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 June 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 August 12, 1998
----- ---------------
Common stock, no par value 4,504,083 Shares
This report contains a total of 25 pages.
-1-
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 9 - 17
ITEM 3
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK 17
PART II - OTHER INFORMATION
ITEM 4
SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS 19
ITEM 6
EXHIBITS AND REPORTS ON FORM 8-K 20
SIGNATURES 25
-2-
PART 1
ITEM 1 - FINANCIAL INFORMATION
PACIFIC CAPITAL BANCORP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
June 30, December 31,
1998 1997
--------------------------------
Assets
Cash and due from banks $ 51,303 $ 49,982
Federal funds sold and other short term investments 52,393 28,537
--------------------------------
Total cash and equivalents 103,696 78,519
Investment securities:
Available-for-sale securities, at fair value 226,976 220,984
Held-to-maturity securities, at amortized cost
(fair value of $5,667 and $7,347, respectively) 5,644 7,347
Loans held for sale 12,971 10,523
Total loans held for investment 438,602 419,293
Less allowance for possible loan losses (4,544) (4,266)
--------------------------------
Net loans 434,058 415,027
Premises and equipment, net 15,161 15,331
Accrued interest receivable and other, net 17,054 16,988
--------------------------------
Total assets $ 815,560 $ 764,719
================================
Liabilities and shareholders' equity
Deposits:
Demand, non-interest bearing $ 168,550 $ 174,649
Demand, interest bearing 95,309 97,322
Savings and money market 184,947 173,151
Time certificates 281,519 238,276
--------------------------------
Total deposits 730,325 683,398
Accrued interest payable and other liabilities 9,171 8,763
--------------------------------
Total liabilities 739,496 692,161
Shareholders' equity:
Preferred stock; 20,000,000 shares authorized and unissued -- --
Common stock, no par value; 20,000,000 shares authorized;
4,322,687 and 4,294,403 shares issued and outstanding at
June 30, 1998 and at December 31, 1997, respectively 58,444 58,434
Retained earnings 16,769 12,852
Accumulated other comprehensive income 851 1,272
--------------------------------
Total shareholders' equity 76,064 72,558
--------------------------------
Total liabilities and shareholders' equity $ 815,560 $ 764,719
================================
<FN>
See accompanying notes to unaudited consolidated financial statements.
</FN>
-3-
PACIFIC CAPITAL BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
Six months Six months
ended ended
June 30, 1998 June 30, 1997
-------------------------------------
Interest income:
Interest and fees on loans $ 21,271 $ 19,996
Interest on fed funds sold 1,298 732
Interest on investment securities 6,850 4,307
-----------------------------------
Total interest income 29,419 25,035
-----------------------------------
Interest expense:
Interest on deposits 10,141 7,984
Other 5 21
-----------------------------------
Total interest expense 10,146 8,005
-----------------------------------
Net interest income 19,273 17,030
Provision for possible loan losses 690 570
-----------------------------------
Net interest income after provision for possible loan losses 18,583 16,460
-----------------------------------
Other income:
Service charges 1,480 1,240
Gain on sale of loans 11 11
Net gain (loss) on securities transactions (14) 11
Other 367 342
-----------------------------------
Total other income 1,844 1,604
-----------------------------------
Other expenses:
Salaries and benefits 6,231 5,443
Occupancy 1,201 1,124
Equipment 972 828
Advertising and promotion 214 343
Stationary and supplies 295 426
Legal and professional fees 693 421
Regulatory assessments 125 107
Other operating 1,267 1,232
-----------------------------------
Total other expenses 10,998 9,924
Earnings before income taxes 9,429 8,140
Income taxes 3,774 3,217
-----------------------------------
Net income $ 5,655 $ 4,923
===================================
Basic earnings per share $ 1.31 $ 1.15
===================================
Diluted earnings per share $ 1.26 $ 1.11
===================================
Weighted average shares outstanding 4,309,558 4,294,459
Dilutive effect of stock options 183,881 148,347
-----------------------------------
Total weighted average diluted shares outstanding 4,493,439 4,442,806
===================================
<FN>
See accompanying notes to unaudited consolidated financial statements.
