<PAGE> 1
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
OF SANTA BARBARA BANCORP
TO BE HELD APRIL 21, 1998
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 East Canon
Perdido, Santa Barbara, California, on Tuesday, April 21, 1998, at 2:00 P.M.,
for the purpose of considering and voting on the following matters:
1. Election of Directors. Electing ten (10) persons to the Board of
Directors to serve until the 1999 Annual Meeting or until their
successors are elected and have qualified. The persons nominated
by the Board to serve as Directors are: Donald M. Anderson, Frank
Barranco, M.D., Edward E. Birch, Terrill F. Cox, Richard M. Davis,
Anthony Guntermann, Dale E. Hanst, Harry B. Powell, David W.
Spainhour and William S. Thomas, Jr.;
2. 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 1998 calendar year; and
3. 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 6, 1998
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 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;
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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
/s/ DONALD M. ANDERSON
--------------------------------------
Donald M. Anderson,
Chairman of the Board
Dated: March 17, 1998
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<PAGE> 3
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
OF
SANTA BARBARA BANCORP
1021 ANACAPA STREET
SANTA BARBARA, CA 93101
TO BE HELD APRIL 21, 1998
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 21,
1998, 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 17, 1998.
The matters to be considered and voted upon at the Meeting will include:
1. Election of Directors. Electing ten (10) persons to the Board of
Directors to serve until the 1998 Annual Meeting or until their
successors are elected and have qualified. The persons nominated
by the Board to serve as Directors are: Donald M. Anderson, Frank
Barranco, M.D., Edward E. Birch, Terrill F. Cox, Richard M. Davis,
Anthony Guntermann, Dale E. Hanst, Harry B. Powell, David W.
Spainhour and William S. Thomas, Jr.;
2. 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 1998 calendar year; and
3. 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 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.
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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 17, 1998.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
There were issued and outstanding 7,679,249 shares of the Company's
common stock on March 6, 1998. March 6, 1998 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. 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 has increased the number of directors from nine (9) to ten
(10) by an amendment to the By-laws adopted at its meeting of May 20, 1997.
When the Board increased the number of Directors from nine to ten, it
appointed Terrill F. Cox to fill the new position.
At the Annual Meeting, ten (10) 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 striking through the nominee's name 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.
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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
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 decides; 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 ten 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 except Terrill F. Cox were elected as Directors of the Company at the
1997 Annual Meeting of the Company's shareholders.
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.
<TABLE>
<CAPTION>
Director Background, Business Experience, and
Director Age Since Position with the Company/Bank
-------- --- -------- -------------------------------------
<S> <C> <C> <C>
Donald M. Anderson 70 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. 67 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 59 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,
</TABLE>
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<TABLE>
<CAPTION>
Director Background, Business Experience, and
Director Age Since Position with the Company/Bank
-------- --- -------- -------------------------------------
<S> <C> <C> <C>
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.
Terrill F. Cox 66 1997 Mr. Cox is the senior partner in the law firm of Grossman, Cox &
Johnson. He is a former Municipal Court Judge. Mr. Cox was a founder
and served on the Board of First Valley Bank of Lompoc for 24 years
from its inception. At the time of its merger with Santa Barbara Bank
& Trust, he was Chairman of the Board.
Richard M. Davis 63 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 78 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 66 1983 Mr. Hanst is currently of counsel to the law firm of Reicker, Clough,
Pfau & Pyle, LLP and was formerly 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 69 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 66 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, Covenant
Benevolent Institutions, Westmont College, and United Way of Santa
Barbara.
William S. Thomas, Jr. 54 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 Executive Vice President and Manager,
Financial
</TABLE>
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<TABLE>
<CAPTION>
Director Background, Business Experience, and
Director Age Since Position with the Company/Bank
-------- --- -------- -------------------------------------
<S> <C> <C> <C>
Institutions. He is a member of the Board of Directors of
the Santa Barbara Chamber of Commerce, Santa Barbara Symphony, C.A.L.M,
Los Padres Council, Boy Scouts of America and El Adobe Corporation.
</TABLE>
COMMITTEES OF THE BOARD OF DIRECTORS
The Company had a standing Nominating Committee and Audit Committee
during 1997. The Bank had a standing Audit Committee and a Compensation
Committee during 1997.
