FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION

                              WASHINGTON, DC. 20549


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

For the quarterly period ended   March 31, 1998

                                       OR

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

For the transition period from __________________ to _____________________.

Commission File Number   0-13528

                             Pacific Capital Bancorp
                             -----------------------
             (Exact name of registrant as specified in its charter)

         California                                             77-0003875
         ----------                                             ----------
(State or other jurisdiction of                             (I.R.S. Employer
 incorporation or organization)                           Identification Number)

                 1001 S. Main Street, Salinas, California 93901
                 ----------------------------------------------
                    (Address of principal executive offices)
                                   (Zip Code)

                                 (408) 757-4900
                                 --------------
              (Registrant's telephone number, including area code)

                                       N/A
                                       ---
             (Former name, former address and former fiscal year, if
                           changed since last report)

         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
   -----     -----

                      APPLICABLE ONLY TO CORPORATE ISSUERS:

         Indicate  the  number of  shares  outstanding  of each of the  issuer's
classes of common stock, as of the latest practicable date.

                                                                Outstanding at
  Class                                                           May 13, 1998
  -----                                                           ------------
  Common stock, no par value                                   4,314,591 Shares

This report contains a total of 33 pages.

                                      -1-

<PAGE>


                         PART I - FINANCIAL INFORMATION

ITEM 1                                                                    PAGE
                                                                          ----

PACIFIC CAPITAL BANCORP AND
SUBSIDIARIES UNAUDITED FINANCIAL STATEMENTS

         CONSOLIDATED BALANCE SHEETS                                         3

         CONSOLIDATED STATEMENTS OF INCOME                                   4

         CONSOLIDATED STATEMENTS OF CASH FLOWS                               5

         CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME                     6

         NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                        7-8


ITEM 2

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS                                        8-14



                           PART II - OTHER INFORMATION

ITEM 6

EXHIBITS AND REPORTS ON FORM 8-K                                             15

SIGNATURES                                                                   20

                                      -2-

<PAGE>


<TABLE>
                                                               PART 1
                                                   ITEM 1 - FINANCIAL INFORMATION
                                              PACIFIC CAPITAL BANCORP AND SUBSIDIARIES
                                                     CONSOLIDATED BALANCE SHEETS
                                                             (UNAUDITED)
                                                (IN THOUSANDS, EXCEPT SHARE AMOUNTS)

<CAPTION>
                                                                                                  March  31,            December 31,
Assets                                                                                                  1998                    1997
                                                                                                   ---------              ---------
<S>                                                                                                <C>                    <C>      
Cash and due from banks                                                                            $  44,309              $  49,982
Federal funds sold and other short term investments                                                   69,079                 28,537
                                                                                                   ---------              ---------
      Total cash and equivalents                                                                     113,388                 78,519
Investment securities:
   Available-for-sale securities, at fair value                                                      203,831                220,984
   Held-to-maturity securities, at amortized cost
     (fair value of $6,598 and $7,347, respectively)                                                   6,614                  7,347

Loans available for sale                                                                              11,537                 10,523

Total loans                                                                                          421,422                419,293
   Less allowance for possible loan losses                                                            (4,280)                (4,266)
                                                                                                   ---------              ---------
      Net loans                                                                                      417,142                415,027

Premises and equipment, net                                                                           15,361                 15,331
Accrued interest receivable and other, net                                                            15,601                 16,988
                                                                                                   ---------              ---------

Total assets                                                                                       $ 783,474              $ 764,719
                                                                                                   =========              =========

Liabilities and shareholders' equity

Deposits:
   Demand, non-interest bearing                                                                    $ 154,982              $ 174,649
   Demand, interest bearing                                                                           91,740                 97,322
   Savings and money market                                                                          178,265                173,151
   Time certificates                                                                                 275,638                238,276
                                                                                                   ---------              ---------
      Total deposits                                                                                 700,625                683,398

Accrued interest payable and other liabilities                                                         8,525                  8,763
                                                                                                   ---------              ---------

Total liabilities                                                                                    709,150                692,161

Shareholders' equity:
Preferred stock; 20,000,000 shares authorized and unissued                                              --                     --
Common stock, no par value; 20,000,000 shares authorized;
   4,310,155 and 4,294,403 shares issued and outstanding at
   March 31, 1998  and at December 31, 1997, respectively                                             58,310                 58,434
Retained earnings                                                                                     14,780                 12,852
Accumulated other comprehensive income                                                                 1,234                  1,272
                                                                                                   ---------              ---------

Total shareholders' equity                                                                            74,324                 72,558
                                                                                                   ---------              ---------

Total liabilities and shareholders' equity                                                         $ 783,474              $ 764,719
                                                                                                   =========              =========

<FN>
See accompanying notes to unaudited consolidated financial statements.
</FN>
</TABLE>

                                                                -3-

<PAGE>


<TABLE>
                                              PACIFIC CAPITAL BANCORP AND SUBSIDIARIES
                                                  CONSOLIDATED STATEMENTS OF INCOME
                                                             (UNAUDITED)
                                         (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

<CAPTION>
                                                                                                 Three months           Three months
                                                                                                        ended                  ended
                                                                                               March 31, 1998         March 31, 1997
                                                                                               --------------         --------------
<S>                                                                                                <C>                    <C>       
Interest income:
   Interest and fees on loans                                                                      $   10,369             $    9,531
   Interest on fed funds sold                                                                             635                    309
   Interest on investment securities                                                                    3,521                  2,146
                                                                                                   ----------             ----------
     Total interest income                                                                             14,525                 11,986
                                                                                                   ----------             ----------
Interest expense:
   Interest on deposits                                                                                 4,964                  3,855
   Other                                                                                                    3                      7
                                                                                                   ----------             ----------
     Total interest expense                                                                             4,967                  3,862
                                                                                                   ----------             ----------
     Net interest income                                                                                9,558                  8,124
 Provision for possible loan losses                                                                       345                    285
                                                                                                   ----------             ----------
Net interest income after provision for possible loan losses                                            9,213                  7,839
                                                                                                   ----------             ----------

