SDNB FINANCIAL CORP.
1420 Kettner Boulevard
San Diego, California 92101
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
May 15, 1996
10:00 A.M.
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders (the
"Meeting") of SDNB Financial Corp., a California corporation (the "Company")
will be held at the San Diego National Bank Building, 1420 Kettner
Boulevard, San Diego, California, on Wednesday, May 15, 1996 at 10:00 a.m.,
Pacific Time for the following purposes.
(1) To elect nine directors of the Company for the ensuing year;
(2) To ratify the appointment of Coopers & Lybrand, L.L.P. as
independent accountants for the ensuing year;
(3) To transact such other business as may properly come before the
Meeting and any adjournment or adjournments thereof.
Please carefully read the following Proxy Statement, which describes the
matters to be voted upon at the Meeting, and then sign and return your proxy
card as soon as possible. Should you receive more than one proxy because
your shares are registered in different names or addresses, each proxy
should be signed and returned to assure that all your shares will be voted.
Any shareholder present at the Meeting may withdraw his or her proxy and
vote personally on each matter brought before the Meeting.
By Order of the Board of Directors
/s/Howard W. Brotman
Howard W. Brotman, Secretary
April 10, 1996
San Diego, California
SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON. WHETHER
OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE SIGN, DATE AND MAIL THE
ENCLOSED PROXY CARD PROMPTLY.
<PAGE>
SDNB FINANCIAL CORP.
1420 Kettner Boulevard
San Diego, California 92101
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
May 15, 1996
INTRODUCTION
Information Concerning Proxies
This Proxy Statement and the enclosed proxy card are being mailed in
connection with the solicitation of proxies by the Board of Directors of
SDNB Financial Corp., a California corporation (the "Company") for the Annual
Meeting of Shareholders (the "Meeting") to be held at 10:00 a.m., Pacific
Time on Wednesday, May 15, 1996 at 1420 Kettner Boulevard, San Diego,
California 92101, and any adjournment of such Meeting. This Proxy Statement
and the enclosed form of proxy are being mailed on or about April 10, 1996
to shareholders of record as of March 29, 1996.
If a proxy in the accompanying form is duly executed and returned, the
shares represented thereby will be voted as directed. If no direction is
given, the shares represented by the proxy will be voted for the election of
all of the nominees for directors named herein, and in the discretion of the
proxy.
Any shareholder may revoke his or her proxy by written notice delivered to
the Secretary of the Company, by submitting a subsequent proxy to the
Secretary of the Company, or by attending the Meeting and voting in person.
The cost of soliciting proxies will be paid by the Company and may include
reimbursement paid to brokerage firms and others holding shares in their name
for their expense in forwarding solicitation material to their principals.
Solicitation will be made primarily through the use of the mail, but certain
directors, officers and regular employees of the Company may, without
additional remuneration, solicit proxies personally or by telephone or
telegram.
Voting Securities and Principal Holders Thereof
The record date for determining those shareholders who are entitled to
notice of, and to vote at, the Meeting has been fixed as March 29, 1996. At
the close of business on the record date, the Company had 3,073,260
outstanding shares of Common Stock, its only class of voting stock.
The following table sets forth those shareholders known to the Company who
on March 29, 1996 owned beneficially or of record more than 5% of the Common
Stock of the Company.
Name of Amount and Nature
Beneficial of Beneficial
Owner Ownership (1) of Class (2) Percentage (1)
Two limited partnerships managed 765,314 22.3
by WHR Management Corp. (a)
767 Third Avenue
New York, NY 10017
Basswood Partners, L.P. 295,000 8.7
52 Forest Ave.
Paramus, NJ 07652
Charles I. Feurzeig 381,164 (3) 11.2
6363 El Cajon Blvd. Ste 206
San Diego, CA 92115
Murray L. Galinson 186,400 (4) (6) 5.5
1420 Kettner Blvd.
San Diego, CA 92101
(a) Pursuant to an agreement between the Federal Reserve Bank and WHR
Management Corp. ("WHR"), in which the Federal Reserve Bank did not object to
the purchase by WHR of 24.9% of the Company's outstanding common stock
(without taking into account vested options), WHR stipulated to restrictions
on its involvement in the management of the Company. As a result, WHR's
purchase was deemed not to be a "change of control" of the Company
The following table sets forth information as to outstanding shares of the
Company's Common Stock beneficially owned as of March 29, 1996 by each
director of the Company, and by all directors and executive officers of the
Company and San Diego National Bank ("Bank') as a group. Except as
indicated, the persons named have sole voting power and sole investment power
over the amount of shares shown.
