FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC. 20549
(Mark One)
( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1998
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________________ to _____________________.
Commission File Number 0-13528
-------
Pacific Capital Bancorp
-----------------------
(Exact name of registrant as specified in its charter)
California 77-0003875
---------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1001 S. Main Street, Salinas, California 93901
----------------------------------------------
(Address of principal executive offices)
(Zip Code)
(408) 757-4900
--------------
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if
changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes __X__ No _____
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Outstanding at
Class November 13, 1998
----- -----------------
Common stock, no par value 4,504,949 Shares
This report contains a total of 25 pages.
1
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1 PAGE
PACIFIC CAPITAL BANCORP AND
SUBSIDIARIES UNAUDITED FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS 3
CONSOLIDATED STATEMENTS OF INCOME 4
CONSOLIDATED STATEMENTS OF CASH FLOWS 6
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME 7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 8-9
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS 10-18
ITEM 3
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 18-19
PART II - OTHER INFORMATION
ITEM 6
EXHIBITS AND REPORTS ON FORM 8-K 20
SIGNATURES 25
2
<PAGE>
<TABLE>
PART 1
ITEM 1 - FINANCIAL INFORMATION
PACIFIC CAPITAL BANCORP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<CAPTION>
September 30, December 31,
Assets 1998 1997
--------- ---------
<S> <C> <C>
Cash and due from banks $ 45,907 $ 49,982
Federal funds sold and other short term investments 73,151 28,537
--------- ---------
Total cash and equivalents 119,058 78,519
Investment securities:
Available-for-sale securities, at fair value 234,584 220,984
Held-to-maturity securities, at amortized cost
(fair value of $5,309 and $7,347, respectively) 5,272 7,347
Loans held for sale 12,208 10,523
Loans held for investment 455,257 419,293
Less allowance for possible loan losses (4,646) (4,266)
--------- ---------
Net loans 450,611 415,027
Premises and equipment, net 14,879 15,331
Accrued interest receivable and other, net 15,980 16,988
--------- ---------
Total assets $ 852,592 $ 764,719
========= =========
Liabilities and shareholders' equity
Deposits:
Demand, non-interest bearing $ 188,058 $ 174,649
Demand, interest bearing 97,260 97,322
Savings and money market 188,158 173,151
Time certificates 283,036 238,276
--------- ---------
Total deposits 756,512 683,398
Accrued interest payable and other liabilities 11,849 8,763
--------- ---------
Total liabilities 768,361 692,161
Shareholders' equity:
Preferred stock; 20,000,000 shares authorized and unissued -- --
Common stock, no par value; 20,000,000 shares authorized;
4,504,516 and 4,294,403 shares issued and outstanding at
September 30, 1998 and at December 31, 1997, respectively 62,201 58,434
Retained earnings 19,128 12,852
Accumulated other comprehensive income 2,902 1,272
--------- ---------
Total shareholders' equity 84,231 72,558
--------- ---------
Total liabilities and shareholders' equity $ 852,592 $ 764,719
========= =========
<FN>
See accompanying notes to unaudited consolidated financial statements.
</FN>
</TABLE>
3
<PAGE>
<TABLE>
PACIFIC CAPITAL BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<CAPTION>
Nine months Nine months
ended ended
September 30, 1998 September 30, 1997
------------------ ------------------
<S> <C> <C>
Interest income:
Interest and fees on loans $ 32,670 $ 30,452
Interest on fed funds sold 2,196 1,544
Interest on investment securities 10,447 6,672
----------- -----------
Total interest income 45,313 38,668
----------- -----------
Interest expense:
Interest on deposits 15,487 12,494
Other 12 24
----------- -----------
Total interest expense 15,499 12,518
----------- -----------
Net interest income 29,814 26,150
Provision for possible loan losses 1,035 910
----------- -----------
Net interest income after provision for possible loan losses 28,779 25,240
----------- -----------
Other income:
Service charges 2,270 1,872
Gain on sale of loans 16 17
Net gain (loss) on securities transactions (12) 11
Other 589 518
----------- -----------
Total other income 2,863 2,418
----------- -----------
Other expenses:
Salaries and benefits 9,354 8,211
Occupancy 1,842 1,706
Equipment 1,471 1,271
Advertising and promotion 365 534
Stationary and supplies 426 600
Legal and professional fees 1,082 658
Regulatory assessments 192 164
Other operating 2,013 1,814
----------- -----------
Total other expenses 16,745 14,958
Earnings before income taxes 14,897 12,700
Income taxes 5,984 5,028
----------- -----------
Net income $ 8,913 $ 7,672
=========== ===========
Basic earnings per share $ 2.04 $ 1.79
=========== ===========
Diluted earnings per share $ 1.97 $ 1.72
=========== ===========
Weighted average shares outstanding 4,364,169 4,296,864
Dilutive effect of stock options 169,281 151,392
----------- -----------
Total weighted average diluted shares outstanding 4,533,450 4,448,256
=========== ===========
<FN>
See accompanying notes to unaudited consolidated financial statements.
</FN>
</TABLE>
4
<PAGE>
<TABLE>
PACIFIC CAPITAL BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<CAPTION>
Three months Three months
ended ended
September 30, 1998 September 30, 1997
------------------ ------------------
<S> <C> <C>
Interest income:
Interest and fees on loans $ 11,399 $ 10,456
Interest on fed funds sold 898 812
Interest on investment securities 3,597 2,365
---------- ----------
Total interest income 15,894 13,633
---------- ----------
Interest expense:
Interest on deposits 5,346 4,510
Other 7 3
---------- ----------
Total interest expense 5,353 4,513
---------- ----------
Net interest income 10,541 9,120
Provision for possible loan losses 345 340
---------- ----------
Net interest income after provision for possible loan losses 10,196 8,780
---------- ----------
Other income:
Service charges 790 632
Gain on sale of loans 5 6
Net gain (loss) on securities transactions 2 --
Other 222 176
---------- ----------
Total other income 1,019 814
---------- ----------
Other expenses:
Salaries and benefits 3,123 2,768
Occupancy 641 582
Equipment 499 443
Advertising and promotion 151 191
Stationary and supplies 131 174
Legal and professional fees 389 237
Regulatory assessments 67 57
Other operating 746 582
---------- ----------
Total other expenses 5,747 5,034
Earnings before income taxes 5,468 4,560
Income taxes 2,210 1,811
---------- ----------
Net income $ 3,258 $ 2,749
========== ==========
Basic earnings per share $ 0.73 $ 0.64
========== ==========
Diluted earnings per share $ 0.71 $ 0.62
========== ==========
Weighted average shares outstanding 4,472,205 4,301,597
Dilutive effect of stock options 130,198 150,052
---------- ----------
Total weighted average diluted shares outstanding 4,602,403 4,451,649
========== ==========
<FN>
See accompanying notes to unaudited consolidated financial statements.
