UNIONBANCAL CORP, S-3/A, 1999-01-11

UNIONBANCAL CORP
S-3/A, 1999-01-11
NATIONAL COMMERCIAL BANKS

Previous: UNIONBANCAL CORP, S-3/A, 1999-01-11

Next: VOYAGEUR UNIT INVESTMENT TRUST SERIES 10, 497, 1999-01-11

<PAGE>

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 11, 1999

REGISTRATION NO. 333-67579

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

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------

AMENDMENT NO. 1
TO
FORM S-3

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933
-------------------

UNIONBANCAL CORPORATION

(Exact name of Registrant as specified in its charter)

<TABLE>
<S> <C>
CALIFORNIA 94-1234979
(State or other (I.R.S. employer
jurisdiction of identification
incorporation or number)
organization)
</TABLE>

350 CALIFORNIA STREET
SAN FRANCISCO, CALIFORNIA 94104
415-765-2969

(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)

JOHN H. MCGUCKIN, JR.
EXECUTIVE VICE PRESIDENT
UNIONBANCAL CORPORATION
400 CALIFORNIA STREET
SAN FRANCISCO, CALIFORNIA 94104
415-765-2969
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
---------------------

COPIES TO:

<TABLE>
<S> <C> <C>
GREGG A. NOEL JEFFREY SMALL DAVID K. LAKHDHIR
Skadden, Arps, Slate, Meagher & Flom Davis Polk & Wardwell Paul, Weiss, Rifkind, Wharton &
LLP 450 Lexington Avenue Garrison
300 South Grand Avenue, Suite 3400 New York, NY 10017 1285 Avenue of the Americas
Los Angeles, California 90071 (212) 450-4000 New York, NY 10019
(213) 687-5000 (212) 373-3000
</TABLE>

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

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THE REGISTRATION STATEMENT.
---------------------

If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /

If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act,
other than securities being offered only in connection with dividend or interest
reinvestment plans, please check the following box. / /

If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /

If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
---------------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON
SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY
DETERMINE.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
EXPLANATORY NOTE

This Registration Statement covers the registration of shares of our common
stock to be offered in the United States and Canada (the "U.S. Offering") and
shares of our common stock to be offered in a concurrent offering outside the
United States and Canada (the "International Offering"). The complete form of
prospectus relating to the U.S. Offering (the "U.S. Prospectus") follows
immediately after this explanatory note. The form of prospectus relating to the
International Offering (the "International Prospectus") will be identical in all
respects to the U.S. Prospectus, except that the International Prospectus will
contain a different front cover page. The form of the U.S. Prospectus included
herein is followed by the front cover page of the International Prospectus. The
International Prospectus front cover page is labeled "Alternate Page for
International Prospectus."

<PAGE>
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THE
SELLING SHAREHOLDER MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS
PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND THE SELLING SHAREHOLDER
IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE SUCH OFFER
OR SALE IS NOT PERMITTED.
<PAGE>

PROSPECTUS (SUBJECT TO COMPLETION)
ISSUED JANUARY 11, 1999

[LOGO]

COMMON STOCK
-----------------

THE BANK OF TOKYO-MITSUBISHI, LTD. IS OFFERING MILLION SHARES OF COMMON
STOCK OF
UNIONBANCAL CORPORATION. THE BANK OF TOKYO-MITSUBISHI, LTD. CURRENTLY OWNS
81.6% OF OUR COMMON STOCK AND WILL OWN % AFTER THE OFFERING AND RELATED
TRANSACTIONS.

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

UNIONBANCAL CORPORATION'S COMMON STOCK IS LISTED ON THE NASDAQ NATIONAL MARKET
UNDER THE SYMBOL "UNBC". ON JANUARY 7 , 1999, THE LAST REPORTED SALE PRICE
OF THE COMMON STOCK ON THE NASDAQ NATIONAL MARKET WAS $34.00 PER
SHARE.

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

INVESTING IN THE COMMON STOCK INVOLVES RISKS.
SEE "RISK FACTORS" BEGINNING ON PAGE 11.

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

PRICE $ A SHARE

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

<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND SELLING
PUBLIC COMMISSIONS SHAREHOLDER
------------------ ------------------ ------------------
<S> <C> <C> <C>
PER SHARE.......................................... $ $ $
TOTAL.............................................. $ $ $
</TABLE>

- ---------

THE SECURITIES AND EXCHANGE COMMISSION AND STATE SECURITIES REGULATORS HAVE NOT
APPROVED OR DISAPPROVED THESE SECURITIES, OR DETERMINED IF THIS PROSPECTUS IS
TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

THE BANK OF TOKYO-MITSUBISHI, LTD. HAS GRANTED THE UNDERWRITERS THE RIGHT TO
PURCHASE UP TO AN ADDITIONAL SHARES TO COVER OVER-ALLOTMENTS. MORGAN STANLEY
& CO. INCORPORATED EXPECTS TO DELIVER THE SHARES TO PURCHASERS ON ,
1999.

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

MORGAN STANLEY DEAN WITTER

LEHMAN BROTHERS

J.P. MORGAN & CO.

SALOMON SMITH BARNEY

, 1999
<PAGE>
TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Prospectus Summary............................. 3
Risk Factors................................... 11
The Transactions............................... 15
Use of Proceeds................................ 15
Price Range of Common Stock and Dividend
Policy....................................... 16
Capitalization................................. 17
Selected Consolidated Financial and Operating
Data......................................... 18
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................... 22

<CAPTION>
PAGE
---------
<S> <C>
Business....................................... 64
Management..................................... 75
Selling Shareholder............................ 82
Description of Capital Stock................... 82
Certain United States Federal Tax Consequences
to Non-United States Holders................. 84
Underwriters................................... 86
Legal Matters.................................. 89
Experts........................................ 89
Where You Can Find More Information............ 89
Index to Consolidated Financial Statements..... F-1
</TABLE>

ABOUT THIS PROSPECTUS

This prospectus is part of a registration statement that we filed with the
Securities and Exchange Commission. This prospectus provides you with a general
description of our common stock that the selling shareholder is offering. You
should read this prospectus together with the additional information described
under the heading "Where You Can Find More Information," located on page 89.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus and the information incorporated by reference includes
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Some of the
forward-looking statements can be identified by the use of forward-looking words
such as "believes," "expects," "may," "will," "should," "seeks,"
"approximately," "intends," "plans," "estimates," or "anticipates" or the
negative of those words or other comparable terminology. Forward-looking
statements involve inherent risks and uncertainties. A number of important
factors could cause actual results to differ materially from those in the
forward-looking statements. Some factors include fluctuations in interest rates,
inflation, government regulations, and economic conditions and competition in
the geographic and business areas in which we conduct our operations. For a
discussion of factors that could cause actual results to differ, please see the
discussion under "Risk Factors" contained in this prospectus and in other
information contained in our publicly available SEC filings.

2
<PAGE>

PROSPECTUS SUMMARY

YOU SHOULD READ THE FOLLOWING SUMMARY WITH THE MORE DETAILED INFORMATION
ABOUT US AND OUR FINANCIAL STATEMENTS, INCLUDING THE NOTES TO THOSE FINANCIAL
STATEMENTS, INCLUDED IN THIS PROSPECTUS AND IN THE DOCUMENTS INCORPORATED BY
REFERENCE IN THIS PROSPECTUS.

UnionBanCal Corporation, or "UNBC," is a California-based commercial bank
holding company. Its principal subsidiary is Union Bank of California, N.A.
Union Bank of California is the third largest commercial bank in California,
based on both total assets and total deposits in California, and is among the 30
largest in the United States. Having roots as far back as 1864, we are among the
oldest banks on the West Coast. At September 30, 1998, we had 244 full-service
branches in California, six full-service branches in Oregon and Washington, two
facilities in Texas and New York and 18 offices abroad. Most of our customers
are located in California, the nation's most populous state with over 32 million
residents. Our bank was formed through the combination of Union Bank and BanCal
Tri-State Corporation in 1996. We are presently approximately 82% owned by The
Bank of Tokyo-Mitsubishi, Ltd.

We provide a wide range of financial products and services to retail
customers, small businesses, middle-market companies and major corporations.
These products and services include a variety of personal and commercial
financial services, including:

- consumer and small-business lending,

- corporate and international lending,

- corporate and international cash management,

- treasury,

- trust services, and

- investment advisory services.

As of September 30, 1998, we had total assets of $31.4 billion, total
deposits of $23.7 billion and total shareholders' equity of $3.0 billion. We had
net income for the nine months ended September 30, 1998 of $352.4 million, and
net income per diluted share of $2.01 after giving effect to the December 1998
3-for-1 stock split described below.

THE STRATEGIC REPOSITIONING

THE TRANSACTIONS. The Bank of Tokyo-Mitsubishi is offering to sell
approximately $750 million in shares of our common stock to the public. In
connection with this offering, we are seeking to repurchase shares of our common
stock from two of our existing shareholders. We expect to repurchase $250
million in shares of our common stock from The Bank of Tokyo-Mitsubishi,
concurrently with the closing of this offering. We expect to repurchase the
shares at the public offering price set forth on the cover page of this
prospectus, less the underwriting discounts and commissions. In addition, we are
currently negotiating with another foreign institutional shareholder regarding
the repurchase of approximately 2.1 million shares of our common stock. Two
other foreign institutional shareholders decided not to participate in the
repurchase. We intend to use the net proceeds of an offering of trust preferred
securities to finance both of the repurchases. The trust preferred offering, the
repurchases and this offering are referred to in this prospectus as the
"Transactions." We anticipate that this offering and the trust preferred
offering will close in the first quarter of 1999.

From UNBC's point of view, the Transactions are principally designed to
improve our return on average common equity and earnings per share and to
increase our public float. In addition, the sale of common stock by The Bank of
Tokyo-Mitsubishi to the public will raise proceeds for, and enhance the capital
base of, The Bank of Tokyo-Mitsubishi.

3
<PAGE>

The repurchase of the common stock from The Bank of Tokyo-Mitsubishi and the
issuance of the trust preferred securities would, on a pro forma basis:

- increase UNBC's return on average common equity from 16.87% to % at
September 30, 1998; and

- increase UNBC's diluted earnings per share for the year ended December 31,
1997 and nine months ended September 30, 1998 from $2.30 up to $ , and
from $2.01 up to $ , respectively, representing an approximate %
increase and an approximate % increase, respectively.

The sale of the common stock by The Bank of Tokyo-Mitsubishi to the public
will also substantially increase the percentage of UNBC's common stock held by
public investors. This increase in public shareholders will increase our common
stock's float. The Bank of Tokyo-Mitsubishi currently owns 81.6% of our common
stock and will own % after the Transactions.

We believe the Transactions will provide UNBC with additional benefits. The
Transactions should increase our market visibility as a result of more research
coverage and should make our common stock a more attractive acquisition
currency. The Transactions will not result in a material change to our Tier 1
risk-based capital ratio, our total risk-based capital ratio or our leverage
ratio.

DIVIDEND POLICY AND STOCK SPLIT. On November 19, 1998, we announced a
3-for-1 common stock split, which became effective in December 1998, and a 36%
increase in our quarterly common stock dividend for the fourth quarter of 1998
from $0.14 per share to $0.19 per share after giving effect to the stock split.

THE BANK OF TOKYO-MITSUBISHI, LTD.

The Bank of Tokyo-Mitsubishi, Ltd. is Japan's largest bank, based on total
assets. It has a domestic network that comprises approximately 350 branches,
sub-branches and agencies. It also has an overseas network that includes more
than 400 facilities located in all the major financial and commercial centers of
the world. UNBC is The Bank of Tokyo-Mitsubishi's largest overseas subsidiary.
The Bank of Tokyo-Mitsubishi has stated that it intends to maintain its majority
stake in UNBC after the closing of this offering and the related transactions.

BANKING SERVICES

UNBC's operations are divided into four primary segments:

THE COMMUNITY BANKING GROUP. This group provides its customers with a full
line of checking and savings, investment, loan and fee-based banking products.
It has 244 branches in California, as well as six branches in Oregon and
Washington. It also has the fifth largest branch network among depository
institutions in California. It competes with larger banks by providing service
quality superior to that of its major competitors and is recognized as among the
highest rated banks in California for customer service quality. For the nine
months ended September 30, 1998, average assets in this group were $10.3
billion, and average deposits were $12.3 billion.

THE COMMERCIAL FINANCIAL SERVICES GROUP. This group offers a variety of
commercial financial services, including commercial and project loans, real
estate financing, asset-based and leveraged commercial financing, trade finance
and letters of credit, lease financing, customized cash management services and
selected capital markets products. The group's customers include middle-market
companies, large corporations, real estate companies and other more specialized
industry customers. This group competes with other banks primarily on the basis
of its reputation as a "business bank," the quality of its relationship
managers, and the delivery of superior customer service. For the nine months
ended September 30, 1998, average assets in this group were $12.0 billion, and
average deposits were $5.8 billion.

4
<PAGE>

THE TRUST & PRIVATE FINANCIAL SERVICES GROUP. This group offers investment
management and administration services for a broad range of individuals and
institutions. It services individual client needs through its trust and private
banking, investment management and brokerage products and services. It services
institutional client needs through traditional employee benefit and 401(k)
programs, global and domestic securities custody, securities lending and
corporate trust products. The group also 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
September 30, 1998, this group had over $90 billion in assets under
administration.

THE INTERNATIONAL BANKING GROUP. This group primarily provides
correspondent banking and trade finance-related products and services to
financial institutions worldwide, including Brazil, Hong Kong, Japan, Korea and
Taiwan. It also serves selected foreign firms and U.S. corporate clients in
selected countries worldwide, particularly in Asia. This group has a long and
stable history of providing correspondent and trade-related services to
international financial institutions. In light of recent volatility in global
markets, we have reduced our credit exposure and the average maturity of this
portfolio. UNBC reduced cross border outstandings to Japan, Korea, Malaysia,
Thailand, Vietnam, Singapore, Indonesia, the Philippines, China and Hong Kong by
$1 billion to $1.6 billion at September 30, 1998 compared to $2.6 billion at
December 31, 1997. A large part of the outstandings are related to this group.
For the nine months ended September 30, 1998, average assets in this group were
$2.1 billion, and average deposits were $864 million, in each case excluding
inter-company placements and overnight inter-bank loans, consisting primarily of
export/import related short-term trade transactions.

OPERATING STRATEGY

We focus our strategy on the following:

- CAPITALIZE ON STRONG POSITION IN CORE CALIFORNIA MARKET. California is
the largest state in the United States, with over 32 million residents
and nearly $1 trillion in gross state product. Based on both total
assets and total deposits in California, we are the third largest
commercial bank in California, and we are among the oldest banks on the
West Coast.

- FOCUS COMMERCIAL BANKING EFFORTS ON SPECIFIC INDUSTRIES AND
COMPANIES. We target our commercial banking activities on industries
and companies for which we can reasonably expect to be one of a
customer's principal banks. Our emphasis is on relationship management
and meeting a large part of our targeted customers' credit and
depository needs.

- MAINTAIN HIGH LENDING STANDARDS AND STRONG ASSET QUALITY PROFILE. We
strive to maintain strong asset quality through our underwriting
standards, credit policies and ongoing credit reviews of our existing
loan portfolio. At September 30, 1998, our ratio of non-performing
assets to total assets was 0.26%, or the seventh lowest of the 30
largest commercial banks in the United States.

5
<PAGE>

- IDENTIFY STRATEGIC BUSINESSES AND CONSIDER POTENTIAL ACQUISITIONS OR
DIVESTITURES. We view selective acquisitions and divestitures, as well
as internal growth, as the primary means to increase and enhance our
core businesses.

- IMPROVE OPERATING EFFICIENCY.

- ATTAIN NEW FINANCIAL PERFORMANCE TARGETS.

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

Our principal executive offices are located at 350 California Street, San
Francisco, California, 94104, and our telephone number is (415) 765-2969.

6
<PAGE>

THE OFFERING

<TABLE>
<S> <C>
Common stock offered by BTM....... shares(1)

Over-allotment option............. shares

Common stock offered in:
U.S. offering................... shares(1)
International offering.......... shares
Total......................... shares(1)

Common stock to be repurchased in
connection with this offering... shares

Common stock to be outstanding
after this offering and the
repurchases..................... shares(1)(2)

Use of proceeds................... UNBC will not receive any of the net proceeds
from this offering.

Dividend policy................... On November 18, 1998, our Board of Directors
approved a 36% increase in our quarterly common
stock dividend for the fourth quarter of 1998
from $0.14 per share to $0.19 per share after
giving effect to the 3-for-1 stock split. Future
dividends will depend upon our earnings,
financial condition, capital requirements and
other factors as our Board of Directors may deem
relevant.

Nasdaq National Market symbol..... UNBC
</TABLE>

- ---------

(1) Assumes the over-allotment option granted to the U.S. underwriters will not
be exercised.

(2) Based on shares outstanding as of , 1999. Excludes shares of
common stock issuable upon the exercise of stock options granted under
UNBC's stock incentive plans, of which options to purchase shares are
currently outstanding but not exercisable and options to purchase
shares are currently outstanding and exercisable.

7
<PAGE>

SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA

The summary financial and other data as of December 31, 1996 and 1997 and
for the years ended December 31, 1995, 1996 and 1997 are derived from our
audited consolidated financial statements included in this prospectus. The
summary financial and other data as of December 31, 1995 is derived from our
audited consolidated financial statements that are not included in this
prospectus. The summary financial and other data as of September 30, 1997 and
1998 and for the nine-month periods ended September 30, 1997 and 1998 are
derived from our unaudited consolidated financial statements included in this
prospectus, which, in the opinion of our management, include all adjustments
necessary for a fair presentation of our financial position at such date and the
results of operations for such interim period. The results for the nine-month
period ended September 30, 1998 are not necessarily indicative of the results to
be expected of the full fiscal year. You should read the following data with the
more detailed information contained in "Selected Consolidated Financial and
Operating Data," "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and our consolidated financial statements and the
notes to the consolidated financial statements, each included in this
prospectus.

8
<PAGE>

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------- ------------------------
1995 1996 1997 1997 1998
----------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS:
Net interest income(1).................... $ 1,152,777 $ 1,175,302 $ 1,237,010 $ 917,408 $ 983,056
Provision for credit losses............... 53,250 40,000 -- -- 45,000
Noninterest income........................ 395,319 418,676 463,001 342,627 399,949
Noninterest expense(2).................... 978,101 1,134,904 1,044,665 762,208 836,178
----------- ----------- ----------- ----------- -----------
Income before income taxes(1)............. 516,745 419,074 655,346 497,827 501,827
Taxable-equivalent adjustment............. 10,444 6,724 5,328 4,107 3,417
Income tax expense........................ 193,359 162,892 238,722 174,869 146,045
----------- ----------- ----------- ----------- -----------
Net income................................ $ 312,942 $ 249,458 $ 411,296 $ 318,851 $ 352,365
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
NET INCOME APPLICABLE TO COMMON STOCK....... $ 301,637 $ 238,152 $ 403,696 $ 311,251 $ 352,365
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
PER COMMON SHARE:(3)
Net income -- basic(4).................... $ 1.74 $ 1.37 $ 2.31 $ 1.78 $ 2.01
Net income -- diluted(4).................. 1.73 1.36 2.30 1.78 2.01
Pro forma earnings -- basic, excluding
after tax merger and integration expense
and cumulative effect of accounting
change(2)................................ 1.74 1.78 2.33 1.80 2.01
Pro forma earnings -- diluted, excluding
after tax merger and integration expense
and cumulative effect of accounting
change(2)................................ 1.73 1.77 2.32 1.80 2.01
Dividends(5).............................. 0.47 0.47 0.51 0.37 0.42
Book value (end of period)(6)............. 13.49 13.53 15.32 14.96 17.04
Common shares outstanding (end of
period)................................... 174,180,493 174,457,603 174,917,674 174,848,461 175,208,037
Weighted average common shares outstanding
-- basic................................. 173,806,300 174,391,048 174,683,338 174,614,764 175,090,890
Weighted average common shares outstanding
-- diluted............................... 174,099,241 174,783,565 175,189,078 175,071,292 175,728,849
BALANCE SHEET DATA (END OF PERIOD):
Total assets.............................. $27,546,859 $29,234,059 $30,585,265 $30,982,479 $31,407,318
Total loans............................... 20,431,683 21,049,787 22,741,408 22,297,724 23,497,845
Nonperforming assets...................... 246,871 156,784 129,809 132,974 81,399
Total deposits............................ 19,655,043 21,532,960 23,296,374 22,974,188 23,663,129
Common equity............................. 2,349,092 2,359,933 2,679,299 2,615,327 2,984,950
BALANCE SHEET DATA (PERIOD AVERAGE):
Total assets.............................. $25,564,843 $27,899,734 $29,692,992 $29,451,728 $30,130,893
Total loans............................... 18,974,540 20,727,577 21,855,911 21,693,329 22,916,992
Earning assets............................ 22,849,129 24,717,326 26,291,822 26,066,274 27,002,879
Total deposits............................ 17,969,972 20,101,544 22,067,155 21,823,524 22,386,160
Common equity............................. 2,197,476 2,325,437 2,514,610 2,469,521 2,792,727
OTHER DATA:
Return on average assets(7)............... 1.22% 0.89% 1.39% 1.45% 1.56%
Pro forma return on average assets,
excluding after-tax merger and
integration expense and cumulative effect
of accounting change(2)(7)............... 1.22 1.15 1.40 1.46 1.56
Return on average common equity, excluding
after-tax merger and integration expense
and cumulative effect of accounting
change(2)(8)............................. 13.73 10.24 16.05 16.85 16.87
Pro forma return on average common
equity(2)(8)............................. 13.73 13.33 16.20 17.04 16.87
Efficiency ratio(9)....................... 63.39 71.02 61.53 60.55 60.51
Pro forma efficiency ratio, excluding
merger and integration expense(2)(9)..... 63.39 63.65 61.17 60.07 60.51
Net interest margin(10)................... 5.05 4.75 4.70 4.70 4.86
Tier 1 risk-based capital ratio(11)....... 9.35 9.08 8.96 8.92 9.53
Total risk-based capital ratio(12)........ 11.70 11.17 11.05 11.02 11.51
</TABLE>

- ----------

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

(2) Merger and integration expense was $117 million and $6 million for December
31, 1996 and 1997, respectively, and after-tax merger and integration
expense was $72 million and $4 million for December 31, 1996 and 1997,
respectively. Merger and integration expense was $6 million ($4 million
after-tax) for the nine-months ended September 30, 1997. See page 34 "Year
Ended December 31, 1997 compared to Year Ended December 31, 1996" for a
description of merger accounting and pro forma presentations.

9
<PAGE>

(3) Amounts have been restated to give retroactive effect to the December 1998
3-for-1 stock split.

(4) Basic and diluted earnings per share is computed by dividing net income
applicable to common stock by the weighted average number of common shares
outstanding during the period. Diluted earnings per share incorporate the
dilutive effects of outstanding stock options.

(5) Dividends per share reflect dividends declared on UNBC's common stock
outstanding as of the declaration date. Amounts prior to the merger on April
1, 1996 are based on Union Bank only and do not include the dividend of $145
million paid to The Mitsubishi Bank, Limited in the first quarter of 1996 by
BanCal Tri-State Corporation and The Bank of California, N.A.

(6) Book value per share is computed by dividing the common equity at the end of
the period by the number of common shares outstanding at the end of the
period.

(7) Return on average assets is computed by dividing net income by the average
assets for the period. Net income for the nine months ended September 30,
1997 and 1998 has been annualized.

(8) Return on average common equity is computed by dividing net income
applicable to common stock by average common equity for the period. Net
income for the nine months ended September 30, 1997 and 1998 has been
annualized.

(9) 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 $(3.2) million, $2.9 million and $(1.3) million for the years
ended 1995 through 1997, respectively. For the nine months ended September
30, 1997 and 1998, foreclosed asset expense (income) was $(0.7) million in
each period.

(10) The net interest margin is computed by dividing net interest income
(taxable-equivalent) by average earning assets for the period. Net interest
income (taxable-equivalent) for the nine months ended September 30, 1997 and
1998 has been annualized.

(11) The Tier 1 risk-based capital ratio is computed by dividing Tier 1 capital
(common and preferred equity, less certain intangible assets) by risk
weighted period-end assets.

(12) The total risk-based capital ratio was computed by dividing total capital
(Tier 1 capital, subordinated debt, and a limited amount of the allowance
for credit losses) by risk-weighted period-end assets (excluding certain
intangible assets).

10
<PAGE>
RISK FACTORS

YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING RISKS AS WELL AS THE OTHER
INFORMATION CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS BEFORE
PURCHASING THE COMMON STOCK.

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 1990s, 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 financial institutions.
If California were to experience another recession, we expect 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. Last year's 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 non-performing assets and net charge-offs, which could adversely
affect our business.

FAILURE TO COMPLETE ANY OF THE TRANSACTIONS COULD RESULT IN FEWER BENEFITS TO US

Although UNBC and The Bank of Tokyo-Mitsubishi intend to complete all of the
Transactions during the first quarter of 1999, the Transactions may not occur.
This offering and the repurchases are dependent upon each other. Accordingly, if
either of the repurchases does not occur, then the parties to this offering are
not required to complete this offering. Even if the parties to this offering
decided to proceed with the offering, we would not recognize certain of the
anticipated benefits of the Transactions as a whole.

SHAREHOLDER VOTES ARE CONTROLLED BY THE BANK OF TOKYO-MITSUBISHI, LTD.

Upon completion of this offering and the repurchases, The Bank of
Tokyo-Mitsubishi will continue to own a majority of the outstanding shares of
our common stock. The Bank of Tokyo-Mitsubishi will continue to be able to elect
all of our directors and to control the vote on all matters, including
determinations such as:

- approval of mergers or other business combinations;

- sales of all or substantially all of UNBC's assets;

11
<PAGE>
- any matters submitted to a vote of UNBC's 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 the Chief Executive Officer of UNBC;

- 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 UNBC or
any other change in control of UNBC could have an adverse effect on the market
price for our common stock. A majority of UNBC's directors are not officers or
employees of UNBC or any of its affiliates, including The Bank of
Tokyo-Mitsubishi. However, because of The Bank of Tokyo-Mitsubishi's control
over the election of our directors, it could change the composition of our Board
of Directors so that it 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
its business or outlook, its 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 currently are on Moody's Investors Service,
Inc.'s credit watch with negative implications. Any future downgrading of its
credit rating could adversely affect our credit ratings. Therefore, as long as
The Bank of Tokyo-Mitsubishi maintains a majority interest in UNBC, 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,
it manages its global credit exposures and concentrations on an aggregate basis,
including UNBC. 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 UNBC 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 nonfinancial 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)

12
<PAGE>
that have substantial capital, technology and marketing resources. Such large
financial institutions may have greater access to capital at a lower cost than
UNBC, 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 that
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, we would be in the same position.

BANKING REGULATIONS OR CHANGES IN BANKING REGULATIONS COULD ADVERSELY AFFECT US

We are subject to significant federal and state regulation and supervision,
which is primarily for the benefit and protection of our customers and not for
the benefit of investors. In the past, our business has been materially affected
by these regulations. This trend is likely to continue in the future. Laws,
regulations or policies currently affecting us and our subsidiaries may change
at any time. Regulatory authorities may also change their interpretation of
these statutes and regulations. Therefore, our business may be adversely
affected by any future changes in laws, regulations, policies or
interpretations.

Additionally, our international activities may be subject to the laws and
regulations of the jurisdiction where business is being conducted. International
laws, regulations and policies affecting us and our subsidiaries may change at
any time and affect our business opportunities and competitiveness in these
jurisdictions. Due to The Bank of Tokyo-Mitsubishi's controlling ownership of
UNBC, 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 a 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, UNBC
may be required to commit financial and other resources to its subsidiary bank
in circumstances where it 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.

Many of our critical operations are not presently ready to operate normally
in the year 2000 and beyond, although preparations are underway to correct this.
We are preparing for the century change with an enterprise-wide year 2000
program. As part of the program, we have identified all of the major application
and processing systems and have 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

13
<PAGE>

UNBC 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 whom we do business will be year 2000 compliant 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 by
normal operating cash flow. We are staffing the 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 PRICE OF OUR COMMON STOCK

Although The Bank of Tokyo-Mitsubishi has announced its intention to
maintain its majority ownership in UNBC, it will be able to sell shares of our
common stock after the completion of this offering and the repurchase of our
common stock from them. The federal securities laws and the restrictions
discussed below will be the only restrictions on The Bank of Tokyo-Mitsubishi's
ability to sell. They have agreed not to sell any shares of our common stock,
except for the shares they are selling to us in the repurchase, for 90 days
after the date of this prospectus without the prior written consent of Morgan
Stanley & Co. Incorporated. By virtue of its current control of UNBC, The Bank
of Tokyo-Mitsubishi could sell large amounts of its 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 its
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 market prices. If The Bank of Tokyo-Mitsubishi
sells or transfers its shares of our common stock as a block, another person or
entity could become the controlling shareholder of UNBC.

14
<PAGE>

THE TRANSACTIONS

The Bank of Tokyo-Mitsubishi is offering to sell approximately $750 million
in shares of our common stock to the public. In connection with this offering,
we are seeking to repurchase shares of our common stock from two of our existing
shareholders. We expect to repurchase $250 million in shares of our common stock
from The Bank of Tokyo-Mitsubishi, concurrently with the closing of this
offering. We expect to repurchase the shares at the public offering price set
forth on the cover page of this prospectus, less the underwriting discounts and
commissions. In addition, we are currently negotiating with another foreign
institutional shareholder regarding the repurchase of approximately 2.1 million
shares of our common stock. Two other foreign institutional shareholders decided
not to participate in the repurchase. We intend to use the net proceeds of an
offering of trust preferred securities to finance both of the repurchases. The
trust preferred offering, the repurchases and this offering are referred to in
this prospectus as the "Transactions." We anticipate that this offering and the
trust preferred offering will close in the first quarter of 1999.

From UNBC's point of view the Transactions are principally designed to
improve our return on average common equity and earnings per share and to
increase our public float. In addition, the sale of common stock by The Bank of
Tokyo-Mitsubishi to the public will raise proceeds for, and enhance the capital
base of, The Bank of Tokyo-Mitsubishi.

The repurchase of the common stock from The Bank of Tokyo-Mitsubishi and the
issuance of the trust preferred securities would, on a pro forma basis:

- increase UNBC's return on average common equity from 16.87% to % at
September 30, 1998; and

USE OF PROCEEDS

The net proceeds to be received by The Bank of Tokyo-Mitsubishi from the
sale of common stock in the offering, after deducting estimated expenses of
$ and underwriting discounts and commissions, are estimated to be
approximately $ , assuming a public offering price of $ , which was
the last reported sale price of the common stock on the Nasdaq National Market
on , 1999.

From time to time, all net proceeds from the sale of the shares of our
common stock in this offering will go to The Bank of Tokyo-Mitsubishi.
Accordingly, we will not receive any of the proceeds from the sale of the shares
of our common stock.

15
<PAGE>

PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY

UNBC's common stock is quoted on the Nasdaq National Market under the symbol
"UNBC". The following table sets forth the high and low closing sale prices for
our common stock for the periods indicated, as reported by the Nasdaq National
Market, and the cash dividends declared on the common stock during such periods.

<TABLE>
<CAPTION>
COMMON STOCK CASH
PRICE(1) DIVIDENDS
-------------------- DECLARED PER
HIGH LOW SHARE(1)
--------- --------- -------------
<S> <C> <C> <C>
Year ended December 31, 1997
First Quarter................................................................. $ 21.00 $ 17.63 $ 0.117
Second Quarter................................................................ 25.96 16.92 0.117
Third Quarter................................................................. 29.50 23.92 0.140
Fourth Quarter................................................................ 35.83 27.83 0.140
Year ended December 31, 1998
First Quarter................................................................. 35.67 27.83 0.140
Second Quarter................................................................ 38.33 29.83 0.140
Third Quarter................................................................. 34.33 23.88 0.140
Fourth Quarter................................................................ 35.25 24.67 0.190
Year ended December 31, 1999
First Quarter (through January , 1999)......................................
</TABLE>

- ---------

(1) The prices and dividends in this table have been adjusted to reflect the
3-for-1 stock split.

A recent reported last sale price for UNBC's common stock as reported on the
Nasdaq National Market is set forth on the cover page of this prospectus. On
January , 1999, there were approximately holders of record of our common
stock.

On November 18, 1998, our Board of Directors approved a 36% increase in our
quarterly common stock dividend for the fourth quarter of 1998 from $0.14 per
share to $0.19 per share. Future dividends will depend upon our earnings,
financial condition, capital requirements and other factors as our Board of
Directors may deem relevant.

16
<PAGE>
CAPITALIZATION

The following table presents the short-term debt and total capitalization of
UNBC on a consolidated basis at September 30, 1998. The "As Adjusted for The
Transactions" column presents our capitalization at September 30, 1998, after
giving effect to this offering, the offering of the common stock by The Bank of
Tokyo-Mitsubishi and the repurchase of shares of our common stock from The Bank
of Tokyo-Mitsubishi and a foreign institutional shareholder.

<TABLE>
<CAPTION>
SEPTEMBER 30, 1998
-------------------------------
AS ADJUSTED
FOR
ACTUAL THE TRANSACTIONS
------------- ----------------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
Short-term debt:
Federal funds purchased and securities sold under repurchase agreements........ $ 1,574,163 $
Commercial paper............................................................... 1,417,077
Other borrowed funds........................................................... 339,340
------------- ----------------
Total short-term debt...................................................... $ 3,330,580 $
------------- ----------------
------------- ----------------

Long-term debt:
UNBC-obligated mandatorily redeemable preferred securities of subsidiary
grantor trust whose sole assets are junior subordinated debentures of
UNBC(1)....................................................................... $ -- $
Subordinated capital notes..................................................... 298,000
------------- ----------------
Total long-term debt....................................................... 298,000
------------- ----------------

Shareholders' equity:
Preferred stock, 5,000,000 shares authorized, none outstanding................. -- --

Common stock, 300,000,000 shares authorized, 175,208,037 shares
outstanding(2)................................................................ 292,013
Additional paid-in capital..................................................... 1,430,539
Retained earnings.............................................................. 1,233,068
Accumulated other comprehensive income......................................... 29,330
------------- ----------------
Total shareholders' equity................................................. 2,984,950
------------- ----------------
Total capitalization..................................................... $ 3,282,950 $
------------- ----------------
------------- ----------------

Tier 1 risk-based capital ratio.................................................. 9.53%
Total risk-based capital ratio................................................... 11.51
Return on average common equity ratio............................................ 16.87
</TABLE>

- ---------

(1) The sole asset of the subsidiary trust is the $ aggregate principal
amount of the % Junior Subordinated Debentures due of UNBC.

(2) On November 18, 1998, our Board of Directors approved a 3-for-1 common stock
split and a corresponding increase in the number of authorized shares of our
common stock to 300,000,000, which became effective on December 7, 1998.

17
<PAGE>

SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA

The selected financial and other data as of December 31, 1996 and 1997 and
for the years ended December 31, 1995, 1996 and 1997 are derived from our
audited consolidated financial statements included in this prospectus. The
selected financial and other data for the year ending December 31, 1994 and as
of December 31, 1995 are derived from our audited consolidated financial
statements that are not included in this prospectus. The selected financial and
other data as of December 31, 1993 and 1994 and for the year ended December 31,
1993 are derived from the combined historical financial information of Union
Bank and BanCal Tri-State Corporation and its banking subsidiary, The Bank of
California, N.A. Such combined historical information was, in turn, derived from
the separate audited consolidated financial statements of Union Bank and BanCal
Tri-State for those periods that are not included in this prospectus. The
selected financial and other data as of September 30, 1997 and 1998 and for the
nine-month periods ended September 30, 1997 and 1998 are derived from our
unaudited consolidated financial statements included in this prospectus, which,
in the opinion of our management, include all adjustments necessary for a fair
presentation of our financial position at such date and the results of
operations for such interim period. The results for the nine-month period ended
September 30, 1998 are not necessarily indicative of the results to be expected
of the full fiscal year. We have restated all historical financial information
as if the combination of Union Bank with BanCal Tri-State Corporation and its
banking subsidiary, The Bank of California, N.A., which occurred on April 1,
1996, had been in effect for all periods presented. You should read the
following data with the more detailed information contained in "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
our consolidated financial statements and the notes to the consolidated
financial statements, each included in this prospectus.

18
<PAGE>

<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER
YEAR ENDED DECEMBER 31, 30
------------------------------------------------------------------ -----------
1993 1994 1995 1996 1997 1997
-------------- ----------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS:
Net interest income(1)............... $ 986,411 $ 1,007,789 $ 1,152,777 $ 1,175,302 $ 1,237,010 $ 917,408
Provision for credit losses.......... 151,000 73,000 53,250 40,000 -- --
Noninterest income................... 405,965 359,831 395,319 418,676 463,001 342,627
Noninterest expense(2)............... 1,055,020 1,036,349 978,101 1,134,904 1,044,665 762,208
-------------- ----------- ----------- ----------- ----------- -----------
Income before income taxes and
cumulative effect of accounting
change(1)............................ 186,356 258,271 516,745 419,074 655,346 497,827
Taxable-equivalent adjustment........ 14,734 12,566 10,444 6,724 5,328 4,107
Income tax expense................... 63,966 120,356 193,359 162,892 238,722 174,869
-------------- ----------- ----------- ----------- ----------- -----------
Income before cumulative effect of
accounting change 107,656 125,349 312,942 249,458 411,296 318,851
Cumulative effect of accounting
change(3) 192,793 -- -- -- -- --
-------------- ----------- ----------- ----------- ----------- -----------
Net income........................... $ 300,449 $ 125,349 $ 312,942 $ 249,458 $ 411,296 $ 318,851
-------------- ----------- ----------- ----------- ----------- -----------
-------------- ----------- ----------- ----------- ----------- -----------
NET INCOME APPLICABLE TO COMMON STOCK.. $ 289,174 $ 114,045 $ 301,637 $ 238,152 $ 403,696 $ 311,251
-------------- ----------- ----------- ----------- ----------- -----------
-------------- ----------- ----------- ----------- ----------- -----------
PER COMMON SHARE:(4)
Net income -- basic(5)............... $ 1.73 $ 0.67 $ 1.74 $ 1.37 $ 2.31 $ 1.78
Net income -- diluted(5)............. 1.73 0.67 1.73 1.36 2.30 1.78
Pro forma earnings -- basic,
excluding after tax merger and
integration expense and cumulative
effect of accounting change(2)...... 0.58 0.67 1.74 1.78 2.33 1.80
Pro forma earnings -- diluted,
excluding after tax merger and
integration expense and cumulative
effect of accounting change(2)...... 0.58 0.67 1.73 1.77 2.32 1.80
Dividends(6)......................... 0.47 0.47 0.47 0.47 0.51 0.37
Book value (end of period)(7)........ 11.64 11.88 13.49 13.53 15.32 14.96
Common shares outstanding (end of
period)............................. 169,989,829 172,043,617 174,180,493 174,457,603 174,917,674 174,848,461
Weighted average common shares
outstanding -- basic................ 166,857,166 171,089,311 173,806,300 174,391,048 174,683,338 174,614,764
Weighted average common shares
outstanding -- diluted.............. 166,917,256 171,149,731 174,099,241 174,783,565 175,189,078 175,071,292
BALANCE SHEET DATA (END OF PERIOD):
Total assets......................... $ 24,005,530 $24,569,042 $27,546,859 $29,234,059 $30,585,265 $30,982,479
Total loans.......................... 17,759,181 18,065,650 20,431,683 21,049,787 22,741,408 22,297,724
Nonperforming assets................. 1,193,450 421,227 246,871 156,784 129,809 132,974
Total deposits....................... 16,978,347 17,409,737 19,655,043 21,532,960 23,296,374 22,974,188
Subordinated capital notes........... 725,859 655,859 501,369 382,000 348,000 382,000
Preferred Stock...................... 135,000 135,000 135,000 135,000 -- --
Common equity........................ 1,978,455 2,044,202 2,349,092 2,359,933 2,679,299 2,615,327
BALANCE SHEET DATA (PERIOD AVERAGE):
Total assets......................... $ 23,926,924 $23,692,560 $25,564,843 $27,899,734 $29,692,992 $29,451,728
Total loans.......................... 18,219,288 17,616,002 18,974,540 20,727,577 21,855,911 21,693,329
Earning assets....................... 21,176,396 21,046,600 22,849,129 24,717,326 26,291,822 26,066,274
Total deposits....................... 17,160,129 16,826,443 17,969,972 20,101,544 22,067,155 21,823,524
Common equity........................ 1,917,530 1,980,577 2,197,476 2,325,437 2,514,610 2,469,521
OTHER DATA:
Return on average assets(8).......... 1.26% 0.53% 1.22% 0.89% 1.39% 1.45%
Pro forma return on average assets,
excluding after-tax merger and
integration expense and cumulative
effect of accounting change(2)(8)... 0.45 0.53 1.22 1.15 1.40 1.46
Return on average common equity(9)... 15.08 5.76 13.73 10.24 16.05 16.85
Pro forma return on average common
equity, excluding after-tax merger
and integration expense and
cumulative effect of accounting
change(2)(9)........................ 5.03 5.76 13.73 13.33 16.20 17.04
Efficiency ratio(10)................. 66.92 70.39 63.39 71.02 61.53 60.55
Pro forma efficiency ratio, excluding
merger and integration
expense(2)(10)...................... 66.92 70.39 63.39 63.65 61.17 60.07
Net interest margin(11).............. 4.66 4.79 5.05 4.75 4.70 4.70

1998
-----------

<S> <C>
RESULTS OF OPERATIONS:
Net interest income(1)............... $ 983,056
Provision for credit losses.......... 45,000
Noninterest income................... 399,949
Noninterest expense(2)............... 836,178
-----------
Income before income taxes and
cumulative effect of accounting
change(1)............................ 501,827
Taxable-equivalent adjustment........ 3,417
Income tax expense................... 146,045
-----------
Income before cumulative effect of
accounting change 352,365
Cumulative effect of accounting
change(3) --
-----------
Net income........................... $ 352,365
-----------
-----------
NET INCOME APPLICABLE TO COMMON STOCK.. $ 352,365
-----------
-----------
PER COMMON SHARE:(4)
Net income -- basic(5)............... $ 2.01
Net income -- diluted(5)............. 2.01
Pro forma earnings -- basic,
excluding after tax merger and
integration expense and cumulative
effect of accounting change(2)...... 2.01
Pro forma earnings -- diluted,
excluding after tax merger and
integration expense and cumulative
effect of accounting change(2)...... 2.01
Dividends(6)......................... 0.42
Book value (end of period)(7)........ 17.04
Common shares outstanding (end of
period)............................. 175,208,037
Weighted average common shares
outstanding -- basic................ 175,090,890
Weighted average common shares
outstanding -- diluted.............. 175,728,849
BALANCE SHEET DATA (END OF PERIOD):
Total assets......................... $31,407,318
Total loans.......................... 23,497,845
Nonperforming assets................. 81,399
Total deposits....................... 23,663,129
Subordinated capital notes........... 298,000
Preferred Stock...................... --
Common equity........................ 2,984,950
BALANCE SHEET DATA (PERIOD AVERAGE):
Total assets......................... $30,130,893
Total loans.......................... 22,916,992
Earning assets....................... 27,002,879
Total deposits....................... 22,386,160
Common equity........................ 2,792,727
OTHER DATA:
Return on average assets(8).......... 1.56%
Pro forma return on average assets,
excluding after-tax merger and
integration expense and cumulative
effect of accounting change(2)(8)... 1.56
Return on average common equity(9)... 16.87
Pro forma return on average common
equity, excluding after-tax merger
and integration expense and
cumulative effect of accounting
change(2)(9)........................ 16.87
Efficiency ratio(10)................. 60.51
Pro forma efficiency ratio, excluding
merger and integration
expense(2)(10)...................... 60.51
Net interest margin(11).............. 4.86
</TABLE>

19
<PAGE>

<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Dividend payout ratio(12)............ 27.17 70.15 27.01 34.31 22.08 20.79
Tier 1 risk-based capital
ratio(13)............................ 8.88 9.24 9.35 9.08 8.96 8.92
Total risk-based capital ratio(14)... 12.07 12.03 11.70 11.17 11.05 11.02
Leverage ratio(15)................... 8.26 8.67 8.70 8.41 8.53 8.39
Allowances for credit losses to total
loans(16)........................... 3.90 3.12 2.72 2.49 1.99 2.15
Allowance for credit losses to
nonaccrual loans(17)................ 84.82 161.08 266.56 408.48 413.12 435.92
Net loans charged off to average
total loans(18)..................... 1.37 1.15 0.32 0.34 0.33 0.28
Nonperforming assets to total loans
and foreclosed assets(19)........... 6.58 2.32 1.21 0.74 0.57 0.60
Nonperforming assets to total
assets(20)........................... 4.97 1.71 0.90 0.54 0.42 0.43

<CAPTION>
Dividend payout ratio(12)............ 20.90
Tier 1 risk-based capital
ratio(13)............................ 9.53
Total risk-based capital ratio(14)... 11.51
Leverage ratio(15)................... 9.37
Allowances for credit losses to total
loans(16)........................... 2.02
Allowance for credit losses to
nonaccrual loans(17)................ 697.19
Net loans charged off to average
total loans(18)..................... 0.12
Nonperforming assets to total loans
and foreclosed assets(19)........... 0.35
Nonperforming assets to total
assets(20)........................... 0.26
</TABLE>

- ---------

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

(2) Merger and integration expense was $117 million and $6 million for 1996 and
1997, respectively, and after-tax merger and integration expense was $72
million and $4 million for 1996 and 1997, respectively. Merger and
integration expense was $6 million ($4 million after-tax) for the nine
months ended September 30, 1997. See page 34 "Year Ended December 31, 1997
compared to Year Ended December 31, 1996" for a description of merger
accounting and pro forma presentations.

(3) 1993 net income includes the cumulative effect of the adoption of Statement
of Financial Accounting Standards No. 109, "Accounting for Income Taxes."

(4) Amounts have been restated to give retroactive effect to the December 1998
3-for-1 stock split.

(5) Basic and diluted earnings per share is computed by dividing net income
applicable to common stock by the weighted average number of common shares
outstanding during the period. Diluted earnings per share incorporate the
dilutive effects of outstanding stock options.

(6) Dividends per share reflect dividends declared on UNBC's common stock
outstanding as of the declaration date. Amounts prior to the merger on April
1, 1996 are based on Union Bank only and do not include the dividend of $145
million paid to The Mitsubishi Bank, Limited in the first quarter of 1996 by
BanCal Tri-State Corporation and The Bank of California, N.A.

(7) Book value per share is computed by dividing the common equity at the end of
the period by the number of common shares outstanding at the end of the
period.

(8) Return on average assets is computed by dividing net income by the average
assets for the period. Net income for the nine months ended September 30,
1997 and 1998 has been annualized.

(9) Return on average common equity is computed by dividing net income
applicable to common stock by average common equity for the period. Net
income for the nine months ended September 30, 1997 and 1998 has been
annualized.

(10) 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 $123.3 million, $73.7 million, $(3.2) million, $2.9 million and
$(1.3) million for the years ended 1993 through 1997, respectively. For the
nine months ended September 30, 1997 and 1998, foreclosed asset expense
(income) was $(0.7) million in each period.

(11) The net interest margin is computed by dividing net interest income
(taxable-equivalent) by average earning assets for the period. Net interest
income (taxable-equivalent) for the nine months ended September 30, 1997 and
1998 has been annualized.

(12) The dividend payout ratio is computed by dividing dividends applicable to
common shareholders for the period by net income available to common
shareholders for the period.

(13) The Tier 1 risk-based capital ratio is computed by dividing Tier 1 capital
(common and preferred equity, less certain intangible assets) by risk
weighted period-end assets.

