UNIONBANCAL CORP, 10-Q, 1999-05-17

UNIONBANCAL CORP
10-Q, 1999-05-17
NATIONAL COMMERCIAL BANKS

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1999

Commission file number 0-28118

UNIONBANCAL CORPORATION

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

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

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

Number of shares of Common Stock outstanding at April 30, 1999: 164,583,338

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<PAGE>
UNIONBANCAL CORPORATION AND SUBSIDIARIES

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
NUMBER
-----------
<S> <C>

PART I
FINANCIAL INFORMATION

Consolidated Financial Highlights..................................................................... 2

Item 1. Financial Statements:
Consolidated Statements of Income................................................................... 3
Consolidated Balance Sheets......................................................................... 4
Consolidated Statements of Changes in Shareholders' Equity.......................................... 5
Consolidated Statements of Cash Flows............................................................... 6
Notes to Consolidated Financial Statements.......................................................... 7

Item 2. Management's Discussion and Analysis:
Introduction........................................................................................ 11
Summary............................................................................................. 11
Business Segments................................................................................... 12
Net Interest Income................................................................................. 16
Noninterest Income.................................................................................. 17
Noninterest Expense................................................................................. 18
Income Tax Expense.................................................................................. 19
Loans............................................................................................... 20
Cross-Border Outstandings........................................................................... 21
Provision for Credit Losses......................................................................... 22
Allowance for Credit Losses......................................................................... 22
Nonperforming Assets................................................................................ 26
Loans 90 Days or More Past Due and Still Accruing................................................... 26
Liquidity........................................................................................... 26
Regulatory Capital.................................................................................. 27
Year 2000........................................................................................... 27

Item 3. Market Risk................................................................................... 32

PART II
OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K.............................................................. 33

Signatures............................................................................................ 34
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION

UNIONBANCAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL HIGHLIGHTS
(UNAUDITED)

<TABLE>
<CAPTION>
PERCENT CHANGE TO
FOR THE THREE MONTHS ENDED MARCH 31, 1999 FROM:
-------------------------------------- ----------------------------
MARCH 31, DECEMBER 31, MARCH 31, MARCH 31, DECEMBER 31,
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 1998 1998 1999 1998 1998
- ---------------------------------------------------- ----------- ------------ ----------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS:
Net interest income(1)............................ $ 318,646 $ 339,599 $ 340,711 6.92% 0.33%
Provision for credit losses....................... 20,000 -- 5,000 (75.00) nm
Noninterest income................................ 128,030 133,582 139,308 8.81 4.29
Noninterest expense............................... 268,475 299,040 302,993 12.86 1.32
----------- ------------ -----------
Income before income taxes(1)..................... 158,201 174,141 172,026 8.74 (1.21 )
Taxable-equivalent adjustment..................... 1,196 1,015 890 (25.59 ) (12.32 )
Income tax expense................................ 61,428 59,030 52,641 (14.30 ) (10.82 )
----------- ------------ -----------
Net income........................................ $ 95,577 $ 114,096 $ 118,495 23.98% 3.86%
----------- ------------ -----------
----------- ------------ -----------
PER COMMON SHARE:
Net income--basic................................. $ 0.55 $ 0.65 $ 0.69 25.45% 6.15%
Net income--diluted............................... 0.54 0.65 0.69 27.78 6.15
Dividends(2)...................................... 0.14 0.19 0.19 35.71 --
Book value (end of period)........................ 15.72 17.45 17.17 9.22 (1.60 )
Common shares outstanding (end of period)......... 174,996,613 175,259,919 164,580,273 (5.95 ) (6.09 )
Weighted average common shares
outstanding--basic.............................. 174,967,192 175,236,084 171,825,589 (1.80 ) (1.95 )
Weighted average common shares
outstanding--diluted............................ 175,620,877 175,840,158 172,465,676 (1.80 ) (1.92 )
BALANCE SHEET (END OF PERIOD):
Total assets...................................... $30,904,567 $32,276,316 $32,347,577 4.67% 0.22%
Total loans....................................... 22,504,043 24,296,111 24,352,354 8.21 0.23
Nonperforming assets.............................. 132,403 89,850 109,837 (17.04 ) 22.24
Total deposits.................................... 23,411,367 24,507,879 23,996,023 2.50 (2.09 )
Common equity..................................... 2,750,696 3,058,244 2,825,730 2.73 (7.60 )
BALANCE SHEET (PERIOD AVERAGE):
Total assets...................................... $29,865,256 $31,690,292 $31,727,726 6.24% 0.12%
Total loans....................................... 22,611,092 24,101,304 24,280,726 7.38 0.74
Earning assets.................................... 26,613,204 28,615,543 28,618,688 7.54 0.01
Total deposits.................................... 22,431,446 23,451,618 23,305,935 3.90 (0.62 )
Common equity..................................... 2,714,296 3,003,941 2,994,352 10.32 (0.32 )
FINANCIAL RATIOS:
Return on average assets(3)....................... 1.30% 1.43% 1.51%
Return on average common equity(3)................ 14.28 15.07 16.05
Efficiency ratio(4)............................... 60.15 63.64 63.13
Net interest margin(1)............................ 4.86 4.71 4.83
Dividend payout ratio............................. 25.45 29.23 27.54
Tangible equity ratio............................. 8.70 9.30 8.57
Tier 1 risk-based capital ratio................... 9.16 9.64 9.90
Total risk-based capital ratio.................... 11.23 11.61 11.86
Leverage ratio.................................... 8.94 9.38 9.78
Allowance for credit losses to total loans........ 2.07 1.89 1.84
Allowance for credit losses to nonaccrual loans... 414.44 585.50 446.10
Net loans charged off to average total loans(3)... 0.10 0.24 0.27
Nonperforming assets to total loans and foreclosed
assets.......................................... 0.59 0.37 0.45
Nonperforming assets to total assets.............. 0.43 0.28 0.34
</TABLE>

- ------------------------------
(1) Amounts are on a taxable-equivalent basis using the federal statutory tax
rate of 35 percent.
(2) Dividends per share reflect dividends declared on UnionBanCal
Corporation's common stock outstanding as of the declaration date.
(3) Annualized.
(4) The efficiency ratio is noninterest expense, excluding foreclosed asset
expense (income), as a percentage of net interest income
(taxable-equivalent) and noninterest income. Foreclosed asset expense
(income) was $(0.2) million in the first quarter of 1998, $(2.1) million
in the fourth quarter of 1998, and none in the first quarter of 1999.
nm = not meaningful

2
<PAGE>
ITEM 1. FINANCIAL STATEMENTS

UNIONBANCAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)

<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED MARCH 31,
--------------------
<S> <C> <C>
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA) 1998 1999
- ------------------------------------------------------------------------------------------ --------- ---------
INTEREST INCOME
Loans................................................................................... $ 448,049 $ 451,492
Securities.............................................................................. 42,895 56,818
Interest bearing deposits in banks...................................................... 8,299 3,188
Federal funds sold and securities purchased under resale agreements..................... 4,142 1,697
Trading account assets.................................................................. 5,268 3,898
--------- ---------
Total interest income............................................................... 508,653 517,093
--------- ---------
INTEREST EXPENSE
Domestic deposits....................................................................... 121,300 106,147
Foreign deposits........................................................................ 23,577 16,632
Federal funds purchased and securities sold under repurchase agreements................. 14,075 19,769
Commercial paper........................................................................ 21,395 19,174
Subordinated capital notes.............................................................. 5,754 4,109
UnionBanCal Corporation--obligated mandatorily redeemable preferred securities of
subsidiary grantor trust.............................................................. -- 3,291
Other borrowed funds.................................................................... 5,102 8,150
--------- ---------
Total interest expense.............................................................. 191,203 177,272
--------- ---------
NET INTEREST INCOME....................................................................... 317,450 339,821
Provision for credit losses............................................................. 20,000 5,000
--------- ---------
Net interest income after provision for credit losses............................... 297,450 334,821
--------- ---------
NONINTEREST INCOME
Service charges on deposit accounts..................................................... 33,026 39,651
Trust and investment management fees.................................................... 27,993 32,271
International commissions and fees...................................................... 17,631 17,631
Merchant transaction processing fees.................................................... 14,379 14,512
Merchant banking fees................................................................... 9,622 7,461
Securities gains, net................................................................... 4,926 1,261
Other................................................................................... 20,453 26,521
--------- ---------
Total noninterest income............................................................ 128,030 139,308
--------- ---------
NONINTEREST EXPENSE
Salaries and employee benefits.......................................................... 149,204 167,667
Net occupancy........................................................................... 22,025 22,461
Equipment............................................................................... 13,839 14,541
Merchant transaction processing......................................................... 10,080 11,610
Professional services................................................................... 7,307 10,694
Communications.......................................................................... 11,229 9,933
Data processing......................................................................... 6,502 8,001
Printing and office supplies............................................................ 6,335 6,672
Foreclosed asset expense (income)....................................................... (198) (41)
Other................................................................................... 42,152 51,455
--------- ---------
Total noninterest expense........................................................... 268,475 302,993
--------- ---------
Income before income taxes.............................................................. 157,005 171,136
Income tax expense...................................................................... 61,428 52,641
--------- ---------
NET INCOME................................................................................ $ 95,577 $ 118,495
--------- ---------
--------- ---------
NET INCOME PER COMMON SHARE--BASIC........................................................ $ 0.55 $ 0.69
--------- ---------
--------- ---------
NET INCOME PER COMMON SHARE--DILUTED...................................................... $ 0.54 $ 0.69
--------- ---------
--------- ---------
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING--BASIC......................................... 174,967 171,826
--------- ---------
--------- ---------
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING--DILUTED....................................... 175,621 172,466
--------- ---------
--------- ---------
</TABLE>

See accompanying notes to consolidated financial statements.

3
<PAGE>
UNIONBANCAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
(UNAUDITED) (UNAUDITED)
MARCH 31, DECEMBER 31, MARCH 31,
(DOLLARS IN THOUSANDS) 1998 1998 1999
- -------------------------------------------------------------------------- ------------ ------------ ------------
<S> <C> <C> <C>
ASSETS
Cash and due from banks................................................... $2,449,290 $2,135,380 $2,313,357
Interest bearing deposits in banks........................................ 193,578 209,568 256,656
Federal funds sold and securities purchased under resale agreements....... 743,887 333,530 355,050
------------ ------------ ------------
Total cash and cash equivalents....................................... 3,386,755 2,678,478 2,925,063
Trading account assets.................................................... 892,171 267,718 336,089
Securities available for sale............................................. 2,807,124 3,638,532 3,375,255
Securities held to maturity (market value: March 31, 1998, $179,317;
December 31, 1998, $163,244; March 31, 1999, $141,081).................. 175,696 160,513 139,321
Loans (net of allowance for credit losses: March 31, 1998, $466,043;
December 31, 1998, $459,328; March 31, 1999, $447,936).................. 22,038,000 23,836,783 23,904,418
Due from customers on acceptances......................................... 535,754 489,480 419,386
Premises and equipment, net............................................... 395,272 421,091 427,697
Other assets.............................................................. 673,795 783,721 820,348
------------ ------------ ------------
Total assets.......................................................... $30,904,567 $32,276,316 $32,347,577
------------ ------------ ------------
------------ ------------ ------------
LIABILITIES
Domestic deposits:
Noninterest bearing..................................................... $9,047,869 $9,919,316 $9,332,370
Interest bearing........................................................ 12,201,217 12,609,565 12,643,022
Foreign deposits:
Noninterest bearing..................................................... 271,250 260,089 341,298
Interest bearing........................................................ 1,891,031 1,718,909 1,679,333
------------ ------------ ------------
Total deposits........................................................ 23,411,367 24,507,879 23,996,023
Federal funds purchased and securities sold under repurchase agreements... 1,009,523 1,307,744 1,073,376
Commercial paper.......................................................... 1,588,589 1,444,745 1,737,265
Other borrowed funds...................................................... 401,221 331,165 962,416
Acceptances outstanding................................................... 535,754 489,480 419,386
Other liabilities......................................................... 859,417 839,059 685,381
Subordinated capital notes................................................ 348,000 298,000 298,000
UnionBanCal Corporation--obligated mandatorily redeemable preferred
securities of subsidiary grantor trust.................................. -- -- 350,000
------------ ------------ ------------
Total liabilities..................................................... 28,153,871 29,218,072 29,521,847
------------ ------------ ------------
Commitments and contingencies
SHAREHOLDERS' EQUITY
Preferred stock:
Authorized 5,000,000 shares, no shares issued or outstanding as of
March 31, 1998, December 31, 1998, or March 31, 1999.................. -- -- --
Common stock--no stated value:
Authorized 300,000,000 shares, issued 174,996,613 shares as of
March 31, 1998, 175,259,919 shares as of December 31, 1998, and
164,580,273 shares as of March 31, 1999............................... 1,715,800 1,725,619 1,415,227
Retained earnings......................................................... 1,029,401 1,314,915 1,403,180
Accumulated other comprehensive income.................................... 5,495 17,710 7,323
------------ ------------ ------------
Total shareholders' equity............................................ 2,750,696 3,058,244 2,825,730
------------ ------------ ------------
Total liabilities and shareholders' equity............................ $30,904,567 $32,276,316 $32,347,577
------------ ------------ ------------
------------ ------------ ------------
</TABLE>

See accompanying notes to consolidated financial statements.

