UNIONBANCAL CORP, 10-Q, 1999-08-10

UNIONBANCAL CORP
10-Q, 1999-08-10
NATIONAL COMMERCIAL BANKS

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1999

Commission file number 0-28118

UNIONBANCAL CORPORATION

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

350 California Street
San Francisco, California 94104-1476
Registrant's telephone number (415) 765-2969

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

Number of shares of Common Stock outstanding at July 31, 1999: 164,611,527

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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........................................................................................ 12
Summary............................................................................................. 12
Mission Excel....................................................................................... 14
Business Segments................................................................................... 14
Net Interest Income................................................................................. 20
Noninterest Income.................................................................................. 23
Noninterest Expense................................................................................. 24
Income Tax Expense.................................................................................. 26
Loans............................................................................................... 27
Cross-Border Outstandings........................................................................... 28
Provision for Credit Losses......................................................................... 29
Allowance for Credit Losses......................................................................... 29
Nonperforming Assets................................................................................ 33
Loans 90 Days or More Past Due and Still Accruing................................................... 33
Liquidity........................................................................................... 34
Regulatory Capital.................................................................................. 34
Year 2000........................................................................................... 34
Forward-looking Statements.......................................................................... 38

Item 3. Market Risk................................................................................... 41

PART II
OTHER INFORMATION

Item 4. Submission of Matters to a Vote of Security Holders........................................... 42

Item 5. Other Information............................................................................. 42

Item 6. Exhibits and Reports on Form 8-K.............................................................. 43

Signatures............................................................................................ 44
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION

UNIONBANCAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL HIGHLIGHTS
(UNAUDITED)

<TABLE>
<CAPTION>
PERCENT CHANGE TO
FOR THE THREE MONTHS ENDED JUNE 30, 1999 FROM:
---------------------------------------- --------------------
JUNE 30, MARCH 31, JUNE 30, JUNE 30, MARCH 31,
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 1998 1999 1999 1998 1999
- ---------------------------------------------- ------------ ------------ ------------ -------- ---------
<S> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS:
Net interest income(1)...................... $ 326,708 $ 340,711 $ 348,014 6.52% 2.14%
Provision for credit losses................. 15,000 5,000 10,000 (33.33) 100.00
Noninterest income.......................... 147,994 139,308 144,798 (2.16) 3.94
Noninterest expense......................... 277,325 302,993 307,582 10.91 1.51
------------ ------------ ------------
Income before income taxes(1)............... 182,377 172,026 175,230 (3.92) 1.86
Taxable-equivalent adjustment............... 1,152 890 851 (26.13) (4.38)
Income tax expense.......................... 72,704 52,641 59,652 (17.95) 13.32
------------ ------------ ------------
Net income.................................. $ 108,521 $ 118,495 $ 114,727 5.72% (3.18)%
------------ ------------ ------------
------------ ------------ ------------
PER COMMON SHARE:
Net income--basic........................... $ 0.62 $ 0.69 $ 0.70 12.90% 1.45%
Net income--diluted......................... 0.62 0.69 0.69 11.29 --
Dividends(2)................................ 0.14 0.19 0.19 35.71 --
Book value (end of period).................. 16.21 17.17 17.50 7.96 1.92
Common shares outstanding (end of period)... 175,174,615 164,580,273 164,600,997 (6.04) 0.01
Weighted average common shares
outstanding--basic........................ 175,114,975 171,825,589 164,588,227 (6.01) (4.21)
Weighted average common shares
outstanding--diluted...................... 175,789,969 172,465,676 165,278,828 (5.98) (4.17)
BALANCE SHEET (END OF PERIOD):
Total assets................................ $ 30,922,575 $ 32,347,577 $ 32,386,153 4.73% 0.12%
Total loans................................. 22,958,328 24,352,354 24,586,658 7.09 0.96
Nonperforming assets........................ 122,943 109,837 97,449 (20.74) (11.28)
Total deposits.............................. 23,412,519 23,996,023 24,133,148 3.08 0.57
Common equity............................... 2,839,530 2,825,730 2,881,137 1.47 1.96
BALANCE SHEET (PERIOD AVERAGE):
Total assets................................ $ 29,756,517 $ 31,727,726 $ 31,960,796 7.41% 0.73%
Total loans................................. 22,698,082 24,280,726 24,854,844 9.50 2.36
Earning assets.............................. 26,845,853 28,618,688 28,867,990 7.53 0.87
Total deposits.............................. 22,154,050 23,305,935 23,348,561 5.39 0.18
Common equity............................... 2,795,714 2,994,352 2,872,991 2.76 (4.05)
FINANCIAL RATIOS:
Return on average assets(3)................. 1.46% 1.51% 1.44%
Return on average common equity(3).......... 15.57 16.05 16.02
Efficiency ratio(4)......................... 58.47 63.13 62.52
Net interest margin(1)...................... 4.88 4.83 4.84
Dividend payout ratio....................... 22.58 27.54 27.14
Tangible equity ratio....................... 8.99 8.56 8.70
Tier 1 risk-based capital ratio............. 9.28 9.90 10.02
Total risk-based capital ratio.............. 11.34 11.86 11.96
Leverage ratio.............................. 9.27 9.78 9.91
Allowance for credit losses to total
loans..................................... 2.08 1.84 1.83
Allowance for credit losses to nonaccrual
loans..................................... 446.71 446.10 495.45
Net loans charged off to average total
loans(3).................................. 0.05 0.27 0.12
Nonperforming assets to total loans and
foreclosed assets......................... 0.54 0.45 0.40
Nonperforming assets to total assets........ 0.40 0.34 0.30
</TABLE>

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(1) Amounts are on a taxable-equivalent basis using the federal statutory tax
rate of 35 percent.

(2) Dividends per share reflect dividends declared on UnionBanCal
Corporation's common stock outstanding as of the declaration date.

(3) Annualized.

(4) The efficiency ratio is noninterest expense, excluding foreclosed asset
expense (income), as a percentage of net interest income
(taxable-equivalent) and noninterest income. Foreclosed asset expense
(income) was $(0.2) million in the second quarter of 1998, none in the
first quarter of 1999, and $(0.5) million in the second quarter of 1999.

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

<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
----------------------------------------
JUNE 30, JUNE 30, PERCENT
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 1998 1999 CHANGE
- -------------------------------------------------- ------------ ------------ ------------
<S> <C> <C> <C>

RESULTS OF OPERATIONS:
Net interest income(1).......................... $ 645,354 $ 688,725 6.72%
Provision for credit losses..................... 35,000 15,000 (57.14)
Noninterest income.............................. 276,024 284,106 2.93
Noninterest expense............................. 545,800 610,575 11.87
------------ ------------
Income before income taxes(1)................... 340,578 347,256 1.96
Taxable-equivalent adjustment................... 2,348 1,741 (25.85)
Income tax expense.............................. 134,132 112,293 (16.28)
------------ ------------
Net income...................................... $ 204,098 $ 233,222 14.27%
------------ ------------
------------ ------------
PER COMMON SHARE:
Net income--basic............................... $ 1.17 $ 1.39 18.80%
Net income--diluted............................. 1.16 1.38 18.97
Dividends(2).................................... 0.28 0.38 35.71
Book value (end of period)...................... 16.21 17.50 7.96
Common shares outstanding (end of period)....... 175,174,615 164,600,997 (6.04)
Weighted average common shares
outstanding--basic............................ 175,041,490 168,186,916 (3.92)
Weighted average common shares
outstanding--diluted.......................... 175,696,498 168,842,537 (3.90)

BALANCE SHEET (END OF PERIOD):
Total assets.................................... $ 30,922,575 $ 32,386,153 4.73%
Total loans..................................... 22,958,328 24,586,658 7.09
Nonperforming assets............................ 122,943 97,449 (20.74)
Total deposits.................................. 23,412,519 24,133,148 3.08
Common equity................................... 2,839,530 2,881,137 1.47

BALANCE SHEET (PERIOD AVERAGE):
Total assets.................................... $ 29,810,472 $ 31,844,898 6.82%
Total loans..................................... 22,654,828 24,569,371 8.45
Earning assets.................................. 26,730,172 28,744,028 7.53
Total deposits.................................. 22,291,982 23,327,365 4.64
Common equity................................... 2,755,230 2,933,336 6.46

FINANCIAL RATIOS:
Return on average assets(3)..................... 1.38% 1.48%
Return on average common equity(3).............. 14.94 16.03
Efficiency ratio(4)............................. 59.28 62.82
Net interest margin(1).......................... 4.87 4.83
Dividend payout ratio........................... 23.93 27.34
Tangible equity ratio........................... 8.99 8.70
Tier 1 risk-based capital ratio................. 9.28 10.02
Total risk-based capital ratio.................. 11.34 11.96
Leverage ratio.................................. 9.27 9.91
Allowance for credit losses to total loans...... 2.08 1.83
Allowance for credit losses to nonaccrual
loans......................................... 446.71 495.45
Net loans charged off to average total
loans(3)...................................... 0.08 0.20
Nonperforming assets to total loans and
foreclosed assets............................. 0.54 0.40
Nonperforming assets to total assets............ 0.40 0.30
</TABLE>

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(1) Amounts are on a taxable-equivalent basis using the federal statutory tax
rate of 35 percent.

(2) Dividends per share reflect dividends declared on UnionBanCal
Corporation's common stock outstanding as of the declaration date.

(3) Annualized.

(4) The efficiency ratio is noninterest expense, excluding foreclosed asset
expense (income), as a percentage of net interest income
(taxable-equivalent) and noninterest income. Foreclosed asset expense
(income) was $(0.4) million and $(0.6) million for the first six months
of 1998 and 1999, respectively.

3
<PAGE>
ITEM 1. FINANCIAL STATEMENTS

UNIONBANCAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)

<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
-------------------- --------------------
<S> <C> <C> <C> <C>
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA) 1998 1999 1998 1999
- --------------------------------------------------------------- --------- --------- --------- ---------
INTEREST INCOME
Loans........................................................ $ 449,037 $ 464,858 $ 897,086 $ 916,350
Securities................................................... 48,936 54,213 91,831 111,031
Interest bearing deposits in banks........................... 3,119 3,068 11,418 6,256
Federal funds sold and securities purchased under resale
agreements................................................. 3,568 1,196 7,710 2,893
Trading account assets....................................... 7,336 2,503 12,604 6,401
--------- --------- --------- ---------
Total interest income.................................... 511,996 525,838 1,020,649 1,042,931
--------- --------- --------- ---------
INTEREST EXPENSE
Domestic deposits............................................ 113,136 101,519 234,436 207,666
Foreign deposits............................................. 22,073 17,181 45,650 33,813
Federal funds purchased and securities sold under repurchase
agreements................................................. 19,541 21,107 33,616 40,876
Commercial paper............................................. 22,067 18,020 43,462 37,194
Subordinated capital notes................................... 5,332 4,036 11,086 8,145
UnionBanCal Corporation--obligated mandatorily redeemable
preferred securities of subsidiary grantor trust........... -- 7,091 -- 10,382
Other borrowed funds......................................... 4,291 9,721 9,393 17,871
--------- --------- --------- ---------
Total interest expense................................... 186,440 178,675 377,643 355,947
--------- --------- --------- ---------
NET INTEREST INCOME............................................ 325,556 347,163 643,006 686,984
Provision for credit losses.................................. 15,000 10,000 35,000 15,000
--------- --------- --------- ---------
Net interest income after provision for credit losses.... 310,556 337,163 608,006 671,984
--------- --------- --------- ---------
NONINTEREST INCOME
Service charges on deposit accounts.......................... 32,553 42,929 65,579 82,580
Trust and investment management fees......................... 30,036 33,983 58,029 66,254
International commissions and fees........................... 18,934 18,080 36,565 35,711
Merchant transaction processing fees......................... 13,738 18,146 28,117 32,658
Merchant banking fees........................................ 8,366 9,154 17,988 16,615
Securities gains, net........................................ -- 634 4,926 1,895
Other........................................................ 44,367 21,872 64,820 48,393
--------- --------- --------- ---------
Total noninterest income................................. 147,994 144,798 276,024 284,106
--------- --------- --------- ---------
NONINTEREST EXPENSE
Salaries and employee benefits............................... 150,708 167,015 299,912 334,682
Net occupancy................................................ 21,679 21,917 43,704 44,378
Equipment.................................................... 13,964 15,475 27,803 30,016
Merchant transaction processing.............................. 11,513 13,258 21,593 24,868
Professional services........................................ 8,594 10,290 15,901 20,984
Communications............................................... 10,452 10,618 21,681 20,551
Data processing.............................................. 6,633 7,661 13,135 15,662
Advertising and public relations............................. 8,302 9,390 14,353 15,496
Foreclosed asset income...................................... (223) (512) (421) (553)
Other........................................................ 45,703 52,470 88,139 104,491
--------- --------- --------- ---------
Total noninterest expense................................ 277,325 307,582 545,800 610,575
--------- --------- --------- ---------
Income before income taxes................................... 181,225 174,379 338,230 345,515
Income tax expense........................................... 72,704 59,652 134,132 112,293
--------- --------- --------- ---------
NET INCOME..................................................... $ 108,521 $ 114,727 $ 204,098 $ 233,222
--------- --------- --------- ---------
--------- --------- --------- ---------
NET INCOME PER COMMON SHARE--BASIC............................. $ 0.62 $ 0.70 $ 1.17 $ 1.39
--------- --------- --------- ---------
--------- --------- --------- ---------
NET INCOME PER COMMON SHARE--DILUTED........................... $ 0.62 $ 0.69 $ 1.16 $ 1.38
--------- --------- --------- ---------
--------- --------- --------- ---------
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING--BASIC.............. 175,115 164,588 175,041 168,187
--------- --------- --------- ---------
--------- --------- --------- ---------
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING--DILUTED............ 175,790 165,279 175,696 168,843
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>

See accompanying notes to consolidated financial statements.

4
<PAGE>
UNIONBANCAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
(UNAUDITED) (UNAUDITED)
JUNE 30, DECEMBER 31, JUNE 30,
(DOLLARS IN THOUSANDS) 1998 1998 1999
- -------------------------------------------------- ------------ ------------ ------------
<S> <C> <C> <C>
ASSETS
Cash and due from banks........................... $ 2,485,158 $ 2,135,380 $ 2,499,686
Interest bearing deposits in banks................ 136,182 209,568 203,428
Federal funds sold and securities purchased under
resale agreements............................... 57,503 333,530 385,930
------------ ------------ ------------
Total cash and cash equivalents............... 2,678,843 2,678,478 3,089,044
Trading account assets............................ 748,593 267,718 197,120
Securities available for sale..................... 3,312,933 3,638,532 3,272,934
Securities held to maturity (market value: June
30, 1998, $167,395;
December 31, 1998, $163,244; June 30, 1999,
$138,269)....................................... 164,353 160,513 138,267
Loans (net of allowance for credit losses: June
30, 1998, $478,133;
December 31, 1998, $459,328; June 30, 1999,
$450,403)....................................... 22,480,195 23,836,783 24,136,255
Due from customers on acceptances................. 430,141 489,480 323,307
Premises and equipment, net....................... 397,014 421,091 440,569
Other assets...................................... 710,503 783,721 788,657
------------ ------------ ------------
Total assets.................................. $30,922,575 $32,276,316 $32,386,153
------------ ------------ ------------
------------ ------------ ------------
LIABILITIES
Domestic deposits:
Noninterest bearing............................. $ 9,608,033 $ 9,919,316 $ 9,619,005
Interest bearing................................ 11,800,528 12,609,565 12,695,248
Foreign deposits:
Noninterest bearing............................. 268,599 260,089 231,964
Interest bearing................................ 1,735,359 1,718,909 1,586,931
------------ ------------ ------------
Total deposits................................ 23,412,519 24,507,879 24,133,148

Federal funds purchased and securities sold under
repurchase agreements........................... 1,566,817 1,307,744 1,616,670
Commercial paper.................................. 1,331,000 1,444,745 1,344,156
Other borrowed funds.............................. 171,091 331,165 817,031
Acceptances outstanding........................... 430,141 489,480 323,307
Other liabilities................................. 823,477 839,059 622,704
Subordinated capital notes........................ 348,000 298,000 298,000
UnionBanCal Corporation--obligated mandatorily
redeemable preferred
securities of subsidiary grantor trust.......... -- -- 350,000
------------ ------------ ------------
Total liabilities............................. 28,083,045 29,218,072 29,505,016
------------ ------------ ------------
Commitments and contingencies

SHAREHOLDERS' EQUITY
Preferred stock:
Authorized 5,000,000 shares, no shares issued or
outstanding as of
June 30, 1998, December 31, 1998, or June 30,
1999.......................................... -- -- --
Common stock--no stated value:
Authorized 300,000,000 shares, issued
175,174,615 shares as of
June 30, 1998, 175,259,919 shares as of
December 31, 1998, and
164,600,997 shares as of June 30, 1999........ 1,721,604 1,725,619 1,415,104
Retained earnings................................. 1,109,071 1,314,915 1,487,481
Accumulated other comprehensive income............ 8,855 17,710 (21,448)
------------ ------------ ------------
Total shareholders' equity.................... 2,839,530 3,058,244 2,881,137
------------ ------------ ------------
Total liabilities and shareholders' equity.... $30,922,575 $32,276,316 $32,386,153
------------ ------------ ------------
------------ ------------ ------------
</TABLE>

See accompanying notes to consolidated financial statements.