Other income:
   Service charges                                                                                        751                    620
   Gain on sale of loans                                                                                    5                      6
   Net gain  on securities transactions                                                                     4                   --
   Other                                                                                                  181                    179
                                                                                                   ----------             ----------
     Total other income                                                                                   941                    805
                                                                                                   ----------             ----------

Other expenses:
   Salaries and benefits                                                                                3,145                  2,747
   Occupancy                                                                                              607                    564
   Equipment                                                                                              491                    391
   Advertising and promotion                                                                               45                    152
   Stationary and supplies                                                                                160                    232
   Legal and professional fees                                                                            328                    204
   Regulatory assessments                                                                                  70                     54
   Other operating                                                                                        668                    616
                                                                                                   ----------             ----------
     Total other expenses                                                                               5,514                  4,960

Earnings before income taxes                                                                            4,640                  3,684

Income taxes                                                                                            1,848                  1,442
                                                                                                   ----------             ----------

Net income                                                                                         $    2,792             $    2,242
                                                                                                   ==========             ==========

Basic earnings per share                                                                           $     0.65             $     0.52
                                                                                                   ==========             ==========
Diluted earnings per share                                                                         $     0.62             $     0.50
                                                                                                   ==========             ==========

Weighted average shares outstanding                                                                 4,296,567              4,292,912
Dilutive effect of stock options                                                                      181,848                161,605
                                                                                                   ----------             ----------
Total weighted average diluted shares outstanding                                                   4,478,415              4,454,517
                                                                                                   ==========             ==========

<FN>
See accompanying notes to unaudited consolidated financial statements.
</FN>
</TABLE>

                                                                -4-

<PAGE>


<TABLE>
                                              PACIFIC CAPITAL BANCORP AND SUBSIDIARIES
                                                CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                             (UNAUDITED)
                                                           (IN THOUSANDS)

<CAPTION>
                                                                                                Three months            Three months
                                                                                                       ended                   ended
                                                                                              March 31, 1998          March 31, 1997
                                                                                              --------------          --------------
<S>                                                                                                <C>                    <C>      
Cash flows from operating activities:
Net income                                                                                         $   2,792              $   2,242
Adjustments to reconcile net income to net cash provided by
     (used in) operating activities:
   Depreciation and amortization                                                                         390                    354
   Provision for possible loan losses                                                                    345                    285
   Net originations of loans available for sale                                                       (1,014)                (2,120)
   Gain on sale of loans                                                                                  (5)                    (6)
   Deferral of loan origination fees                                                                     (24)                   (30)
   Change in accrued interest receivable and other assets                                              1,349                   (926)
   Change in accrued interest payable and other liabilities                                             (238)                (2,032)
                                                                                                   ---------              ---------
Net cash provided by (used in) operating activities                                                    3,595                 (2,233)
                                                                                                   ---------              ---------

Investing activities:
   Net increase in loans                                                                              (2,517)                (8,165)
   Recoveries on loans                                                                                    86                     38
   Maturities of investment securities                                                                18,529                  3,553
   Purchases of investment securities                                                                   (643)                (6,504)
   Capital expenditures, net                                                                            (420)                  (457)
                                                                                                   ---------              ---------
Net cash provided by (used in) investing activities                                                   15,035                (11,535)
                                                                                                   ---------              ---------

Financing activities:
   Net increase in deposits                                                                           17,227                 27,241
   Cash paid for retirement of stock                                                                    (875)                  --
   Proceeds from exercise of options                                                                     751                    104
   Cash paid for dividends                                                                              (864)                  (653)
                                                                                                   ---------              ---------
Net cash provided by financing activities                                                             16,239                 26,692
                                                                                                   ---------              ---------

Net increase in cash and equivalents                                                                  34,869                 12,924
Cash and equivalents at beginning of period                                                           78,519                 76,245
                                                                                                   =========              =========
Cash and equivalents at end of period                                                              $ 113,388              $  89,169
                                                                                                   =========              =========

Supplemental disclosures of cash flow information:
    Cash paid during the period
     Interest                                                                                      $   5,432              $   4,248
     Income taxes                                                                                        150                   --

<FN>
See accompanying notes to unaudited consolidated financial statements.
</FN>
</TABLE>

                                                                -5-

<PAGE>


                    PACIFIC CAPITAL BANCORP AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF COMPRTEHENSIVE INCOME
                                   (UNAUDITED)
                                 (IN THOUSANDS)

                                                          Three Months Ended
                                                        March 31,      March 31,
                                                             1998           1997
                                                          -------       -------
Net income                                                $ 2,792       $ 2,242
Net change in unrealized gain on
  available-for-sale securities                               (38)       (1,201)
                                                          -------       -------
Total comprehensive income for the period                 $ 2,754       $ 1,041
                                                          =======       =======

                                      -6-

<PAGE>


                    PACIFIC CAPITAL BANCORP AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

Note 1 - Basis of Presentation

         In the opinion of the Company,  the  unaudited  consolidated  financial
         statements,  prepared on the accrual basis of  accounting,  contain all
         adjustments (consisting of only normal recurring adjustments) which are
         necessary to present  fairly the financial  position of the Company and
         subsidiaries  at March 31, 1998 and December  31, 1997,  the results of
         its operations,  statements of cash flows, and comprehensive income for
         the periods ended March 31, 1998 and 1997.

         Certain   information  and  note  disclosures   normally  presented  in
         financial  statements  prepared in accordance  with generally  accepted
         accounting  principles have been omitted. The results of operations for
         the period ended March 31, 1998 are not  necessarily  indicative of the
         operating results for the full year ending December 31, 1998.

         In June 1997, the Financial  Accounting  Standards  Board (FASB) issued
         Statement of Financial  Accounting Standard (SFAS) No. 131, Disclosures
         about Segments of an Enterprise and Related Information.  The Statement
         establishes  standards for the way the public business  enterprises are
         to report  information  about  operating  segments in annual  financial
         statements   and  requires  those   enterprises   to  report   selected
         information  about  operating  segments  in interim  financial  reports
         issued to  shareholders.  This  statement is effective for fiscal years
         beginning after December 15, 1997. The Company does not believe it will
         have a significant impact on its consolidated financial statements.