4
<PAGE>
UNIONBANCAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(UNAUDITED)

<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED MARCH 31,
--------------------------------------------------
(DOLLARS IN THOUSANDS) 1998 1999
- ------------------------------------------------------------ ------------------------ ------------------------
<S> <C> <C> <C> <C>
COMMON STOCK
Balance, beginning of period................................ $1,714,209 $1,725,619
Dividend reinvestment plan.................................. 6 13
Deferred compensation--restricted stock awards.............. 109 (15)
Stock options exercised..................................... 1,476 594
Common stock repurchased.................................... -- (310,984)
----------- -----------
Balance, end of period.................................... $1,715,800 $1,415,227
----------- -----------
RETAINED EARNINGS
Balance, beginning of period................................ $ 957,662 $1,314,915
Net income.................................................. 95,577 $ 95,577 118,495 $ 118,495
Dividends on common stock(1)................................ (24,538 ) (31,269 )
Deferred compensation--restricted stock awards.............. 700 1,039
----------- -----------
Balance, end of period.................................... $1,029,401 $1,403,180
----------- -----------
ACCUMULATED OTHER COMPREHENSIVE INCOME......................
Balance, beginning of period................................ $ 7,428 $ 17,710
Unrealized holding gains (losses) arising during the period
on securities available for sale, net of tax expense
(benefit) of $443 and $(6,071) in the first quarter of
1998 and 1999, respectively............................... 651 (9,797 )
Less: reclassification adjustment for gains on securities
available for sale included in net income, net of
tax expense of $1,995 and $482 in the first
quarter of 1998 and 1999, respectively.................... (2,931 ) (779 )
----------- -----------
Net unrealized gains (losses) on securities available for
sale...................................................... (2,280 ) (10,576 )
Foreign currency translation adjustment, net of tax
expense (benefit) of $236 and $(297) in the first
quarter of 1998 and 1999, respectively.................... 347 (480 )
Minimum pension liability adjustment, net of tax
expense of $414 in the first quarter of 1999.............. -- 669
----------- -----------
Other comprehensive income.................................. (1,933 ) (1,933 ) (10,387 ) (10,387 )
----------- ----------- ----------- -----------
Total comprehensive income.................................. $ 93,644 $ 108,108
----------- -----------
----------- -----------
Balance, end of period.................................... $ 5,495 $ 7,323
----------- -----------
TOTAL SHAREHOLDERS' EQUITY............................. $2,750,696 $2,825,730
----------- -----------
----------- -----------
</TABLE>

- ------------------------------
(1) Dividends per share were $0.14 and $0.19 in the first quarter of 1998 and
1999, respectively, and are based on UnionBanCal Corporation's shares
outstanding as of the declaration date.

See accompanying notes to consolidated financial statements.

5
<PAGE>
UNIONBANCAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED MARCH 31,
------------------------
(DOLLARS IN THOUSANDS) 1998 1999
- ---------------------------------------------------------------------------------------- ----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................................................................ $ 95,577 $ 118,495
Adjustments to reconcile net income to net cash used by operating activities:
Provision for credit losses......................................................... 20,000 5,000
Depreciation, amortization and accretion............................................ 16,850 17,815
Provision for deferred income taxes................................................. 12,467 9,135
Gain on sales of securities available for sale...................................... (4,926) (1,261)
Merger and integration costs less than cash utilized................................ (8,662) (1,016)
Net increase in trading account assets.............................................. (456,876) (68,371)
Other, net.......................................................................... 233,032 (166,369)
----------- -----------
Total adjustments................................................................. (188,115) (205,067)
----------- -----------
Net cash used by operating activities................................................. (92,538) (86,572)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of securities available for sale.................................. 317,209 197,913
Proceeds from matured and called securities available for sale........................ 65,072 213,227
Purchases of securities available for sale............................................ (668,162) (163,466)
Proceeds from matured and called securities held to maturity.......................... 13,136 21,262
Net (increase) decrease in loans...................................................... 224,162 (88,272)
Other, net............................................................................ 15,694 (21,247)
----------- -----------
Net cash provided (used) by investing activities.................................... (32,889) 159,417
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (decrease) increase in deposits................................................... 114,993 (511,856)
Net decrease in federal funds purchased and securities sold under repurchase
agreements.......................................................................... (326,361) (234,368)
Net increase in commercial paper and other borrowed funds............................. 547,225 923,771
Common stock repurchased.............................................................. -- (310,984)
Proceeds from issuance of UnionBanCal Corporation--obligated
mandatorily redeemable preferred securities of subsidiary grantor trust............. -- 350,000
Dividends paid........................................................................ (24,528) (33,299)
Other, net............................................................................ 1,829 127
----------- -----------
Net cash provided by financing activities........................................... 313,158 183,391
----------- -----------
Net increase in cash and cash equivalents............................................... 187,731 256,236
Cash and cash equivalents at beginning of period........................................ 3,199,455 2,678,478
Effect of exchange rate changes on cash and cash equivalents............................ (431) (9,651)
----------- -----------
Cash and cash equivalents at end of period.............................................. $ 3,386,755 $ 2,925,063
----------- -----------
----------- -----------
CASH PAID (RECEIVED) DURING THE PERIOD FOR:
Interest.............................................................................. $ 200,270 $ 173,138
Income taxes.......................................................................... 17,843 (34,486)

SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Loans transferred to foreclosed assets (OREO)......................................... $ 6,990 $ 1,469
Dividends declared but unpaid......................................................... 24,538 31,269
</TABLE>

See accompanying notes to consolidated financial statements.

6
<PAGE>
UNIONBANCAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 1999
(UNAUDITED)

NOTE 1--BASIS OF PRESENTATION AND NATURE OF OPERATIONS

The unaudited consolidated financial statements of UnionBanCal Corporation
and subsidiaries (the Company) have been prepared in accordance with generally
accepted accounting principles (GAAP) for interim financial reporting and the
instructions to Form 10-Q and Rule 10-01 of Regulation S-X. However, they do not
include all of the disclosures necessary for annual financial statements in
conformity with GAAP. Accordingly, these unaudited consolidated financial
statements should be read in conjunction with the audited consolidated financial
statements included in the Company's Form 10-K for the year ended December 31,
1998. The preparation of financial statements in conformity with GAAP also
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenue and expense during the reporting period. Actual results could differ
from those estimates.

On March 3, 1999, the Company completed a secondary offering of 28.75
million shares of its Common Stock owned by The Bank of Tokyo-Mitsubishi, Ltd.
(BTM). The Company received no proceeds from this transaction. Concurrent with
the secondary offering, the Company repurchased 8.6 million shares of its
outstanding Common Stock from BTM and 2.1 million shares owned by Meiji Life
Insurance Company with $311 million of the net proceeds from the issuance of
$350 million of 7 3/8 percent redeemable preferred securities that occurred on
February 19, 1999. Upon completion of the secondary offering and the repurchase
of the Company's common stock from BTM, BTM owns 64 percent of the Company, or
105.6 million shares, compared with 82 percent prior to the transactions.

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

NOTE 2--RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

On January 1, 1999, the Company adopted Statement of Financial Accounting
Standards (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. Adoption of
this Statement did not impact the Company's financial position or results of
operations.

On January 1, 1999, the Company adopted 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 determined that the effect of adoption of SOP 98-1 on
the Company's financial position or results of operations was not material.

On January 1, 1999, the Company adopted 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. Adoption of SOP 98-5 did not have a
material effect on the Company's financial position or results of operations.

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

MARCH 31, 1999
(UNAUDITED)

NOTE 2--RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS (CONTINUED)
In June 1998, the Financial Accounting Standards Board 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 to effectiveness and ineffectiveness when hedging
changes in fair value or cash flows. Derivative instruments that do not qualify
as either a fair value or cash flow hedge will be valued at fair value with the
resultant gain or loss recognized in current earnings. Changes in the effective
portion of fair value hedges will be recognized in current earnings along with
the change in fair value of the hedged item. Changes in the effective portion of
the fair value of cash flow hedges will be recognized in other comprehensive
income until realization of the cash flows of the hedged item through current
earnings. Any ineffective portion of hedges will be recognized in current
earnings. 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.

NOTE 3--EARNINGS PER SHARE

Basic earnings per share (EPS) is computed by dividing net income by the
weighted average number of common shares outstanding during the period. Diluted
EPS incorporates the dilutive effect of common stock equivalents outstanding on
an average basis during the period. Stock options are a common stock equivalent.
The following table presents a reconciliation of basic and diluted EPS for the
three months ended March 31, 1998 and 1999:

<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED MARCH 31,
----------------------------------------------
1998 1999
---------------------- ----------------------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA) BASIC DILUTED BASIC DILUTED
- ----------------------------------------------------------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net Income....................................................... $ 95,577 $ 95,577 $ 118,495 $ 118,495
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Weighted average common shares outstanding....................... 174,967 174,967 171,826 171,826
Additional shares due to:
Assumed conversion of dilutive stock options................... -- 654 -- 640
---------- ---------- ---------- ----------
Adjusted weighted average common shares
outstanding.................................................... 174,967 175,621 171,826 172,466
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Net income per share............................................. $ 0.55 $ 0.54 $ 0.69 $ 0.69
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>

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

MARCH 31, 1999
(UNAUDITED)

NOTE 4--COMPREHENSIVE INCOME

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

<TABLE>
<CAPTION>
NET UNREALIZED
GAINS (LOSSES) ON FOREIGN MINIMUM PENSION
SECURITIES AVAILABLE CURRENCY LIABILITY ACCUMULATED OTHER
FOR SALE TRANSLATION ADJUSTMENT COMPREHENSIVE INCOME
--------------------- --------------------- ------------------- ---------------------
FOR THE THREE MONTHS ENDED MARCH 31,
-------------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS) 1998 1999 1998 1999 1998 1999 1998 1999
- ------------------------------ --------- --------- --------- --------- --------- ------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Beginning balance............. $19,886 $29,109 $(12,458) $(9,651) $ -- ($1,748) $ 7,428 $17,710

Change during the period...... (2,280) (10,576) 347 (480) -- 669 (1,933) (10,387)
--------- --------- --------- --------- --------- ------- --------- ---------

Ending balance................ $17,606 $18,533 $(12,111) $(10,131) $ -- ($1,079) $ 5,495 $ 7,323
--------- --------- --------- --------- --------- ------- --------- ---------
--------- --------- --------- --------- --------- ------- --------- ---------
</TABLE>

NOTE 5--BUSINESS SEGMENTS

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

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

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

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

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

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

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

"Other" is comprised of goodwill, certain parent company non-bank
subsidiaries, the elimination of the fully taxable-equivalent amounts, the
unallocated allowance and related provision for credit losses, the earnings
associated with the unallocated equity capital, the residual costs of support
groups, and merger and integration expense when applicable. In addition, it
includes two units, the Credit and Compliance Group, which manages nonperforming
assets, and the Pacific Rim Group, which offers financial products

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

MARCH 31, 1999
(UNAUDITED)

NOTE 5--BUSINESS SEGMENTS (CONTINUED)
to Asian-owned subsidiaries located in the U.S. On an individual basis, none of
the items in "Other" are significant to our business.

<TABLE>
<CAPTION>
TRUST AND
PRIVATE
COMMERCIAL FINANCIAL
COMMUNITY FINANCIAL INTERNATIONAL SERVICES
BANKING GROUP SERVICES GROUP BANKING GROUP GROUP
------------------ ------------------ ---------------- ----------------
FOR THE THREE MONTHS ENDED MARCH 31,
--------------------------------------------------------------------------
1998 1999 1998 1999 1998 1999 1998 1999
-------- -------- -------- -------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS (DOLLARS IN THOUSANDS):

Total revenue........................... $210,755 $213,815 $140,805 $160,440 $29,989 $30,880 $38,897 $45,014

Net income.............................. $ 35,486 $ 33,747 $ 49,519 $ 56,144 $ 7,053 $ 2,540 $ 4,191 $ 4,313

Total assets at period end (DOLLARS IN
MILLIONS)............................. $ 10,720 $ 10,142 $ 11,449 $ 14,084 $ 1,698 $ 1,477 $ 282 $ 375
</TABLE>

Total revenue........................................ $ 14,143 $ 21,861 $ 10,891 $ 7,119 $ 445,480 $ 479,129

Net income........................................... $ 3,195 $ 8,276 $ (3,867) $ 13,475 $ 95,577 $ 118,495

Total assets at period end (DOLLARS IN MILLIONS)..... $ 4,680 $ 4,250 $ 2,076 $ 2,020 $ 30,905 $ 32,348
</TABLE>

NOTE 6-- UNIONBANCAL CORPORATION--OBLIGATED MANDATORILY REDEEMABLE PREFERRED
SECURITIES OF SUBSIDIARY GRANTOR TRUST

During the first quarter of 1999, UnionBanCal Finance Trust I issued $350
million preferred securities to the public and $10,824,750 common securities to
the Company. The proceeds of such issuances were invested by UnionBanCal Finance
Trust I in $360,824,750 aggregate principal amount of the Company's 7 3/8
percent debt securities due May 15, 2029 (the Trust Notes). The Trust Notes
represent the sole asset of UnionBanCal Finance Trust I. The Trust Notes mature
on May 15, 2029, bear interest at the rate of 7 3/8 percent, payable quarterly,
and are redeemable by the Company beginning on or after February 19, 2004 at 100
percent of the principal amount thereof, plus any accrued and unpaid interest to
the redemption date.

Holders of the preferred securities and common securities are entitled to
cumulative cash distributions at an annual rate of 7 3/8 percent of the
liquidation amount of $25 per security. The preferred securities are subject to
mandatory redemption upon repayment of the Trust Notes and are callable by the
Company at 100 percent of the liquidation amount beginning on or after February
19, 2004. The Trust exists for the sole purpose of issuing the preferred
securities and investing the proceeds in the Trust Notes issued by the Company.

10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

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

INTRODUCTION

We are a California-based commercial bank holding company with consolidated
assets of $32.3 billion at March 31, 1999. Our wholly-owned subsidiary, Union
Bank of California, N.A., was the third largest commercial bank in California,
based on total assets and total deposits in California, and one of the 30
largest commercial banks in the United States. At March 31, 1999, we operated
244 banking offices in California, 6 banking offices in Oregon and Washington,
and 17 overseas facilities. At March 31, 1999, we were 64 percent owned by The
Bank of Tokyo-Mitsubishi, Ltd. and 36 percent owned by other shareholders. See
Note 1 of the accompanying notes to our Consolidated Financial Statements for
further information.

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

SUMMARY

Net income was $95.6 million, or $0.54 per diluted common share, in the
first quarter of 1998, compared with $118.5 million, or $0.69 per diluted common
share, in the first quarter of 1999. This increase in diluted earnings per share
of 28 percent over the first quarter of 1998 was due to a 7 percent increase in
net interest income, a $15.0 million decrease in the provision for credit
losses, a 9 percent increase in noninterest income, and a 8 percent decrease in
the effective income tax rate, partially offset by a 13 percent increase in
noninterest expense. Excluding a federal income tax benefit of $6.3 million as
described below, net income was $112.2 million, or $0.65 per diluted common
share, in the first quarter of 1999. Other highlights of the first quarter of
1999 include:

- Net interest income, on a taxable-equivalent basis, was $340.7 million in
the first quarter of 1999, an increase of $22.1 million, or 7 percent,
over the first quarter of 1998. Net interest margin in the first quarter
of 1999 was 4.83 percent, a decrease of 3 basis points from the first
quarter of 1998.