Name of Amount and Nature
Beneficial of Beneficial
Owner Ownership (1) of Class (2) Percentage (1)
Douglas E. Barnhart 5,000 *
Howard W. Brotman 13,776 *
Margaret Costanza 14,200 *
Charles I. Feurzeig 381,164 (3) 11.2
Murray L. Galinson 186,400 (4) (6) 5.5
Karla J. Hertzog 14,200 *
Robert B. Horsman 32,435 (6) 1.0
Mark P. Mandell 14,200 *
Patricia L. Roscoe 30,051 *
Julius H. Zolezzi 70,448 2.1
All Executive Officers
and Directors as a group 779,915 (3) (4) (5) (6) 22.9
(16 persons)
(1) All percentages and share amounts in these sections were calculated
on the basis of outstanding securities, plus shares issuable pursuant
to vested stock options. Includes shares owned beneficially and of
record, directly or indirectly, together with associates. Also
includes shares held by or on behalf of minor and/or adult children
and family trusts.
(2) Asterisk indicates percentage of less than 1%.
(3) Includes 153,650 shares held by CIF Holdings, LP, a partnership of
which Mr. Feurzeig is a limited partner and PVCC, Inc., of which
Mr. Feurzeig is a controlling person, is the managing general partner.
(4) Includes 86,358 shares held as trustee.
(5) Includes 313,281 shares issuable to directors and executive officers
pursuant to vested stock options.
(6) Does not include shares owned by San Diego National Bank Profit
Sharing Plan and 401-K Savings Plan attributable to executive
officers' vested interests therein.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Exchange Act required the Company's Directors and
Officers, persons who own more than 10% of a registered class of the
Company's equity securities, to file reports of ownership and changes in
ownership of such equity securities with the SEC and NASDAQ. Directors,
Officers and greater than 10% shareholders are required by SEC regulations to
furnish the Company with copies of all Section 16(a) forms they file.
Based solely on a review of the copies of such forms furnished to the
Company, the Company believes that from January 1, 1995, through December 31,
1995, the Directors, Officers and greater than 10% beneficial owners complied
with all Section 16(a) filing requirements, except that one report covering
the purchase of 255,193 shares by WHR Management Corp. ("WHR"), the general
partner of two limited partnerships, pursuant to the Company's capital
infusion plan, was filed late by WHR.
Voting of Securities
Each share is entitled to one vote on all matters brought before the Meeting.
Under California law, in voting for directors, if any shareholder gives
notice at the Meeting, prior to the voting, of that shareholder's intention
to cumulate his/her votes, each shareholder will have the right to cumulate
his/her votes and give one nominee a number of votes equal to the number of
directors to be elected, multiplied by the number of shares he/she holds, or
to distribute his/her votes on the same principle among the nominees to be
elected in such manner as he/she may see fit. The proxy holders named in
the enclosed proxy card may or may not elect to give such notice.
<PAGE>
MATTERS TO BE CONSIDERED AT ANNUAL MEETING
ITEM 1
ELECTION OF DIRECTORS
A Board of nine directors is to be elected at the Meeting to hold office
until the next annual meeting and until their successors shall be elected
and qualified. Unless individual shareholders specify otherwise, each
returned proxy will be voted for the election of the nine nominees who are
listed below, or as many of such nominees of the Board of Directors as
possible, such votes to be distributed among such nominees in such manner as
the persons named in the enclosed proxy card see fit.