During 1997 the Nominating Committee, which considers the qualifications
and the composition of the Board of Directors of the Company, was composed of
Messrs. Hanst, Guntermann, and Spainhour. The Committee met twice in 1997. The
Committee does not consider shareholder nominations for Director's positions.
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 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."
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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 1997 were Anthony Guntermann, Chairman, Dale E. Hanst,
Richard M. Davis, Frank Barranco, Edward Birch, and Harry B. Powell. Each of the
Committees met five (5) times during 1996.
The members of the Bank's Compensation and Stock Option Committee during
1997 were Dale E. Hanst, Anthony Guntermann, Richard M. Davis, and Harry B.
Powell. They met ten (10) times during 1997 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. The Committee also administers the
Company's stock option plans.
The full Board of Directors met twelve (12) times during 1997. 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 53 Currently serves as Executive Vice President of the Company and Executive Vice
President, Retail Banking, which includes 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 58 Currently serves as Executive Vice President of the Company and Executive Vice
President and Manager of the Wholesale Banking Division, which includes Trust and
Investments, 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 51 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 55 Currently serves as a Senior Vice President of the Company and Senior Vice
President and Director of the Risk Management Division of the Bank. From 1994
through 1997 he served as Chief Credit Officer of the Bank. From 1987 to 1994 he
served as Chief Administrative Officer. During 1987, he served as Manager of the
</TABLE>
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<PAGE> 10
<TABLE>
<S> <C> <C>
Trust Division and from February 1982 to December 1986, he served as Loan
Administrator of the Bank
Jay D. Smith 57 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 44 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 same division
with Security Pacific National Bank from October, 1990 until its merger with Bank
of America in 1992. Prior to that time, she was Vice President and Director of
Human Resources for Security Pacific Auto Finance
Kent M. Vining 50 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>
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, 1997, 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.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF PERCENT
BENEFICIAL OF
OWNERSHIP (1) CLASS (2)
------------- ---------
<S> <C> <C>
BENEFICIAL OWNER
Santa Barbara Bank and Trust, Trustee of the Santa Barbara Bank
and Trust Employee Stock Ownership Trust
1021 Anacapa Street
Santa Barbara, CA 93101 748,657 9.82%
DIRECTORS
Donald M. Anderson 282,927 (3) 3.70%
Frank H. Barranco, M.D. 20,036 (4) 0.26%
Edward E. Birch 27,877 (5) 0.33%
Terrill F. Cox 1,500 (6) 0.02%
Richard M. Davis 20,875 (7) 0.27%
Anthony Guntermann 40,112 (8) 0.53%
Dale E. Hanst 58,193 (9) 0.76%
Harry B. Powell 19,638 (10) 0.26%
David W. Spainhour 250,144 (11) 3.28%
William S. Thomas, Jr. 39,552 (12) 0.52%
NAMED OFFICERS
David Abts 33,981 (13) 0.45%
Donald Barry 13,395 (14) 0.18%
John J. McGrath 62,242 (15) 1.26%
All Directors and Executive Officers as a Group (17 individuals) 1,037,281 (16) 11.83%
</TABLE>
- ---------------
8
<PAGE> 11
<TABLE>
<S> <C>
(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 and shares allocated to
Named Officers under the Bank's Employee Stock Ownership Plan ("ESOP").
Also includes any stock acquirable by exercise of stock options
exercisable within 60 days following December 31, 1997. All share data are
stated as of December 31, 1997.
(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 2,000 shares acquirable by exercise of exercisable stock options.
(4) Includes 1,000 shares acquirable by exercise of exercisable stock options.
(5) Includes 14,613 shares acquirable by exercise of exercisable stock options.
(6) Includes 1,000 shares acquirable by exercise of exercisable stock options.
(7) Includes 1,300 shares acquirable by exercise of exercisable stock options.
(8) Includes 12,242 shares acquirable by exercise of exercisable stock options.
(9) Includes 18,048 shares acquirable by exercise of exercisable stock options.
(10) Includes 7,265 shares acquirable by exercise of exercisable stock options.
(11) Includes 14,477 shares acquirable by exercise of exercisable stock options.
(12) Includes 36,800 shares acquirable by exercise of exercisable stock options.
(13) Includes 14,008 shares acquirable by exercise of exercisable stock options.
(14) Includes 10,500 shares acquirable by exercise of exercisable stock options.