- A provision for credit losses of $20.0 million was recorded in the first
quarter of 1998, compared with $5.0 million in the first quarter of 1999.
This resulted from management's regular assessment of overall credit
quality, loan portfolio composition and growth and economic conditions in
relation to the level of the allowance for credit losses. The allowance
for credit losses was $466.0 million, or 414 percent of total nonaccrual
loans, at March 31, 1998, compared with $447.9 million, or 446 percent of
total nonaccrual loans, at March 31, 1999. Net loans charged off in the
first quarter of 1999 was $16.3 million.

- Nonperforming assets declined $22.6 million, or 17 percent, from March
31, 1998 to $109.8 million at March 31, 1999. Nonperforming assets as a
percentage of total assets declined to 0.34 percent at March 31, 1999,
compared with 0.43 percent a year earlier. Total nonaccrual loans were
$112.5 million at March 31, 1998, compared with $100.4 million at March
31, 1999, resulting in a reduction in the ratio of nonaccrual loans to
total loans from 0.50 percent at March 31, 1998 to 0.41 percent at March
31, 1999.

11
<PAGE>
- Noninterest income was $139.3 million in the first quarter of 1999, an
increase of $11.3 million, or 9 percent, over the first quarter of 1998.
Service charges on deposit accounts grew $6.6 million, or 20 percent,
trust and investment management fees increased $4.3 million, or 15
percent, and other noninterest income increased $4.6 million, or 41
percent. These increases were partially offset by a decrease in merchant
banking fees of $2.2 million, or 22 percent, and a decrease in net
securities gains of $3.7 million, or 74 percent.

- Noninterest expense was $303.0 million in the first quarter of 1999, an
increase of $34.5 million, or 13 percent, over the first quarter of 1998.
Personnel-related expense increased $18.5 million, or 12 percent,
professional services increased $3.4 million, or 46 percent, and other
noninterest expense increased $6.4 million, or 30 percent.

- Our effective tax rate for the first quarter of 1998 was 39 percent,
compared with 31 percent for the first quarter of 1999. In March 1999, we
recognized a $6.3 million federal tax benefit as the result of an
Internal Revenue Service (IRS) settlement with respect to refund claims
we filed for the years 1992 through 1994. The lower effective tax rate in
the first quarter of 1999 also reflects our intention to file our 1999
California franchise tax returns on a worldwide unitary reporting basis,
which incorporates the results of our majority shareholder, The Bank of
Tokyo-Mitsubishi, Ltd. and their worldwide affiliates. Excluding the $6.3
million federal tax benefit, our effective tax rate would have been 34
percent in the first quarter of 1999.

- In the first quarter of 1999, our return on average assets increased to
1.51 percent from 1.30 percent a year earlier, and our return on average
common equity increased to 16.05 percent from 14.28 percent a year
earlier.

- Total loans at March 31, 1999 were $24.4 billion, an increase of $1.8
billion, or 8 percent, over March 31, 1998.

- Our Tier 1 and total risk-based capital ratios were 9.16 percent and
11.23 percent, respectively, at March 31, 1998, compared with 9.90
percent and 11.86 percent, respectively, at March 31, 1999. Our first
quarter 1998 leverage ratio was 8.94 percent, compared with 9.78 percent
for the first quarter of 1999.

BUSINESS SEGMENTS

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

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

Business unit results are based on an internal management reporting system
used by management to measure the performance of the units and the Company as a
whole. The management reporting system assigns balance sheet and income
statement items to each business unit based on internal management accounting
policies. Net interest income is determined using our internal funds transfer
pricing system, which assigns a cost of funds or a credit for funds to assets or
liabilities based on their type, maturity or repricing characteristics.
Noninterest income and expense directly attributable to a business unit are
assigned to that business. Indirect costs, such as overhead, operation, and
technology expense, are allocated to the business units based on studies of
billable unit costs for product or data processing. The provision for credit
losses is allocated based on the formula and specific reserves and the net
chargeoffs for

12
<PAGE>
each respective business unit. Equity is allocated based on a combination of
regulatory requirements and management's assessment of economic risk factors,
primarily credit, operating, foreign exchange and interest rate risk.

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

<TABLE>
<CAPTION>
TRUST AND
COMMERCIAL PRIVATE
COMMUNITY FINANCIAL INTERNATIONAL FINANCIAL
BANKING GROUP SERVICES GROUP BANKING GROUP SERVICES GROUP
------------------ ------------------ ------------------ ------------------
FOR THE THREE MONTHS ENDED MARCH 31,
------------------------------------------------------------------------------
1998 1999 1998 1999 1998 1999 1998 1999
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS (DOLLARS
IN THOUSANDS):
Net interest income......... $172,393 $171,586 $109,937 $133,882 $ 13,956 $ 12,831 $ 5,571 $ 5,836
Noninterest income.......... 38,362 42,229 30,868 26,558 16,033 18,049 33,326 39,178
-------- -------- -------- -------- -------- -------- -------- --------
Total revenue............... 210,755 213,815 140,805 160,440 29,989 30,880 38,897 45,014

Noninterest expense......... 146,845 156,714 57,817 66,861 16,382 17,565 32,066 38,101
Credit expense (income)..... 7,951 3,932 3,173 5,844 1,120 8,478 7 (68)
-------- -------- -------- -------- -------- -------- -------- --------
Income (loss) before income
tax expense
(benefit) and performance
center
earnings (expense)........ 55,959 53,169 79,815 87,735 12,487 4,837 6,824 6,981
Performance center earnings
(expense)(1).............. 2,034 1,580 1,112 468 (961) (716) 25 16
-------- -------- -------- -------- -------- -------- -------- --------
Income (loss) before income
tax expense (benefit)..... 57,993 54,749 80,927 88,203 11,526 4,121 6,849 6,997
Income tax expense
(benefit)................. 22,507 21,002 31,408 32,059 4,473 1,581 2,658 2,684
-------- -------- -------- -------- -------- -------- -------- --------
Net income (loss)........... $ 35,486 $ 33,747 $ 49,519 $ 56,144 $ 7,053 $ 2,540 $ 4,191 $ 4,313
-------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- --------
AVERAGE BALANCES (DOLLARS IN
MILLIONS):
Total loans before
performance centers(2).... $ 9,588 $ 9,096 $ 10,196 $ 12,731 $ 1,442 $ 1,146 $ 232 $ 302
Total assets................ 10,620 10,101 11,352 13,974 2,306 1,779 288 379
Total deposits before
performance centers(2).... 12,789 13,539 4,938 5,534 928 781 808 620
FINANCIAL RATIOS:
Return on average assets.... 1.36% 1.35% 1.77% 1.63% 1.24% 0.58% 5.90% 4.62%
Efficiency ratio before
performance centers....... 69.68 73.29 41.06 41.67 54.63 56.88 82.44 84.64
</TABLE>

<TABLE>
<CAPTION>
GLOBAL UNIONBANCAL
MARKETS GROUP OTHER CORPORATION
-------------------- -------------------- --------------------
FOR THE THREE MONTHS ENDED MARCH 31,
----------------------------------------------------------------
1998 1999 1998 1999 1998 1999
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS (DOLLARS IN THOUSANDS):
Net interest income........................................... $ 6,159 $ 14,177 $ 9,434 $ 1,509 $ 317,450 $ 339,821
Noninterest income............................................ 7,984 7,684 1,457 5,610 128,030 139,308
--------- --------- --------- --------- --------- ---------
Total revenue................................................. 14,143 21,861 10,891 7,119 445,480 479,129
Noninterest expense........................................... 6,705 6,672 8,660 17,080 268,475 302,993
Credit expense (income)....................................... -- -- 7,749 (13,186) 20,000 5,000
--------- --------- --------- --------- --------- ---------
Income (loss) before income tax expense (benefit) and
performance center earnings (expense)....................... 7,438 15,189 (5,518) 3,225 157,005 171,136
Performance center earnings (expense)(1)...................... (2,217) (1,762) 7 414 -- --
--------- --------- --------- --------- --------- ---------
Income (loss) before income tax expense (benefit)............. 5,221 13,427 (5,511) 3,639 157,005 171,136
Income tax expense (benefit).................................. 2,026 5,151 (1,644) (9,836) 61,428 52,641
--------- --------- --------- --------- --------- ---------
Net income (loss)............................................. $ 3,195 $ 8,276 $ (3,867) $ 13,475 $ 95,577 $ 118,495
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
AVERAGE BALANCES (DOLLARS IN MILLIONS):
Total loans before performance centers(2)..................... $ -- $ -- $ 1,153 $ 1,006 $ 22,611 $ 24,281
Total assets.................................................. 3,805 4,118 1,494 1,377 29,865 31,728
Total deposits before performance centers(2).................. 2,915 2,891 53 (59) 22,431 23,306
FINANCIAL RATIOS:
Return on average assets...................................... 0.34% 0.82% na na 1.30% 1.51%
Efficiency ratio.............................................. 47.41 30.52 na na 60.15 63.13
</TABLE>

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

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

(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.

13
<PAGE>
COMMUNITY BANKING GROUP

The Community Banking Group provides its customers with a full line of
checking and savings, investment, loan and fee-based banking products. In the
first quarter of 1999, average assets in this group were $10.1 billion, and
average deposits were $13.5 billion. The decrease in average loans from the
first quarter of 1998 was primarily due to the sale of the credit card portfolio
and the increase in refinancing activity as further discussed on page 21.

The group focuses on four major markets:

- consumers,

- businesses with sales under $3 million,

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

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

COMMERCIAL FINANCIAL SERVICES GROUP

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

- commercial and project loans,

- real estate financing,

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

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

- lease financing,

- customized cash management services, and

- selected capital markets products.

The group's customers provide a significant source of opportunities for us
to sell products and services of other units of Union Bank of California, N.A.,
including treasury, trust, and retail banking services. In the first quarter of
1999, average assets in this group were $14.0 billion, and average deposits were
$5.5 billion. The increase in the group's net income over the first quarter of
1998 was primarily due to the growth in commercial, financial and industrial
lending as discussed on page 20.

INTERNATIONAL BANKING GROUP

The International Banking Group primarily provides correspondent banking and
trade finance-related products and services to financial institutions worldwide,
particularly in Brazil, Hong Kong, Japan, Korea, and Taiwan. This includes the
delivery of products and services that facilitate trade finance transactions,
including payments, collection and the extension of short-term credit. The group
also serves selected foreign firms and U.S. corporate clients in selected
countries worldwide, particularly in Asia. In the U.S., the group serves
subsidiaries and affiliates of non-Japanese Asian companies and U.S. branches
and agencies of foreign banks. The group also provides international services to
domestic corporate clients along the West Coast. The group's revenue
predominately relates to foreign customers. In the first quarter of 1999,
average assets in this group were $1.8 billion and average deposits were $781
million.

14
<PAGE>
TRUST AND PRIVATE FINANCIAL SERVICES GROUP

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

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

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

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

As of March 31, 1999, the group had over $99.7 billion in assets under
administration.

GLOBAL MARKETS GROUP

The Global Markets Group conducts business activities primarily to support
the previously described business groups and their customers. This group offers
a broad range of risk management products, such as foreign exchange and interest
rate swaps, caps and floors. Additionally, it trades money market and other
securities in the secondary market, including the placement of Union Bank of
California, N.A.'s own liabilities with institutional investors. This group also
manages our market-related risks as part of its responsibilities for
asset/liability management. The group is also responsible for maintaining Union
Bank of California, N.A.'s investment securities portfolio. In the first quarter
of 1999, average assets in this group were $4.1 billion and average deposits
were $2.9 billion.

The group manages our securities portfolio, trading operations, wholesale
funding needs, and interest rate and liquidity risk. The group includes products
that support corporate lending, customer interest rate risk management needs and
foreign exchange.

OTHER

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

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

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

- The Credit and Compliance Group, which includes $172 million of average
assets, primarily loans with special credit conditions.

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

- The residual costs of support groups.

15
<PAGE>
NET INTEREST INCOME

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

<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
--------------------------------------------------------------------------
MARCH 31, 1998 MARCH 31, 1999
------------------------------------ ------------------------------------
INTEREST AVERAGE INTEREST AVERAGE
AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/
(DOLLARS IN THOUSANDS) BALANCE EXPENSE(1) RATE(1) BALANCE EXPENSE(1) RATE(1)
- ---------------------------------------------------- ---------- ----------- ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Loans:(2)
Domestic........................................ $21,193,940 $ 424,538 8.10% $23,140,810 $ 433,113 7.57%
Foreign(3)...................................... 1,417,152 23,717 6.79 1,139,916 18,530 6.59
Securities - taxable(4)............................. 2,571,452 41,019 6.41 3,534,633 55,387 6.29
Securities - tax-exempt(4).......................... 112,809 2,826 10.02 84,883 2,130 10.04
Interest bearing deposits in banks.................. 533,462 8,299 6.31 215,568 3,188 6.00
Federal funds sold and securities
purchased under resale agreements............... 298,288 4,142 5.63 139,274 1,697 4.94
Trading account assets.............................. 486,101 5,308 4.43 363,604 3,938 4.39
---------- ----------- ---------- -----------
Total earning assets.......................... 26,613,204 509,849 7.77 28,618,688 517,983 7.34
----------- -----------
Allowance for credit losses......................... (458,761) (457,277)
Cash and due from banks............................. 1,953,427 1,982,326
Premises and equipment, net......................... 402,392 427,603
Other assets........................................ 1,354,994 1,156,386
---------- ----------
Total assets.................................. $29,865,256 $31,727,726
---------- ----------
---------- ----------
LIABILITIES
Domestic deposits:
Interest bearing.................................. $5,447,502 38,448 2.86 $5,509,002 34,707 2.56
Savings and consumer time......................... 3,079,386 29,212 3.85 3,335,641 27,261 3.31
Large time........................................ 3,917,627 53,640 5.55 3,998,778 44,179 4.48
Foreign deposits(3)................................. 1,837,349 23,577 5.20 1,521,529 16,632 4.43
---------- ----------- ---------- -----------
Total interest bearing deposits............... 14,281,864 144,877 4.11 14,364,950 122,779 3.47
---------- ----------- ---------- -----------
Federal funds purchased and securities
sold under repurchase agreements................ 1,080,828 14,075 5.28 1,703,531 19,769 4.71
Commercial paper.................................... 1,568,756 21,395 5.53 1,596,643 19,174 4.87
Other borrowed funds................................ 365,488 5,102 5.66 637,065 8,150 5.19
Subordinated capital notes.......................... 349,111 5,754 6.68 298,000 4,109 5.59
UnionBanCal Corporation - obligated mandatorily
redeemable preferred securities of subsidiary
grantor trust................................... -- -- -- 159,444 3,291 8.26
---------- ----------- ---------- -----------
Total borrowed funds.......................... 3,364,183 46,326 5.58 4,394,683 54,493 5.03
---------- ----------- ---------- -----------
Total interest bearing liabilities............ 17,646,047 191,203 4.39 18,759,633 177,272 3.83
----------- -----------
Noninterest bearing deposits........................ 8,149,582 8,940,985
Other liabilities................................... 1,355,331 1,032,756
---------- ----------
Total liabilities............................. 27,150,960 28,733,374
SHAREHOLDERS' EQUITY
Common equity....................................... 2,714,296 2,994,352
---------- ----------
Total shareholders' equity.................... 2,714,296 2,994,352
---------- ----------
Total liabilities and shareholders'
equity...................................... $29,865,256 $31,727,726
---------- ----------
---------- ----------
Net interest income/margin
(taxable-equivalent basis)...................... 318,646 4.86% 340,711 4.83%
Less: taxable-equivalent adjustment................. 1,196 890
----------- -----------
Net interest income........................... $ 317,450 $ 339,821
----------- -----------
----------- -----------
</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.

