SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------
FORM 11-K
X ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________________ to _________________
Commission file number 0-11113
Full Title of the Plan and the Address of the Plan:
Santa Barbara Bank & Trust
Employee Stock Ownership Plan and Trust
1021 Anacapa Street
Santa Barbara, CA 93101
Name of Issuer of the securities held pursuant to the plan and the
address of the principal executive office:
Santa Barbara Bancorp
1021 Anacapa Street
Santa Barbara, CA 93101
<PAGE>
REQUIRED INFORMATION
The Santa Barbara Bank & Trust Employee Stock Ownership Plan and Trust ("Plan")
is subject to the Employee Retirement Income Security Act of 1974 ("ERISA").
Therefore, in lieu of the requirement of Items 1-3 of Form 11-K, the financial
statements and schedules of the Plan for the two fiscal years ended December 31,
1995 and 1996, which have been prepared in accordance with the financial
reporting requirements of ERISA, are attached hereto as Appendix 1 and
incorporated herein by this reference.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustees (or other persons who administer the Plan) have duly caused this annual
report to be signed on its behalf by the undersigned hereunto duly authorized.
Santa Barbara Bank & Trust
Employee Stock Ownership Plan & Trust
Date: June 30, 1997 By: /s/Jay Donald Smith
Jay Donald Smith
Senior Vice President
of Santa Barbara Bank & Trust, Trustee
<PAGE>
APPENDIX 1
SANTA BARBARA BANK & TRUST EMPLOYEE STOCK OWNERSHIP PLAN & TRUST
FINANCIAL STATEMENTS AS OF AND
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
SUPPLEMENTAL SCHEDULE AS OF AND FOR THE YEAR ENDED
DECEMBER 31, 1996 AND INDEPENDENT PUBLIC ACCOUNTANTS' REPORT
<PAGE>
SANTA BARBARA BANK & TRUST EMPLOYEE STOCK OWNERSHIP PLAN & TRUST
INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULE
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
FINANCIAL STATEMENTS
Statements of Net Assets Available for Plan Benefits as of
December 31, 1996 and 1995
Statements of Changes in Net Assets Available for Plan Benefits for the
Years Ended December 31, 1996 and 1995
Notes to Financial Statements
SUPPLEMENTAL SCHEDULE
Item 27a - Schedule of Assets Held for Investment as of December 31, 1996
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Trustees of the Santa Barbara Bank & Trust Employee Stock Ownership
Plan & Trust:
We have audited the accompanying statements of net assets available for plan
benefits of Santa Barbara Bank & Trust Employee Stock Ownership Plan & Trust
(the Plan) as of December 31, 1996 and 1995, and the related statements of
changes in net assets available for plan benefits for the years then ended.
These financial statements are the responsibility of the Plan's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for plan benefits as of December
31, 1996 and 1995, and the changes in its net assets available for plan benefits
for the years then ended in conformity with generally accepted accounting
principles.
Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The supplemental schedule of assets held for
investment as of December 31, 1996 is presented for the purpose of additional
analysis and is not a required part of the basic financial statements but is
supplementary information required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. The supplemental schedule has been subjected to the
auditing procedures applied in the audit of the basic financial statements and,
in our opinion, is fairly stated in all material respects in relation to the
basic financial statements taken as a whole.