</FN>
-4-
PACIFIC CAPITAL BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
Three months Three months
ended ended
June 30, 1998 June 30, 1997
-------------------------------------
Interest income:
Interest and fees on loans $ 10,902 $ 10,465
Interest on fed funds sold 663 423
Interest on investment securities 3,329 2,161
-----------------------------------
Total interest income 14,894 13,049
-----------------------------------
Interest expense:
Interest on deposits 5,177 4,129
Other 2 14
-----------------------------------
Total interest expense 5,179 4,143
-----------------------------------
Net interest income 9,715 8,906
Provision for possible loan losses 345 285
-----------------------------------
Net interest income after provision for possible loan losses 9,370 8,621
-----------------------------------
Other income:
Service charges 729 620
Gain on sale of loans 6 5
Net gain (loss) on securities transactions (18) 11
Other 186 163
-----------------------------------
Total other income 903 799
-----------------------------------
Other expenses:
Salaries and benefits 3,086 2,696
Occupancy 594 560
Equipment 481 437
Advertising and promotion 169 191
Stationary and supplies 135 194
Legal and professional fees 365 217
Regulatory assessments 55 53
Other operating 599 616
-----------------------------------
Total other expenses 5,484 4,964
Earnings before income taxes 4,789 4,456
Income taxes 1,926 1,775
-----------------------------------
Net income $ 2,863 $ 2,681
===================================
Basic earnings per share $ 0.66 $ 0.62
===================================
Diluted earnings per share $ 0.64 $ 0.60
===================================
Weighted average shares outstanding 4,315,432 4,295,988
Dilutive effect of stock options 191,148 147,939
-----------------------------------
Total weighted average diluted shares outstanding 4,506,580 4,443,927
===================================
<FN>
See accompanying notes to unaudited consolidated financial statements.
</FN>
-5-
PACIFIC CAPITAL BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
Six months Six months
ended ended
June 30, 1998 June 30, 1997
------------------------------------
Cash flows from operating activities:
Net income $ 5,655 $ 4,923
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation and amortization 779 725
Provision for possible loan losses 690 570
(Gain) (loss) on sale of investment securities, net 14 (11)
Net originations of loans available for sale (2,448) (2,736)
Gain on sale of loans (11) (11)
Amortization of loan origination fees, net (95) (90)
Change in accrued interest receivable and other assets (487) (992)
Change in accrued interest payable and other liabilities 419 (3,584)
--------------------------------
Net cash provided by (used in) operating activities 4,516 (1,206)
--------------------------------
Investing activities:
Net increase in loans (19,742) (25,481)
Recoveries on loans 116 113
Maturities of investment securities 31,974 8,516
Purchases of investment securities (55,408) (9,029)
Proceeds from sale of available-for-sale securities 19,131 --
Capital expenditures, net (609) (624)
--------------------------------
Net cash used in investing activities (24,538) (26,505)
--------------------------------
Financing activities:
Net increase in deposits 46,927 60,412
Cash paid for retirement of stock (875) --
Proceeds from exercise of options 885 387
Cash paid for dividends (1,738) (1,315)
--------------------------------
Net cash provided by financing activities 45,199 59,484
--------------------------------
Net increase in cash and equivalents 25,177 31,773
Cash and equivalents at beginning of period 78,519 76,245
================================
Cash and equivalents at end of period $ 103,696 $ 108,018
================================
Supplemental disclosures of cash flow information:
Cash paid during the period
Interest $ 9,996 $ 8,137
Income taxes 2,785 2,450
<FN>
See accompanying notes to unaudited consolidated financial statements.
</FN>
-6-
PACIFIC CAPITAL BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
(IN THOUSANDS)
Six Months Ended
June 30, June 30,
1998 1997
-------------------------
Net income $ 5,655 $ 4,923
Net change in unrealized gain on available-for-sale securities (413) (236)
Realized gain (loss) on sale of available-for-sale securities, net of taxes (8) 7
-------------------------
Total comprehensive income for the period $ 5,234 $ 4,694
=========================
Three Months Ended
June 30, June 30,
1998 1997
-------------------------
Net income $ 2,863 $ 2,681
Net change in unrealized gain (loss) on available-for-sale securities (372) 965
Realized gain (loss) on sale of available-for-sale securities, net of taxes (11) 7
-------------------------
Total comprehensive income for the period $ 2,480 $ 3,653
=========================
-7-
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 June
30, 1998 and December 31, 1997, the results of its operations,
statements of cash flows, and comprehensive income for the
periods ended June 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 June 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. The Company will begin evaluating the impact
of its adoption on the Company's consolidated financial
statements.