(15) Includes 20,598 shares acquirable by exercise of exercisable stock options.
(16) Includes 215,075 shares acquirable by exercise of exercisable stock options. Actual share ownership
as of December 31, 1997, by the Directors and Executive Officers was 822,206.
</TABLE>
EXECUTIVE COMPENSATION
Executive Officers of the Company do not receive any compensation from
the Company but derive all of their compensation as executive officers of the
Bank. Shown below is information concerning the annual and long-term
compensation for services in all capacities to the Bank for the fiscal years
ended December 31, 1997, 1996, and 1995, of those persons who were, as of
December 31, 1997, (i) the Chief Executive Officer and (ii) the other four most
highly compensated Executive Officers of the Bank (the "Named Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
---------------------------------------- ------------
OTHER SECURITIES
ANNUAL UNDERLYING ALL OTHER
SALARY BONUS (1) COMPENSATION(2) OPTIONS(3) COMPENSATION(4)
NAME AND PRINCIPAL POSITION YEAR (DOLLARS) (DOLLARS) (DOLLARS) (NUMBER) (DOLLARS)
- --------------------------- ---- --------- --------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
David W. Spainhour 1997 190,896 75,000 265,605 16,280 44,105
Chairman of the Board of the 1996 190,182 -0- 344,725 22,835 41,101
Bank 1995 225,000 60,000 238,660 17,686 32,053
William S. Thomas, Jr. 1997 243,353 125,000 68,623 15,000 20,931
President and Chief 1996 247,469 -0- 2,938 30,000 20,769
Executive Officer of the Bank 1995 197,497 25,000 -0- 15,000 10,315
David A. Abts 1997 144,704 75,000 264,828 13,959 25,917
Executive Vice President of 1996 137,067 8,000 331,842 17,140 25,054
Company and Executive Vice 1995 120,073 50,000 550 -0- 13,728
President, Retail Banking
</TABLE>
9
<PAGE> 12
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
D
Donald E. Barry 1997 138,338 83,000 2,250 10,000 20,723
Executive Vice President of 1996 163,000 -0- 12,500 10,000 10,734
Company and Manager of the 1995 59,583 -0- -0- -0- -0-
Wholesale Banking Division
John J. McGrath 1997 128,365 65,000 555,977 13,200 39,902
Senior Vice President of Company, 1996 120,000 -0- 179,905 8,982 34,370
and Director of the Risk 1995 120,022 35,000 3,690 -0- 27,723
Management Division
</TABLE>
- ---------------
(1) Amounts in this column represent bonuses awarded by the Company's
Compensation Committee upon evaluation of performance during fiscal years
1996, 1995 and 1994, respectively, but paid during fiscal years 1997, 1996
and 1995, respectively. Please refer to the Report of the Compensation
Committee on page 16 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 1997, 1996 and 1995. The amount stated for David W.
Spainhour, David A. Abts and John J. McGrath in 1997 includes $263,695,
$263,148 and $555,977, 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) Please see the table on pages 12 and 13 for a detailed explanation.
(4) 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 Bank on behalf of the Named Officers
to the Bank'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 Bank
makes discretionary contributions which are allocated among Plan
participants ratably based on participants' relative compensation levels.
During the Company's last fiscal year, the Bank 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 1997,
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 $34,462, in the respective amounts
set forth in the following Table entitled "401(k) Matching Contributions".
I & I DISCRETIONARY CONTRIBUTIONS
<TABLE>
<S> <C>
David W. Spainhour........................................................ $ 2,279
William S. Thomas, Jr..................................................... $ 2,909
David A. Abts............................................................. $ 2,127
Donald E. Barry .......................................................... $ 5,709
John J. McGrath........................................................... $ 2,809
401(K) MATCHING CONTRIBUTIONS
David W. Spainhour........................................................ $ 7,780
William S. Thomas, Jr..................................................... $ 7,150
David A. Abts............................................................. $ 7,932
Donald E. Barry .......................................................... $ 4,350
John J. McGrath........................................................... $ 7,250
</TABLE>
10
<PAGE> 13
All Other Compensation also includes contributions, if any, made by the Company
on behalf of the Named Officers under the Company's Employee Stock Ownership
Plan ("ESOP"). During the last fiscal year, the Company made contributions to
the ESOP totaling $52,205 on behalf of the Named Officers.