20
<PAGE>

(14) The total risk-based capital ratio was computed by dividing total capital
(Tier 1 capital, subordinated debt, and a limited amount of the allowance
for credit losses) by risk weighted period-end assets (excluding certain
intangible assets).

(15) The leverage ratio is computed by dividing Tier 1 capital by quarterly
average assets (excluding certain intangible assets).

(16) The allowance for credit losses to total loans is computed by dividing the
allowance for credit losses at the end of the period by total loans at the
end of the period.

(17) The allowance for credit losses to nonaccrual loans is computed by dividing
the allowance for credit losses at the end of the period by nonaccrual loans
at the end of the period.

(18) Net loans charged off to average total loans is computed by dividing the
net loans charged off for the period by average total loans for the period.
Net loans charged off for the nine months ended September 30, 1997 and 1998
has been annualized.

(19) Nonperforming assets to total loans and foreclosed assets is computed by
dividing nonperforming assets at the end of the period by total loans and
foreclosed assets at the end of the period.

(20) Nonperforming assets to total assets is computed by dividing nonperforming
assets at the end of the period by total assets at the end of the period.

21
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

YOU SHOULD READ THE FOLLOWING DISCUSSION AND ANALYSIS OF OUR FINANCIAL
CONDITION AND THE RESULTS OF OUR OPERATIONS TOGETHER WITH OUR FINANCIAL
STATEMENTS AND THE NOTES TO THOSE FINANCIAL STATEMENTS INCLUDED IN THIS
PROSPECTUS. CERTAIN AMOUNTS FOR PRIOR PERIODS HAVE BEEN RECLASSIFIED TO CONFORM
TO CURRENT FINANCIAL STATEMENT PRESENTATION.

INTRODUCTION

UnionBanCal Corporation, or "UNBC," is a California-based commercial bank
holding company with consolidated assets of $31.4 billion at September 30, 1998.
Based on total assets, UNBC, together with its consolidated subsidiaries, was
the third largest bank holding company in California and among the 30 largest in
the United States. At September 30, 1998, we operated 244 full-service branches
in California, six banking offices in Oregon and Washington, and 18 overseas
facilities.

The combination of Union Bank with BanCal Tri-State Corporation and its
banking subsidiary, The Bank of California, N.A., was completed on April 1, 1996
(the "Merger"), resulting in UnionBanCal Corporation and its banking subsidiary,
Union Bank of California, N.A. The combination was accounted for as a
reorganization of entities under common control (similar to a pooling of
interests). Accordingly, all historical financial information has been restated
as if the combination had been in effect for all periods presented.

On August 10, 1998, UNBC and its consolidated subsidiaries exchanged 10.2
million shares of its common stock for the 7.2 million shares of the common
stock of Union Bank of California, N.A. owned directly by The Bank of
Tokyo-Mitsubishi, Ltd. This share exchange provided UNBC with a 100 percent
ownership interest in Union Bank of California, N.A. In addition, it increased
The Bank of Tokyo-Mitsubishi's ownership percentage of UNBC to 82 percent from
81 percent.

The exchange of shares was accounted for as a reorganization of entities
under common control. Accordingly, amounts previously reported as "Parent Direct
Interest in Bank Subsidiary," including the proportionate share of net income,
dividends, and other comprehensive income, have been reclassified to combine
them with the corresponding amounts attributable to our common shareholders for
all periods presented.

On November 18, 1998, our Board of Directors approved the declaration of a
3-for-1 stock split effective for shareholders of record on December 7, 1998.
Accordingly, all historical financial information has been restated as if the
stock split had been in effect for all periods presented.

NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1997

SUMMARY

Net income for the first nine months of 1998 was $352.4 million, compared to
$318.9 million for the first nine months of 1997. Net income applicable to
common stock was $352.4 million, or $2.01 per diluted common share, for the
first nine months of 1998, compared with $311.3 million, or $1.78 per diluted
common share, for the first nine months of 1997. Excluding the tax benefit of
$52.4 million, net of federal tax, recorded in the first nine months of 1998,
net income applicable to common stock was $299.9 million, or $1.71 per diluted
common share. Excluding the $24.7 million tax refund for the first nine months
of 1997, net income applicable to common stock was $286.6 million, or $1.64 per
diluted common share.

Other highlights of the first nine months of 1998 include:

- Net interest income, on a taxable-equivalent basis, was $983.1 million for
the first nine months of 1998, a $65.6 million, or 7 percent, increase
from the comparable period one year earlier. The increase in net interest
income was primarily due to a 16 basis point increase in the net interest

22
<PAGE>

margin and a $936.6 million, or 4 percent, increase in average earning
assets, resulting primarily from a $1.2 billion, or 6 percent, increase in
average loans, largely funded by a $1.1 billion, or 15 percent, increase
in average noninterest bearing deposits.

- A provision for credit losses of $45.0 million was recorded for the first
nine months of 1998, compared with no provision in 1997. Net charge-offs
for the nine months ended September 30, 1998 were $21.0 million. This
resulted from management's regular quarterly assessments of overall credit
quality, loan growth and economic conditions in relation to the level of
the allowance for credit losses.

- Noninterest income was $399.9 million, an increase of $57.3 million, or 17
percent, over the first nine months of 1997. This increase includes the
$17.1 million gain from the sale of the credit card portfolio in the
second quarter of 1998. Service charges on deposit accounts grew $16.6
million, or 20 percent, reflecting growth in average deposits; trust and
investment management fees increased $12.1 million, or 16 percent, on
growth in assets under management; international commissions and fees
increased $4.9 million; and securities gains, net increased $3.5 million,
primarily from the sale of securities available for sale.

- Noninterest expense was $836.2 million for the first nine months of 1998,
compared with $762.2 million for the first nine months of 1997, an
increase of $74.0 million, or 10 percent. Personnel-related expense
increased $40.6 million, or 10 percent, primarily due to increases in
salaries, a portion of which relates to increases in staffing,
performance-based incentive compensation as well as a decline in the fair
value of assets underlying postretirement benefit plans, caused by the
downturn in the financial markets. Professional fees increased $6.1
million, or 32 percent, primarily due to additional costs related to the
year 2000 effort. Other noninterest expense increased $24.4 million, or 22
percent, primarily attributable to additional expenses incurred to support
higher deposit volumes.

- The effective tax rate for the first nine months of 1998 was 29 percent,
compared with 35 percent for the first nine months of 1997. The lower
effective tax rate for the first nine months of 1998 was the result of a
total reduction of $52.4 million, net of federal tax, in state income tax
liabilities. Excluding this state tax reduction, the effective tax rate
for the first nine months of 1998 was 40 percent. Excluding the $24.7
million after-tax refund from the State of California Franchise Tax Board,
the effective tax rate for the first nine months of 1997 was 40 percent.

- The return on average assets for the first nine months of 1998 increased
to 1.56 percent, compared to 1.45 percent for the first nine months of
1997. The return on average common equity increased slightly to 16.87
percent for the first nine months of 1998, compared to 16.85 percent for
the first nine months of 1997.

- Total loans at September 30, 1998 increased $756.4 million, or 3 percent,
over December 31, 1997, primarily due to growth in the commercial,
financial and industrial portfolio.

- Our Tier 1 and total risk-based capital ratios were 9.53 percent and 11.51
percent at September 30, 1998, compared with 8.96 percent and 11.05
percent at December 31, 1997. Our September 30, 1998 leverage ratio was
9.37 percent, compared with 8.53 percent at December 31, 1997.

23
<PAGE>

NET INTEREST INCOME

<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
------------------------------------------------------------------------------
SEPTEMBER 30, 1997 SEPTEMBER 30, 1998
-------------------------------------- --------------------------------------
INTEREST AVERAGE INTEREST AVERAGE
AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/
BALANCE EXPENSE(1) RATE(1) BALANCE EXPENSE(1) RATE(1)
------------ ----------- ----------- ------------ ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Loans:(2)
Domestic............................ $ 20,218,298 $ 1,245,658 8.23% $ 21,569,891 $ 1,297,483 8.04%
Foreign(3).......................... 1,475,031 66,578 6.03 1,347,101 68,380 6.79
Securities -- taxable(4).............. 2,476,970 116,715 6.29 2,949,151 139,720 6.32
Securities -- tax-exempt(4)........... 126,634 9,567 10.07 106,783 8,348 10.42
Interest bearing deposits in banks.... 996,710 43,404 5.82 279,938 14,187 6.78
Federal funds sold and securities
purchased under resale agreements.... 450,603 18,727 5.56 281,565 11,784 5.60
Trading account assets................ 322,028 13,389 5.56 468,450 20,137 5.75
------------ ----------- ------------ -----------
Total earning assets.............. 26,066,274 1,514,038 7.76 27,002,879 1,560,039 7.72
------------ ----------- ------------ -----------
Allowance for credit losses........... (514,043) (471,384)
Cash and due from banks............... 2,005,177 1,903,155
Premises and equipment, net........... 413,024 402,197
Other assets.......................... 1,481,296 1,294,046
------------ ------------
Total assets...................... $ 29,451,728 $ 30,130,893
------------ ------------
------------ ------------
LIABILITIES:
Domestic deposits:
Interest bearing.................... $ 5,274,137 $ 111,457 2.83 $ 5,447,712 $ 115,626 2.84
Savings and consumer time........... 2,956,493 83,695 3.78 3,176,898 90,713 3.82
Large time............................ 4,691,506 191,547 5.46 3,606,182 146,945 5.45
Foreign deposits(3)................... 1,560,149 55,156 4.73 1,723,282 66,454 5.16
------------ ----------- ------------ -----------
Total interest bearing deposits... 14,482,285 441,855 4.08 13,954,074 419,738 4.02
------------ ----------- ------------ -----------
Federal funds purchased and securities
sold under repurchase agreements..... 1,106,180 44,053 5.32 1,481,809 59,667 5.38
Subordinated capital notes............ 353,429 17,180 6.50 335,179 15,883 6.34
Commercial paper...................... 1,631,056 66,543 5.45 1,641,425 67,720 5.52
Other borrowed funds.................. 673,359 26,999 5.36 323,082 13,975 5.78
------------ ----------- ------------ -----------
Total borrowed funds.............. 3,764,024 154,775 5.50 3,781,495 157,245 5.56
------------ ----------- ------------ -----------
Total interest bearing
liabilities...................... 18,246,309 596,630 4.37 17,735,569 576,983 4.35
----------- -----------
Noninterest bearing deposits.......... 7,341,239 8,432,086
Other liabilities..................... 1,274,000 1,170,511
------------ ------------
Total liabilities................. 26,861,548 27,338,166
------------ ------------
------------ ------------
SHAREHOLDERS' EQUITY
Preferred stock....................... 120,659 --
Common equity......................... 2,469,521 2,792,727
------------ ------------
Total shareholders' equity........ 2,590,180 2,792,727
------------ ------------
Total liabilities and
shareholders' equity............. $ 29,451,728 $ 30,130,893
------------ ------------
------------ ------------
Net interest income/margin (taxable-
equivalent basis).................... 917,408 4.70% 983,056 4.86%
Less: taxable-equivalent adjustment... 4,107 3,417
----------- -----------
Net interest income............... $ 913,301 $ 979,639
----------- -----------
----------- -----------
</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.

24
<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.

For the first nine months of 1998, net interest income, on a taxable
equivalent basis, was $983.1 million, compared with $917.4 million in the
comparable period one year earlier. The increase of $65.6 million, or 7 percent,
was primarily attributable to a $936.6 million, or 4 percent, increase in
average earning assets largely funded by a $1.1 billion, or 15 percent, increase
in average noninterest bearing deposits. In addition, the net interest margin
increased 16 basis points to 4.86 percent. Although the differential between the
decrease in the yield on average earning assets and the decrease in the rate of
average interest bearing liabilities was a negative 2 basis points, the negative
impact on the net interest margin of these two factors was more than offset by
the increase in the proportion of funding provided by average noninterest
bearing deposits.

Average earning assets were $26.1 billion and $27.0 billion, for the nine
months ended September 30, 1997 and 1998, respectively. Most of this increase
was attributable to growth in average loans, which increased $1.2 billion, or 6
percent, and average securities, which were $452.3 million, or 17 percent,
higher. This increase was partially offset by a $716.8 million decrease in
average interest bearing deposits in banks. The growth in average loans
outstanding was attributable to the increase in average commercial, financial
and industrial loans of $1.5 billion, partly offset by the decrease in average
consumer loans of $337.4 million, which was primarily related to the sale of the
credit card portfolio. See "Loans" on page 28 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.

NONINTEREST INCOME

<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
---------------------------------------
SEPTEMBER 30, SEPTEMBER 30, PERCENT
1997 1998 CHANGE
------------- ------------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Service charges on deposit accounts....................................... $ 84,699 $ 101,288 19.59%
Trust and investment management fees...................................... 76,737 88,806 15.73
International commissions and fees........................................ 49,593 54,516 9.93
Merchant transaction processing fees...................................... 42,653 42,988 0.79
Merchant banking fees..................................................... 19,899 24,083 21.03
Brokerage commissions and fees............................................ 11,529 14,188 23.06
Foreign exchange trading gains, net....................................... 11,249 14,159 25.87
Securities gains, net..................................................... 2,098 5,579 165.92
Gain on sale of credit card portfolio..................................... -- 17,056 nm
Other..................................................................... 44,170 37,286 (15.59)
------------- -------------
Total noninterest income................................................ $ 342,627 $ 399,949 16.73%
------------- -------------
------------- -------------
</TABLE>

- ---------

nm = not meaningful

For the first nine months of 1997, noninterest income was $342.6 million,
compared with $399.9 million for the same period in 1998. This increase of $57.3
million, or 17 percent, includes the second quarter 1998 gain of $17.1 million
from the sale of the credit card portfolio, a $16.6 million increase in service
charges on deposit accounts, reflecting a 3 percent increase in average deposits
coupled with the expansion of several products and services, a $12.1 million
increase in trust and investment management fees, largely due to growth of
assets under management, a $4.9 million increase in international commissions
and fees, a $3.5 million increase in securities gains, net, and a $6.8 million
increase related to brokerage commissions and merchant banking fees. In
contrast, other noninterest income decreased $6.9 million, or 16 percent, due to
a

25
<PAGE>

$7.7 million nonrecurring gain recognized in 1997 related to a real estate joint
venture and the $2.9 million trading loss in 1998, partially offset by the $4.8
million gain recognized in the second quarter of 1998 from the sale of
commercial real estate loans.

NONINTEREST EXPENSE

<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
-----------------------------------------
SEPTEMBER 30, SEPTEMBER 30, PERCENT
1997 1998 CHANGE
------------- ------------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Salaries and other compensation........................................... $ 337,401 $ 369,715 9.58%
Employee benefits......................................................... 81,569 89,877 10.19
------------- -------------
Personnel-related expense............................................... 418,970 459,592 9.70
Net occupancy............................................................. 64,133 67,294 4.93
Equipment................................................................. 41,206 41,842 1.54
Merchant transaction processing........................................... 31,269 33,008 5.56
Communications............................................................ 31,135 31,515 1.22
Professional services..................................................... 19,062 25,186 32.13
Advertising and public relations.......................................... 20,759 22,419 8.00
Data processing........................................................... 19,115 20,462 7.05
Printing and office supplies.............................................. 17,646 19,112 8.31
Software.................................................................. 12,358 14,536 17.62
Travel.................................................................... 11,321 13,041 15.19
Intangible asset amortization............................................. 10,014 10,069 0.55
Armored car............................................................... 9,160 8,989 (1.87)
Foreclosed asset expense (income)......................................... (696) (746) nm
Merger and integration expense............................................ 6,037 -- nm
Other..................................................................... 50,719 69,859 37.74
------------- -------------
Total noninterest expense............................................... $ 762,208 $ 836,178 9.70%
------------- -------------
------------- -------------
</TABLE>

- ---------

nm = not meaningful

Noninterest expense was $762.2 million for the first nine months of 1997,
compared with $836.2 million for the first nine months of 1998, an increase of
$74.0 million, or 10 percent. Personnel-related expense increased $40.6 million,
or 10 percent, primarily due to a $16.7 million increase in performance-based
incentive compensation, a 4 percent increase in the workforce, to support
increased revenue growth, and a $4.8 million increase in benefits expense
arising from a loss in the fair value of assets underlying postretirement
benefit plans. Professional services increased $6.1 million, or 32 percent, due
to additional costs related to the year 2000 effort. In addition, other
noninterest expense increased $19.1 million, primarily attributable to
additional expenses incurred to support higher deposit volumes.

We continue to make preparations for the year 2000. (For a detailed
discussion of our year 2000 program see page 60). The total cost of our year
2000 project is estimated to be approximately $50 million, of which $10 million
relates to capital expenditures which we will capitalize and depreciate over
their useful lives. The remaining $40 million will be included in noninterest
expense in the period incurred. As of September 30, 1998, we had spent $19
million on our year 2000 project, $2 million and $17 million in 1997 and 1998,
respectively. Of the $19 million spent as of September 30, 1998, $6 million
relates to capital expenditures, $1 million and $5 million in 1997 and 1998,
respectively. Of the estimated $31 million remaining to be spent, an estimated
$4 million is for capital expenditures. The cost of the year 2000 project is
being funded by normal operating cash and staffed by external resources as well
as internal staff re-deployed from less time-sensitive assignments. Estimated
total cost could change further as analysis continues.

26
<PAGE>

The combination of Union Bank and BanCal Tri-State Corporation on April 1,
1996 resulted in the recording of a total of $123.5 million in merger and
integration expense. The remaining liability balance at September 30, 1998 was
$10.6 million. The balance includes amounts primarily for lease payments that
are continuing over the expected term of the leases. Merger and integration
expense of $6.0 million was recorded for the first nine months of 1997, compared
with none for the first nine months of 1998.

INCOME TAX EXPENSE

The effective tax rate for the nine months ended September 30, 1997 was
reduced as a result of an after-tax refund from the State of California
Franchise Tax Board of $24.7 million in settlement of litigation, administration
and audit disputes covering the years 1975-1987. The effective tax rate for the
nine months ended September 30, 1997 was 35 percent. The effective tax rate for
the nine months ended September 30, 1998 was 29 percent. The decrease in the
effective tax rate for 1998 was the result of a reduction of California
franchise taxes for 1997 and 1998 from our ability to file California franchise
tax returns on a worldwide unitary basis, which incorporates the financial
results of The Bank of Tokyo-Mitsubishi and its worldwide affiliates. The total
reduction of $52.4 million, net of federal tax, was reflected in the third
quarter of 1998. Of this amount, $29 million related to the reversal of
previously accrued 1997 state income tax liabilities and $23.4 million related
to a lower state tax provision in 1998. Excluding these reductions, the
effective tax rates for all periods would have been 40 percent.

At this time, we anticipate that we will continue to file our California
franchise tax return on the worldwide basis for 1999. Our anticipated 1999 tax
rate will be dependent on our proportionate share of The Bank of
Tokyo-Mitsubishi financial results for that year, and is expected to be within
the range of 35 to 40 percent.

27
<PAGE>

LOANS

The following table shows loans outstanding by loan type.

<TABLE>
<CAPTION>
PERCENT CHANGE TO
SEPTEMBER 30, 1998 FROM:
---------------------------
SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31,
1997 1997 1998 1997 1997
------------- ------------- ------------- ------------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Domestic:
Commercial, financial and
industrial......................... $ 10,405,299 $ 10,747,179 $ 12,151,210 16.78% 13.06%
Construction........................ 312,318 293,333 420,267 34.56 43.27
Mortgage:
Residential....................... 2,966,326 2,961,233 2,742,451 (7.55) (7.39)
Commercial........................ 2,851,838 2,951,807 2,980,371 4.51 0.97
------------- ------------- -------------
Total mortgage.................. 5,818,164 5,913,040 5,722,822 (1.64) (3.22)
Consumer:
Installment....................... 2,075,065 2,090,752 2,026,441 (2.34) (3.08)
Home equity....................... 1,027,147 992,916 844,256 (17.81) (14.97)
Credit card and other lines of
credit........................... 275,258 270,097 -- nm nm
------------- ------------- -------------
Total consumer.................. 3,377,470 3,353,765 2,870,697 (15.00) (14.40)
Lease financing..................... 863,745 874,860 1,013,772 17.37 15.88
------------- ------------- -------------
Total loans in domestic
offices........................ 20,776,996 21,182,177 22,178,768 6.75 4.70
Loans originated in foreign
branches............................ 1,520,728 1,559,231 1,319,077 (13.26) (15.40)
------------- ------------- -------------
Total loans..................... $ 22,297,724 $ 22,741,408 $ 23,497,845 5.38% 3.33%
------------- ------------- -------------
------------- ------------- -------------
</TABLE>

- ---------

nm = not meaningful

Our lending activities are predominantly domestic, with such loans and
leases comprising 94 percent of the portfolio at September 30, 1998. Total loans
at September 30, 1998 were $23.5 billion, an increase of $756.4 million, or 3
percent, from December 31, 1997. The increase was primarily attributable to
growth in the commercial, financial and industrial loan portfolio, which
increased $1.4 billion from December 31, 1997, partly offset by the consumer
loan portfolio, which decreased $483.1 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
year-end 1997 and September 30, 1998, the commercial, financial and industrial
loan portfolio was $10.7 billion, or 47 percent of total loans, and $12.2
billion, or 52 percent of total loans, respectively. The increase of $1.4
billion, or 13 percent, from year-end 1997 was primarily attributable to
continued growth in loans extended to large corporations.

The construction loan portfolio totaled $293.3 million, or 1 percent of
total loans, at December 31, 1997, compared with $420.3 million, or 2 percent of
total loans, at September 30, 1998. This growth is primarily attributable to the
favorable California real estate market coupled with the continuing improvement
in the West Coast economy.

Mortgage loans were $5.9 billion, or 26 percent of total loans, at December
31, 1997, compared with $5.7 billion, or 24 percent of total loans, at September
30, 1998. The mortgage loan portfolio consists of loans

28
<PAGE>

on commercial and industrial projects and loans secured by one to four family
residential properties, primarily in California. Despite the sale of $123.0
million in commercial real estate mortgages during the second quarter of 1998,
commercial mortgage loans increased $28.6 million from December 31, 1997,
primarily attributable to the favorable California real estate market coupled
with the continuing improvement in the West Coast economy. Residential mortgage
loans decreased $218.8 million due to prepayments arising from the favorable
interest rate environment and to sales in the secondary market.

Consumer loans totaled $3.4 billion, or 15 percent of total loans, at
December 31, 1997, compared with $2.9 billion, or 12 percent of total loans, at
September 30, 1998. The decrease of $483.1 million was attributable to the sale
of the $253.0 million credit card loan portfolio in April 1998, and to a
reduction in home equity loans as customers refinanced to take advantage of
favorable long-term, fixed rate mortgages.

Lease financing totaled $874.9 million, or 4 percent of total loans, at
December 31, 1997, compared with $1 billion, or 4 percent of total loans, at
September 30, 1998.

Loans originated in foreign branches totaled $1.6 billion, or 7 percent of
total loans, at December 31, 1997 and $1.3 billion, or 6 percent of total loans,
at September 30, 1998.

CROSS-BORDER OUTSTANDINGS

Our cross-border outstandings reflect certain additional economic and
political risks that are not reflected in domestic outstandings. These risks
include those arising from exchange rate fluctuations and restrictions on the
transfer of funds. The following table sets forth our cross-border outstandings
as of September 30, 1997, December 31, 1997, and September 30, 1998 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. We do not have significant local currency outstandings to
the individual countries listed in the following table that are not hedged or
are not funded by local currency borrowings.

<TABLE>
<CAPTION>
PUBLIC CORPORATIONS
FINANCIAL SECTOR AND OTHER TOTAL
INSTITUTIONS ENTITIES BORROWERS OUTSTANDINGS
------------- ----------- --------------- -------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
September 30, 1997
Japan....................................................... $ 939 $ -- $ 403 $ 1,342
Korea....................................................... 691 36 293 1,020

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

September 30, 1998
Japan....................................................... 115 -- 469 584
Korea....................................................... 376 -- 139 515
</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 which began in the second half of 1997.
The impact of the Asian crisis appears to be spreading to other global markets.
Our exposure in all affected countries continues to be short-term in nature and
substantially related to the finance of trade. Although the extent of risk will
vary from country to country, and institution to institution, these short-term
exposures are characterized by management to be in the low to moderate range.

29
<PAGE>

Cross-border exposures, other than those referred to in the table above,
include total outstandings as of September 30, 1998 of $133 million in Brazil.

Since Japan is the second largest trading nation in the world, its
political, economic and financial markets situation is being closely monitored.
The situation in Japan is worsening and the depressed conditions in that country
are impacting other areas which are highly dependent on trade relations with it.
There is considerable concern that the United States is not immune to the
effects of the depressed economic conditions in Japan and to the Asian crisis.
Management is monitoring our portfolio accordingly.

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

ALLOWANCE FOR CREDIT LOSSES

The allowance for credit losses is maintained at a level considered
appropriate by management and is based on an ongoing assessment of risk in the
credit and lease portfolio, including commitments to provide financing. The
allowance is increased by the provision for credit losses, which is charged
against current period operating results, and is decreased by the amount of net
loans charged off during the period. In evaluating the adequacy of the allowance
for credit losses, management incorporates such factors as collateral value,
portfolio composition and concentration, and trends in local, national, and
international economic conditions and the related impact on the financial
strength of our borrowers. While the allowance is segmented by broad portfolio
categories to analyze its adequacy, the allowance is general in nature and is
available for the portfolio in its entirety. Although management believes that
the allowance for credit losses is adequate as of September 30, 1998, future
provisions will be subject to continuing evaluation of risk in the credit and
lease portfolio.

30
<PAGE>

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

<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED SEPTEMBER 30,
----------------------
1997 1998
---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Balance, beginning of period............................................................ $ 523,946 $ 451,692
Loans charged off:
Commercial, financial and industrial.................................................. 40,618 21,966
Construction.......................................................................... 120 3
Mortgage.............................................................................. 4,481 4,992
Consumer.............................................................................. 38,864 24,206
Lease financing....................................................................... 2,502 1,971
---------- ----------
Total loans charged off............................................................. 86,585 53,138
Recoveries of loans previously charged off:
Commercial, financial and industrial.................................................. 18,473 17,788
Construction.......................................................................... 9,054 3
Mortgage.............................................................................. 2,833 2,705
Consumer.............................................................................. 10,575 11,389
Lease financing....................................................................... 284 273
---------- ----------
Total recoveries of loans previously charged off.................................... 41,219 32,158
---------- ----------
Net loans charged off............................................................. 45,366 20,980
Provision for credit losses............................................................. -- 45,000
Transfer of reserve for trading account assets.......................................... -- (1,911)
Foreign translation adjustment and other net additions (deductions)..................... (126) (84)
---------- ----------
Balance, end of period.................................................................. $ 478,454 $ 473,717
---------- ----------
---------- ----------
Allowance for credit losses to total loans.............................................. 2.15% 2.02%
Provision for credit losses to net loans charged off.................................... nm 214.49
Net loans charged off to average loans outstanding for the period(1).................... 0.28 0.12
</TABLE>

- ---------

(1) Annualized.

nm = not meaningful

At September 30, 1997, our allowance for credit losses was $478.5 million,
or 2.15 percent of total loans, and 435.9 percent of total nonaccrual loans,
compared with an allowance for credit losses at September 30, 1998 of $473.7
million, or 2.02 percent of total loans, and 697.2 percent of total nonaccrual
loans.

For the nine months ended September 30, 1997, we recorded no provision for
credit losses, compared with a $45.0 million provision for the nine months ended
September 30, 1998. Management considers a range of estimated credit losses
inherent in the portfolio when evaluating the adequacy of the allowance for
credit losses. Central to this process is the required reserve, an amount
calculated by applying historical loss factors to credit exposures. These
factors are based on loss experience, adjusted for significant factors that
affect the collectibility of the portfolio as of the evaluation date. Additional
amounts, which are unallocated, provide a margin of error for the required
reserve calculation. At September 30, 1998, the unallocated reserve is also
available to cover specific credit risks which are more difficult to quantify.
These risks, such as the weak economic indicators in the global markets, the
decline in oil prices, the potentially adverse impact on agriculture from "El
Nino," and the volatility in the debt and equity markets, add to the uncertainty
in estimating credit losses. When determining the need for a credit provision,
these factors, as well as the likelihood of loan charge-offs, are used.

31
<PAGE>

Net loans charged-off were $45.4 million and $21.0 million for the nine
months ended September 30, 1997 and 1998, respectively. Loans charged-off in
1998 decreased by $33.4 million primarily due to a $18.7 million decrease in
commercial, financial and industrial loans charged-off as portfolio quality
improved, and a $14.7 million decrease in consumer loans charged-off primarily
due to the sale of the credit card portfolio in April of 1998. Recoveries of
loans previously charged-off decreased by $9.1 million, and the percentage of
net loans charged-off to average loans decreased from 0.28 to 0.12 percent for
the nine months ended September 30, 1997 and 1998, respectively.

In the third quarter 1998, we reclassified a $1.9 million previously
established reserve for credit losses related to interest rate derivatives and
foreign exchange contracts from the unallocated portion of the allowance for
credit losses. The reserve for derivative and foreign exchange contracts is
presented as an offset to trading account assets. Future changes in the reserve
as a result of changes in the positive replacement cost of those contracts will
be provided as an offset to trading gains and losses.

We evaluate our loan portfolio for impairment as defined by SFAS No. 114,
"Accounting by Creditors for Impairment of a Loan", as amended. At December 31,
1997, total impaired loans were $108.4 million and the associated impairment
allowance was $9.4 million, compared with total impaired loans of $67.9 million
and an associated impairment allowance of $7.5 million at September 30, 1998.

NONPERFORMING ASSETS

<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30,
1997 1997 1998
------------- ------------ -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Commercial, financial and industrial................................. $ 54,087 $ 46,392 $ 55,407
Construction......................................................... 4,579 4,071 4,377
Mortgage:
Residential........................................................ 1,133 954 --
Commercial......................................................... 49,959 57,921 8,163
------------- ------------ -------------
Total mortgage................................................... 51,092 58,875 8,163
------------- ------------ -------------
Total nonaccrual loans........................................... 109,758 109,338 67,947
Foreclosed assets.................................................... 23,216 20,471 13,452
------------- ------------ -------------
Total nonperforming assets....................................... $ 132,974 $ 129,809 $ 81,399
------------- ------------ -------------
------------- ------------ -------------
Allowance for credit losses.......................................... $ 478,454 $ 451,692 $ 473,717
------------- ------------ -------------
------------- ------------ -------------
Nonaccrual loans to total loans...................................... 0.49% 0.48% 0.29%
Allowance for credit losses to nonaccrual loans...................... 435.92 413.12 697.19
Nonperforming assets to total loans and foreclosed assets............ 0.60 0.57 0.35
Nonperforming assets to total assets................................. 0.43 0.42 0.26
</TABLE>

At September 30, 1998, nonperforming assets totaled $81.4 million, a
decrease of $48.4 million, or 37 percent, from December 31, 1997. The decrease
was primarily the result of reductions of $49.8 million in nonaccrual commercial
mortgage loans due to a combination of note sales, repayments and restorations
to accrual and $7.0 million in foreclosed assets due to sales of individual
assets.

Nonaccrual loans as a percentage of total loans were 0.48 percent at
December 31, 1997, compared with 0.29 percent at September 30, 1998.
Nonperforming assets as a percentage of total loans and foreclosed assets were
0.57 percent at December 31, 1997, compared with 0.35 percent at September 30,
1998.

32
<PAGE>

LOANS 90 DAYS OR MORE PAST DUE AND STILL ACCRUING

REGULATORY CAPITAL

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

<TABLE>
<CAPTION>
MINIMUM
SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30, REGULATORY
1997 1997 1998 REQUIREMENT
------------- ------------- ------------- -----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
CAPITAL COMPONENTS:
Tier 1 capital...................................... $ 2,520,589 $ 2,587,071 $ 2,876,605
Tier 2 capital...................................... 593,865 601,102 598,027
------------- ------------- -------------
Total risk-based capital.......................... $ 3,114,454 $ 3,188,173 $ 3,474,632
------------- ------------- -------------
Risk-weighted assets................................ $ 28,249,379 $ 28,862,340 $ 30,176,967
------------- ------------- -------------
------------- ------------- -------------
Quarterly average assets............................ $ 30,037,626 $ 30,334,507 $ 30,696,414
------------- ------------- -------------
------------- ------------- -------------

CAPITAL RATIOS:
Total risk-based capital............................ 11.02% 11.05% 11.51% 8.0%
Tier 1 risk-based capital........................... 8.92 8.96 9.53 4.0
Leverage ratio(1)................................... 8.39 8.53 9.37 4.0
</TABLE>

- ---------

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

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

Compared with December 31, 1997, our Tier 1 risk-based capital ratio at
September 30, 1998 increased 57 basis points to 9.53 percent, the total
risk-based capital ratio increased 46 basis points to 11.51 percent, and the
leverage ratio increased 84 basis points to 9.37 percent. The increase in the
capital ratios was primarily attributable to retained earnings growing faster
than both risk-weighted assets and average assets, partly offset by the
reduction of $50.0 million in subordinated capital notes.

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

33
<PAGE>

YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996

To facilitate the discussion of the results of operations, the Summary
Consolidated Financial and Operating Data table on page 9 and the Selected
Consolidated Financial and Operating Data table on page 19 include certain pro
forma earnings disclosures and ratios. These presentations supplement the
Consolidated Statements of Income on page F-2 (which are prepared in accordance
with generally accepted accounting principles), primarily with respect to the
treatment of merger and integration expense. We believe that it is meaningful to
understand the operating results and trends excluding these expenses and,
therefore, have included information in the tables referred to above and in the
MD&A which follows, that presents income before merger and integration expense
and income taxes and related pro forma ratio and per share calculations.

SUMMARY

Net income in 1997 was $411 million, including $4 million (after-tax) of
merger and integration related expense. Net income in 1996 was $249 million,
including $72 million (after-tax) of merger and integration related expense. Net
income applicable to common stock was $404 million, or $2.30 per diluted common
share, in 1997 compared with $238 million, or $1.36 per diluted common share, in
1996. Excluding after-tax merger and integration expense, pro forma earnings for
1997 were $415 million, an increase of 29 percent from $321 million a year
earlier. Pro forma earnings applicable to common stock were $407 million, or
$2.32 per diluted common share, in 1997 compared with $310 million, or $1.77 per
diluted common share, in 1996. This increase of 31 percent over the comparable
figures for 1996 was due to a 5 percent increase in net interest income, an 11
percent increase in noninterest income, a decrease in the effective income tax
rate, and a $40 million reduction in the provision for credit losses, partially
offset by a 2 percent increase in noninterest expense (excluding merger and
integration expense). Other highlights for 1997 include:

- Net interest income, on a taxable-equivalent basis, was $1,237 million in
1997, an increase of $62 million, or 5 percent, over 1996 primarily due to
a $1.6 billion, or 6 percent, increase in average earning assets,
resulting primarily from a $1.1 billion, or 5 percent, increase in average
loans and largely funded by an $851 million, or 13 percent, increase in
average demand deposits. Partially offsetting the positive impact of the
growth in earning assets and demand deposits on net interest income was a
5 basis point decline in the net interest margin to 4.70%. The decline in
net interest margin was primarily due to a 14 basis point decrease in the
spread between the average yield on earning assets and the average rate
paid on interest bearing liabilities.

- No provision for credit losses was recorded in 1997 compared with $40
million in 1996, reflecting improvement in the quality of our loan
portfolio and a reduction in nonaccrual loans. Nonperforming assets
declined $27 million, or 17 percent, from December 31, 1996 to $130
million at December 31, 1997. Nonperforming assets as a percent of total
assets declined to 0.42% at December 31, 1997 compared with 0.54% a year
earlier. Total nonaccrual loans were $109 million at December 31, 1997
compared with $128 million at year-end 1996, resulting in a reduction in
the ratio of nonaccrual and renegotiated loans to total loans from 0.61%
at December 31, 1996 to 0.48% at year-end 1997. The allowance for credit
losses was $452 million, or 413% of total nonaccrual loans, at December
31, 1997 compared with $524 million, or 408% of total nonaccrual loans, at
December 31, 1996.

- Noninterest income was $463 million in 1997, an increase of $44 million,
or 11 percent, over 1996. Service charges on deposit accounts grew $13
million, or 12 percent, reflecting growth in deposit balances while trust
and investment management fees increased $14 million, or 15 percent, on
growth in trust accounts and assets under management.

- Excluding merger and integration expense, noninterest expense was $1,039
million in 1997, an increase of $21 million, or 2 percent, over 1996. This
increase was primarily attributable to an increase of $14 million, or 3
percent, in personnel-related expense, a significant portion of which was
due to severance payments related to realignment of departments and to
higher performance-related

34
<PAGE>

incentive compensation, and an increase of $14 million, or 25 percent, in
other expenses. These increases were partially offset by a decline of $18
million in net occupancy expense, reflecting a $12 million charge recorded
in 1996 related to former banking facilities, as well as merger
efficiencies realized in 1997. Excluding the $12 million charge in 1996
and merger and integration expense, noninterest expense increased $33
million over 1996.

- The effective tax rate for 1997 was 37% compared with 40% for 1996.
Excluding the $25 million after-tax refund from the State of California
Franchise Tax Board, the effective tax rate in 1997 was 41%. Excluding a
$5 million after-tax benefit from the settlement of a unitary tax issue
with the State of California Franchise Tax Board, the effective tax rate
in 1996 was also 41%.

- The return on average assets for 1997 increased to 1.39% compared to 0.89%
for 1996. Excluding the after-tax effect of merger and integration
expense, the pro forma return on average assets was 1.40% for 1997
compared to 1.15% for 1996. The return on average common equity for 1997
was 16.05% compared to 10.24% for 1996. Excluding the after-tax effect of
merger and integration expense, the pro forma return on average common
equity was 16.20% for 1997 compared to 13.33% for 1996.

- Total loans at December 31, 1997 were $22.7 billion, an increase of $1.7
billion, or 8 percent, over year-end 1996, primarily from growth in the
commercial, financial and industrial loan portfolio.

- At December 31, 1997, our Tier 1 risk-based capital ratio was 8.96% and
the total risk-based capital ratio was 11.05%, exceeding the minimum
regulatory guidelines for bank holding companies of 4% and 8%,
respectively. The Tier 1 and total risk-based capital ratios for our bank
at December 31, 1997 exceeded the regulatory guidelines for
"well-capitalized" banks. Our leverage ratio was 8.53% at December 31,
1997, exceeding the minimum regulatory guideline for bank holding
companies.

35
<PAGE>

NET INTEREST INCOME

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

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------------------------------------
1995 1996 1997
------------------------------------ ------------------------------------ ----------
INTEREST AVERAGE INTEREST AVERAGE
AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/ AVERAGE
BALANCE EXPENSE(1) RATE(1) BALANCE EXPENSE(1) RATE(1) BALANCE
---------- ----------- ----------- ---------- ----------- ----------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
Loans: (2)
Domestic.................... $17,783,993 $1,540,694 8.66% $19,328,752 $1,604,799 8.30% $20,332,494
Foreign(3).................. 1,190,547 76,723 6.44 1,398,825 84,693 6.05 1,523,417
Securities -- taxable(4)...... 2,055,504 120,210 5.85 2,138,282 133,170 6.23 2,521,339
Securities -- tax-exempt(4)... 185,934 18,984 10.21 151,970 15,451 10.17 124,174
Interest bearing deposits in
banks........................ 930,999 58,201 6.25 911,575 52,709 5.78 968,966
Federal funds sold and
securities purchased under
resale agreements............ 368,684 22,247 6.03 547,547 30,246 5.52 466,321
Trading account assets........ 333,468 20,578 6.17 240,375 12,960 5.39 355,111
---------- ----------- ---------- ----------- ----------
Total earning assets...... 22,849,129 1,857,637 8.13 24,717,326 1,934,028 7.82 26,291,822
----------- -----------
Allowance for credit losses... (573,648) (544,806) (503,126)
Cash and due from banks....... 1,617,715 1,926,050 2,006,038
Premises and equipment, net... 411,794 425,943 411,302
Other assets.................. 1,259,853 1,375,221 1,486,956
---------- ---------- ----------
Total assets.............. $25,564,843 $27,899,734 $29,692,992
---------- ---------- ----------
---------- ---------- ----------
LIABILITIES:
Domestic deposits:
Interest bearing............ $4,955,750 129,860 2.62 $5,001,060 135,821 2.72 $5,340,661
Savings and consumer time... 2,738,588 99,215 3.62 2,837,198 105,350 3.71 2,970,370
Large time.................. 2,474,685 128,974 5.21 4,095,222 218,959 5.35 4,652,293
Foreign deposits(3)........... 1,806,820 96,109 5.32 1,504,067 71,437 4.75 1,589,303
---------- ----------- ---------- ----------- ----------
Total interest bearing
deposits................. 11,975,843 454,158 3.79 13,437,547 531,567 3.96 14,552,627
---------- ----------- ---------- ----------- ----------
Federal funds purchased and
securities sold under
repurchase agreements........ 1,384,762 78,908 5.70 933,433 47,095 5.05 1,097,707
Subordinated capital notes.... 615,868 42,538 6.91 458,966 30,104 6.56 354,575
Commercial paper.............. 1,448,739 86,695 5.98 1,620,087 87,411 5.40 1,637,070
Other borrowed funds.......... 731,759 42,561 5.82 1,119,051 62,549 5.59 635,900
---------- ----------- ---------- ----------- ----------
Total borrowed funds...... 4,181,128 250,702 6.00 4,131,537 227,159 5.50 3,725,252
---------- ----------- ---------- ----------- ----------
Total interest bearing
liabilities.............. 16,156,971 704,860 4.36 17,569,084 758,726 4.32 18,277,879
----------- -----------
Demand deposits............... 5,994,129 6,663,997 7,514,528
Other liabilities............. 1,081,267 1,206,216 1,295,728
---------- ---------- ----------
Total liabilities......... 23,232,367 25,439,297 27,088,135
SHAREHOLDER'S EQUITY:
Preferred stock............... 135,000 135,000 90,247
Common equity(5).............. 2,197,476 2,325,437 2,514,610
---------- ---------- ----------
Total shareholders'
equity................... 2,332,476 2,460,437 2,604,857
---------- ---------- ----------
Total liabilities and
shareholders' equity..... $25,564,843 $27,899,734 $29,692,992
---------- ---------- ----------
---------- ---------- ----------
Net interest income/margin
(taxable-equivalent basis).... 1,152,777 5.05% 1,175,302 4.75%
Less: taxable-equivalent
adjustment.................... 10,444 6,724
----------- -----------
Net interest income............. $1,142,333 $1,168,578
----------- -----------
----------- -----------

INTEREST AVERAGE
INCOME/ YIELD/
EXPENSE(1) RATE(1)
----------- -----------

<S> <C> <C>
ASSETS:
Loans: (2)
Domestic.................... $1,672,006 8.22%
Foreign(3).................. 92,420 6.07
Securities -- taxable(4)...... 158,950 6.30
Securities -- tax-exempt(4)... 12,669 10.20
Interest bearing deposits in
banks........................ 56,748 5.86
Federal funds sold and
securities purchased under
resale agreements............ 26,079 5.59
Trading account assets........ 19,917 5.61
-----------
Total earning assets...... 2,038,789 7.75
-----------
Allowance for credit losses...
Cash and due from banks.......
Premises and equipment, net...
Other assets..................

Total assets..............

LIABILITIES:
Domestic deposits:
Interest bearing............ 151,768 2.84
Savings and consumer time... 112,808 3.80
Large time.................. 256,007 5.50
Foreign deposits(3)........... 75,398 4.74
-----------
Total interest bearing
deposits................. 595,981 4.10
-----------
Federal funds purchased and
securities sold under
repurchase agreements........ 58,544 5.33
Subordinated capital notes.... 22,850 6.44
Commercial paper.............. 89,912 5.49
Other borrowed funds.......... 34,492 5.42
-----------
Total borrowed funds...... 205,798 5.52
-----------
Total interest bearing
liabilities.............. 801,779 4.39

Demand deposits...............
Other liabilities.............

Total liabilities.........
SHAREHOLDER'S EQUITY:
Preferred stock...............
Common equity(5)..............

Total shareholders'
equity...................

Total liabilities and
shareholders' equity.....

Net interest income/margin
(taxable-equivalent basis).... 1,237,010 4.70%
Less: taxable-equivalent
adjustment.................... 5,328
-----------
Net interest income............. $1,231,682
-----------
-----------
</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 were based on fair value. The
difference between these yields and those based on amortized cost was not
significant.

(5) Amounts restated to give retroactive effect to the exchange referred to in
Note 1 of the accompanying Notes to Consolidated Financial Statements.

36
<PAGE>

Excluding the provision for credit losses, net interest income on a
taxable-equivalent basis was $1,175 million in 1996, compared with $1,237
million in 1997. The increase of $62 million, or 5 percent, was primarily
attributable to a $1.6 billion, or 6 percent, increase in average earning assets
largely funded by an $851 million, or 13 percent, increase in average demand
deposits. Partially offsetting the positive impact of the growth in earning
assets and demand deposits on net interest income was a 5 basis point decline in
the net interest margin to 4.70%, primarily as a result of both a 14 basis point
increase in the cost of interest bearing deposits due to a 25 basis point
increase in the Federal Funds rate in March 1997, and a decrease in the average
yield on domestic loans of 8 basis points.

Average earning assets were $24.7 billion in 1996 compared with $26.3
billion in 1997. This growth was primarily attributable to a $1.1 billion, or 5
percent, increase in average loans and a $355 million, or 16 percent, increase
in average securities. Average commercial, financial and industrial loans, which
increased $582 million, and average commercial mortgage loans, which increased
$437 million, contributed most of the loan growth. See "Loans" at page 43 for
additional commentary on loan portfolio growth. The increase in primarily fixed
rate securities reflected interest rate risk management actions to reduce our
exposure to declines in interest rates.

The $1.6 billion, or 6 percent, increase in average earning assets over 1996
was primarily funded by increases in average demand deposits and average
interest bearing core deposits. Increases in these categories were: demand
deposits $851 million, or 13 percent; interest bearing domestic deposits $340
million, or 7 percent; and savings and consumer time deposits $133 million, or 5
percent. The increase in demand deposits in 1997 was partially due to an influx
of new customer relationships, arising from the recent merger and acquisition
activities of other financial institutions in the California market during the
year.

37
<PAGE>

ANALYSIS OF CHANGES IN NET INTEREST INCOME

The following table shows the changes in the components of net interest
income on a taxable-equivalent basis. The changes in net interest income between
periods have been reflected as attributable either to volume or rate changes.
For purposes of this table, changes which are not solely due to volume or rate
changes are allocated to rate.