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

<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED JUNE 30,
-------------------------------------------
(DOLLARS IN THOUSANDS) 1998 1999
- -------------------------------------------------- --------------------- --------------------
<S> <C> <C> <C> <C>
COMMON STOCK
Balance, beginning of period...................... $1,714,209 $1,725,619
Dividend reinvestment plan........................ 15 29
Deferred compensation--restricted stock awards.... 5,105 (34)
Stock options exercised........................... 2,275 1,028
Common stock repurchased.......................... -- (311,538)
---------- ----------
Balance, end of period.......................... $1,721,604 $1,415,104
---------- ----------
RETAINED EARNINGS
Balance, beginning of period...................... $ 957,662 $1,314,915
Net income........................................ 204,098 $ 204,098 233,222 $233,222
Dividends on common stock(1)...................... (49,104) (62,541)
Deferred compensation--restricted stock awards.... (3,585) 1,885
---------- ----------
Balance, end of period.......................... $1,109,071 $1,487,481
---------- ----------
ACCUMULATED OTHER COMPREHENSIVE INCOME
Balance, beginning of period...................... $ 7,428 $ 17,710
Unrealized holding gains (losses) arising during
the period on securities available for sale, net
of tax expense (benefit) of $2,986 and $(23,967)
in the first six months of 1998 and 1999,
respectively.................................... 4,387 (38,566)
Less: reclassification adjustment for gains on
securities available for sale included in net
income, net of tax expense of $1,995 and $678 in
the first six months of 1998 and 1999,
respectively.................................... (2,931) (1,217)
--------- --------
Net unrealized gains (losses) on securities
available for sale.............................. 1,456 (39,783)
Foreign currency translation adjustment, net of
tax benefit of $20 and $25 in the first six
months of 1998 and 1999, respectively........... (29) (44)
Minimum pension liability adjustment, net of tax
expense of $373 in the first six months of
1999............................................ -- 669
--------- --------
Other comprehensive income........................ 1,427 1,427 (39,158) (39,158)
---------- --------- ---------- --------
Total comprehensive income........................ $ 205,525 $194,064
--------- --------
--------- --------
Balance, end of period.......................... $ 8,855 $ (21,448)
---------- ----------
TOTAL SHAREHOLDERS' EQUITY.................... $2,839,530 $2,881,137
---------- ----------
---------- ----------
</TABLE>

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

(1) Dividends per share were $0.28 and $0.38 for the first six months of 1998
and 1999, respectively, and are based on UnionBanCal Corporation'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 1999
- -------------------------------------------------------------------------------- ----------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.................................................................... $ 204,098 $ 233,222
Adjustments to reconcile net income to net cash provided by operating
activities:
Provision for credit losses................................................. 35,000 15,000
Depreciation, amortization and accretion.................................... 33,821 36,064
Provision for deferred income taxes......................................... 12,548 11,302
Gain on sales of securities available for sale.............................. (4,926) (1,895)
Merger and integration costs less than cash utilized........................ (11,004) (1,729)
Net decrease (increase) in trading account assets........................... (354,280) 70,598
Other, net.................................................................. 242,170 (181,400)
----------- ----------
Total adjustments......................................................... (46,671) (52,060)
----------- ----------
Net cash provided by operating activities..................................... 157,427 181,162
----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of securities available for sale.......................... 317,209 199,852
Proceeds from matured and called securities available for sale................ 143,737 329,486
Purchase of securities available for sale..................................... (1,247,304) (224,325)
Proceeds from matured and called securities held to maturity.................. 24,575 22,417
Net increase in loans......................................................... (239,316) (336,296)
Other, net.................................................................... (17,320) (50,643)
----------- ----------
Net cash used by investing activities....................................... (1,018,419) (59,509)
----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (decrease) increase in deposits........................................... 116,145 (374,731)
Net increase in federal funds purchased and securities sold under repurchase
agreements.................................................................. 230,933 308,926
Net increase in commercial paper and other borrowed funds..................... 59,506 385,277
Common stock repurchased...................................................... -- (311,538)
Proceeds from issuance of UnionBanCal Corporation--obligated mandatorily
redeemable preferred securities of subsidiary grantor trust................. -- 350,000
Dividends paid................................................................ (49,065) (64,568)
Other, net.................................................................... 2,261 1,013
----------- ----------
Net cash provided by financing activities................................... 359,780 294,379
----------- ----------
Net increase (decrease) in cash and cash equivalents............................ (501,212) 416,032
Cash and cash equivalents at beginning of period................................ 3,199,455 2,678,478
Effect of exchange rate changes on cash and cash equivalents.................... (19,400) (5,466)
----------- ----------
Cash and cash equivalents at end of period...................................... $ 2,678,843 $3,089,044
----------- ----------
----------- ----------
CASH PAID DURING THE PERIOD FOR:
Interest...................................................................... $ 401,959 $ 348,438
Income taxes.................................................................. 99,817 33,178

SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Loans transferred to foreclosed assets (OREO)................................. $ 11,032 $ 3,892
Dividends declared but unpaid................................................. 24,567 31,312
</TABLE>

See accompanying notes to consolidated financial statements.

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

JUNE 30, 1999
(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. The results of operations for the period ended June 30,
1999 are not necessarily indicative of the operating results anticipated for the
full year. 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 for the year ended December 31, 1998. The
preparation of financial statements in conformity with GAAP also requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenue and
expense during the reporting period. Actual results could differ from those
estimates.

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

NOTE 2--RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

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

NOTE 3--EARNINGS PER SHARE

Basic earnings per share (EPS) is computed by dividing net income by the
weighted average number of common shares outstanding during the period. Diluted
EPS incorporates the dilutive effect of common stock equivalents outstanding on
an average basis during the period. Stock options are a common stock

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

JUNE 30, 1999
(UNAUDITED)

NOTE 3--EARNINGS PER SHARE (CONTINUED)
equivalent. The following table presents a reconciliation of basic and diluted
EPS for the three months and six months ended June 30, 1998 and 1999:
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
------------------------------------------ -------------------------------
1998 1999 1998 1999
-------------------- -------------------- -------------------- ---------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA) BASIC DILUTED BASIC DILUTED BASIC DILUTED BASIC
- ----------------------------------------------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Income..................................... $ 108,521 $ 108,521 $ 114,727 $ 114,727 $ 204,098 $ 204,098 $ 233,222
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Weighted average common shares outstanding..... 175,115 175,115 164,588 164,588 175,041 175,041 168,187
Additional shares due to:
Assumed conversion of dilutive stock
options.................................... -- 675 -- 691 -- 655 --
--------- --------- --------- --------- --------- --------- ---------
Adjusted weighted average common shares
outstanding.................................. 175,115 175,790 164,588 165,279 175,041 175,696 168,187
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Net income per share........................... $ 0.62 $ 0.62 $ 0.70 $ 0.69 $ 1.17 $ 1.16 $ 1.39
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------

(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA) DILUTED
- ----------------------------------------------- ---------
<S> <C>
Net Income..................................... $ 233,222
---------
---------
Weighted average common shares outstanding..... 168,187
Additional shares due to:
Assumed conversion of dilutive stock
options.................................... 656
---------
Adjusted weighted average common shares
outstanding.................................. 168,843
---------
---------
Net income per share........................... $ 1.38
---------
---------
</TABLE>

NOTE 4--COMPREHENSIVE INCOME

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

<TABLE>
<CAPTION>
NET UNREALIZED
GAINS (LOSSES) ON FOREIGN MINIMUM PENSION
SECURITIES AVAILABLE CURRENCY LIABILITY ACCUMULATED OTHER
FOR SALE TRANSLATION ADJUSTMENT COMPREHENSIVE INCOME
---------------------- ---------------------- --------------------- ----------------------
FOR THE SIX MONTHS ENDED JUNE 30,
------------------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS) 1998 1999 1998 1999 1998 1999 1998 1999
- ------------------------------ --------- ---------- ---------- --------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Beginning balance............. $19,886 $ 29,109 $(12,458) $(9,651) $ -- $(1,748) $ 7,428 $ 17,710

Change during the period...... 1,456 (39,783) (29) (44) -- 669 1,427 (39,158)
--------- ---------- ---------- --------- --------- --------- --------- ----------

Ending balance................ $21,342 $(10,674) $(12,487) $(9,695) $ -- $(1,079) $ 8,855 $(21,448)
--------- ---------- ---------- --------- --------- --------- --------- ----------
--------- ---------- ---------- --------- --------- --------- --------- ----------
</TABLE>

NOTE 5--BUSINESS SEGMENTS

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

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

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

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

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

JUNE 30, 1999
(UNAUDITED)

NOTE 5--BUSINESS SEGMENTS (CONTINUED)
- - The Trust and Private Financial Services Group principally provides
fiduciary, private banking, investment and asset management services for
individuals and institutions.

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

The information set forth in the tables that follow reflect selected income
statement items and a selected balance sheet item by business unit. The
information presented does not necessarily represent the business units'
financial condition and results of operations as if they were independent
entities. Unlike financial accounting, there is no authoritative body of
guidance for management accounting equivalent to generally accepted accounting
principles. Consequently, reported results are not necessarily comparable with
those presented by other companies.

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

<TABLE>
<CAPTION>
TRUST AND
PRIVATE
COMMERCIAL FINANCIAL
COMMUNITY FINANCIAL INTERNATIONAL SERVICES
BANKING GROUP SERVICES GROUP BANKING GROUP GROUP
------------------ ------------------ ---------------- ----------------
FOR THE THREE MONTHS ENDED JUNE 30,
--------------------------------------------------------------------------
1998 1999 1998 1999 1998 1999 1998 1999
-------- -------- -------- -------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS (DOLLARS IN THOUSANDS):
Total revenue(1)........................ $228,356 $225,967 $146,851 $171,867 $31,322 $28,808 $42,195 $47,223
Net income.............................. $ 59,330 $ 38,581 $ 51,641 $ 48,592 $ 6,986 $ 8,062 $ 5,152 $ 5,161
Total assets at period end (DOLLARS IN
MILLIONS)............................. $ 10,562 $ 10,225 $ 12,138 $ 13,995 $ 1,731 $ 1,333 $ 314 $ 434
</TABLE>

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

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

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

JUNE 30, 1999
(UNAUDITED)

NOTE 5--BUSINESS SEGMENTS (CONTINUED)

<TABLE>
<CAPTION>
TRUST AND
PRIVATE
COMMERCIAL FINANCIAL
COMMUNITY FINANCIAL INTERNATIONAL SERVICES
BANKING GROUP SERVICES GROUP BANKING GROUP GROUP
------------------ ------------------ ---------------- ----------------
FOR THE SIX MONTHS ENDED JUNE 30,
--------------------------------------------------------------------------
1998 1999 1998 1999 1998 1999 1998 1999
-------- -------- -------- -------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS (DOLLARS IN THOUSANDS):
Total revenue(1)........................ $439,113 $439,789 $287,656 $332,308 $61,314 $59,691 $81,091 $92,241
Net income.............................. $ 94,955 $ 73,561 $101,116 $103,429 $14,033 $10,753 $ 9,344 $ 9,920
</TABLE>

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

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

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

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 ON PAGE 38 AND IN
OUR PUBLICLY AVAILABLE SECURITIES AND EXCHANGE COMMISSION FILINGS AND PRESS
RELEASES.

INTRODUCTION

We are a California-based commercial bank holding company with consolidated
assets of $32.4 billion at June 30, 1999. Our wholly-owned subsidiary, Union
Bank of California, N.A., was the third largest commercial bank in California,
based on total assets and total deposits in California, and one of the 30
largest commercial banks in the United States. At June 30, 1999, we operated 241
banking offices in California, 6 banking offices in Oregon and Washington, and
18 overseas facilities. At June 30, 1999, we were 64 percent owned by The Bank
of Tokyo-Mitsubishi, Ltd. and 36 percent owned by other shareholders.

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

SUMMARY

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

Net income was $108.5 million, or $0.62 per diluted common share, in the
second quarter of 1998, compared with $114.7 million, or $0.69 per diluted
common share, in the second quarter of 1999. This increase in diluted earnings
per share of 11 percent over the second quarter of 1998 was due to a $21.3
million, or 7 percent, increase in net interest income, a $5.0 million, or 33
percent, decrease in the provision for credit losses, and a 6 percentage point
decrease in the effective income tax rate, partially offset by a $3.2 million,
or 2 percent, decrease in noninterest income and a $30.3 million, or 11 percent,
increase in noninterest expense. Excluding the $17.1 million pre-tax gain ($10.3
million after-tax) on the sale of our credit card portfolio discussed below, net
income was $98.2 million, or $0.56 per diluted common share, in the second
quarter of 1998. Other highlights of the second quarter of 1999 include:

- Net interest income, on a taxable-equivalent basis, was $348.0 million in
the second quarter of 1999, an increase of $21.3 million, or 7 percent,
over the second quarter of 1998. Net interest margin in the second
quarter of 1999 was 4.84 percent, a decrease of 4 basis points from the
second quarter of 1998.

- A provision for credit losses of $15.0 million was recorded in the second
quarter of 1998, compared with $10.0 million in the second quarter of
1999. This resulted from management's regular assessment of overall
credit quality, loan portfolio composition and growth and economic
conditions in relation to the level of the allowance for credit losses.
The allowance for credit losses was $478.1 million, or 447 percent of
total nonaccrual loans, at June 30, 1998, compared with $450.4 million,
or 495 percent of total nonaccrual loans, at June 30, 1999.

- Nonperforming assets declined $25.5 million, or 21 percent, from June 30,
1998 to $97.4 million at June 30, 1999. Nonperforming assets as a
percentage of total assets declined to 0.30 percent at June 30, 1999,
compared with 0.40 percent a year earlier. Total nonaccrual loans were
$107.0 million at June 30, 1998, compared with $90.9 million at June 30,
1999, resulting in a reduction in the ratio of nonaccrual loans to total
loans from 0.47 percent at June 30, 1998 to 0.37 percent at June 30,
1999.

12
<PAGE>
- Noninterest income was $144.8 million in the second quarter of 1999, a
decrease of $3.2 million, or 2 percent, from the second quarter of 1998.
Excluding the $17.1 million pre-tax gain from the sale of our $253
million credit card portfolio in April 1998, noninterest income increased
$13.9 million, or 11 percent, over the second quarter of 1998. Service
charges on deposit accounts grew $10.4 million, or 32 percent, trust and
investment management fees increased $3.9 million, or 13 percent, and
merchant transaction processing fees increased $4.4 million, or 32
percent. These increases were partially offset by a decrease in other
noninterest income of $6.3 million, or 36 percent.

- Noninterest expense was $307.6 million in the second quarter of 1999, an
increase of $30.3 million, or 11 percent, over the second quarter of
1998. Personnel-related expense increased $16.3 million, or 11 percent,
merchant transaction processing fees increased $1.7 million, or 15
percent, professional services increased $1.7 million, or 20 percent,
software increased $1.7 million, or 37 percent, and other noninterest
expense increased $3.9 million, or 16 percent.

- Our effective tax rate for the second quarter of 1998 was 40 percent,
compared with 34 percent for the second quarter of 1999. The lower
effective tax rate in the second quarter of 1999 reflects our intention
to file our 1999 California franchise tax returns on a worldwide unitary
reporting basis, which incorporates the results of our majority
shareholder, The Bank of Tokyo-Mitsubishi, Ltd. and its worldwide
affiliates.

- In the second quarter of 1999, our return on average assets decreased to
1.44 percent from 1.46 percent a year earlier, and our return on average
common equity increased to 16.02 percent from 15.57 percent a year
earlier.

- Total loans at June 30, 1999 were $24.6 billion, an increase of $1.6
billion, or 7 percent, over June 30, 1998.

- Our Tier 1 and total risk-based capital ratios were 9.28 percent and
11.34 percent, respectively, at June 30, 1998, compared with 10.02
percent and 11.96 percent, respectively, at June 30, 1999. Our second
quarter 1998 leverage ratio was 9.27 percent, compared with 9.91 percent
for the second quarter of 1999.

COMPARISON OF SIX MONTHS ENDED JUNE 30, 1998 AND JUNE 30, 1999

Net income was $204.1 million, or $1.16 per diluted common share, for the
first six months of 1998, compared with $233.2 million, or $1.38 per diluted
common share, for the first six months of 1999. This increase in diluted
earnings per share of 19 percent over the first six months of 1998 was due to a
$43.4 million, or 7 percent, increase in net interest income, a $20.0 million,
or 57 percent, decrease in the provision for credit losses, an $8.1 million, or
3 percent, increase in noninterest income, and a 7 percentage point decrease in
the effective income tax rate, partially offset by a $64.8 million, or 12
percent, increase in noninterest expense. Excluding the $17.1 million pre-tax
gain previously discussed, net income was $193.8 million, or $1.10 per diluted
common share, for the first six months of 1998. Excluding a federal income tax
benefit of $6.3 million as described below, net income was $226.9 million, or
$1.34 per diluted common share, for the first six months of 1999. Other
highlights of the first half of 1999 include:

- Net interest income, on a taxable-equivalent basis, was $688.7 million
for the first six months of 1999, an increase of $43.4 million, or 7
percent, over the first six months of 1998. Net interest margin for the
first six months of 1999 was 4.83 percent, a decrease of 4 basis points
from the first six months of 1998.

- A provision for credit losses of $35.0 million was recorded for the first
six months of 1998, compared with $15.0 million for the first six months
of 1999. This resulted from management's regular assessment of overall
credit quality, loan portfolio composition and growth and economic
conditions in relation to the level of the allowance for credit losses.

13
<PAGE>
- Noninterest income was $284.1 million for the first six months of 1999,
an increase of $8.1 million, or 3 percent, over the first six months of
1998. Excluding the $17.1 million pre-tax gain previously discussed,
noninterest income increased $25.1 million, or 10 percent, over the first
six months of 1998. Service charges on deposit accounts grew $17.0
million, or 26 percent, trust and investment management fees increased
$8.2 million, or 14 percent, and merchant transaction processing fees
increased $4.5 million, or 16 percent. These increases were partially
offset by a decrease in net securities gain of $3.0 million, or 62
percent, and a decrease in other noninterest income of $1.7 million, or 6
percent.

- Noninterest expense was $610.6 million for the first six months of 1999,
an increase of $64.8 million, or 12 percent, over the first six months of
1998. Personnel-related expense increased $34.8 million, or 12 percent,
merchant transaction processing fees increased $3.3 million, or 15
percent, professional services increased $5.1 million, or 32 percent,
software increased $3.7 million, or 41 percent, and other noninterest
expense increased $10.3 million, or 23 percent.