         In February 1998, the FASB issued SFAS No. 132, Employers'  Disclosures
         about Pensions and Other Postretirement Benefits. This Statement amends
         the disclosure requirements of Statements No. 87, Employers' Accounting
         for  Pensions,  No.  88,  Employers'  Accounting  for  Settlements  and
         Curtailments  of  Defined  Benefit  Pension  Plans and for  Termination
         Benefits,   and  No.  106,  Employers'  Accounting  for  Postretirement
         Benefits  Other  Than  Pensions.   This  Statement   standardizes   the
         disclosure  requirements of Statements No. 87 and No. 106 to the extent
         practicable and recommends a parallel format for presenting information
         about  pensions and other  postretirement  benefits.  This Statement is
         effective  for fiscal years  beginning  after  December  15, 1997.  The
         statement is not anticipated to have a material impact on the financial
         condition or results of operations of the Company.

Note 2 - Consolidation

         The  consolidated  financial  statements  include  the  accounts of the
         Company  and its  wholly-owned  subsidiaries,  First  National  Bank of
         Central California,  ("First National"), and South Valley National Bank
         ("South Valley"). For purposes used herein, the term "Subsidiary Banks"
         shall mean First National and South Valley, collectively.  All material
         intercompany   accounts  and  transactions   have  been  eliminated  in
         consolidation.

Note 3 - Loans to Directors

         In the  ordinary  course of  business,  the  Company  has made loans to
         directors of the Company and their affiliates,  which at March 31, 1998
         amounted to approximately $9,847,000.

Note 4 - Commitments

         The Company had outstanding  standby letters of credit of approximately
         $4,868,000 at March 31, 1998.

Note 5 - Net Income Per Share and Dividends

         Net income per share is computed  using the weighted  average number of
         shares of common and

                                      -7-

<PAGE>


         common  equivalent  shares  outstanding.  On  January  28  the  Company
         declared a $0.20 per share cash dividends to  shareholders of record on
         March 16, payable on March 31, 1998.

Note 6 - Taxes

         As of  March  31,  1998,  the  Company  had a  deferred  tax  asset  of
         approximately   $2,977,000.   The  asset  results  primarily  from  the
         provisions  for possible loan losses and  depreciation  of premises and
         equipment, which are recognized in the financial statements but are not
         yet  deductible  for income tax reporting  purposes.  Management of the
         Company  believes  that the net deferred tax asset is fully  realizable
         through  sufficient taxable income within carryback periods and current
         year taxable income.


                                     PART 1
               ITEM II - PACIFIC CAPITAL BANCORP AND SUBSIDIARIES
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                                       OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS


Overview of Changes in the Financial Statements

         Net income for the three months ended March 31, 1998 was  $2,792,000 or
$0.62  diluted  earnings  per share  compared  to  $2,242,000  or $0.50  diluted
earnings per share during the comparable  period in 1997. This 24.5% increase in
net income is due mainly to a $1,434,000  increase in net interest  income.  The
increase in net interest income is due to growth in average total earning assets
of  $138,942,000 or 24.9%  partially  offset by an increase in average  interest
bearing deposits of $96,783,000 as compared to the comparable 1997 period.

         Outstanding  loans were  $421,422,000  at March 31,  1998  compared  to
$419,293,000 at December 31, 1997, a $2,129,000 or 0.5% increase.  Federal Funds
Sold  and  Investment  Securities  at  March  31,  1998  were  $279,524,000,   a
$22,656,000  or 8.8% increase from December 31, 1997.  This was primarily due to
the increase in total  deposits  which resulted in an increase in investments in
Federal Funds and investment securities.

         The  Company's  total  deposits  at March 31,  1998  were  $700,625,000
compared to  $683,398,000  at December 31, 1997, a $17,227,000 or 2.5% increase.
Non-interest  bearing demand deposits  decreased  $19,667,000,  interest bearing
demand  deposits  decreased  $5,582,000,  while savings and money market deposit
accounts   increased   $5,114,000  and  certificates  of  deposit  increased  by
$37,362,000 during the first three months of 1998.  Management believes that the
growth in deposits is a result of the overall  strength in the local tourism and
agribusiness  industries.  In  addition,  growth in  housing  demand and a small
influx of  businesses  moving into the  southern  Santa  Clara  County area have
contributed to the Company's deposit growth.

         Certain information concerning the Company's average balances,  yields,
and rates on average interest-earning assets and interest-bearing liabilities is
set forth in the following table. Interest yields and amounts earned include net
loan fees of $221,000 and $307,000 in 1998 and 1997, respectively.

                                      -8-

<PAGE>


<TABLE>
                                                       AVERAGE BALANCE SHEETS
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                            1998                                     1997
                                                        Average      Yield/     Interest     Average         Yield/       Interest
(Dollars in thousands)                                  Balance       Rate       Amount      Balance         Rate          Amount
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                    <C>             <C>       <C>        <C>               <C>         <C>   
Assets
Earning assets:
 Investment securities:
  Taxable                                              $206,252        6.6%      $3,355     $126,269          6.4%        $1,982
  Non-taxable                                            14,129        4.8%         166       13,337          5.0%           165
  Federal funds sold                                     47,439        5.4%         635       24,075          5.2%           309
------------------------------------------------------------------------------------------------------------------------------------
Total investment securities                             267,820        6.3%       4,156      163,681          6.1%         2,456

Loans                                                   429,229        9.8%      10,369      394,426          9.8%         9,530
------------------------------------------------------------------------------------------------------------------------------------

Total earning assets                                    697,049        8.5%      14,525      558,107          8.7%        11,986
Non-earning assets:
  Premises and equipment                                 15,340                               15,420
  Other                                                  46,682                               45,592
------------------------------------------------------------------------------------------------------------------------------------

Total non-earning assets                                 62,022                               61,012
------------------------------------------------------------------------------------------------------------------------------------

Total assets                                           $759,071                             $619,119
====================================================================================================================================

Liabilities and Shareholders' Equity
 Interest-bearing deposits:
  Demand                                                $91,598        0.8%        $187      $81,939          1.1%          $220
  Savings and money market                              177,541        3.0%       1,290      162,906          2.8%         1,128
  Time certificates                                     260,915        5.4%       3,486      188,426          5.4%         2,508
  Other interest-bearing liabilities                        522        2.3%           3          666          4.3%             7
------------------------------------------------------------------------------------------------------------------------------------