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------------------------
1996 VERSUS 1995 1997 VERSUS 1996
---------------------------------- ----------------------------------
INCREASE (DECREASE) DUE TO CHANGE INCREASE (DECREASE) DUE TO
IN CHANGE IN
---------------------------------- ----------------------------------
AVERAGE AVERAGE AVERAGE AVERAGE NET
VOLUME RATE NET CHANGE VOLUME RATE CHANGE
---------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
CHANGES IN INTEREST INCOME:
Loans:
Domestic...................................... $ 133,776 $ (69,671) $ 64,105 $ 83,311 $ (16,104) $ 67,207
Foreign(1).................................... 13,413 (5,443) 7,970 7,538 189 7,727
Securities -- taxable........................... 4,843 8,117 12,960 23,856 1,924 25,780
Securities -- tax-exempt........................ (3,468) (65) (3,533) (2,826) 44 (2,782)
Interest bearing deposits in banks.............. (1,214) (4,278) (5,492) 3,317 722 4,039
Federal funds sold and securities purchased
under resale agreements........................ 10,785 (2,786) 7,999 (4,484) 317 (4,167)
Trading account assets.......................... (5,744) (1,874) (7,618) 6,184 773 6,957
---------- ---------- ---------- ---------- ---------- ----------
Total earning assets........................ 152,391 (76,000) 76,391 116,896 (12,135) 104,761
---------- ---------- ---------- ---------- ---------- ----------
CHANGES IN INTEREST EXPENSE:
Domestic deposits:
Interest bearing.............................. 1,187 4,774 5,961 9,237 6,710 15,947
Savings and consumer time..................... 3,572 2,563 6,135 4,941 2,517 7,458
Large time.................................... 84,458 5,527 89,985 29,803 7,245 37,048
Foreign deposits(1)............................. (16,104) (8,568) (24,672) 4,049 (88) 3,961
---------- ---------- ---------- ---------- ---------- ----------
Total interest bearing deposits............. 73,113 4,296 77,409 48,030 16,384 64,414
---------- ---------- ---------- ---------- ---------- ----------
Federal funds purchased and securities sold
under repurchase agreements.................... (25,718) (6,095) (31,813) 8,296 3,153 11,449
Subordinated capital notes...................... (10,837) (1,597) (12,434) (6,848) (406) (7,254)
Commercial paper................................ 10,254 (9,538) 716 916 1,585 2,501
Other borrowed funds............................ 22,526 (2,538) 19,988 (27,006) (1,051) (28,057)
---------- ---------- ---------- ---------- ---------- ----------
Total borrowed funds........................ (3,775) (19,768) (23,543) (24,642) 3,281 (21,361)
---------- ---------- ---------- ---------- ---------- ----------
Total interest bearing liabilities.......... 69,338 (15,472) 53,866 23,388 19,665 43,053
---------- ---------- ---------- ---------- ---------- ----------
Changes in net interest income.............. $ 83,053 $ (60,528) $ 22,525 $ 93,508 $ (31,800) $ 61,708
---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ----------
</TABLE>

- ---------

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

Interest income on a taxable-equivalent basis increased $105 million in
1997, primarily due to growth in interest income from domestic loans and
securities, which reflected higher average balances outstanding, partially
offset by a lower average yield primarily on domestic loans.

38
<PAGE>

Interest expense increased $43 million in 1997 due to higher interest
expense on interest bearing deposits, primarily reflecting higher average
deposit balances and higher average rates. Interest expense on borrowed funds
declined $21 million in 1997, reflecting lower volumes, offset by a 2 basis
point increase in the average rate paid.

NONINTEREST INCOME

<TABLE>
<CAPTION>
INCREASE (DECREASE)
----------------------------------------------
YEARS ENDED DECEMBER 31,
----------------------------------------------
YEARS ENDED DECEMBER 31, 1996 VERSUS 1995 1997 VERSUS 1996
---------------------------------- ---------------------- ----------------------
1995 1996 1997 AMOUNT PERCENT AMOUNT PERCENT
---------- ---------- ---------- --------- ----------- --------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Service charges on deposit
accounts.......................... $ 95,177 $ 101,975 $ 114,647 $ 6,798 7% $ 12,672 12%
Trust and investment management
fees.............................. 87,743 93,479 107,527 5,736 7 14,048 15
International commissions and
fees.............................. 68,621 66,108 66,122 (2,513) (4) 14 --
Credit card merchant fees........... 45,767 49,778 57,128 4,011 9 7,350 15
Merchant banking fees............... 24,483 23,929 24,924 (554) (2) 995 4
Foreign exchange trading gains,
net............................... 19,043 13,255 16,268 (5,788) (30) 3,013 23
Brokerage commissions and fees...... 9,270 12,932 15,569 3,662 40 2,637 20
Securities gains (losses), net...... (702) 4,502 2,711 5,204 nm (1,791) (40)
Other............................... 45,917 52,718 58,105 6,801 15 5,387 10
---------- ---------- ---------- --------- ---------
Total noninterest income........ $ 395,319 $ 418,676 $ 463,001 $ 23,357 6% $ 44,325 11%
---------- ---------- ---------- --------- ---------
---------- ---------- ---------- --------- ---------
</TABLE>

- ---------

nm = not meaningful

Noninterest income in 1997 was $463 million, an increase of $44 million, or
11 percent, over 1996. This included a $13 million increase in revenue from
service charges on deposit accounts, a $14 million increase in trust and
investment management fees, a $7 million increase in credit card merchant fees,
a $3 million increase in foreign exchange trading gains, net, a $3 million
increase in brokerage commissions and fees, and a $5 million increase in other
noninterest income, partially offset by a $2 million decrease in securities
gains, net.

Revenue from service charges on deposit accounts was $115 million in 1997,
an increase of 12 percent over 1996. The increase was primarily attributable to
an increase in the volume of non-credit services provided.

Trust and investment management fees were $108 million in 1997, 15 percent
higher than in 1996, primarily due to an increase in assets under management,
which resulted in higher mutual fund management fees and personal trust fees.

Credit card merchant fees were $57 million in 1997, an increase of 15
percent over 1996. The increase was primarily due to an increase in the volume
of credit card drafts deposited by merchants.

Foreign exchange trading gains, net increased $3 million, or 23 percent, in
1997, primarily due to more volatility in the foreign exchange markets in 1997.

Brokerage commissions and fees were $16 million in 1997, an increase of 20
percent over 1996. The increase was primarily attributable to brokerage
commissions on non-proprietary mutual fund sales.

39
<PAGE>

Other noninterest income in 1997 was $5 million, or 10 percent, higher than
in 1996. Included in other noninterest income in 1997 was an $8 million gain
related to a real estate joint venture, compared with gains of $2 million
related to a real estate joint venture and $2 million related to a non-recurring
insurance refund recognized in 1996.

NONINTEREST EXPENSE

<TABLE>
<CAPTION>
INCREASE (DECREASE)
-------------------------------------------------
YEARS ENDED DECEMBER 31,
-------------------------------------------------
YEARS ENDED DECEMBER 31, 1996/1995 1997/1996
-------------------------------------- ----------------------- ------------------------
1995 1996 1997 AMOUNT PERCENT AMOUNT PERCENT
---------- ------------ ------------ ---------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Salaries and other
compensation.................. $ 432,581 $ 448,793 $ 461,915 $ 16,212 4% $ 13,122 3%
Employee benefits............... 104,090 108,454 109,729 4,364 4 1,275 1
---------- ------------ ------------ ---------- -----------
Personnel-related expense..... 536,671 557,247 571,644 20,576 4 14,397 3
Net occupancy................... 92,863 103,335 85,630 10,472 11 (17,705) (17)
Equipment....................... 55,056 55,942 56,137 886 2 195 --
Communications.................. 35,806 40,133 42,372 4,327 12 2,239 6
Credit card processing.......... 31,288 37,091 42,274 5,803 19 5,183 14
Advertising and public
relations..................... 20,911 28,788 28,664 7,877 38 (124) --
Professional services........... 26,197 24,342 28,075 (1,855) (7) 3,733 15
Data processing................. 18,557 22,140 25,973 3,583 19 3,833 17
Printing and office supplies.... 22,626 27,085 24,098 4,459 20 (2,987) (11)
Software........................ 13,839 15,895 16,562 2,056 15 667 4
Travel.......................... 12,183 14,936 15,763 2,753 23 827 6
Intangible asset
amortization.................. 13,353 13,335 13,352 (18) -- 17 --
Armored car..................... 13,792 13,296 12,209 (496) (4) (1,087) (8)
Regulatory authority
assessments................... 23,431 4,048 5,778 (19,383) (83) 1,730 43
Foreclosed asset expense
(income)...................... (3,213) 2,889 (1,268) 6,102 nm (4,157) nm
Other........................... 64,741 56,938 71,365 (7,803) (12) 14,427 25
---------- ------------ ------------ ---------- -----------
Noninterest expense, excluding
merger and integration
expense...................... 978,101 1,017,440 1,038,628 39,339 4 21,188 2
Merger and integration
expense....................... -- 117,464 6,037 117,464 nm (111,427) (95)
---------- ------------ ------------ ---------- -----------
Total noninterest expense... $ 978,101 $ 1,134,904 $ 1,044,665 $ 156,803 16 % $ (90,239) (8)%
---------- ------------ ------------ ---------- -----------
---------- ------------ ------------ ---------- -----------
</TABLE>

- ---------

nm = not meaningful

Noninterest expense, excluding merger and integration expense, was $1,039
million in 1997, an increase of $21 million, or 2 percent, over 1996. This
included a $14 million increase in personnel-related expense, a $5 million
increase in credit card processing expense, a $4 million increase in data
processing expense, and a $14 million increase in other noninterest expense,
partially offset by an $18 million decrease in net occupancy expense and a $4
million decrease in foreclosed asset expense.

40
<PAGE>

Personnel-related expense was $572 million in 1997, an increase of $14
million, or 3 percent, compared to 1996. This increase was primarily due to the
increase in salaries and other compensation expense, a significant portion of
which was due to severance payments related to realignment of departments and to
higher performance-related incentive compensation.

Credit card processing expense was $42 million in 1997, an increase of $5
million, or 14 percent, over 1996 due to higher merchant volumes.

Data processing expense was $26 million in 1997, an increase of $4 million,
or 17 percent, over 1996 due to increased activity in data processing systems
supporting the growth in deposits.

Other noninterest expense increased $14 million in 1997. Of the total
increase, $7.5 million reflected additional expenses incurred to support higher
deposit volumes.

Net occupancy expense was $86 million in 1997, $18 million, or 17 percent,
lower than the previous year. The decrease in net occupancy expense was
primarily due to a $12 million charge related to former banking facilities in
1996. Excluding this charge, net occupancy expense in 1997 declined 6 percent
due to merger-related efficiencies realized in 1997.

Foreclosed asset expense decreased $4 million in 1997. The decrease was
primarily due to lower writedowns and maintenance and selling expenses,
reflecting a 28 percent reduction in the portfolio of foreclosed assets.

MERGER AND INTEGRATION EXPENSE

Merger and integration expense of $124 million in total was recorded in 1996
and 1997 to cover $38 million of personnel expense for severance, retention and
other employee related costs, $54 million for facilities expense related to
redundant banking facilities and $32 million in professional services and other
expense as a result of the combination of Union Bank and BanCal Tri-State
Corporation.

The following table presents merger and integration expense provisions in
1996 and 1997, the cash and noncash utilization of those expense provisions
during the periods, and the resulting liability balances as of December 31, 1996
and 1997.

<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
---------------------
1996 1997
---------- ---------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Balance, accrued merger and integration expense, beginning of period....................... $ -- $ 54,344
Provision for merger and integration costs................................................. 117,464 6,037
Utilization for the period:
Cash..................................................................................... 40,155 35,809
Noncash.................................................................................. 22,965 1,642
---------- ---------
Total utilization...................................................................... 63,120 37,451
---------- ---------
Balance, accrued merger and integration expense, end of period............................. $ 54,344 $ 22,930
---------- ---------
---------- ---------
</TABLE>

At December 31, 1997, the liability balance included amounts primarily for
severance payments that are being paid on a periodic basis and for lease
payments that are continuing over the expected term of the leases.

41
<PAGE>

INCOME TAX EXPENSE

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------
1995 1996 1997
---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Income before income taxes................................................... $ 506,301 $ 412,350 $ 650,018
Income tax expense........................................................... 193,359 162,892 238,722
Effective tax rate........................................................... 38% 40% 37%
</TABLE>

Our effective tax rate in 1996 was 40% compared with 37% in 1997. Excluding
a $5 million after-tax benefit recognized in 1996 from a settlement with the
State of California Franchise Tax Board for 1985 and 1986, the effective tax
rate in 1996 was 41%. The lower 1997 effective tax rate was the result of an
after-tax refund from the State of California Franchise Tax Board of
approximately $25 million to settle litigation, administration, and audit
disputes covering the years 1975-1987. Excluding the State of California
Franchise Tax Board refund, the effective tax rate for 1997 was also 41%.

CREDIT RISK MANAGEMENT

Our principal business activity is the extension of credit in the form of
loans or other credit substitutes to individuals and businesses. Our policies
and applicable laws and regulations governing the extension of credit require
risk analysis as well as ongoing portfolio and credit management through loan
product diversification, lending limit constraints, credit review and approval
policies, and extensive internal monitoring.

We manage and control credit risk through diversification of the portfolio
by type of loan, industry concentration, dollar limits on multiple loans to the
same borrower, geographic distribution and type of borrower. Geographic
diversification of loans originated through our branch network is generally
within California, Oregon and Washington, which we consider to be our principal
markets. In addition, we will continue to originate and participate in lending
activities outside these states, as well as internationally.

In analyzing our existing loan portfolios, we apply specific monitoring
policies and procedures which vary according to the relative risk profile and
other characteristics of the loans within the various portfolios. Our
residential and consumer loans are relatively homogeneous and no single loan is
individually significant in terms of its size or potential risk of loss.
Therefore, we review our residential and consumer portfolios by analyzing their
performance as a pool of loans. In contrast, our monitoring process for the
commercial, financial and industrial; construction; commercial mortgage; and
foreign loan portfolios includes a periodic review of individual loans. Loans
that are performing but have shown some signs of weakness are subjected to more
stringent reporting and oversight. We review these loans to assess the ability
of the borrowing entity to continue to service all of its interest and principal
obligations and as a result may adjust the risk grade accordingly. In the event
that we believe that full collection of principal and interest is not reasonably
assured, the loan will be appropriately downgraded and, if warranted, placed on
nonaccrual status, even though the loan may be current as to principal and
interest payments.

We have a Credit Policy Forum, composed of the Chief Credit Officer, senior
credit officers, and appropriate line officers who establish policy, credit
quality criteria, portfolio guidelines and other controls. Credit Administration
together with a series of loan committees, have the responsibility for
administering the credit approval process, as well as the implementation and
administration of our credit policies and lending practices and procedures.
These policies require an extensive evaluation of credit requests and continuing
review of existing credits in order to promptly identify, monitor and quantify
evidence of deterioration of asset credit quality or potential loss.

As another part of the control process, an independent internal credit
review and examination function provides quality assurance that loans and
commitments are made and maintained as prescribed by our credit

42
<PAGE>

policies and that the assets are appropriately and timely risk graded. This
includes a review of compliance with our underwriting policies when the loan is
initially extended and subsequent on-site examinations to ensure continued
compliance.

LOANS

The following table shows loans outstanding at year-end by loan type. Loans
outstanding by loan type as a percentage of total loans is shown for 1993
through 1997.

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------------------------------------------------------------------
1993 1994 1995 1996 1997
-------------------- -------------------- -------------------- -------------------- ---------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Domestic:
Commercial, financial and
industrial.................. $ 8,135 46% $ 8,547 47% $ 9,684 47% $ 9,496 45% $ 10,747
Construction................. 877 5 464 3 370 2 358 2 293
Mortgage:
Residential................ 1,964 11 2,253 12 2,642 13 2,961 14 2,961
Commercial................. 2,088 12 1,778 10 2,143 10 2,598 12 2,952
--------- --- --------- --- --------- --- --------- --- ---------
Total mortgage........... 4,052 23 4,031 22 4,785 23 5,559 26 5,913
Consumer:
Installment................ 1,351 8 1,644 9 1,812 9 2,063 10 2,091
Home equity................ 1,302 7 1,222 7 1,222 6 1,113 5 993
Credit card and other
lines of credit.......... 207 1 219 1 309 2 303 1 270
--------- --- --------- --- --------- --- --------- --- ---------
Total consumer........... 2,860 16 3,085 17 3,343 17 3,479 16 3,354
Lease financing.............. 831 4 829 5 845 4 800 4 875
--------- --- --------- --- --------- --- --------- --- ---------
Total loans in domestic
offices................ 16,755 94 16,956 94 19,027 93 19,692 93 21,182
--------- --------- --------- --------- ---------
Loans originated in foreign
branches..................... 1,004 6 1,110 6 1,405 7 1,358 7 1,559
--------- --- --------- --- --------- --- --------- --- ---------
Total loans.............. $ 17,759 100% $ 18,066 100% $ 20,432 100% $ 21,050 100% $ 22,741
--------- --- --------- --- --------- --- --------- --- ---------
--------- --- --------- --- --------- --- --------- --- ---------

<S> <C>
Domestic:
Commercial, financial and
industrial.................. 47%
Construction................. 1
Mortgage:
Residential................ 13
Commercial................. 13
---
Total mortgage........... 26
Consumer:
Installment................ 9
Home equity................ 5
Credit card and other
lines of credit.......... 1
---
Total consumer........... 15
Lease financing.............. 4
---
Total loans in domestic
offices................ 93

Loans originated in foreign
branches..................... 7
---
Total loans.............. 100%
---
---
</TABLE>

Our lending activities are predominantly domestic, with such loans
comprising approximately 93 percent of the portfolio at December 31, 1997. Total
loans at December 31, 1997 were $22.7 billion, an increase of $1,691 million, or
8 percent, from one year earlier. The increase was primarily attributable to
growth in the commercial, financial and industrial loan portfolio, which
increased $1,251 million from 1996, and to growth in the commercial mortgage
loan portfolio, which increased $354 million.

COMMERCIAL, FINANCIAL AND INDUSTRIAL LOANS. 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 ten percent of
total commercial, financial and industrial loans.

Our commercial market lending originates primarily through its banking
office network. These offices, which rely extensively on relationship oriented
banking, provide many services including cash management services, lines of
credit, accounts receivable and inventory financing. Separately, we originate or
participate in a wide variety of financial services to major corporations. These
services include traditional commercial banking and specialized financing
tailored to the needs of each customer's specific industry. Presently, we are
active in the communications and media, energy related services, retailing and
financial services industries.

43
<PAGE>

At December 31, 1997, the commercial, financial and industrial loan
portfolio was $10,747 million, or 47 percent, of the total loan portfolio. The
increase of $1,251 million, or 13 percent, from the previous year-end was
primarily attributable to loans extended to large corporations in industries
where our bank has specialized lending expertise.

CONSTRUCTION AND COMMERCIAL MORTGAGE LOANS. We engage in nonresidential
real estate lending which includes commercial mortgage loans and construction
loans secured by deeds of trust. Construction loans are made primarily to
residential builders and to commercial property developers.

At December 31, 1997, construction loans were $293 million, $65 million
lower than at the end of the previous year. Commercial mortgage loans were
$2,952 million, an increase of $354 million, or 14 percent, from a year earlier.
This increase was primarily attributable to a strong recovery in the California
real estate market reflecting the continuing improvement in the West Coast
economy, particularly in the real estate sector.

RESIDENTIAL MORTGAGE LOANS. We originate residential loans through its
branch network in California, Oregon, and Washington, and periodically purchases
loans in its market area.

At December 31, 1997, residential loans were $2,961 million, unchanged from
the prior year.

CONSUMER LOANS. Through our branch network, we originate consumer loans,
such as vehicle-secured installment loans, home equity lines where advances are
generally secured by second deeds of trust on residential real estate, and
credit card loans.

At December 31, 1996, consumer loans were $3,479 million, or 16 percent of
total loans, compared with $3,354 million, or 15 percent of total loans, at
year-end 1997.

LEASE FINANCING. We enter into direct financing and leveraged leases
through an agreement with a subsidiary of The Bank of Tokyo-Mitsubishi. In
addition, we originate auto leases.

At December 31, 1997, lease financing outstandings were $875 million, an
increase of $75 million from the end of 1996.

LOANS ORIGINATED IN FOREIGN BRANCHES. Our loans originated in foreign
branches consist primarily of short-term credit extensions to financial
institutions located primarily in Asia and short-term commercial and industrial
loans to major Japanese, Korean, and Taiwanese corporations.

At December 31, 1996, loans originated in foreign branches totaled $1,358
million, or 7 percent of the total loan portfolio, compared with $1,559 million,
or 7 percent of total loans, at December 31, 1997.

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 December 31, 1995, 1996 and 1997 for each country where such outstandings
exceeded one 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 securities, securities available for sale,
securities purchased under resale agreements, loans, accrued interest
receivable, acceptances outstanding and investments with

44
<PAGE>

foreign entities. The amounts outstanding for each country exclude local
currency outstandings. We do not have significant local currency outstandings to
the individual countries listed in the following table that are not hedged or
are not funded by local currency borrowings.

<TABLE>
<CAPTION>
PUBLIC CORPORATIONS
FINANCIAL SECTOR AND OTHER TOTAL
INSTITUTIONS ENTITIES BORROWERS OUTSTANDINGS
----------- ----------- --------------- -------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
December 31, 1995
Japan....................................................... $ 1,111 $ -- $ 567 $ 1,678
Korea....................................................... 641 -- 269 910

December 31, 1996
Japan....................................................... 1,373 -- 452 1,825
Korea....................................................... 574 8 330 912

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 beginning in the second half of 1997. The
events leading to the crisis included currency devaluations, business failures,
principally caused by excessive debt levels and overcapacity, and some loss of
confidence in the banking system in the affected countries, resulting mainly
from past lending practices and the associated impact of internal and external
economic conditions. The crisis resulted in a substantial erosion of
international confidence, rapid declines in stock market valuations, steep
increases in interest rates and further pressure on the debt structures of the
corporate and financial market participants. International Monetary Fund
programs have been established or are in the process of being established which,
in cooperation with steps being taken by the local governments and other global
institutions, are designed to restore confidence. The success of these programs
is still being evaluated.

We are managing our exposures in these and other impacted countries very
cautiously with a view to minimizing risk and supporting its long term and
viable customer relationships. High risk situations are being identified and
reduced where possible, and additional reserves against potential credit losses
have been identified and allocated, as determined by management at year end.
None of our cross-border exposure has been subject to the recently announced
debt restructuring program with South Korea.

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

Management, in accordance with its established risk management practices,
will also continue to review the impact of the crisis on the stability of other
countries and the potential impact on domestic business activities, particularly
in our core West Coast markets.

ALLOWANCE FOR CREDIT LOSSES

The allowance for credit losses is maintained at a level considered
appropriate by management and is based on an ongoing assessment of the risks
inherent in the credit and lease portfolio, including commitments to provide
financing. The allowance is increased by the provision for credit losses, which
is charged against current period operating results, and is decreased by the
amount of net loans charged off

45
<PAGE>

during the period. In evaluating the adequacy of the allowance for credit
losses, management incorporates such factors as collateral value, portfolio
composition and concentration, and trends in local and national economic
conditions and the related impact on the financial strength of our borrowers.
While the allowance is segmented by broad portfolio categories to analyze its
adequacy, the allowance is general in nature and is available for the portfolio
in its entirety. Although management believes that the allowance for possible
credit losses is adequate, future provisions will be subject to continuing
evaluation of inherent risk in the loan portfolio. Based on the process of
evaluation described above, we did not provide for credit losses during 1997.

The following table sets forth the allocation of the allowance for credit
losses. The percentages reflect the allowance allocated to each respective loan
category at period end, as a percentage of the total period end balance of that
loan category, as set forth in the "Loans" table at page 43.

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------------------------------------------------------------------
1993 1994 1995 1996 1997
-------------------- -------------------- -------------------- -------------------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Domestic:
Commercial, financial and
industrial.............. $ 205,398 2.52% $ 146,784 1.72% $ 174,146 1.80% $ 166,100 1.75% $ 123,610
Construction............. 106,398 12.13 69,787 15.04 24,752 6.69 5,700 1.59 3,221
Mortgage:
Residential............ 31,409 1.60 23,581 1.05 5,466 0.21 4,000 0.14 2,700
Commercial............. 139,303 6.67 70,130 3.94 59,931 2.80 39,000 1.50 60,680
--------- --------- --------- --------- ---------
Total mortgage....... 170,712 4.21 93,711 2.32 65,397 1.37 43,000 0.77 63,380
Consumer:
Installment............ 13,100 0.97 12,500 0.76 13,200 0.73 10,400 0.50 11,400
Home equity............ 6,062 0.47 7,143 0.58 5,532 0.45 4,900 0.44 3,600
Credit card and other
lines of credit....... 15,171 7.33 17,101 7.81 32,799 10.61 34,000 11.22 30,500
--------- --------- --------- --------- ---------
Total consumer....... 34,333 1.20 36,744 1.19 51,531 1.54 49,300 1.42 45,500
Lease financing.......... 12,500 1.50 10,000 1.21 1,300 0.15 5,300 0.66 4,862
--------- --------- --------- --------- ---------
Total domestic
allowance........... 529,341 3.16 357,026 2.11 317,126 1.67 269,400 1.37 240,573
Foreign allowance.......... 14,293 1.42 15,330 1.38 13,968 0.99 9,394 0.69 39,313
Unallocated................ 148,950 190,786 224,055 245,152 171,806
--------- --------- --------- --------- ---------
Total allowance for
credit losses....... $ 692,584 3.90% $ 563,142 3.12% $ 555,149 2.72% $ 523,946 2.49% $ 451,692
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------

<CAPTION>
<S> <C>
Domestic:
Commercial, financial and
industrial.............. 1.15%
Construction............. 1.10
Mortgage:
Residential............ 0.09
Commercial............. 2.06
Total mortgage....... 1.07
Consumer:
Installment............ 0.55
Home equity............ 0.36
Credit card and other
lines of credit....... 11.30
Total consumer....... 1.36
Lease financing.......... 0.56
Total domestic
allowance........... 1.14
Foreign allowance.......... 2.52
Unallocated................
Total allowance for
credit losses....... 1.99%
</TABLE>

At December 31, 1997, we reallocated a portion of the allowance for credit
losses to foreign exposures which include off-balance sheet instruments. The
increase from $9 million at December 31, 1996 to $39 million at December 31,
1997 was primarily precautionary in nature, in light of the recent volatility in
the Asian financial markets. As is the case with the allowance in general,
amounts may be reallocated as circumstances change.

46
<PAGE>

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

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------------
1993 1994 1995 1996 1997
---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Balance, beginning of year........................... $ 790,479 $ 692,584 $ 563,142 $ 555,149 $ 523,946
Loans charged off:
Commercial, financial and industrial............... 99,280 105,774 47,524 42,134 58,664
Construction....................................... 58,835 32,151 9,401 3,249 120
Mortgage........................................... 113,791 100,613 29,330 13,483 5,058
Consumer........................................... 39,576 31,806 44,627 56,361 55,336
Lease financing.................................... 11,432 2,940 2,422 2,623 3,601
Foreign(1)......................................... 201 533 295 1,250 --
---------- ---------- ---------- ---------- ----------
Total loans charged off.......................... 323,115 273,817 133,599 119,100 122,779
Recoveries of loans previously charged off:
Commercial, financial and industrial............... 41,552 39,177 39,178 22,341 23,371
Construction....................................... 2,955 5,868 3,195 132 9,054
Mortgage........................................... 6,201 16,228 18,500 12,277 3,292
Consumer........................................... 8,872 8,915 10,924 12,906 14,946
Lease financing.................................... 3,353 435 311 368 351
Foreign(1)......................................... 11,229 627 295 -- --
---------- ---------- ---------- ---------- ----------
Total recoveries of loans previously charged
off............................................. 74,162 71,250 72,403 48,024 51,014
---------- ---------- ---------- ---------- ----------
Net loans charged off.......................... 248,953 202,567 61,196 71,076 71,765
Provision for credit losses.......................... 151,000 73,000 53,250 40,000 --
Foreign translation adjustment and other net
additions (deductions)............................. 58 125 (47) (127) (489)
---------- ---------- ---------- ---------- ----------
Balance, end of year................................. $ 692,584 $ 563,142 $ 555,149 $ 523,946 $ 451,692
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Allowance for credit losses to total loans........... 3.90% 3.12% 2.72% 2.49% 1.99%
Provision for credit losses to net loans charged
off................................................ 60.65 36.04 87.02 56.28 --
Recoveries of loans to loans charged off in the
previous year...................................... 24.38 22.05 26.44 35.95 42.83
Net loans charged off to average loans outstanding... 1.37 1.15 0.32 0.34 0.33
Allowance for credit losses to nonaccrual
loans.............................................. 84.82 161.08 266.56 408.48 413.12
</TABLE>

- ---------

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

At December 31, 1996, our allowance for credit losses was $524 million, or
2.49% of the total loan portfolio, and 408% of total nonaccrual loans. This
compares with an allowance for credit losses of $452 million, or 1.99% of the
total loan portfolio, and 413% of total nonaccrual loans at December 31, 1997.
At year-end 1996, the unallocated portion of the allowance for credit losses was
$245 million compared with $172 million at the end of 1997.

During 1997, we recorded no provision for credit losses, a decrease of $40
million from 1996. The decline in the provision for credit losses reflected the
improvement in the quality of our loan portfolio, including a 15 percent
reduction in nonaccrual loans.

47
<PAGE>

During 1996, we had net loans charged off of $71 million compared to net
loans charged off of $72 million in 1997. Recoveries of loans previously charged
off increased by $3 million, and the percentage of current year recoveries to
loans charged off in the previous year increased from 35.95% in 1996 to 42.83%
in 1997. Loans charged off in 1997 increased by $4 million primarily due to a
$17 million increase in commercial, financial and industrial loans charged off,
partially offset by a $8 million decrease in mortgage loans charged off.

NONPERFORMING ASSETS

Nonperforming assets consist of nonaccrual loans, renegotiated loans, and
foreclosed assets. Nonaccrual loans are those for which management has
discontinued accrual of interest because there exists significant uncertainty as
to the full and timely collection of either principal or interest or such loans
have become contractually past due 90 days with respect to principal or
interest. For a more detailed discussion of the accounting for nonaccrual loans,
see Note 1 to our Consolidated Financial Statements.

Renegotiated loans are those accruing loans for which, for reasons related
to the borrower's financial difficulties, we have amended the terms of the
original loan agreement and the borrower is performing according to the
renegotiated terms.

Foreclosed assets includes property where we acquired title through
foreclosure or "deed in lieu" of foreclosure. On an ongoing basis, foreclosed
asset values are reviewed and any decline in value is recognized as noninterest
expense in the current period.

The following table sets forth an analysis of nonperforming assets.

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------------------------
1993 1994 1995 1996 1997
------------ ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Commercial, financial and industrial............... $ 145,907 $ 106,447 $ 84,336 $ 56,864 $ 46,392
Construction....................................... 231,148 73,643 40,026 7,349 4,071
Mortgage:
Residential...................................... 61,809 17,020 19,220 11,214 954
Commercial....................................... 367,072 145,207 63,836 52,593 57,921
------------ ---------- ---------- ---------- ----------
Total mortgage................................. 428,881 162,227 83,056 63,807 58,875
Other.............................................. 7,288 7,285 849 247 --
Foreign(1)......................................... 3,331 -- -- -- --
------------ ---------- ---------- ---------- ----------
Total nonaccrual loans......................... 816,555 349,602 208,267 128,267 109,338
Renegotiated loans................................. 4,617 14,843 1,612 -- --
Nonperforming real estate ventures................. 23,256 -- -- -- --
Foreclosed assets.................................. 349,022 56,782 36,992 28,517 20,471
------------ ---------- ---------- ---------- ----------
Total nonperforming assets..................... $ 1,193,450 $ 421,227 $ 246,871 $ 156,784 $ 129,809
------------ ---------- ---------- ---------- ----------
------------ ---------- ---------- ---------- ----------
Allowance for credit losses........................ $ 692,584 $ 563,142 $ 555,149 $ 523,946 $ 451,692
------------ ---------- ---------- ---------- ----------
------------ ---------- ---------- ---------- ----------
Nonaccrual and renegotiated loans to total loans... 4.62% 2.02% 1.03% 0.61% 0.48%
Nonaccrual loans to allowance for credit losses.... 117.90 62.08 37.52 24.48 24.21
Nonperforming assets to total loans, real estate
ventures and foreclosed assets................... 6.58 2.32 1.21 0.74 0.57
Nonperforming assets to total assets............... 4.97 1.71 0.90 0.54 0.42
</TABLE>

- ---------

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

48
<PAGE>

The following table sets forth an analysis of loans contractually past due
90 days or more as to interest or principal, but not included in nonaccrual
loans above.

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------------------
1993 1994 1995 1996 1997
--------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Commercial, financial and industrial....................... $ 12,116 $ 3,690 $ 3,752 $ 4,527 $ 450
Construction............................................... 10,711 5,735 1,063 -- --
Mortgage:
Residential.............................................. 14,602 2,123 8,479 8,969 10,170
Commercial............................................... 35,071 -- 3,592 168 1,660
--------- --------- --------- --------- ---------
Total mortgage......................................... 49,673 2,123 12,071 9,137 11,830
Consumer and other......................................... 8,481 8,573 8,854 10,028 7,712
--------- --------- --------- --------- ---------
Total loans 90 days or more past due and still
accruing.............................................. $ 80,981 $ 20,121 $ 25,740 $ 23,692 $ 19,992
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>

At December 31, 1997, nonaccrual loans totaled $109 million, a decrease of
$19 million, or 15 percent, from year-end 1996. The decline was primarily
attributable to a $10 million reduction in nonaccrual commercial, financial and
industrial loans and a $10 million reduction in nonaccrual residential mortgage
loans. Foreclosed assets, primarily other real estate owned, decreased by $8
million due to sales of individual assets.

Nonaccrual and renegotiated loans as a percentage of total loans were 0.61%
at December 31, 1996 compared with 0.48% at December 31, 1997. Nonperforming
assets as a percentage of total loans, real estate ventures and foreclosed
assets improved from 0.74% at December 31, 1996 to 0.57% at year-end 1997. At
December 31, 1997, approximately 58 percent of nonaccrual loans were real estate
related.

Total loans 90 days or more past due and still accruing were $24 million at
December 31, 1996 compared with $20 million at December 31, 1997. At December
31, 1996, impaired loans were $114 million and the associated impairment
allowance was $21 million compared with $108 million and $9 million,
respectively, at December 31, 1997.

INTEREST FOREGONE

Interest foregone during 1996 and 1997 for loans that were on nonaccrual
status at December 31, 1996 and 1997 was $9 million and $6 million,
respectively. We recognized interest income during 1996 and 1997 for loans that
were on nonaccrual status at December 31, 1996 and 1997 of $5 million and $3
million, respectively.

49
<PAGE>

SECURITIES

The following tables summarize the composition of the securities portfolio
and the gross unrealized gains and losses within the portfolio.

SECURITIES AVAILABLE FOR SALE.

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------------------------------------------------------------------------
1996 1997
1995 ---------------------------------------------- ----------------------------------------------
--------- GROSS GROSS GROSS GROSS
FAIR AMORTIZED UNREALIZED UNREALIZED FAIR AMORTIZED UNREALIZED UNREALIZED FAIR
VALUE COST GAINS LOSSES VALUE COST GAINS LOSSES VALUE
--------- --------- ----------- ----------- --------- --------- ----------- ----------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury..... $ 994,492 $1,137,992 $ 4,993 $ 1,933 $1,141,052 $ 987,374 $ 10,793 $ 170 $ 997,997
Other U.S.
government...... 364,584 687,717 4,993 779 691,931 709,536 6,005 67 715,474
Mortgage-backed
securities...... 448,173 193,531 400 274 193,657 679,692 3,331 265 682,758
State and
municipal....... 132,698 101,006 13,749 -- 114,755 90,937 13,236 -- 104,173
Corporate debt
securities...... -- -- -- -- -- 2,698 311 1 3,008
Equity
securities...... 16,539 19,041 2,553 -- 21,594 28,881 1,596 672 29,805
Foreign
securities...... 4,065 1,136 72 -- 1,208 5,132 39 -- 5,171
--------- --------- ----------- ----------- --------- --------- ----------- ----------- ---------
Total securities
available for
sale........... $1,960,551 $2,140,423 $ 26,760 $ 2,986 $2,164,197 $2,504,250 $ 35,311 $ 1,175 $2,538,386
--------- --------- ----------- ----------- --------- --------- ----------- ----------- ---------
--------- --------- ----------- ----------- --------- --------- ----------- ----------- ---------
</TABLE>

SECURITIES HELD TO MATURITY.

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------------------------------------------------------------
1996 1997
1995 ------------------------------------------------ -------------------------------------
----------- GROSS GROSS GROSS GROSS
AMORTIZED AMORTIZED UNREALIZED UNREALIZED FAIR AMORTIZED UNREALIZED UNREALIZED
COST COST GAINS LOSSES VALUE COST GAINS LOSSES
----------- ----------- ----------- ----------- --------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury........ $ 51,125 $ 50,109 $ 1,735 $ -- $ 51,844 $ 40,092 $ 1,333 $ --
Other U.S.
government......... 138,816 139,188 4,412 -- 143,600 99,520 2,568 --
Mortgage-backed
securities......... 124,375 41,985 2,019 68 43,936 24,477 1,745 14
State and
municipal.......... 48,971 36,914 310 2,199 35,025 24,686 75 1,367
----------- ----------- ----------- ----------- --------- ----------- ----------- -----------
Total securities
held to
maturity.......... $ 363,287 $ 268,196 $ 8,476 $ 2,267 $ 274,405 $ 188,775 $ 5,721 $ 1,381
----------- ----------- ----------- ----------- --------- ----------- ----------- -----------
----------- ----------- ----------- ----------- --------- ----------- ----------- -----------

FAIR
VALUE
---------

<S> <C>
U.S. Treasury........ $ 41,425
Other U.S.
government......... 102,088
Mortgage-backed
securities......... 26,208
State and
municipal.......... 23,394
---------
Total securities
held to
maturity.......... $ 193,115
---------
---------
</TABLE>

Management of the securities portfolio involves the maximization of return
while maintaining prudent levels of quality and liquidity. At December 31, 1997,
approximately 98 percent of total securities were investment grade.

During the quarter ended December 31, 1995, in accordance with guidance
issued by the Financial Accounting Standards Board, we reclassified from
securities held to maturity to securities available for sale approximately $285
million at amortized cost of U.S. Treasury Notes (fair value $285 million) and
$64 million at amortized cost of municipal bonds (fair value $72 million).

50
<PAGE>

ANALYSIS OF SECURITIES PORTFOLIO

The following tables show the remaining contractual maturities and expected
yields of the securities portfolio.

SECURITIES AVAILABLE FOR SALE.

<TABLE>
<CAPTION>
DECEMBER 31, 1997
-------------------------------------------------------------------------------------
MATURITY
-------------------------------------------------------------------------------------
AFTER ONE YEAR AND AFTER FIVE YEARS AND
WITHIN WITHIN WITHIN AFTER TEN
ONE YEAR FIVE YEARS TEN YEARS YEARS
---------------------- ---------------------- ------------------------ -----------
AMOUNT YIELD(4) AMOUNT YIELD(4) AMOUNT YIELD(4) AMOUNT
--------- ----------- --------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS)
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury........................ $ 150,048 6.22% $ 837,326 6.31% $ -- -- % $ --
Other U.S. government................ 99,940 6.49 609,596 6.38 -- -- --
Mortgage-backed securities(1)........ 53,108 6.82 626,584 6.41 -- -- --
State and municipal(2)............... 14,944 10.49 26,409 9.90 12,971 11.09 36,613
Corporate debt securities............ -- -- 1,432 17.31 1,266 12.42 --
Equity securities(3)................. -- -- -- -- -- -- --
Foreign securities................... 3,419 14.30 -- -- 1,713 6.29 --
--------- --------- ----------- -----------
Total securities available for
sale............................ $ 321,459 6.69% $2,101,347 6.41% $ 15,950 10.68% $ 36,613
--------- --------- ----------- -----------
--------- --------- ----------- -----------

TOTAL AMORTIZED
----------------------
YIELD(4) AMOUNT YIELD(4)
----------- --------- -----------

<S> <C> <C> <C>
U.S. Treasury........................ -- % $ 987,374 6.30%
Other U.S. government................ -- 709,536 6.40
Mortgage-backed securities(1)........ -- 679,692 6.44
State and municipal(2)............... 11.33 90,937 10.74
Corporate debt securities............ -- 2,698 15.02
Equity securities(3)................. -- 28,881 --
Foreign securities................... -- 5,132 11.63
---------
Total securities available for
sale............................ 11.33% $2,504,250 6.48%
---------
---------
</TABLE>

SECURITIES HELD TO MATURITY.

<TABLE>
<CAPTION>
DECEMBER 31, 1997
---------------------------------------------------------------------------------------
MATURITY
---------------------------------------------------------------------------------------
AFTER ONE YEAR AND AFTER FIVE YEARS AND
WITHIN WITHIN WITHIN AFTER TEN
ONE YEAR FIVE YEARS TEN YEARS YEARS
------------------------ ---------------------- ------------------------ -----------
AMOUNT YIELD(4) AMOUNT YIELD(4) AMOUNT YIELD(4) AMOUNT
----------- ----------- --------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury.......................... $ -- -- % $ 40,092 7.56% $ -- -- % $ --
Other U.S. government.................. 10,000 8.00 89,520 7.72 -- -- --
Mortgage-backed securities(1).......... 3,622 4.88 20,855 9.03 -- -- --
State and municipal(2)................. 9,077 9.19 -- -- 2,596 6.35 13,013
----------- --------- ----------- -----------
Total securities held to maturity.... $ 22,699 7.98% $ 150,467 7.86% $ 2,596 6.35% $ 13,013
----------- --------- ----------- -----------
----------- --------- ----------- -----------

TOTAL AMORTIZED
----------------------
YIELD(4) AMOUNT YIELD(4)
----------- --------- -----------

<S> <C> <C> <C>
U.S. Treasury.......................... -- % $ 40,092 7.56%
Other U.S. government.................. -- 99,520 7.75
Mortgage-backed securities(1).......... -- 24,477 8.42
State and municipal(2)................. 5.77 24,686 7.09
---------
Total securities held to maturity.... 5.77% $ 188,775 7.71%
---------
---------
</TABLE>

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

(1) Expected maturities may differ from contractual maturities because borrowers
have the right to call or prepay obligations, with or without call or
prepayment penalties.

(2) Yields on tax-exempt municipal securities are presented on a
taxable-equivalent basis using the current federal statutory rate of 35
percent.

(3) Equity securities do not have a stated maturity and are included in the
total column only.

(4) Yields are based on amortized cost.

51
<PAGE>

LOAN MATURITIES

The following table presents our loans by maturity.

<TABLE>
<CAPTION>
DECEMBER 31, 1997
--------------------------------------------------------
AFTER
ONE YEAR
WITHIN AND WITHIN AFTER
ONE YEAR FIVE YEARS FIVE YEARS TOTAL
------------- ------------ ------------ -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Domestic:
Commercial, financial and industrial................. $ 4,102,910 $ 4,477,317 $ 2,166,952 $ 10,747,179
Construction......................................... 173,504 119,829 -- 293,333
Mortgage:
Residential........................................ 4,230 32,000 2,925,003 2,961,233
Commercial......................................... 228,955 1,085,913 1,636,939 2,951,807
------------- ------------ ------------ -------------
Total mortgage................................... 233,185 1,117,913 4,561,942 5,913,040
Consumer:
Installment........................................ 136,264 1,801,620 152,868 2,090,752
Home equity........................................ 2,816 38,570 951,530 992,916
Credit card and other lines of credit.............. 270,045 52 -- 270,097
------------- ------------ ------------ -------------
Total consumer................................... 409,125 1,840,242 1,104,398 3,353,765
Lease financing...................................... 83,478 606,904 184,478 874,860
------------- ------------ ------------ -------------
Total loans in domestic offices.................. 5,002,202 8,162,205 8,017,770 21,182,177
Loans originated in foreign branches................... 1,515,844 25,627 17,760 1,559,231
------------- ------------ ------------ -------------
Total loans...................................... $ 6,518,046 $ 8,187,832 $ 8,035,530 22,741,408
------------- ------------ ------------
------------- ------------ ------------
Allowance for credit losses.................... 451,692
-------------
Loans, net....................................... $ 22,289,716
-------------
-------------
Total fixed rate loans due after one year.............. $ 5,353,709
Total variable rate loans due after one year........... 10,869,653
-------------
Total loans due after one year................... $ 16,223,362
-------------
-------------
</TABLE>

CERTIFICATES OF DEPOSIT OF $100,000 AND OVER

The following table presents domestic certificates of deposit of $100,000
and over by maturity.

<TABLE>
<CAPTION>
DECEMBER 31,
1997
--------------------
(DOLLARS IN
THOUSANDS)
<S> <C>
Three months or less........................................................................ $ 2,684,438
Over three months through six months........................................................ 1,163,014
Over six months through twelve months....................................................... 261,739
Over twelve months.......................................................................... 154,948
-----------
Total domestic certificates of deposit of $100,000 and over............................. $ 4,264,139
-----------
-----------
</TABLE>

We offer certificates of deposit of $100,000 and over at market rates of
interest. Many of these certificates are issued to customers, both public and
private, who have done business with us for an extended period. We expect that
as these deposits come due, the majority will continue to be renewed at market
rates of interest.

Substantially all of our deposits in foreign branches are certificates of
deposit of $100,000 and over and mature in less than one year.

52
<PAGE>

BORROWED FUNDS

The following table presents information on our borrowed funds, excluding
subordinated capital notes.

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------
1995 1996 1997
------------ ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Federal funds purchased and securities sold under repurchase agreements
with weighted average interest rates of 4.96%, 5.09% and 5.38% at
December 31, 1995, 1996 and 1997, respectively........................ $ 1,195,058 $ 1,322,654 $ 1,335,884
Commercial paper, with weighted average interest rates of 5.75%, 5.34%
and 5.64% at December 31, 1995, 1996 and 1997, respectively........... 1,389,870 1,495,463 966,575
Other borrowed funds, with weighted average interest rates of 5.78%,
5.66% and 6.23% at December 31, 1995, 1996 and 1997, respectively..... 1,064,472 749,422 476,010
------------ ------------ ------------
Total borrowed funds................................................ $ 3,649,400 $ 3,567,539 $ 2,778,469
------------ ------------ ------------
------------ ------------ ------------
Federal funds purchased and securities sold under repurchase agreements:
Maximum outstanding at any month end.................................. $ 1,517,999 $ 1,322,654 $ 1,575,930
Average balance during the year....................................... 1,384,762 933,433 1,097,707
Weighted average interest rate during the year........................ 5.70% 5.05% 5.33%

Commercial paper:
Maximum outstanding at any month end.................................. $ 1,591,712 $ 1,854,576 $ 1,876,135
Average balance during the year....................................... 1,448,739 1,620,087 1,637,070
Weighted average interest rate during the year........................ 5.98% 5.40% 5.49%

Other borrowed funds:
Maximum outstanding at any month end.................................. $ 1,319,444 $ 1,697,236 $ 851,694
Average balance during the year....................................... 731,759 1,119,051 635,900
Weighted average interest rate during the year........................ 5.82% 5.59% 5.42%
</TABLE>

CAPITAL ADEQUACY AND DIVIDENDS

Our principal capital objectives are to support future growth, to protect
depositors, to absorb any unanticipated losses and to comply with various
regulatory requirements. Management believes that we have retained our capital
at a level which supports our risk structure, as well as providing for
anticipated growth of current business activities and strategic expansion.

Total shareholders' equity was $2,679 million at December 31, 1997, an
increase of $184 million from year-end 1996. This change was primarily a result
of $411 million of net income for 1997, offset by the redemption of $135 million
in preferred stock and dividends on common and preferred stock of $97 million.

We offer a dividend reinvestment plan that allows shareholders to reinvest
dividends in our common stock at 5 percent below the market price. At December
31, 1997, The Bank of Tokyo-Mitsubishi was not a participant in the plan.

Capital adequacy depends on a variety of factors including asset quality and
risk profile, liquidity, stability of earnings, competitive and economic
conditions, and management. We believe that the current level of profitability,
coupled with a prudent dividend policy, is adequate to support normal growth in
operations while meeting regulatory capital guidelines.

