UNIONBANCAL CORP, 10-Q/A, 1998-11-19

UNIONBANCAL CORP
10-Q/A, 1998-11-19
NATIONAL COMMERCIAL BANKS

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q/A

/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 October 31, 1998: 58,403,188

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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(2).............................. $ 108,521 $ 95,577 $ 93,718 13.54% 15.80%
----------- ----------- -----------
----------- ----------- -----------
PER COMMON SHARE:
Net income--basic(2)................................................ $ 1.86 $ 1.64 $ 1.61 13.41% 15.53%
Net income--diluted(2).............................................. 1.85 1.63 1.61 13.50 14.91
Pro forma net income--basic(3)...................................... 0.62 0.55 0.54 12.73 14.81
Pro forma net income--diluted(3).................................... 0.62 0.54 0.54 14.81 14.81
Dividends(4)........................................................ 0.42 0.42 0.35 -- 20.00
Book value (end of period)(2)....................................... 48.63 47.16 43.00 3.12 13.09
Common shares outstanding (end of period)(2)........................ 58,391,538 58,332,204 58,256,833 0.10 0.23
Weighted average common shares outstanding--basic(2)................ 58,371,658 58,322,397 58,185,506 0.08 0.32
Weighted average common shares outstanding--diluted(2).............. 58,596,656 58,540,292 58,337,514 0.10 0.44
Pro forma weighted average common shares outstanding--basic(3)...... 175,114,975 174,967,192 174,556,519 0.08 0.32
Pro forma weighted average common shares
outstanding--diluted(3)........................................... 175,789,969 175,620,877 175,012,543 0.10 0.44
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).................................................... 2,839,530 2,750,696 2,504,857 3.23 13.36
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).................................................... 2,795,714 2,714,296 2,464,751 3.00 13.43
FINANCIAL RATIOS:
Return on average assets(5)......................................... 1.46% 1.30% 1.32%
Return on average common equity(2)(6)............................... 15.57 14.28 15.25
Efficiency ratio(7)................................................. 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(8)..................... 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>

- ------------------------
(1) Amounts are on a taxable-equivalent basis using the federal statutory tax
rate of 35 percent.
(2) All periods have been restated to give retroactive effect to the exchange
on August 10, 1998 of 3.4 million shares of the Company's common stock
for the Bank of Tokyo-Mitsubishi, Ltd.'s direct ownership interest in
Union Bank of California.
(3) See Note 5 of accompanying notes to consolidated financial statements for
information related to stock split declaration.
(4) Dividends per share reflect dividends declared on the Company's common
stock outstanding as of the declaration date.
(5) Based on annualized net income.
(6) Based on annualized net income applicable to common stock.
(7) 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.
(8) 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(2)....................................................... $ 204,098 $ 183,394 11.29%
----------- -----------
----------- -----------
PER COMMON SHARE:
Net income--basic(2)......................................................................... $ 3.50 $ 3.15 11.11%
Net income--diluted(2)....................................................................... 3.48 3.15 10.48
Pro forma net income--basic(3)............................................................... 1.17 1.05 11.43
Pro forma net income--diluted(3)............................................................. 1.16 1.05 10.48
Dividends(4)................................................................................. 0.84 0.70 20.00
Book value (end of period)(2)................................................................ 48.63 43.00 13.09
Common shares outstanding (end of period)(2)................................................. 58,391,538 58,256,833 0.23
Weighted average common shares outstanding--basic(2)......................................... 58,347,163 58,170,039 0.30
Weighted average common shares outstanding--diluted(2)....................................... 58,565,499 58,310,876 0.44
Pro forma weighted average common shares outstanding--basic(3)............................... 175,041,490 174,510,118 0.30
Pro forma weighted average common shares outstanding--diluted(3)............................. 175,696,498 174,932,629 0.44

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)............................................................................. 2,839,530 2,504,857 13.36

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)............................................................................. 2,755,230 2,428,484 13.45

FINANCIAL RATIOS:
Return on average assets(5).................................................................. 1.38% 1.31%
Return on average common equity(2)(6)........................................................ 14.94 15.23
Efficiency ratio(7).......................................................................... 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(8).............................................. 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>