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
June 30, 1998 amounted to approximately $8,648,000.
Note 4 - Commitments
The Company had outstanding standby letters of credit of
approximately $4,786,000 at June 30, 1998 .
-8-
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 and April 28, the Company declared
a $0.20 per share cash dividend to shareholders of record on
March 16 and June 15, payable on March 31 and June 30, 1998,
respectively.
Note 6 - Taxes
As of June 30, 1998, the Company had a deferred tax asset of
approximately $2,399,000. 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 Company 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.
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 six months ended June 30, 1998 was $5,655,000 or
$1.26 diluted earnings per share compared to $4,923,000 or $1.11 diluted
earnings per share during the comparable period in 1997. This represents an
earnings per share increase of 13.6% over 1997. The increase in net income is
due mainly to a $2,243,000 increase in net interest income. The increase in net
interest income is due to growth in average total earning assets of $136,945,000
or 24.0% partially offset by an increase in average interest bearing deposits of
$96,953,000 as compared to the comparable 1997 period.
Outstanding loans were $438,602,000 at June 30, 1998 compared to
$419,293,000 at December 31, 1997, a $19,309,000 or 4.6% increase. Federal Funds
Sold and Investment Securities at June 30, 1998 were $285,013,000, a $28,145,000
or 11.0% 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 June 30, 1998 were $730,325,000
compared to $683,398,000 at December 31, 1997, a $46,927,000 or 6.9% increase.
Non-interest bearing demand deposits decreased $6,099,000, interest bearing
demand deposits decreased $2,013,000, while savings and money market deposit
accounts increased $11,796,000 and certificates of deposit increased by
$43,243,000 during the first six 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.
-9-
Loans
Outstanding total loans averaged $436,622,000 for the six months ended
June 30, 1998 compared to $404,858,000 for the comparable period in 1997, an
increase of $31,764,000, or 7.9%. 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 June 30, 1998 , December
31, 1997, and June 30, 1997 is summarized in the following table.
Non-performing Loans
(Dollars in Thousands)
June 30, December 31, June 30,
1998 1997 1997
------ ------ ------
Accruing loans past due 90 days or more:
Commercial $ 15 $ 26 $ 17
Consumer -- 17 32
Real Estate -- -- --
------ ------ ------
Total $ 15 $ 43 $ 49
Nonaccrual loans:
Commercial 490 1,278 821
Consumer 250 106 130
Real Estate 200 766 831
------ ------ ------
Total $ 940 $2,150 $1,782
Total Non-performing
Loans $ 955 $2,193 $1,831
====== ====== ======
Non-performing Loans
To Total Loans 0.22% 0.52% 0.44%
Allowance For Possible
Loan Losses To Total
Non-performing Loans 475.81% 194.53% 222.62%
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
-10-
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.
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.
The table set forth below summarizes the actual loan losses and
provision for possible losses as of and for the periods ended June 30, 1998 ,
December 31, 1997, and June 30, 1997:
Loan Charge-Off/Recovery Activity
(Dollars in Thousands)
Six months Year Six months
Ended Ended Ended
June 30, 1998 December 31,1997 June 30, 1997
-------- -------- --------
Loans Outstanding, at period end $438,602 $419,293 $414,018
Average Loans $436,622 $411,546 $404,858
Allowance Balance:
Beginning Of Period 4,266 3,672 3,672
Charge-Offs By Loan Category:
Commercial 421 873 91
Consumer 106 59 24
Real Estate -- 211 166
-------- -------- --------
Total $ 527 $ 1,143 $ 281
-------- -------- --------
Recoveries By Loan Category:
Commercial 62 120 90
Consumer 45 24 17
Real Estate 8 73 6
-------- -------- --------
Total $ 115 $ 217 $ 113
-------- -------- --------
Net Charge-Offs $ 412 $ 926 $ 168
-------- -------- --------
Provision Charged
To Expense $ 690 $ 1,520 $ 570
Allowance Balance
End Of Period $ 4,544 $ 4,266 $ 4,074
======== ======== ========
Allowance For Possible
Loan Losses
To Period End Loans 1.04% 1.02% 0.98%
Annualized Net Charge-offs
to Average Loans 0.19 0.23% 0.05%
-11-
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 $4,544,000 or 1.04% of total loans was adequate as of June 30,
1998.