- Our effective tax rate for the first six months of 1998 was 40 percent,
compared with 33 percent for the first six months of 1999. In March 1999,
we recognized a $6.3 million federal tax benefit as the result of an
Internal Revenue Service (IRS) settlement with respect to refund claims
we filed for the years 1992 through 1994. Excluding the $6.3 million
federal tax benefit, our effective tax rate would have been 34 percent
for the first six months of 1999. The lower effective tax rate for the
first six months of 1999 also reflects our intention to file our 1999
California franchise tax returns on a worldwide unitary reporting basis,
which incorporates the results of our majority shareholder, The Bank of
Tokyo-Mitsubishi, Ltd. and its worldwide affiliates.

- Our return on average assets for the first six months of 1999 increased
to 1.48 percent, compared to 1.38 percent for the first six months of
1998. Our return on average common equity for the first six months of
1999 increased to 16.03 percent, compared to 14.94 percent for the first
six months of 1998.

MISSION EXCEL

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

The culmination of the first phase of the Mission Excel project will be the
development of an implementation plan. We anticipate that this plan will be
finalized and approved by our Board of Directors in August 1999. Implementation
of the Mission Excel project, which will be overseen by dedicated senior staff,
is expected to be completed within 18 months. If the plan is approved,
restructuring expenses related to the exit or closure of any business activities
or operations will be announced on August 16, 1999. These non-recurring expenses
will be included in our third quarter results.

BUSINESS SEGMENTS

We segregate our operations into five primary business units for the purpose
of management reporting, as shown in the tables on the following pages. The
results show the financial performance of our major business units.

The information reflects the condensed income statements, selected balance
sheet items and selected financial ratios by business unit. The information
presented does not necessarily represent the business units' financial condition
and results of operations as if they were independent entities. Unlike financial
accounting, there is no authoritative body of guidance for management accounting
equivalent to generally

14
<PAGE>
accepted accounting principles. Consequently, reported results are not
necessarily comparable with those presented by other companies.

Business unit results are based on an internal management reporting system
used by management to measure the performance of the units and the Company as a
whole. The management reporting system assigns balance sheet and income
statement items to each business unit based on internal management accounting
policies. Net interest income is determined using our internal funds transfer
pricing system, which assigns a cost of funds or a credit for funds to assets or
liabilities based on their type, maturity or repricing characteristics.
Noninterest income and expense directly attributable to a business unit are
assigned to that business. Indirect costs, such as overhead, operation, and
technology expense, are allocated to the business units based on various
studies. The provision for credit losses is allocated based on the formula and
specific reserves and the net chargeoffs for each respective business unit.
Equity is allocated based on a combination of regulatory requirements and
management's assessment of economic risk factors, primarily credit, operating,
foreign exchange and interest rate risk.

We are in the process of developing a model for measuring profitability on a
risk adjusted return on capital basis. When fully implemented, this methodology
will be adopted and all prior periods will be restated for comparability
purposes.

<TABLE>
<CAPTION>
TRUST AND PRIVATE
COMMERCIAL
COMMUNITY FINANCIAL INTERNATIONAL FINANCIAL
BANKING GROUP SERVICES GROUP BANKING GROUP SERVICES GROUP
------------------ ------------------ ------------------ ------------------
FOR THE THREE MONTHS ENDED JUNE 30,
------------------------------------------------------------------------------
1998 1999 1998 1999 1998 1999 1998 1999
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS (DOLLARS
IN THOUSANDS):
Net interest income......... $170,948 $176,067 $117,731 $142,852 $ 13,963 $ 12,062 $ 5,433 $ 5,962
Noninterest income.......... 57,408 49,900 29,120 29,015 17,359 16,746 36,762 41,261
-------- -------- -------- -------- -------- -------- -------- --------
Total revenue............... 228,356 225,967 146,851 171,867 31,322 28,808 42,195 47,223

Noninterest expense......... 150,984 159,337 60,183 65,020 16,477 17,187 33,592 38,816
Credit expense (income)..... (19,069) 5,401 1,099 29,203 2,458 (2,805) 79 73
-------- -------- -------- -------- -------- -------- -------- --------
Income (loss) before income
tax expense
(benefit) and performance
center
earnings (expense)........ 96,441 61,229 85,569 77,644 12,387 14,426 8,524 8,334
Performance center earnings
(expense)(1).............. 2,130 1,220 227 1,009 (780) (1,376) 35 20
-------- -------- -------- -------- -------- -------- -------- --------
Income (loss) before income
tax expense (benefit)..... 98,571 62,449 85,796 78,653 11,607 13,050 8,559 8,354
Income tax expense
(benefit)................. 39,241 23,868 34,155 30,061 4,621 4,988 3,407 3,193
-------- -------- -------- -------- -------- -------- -------- --------
Net income (loss)........... $ 59,330 $ 38,581 $ 51,641 $ 48,592 $ 6,986 $ 8,062 $ 5,152 $ 5,161
-------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- --------
AVERAGE BALANCES (DOLLARS IN
MILLIONS):
Total loans before
performance centers(2).... $ 9,338 $ 9,085 $ 10,644 $ 13,529 $ 1,373 $ 1,036 $ 243 $ 316
Total assets................ 10,319 10,094 11,800 14,756 2,072 1,584 293 405
Total deposits before
performance centers(2).... 12,935 13,703 5,274 5,416 828 789 607 659
FINANCIAL RATIOS:
Return on average assets.... 2.31% 1.53% 1.76% 1.32% 1.35% 2.04% 7.05% 5.12%
Efficiency ratio before
performance centers....... 66.12 70.51 40.98 37.83 52.61 59.66 79.61 82.20
</TABLE>

15
<PAGE>

<TABLE>
<CAPTION>
GLOBAL UNIONBANCAL
MARKETS GROUP OTHER CORPORATION
-------------------- -------------------- --------------------
FOR THE THREE MONTHS ENDED JUNE 30,
----------------------------------------------------------------
1998 1999 1998 1999 1998 1999
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS (DOLLARS IN THOUSANDS):
Net interest income.......................................... $ 7,482 $ 8,741 $ 9,999 $ 1,479 $ 325,556 $ 347,163
Noninterest income........................................... 6,172 5,072 1,173 2,804 147,994 144,798
--------- --------- --------- --------- --------- ---------
Total revenue................................................ 13,654 13,813 11,172 4,283 473,550 491,961
Noninterest expense.......................................... 6,654 6,334 9,435 20,888 277,325 307,582
Credit expense (income)...................................... -- -- 30,433 (21,872) 15,000 10,000
--------- --------- --------- --------- --------- ---------
Income (loss) before income tax expense (benefit) and
performance center earnings (expense)...................... 7,000 7,479 (28,696) 5,267 181,225 174,379
Performance center earnings (expense)(1)..................... (2,289) (1,559) 677 686 -- --
--------- --------- --------- --------- --------- ---------
Income (loss) before income tax expense (benefit)............ 4,711 5,920 (28,019) 5,953 181,225 174,379
Income tax expense (benefit)................................. 1,875 2,263 (10,595) (4,721) 72,704 59,652
--------- --------- --------- --------- --------- ---------
Net income (loss)............................................ $ 2,836 $ 3,657 $ (17,424) $ 10,674 $ 108,521 $ 114,727
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
AVERAGE BALANCES (DOLLARS IN MILLIONS):
Total loans before performance centers(2).................... $ -- $ -- $ 1,100 $ 889 $ 22,698 $ 24,855
Total assets................................................. 4,002 3,789 1,271 1,333 29,757 31,961
Total deposits before performance centers(2)................. 2,454 2,748 56 34 22,154 23,349
FINANCIAL RATIOS:
Return on average assets..................................... 0.28% 0.39% na na 1.46% 1.44%
Efficiency ratio before performance centers.................. 48.73 45.86 na na 58.47 62.52
</TABLE>

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

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

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

<TABLE>
<CAPTION>
TRUST AND
COMMERCIAL PRIVATE
COMMUNITY FINANCIAL INTERNATIONAL FINANCIAL
BANKING GROUP SERVICES GROUP BANKING GROUP SERVICES GROUP
------------------ ------------------ ------------------ ------------------
FOR THE SIX MONTHS ENDED JUNE 30,
------------------------------------------------------------------------------
1998 1999 1998 1999 1998 1999 1998 1999
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS (DOLLARS
IN THOUSANDS):
Net interest income......... $343,343 $347,660 $227,669 $276,736 $ 27,921 $ 24,893 $ 11,005 $ 11,802
Noninterest income.......... 95,770 92,129 59,987 55,572 33,393 34,798 70,086 80,439
-------- -------- -------- -------- -------- -------- -------- --------
Total revenue............... 439,113 439,789 287,656 332,308 61,314 59,691 81,091 92,241

Noninterest expense......... 297,832 314,052 118,002 131,137 32,859 34,501 65,658 76,197
Credit expense (income)..... (11,118) 9,333 4,272 35,045 3,578 5,673 86 5
-------- -------- -------- -------- -------- -------- -------- --------
Income (loss) before income
tax expense
(benefit) and performance
center
earnings (expense)........ 152,399 116,404 165,382 166,126 24,877 19,517 15,347 16,039
Performance center earnings
(expense)(1).............. 4,163 2,800 1,339 1,479 (1,740) (2,092) 60 36
-------- -------- -------- -------- -------- -------- -------- --------
Income (loss) before income
tax expense (benefit)..... 156,562 119,204 166,721 167,605 23,137 17,425 15,407 16,075
Income tax expense
(benefit)................. 61,607 45,643 65,605 64,176 9,104 6,672 6,063 6,155
-------- -------- -------- -------- -------- -------- -------- --------
Net income (loss)........... $ 94,955 $ 73,561 $101,116 $103,429 $ 14,033 $ 10,753 $ 9,344 $ 9,920
-------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- --------
AVERAGE BALANCES (DOLLARS IN
MILLIONS):
Total loans before
performance centers(2).... $ 9,464 $ 9,091 $ 10,420 $ 13,130 $ 1,407 $ 1,091 $ 238 $ 309
Total assets................ 10,469 10,098 11,576 14,365 2,189 1,681 290 392
Total deposits before
performance centers(2).... 12,862 13,621 5,106 5,475 878 785 708 640
FINANCIAL RATIOS:
Return on average assets.... 1.83% 1.47% 1.76% 1.45% 1.29% 1.29% 6.49% 5.10%
Efficiency ratio before
performance centers....... 67.83 71.41 41.02 39.46 53.59 57.80 80.97 82.61
</TABLE>

16
<PAGE>

<TABLE>
<CAPTION>
GLOBAL UNIONBANCAL
MARKETS GROUP OTHER CORPORATION
-------------------- -------------------- --------------------
FOR THE SIX MONTHS ENDED JUNE 30,
----------------------------------------------------------------
1998 1999 1998 1999 1998 1999
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS (DOLLARS IN THOUSANDS):
Net interest income..................................... $ 13,640 $ 18,846 $ 19,428 $ 7,047 $ 643,006 $ 686,984
Noninterest income...................................... 14,155 12,754 2,633 8,414 276,024 284,106
--------- --------- --------- --------- --------- ---------
Total revenue........................................... 27,795 31,600 22,061 15,461 919,030 971,090
Noninterest expense..................................... 13,363 12,899 18,086 41,789 545,800 610,575
Credit expense (income)................................. -- -- 38,182 (35,056) 35,000 15,000
--------- --------- --------- --------- --------- ---------
Income (loss) before income tax expense (benefit) and
performance center earnings (expense)................. 14,432 18,701 (34,207) 8,728 338,230 345,515
Performance center earnings (expense)(1)................ (4,507) (3,321) 685 1,098 -- --
--------- --------- --------- --------- --------- ---------
Income (loss) before income tax expense (benefit)....... 9,925 15,380 (33,522) 9,826 338,230 345,515
Income tax expense (benefit)............................ 3,905 5,889 (12,152) (16,242) 134,132 112,293
--------- --------- --------- --------- --------- ---------
Net income (loss)....................................... $ 6,020 $ 9,491 $ (21,370) $ 26,068 $ 204,098 $ 233,222
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
AVERAGE BALANCES (DOLLARS IN MILLIONS):
Total loans before performance centers(2)............... $ -- $ -- $ 1,126 $ 948 $ 22,655 $ 24,569
Total assets............................................ 3,904 3,953 1,382 1,356 29,810 31,845
Total deposits before performance centers(2)............ 2,684 2,820 54 (14) 22,292 23,327
FINANCIAL RATIOS:
Return on average assets................................ 0.31% 0.48% na na 1.38% 1.48%
Efficiency ratio before performance centers............. 48.08 40.82 na na 59.28 62.82
</TABLE>

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

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

COMMUNITY BANKING GROUP

The Community Banking Group provides its customers with a full line of
checking and savings, investment, loan and fee-based banking products. For the
first three months and six months ended June 30, 1999, average assets in this
group were $10.1 billion and $10.1 billion, respectively, and average deposits
were $13.7 billion and $13.6 billion, respectively. The decrease in average
loans from its respective prior periods in 1998 was primarily due to the sale of
the credit card portfolio and the increase in refinancing activity as further
discussed on page 28.

The group focuses on four major markets:

- consumers,

- businesses with sales under $3 million,

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

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

COMMERCIAL FINANCIAL SERVICES GROUP

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

- commercial and project loans,

- real estate financing,

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

17
<PAGE>
- trade financing, which is the short-term extension of credit to support
export/import transactions, including letters of credit,

- lease financing,

- customized cash management services, and

- selected capital markets products.

The group's customers provide a significant source of opportunities for us
to sell products and services of other units of Union Bank of California, N.A.,
including treasury, trust, and retail banking services. For the first three
months and six months ended June 30, 1999, average assets in this group were
$14.8 billion and $14.4 billion, respectively, and average deposits were $5.4
billion and $5.5 billion, respectively. Despite growth in commercial, financial
and industrial lending as discussed on page 27, the group's net income for the
second quarter of 1999 decreased by $3.1 million from the second quarter of 1998
as a result of downgrades in commercial loans.

INTERNATIONAL BANKING GROUP

The International Banking Group primarily provides correspondent banking and
trade finance-related products and services to financial institutions worldwide,
particularly in Brazil, Hong Kong, Japan, Korea, and Taiwan. This includes the
delivery of products and services that facilitate trade finance transactions,
including payments, collection and the extension of short-term credit. The group
also serves selected foreign firms and U.S. corporate clients in selected
countries worldwide, particularly in Asia. In the U.S., the group serves
subsidiaries and affiliates of non-Japanese Asian companies and U.S. branches
and agencies of foreign banks. The group also provides international services to
domestic corporate clients along the West Coast. The group's revenue
predominately relates to foreign customers. For the first three months and six
months ended June 30, 1999, average assets in this group were $1.6 billion and
$1.7 billion, respectively, and average deposits were $789 million and $785
million, respectively.

TRUST AND PRIVATE FINANCIAL SERVICES GROUP

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

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

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

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

As of June 30, 1999, the group had $109.8 billion in assets under
administration. The group's assets were strengthened by approximately $10.0
billion through the acquisition in April 1999 of the trust business portfolio of
Imperial Trust Company (ITC).

GLOBAL MARKETS GROUP

The Global Markets Group conducts business activities primarily to support
the previously described business groups and their customers. This group offers
a broad range of risk management products, such as foreign exchange and interest
rate swaps, caps and floors. Additionally, it trades money market and other
securities in the secondary market, including the placement of Union Bank of
California, N.A.'s own liabilities with institutional investors. This group also
manages our market-related risks as part of its responsibilities for
asset/liability management. The group is also responsible for maintaining Union
Bank of California, N.A.'s investment securities portfolio. For the first three
months and six months ended

18
<PAGE>
June 30, 1999, average assets in this group were $3.8 billion and $4.0 billion,
respectively, and average deposits were $2.7 billion and $2.8 billion,
respectively.

OTHER

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

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

- The unallocated allowance and related provision for credit losses and
earnings associated with unallocated equity capital.

- The Credit and Compliance Group, which includes $192 million and $182
million of average assets for the first three months and six months ended
June 30, 1999, respectively, primarily loans with special credit
conditions.

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

- The residual costs of support groups.

19
<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, 1999
--------------------------------- ---------------------------------
INTEREST AVERAGE INTEREST AVERAGE
AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/
(DOLLARS IN THOUSANDS) BALANCE EXPENSE(1) RATE(1) BALANCE EXPENSE(1) RATE(1)
- ---------------------------------------------- ----------- ---------- ------- ----------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Loans:(2)
Domestic.................................... $21,372,800 $426,957 8.01% $23,798,981 $448,704 7.56%
Foreign(3).................................. 1,325,282 22,274 6.74 1,055,863 16,284 6.19
Securities--taxable(4)........................ 2,981,044 47,118 6.33 3,385,289 52,798 6.24
Securities--tax-exempt(4)..................... 108,247 2,712 10.02 80,378 2,076 10.33
Interest bearing deposits in banks............ 158,259 3,119 7.90 204,783 3,068 6.01
Federal funds sold and securities purchased
under resale agreements..................... 258,220 3,568 5.54 96,976 1,196 4.95
Trading account assets........................ 642,001 7,400 4.62 245,720 2,563 4.18
----------- ---------- ----------- ----------
Total earning assets...................... 26,845,853 513,148 7.67 28,867,990 526,689 7.32
---------- ----------
Allowance for credit losses................... (474,598) (444,775)
Cash and due from banks....................... 1,875,745 1,992,353
Premises and equipment, net................... 397,779 434,916
Other assets.................................. 1,111,738 1,110,312
----------- -----------
Total assets.............................. $29,756,517 $31,960,796
----------- -----------
----------- -----------
LIABILITIES
Domestic deposits:
Interest bearing............................ $ 5,393,702 38,058 2.83 $ 5,642,605 35,065 2.49
Savings and consumer time................... 3,176,754 30,247 3.82 3,349,783 26,423 3.16
Large time.................................. 3,341,502 44,831 5.38 3,780,046 40,031 4.25
Foreign deposits(3)........................... 1,730,172 22,073 5.12 1,588,022 17,181 4.34
----------- ---------- ----------- ----------
Total interest bearing deposits........... 13,642,130 135,209 3.98 14,360,456 118,700 3.32
----------- ---------- ----------- ----------
Federal funds purchased and securities sold
under repurchase agreements................. 1,454,457 19,541 5.39 1,810,742 21,107 4.68
Commercial paper.............................. 1,601,810 22,067 5.53 1,513,389 18,020 4.78
Other borrowed funds.......................... 285,088 4,291 6.04 809,688 9,721 4.82
Subordinated capital notes.................... 348,000 5,332 6.15 298,000 4,036 5.43
UnionBanCal Corporation--obligated mandatorily
redeemable preferred securities of
subsidiary grantor trust.................... -- -- -- 350,000 7,091 8.11
----------- ---------- ----------- ----------
Total borrowed funds...................... 3,689,355 51,231 5.57 4,781,819 59,975 5.03
----------- ---------- ----------- ----------
Total interest bearing liabilities........ 17,331,485 186,440 4.31 19,142,275 178,675 3.74
---------- ----------
Noninterest bearing deposits.................. 8,511,920 8,988,105
Other liabilities............................. 1,117,398 957,425
----------- -----------
Total liabilities......................... 26,960,803 29,087,805
SHAREHOLDERS' EQUITY
Common equity................................. 2,795,714 2,872,991
----------- -----------
Total shareholders' equity................ 2,795,714 2,872,991
----------- -----------
Total liabilities and shareholders'
equity.................................. $29,756,517 $31,960,796
----------- -----------
----------- -----------
Net interest income/margin (taxable-equivalent
basis)...................................... 326,708 4.88% 348,014 4.84%
Less: taxable-equivalent adjustment........... 1,152 851
---------- ----------
Net interest income....................... $325,556 $347,163
---------- ----------
---------- ----------
</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.