Total interest-bearing liabilities                      530,576        3.8%       4,966      433,937          3.6%         3,863
Non interest-bearing deposits
And other liabilities:
  Demand, non interest-bearing                          148,729                              115,163
  Other liabilities                                       5,267                                4,826
  Shareholder's equity                                   74,499                               65,193
------------------------------------------------------------------------------------------------------------------------------------

Total other liabilities                                 228,495                              185,182
------------------------------------------------------------------------------------------------------------------------------------

TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY                                   $759,071                             $619,119
====================================================================================================================================

NET INTEREST INCOME                                                              $9,559                                   $8,123
NET INTEREST MARGIN                                                    5.6%                                   5.9%
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

The net interest margin is expressed as the percentage of net interest income to
average  total  earning  assets.  The average  balance on  non-accrual  loans is
immaterial as a percentage of total loans and as such has been included in total
loans.  Non-taxable  securities  and leases  have not been  calculated  on a tax
equivalent basis.


Loans

         Outstanding  total loans  averaged  $429,229,000  for the three  months
ended March 31, 1998 compared to $394,426,000 for the comparable period in 1997,
an increase of $34,803,000,  or 8.8%. This increase in loans is due to growth in
loan demand from  qualified  borrowers  and  reflects  stability  in most of the
primary markets which the Company  serves.  The Company lends primarily to small
and  medium  sized  businesses  and  consumers  within  its  markets,  which are
comprised  principally of Monterey,  Santa Cruz, San Benito,  and southern Santa
Clara  counties.

                                       -9-

<PAGE>


Quality of Loans

         The composition of non-performing loans as of March 31, 1998 , December
31, 1997, and March 31, 1997 is summarized in the following table.

                              Non-performing Loans
                             (Dollars in Thousands)

                                        March 31,   December 31,       March 31,
                                             1998           1997            1997
                                           ------         ------         ------
Accruing loans
past due 90 days
or more:
      Commercial                           $ --           $   26         $   50
      Consumer                                193             17             41
      Real Estate                            --             --              671
                                           ------         ------         ------
Total                                      $  193         $   43         $  762

Nonaccrual loans:
      Commercial                              765          1,278            418
      Consumer                                 74            106            113
      Real Estate                              66            766          1,019
                                           ------         ------         ------
Total                                      $  905         $2,150         $1,550

Total Non-performing
Loans                                      $1,098         $2,193         $2,312
                                           ======         ======         ======

Non-performing Loans
To Total Loans                               0.26%          0.52%          0.58%

Allowance For Possible
Loan Losses To Total
Non-performing Loans                       389.80%        194.53%        168.99%


         The  Company  does  not  expect  to  sustain  losses  from  any  of the
non-performing  loans  in  excess  of  that  specifically  provided  for  in the
allowance  for  possible  loan  losses.   Currently,   the  Company's  level  of
non-performing loans to total loans is below that of peer banks.

         In addition to the above, the Company holds one Other Real Estate Owned
(OREO) property,  which totals  $1,213,000.  The amount recorded  represents the
lesser  of the loan  balance  or  current  fair  value  obtained  from a current
appraisal less  anticipated  selling costs;  therefore,  any identified loss has
already been recognized.

         Inherent in the  lending  function is the fact that loan losses will be
experienced  and that the risk of loss will vary with the type of loan  extended
and the creditworthiness of the borrower. To reflect the estimated risks of loss
associated  with  its  loan  portfolio,  additions  are  made  to the  Company's
allowance  for possible loan losses.  As an integral  part of this process,  the
allowance for possible loan losses is subject to review and possible  adjustment
as a  result  of  management's  assessment  of risk or  regulatory  examinations
conducted  by  governmental  agencies.  The  Company's  entire  allowance  is  a
valuation  allowance  created by direct charges against  operations  through the
provision for possible loan losses.

         The provision for possible loan losses  charged  against  operations is
based upon the actual net loan losses  incurred plus an amount for other factors
which, in management's judgment, deserve recognition in estimating possible loan
losses.  The Company  evaluates  the adequacy of its allowance for possible loan
losses on a quarterly basis. The Company has also contracted with an independent
loan review  consulting firm to evaluate overall credit quality and the adequacy
of  the  allowance  for  possible  loan  losses.   Both  internal  and  external
evaluations  take into  account  the  following:  specific  loan  conditions  as
determined by management;  the historical  relationship  between charge-offs and
the level of the allowance;  the estimated future loss in all significant loans;
known  deterioration in  concentrations  of credit,  certain classes of loans or
pledged  collateral;  historical  loss  experience  based on volume and types of
loans; the results of any independent review or evaluation of the loan portfolio
quality  conducted  by or at the  direction  of  Company  management  or by bank

                                      -10-

<PAGE>


regulatory  agencies;  trends in portfolio  volume,  maturity  and  composition;
off-balance   sheet  credit  risk;   volume  and  trends  in  delinquencies  and
nonaccruals;  lending  policies and procedures  including  those for charge-off,
collection  and  recovery;  national  and local  economic  conditions  and their
effects on specific local industries;  and the experience,  ability and depth of
lending management and staff.  These factors are essentially  judgmental and may
not be reduced to a mathematical formula.

         The Company closely monitors the local markets in which it conducts its
lending activities. The overall increase in loan demand from qualified borrowers
during  the past  year is  indicative  of the  strength  in the  local  economic
climate.