53
<PAGE>

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

<TABLE>
<CAPTION>
DECEMBER 31, MINIMUM
------------------------------------------------------------------------- REGULATORY
1993 1994 1995 1996 1997 REQUIREMENT
------------- ------------- ------------- ------------- ------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
CAPITAL COMPONENTS:
Tier 1 capital................. $ 1,952,045 $ 2,070,554 $ 2,355,057 $ 2,395,580 $ 2,587,071
Tier 2 capital................. 702,652 626,903 591,266 551,074 601,102
------------- ------------- ------------- ------------- -------------
Total risk-based capital..... $ 2,654,697 $ 2,697,457 $ 2,946,323 $ 2,946,654 $ 3,188,173
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
Risk-weighted assets........... $ 21,992,647 $ 22,419,516 $ 25,179,489 $ 26,390,288 $ 28,862,340
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
Quarterly average assets....... $ 23,624,622 $ 23,868,729 $ 27,073,158 $ 28,496,355 $ 30,334,507
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
CAPITAL RATIOS:
Total risk-based capital....... 12.07% 12.03% 11.70% 11.17% 11.05% 8.0%
Tier 1 risk-based capital...... 8.88 9.24 9.35 9.08 8.96 4.0
Leverage ratio(1).............. 8.26 8.67 8.70 8.41 8.53 4.0
</TABLE>

- ---------

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

For regulatory purposes, our capital computations are based on risk-adjusted
Tier 1 and total capital. Our Tier 1 and total risk-based capital ratios were
9.08% and 11.17%, respectively, at December 31, 1996 compared to 8.96% and
11.05%, respectively, at December 31, 1997. The decrease in the capital ratios
was attributable to the redemption of $135 million of preferred stock in the
third quarter of 1997, partly offset by retained earnings growing faster than
both risk-weighted assets and average assets. As of December 31, 1997,
management believes the capital ratios of our bank met all regulatory minimums
of a "well-capitalized" institution.

YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995

Net income in 1996 was $249 million compared with $313 million in 1995.
Excluding the effects of the $72 million after-tax charge for merger-integration
expense, net income improved as a result of higher net interest income, higher
noninterest income, and lower credit loss provision expense than in 1995.

Net income applicable to common stock was $238 million, or $1.36 per diluted
common share, in 1996 compared with $302 million, or $1.73 per diluted common
share, in 1995.

The return on average assets was 0.89% in 1996 versus 1.22% in 1995. The
return on average common equity was 10.24% in 1996 compared with 13.73% in 1995.

Net interest income on a taxable-equivalent basis increased by $23 million,
or 2 percent, over 1995. Average loans increased $1,753 million, or 9 percent,
and the net interest margin decreased 30 basis points to 4.75%.

Noninterest income increased by $23 million, or 6 percent, over 1995.
Service charges on deposits, trust and investment management fees, credit card
merchant fees, brokerage commissions and fees, securities gains, and other
revenue collectively grew 11 percent and accounted for $32 million of the growth
in noninterest income. This increase was partially offset by a $6 million
decrease in foreign exchange trading gains.

The provision for credit losses was $40 million in 1996, $13 million, or 25
percent, lower than in 1995, reflecting the improved quality of the loan
portfolio.

54
<PAGE>

Noninterest expense, excluding merger and integration expense, increased by
$39 million, or 4 percent, from 1995. Personnel-related expense increased $21
million, or 4 percent, due partially to increased contract labor used to augment
staffing requirements as a residual effect of the merger. Net occupancy expense
increased $10 million, or 11 percent, due to a $12 million one-time charge in
1996 related to former banking facilities. This was offset by a 2 percent
decrease in net occupancy expense due to the closure of 20 branches late in the
third quarter of 1996. Credit card processing expense increased $6 million, or
19 percent, in 1996 due to higher merchant volumes. Advertising and public
relations expense increased $8 million, or 38 percent, over 1995 due primarily
to expanded activities in 1996 to increase awareness of our bank, following the
April 1, 1996 combination of Union Bank and BanCal Tri-State Corporation and its
subsidiary. In 1996, regulatory authority assessments expense declined $19
million, or 83 percent, primarily because the Federal Deposit Insurance
Corporation decided to eliminate insurance assessments for all of 1996. Merger
and integration expense was $117 million in 1996.

Income tax expense was $30 million lower in 1996 than in 1995, primarily due
to lower taxable income. The effective rate increased from 38% in 1995 to 40% in
1996 primarily due to a $3 million after-tax benefit recognized in 1995 from a
favorable settlement of an Internal Revenue Service examination of 1989 and
1990.

Total loans at December 31, 1996 were $21.0 billion, an increase of $0.6
billion, or 3 percent, over year-end 1995. Commercial, financial and industrial
loans declined $188 million, or 2 percent, from the previous year, primarily due
to planned reductions from a portfolio overlap arising from the merger and a
reduction in certain low margin lending. At year-end 1996, construction loans
decreased $12 million, or 3 percent, while commercial mortgages increased $455
million, or 21 percent, from 1995. This increase in commercial mortgages
reflected the continuing improvement in the West Coast economy, particularly the
real estate sector. It was primarily attributable to new originations of
mini-perm loans, ranging in size from $1 million to $10 million, resulting from
a vigorous marketing program. At December 31, 1996 residential loans were $319
million, or 12 percent, higher than the previous year as the favorable interest
rate environment and a stronger housing market continued to generate significant
opportunities for residential mortgage lenders. Consumer loans increased $136
million, or 4 percent, from 1995 due primarily to increases in direct and
indirect auto loans for used vehicles, partially offset by a decrease in home
equity balances.

Total nonperforming assets were $157 million at December 31, 1996, $90
million, or 36 percent, lower than one year earlier. The decline was primarily
attributable to a $27 million, or 33 percent, reduction in nonaccrual
commercial, financial and industrial loans and a $33 million, or 82 percent,
reduction in nonaccrual construction loans, due to a combination of note sales,
payoffs, and upgrades. Foreclosed assets, primarily other real estate owned,
decreased by $8 million, or 23 percent, from 1995, due to sales of individual
assets. Net loan charge-offs in 1996 were $71 million compared to net loans
charged off of $61 million in 1995. Recoveries of loans previously charged off
decreased by $24 million, despite an increase in the percentage of recoveries in
1996 to loans charged off in the previous year from 26.44% in 1995 to 35.95% in
1996. Loans charged off in 1996 decreased by $14 million due to a reduction in
new nonperforming assets in 1996 and a reduction in nonaccrual and
underperforming loans, partly offset by a $12 million increase in consumer loans
charged off, primarily attributable to credit card loans.

At December 31, 1996, the Tier 1 risk-based capital ratio was 9.08% and the
total risk-based capital ratio was 11.17% compared with ratios of 9.35% and
11.70%, respectively, at December 31, 1995.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

GENERAL

Market risk is the risk of loss to future earnings, to fair values, or to
future cash flows that may result from changes in the price of a financial
instrument. The value of a financial instrument may change as a result of
changes in interest rates, foreign currency exchange rates, commodity prices,
equity prices and other market changes that affect market risk sensitive
instruments. Market risk is attributed to all market

55
<PAGE>

risk sensitive financial instruments, including securities, loans, deposits,
borrowings, as well as derivative instruments. Our exposure to market risk is a
function of its asset and liability management activities, its trading
activities for its own account, and its role as a financial intermediary in
customer-related transactions. The objective of market risk management is to
avoid excessive exposure of our earnings and equity to loss and to reduce the
volatility inherent in certain financial instruments.

The management of market risk is governed by policies reviewed and approved
annually by our Board of Directors. Our Board of Directors delegates
responsibility for market risk management to the Asset & Liability Management
Committee (the "A&L Management Committee"), who reports quarterly to our Board
of Directors on activities related to the management of market risk. As part of
the management of our market risk, the A&L Management Committee may direct
changes in the mix of assets and liabilities and the use of derivative
instruments such as interest rate swaps, caps and floors. The A&L Management
Committee also reviews and approves all major funding, market risk-management
programs, and market risk limits. The Chief Financial Officer, as chairman of
the A&L Management Committee, is responsible for companywide management of
market risk. The Treasurer is responsible for implementing funding, investment,
and hedging strategies designed to manage this risk. On a day-to-day basis, the
oversight of market risk management takes place at a centralized level within
the Risk Monitoring Unit. The Risk Monitoring Unit is responsible for measuring
risks to ensure compliance with all market risk limits and guidelines
incorporated within the policies and procedures established by the A&L
Management Committee. The Risk Monitoring Unit reports monthly to the A&L
Management Committee on the effectiveness of our hedging activities, on trading
risk exposures, and on compliance with policy limits. In addition, periodic
reviews by internal audit, regulators and independent accountants provide
further evaluation of controls over the risk management process.

We have separate and distinct methods for managing the market risk
associated with our trading activities and our asset and liability management
activities, as described below.

INTEREST RATE RISK MANAGEMENT (OTHER THAN TRADING)

We engage in asset and liability management activities with the objective of
reducing adverse changes in earnings as a result of changes in interest rates.
The management of interest rate risk relates to the timing and magnitude of the
repricing of assets compared to liabilities and has, as its objective, the
control of risks associated with movements in interest rates.

The Asset & Liability Management Policy approved by our Board of Directors
requires monthly monitoring of interest rate risk by the A&L Management
Committee. As part of the management of our interest rate risk, the A&L
Management Committee may direct changes in the composition of the balance sheet
and the extent to which we utilize off-balance sheet derivative instruments such
as interest rate swaps, floors, and caps.

Our balance sheet is "asset-sensitive", which means that assets generally
reprice more quickly than liabilities. An asset-sensitive balance sheet tends to
reduce net interest income when interest rates decline and to increase net
interest income when interest rates rise.

One method of measuring interest rate risk is by measuring the interest rate
sensitivity gap, which is the difference between earning assets and liabilities
maturing or repricing within specified periods. The table on page 59 presents
such an analysis, which reflects certain assumptions as to the rate sensitivity
of deposits without contractual maturities or repricing dates. These include
demand deposits, money market demand accounts, and savings deposits. Additional
assumptions such as prepayment estimates for residential mortgages and
mortgage-backed securities are made to reflect the probable behavior of those
assets. The section of the table on page 59 entitled Interest Rate Risk
Management Positions presents the effects of the securities portfolio and of
derivatives used for hedging, such as interest rate swaps and floors, in
reducing the interest rate sensitivity gap primarily for LIBOR-based loans.

56
<PAGE>

The table on page 59 shows that our assets that are rate sensitive within
one year exceeded liabilities within that same period by $4.9 billion at
December 31, 1997. Adjusted for the effects of the securities portfolio and
derivatives used for hedging, this cumulative gap was reduced to $2.5 billion.

Gap analysis has significant limitations as a method for measuring interest
rate risk since changes in interest rates do not affect all categories of assets
and liabilities in the same way. To address these limitations, we use a
simulation model to quantify the impact of changing interest rates on net
interest income. A frequency distribution of simulated 12-month net interest
income outcomes based on rate scenarios produced through a Monte Carlo rate
generation process is prepared monthly to determine statistically the mean net
interest income. The amount of Earnings at Risk, defined as the potential
negative change in net interest income, is measured at a 97.5 percent confidence
level and is managed within the limit established in our Board of Director's
Asset & Liability Policy at 5 percent of mean net interest income. Based on the
December 31, 1997 balance sheet, the Earnings at Risk was $23.0 million or 1.80%
of mean net interest income.

An additional limit established by our Board of Director's Asset & Liability
Policy is that the negative change in simulated net interest income for 12
months under single interest rate shock scenarios, up or down 200 basis points,
must be no more than 8 percent of the mean net interest income. Based on the
December 31, 1997 balance sheet, the negative change for a downward shock of 200
basis points was $51.8 million or 4.05% of mean net interest income.

TRADING ACTIVITIES

We enter into trading account activities primarily as a financial
intermediary for customers, and, to a lesser extent, for our own account. By
acting as a financial intermediary, we are able to provide our customers with
access to a wide range of products from the securities, foreign exchange, and
derivatives markets. In acting for our own account, we may take positions in
some of these instruments with the objective of generating trading profits.
These activities expose us to two primary types of market risk: interest rate
and foreign currency exchange risk.

In order to manage interest rate and foreign currency exchange risk
associated with our trading activities, we use a variety of non-statistical
methods including: position limits for each trading activity, daily marking of
all positions to market, daily profit and loss statements, position reports, and
independent verification of all inventory pricing. Additionally, the Risk
Management Unit reports positions and profits and losses daily to the Treasurer
and trading managers and weekly to the Chief Financial Officer. The A&L
Management Committee is provided reports on a monthly basis. We believe that
these procedures, which stress timely communication between the Risk Management
Unit and senior management, are the most important elements of the risk
management process.

We use a form of Value at Risk methodology to measure the overall market
risk inherent in our trading account activities. Under this methodology,
management statistically calculates, with 97.5 percent confidence, the potential
loss in fair value that we might experience if an adverse shift in market prices
were to occur within a period of 5 business days. The amount of Value at Risk is
managed within limits well below the maximum limit established by Board policy
at 0.5% of shareholders' equity. The Value at Risk model incorporates a number
of key assumptions, including assumed holding period and historical volatility
based on 3 years of historical market data updated quarterly.

During 1997 our foreign exchange trading Value at Risk averaged $73 thousand
and peaked at $147 thousand. The low Value at Risk was $32 thousand.
Correspondingly, our securities trading Value at Risk averaged $558 thousand and
peaked at $717 thousand. The low Value at Risk was $439 thousand.

57
<PAGE>

Our interest rate derivatives contracts include $2.4 billion of derivative
contracts entered into as an accommodation for customers. We act as an
intermediary and we match these contracts at a profit with contracts with The
Bank of Tokyo-Mitsubishi or other dealers, thus neutralizing the related market
risk. We maintain responsibility for the credit risk associated with these
contracts.

LIQUIDITY RISK

Liquidity risk represents the potential for loss as a result of limitations
on our ability to adjust its future cash flows to meet the needs of depositors
and borrowers and to fund operations on a timely and cost-effective basis. The
Asset & Liability Management Policy approved by our Board of Directors requires
quarterly reviews of our liquidity by the A&L Management Committee, which is
composed of bank senior executives. Our liquidity draws upon the strength of our
extensive retail and commercial market business franchise, coupled with the
ability to obtain funds for various terms in a variety of domestic and
international money markets. Liquidity is managed through the funding and
investment functions of the Treasury Division.

Core deposits provide us with a sizable source of relatively stable and
low-cost funds. In the third quarter of 1998, lower cost sources of funds, which
include noninterest bearing deposits and interest bearing core deposits, funded
63 percent of average earning assets. Most of the remaining funding was provided
by short-term borrowing in the form of negotiable certificates of deposit,
foreign deposits, federal funds purchased and securities sold under repurchase
agreements, and other borrowings. In the third quarter 1998, we increased our
Commercial Paper program by $100 million.

Our average core deposits, which include demand deposits, money market
demand accounts, and savings and consumer time deposits, combined with average
common shareholder's equity, funded 61 percent of average total assets of $29.7
billion for the year ended December 31, 1997. 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.

Liquidity may also be provided by the sale or maturity of assets. Such
assets include interest bearing deposits in banks, federal funds sold and
securities purchased under resale agreements, and trading account securities.
The aggregate of these assets averaged $1.8 billion during 1997. Additional
liquidity may be provided by investment securities available for sale which
amounted to $2.5 billion at December 31, 1997, and by loan maturities. At
December 31, 1997, $6.5 billion of loans were scheduled to mature within one
year.

58
<PAGE>

The following table summarizes our interest rate sensitivity based on
expected repricings in the time frames indicated for the balance sheet and
interest rate derivatives as of December 31, 1997.

<TABLE>
<CAPTION>
DECEMBER 31, 1997
----------------------------------------------------------
AMOUNTS MATURING OR REPRICING IN
----------------------------------------------------------
0-12 MONTHS 1-5 YEARS AFTER 5 YEARS TOTAL
------------- ------------- ------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS:
Federal funds sold and securities purchased under
resale agreements................................. $ 24,335 $ -- $ -- $ 24,335
Interest bearing deposits in banks................. 633,421 -- -- 633,421
Trading account assets............................. 394,313 -- -- 394,313
Loans.............................................. 17,320,010 3,926,152 1,495,246 22,741,408
Other assets(1)(2)................................. 1,217,060 1,111,518 1,736,049 4,064,627
------------- ------------- ------------- -------------
Total assets (except securities)............... 19,589,139 5,037,670 3,231,295 27,858,104
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
LIABILITIES AND SHAREHOLDERS' EQUITY:
Interest bearing deposits:
Interest bearing checking(1)(3).................. 180,074 1,260,520 -- 1,440,594
Money market demand accounts(1)(3)............... 1,353,636 2,671,392 -- 4,025,028
Savings(1)(3).................................... 166,562 1,165,932 -- 1,332,494
Other time deposits(1)........................... 7,208,342 434,309 6,063 7,648,714
Federal funds purchased and securities sold under
repurchase agreements............................. 1,335,884 -- -- 1,335,884
Other borrowed funds............................... 1,442,585 -- -- 1,442,585
Subordinated capital notes......................... 348,000 -- -- 348,000
Demand deposit accounts(1)(4)...................... 2,654,863 6,194,681 -- 8,849,544
Other liabilities(1)(2)............................ -- -- 1,483,123 1,483,123
Shareholders' equity(2)............................ -- -- 2,679,299 2,679,299
------------- ------------- ------------- -------------
Total liabilities and shareholders' equity..... $ 14,689,946 $ 11,726,834 $ 4,168,485 $ 30,585,265
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Gap before risk management positions............... $ 4,899,193 $ (6,689,164) $ (937,190) $ (2,727,161)
Cumulative gap before risk management positions.... $ 4,899,193 $ (1,789,971) $ (2,727,161)
INTEREST RATE RISK MANAGEMENT POSITIONS:
Securities(1)...................................... 366,467 2,214,199 146,495 2,727,161
Interest rate swaps................................ (425,000) 425,000 -- --
Interest rate floors(5)............................ (2,350,000) 2,350,000 -- --
------------- ------------- ------------- -------------
Gap adjusted for risk management positions......... $ 2,490,660 $ (1,699,965) $ (790,695) $ --
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Cumulative gap adjusted for risk management
positions......................................... $ 2,490,660 $ 790,695 $ -- $ --
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
</TABLE>

- ---------

(1) Certain balance sheet classifications used for interest rate sensitivity
analysis do not conform to the Consolidated Balance Sheets on F-3.

(2) Items that neither reprice nor mature are included in the "After 5 Years"
column.

(3) Interest rate sensitivity of non-maturity deposit accounts are based on
assumptions for a declining interest rate scenario since our balance sheet
is asset-sensitive.

(4) 70 percent of the demand deposit account balance is assumed to be "core"
deposits, which are not sensitive to interest rate changes.

(5) Floors purchased affect interest rate sensitivity in a declining interest
rate scenario.

59
<PAGE>

YEAR 2000

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

The following 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,
which were derived utilizing a number of assumptions of future events including
the continued availability of internal and external resources, third party
modifications and other factors. (See details with respect to costs for year
2000 on page 26). However, there can be no guarantee that these estimates will
be achieved and actual results could differ. Moreover, although we believe we
will be able to make the necessary modifications in advance, there can be no
guarantee that failure to modify the systems would not have a material adverse
effect on us.

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

READINESS PREPARATION

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

We are preparing for the century change with an enterprise-wide year 2000
program. As part of the program, we have identified all of the major application
and processing systems, and sought external and internal resources to replace
and test the systems. Purchased software, internally developed systems and
systems supported by external parties are being tested as part of the program.
Customers and vendors which have significant relationships with us are being
evaluated to determine whether they are adequately preparing for the year 2000.
In addition, contingency plans are being developed to reduce the impact of some
potential events that may occur. However, there can be no guarantee that the
systems of vendors or customers with whom we do business will be year 2000
compliant 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 which
address the following broad areas: data processing systems, telecommunications
and data networks, building facilities and security systems, vendor risk,
customer risk, contingency planning, and communications. There are over 2,000
individual projects identified. The projects vary in size, importance and
materiality: from large undertakings, such as remediating complicated data
systems and organizing the process of assessing the readiness of customers, to
smaller, but still important, projects such as installing compliant computer
utility systems or assuring that processor-controlled systems in individual
buildings will perform properly. The program continues to evolve as new projects
are identified to keep up with increased understanding of year 2000 implications
and evolving external requirements. Virtually all of the projects currently
identified have begun, while more than a third have been completed.

60
<PAGE>

Projects are assigned a priority indicating the importance of the function
to our continuing operation. This prioritization facilitates reporting on
projects based on their relative importance. We have prioritized projects as
Critical and Non-Critical. Critical projects are further prioritized as Mission
Critical and Other Critical. Mission Critical projects are defined as:

- systems vital to the continuance of a broad core business activity;

- functions, the interruption of which for longer than 3 days would threaten
the viability of UNBC;

- functions that provide the environment and infrastructure necessary to
continue the broad core business activities.

Other Critical projects are defined as:

- other customer and accounting systems;

- functions supporting delivery of information and service to customers;

- administrative systems, the interruption of which for longer than 2 weeks
would cause severe business impact;

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

We plan to complete all projects currently identified prior to the year
2000, with special emphasis placed on those prioritized as Mission Critical or
Other Critical. Failure to complete an Other Critical project would not
necessarily have a material adverse effect on UNBC.

The most important projects are the Mission Critical application systems
upon which we rely for our principal business functions. Most of these systems
have been renovated. We expect to have all of these systems renovated by
December 31, 1998, and tested by March 30, 1999.

In addition to testing individual systems, we also plan to conduct
integrated contingency testing of our Mission Critical and many other systems
during 1999 in a separate computer environment where machine dates will be set
forward in order to identify and correct problems which might not otherwise
become evident until the actual end of the century.

We do not significantly rely on embedded technology in our critical
processes. Embedded technology does control some building security and
operations such as power management, ventilation, and elevator control. All
building facilities are presently being evaluated, and we expect for all systems
using embedded technology to be confirmed as year 2000 ready by June 1999.

We are reliant on vendors and customers, and year 2000 issues with both
groups are being addressed. Over 300 vendors, upon whom there is significant
reliance, have been identified and inquiries have been made regarding their year
2000 readiness plans and status. Written risk assessments are being completed on
each and appropriate measures to minimize risk will be undertaken with those
vendors that appear to pose a significant risk. Risk assessments of the critical
vendors are scheduled to be completed by December 1998, and replacements
effected where necessary by June 1999. We, however, have no viable alternatives
for some suppliers, such as power distribution and local telephone companies.
These companies are still being evaluated and the results will be used as
information for contingency planning. As with all financial institutions, we
place a high degree of reliance on the systems of other institutions, including
governmental agencies, to settle transactions. Principal settlement methods
associated with major payment systems will be tested as part of their associated
system projects.

We are also reliant 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. Over 2,500
borrowers, capital market counterparties, funding sources, and large depositors
(collectively referred to as "customers") have been identified as having
financial volumes sufficiently large to

61
<PAGE>

warrant inquiry and assessment of their year 2000 preparation. The financial
volumes included, among other components, loans and unused commitments,
collected deposit balances, Automated Clearing House, foreign exchange, and
derivatives. At September 30, 1998, inquiries and initial written assessments
had been completed for 90% of the identified financial volumes. Assessments for
the remaining 10% continue.

In the initial assessments, customers were classified as representing low,
medium and high risks. Approximately 80% were classified as low risk, 18% as
medium risk and 2% as high risk. High risk customers include those which failed
to respond to the inquiry or which appear to pose a high degree of risk of not
being ready for year 2000.

The population of customers with loans and unused commitments outstanding
("borrowers") pose the highest level of concern for any lender. As of September
30, 1998, the assessment of these borrowers resulted in the following
assignments of risk: 79% low risk, 19% medium risk and 2% high risk.

Ongoing assessments will be made for all levels of risk. Customers with low
risk will be reassessed semi-annually, while customers with medium and high risk
will be reassessed quarterly. Risk mitigation plans will be developed for
customers with high risk. The risk mitigation plan will evaluate whether year
2000 issues will materially affect the customer's cash flow, asset account
values related to its balance sheet, and/or collateral pledged to us. The risk
mitigation plan utilizes the normal credit process that we employ to manage
credit risk and requires the concurrence of a credit administrator.

RISKS

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

The only risk largely under 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 in the event necessary modifications are not completed on
schedule. Management believes it will be able to make the necessary
modifications on schedule.

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

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

PROGRAM ASSESSMENT

The Internal Audit Division and the National Bank Examiners regularly assess
our year 2000 preparations. In addition, a leading information technology
consulting and services firm was engaged to conduct a third party review of the
our year 2000 program. We are considering the recommendations provided by the
firm to further enhance the year 2000 program.

62
<PAGE>

CONTINGENCY PLANS

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

Our contingency planning strategy is a four-phase process: Organizational
Planning Guidelines, Business Impact Analysis, Plan Development for Individual
Operating Units and Validation of Plans. The first two phases have been
completed. We identified the following system-wide areas of concern, assigned to
each a level of potential risk and a probability of occurrence and determined
whether a contingency plan was warranted.

The areas of concern are as follows:

- Global telecommunications and network

- Enterprise information systems

- Operational disruptions

- Vendors and service providers

The level of potential risk was rated as high, moderate or low and the
probability of occurrence was rated as high, moderate or low. Those areas with a
low or moderate level of potential risk and a low probability of occurrence do
not require a contingency plan. For any other combination, the development of a
contingency plan is required. The development and validation of the plans are
expected to be completed by June 1999.

OTHER RELATED DISCLOSURES

Certain of our subsidiaries are registered investment advisers or
broker-dealers that make publicly available separate year 2000 reports.
Additional year 2000 information may be found in those reports.

EURO CONVERSION

On January 1, 1999, 11 European countries who joined the Economic and
Monetary Union transitioned into a single currency (the "Euro") and a single
central bank -- the European Central Bank. On that date, the exchange rates of
the national currencies of the 11 countries were fixed and all financial
transactions will be settled in Euros.

We have completed our analysis of the bank-wide impact and have implemented
a project plan in anticipation of the Euro conversion. We are now fully
operational to settle transactions in the Euro.

63
<PAGE>

BUSINESS

UnionBanCal Corporation, or "UNBC," is a California-based bank holding
company. Its principal subsidiary is Union Bank of California, N.A. Union Bank
of California is the third largest commercial bank in California, based on both
total assets and total deposits in California, and is among the 30 largest in
the United States. Having roots as far back as 1864, we are among the oldest
banks on the West Coast. At September 30, 1998, we had 244 full-service branches
in California, six full-service branches in Oregon and Washington, two
facilities in Texas and New York and 18 offices abroad. Our bank was formed
through the combination of Union Bank and BanCal Tri-State Corporation in 1996.
We are presently approximately 82% owned by The Bank of Tokyo-Mitsubishi.

- consumer and small-business lending,

- corporate and international lending and cash management,

- treasury,

- trust,

- investment advisory services.

Most of our customers are located in California, the nation's most populous
state with over 32 million residents.

BANKING SERVICES

UNBC's operations are divided into four primary segments: the Community
Banking Group; the Commercial Financial Services Group; the Trust and Private
Financial Services Group; and the International Banking Group.

64
<PAGE>

COMMUNITY BANKING GROUP

The following table sets forth the historical results of operations for the
Community Banking Group:

<TABLE>
<CAPTION>
COMMUNITY BANKING GROUP
----------------------------------------------
AS OF AND FOR THE AS OF AND FOR THE
YEARS ENDED DECEMBER PERIODS ENDED
31, SEPTEMBER 30,
---------------------- ----------------------
1996 1997 1997 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
RESULTS OF OPERATIONS:
(IN THOUSANDS)
Revenues
Net interest income...................................... $ 658,144 $ 682,782 $ 511,212 $ 504,709
Noninterest income....................................... 133,559 142,944 105,991 136,101
---------- ---------- ---------- ----------
Total.................................................... 791,703 825,726 617,203 640,810
Noninterest expense...................................... 577,655 568,031 419,050 439,927
Credit expense (income).................................. 35,644 57,870 40,975 (3,059)
Performance center earnings(1)........................... 7,688 10,040 6,558 6,403
Income before income taxes............................... 186,092 209,865 163,736 210,345

BALANCE SHEET DATA (PERIOD AVERAGE):
(IN MILLIONS)

Total loans before performance centers(2)................ $ 9,877 $ 9,672 $ 9,691 $ 9,389
Total assets............................................. 10,991 10,626 10,632 10,329
Total deposits before performance centers(2)............. 11,131 11,757 11,646 12,322
FINANCIAL RATIOS.........................................
Return on average assets............................... 1.02% 1.17% 1.23% 1.63%
Efficiency ratio....................................... 73.00% 68.80% 67.90% 68.70%
</TABLE>

- ---------

(1) Performance center earnings 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.

(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.

The Community Banking Group provides its customers with a full line of
checking and savings, investment, loan and fee-based banking products. For the
nine months ended September 30, 1998, average assets in this group were $10.3
billion, and average deposits were $12.3 billion.

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. It serves over one million consumer
households and businesses through its 244 branches in California, six branches
in Oregon and Washington and its network of over 380 proprietary ATMs. Customers
may also access our services 24 hours a day by telephone or personal computer.
In addition, Community Banking offers automated teller and point-of-sale debit
services through our founding membership in the Star System, the largest shared
ATM network in the Western United States. The group is organized by service
delivery method, by markets and by geography. The primary sub-units of the group
are:

- community banking branches, which serve consumers, businesses and, in
certain locations, affluent individuals;

- business banking centers, which serve businesses with sales between $3
million and $20 million;

- in-store branches, which also serve consumers and businesses;

65
<PAGE>

- middle market and agricultural lending offices; and

- the Consumer Asset Management division, which is responsible for indirect
auto finance, auto leasing, and residential real estate lending.

Through alliances with other financial institutions, the group offers
additional products and services, such as credit cards, small-ticket leasing and
asset-based finance.

Community Banking competes with larger banks by providing service quality
superior to that of its major competitors. We are recognized as among the
highest rated banks in California for customer service quality and satisfaction.

The group's primary means of competing with community banks include its
large and convenient branch network and its reputation for innovative use of
technology to deliver banking services. We have the fifth largest branch network
among depository institutions in California. We also offer convenient banking
hours to consumers through our drive-through banking locations and selected
branches that are open seven days a week.

Community Banking continues to enhance its customer service through the
innovative use of technology. We were among the first banks to team with Intuit
and Microsoft in the launches of their personal financial management software
products, Quicken-Registered Trademark- and Money-Registered Trademark- for
on-line banking. In 1996, we joined America Online's Banking Center as a charter
member. We also worked with Sony to develop the first interactive video banking
application of its kind on the West Coast. In December 1998, we jointly
announced with IBM the first of its kind comprehensive on-line banking system
using Lotus Notes-Registered Trademark- and Domino-Registered Trademark-.

These services and enhancements have enabled UNBC to increase its share of
the consumer and small business markets. From June 30, 1994 to June 30, 1998,
UNBC's share of the California deposit market increased from 4.0% to 5.1%,
representing an annual growth rate of 6.3%. Similarly, since April 1996,
Community Banking has increased the number of households it serves by
approximately 5% annually.

The group's strategies include continuing to build upon the more than one
million households and businesses it serves and broadening the range of
financial products and services it provides to existing customers. The group
uses direct mail marketing methods targeted at specific consumers to supplement
its traditional mass media advertising. We are also introducing a new
computer-driven sales system designed to foster cross-selling of our products.
The new system uses improved software to prompt sales staff to offer customers
additional products and services, based on a customer profile. We have installed
the new system in 40 of our branches, and we anticipate full implementation
within 18 months.

The group will continue to use varied pricing strategies to encourage
customers to use lower-cost methods of delivery to receive our products and
services. Community Banking is emphasizing further development of existing
lower-cost product and service delivery methods, such as the Internet, video
kiosks and loans-by-phone, and is expanding its Direct Banking Center, which
offers products, services and technical support for home banking via the
telephone and computer.

Community Banking competes with a number of commercial banks, savings
associations and credit unions, as well as more specialized financial services
providers, such as investment brokerage companies, consumer finance companies,
and residential real estate lenders. The group's primary competitors are other
major depository institutions such as Bank of America, California Federal,
Washington Mutual and Wells Fargo, as well as smaller community banks in the
markets in which we operate.

66
<PAGE>

COMMERCIAL FINANCIAL SERVICES GROUP

The following table sets forth the historical results of operations for the
Commercial Financial Services Group:

<TABLE>
<CAPTION>
COMMERCIAL FINANCIAL SERVICES GROUP
----------------------------------------------
AS OF AND FOR THE AS OF AND FOR THE
YEARS ENDED DECEMBER PERIODS ENDED
31, SEPTEMBER 30,
---------------------- ----------------------
1996 1997 1997 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
RESULTS OF OPERATIONS:
(IN THOUSANDS)
Revenues
Net interest income...................................... $ 401,912 $ 440,804 $ 321,600 $ 360,625
Noninterest income....................................... 78,238 100,316 75,450 82,638
---------- ---------- ---------- ----------
Total.................................................... 480,150 541,120 397,050 443,263
Noninterest expense...................................... 201,870 231,906 166,305 188,328
Credit expense (income).................................. 14,362 18,872 15,065 15,963
Performance center earnings(1)........................... 4,141 3,926 2,968 2,037
Income before income taxes............................... 268,059 294,268 218,648 241,009

BALANCE SHEET DATA (PERIOD AVERAGE):
(IN MILLIONS)

Total loans before performance centers(2)................ $ 8,286 $ 9,329 $ 9,178 $ 10,783
Total assets............................................. 9,287 10,513 10,344 12,005
Total deposits before performance centers(2)............. 3,959 4,875 4,684 5,844
FINANCIAL RATIOS.........................................
Return on average assets............................... 1.72% 1.65% 1.69% 1.63%
Efficiency ratio....................................... 42.00% 42.90% 41.90% 42.50%
</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.

The Commercial Financial Services Group offers a variety of commercial
financial services, including commercial and project loans, real estate
financing, asset-based and leveraged commercial financing, trade finance and
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
the bank, including treasury, trust, and retail banking services. For the nine
months ended September 30, 1998, average assets in this group were $12.0
billion, and average deposits were $5.8 billion.

Commercial Financial Services is divided into the following business units,
which serve specific markets and industries:

- The Commercial Banking Group, which serves California middle-market
companies and larger companies most often headquartered in the Western
United States;

- The Real Estate Industries Group, which serves real estate developers and
real estate investment trusts;

- The Specialized Lending Group, which serves companies operating in various
industries, including oil and gas, utilities, media, communications,
healthcare, finance and retailing; and

67
<PAGE>

- The Institutional and Deposit Markets Group, which serves title and escrow
companies, retailers, bankruptcy trustees and other customers with large
pools of deposits.

The Commercial Customer Service Unit supports these business units by
providing centralized customer service support.

The group competes with other banks primarily on the basis of its reputation
as a "business bank," the quality of its relationship managers, and the delivery
of superior customer service. We are recognized in California as having a
superior "business banking" reputation relative to other large banks. We are
also rated among the highest for our cash management services and systems.
Commercial Financial Services relationship managers are among the most
experienced in the industries that we target, and are trained to be consultative
advisers to our customers.

The group's main strategy is to target industries and companies for which
the group can reasonably expect to be one of a customer's primary banks.
Consistent with its strategy, the group attempts to serve a large part of its
targeted customers' credit and depository needs.

One result of this strategy is increased loan syndication activity. The
group has successfully increased non-interest revenue by expanding its loan
syndication activities, and it plans to continue to emphasize its operations in
this area. Loan syndication revenues increased by $6.2 million to $12.6 million
through the first nine months of 1998 compared to $6.4 million in 1996. This
increase is largely a result of our acting more frequently as agent and/or
underwriter in syndicated loans to middle market, real estate, and Specialized
Lending Group customers.

We believe that an additional source of increased non-interest income will
come from our expanded participation in capital market transactions. As of
September 30, 1998, UNBC had approximately $58 million committed to a private
capital investment program, with plans to expand our investments in 1999.
Commercial Financial Services generally makes investments in funds and companies
with proven operating histories and in industries in which the group
specializes. We will seek to earn more fee income from loan securitizations,
particularly from commercial mortgages.

As the group increasingly allocates its resources to those industries and
companies that fit its strategy, it will simultaneously de-emphasize efforts to
build banking relationships with companies outside of its target markets. We
expect to move away from junior syndicate roles in the market for large
corporate credits and toward the purchase of selected credits from the secondary
market for bank loans.

In addition, Commercial Financial Services intends to use improved
technology to enhance the efficiency of its operations and the productivity of
its bankers and support staff. Among its planned system improvements are
enhancements to loan automation technology, improved software to measure
customer profitability, and enhanced information and contact management systems
for relationship officers.

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

68
<PAGE>

TRUST & PRIVATE FINANCIAL SERVICES GROUP

The following table sets forth the historical results of operations for the
Trust & Private Financial Services Group:

<TABLE>
<CAPTION>
TRUST AND PRIVATE FINANCIAL SERVICES GROUP
----------------------------------------------
AS OF AND FOR THE AS OF AND FOR THE
YEARS ENDED DECEMBER PERIODS ENDED
31, SEPTEMBER 30,
---------------------- ----------------------
1996 1997 1997 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
RESULTS OF OPERATIONS:
(IN THOUSANDS)
Revenues
Net interest income...................................... $ 11,539 $ 20,995 $ 14,332 $ 16,770
Noninterest income....................................... 110,182 128,100 91,951 106,843
---------- ---------- ---------- ----------
Total.................................................... 121,721 149,095 106,283 123,613
Noninterest expense...................................... 108,495 123,102 89,581 96,897
Credit expense (income).................................. 927 155 102 249
Performance center earnings(1)........................... (674) (1,472) (929) 105
Income before income taxes............................... 11,625 24,366 15,671 26,572

BALANCE SHEET DATA (PERIOD AVERAGE):
(IN MILLIONS)

Total loans before performance centers(2)................ $ 62 $ 229 $ 236 $ 245
Total assets............................................. 94 303 322 297
Total deposits before performance centers(2)............. 425 708 625 679
FINANCIAL RATIOS.........................................
Return on average assets............................... 7.36% 4.74% 3.90% 7.34%
Efficiency ratio....................................... 89.10% 82.60% 84.30% 78.40%
</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.

The Trust & 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. It 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. Trust & Private Financial Services also
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 September 30, 1998, the group had over $90 billion
in assets under administration.

The group is organized into five business divisions:

- The Private Bank division focuses primarily on delivering integrated and
customized financial services to high-net worth individuals with
sophisticated financial needs. Specific products and services include
trust and estate services, investment account management services,
offshore trust services and customized deposit and credit products. The
Private Bank's strategy is to expand its business by increasing its
geographic market coverage and the breadth of its products and services.
To

69
<PAGE>

support that strategy, The Private Bank expanded from nine offices to 15
during 1998. In addition, it has shifted sales staff training efforts
toward increased cross-selling of all of the bank's available products and
services.

- HighMark Capital Management, Inc. is a registered investment advisor that
manages UNBC's proprietary HighMark family of mutual funds. It also
provides investment management services to institutions, pension plans and
individuals, including to clients of other divisions. HighMark Capital
Management's strategy is to expand distribution of its mutual funds by
targeting its marketing efforts at registered investment advisors and
regional broker/dealers. In addition, HighMark is working with The Bank of
Tokyo-Mitsubishi to distribute HighMark mutual funds offshore and to serve
as a sub-advisor for funds managed by The Bank of Tokyo-Mitsubishi in
Japan.

- The Business Trust division provides businesses, government agencies,
unions and non-profit organizations with trustee services, investment
management and 401(k) valuation and record keeping services. Business
Trust's strategy is to expand its third-party distribution network to
include insurance companies, investment managers, brokers and mutual
funds.

- The Investment Services division consists of UBOC Investment Services,
Inc., a registered broker/ dealer offering a full line of investment
products to individuals and institutional clients, and UBOC Insurance
Services. The division's primary strategy is to further penetrate UNBC's
existing client base.

- The Securities Services division is engaged in domestic and global
securities custody, safekeeping, mutual fund accounting, securities
lending and corporate trust services. Its client base includes financial
institutions, businesses, government agencies, unions, investment managers
and non-profit organizations. Securities Services is the only West Coast
based provider of a full range of institutional financial services.

70
<PAGE>

INTERNATIONAL BANKING GROUP

The following table sets forth the historical results of operations for the
International Banking Group:

<TABLE>
<CAPTION>
INTERNATIONAL BANKING GROUP
----------------------------------------------
AS OF AND FOR THE AS OF AND FOR THE
YEARS ENDED DECEMBER PERIODS ENDED
31, SEPTEMBER 30,
---------------------- ----------------------
1996 1997 1997 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
RESULTS OF OPERATIONS:
(IN THOUSANDS)
Revenues
Net interest income...................................... $ 48,175 $ 49,405 $ 35,990 $ 42,487
Noninterest income....................................... 62,373 62,238 46,887 49,758
---------- ---------- ---------- ----------
Total.................................................... 110,548 111,643 82,877 92,245
Noninterest expense...................................... 72,719 64,874 48,942 48,765
Credit expense (income).................................. (4,361) 234 216 2,915
Performance center earnings(1)........................... (6,917) (3,759) (3,171) (2,394)
Income before income taxes............................... 35,273 42,776 30,548 38,171

BALANCE SHEET DATA (PERIOD AVERAGE):
(IN MILLIONS)

Total loans before performance centers(2)................ $ 1,245 $ 1,483 $ 1,423 $ 1,385
Total assets............................................. 2,210 2,631 2,563 2,123
Total deposits before performance centers(2)............. 1,080 959 980 864
FINANCIAL RATIOS.........................................
Return on average assets............................... 0.95% 0.96% 0.96% 1.45%
Efficiency ratio....................................... 65.80% 58.10% 59.10% 52.90%
</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.

The International Banking Group primarily provides correspondent banking and
trade finance-related products and services to financial institutions worldwide,
including Brazil, Hong Kong, Japan, Korea and Taiwan. It also serves selected
foreign firms and U.S. corporate clients in selected countries worldwide,
particularly in Asia. In the United States, International Banking serves
subsidiaries and affiliates of non-Japanese Asian companies and U.S. branches
and agencies of foreign banks. It also provides international services to
domestic corporate clients along the West Coast. For the nine months ended
September 30, 1998, average assets in this group were $2.1 billion and average
deposits were $864 million, in each case excluding inter-company placements and
overnight inter-bank loans, consisting primarily of export/import related
short-term trade transactions.

This group has a long and stable history of providing correspondent and
trade-related services to international financial institutions. We believe that
we have achieved a leading market position and strong customer loyalty in the
Asian/Pacific correspondent banking market because we provide high quality,
customized products and services at competitive prices. The group maintains
branches in Tokyo, Taipei, Seoul and Hong Kong, representative offices in other
parts of Asia and Latin America, and an international banking subsidiary in New
York.

71
<PAGE>

One of International Banking's primary services is international trade
finance. Trade finance is typically short term, which means it generally has a
lower credit risk. Despite this relatively lower credit risk compared to some
other forms of commercial credit, we have reduced our credit exposure and the
average maturity of this portfolio in response to recent instability in global
markets.

UNBC has substantially reduced its cross-border outstandings. We reduced
outstandings to Japan, Korea, Malaysia, Thailand, Vietnam, Singapore, Indonesia,
the Philippines, China and Hong Kong by $1 billion to $1.6 billion at September
30, 1998 compared to $2.6 billion at December 31, 1997. A substantial portion of
the outstandings are related to the International Banking Group. Management
continues to closely monitor its credit exposure in international markets.

International Banking's strategy is to improve its global operations by
reducing costs and improving productivity. It competes with both U.S. and
foreign banks. Approximately 25 U.S. banks compete with the group to provide
correspondent banking and trade-related services to Asian banks. The group's
primary competitors include First Union, Bank of New York, Chase Manhattan,
Citibank, Bank of America, and Bank of Hawaii.

OTHER BUSINESS ACTIVITIES

UNBC also conducts business activities with certain customers through other
organizational units of the bank.

The Pacific Rim Corporate Group specializes in providing a range of credit,
deposit, and investment management products and services to companies in the
United States that are affiliated with companies headquartered outside the
United States, mostly in Japan. Average assets of this group for the nine months
ended September 1998 were $811 million.

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, interest
rate swaps, caps and floors. Additionally, it originates debt instruments for
bank eligible issuers, places debt securities, as well as the bank's own
liabilities, with institutional investors and trades debt instruments in the
secondary market. This group also manages the market-related risks of UNBC as
part of its responsibilities for asset/liability management. It is also
responsible for maintaining the bank's investment securities portfolio.

OPERATING STRATEGY

We focus our strategy on the following:

- CAPITALIZE ON STRONG POSITION IN CORE CALIFORNIA MARKET. We believe
that one of our primary strategic strengths is our established position
in the attractive California bank market. California is the largest
state in the United States, with over 32 million residents and nearly
$1 trillion in gross state product. Based on both total assets and
total deposits in California, we are the third largest commercial bank
in California, and we are among the oldest banks on the West Coast. We
serve approximately one million households and small businesses, with
244 full-service branches in California.

- STRENGTHEN CONSUMER BANKING FRANCHISE. We offer a distinctive
combination of traditional community bank service with a large branch
network and a broad array of products. We are seeking to increase the
number of consumer households we serve, and we are simultaneously
broadening the range of financial products and services we provide to
existing customers. We are also adding to the number of households we
serve by offering product and service delivery alternatives, including
online banking, video kiosks and telephone-based services. We are also
obtaining new customers with the successful use of targeted direct mail
promotions. In an effort to offer our customers more loan and deposit
products to meet their financial services needs, we

72
<PAGE>

have installed a new computer-driven sales system designed to foster
cross-selling. The new system has been installed in 40 of our branches,
and we anticipate full implementation within 18 months. We are seeking
to increase the efficiency of our consumer banking business by
implementing pricing that encourages our customers to use alternative
delivery systems. We also plan to expand the franchise through new
branch openings and the possible acquisition of community banks in
targeted markets.

- FOCUS COMMERCIAL BANKING EFFORTS ON SPECIFIC INDUSTRIES AND
COMPANIES. We are targeting our commercial banking activities on
industries and companies for which we can reasonably expect to be one
of a customers' principal banks. Our emphasis is on relationship
management and meeting a large part of our targeted customers' credit
and depository needs. Our commercial banking activities include certain
industry specialties, such as communications, media and energy. We have
been successful in increasing our role as agent and/or underwriter in
syndicated loans to these specialized industry customers. We intend to
broaden our syndication efforts to include other markets we serve, such
as real estate finance and middle market companies. We also operate in
certain niche markets for providing depository and cash management
services. These niche markets include title and escrow companies,
financial institutions, retailers and bankruptcy trustees.

- DIVERSIFY REVENUE SOURCES AND EXPAND FEE-BASED BUSINESS. We are seeking
to diversify our revenue sources by expanding our fee-based businesses,
with a particular emphasis on our trust and asset management
businesses. We are working with The Bank of Tokyo-Mitsubishi to
distribute our proprietary HighMark mutual funds offshore and to serve
as a sub-advisor for funds managed by them in Japan. We intend to
expand the activities of our brokerage and insurance businesses by
further penetrating our existing client base. We expanded our private
banking business in 1998 to include 15 offices, and we intend to expand
our third-party distribution network, which provides 401(k) valuation
and record-keeping services, to insurance companies, investment
managers, brokers and mutual funds. Our non-interest income, net of
gain on the sale of our credit card portfolio, has increased from 26%
of total revenue in 1995 to 28% of total revenue for the nine-month
period ended September 30, 1998. For the nine-month period ended
September 30, 1997 to the nine-month period ended September 30, 1998,
non-interest income, net of gain on the sale of our credit card
portfolio, increased from $342.6 million to $389.9 million.

- EMPHASIZE QUALITY CUSTOMER SERVICE. We seek to continue to provide
highly responsive customer service to create and maintain long-term
relationships with clients who are often underserved by larger banks.
We intend to continue to capitalize on the high quality of our customer
service, taking advantage of any changes in service levels caused by
recent increases in bank merger activity in the California market.