</FN>
</TABLE>
5
<PAGE>
<TABLE>
PACIFIC CAPITAL BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<CAPTION>
Nine months Nine months
ended ended
September 30, 1998 September 30, 1997
------------------ ------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 8,913 $ 7,672
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation and amortization 1,168 1,096
Provision for possible loan losses 1,035 910
(Gain) loss on sale of investment securities, net 12 (11)
Net originations of loans available for sale (1,685) (3,904)
Gain on sale of loans (16) (17)
Amortization of loan origination fees, net (228) 121
Change in accrued interest receivable and other assets 2,638 (970)
Change in accrued interest payable and other liabilities 3,102 (2,291)
--------- ---------
Net cash provided by (used in) operating activities 14,939 2,606
--------- ---------
Investing activities:
Net increase in loans (36,562) (18,311)
Recoveries on loans 171 162
Maturities of investment securities 45,652 14,799
Purchases of investment securities (76,610) (49,945)
Proceeds from sale of available-for-sale securities 19,421 --
Capital expenditures, net (716) (752)
--------- ---------
Net cash used in investing activities (48,644) (54,047)
--------- ---------
Financing activities:
Net increase in deposits 73,114 99,614
Cash paid for retirement of stock (875) --
Proceeds from exercise of options 4,642 452
Cash paid for dividends (2,637) (1,984)
--------- ---------
Net cash provided by financing activities 74,244 98,082
--------- ---------
Net increase in cash and equivalents 40,539 46,641
Cash and equivalents at beginning of period 78,519 76,245
--------- ---------
Cash and equivalents at end of period $ 119,058 $ 122,886
========= =========
Supplemental disclosures of cash flow information:
Cash paid during the period
Interest $ 15,304 $ 12,824
Income taxes 3,735 4,115
<FN>
See accompanying notes to unaudited consolidated financial statements.
</FN>
</TABLE>
6
<PAGE>
<TABLE>
PACIFIC CAPITAL BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
(IN THOUSANDS)
<CAPTION>
Nine months ended
September 30, September 30,
1998 1997
----------------------------------
<S> <C> <C>
Net income $ 8,913 $ 7,672
Net change in unrealized gain on available-for-sale securities 1,630 457
Realized gain (loss) on sale of available-for-sale securities, net of taxes (12) 11
-------- --------
Total comprehensive income for the period $ 10,531 $ 8,140
======== ========
Three months ended
September 30, September 30,
1998 1997
----------------------------------
Net income $ 3,258 $ 2,749
Net change in unrealized gain (loss) on available-for-sale securities 2,150 686
Realized gain (loss) on sale of available-for-sale securities, net of taxes 2 --
-------- --------
Total comprehensive income for the period $ 5,410 $ 3,435
======== ========
</TABLE>
7
<PAGE>
PACIFIC CAPITAL BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1 - Basis of Presentation
In the opinion of the Company, the unaudited consolidated
financial statements, prepared on the accrual basis of
accounting, contain all adjustments (consisting of only normal
recurring adjustments) which are necessary to present fairly
the financial position of the Company and subsidiaries at
September 30, 1998 and December 31, 1997, the results of its
operations, statements of cash flows, and comprehensive income
for the periods ended September 30, 1998 and 1997.
Certain information and note disclosures normally presented in
financial statements prepared in accordance with generally
accepted accounting principles have been omitted. The results
of operations for the period ended September 30, 1998 are not
necessarily indicative of the operating results for the full
year ending December 31, 1998.
In June 1997, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standard (SFAS) No.
131, Disclosures about Segments of an Enterprise and Related
Information. The Statement establishes standards for the way
the public business enterprises are to report information
about operating segments in annual financial statements and
requires those enterprises to report selected information
about operating segments in interim financial reports issued
to shareholders. This statement is effective for fiscal years
beginning after December 15, 1997. The Company does not
believe it will have a significant impact on its consolidated
financial statements.
In February 1998, the FASB issued SFAS No. 132, Employers'
Disclosures about Pensions and Other Postretirement Benefits.
This Statement amends the disclosure requirements of
Statements No. 87, Employers' Accounting for Pensions, No. 88,
Employers' Accounting for Settlements and Curtailments of
Defined Benefit Pension Plans and for Termination Benefits,
and No. 106, Employers' Accounting for Postretirement Benefits
Other Than Pensions. This Statement standardizes the
disclosure requirements of Statements No. 87 and No. 106 to
the extent practicable and recommends a parallel format for
presenting information about pensions and other postretirement
benefits. This Statement is effective for fiscal years
beginning after December 15, 1997. The statement is not
anticipated to have a material impact on the financial
condition or results of operations of the Company.
In June 1998, the FASB issued SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities. This Statement
requires that an entity recognize all derivatives as either
assets or liabilities in the statement of financial position
and measure those instruments at fair value. The statement is
effective for fiscal quarters of fiscal years beginning after
June 15, 1999. The Company expects to adopt this Statement on
January 1, 2000. At this time, the Company does not expect
this statement to have a material impact on the financial
condition or results of operations of the Company.
Note 2 - Consolidation
The consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiaries, First National
Bank of Central California, ("First National"), and South
Valley National Bank ("South Valley"). For purposes used
herein, the term "Subsidiary Banks" shall mean First National
and South Valley, collectively. All material intercompany
accounts and transactions have been eliminated in
consolidation.
Note 3 - Loans to Directors
In the ordinary course of business, the Company has made loans
to directors of the Company and their affiliates, which at
September 30, 1998 amounted to approximately $6,562,000.
8
<PAGE>
Note 4 - Commitments
The Company had outstanding standby letters of credit of
approximately $3,861,000 at September 30, 1998.
Note 5 - Net Income Per Share and Dividends
Net income per share is computed using the weighted average
number of shares of common and common equivalent shares
outstanding. On January 28, April 28, and July 28, the Company
declared a $0.20 per share cash dividend to shareholders of
record on March 16, June 15, and September 15, payable on
March 31, June 30, and September 30, 1998, respectively.
Note 6 - Taxes
As of September 30, 1998, the Company had a deferred tax asset
of approximately $1,304,000. The asset results primarily from
the provisions for possible loan losses and other income
statement items, which are recognized in the financial
statements but are not yet deductible for income tax reporting
purposes. Management of the Company believes that the net
deferred tax asset is fully realizable through sufficient
taxable income within carryback periods and current year
taxable income.
Note 7 - Proposed Merger
On July 20, 1998, the Company announced the signing of a
definitive agreement whereby it would merge with and into
Santa Barbara Bancorp in a tax-free exchange to be accounted
for as a pooling-of-interests. The agreement provides for
shareholders of the Company to receive 1.935 shares, subject
to adjustment, of Santa Barbara Bancorp common stock for each
outstanding share of the Company's common stock. The
transaction is valued at approximately $287.6 million, based
on the closing price of Santa Barbara Bancorp on July 17,
1998. The transaction is expected to close in December of
1998.
Santa Barbara Bancorp, headquartered in Santa Barbara, is the
holding company for Santa Barbara Bank & Trust with 26 banking
offices throughout Santa Barbara County and Western Ventura
County.
9
<PAGE>
PART 1
ITEM II - PACIFIC CAPITAL BANCORP AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview of Changes in the Financial Statements
Net income for the nine months ended September 30, 1998 was $8,913,000
or $1.97 diluted earnings per share compared to $7,672,000 or $1.72 diluted
earnings per share during the comparable period in 1997. This represents an
earnings per share increase of 14.0% over 1997. The increase in net income is
due mainly to a $3,664,000 increase in net interest income. The increase in net
interest income is due to growth in average total earning assets of $135,939,000
or 21.1% partially offset by an increase in average interest bearing deposits of
$93,635,000 as compared to the comparable 1997 period.
