As filed with the Securities and Exchange Commission on July 21, 1995
Registration No. 33-58379
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
POST-EFFECTIVE
AMENDMENT NO. 2 TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
SDNB FINANCIAL CORP.
(Exact name of registrant as specified in its charter)
California 95-3725079
(State or other (I.R.S. Employer
jurisdiction of Identification
incorporation or Number)
organization)
1420 Kettner Boulevard
San Diego, California 92101
(619) 233-1234
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive office)
Murray L. Galinson
President and Chief Executive Officer
1420 Kettner Boulevard
San Diego, California 92101
(619) 233-1234
(Name, address, including zip code, and telephone number, including area
code, of agent for service)
With Copies to:
Lawrence M. Sherman, Esq. Theodore G. Johnsen, Esq.
Sherman & Eggers, P.C. Arnold & Porter
350 West Ash Street, Suite 1100 777 South Figueroa Street
San Diego, California 92101 Los Angeles, California 90017-2513
(619) 338-4900 (213) 243-4000
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration
Statement.
If the only securities being registered on this Form are being
offered pursuant to dividend or interest reinvestment plans, please
check the following box. [ ]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection
with dividend or interest reinvestment plans, check the following box. [X]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
Title of class Proposed maximum Proposed maximum
of securities Amount to offering price aggregate offering Amount of
to be registered be registered per security<F1> price<F1> registration fee
<S> <C> <C> <C> <C>
Common Stock
(no par value) 769,582 $4.34 $3,339,986 $1,151.72
Subscription Rights
to purchase Common Stock 769,582 (2)<F2> (2)<F2> None
The Registrant hereby amends this Registration Statement on such
date or dates as may be necessary to delay its effective date until the
Registrant shall file a further amendment which specifically states that
the Registration Statement shall thereafter become effective in
accordance with Section 8(a) of the Securities Act of 1933, as amended,
or until the Registration Statement shall become effective on such date
as the Commission, acting pursuant to said Section 8(a), may determine.
<FN>
<F1>
(1) Estimated solely for the purpose of calculating the registration fee.
<F2>
(2) No separate consideration will be received for the Subscription Rights.
<F3>
(3) 1/29 of 1% of the proposed maximum aggregate offering price. Previously paid.
</FN>
</TABLE>
<PAGE>
SDNB FINANCIAL CORP.
CROSS REFERENCE SHEET
Pursuant to Item 501(b)
Item Number and Location or
Caption Heading
in Form S-3 in Prospectus
1. Forepart of Registration Facing Page and Cross-
Statement Reference Sheet of
and Outside Front Cover Registration Statement and
Page of Cover Page of
Prospectus. Prospectus.
2. Inside Front and Outside Inside Front and Outside
Back Cover Back Cover
Pages of Prospectus. Pages of Prospectus.
3. Summary Information, Risk Prospectus Summary(pp. 4-6);
Factors Risk Factors (pp. 7-11).
and Ratio of Earnings to
Fixed
Charges.
4. Use of Proceeds. Use of Proceeds (p. 17).
5. Determination of Offering The Subscription Offering -
Price. Determination
of Subscription Price and
Fairness Opinion (p. 15).
6. Dilution. Risk Factors -
Dilution (pp. 8-9).
7. Selling Security Holders. *
8. Plan of Distribution. Plan of Distribution (p. 21).
9. Description of Securities Incorporation of Certain
to be Documents by Reference (p. 32);
Registered. The Subscription Offering
(pp. 11-16); Description of
Capital Stock and Rights of
Shareholders (pp.20-21).
10. Interests of Named *
Experts and
Counsel.
11. Material Changes. *
12. Incorporation of Certain Incorporation of Certain
Information Documents by
by Reference. Reference (p. 3).
13. Disclosure of Commission *
Position on
Indemnification for
Securities Act
Liabilities.
_____________________________
* Omitted as not applicable.
<PAGE>
SDNB Financial Corp.
PROSPECTUS
769,582 Shares of Common Stock
(no par value)
SDNB Financial Corp. (the "Company") is hereby offering (the
"Subscription Offering") up to 769,582 shares of its Common Stock, no
par value ("Common Stock"), to holders of record of its Common Stock
(the "Shareholders") at the close of business on May 5, 1995
(the "Record Date"), pursuant to transferable subscription rights (the
"Basic Subscription Rights" and, together with the Oversubscription
Rights (as defined below), the "Subscription Rights"). The
subscription price is $4.34 per share (the "Subscription Price").
Holders of Subscription Rights, including transferees of Shareholders
(collectively, the "Rights Holders" and, together with the
Shareholders, the "Holders"), will be able to exercise their
Subscription Rights until 5:00 p.m., New York time, on September 21,
1995 (such date, as it may be extended by the Company to October 5, 1995,
being the "Expiration Date"). See "THE SUBSCRIPTION OFFERING." After the
Expiration Date, the Subscription Rights will no longer be exercisable
to purchase shares of Common Stock.
For each two shares of Common Stock held of record as of the close of
business on the Record Date, a Shareholder will receive one Basic
Subscription Right. No fractional Basic Subscription Rights will be
issued by the Company. The number of Basic Subscription Rights
distributed by the Company to each Shareholder will be rounded up to
the nearest whole number. Each Rights Holder will have the right to
purchase one share of Common Stock for each Basic Subscription Right.
Rights Holders are entitled to subscribe for all, or any portion of,
the shares of Common Stock underlying their Basic Subscription Rights.
A Rights Holder who subscribes for the full number of shares of Common
Stock underlying the Basic Subscription Rights held by such Rights
Holder on the date of exercise (other than in his or her capacity
as a participant in the San Diego National Bank Deferred Savings Plan)
and evidenced by a Subscription Warrant will have the right to subscribe
for additional shares of Common Stock that are not subscribed for by
other Rights Holders pursuant to their Basic Subscription Rights (the
"Oversubscription Rights"). See "THE SUBSCRIPTION OFFERING -
Oversubscription Rights" and "RISK FACTORS - Principal
Shareholder." No minimum amount of proceeds is required for the
Company to consummate the Subscription Offering.
The Common Stock is traded on the NASDAQ National Market System (the
"NASDAQ/NMS") under the symbol "SDNB" and, on July 20, 1995, the
closing bid price of the Common Stock was $3.875. See "MARKET
PRICE AND DIVIDENDS ON THE COMMON STOCK." The Basic Subscription
Rights will be tradable on the NASDAQ/NMS under the symbol "SDNBR"
until the end of trading on the NASDAQ/NMS on the Expiration Date.
However, there has been no prior market for the Basic Subscription
Rights and no assurance can be given that a market will develop.
See "THE SUBSCRIPTION OFFERING - Transferability of Basic
Subscription Rights."
HOLDERS SHOULD CAREFULLY CONSIDER THE MATTERS SET FORTH UNDER
"RISK FACTORS (PAGES 7-11)."
_______________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
_________________
THESE SECURITIES ARE NOT SAVINGS OR DEPOSIT ACCOUNTS AND ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION,
THE BANK INSURANCE FUND, OR ANY OTHER GOVERNMENTAL AGENCY.
Subscription Underwriting Discounts Proceeds to
Price and Commissions(1) the Company(2)
Per share $4.34 None $4.34
Total $3,339,986 None $3,339,986
(1) See "THE SUBSCRIPTION OFFERING - Commissions Payable" and
"PLAN OF DISTRIBUTION" for information with respect to commissions
payable to certain brokers and dealers. See also "THE SUBSCRIPTION
OFFERING - Determination of SubscriptionPrice and Fairness Opinion" for
information with respect to financial advisory fees payable by the
Company.
(2) Before deducting expenses payable by the Company estimated at
$350,000.
_______________________
The Common Stock is being offered directly to Rights Holders by the
Company and is not the subject of any underwriting agreement. See
"PLAN OF DISTRIBUTION." It is expected that delivery of the shares of
Common Stock will be made as soon as practicable after the Expiration
Date.
July 25, 1995
<PAGE>
NOTICE REGARDING RESIDENTS OF FLORIDA
DUE TO BURDENSOME SECURITIES AND DEALER REGISTRATION REQUIREMENTS OF THE
FLORIDA SECURITIES AND PROTECTION ACT, SUBSCRIPTION RIGHTS MAY NOT BE
TRANSFERRED TO, OR EXCERCISED BY, A RESIDENT OF FLORIDA WHO WAS NOT A
SHAREHOLDER OF RECORD OF THE COMPANY'S COMMON STOCK ON THE RECORD DATE
(MAY 5, 1995).
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and in
accordance therewith files reports, proxy statements, and other
information with the Securities and Exchange Commission (the
"Commission"). Such reports, proxy statements, and other information
can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549 and at its Regional Offices at
Seven World Trade Center, Suite 1300, New York, New York 10048,
and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such material can be obtained from the
Commission's Public Reference Section at 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates.
The Company has filed with the Commission a Registration Statement
on Form S-3 (together with all amendments and exhibits, the
"Registration Statement") relating to the shares of Common Stock that
may be issued to Rights Holders. This Prospectus does not contain all
of the information set forth in the Registration Statement and exhibits
thereto that the Company has filed with the Commission under the
Securities Act of 1933, as amended (the "Securities Act"), and to which
reference is hereby made.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Incorporated by reference in this Prospectus are the following
documents filed by the Company with the Commission pursuant to the
Exchange Act:
1. the Company's Annual Report on Form 10-K for the year ended
December 31, 1994;
2. the Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1995; and
3. the description of the Common Stock in the Company's
registration statement filed under the Exchange Act with respect to the
Common Stock, including any amendments and reports filed for the
purpose of updating such description.
All documents subsequently filed by the Company with the
Commission pursuant to Sections 13(a), 13(c), 14, or 15(d) of the
Exchange Act after the date of this Prospectus and prior to the
termination of the Subscription Offering shall be deemed to be
incorporated by reference in this Prospectus and to be a part hereof
from the date such documents are filed. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in any
other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement.
Any statement so modified or superseded shall not be deemed, except as
so modified or superseded, to constitute a part of this Prospectus.
The Company will provide, without charge, to each person to whom
this Prospectus is delivered, on the written or oral request of any
such person, a copy of any or all of the information incorporated
herein by reference other than exhibits to such information (unless
such exhibits are specifically incorporated by reference into such
information). Written or oral requests should be directed to SDNB
Financial Corp., 1420 Kettner Boulevard, San Diego, California 92101,
Attention: Howard W. Brotman, telephone (619) 233-1234, ext. 717.
<PAGE>
PROSPECTUS SUMMARY
The following summary does not purport to be complete and is
qualified in its entirety by the more detailed information, including
consolidated financial statements, appearing elsewhere, or incorporated
by reference, in this Prospectus.
The Company
SDNB Financial Corp. (the "Company") is a registered bank holding
company organized in 1982. The Company's principal subsidiary is San
Diego National Bank, San Diego, California (the "Bank"), a national
banking association organized in 1981, the deposits of which are
insured by the Bank Insurance Fund ("BIF") of the Federal Deposit
Insurance Corporation (the "FDIC") up to applicable limits. Through
the Bank, the Company provides general commercial banking services.
