SANTA BARBARA BANCORP, DEF 14A, 1996-03-15

SANTA BARBARA BANCORP
DEF 14A, 1996-03-15
STATE COMMERCIAL BANKS

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<PAGE> 1

SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )

Filed by the Registrant /X/

Filed by a Party other than the Registrant / /

Check the appropriate box:

<TABLE>
<S> <C>
/ / Preliminary Proxy Statement / / Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12

</TABLE>
SANTA BARBARA BANCORP
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)

- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.

/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).

/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

(1) Title of each class of securities to which transaction applies:

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(2) Aggregate number of securities to which transaction applies:

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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):

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(4) Proposed maximum aggregate value of transaction:

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(5) Total fee paid:

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/ / Fee paid previously with preliminary materials.

/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:

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(2) Form, Schedule or Registration Statement No.:

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(3) Filing Party:

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(4) Date Filed:

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<PAGE> 2
[SANTA BARBARA BANCORP LETTERHEAD]

March 14, 1996

Dear Shareholder:

You are cordially invited to attend the annual meeting of shareholders of Santa
Barbara Bancorp on Tuesday, April 23, 1996, at 2:00 p.m. The meeting will be
held at the Lobero Theatre, 33 E. Canon Perdido, Santa Barbara, California.

We shall present a report on the 1995 performance of Santa Barbara Bancorp and
Santa Barbara Bank & Trust as well as an outline of our plans for the year
1996. A question and answer period will follow.

We look forward to your attendance at this meeting as it provides us with the
opportunity to hear your views as we discuss the progress of Santa Barbara
Bancorp.

We respectfully ask that you sign, date and mail the enclosed proxy promptly in
the stamped envelope which has been provided. By doing so, your shares will be
voted if you are unable to attend the meeting.

Thank you.

Sincerely yours,

[SIG]

Donald M. Anderson
Chairman of the Board

[SIG]

David W. Spainhour
President

[SIG]

William S. Thomas, Jr.
President & Chief Executive Officer
Santa Barbara Bank & Trust

Enclosures
CM

<PAGE> 3
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

OF SANTA BARBARA BANCORP

TO BE HELD APRIL 23, 1996

TO THE SHAREHOLDERS OF SANTA BARBARA BANCORP:

NOTICE IS HEREBY GIVEN that, pursuant to the call of its Board of
Directors, an annual Meeting of Shareholders (the "Meeting") of Santa Barbara
Bancorp (the "Company") will be held at the Lobero Theater, 33 E. Canon
Perdido, Santa Barbara, California, on Tuesday, April 23, 1996, at 2:00 P.M.,
for the purpose of considering and voting on the following matters:

1. Election of Directors. Electing nine (9) persons to the Board of
Directors to serve until the 1997 Annual Meeting or until their
successors are elected and have qualified. The persons nominated by
Management to serve as Directors are: Donald M. Anderson, Frank
Barranco, M.D., Edward E. Birch, Richard M. Davis, Anthony Guntermann,
Dale E. Hanst, Harry B. Powell, David W. Spainhour and William S.
Thomas, Jr.;

2. Directors' Stock Option Plan. To consider and approve the
Company's 1996 Directors' Stock Option Plan;

3. Restricted Stock Option Plan. For approval to increase the
number of shares allocated to the Amended and Restated Restricted
Stock Option Plan;

4. Selection of Auditors. To vote upon a recommendation of the
Board of Directors of the Company to approve the selection of Arthur
Andersen, LLP to serve as independent certified public accountants for
the Company for the 1996 calendar year; and

5. Other Business. Transacting such other business as may properly
come before the Meeting, and any adjournments thereof.

The Board of Directors has fixed the close of business on March 1, 1996 as
the record date for determination of shareholders entitled to notice of, and
the right to vote at, the Meeting.

Section 3.6 of the By-laws sets forth the procedure for nomination of
Directors. That Section provides:

Section 3.6 Nomination of Directors.

3.6.1 Authority to Make Nominations. Nominations for
Directors may be made by the Board of Directors or by any holder of record of
any outstanding class of capital stock of the Corporation entitled to vote for
the election of Directors.

3.6.2 Nomination Procedures. At annual meetings and special
meetings of the shareholders called by the Board of Directors, nominations for
Directors, other than those approved by the Board of Directors of the
Corporation, shall be made in writing and shall be delivered or mailed to the
Secretary of the Corporation at its principal place of business not less than
fourteen (14) days nor more than fifty (50) days prior to scheduled date of the
meeting; provided, however, that if less than twenty-one (21) days' notice of
the meeting is given to the shareholders, such nominations shall be mailed or
delivered to the Secretary of the Corporation not later than the close of
business on the seventh (7th) day following the day on which notice of the
meeting was mailed to the shareholders. Any such notification shall (a) be
accompanied by a written statement signed and acknowledged by

<PAGE> 4

the nominee consenting to his or her nomination and agreeing to serve as
Director if elected by the shareholders, and (b) shall contain the following
information, to the extent known to the nominating shareholder:

A. The name and address of each proposed nominee;

B. The total number of shares of capital stock of
the Corporation expected to be voted for each proposed
nominee;

C. The principal occupation of each proposed
nominee;

D. The name and residence address of the
nominating shareholder; and

E. The number of shares of capital stock of the
Corporation owned by the nominating shareholder.

3.6.3 Defective Nominations. Nominations not made in accordance
with this Section 3.6 may be disregarded by the Chairperson of the meeting, at
his or her discretion, and upon the instructions of the Chairperson, the
inspectors of the election may disregard any votes cast for any such nominee.

3.6.4 Exceptions. The provisions of this Section 3.6 shall apply
only to nominations for Directors who are to be elected at the annual meeting or
any special meeting of shareholders called by the Board of Directors, and this
Section shall not apply to (a) nominations for Directors who are to be elected
at a special meeting of shareholders properly called by the shareholders at
which Directors are to be elected pursuant to Section 305 of the California
Corporations Code to fill a vacancy on the Board of Directors, or (b) the
election of Directors by the written consent of the shareholders pursuant to
Section 603 of the California Corporations Code."

You are urged to vote in favor of each of the proposals by so indicating
on the enclosed proxy and by signing and returning the enclosed proxy as
promptly as possible, whether or not you plan to attend the Meeting in person.
The enclosed proxy is solicited by the Company's Board of Directors. Any
shareholder giving a proxy may revoke it prior to the time it is voted by
notifying the Secretary, in writing, to that effect, by filing with him a later
dated proxy, or by voting in person at the Meeting.

By Order of the Board of Directors

[SIG]
______________________________________
Donald M. Anderson,
Chairman of the Board

Dated: March 15, 1996

<PAGE> 5

PROXY STATEMENT
FOR AN
ANNUAL MEETING OF SHAREHOLDERS
OF
SANTA BARBARA BANCORP
1021 ANACAPA STREET
SANTA BARBARA, CA 93101

TO BE HELD APRIL 23 , 1996

INTRODUCTION

This proxy statement is furnished in connection with the solicitation of
proxies for use at the Annual Meeting of Shareholders (the "Meeting") of Santa
Barbara Bancorp (the "Company"), to be held at the Lobero Theater, 33 E. Canon
Perdido, Santa Barbara, California, 93101, at 2:00 P.M. on Tuesday, April 23,
1996, and at all adjournments thereof.

It is expected that this proxy statement and accompanying Notice and form
of proxy will be mailed to shareholders on or about March 15, 1996.

The matters to be considered and voted upon at the Meeting will include:

2. Directors' Stock Option Plan. To consider and approve the
Company's 1996 Directors' Stock Option Plan;

3. Restricted Stock Option Plan. For approval to increase the
number of shares allocated to the Amended and Restated Restricted
Stock Option Plan;

4. Selection of Auditors. To vote upon the recommendation of the
Board of Directors of the Company to approve the selection of Arthur
Andersen, LLP to serve as independent certified public accountants for
the Company for the 1996 calendar year; and

5. Other Business. Transacting such other business as may properly
come before the Meeting, and any adjournments thereof.

REVOCABILITY OF PROXIES

A proxy for use at the Meeting is enclosed. Any shareholder who executes
and delivers such proxy has the right to revoke it at any time before it is
exercised, (a) by filing with the Secretary of the Company an instrument
revoking it, or (b) by executing a proxy bearing a later date, or (c) by
attending the Meeting and voting in person. Subject to such revocation or
suspension, all shares represented by a properly executed proxy received in
time for the Meeting will be voted by the proxy-holders, in accordance with the
instructions on the proxy. IF NO

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INSTRUCTION IS SPECIFIED WITH REGARD TO A MATTER TO BE ACTED UPON, THE SHARES
REPRESENTED BY THE PROXY WILL BE VOTED IN ACCORDANCE WITH THE RECOMMENDATIONS
OF MANAGEMENT.

PERSONS MAKING THE SOLICITATION

This solicitation of proxies is being made by the Board of Directors of
the Company. The expense of preparing, assembling, printing and mailing this
proxy statement and the material used in the solicitation of proxies for the
Meeting will be borne by the Company. It is contemplated that proxies will be
solicited principally through the use of the mail, but officers, Directors, and
employees of the Company may solicit proxies personally or by telephone,
without receiving special compensation therefor. Although there is no formal
agreement to do so, the Company may reimburse banks, brokerage houses, and
other custodians, nominees and fiduciaries for their reasonable expense in
forwarding these proxy materials to their principals. The proxy materials will
first be sent or given to shareholders on or about March 15, 1996.

VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF

There were issued and outstanding 7,679,345 shares of the Company's common
stock on March 1, 1996. March 1, 1996 has been fixed as the record date for
the purpose of determining the shareholders entitled to notice of, and to vote
at, the Meeting (the "Record Date"). Each holder of the Company's common stock
will be entitled to one vote, in person or by proxy, for each share of common
stock held of record on the books of the Company as of the Record Date, on any
matter submitted to the vote of the shareholders, except in the election of
Directors, where cumulative voting is permitted. See "Cumulative Voting" on
page 3 below.

The presence in person or by proxy of the holders of a majority of the
outstanding shares of stock entitled to vote at the Annual Meeting will
constitute a quorum for the purpose of transacting business at the meeting.
Proposals submitted for approval by the shareholders, other than the election
of Directors, will be deemed approved if they are approved by the affirmative
vote of a majority of the shares of common stock represented and voting at the
Meeting, either in person or by proxy, and the number of shares voting in favor
of the proposal constitutes at least a majority of the required quorum for the
Meeting. This practically means that a proposal will be deemed approved if it
is approved by a majority of the shares of common stock voting on the proposal
and the number of shares voting in favor of the proposal is more than 25% of
the total number of shares of common stock of the Company then issued and
outstanding. Directors shall be elected by a plurality of the votes cast.
Votes that are cast against a proposal will be counted for purposes of
determining the presence or absence of a quorum for the transaction of business
and the total number of votes cast with respect to any proposal. Under
California law, abstentions from voting on any proposal will be counted for
purposes of determining the presence or absence of a quorum for the transaction
of business, but otherwise will not be counted for purposes of determining the
votes cast for or against the proposal and the total number of votes cast with
respect to any proposal. Accordingly, abstentions will not have the same
effect as a vote against a proposal.

If the enclosed proxy is completed in the appropriate spaces, signed,
dated and returned, the proxy will be voted as specified in the proxy. If no
specification is made on a signed, dated and returned proxy, it will be voted
at the discretion of the proxy holders on any matter described in this proxy
statement. The proxy also grants the proxy holders authority to vote as they
deem appropriate, in their sole discretion, on such other business as may
properly come before the Meeting or any adjournments thereof.

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ELECTION OF DIRECTORS OF COMPANY
(PROPOSAL 1)

The By-laws of the Company provide that the number of Directors shall not
be less than seven (7) nor more than thirteen (13) until changed by an
amendment to the Articles of Incorporation or the By-laws duly adopted by the
Company's shareholders. The By-laws further provide that the exact number of
Directors shall be fixed from time-to-time within the stated range by a by-law,
by-law amendment, or resolution adopted by the Company's shareholders or Board
of Directors. The Board of Directors at its December, 1995, meeting approved
an amendment to the By-laws increasing the number of Directors from eight (8)
to nine (9) and elected William S. Thomas, Jr. to fill the vacancy which was
created by the amendment.

At the Annual Meeting, nine (9) Directors (the entire Board of Directors)
are to be elected to serve until the next Annual Meeting of Shareholders or
until their successors are elected and qualified.

A shareholder may withhold authority for the proxy holders to vote for any
or all of the nominees identified below by so indicating on the enclosed proxy.
Further, a shareholder may withhold authority for the proxy holders to vote
for an individual nominee by writing that nominee's name in the appropriate
space provided on the proxy. Unless authority to vote for the nominees is so
withheld, the proxy holders will vote the proxies received by them for the
election of the nominees identified below as Directors of the Company. Should
any shareholder vote for a nominee not identified below and who was properly
nominated, the proxy holders will vote such shareholder's shares in accordance
with his or her wishes. If any of the nominees identified below should be
unable or decline to serve, which is not now anticipated, the proxy holders
shall have discretionary authority to vote for a substitute at the meeting (or
any adjournment thereof), or alternatively, a substitute may be designated by
the present Board of Directors to fill the resulting vacancy. In the event
that additional persons are nominated for election as Directors, the proxy
holders intend to vote all of the proxies received by them in such a manner, in
accordance with cumulative voting, as will assure the election of as many of
the nominees identified below as possible. In such event, the specific
nominees to be voted for will be determined by the proxy holders.

None of the Directors or Executive Officers of the Company or the Bank was
selected pursuant to any arrangement or understanding between themselves and
any other individual (other than arrangements or understandings with Directors
or officers acting solely in their capacities as such). There are no family
relationships between any of the Directors and Executive Officers, and except
as noted below, none serve as Directors of any company which has a class of
securities registered under or which is subject to the periodic reporting
requirements of the Securities Exchange Act of 1934 or any investment company
registered under the Investment Company Act of 1940.

VOTING RIGHTS--CUMULATIVE VOTING

All voting rights are vested in the holders of the common stock of the
Company, each share being entitled to one vote, except with respect to the
election of Directors, as described below.

California State law provides that a shareholder of a California
corporation, or the shareholder's proxy, may cumulate votes in the election of
Directors. That is, each shareholder has a number of votes equal to the number
of shares owned by that shareholder, multiplied by the number of Directors to
be elected, and the shareholder may cumulate such votes for a single candidate
or distribute such votes among as many candidates as is deemed appropriate.
However, a shareholder may cumulate votes only for a candidate or candidates
whose names have been placed in nomination prior to the voting, and only if the
shareholder has given notice at the meeting prior to the voting of the
shareholder's intention to cumulate votes. If any one shareholder has given
such notice, all shareholders may cumulate votes for candidates in nomination.

Certain affirmative steps must be taken by the shareholders of the Company
in order to be entitled to vote their shares cumulatively in the election of
Directors. At the shareholders' meeting at which Directors are to be elected,
no shareholder shall be entitled to cumulate votes (i.e., cast for any one or
more candidates a number of votes greater than the number of the shareholder's
shares) unless the candidates' names have been placed in

<PAGE> 8

nomination prior to the commencement of the voting and a shareholder has given
notice prior to commencement of the voting of the shareholder's intention to
cumulate votes. If any shareholder has given such a notice, then every
shareholder entitled to vote may cumulate votes for candidates in nomination
and give one candidate a number of votes equal to the number of Directors to be
elected multiplied by the number of votes to which that shareholder's shares
are entitled, or distribute the shareholder's votes on the same principle among
any or all of the candidates, as the shareholder thinks fit; the candidates
receiving the highest number of votes, up to the number of Directors to be
elected, shall be elected. It is intended that shares represented by proxies
in the accompanying form will be voted for the election of persons nominated by
Management. Although the Board of Directors does not know whether there will
be any nominations for Directors other than those shown above, if any such
nomination is made, or if votes are cast for any candidates other than those
nominated by the Board of Directors, the persons authorized to vote shares
represented by executed proxies in the enclosed form (if authority to vote for
the election of Directors or for any particular nominees is not withheld) will
have full discretion and authority to vote cumulatively and to allocate votes
among any or all of the nominees of the Board of Directors in such order as
they may determine, provided all the above-listed requirements are met.