Outstanding loans were $467,465,000 at September 30, 1998 compared to
$429,816,000 at December 31, 1997, a $37,649,000 or 8.8% increase. Federal Funds
Sold and Investment Securities at September 30, 1998 were $313,007,000, a
$56,139,000 or 21.9% increase from December 31, 1997. This was primarily due to
the increase in total deposits, which resulted in an increase in investments in
Federal Funds and investment securities.
The Company's total deposits at September 30, 1998 were $756,512,000
compared to $683,398,000 at December 31, 1997, a $73,114,000 or 10.7% increase.
Non-interest bearing demand deposits increased $13,409,000, savings and money
market deposit accounts increased $15,007,000, certificates of deposit increased
by $44,760,000 while interest bearing demand deposits decreased $62,000 during
the first nine months of 1998. Management believes that the growth in deposits
is a result of the overall strength in the local tourism and agribusiness
industries. In addition, growth in housing demand and a small influx of
businesses moving into the southern Santa Clara County area have contributed to
the Company's deposit growth.
Loans
Outstanding total loans averaged $444,754,000 for the nine months ended
September 30, 1998 compared to $410,011,000 for the comparable period in 1997,
an increase of $34,743,000, or 8.5%. This increase in loans is due to growth in
loan demand from qualified borrowers and reflects stability in most of the
primary markets which the Company serves. The Company lends primarily to small
and medium sized businesses and consumers within its markets, which are
comprised principally of Monterey, Santa Cruz, San Benito, and southern Santa
Clara counties.
Quality of Loans
The composition of non-performing loans as of September 30, 1998,
December 31, 1997, and September 30, 1997 is summarized in table on the
following page.
10
<PAGE>
<TABLE>
Non-performing Loans
(Dollars in Thousands)
<CAPTION>
September 30, December 31, September 30,
1998 1997 1997
------ ------ ------
<S> <C> <C> <C>
Accruing loans past due 90 days or more:
Commercial $ 287 $ 26 $ 29
Consumer -- 17 17
Real Estate -- -- --
------ ------ ------
Total $ 287 $ 43 $ 46
Nonaccrual loans:
Commercial 445 1,278 524
Consumer 106 106 111
Real Estate 352 766 1,445
------ ------ ------
Total $ 903 $2,150 $2,080
Total Non-performing Loans $1,190 $2,193 $2,126
====== ====== ======
Non-performing Loans To Total Loans 0.25% 0.52% 0.52%
Allowance For Possible Loan Losses to Total
Non-performing Loans 390.42% 194.53% 196.05%
</TABLE>
The Company does not expect to sustain losses from any of the
non-performing loans in excess of that specifically provided for in the
allowance for possible loan losses. Currently, the Company's level of
non-performing loans to total loans is below that of peer banks.
In addition to the above, the Company holds one Other Real Estate Owned
(OREO) property, which totals $1,213,000. The amount recorded represents the
lesser of the loan balance or current fair value obtained from a current
appraisal less anticipated selling costs; therefore, any identified loss has
already been recognized.
Inherent in the lending function is the fact that loan losses will be
experienced and that the risk of loss will vary with the type of loan extended
and the creditworthiness of the borrower. To reflect the estimated risks of loss
associated with its loan portfolio, additions are made to the Company's
allowance for possible loan losses. As an integral part of this process, the
allowance for possible loan losses is subject to review and possible adjustment
as a result of management's assessment of risk or regulatory examinations
conducted by governmental agencies. The Company's entire allowance is a
valuation allowance created by direct charges against operations through the
provision for possible loan losses.
The provision for possible loan losses charged against operations is
based upon the actual net loan losses incurred plus an amount for other factors
which, in management's judgment, deserve recognition in estimating possible loan
losses. The Company evaluates the adequacy of its allowance for possible loan
losses on a quarterly basis. The Company has also contracted with an independent
loan review consulting firm to evaluate overall credit quality and the adequacy
of the allowance for possible loan losses. Both internal and external
evaluations take into account the following: specific loan conditions as
determined by management; the historical relationship between charge-offs and
the level of the allowance; the estimated future loss in all significant loans;
known deterioration in concentrations of credit, certain classes of loans or
pledged collateral; historical loss experience based on volume and types of
loans; the results of any independent review or evaluation of the loan portfolio
quality conducted by or at the direction of Company management or by bank
regulatory agencies; trends in portfolio volume, maturity and composition;
off-balance sheet credit risk; volume and trends in delinquencies and
nonaccruals; lending policies and procedures including those for charge-off,
collection and recovery; national and local economic conditions and their
effects on specific local industries; and the experience, ability and depth of
lending management and staff. These factors are essentially judgmental and may
not be reduced to a mathematical formula.
11
<PAGE>
The Company closely monitors the local markets in which it conducts its
lending activities. The overall increase in loan demand from qualified borrowers
during the past year is indicative of the strength in the local economic
climate.
<TABLE>
The table set forth below summarizes the actual loan losses and
provision for possible losses as of and for the periods ended September 30,
1998, December 31, 1997, and September 30, 1997:
Loan Charge-Off/Recovery Activity
(Dollars in Thousands)
<CAPTION>
Nine months Year Nine months
Ended Ended Ended
September 30, 1998 December 31,1997 September 30, 1997
------------------ ---------------- ------------------
<S> <C> <C> <C>
Loans Outstanding, at period end $455,257 $419,293 $406,342
Average Loans $444,754 $411,546 $410,011
Allowance Balance:
Beginning Of Period $ 4,266 $ 3,672 $ 3,672
Charge-Offs By Loan Category:
Commercial 492 873 357
Consumer 301 59 45
Real Estate 33 211 174
-------- -------- --------
Total $ 826 $ 1,143 $ 576
-------- -------- --------
Recoveries By Loan Category:
Commercial $ 106 $ 120 $ 102
Consumer 56 24 21
Real Estate 9 73 39
-------- -------- --------
Total $ 171 $ 217 $ 162
-------- -------- --------
Net Charge-Offs $ 655 $ 926 $ 414
-------- -------- --------
Provision Charged
To Expense $ 1,035 $ 1,520 $ 910
Allowance Balance End Of Period $ 4,646 $ 4,266 $ 4,168
======== ======== ========
Allowance For Possible Loan Losses
To Period End Loans 1.02% 1.02% 1.03%
Annualized Net Charge-offs
to Average Loans 0.20% 0.23% 0.13%
</TABLE>
The provision for possible loan losses charged against earnings is
based upon an analysis of the actual migration of loans to losses plus an amount
for other factors which, in management's judgment, deserve recognition in
estimating possible loan losses. While these factors cannot be reduced to a
mathematical formula, it is management's view that the allowance for possible
loan losses of $4,646,000 or 1.02% of total loans was adequate as of September
30, 1998.
