1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 11-K (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from to -------------------- -------------------- Commission file number: 33-34124 ------------------------------------------------- A. Full title of the plan and the address of the plan, if different from that of the issuer named below: Santa Monica Bank 401(k) Plan B. Name of issuer of the securities held pursuant to the plan and the address of its principal executive office: Santa Monica Bank 1251 Fourth Street P.O. Box 1320 Santa Monica, California 90406 2 SANTA MONICA BANK 401(k) PLAN FINANCIAL STATEMENTS AND SCHEDULES DECEMBER 31, 1996 AND 1995 TABLE OF CONTENTS REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS FINANCIAL STATEMENTS: Statements of Net Assets Available for Plan Benefits, with Fund Information as of December 31, 1996 and 1995 Statement of Changes in Net Assets Available for Plan Benefits, with Fund Information for the Year Ended December 31, 1996 NOTES TO FINANCIAL STATEMENTS SUPPLEMENTAL SCHEDULES: Schedule I: Item 27a - Schedule of Assets Held for Investment Purposes as of December 31, 1996 Schedule II: Item 27d - Schedule of Reportable Transactions for the Year Ended December 31, 1996 3 [ARTHUR ANDERSEN LLP LOGO] REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Profit Sharing Retirement Committee of Santa Monica Bank: We have audited the accompanying statements of net assets available for plan benefits with fund information of the SANTA MONICA BANK 401(K) PLAN (the Plan) as of December 31, 1996 and 1995, and the related statement of changes in net assets available for plan benefits with fund information and supplemental schedules for the year ended December 31, 1996, as listed in the accompanying index. These financial statements and schedules are the responsibility of the Plan's management. Our responsibility is to express an opinion on these financial statements and schedules based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts of disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for plan benefits with fund information of the Plan as of December 31, 1996 and 1995, and the changes in net assets available for plan benefits with fund information for the year ended December 31, 1996, in conformity with generally accepted accounting principles. Our audits were performed for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedules of assets held for investment purposes and reportable transactions are presented for the purpose of additional analysis and are not a required part of the basic financial statements but are supplementary information required by the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. The Fund Information in the statement of net assets available for plan benefits and the statement of changes in net assets available for plan benefits is presented for purposes of additional analysis rather than to present the net assets available for plan benefits and the changes in net assets available for plan benefits of each fund. The supplemental schedules and Fund Information have been subjected to 4 the auditing procedures applied in the audits of the basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the basic financial statements taken as a whole. /s/ ARTHUR ANDERSEN LLP ARTHUR ANDERSEN LLP Los Angeles, California June 30, 1997 5 SANTA MONICA BANK 401(k) PLAN STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS, WITH FUND INFORMATION AS OF DECEMBER 31, 1996 PARTICIPANT DIRECTED ---------------------------------------------------------------------------- WELLS FARGO WESTCORE INVESCO STABLE INTERMEDIATE SELECT WELLS FARGO STRONG ASSET FUND TERM BOND FUND INCOME FUND S&P 500 FUND OPPORTUNITY FUND ----------- -------------- ----------- ------------ ---------------- ASSETS: Investments at Fair Value: Cash and cash equivalents $ -- $ -- $ -- $ -- $ -- Common stock -- -- -- -- -- Common/collective trusts 38,887 -- -- 125,002 -- Registered investment companies -- 65,341 50,121 -- 221,499 -------- -------- -------- -------- -------- Total investments 38,887 65,341 50,121 125,002 221,499 -------- -------- -------- -------- -------- Employer