16
<PAGE>
Net interest income is interest earned on loans and investments less
interest expense on deposit accounts and borrowings. Primary factors affecting
the level of net interest income include the margin between the yield earned on
interest earning assets and the rate paid on interest bearing liabilities, as
well as the volume and composition of average interest earning assets and
average interest bearing liabilities.

Net interest income, on a taxable-equivalent basis, was $318.6 million in
the first quarter of 1998, compared with $340.7 million in the first quarter of
1999. This increase of $22.1 million, or 7 percent, was primarily attributable
to a $2.0 billion, or 8 percent, increase in average earning assets largely
funded by a $791.4 million, or 10 percent, increase in average noninterest
bearing deposits. The net interest margin decreased 3 basis points to 4.83
percent as a result of a lower interest rate environment that contributed to
lower yields on loans and other average earning assets as well as a lower
effective cost of funding those assets.

Average earning assets were $26.6 billion in the first quarter of 1998,
compared with $28.6 billion in the first quarter of 1999. This growth was
primarily attributable to a $1.7 billion, or 7 percent, increase in average
loans and a $935.3 million, or 35 percent, increase in average securities,
partially offset by a $317.9 million, or 60 percent, decrease in average
interest bearing deposits in banks. The growth in average loans was mostly due
to the increase in average commercial, financial and industrial loans of $2.4
billion, partially offset by the decrease in average residential mortgage loans
of $349.5 million, primarily related to continued mortgage refinancing activity,
and the decrease in average consumer loans of $553.1 million, primarily related
to the sale of the credit card portfolio which took place in the second quarter
of 1998. See "Loans" on page 20 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.

The $2.0 billion, or 8 percent, growth in average earning assets over the
first quarter of 1998 was partially funded by a $791.4 million increase in
average noninterest bearing deposits. The increase in average noninterest
bearing deposits was primarily due to the efforts of our institutional and
deposit markets group coupled with an influx of new customer relationships,
arising from the merger and acquisition activities of other financial
institutions in the California market during the past year.

NONINTEREST INCOME

In the first quarter of 1999, noninterest income was $139.3 million, an
increase of $11.3 million, or 9 percent, over the same period in 1998. This
included a $6.6 million increase in service charges on deposit accounts, a $4.3
million increase in trust and investment management fees, and a $4.6 million
increase in other noninterest income, partially offset by a $2.2 million
decrease in merchant banking fees and a $3.7 million decrease in net securities
gains, related to securities available for sale.

17
<PAGE>
Revenue from service charges on deposit accounts was $39.7 million, an
increase of 20 percent over the first quarter of 1998. The increase was
primarily attributable to a 4 percent increase in average deposits coupled with
the expansion of several products and services.

Trust and investment management fees were $32.3 million, an increase of 15
percent over the first quarter of 1998. The increase was due to strong growth in
trust accounts and assets under management, which resulted in higher mutual fund
management fees.

Other noninterest income was $15.8 million, an increase of 41 percent over
the first quarter of 1998. The increase was mostly due to a $2.3 million gain
related to the sale of Argentine bonds and a $1.1 million gain related to the
sale of a leased asset in the first quarter of 1999.

Merchant banking fees were $7.5 million, a decrease of 22 percent from the
first quarter of 1998. The decrease was due to lower syndication fees of $3.2
million, partly offset by higher investment banking fees of $1.1 million.

NONINTEREST EXPENSE

<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
--------------------------------------------
INCREASE (DECREASE)
MARCH 31, MARCH 31, --------------------
(DOLLARS IN THOUSANDS) 1998 1999 AMOUNT PERCENT
- --------------------------------------------------------------------- ---------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Salaries and other compensation...................................... $ 118,699 $ 131,074 $ 12,375 10.43%
Employee benefits.................................................... 30,505 36,593 6,088 19.96
---------- ---------- ---------
Personnel-related expense.......................................... 149,204 167,667 18,463 12.37
Net occupancy........................................................ 22,025 22,461 436 1.98
Equipment............................................................ 13,839 14,541 702 5.07
Merchant transaction processing...................................... 10,080 11,610 1,530 15.18
Professional services................................................ 7,307 10,694 3,387 46.35
Communications....................................................... 11,229 9,933 (1,296) (11.54)
Data processing...................................................... 6,502 8,001 1,499 23.05
Printing and office supplies......................................... 6,335 6,672 337 5.32
Software............................................................. 4,440 6,413 1,973 44.44
Advertising and public relations..................................... 6,051 6,106 55 0.91
Travel............................................................... 3,762 4,079 317 8.43
Intangible asset amortization........................................ 3,338 3,509 171 5.12
Armored car.......................................................... 2,859 3,227 368 12.87
Foreclosed asset expense (income).................................... (198) (41) 157 (79.29)
Other................................................................ 21,702 28,121 6,419 29.58
---------- ---------- ---------
Total noninterest expense......................................... $ 268,475 $ 302,993 $ 34,518 12.86%
---------- ---------- ---------
---------- ---------- ---------
</TABLE>

In the first quarter of 1999, noninterest expense was $303.0 million, an
increase of $34.5 million, or 13 percent, over the same period in 1998. This
included a $18.5 million increase in personnel-related expense, a $3.4 million
increase in professional services expense, a $2.0 million increase in software
expense, and a $6.4 million increase in other noninterest expense.

Personnel-related expense was $167.7 million, an increase of 12 percent over
the first quarter of 1998. This increase was mostly due to $6.2 million in merit
increases, an increase of $2.3 million in contract labor, an increase of $2.1
million in performance-based incentive compensation, and a $2.3 million increase
in benefits expense arising from a loss in the fair value of assets underlying
postretirement benefit plans.

Professional services expense was $10.7 million, an increase of 46 percent
over the first quarter of 1998, due to costs related to the year 2000 effort.

18
<PAGE>
Software expense was $6.4 million, an increase of 44 percent over the first
quarter of 1998, primarily due to increased purchases of computer software
products related to system upgrades and increased software maintenance
contracts.

Other noninterest expense was $28.1 million, an increase of 30 percent over
the first quarter of 1998, primarily attributable to an increase of $4.5 million
in expenses incurred to support higher deposit volumes and an increase of $2.7
million in other outside service expenses.

We continue to make preparations for the year 2000. (See "Year 2000" on page
27 for a detailed discussion of the year 2000 program.) We estimate that the
total cost of the year 2000 project will be approximately $50.0 million, of
which $10.0 million relates to capital expenditures which we will capitalize and
depreciate over their useful lives. The remaining $40.0 million will be included
in noninterest expense in the period incurred. As of March 31, 1999, we have
spent $28.6 million on the year 2000 project, $2.2 million in 1997, $21.6
million in 1998 and $4.8 million in the first quarter of 1999. Of the $28.6
million spent as of March 31, 1999, $6.5 million related to capital
expenditures, $0.8 million in 1997, $5.2 million in 1998, and $0.5 million in
the first quarter of 1999. Of the estimated $21.4 million remaining to be spent,
an estimated $3.5 million is expected to be for capital expenditures and $17.9
million is expected to be included in noninterest expense over the next 21
months. Of the $17.9 million to be included in noninterest expense, we expect
that approximately $10.1 million will be spent on salaries and contract labor.
This assumes that the current mix of internal staff and contract labor remains
the same, the hours and the person-days needed to complete the projects are not
materially exceeded, and that preparations for the year 2000 remain on schedule.
The remaining $7.8 million is expected to relate to other operating expenses. We
are funding the cost of the year 2000 project with normal operating cash and are
staffing it with external resources as well as internal staff re-deployed from
less time-sensitive assignments. Estimated total cost could change further as
analysis continues.

INCOME TAX EXPENSE

The effective tax rates for the first quarter of 1998 and 1999 were 39
percent and 31 percent, respectively. We recognized a $6.3 million federal tax
benefit as the result of an IRS settlement with respect to refund claims we
filed for the years 1992 through 1994. The lower effective tax rate in the first
quarter of 1999 also reflects our ability to file our 1999 California franchise
tax returns on a worldwide unitary reporting basis, which incorporates the
financial results of our majority shareholder, The Bank of Tokyo-Mitsubishi,
Ltd. and their worldwide affiliates. Excluding the $6.3 million federal tax
benefit, our effective tax rate for the first quarter of 1999 would have been 34
percent.

19
<PAGE>
LOANS

The following table shows loans outstanding by loan type.

<TABLE>
<CAPTION>
PERCENT CHANGE TO
MARCH 31, 1999 FROM:
------------------------
MARCH 31, DECEMBER 31, MARCH 31, MARCH 31, DECEMBER 31,
(DOLLARS IN THOUSANDS) 1998 1998 1999 1998 1998
- --------------------------------------------- ----------- ------------ ---------- --------- ------------
<S> <C> <C> <C> <C> <C>
Domestic:
Commercial, financial and industrial...... $10,908,882 $13,119,534 $13,393,019 22.77% 2.08%
Construction.............................. 270,210 439,806 535,015 98.00 21.65
Mortgage:
Residential........................... 2,923,174 2,627,668 2,543,801 (12.98) (3.19)
Commercial............................ 2,971,186 2,975,484 3,011,719 1.36 1.22
----------- ------------ ----------
Total mortgage...................... 5,894,360 5,603,152 5,555,520 (5.75) (0.85)
Consumer:
Installment........................... 2,067,372 1,984,941 1,968,849 (4.77) (0.81)
Home equity........................... 934,857 818,199 744,783 (20.33) (8.97)
Credit card and other lines of
credit............................... 254,525 -- -- (100.00) --
----------- ------------ ----------
Total consumer...................... 3,256,754 2,803,140 2,713,632 (16.68) (3.19)
Lease financing........................... 888,846 1,032,148 1,066,134 19.95 3.29
----------- ------------ ----------
Total loans in domestic offices..... 21,219,052 22,997,780 23,263,320 9.63 1.15
Loans originated in foreign branches......... 1,284,991 1,298,331 1,089,034 (15.25) (16.12)
----------- ------------ ----------
Total loans......................... $22,504,043 $24,296,111 $24,352,354 8.21% 0.23%
----------- ------------ ----------
----------- ------------ ----------
</TABLE>

Our lending activities are predominantly domestic, with such loans
comprising 96 percent of the total loan portfolio at March 31, 1999. Total loans
at March 31, 1999 were $24.4 billion, an increase of $1.8 billion, or 8 percent,
from March 31, 1998. The increase was primarily attributable to growth in the
commercial, financial and industrial loan portfolio, which increased $2.5
billion, and the construction loan portfolio, which increased $264.8 million,
partially offset by the residential mortgage loan portfolio, which decreased
$379.4 million, and by the consumer loan portfolio, which decreased $543.1
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
March 31, 1998 and 1999, the commercial, financial and industrial loan portfolio
was $10.9 billion, or 48 percent of total loans, and $13.4 billion, or 55
percent of total loans, respectively. The increase of $2.5 billion, or 23
percent, from March 31, 1998 was primarily attributable to loans extended to
businesses with revenues exceeding $20 million. The growth continued to reflect
the results of initiatives to increase participation in larger syndicated loan
positions as lead manager and as agent, especially in the communications, media,
and entertainment and energy capital services industries in which we have
developed specialized lending expertise.

The construction loan portfolio totaled $270.2 million, or 1 percent of
total loans, at March 31, 1998, compared with $535.0 million, or 2 percent of
total loans, at March 31, 1999. This growth of $264.8 million, or 98 percent,
from March 31, 1998 was primarily attributable to the favorable California real
estate market coupled with the continuing improvement in the West Coast economy.

Mortgage loans were $5.9 billion, or 26 percent of total loans, at March 31,
1998, compared with $5.6 billion, or 23 percent of total loans, at March 31,
1999. The mortgage loan portfolio consists of loans on commercial and industrial
projects and residential loans, secured by one-to-four family residential

20
<PAGE>
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 slightly increased by $40.5 million, or 1 percent, from March 31,
1998, reflecting both the favorable California real estate market and the
continued improvement in the West Coast economy. Residential mortgage loans
decreased $379.4 million, or 13 percent, principally due to prepayments arising
from the lower interest rate environment.

Consumer loans totaled $3.3 billion, or 14 percent of total loans, at March
31, 1998, compared with $2.7 billion, or 11 percent of total loans, at March 31,
1999. The decrease of $543.1 million, or 17 percent, 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 mortgage rates.

Lease financing totaled $888.8 million, or 4 percent of total loans, at
March 31, 1998, compared with $1.1 billion, or 4 percent of total loans, at
March 31, 1999. During 1998, management created new initiatives for lending,
especially in the lease financing segment. This continued refocus on leasing
resulted in a $177.3 million, or 20 percent, increase in lease financing over
the first quarter of 1998.

Loans originated in foreign branches totaled $1.3 billion, or 6 percent of
total loans, at March 31, 1998 and $1.1 billion, or 4 percent of total loans, at
March 31, 1999. The decrease of $196.0 million, or 15 percent, is attributable
to the contraction of our exposure to key Asian markets, primarily Japan, Korea,
Indonesia and Thailand, in response to the Asian economic crisis.

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 March 31, 1998, December 31, 1998, and March 31, 1999 for each country
where such outstandings exceeded 1 percent of total assets. The cross-border
outstandings were compiled based upon category and domicile of ultimate risk and
are comprised of balances with banks, trading account assets, securities
available for sale, securities purchased under resale agreements, loans, accrued
interest receivable, acceptances outstanding and investments with foreign
entities. The amounts outstanding for each country exclude local currency
outstandings. For those individual countries shown in the table below, most of
our local currency outstandings are hedged or are funded by local currency
borrowings.