If, however, any of the Board's nominees is unable to serve, or for good
cause declines to serve at the time of the Meeting, the persons named in the
enclosed proxy will exercise discretionary authority to vote for a
substitute. The Board of Directors is not aware of any circumstances that
would render any nominee unavailable for election.
It is intended that the proxies received by the proxy holders pursuant to
the solicitation will be voted in a manner designed to cause the election of
the maximum number of the Board of Directors' nominees.
The following schedule sets forth certain information concerning the
nominees for election as directors, each of whom currently is a director of
the Company and the Bank, and concerning the (non-director) executive
officers of the Company and the Bank. An asterisk indicates the nominees
for election as directors. A double asterisk indicates nominees whom the
Board also intends to elect as directors of the Bank.
Positions held with the Company and
Name Age principal occupations during five years.
Douglas E. Barnhart** 49 Director of the Company since August
1995; President/Chief Executive Officer
of Douglas E. Barnhart, Inc., general
building and engineering firm from
before 1991 to present.
Ronald P. Bird 55 Senior Vice President of the Bank from
April 1995 to present; Vice President of
Bank from January 1994 to April 1995;
President/Chief Executive Officer of
Bank of Southern California from before
1991 to June 1993.
Howard W. Brotman* 66 Director of the Company since March 1996;
Senior Vice President and Chief Financial
Officer of the Company and the Bank from
before 1991 to present; Secretary of the
Company from February 1993 to present.
Joyce I. Chewning 49 Executive Vice President of the Bank
from January 1996 to present; Senior
Vice President of the Company January
1994 to present; Senior Vice President
of Operations of the Bank from before
1991 to January 1996.
Positions held with the Company and
Name Age principal occupations during five years.
Margaret "Midge" Costanza** 63 Director of the Company since June 1993;
Partner of Martin & Costanza -
Presentation Skills Trainers from before
to present; Political Consultant-
Congresswoman Lynn Schenk and State
Treasurer Kathleen Brown from 1993
to November 1994; Campaign Coordinator
for California Democratic State Central
Committee and Boxer for Senate Committee
from 1991 to 1992.
Murray L. Galinson** 58 Director of the Company since 1982;
Chief Executive Officer and President of
the Company and Chief Executive Officer
of the Bank from before 1991 to present;
Vice Chairman of the Board of the Bank
from January, 1996 to present; President
of the Bank from before 1991 to January
1996. Director of Price Enterprises,
Inc. from December 1994 to present.
Karla J. Hertzog** 45 Director of the Company since February
1992; President of TOPS Personnel
Service, Inc., a temporary personnel
agency, from before 1991 to present.
Robert B. Horsman** 49 Director of the Company since 1991;
Executive Vice President of the Company
from January 1994 to present; President
of the Bank from January 1996 to
present; Executive Vice President of the
Bank from before 1991 to January 1996.
Gail Jensen-Bigknife 45 Senior Vice President of the Bank from
before 1991 to present.
Mark P. Mandell** 45 Director of the Company since January
1992, Director of Strategic Planning and
Business Development of the Bank from
January 1996 to present. Attorney-at-law
from before 1991 to present; Chief
Executive Officer and Legal Counsel of
Square One Development Corporation,
commercial real estate developers, from
before 1991 to present.
Richard Nance 51 Senior Vice President of the Bank from
before 1991 to present.
Debra Perkins 41 Vice President/Compliance of the Bank
from before 1991 to present.
Connie M. Reckling 47 Vice President/Human Resources of the
Bank from before 1991 to present.
Patricia L. Roscoe** 52 Director of the Company since 1990;
Chairman of Patti Roscoe & Associates,
Inc., destination management company,
from before 1991 to present.
Julius H. Zolezzi** 66 Director of the Company since 1982;
President of Zolezzi Enterprises, Inc.
which owns fishing vessels and of
Embarcadero Marine, Inc., a supplier of
diesel fuel, from before 1991 to present.
Information Regarding The Board of Directors and Its Committees
The Company's Board of Directors met 16 times during 1995. Each director
nominated for election attended at least 75% of the aggregate number of
meetings of the Board and the committees on which he/she served except for
Mr. Barnhart, who attended 67%.