handwritten signature:
ARTHUR ANDERSON LLP
Los Angeles, California
June 13, 1997
<PAGE>
<TABLE>
<CAPTION>
Santa Barbara Bank & Trust
Plan Number 003
EIN 95-2089059
Employee Stock Ownership Plan & Trust
Statements of Net Assets Available for Plan Benefits
as of December 31, 1996 and 1995
ASSETS: 1996 1995
<S> <C> <C>
Investment in Common Stock of Santa Barbara
Bancorp, at fair value (Notes 1 and 5) $ 19,968,536 $ 16,427,565
Investment in Mutual Funds, at fair value 525,751 492,366
Cash -- 5,161
Employer contribution receivable 1,000,000 --
Dividend receivable -- 356
Interest receivable -- 230
NET ASSETS AVAILABLE
FOR PLAN BENEFITS $ 21,494,287 $ 16,925,678
<FN>
The accompanying notes are an integral part of these statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Santa Barbara Bank & Trust
Plan Number 003
EIN 95-2089059
Employee Stock Ownership Plan & Trust
Statements of Changes in Net Assets Available for Plan Benefits
for the Years Ended December 31, 1996 and 1995
1996 1995
<S> <C> <C>
Net assets at beginning of year $16,925,678 $14,274,386
Net investment gain:
Realized gain on sale of Common Stock of
Santa Barbara Bancorp 4,015 12,909
Realized appreciation on Mutual Funds 24,943 7,520
Unrealized appreciation on Common Stock
of Santa Barbara Bancorp 4,992,087 3,389,970
Unrealized appreciation on Mutual Funds 10,454 49,569
Dividends on Common Stock of
Santa Barbara Bancorp 493,355 428,540
Dividends on Mutual Funds 9,913 11,120
Interest income 176 2,796
Capital gain distribution 10,125 36,345
5,545,068 3,938,769
Employer contribution 1,000,000 --
Payment of dividends to participants (Note 7) (474,137) (414,921)
Transfer to profit sharing plan for diversification (18,458) (21,875)
Distributions to Plan participants (1,483,864) (850,681)
Net assets at end of year $21,494,287 $16,925,678
<FN>
The accompanying notes are an integral part of these statements.
</FN>
</TABLE>
<PAGE>
Santa Barbara Bank & Trust
Employee Stock Ownership Plan & Trust
Plan Number 003
EIN 95-2089059
Notes to Financial Statements
December 31, 1996 and 1995
1. Plan Description and Significant Accounting Policies
The Santa Barbara Bank & Trust Employee Stock Ownership Plan & Trust (the
"Plan") was approved by the Board of Directors of Santa Barbara Bank & Trust
(the "Bank") on January 8, 1985. The Bank is a wholly owned subsidiary of Santa
Barbara Bancorp (the "Company"). The Bank is also the Trustee and Administrator
of the Plan. Since the initial purchase of common stock of the Company in
January, 1985, the Plan has made several other large purchases of the Company's
stock.
The Plan covers employees of the Bank who have completed one year of service,
have worked more than 1,000 hours during the Plan year and have attained age 18.
Contributions by the Bank to the Plan are discretionary, but generally have been
approximately 10 percent of pre-tax Bank profits prior to employer contributions
to the Plan, reduced by the amounts paid to the Bank's other profit sharing
plan, the Incentive & Investment and Salary Savings Plan, and adjusted for the
difference between the provision for loan loss and actual net charge-offs,
unless additional amounts are required by the Plan for debt service and/or stock
purchases. A $1,000,000 employer contribution was accrued for the 1996 Plan
year. Employees do not contribute to the Plan.
The Plan is subject to the applicable provisions of the Employee Retirement
Income Security Act of 1974, as amended.
When employees have been participating in an Employee Stock Ownership Plan
("ESOP") for ten years and have attained age 55, the Internal Revenue Code
requires the ESOP to permit those "qualified" employees to begin to diversify
the assets that are held in their accounts. While the Plan would not be in
effect ten years until 1995, in 1993 the Bank decided to permit those
participants who would become "qualified participants" in the years 1995 - 2000
to diversify a portion of their vested account balance. They were permitted to
have the Plan sell a number of their allocated shares representing not more than
25% of the value of their account balance. These shares were purchased by the
Company through the tender offer that the Company made to its shareholders on
October 1, 1993 and retired. The proceeds from the sale of the stock were used
to purchase mutual funds. These investments remained in the ESOP and are
reported in the Statements of Net Assets as Investments in Mutual Funds. This
first diversification occurred in 1994.
