SANTA BARBARA BANCORP - 10-K Annual Report

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THIS CONFORMING PAPER FORMAT DOCUMENT IS BEING SUBMITTED PURSUANT
TO RULE 901(d) OF REGULATION S-T.

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 1996

___ 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 0-11113

SANTA BARBARA BANCORP
(Exact Name of Registrant as Specified in its Charter)

California 95-3673456
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

1021 Anacapa Street, Santa Barbara, California 93101
(Address of principal executive offices) (Zip Code)

(805) 564-6300
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:

Title of Class Name of Each Exchange on Which Registered
Common Stock, no par value Not Listed

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [x]

The aggregate market value of the voting stock held by non-affiliates of the
registrant as of March 10, 1997, based on the sales prices reported to the
Company on that date of 30.00 per share:
Common Stock - $184,457,040*

*Based on reported beneficial ownership by all directors and executive officers
and the Company's Employee Stock Ownership Plan; however, this determination
does not constitute an admission of affiliate status for any of these
stockholders.

As of March 10, 1997, there were 7,551,499 shares of the issuer's common stock
outstanding.

DOCUMENTS INCORPORATED BY REFERENCE: Portions of registrant's Proxy Statement
for the Annual Meeting of Shareholders on April 24, 1997 and the Annual Report
to Shareholders for the fiscal year ended December 31, 1996 are incorporated by
reference into Parts I, II, and III.

Pursuant to Rules 12b-23 and 12b-32 and Instruction G to Form 10-K, the
following indicated items of information from the registrant's Proxy Statement
for the Annual Meeting of Shareholders on April 24, 1997 ("Proxy") and the
Annual Report to Shareholders for the fiscal year ended December 31, 1996
("Annual Report") are incorporated into this form by reference to the page
number in the relevant printed document.

Annual
Report Proxy

(Page Numbers in Printed
Documents as Distributed
to Shareholders)

PART I
Item 1. Business 20
a) General Description of Business
Operations commenced as Santa Barbara National
Bank with one office and 18 employees in 1960.
The Company was formed in 1982. The Bank (name
changed to Santa Barbara Bank & Trust) became
the principal subsidiary of the Company, and has
grown to 16 banking offices and trust, escrow,
and real estate offices. Two of the banking
offices were added in the merger with Community
Bank of Santa Ynez Valley on March 31, 1989. In
1995, three banking offices were opened in
Ventura county and a fourth office was added in
1996.
A second subsidiary, Sanbarco Mortgage
Corporation-formerly known as SBBT Service
Corporation, was formed in 1988. The Bank
continued its pattern of growth in 1996 with
significant increases in assets and deposits.

b) Financial Information about Industry Segments
There are no identifiable industry segments.

c) Narrative Description of Business 20-48
As of December 31, 1996, the Company had the
equivalent of approximately 535 employees
engaged to provide banking and trust services to
the local community, including correspondent
services to other local banks. For most of its
banking products, the Company faces competition
in its market area from branches of most of the
major California money banks, some of the
state-wide savings and loan associations, and
other community banks and savings and loans. For
some of its products, the Company faces
competition from other non-bank financial
service companies, especially securities firms.

d) Financial Information about Foreign and Domestic
Operations and Export Sales
The Company does not have any foreign business
operations or export sales of our own. However,
it does provide financial services including
wire transfers, currency exchange, letters of
credit, and loans to other businesses involved
in foreign trade.

Item 2. Properties 56,61,
The Company maintains executive and 72
administrative offices at leased premises at
1021 Anacapa Street, Santa Barbara, California.
Of the 16 branch banking offices, all or a
portion of 13 are leased. The office space used
by the Real Estate and Escrow departments is
owned, and space is leased for the Trust, and
Management Information Services, and Loan
Servicing departments.

Item 3. Legal Proceedings
There are no material legal proceedings pending.

Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted during the fourth
quarter of the fiscal year covered by this
report.

PART II
Item 5. Market for the Registrant's Common Stock and Related
Stockholder Matters
a) Market Information 46,76
b) Holders
There are approximately 1,571 holders of stock
as of February 11, 1997.
c) Dividends 46,52
Dividends are currently declared four times 76
a year, and the Company expects to follow the
same policy in the future.
Item 6. Selected Financial Data (and included in Exhibit 13 76
to this Report)
Item 7. Management's Discussion and Analysis of Financial 20-48
Condition and Results of Operation (and included
in Exhibit 13 to this Report)
Item 8. Financial Statements and Supplementary Data 49-75
(and included in Exhibit 13 to this Report)
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
None.

PART III
Item 10. Directors and Executive Officers of the Registrant
Directors 4-5
Executive Officers 7-8
Item 11. Executive Compensation 9-15
Item 12. Security Ownership of Certain Beneficial Owners and
Management 8-9
Item 13. Certain Relationships and Related Transactions 18

PART IV
Item 14. Exhibits, Financial Statements, and Reports on
Form 8-K

a) The following documents are filed as a part of
this Report in Exhibit 13, Annual Report to
Security-holders:

1) Financial Statements:
Consolidated Balance Sheets as of December 31,
1996 and 1995 50
Consolidated Statements of Income for the years
ended December 31, 1996, 1995, and 1994 51
Consolidated Statements of Changes in
Shareholders' Equity for the years ended
December 31, 1996, 1995, and 1994 52
Consolidated Statements of Cash Flows for the
years ended December 31, 1996, 1995, and 1994 53

2) Financial Statement Schedules:

The following schedules and information are
included in the Footnotes to the above Financial
Statements or in Management's Discussion and
Analysis of Financial Condition and Results of
Operations, both of which are included in the
Annual Report:
Interest Rate Sensitivity 24
Distribution of Average Assets, Liabilities,
and Shareholders' Equity and Related Interest
Income, Expense, and Rates 26
Volume and Rate Variance Analysis of Net
Interest Income 27
Maturity Distribution and Yield Analysis of
the Securities Portfolios 30
Loan Portfolio Analysis by Category 32
Maturity and Sensitivities of
Selected Loan Types to Changes
in Interest Rates 33
Risk Elements:
Non-Accrual, Past Due
and Restructured Loans 38
Potential Problem Loans 37
Foreign Loans 39
Summary of Loan Loss Experience 37
Foregone Interest on Non-Accrual Loans 38
Detailed Deposit Summary 40
Maturity Distribution of Time Certificates
of Deposit of $100,000 or More 12
Return on Equity and Assets, Operating and
Capital Ratios 76
Short-term Borrowings 64

b) Three reports on Form 8-K were filed during the
fourth quarter of the fiscal year ended December
31, 1996. Acquisition of 56,100 shares of common
stock from two shareholders was reported on Form
8-K filed with the Commission on December 2,
1996. Acquisition of $59 million of leasing
assets was reported on Form 8-K filed with the
Commission on December 11, 1996. A definitive
agreement to acquire all of the outstanding
shares of First Valley Bank of Lompoc, California
for $26.1 million was reported on Form 8-K filed
with the Commission on December 20, 1996.
c) Exhibits - See exhibits listed in "Exhibit Index"

d) Financial statement schedules required by
Regulation S-X which are excluded from the annual
report to shareholders- Not Applicable

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be
signed by the undersigned, thereunto duly authorized.
Santa Barbara Bancorp

By /s/David W. Spainhour 3/20/97
David W. Spainhour date
President
Director

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Company and in
the capacities and on the dates indicated.

/s/ Donald M. Anderson 3/20/97 /s/ David W. Spainhour 3/20/97
Donald M. Anderson date David W. Spainhour date
Chairman of the Board President
Director Director

/s/ William S. Thomas 3/20/97 /s/ Donald Lafler 3/20/97
William S. Thomas date Donald Lafler date
Vice Chairman Senior Vice President
Chief Operating Officer Chief Financial Officer

/s/ Frank H. Barranco, M.D. 3/20/97 /s/ Edward E. Birch 3/20/97
Frank H. Barranco, M.D. date Edward E. Birch date
Director Director

/s/ Richard M. Davis 3/20/97 /s/ Anthony Guntermann 3/20/97
Richard M. Davis date Anthony Guntermann date
Director Director

/s/ Dale E. Hanst 3/20/97 /s/ Harry B. Powell 3/20/97
Dale E. Hanst date Harry B. Powell date
Director Director

EXHIBIT INDEX TO
SANTA BARBARA BANCORP FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996

Exhibit
Number Description

3 Articles of Incorporation and Bylaws

3.1 Restated Articles of Incorporation of Santa
Barbara Bancorp (filed as Exhibit 3(i) to the
Company's Form S-4, File No. 33-19181, and is
incorporated herein by reference thereto).

3.2 Certificate of Amendment of Articles of
Incorporation of the Company as filed with the
California Secretary of State on January 24, 1996
(previously filed with the Commission as Exhibit
3.2 to the Company's annual report on Form 10-K
on March 28, 1996, File No. 0-11113, incorporated
herein by this reference).

3.3 Amended and Restated Bylaws of the Company dated
September 25, 1991 (filed as "Other Information"
to the Company's form 10-Q for the quarter ended
September 30, 1991, File No. 0-11113, and is
incorporated herein by reference thereto).

3.4 Amendment No. One to Bylaws of the Company as
adopted by the Board of Directors on October 24,
1995 (previously filed with the Commission as
Exhibit 3.4 to the Company's annual report on
Form 10-K on March 28, 1996, File No. 0-11113,
incorporated herein by this reference).

4 Instruments defining rights of security holders -
The rights of security holders are defined by
applicable law and in the Bylaws of the
Company-see Exhibit 3.2 above.

10 Material Contracts

10.1 Compensation Plans and Agreements:

10.1.1 Santa Barbara Bancorp Amended and Restated
Restricted Stock Option Plan as amended effective
December 17, 1997 ***

10.1.1.1 Santa Barbara Bancorp Restricted Stock Option
Agreement (Incentive Stock Option)***

10.1.1.2 Santa Barbara Bancorp Restricted Stock Option
Agreement (Nonstatutory Stock Option - 5 Year)***

10.1.1.3 Santa Barbara Bancorp Restricted Stock Option
Agreement (Nonstatutory Stock Option - 10
Year)***

10.1.1.4 Santa Barbara Bancorp Restricted Stock Option
Agreement (Incentive Reload Option)***

10.1.1.5 Santa Barbara Bancorp Restricted Stock Option
Agreement (Non statutory Reload Option)***

10.1.2 Santa Barbara Bancorp Director Stock Option Plan
(previously filed as Exhibit 4.2 to
Post-Effective Amendment No. One to the Company's
Registration Statement on Form S-8, filed with
the Commission on June 13, 1995, File No.
33-48724, incorporated herein by this reference).

10.1.3 Santa Barbara Bancorp Stock Option Plan
(previously filed as Exhibit 4.2 of the Company's
Registration Statement on Form S-8, filed with
the Commission on October 28, 1991, File No.
33-43560, incorporated herein by this reference).

10.1.4 Santa Barbara Bank & Trust Incentive and
Investment and Salary Savings Plan, as amended
through December 31, 1991 (previously filed with
the Commission as Exhibit 10.1.4 to the Company's
annual report on Form 10-K on March 29, 1993,
File No. 0-11113, incorporated herein by this
reference).

10.1.4.1 First Amendment to Santa Barbara Bank & Trust
Incentive & Investment and Salary Savings Plan
executed April 27, 1994 (previously filed with
the Commission as Exhibit 10.1.5 to the Company's
annual report on Form 10-K on March 28, 1996,
File No. 0-11113, incorporated herein by this
reference).

10.1.4.2 Second Amendment to Santa Barbara Bank & Trust
Incentive & Investment and Salary Savings Plan
executed June 17, 1994 (previously filed with the
Commission as Exhibit 10.1.6 to the Company's
annual report on Form 10-K on March 28, 1996,
File No. 0-11113, incorporated herein by this
reference).

10.1.4.3 Third Amendment to Santa Barbara Bank & Trust
Incentive & Investment and Salary Savings Plan
executed December 28, 1994 (previously filed with
the Commission as Exhibit 10.1.7 to the Company's
annual report on Form 10-K on March 28, 1996,
File No. 0-11113, incorporated herein by this
reference.

10.1.4.4 Fourth Amendment to Santa Barbara Bank & Trust
Incentive & Investment and Salary Savings Plan
executed March 2, 1995 (previously filed with the
Commission as Exhibit 10.1.8 to the Company's
annual report on Form 10-K on March 28, 1996,
File No. 0-11113, incorporated herein by this
reference).

10.1.5 Santa Barbara Bank & Trust Employee Stock
Ownership Plan and Trust, as amended and restated
through July 6, 1995 (previously filed with the
Commission as Exhibit 4.1 to the Post-Effective
Amendment No. One to the Company's Registration
Statement on Form S-8, filed with the Commission
on July 10, 1995, File No. 33-43560, incorporated
herein by this reference).

10.1.5.1 First Amendment to Santa Barbara Bank & Trust
Employee Stock Ownership Plan and Trust executed
February 24, 1995 (previously filed with the
Commission as Exhibit 10.1.10 to the Company's
annual report on Form 10-K on March 28, 1996,
File No. 0-11113, incorporated herein by this
reference).

10.1.6 Description of Group Term Life and Accidental
Death and Dismemberment Benefits and of Payment
of Membership Dues (previously filed with the
Commission as Exhibit 10.1.7 to the Company's
annual report on Form 10-K on March 29, 1993,
File No. 0-11113, incorporated herein by this
reference).

10.1.7 Santa Barbara Bank & Trust Key Employee Retiree
Health Plan dated December 29, 1992 (previously
filed with the Commission as Exhibit 10.1.8 to
the Company's annual report on Form 10-K on March
16, 1994, File No. 0-11113, incorporated herein
by this reference).

10.1.7.1 First Amendment to Trust Agreement of Santa
Barbara Bank & Trust Voluntary Beneficiary
Association, executed July 23, 1993 (previously
filed with the Commission as Exhibit 10.1.13 to
the Company's annual report on Form 10-K on March
28, 1996, File No. 0-11113, incorporated herein
by this reference).

10.1.8 Santa Barbara Bank & Trust Retiree Health Plan
(Non-Key Employees) dated December 29, 1992
(previously filed with the Commission as Exhibit
10.1.9 to the Company's annual report on Form
10-K on March 16, 1994, File No. 0-11113,
incorporated herein by this reference).

10.1.9 Santa Barbara Bank & Trust Second Amended and
Restated Flexmaster Plan adopted effective
October 1, 1991 (previously filed with the
Commission as Exhibit 10.1.15 to the Company's
annual report on Form 10-K on March 28, 1996,
File No. 0-11113, incorporated herein by this
reference).

10.1.10 Santa Barbara Bancorp 1996 Directors Stock Option
Plan, as amended December 17, 1996.***

10.1.10.1 Santa Barbara Bancorp 1996 Directors Stock Option
Agreement ***

10.1.10.2 Santa Barbara Bancorp 1996 Directors Stock Option
Agreement (Reload Option)***

10.2.0 Securities and Insurance Service Agreement
(previously filed with the Commission as Exhibit
10.2.0 to the Company's annual report on Form
10-K on March 30, 1995, File No. 0-11113,
incorporated by this reference).

10.2.1 IRA Custodial Agreement (previously filed with
the Commission as Exhibit 10.2.1 to the Company's
annual report on Form 10-K on March 30, 1995,
File No. 0-11113, incorporated by this
reference).

11 Statement re Computation of Per Share Earnings***

13 Annual Report to Security-holders***

21 Subsidiaries of the Registrant***

23 Consent Independent Public Accountants***

27 Financial Data Schedules***

Shareholders may obtain a copy of any exhibit by writing to:
Clare McGivney, Corporate Services Administrator
Santa Barbara Bancorp
P.O. Box 1119
Santa Barbara, CA 93102

*** Filed herewith

Exhibit 10.1.1
SANTA BARBARA BANCORP

AMENDED AND RESTATED
RESTRICTED STOCK OPTION PLAN
(As Amended effective December 17, 1996)

SANTA BARBARA BANCORP hereby adopts the following employee stock option plan:

1. PURPOSES OF THE PLAN

The purposes of this Plan are to attract, motivate and retain the best
available officers and employees, and to provide them with additional incentive
to promote the success of the Company's business.

2. DEFINITIONS

As used herein, the following definitions shall apply:

2.1 "Board of Directors" shall mean the Board of Directors of the
Company.

2.2 "Code" shall mean the Internal Revenue Code of 1986, as amended.

2.3 "Commission" shall mean the Securities and Exchange Commission.

2.4 "Committee" shall mean the Committee of the Board of Directors that
shall administer the Plan.

2.5 "Common Stock" shall mean the Common Stock of the Company.

2.6 "Company" shall mean Santa Barbara Bancorp, a California
corporation.

2.7 "Donative Transfer" means any transfer of an Option or Reload Option
made for donative purposes or without the payment or receipt by or on behalf of
the Optionee of any cash, property or other consideration. For purposes of this
Section, neither an Optionee's receipt of or eligibility for a deduction, credit
or similar allowance for federal or state income tax or estate tax purposes nor
the transferee's use for family or support purposes of any proceeds realized
from the sale of the any shares of Common Stock acquired on exercise of an
Option shall be deemed to be the receipt of consideration.

2.8 "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.

2.9 "Fair Market Value" shall mean, as of any date, the value of the Common
Stock determined as follows.

2.9.1 If the Common Stock is listed on an established stock exchange or a
national market system, including without limitation the Nasdaq National Market
of the National Association of Securities Dealers, Inc. Automated Quotation
("NASDAQ") System, the Fair Market Value of a share of Common Stock shall be the
closing sales price for such stock (or the closing bid, if no sales were
reported) as quoted on such system or exchange (or the exchange with the
greatest volume of trading in the Common Stock) on the last market trading day
prior to the date of determination.

2.9.2 If the Common Stock is quoted on the NASDAQ System (but not on the
Nasdaq National Market thereof) or is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market Value of
a share of Common Stock shall be the mean between the high bid and low asked
prices for the Common Stock on the last market trading day prior to the date of
determination.

2.10 "Option" shall mean a stock option granted pursuant to the Plan and
shall include Reload Options. All Options granted hereunder shall be
"nonstatutory stock options" and each such Option shall be evidenced by a
written Stock Option Agreement.

2.11 "Optioned Stock" shall mean the Common Stock subject to an Option.

2.12 "Optionee" shall mean an employee who receives an Option.

2.13 "Parent" shall mean a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.

2.14 "Plan" shall mean this restricted Stock Option Plan, as amended and
restated.

2.15 "Rule 16b-3" shall mean Rule 16b-3 promulgated under the Exchange Act
or any successor to Rule 16b-3 in effect at the time in question.

2.16 "Section 16(b)" shall mean Section 16(b) of the Exchange Act.

2.17 "Stock Option Agreement" means a written agreement between the Company
and an Optionee evidencing the terms and conditions of an individual Option
grant. Each Option Agreement is subject to the terms and conditions of the Plan.
The terms and provisions of each Option Agreement need not be the same.

2.18 "Subsidiary" shall mean a "subsidiary corporation," whether now or
hereafter existing, as defined as Section 424(f) of the Code.

3. OPTIONS

Pursuant to the Plan, two separate types of options for Common Stock may be
granted:

3.1 Incentive Options. Incentive Stock Options ("Incentive Options");
and

3.2 Non-Qualified Options. Non-Qualified Stock Options ("Non-Qualified
Options").

Incentive Options are intended to qualify as incentive stock options within
the meaning of Section 422 of the Code. Non-Qualified Options are not intended
to so qualify. Unless specified otherwise, all the provisions of this Plan
relate equally to both Incentive Options and Non-Qualified Options. Each Option
granted under this Plan shall be evidenced by a Stock Option Agreement between
the Company and the Optionee, designating the type of Option being issued and
containing such other terms and conditions as deemed appropriate- .

4. ADMINISTRATION OF THE PLAN

The Plan shall be administered by the Board of Directors or the Committee.
The Committee shall consist of not less than three persons all of whom shall be
members of the Board of Directors. None of the members of the Board of Directors
or the Committee shall be eligible to be allocated any Options pursuant to this
Plan. No person shall be appointed to be a member of the Committee if such
person was eligible to be allocated any stock options pursuant to this Plan at
any time within one (1) year prior to his or her appointment to the Committee.
For purposes of this Section, a person shall be deemed to be eligible to be
allocated any Options pursuant to this Plan during any period if, during such
period, such person is eligible to receive a Reload Option pursuant to this
Plan. Members of the Committee shall serve at the pleasure of the Board of
Directors. No member of the Board of Directors or the Committee shall be liable
for any action or determination undertaken or made in good faith with respect to
the Plan, any Stock Option Agreement or any Option granted under the Plan.
Subject to the provisions contained herein, the Board of Directors or the
Committee shall determine:

4.1 Employees to Receive Option. The employees to whom Options shall be
granted;

4.2 Type of Options to be Granted. Whether Options to be granted shall
be Incentive Options or Non-Qualified Options or both;

4.3 Number of Shares. The number of shares to be optioned to each such
employee;

4.4 Option Price. The price to be paid for the shares upon the exercise
of each Option;

4.5 Option Period. The period within which each Option shall be
exercised; and

4.6 Other Terms and Conditions. The terms and conditions of each Stock
Option Agreement between the Company and each employee to whom the Board of
Directors or the Committee has granted an Option; which terms and conditions
shall be in accordance with the provisions of this Plan but may include any
other or additional terms or conditions not inconsistent with this Plan and need
not be identical for every Stock Option Agreement.

5. GRANT OF OPTIONS

5.1 Effective Date of Option Grant. The "grant" of an Option pursuant to
this Plan shall be deemed to have occurred on the latest of: (a) the date the
Board of Directors or the Committee announces the grant of the Option; or (b)
such later date designated by the Board of Directors or the Committee or set
forth in the Stock Option Agreement.

6. ELIGIBILITY

Full-time salaried employees of the Company who shall, in the judgment of
the Board of Directors or the Committee, be qualified by position, training, or
ability to contribute substantially to the success of the Company, shall be
eligible to participate in the Plan. The number of shares allocable to any
person by means of Options under this Plan is to be reasonable, as determined by
the Board of Directors or the Committee, in relation to the purposes of the Plan
and the needs and capabilities of the Company. No Option may be granted to any
employee owning more than ten percent (10%) of the voting power of all classes
of stock of the Company or its Parent or any Subsidiary.

7. RESERVE OF SHARES

7.1 Reserve. Subject to the provisions of Section 6.2, below, the maximum
aggregate number of shares of Common Stock reserved for issuance upon the
exercise of Options granted under the Plan is 1,000,000 shares of authorized but
unissued shares of Common Stock of the Company. No more than the total number of
shares held in this Reserve shall be issued under the Plan pursuant to the
exercise of Incentive Options and Non-Qualified Options in the aggregate.

7.2 Adjustments In Reserve. If the outstanding shares of Common Stock are
increased or decreased, or are changed into or exchanged for a different number
or kind of shares or other securities, as a result of the occurrence of an event
described in Section 24 or Section 25, below, then and in such event,
appropriate adjustments shall be made in the number and/or kind of shares or
other securities for which Options may thereafter be granted under this Plan. In
the event that any outstanding Option under the Plan expires or is terminated
without exercise, or with only partial exercise, prior to the end of the period
during which Options may be granted under the Plan, the shares allocable to the
unexercised portion of any such Option may be added back into the Reserve and
may again be subject to Option under the Plan.

8. OPTION EXERCISE PRICE

8.1 Establishment of Option Price. The price per share required to be paid
upon exercise of any Option granted hereunder, whether an Incentive Option or a
Non-Qualified Option, shall be 100% of the fair market value per share, as
determined by the Board of Directors or the Committee, of the Common Stock at
the time of the grant of the Option.

8.2 Payment of Option Price. The Option price shall be payable either (a) in
cash in immediately available funds, or (b) with stock of the Company, valued at
its then Fair Market Value. In the event that the Option price is paid, whether
in whole or in part, through the tender of shares of Common Stock already owned
by the Option holder, then the Option must be exercised for a minimum of at
least 100 shares, or the total number of shares subject to the outstanding
Option being exercised, if less than 100 shares.

8.3 Exchange of Options. Notwithstanding the foregoing, in the event that
any Option is granted under this Plan in exchange for the surrender by the
grantee of another Option for the Common Stock, the Board of Directors or the
Committee, in its discretion, may establish the exercise price under the new
Option at the same price as provided in the Option which is surrendered, but
only to the extent of the number of shares then subject to the Option which is
surrendered.

9. OPTION PERIOD

The term of any Incentive Option granted pursuant to this Plan shall not
exceed five (5) years. The term of any Non-Qualified Option shall not exceed ten
(10) years. The aggregate Fair Market Value, as determined by the Board of
Directors or the Committee, of the shares of Common Stock with respect to which
an Incentive Option granted under this Plan is exercisable for the first time by
an Optionee during any calendar year shall not exceed the difference between (a)
One Hundred Thousand Dollars ($100,000) and (b) the sum of the Fair Market
Value, as determined by the Board of Directors or the Committee, as of the time
the Incentive Options, if any, were granted, of the shares of Common Stock
covered by all Incentive Options which were granted to the Optionee under this
Plan and all other incentive stock option plans of the Company and which are
exercisable for the first time by the Optionee during such calendar year. If an
Incentive Option is granted pursuant to which the aggregate fair market value of
shares with respect to which it first becomes exercisable in any calendar year
exceeds such $100,000 limitation, the portion of such Option which is in excess
of the $100,000 limitation shall be treated as a Non-qualified Option pursuant
to Section 422(d)(1) of the Code. This Section is intended to comply with the
provisions of Section 422 of the Code and shall be interpreted so as to comply
with the provisions of such Section of the Code. Nothing in this Section shall
obligate the Company to grant Options or any additional Options to any employee
under this Plan or any other stock option plan here or hereafter adopted by the
Company by reason of the treatment of any Options as Non-Qualified Options under
this Section.

10. EXERCISE; VESTING

Options granted hereunder (whether Incentive Options or Non-Qualified
Options) shall become exercisable ("vest") in accordance with such schedule as
the Board of Directors or the Committee, in the exercise of its discretion, may
deem appropriate in any particular case. To the extent not so provided by the
Board of Directors or the Committee, Options shall vest as follows: The
aggregate number of shares covered by the Option shall be divided by the number
of years included in the Option term (each such year being hereinafter called an
"Option Year"). The Employee shall become entitled to purchase the number of
shares of Common Stock resulting from the foregoing division at the end of each
Option Year. Notwithstanding anything in the Plans to the contrary, (a) Options
granted under this Plan shall vest and become exercisable over a period no
longer than five (5) years and at a rate not less than twenty percent (20%) per
year, and (b) no Option granted under this Plan shall be exercisable for at
least six (6) months following the date of the grant of the Option, except in
case of death or disability.

11. RESTRICTION ON TRANSFER OF STOCK ISSUED

11.1 Holding Period. The Stock Option Agreements covering Options granted
under this Plan may provide that shares of Common Stock issued upon exercise of
the Options may not be sold, exchanged, transferred, pledged, hypothecated or
otherwise disposed of, without the prior written approval of the Company, for a
period equal to the longer of five (5) years following the date the Option is
granted and two (2) years following the date on which such shares are issued to
the Optionee on exercise of the Option; provided that the foregoing restriction
on transfer shall not apply to an Optionee's transfer of shares of Common Stock
(a) to the Company in payment of all or any portion of the exercise price
payable upon exercise of an Option or the satisfaction of any income tax
withholding obligation with respect to any exercise of an Option or (b) to the
acquiring party in any transaction described in Section 25, below, in which the
Company is not the surviving corporation, or (c) to a person or entity described
in Section 15.2.1 hereof.

11.2 Exempt Transfers. Notwithstanding the foregoing, an Optionee may
transfer shares of Common Stock acquired on exercise of an Option to a person
described in Section 15.2.1 hereof only if all of the following conditions are
satisfied: (i) the transfer is a permitted transfer under Section 15.2.2 hereof;
(ii) the Optionee gives the Company at least ten (10) days prior written notice
of the proposed transfer, which notice shall specify the name and address of the
proposed transferee and the basis on which the proposed transferee is a person
or entity described in Section 15.2.1 hereof; (iii) the proposed transferee
agrees in writing for the benefit of the Company to acquire and hold the
transferred shares of Common Stock subject to the terms and conditions of this
Plan and the applicable Stock Option Agreement, including the provisions of this
Section; and (iv) the transfer is of a whole number multiple of one hundred
(100) shares.

11.3 Legend. Appropriate legends shall be placed on any certificates
evidencing the shares of Common Stock issued upon exercise of an Option and
appropriate stop transfer instructions shall be given to the Company's transfer
agent.

12. EXPIRATION OF OPTIONS

Notwithstanding any other provisions of this Plan or the terms of any Stock
Option Agreement, Options granted pursuant to this Plan shall expire upon the
occurrence of any of the following events:

12.1 Termination of Employment. Thirty (30) days following the termination
of the Optionee's employment, other than as a result of the Optionee's
retirement, death or disability (but in no event beyond the period of time for
which the Optionee is granted);

12.2 Retirement. Immediately upon retirement of the Optionee in accordance
with the Company's retirement policy, provided that the Optionee may within
three (3) months after the date of retirement (but in no event beyond the period
of time for which the Option is granted) exercise the Option as to those shares
with respect to which any vesting installments, if any, had accrued as of the
date on which the employee retired; and

12.3 Death or Disability. Twelve (12) months after the death or permanent
disability (as defined in the Company's Incentive and Investment Profit Sharing
Plan and Trust) of the Optionee while in the employ of the Company (but in no
event beyond the period of time for which the Option is granted). During such
twelve-month period the Optionee (or his or her personal representative) or the
persons to whom the Optionee's rights under the Option shall have passed by will
or by the applicable laws of descent and distribution shall have the right to
exercise the Option to the extent that any vesting installments, if any, had
accrued as of the date of Optionee's death or disability.

