the person is or was an agent of the corporation, against
expenses actually and reasonably incurred by that person in connection with the
defense or settlement of the action if the person acted in good faith, in a
manner the person believed to be in the best interests of the corporation and
its shareholders.

No indemnification shall be made for any of the following:

(1) In respect of any claim, issue or matter as to which the person shall
have been adjudged to be liable to the corporation in the performance of
that person's duty to the corporation, unless and only to the extent that
the court in which the proceeding is or was pending shall determine upon
application that, in view of all the circumstances of the case, the person
is fairly and reasonably entitled to indemnity for the expenses and then
only to the extent that the court shall determine.

<PAGE>

(2) Of amounts paid in settling or otherwise disposing of a pending
action, without court approval.

(3) Of expenses incurred in defending a pending action which is settled
or otherwise disposed of without court approval.

(d) To the extent that an agent of a corporation has been successful on
the merits in defense of any proceeding referred to in paragraphs (b) and (c)
above or in defense of any claim, issue or matter therein, the agent shall be
indemnified against expenses actually and reasonably incurred by the agent in
connection therewith.

(e) Except as provided in paragraph (d) above, any indemnification under
this Section 55 shall be made by the corporation only if authorized in the
specific case, upon a determination that indemnification of the agent is proper
in the circumstances because the agent has met the applicable standard of
conduct set forth in paragraphs (b) or (c), by any of the following:

(1) A majority vote of a quorum consisting of directors who are not
parties to such proceeding;

(2) If such a quorum of directors is not obtainable, by independent legal
counsel in a written opinion;

(3) Approval of the shareholders, with the shares owned by the person to
be indemnified not being entitled to vote thereon, which approval shall be
either by the affirmative vote of a majority of the shares represented and
voting at a duly held meeting at which a quorum is present (which shares
voting affirmatively also constitute at least a majority of the required
quorum), by the written consent of shareholders as provided in Section 10
of these Bylaws, or by the affirmative vote or written consent of such
greater proportion (including all) of the shares of any class or or series
as may be provided in the articles for all or any specified shareholder
action; or

<PAGE>

(4) The court in which the proceeding is or was pending upon application
made by the corporation or the agent or the attorney or other person
rendering services in connection with the defense, whether or not the
application by the agent, attorney or other person is opposed by the
corporation.

(f) Upon written request of an agent seeking indemnification under this
Section 55, the Board of Directors by majority vote shall promptly make a
determination in good faith as to whether the applicable standard of conduct
has been met. If a positive determination is made, indemnification shall be
authorized forthwith if the directors approving the determination include a
majority of a quorum of directors not parties to the proceeding; otherwise the
question of authorization by the shareholders shall be put to a shareholder
vote no later than the date of the next annual meeting and said question shall
be included in any management proxy solicitation for or prior to said meeting.

(g) Expenses incurred in defending any proceeding shall be advanced by
the corporation prior to the final disposition of the proceeding upon receipt
of an undertaking by or on behalf of the agent to repay that amount if it shall
be determined ultimately that the agent is not entitled to be indemnified as
authorized in this Section.

(h) The indemnification authorized by this Section 55 shall not be deemed
exclusive of any additional rights to indemnification for breach of duty to the
corporation and its shareholders while acting in the capacity of a director or
officer of the corporation to the extent the additional rights to
indemnification are authorized in the articles of the corporation. The
indemnification provided by this section for acts, omissions, or transactions
while acting in the capacity of, or while serving as, a director or officer of
the corporation but not involving breach of duty to the corporation and its
shareholders shall not be deemed exclusive of any other rights to which those
seeking indemnification may be entitled under any Bylaw, agreement, vote of
shareholders or disinterested

<PAGE>

directors, or otherwise, to the extent the additional rights to
indemnification are authorized in the articles of the corporation. An
article provision authorizing indemnification "in excess of that otherwise
permitted by California Corporations Code Section 317" or "to the fullest
extent permissible under California law" or the substantial equivalent
thereof shall be construed to be both a provision for additional
indemnification for breach of duty to the corporation and its shareholders as
referred to in, and with the limitations required by, paragraph (ll) of
subdivision (a) of California Corporations Code Section 204 (which is set
forth below) and a provision for additional indemnification as referred to in
the second sentence of this paragraph. The rights to indemnity hereunder
shall continue as to a person who has ceased to be a director, officer,
employee, or agent and shall inure to the benefit of the heirs, executors,
and administrators of the person. Nothing contained in this section shall
affect any right to indemnification to which persons other than the directors
and officers may be entitled by contract or otherwise.