20
<PAGE>
NET INTEREST INCOME (CONTINUED)

<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
-------------------------------------------------------------------
JUNE 30, 1998 JUNE 30, 1999
-------------------------------- --------------------------------
INTEREST AVERAGE INTEREST AVERAGE
AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/
(DOLLARS IN THOUSANDS) BALANCE EXPENSE(1) RATE(1) BALANCE EXPENSE(1) RATE(1)
- ---------------------------------------------- ----------- ---------- ------- ----------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Loans:(2)
Domestic.................................... $21,283,864 $ 851,495 8.06% $23,471,714 $ 881,817 7.57%
Foreign(3).................................. 1,370,964 45,991 6.76 1,097,657 34,814 6.40
Securities--taxable(4)........................ 2,777,379 88,137 6.36 3,459,548 108,185 6.26
Securities--tax-exempt(4)..................... 110,515 5,538 10.02 82,618 4,206 10.18
Interest bearing deposits in banks............ 344,824 11,418 6.68 210,146 6,256 6.00
Federal funds sold and securities purchased
under resale agreements..................... 278,144 7,710 5.59 118,008 2,893 4.94
Trading account assets........................ 564,482 12,708 4.54 304,337 6,501 4.31
----------- ---------- ----------- ----------
Total earning assets...................... 26,730,172 1,022,997 7.72 28,744,028 1,044,672 7.33
---------- ----------
Allowance for credit losses................... (466,723) (450,991)
Cash and due from banks....................... 1,910,050 1,987,361
Premises and equipment, net................... 400,073 431,280
Other assets.................................. 1,236,900 1,133,220
----------- -----------
Total assets.............................. $29,810,472 $31,844,898
----------- -----------
----------- -----------
LIABILITIES
Domestic deposits:
Interest bearing............................ $ 5,420,453 76,506 2.85 $ 5,576,172 69,772 2.52
Savings and consumer time................... 3,128,338 59,459 3.83 3,342,751 53,684 3.24
Large time.................................. 3,627,973 98,471 5.47 3,888,808 84,210 4.37
Foreign deposits(3)........................... 1,783,466 45,650 5.16 1,554,959 33,813 4.39
----------- ---------- ----------- ----------
Total interest bearing deposits........... 13,960,230 280,086 4.05 14,362,690 241,479 3.39
----------- ---------- ----------- ----------
Federal funds purchased and securities sold
under repurchase agreements................. 1,268,675 33,616 5.34 1,757,433 40,876 4.69
Commercial paper.............................. 1,585,374 43,462 5.53 1,554,786 37,194 4.82
Other borrowed funds.......................... 324,953 9,393 5.83 723,847 17,871 4.98
Subordinated capital notes.................... 348,552 11,086 6.41 298,000 8,145 5.51
UnionBanCal Corporation--obligated mandatorily
redeemable preferred securities of
subsidiary grantor trust.................... -- -- -- 255,249 10,382 8.15
----------- ---------- ----------- ----------
Total borrowed funds...................... 3,527,554 97,557 5.58 4,589,315 114,468 5.03
----------- ---------- ----------- ----------
Total interest bearing liabilities........ 17,487,784 377,643 4.35 18,952,005 355,947 3.79
---------- ----------
Noninterest bearing deposits.................. 8,331,752 8,964,675
Other liabilities............................. 1,235,706 994,882
----------- -----------
Total liabilities......................... 27,055,242 28,911,562
SHAREHOLDERS' EQUITY
Common equity................................. 2,755,230 2,933,336
----------- -----------
Total shareholders' equity................ 2,755,230 2,933,336
----------- -----------
Total liabilities and shareholders'
equity.................................. $29,810,472 $31,844,898
----------- -----------
----------- -----------
Net interest income/margin (taxable-equivalent
basis)...................................... 645,354 4.87% 688,725 4.83%
Less: taxable-equivalent adjustment........... 2,348 1,741
---------- ----------
Net interest income....................... $ 643,006 $ 686,984
---------- ----------
---------- ----------
</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.

21
<PAGE>
Net interest income is interest earned on loans and investments less
interest expense on deposit accounts and borrowings. Primary factors affecting
the level of net interest income include the margin between the yield earned on
interest earning assets and the rate paid on interest bearing liabilities, as
well as the volume and composition of average interest earning assets and
average interest bearing liabilities.

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

Net interest income, on a taxable-equivalent basis, was $326.7 million in
the second quarter of 1998, compared with $348.0 million in the second quarter
of 1999. This increase of $21.3 million, or 7 percent, was primarily
attributable to a $2.0 billion, or 8 percent, increase in average earning assets
partially funded by a $476.2 million, or 6 percent, increase in average
noninterest bearing deposits. The net interest margin decreased 4 basis points
to 4.84 percent as a result of the cost associated with the issuance of $350
million of 7 3/8 percent redeemable preferred securities on February 19, 1999.
In addition, the net interest margin was negatively impacted by the lower
interest rate environment that contributed to lower yields on loans and other
average earning assets as well as a lower effective cost of funding those
assets.

Average earning assets were $26.8 billion in the second quarter of 1998,
compared with $28.9 billion in the second quarter of 1999. This growth was
primarily attributable to a $2.2 billion, or 10 percent, increase in average
loans and a $376.4 million, or 12 percent, increase in average securities,
partially offset by a $396.3 million, or 62 percent, decrease in average trading
account assets. The growth in average loans was mostly due to the increase in
average commercial, financial and industrial loans of $2.5 billion, partially
offset by the decrease in average residential mortgage loans of $335.4 million,
primarily related to continued mortgage refinancing activity, and the decrease
in average consumer loans of $305.2 million, primarily related to the sale of
the credit card portfolio which took place in the second quarter of 1998. The
increase in average securities, which comprised primarily fixed rate available
for sale securities, reflected interest rate risk management actions to reduce
our exposure to declines in interest rates.

The $2.0 billion, or 8 percent, growth in average earning assets over the
second quarter of 1998 was partially funded by a $476.2 million increase in
average noninterest bearing deposits. The increase in average noninterest
bearing deposits was primarily due to the efforts of our institutional and
deposit markets group coupled with an influx of new customer relationships,
arising from the merger and acquisition activities of other financial
institutions in the California market during the past year.

SIX MONTHS ENDED JUNE 30, 1998 AND JUNE 30, 1999

For the first six months of 1998, net interest income, on a
taxable-equivalent basis, was $645.4 million, compared with $688.7 million for
the first six months of 1999. The increase of $43.4 million, or 7 percent, was
primarily attributable to a $2.0 billion, or 8 percent, increase in average
earning assets partially funded by a $632.9 million, or 8 percent, increase in
average noninterest bearing deposits. In addition, net interest margin decreased
4 basis points to 4.83 percent as a result of the cost associated with the
issuance of redeemable preferred securities as described above. In addition, the
net interest margin was negatively impacted by the lower interest rate
environment that contributed to lower yields on loans and other average earning
assets as well as a lower effective cost of funding those assets.

Average earning assets were $26.7 billion for the first six months of 1998,
compared with $28.7 billion for the first six months of 1999. Most of this
growth was attributable to a $1.9 billion, or 8 percent, increase in average
loans and a $654.3 million, or 23 percent, increase in average securities,
partially offset by a $260.1 million, or 46 percent, decrease in average trading
account assets. The growth in average loans was mostly due to the increase in
average commercial, financial and industrial loans of $2.5 billion, partially
offset by the decrease in average residential mortgage loans of $342.4 million,
primarily related to continued mortgage refinancing activity, and the decrease
in average consumer loans of $428.4 million, primarily related to the sale of
the credit card portfolio. See "Loans" on page 27 for additional commentary on
growth in the loan portfolio. The increase in primarily fixed rate securities
reflected interest rate risk management actions to reduce our exposure to
declines in interest rates.

22
<PAGE>
NONINTEREST INCOME

<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 1999 CHANGE 1998 1999 CHANGE
- -------------------------------------------------- -------- -------- ------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Service charges on deposit accounts............... $ 32,553 $ 42,929 31.87% $ 65,579 $ 82,580 25.92%
Trust and investment management fees.............. 30,036 33,983 13.14 58,029 66,254 14.17
International commissions and fees................ 18,934 18,080 (4.51) 36,565 35,711 (2.34)
Merchant transaction processing fees.............. 13,738 18,146 32.09 28,117 32,658 16.15
Merchant banking fees............................. 8,366 9,154 9.42 17,988 16,615 (7.63)
Brokerage commissions and fees.................... 5,092 6,080 19.40 9,465 11,676 23.36
Foreign exchange trading gains, net............... 4,600 4,494 (2.30) 9,451 9,606 1.64
Securities gains, net............................. -- 634 nm 4,926 1,895 (61.53)
Gain on sale of credit card portfolio............. 17,056 -- (100.00) 17,056 -- (100.00)
Other............................................. 17,619 11,298 (35.88) 28,848 27,111 (6.02)
-------- -------- -------- --------
Total noninterest income........................ $147,994 $144,798 (2.16)% $276,024 $284,106 2.93%
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>

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

nm = not meaningful

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

In the second quarter of 1999, noninterest income was $144.8 million, a
decrease of $3.2 million, or 2 percent, from the same period in 1998. This
decrease included a $17.1 million pre-tax gain from the sale of our credit card
portfolio in April 1998. Excluding this amount, noninterest income increased
$13.9 million, or 11 percent, over the same period in 1998. This increase was
primarily due to a $10.4 million increase in service charges on deposit
accounts, a $3.9 million increase in trust and investment management fees, a
$4.4 million increase in merchant transaction processing fees, and a $1.0
million increase in brokerage commissions and fees, partially offset by a $6.3
million decrease in other noninterest income.

Revenue from service charges on deposit accounts was $42.9 million, an
increase of 32 percent over the second quarter of 1998. The increase was
primarily attributable to a 5 percent increase in average deposits, higher
overdraft fees due to a change in fee structure, and the expansion of several
products and services.

Trust and investment management fees were $34.0 million, an increase of 13
percent over the second quarter of 1998. The increase was due to growth in trust
accounts and assets under management, which resulted in higher mutual fund
management fees and higher institutional account fees.

Merchant transaction processing fees were $18.1 million, an increase of 32
percent over the second quarter of 1998. The increase was primarily due to an
increase in the volume of credit card drafts deposited by merchants, coupled
with a higher merchant discount rate.

Brokerage commissions and fees were $6.1 million, an increase of 19 percent
over the second quarter of 1998. The increase was primarily due to brokerage
commissions on non-proprietary mutual fund sales and growth in corporate sweep
products.

Other noninterest income was $11.3 million, a decrease of 36 percent from
the second quarter of 1998. The decrease was mostly due to a $4.8 million gain
in 1998 from the sale of commercial real estate loans and higher credit card
servicing fee income in 1998 related to the sale of the credit card portfolio.

SIX MONTHS ENDED JUNE 30, 1998 AND JUNE 30, 1999

For the first six months of 1999, noninterest income was $284.1 million, an
increase of $8.1 million, or 3 percent, over the same period in 1998. Excluding
the $17.1 million pre-tax gain as mentioned above, noninterest income increased
$25.1 million, or 10 percent, over the same period in 1998. This increase was

23
<PAGE>
primarily due to a $17.0 million increase in service charges on deposit
accounts, an $8.2 million increase in trust and investment management fees, a
$4.5 million increase in merchant transaction processing fees, and a $2.2
million increase in brokerage commissions and fees, partially offset by a $3.0
million decrease in net securities gains, related to securities available for
sale, and a $1.7 million decrease in other noninterest income.

Revenue from service charges on deposit accounts was $82.6 million, an
increase of 26 percent over the first six months of 1998. The increase was
primarily attributable to a 5 percent increase in average deposits, higher ATM
surcharges, higher overdraft fees due to a change in fee structure, and the
expansion of several products and services.

Trust and investment management fees were $66.3 million, an increase of 14
percent over the first six months of 1998. The increase was due to growth in
trust accounts and assets under management, which resulted in higher mutual fund
management fees and higher institutional account fees.

Merchant transaction processing fees were $32.7 million, an increase of 16
percent over the first six months of 1998. The increase was primarily due to an
increase in the volume of credit card drafts deposited by merchants coupled with
a higher merchant discount rate, partially offset by lower interchange fees.

Brokerage commissions and fees were $11.7 million, an increase of 23 percent
over the first six months of 1998. The increase was due to brokerage commissions
on non-proprietary mutual fund sales and growth in corporate sweep products.

Other noninterest income was $27.1 million, a decrease of 6 percent from the
first six months of 1998. The decrease was mostly due to a $4.8 million gain in
1998 from the sale of commercial real estate loans and higher credit card
servicing fee income in 1998 related to the sale of the credit card portfolio,
partially offset by a $2.3 million gain related to the sale of Argentine bonds
and a $1.1 million gain related to the sale of a leased asset in the first
quarter of 1999.

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 1999 CHANGE 1998 1999 CHANGE
- -------------------------------------------------- -------- -------- ------- -------- -------- ------
<S> <C> <C> <C> <C> <C> <C>
Salaries and other compensation................... $123,310 $135,202 9.64% $242,009 $266,276 10.03%
Employee benefits................................. 27,398 31,813 16.11 57,903 68,406 18.14
-------- -------- -------- --------
Personnel-related expense....................... 150,708 167,015 10.82 299,912 334,682 11.59
Net occupancy..................................... 21,679 21,917 1.10 43,704 44,378 1.54
Equipment......................................... 13,964 15,475 10.82 27,803 30,016 7.96
Merchant transaction processing................... 11,513 13,258 15.16 21,593 24,868 15.17
Professional services............................. 8,594 10,290 19.73 15,901 20,984 31.97
Communications.................................... 10,452 10,618 1.59 21,681 20,551 (5.21)
Data processing................................... 6,633 7,661 15.50 13,135 15,662 19.24
Advertising and public relations.................. 8,302 9,390 13.11 14,353 15,496 7.96
Printing and office supplies...................... 6,488 6,025 (7.14) 12,823 12,697 (0.98)
Software.......................................... 4,570 6,264 37.07 9,010 12,677 40.70
Travel............................................ 4,555 5,822 27.82 8,317 9,901 19.05
Intangible asset amortization..................... 3,338 3,509 5.12 6,676 7,018 5.12
Armored car....................................... 3,012 3,241 7.60 5,871 6,468 10.17
Foreclosed asset expense (income)................. (223) (512) 129.60 (421) (553) 31.35
Other............................................. 23,740 27,609 16.30 45,442 55,730 22.64
-------- -------- -------- --------
Total noninterest expense...................... $277,325 $307,582 10.91% $545,800 $610,575 11.87%
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>

24
<PAGE>
THREE MONTHS ENDED JUNE 30, 1998 AND JUNE 30, 1999

In the second quarter of 1999, noninterest expense was $307.6 million, an
increase of $30.3 million, or 11 percent, over the same period in 1998. This
increase was mostly due to a $16.3 million increase in personnel-related
expense, a $1.5 million increase in equipment expense, a $1.7 million increase
in merchant transaction processing expense, a $1.7 million increase in
professional services expense, a $1.7 million increase in software expense, and
a $3.9 million increase in other noninterest expense.

Personnel-related expense was $167.0 million, an increase of 11 percent over
the second quarter of 1998. This increase was mostly due to $5.5 million in
merit increases, $1.6 million due to changes in our standard costing associated
with loan originations, $4.1 million in performance-based incentive
compensation, due to achievements in the year 2000 effort and the expected
achievement through Mission Excel of the efficiency ratio targets in the years
1999 and 2000, and $1.6 million in pension expense.

Equipment expense was $15.5 million, an increase of 11 percent over the
second quarter of 1998. This increase was due to higher depreciation expense on
personal computers and increased repairs and maintenance expense on service
contracts.

Merchant transaction processing expense was $13.3 million, an increase of 15
percent over the second quarter of 1998 due to higher merchant volumes.

Professional services expense was $10.3 million, an increase of 20 percent
over the second quarter of 1998 due to costs related to the year 2000 effort.

Software expense was $6.3 million, an increase of 37 percent over the second
quarter of 1998. This increase was primarily due to increased purchases of
computer software products related to system upgrades and increased software
maintenance contracts.