At March 31, 1995, the Company had consolidated assets of approximately
$168 million, consolidated liabilities of approximately $157 million
(which includes total deposits through the Bank of approximately $129
million), and shareholders' equity of approximately $11 million.
The Company's principal executive office is located at 1420 Kettner
Boulevard, San Diego, California 92101, and its telephone number
is (619) 233-1234. See "THE COMPANY."
The Subscription Offering
Shares Offered Hereby Up to 769,582 shares of Common Stock.
Subscription Price $4.34 per share of Common Stock.
Risk Factors See "RISK FACTORS" for a discussion
of certain important factors to be
considered by Holders.
Basic Subscription Rights For each two shares of
Common Stock held of record as of the
close of business on May 5, 1995,
1995 (the "Record Date"), a Shareholder
will receive one Basic Subscription
Right. The number of Basic Subscription
Rights distributed by the Company to each
Shareholder will be rounded up to the
nearest whole number. Each Rights Holder
will have the right to purchase one share
of Common Stock for each Basic
Subscription Right. Rights Holders are
entitled to subscribe for all, or any
portion of, the shares of Common Stock
underlying their Basic Subscription
Rights. Basic Subscription Rights will
be evidenced by Subscription Warrants.
Oversubscription Rights A Rights Holder who
subscribes for the full number of shares
of Common Stock underlying the Basic
Subscription Rights held by such Rights
Holder on the date of exercise (other
than in his or her capacity as a
participant in the San Diego National
Bank Deferred Savings Plan (the "Plan"))
and evidenced by a Subscription Warrant will
have the right to subscribe for
additional shares of Common Stock that
are not subscribed for by other Rights
Holders pursuant to their Basic
Subscription Rights. Basic Subscription
Rights held by the Plan shall not be
eligible for Oversubscription Rights due
to the prohibited transaction rules of the
Internal Revenue Code and the Employee
Retirement Income Security Act of 1974.
There can be no assurance that any shares
of Common Stock will be available to
satisfy in whole or in part a Rights
Holder's request to subscribe for shares
in excess of the shares underlying such
Rights Holder's Basic Subscription
Rights. Oversubscription Rights are
exercisable by all Rights Holders, other
than the Plan, including transferees of
Shareholders. See "THE SUBSCRIPTION
OFFERING - Oversubscription Rights."
Proration of
Oversubscription Rights If there are shares
available for sale pursuant to the
exercise of Oversubscription Rights and
the number of such shares is not
sufficient to satisfy in full all
subscriptions submitted pursuant to such
requests, the available shares of Common
Stock will be allocated among the Rights
Holders who exercise Oversubscription
Rights pro rata based upon the
<PAGE>
number of Basic Subscription Rights
held by each such Rights Holder on the
Expiration Date.
Principal Shareholder On January 31, 1995, two
limited partnerships, of which WHR
Management Corp. is the general partner
(the two limited partnerships and WHR
Management Corp. are referred to herein,
collectively, as "WHR"), agreed to
purchase 510,121 shares of the Company's
Common Stock (the "Private Placement"),
which purchase was consummated on March 28,
1995. The 510,121 shares issued to WHR
constitute 24.9% of the Company's
outstanding Common Stock after such
issuance (without taking into
consideration shares to be issued in this
Subscription Offering). In lieu of
participating in the Subscription Offering,
WHR also agreed to purchase an additional
255,193 shares of Common Stock at $4.34
per share, for an aggregate purchase price of
$1,107,538, if the Subscription Offering
is fully subscribed, or such lesser
amount so that after such purchase WHR
will hold an aggregate of 24.9% of the
outstanding Common Stock of the Company,
taking into account the shares issued in
the Subscription Offering.
Use of Proceeds The net proceeds from the
sale of the Common Stock will be used for
general corporate purposes, which may
include investments in or extensions of
credit to the Company's subsidiaries, the
reduction of existing debt, and financing
of possible future acquisitions of other
banking institutions or related
businesses. At the present time, the
Company does not have any specific plans,
agreements, or understandings, written or
oral, pertaining to the proposed acquisition
of any banking institution or related
business.
Commissions Payable The Company will pay to any registered or
licensed broker or dealer a commission
equal to 5% of the aggregate Subscription
Price attributable to any Subscription
Rights validly exercised through such
broker or dealer. No commission will be
paid to any broker or dealer affiliated
with WHR.
Shares Currently
Outstanding 2,048,485 shares of Common
Stock, at July 20, 1995.
Subscription Agent The Subscription Agent is
American Stock Transfer & Trust Company
(the "Subscription Agent"). See "THE
SUBSCRIPTION OFFERING - Subscription
Agent" for addresses and information
relating to the delivery of Subscription
Warrants and the payment of the aggregate
Subscription Price.
Information Agent The Information Agent is
Western Financial Corporation. The
Information Agent's toll-free telephone
number is (800) 488-5990.
Method of Exercising
Subscription Rights Basic Subscription Rights
and Oversubscription Rights may be
exercised by properly completing,
signing, and delivering the Subscription
Warrant accompanying this Prospectus,
together with payment in full of the
aggregate Subscription Price by either
bank certified check or cashier's check.
See "THE SUBSCRIPTION OFFERING - Method
of Exercising Subscription Rights."
Expiration Date Rights Holders will be able
to exercise their Subscription Rights
until 5:00 p.m., New York time, on
September 21, 1995, unless such period is
extended by the Company, at its
option, to October 5, 1995. After the
Expiration Date, Subscription Rights will
no longer be exercisable to purchase shares
of Common Stock and will have no
value. See "Foreign Restrictions and
Undeliverable Subscription Warrants"
below for a summary of the restrictions
on the method of exercising Subscription
Rights held by shareholders whose record
<PAGE>
addresses are outside of the continental
United States or Canada, or are Army Post
Office ("A.P.O.") or Fleet Post Office
("F.P.O.") addresses.
Amendments, Termination The Company reserves the
right to amend the terms and conditions
of the Subscription Offering or to
terminate the Subscription Offering at
any time prior to delivery of the shares
of Common Stock offered hereby. See "THE
SUBSCRIPTION OFFERING - Amendments and
Waivers; Termination."
Transferability of
Subscription Rights The Basic Subscription
Rights are transferable, and the right to
subscribe for additional shares of Common
Stock pursuant to the Oversubscription
Rights is transferable with each Basic
Subscription Right. DUE TO BURDENSOME
SECURITIES AND DEALER REGISTRATION
REQUIREMENTS OF THE FLORIDA SECURITIES
AND INVESTOR PROTECTION ACT, SUBSCRIPTION
RIGHTS MAY NOT BE TRANSFERRED TO, OR
EXCERCISED BY, A RESIDENT OF FLORIDA WHO
WAS NOT A SHAREHOLDER OF THE COMPANY'S
COMMON STOCK ON THE RECORD DATE (MAY 5, 1995).
The Basic Subscription Rights will be
tradable on the NASDAQ National Market
System (the "NASDAQ/NMS") until the end
of trading on the NASDAQ/NMS on the
Expiration Date. There is no assurance,
however, that a market for the Basic
Subscription Rights will develop.
The Subscription Agent
will attempt to sell Basic Subscription
Rights for the convenience of Rights
Holders, provided the Subscription
Warrant with the instructions for sale
properly executed is received by the
Subscription Agent before 11:00 a.m.,
New York time, on the Expiration Date.
No assurance can be given that the
Subscription Agent will be able to sell
any Basic Subscription Rights.
Foreign Restrictions and
Undeliverable Subscription
Warrants Subscription Warrants will
not be mailed to Shareholders whose
record addresses are outside the
continental United States or Canada, or
are A.P.O. or F.P.O. addresses. Such
Subscription Warrants will be held by the
Subscription Agent for such Shareholders'
accounts until instructions are received
to exercise or transfer the Subscription
Rights. If no instructions have been
received by 11:00 a.m., New York time, on
the Expiration Date, the Subscription
Agent will attempt to sell the
Subscription Rights of those Shareholders
together with the rights of Shareholders
whose addresses are not known by the
Company or the Subscription Agent or to
whom delivery of a Subscription Warrant
could not be made.
No Fractional Basic
Subscription Rights . . . No fractional Basic
Subscription Rights will be issued by the
Company. The number of Basic
Subscription Rights distributed by the
Company to each Shareholder will be
rounded up to the nearest whole number.
NASDAQ/NMS Symbols Common Stock - "SDNB."
Basic Subscription Rights - "SDNBR."
CUSIP Number . . . . Basic Subscription Rights -
784082-11-7.
<PAGE>
Federal Income Tax
Considerations For United States federal
income tax purposes, receipt of the
Subscription Rights by Shareholders
pursuant to the Subscription Offering
should be treated as a nontaxable
dividend distribution. See "CERTAIN
FEDERAL INCOME TAX CONSIDERATIONS."
<PAGE>
RISK FACTORS
Dividend Limitations
The capital stock of San Diego National Bank (the "Bank") is one of
the Company's two principal assets. See "THE COMPANY." As a national
bank subject to the regulation of the Office of the Comptroller of the
Currency (the "Comptroller"), the Bank is subject to legal limitations
on the source and amount of dividends it is permitted to pay to the
Company. The approval of the Comptroller is required for any dividend
by a national bank if the total of all dividends declared by the bank
in any calendar year would exceed the total of its net profits, as
defined by the Comptroller, for that year, combined with its retained
net profits for the preceding two years. The Bank had a net loss (as
defined by the Comptroller) of approximately $1.49 million for 1993 and
1994, combined. Until the effects of that loss are overcome, the Bank
will be precluded from paying dividends to the Company without the
Comptroller's approval. The payment of dividends by the Bank may also
be affected by other factors, such as requirements for the maintenance
of adequate capital. In addition, the Comptroller and the Federal
Deposit Insurance Corporation (the "FDIC") are authorized to determine
under certain circumstances relating to the financial condition of a
national bank whether the payment of dividends would be an unsafe or
unsound banking practice and to prohibit payment thereof. Finally,
under the Federal Deposit Insurance Corporation Improvement Act
("FDICIA"), an insured depository institution is prohibited from making
any capital distribution to its owner, including any dividend, if,
after making such distribution, the depository institution fails to
meet the required minimum level for any relevant capital measure,
including the risk-based capital adequacy and leverage standards
discussed under "Capital" below.
The Company and the Federal Reserve Bank of San Francisco ("Reserve
Bank") entered into an agreement on November 20, 1992, pursuant to
which the Company must obtain the approval of the Reserve Bank prior to,
among other actions, the declaration of any cash dividends.
Capital
The Federal Reserve Board (the "Reserve Board") and the Comptroller
have adopted risk-based capital adequacy guidelines for bank holding
companies and banks under their supervision. Under the Comptroller's
guidelines, a bank is "well capitalized" (the highest rating) if its so
called "Tier 1 capital" and "total capital" as a percentage of risk-weighted
assets and certain off-balance sheet instruments are at least 6% and 10%,
respectively. Under the Reserve Board guidelines, the Tier 1 capital and
total capital of all bank holding companies must be at least 4% and 8%,
respectively.