contributions receivable -- -- -- -- -- -------- -------- -------- -------- -------- TOTAL ASSETS 38,887 65,341 50,121 125,002 221,499 -------- -------- -------- -------- -------- LIABILITIES: Excess contributions 764 4,077 1,191 7,808 8,176 -------- -------- -------- -------- -------- NET ASSETS AVAILABLE FOR PLAN BENEFITS, as of December 31, 1996 $ 38,123 $ 61,264 $ 48,930 $117,194 $213,323 ======== ======== ======== ======== ======== NON- PARTICIPANT PARTICIPANT DIRECTED DIRECTED -------------------------- ------------ STRONG TOTAL SANTA MONICA SANTA MONICA RETURN FUND BANK STOCK BANK STOCK TOTAL ------------ ------------ ------------ -------- ASSETS: Investments at Fair Value: Cash and cash equivalents $ -- $ 113 $ -- $ 113 Common stock -- 56,839 -- 56,839 Common/collective trusts -- -- -- 163,889 Registered investment companies 49,358 -- -- 386,319 -------- -------- -------- -------- Total investments 49,358 56,952 -- 607,160 -------- -------- -------- -------- Employer contributions receivable -- -- 157,768 157,768 -------- -------- -------- -------- TOTAL ASSETS 49,358 56,952 157,768 764,928 -------- -------- -------- -------- LIABILITIES: Excess contributions 2,682 3,155 27,519 55,372 -------- -------- -------- -------- NET ASSETS AVAILABLE FOR PLAN BENEFITS, as of December 31, 1996 $ 46,676 $ 53,797 $130,249 $709,556 ======== ======== ======== ======== The accompanying notes are an integral part of this financial statement. 6 SANTA MONICA BANK 401(k) PLAN STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS, WITH FUND INFORMATION AS OF DECEMBER 31, 1995 PARTICIPANT DIRECTED ------------------------------------------------------------------------------- WESTCORE INVESCO STRONG BANKERS INTERMEDIATE SELECT EQUITY OPPORTUNITY STRONG TOTAL GIC FUND TERM BOND FUND INCOME FUND INDEX FUND FUND RETURN FUND TOTAL -------- -------------- ----------- ---------- ----------- ------------ -------- ASSETS: Investments at Fair Value: Common/collective trusts $ 34,540 $ -- $ -- $ 23,232 $ -- $ -- $ 57,772 Registered investment companies -- 18,096 16,003 -- 38,059 9,763 81,921 TOTAL ASSETS 34,540 18,096 16,003 23,232 38,059 9,763 139,693 -------- -------- -------- -------- -------- -------- -------- NET ASSETS AVAILABLE FOR PLAN BENEFITS, as of December 31, 1995 $ 34,540 $ 18,096 $ 16,003 $ 23,232 $ 38,059 $ 9,763 $139,693 ======== ======== ======== ======== ======== ======== ======== The accompanying notes are an integral part of this financial statement. 7 SANTA MONICA BANK 401(k) PLAN STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS, WITH FUND INFORMATION FOR THE YEAR ENDED DECEMBER 31, 1996 PARTICIPANT DIRECTED ---------------------------------------------------------------------------- Wells Fargo Westcore INVESCO Stable Intermediate Select Wells Fargo Strong Asset Fund Term Bond Fund Income Fund S&P 500 Fund Opportunity Fund ----------- -------------- ----------- ----------- ---------------- NET ASSETS AVAILABLE FOR PLAN BENEFITS, beginning of year $ 34,540 $ 18,096 $ 16,003 $ 23,232 $ 38,059 ADDITIONS: Employee contributions 23,427 48,067 42,162 82,005 152,784 Employer contributions -- -- -- -- -- --------- --------- --------- --------- --------- Total contributions 23,427 48,067 42,162 82,005 152,784 --------- --------- --------- --------- --------- Investment Income: Dividends 1,415 2,915 2,499 -- 23,061 Net appreciation (depreciation) in fair value of investments -- (335) (209) 16,047 2,923 --------- --------- --------- --------- --------- Total investment income 1,415 2,580 2,290 16,047 25,984 --------- --------- --------- --------- --------- Total additions 24,842 50,647 44,452 98,052 178,768 --------- --------- --------- --------- --------- DEDUCTIONS: Benefits paid to participants -- (4,276) (1,942) (47) (3,038) Excess contributions (764) (4,077) (1,191) (7,808) (8,176) --------- --------- --------- --------- --------- Total deductions (764) (8,353) (3,133) (7,855) (11,214) NET INTERFUND TRANSFERS (20,495) 874 (8,392) 3,765 7,710 --------- --------- --------- --------- --------- NET INCREASE 3,583 43,168 32,927 93,962 175,264 --------- --------- --------- --------- --------- NET