13. METHOD OF EXERCISE

Options granted pursuant to this Plan shall be exercised by delivery to the
Board of Directors or the Committee of a written notice specifying (a) the
number of shares which an Optionee (or his or her personal representative) then
desires to purchase, (b) the name or names in which Optionee (or his or her
personal representative) desires to have the shares issued, and (c) whether the
Options being exercised are Incentive Options or Non-Qualified Options. Said
notice shall be accompanied by full payment of the aggregate purchase price of
such Options in immediately available funds (or stock of the Company). The
Company shall, as soon as practicable thereafter, issue and deliver to the
Optionee and/or any other persons designated in the notice of exercise, the
necessary certificate or certificates evidencing the number of shares purchased
(excluding any fractional shares), in the name of the Optionee and/or in the
name of the other persons designated in the notice of exercise. The Optionee may
designate in the notice of exercise that some or all of the shares to be issued
upon such exercise shall be issued in the name of Optionee's spouse, the trustee
of a revocable trust in which Optionee and his or her spouse are the sole
primary beneficiaries, Optionee's prior spouse, or any combination of the
foregoing. Notwithstanding anything herein to the contrary, Optionee may not
designate in the notice of exercise that any of the shares of Common Stock or
other securities shall be issued to Optionee's prior spouse unless such issuance
is to be made pursuant to a domestic relations order as defined in the Code or
Title I of the Employee Income Retirement Security Act, or the rules thereunder.
The Board of Directors or the Committee may rely on a representation of the
person exercising the Option, or such other evidence as the Board of Directors
or the Committee deems appropriate- ate, for purposes of determining the
propriety of the exercise of any Option and the compliance of such exercise with
the terms of this Plan and any applicable Stock Option Agreement. The Board of
Directors or the Committee shall have no obligation to independently investigate
the propriety of the exercise of any Option or the compliance of such exercise
with the terms of this Plan or any applicable Stock Option Agreement.

14. RELOAD FEATURES

14.1 Grant of Reload Options. Whenever the holder of any Option (the
"Original Option") outstanding under this Plan (whether an Incentive Option or a
Non-Qualified Option, and including any Reload Options granted under the
provisions of this Section 14) exercises the Original Option and makes payment
of the option price by tendering shares of the Common Stock of the Company
previously held by him or her, then the holder of that Option shall be entitled
to receive and the Company shall grant a new Option (the "Reload Option") for
that number of additional shares of the Common Stock of the Company which is
equal to the number of shares tendered by the Optionee in payment of the option
price for the Original Option being exercised. All such Reload Options granted
hereunder shall be on the following terms and conditions.

14.1.1 Option Price. The option price per share shall be an amount equal
to the then current Fair Market Value per share of the Common Stock, as of the
date of exercise of the Original Option, as determined by the Board of Directors
or the Committee.

14.1.2 Expiration Date. The option exercise period shall expire, and the
Reload Option shall no longer be exercisable, on the expiration of the option
period of the Original Option or five (5) years from the date of the grant of
the Reload Option, whichever is later.

14.1.3 Vesting Period. Any Reload Option granted under this Section 14
shall "vest" and first become exercisable one (1) year following the date of
exercise of the Original Option.

14.1.4 Other Terms. All other terms of Reload Options granted hereunder
shall be identical to the terms and conditions of the Original Option, the
exercise of which gives rise to the grant of the Reload Option. Further, the
character of the Reload Option shall be the same as the character of the
Original Option, namely if the Original Option is an Incentive Option, the
Reload Option shall be an Incentive Option; and if the Original Option is a
Non-Qualified Option, the Reload Option shall also be a Non-Qualified Option.

14.2 Restrictions on Reload Options. Any and all Reload Options granted
pursuant to this Section 14 (or Section 16, below) shall be subject to the
following conditions and restrictions:

14.2.1 No Reload on Existing Incentive Options. Notwithstanding Section
14.1, above, no Reload Option shall be granted pursuant to Section 13.3, below,
upon the exercise of any Incentive Option which is outstanding as of the
effective date of this Plan.

14.2.2 Holding Period of Shares Tendered. No Reload Option shall be
granted pursuant to Section 14.1, above, unless the shares tendered upon
exercise of the Original Option in payment therefore have been held by the
Employee for a period of more than six (6) months prior to the exercise of the
Original Option.

14.2.3 Holding Period of Original Option Shares. If the shares of Common
Stock of the Company which are issued upon exercise of the Original Option are
sold within one (1) year following the exercise of the Original Option, then the
Reload Option shall immediately terminate.

14.2.4 Exception. The holding period restrictions set forth in Sections
14.2.2 and 14.2.3 above shall not apply to an Optionee's (a) transfer of shares
of Common Stock to the Company in payment of all or any portion of the purchase
price upon exercise of an Option, whether an Original Option or a Reload Option,
or (b) satisfaction of his withholding obligation, if any, pursuant to Section
16 below by the withholding of shares that would otherwise be issued as a result
of the exercise of an Option.

14.3 "Grandfather" Provisions. The Company acknowledges that there are
outstanding Options granted to employees under the Company's prior employee
Stock Option Plan, which Plan expired in calendar year 1993, and that said Plan
contained "reload" features similar to those contained herein. To the extent
that any such outstanding Options under said Stock Option Plan are exercised
after the expiration of that Plan, the Board of Directors or the Committee shall
have the power, in its sole discretion, to grant to any such Option holders a
Reload Option under and containing the terms specified in this Plan.

15. TRANSFERABILITY OF OPTIONS

15.1 Restriction on Transfer. Except as specifically set forth in Section
15.2 hereof, no Option or Reload Option may be sold, pledged, assigned,
hypothecated, transferred, or otherwise disposed of in any manner, other than by
will or the laws of descent and distribution.

15.2 Limited Transferability. A Stock Option Agreement may provide that an
Optionee may transfer all or a portion of any Non-Qualified Option or Non-
Qualified Reload Option in accordance with provisions of this Section 15.2. If a
Stock Option Agreement permits the transfer of any Non-Qualified Option or
Non-Qualified Reload Option, any transfer that does not comply with all of the
provisions of this Section 15.2 and the Stock Option Agreement shall be null and
void ab initio. The provisions of the Stock Option Agreements dealing with the
transferability of the Options need not be identical for all Options and the
provision for transferability with respect to one Option shall not require the
provision for transferability with respect to any other Option. (For purposes of
this Section, Non-Qualified Options and Non- Qualified Reload Options which may
be transferred are referred to as "Transferable Option".)

15.2.1 Permitted Transferees. A Transferable Option may be transferred by
the Optionee only to one or more of the following: (a) the Optionee's spouse,
parents and lineal descendants, including adopted children (the "Immediate
Family Members"); (b) a trust established by the Optionee and with respect to
which all beneficial interests are held by one or more of the Optionee, the
Immediate Family Members, and a tax-exempt charitable organization which has
only a contingent residual interest in the trust; (c) a partnership or limited
liability company established by the Optionee and in which all beneficial
interests are held by one or more of the Optionee and the Immediate Family
Members; (d) a tax-exempt educational, religious or charitable organization, as
those terms are defined in Section 501(c)(3) of the Code; and (e) such other
persons and entities as the Company may specifically approve in writing after
written notice from the Optionee. The Company may require as a condition to the
transfer of any Transferable Option under this Section that the transferee
provide to the Company reasonable evidence that the proposed transferee is
described in one of the foregoing clauses.

15.2.1 Permitted Transfers. Any transfer of a Transferable Option under
this Section 15.2 must be either a Donative Transfer, a transfer to a
partnership or limited liability company described in clause (c) of Section
15.2.1 above, pursuant to which the Optionee receives only his or her interest
in the partnership or limited liability company, or a transfer specifically
approved in writing by the Company after written notice from the Optionee.

15.2.3 Minimum Transfer. Any transfer of a Transferable Option or a
Reload Option must be with respect to not less than one hundred (100) shares of
Optioned Stock and may be made only in whole number multiples of one hundred
(100) shares of Optioned Stock.

15.2.4 Notice to the Company. The Optionee shall give the Company at
least ten (10) days prior written notice of any proposed transfer of a
Transferable Option pursuant to this Section 15.2 and shall include with such
notice:

A. The name and address of the proposed transferee and a statement
of the basis on which the proposed transferee is a permitted transferee under
Section 15.2.1 hereof; and

B. The proposed transferee's written agreement to accept the
Transferable Option and any shares of Common Stock acquired on exercise of the
Transferable Option subject to all of the terms and conditions of this Plan and
the applicable Stock Option Agreement, including the provisions dealing with the
termination of the Transferable Option on the death or disability of the
Optionee or the termination of the Optionee's employment with the Company.

15.2.5 No Further Transfer. Notwithstanding anything in this Plan or any
Stock Option Agreement to the contrary, a transferee of any Transferable Option
shall not have the right to further transfer all or any portion of the
Transferable Option, other than (a) by will or the laws of descent and
distribution, or (b), if the transferee is a trust, pursuant to the terms of the
trust agreement by reason of the death of any settlor.

15.2.6 No Transfer of Incentive Options. Notwithstanding anything in this
Plan or any Stock Option Agreement to the contrary, an Optionee may not transfer
any Incentive Option or Reload Option granted with respect to an Incentive
Option other than by will or the laws of descent and distribution.

15.2.7 Further Acts. The Company may require as a condition to the
transfer of any Transferable Option such additional information and agreements
from the Optionee and the proposed transferee as the Company may deem necessary
or beneficial for purposes of complying with this Section or any applicable
federal or state law, rule or regulation.

15.2.8 Disclaimer. The Company's acceptance of any transfer of a
Transferable Option shall not be considered legal or tax advice to the Optionee
or the proposed transferee as to their compliance with any applicable law, rule
or regulation or the legal or tax consequences of such transfer or the
subsequent exercise of the Transferable Option or the sale or exchange of any of
the shares of Common Stock acquired on exercise of the Transferable Option.

16. TAX WITHHOLDING

To the extent that the exercise of any Option granted hereunder gives rise
to an obligation on the part of the Company to withhold from Optionee's wages,
the Company shall do so on such terms and in accordance with such procedures as
may be required under applicable law. At the election of the Optionee,
withholding may be made through the surrender of shares of the Common Stock or
through the withholding of shares of Common Stock which would otherwise be
issued as a result of the exercise. If withholding is made through the surrender
or withholding of shares of the Common Stock, the Board of Directors or the
Committee, in its sole discretion, may grant Reload Option(s), on the terms
specified in Section 14, above, for the number of shares so surrendered or
withheld.

17. NO SHAREHOLDER RIGHTS

An Option holder shall not be deemed to be a shareholder of the Company with
respect to Options unless and until the shares of Common Stock covered by the
Option shall have been issued upon exercise thereof and are paid for in full.

18. SECURITIES COMPLIANCE

Options granted pursuant to this Plan shall be subject to the requirement
that if at any time the Board of Directors or the Committee shall determine, in
its discretion, that the listing, registration, or qualification of the shares
covered thereby is required upon any securities exchange or under any state or
federal law, or the consent or approval of any governmental regulatory authority
is necessary or desirable as a condition of the exercise of such Option, the
Option may not be exercised, in whole or in part, unless and until such listing,
registration, qualification, consent or approval shall have effected or obtained
free of any conditions not acceptable to the Board of Directors or the
Committee.

19. TERM OF PLAN

No Option shall be granted under this Plan after ten (10) years from the
date of the original adoption of the Plan by the Board of Directors or the
original approval of the Plan by a majority of the voting shares, whichever
event first occurred.

20. AMENDMENT OF PLAN

The Board of Directors of the Company may at any time suspend, amend, or
terminate the Plan, and may, with the consent of an Option holder, make such
modification of the terms and conditions of Options granted hereunder as it
shall deem advisable; provided that, any amendment or modification which would:

20.1 Number of Shares. Materially increase the number or shares which
may be issued pursuant to the Plan (other than in accordance with Section 24
and Section 25. below);

20.2 Eligibility. Materially modify the requirements as to eligibility
for participation in the Plan; or

20.3 Increase in Benefits. Otherwise materially increase the benefits
accruing to participants under the Plan;

shall be subject to approval thereof by shareholders of the Company holding not
less than a majority of the voting power.

21. SUBSTITUTION OF OPTIONS

Notwithstanding the provisions of Section 20, above, the Board of Directors
or the Committee may grant to an Option holder, if he or she is otherwise
eligible, additional Options under this Plan or, with the consent of the Option
holder, grant new Options under this Plan in lieu of any outstanding Options for
a number of shares, at a purchase price and for a term which in any respect is
greater or lesser than that of the earlier Option, subject to those limitations
as to Options otherwise set forth herein.

22. LIMITS ON AMENDMENTS

This Plan may not, without approval of the shareholders of the Company, be
amended in any manner that will cause Incentive Options issued under it to fail
to meet the requirements of incentive stock Options as defined in Section 422 of
the Code, or to change the maximum number of shares which any one person may
receive.

23. EFFECT ON SUSPENSION OR TERMINATION OF PLAN

No Option may be granted during any suspension, or after termination, of
this Plan. Amendment, suspension, or termination of the Plan shall not, without
the consent of the Option holder, alter or impair any rights or obligations
under any Option or Stock Option Agreement theretofore granted under the Plan.

24. RECAPITALIZATION OF COMPANY

Except as otherwise provided herein, appropriate and proportionate
adjustments shall be made in the number and class of shares subject to the Plan
and to the Options granted under the Plan, and the exercise price of such
Options, in the event of a stock dividend (but only on Common Stock), stock
split, reverse stock split, recapitalization, reorganization or like change in
the capital structure of the Company. To the extent that the foregoing
adjustments relate to stock or securities of the Company, such adjustments shall
be made by the Board of Directors or the Committee, the determination of which
in that respect shall be final, binding, and conclusive; provided that no
Incentive Option granted under the Plan shall be adjusted in a manner that
causes the Option to fail to continue to qualify as an incentive stock option
within the meaning of Section 422 of the Code.

25. REORGANIZATION OR LIQUIDATION OF THE COMPANY

In the event of (a) a liquidation of the Company, or (b) a merger,
reorganization, or consolidation of the Company with any other corporation in
which the Company is not the surviving corporation or the Company becomes a
wholly-owned subsidiary of another corporation, or (c) any sale of all or
substantially all of the Company's assets, any unexercised Options then
outstanding under the Plan shall be deemed cancelled unless the surviving
corporation in any such merger, reorganization or consolidation or the acquiring
corporation in any such sale elects to assume the Options under the Plan or to
issue substitute options in place thereof; provided, however, that if any
Options granted under the Plan would be cancelled in accordance with the
foregoing, the Optionee shall have the right, exercisable during a 10-day period
ending on the fifth day prior to the effective date of such liquidation, merger,
reorganization, consolidation or sale, to exercise the Optionee's Option in
whole or in part without regard to any installment exercise provisions in the
Optionee's Stock Option Agreement. If any Options or portion thereof originally
designated as Incentive Options would cease to qualify as incentive stock
options under Section 422 of the Code as a result of the exercise of such
Options in accordance with the preceding sentence, then such Incentive Options
or portion thereof shall be redesignated as Non-qualified Options. The Company
shall give each Optionee at least thirty (30) days prior written notice of the
anticipated effective date of any such liquidation, merger, reorganization,
consolidation or sale. Notwithstanding anything in this Plan or in any Stock
Option Agreement to the contrary, (i) all Option exercises effected during the
foregoing 10-day period shall be deemed to be effective immediately prior to the
closing of such liquidation, merger, reorganization, consolidation or sale and
(ii), if the Company abandons or otherwise fails to close any such liquidation,
merger, reorganization, consolidation or sale, then (A) all exercises during the
foregoing 10- day period shall cease to be effective ab initio and (B) the
outstanding Options shall be exercisable as otherwise determined under the
applicable Stock Option Agreement and without consideration of this Section or
the corresponding provisions of any Stock Option Agreement.

26. APPROVAL OF SHAREHOLDERS; EFFECTIVE DATE

This Plan shall not take effect until approved by the affirmative vote of
the holders of a majority of the Common Stock of the Company present, or
represented, and entitled to vote at a meeting of shareholders duly held in
accordance with the laws of the State of California, solicited in accordance
with the rules and regulations of the Securities and Exchange Commission, which
approval must occur within the period beginning twelve (12) months before and
ending twelve (12) months after the date such amendments are adopted by the
Board of Directors.

27. STOCK OPTION AGREEMENTS

The Stock Option Agreements entered into hereunder shall contain such other
provisions, including, without limitation, restrictions upon the exercise of an
Option, as the Board of Directors or the Committee shall deem advisable.
Incentive Stock Option Agreements shall contain such limitations and
restrictions upon the exercise of the Incentive Options as shall be necessary in
order that such Incentive Options will constitute an "incentive stock option" as
defined in Section 422 of the Code or to conform to any change in the law. The
terms and provisions of the Stock Option Agreements need not be identical for
all Options granted under the Plan.

28. INDEMNIFICATION

In addition to such other rights of indemnification as they may have as
members of the Board of Directors, the members of the Board of Directors and the
Committee shall be indemnified by the Company against reasonable expenses,
including attorney's fees, actually and necessarily incurred in connection with
the defense of any action, suit, or proceeding, or in connection with any appeal
therein, to which they or any of them may be a party by reason of any action
taken or failure to act under or in connection with the Plan or any Option
granted thereunder, and against all amounts paid by them in settlement thereof
(provided such settlement is approved by independent legal counsel selected by
the Company) or paid by them in satisfaction of a judgment in any action, suit,
or proceeding, except in relation to matters as to which it shall be adjudged in
such action, suit, or proceeding that such member is liable for negligence or
misconduct in the performance of his or her duties. The indemnification provided
for in this Section shall be available only if, within sixty (60) days after
institution of any such action, suit, or proceeding, the member of the Board of
Directors or the Committee seeking indemnification shall in writing offer the
Company the opportunity, at its own expense, to handle and defend the same.

29. EFFECT OF AMENDMENTS

29.1 Non-Qualified Options. From and after December 17, 1996, the date of
this Amended and Restated Plan, all of the terms and provisions of the Plan as
amended and restated shall apply to all Non-Qualified Options which are
outstanding as of such date and the Stock Option Agreements covering such Non-
Qualified Options shall be deemed automatically amended to reflect the amended
and restated terms of this Plan.

29.2 Incentive Options. From and after December 17, 1996, the date of this
Amended and Restated Plan, all of the terms and provisions of the Plan as
amended and restated shall apply to all Incentive Options which are outstanding
as of such date and the Stock Option Agreements covering such Incentive Options
shall be deemed automatically amended to reflect the amended and restated terms
of this Plan; provided that in no event shall any of the terms or provisions of
the Plan as amended and restated apply to any Incentive Option, and no Stock
Option Agreement for an Incentive Option shall be deemed amended to include any
of the terms and provisions of the Plan as amended and restated, if such
application or amendment would be deemed to be a modification of the Incentive
Option under the Code and such modification would result in such Incentive
Option ceasing to qualify as an incentive stock option under the Code.

29.3 No Change in Price or Term. Notwithstanding anything in this Plan to
the contrary, in no event shall the amendment of any Stock Option Agreement in
accordance with the provisions of this Section change any or all of the number
of shares covered by any Option or the exercise price, vesting schedule or term
of the Option.

29.4 Amended Stock Option Agreements. Any Optionee who holds an Option that
is deemed amended under this Section may at any time deliver to the Company his
or her existing Stock Option Agreement and request that the Company deliver to
the Optionee a new Stock Option Agreement incorporating the amended and restated
terms and provisions of the Plan. The Company shall deliver to the Optionee a
new Stock Option Agreement promptly after the Optionee's delivery of the
existing Stock Option Agreement. NOTWITHSTANDING ANYTHING IN THIS PLAN TO THE
CONTRARY, THE OPTIONEE SHALL BE SOLELY RESPONSIBLE FOR DETERMINING WHETHER THE
AMENDMENT OF A STOCK OPTION AGREEMENT WILL CONSTITUTE A MODIFICATION OF THE
OPTION AND THE COMPANY SHALL HAVE TO RESPONSIBILITY OR LIABILITY NO THE OPTIONEE
BY REASON OF THE AMENDMENT OF A STOCK OPTION AGREEMENT BEING A MODIFICATION OF
THE OPTION.

CERTIFICATE OF SECRETARY

The undersigned, being the Corporate Secretary of the Company, does hereby
certify that:

(a) the foregoing Plan was adopted by the Board of Directors of the Company
at a duly called and held meeting of the Board of Directors on January 29, 1992,
and that the Plan was approved by the shareholders of the Company at a duly
called and held meeting of the shareholders on April 28, 1992;

(b) the Amended and Restated Plan effective as of November 22, 1994, was
adopted by the Board of Directors of the Company at a duly called and held
meeting of the Board of Directors on November 22, 1996;

(c) the Amended and Restated Plan effective as of February 27, 1996, was
adopted by the Board of Directors of the Company at a duly called and held
meeting of the Board of Directors on February 27, 1996, and was approved by the
shareholders of the Company at a duly called and held meeting of shareholders on
April 23, 1996; and

(d) the Plan was amended at a duly called and held meeting of the Board of
Directors on December 17, 1996, and that the amendments adopted by the Board of
Directors on December 17, 1996, did not need to be approved by the shareholders
of the Company.

Dated:December 17, 1997 Jay D. Smith, Esq., Corporate Secretary

Exhibit 10.1.1.1

SANTA BARBARA BANCORP

RESTRICTED STOCK OPTION AGREEMENT

(Incentive Stock Option)

THIS AGREEMENT ("Agreement") is entered into this day of _____________ , 19 ,
between SANTA BARBARA BANCORP (the "Company") and
("Employee").

RECITALS

WHEREAS, the Company has duly adopted a Stock Option Plan, (the "Plan"),
which was adopted by the Board of Directors of the Company on January 29, 1992,
and approved by the shareholders of the Company on April 28, 1992; and

WHEREAS, the Plan provides for the issuance of incentive stock options, as
defined in Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"); and

WHEREAS, Employee has been designated by the Committee which administers the
Plan as the recipient of an incentive stock option under the Plan.

AGREEMENT

NOW, THEREFORE:

1. GRANT

The Company hereby grants to Employee the option to purchase an aggregate of
shares of the Company's Common Stock at a price of $ per
share, (which price the Company has determined to be 100% of the fair market
value at the time of grant).

2. OPTION PERIOD

The period during which the option granted hereby may be exercised
(hereinafter called the "Option Period") shall commence after the expiration of
six (6) months following the date hereof and shall terminate five years from the
date hereof, subject to the provisions governing earlier termination in
paragraph 4, below.

3. EXERCISE

3.1 Vesting. The Option shall "vest" and become exercisable in accordance
with the provisions of Section 1 of Exhibit A attached hereto.

3.2 Option Exercise Price. The option price must be paid (a) in cash or check
or (b) by the tender of other Shares of Common Stock owned by the Employee,
having a fair market value on the date of surrender equal to the aggregate
exercise price of the Shares as to which said option is intended to be
exercised, or (c) any combination of such methods of payment.

3.3 Stock-for-Stock Exercises. In the event that the option price is paid,
whether in whole or in part, through the tender of shares of Common Stock of the
Company already owned by the Employee, then this Option must be exercised for a
minimum of at least 100 shares, or the total number of shares remaining subject
to the Option, if less than 100 shares.

3.4 Periodic Exercise. The Option may be exercised by Employee with respect
to some or all of the shares of Common Stock and other securities covered by the
Option at any time and from time to time on or after the date on which the
Option becomes exercisable with respect to such shares; provided that the Option
may not be exercised at any one time with respect to less that one hundred (100)
shares of Common Stock unless the number of shares with respect to which the
Option is exercised is the total number of shares with respect to which the
Option is exercisable at that time.

4. RESTRICTION ON TRANSFER OF STOCK ISSUED

Any and all shares of Common Stock and other securities, if any, issued
pursuant to this Agreement shall be subject to the restrictions on transfer, if
any, set forth in Section 2 of Exhibit A attached hereto. Any restriction on
transfer set forth in Exhibit A attached hereto shall not apply to Employee's
transfer of shares of Common Stock to the Company in payment of all or any
portion of the exercise price payable on exercise of this Option. Appropriate
legends shall be placed on any certificates evidencing any shares of Common
Stock or other securities issued upon exercise of this Option, and appropriate
stop transfer instructions shall be given to the Company's transfer agent.

5. EXPIRATION

This Option shall expire upon the occurrence of the following events:

5.1 Thirty (30) days following termination of employment, other than as a
result of the Employee's retirement, death or disability;

5.2 Immediately upon retirement of Employee in accordance with the Company's
retirement policy; provided, however, that Employee may within three (3) months
after the date of retirement (but in no event beyond the period of time for
which the options evidenced by this Agreement are granted) exercise the option
as to those shares with respect to which installments, if any, had accrued and
were exercisable as of the date on which Employee retired; and

5.3 Twelve (12) months after the death or permanent disability (as defined in
the Company's Incentive and Investment Profit Sharing Plan and Trust) of
Employee while in the employ of the Company (but in no event beyond the period
of time for which the options evidenced by this Agreement are granted). During
such twelve-month period, Employee (or his personal representative) or the
persons to whom the Employee's rights under this Agreement shall have passed by
will or by the applicable laws of descent and distribution, shall have the right
to exercise the Option evidenced by this Agreement to the extent that
installments, if any, had accrued and were exercisable as of the date of
Employee's death or disability.

6. TAX WITHHOLDING

To the extent that the exercise of any Option granted hereunder gives rise to
an obligation on the part of the Company to withhold from amounts otherwise to
be paid to the Employee, the Company shall do so on such terms and in accordance
with such procedures as may be required under applicable law. At the election of
the Employee, withholding may be made in shares of the Common Stock of the
Company which would otherwise be issued as a result of the exercise; provided,
however, that such an election must be an irrevocable election which is made at
last six (6) months prior to the exercise of the Option, in accordance with
regulations and interpretations of the Securities and Exchange Commission. If
withholding is made in shares of the Company's stock, the Company shall grant a
Reload Option(s), in accordance with the terms and conditions specified in the
Plan, for the number of shares so withheld.

7. LIMIT ON GRANT

The aggregate fair market value, as determined by the Committee, of the
shares of Common Stock with respect to which this Option is exercisable for the
first time by Employee during any calendar year shall not exceed the difference
between (a) One Hundred Thousand Dollars ($100,000) and (b) the sum of the fair
market value, as determined by the Committee, as of the time the options, if
any, were granted, of the shares of Common Stock covered by this Option and all
other incentive stock options granted to Employee under the Plan and all other
incentive stock option plans of the Company and which are exercisable for the
first time by the Employee during such calendar year. If the aggregate fair
market value of the shares with respect to which this Option first becomes
exercisable in any calendar year exceeds such $100,000 limitation, the portion
of this Option which is in excess of the $100,000 limitation shall be treated as
a Non-qualified Option pursuant to Section 422(d)(1) of the Code. This Section
is intended to comply with the provisions of Section 422 of the Code and shall
be interpreted so as to comply with the provisions of such Section of the Code.
Nothing in this Section shall obligate the Company, to grant options or any
additional options to Employee under this Plan or any other stock option plan
here or hereafter adopted by the Company.

8. RECAPITALIZATION OF COMPANY

Except as otherwise provided herein, appropriate and proportionate
adjustments shall be made in the number and class of shares subject to the
Option, and the exercise price of the Option, in the event of a stock dividend
(but only on Common Stock), stock-split, reverse stock-split, recapitalization,
reorganization or like change in the capital structure of the Company. To the
extent that the foregoing adjustments relate to stock or securities of the
Company, such adjustments shall be made by the Committee, the determination of
which in that respect shall be final, binding, and conclusive; provided that
this Option shall not be adjusted in a manner that causes the Option to fail to
continue to qualify as an incentive stock option within the meaning of Section
422 of the Code.

9. REORGANIZATION OR LIQUIDATION OF THE COMPANY

In the event of (a) a liquidation of the Company, or (b) a merger,
reorganization, or consolidation of the Company with any other corporation in
which the Company is not the surviving corporation or the Company becomes a
wholly-owned subsidiary of another corporation, or (c) any sale of all or
substantially all of the Company's assets, any unexercised portion of this
Option shall be deemed cancelled unless the surviving corporation in any such
merger, reorganization or consolidation or the acquiring corporation in any such
sale elects to assume the Option or to issue substitute options in place
thereof; provided, however, that if the unexercised portion of this Option would
be cancelled in accordance with the foregoing, Employee shall have the right,
exercisable during a 10-day period ending on the fifth day prior to the
effective date of such liquidation, merger, reorganization, consolidation or
sale, to exercise the Option in whole or in part without regard to any
installment exercise provisions in this Agreement. If the Option or portion
thereof originally designated as an Incentive Option would cease to qualify as
an incentive stock option under Section 422 of the Code as a result of the
exercise of the Option in accordance with the preceding sentence, then the
Option or portion thereof shall be redesignated as a non-qualified stock option.
The Company shall give Employee at least thirty (30) days prior written notice
of the anticipated effective date of any such liquidation, merger,
reorganization, consolidation or sale. Notwithstanding anything in the Plan or
this Agreement to the contrary, (i) any exercise of the Option effected during
the foregoing 10-day period shall be deemed to be effective immediately prior to
the closing of such liquidation, merger, reorganization, consolidation or sale
and (ii), if the Company abandons or otherwise fails to close any such
liquidation, merger, reorganization, consolidation or sale, then (A) any
exercise during the foregoing 10-day period shall cease to be effective ab
initio and (B) the unexercised portion of the Option shall be exercisable as
otherwise determined under this Agreement and without consideration of this
Section.

10. SECURITIES COMPLIANCE

Should the Company at any time determine that the listing, registration,
qualification, or exemption of the shares covered by this Option is required on
any securities exchange or under any state or federal law, or should the Company
determine that the notification, consent, or approval of any governmental
regulatory authority is necessary or desirable as a condition to the exercise of
this Option, then this Option may not be exercised, in whole or in part, unless
and until such listing, registration, qualification, notification, consent, or
approval shall have been effected, obtained, or given, free of any conditions
not acceptable to the Company.

11. METHOD OF EXERCISE

The Option granted pursuant to this Agreement shall be exercised by delivery
to a designated representative of the Committee administering the Plan, a
written notice specifying (a) the number of shares which Employee (or his
personal representative) then desires to purchase, (b) the name or names in
which Employee desires to have the shares issued, and (c) that the options being
exercised are incentive stock options granted pursuant to this Agreement.
Employee may designate in the notice of exercise that some or all of the shares
to be issued upon such exercise shall be issued in the name of Employee's
spouse, the trustee of a revocable trust in which Employee and his or her spouse
are the sole primary beneficiaries, Employee's prior spouse, or any combination
of the foregoing. Notwithstanding anything in this Agreement to the contrary,
Employee may not designate in the notice of exercise that any of the shares
shall be issued to Employee's ex-spouse unless such issuance is to be made
incident to Employee's divorce within the meaning of Section 1041 of the Code.
Said notice shall be accompanied by full payment of the aggregate purchase price
for the shares being acquired. The Company shall, as soon as practicable
thereafter, issue and deliver to Employee the necessary certificate or
certificates evidencing the number of shares purchased (excluding any fractional
shares) in the name of Employee and/or such other person(s) as Employee has
properly designated in the notice of exercise. The Company shall have no
obligation to deal directly with, and shall have no liability to, any person
other than Employee, or Employee's personal representative if Employee has died
or become permanently disabled prior to the delivery of the shares. Employee
shall indemnify and hold harmless the Company, and each of its officers,
directors, employees and agents, from and against any and all claims made by any
person other than Employee, or Employee's personal representative, who is
designated in the notice of exercise. The Company shall pay all expenses, taxes
and other charges payable in connection with the preparation, issue and delivery
of the foregoing stock certificates, except that, in case such stock
certificates shall be registered in a name or names other than the name of
Employee, funds sufficient to pay all stock transfer taxes which shall be
payable upon the issuance of such stock certificates shall be paid by Employee
at the time of the delivery of the notice of exercise.