The Reserve Board and the Comptroller have also imposed a leverage
standard to supplement their risk-based ratios. This leverage standard
focuses on a banking institution's ratio of Tier 1 capital to average
total assets adjusted for goodwill and certain other items. Under
these guidelines, banking institutions that meet certain criteria,
including excellent asset quality, high liquidity, low interest rate
exposure, and good earnings, and have received the highest regulatory
rating must maintain a ratio of Tier 1 capital to total assets of at
least 3%. Institutions not meeting these criteria, as well as
institutions with supervisory, financial, or operational weaknesses,
along with those experiencing or anticipating significant growth, are
expected to maintain a Tier 1 capital to total assets ratio equal to at
least 4% to 5%.
As reflected in the following table, the risk-based capital ratios
and leverage ratios of the Company and the Bank, as of March 31,
1995, exceeded the fully phased-in risk-based capital adequacy
guidelines and the leverage standard.
<PAGE>
Capital Components and Ratios
(Dollars in Thousands)
March 31, 1995
Company Bank
Capital Components:
Tier 1 capital $ 11,454 $ 11,913
Total capital 12,963 13,682
Risk-weighted assets
and off-balance sheet
instruments 119,979 108,669
Regulatory Capital
Tier 1 capital risk-based:
Actual 9.55% 10.96%
Required 4.00 6.00
Excess 5.55% 4.96%
Total risk-based:
Actual 10.80% 12.22%
Required 8.00 10.00
Excess 2.80% 2.22%
Leverage:
Actual 7.63% 7.94%
Required 5.00 5.00
Excess 2.63% 2.94%
FDICIA requires each federal banking agency, including the Reserve
Board, to revise its risk-based capital standards to ensure that those
standards take adequate account of interest rate risk, concentration of
credit risk, and the risk of non-traditional activities, and reflect
the actual performance and expected risk of loss on multifamily
mortgages. The Reserve Board, the FDIC, and the Comptroller have issued
proposed rules whereby exposures to interest rate risk would be
measured as the effect that a specified change in market interest rates
would have on the net economic value of a bank. This economic
perspective considers the effect that changing market interest rates
may have on the value of a bank's assets, liabilities, and off-balance
sheet positions. Institutions with interest rate risk exposure in
excess of a threshold level would be required under the proposed rules
to hold additional capital proportional to that risk. The Reserve
Board, the FDIC, the Comptroller, and the Office of Thrift Supervision
have issued a final rule amending the risk-based capital guidelines to
take account of concentration of credit risk and the risk of
non-traditional activities. The final rule amends each agency's
risk-based capital standards by explicitly identifying concentration of
credit risk and the risk arising from non-traditional activities, as
well as an institution's ability to manage those risks, as important
factors to be taken into account by the agency in assessing an
institution's overall capital adequacy. The final rule became
effective on January 17, 1995. The final rule has not materially
impacted on the Company's capital requirements, but there can be no
assurance that the adoption of other proposals implementing FDICIA will
not have an adverse impact on the Company's capital requirements.
Bank regulators and legislators continue to indicate their desire to
raise capital requirements applicable to banking organizations beyond
their current levels. However, management is unable to predict whether
and when higher capital requirements would be imposed and, if imposed,
at what levels and on what schedule.
Dilution
Due to the Private Placement, Shareholders have suffered a dilution
in their voting rights and in their percentage interest in any future
net earnings of the Company. In addition, Shareholders who do not
exercise their Basic Subscription Rights in full will suffer an
additional dilution in their voting rights and in their percentage
interest in any future net earnings of the Company. All Shareholders
have suffered a reduction in the per share book value of the shares of
Common Stock currently held by them as a result of the sale of the
510,121 shares to WHR at less than book value in the Private Placement
and will suffer an additional reduction as a result of the sale of
shares to subscribing Rights Holders at less than book value in the
Subscription Offering and the sale of additional shares to WHR at less
than book value as discussed below under "Principal Shareholder" and
"THE SUBSCRIPTION OFFERING - Private Placement."
<PAGE>
The following tables show the detail of such dilution (assuming,
respectively, all Subscription Rights are exercised and half of the
Subscription Rights are exercised):
Number of
Shares Shareholders' Per Share
Fully Subscribed Outstanding Equity Book Value
March 31, 1995 amounts 2,048,485 $11,224,138 $5.48
(includes initial issuance
to WHR at $4.34 per share)
Proforma Proforma
Shareholders' Per Share
Equity Book Value
Rights offering @ $4.34
per share 769,582 3,339,986
Additional issuance to
WHR @ $4.34 per share 255,193 1,107,538
Less estimated costs
and commissions (517,000)
Totals 3,073,260 $15,154,662 $4.93
Number of
Shares Shareholders' Per Share
Half subscribed Outstanding Equity Book Value
December 31, 1994 amounts 2,048,485 $11,224,138 $5.48
Proforma Proforma
Shareholders' Per Share
Equity Book Value
Rights offering @ $4.34
per share 384,791 1,669,993
Additional issuance to
WHR @ $4.34 per share 127,596 553,767
Less estimated costs
and commissions (433,500)
Totals 2,560,872 $13,014,398 $5.08
No Minimum Size of Offering
No minimum amount of proceeds is required for the Company to
consummate the Subscription Offering.
No assurance can be given regarding the amount of proceeds that
the Company will receive from the Subscription Offering. See "THE
SUBSCRIPTION OFFERING." The Company does not know if Holders will
exercise their Subscription Rights. The Company does not have a
commitment from any person to purchase any shares of Common Stock that
remain unsold after the termination of the Subscription Offering.
Right to Terminate and Amend the Subscription Offering
The Company expressly reserves the right, in its sole discretion,
at any time prior to delivery of the shares of Common Stock offered in
the Subscription Offering, to terminate the Subscription Offering by
giving oral or written notice thereof to the Subscription Agent and
making a public announcement thereof. If the Subscription Offering is
so terminated, all funds received from Rights Holders will be promptly
refunded, without interest. The Company also reserves the right to
amend the
<PAGE>
terms and conditions of the Subscription Offering. See
"SUBSCRIPTION OFFERING - Amendments and Waivers; Termination."
Market Considerations
It is possible that although a Rights Holder may subscribe for
shares at a time when the Subscription Price is less than the
prevailing market price, the market price of the Common Stock may
decline during the subscription period after such Rights Holder
exercises its Subscription Rights. The election of a Rights Holder to
exercise Subscription Rights in the Subscription Offering is
irrevocable. In addition, there can be no assurance that, following
the Subscription Offering, a subscribing Rights Holder will be able to
sell shares purchased in the Subscription Offering at a price equal to
or greater than the Subscription Price. Moreover, until stock
certificates are delivered, subscribing Rights Holders may not be able
to sell the shares of Common Stock which they have purchased in the
Subscription Offering.
No interest will be paid to Rights Holders on funds delivered to
the Subscription Agent pursuant to the exercise of Subscription Rights.
The Company has been informed by the National Association of
Securities Dealers, Inc. (the "NASD") that the Basic Subscription
Rights will not trade on a "when issued" basis (i.e., traded securities
having no settlement date at the time the trade is executed with
delivery at a future date to be determined by the Uniform Practice
Committee of the NASD after the date of the issuance or distribution
of the traded securities) but will trade "regular way" (i.e., prior
to June 7, 1995, traded securities to be delivered on the fifth
business day following the date of the transaction and, on or after
June 7, 1995, traded securities to be delivered on the third business
day following the date of the transaction) until the Expiration Date.
Litigation
In January 1993, the Bank was named as a defendant in an adversary
proceeding in Bankruptcy Court filed by Pioneer Liquidating Corporation
("PLC"), successor to six bankrupt Pioneer Mortgage Company entities
(collectively, "Pioneer"). Investors in Pioneer had previously filed
suit against the Bank, which litigation was settled in 1992. The PLC
case has been transferred to United States District Court. The PLC
complaint, which does not specify the amount of damages, alleges that
the Bank and five other banks received preferential payments and
voidable transfers from Pioneer prior to the filing of the Chapter 11
petition in January 1991. The attorneys for PLC have alleged recoverable
transfers from the Bank in excess of $14 million but have stated
informally that they are seeking recovery of approximately $1.75 million.
Of the $1.75 million, the sum of $250,000 would be in cash with the balance
in the form of charged-off Bank loans. PLC and the Bank have been
engaged in ongoing settlement negotiations, however, as yet no resolution
has been reached. As of March 31, 1995, the Bank has set aside a provision
of $250,000 for resolution of this litigation.
Interests of WHR
At July 20, 1995, there were 2,048,485 shares of
Common Stock of the Company outstanding and entitled to vote. As of
such date, WHR beneficially owned 510,121 shares of Common Stock,
representing 24.9% of the outstanding shares of Common Stock. In lieu
of participating in the Subscription offering, WHR is obligated to
purchase an additional 255,193 shares of the Company's Common Stock at
$4.34 per share, for an aggregate purchase price of $1,107,538,
if the Subscription Offering is fully subscribed, or such lesser
amount so that after such purchase WHR will hold anaggregate of 24.9%
of the outstanding Common Stock of the Company, taking into account
the shares issued in the Subscription Offering.
There is a pre-existing relationship between the Bank and Danielson
Trust Company ("Danielson"), an affiliate of WHR, in which the Bank refers
potential trust customers to Danielson for a referral fee. The Company
has been informed that Danielson has over $4 billion in trust assets under
administration. The referral fee arrangement is conducted on an arm's-
length basis and on market terms and conditions. It is not a significant
financial transaction for either the Bank or Danielson. The Company is
also advised that a corporation controlled by Charles I. Feurzeig, the
Chairman of the Company's Board of Directors, is a customer of Danielson,
with an account of approximately $800,000 under administration. There
are no other existing affiliations, other than those described herein, between
WHR and the Company or any of the Company's officers and directors.
<PAGE>
Special Considerations Affecting the San Diego National Bank Deferred
Savings Plan
On May 22, 1995, the Company submitted an exemption request with the
Department of Labor (the "DOL") with respect to the exercise of
Subscription Rights by the San Diego National Bank Deferred Savings
Plan (the "Plan"), which request, if approved, will be retroactively
effective to the Expiration Date. In the event that the exemption request
is not approved by the DOL, any Subscription Rights exercised by the Plan,
or Common Stock issued to the Plan pursuant to such exercise, will be
invalidated by the Company and the aggregate Subscription Price paid by
the Plan to exercise such Subscription Rights will be returned to the
Plan, without interest.
THE SUBSCRIPTION OFFERING
The Company is offering (the "Subscription Offering") up to
769,582 shares of its Common Stock, no par value ("Common Stock"), to
holders of record of its Common Stock (the "Shareholders") at the close
of business on May 5, 1995 (the "Record Date"), pursuant to
transferable subscription rights (the "Basic Subscription Rights" and,
together with the Oversubscription Rights, the "Subscription Rights").
The subscription price is $4.34 per share (the "Subscription Price").
Holders of Subscription Rights, including transferees of Shareholders
(collectively, the "Rights Holders" and, together with the
Shareholders, the "Holders"), will be able to exercise their
Subscription Rights until 5:00 p.m., New York time, on September 21,
1995 (such date, as it may be extended by the Company to October 5, 1995,
being the "Expiration Date"). Subscription Rights not exercised by
5:00 p.m., New York time, on the Expiration Date will be void. After the
Expiration Date, Subscription Rights will no longer be exercisable to
purchase shares of Common Stock and will have no value. The term
"Shareholder" includes financial institutions that are participants in
a securities depository, such as The Depository Trust Company, and that
held shares of Common Stock on the Record Date in such securities depository.