         The table  set forth  below  summarizes  the  actual  loan  losses  and
provision  for possible  losses as of and for the periods ended March 31, 1998 ,
December 31, 1997, and March 31, 1997 :


<TABLE>
                                                  Loan Charge-Off/Recovery Activity
                                                       (Dollars in Thousands)

<CAPTION>
                                                                         Three months               Year             Three months
                                                                             Ended                  Ended                Ended
                                                                         March 31, 1998       December 31, 1997      March 31, 1997
                                                                         --------------       -----------------      --------------
<S>                                                                        <C>                    <C>                    <C>     
Loans Outstanding, at period end                                           $421,422               $419,293               $396,835

Average Loans                                                              $429,229               $411,546               $394,426

Allowance Balance:
   Beginning Of Period                                                        4,266                  3,672                  3,672

     Charge-Offs By Loan Category:
         Commercial                                                             384                    873                     53
         Consumer                                                                33                     59                      4
         Real Estate                                                           --                      211                     31
                                                                           --------               --------               --------
         Total                                                             $    417               $  1,143               $     88
                                                                           --------               --------               --------

     Recoveries By Loan Category:
         Commercial                                                              49                    120                     32
         Consumer                                                                34                     24                      4
         Real Estate                                                              3                     73                      2
                                                                           --------               --------               --------
         Total                                                             $     86               $    217               $     38
                                                                           --------               --------               --------

   Net Charge-Offs                                                         $    331               $    926               $     50
                                                                           --------               --------               --------

   Provision Charged
   To Expense                                                              $    345               $  1,520               $    285

Allowance Balance
   End Of Period                                                           $  4,280               $  4,266               $  3,907
                                                                           ========               ========               ========

Allowance For Possible
Loan Losses
To Period End Loans                                                            1.02%                  1.02%                  0.98%

Annualized Net Charge-offs
to Average Loans                                                               0.31%                  0.23%                  0.05%
</TABLE>


         The  provision  for possible loan losses  charged  against  earnings is
based upon an analysis of the actual migration of loans to losses plus an amount
for other factors  which,  in  management's  judgment,  deserve  recognition  in
estimating  possible  loan losses.  While these  factors  cannot be reduced to a
mathematical  formula,  it is management's  view that the allowance for possible
loan losses of  $4,280,000  or 1.02% of total loans was adequate as of March 31,
1998.

                                      -11-

<PAGE>


Results of Operations


                        Three months ended March 31, 1998
                                  Compared with
                        Three months ended March 31, 1997

         Net income for the three months ended March 31, 1998 was $2,792,000, an
increase of $550,000 or 24.5% as compared to the same 1997 period.  The increase
in net income for the period was due  primarily  to an increase in net  interest
income of $1,434,000  partially offset by an increase in non-interest expense of
$554,000.  The increase in net interest income is due to growth in average total
earning  assets of  $138,942,000  partially  offset by an  increase  in  average
interest bearing deposits of $96,783,000 compared to the same 1997 period.

         The average balance of interest  earning assets during the three months
ended March 31, 1998 was $697,049,000, a 24.9% increase over the comparable 1997
period. The Company's average yield on earning assets for the three months ended
March 31, 1998 decreased to 8.5% from 8.7% in the comparable 1997 period.  Total
interest income  increased  $2,539,000 or 21.2% for the three months ended March
31,  1998  compared  to the same 1997  period  due to the  increase  in  average
interest earning assets.

         Average  deposits  for the Company for the three months ended March 31,
1998 was  $678,783,000,  a $130,349,000  or 23.8% increase  compared to the same
period ended March 31, 1997 . The Company's  average cost of funds for the three
months  ended March 31,  1998 was 3.8% which  yielded a net  interest  margin of
5.6%.  This  compares  to an  average  cost of funds of 3.6% and a net  interest
margin of 5.9% for the comparable  1997 period.  Interest  expense of $4,967,000
for the three  months  ended  March 31,  1998 was  $1,105,000  or 28.6% over the
comparable 1997 period due to an increase in average  interest  bearing deposits
of  $96,783,000  and an increase  in the  Company's  cost of funds of 0.2%.  Net
interest  income for the three months ended March 31, 1998 increased  $1,434,000
or 17.7%.

         The Company made a provision to the  allowance for possible loan losses
of  $345,000 in the three  months  ended  March 31,  1998  primarily  due to the
overall growth  experienced  within the loan portfolio.  An analysis of the loan
portfolio completed by the Company indicates that the current allowance for loan
losses is adequate based on the Company's calculated provision requirements.

         Total loans  charged-off  net of recoveries  for the three months ended
March 31, 1998  amounted to $331,000  compared to $50,000 for the same period in
1997.  Annualized net loan  charge-offs as a percentage of average loans for the
three  months  ended  March 31,  1998 was 0.31%  compared to 0.05% for the three
months ended March 31, 1997 and 0.23% for the year ended December 31, 1997.

         Total other  income was  $941,000  for the three months ended March 31,
1998, a $136,000 or 16.9% increase compared to the same period in 1997.  Service
charges on deposit  accounts  increased by $131,000 or 21.1% over the comparable
period in 1997.  Other  income  increased  by $5,000 for the three  months ended
March 31, 1998, as compared to the same period in 1997.

         Salaries and benefits expense for the three months ended March 31, 1998
was  $3,145,000,  a $398,000 or 14.5% increase over the comparable  1997 period.
This variance resulted  primarily from an increase in overall staffing levels to
accommodate  internal growth as well as regular salary increases and an increase
in the accrual for salary continuation plans. The Company employed 267 full time
equivalent  employees  at March 31, 1998  compared  to 285 full time  equivalent
employees at December 31, 1997 and 259 full time  equivalent  employees at March
31, 1997.

         Total other expenses,  excluding  salaries and benefits,  for the three
months ended March 31, 1998 , was  $2,369,000,  a $156,000 or 7.0% increase from
the  comparable  1997 period.  This was  primarily due to increases in equipment
expense  of  $100,000,  and an  increase  in legal and  professional  expense of
$124,000. These increases were partially offset by a decrease in advertising and
promotion expense of $107,000 and a decrease in stationery expense of $72,000.

         Applicable  income taxes of $1,848,000 for the three months ended March
31, 1998 were  $406,000,  or 28.2% more than the  comparable  1997  period.  The
Company's effective tax rate for the three months ended March 31, 1998 was 39.8%
compared to 39.1% for the same period in 1997.

                                      -12-

<PAGE>


Year 2000

         During  1997,  the Company  began the  implementation  of its Year 2000
Plan. The Company is utilizing both internal and external resources to identify,
correct  or  reprogram  and test the  systems  for year  2000  readiness.  It is
anticipated  that all  reprogramming  efforts  will be complete by December  31,
1998,  allowing  adequate  time for testing.  To date,  confirmations  have been
received by the Company's primary processing vendors that their systems are year
2000 ready.  Based on data  received so far,  the Company  anticipates  spending
approximately  $200,000  over the  remainder of 1998 and 1999 to modify and test
its systems.