The Company's Audit Committee (as well as the Audit Committee of the Bank)
consisted of Karla J. Hertzog, Mark P. Mandell and Patricia L. Roscoe. The
Company's Audit Committee assists in selecting the independent accountants,
in designating services they are to perform and in maintaining effective
communication with the Company's accountants. The Audit Committee met four
times in 1995.
The Company's Executive Compensation Committee, which was composed of Charles
I. Feurzeig, Patricia L. Roscoe, Karla J. Hertzog and March P. Mandell met
once during 1995. The Executive Compensation Committee reviews and acts on
matters relating to compensation levels and benefit plans for executive
officers and other key employees of the Company and the Bank.
The Company does not have a standing nominating committee or any other
committee performing similar functions, and such matters are considered at
meetings of the full Board of Directors.
At the annual organizational meeting of the Bank, the Company, as the sole
shareholder of the Bank, intends to elect the nominees for director of the
Company (as indicated by the double asterisk under Item 1) as directors of
the Bank until the next annual meeting of the Bank and until their successors
are elected and have qualified.
Charles I. Feurzeig, who is a founding shareholder of the Company and the
Bank and who has served as Chairman of the Board of both since inception, has
chosen to not stand for reelection. The Board intends, at its organizational
meeting following the Annual Meeting of Shareholders, to appoint Mr. Feurzeig
as Chairman Emeritus of the Company in recognition of his long and valuable
service as Board Chairman, and in anticipation of his continued valuable
contributions to the success of the Company and the Bank.
The Board also intends to elect Murray L. Galinson, President and C.E.O. of
the Company and Vice-Chairman of the Board and C.E.O. of the Bank and who
has recently withdrawn his name from consideration for appointment as a
Federal District Judge, to succeed Mr. Feurzeig as Chairman of the Board of
the Company and the Bank.
<PAGE>
<TABLE>
<CAPTION>
EXECUTIVE COMPENSATION
Other Compensation
Name and Long-Term Profit-Sharing
Principal Annual Compensation Compensation and 401-K Plan
Position Year Salary Bonus Option Awards Contribution
<S> <C> <C> <C> <C> <C>
Murray L. Galinson 1995 $180,809 $10,710 14,000 (1) $5,894
President/CEO 1994 174,050 0 0
1993 167,700 0 35,003 (2)
Robert B. Horsman 1995 119,067 7,875 14,000 (1) 5,607
Executive Vice President 1994 113,330 0 0
1993 109,200 0 27,548 (2)
Joyce Chewning 1995 107,492 6,458 0 5,458
Senior Vice President 1994 102,440 0 0
1993 97,940 0 10,099
Howard W. Brotman 1995 103,361 6,458 0 3,183
Senior Vice President, Secretary, 1994 99,100 0 0
Chief Financial Officer 1993 96,469 0 8,371
(1) Awarded in his role as a Director of the Company.
(2) Includes 10,500 shares awarded in his role as a Director of the Company.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year End Option Values
Value of Unexercised
Number of Unexercised In-the-Money Options
Shares Acquired Value Options at Fiscal Year End - at Fiscal Year End
Officer on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C> <C> <C>
Murray L. Galinson None None 41,489 35,003 None $83,132
Robert B. Horsman None None 25,585 27,548 None $65,426
Joyce Chewning None None None 10,099 None $23,985
Howard W. Brotman None None 10,743 8,371 None $19,881
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Option Grants in Last Fiscal Year
Individual Grants
Potential Realizable
Value at Assumed
% of Total Annual Rates of Stock
Options Granted Price Appreciation For
Options To Employees In Exercise Expiration Option Term
Officer Granted Fiscal Year Price Date @5% @10%
<S> <C> <C> <C> <C> <C> <C>
Murray L. Galinson 14,000* 20.4% $6.00 10/24/05 $52,800 $133,900
Robert B. Horsman 14,000* 20.4% $6.00 10/24/05 $52,800 $133,900
*Awarded in his role as a Director of the Company.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Comparison of Five Year-Cumulative Total Returns
Performance Graph for
SDNB Financial Corp.