Other noninterest expense was $27.6 million, an increase of 16 percent over
the second quarter of 1998. This increase was primarily attributable to
amortization expense of $2.4 million related to several low income housing
investments and an increase of $1.3 million in miscellaneous outside service
fees.

SIX MONTHS ENDED JUNE 30, 1998 AND JUNE 30, 1999

For the first six months of 1999, noninterest expense was $610.6 million, an
increase of $64.8 million, or 12 percent, over the same period in 1998. This
increase was primarily attributable to a $34.8 million increase in
personnel-related expense, a $2.2 million increase in equipment expense, a $3.3
million increase in merchant transaction processing expense, a $5.1 million
increase in professional services expense, a $2.5 million increase in data
processing expense, a $3.7 million increase in software expense, a $1.6 million
increase in travel expense, and a $10.3 million increase in other noninterest
expense.

Personnel-related expense was $334.7 million, an increase of 12 percent over
the first six months of 1998. This increase was mostly due to $11.7 million in
merit increases, a $2.4 million increase in compensation expense related to the
consolidation of the Global Capital Markets Group, a $2.2 million increase in
contract labor, a $3.1 million increase in benefits expenses related to annual
bonuses, a $2.3 million increase in benefits expense arising from a loss in the
fair value of assets underlying postretirement benefit plans, and a $1.6 million
increase in pension expense. In addition, performance-based incentive
compensation increased $6.2 million, due to achievements in the year 2000 effort
and the expected achievement through Mission Excel of the efficiency ratio
targets in the years 1999 and 2000.

Equipment expense was $30.0 million, an increase of 8 percent over the first
six months of 1998. This increase was due to higher depreciation expense on
personal computers and increased repairs and maintenance expense on service
contracts.

Merchant transaction processing expense was $24.9 million, an increase of 15
percent over the first six months of 1998 due to higher merchant volumes.

25
<PAGE>
Professional services expense was $21.0 million, an increase of 32 percent
over the first six months of 1998 due to costs related to the year 2000 effort.

Data processing expense was $15.7 million, an increase of 19 percent over
the first six months of 1998 due to increased activity in data processing
systems supporting the growth in deposits.

Software expense was $12.7 million, an increase of 41 percent over the first
six months of 1998. This increase was primarily due to increased purchases of
computer software products related to system upgrades and increased software
maintenance contracts.

Travel expense was $9.9 million, an increase of 19 percent over the first
six months of 1998 due to the Mission Excel effort.

Other noninterest expense was $55.7 million, an increase of 23 percent over
the first six months of 1998. This increase was primarily attributable to
amortization expense of $4.2 million related to several low income housing
investments, a $1.3 million increase in charitable contributions, and an
increase of $3.0 million in miscellaneous outside service fees.

YEAR 2000 EXPENSES

We continue to make preparations for the year 2000. (See "Year 2000" on page
34 for a detailed discussion of the year 2000 program.) We estimate that the
total cost of the year 2000 project will be approximately $50.0 million, of
which $10.0 million relates to capital expenditures which we will capitalize and
depreciate over their useful lives. The remaining $40.0 million will be included
in noninterest expense in the period incurred. As of June 30, 1999, we have
spent $33.6 million on the year 2000 project, $2.2 million in 1997, $21.6
million in 1998 and $9.9 million in the first six months of 1999. Of the $33.6
million spent as of June 30, 1999, $6.8 million related to capital expenditures,
$0.8 million in 1997, $5.2 million in 1998, and $0.8 million in the first six
months of 1999. Of the estimated $16.4 million remaining to be spent, an
estimated $3.2 million is expected to be for capital expenditures and $13.2
million is expected to be included in noninterest expense over the next 18
months. Of the $13.2 million to be included in noninterest expense, we expect
that approximately $6.3 million will be spent on salaries and contract labor.
This assumes that the current mix of internal staff and contract labor remains
the same, the hours and the person-days needed to complete the projects are not
materially exceeded, and that preparations for the year 2000 remain on schedule.
The remaining $6.9 million is expected to relate to other operating expenses. We
are funding the cost of the year 2000 project with normal operating cash and are
staffing it with external resources as well as internal staff re-deployed from
less time-sensitive assignments. Estimated total cost could change further as
our preparations continue.

INCOME TAX EXPENSE

The effective tax rates for the second quarter of 1998 and 1999 were 40
percent and 34 percent, respectively. The effective tax rates for the six months
ended June 30, 1998 and 1999 were 40 percent and 33 percent, respectively. In
the first quarter of 1999, we recognized a $6.3 million federal tax benefit as
the result of an IRS settlement with respect to refund claims we filed for the
years 1992 through 1994. Excluding this $6.3 million federal tax benefit, our
effective tax rate for the first six months ended June 30, 1999 would have been
34 percent. The lower effective tax rate in the first quarter and first six
months of 1999 also reflects our ability to file our 1999 California franchise
tax returns on a worldwide unitary reporting basis, which incorporates the
financial results of our majority shareholder, The Bank of Tokyo-Mitsubishi,
Ltd. and their worldwide affiliates.

26
<PAGE>
LOANS

The following table shows loans outstanding by loan type.

<TABLE>
<CAPTION>
PERCENT CHANGE TO
JUNE 30, 1999 FROM:
-----------------------
JUNE 30, DECEMBER 31, JUNE 30, JUNE 30, DECEMBER 31,
(DOLLARS IN THOUSANDS) 1998 1998 1999 1998 1998
- -------------------------------------------------- ----------- ------------ ----------- -------- ------------
<S> <C> <C> <C> <C> <C>
Domestic:
Commercial, financial and industrial............ $11,580,416 $ 13,119,534 $13,440,720 16.06% 2.45%
Construction.................................... 377,467 439,806 559,906 48.33 27.31
Mortgage:
Residential................................... 2,844,391 2,627,668 2,567,584 (9.73) (2.29)
Commercial.................................... 2,872,705 2,975,484 3,132,623 9.05 5.28
----------- ------------ -----------
Total mortgage.............................. 5,717,096 5,603,152 5,700,207 (0.30) 1.73
Consumer:
Installment................................... 2,043,933 1,984,941 1,969,685 (3.63) (0.77)
Home equity................................... 893,572 818,199 732,758 (18.00) (10.44)
----------- ------------ -----------
Total consumer.............................. 2,937,505 2,803,140 2,702,443 (8.00) (3.59)
Lease financing................................. 941,729 1,032,148 1,142,180 21.29 10.66
----------- ------------ -----------
Total loans in domestic offices............. 21,554,213 22,997,780 23,545,456 9.24 2.38
Loans originated in foreign branches.............. 1,404,115 1,298,331 1,041,202 (25.85) (19.80)
----------- ------------ -----------
Total loans................................. $22,958,328 $ 24,296,111 $24,586,658 7.09% 1.20%
----------- ------------ -----------
----------- ------------ -----------
</TABLE>

Our lending activities are predominantly domestic, with such loans
comprising 96 percent of the total loan portfolio at June 30, 1999. Total loans
at June 30, 1999 were $24.6 billion, an increase of $1.6 billion, or 7 percent,
over June 30, 1998. The increase was attributable to growth in the commercial,
financial and industrial loan portfolio, which increased $1.9 billion, the
construction loan portfolio, which increased $182.4 million, the commercial
mortgage loan portfolio, which increased $259.9 million, and the lease financing
loan portfolio, which increased $200.5 million, partially offset by the
residential mortgage loan portfolio, which decreased $276.8 million, the
consumer loan portfolio, which decreased $235.1 million, and the loans
originated in foreign branches, which decreased $362.9 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 1999, the commercial, financial and industrial loan portfolio
was $11.6 billion, or 50 percent of total loans, and $13.4 billion, or 55
percent of total loans, respectively. The increase of $1.9 billion, or 16
percent, from June 30, 1998 was primarily attributable to loans extended to
businesses with revenues exceeding $20 million. The growth continued to reflect
the results of initiatives to increase participation in larger syndicated loan
positions as lead manager and as agent, especially in the communications, media,
and entertainment and energy capital services industries in which we have
developed specialized lending expertise.

The construction loan portfolio totaled $377.5 million, or 2 percent of
total loans, at June 30, 1998, compared with $559.9 million, or 2 percent of
total loans, at June 30, 1999. This growth of $182.4 million, or 48 percent,
from June 30, 1998 was primarily attributable to the favorable California real
estate market coupled with the continuing improvement in the West Coast economy.

Mortgage loans were $5.7 billion, or 25 percent of total loans, at June 30,
1998, compared with $5.7 billion, or 23 percent of total loans, at June 30,
1999. The mortgage loan portfolio consists of loans on commercial and industrial
projects and residential loans, secured by one-to-four family residential
properties, primarily in California. The increase in commercial mortgage loans
of $259.9 million, or 9 percent,

27
<PAGE>
from June 30, 1998, reflected both the favorable California real estate market
and the continued improvement in the West Coast economy. Residential mortgage
loans decreased $276.8 million, or 10 percent, principally due to prepayments
arising from the lower interest rate environment.

Consumer loans totaled $2.9 billion, or 13 percent of total loans, at June
30, 1998, compared with $2.7 billion, or 11 percent of total loans, at June 30,
1999. The decrease of $235.1 million, or 8 percent, was attributable to a
reduction in home equity loans as customers refinanced to take advantage of
favorable long-term, fixed mortgage rates.

Lease financing totaled $941.7 million, or 4 percent of total loans, at June
30, 1998, compared with $1.1 billion, or 5 percent of total loans, at June 30,
1999. During 1998, management created new initiatives for lending, especially in
the lease financing segment. This continued refocus on leasing resulted in a
$200.5 million, or 21 percent, increase in lease financing over the first six
months of 1998.

Loans originated in foreign branches totaled $1.4 billion, or 6 percent of
total loans, at June 30, 1998 and $1.0 billion, or 4 percent of total loans, at
June 30, 1999. The decrease of $362.9 million, or 26 percent, was attributable
to the reduction of our exposures in certain Asian markets, primarily Japan,
Korea, Indonesia and Thailand, in response to the continuing uncertainty that
exists in those markets.

CROSS-BORDER OUTSTANDINGS

Our cross-border outstandings reflect certain additional economic and
political risks that are not reflected in domestic outstandings. These risks
include those arising from exchange rate fluctuations and restrictions on the
transfer of funds. The following table sets forth our cross-border outstandings
as of June 30, 1998, December 31, 1998, and June 30, 1999 for each country where
such outstandings exceeded 1 percent of total assets. The cross-border
outstandings were compiled based upon category and domicile of ultimate risk and
are comprised of balances with banks, trading account assets, securities
available for sale, securities purchased under resale agreements, loans, accrued
interest receivable, acceptances outstanding and investments with foreign
entities. The amounts outstanding for each country exclude local currency
outstandings. For those individual countries shown in the table below, most of
our local currency outstandings are hedged or are funded by local currency
borrowings.

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

December 31, 1998
Japan....................................................... 173 -- 464 637
Korea....................................................... 448 1 117 566

June 30, 1999
Japan....................................................... 72 -- 448 520
Korea....................................................... 353 -- 122 475
</TABLE>

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

28
<PAGE>
PROVISION FOR CREDIT LOSSES

We recorded a $15.0 million provision for credit losses in the second
quarter of 1998, compared with a $10.0 million provision for credit losses in
the second quarter of 1999. For the six months ended June 30, 1998, we recorded
a $35.0 million provision for credit losses compared with a $15.0 million
provision for the same period in 1999.

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

ALLOWANCE FOR CREDIT LOSSES

ALLOWANCE POLICY AND METHODOLOGY

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

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

- Problem graded loan loss factors are derived from a migration model that
tracks historical loss experience over a full business cycle.

- Pass graded loan loss factors are based on the average annual net
chargeoff rate over an eight-year period.

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

Specific allowances are established in cases where management has identified
significant conditions or circumstances related to a credit that management
believes indicate the probability that a loss has been incurred. This amount may
be determined either by a method prescribed by Statement of Financial Accounting
Standards (SFAS) No. 114, "Accounting by Creditors for Impairment of a Loan", or
by a qualitative method which is in excess of the amount determined by the
application of the formula allowance.

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

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

29
<PAGE>
- credit quality trends (including trends in nonperforming loans expected
to result from existing conditions),

- collateral values,

- loan volumes and concentrations,

- seasoning of the loan portfolio,

- specific industry conditions within portfolio segments,

- recent loss experience in particular segments of the portfolio,

- duration of the current business cycle,

- bank regulatory examination results and

- findings of our internal credit examiners.

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

The allowance for credit losses is based upon estimates of probable losses
inherent in the loan portfolio. The amount actually observed for these losses
can vary significantly from the estimated amounts. Our methodology includes
several features that are intended to reduce the differences between estimated
and actual losses. The loss migration model that is used to establish the loan
loss factors for problem graded loans is designed to be self-correcting by
taking into account our recent loss experience. Similarly, by basing the pass
graded loan loss factors on loss experience over the last eight years, the
methodology is designed to take our recent loss experience into account. Pooled
loan loss factors are adjusted quarterly based upon the level of net chargeoffs
expected by management in the next twelve months. Furthermore, our methodology
permits adjustments to any loss factor used in the computation of the formula
allowance in the event that, in management's judgment, significant factors which
affect the collectibility of the portfolio as of the evaluation date are not
reflected in the loss factors. By assessing the probable estimated losses
inherent in the loan portfolio on a quarterly basis, we are able to adjust
specific and inherent loss estimates based upon any more recent information that
has become available.

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

At December 31, 1998, our allowance for credit losses was $459.3 million, or
1.89 percent of total loans, and 586 percent of total nonaccrual loans, compared
with an allowance for credit losses at June 30, 1999 of $450.4 million, or 1.83
percent of total loans, and 495 percent of total nonaccrual loans.

In addition, the allowance incorporates the results of measuring impaired
loans as provided in SFAS No. 114 and SFAS No. 118, "Accounting by Creditors for
Impairment of a Loan--Income Recognition and Disclosures". These accounting
standards prescribe the measurement methods, income recognition and disclosures
related to impaired loans. At December 31, 1998, total impaired loans were $78.5
million and the associated impairment allowance was $11.2 million, compared with
$90.9 million and $22.3 million, respectively, at June 30, 1999.

30
<PAGE>
During the second quarter of 1999, there were no changes in estimation
methods or assumptions that affected our methodology for assessing the
appropriateness of the allowance for credit losses. Changes in assumptions
regarding the effects of economic and business conditions on borrowers and other
factors, which are described below, affected the assessment of the unallocated
allowance.

In our assessment as of June 30, 1999, management has continued to focus, in
particular, on factors affecting elements of the oil and gas, agriculture and
technology industries, and the continuing effects of the global financial
turmoil on companies and financial institutions in domestic and foreign markets
in which we operate and the growth in, and changes in the composition of, the
loan portfolio.

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

At June 30, 1999, the formula allowance increased by $15 million from
December 31, 1998 to $221 million, primarily due to adverse changes in the risk
grades of criticized loans.

At June 30, 1999, the specific allowance decreased by $13 million from
December 31, 1998 to $25 million, primarily due to the elimination of the $26
million specific allowance on Asian country exposures, which has been
incorporated into the formula allowance, offset by an increase of $13 million in
the allowance on impaired loans.

At June 30, 1999, the unallocated allowance decreased by $11 million from
December 31, 1998. Management believes that the inherent losses related to
certain conditions considered in its evaluation of the unallocated allowance
have remained relatively stable during the six months ended June 30, 1999,
except for the $14.1 million charge-off related to a single Taiwanese credit
which was recognized in the first quarter of 1999.

We do not weight the unallocated allowance among segments of the portfolio.
At June 30, 1999, we had a $204 million unallocated allowance in our allowance
for credit losses. In evaluating the appropriateness of the unallocated
allowance, we considered the following factors:

- the approximately $49 million to $61 million margin for model and
estimation risk prescribed by our credit policy,

- the effects of the decline in oil prices on borrowers in the oil and gas
industry, which could be in the range of $15 million to $24 million,

- the effects of abnormal weather conditions and export market conditions
on agricultural borrowers, which could be in the range of $11 million to
$17 million,

- the effects of export market conditions and cyclical overcapacity on
borrowers in the technology industry, which could be in the range of $17
million to $26 million,

- the continued effects of the global financial turmoil on borrowers in
Asia/Pacific countries, which could be in the range of $35 million to $64
million, and

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

There can be no assurance that the adverse impact of any of these conditions
on us will not be in excess of the range set forth above. See forward-looking
statements on page 38.

31
<PAGE>
CHANGE IN THE TOTAL ALLOWANCE FOR CREDIT LOSSES

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

<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
-------------------- --------------------
(DOLLARS IN THOUSANDS) 1998 1999 1998 1999
- --------------------------------------------------------- --------- --------- --------- ---------
<S> <C> <C> <C> <C>
Balance, beginning of period............................. $ 466,043 $ 447,936 $ 451,692 $ 459,328
Loans charged off:
Commercial, financial and industrial................... 7,213 8,758 11,201 12,490
Construction........................................... -- -- 3 --
Mortgage............................................... 181 231 995 640
Consumer............................................... 6,595 3,415 19,033 7,812
Lease financing........................................ 674 882 1,331 1,774
Foreign(1)............................................. -- -- -- 14,127
--------- --------- --------- ---------
Total loans charged off.............................. 14,663 13,286 32,563 36,843
Recoveries of loans previously charged off:
Commercial, financial and industrial................... 6,856 3,008 14,601 7,570
Construction........................................... -- -- 3 --
Mortgage............................................... 1,129 307 1,657 403
Consumer............................................... 3,777 2,223 7,672 4,637
Lease financing........................................ 101 194 178 343
--------- --------- --------- ---------
Total recoveries of loans previously charged off..... 11,863 5,732 24,111 12,953
--------- --------- --------- ---------
Net loans charged off.............................. 2,800 7,554 8,452 23,890
Provision for credit losses.............................. 15,000 10,000 35,000 15,000
Foreign translation adjustment and other net additions
(deductions)........................................... (110) 21 (107) (35)
--------- --------- --------- ---------
Balance, end of period................................... $ 478,133 $ 450,403 $ 478,133 $ 450,403
--------- --------- --------- ---------
--------- --------- --------- ---------
Allowance for credit losses to total loans............... 2.08% 1.83% 2.08% 1.83%
Provision for credit losses to net loans charged off..... 535.71 132.38 414.10 62.79
Recoveries of loans to loans charged off in the previous
period................................................. 66.27 24.33 32.70 29.29
Net loans charged off to average loans outstanding for
the period(2).......................................... 0.05 0.12 0.08 0.20
</TABLE>

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

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

(2) Annualized.