Liquidity Management

         Liquidity   represents   the   ability  of  the  Company  to  meet  the
requirements  of customer  borrowing  needs as well as  fluctuations  in deposit
flows.

         The Company manages its liquidity primarily by maintaining  investments
in  overnight  fed  funds,   money  market   mutual  funds,   available-for-sale
securities,  and by maintaining  lines of credit with  correspondent  banks.  At
March 31, 1998, the total of cash and due from banks, overnight fed funds, money
market mutual funds, and available-for-sale  securities represented $317,219,000
or 45.3% of total deposits  compared to  $299,503,000 or 43.8% at year end 1997.
This  increase  in liquid  assets  for the three  months  ended  March 31,  1998
resulted primarily from an increase in deposits which were invested in fed funds
sold and short term investments.

         In the opinion of management,  there are  sufficient  resources to meet
the liquidity needs of the Company at present and projected future levels.

Capital Resources

         Capital  management  is a  continuous  process  of  providing  adequate
capital for current needs and  anticipated  future  growth.  Capital serves as a
source of funds for the  acquisition  of fixed and  other  assets  and  protects
depositors against potential losses. As the Company's assets increase, so do its
capital requirements.

         The Company  and the  Subsidiary  Banks are subject to Federal  Reserve
Board   guidelines  and   regulations   of  the   Comptroller  of  the  Currency
("Comptroller"),  respectively,  governing capital adequacy. The Federal Reserve
Board has established final risk-based and leverage capital  guidelines for bank
holding  companies which are the same as the Comptroller's  capital  regulations
for national banks.

         The Federal Reserve Board capital guidelines for bank holding companies
and  the  Comptroller's   regulations  for  national  banks  set  total  capital
requirements and define capital in terms of "core capital elements"  (comprising
Tier 1 capital) and "supplemental capital elements" (comprising Tier 2 capital).
Tier 1 capital is generally defined as the sum of the core capital elements less
goodwill.  The  following  items are defined as core  capital  elements:  common
shareholders' equity,  qualifying  noncumulative  perpetual preferred stock, and
minority  interests  in  the  equity  accounts  of  consolidated   subsidiaries.
Supplementary  capital  elements  include:  allowance  for loan and lease losses
(which cannot exceed 1.25% of an institution's risk weighted assets),  perpetual
preferred stock not qualifying as core capital,  hybrid capital  instruments and
mandatory   convertible  debt  instruments,   and  term  subordinated  debt  and
intermediate-term  preferred stock.  The maximum amount of supplemental  capital
elements which qualifies as Tier 2 capital is limited to 100% of Tier 1 capital,
net of goodwill.

         Risk-based   capital   ratios  are   calculated   with   reference   to
risk-weighted assets,  including both on and off-balance sheet exposures,  which
are multiplied by certain risk weights  assigned by the Federal Reserve Board to
those assets.  Both bank holding  companies  and national  banks are required to
maintain a minimum ratio of qualifying total capital to risk-weighted  assets of
8%, at least one-half of which must be in the form of Tier 1 capital.  There are
presently  four  risk-weight   categories:   0%  for  cash  and  unconditionally
guaranteed government  securities;  20% for conditionally  guaranteed government
securities;  50% for performing  residential  real estate loans secured by first
liens; and 100% for commercial loans.

         The Federal Reserve Board and the Comptroller  also have  established a
minimum  leverage  ratio of 3% Tier I capital to total  assets for bank  holding
companies and national banks that have received the highest composite regulatory
rating and are not  anticipating or experiencing  any  significant  growth.  All
other institutions will be required to maintain a leverage ratio of at least 100
to 200 basis points above the 3% minimum.

                                      -13-

<PAGE>


<TABLE>
         The  following  tables show the  Company's  and the  Subsidiary  Banks'
risk-based  and  leverage  capital  ratios as of March 31, 1998.  The  Company's
capital ratios  significantly  exceeded the minimum  capital levels  required by
current federal regulations.  Management believes that the Company will continue
to meet the respective minimum capital requirements in the foreseeable future.

<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Risk Based Capital Ratio
As of March 31, 1998
------------------------------------------------------------------------------------------------------------------------------------
                                                   Company                  South Valley              First National
(Dollars in thousands)                       Amount        Ratio        Amount         Ratio        Amount        Ratio
--------------------------------------- -------------- ------------ ------------- ------------- ------------- ------------
<S>                                           <C>           <C>          <C>            <C>          <C>           <C>   
Tier 1 capital                                $70,790       13.72%       $17,529        11.50%       $45,428       12.78%
Tier 1 capital minimum requirement             20,632        4.00%         6,097         4.00%        14,215        4.00%
======================================= ============== ============ ============= ============= ============= ============
      Excess                                   50,158        9.72%        11,432         7.50%        31,213        8.78%
======================================= ============== ============ ============= ============= ============= ============
Total capital                                  75,070       14.55%        19,054        12.50%        48,177       13.56%
Total capital minimum requirement              41,265        8.00%        12,194         8.00%        28,429        8.00%
--------------------------------------- -------------- ------------ ------------- ------------- ------------- ------------
      Excess                                   33,805        6.55%         6,860         4.50%        19,748        5.56%
======================================= ============== ============ ============= ============= ============= ============
Risk-adjusted assets                         $515,811                   $152,419                    $355,368
======================================= ============== ============ ============= ============= ============= ============
</TABLE>