Results of Operations
Six months ended June 30, 1998
Compared with
Six months ended June 30, 1997
Net income for the six months ended June 30, 1998 was $5,655,000, an
increase of $732,000 or 14.9% 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 $2,243,000 partially offset by an increase in non-interest expense of
$1,074,000. The increase in net interest income is due to growth in average
total earning assets of $136,945,000 partially offset by an increase in average
interest bearing deposits of $96,953,000 compared to the same 1997 period.
The average balance of interest earning assets during the six months
ended June 30, 1998 was $708,650,000, a 24.0% increase over the comparable 1997
period. The Company's average yield on earning assets for the six months ended
June 30, 1998 decreased to 8.4% from 8.8% in the comparable 1997 period. Total
interest income increased $4,384,000 or 17.5% for the six months ended June 30,
1998 compared to the same 1997 period due to the increase in average interest
earning assets.
Average deposits for the Company for the six months ended June 30, 1998
was $690,204,000, a $125,696,000 or 22.3% increase compared to the same period
ended June 30, 1997. The Company's average cost of funds for the six months
ended June 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 6.0%
for the comparable 1997 period. Interest expense of $10,146,000 for the six
months ended June 30, 1998 was $2,141,000 or 26.8% over the comparable 1997
period due to an increase in average interest bearing deposits of $96,953,000
and an increase in the Company's cost of funds of 0.1%. Net interest income for
the six months ended June 30, 1998 increased $2,243,000 or 13.2%.
The Company made a provision to the allowance for possible loan losses
of $690,000 in the six months ended June 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 is
adequate based on the Company's calculated provision requirements.
Total loans charged-off net of recoveries for the six months ended June
30, 1998 amounted to $412,000 compared to $168,000 for the same period in 1997.
Annualized net loan charge-offs as a percentage of average loans for the six
months ended June 30, 1998 was 0.19% compared to 0.05% for the six months ended
June 30, 1997 and 0.23% for the year ended December 31, 1997.
Total other income was $1,844,000 for the six months ended June 30,
1998, a $240,000 or 15.0% increase compared to the same period in 1997. Service
charges on deposit accounts increased by $240,000 or 19.4% over the comparable
period in 1997. The net gain (loss) on securities transactions decreased by
$25,000 offset by other income which increased by $25,000 compared to the six
months ended June 30, 1997.
Salaries and benefits expense for the six months ended June 30, 1998
was $6,231,000, a $788,000 or 14.5% 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 288 full time
equivalent employees at June 30, 1998 compared to 285 full time equivalent
employees at December 31, 1997 and 259 full time equivalent employees at June
30, 1997.
Total other expenses, excluding salaries and benefits, for the six
months ended June 30, 1998, was $4,767,000, a $286,000 or 6.4% increase from the
comparable 1997 period. This was primarily due to increases in equipment expense
of $144,000, and an increase in legal and professional expense of $272,000.
These increases were partially offset by a decrease in advertising and promotion
expense of $129,000 and a decrease in stationery expense of $131,000.
-12-
Applicable income taxes of $3,774,000 for the six months ended June 30,
1998 were $557,000, or 17.3% more than the comparable 1997 period. The Company's
effective tax rate for the six months ended June 30, 1998 was 40.0% compared to
39.5% for the same period in 1997.
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 $527,000 and $732,000 in 1998 and 1997, respectively.