<TABLE>
<CAPTION>
PUBLIC CORPORATIONS
FINANCIAL SECTOR AND OTHER TOTAL
(DOLLARS IN MILLIONS) INSTITUTIONS ENTITIES BORROWERS OUTSTANDINGS
- -------------------------------------------------------------- ------------- ----------- --------------- ---------------
<S> <C> <C> <C> <C>
March 31, 1998
Japan......................................................... $ 100 $ -- $ 424 $ 524
Korea......................................................... 379 1 168 548

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

March 31, 1999
Japan......................................................... 182 -- 445 627
Korea......................................................... 472 2 119 593
</TABLE>

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

21
<PAGE>
taken by management to reduce our credit exposure in Asia and Latin America, see
"Allowance for Credit
Losses" below.

PROVISION FOR CREDIT LOSSES

We recorded a $20.0 million provision for credit losses in the first quarter
of 1998, compared with $5.0 million provision for credit losses in the first
quarter of 1999. Provisions for credit losses are charged to income to bring our
allowance for credit losses to a level deemed appropriate by management based on
the factors discussed under "Allowance for Credit Losses" below.

ALLOWANCE FOR CREDIT LOSSES

RESERVE POLICY AND METHODOLOGY

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

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

- Problem graded loan loss factors are derived from a migration model that
tracks five years of historical loss experience. The periods used by the
migration model are being increased in order to eventually cover a full
business cycle period.

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

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

Specific allowances are established in cases where management has identified
significant conditions or circumstances related to a credit that management
believes indicate the probability that a loss has been incurred in excess of the
amount determined by the application of the formula allowance.

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

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

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

22
<PAGE>
- collateral values,

- loan volumes and concentrations,

- seasoning of the loan portfolio,

- specific industry conditions within portfolio segments,

- recent loss experience in particular segments of the portfolio

- duration of the current business cycle,

- bank regulatory examination results and

- findings of our internal credit examiners.

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

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

COMPARISON OF THE TOTAL ALLOWANCE AND RELATED PROVISION FOR CREDIT LOSSES

At December 31, 1998, our allowance for credit losses was $459.3 million, or
1.89 percent of total loans, and 586 percent of total nonaccrual loans, compared
with an allowance for credit losses at March 31, 1999 of $447.9 million, or 1.84
percent of total loans, and 446 percent of total nonaccrual loans.

In addition, the allowance incorporates the results of measuring impaired
loans as provided in Statement of Financial Accounting Standards (SFAS) No. 114,
"Accounting by Creditors for Impairment of a Loan" and SFAS No. 118, "Accounting
by Creditors for Impairment of a Loan--Income Recognition and Disclosures".
These accounting standards prescribe the measurement methods, income recognition
and disclosures related to impaired loans. At December 31, 1998, total impaired
loans were $78.5 million and the associated impairment allowance was $11.2
million, compared with $100.4 million and $20.8 million, respectively, at March
31, 1999.

During the first quarter of 1999, there were no changes in estimation
methods or assumptions that affected our methodology for assessing the
appropriateness of the allowance for credit losses except for the increase in
the periods utilized by the migration model, which had an immaterial impact on
the allowance. Changes in assumptions regarding the effects of economic and
business conditions on borrowers and other factors, which are described below,
affected the assessment of the unallocated allowance. In addition, as

23
<PAGE>
described below, we allocated a portion of the unallocated allowance to foreign
loans amid concerns that the Asian financial turmoil had adversely impacted
companies and financial institutions in Asian markets in which we operate.

In our assessment as of March 31, 1999, management has continued to focus,
in particular, on factors affecting elements of the oil and gas, agriculture and
technology industries, and the continuing effects of the global financial
turmoil on companies and financial institutions in domestic and foreign markets
in which we operate and the growth in, and changes in the composition of, the
loan portfolio.

CHANGES IN THE FORMULA, SPECIFIC AND UNALLOCATED ALLOWANCES

At March 31, 1999, the formula allowance decreased by $7 million from
December 31, 1998, primarily due to a decline in this allowance related to
criticized assets.

At March 31, 1999, the specific allowance increased by $9 million from
December 31, 1998, primarily due to the increase in impaired loans.

At March 31, 1999, the unallocated allowance decreased by $13 million from
December 31, 1998 due to a slight increase in the specific allowance. In
addition, management believes that the inherent losses related to certain
conditions considered in its evaluation of the unallocated allowance have
remained relatively stable except for the $14.1 million one-time chargeoff taken
on a single Taiwanese credit, which is described after the reconciliation of the
allowance for credit losses on the following page.

We do not weight the unallocated allowance among segments of the portfolio.
At March 31, 1999, we had a $202 million unallocated allowance in our allowance
for credit losses. In evaluating the appropriateness of the unallocated
allowance, we considered the following factors:

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

- the effects of the decline in oil prices on borrowers in the oil and gas
industry, which could be in the range of $15 million to $22 million,

- the effects of abnormal weather conditions and export market conditions
on agricultural borrowers, which could be in the range of $12 million to
$18 million,

- the effects of export market conditions and cyclical overcapacity on
borrowers in the technology industry, which could be in the range of $19
million to $28 million,

- the continued effects of the global financial turmoil on borrowers in
Asia/Pacific countries, which could be in the range of $35 million to $65
million, and

- the continued effects of the global financial turmoil on borrowers in
Latin American countries, which could be in the range of $10 million to
$15 million.

There can be no assurance that the adverse impact of any of these conditions
on us will not be in excess of the range set forth above. See paragraph on
forward-looking statements on page 11.

24
<PAGE>
CHANGE IN THE TOTAL ALLOWANCE FOR CREDIT LOSSES

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

<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED MARCH 31,
--------------------
(DOLLARS IN THOUSANDS) 1998 1999
- ----------------------------------------------------------------------- --------- ---------
<S> <C> <C>
Balance, beginning of period........................................... $451,692 $459,328
Loans charged off:
Commercial, financial and industrial............................... 3,988 3,732
Construction....................................................... 3 --
Mortgage........................................................... 814 409
Consumer........................................................... 12,438 4,397
Lease financing.................................................... 657 892
Foreign(1)......................................................... -- 14,127
--------- ---------
Total loans charged off......................................... 17,900 23,557
Recoveries of loans previously charged off:
Commercial, financial and industrial............................... 7,745 4,562
Construction....................................................... 3 --
Mortgage........................................................... 528 96
Consumer........................................................... 3,895 2,414
Lease financing.................................................... 77 149
--------- ---------
Total recoveries of loans previously charged off................ 12,248 7,221
--------- ---------
Net loans charged off......................................... 5,652 16,336
Provision for credit losses............................................ 20,000 5,000
Foreign translation adjustment and other net additions (deductions).... 3 (56)
--------- ---------
Balance, end of period................................................. $466,043 $447,936
--------- ---------
--------- ---------
Allowance for credit losses to total loans............................. 2.07% 1.84%
Provision for credit losses to net loans charged off................... 353.86 30.61
Recoveries of loans to loans charged off in the previous period........ 33.84 30.53
Net loans charged off to average loans outstanding for the period(2)... 0.10 0.27
</TABLE>

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

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

(2) Annualized.

Total loans charged off in the first quarter of 1999 increased by $5.7
million over the first quarter of 1998, primarily due to a $14.1 million
chargeoff of a loan from a single foreign relationship, partially offset by a
$8.0 million decrease in consumer loans charged off, primarily due to the sale
of the credit card portfolio in the second quarter of 1998. Chargeoffs reflect
the realization of losses in the portfolio that were recognized previously
through provisions for credit losses.

Recoveries of loans previously charged off decreased by $5.0 million from
March 31, 1998, while the percentage of net loans charged off to average loans
increased from 0.10 percent in the first quarter of 1998 to 0.27 percent in the
first quarter of 1999. At March 31, 1999, the allowance for credit losses
exceeded the net loans charged off during the first quarter of 1999, reflecting
management's belief, based on the foregoing analysis, that there were additional
losses inherent in the portfolio.

At March 31, 1999, our average annual net chargeoffs for the past five years
and the three months ended March 31, 1999, were $87.3 million, which represents
5.1 years of losses based on the level of the allowance for credit losses at
that date. Historical net chargeoffs are not necessarily indicative of the
amount of net chargeoffs that we will realize in the future.

25
<PAGE>
NONPERFORMING ASSETS

<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31, MARCH 31,
(DOLLARS IN THOUSANDS) 1998 1998 1999
- ---------------------------------------------------------------------- ------------ ------------ ------------
<S> <C> <C> <C>
Commercial, financial and industrial.................................. $ 65,540 $ 60,703 $ 89,814
Construction.......................................................... 4,389 4,359 4,370
Mortgage:
Residential....................................................... 951 -- --
Commercial........................................................ 41,571 8,254 6,227
------------ ------------ ------------
Total mortgage.................................................. 42,522 8,254 6,227
Other................................................................. -- 5,134 --
------------ ------------ ------------
Total nonaccrual loans.......................................... 112,451 78,450 100,411
Foreclosed assets..................................................... 19,952 11,400 9,426
------------ ------------ ------------
Total nonperforming assets...................................... $ 132,403 $ 89,850 $ 109,837
------------ ------------ ------------
------------ ------------ ------------
Allowance for credit losses........................................... $ 466,043 $ 459,328 $ 447,936
------------ ------------ ------------
------------ ------------ ------------
Nonaccrual loans to total loans....................................... 0.50% 0.32% 0.41%
Allowance for credit losses to nonaccrual loans....................... 414.44 585.50 446.10
Nonperforming assets to total loans and foreclosed assets............. 0.59 0.37 0.45
Nonperforming assets to total assets.................................. 0.43 0.28 0.34
</TABLE>

At March 31, 1999, nonperforming assets totaled $109.8 million, a decrease
of $22.6 million, or 17 percent, from a year earlier. The decrease was primarily
the result of reductions of $35.3 million in nonaccrual commercial mortgage
loans, due to third quarter 1998 note sales totaling $29.8 million, repayments
and restorations to accrual status, and $10.5 million in foreclosed assets, due
to sales of individual assets, partially offset by a $24.3 million increase in
nonaccrual commercial, financial and industrial loans, due to the placement on
nonaccrual status of a few large loans made to upper-middle market and large
businesses.

Nonaccrual loans as a percentage of total loans were 0.50 percent at March
31, 1998, compared with 0.41 percent at March 31, 1999. Nonperforming assets as
a percentage of total loans and foreclosed assets improved to 0.45 percent at
March 31, 1999 from 0.59 percent at March 31, 1998.

LOANS 90 DAYS OR MORE PAST DUE AND STILL ACCRUING

LIQUIDITY

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

26
<PAGE>
Core deposits provide us with a sizable source of relatively stable and
low-cost funds. In the first quarter of 1999, lower cost sources of funds, which
include noninterest bearing deposits and interest bearing core deposits, funded
62 percent of average earning assets. Most of the remaining funding was provided
by short-term borrowings in the form of negotiable certificates of deposit,
foreign deposits, federal funds purchased and securities sold under repurchase
agreements, commercial paper and other borrowings.

REGULATORY CAPITAL

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

<TABLE>
<CAPTION>
MINIMUM
MARCH 31, DECEMBER 31, MARCH 31, REGULATORY
(DOLLARS IN THOUSANDS) 1998 1998 1999 REQUIREMENT
- -------------------------------------------------- -------------- -------------- -------------- -----------------
<S> <C> <C> <C> <C>
CAPITAL COMPONENTS
Tier 1 capital.................................... $ 2,663,606 $ 2,965,865 $ 3,097,234
Tier 2 capital.................................... 604,145 604,938 611,254
-------------- -------------- --------------
Total risk-based capital.......................... $ 3,267,751 $ 3,570,803 $ 3,708,488
-------------- -------------- --------------
-------------- -------------- --------------
Risk-weighted assets.............................. $ 29,094,505 $ 30,753,030 $ 31,276,042
-------------- -------------- --------------
-------------- -------------- --------------
Quarterly average assets.......................... $ 29,795,772 $ 31,627,022 $ 31,667,763
-------------- -------------- --------------
-------------- -------------- --------------
CAPITAL RATIOS
Total risk-based capital.......................... 11.23% 11.61% 11.86% 8.0 %
Tier 1 risk-based capital......................... 9.16 9.64 9.90 4.0
Leverage ratio(1)................................. 8.94 9.38 9.78 4.0
</TABLE>

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

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

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

Compared with December 31, 1998, our Tier 1 risk-based capital ratio at
March 31, 1999 increased 26 basis points to 9.90 percent, the total risk-based
capital ratio increased 25 basis points to 11.86 percent, and the leverage ratio
increased 40 basis points to 9.78 percent. The increase in the capital ratios
was primarily attributable to the issuance of $350 million in redeemable
preferred securities.

As of March 31, 1999, management believes the capital ratios of Union Bank
of California, N.A. met all regulatory minimums of a "well-capitalized"
institution.

YEAR 2000

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

27
<PAGE>
This discussion of the implications of the year 2000 problem for us contains
numerous forward-looking statements based on inherently uncertain information.
The cost of the project and the date on which we plan to complete the internal
year 2000 modifications are based on management's best estimates of future
events. See details with respect to costs for year 2000 on page 19. The material
assumptions underlying the estimated cost are:

- the continued availability of internal and external resources,

- the cost of these resources,

- the time required to accomplish the tasks, and

- the cost of needed equipment.

We cannot guarantee, however, these estimates, and actual results could
differ. Moreover, although management believes it will be able to make the
necessary modifications in advance, failure to modify the systems may 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, the failure of these third parties to modify their
systems in advance of December 31, 1999 may have a material adverse effect on
us.

READINESS PREPARATION

Resolution of the year 2000 problem is among our highest priorities, and we
are preparing for the century change with a comprehensive enterprise-wide year
2000 program. We have identified all of the major systems and have sought
external and internal resources to renovate and test the systems. We are testing
purchased software, internally developed systems and systems supported by
external parties as part of the program. We are evaluating customers and vendors
that have significant relationships with us to determine whether they are
adequately preparing for the year 2000. In addition, we are developing
contingency plans to reduce the impact of some potential events that may occur.
We cannot guarantee, however, that the systems of vendors or customers with whom
we do business will be completed on a timely basis, or that contingency plans
will shield operations from failures that may occur.

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

- data processing systems,

- telecommunications and data networks,

- building facilities and security systems,

- vendor risk,

- customer risk,

- contingency planning, and

- communications.