12
<PAGE>
Results of Operations
Nine months ended September 30, 1998
Compared with
Nine months ended September 30, 1997
Net income for the nine months ended September 30, 1998 was $8,913,000,
an increase of $1,241,000 or 16.2% as compared to the same 1997 period. The
increase in net income for the period was due primarily to an increase in net
interest income of $3,664,000 partially offset by an increase in non-interest
expense of $1,787,000. The increase in net interest income is due to growth in
average total earning assets of $135,939,000 partially offset by an increase in
average interest bearing deposits of $93,635,000 compared to the same 1997
period.
The average balance of interest earning assets during the nine months
ended September 30, 1998 was $727,776,000, a 23.0% increase over the comparable
1997 period. The Company's average yield on earning assets for the nine months
ended September 30, 1998 decreased to 8.3% from 8.7% in the comparable 1997
period. Total interest income increased $6,645,000 or 17.2% for the nine months
ended September 30, 1998 compared to the same 1997 period due to the increase in
average interest earning assets.
Average deposits for the Company for the nine months ended September
30, 1998 was $707,311,000, a $123,338,000 or 21.1% increase compared to the same
period ended September 30, 1997. The Company's average cost of funds for the
nine months ended September 30, 1998 was 3.8%, which yielded a net interest
margin of 5.5%. This compares to an average cost of funds of 3.7% and a net
interest margin of 5.9% for the comparable 1997 period. Interest expense of
$15,499,000 for the nine months ended September 30, 1998 was $2,981,000 or 23.8%
over the comparable 1997 period due to an increase in average interest bearing
deposits of $93,635,000 and an increase in the Company's cost of funds of 0.1%.
Net interest income for the nine months ended September 30, 1998 increased
$3,664,000 or 14.0%.
The Company made a provision to the allowance for possible loan losses
of $1,035,000 in the nine months ended September 30, 1998 primarily due to the
overall growth experienced within the loan portfolio. An analysis of the loan
portfolio completed by the Company indicates that the current allowance for loan
losses are adequate based on the Company's calculated provision requirements.
Total loans charged-off net of recoveries for the nine months ended
September 30, 1998 amounted to $655,000 compared to $414,000 for the same period
in 1997. Annualized net loan charge-offs as a percentage of average loans for
the nine months ended September 30, 1998 was 0.20% compared to 0.13% for the
nine months ended September 30, 1997 and 0.23% for the year ended December 31,
1997.
Total other income was $2,863,000 for the nine months ended September
30, 1998, a $445,000 or 18.4% increase compared to the same period in 1997.
Service charges on deposit accounts increased by $398,000 or 21.3% over the
comparable period in 1997. The net gain (loss) on securities transactions
decreased by $23,000 offset by other income which increased by $71,000 compared
to the nine months ended September 30, 1997.
Salaries and benefits expense for the nine months ended September 30,
1998 was $9,354,000, a $1,143,000 or 13.9% increase over the comparable 1997
period. This variance resulted primarily from an increase in overall staffing
levels to accommodate internal growth as well as regular salary increases and an
increase in the accrual for salary continuation plans. The Company employed 273
full time equivalent employees at September 30, 1998 compared to 285 full time
equivalent employees at December 31, 1997 and 271 full time equivalent employees
at September 30, 1997.
Total other expenses, excluding salaries and benefits, for the nine
months ended September 30, 1998, was $7,391,000, a $644,000 or 9.5% increase
from the comparable 1997 period. This was primarily due to increases in legal
and professional expense and equipment expense of $424,000 and $200,000,
respectively. These increases were partially offset by a decrease in advertising
and promotion expense of $169,000 and a decrease in stationery expense of
$174,000.
Applicable income taxes of $5,984,000 for the nine months ended
September 30, 1998 were $956,000, or 19.0% more than the comparable 1997 period.
The Company's effective tax rate for the nine months ended September 30, 1998
was 40.2% compared to 39.6% for the same period in 1997.
13
<PAGE>
<TABLE>
Certain information concerning the Company's average balances, yields,
and rates on average interest-earning assets and interest-bearing liabilities is
set forth in the following table. Interest yields and amounts earned include net
loan fees of $857,000 and $1,040,000 in 1998 and 1997, respectively.
<CAPTION>
AVERAGE BALANCE SHEETS
- ---------------------------------------------------------------------------------------------------------------------------------
1998 1997
Average Yield/ Interest Average Yield/ Interest
(Dollars in thousands) Balance Rate Amount Balance Rate Amount
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Assets
Earning assets:
Investment securities:
Taxable $215,635 6.2% $9,985 $129,910 6.4% $6,200
Non-taxable 13,374 4.6% 462 13,270 4.9% 491
Federal funds sold 54,013 5.4% 2,196 38,646 5.3% 1,544
- ---------------------------------------------------------------------------------------------------------------------------------
Total investment securities 283,022 6.0% 12,643 181,826 6.1% 8,235
Loans 444,754 9.8% 32,670 410,011 9.9% 30,433
- ---------------------------------------------------------------------------------------------------------------------------------
Total earning assets 727,776 8.3% 45,313 591,837 8.7% 38,668
Non-earning assets:
Premises and equipment 15,217 15,294
Other 49,801 47,582
- ---------------------------------------------------------------------------------------------------------------------------------
Total non-earning assets 65,018 62,876
- ---------------------------------------------------------------------------------------------------------------------------------
Total assets $792,794 $654,713
=================================================================================================================================
Liabilities and Shareholders' Equity
Interest-bearing deposits:
Demand $93,666 1.1% $776 $ 84,233 1.1% $692
Savings and money market 183,657 3.1% 4,229 165,720 2.8% 3,483
Time certificates 271,111 5.2% 10,482 204,846 5.4% 8,319
Other interest-bearing liabilities 426 3.8% 12 541 5.9% 24
- ---------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities 548,860 3.8% 15,499 455,340 3.7% 12,518
Non interest-bearing deposits
and other liabilities:
Demand, non interest-bearing 158,877 129,174
Other liabilities 7,579 3,181
Shareholder's equity 77,478 67,018
- ---------------------------------------------------------------------------------------------------------------------------------
Total other liabilities 243,934 199,373
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $792,794 $654,713
=================================================================================================================================
NET INTEREST INCOME $29,814 $26,150
NET INTEREST MARGIN 5.5% 5.9%
- ---------------------------------------------------------------------------------------------------------------------------------
<FN>
The net interest margin is expressed as the percentage of net interest income to average total earning assets. The average balance
on non-accrual loans is immaterial as a percentage of total loans and as such has been included in total loans. Non-taxable
securities and leases have not been calculated on a tax equivalent basis.
</FN>
</TABLE>
Results of Operations
Three months ended September 30, 1998
Compared with
Three months ended September 30, 1997
Net income for the three months ended September 30, 1998 was
$3,258,000, an increase of $509,000 or 18.5% as compared to the same 1997
period. The increase in net income for the period was due primarily to an
increase in net interest income of $1,421,000 partially offset by an increase in
non-interest expense of $713,000. The increase in net interest income is due to
growth in average total earning assets of $135,233,000 or 21.5% partially offset
by an increase in average interest bearing deposits of $86,986,000 or 18.1%
compared to the same 1997 period.