AVERAGE BALANCE SHEETS
- ------------------------------------------------------------------------------------------------------------------------------------
1998 1997
Average Yield/ Interest Average Yield/ Interest
(Dollars in thousands) Balance Rate Amount Balance Rate Amount
- ------------------------------------------------------------------------------------------------------------------------------------
Assets
Earning assets:
Investment securities:
Taxable $209,882 6.3% $ 6,525 $125,594 6.4% $ 3,994
Non-taxable 13,887 4.7% 324 13,286 5.0% 327
Federal funds sold 48,259 5.4% 1,298 27,967 5.3% 732
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment securities 272,028 6.0% 8,147 166,847 6.1% 5,053
Loans 436,622 9.8% 21,272 404,858 10.0% 19,982
- ------------------------------------------------------------------------------------------------------------------------------------
Total earning assets 708,650 8.4% 29,419 571,705 8.8% 25,035
Non-earning assets:
Premises and equipment 15,307 15,393
Other 48,884 46,948
- ------------------------------------------------------------------------------------------------------------------------------------
Total non-earning assets 64,191 62,341
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets $772,841 $634,046
====================================================================================================================================
Liabilities and Shareholders' Equity
Interest-bearing deposits:
Demand $ 91,676 1.1% $ 509 $ 82,512 1.1% $ 446
Savings and money market 180,212 2.8% 2,504 162,921 2.8% 2,270
Time certificates 266,958 5.4% 7,128 196,460 5.4% 5,268
Other interest-bearing liabilities 265 3.8% 5 621 6.8% 21
- ------------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities 539,111 3.8% 10,146 442,514 3.7% 8,005
Non interest-bearing deposits
And other liabilities:
Demand, non interest-bearing 151,358 122,615
Other liabilities 7,169 3,200
Shareholder's equity 75,203 65,717
- ------------------------------------------------------------------------------------------------------------------------------------
Total other liabilities 233,730 191,532
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $772,841 $634,046
====================================================================================================================================
NET INTEREST INCOME $ 19,273 $ 17,030
NET INTEREST MARGIN 5.5% 6.0%
- ------------------------------------------------------------------------------------------------------------------------------------
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.
Results of Operations
Three months ended June 30, 1998
Compared with
Three months ended June 30, 1997
Net income for the three months ended June 30, 1998 was $2,863,000, an
increase of $182,000 or 6.8% 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 $809,000 partially offset by an increase in non-interest expense of
$520,000. The increase in net interest income is due to growth in average total
earning assets of $131,849,000 or 22.4%
-13-
partially offset by an increase in average interest bearing deposits of
$97,133,000 or 21.6% compared to the same 1997 period.
The average balance of interest earning assets during the three months
ended June 30, 1998 was $719,452,000, a 22.4% increase over the comparable 1997
period. The Company's average yield on earning assets for the three months ended
June 30, 1998 decreased to 8.3% from 8.9% in the comparable 1997 period. Total
interest income increased $1,845,000 or 14.1% for the three months ended June
30, 1998 compared to the same 1997 period due to the increase in average
interest earning assets.
Average deposits for the Company for the three months ended June 30,
1998 was $701,577,000, a $121,580,000 or 21.0% increase compared to the same
period ended June 30, 1997. The Company's average cost of funds for the three
months ended June 30, 1998 was 3.8% which yielded a net interest margin of 5.4%.
This compares to an average cost of funds of 3.7% and a net interest margin of
6.1% for the comparable 1997 period. Interest expense of $5,179,000 for the
three months ended June 30, 1998 was $1,036,000 or 25.0% over the comparable
1997 period due to an increase in average interest bearing deposits of
$97,133,000 and an increase in the Company's cost of funds of 0.1%. Net interest
income for the three months ended June 30, 1998 increased $809,000 or 9.1%.
The Company made a provision to the allowance for possible loan losses
of $345,000 in the three months ended June 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 is
adequate based on the Company's calculated provision requirements.
Total other income was $903,000 for the three months ended June 30,
1998, a $104,000 or 13.0% increase compared to the same period in 1997. Service
charges on deposit accounts increased by $109,000 or 17.6% over the comparable
period in 1997. Net gains (losses) on securities transactions decreased by
$29,000 partially offset by other income which increased $23,000 compared to the
same 1997 period.