Prepared by the Center for Researching Security Prices
Produced on 1/24/96 including data to 12/29/95
CRSP Total Returns Index For: 12/31/90 12/31/91 12/31/92 12/31/93 12/30/94 12/29/95
<S> <C> <C> <C> <C> <C> <C>
SDNB Financial Corp. 100.0 65.0 54.1 38.7 44.9 70.1
Nasdaq Stock Market (US Companies) 100.0 160.6 186.9 214.5 209.7 296.3
Nasdaq Bank Stocks 100.0 164.1 238.9 272.4 271.4 404.4
Sic 6020-6029, 6710-6719 US & Foreign
<FN>
Notes:
A. The lines represent monthly index levels derived from compounded daily returns that include all
dividends.
B. The indexes are reweighted daily, using the market capitalization on the previous trading day.
C. If the monthly interval, based on the fiscal year-end, is not a trading day, the preceding trading
day is used.
D. The index level for all series was set to $100.0 on 12/31/90.
</FN>
</TABLE>
<PAGE>
Executive Employment Agreements
On March 27, 1996 the Company entered into employment agreements, comparable
to previous agreements, with Murray L. Galinson, Robert B. Horsman, Joyce
Chewning and Howard W. Brotman which continue through December 31, 1998. The
agreements provide for base salaries of $185,120, $123,550, $105,930 and
$101,658 respectively, with adjustments on January 1 of each year during the
term at the discretion of the Board of Directors, but in no event will the
adjusted salary be less than the preceding year. The agreements also provide
for normal employee perquisites, participation in the other compensation
plans and for extension of employment for three years from the date of a
"change of control" of the Company or the Bank.
REPORT OF THE EXECUTIVE COMPENSATION COMMITTEE
Overall Compensation Philosophy
The Executive Compensation Committee of the Board of Directors, consisting
entirely of non-employee Directors, approves all of the policies under which
compensation is paid tot he Company's executive officers. The Company's
executive compensation objective is to link compensation with corporate and
individual performance in a manner which, recognizing the marketplace
practices of other banks, will retain and attract executives who can achieve
the short and long-term goals of the Company. The policy is to provide for
competitive base salaries which reflect individual levels of responsibility
and performance and annual bonuses based upon achievement of annual corporate
performance. The result is a strengthening of the mutuality of interest in
the Company's long-term performance between its executive officers and the
Company's shareholders.
Base Salaries
In December of 1994, a base salary has been established for each executive
officer for the 1995 fiscal year. These base salaries are established in
relation to the external marketplace based on surveys by the California
Bankers Association and California State Banking Department, American Bankers
Association, Livingstone Services, The Findley Reports, Community Banks of
Southern California and the Independent Bankers Association, and internal
factors including but not limited to the following: (1) the compensation
history of the individual officer; (2) the individual's years of experience
with the Company or the Bank and in the industry; (3) the performance and
contribution of the officer relative to his/her job responsibility; and (4)
the current financial condition of the Company and the Bank. Additionally,
the Board also considers various qualitative factors including but not
limited to knowledge of the banking industry, knowledge of the San Diego
community, commitment and dedication and entrepreneurial spirit. As a matter
of policy, the Board does not assign specific weights to the above factors
for any of its executive officers due to the belief that the evaluation and
awarding of compensation to the officers' group cannot be simplified to a
mathematical computation. As such, the compensation policy used by the
Committee and the Board to set salaries is considered subjective.
Bonuses
Officers can earn bonuses on an annual basis pursuant to an Incentive Bonus
Plan for officer or the Management Bonus Plan for senior management. The
Payments under each of those bonus plans for 1995 were not material.