The nine nominees for Director receiving the highest number of affirmative
votes shall be elected as Directors. Votes withheld from any Director nominee
are counted for purposes of determining the presence or absence of a quorum and
the total number of votes cast with respect to the election of Directors.
Broker non-votes will not be counted for purposes of determining the number of
votes cast for the election of Directors.

DIRECTORS AND NOMINEES

The following table sets forth as to each Director and each of the persons
nominated for election as a Director of the Company, such person's age, such
person's principal occupations during the past five years, and the period
during which such person has served as a Director of the Company. All of the
nominees were elected as Directors of the Company at the 1995 Annual Meeting of
the Company's shareholders except Mr. Thomas who was appointed in December,
1995, to fill a vacancy on the Board.

Persons nominated to serve on the Company's Board of Directors will
simultaneously serve on the Board of Directors of Santa Barbara Bank & Trust
(the "Bank"), a wholly-owned subsidiary of the Company.

Director Background, Business Experience and
Director Age Since Position with the Company/Bank
-------- --- -------- -----------------------------------
<S> <C> <C> <C>
Donald M. Anderson 68 1971 Chairman of the Board of the Company and
Vice Chairman of the Bank. Mr. Anderson
joined the Bank in October, 1969, as
Vice President and Commercial Lending
Officer. He was elected President, CEO
and Director in 1971 and served in those
capacities until elected Chairman of the
Board in February, 1989. He has served
on numerous charitable, civic and
banking organizations.

Frank Barranco M.D. 65 1989 Dr. Barranco is a retired physician and
was a founding Director of the Community
Bank of Santa Ynez Valley. Prior to his
retirement, he practiced family medicine
in Solvang and was a member of the
teaching staffs at both UCLA and USC
medical schools. He has been Chief of
Staff at Santa Ynez Community Hospital
and has served on the Board of Trustees
of the Santa Ynez School District.

Edward E. Birch 57 1983 Dr. Birch was Vice-Chancellor of the
University of California at Santa
Barbara from 1976 until his retirement
in 1993. He is currently Executive Vice
President for Westmont College in Santa
Barbara, California. He has been
involved in a number of civic and
community organizations, including the
Cancer Foundation of Santa Barbara,
Goleta Valley Community Hospital, the
Santa Barbara Industry Education
Council, and the Santa Barbara Chamber
of Commerce.
</TABLE>

<PAGE> 9

<TABLE>
<S> <C> <C> <C>
Richard M. Davis 61 1984 Mr. Davis is a retired business
executive. He is a past Chairman of the
Board of Directors of Santa Barbara
Cottage Hospital, a past Chairman of the
Santa Barbara Chamber of Commerce, and a
past Chairman of the Board of United Way
of Santa Barbara.

Anthony Guntermann 76 1960 Mr. Guntermann, a Certified Public
Accountant since 1954, recently retired
from the accounting firm of Guntermann,
Thompson & Lanza, Accountants, Inc. (now
McGowen-Guntermann). He has served as a
Director and President of the California
State Board of Accountancy and as a
member of the Santa Barbara City
Council, as well as on numerous civic
and community organizations. He was one
of the organizers of the Bank. He also
was one of the organizers of Investors
Research Fund, Inc.

Dale E. Hanst 64 1983 Mr. Hanst is currently a senior partner
in the law firm of Schramm & Raddue,
having started with the firm in 1960.
He was President of the State Bar of
California in 1984 and served on the
California Commission on Judicial
Performance from 1984 to 1988. Mr.
Hanst is a past President of the Santa
Barbara Zoological Society.

Harry B. Powell 67 1989 Mr. Powell is a retired businessman
residing in Carpinteria. He is a past
President of Rexall Clubs International,
the Carpinteria Business Association and
the Carpinteria Unified School District.

David W. Spainhour 64 1974 Mr. Spainhour is President and Chief
Executive Officer of the Company and
Chairman of the Board of the Bank. Mr.
Spainhour joined the Bank in 1966 as
Controller. He became Cashier in 1969,
Senior Vice President in 1972, was
elected to the Board of Directors in
1974, was named Executive Vice President
in 1980, and elected President in
February, 1989. He served as President
and CEO of the Bank until December,
1995. Mr. Spainhour serves on the
boards of the Santa Barbara Industry
Education Council, Channel City Club,
Westmont College, and United Way of
Santa Barbara.

William S. Thomas, Jr. 52 1995 Mr. Thomas is the Vice Chairman and
Chief Operating Officer of the Company
and President and Chief Executive
Officer of the Bank. Mr. Thomas joined
the Bank in 1994 as Manager of the Trust
and Investment Services Division. Prior
to coming to the Bank, Mr. Thomas was an
Executive Vice President of Bank of
America and Manager of the Financial
Institutions Group from 1992 to 1994.
Prior to that time he spent sixteen
years with Security Pacific National
Bank in various capacities until its
merger with Bank of America. His last
position with Security Pacific was as an
Executive Vice President, Manager
Financial Institutions. He is a member
of the Board of Directors of the Santa
Barbara Chamber of Commerce, Santa
Barbara Symphony and C.A.L.M, and a
member of the Finance Committee of the
Santa Barbara Foundation.
</TABLE>

COMMITTEES OF THE BOARD OF DIRECTORS

The Company had a standing Nominating Committee and Audit Committee during
1995. The Bank had a standing Audit Committee and a Compensation Committee
during 1995.

During 1995 the Nominating Committee, which considers the qualifications
and the composition of the Board of Directors of the Company, was composed of
Messrs. Hanst, Guntermann, Anderson and Spainhour. The Committee met once in
1995. The Committee does not consider shareholder nominations for Director's
positions.

<PAGE> 10

Section 3.6 of the By-laws sets forth the procedure for nomination of
Directors. That Section provides:

"Section 3.6 Nomination of Directors.

3.6.1 Authority to Make Nominations. Nominations for Directors may
be made by the Board of Directors or by any holder of record of any outstanding
class of capital stock of the Corporation entitled to vote for the election of
Directors.

A. The name and address of each proposed nominee;

B. The total number of shares of capital stock of
the Corporation expected to be voted for each proposed
nominee;

C. The principal occupation of each proposed
nominee;

D. The name and residence address of the
nominating shareholder; and

E. The number of shares of capital stock of the
Corporation owned by the nominating shareholder.

The Audit Committees of the Company and the Bank provide for suitable
annual examinations of each branch office and administrative division of the
Bank. The Committees are responsible for reporting the results of the
examinations and the adequacy of internal controls and procedures to the Board.
The Audit Committees are also responsible for recommending to the Board any
changes in doing business or corrective actions necessary for the soundness of
the Bank and the Company. The members of both the Audit Committee of the
Company and of the Bank during 1995 were Anthony Guntermann, Chairman, Dale E.
Hanst, Richard M. Davis, Frank Barranco, Edward Birch, and Harry B. Powell.
Each of the Committees met four (4) times during 1995.

The members of the Bank Compensation Committee during 1995 were Dale E.
Hanst, Anthony Guntermann, Richard M. Davis, and Harry B. Powell. They met one
(1) time during 1995 to determine what the Bank's salary philosophy should be,
set the objectives of the Bank's Salary Administration Program, approve exempt
salary ranges, determine Senior Officers' salaries and perform the function of
overseer to ensure that the objectives of the Salary Administration Program
were being met.

<PAGE> 11

The full Board of Directors met twelve (12) times during 1995. No
Director attended fewer than 75 percent of the total number of meetings of the
Board and of the committees of which he is a member.

EXECUTIVE OFFICERS

Except for Messrs. Anderson, Spainhour and Thomas, the following table
sets forth as to each of the persons who currently serves as an Executive
Officer of the Company and the Bank, such person's age, such person's principal
occupations during the past five years, such person's current position with the
Company and the Bank, and the period during which the person has served in such
position. Each of the Executive Officers named herein serves at the pleasure
of the Board. The information for Messrs. Anderson, Spainhour and Thomas is
provided on pages 4 and 5 of this proxy statement.

<TABLE>
<CAPTION>
Position and Principal Occupations
Officer Age During the Past Five Year
------- --- ----------------------------------
<S> <C> <C>
David A. Abts 51 Currently serves as Executive Vice President of the
Company and Executive Vice President, Retail Banking
Manager and Director of MIS/Operations for the Bank.
Before joining the Bank in July, 1989, he was
President of Key Pacific Services, a data processing
subsidiary of Key Corp., a bank holding company,
from November 1986 to June 1989. Prior to that
time, he was Senior Vice President and Director of
MIS/Operations for Pacific Western Bank in Oregon.

Donald E. Barry 56 Currently serves as a Senior Vice President of the
Company and Senior Vice President and Manager of the
Trust and Investments Division of the Bank. Before
joining the Bank in July, 1995, he was a Regional
Vice President of Chase Manhattan from February,
1993 to July, 1995 in charge of private banking and
from 1987 to 1992 was a Senior Vice President of
Security Pacific National Bank in charge of private
banking.

Donald E. Lafler 49 Currently serves as Senior Vice President and Chief
Financial Officer of the Company and the Bank. From
1987 to 1995 he served as Vice President and
Principal Accounting Officer.

John J. McGrath 53 Currently serves as a Senior Vice President of the
Company and Senior Vice President and Chief Credit
and Lending Officer of the Bank. From 1987 to 1994
he served as Chief Administrative Officer. During
1987, he served as Manager of the Trust Division and
from February 1982 to December 1986, he served as
Loan Administrator of the Bank.

Jay D. Smith 55 Currently serves as Senior Vice President, General
Counsel and Corporate Secretary of the Company and
the Bank. He has served as Legal Counsel of the
Bank since July 1979.

Catherine R. Steinke 42 Currently serves as a Senior Vice President and
Director of the Human Resources Division of the
Bank. Before joining the Bank in March, 1993, she
was Vice President and Manager for the Teleservices
Statewide Operations Division at Bank of America and
held the position of Human Resources Manager for the
group with Security Pacific National Bank from
October, 1990 until its merger with Bank of American
in 1992. Prior to that time, she was Vice President
and Director of Human Resources for Security Pacific
Auto Finance.

Kent M. Vining 48 Currently serves as Senior Vice President and
Strategic Planning Officer of the Company and the
Bank. He served as Chief Financial Officer of the
Bank from April 1980 until July 1, 1995.
</TABLE>

<PAGE> 12

COMMON STOCK OWNERSHIP OF DIRECTORS, EXECUTIVE OFFICERS AND CERTAIN PRINCIPAL
SHAREHOLDERS

The following table sets forth information concerning the beneficial
ownership of the Company's common stock as of December 31, 1995, by each
Director, by each Named Officer (as defined on page 9), by the Directors and
Executive Officers as a group, and by beneficial owners of more than 5 percent
of the Company's outstanding common stock. All share information takes into
account the three-for-two stock split which was distributed February 14, 1996.

AMOUNT AND
NATURE OF PERCENT
BENEFICIAL OF
BENEFICIAL OWNER OWNERSHIP(1) CLASS(2)
------------ --------
<S> <C> <C>
Santa Barbara Bank and Trust, Trustee of the Santa Barbara Bank
and Trust Employee Stock Ownership Trust
1021 Anacapa Street
Santa Barbara, CA 93101 782,265 10.19%
DIRECTORS
Donald M. Anderson 327,601(3) 4.27%
Frank H. Barranco, M.D. 19,665(4) 0.26%
Edward E. Birch 27,890(5) 0.36%
Richard M. Davis 16,575(6) 0.22%
Anthony Guntermann 46,672(7) 0.61%
Dale E. Hanst 58,271(8) 0.76%
Harry B. Powell 16,450(9) 0.21%
David W. Spainhour 217,913(10) 2.84%
William S. Thomas, Jr. 6,019(11) 0.08%
NAMED OFFICERS
David Abts 34,035(12) 0.44%
Jay D. Smith 90,137(13) 1.17%
All Directors and Executive Officers as a Group (16 individuals) 998,684(14) 13.00%
</TABLE>

_______________

(1) Includes all shares beneficially owned, whether directly or indirectly,
together with known associates. Also includes any shares owned, whether
jointly or as community property, with a spouse. Also includes any stock
acquirable by exercise of stock options exercisable within 60 days
following December 31, 1995. All share data are stated as of December 31,
1995.

(2) Percentages are stated to include exercisable stock options accounted for
in the column listing Amount and Nature of Beneficial Ownership. See
Footnote (1) above.

(3) Includes 28,474 shares acquirable by exercise of exercisable stock options.

(4) Includes 7,125 shares acquirable by exercise of exercisable stock options.

(5) Includes 20,108 shares acquirable by exercise of exercisable stock options.

(6) Includes 4,500 shares acquirable by exercise of exercisable stock options.

(7) Includes 19,645 shares acquirable by exercise of exercisable stock options.

(8) Includes 28,910 shares acquirable by exercise of exercisable stock options.

(9) Includes 9,000 shares acquirable by exercise of exercisable stock options.

(10) Includes 1 shares acquirable by exercise of exercisable stock options.

(11) Includes 6,000 shares acquirable by exercise of exercisable stock options.

(12) Includes 24,828 shares acquirable by exercise of exercisable stock options

<PAGE> 13

(13) Includes 25,969 shares acquirable by exercise of exercisable stock
options.

(14) Includes 240,367 shares acquirable by exercise of exercisable stock
options. Actual share ownership as of December 31, 1995, by the Directors
and Executive Officers was 758,317.

EXECUTIVE COMPENSATION

Shown below is information concerning the annual and long-term
compensation for services in all capacities to the Company for the fiscal years
ended December 31, 1995, 1994, and 1993, of those persons who were, as of
December 31, 1995, (i) the chief Executive Officer and (ii) the other four most
highly compensated Executive Officers of the Company (the "Named Officers").
Information regarding share ownership takes into account the three-for-two
stock split distributed February 14, 1996.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
---------------------- ------------
OTHER SECURITIES
ANNUAL UNDERLYING ALL OTHER
SALARY BONUS (1) COMPENSATION(2) OPTIONS COMPENSATION(3)
NAME AND PRINCIPAL POSITION YEAR (DOLLARS) (DOLLARS) (DOLLARS) (NUMBER) (DOLLARS)
- --------------------------- ---- ---------- ---------- ---------------- ------------ ----------------
<S> <C> <C> <C> <C> <C> <C>
Donald M. Anderson 1995 167,500 25,000 5,166 -0- 29,937
Chairman of the Board of the 1994 180,000 65,000 11,552 -0- 36,288
Company 1993 178,333 65,000 12,340 11,250 35,970

David W. Spainhour 1995 288,750 60,000 238,660 17,686 32,053
Chairman of the Board of the 1994 220,833 130,000 8,897 -0- 36,537
Bank 1993 195,833 130,000 73,833 22,500 40,338

William S. Thomas, Jr. 1995 197,497 25,000 -0- 15,000 10,315
President and Chief 1994 61,844 -0- -0- 15,000 731
Executive Officer of the Bank 1993 -0- -0- -0- -0- -0-

David A. Abts 1995 120,073 50,000 550 -0- 13,728
Executive Vice President and 1994 118,333 65,000 -0- -0- 23,627
Director MIS/Operations 1993 108,333 60,000 -0- 11,250 22,381

Jay D. Smith 1995 120,000 40,000 91,695 7,020 25,998
Senior Vice President, General 1994 118,333 65,000 51,561 4,921 21,694
Counsel and Secretary 1993 108,333 60,000 19,850 15,560 23,818
</TABLE>

________________

(1) Amounts in this column represent bonuses awarded by the Company's
Compensation Committee upon evaluation of performance during fiscal years
1994, 1993 and 1992, respectively, but paid during fiscal years 1995, 1994
and 1993, respectively. A total of $35,000 in bonuses was awarded to
executive officers in 1996 for the 1995 fiscal year. Please refer to the
Report of the Compensation Committee on page 14 for additional
information.