We have identified over 2,000 individual projects. The projects vary in
size, importance and materiality, from large undertakings, such as remediating
complicated data systems, to smaller, but still important, projects such as
installing compliant computer utility systems or assuring that building
equipment will perform properly. The program continues to evolve as we identify
new projects to keep up with increased understanding of year 2000 implications
and evolving external requirements. Virtually all of the projects currently
identified have begun, and more than 80 percent have been completed.

28
<PAGE>
We assign projects 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 our viability; or

- 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; or

- 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 us.

The most important projects are the "Mission Critical" application systems
upon which we rely for our principal business functions. Remediation of the
Mission Critical Systems is now complete as indicated in the following table.

MISSION CRITICAL APPLICATION COMPLETION

<TABLE>
<CAPTION>
% COMPLETED
---------------
<S> <C>
June 1998........................................................................................... 10%
September 1998...................................................................................... 38%
December 1998....................................................................................... 90%
March 1999.......................................................................................... 100%
</TABLE>

We have also achieved substantial progress with systems prioritized as
"Other Critical". As of March 31, 1999, 90 percent of these systems were
complete. Substantially all are expected to be complete by June 30, 1999.

In addition to testing individual systems, we have begun integrated
contingency testing of our "Mission Critical" and many other systems in a
separate computer environment where dates are set forward in order to identify
and correct problems that might not otherwise become evident until processing in
the new century begins. This testing, referred to as "Time Machine Integrated
Contingency Testing", is well underway and will extend throughout 1999.

We do not significantly rely on "embedded technology" in our critical
processes. "Embedded technology", which means microprocessor-controlled devices
as opposed to multi-purpose computers, does control some building security and
operations, such as power management, ventilation, and building access. All
building facilities are presently being evaluated, and we expect all systems
using embedded technology to be confirmed as year 2000 ready by June 1999.

29
<PAGE>
We rely on vendors and customers, and we are addressing year 2000 issues
with both groups. We have identified over 300 vendors and have made inquiries
about their year 2000 readiness plans and status. Risk assessments have been
made and we are undertaking appropriate measures to minimize risk as much as
possible for those vendors that we have assigned a risk rating of medium or
high. Presently, approximately 15 percent are rated as medium or high risk, and
risk mitigation planning is underway. We have, however, no viable alternatives
for some suppliers, such as power distribution and local telephone companies. We
are still evaluating these companies, and we will use the results as information
for system-wide 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. We will test principal settlement
methods associated with major payment systems as part of their associated system
projects.

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

Our borrowers, the population of customers with loans and unused commitments
outstanding, pose the highest level of concern. As of March 31, 1999, our
ongoing assessment of these borrowers resulted in the following assignments of
risk: 87 percent low risk, 12 percent medium risk and 1 percent high risk. We
have established individual risk mitigation plans for substantially all
customers rated as high risk. The risk mitigation plans further evaluate whether
year 2000 issues will materially affect the customer's cash flow, asset values,
and collateral pledged to us. They seek to implement specific actions that will
keep the borrowers focused on corrective measures to reduce potential credit
risk. The risk mitigation plans use the normal credit process that we employ to
manage credit risk and require the concurrence of a credit administrator.

We will make ongoing assessments of customers at all levels of risk. Those
with low risk will be reassessed semi-annually, while customers with medium and
high risk will be reassessed quarterly.

RISKS

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

- incomplete preparation of our operations for the next century,

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

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

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

30
<PAGE>
Failure of third parties may jeopardize our operations, but the seriousness
of this risk depends on the nature and duration of the failures. The most
serious impact on our operations from vendors would result if basic services
such as telecommunications, electric power, and services provided by other
financial institutions and governmental agencies were disrupted. Some public
disclosure about readiness preparation among basic infrastructure and other
suppliers is now available. We are unable, however, to estimate the likelihood
of significant disruptions among our basic infrastructure suppliers. In view of
the unknown probability of occurrence and impact on operations, we consider the
loss of basic infrastructure services to be the most reasonably likely worst
case year 2000 scenario.

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

PROGRAM ASSESSMENT

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

CONTINGENCY PLANS

We are developing year 2000 remediation contingency plans and business
resumption contingency plans specific to the year 2000. Remediation contingency
plans address the actions we would take 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 we would take if critical business functions
cannot be carried out in the normal manner upon entering the next century due to
system or supplier failure.

Our business resumption contingency planning is following a four-phase
process:

- Organizational Planning Guidelines,

- Business Impact Analysis,

- Plan Development, and

- Validation of Plans

During the first two phases, which have been completed, we assigned
responsibilities, specified scenarios and determined which scenarios were
significant for each critical business unit. The second two phases call for the
development of plans to meet the significant scenarios and testing the
effectiveness of the plans.

We are developing plans for system-wide or regional failures and for
individual critical operating units where necessary. We expect to complete
development of plans for the operating units and their validation in June 1999.
We expect to complete development of plans to address system-wide or regional
failures, and their validation, in September 1999.

31
<PAGE>
To determine where plans are necessary for individual operating units, we
identified the following areas of concern, assigned to each a level of potential
risk and a probability of occurrence. The areas of concern are:

- telecommunications or data network outage,

- enterprise information systems failure,

- operational disruptions,

- vendor or service provider failure,

- staff unavailability,

- utility or facility failure, and

- personal computer or local area network failure.

We rated the level of potential risk as high, moderate or low, and we rated
the probability of occurrence as high, moderate or low. Critical operating units
with a low or moderate level of potential risk and a low probability of
occurrence do not require a contingency plan for the area of concern. For any
other combination, the development of a contingency plan is required. Plans have
been developed and are now being reviewed.

OTHER RELATED DISCLOSURES

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

ITEM 3. MARKET RISK

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

32
<PAGE>
PART II. OTHER INFORMATION

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits Index:

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

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

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

(2) Filed herewith.

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

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

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

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

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

* Management contract or compensatory plan, contract or arrangement.

(b) Reports on Form 8-K

We filed a report on Form 8-K on January 11, 1999 under Item 5, to restate
the Consolidated Financial Statements for the years ended December 31, 1995,
1996 and 1997, and for the nine months ended September 30, 1997 (unaudited) and
1998 (unaudited), to give retroactive effect to the 3-for-1 common stock split.

We filed a report on Form 8-K on February 5, 1999 under Item 5 containing
the following items: audited September 30, 1998 Consolidated Financial
Statements, a press release of our financial results for the year and for the
quarter ended December 31, 1998, and an update of our progress with respect to
our year 2000 project since the quarter ended September 30, 1998.

We filed a report on Form 8-K on February 19, 1999 under Item 5, which
included the underwriting agreement that we entered into in connection with the
simultaneous offering of trust preferred securities by our subsidiary,
UnionBanCal Finance Trust I, and the purchase by the trust of 7 3/8 percent
junior subordinated debentures issued by us.

33
<PAGE>
SIGNATURES

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

UNIONBANCAL CORPORATION

(Registrant)

By /s/ DAVID I. MATSON

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

David I. Matson
EXECUTIVE VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER

By /s/ DAVID A. ANDERSON

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

David A. Anderson
SENIOR VICE PRESIDENT AND CONTROLLER

Dated: May 17, 1999

<PAGE>

CERTIFICATE

I, Jean C. Nomura, certify

1. I am Vice President and Corporate Secretary of UnionBanCal Corporation,
a corporation created and existing under the laws of the State of
California.

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

Dated: April 9, 1999
-----------------

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

<PAGE>
BYLAWS OF
UNIONBANCAL CORPORATION
(A CALIFORNIA CORPORATION)
(RESTATED AS OF JANUARY 27, 1999)
ARTICLE I
OFFICES

Section 1.1. PRINCIPAL EXECUTIVE OFFICE. The principal executive office of
the Corporation (the "Head Office") is hereby fixed and located in the City and
County of San Francisco, California as the Board of Directors shall establish by
resolution.

Section 1.2. OTHER OFFICES. The Corporation may also have offices at any
other places, within or without the State of California, where the Corporation
is qualified to do business, as the Board of Directors may from time to time
designate or the business of the Corporation may require.

ARTICLE II
MEETINGS OF SHAREHOLDERS

Section 2.1. PLACE OF MEETINGS. All meetings of shareholders shall be held
at the Head Office or at any other place that may be designated by the Board of
Directors.

Section 2.2. ANNUAL MEETINGS. The annual meeting of the shareholders shall
be held each year on the date and at the time specified by the Board of
Directors. At each annual meeting the shareholders shall elect directors and
transact such other business as may properly be brought before the meeting.

Section 2.3. SPECIAL MEETINGS. Special meetings of the shareholders, for
the purpose of taking any action permitted by the shareholders under the
California Corporations Code and the Articles of Incorporation of this
Corporation, may be called at any time by the Board of Directors, the Chairman
of the Board of Directors, the President, or by the holders of shares entitled
to cast not less than ten percent (10%) of the votes at the meeting.

If a special meeting is called by any person or persons other than the Board
of Directors, the request shall be in writing, specifying the time of such
meeting and the general nature of the business proposed to be transacted, and
shall be delivered personally or sent by registered mail or by telegraphic or
other facsimile transmission to the Chairman of the Board or the President, and
the Secretary of the Corporation. The officer receiving the request shall cause
notice to be promptly given to the shareholders entitled to vote, in accordance
with the provisions of Section 2.4 of this Article II, that a meeting will be
held at the time requested by the person or persons calling the meeting, not
less than thirty-five (35) nor more than sixty (60) days after the receipt of
the request. If the notice is not given within twenty (20) days after the
receipt of the request, the person or persons requesting the meeting may give
the notice. Nothing contained in this paragraph of this Section 2.3 shall be
construed as limiting, fixing or affecting the time when a meeting of
shareholders called by action of the Board of Directors may be held.

Section 2.4. Notice of Shareholders' Meeting. All notices of meetings of
shareholders shall be sent or otherwise given not less than ten (10) [or, if
sent by third-class mail, thirty (30)], nor more than sixty (60) days before the
date of the meeting to each shareholder entitled to vote thereat. The notice
shall state the place, date and hour of the meeting and (1) in the case of a
special meeting, the general nature of the business to be transacted, and no
other business may be transacted at such meeting, or (2) in the case of the
annual meeting, those matters which the Board of Directors, at the time of the
mailing of the notice,

2
<PAGE>
intends to present for action by the shareholders, but subject to the provision
of Section 601(f) of the California Corporations Code, any proper matter may be
presented at the meeting for such action. The notice of any meeting at which
directors are to be elected shall include the names of nominees intended at the
time of the notice to be presented by management for election.

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

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

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

Section 2.5 ADVANCE NOTICE OF SHAREHOLDER PROPOSALS. A motion related to
business proposed to be brought before any shareholders' meeting may be made by
any shareholder entitled to vote if the business proposed is otherwise proper to
be brought before the meeting. However, any such shareholder may propose
business to be brought before a meeting only if such shareholder has given
timely notice to the Secretary of the Corporation in proper written form of the
shareholder's intent to propose such business. To be timely, the shareholder's
notice must be delivered to or mailed and received by the Secretary of the
Corporation not less than one hundred twenty (120) calendar days in advance of
the date the Corporation's proxy statement was released to the shareholders in
connection with the previous year's annual meeting of shareholders; provided,
however, that in the event that no annual meeting was held in the previous year
or the date of the annual meeting has been changed by more than thirty (30) days
from the date contemplated at the time of the previous year's proxy statement,
notice by the shareholder must be received by the Secretary of the Corporation a
reasonable time before the Corporation mails its proxy statement.

Section 2.6. QUORUM. Unless otherwise provided in the Articles of
Incorporation, a majority of the shares entitled to vote, represented in person
or by proxy, shall constitute a quorum at a meeting of shareholders. Except as
provided in this Bylaw, the affirmative vote of a majority of the shares
represented and voting at a duly held meeting at which a quorum is present
(which shares voting affirmatively also constitute at least a majority of the
required quorum) shall be the act of the shareholders, unless the vote of a
greater number or voting by classes is required by applicable law or the
Articles of Incorporation. Shareholders present at a valid meeting at which a
quorum is initially present may continue to transact business until adjournment
notwithstanding the withdrawal of enough shareholders to leave less than a
quorum, if any action taken (other than adjournment) is approved by at least a
majority of the shares required to constitute a quorum.

3
<PAGE>
Section 2.7. ADJOURNED MEETINGS. Any annual or special shareholders'
meeting may be adjourned from time to time, even though a quorum is not present,
by the vote of the holders of a majority of the voting shares present at the
meeting either in person or by proxy, provided that in the absence of a quorum,
no other business may be transacted at the meeting except as provided in Section
2.6 of these Bylaws.

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

Section 2.8. WAIVER OR CONSENT BY SHAREHOLDERS. The transactions of any
meeting of shareholders, however called and noticed, and wherever held, are as
valid as though had at a meeting duly held after regular call and notice, if a
quorum is present either in person or by proxy, and if, either before or after
the meeting, each of the persons entitled to vote, not present in person or by
proxy, signs a written waiver of notice or a consent to the holding of the
meeting or an approval of the minutes thereof. All such waivers, consents and
approvals shall be filed with the corporate records or made a part of the
minutes of the meeting. Attendance of a person at a meeting shall constitute a
waiver of notice of and presence at such meeting, except when the person
objects, at the beginning of the meeting, to the transaction of any business
because the meeting is not lawfully called or convened and except that
attendance at a meeting is not a waiver of any right to object to the
consideration of matters required by Section 2.4 of these Bylaws or Section
601(f) of the California Corporations Code to be included in the notice but not
so included, if such objection is expressly made at the meeting. Neither the
business to be transacted at nor the purpose of any regular or special meeting
of shareholders need be specified in any written waiver of notice, consent to
the holding of the meeting or approval of the minutes thereof, except as
provided in Section 601(f) of the California Corporations Code.

Section 2.9. ACTION WITHOUT MEETING. Unless otherwise specified in the
Articles of Incorporation, an action which may be taken at any annual or special
meeting of shareholders may be taken without a meeting and without prior notice,
if a consent in writing, setting forth the action so taken, shall be signed by
the holders of outstanding shares having not less than the minimum number of
votes that would be necessary to authorize or take such action at a meeting at
which all shares entitled to vote thereon were present and voted, except that
unanimous written consent of all shares entitled to vote for the election of
directors shall be required for election of directors to fill vacancies created
by removal.