12. NON-TRANSFERABILITY

Options granted pursuant to this Agreement are not transferable by Employee
other than by will or by the laws of descent and distribution. Said options are
exercisable during Employee's lifetime only by Employee (or Employee's legal
representative). Any attempt by Employee to assign or transfer the options
granted herein other than as provided in this paragraph shall be null and void.
If Employee designates in the written notice of exercise any person other than
Employee, or Employee's personal representative, to whom stock certificates
should be issued upon such exercise, the Company may require, as a condition to
such exercise, that Employee and the other persons designated in the notice of
exercise represent and warrant to the Company that Employee has neither
transferred or assigned, nor attempted to transfer or assign, all or any portion
of this Option prior to Employee's delivery of the notice of exercise, payment
of the exercise price, and performance of the other conditions required to be
performed by Employee in connection with such exercise of this Option and that
such other persons are either Employee's spouse, the trustee of a revocable
trust in which Employee and his or her spouse are the sole primary
beneficiaries, or Employee's ex-spouse and the issuance to such person is being
made incident to Employee's divorce.

13. NO SHAREHOLDER RIGHTS

Employee shall not be deemed to be a shareholder of the Company with respect
to the shares covered by the options granted herein unless and until such shares
shall have been issued to Employee upon exercise of said options and the
exercise price therefor has been paid for in full.

14. INTERPRETATION

This Agreement is subject to all of the terms and conditions of the Plan, and
in the event of any conflict between any of the provisions of this Agreement and
any of the provisions of the Plan, the applicable provisions of the Plan shall
control. The Committee administering the Plan shall have full power to interpret
the provisions of this Agreement and of the Plan and to decide any dispute which
may arise hereunder or thereunder. Said Committee's action shall be final and
conclusive upon all persons affected thereby. All references in this Plan to
Employee shall mean and include Employee's personal representative if Employee
has died or become permanently disabled prior to the time in question.

15. AMENDMENT

The Board of Directors of the Company shall have such power to amend or
terminate the Plan as is specified in the Plan. Such amendment or termination
shall not, however, affect any options then outstanding hereunder.

16. SUCCESSORS

This Agreement shall be binding upon the heirs, executors, administrators and
successors of the parties hereto.

17. SUBSIDIARIES

The term "Company" as used herein shall include Santa Barbara Bancorp and any
of its subsidiaries.

18. TAX MATTERS

Employee understands that the grant and exercise of the Option under this
Agreement will have tax and legal consequences to Employee and that the Company
is not making any representation to Employee and is not advising Employee as to
the tax or other legal consequences of the grant or exercise of this Option or
of any other action taken or to be taken by Employee under this Agreement or
with respect to the Option. Employee shall be solely responsible for determining
such tax and legal consequences to Employee and for obtaining such advice as
Employee deems appropriate.

EMPLOYEE ACKNOWLEDGES THAT IT IS EMPLOYEE'S SOLE RESPONSIBILITY TO
EVALUATE AND DETERMINE THE TAX AND LEGAL CONSEQUENCES TO EMPLOYEE OF
THIS AGREEMENT AND EMPLOYEE'S EXERCISE OF THE OPTION AND ACQUISITION OF
THE SHARES AND THAT THE COMPANY HAS NOT ADVISED, AND HAS NO OBLIGATION
TO ADVISE, EMPLOYEE WITH RESPECT TO ANY SUCH TAX AND LEGAL
CONSEQUENCES, EVEN IF EMPLOYEE REQUESTS THE COMPANY TO DO SO.

19. SPOUSAL CONSENT

If Employee is married or otherwise deemed to have a spouse for purposes of
California law, Employee shall have his or her spouse execute the form of
Spousal Consent attached to this Agreement, as such form may be amended or
revised by the Company from time to time, contemporaneously with the execution
of this Agreement and on each exercise of the Option by Employee.
Notwithstanding anything in this Agreement to the contrary, if Employee is
married or otherwise deemed to have a spouse for purposes of California law, (a)
this Agreement and the Option shall not be effective for any purpose until
Employee delivers to the Company a duly executed Spousal Consent form and (b)
the exercise of the Option shall not be effective and the Company shall not be
obligated to issue to Employee any shares covered by the Option until Employee
delivers to the Company a duly executed Spousal Consent form.

20. ENTIRE AGREEMENT

This Agreement and the Plan collectively contain the entire understanding
between the parties with respect to the subject matter hereof, and supersede any
and all prior written or oral agreements between the parties with respect to the
subject matter hereof. There are no representations, agreements, arrangements,
or understandings, either written or oral, between or among the parties with
respect to the subject matter hereof which are not set forth in this Agreement.

21. GOVERNING LAW

This Agreement shall be governed by, and construed in accordance with, the
laws of the State of California applicable to contracts made and to be fully
performed in the State of California.

22. NOTICES

Any notice given pursuant to this Agreement shall be in writing and shall be
given by personal service or by United States certified mail, return receipt
requested, postage prepaid to the addresses appearing on the signature page of
this Agreement or such other address as may be given by either party for
purposes of this Agreement. Notice given by personal service shall be deemed
effective on the date it is delivered to the addressee, and notice mailed shall
be deemed effective on the third day following its placement in the mail
addressed to the addressee. Either party may change its address for notice
purposes by giving the other party notice of such change in accordance with this
Section. Notwithstanding anything herein to the contrary, any notice that
consists solely of notice of the change of address of any party may be given by
regular mail.

23. INCORPORATION OF EXHIBITS

Each and all of the Exhibits to this Agreement are, by this reference,
incorporated herein to the same extent as if they were set forth in full herein.

[Signatures appear on next page]

IN WITNESS WHEREOF, the parties have entered into this Restricted Stock
Option Agreement as of the date first above written.

"COMPANY":

SANTA BARBARA BANCORP

By:___________________________

Its:__________________________

1021 Anacapa Street
Santa Barbara, CA 93102
Attn:
"EMPLOYEE":

- ------------------------------
Signature of Employee

- ------------------------------
Name of Employee

Address of Employee

Vesting; Restrictions on Transfer

Set forth below are the terms on which the Option shall vest and the
restrictions on transfer, if any, that are applicable to the shares of Common
Stock and other securities issued upon exercise of this Option. The provisions
that are applicable to this Option are those that are initialed by the Company
and Employee. In the event that either (a) the Company and Employee do not
initial a subsection under either Section 1 or Section 2 of this Exhibit or (b)
the Company and Employee initial more than one subsection in either Section 1 or
Section 2, then Section 1.1 and Section 2.1 shall apply for all purposes under
this Agreement.

1. Vesting

1.1 Five-Year Vesting. The Option shall "vest" and become exercisable in
equal annual installments over a period of five (5) years. Specifically,
Employee shall become entitled to purchase an additional 20% of the total number
of option shares specified in Section 1 of the Agreement (on a cumulative basis)
during each one-year period following the date of the Agreement. Thus, during
the first year following the date of the Agreement, Employee shall be entitled
to exercise this Option to purchase 20% of the total number of option shares;
40% during the second year; 60% during the third year; 80% during the fourth
year; and 100% during the fifth year.

Company initial Employee initial

1.2 Other Vesting. The Option shall "vest" and become exercisable in equal
installments over a period of ( ) years.

Company initial Employee initial

2. Restriction on Transfer.

2.1 Five-Year Restriction. None of the shares of Common Stock and other
securities issued upon exercise of the Option may be sold, exchanged,
transferred, pledged, hypothecated or otherwise disposed of, without the prior
written approval of the Committee, for a period of five (5) years following the
date this Agreement and two (2) years following the date of exercise of the
Option as to those shares of Common Stock and/or other securities issued upon
such exercise, whichever is later. The foregoing restriction on transfer shall
not apply to Employee's transfer of shares of Common Stock to the Company in
payment of all or any portion of the exercise price payable on exercise of this
Option, or to Employee's election to satisfy his tax withholding obligation, if
any, with respect to any exercise of this Option through shares which otherwise
would be issued as a result of the exercise. Appropriate legends shall be placed
on any certificates evidencing any shares issued upon exercise of this Option,
and appropriate stop transfer instructions shall be given to the Company's
transfer agent.

Company initial Employee initial

2.2 Other Restriction. None of the shares of Common Stock and other
securities issued upon exercise of the Option may be sold, exchanged,
transferred, pledged, hypothecated or otherwise disposed of, without the prior
written approval of the Committee, for a period of ( ) years following the date
of this Agreement and ( ) years following the date of exercise of the Option as
to those shares of Common Stock and/or other securities issued upon such
exercise, whichever is later. The foregoing restriction on transfer shall not
apply to Employee's transfer of shares of Common Stock to the Company in payment
of all or any portion of the exercise price payable on exercise of this Option,
or to Employee's election to satisfy his tax withholding obligation, if any,
with respect to any exercise of this Option through shares which otherwise would
be issued as a result of the exercise. Appropriate legends shall be placed on
any certificates evidencing any shares issued upon exercise of this Option, and
appropriate stop transfer instructions shall be given to the Company's transfer
agent.

Company initial Employee initial

2.3 No Restriction. The shares of Common Stock and other securities issued
upon exercise of the Option may be sold, exchanged, transferred, pledged,
hypothecated or otherwise disposed of at any time without the prior written
approval of the Committee.

Company initial Employee initial

CONSENT OF SPOUSE

I acknowledge that I have read the foregoing Restricted Stock Option
Agreement (the "Agreement") and that I know its contents. I am aware that by its
provisions my spouse agrees to not sell the Shares that may be issued upon
exercise of the Option, including my community interest, if any, in them, during
certain periods specified in the Agreement. I hereby approve of the provisions
of the Agreement, agree that such Shares and my community property interest in
them, if any, are subject to the provisions of the Agreement and that I will
take no action at any time to hinder operation of the Agreement or to attempt
the sale or transfer of any of the Shares, including my community property
interest in them, if any, other than pursuant to the terms of the Agreement.

Date , spouse of

Exhibit 10.1.1.2

SANTA BARBARA BANCORP

RESTRICTED STOCK OPTION AGREEMENT

(Nonstatutory Stock Option - 5 Year)

THIS AGREEMENT ("Agreement") is entered into this day of
, 19 , between SANTA BARBARA BANCORP ("the Company") and
, ("Employee").

RECITALS

WHEREAS, the Company has duly adopted a Restricted Stock Option Plan, (the
"Plan"), which was adopted by the Board of Directors of the Company on January
29, 1992, and approved by the shareholders of the Company on April 28, 1992; and

WHEREAS, the Plan provides for the issuance of non-statutory stock options
(options which do not qualify as Incentive Stock Options, as defined in Section
422 of the Internal Revenue Code); and

WHEREAS, Employee has been designated by the Committee which administers the
Plan as the recipient of a Nonstatutory Stock Option (the "Option") under the
Plan.

AGREEMENT

NOW, THEREFORE:

1. GRANT

The Company hereby grants to Employee the option to purchase an aggregate of
shares of the Company's Common Stock at a price of $ per share,
(which price the Company has determined to be 100% of the fair market value of
the shares at the time of grant).

2. OPTION PERIOD

The period during which the option granted hereby may be exercised
(hereinafter called the "Option Period") shall commence after the expiration of
six (6) months following the date hereof and shall terminate five (5) years from
the date hereof, subject to the provisions governing earlier termination in
Section 5, below.

3. EXERCISE

3.1 Vesting. The Option shall "vest" and become exercisable in accordance
with the provisions of Section 1 of Exhibit A attached hereto.

3.2 Option Exercise Price. The option price must be paid (a) in cash or check
or (b) by the tender of other Shares of Common Stock owned by the Employee,
having a fair market value on the date of surrender equal to the aggregate
exercise price of the Shares as to which said option is intended to be
exercised, or (c) any combination of such methods of payment.

3.3 Stock-for-Stock Exercises. In the event that the option price is paid,
whether in whole or in part, through the tender, whether through surrender or
attestation, of shares of Common Stock of the Company already owned by the
Employee, then this Option must be exercised for a minimum of at least 100
shares, or the total number of shares remaining subject to the Option, if less
than 100 shares.

3.4 Periodic Exercise. The Option may be exercised by Employee with respect
to some or all of the shares of Common Stock and other securities covered by the
Option at any time and from time to time on or after the date on which the
Option becomes exercisable with respect to such shares; provided that the Option
may not be exercised at any one time with respect to less that one hundred (100)
shares of Common Stock unless the number of shares with respect to which the
Option is exercised is the total number of shares with respect to which the
Option is exercisable at that time.

4. RESTRICTION ON TRANSFER OF STOCK ISSUED

Any and all shares of Common Stock and other securities, if any, issued
pursuant to this Agreement shall be subject to the restrictions on transfer, if
any, set forth in Section 2 of Exhibit A attached hereto.

5. EXPIRATION

This Option shall expire upon the occurrence of the following events:

5.1 Thirty (30) days following termination of employment, other than as a
result of the Employee's retirement, death or disability;

5.2 Immediately upon retirement of Employee in accordance with the Company's
retirement policy; provided, however, that Employee may within three (3) months
after the date of retirement (but in no event beyond the period of time for
which the options evidenced by this Agreement are granted) exercise the option
as to those shares with respect to which installments, if any, had accrued and
were exercisable as of the date on which Employee retired; and

5.3 Twelve (12) months after the death or permanent disability (as defined in
the Company's Incentive and Investment Profit Sharing Plan and Trust) of
Employee while in the employ of the Company (but in no event beyond the period
of time for which the options evidenced by this Agreement are granted). During
such twelve-month period, Employee (or his personal representative) or the
persons to whom the Employee's rights under this Agreement shall have passed by
will or by the applicable laws of descent and distribution, shall have the right
to exercise the Option evidenced by this Agreement to the extent that
installments, if any, had accrued and were exercisable as of the date of
Employee's death or disability.

6. TAX WITHHOLDING

To the extent that the exercise of any Option granted hereunder gives rise to
an obligation on the part of the Company to withhold from amounts otherwise to
be paid to the Employee, the Company shall do so on such terms and in accordance
with such procedures as may be required under applicable law. At the election of
the Employee, withholding may be made in shares of the Common Stock of the
Company which would otherwise be issued as a result of the exercise. If
withholding is made in shares of the Company's stock, the Company shall grant a
Reload Option(s), in accordance with the terms and conditions specified in the
Plan, for the number of shares so withheld.

7. NO LIMIT ON GRANT

The options evidenced by this Agreement are nonstatutory or non-qualified
stock options and not incentive stock options as defined in Section 422 of the
Internal Revenue Code (the "Code"). As nonstatutory stock options issued
pursuant to the Plan, they are not subject to any limitations as to the
aggregate fair market value of the stock subject to such options and,
specifically, shall not be subject to the $100,000 limitation specified in
Section 422(b)(7) of the Code.

8. RECAPITALIZATION OF COMPANY

Except as otherwise provided herein, appropriate and proportionate
adjustments shall be made in the number and class of shares subject to the
Option, and the exercise price of the Option, in the event of a stock dividend
(but only on Common Stock), stock-split, reverse stock-split, recapitalization,
reorganization or like change in the capital structure of the Company. To the
extent that the foregoing adjustments relate to stock or securities of the
Company, such adjustments shall be made by the Committee, the determination of
which in that respect shall be final, binding, and conclusive.

9. REORGANIZATION OR LIQUIDATION OF THE COMPANY

In the event of (a) a liquidation of the Company, or (b) a merger,
reorganization, or consolidation of the Company with any other corporation in
which the Company is not the surviving corporation or the Company becomes a
wholly-owned subsidiary of another corporation, or (c) any sale of all or
substantially all of the Company's assets, any unexercised portion of this
Option shall be deemed cancelled unless the surviving corporation in any such
merger, reorganization or consolidation or the acquiring corporation in any such
sale elects to assume the Option or to issue substitute options in place
thereof; provided, however, that if the unexercised portion of this Option would
be cancelled in accordance with the foregoing, Employee shall have the right,
exercisable during a 10-day period ending on the fifth day prior to the
effective date of such liquidation, merger, reorganization, consolidation or
sale, to exercise the Option in whole or in part without regard to any
installment exercise provisions in this Agreement. The Company shall give
Employee at least thirty (30) days prior written notice of the anticipated
effective date of any such liquidation, merger, reorganization, consolidation or
sale. Notwithstanding anything in the Plan or this Agreement to the contrary,
(i) any exercise of the Option effected during the foregoing 10- day period
shall be deemed to be effective immediately prior to the closing of such
liquidation, merger, reorganization, consolidation or sale and (ii), if the
Company abandons or otherwise fails to close any such liquidation, merger,
reorganization, consolidation or sale, then (A) any exercise during the
foregoing 10-day period shall cease to be effective ab initio and (B) the
unexercised portion of the Option shall be exercisable as otherwise determined
under this Agreement and without consideration of this Section.

10. SECURITIES COMPLIANCE

Should the Company at any time determine that the listing, registration,
qualification, or exemption of the shares covered by this Option is required on
any securities exchange or under any state or federal law, or should the Company
determine that the notification, consent, or approval of any governmental
regulatory authority is necessary or desirable as a condition to the exercise of
this Option, then this Option may not be exercised, in whole or in part, unless
and until such listing, registration, qualification, notification, consent, or
approval shall have been effected, obtained, or given, free of any conditions
not acceptable to the Company.

11. METHOD OF EXERCISE

11.1 Exercise Procedure. The Option shall be exercised by Employee's delivery
to the Company of a written notice specifying the number of shares which
Employee then desires to purchase, accompanied by full payment of the aggregate
exercise price thereof and, if appropriate, an executed Spousal Consent. As soon
as practicable after its receipt of the notice of exercise and payment of the
exercise price, the Company shall issue and deliver to Employee one or more
certificates evidencing the number of shares purchased (excluding any fractional
shares), in the name of Employee and/or such other person(s) as Employee has
properly designated in the notice of exercise.

11.2 Name of Issuee. Employee may designate in the notice of exercise that
some or all of the shares of Common Stock or other securities to be issued on
such exercise shall be issued in the name of Employee's spouse, the trustee of a
revocable trust in which Employee and his or her spouse are the sole primary
beneficiaries, Employee's prior spouse, or any combination of the foregoing.
Notwithstanding anything in this Agreement to the contrary, Employee may not
designate in the notice of exercise that any of the shares of Common Stock and
other securities issuable on exercise of the Option shall be issued to
Employee's prior spouse unless such issuance is to be made pursuant to a
domestic relations order as defined in the Code or Title I of the Employee
Income Retirement Security Act or the rules thereunder. The Company may rely on
a representation of Employee, or such other evidence as the Company deems
appropriate, for purposes of determining the propriety of the exercise of the
Option and the compliance of such exercise with the terms of the Plan and this
Agreement. The Company shall have no obligation to deal directly with, and shall
have no liability to, any person other than Employee, or Employee's personal
representative if Employee has died or become permanently disabled prior to the
delivery of the shares. Employee shall indemnify and hold harmless the Company,
and each of its officers, directors, employees and agents, from and against any
and all claims made by any person other than Employee, or Employee's personal
representative, who is designated in the notice of exercise.

11.3 Transfer Taxes. The Company shall pay all expenses, taxes and other
charges payable in connection with the preparation, issue and delivery of the
foregoing stock certificates, except that, in case such stock certificates shall
be registered in a name or names other than the name of Employee, funds
sufficient to pay all stock transfer taxes which shall be payable upon the
issuance of such stock certificates shall be paid by Employee at the time of the
delivery of the notice of exercise.

12. TRANSFERABILITY OF OPTIONS

12.1 Restriction on Transfer. Except as specifically set forth in Section
12.2 hereof, Employee may not sell, pledge, assign, hypothecate, transfer, or
otherwise dispose of all or any portion of the Option other than by will or the
laws of descent and distribution.

12.2 Limited Transferability. Notwithstanding anything in Section 12.1 hereof
to the contrary, Employee may transfer all or a portion of the Option in
accordance with the provisions of this Section 12.2. Any purported transfer of
all or any portion of the Option that does not comply with all of the provisions
of this Section 12.2 shall be null and void ab initio.

12.2.1 Permitted Transferees. All or any portion of the Option may be
transferred or assigned by Employee only to one or more of the following: (a)
Employee's spouse, parents and lineal descendants, including adopted children
(the "Immediate Family Members"); (b) a trust established by Employee and with
respect to which all beneficial interests are held by one or more of Employee,
the Immediate Family Members, and a tax-exempt charitable organization which has
only a contingent residual interest in the trust; (c) a partnership or limited
liability company in which all voting and equity interests are held by one or
more of Employee and the Immediate Family Members; (d) a tax-exempt educational,
religious or charitable organization, as those terms are defined in Section
501(c)(3) of the Code; and (e) such other persons and entities as the Company
may specifically approve in writing after written notice from Employee. The
Company may require as a condition to any transfer under this Section 12.2 that
the proposed transferee provide to the Company reasonable evidence that the
transferee is described in one of the foregoing clauses.

12.2.2 Permitted Transfers. Any transfer of all or any portion of the
Option under this Section 12.2 must be either a Donative Transfer, a transfer to
a partnership or limited liability company described in clause (c) of Section
12.2.1 above, in which the Employee does not receive any consideration other
than the Employee's interest in such partnership or limited liability company,
or a transfer specifically approved in writing by the Company after written
notice from the Employee.

12.2.3 Minimum Transfer. Any transfer of a portion of the Option must be
with respect to not less than one hundred (100) shares of Common Stock and may
be made only in whole number multiples of one hundred (100) shares of Common
Stock.

12.2.4 Notice to the Company. Employee shall give the Company at least ten
(10) days prior written notice of any proposed transfer or assignment of all or
any portion of the Option pursuant to this Section 12.2 and shall include with
such notice:

A. The name and address of the proposed transferee and a statement of
the basis on which the proposed transferee is a permitted transferee under
Section 12.2.1 hereof; and

B. The proposed transferee's written agreement to accept the
transferred Option and any shares of Common Stock acquired on exercise of the
Option subject to all of the terms and conditions of the Plan and this
Agreement, including the provisions dealing with the termination of the Option
on the death or disability of Employee or the termination of Employee's status
as an employee of the Company.

12.2.5 No Further Transfer. Notwithstanding anything in the Plan or this
Agreement to the contrary, a transferee of all or any portion of the Option
shall not have the right to further transfer all or any portion of the
transferred Option to any person or entity other than (a) by will or the laws of
descent and distribution, or (b), if the transferee is a trust, pursuant to the
terms of the trust agreement by reason of the death of any settlor.

12.2.6 Further Acts. The Company may require as a condition to the
transfer of all or any portion of the Option such additional information and
agreements from Employee and the proposed transferee as the Company may deem
necessary or beneficial for purposes of complying with this Section or any
applicable federal or state law, rule or regulation.

12.2.7 Withholding on Exercise of Transferred Option. Employee
acknowledges and agrees that, if Employee transfers all or any portion of the
Option pursuant to this Section 12.2 and the transferee exercises the Option,
such exercise may be subject to income tax withholding and Employee will be
obligated to satisfy such income tax withholding obligation to the same extent
as if Employee had retained and exercised the Option. Employee shall be solely
responsible for determining the tax and legal consequences of Employee's
transfer of all or any portion of the Option and of the transferee's exercise of
the Option, and for obtaining such tax and legal advice as Employee deems
appropriate.

12.2.8 Disclaimer. The Company's acceptance of any transfer of all or any
portion of the Option shall not be considered legal or tax advice to Employee or
the proposed transferee as to (a) their compliance with any applicable law, rule
or regulation or (b) the legal or tax consequences of such transfer or the
subsequent exercise of the transferred Option or the sale or exchange of any of
the shares of Common Stock acquired on exercise of the transferred Option. The
Company's acceptance of any transfer of all or any portion of the Option shall
not obligate the Company to accept any subsequent transfer of all or any portion
of the Option.

13. NO SHAREHOLDER RIGHTS

Employee shall not be deemed to be a shareholder of the Company with respect
to the shares issuable upon exercise of the options granted herein unless and
until such shares shall have been issued to Employee upon exercise of said
options and the exercise price therefor has been paid for in full.

14. INTERPRETATION

This Agreement is subject to all of the terms and conditions of the Plan, and
in the event of any conflict between any of the provisions of this Agreement and
any of the provisions of the Plan, the applicable provisions of the Plan shall
control. The Committee administering the Plan shall have full power to interpret
the provisions of this Agreement and of the Plan and to decide any dispute which
may arise hereunder or thereunder. Said Committee's action shall be final and
conclusive upon all persons affected thereby. All references in this Plan to
Employee shall mean and include Employee's personal representative if Employee
has died or become permanently disabled prior to the time in question.

15. AMENDMENT

The Board of Directors of the Company shall have such power to amend or
terminate the Plan as is specified in the Plan. Such amendment or termination
shall not, however, affect any options then outstanding hereunder.

16. SUCCESSORS

This Agreement shall be binding upon the heirs, executors, administrators and
successors of the parties hereto.

17. SUBSIDIARIES

The term "Company" as used herein shall include Santa Barbara Bancorp and any
of its subsidiaries.

18. TAX MATTERS

Employee understands that the grant and exercise of the Option under this
Agreement will have tax and legal consequences to Employee and that the Company
is not making any representation to Employee and is not advising Employee as to
the tax or other legal consequences of the grant or exercise of this Option or
of any other action taken or to be taken by Employee under this Agreement or
with respect to the Option. Employee shall be solely responsible for determining
such tax and legal consequences to Employee and for obtaining such advice as
Employee deems appropriate.

EMPLOYEE ACKNOWLEDGES THAT IT IS EMPLOYEE'S SOLE RESPONSIBILITY TO
EVALUATE AND DETERMINE THE TAX AND LEGAL CONSEQUENCES TO EMPLOYEE OF
THIS AGREEMENT AND EMPLOYEE'S EXERCISE OF THE OPTION AND ACQUISITION OF
THE SHARES AND THAT THE COMPANY HAS NOT ADVISED, AND HAS NO OBLIGATION
TO ADVISE, EMPLOYEE WITH RESPECT TO ANY SUCH TAX AND LEGAL
CONSEQUENCES, EVEN IF EMPLOYEE REQUESTS THE COMPANY TO DO SO.

19. SPOUSAL CONSENT

If Employee is married or otherwise deemed to have a spouse for purposes of
California law, Employee shall have his or her spouse execute the form of
Spousal Consent attached to this Agreement, as such form may be amended or
revised by the Company from time to time, contemporaneously with the execution
of this Agreement and on each exercise of the Option by Employee.
Notwithstanding anything in this Agreement to the contrary, if Employee is
married or otherwise deemed to have a spouse for purposes of California law, (a)
this Agreement and the Option shall not be effective for any purpose until
Employee delivers to the Company a duly executed Spousal Consent form and (b)
the exercise of the Option shall not be effective and the Company shall not be
obligated to issue to Employee any shares covered by the Option until Employee
delivers to the Company a duly executed Spousal Consent form.

20. ENTIRE AGREEMENT

This Agreement and the Plan collectively contain the entire understanding
between the parties with respect to the subject matter hereof, and supersede any
and all prior written or oral agreements between the parties with respect to the
subject matter hereof. There are no representations, agreements, arrangements,
or understandings, either written or oral, between or among the parties with
respect to the subject matter hereof which are not set forth in this Agreement.

21. GOVERNING LAW

This Agreement shall be governed by, and construed in accordance with, the
laws of the State of California applicable to contracts made and to be fully
performed in the State of California.

22. NOTICES

Any notice given pursuant to this Agreement shall be in writing and shall be
given by personal service or by United States certified mail, return receipt
requested, postage prepaid to the addresses appearing on the signature page of
this Agreement or such other address as may be given by either party for
purposes of this Agreement. Notice given by personal service shall be deemed
effective on the date it is delivered to the addressee, and notice mailed shall
be deemed effective on the third day following its placement in the mail
addressed to the addressee. Either party may change its address for notice
purposes by giving the other party notice of such change in accordance with this
Section. Notwithstanding anything herein to the contrary, any notice that
consists solely of notice of the change of address of any party may be given by
regular mail.

23. INCORPORATION OF EXHIBITS

Each and all of the Exhibits to this Agreement are, by this reference,
incorporated herein to the same extent as if they were set forth in full herein.

IN WITNESS WHEREOF, the parties have entered into this Restricted Stock
Option Agreement as of the date first above written.

"COMPANY":

SANTA BARBARA BANCORP

By:___________________________

Its:__________________________

1021 Anacapa Street
Santa Barbara, CA 93102
Attn:

"EMPLOYEE":

- ------------------------------
Signature of Employee

- ------------------------------
Name of Employee

Address of Employee

Exhibit A

Vesting; Restrictions on Transfer

Set forth below are the terms on which the Option shall vest and the
restrictions on transfer, if any, that are applicable to the shares of Common
Stock and other securities issued upon exercise of this Option. The provisions
that are applicable to this Option are those that are initialed by the Company
and Employee. In the event that either (a) the Company and Employee do not
initial a subsection under either Section 1 or Section 2 of this Exhibit or (b)
the Company and Employee initial more than one subsection in either Section 1 or
Section 2, then Section 1.1 and Section 2.1 shall apply for all purposes under
this Agreement.

1. Vesting

1.1 Five-Year Vesting. The Option shall "vest" and become exercisable in
equal annual installments over a period of five (5) years. Specifically,
Employee shall become entitled to purchase an additional 20% of the total number
of option shares specified in Section 1 of the Agreement (on a cumulative basis)
during each one-year period following the date of the Agreement. Thus, during
the first year following the date of the Agreement, Employee shall be entitled
to exercise this Option to purchase 20% of the total number of option shares;
40% during the second year; 60% during the third year; 80% during the fourth
year; and 100% during the fifth year.

Company initial Employee initial

1.2 Other Vesting. The Option shall "vest" and become exercisable in
equal installments over a period of ( ) years.

Company initial Employee initial

2. Restriction on Transfer.

2.1 Five-Year Restriction. None of the shares of Common Stock and other
securities issued upon exercise of the Option may be sold, exchanged,
transferred, pledged, hypothecated or otherwise disposed of, without the prior
written approval of the Company, for a period of five (5) years following the
date this Agreement and two (2) years following the date of exercise of the
Option as to those shares of Common Stock and/or other securities issued upon
such exercise, whichever is later; provided that the foregoing restriction on
transfer shall not apply to Employee's transfer of shares of Common Stock (a) to
the Company in payment of all or any portion of the exercise price payable upon
exercise of the Option or the satisfaction of any income tax withholding
obligation with respect to any exercise of the Option or (b) to the acquiring
party in any transaction described in Section 9 of this Agreement in which the
Company is not the surviving corporation, or (c), subject to the provisions of
Section 2.4 of this Exhibit, to a person or entity described in Section 12.2
hereof.