ESOP CASH CONTRIBUTIONS AND DIVIDENDS
<TABLE>
<S> <C>
David W. Spainhour........................................................ $ 33,806
William S. Thomas, Jr..................................................... $ 10,626
David A. Abts............................................................. $ 15,612
Donald E. Barry .......................................................... $ 10,538
John J. McGrath........................................................... $ 27,791
</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 are as
follows:
(BALANCE OF PAGE INTENTIONALLY LEFT BLANK)
11
<PAGE> 14
ESOP SHARE ALLOCATIONS
<TABLE>
<CAPTION>
NUMBER OF TOTAL
SHARES ALLOCATED SHARES ALLOCATED
NAMED OFFICERS DURING 1997 AS OF 12/31/97
-------------- ------------- ---------------
<S> <C> <C>
David W. Spainhour.......................... 841 25,860
William S. Thomas, Jr....................... 532 552
David A. Abts............................... 697 6,030
Donald E. Barry ............................ 357 395
John J. McGrath............................. 681 19,272
</TABLE>
The dollar value of these shares allocated to the Named Officers'
accounts during 1997 are represented in the table "ESOP Cash
Contributions and Dividends" above, and are 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>
David W. Spainhour........................................................ $ 240
William S. Thomas, Jr..................................................... $ 246
David A. Abts............................................................. $ 246
Donald E. Barry .......................................................... $ 126
John J. McGrath........................................................... $ 2,052
</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, 1997, which are reflected in the Summary
Compensation Table on page 9 as long-term compensation awards.
<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 1997(1) FISCAL 1997 (PER SHARE) DATE VALUE(2)
---- -------------- ------------- ----------- ------ ---------
<S> <C> <C> <C> <C> <C> <C>
David W. Spainhour.......................... 1,901 * 0.76% $30.00 03/14/99 $ 10,817
" "............................ 10,000 4.02% $41.31 07/01/07 $ 83,500
" "............................ 620 * 0.25% $42.00 09/12/02 $ 5,239
" "............................ 643 * 0.26% $42.00 09/12/02 $ 5,433
" "............................ 3,116 * 1.25% $46.88 12/12/02 $ 29,384
William S. Thomas, Jr....................... 15,000 6.03% $41.31 07/01/07 $ 125,250
</TABLE>
(continued on next page)
12
<PAGE> 15
(continued from previous page)
<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 1997(1) FISCAL 1997 (PER SHARE) DATE VALUE(2)
---- -------------- ------------- ----------- ------ ---------
<S> <C> <C> <C> <C> <C> <C>
David A. Abts ............................ 1,488 * 0.60% $38.50 06/13/02 $ 11,279
" ............................ 1,892 * 0.76% $38.50 06/13/02 $ 14,341
" ............................ 579 * 0.23% $38.50 06/13/02 $ 4,389
" ............................ 10,000 4.02% $41.31 07/01/07 $ 83,500
Donald E. Barry ............................ 10,000 4.02% $41.31 07/01/07 $
83,500
John J. McGrath ............................ 7,500 3.02% $41.31 07/01/07 $
62,625
" ............................ 1,087 * 0.44% $42.00 09/12/02 $ 9,185
" ............................ 3,393 * 1.36% $42.00 09/12/02 $ 28,671
" ............................ 1,220 * 0.49% $42.00 09/12/02 $ 10,309
</TABLE>
*RELOAD GRANTS
- ---------------
(1) Options granted under the Company's Stock Option Plan and Restricted Stock
Option Plan are administered by the Company's Stock Option Committee and
the Board of Directors. All of the above options granted during 1997 were
pursuant to the Restricted Stock Option Plan and, except for reload
options, 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. A "reload" option is granted when someone exercises a
stock option by tendering stock already owned. The number of shares
granted is equal to the number of shares tendered in payment of the option
exercise price and the exercise price is the fair market value of the
Company's stock as of the date the shares are tendered. Reload options
vest and first become exercisable one (1) year following grant. There are
also certain restrictions on reload options which are described in the
Company's stock option plans. Of the total number of options granted to
Messrs. Spainhour, Abts and McGrath in 1997, 6,280, 3,959 and 5,700,
respectively, were reload options.
(2) Values are based on a binomial 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 binomial 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
present value of the options are based on the expected term of 5 years, a
risk-free rate of return ranging from 5.68% to 6.65%, an annual dividend
yield ranging from 2.22% to 3.32%, and stock price volatility of 19.87%.