Private Placement
On January 31, 1995, two limited partnerships, of which WHR
Management Corp. is the general partner (the two limited partnerships
and WHR Management Corp. are referred to herein, collectively, as
"WHR"), entered into an agreement (the "Stock Purchase Agreement") with
the Company whereby WHR agreed to purchase, in compliance with
regulatory requirements, shares of the Company's Common Stock in an
amount equal to 24.9% of the Company's outstanding Common Stock after
such issuance (without taking into consideration shares to be issued in
this Subscription Offering).
On March 28, 1995, the Company issued to WHR 510,121 shares of
Common Stock for an aggregate price of $2,213,925 ($4.34 per share).
At that date, the reported closing bid price for the Company's Common
Stock on the NASDAQ National Market System (the "NASDAQ/NMS") was
$3.25 per share. The book value of the Company's Common Stock on
March 31, 1995 was $5.48.
Pursuant to the Stock Purchase Agreement, and in lieu of
participating in the Subscription Offering, WHR is obligated to
purchase an additional 255,193 shares of the Company's Common Stock at
$4.34 per share for an aggregate purchase price of $1,107,538, if the
Subscription Offering is fully subscribed, or such lesser amount so
that after such purchase WHR holds an aggregate of 24.9% of the
outstanding Common Stock of the Company, taking into account the shares
issued in the Subscription Offering.
Purpose of Offering
Common Stock qualifies as Tier I capital of the Company for
regulatory purposes, and the issuance of additional Common Stock
pursuant to the Subscription Offering will enhance the Company's
capital structure. See "USE OF PROCEEDS" for a discussion of the
Company's intended use of the proceeds from the Subscription Offering.
Basic Subscription Rights
For each two shares of Common Stock held of record as of the close
of business on the Record Date, a Shareholder will receive one Basic
Subscription Right. No fractional Basic Subscription Rights will be
issued by the Company. The number of Basic Subscription Rights
distributed by the Company to each Shareholder will be rounded up to
the nearest whole number. Each Rights Holder will have the right to
purchase one share of Common Stock for each Basic Subscription Right.
Rights Holders are entitled to subscribe for all, or any portion of,
the shares of Common Stock underlying their Basic Subscription
<PAGE>
Rights. Subscription Rights are evidenced by subscription warrants
("Subscription Warrants") which are being distributed to the Company's
Shareholders contemporaneously with the delivery of this Prospectus.
Oversubscription Rights
A Rights Holder who subscribes for the full number of shares of
Common Stock underlying the Basic Subscription Rights held by such
Rights Holder on the date of exercise (other than in his or her
capacity as a participant in the Plan) and evidenced by a Subscription
Warrant will have the right to subscribe for additional shares of
Common Stock (the "Oversubscription Rights"). Basic Subscription
Rights held by the Plan shall not be eligible for Oversubscription
Rights due to the prohibited transaction rules of the Internal Revenue
Code and the Employee Retirement Income Security Act of 1974.
Rights Holders will be entitled to purchase additional shares of
Common Stock to the extent available as a result of other Holders
electing not to subscribe, or subscribing for fewer shares than those
to which they are otherwise entitled, pursuant to their respective
Basic Subscription Rights. Subject to the aggregate number of shares
of Common Stock offered in this Subscription Offering, there is no
limitation on the number of shares of Common Stock for which an
eligible Rights Holder may elect to oversubscribe. However, if there
are shares available for sale pursuant to the exercise of
Oversubscription Rights, and if the number of such shares is not
sufficient to satisfy in full all oversubscriptions submitted pursuant
to such requests, the available shares of Common Stock will be
allocated among the Rights Holders who exercise such Oversubscription
Rights pro rata based upon the number of Basic Subscription Rights held
by each such Rights Holder on the Expiration Date. If the amount so
allocated exceeds the amount subscribed for pursuant to the exercise of
a Rights Holder's Oversubscription Rights, the excess will be
reallocated among those Rights Holders whose subscriptions are not
fully satisfied on the same principle, until all available shares have
been allocated or all exercises of Oversubscription Rights have been
satisfied. There can be no assurance, however, that any shares of
Common Stock will be available to satisfy in whole or in part any
Rights Holder's request to subscribe for additional shares in excess of
the shares underlying such Rights Holder's Basic Subscription Rights.
To exercise the Oversubscription Rights properly, the appropriate
section on the Subscription Warrant must be completed, and payment in
full of the aggregate Subscription Price for the additional shares of
Common Stock must accompany the Subscription Warrant. Payments for
oversubscriptions will be deposited upon receipt by the Subscription
Agent, and refunds will be made promptly after the Expiration Date,
without interest, to the extent oversubscriptions are not honored due
to proration or otherwise. Oversubscription Rights are exercisable by
all Rights Holders, other than the Plan, including transferees of
Shareholders.
No Fractional Basic Subscription Rights
No fractional Basic Subscription Rights will be issued by the
Company. The number of Basic Subscription Rights distributed by the
Company to each Shareholder will be rounded up to the nearest whole
number.
Method of Exercising Subscription Rights
Basic Subscription Rights and Oversubscription Rights may be
exercised by properly completing, signing, and delivering the
Subscription Warrant accompanying this Prospectus, together with
payment in full of the aggregate Subscription Price for shares of
Common Stock subscribed for pursuant to Basic Subscription Rights and
Oversubscription Rights. Subscription Warrants and payments must be
received by the Subscription Agent before 5:00 p.m., New York time, on
the Expiration Date, at the address provided below under "Subscription
Agent." Payment of the aggregate Subscription Price must be made in
United States dollars and must be made by bank certified check or
cashier's check, payable to the order of the Subscription Agent. ONCE
A HOLDER HAS EXERCISED A SUBSCRIPTION RIGHT, THE EXERCISE IS
IRREVOCABLE UNLESS, IN THE JUDGMENT OF THE COMPANY, THERE IS A MATERIAL
AMENDMENT TO THE SUBSCRIPTION OFFERING AND THE SUBSCRIPTION RIGHT IS
EXERCISED BEFORE SUCH AMENDMENT. See "Amendments and Waivers;
Termination" below. See "Foreign Restrictions and Undeliverable
Subscription Warrants" below for a discussion of restrictions on the
method of exercising Subscription Rights held by Shareholders whose
record addresses are outside of the continental United States or
Canada, or are A.P.O. or F.P.O. addresses.
The method of delivery of Subscription Warrants and payments of
any Subscription Price to the Subscription Agent is at the risk of the
Rights Holder. The Company suggests that Express Mail or similar
overnight carrier be used to ensure timely delivery. If delivery is
made by regular mail service, the use of registered or certified mail,
return receipt requested,
<PAGE>
properly insured, is recommended. COMPLETED SUBSCRIPTION WARRANTS AND
PAYMENTS SHOULD BE MAILED OR DELIVERED TO THE SUBSCRIPTION AGENT AND
NOT TO THE COMPANY. QUESTIONS SHOULD BE DIRECTED TO THE INFORMATION
AGENT OR THE SUBSCRIPTION AGENT. SEE "SUBSCRIPTION AGENT" AND
"INFORMATION AGENT" BELOW.
A Rights Holder who subscribes for fewer than all of the shares
represented by such Holder's Subscription Warrants may, under certain
circumstances, (i) direct the Subscription Agent to attempt to sell its
remaining Basic Subscription Rights, or (ii) receive from the
Subscription Agent a new Subscription Warrant representing the unused
Basic Subscription Rights. See "Partial Exercise or Sale of Rights"
below. A Rights Holder's election to exercise its Oversubscription
Rights must be made at the time such Rights Holder exercises fully the
Basic Subscription Rights.
Late Delivery of Subscription Warrants
If, prior to 5:00 p.m., New York time, on the Expiration Date, the
Subscription Agent has received full payment as specified above for the
total number of shares of Common Stock subscribed for, together with a
letter or telegram from a bank or trust company or a member of a
national securities exchange in the United States stating the name of
the subscriber, the number of Subscription Rights represented by the
Subscription Warrant, and the number of shares of Common Stock
subscribed for, and guaranteeing that the Subscription Warrant will be
delivered to the Subscription Agent within five business days after
Subscription Agent's receipt of payment, such subscription will be
accepted by the Subscription Agent, subject to the withholding of the
stock certificates representing the shares of Common Stock subscribed
for pending receipt of the duly executed Subscription Warrant within
such five day period.
Delivery of Stock Certificates; Refunds
Certificates representing shares of Common Stock subscribed for
and issued, together with any refund, without interest, of the
aggregate Subscription Price for shares of Common Stock subscribed for
pursuant to Oversubscription Rights but not issued, will be mailed
promptly after the Expiration Date. Certificates for shares of Common
Stock issued pursuant to the exercise of Subscription Rights will be
registered in the name of the Rights Holder exercising such
Subscription Rights. The Subscription Agent will place all proceeds of
the Subscription Offering into an escrow account until such funds are
transferred to the Company or refunded to Rights Holders at the
completion or termination of the Subscription Offering. No interest
will be paid to Rights Holders on funds delivered to the Subscription
Agent pursuant to the exercise of the Subscription Rights. The shares
of Common Stock subscribed for pursuant to the Subscription Offering
will be issued and sold as of the Expiration Date.
Transferability of Subscription Rights
Rights Holders may attempt to sell their Basic Subscription Rights
through transactions on the NASDAQ/NMS, by the delivery of sale
instructions to the Subscription Agent, or otherwise. Basic
Subscription Rights traded on the NASDAQ/NMS may be bought or sold
through usual investment channels, including banks or brokers. There
has been no prior trading in the Basic Subscription Rights, and no
assurance can be given that a trading market will develop for the
Basic Subscription Rights.
DUE TO BURDENSOME SECURITIES AND DEALER REGISTRATION REQUIREMENTS
OF THE FLORIDA SECURITIES AND INVESTOR PROTECTION ACT, SUBSCRIPTION
RIGHTS MAY NOT BE TRANSFERRED TO, OR EXERCISED BY, A RESIDENT OF
FLORIDA WHO WAS NOT A SHAREHOLDER OF RECORD OF THE COMPANY'S COMMON STOCK
ON THE RECORD DATE (MAY 5, 1995).
Basic Subscription Rights may be transferred in whole by endorsing
the Subscription Warrant for transfer. Rights Holders who elect to
sell their Basic Subscription Rights in part may effect such sales in
the manner described in "Partial Exercise or Sale of Rights" below.
The right to subscribe for additional shares of Common Stock pursuant
to the Oversubscription Rights is transferable with each Basic
Subscription Right. All commissions, fees, and other expenses
(including brokerage commissions and any transfer taxes) incurred in
connection with the purchase or sale of Basic Subscription Rights are
for the account of the transferor or the transferee of the Basic
Subscription Rights, and none of such commissions, fees, or expenses
will be paid by the Company or the Subscription Agent. With respect
to commissions payable upon the exercise of Subscription Rights, see
"Commissions Payable" below.