Company initial Employee initial

2.2 Other Restriction. None of the shares of Common Stock and other
securities issued upon exercise of the Option may be sold, exchanged,
transferred, pledged, hypothecated or otherwise disposed of, without the prior
written approval of the Company, for a period of ( ) years following the date
this Agreement and ( ) years following the date of exercise of the Option as to
those shares of Common Stock and/or other securities issued upon such exercise,
whichever is later; provided that the foregoing restriction on transfer shall
not apply to Employee's transfer of shares of Common Stock (a) to the Company in
payment of all or any portion of the exercise price payable upon exercise of the
Option or the satisfaction of any income tax withholding obligation with respect
to any exercise of the Option or (b) to the acquiring party in any transaction
described in Section 9 of the Agreement in which the Company is not the
surviving corporation, or (c), subject to the provisions of Section 2.4 of this
Exhibit, to a person or entity described in Section 12.2 hereof.

Company initial Employee initial

2.3 No Restriction. The shares of Common Stock and other securities issued
upon exercise of the Option may be sold, exchanged, transferred, pledged,
hypothecated or otherwise disposed of at any time without the prior written
approval of the Committee.

Company initial Employee initial

2.4 Exempt Transfers. Notwithstanding the foregoing, Employee may transfer
shares of Common Stock or other securities acquired on exercise of the Option to
a person described in Section 12.2.1 hereof only if all of the following
conditions are satisfied: (i) the transfer is a permitted transfer under Section
12.2.1 hereof; (ii) Employee gives the Company at least ten (10) days prior
written notice of the proposed transfer, which notice shall specify the name and
address of the proposed transferee and the basis on which the proposed
transferee is a person or entity described in Section 12.2.1 hereof; (iii) the
proposed transferee agrees in writing for the benefit of the Company to acquire
and hold the transferred shares of Common Stock or other securities subject to
the terms and conditions of the Plan and this Agreement, including the
provisions of this Exhibit; and (iv) the transfer is of a whole number multiple
of one hundred (100) shares.

2.5 Legend. Appropriate legends shall be placed on any certificates
evidencing the shares of Common Stock or other securities issued upon exercise
of the Option and appropriate stop transfer instructions shall be given to the
Company's transfer agent.

CONSENT OF SPOUSE

I acknowledge that I have read the foregoing Restricted Stock Option
Agreement (the "Agreement") and that I know its contents. I am aware that by its
provisions my spouse agrees to not sell the Shares that may be issued upon
exercise of the Option, including my community interest, if any, in them, during
certain periods specified in the Agreement. I hereby approve of the provisions
of the Agreement, agree that such Shares and my community property interest in
them, if any, are subject to the provisions of the Agreement and that I will
take no action at any time to hinder operation of the Agreement or to attempt
the sale or transfer of any of the Shares, including my community property
interest in them, if any, other than pursuant to the terms of the Agreement.

Date ____________________, spouse of

Exhibit 10.1.1.3

SANTA BARBARA BANCORP

RESTRICTED STOCK OPTION AGREEMENT

(Nonstatutory Stock Option - 10 Year)

THIS AGREEMENT ("Agreement") is entered into this day of
, 19 , between SANTA BARBARA BANCORP ("the Company") and
, ("Employee").

RECITALS

WHEREAS, the Company has duly adopted a Restricted Stock Option Plan, (the
"Plan"), which was adopted by the Board of Directors of the Company on January
29, 1992, and approved by the shareholders of the Company on April 28, 1992; and

WHEREAS, the Plan provides for the issuance of non-statutory stock options
(options which do not qualify as Incentive Stock Options, as defined in Section
422 of the Internal Revenue Code of 1986, as amended (the "Code")); and

WHEREAS, Employee has been designated by the Committee which administers the
Plan as the recipient of a Nonstatutory Stock Option (the "Option") under the
Plan.

AGREEMENT

NOW, THEREFORE:

1. GRANT

The Company hereby grants to Employee the option to purchase an aggregate of
________ shares of the Company's Common Stock at a price of _$ per share, (which
price the Company has determined to be 100% of the fair market value of the
shares at the time of grant).

2. OPTION PERIOD

The period during which the option granted hereby may be exercised
(hereinafter called the "Option Period") shall commence after the expiration of
six (6) months following the date hereof and shall terminate ten (10) years from
the date hereof, subject to the provisions governing earlier termination in
Section 5, below.

3. EXERCISE

3.1 Vesting. The Option shall "vest" and become exercisable in accordance
with the provisions of Section 1 of Exhibit A attached hereto.

3.2 Option Exercise Price. The option price must be paid (a) in cash or check
or (b) by the tender of other Shares of Common Stock owned by the Employee,
having a fair market value on the date of surrender equal to the aggregate
exercise price of the Shares as to which said option is intended to be
exercised, or (c) any combination of such methods of payment.

3.3 Stock-for-Stock Exercises. In the event that the option price is paid,
whether in whole or in part, through the tender, whether through surrender or
attestation, of shares of Common Stock of the Company already owned by the
Employee, then this Option must be exercised for a minimum of at least 100
shares, or the total number of shares remaining subject to the Option, if less
than 100 shares.

3.4 Periodic Exercise. The Option may be exercised by Employee with respect
to some or all of the shares of Common Stock and other securities covered by the
option at any time and from time to time on or after the date on which the
Option becomes exercisable with respect to such shares; provided that the Option
may not be exercised at any one time with respect to less that one hundred (100)
shares of Common Stock unless the number of shares with respect to which the
Option is exercised is the total number of shares with respect to which the
Option is exercisable at that time.

4. RESTRICTION ON TRANSFER OF STOCK ISSUED

Any and all shares of stock and other securities, if any, issued pursuant to
this Agreement shall be subject to the restrictions on transfer, if any, set
forth in Section 2 of Exhibit A attached hereto.

5. EXPIRATION

This Option shall expire upon the occurrence of the following events:

5.1 Thirty (30) days following termination of employment, other than as a
result of the Employee's retirement, death or disability;

5.2 Immediately upon retirement of Employee in accordance with the Company's
retirement policy; provided, however, that Employee may within three (3) months
after the date of retirement (but in no event beyond the period of time for
which the options evidenced by this Agreement are granted) exercise the option
as to those shares with respect to which installments, if any, had accrued and
were exercisable as of the date on which Employee retired; and

5.3 Twelve (12) months after the death or permanent disability (as defined in
the Company's Incentive and Investment Profit Sharing Plan and Trust) of
Employee while in the employ of the Company (but in no event beyond the period
of time for which the options evidenced by this Agreement are granted). During
such twelve-month period, Employee (or his personal representative) or the
persons to whom the Employee's rights under this Agreement shall have passed by
will or by the applicable laws of descent and distribution, shall have the right
to exercise the Option evidenced by this Agreement to the extent that
installments, if any, had accrued and were exercisable as of the date of
Employee's death or disability.

6. TAX WITHHOLDING

To the extent that the exercise of any Option granted hereunder gives rise to
an obligation on the part of the Company to withhold from amounts otherwise to
be paid to the Employee, the Company shall do so on such terms and in accordance
with such procedures as may be required under applicable law. At the election of
the Employee, withholding may be made in shares of the Common Stock of the
Company which would otherwise be issued as a result of the exercise. If
withholding is made in shares of the Company's stock, the Company shall grant a
Reload Option(s), in accordance with the terms and conditions specified in the
Plan, for the number of shares so withheld.

7. NO LIMIT ON GRANT

The options evidenced by this Agreement are nonstatutory or non-qualified
stock options and not incentive stock options as defined in Section 422 of the
Internal Revenue Code (the "Code"). As nonstatutory stock options issued
pursuant to the Plan, they are not subject to any limitations as to the
aggregate fair market value of the stock subject to such options and,
specifically, shall not be subject to the $100,000 limitation specified in
Section 422(b)(7) of the Code.

8. RECAPITALIZATION OF COMPANY

Except as otherwise provided herein, appropriate and proportionate
adjustments shall be made in the number and class of shares subject to the
Option, and the exercise price of the Option, in the event of a stock dividend
(but only on Common Stock), stock-split, reverse stock-split, recapitalization,
reorganization or like change in the capital structure of the Company. To the
extent that the foregoing adjustments relate to stock or securities of the
Company, such adjustments shall be made by the Committee, the determination of
which in that respect shall be final, binding, and conclusive.

9. REORGANIZATION OR LIQUIDATION OF THE COMPANY

In the event of (a) a liquidation of the Company, or (b) a merger,
reorganization, or consolidation of the Company with any other corporation in
which the Company is not the surviving corporation or the Company becomes a
wholly-owned subsidiary of another corporation, or (c) any sale of all or
substantially all of the Company's assets, any unexercised portion of this
Option shall be deemed cancelled unless the surviving corporation in any such
merger, reorganization or consolidation or the acquiring corporation in any such
sale elects to assume the Option or to issue substitute options in place
thereof; provided, however, that if the unexercised portion of this Option would
be cancelled in accordance with the foregoing, Employee shall have the right,
exercisable during a 10-day period ending on the fifth day prior to the
effective date of such liquidation, merger, reorganization, consolidation or
sale, to exercise the Option in whole or in part without regard to any
installment exercise provisions in this Agreement. The Company shall give
Employee at least thirty (30) days prior written notice of the anticipated
effective date of any such liquidation, merger, reorganization, consolidation or
sale. Notwithstanding anything in the Plan or this Agreement to the contrary,
(i) any exercise of the Option effected during the foregoing 10- day period
shall be deemed to be effective immediately prior to the closing of such
liquidation, merger, reorganization, consolidation or sale and (ii), if the
Company abandons or otherwise fails to close any such liquidation, merger,
reorganization, consolidation or sale, then (A) any exercise during the
foregoing 10-day period shall cease to be effective ab initio and (B) the
unexercised portion of the Option shall be exercisable as otherwise determined
under this Agreement and without consideration of this Section.

10. SECURITIES COMPLIANCE

Should the Company at any time determine that the listing, registration,
qualification, or exemption of the shares covered by this Option is required on
any securities exchange or under any state or federal law, or should the Company
determine that the notification, consent, or approval of any governmental
regulatory authority is necessary or desirable as a condition to the exercise of
this Option, then this Option may not be exercised, in whole or in part, unless
and until such listing, registration, qualification, notification, consent, or
approval shall have been effected, obtained, or given, free of any conditions
not acceptable to the Company.

11. METHOD OF EXERCISE

11.1 Exercise Procedure. The Option shall be exercised by Employee's delivery
to the Company of a written notice specifying the number of shares which
Employee then desires to purchase, accompanied by full payment of the aggregate
exercise price thereof and, if appropriate, an executed Spousal Consent. As soon
as practicable after its receipt of the notice of exercise and payment of the
exercise price, the Company shall issue and deliver to Employee one or more
certificates evidencing the number of shares purchased (excluding any fractional
shares), in the name of Employee and/or such other person(s) as Employee has
properly designated in the notice of exercise.

11.2 Name of Issuee. Employee may designate in the notice of exercise that
some or all of the shares of Common Stock or other securities to be issued on
such exercise shall be issued in the name of Employee's spouse, the trustee of a
revocable trust in which Employee and his or her spouse are the sole primary
beneficiaries, Employee's prior spouse, or any combination of the foregoing.
Notwithstanding anything in this Agreement to the contrary, Employee may not
designate in the notice of exercise that any of the shares of Common Stock and
other securities issuable on exercise of the Option shall be issued to
Employee's prior spouse unless such issuance is to be made pursuant to a
domestic relations order as defined in the Code or Title I of the Employee
Income Retirement Security Act or the rules thereunder. The Company may rely on
a representation of Employee, or such other evidence as the Company deems
appropriate, for purposes of determining the propriety of the exercise of the
Option and the compliance of such exercise with the terms of the Plan and this
Agreement. The Company shall have no obligation to deal directly with, and shall
have no liability to, any person other than Employee, or Employee's personal
representative if Employee has died or become permanently disabled prior to the
delivery of the shares. Employee shall indemnify and hold harmless the Company,
and each of its officers, directors, employees and agents, from and against any
and all claims made by any person other than Employee, or Employee's personal
representative, who is designated in the notice of exercise.

11.3 Transfer Taxes. The Company shall pay all expenses, taxes and other
charges payable in connection with the preparation, issue and delivery of the
foregoing stock certificates, except that, in case such stock certificates shall
be registered in a name or names other than the name of Employee, funds
sufficient to pay all stock transfer taxes which shall be payable upon the
issuance of such stock certificates shall be paid by Employee at the time of the
delivery of the notice of exercise.

12. TRANSFERABILITY OF OPTIONS

12.1 Restriction on Transfer. Except as specifically set forth in Section
12.2 hereof, Employee may not sell, pledge, assign, hypothecate, transfer, or
otherwise dispose of all or any portion of the Option other than by will or the
laws of descent and distribution.

12.2 Limited Transferability. Notwithstanding anything in Section 12.1 hereof
to the contrary, Employee may transfer all or a portion of the Option in
accordance with the provisions of this Section 12.2 . Any purported transfer of
all or any portion of the Option that does not comply with all of the provisions
of this Section 12.2 shall be null and void ab initio.

12.2.1 Permitted Transferees. All or any portion of the Option may be
transferred or assigned by Employee only to one or more of the following: (a)
Employee's spouse, parents and lineal descendants, including adopted children
(the "Immediate Family Members"); (b) a trust established by Employee and with
respect to which all beneficial interests are held by one or more of Employee,
the Immediate Family Members, and a tax-exempt charitable organization which has
only a contingent residual interest in the trust; (c) a partnership or limited
liability company in which all voting and equity interests are held by one or
more of Employee and the Immediate Family Members; (d) a tax-exempt educational,
religious or charitable organization, as those terms are defined in Section
501(c)(3) of the Code; and (e) such other persons and entities as the Company
may specifically approve in writing after written notice from Employee. The
Company may require as a condition to any transfer under this Section 12.2 that
the proposed transferee provide to the Company reasonable evidence that the
transferee is described in one of the foregoing clauses.

12.2.2 Permitted Transfers. Any transfer of all or any portion of the
Option under this Section 12.2 must be either a Donative Transfer, a transfer to
a partnership or limited liability company described in clause (c) of Section
12.2.1 above, in which the Employee does not receive any consideration other
than the Employee's interest in such partnership or limited liability company,
or a transfer specifically approved in writing by the Company after written
notice from the Employee.

12.2.3 Minimum Transfer. Any transfer of a portion of the Option must be with
respect to not less than one hundred (100) shares of Common Stock and may be
made only in whole number multiples of one hundred (100) shares of Common Stock.

12.2.4 Notice to the Company. Employee shall give the Company at least ten
(10) days prior written notice of any proposed transfer or assignment of all or
any portion of the Option pursuant to this Section 12.2 and shall include with
such notice:

A. The name and address of the proposed transferee and a statement of
the basis on which the proposed transferee is a permitted transferee under
Section 12.2.1 hereof; and

B. The proposed transferee's written agreement to accept the transferred
Option and any shares of Common Stock acquired on exercise of the Option subject
to all of the terms and conditions of the Plan and this Agreement, including the
provisions dealing with the termination of the Option on the death or disability
of Employee or the termination of Employee's status as an employee of the
Company.

12.2.5 No Further Transfer. Notwithstanding anything in the Plan or this
Agreement to the contrary, a transferee of all or any portion of the Option
shall not have the right to further transfer all or any portion of the
transferred Option to any person or entity other than (a) by will or the laws of
descent and distribution, or (b), if the transferee is a trust, pursuant to the
terms of the trust agreement by reason of the death of any settlor.

12.2.6 Further Acts. The Company may require as a condition to the
transfer of all or any portion of the Option such additional information and
agreements from Employee and the proposed transferee as the Company may deem
necessary or beneficial for purposes of complying with this Section or any
applicable federal or state law, rule or regulation.

12.2.7 Withholding on Exercise of Transferred Option. Employee
acknowledges and agrees that, if Employee transfers all or any portion of the
Option pursuant to this Section 12.2 and the transferee exercises the Option,
such exercise may be subject to income tax withholding and Employee will be
obligated to satisfy such income tax withholding obligation to the same extent
as if Employee had retained and exercised the Option. Employee shall be solely
responsible for determining the tax and legal consequences of Employee's
transfer of all or any portion of the Option and of the transferee's exercise of
the Option, and for obtaining such tax and legal advice as Employee deems
appropriate.

12.2.8 Disclaimer. The Company's acceptance of any transfer of all or any
portion of the Option shall not be considered legal or tax advice to Employee or
the proposed transferee as to (a) their compliance with any applicable law, rule
or regulation or (b) the legal or tax consequences of such transfer or the
subsequent exercise of the transferred Option or the sale or exchange of any of
the shares of Common Stock acquired on exercise of the transferred Option. The
Company's acceptance of any transfer of all or any portion of the Option shall
not obligate the Company to accept any subsequent transfer of all or any portion
of the Option.

13. NO SHAREHOLDER RIGHTS

Employee shall not be deemed to be a shareholder of the Company with respect
to the shares issuable upon exercise of the options granted herein unless and
until such shares shall have been issued to Employee upon exercise of said
options and the exercise price therefore has been paid for in full.

14. INTERPRETATION

This Agreement is subject to all of the terms and conditions of the Plan, and
in the event of any conflict between any of the provisions of this Agreement and
any of the provisions of the Plan, the applicable provisions of the Plan shall
control. The Committee administering the Plan shall have full power to interpret
the provisions of this Agreement and of the Plan and to decide any dispute which
may arise hereunder or thereunder. Said Committee's action shall be final and
conclusive upon all persons affected thereby. All references in this Plan to
Employee shall mean and include Employee's personal representative if Employee
has died or become permanently disabled prior to the time in question.

15. AMENDMENT

The Board of Directors of the Company shall have such power to amend or
terminate the Plan as is specified in the Plan. Such amendment or termination
shall not, however, affect any options then outstanding hereunder.

16. SUCCESSORS

This Agreement shall be binding upon the heirs, executors, administrators and
successors of the parties hereto.

17. SUBSIDIARIES

The term "Company" as used herein shall include Santa Barbara Bancorp and any
of its subsidiaries.

18. TAX MATTERS

Employee understands that the grant and exercise of the Option under this
Agreement will have tax and legal consequences to Employee and that the Company
is not making any representation to Employee and is not advising Employee as to
the tax or other legal consequences of the grant or exercise of this Option or
of any other action taken or to be taken by Employee under this Agreement or
with respect to the Option. Employee shall be solely responsible for determining
such tax and legal consequences to Employee and for obtaining such advice as
Employee deems appropriate.

EMPLOYEE ACKNOWLEDGES THAT IT IS EMPLOYEE'S SOLE RESPONSIBILITY TO
EVALUATE AND DETERMINE THE TAX AND LEGAL CONSEQUENCES TO EMPLOYEE OF
THIS AGREEMENT AND EMPLOYEE'S EXERCISE OF THE OPTION AND ACQUISITION OF
THE SHARES AND THAT THE COMPANY HAS NOT ADVISED, AND HAS NO OBLIGATION
TO ADVISE, EMPLOYEE WITH RESPECT TO ANY SUCH TAX AND LEGAL
CONSEQUENCES, EVEN IF EMPLOYEE REQUESTS THE COMPANY TO DO SO.

19. SPOUSAL CONSENT

If Employee is married or otherwise deemed to have a spouse for purposes of
California law, Employee shall have his or her spouse execute the form of
Spousal Consent attached to this Agreement, as such form may be amended or
revised by the Company from time to time, contemporaneously with the execution
of this Agreement and on each exercise of the Option by Employee.
Notwithstanding anything in this Agreement to the contrary, if Employee is
married or otherwise deemed to have a spouse for purposes of California law, (a)
this Agreement and the Option shall not be effective for any purpose until
Employee delivers to the Company a duly executed Spousal Consent form and (b)
the exercise of the Option shall not be effective and the Company shall not be
obligated to issue to Employee any shares covered by the Option until Employee
delivers to the Company a duly executed Spousal Consent form.

20. ENTIRE AGREEMENT

This Agreement and the Plan collectively contain the entire understanding
between the parties with respect to the subject matter hereof, and supersede any
and all prior written or oral agreements between the parties with respect to the
subject matter hereof. There are no representations, agreements, arrangements,
or understandings, either written or oral, between or among the parties with
respect to the subject matter hereof which are not set forth in this Agreement.

21. GOVERNING LAW

This Agreement shall be governed by, and construed in accordance with, the
laws of the State of California applicable to contracts made and to be fully
performed in the State of California.

22. NOTICES

Any notice given pursuant to this Agreement shall be in writing and shall be
given by personal service or by United States certified mail, return receipt
requested, postage prepaid to the addresses appearing on the signature page of
this Agreement or such other address as may be given by either party for
purposes of this Agreement. Notice given by personal service shall be deemed
effective on the date it is delivered to the addressee, and notice mailed shall
be deemed effective on the third day following its placement in the mail
addressed to the addressee. Either party may change its address for notice
purposes by giving the other party notice of such change in accordance with this
Section. Notwithstanding anything herein to the contrary, any notice that
consists solely of notice of the change of address of any party may be given by
regular mail.

23. INCORPORATION OF EXHIBITS

Each and all of the Exhibits to this Agreement are, by this reference,
incorporated herein to the same extent as if they were set forth in full herein.

IN WITNESS WHEREOF, the parties have entered into this Restricted Stock
Option Agreement as of the date first above written.

"COMPANY":

SANTA BARBARA BANCORP

By:___________________________

Its:__________________________

1021 Anacapa Street
Santa Barbara, CA 93102
Attn:
"EMPLOYEE":

- ------------------------------
Signature of Employee

- ------------------------------
Name of Employee

Address of Employee

Exhibit A

Vesting; Restrictions on Transfer

Set forth below are the terms on which the Option shall vest and the
restrictions on transfer, if any, that are applicable to the shares of Common
Stock and other securities issued upon exercise of this Option. The provisions
that are applicable to this Option are those that are initialed by the Company
and Employee. In the event that either (a) the Company and Employee do not
initial a subsection under either Section 1 or Section 2 of this Exhibit or (b)
the Company and Employee initial more than one subsection in either Section 1 or
Section 2, then Section 1.1 and Section 2.1 shall apply for all purposes under
this Agreement.

1. Vesting

1.1 Five-Year Vesting. The Option shall "vest" and become exercisable in
equal annual installments over a period of five (5) years. Specifically,
Employee shall become entitled to purchase an additional 20% of the total number
of option shares specified in Section 1 of the Agreement (on a cumulative basis)
during each one-year period following the date of the Agreement. Thus, during
the first year following the date of the Agreement, Employee shall be entitled
to exercise this Option to purchase 20% of the total number of option shares;
40% during the second year; 60% during the third year; 80% during the fourth
year; and 100% during the fifth year.

Company initial Employee initial

1.2 Other Vesting. The Option shall "vest" and become exercisable in
equal ____________installments over a period of____________( ) years.

Company initial Employee initial

2. Restriction on Transfer.

2.1 Five-Year Restriction. None of the shares of Common Stock and other
securities issued upon exercise of the Option may be sold, exchanged,
transferred, pledged, hypothecated or otherwise disposed of, without the prior
written approval of the Company, for a period of five (5) years following the
date this Agreement and two (2) years following the date of exercise of the
Option as to those shares of Common Stock and/or other securities issued upon
such exercise, whichever is later; provided that the foregoing restriction on
transfer shall not apply to Employee's transfer of shares of Common Stock (a) to
the Company in payment of all or any portion of the exercise price payable upon
exercise of the Option or the satisfaction of any income tax withholding
obligation with respect to any exercise of the Option or (b) to the acquiring
party in any transaction described in Section 9 of this Agreement in which the
Company is not the surviving corporation, or (c), subject to the provisions of
Section 2.4 of this Exhibit, to a person or entity described in Section 12.2
hereof.

Company initial Employee initial

2.2 Other Restriction. None of the shares of Common Stock and other
securities issued upon exercise of the Option may be sold, exchanged,
transferred, pledged, hypothecated or otherwise disposed of, without the prior
written approval of the Company, for a period of ( ) years following the date
this Agreement and ( ) years following the date of exercise of the Option as to
those shares of Common Stock and/or other securities issued upon such exercise,
whichever is later; provided that the foregoing restriction on transfer shall
not apply to Employee's transfer of shares of Common Stock (a) to the Company in
payment of all or any portion of the exercise price payable upon exercise of the
Option or the satisfaction of any income tax withholding obligation with respect
to any exercise of the Option or (b) to the acquiring party in any transaction
described in Section 9 of the Agreement in which the Company is not the
surviving corporation, or (c), subject to the provisions of Section 2.4 of this
Exhibit, to a person or entity described in Section 12.2 hereof.

Company initial Employee initial

2.3 No Restriction. The shares of Common Stock and other securities issued
upon exercise of the Option may be sold, exchanged, transferred, pledged,
hypothecated or otherwise disposed of at any time without the prior written
approval of the Committee.

Company initial Employee initial

2.4 Exempt Transfers. Notwithstanding the foregoing, Employee may transfer
shares of Common Stock or other securities acquired on exercise of the Option to
a person described in Section 12.2.1 hereof only if all of the following
conditions are satisfied: (i) the transfer is a permitted transfer under Section
12.2.1 hereof; (ii) Employee gives the Company at least ten (10) days prior
written notice of the proposed transfer, which notice shall specify the name and
address of the proposed transferee and the basis on which the proposed
transferee is a person or entity described in Section 12.2.1 hereof; (iii) the
proposed transferee agrees in writing for the benefit of the Company to acquire
and hold the transferred shares of Common Stock or other securities subject to
the terms and conditions of the Plan and this Agreement, including the
provisions of this Exhibit; and (iv) the transfer is of a whole number multiple
of one hundred (100) shares.

2.5 Legend. Appropriate legends shall be placed on any certificates
evidencing the shares of Common Stock or other securities issued upon exercise
of the Option and appropriate stop transfer instructions shall be given to the
Company's transfer agent.

CONSENT OF SPOUSE

I acknowledge that I have read the foregoing Restricted Stock Option
Agreement (the "Agreement") and that I know its contents. I am aware that by its
provisions my spouse agrees to not sell the Shares that may be issued upon
exercise of the Option, including my community interest, if any, in them, during
certain periods specified in the Agreement. I hereby approve of the provisions
of the Agreement, agree that such Shares and my community property interest in
them, if any, are subject to the provisions of the Agreement and that I will
take no action at any time to hinder operation of the Agreement or to attempt
the sale or transfer of any of the Shares, including my community property
interest in them, if any, other than pursuant to the terms of the Agreement.

Date ____________________, spouse of

Exhibit 10.1.1.4

SANTA BARBARA BANCORP

RESTRICTED STOCK OPTION AGREEMENT

(INCENTIVE RELOAD OPTION)

THIS AGREEMENT ("Agreement") is entered into this day of ,
19 , between SANTA BARBARA BANCORP (the "Company") and
, ("Employee").

RECITALS

WHEREAS, the Company has duly adopted a Restricted Stock Option Plan, (the
"Plan"), which was adopted by the Board of Directors of the Company on January
29, 1992, and approved by the shareholders of the Company on April 28, 1992; and

WHEREAS, the Plan provides for the issuance of incentive stock options (that
is, options which qualify as Incentive Stock Options, as defined in Section 422
of the Internal Revenue Code of 1986, as amended (the "Code)); and

WHEREAS, Employee has exercised an option previously granted under the Plan
(the "Original Option") through the tender of shares of the Common Stock of the
Company previously held by the Employee, and the Employee is therefore entitled
under the Plan to an award and grant of this Reload Option, which shall be an
incentive stock option under the Plan.

AGREEMENT

NOW, THEREFORE:

1. GRANT

The Company hereby grants to Employee the option to purchase an aggregate of
shares of the Company's Common Stock at a price of $ per
share, (which price the Company has determined to be 100% of the fair market
value at the time of grant).

2. OPTION PERIOD

The period during which the option granted hereby may be exercised
(hereinafter called the "Option Period") shall commence after the expiration of
six (6) months following the date hereof and shall terminate five (5) years
following the date hereof (namely, on , 19 ), subject to the provisions
governing earlier termination set forth in Section 5, below.

3. EXERCISE

3.1 Vesting. The Option shall "vest" and become exercisable in accordance
with the provisions of Section 1 of Exhibit A attached hereto.

3.2 Option Exercise Price. The option price must be paid (a) in cash or check
or (b) by the tender of other Shares of Common Stock owned by the Employee,
having a fair market value on the date of surrender equal to the aggregate
exercise price of the Shares as to which said option is intended to be
exercised, or (c) any combination of such methods of payment.

3.3 Stock-for-Stock Exercises. In the event that the option price is paid,
whether in whole or in part, through the tender of shares of Common Stock of the
Company already owned by the Employee, then this Option must be exercised for a
minimum of at least 100 shares, or the total number of shares remaining subject
to the Option, if less than 100 shares.

3.4 Periodic Exercise. The Option may be exercised by Employee with respect
to some or all of the shares of Common Stock and other securities covered by the
Option at any time and from time to time on or after the date on which the
Option becomes exercisable with respect to such shares; provided that the Option
may not be exercised at any one time with respect to less that one hundred (100)
shares of Common Stock unless the number of shares with respect to which the
Option is exercised is the total number of shares with respect to which the
Option is exercisable at that time.

4. RESTRICTION ON TRANSFER OF STOCK ISSUED

Any and all shares of Common Stock and other securities, if any, issued
pursuant to this Agreement shall be subject to the restrictions on transfer, if
any, set forth in Section 2 of Exhibit A attached hereto. Any restriction on
transfer set forth in Exhibit A attached hereto shall not apply to Employee's
transfer of shares of Common Stock to the Company in payment of all or any
portion of the exercise price payable on exercise of this Option. Appropriate
legends shall be placed on any certificates evidencing any shares of Common
Stock or other securities issued upon exercise of this Option, and appropriate
stop transfer instructions shall be given to the Company's transfer agent.