The average balance of interest earning assets during the three months
ended September 30, 1998 was $765,515,000, a 21.5% increase over the comparable
1997 period. The Company's average yield on earning assets for the three months
ended September 30, 1998 decreased to 8.2% from 8.6% in the comparable 1997
14
<PAGE>
period. Total interest income increased $1,421,000 or 15.6% for the three months
ended September 30, 1998 compared to the same 1997 period due to the increase in
average interest earning assets.
Average total deposits for the Company for the three months ended
September 30, 1998 was $741,992,000, a $119,501,000 or 19.2% increase compared
to the same period ended September 30, 1997. The Company's average cost of funds
for the three months ended September 30, 1998 was 3.7% which yielded a net
interest margin of 5.5%. This compares to an average cost of funds of 3.7% and a
net interest margin of 5.7% for the comparable 1997 period. Interest expense of
$5,353,000 for the three months ended September 30, 1998 was $840,000 or 18.6%
over the comparable 1997 period due to an increase in average interest bearing
deposits of $86,987,000.
The Company made a provision to the allowance for possible loan losses
of $345,000 in the three months ended September 30, 1998 primarily due to the
overall growth experienced within the loan portfolio. An analysis of the loan
portfolio completed by the Company indicates that the current allowance for loan
losses are adequate based on the Company's calculated provision requirements.
Total other income was $1,019,000 for the three months ended September
30, 1998, a $205,000 or 25.2% increase compared to the same period in 1997.
Service charges on deposit accounts increased by $158,000 or 25.0% over the
comparable period in 1997. Other income, which consists of mortgage banking fees
and other miscellaneous income increased $46,000 compared to the same 1997
period.
Salaries and benefits expense for the three months ended September 30,
1998 was $3,123,000, a $355,000 or 12.8% increase over the comparable 1997
period. This variance resulted primarily from an increase in overall staffing
levels to accommodate internal growth as well as regular salary increases and an
increase in the accrual for salary continuation plans.
Total other expenses, excluding salaries and benefits, for the three
months ended September 30, 1998, was $2,624,000, a $358,000 or 15.8% increase
from the comparable 1997 period. This was primarily due to an increase in legal
and professional expense of $152,000 and an increase in other expense of
$164,000.These increases were partially offset by a decrease in stationery
expense of $43,000 and a decrease in advertising expense of $40,000.
Applicable income taxes of $2,210,000 for the three months ended
September 30, 1998 were $399,000, or 22.0% more than the comparable 1997 period.
The Company's effective tax rate for the three months ended September 30, 1998
was 40.4% compared to 39.7% for the same period in 1997.
15
<PAGE>
<TABLE>
Certain information concerning the Company's average balances, yields,
and rates on average interest-earning assets and interest-bearing liabilities is
set forth in the following table. Interest yields and amounts earned include net
loan fees of $330,000 and $308,000 in 1998 and 1997, respectively.
<CAPTION>
AVERAGE BALANCE SHEETS
- ---------------------------------------------------------------------------------------------------------------------------------
1998 1997
Average Yield/ Interest Average Yield/ Interest
(Dollars in thousands) Balance Rate Amount Balance Rate Amount
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Assets
Earning assets:
Investment securities:
Taxable $227,027 6.1% $3,460 $138,959 6.3% $2,201
Non-taxable 12,362 4.4% 138 13,240 4.9% 164
Federal funds sold 65,296 5.5% 898 59,714 5.4% 812
- ---------------------------------------------------------------------------------------------------------------------------------
Total investment securities 304,685 5.9% 4,496 211,913 5.9% 3,177
Loans 460,830 9.8% 11,398 418,369 9.9% 10,456
- ---------------------------------------------------------------------------------------------------------------------------------
Total earning assets 765,515 8.2% 15,894 630,282 8.6% 13,633
Non-earning assets:
Premises and equipment 15,038 15,098
Other 52,561 52,117
- ---------------------------------------------------------------------------------------------------------------------------------
Total non-earning assets 67,600 67,215
- ---------------------------------------------------------------------------------------------------------------------------------
Total assets $833,114 $697,497
=================================================================================================================================
Liabilities and Shareholders' Equity
Interest-bearing deposits:
Demand $ 97,608 1.1% $ 267 $ 87,629 1.4% $ 301
Savings and money market 190,451 3.6% 1,725 171,334 2.7% 1,159
Time certificates 279,281 4.8% 3,354 221,391 5.5% 3,050
Other interest-bearing liabilities 743 3.7% 7 382 3.1% 3
- ---------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities 568,083 3.7% 5,353 480,736 3.7% 4,513
Non interest-bearing deposits
And other liabilities:
Demand, non interest-bearing 174,652 142,137
Other liabilities 8,395 5,038
Shareholder's equity 81,984 69,586
- ---------------------------------------------------------------------------------------------------------------------------------
Total other liabilities 265,031 216,761
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $833,114 $697,497
=================================================================================================================================
NET INTEREST INCOME $10,541 $ 9,120
NET INTEREST MARGIN 5.5% 5.7%
- ---------------------------------------------------------------------------------------------------------------------------------
<FN>
The net interest margin is expressed as the percentage of net interest income to average total earning assets. The average balance
on non-accrual loans is immaterial as a percentage of total loans and as such has been included in total loans. Non-taxable
securities and leases have not been calculated on a tax equivalent basis.
</FN>
</TABLE>
Year 2000
During 1997, the Company began the implementation of its Year 2000
Plan. The Company is utilizing both internal and external resources to identify
correct or reprogram and test the systems for year 2000 readiness. Since the
Company does not utilize any proprietary software, there will be no
reprogramming costs for any systems that are deemed critical. The Company uses
third party software to run and operate all mainframe applications and the
testing of most of those systems has been performed by the software provider and
the Company is in the process of verifying the results of that testing. Based on
data received so far, the Company anticipates spending approximately $300,000
throughout 1998 and 1999 on the Year 2000 problem which includes personal
computer upgrades.
During the third quarter, the Company's loan officers completed their second
review of the loan portfolio, which included all large loan customers to
determine their Year 2000 state of readiness. Large credit customers, comprising
over 60% of the Company's outstanding loans, cooperate with the Company's loan
officers in assessing their operating risks associated with the Year 2000. At
this time, the Company is pleased to report that the majority of large loan
customers are considered to be at a low risk to the Year 2000 computer problem.
16
<PAGE>
As a financial institution, the Company is reliant on the rapid transfer of
funds electronically to and from a wide network of customers, including but not
limited to other financial institutions all over the United States. Failure in
the payment system in whole or in part would delay the transfer of funds,
largely affecting the Company's ability to operate effectively. Contingency
plans for continuing operations have been developed for a variety of disasters
under guidelines established by the Federal Financial Institutions Examination
Council. Examples of contingency planning include contracting with a third party
to provide mainframe data processing services from a remote location as well as
maintaining multiple offsite data tape storage locations.
Liquidity Management
Liquidity represents the ability of the Company to meet the
requirements of customer borrowing needs as well as fluctuations in deposit
flows.