Total loans charged off in the second quarter of 1999 decreased by $1.4
million from the second quarter of 1998, primarily due to a $3.2 million
decrease in consumer loans charged off as portfolio quality improved, partially
offset by a $1.5 million increase in commercial, financial and industrial loans
charged off. Chargeoffs reflect the realization of losses in the portfolio that
were recognized previously through provisions for credit losses.

Recoveries of loans previously charged off decreased by $6.1 million from
June 30, 1998, while the percentage of net loans charged off to average loans
increased from 0.05 percent in the second quarter of 1998 to 0.12 percent in the
second quarter of 1999. At June 30, 1999, the allowance for credit losses
exceeded the net loans charged off during the second quarter of 1999, reflecting
management's belief, based on the foregoing analysis, that there were additional
losses inherent in the portfolio.

Total loans charged off in the first six months of 1999 increased by $4.3
million over the first six months of 1998, primarily due to a $14.1 million
chargeoff of a loan from a single foreign relationship as previously described,
partially offset by a $11.2 million decrease in consumer loans charged off as
portfolio

32
<PAGE>
quality improved. Recoveries of loans previously charged off decreased by $11.2
million while the percentage of net loans charged off to average loans increased
from 0.08 percent to 0.20 percent for the six months ended June 30, 1998 and
1999, respectively.

At June 30, 1999, our average annual net chargeoffs for the past five years
and the six months ended June 30, 1999, were $84.8 million, which represents 5.3
years of losses based on the level of the allowance for credit losses at that
date. Historical net chargeoffs are not necessarily indicative of the amount of
net chargeoffs that we will realize in the future.

NONPERFORMING ASSETS

<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31, JUNE 30,
(DOLLARS IN THOUSANDS) 1998 1998 1999
- --------------------------------------------------------------------------- ---------- ------------ ----------
<S> <C> <C> <C>
Commercial, financial and industrial....................................... $ 69,235 $ 60,703 $ 81,441
Construction............................................................... 4,389 4,359 4,352
Commercial mortgage........................................................ 33,410 8,254 5,115
Other...................................................................... -- 5,134 --
---------- ------------ ----------
Total nonaccrual loans................................................. 107,034 78,450 90,908
Foreclosed assets.......................................................... 15,909 11,400 6,541
---------- ------------ ----------
Total nonperforming assets............................................. $ 122,943 $ 89,850 $ 97,449
---------- ------------ ----------
---------- ------------ ----------
Allowance for credit losses................................................ $ 478,133 $ 459,328 $ 450,403
---------- ------------ ----------
---------- ------------ ----------
Nonaccrual loans to total loans............................................ 0.47% 0.32% 0.37%
Allowance for credit losses to nonaccrual loans............................ 446.71 585.50 495.45
Nonperforming assets to total loans and foreclosed assets.................. 0.54 0.37 0.40
Nonperforming assets to total assets....................................... 0.40 0.28 0.30
</TABLE>

At June 30, 1999, nonperforming assets totaled $97.4 million, a decrease of
$25.5 million, or 21 percent, from a year earlier. The decrease was primarily
the result of reductions of $28.3 million in nonaccrual commercial mortgage
loans, due to a combination of note sales totaling $29.8 million in the third
quarter of 1998 and repayments and restorations to accrual status, and $9.4
million in foreclosed assets, due to sales of individual assets, partially
offset by a $12.2 million increase in nonaccrual commercial, financial and
industrial loans, due to the placement on nonaccrual status of a few large loans
made to upper-middle market and large businesses.

Nonaccrual loans as a percentage of total loans were 0.47 percent at June
30, 1998, compared with 0.37 percent at June 30, 1999. Nonperforming assets as a
percentage of total loans and foreclosed assets improved to 0.40 percent at June
30, 1999 from 0.54 percent at June 30, 1998.

LOANS 90 DAYS OR MORE PAST DUE AND STILL ACCRUING

33
<PAGE>
LIQUIDITY

Liquidity refers to our ability to adjust our future cash flows to meet the
needs of depositors and borrowers and to fund operations on a timely and
cost-effective basis. Our liquidity management draws upon the strengths of our
extensive retail and commercial market business franchise, coupled with the
ability to obtain funds for various terms in a variety of domestic and
international money markets.

Core deposits provide us with a sizable source of relatively stable and
low-cost funds. In the second quarter of 1999, lower cost sources of funds,
which include noninterest bearing deposits and interest bearing core deposits,
funded 62 percent of average earning assets. Most of the remaining funding was
provided by short-term borrowings in the form of negotiable certificates of
deposit, foreign deposits, federal funds purchased and securities sold under
repurchase agreements, commercial paper and other borrowings.

REGULATORY CAPITAL

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

<TABLE>
<CAPTION>
MINIMUM
JUNE 30, DECEMBER 31, JUNE 30, REGULATORY
(DOLLARS IN THOUSANDS) 1998 1998 1999 REQUIREMENT
- ---------------------------------------- ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
CAPITAL COMPONENTS
Tier 1 capital.......................... $ 2,752,209 $ 2,965,865 $ 3,160,230
Tier 2 capital.......................... 611,241 604,938 614,712
----------- ------------ -----------
Total risk-based capital................ $ 3,363,450 $ 3,570,803 $ 3,774,942
----------- ------------ -----------
----------- ------------ -----------
Risk-weighted assets.................... $29,657,202 $ 30,753,030 $31,553,704
----------- ------------ -----------
----------- ------------ -----------
Quarterly average assets................ $29,690,168 $ 31,627,022 $31,889,889
----------- ------------ -----------
----------- ------------ -----------
CAPITAL RATIOS
Total risk-based capital................ 11.34% 11.61% 11.96% 8.0%
Tier 1 risk-based capital............... 9.28 9.64 10.02 4.0
Leverage ratio(1)....................... 9.27 9.38 9.91 4.0
</TABLE>

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

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

We and Union Bank of California, N.A. are subject to various regulations
issued by federal banking agencies, including minimum capital requirements. We
and Union Bank of California, N.A. are required to maintain minimum ratios of
total and Tier 1 capital to risk-weighted assets and of Tier 1 capital to
quarterly average assets (the leverage ratio).

Compared with December 31, 1998, our Tier 1 risk-based capital ratio at June
30, 1999 increased 38 basis points to 10.02 percent, our total risk-based
capital ratio increased 35 basis points to 11.96 percent, and our leverage ratio
increased 53 basis points to 9.91 percent. The increase in the capital ratios
was primarily attributable to the issuance of $350 million in redeemable
preferred securities.

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

YEAR 2000

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

34
<PAGE>
This discussion of the implications of the year 2000 problem for us contains
numerous forward-looking statements based on inherently uncertain information.
The cost of the project and the date on which we plan to complete the internal
year 2000 modifications are based on management's best estimates of future
events. See details with respect to costs for year 2000 on page 26. The material
assumptions underlying the estimated cost are the expenses incurred to date, the
cost and continued availability of internal and external resources and the time
required to accomplish remaining tasks. We cannot guarantee, however, these
estimates, and actual results could differ. Moreover, although management
believes preparations will be adequate, situations may occur that could have a
material adverse effect on us. For example, we place a high degree of reliance
on third parties, such as customers, vendors, utilities and other financial and
governmental institutions. Although we are assessing the readiness of these
third parties and preparing contingency plans, their performance may affect us
adversely.

READINESS

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

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

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

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

- data processing systems,

- telecommunications and data networks,

- building facilities and security systems,

- vendor risk,

- customer risk,

- contingency planning, and

- communications.

In addition to testing individual systems, we have conducted integrated
contingency testing of our systems identified as vital to the continuance of a
broad core business activity. Contingency testing of these vital systems and
many other systems occurred in a separate computer environment where dates are
set forward in order to identify and correct problems that might not otherwise
become evident until processing in the new century begins. This testing,
referred to as "Time Machine Integrated Contingency Testing", has

35
<PAGE>
been completed for the year-end and February "leap day" periods. It will be
conducted again for the year-end period in the fourth quarter 1999.

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

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

We rely on vendors and customers, and we are addressing year 2000 issues
with both groups. We have performed risk assessments and we have taken
appropriate measures to minimize risk as much as possible for those vendors that
we have assigned a risk rating of medium or high. Presently, approximately 7
percent are rated as medium or high risk, and risk mitigation planning is
complete. We have, however, no viable alternatives for some suppliers, such as
power distribution and local telephone companies. As with all financial
institutions, we place a high degree of reliance on the systems of other
institutions, including governmental agencies, to settle transactions. We have
successfully tested principal settlement methods associated with major payment
systems.

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

Our borrowers, the population of customers with loans and unused commitments
outstanding, pose the highest level of potential concern. As of June 30, 1999,
our ongoing assessment of these borrowers resulted in the following assignments
of risk: 92 percent low risk, 8 percent medium risk and less than 1 percent high
risk. We have established individual risk mitigation plans for all customers
rated as high risk. The risk mitigation plans further evaluate whether year 2000
issues will materially affect the customer's cash flow, asset values, and
collateral pledged to us. We seek to implement specific actions that will keep
the borrowers focused on corrective measures to reduce potential credit risk.
The risk mitigation plans use the normal credit process that we employ to manage
credit risk and require the concurrence of a credit administrator.

36
<PAGE>
RISKS

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

- incomplete preparation of our operations for the next century,

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

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

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

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

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

PROGRAM ASSESSMENT

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

CONTINGENCY PLANS

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

- Absenteeism

- Inaccessible physical site

- Local telecommunications and network failure

- Desktop workstation and office equipment failure

- Support system failure

- Operational disruptions

- Vendors and service provider failure

OTHER RELATED DISCLOSURES

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

37
<PAGE>
FORWARD-LOOKING STATEMENTS

Our management frequently makes forward-looking statements in Securities and
Exchange Commission filings, such as this one, press releases, news articles,
conference calls with Wall Street analysts and almost any other time in which we
are speaking on behalf of us. The forward-looking statements we make are
intended to provide investors with additional information with which they may
assess our future potential. All of these forward-looking statements are based
on assumptions about an uncertain future. There are numerous factors that could
and will cause actual results to differ from those discussed in our
forward-looking statements. Many of these factors are beyond our ability to
control or predict and could have a material adverse effect on our stock price,
financial position, or results of operations. Some, but not all of these
factors, are discussed below.

ADVERSE CALIFORNIA ECONOMIC CONDITIONS COULD ADVERSELY AFFECT OUR
BUSINESS. A substantial majority of our assets and deposits are generated in
California. As a result, poor economic conditions in California may cause us to
incur losses associated with higher default rates and decreased collateral
values in our loan portfolio. In the early 1990's, the California economy
experienced an economic recession that resulted in increases in the level of
delinquencies and losses for us and many of the state's other financial
institutions. If California were to experience another recession, it is expected
that our level of problem assets would increase accordingly. The current
economic crisis in Asia is expected to continue to negatively impact the
economic conditions in California, which could adversely affect our business.

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

FLUCTUATIONS IN INTEREST RATES COULD ADVERSELY AFFECT OUR
BUSINESS. Significant increases in market interest rates, or the perception
that an increase may occur, could adversely affect both our ability to originate
new loans and our ability to grow. Conversely, a decrease in interest rates
could result in an acceleration in the prepayment of loans. In addition, changes
in market interest rates, or changes in the relationships between short-term and
long-term market interest rates, or changes in the relationships between
different interest rate indices, could affect the interest rates charged on
interest earning assets differently than the interest rates paid on interest
bearing liabilities. This difference could result in an increase in interest
expense relative to interest income. An increase in market interest rates also
could adversely affect the ability of our floating-rate borrowers to meet their
higher payment obligations. If this occurred, it could cause an increase in
nonperforming assets and chargeoffs, which could adversely affect our business.

SHAREHOLDER VOTES ARE CONTROLLED BY THE BANK OF TOKYO-MITSUBISHI, LTD. The
Bank of Tokyo-Mitsubishi, Ltd. owns a majority of the outstanding shares of our
common stock. As a result, The Bank of Tokyo-Mitsubishi can elect all of our
directors and can control the vote on all matters, including determinations such
as: approval of mergers or other business combinations; sales of all or
substantially all of our assets; any matters submitted to a vote of our
shareholders; issuance of any additional common stock or other equity
securities; incurrence of debt other than in the ordinary course of business;
the selection and tenure of our Chief Executive Officer; payment of dividends
with respect to common stock or other equity securities; and matters that might
be favorable to The Bank of Tokyo-Mitsubishi. The Bank of Tokyo-Mitsubishi's
ability to prevent an unsolicited bid for us or any other change in control
could have an adverse effect on the market price for our common stock. A
majority of our directors are not officers or employees of UnionBanCal
Corporation or any of our affiliates, including The Bank of Tokyo-Mitsubishi.

38
<PAGE>
However, because of The Bank of Tokyo-Mitsubishi's control over the election of
our directors, The Bank of Tokyo-Mitsubishi could change the composition of our
Board of Directors so that the Board would not have a majority of outside
directors.

THE BANK OF TOKYO-MITSUBISHI'S FINANCIAL CONDITION COULD ADVERSELY AFFECT
OUR OPERATIONS. Although we fund our operations independently of The Bank of
Tokyo-Mitsubishi and believe our business is not necessarily closely related to
The Bank of Tokyo-Mitsubishi's business or outlook, The Bank of
Tokyo-Mitsubishi's credit ratings may affect our credit ratings. The Bank of
Tokyo-Mitsubishi's credit ratings were downgraded in October 1998 by Standard
and Poor's Corporation and are currently on Moody's Investors Service, Inc.'s
credit watch with negative implications. Any future downgrading of The Bank of
Tokyo-Mitsubishi's credit rating could adversely affect our credit ratings.
Therefore, as long as The Bank of Tokyo-Mitsubishi maintains a majority interest
in us, a deterioration in The Bank of Tokyo-Mitsubishi's financial condition
could result in an increase in our borrowing costs and could impair our access
to the public and private capital markets. The Bank of Tokyo-Mitsubishi is also
subject to regulatory oversight and review. Our business operations and
expansion plans could be negatively affected by regulatory concerns related to
the Japanese financial system and The Bank of Tokyo-Mitsubishi.

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

SUBSTANTIAL COMPETITION IN THE CALIFORNIA BANKING MARKET COULD ADVERSELY
AFFECT US. Banking is a highly competitive business. We compete actively for
loan, deposit, and other financial services business in California, as well as
nationally and internationally. Our competitors include a large number of state
and national banks, thrift institutions and major foreign-affiliated or foreign
banks, as well as many financial and non-financial firms that offer services
similar to those offered by us. Some of our competitors are community banks that
have strong local market positions. Other competitors include large financial
institutions (such as Bank of America, California Federal, Washington Mutual,
and Wells Fargo) that have substantial capital, technology and marketing
resources. Such large financial institutions may have greater access to capital
at a lower cost than us, which may adversely affect our ability to compete
effectively. In addition, there have been a number of recent mergers involving
financial institutions located in California. Some of the merged banks, such as
Norwest/Wells Fargo, employ a strong community-based banking model of doing
business that may increase competition with our distinctive combination of
traditional community bank service coupled with a large branch network.

RESTRICTIONS ON DIVIDENDS AND OTHER DISTRIBUTIONS COULD LIMIT AMOUNTS
PAYABLE TO US. A substantial portion of our cash flow typically comes from
dividends our bank and nonbank subsidiaries pay to us. Various statutory
provisions restrict the amount of dividends our subsidiaries can pay to us
without regulatory approval. In addition, if any of our subsidiaries liquidates,
that subsidiary's creditors will be entitled to receive distributions from the
assets of that subsidiary to satisfy their claims against it before we, as a
holder of an equity interest in the subsidiary, will be entitled to receive any
of the assets of the subsidiary. If, however, we are a creditor of the
subsidiary with recognized claims against it, we would be in the same position.

ADVERSE EFFECTS OF BANKING REGULATIONS OR CHANGES IN BANKING REGULATIONS
COULD ADVERSELY AFFECT US. We are subject to significant federal and state
regulation and supervision, which is primarily for the benefit

39
<PAGE>
and protection of our customers and not for the benefit of investors. In the
past, our business has been materially affected by these regulations. This trend
is likely to continue in the future. Laws, regulations or policies currently
affecting us and our subsidiaries may change at any time. Regulatory authorities
may also change their interpretation of these statutes and regulations.
Therefore, our business may be adversely affected by any future changes in laws,
regulations, policies or interpretations. Additionally, our international
activities may be subject to the laws and regulations of the jurisdiction where
business is being conducted. International laws, regulations and policies
affecting us and our subsidiaries may change at any time and affect our business
opportunities and competitiveness in these jurisdictions. Due to The Bank of
Tokyo-Mitsubishi's controlling ownership of us, laws, regulations and policies
adopted or enforced by the Government of Japan may adversely affect our
activities and investments and those of our subsidiaries in the future. Under
long-standing policy of the Board of Governors of the Federal Reserve System, a
bank holding company is expected to act as a source of financial strength for
its subsidiary banks. As a result of that policy, we may be required to commit
financial and other resources to our subsidiary bank in circumstances where we
might not otherwise do so.