5. EXPIRATION

This Option shall expire and terminate upon the occurrence of the following
events:

5.1 Thirty (30) days following termination of employment, other than as a
result of the Employee's retirement, death or disability;

5.2 Immediately upon retirement of Employee in accordance with the Company's
retirement policy; provided, however, that Employee may within three (3) months
after the date of retirement (but in no event beyond the period of time for
which the options evidenced by this Agreement are granted) exercise the option
as to those shares with respect to which installments, if any, had accrued and
were exercisable as of the date on which Employee retired;

5.3 Twelve (12) months after the death or permanent disability (as defined in
the Company's Incentive and Investment Profit Sharing Plan and Trust) of
Employee while in the employ of the Company (but in no event beyond the period
of time for which the options evidenced by this Agreement are granted). During
such twelve-month period, Employee (or his personal representative) or the
persons to whom the Employee's rights under this Agreement shall have passed by
will or by the applicable laws of descent and distribution, shall have the right
to exercise the Option evidenced by this Agreement to the extent that
installments, if any, had accrued and were exercisable as of the date of
Employee's death or disability; and

5.4 If the shares of Common Stock of the Company which are issued upon
exercise of the Original Option (which gave rise to the issuance of this Reload
Option) are sold within one (1) year following the exercise of the Original
Option; provided that, for purposes of this Section, Employee shall not be
deemed to have sold any such shares of Common Stock if Employee transfers such
shares of Common Stock to the Company in payment of all or any portion of the
exercise price of this Option or any other option granted by the Company to
Employee or in satisfaction of any tax withholding obligation relating to the
exercise of this Option or any other option granted by the Company to Employee.

6. TAX WITHHOLDING

To the extent that the exercise of any Option granted hereunder gives rise to
an obligation on the part of the Company to withhold from amounts otherwise to
be paid to the Employee, the Company shall do so on such terms and in accordance
with such procedures as may be required under applicable law. At the election of
the Employee, withholding may be made in shares of the Common Stock of the
Company which would otherwise be issued as a result of the exercise; provided,
however, that such an election must be an irrevocable election which is made at
last six (6) months prior to the exercise of the Option, in accordance with
regulations and interpretations of the Securities and Exchange Commission. If
withholding is made in shares of the Company's stock, the Company shall grant a
Reload Option(s), in accordance with the terms and conditions specified in the
Plan, for the number of shares so withheld.

7. LIMIT ON GRANT

The aggregate fair market value as determined by the Committee at the time an
option is granted, of all shares of Common Stock with respect to which this
Option is exercisable for the first time by Employee during any calendar year,
shall not exceed the difference between (a) One Hundred Thousand Dollars
($100,000) and (b) the sum of the fair market value, as determined by the
Committee, as of the time the options, if any, were granted, of the shares of
Common Stock covered by this Option and all other incentive stock options
granted to Employee under the Plan and all other incentive stock option plans of
the Company and which are exercisable for the first time by the Employee during
such calendar year. If the aggregate fair market value of the shares with
respect to which this Option first becomes exercisable in any calendar year
exceeds such $100,000 limitation, the portion of this Option which is in excess
of the $100,000 limitation shall be treated as a Non-qualified Option pursuant
to Section 422(d)(1) of the Code. This Section is intended to comply with the
provisions of Section 422 of the Code and shall be interpreted so as to comply
with the provisions of such Section of the Code. Nothing in this Section shall
obligate the Company, to grant options or any additional options to Employee
under this Plan or any other stock option plan here or hereafter adopted by the
Company.

8. RECAPITALIZATION OF COMPANY

Except as otherwise provided herein, appropriate and proportionate
adjustments shall be made in the number and class of shares subject to the
Option, and the exercise price of the Option, in the event of a stock dividend
(but only on Common Stock), stock-split, reverse stock-split, recapitalization,
reorganization or like change in the capital structure of the Company. To the
extent that the foregoing adjustments relate to stock or securities of the
Company, such adjustments shall be made by the Committee, the determination of
which in that respect shall be final, binding, and conclusive; provided that
this Option shall not be adjusted in a manner tat causes the Option to fail to
continue to qualify as an incentive stock option within the meaning of Section
422 of the Code.

9. REORGANIZATION OR LIQUIDATION OF THE COMPANY

In the event of (a) a liquidation of the Company, or (b) a merger,
reorganization, or consolidation of the Company with any other corporation in
which the Company is not the surviving corporation or the Company becomes a
wholly-owned subsidiary of another corporation, or (c) any sale of all or
substantially all of the Company's assets, any unexercised portion of this
Option shall be deemed cancelled unless the surviving corporation in any such
merger, reorganization or consolidation or the acquiring corporation in any such
sale elects to assume the Option or to issue substitute options in place
thereof; provided, however, that if the unexercised portion of this Option would
be cancelled in accordance with the foregoing, Employee shall have the right,
exercisable during a 10-day period ending on the fifth day prior to the
effective date of such liquidation, merger, reorganization, consolidation or
sale, to exercise the Option in whole or in part without regard to any
installment exercise provisions in this Agreement. If the Option or portion
thereof originally designated as an Incentive Option would cease to qualify as
an incentive stock option under Section 422 of the Code as a result of the
exercise of the Option in accordance with the preceding sentence, then the
Option or portion thereof shall be redesignated as a non-qualified stock option.
The Company shall give Employee at least thirty (30) days prior written notice
of the anticipated effective date of any such liquidation, merger,
reorganization, consolidation or sale. Notwithstanding anything in the Plan or
this Agreement to the contrary, (i) any exercise of the Option effected during
the foregoing 10-day period shall be deemed to be effective immediately prior to
the closing of such liquidation, merger, reorganization, consolidation or sale
and (ii), if the Company abandons or otherwise fails to close any such
liquidation, merger, reorganization, consolidation or sale, then (A) any
exercise during the foregoing 10-day period shall cease to be effective ab
initio and (B) the unexercised portion of the Option shall be exercisable as
otherwise determined under this Agreement and without consideration of this
Section.

10. SECURITIES COMPLIANCE

Should the Company at any time determine that the listing, registration,
qualification, or exemption of the shares covered by this Option is required on
any securities exchange or under any state or federal law, or should the Company
determine that the notification, consent, or approval of any governmental
regulatory authority is necessary or desirable as a condition to the exercise of
this Option, then this Option may not be exercised, in whole or in part, unless
and until such listing, registration, qualification, notification, consent, or
approval shall have been effected, obtained, or given, free of any conditions
not acceptable to the Company.

11. METHOD OF EXERCISE

The Option granted pursuant to this Agreement shall be exercised by delivery,
to a designated representative of the Committee administering the Plan, of a
written notice specifying (a) the number of shares which Employee (or his
personal representative) then desires to purchase, (b) the name or names in
which Employee desires to have the shares issued, and (c) that the options being
exercised are incentive stock options granted pursuant to this Agreement.
Employee may designate in the notice of exercise that some or all of the shares
to be issued upon such exercise shall be issued in the name of Employee's
spouse, the trustee of a revocable trust in which Employee and his or her spouse
are the sole primary beneficiaries, Employee's prior spouse, or any combination
of the foregoing. Notwithstanding anything in this Agreement to the contrary,
Employee may not designate in the notice of exercise that any of the shares
shall be issued to Employee's ex-spouse unless such issuance is to be made
incident to Employee's divorce within the meaning of Section 1041 of the Code.
Said notice shall be accompanied by full payment of the aggregate purchase price
for the shares being acquired. The Company shall, as soon as practicable
thereafter, issue and deliver to Employee, the necessary certificate or
certificates evidencing the number of shares purchased (excluding any fractional
shares) in the name of Employee and/or such other person(s) as Employee has
properly designated in the notice of exercise. The Company shall have no
obligation to deal directly with, and shall have no liability to, any person
other than Employee, or Employee's personal representative if Employee has died
or become permanently disabled prior to the delivery of the shares. Employee
shall indemnify and hold harmless the Company, and each of its officers,
directors, employees and agents, from and against any and all claims made by any
person other than Employee, or Employee's personal representative, who is
designated in the notice of exercise with respect to any matter related to this
Option and/or the delivery of any shares to such person. The Company shall pay
all expenses, taxes and other charges payable in connection with the
preparation, issue and delivery of the foregoing stock certificates, except
that, in case such stock certificates shall be registered in a name or names
other than the name of Employee, funds sufficient to pay all stock transfer
taxes which shall be payable upon the issuance of such stock certificates shall
be paid by Employee at the time of the delivery of the notice of exercise.

12. NON TRANSFERABILITY

Options granted pursuant to this Agreement are not transferable by Employee
other than by will or by the laws of descent and distribution. Said options are
exercisable during Employee's lifetime only by Employee (or Employee's legal
representative). Any attempt by Employee to assign or transfer the options
granted herein other than as provided in this Section shall be null and void. If
Employee designates in the written notice of exercise any person other than
Employee, or Employee's personal representative, to whom stock certificates
should be issued upon such exercise, the Company may require, as a condition to
such exercise, that Employee and the other persons designated in the notice of
exercise represent and warrant to the Company that Employee has neither
transferred or assigned, nor attempted to transfer or assign, all or any portion
of this Option prior to Employee's delivery of the notice of exercise, payment
of the exercise price, and performance of the other conditions required to be
performed by Employee in connection with such exercise of this Option and that
such other persons are either Employee's spouse, the trustee of a revocable
trust in which Employee and his or her spouse are the sole primary
beneficiaries, or Employee's ex-spouse and the issuance to such person is being
made incident to Employee's divorce.

13. NO SHAREHOLDER RIGHTS

Employee shall not be deemed to be a shareholder of the Company with respect
to the shares covered by the options granted herein unless and until said shares
shall have been issued to Employee upon exercise of said options and the
exercise price therefor has been paid for in full.

14. INTERPRETATION

This Agreement is subject to all of the terms and conditions of the Plan, and
in the event of any conflict between any of the provisions of this Agreement and
any of the provisions of the Plan, the applicable provisions of the Plan shall
control. The Committee administering the Plan shall have full power to interpret
the provisions of this Agreement and of the Plan and to decide any dispute which
may arise hereunder or thereunder. Said Committee's action shall be final and
conclusive upon all persons affected thereby. All references in this Plan to
Employee shall mean and include Employee's personal representative if Employee
has died or become permanently disabled prior to the time in question.

15. AMENDMENT

The Board of Directors of the Company shall have such power to amend or
terminate the Plan as is specified in the Plan. Such amendment or termination
shall not, however, affect any options then outstanding hereunder.

16. SUCCESSORS

This Agreement shall be binding upon the heirs, executors, administrators and
successors of the parties hereto.

17. SUBSIDIARIES

The term "Company" as used herein shall include Santa Barbara Bancorp and any
of its subsidiaries.

18. TAX MATTERS

Employee understands that the grant and exercise of the Option under this
Agreement will have tax and legal consequences to Employee and that the Company
is not making any representation to Employee and is not advising Employee as to
the tax or other legal consequences of the grant or exercise of this Option or
of any other action taken or to be taken by Employee under this Agreement or
with respect to the Option. Employee shall be solely responsible for determining
such tax and legal consequences to Employee and for obtaining such advice as
Employee deems appropriate.

EMPLOYEE ACKNOWLEDGES THAT IT IS EMPLOYEE'S SOLE RESPONSIBILITY TO
EVALUATE AND DETERMINE THE TAX AND LEGAL CONSEQUENCES TO EMPLOYEE OF
THIS AGREEMENT AND EMPLOYEE'S EXERCISE OF THE OPTION AND ACQUISITION OF
THE SHARES AND THAT THE COMPANY HAS NOT ADVISED, AND HAS NO OBLIGATION
TO ADVISE, EMPLOYEE WITH RESPECT TO ANY SUCH TAX AND LEGAL
CONSEQUENCES, EVEN IF EMPLOYEE REQUESTS THE COMPANY TO DO SO.

19. SPOUSAL CONSENT

If Employee is married or otherwise deemed to have a spouse for purposes of
California law, Employee shall have his or her spouse execute the form of
Spousal Consent attached to this Agreement, as such form may be amended or
revised by the Company from time to time, contemporaneously with the execution
of this Agreement and on each exercise of the Option by Employee.
Notwithstanding anything in this Agreement to the contrary, if Employee is
married or otherwise deemed to have a spouse for purposes of California law, (a)
this Agreement and the Option shall not be effective for any purpose until
Employee delivers to the Company a duly executed Spousal Consent form and (b)
the exercise of the Option shall not be effective and the Company shall not be
obligated to issue to Employee any shares covered by the Option until Employee
delivers to the Company a duly executed Spousal Consent form.

20. ENTIRE AGREEMENT

This Agreement and the Plan collectively contain the entire understanding
between the parties with respect to the subject matter hereof, and supersede any
and all prior written or oral agreements between the parties with respect to the
subject matter hereof. There are no representations, agreements, arrangements,
or understandings, either written or oral, between or among the parties with
respect to the subject matter hereof which are not set forth in this Agreement.

21. GOVERNING LAW

This Agreement shall be governed by, and construed in accordance with, the
laws of the State of California applicable to contracts made and to be fully
performed in the State of California.

22. NOTICES

Any notice given pursuant to this Agreement shall be in writing and shall be
given by personal service or by United States certified mail, return receipt
requested, postage prepaid to the addresses appearing on the signature page of
this Agreement or such other address as may be given by either party for
purposes of this Agreement. Notice given by personal service shall be deemed
effective on the date it is delivered to the addressee, and notice mailed shall
be deemed effective on the third day following its placement in the mail
addressed to the addressee. Either party may change its address for notice
purposes by giving the other party notice of such change in accordance with this
Section. Notwithstanding anything herein to the contrary, any notice that
consists solely of notice of the change of address of any party may be given by
regular mail.

23. INCORPORATION OF EXHIBITS

Each and all of the Exhibits to this Agreement are, by this reference,
incorporated herein to the same extent as if they were set forth in full herein.

IN WITNESS WHEREOF, the parties have entered into this Restricted Stock
Option Agreement as of the date first above written.

"COMPANY":

SANTA BARBARA BANCORP

By:___________________________

Its:__________________________

1021 Anacapa Street
Santa Barbara, CA 93102
Attn:
"EMPLOYEE":

- ------------------------------
Signature of Employee

- ------------------------------
Name of Employee

Address of Employee

Exhibit A

Vesting; Restrictions on Transfer

Set forth below are the terms on which the Option shall vest and the
restrictions on transfer, if any, that are applicable to the shares of Common
Stock and other securities issued upon exercise of this Option. The provisions
that are applicable to this Option are those that are initialed by the Company
and Employee. In the event that either (a) the Company and Employee do not
initial a subsection under either Section 1 or Section 2 of this Exhibit or (b)
the Company and Employee initial more than one subsection in either Section 1 or
Section 2, then Section 1.1 and Section 2.1 shall apply for all purposes under
this Agreement.

1. Vesting

1.1 Five-Year Vesting. The Option shall "vest" and become exercisable in
equal annual installments over a period of five (5) years. Specifically,
Employee shall become entitled to purchase an additional 20% of the total number
of option shares specified in Section 1 of the Agreement (on a cumulative basis)
during each one-year period following the date of the Agreement. Thus, during
the first year following the date of the Agreement, Employee shall be entitled
to exercise this Option to purchase 20% of the total number of option shares;
40% during the second year; 60% during the third year; 80% during the fourth
year; and 100% during the fifth year.

Company initial Employee initial

1.2 Other Vesting. The Option shall "vest" and become exercisable in equal
installments over a period of ( ) years.

Company initial Employee initial

2. Restriction on Transfer.

2.1 Five-Year Restriction. None of the shares of Common Stock and other
securities issued upon exercise of the Option may be sold, exchanged,
transferred, pledged, hypothecated or otherwise disposed of, without the prior
written approval of the Committee, for a period of five (5) years following the
date this Agreement and two (2) years following the date of exercise of the
Option as to those shares of Common Stock and/or other securities issued upon
such exercise, whichever is later. The foregoing restriction on transfer shall
not apply to Employee's transfer of shares of Common Stock to the Company in
payment of all or any portion of the exercise price payable on exercise of this
Option, or to Employee's election to satisfy his tax withholding obligation, if
any, with respect to any exercise of this Option through shares which otherwise
would be issued as a result of the exercise. Appropriate legends shall be placed
on any certificates evidencing any shares issued upon exercise of this Option,
and appropriate stop transfer instructions shall be given to the Company's
transfer agent.

Company initial Employee initial

2.2 Other Restriction. None of the shares of Common Stock and other
securities issued upon exercise of the Option may be sold, exchanged,
transferred, pledged, hypothecated or otherwise disposed of, without the prior
written approval of the Committee, for a period of ( ) years following the date
this Agreement and ( ) years following the date of exercise of the Option as to
those shares of Common Stock and/or other securities issued upon such exercise,
whichever is later. The foregoing restriction on transfer shall not apply to
Employee's transfer of shares of Common Stock to the Company in payment of all
or any portion of the exercise price payable on exercise of this Option, or to
Employee's election to satisfy his tax withholding obligation, if any, with
respect to any exercise of this Option through shares which otherwise would be
issued as a result of the exercise. Appropriate legends shall be placed on any
certificates evidencing any shares issued upon exercise of this Option, and
appropriate stop transfer instructions shall be given to the Company's transfer
agent.

Company initial Employee initial

2.3 No Restriction. The shares of Common Stock and other securities issued
upon exercise of the Option may be sold, exchanged, transferred, pledged,
hypothecated or otherwise disposed of at any time without the prior written
approval of the Committee.

Company initial Employee initial

CONSENT OF SPOUSE

I acknowledge that I have read the foregoing Restricted Stock Option
Agreement (the "Agreement") and that I know its contents. I am aware that by its
provisions my spouse agrees to not sell the Shares that may be issued upon
exercise of the Option, including my community interest, if any, in them, during
certain periods specified in the Agreement. I hereby approve of the provisions
of the Agreement, agree that such Shares and my community property interest in
them, if any, are subject to the provisions of the Agreement and that I will
take no action at any time to hinder operation of the Agreement or to attempt
the sale or transfer of any of the Shares, including my community property
interest in them, if any, other than pursuant to the terms of the Agreement.

Date ____________________, spouse of

Exhibit 10.1.1.5

SANTA BARBARA BANCORP

RESTRICTED STOCK OPTION AGREEMENT

(Nonstatutory Reload Option)

THIS AGREEMENT ("Agreement") is entered into this day of
, 19 , between SANTA BARBARA BANCORP ("the Company") and
, ("Employee").

RECITALS

WHEREAS, the Company has duly adopted a Restricted Stock Option Plan, (the
"Plan"), which was adopted by the Board of Directors of the Company on January
29, 1992, and approved by the shareholders of the Company on April 28, 1992; and

WHEREAS, the Plan provides for the issuance of non statutory stock options
(options which do not qualify as Incentive Stock Options, as defined in Section
422 of the Internal Revenue Code of 1986, as amended (the "Code"); and

WHEREAS, Employee has exercised an option previously granted under the Plan
(the "Original Option") through the tender, whether through surrender or
attestation, of shares of the Common Stock of the Company previously held by the
Optionee, and the Optionee is therefore entitled under the Plan to an award and
grant of this Reload Option;

AGREEMENT

NOW, THEREFORE:

1. GRANT

The Company hereby grants to Employee the option to purchase an aggregate
of shares of the Company's Common Stock at a price of $ per share,
(which price the Company has determined to be 100% of the fair market value of
the shares at the time of grant).

2. OPTION PERIOD

The period during which the option granted hereby may be exercised
(hereinafter called the "Option Period") shall commence after the expiration of
six (6) months following the date hereof and, subject to the provisions
governing earlier termination set forth in Section 5, below, shall terminate on
the later of (a) the date of expiration or earlier termination of the Original
Option and (b) five (5) years following the date hereof (namely, ).

3. EXERCISE

3.1 Vesting. The Option shall "vest" and become exercisable in accordance
with the provision of Section 1 of Exhibit A attached hereto.

3.2 Option Exercise Price. The option price must be paid (a) in cash or check
or (b) by the tender, whether through surrender or attestation, of other Shares
of Common Stock owned by the Employee, having a fair market value on the date of
surrender equal to the aggregate exercise price of the Shares as to which said
option is intended to be exercised, or (c) any combination of such methods of
payment.

3.3 Stock-for-Stock Exercises. In the event that the option price is paid,
whether in whole or in part, through the tender of shares of Common Stock of the
Company already owned by the Employee, then this Option must be exercised for a
minimum of at least 100 shares, or the total number of shares remaining subject
to the Option, if less than 100 shares.

3.4 Periodic Exercise. The Option may be exercised by Employee with respect
to some or all of the shares of Common Stock and other securities covered by the
Option at any time and from time to time on or after the date on which the
Option becomes exercisable with respect to such shares; provided that the Option
may not be exercised at any one time with respect to less that one hundred (100)
shares of Common Stock unless the number of shares with respect to which the
Option is exercised is the total number of shares with respect to which the
Option is exercisable at that time.

4. RESTRICTION ON TRANSFER OF STOCK ISSUED

Any and all shares of Common Stock and other securities issued pursuant to
this Agreement shall be subject to the restrictions on transfer, if any, set
forth in Section 2 of Exhibit A attached hereto.

5. EXPIRATION

This option shall expire and terminate upon the occurrence of the following
events:

5.1 Thirty (30) days following termination of employment, other than as a
result of the Employee's retirement, death or disability;

5.2 Immediately upon retirement of Employee in accordance with the Company's
retirement policy; provided, however, that Employee may within three (3) months
after the date of retirement (but in no event beyond the period of time for
which the options evidenced by this Agreement are granted) exercise the option
as to those shares with respect to which installments, if any, had accrued and
were exercisable as of the date on which Employee retired; and

5.3 Twelve (12) months after the death or permanent disability (as defined in
the Company's Incentive and Investment Profit Sharing Plan and Trust) of
Employee while in the employ of the Company (but in no event beyond the period
of time for which the options evidenced by this Agreement are granted). During
such twelve-month period, Employee (or his personal representative) or the
persons to whom the Employee's rights under this Agreement shall have passed by
will or by the applicable laws of descent and distribution, shall have the right
to exercise the Option evidenced by this Agreement to the extent that
installments, if any, had accrued and were exercisable as of the date of
Employee's death or disability.

5.4 If the shares of Common Stock of the Company which are issued upon
exercise of the Original Option (which gave rise to the issuance of this Reload
Option) are sold within one (1) year following the exercise of the Original
Option; provided that, for purposes of this Section, Employee shall not be
deemed to have sold any such shares of Common Stock if Employee transfers such
shares of Common Stock to the Company in payment of all or any portion of the
exercise price of this Option or any other option granted by the Company to
Employee or in satisfaction of any tax withholding obligation relating to the
exercise of this Option or any other option granted by the Company to Employee.

6. TAX WITHHOLDING

To the extent that the exercise of any Option granted hereunder gives rise to
an obligation on the part of the Company to withhold from amounts otherwise to
be paid to the Employee, the Company shall do so on such terms and in accordance
with such procedures as may be required under applicable law. At the election of
the Employee, withholding may be made in shares of the Common Stock of the
Company which would otherwise be issued as a result of the exercise. If
withholding is made in shares of the Company's stock, the Company shall grant a
Reload Option(s), in accordance with the terms and conditions specified in the
Plan, for the number of shares so withheld.

7. NO LIMIT ON GRANT

The options evidenced by this Agreement are nonstatutory or non-qualified
stock options and not incentive stock options as defined in Section 422 of the
Internal Revenue Code (the "Code"). As nonstatutory stock options issued
pursuant to the Plan, they are not subject to any limitations as to the
aggregate fair market value of the stock subject to such options and,
specifically, shall not be subject to the $100,000 limitation specified in
Section 422(b)(7) of the Code.

8. RECAPITALIZATION OF COMPANY

Except as otherwise provided herein, appropriate and proportionate
adjustments shall be made in the number and class of shares subject to the
Option, and the exercise price of the Option, in the event of a stock dividend
(but only on Common Stock), stock-split, reverse stock-split, recapitalization,
reorganization or like change in the capital structure of the Company. To the
extent that the foregoing adjustments relate to stock or securities of the
Company, such adjustments shall be made by the Committee, the determination of
which in that respect shall be final, binding, and conclusive.

9. REORGANIZATION OR LIQUIDATION OF THE COMPANY

In the event of (a) a liquidation of the Company, or (b) a merger,
reorganization, or consolidation of the Company with any other corporation in
which the Company is not the surviving corporation or the Company becomes a
wholly-owned subsidiary of another corporation, or (c) any sale of all or
substantially all of the Company's assets, any unexercised portion of this
Option shall be deemed cancelled unless the surviving corporation in any such
merger, reorganization or consolidation or the acquiring corporation in any such
sale elects to assume the Option or to issue substitute options in place
thereof; provided, however, that if the unexercised portion of this Option would
be cancelled in accordance with the foregoing, Employee shall have the right,
exercisable during a 10-day period ending on the fifth day prior to the
effective date of such liquidation, merger, reorganization, consolidation or
sale, to exercise the Option in whole or in part without regard to any
installment exercise provisions in this Agreement. The Company shall give
Employee at least thirty (30) days prior written notice of the anticipated
effective date of any such liquidation, merger, reorganization, consolidation or
sale. Notwithstanding anything in the Plan or this Agreement to the contrary,
(i) any exercise of the Option effected during the foregoing 10- day period
shall be deemed to be effective immediately prior to the closing of such
liquidation, merger, reorganization, consolidation or sale and (ii), if the
Company abandons or otherwise fails to close any such liquidation, merger,
reorganization, consolidation or sale, then (A) any exercise during the
foregoing 10-day period shall cease to be effective ab initio and (B) the
unexercised portion of the Option shall be exercisable as otherwise determined
under this Agreement and without consideration of this Section.

10. SECURITIES COMPLIANCE

Should the Company at any time determine that the listing, registration,
qualification, or exemption of the shares covered by this Option is required on
any securities exchange or under any state or federal law, or should the Company
determine that the notification, consent, or approval of any governmental
regulatory authority is necessary or desirable as a condition to the exercise of
this Option, then this Option may not be exercised, in whole or in part, unless
and until such listing, registration, qualification, notification, consent, or
approval shall have been effected, obtained, or given, free of any conditions
not acceptable to the Company.

11. METHOD OF EXERCISE

11.1 Exercise Procedure. The Option shall be exercised by Employee's delivery
to the Company of a written notice specifying the number of shares which
Employee then desires to purchase, accompanied by full payment of the aggregate
exercise price thereof and, if appropriate, an executed Spousal Consent. As soon
as practicable after its receipt of the notice of exercise and payment of the
exercise price, the Company shall issue and deliver to Employee one or more
certificates evidencing the number of shares purchased (excluding any fractional
shares), in the name of Employee and/or such other person(s) as Employee has
properly designated in the notice of exercise.

11.2 Name of Issuee. Employee may designate in the notice of exercise that
some or all of the shares of Common Stock or other securities to be issued on
such exercise shall be issued in the name of Employee's spouse, the trustee of a
revocable trust in which Employee and his or her spouse are the sole primary
beneficiaries, Employee's prior spouse, or any combination of the foregoing.
Notwithstanding anything in this Agreement to the contrary, Employee may not
designate in the notice of exercise that any of the shares of Common Stock and
other securities issuable on exercise of the Option shall be issued to
Employee's prior spouse unless such issuance is to be made pursuant to a
domestic relations order as defined in the Code or Title I of the Employee
Income Retirement Security Act or the rules thereunder. The Company may rely on
a representation of Employee, or such other evidence as the Company deems
appropriate, for purposes of determining the propriety of the exercise of the
Option and the compliance of such exercise with the terms of the Plan and this
Agreement. The Company shall have no obligation to deal directly with, and shall
have no liability to, any person other than Employee, or Employee's personal
representative if Employee has died or become permanently disabled prior to the
delivery of the shares. Employee shall indemnify and hold harmless the Company,
and each of its officers, directors, employees and agents, from and against any
and all claims made by any person other than Employee, or Employee's personal
representative, who is designated in the notice of exercise.

11.3 Transfer Taxes. The Company shall pay all expenses, taxes and other
charges payable in connection with the preparation, issue and delivery of the
foregoing stock certificates, except that, in case such stock certificates shall
be registered in a name or names other than the name of Employee, funds
sufficient to pay all stock transfer taxes which shall be payable upon the
issuance of such stock certificates shall be paid by Employee at the time of the
delivery of the notice of exercise.

12. TRANSFERABILITY OF OPTIONS

12.1 Restriction on Transfer. Except as specifically set forth in Section
12.2 hereof, Employee may not sell, pledge, assign, hypothecate, transfer, or
otherwise dispose of all or any portion of the Option other than by will or the
laws of descent and distribution.

12.2 Limited Transferability. Notwithstanding anything in Section 12.1 hereof
to the contrary, Employee may transfer all or a portion of the Option in
accordance with the provisions of this Section 12.2. Any purported transfer of
all or any portion of the Option that does not comply with all of the provisions
of this Section 12.2 shall be null and void ab initio.

12.2.1 Permitted Transferees. All or any portion of the Option may be
transferred or assigned by Employee only to one or more of the following: (a)
Employee's spouse, parents and lineal descendants, including adopted children
(the "Immediate Family Members"); (b) a trust established by Employee and with
respect to which all beneficial interests are held by one or more of Employee,
the Immediate Family Members, and a tax-exempt charitable organization which has
only a contingent residual interest in the trust; (c) a partnership or limited
liability company in which all voting and equity interests are held by one or
more of Employee and the Immediate Family Members; (d) a tax-exempt educational,
religious or charitable organization, as those terms are defined in Section
501(c)(3) of the Code; and (e) such other persons and entities as the Company
may specifically approve in writing after written notice from Employee. The
Company may require as a condition to any transfer under this Section 12.2 that
the proposed transferee provide to the Company reasonable evidence that the
transferee is described in one of the foregoing clauses.

12.2.2 Permitted Transfers. Any transfer of all or any portion of the
Option under this Section 12.2 must be either a Donative Transfer, a transfer to
a partnership or limited liability company described in clause (c) of Section
12.2.1 above, in which the Employee does not receive any consideration other
than the Employee's interest in such partnership or limited liability company,
or a transfer specifically approved in writing by the Company after written
notice from the Employee.

12.2.3 Minimum Transfer. Any transfer of a portion of the Option must be
with respect to not less than one hundred (100) shares of Common Stock and may
be made only in whole number multiples of one hundred (100) shares of Common
Stock.

12.2.4 Notice to the Company. Employee shall give the Company at least ten
(10) days prior written notice of any proposed transfer or assignment of all or
any portion of the Option pursuant to this Section 12.2 and shall include with
such notice:

A. The name and address of the proposed transferee and a statement of
the basis on which the proposed transferee is a permitted transferee under
Section 12.2.1 hereof; and

B. The proposed transferee's written agreement to accept the
transferred Option and any shares of Common Stock acquired on exercise of the
Option subject to all of the terms and conditions of the Plan and this
Agreement, including the provisions dealing with the termination of the Option
on the death or disability of Employee or the termination of Employee's status
as an employee of the Company.