The Company manages its liquidity primarily by maintaining investments
in overnight fed funds, money market mutual funds, available-for-sale
securities, and by maintaining lines of credit with correspondent banks. At
September 30, 1998, the total of cash and due from banks, overnight fed funds,
money market mutual funds, and available-for-sale securities represented
$353,642,000 or 46.7% of total deposits compared to $299,503,000 or 43.8% at
year end 1997. This increase in liquid assets for the nine months ended
September 30, 1998 resulted primarily from an increase in deposits which were
invested in fed funds sold and available-for-sale investment securities.
In the opinion of management, there are sufficient resources to meet
the liquidity needs of the Company at present and projected future levels.
Capital Resources
Capital management is a continuous process of providing adequate
capital for current needs and anticipated future growth. Capital serves as a
source of funds for the acquisition of fixed and other assets and protects
depositors against potential losses. As the Company's assets increase, so do its
capital requirements.
The Company and the Subsidiary Banks are subject to Federal Reserve
Board guidelines and regulations of the Comptroller of the Currency
("Comptroller"), respectively, governing capital adequacy. The Federal Reserve
Board has established final risk-based and leverage capital guidelines for bank
holding companies which are the same as the Comptroller's capital regulations
for national banks.
The Federal Reserve Board capital guidelines for bank holding companies
and the Comptroller's regulations for national banks set total capital
requirements and define capital in terms of "core capital elements" (comprising
Tier 1 capital) and "supplemental capital elements" (comprising Tier 2 capital).
Tier 1 capital is generally defined as the sum of the core capital elements less
goodwill. The following items are defined as core capital elements: common
shareholders' equity, qualifying noncumulative perpetual preferred stock, and
minority interests in the equity accounts of consolidated subsidiaries.
Supplementary capital elements include: allowance for loan and lease losses
(which cannot exceed 1.25% of an institution's risk weighted assets), perpetual
preferred stock not qualifying as core capital, hybrid capital instruments and
mandatory convertible debt instruments, and term subordinated debt and
intermediate-term preferred stock. The maximum amount of supplemental capital
elements which qualifies as Tier 2 capital is limited to 100% of Tier 1 capital,
net of goodwill.
Risk-based capital ratios are calculated with reference to
risk-weighted assets, including both on and off-balance sheet exposures, which
are multiplied by certain risk weights assigned by the Federal Reserve Board to
those assets. Both bank holding companies and national banks are required to
maintain a minimum ratio of qualifying total capital to risk-weighted assets of
8%, at least one-half of which must be in the form of Tier 1 capital. There are
presently four risk-weight categories: 0% for cash and unconditionally
guaranteed government securities; 20% for conditionally guaranteed government
securities; 50% for performing residential real estate loans secured by first
liens; and 100% for commercial loans.
The Federal Reserve Board and the Comptroller also have established a
minimum leverage ratio of 3% Tier I capital to total assets for bank holding
companies and national banks that have received the highest composite regulatory
rating and are not anticipating or experiencing any significant growth. All
other
17
<PAGE>
institutions will be required to maintain a leverage ratio of at least 100 to
200 basis points above the 3% minimum.
<TABLE>
The following tables show the Company's and the Subsidiary Banks'
risk-based and leverage capital ratios as of September 30, 1998. The Company's
capital ratios significantly exceeded the minimum capital levels required by
current federal regulations. Management believes that the Company will continue
to meet the respective minimum capital requirements in the foreseeable future.
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Risk Based Capital Ratio
As of September 30, 1998
- -----------------------------------------------------------------------------------------------------------------------------------
Company South Valley First National
(Dollars in thousands) Amount Ratio Amount Ratio Amount Ratio
- ---------------------------------------- --------------- ----------- ------------- -------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Tier 1 capital $ 79,157 14.01% $ 17,967 10.90% $ 48,325 12.44%
Tier 1 capital minimum
requirement 22,596 4.00% 6,593 4.00% 15,539 4.00%
======================================== =============== =========== ============= ============== ============ =============
Excess 56,561 10.01% 11,374 6.90% 32,786 8.44%
======================================== =============== =========== ============= ============== ============ =============
Total capital 83,802 14.83% 19,764 11.99% 51,147 13.17%
Total capital minimum
requirement 45,192 8.00% 13,185 8.00% 31,078 8.00%
- ---------------------------------------- --------------- ----------- ------------- -------------- ------------ -------------
Excess 38,610 6.83% 6,579 3.99% 20,069 5.17%
======================================== =============== =========== ============= ============== ============ =============
Risk-adjusted assets $ 564,894 $164,817 $388,471
======================================== =============== =========== ============= ============== ============ =============
- -----------------------------------------------------------------------------------------------------------------------------------
Leverage Capital Ratio
As of September 30, 1998
- -----------------------------------------------------------------------------------------------------------------------------------
Company South Valley First National
(Dollars in thousands) Amount Ratio Amount Ratio Amount Ratio
- ----------------------------------------- ------------- ------------ -------------- -------------- ------------ -----------
Tier 1 capital to quarterly average
total assets (leverage ratio) $ 79,157 9.53% $ 17,967 7.64% $ 48,325 8.28%
Minimum leverage requirement 24,909 to 3.00% to 7,053 to 3.00% to 17,514 to 3.00% to
41,515 5.00% 11,755 5.00% 29,191 5.00%
- ----------------------------------------- ------------- ------------ -------------- -------------- ------------ -----------
Excess 37,642 to 4.53% to 6,212 to 2.64% to 19,134 to 3.28% to
54,248 6.53% 10,914 4.64% 30,811 5.28%
========================================= ============= ============ ============== ============== ============ ===========
Total quarterly average assets $ 830,293 $235,094 $583,812
========================================= ============= ============ ============== ============== ============ ===========
</TABLE>
Federal banking laws impose restrictions upon the amount of dividends
the Subsidiary Banks may declare to the Company. Federal laws also impose
restrictions upon the amount of loans or advances that the Subsidiary Banks may
extend to the Company. In management's opinion, these do not affect the ability
of the Company to meet its cash obligations.
ITEM 3
Quantitative and Qualitative Disclosures about Market Risk
The Company's success is largely dependent upon its ability to manage interest
rate risk. Interest rate risk can be defined as the exposure of the Company's
net interest income to adverse movements in interest rates. Although the Company
manages other risks, as in credit and liquidity risk, in the normal course of
its business, management considers interest rate risk to be its most significant
market risk and could potentially have the largest material effect on the
Company's financial condition. The primary objective of the asset/liability
management process is to measure the effect of changing interest rates on net
interest income and market value and adjust the balance sheet (if necessary) to
minimize the inherent risk and maximize income. The Company's exposure to market
risk and interest rate risk is reviewed on a regular basis by the
Asset/Liability Committee. Tools used by management include a modified GAP
report and an asset/liability simulation model. Management believes that the
Company's market risk and interest rate risk profiles are within reasonable
18
<PAGE>
tolerances at this time. No significant changes to the market risk or interest
rate risk of the Company have occurred since December 31, 1997.