<PAGE>
The Subscription Agent will attempt to sell Basic Subscription
Rights in the open market for the convenience of Rights Holders as soon
as practical after receipt by the Subscription Agent of an applicable
Subscription Warrant with the instructions for sale properly executed;
provided that such Subscription Warrant is received by the Subscription
Agent by 11:00 a.m., New York time, on the Expiration Date. A Rights
Holder for which the Subscription Agent sells Basic Subscription Rights
on any given day will receive for each of its Basic Subscription Rights
the net weighted average sales price of all Basic Subscription Rights
sold on that day by the Subscription Agent. The net weighted average
sales price will be calculated by dividing the total proceeds from all
sales realized by the Subscription Agent on the day of sale by the
total number of Basic Subscription Rights sold by the Subscription
Agent on that day and then subtracting a pro rata portion of any
applicable brokerage commissions, taxes, and other expenses. No
assurance can be given that the Subscription Agent will be able to sell
any Basic Subscription Rights.
Foreign Restrictions and Undeliverable Subscription Warrants
Because of the short exercise period for the Subscription Rights,
Subscription Warrants will not be mailed to Shareholders whose record
addresses are outside the continental United States or Canada, or are
A.P.O. or F.P.O. addresses. Subscription Warrants will be held by the
Subscription Agent for such Shareholders' respective accounts until
instructions are received to exercise or transfer the Subscription
Rights. If no instructions have been received by 11:00 a.m., New York
time, on the Expiration Date, the Basic Subscription Rights of those
Shareholders, together with the Basic Subscription Rights of those
Shareholders whose addresses are not known by the Company or the
Subscription Agent or to whom delivery of a Subscription Warrant could
not be made, will be sold, subject to the Subscription Agent's ability
to find a purchaser. See "Transferability of Basic Subscription
Rights" above for a description of how the Subscription Agent will
attempt to sell Basic Subscription Rights. The net proceeds, if any,
resulting from all sales of Basic Subscription Rights of Shareholders
whose addresses are not known by the Subscription Agent or to whom
delivery could not be made will be held in a non-interest bearing
account at the Bank. Any amounts remaining unclaimed on the second
anniversary of the Expiration Date will be turned over to the Company
and, after such date but before any such amounts become subject to the
unclaimed property law of any state, any person claiming such proceeds
will, as an unsecured general creditor of the Company, be able to look
only to the Company for payment thereof.
Partial Exercise or Sale of Rights
Rights Holders who elect to exercise their Basic Subscription
Rights in part or to sell their Basic Subscription Rights in part may
do so by delivering to the Subscription Agent at the address set forth
under "Subscription Agent" below, a Subscription Warrant that has been
properly endorsed for subscription or sale, or for part subscription
and part sale, with instructions to issue to the submitting Rights
Holder a Subscription Warrant representing Basic Subscription Rights
not sold or exercised. The right to subscribe for additional shares of
Common Stock pursuant to the Oversubscription Rights is transferable
with each Basic Subscription Right.
A new Subscription Warrant will be issued to a submitting Rights
Holder upon the partial exercise or sale of Basic Subscription Rights
only if the Subscription Agent receives a properly endorsed
Subscription Warrant not later than 11:00 a.m., New York time, on the
Expiration Date. After such time and date, no new Subscription
Warrants will be issued. Accordingly, after such time and date a
Rights Holder exercising less than all of such Holder's Basic
Subscription Rights will lose the power to sell or exercise any
remaining Basic Subscription Rights. A new Subscription Warrant will
be sent by first class mail to the submitting Rights Holder if the
Subscription Agent receives the properly completed Subscription Warrant
by 11:00 a.m., New York time, on the fourth business day before the
Expiration Date. Unless the submitting Rights Holder makes other
arrangements with the Subscription Agent, a new Subscription Warrant
issued after 11:00 a.m., New York time, on the fourth business day
before the Expiration Date will be held for pick-up by the submitting
Rights Holder at the Subscription Agent's New York hand delivery address
provided under "Subscription Agent" below. All deliveries of newly
issued Subscription Warrants will be at the risk of the submitting
Rights Holder.
Commissions Payable
The Company will pay to any registered or licensed broker or dealer
a commission equal to 5% of the aggregate Subscription Price
attributable to Subscription Rights validly exercised through such
broker or dealer. No commission will be paid to any broker or dealer
affiliated with WHR.
<PAGE>
Amendments and Waivers; Termination
The Company reserves the right to automatically extend the Expiration
Date to the last date provided in the first paragraph on the cover page of
this Prospectus and to amend the terms and conditions of the Subscription
Offering, including, but not limited to, further extension of the
Expiration Date, whether the amended terms are less or more favorable to
the Holders. If any such amendment to the terms and conditions of the
Subscription Offering constitutes, in the judgment of the Company, a
material adverse change to Holders, the Company will deliver to Shareholders
a new prospectus incorporating such amendment and the Company will set a
new expiration date which will be a minimum of ten business days from the
date of the amended prospectus. Properly completed subscriptions received
or in transit prior to such amendment, unless revoked before the new
expiration date, will be honored.
All questions as to the validity, form, eligibility (including
time of receipt and record ownership), and acceptance of any exercise
of Subscription Rights shall be determined by the Company, in its sole
discretion, and its determination shall be final and binding. The
Company reserves the right to reject any exercise if such exercise is
not in accordance with the terms of the Subscription Offering or not in
proper form or if the acceptance thereof or the issuance of shares of
Common Stock pursuant thereto could be deemed unlawful. The Company
also reserves the right to waive any deficiency or irregularity with
respect to the exercise of any Subscription Warrant.
The Company reserves the right, in its sole discretion, at any
time prior to delivery of the shares of Common Stock offered hereby, to
terminate the Subscription Offering by giving oral or written notice
thereof to the Subscription Agent and making a public announcement
thereof. If the Subscription Offering is so terminated, all funds
received from Holders will be promptly refunded, without interest.
Determination of Subscription Price and Fairness Opinion
The Subscription Price was determined by the Company in
consultation with its financial advisor, Hoefer & Arnett, Incorporated
("Hoefer & Arnett"), and was based upon the price paid by WHR in the
Private Placement. In determining the price to be paid by WHR in the
Private Placement, and, thus, the Subscription Price, the Company
considered, among other things, such factors as the prevailing market
price and book value of the Company's Common Stock, the business
prospects of the Company, and the general condition of the securities
markets at the time of the Private Placement.
The Company has received from Hoefer & Arnett an opinion dated
May 26, 1995, to the effect that based on, among other things, the
trading history of the Common Stock, the publicly available financial
information regarding the Company, discussions with management regarding
the terms of the Subscription Offering, and a review of the terms and
conditions of rights offerings of other publicly traded companies, the
consideration to be received pursuant to the Subscription Offering and
the Private Placement and the terms and conditions that exist as of the
date of the opinion, taken as a whole, are fair from a financial point of
view to the shareholders of the Company. The full text of Hoefer &
Arnett's opinion is set forth as an Appendix to this Prospectus and should
be read in its entirety with respect to the assumptions made and other
matters considered and limitations on the review undertaken. The Company
has paid Hoefer & Arnett $35,000.00 as financial advisory fees for its
services. In addition, Hoefer & Arnett will be indemnified against
certain liabilities, including liabilities under the securities laws.
Market Conditions
It is possible that a Rights Holder may subscribe for shares of
Common Stock at a time when the Subscription Price is less than the
prevailing market price. The market price of the Common Stock,
however, may decline during the subscription period after such Rights
Holder exercises its Subscription Rights. The election of a Rights
Holder to exercise Subscription Rights in the Subscription Offering is
irrevocable unless, in the judgment of the Company, there is a material
amendment to the Subscription Offering and the Subscription Rights were
exercised before such amendment. See "Amendments and Waivers;
Termination" above. In addition, there can be no assurance that
following the Subscription Offering a subscribing Rights Holder will be
able to sell shares purchased in the Subscription Offering at a price
equal to or greater than the Subscription Price. Moreover, until
certificates are delivered, subscribing Rights Holders may not be able
to sell the shares of Common Stock which they have purchased in the
Subscription Offering. Certificates representing shares of Common
Stock issued in the Subscription Offering will be mailed to subscribing
Rights Holders at the addresses appearing on their Subscription Warrant
promptly following the Expiration Date.
<PAGE>
Regulatory Limitation
The Company will not be required to issue Subscription Rights or
shares of Common Stock pursuant to the Subscription Offering to any
Holder to whom such issuance is prohibited by law or regulation or to
anyone who would be required to obtain prior clearance or approval from
any state or federal bank regulatory authority to own or control such
shares if, on the Expiration Date, such clearance or approval has not
been obtained. If the Company elects not to issue shares in such a
case, such shares will become available to satisfy the exercise of
Oversubscription Rights.
The Federal Change in Bank Control Act of 1978, as amended (the
"Act"), generally prohibits a person or group of persons "acting in
concert" from acquiring "control" of a bank holding company unless the
Reserve Board has been given 60 days' prior written notice of such
proposed acquisition and within that time period the Reserve Board has
not issued a notice disapproving the proposed acquisition or extending
for up to another 30 days the period during which such a disapproval may
be issued. An acquisition may be made prior to the expiration of the
disapproval period if the Reserve Board issues written notice of its
intent not to disapprove the action. Under a rebuttable presumption
established by the Reserve Board, the acquisition of more than 10% of a
class of voting stock of a bank holding company with a class of
securities registered under Section 12 of the Exchange Act (such as the
Common Stock of the Company) would, under the circumstances set forth in
the presumption, constitute the acquisition of control. WHR has filed a
written notice under the Act with respect to its acquisition of shares
in the Company, and the Company has been informed by the Reserve Board
that it does not object to the acquisition by WHR of 24.9% of the
Company's Common Stock based on the information contained in the notice.
In addition, any "company" would be required to obtain the
approval of the Reserve Board under the Bank Holding Company Act of
1956, as amended (the "BHCA") before acquiring 25% (5% in the case of
an acquiror that is a bank holding company) or more of the outstanding
Common Stock of, or such lesser number of shares as constitute control
over, the Company.
No Board or Financial Advisor Recommendation
An investment in the Common Stock must be made pursuant to each
investor's evaluation of its, his, or her best interests. ACCORDINGLY,
NEITHER THE BOARD OF DIRECTORS OF THE COMPANY NOR ITS FINANCIAL ADVISOR
MAKES ANY RECOMMENDATION TO THE RIGHTS HOLDERS REGARDING WHETHER THEY
SHOULD EXERCISE THEIR SUBSCRIPTION RIGHTS.
No Commitment to Purchase Unsold Shares
The Company does not have a commitment from any person to purchase
any shares of Common Stock which remain unsold after the completion of
the Subscription Offering. WHR does not have the right to participate
in the Subscription Offering. See "RISK FACTORS - Principal Shareholder."
