HOEFER & ARNETT
INCORPORATED
INVESTMENT BANKERS
353 SACRAMENTO STREET, TENTH FLOOR
SAN FRANCISCO, CALIFORNIA 94111
(415)362-7111
December 14, 1994
Board of Directors
SDNB Financial Corp.
1420 Kettner Blvd.
San Diego, CA 92101
Dear Members of the Board:
You have requested our opinion as to the fairness to the
shareholders of SDNB Financial Corp. ("SDNB" or the "Company")
from a financial point of view, of the terms and conditions of
the proposed private placement and rights offering (collectively,
the "Offering") of common stock by the Company as stated in the
Proxy Statement (the "Proxy Statement"), attached hereto as
Exhibit A and incorporated herein by this reference.
Qualifications of the Appraiser
Hoefer & Arnett, Incorporated ("H&A") conducts business in
investment banking and securities brokerage specific to
independent financial institutions. The analysis of securities
and of mergers, acquisitions, tender offers and other corporate
transactions for the purpose of (i) providing transactional
advice and assistance, (ii) investment research, (iii) capital
financing activities, and (iv) rendering opinions concerning
fairness, is a normal part of this business. H&A currently
conducts dealer markets in the shares of more than 100
independent California financial institutions, but not SDNB. In
addition, the principals of H&A have substantially broader
experience in investment and commercial banking, some of which
may be deemed applicable to this evaluation and opinion.
Procedure
In connection with our opinion, we have, among other things: (i)
reviewed the Proxy Statement (Exhibit A) including the terms and
conditions of the Offering; (ii) reviewed certain publicly
available financial and other data with respect to SDNB,
including the financial statements for recent years and interim
periods to date and certain other relevant financial and
operating data relating to the Company made available to us from
published sources and from internal records of the Company
including the 10-Q for the most recent quarter ended September
30, 1994 and asset quality migration analysis dated September 30,
1994; (iii) compared the Company from a financial point of view
with certain other companies in the financial services industry
which we deemed relevant; (iv) considered the financial terms and
conditions, to the extent publicly available, of selected common
stock offerings of financial institutions, which we deemed to be
comparable, in whole or in part, to the Offering and the Company;
(v) reviewed and discussed with representatives of the management
of the Company certain information of a business and financial
nature regarding the Company, furnished to us by them, including
the related assumptions of the Company; (vi) discussed the Proxy
Statement with the Company's counsel and (vii) performed such
other analyses and examinations as we have deemed appropriate.
Hoefner & Arnett also conducted its own assessment of general
economic, market and financial conditions.
In connection with our review, we have not independently verified
any of the foregoing information, have relied on all such
information and assumed that all such information is complete and
accurate in all material respects. We have also assumed that
there has been no material change in the Company's assets,
financial condition, results of operations, business or prospects
since the date of the last financial statements made available to
us. We have relied on advice of counsel to the Company as to all
legal matters with respect to the Company and the offering
document. In addition, we have not made an independent
evaluation, appraisal or physical inspection of the assets or
individual properties of the Company. Further, our opinion is
based on economic, monetary and market conditions existing as of
the date hereof.
Based upon the foregoing, and reliance thereon, it is our opinion
that, as of the date hereof, the consideration to be received
pursuant to the Offering and the terms and conditions that exist
as of the date hereof, taken as a whole, are fair from a
financial point of view to the shareholders of SDNB Financial
Corp. Our opinion should not be construed in any way as a
valuation of the Company nor as a recommendation to participate
in the Offering. Further any material changes in the terms and
conditions of the proposed Offering prior to closing would render
this opinion invalid.
We hereby consent to the inclusion of this opinion as an exhibit
to the Proxy Statement and to the reference to our firm under the
caption "PROPOSAL REGARDING STOCK ISSUANCES AND OTHER CAPITAL
TRANSACTIONS".
Very truly yours,
HOEFER & ARNETT, INCORPORATED