A derivative financial instrument includes futures, forward contracts,
interest rate swaps, option contracts, and other financial instruments with
similar characteristics. The Company currently does not enter into futures,
forwards, swaps, or options. The Company is however, party to financial
instruments with off-balance sheet risk in the normal course of business to meet
the financing needs of its customers. These instruments include commitments to
extend credit and standby letters of credit. These instruments involve to
varying degrees, elements of credit and interest rate risk in excess of the
amount recognized in the consolidated statement of condition. Commitments to
extend credit are agreements to lend to a customer as long as there is no
violation of any condition established in the contract. Commitments generally
have fixed expiration dates and may require collateral from the borrower if
deemed necessary by the Company. Standby letters of credit are conditional
commitments issued by the Subsidiary Banks to guarantee the performance of a
customer to a third party up to a stipulated amount and with specified terms and
conditions. Commitments to extend credit and standby letters of credit are not
recorded on the Company's consolidated balance sheet until the instrument is
exercised.
19
<PAGE>
<TABLE>
PART II -- OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) INDEX TO EXHIBITS
<CAPTION>
Exhibit Sequentially
Number Exhibit Numbered Page
- ------ ------- -------------
<S> <C> <C>
2.1 Agreement and Plan of Reorganization between Santa Barbara (*)
Bancorp and Pacific Capital Bancorp dated July 20, 1998 15/
3.1 Articles of incorporation of the Company as amended 1/ (*)
3.2 Bylaws of Company as amended 2/ (*)
10.1 Lease -- 601 Abrego Street, Monterey, Premises 3/ (*)
10.2 Lease for 1001 South Main Street, Salinas, Banking office 2/ (*)
10.3 Lease dated December 15, 1988 by and between the Bank (*)
and James L. Gattis for 307 Main Street, Salinas Old Town Office. 2/
10.4 Lease dated May 1, 1985 by and between the Bank (*)
and Pacific Capital Bancorp. 4/
10.5 Pacific Capital Bancorp Employee Stock Ownership (*)
Plan and Trust Agreement. 5/
10.6 Master Equipment Lease Agreement between Bank and (*)
Parker North American Corporation. 5/
10.7 Lease dated September 22, 1986 between (*)
Bank and The Saunders Company. 5/
<FN>
*/ Not Applicable.
- --------------------
1/ Filed as Exhibits 3.1, 10.21 and 10.32, respectively, to the Company's Annual
Report on Form 10-K (File No. 0-13528) for the fiscal year ended December 31,
1988, and are incorporated herein by reference.
2/ Filed as Exhibits 3.2 and 10.17, respectively, to the Company's Annual Report
on Form 10-K (File No. 2-87513) for the fiscal year ended December 31, 1984,
which are incorporated by reference.
3/ Filed as Exhibit to the Company's Registration Statement on Form S-18
(Registration No. 2-87513), which is incorporated by reference.
4/ Filed as Exhibit 10.20 to the Company's Annual Report on Form 10-K (File No.
0-13528) for the fiscal year ended December 31, 1985, which is incorporated by
reference.
5/ Filed as Exhibits 10.24 through 10.26, respectively, to Company's Annual
Report on Form 10-K (File No. 0-13528) for the fiscal year ended December 31,
1986, which are incorporated by reference.
20
<PAGE>
Exhibit Sequentially
Number Exhibit Numbered Page
- ------ ------- -------------
10.9 Lease dated January 24, 1989 by and between First National Bank (*)
of Monterey County and Stanley R. Haynes. 6/
10.13 Amendment No. One to Pacific Capital Bancorp (*)
Employee Stock Ownership Plan. 2/
10.14 Amendment No. Two to Pacific Capital Bancorp (*)
Employee Stock Ownership Plan. 7/
10.15 Amendment No. Three to Pacific Capital Bancorp (*)
Employee Stock Ownership Plan. 7/
10.16 Lease dated August 10, 1990 by and between the (*)
Trustees of the Stanley Family Trust and Pacific
Capital Bancorp for Carmel Office. 7/
10.17 Assignment of Lease dated November 1, 1990 by and (*)
between Pacific Capital Bancorp and First National
Bank of Monterey-County for Carmel Office. 7/
10.18 Lease dated November 12, 1990 by and between (*)
First National Bank of Monterey County and Carmel
Monterey Travel for Premises located at 601 Abrego
Street, Monterey, California. 7/
10.19 Prunetree Shopping Center Lease dated June 28, 1988 (*)
by and between Dennis R. Keith and Pajaro Valley Bancorporation. 7/
- --------------------
6/ Filed as Exhibits 10.20 through 10.24, respectively, to the Company's Annual
Report on Form 10-K (File No. 0-13528) for the fiscal year ended December 31,
1989, which are incorporated by reference.
7/ Filed as Exhibits 10.25 through 10.32 to the Company's Annual Report on Form
10-K (File No. 0-13528) for the fiscal year ended December 31, 1990, which are
incorporated by reference.
21
<PAGE>
Exhibit Sequentially
Number Exhibit Numbered Page
- ------ ------- -------------
10.20 Lease dated June 21, 1990 by and between Saucito (*)
Land Co. and First National Bank of Monterey County. 7/
10.22 Amendment No. Four to Pacific Capital Bancorp (*)
Employee Stock Ownership Plan. 8/
10.23 Amendment dated May 20, 1991 to Lease dated (*)
December 15, 1988 by and between the Bank and
James L. Gattis for 307 Main Street, Salinas Old Town Office. 8/
10.24 Pacific Capital Bancorp Directors' Stock Option Plan (*)
and Form of Stock Option Agreement. 8/
10.26 Pacific Capital Bancorp 1984 Stock Option Plan (*)
and Forms of Agreements as amended to date. 8/
10.30 Business Recovery Services Agreement dated September 30, 1991 (*)
by and between Bank and J.D.B. & Associates, Inc. 8/
10.31 Consolidated Agreement dated December 17, 1991 (*)
by and between Bank and Unisys with Equipment Sale Agreement,
Software License Agreement and Product License Agreement by
and between Bank and Information Technology, Inc. 8/
10.32 Fidelity and Deposit Company of Maryland Directors and Officers (*)
Liability Insurance Policy including Bank Reimbursement. 8/
10.33 Fidelity and Deposit Company of Maryland (*)
Financial Institution Bond. 8/
10.34 Lease dated January 28, 1993 by and between J.W. and R.W. (*)
McClellan, Partners, and First National Bank of Central California. 9/
10.35 Exercise of Lease Option as of September 19, 1992 by and between (*)
First National Bank of Central California and James L. Gattis. 9/
- --------------------
8/ Filed as Exhibits 10.34 through 10.35 to the Company's Annual Report on Form
10-K (File No. 0-13528) for the fiscal year ended December 31, 1991, which are
incorporated by reference.
9/ Filed as exhibits to the Company's Annual Report on Form 10-K (File No.
0-13528) for the fiscal year ended December 31, 1993, which are incorporated by
reference.