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

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

Section 2.10. VOTING RIGHTS. Only persons in whose names shares entitled
to vote stand on the stock records of the Corporation at the close of business
on the record date fixed by the Board of Directors as provided in Section 5.1of
these Bylaws for the determination of shareholders of record shall be entitled
to notice of and to vote at such meeting of shareholders. If no record date is
fixed: (1) the record date for determining shareholders entitled to notice of or
to vote at a meeting of shareholders shall be at the close of business on the
business day next preceding the day on which notice is given or, if notice is
waived, at the close of business on the business day next preceding the day on
which the meeting is held; (2) the record

4
<PAGE>
date for determining shareholders entitled to give consent to corporate action
in writing without a meeting, when no prior action by the Board has been taken,
shall be the day on which the first written consent is given; (3) the record
date for determining shareholders for any other purpose shall be at the close of
business on the day on which the Board adopts the resolution relating thereto,
or the 60th day prior to the date of such other action, whichever is later.

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

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

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

Section 2.11. PROXIES. Every person entitled to vote shares may authorize
another person or persons to act by proxy with respect to such shares. All
proxies must be in writing and must be signed by the shareholder or his
attorney-in-fact confirming the proxy. No proxy shall be valid after the
expiration of eleven (11) months from the date thereof unless otherwise provided
in the proxy. Every proxy continues in full force and effect until revoked by
the person executing it prior to the vote pursuant thereto, except as otherwise
provided in Section 705 of the California Corporations Code. Such revocation may
be effected by a writing delivered to the Corporation stating that the proxy is
revoked or by a subsequent proxy executed by the person executing the prior
proxy and presented to the meeting, or as to any meeting by attendance at such
meeting and voting in person by the person executing the proxy. The dates
contained on the forms of proxy presumptively determine the order of execution,
regardless of the postmark dates on the envelopes in which they are mailed.

Section 2.12. VOTING BY JOINT HOLDERS OR PROXIES. Shares or proxies
standing in the names of two or more persons shall be voted or represented in
accordance with the vote or consent of the majority of such persons. If only one
of such persons is present in person or by proxy, that person shall have the
right to vote all such shares, and all of the shares standing in the names of
such persons shall be deemed to be represented for the purpose of determining a
quorum. If more than one vote, but the vote is evenly split on any particular
matter, each faction may vote the shares in question proportionately. This
section shall apply to the voting of shares by two or more administrators,
executors, trustees or other fiduciaries, or joint proxyholders, unless the
instrument or order of court appointing them shall otherwise direct.

Section 2.13. INSPECTORS OF ELECTION. In advance of any meeting of
shareholders, the Board may appoint inspectors of election to act at the meeting
and any adjournment thereof. If inspectors of election are not so appointed, or
if any persons so appointed fail to appear or refuse to act, the chairman of any
meeting of shareholders may, and on the request of any shareholder or a
shareholder's proxy, shall appoint inspectors of election (or persons to replace
those who so fail or refuse) at the meeting. The number of inspectors shall be
either one or three. If appointed at a meeting on the request of one or more
shareholders or proxies, the majority of shares represented in person or by
proxy shall determine whether one or three inspectors are to be appointed. If
there are three inspectors of election, the decision, act or certificate of
majority is effective in all respects as the decision, act or certificate of
all.

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

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ARTICLE III
DIRECTORS; MANAGEMENT

Section 3.1. POWERS. Subject to any provisions of the Articles of
Incorporation, of the Bylaws and of law limiting the powers of the Board of
Directors or reserving powers to the shareholders, the Board of Directors shall,
directly or by delegation, manage the business and affairs of the Corporation
and exercise all corporate powers permitted by law.

Section 3.2. NUMBER AND QUALIFICATION OF DIRECTORS. The authorized number
of directors shall be not less than sixteen (16) nor more than thirty (30),
until changed by amendment of the Articles of Incorporation. The exact number of
directors within these limits shall be fixed from time to time by resolution
adopted by a majority of the Board of Directors or the shareholders.

Nomination for election of members of the Board of Directors may be made by
the Board of Directors or by any shareholder of any outstanding capital stock of
the Corporation entitled to vote for the election of directors at the Annual
Meeting of Shareholders. Notice of intention to make any nominations by a
shareholder shall be made in writing and shall be delivered or mailed to and
received by the Secretary of the Corporation not less than one hundred twenty
(120) calendar days in advance of the date the Corporation's proxy statement was
released to the shareholders in connection with the previous year's annual
meeting of shareholders; provided, however, that in the event that no annual
meeting was held in the previous year or the date of the annual meeting has been
changed by more than thirty (30) days from the date contemplated at the time of
the previous year's proxy statement, notice by the shareholder must be received
by the Secretary of the Corporation a reasonable time before the Corporation
mails its proxy statement. Such notification shall contain the following
information to the extent known to the notifying shareholder: (a) the name and
address of each proposed nominee; (b) the principal occupation of each proposed
nominee; (c) the number of shares of capital stock of the Corporation owned by
each proposed nominee; (d) the name and residence address of the notifying
shareholder; (e) the number of shares of capital stock of the Corporation owned
by the notifying shareholder. Nominations not made in accordance herewith may,
in the discretion of the chairman of the meeting, be disregarded and upon the
chairman's instructions, the inspectors of election can disregard all votes cast
for each such nominee.

Section 3.3. ELECTION AND TERM OF OFFICE. The directors shall be elected
annually by the shareholders at the Annual Meeting of Shareholders; provided,
that if for any reason, said annual meeting or an adjournment thereof is not
held or the directors are not elected thereat, then the directors may be elected
at any special meeting of the shareholders called and held for that purpose. The
term of office of the directors shall, except as provided in Section 3.5 of
these Bylaws, begin immediately after their election and shall continue until
the next annual meeting or until their respective successors are elected and
qualified.

Section 3.4. REMOVAL OF DIRECTORS. A director may be removed from office
by the Board of Directors if he is declared of unsound mind by an order of court
or convicted of a felony. Any or all of the directors may be removed from office
without cause by a vote of shareholders holding a majority of the outstanding
shares entitled to vote at an election of directors; however, unless the entire
Board of Directors is removed, an individual director shall not be removed if
the votes cast against removal, or not consenting in writing to such removal,
would be sufficient to elect such director if voted cumulatively at an election
at which the same total number of votes were cast, or, if such action is taken
by written consent, all shares entitled to vote were voted, and the entire
number of directors authorized at the time of the director's most recent
election were then being elected. A director may also be removed from office by
the Superior Court of the county in which the Head Office is located, at the
request of shareholders holding at least ten percent (10%) of the number of
outstanding shares of any class, in case of fraudulent or dishonest acts or
gross abuse of authority or discretion with reference to the Corporation, in the
manner provided by law.

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

Section 3.5. VACANCIES. A vacancy or vacancies on the Board of Directors
shall exist on the death, resignation, or removal of any director, or if the
number of directors is increased or the shareholders fail to elect the full
number of directors.

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

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

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

Section 3.6. PLACE, DATE AND TIME OF REGULAR MEETINGS. Regular meetings of
the Board of Directors may be held without notice at such places within or
without the State of California and on such dates and at such times as the Board
may from time to time determine by resolution or written consent.

Section 3.7. ORGANIZATIONAL MEETINGS. Immediately following each annual
shareholders' meeting, the Board of Directors shall hold an organizational
meeting to organize and transact other business. Notice of this meeting shall
not be required. The regular meeting of the Board of Directors may be held
jointly with this organizational meeting.

Section 3.8. SPECIAL MEETINGS. Special meetings of the Board of Directors
for any purpose may be called at any time by the Chairman of the Board of
Directors, the Deputy Chairman, or the President, or the Secretary, or any two
directors.

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

Section 3.9. QUORUM. A majority of the directors shall constitute a quorum
for the transaction of business, except to adjourn a meeting under Section 3.11
of these Bylaws. Every act done or decision made by a majority of the directors
present at a meeting at which a quorum is present shall be regarded as the act
of the Board of Directors, unless the vote of a greater number is required by
law, the Articles of Incorporation, or these Bylaws. A meeting at which a quorum
is initially present may continue to transact business notwithstanding the
withdrawal of directors, if any action taken is approved by a majority of the
required quorum for such meeting.

Section 3.10. CONTENTS OF NOTICE AND WAIVER OF NOTICE. Neither the
business to be transacted at, nor the purpose of, any regular or special Board
meeting need be specified in the notice or waiver of notice of

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the meeting. Notice of a meeting need not be given to any director who signs a
waiver of notice or a consent to holding the meeting or an approval of the
minutes thereof, either before or after the meeting, or who attends the meeting
without protesting, prior thereto or at its commencement, the lack of notice to
said director. All such waivers, consents, and approvals shall be filed with the
corporate records or made a part of the minutes of the meeting.

Section 3.11. ADJOURNMENT. A majority of the directors present, whether or
not a quorum is present, may adjourn any meeting to another time and place.

Section 3.12. NOTICE OF ADJOURNMENT. Notice of the time and place of
holding an adjourned meeting need not be given to absent directors if the time
and place are fixed at the meeting being adjourned, except that if the meeting
is adjourned for more than twenty-four (24) hours such notice shall be given
prior to the adjourned meeting to the directors who were not present at the time
of the adjournment.

Section 3.13. PARTICIPATION BY COMMUNICATIONS EQUIPMENT. Members of the
Board may participate in a meeting through use of conference telephone,
electronic video screen communication or other communications equipment, so long
as all members participating in such meetings can communicate with all of the
other members concurrently and are provided the means of participating in all
matters before the Board, and the Corporation confirms that the person
communicating by telephone, electronic video screen or other communications
equipment is a director entitled to participate in the Board meeting and that
all statements, actions and votes were made by such director. Such participation
constitutes presence in person at such meeting.

Section 3.14. ACTION WITHOUT MEETING. The Board of Directors may take any
action without a meeting that may be required or permitted to be taken by the
Board at a meeting, if all members of the Board individually or collectively
consent in writing to the action. The written consent or consents shall be filed
in the minutes of the proceedings of the Board of Directors. Such action by
written consent shall have the same effect as a unanimous vote of directors.

Section 3.15. EXECUTIVE COMMITTEE. There shall be an executive committee
composed of the chairman of the board, the president, the deputy chairman and
not less than four (4) other directors who shall be appointed by the board to
serve during its pleasure. Subject at all times to the control of the board, the
committee shall have and may exercise all the powers of the board, except

(a) The approval of any action for which shareholder approval or approval of
outstanding shares is also required.

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

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

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

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

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

The Board of Directors may designate one or more directors as alternate
members of the Executive Committee, who may replace any absent members at any
meeting of the committee. The appointment of members or alternate members of the
Executive Committee requires the vote of a majority of the authorized number of
directors. The committee shall meet at such times as it or the board may
designate and shall makes its own rules of procedures. A majority of its members
shall constitute a quorum. The

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<PAGE>
affirmative vote of the majority of its members shall be necessary for the
adoption of any resolution. The committee shall keep minutes of its meetings and
such minutes shall be submitted to the next regular meeting of the board at
which a quorum is present, and any action taken by the board with respect
thereto shall be entered into the minutes of the board.

Section 3.16. OTHER COMMITTEES OF THE BOARD OF DIRECTORS. The Board of
Directors may, by resolution adopted by a majority of the authorized number of
directors designate one or more committees from time to time, each consisting of
two or more directors to serve at the pleasure of the Board. The Board of
Directors may designate one or more directors as alternate members of any
committee, who may replace any absent member at any meeting of the committee.
The appointment of members or alternate members of a committee requires the vote
of a majority of the authorized number of directors. Any such committee, to the
extent provided in the resolution of the Board of Directors shall have all the
authority of the Board, except with respect to:

(a) The approval of any action for which shareholder approval or approval of
outstanding shares is also required.

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

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

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

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

ARTICLE IV
OFFICERS

Section 4.1. OFFICERS. The officers of the Corporation shall be a Chairman
of the Board,, a Presidentand Chief Executive Officer, a Deputy Chairman, one or
more Vice Chairmen of the Board, a chief financial officer, a chief credit
officer, a general auditor, a chief credit examiner, a chief compliance officer,
one or more Executive Vice Presidents, one or more Senior Vice Presidents, one
or more Vice Presidents, one or more assistant vice presidents, a Secretary, one
or more Assistant Secretaries, and such other officers as the Board of Directors
may by resolution create, and such officers shall have such powers and perform
such duties as are prescribed in these Bylaws or as may be prescribed by the
Board of Directors.

Section 4.2. ELECTION. The officers of the Corporation shall be chosen by
the Board of Directors at any meeting of the Board, and each shall hold his
office until he resigns or is removed or otherwise disqualified to serve, or his
successor is elected and qualified.

Section 4.3. REMOVAL AND RESIGNATION. Any officer may be removed with or
without cause by the Board of Directors at any regular or special directors'
meeting.Any officer may resign at any time by giving written notice to the Board
of Directors, the Chief Executive Officer, the President or the Secretary of the
Corporation. An officer's resignation shall take effect when it is received or
at any later time specified in the resignation. Unless the resignation specifies
otherwise, its acceptance by the Corporation shall not be necessary to make it
effective.

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<PAGE>
Section 4.4. VACANCIES. A vacancy in any office because of death,
resignation, removal, disqualification, or any other cause shall be filled in
the manner prescribed in these Bylaws for regular appointments to the office.

Section 4.5. CHAIRMAN, PRESIDENT, DEPUTY CHAIRMAN AND VICE CHAIRMEN. The
chairman of the board shall preside at all shareholders' meetings and all
meetings of the board unless he delegates this duty to the President or Deputy
Chairman. In the absence or disability of the chairman of the board, the
following shall perform the duties and have the powers of the chairman of the
board in the order set forth:

President and Chief Executive Officer

Deputy Chairman

Vice Chairmen in the order designated by the Board

Section 4.6. PRESIDENT AND CHIEF EXECUTIVE OFFICER. The President shall
have general and active management of the business of the Corporation and shall
have and may exercise any and all powers and duties pertaining by law,
regulation, or practice, to the office of president or prescribed in the Bylaws.
The President shall be the Chief Executive Officer.

Section 4.7. CHIEF FINANCIAL OFFICER. The Chief Financial Officer shall be
the principal financial officer of the Corporation and shall perform the duties
imposed upon him by these Bylaws or the Board of Directors.

Section 4.8. SECRETARY. The Secretary shall keep or cause to be kept, and
be available at the Head Office or any other place that the Board of Directors
specifies, a book of minutes of all directors' and shareholders' meetings. The
minutes of each meeting shall state the time and place that it was held; whether
it was regular or special; if a special meeting, how it was authorized; the
notice given; the names of those present or represented at shareholders'
meetings; and the proceedings of the meetings. A similar minute book shall be
kept for each committee of the Board.

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

The Secretary shall give, or cause to be given, notice of all directors' and
shareholders' meetings required to be given under these Bylaws or by law, shall
keep the corporate seal in safe custody, and shall have any other powers and
perform any other duties that are prescribed by the Board of Directors or these
Bylaws.