Salaries and benefits expense for the three months ended June 30, 1998
was $3,086,000, a $390,000 or 14.5% 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 June 30, 1998 , was $2,398,000, a $130,000 or 5.7% increase from
the comparable 1997 period. This was primarily due to an increase in legal and
professional expense of $148,000. This increase was partially offset by a
decrease in stationery expense of $59,000 and a decrease in advertising expense
of $22,000.
Applicable income taxes of $1,926,000 for the three months ended June
30, 1998 were $151,000, or 8.5% more than the comparable 1997 period. The
Company's effective tax rate for the three months ended June 30, 1998 was 40.2%
compared to 39.8% for the same period in 1997.
-14-
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 $306,000 and $425,000 in 1998 and 1997, respectively.
AVERAGE BALANCE SHEETS
- ------------------------------------------------------------------------------------------------------------------------------------
1998 1997
Average Yield/ Interest Average Yield/ Interest
(Dollars in thousands) Balance Rate Amount Balance Rate Amount
- ------------------------------------------------------------------------------------------------------------------------------------
Assets
Earning assets:
Investment securities:
Taxable $213,455 6.0% $3,170 $126,505 6.4% $2,012
Non-taxable 13,647 4.6% 158 13,236 4.9% 162
Federal funds sold 49,170 5.4% 663 31,886 5.3% 423
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment securities 276,273 5.8% 3,991 170,627 6.1% 2,597
Loans 443,179 9.9% 10,903 416,976 10.1% 10,452
- ------------------------------------------------------------------------------------------------------------------------------------
Total earning assets 719,452 8.3% 14,894 587,603 8.9% 13,049
Non-earning assets:
Premises and equipment 15,274 15,366
Other 50,448 47,323
- ------------------------------------------------------------------------------------------------------------------------------------
Total non-earning assets 65,722 62,689
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets $785,175 $650,292
====================================================================================================================================
Liabilities and Shareholders' Equity
Interest-bearing deposits:
Demand $91,790 1.4% $322 $83,107 1.1% $226
Savings and money market 182,833 2.7% 1,214 162,955 2.8% 1,143
Time certificates 272,984 5.4% 3,641 204,412 5.4% 2,760
Other interest-bearing liabilities 268 3.0% 2 1,064 5.3% 14
- ------------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities 547,875 3.8% 5,179 451,538 3.7% 4,143
Non interest-bearing deposits
And other liabilities:
Demand, non interest-bearing 153,970 129,523
Other liabilities 7,431 2,993
Shareholder's equity 75,898 66,238
- ------------------------------------------------------------------------------------------------------------------------------------
Total other liabilities 237,300 198,754
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $785,175 $650,292
====================================================================================================================================
NET INTEREST INCOME $9,715 $8,906
NET INTEREST MARGIN 5.4% 6.1%
- ------------------------------------------------------------------------------------------------------------------------------------
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.
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 would be deemed critical. The Company
uses third party software to run and operate all mainframe applications and the
testing of those systems has been performed and the Company is in the process of
verifying all results of that testing. Based on data received so far, the
Company anticipates spending approximately $250,000 over the remainder of 1998
and 1999 to modify and test its systems.
The Company is currently in the process of developing a Contingency
Plan as required by the Federal Financial Institutions Examination Council in
case of any failure of any critical system. It is anticipated that this Plan
will be completed prior to September 1, 1998.
-15-
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 June
30, 1998, the total of cash and due from banks, overnight fed funds, money
market mutual funds, and available-for-sale securities represented $330,672,000
or 45.3% of total deposits compared to $299,503,000 or 43.8% at year end 1997.
This increase in liquid assets for the six months ended June 30, 1998 resulted
primarily from an increase in deposits which were invested in fed funds sold and
short term investments.
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 institutions will be required to maintain a leverage ratio of at least 100
to 200 basis points above the 3% minimum.
-16-
The following tables show the Company's and the Subsidiary Banks'
risk-based and leverage capital ratios as of June 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.