(2) Other Annual Compensation consists of insurance premiums (other than term
insurance) and dues and memberships paid on behalf of the Named Officers
for fiscal year 1995, 1994 and 1993. The amount stated for David W.
Spainhour and Jay D. Smith in 1995 includes $235,070 and $88,000,
respectively, received in the form of the difference between the price
paid for stock of the Company purchased upon exercise of employee stock
options and the fair market value of such stock at the date of purchase.

(3) This column includes the amount of ESOP cash contributions and dividends
paid on ESOP shares allocated to the Named Officers, term life insurance
premiums, amounts contributed by the Company on behalf of the

<PAGE> 14

Named Officers to the Company's Incentive & Investment and Salary Savings
Plan which is a defined contribution profit sharing plan which includes a
401(k) savings feature, and the 401(k) matching contribution. Under this
Plan, the Company makes discretionary contributions which are allocated
among Plan participants ratably based on participants' relative compensation
levels. During the Company's last fiscal year, the Company made
discretionary contributions to the Plan on behalf of the Named Officers in
the amounts stated in the following Table entitled "I & I Discretionary
Contributions". Under the 401(k) savings feature of the Plan during 1995,
the Company matched $1.00 for every $1.00 of voluntary employee
contributions up to 3% of employee compensation and $.50 for every $1.00 of
the next 3% of compensation up to a maximum of 4.5% of compensation. During
the last fiscal year, the Company made matching contributions on behalf of
the Named Officers totaling $26,893, in the respective amounts set forth in
the following Table entitled "401(k) Matching Contributions".

I & I DISCRETIONARY CONTRIBUTIONS

<TABLE>
<S> <C>
Donald M. Anderson ...... $7,426
David W. Spainhour ...... $7,426
William S. Thomas, Jr. .. $3,053
David A. Abts ........... $3,426
Jay D. Smith ............ $7,426
</TABLE>

401(K) MATCHING CONTRIBUTIONS

<TABLE>
<S> <C>
Donald M. Anderson....... $6,150
David W. Spainhour....... $6,750
William S. Thomas, Jr. .. $6,943
David A. Abts............ $5,175
Jay D. Smith............. $7,050
</TABLE>

All Other Compensation also includes contributions made by the Company, if any,
on behalf of the Named Officers under the Company's Employee Stock Ownership
Plan ("ESOP"). During the last fiscal year, the Company made no such
contributions to the ESOP on behalf of the Named Officers except for dividends
paid on stock held in the Named Officers' accounts under the Plan and
forfeitures:

ESOP CASH CONTRIBUTIONS AND DIVIDENDS

<TABLE>
<S> <C>
Donald M. Anderson....... $12,927
David W. Spainhour....... $13,413
William S. Thomas, Jr. .. $ 43
David A. Abts.............$ 2,919
Jay D. Smith..............$ 7,922

</TABLE>

The specific number of shares allocated to the participant accounts of each
Named Officer for the last fiscal year of the Company from forfeitures as of the
date hereof, are as follows:

ESOP SHARE ALLOCATIONS

NUMBER OF TOTAL
SHARES ALLOCATED SHARES ALLOCATED
NAMED OFFICERS DURING 1995 AS OF 12/31/95
--------------- ---------------- ----------------
<S> <C> <C>
Donald M. Anderson ...... 48 24,098
David W. Spainhour ...... 48 25,008
William S. Thomas, Jr. .. 20 20
David A. Abts ........... 48 5,327
Jay D. Smith ............ 48 14,711
</TABLE>

<PAGE> 15

The dollar value of these shares allocated to the Named Officers' accounts
during 1995 are represented in the table "ESOP Cash Contributions and
Dividends" above, and are thus included in the above Summary Compensation
Table.

All Other Compensation also includes the dollar value of any premiums paid
by the Company during its last fiscal year with respect to term life
insurance for the benefit of the Named Officers. During the last fiscal
year, the dollar value of such premiums paid on behalf of the Named
Officers was as follows:

TERM LIFE INSURANCE PREMIUMS

<TABLE>
<S> <C>
Donald M. Anderson ...... $3,434
David W. Spainhour ...... $4,464
William S. Thomas, Jr. .. $ 276
David A. Abts ........... $2,208
Jay D. Smith ............ $3,600
</TABLE>

The Company also maintains for the benefit of the Named Officers and other
"key" employees, its Key Employee Retiree Health Plan, which was adopted by
the Company effective December 29, 1992. This Plan is an unfunded plan
which pays a portion of health insurance coverage for retired key employees
and their spouses (but not dependents). While the Named Officers may be
eligible for coverage under this Plan when they retire, no amounts were
paid by the Company during the last fiscal year for coverage for any Named
Officers, nor were any amounts contributed to the Plan during the last
fiscal year. The Company also maintains a similar program for all of its
other employees.

OPTION GRANTS

Shown below is information on grants of stock options to the Named
Officers pursuant to the Company's various employee stock option plans during
the fiscal year ended December 31, 1995, which are reflected in the Summary
Compensation Table on page 9.

<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
-------------------------------------------------------------------
NUMBER OF
SECURITIES PERCENT OF
UNDERLYING TOTAL OPTIONS
OPTIONS GRANTED TO EXERCISE GRANT DATE
GRANTED IN EMPLOYEES IN PRICE EXPIRATION PRESENT
NAME FISCAL 1995(1) FISCAL 1995 (PER SHARE) DATE VALUE(2)
---- -------------- ------------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Donald M. Anderson ...................... -0- 0% -0- - -0-
David W. Spainhour ...................... 5,634 6.76% $19.75 10/20/00 $22,074
"" ...................... 6,279 7.53% $19.75 05/01/02 $24,601
"" ...................... 5,773 6.92% $19.75 10/20/00 $22,621
William S. Thomas, Jr.................... 15,000 17.99% $17.67 07/05/00 $57,920
David A. Abts ........................... -0- 0% -0- - -0-
Jay D. Smith............................. 7,020 8.42% $17.67 05/01/02 $23,671
</TABLE>

_______________

(1) Options granted under the Company's Stock Option Plan and Restricted
Stock Option Plan are administered by the Company's Stock Option
Committee. All of the above options granted during 1995 were pursuant to
the Restricted Stock Option Plan and contained the following terms, in
addition to those terms set forth above: (a) they vest over a period of
five years at the rate of 20% per year; and (b) options granted under the
Restricted Stock Option Plan are subject to the restrictions that the
shares issued may not be transferred without the approval of the Committee
for five years following the option grant or two years following the
exercise of the option, whichever is later. All options granted to Mr.
Spainhour and Mr. Smith were reload options which are granted under the
Plan when someone exercises a stock option by tendering stock already
owned (a so-called stock for stock exercise).

<PAGE> 16

(2) Values are based on Black-Scholes option pricing model adapted for use in
valuing executive stock options. The actual value, if any, a Named
Officer may realize will depend on the excess of the stock price over the
exercise price on the date the option is exercised, and there is no
assurance that the value realized by a Named Officer will be at or near
the value estimated by the Black-Scholes model. The estimated values
under this model are based on certain assumptions as to variables such as
interest rates, stock price volatility and future dividend yield. The
above calculations for the reload options are based on the expected term
of 5 years, a risk-free rate of return of 8.65%, an annual dividend yield
of 2.81%, and stock price volatility of 29%.

OPTION EXERCISES AND FISCAL YEAR-END VALUES

Shown below is information with respect to the unexercised options to
purchase the Company's common stock granted to the Named Officers in fiscal
1995 and prior years under the Company's Stock Option Plan, and Restricted
Stock Option Plan and held by them at December 31, 1995.

<TABLE>
<CAPTION>
AGGREGATE OPTION EXERCISES LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
----------------------------------------------------------------------------------
OPTIONS EXERCISED
DURING FISCAL YEAR 1995 NUMBER OF SECURITIES
-------------------------- UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS HELD AT IN-THE-MONEY OPTIONS AT
ACQUIRED VALUE DECEMBER 31, 1995 DECEMBER 31, 1995(1)
ON EXERCISE REALIZED(1) -------------------------- ---------------------------
NAME (NUMBER) (DOLLARS) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ ------------ ----------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Donald M. Anderson ...... -0- -0- 28,474 11,667 $288,728 $89,397
David W. Spainhour ...... 29,586 235,070 1 38,937 $22 $48,226
William S. Thomas, Jr. .. -0- -0- 6,000 24,000 $16,998 $57,992
David A. Abts ........... -0- -0- 24,828 10,104 $204,154 $78,656
Jay D. Smith ............ 12,000 88,000 25,968 18,687 $155,235 $104,604
</TABLE>

_______________

(1) The value realized from options exercised during Fiscal Year 1995 and the
value of unexercised in-the-money options at December 31, 1995 are
calculated by determining the difference between the estimated fair market
value of the stock underlying the options, based on third-party
transactions reported to the Company ($19.83 per share at year end), and
the exercise price of the options as of the exercise date or as of
year-end, respectively.

EXECUTIVE EMPLOYMENT CONTRACTS

The Company has no contract of employment with any Named Officer, nor does
it have any compensatory plan or arrangement with any Named Officer concerning
termination of employment or change in control of the Company.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Bank's Compensation Committee is composed of four of the Bank's
"outside" Directors: Dale E. Hanst, Chairman, Anthony Guntermann, Richard M.
Davis and Harry B. Powell. None of these Directors has ever been employed by
the Company or the Bank in any position, other than as a Director. Mr. Hanst
is a senior partner in the law firm of Schramm & Raddue, Santa Barbara,
California. During the past fiscal year, Schramm & Raddue served as outside
corporate and litigation counsel to the Company and the Bank.

No Executive Officer of the Company or the Bank had any interlocking
relationship with any other for-profit entity during the last fiscal year,
including (a) serving on the compensation committee of any other such entity,
or (b) serving as a Director of any other such entity.

<PAGE> 17

EXTENT OF PARTICIPATION IN THE COMPANY'S STOCK PLANS

As of the date of this proxy statement, the following number of
employees/Directors of the Company and/or the Bank were eligible to participate
and were participating in each of the employee/Director plans of the Company:

<TABLE>
<CAPTION>
NUMBER NUMBER
PLAN ELIGIBLE PARTICIPATING
---- -------- -------------
<S> <C> <C>
Employee Stock Ownership Plan .. 409 409
Stock Option Plan .............. 82 73
Restricted Stock Option Plan ... 82 73
Director Stock Option Plan ..... 6 6
</TABLE>

SECURITIES SUBJECT TO OPTION PLANS

The following tables set forth information, as of December 31, 1995 (as
adjusted to reflect subsequent stock splits and stock dividends), regarding
options under the various employee and Director stock option plans of the
Company:

STOCK OPTION PLAN
<TABLE>
<CAPTION>

NUMBER OF
SHARES REMAINING
RESERVED FOR
ISSUANCE NUMBER OF SHARES NUMBER OF SHARES
(EXCLUSIVE OF ISSUED PURSUANT SUBJECT TO WEIGHTED AVERAGE RANGE OF
OUTSTANDING TO EXERCISES OF OUTSTANDING EXERCISE PRICE EXPIRATION
OPTIONS) OPTIONS OPTIONS PER SHARE DATES
- ---------------- ---------------- ---------------- ---------------- -----------
<S> <C> <C> <C> <C>

-0- 1,097,136 112,928 $12.44 06/01/97
to 07/01/99
</TABLE>

RESTRICTED STOCK OPTION PLAN

192,922 101,777 455,301 $13.47 05/01/97
to 05/20/02
</TABLE>

DIRECTOR STOCK OPTION PLAN

50,536 222,255 98,287 $12.53 07/02/96
to 07/03/00
</TABLE>

COMPENSATION OF DIRECTORS

The Company has a policy of paying non-employee Directors an annual
retainer of $6,000 plus $500 per Board meeting attended and $250 per committee
meeting attended, except for the Executive Committee and the

<PAGE> 18

Loan Policy and Review Committee. Each outside Director who is a member of the
Executive Committee is paid $1,000 per month and each member of the Loan Policy
and Review Committee is paid $400 per meeting. Total Directors' fees paid in
1995 were $191,432.

REPORT OF COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION

The Compensation Committee of the Bank is composed of the undersigned
independent outside Directors. The Committee meets after the end of each year
to review the performance of the Bank's Chief Executive Officer and its other
Executive Officers, including those named in the Summary Compensation Table set
forth above, during the just-completed calendar year and to make
recommendations to the Board on executive salaries for the ensuing year and
bonuses for the past year. The Committee met in February, 1995 to make its
compensation recommendations for calendar year 1995. The Committee met again
in January and February, 1996 to review the Bank's 1995 performance and
recommend bonuses for the Bank's Executive Officers which are actually paid in
1996.

The Committee makes this report to the Shareholders so that they may be
fully informed as to the factors utilized by the Committee in making its
recommendations to the Board of Directors concerning compensation levels for
the Bank's senior executives for calendar year 1995. The discretionary
components of executive compensation (excluding those benefits which are
generally available to all employees, such as ESOP contributions, insurance,
etc.) are salary, bonus and stock options.

In considering salary levels of the Chief Executive Officer and other
Executive Officers, the Committee's recommendations, while subjective, are
intended to be competitive within the industry to ensure retention of the
Bank's high quality Executive Officers, and to maintain the "team approach" to
Management of the Bank. In making these recommendations, the Committee
considers the compensation levels of peer group companies (which are other
California independent community banks) through reference to information
available in the industry such as the State Banking Department's Executive
Officer Compensation Survey, the Survey of Executive Compensation of California
Independent Banks and other relevant surveys prepared by industry consultants.

Another component of officer and executive compensation is the bonuses
which are available to the Bank's Executive Management and other Senior
Officers. The bonus recommendations of the Committee are based upon
performance against individual goals as well as the Bank's overall performance
for the period in question as measured by its profitability and its capital
levels. In addition, the Bank's performance relative to the industry in terms
of returns on assets and equity is an important factor. The Committee also
considers the Bank's problem asset levels, its loan production, the quality of
its asset-liability management and its regulatory compliance. The overall
value of the Bank and shareholder equity levels are also important factors
considered by the Committee in making its recommendations. The importance of
the Bank's performance in the setting of bonus and compensation levels is best
understood by comparing the bonus levels for the last three years. In 1993 (a
high performance year for the Bank), the bonuses distributed were $1,055,400.
In 1994 (a year of average performance), the bonuses distributed were $750,350.
In 1995, which was considered to be a substandard performance year, a total of
$223,750 was distributed in bonuses, which was almost 80% lower than those paid
in 1993.

A final component of executive compensation is stock options which are
granted from time-to-time to members of the executive group. Stock options are
primarily utilized to provide longer range incentives to the executives to
insure their long-range commitment to the Bank. Grants of stock options are
determined by the Company's Stock Option Committee after consultation with the
Compensation Committee.

SANTA BARBARA BANK & TRUST
COMPENSATION COMMITTEE

Dale E. Hanst, Committee Chairman
Richard M. Davis, Committee Member
Anthony Guntermann, Committee Member
Harry B. Powell, Committee Member

<PAGE> 19

PERFORMANCE GRAPH

The following graph compares the yearly percentage change in the Company's
cumulative total shareholder return on its outstanding common stock, stated as
if a $100 initial investment had been made at the beginning of the period,
including reinvestment of dividends, utilizing a measurement period beginning
on December 31, 1990 through December 31, 1995, measured against (i) the
Standard & Poor's 500 Stock Index and (ii) Montgomery Securities' Southern
California Bank Proxy Index as published in its Western Bank Monitor.