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 1997
and prior years under the Company's Stock Option Plan and Restricted Stock
Option Plan and held by them at December 31, 1997.
13
<PAGE> 16
<TABLE>
<CAPTION>
AGGREGATE OPTION EXERCISES LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
--------------------------------------------------------------------------------------
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS EXERCISED OPTIONS HELD AT IN-THE-MONEY OPTIONS AT
DURING FISCAL YEAR 1997 DECEMBER 31, 1997 DECEMBER 31, 1997(1)
------------------------- ------------------- ---------------------
SHARES
ACQUIRED VALUE
ON EXERCISE REALIZED(1)
NAME (NUMBER) (DOLLARS) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- -------- --------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
David W. Spainhour.............. 13,943 263,695 12,477 21,364 $238,635 $232,502
William S. Thomas, Jr........... 2,200 65,725 30,800 42,000 $869,370 $817,842
David A. Abts................... 11,119 263,148 12,008 20,827 $269,857 $266,686
Donald E. Barry................. -0- -0- 8,500 19,000 $229,062 $291,250
John J. McGrath................. 18,896 554,267 19,098 17,589 $536,962 $192,640
</TABLE>
- ---------------
(1) The value realized from options exercised during Fiscal Year 1997 and the
value of unexercised in-the-money options at December 31, 1997 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 ($47.125 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 written 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 except
that the Key Employee Retiree Health Plan does provide for the continuation of
benefits under certain circumstances following a 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 was a
senior partner in the law firm of Schramm & Raddue, Santa Barbara, California
and is currently Of Counsel to Reicker, Clough, Pfau & Pyle, LLP which serves 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.
EXTENT OF PARTICIPATION IN THE COMPANY'S STOCK PLANS
As of December 31, 1997, the following number of employees/Directors of
the Company and/or the Bank were eligible to participate and were participating
in each of the stock plans of the Company:
<TABLE>
<CAPTION>
NUMBER NUMBER
PLAN ELIGIBLE PARTICIPATING
---- -------- -------------
<S> <C> <C>
Employee Stock Ownership Plan........................ 565 565
1983 Stock Option Plan............................... 9 9
1992 Restricted Stock Option Plan.................... 232 137
1985 Directors Stock Option Plan..................... 3 3
1996 Directors Stock Option Plan..................... 7 7
</TABLE>
14
<PAGE> 17
SECURITIES SUBJECT TO OPTION PLANS
The following tables set forth information, as of December 31, 1997 (as
adjusted to reflect subsequent stock splits and stock dividends), regarding
options under the various employee and Director stock option plans of the
Company:
<TABLE>
<CAPTION>
1983 STOCK OPTION PLAN
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- 1,189,744 18,058 $12.96 06/01/99
to 07/01/99
1992 RESTRICTED STOCK OPTION PLAN
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
-------- ------- ------- --------- -----
296,706 388,162 615,132 $26.72 03/01/98
to 07/01/07
1985 DIRECTORS STOCK OPTION PLAN
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
-------- ------- ------- --------- -----
-0- 300,768 19,774 $16.57 07/01/98
to 07/03/00
1996 DIRECTORS STOCK OPTION PLAN
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
-------- ------- ------- --------- -----
67,985 3,300 78,715 $33.67 06/20/01
to 07/01/02
</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
15
<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
1997 were $173,750.
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 January, 1998 to make its compensation
recommendations for calendar year 1998 and to recommend bonuses for the Bank's
Executive Officers based on performance in 1997.
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 1997 and bonus awards for 1997. 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 Department of Financial Institutions' Executive
Officer Compensation Survey, the Survey of Executive Compensation of California
Independent Banks and other relevant surveys prepared by industry consultants.
Other components of executive compensation are the bonuses which are
awarded to the Bank's Executive 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 highlighted by considering the Bank's
performance and executive officers' bonuses paid over the last three years. In
1995, net income was $10,415,000 or $1.36 per share and executive officers'
bonuses were $43,000 and paid in 1996. In 1996, net income was $15,665,000 or
$2.05 per share and executive officers' bonuses were $650,000 and paid in 1997.
In 1997, the Bank had its best year ever with net income of $20,136,000 or $2.65
per share and executive officers' bonuses were $805,000 and paid in 1998.