CEO Compensation
The members of the Board have determined that Mr. Galinson is a person with
extreme dedication to the success of the Company. Although the Company has
not been profitable over the last three years, the Board felt these losses
were beyond the control of Mr. Galinson and the executive officers due to
extrinsic factors. Accordingly, in December of 1994, the Committee
recommended to the Board an increase in his base salary in the amount of 5%
above his 1994 base salary commencing January 1, 1995, which would place his
salary generally in the third quartile of the surveys referred to above. The
bonus paid to Mr. Galinson for 1995 was pursuant to the formula contained in
the Management Bonus Plan in effect since 1982.
Conclusion
The Board believes the executive officers' individual compensation programs
discussed in this report are designed in a manner which is consistent with
the Company's overall compensation philosophy. As such, the compensation
provided to the Company's CEO, Murray L. Galinson, and to other executive
officers, is deemed appropriate.
Charles I Feurzeig
Patricia L. Roscoe
Karla J. Hertzog
Julius H. Zolezzi
Director Compensation
During 1995, Mr. Feurzeig was paid $1,000 per board meeting and $150 per
committee meeting attended. All other non-employee directors were paid $500
per board meeting and $75 per committee meeting attended. Effective January
1, 1996, the compensation was increased to $2,000 per board meeting and $400
per committee meeting for the Chairman of the Board and to $1,000 per board
meeting and $200 per committee meeting for non-employee board members.
Employee Benefit Plans
In April 1982, the Bank's Board of Directors adopted a Profit Sharing Plan,
which was approved by the Internal Revenue Service in 1983. This Plan
provides for contributions to be made by the Bank from current or accumulated
profits in amounts not to exceed 15% of the compensation paid to plan
participants. All employees are eligible to participate as of the January 1
next following their date of employment and are allocated a portion of the
Bank's contributions as determined by the Plan. Participants who terminate
their employment with the Bank will receive their vested percentage of their
account balances in either a single lump sum or payment in kind.
In July 1989, the Bank's Board of Directors approved the Deferred Savings
Plan for the benefit of all employees. In addition to the Profit Sharing
Plan already in effect, the Deferred Savings Plan provides a 401(k) plan for
which the Bank makes matching contributions on a percentage basis. All
employees are eligible to participate on the January 1 following their hire
date. Participants who terminate their employment with the Bank will receive
their vested percentage of their account balance.
In 1995, $59,000 was accrued under these plans. No accrual was made for the
years 1994 and 1993.
Deferred Compensation Plan
On March 20, 1985, the Bank entered into unfunded deferred compensation
agreements with Murray L. Galinson, Robert B. Horsman and Joyce I. Chewning.
The agreements permit these employees, prior to the time of rendering
services, to have their salary reduced and the reduction paid as deferred
compensation over a five year period following termination of employment,
death or retirement. The employees become general unsecured creditors of the
Bank with respect to such deferred accounts. Nothing was deferred under this
plan in 1995.
Company Stock Option Plans
In 1994 the Board of Directors adopted the "1994 Stock Option Plan" ("1994
Plan"), which was approved by the Company's shareholders on March 17, 1995.
The Company has reserved 400,000 shares for issuance under the plan. Options
are granted under the plan at a price not less than the fair market value of
the Company's common stock on the date of grant. The options are exercisable
in increments over a number of years as determined by the Board of Directors
but not to exceed 10 years and expire three months after termination of
employment or cessation of affiliation as a director. The plan expires
September 10, 2004, as to any shares not at the time subject to option.
Options can, depending on the circumstances of issuance, be either incentive
stock options, which are qualified under provisions of the Internal Revenue
Code for certain tax-advantaged treatment, or non-qualified options.
The 1994 Plan replaced a similar plan, the "1984 Stock Option Plan" ("1984
Plan") which had expired.
As of March 29, 1996, there were non-qualified options outstanding under the
1984 Plan for 168,294 shares at exercise prices ranging from $3.25 to $7.94
per share, and Incentive Stock Options outstanding for 244,896 shares at
exercise prices ranging from $3.25 to $11.13 per share.
As of March 29, 1996, there were non-qualified options outstanding under the
1994 plan for 98,000 shares at $6.00 per share and Incentive Stock Options
outstanding for 80,500 shares at prices ranging from $3.25 to $5.31 per share.