- ------------------------------
(1) Amounts are on a taxable-equivalent basis using the federal statutory tax
rate of 35 percent.
(2) All periods have been restated to give retroactive effect to the exchange
on August 10, 1998 of 3.4 million shares of the Company's common stock
for the Bank of Tokyo-Mitsubishi, Ltd.'s direct ownership interest in
Union Bank of California.
(3) See Note 5 of accompanying notes to consolidated financial statements for
information related to stock split declaration.
(4) Dividends per share reflect dividends declared on the Company's common
stock outstanding as of the declaration date.
(5) Based on annualized net income.
(6) Based on annualized net income applicable to common stock.
(7) 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.
(8) 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,
------------------------ --------------------------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA) 1998 1997 1998 1997
- ------------------------------------------------------------------------ ----------- ----------- ------------- -----------
<S> <C> <C> <C> <C>
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(1)................................ $ 108,521 $ 93,718 $ 204,098 $ 183,394
----------- ----------- ------------- -----------
----------- ----------- ------------- -----------
NET INCOME PER COMMON SHARE--BASIC(1)................................... $ 1.86 $ 1.61 $ 3.50 $ 3.15
----------- ----------- ------------- -----------
----------- ----------- ------------- -----------
NET INCOME PER COMMON SHARE--DILUTED(1)................................. $ 1.85 $ 1.61 $ 3.48 $ 3.15
----------- ----------- ------------- -----------
----------- ----------- ------------- -----------
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING--BASIC(1).................... 58,372 58,186 58,347 58,170
----------- ----------- ------------- -----------
----------- ----------- ------------- -----------
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING--DILUTED(1).................. 58,597 58,338 58,565 58,311
----------- ----------- ------------- -----------
----------- ----------- ------------- -----------
PRO FORMA NET INCOME PER COMMON SHARE--BASIC(2)......................... $ 0.62 $ 0.54 $ 1.17 $ 1.05
----------- ----------- ------------- -----------
----------- ----------- ------------- -----------
PRO FORMA NET INCOME PER COMMON SHARE--DILUTED(2)....................... $ 0.62 $ 0.54 $ 1.16 $ 1.05
----------- ----------- ------------- -----------
----------- ----------- ------------- -----------
PRO FORMA WEIGHTED AVERAGE COMMON SHARES OUTSTANDING--BASIC(2).......... 175,115 174,557 175,041 174,510
----------- ----------- ------------- -----------
----------- ----------- ------------- -----------
PRO FORMA WEIGHTED AVERAGE COMMON SHARES OUTSTANDING--DILUTED(2)........ 175,790 175,013 175,696 174,933
----------- ----------- ------------- -----------
----------- ----------- ------------- -----------
</TABLE>

- ----------------------------------
(1) Amounts restated to give retroactive effect to the exchange referred to
in Note 1 of the accompanying notes to consolidated financial statements.
(2) See Note 5 of accompanying notes to consolidated financial statements for
information related to stock split declaration.

See accompanying notes to consolidated financial statements.

4
<PAGE>
UNIONBANCAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)

<TABLE>
<CAPTION>
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(1)
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 58,391,538 as of June 30, 1998,
58,305,891 as of December 31, 1997, and 58,256,833 as of June 30,
1997............................................................... 291,957 291,529 291,283
Additional paid-in capital............................................. 1,429,647 1,422,680 1,419,236
Retained earnings...................................................... 1,109,071 957,662 785,025
Accumulated other comprehensive income................................. 8,855 7,428 9,313
------------ ------------ ------------
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>

- --------------------------
(1) Amounts restated to give retroactive effect to the exchange referred to
in Note 1 of the accompanying notes to consolidated financial statements.

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,
------------------------
(DOLLARS IN THOUSANDS) 1998(1) 1997(1)
- ---------------------------------------------------------------------------------------- ----------- -----------
<S> <C> <C>
PREFERRED STOCK
Balance, beginning of period............................................................ $ -- $ 135,000
Redemption of preferred stock........................................................... -- --
----------- -----------
Balance, end of period................................................................ $ -- $ 135,000
----------- -----------
COMMON STOCK
Balance, beginning of period............................................................ $ 291,529 $ 290,762
Dividend reinvestment plan.............................................................. 5 1
Deferred compensation--restricted stock awards.......................................... 234 287
Stock options exercised................................................................. 189 233
----------- -----------
Balance, end of period................................................................ $ 291,957 $ 291,283
----------- -----------
ADDITIONAL PAID-IN CAPITAL
Balance, beginning of period............................................................ $ 1,422,680 $ 1,413,076
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................................................................ $ 1,429,647 $ 1,419,236
----------- -----------
RETAINED EARNINGS
Balance, beginning of period............................................................ $ 957,662 $ 645,214
Net income(2)........................................................................... 204,098 189,047
Dividends on common stock(3)............................................................ (49,104) (40,802)
Dividends on preferred stock............................................................ -- (5,653)
Deferred compensation--restricted stock awards.......................................... (3,585) (2,781)
----------- -----------
Balance, end of period................................................................ $ 1,109,071 $ 785,025
----------- -----------
ACCUMULATED OTHER COMPREHENSIVE INCOME
Balance, beginning of period............................................................ $ 7,428 $ 10,881
Net income(2)........................................................................... 204,098 189,047
Other comprehensive income.............................................................. 1,427 (1,568)
----------- -----------
Comprehensive income.................................................................... 212,953 198,360
Less: net income included in retained earnings.......................................... (204,098) (189,047)
----------- -----------
Balance, end of period................................................................ $ 8,855 $ 9,313
----------- -----------
TOTAL SHAREHOLDERS' EQUITY.......................................................... $ 2,839,530 $ 2,639,857
----------- -----------
----------- -----------
</TABLE>