1990 1991 1992 1993 1994 1995
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Santa Barbara Bancorp $100.00 $ 84.22 $124.19 $146.83 $173.77 $212.74
S&P 500 $100.00 $126.31 $131.95 $141.25 $139.08 $186.52
Montgomery Securities $100.00 $100.98 $100.50 $122.83 $140.19 $177.81

</TABLE>

<PAGE> 20

APPROVAL OF 1996 DIRECTORS' STOCK OPTION PLAN
(PROPOSAL 2)

The shareholders approved the creation of the Company's Director Stock
Option Plan (The "1986 Plan")at the 1986 Annual Meeting. Amendments to the
1986 Plan were approved by the shareholders at the 1992 Annual Meeting. The
1986 Plan expired by its term in January, 1996.

On February 27, 1996, the Board of Directors approved adoption of the
Company's 1996 Directors' Stock Option Plan (The "1996 Plan"), subject to the
approval of the shareholders. A copy of the 1996 Plan is attached hereto as
Exhibit A.

When the 1986 Plan expired, there were 50,536 shares remaining available
for the grant of options which have now been canceled. The 1996 Plan provides
that the maximum aggregate number of shares to be reserved for issuance upon
the exercise of options granted under the 1996 Plan is 150,000.

The Company believes that the adoption of the Plan is necessary and
appropriate in order to permit the Company to attract and retain qualified
individuals to its Board of Directors and to adequately compensate them for
their services to the Company.

DESCRIPTION OF
1996 DIRECTORS' STOCK OPTION PLAN

Administration of the Plan. The 1996 Directors' Stock Option Plan is a
"formula" plan, thereby qualifying it under Rule 16b-3 promulgated by the
Securities and Exchange Commission under the Securities Exchange Act of 1934.
As a "formula" plan, options are granted under the 1996 Plan on an annual basis
in accordance with the formula established in the 1996 Plan itself, rather than
pursuant to the exercise of any discretion by an administrative committee.
Pursuant to the terms of the Plan, each eligible participant Director would be
entitled to receive a grant of an option for fifteen hundred (1,500) shares of
the common stock of the Company on July 1, 1996 if the Plan is approved by the
shareholders, and on the same date each year thereafter. Directors of the
Company who are otherwise employed by the Company are not eligible to
participate under the 1996 Plan. Of the current Board members, six (6) would
be eligible to participate in the 1996 Plan as of the date hereof.

Terms of Options. Options granted under the Plan are not transferable,
except in the event of the optionee's death. The term of each option granted
under the 1996 Plan is five years. The expiration date of any option is
accelerated if the optionee's continuous status as a Director of the Company is
terminated for any reason. The option expiration date also accelerates in the
event of death or permanent disability of the optionee, in which case the
option must be exercised within twelve months after the date of death or
disability. The exercise price for any options granted pursuant to the 1996
Plan must be no less than 100% of the fair market value of the Company's common
stock per share on the date of the grant of the option. Payment of the
exercise price under an option may be made in whole or in part in the form of
cash or stock of the Company (valued at its then fair market value). Options
granted under the 1996 Plan become exercisable only after the expiration of six
months following the date of grant.

Amendment and Termination of the Plan. The Board of Directors may amend,
modify or terminate the 1996 Plan at any time without notice, provided that no
outstanding option may be adversely affected thereby, without the optionee's
consent. The approval of the Company's stockholders is required only for
amendments that materially increase the number of shares available for issuance
under the 1996 Plan; materially modify the requirements as to eligibility for
participation in the 1996 Plan; or increase the benefits accruing to
participants under the Plan. Furthermore, the "formula" aspects of the 1996
Plan, described above, may not be amended more than once every six months,
other than to comport with changes in the Internal Revenue Code or the rules
and regulations thereunder.

The 1996 Plan will automatically terminate on December 31, 2005, unless it
has previously been terminated by the Board of Directors, but options granted
before the termination of the 1996 Plan may be exercised until they expire in
accordance with their terms.

<PAGE> 21

Restrictions on Stock Issued Pursuant to the Plan. The stock option
agreements covering any options granted under the 1996 Plan must provide that
stock issued pursuant thereto shall be subject to the following restriction:
Such stock may not be sold, exchanged, transferred, pledged, hypothecated or
otherwise disposed of until the later of (a) five years following the date of
the option is granted, or (b) two years following the date the option is
exercised; provided that such restriction does not apply to the optionees
surrender of the stock to the Company on a stock-for-stock exercise of an
option.

Federal Income Tax Effects of Directors' Stock Options. The options
granted under this 1996 Plan constitute "non-statutory" options for federal and
state income tax purposes. No taxable income results to a Director from the
grant of a non-statutory option to purchase common stock, nor is the Company
entitled to a deduction with respect to such grant.

However, the exercise of such an option generally results in a taxable
event. An individual who purchases shares by exercising a non-statutory
option, will realize ordinary income in the year of the purchase (assuming the
stock received is not restricted stock). The amount of this income is equal
(i) to the fair market value of the shares of common stock on the date of
exercise, minus (ii) the purchase price. The Company is entitled to a
corresponding deduction in an amount equal to any ordinary income realized by
the Director.

Upon the disposition of stock acquired by exercising a non-statutory
option under the 1996 Plan, any gain or loss will be taxed as a capital gain or
loss (represented by the difference between the amount of the sales proceeds
and the adjusted basis in the stock, which would include the amount of gain
recognized on exercise), and this gain would be treated as a short or long-term
capital gain (or loss), depending upon how long the individual has held the
stock from the date of the exercise of the option.

Reload Features of Options under the Plan. The 1996 Plan provides for the
issuance of what are commonly known as "reload" options, which are designed to
encourage "stock-for-stock" exercises of options by Directors. The "reload"
features of the Plan call for the grant of an additional "reload" option to any
Director who exercises any outstanding option by tendering stock of the
Company. The number of shares covered by this new reload option is equal to
the number of shares tendered in the stock-for-stock exercise (in essence,
replacing those shares); the exercise price would be equal to the then-current
market value of the shares; and the option exercise period would be equal to
the remaining term of the underlying option, or five years, whichever is
greater. All the other terms of the reload option would be identical to the
underlying option.

The following table sets forth information regarding the options grants
that would be made under the 1996 Plan as of July 1, 1996, (i) to each Named
Executive Officer, (ii) to all current executive officers as a group and (iii)
to all non-employee Directors as a group. The 1996 Plan permits the grant of
options only to non-employee Directors of the Company. As a result, no options
will be granted to the persons identified in the following table so long as
they are employees of the Company

<TABLE>
<CAPTION>
OPTIONS EXERCISE PRICE
IDENTITY OF PERSON OR GROUP GRANTED PER SHARE
- --------------------------- ------- -------------
<S> <C> <C>
Donald Anderson -0-
David W. Spainhour -0-
William S. Thompson, Jr. -0-
David A. Abts -0-
Jay D. Smith -0-
All current Executive Officers as a group -0-
All non-Executive Directors as a group (6 persons) 9,000 $23.00
</TABLE>

For purposes of this table, he Company has used a fair market value of
$23.00 per share which was the value of the Company's common stock as of the
latest practicable date as determined by third-party transactions reported to
the Company. The actual exercise price as of July 1, 1996 will be equal to the
per share fair market value of the Company's stock as of that date.

<PAGE> 22

Shareholder Approval. An approval of the 1996 Plan will require the
affirmative vote of a majority of the shares present (whether in person or by
proxy) and voting at the Meeting.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE 1996 DIRECTORS'
STOCK OPTION PLAN.

(INTENTIONALLY LEFT BLANK)

<PAGE> 23

APPROVAL TO INCREASE THE NUMBER OF SHARES ALLOCATED TO
THE AMENDED AND RESTATED RESTRICTED STOCK OPTION PLAN
(PROPOSAL 3)

On February 27, 1996, the Board of Directors adopted the Company's Amended
and Restated Restricted Stock Option Plan (referred to herein as the "RSOP" or
the "Plan"), subject to the approval of the shareholders. A copy of the Plan is
attached as Exhibit A hereto. The sole purpose of the amendment and
restatement of the Plan (which was originally approved by the shareholders at
the 1993 Annual Meeting) was to increase the number of shares allocated to the
Plan.

The purpose of the Plan is to permit the Company to attract, motivate and
retain qualified key employees. Currently, there are only 192,922 shares
available for issuance of new stock options. Since the Bank has hired a number
of new key officers recently and has not granted a substantial number of stock
options for the past two years, the Board's Stock Option Committee has
recommended that there is a need to grant a number of new stock options.
Increasing the number of shares reserved under the Plan by 250,000 will allow
the Board to meet its objective.

The following discussion summarizes the significant features of the Plan,
as amended and proposed for shareholder approval.

DESCRIPTION OF RESTRICTED STOCK OPTION PLAN

Administration of the Plan. The Plan is administered by a Committee
appointed by the Board of Directors and consisting of not less than three
members of the Board who do not participate in the Plan. The Committee has full
authority to construe and implement the Plan, to select the individuals who
will be eligible for options granted under the Plan, to determine the number of
shares that such individuals may acquire as well as the option price thereof,
to impose restrictions on the transferability of shares acquired pursuant to
the exercise of options granted under the Plan (as described in more detail
below) and to prescribe all other terms and conditions of each option granted
under the Plan.

Eligibility. The Committee may grant options to purchase shares of common
stock to select employees including officers and Directors, provided they are
also employees of the Company or a subsidiary of the Company. The selection of
particular employees who will receive options is at the discretion of the
Committee. Eligibility is limited to full-time salaried employees who, in the
judgment of the Committee, are qualified by position, training or ability to
contribute substantially to the progress of the Company. As of the date hereof,
there were approximately 100 employees who the Company feels might be eligible
to receive options under the Plan. However, employees have no vested rights in
the Plan nor are they entitled to receive the grant of an option unless and
until the Committee, in its sole discretion, approves the grant of an option.
Individuals who serve on the Committee are not eligible to participate in the
Plan, nor are individuals who own stock possessing more than 10% of the total
combined voting rights or value of all classes of stock outstanding. Each of
the officers named in the Executive Compensation Table set forth above would be
eligible to receive options under the Plan (except to the extent that they
serve on the Committee or may so serve in the future).

Reserve of Shares. Currently the Plan reserves a total of 750,000 of
authorized but unissued shares of the Company's common stock to be available
for issuance under the Plan pursuant to the exercise of options granted
thereunder. The aggregate market value of the shares remaining in the reserve
and available for the grant of options, based on the estimated fair market
value of the Company's Common shares as of the latest practicable date, would
be $10,187,206. The Plan provides for adjustment in this reserve in the event
of, among other things, any stock splits or stock dividends and any
combinations or reclassifications of the Company's outstanding Common shares.

Grant and Exercise of Option. Options granted under the Plan may be
incentive stock options or non-statutory stock options for federal and state
tax purposes (see discussion below). Options granted under the Plan are not
transferable, except in the event of the optionee's death, and options granted
under the Plan may be exercised

<PAGE> 24

only within the period prescribed by the Committee. The maximum term of any
incentive option granted under the Plan is five years. The maximum term for any
non-statutory option is ten years.

Options generally become exercisable ("vest") at the rate of 20% after
each year of employment following grant of the options (but in the event of a
merger, reorganization or similar restructuring of the Company, all outstanding
options would vest in full). However, the Committee has discretion to establish
other vesting schedules, as it deems appropriate in specific cases, so long as
the vesting is over no longer a period than 20% per year over five years. With
respect to options granted to corporate "insiders," however, such options first
become exercisable only after the expiration of six months following the date
of grant.

The expiration of any option is accelerated if the optionee's employment
with the Company terminates for any reason, and the option has to be exercised
within thirty days following the employee's termination. If the optionee's
employment with the Company is terminated by reason of the employee's
retirement, the option has to be exercised within three months after the date
of retirement. The option expiration date also accelerates in the event of
death or permanent disability of the option holder, in which case the option
must be exercised within twelve months after the date of death or disability.

The exercise price under an option is also set by the Committee at the
time of grant. However, it cannot be set lower than 100% of the fair market
value of common stock on the date of grant. The Company estimates that the
market value of the Company's common stock as of the latest practicable date
was approximately $23.00 per share, based on third-party transactions reported
to the Company. Payment of the exercise price under an option may be made in
whole or in part in the form of cash or stock of the Company (valued at its
then fair market value).

Restrictions on Stock Issued Pursuant to the Plan. The Plan gives the
Committee the discretion to impose restrictions on the transferability of any
shares issued pursuant to the Plan. Unless the Committee otherwise designates,
pursuant to its authority under the Plan, the stock option agreements covering
any options granted under the Plan must provide that stock issued pursuant
thereto shall be subject to the following restriction: Such stock may not be
sold, exchanged, transferred, pledged, hypothecated or otherwise disposed of
without the prior written approval of the Committee until the later of (a) five
years following the date of the option is granted, or (b) two years following
the date the option is exercised; provided that such restriction does not apply
to the optionee's surrender of the stock to the Company on a stock-for-stock
exercise of an option.

Amendment and Termination of the Plan. The Board of Directors may amend,
modify or terminate the Plan at any time without notice, provided that no
outstanding option is adversely affected thereby, without the optionee's
consent. The approval of the Company's stockholders is required only for
amendments that materially increase the number or shares available for issuance
under the Plan; materially modify the requirements as to eligibility for
participation in the Plan; or, otherwise increase the benefits accruing to
participants under the Plan. The Plan will automatically terminate on January
29, 2002, unless it has previously been terminated by the Board of Directors;
but options granted before the termination of the Plan may be exercised until
they expire in accordance with their terms.

Federal Income Tax Effects of Non-statutory Options. No taxable income
results to an employee from the grant of a non-statutory option to purchase
common stock, nor is the Company entitled to a deduction with respect to such
grant.

However, the exercise of such an option generally results in a taxable
event. An individual who purchases shares by exercising a non-statutory option,
generally will realize ordinary income in the year of the purchase. The amount
of this income is equal to (i) the fair market value of the shares of common
stock on the date of exercise of the option, minus (ii) the option exercise
price. Where the stock issued upon exercise of the options is subject to both a
substantial risk of forfeiture and a restriction on transfer, the participant
will realize income only upon the lapse of such risk of forfeiture or the
expiration of these restrictions. The amount of this income will be equal (i)
to the fair market value of the shares of common stock on the date of lapse of
the risk of forfeiture or restrictions, minus (ii) the option exercise price.
Alternatively, the participant may make an election under Section 83(b) of the
Internal Revenue Code (the "code") to be taxed upon exercise of the option, as
though such risk of forfeiture or

<PAGE> 25

restrictions did not exist. In either case, the Company is entitled to a
corresponding deduction in an amount equal to any ordinary income realized by
the employee.

Upon the disposition of stock acquired by exercising a non-statutory
option under the Plan, any gain or loss will be taxed as a capital gain or loss
(represented by the difference between the amount of the sales proceeds and the
adjusted basis in the stock, which would include the amount of gain recognized
on exercise), and this gain would be treated as a short- or long-term capital
gain (or loss), depending upon how long the individual has held the stock from
the date of the exercise of the option.

Federal Income Tax Effects of ISOs. Neither the optionee nor the Company
incurs any tax consequence as the result of the grant of an incentive stock
option ("ISO") under the Plan. Likewise, under Section 422 and related
provisions of the Code, the optionee has no taxable income upon exercising an
ISO (subject to the alternative minimum tax rules discussed below), and the
Company receives no deduction at that time. Further, upon the disposition of
stock acquired by exercising an ISO granted under the Plan, any gain would be
taxed as a capital gain. The amount of gain is equal to the difference between
(i) the sales price of the shares and (ii) the holder's basis in the shares
(i.e. the exercise price at which they were acquired.) The Company is not
entitled to any deduction under these circumstances.