- MAINTAIN HIGH LENDING STANDARDS AND STRONG ASSET QUALITY PROFILE. We
strive to maintain strong asset quality through our underwriting
standards, credit policies and ongoing credit reviews of our existing
loan portfolio. These criteria, along with the recent strength of the
California economy, have resulted in our current high quality
portfolio. At September 30, 1998, our ratio of non-performing assets to
total assets was 0.26%, or the seventh lowest of the 30 largest
commercial banks in the United States. In addition, as of September 30,
1998, our ratio of reserves to total loans was 2.02%, or the eighth
highest of the 30 largest commercial banks in the United States. At
September 30, 1998, no industry concentration exceeded 10% of our total
commercial, financial and industrial loans. Additionally, at September
30, 1998, we had a limited number of borrowers with larger loans. We
had only 10 borrowers with total outstanding balances of over $50
million, and only one borrower with a total outstanding balance of over
$75 million.

- IDENTIFY STRATEGIC BUSINESSES AND CONSIDER POTENTIAL ACQUISITIONS OR
DIVESTITURES. We view selective acquisitions and divestitures, as well
as internal growth, as the primary means to increase and

73
<PAGE>

enhance our core businesses. We will consider acquisitions of banks and
other financial service businesses that will increase our presence in
existing markets or allow us to expand into contiguous markets. We will
also consider acquisitions in other complementary financial service
businesses in which we believe there exists superior growth potential.
In addition, we will consider exiting businesses that do not meet our
core business criteria. Our strategic business evaluation process
focuses on historical financial performance, the competitive
environment, future growth potential and regulatory considerations.

- IMPROVE OPERATING EFFICIENCY.

- ATTAIN NEW FINANCIAL PERFORMANCE TARGETS.

74
<PAGE>

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The following table presents certain information with respect to the
directors and executive officers of UNBC as of the date of this prospectus.

<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------ --------- ----------------------------------------------------------
<S> <C> <C>
Kaoru Hayama........................ 64 Chairman of the Board
Takahiro Moriguchi.................. 54 President and Chief Executive Officer
Yoshihiko Someya.................... 52 Deputy Chairman of the Board
Richard C. Hartnack................. 53 Vice Chairman of the Board
Robert M. Walker.................... 57 Vice Chairman of the Board
Peter R. Butcher.................... 58 Executive Vice President and Chief Credit Officer
Katsuyoshi Hamahashi................ 49 Executive Vice President and Treasurer
David I. Matson..................... 54 Executive Vice President and Chief Financial Officer
Magan C. Patel...................... 61 Executive Vice President
Charles L. Pedersen................. 55 Executive Vice President
Michael A.C. Spilsbury.............. 49 Executive Vice President
Ikuzo Sugiyama...................... 49 Executive Vice President
Philip M. Wexler.................... 60 Executive Vice President
Richard D. Farman................... 63 Director
Stanley F. Farrar................... 55 Director
Herman E. Gallegos.................. 68 Director
Jack L. Hancock..................... 68 Director
Harry W. Low........................ 67 Director
Mary S. Metz........................ 61 Director
Raymond E. Miles.................... 66 Director
J. Fernando Niebla.................. 69 Director
Sidney R. Petersen.................. 68 Director
Carl W. Robertson................... 62 Director
Henry T. Swigert.................... 68 Director
Tsuneo Wakai........................ 72 Director
Hiroshi Watanabe.................... 57 Director
Blenda J. Wilson.................... 57 Director
Kenji Yoshizawa..................... 66 Director
</TABLE>

KAORU HAYAMA. Mr. Hayama has served as Chairman of UNBC and the bank since
September 1998. Prior to that he served as Deputy President and Senior Managing
Director of The Bank of Tokyo-Mitsubishi from April 1996 until June 1998. From
June 1994 to April 1996, Mr. Hayama served as Deputy President of the former
Bank of Tokyo, Ltd., and from June 1992 to June 1994, he served as Senior
Managing Director of the Americas for the former Bank of Tokyo, Ltd. and as
Chairman and CEO of the Bank of Tokyo Trust Company. From June 1986 to June
1992, he served as General Manager of the former Bank of Tokyo's Planning
Division. Mr. Hayama was elected to the former Bank of Tokyo, Ltd.'s Board of
Directors in June 1986, and he was elected Managing Director in June 1988 and
Senior Managing Director in June 1992.

TAKAHIRO MORIGUCHI. Mr. Moriguchi has served as President and Chief
Executive Officer of UNBC and the bank since May 1997. Prior to that he served
as Vice Chairman and Chief Financial Officer of UNBC and the bank from April
1996 to May 1997 and as Vice Chairman and Chief Financial Officer of the former
Union Bank from June 1993 until March 1996. From May 1992 to May 1993, Mr.
Moriguchi served as General Manager of the former Bank of Tokyo, Ltd.'s Capital
Markets Division No. 2, and from July 1988 to April 1992, as President and
Managing Director of the former Bank of Tokyo Capital Markets, Ltd., London.

75
<PAGE>

He has served as a director of The Bank of Tokyo-Mitsubishi since April 1996 and
he served as a director of the former Bank of Tokyo, Ltd. from June 1995 to
April 1996. Mr. Moriguchi has served as a director of UNBC since June 1993.

YOSHIHIKO SOMEYA. Mr. Someya has served as Deputy Chairman, Credit and
Administration, and Trust and Private Financial Services Group since July 1998.
He served as Executive Vice President, Credit Management and Support Liaison
from March 1998 to July 1998. Prior to that he served as Deputy General Manager,
The Bank of Tokyo-Mitsubishi Osaka Branch from June 1996 to March 1998. From
June 1995 to May 1996, Mr. Someya served as the General Manager of The Bank of
Tokyo-Mitsubishi's Financial Institutions Division, and from June 1993 to May
1995, he served as Director and General Manager, Management Planning Division of
DC Card Co., Ltd., a subsidiary of The Mitsubishi Bank, Limited. In addition,
Mr. Someya served as General Manager of Mitsubishi Bank's Tameike Branch from
May 1991 to May 1993, and from May 1987 to January 1991, he served as Vice
President, Corporate Management, of the former Bank of California, N.A.

RICHARD C. HARTNACK. Mr. Hartnack has served as Vice Chairman and head of
the Community Banking Group of UNBC and the bank since April 1996. Prior to that
he served as Vice Chairman of the former Union Bank from June 1991 until March
1996, and from mid-1987 to June 1991, he served as Executive Vice President and
head of the Community Bank Group, First National Bank of Chicago. Mr. Hartnack
has served as a director of UNBC since June 1991.

ROBERT M. WALKER. Mr. Walker has served as Vice Chairman and head of the
Commercial Financial Services Group for UNBC and the bank since April 1996 and
as head of the Corporate and Real Estate Banking Group for UNBC and the bank
since July 1996. Prior to that Mr. Walker served as Vice Chairman and head of
the Commercial Financial Services Group of the former Union Bank from July 1992
until March 1996. From February 1992 to July 1992, he served as Vice Chairman
and Chief Credit Officer of Valley National Bank, and from August 1988 to
February 1992, he served as Senior Vice President and Chief Credit Officer,
Valley National Bank. Mr. Walker has served as a director of UNBC since July
1992.

PETER R. BUTCHER. Mr. Butcher has served as Executive Vice President,
Credit Management Group, of UNBC and the bank since April 1996 and as Chief
Credit Officer since July 1998. Prior to that he served as Executive Vice
President and Chief Credit Officer of the former BanCal Tri-State Corporation
and former Bank of California, N.A. from July 1993 until March 1996, and from
March 1992 to July 1993, Mr. Butcher served as Executive Vice President of
Society National Bank. From 1990 to 1992, he served as Executive Vice President
and Chief Credit Policy Officer, Ameritrust Corporation. He also served as
Principal of ICON Associates from 1989 to 1990, and he served in various
positions with Midland Bank PLC, London, England, from 1956 to 1988.

KATSUYOSHI HAMAHASHI. Mr. Hamahashi has served as head of the Global
Markets Group of UNBC and the bank since October 1998. He also has served as
Executive Vice President and Treasurer of UNBC and the bank since April 1996.
Prior to that he served as Executive Vice President and Treasurer of the former
Union Bank from February 1996 to March 1996 and as Senior Vice President and
Treasurer of the former Union Bank from February 1993 to February 1996. From
October 1989 to January 1993, Mr. Hamahashi served as Deputy General Manager,
Money Market Planning Division of the former Bank of Tokyo, Ltd.

DAVID I. MATSON. Mr. Matson has served as Executive Vice President and
Chief Financial Officer of UNBC and the bank since August 1997 and July 1998,
respectively. Prior to that he served as Director of Finance of UNBC and the
bank from August 1997 until July 1998 and as Executive Vice President and head
of the Institutional and Deposit Markets Division from April 1996 until July
1997. From January 1994 to March 1996, Mr. Matson served in the same capacity at
the former Union Bank. Mr. Matson held various

76
<PAGE>

positions at the former Union Bank, including in the middle market, corporate,
leasing, merchant banking and cash management divisions, beginning in 1976. He
also served as Controller of the former Union Bank for seven years during that
time.

MAGAN C. PATEL. Mr. Patel has served as Executive Vice President and head
of the International Banking Group of UNBC and the bank since April 1996. Prior
to that he served as Executive Vice President, International Banking Group, of
the former Bank of California, N.A. from 1985 to 1996.

CHARLES L. PEDERSEN. Mr. Pedersen has served as Executive Vice President
and head of the Systems, Technology and Item Processing Group of UNBC and the
bank since April 1996. Prior to that he served as Senior Vice President and head
of the Bank Operations and Automation Group of the former Union Bank from
February 1991 to March 1996, becoming Executive Vice President in September
1992. He served as a division head for the former Union Bank's Systems and Item
Processing in the Bank Operations and Automation Group from November 1988 to
February 1991.

MICHAEL A. C. SPILSBURY. Mr. Spilsbury has served as Executive Vice
President and head of the Operations and Services Group of UNBC and the bank
since April 1996. Prior to that he served as Executive Vice President, Resources
and Services, with the former Bank of California, N.A. from January 1992 through
March 1996. Mr. Spilsbury served as Senior Vice President in the Banking Group
of the former Bank of California, N.A. from January 1989 to January 1992.

IKUZO SUGIYAMA. Mr. Sugiyama has served as Executive Vice President and
head of the Pacific Rim Corporate Group of UNBC and the bank and as General
Manager of the Los Angeles Branch of The Bank of Tokyo-Mitsubishi since July
1997. Prior to that he served as Chief Manager, Corporate Banking Division No. 3
under Corporate Banking Group No. 1 of BTM from April 1996 to July 1997. From
April 1994 to March 1996, Mr. Sugiyama served as Deputy General Manager of the
Marunouchi Office of the former Bank of Tokyo, Ltd., and from May 1991 to March
1994, he served as Deputy General Manager of the Los Angeles Agency of the
former Bank of Tokyo, Ltd. and as Senior Vice President of the Japanese
Corporate Department-LA of the former Union Bank. From August 1989 to May 1991,
he served as Manager, Loan Department, of the former Bank of Tokyo, Ltd.'s Los
Angeles Office, and from September 1988 to August 1989, he served as Vice
President, Japanese Corporate Department of California First Bank in Los
Angeles.

PHILIP M. WEXLER. Mr. Wexler has served as Executive Vice President and
head of the Specialized Lending Group of UNBC and the bank since April 1996.
Prior to that he served as Executive Vice President and General Manager of the
Specialized Lending Group of the former Union Bank from October 1987 through
March 1996.

RICHARD D. FARMAN. Mr. Farman has served as Chairman and Chief Executive
Officer of Sempra Energy since June 1998. Prior to that he served as President
and Chief Operating Officer of Pacific Enterprises from September 1993 to June
1998. Mr. Farman also served as Chief Executive Officer of Southern California
Gas Company, a subsidiary of Pacific Enterprises, from January 1989 through
December 1994. Mr. Farman has been a director of UNBC since November 1988.

STANLEY F. FARRAR. Mr. Farrar has been a partner of Sullivan & Cromwell
since October 1984. He served as a director of the former BanCal Tri-State
Corporation and the former Bank of California, N.A. from June 1984 until March
1996. Mr. Farrar has been a director of UNBC since April 1996.

HERMAN E. GALLEGOS. Mr. Gallegos has been an independent management
consultant since January 1982. He has served as a director of SBC Communications
Inc. and its predecessors since 1974 and The California Endowment since May
1996. Mr. Gallegos has been a director of UNBC since November 1988.

77
<PAGE>

JACK L. HANCOCK. Mr. Hancock was Executive Vice President of Pacific Bell
from February 1988 until December 1993. He has been a director of Whittaker
Corporation since February 1994 and of MGC Communications and BServ, Inc., since
July 1996. Mr. Hancock has been a director of UNBC since July 1994.

HARRY W. LOW. Justice Low has been a mediator and arbitrator with Judicial
Arbitration & Mediation Services/Endispute, Inc. (JAMS/Endispute) since March
1992. He was the Presiding Justice for the State of California Court of Appeal,
1st District, Division 5, from 1982 until his retirement in January 1992. Judge
Low has been a director of UNBC since January 1993.

MARY S. METZ. Dr. Metz has served as President and Chief Executive Officer
of the S.H. Cowell Foundation since January 1, 1999, and as President Emerita of
Mills College since June 1990. Prior to that she served as the Dean of
University Extension, University of California, Berkeley, from July 1991 to June
1998. Dr. Metz has served as a director of SBC Communications, Inc. and its
predecessors since July 1986, Pacific Gas & Electric Co. since March 1986, and
Longs Drugs Stores since February 1991. Dr. Metz has been director of UNBC since
November 1988.

RAYMOND E. MILES. Professor Miles has been a Professor at the Haas School
of Business at the University of California, Berkeley, since July 1963. He
served as a director of the former BanCal Tri-State Corporation and the former
Bank of California, N.A. from January 1987 to March 1996. He has served as a
director of Granite Construction Co., Inc. since May 1988. Professor Miles has
been a director of UNBC since April 1996.

J. FERNANDO NIEBLA. Mr. Niebla has served as Chairman and Chief Executive
Officer of Infotec Commercial Systems since December 1995. From September 1979
to June 1996, he served as Chairman and Chief Executive Officer of Infotec
Development, Inc. He also served as a director of the former BanCal Tri-State
Corporation and the former Bank of California, N.A. from July 1994 through March
1996. Mr. Niebla has been a director of UNBC since April 1996.

SIDNEY R. PETERSEN. Mr. Petersen has been a consultant and private investor
since August 1984. He served as Chairman and Chief Executive Officer of Getty
Oil Company until his retirement in July 1984. He has been a director of Avery
Dennison Corporation since December 1981, NICOR, Inc. since May 1987, Group
Technologies Corporation since July 1994, and Seagull Energy Corporation since
October 1996. Mr. Petersen has been a director of UNBC since November 1988.

CARL W. ROBERTSON. Mr. Robertson has been the Managing Director of Warland
Investments Company since January 1985. He served as a director of the former
BanCal Tri-State Corporation and the former Bank of California, N.A. from April
1975 to March 1996. Mr. Robertson has been a director of UNBC since April 1996.

HENRY T. SWIGERT. Mr. Swigert has served as Chairman of ESCO Corporation
since January 1979. From April 1989 until April 1996, he served as a director of
the former BanCal Tri-State Corporation and the former Bank of California, N.A.
Mr. Swigert has been a director of UNBC since April 1996.

TSUNEO WAKAI. Mr. Wakai has been the Senior Advisor of The Bank of
Tokyo-Mitsubishi since January 1998. Prior to that he was Chairman of the Board
of The Bank of Tokyo-Mitsubishi from April 1996 through December 1997, and the
President of the former Mitsubishi Bank, Ltd. from June 1990 through March 1996.
Mr. Wakai has been a director of UNBC since April 1996.

HIROSHI WATANABE. Mr. Watanabe has served as Chief Executive Officer of The
Bank of Tokyo-Mitsubishi, Ltd., Headquarters for the Americas, since July 1998.
Prior to that he served as Managing Director and General Manager, Corporate
Planning Division, of The Bank of Tokyo-Mitsubishi from April 1996 to July 1998,
and he served in the same capacity in the Planning Division of the former Bank
of Tokyo, Ltd. from June 1995 to April 1996. Mr. Watanabe served as a director
and General Manager of the former

78
<PAGE>

Bank of Tokyo, Ltd. from June 1992 to June 1995, as General Manager, Planning
Division of the former Bank of Tokyo, Ltd. from June 1991 to June 1992, and as
General Manager, Shinjuku Office, from February 1990 to June 1991. Mr. Watanabe
served as Managing Director, Bank of Tokyo International Limited and as Senior
Counselor for the Resident Senior Managing Director for Europe from April 1988
to February 1990.

BLENDA J. WILSON. Dr. Wilson has served as the President of California
State University, Northridge, since September 1992. She served as Chancellor of
the University of Michigan-Dearborn from 1988 to 1992. Dr. Wilson has been a
director of UNBC since July 1993.

KENJI YOSHIZAWA. Mr. Yoshizawa has served as the Deputy President and
director of The Bank of Tokyo-Mitsubishi, Ltd. since April 1996. Prior to that
he served as Deputy President and director of the former Bank of Tokyo, Ltd.
from June 1990 through March 1996 and as Chairman and Chief Executive Officer of
the former Bank of Tokyo Trust Company from September 1989 to September 1990.
Mr. Yoshizawa served as a Senior Managing Director of the former Bank of Tokyo,
Ltd. from June 1988 to June 1990, and as Managing Director thereof from April
1986 to June 1988. Mr. Yoshizawa has been a director of UNBC since September
1989.

EXECUTIVE COMPENSATION

SPECIFIED OFFICERS

The following summarizes the compensation that UNBC paid to its President
and Chief Executive Officer, the Deputy Chairman and two Vice Chairmen of the
Board (collectively, the "Specified Officers") in 1998 and 1997. The Executive
Compensation and Benefits Committee of the Board approves all elements of the
compensation and benefits for these individuals, as well as certain other
executive officers of UNBC. Messrs. Moriguchi and Someya are serving as
executive officers of UNBC on a rotational assignment from The Bank of
Tokyo-Mitsubishi. The Committee therefore takes into account the applicable
compensation policies of The Bank of Tokyo-Mitsubishi when determining their
compensation during their tenure at UNBC. As expatriate officers, they are not
eligible to receive annual bonuses, restricted stock awards, stock option
grants, or performance share awards.

Mr. Moriguchi was elected President and Chief Executive Officer of UNBC and
the bank in May 1997, replacing Mr. Kanetaka Yoshida. Mr. Moriguchi's salary
totaled $329,735 in 1998, and $378,785 in 1997.

Mr. Someya was elected Deputy Chairman of the Board in July 1998, replacing
Mr. Minoru Noda. Mr. Someya's salary for the period March 1998 through December
1998 totaled $296,497. Mr. Someya was employed by The Bank of Tokyo-Mitsubishi
prior to that time.

Messrs. Hartnack and Walker have been serving as Vice Chairmen since April
1996. Their salaries totaled $415,000 and $ 415,000, respectively, for 1998,
which does not include bonuses, as UNBC will not determine such compensation
until first quarter of 1999. In 1998, Messrs. Hartnack and Walker each received
a grant of 19,500 stock options and a target award of 6,600 performance shares,
each on a post-split basis. Mr. Walker also was awarded 18,000 shares, on a
post-split basis, of restricted stock. In 1997, UNBC paid each of Messrs.
Hartnack and Walker $353,842 in salary, $240,000 in bonuses and $53,100 in
restricted stock awards.

COMPENSATION COMPONENTS

The following summarizes the main components of our compensation package
offered to executive officers of UNBC, including the Specified Officers and
certain Executive and Senior Vice Presidents of UNBC.

BASE SALARY. The Executive Compensation and Benefits Committee establishes
base salaries for the Specified Officers as well as for other executives of
UNBC. The Committee considers comparable positions at other banks, taking into
account the relative responsibilities of the executives involved. In general, we

79
<PAGE>

target base salaries at the median competitive levels to attract and retain
highly experienced and qualified executives. Where the responsibilities of
executive positions at UNBC exceed those typically found among other banks, or
if the executive plays a particularly critical role at UNBC, we may target base
salaries above median competitive levels. In determining salaries, the Executive
Compensation and Benefits Committee also takes into account individual
leadership and vision, experience and performance, as well as internal equity
relative to other positions within UNBC, and specific issues particular to UNBC
and the position involved.

ANNUAL BONUSES. The purpose of the annual bonus plan is to provide a median
competitive annual incentive opportunity at target performance levels. Target
awards under the plan represent the median of the competitive market for
comparable executive positions at banks of similar size and focus. Actual awards
are determined based on the performance of UNBC and the individual participant.

For 1997, participating executives were eligible to earn annual bonuses
under our Senior Management Bonus Plan based on UNBC's achievement of
predetermined return on assets and net income performance objectives, as well as
individual performance and contributions.

For 1998, participants under the Senior Management Bonus Plan include all
executives at the Senior Vice President level and above (other than expatriate
officers) with responsibility for matters that impact our overall performance.
We assign participants target bonuses comparable to median competitive levels.
The size of the bonus fund is based on our performance on two measures: return
on assets and net income, in each case relative to our 1998 financial plan. The
bonus fund size may vary up to two times aggregate target bonuses, based on our
performance on these two measures. In addition, the Executive Compensation and
Benefits Committee may increase or decrease the bonus fund within certain
limits, based on our performance in other areas, including strategic and
organizational achievements, other financial measures, and relative performance
against our peers. We base individual bonus awards on individual performance and
contributions.

LONG TERM INCENTIVE PROGRAM. We provide long-term incentive awards to
individuals who can directly impact our long-term performance and value. Target
awards are comparable to median competitive levels. Eligible participants may
receive grants consisting of one or more types of long-term incentives,
including stock options, restricted stock, and performance shares. We base
grants on an individual's scope and level of responsibilities within UNBC. The
grants reflect competitive practices for similar positions in peer companies. We
determine performance share awards based on our performance compared to the
performance of our peers.

STOCK OPTIONS AND RESTRICTED STOCK. We believe in tying rewards for
eligible executives directly to our long-term success and increases in
shareholder value through stock option grants and restricted stock awards. These
rewards also enable executives to develop and maintain a stock ownership
position in our common stock. We target the amounts of long-term incentives at
median competitive levels, taking into account the responsibilities of the
officers involved. It is our intention to place greater emphasis on the use of
stock options rather than restricted stock in future incentive awards.

The UnionBanCal Corporation Management Stock Plan authorizes us to issue up
to 6,600,000 shares of our common stock to certain of our employees and our
subsidiaries' employees as grants of stock options and awards of restricted
stock. The 6,600,000 share maximum represented approximately 3.8 percent of our
common stock outstanding as of December 31, 1998. Canceled or forfeited options
and restricted stock become available for future grants. Expatriate officers are
not eligible to participate in the UnionBanCal Corporation Management Stock
Plan.

The Executive Compensation and Benefits Committee determines the term of
each stock option grant, up to a maximum of ten years from the date of grant.
The exercise price must not be less than the fair market

80
<PAGE>

value on the grant date. Options vest in thirds over three years, provided that
the employee has completed the specified continuous service requirement, or
earlier if the employee dies or is permanently and totally disabled or retires
under certain grant, age and service conditions.

In general, awards of restricted stock vest in fourths over four years from
the grant date, provided that the employee has completed the specified
continuous service requirement, or earlier if the employee dies or is
permanently and totally disabled or retires under certain grant, age and service
conditions. Restricted stockholders have the right to vote their restricted
shares and to receive dividends.

1997 UNIONBANCAL CORPORATION PERFORMANCE SHARE PLAN. In 1997, we adopted
the 1997 UnionBanCal Corporation Performance Share Plan. Eligible participants
may earn performance share awards to be redeemed in cash three years after the
date of grant. Performance shares are linked to shareholder value in two ways:
(1) the market price of our common stock, and (2) performance as measured on
return on assets, a performance measure closely linked to value creation.
Expatriate officers are not eligible to participate in the UnionBanCal
Corporation Performance Share Plan.

EMPLOYMENT AGREEMENTS

Mr. Hartnack entered into a new Employment Agreement with the bank in
January 1998, which replaced the agreement he entered into when he began
employment with us in 1991. In addition to other benefits, Mr. Hartnack is
entitled, under certain circumstances, to severance benefits including
separation pay and benefits for a minimum of two years treatment as though he
were eligible for early retirement benefits, if not yet eligible, and vesting in
full of the target award amount under his outstanding grants of performance
shares under the UNBC Performance Share Plan. Additionally, Mr. Hartnack will
receive a pension supplement which will provide the actuarial equivalent of the
extra amount Mr. Hartnack would receive under the Union Bank of California
Retirement Plan if the limitations on benefits set forth in Sections 415 and
401(a)(17) of the Internal Revenue Code did not otherwise apply. In addition,
the supplement will provide the actuarial equivalent of the extra amount Mr.
Hartnack would receive if the Union Bank of California Retirement Plan had taken
into account Mr. Hartnack's nine previous years of service with the First
National Bank of Chicago. The supplement will be reduced by the actuarial
equivalent of the lump sum distributions Mr. Hartnack has received from the
qualified and non-qualified plans of First National Bank of Chicago.

Mr. Walker entered into a new Employment Agreement with the bank in January
1998, which replaced the agreement he entered into when he began employment with
us in 1992. In addition to other benefits, Mr. Walker is entitled, under certain
circumstances, to severance benefits consisting of separation pay benefits for a
minimum of two years and vesting in full of the target award amount under his
outstanding grants of performance shares under the UNBC Performance Shares Plan.
Additionally, Mr. Walker will receive a supplemental pension which will provide
the actuarial equivalent of the extra amount Mr. Walker would receive under the
Union Bank of California Retirement Plan if the limitations on benefits set
forth in Sections 415 and 401(a)(17) of the Internal Revenue Code did not
otherwise apply. This supplement also credits Mr. Walker with an additional five
years of credited service.

81
<PAGE>
SELLING SHAREHOLDER

The selling shareholder is The Bank of Tokyo-Mitsubishi, Ltd. UNBC is The
Bank of Toyko-Mitsubishi's largest overseas subsidiary. The Bank of
Tokyo-Mitsubishi was created through the merger, on April 1, 1996, of Bank of
Tokyo, Ltd. and The Mitsubishi Bank, Limited. In connection with that merger, on
April 1, 1996, Union Bank, formerly majority owned by The Bank of Tokyo,
combined with BanCal Tri-State Corporation, formerly wholly owned by Mitsubishi
Bank. As a result, The Bank of Tokyo-Mitsubishi came to own over 80% of UNBC.
The Bank of Tokyo-Mitsubishi has stated that it intends to maintain its majority
stake in UNBC after the closing of this offering and the related transactions.
Since 1996, a number of officers of The Bank of Tokyo-Mitsubishi have served in
management positions with us and/or served on our Board of Directors. The
following table presents certain information about the shares of our common
stock that are owned by The Bank of Tokyo-Mitsubishi as of the date of this
prospectus:

<TABLE>
<CAPTION>
SHARES OWNED SHARES OWNED
PRIOR TO THE OFFERING AFTER THE OFFERING
-------------------------- SHARES BEING -------------------------
NAME OF SELLING SHAREHOLDER NUMBER PERCENT OFFERED NUMBER PERCENT
- --------------------------------------------------- ------------- ----------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
The Bank of Tokyo-Mitsubishi, Ltd.................. 142,925,616(1) 81.6% (2) (2 (3) %(2)(3)
7-1, Marunouchi 2-chome,
Chiyoda-ku, Tokyo, 100, Japan
</TABLE>

- ---------

(1) After giving effect to the December 1998 3-for-1 common stock split.

(2) Assuming the over-allotment option granted to the U.S. underwriters is not
exercised.

(3) Assuming the sale of million shares of common stock to UNBC pursuant to
the repurchases.

DESCRIPTION OF CAPITAL STOCK

The following descriptions of the capital stock of UNBC are not complete.
You should also read our Amended and Restated Articles of Incorporation, our
Bylaws and the California General Corporation Law ("CGCL"). We have filed copies
of our Articles of Incorporation and Bylaws with the SEC. These documents are
incorporated by reference into the registration statement of which this
prospectus is a part.

UNBC has 305,000,000 shares of capital stock authorized, of which
300,000,000 shares are common stock and 5,000,000 shares are preferred stock. As
of December 31, 1998, shares of our common stock were issued and
outstanding, and no shares of our preferred stock were issued or outstanding.

COMMON STOCK

Each holder of shares of our common stock is entitled to one vote for each
share held on all matters to be voted upon by our shareholders. The holders of
outstanding shares of our common stock are entitled to receive ratably such
dividends out of assets legally available therefor as our Board of Directors may
determine. Upon liquidation or dissolution of UNBC, the holders of our common
stock will be entitled to share ratably in the assets of UNBC legally available
for distribution to shareholders after payment of liabilities. If we have any
preferred stock outstanding, holders of the preferred stock may be entitled to
dividend and/or liquidation preferences. In either such case, we must pay the
applicable distribution to the holders of our preferred stock before we may pay
them to the holders of our common stock. Holders of our common stock have no
conversion, sinking fund, redemption, preemptive or subscription rights. In
addition, our common stock does not have cumulative voting rights. Shares of our
common stock are not subject to further calls or assessments by UNBC.

PREFERRED STOCK

UNBC is authorized to issue 5,000,000 shares of preferred stock, none of
which currently is issued or outstanding. Our Board of Directors has the
authority to determine and alter the rights, preferences,

82
<PAGE>

privileges and restrictions granted to or imposed upon any wholly unissued
series of our preferred stock and to fix the number of shares, dividend rights,
conversion or exchange rights, voting rights, redemption rights, liquidation
preferences, and sinking funds of any series of our preferred stock. The
authorized shares of our preferred stock will be available for issuance without
further action by our shareholders, unless shareholder action is required by
applicable law or by the rules of a stock exchange on which any series of UNBC's
stock may be listed. The holders of our preferred stock will have the right to
vote separately as a class on any proposal involving fundamental changes in the
rights of holders of such preferred stock pursuant to the CGCL.

This authority of our Board of Directors gives it the power to approve the
issuance of a series of preferred stock that could, depending on its terms,
either impede or facilitate the completion of a merger, tender offer or other
takeover attempt. For example, the issuance of new shares might impede a
business combination if the terms of those shares include voting rights that
would enable a holder to block business combinations. Conversely, the issuance
of new shares might facilitate a business combination if those shares have
general voting rights sufficient to satisfy an applicable percentage vote
requirement.

If applicable, the terms on which our preferred stock may be convertible
into or exchangeable for our common stock or other securities of UNBC will be
set forth in the applicable Certificate of Determination. The terms will include
provisions as to whether conversion or exchange is mandatory, at the option of
the holder, or at the option of UNBC, and may include provisions that adjust the
number of shares of our common stock or other securities of ours that the
holders of our preferred stock may receive.

WRITTEN CONSENTS

Our Bylaws provide that any shareholder action can be taken by written
consent of the shareholders. As a result, The Bank of Tokyo-Mitsubishi, which
owns a majority of shares of our common stock, can take action by written
consent.

DIRECTORS' LIABILITY

Our Articles of Incorporation provide for indemnification of directors to
the fullest extent authorized by California law. Section 317 of the CGCL
contains provisions permitting, and in some situations requiring, California
corporations to provide indemnification to their directors and officers for
losses and litigation expenses incurred in connection with their service to the
corporation in those capacities.

TRANSFER AGENT AND REGISTRAR

Harris Trust Company of California acts as transfer agent and registrar for
our common stock.

83
<PAGE>

CERTAIN UNITED STATES FEDERAL TAX CONSEQUENCES
TO NON-UNITED STATES HOLDERS

The following is a general discussion of certain United States federal tax
consequences of the acquisition, ownership, and disposition of UNBC common stock
by a holder that, for United States federal income tax purposes, is not a
"United States person" (as defined below) (a "Non-United States Holder"). This
summary is based upon the United States federal tax law now in effect, which is
subject to change, possibly retroactively. This summary does not discuss all
aspects of United States federal taxation which may be important to particular
investors in light of their individual investment circumstances, such as
investors subject to special tax rules (E.G., financial institutions, insurance
companies, broker-dealers, and tax-exempt organizations). Prospective investors
are urged to consult their tax advisors regarding the United States federal tax
consequences of acquiring, holding, and disposing of UNBC common stock, as well
as any tax consequences that may arise under the laws of any foreign, state,
local, or other taxing jurisdiction.

For purposes of this discussion, a "United States person" means (i) a
citizen or resident of the United States, (ii) a corporation, partnership, or
other entity created or organized in the United States or under the laws of the
United States or of any political subdivision thereof, (iii) an estate the
income of which is includible in gross income for United States federal income
tax purposes regardless of its source, or (iv) a trust the administration of
which is subject to the primary supervision of a United States court and which
has one or more United States persons who have the authority to control all
substantial decisions of the trust.

DIVIDENDS

Dividends paid to a Non-United States Holder will generally be subject to
withholding of United States federal income tax at the rate of 30% unless the
dividend is effectively connected with the conduct of a trade or business in the
United States by the Non-United States Holder, in which case the dividend will
be subject to the United States federal income tax imposed on net income on the
same basis that applies to United States persons generally (and, with respect to
corporate holders and under certain circumstances, the branch profits tax).
Non-United States Holders should consult any applicable income tax treaties that
may provide for a reduction of, or exemption from, withholding taxes. For
purposes of determining whether tax is to be withheld at a reduced rate as
specified by a treaty, UNBC generally will presume that dividends paid on or
before December 31, 1999 to an address in a foreign country are paid to a
resident of such country. Under recently finalized Treasury regulations, which
in general apply to dividends paid after December 31, 1999, to obtain a reduced
rate of withholding under a treaty, a Non-United States Holder generally will be
required to provide an Internal Revenue Service Form W-8 certifying as to such
Non-United States Holder's entitlement to treaty benefits. Such regulations also
provide special rules to determine whether for treaty applicability purposes
dividends paid to a Non-United States Holder that is an entity should be treated
as paid to holders of interests in such entity.

GAIN ON DISPOSITION

A Non-United States Holder will generally not be subject to United States
federal income tax (including by way of withholding) on gain recognized on a
sale or other disposition of UNBC common stock unless (i) the gain is
effectively connected with the conduct of a trade or business in the United
States by the Non-United States Holder or (ii) in the case of a Non-United
States Holder who is a nonresident alien individual and holds UNBC common stock
as a capital asset, such holder is present in the United States for 183 or more
days in the taxable year of the disposition and certain other requirements are
met. Gain that is effectively connected with the conduct of a trade or business
in the United States by the Non-United States Holder will be subject to the
United States federal income tax imposed on net income on the same basis that
applies to United States persons generally (and, with respect to corporate
holders and under certain circumstances, the branch profits tax) but will not be
subject to withholding. Non-United States Holders should consult any applicable
income tax treaties that may provide for different rules.

84
<PAGE>

UNITED STATES FEDERAL ESTATE TAXES

UNBC common stock owned or treated as owned by an individual who is not a
citizen or resident (as specially defined for United States federal estate tax
purposes) of the United States on the date of death will be included in such
individual's estate for United States federal estate tax purposes, unless an
applicable estate tax treaty provides otherwise.

INFORMATION REPORTING AND BACKUP WITHHOLDING

Generally, UNBC must report annually to the United States Internal Revenue
Service and to each Non-United States Holder the amount of dividends paid to
such holder, and the tax withheld on such dividends, regardless of whether any
tax has been actually withheld. This information may also be made available to
the tax authorities of a country in which the Non-United States Holder resides.

Under current United States Treasury regulations, United States information
reporting requirements and backup withholding tax will generally not apply to
dividends paid on UNBC common stock to a Non-United States Holder at an address
outside the United States. Payments by a United States office of a broker of the
proceeds of a sale of UNBC common stock are subject to both backup withholding
at a rate of 31% and information reporting unless the holder certifies as to its
Non-United States Holder status under penalties of perjury or otherwise
establishes an exemption. Information reporting requirements (but not backup
withholding) will also apply to payments of the proceeds of sales of UNBC common
stock by foreign offices of United States brokers, or foreign brokers with
certain types of relationships to the United States, unless the broker has
documentary evidence in its records that the holder is a Non-United States
Holder and certain other conditions are met, or the holder otherwise establishes
an exemption.

Backup withholding is not an additional tax. Any amounts withheld under the
backup withholding rules will be refunded or credited against the Non-United
States Holder's United States federal income tax liability, provided that
certain required information is furnished to the United States Internal Revenue
Service.

The United States Treasury Department has promulgated final regulations
regarding the withholding and information reporting rules discussed above. In
general, such regulations do not significantly alter the substantive withholding
and information reporting requirements but unify current certification
procedures and forms and clarify reliance standards. The final regulations are
generally effective for payments made after December 31, 1999, subject to
certain transition rules.

85
<PAGE>
UNDERWRITERS

Under the terms and subject to the conditions contained in the Underwriting
Agreement dated the date of this prospectus, the U.S. underwriters named below,
for whom Morgan Stanley & Co. Incorporated, Lehman Brothers Inc., J.P. Morgan
Securities Inc. and Salomon Smith Barney Inc. are acting as U.S.
representatives, and the international underwriters named below for whom Morgan
Stanley & Co. International Limited, Lehman Brothers International (Europe),
J.P. Morgan Securities Ltd., Salomon Brothers International Limited and
Tokyo-Mitsubishi International plc. are acting as international representatives,
have severally agreed to purchase, and the selling shareholder has agreed to
sell to them, severally, the respective number of shares of common stock set
forth opposite the names of such underwriters below:

<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
- ------------------------------------------------------------------------------------------------------ -----------
<S> <C>
U.S. Underwriters:
Morgan Stanley & Co. Incorporated...................................................................
Lehman Brothers Inc.................................................................................
J.P. Morgan Securities Inc..........................................................................
Salomon Smith Barney Inc............................................................................
-----------
Subtotal............................................................................................
-----------
</TABLE>

<TABLE>
<S> <C>
International Underwriters:
Morgan Stanley & Co. International Limited......................................
Lehman Brothers International (Europe)..........................................
J.P. Morgan Securities Ltd......................................................
Salomon Brothers International Limited..........................................
Tokyo-Mitsubishi International plc..............................................
-----------
Subtotal........................................................................
-----------
Total.........................................................................
-----------
-----------
</TABLE>

The U.S. underwriters and the international underwriters are collectively
referred to as the "underwriters." The U.S. representatives and the
international representatives are collectively referred to as the
"representatives." The underwriters are offering the shares of common stock
subject to their acceptance of the shares from the selling shareholder and
subject to prior sale. The Underwriting Agreement provides that the obligations
of the several underwriters to pay for and accept delivery of the shares of
common stock offered hereby are subject to, among other conditions, the delivery
of legal opinions by their counsel. The underwriters are obligated to take and
pay for all of the shares of common stock offered hereby (other than those
covered by the U.S. underwriters' over-allotment option described below) if any
such shares are taken.

Pursuant to the Agreement between U.S. and International Underwriters, each
U.S. underwriter has represented and agreed that, with certain exceptions: (1)
it is not purchasing any shares for the account of anyone other than a United
States or Canadian person and (2) it has not offered or sold, and will not offer
or sell any shares or distribute any prospectus relating to the shares outside
the United States or Canada or to anyone other than a United States or Canadian
person. Each international underwriter has represented and agreed that, with
certain exceptions: (1) it is not purchasing any shares for the account of any
United States or Canadian person and (2) it has not offered or sold, and will
not offer or sell any shares or distribute any prospectus relating to the shares
in the United States or Canada or to any United States or Canadian person. With
respect to any underwriter that is both a U.S. underwriter and an international
underwriter, these representations and agreements (1) made by it in its capacity
as a U.S. underwriter apply only to it in its capacity as a U.S. underwriter and
(2) made by it in its capacity as an international underwriter apply only to

86
<PAGE>

it in its capacity as an international underwriter. The limitations described
above do not apply to, among other things, stabilization transactions or to
certain other transactions specified in the Agreement between U.S. and
International Underwriters. As used in this section, "United States or Canadian
person" means any national or resident of the United States or Canada, or any
corporation, pension, profit-sharing or other trust or other entity organized
under the laws of the United States or Canada or of any political subdivision
thereof, other than a branch located outside the United States and Canada of any
United States or Canadian person. "United States or Canadian person" includes
any United States or Canadian branch of a person who is otherwise not a United
States or Canadian person. All shares of common stock to be purchased by the
underwriters under the Underwriting Agreement are referred to herein as the
"shares."

Pursuant to the Agreement between U.S. and International Underwriters, sales
of shares may be made between U.S. underwriters and international underwriters.
The price of any shares so sold shall be the public offering price set forth on
the cover page hereof, in United States dollars, less an amount not greater than
$ a share.

Pursuant to the Agreement between U.S. and International Underwriters, each
U.S. underwriter has represented that it has not offered or sold, and has agreed
not to offer or sell, any shares in any province or territory of Canada or to,
or for the benefit of, any resident of any province or territory of Canada in
contravention of the securities laws of Canada. Each U.S. Underwriter has
represented that any offer or sale of shares in Canada will be made only
pursuant to an exemption from the requirement to file a prospectus in the
province or territory of Canada in which such offer or sale is made. Each U.S.
underwriter has further agreed to send to any dealer who purchases from it any
of the shares a notice stating in substance that, by purchasing such shares,
such dealer agrees that any offer or sale of shares in Canada will be made only
pursuant to an exemption from the requirement to file a prospectus in the
province or territory of Canada in which such offer or sale is made. Each dealer
will deliver to any other dealer to whom it sells any of such shares a notice
containing substantially the same Canadian selling restrictions.

Pursuant to the Agreement between U.S. and International Underwriters, each
international underwriter has represented and agreed that (1) it has not offered
or sold and, prior to the date six months after the closing date for the sale of
the shares to the international underwriters, will not offer or sell, any shares
to persons in the United Kingdom except to persons whose ordinary activities
involve them in acquiring, holding, managing or disposing of investments (as
principal or agent) for the purposes of their businesses or otherwise in
circumstances which have not resulted and will not result in an offer to the
public in the United Kingdom within the meaning of the Public Offers of
Securities Regulations 1995; (2) it has complied and will comply with all
applicable provisions of the Financial Services Act 1986 with respect to
anything done by it in relation to the shares in, from or otherwise involving
the United Kingdom; and (3) it has only issued or passed on and will only issue
or pass on in the United Kingdom any document received by it in connection with
the offering of the shares to a person who is of a kind described in Article
11(3) of the Financial Services Act 1986 (Investment Advertisements)
(Exemptions) Order 1996 (as amended) or is a person to whom such document may
otherwise lawfully be issued or passed on.

Pursuant to the Agreement between U.S. and International Underwriters, each
international underwriter has further represented that it has not offered or
sold, and has agreed not to offer or sell in Japan or to or for the account of
any resident of Japan any of the shares acquired in connection with the
distribution contemplated hereby. This limitation does not apply to offers or
sales to Japanese international underwriters or dealers and offers and sales
pursuant to any exemption from the registrations requirements of the Securities
and Exchange Law and otherwise in compliance with applicable provisions of
Japanese law. Each international underwriter has further agreed to send to any
dealer who purchases from it any of the shares a notice stating in substance
that, by purchasing such shares, such dealer agrees that any offer or sale in
Japan will be made only to Japanese international underwriters or dealers or
under an exemption from the registration requirements of the Securities and
Exchange Law and otherwise in compliance with applicable provisions of Japanese
law. Each dealer will send to any other dealer to whom it sells any of such
shares a notice containing substantially the same Japanese selling restrictions.

87
<PAGE>
The underwriters initially propose to offer part of the shares of common
stock directly to the public at the public offering price set forth on the cover
page hereof and part to certain dealers at a price that represents a concession
not in excess of $ a share under the public offering price. Any underwriter
may allow, and such dealers may reallow, a concession not in excess of $ a
share to other underwriters or to certain dealers. After the initial offering of
the shares of common stock, the offering price and other selling terms may from
time to time be varied by the representatives.

The selling shareholder has granted to the U.S. underwriters an option,
exercisable for 30 days from the date of this prospectus, to purchase up to an
aggregate of additional shares of common stock at the public offering
price set forth on the cover page hereof, less underwriting discounts and
commissions. The U.S. underwriters may exercise such option solely for the
purpose of covering overallotments, if any, made in connection with the offering
of the shares of common stock offered hereby. To the extent such option is
exercised, each U.S. underwriter will become obligated, subject to certain
conditions, to purchase the same percentage of such additional shares of common
stock as the number set forth next to such U.S. underwriter's name in the
preceding table bears to the total number of shares of common stock set forth
next to the names of all U.S. underwriters in the preceding table. If the
underwriter's option is exercised in full, the total price to the public for
this offering would be $ , the total underwriting discounts and
commissions would be $ and the total proceeds to Finance Trust I would be
$ .

Each of UNBC, The Bank of Tokyo-Mitsubishi, Ltd. and the directors,
executive officers, and certain other shareholders of UNBC has agreed, subject
to certain limited exceptions, that, without the prior written consent of Morgan
Stanley & Co. Incorporated on behalf of the underwriters, it will not, during
the period ending days after the date of this prospectus:

- offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option,
right, or warrant to purchase, lend, or otherwise transfer or dispose of,
directly or indirectly, any shares of common stock or any securities
convertible into or exercisable or exchangeable for common stock; or

- enter into any swap or other arrangement that transfers to another person,
in whole or in part, any of the economic consequences of ownership of the
common stock,

whether any such transaction described above is to be settled by delivery of
common stock or such other securities, in cash, or otherwise.

In order to facilitate the offering of our common stock, the underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
price of the common stock. Specifically, the underwriters may over-allot in
connection with the offering, creating a short position in the common stock for
their own account. In addition, to cover over-allotments or to stabilize the
price of the common stock, the underwriters may bid for, and purchase, shares of
common stock in the open market. Finally, the underwriting syndicate may reclaim
selling concessions allowed to an underwriter or a dealer for distributing the
common stock in the offering, if the syndicate repurchases previously
distributed common stock in transactions to cover syndicate short positions, in
stabilization transactions or otherwise. Any of these activities may stabilize
or maintain the market price of the common stock above independent market
levels. The underwriters are not required to engage in these activities, and may
end any of these activities at any time.

The underwriters have agreed to reimburse The Bank of Tokyo-Mitsubishi for
certain of its expenses incurred in connection with the offering.

From time to time, certain U.S. and international underwriters and their
affiliates have engaged in, and may in the future engage in commercial banking
and investment banking transactions with UNBC and the selling shareholder and
their affiliates.

UNBC, The Bank of Tokyo-Mitsubishi and the underwriters have agreed to
indemnify each other against certain liabilities, including liabilities under
the Securities Act.

88
<PAGE>

LEGAL MATTERS

The validity of the securities being offered hereby is being passed upon for
UNBC by Skadden, Arps, Slate, Meagher & Flom LLP, Los Angeles, California.
Certain matters for the underwriters will be passed upon by Davis Polk &
Wardwell.

EXPERTS

The consolidated financial statements included herein and incorporated in
this prospectus by reference from Form 8-K of UnionBanCal Corporation dated
January 8, 1999, have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report also included herein and incorporated by
reference in this prospectus, and have been so included and incorporated in
reliance upon the report of such firm given upon their authority as experts in
accounting and auditing. The consolidated financial statements given retroactive
effect to the 1996 merger of BanCal Tri-State Corporation and Union Bank which
has been accounted for as a pooling-of-interests. The consolidated statements of
income, changes in shareholders' equity, and cash flows of Union Bank and
subsidiaries for the year ended December 31, 1995 (not presented separately in
Form 8-K) were audited by Arthur Andersen LLP, independent public accountants,
as stated in their report also included and incorporated by reference herein, in
reliance upon the authority of such firm as experts in giving said report.

WHERE YOU CAN FIND MORE INFORMATION

We file reports, proxy statements, and other information with the SEC. Such
reports, proxy statements, and other information concerning UnionBanCal
Corporation can be read and copied at the SEC's Public Reference Room at 450
Fifth Street, N.W., Washington, D.C. 20549. Please call the SEC at
1-800-SEC-0330 for further information on the Public Reference Room. The SEC
maintains an internet site at http:// www.sec.gov that contains reports, proxy
and information statements and other information regarding issuers that file
electronically with the SEC, including UnionBanCal Corporation. Our common stock
is quoted on the Nasdaq National Market. These reports, proxy statements and
other information are also available for inspection at the offices of the
National Association of Securities Dealers, Inc., Report Section, 1735 K Street
N.W., Washington, D.C. 20006.