- ------------------------
(1) Amounts restated to give retroactive effect to the exchange referred to
in Note 1 of the accompanying notes to consolidated financial statements.
(2) Includes income applicable to preferred shareholders of $5.7 million for
the first six months of 1997.
(3) Dividends per share were $0.84 and $0.70 for the first six months of 1998
and 1997, respectively, and are based on the Company's shares outstanding
as of the declaration date.

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. However, they do not
include all of the disclosures necessary for annual financial statements in
conformity with GAAP. Accordingly, these unaudited consolidated financial
statements should be read in conjunction with the audited consolidated financial
statements included in the Company's Form 10-K/A for the year ended December 31,
1997. 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.

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
provides the Company with a 100 percent ownership interest in 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. Accordingly, amounts previously reported as Parent Direct
Interest in Bank Subsidiary, including the proportionate share of net income,
dividends, and other comprehensive income have been reclassified to combine with
the corresponding amounts attributable to the Company's common shareholders for
all periods presented.

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.

8
<PAGE>
UNIONBANCAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998
(UNAUDITED) (CONTINUED)

NOTE 2--RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS (CONTINUED)
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. SFAS No. 133
requires that derivative instruments used to hedge be identified specifically to
assets, liabilities, firm commitments or anticipated transactions and measured
as effective and ineffective when hedging changes in fair value or cash flows.
Derivative instruments that do not qualify as either a fair value or cash flow
hedge will be valued as fair value with the resultant gain or loss recognized in
current earnings. Changes in the effective portion of fair value hedges will be
recognized in current earnings along with the changes in fair value of the
hedged item. Changes in the effective portion of the fair value of cash flow
hedges will be recognized in other comprehensive income until realization of the
cash flows of the hedged item through current earnings. Any ineffective portion
of hedges will be recognized in current earnings. Management believes that,
depending upon the accumulated net gain or loss of the effective portion of cash
flow hedges at the date of adoption, the impact of SFAS No. 133 could have a
material impact on other comprehensive income. However, Management believes that
any ineffective portion of cash flow hedges or any other hedges will not have a
material impact on the Company's financial position or results of operations.
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.

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 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

9
<PAGE>
UNIONBANCAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998
(UNAUDITED) (CONTINUED)

NOTE 3--EARNINGS PER SHARE (CONTINUED)
options are a common stock equivalent. The following table presents a
reconciliation of basic and diluted EPS for the three months and six months
ended June 30, 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,
------------------------------------------ ------------------------------------------
1998 1997 1998 1997
-------------------- -------------------- -------------------- --------------------
(AMOUNTS IN THOUSANDS, EXCEPT PER
SHARE DATA) BASIC DILUTED BASIC DILUTED BASIC DILUTED BASIC DILUTED
- ---------------------------------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net income........................ $ 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)
--------- --------- --------- --------- --------- --------- --------- ---------
Income available to common
shareholders(1)................. $ 108,521 $ 108,521 $ 93,718 $ 93,718 $ 204,098 $ 204,098 $ 183,394 $ 183,394
--------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- ---------
Weighted average common shares
outstanding(1).................. 58,372 58,372 58,186 58,186 58,347 58,347 58,170 58,170
Additional shares due to:
Assumed conversion of dilutive
stock options................. -- 225 -- 152 -- 218 -- 141
--------- --------- --------- --------- --------- --------- --------- ---------
Adjusted weighted average common
shares outstanding(1)........... 58,372 58,597 58,186 58,338 58,347 58,565 58,170 58,311
--------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- ---------
Net income per share(1)........... $ 1.86 $ 1.85 $ 1.61 $ 1.61 $ 3.50 $ 3.48 $ 3.15 $ 3.15
--------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- ---------
</TABLE>

- --------------------------
(1) Amounts restated to reflect the exchange referred to in Note 1 of the
accompanying notes to consolidated financial statements.