In 1995, when the Plan was in effect ten years, the Plan was required to permit
some of the above participants to further diversify. The Company again purchased
shares from the Plan, but in these subsequent distributions, the proceeds were
transferred to the participants' accounts in the Incentive & Investment and
Salary Savings Plan.
Participants, who have completed a year of service during the Plan year and are
employed on the last day of the Plan year, receive allocations of forfeitures
and Bank contributions based on their eligible compensation. The Plan's invested
assets consist of Santa Barbara Bancorp stock and shares in various mutual funds
as shown in the supplemental Schedule of Assets Held for Investment as of
December 31, 1996. The distributions to Plan participants shown on the
Statements of Changes in Net Assets Available for Plan Benefits include
appreciation of Santa Barbara Bancorp stock arising from distribution of
participants' shares upon their termination.
Participants vest in their account as follows:
Plan Years of Percent
-------------- -------
Service Vested
------- ------
Less than 2 years 0%
2 years 20%
3 years 30%
4 years 40%
5 years 60%
6 years 80%
7 years 100%
All participants are considered fully vested upon attainment of retirement age
(65) or their earlier qualifying retirement, disability or death.
The Bank retains all rights to terminate or amend the Plan at any time. In the
event of termination of the Plan, all participants will be fully vested and the
Bank, as the Trustee, will be directed to distribute the participants' equity to
participants in proportion to their accounts.
All administrative expenses are paid by the Bank.
The significant accounting policies of the Plan are as follows:
A. Contributions from the Bank are recorded on an accrual basis and are
allocated annually to individual participants' accounts as provided by the
Plan and in accordance with the law, net of amounts used to make payments
on any debt.
B. Investment income is accrued and is allocated to individual
participants' accounts quarterly.
C. The Plan requires unvested amounts forfeited by former
participants to be allocated among the individual accounts
of active participants at the end of the Plan year.
D. Investments in the Common Stock of the Company are stated at fair value.
Unrealized appreciation or depreciation is recorded in income currently.
Realized appreciation on investments represents the excess of fair value
over cost (cost equals the market value at the beginning of the period as
more fully described below) of vested shares distributed to terminated
Plan participants.
E. The Plan accounts for investments by means of the current value approach
whereby the realized and unrealized appreciation and depreciation of Plan
assets is based on the value of the assets at the beginning of the Plan
year or at the time of purchase during the year. The use of the current
value approach is required for reporting to the U.S.
Department of Labor.
F. Certain prior year amounts have been reclassified to conform
with the 1996 presentation.
G. The preparation of these financial statements in conformity
with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results
could differ from these estimates.
<PAGE>
2. Reconciliation of Financial Statements to Form 5500
The following is a reconciliation of net assets available for benefits per the
financial statements to the Form 5500 as of December 31:
1996 1995
Net assets available for benefits $21,494,287 $16,925,678
per the financial
statements
Amounts allocated to withdrawing (436,284) (758,596)
participants
------------ -----------
Net assets available for benefits $21,058,003 $16,167,082
per the Form 5500
============ ===========
The following is a reconciliation of benefits paid to participants per the
financial statements to the Form 5500 for the year ended December 31, 1996:
Benefits paid to participants per the $1,483,864
financial statements
Add:
Amounts allocated to withdrawing
participants at December 31, 1996 436,284
Less:
Amounts allocated to withdrawing (758,596)
participants at
December 31, 1995
-----------
Benefits paid to participants per the
Form 5500 $1,161,552
===========
Amounts allocated to withdrawing participants are recorded on the Form 5500 for
benefits claims that have been processed and approved for payment prior to
December 31, but not yet paid as of that date.
3. Tax Status
The Plan obtained its most recent determination letter from the Internal Revenue
Service on February 23, 1995. At that time, the Plan was deemed to be designed
to satisfy the qualification requirements, and consequently the related trust
appeared to satisfy the tax exempt requirement of the Internal Revenue Code. The
Plan has been amended subsequently. The Plan Administrator believes that the
Plan is currently designed and being operated in compliance with the
qualification requirements of the Internal Revenue Code, and that the related
trust was tax exempt as of the financial statement date.