However, if the option holder failed to hold the shares for a period of
two years following the date of grant of the option and one year following the
date of exercise of the option, (in which case the disposition is referred to
as a "disqualifying disposition"), then the option holder is taxed on the
difference between the sales price and the option exercise price. This gain is
taxed as ordinary income to the extent of the difference between the exercise
price and the fair market value of the stock on the date of exercise (or the
amount realized from the sale, if that amount is less), with any balance taxed
as capital gains. In these circumstances, the Company is entitled to a
deduction equal to the amount of ordinary income realized by the option holder.

The extent of participation of individual employees in ISOs granted under
the Plan also is limited by federal tax law. The aggregate fair market value of
the shares for which ISOs first become exercisable by any individual under all
plans of the Company cannot exceed $100,000 in any calendar year.

Alternative Minimum Tax. The "spread" under an ISO, (i.e., the difference
between (i) the fair market value of the shares at exercise and (ii) the
exercise price) is treated as an adjustment to taxable income for alternative
minimum tax ("AMT") purposes for the year of exercise (or for the year of lapse
of any restriction on the stock, if applicable); that is, alternative minimum
taxable income is increased by the amount of the spread, potentially subjecting
the holder to the AMT. This ISO AMT adjustment would be eliminated by a
disqualifying disposition of the ISO shares, provided the disposition occurs in
the taxable year in which the ISO is exercised. The AMT does not affect the tax
consequences of the Plan to the Company.

Reload Features of Options Under the Plan. The Plan provides for the
issuance of what are commonly known as "reload" options, which are designed to
encourage "stock-for-stock" exercises of options by employees. In a
stock-for-stock exercise of an outstanding stock option, the holder of the
option tenders the purchase price in the form of shares of the common stock of
the Company already owned by the holder, instead of tendering the purchase
price in cash. The advantage of this for the holder of the option is that an
expenditure of cash is not necessary at the time of exercise; however, it also
results in a dilution of the potential stock ownership position of the option
holder. The "reload" features of the Plan are designed to replenish this
dilution. The Plan calls for the grant of an additional "reload" option to any
option holder who exercises an outstanding option by tendering stock of the
Company. The number of shares covered by this new reload option is equal to the
number of shares tendered in the stock-for-stock exercise (in essence,
replacing those shares); the exercise price would be equal to the then-current
market value of the shares; and the option exercise period would be equal to
the remaining term of the underlying option, or five years, whichever is
greater. All the other terms of the reload option would be identical to the
underlying option.

Because of the substantial overlap of options granted under the previous
employee Stock Option Plan, which also carried a "reload" feature, the
Committee is granted the discretion to honor options granted under the "old"
plan with reloads granted under the new Plan. In other words, if an "old"
option is exercised (after expiration of the "old"

<PAGE> 26

plan) on a "stock-for-stock" basis, with a portion of the exercise price being
paid in previously owned shares of the Company, the Committee has the
discretion to issue a reload option to that employee under the Plan to replace
those shares tendered upon exercise of the "old" option.

The Plan also contains certain restrictive features designed to prevent
abuse of the reload options and ensure that they fulfill their intended
function of enhancing share ownership by employees and Directors. For example,
the Plan provides that the shares issued on exercise of any option must be held
for a period of one year following exercise of the option. If those shares are
sold before one year following exercise of the option, then the reload option
terminates; and as a corollary, the Plan provides that any reload option itself
may not be exercised for one year following its grant. There are also
restrictions designed to ensure compliance with applicable securities laws and
to minimize the administrative burden associated with stock-for-stock
exercises.

The following table sets forth information regarding the options grants
made under the Restricted Plan during the 1995 fiscal year, (i) to each Named
Executive Officer, (ii) to all current executive officers as a group, (iii) all
Directors who are not executive officers as a group and (iv) to all employees
as a group.

<TABLE>
<CAPTION>
WEIGHTED AVERAGE
OPTIONS EXERCISE PRICE
IDENTITY OF PERSON OR GROUP GRANTED PER SHARE
- -------------------------------------------------- ------------ ----------------
<S> <C> <C>
Donald M. Anderson -0- $ 0.00
David W. Spainhour 17,686 (1) $19.75
William S. Thomas, Jr. 15,000 $17.67
David A. Abts -0- $ 0.00
Jay D. Smith 7,020 (1) $17.67
All current Executive Officers as a group 49,235 (2) $17.62
All non-Executive Directors as a group (6 persons) -0-
All employees as a group 80,452 (3) $18.26
</TABLE>

_____________________

(1) All options granted to Mr. Spainhour and Mr. Smith were reload options
which were granted in connection with their stock-for-stock exercise of
existing options granted under the Company's stock option plans.

(2) Of this total, 26,735 shares were reload grants including Mr. Spainhour's
and Mr. Smith's.

(3) Of this total, 9,686 were reload grants arising from the stock for stock
exercise of options granted under the Stock Option Plan and 28,766 were
reload grants similarly arising under the Restricted Stock Option Plan.

The Company has determined that the fair market value of the Company's
common stock was $23.00 per share as of the latest practicable date as
determined by third-party transactions reported to the Company.

Shareholder Approval. An approval to increase the number of shares
allocated to the Plan will require the affirmative vote of a majority of the
shares present (whether in person or by proxy) and voting at the shareholders'
meeting.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL

<PAGE> 27

SELECTION OF INDEPENDENT ACCOUNTANTS
(PROPOSAL 4)

The firm of Arthur Andersen, LLP served as independent certified public
accountants for the Company and the Bank with respect to the year 1995, and has
been recommended by the Board to be the Company's and the Bank's accountants
for calendar year 1996. It is expected that one or more representatives of
Arthur Andersen, LLP will be present at the meeting, and will be given the
opportunity to make a statement, if desired, and to respond to all appropriate
questions.

Audit services performed by Arthur Andersen, LLP for the year ended
December 31, 1995 consisted of examination of the financial statements of the
Company, the Bank and its employee benefit plans, certain services related to
filings with the Securities and Exchange Commission, and consultation on
matters related to accounting and financial reporting. In addition to these
services, Arthur Andersen, LLP performed certain non-audit services consisting
primarily of consultation on matters relating to the preparation of tax
returns, the total fees for which amounted to approximately 17.7% of the total
fees for services paid to Arthur Andersen, LLP for the year ended December 31,
1995. All such services were approved by the Company's Audit Committee, which
has determined the firm of Arthur Andersen, LLP to be fully independent of the
operations of the Company.

RECOMMENDATION OF THE BOARD OF DIRECTORS

The Company's Board of Directors recommends that the shareholders approve
Arthur Andersen, LLP to serve as independent certified public accountants for
the Company for the calendar year 1996. The affirmative vote of a majority of
the shares present or represented and entitled to vote at the meeting will be
required to approve this action.

(BALANCE OF PAGE INTENTIONALLY LEFT BLANK)

<PAGE> 28

CERTAIN TRANSACTIONS

Some of the Directors of the Company and the companies with which they are
associated are customers of, and have had banking transactions with the Bank in
the ordinary course of the Bank's business, and the Bank expects to have
banking transactions with such persons in the future. In Management's opinion,
all loans and commitments to lend included in such transactions were made in
the ordinary course of the Company's business and in compliance with applicable
laws on substantially the same terms, including interest rates and collateral,
as those prevailing for comparable transactions with other persons of similar
creditworthiness and, in the opinion of Management, did not involve more than a
normal risk of collectability or present other unfavorable features. The
aggregate amount of all such loans and credit extensions outstanding as of
December 31, 1995, to all Directors and Executive Officers, together with their
associates and members of their immediate family, was approximately $1,107,000,
constituting approximately 1.09% of Company's stockholders' equity. The
Company has a very strong policy regarding review of the adequacy and fairness
to the Bank of loans to its Directors and officers.

Mr. Dale Hanst, a Director of the Company, is a senior partner in the law
firm of Schramm & Raddue. The firm of Schramm & Raddue represented the Bank in
corporate and certain litigation matters in 1995.

Donald M. Anderson, Chairman of the Board and Director of the Company, is
a general partner in Pueblo Associates, from which the Company leases space at
1021 Anacapa Street for its executive headquarters and the housing of
administrative functions of the Bank. The lease, covering 28,957 square feet
of space, was restated in 1994 for a term of five (5) years with four (4) five
(5) year options to renew. The lease payments to Pueblo Associates totaled
$496,765 during 1995. In the Company's opinion the lease is comparable to an
"arms length" negotiated lease.

COMPLIANCE WITH SECTION 16(A) OF THE
SECURITIES EXCHANGE ACT OF 1934

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's Directors and Executive Officers, and persons who own more than
ten percent of a registered class of the Company's equity securities, to file
with the Securities and Exchange Commission initial reports of ownership and
reports of changes in ownership of common stock of the Company. Officers,
Directors and greater than ten-percent stockholders are required by Securities
and Exchange Commission regulation to furnish the Company with copies of all
Section 16(a) forms they file.

To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company and written representations that no other
reports were required during the fiscal year ended December 31, 1995, all
Section 16(a) filing requirements applicable to its officers, Directors and
greater than ten-percent beneficial owners were completed.

SHAREHOLDER PROPOSALS

The deadline for shareholders to submit proposals to be considered for
inclusion in the Company's proxy statement for the Company's 1997 Annual
Meeting of Shareholders is November 15, 1996. No such proposals were submitted
with respect to the 1996 Annual Meeting.

LEGAL MATTERS

There are no pending or threatened legal proceedings to which the Company
or Bank is or may become a party, which may materially affect its property or
proposed business, other than ordinary routine litigation incidental to the
Company's business.

<PAGE> 29

OTHER MATTERS

Management does not know of any matters to be presented at the Meeting,
other than those set forth above. However, if other matters come before the
Meeting, it is the intention of the persons named in the accompanying proxy to
vote said proxy in accordance with the recommendations of the Board of
Directors of the Company on such matters, and discretionary authority to do so
is included in the proxy.

FINANCIAL STATEMENTS OF THE COMPANY

Shareholders of the Company are advised that they may, upon request made
to the Company's Head Office located at 1021 Anacapa, Santa Barbara, California
93101, obtain copies (free of charge) of the Company's Financial Statements or
additional copies of the Company's Annual Report for 1995 by requesting them
from the Secretary of the Company. Pursuant to regulations of the Securities
and Exchange Commission, shareholders of the Company will receive the 1995
Annual Report of the Company together with this proxy statement. If for any
reason any shareholder does not receive a copy of the 1995 Annual Report of the
Company together with this proxy statement, please advise the Company, and a
copy will be provided promptly.

NOTICE OF AVAILABILITY OF MATERIAL

THE BANK WILL PROVIDE WITHOUT CHARGE TO THE SHAREHOLDERS OF RECORD ON
MARCH 1, 1996 (THE RECORD DATE FOR ELIGIBILITY TO VOTE AT THE ANNUAL MEETING) A
COPY OF THE COMPANY'S 1995 FORM 10-K AND ANNUAL REPORT, WHICH WILL BE FILED
UNDER THE SECURITIES AND EXCHANGE ACT OF 1934.

All written requests for this report should be addressed to:

Dr. Clare McGivney
Assistant Vice President
Santa Barbara Bank & Trust
Post Office Box 1119
Santa Barbara, California 93102

SHAREHOLDERS ARE REQUESTED TO VOTE, DATE, SIGN AND RETURN PROMPTLY THE
ENCLOSED PROXY WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING. A RETURN,
SELF-ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS
REQUIRED IF MAILED WITHIN THE UNITED STATES. PROMPT RESPONSE IS HELPFUL AND
YOUR COOPERATION WILL BE APPRECIATED. YOU MAY, WITHOUT AFFECTING ANY VOTE
PREVIOUSLY TAKEN, REVOKE YOUR PROXY BY A LATER PROXY FILED WITH THE SECRETARY
OF THE COMPANY OR BY FILING WRITTEN NOTICE OF REVOCATION WITH THE SECRETARY OF
THE COMPANY. ATTENDANCE AT THE MEETING WILL NOT IN AND OF ITSELF REVOKE A
PROXY. IF YOU ATTEND THE MEETING, YOU MAY REVOKE THE PROXY BY ADVISING THE
INSPECTOR OF ELECTIONS THAT YOU ELECT TO VOTE IN PERSON.

SANTA BARBARA BANCORP

[SIG]
By:__________________________________
Donald M. Anderson,
Chairman of the Board
Dated: March 15, 1996

<PAGE> 30

EXHIBIT A

1996 DIRECTORS STOCK OPTION PLAN

1. PURPOSES OF THE PLAN

The purposes of this 1996 Directors Stock Option Plan are to attract,
motivate and retain the best available Directors for the Company and each of
the Company Parent and Subsidiaries and to provide them with additional
incentive to promote the success of the Company's business.

2. DEFINITIONS

As used herein, the following definitions shall apply:

2.1 "BOARD OF DIRECTORS" shall mean the Board of Directors of the Company.

2.2 "CODE" shall mean the Internal Revenue Code of 1986, as amended.

2.3 "COMMISSION" shall mean the Securities and Exchange Commission.

2.4 "COMMON STOCK" shall mean the common stock of the Company.

2.5 "COMPANY" shall mean Santa Barbara Bancorp, a California corporation.

2.6 "DISABILITY" shall mean total and permanent disability as defined in
Section 22(e)(3) of the Code.

2.7 "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.

2.8 "FAIR MARKET VALUE" shall mean, as of any date, the value of the
common stock determined as follows.

2.8.1 If the common stock is listed on an established stock
exchange or a national market system, including without limitation the Nasdaq
National Market of the National Association of Securities Dealers, Inc.
Automated Quotation ("NASDAQ") System, the Fair Market Value of a share of
common stock shall be the closing sales price for such stock (or the closing
bid, if no sales were reported) as quoted on such system or exchange (or the
exchange with the greatest volume of trading in the common stock) on the last
market trading day prior to the date of determination.

2.8.2 If the common stock is quoted on the NASDAQ System (but not on
the Nasdaq National Market thereof) or is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market Value of
a share of common stock shall be the mean between the high bid and low asked
prices for the common stock on the last market trading day prior to the date of
determination.

2.9 "OPTION" shall mean a stock option granted pursuant to the Plan and
shall include Reload Options. All Options granted hereunder shall be
"non-statutory stock options" and each such Option shall be evidenced by a
written Stock Option Agreement.

2.10 "OPTIONED STOCK" shall mean the common stock subject to an Option.

2.11 "OPTIONEE" shall mean a Director who receives an Option.

A - 1

<PAGE> 31

2.12 "PARENT" shall mean a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.

2.13 "PLAN" shall mean this 1996 Directors Stock Option Plan.

2.14 "RULE 16B-3" shall mean Rule 16b-3 promulgated under the Exchange Act
or any successor to Rule 16b-3 in effect at the time in question.

2.15 "SECTION 16(B)" shall mean Section 16(b) of the Exchange Act.

2.16 "SUBSIDIARY" shall mean a "subsidiary corporation," whether now or
hereafter existing, as defined as Section 424(f) of the Code.

3. STOCK SUBJECT TO THE PLAN

3.1 ORIGINAL RESERVE. Subject to the provisions of Section 14 and Section
15 of the Plan, the maximum aggregate number of shares which are reserved for
issuance upon exercise of Options granted under the Plan is One Hundred Fifty
Thousand (150,000) shares of common stock.

3.2 ADJUSTMENTS IN RESERVE. In the event that any outstanding Option
granted under the Plan expires or is terminated without exercise, or with only
partial exercise, prior to the end of the period during which Options may be
granted under the Plan, the shares allocable to the unexercised portion of such
Option shall be added back into the Reserve and may again be subject to Option
under the Plan.