This prospectus is part of a registration statement filed with the SEC by
us. The full registration statement can be obtained from the SEC as indicated
above, or from us.

The SEC allows us to "incorporate by reference" the information we file with
the SEC. This permits us to disclose important information to you by referring
to these filed documents. Any information referred to in this way is considered
part of this prospectus, and any information filed with the SEC by us after the
date of this prospectus will automatically be deemed to update and supersede
this information. We incorporate by reference the following documents that have
been filed with the SEC:

- Annual Report on Form 10-K for the year ended December 31, 1997 and all
amendments thereto (except for Item 8, "Financial Statements and
Supplementary Data," which has been updated, included and incorporated by
reference elsewhere in this prospectus);

- Quarterly Reports on Form 10-Q for the quarters ended March 31, 1998, June
30, 1998 and September 30, 1998 and all amendments thereto;

- Current Report on Form 8-K dated August 10, 1998;

- Current Report on Form 8-K dated December 7, 1998; and

- Current Report on Form 8-K dated January 8, 1999.

89
<PAGE>

We also incorporate by reference any future filings made with the SEC
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act until we file
a post-effective amendment which indicates the termination of the offering of
the securities made by this prospectus.

We will provide without charge upon written or oral request, a copy of any
or all of the documents that are incorporated by reference into this prospectus.
Requests should be directed to Investor Relations, UnionBanCal Corporation, 400
California Street, San Francisco, California 94104 (telephone number
415-765-2969).

90
<PAGE>

UNIONBANCAL CORPORATION AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Consolidated Statements of Income for the Years Ended December 31, 1995, 1996 and 1997 and for the Nine
Months Ended September 30, 1997 (unaudited) and 1998 (unaudited)....................................... F-2

Consolidated Balance Sheets as of December 31, 1996 and 1997 and September 30, 1998 (unaudited).......... F-3

Consolidated Statements of Changes in Shareholders' Equity for the Years Ended December 31, 1995, 1996
and 1997 and for the Nine Months Ended September 30, 1998 (unaudited).................................. F-4

Consolidated Statements of Cash Flows for the Years Ended December 31, 1995, 1996 and 1997 and for the
Nine Months Ended September 30, 1997 (unaudited) and 1998 (unaudited).................................. F-5

Notes to Consolidated Financial Statements............................................................... F-6

Independent Auditors' Reports............................................................................ F-50
</TABLE>

F-1
<PAGE>

UNIONBANCAL CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
FOR THE NINE MONTHS
YEARS ENDED DECEMBER 31, ENDED SEPTEMBER 30,
------------------------------- ----------------------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA) 1995 1996 1997 1997 1998
- ----------------------------------------------------------- --------- --------- --------- ----------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
INTEREST INCOME
Loans...................................................... $1,613,376 $1,687,977 $1,763,277 $1,311,337 $1,365,285
Securities................................................. 132,802 143,412 167,440 123,075 145,390
Interest bearing deposits in banks......................... 58,201 52,709 56,748 43,404 14,187
Federal funds sold and securities purchased under resale
agreements............................................... 22,247 30,246 26,079 18,727 11,784
Trading account assets..................................... 20,567 12,960 19,917 13,388 19,976
--------- --------- --------- ----------- ---------
Total interest income.................................. 1,847,193 1,927,304 2,033,461 1,509,931 1,556,622
--------- --------- --------- ----------- ---------
INTEREST EXPENSE
Domestic deposits.......................................... 358,049 460,130 520,583 386,699 353,283
Foreign deposits........................................... 96,109 71,437 75,398 55,156 66,455
Federal funds purchased and securities sold under
repurchase agreements.................................... 78,908 47,095 58,544 44,053 59,667
Commercial paper........................................... 86,695 87,411 89,912 66,543 67,719
Subordinated capital notes................................. 42,538 30,104 22,850 17,180 15,883
Other borrowed funds....................................... 42,561 62,549 34,492 26,999 13,976
--------- --------- --------- ----------- ---------
Total interest expense................................. 704,860 758,726 801,779 596,630 576,983
--------- --------- --------- ----------- ---------
NET INTEREST INCOME........................................ 1,142,333 1,168,578 1,231,682 913,301 979,639
Provision for credit losses................................ 53,250 40,000 -- -- 45,000
--------- --------- --------- ----------- ---------
Net interest income after provision for credit
losses................................................ 1,089,083 1,128,578 1,231,682 913,301 934,639
--------- --------- --------- ----------- ---------
NONINTEREST INCOME
Service charges on deposit accounts........................ 95,177 101,975 114,647 84,699 101,288
Trust and investment management fees....................... 87,743 93,479 107,527 76,737 88,806
International commissions and fees......................... 68,621 66,108 66,122 49,593 54,516
Merchant transaction processing fees....................... 45,767 49,778 57,128 42,653 42,988
Merchant banking fees...................................... 24,483 23,929 24,924 19,899 24,083
Securities gains (losses), net............................. (702) 4,502 2,711 2,098 5,579
Other...................................................... 74,230 78,905 89,942 66,948 82,689
--------- --------- --------- ----------- ---------
Total noninterest income............................... 395,319 418,676 463,001 342,627 399,949
--------- --------- --------- ----------- ---------
NONINTEREST EXPENSE
Salaries and employee benefits............................. 536,671 557,247 571,644 418,970 459,592
Net occupancy.............................................. 92,863 103,335 85,630 64,133 67,294
Equipment.................................................. 55,056 55,942 56,137 41,206 41,842
Foreclosed asset expense (income).......................... (3,213) 2,889 (1,268) (696) (746)
Merger and integration..................................... -- 117,464 6,037 6,037 --
Other...................................................... 296,724 298,027 326,485 232,558 268,196
--------- --------- --------- ----------- ---------
Total noninterest expense.............................. 978,101 1,134,904 1,044,665 762,208 836,178
--------- --------- --------- ----------- ---------
Income before income taxes................................. 506,301 412,350 650,018 493,720 498,410
Income tax expense......................................... 193,359 162,892 238,722 174,869 146,045
--------- --------- --------- ----------- ---------
NET INCOME................................................. $ 312,942 $ 249,458 $ 411,296 $ 318,851 $ 352,365
--------- --------- --------- ----------- ---------
--------- --------- --------- ----------- ---------
NET INCOME APPLICABLE TO COMMON STOCK...................... $ 301,637 $ 238,152 $ 403,696 $ 311,251 $ 352,365
--------- --------- --------- ----------- ---------
--------- --------- --------- ----------- ---------
NET INCOME PER COMMON SHARE -- BASIC(1).................... $ 1.74 $ 1.37 $ 2.31 $ 1.78 $ 2.01
--------- --------- --------- ----------- ---------
--------- --------- --------- ----------- ---------
NET INCOME PER COMMON SHARE -- DILUTED(1).................. $ 1.73 $ 1.36 $ 2.30 $ 1.78 $ 2.01
--------- --------- --------- ----------- ---------
--------- --------- --------- ----------- ---------
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING -- BASIC(1)..... 173,806 174,391 174,683 174,615 175,091
--------- --------- --------- ----------- ---------
--------- --------- --------- ----------- ---------
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING -- DILUTED(1)... 174,099 174,784 175,189 175,071 175,729
--------- --------- --------- ----------- ---------
--------- --------- --------- ----------- ---------
</TABLE>

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

(1) Amounts restated to give retroactive effect to the stock split referred to
in Note 1 of the accompanying notes to Consolidated Financial Statements.

See accompanying notes to consolidated financial statements.

F-2
<PAGE>

UNIONBANCAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA) 1996 1997
- ------------------------------------------------------------------------- ---------- ---------- SEPTEMBER 30,
1998
-------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Cash and due from banks.................................................. $2,268,771 $2,541,699 $ 2,211,595
Interest bearing deposits in banks....................................... 1,131,216 633,421 133,165
Federal funds sold and securities purchased under resale agreements...... 537,710 24,335 629,784
---------- ---------- -------------
Total cash and cash equivalents...................................... 3,937,697 3,199,455 2,974,544
Trading account assets................................................... 465,782 394,313 357,515
Securities available for sale............................................ 2,164,197 2,538,386 3,200,376
Securities held to maturity (fair value: December 31, 1996, $274,405;
December 31, 1997, $193,115; September 30, 1998, $165,807
(unaudited))........................................................... 268,196 188,775 162,018
Loans (net of allowance for credit losses: December 31, 1996, $523,946;
December 31, 1997, $451,692; September 30, 1998, $473,717
(unaudited))........................................................... 20,525,841 22,289,716 23,024,128
Due from customers on acceptances........................................ 778,378 773,339 464,581
Premises and equipment, net.............................................. 410,621 406,299 407,863
Other assets............................................................. 683,347 794,982 816,293
---------- ---------- -------------
Total assets......................................................... $29,234,059 $30,585,265 $31,407,318
---------- ---------- -------------
---------- ---------- -------------

LIABILITIES
Domestic deposits:
Noninterest bearing.................................................... $7,381,078 $8,574,515 $ 9,427,080
Interest bearing....................................................... 12,607,691 12,666,458 12,379,167
Foreign deposits:
Noninterest bearing.................................................... 274,031 275,029 247,038
Interest bearing....................................................... 1,270,160 1,780,372 1,609,844
---------- ---------- -------------
Total deposits....................................................... 21,532,960 23,296,374 23,663,129
Federal funds purchased and securities sold under repurchase
agreements............................................................. 1,322,654 1,335,884 1,574,163
Commercial paper......................................................... 1,495,463 966,575 1,417,077
Other borrowed funds..................................................... 749,422 476,010 339,340
Acceptances outstanding.................................................. 778,378 773,339 464,581
Other liabilities........................................................ 478,249 709,784 666,078
Subordinated capital notes............................................... 382,000 348,000 298,000
---------- ---------- -------------
Total liabilities.................................................... 26,739,126 27,905,966 28,422,368
---------- ---------- -------------
Commitments and contingencies

SHAREHOLDERS' EQUITY
Preferred stock:
Authorized 5,000,000 shares 8 3/8% Noncumulative, Series A, issued
1,350,000 shares in 1996............................................ 135,000 -- --
Common stock(1)--$5 stated value:
Authorized 300,000,000 shares, issued 174,457,602 shares as of
December 31, 1996, 174,917,673 shares as of December 31, 1997 and
175,208,037 shares as of September 30, 1998 (unaudited)............. 290,762 291,529 292,013
Additional paid-in capital............................................. 1,413,076 1,422,680 1,430,539
Retained earnings...................................................... 645,214 957,662 1,233,068
Accumulated other comprehensive income................................. 10,881 7,428 29,330
---------- ---------- -------------
Total shareholders' equity........................................... 2,494,933 2,679,299 2,984,950
---------- ---------- -------------
Total liabilities and shareholders' equity........................... $29,234,059 $30,585,265 $31,407,318
---------- ---------- -------------
---------- ---------- -------------
</TABLE>

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

(1) Amounts restated to give retroactive effect to the stock split referred to
in Note 1 of the accompanying notes to Consolidated Financial Statements.

See accompanying notes to consolidated financial statements.

F-3
<PAGE>

UNIONBANCAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
(DOLLARS IN THOUSANDS) 1995 1996 1997
- --------------------------------------------------------------- --------- --------- --------- FOR THE NINE
MONTHS ENDED
SEPTEMBER 30,
1998
-------------
(UNAUDITED)
<S> <C> <C> <C> <C>
PREFERRED STOCK
Balance, beginning of period................................... $ 135,000 $ 135,000 $ 135,000 $ --
Redemption of preferred stock.................................. -- -- (135,000) --
--------- --------- --------- -------------
Balance, end of period....................................... $ 135,000 $ 135,000 $ -- $ --
--------- --------- --------- -------------
COMMON STOCK
Balance, beginning of period................................... $ 286,739 $ 290,300 $ 290,762 $ 291,529
Dividend reinvestment plan..................................... 3,103 121 6 6
Deferred compensation -- restricted stock awards............... 379 207 279 281
Stock options exercised........................................ 79 134 482 197
--------- --------- --------- -------------
Balance, end of period....................................... $ 290,300 $ 290,762 $ 291,529 $ 292,013
--------- --------- --------- -------------
ADDITIONAL PAID-IN CAPITAL
Balance, beginning of period................................... $1,390,925 $1,408,960 $1,413,076 $ 1,422,680
Dividend reinvestment plan..................................... 15,238 1,041 (43) 10
Deferred compensation -- restricted stock awards............... 2,268 2,148 3,478 5,217
Stock options exercised........................................ 529 927 6,169 2,632
--------- --------- --------- -------------
Balance, end of period....................................... $1,408,960 $1,413,076 $1,422,680 $ 1,430,539
--------- --------- --------- -------------
RETAINED EARNINGS
Balance, beginning of period................................... $ 376,468 $ 626,172 $ 645,214 $ 957,662
Net income(1).................................................. 312,942 249,458 411,296 352,365
Dividends on common stock(2)(3)................................ (50,989) (73,932) (89,848) (73,632)
Dividends on preferred stock................................... (11,305) (11,306) (7,600) --
Dividend to MBL................................................ -- (144,890) -- --
Deferred compensation -- restricted stock awards............... (944) (288) (1,400) (3,327)
--------- --------- --------- -------------
Balance, end of period......................................... $ 626,172 $ 645,214 $ 957,662 $ 1,233,068
--------- --------- --------- -------------
ACCUMULATED OTHER COMPREHENSIVE INCOME
Balance, beginning of period................................... $ (9,930) $ 23,660 $ 10,881 $ 7,428
--------- --------- --------- -------------
Net income(1).................................................. 312,942 249,458 411,296 352,365
Other comprehensive income..................................... 33,590 (12,779) (3,453) 21,902
--------- --------- --------- -------------
Total comprehensive income..................................... 346,532 236,679 407,843 374,267
Less: net income included in retained earnings................. (312,942) (249,458) (411,296) (352,365)
--------- --------- --------- -------------
Balance, end of period....................................... $ 23,660 $ 10,881 $ 7,428 $ 29,330
--------- --------- --------- -------------
TOTAL SHAREHOLDERS' EQUITY................................. $2,484,092 $2,494,933 $2,679,299 $ 2,984,950
--------- --------- --------- -------------
--------- --------- --------- -------------
</TABLE>

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

(1) Includes dividends applicable to preferred shareholders of $11.3 million for
the years ended December 31, 1995 and 1996, respectively, and $7.6 million
for the year ended December 31, 1997.

(2) Dividends per share in 1996 were based on historical Union Bank common cash
dividends declared and did not include the $145 million dividend paid to The
Mitsubishi Bank, Limited (MBL) in the first quarter of 1996 by BanCal
Tri-State Corporation and The Bank of California, N.A.

(3) Dividends per share, after giving effect to the stock split referred to in
Note 1 of the accompanying notes to Consolidated Financial Statements, were
$0.47 in 1995 and 1996, respectively, $0.51 in 1997, and $0.42 for the nine
months ended September 30, 1998, (unaudited) and are based on the Company's
shares outstanding as of the declaration date.

See accompanying notes to consolidated financial statements.

F-4
<PAGE>

UNIONBANCAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
FOR THE NINE MONTHS
YEARS ENDED DECEMBER 31, ENDED SEPTEMBER 30,
--------------------------------- -----------------------
(DOLLARS IN THOUSANDS) 1995 1996 1997 1997 1998
- -------------------------------------------------------------- ---------- --------- ---------- ----------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.................................................. $ 312,942 $ 249,458 $ 411,296 $ 318,851 $ 352,365
Adjustments to reconcile net income to net cash provided by
operating activities:
Provision for credit losses............................... 53,250 40,000 -- -- 45,000
Depreciation, amortization and accretion.................. 61,767 65,092 65,469 49,285 50,528
Provision for deferred income taxes....................... 50,841 50,658 59,814 38,734 16,018
(Gain) loss on sales of securities available for sale..... 801 (4,502) (2,711) (2,098) (5,579)
Merger and integration costs in excess of (less than) cash
utilized................................................. -- 54,344 (31,414) (27,200) (12,350)
Net (increase) decrease in trading account assets......... 82,541 (359,234) 52,743 (37,045) 36,798
Other, net................................................ 157,244 52,101 173,706 92,393 (33,448)
---------- --------- ---------- ----------- ----------
Total adjustments......................................... 406,444 (101,541) 317,607 114,069 96,967
---------- --------- ---------- ----------- ----------
Net cash provided by operating activities................... 719,386 147,917 728,903 432,920 449,332
---------- --------- ---------- ----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of securities available for sale........ 240,731 19,536 171,629 3,920 418,456
Proceeds from matured and called securities available for
sale....................................................... 764,853 757,463 587,034 326,833 196,358
Purchase of securities available for sale................... (1,452,339) (995,479) (1,112,080) (777,281) (1,253,529)
Proceeds from matured and called securities held to
maturity................................................... 213,337 95,829 79,828 36,121 26,960
Purchase of securities held to maturity..................... (123,886) -- -- -- --
Net increase in loans....................................... (2,478,608) (741,335) (1,788,179) (1,315,578) (797,343)
Other, net.................................................. (34,902) (54,120) (56,584) (19,986) (42,032)
---------- --------- ---------- ----------- ----------
Net cash used by investing activities..................... (2,870,814) (918,106) (2,118,352) (1,745,971) (1,451,130)
---------- --------- ---------- ----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits.................................... 2,245,306 1,877,917 1,763,414 1,441,228 366,755
Net increase (decrease) in federal funds purchased and
securities sold under repurchase agreements................ (287,387) 127,596 13,230 (27,711) 238,279
Net increase (decrease) in commercial paper and other
borrowed funds............................................. 623,612 (201,214) (797,464) 94,601 313,832
Maturity and redemption of subordinated debt................ (154,490) (119,369) (234,000) (200,000) (50,000)
Proceeds from issuance of subordinated debt................. -- -- 200,000 200,000 --
Payments of cash dividends.................................. (62,044) (222,533) (93,303) (68,787) (73,631)
Redemption of preferred stock............................... -- -- (135,000) (135,000) --
Repayment of borrowing to support corporate owned life
insurance.................................................. (10,638) (95,475) -- -- --
Other, net.................................................. 485 (882) (2,661) 2,642 2,471
---------- --------- ---------- ----------- ----------
Net cash provided by financing activities................. 2,354,844 1,366,040 714,216 1,306,973 797,706
---------- --------- ---------- ----------- ----------
Net increase (decrease) in cash and cash equivalents.......... 203,416 595,851 (675,233) (6,078) (204,092)
Cash and cash equivalents at beginning of period.............. 3,153,713 3,352,423 3,937,697 3,937,697 3,199,455
Effect of exchange rate changes on cash and cash
equivalents................................................. (4,706) (10,577) (63,009) (16,910) (20,819)
---------- --------- ---------- ----------- ----------
Cash and cash equivalents at end of period.................... $3,352,423 $3,937,697 $3,199,455 $3,914,709 $2,974,544
---------- --------- ---------- ----------- ----------
---------- --------- ---------- ----------- ----------
CASH PAID DURING THE PERIOD FOR:
Interest.................................................... $ 739,300 $ 764,327 $ 820,355 $ 611,347 $ 588,487
Income taxes................................................ 91,717 172,451 113,588 47,359 189,411
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING
ACTIVITIES:
Loans transferred to foreclosed assets (OREO)............... $ 48,397 $ 44,557 $ 23,114 $ 19,033 $ 13,882
Securities transferred from held to maturity to available
for sale................................................... 348,717 -- -- -- --
Dividends declared but unpaid............................... 12,788 20,383 24,528 24,518 24,529
</TABLE>

See accompanying notes to consolidated financial statements.

F-5
<PAGE>

UNIONBANCAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 1995, 1996, 1997,

AND CONDENSED NOTES FOR

SEPTEMBER 30, 1997 (UNAUDITED) AND 1998 (UNAUDITED)

NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NATURE OF OPERATIONS

UnionBanCal Corporation (a commercial bank holding company and subsidiaries)
(the Company) is 82 percent owned by The Bank of Tokyo-Mitsubishi, Ltd. (BTM)
and 18 percent owned by other shareholders.

On April 1, 1996, the Company was created by the combination of Union Bank
with BanCal Tri-State Corporation and its banking subsidiary, The Bank of
California, N.A. The combination was accounted for as a reorganization of
entities under common control (similar to a business combination under the
pooling of interests method). Accordingly, all historical financial information
has been restated as if the combination had been in effect for all periods
presented. The merger was effected by the issuance of 54,402,081 shares of Union
Bank common stock in exchange for all the outstanding common shares of BanCal
Tri-State Corporation. Information pretaining to merger and intergration expense
is presented in Note 7.

On August 10, 1998, the Company exchanged 10.2 million shares of its common
stock for 7.2 million shares of Union Bank of California, N.A. (the Bank) common
stock owned directly by BTM. This share exchange provided the Company with a 100
percent ownership interest in the Bank. In addition, it increased BTM's
ownership percentage of the Company to 82 percent from 81 percent.

The exchange of shares was accounted for as a reorganization of entities
under common control. Accordingly, amounts previously reported as Parent Direct
Interest in Bank Subsidiary, including the proportionate share of net income,
dividends, and other comprehensive income have been reclassified to combine them
with the corresponding amounts attributable to the Company's common shareholders
for all periods presented.

On November 18, 1998, the Board of Directors approved the declaration of a
3-for-1 stock split effective for shareholders of record on December 7, 1998.
Accordingly, all historical financial information has been restated as if the
stock split had been in effect for all periods presented.

The Company provides a wide range of financial services to consumers, small
businesses, middle market companies and major corporations, primarily in
California, Oregon and Washington, but also nationally and internationally.

BASIS OF FINANCIAL STATEMENT PRESENTATION

The accounting and reporting policies of the Company conform to generally
accepted accounting principles (GAAP) and general practice within the banking
industry. Those policies that materially affect the determination of financial
position, results of operations, and cash flows are summarized below.

The Consolidated Financial Statements include the accounts of the Company.
All material intercompany transactions and balances have been eliminated. The
preparation of financial statements in conformity with GAAP 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 revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Certain amounts for prior periods have been reclassified to conform with current
financial statement presentation.

F-6
<PAGE>

UNIONBANCAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1995, 1996, 1997,

AND CONDENSED NOTES FOR

SEPTEMBER 30, 1997 (UNAUDITED) AND 1998 (UNAUDITED)

NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NATURE OF OPERATIONS
(CONTINUED)

The unaudited consolidated financial statements of UnionBanCal Corporation
and subsidiaries (the Company) as of September 30, 1997 and 1998 have been
prepared in accordance with generally accepted accounting principles (GAAP) for
interim financial reporting. However, they do not include all of the disclosures
necessary for annual financial statements in conformity with GAAP.

CASH AND CASH EQUIVALENTS

For purposes of reporting cash flows, cash and cash equivalents include cash
and due from banks, interest bearing deposits in banks and federal funds sold
and securities purchased under resale agreements, substantially all of which
have maturities less than 90 days.

TRADING ACCOUNT ASSETS

Trading account assets are those financial instruments that management
acquires with the intent to hold for short periods of time in order to take
advantage of anticipated changes in market values. Substantially all of these
assets are securities with a high degree of liquidity and a readily determinable
market value. Interest earned, paid, or accrued on trading account assets is
included in interest income using a method that generally produces a level
yield. Realized gains and losses from the close out of trading account positions
and unrealized market value adjustments are recognized in noninterest income.

SECURITIES AVAILABLE FOR SALE AND SECURITIES HELD TO MATURITY

The Company's securities portfolios consist of debt and equity securities
that are classified either as securities available for sale or securities held
to maturity.

Debt securities for which the Company has the positive intent and ability to
hold until maturity are classified as securities held to maturity and carried at
amortized cost.

Debt securities and equity securities with readily determinable market
values that are not classified as either held to maturity securities or trading
account assets are classified as securities available for sale and carried at
fair value, with the unrealized gains or losses reported net of taxes as a
separate component of shareholders' equity until realized.

Realized gains and losses arising from the sale of securities are based upon
the specific identification method and included in noninterest income as
securities gains (losses), net.

Interest income on debt securities includes the amortization of premiums and
the accretion of discounts using the effective interest method and is included
in interest income on securities. Dividend income on equity securities is
included in noninterest income.

LOANS

Loans are reported at the principal amounts outstanding, net of unamortized
nonrefundable loan fees and related direct loan origination costs. Deferred net
fees and costs are recognized in interest income over the loan term using a
method that generally produces a level yield on the unpaid loan balance.

F-7
<PAGE>

UNIONBANCAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1995, 1996, 1997,

AND CONDENSED NOTES FOR

SEPTEMBER 30, 1997 (UNAUDITED) AND 1998 (UNAUDITED)

NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NATURE OF OPERATIONS
(CONTINUED)

Nonrefundable fees and direct loan origination costs related to loans held for
sale are deferred and recognized as a component of the gain or loss on sale.
Interest income is accrued principally on a simple interest basis.

Nonaccrual loans are those for which management has discontinued accrual of
interest because there exists significant uncertainty as to the full and timely
collection of either principal or interest or such loans have become
contractually past due 90 days with respect to principal or interest.

Interest accruals are continued for certain small business loans that are
processed centrally, consumer loans, credit cards, and one-to-four family
residential real estate loans. These loans are charged off or written down to
their net realizable value based on delinquency time frames that range from 120
to 270 days, depending on the type of credit that has been extended. Interest
accruals are also continued for loans that are both well-secured and in the
process of collection. For this purpose, loans are considered well-secured if
they are collateralized by property having a net realizable value in excess of
the amount of principal and accrued interest outstanding or are guaranteed by a
financially responsible and willing party. Loans are considered "in the process
of collection" if collection is proceeding in due course either through legal
action or other actions that are reasonably expected to result in the prompt
repayment of the debt or in its restoration to current status.

When a loan is placed on nonaccrual, all previously accrued but uncollected
interest is reversed against current period operating results. All subsequent
payments received are first applied to unpaid principal and then to uncollected
interest. Interest income is accrued at such time as the loan is brought fully
current as to both principal and interest, and, in management's judgment, such
loans are considered to be fully collectible. However, Company policy also
allows management to continue the recognition of interest income on certain
loans designated as nonaccrual. This portion of the nonaccrual portfolio is
referred to as "Cash Basis Nonaccrual" loans. This policy only applies to loans
that are well secured and in management's judgment are considered to be fully
collectible. Although the accrual of interest is suspended, any payments
received may be applied to the loan according to its contractual terms and
interest income recognized when cash is received.

Loans are considered impaired when, based on current information, it is
probable that the Company will be unable to collect all amounts due according to
the contractual terms of the loan agreement, including interest payments.
Impaired loans are carried at the lower of the recorded investment in the loan,
the estimated present value of total expected future cash flows, discounted at
the loan's effective rate, or the fair value of the collateral, if the loan is
collateral dependent. Additionally, some impaired loans with commitments of less
than $1 million are aggregated for the purpose of measuring impairment using
historical loss factors as a means of measurement. Excluded from the impairment
analysis are large groups of smaller balance homogeneous loans such as consumer
and residential mortgage loans.

Renegotiated loans are those in which the Company has formally restructured
a significant portion of the loan. The remaining portion is normally charged
off, with a concession either in the form of below market rate financing, or
debt forgiveness on the charged off portion. Loans that have been renegotiated
and

F-8
<PAGE>

UNIONBANCAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1995, 1996, 1997,

AND CONDENSED NOTES FOR

SEPTEMBER 30, 1997 (UNAUDITED) AND 1998 (UNAUDITED)

NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NATURE OF OPERATIONS
(CONTINUED)

have not met specific performance standards for payment are classified as
renegotiated loans within the classification of nonperforming assets. Upon
payment performance, such loans may be transferred from nonperforming status to
accrual status.

The Company offers primarily two types of leases to customers: 1) direct
financing leases where the assets leased are acquired without additional
financing from other sources, and 2) leveraged leases where a substantial
portion of the financing is provided by debt with no recourse to the Company.
Direct financing leases are carried net of unearned income, unamortized
nonrefundable fees and related direct costs associated with the origination or
purchase of leases. Leveraged leases are carried net of nonrecourse debt.

ALLOWANCE FOR CREDIT LOSSES

The Company's allowance for credit losses is maintained at a level
considered by management to be adequate to absorb estimated credit losses and
other credit-related charges. The allowance for credit losses is increased by
the provision for credit losses, which is charged against current period
operating results and decreased by the amount of credit losses, net of
recoveries. Losses are fully or partially charged against the allowance for
credit losses when, in management's judgment, the uncollectible portion of a
loan's principal balance is determined. While management has segmented the
allowance to various credit-related products, the allowance is general in nature
and is available for all extension of credits, including off-balance sheet
instruments.

In evaluating the adequacy of the allowance for credit losses, management
estimates the amount of the potential risk of loss for each loan that has been
identified as having more than standard credit risk. Those estimates give
consideration to general economic conditions and their effects on the borrower's
industry, financial and management abilities and to current valuations of
collateral where appropriate. An estimate for potential credit loss content is
calculated for all loans not so identified based upon the risk characteristics
of particular categories of loans and historical loss experience in the
portfolio, adjusted, as appropriate, for the estimated effects of current
economic conditions. Further consideration for the allocation is based on credit
risk concentrations in the portfolio and commitments and contingent obligations
under off-balance sheet commercial and standby letters of credit. For analytical
purposes only, management attributes portions of the allowance for credit losses
to individual loans or groups of loans. Although the allowance for credit losses
is allocated to various portfolio segments, it is general in nature and is
available for the loan portfolio in its entirety. Although management believes
that the allowance for possible credit losses is adequate, future provisions
will be subject to continuing evaluation of inherent risk in the loan portfolio
and other credit exposures.

A loan is considered impaired when management determines that it is probable
that the Company will be unable to collect all amounts due according to the
original contractual terms of the loan agreement. Impairment is measured by the
difference between the recorded investment in the loan (including accrued
interest, net deferred loan fees or cost and unamortized premium or discount)
and the estimated present value of total expected future cash flows, discounted
at the loan's effective rate, or the fair value of the collateral, if the loan
is collateral dependent. An impairment is recognized by adjusting an allocation
of the existing allowance for credit losses.

F-9
<PAGE>

UNIONBANCAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1995, 1996, 1997,

AND CONDENSED NOTES FOR

SEPTEMBER 30, 1997 (UNAUDITED) AND 1998 (UNAUDITED)

NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NATURE OF OPERATIONS
(CONTINUED)

PREMISES AND EQUIPMENT

Premises and equipment are carried at cost, less accumulated depreciation
and amortization. Depreciation and amortization are calculated using the
straight-line method over the estimated useful life of each asset. Lives of
premises range from ten to forty years; lives of furniture and equipment range
from three to eight years. Leasehold improvements are amortized over the term of
the respective lease or 10 years, whichever is shorter.

OTHER ASSETS

Goodwill represents the excess of purchase price over the fair value of
identifiable net assets of acquired companies and is reported as intangible
assets. Goodwill is amortized using the straight-line method, generally over 15
years.

Other real estate owned (OREO) represents the collateral acquired through
foreclosure in full or partial satisfaction of the related loan. OREO is
recorded at the lower of the loan's unpaid principal balance or its fair value
as established by a current appraisal, adjusted for disposition costs. Any
write-down at the date of transfer is charged to the allowance for credit
losses. On an ongoing basis, OREO values, recorded in other assets, are reviewed
annually and any decline in value is recognized as foreclosed asset expense in
the current period. The net operating results from these assets are included in
the current period in noninterest expense as foreclosed asset expense (income).

DERIVATIVE INSTRUMENTS HELD FOR TRADING OR CUSTOMER ACCOMMODATION

The Company enters into a variety of interest rate derivative contracts,
primarily swaps and options and foreign exchange contracts, which include spot,
futures, forward, swap and option positions either for trading purposes, based
on management's intent at inception, or as an accommodation to customers.

Derivatives held or issued for trading or customer accommodation are carried
at fair value, with realized and unrealized changes in fair values on contracts
included in noninterest income in the period in which the changes occur.
Unrealized gains and losses are reported gross and included in trading account
assets and other liabilities, respectively. Cash flows are reported net as
operating activities.

DERIVATIVE INSTRUMENTS HELD FOR PURPOSES OTHER THAN TRADING

The Company enters into a variety of derivative contracts as a means of
reducing the Company's interest rate and foreign exchange exposures. At
inception these contracts are evaluated in order to determine if they qualify
for hedge accounting treatment and are accounted for either on a deferral,
accrual or market value basis, depending on the nature of the Company's hedge
strategy and the method used to account for the hedged item. Hedge criteria
include demonstrating the manner in which the hedge will reduce risk,
identifying the specific asset, liability or firm commitment being hedged, and
citing the time horizon being hedged. A monthly evaluation is performed to
ensure that continuing correlation exists between the hedge and the item being
hedged.

F-10
<PAGE>

UNIONBANCAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1995, 1996, 1997,

AND CONDENSED NOTES FOR

SEPTEMBER 30, 1997 (UNAUDITED) AND 1998 (UNAUDITED)

NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NATURE OF OPERATIONS
(CONTINUED)

Net interest settlements on interest rate swap, cap and floor agreements are
recognized on an accrual basis as interest income or expense of the related
asset or liability over the lives of the agreements. Premiums paid or received
for interest rate caps and floors are amortized either to interest income or to
expense of the related asset or liability over the lives of the agreements. If
an agreement is terminated early, any resulting gain or loss is deferred and
amortized as interest income or expense of the related asset or liability over
the remaining life of the original agreement. Net settlement amounts are
reported gross as other assets and other liabilities. Cash flows are reported
net as operating activities.

FOREIGN CURRENCY TRANSLATION

Assets, liabilities and results of operations for foreign branches are
recorded based on the functional currency of each branch. Since the functional
currency of the branches is the local currency, the net assets are re-measured
into U.S. dollars using a combination of current and historical exchange rates.
The resulting gains or losses are included in shareholders' equity, on a net of
tax basis.

TRANSFERS AND SERVICING OF FINANCIAL ASSETS AND EXTINGUISHMENT OF
LIABILITIES

On January 1, 1997, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 125, "Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities". The Statement establishes standards
for when transfers of financial assets, including those with continuing
involvement by the transferor, should be considered a sale. SFAS No. 125 also
establishes standards for when a liability should be considered extinguished.
This Statement is effective for transfers of assets and extinguishments of
liabilities occurring after December 31, 1996 and has been applied
prospectively. Certain provisions of SFAS No. 125 have been postponed under SFAS
No. 127, "Deferral of the Effective Date of Certain Provisions of FASB Statement
No. 125". SFAS No. 127 deferred for one year the effective date of
implementation for transactions related to repurchase agreements, dollar-roll
repurchase agreements, securities lending and similar transactions. Management
determined that the effect of adoption of SFAS No. 127 on the Company's
financial statements was not material.

INCOME TAXES

The Company files consolidated federal and combined state income tax
returns. Amounts provided for income tax expense are based on income reported
for financial statement purposes and do not necessarily represent amounts
currently payable under tax laws. Deferred taxes, which arise principally from
temporary differences between the period in which certain income and expenses
are recognized for financial accounting purposes and the period in which they
affect taxable income, are included in the amounts provided for income taxes.
Under this method, the computation of the net deferred tax liability or asset
gives current recognition to changes in the tax laws.

F-11
<PAGE>

UNIONBANCAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1995, 1996, 1997,

AND CONDENSED NOTES FOR

SEPTEMBER 30, 1997 (UNAUDITED) AND 1998 (UNAUDITED)

NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NATURE OF OPERATIONS
(CONTINUED)

NET INCOME PER COMMON SHARE

Basic earnings per share (EPS) is computed by dividing net income after
preferred dividends by the weighted average number of common shares outstanding
during the period. Diluted EPS incorporates the dilutive effect of common stock
equivalents outstanding on an average basis during the period. Stock options
(see Note 12) are a common stock equivalent.

The Company adopted the provisions of SFAS No. 128, "Earnings per Share",
for the year ended December 31, 1997. As required by the provisions of the
Statement, all prior period and interim period EPS data presented have been
restated. This Statement simplifies the standards for computing EPS and makes
them comparable to international EPS standards. SFAS No. 128 replaces the
presentation of primary EPS with a presentation of basic EPS. In addition, all
entities with complex capital structures are required to provide a dual
disclosure of basic and diluted EPS on the face of the income statement and a
reconciliation of the numerator and denominator of the basic EPS computation to
the numerator and denominator of the diluted EPS computation. Also see Note 17.

COMPREHENSIVE INCOME

The Company has retroactively adopted SFAS No. 130, "Reporting Comprehensive
Income", which requires that an enterprise report and display, by major
components and as a single total, the change in its net assets during the period
from non-owner sources. The adoption of this Statement resulted in a change in
the financial statement presentation, but did not have an impact on the
Company's consolidated financial position, results of operations or cash flows.

EMPLOYEE BENEFIT AND INCENTIVE PLANS AND OTHER POSTRETIREMENT BENEFITS

The Company provides a variety of benefit and incentive compensation plans
for eligible employees and retirees. Provisions for the costs of these employee
benefit and incentive plans and postretirement benefit plans are accrued and
charged to expense when the benefit is earned.

STOCK-BASED COMPENSATION

The Company adopted the disclosure provisions of SFAS No. 123, "Accounting
for Stock-Based Compensation", on January 1, 1996. SFAS No. 123 establishes
accounting and disclosure requirements using a fair value-based method of
accounting for stock-based compensation plans.

As allowed under the provisions of SFAS No. 123, the Company has chosen to
continue to recognize compensation expense using the intrinsic value-based
method of valuing stock options prescribed in Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees" and related
Interpretations. Under the intrinsic value-based method, compensation cost is
measured as the amount by which the quoted market price of the Company's stock
at the date of grant exceeds the stock option exercise price.

F-12
<PAGE>

UNIONBANCAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1995, 1996, 1997,

AND CONDENSED NOTES FOR

SEPTEMBER 30, 1997 (UNAUDITED) AND 1998 (UNAUDITED)

NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NATURE OF OPERATIONS
(CONTINUED)

Compensation cost associated with the Company's unvested restricted stock
issued under the management stock plan is measured based on the market price of
the stock at the grant date and is expensed over the vesting period.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In June 1997, the Financial Accounting Standards Board (FASB) issued SFAS
No. 131, "Disclosures about Segments of an Enterprise and Related Information",
which establishes annual and interim reporting standards for an enterprise's
operating segments and related disclosures about its products, services,
geographic areas, and major customers. Adoption of this Statement will not
impact the Company's consolidated financial position, results of operations, or
cash flows, and any effect will be limited to the form and content of its
disclosures. The Statement is effective with the year-end 1998 financial
statements.

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

In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities". The Statement will require the Company to
recognize all derivatives on the balance sheet at fair value. SFAS No. 133
requires that derivative instruments used to hedge be identified specifically to
assets, liabilities, firm commitments or anticipated transactions and measured
as effective and ineffective when hedging changes in fair value or cash flows.
Derivative instruments that do not qualify as either a fair value or cash flow
hedge will be valued 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. Management believes that,
depending upon the accumulated net gain or loss of the effective portion of cash
flow hedges at the date of adoption, the impact of SFAS No. 133 could have a
material impact on other comprehensive income. However, Management believes that
any ineffective portion of cash flow hedges or any other hedges will not have a
material impact on the Company's financial position or results of operations.
This Statement is effective for fiscal years beginning after June 15, 1999, with
earlier application encouraged. The Company expects to adopt SFAS No. 133 as of
January 1, 2000.

In October 1998, the FASB issued SFAS No. 134, "Accounting for
Mortgage-Backed Securities Retained after the Securitization of Mortgage Loans
Held for Sale by a Mortgage Banking Enterprise". This Statement amends SFAS No.
65, "Accounting for Certain Mortgage Banking Activities", which established
accounting and reporting standards for certain activities of mortgage banking
and other similar enterprises. After securitization of mortgage loans held for
sale, SFAS No. 134 requires an entity to classify the resulting mortgage-backed
securities or other retained interests, based on its ability or intent to sell
or hold those investments. Management believes that the adoption of SFAS No. 134
will have no impact on the Company's

F-13
<PAGE>

UNIONBANCAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1995, 1996, 1997,

AND CONDENSED NOTES FOR

SEPTEMBER 30, 1997 (UNAUDITED) AND 1998 (UNAUDITED)

NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NATURE OF OPERATIONS
(CONTINUED)

financial position or results of operations. This Statement is effective for
fiscal years beginning after December 15, 1998, with earlier application
permitted. The Company expects to adopt SFAS No. 134 on January 1, 1999.

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

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

NOTE 2 -- SECURITIES

The amortized cost, gross unrealized gains, gross unrealized losses, and
fair values of securities are presented below.

SECURITIES AVAILABLE FOR SALE

<TABLE>
<CAPTION>
DECEMBER 31, 1996
----------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED
(DOLLARS IN THOUSANDS) COST GAINS LOSSES FAIR VALUE
- ------------------------------------------------------------- ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C>
U.S. Treasury................................................ $ 1,137,992 $ 4,993 $ 1,933 $ 1,141,052
Other U.S. government........................................ 687,717 4,993 779 691,931
Mortgage-backed securities................................... 193,531 400 274 193,657
State and municipal.......................................... 101,006 13,749 -- 114,755
Corporate debt securities.................................... -- -- -- --
Equity securities............................................ 19,041 2,553 -- 21,594
Foreign securities........................................... 1,136 72 -- 1,208
------------ ----------- ----------- ------------
Total securities available for sale...................... $ 2,140,423 $ 26,760 $ 2,986 $ 2,164,197
------------ ----------- ----------- ------------
------------ ----------- ----------- ------------
</TABLE>

F-14
<PAGE>

UNIONBANCAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1995, 1996, 1997,

AND CONDENSED NOTES FOR

SEPTEMBER 30, 1997 (UNAUDITED) AND 1998 (UNAUDITED)

NOTE 2 -- SECURITIES (CONTINUED)

<TABLE>
<CAPTION>
DECEMBER 31, 1997
----------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED
(DOLLARS IN THOUSANDS) COST GAINS LOSSES FAIR VALUE
- ------------------------------------------------------------- ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C>
U.S. Treasury................................................ $ 987,374 $ 10,793 $ 170 $ 997,997
Other U.S. government........................................ 709,536 6,005 67 715,474
Mortgage-backed securities................................... 679,692 3,331 265 682,758
State and municipal.......................................... 90,937 13,236 -- 104,173
Corporate debt securities.................................... 2,698 311 1 3,008
Equity securities............................................ 28,881 1,596 672 29,805
Foreign securities........................................... 5,132 39 -- 5,171
------------ ----------- ----------- ------------
Total securities available for sale...................... $ 2,504,250 $ 35,311 $ 1,175 $ 2,538,386
------------ ----------- ----------- ------------
------------ ----------- ----------- ------------
</TABLE>

SECURITIES HELD TO MATURITY

<TABLE>
<CAPTION>
DECEMBER 31, 1996
------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED
(DOLLARS IN THOUSANDS) COST GAINS LOSSES FAIR VALUE
- ----------------------------------------------------------------- ---------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
U.S. Treasury.................................................... $ 50,109 $ 1,735 $ -- $ 51,844
Other U.S. government............................................ 139,188 4,412 -- 143,600
Mortgage-backed securities....................................... 41,985 2,019 68 43,936
State and municipal.............................................. 36,914 310 2,199 35,025
---------- ----------- ----------- ----------
Total securities held to maturity............................ $ 268,196 $ 8,476 $ 2,267 $ 274,405
---------- ----------- ----------- ----------
---------- ----------- ----------- ----------

DECEMBER 31, 1997
------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED
(DOLLARS IN THOUSANDS) COST GAINS LOSSES FAIR VALUE
- ----------------------------------------------------------------- ---------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
U.S. Treasury.................................................... $ 40,092 $ 1,333 $ -- $ 41,425
Other U.S. government............................................ 99,520 2,568 -- 102,088
Mortgage-backed securities....................................... 24,477 1,745 14 26,208
State and municipal.............................................. 24,686 75 1,367 23,394
---------- ----------- ----------- ----------
Total securities held to maturity............................ $ 188,775 $ 5,721 $ 1,381 $ 193,115
---------- ----------- ----------- ----------
---------- ----------- ----------- ----------
</TABLE>

The amortized cost and fair value of securities, by contractual maturity,
are shown below. Expected maturities may differ from contractual maturities
because borrowers may have the right to call or prepay obligations, with or
without call or prepayment penalties.

F-15
<PAGE>

UNIONBANCAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1995, 1996, 1997,

AND CONDENSED NOTES FOR

SEPTEMBER 30, 1997 (UNAUDITED) AND 1998 (UNAUDITED)

NOTE 2 -- SECURITIES (CONTINUED)

MATURITY SCHEDULE OF SECURITIES

<TABLE>
<CAPTION>
SECURITIES SECURITIES
AVAILABLE FOR SALE HELD TO MATURITY
-------------------------- ----------------------
DECEMBER 31, 1997 DECEMBER 31, 1997
-------------------------- ----------------------
AMORTIZED FAIR AMORTIZED FAIR
(DOLLARS IN THOUSANDS) COST VALUE COST VALUE
- ------------------------------------------------------------- ------------ ------------ ---------- ----------
<S> <C> <C> <C> <C>
Due in one year or less...................................... $ 321,459 $ 322,592 $ 22,699 $ 22,801
Due after one year through five years........................ 2,101,347 2,122,154 150,467 156,069
Due after five years through ten years....................... 15,950 18,508 2,596 2,536
Due after ten years.......................................... 36,613 45,327 13,013 11,709
Equity securities............................................ 28,881 29,805 -- --
------------ ------------ ---------- ----------
Total securities........................................... $ 2,504,250 $ 2,538,386 $ 188,775 $ 193,115
------------ ------------ ---------- ----------
------------ ------------ ---------- ----------
</TABLE>

During the quarter ended December 31, 1995, in accordance with guidance
issued by the FASB, the Company reclassified from securities held to maturity to
securities available for sale approximately $285 million at amortized cost of
U.S. Treasury Notes (fair value $285 million) and $64 million at amortized cost
of municipal bonds (fair value $72 million). During the years ended December 31,
1996 and 1997, there were no sales or transfers from the securities held to
maturity portfolio.

In 1995, proceeds from sales of securities available for sale were $241
million with gross realized gains of $2 million and gross realized losses of $3
million. In 1996, proceeds from sales of securities available for sale were $20
million with gross realized gains of $5 million and no gross realized losses. In
1997, proceeds from sales of securities available for sale were $172 million
with gross realized gains of $3 million and no gross realized losses.