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

POSSIBLE FUTURE SALES OF SHARES BY THE BANK OF TOKYO-MITSUBISHI, LTD. COULD
ADVERSELY AFFECT THE MARKET FOR OUR STOCK. Although The Bank of
Tokyo-Mitsubishi has announced its intention to maintain its majority ownership
in us, The Bank of Tokyo-Mitsubishi may sell shares of our common stock in
compliance with the federal securities laws. By virtue of The Bank of
Tokyo-Mitsubishi's current control of us, The Bank of Tokyo-Mitsubishi could
sell large amounts of shares of our common stock by causing us to file a
registration statement that would allow them to sell shares more easily. In
addition, The Bank of Tokyo-Mitsubishi could sell shares of our common stock
without registration pursuant to Rule 144 under the Securities Act. Although we
can make no prediction as to the effect, if any, that such sales would have on
the market price of our common stock, sales of substantial amounts of our common
stock, or the perception that such sales could occur, could adversely affect our
market price. If The Bank of Tokyo-

40
<PAGE>
Mitsubishi sells or transfers shares of our common stock as a block, another
person or entity could become our controlling shareholder.

STRATEGIES. In connection with our strategic repositioning, we have
developed long-term financial performance goals, which we expect to result from
successful implementation of our operating strategies. We cannot assure you that
we will be successful in achieving these long-term goals or that our operating
strategies will be successful. Achieving success in these areas is dependent on
a number of factors, many of which are beyond our direct control. Factors that
may adversely affect our ability to attain our long-term financial performance
goals include:

- deterioration of our asset quality,

- our inability to reduce noninterest expenses,

- our inability to increase noninterest income,

- our inability to decrease reliance on asset revenues,

- regulatory and other impediments associated with making acquisitions,

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

- decreases in net interest margins,

- increases in competition,

- adverse regulatory developments,

- unexpected increases in costs related to potential acquisitions, and

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

RISKS ASSOCIATED WITH POTENTIAL ACQUISITIONS OR DIVESTITURES OR
RESTRUCTURING. We may acquire or invest in companies, technologies, services or
products that complement our business. In addition, we continue to evaluate
performance of all of our businesses and business lines and may sell a business
or business lines. Any acquisitions, divestitures or restructuring may result in
potentially dilutive issuance of equity securities, significant write-offs, the
amortization of expenses related to goodwill and other intangible assets and/or
the incurrence of debt, any of which could have a material adverse effect on our
business, financial condition and results of operations. Acquisitions,
divestitures or restructuring would involve numerous additional risks including
difficulties in the assimilation or separation of operations, services, products
and personnel, the diversion of management's attention from other business
concerns, the disruption of our business, the entry into markets in which we
have little or no direct prior experience and the potential loss of key
employees. There can be no assurance that we would be successful in overcoming
these or any other significant risks encountered.

ITEM 3. MARKET RISK.

Information concerning our exposure to market risk, which has remained
relatively unchanged from December 31, 1998, is incorporated by reference from
the text under the caption "Quantitative and Qualitative Disclosures About
Market Risk" in the Form 10-K for the year ended December 31, 1998.

41
<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 26, 1999 ("Annual Meeting"):

DIRECTORS: Each of the following persons was elected as a director to hold
office until the 2000 Annual Meeting of Shareholders or until earlier
retirement, resignation or removal.

<TABLE>
<CAPTION>
DIRECTOR'S NAME FOR WITHHELD
- -------------------------------------------------------------------------------------- ------------- ----------
<S> <C> <C>
Richard D. Farman..................................................................... 152,957,436 319,797
Stanley F. Farrar..................................................................... 152,964,401 312,832
Herman E. Gallegos.................................................................... 152,878,840 398,393
Jack L. Hancock....................................................................... 152,959,320 317,913
Richard C. Hartnack................................................................... 152,960,493 316,740
Kaoru Hayama.......................................................................... 152,953,388 323,845
Harry W. Low.......................................................................... 152,962,819 314,414
Mary S. Metz.......................................................................... 152,961,094 316,139
Raymond E. Miles...................................................................... 152,955,831 321,402
Takahiro Moriguchi.................................................................... 152,970,435 306,798
J. Fernando Niebla.................................................................... 152,964,155 313,078
Sidney R. Petersen.................................................................... 152,962,578 314,655
Carl W. Robertson..................................................................... 152,949,534 327,699
Yoshihiko Someya...................................................................... 152,957,615 319,618
Henry T. Swigert...................................................................... 152,958,257 318,976
Tsuneo Wakai.......................................................................... 146,567,491 6,709,742
Robert M. Walker...................................................................... 152,727,044 550,189
Hiroshi Watanabe...................................................................... 152,962,137 315,096
Kenji Yoshizawa....................................................................... 145,711,369 7,565,864
</TABLE>

MANAGEMENT STOCK PLAN: Proposal No. 2 to approve the Year 2000 UnionBanCal
Corporation Management Stock Plan received the following votes.

<TABLE>
<S> <C>
FOR: 142,916,309
AGAINST: 6,165,326
ABSTAIN: 113,537
</TABLE>

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: 153,184,629
AGAINST: 23,108
ABSTAIN: 69,496
</TABLE>

ITEM 5. OTHER INFORMATION

SHAREHOLDER PROPOSALS: Shareholders who expect to present an oral proposal
at the 2000 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
December 31, 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.

42
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

(a) Exhibits Index:

<TABLE>
<CAPTION>
NO. DESCRIPTION
- --------- ----------------------------------------------------------------------------------------------------------
<C> <S>
3.1 Restated Articles of Incorporation of the Registrant, as amended(1)
3.2 By-laws of the Registrant, as amended January 27, 1999(2)
10.1 Management Stock Plan. (As restated effective June 1, 1997)*(3)
10.2 Union Bank of California Deferred Compensation Plan. (January 1, 1997, Restatement, as amended November
21, 1996)*(4)
10.3 Union Bank of California Senior Management Bonus Plan. (Effective January 1, 1999)*(5)
10.4 Richard C. Hartnack Employment Agreement. (Effective January 1, 1998)*(6)
10.5 Robert M. Walker Employment Agreement. (Effective January 1, 1998)*(6)
10.6 Union Bank of California Supplemental Executive Retirement Plan. (Effective January 1, 1988) (Amended and
restated as of January 1, 1997)*(3)
10.7 Union Bank Executive Wellness Plan. (Effective January 1, 1994)*(7)
10.8 Union Bank Financial Services Reimbursement Program. (Effective January 1, 1996)*(8)
10.9 Performance Share Plan. (Effective January 1, 1997)*(3)
10.10 Service Agreement Between Union Bank of California and The Bank of Tokyo-Mitsubishi Ltd. (Effective
October 1, 1997)*(3)
10.11 Management Stock Plan. (As restated effective January 1, 2000)*(5)
27 Financial Data Schedule(5)
</TABLE>

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

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

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

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

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

(5) Filed herewith.

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

(7) Incorporated by reference to Form 8-K dated April 1, 1996 (filed as exhibit
10.12).

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

* Management contract or compensatory plan, contract or arrangement.

(b) Reports on Form 8-K: None

43
<PAGE>
SIGNATURES

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

UNIONBANCAL CORPORATION

(Registrant)

By /s/ DAVID I. MATSON

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

By /s/ DAVID A. ANDERSON

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

Dated: August 9, 1999

<PAGE>

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

UNION BANK OF CALIFORNIA

SENIOR MANAGEMENT
BONUS PLAN

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

-- EFFECTIVE JANUARY 1, 1999 --

<PAGE>

UNION BANK OF CALIFORNIA
SENIOR MANAGEMENT BONUS PLAN

I. OBJECTIVE

Union Bank of California (the Bank) provides a challenging and rewarding
environment where outstanding performance is encouraged and recognized.
Senior Managers are provided with a base salary and the opportunity to
earn additional compensation based on, and consistent with, their
individual performance.

The objective of the Senior Management Bonus Plan (the Plan) is to reward
Senior managers who assist in achieving and exceeding the Bank's and
their Group's financial goals. In addition, the Plan is designed to help
provide an environment that stimulates high performance, as well as
motivates Senior Managers to exercise initiative, effort, and ingenuity.

II. EFFECTIVE DATE

The Plan is effective as of January 1, 1999.

III. ELIGIBILITY

With the exception of policy-making officers who are Bank Of
Tokyo-Mitsubishi (BTM) expatriates and the Chairman, the following
individuals are eligible to participate in the Plan:

- - Vice Chairmen and policy-making EVP's.

- - Other Executive Vice Presidents (EVP) and Senior Vice Presidents (SVP)
whose focus and impact are on overall Bank performance and do not
participate in business unit incentive plans.

IV. BASIS FOR PAYMENT

A. BANK FINANCIAL GOALS

The Bank's Plan goals for Return On Average Common Shareholders
Equity Ratio and goal for Net Income will be designated by the
President and CEO in the financial planning process, as follows:

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

NORMALIZED RETURN ON NORMALIZED NET INCOME
AVERAGE COMMON AVERAGE COMMON
SHAREHOLDERS = SHAREHOLDERS
EQUITY EQUITY

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

<PAGE>

B. INCENTIVE TARGETS

Incentive targets with Bank performance at 100% of financial goals are
30% for SVP's, 45% for EVPs, and 60% for Vice Chairmen.

Group Heads may recommend individual incentive targets that vary by
position within officer level, taking into consideration competitive
market factors and the criticality of the position. Variances in
individual incentive targets and resulting payments are subject to review
and approval of the President and CEO, provided that the payments do not
exceed the approved bonus fund designated for the respective officer
level for each Group.

C. FUNDING FORMULA

The size of the bonus pool will be based on the Bank's performance
against budgeted ROE and Net Income as follows:

BONUS INCENTIVE PAYOUT MATRIX
(% OF TARGET PAYOUT)

---------------
NET INCOME
------------------------------------------------------------------------------
> OR =
< 75% 75% 80% 90% 100% 110% 120% TO 125%
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------------
RETURN < 80% 0% 0% 5% 15% 25% 35% 45% 50%
ON
EQUITY
------------------------------------------------------------------------------------------------------
80% 0% 25% 30% 40% 50% 60% 70% 75%
-------------------------------------------------------------------------------------------
90% 13% 38% 45% 60% 75% 90% 105% 113%
-------------------------------------------------------------------------------------------
100% 25% 50% 60% 80% 100% 120% 140% 150%
-------------------------------------------------------------------------------------------
110% 37% 63% 75% 100% 125% 145% 165% 175%
-------------------------------------------------------------------------------------------
> OR = TO
120% 50% 75% 90% 120% 150% 170% 190% 200%
-------------------------------------------------------------------------------------------

</TABLE>

- The bonus pool may then be modified by up to +/- 20% of target
according to other performance considerations by the Committee.

- For purposes of interpolating between performance levels,
additional discrete performance levels may be added between the
minimum and maximum for each performance factor.

The President and CEO, in consultation with the CFO, will submit bonus
fund recommendations to the Committee, which may modify the fund by
+/- 20% of target

<PAGE>

(but in no event may the fund exceed two (2) times the target) based on
such factors as:

- The Bank's overall performance in relation to other peer banks;

- Whether absolute Return On Equity and/or Net Income goals are
reasonable in relation to long-term objectives and the Bank's
historical performance;

- Efficiency ratios as compared to peer banks, with recognition that
constant attention must be given to long-term expense reduction
through continuous productivity improvement in order to support
UBOC's competitiveness;

- Effectiveness of risk management;

- General economic or market conditions;

- Achievement of other financial and strategic objectives;

- Normalizing financial data to allow for an acquisition/merger,
other extraordinary circumstances or material events that were not
specifically planned or not directly related to the performance of
Bank executives during the performance year.

<PAGE>

D. BONUS POOL ALLOCATION

The pool will be allocated based on corporate and unit/individual
performance as follows:

[GRAPHIC]

<PAGE>

E. DETERMINING INDIVIDUAL AWARDS

1. Individual bonus awards will be based on performance criteria
established at the beginning of the year and are determined in
the following manner:

a. The President and CEO will recommend awards for eligible
Vice Chairmen and policy-making officers to the Committee,
which will then review and approve these awards, with or
without modification.

b. The President and CEO will allocate the remaining funds
for non-policy-making officers to Group Heads based on
aggregate individual incentive award targets and Group
performance. Any adjustments to allocations, based on
Group performance, must be made within the approved
bonus funding limits. The President and CEO will also
issue guidelines for Group Heads to develop individual
bonus award recommendations.

c. Group Heads will submit individual EVP and eligible SVP
bonus award recommendations for review and approval by
the President and CEO.

d. The Committee may request a report on bonuses awarded to
executives other than policy-making officers.

2. Individual awards may range from zero (0) times to two
(2) times target awards.

3. Vacation, sick pay, and all other employee benefit plans
excluding the 401(k) plan and retirement are based on the base
salary rate and do not include Senior Management Bonus
payments.

V. ADMINISTRATION

A. The final authority and responsibility for administration of the
Plan resides exclusively with the Committee.

B. The Chief Financial Officer will have responsibility for
calculating the bonus funds including the application of any fund
limitations specified by the Committee. The bonus funds will be
rounded to the nearest thousand dollars and individual awards will
be rounded to the nearest one hundred dollars.

C. The Director of Human Resources will have responsibility for
providing the Chief Financial Officer with information on
bonus-eligible executives and salaries, processing award payments,
and keeping records of activities related to the Plan.

<PAGE>

D. Participants must be employed by the Bank, Bank of Tokyo-Mitsubishi
Group or a subsidiary or affiliate through the end of the performance
year in order to receive payment. In the case of retirement, death,
permanent disability, or exceptional circumstances, deviations from
eligibility may be approved at the sole discretion of the President
and CEO for non-policy making EVPs and eligible SVP's and at the sole
discretion of the Committee for policy-making officers.

E. The award payments will be made as soon as administratively practical
after the end of the fiscal year.

VI. STAFF CHANGES

A. New employees will be eligible to participate in the Plan
immediately. Awards may be prorated based on the time in the Plan
and the contribution of the participant.

B. Plan participants who are transferred to another Bank position not
covered by this Plan or who are on Leave of Absence during the
year will be eligible for an award that will be calculated on a
prorated basis. Incentive payments will be calculated according to
the provisions described in this Plan and paid on the established
schedule for other Plan participants.

VII. GENERAL PROVISIONS

A. NO CONTRACT OF EMPLOYMENT
Neither the actions of the Bank in establishing this Plan or its
provisions, nor any action taken according to those provisions,
will be construed as giving the right to a participant to continue
in the employ of the Bank. The Plan is not a contract of
employment. No rights in the Plan will accrue to any person
whether or not he/she is selected to participate in the Plan, and
no person will, because of the Plan acquire any right to an
accounting or to examine the books or the affairs of the Bank.

B. ASSIGNMENT
No funds, assets or other property of the Bank, and no obligation
or liability of the Bank under this Plan, will be subject to any
claim of any participant, nor will any participant have any right
or power to pledge, encumber or assign any incentive award
provided for in the Plan.

<PAGE>

C. SOLE AND ENTIRE PLAN
No Bank director, officer, employee or other person has the
authority to enter into any agreement, either written or oral,
with any person or participant concerning an award or payment of
an incentive award, or to make any representation or warranty with
respect to any incentive award under this plan. Only the Director
of Human Resources with the written concurrence of the Chief
Executive Officer will have such authority. This Plan supersedes
any prior oral or written understanding on this subject.

D. CONTINGENCY
The Plan is contingent in character and, therefore, no rights will
vest in any individual participant under the Plan until all
conditions of the Plan are satisfied.

E. MINIMUM PERSONAL PERFORMANCE
Bank management in its absolute discretion retains the right to
reduce or eliminate incentive awards which are not yet paid for a
participant whose personal performance level is unsatisfactory,
regardless of the Bank's or Group's performance. Unsatisfactory
personal performance shall be determined by the Bank in its
absolute discretion and may include, but only as examples and not
as an exhaustive list, such factors as misconduct, poor
performance appraisal rating, poor credit management, poor account
management, disruptive behavior, failure to adhere to Bank
policies and procedures, failure to abide by Bank compliance
standards, poor audits, failure to control or monitor risk, or
other relevant factors.

F. NO VESTING
The right to receive any payment of an incentive award shall not
vest in any employee, or the estate of the employee, until such
payment is actually made in accordance with the terms and
conditions of the Plan.

G. ADMINISTRATION
Bank management shall determine in its absolute discretion all
elements and goals of the Plan. All determinations made by the
Bank shall be binding. At any time prior to the date the awards
are paid, the Bank reserves the right to adjust any elements or
goals of the Plan.

H. AMENDMENT
Bank management may at any time, revise, amend, suspend, or
terminate in whole or in part, any or all provisions of this Plan.

I. OTHER INCENTIVE PLANS
An individual may not participate in this Plan if he/she is
participating in any business unit incentive plan.

<PAGE>

J. TAX RELATED LIABILITIES
Participants are responsible for determining the tax consequences
of incentive awards and arranging for appropriate withholding and
payment of all taxes due. The Bank will not be responsible for and
will be held harmless from liability for payments, interest,
penalties, costs or expenses incurred as a result of not arranging
for sufficient withholding or deductions from incentive awards.

K. ARBITRATION
This Plan is made, and shall in all respects be interpreted,
enforced and governed by and under the laws of the United States,
as appropriate, and the State of California. Any dispute arising
out of or relating to this Plan including its meaning or
interpretation will be resolved solely by arbitration before an
experienced employment arbitrator selected in accordance with the
model employment arbitration procedures of the American
Arbitration Association. The locations of the arbitration will be
in San Francisco, Los Angeles or San Diego as selected by the Bank
in good faith. The provisions of this paragraph are exclusive for
all purposes and applicable to any and all disputes between a
participant and the Plan. Any decision or award by an arbitrator
shall affect the Plan solely as to its obligations to the
participant who requests arbitration. The arbitrator's decision
will have no impact on the Plan's relationship to any other
participant, nor will it require the Bank to interpret the Plan in
any particular manner.