ASSETS AVAILABLE FOR PLAN BENEFITS, end of year $ 38,123 $ 61,264 $ 48,930 $ 117,194 $ 213,323 ========= ========= ========= ========= ========= NON- PARTICIPANT PARTICIPANT DIRECTED DIRECTED -------------------------- ------------ Strong Total Santa Monica Santa Monica Return Fund Bank Stock Bank Stock Total ----------- ------------ ------------ ----- NET ASSETS AVAILABLE FOR PLAN BENEFITS, beginning of year $ 9,763 $ -- $ -- $ 139,693 ADDITIONS: Employee contributions 35,455 32,111 -- 416,011 Employer contributions -- -- 157,768 157,768 --------- --------- --------- --------- Total contributions 35,455 32,111 157,768 573,779 --------- --------- --------- --------- Investment Income: Dividends 8,194 259 -- 38,343 Net appreciation (depreciation) in fair value of investments (3,539) 10,783 -- 25,670 --------- --------- --------- --------- Total investment income 4,655 11,042 -- 64,013 --------- --------- --------- --------- Total additions 40,110 43,153 157,768 637,792 --------- --------- --------- --------- DEDUCTIONS: Benefits paid to participants (2,725) (529) -- (12,557) Excess contributions (2,682) (3,155) (27,519) (55,372) --------- --------- --------- --------- Total deductions (5,407) (3,684) (27,519) (67,929) NET INTERFUND TRANSFERS 2,210 14,328 -- -- --------- --------- --------- --------- NET INCREASE 36,913 53,797 130,249 569,863 --------- --------- --------- --------- NET ASSETS AVAILABLE FOR PLAN BENEFITS, end of year $ 46,676 $ 53,797 $ 130,249 $ 709,556 ========= ========= ========= ========= The accompanying notes are an integral part of this financial statement. 8 SANTA MONICA BANK 401(k) PLAN NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996 AND 1995 1. PLAN DESCRIPTION The following description of the Santa Monica Bank 401(k) Plan (the Plan) is provided for general information purposes only. More complete information regarding the Plan's provisions may be found in the plan document. General Effective September 1, 1995, Santa Monica Bank (the Bank) established the Plan as a defined contribution plan under the provisions of Section 401(a) of the Internal Revenue Code (IRC), which includes a qualified cash or deferred arrangement as described in Section 401(k) of the IRC, for the benefit of eligible employees of the Bank. All employees of the Bank who have completed one year of service, as defined by the Plan, are eligible to participate. Employees who are "leased employees" as defined in the IRC may not participate in the Plan. The Plan is subject to the provisions of the Employee Retirement Security Act of 1974 (ERISA), as amended. Plan Administration Wells Fargo Bank N.A. (the Trustee), formerly First Interstate Bank of California, is the record keeper and trustee of the Plan. The Bank is the plan administrator. Contributions Employees may defer up to fifteen percent of their before-tax compensation subject to certain limitations. These employee contributions are normally made through payroll deductions which are remitted to the Plan on a bi-monthly basis. The Bank may also make discretionary matching and discretionary profit sharing contributions in amounts determined by the Board of Directors of the Bank. The Bank made a commitment for a matching contribution of $157,768 in 1996 but did not elect to make either of these contributions in 1995. 9 -2- Vesting Participants are always 100 percent vested in employee contributions and related earnings. The Bank's contributions and related earnings vest at 20 percent after three years of service and at the rate of an additional 20 percent per year for each succeeding year until 100 percent vested. Forfeitures At December 31, 1996 forfeited matching contributions totaled approximately $5,700. There were no forfeited amounts at December 31, 1995. Forfeited matching contributions are applied to reduce matching contributions for the year. Any forfeited profit sharing Bank contributions are allocated among all participants who are employees at year-end, pro rata, based on eligible earnings for the plan year or are applied to restore forfeited amounts to the plan accounts of participants who are rehired within 5 years. Benefits Upon termination of service including death, disability, or retirement, a participant fully vests in any previously unvested amounts. The participant or beneficiary may elect to receive an amount equal to the value of the participant's vested interest in his or her account. The form of payment is a lump-sum distribution. Allocations to Participant's Accounts Gains and losses and investment income are posted to each participant's individual investment fund based on each fund's earnings performance percentage return as published monthly by the Trustee. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Accounting The accompanying financial statements are prepared on the accrual basis of accounting. The preparation of the financial statements in conformity with generally accepted accounting principles requires the Plan's management to use estimates and assumptions that affect the accompanying financial statements and disclosures. Actual results could differ from these estimates. Valuation of Investments Investments are stated at fair value as of the plan's year-end. Realized and unrealized gains or losses are recorded as "net appreciation / depreciation of investments" in the statement of changes in net assets available for plan benefits. 10 -3- Realized and unrealized gains and losses are based on the difference between the market value of the assets at the beginning of the plan year or at the time of purchase for assets purchased during the plan year and the market value of those assets at the end of the year. Dividends Dividends are recorded as income when earned. Administrative Expenses Administrative expenses including Trustee and recordkeeping fees are paid for by the Bank. For the year ended December 31, 1996 Plan expenses paid for by the Bank totaled approximately $6,000. 3. INVESTMENT OPTIONS At December 31, 1996, the majority of the Plan's assets were invested in participant-directed mutual funds administered by the Trustee. Under the investment arrangement, investments are directed among seven investment options. A description of each fund is as follows: Wells Fargo Stable Asset Fund Previously Bankers GIC Fund, this fund seeks to provide stability of principal and relatively high current income by investing primarily in investment contracts of selected insurance companies and banks. The yield on investment contracts is more stable than most fixed income funds, but will fluctuate with market interest rates. Westcore Intermediate-Term Bond Fund This fund seeks to provide current income with relatively small volatility of principal. This is achieved through investments in high-quality corporate and government bonds with intermediate maturities between three and six years. The value of shares will fluctuate with market rates. INVESCO Select Income Fund This fund seeks a high level of current income by investing primarily in government and corporate bonds and other debt securities. The price of bonds will fluctuate with market conditions. Wells Fargo S&P 500 Fund Previously Equity Index Fund, this fund seeks to provide capital growth and current income that closely corresponds to the total return of the Standard and Poor's 500 Stock Index (S&P 500). This portfolio offers broad diversification among issues and sectors. 11 -4- Strong Opportunity Fund This fund seeks capital growth by investing primarily in equity securities of small and medium sized companies. The fund is appropriate for investors who have a long-term investment horizon. Stocks require a long investment period because their high historical returns relative to other types of investments have been accomplished by greater price fluctuations. Strong Total Return Fund This fund seeks a high total return by investing for capital growth and income. The Fund invests primarily in common stocks, corporate bonds and debentures, and money market instruments. Santa Monica Bank Stock Effective January 1, 1996, this fund was added as an investment option. Contributions to this fund are used solely to purchase shares of the Bank's Common Stock. Also, the Plan was amended effective January 1, 1996 to invest all matching