Subscription Agent
American Stock Transfer & Trust Company will act as the Company's
agent to accept exercises of Subscription Rights (the "Subscription
Agent"). All communications to the Subscription Agent, including the
delivery of Subscription Warrants and payment of the aggregate
Subscription Price, should be addressed as follows:
American Stock Transfer & Trust Company
6201 15th Avenue, Floor 3L
Brooklyn, New York 11219
Attn: Cynthia Trotman
Information Agent
Western Financial Corporation will serve as Information Agent for
the Subscription Offering. Any questions or requests for assistance
concerning the method of subscribing for shares of Common Stock or for
additional copies of this Prospectus or Subscription Warrants can be
directed to the Information Agent as follows:
Western Financial Corporation
600 "B" Street, Suite 1904
San Diego, California 92101
Attn: Howard B. Levenson
<PAGE>
THE COMPANY
The Company is a bank holding company incorporated under the laws
of the State of California and is registered under the BHCA. The
Company's principal assets are the capital stock of the Bank and its
joint venture interest in the office building which houses the Company
and the Bank (the "Bank Building"). As of March 31, 1995, the
Company had consolidated assets of approximately $168 million,
consolidated liabilities of approximately $157 million (which includes
total deposits through the Bank of approximately $129 million), and
shareholders' equity of approximately $11 million.
The Company, through the Bank, engages in a general commercial
banking business in the metropolitan San Diego area. The Bank was
granted its Charter by the Comptroller on November 12, 1981, and
commenced operations as a national bank on the same date. The Bank had
assets of approximately $156 million as of March 31, 1995. The Bank
focuses primarily upon wholesale commercial banking operations,
emphasizing the needs of small and medium size business firms and
corporations and the personal banking needs of business executives and
professional persons located in the Bank's immediate service area.
The Company is a joint venture partner in the San Diego National
Bank Building Joint Venture (the "Joint Venture"), a partnership formed
for the purpose of constructing and developing the Bank Building. The
Joint Venture is 62% owned by the Company and the Company is the
general partner. In addition, the Company owns SDNB Mortgage Bankers,
a California corporation, which is currently inactive.
USE OF PROCEEDS
The net proceeds from the sale of the Common Stock in the
Subscription Offering will be used for general corporate purposes,
which may include investments in or extensions of credit to the
Company's subsidiaries, reduction of existing debt, or financing
possible future acquisitions of other banking institutions or related
businesses. At the present time, the Company does not have any
specific plans, agreements, or understandings, written or oral,
pertaining to the proposed acquisition of any banking institution or
related business.
The Company is obligated to utilize $250,000 of the proceeds
from the Private Placement to make a loan to the Joint Venture, which
in turn will use the funds to make a partial payment on a note (the
"PV Note") owed to Pacific View Construction Co., Inc. ("Pacific View"),
which is secured by a second trust deed (the "Second Trust Deed") on
the Bank Building. Pacific View is a corporation controlled by
Charles I. Feurzeig, Chairman of the Company's Board of Directors.
The PV Note and Second Trust Deed have been assigned to River Forest
Bank as collateral for other loans made by that bank to Pacific View
and other entities controlled by Mr. Feurzeig. Murray L. Galinson,
the Company's President and Chief Executive Officer, and his wife own
less than 2% of the outstanding shares of the holding company of River
Forest Bank. The family of Mr. Galinson's wife owns a controlling
interest in such holding company. The Joint Venture owes Pacific View
$1.9 million on the PV Note.
The PV Note originally was scheduled to mature on January 4, 1995,
at an interest rate of "prime" (8.5% at January 31, 1995) plus one and
one-half percent. The PV Note recently was modified to fix the interest
rate at 10% per annum and extend the due date to April 1, 1997, and to
provide for a further mandatory payment of principal in the
event the Company realizes an aggregate of $4.447 million of gross
proceeds from the Subscription Offering and the subsequent additional
investment by WHR. In such event, the Company shall purchase from the
Bank and lend to the Joint Venture, which shall then assign and transfer
to Pacific View, without recourse or reserve of any type, certain notes
evidencing loans in the aggregate stated principal amount of approximately
$1.1 million and the amount of the PV Note shall be correspondingly reduced.
In addition, if the Company realizes less than the $4.447 million of gross
proceeds from the Subscription Offering and the subsequent additional
investment by WHR, but is still willing and able to purchase such notes
from the Bank and lend them to the Joint Venture, the Joint Venture shall
have the option to prepay the PV Note in the amount of the outstanding
principal balance of the notes purchased from the Bank.
<PAGE>
CAPITALIZATION
The following tables set forth the consolidated capitalization of
the Company as of March 31, 1995, and as adjusted to give effect to
the issuance of the Common Stock in the Private Placement, the Subscription
Offering, and the second issuance to WHR (assuming, respectively, all
Subscription Rights are exercised and half of the Subscription Rights are
exercised). The tables should be read in conjunction with the detailed
information and consolidated financial statements and related notes
incorporated by reference herein. See "INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE."
As of March 31, 1995
As
Fully Subscribed Actual Adjusted(1)
(Dollars in Thousands)
Liabilities:
Deposit accounts $ 129,212 $ 129,212
Securities sold under agreement to repurchase 14,333 14,333
Accrued interest payable and other liabilities 802 802
Notes payable 12,454 12,454
Total liabilities 156,801 156,801
Shareholders' Equity:
Common stock, no par value;
authorized 15,000,000 shares,
issued and outstanding 2,048,485 shares
(as adjusted: 3,073,260) $ 16,648 $ 20,579
Accumulated deficit (5,194) (5,194)
Net unrealized holding losses in (230) (230)
available-for-sale securities
Total shareholders' equity 11,224 15,155
Total capitalization $ 168,025 $ 171,956
(1) Adjusted to reflect the issuance of 1,024,775 shares of Common Stock
offered by the Company assuming: (a) exercise of all Subscription
Rights; (b) an issue price of $4.34 per share in the Subscription
Offering; (c) the purchase of 255,193 shares of Common Stock by
WHR at $4.34 per share subsequent to the Subscription Offering;
and (d) aggregate estimated selling costs attributed to the
Subscription Offering and the second WHR issuance of $517,000.
As of March 31, 1995
As
Half subscribed Actual Adjusted(1)
(Dollars in Thousands)
Liabilities:
Deposit accounts $ 129,212 $ 129,212
Securities sold under agreement to repurchase 14,333 14,333
Accrued interest payable and other liabilities 802 802
Notes payable 12,454 12,454
Total liabilities 156,801 156,801
Shareholders' Equity:
Common stock, no par value;
authorized 15,000,000 shares,
issued and outstanding 2,048,485 shares
(as adjusted: 3,073,260) $ 16,648 $ 18,438
Accumulated deficit (5,194) (5,194)
Net unrealized holding losses in (230) (230)
available-for-sale securities
Total shareholders' equity 11,224 13,014
Total capitalization $ 168,025 $ 169,815
(1) Adjusted to reflect the issuance of 512,387 of Common Stock
offered by the Company assuming: (a) exercise of half of the
Subscription Rights; (b) an issue price of $4.34 per share in the
Subscription Offering; (c) the purchase of 127,596 shares
of Common Stock by WHR at $4.34 per share subsequent to the
Subscription Offering; and (de) aggregate estimated selling costs
attributed to the Subscription Offering and the second WHR issuance
of $433,500.
<PAGE>
MARKET PRICE AND DIVIDENDS ON THE COMMON STOCK
The Common Stock is traded in the over-the-counter market on the
NASDAQ/NMS under the symbol "SDNB." The following table sets forth the
high and low sales prices of the Common Stock as quoted on the
NASDAQ/NMS and the cash dividends declared per share of the Common
Stock for the periods indicated.
Price Range
Dividends
High Low Per Share
1992
First Quarter $6.50 $4.75 ---
Second Quarter $4.75 $4.75 ---
Third Quarter $4.75 $2.75 ---
Fourth Quarter $4.50 $3.25 ---
1993
First Quarter $4.00 $3.50 ---
Second Quarter $4.38 $3.50 ---
Third Quarter $4.00 $2.50 ---
Fourth Quarter $3.38 $2.50 ---
1994
First Quarter $3.25 $2.50 ---
Second Quarter $3.25 $2.50 ---
Third Quarter $4.75 $2.50 ---
Fourth Quarter $4.75 $3.00 ---
1995
First Quarter $4.25 $3.25 ---
Second Quarter $4.25 $3.625 ---
Third Quarter (through
July 20, 1995) $4.125 $3.875 ---
On July 12, 1994, the last trading day before the Company's public
announcement that it was considering making a Subscription Offering,
the reported closing bid price of the Company's Common Stock as quoted
on the NASDAQ/NMS was $2.50. On July 20, 1995, the last trading day
before the filing of the Registration Statement with the Commission,
the closing bid price of the Common Stock as quoted on the NASDAQ/NMS
was $3.875.
No dividends were paid to the Company by the Bank during 1994, nor
for the two preceding fiscal years, and no assurances can be given with
respect to the amount and timing of future dividends. For a discussion
of the Company's inability to pay dividends due to certain regulatory
restrictions, see "RISK FACTORS - Dividend Limitations." Due
to the Bank's financial condition and regulatory restrictions,
management does not anticipate the payment of dividends to holders of
Common Stock in the foreseeable future.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
Federal Income Tax Consequences
The following discussion sets forth the material United States
federal income tax consequences associated with the receipt, ownership,
and exercise of Subscription Rights.
<PAGE>
For United States federal income tax purposes, receipt of the
Subscription Rights pursuant to the Subscription Offering should be
treated as a nontaxable dividend distribution. A Shareholder will have
a zero basis in the Subscription Rights received in the Subscription
Offering, unless: (i) either the Shareholder elects under Section 307
of the Internal Revenue Code of 1986, as amended, to allocate a portion
of his basis in his existing shares of Common Stock to the Subscription
Rights (based on their relative fair market values on the date of
distribution) or the fair market value of the Subscription Rights at
the time of the distribution equals or exceeds 15% of the fair market
value of the Common Stock at that time, in which case the allocation of
basis (based upon relative fair market values) is required; and (ii)
the Shareholder sells or exercises such Subscription Rights.
Upon exercise of a Subscription Right, a Shareholder will not
recognize gain or loss. The basis of each share of Common Stock
acquired upon exercise of a Subscription Right will equal the sum of
the Subscription Price and the basis, if any, in the Subscription
Rights exercised. The holding period for such Common Stock will begin
on the date the Subscription Rights are exercised.
No loss will be recognized by a Shareholder who receives
Subscription Rights in the Subscription Offering and allows those
Subscription Rights to lapse.
Gain or loss will be recognized by a Shareholder who sells or
exchanges a Basic Subscription Right received in the Subscription
Offering. Such gain or loss will be measured by the difference between
the selling price and the basis, if any, of the Basic Subscription
Right. It will be a capital gain or loss if the Basic Subscription
Right is a capital asset in the hands of the Shareholder. The holding
period of the Basic Subscription Rights in such circumstances will
include the period for which the Common Stock with respect to which the
Basic Subscription Rights were distributed has been held.
THE ACTUAL TAX CONSEQUENCES TO SHAREHOLDERS MAY VARY DEPENDING UPON
THEIR OWN PARTICULAR CIRCUMSTANCES. ACCORDINGLY, SHAREHOLDERS ARE
ADVISED TO CONSULT THEIR OWN TAX ADVISERS WITH RESPECT TO THE FEDERAL,
STATE, AND LOCAL TAX CONSEQUENCES OF THE DISTRIBUTION AND EXERCISE OF
THE SUBSCRIPTION RIGHTS.