(i) No indemnification or advance shall be made under this Section,
except as provided in paragraph (d) above or paragraph (e)(4) above, in any
circumstance where it appears:

(l) That it would be inconsistent with a provision of the articles,
bylaws, a resolution of the shareholders, or an agreement in effect at the time
of the accrual of the alleged cause of action asserted in the proceeding in
which the expenses were incurred or other amounts were paid, which prohibits or
otherwise limits indemnification;

(2) That it would be inconsistent with any condition expressly imposed by
a court in approving a settlement.

Under paragraph (11) of subdivision (a) of California Corporations Code
Section 204, a provision authorizing, whether by bylaw, agreement or otherwise,
the indemnification of agents in excess of that expressly permitted by
California Corporations Code Section 317 for breach of duty to the corporation
and its stockholders may not provide for indemnification of any agent for any

<PAGE>

acts, omissions or transactions from which a director may not be relieved from
liability as set forth in paragraph (10) of subdivision (a) of Section 204 or
as to circumstances in which indemnity is expressly prohibited by Section 317.

According to Paragraph (10) of subdivision (a) of Section 204, a provision
eliminating or limiting the personal liability of a director for monetary
damages in an action brought by or in the right of the corporation and its
shareholders, as set forth in California Corporations Code Section 309, may not
eliminate or limit the liability of directors as follows:

(i) For acts or omissions that involve intentional misconduct or a
knowing and culpable violation of law;

(ii) For acts or omissions that a director believes to be contrary to the
best interests of the corporation or its shareholders or that involve the
absence of good faith on the part of the director;

(iii) For any transaction from which a director derived an improper
personal benefit;

(iv) For acts or omissions that show a reckless disregard for the
director's duty to the corporation or its shareholders in circumstances in
which the director was aware, or should have been aware, in the ordinary course
of performing a director's duties, of a risk of serious injury to the
corporation or its shareholders;

(v) For acts or omissions that constitute an unexcused pattern of
inattention that amounts to an abdication of the director's duty to the
corporation or its shareholders;

(vi) Under California Corporations Code Section 310; or

(vii) Under California Corporations Code Section 316.

No such provision shall eliminate or limit the liability of a director for
any act or omission occurring prior to the date when the provision becomes
effective, and no such provision shall eliminate or limit the liability of an
officer for any act or omission as an officer, notwithstanding that

<PAGE>

the officer is also a director or that his or her actions, if negligent or
improper, have been ratified by the directors.

ARTICLE VI

AMENDMENTS

SECTION 56. AMENDMENTS BY SHAREHOLDERS. New Bylaws may be adopted or
these Bylaws may be amended or repealed by the affirmative vote or written
consent of a majority of the outstanding shares entitled to vote.

SECTION 57. AMENDMENTS BY DIRECTORS. Subject to the right of
shareholders under the preceding Section 56 of these Bylaws, Bylaws (other
than a Bylaw fixing or changing the authorized number of directors or
classifying the board of directors) may be adopted, amended, or repealed by the
Board of Directors.

ARTICLE VII

EMERGENCY PROCEDURES

SECTION 58. EMERGENCY DEFINED. "Emergency" as used in this Article
VII means disorder, disturbance or damage caused by disaster, war, enemy attack
or other warlike acts which prevent conduct and management of the affairs and
business of the corporation by the Board of Directors and officers in the
manner provided for in the Articles of Incorporation and in these Bylaws. The
powers and duties conferred and imposed by this Article and any resolutions
adopted pursuant hereto shall be effective only during an emergency. This
Article may be implemented from time to time by resolutions adopted by the
Board of Directors before or during an emergency, or during an emergency by the
Emergency Managing Committee constituted and then acting pursuant thereto. An
emergency, once commenced, shall be deemed to continue until terminated by
resolutions adopted for that purpose by the Board of Directors. During an
emergency, the

<PAGE>

provisions of this Article and any implementing resolutions shall supersede
any conflicting provisions of any Article of these Bylaws or resolutions
adopted pursuant hereto.