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
JUNE 30, 1998
(UNAUDITED) (CONTINUED)

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
--------------------------------------
JUNE 30, 1998 JUNE 30, 1997
------------------ ------------------
ACCUMULATED OTHER ACCUMULATED OTHER
COMPREHENSIVE COMPREHENSIVE
(DOLLARS IN THOUSANDS) INCOME(1) INCOME(1)
- ----------------------------------------------------------------------------- ------------------ ------------------
<S> <C> <C>
Net unrealized gain (loss) on available for sale securities, net of
reclassification adjustment:
Beginning balance.......................................................... $ 19,886 $ 14,064
Net unrealized gain (loss) on available for sale securities during the
first six months, before tax............................................. 7,373 (603)
Income tax (expense) benefit............................................... (2,986) 244
Less: reclassification adjustment for net realized gains on available for
sale securities included in net income during the first six months,
before tax............................................................... (4,926) (552)
Plus: income tax expense................................................... 1,995 224
------- -------
Net activity............................................................... 1,456 (687)
------- -------
Ending balance............................................................. 21,342 13,377
------- -------
Foreign currency translation adjustments:
Beginning balance.......................................................... (12,458) (3,183)
Foreign currency translation adjustments during the first six months,
before tax............................................................... (49) (1,481)
Income tax benefit......................................................... 20 600
------- -------
Net activity............................................................... (29) (881)
------- -------
Ending balance............................................................. (12,487) (4,064)
------- -------
Other comprehensive income................................................... $ 1,427 $ (1,568)
------- -------
------- -------
Accumulated other comprehensive income....................................... $ 8,855 $ 9,313
------- -------
------- -------
</TABLE>

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

(1) Amounts restated to reflect the exchange referred to in Note 1 of the
accompanying notes to consolidated financial statements.

11
<PAGE>
UNIONBANCAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998
(UNAUDITED) (CONTINUED)

NOTE 5--SUBSEQUENT EVENT AND PRO FORMA INFORMATION

On November 18, 1998, the Company's Board of Directors approved the
declaration of a 3 for 1 stock split effective for shareholders of record on
December 7, 1998. The following table presents a retroactive reconciliation of
the pro forma basic and diluted EPS for the three months and six months ended
June 30, 1998 and 1997, assuming that the stock split has occurred.

<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED JUNE 30, FOR THE SIX MONTHS ENDED JUNE 30,
------------------------------------------ ------------------------------------------
1998 1997 1998 1997
(AMOUNTS IN THOUSANDS, EXCEPT PER -------------------- -------------------- -------------------- --------------------
SHARE DATA) BASIC DILUTED BASIC DILUTED BASIC DILUTED BASIC DILUTED
- -------------------------------------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net income............................ $ 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)
--------- --------- --------- --------- --------- --------- --------- ---------
Income available to common
shareholders........................ $ 108,521 $ 108,521 $ 93,718 $ 93,718 $ 204,098 $ 204,098 $ 183,394 $ 183,394
--------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- ---------
Pro forma weighted average common
shares outstanding.................. 175,115 175,115 174,557 174,557 175,041 175,041 174,510 174,510
Pro forma additional shares due to:
Assumed conversion of dilutive stock
options........................... -- 675 -- 456 -- 655 -- 423
--------- --------- --------- --------- --------- --------- --------- ---------
Pro forma adjusted weighted average
common shares outstanding........... 175,115 175,790 174,557 175,013 175,041 175,696 174,510 174,933
--------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- ---------
Pro forma net income per share........ $ 0.62 $ 0.62 $ 0.54 $ 0.54 $ 1.17 $ 1.16 $ 1.05 $ 1.05
--------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- ---------
</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 82 percent owned by The Bank
of Tokyo-Mitsubishi, Ltd. (BTM) and 18 percent owned by other shareholders.
UNBC's principal subsidiary, Union Bank of California, N.A. (the Bank), is
wholly owned by UNBC. (See Note 1 of the accompanying notes to the consolidated
financial statements.)