12.2.5 No Further Transfer. Notwithstanding anything in the Plan or this
Agreement to the contrary, a transferee of all or any portion of the Option
shall not have the right to further transfer all or any portion of the
transferred Option to any person or entity other than (a) by will or the laws of
descent and distribution, or (b), if the transferee is a trust, pursuant to the
terms of the trust agreement by reason of the death of any settlor.

12.2.6 Further Acts. The Company may require as a condition to the
transfer of all or any portion of the Option such additional information and
agreements from Employee and the proposed transferee as the Company may deem
necessary or beneficial for purposes of complying with this Section or any
applicable federal or state law, rule or regulation.

12.2.7 Withholding on Exercise of Transferred Option. Employee
acknowledges and agrees that, if Employee transfers all or any portion of the
Option pursuant to this Section 12.2 and the transferee exercises the Option,
such exercise may be subject to income tax withholding and Employee will be
obligated to satisfy such income tax withholding obligation to the same extent
as if Employee had retained and exercised the Option. Employee shall be solely
responsible for determining the tax and legal consequences of Employee's
transfer of all or any portion of the Option and of the transferee's exercise of
the Option, and for obtaining such tax and legal advice as Employee deems
appropriate.

12.2.8 Disclaimer. The Company's acceptance of any transfer of all or any
portion of the Option shall not be considered legal or tax advice to Employee or
the proposed transferee as to (a) their compliance with any applicable law, rule
or regulation or (b) the legal or tax consequences of such transfer or the
subsequent exercise of the transferred Option or the sale or exchange of any of
the shares of Common Stock acquired on exercise of the transferred Option. The
Company's acceptance of any transfer of all or any portion of the Option shall
not obligate the Company to accept any subsequent transfer of all or any portion
of the Option.

13. NO SHAREHOLDER RIGHTS

Employee shall not be deemed to be a shareholder of the Company with respect
to the shares issuable upon exercise of the options granted herein unless and
until said shares shall have been issued to Employee upon exercise of said
options and the exercise price therefor has been paid for in full.

14. INTERPRETATION

This Agreement is subject to all of the terms and conditions of the Plan, and
in the event of any conflict between any of the provisions of this Agreement and
any of the provisions of the Plan, the applicable provisions of the Plan shall
control. The Committee administering the Plan shall have full power to interpret
the provisions of this Agreement and of the Plan and to decide any dispute which
may arise hereunder or thereunder. Said Committee's action shall be final and
conclusive upon all persons affected thereby. All references in this Agreement
to Employee shall mean and include Employee's personal representative if
Employee has died or become permanently disabled prior to the time in question.

15. AMENDMENT

The Board of Directors of the Company shall have such power to amend or
terminate the Plan as is specified in the Plan. Such amendment or termination
shall not, however, affect any options then outstanding hereunder.

16. SUCCESSORS

This Agreement shall be binding upon the heirs, executors, administrators and
successors of the parties hereto.

17. SUBSIDIARIES

The term "Company" as used herein shall include Santa Barbara Bancorp and any
of its subsidiaries.

18. TAX MATTERS

Employee understands that the grant and exercise of the Option under this
Agreement will have tax and legal consequences to Employee and that the Company
is not making any representation to Employee and is not advising Employee as to
the tax or other legal consequences of the grant or exercise of this Option or
of any other action taken or to be taken by Employee under this Agreement or
with respect to the Option. Employee shall be solely responsible for determining
such tax and legal consequences to Employee and for obtaining such advice as
Employee deems appropriate.

EMPLOYEE ACKNOWLEDGES THAT IT IS EMPLOYEE'S SOLE RESPONSIBILITY TO
EVALUATE AND DETERMINE THE TAX AND LEGAL CONSEQUENCES TO EMPLOYEE OF
THIS AGREEMENT AND EMPLOYEE'S EXERCISE OF THE OPTION AND ACQUISITION OF
THE SHARES AND THAT THE COMPANY HAS NOT ADVISED, AND HAS NO OBLIGATION
TO ADVISE, EMPLOYEE WITH RESPECT TO ANY SUCH TAX AND LEGAL
CONSEQUENCES, EVEN IF EMPLOYEE REQUESTS THE COMPANY TO DO SO.

19. SPOUSAL CONSENT

If Employee is married or otherwise deemed to have a spouse for purposes of
California law, Employee shall have his or her spouse execute the form of
Spousal Consent attached to this Agreement, as such form may be amended or
revised by the Company from time to time, contemporaneously with the execution
of this Agreement and on each exercise of the Option by Employee.
Notwithstanding anything in this Agreement to the contrary, if Employee is
married or otherwise deemed to have a spouse for purposes of California law, (a)
this Agreement and the Option shall not be effective for any purpose until
Employee delivers to the Company a duly executed Spousal Consent form and (b)
the exercise of the Option shall not be effective and the Company shall not be
obligated to issue to Employee any shares covered by the Option until Employee
delivers to the Company a duly executed Spousal Consent form.

20. ENTIRE AGREEMENT

This Agreement and the Plan collectively contain the entire understanding
between the parties with respect to the subject matter hereof, and supersede any
and all prior written or oral agreements between the parties with respect to the
subject matter hereof. There are no representations, agreements, arrangements,
or understandings, either written or oral, between or among the parties with
respect to the subject matter hereof which are not set forth in this Agreement.

21. GOVERNING LAW

This Agreement shall be governed by, and construed in accordance with, the
laws of the State of California applicable to contracts made and to be fully
performed in the State of California.

22. NOTICES

Any notice given pursuant to this Agreement shall be in writing and shall be
given by personal service or by United States certified mail, return receipt
requested, postage prepaid to the addresses appearing on the signature page of
this Agreement or such other address as may be given by either party for
purposes of this Agreement. Notice given by personal service shall be deemed
effective on the date it is delivered to the addressee, and notice mailed shall
be deemed effective on the third day following its placement in the mail
addressed to the addressee. Either party may change its address for notice
purposes by giving the other party notice of such change in accordance with this
Section. Notwithstanding anything herein to the contrary, any notice that
consists solely of notice of the change of address of any party may be given by
regular mail.

23. INCORPORATION OF EXHIBITS

Each and all of the Exhibits to this Agreement are, by this reference,
incorporated herein to the same extent as if they were set forth in full herein.

IN WITNESS WHEREOF, the parties have entered into this Restricted Stock
Option Agreement as of the date first above written.

"COMPANY":

SANTA BARBARA BANCORP

By:___________________________

Its:__________________________

1021 Anacapa Street
Santa Barbara, CA 93102
Attn:
"EMPLOYEE":

- ------------------------------
Signature of Employee

- ------------------------------
Name of Employee

Address of Employee

Exhibit A

Vesting; Restrictions on Transfer

Set forth below are the terms on which the Option shall vest and the
restrictions on transfer, if any, that are applicable to the shares of Common
Stock and other securities issued upon exercise of this Option. The provisions
that are applicable to this Option are those that are initialed by the Company
and Employee. In the event that either (a) the Company and Employee do not
initial a subsection under either Section 1 or Section 2 of this Exhibit or (b)
the Company and Employee initial more than one subsection in either Section 1 or
Section 2, then Section 1.1 and Section 2.1 shall apply for all purposes under
this Agreement.

1. Vesting

1.1 One-Year Vesting. The Option shall "vest" and become exercisable one
(1) year following the date of exercise of the original option.

Company initial Employee initial

1.2 Other Vesting. The Option shall "vest" and become exercisable in equal
installments over a period of ( ) years.

Company initial Employee initial

2. Restriction on Transfer.

2.1 Five-Year Restriction. None of the shares of Common Stock and other
securities issued upon exercise of the Option may be sold, exchanged,
transferred, pledged, hypothecated or otherwise disposed of, without the prior
written approval of the Company, for a period of five (5) years following the
date this Agreement and two (2) years following the date of exercise of the
Option as to those shares of Common Stock and/or other securities issued upon
such exercise, whichever is later; provided that the foregoing restriction on
transfer shall not apply to Employee's transfer of shares of Common Stock (a) to
the Company in payment of all or any portion of the exercise price payable upon
exercise of the Option or the satisfaction of any income tax withholding
obligation with respect to any exercise of the Option or (b) to the acquiring
party in any transaction described in Section 9 of this Agreement in which the
Company is not the surviving corporation, or (c), subject to the provisions of
Section 2.4 of this Exhibit, to a person or entity described in Section 12.2
hereof.

Company initial Employee initial

2.2 Other Restriction. None of the shares of Common Stock and other
securities issued upon exercise of the Option may be sold, exchanged,
transferred, pledged, hypothecated or otherwise disposed of, without the prior
written approval of the Company, for a period of ( ) years following the date
this Agreement and ( ) years following the date of exercise of the Option as to
those shares of Common Stock and/or other securities issued upon such exercise,
whichever is later; provided that the foregoing restriction on transfer shall
not apply to Employee's transfer of shares of Common Stock (a) to the Company in
payment of all or any portion of the exercise price payable upon exercise of the
Option or the satisfaction of any income tax withholding obligation with respect
to any exercise of the Option or (b) to the acquiring party in any transaction
described in Section 9 of the Agreement in which the Company is not the
surviving corporation, or (c), subject to the provisions of Section 2.4 of this
Exhibit, to a person or entity described in Section 12.2 hereof.

Company initial Employee initial

2.3 No Restriction. The shares of Common Stock and other securities issued
upon exercise of the Option may be sold, exchanged, transferred, pledged,
hypothecated or otherwise disposed of at any time without the prior written
approval of the Committee.

Company initial Employee initial

2.4 Exempt Transfers. Notwithstanding the foregoing, Employee may transfer
shares of Common Stock or other securities acquired on exercise of the Option to
a person described in Section 12.2.1 hereof only if all of the following
conditions are satisfied: (i) the transfer is a permitted transfer under Section
12.2.1 hereof; (ii) Employee gives the Company at least ten (10) days prior
written notice of the proposed transfer, which notice shall specify the name and
address of the proposed transferee and the basis on which the proposed
transferee is a person or entity described in Section 12.2.1 hereof; (iii) the
proposed transferee agrees in writing for the benefit of the Company to acquire
and hold the transferred shares of Common Stock or other securities subject to
the terms and conditions of the Plan and this Agreement, including the
provisions of this Exhibit; and (iv) the transfer is of a whole number multiple
of one hundred (100) shares.

2.5 Legend. Appropriate legends shall be placed on any certificates
evidencing the shares of Common Stock or other securities issued upon exercise
of the Option and appropriate stop transfer instructions shall be given to the
Company's transfer agent.

CONSENT OF SPOUSE

I acknowledge that I have read the foregoing Restricted Stock Option
Agreement (the "Agreement") and that I know its contents. I am aware that by its
provisions my spouse agrees to not sell the Shares that may be issued upon
exercise of the Option, including my community interest, if any, in them, during
certain periods specified in the Agreement. I hereby approve of the provisions
of the Agreement, agree that such Shares and my community property interest in
them, if any, are subject to the provisions of the Agreement and that I will
take no action at any time to hinder operation of the Agreement or to attempt
the sale or transfer of any of the Shares, including my community property
interest in them, if any, other than pursuant to the terms of the Agreement.

Date ____________________, spouse of

Exhibit 10.1.10

SANTA BARBARA BANCORP

1996 DIRECTORS STOCK OPTION PLAN
(As Amended December 17, 1996)

1. PURPOSES OF THE PLAN

The purposes of this 1996 Directors Stock Option Plan are to attract,
motivate and retain the best available Directors for the Company and each of the
Parent and Subsidiaries and to provide them with additional incentive to promote
the success of the Company's business.

2. DEFINITIONS

As used herein, the following definitions shall apply:

2.1 "Board of Directors" shall mean the Board of Directors of the
Company.

2.2 "Code" shall mean the Internal Revenue Code of 1986, as amended.

2.3 "Commission" shall mean the Securities and Exchange Commission.

2.4 "Committee" shall mean the Committee of the Board of Directors that
shall administer the Plan.

2.5 "Common Stock" shall mean the Common Stock of the Company.

2.6 "Company" shall mean Santa Barbara Bancorp, a California
corporation.

2.7 "Disability" shall mean total and permanent disability as defined in
Section 22(e)(3) of the Code.

2.8 "Donative Transfer" means any transfer of an Option or Reload Option
made for donative purposes or without the payment or receipt by or on behalf of
the Optionee of any cash, property or other consideration. For purposes of this
Section, neither an Optionee's receipt of or eligibility for a deduction, credit
or similar allowance for federal or state income tax or estate tax purposes nor
the transferee's use for family or support purposes of any proceeds realized
from the sale of the any shares of Common Stock acquired on exercise of an
Option shall be deemed to be the receipt of consideration.

2.9 "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.

2.10 "Fair Market Value" shall mean, as of any date, the value of the Common
Stock determined as follows.

2.10.1 If the Common Stock is listed on an established stock exchange or
a national market system, including without limitation the Nasdaq National
Market of the National Association of Securities Dealers, Inc. Automated
Quotation ("NASDAQ") System, the Fair Market Value of a share of Common Stock
shall be the closing sales price for such stock (or the closing bid, if no sales
were reported) as quoted on such system or exchange (or the exchange with the
greatest volume of trading in the Common Stock) on the last market trading day
prior to the date of determination.

2.10.2 If the Common Stock is quoted on the NASDAQ System (but not on the
Nasdaq National Market thereof) or is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market Value of
a share of Common Stock shall be the mean between the high bid and low asked
prices for the Common Stock on the last market trading day prior to the date of
determination.

2.11 "Option" shall mean a stock option granted pursuant to the Plan and
shall include Reload Options. All Options granted hereunder shall be
"nonstatutory stock options" and each such Option shall be evidenced by a
written Stock Option Agreement.

2.12 "Optioned Stock" shall mean the Common Stock subject to an Option.

2.13 "Optionee" shall mean a Director who receives an Option.

2.14 "Plan" shall mean this 1996 Directors Stock Option Plan.

2.15 "Rule 16b-3" shall mean Rule 16b-3 promulgated under the Exchange Act
or any successor to Rule 16b-3 in effect at the time in question.

2.16 "Section 16(b)" shall mean Section 16(b) of the Exchange Act.

2.17 "Stock Option Agreement" means a written agreement between the Company
and an Optionee evidencing the terms and conditions of an individual Option
grant. Each Option Agreement is subject to the terms and conditions of the Plan.
The terms and provisions of each Option Agreement need not be the same.

2.18 "Subsidiary" shall mean a "subsidiary corporation," whether now or
hereafter existing, as defined as Section 424(f) of the Code.

3. STOCK SUBJECT TO THE PLAN

3.1 Original Reserve. Subject to the provisions of Section 15 and Section 16
of the Plan, the maximum aggregate number of shares which are reserved for
issuance upon exercise of Options granted under the Plan is One Hundred Fifty
Thousand (150,000) shares of Common Stock.

3.2 Adjustments In Reserve. In the event that any outstanding Option granted
under the Plan expires or is terminated without exercise, or with only partial
exercise, prior to the end of the period during which Options may be granted
under the Plan, the shares allocable to the unexercised portion of such Option
shall be added back into the Reserve and may again be subject to option under
the Plan.

4. ADMINISTRATION OF THE PLAN

The Plan shall be administered by the Board of Directors or the Committee.
The Committee shall consist of not less than two (2) Directors all of whom shall
be Non-Employee Directors of the Company within the meaning of Rule 16b- 3.
Members of the Committee shall serve at the pleasure of the Board of Directors.
No member of the Board of Directors or the Committee shall be liable for any
action or determination undertaken or made in good faith with respect to the
Plan or any agreement executed pursuant to the Plan. Subject to the terms of
this Plan, the Board of Directors or the Committee shall determine:

4.1 Directors to Receive Option. The Directors to whom options shall be
granted;

4.2 Number of Shares. The number of shares of Common Stock to be
optioned to each such Director;

4.3 Option Price. The price to be paid for the shares of Common Stock
upon the exercise of each Option;

4.4 Option Period. The period within which each Option shall be or
become exercisable; and

4.5 Other Terms and Conditions. The terms and conditions of the Stock Option
Agreement between the Company and each Director to whom an Option is granted
under the Plan; which terms and conditions shall be in accordance with the
provisions of this Plan but may include any other or additional terms or
conditions not inconsistent with this Plan. The terms and conditions of each
Stock Option Agreement need not be identical.

5. ELIGIBILITY

Options may be granted only to Directors of the Company, or any Subsidiary,
who are not otherwise employed by the Company or any Subsidiary. In addition,
notwithstanding any other provision contained in this Plan, no Director shall be
eligible to participate in the Plan if such individual owns stock and securities
possessing more than ten percent (10%) of the total combined voting power or
value of all classes of stock of the Company or any Subsidiary. Notwithstanding
anything in this Plan to the contrary, no person shall be entitled to the grant
of more than one Option during or with respect to any year by reason of such
person acting as a Director of more than one of the Company or a Subsidiary. No
person shall be eligible to receive the grant of an Option under this Plan
unless he or she is a Director of the Company or such Subsidiary on the date of
such grant.

6. EFFECTIVE DATE OF OPTION GRANT.

The "grant" of an Option pursuant to this Plan shall be deemed to have
occurred on the later of: (a) the date the Committee announces the grant of the
Option; or (b) such later date set by the Committee or set forth in the Stock
Option Agreement.

7. TERM OF PLAN

This Plan has been adopted by the Board of Directors as of February 27, 1996.
The term of the Plan shall begin as of February 27, 1996, and shall continue
until December 31, 2005, unless terminated sooner in accordance with the
provisions of the Plan.

8. TERM OF OPTION

Subject to the provisions of Section 10, below, the term of each Option shall
be five (5) years from the date of grant thereof.

9. EXERCISE PRICE AND CONSIDERATION

9.1 Exercise Price. The exercise price per share for the shares to be issued
upon exercise of an Option shall be 100% of the Fair Market Value per share of
Common Stock on the date of grant of the Option.

9.2 Consideration. The consideration to be paid for the shares to be issued
upon exercise of an Option shall consist entirely of cash, cashier's or bank
certified check, or other shares of Common Stock having a Fair Market Value on
the date of exercise of the Option equal to the exercise price for the shares as
to which the Option is being exercised, or any combination of such methods of
payment. In the event that the exercise price is paid, whether in whole or in
part, through the tender of shares of Common Stock already owned by the
Optionee, then the Option must be exercised for a minimum of at least 100 shares
or the total number of shares subject to the Option, if less than 100 shares.

10. EXERCISE OF OPTION

10.1 Six-Month Vesting Period. Any Option shall become exercisable only
after the expiration of six (6) months following the date of grant of such
Option. Thereafter, the Option shall be fully vested and shall be exercisable in
whole or in part at any time and from time to time during the term of the
Option.

10.2 Procedure for Exercise. An Option shall be deemed to be exercised when
the Optionee has delivered to the Company written notice of such exercise and
full payment of the exercise price for the shares with respect to which the
Option is being exercised. Full payment shall consist of such consideration as
is allowable under Section 9.2, above. An Option may not be granted or exercised
for a fraction of a share. Exercise of an Option in any manner shall result in a
decrease in the number of shares which thereafter may be available, both for the
purposes of the Plan and for issuance under the Option, by the number of shares
as to which the Option is exercised. Optionee may designate in the notice of
exercise that some or all of the shares of Common Stock or other securities to
be issued upon such exercise shall be issued in the name of Optionee's spouse,
the trustee of a revocable trust in which Optionee and his or her spouse are the
sole primary beneficiaries, Optionee's prior spouse, or any combination of the
foregoing. Notwithstanding anything herein to the contrary, Optionee may not
designate in the notice of exercise that any of the shares of Common Stock or
other securities shall be issued to Optionee's prior spouse unless such issuance
is to be made pursuant to a domestic relations order as defined in the Code or
Title I of the Employee Income Retirement Security Act, or the rules thereunder.
The Company may rely on a representation of the Optionee, or such other evidence
as the Company deems appropriate, for purposes of determining the propriety of
the exercise of any Option and the compliance of such exercise with the terms of
this Plan and any applicable Stock Option Agreement. The Company shall have no
obligation to independently investigate the propriety of the exercise of any
Option or the compliance of such exercise with the terms of this Plan or any
applicable Stock Option Agreement.

10.3 Rights as a Shareholder. Until the issuance (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the stock certificate evidencing the shares of Common
Stock, the Optionee shall have no right to vote or receive dividends or any
other rights as a shareholder with respect to the Optioned Stock,
notwithstanding the exercise of the Option. No adjustment shall be made in the
exercise price payable on the exercise of any Option or the number of shares of
Common Stock or other securities or property issuable upon exercise of an Option
for any dividend, distribution or other right for which the record date is prior
to the date the stock certificate is issued to Optionee with respect to any
Optioned Stock, except as provided in Section 15 and Section 16, below.

10.4 Termination of Status as Director. If an Optionee's continuous status
as a Director is terminated other than for cause or by reason of the Optionee's
death or disability, the Optionee may, but only within the three (3)-month
period from the date of the termination of the Optionee's status as a Director
(but not later than the expiration of the term of the Option), exercise any
outstanding Option (including any Reload Option) to the extent that the Option
was exercisable at the date of such termination. If the Optionee does not
exercise the Option in full during such 3-month period, the unexercised portion
of the Option shall terminate at the close of business, California time, on the
last business day of such 3-month period and thereafter shall not be exercisable
in whole or in part. Notwithstanding anything in this Section to the contrary,
if the Option is not exercisable on the date of the termination of the
Optionee's status as a Director, then the Option shall terminate simultaneously
with the termination of the Optionee's status as a Director and thereafter shall
not be exercisable in whole or in part.

10.5 Disability of Optionee. Notwithstanding the provisions of Section 10.4,
above, if an Optionee's continuous status as a Director is terminated as a
result of the Optionee's death or disability, the Optionee or his or her estate
or personal representative may exercise the Option to the extent that the Option
was exercisable at the date of such termination in whole or in part at any time
and from time to time during the twelve (12)- month period from the date of the
termination of the Optionee's status as a Director. If the Optionee does not
exercise the Option in full during such 12-month period, the unexercised portion
of the Option shall terminate at the close of business, California time, on the
last business day of such 12-month period and thereafter shall not be
exercisable in whole or in part. Notwithstanding anything in this Section to the
contrary, if the Option is not exercisable on the date of the termination of the
Optionee's status as a Director, then the Option shall terminate simultaneously
with the termination of the Optionee's status as a Director and thereafter shall
not be exercisable in whole or in part.

10.6 Termination for Cause. If an Optionee's continuous status as a Director
is terminated for cause, all outstanding Options held by the Optionee shall
terminate simultaneously with the termination of the Optionee's status as a
Director and thereafter shall not be exercisable in whole or in part. For
purposes of this Section, an Optionee's status as a Director shall be deemed to
be terminated for "cause" as of the date on which the Optionee is removed as a
Director for any reason described in Section 304 of the California General
Corporation Law.

10.7 Status as a Director. The termination of an Optionee's status as a
Director shall be deemed to occur on the effective date of the earliest of (a)
the Optionee's resignation as a Director, (b) the removal of the Optionee as a
Director, and (c) the Optionee's death.

11. RESTRICTION ON TRANSFER OF STOCK ISSUED

11.1 Holding Period. The Stock Option Agreements covering all Options
granted under this Plan shall provide that shares of Common Stock issued upon
exercise of the Options may not be sold, exchanged, transferred, pledged,
hypothecated or otherwise disposed of, without the prior written approval of the
Company for a period equal to the longer of five (5) years following the date on
which the Option is granted and two (2) years following the date on which such
shares are issued to the Optionee on exercise of the Option; provided that the
foregoing restriction on transfer shall not apply to an Optionee's transfer of
shares of Common Stock (a) to the Company in payment of all or any portion of
the exercise price payable upon exercise of an Option or the satisfaction of any
income tax withholding obligation with respect to any exercise of an Option or
(b) to the acquiring party in any transaction described in Section 16, below, in
which the Company is not the surviving corporation, or (c) to a person or entity
described in Section 13.2.1 hereof.

11.2 Exempt Transfers. Notwithstanding the foregoing, an Optionee may
transfer shares of Common Stock or other securities acquired on exercise of an
Option to a person described in Section 13.2.1 hereof only if all of the
following conditions are satisfied: (a) the transfer is a permitted transfer
under Section 13.2.2 hereof; (b) the Optionee gives the Company at least ten
(10) days prior written notice of the proposed transfer, which notice shall
specify the name and address of the proposed transferee and the basis on which
the proposed transferee is a person or entity described in Section 13.2.1
hereof; (c) the proposed transferee agrees in writing for the benefit of the
Company to acquire and hold the transferred shares of Common Stock or other
securities subject to the terms and conditions of this Plan and the applicable
Stock Option Agreement, including the provisions of this Section; and (d) the
transfer is of a whole number multiple of one hundred (100) shares.

11.3 Legend. Appropriate legends shall be placed on any certificates
evidencing the shares of Common Stock or other securities issued upon exercise
of an Option and appropriate stop transfer instructions shall be given to the
Company's transfer agent.

12. RELOAD FEATURES

12.1 Grant of Reload Options. Whenever the holder of an Option granted under
this Plan (including any Reload Options granted under the provisions of this
Section 12 or Section 14, below) (the "Original Option") exercises the Original
Option and makes payment of the exercise price by tendering shares of the Common
Stock previously held by the Optionee, then the Optionee shall be entitled to
receive and the Company shall grant the Optionee a new option (the "Reload
Option") for that number of shares of the Common Stock which is equal to the
number of shares tendered by the Optionee in payment of the exercise price for
the Original Option being exercised. All such Reload Options granted hereunder
shall be on the following terms and conditions.

12.1.1 Exercise Price. The exercise price per share shall be an
amount equal to the Fair Market Value per share of the Common Stock as of the
date of exercise of the Original Option.

12.1.2 Expiration Date. The term of the Reload Option shall begin as of
the date of exercise of the Original Option and, unless terminated sooner
pursuant to the terms of this Plan or the Stock Option Agreement, shall
terminate five (5) years thereafter.

12.1.3 Vesting Period. Any Reload Option shall become exercisable one (1)
year following the date of grant of such Reload Option. Thereafter the Reload
Option shall be fully vested and shall be exercisable in whole or in part at any
time and from time to time during the term of the Reload Option.

12.1.4 Other Terms. All other terms of Reload Options granted hereunder
shall be identical to the terms and conditions of the Original Option, the
exercise of which gives rise to the grant of the Reload Option.

12.2 Restrictions on Reload Options. Any and all Reload Options granted
pursuant to this Section 12 (or Section 14, below) shall be subject to the
following conditions and restrictions.

12.2.1 Holding Period of Shares Tendered. No Reload Option shall be
granted pursuant to Section 12.1, above, unless the shares of Common Stock
tendered upon exercise of the Original Option in payment therefore have been
held by the Optionee for a period of more than six (6) months prior to the
exercise of the Original Option. The Company may rely on a representation of the
Optionee, or such other evidence as the Company deems appropriate, for purposes
of determining the holding period of any shares surrendered on exercise of an
Option and the compliance of such exercise with the terms of this Plan and any
applicable Stock Option Agreement. The Company shall have no obligation to
independently investigate the holding period or the propriety of the exercise of
any Option or the compliance of such exercise with the terms of this Plan or any
applicable Stock Option Agreement.

12.2.2 Holding Period of Original Option Shares. If any of the shares of
Common Stock of the Company which are issued upon exercise of the Original
Option are sold within one (1) year following the exercise of the Original
Option, then the Reload Option shall immediately terminate.

12.2.3 Exception. The holding period restrictions set forth in Sections
12.2.1 and 12.2.2, above, shall not apply to an Optionee's transfer of shares of
Common Stock (a) to the Company in payment of all or any portion of the exercise
price upon exercise of an Option, whether an Original Option or a Reload Option,
or (b) in satisfaction of the Optionee's income tax withholding obligation, if
any, by the transfer of shares to the Company or by the Company's withholding of
shares that would otherwise be issued as a result of the exercise of an Option,
or (c) to the acquiring party in any transaction described in Section 16, below,
in which the Company is not the surviving corporation, or (d) to any person
described in Section 13.2.1 hereof so long as the transfer satisfies the
conditions of Section 13.2 hereof.

13. TRANSFERABILITY OF OPTIONS

13.1 Restriction on Transfer. Except as specifically set forth in Section
13.2 hereof, no Option or Reload Option may be sold, pledged, assigned,
hypothecated, transferred, or otherwise disposed of in any manner, other than by
will or the laws of descent and distribution.

13.2 Limited Transferability. A Stock Option Agreement may provide that an
Optionee may transfer all or any portion of any Option or Reload Option in
accordance with the provisions of this Section 13.2. If a Stock Option Agreement
permits the transfer of any Option or Reload Option, any transfer that does not
comply with all of the provisions of this Section 13.2 and the Stock Option
Agreement shall be null and void ab initio. The provisions of the Stock Option
Agreements dealing with the transferability of the Options need not be identical
for all Options and the provision for transferability with respect to one Option
shall not require the provision for transferability with respect to any other
Option.

13.2.1 Permitted Transferees. An Option or Reload Option may be
transferred or assigned by the Optionee only to one or more of the following:
(a) the Optionee's spouse, parents and lineal descendants, including adopted
children (the "Immediate Family Members"); (b) a trust established by the
Optionee and with respect to which all beneficial interests are held by one or
more of the Optionee, the Immediate Family Members, and a tax-exempt charitable
organization which has only a contingent residual interest in the trust; (c) a
partnership or limited liability company established by the Optionee and in
which all beneficial interests are held by one or more of the Optionee and the
Immediate Family Members; (d) a tax-exempt educational, religious or charitable
organization, as those terms are defined in Section 501(c)(3) of the Code; and
(e) such other persons and entities as the Company may specifically approve in
writing after written notice from the Optionee. The Company may require as a
condition to the transfer of any Option or Reload Option under this Section that
the transferee provide to the Company reasonable evidence that the proposed
transferee is described in one of the foregoing clauses.

13.2.2 Permitted Transfers. Any transfer of an Option or Reload Option
under this Section 13.2 must be either a Donative Transfer, a transfer to a
partnership or limited liability company described in clause (c) of Section
13.2.1 above, or a transfer specifically approved in writing by the Company
after written notice from the Optionee.

13.2.3 Minimum Transfer. Any transfer of an Option or a Reload Option
must be with respect to not less than one hundred (100) shares of Optioned Stock
and may be made only in whole number multiples of one hundred (100) shares of
Optioned Stock.