contributions into the fund. 4. TAX STATUS Subsequent to year end, the Internal Revenue Service issued a determination letter dated January 23, 1997 stating that the Plan was designed in accordance with applicable IRC requirements as of that date. The Plan has been amended since receiving the determination letter. However, the plan administrator believes that the Plan is currently designed and is being operated in compliance with the applicable requirements of the IRC. Therefore, the plan administrator believes that the Plan was qualified and the related trust was tax-exempt for the years ended December 31, 1996 and 1995. 5. PLAN TERMINATION Although it has not expressed any intent to do so, the Bank has the right under the Plan to amend or discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA. In the event of plan termination, participants will become 100 percent vested in their accounts. 12 -5- 6. RECONCILIATION TO FORM 5500 The following table reconciles net assets available for benefits per the financial statements to the Form 5500 as filed by the Company for the years ended December 31, 1996 and 1995: Net Assets Available Benefits for Plan Benefits Payable to Benefits --------------------------- Participants Paid 1996 1995 ------------ ------------ ------------ ------------ Per financial statements $ -- $ 12,557 $ 709,556 $ 139,693 1996 Employer contributions receivable -- -- (157,768) -- 1996 Excess contributions -- -- 55,372 -- ------------ ------------ ------------ ------------ Per Form 5500 $ -- $ 12,557 $ 607,160 $ 139,693 ============ ============ ============ ============ 13 SCHEDULE I SANTA MONICA BANK 401(K) PLAN EIN #95-1191910 PLAN #002 ITEM 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES AS OF DECEMBER 31, 1996 Identify of Issuer, Borrower, Lessor, or Similar Party Description of Investment Cost Value - -------------------- ------------------------------- ---------- ---------- * Wells Fargo Stable Asset Fund Guaranteed Investment Contracts $ 38,887 $ 38,887 * Santa Monica Bank Corporate Common Stock 46,106 56,839 * Wells Fargo S&P 500 Stock Mutual Fund 107,509 125,002 INVESCO Select Income Mutual Fund 49,848 50,121 * Santa Monica Bank Stock Liquidity Mutual Fund 113 113 Strong Opportunity Mutual Fund 219,409 221,499 Strong Total Return Mutual Fund 53,221 49,358 Westcore Intermediate-Term Bond Mutual Fund 65,477 65,341 -------- -------- Total investments $580,570 $607,160 ======== ======== * Indicates a party-in-interest 14 SCHEDULE II SANTA MONICA BANK 401(K) PLAN EIN #95-1191910 PLAN #002 ITEM 27D - SCHEDULE OF REPORTABLE TRANSACTIONS FOR THE YEAR ENDED DECEMBER 31, 1996 Current Value of Cost Asset on Net Purchase Selling of Transaction Gain or Identity of Party Description of Assets Price Price Asset Date Loss - ------------------------------------------------------------------------------------------------------------------ Wells Fargo Bank Stable Asset Fund Guaranteed Investment Contracts 39 Acquisitions $ 32,579 $ 32,579 $ - 7 Dispositions $28,232 $28,232 - Westcore Intermediate-Term Bond Mutual Fund 44 Acquisitions 57,033 57,033 - 13 Dispositions 9,453 9,483 (30) INVESCO Select Income Mutual Fund 43 Acquisitions 45,291 45,291 - 14 Acquisitions 10,965 11,189 (224) Wells Fargo Bank S&P 500 Stock Mutual Fund 35 Acquisitions 173,591 173,591 - 5 Dispositions 1,683 2,118 (435) Strong Opportunity Fund Mutual Fund 39 Acquisitions 193,546 193,546 - 9 Dispositions 13,029 12,333 696 Strong Total Return Fund Mutual Fund 33 Acquisitions 47,018 47,018 - 8 Dispositions 3,884 3,668 216 Santa Monica Bank Stock Liquidity 31 Acquisitions 46,698 46,698 - 9 Dispositions 46,585 46,585 - Santa Monica Bank Common Stock Corporate Stock 8 Acquisitions 46,585 46,585 - 1 Disposition 529 479 50 15 SIGNATURES THE PLAN. Pursuant to the requirements of the Securities Exchange Act of 1934, the trustees (or other persons who administer the employee benefit plan) have duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized. SANTA MONICA BANK 401(k) By /s/ Dario Quiroga ------------------------------------- Dario Quiroga Senior Vice President and Chief Financial Officer Date: July 14, 1997