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 $108.5 million, or $1.85 per diluted common share, in the second
quarter of 1998, compared with $93.7 million, or $1.61 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 incentive compensation. Other noninterest expense
increased $5.3 million, or 29 percent, primarily

13
<PAGE>
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 15.57 percent at June 30, 1998, compared to 15.25
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 $204.1 million, or $3.48 per diluted common share, for the first six
months of 1998, compared with $183.4 million, or $3.15 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 14.94 percent for the
first six months of 1998, compared to 15.23 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
Preferred stock............................................. -- 135,000
Common equity(5)............................................ 2,795,714 2,464,751
----------- -----------
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.

(5) Amounts restated to reflect the exchange referred to in Note 1 of the
accompanying notes to consolidated financial statements.

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
Preferred stock.............................................. -- 135,000
Common equity(5)............................................. 2,755,230 2,428,484
----------- -----------
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.

(5) Amounts restated to reflect the exchange referred to in Note 1 of the
accompanying notes to consolidated financial statements.

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:
-----------------------
JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31, JUNE 30,
(DOLLARS IN THOUSANDS) 1998 1997 1997 1997 1997
- --------------------------------------- ------------- ------------- ------------- ------------ ---------
<S> <C> <C> <C> <C> <C>
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,
---------------------- ----------------------
(DOLLARS IN THOUSANDS) 1998 1997 1998 1997
- ----------------------------------------------------------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
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>
INCORPORATED BY
REFERENCE TO REPORT
ON FORM
--------------------
FILED 10-Q EXHIBIT
NO. DESCRIPTION HEREWITH DATED NO.
--- ------------------------------------------------------------------- --------- --------- ---------
<C> <S> <C> <C> <C>
3.1 Restated Articles of Incorporation of the Registrant, as amended 8-14-98 3.1
3.2 By-laws of the Registrant, as amended 8-14-98 3.2
27 Financial Data Schedule X
</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.

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: November 19, 1998

<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>
<RESTATED>
<MULTIPLIER> 1,000

<S> <C> <C>
<PERIOD-TYPE> 6-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997
<PERIOD-START> JAN-01-1998 JAN-01-1997
<PERIOD-END> JUN-30-1998 JUN-30-1997
<CASH> 2,485,158 2,340,247
<INT-BEARING-DEPOSITS> 136,182 919,040
<FED-FUNDS-SOLD> 57,503 262,700
<TRADING-ASSETS> 748,593 402,842
<INVESTMENTS-HELD-FOR-SALE> 3,312,933 2,531,733
<INVESTMENTS-CARRYING> 164,353 247,809
<INVESTMENTS-MARKET> 167,395 252,188
<LOANS> 22,958,328 22,129,118
<ALLOWANCE> 478,133 502,114
<TOTAL-ASSETS> 30,922,575 30,171,952
<DEPOSITS> 23,412,519 22,352,919
<SHORT-TERM> 3,118,908 3,482,736
<LIABILITIES-OTHER> 823,477 597,648
<LONG-TERM> 298,000 398,718
0 0
0 135,000
<COMMON> 291,957 291,283
<OTHER-SE> 2,547,573 2,213,574
<TOTAL-LIABILITIES-AND-EQUITY> 30,922,575 30,171,952
<INTEREST-LOAN> 897,086 861,497
<INTEREST-INVEST> 91,831 78,849
<INTEREST-OTHER> 31,732 49,348
<INTEREST-TOTAL> 1,020,649 989,694
<INTEREST-DEPOSIT> 280,086 289,208
<INTEREST-EXPENSE> 377,643 388,647
<INTEREST-INCOME-NET> 643,006 601,047
<LOAN-LOSSES> 35,000 0
<SECURITIES-GAINS> 4,926 552
<EXPENSE-OTHER> 545,800 508,891
<INCOME-PRETAX> 338,230 317,963
<INCOME-PRE-EXTRAORDINARY> 204,098 189,047
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 204,098 189,047
<EPS-PRIMARY> 3.50 3.15
<EPS-DILUTED> 3.48 3.15
<YIELD-ACTUAL> 4.88 4.72
<LOANS-NON> 107,034 146,140
<LOANS-PAST> 18,936 27,352
<LOANS-TROUBLED> 0 0
<LOANS-PROBLEM> 0 0
<ALLOWANCE-OPEN> 451,692 523,946
<CHARGE-OFFS> 32,563 49,043
<RECOVERIES> 24,111 27,245
<ALLOWANCE-CLOSE> 478,133 502,114
<ALLOWANCE-DOMESTIC> 200,000 273,404
<ALLOWANCE-FOREIGN> 32,700 9,390
<ALLOWANCE-UNALLOCATED> 245,233 219,320

</TABLE>