13.2.4 Notice to the Company. The Optionee shall give the Company at
least ten (10) days prior written notice of any proposed transfer of an Option
or Reload Option pursuant to this Section 13.2 and shall include with such
notice:

A. The name and address of the proposed transferee and a statement
of the basis on which the proposed transferee is a permitted transferee under
Section 13.2.1 hereof; and

B. The proposed transferee's written agreement to accept the
transferred Option or Reload Option and any shares of Common Stock acquired on
exercise of the Option or Reload Option subject to all of the terms and
conditions of this Plan and the applicable Stock Option Agreement, including the
provisions dealing with the termination of the Option or Reload Option on the
death or disability of the Optionee or the termination of the Optionee's status
as a Director of the Company.

13.2.5 No Further Transfer. Notwithstanding anything in this Plan or any
Stock Option Agreement to the contrary, a transferee of any Option or Reload
Option shall not have the right to further transfer all or any portion of the
transferred Option, other than (a) by will or the laws of descent and
distribution, or (b), if the transferee is a trust, pursuant to the terms of the
trust agreement by reason of the death of any settlor.

13.2.6 Further Acts. The Company may require as a condition to the
transfer of any Option or Reload Option such additional information and
agreements from the Optionee and the proposed transferee as the Company may deem
necessary or beneficial for purposes of complying with this Section or any
applicable federal or state law, rule or regulation.

13.2.7 Disclaimer. The Company's acceptance of any transfer of an Option
or Reload Option shall not be considered legal or tax advice to the Optionee or
the proposed transferee as to their compliance with any applicable law, rule or
regulation or the legal or tax consequences of such transfer or the subsequent
exercise of the transferred Option or the sale or exchange of any of the shares
of Common Stock acquired on exercise of the transferred Option.

14. TAX WITHHOLDING

To the extent that the exercise of any Option (including any Reload Option)
granted hereunder gives rise to an income tax withholding obligation on the part
of the Company with respect to the Optionee, the Company may satisfy such
obligation on such terms and in accordance with such procedures as it deems
appropriate under applicable law. At the election of the Optionee, such
withholding obligation may be satisfied through the Optionee's surrender of
shares of Common Stock owned by the Optionee or through the Company's retention
of shares of the Common Stock which would otherwise be issued as a result of the
exercise of the Option. If withholding is made in shares of Common Stock, the
Company shall grant to the Optionee a Reload Option, on the terms specified in
Section 12 hereof for the number of shares so withheld.

15. RECAPITALIZATION OF COMPANY

Except as otherwise provided herein, appropriate and proportionate
adjustments shall be made in the number and class of shares subject to the Plan
and to the Options granted under the Plan, and the exercise price of such
Options, in the event of a stock dividend (but only on Common Stock), stock
split, reverse stock split, recapitalization, reorganization or like change in
the capital structure of the Company. To the extent that the foregoing
adjustments relate to stock or securities of the Company, such adjustments shall
be made by the Committee, the determination of which in that respect shall be
final, binding, and conclusive.

16. REORGANIZATION OR LIQUIDATION OF THE COMPANY

In the event of (a) a liquidation of the Company, or (b) a merger,
reorganization, or consolidation of the Company with any other corporation in
which the Company is not the surviving corporation or the Company becomes a
wholly owned subsidiary of another corporation, or (c) any sale of all or
substantially all of the Company's assets, any unexercised Options then
outstanding under the Plan shall be deemed cancelled as of the effective date of
any such liquidation, merger, reorganization, consolidation or sale, unless the
surviving corporation in any such merger, reorganization or consolidation or the
acquiring corporation in any such sale elects to assume the Options under the
Plan or to issue substitute options in place thereof; provided that, if any
Options granted under the Plan would be cancelled in accordance with the
foregoing, the Optionee shall have the right, exercisable during a 10-day period
ending on the fifth day prior to the effective date of such liquidation, merger,
reorganization, consolidation or sale, to exercise the Options in whole or in
part even though the Option otherwise was not then exercisable. The Company
shall give each Optionee at least thirty (30) days' prior written notice of the
anticipated effective date of any such liquidation, merger, reorganization,
consolidation or sale. Notwithstanding anything in this Plan or in any Stock
Option Agreement to the contrary, (i) all Option exercises effected during the
foregoing 10-day period shall be deemed to be effective immediately prior to the
closing of such liquidation, merger, reorganization, consolidation or sale and
(ii) if the Company abandons or otherwise fails to close any such liquidation,
merger, reorganization, consolidation or sale, then (A) all exercises during the
foregoing 10-day period shall cease to be effective ab initio and (B) the
outstanding Options shall be exercisable as otherwise determined under the
applicable Stock Option Agreements and without consideration of this Section or
the corresponding provisions of any Stock Option Agreement.

17. AMENDMENT AND TERMINATION OF THE PLAN

17.1 Amendment and Termination. The Board of Directors may amend or
terminate the Plan from time to time in such respects as the Board may deem
advisable; provided that the following revisions or amendments shall require
approval of the shareholders of the Company entitled to vote:

17.1.1 Number of Shares. Any material increase in the number or
shares which may be issued pursuant to the Plan (other than in accordance with
Section 15 and 16, above);

17.1.2 Eligibility. Any material modification of the requirements as
to eligibility for participation in the Plan; or

17.1 Increase in Benefits. Any material increase in the benefits accruing to
participants under the Plan.

17.2 Effect of Amendment or Termination. Any amendment or termination of the
Plan shall not affect Options already granted and such Options shall remain in
full force and effect as if this Plan had not been amended or terminated, unless
mutually agreed otherwise between the Optionee and the Company, which agreement
must be in writing and signed by the Optionee and the Company.

18. CONDITIONS UPON ISSUANCE OF SHARES

18.1 Compliance with Law. Shares of Common Stock shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, and the requirements of any stock exchange upon which the shares may
then be listed, and shall be further subject to the approval of counsel for the
Company with respect to such compliance.

18.2 Investment Intent. As a condition to the exercise of an Option, the
Company may require the person exercising such Option to represent and warrant
at the time of any such exercise that the shares of Common Stock are being
purchased only for investment and without any present intention to sell or
distribute such shares if, in the opinion of counsel for the Company, such a
representation is required by applicable law.

18.3 Governmental Consents. Inability of the Company to obtain authority
from any regulatory body having jurisdiction, which authority is deemed by the
Company's counsel to be necessary to the lawful issuance and sale of any shares
of Common Stock hereunder, shall relieve the Company of any liability in respect
of the failure to issue or sell, or any delay in issuing or selling, such shares
as to which such requisite shall not have been obtained.

19. RESERVE OF SHARES

During the term of this Plan, the Company will at all times reserve and
keep available such number of shares as shall be sufficient to satisfy the
requirements of the Plan (the Plan "Reserve").

20. OPTION AGREEMENT

Each Option granted hereunder shall be evidenced by a written Stock Option
Agreement (the "Stock Option Agreement").

21. INDEMNIFICATION

In addition to such other rights of indemnification as they may have as
members of the Board of Directors and/or employees of the Company, the members
of the Committee administering the Plan shall be indemnified by the Company
against reasonable expenses, including attorneys' fees, actually and necessarily
incurred in connection with the defense of any action, suit, or proceeding, or
in connection with any appeal therein, to which they or any of them may be a
party by reason of any action taken or failure to act under or in connection
with the Plan, any Stock Option Agreement or any Option granted under the Plan,
and against all amounts paid or payable by them in settlement thereof (provided
such settlement is approved by independent legal counsel selected by the
Company) or paid or payable by them in satisfaction of a judgment in any action,
suit, or proceeding, except in relation to matters as to which it shall be
adjudged in such action, suit, or proceeding that such person is liable for
gross negligence or willful misconduct in the performance of his or her duties.
The indemnification provided in this Section shall be available only if, within
sixty (60) days after institution of any such action, suit, or proceeding, the
person seeking indemnification shall in writing offer the Company the
opportunity, at its own expense, to handle and defend the same.

22. EFFECTIVE DATE OF PLAN; SHAREHOLDER APPROVAL

The Plan was adopted by action of the Board of Directors taken at a duly
noticed and held meeting on February 27, 1996. The effectiveness of the Plan
shall be subject to approval by the shareholders of the Company within twelve
(12) months after the aforesaid date of the adoption of the Plan. The manner and
method for approval of the Plan by the shareholders of the Company must comply
with Rule 16b-3. If the Plan has not been previously approved by the
shareholders of the Company, the Plan shall terminate on January 31, 1997.

23. EFFECT OF AMENDMENTS

23.1 Amendment of Options. From and after December 17, 1996, the date of
this Amended Plan, all of the terms and provisions of the Plan as amended shall
apply to all Options which are outstanding as of such date and the Stock Option
Agreements covering such Options shall be deemed automatically amended to
reflect the amended terms of this Plan.

23.2 No Change in Price or Term. Notwithstanding anything in this Plan to
the contrary, in no event shall the amendment of any Stock Option Agreement in
accordance with the provisions of this Section change any or all of the number
of shares covered by any Option or the exercise price, vesting schedule or term
of the Option.

23.3 Amended Stock Option Agreements. Any Optionee who holds an Option that
is deemed amended under this Section may at any time deliver to the Company his
or her existing Stock Option Agreement and request that the Company deliver to
the Optionee a new Stock Option Agreement incorporating the amended and restated
terms and provisions of the Plan. The Company shall deliver to the Optionee a
new Stock Option Agreement promptly after the Optionee's delivery of the
existing Stock Option Agreement. NOTWITHSTANDING ANYTHING IN THIS PLAN TO THE
CONTRARY, THE OPTIONEE SHALL BE SOLELY RESPONSIBLE FOR DETERMINING WHETHER THE
AMENDMENT OF A STOCK OPTION AGREEMENT WILL CONSTITUTE A MODIFICATION OF THE
OPTION AND THE COMPANY SHALL HAVE NO RESPONSIBILITY OR LIABILITY TO THE OPTIONEE
BY REASON OF THE AMENDMENT OF A STOCK OPTION AGREEMENT BEING A MODIFICATION OF
THE OPTION.

CERTIFICATE OF SECRETARY

The undersigned, being the Corporate Secretary of the Company, does hereby
certify that:

(a) the foregoing Plan was adopted by the Board of Directors of the Company
at a duly called and held meeting of the Board of Directors on February 27,
1996, and the Plan was approved by the shareholders of the Company at a duly
called and held meeting of the shareholders on April 23, 1996;

(b) the Plan was amended at duly called and held meetings of the Board of
Directors on August 27, 1996, and September 25, 1996, and that the amendments
adopted by the Board of Directors on August 27, 1996, and September 25, 1996,
did not need to be approved by the shareholders of the Company; and

(c) the Plan was amended at a duly called and held meeting of the Board of
Directors on December 17, 1996, and that the amendments adopted by the Board of
Directors on December 17, 1996, did not need to be approved by the shareholders
of the Company.

Dated: December 17, 1996
Jay D. Smith, Esq.
Corporate Secretary

Exhibit 10.1.10.1

SANTA BARBARA BANCORP

1996 DIRECTORS STOCK OPTION AGREEMENT

THIS OPTION AGREEMENT (the "Agreement), is granted as of July 1, 19___ (the
"Effective Date"), by SANTA BARBARA BANCORP (the "Company") to ________________
("Optionee").

RECITALS

WHEREAS, the Company has duly adopted its 1996 Director Stock Option Plan
(the "Plan"); and

WHEREAS, Optionee is entitled to be awarded and granted an option under the
Plan;

NOW, THEREFORE:

1. GRANT OF OPTION

The Company hereby grants to Optionee the option to purchase ("Option") from
the Company _________________________ (_____) shares of its Common Stock at an
exercise price of $_____ per share, which price is not less than the fair market
value per share of the Common Stock of the Company as of the Effective Date. The
Option may be exercised on the terms and conditions set forth in this Agreement
and the Plan. In the event of any conflict between the terms and conditions of
the Plan and the terms and conditions of this Agreement, the terms and
conditions of the Plan shall control.

2. OPTION PERIOD

The period during which the Option may be exercised (the "Option Period")
shall commence on the date six (6) months after the Effective Date and shall
terminate five (5) years after the Effective Date unless the Option is
terminated earlier in accordance with the provisions of this Agreement or the
Plan.

3. EXERCISE

The Option may be exercised in full or in part at any time and from time to
time during the Option Period (except that it may not be exercised for any
fractional shares). The exercise price must be paid (a) in cash or check or (b)
by the tender, whether through surrender or attestation, of shares of Common
Stock of the Company owned by Optionee having a fair market value on the date of
surrender equal to the aggregate exercise price of the shares as to which the
Option is being exercised, or (c) any combination of such methods of payment. In
the event that the exercise price is paid, whether in whole or in part, through
the tender of shares of Common Stock of the Company owned by Optionee, then (i)
Optionee shall be entitled to receive a grant of a Reload Option in accordance
with the terms of the Plan, but (ii) the Option must be exercised for a minimum
of at least 100 shares.

4. EXPIRATION

4.1 Termination of Status as Director. If Optionee's status as a Director is
terminated for any reason other than cause or Optionee's death or disability,
Optionee may, but only during the three (3)-month period immediately following
the date of the termination of Optionee's status as a Director (but not later
than the expiration of the term of the Option), exercise the Option to the
extent that the Option was exercisable at the date of such termination. If
Optionee does not exercise the Option in full during such 3-month period, the
unexercised portion of the Option shall terminate at the close of business,
California time, on the last business day of such 3-month period and thereafter
shall not be exercisable in whole or in part. Notwithstanding anything in this
Section to the contrary, if the Option is not exercisable on the date of the
termination of Optionee's status as a Director, then the Option shall terminate
simultaneously with the termination of Optionee's status as a Director and
thereafter shall not be exercisable in whole or in part.

4.2 Disability of Optionee. Notwithstanding the provisions of Section 4.1,
above, if Optionee's status as a Director is terminated by reason of Optionee's
death or disability (as such term is defined in the Plan), Optionee or his or
her estate or personal representative may exercise the Option to the extent that
the Option was exercisable at the date of such termination in whole or in part
at any time and from time to time during the twelve (12)-month period
immediately following the date of the termination of Optionee's status as a
Director (but not later than the expiration of the term of the Option). If
Optionee does not exercise the Option in full during such 12-month period, the
unexercised portion of the Option shall terminate at the close of business,
California time, on the last business day of such 12-month period and thereafter
shall not be exercisable in whole or in part. Notwithstanding anything in this
Section to the contrary, if the Option is not exercisable on the date of the
termination of Optionee's status as a Director, then the Option shall terminate
simultaneously with the termination of Optionee's status as a Director and
thereafter shall not be exercisable in whole or in part.

4.3 Termination for Cause. If Optionee's status as a Director is
terminated for cause, the Option shall terminate simultaneously with the
termination of Optionee's status as a Director and thereafter shall not be
exercisable in whole or in part. For purposes of this Section, Optionee's status
as a Director shall be deemed to be terminated for "cause" as of the date on
which Optionee is removed as a Director for any reason described in Section 304
of the California General Corporation Law, as amended from time to time.

4.4 Status as a Director. The termination of Optionee's status as a
Director shall be deemed to occur on the effective date of the earliest of (a)
Optionee's resignation as a Director, (b) the removal of Optionee as a Director,
and (c) Optionee's death or disability.

5. RESTRICTION ON TRANSFER OF STOCK ISSUED

5.1 Holding Period. None of the shares of Common Stock and other
securities issued upon exercise of the Option may be sold, exchanged,
transferred, pledged, hypothecated or otherwise disposed of, without the prior
written approval of the Company, for a period equal to the longer of five (5)
years following the Effective Date and two (2) years following the date on which
such shares are issued to the Optionee on exercise of the Option; provided that
the foregoing restriction on transfer shall not apply to Optionee's transfer of
shares of Common Stock (a) to the Company in payment of all or any portion of
the exercise price payable upon exercise of the Option or the satisfaction of
any income tax withholding obligation with respect to any exercise of the Option
or (b) to the acquiring party in any transaction described in Section 12, below,
in which the Company is not the surviving corporation, or (c), subject to the
provisions of Section 5.2 hereof, to a person or entity described in Section
9.2.1 hereof.

5.2 Exempt Transfers. Notwithstanding the foregoing, Optionee may transfer
shares of Common Stock or other securities acquired on exercise of the Option to
a person described in Section 9.2.1 hereof only if all of the following
conditions are satisfied: (a) the transfer is a permitted transfer under Section
9.2.1 hereof; (b) Optionee gives the Company at least ten (10) days prior
written notice of the proposed transfer, which notice shall specify the name and
address of the proposed transferee and the basis on which the proposed
transferee is a person or entity described in Section 9.2.1 hereof; (c) the
proposed transferee agrees in writing for the benefit of the Company to acquire
and hold the transferred shares of Common Stock or other securities subject to
the terms and conditions of the Plan and this Agreement, including the
provisions of this Section; and (d) the transfer is of a whole number multiple
of one hundred (100) shares.

5.3 Legend. Appropriate legends shall be placed on any certificates
evidencing the shares of Common Stock or other securities issued upon exercise
of the Option and appropriate stop transfer instructions shall be given to the
Company's transfer agent.

6. TAX WITHHOLDING

To the extent that the exercise of the Option gives rise to an obligation on
the part of the Company to withhold income tax from amounts otherwise to be paid
to Optionee, the Company shall do so on such terms and in accordance with such
procedures as may be required under applicable law. At Optionee's election,
withholding may be made by the Company's retention of shares of Common Stock of
the Company which would otherwise be issued to Optionee as a result of the
exercise of the Option. If withholding is made in shares of the Company's Common
Stock, the Company shall grant to Optionee, in accordance with the terms and
conditions specified in the Plan, a Reload Option for the number of shares so
withheld.

7. COMPLIANCE WITH APPLICABLE LAW

7.1 Applicable Law. Shares of Common Stock and other securities shall not
be issued pursuant to the exercise of the Option unless the exercise of the
Option and the issuance and delivery of such shares and securities shall comply
with all relevant provisions of law, including, without limitation, the
Securities Act of 1933, the Securities Exchange Act of 1934, the rules and
regulations promulgated thereunder, the requirements of any stock exchange on
which the shares or securities then may be listed, and any applicable state
securities laws. In addition, the Company may require as a condition to the
issuance of any shares or securities pursuant to the exercise of the Option, an
opinion of counsel for the Company with respect to such compliance.

7.2 Investment Intent. As a condition to the exercise of the Option, the
Company may require Optionee to represent and warrant at the time of such
exercise that the shares and securities are being purchased for investment and
without any intention to sell or distribute such shares or securities if, in the
opinion of counsel for the Company, such a representation is required for
compliance with applicable law.

7.3 Company Efforts. The inability of the Company to obtain authority from
any regulatory body having jurisdiction over the issuance of any shares of
Common Stock or other securities on the exercise of the Option, which authority
is deemed by the Company's counsel to be necessary to the lawful issuance of
such shares or securities, shall relieve the Company of liability in respect of
the failure to issue such shares or securities as to which such authority has
not been obtained. The Company shall use reasonable efforts to obtain all
authority required for the due issuance of any shares of Common Stock and other
securities issuable on exercise of the Option.

8. NOTICE OF EXERCISE

8.1 Exercise Procedure. The Option shall be exercised by Optionee's
delivery to the Company of a written notice specifying the number of shares
which Optionee then desires to purchase, accompanied by full payment of the
aggregate exercise price thereof and, if appropriate, an executed Spousal
Consent. As soon as practicable after its receipt of the notice of exercise and
payment of the exercise price, the Company shall issue and deliver to Optionee
one or more certificates evidencing the number of shares purchased (excluding
any fractional shares), in the name of Optionee and/or such other person(s) as
Optionee has properly designated in the notice of exercise.

8.2 Name of Issuee. Optionee may designate in the notice of exercise that
some or all of the shares of Common Stock or other securities to be issued on
such exercise shall be issued in the name of Optionee's spouse, the trustee of a
revocable trust in which Optionee and his or her spouse are the sole primary
beneficiaries, Optionee's prior spouse, or any combination of the foregoing.
Notwithstanding anything in this Agreement to the contrary, Optionee may not
designate in the notice of exercise that any of the shares of Common Stock and
other securities issuable on exercise of the Option shall be issued to
Optionee's prior spouse unless such issuance is to be made pursuant to a
domestic relations order as defined in the Code or Title I of the Employee
Income Retirement Security Act or the rules thereunder. The Company may rely on
a representation of Optionee, or such other evidence as the Company deems
appropriate, for purposes of determining the propriety of the exercise of the
Option and the compliance of such exercise with the terms of the Plan and this
Agreement. The Company shall have no obligation to deal directly with, and shall
have no liability to, any person other than Optionee, or Optionee's personal
representative if Optionee has died or become permanently disabled prior to the
delivery of the shares. Optionee shall indemnify and hold harmless the Company,
and each of its officers, directors, employees and agents, from and against any
and all claims made by any person other than Optionee, or Optionee's personal
representative, who is designated in the notice of exercise.

8.3 Transfer Taxes. The Company shall pay all expenses, taxes and other
charges payable in connection with the preparation, issue and delivery of the
foregoing stock certificates, except that, in case such stock certificates shall
be registered in a name or names other than the name of Optionee, funds
sufficient to pay all stock transfer taxes which shall be payable upon the
issuance of such stock certificates shall be paid by Optionee at the time of the
delivery of the notice of exercise.

9. TRANSFERABILITY OF OPTIONS

9.1 Restriction on Transfer. Except as specifically set forth in Section
9.2 hereof, Optionee may not sell, pledge, assign, hypothecate, transfer, or
otherwise dispose of all or any portion of the Option other than by will or the
laws of descent and distribution.

9.2 Limited Transferability. Notwithstanding anything in Section 9.1
hereof to the contrary, Optionee may transfer all or any portion of the Option
in accordance with the provisions of this Section 9.2. Any purported transfer of
all or any portion of the Option that does not comply with all of the provisions
of this Section 9.2 shall be null and void ab initio.

9.2.1 Permitted Transferees. All or any portion of the Option may be
transferred or assigned by Optionee only to one or more of the following: (a)
Optionee's spouse, parents and lineal descendants, including adopted children
(the "Immediate Family Members"); (b) a trust established by Optionee and with
respect to which all beneficial interests are held by one or more of Optionee,
the Immediate Family Members, and a tax-exempt charitable organization which has
only a contingent residual interest in the trust; (c) a partnership or limited
liability company in which all voting and equity interests are held by one or
more of Optionee and the Immediate Family Members; (d) a tax-exempt educational,
religious or charitable organization, as those terms are defined in Section
501(c)(3) of the Code; and (e) such other persons and entities as the Company
may specifically approve in writing after written notice from Optionee. The
Company may require as a condition to any transfer under this Section 9.2 that
the proposed transferee provide to the Company reasonable evidence that the
transferee is described in one of the foregoing clauses.

9.2.2 Permitted Transfers. Any transfer of all or any portion of the
Option under this Section 9.2 must be either a Donative Transfer, a transfer to
a partnership or limited liability company described in clause (c) of Section
9.2.1 above, in which the Optionee does not receive any consideration other than
the Optionee's interest in such partnership or limited liability company, or a
transfer specifically approved in writing by the Company after written notice
from the Optionee.

9.2.3 Minimum Transfer. Any transfer of a portion of the Option must be
with respect to not less than one hundred (100) shares of Optioned Stock and may
be made only in whole number multiples of one hundred (100) shares of Optioned
Stock.

9.2.4 Notice to the Company. Optionee shall give the Company at least ten
(10) days prior written notice of any proposed transfer of all or any portion of
the Option pursuant to this Section 9.2 and shall include with such notice:

A. The name and address of the proposed transferee and a statement
of the basis on which the proposed transferee is a permitted transferee under
Section 9.2.1 hereof; and

B. The proposed transferee's written agreement to accept the
transferred Option and any shares of Common Stock acquired on exercise of the
Option subject to all of the terms and conditions of the Plan and this
Agreement, including the provisions dealing with the termination of the Option
on the death or disability of Optionee or the termination of Optionee's status
as a Director of the Company.

9.2.5 No Further Transfer. Notwithstanding anything in the Plan or
this Agreement to the contrary, a transferee of all or any portion of the Option
shall not have the right to further transfer all or any portion of the
transferred Option to any person or entity other than (a) by will or the laws of
descent and distribution, or (b), if the transferee is a trust, pursuant to the
terms of the trust agreement by reason of the death of any settlor.

9.2.6 Further Acts. The Company may require as a condition to the
transfer of all or any portion of the Option such additional information and
agreements from Optionee and the proposed transferee as the Company may deem
necessary or beneficial for purposes of complying with this Section or any
applicable federal or state law, rule or regulation.

9.2.7 Withholding on Exercise of Transferred Option. Optionee
acknowledges and agrees that, if Optionee transfers all or any portion of the
Option pursuant to this Section 9.2 and the transferee exercises the Option,
such exercise may be subject to income tax withholding and Optionee will be
obligated to satisfy such income tax withholding obligation to the same extent
as if Optionee had retained and exercised the Option. Optionee shall be solely
responsible for determining the tax and legal consequences of Optionee's
transfer of all or any portion of the Option and of the transferee's exercise of
the Option, and for obtaining such tax and legal advice as Optionee deems
appropriate.

9.2.8 Disclaimer. The Company's acceptance of any transfer of all or
any portion of the Option shall not be considered legal or tax advice to
Optionee or the proposed transferee as to (a) their compliance with any
applicable law, rule or regulation or (b) the legal or tax consequences of such
transfer or the subsequent exercise of the transferred Option or the sale or
exchange of any of the shares of Common Stock acquired on exercise of the
transferred Option. The Company's acceptance of any transfer of all or any
portion of the Option shall not obligate the Company to accept any subsequent
transfer of all or any portion of the Option.

10. NO RIGHTS AS SHAREHOLDER

Optionee shall not be deemed to be a shareholder of the Company with respect
to the shares of Common Stock or other securities issuable upon exercise of the
Option, unless and until such shares or securities shall have been duly issued
to Optionee upon exercise of the Option and the exercise price shall have been
paid in full.

11. RECAPITALIZATION OF COMPANY

Except as otherwise provided herein, appropriate and proportionate
adjustments shall be made in the number and class of shares subject to the
Option and the exercise price of the Option, in the event of a stock dividend
(but only on Common Stock), stock-split, reverse stock-split, recapitalization,
reorganization or like change in the capital structure of the Company. To the
extent that the foregoing adjustments relate to stock or securities of the
Company, such adjustments shall be made by the Board of Directors of the
Company, the determination of which in that respect shall be final, binding, and
conclusive.

12. REORGANIZATION OR LIQUIDATION OF THE COMPANY

In the event of (a) a liquidation of the Company, or (b) a merger,
reorganization, or consolidation of the Company with any other corporation in
which the Company is not the surviving corporation or the Company becomes a
wholly-owned subsidiary of another corporation, or (c) any sale of all or
substantially all of the Company's assets, any unexercised portion of the Option
shall be deemed cancelled unless the surviving corporation in any such merger,
reorganization or consolidation or the acquiring corporation in any such sale
elects to assume the Option or to issue substitute options in place thereof;
provided that, if the Option would be cancelled in accordance with the
foregoing, Optionee shall have the right, exercisable during a 10-day period
ending on the fifth day prior to the effective date of such liquidation, merger,
reorganization, consolidation or sale, to exercise the Option in whole or in
part even though the Option Period has not yet begun. The Company shall give
Optionee at least thirty (30) days prior written notice of the anticipated
effective date of any such liquidation, merger, reorganization, consolidation or
sale. Notwithstanding anything herein to the contrary, (i) any exercise of the
Option effected during the foregoing 10-day period shall be deemed to be
effective immediately prior to the closing of such liquidation, merger,
reorganization, consolidation or sale, and (ii) if the Company abandons or
otherwise fails to close any such liquidation, merger, reorganization,
consolidation or sale, then (A) such exercise during the foregoing 10-day period
shall cease to be effective ab initio and (B) the Option shall be exercisable as
otherwise determined under this Agreement and without consideration of this
Section.

13. INTERPRETATION

13.1 Coordination with Plan. This Agreement is subject to all of the terms
and conditions of the Plan, and in the event of any conflict between any of the
provisions of this Agreement and any of the provisions of the Plan, the
applicable provisions of the Plan shall control. The Board of Directors of the
Company shall have full power to interpret the provisions of this Agreement and
the Plan and to decide any dispute which may arise hereunder or thereunder, and
its action shall be final and conclusive upon all persons affected thereby. All
references in this Agreement to Optionee shall mean and include Optionee's
personal representative if Optionee has died or become permanently disabled
prior to the time in question.

13.2 Fair Market Value. The fair market value of the Company's Common
Stock as of any date shall be the value of the Common Stock determined as
follows.

13.2.1 If the Common Stock is listed on an established stock exchange
or a national market system, including without limitation the Nasdaq National
Market of the National Association of Securities Dealers, Inc. Automated
Quotation ("NASDAQ") System, the Fair Market Value of a share of Common Stock
shall be the closing sales price for such stock (or the closing bid, if no sales
were reported) as quoted on such system or exchange (or the exchange with the
greatest volume of trading in the Common Stock) on the last market trading day
prior to the date of determination.

13.2.2 If the Common Stock is quoted on the NASDAQ System (but not on
the Nasdaq National Market thereof) or is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market Value of
a share of Common Stock shall be the mean between the high bid and low asked
prices for the Common Stock on the last market trading day prior to the date of
determination.

13.3 Definitions. Capitalized terms not otherwise defined in this
Agreement shall be used as they are defined in the Plan.

14. ACKNOWLEDGEMENT OF RECEIPT; OPTION SUBJECT TO PLAN

Optionee acknowledges receipt of a copy of the Plan, the Prospectus
applicable to the Plan and all other information regarding the Company and the
Plan as Optionee has reasonably requested.

15. TAX MATTERS

Optionee understands that the grant and exercise of the Option will have tax
and legal consequences to Optionee and that the Company is neither making any
representation to Optionee nor advising Optionee as to the tax or other legal
consequences of the grant or exercise of the Option or of any other action taken
or to be taken by Optionee under this Agreement or with respect to the Option.
Optionee shall be solely responsible for determining such tax and legal
consequences and for obtaining such advice as Optionee deems appropriate.

OPTIONEE ACKNOWLEDGES THAT IT IS OPTIONEE'S SOLE RESPONSIBILITY TO
EVALUATE AND DETERMINE THE TAX AND LEGAL CONSEQUENCES TO OPTIONEE OF
THIS AGREEMENT AND OPTIONEE'S EXERCISE OF THE OPTION AND ACQUISITION OF
THE SHARES AND THAT THE COMPANY HAS NOT ADVISED, AND HAS NO OBLIGATION
TO ADVISE, OPTIONEE WITH RESPECT TO ANY SUCH TAX AND LEGAL
CONSEQUENCES, EVEN IF OPTIONEE REQUESTS THE COMPANY TO DO SO.