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Leverage Capital Ratio
As of March 31, 1998
------------------------------------------------------------------------------------------------------------------------------------
                                                   Company                  South Valley              First National
(Dollars in thousands)                       Amount        Ratio        Amount         Ratio        Amount        Ratio
--------------------------------------- ------------- ------------ -------------- -------------- ------------ -----------
<S>                                        <C>           <C>            <C>            <C>         <C>          <C>     
Tier 1 capital to quarterly average
    total assets (leverage ratio)            $70,790        9.35%        $17,529          7.92%      $45,428       8.61%
Minimum leverage requirement               22,703 to     3.00% to       6,640 to       3.00% to    15,822 to    3.00% to
                                              37,838        5.00%         11,066          5.00%       26,370       5.00%
--------------------------------------- ------------- ------------ -------------- -------------- ------------ -----------
      Excess                               32,952 to     4.35% to       6,463 to       2.92% to    19,058 to    3.61% to
                                              48,087        6.35%         10,889          4.92%       29,606       5.61%
======================================= ============= ============ ============== ============== ============ ===========
Total quarterly average assets              $756,764                    $221,319                    $527,402
======================================= ============= ============ ============== ============== ============ ===========
</TABLE>


         Federal banking laws impose  restrictions  upon the amount of dividends
the  Subsidiary  Banks may  declare to the  Company.  Federal  laws also  impose
restrictions  upon the amount of loans or advances that the Subsidiary Banks may
extend to the Company. In management's opinion,  these do not affect the ability
of the Company to meet its cash obligations.

                                      -14-

<PAGE>


PART II -- OTHER INFORMATION

ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K

         (a) INDEX TO EXHIBITS

Exhibit                                                            Sequentially
Number                   Exhibit                                   Numbered Page
------                   -------                                   -------------
 3.1   Articles of incorporation of the Company as amended   1/          (*)

 3.2   Bylaws of Company as amended  2/                                  (*)

10.1   Lease -- 601 Abrego Street, Monterey, Premises  3/                (*)

10.2   Lease for 1001 South Main Street, Salinas, Banking office 2/      (*)

10.3   Lease dated December 15, 1988 by and between the Bank             (*)
       and James L. Gattis for 307 Main Street, Salinas Old 
       Town Office. 2/

10.4   Lease dated May 1, 1985 by and between the Bank                   (*)
       and Pacific Capital Bancorp. 4/

10.5   Pacific Capital Bancorp Employee Stock Ownership                  (*)
       Plan and Trust Agreement. 5/

10.6   Master Equipment Lease Agreement between Bank and                 (*)
       Parker North American Corporation. 5/

10.7   Lease dated September 22, 1986 between                            (*)
       Bank and The Saunders Company.  5/

*/   Not Applicable.


----------------
1/ Filed as Exhibits 3.1, 10.21 and 10.32, respectively, to the Company's Annual
Report on Form 10-K (File No.  0-13528)  for the fiscal year ended  December 31,
1988, and are incorporated herein by reference.

2/ Filed as Exhibits 3.2 and 10.17, respectively, to the Company's Annual Report
on Form 10-K (File No.  2-87513)  for the fiscal year ended  December  31, 1984,
which are incorporated by reference.

3/ Filed  as  Exhibit  to the  Company's  Registration  Statement  on Form  S-18
(Registration No. 2-87513), which is incorporated by reference.

4/ Filed as Exhibit 10.20 to the Company's  Annual Report on Form 10-K (File No.
0-13528) for the fiscal year ended December 31, 1985,  which is  incorporated by
reference.

5/ Filed as Exhibits  10.24 through  10.26,  respectively,  to Company's  Annual
Report on Form 10-K (File No.  0-13528)  for the fiscal year ended  December 31,
1986, which are incorporated by reference.

                                      -15-

<PAGE>


Exhibit                                                            Sequentially
Number                   Exhibit                                   Numbered Page
------                   -------                                   -------------
10.9   Lease dated January 24, 1989 by and between First                 (*)
       National Bank of Monterey County and Stanley R.
       Haynes. 6/

10.13  Amendment No. One to Pacific Capital Bancorp                      (*)
       Employee Stock Ownership Plan. 2/

10.14  Amendment No. Two to Pacific Capital Bancorp                      (*)
       Employee Stock Ownership Plan. 7/

10.15  Amendment No. Three to Pacific Capital Bancorp                    (*)
       Employee Stock Ownership Plan. 7/

10.16  Lease dated August 10, 1990 by and between the                    (*)
       Trustees of the Stanley Family Trust and Pacific
       Capital Bancorp for Carmel Office. 7/

10.17  Assignment of Lease dated November 1, 1990 by and                 (*)
       between Pacific Capital Bancorp and First National
       Bank of Monterey-County for Carmel Office. 7/

10.18  Lease dated November 12, 1990 by and between                      (*)
       First National Bank of Monterey County and Carmel
       Monterey Travel for Premises located at 601 Abrego
       Street, Monterey, California. 7/

10.19  Prunetree Shopping Center Lease dated June 28, 1988               (*)
       by and between Dennis R. Keith and Pajaro Valley 
       Bancorporation. 7/


----------------
6/ Filed as Exhibits 10.20 through 10.24, respectively,  to the Company's Annual
Report on Form 10-K (File No.  0-13528)  for the fiscal year ended  December 31,
1989, which are incorporated by reference.

7/ Filed as Exhibits 10.25 through 10.32 to the Company's  Annual Report on Form
10-K (File No.  0-13528) for the fiscal year ended December 31, 1990,  which are
incorporated by reference.

                                      -16-

<PAGE>


Exhibit                                                            Sequentially
Number                   Exhibit                                   Numbered Page
------                   -------                                   -------------
10.20  Lease dated June 21, 1990 by and between Saucito                  (*)
       Land Co. and First National Bank of Monterey County. 7/

10.22  Amendment No. Four to Pacific Capital Bancorp                     (*)
       Employee Stock Ownership Plan. 8/

10.23  Amendment dated May 20, 1991 to Lease dated                       (*)
       December 15, 1988 by and between the Bank and
       James L. Gattis for 307 Main Street, Salinas Old
       Town Office. 8/

10.24  Pacific Capital Bancorp Directors' Stock Option Plan              (*)
       and Form of Stock Option Agreement. 8/

10.26  Pacific Capital Bancorp 1984 Stock Option Plan                    (*)
       and Forms of Agreements as amended to date.  8/

10.30  Business Recovery Services Agreement dated September              (*)
       30, 1991 by and between Bank and J.D.B. & Associates, 
       Inc. 8/

10.31  Consolidated Agreement dated December 17, 1991                    (*)
       by and between Bank and Unisys with Equipment Sale Agreement,
       Software License Agreement and Product License Agreement by
       and between Bank and Information Technology, Inc. 8/

10.32  Fidelity and Deposit Company of Maryland Directors and Officers   (*)
       Liability Insurance Policy including Bank Reimbursement. 8/

10.33  Fidelity and Deposit Company of Maryland                          (*)
       Financial Institution Bond.  8/

10.34  Lease dated January 28, 1993 by and between J.W. and R.W.         (*)
       McClellan, Partners, and First National Bank of Central 
       California. 9/

10.35  Exercise of Lease Option as of September 19, 1992                 (*)
       by and between First National Bank of Central California
       and James L. Gattis. 9/


----------------
8/ Filed as Exhibits 10.34 through 10.35 to the Company's  Annual Report on Form
10-K (File No.  0-13528) for the fiscal year ended December 31, 1991,  which are
incorporated by reference.