Other Transactions
The Bank had banking transactions in the ordinary course of its business with
the Company and its subsidiaries, directors, executive officers, and their
associates, on the same terms, including interest rates and collateral on
loans, as those prevailing at the same time for comparable transactions with
other customers of the Bank, and which do not, in the opinion of management,
involve more than the normal risks of collectability or present other
unfavorable features. Under federal law, additional restrictions are placed
upon the aggregate amount of, and other terms and conditions of, loans to
executive officers, directors and principal shareholders. The maximum
aggregate available amount of all such loans and credit extensions at
December 31, 1995 to all directors and officers of the Bank, together with
their associates, was approximately $590,000 (constituting approximately 4%
of the Company's equity capital). The actual aggregate balance outstanding
on all such loans and credit extensions at December 31, 1995 was $505,000. In
October 1990, the Bank Board adopted a policy of eliminating further lending
to executive officers and directors (except for cash-secured loans) beyond
the maturity of then existing debt. Exceptions to this policy were granted
to one director where the amounts of the loans outstanding are less than the
amounts outstanding when the policy was adopted and to another whose
guarantee of a loan was made prior to his becoming a director.
During 1995 the Company repaid PVCC, Inc., a corporation controlled by Mr.
Feurzeig, the note in the original amount of $2 million which note was
secured by a second trust deed note on the San Diego National Bank Building,
from the proceeds of the capital infusion and the refinancing of the
Building. Also paid from the proceeds of the capital infusion were notes
payable to Murray L. Galinson for $350,000 and Howard W. Brotman for $40,000.
In January 1993, the Bank was named as a defendant in an adversary proceeding
filed by Pioneer Liquidating Corporation ("PLC"), successor to six bankrupt
Pioneer Mortgage Company entities (collectively, "Pioneer") in the Bankruptcy
Court of the Southern District of California. Investors in Pioneer had
previously filed suit against the Bank, which litigation was settled in 1992.
The PLC case was settled with the final settlement agreement approved by the
Federal District Court for the Southern District of California on November 29,
1995.
A preliminary agreement between the Bank would make payment to PLC on
execution of the settlement agreement and assign to PLC certain charged-off
loans, without recourse. The preliminary agreement further provided that
after being given credit for the payment by the Bank and the collections on
the assigned charged-off loans, payment of the remaining balance of the total
settlement amount was to be guaranteed by Charles I. Feurzeig, Chairman of
the Board of the Company, and PVCC, Inc., a corporation controlled by Mr.
Feurzeig (collectively, the "Feurzeig Entities"). Such guarantee was being
given by the Feurzeig Entities for consideration independent of Mr.
Feurzeig's investment in the Company.
Subsequent negotiations led to the settlement agreement approved by the Court
whereby the Bank paid $600,000 to PLC and the Feurzeig Entities paid
$1,050,000 to PLC upon execution of the settlement agreement and the Feurzeig
Entities took the place of PLC with respect to assignment of the charged-off
loans. In consideration of the modification of the original list of charged-
off loans to eliminate certain loans which had been only partially charged-
off, the Bank agreed to assign additional newly charged-off loans (90 days
after charge-off) to the Feurzeig Entities, until the first to occur of:
(a) Five years after the date of the settlement agreement; or
(b) Such time as the Feurzeig Entities have collected on such loans
$1,050,000 plus a return equal to the rate of 9.5% per year on the unpaid
portion of such $1,050,000.
Pursuant to the settlement agreement the Feurzeig Entities do not have
recourse or a claim against the Bank should the collections on the assigned
charged-off loans amount to less than $1,050,000. Should the collections
exceed $1,050,000 plus the return referred to above, the Feurzeig Entities
have agreed to pay to the Bank 50% of such excess collections.
ITEM 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors has selected Coopers & Lybrand, L.L.P. independent
public accountants, to audit the financial statements of the Company for the
year ending December 31, 1996 and recommends to shareholders that they vote
for ratification of that appointment. Coopers & Lybrand, L.L.P. has audited
the Company's financial statements since the year ended December 31, 1985.