ARTICLE V
GENERAL CORPORATE MATTERS

Section 5.1. RECORD DATE AND CLOSING OF STOCKBOOKS. The Board of Directors
may fix a time in the future as a record date for determining shareholders
entitled to notice of and to vote at any shareholders' meeting; to receive any
dividend, distribution, or allotment of rights; or to exercise rights in respect
of any other lawful action, including change, conversion, or exchange of shares.
The record date shall not, however, be more than sixty (60) nor less than ten
(10) days prior to the date of such meeting nor more than sixty (60) days prior
to any other action. If a record date is fixed for a particular meeting or
event, only shareholders of record on that date are entitled to notice and to
vote and to receive the dividend, distribution, or allotment of rights or to
exercise the rights, as the case may be, notwithstanding any transfer of any
shares on the books of the Corporation after the record date.

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

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

Section 5.2. CORPORATE RECORDS AND INSPECTION BY SHAREHOLDERS AND
DIRECTORS. Books and records of account and minutes of the proceedings of the
shareholders, Board, and committees of the Board and a record of the
shareholders, giving the names and addresses of all shareholders and the number
of shares held by each, shall be kept at the Head Office or at the office of the
Corporation's transfer agent and shall be open to inspection upon the written
demand on the Corporation of any shareholder at any reasonable time during usual
business hours, for a purpose reasonably related to such holder's interests as a
shareholder.

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

Section 5.3. STOCK CERTIFICATES. Subject to the adoption (pursuant to
Section 416(b) of the California Corporations Code) by the Corporation of a
system of issuance, recordation and transfer of its shares by electronic or
other means not involving any issuance of certificates, every holder of shares
in the Corporation shall be entitled to have a certificate signed in the name of
the Corporation by the Chairman or Vice Chairmen of the Board or the President
or a vice president and by the Chief Financial Officer or an assistant treasurer
or the Secretary or any assistant secretary, certifying the number of shares and
the class or series of shares owned by the shareholder. Such facsimile
signatures shall continue to be effective as an act of the Corporation
notwithstanding the fact that at the time a certificate is issued and delivered,
an officer whose facsimile signature appears thereon has ceased to be an officer
of the Corporation.

Section 5.4. LOST CERTIFICATES. The holder of any stock of the Corporation
shall immediately notify the Corporation of any loss, destruction or mutilation
of the certificate therefor, and the Board of Directors or a committee or an
officer designated thereby, with power so to act may, in its or his discretion,
cause to be issued to him a new certificate, or, in case of loss or destruction
of the certificate, upon satisfactory proof of such loss or destruction, and the
Board of Directors or such committee or officer may, in its or his discretion,
require the owner of the lost or destroyed certificate or his legal
representative to give the Corporation a bond (or other adequate security) in
such sum and with such surety or sureties, as it or he may direct, to indemnify
the Corporation against any claim that may be made against it (including any
expense or liability) on account of the alleged loss or destruction of any such
certificate or the issuance of such new certificate.

Section 5.5. TRANSFER AGENT REGULATIONS. The Corporation shall, if and
whenever the Board of Directors or a committee designated thereby with power so
to act shall so determine, maintain one or more transfer offices or agencies,
each in charge of a transfer agent designated by the Board of Directors or by
such committee, at which the shares of the capital stock of the Corporation
shall be transferable, and no certificate for shares of the capital stock of the
Corporation in respect of which a transfer agent shall have been designated,
shall be valid unless countersigned by such transfer agent. The Board of
Directors or such committee may also make such additional rules and regulations
as it may deem expedient concerning the issue and transfer of certificates for
shares of the capital stock of the Corporation.

Section 5.6. TRANSFER OF STOCK. Transfers of the stock of the Corporation
shall be made only on the books of the Corporation by the holder thereof or by
his attorney thereunto authorized by a power of attorney duly executed and filed
with the Secretary of the Corporation or a transfer agent of the Corporation, if
any, and on surrender of the certificate or certificates for such shares
properly endorsed. The person in whose name shares of stock stand on the books
of the Corporation shall be deemed the owner thereof for all purposes as regards
the Corporation, and upon any transfer of stock the person or persons into whose
name or names such stock shall be transferred on the books of the Corporation
shall be substituted for the person or persons out of whose name or names such
shares shall have been transferred

<PAGE>
with respect to all rights, privileges and obligations of holders of stock of
the Corporation and as against the Corporation or any other person or persons.

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

Section 5.7. REPORTS TO SHAREHOLDERS. An annual report complying with
Section 1501 of the California Corporations Code shall be sent to the
shareholders not later than one hundred twenty (120) days after the close of the
fiscal year and at least fifteen (15) or, if sent by third-class mail,
thirty-five (35) days prior to the Annual Meeting of Shareholders to be held
during the next fiscal year. The foregoing requirement of an annual report shall
be waived so long as the shares of the Corporation are held by fewer than one
hundred (100) holders of record.

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

A shareholder or shareholders holding at least five percent (5%) of the
outstanding shares of any class of the Corporation may make a written request to
the Corporation for an income statement of the Corporation for the three-month,
six-month, or nine-month period of the current fiscal year ended more than
thirty (30) days prior to the date of the request and a balance sheet of the
Corporation as of the end of such period and, in addition, if no annual report
for the last fiscal year has been sent to shareholders, the statements referred
to in Section 1501(a) of the California Corporations Code for the last fiscal
year. The statementS shall be delivered or mailed to the person making the
request within thirty (30) days thereafter. A copy of the statements shall be
kept on file at the Head Office of the Corporation for twelve (12) months and
they shall be exhibited at all reasonable times to any shareholder demanding an
examination of them or a copy shall be mailed to such shareholder. The income
statements and balance sheets referred to shall be accompanied by the report
thereon, if any, of any independent accountants engaged by the Corporation or
the certificate of an authorized officer of the Corporation that such financial
statements were prepared without audit from the books and records of the
Corporation.

Section 5.8. DIRECTOR LIABILITY AND INDEMNITY OF AGENTS.

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

B. INDEMNITY OF AGENTS.

(1) For the purposes of this Section 5.8, "agent" means any person who is or
was a director, officer, employee or other agent of the Corporation, or
is or was serving at the request of the Corporation as a director,
officer, employee or agent of another foreign or domestic corporation,
partnership, joint venture, trust or other enterprise or was a director,
officer, employee or agent of a foreign or domestic Corporation which was
a predecessor corporation of the Corporation or of another enterprise at
the request of the predecessor corporation; "proceeding" means any
threatened, pending or completed action or proceeding, whether civil,
criminal, administrative or investigative; and "expenses" includes
without limitation attorneys' fees and any expenses of establishing a
right to indemnification under this Section 5.8.

(2) The Corporation may indemnify any person who was or is a party or is
threatened to be made a party to any proceeding (other than an action by
or in the right of the Corporation to procure a judgment in its favor) by
reason of the fact that the person is or was an agent of the Corporation,
against expenses, judgments, fines, settlements and other amounts
actually and reasonably incurred in connection with the proceeding if
that person acted in good faith and in a manner the person reasonably
believed to be in the best interest of the Corporation and, in the case
of a

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criminal proceeding, had no reasonable cause to believe the conduct of
the person was unlawful. The termination of any proceeding, by judgment,
order, settlement, conviction or upon a plea of nolo contendere or its
equivalent shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which the person reasonably
believed to be in the best interests of the Corporation or that the
person had reasonable cause to believe that the person's conduct was
unlawful.

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

No indemnification shall be made for any of the following:

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

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

(4) To the extent that an agent of a corporation has been successful on the
merits in defense of any proceeding referred to in paragraphs (2) and (3)
above or in defense of any claim, issue or matter therein, the agent
shall be indemnified against expenses actually and reasonably incurred by
the agent in connection therewith.

(5) Except as provided in paragraph (4) above, any indemnification under
this Section 5.8 shall be made by the Corporation only if authorized in
the specific case, upon a determination that indemnification of the agent
is proper in the circumstances because the agent has met the applicable
standard of conduct set forth in paragraphs (2) or (3), by any of the
following:

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

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

(c) Approval of the shareholders, with the shares owned by the person to
be indemnified not being entitled to vote thereon, which approval
shall be either by the affirmative vote of a majority of the shares
represented and voting at a duly held meeting at which a quorum is
present (which shares voting affirmatively also constitute at least a
majority of the required quorum), by the written consent of
shareholders as provided in Section 2.8 of these Bylaws, or by the
affirmative vote or written consent of such greater proportion
(including all) of the shares of any class or series as may be
provided in the articles for all or any specified shareholder action;
or

(d) The court in which the proceeding is or was pending upon application
made by the Corporation or the agent or the attorney or other person
rendering services in connection

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with the defense, whether or not the application by the agent,
attorney or other person is opposed by the Corporation.

(6) Upon written request of an agent seeking indemnification under this
Section 5.8, the Board of Directors by majority vote shall promptly make
a determination in good faith as to whether the applicable standard of
conduct has been met. If a positive determination is made,
indemnification shall be authorized forthwith if the directors approving
the determination include a majority of a quorum of directors not parties
to the proceeding; otherwise the question of authorization by the
shareholders shall be put to a shareholder vote no later than the date of
the next annual meeting and said question shall be included in any
management proxy solicitation for or prior to said meeting.

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

(8) The indemnification authorized by this Section 5.8 shall not be deemed
exclusive of any additional rights to indemnification for breach of duty
to the Corporation and its shareholders while acting in the capacity of a
director or officer of the Corporation to the extent the additional
rights to indemnification are authorized in the articles of the
Corporation. The indemnification provided by this section for acts,
omissions, or transactions while acting in the capacity of, or while
serving as, a director or officer of the Corporation but not involving
breach of duty to the Corporation and its shareholders shall not be
deemed exclusive of any other rights to which those seeking
indemnification may be entitled under any Bylaw, agreement, vote of
shareholders or disinterested directors, or otherwise, to the extent the
additional rights to indemnification are authorized in the articles of
the Corporation. An article provision authorizing indemnification "in
excess of that otherwise permitted by California Corporations Code
Section 317" or "to the fullest extent permissible under California law"
or the substantial equivalent thereof shall be construed to be both a
provision for additional indemnification for breach of duty to the
Corporation and its shareholders as referred to in, and with the
limitations required by, paragraph (ll) of subdivision (a) of California
Corporations Code Section 204 (which is set forth below) and a provision
for additional indemnification as referred to in the second sentence of
this paragraph. The rights to indemnity hereunder shall continue as to a
person who has ceased to be a director, officer, employee, or agent and
shall inure to the benefit of the heirs, executors, and administrators of
the person. Nothing contained in this section shall affect any right to
indemnification to which persons other than the directors and officers
may be entitled by contract or otherwise.

(9) No indemnification or advance shall be made under this Section, except
as provided in paragraph (4) above or paragraph (5)(d) above, in any
circumstance where it appears:

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

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

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

14
<PAGE>
transactions from which a director may not be relieved from liability as set
forth in paragraph (10) of subdivision (a) of Section 204 or as to circumstances
in which indemnity is expressly prohibited by Section 317.

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

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

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

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

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

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

(vi) Under California Corporations Code Section 310; or

(vii) Under California Corporations Code Section 316.

No such provision shall eliminate or limit the liability of a director for
any act or omission occurring prior to the date when the provision becomes
effective, and no such provision shall eliminate or limit the liability of an
officer for any act or omission as an officer, notwithstanding that the officer
is also a director or that his or her actions, if negligent or improper, have
been ratified by the directors.

ARTICLE VI
AMENDMENTS

Section 6.1. AMENDMENTS BY SHAREHOLDERS. New Bylaws may be adopted or
these Bylaws may be amended or repealed by the affirmative vote or written
consent of a majority of the outstanding shares entitled to vote.

Section 6.2. AMENDMENTS BY DIRECTORS. Subject to the right of shareholders
under the preceding Section 6.1 of these Bylaws, Bylaws (other than a Bylaw
fixing or changing the authorized number of directors or classifying the board
of directors) may be adopted, amended, or repealed by the Board of Directors.

ARTICLE VII
EMERGENCY PROVISIONS

Section 7.1. EMERGENCY DEFINED. "Emergency" as used in this Article VII
means disorder, disturbance or damage caused by disaster, war, enemy attack or
other warlike acts which prevent conduct and management of the affairs and
business of the Corporation by the Board of Directors and officers. The powers
and duties conferred and imposed by this Article and any resolutions adopted
pursuant hereto shall be effective only during an emergency. This Article may be
implemented from time to time by resolutions

15
<PAGE>
adopted by the Board of Directors before or during an emergency, or during an
emergency by the Executive Committee of the Board of Directors constituted and
then acting pursuant thereto. During an emergency, the provisions of this
Article and any implementing resolutions shall supersede any conflicting
provisions of any Article of these Bylaws or resolutions adopted pursuant
hereto.

Section 7.2 ALTERNATE LOCATIONS. During an emergency, the business
ordinarily conducted at the principal executive office of the Corporation shall,
if so permitted by applicable statutes or regulations, be relocated elsewhere in
suitable quarters, as may be designated by the board of directors or by the
Executive Committee of the Board of Directors or by such persons as are then, in
accordance with these bylaws or resolutions adopted from time to time by the
board of directors, dealing with the exercise of authority in a time of such
emergency, conducting the affairs of this Corporation. Any temporarily relocated
place of business of this Corporation shall be returned to its legally
authorized location as soon as practicable and such temporary place of business
shall then be discontinued.

Section 7.3 ALTERNATE MANAGEMENT.

(a) In the event of a state of disaster of sufficient severity to prevent
the conduct and management of the affairs of business of this Corporation
by its directors and officers as contemplated by these bylaws, any
available members of the then incumbent Executive Committee of the Board
shall constitute an Interim Executive Committee for the full conduct and
management of the affairs and business of the Corporation.

(b) If as a result of a state of disaster as described under 7.3(a) above,
the chief executive officer is unable or unavailable to act, then until
such chief executive officer becomes able and available to act or a new
chief executive officer is appointed or elected, the senior surviving
officer who is able and available to act shall act as the chief executive
officer of this Corporation. If a person in good faith assumes the powers
of the chief executive officer pursuant to these provisions in the belief
he is the senior surviving officer and the office of the chief executive
officer is vacant, the acts of such a person shall be valid and binding
although it may subsequently develop that he was not in fact the senior
surviving officer or that the office was not in fact vacant.

(c) No officer, director or employee acting in accordance with these
Emergency Provisions shall be liable except for willful misconduct.

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

<S> <C>
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