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 Compensation Committee which also acts as the Stock Option
Committee under the Company's stock option plans.
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
16
<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, 1992 through December 31, 1997, measured against (i)
the Standard & Poor's 500 Stock Index and (ii) SNL Banks (Western) Index as
obtained from SNL Securities LC.
SANTA BARBARA BANCORP
Total Return Performance
<TABLE>
<CAPTION>
Period Ending Santa Barbara Bancorp S&P 500 SNL Banks (Western) Index
- ------------- --------------------- ------- -------------------------
<S> <C> <C> <C>
12/31/92 100.00 100.00 100.00
12/31/93 118.31 110.08 114.57
12/31/94 140.18 111.53 113.43
12/31/95 171.72 153.44 190.22
12/31/96 248.69 188.52 270.43
12/31/97 429.07 251.44 398.65
</TABLE>
*Santa Barbara Total Return calculated using dividends and prices supplied in
part by the company.
17
<PAGE> 20
SELECTION OF INDEPENDENT ACCOUNTANTS
(PROPOSAL 2)
The firm of Arthur Andersen, LLP served as independent certified public
accountants for the Company and the Bank with respect to the calendar year 1997,
and has been recommended by the Board to be the Company's and the Bank's
accountants for calendar year 1998. 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, 1997 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 40.1% of the total fees for services
paid to Arthur Andersen, LLP for the year ended December 31, 1997. 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 1998. 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)
18
<PAGE> 21
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, 1997, to all Directors and Executive Officers, together with their
associates and members of their immediate family, was approximately $909,652,
constituting approximately .76% 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.
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 $512,467
during 1997. In the Company's opinion the lease is comparable to an "arms
length" negotiated lease.
SECTION 16(a) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
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 on review of the copies of such reports
furnished to the Company, written representations that no other reports were
required during the fiscal year ended December 31, 1997 and other information
available to the Company, all Section 16(a) filing requirements applicable to
its officers, Directors and greater than ten-percent beneficial owners were
timely filed.
SHAREHOLDER PROPOSALS
The deadline for shareholders to submit proposals to be considered for
inclusion in the Company's proxy statement for the Company's 1999 Annual Meeting
of Shareholders is November 15, 1998. No such proposals were submitted with
respect to the 1998 Annual Meeting.
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 1997 by requesting them
from the
19
<PAGE> 22
Secretary of the Company. Pursuant to regulations of the Securities and Exchange
Commission, shareholders of the Company will receive the 1997 Annual Report of
the Company together with this proxy statement. If for any reason any
shareholder does not receive a copy of the 1997 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 6, 1998 (THE RECORD DATE FOR ELIGIBILITY TO VOTE AT THE ANNUAL MEETING) A
COPY OF THE COMPANY'S 1997 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
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
By: /s/ Donald M. Anderson
------------------------------------
Donald M. Anderson,
Chairman of the Board
Dated: March 17, 1998
20
<PAGE> 23
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 Proxy Holders, each with the power to
appoint his substitute, and hereby authorizes them to represent and to vote, as
designated on the reverse side, all the shares of common stock of Santa Barbara
Bancorp held of record by the undersigned on March 6, 1998 at the Annual
Meeting of Shareholders to be held on April 21, 1998 or any adjournment thereof.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE.)
<PAGE> 24
+ Please detach here +
Please mark
your vote 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 strike
through that nominee's name below.)
Nominees: Donald M. Anderson Anthony Guntermann
Frank Barranco, M.D. Dale E. Hanst
Edward E. Birch Harry B. Powell
Terrill F. Cox David W. Spainhour
Richard M. Davis William S. Thomas, Jr.
_________________________________________________
Please Mark, Sign, Date and Return this Proxy Card Promptly Using the
Enclosed Envelope
FOR AGAINST ABSTAIN
2. PROPOSAL TO APPROVE SELECTION
OF ARTHUR ANDERSEN LLP TO [ ] [ ] [ ]
SERVE AS INDEPENDENT PUBLIC
ACCOUNTANTS FOR SANTA BARBARA
BANCORP FOR THE YEAR 1998.
3. IN THEIR DISCRETION, THE PROXY HOLDERS 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 and 2. 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.
__________________________________
Signature
__________________________________
Signature
__________________________________
Signature
Dated ____________ 1998
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.
+ Please detach here +