Representatives of Coopers & Lybrand, L.L.P. are expected to be present at
the Meeting, will have the opportunity to make a statement if they desire to
do so, and are expected to be available to respond to appropriate questions.
SHAREHOLDER PROPOSALS
In order to be considered for inclusion in the Company's proxy materials for
the 1997 annual meeting, shareholder proposals, if any, must be received by
the Company at its principal executive office prior to January 15, 1997.
ANNUAL REPORT TO SEC ON FORM 10-K
The Company will furnish, without charge, upon written request of any
shareholder who represents in the request that he/she was the beneficial
owner of the Company's stock on March 29, 1996, a copy of the Company's
annual report to the Securities and Exchange Commission on Form 10-K
(including financial statements and financial statement schedules, but
without exhibits) for the fiscal year ended December 31, 1995. Requests
should be addressed to: Howard W. Brotman, Secretary, SDNB Financial Corp.,
P.O. Box 12605, San Diego, CA 92112-3605 (telephone 619/231-4989).
ANNUAL DISCLOSURE STATEMENT
The Company will furnish, without charge for the first copy, the annual
disclosure statement of San Diego National Bank for the fiscal year ended
December 31, 1995 upon request. Requests should be made to Howard W.
Brotman, Secretary, SDNB Financial Corp., P.O. Box 12605, San Diego, CA 92112-
3605 (telephone 619/231-4989).
OTHER BUSINESS
The Board of Directors is not aware of any matter to be presented for action
at the Meeting other than the matters set forth in this Proxy Statement.
Should any other matter requiring a vote of the shareholders arise, the
persons named as proxies on the enclosed proxy card will vote the shares
represented thereby in accordance with their best judgment in the interest
of the Company. Discretionary authority with respect to such other matters
is granted by the execution of the enclosed proxy card.
By Order of the Board of Directors
/s/Howard W. Brotman
April 10, 1996 Howard W. Brotman, Secretary
<PAGE>
(front of enclosed Proxy Card)
SDNB FINANCIAL CORP.
Proxy for Annual Meeting of Stockholders May 15, 1996
The undersigned hereby appoints Murray L. Galinson and Robert B.
Horsman, as Proxies, each with full power of substitution, and hereby
authorize them, to represent and vote, as designated on the reverse, all
shares of Common Stock of SDNB Financial Corp. ("the Company") held of record
by the undersigned on March 29, 1996, at the Annual Meeting of Stockholders
to be held on May 15, 1996 at 10:00 A.M. at the offices of the Company or any
adjournments thereof.
(To Be Signed on Reverse Side.)
(reverse side of Proxy Card)
X Please mark your
votes as in this
example.
WITHHOLD AUTHORITY
to vote for all nominees
listed at right
FOR Nominees: Douglas E. Barnhart
1. ELECTION Howard W. Brotman
OF Margaret "Midge" Costanza
DIRECTORS Murray L. Galinson
Karla J. Hertzog
Robert B. Horsman
Mark P. Mandall
Patricia L. Rosoce
Juluis H. Zolezzi
FOR AGAINST ABSTAIN
2. Proposal to ratify the selection of Coopers
and Lybrand LLP to serve as the Company's
independent accountants for the fiscal year 1996.
3. In their discretion, upon such other business as may properly come
before the Annual Meeting or any postponement or adjournment thereof.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. THIS
PROXY WILL BE VOTED AS DIRECTED. IN THE ABSENCE OF DIRECTION, THIS
PROXY WILL BE VOTED FOR THE NOMINEES FOR ELECTION AND FOR PROPOSALS.
STOCKHOLDERS ARE URGED TO DATE, MARK, SIGN AND RETURN THIS PROXY
PROMPTLY IN THE ENVELOPE PROVIDED, WHICH REQUIRES NO POSTAGE IF MAILED
WITHIN THE UNITED STATES.
SIGNATURES: DATE:
NOTE: Please sign exactly as your names appear on stock certificate
(as indicated hereon).