9/ Filed as  exhibits  to the  Company's  Annual  Report on Form 10-K  (File No.
0-13528) for the fiscal year ended December 31, 1993,  which are incorporated by
reference.

                                      -17-

<PAGE>


Exhibit                                                            Sequentially
Number                   Exhibit                                   Numbered Page
------                   -------                                   -------------
10.37  Lease dated  November 18, 1993 by and between Hazel Graven        (*)
       and  Vines   Stewart  and  First   National  Bank  of
       Central California. 10/

10.38  Software License Agreement for Platform Transfer Module           (*)
       and Interface dated September 15, 1993 by and between
       First National Bank of Central California and Information
       Technology, Inc. 10/

10.39  Equipment Sale Agreement dated December 16, 1993 by and           (*)
       between First National Bank of Central California and
       Information Technology, Inc. 10/

10.42  Consolidated Agreement for the purchase of computer hardware      (*)
       dated December 20, 1993 by and between First National Bank of
       Central California and Unisys Corporation. 10/

10.46  Amended Pacific Capital Bancorp 1994 Stock Option Plan            (*)
       and Form of Incentive and Non-Qualified Stock Option
       Agreements. 9/

10.47  Amendment No. Five to Pacific Capital Bancorp Employee            (*)
       Stock Ownership Plan and Trust. 10/

10.48  Pacific Capital Bancorp 401(k) Profit Sharing Plan. 10/           (*)

10.49  Equipment Sale Agreement dated March 22, 1995, by and between     (*)
       First National Bank of Central California and
       Information Technology, Inc. 11/

10.50  Equipment Sale Agreement dated February 2, 1996, by               (*)
       and between First National Bank of Central California
       and Information Technology, Inc. 11/

10.52  Employee Welfare Benefit Plan Agreement dated                     (*)
       January 1, 1995, between Pacific Capital Bancorp
       and Great-West Life & Annuity Insurance Co. 11/


----------------
9/ Filed as Exhibits to the Company's  Registration  Statement on Form S-8 (File
No.  33-83848) as filed on September 8, 1994, and Amendment No. 1 to Form S-8 as
filed on November 15, 1994.

10/ Filed as  exhibits  to the  Company's  Annual  Report on Form 10-K (File No.
0-13528) for the fiscal year ended December 31, 1994,  which are incorporated by
reference.

11/ Filed as  exhibits  to the  Company's  Annual  Report on Form 10-K (File No.
0-13528) for the fiscal year ended December 31, 1995,  which are incorporated by
reference.

                                      -18-

<PAGE>


Exhibit                                                            Sequentially
Number                   Exhibit                                   Numbered Page
------                   -------                                   -------------
10.53  Lease Agreement dated October 29, 1996 by and                     (*)
       between James L. Gattis and Pacific Capital
       Bancorp for property located at 517 S. Main
       Street, Salinas  /12

10.57  Employment Agreement dated November 20, 1996 between South        (*)
       Valley National Bank and Brad L. Smith /12

10.58  Employment Agreement dated August 26, 1997 between Pacific        (*)
       Capital Bancorp and Clayton C. Larson /13

10.59  Employment Agreement dated August 26, 1997 between Pacific        (*)
       Capital Bancorp and D. Vernon Horton /13

10.60  Employment Agreement dated August 26, 1997 between Pacific        (*)
       Capital Bancorp and Dennis A. DeCius /13

10.61  Employment Agreement dated August 26, 1997 between Pacific        (*)
       Capital Bancorp and Dale R. Diederick /13

10.62  Amended and Restated Executive Salary Continuation Agreement      (*)
       dated September 23, 1997 between Pacific Capital Bancorp and
       Clayton C. Larson  /13

10.63  Amended and Restated Executive Salary Continuation Agreement      (*)
       dated September 23, 1997 between Pacific Capital Bancorp and
       D. Vernon Horton /13

10.64  Amended and Restated Executive Salary Continuation Agreement      (*)
       dated September 23, 1997 between Pacific Capital Bancorp and
       Dennis A. DeCius /13

10.65  Amended and Restated Executive Salary Continuation Agreement      (*)
       dated September 23, 1997 between Pacific Capital Bancorp and
       Dale R. Diederick /13

10.67  Executive Salary Continuation Agreement between South Valley       21
       National Bank and Brad L. Smith dated March 24, 1998

  27.  Financial Data Schedule                                            33


       (b)   REPORTS ON FORM 8-K

       No reports were filed on Form 8-K for the quarter ended March 31, 1998


----------------
12/ Filed as  exhibits  to the  Company's  Annual  Report on Form 10-K (File No.
0-13528) for the fiscal year ended December 31, 1996,  which are incorporated by
reference.

13/ Filed as exhibits to the Company's  Quarterly  Report on Form 10-Q (File No.
0-13528)  for the period  ended  September  30, 1997 which are  incorporated  by
reference

                                      -19-

<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.

                                                         Pacific Capital Bancorp


Date    May 13, 1998                                     /S/ D. Vernon Horton
       -------------                                     --------------------
                                                         D. Vernon Horton
                                                         Chairman of the Board
                                                         Chief Executive Officer



Date    May 13, 1998                                     /S/ Edward J. Czajka
       -------------                                     --------------------
                                                         Edward J. Czajka
                                                         Senior Vice President
                                                         Corporate Controller

                                      -20-