DESCRIPTION OF CAPITAL STOCK AND RIGHTS OF SHAREHOLDERS
The authorized capital stock of the Company consists of 15,000,000
shares of Common Stock, no par value. As of July 20, 1995, there were
issued and outstanding 2,048,485 shares of Common Stock. The following
description of the Company's Common Stock and summary of the material
rights of the Company's shareholders does not purport to be complete and is
subject in all respects to the applicable provisions of the General
Corporation Law of the State of California and the Company's Restated
Articles of Incorporation.
Common Stock
Holders of Common Stock are entitled to: (i) receive ratably such
dividends, if any, as the Board of Directors may in its discretion
declare out of legally available funds; (ii) cast one vote for each
share held of record on all matters submitted to a vote of
shareholders; and (iii) receive ratably, in the event of liquidation,
dissolution, or winding up of the Company, all assets remaining
available for distribution to shareholders after payment of creditors.
See "RISK FACTORS - Dividend Limitations."
All of the issued and outstanding shares of Common Stock are fully
paid and nonassessable and the shares of Common Stock offered hereby
will be fully paid and nonassessable upon their due issuance, delivery,
and the receipt of payment therefor. The Articles of Incorporation do
not provide for any conversion rights, sinking fund provisions,
redemption provisions, or restrictions on alienability with respect to
the Common Stock.
The Transfer Agent and Registrar for the Common Stock of the Company
is American Stock Transfer & Trust Company, 40 Wall Street, New York,
New York 10005.
<PAGE>
Supermajority Voting Provisions
Anti-Takeover Provisions
Certain provisions of the Company's Restated Articles of Incorporation
may discourage an attempt to acquire control of the Company or the Bank
if a majority of the Company's shareholders determines that such attempt
is not in their best interest. Specifically, the Company's Restated
Articles of Incorporation generally require the affirmative vote of at
least 85% of the outstanding shares entitled to vote to approve certain
enumerated transactions, including, but not limited to: (i) a merger or
consolidation of the Company or the Bank; (ii) any disposition of all,
substantially all, or more than 5% of the total consolidated
assets of the Company and its subsidiaries; (iii) the issuance of any
securities, or of any rights, warrants, or options to acquire any
securities, of the Company or the Bank, 80% or more of which are issued
to a beneficial owner of 10% or more of the voting power or voting stock
of the Company; and (iv) any reclassification of the Company's voting stock,
or recapitalization of the Company, or any merger or consolidation of the
Company with any of its subsidiaries or any other transaction which has
the effect, directly or indirectly, of increasing the proportionate share
of the voting stock of the Company or any subsidiary which is directly or
indirectly owned by a beneficial owner of 10% or more of the voting power
or voting stock of the Company or any affiliate or associate of such
beneficial owner. The 85% approval requirement does not apply if the
subject transaction is approved by the affirmative vote of at least 66-2/3%
of the outstanding shares entitled to vote and certain other conditions
are satisfied.
Stock Repurchases
The Company's Restated Articles of Incorporation generally require the
affirmative vote of at least 66-2/3% of the outstanding shares entitled to
vote to approve any direct or indirect purchase or other acquisition by the
Company of any voting stock from a beneficial owner of 10% or more of the
voting power or voting stock of the Company who has beneficially owned such
securities for less than two years prior to the date of such purchase. No
affirmative vote shall be required, however, with respect to any purchase
or other acquisition of securities made as part of a tender offer, exchange
offer, or other offer by the Corporation to purchase securities of the same
class that is made on the same terms to all holders of such securities and
in compliance with the requirements of the Exchange Act.
Shareholder Action
The Company's Restated Articles of Incorporation provide that no action
shall be taken by the shareholders of the Company except in an annual or
special meeting of shareholders.
Amendments
Any amendment, change, or repeal of the Company's Restated Articles of
Incorporation which would have the effect of modifying or circumventing the
supermajority voting or shareholder action provisions of the Restated
Articles of Incorporation requires the affirmative vote of at least 80%
of the outstanding shares entitled to vote.
Indemnification
The Company's Restated Articles of Incorporation limit the liability of
directors for monetary damages and provide for the indemnification of
agents of the Company for breach of duty to the Company and its shareholders.
PLAN OF DISTRIBUTION
The Common Stock offered hereby is being offered by the Company
directly to Shareholders on the Record Date. The Company has not
employed any brokers, dealers, or underwriters in connection with the
Subscription Offering, and no underwriting commissions, fees, or
discounts will be paid in connection with the Subscription Offering.
Certain regular employees in the Exchange Department of the
Subscription Agent may solicit responses from Holders to the
Subscription Offering, but such employees will not receive any
commission or compensation for such services other than their normal
employment compensation. However, the Company will pay to any registered
or licensed broker or dealer a commission equal to 5% of the
aggregate Subscription Price attributable to Subscription Rights
validly exercised through such broker or dealer.
<PAGE>
No directors or employees of the Company or the Subscription Agent
will solicit sales of the Common Stock or the Subscription Rights.
Shareholders or Rights Holders who desire to purchase shares of
Common Stock in the Subscription Offering are urged to complete, date,
and sign the Subscription Warrant accompanying this Prospectus and
return it to the Subscription Agent on or before the Expiration Date of
the Subscription Offering, together with payment in full of the
aggregate Subscription Price.
Any questions concerning the procedure for subscribing for the purchase
of shares of Common Stock should be directed to the Subscription Agent
or the Information Agent.
EXPERTS
The consolidated balance sheets as of December 31, 1994 and 1993 and
the consolidated statements of operations, shareholders' equity and
cash flows for each of the three years in the period ended December 31,
1994, incorporated by reference in this Prospectus, have been
incorporated herein in reliance on the report, which includes an
explanatory paragraph related to the outcome of litigation, of Coopers
& Lybrand L.L.P., independent accountants, given on the authority of
that firm as experts in accounting and auditing.
OPINIONS
Arnold & Porter, Los Angeles, California, special counsel to the
Company, has rendered an opinion to the effect that the Subscription
Rights and the Common Stock offered hereby, when issued as contemplated
in the Prospectus, will be legally issued and the Common Stock, when sold
as contemplated in the Prospectus, will be fully paid and nonassessable.
Subscription Warrants should be sent or delivered by each Rights
Holder or its broker, dealer, commercial bank, or trust company to the
Subscription Agent at the address set forth below:
<PAGE>
The Subscription Agent for the Subscription Offering is:
AMERICAN STOCK TRANSFER & TRUST COMPANY
American Stock Transfer & Trust Company
6201 15th Avenue, Floor 3L
Brooklyn, New York 11219
Attn: Cynthia Trotman
Facsimile No.: For Information:
(718) 234-5001 (718) 921-8200
(Call Collect)
Any questions or requests for assistance may be directed to the
Information Agent at its address and telephone numbers set forth below.
Requests for additional copies of this Prospectus and the related
Letters of Transmittal and Instructions Booklet may be directed to the
Information Agent. Rights Holders may also contact their brokers,
dealers, commercial banks, or trust companies for assistance concerning
the Subscription Offering.
The Information Agent for the Subscription Offering is:
WESTERN FINANCIAL CORPORATION
600 "B" Street, Suite 1904 Banks and Brokers call
San Diego, California 92101 (619) 234-0197
Attn: Howard B. Levenson
Toll Free 1-800-488-5990
<PAGE>
APPENDIX
[HOEFER & ARNETT LETTERHEAD]
May 26, 1995
Board of Directors
SDNB Financial Corp.
1420 Kettner Blvd.
San Diego, CA 92101
Dear Members of the Board:
You have requested our opinion as to the fairness to the shareholders
of SDNB Financial Corp. ("SDNB" or the "Company") from a financial
point of view, of the terms and conditions of the proposed private
placement and rights offering (collectively, the "Offering") of common
stock by the Company as stated in the Registration Statement on Form S-3
(the "Registration Statement"), attached hereto as Exhibit A and
incorporated herein by this reference.
Qualifications of the Appraiser
Hoefer & Arnett, Incorporated ("H&A") conducts business in investment
banking and securities brokerage specific to independent financial
institutions. The analysis of securities and of mergers, acquisitions,
tender offers and other corporate transactions for the purpose of (i)
providing transactional advice and assistance, (ii) investment
research, (iii) capital financing activities, and (iv) rendering
opinions concerning fairness, is a normal part of this business. H&A
currently conducts dealer markets in the shares of more than 100
independent California financial institutions, but not SDNB. In
addition, the principals of H&A have substantially broader experience
in investment and commercial banking, some of which may be deemed
applicable to this evaluation and opinion.
Procedure
In connection with our opinion, we have, among other things: (i)
reviewed the Registration Statement (Exhibit A) including the terms and
conditions of the Offering; (ii) reviewed certain publicly available
financial and other data with respect to SDNB, including the financial
statements for recent years and interim periods to date and certain
other relevant financial and operating data relating to the Company
made available to us from published sources and from the internal
records of the Company including the 10-Q for the most recent quarter
ended March 31, 1995 and asset quality migration analysis dated
March 31, 1995; (iii) compared the Company from a financial point of view
with certain other companies in the financial services industry which we
deemed relevant; (iv) considered the financial terms and conditions, to
the extent publicly available, of selected common stock offerings of
financial institutions, which we deemed to be comparable, in whole or
in part, to the Offering and the Company; (v) reviewed and discussed
with representatives of the management of the Company certain information
of a business and financial nature regarding the Company, furnished to us
by them, including the related assumptions of the Company: (vi) discussed
the Registration Statement with the Company's counsel and (vii) performed
such other analyses and examinations as we have deemed appropriate. H&A
also conducted its own assessment of general economic, market and
financial conditions.
<PAGE>
In connection with our review, we have not independently verified any
of the foregoing information, have relied on all such information and
assumed that all such information is complete and accurate in all
material respects. We have also assumed that there has been no
material change in the Company's assets, financial condition, results
of operations, business or prospects since the date of the last
financial statements made available to us. In addition, we have not made
an independent evaluation, appraisal or physical inspection of the assets
or individual properties of the Company. Further, our opinion is based
on economic, monetary and market conditions existing as of the date
hereof.
Based upon the foregoing, and in reliance thereon, it is our opinion that,
as of the date hereof, the consideration to be received pursuant to the
Offering and the terms and conditions that exist as of the date hereof,
taken as a whole, are fair from a financial point of view to the
shareholders of SDNB Financial Corp. Our opinion should not be
construed in any way as a valuation of the Company nor as a
recommendation to participate in the Offering. Further any material
changes in the terms and conditions of the proposed Offering prior to
closing would render this opinion invalid.
We hereby consent to the inclusion of this opinion as the Appendix to the
Prospectus that is a part of the Registration Statement and to the
reference to our firm under the caption "THE SUBSCRIPTION OFFERING --
Determination of Subscription Price and Fairness Opinion" in the
Prospectus.
Very truly yours,
/S/ HOEFER & ARNETT, INCORPORATED
HOEFER & ARNETT, INCORPORATED
<PAGE>
No person has been authorized to
give any information or to make
any representation not contained
in this Prospectus and, if given
or made, such information or
representation must not be
relied upon as having been
authorized by the Company. This
Prospectus does not constitute
an offer to sell or a
solicitation of an offer to buy
any of the securities offered
hereby in any jurisdiction to SDNB FINANCIAL CORP.
any person to whom it is
unlawful to make such offer in
such jurisdiction. Neither the 769,582 Shares
delivery of this Prospectus nor
any sale made hereunder shall,
under any circumstances, create
an implication that the
information herein is correct as
of any time subsequent to the
date hereof or that there has Common Stock
been no change in the affairs of (no par value)
the Company since such date.