4. ELIGIBILITY

Options may be granted only to Directors of the Company, or any Parent or
Subsidiary, who are not otherwise employed by the Company or any Parent or
Subsidiary. In addition, notwithstanding any other provision contained in this
Plan, no Director shall be eligible to participate in the Plan if such
individual owns stock and securities possessing more than ten percent (10%) of
the total combined voting power or value of all classes of stock of the Company
or any Parent or Subsidiary. Notwithstanding anything in this Plan to the
contrary, no person shall be entitled to the grant of more than one Option
during or with respect to any year by reason of such person acting as a
Director of more than one of the Company, the Parent or a Subsidiary. No
person shall be eligible to receive the grant of an Option under this Plan as
of July 1 of any year unless he or she is a Director of the Company or such
Parent or Subsidiary on such date.

5. FORMULA FOR GRANT OF OPTIONS

Options shall be granted under this Plan in accordance with the following
schedule.

5.1 GRANTS TO ALL PARTICIPANTS; NUMBER OF SHARES AND TIMING. Each
eligible Director of the Company shall receive a grant of an Option for fifteen
hundred (1,500) shares of the common stock of the Company on July 1, 1996, and
on July 1 of each year thereafter during the term of the Plan for so long as
there shall remain shares available in the Reserve established pursuant to
Section 3, above. Notwithstanding the foregoing, no Options shall be granted
under this Plan prior to the approval of this Plan by the shareholders of the
Company. In the event that there shall at any time be an insufficient number
of shares remaining available in the Reserve to award and grant to each of the
Directors an Option covering the full number of shares then to be awarded, then
and in such event each Director shall receive an Option covering a pro rata
number of shares, calculated on the basis of the number of Directors then
eligible to participate in the award. Nothing in this Plan or any Stock Option
Agreement shall obligate the Company to increase the number of shares in the
Reserve so that the Company may grant Options to eligible Directors throughout
the entire term of this Plan or to grant Options or other rights to any
Director after Options covering the total number of shares in the Reserve have
been granted or after the expiration of the term of the Plan.

A - 2

<PAGE> 32

5.2 ADJUSTMENT IN NUMBER OF OPTION SHARES. The number of shares covered
by the Options to be awarded to each Director pursuant to Section 5.1, above,
shall be adjusted in accordance with the provisions of Sections 14 and 15 and ,
below.

5.3 NON-DISCRETIONARY PLAN. No discretion concerning any decisions
regarding the Plan shall be afforded to any person who is not a "disinterested
person," as that term is defined under Rule 16b-3.

5.4 SINGLE ANNUAL OPTION. The Company shall be obligated to grant to each
eligible Director under Section 5.1, above, only one (1) Option during or with
respect to any year. Notwithstanding anything in this Plan to the contrary,
no person shall be entitled to the grant of more than one Option during or with
respect to any year by reason of such person acting as a Director of more than
one of the Company, the Parent or a Subsidiary.

6. TERM OF PLAN

This Plan has been adopted by the Board of Directors as of February 27,
1996. The term of the Plan shall begin as of February 27, 1996, and shall
continue until December 31, 2005, unless terminated sooner in accordance with
the provisions of the Plan.

7. TERM OF OPTION

Subject to the provisions of Section 9, below, the term of each Option
shall be five (5) years from the date of grant thereof. Each Option granted
under this Plan shall be deemed granted as of July 1 of the year of grant,
regardless of the date on which the Stock Option Agreement is delivered to or
received by the Optionee.

8. EXERCISE PRICE AND CONSIDERATION

8.1 EXERCISE PRICE. The exercise price per share for the shares to be
issued upon exercise of an Option shall be 100% of the Fair Market Value per
share of common stock on the date of grant of the Option.

8.2 CONSIDERATION. The consideration to be paid for the shares to be
issued upon exercise of an Option shall consist entirely of cash, cashier's or
bank certified check, or other shares of common stock having a Fair Market
Value on the date of exercise of the Option equal to the exercise price for the
shares as to which the Option is being exercised, or any combination of such
methods of payment. In the event that the exercise price is paid, whether in
whole or in part, through the tender of shares of common stock already owned by
the Optionee, then the Option must be exercised for a minimum of at least 100
shares or the total number of shares subject to the Option, if less than 100
shares.

9. EXERCISE OF OPTION

9.1 SIX-MONTH VESTING PERIOD. Any Option shall become exercisable only
after the expiration of six (6) months following the date of grant of such
Option. Thereafter, the Option shall be fully vested and shall be exercisable
in whole or in part at any time and from time to time during the term of the
Option.

9.2 PROCEDURE FOR EXERCISE. An Option shall be deemed to be exercised
when the Optionee has delivered to the Company written notice of such exercise
and full payment of the exercise price for the shares with respect to which the
Option is being exercised. Full payment shall consist of such consideration as
is allowable under Section 8.2, above. An Option may not be granted or
exercised for a fraction of a share. Exercise of an Option in any manner shall
result in a decrease in the number of shares which thereafter may be available,
both for the purposes of the Plan and for issuance under the Option, by the
number of shares as to which the Option is exercised. Optionee may designate
in the notice of exercise that some or all of the shares of common stock or
other securities to be issued upon such exercise shall be issued in the name of
Optionee's spouse, the trustee of a revocable trust in which Optionee and his
or her spouse are the sole primary beneficiaries, Optionee's prior spouse, or
any combination of the foregoing. Notwithstanding anything herein to the
contrary, Optionee may not designate in the

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notice of exercise that any of the shares of common stock or other securities
shall be issued to Optionee's prior spouse unless such issuance is to be made
incident to Optionee's divorce within the meaning of Section 1041 of the Code
and to a qualified domestic relations order as defined in Section 414(p)(1)(B)
of the Code which satisfies the provisions of Section 414(p)(1)(A) of the Code.
The Company may rely on a representation of the Optionee, or such other
evidence as the Company deems appropriate, for purposes of determining the
propriety of the exercise of any Option and the compliance of such exercise
with the terms of this Plan and any applicable Stock Option Agreement. The
Company shall have no obligation to independently investigate the propriety of
the exercise of any Option or the compliance of such exercise with the terms of
this Plan or any applicable Stock Option Agreement.

9.3 RIGHTS AS A SHAREHOLDER. Until the issuance (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the stock certificate evidencing the shares of common
stock, the Optionee shall have no right to vote or receive dividends or any
other rights as a shareholder with respect to the Optioned Stock,
notwithstanding the exercise of the Option. No adjustment shall be made in the
exercise price payable on the exercise of any Option or the number of shares of
common stock or other securities or property issuable upon exercise of an
Option for any dividend, distribution or other right for which the record date
is prior to the date the stock certificate is issued to Optionee with respect
to any Optioned Stock, except as provided in Section 14 and Section 15, below.

9.4 TERMINATION OF STATUS AS DIRECTOR. If an Optionee's continuous status
as a Director is terminated other than for cause or by reason of the Optionee's
death or disability, the Optionee may, but only within the three (3)-month
period from the date of the termination of the Optionee's status as a Director
(but not later than the expiration of the term of the Option), exercise any
outstanding Option (including any "reload" Option) to the extent that the
Option was exercisable at the date of such termination. If the Optionee does
not exercise the Option in full during such 3-month period, the unexercised
portion of the Option shall terminate at the close of business, California
time, on the last business day of such 3-month period and thereafter shall not
be exercisable in whole or in part. Notwithstanding anything in this Section
to the contrary, if the Option is not exercisable on the date of the
termination of the Optionee's status as a Director, then the Option shall
terminate simultaneously with the termination of the Optionee's status as a
Director and thereafter shall not be exercisable in whole or in part.

9.5 DISABILITY OF OPTIONEE. Notwithstanding the provisions of Section
9.4, above, if an Optionee's continuous status as a Director is terminated as a
result of the Optionee's death or disability, the Optionee or his or her estate
or personal representative may exercise the Option to the extent that the
Option was exercisable at the date of such termination in whole or in part at
any time and from time to time during the twelve (12)-month period from the
date of the termination of the Optionee's status as a Director. If the
Optionee does not exercise the Option in full during such 12-month period, the
unexercised portion of the Option shall terminate at the close of business,
California time, on the last business day of such 12-month period and
thereafter shall not be exercisable in whole or in part. Notwithstanding
anything in this Section to the contrary, if the Option is not exercisable on
the date of the termination of the Optionee's status as a Director, then the
Option shall terminate simultaneously with the termination of the Optionee's
status as a Director and thereafter shall not be exercisable in whole or in
part.

9.6 TERMINATION FOR CAUSE. If an Optionee's continuous status as a
Director is terminated for cause, all outstanding Options held by the Optionee
shall terminate simultaneously with the termination of the Optionee's status as
a Director and thereafter shall not be exercisable in whole or in part. For
purposes of this Section, an Optionee's status as a Director shall be deemed to
be terminated for "cause" as of the date on which the Optionee is removed as a
Director for any reason described in Section 304 of the California General
Corporation Law.

9.7 STATUS AS A DIRECTOR. The termination of an Optionee's status as a
Director shall be deemed to occur on the effective date of the earliest of (a)
the Optionee's resignation as a Director, (b) the removal of the Optionee as a
Director, and (c) the Optionee's death.

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10. RESTRICTION ON TRANSFER OF STOCK ISSUED

The Stock Option Agreements covering all Options granted under this Plan
shall provide that shares of common stock issued upon exercise of the Options
may not be sold, exchanged, transferred, pledged, hypothecated or otherwise
disposed of for a period equal to the longer of five (5) years following the
date the Option is granted and two (2) years following the date on which such
shares are issued to the Optionee on exercise of the Option; provided that the
foregoing restriction on transfer shall not apply to an Optionee's transfer of
shares of common stock (a) to the Company in payment of all or any portion of
the exercise price payable upon exercise of an Option or the satisfaction of
any income tax withholding obligation with respect to any subsequent exercise
of an Option or (b) to the acquiring party in any transaction described in
Section 15, below, in which the Company is not the surviving corporation.
Appropriate legends shall be placed on any certificates evidencing such
restricted shares of common stock and appropriate stop transfer instructions
shall be given to the Company's transfer agent.

11. RELOAD FEATURES

11.1 GRANT OF RELOAD OPTIONS. Whenever the holder of an Option granted
under this Plan (including any Reload Options granted under the provisions of
this Section 11 or Section 13, below) (the "Original Option") exercises the
Original Option and makes payment of the exercise price by tendering shares of
the common stock previously held by the Optionee, then the Optionee shall be
entitled to receive and the Company shall grant the Optionee a new option (the
"Reload Option") for that number of shares of the common stock which is equal
to the number of shares tendered by the Optionee in payment of the exercise
price for the Original Option being exercised. All such Reload Options granted
hereunder shall be on the following terms and conditions.

11.1.1 EXERCISE PRICE. The exercise price per share shall be an amount
equal to the Fair Market Value per share of the common stock as of the date of
exercise of the Original Option.

11.1.2 EXPIRATION DATE. The term of the Reload Option shall begin as of
the date of exercise of the Original Option and, unless terminated sooner
pursuant to the terms of this Plan or Stock Option Agreement, shall terminate
five (5) years thereafter.

11.1.3 VESTING PERIOD. Any Reload Option shall become exercisable one (1)
year following the date of grant of such Reload Option. Thereafter the Reload
Option shall be fully vested and shall be exercisable in whole or in part at
any time and from time to time during the term of the Reload Option.

11.1.4 OTHER TERMS. All other terms of Reload Options granted hereunder
shall be identical to the terms and conditions of the Original Option, the
exercise of which gives rise to the grant of the Reload Option.

11.2 RESTRICTIONS ON RELOAD OPTIONS. Any and all Reload Options granted
pursuant to this Section 11 (or Section 13, below) shall be subject to the
following conditions and restrictions.

11.2.1 HOLDING PERIOD OF SHARES TENDERED. No Reload Option shall be
granted pursuant to Section 11.1, above, unless the shares of common stock
tendered upon exercise of the Original Option in payment therefore have been
held by the Optionee for a period of more than six (6) months prior to the
exercise of the Original Option. The Company may rely on a representation of
the Optionee, or such other evidence as the Company deems appropriate, for
purposes of determining the holding period of any shares surrendered on
exercise of an Option and the compliance of such exercise with the terms of
this Plan and any applicable Stock Option Agreement. The Company shall have no
obligation to independently investigate the holding period or the propriety of
the exercise of any Option or the compliance of such exercise with the terms of
this Plan or any applicable Stock Option Agreement.

11.2.2 HOLDING PERIOD OF ORIGINAL OPTION SHARES. If any of the
shares of common stock of the Company which are issued upon exercise of the
Original Option are sold within one (1) year following the exercise of the
Original Option, then the Reload Option shall immediately terminate.

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11.2.3 EXCEPTION. The holding period restrictions set forth in
Sections 11.2.1 and 11.2.2, above, shall not apply to an Optionee's (a) transfer
of shares of common stock to the Company in payment of all or any portion of the
exercise price upon exercise of an Option, whether an Original Option or a
Reload Option, or (b) satisfaction of the Optionee's tax withholding obligation,
if any, by the transfer of shares to the Company or by the Company's withholding
of shares that would otherwise be issued as a result of the exercise of an
Option.

12. NONTRANSFERABILITY OF OPTIONS

No Option or Reload Option may be sold, pledged, assigned, hypothecated,
transferred, or otherwise disposed of in any manner, other than by will or the
laws of descent and distribution. Each Option and Reload Option may be
exercised, during the lifetime of the Optionee, only by the Optionee or his or
her guardian or legal representative.

13. TAX WITHHOLDING

To the extent that the exercise of any Option (including any Reload
Option) granted hereunder gives rise to an income tax withholding obligation on
the part of the Company with respect to the Optionee, the Company may satisfy
such obligation on such terms and in accordance with such procedures as it
deems appropriate under applicable law. At the election of the Optionee, such
withholding obligation may be satisfied through the Company's retention of
shares of the common stock which would otherwise be issued as a result of the
exercise of the Option; provided, however, that such an election must be an
irrevocable election which is made by the Optionee at least six (6) months
prior to the exercise of the Option, in accordance with regulations and
interpretations of the Commission. If withholding is made in shares of the
common stock, the Company shall grant to the Optionee a Reload Option, on the
terms specified in Section 11, above, for the number of shares so withheld.

14. RECAPITALIZATION OF COMPANY

Except as otherwise provided herein, appropriate and proportionate
adjustments shall be made in the number and class of shares subject to the Plan
and to the Options granted under the Plan, and the exercise price of such
Options, in the event of a stock dividend (but only on common stock), stock
split, reverse stock split, recapitalization, reorganization or like change in
the capital structure of the Company. To the extent that the foregoing
adjustments relate to stock or securities of the Company, such adjustments
shall be made by the members of the Board of Directors who are not eligible for
the grant of Options under this Plan, the determination of which in that
respect shall be final, binding, and conclusive.

15. REORGANIZATION OR LIQUIDATION OF THE COMPANY

In the event of (a) a liquidation of the Company, or (b) a merger,
reorganization, or consolidation of the Company with any other corporation in
which the Company is not the surviving corporation or the Company becomes a
wholly owned subsidiary of another corporation, or (c) any sale of all or
substantially all of the Company's assets, any unexercised Options then
outstanding under the Plan shall be deemed canceled as of the effective date of
any such liquidation, merger, reorganization, consolidation or sale, unless the
surviving corporation in any such merger, reorganization or consolidation or
the acquiring corporation in any such sale elects to assume the Options under
the Plan or to issue substitute options in place thereof; provided, that, if
any Options granted under the Plan would be canceled in accordance with the
foregoing, the Optionee shall have the right, exercisable during a 10-day
period ending on the fifth day prior to the effective date of such liquidation,
merger, reorganization, consolidation or sale, to exercise the Options in whole
or in part even though the Option otherwise was not then exercisable. The
Company shall give each Optionee at least thirty (30) days' prior written
notice of the anticipated effective date of any such liquidation, merger,
reorganization, consolidation or sale. Notwithstanding anything in this Plan
or in any Stock Option Agreement to the contrary, (i) all Option exercises
effected during the foregoing 10-day period shall be deemed to be effective
immediately prior to the closing of such liquidation, merger, reorganization,
consolidation or sale and (ii) if the Company abandons or otherwise fails to
close any such liquidation, merger, reorganization, consolidation or sale, then
(A) all exercises during the foregoing 10-day period shall cease to be
effective ab initio and (B) the outstanding Options shall be exercisable as
otherwise determined

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under the applicable Stock Option Agreements and without consideration of this
Section or the corresponding provisions of any Stock Option Agreement.