L. EXCEPTIONS
Bank management recognizes that occasionally unique or unusual
circumstances including, but not limited to, internal
reorganizations, dual responsibilities or special and
extraordinary efforts by participants will arise that may require
consideration of exceptions to Plan provisions. Accordingly, on a
case-by-case basis, exceptions to any provision in this incentive
plan may be made with the recommendation and approval of the Group
Head, the Director of Human Resources and the Chief Executive
Officer or his designee. The Committee has the sole discretion to
approve exceptions applicable to policy-making officers. This
approval may be sought at the time incentive payments are
submitted for approval. Any approved exceptions will affect the
Plan solely as to the participant involved and will have no impact
on other Bank employees or participants in the Plan.

M. FORM AND TIMING OR PAYMENT
Incentive awards will be paid in cash, less applicable employment
taxes and federal, state and foreign withholding taxes. Incentive
awards will be calculated and paid as provided in the Plan. In
order to induce continued employment with the Bank, however,
participants must be actively employed by the Bank on the last day
of the performance period in order to be paid the incentive award.
Thus, participants who terminate before the end of the performance
period shall forfeit such award. Nevertheless, based on the Bank's
absolute discretion, participants whose employment is terminated
during the performance period due to death, disability,

<PAGE>

retirement or as a result of an organizational structure,
office/unit closure or reduction in force may receive a prorated
award. Such awards will be calculated and paid according to the
normal procedures set forth in the Plan. All awards paid shall be
final.

N. BENEFITS UNFUNDED AND UNSECURED
The rights of a participant, or any designated beneficiary of the
participant, shall be solely those of an unsecured general
creditor of the Bank, and the Bank's obligation shall be an
unfunded and unsecured promise to pay.

<PAGE>

YEAR 2000 UNIONBANCAL CORPORATION
MANAGEMENT STOCK PLAN

<PAGE>

YEAR 2000 UNIONBANCAL CORPORATION MANAGEMENT STOCK PLAN

1. ESTABLISHMENT, PURPOSE AND DEFINITIONS.

(a) This Year 2000 UnionBanCal Corporation Management Stock Plan (the
"Plan") was adopted by the Board on March 24, 1999, effective upon
the approval of UNBC's shareholders, to take effect upon the
expiration of the UnionBanCal Corporation Management Stock Plan
due to expire on January 1, 2000; provided, however, that the Plan
is approved within 12 months after March 24, 1999, and on or prior
to the date of the first annual meeting of UNBC's shareholders
held subsequent to the acquisition of Common Stock by a
Participant pursuant to the Plan. Notwithstanding any provision
of the Plan or of any Option Agreement to the contrary, no Option
may be exercisable and no Common Stock may be granted pursuant to
the Plan prior to such shareholder approval.

(b) The purpose of the Plan is to provide a means whereby:

(i) Employees may be given an opportunity to purchase shares of
Common Stock pursuant to options which may qualify as
incentive stock options under Section 422 of the Code
(referred to as "incentive stock options");

(ii) Employees and Non-Employee Directors, and designated
Consultants may be given an opportunity to purchase shares
of Common Stock pursuant to options which do not so qualify
(referred to as "nonqualified stock options");

(iii) Employees and Non-Employee Directors, and designated
Consultants may acquire Stock and Stock Appreciation Rights
for such consideration (if any) and subject to such
restrictions (if any) as the Committee of UNBC determines
appropriate.

(i) AWARD refers collectively to Common Stock grants, Common
Stock sales and Options to purchase Common Stock, made
pursuant to the Plan.

(ii) BOARD refers to UNBC's board of directors.

(iii) CODE refers to the Internal Revenue Code of 1986, as
amended. Reference in the Plan to any Section of the Code
shall be deemed to include any amendments or successor
provisions to such Section and any regulations under such
Section.

(iv) COMMITTEE refers to the Executive Compensation and Benefits
Committee of UNBC's Board.

<PAGE>

(v) COMMON STOCK refers to the Common Stock of UNBC.

(vi) Consultant refers to any person designated by the Committee
who is: (I) an independent contractor retained to perform
services for UNBC or its Subsidiaries; or (ii) a person who
provides services to UNBC or its Subsidiaries pursuant to
an agreement between UNBC or its Subsidiaries and any other
person or organization, other than Bank of
Tokyo-Mitsubishi.

(vii) FAIR MARKET VALUE as of any specified date refers to the
closing per share price of the Common Stock on the Nasdaq
National Market or on any national securities stock
exchange on which the Common Stock is traded, as
applicable, on that date, or if no price is reported on
that date, on the last preceding date on which such price
of the Common Stock is reported.

(viii) EMPLOYEE refers to any common law employee of UNBC or its
Subsidiaries except: (1) any independent contractor
retained to perform services for UNBC or its Subsidiaries,
including consultants; and (2) any person who provides
services to UNBC or its Subsidiaries pursuant to an
agreement between UNBC or its Subsidiaries and any other
person or organization, other than Bank of
Tokyo-Mitsubishi.

(ix) NON-EMPLOYEE DIRECTOR refers to a member of the Board who
is not an Employee.

(x) OPTION refers to an Award granted under Section 6 of the
Plan and includes both incentive stock options and
nonqualified stock options.

(xi) OPTION AGREEMENT refers to a written agreement between UNBC
and an Employee, Non-Employee Director or Consultant with
respect to an Option.

(xii) OPTIONEE refers to an Employee, Non-Employee Director or
Consultant who has been granted an Option.

(xiii) OUTSIDE DIRECTOR refers to a member of the Board who
qualifies as an "outside director" as such term is used in
Section 162(m) of the Code and defined in any applicable
Treasury regulations promulgated thereunder, including
Treasury regulation 1.162-27(e)(3). Such member must also
qualify as a "non-employee director" under
Rule 16b-3(b)(3) of the general Rules and Regulations of
the Securities and Exchange Commission under the Securities
Exchange Act of 1934, as amended.

(xiv) PARTICIPANT refers to a recipient of an Award.

(xv) SUBSIDIARIES refers to subsidiary corporations, as defined
in Section 424(f) of the Code (but substituting "UNBC" for
"employer corporation"), including Subsidiaries of UNBC
which become such after the adoption of the Plan.

<PAGE>

2. ADMINISTRATION OF THE PLAN.

(a) The Plan shall be administered by the Committee, which shall be
composed as hereinafter set forth in Section 2(b).

(b) The Committee shall consist solely of not less than two Outside
Directors elected by the Board. The Board may from time to time
increase (and thereafter may decrease) the size of the Committee,
elect or remove members thereto (with or without cause) and fill
any vacancies however created; provided, however, that the minimum
number of members on the Committee must be two.

(c) The Committee shall meet at such times and places and upon such
notice as the Committee's Chair determines. A majority of the
Committee shall constitute a quorum. Any acts by the Committee may
be taken at any meeting at which a quorum is present and shall be
by majority vote of those members entitled to vote.

(d) The Committee shall determine which Employees, Non-Employee
Directors, or Consultants of UNBC or its Subsidiaries shall be
granted Awards under the Plan, the timing of such Awards, the
terms thereof and the number of shares of Common Stock subject to
each Award.

(e) The Committee shall have the sole authority, in its absolute
discretion, to adopt, amend and rescind such rules and regulations
as, in its opinion, may be advisable in the administration of the
Plan, to construe and interpret the Plan, its rules and
regulations, and the instruments evidencing Awards granted under
the Plan, and to make all other determinations deemed necessary or
advisable for the administration of the Plan. All decisions,
determinations and interpretations of the Committee shall be
binding on all Participants.

3. STOCK SUBJECT TO THE PLAN.

(a) Awards may be granted under the Plan to eligible persons for an
aggregate of not more than 10,000,000 shares of Common Stock. If
an Option is surrendered for cash or other consideration or for
any other reason ceases to be exercisable in whole or in part, the
shares of Common Stock which were subject to such Option but as to
which the Option had not been exercised shall continue to be
available under the Plan. If Common Stock is granted or sold
subject to restrictions and is subsequently forfeited, the
forfeited shares shall again be available for Awards under the
Plan.

<PAGE>

(b) If there is any change in the Common Stock subject to the Plan or
the Common Stock subject to any Award granted under the Plan,
through merger, consolidation, reorganization, recapitalization,
reincorporation, stock split, stock dividend, or other change in
the corporate structure of UNBC, the Board and the Committee shall
make appropriate adjustments in order to preserve but not to
increase the benefits to the Participants, including adjustments
in the aggregate number of shares of Common Stock subject to the
Plan and the number of shares of Common Stock and the Fair Market
Value subject to outstanding Awards.

4. ELIGIBILITY. Persons who shall be eligible to have Awards granted to
them shall be such Employees, Non-Employee Directors, and Consultants as
the Committee, in its discretion, shall designate from time to time. Only
Employees shall be eligible to receive incentive stock options.

5. OPTION EXERCISE PRICE. The exercise price of the Common Stock covered by
each Option shall not be less than the Fair Market Value of such Common
Stock on the date the Option is granted. Notwithstanding the foregoing,
in the case of an incentive stock option granted to a person possessing
more than 10% of the combined voting power of UNBC or its Subsidiaries,
the exercise price shall not be less than 110% of the Fair Market Value
of the Common Stock on the date the Option is granted. The exercise price
of an Option shall be subject to adjustment to the extent provided in
Section 3(b), above.

6. TERMS AND CONDITIONS OF OPTIONS.

(a) Each Option granted pursuant to the Plan shall be evidenced by an
Option Agreement executed by the Union Bank of California, N.A.
("UBOC") Director of Human Resources or his or her designee and
the person to whom such option is granted.

(b) The Committee shall determine the term of each Option granted
under the Plan, but the term of each Option shall be for no more
than ten years; provided, however, that in the case of an Option
granted to a person possessing more than 10% of the combined
voting power of UNBC or its Subsidiaries, the term of each
incentive stock option shall be for no more than five years.

(c) In the case of incentive stock options, the aggregate Fair Market
Value (determined as of the time such option is granted) of the
Common Stock with respect to which incentive stock options are
exercisable for the first time by the Optionee in any calendar
year (under the Plan and any other plans of UNBC or its
Subsidiaries) shall not exceed $100,000.

(d) An Option Agreement may contain such other terms, provisions and
conditions as may be determined by the Committee (not inconsistent
with the Plan), including, without limitation, stock appreciation
rights pursuant to Section 7 of the Plan with respect to Options
granted under the Plan. If an Option, or any part thereof, is
intended to qualify as an incentive stock option, the Option
Agreement shall contain those terms and conditions which are
necessary to so qualify it as required by Section 422 of the Code
and any applicable Treasury Regulations promulgated thereunder.

<PAGE>

(e) Each incentive stock option granted pursuant to the Plan shall,
during the Optionee's lifetime, be exercisable only by him, and
neither the incentive stock option nor any right hereunder shall
be transferable by the Optionee by operation of law or otherwise
other than by will or the laws of descent and distribution. The
transferability of a nonqualified stock option will be established
in the Option Agreement to be entered into between UNBC and the
Optionee.

(f) The maximum number of shares of Common Stock with respect to which
the Committee may make Awards during any calendar year to any
Employee, any Non-Employee Director, or any Consultant shall not
exceed 300,000.

7. STOCK APPRECIATION RIGHTS. The Committee may, under such terms and
conditions as it deems appropriate, authorize the surrender by an
Optionee of all or part of an unexercised Option and authorize a payment
in consideration therefor in an amount equal to the difference obtained
by subtracting the Option exercise price of the shares then subject to
exercise under such Option from the Fair Market Value of the Common Stock
represented by such shares on the date of surrender, provided that the
Committee determines that such settlement is consistent with the purpose
of the Plan. Such payment may be made in shares of Common Stock valued at
their Fair Market Value on the date of surrender of such Option or in
cash, or partly in shares and partly in cash. Acceptance of surrender and
the manner of payment shall be in the discretion of the Committee. Any
payments of cash under this Section shall be from the general assets of
UNBC. Notwithstanding anything to the contrary herein, the maximum number
of shares of Common Stock with respect to which the Committee may award
stock appreciation rights during any calendar year to any Employee, any
Non-Employee Director, or any Consultant shall not exceed 300,000.

8. COMMON STOCK GRANTS AND COMMON STOCK SALES. The Committee may, in its
discretion, issue Common Stock, with or without consideration, to
eligible persons as compensation for services rendered to UNBC or its
Subsidiaries, on whatever basis and subject to such terms and conditions
as the Committee determines. The terms and conditions of such an Award
shall be evidenced by a written agreement executed by UNBC and the
Participant.

9. RESTRICTIONS ON TRANSFER OF COMMON STOCK. Common Stock acquired under
the Plan shall be subject to such restrictions and agreements regarding
vesting, sale, assignment, encumbrance or other transfer as the Committee
deems appropriate at the time of making an Award; subject, however, to
compliance with applicable state and federal laws.

10. USE OF PROCEEDS. Any cash proceeds realized from the sale of Common
Stock pursuant to the Plan or from the exercise of Options granted under
the Plan shall constitute general funds of UNBC.

<PAGE>

11. AMENDMENT, SUSPENSION OR TERMINATION OF THE PLAN.

(a) The Board may at any time amend, suspend or terminate the Plan as
it deems advisable; provided, however, except as provided in
Section 3(b), above, the Board shall not amend the Plan in the
following respects without the consent of UNBC's shareholders then
sufficient to approve the Plan in the first instance:

(i) to increase the maximum number of shares of Common Stock
subject to the Plan; or

(ii) to change the designation or class of persons eligible to
receive Awards under the Plan.

(b) No Award may be granted during any suspension or after the
termination of the Plan, and no amendment, suspension or
termination of the Plan shall, without the Participant's consent,
alter or impair any rights or obligations under any Award
previously made under the Plan.

(c) The Plan shall terminate ten years from the original effective
date of the Plan, unless previously terminated by the Board
pursuant to this Section 11.

(d) Upon a termination of the Plan, UNBC or the Committee may
authorize the surrender by an Optionee of all or part of an
unexercised Option and authorize a payment in consideration
therefor in the same manner as if the Participant had surrendered
an Option under Section 7 regarding stock appreciation rights. The
payment received by the Optionee pursuant to this Section
11(d) shall not be considered remuneration for services performed
by the Optionee under Section 162(m) of the Code.

12. CONSIDERATION. Payment of the exercise price of an Option or payment of
any consideration required for an Award granted under the Plan shall be
made in cash; provided, however, that the Committee, in its sole
discretion, may permit a Participant to pay the exercise or purchase
price in whole or in part by (a) delivery (on a form prescribed by the
Committee) of an irrevocable direction to a securities broker or brokers
approved by the UBOC Director of Human Resources or his or her designee
to sell shares and deliver all or a portion of the proceeds to UNBC in
payment for the Common Stock, or (b) Common Stock. For purposes of
determining the amount of exercise price or purchase price satisfied by
payment of Common Stock, such Common Stock shall be valued at its Fair
Market Value as of the date of exercise of Option or purchase of Award,
whichever is applicable.

<PAGE>

13. PERFORMANCE-BASED COMPENSATION. The Plan shall be interpreted to be in
compliance with requirements under Section 162(m) of the Code and all
applicable Treasury Regulations promulgated thereunder so that grants of
Options or Stock Appreciation Rights under the Plan will be treated as
"Performance-Based Compensation" as such term is used in Section
162(m)(4)(C) of the Code. To the extent that any provision in the Plan
would cause the Options or Stock Appreciation Rights not to be treated as
"Performance-Based Compensation" under Section 162(m)(4)(C) of the Code,
such provision will be stricken from the Plan, and the remaining
provisions shall nevertheless continue in full force and effect without
being impaired or invalidated.

14. GOVERNING LAW. The Plan will be administered in accordance with the laws
of the State of California and all applicable federal law.

IN WITNESS WHEREOF, the undersigned have executed the Year 2000
UnionBanCal Corporation Management Stock Plan, at San Francisco, California, on
this May 26, 1999.

UNIONBANCAL CORPORATION

By: /s/ Takahiro Moriguchi
---------------------------------------
Takahiro Moriguchi
PRESIDENT AND CHIEF EXECUTIVE OFFICER

By: /s/ Paul E. Fearer
---------------------------------------
Paul E. Fearer
DIRECTOR OF HUMAN RESOURCES

Date Approved By Executive Compensation and Benefits Committee: February 24,
1999

Date Adopted By UnionBanCal Corporation Board of Directors: March 24, 1999

Date Approved By Shareholders: May 26, 1999

Effective Date: January 1, 2000

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

<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 2,499,686
<INT-BEARING-DEPOSITS> 203,428
<FED-FUNDS-SOLD> 385,930
<TRADING-ASSETS> 197,120
<INVESTMENTS-HELD-FOR-SALE> 3,272,934
<INVESTMENTS-CARRYING> 138,267
<INVESTMENTS-MARKET> 138,269
<LOANS> 24,586,658
<ALLOWANCE> 450,403
<TOTAL-ASSETS> 32,386,153
<DEPOSITS> 24,133,148
<SHORT-TERM> 3,777,857
<LIABILITIES-OTHER> 622,704
<LONG-TERM> 648,000
0
0
<COMMON> 1,415,104
<OTHER-SE> 1,466,033
<TOTAL-LIABILITIES-AND-EQUITY> 32,386,153
<INTEREST-LOAN> 916,350
<INTEREST-INVEST> 111,031
<INTEREST-OTHER> 15,550
<INTEREST-TOTAL> 1,042,931
<INTEREST-DEPOSIT> 241,479
<INTEREST-EXPENSE> 355,947
<INTEREST-INCOME-NET> 686,984
<LOAN-LOSSES> 15,000
<SECURITIES-GAINS> 1,895
<EXPENSE-OTHER> 610,575
<INCOME-PRETAX> 345,515
<INCOME-PRE-EXTRAORDINARY> 345,515
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 233,222
<EPS-BASIC> 1.39
<EPS-DILUTED> 1.38
<YIELD-ACTUAL> 4.83
<LOANS-NON> 90,908
<LOANS-PAST> 15,151
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 459,328
<CHARGE-OFFS> 36,843
<RECOVERIES> 12,953
<ALLOWANCE-CLOSE> 450,403
<ALLOWANCE-DOMESTIC> 228,100
<ALLOWANCE-FOREIGN> 17,800
<ALLOWANCE-UNALLOCATED> 204,500

</TABLE>