__________________
PROSPECTUS
__________________
TABLE OF CONTENTS
Page
Notice Regarding Residents
of Florida 2
Available Information 3
Incorporation of Certain Documents
by Reference 3
Prospectus Summary 4
Risk Factors 7
The Subscription Offering 11
The Company 17
Use of Proceeds 17
Capitalization 18
Market Price and Dividends on
the Common Stock 19
Certain Federal Income
Tax Considerations 19
Description of Capital Stock
and Rights of Shareholders 20
Plan of Distribution 21
Experts 22
Opinions 22
Appendix -- Opinion of Hoefer &
Arnett, Incorporated.
July 25, 1995
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
Securities and Exchange Commission registration
fee $1,151.72
Fees and expenses of Subscription Agent,
Transfer Agent, and Registrar 10,000.00
Printing and engraving expenses 5,000.00*
Legal fees and expenses $175,000.00*
Accounting fees and expenses 10,000.00*
Blue Sky fees and expenses $8,000.00*
Fees and expenses of Company's Financial
Advisor $35,000.00
Fees and expenses of the Information
Agent $ 6,000.00
NASDAQ/NMS Listing Fees $17,500.00*
Miscellaneous expenses $82,348.28*
Total $350,000.00*
________________
* Estimated
Item 15. Indemnification of Directors and Officers
The Company has adopted provisions in its Restated Articles of
Incorporation which provide for indemnification of its officers and
directors in excess of the indemnification expressly permitted by
Section 317 of the California General Corporation Law, as amended (the
"Code"), subject to applicable limits in the Code with respect to
breach of duty to the Company and its shareholders. As authorized by
the Code, the Restated Articles of Incorporation limit the liability of
directors to the Company for monetary damages. The effect of this
provision is to eliminate the rights of the Company and its
shareholders (through shareholders' derivative suits on behalf of the
Company) to recover monetary damages against a director for breach of
the fiduciary duty of care as a director (including breaches resulting
from negligent behavior) except in certain limited situations. This
provision does not limit or eliminate the rights of the Company or any
shareholder to seek non-monetary relief such as an injunction or
rescission in the event of a breach of a director's duty of care.
These provisions will not alter the liability of directors under
federal securities laws. In addition, the Company has entered into
Indemnification Agreements with each director and executive officer
which provide that the Company shall indemnify such directors and
executive officers to the fullest extent authorized by the Code. The
Company and its directors and officers are also insured up to
$3 million for liability arising from claims against the Company's
directors and officers in their capacities as such.
Item 16. Exhibits
3(a)* Restated Articles of Incorporation, as amended (incorporated by
reference from the Company's Annual Report on Form 10-K for the
year ended December 31, 1988, SEC File No. 0-11117).
3(b)* Bylaws, as amended through May 18, 1988 (incorporated by reference
from the Company's Annual Report on Form 10-K for the year ended
December 31, 1988, SEC File No. 0-11117).
4* Common Stock Specimen Certificate (incorporated by reference
from the Company's Registration Statement on Form S-14, filed
April 27, 1982, SEC File No. 2-77187).
5* Opinion of Arnold & Porter, dated May 24, 1995.
23(a) Consent of Coopers & Lybrand L.L.P., dated July 20, 1995.
23(b)* Consent of Arnold & Porter (included as part of Exhibit 5).
<PAGE>
23(c)* Consent of Hoefer & Arnett, Incorporated (included as part of
Exhibit 99(g)).
99(a)* Form of Subscription Agent Agreement between the Company and
American Stock Transfer & Trust Company.
99(b)* Form of Subscription Warrant.
99(c)* Form of Letter to Securities Dealers, Commercial Banks, Trust
Companies, and Other Nominees.
99(d)* Form of Transmittal Letter to Holders of Common Stock whose
addresses are within the continental United States or Canada and
who do not have A.P.O. or F.P.O. addresses.
99(e)* Instructions Booklet.
99(f)* Form of Letter of Transmittal to Holders of Common Stock whose
addresses are outside the continental United States and Canada or
who have A.P.O. and F.P.O addresses.
99(g)* Opinion of Hoefer & Arnett, Incorporated (included as a part of
the Prospectus filed herewith).
99(h) Form of Notice to Holders of Subscription Rights regarding
amendment of the Subscription Offering.
* Previously filed.
Item 17. Undertakings
A. The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration
statement;
(i) To include any prospectus required by Section 10(a)(3)
of the Securities Act of 1933, as amended (the "Securities Act");
(ii) To reflect in the prospectus any facts or events
arising after the effective date of registattion statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high and of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than
a 20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement; and
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the registration
statement or any material change to such information in the registration
statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be
a new registration statement relating to all the securities offered
therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold
at the termination of the offering.
B. The Company hereby undertakes that, for purposes of determining
any liability under the Securities Act each filing of the Company's
annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") (and, where
applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d)
<PAGE>
of the Exchange Act) that is incorporated by reference in the
Registration Statement shall be deemed to be a new Registration
Statement relating to the securities offered therein, and the offering
of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
C. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers, and controlling
persons of the Company pursuant to the foregoing provisions, or
otherwise, the Company has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Company of expenses
incurred or paid by a director, officer, or controlling person of the
Company in the successful defense of any action, suit, or proceeding)
is asserted by such director, officer, or controlling person in
connection with the securities being registered, the Company will,
unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the
final adjudication of such issue.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Company certifies that it has reasonable grounds to
believe that it meets all of the requirements for filing on Form S-3
and has duly caused this Amendment to its Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in
the City of San Diego, California, on July 21, 1995.
SDNB Financial Corp.
By /s/Murray L.Galinson
Murray L. Galinson
President and Chief
Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons
in the capacities and on the dates indicated.
Signatures Title Date
Chairman of the Board and
Director July __, 1995
CHARLES I. FEURZEIG
President, Chief Executive
/s/Murray L. Galinson Officer, and Director July 21, 1995
MURRAY L. GALINSON
Director July __, 1995
MARGARET COSTANZA
/s/Karla J. Hertzog* Director July 21, 1995
KARLA J. HERTZOG
/s/Robert B. Horsman* Director July 21, 1995
ROBERT B. HORSMAN
/s/Mark P. Mandell* Director July 21, 1995
MARK P. MANDELL
/s/Patricia L. Roscoe* Director July 21, 1995
PATRICIA L. ROSCOE
/s/Julius H. Zolezzi* Director July 21, 1995
JULIUS H. ZOLEZZI
Senior Vice President,
Secretary, and Chief
/s/Howard W. Brotman Financial Officer July 21, 1995
HOWARD W. BROTMAN
* By Howard W. Brotman, attorney-in-fact.
<PAGE>
INDEX OF EXHIBITS
3(a)* Restated Articles of Incorporation, as amended (incorporated by
reference from the Company's Annual Report on Form 10-K for the
year ended December 31, 1988, SEC File No. 0-11117).
3(b)* Bylaws (incorporated by reference from the Company's Annual Report
on Form 10-K for the year ended December 31, 1988, SEC File No.
0-11117).
4* Common Stock Specimen Certificate (incorporated by reference from
the Company's Registration Statement on Form S-14, filed
April 27, 1982, SEC File No. 0-11117).
5* Opinion of Arnold & Porter, dated May 24, 1995.
23(a) Consent of Coopers & Lybrand L.L.P., dated July 20, 1995.
23(b)* Consent of Arnold & Porter (included as part of Exhibit 5).
23(c)* Consent of Hoefer & Arnett, Incorporated (included as part of
Exhibit 99(g)).
99(a)* Form of Subscription Agent Agreement between the Company and
American Stock Transfer & Trust Company.
99(b)* Form of Subscription Warrant.
99(c)* Form of Letter to Securities Dealers, Commercial Banks, Trust
Companies, and Other Nominees.
99(d)* Form of Transmittal Letter to Holders of Common Stock whose
addresses are within the continental United States or Canada and
who do not have A.P.O. or F.P.O. addresses.
99(e)* Instructions Booklet.
99(f)* Form of Letter of Transmittal to Holders of Common Stock whose
addresses are outside the continental United States and Canada or
who have A.P.O. and F.P.O addresses.
99(g)* Opinion of Hoefer & Arnett, Incorporated.
99(h) Form of Notice to Holders of Subscription Rights regarding
amendment of the Subscription Offering.
* Previously filed.
Exhibit 23(a)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration
statement of SDNB Financial Corp. (the "Company") on Form S-3 of our
report, which includes an explanatory paragraph related to the outcome of
litigation, dated February 17, 1995, on our audits of the consolidated
financial statements of the Company as of December 31, 1994 and 1993, and
for each of the three years in the period ended December 31, 1994, which
report is included in the Company's Annual Report on Form 10-K for the
year ended December 31, 1994. We also consent to the refernce to our firm
under the caption "Experts".
/s/ COOPERS & LYBRAND L.L.P.
COOPERS & LYBRAND L.L.P.
San Diego, California
July 20, 1995
EXHIBIT 99H
[SDNB Letterhead]
, 1995
NOTICE OF AMENDMENT OF
SDNB FINANCIAL CORP. SUBSCRIPTION OFFERING
To Holders of
Subscription Rights:
SDNB Financial Corp. (the "Company") has elected to amend the terms
of its offering (the "Subscription Offering") of up to 769,582 shares of
its Common Stock, no par value per share, to holders of record of the
Common Stock on May 5, 1995. Unless otherwise specified, capitalized
terms used but not defined herein shall have the same meaning as set
forth in the Company's original Prospectus, dated May 30, 1995, which
Prospectus was supplemented on July 6, 1995.
As permitted by the original terms of the Subscription Offering,
the Company has amended the Subscription Offering in order to: (i) permit
the Company to pay to properly registered and licensed brokers or dealers
a commission of 5% of the aggregate Subscription Price attributable to
Subscription Rights validly exercised through such broker or dealer; and
(ii) permit the Company to extend the Subscription Offeringbeyond the
Expiration Date. The Company has determined that the first amendment
constitutes a material adverse change to Holders of Subscription Rights
because the payment of such commission will reduce the net proceeds
realized by the Company from the Subscription Offering. Accordingly, as
permitted by the original terms of the Subscription Offering, the Company
has: (i) set a new Expiration Date of September 21, 1995 (which date,
as it may be extended by the Company to October 5, 1995, is the "New
Expiration Date"); and (ii) enclosed a new Prospectus, dated July 25, 1995,
which incorporates the amendments to the Subscription Offering and the New
Expiration Date. All other offering materials (including the form of
Subscription Warrant) and all other terms of the Subscription Offering
(including the ability of a Rights Holder, before the New Expiration Date,
to revoke completed subscriptions received or in transit prior to the
amendment of the Subscription Offering) remain unchanged.
Very truly yours,
/s/Murray L. Galinson
Murray L. Galinson
President and Chief
Executive Officer