<PAGE>
4. Administration of Plan Assets
The Plan's assets, which consist principally of the Company's common shares, are
held by the Trustee of the Plan.
Bank contributions are held and managed by the Trustee, which invests cash
received, interest, and dividend income and makes distributions to participants.
Certain administrative functions are performed by officers or employees of the
Bank. No such officer or employee receives compensation from the Plan.
Administrative expenses for the Trustee's fees are paid directly by the Bank.
The amount of these expenses amounted to $42,769 in fiscal year 1996.
5. Investment in Common Stock of Santa Barbara Bancorp
The changes in the investment account of Common Stock of the Company for the
year ended December 31, 1996 are summarized as follows:
Total number of shares as of January 782,265
1, 1996
Distribution to plan participants (69,103)
----------
Balance as of December 31, 1996 713,162
==========
Fair value per share as of December
31, 1996 $28.00
Number of participants 465
As explained in Note 1, under the current value method of accounting for
investments, the cost of investments is equal to the market value of the
investment at the end of the previous year. The cost of the Company's shares at
the end of the previous period for determining realized and unrealized
appreciation was $21.00 per share. Investment in common stock of the Company
represents greater than 5% of the net assets of the Plan. There were no other
significant related party transactions during the Plan year.
6. Repurchase of Shares
Occasionally, the Plan repurchases stock from terminating employees who do not
wish to retain their stock. Repurchased shares are retained by the Plan and
therefore are not reported in the table as a change in the Investment in Common
Stock of the Company. The market value of investments other than stock is
distributed to terminating employees in cash.
7. Dividends
Cash dividends on allocated shares are distributed directly to participants as
received from the Company. Cash dividends on unallocated shares were allocated
to participants' accounts at the end of year.
<TABLE>
<CAPTION>
Santa Barbara Bank & Trust
Plan Number 003
EIN 95-2089059
Employee Stock Ownership Plan
Item 27a - Schedule of Assets Held for Investment
as of December 31, 1996
Identity of issue,
borrower, lessor, or Current
similar party Description of investment Cost Value
<S> <C> <C> <C>
Santa Barbara Bancorp * 713,162 common stock shares $14,976,449 $19,968,536
Fidelity Advisor Short Fixed Income 27 corporate bond units 37 255
Fidelity Advisor High Yield 4,296 corporate bond units 52,714 52,405
Fidelity Advisor Inter Bond Class T 7,497 corporate bond units 79,846 78,718
Fidelity Advisor Equity Growth 1,224 common stock shares 52,056 51,417
Fidelity Advisor Equity Income Fund 2,438 common stock shares 52,084 53,439
Fidelity Advisor Series II Growth 1,554 common stock shares 49,930 54,871
Franklin Small Cap Growth 2,519 common stock shares 52,025 52,192
Templeton Funds 5,260 common stock shares 49,611 54,496
Van Kampen American Capital 3,519 common stock shares 47,422 53,211
Van Kampen Emerging Growth 2,176 common stock shares 79,570 74,747
Total Investments $15,491,744 $20,494,287
<FN>
* Party in interest to the Plan
The accompanying notes are an integral part of these statements.
</FN>
</TABLE>
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
report dated June 13, 1997 into this Form 11-K and into Santa Barbara Bancorp's
previously filed Form S-8 Registration Statements File Nos. 33-5493, 2-83293,
33-43560, 33-48724, 333-05117 and 333-05119. It should be noted that we have not
audited any financial statements of Santa Barbara Bancorp and Subsidiaries
subsequent to December 31, 1996 or performed any audit procedures subsequent to
the date of our report.
handwritten signature
ARTHUR ANDERSEN LLP
Los Angeles, California
June 13, 1997