F-16
<PAGE>

UNIONBANCAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1995, 1996, 1997,
AND CONDENSED NOTES FOR
SEPTEMBER 30, 1997 (UNAUDITED) AND 1998 (UNAUDITED)

NOTE 3 -- LOANS AND ALLOWANCE FOR CREDIT LOSSES

A summary of loans net of unearned interest and fees of $150 million and
$128 million at December 31, 1996 and 1997, respectively, is as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
(DOLLARS IN THOUSANDS) 1996 1997
- ----------------------------------------------------------------------------------- ------------- -------------
<S> <C> <C>
Domestic:
Commercial, financial and industrial............................................. $ 9,495,592 $ 10,747,179
Construction..................................................................... 357,817 293,333
Mortgage:
Residential.................................................................... 2,960,908 2,961,233
Commercial..................................................................... 2,597,616 2,951,807
------------- -------------
Total mortgage............................................................... 5,558,524 5,913,040
Consumer:
Installment.................................................................... 2,063,434 2,090,752
Home equity.................................................................... 1,113,269 992,916
Credit card and other lines of credit.......................................... 303,235 270,097
------------- -------------
Total consumer............................................................... 3,479,938 3,353,765
Lease financing.................................................................. 800,048 874,860
------------- -------------
Total loans in domestic offices.............................................. 19,691,919 21,182,177
Loans originated in foreign branches............................................... 1,357,868 1,559,231
------------- -------------
Total loans.................................................................. 21,049,787 22,741,408
Allowance for credit losses................................................ 523,946 451,692
------------- -------------
Loans, net................................................................... $ 20,525,841 $ 22,289,716
------------- -------------
------------- -------------
</TABLE>

Changes in the allowance for credit losses were as follows:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------
(DOLLARS IN THOUSANDS) 1995 1996 1997
- --------------------------------------------------------------------------- ----------- ----------- -----------
<S> <C> <C> <C>
Balance, beginning of year................................................. $ 563,142 $ 555,149 $ 523,946
Loans charged off.......................................................... (133,599) (119,100) (122,779)
Loan loss recoveries....................................................... 72,403 48,024 51,014
----------- ----------- -----------
Total net loans charged off............................................ (61,196) (71,076) (71,765)
Provision for credit losses................................................ 53,250 40,000 --
Transfer of reserve for trading account assets............................. -- -- --
Foreign translation adjustment and other net deductions.................... (47) (127) (489)
----------- ----------- -----------
Balance, end of year....................................................... $ 555,149 $ 523,946 $ 451,692
----------- ----------- -----------
----------- ----------- -----------
</TABLE>

F-17
<PAGE>

UNIONBANCAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1995, 1996, 1997,
AND CONDENSED NOTES FOR
SEPTEMBER 30, 1997 (UNAUDITED) AND 1998 (UNAUDITED)

NOTE 3 -- LOANS AND ALLOWANCE FOR CREDIT LOSSES (CONTINUED)

Nonaccrual loans totaled $128 million and $109 million at December 31, 1996
and 1997, respectively. A significant portion of these loans were real estate
related. There were no renegotiated loans at December 31, 1996 and 1997.
Interest foregone on loans designated as nonaccrual at December 31, 1995, 1996
and 1997 was $18 million, $9 million and $6 million, respectively.

LOAN IMPAIRMENT

Impaired loans of the Company include commercial, financial and industrial,
construction and commercial mortgage loans designated as nonaccrual. When the
value of an impaired loan is less than the recorded investment in the loan, a
portion of the Company's allowance for credit losses is allocated as an
impairment allowance.

Effective January 1, 1995, the Company's policy for recognition of interest
income, charge-offs of loans, and application of payments on impaired loans is
the same as the policy applied to nonaccrual loans.

The following table sets forth information about the Company's impaired
loans at the dates indicated.

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------
(DOLLARS IN THOUSANDS) 1995 1996 1997
- ----------------------------------------------------------------------------- ---------- ---------- ----------
<S> <C> <C> <C>
Impaired loans with an allowance............................................. $ 58,584 $ 69,886 $ 59,351
Impaired loans without an allowance(1)....................................... 114,611 43,962 49,033
---------- ---------- ----------
Total impaired loans(2).................................................. $ 173,195 $ 113,848 $ 108,384
---------- ---------- ----------
---------- ---------- ----------
Allowance for impaired loans................................................. $ 15,837 $ 21,260 $ 9,418
Average balance of impaired loans during the year............................ $ 277,955 $ 145,351 $ 120,096
</TABLE>

- ---------

(1) These loans do not require an allowance for credit losses since the fair
values of the impaired loans equal or exceed the recorded investments in the
loans.

(2) This amount was evaluated for impairment using three measurement methods as
follows: $64 million, $38 million, and $27 million was evaluated using the
present value of the expected future cash flows at December 31, 1995, 1996
and 1997, respectively; $95 million, $45 million, and $53 million was
evaluated using the fair value of the collateral at December 31, 1995, 1996
and 1997, respectively; $14 million, $31 million, and $28 million was
evaluated using historical loss factors at December 31, 1995, 1996 and 1997,
respectively.

Interest income recognized on nonaccrual loans was $11 million, $5 million
and $3 million for the years ended December 31, 1995, 1996 and 1997,
respectively.

RELATED PARTY LOANS

The Company in some cases makes loans to related parties including its
directors, executive officers and their affiliated companies. At December 31,
1996, related party loans outstanding to individuals who served as directors or
executive officers at anytime during the year totaled $79 million as compared to
$38 million at December 31, 1997. In the opinion of management, these related
party loans were made on substantially the

F-18
<PAGE>

UNIONBANCAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1995, 1996, 1997,
AND CONDENSED NOTES FOR
SEPTEMBER 30, 1997 (UNAUDITED) AND 1998 (UNAUDITED)

NOTE 3 -- LOANS AND ALLOWANCE FOR CREDIT LOSSES (CONTINUED)

same terms, including interest rates and collateral requirements, as those terms
prevailing at the date these loans were made. During 1996 and 1997, there were
no loans to related parties which were charged off. Additionally, at December
31, 1996 and 1997, there were no loans to related parties which were
nonperforming.

NOTE 4 -- PREMISES AND EQUIPMENT

Premises and equipment are carried at cost, less accumulated depreciation
and amortization. As of December 31, 1996 and 1997, the amounts were:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------------------------------------
1996 1997
------------------------------------ ------------------------------------
ACCUMULATED ACCUMULATED
DEPRECIATION DEPRECIATION
AND NET BOOK AND NET BOOK
(DOLLARS IN THOUSANDS) COST AMORTIZATION VALUE COST AMORTIZATION VALUE
- --------------------------------------------------- --------- ------------ ----------- --------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Land............................................... $ 73,309 $ -- $ 73,309 $ 69,290 $ -- $ 69,290
Premises........................................... 264,545 98,785 165,760 253,752 101,997 151,755
Leasehold improvements............................. 124,065 75,264 48,801 135,609 80,019 55,590
Furniture, fixtures and equipment.................. 362,063 239,312 122,751 400,774 271,110 129,664
--------- ------------ ----------- --------- ------------ -----------
Total............................................ $ 823,982 $ 413,361 $ 410,621 $ 859,425 $ 453,126 $ 406,299
--------- ------------ ----------- --------- ------------ -----------
--------- ------------ ----------- --------- ------------ -----------
</TABLE>

Rental, depreciation and amortization expense were as follows:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
(DOLLARS IN THOUSANDS) 1995 1996 1997
- --------------------------------------------------------------------------------- --------- --------- ---------
<S> <C> <C> <C>
Rental expense of premises....................................................... $ 53,493 $ 66,189 $ 46,556
Less: rental income.............................................................. 11,050 11,904 11,049
--------- --------- ---------
Net rental expense............................................................. $ 42,443 $ 54,285 $ 35,507
--------- --------- ---------
--------- --------- ---------
Other net rental expense (income), primarily for equipment....................... $ 2,705 $ 2,218 $ 298
--------- --------- ---------
--------- --------- ---------
Depreciation and amortization of premises and equipment.......................... $ 49,036 $ 51,821 $ 53,652
--------- --------- ---------
--------- --------- ---------
</TABLE>

F-19
<PAGE>

UNIONBANCAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1995, 1996, 1997,
AND CONDENSED NOTES FOR
SEPTEMBER 30, 1997 (UNAUDITED) AND 1998 (UNAUDITED)

NOTE 4 -- PREMISES AND EQUIPMENT (CONTINUED)

Future minimum operating lease payments are as follows.

<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS) DECEMBER 31, 1997
- ----------------------------------------------------------------------------------------------- -----------------
<S> <C>
Years ending December 31,
1998......................................................................................... $ 48,156
1999......................................................................................... 46,564
2000......................................................................................... 38,078
2001......................................................................................... 33,793
2002......................................................................................... 23,654
Later years.................................................................................. 127,654
--------
Total minimum operating lease payments......................................................... $ 317,899
--------
--------
Minimum rental income due in the future under noncancellable subleases......................... $ 36,349
--------
--------
</TABLE>

Included in other liabilities in the accompanying December 31, 1997
Consolidated Balance Sheet is $13 million of future operating lease payments
accrued in connection with the Merger (also see Note 7).

A majority of the leases provide for the payment of taxes, maintenance,
insurance and certain other expenses applicable to the leased premises. Many of
the leases contain extension provisions, escalation clauses and purchase
options. There are no restrictions on paying dividends, incurring additional
debt or negotiating additional leases under the terms of the present lease
agreements.

NOTE 5 -- DEPOSITS

At December 31, 1997, the Company had $155 million in domestic interest
bearing time deposits exceeding $100,000 with a remaining term of greater than
one year. Maturity information for those deposits is summarized below.

<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS) DECEMBER 31, 1997
- ----------------------------------------------------------------------------------------------- -----------------
<S> <C>
Due after one year through two years........................................................... $ 82,707
Due after two years through three years........................................................ 30,064
Due after three years through four years....................................................... 21,854
Due after four years through five years........................................................ 17,642
Due after five years........................................................................... 2,681
--------
Total...................................................................................... $ 154,948
--------
--------
</TABLE>

Substantially all of the foreign interest bearing time deposits exceeding
$100,000 mature in less than one year.

F-20
<PAGE>

UNIONBANCAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1995, 1996, 1997,
AND CONDENSED NOTES FOR
SEPTEMBER 30, 1997 (UNAUDITED) AND 1998 (UNAUDITED)

NOTE 6 -- EMPLOYEE BENEFIT AND INCENTIVE PLANS AND OTHER POSTRETIREMENT BENEFITS

RETIREMENT PLANS

Between April 1, 1996 and December 31, 1996, the Company maintained two
retirement plans, one covering former Union Bank employees and the other
covering former BanCal Tri-State Corporation employees. Effective January 1,
1997, the Union Bank Retirement Plan was amended and renamed the Union Bank of
California, N.A. Retirement Plan (the Plan). In addition, the plan covering
former BanCal Tri-State Corporation employees was terminated and all account
balances became fully vested. Employees of the former BanCal Tri-State
Corporation entered the Plan on January 1, 1997.

The Plan is a noncontributory defined benefit plan that provides retirement
benefits based on years of credited service and the final average compensation
amount, as defined in the Plan. Employees become eligible for this plan after
one year of service and become fully vested after five years of service. Prior
Bank of California participants received credited service from date of hire for
vesting, eligibility and early retirement purposes, but only received service
from January 1, 1997 for benefit purposes. The Company's funding policy is to
make contributions equal to the maximum deductible amount as allowed by the
Internal Revenue Code. Contributions are intended to provide not only for
benefits attributed to services to date, but also for those expected to be
earned in the future. Plan assets are invested in U.S. government securities,
corporate bonds, and commingled investment funds.

The following sets forth the funded status of the Plan and the amounts
recognized in the Company's Consolidated Balance Sheets at December 31, 1996 and
1997.

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
<S> <C> <C>
(DOLLARS IN THOUSANDS) 1996 1997
- ------------------------------------------------------------------------------ ----------- -----------
Accumulated benefit obligation:
Actuarial present value of benefits for services rendered to date:
Vested.................................................................... $ (241,188) $ (297,646)
Non-vested................................................................ (27,821) (30,858)
----------- -----------
Total................................................................... $ (269,009) $ (328,504)
----------- -----------
----------- -----------
Projected benefit obligation.................................................. $ (323,646) $ (400,958)

Fair value of plan assets..................................................... 381,194 460,501
----------- -----------
Projected benefit obligation less than plan assets.......................... 57,548 59,543
Prior service cost not yet recognized in net periodic pension cost............ 5,165 12,915
Unrecognized net gain due to change of assumptions and experience different
from assumptions made........................................................ (29,660) (37,717)
Unrecognized transition asset at January 1, 1986, being recognized over 13.4
years........................................................................ (359) (210)
----------- -----------
Prepaid pension costs included in other assets.......................... $ 32,694 $ 34,531
----------- -----------
----------- -----------
</TABLE>

F-21
<PAGE>

UNIONBANCAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1995, 1996, 1997,
AND CONDENSED NOTES FOR
SEPTEMBER 30, 1997 (UNAUDITED) AND 1998 (UNAUDITED)

NOTE 6 -- EMPLOYEE BENEFIT AND INCENTIVE PLANS AND OTHER POSTRETIREMENT BENEFITS
(CONTINUED)

The following items are components of net pension expense.

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------
<S> <C> <C> <C>
(DOLLARS IN THOUSANDS) 1995 1996 1997
- -------------------------------------------------------------------- ---------- ---------- ----------
Service cost -- present value of benefits earned.................... $ 10,516 $ 12,651 $ 20,667
Interest cost on projected benefit obligation....................... 19,637 22,043 25,049
Less return on plan assets:
Actual gain....................................................... (63,304) (44,210) (66,819)
Gains in excess of expected return on plan assets................. 42,286 20,333 39,700
---------- ---------- ----------
Expected return on plan assets.................................. (21,018) (23,877) (27,119)
Amortization of prior service cost.................................. 2,108 2,108 3,175
Amortization of transition asset.................................... (149) (149) (149)
---------- ---------- ----------
Net pension expense............................................. $ 11,094 $ 12,776 $ 21,623
---------- ---------- ----------
---------- ---------- ----------
</TABLE>

The following summarizes the assumptions used in computing the present value
of the accumulated benefit obligation, the present value of the projected
benefit obligation and the net pension expense.

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
<S> <C> <C> <C>
1995 1996 1997
--------- --------- ---------
Discount rate in determining expense.......................................... 7.50% 7.50% 7.50%
Discount rate in determining benefit obligations at year end.................. 7.50 7.50 7.00
Rate of increase in future compensation levels for determining expense........ 5.50 5.50 5.50
Rate of increase in future compensation levels for determining benefit
obligations at year end...................................................... 5.50 5.50 5.00
Expected return on plan assets................................................ 8.25 8.25 8.25
</TABLE>

The former BanCal Tri-State Corporation retirement plan, which was
terminated effective January 1, 1997, was a defined contribution plan. The
Company's expense for pension contributions for the years ended December 31,
1995 and 1996 was $6 million and $5 million, respectively.

EXECUTIVE SUPPLEMENTAL BENEFIT PLANS

The Company has several Executive Supplemental Benefit Plans (ESBP) which
provide eligible employees with supplemental retirement benefits. The plans are
unfunded. The accrued liability for ESBP's included in other liabilities in the
Consolidated Balance Sheets was $35 million at December 31, 1996 and $39 million
at December 31, 1997. The Company's expense relating to the ESBP's was $3
million for the year ended December 31, 1995 and $4 million for each of the
years ended December 31, 1996 and 1997.

F-22
<PAGE>

UNIONBANCAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1995, 1996, 1997,
AND CONDENSED NOTES FOR
SEPTEMBER 30, 1997 (UNAUDITED) AND 1998 (UNAUDITED)

NOTE 6 -- EMPLOYEE BENEFIT AND INCENTIVE PLANS AND OTHER POSTRETIREMENT BENEFITS
(CONTINUED)

SECTION 401(K) SAVINGS PLANS

The Company has a defined contribution plan authorized under Section 401(k)
of the Internal Revenue Code. All benefits-eligible employees with at least one
year of service are eligible to participate in the plan. Employees may
contribute up to 16 percent of their pre-tax covered compensation or up to 10
percent of their after-tax covered compensation through salary deductions. The
Company contributes 50 percent of every pre-tax dollar an employee contributes
up to the first 6 percent of the employee's pre-tax covered compensation.
Effective January 1, 1997, employees are fully vested in the employer's
contributions immediately. In addition, the Company may make a discretionary
annual profit-sharing contribution up to 2.5 percent of an employee's pay. This
profit-sharing contribution is for all eligible employees, regardless of whether
an employee is participating in the 401(k) plan, and depends on the Bank's
annual financial performance. All employer contributions are tax deductible by
the Company. The Company's combined matching contribution expense was $9
million, $9 million and $13 million for the years ended December 31, 1995, 1996
and 1997, respectively.

OTHER POSTRETIREMENT BENEFITS

The Company provides certain health care and life insurance benefits for its
retired employees. The health care cost is shared between the Company and the
retiree. The life insurance plan is noncontributory. The accounting for the
health care plan anticipates future cost-sharing changes to the written plan
that are consistent with the Company's intent to maintain a level of
cost-sharing at approximately 25 percent. Assets set aside to cover such
obligations are primarily invested in mutual funds.

The following table sets forth the plan's combined funded status recognized.

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
(DOLLARS IN THOUSANDS) 1996 1997
- --------------------------------------------------------------------------- ------------ ------------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees................................................................. $ (48,747) $ (48,519)
Fully eligible plan participants......................................... (11,876) (12,208)
Other active plan participants........................................... (19,651) (18,581)
------------ ------------
Accumulated postretirement obligation.................................. (80,274) (79,308)
Fair value of plan assets.................................................. 21,703 31,136
------------ ------------
Accumulated postretirement obligation in excess of plan assets........... (58,571) (48,172)
Unrecognized net gain due to change in assumption and experience different
from assumptions made..................................................... (14,829) (21,119)
Unrecognized transition obligation......................................... 63,800 59,813
------------ ------------
Accrued postretirement benefit cost.................................... $ (9,600) $ (9,478)
------------ ------------
------------ ------------
</TABLE>

F-23
<PAGE>

UNIONBANCAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1995, 1996, 1997,
AND CONDENSED NOTES FOR
SEPTEMBER 30, 1997 (UNAUDITED) AND 1998 (UNAUDITED)

NOTE 6 -- EMPLOYEE BENEFIT AND INCENTIVE PLANS AND OTHER POSTRETIREMENT BENEFITS
(CONTINUED)

The following table sets forth the components of postretirement benefit
expense.

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------
(DOLLARS IN THOUSANDS) 1995 1996 1997
- ------------------------------------------------------------ ------------ ------------ ------------
<S> <C> <C> <C>
Service cost................................................ $ 1,792 $ 1,741 $ 3,123
Interest cost............................................... 6,091 5,581 5,150
Actual return on plan assets................................ (3,337) (2,590) (4,445)
Net amortization and deferral............................... 5,559 4,397 4,826
------------ ------------ ------------
Net periodic postretirement benefit cost.................. $ 10,105 $ 9,129 $ 8,654
------------ ------------ ------------
------------ ------------ ------------

Postretirement benefit claims paid for the year............. $ 5,309 $ 3,808 $ 3,787
------------ ------------ ------------
------------ ------------ ------------
</TABLE>

The unrecognized transition obligation recorded on January 1, 1993 is being
amortized over 20 years.

For 1995, the former Union Bank assumed a 9 percent annual rate of increase
in the per capita cost of postretirement medical benefits for the indemnity plan
and a 4 percent annual rate of increase was assumed for the HMO plan. For future
periods the assumed rate for the indemnity plan gradually decreased from 9
percent to 5.5 percent in 2007 and remained level thereafter. The assumed rate
of change on the HMO plan increased for the remainder of the decade, then
gradually decreased to 5.5 percent in the year 2007 and thereafter.

For 1995, former BanCal Tri-State Corporation assumed an 11.5 percent annual
rate of increase in the per capita cost of postretirement medical benefits for
the indemnity plan. For future periods, the assumed rate for the indemnity plan
gradually decreased from 11.5 percent to 5.5 percent in 2003 and remained level
thereafter.

For 1996, the Company assumed a 9 percent annual rate of increase in the per
capita cost of postretirement medical benefits for the indemnity plan and a 4
percent annual rate of increase was assumed for the HMO plan. For future periods
the assumed rate for the indemnity plan gradually decreased from 9 percent to
5.5 percent in 2007 and remained level thereafter. The assumed rate of change on
the HMO plan increased to 7 percent in 1997 and then gradually decreased to 5.5
percent in the year 2007 and thereafter.

For 1997, the Company assumed a 9 percent annual rate of increase in the per
capita cost of postretirement medical benefits for the indemnity plan and a 4
percent annual rate of increase was assumed for the health maintenance
organization (HMO) plan. For future periods, the rate for the indemnity plan was
expected to gradually decrease from 9 percent to 5.5 percent in 2007 and remain
at that level thereafter. The rate for the HMO plan was expected to increase
after one year of being at a low rate and then gradually decrease to 5.5 percent
in the year 2007 and thereafter.

The healthcare cost trend rate assumption has a significant effect on the
amounts reported. To illustrate, increasing the assumed health care cost trend
rates by one percentage point in each year would

F-24
<PAGE>

UNIONBANCAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1995, 1996, 1997,
AND CONDENSED NOTES FOR
SEPTEMBER 30, 1997 (UNAUDITED) AND 1998 (UNAUDITED)

NOTE 6 -- EMPLOYEE BENEFIT AND INCENTIVE PLANS AND OTHER POSTRETIREMENT BENEFITS
(CONTINUED)

increase the accumulated postretirement benefit obligation as of December 31,
1997 by $11 million and the aggregate of the service and interest cost
components of net periodic postretirement benefit cost for the year then ended
by $1 million.

The discount rate used in determining the actuarial present value of the
accumulated postretirement benefit obligation was 7.50% as of December 31, 1995
and 1996 and 7.00% as of December 31, 1997. The estimated rate of return on plan
assets was 8.00% as of December 31, 1995, 1996 and 1997.

NOTE 7 -- OTHER EXPENSES

The detail of other expenses is as follows:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------
(DOLLARS IN THOUSANDS) 1995 1996 1997
- ----------------------------------------------------------------------------- ---------- ---------- ----------
<S> <C> <C> <C>
Merchant transaction processing fees......................................... $ 31,288 $ 37,091 $ 42,274
Communications............................................................... 35,806 40,133 42,372
Professional services........................................................ 26,197 24,342 28,075
Advertising and public relations............................................. 20,911 28,788 28,664
Data processing.............................................................. 18,557 22,140 25,973
Printing and office supplies................................................. 22,626 27,085 24,098
Regulatory assessments....................................................... 23,431 4,048 5,778
Other........................................................................ 117,908 114,400 129,251
---------- ---------- ----------
Total other expenses..................................................... $ 296,724 $ 298,027 $ 326,485
---------- ---------- ----------
---------- ---------- ----------
</TABLE>

In connection with the Merger, the Company incurred merger and integration
expense of $117 million and $6 million for the years ended 1996 and 1997,
respectively, as summarized in the following table.

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER
31,
---------------------
(DOLLARS IN THOUSANDS) 1996 1997
- ------------------------------------------------------------------------------------------- ---------- ---------
<S> <C> <C>
Balance, accrued merger and integration expense, beginning of year......................... $ -- $ 54,344
Provision for merger and integration costs................................................. 117,464 6,037
Utilization:
Cash..................................................................................... 40,155 35,809
Noncash.................................................................................. 22,965 1,642
---------- ---------
Total utilization...................................................................... 63,120 37,451
---------- ---------
Balance, accrued merger and integration expense, end of year............................... $ 54,344 $ 22,930
---------- ---------
---------- ---------
</TABLE>

Total merger and integration expense of $124 million was recorded to cover
$38 million of personnel expense for severance, retention and other employee
related costs, $54 million for facilities expense related

F-25
<PAGE>

UNIONBANCAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1995, 1996, 1997,
AND CONDENSED NOTES FOR
SEPTEMBER 30, 1997 (UNAUDITED) AND 1998 (UNAUDITED)

NOTE 7 -- OTHER EXPENSES (CONTINUED)

to redundant banking facilities, and $32 million in professional services and
other expense. At December 31, 1997, the liability balance included amounts
primarily for severance payments that are being paid on a periodic basis and for
operating lease payments related to redundant banking facilities which are
continuing over the expected term of the leases.

NOTE 8 -- INCOME TAXES

The components of income tax expense were as follows:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------
(DOLLARS IN THOUSANDS) 1995 1996 1997
- ----------------------------------------------------------------------------- ---------- ---------- ----------
<S> <C> <C> <C>
Taxes currently payable:
Federal.................................................................... $ 96,732 $ 86,159 $ 168,375
State...................................................................... 42,356 23,180 8,441
Foreign.................................................................... 3,430 2,895 2,092
---------- ---------- ----------
Total currently payable.................................................. 142,518 112,234 178,908
---------- ---------- ----------
Taxes deferred:
Federal.................................................................... 34,839 47,575 49,437
State...................................................................... 16,005 3,455 10,499
Foreign.................................................................... (3) (372) (122)
---------- ---------- ----------
Total deferred........................................................... 50,841 50,658 59,814
---------- ---------- ----------
Total income tax expense................................................. $ 193,359 $ 162,892 $ 238,722
---------- ---------- ----------
---------- ---------- ----------
</TABLE>

F-26
<PAGE>

UNIONBANCAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1995, 1996, 1997,
AND CONDENSED NOTES FOR
SEPTEMBER 30, 1997 (UNAUDITED) AND 1998 (UNAUDITED)

NOTE 8 -- INCOME TAXES (CONTINUED)

The components of the net deferred tax balances of the Company were as
follows:

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
(DOLLARS IN THOUSANDS) 1996 1997
- ------------------------------------------------------------------------------------------ ---------- ----------
<S> <C> <C>
Deferred tax assets:
Allowance for credit losses............................................................. $ 195,128 $ 169,769
Accrued income & expense................................................................ 31,964 21,987
Accrued merger expense.................................................................. 22,051 15,641
Deferred state taxes.................................................................... 13,572 21,063
Other................................................................................... 2,567 7,585
---------- ----------
Total deferred tax assets............................................................. 265,282 236,045
---------- ----------
Deferred tax liabilities:
Leasing................................................................................. 276,922 297,891
Depreciation............................................................................ 13,809 17,192
Unrealized gain on securities available for sale........................................ 9,711 13,536
---------- ----------
Total deferred tax liabilities........................................................ 300,442 328,619
---------- ----------
Net deferred tax liability.......................................................... $ 35,160 $ 92,574
---------- ----------
---------- ----------
</TABLE>

The following table is an analysis of the effective tax rate.

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------
1995 1996 1997
----- ----- -----
<S> <C> <C> <C>
Federal income tax rate................................................................ 35% 35% 35%
Net tax effects of:
State income taxes, net of federal income tax benefit................................ 5 4 2
Tax-exempt interest income........................................................... (1) (1) (1)
Amortization of intangibles.......................................................... 1 1 1
Other................................................................................ (2) 1 --
-- -- --
Effective tax rate................................................................. 38% 40% 37%
-- -- --
-- -- --
</TABLE>

During 1997, the Company received a refund from the State of California
Franchise Tax Board of approximately $25 million (net of federal taxes of $17
million) in settlement of litigation, administration and audit disputes covering
the years 1975-1987. The refund was recorded as a reduction to state income tax
expense.

During the nine months ended September 30, 1998, a reduction in state income
tax liabilities of $52.4 million, net of federal tax, was recorded. Of the $52.4
million reduction, $29 million related to the reversal of previously accrued
1997 state income tax liabilities and $23.4 million related to a lower tax

F-27
<PAGE>

UNIONBANCAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1995, 1996, 1997,
AND CONDENSED NOTES FOR
SEPTEMBER 30, 1997 (UNAUDITED) AND 1998 (UNAUDITED)

NOTE 8 -- INCOME TAXES (CONTINUED)

provision in 1998. The decrease in the effective tax rate in 1998 resulted from
the Company's ability to file California franchise tax returns on a worldwide
unitary basis, which incorporates the financial results of BTM and its worldwide
affiliates.

Federal and state tax returns for several years are under or subject to
examination by the respective taxing authorities. Although the ultimate outcome
of such examinations cannot be determined at this time, management believes that
the resolution of issues that have been or may be raised will not have a
material adverse effect on the Company's consolidated financial position or
results of operations.

NOTE 9 -- BORROWED FUNDS

The following is a summary of the major categories of borrowed funds.

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
(DOLLARS IN THOUSANDS) 1996 1997
- -------------------------------------------------------------------------------------- ------------ ------------
<S> <C> <C>
Federal funds purchased and securities sold under repurchase agreements with weighted
average interest rates of 5.09% and 5.38% at December 31, 1996 and 1997,
respectively........................................................................ $ 1,322,654 $ 1,335,884
Commercial paper with weighted average interest rates of 5.34% and 5.64% at December
31, 1996 and 1997, respectively..................................................... 1,495,463 966,575
Other borrowed funds with weighted average interest rates of 5.66% and 6.23% at
December 31, 1996 and 1997, respectively............................................ 749,422 476,010
------------ ------------
Total borrowed funds.............................................................. $ 3,567,539 $ 2,778,469
------------ ------------
------------ ------------

Federal funds purchased and securities sold under repurchase agreements:
Maximum outstanding at any month end................................................ $ 1,322,654 $ 1,575,930
Average balance during the year..................................................... 933,433 1,097,707
Weighted average interest rate during the year...................................... 5.05% 5.33%

Commercial paper:
Maximum outstanding at any month end................................................ $ 1,854,576 $ 1,876,135
Average balance during the year..................................................... 1,620,087 1,637,070
Weighted average interest rate during the year...................................... 5.40% 5.49%

*Other borrowed funds:
Maximum outstanding at any month end................................................ $ 1,697,236 $ 851,694
Average balance during the year..................................................... 1,119,051 635,900
Weighted average interest rate during the year...................................... 5.59% 5.42%
</TABLE>

F-28
<PAGE>

UNIONBANCAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1995, 1996, 1997,
AND CONDENSED NOTES FOR
SEPTEMBER 30, 1997 (UNAUDITED) AND 1998 (UNAUDITED)

NOTE 10 -- SUBORDINATED CAPITAL NOTES AND PREFERRED STOCK

The following is a summary of capital notes which are subordinated to other
obligations of the Company.

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
(DOLLARS IN THOUSANDS) 1996 1997
- ------------------------------------------------------------------------------------------ ---------- ----------
<S> <C> <C>
Floating rate notes due June 2007. These notes bear interest at 0.325% above 3-month
London Interbank Offered Rate (LIBOR) and are payable to the holder of the note (BTM at
December 31, 1997)...................................................................... $ -- $ 200,000
Floating rate notes due July 2000. These notes bear interest at 0.30% above 3-month
LIBOR................................................................................... 98,000 98,000
Floating rate notes due July 1997 and July 1998. These notes bear interest at 0.25% above
3-month LIBOR and are payable to BTM.................................................... 100,000 50,000
8.00% fixed rate notes due February 2002. The notes were called at par on February 25,
1997.................................................................................... 100,000 --
6.67% fixed rate notes due August 2002. The notes were called at par on August 20, 1997... 50,000 --
Fixed rate and floating rate notes matured in October 1997, with $23,000 bearing interest
at fixed rates of 10.05% to 10.14% and notes totaling $11,000 bearing interest at 0.375%
above 3-month LIBOR..................................................................... 34,000 --
---------- ----------
Total subordinated capital notes...................................................... $ 382,000 $ 348,000
---------- ----------
---------- ----------
</TABLE>

All of the above notes qualify as Tier 2 risk-based capital under the
Federal Reserve guidelines for assessing regulatory capital. For the total
risk-based capital ratio, the amount of notes which qualify as capital is
reduced as the notes approach maturity. At December 31, 1996 and 1997, $219
million and $239 million, respectively, of the notes qualified as risk-based
capital.

Provisions of several of the notes restrict the use of the Company's
property as security for borrowings, and place limitations on leases,
indebtedness, distributions to shareholders, mergers, sales of certain assets,
transactions with affiliates and changes in majority stock ownership of the
Company.

The following table presents the maturities of subordinated capital notes.

<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS) DECEMBER 31, 1997
- --------------------------------------------------------------------------- -----------------
<S> <C>
Years ending December 31,
1998..................................................................... $ 50,000
2000..................................................................... 98,000
Years after 2002......................................................... 200,000
--------
Total.................................................................. $ 348,000
--------
--------
</TABLE>

At December 31, 1996, the Company had outstanding 1,350,000 shares (or
5,400,000 depositary shares) of 8 3/8% Noncumulative Preferred Stock, Series A
(Preferred Stock) totaling $135 million. On September 3, 1997, the Company
redeemed all 1,350,000 outstanding shares of its Preferred Stock, reducing
shareholders'

F-29
<PAGE>

UNIONBANCAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1995, 1996, 1997,
AND CONDENSED NOTES FOR
SEPTEMBER 30, 1997 (UNAUDITED) AND 1998 (UNAUDITED)

NOTE 10 -- SUBORDINATED CAPITAL NOTES AND PREFERRED STOCK (CONTINUED)

equity by $135 million. The redemption price was equal to the stated value of
$100 per share of Preferred Stock (equivalent to $25 per depositary share), plus
$2 million in accrued and unpaid dividends to the redemption date. The
redemption was funded by proceeds from the issuance of $200 million in
subordinated capital notes in June 1997.

NOTE 11 -- DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN

The Company has a dividend reinvestment and stock purchase plan for
shareholders. The plan allows shareholders to automatically reinvest all or part
of their dividends in additional shares of the Company's common stock at a cost
of 5 percent below the market price. Participating shareholders also have the
option of purchasing additional shares at full market price with cash payments
of $25 to $3,000 per quarter. The Company obtains shares required for
reinvestment through open market purchases or by the issuance of new shares from
its authorized but unissued stock. During the years ended December 31, 1995,
1996, and 1997, 1,862,034; 155,724; and, 131,127 shares, respectively, were
required for dividend reinvestment purposes, of which 1,862,034; 71,706; and,
3,897 shares were considered new issuances during 1995, 1996 and 1997,
respectively. BTM discontinued its participation in the plan after the quarter
ended March 31, 1995 and did not participate in the plan as of December 31,
1997.

NOTE 12 -- MANAGEMENT STOCK PLAN

The Company has a management stock plan (the Stock Plan) which has 6,600,000
shares of the Company's common stock authorized to be awarded to key employees
and outside directors of the Company and its subsidiaries at the discretion of
the Executive Compensation and Benefits Committee of the Board of Directors (the
Committee). The combined number of shares that are granted under the Stock Plan
cannot exceed 6,600,000 shares of the Company's common stock. Committee members
and employees on rotational assignment from BTM are not eligible for stock
awards.

The Committee determines the term of each stock option grant, up to a
maximum of ten years from the date of grant. The exercise price of the options
issued under the Stock Plan shall not be less than the fair market value on the
date the option is granted. Unvested restricted stock issued under the Stock
Plan is shown as a reduction to retained earnings. The value of the restricted
shares at the date of grant is amortized to compensation expense over its
vesting period. All cancelled or forfeited options and restricted stock become
available for future grants.

In 1995, 1996 and 1997, the Company granted options to various key
employees, including principal officers, under the Stock Plan. The stock options
vest pro rata on each anniversary of the grant date and become fully exercisable
three years from the grant date, provided that the employee has completed the
specified continuous service requirement. They vest earlier if the employee
dies, is permanently and totally disabled, or retires under certain grant, age
and service conditions.

F-30
<PAGE>

UNIONBANCAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1995, 1996, 1997,
AND CONDENSED NOTES FOR
SEPTEMBER 30, 1997 (UNAUDITED) AND 1998 (UNAUDITED)

NOTE 12 -- MANAGEMENT STOCK PLAN (CONTINUED)

The following is a summary of stock option transactions under the Stock
Plan.

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------------------------------------------------------
1995 1996 1997
----------------------------- ----------------------------- -----------------------------
NUMBER OF WEIGHTED-AVERAGE NUMBER OF WEIGHTED-AVERAGE NUMBER OF WEIGHTED-AVERAGE
SHARES EXERCISE PRICE SHARES EXERCISE PRICE SHARES EXERCISE PRICE
---------- ----------------- ---------- ----------------- ---------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Options outstanding,
beginning of year... 740,502 $ 9.94 1,082,106 $ 10.42 1,263,807 $ 12.13
Granted............ 389,100 11.25 277,200 18.29 441,900 22.13
Exercised.......... (47,496) 9.83 (80,496) 10.69 (289,029) 10.84
Forfeited.......... -- -- (15,003) -- (19,500) 22.13
---------- ---------- ----------
Options outstanding,
end of year......... 1,082,106 $ 10.42 1,263,807 $ 12.13 1,397,178 $ 15.41
---------- ---------- ----------
---------- ---------- ----------
Options exercisable,
end of year......... 407,466 $ 9.78 686,145 $ 10.38 712,107 $ 11.50
---------- ---------- ----------
---------- ---------- ----------
</TABLE>

The weighted-average fair value of options granted was $3.13 during 1995,
$6.00 during 1996, and $6.94 during 1997.

The following table summarizes information about stock options outstanding.

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING AT DECEMBER 31, 1997 OPTIONS EXERCISABLE AT
------------------------------------------------ DECEMBER 31, 1997
WEIGHTED-AVERAGE ------------------------------
RANGE OF NUMBER REMAINING WEIGHTED-AVERAGE NUMBER WEIGHTED-AVERAGE
EXERCISE PRICES OUTSTANDING CONTRACTUAL LIFE EXERCISE PRICE EXERCISABLE EXERCISE PRICE
- ------------------- ----------- ---------------- ----------------- ----------- -----------------
<S> <C> <C> <C> <C> <C>
$6.66 - 9.08 267,408 5.0 years $ 8.34 267,408 $ 8.34
11.25 - 12.83 456,114 6.2 11.76 348,867 11.92
18.29 251,256 7.7 18.29 83,832 18.29
22.13 422,400 9.1 22.13 12,000 22.13
----------- -----------
1,397,178 712,107
----------- -----------
----------- -----------
</TABLE>

In 1995, 1996 and 1997, the Company also granted 231,210; 133,440; and,
178,320 shares, respectively, of restricted stock to key officers, including
executive officers, under the Stock Plan. The awards of restricted stock vest
pro rata on each anniversary of the grant date and become fully vested four
years from the grant date, provided that the employee has completed the
specified continuous service requirement. They vest earlier if the employee
dies, is permanently and totally disabled, or retires under certain grant, age
and service conditions. Restricted shareholders have the right to vote their
restricted shares and receive dividends.

F-31
<PAGE>

UNIONBANCAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1995, 1996, 1997,
AND CONDENSED NOTES FOR
SEPTEMBER 30, 1997 (UNAUDITED) AND 1998 (UNAUDITED)

NOTE 12 -- MANAGEMENT STOCK PLAN (CONTINUED)

The following is a summary of restricted stock transactions under the Stock
Plan.

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------------------------------------------------------
1995 1996 1997
----------------------------- ----------------------------- -----------------------------
WEIGHTED-AVERAGE WEIGHTED-AVERAGE WEIGHTED-AVERAGE
NUMBER OF GRANT DATE NUMBER OF GRANT DATE NUMBER OF GRANT DATE
SHARES FAIR VALUE SHARES FAIR VALUE SHARES FAIR VALUE
---------- ----------------- ---------- ----------------- ---------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Restricted stock
awards outstanding,
beginning of year... 817,608 $ 8.25 1,044,951 $ 8.99 1,166,820 $ 10.04
Granted............ 231,210 11.61 133,440 18.29 178,320 22.18
Cancelled.......... (3,867) 9.72 (11,571) 10.78 (7,923) 20.08
---------- ---------- ----------
Restricted stock
awards outstanding,
end of year......... 1,044,951 $ 8.99 1,166,820 $ 10.04 1,337,217 $ 11.59
---------- ---------- ----------
---------- ---------- ----------
Restricted stock
awards vested, end
of year............. 568,449 $ 7.81 764,670 $ 8.35 942,738 $ 9.17
---------- ---------- ----------
---------- ---------- ----------
</TABLE>

At December 31, 1995, 1996 and 1997, 1,342,449; 958,383; and, 3,365,586
shares, respectively, were available for future grants as either stock options
or restricted stock under the Stock Plan.

The Company follows the intrinsic value based method in accounting for its
employee stock-based compensation plan. Accordingly, no compensation cost has
been recognized for its stock option grants. Had compensation cost for the
Company's stock-based plan been determined based on the fair value at the grant
dates for awards under that plan consistent with the method of SFAS No. 123,
"Accounting for Stock-Based Compensation", the Company's net income and net
income per share would have decreased to the pro forma amounts indicated in the
following table. Options that were granted prior to January 1, 1995 with vesting
periods in 1995 and later are excluded from the pro forma results indicated for
1995 and 1996 in the following table.

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 1995 1996 1997
- ------------------------------------------------------------------------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net income............................................... As reported $ 312,942 $ 249,458 $ 411,296
Pro forma 312,691 248,874 410,068
Net income applicable to common stock.................... As reported $ 301,637 $ 238,152 $ 403,696
Pro forma 301,386 237,568 402,468
Net income per common share -- basic..................... As reported $ 1.74 $ 1.37 $ 2.31
Pro forma 1.73 1.36 2.30
Net income per common share -- diluted................... As reported $ 1.73 $ 1.36 $ 2.30
Pro forma 1.73 1.36 2.30
</TABLE>

F-32
<PAGE>

UNIONBANCAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1995, 1996, 1997,
AND CONDENSED NOTES FOR
SEPTEMBER 30, 1997 (UNAUDITED) AND 1998 (UNAUDITED)

NOTE 12 -- MANAGEMENT STOCK PLAN (CONTINUED)

The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model with the following weighted-average
assumptions used for grants made in the years ended 1995, 1996 and 1997:
risk-free interest rates of 7.1%, 6.3% and 6.6% in the years ended 1995, 1996
and 1997, respectively; expected volatility of 28%, 28% and 26% in the years
ended 1995, 1996 and 1997, respectively; expected lives of 7 years for the years
ended 1995 and 1996, respectively, and 6 years for the year ended 1997; and
expected dividend yields of 4.2%, 2.6% and 2.1% in the years ended 1995, 1996
and 1997.

Effective January 1, 1997, the Company established a Performance Share Plan.
Eligible participants may earn performance share awards to be redeemed in cash
three years after the date of grant. Performance shares are linked to
shareholder value in two ways: (1) the market price of the Company's common
stock, and (2) return on assets, a performance measure closely linked to value
creation. Eligible participants generally receive grants of performance shares
annually. The total number of performance shares granted under the plan cannot
exceed 600,000 and the Company granted 14,400 shares in the year ended 1997. The
value of a performance share is equal to the market price of the Company's
common stock. All cancelled or forfeited performance shares become available for
future grants.

NOTE 13 -- FAIR VALUE OF FINANCIAL INSTRUMENTS

The fair value of a financial instrument is the amount at which the
instrument could be exchanged in a current transaction between willing parties,
other than in a forced or liquidation sale. All of the fair values presented
below have been made under this definition of fair value unless otherwise
disclosed.

It is management's belief that the fair values presented below are
reasonable based on the valuation techniques and data available to the Company
as of December 31, 1996 and 1997, as more fully described below. It should be
noted that the operations of the Company are managed on a going concern basis
and not a liquidation basis. As a result, the ultimate value realized for the
financial instruments presented could be substantially different when actually
recognized over time through the normal course of operations. Additionally, a
substantial portion of an institution's inherent value is its capitalization and
franchise value. Neither of these components have been given consideration in
the presentation of fair values which follow.

F-33
<PAGE>

UNIONBANCAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1995, 1996, 1997,
AND CONDENSED NOTES FOR
SEPTEMBER 30, 1997 (UNAUDITED) AND 1998 (UNAUDITED)

NOTE 13 -- FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)

The table below presents the carrying value and fair value of the specified
assets and liabilities held by the Company.

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------------------------
<S> <C> <C> <C> <C>
1996 1997
----------------------------- -----------------------------

<CAPTION>
(DOLLARS IN THOUSANDS) CARRYING VALUE FAIR VALUE CARRYING VALUE FAIR VALUE
- --------------------------------------------------- -------------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents.......................... $ 3,937,697 $ 3,937,697 $ 3,199,455 $ 3,199,455
Trading account assets............................. 465,782 465,782 394,313 394,313
Securities available for sale...................... 2,164,197 2,164,197 2,538,386 2,538,386
Securities held to maturity........................ 268,196 274,405 188,775 193,115
Loans, net of allowance for credit losses.......... 20,525,841 20,803,651 22,289,716 22,511,510

LIABILITIES
Deposits:
Noninterest bearing.............................. 7,655,109 7,655,109 8,849,544 8,849,544
Interest bearing................................. 13,877,851 13,885,504 14,446,830 14,453,029
-------------- ------------- -------------- -------------
Total deposits................................. 21,532,960 21,540,613 23,296,374 23,302,573
Borrowed funds..................................... 3,567,539 3,567,836 2,778,469 2,775,531
Subordinated capital notes......................... 382,000 388,388 348,000 348,000
</TABLE>

The Company is also a party to financial instruments that are not reflected
on the balance sheet but represent obligations of the Company in the normal
course of business. For information regarding the fair value of off-balance
sheet financial instruments, see Note 14.

The following methods and assumptions were used to estimate fair value of
each class of financial instruments for which it is practicable to estimate that
value.

CASH AND CASH EQUIVALENTS: The book value of cash and cash equivalents is
considered a reasonable estimate of fair value.

TRADING ACCOUNT ASSETS: Trading account assets are short term in nature and
valued at market based on quoted market prices or dealer quotes. If a quoted
market price is not available, the recorded amounts are estimated using quoted
market prices for similar securities. Thus, carrying value is considered a
reasonable estimate of fair value for these financial instruments.

SECURITIES: The fair value of securities is based on quoted market prices
or dealer quotes. If a quoted market price is not available, fair value is
estimated using quoted market prices for similar securities. Available for sale
securities are carried at their aggregate fair value, while held to maturity
securities are carried at amortized cost.

LOANS: The fair value for performing fixed and non-reference rate loans was
estimated by discounting the future cash flows using the current rates at which
similar loans would be made to borrowers with similar credit ratings and for
similar remaining maturities and where available, discount rates were based on
current market rates.

F-34
<PAGE>

UNIONBANCAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1995, 1996, 1997,
AND CONDENSED NOTES FOR
SEPTEMBER 30, 1997 (UNAUDITED) AND 1998 (UNAUDITED)

NOTE 13 -- FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)

The fair value of performing loans tied to the Company's reference rate with
normal credit risk is assumed to approximate their book value. The fair value
for these floating rate loans with increasing credit risk was estimated by
calculating their present value using a yield the Company would currently
require for loans with similar terms to borrowers with similar credit quality.

Loans which are on nonaccrual status were not included in the loan valuation
methods discussed previously. The fair value of these assets was estimated
assuming these loans were sold on a liquidation basis.

The fair value of performing mortgage loans was based on quoted market
prices for loans with similar credit and interest rate risk characteristics.

The fair value of performing credit card loans and credit lines is assumed
to approximate their book value. The fair value was estimated for credit card
loans and credit lines which were past due at December 31, 1996 and 1997 by
segregating them according to their past due status and then discounting them
based on the Company's historical probability of loss.

NONINTEREST BEARING DEPOSITS: The fair value of noninterest bearing
deposits is the amount payable on demand at the reporting date. The fair value
of the demand deposit intangible has not been estimated.

INTEREST BEARING DEPOSITS: The fair value of savings accounts and certain
money market accounts is the amount payable on demand at the reporting date. The
fair value of fixed maturity certificates of deposit was estimated using rates
currently being offered on certificates with similar maturities.

BORROWED FUNDS: The book values of federal funds purchased, securities sold
under repurchase agreements and other short-term borrowings are assumed to
approximate their fair value due to their limited duration characteristics. The
fair value for commercial paper and term federal funds purchased was estimated
using market quotes.

SUBORDINATED CAPITAL NOTES: The fair value of fixed-rate subordinated
capital notes was estimated using discounted cash flows based on market rates
for A-rated bank borrowings. The book values for variable-rate subordinated
capital notes are assumed to approximate fair market value.

NOTE 14 -- DERIVATIVE INSTRUMENTS AND OTHER FINANCIAL INSTRUMENTS WITH
OFF-BALANCE SHEET RISK

The Company is a party to certain derivative and other financial instruments
that are not reflected on the balance sheet but represent obligations or assets
of the Company in the normal course of business. These financial instruments are
used for trading activities of the Company, to meet the needs of customers and
to reduce the impact on the Company's operating results due to market
fluctuations in currency or interest rates.

These financial instruments involve, to varying degrees, elements of credit
and market risk which are not recognized on the balance sheet. Credit risk is
defined as the possibility that a loss may occur from the failure of another
party to perform in accordance with the terms of the contract which exceeds the
value of the existing collateral, if any. Market risk is the possibility that
future changes in market conditions may make the financial instrument less
valuable.