SECTION 59. CONDUCT OF AFFAIRS. During any emergency, the officers and
employees of the corporation shall continue, so far as possible, to conduct the
affairs and business of the corporation under the guidance of the Board of
Directors, or of the Emergency Managing Committee acting pursuant to this
Article, and in accordance with known orders of governmental authorities.

SECTION 60. QUORUM AND POWER OF BOARD OF DIRECTORS. If, during any
emergency, a quorum of the Board of Directors cannot be found or is unable to
act, any three or more available members of the Board of Directors shall
constitute a quorum, and as such shall have and exercise the fullest power for
conduct and management of the property, affairs and business of the
corporation, including the power to relocate the Head Office or any other
office or branch as circumstances may require.

SECTION 61. POWER OF EMERGENCY MANAGING COMMITTEE. If during any
emergency, a quorum of the Board of Directors as provided for in Section 60
above is not available to serve, then the powers conferred and duties imposed
by said Section 61 shall be vested in and devolve upon an Emergency Managing
Committee consisting of all available directors, the then acting Chief
Executive Officer if he is available, and as many Vice Presidents or officers
senior thereto as may be necessary to constitute a total of five committee
members. If officers are needed to serve on the Emergency Managing Committee
initially, or to fill vacancies from time to time, such vacancies shall be
filled by the available Vice Presidents and officers senior thereto assigned to
the Head Office as constituted prior to the emergency, in order of their rank
and seniority. If a sufficient number of such officers is not available, such
vacancies shall be filled by other Vice Presidents

<PAGE>

selected by the incumbent members of the Committee. Any two members of the
Emergency Managing Committee and the then acting Chief Executive Officer, if
he is available, shall constitute a quorum of the Emergency Managing
Committee and shall have and exercise all of the powers conferred and perform
the duties imposed by this Section 61, but if the then acting Chief Executive
Officer is not available any three members of the Emergency Managing
Committee shall constitute a quorum of said Committee.

<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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 2,485,158
<INT-BEARING-DEPOSITS> 136,182
<FED-FUNDS-SOLD> 57,503
<TRADING-ASSETS> 748,593
<INVESTMENTS-HELD-FOR-SALE> 3,312,933
<INVESTMENTS-CARRYING> 164,353
<INVESTMENTS-MARKET> 167,395
<LOANS> 22,958,328
<ALLOWANCE> 478,133
<TOTAL-ASSETS> 30,922,575
<DEPOSITS> 23,412,519
<SHORT-TERM> 3,068,908
<LIABILITIES-OTHER> 823,477
<LONG-TERM> 348,000
0
0
<COMMON> 275,008
<OTHER-SE> 2,564,522
<TOTAL-LIABILITIES-AND-EQUITY> 30,922,575
<INTEREST-LOAN> 897,086
<INTEREST-INVEST> 91,831
<INTEREST-OTHER> 31,732
<INTEREST-TOTAL> 1,020,649
<INTEREST-DEPOSIT> 280,086
<INTEREST-EXPENSE> 377,643
<INTEREST-INCOME-NET> 643,006
<LOAN-LOSSES> 35,000
<SECURITIES-GAINS> 4,926
<EXPENSE-OTHER> 545,800
<INCOME-PRETAX> 338,230
<INCOME-PRE-EXTRAORDINARY> 338,230
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 204,098
<EPS-PRIMARY> 3.50
<EPS-DILUTED> 3.48
<YIELD-ACTUAL> 4.88
<LOANS-NON> 107,034
<LOANS-PAST> 18,936
<LOANS-TROUBLED> 0
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<ALLOWANCE-OPEN> 451,692
<CHARGE-OFFS> 32,563
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<ALLOWANCE-CLOSE> 478,133
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</TABLE>