22
<PAGE>
Exhibit Sequentially
Number Exhibit Numbered Page
- ------ ------- -------------
10.37 Lease dated November 18, 1993 by and between Hazel Graven (*)
and Vines Stewart and First National Bank of Central
California. 10/
10.38 Software License Agreement for Platform Transfer Module and (*)
Interface dated September 15, 1993 by and between First National
Bank of Central California and Information Technology, Inc. 10/
10.39 Equipment Sale Agreement dated December 16, 1993 by and (*)
between First National Bank of Central California and
Information Technology, Inc. 10/
10.42 Consolidated Agreement for the purchase of computer hardware (*)
dated December 20, 1993 by and between First National Bank of
Central California and Unisys Corporation. 10/
10.46 Amended Pacific Capital Bancorp 1994 Stock Option Plan and Form of (*)
Incentive and Non-Qualified Stock Option Agreements. 9/
10.47 Amendment No. Five to Pacific Capital Bancorp Employee (*)
Stock Ownership Plan and Trust. 10/
10.48 Pacific Capital Bancorp 401(k) Profit Sharing Plan. 10/ (*)
10.49 Equipment Sale Agreement dated March 22, 1995, by and between (*)
First National Bank of Central California and
Information Technology, Inc. 11/
10.50 Equipment Sale Agreement dated February 2, 1996, by and between (*)
First National Bank of Central California and
Information Technology, Inc. 11/
10.52 Employee Welfare Benefit Plan Agreement dated January 1, 1995, (*)
between Pacific Capital Bancorp and
Great-West Life & Annuity Insurance Co. 11/
10.53 Lease Agreement dated October 29, 1996 by and between James L.
(*) Gattis and Pacific Capital Bancorp for property located at
517 S. Main Street, Salinas 12/
- --------------------
9/ Filed as Exhibits to the Company's Registration Statement on Form S-8 (File
No. 33-83848) as filed on September 8, 1994, and Amendment No. 1 to Form S-8 as
filed on November 15, 1994.
10/ Filed as exhibits to the Company's Annual Report on Form 10-K (File No.
0-13528) for the fiscal year ended December 31, 1994, which are incorporated by
reference.
11/ Filed as exhibits to the Company's Annual Report on Form 10-K (File No.
0-13528) for the fiscal year ended December 31, 1995, which are incorporated by
reference.
23
<PAGE>
Exhibit Sequentially
Number Exhibit Numbered Page
- ------ ------- -------------
10.57 Employment Agreement dated November 20, 1996 between South (*)
Valley National Bank and Brad L. Smith /12
10.58 Employment Agreement dated August 26, 1997 between Pacific (*)
Capital Bancorp and Clayton C. Larson /13
10.59 Employment Agreement dated August 26, 1997 between Pacific (*)
Capital Bancorp and D. Vernon Horton /13
10.60 Employment Agreement dated August 26, 1997 between Pacific (*)
Capital Bancorp and Dennis A. DeCius /13
10.61 Employment Agreement dated August 26, 1997 between Pacific (*)
Capital Bancorp and Dale R. Diederick /13
10.62 Amended and Restated Executive Salary Continuation Agreement (*)
dated September 23, 1997 between Pacific Capital Bancorp and
Clayton C. Larson /13
10.63 Amended and Restated Executive Salary Continuation Agreement (*)
dated September 23, 1997 between Pacific Capital Bancorp and
D. Vernon Horton /13
10.64 Amended and Restated Executive Salary Continuation Agreement (*)
dated September 23, 1997 between Pacific Capital Bancorp and
Dennis A. DeCius /13
10.65 Amended and Restated Executive Salary Continuation Agreement (*)
dated September 23, 1997 between Pacific Capital Bancorp and
Dale R. Diederick /13
10.67 Executive Salary Continuation Agreement between South Valley (*)
National Bank and Brad L. Smith dated March 24, 1998 /14
27. Financial Data Schedule 26
(b) REPORTS ON FORM 8-K
No reports were filed on Form 8-K for the quarter ended September 30, 1998
- --------------------
12/ Filed as exhibits to the Company's Annual Report on Form 10-K (File No.
0-13528) for the fiscal year ended December 31, 1996, which are incorporated by
reference.
13/ Filed as exhibits to the Company's Quarterly Report on Form 10-Q (File No.
0-13528) for the period ended September 30, 1997 which are incorporated by
reference
14/ Filed as exhibits to the Company's Quarterly Report on Form 10-Q (File No.
0-13528) for the period ended March 31, 1998 which are incorporated by reference
15/ Filed as exhibits to the Company's Quarterly Report on Form 10-Q (File No.
0-13528) for the period ended June 30, 1998 which are incorporated by reference
</FN>
</TABLE>
24
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Pacific Capital Bancorp
Date November 13, 1998 /S/ D. Vernon Horton
----------------- -----------------------
D. Vernon Horton
Chairman of the Board
Chief Executive Officer
Date November 13, 1998 /S/ Dennis A. DeCius
----------------- ------------------------
Dennis A. DeCius
Executive Vice President
Chief Financial Officer
25
<TABLE> <S> <C>
<ARTICLE> 9
<CIK> 0000731805
<NAME> Pacific Capital Bancorp
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1998
<PERIOD-START> JAN-01-1997 JAN-01-1998
<PERIOD-END> SEP-30-1997 SEP-30-1998
<CASH> 47,754 45,907
<INT-BEARING-DEPOSITS> 473 675
<FED-FUNDS-SOLD> 74,659 73,151
<TRADING-ASSETS> 0 0
<INVESTMENTS-HELD-FOR-SALE> 153,897 234,584
<INVESTMENTS-CARRYING> 7,457 5,272
<INVESTMENTS-MARKET> 7,469 5,309
<LOANS> 416,067 467,465
<ALLOWANCE> 4,168 4,646
<TOTAL-ASSETS> 723,331 852,592
<DEPOSITS> 646,796 756,512
<SHORT-TERM> 0 0
<LIABILITIES-OTHER> 6,292 11,849
<LONG-TERM> 0 0
0 0
0 0
<COMMON> 49,840 62,201
<OTHER-SE> 20,403 22,030
<TOTAL-LIABILITIES-AND-EQUITY> 723,331 852,592
<INTEREST-LOAN> 30,452 32,670
<INTEREST-INVEST> 8,216 12,643
<INTEREST-OTHER> 0 0
<INTEREST-TOTAL> 38,668 45,313
<INTEREST-DEPOSIT> 12,494 15,487
<INTEREST-EXPENSE> 12,518 15,499
<INTEREST-INCOME-NET> 26,150 29,814
<LOAN-LOSSES> 910 1,035
<SECURITIES-GAINS> 11 (12)
<EXPENSE-OTHER> 14,957 16,745
<INCOME-PRETAX> 12,700 14,897
<INCOME-PRE-EXTRAORDINARY> 12,700 14,897
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 7,672 8,913
<EPS-PRIMARY> 1.79 2.04
<EPS-DILUTED> 1.72 1.97
<YIELD-ACTUAL> 8.7 8.3
<LOANS-NON> 2,080 903
<LOANS-PAST> 46 287
<LOANS-TROUBLED> 246 25
<LOANS-PROBLEM> 0 0
<ALLOWANCE-OPEN> 3,672 4,266
<CHARGE-OFFS> 576 826
<RECOVERIES> 162 171
<ALLOWANCE-CLOSE> 4,168 4,646
<ALLOWANCE-DOMESTIC> 4,168 4,646
<ALLOWANCE-FOREIGN> 0 0
<ALLOWANCE-UNALLOCATED> 0 0
</TABLE>