16. AMENDMENT AND TERMINATION OF THE PLAN

16.1 AMENDMENT AND TERMINATION. The Board of Directors may amend or
terminate the Plan from time to time in such respects as the Board may deem
advisable; provided that the following revisions or amendments shall require
approval of the shareholders of the Company entitled to vote:

16.1.1 NUMBER OF SHARES. Any material increase in the number or
shares which may be issued pursuant to the Plan (other than in accordance with
Sections 14 and 15 and, above);

16.1.2 ELIGIBILITY. Any material modification of the requirements
as to eligibility for participation in the Plan; or

16.1.3 INCREASE IN BENEFITS. Any material increase in the benefits
accruing to participants under the Plan.

16.2 LIMITATIONS ON AMENDMENT TIMING. The formula aspects of this Plan,
namely the procedures for determining the Fair Market Value of the common stock
and those matters set forth in Section 5, above, shall not be amended more
frequently than once every six (6) months, other than to comport with changes
in the Code, the Employee Retirement Income Security Act of 1974, as amended,
or the rules and regulations thereunder.

16.3 EFFECT OF AMENDMENT OR TERMINATION. Any amendment or termination of
the Plan shall not affect Options already granted and such Options shall remain
in full force and effect as if this Plan had not been amended or terminated,
unless mutually agreed otherwise between the Optionee and the Company, which
agreement must be in writing and signed by the Optionee and the Company.

17. CONDITIONS UPON ISSUANCE OF SHARES

17.1 COMPLIANCE WITH LAW. Shares of common stock shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and
the issuance and delivery of such shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act
of 1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, and the requirements of any stock exchange upon which the shares
may then be listed, and shall be further subject to the approval of counsel for
the Company with respect to such compliance.

17.2 INVESTMENT INTENT. As a condition to the exercise of an Option, the
Company may require the person exercising such Option to represent and warrant
at the time of any such exercise that the shares of common stock are being
purchased only for investment and without any present intention to sell or
distribute such shares if, in the opinion of counsel for the Company, such a
representation is required by applicable law.

17.3 GOVERNMENTAL CONSENTS. Inability of the Company to obtain authority
from any regulatory body having jurisdiction, which authority is deemed by the
Company's counsel to be necessary to the lawful issuance and sale of any shares
of common stock hereunder, shall relieve the Company of any liability in
respect of the failure to issue or sell, or any delay in issuing or selling,
such shares as to which such requisite shall not have been obtained.

18. RESERVE OF SHARES

During the term of this Plan, the Company will at all times reserve and
keep available such number of shares as shall be sufficient to satisfy the
requirements of the Plan (the Plan "Reserve").

19. OPTION AGREEMENT

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Each Option granted hereunder shall be evidenced by a written Stock Option
Agreement.

20. INDEMNIFICATION

In addition to such other rights of indemnification as they may have as
members of the Board of Directors and/or employees of the Company, the persons
administering the Plan shall be indemnified by the Company against reasonable
expenses, including attorneys' fees, actually and necessarily incurred in
connection with the defense of any action, suit, or proceeding, or in
connection with any appeal therein, to which they or any of them may be a party
by reason of any action taken or failure to act under or in connection with the
Plan, any Stock Option Agreement or any Option granted under the Plan, and
against all amounts paid or payable by them in settlement thereof (provided
such settlement is approved by independent legal counsel selected by the
Company) or paid or payable by them in satisfaction of a judgment in any
action, suit, or proceeding, except in relation to matters as to which it shall
be adjudged in such action, suit, or proceeding that such person is liable for
gross negligence or willful misconduct in the performance of his or her duties.
The indemnification provided in this Section shall be available only if,
within sixty (60) days after institution of any such action, suit, or
proceeding, the person seeking indemnification shall in writing offer the
Company the opportunity, at its own expense, to handle and defend the same.

21. EFFECTIVE DATE OF PLAN; SHAREHOLDER APPROVAL

The Plan was adopted by action of the Board of Directors taken at a duly
noticed and held meeting on February 27, 1996. The effectiveness of the Plan
shall be subject to approval by the shareholders of the Company within twelve
(12) months after the aforesaid date of the adoption of the Plan. The manner
and method for approval of the Plan by the shareholders of the Company must
comply with Rule 16b-3. If the Plan has not been previously approved by the
shareholders of the Company, the Plan shall terminate on January 31, 1997.

* * * * * *

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EXHIBIT B

AMENDED AND RESTATED
RESTRICTED STOCK OPTION PLAN
(AS AMENDED AND RESTATED, EFFECTIVE FEBRUARY 27, 1996)

SANTA BARBARA BANCORP (the "Company") hereby adopts the following employee
stock option plan:

1. OPTIONS

This instrument is intended to implement and govern the RESTRICTED STOCK
OPTION PLAN (the "Plan") of Santa Barbara Bancorp (the "Company"). Pursuant to
the Plan, two separate types of options for common stock of the Company may be
granted:

1.1 INCENTIVE OPTIONS. Incentive Stock Options ("Incentive Options"); and

1.2 NON-QUALIFIED OPTIONS. Non-qualified Stock Options ("Non-qualified
Options").

Incentive Options are intended to qualify as incentive stock options within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"). Non-qualified options are not intended to so qualify. Unless
specified otherwise, all the provisions of this Plan relate equally to both
Incentive Options and Non-qualified Options. Each option granted under this
Plan shall be evidenced by a Stock Option Agreement (the "Agreement") between
the Company and the employee concerned, designating the type of option being
issued and containing such other terms and conditions as deemed appropriate.

2. PURPOSES OF THE PLAN

The purposes of this Plan are to attract, motivate and retain the best
available officers and employees, and to provide them with additional incentive
to promote the success of the Company's business.

3. ADMINISTRATION OF THE PLAN

The Plan shall be administered by a committee to be appointed by the Board
of Directors of the Company (the "Committee"). The Committee shall consist of
not less than three persons all of whom shall be Members of the Board of
Directors. None of the members of the Committee shall be eligible to be
allocated any stock options pursuant to this Plan. No person shall be
appointed to be a member of the Committee if such person was eligible to be
allocated any stock options pursuant to this Plan at any time within one (1)
year prior to his appointment to the Committee. For purposes of this Section,
a person shall be deemed to be eligible to be allocated any stock options
pursuant to this Plan during any period if, during such period, he is eligible
to receive a Reload Option pursuant to this Plan. Members of the Committee
shall serve at the pleasure of the Board of Directors. No member of the
Committee shall be liable for any action or determination undertaken or made in
good faith with respect to the Plan or any agreement executed pursuant to the
Plan. Subject to the provisions contained herein, the Committee shall
determine:

3.1 EMPLOYEES TO RECEIVE OPTIONS. The employees to whom options shall be
granted;

3.2 TYPE OF OPTIONS TO BE GRANTED. Whether options to be granted shall be
Incentive Options or Non-qualified Options or both;

3.3 NUMBER OF SHARES. The number of shares to be optioned to each such
employee;

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3.4 OPTION PRICE. The price to be paid for the shares upon the exercise
of each option;

3.5 OPTION PERIOD. The period within which each option shall be
exercised; and

3.6 OTHER TERMS AND CONDITIONS. The terms and conditions of each
Agreement between the Company and each employee to whom the Committee has
granted an option; which terms and conditions, however, shall be in accordance
with the provisions of this Plan but may include any other or additional terms
or conditions not inconsistent with this Plan.

4. GRANT OF OPTIONS

4.1 EFFECTIVE DATE OF OPTION GRANT. The "grant" of an option pursuant to
this Plan shall be deemed to have occurred on the latest of: (a) the date the
Committee announces the grant of the option; or (b) such later date set by the
Committee or set forth in the Agreement.

5. ELIGIBILITY

Full-time salaried employees of the Company who shall, in the judgment of
the Committee, be qualified by position, training, or ability to contribute
substantially to the success of the Company, shall be eligible to participate
in the Plan. The number of shares allocable to any person by means of options
under this Plan is to be reasonable, as determined by the Committee, in
relation to the purposes of the Plan and the needs and capabilities of the
Company. No option may be granted to any employee owning more than ten percent
(10%) of the voting power of all classes of stock of the Company or its parent
or subsidiary.

6. RESERVE OF SHARES

6.1 RESERVE. Subject to the provisions of Section 6.2, below, the maximum
aggregate number of shares of common stock of the Company reserved for issuance
upon the exercise of Options granted under the Plan is 1,000,000 shares of
authorized but unissued shares of common stock of the Company. No more than
the total number of shares held in this Reserve shall be issued under the Plan
pursuant to the exercise of Incentive Options and Non-qualified Options in the
aggregate.

6.2 ADJUSTMENTS IN RESERVE. If the outstanding shares of common stock of
the Company are increased or decreased, or are changed into or exchanged for a
different number or kind of shares or other securities, as a result of the
occurrence of an event described in Section 23 or Section 24, below, then and
in such event, appropriate adjustments shall be made in the number and/or kind
of shares or other securities for which options may thereafter be granted under
this Plan. In the event that any outstanding option under the Plan expires or
is terminated without exercise, or with only partial exercise, prior to the end
of the period during which options may be granted, the shares allocable to the
unexercised portion of any such option may be added back into the Reserve and
may again be subject to option under the Plan.

7. OPTION EXERCISE PRICE

7.1 ESTABLISHMENT OF OPTION PRICE. The price per share required to be
paid upon exercise of any option granted hereunder, whether an Incentive Option
or a Non-qualified Option, shall be 100% of the fair market value per share, as
determined by the Committee, of the Company's common stock at the time of the
grant of the option.

7.2 PAYMENT OF OPTION PRICE. The option price shall be payable either (a)
in cash in immediately available funds, or (b) with stock of the Company,
valued at its then fair market value. In the event that the option price is
paid, whether in whole or in part, through the tender of shares of common stock
of the Company already owned by the option holder, then the option must be
exercised for a minimum of at least 100 shares, or the total number of shares
subject to the outstanding option being exercised, if less than 100 shares.

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7.3 EXCHANGE OF OPTIONS. Notwithstanding the foregoing, however, in the
event that any option is granted under this Plan in exchange for the surrender
by the grantee of another option for the common stock of the Company, the
Committee, in its discretion, may establish the option exercise price under the
new option at the same amount as provided in the option which is surrendered,
but only to the extent of the number of shares then subject to the option which
is surrendered.

8. OPTION PERIOD

The term of any Incentive Option granted pursuant to this Plan shall not
exceed five (5) years. The term of any Non-qualified Option shall not exceed
ten (10) years. The aggregate fair market value, as determined by the
Committee, of the shares of common stock with respect to which an Incentive
Option granted under this Plan is exercisable for the first time by an Optionee
during any calendar year shall not exceed the difference between (a) One
Hundred Thousand Dollars ($100,000) and (b) the sum of the fair market value,
as determined by the Committee as of the time the Incentive Options, if any,
were granted, of the shares of common stock covered by all Incentive Options
which were granted to the Optionee under this Plan and all other incentive
stock option plans of the Company and which are exercisable for the first time
by the Optionee during such calendar year. If an Incentive Option is granted
pursuant to which the aggregate fair market value of shares with respect to
which it first becomes exercisable in any calendar year exceeds such $100,000
limitation, the portion of such Option which is in excess of the $100,000
limitation shall be treated as a Non-qualified Option pursuant to Section
422(d)(1) of the Code. This Section is intended to comply with the provisions
of Section 422 of the Code and shall be interpreted so as to comply with the
provisions of such Section of the Code. Nothing in this Section shall obligate
the Company to grant options or any additional options to any employee under
this Plan or any other stock option plan here or hereafter adopted.

9. EXERCISE; VESTING

Options granted hereunder (whether Incentive Options or Non-qualified
Options) shall become exercisable ("vest") in accordance with such schedule as
the Committee, in the exercise of its discretion, may deem appropriate in any
particular case. To the extent not so provided by the Committee, options shall
vest as follows: The aggregate number of shares covered by the option shall be
divided by the number of years included in the option term (each such year
being hereinafter called an "Option Year"). The Employee shall become entitled
to purchase the number of shares of common stock resulting from the foregoing
division at the end of each Option Year.

Notwithstanding any other provision contained herein, however, (a) options
here granted shall vest and become exercisable over a period no longer than
five (5) years and at a rate not less than twenty percent (20%) per year, and
(b) no option granted under this Plan shall be exercisable for at least six (6)
months following the grant of the option, except in case of death or
disability.

10. RESTRICTION ON TRANSFER OF STOCK ISSUED

Unless the Committee otherwise designates, pursuant to its authority under
Section 3.6 of this Plan, the stock option agreements covering any options
granted under this Plan shall provide that stock issued pursuant thereto shall
be subject to the following restriction: Such stock may not be sold, exchanged,
transferred, pledged, hypothecated or otherwise disposed of without the prior
written approval of the Committee for a period of five (5) years following the
date the option is granted and two (2) years following the date of exercise of
the option, whichever is later. The foregoing restriction on transfer shall
not apply to an employee's transfer of shares of common stock to the Company in
payment of all or any portion of the purchase price upon exercise of an option
or to an employee's election to satisfy his tax withholding obligation with
respect to any exercise of an option through shares which otherwise would be
issued as a result of the exercise. Appropriate legends shall be placed on any
certificates evidencing such restricted shares and appropriate stop transfer
instructions given to the Company's transfer agent.

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11. EXPIRATION OF OPTIONS

Notwithstanding any other provisions of this Plan or the terms of any
option agreement granted pursuant hereto, options granted pursuant to this Plan
shall expire upon the occurrence of any of the following events:

11.1 TERMINATION OF EMPLOYMENT. Thirty (30) days following termination of
employment, other than as a result of the employee's retirement, death or
disability;

11.2 RETIREMENT. Immediately upon retirement of the employee in
accordance with the Company's retirement policy, provided that the employee may
within three months after the date of retirement (but in no event beyond the
period of time for which the option is granted) exercise the option as to those
shares with respect to which any vesting installments, if any, had accrued as
of the date on which the employee retired; and

11.3 DEATH OR DISABILITY. Twelve months after the death or permanent
disability (as defined in the Company's Incentive and Investment Profit Sharing
Plan and Trust) of the employee while in the employ of the Company (but in no
event beyond the period of time for which the option is granted). During such
twelve-month period the employee (or his personal representative) or the
persons to whom the employee's rights under the Option shall have passed by
will or by the applicable laws of descent and distribution shall have the right
to exercise the option to the extent that any vesting installments, if any, had
accrued as of the date of employee's death or disability.

12. METHOD OF EXERCISE

Options granted pursuant to this Plan shall be exercised by delivery to
the Committee of a written notice specifying (a) the number of shares which an
employee (or his personal representative) then desires to purchase, (b) the
name or names in which Employee (or his personal representative) desires to
have the shares issued, and (c) whether the options being exercised are
Incentive Options or Non-qualified Options. Said notice shall be accompanied
by full payment of the aggregate purchase price of such options in immediately
available funds (or stock of the Company). The Company shall, as soon as
practicable thereafter, issue and deliver to the employee and/or any other
persons designated in the notice of exercise, the necessary certificate or
certificates evidencing the number of shares purchased (excluding any
fractional shares), in the name of the employee and/or in the name of the other
persons designated in the notice of exercise. Employee may designate in the
notice of exercise that some or all of the shares to be issued upon such
exercise shall be issued in the name of Employee's spouse, the trustee of a
revocable trust in which Employee and his or her spouse are the sole primary
beneficiaries, Employee's prior spouse, or any combination of the foregoing.
Notwithstanding anything herein to the contrary, Employee may not designate in
the notice of exercise that any of the shares shall be issued to Employee's
prior spouse unless such issuance is to be made incident to Employee's divorce
within the meaning of Section 1041 of the Code. The Committee may rely on a
representation of the person exercising the option, or such other evidence as
the Committee deems appropriate, for purposes of determining the propriety of
the exercise of any option and the compliance of such exercise with the terms
of this Plan and any applicable Stock Option Agreement. The Committee shall
have no obligation to independently investigate the propriety of the exercise
of any option or the compliance of such exercise with the terms of this Plan or
any applicable Stock Option Agreement.