F-35
<PAGE>

UNIONBANCAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1995, 1996, 1997,
AND CONDENSED NOTES FOR
SEPTEMBER 30, 1997 (UNAUDITED) AND 1998 (UNAUDITED)

NOTE 14 -- DERIVATIVE INSTRUMENTS AND OTHER FINANCIAL INSTRUMENTS WITH
OFF-BALANCE SHEET RISK (CONTINUED)

DERIVATIVE INSTRUMENTS

The fair value of the derivative financial instruments was calculated based
on quoted market prices where available or if quoted market prices were not
available, the Company used the estimated amount it would receive or pay to
offset or terminate the agreements based upon the terms of such contracts
relative to prevailing interest rates.

TRADING ACTIVITIES IN DERIVATIVE INSTRUMENTS

The following table reflects the Company's positions relating to trading
activities in derivative instruments. Trading activities include both activities
for the Company's own account and for customers. At December 31, 1996 and 1997,
the majority of the Company's derivative transactions for customers are hedged
with essentially offsetting contracts with other counterparties. The average
fair value of derivatives held or written for trading purposes during the year
is not significant. The notional amount of derivative instruments reflects the
extent of the Company's involvement in these instruments. For interest rate
swap, cap and floor agreements, notional amounts do not represent exposure to
credit or market risk. Notional amounts are not exchanged, but serve as a point
of reference for calculating payments.

F-36
<PAGE>

UNIONBANCAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1995, 1996, 1997,
AND CONDENSED NOTES FOR
SEPTEMBER 30, 1997 (UNAUDITED) AND 1998 (UNAUDITED)

NOTE 14 -- DERIVATIVE INSTRUMENTS AND OTHER FINANCIAL INSTRUMENTS WITH
OFF-BALANCE SHEET RISK (CONTINUED)

The following is a summary of derivative instruments held or written for
trading purposes.

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------------------------
1996 1997
--------------------------------- ----------------------
NOTIONAL CREDIT ESTIMATED NOTIONAL CREDIT
(DOLLARS IN THOUSANDS) AMOUNTS RISK(1) FAIR VALUE AMOUNTS RISK(1)
- -------------------------------------------------------------------- --------- --------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
HELD OR WRITTEN FOR TRADING PURPOSES AND CUSTOMER ACCOMMODATIONS
Foreign exchange forward contracts:
Commitments to purchase........................................... $ 403,602 $ 2,813 $ (11,735) $ 531,330 $ 366
Commitments to sell............................................... 530,923 18,958 14,759 709,512 40,671
Foreign exchange OTC options:
Options purchased................................................. -- -- -- 46,533 --
Options written................................................... -- -- -- 46,533 637
Currency swap agreements:
Commitments to pay................................................ 64,817 4,821 3,193 55,725 --
Commitments to receive............................................ 38,417 1,628 1,595 55,725 5,971
Interest rate contracts:
Caps purchased.................................................... 994,605 1,858 1,837 1,189,791 796
Floors purchased.................................................. 147,250 1,149 1,149 119,000 612
Caps written...................................................... 994,605 21 (1,838) 1,189,791 --
Floors written.................................................... 147,250 -- (1,149) 119,000 --
Swap contracts:
Pay variable/receive variable..................................... 10,000 28 1 58,000 301
Pay fixed/receive variable........................................ 788,165 1,064 (17,592) 976,180 364
Pay variable/receive fixed........................................ 788,165 19,623 18,674 976,180 30,240

ESTIMATED
(DOLLARS IN THOUSANDS) FAIR VALUE
- -------------------------------------------------------------------- -----------
<S> <C>
HELD OR WRITTEN FOR TRADING PURPOSES AND CUSTOMER ACCOMMODATIONS
Foreign exchange forward contracts:
Commitments to purchase........................................... $ (34,304)
Commitments to sell............................................... 40,274
Foreign exchange OTC options:
Options purchased................................................. (634)
Options written................................................... 637
Currency swap agreements:
Commitments to pay................................................ (5,971)
Commitments to receive............................................ 5,971
Interest rate contracts:
Caps purchased.................................................... 796
Floors purchased.................................................. 612
Caps written...................................................... (796)
Floors written.................................................... (612)
Swap contracts:
Pay variable/receive variable..................................... --
Pay fixed/receive variable........................................ (29,579)
Pay variable/receive fixed........................................ 29,926
</TABLE>

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

(1) Credit risk amounts reflect the replacement cost for those contracts in a
gain position in the event of nonperformance by counterparties.

ASSET AND LIABILITY MANAGEMENT DERIVATIVE INSTRUMENTS

Derivative positions are integral components of the Company's designated
asset and liability management activities. Therefore, the Company does not
believe it is meaningful to separately analyze the derivatives component of its
risk management activities in isolation from related positions. The Company uses
interest rate derivative instruments as part of its management of asset and
liability positions. Derivatives are used to manage interest rate risk relating
to specified groups of assets and liabilities, including LIBOR based commercial
loans, deposit liabilities and certain subordinated capital notes. The Company
uses foreign currency forward contracts as a means of managing foreign exchange
rate risk associated with assets or liabilities denominated in foreign
currencies.

The following table reflects summary information on derivative contracts
used to hedge or modify the Company's risk as of December 31, 1996 and 1997.
Amounts included in the fair value column do not include gains or losses from
changes in the value of the underlying asset or liability being hedged. Notional
amounts are not exchanged, but serve as a point of reference for calculating
payments. For interest rate swap, cap and floor agreements, notional amounts do
not represent exposure to credit or market risk.

F-37
<PAGE>

UNIONBANCAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1995, 1996, 1997,
AND CONDENSED NOTES FOR
SEPTEMBER 30, 1997 (UNAUDITED) AND 1998 (UNAUDITED)

NOTE 14 -- DERIVATIVE INSTRUMENTS AND OTHER FINANCIAL INSTRUMENTS WITH
OFF-BALANCE SHEET RISK (CONTINUED)

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------------------------------------------------
1996 1997
------------------------------------------------------ ----------------------------
UNAMORTIZED UNAMORTIZED
NOTIONAL PREMIUM PAID CREDIT ESTIMATED NOTIONAL PREMIUM PAID
(DOLLARS IN THOUSANDS) AMOUNTS (RECEIVED) RISK(1) FAIR VALUE AMOUNTS (RECEIVED)
- ------------------------------------ ----------- --------------- ----------- ----------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
HELD FOR ASSET AND LIABILITY
MANAGEMENT PURPOSES
Foreign exchange forward contracts:
Commitments to purchase........... $ 129,264 $ -- $ 1,628 $ (2,286) $ 341,298 $ --
Commitments to sell............... 4,142 -- 52 22 51,754 --
Currency swap agreements:
Commitments to pay................ -- -- -- -- 26,400 --
Interest rate contracts:
Caps purchased.................... 15,740 -- -- -- 15,420 --
Floors purchased.................. 2,050,000 6,309 9,750 9,750 3,550,000 11,730
Caps written...................... 250,000 (709) 509 509 250,000 (335)
Floors written.................... 500,000 (1,016) 391 391 1,850,000 (534)
Swap contracts:
Pay fixed/receive variable........ 114,086 -- 241 (851) -- --
Pay variable/receive fixed........ 847,000 -- 3,775 2,398 575,000 --

CREDIT ESTIMATED
(DOLLARS IN THOUSANDS) RISK(1) FAIR VALUE
- ------------------------------------ ----------- -----------
<S> <C> <C>
HELD FOR ASSET AND LIABILITY
MANAGEMENT PURPOSES
Foreign exchange forward contracts:
Commitments to purchase........... $ 862 $ (5,055)
Commitments to sell............... 35 (822)
Currency swap agreements:
Commitments to pay................ 2,590 2,590
Interest rate contracts:
Caps purchased.................... -- --
Floors purchased.................. 4,040 4,040
Caps written...................... 273 273
Floors written.................... -- (1,309)
Swap contracts:
Pay fixed/receive variable........ -- --
Pay variable/receive fixed........ 2,302 2,302
</TABLE>

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

(1) Credit risk amounts reflect the replacement cost for those contracts in a
gain position in the event of nonperformance by counterparties.

F-38
<PAGE>

UNIONBANCAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1995, 1996, 1997,
AND CONDENSED NOTES FOR
SEPTEMBER 30, 1997 (UNAUDITED) AND 1998 (UNAUDITED)

NOTE 14 -- DERIVATIVE INSTRUMENTS AND OTHER FINANCIAL INSTRUMENTS WITH
OFF-BALANCE SHEET RISK (CONTINUED)

OTHER FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK

Commitments to extend credit are legally binding agreements to lend to a
customer provided there are no violations of any condition established in the
contract. Commitments have fixed expiration dates or other termination clauses
and may require payment of a fee or maintenance of compensatory balances. Such
fees are deferred and, upon partial or full exercise of the commitment,
amortized over the life of the loan or, if exercise is deemed remote, amortized
over the commitment period. Since many of the commitments are expected to expire
without being drawn upon, the contractual amounts do not necessarily represent
future cash requirements. With respect to commitments to extend credit and
letters of credit, the Company's exposure to credit risk in the event of
nonperformance by customers is represented by the contractual amount of those
instruments.

Standby letters of credit are provided to customers to assure their
performance to a third party, generally in the production of goods and services
or under contractual commitments in the financial markets. Commercial letters of
credit are issued to customers to facilitate foreign or domestic trade
transactions. The Company charges fees for the issuance of standby and
commercial letters of credit. The majority of these type of commitments have
terms of one year or less and any fees charged are recognized as noninterest
income upon extension of the commitment. The credit risk involved in issuing
letters of credit is essentially the same as that involved in extending loan
facilities to customers and is represented by the contractual amount of those
instruments. When deemed necessary, the Company holds appropriate collateral
supporting those commitments. Management does not anticipate any material losses
as a result of these transactions.

The Company uses the same credit underwriting policies in granting or
accepting such commitments or contingent obligations as it does for on-balance
sheet instruments, by evaluating customers' credit-worthiness. The amount of
collateral obtained, if deemed necessary by the Company upon extension of
credit, is based on management's evaluation of the customer. The nature of the
collateral varies but may include deposits held in financial institutions,
marketable securities, accounts receivable, inventory, property, equipment and
real estate. The Company also provides for potential losses from either
commitments to extend credit or standby letters of credit as a component of its
evaluation in determination of the adequacy of its allowance for credit losses
and resulting level of provision charged against current period earnings.

The Company's pricing of these financial instruments is based on the credit
quality and other covenants or requirements. Management believes that the
current fees assessed on these off-balance sheet items represent market rates
which would be charged for similar agreements. Based on this belief, the Company
feels that the carrying amounts are reasonable estimates of the fair value of
these financial instruments. At

F-39
<PAGE>

UNIONBANCAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1995, 1996, 1997,
AND CONDENSED NOTES FOR
SEPTEMBER 30, 1997 (UNAUDITED) AND 1998 (UNAUDITED)

NOTE 14 -- DERIVATIVE INSTRUMENTS AND OTHER FINANCIAL INSTRUMENTS WITH
OFF-BALANCE SHEET RISK (CONTINUED)

December 31, 1996 and 1997, fair value represents management's estimate of the
unamortized fee income associated with these instruments. The following is a
summary of other financial instruments with off-balance sheet risk.

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------------
1996 1997
------------------------ ------------------------
CONTRACTUAL FAIR CONTRACTUAL FAIR
(DOLLARS IN THOUSANDS) AMOUNTS VALUE AMOUNTS VALUE
- -------------------------------------------------------------- ------------- --------- ------------- ---------
<S> <C> <C> <C> <C>
Commitments to extend credit.................................. $ 12,500,677 $ 6,185 $ 15,111,062 $ 27,571
Standby letters of credit..................................... 2,610,123 2,808 2,289,878 5,776
Other letters of credit....................................... 336,101 -- 314,594 --
</TABLE>

The Company conducts securities lending transactions for institutional
customers as a fully disclosed agent, and, at times, indemnifies its customers
against counterparty default. All lending transactions are collateralized,
primarily by cash. The amount of securities lent with indemnification was $1,170
million and $1,268 million at December 31, 1996 and 1997, respectively. The
market value of the associated collateral was $1,195 million and $1,294 million
at December 31, 1996 and 1997, respectively.

NOTE 15 -- RESTRICTIONS ON CASH AND DUE FROM BANKS, SECURITIES, LOANS AND
DIVIDENDS

Federal Reserve Board regulations require the Bank to maintain reserve
balances based on the types and amounts of deposits received. Average reserve
balances were approximately $291 million and $339 million for the periods ended
December 31, 1996 and 1997, respectively.

As of December 31, 1996 and 1997, securities carried at $1.7 billion for
each of the periods, and loans of $1.8 billion and $2.7 billion, respectively,
were pledged as collateral for borrowings, to secure public and trust department
deposits, and for repurchase agreements as required by contract or law.

The Federal Reserve Act restricts the extension of credit by the Bank to BTM
and affiliates and to UnionBanCal Corporation and its non-bank subsidiaries and
requires that such loans be secured by certain types of collateral. At December
31, 1997, such extensions of credit were not material.

The payment of dividends by the Bank to UnionBanCal Corporation is subject
to the approval of the Office of the Comptroller of the Currency (OCC) if the
total of all dividends declared in any calendar year exceeds certain calculated
amounts. The payment of dividends is also limited by minimum capital
requirements imposed on national banks by the OCC. At December 31, 1997, the
Bank could have declared dividends aggregating $170 million without prior
regulatory approval.

NOTE 16 -- REGULATORY CAPITAL REQUIREMENTS

The Company and the Bank are subject to various regulatory capital
requirements administered by the federal banking agencies, including minimum
capital requirements. Failure to meet minimum capital requirements can initiate
certain mandatory, and possibly additional discretionary, actions by regulators
that, if undertaken, could have a direct material effect on the Company's
Consolidated Financial

F-40
<PAGE>

UNIONBANCAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1995, 1996, 1997,
AND CONDENSED NOTES FOR
SEPTEMBER 30, 1997 (UNAUDITED) AND 1998 (UNAUDITED)

NOTE 16 -- REGULATORY CAPITAL REQUIREMENTS (CONTINUED)

Statements. Under capital adequacy guidelines and the regulatory framework for
prompt corrective action, the Company and the Bank must meet specific capital
guidelines that involve quantitative measures of the Company's and Bank's
assets, liabilities, and certain off-balance sheet items as calculated under
regulatory accounting practices. The Company's and the Bank's capital amounts
and the Bank's prompt corrective action classification are also subject to
qualitative judgments by the regulators about components, risk weightings and
other factors.

Quantitative measures established by regulation to ensure capital adequacy
require the Company and the Bank to maintain minimum amounts and ratios (set
forth in the table below) of total and Tier 1 capital (as defined in the
regulations) to risk-weighted assets (as defined) and of Tier 1 capital (as
defined) to average assets (as defined). Management believes, as of December 31,
1997, that the Company and the Bank meet all capital adequacy requirements to
which they are subject.

As of December 31, 1996, and 1997, the most recent notification from the OCC
categorized the Bank as "well capitalized" under the regulatory framework for
prompt corrective action. To be categorized as "well capitalized", the Bank must
maintain minimum total risk-based, Tier 1 risk-based and Tier 1 leverage ratios
as set forth in the table. There are no conditions or events since that
notification that management believes have changed the Bank's category.

The Company's and the Bank's capital amounts and ratios are presented in the
following tables.

<TABLE>
<CAPTION>
FOR CAPITAL
ACTUAL ADEQUACY PURPOSES
----------------- ------------------------------
(DOLLARS IN THOUSANDS) AMOUNT RATIO AMOUNT RATIO
- ---------------------------------------- ---------- ----- --------------------------------- ------------------------------
<S> <C> <C> <C> <C>
CAPITAL RATIOS FOR THE COMPANY:
As of December 31, 1996:
Total capital (to risk-weighted
assets).............................. $2,946,654 11.17% greater than/equal to $2,111,223 greater than/equal to 8.0%
Tier 1 capital (to risk-weighted
assets).............................. 2,395,580 9.08 greater than/equal to 1,055,612 greater than/equal to 4.0
Tier 1 capital (to quarterly average
assets)(1)........................... 2,395,580 8.41 greater than/equal to 1,139,855 greater than/equal to 4.0
As of December 31, 1997:
Total capital (to risk-weighted
assets).............................. $3,188,173 11.05% greater than/equal to $2,308,988 greater than/equal to 8.0%
Tier 1 capital (to risk-weighted
assets).............................. 2,587,071 8.96 greater than/equal to 1,154,494 greater than/equal to 4.0
Tier 1 capital (to quarterly average
assets)(1)........................... 2,587,071 8.53 greater than/equal to 1,213,381 greater than/equal to 4.0
</TABLE>

- ---------

(1) Excludes certain intangible assets.

F-41

<PAGE>

UNIONBANCAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1995, 1996, 1997,
AND CONDENSED NOTES FOR
SEPTEMBER 30, 1997 (UNAUDITED) AND 1998 (UNAUDITED)

NOTE 16 -- REGULATORY CAPITAL REQUIREMENTS (CONTINUED)

<TABLE>
<CAPTION>
FOR CAPITAL
ACTUAL ADEQUACY PURPOSES
----------------- ---------------------------
(DOLLARS IN THOUSANDS) AMOUNT RATIO AMOUNT RATIO
- ---------------------------------------- ---------- ----- --------------------------------- ------------------------------
<S> <C> <C> <C> <C>
CAPITAL RATIOS FOR THE BANK:
As of December 31, 1996:
Total capital
(to risk-weighted assets)........... $2,746,285 10.51% greater than/equal to $2,090,910 greater than/equal to 8.0%
Tier 1 capital
(to risk-weighted assets)........... 2,208,392 8.45 greater than/equal to 1,045,455 greater than/equal to 4.0
Tier 1 capital
(to quarterly average assets)(1).... 2,208,392 7.76 greater than/equal to 1,138,211 greater than/equal to 4.0
As of December 31, 1997:
Total capital
(to risk-weighted assets)........... $3,025,030 10.58% greater than/equal to $2,286,296 greater than/equal to 8.0%
Tier 1 capital
(to risk-weighted assets)........... 2,527,468 8.84 greater than/equal to 1,143,148 greater than/equal to 4.0
Tier 1 capital
(to quarterly average assets)(1).... 2,527,468 8.35 greater than/equal to 1,210,898 greater than/equal to 4.0

TO BE WELL CAPITALIZED UNDER PROMPT CORRECTIVE ACTION PROVISIONS

----------------------------
(DOLLARS IN THOUSANDS) AMOUNT RATIO

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

<S> <C> <C>
CAPITAL RATIOS FOR THE BANK:
As of December 31, 1996:
Total capital
(to risk-weighted assets)........... greater than/equal to $2,613,638 greater than/equal to 10.0%

Tier 1 capital
(to risk-weighted assets)........... greater than/equal to 1,568,183 greater than/equal to 6.0

Tier 1 capital
(to quarterly average assets)(1).... greater than/equal to 1,422,764 greater than/equal to 5.0

As of December 31, 1997:
Total capital
(to risk-weighted assets)........... greater than/equal to $2,857,870 greater than/equal to 10.0%

Tier 1 capital
(to risk-weighted assets)........... greater than/equal to 1,714,722 greater than/equal to 6.0

Tier 1 capital
(to quarterly average assets)(1).... greater than/equal to 1,513,622 greater than/equal to 5.0

</TABLE>

- ---------

(1) Excludes certain intangible assets.

NOTE 17 -- EARNINGS PER SHARE

Basic EPS is computed by dividing net income after preferred dividends by
the weighted average number of common shares outstanding during the period.
Diluted EPS is computed based on the weighted average number of common shares
outstanding adjusted for common stock equivalents, which include stock options.
The following table presents a reconciliation of basic and diluted EPS for years
ended December 31, 1995, 1996 and 1997 and for the nine months ended September
30, 1997 and 1998 in accordance with SFAS No. 128:

F-42
<PAGE>

UNIONBANCAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1995, 1996, 1997,
AND CONDENSED NOTES FOR
SEPTEMBER 30, 1997 (UNAUDITED) AND 1998 (UNAUDITED)

NOTE 17 -- EARNINGS PER SHARE (CONTINUED)

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------------------------
1995 1996 1997
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE ---------------------- ---------------------- ----------------------
DATA) BASIC DILUTED BASIC DILUTED BASIC DILUTED
- ---------------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net Income.............................. $ 312,942 $ 312,942 $ 249,458 $ 249,458 $ 411,296 $ 411,296
Less:
Preferred stock dividends............. (11,305) (11,305) (11,306) (11,306) (7,600) (7,600)
---------- ---------- ---------- ---------- ---------- ----------
Income available to common
shareholders.......................... $ 301,637 $ 301,637 $ 238,152 $ 238,152 $ 403,696 $ 403,696
---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ----------
Weighted average common shares
outstanding........................... 173,806 173,806 174,391 174,391 174,683 174,683
Additional shares due to:
Assumed conversion of dilutive stock
options.............................. -- 293 -- 393 -- 506
---------- ---------- ---------- ---------- ---------- ----------
Adjusted weighted average common shares
outstanding........................... 173,806 174,099 174,391 174,784 174,683 175,189
---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ----------
Net income per share.................... $ 1.74 $ 1.73 $ 1.37 $ 1.36 $ 2.31 $ 2.30
---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ----------
</TABLE>

<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
----------------------------------------------
1997 1998
---------------------- ----------------------
(UNAUDITED) (UNAUDITED)
---------------------- ----------------------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA) BASIC DILUTED BASIC DILUTED
- ----------------------------------------------------------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net Income....................................................... $ 318,851 $ 318,851 $ 352,365 $ 352,365
Less:
Preferred stock dividends...................................... (7,600) (7,600) -- --
---------- ---------- ---------- ----------
Income available to common shareholders.......................... $ 311,251 $ 311,251 $ 352,365 $ 352,365
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Weighted average common shares outstanding....................... 174,615 174,615 175,091 175,091
Additional shares due to:
Assumed conversion of dilutive stock options................... -- 456 -- 638
---------- ---------- ---------- ----------
Adjusted weighted average common shares outstanding.............. 174,615 175,071 175,091 175,729
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Net income per share............................................. $ 1.78 $ 1.78 $ 2.01 $ 2.01
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>

- ---------

Options to purchase 277,200 shares of common stock at $18 per share were
outstanding but not included in the computation of diluted EPS in 1996 because
the options were anti-dilutive. Options to purchase 422,400 shares of common
stock at $22 per share and options to purchase 527,550 shares of common stock at
$35 per share were outstanding but not included in the computation of diluted
EPS for the nine months ended September 30, 1997 and 1998, respectively, because
the options were anti-dilutive.

F-43
<PAGE>

UNIONBANCAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1995, 1996, 1997,
AND CONDENSED NOTES FOR
SEPTEMBER 30, 1997 (UNAUDITED) AND 1998 (UNAUDITED)

NOTE 18 -- COMPREHENSIVE INCOME

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

<TABLE>
<CAPTION>
FOR THE NINE MONTHS
YEARS ENDED DECEMBER 31, ENDED SEPTEMBER 30,
---------------------------------- -----------------------
(DOLLARS IN THOUSANDS) 1995 1996 1997 1997 1998
- ----------------------------------------------------- ---------- ---------- ---------- ----------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net unrealized gain (loss) on securities available
for sale, net of reclassification adjustment:
Beginning balance.................................. $ (8,838) $ 24,900 $ 14,064 $ 14,064 $ 19,886
Net unrealized gain (loss) on securities
available for sale during the period, before
tax............................................. 53,890 (13,409) 11,908 10,626 41,378
Income tax (expense) benefit....................... (20,586) 5,297 (4,370) (4,229) (15,766)
Less: reclassification adjustment for net realized
(gain) loss on securities available for sale
included in net income during the period, before
tax............................................... 702 (4,502) (2,711) (2,098) (5,579)
Plus: income tax expense (benefit)................. (268) 1,778 995 857 1,960
---------- ---------- ---------- ----------- ----------
Net activity......................................... 33,738 (10,836) 5,822 5,156 21,993
---------- ---------- ---------- ----------- ----------
Ending balance....................................... 24,900 14,064 19,886 19,220 41,879
---------- ---------- ---------- ----------- ----------
Foreign currency translation adjustments:
Beginning balance.................................. (1,092) (1,240) (3,183) (3,183) (12,458)
Foreign currency translation adjustments during the
period, before tax................................ (239) (3,212) (14,652) (2,785) (153)
Income tax benefit................................. 91 1,269 5,377 1,128 62
---------- ---------- ---------- ----------- ----------
Net activity......................................... (148) (1,943) (9,275) (1,657) (91)
---------- ---------- ---------- ----------- ----------
Ending balance....................................... (1,240) (3,183) (12,458) (4,840) (12,549)
---------- ---------- ---------- ----------- ----------
Other comprehensive income........................... $ 33,590 $ (12,779) $ (3,453) $ 3,499 $ 21,902
---------- ---------- ---------- ----------- ----------
---------- ---------- ---------- ----------- ----------
Accumulated other comprehensive income............... $ 23,660 $ 10,881 $ 7,428 $ 14,380 $ 29,330
---------- ---------- ---------- ----------- ----------
---------- ---------- ---------- ----------- ----------
</TABLE>

NOTE 19 -- CONTINGENCIES

The Company is subject to various pending and threatened legal actions which
arise in the normal course of business. The Company maintains reserves for
losses from legal actions which are both probable and estimable. In the opinion
of management, the disposition of claims currently pending will not have a
material adverse effect on the Company's financial position or results of
operations.

F-44
<PAGE>

UNIONBANCAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1995, 1996, 1997,
AND CONDENSED NOTES FOR
SEPTEMBER 30, 1997 (UNAUDITED) AND 1998 (UNAUDITED)

NOTE 20 -- TRANSACTIONS WITH AFFILIATES

The Company has had, and expects to have in the future, banking transactions
and other transactions in the ordinary course of business with BTM and with its
affiliates and associates. During the years ended December 31, 1995, 1996 and
1997, such transactions included, but were not limited to, origination,
participation, servicing and remarketing of loans and leases, purchase and sale
of acceptances and interest rate derivatives, foreign exchange transactions,
funds transfers, custodianships, electronic data processing, investment advice
and management, deposits and credit examination, and trust services. In the
opinion of management, such transactions were made at prevailing rates, terms
and conditions and do not involve more than the normal risk of collectibility or
present other unfavorable features. In addition, some compensation for services
rendered to the Company is paid to the expatriate officers from BTM, and
reimbursed by the Company to BTM under a services agreement.

NOTE 21 -- CONDENSED UNIONBANCAL CORPORATION UNCONSOLIDATED FINANCIAL STATEMENTS

CONDENSED BALANCE SHEETS

LIABILITIES AND SHAREHOLDERS' EQUITY
Commercial paper.................................................................... $ -- $ --
Subordinated capital notes.......................................................... 100,000 250,000
Other liabilities................................................................... 21,676 25,442
------------ ------------
Total liabilities................................................................. 121,676 275,442
Shareholders' equity................................................................ 2,494,933 2,679,299
------------ ------------
Total liabilities and shareholders' equity........................................ $ 2,616,609 $ 2,954,741
------------ ------------
------------ ------------
</TABLE>

F-45
<PAGE>

UNIONBANCAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1995, 1996, 1997,
AND CONDENSED NOTES FOR
SEPTEMBER 30, 1997 (UNAUDITED) AND 1998 (UNAUDITED)

NOTE 21 -- CONDENSED UNIONBANCAL CORPORATION UNCONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)

CONDENSED STATEMENTS OF INCOME

EXPENSE:
Interest expense........................................................... 54,133 22,220 11,174
Other expense, net......................................................... (212) 1,072 1,583
---------- ---------- ----------
Total expense.......................................................... 53,921 23,292 12,757
---------- ---------- ----------
Income before income taxes and equity in undistributed net income of
subsidiaries............................................................... 23,773 273,116 86,160
Income tax expense (benefit)................................................. (694) 889 204
---------- ---------- ----------
Income before equity in undistributed net income of subsidiaries............. 24,467 272,227 85,956
Equity in undistributed net income (loss) of subsidiaries:
Bank subsidiary(1)......................................................... 285,053 (32,894) 314,739
Nonbank subsidiaries....................................................... 3,422 10,125 10,601
---------- ---------- ----------
NET INCOME................................................................... $ 312,942 $ 249,458 $ 411,296
---------- ---------- ----------
---------- ---------- ----------
</TABLE>

- ---------

(1) In 1996 the amount represents dividends distributed by the Bank in excess of
its 1996 net income.

F-46
<PAGE>

UNIONBANCAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1995, 1996, 1997,
AND CONDENSED NOTES FOR
SEPTEMBER 30, 1997 (UNAUDITED) AND 1998 (UNAUDITED)

NOTE 21 -- CONDENSED UNIONBANCAL CORPORATION UNCONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)

CONDENSED STATEMENTS OF CASH FLOWS

CASH FLOWS FROM INVESTING ACTIVITIES:
Advances to subsidiaries.................................................. 33,590 (12,779) (130,805)
Repayment of advances to subsidiaries..................................... 70,000 70,000 76,104
Sales and maturities of securities........................................ 11,650 322 --
---------- ---------- ----------
Net cash provided (used) by investing activities...................... 115,240 57,543 (54,701)

CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in short term borrowings.......................... 366 (632,296) --
Proceeds from reduction of investment in subsidiary equity................ -- 3,966 --
Maturity and redemption of subordinated capital notes and long term
debt..................................................................... (70,000) (70,000) (50,000)
Proceeds from issuance of subordinated capital notes...................... -- -- 200,000
Payments of cash dividends................................................ (62,044) (182,652) (93,303)
Redemption of preferred stock............................................. -- -- (135,000)
Other, net................................................................ 3,392 17,813 9,119
---------- ---------- ----------
Net cash used by financing activities................................. (128,286) (863,169) (69,184)
---------- ---------- ----------
Net increase (decrease) in cash and due from banks........................ 14,221 (537,171) (36,870)
Cash and due from banks at beginning of year.............................. 626,692 640,913 103,742
---------- ---------- ----------
Cash and due from banks at end of year................................ $ 640,913 $ 103,742 $ 66,872
---------- ---------- ----------
---------- ---------- ----------
CASH PAID (RECEIVED) DURING THE YEAR FOR:
Interest.................................................................. $ 52,847 $ 25,785 $ 9,814
Income taxes.............................................................. (2,030) (198) 1,148
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Dividends declared but unpaid............................................. $ 12,788 $ 20,383 $ 24,528
</TABLE>

F-47
<PAGE>

UNIONBANCAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1995, 1996, 1997,
AND CONDENSED NOTES FOR
SEPTEMBER 30, 1997 (UNAUDITED) AND 1998 (UNAUDITED)

NOTE 22 -- SUMMARY OF QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

Certain amounts in the following unaudited quarterly financial information
have been reclassified to conform with current presentation. In the opinion of
management, all adjustments necessary to fairly present the results of
operations have been made.

<TABLE>
<CAPTION>
1996 QUARTERS ENDED
---------------------------------------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
- ------------------------------------------------------------ ---------- ---------- ------------- ------------
<S> <C> <C> <C> <C>
Interest income............................................. $ 483,068 $ 473,601 $ 481,315 $ 489,320
Interest expense............................................ 187,401 185,362 189,727 196,236
---------- ---------- ------------- ------------
Net interest income......................................... 295,667 288,239 291,588 293,084
Provision for credit losses................................. 10,000 10,000 10,000 10,000
Noninterest income.......................................... 102,874 105,550 107,280 102,972
Noninterest expense......................................... 252,024 313,784 284,075 285,021
---------- ---------- ------------- ------------
Income before income taxes.................................. 136,517 70,005 104,793 101,035
Income tax expense.......................................... 53,251 25,597 42,810 41,234
---------- ---------- ------------- ------------
Net income.................................................. $ 83,266 $ 44,408 $ 61,983 $ 59,801
---------- ---------- ------------- ------------
---------- ---------- ------------- ------------
Net income applicable to common stock....................... $ 80,440 $ 41,582 $ 59,156 $ 56,975
---------- ---------- ------------- ------------
---------- ---------- ------------- ------------
Net income per common share -- basic........................ $ 0.46 $ 0.24 $ 0.34 $ 0.33
---------- ---------- ------------- ------------
---------- ---------- ------------- ------------
Net income per common share -- diluted...................... $ 0.46 $ 0.24 $ 0.34 $ 0.33
---------- ---------- ------------- ------------
---------- ---------- ------------- ------------
Dividends per common share(1)(2)............................ $ 0.12 $ 0.12 $ 0.12 $ 0.12
---------- ---------- ------------- ------------
---------- ---------- ------------- ------------
</TABLE>

F-48
<PAGE>

UNIONBANCAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1995, 1996, 1997,
AND CONDENSED NOTES FOR
SEPTEMBER 30, 1997 (UNAUDITED) AND 1998 (UNAUDITED)

NOTE 22 -- SUMMARY OF QUARTERLY FINANCIAL INFORMATION (UNAUDITED) (CONTINUED)

<TABLE>
<CAPTION>
1997 QUARTERS ENDED
---------------------------------------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
- ------------------------------------------------------------ ---------- ---------- ------------- ------------
<S> <C> <C> <C> <C>
Interest income............................................. $ 485,031 $ 504,663 $ 520,237 $ 523,530
Interest expense............................................ 191,000 197,647 207,983 205,149
---------- ---------- ------------- ------------
Net interest income......................................... 294,031 307,016 312,254 318,381
Provision for credit losses................................. -- -- -- --
Noninterest income.......................................... 114,786 111,021 116,820 120,374
Noninterest expense......................................... 253,138 255,753 253,317 282,457
---------- ---------- ------------- ------------
Income before income taxes.................................. 155,679 162,284 175,757 156,298
Income tax expense.......................................... 63,177 65,739 45,953 63,853
---------- ---------- ------------- ------------
Net income.................................................. $ 92,502 $ 96,545 $ 129,804 $ 92,445
---------- ---------- ------------- ------------
---------- ---------- ------------- ------------
Net income applicable to common stock....................... $ 89,676 $ 93,718 $ 127,857 $ 92,445
---------- ---------- ------------- ------------
---------- ---------- ------------- ------------
Net income per common share -- basic........................ $ 0.51 $ 0.54 $ 0.73 $ 0.53
---------- ---------- ------------- ------------
---------- ---------- ------------- ------------
Net income per common share -- diluted...................... $ 0.51 $ 0.54 $ 0.73 $ 0.53
---------- ---------- ------------- ------------
---------- ---------- ------------- ------------
Dividends per common share(1)............................... $ 0.12 $ 0.12 $ 0.14 $ 0.14
---------- ---------- ------------- ------------
---------- ---------- ------------- ------------
</TABLE>

- ---------

(1) Dividends per share for 1996 and 1997 are based on the Company's common
stock outstanding as of the declaration date.

(2) Amounts prior to merger are based on Union Bank only and do not include the
dividend of $145 million paid to The Mitsubishi Bank, Limited in the first
quarter of 1996 by BanCal Tri-State Corporation and The Bank of California,
N.A.

F-49
<PAGE>

INDEPENDENT AUDITORS' REPORT

To the Shareholders and Directors of UnionBanCal Corporation:

We have audited the accompanying consolidated balance sheets of UnionBanCal
Corporation and subsidiaries as of December 31, 1996 and 1997, and the related
consolidated statements of income, changes in shareholders' equity, and cash
flows for each of the three years in the period ended December 31, 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits. The consolidated financial statements give retroactive effect to the
merger of BanCal Tri-State Corporation and Union Bank on April 1, 1996, which
has been accounted for as a pooling of interests as described in Note 1 to the
consolidated financial statements. We did not audit the consolidated statements
of income, changes in shareholders' equity, and cash flows of Union Bank and
subsidiaries for the year ended December 31, 1995, which statements reflect
total net interest income and net income of $832 million and $207 million,
respectively. These statements were audited by other auditors whose report has
been furnished to us, and our opinion expressed herein, insofar as it relates to
the amounts included for Union Bank for 1995, is based solely upon the report of
such other auditors.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and the report of the other auditors provide a
reasonable basis for our opinion.

In our opinion, based upon our audits and the report of the other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of UnionBanCal Corporation and its
subsidiaries as of December 31, 1996 and 1997, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1997, in conformity with generally accepted accounting principles.

[SIG]

Deloitte & Touche LLP
San Francisco, California
January 30, 1998 (November 18, 1998 as to the exchange of
common shares referred to in Note 1, paragraphs 3 and 4, and
the adoption of SFAS No. 130, "Reporting Comprehensive Income",
referred to in Notes 1 and 18, and December 7, 1998 as to the stock split
referred to in Note 1, paragraph 5.)

F-50
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Shareholders and Board of Directors of Union Bank:

We have audited the consolidated statement of income of Union Bank, a California
state chartered bank and a 71% owned subsidiary of The Bank of Tokyo, Ltd., and
subsidiaries ("the Bank") and the related consolidated statements of
shareholders' equity and cash flows for the year ended December 31, 1995 (not
presented herein). These financial statements are the responsibility of the
Bank's management. Our responsibility is to express an opinion on these
financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the results of operations and cash flows for the year
ended December 31, 1995, of Union Bank and subsidiaries, in conformity with
generally accepted accounting principles.

/s/ ARTHUR ANDERSEN LLP

San Francisco, California
January 24, 1996

F-51
<PAGE>
[LOGO]
<PAGE>
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THE
SELLING SHAREHOLDER MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS
PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND THE SELLING SHAREHOLDER
IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE SUCH OFFER
OR SALE IS NOT PERMITTED.
<PAGE>

PROSPECTUS (SUBJECT TO COMPLETION)
ISSUED JANUARY 11, 1999

[LOGO]

COMMON STOCK
-----------------

THE BANK OF TOKYO-MITSUBISHI, LTD. IS OFFERING MILLION SHARES OF COMMON
STOCK OF UNIONBANCAL CORPORATION. THE BANK OF TOKYO-MITSUBISHI, LTD. CURRENTLY
OWNS 81.6% OF OUR COMMON STOCK AND WILL OWN % AFTER THE OFFERING AND
RELATED TRANSACTIONS.

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

INVESTING IN THE COMMON STOCK INVOLVES RISKS.
SEE "RISK FACTORS" BEGINNING ON PAGE 11.

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

PRICE $ A SHARE
-------------------

- ---------

MORGAN STANLEY DEAN WITTER

LEHMAN BROTHERS

J.P. MORGAN SECURITIES LTD.

SALOMON SMITH BARNEY INTERNATIONAL

TOKYO-MITSUBISHI INTERNATIONAL

, 1999
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following expenses (other than the SEC registration fee and NASD filing
fee) are estimated.

<TABLE>
<CAPTION>
<S> <C>
SEC registration fee.......................................................................... $ 239,775
NASD filing fee............................................................................... 30,500
Printing and engraving expenses...............................................................
Accountants' fees and expenses................................................................
Attorneys' fees and expenses..................................................................
Miscellaneous.................................................................................
----------
Total.....................................................................................
----------
----------
</TABLE>

UNBC and The Bank of Tokyo-Mitsubishi will each pay 50% of the registration
expenses incurred in connection with the registration of the shares of UNBC's
common stock. The underwriters have agreed to reimburse The Bank of
Tokyo-Mitsubishi for certain expenses incurred in connection with this offering.

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS

As authorized by Section 317 of the CGCL, each director and officer of UNBC
may be indemnified by UNBC against expenses (including attorney's fees,
judgments, fines and amounts paid in settlement) actually and reasonably
incurred in connection with the defense or settlement of any threatened, pending
or completed legal proceedings in which such person is involved by reason of the
fact that such person is or was a director or officer of UNBC if such person
acted in good faith and in a manner that such person reasonably believed to be
in the best interests of UNBC and, with respect to any criminal action or
proceeding, if such person had no reasonable cause to believe that his conduct
was unlawful. If the legal proceeding, however, is by or in the right of UNBC,
the director or officer may not be indemnified in respect of any claim, issue or
matter as to which such person shall have been adjudged to be liable for
negligence or misconduct in the performance of his duty to UNBC unless a court
determines otherwise.

In addition, we maintain a directors' and officers' liability policy.

Article VII of the Articles of Incorporation and Section 55 of the Bylaws
provide that, to the fullest extent permitted by law, directors of UNBC will not
be liable for monetary damages to UNBC or its shareholders for breaches of their
fiduciary duties.

ITEM 16. EXHIBITS

The following is a list of all exhibits filed as a part of this Registration
Statement on Form S-3, including those incorporated herein by reference.

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
1.1* Form of Underwriting Agreement
4.1 Specimen Certificate representing shares of Common Stock
5.1* Opinion of John H. McGuckin, Jr., General Counsel, as to the legality of the Common Stock
23.1 Consent of Deloitte & Touche LLP, Independent Auditors
23.2 Consent of Arthur Andersen LLP, Independent Accountants
23.3* Consent of John H. McGuckin, Jr. (included in Exhibit 5.1)
24.1** Power of Attorney of certain officers and directors of the Company
</TABLE>

- ---------

* To be filed by amendment.

** Previously filed.

II-1
<PAGE>
ITEM 17. UNDERTAKINGS

The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered herein, and the offering of such securities
at that time shall be deemed to be the initial BONA FIDE offering thereof.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions set forth in Item 15, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.

The undersigned registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b) (1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.

II-2
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on this Form S-3 and has duly caused this Amendment No.
1 to Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of San Francisco, State of California, on
this 8th day of January, 1999.

<TABLE>
<S> <C> <C>
UNIONBANCAL CORPORATION

By: /s/ TAKAHIRO MORIGUCHI
-----------------------------------------
Takahiro Moriguchi
PRESIDENT AND CHIEF EXECUTIVE OFFICER
</TABLE>

Pursuant to the requirements of the Securities Act, this Amendment No. 1 to
Registration Statement has been signed below by the following persons in the
capacities indicated on January 8, 1999.

<TABLE>
<CAPTION>
SIGNATURES TITLE
- ------------------------------ --------------------------

<C> <S>
President and Chief
/s/ TAKAHIRO MORIGUCHI Executive Officer and
- ------------------------------ Director (Principal
Takahiro Moriguchi Executive Officer)

*
- ------------------------------ Deputy Chairman of the
Yoshihiko Someya Board

Executive Vice President
* and Chief Financial
- ------------------------------ Officer (Principal
David I. Matson Financial Officer)

* Senior Vice President and
- ------------------------------ Controller (Principal
David A. Anderson Accounting Officer)

*
- ------------------------------ Chairman of the Board
Kaoru Hayama

*
- ------------------------------ Vice Chairman of the Board
Richard C. Hartnack

*
- ------------------------------ Vice Chairman of the Board
Robert M. Walker
</TABLE>

II-3
<PAGE>
<TABLE>
<CAPTION>
SIGNATURES TITLE
- ------------------------------ --------------------------

<C> <S>
*
- ------------------------------ Director
Richard D. Farman

*
- ------------------------------ Director
Stanley F. Farrar

*
- ------------------------------ Director
Herman E. Gallegos

*
- ------------------------------ Director
Jack L. Hancock

*
- ------------------------------ Director
Harry W. Low

*
- ------------------------------ Director
Mary S. Metz

*
- ------------------------------ Director
Raymond E. Miles

*
- ------------------------------ Director
J. Fernando Niebla

*
- ------------------------------ Director
Sidney R. Petersen

*
- ------------------------------ Director
Carl W. Robertson

*
- ------------------------------ Director
Henry T. Swigert
</TABLE>

II-4
<PAGE>
<TABLE>
<CAPTION>
SIGNATURES TITLE
- ------------------------------ --------------------------

<C> <S>
*
- ------------------------------ Director
Tsuneo Wakai

*
- ------------------------------ Director
Hiroshi Watanabe

- ------------------------------ Director
Blenda J. Wilson

- ------------------------------ Director
Kenji Yoshizawa
</TABLE>

<TABLE>
<S> <C> <C> <C>
*By: /s/ TAKAHIRO MORIGUCHI
-------------------------
Takahiro Moriguchi
ATTORNEY-IN-FACT
</TABLE>

II-5

<PAGE>

Exhibit 4.1
<TABLE>
<S><C>
COMMON STOCK COMMON STOCK

UB UNIONBANCAL
CORPORATION

INCORPORATED UNDER THE LAWS OF SEE REVERSE FOR STATEMENTS RELATING
THE STATE OF CALIFORNIA TO RIGHTS, PREFERENCES,
PRIVILEGES AND RESTRICTIONS, IF ANY
CUSIP 908906 10 0

THIS CERTIFIES THAT

IS THE RECORD HOLDER OF

FULLY PAID AND NONASSESSABLE SHARES OF THE COMMON STOCK OF

UnionBanCal Corporation

CERTIFICATE OF STOCK

transferable on the books of the Corporation by the holder hereof in person or by duly authorized attorney upon surrender of
this certificate properly endorsed. This certificate is not valid until countersigned and registered by the Transfer Agent and
Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile signatures of its duly authorized officers.

Dated:

----------------------- -----------------------------------------
CORPORATE SECRETARY [SEAL] PRESIDENT AND CHIEF EXECUTIVE OFFICER

</TABLE>

COUNTERSIGNED AND REGISTERED:

HARRIS TRUST COMPANY OF CALIFORNIA
TRANSFER AGENT
AND REGISTRAR

AUTHORIZED SIGNATURE

<PAGE>

A statement of the rights, preferences, privileges and restrictions granted
to or imposed upon the respective classes or series of shares and upon the
holders thereof as established, from time to time, by the Articles of
Incorporation of the Corporation and by any certificate of determination, and
the number of shares constituting each class and series and the designations
thereof, may be obtained by the holder hereof upon written request and without
charge from the Secretary of the Corporation at its corporate headquarters.

The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:

<S><C>
TEN COM -- as tenants in common UNIF GIFT MIN ACT -- Custodian
TEN ENT -- as tenants by the entireties ------------------ ------------------
JT TEN -- as joint tenants with right of (Cust) (Minor)
survivorship and not as tenants under Uniform Gifts to Minors
in common Act
-------------------------------------------
(State)
UNIF TRF MIN ACT -- Custodian (until age )
-------------- -----------
(Cust)
under Uniform Transfers
-----------------------
(Minor)
to Minors Act
---------------------------------
(State)
</TABLE>

Additional abbreviations may also be used though not in the above list.

FOR VALUE RECEIVED, __________________ hereby sell, assign and transfer unto

PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------

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

- --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)

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

- --------------------------------------------------------------------------Shares
of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint

- ------------------------------------------------------------------------Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.

Dated
------------------------

X
-------------------------------------------------
X
-------------------------------------------------
THE SIGNATURE(S) TO THIS ASSIGNMENT MUST
CORRESPOND WITH THE NAME(S) AS WRITTEN UPON THE
NOTICE: FACE OF THE CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE
WHATEVER.

Signature(s) Guaranteed

By
--------------------------------------------------
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE
GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS
AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE
MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15.

<PAGE>
EXHIBIT 23.1

INDEPENDENT AUDITORS' CONSENT

We consent to the inclusion and incorporation by reference in this Amendment No.
1 to Registration Statement No. 333-67579 of UnionBanCal Corporation of our
report dated January 30, 1998 (November 18, 1998 as to the exchange of common
stock referred to in Note 1, paragraphs 3 and 4, and the adoption of SFAS No.
130, "Reporting Comprehensive Income," referred to in Notes 1 and 18, and
December 7, 1998 as to the stock split referred to in Note 1, paragraph 5)
appearing herein and in Form 8-K of UnionBanCal Corporation to be dated January
8, 1999, and to the reference to us under the heading "Experts" in the
Prospectus, which is a part of this Registration Statement.

DELOITTE & TOUCHE LLP
San Francisco, California
January 7, 1999

<PAGE>
EXHIBIT 23.2

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the use of our report
dated January 24, 1996 on the consolidated financial statements of Union Bank
and subsidiaries for the year ended December 31, 1995 (not presented herein),
included in Amendment No. 1 to Form S-3 Registration Statement File No.
333-67579 and to the incorporation by reference of said report, included in Form
8-K of UnionBanCal Corporation to be dated January 8, 1999, in said Form S-3
Registration Statement. It should be noted that we have not audited any
financial statements of Union Bank and subsidiaries subsequent to December 31,
1995 or performed any audit procedures subsequent to the date of our report.

ARTHUR ANDERSEN LLP

San Francisco, California
January 7, 1999