- ------------------------------------------------------------------------------------------------------------------------------------
Risk Based Capital Ratio
As of June 30, 1998
- ------------------------------------------------------------------------------------------------------------------------------------
Company South Valley First National
(Dollars in thousands) Amount Ratio Amount Ratio Amount Ratio
- -------------------------------------------------------------------------------------------------------------------------
Tier 1 capital $ 72,980 13.35% $ 17,169 10.66% $ 45,590 12.19%
Tier 1 capital minimum
requirement 21,862 4.00% 6,441 4.00% 14,960 4.00%
- -------------------------------------------------------------------------------------------------------------------------
Excess 51,118 9.35% 10,728 7.50% 30,630 8.19%
=========================================================================================================================
Total capital 77,523 14.18% 18,823 11.69% 48,453 12.96%
Total capital minimum
requirement 43,725 8.00% 12,882 8.00% 29,920 8.00%
- -------------------------------------------------------------------------------------------------------------------------
Excess 33,798 6.18% 5,941 3.69% 18,533 4.96%
- -------------------------------------------------------------------------------------------------------------------------
Risk-adjusted assets $546,557 $161,028 $374,001
=========================================================================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
Leverage Capital Ratio
As of June 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) $72,980 9.32% $17,169 7.60% $45,590 8.36%
Minimum leverage requirement 23,488 to 3.00% to 6,778 to 3.00% to 16,369 to 3.00% to
39,147 5.00% 11,296 5.00% 27,281 5.00%
- -------------------------------------------------------------------------------------------------------------------------
Excess 33,833 to 4.32% to 5,873 to 2.60% to 18,309 to 3.36% to
49,492 6.32% 10,391 4.60% 29,221 5.36%
=========================================================================================================================
Total quarterly average assets $782,941 $225,926 $545,628
=========================================================================================================================
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
tolerances at this time. No significant changes to the market risk or interest
rate risk of the Company have occurred since December 31, 1997
-17-
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.
-18-
PART II -- OTHER INFORMATION
ITEM 4. Submission of Matters to a Vote of Security Holders
(a) The Company's Annual Meeting of Shareholders was held on
May 19, 1998.
(b) At the Annual Meeting the shareholders voted to:
(i) Elect Directors of the Company;
Votes Cast for Votes
Election Withheld
--------------------------------
Charles E. Bancroft 3,374,265 18,193
Gene DiCicco 3,375,031 17,427
Lewis L. Fenton 3,375,031 17,427
Gerald T. Fry 3,375,031 17,427
Eugene R. Guglielmo 3,372,834 19,624
James L. Gattis 3,375,031 17,424
Stanley R. Haynes 3,374,716 17,427
D. Vernon Horton 3,372,834 19,624
Hubert W. Hudson 3,375,716 17,742
William J. Keller 3,375,031 17,427
Roger C. Knopf 3,360,873 31,585
Clayton C. Larson 3,372,834 19,624
William S. McAfee 3,368,573 23,885
William H. Pope 3,373,825 18,633
Mary Lou Rawitser 3,359,667 32,791
William K. Sambrailo 3,373,510 18,948
Robert B. Sheppard 3,373,825 18,633
In the voting for Directors, there were no abstentions
and 955,244 broker nonvotes
(c) Ratify the appointment of KPMG Peat Marwick LLP as
independent public accountants for the 1998 fiscal year;
For 3,348,166
Against 10,935
Abstain 33,356
Broker nonvotes 955,244
-19-
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) INDEX TO EXHIBITS
Exhibit Sequentially
Number Exhibit Numbered Page
- ------ ------- -------------
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/
*/ 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-
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-
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-
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-
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
10.68 Agreement and Plan of Reorganization between Santa Barbara
Bancorp and Pacific Capital Bancorp dated July 20, 1998
27. Financial Data Schedule
(b) REPORTS ON FORM 8-K
No reports were filed on Form 8-K for the quarter ended June
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
-24-
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 August 12, 1998 /S/ D. Vernon Horton
---------------- ------------------------------
D. Vernon Horton
Chairman of the Board
Chief Executive Officer
Date August 12, 1998 /S/ Edward J. Czajka
---------------- ------------------------------
Edward J. Czajka
Senior Vice President
Corporate Controller
-25-