13. RELOAD FEATURES

13.1 GRANT OF RELOAD OPTIONS. Whenever the holder of any option (the
"Original Option") outstanding under this Plan (whether an Incentive Option or
a Non-qualified Option, and including any Reload Options granted under the
provisions of this Section 13) exercises the Original Option and makes payment
of the option price by tendering shares of the common stock of the Company
previously held by him or her, then the holder of that Option shall be entitled
to receive and the Company shall grant a new option (the "Reload Option") for
that number of additional shares of the common stock of the Company which is
equal to the number of shares tendered by the option holder in payment of the
option price for the Original Option being exercised. All such Reload Options
granted hereunder shall be on the following terms and conditions:

B - 4

<PAGE> 42

13.1.1 OPTION PRICE. The option price per share shall be an amount
equal to the then current fair market value per share of the Company's common
stock, as of the date of exercise of the Original Option, as determined by the
Committee.

13.1.2 EXPIRATION DATE. The option exercise period shall expire,
and the Reload Option shall no longer be exercisable, on the expiration of the
option period of the Original Option or five (5) years from the date of the
grant of the Reload Option, whichever is later.

13.1.3 VESTING PERIOD. Any Reload Option granted under this Section
13 shall "vest" and first become exercisable one (1) year following the date of
exercise of the Original Option.

13.1.4 OTHER TERMS. All other terms of Reload Options granted
hereunder shall be identical to the terms and conditions of the Original Option,
the exercise of which gives rise to the grant of the Reload Option. Further,
the character of the Reload Option shall be the same as the character of the
Original Option, namely if the Original Option is an Incentive Option, the
Reload Option shall be an Incentive Option; and if the Original Option is a
Non-qualified Option, the Reload Option shall also be a Non-qualified Option.

13.2 RESTRICTIONS ON RELOAD OPTIONS. Any and all Reload Options granted
pursuant to this Section 13 (or Section 15, below) shall be subject to the
following conditions and restrictions:

13.2.1 NO RELOAD ON EXISTING INCENTIVE OPTIONS. Notwithstanding
Section 13.1, above, no Reload Option shall be granted pursuant to Section 13.3,
below, upon the exercise of any Incentive Option which is outstanding as of the
effective date of this Plan.

13.2.2 HOLDING PERIOD OF SHARES TENDERED. No Reload Option shall be
granted pursuant to Section 13.1, above, unless the shares tendered upon
exercise of the Original Option in payment therefore have been held by the
Employee for a period of more than six (6) months prior to the exercise of the
Original Option.

13.2.3 HOLDING PERIOD OF ORIGINAL OPTION SHARES. If the shares of
common stock of the Company which are issued upon exercise of the Original
Option are sold within one (1) year following the exercise of the Original
Option, then the Reload Option shall immediately terminate.

13.2.4 EXCEPTION. The holding period restrictions set forth in
Sections 13.2.2 and 13.2.3 above shall not apply to an Employee's (a) transfer
of shares of common stock to the Company in payment of all or any portion of the
purchase price upon exercise of an option, whether an Original Option or a
Reload Option, or (b) satisfaction of his withholding obligation, if any,
pursuant to Section 15 below by the withholding of shares that would otherwise
be issued as a result of the exercise of an option.

13.3 "GRANDFATHER" PROVISIONS. The Company acknowledges that there are
outstanding options granted to employees under the Company's prior employee
Stock Option Plan, which Plan expires in calendar year 1993, and that said Plan
contained "reload" features similar to those contained herein. To the extent
that any such outstanding options under said Plan are exercised after the
expiration of that Plan, the Committee shall have the power, in its sole
discretion, to grant to any such option holders a reload option under and
containing the terms specified in this Plan.

14. NON-TRANSFERABILITY

Options granted pursuant to this Plan shall not be transferable other than
by will or by the laws of descent and distribution and shall be exercisable
during the employee's lifetime only by him (or his guardian or legal
representative). Any attempt by an Employee to assign or transfer any option
granted under this Plan other than as provided in this paragraph shall
automatically effect a termination thereof.

B - 5

<PAGE> 43

15. TAX WITHHOLDING

To the extent that the exercise of any Option granted hereunder gives rise
to an obligation on the part of the Company to withhold from Employee's wages,
the Company shall do so on such terms and in accordance with such procedures as
may be required under applicable law. At the election of the Employee,
withholding may be made in shares of the common stock of the Company which
would otherwise be issued as a result of the exercise; provided, however, that
such an election must be an irrevocable election which is made at least six (6)
months prior to the exercise of the option, in accordance with regulations and
interpretation of the Securities Exchange Commission. If withholding is made
in shares of the Company's stock, the Committee, in its sole discretion, may
grant Reload Option(s), on the terms specified in Section 13, above, for the
number of shares so withheld.

16. NO SHAREHOLDER RIGHTS

An option holder shall not be deemed to be a shareholder of the Company
with respect to options unless and until said shares shall have been issued
upon exercise thereof and are paid for in full.

17. SECURITIES COMPLIANCE

Options granted pursuant to this Plan shall be subject to the requirement
that if at any time the Committee shall determine, in its discretion, that the
listing, registration, or qualifications of the shares covered thereby is
required upon any securities exchange or under any state or federal law, or the
consent or approval of any governmental regulatory authority is necessary or
desirable as a condition of the exercise of such option, the option may not be
exercised, in whole or in part, unless and until such listing, registration,
qualification, consent or approval shall have effected or obtained free of any
conditions not acceptable to the Committee.

18. TERM OF PLAN

No option shall be granted under this Plan after ten years from the date
of the original adoption of the Plan by the Board of Directors or the original
approval of the Plan by a majority of the voting shares, whichever event first
occurred.

19. AMENDMENT OF PLAN

The Board of Directors of the Company may at any time suspend, amend, or
terminate the Plan, and may, with the consent of an option holder, make such
modification of the terms and conditions of options granted hereunder as it
shall deem advisable; provided that, any amendment or modification which would:

19.1 NUMBER OF SHARES. Materially increase the number or shares
which may be issued pursuant to the Plan (other than in accordance with
Section 23 and Section 24. below);

19.2 ELIGIBILITY. Materially modify the requirements as to
eligibility for participation in the Plan; or

19.3 INCREASE IN BENEFITS. Otherwise materially increase the benefits
accruing to participants under the Plan, shall be subject to approval thereof
by shareholders of the Company holding not less than a majority of the voting
power.

20. SUBSTITUTION OF OPTIONS

Notwithstanding the provisions of Section 19, above, the Committee may
grant to an option holder, if he or she is otherwise eligible, additional
options under this Plan or, with the consent of the option holder, grant new
options under this Plan in lieu of any outstanding options for a number of
shares, at a purchase price and for a term which in any respect is greater or
lesser than that of the earlier Option, subject to those limitations as to
options otherwise set forth herein.

B - 6

<PAGE> 44

21. LIMITS ON AMENDMENTS

This Plan may not, without approval of the stockholders, be amended in any
manner that will cause Incentive Options issued under it to fail to meet the
requirements of incentive stock options as defined in Section 422 of the
Internal Revenue Code, or to change the maximum number of shares which any one
person may receive.

22. EFFECT ON SUSPENSION OR TERMINATION OF PLAN

No option may be granted during any suspension, or after termination, of
this Plan. Amendment, suspension, or termination of the Plan shall not,
without the consent of the option holder, alter or impair any rights or
obligations under any option theretofore granted hereunder.

23. RECAPITALIZATION OF COMPANY

Except as otherwise provided herein, appropriate and proportionate
adjustments shall be made in the number and class of shares subject to the Plan
and to the options granted under the Plan, and the exercise price of such
options, in the event of a stock dividend (but only on common stock), stock
split, reverse stock split, recapitalization, reorganization or like change in
the capital structure of the Company. To the extent that the foregoing
adjustments relate to stock or securities of the Company, such adjustments
shall be made by the Committee, the determination of which in that respect
shall be final, binding, and conclusive; provided that no Incentive Option
granted under the Plan shall be adjusted in a manner that causes the option to
fail to continue to qualify as an incentive stock option within the meaning of
Section 422 of the Code.

24. REORGANIZATION OR LIQUIDATION OF THE COMPANY

In the event of (a) a liquidation of the Company, or (b) a merger,
reorganization, or consolidation of the Company with any other corporation in
which the Company is not the surviving corporation or the Company becomes a
wholly-owned subsidiary of another corporation, or (c) any sale of all or
substantially all of the Company's assets, any unexercised options then
outstanding under the Plan shall be deemed canceled unless the surviving
corporation in any such merger, reorganization or consolidation or the
acquiring corporation in any such sale elects to assume the options under the
Plan or to issue substitute options in place thereof; provided, however, that
if any options granted under the Plan would be canceled in accordance with the
foregoing, the optionee shall have the right, exercisable during a 10-day
period ending on the fifth day prior to the effective date of such liquidation,
merger, reorganization, consolidation or sale, to exercise the optionee's
Option in whole or in part without regard to any installment exercise
provisions in the optionee's Option Agreement. If any options or portion
thereof originally designated as Incentive Options would cease to qualify as
incentive stock options under Section 422 of the Code as a result of the
exercise of such options in accordance with the preceding sentence, then such
Incentive Options or portion thereof shall be redesignated as Non-qualified
Options. The Company shall give each Optionee at least thirty (30) days prior
written notice of the anticipated effective date of any such liquidation,
merger, reorganization, consolidation or sale. Notwithstanding anything in
this Plan or in any Option Agreement to the contrary, (i) all option exercises
effected during the foregoing 10-day period shall be deemed to be effective
immediately prior to the closing of such liquidation, merger, reorganization,
consolidation or sale and (ii), if the Company abandons or otherwise fails to
close any such liquidation, merger, reorganization, consolidation or sale, then
(A) all exercises during the foregoing 10-day period shall cease to be
effective ab initio and (B) the outstanding Options shall be exercisable as
otherwise determined under the applicable Option Agreement and without
consideration of this Section or the corresponding provisions of any Option
Agreement.

25. APPROVAL OF SHAREHOLDERS; EFFECTIVE DATE

This Plan shall not take effect until approved by the affirmative vote of
the holders of a majority of the common stock of the Company present, or
represented, and entitled to vote at a meeting of shareholders duly held in
accordance with the laws of the State of California, solicited in accordance
with the rules and regulations of the Securities and Exchange Commission, which
approval must occur within the period beginning twelve (12) months before and
ending twelve (12) months after the date such amendments are adopted by the
Board of Directors.

B - 7

<PAGE> 45

26. OPTION AGREEMENTS

The Option Agreements entered into hereunder shall contain such other
provisions, including, without limitation, restrictions upon the exercise of an
option, as the Committee shall deem advisable. Incentive Option Agreements
shall contain such limitations and restrictions upon the exercise of options as
shall be necessary in order that such options will constitute an "incentive
stock option" as defined in Section 422 of the Code or to conform to any change
in the law.

27. INDEMNIFICATION

In addition to such other rights of indemnification as they may have as
members of the Board, the members of the Committee administering the Plan shall
be indemnified by the Company against reasonable expenses, including attorney's
fees, actually and necessarily incurred in connection with the defense of any
action, suit, or proceeding, or in connection with any appeal therein, to which
they or any of them may be a party by reason of any action taken or failure to
act under or in connection with the Plan or any option granted thereunder, and
against all amounts paid by them in settlement thereof (provided such
settlement is approved by independent legal counsel selected by the Company) or
paid by them in satisfaction of a judgment in any action, suit, or proceeding,
except in relation to matters as to which it shall be adjudged in such action,
suit, or proceeding that such member is liable for negligence or misconduct in
the performance of his duties. The indemnification provided for in this
Section shall be available only if, within sixty (60) days after institution of
any such action, suit, or proceeding, the member of the Committee seeking
indemnification shall in writing offer the Company the opportunity, at its own
expense, to handle and defend the same.

* * * * * *

B - 8
<PAGE> 46
PROXY

SANTA BARBARA BANCORP

This Proxy is Solicited on Behalf of the Board of Directors

The undersigned hereby appoints Donald M. Anderson, David W. Spainhour and Jay
Donald Smith, and each of them, as Proxies, each with the power to appoint his
substitute, and hereby authorizes them to represent and to vote, as designated
below, all the shares of common stock of Santa Barbara Bancorp held of record by
the undersigned on March 1, 1996 at the Annual Meeting of Shareholders to be
held on April 23, 1996 or any adjournment thereof.

(CONTINUED AND TO BE SIGNED ON REVERSE SIDE.)

- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE> 47
Please mark
your votes as
indicated in X
this example.

FOR
all nominees WITHHOLD
listed below AUTHORITY
(except as to vote for all
marked to the nominees
contrary below) listed below
1. ELECTION OF DIRECTORS
(INSTRUCTION: To withhold authority to vote
for any individual nominee write that
nominee's name in the space provided below.) / / / /

Nominees: Donald M. Anderson Dale E. Hanst
Frank Barranco, M.D. Harry B. Powell
Edward E. Birch David W. Spainhour
Richard M. Davis WIlliam S. Thomas, Jr.
Anthony Guntermann

FOR AGAINST ABSTAIN
2. PROPOSAL TO APPROVE THE COMPANY'S
1996 DIRECTORS' STOCK OPTION PLAN. / / / / / /

FOR AGAINST ABSTAIN
3. FOR APPROVAL TO INCREASE THE NUMBER
OF SHARES ALLOCATED TO THE AMENDED
AND RESTATED RESTRICTED STOCK OPTION
PLAN. / / / / / /

FOR AGAINST ABSTAIN
4. PROPOSAL TO APPROVE SELECTION OF
ARTHUR ANDERSEN & CO. TO SERVE AS
INDEPENDENT PUBLIC ACCOUNTANTS FOR
SANTA BARBARA BANCORP FOR THE YEAR 1996. / / / / / /

5. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.

This proxy when properly executed and returned will be voted in the manner
directed herein by the undersigned stockholder. If no direction is made, this
proxy will be voted for Proposals 1, 2, 3 and 4. If any other business is
presented at the meeting, this Proxy confers authority to and shall be voted in
accordance with the recommendation of the Board of Directors. This Proxy confers
the power of cumulative voting and the power to vote cumulatively for less than
all of the nominees as described in the proxy statement.

- ---------------------------------------
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.

Signature(s)_______________________________________ Dated________________, 1996
Please date this Proxy and sign exactly as the name appears on this card. When
shares are held by joint tenants, both should sign. When signing as attorney, as
executor, administrator, trustee, or guardian, please give full title as such.
If a corporation, please sign in full corporate name by President or other
authorized officer. If a partnership, please sign in partnership name by
authorized person.

- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE> 48
CORRECTIONS
TO
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
OF
SANTA BARBARA BANCORP

TO BE HELD APRIL 23, 1996

TO THE SHAREHOLDERS OF SANTA BARBARA BANCORP.

1. The 1995 salary of David W. Spainhour, Chairman of the Board of the Bank,
included in the Summary Compensation Table on page 11 of the Proxy Statement
was inadvertently overstated. Mr. Spainhour's salary for 1995 was
$225,000.00.

2. The name "William S. Thompson, Jr." on page 17 should be "William S.
Thomas, Jr."