16. SPOUSAL CONSENT

If Optionee is married or otherwise deemed to have a spouse for purposes of
California law, Optionee shall have his or her spouse execute the form of
Spousal Consent attached to this Agreement, as such form may be amended or
revised by the Company from time to time, contemporaneously with the execution
of this Agreement and on each exercise of the Option. Notwithstanding anything
in this Agreement to the contrary, if Optionee is married or otherwise deemed to
have a spouse for purposes of California law, (a) this Agreement and the Option
shall not be effective for any purpose until Optionee delivers to the Company a
duly executed Spousal Consent form and (b) the exercise of the Option shall not
be effective and the Company shall not be obligated to issue to Optionee any
shares of Common Stock or other securities covered by the Option until Optionee
delivers to the Company a duly executed Spousal Consent form.

17. ENTIRE AGREEMENT

This Agreement and the Plan collectively contain the entire understanding
between the parties with respect to the subject matter hereof, and supersede any
and all prior written or oral agreements between the parties with respect to the
subject matter hereof. There are no representations, agreements, arrangements,
or understandings, either written or oral, between or among the parties with
respect to the subject matter hereof which are not set forth in this Agreement
and the Plan.

18. GOVERNING LAW

This Agreement shall be governed by, and construed in accordance with, the
laws of the State of California applicable to contracts made and to be fully
performed in the State of California.

19. NOTICES

Any notice given pursuant to this Agreement shall be in writing and shall be
given by personal service or by United States certified mail, return receipt
requested, postage prepaid to the addresses appearing on the signature page of
this Agreement or such other address as may be given by either party for
purposes of this Agreement. Notice given by personal service shall be deemed
effective on the date it is delivered to the addressee, and notice mailed shall
be deemed effective on the third day following its placement in the mail
addressed to the addressee. Either party may change its address for notice
purposes by giving the other party notice of such change in accordance with this
Section. Notwithstanding anything herein to the contrary, any notice that
consists solely of notice of the change of address of any party may be given by
regular mail.

IN WITNESS WHEREOF, the parties have entered into this Restricted Stock
Option Agreement as of the date first above written.

"COMPANY":

SANTA BARBARA BANCORP

By:___________________________

Its:__________________________

Address for Notices:

1021 Anacapa Street
Santa Barbara, CA 93102
Attn:
"OPTIONEE":

- ---------------------

- ------------------------------
Signature of Optionee

- ------------------------------
Name of Optionee

Address for Notices:

CONSENT OF SPOUSE

I acknowledge that I have read the foregoing Directors Stock Option
Agreement (the "Agreement") and that I know its contents. I am aware that by its
provisions my spouse agrees to not sell the shares of Common Stock and other
securities that may be issued on exercise of the Option, including my community
interest, if any, in them, during certain periods specified in the Agreement. I
hereby approve of the provisions of the Agreement, agree that such shares of
Common Stock and other securities and my community property interest in them, if
any, are subject to the provisions of the Agreement and that I will take no
action at any time to hinder the operation of the Agreement or to attempt the
sale or transfer of any of the shares of Common Stock and other securities,
including my community property interest in them, if any, other than pursuant to
the terms of the Agreement.

Date ____________________, spouse of

Exhibit 10.1.10.2

SANTA BARBARA BANCORP

1996 DIRECTORS STOCK OPTION AGREEMENT

(RELOAD OPTION)

THIS OPTION AGREEMENT, granted as of_______________ , 19__ (the "Effective
Date"), by SANTA BARBARA BANCORP, (the "Company"), to ____________ ("Optionee").

RECITALS:

A. The Company has duly adopted its 1996 Directors Stock Option Plan (the
"Plan");

B. Optionee has exercised an option previously granted under the Plan (the
"Original Option") through the tender, whether by surrender or attestation, of
shares of the Common Stock of the Company owned by Optionee; and

C. The Company proposes to grant to Optionee under the Plan a Reload Option
with respect to that number of shares of Common Stock tendered by Optionee to
the Company on exercise of the Original Option;

NOW, THEREFORE:

1. GRANT OF OPTION

The Company hereby grants to Optionee the option to purchase ("Option") from
the Company ( ) shares of its Common Stock at an exercise price of $ per share,
which price is not less than the fair market value per share of the Common Stock
of the Company as of the Effective Date. The Option may be exercised on the
terms and conditions set forth in this Agreement and the Plan. In the event of
any conflict between the terms and conditions of the Plan and the terms and
conditions of this Agreement, the terms and conditions of the Plan shall
control.

2. OPTION PERIOD

The period during which the Option may be exercised (the "Option Period")
shall commence on the date six (6) months after the Effective Date and shall
terminate five (5) years after the Effective Date unless the Option is
terminated earlier in accordance with the provisions of this Agreement or the
Plan.

3. EXERCISE

The Option may be exercised in full or in part at any time and from time to
time during the Option Period (except that it may not be exercised for any
fractional shares). The exercise price must be paid (a) in cash or check or (b)
by the tender, whether through surrender or attestation, of shares of Common
Stock owned by Optionee, having a fair market value on the date of surrender
equal to the aggregate exercise price of the shares as to which the Option is
being exercised, or (c) any combination of such methods of payment. In the event
that the exercise price is paid, whether in whole or in part, through the tender
of shares of Common Stock of the Company owned by Optionee, then (i) Optionee
shall be entitled to receive a grant of a Reload Option in accordance with the
terms of the Plan, but (ii) the Option must be exercised for a minimum of at
least 100 shares.

4. EXPIRATION

4.1 Termination of Status as Director. If Optionee's status as a Director
is terminated for any reason other than cause or Optionee's death or disability,
Optionee may, but only within the three (3)-month period from the date of the
termination of Optionee's status as a Director (but not later than the
expiration of the term of the Option), exercise the Option to the extent that
the Option was exercisable at the date of such termination. If Optionee does not
exercise the Option in full during such 3-month period, the unexercised portion
of the Option shall terminate at the close of business, California time, on the
last business day of such 3-month period and thereafter shall not be exercisable
in whole or in part. Notwithstanding anything in this Section to the contrary,
if the Option is not exercisable on the date of the termination of Optionee's
status as a Director, then the Option shall terminate simultaneously with the
termination of Optionee's status as a Director and thereafter shall not be
exercisable in whole or in part.

4.2 Disability of Optionee. Notwithstanding the provisions of Section 4.1,
above, if Optionee's status as a Director is terminated by reason of Optionee's
death or disability, Optionee or his or her estate or personal representative
may exercise the Option to the extent that the Option was exercisable at the
date of such termination in whole or in part at any time and from time to time
during the twelve (12)-month period following the date of the termination of
Optionee's status as a Director (but not later than the expiration of the term
of the Option). If Optionee does not exercise the Option in full during such
12-month period, the unexercised portion of the Option shall terminate at the
close of business, California time, on the last business day of such 12-month
period and thereafter shall not be exercisable in whole or in part.
Notwithstanding anything in this Section to the contrary, if the Option is not
exercisable on the date of the termination of Optionee's status as a Director,
then the Option shall terminate simultaneously with the termination of
Optionee's status as a Director and thereafter shall not be exercisable in whole
or in part.

4.3 Termination for Cause. If Optionee's status as a Director is
terminated for cause, the Option shall terminate simultaneously with the
termination of Optionee's status as a Director and thereafter shall not be
exercisable in whole or in part. For purposes of this Section, Optionee's status
as a Director shall be deemed to be terminated for "cause" as of the date on
which Optionee is removed as a Director for any reason described in Section 304
of the California General Corporation Law.

4.4 Status as a Director. The termination of Optionee's status as a
Director shall be deemed to occur on the effective date of the earliest of (a)
Optionee's resignation as a Director, (b) the removal of Optionee as a Director,
and (c) Optionee's death or disability.

4.5 Early Sale of Shares. If Optionee sells, within one (1) year after the
date of Optionee's exercise of the Original Option, any of the shares of Common
Stock which were issued on the exercise of the Original Option with respect to
which the Option was granted, the Option shall terminate automatically on the
date of such sale.

5. RESTRICTION ON TRANSFER OF STOCK ISSUED

5.1 Holding Period. None of the shares of Common Stock and other
securities issued upon exercise of the Option may be sold, exchanged,
transferred, pledged, hypothecated or otherwise disposed of, without the prior
written approval of the Company, for a period equal to the longer of five (5)
years following the Effective Date and two (2) years following the date on which
such shares are issued to the Optionee on exercise of the Option; provided that
the foregoing restriction on transfer shall not apply to Optionee's transfer of
shares of Common Stock (a) to the Company in payment of all or any portion of
the exercise price payable upon exercise of the Option or the satisfaction of
any income tax withholding obligation with respect to any exercise of the Option
or (b) to the acquiring party in any transaction described in Section 12, below,
in which the Company is not the surviving corporation, or (c), subject to the
provisions of Section 5.2 hereof, to a person or entity described in Section
9.2.1 hereof.

5.2 Exempt Transfers. Notwithstanding the foregoing, Optionee may transfer
shares of Common Stock or other securities acquired on exercise of the Option to
a person described in Section 9.2.1 hereof only if all of the following
conditions are satisfied: (a) the transfer is a permitted transfer under Section
9.2.1 hereof; (b) Optionee gives the Company at least ten (10) days prior
written notice of the proposed transfer, which notice shall specify the name and
address of the proposed transferee and the basis on which the proposed
transferee is a person or entity described in Section 9.2.1 hereof; (c) the
proposed transferee agrees in writing for the benefit of the Company to acquire
and hold the transferred shares of Common Stock or other securities subject to
the terms and conditions of the Plan and this Agreement, including the
provisions of this Section; and (d) the transfer is of a whole number multiple
of one hundred (100) shares.

5.3 Legend. Appropriate legends shall be placed on any certificates
evidencing the shares of Common Stock or other securities issued upon exercise
of the Option and appropriate stop transfer instructions shall be given to the
Company's transfer agent.

6. TAX WITHHOLDING

To the extent that the exercise of the Option gives rise to an obligation on
the part of the Company to withhold income tax from amounts otherwise to be paid
to Optionee, the Company shall do so on such terms and in accordance with such
procedures as may be required under applicable law. At Optionee's election,
withholding may be made by the Company's retention of shares of Common Stock of
the Company which would otherwise be issued to Optionee as a result of the
exercise of the Option. If withholding is made in shares of the Company's Common
Stock, the Company shall grant to Optionee, in accordance with the terms and
conditions specified in the Plan, a Reload Option for the number of shares so
withheld.

7. COMPLIANCE WITH APPLICABLE LAW

7.1 Applicable Law. Shares of Common Stock and other securities shall not
be issued pursuant to the exercise of the Option unless the exercise of the
Option and the issuance and delivery of such shares and securities shall comply
with all relevant provisions of law, including, without limitation, the
Securities Act of 1933, the Securities Exchange Act of 1934, the rules and
regulations promulgated thereunder, the requirements of any stock exchange on
which the shares or securities then may be listed, and any applicable state
securities laws. In addition, the Company may require as a condition to the
issuance of any shares or securities pursuant to the exercise of the Option, an
opinion of counsel for the Company with respect to such compliance.

7.2 Investment Representation. As a condition to the exercise of the
Option, the Company may require Optionee to represent and warrant at the time of
such exercise that the shares and securities are being purchased for investment
and without any intention to sell or distribute such shares or securities if, in
the opinion of counsel for the Company, such a representation is required for
compliance with applicable law.

7.3 Company Efforts. The inability of the Company to obtain authority from
any regulatory body having jurisdiction over the issuance of any shares of
Common Stock or other securities on the exercise of the Option, which authority
is deemed by the Company's counsel to be necessary to the lawful issuance of
such shares or securities, shall relieve the Company of liability in respect of
the failure to issue such shares or securities as to which such authority has
not been obtained. The Company shall use reasonable efforts to obtain all
authority required for the due issuance of any shares of Common Stock and other
securities issuable on exercise of the Option.

8. NOTICE OF EXERCISE

8.1 Exercise Procedure. The Option shall be exercised by Optionee's
delivery to the Company of a written notice specifying the number of shares
which Optionee then desires to purchase, accompanied by full payment of the
aggregate exercise price thereof and, if appropriate, an executed Spousal
Consent. As soon as practicable after its receipt of the notice of exercise and
payment of the exercise price, the Company shall issue and deliver to Optionee
one or more certificates evidencing the number of shares purchased (excluding
any fractional shares), in the name of Optionee and/or such other person(s) as
Optionee has properly designated in the notice of exercise.

8.2 Name of Issuee. Optionee may designate in the notice of exercise that
some or all of the shares of Common Stock or other securities to be issued on
such exercise shall be issued in the name of Optionee's spouse, the trustee of a
revocable trust in which Optionee and his or her spouse are the sole primary
beneficiaries, Optionee's prior spouse, or any combination of the foregoing.
Notwithstanding anything in this Agreement to the contrary, Optionee may not
designate in the notice of exercise that any of the shares of Common Stock and
other securities issuable on exercise of the Option shall be issued to
Optionee's prior spouse unless such issuance is to be made pursuant to a
domestic relations order as defined in the Code or Title I of the Employee
Income Retirement Security Act or the rules thereunder. The Company may rely on
a representation of Optionee, or such other evidence as the Company deems
appropriate, for purposes of determining the propriety of the exercise of the
Option and the compliance of such exercise with the terms of the Plan and this
Agreement. The Company shall have no obligation to deal directly with, and shall
have no liability to, any person other than Optionee, or Optionee's personal
representative if Optionee has died or become permanently disabled prior to the
delivery of the shares. Optionee shall indemnify and hold harmless the Company,
and each of its officers, directors, employees and agents, from and against any
and all claims made by any person other than Optionee, or Optionee's personal
representative, who is designated in the notice of exercise.

8.3 Transfer Taxes. The Company shall pay all expenses, taxes and other
charges payable in connection with the preparation, issue and delivery of the
foregoing stock certificates, except that, in case such stock certificates shall
be registered in a name or names other than the name of Optionee, funds
sufficient to pay all stock transfer taxes which shall be payable upon the
issuance of such stock certificates shall be paid by Optionee at the time of the
delivery of the notice of exercise.

9. TRANSFERABILITY OF OPTIONS

9.1 Restriction on Transfer. Except as specifically set forth in Section
9.2 hereof, Optionee may not sell, pledge, assign, hypothecate, transfer, or
otherwise dispose of all or any portion of the Option other than by will or the
laws of descent and distribution.

9.2 Limited Transferability. Notwithstanding anything in Section 9.1
hereof to the contrary, Optionee may transfer all or any portion of the Option
in accordance with the provisions of this Section 9.2. Any purported transfer of
all or any portion of the Option that does not comply with all of the provisions
of this Section 9.2 shall be null and void ab initio.

9.2.1 Permitted Transferees. All or any portion of the Option may be
transferred or assigned by Optionee only to one or more of the following: (a)
Optionee's spouse, parents and lineal descendants, including adopted children
(the "Immediate Family Members"); (b) a trust established by Optionee and with
respect to which all beneficial interests are held by one or more of Optionee,
the Immediate Family Members, and a tax-exempt charitable organization which has
only a contingent residual interest in the trust; (c) a partnership or limited
liability company in which all voting and equity interests are held by one or
more of Optionee and the Immediate Family Members; (d) a tax-exempt educational,
religious or charitable organization, as those terms are defined in Section
501(c)(3) of the Code; and (e) such other persons and entities as the Company
may specifically approve in writing after written notice from Optionee. The
Company may require as a condition to any transfer under this Section 9.2 that
the proposed transferee provide to the Company reasonable evidence that the
transferee is described in one of the foregoing clauses.

9.2.2 Permitted Transfers. Any transfer of all or any portion of the
Option under this Section 9.2 must be either a Donative Transfer, a transfer to
a partnership or limited liability company described in clause (c) of Section
9.2.1 above, in which the Optionee does not receive any consideration other than
the Optionee's interest in such partnership or limited liability company, or a
transfer specifically approved in writing by the Company after written notice
from the Optionee.

9.2.3 Minimum Transfer. Any transfer of a portion of the Option must be
with respect to not less than one hundred (100) shares of Optioned Stock and may
be made only in whole number multiples of one hundred (100) shares of Optioned
Stock.

9.2.4 Notice to the Company. Optionee shall give the Company at least
ten (10) days prior written notice of any proposed transfer or assignment of all
or any portion of the Option pursuant to this Section 9.2 and shall include with
such notice:

A. The name and address of the proposed transferee and a statement
of the basis on which the proposed transferee is a permitted transferee under
Section 9.2.1 hereof; and

B. The proposed transferee's written agreement to accept the
transferred Option and any shares of Common Stock acquired on exercise of the
Option subject to all of the terms and conditions of the Plan and this
Agreement, including the provisions dealing with the termination of the Option
on the death or disability of Optionee or the termination of Optionee's status
as a Director of the Company.

9.2.5 No Further Transfer. Notwithstanding anything in the Plan or this
Agreement to the contrary, a transferee of all or any portion of the Option
shall not have the right to further transfer all or any portion of the
transferred Option to any person or entity other than by will or the laws of
descent and distribution other than (a) by will or the laws of descent and
distribution, or (b), if the transferee is a trust, pursuant to the terms of the
trust agreement by reason of the death of any settlor.

9.2.6 Further Acts. The Company may require as a condition to the
transfer of all or any portion of the Option such additional information and
agreements from Optionee and the proposed transferee as the Company may deem
necessary or beneficial for purposes of complying with this Section or any
applicable federal or state law, rule or regulation.

9.2.7 Withholding on Exercise of Transferred Option. Optionee
acknowledges and agrees that, if Optionee transfers all or any portion of the
Option pursuant to this Section 9.2 and the transferee exercises the Option,
such exercise may be subject to income tax withholding and Optionee will be
obligated to satisfy such income tax withholding obligation to the same extent
as if Optionee had retained and exercised the Option. Optionee shall be solely
responsible for determining the tax and legal consequences of Optionee's
transfer of all or any portion of the Option and of the transferee's exercise of
the Option, and for obtaining such tax and legal advice as Optionee deems
appropriate.

9.2.8 Disclaimer. The Company's acceptance of any transfer of all or
any portion of the Option shall not be considered legal or tax advice to
Optionee or the proposed transferee as to (a) their compliance with any
applicable law, rule or regulation or (b) the legal or tax consequences of such
transfer or the subsequent exercise of the transferred Option or the sale or
exchange of any of the shares of Common Stock acquired on exercise of the
transferred Option. The Company's acceptance of any transfer of all or any
portion of the Option shall not obligate the Company to accept any subsequent
transfer of all or any portion of the Option.

10. NO RIGHTS AS SHAREHOLDER

Optionee shall not be deemed to be a shareholder of the Company with respect
to the shares of Common Stock or other securities issuable upon exercise of the
Option, unless and until such shares or securities shall have been duly issued
to Optionee upon exercise of the Option and the exercise price shall have been
paid in full.

11. RECAPITALIZATION OF COMPANY

Except as otherwise provided herein, appropriate and proportionate
adjustments shall be made in the number and class of shares subject to the
Option and the exercise price of the Option, in the event of a stock dividend
(but only on Common Stock), stock-split, reverse stock-split, recapitalization,
reorganization or like change in the capital structure of the Company. To the
extent that the foregoing adjustments relate to stock or securities of the
Company, such adjustments shall be made by the Board of Directors of the
Company, the determination of which in that respect shall be final, binding, and
conclusive.

12. REORGANIZATION OR LIQUIDATION OF THE COMPANY

In the event of (a) a liquidation of the Company, or (b) a merger,
reorganization, or consolidation of the Company with any other corporation in
which the Company is not the surviving corporation or the Company becomes a
wholly-owned subsidiary of another corporation, or (c) any sale of all or
substantially all of the Company's assets, any unexercised portion of the Option
shall be deemed cancelled unless the surviving corporation in any such merger,
reorganization or consolidation or the acquiring corporation in any such sale
elects to assume the Option or to issue substitute options in place thereof;
provided that if the unexercised portion of the Option would be cancelled in
accordance with the foregoing, Optionee shall have the right, exercisable during
a 10-day period ending on the fifth day prior to the effective date of such
liquidation, merger, reorganization, consolidation or sale, to exercise the
Option in whole or in part even though the Option Period has not yet begun. The
Company shall give Optionee at least thirty (30) days prior written notice of
the anticipated effective date of any such liquidation, merger, reorganization,
consolidation or sale. Notwithstanding anything in the Plan or this Agreement to
the contrary, (i) any exercise of the Option effected during the foregoing
10-day period shall be deemed to be effective immediately prior to the closing
of such liquidation, merger, reorganization, consolidation or sale and (ii), if
the Company abandons or otherwise fails to close any such liquidation, merger,
reorganization, consolidation or sale, then (A) any exercise during the
foregoing 10-day period shall cease to be effective ab initio and (B) the
unexercised portion of the Option shall be exercisable as otherwise determined
under this Agreement and without consideration of this Section.

13. INTERPRETATION

13.1 Coordination with Plan. This Agreement is subject to all of the terms
and conditions of the Plan, and in the event of any conflict between any of the
provisions of this Agreement and any of the provisions of the Plan, the
applicable provisions of the Plan shall control. The Board of Directors of the
Company shall have full power to interpret the provisions of this Agreement and
of the Plan and to decide any dispute which may arise hereunder or thereunder,
and its action shall be final and conclusive upon all persons affected thereby.
All references in this Agreement to Optionee shall mean and include Optionee's
personal representative if Optionee has died or become permanently disabled
prior to the time in question.

13.2 Fair Market Value. The fair market value of the Company's Common
Stock as of any date shall be the value of the Common Stock determined as
follows.

13.2.1 If the Common Stock is listed on an established stock
exchange or a national market system, including without limitation the Nasdaq
National Market of the National Association of Securities Dealers, Inc.
Automated Quotation ("NASDAQ") System, the Fair Market Value of a share of
Common Stock shall be the closing sales price for such stock (or the closing
bid, if no sales were reported) as quoted on such system or exchange (or the
exchange with the greatest volume of trading in the Common Stock) on the last
market trading day prior to the date of determination.

13.2.2 If the Common Stock is quoted on the NASDAQ System (but not
on the Nasdaq National Market thereof) or is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market Value of
a share of Common Stock shall be the mean between the high bid and low asked
prices for the Common Stock on the last market trading day prior to the date of
determination.

13.3 Definitions. Capitalized terms not otherwise defined in this
Agreement shall be used as they are defined in the Plan.

14. ACKNOWLEDGEMENT OF RECEIPT; OPTION SUBJECT TO PLAN

Optionee acknowledges receipt of a copy of the Plan, the Prospectus
applicable to the Plan and all other information regarding the Company and the
Plan as Optionee has reasonably requested.

15. TAX MATTERS

Optionee understands that the grant and exercise of the Option will have tax
and legal consequences to Optionee and that the Company is neither making any
representation to Optionee nor advising Optionee as to the tax or other legal
consequences of the grant or exercise of the Option or of any other action taken
or to be taken by Optionee under this Agreement or with respect to the Option.
Optionee shall be solely responsible for determining such tax and legal
consequences and for obtaining such advice as Optionee deems appropriate.

OPTIONEE ACKNOWLEDGES THAT IT IS OPTIONEE'S SOLE RESPONSIBILITY TO
EVALUATE AND DETERMINE THE TAX AND LEGAL CONSEQUENCES TO OPTIONEE OF
THIS AGREEMENT AND OPTIONEE'S EXERCISE OF THE OPTION AND ACQUISITION OF
THE SHARES AND THAT THE COMPANY HAS NOT ADVISED, AND HAS NO OBLIGATION
TO ADVISE, OPTIONEE WITH RESPECT TO ANY SUCH TAX AND LEGAL
CONSEQUENCES, EVEN IF OPTIONEE REQUESTS THE COMPANY TO DO SO.

16. SPOUSAL CONSENT

If Optionee is married or otherwise deemed to have a spouse for purposes of
California law, Optionee shall have his or her spouse execute the form of
Spousal Consent attached to this Agreement, as such form may be amended or
revised by the Company from time to time, contemporaneously with the execution
of this Agreement and on each exercise of the Option. Notwithstanding anything
in this Agreement to the contrary, if Optionee is married or otherwise deemed to
have a spouse for purposes of California law, (a) this Agreement and the Option
shall not be effective for any purpose until Optionee delivers to the Company a
duly executed Spousal Consent form and (b) the exercise of the Option shall not
be effective and the Company shall not be obligated to issue to Optionee any
shares of Common Stock or other securities covered by the Option until Optionee
delivers to the Company a duly executed Spousal Consent form.

17. ENTIRE AGREEMENT

This Agreement and the Plan collectively contain the entire understanding
between the parties with respect to the subject matter hereof, and supersede any
and all prior written or oral agreements between the parties with respect to the
subject matter hereof. There are no representations, agreements, arrangements,
or understandings, either written or oral, between or among the parties with
respect to the subject matter hereof which are not set forth in this Agreement
and the Plan.

18. GOVERNING LAW

This Agreement shall be governed by, and construed in accordance with, the
laws of the State of California applicable to contracts made and to be fully
performed in the State of California.

19. NOTICES

Any notice given pursuant to this Agreement shall be in writing and shall be
given by personal service or by United States certified mail, return receipt
requested, postage prepaid to the addresses appearing on the signature page of
this Agreement or such other address as may be given by either party for
purposes of this Agreement. Notice given by personal service shall be deemed
effective on the date it is delivered to the addressee, and notice mailed shall
be deemed effective on the third day following its placement in the mail
addressed to the addressee. Either party may change its address for notice
purposes by giving the other party notice of such change in accordance with this
Section. Notwithstanding anything herein to the contrary, any notice that
consists solely of notice of the change of address of any party may be given by
regular mail.

IN WITNESS WHEREOF, the parties have entered into this Restricted Stock
Option Agreement as of the date first above written.

"COMPANY":

SANTA BARBARA BANCORP

By: Its:

1021 Anacapa Street
Santa Barbara, CA 93102
Attn:
"OPTIONEE":

Signature of Optionee

Name of Optionee

Address of Optionee

CONSENT OF SPOUSE

I acknowledge that I have read the foregoing Directors Stock Option Agreement
(Reload Option) (the "Agreement") and that I know its contents. I am aware that
by its provisions my spouse agrees to not sell the shares of Common Stock and
other securities that may be issued on exercise of the Option, including my
community interest, if any, in them, during certain periods specified in the
Agreement. I hereby approve of the provisions of the Agreement, agree that such
shares of Common Stock and other securities and my community property interest
in them, if any, are subject to the provisions of the Agreement and that I will
take no action at any time to hinder operation of the Agreement or to attempt
the sale or transfer of any of the shares of Common Stock and other securities,
including my community property interest in them, if any, other than pursuant to
the terms of the Agreement.

Date ____________________, spouse of

EXHIBIT 11
SANTA BARBARA BANCORP & SUBSIDIARIES
COMPUTATION OF PER SHARE EARNINGS

(amounts in thousands For the Years Ended December 31
except per share amounts) 1996 1995
Fully Fully
Primary Diluted Primary Diluted

Weighted Average Shares Outstanding 7,635 7,635 7,677 7,677

Weighted Average Options Outstanding 747 747 678 678
Anti-dilution adjustment (1) (34) (14)
Adjusted Options Outstanding 713 747 664 678
Equivalent Buyback Shares (2) (416) (416) (451) (432)
Total Equivalent Shares 297 331 213 246
Adjustment for Non-Qualified
Tax Benefit (3) (122) (136) (88) (101)
Weighted Average Equivalent
Shares Outstanding 175 195 125 145

Weighted Average Shares for Computation 7,810 7,830 7,802 7,822

Fair Market Value (4) $25.74 $28.00 $18.40 $19.83

Net Income $15,665 $15,665 $10,416 $10,416

Per Share Earnings $2.01 $2.00 $1.34 $1.33

(1) Options with exercise prices above fair market value are excluded because of
their anti-dilutive effect.

(2) The number of shares that could be purchased at fair market value from the
proceeds were the adjusted options outstanding to be exercised.

(3) The Company receives a tax benefit when non-qualified options are exercised
equal to its tax rate times the difference between the market value at the
time of exercise and the exercise price. This benefit is assumed available
for purchase of additional outstanding shares.

(4) Fair market value for the computation is defined as the average market price
during the period for primary dilution, and the greater of that average or
the end of period market price for full dilution.

Exhibit 13 - Annual Report to Security-holders

1996 FINANCIAL STATEMENTS & INFORMATION
Santa Barbara Bancorp and Subsidiaries

TABLE OF CONTENTS

17 Management's Responsibility for Financial Reporting
18 Historical Summary
20 Management's Discussion and Analysis of Financial Condition
and Results of Operations
49 Report of Independent Public Accountants
50 Consolidated Financial Statements
54 Notes to Consolidated Financial Statements
76 Selected Annual and Quarterly Financial Data

MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING

The Management of Santa Barbara Bancorp is responsible for the preparation,
integrity, and fair presentation of the Company's annual financial statements
and related financial data contained in this report. With the exception that
some of the information in Management's Discussion and Analysis of Financial
Condition and Results of Operations is presented on a tax-equivalent basis to
improve comparability, all information has been prepared in accordance with
generally accepted accounting principles and, as such, includes certain amounts
that are based on Management's best estimates and judgments.

The consolidated financial statements presented on pages 50 through 53 have been
audited by Arthur Andersen LLP, who have been given unrestricted access to all
financial records and related data, including minutes of all meetings of
shareholders, the Board of Directors, and committees of the Board. Management
believes that all representations made to Arthur Andersen LLP during the audit
were valid and appropriate.

Management is responsible for establishing and maintaining an internal control
structure over financial reporting. Two of the objectives of this internal
control structure are to provide reasonable assurance to Management and the
Board of Directors that transactions are properly authorized and recorded in our
financial records, and that the preparation of the Company's financial
statements and other financial reporting is done in accordance with generally
accepted accounting principles.

Management has made its own assessment of the effectiveness of the Company's
internal control structure over financial reporting as of December 31, 1996, in
relation to the criteria described in the report, Internal Control-Integrated
Framework, issued by the Committee of Sponsoring Organizations of the Treadway
Commission.

There are inherent limitations in the effectiveness of any internal control
structure, including the possibility of human error and the circumvention or
overriding of controls. Accordingly, even an effective internal control
structure can provide only reasonable assurance with respect to reliability of
financial statements. Furthermore, the effectiveness of any internal control
structure can vary with changes in circumstances. Nonetheless, based on its
assessment, Management believes that as of December 31, 1996, Santa Barbara
Bancorp's internal control structure was effective in achieving the objectives
stated above.

The Board of Directors is responsible for reviewing and monitoring the policies
and practices employed by Management in preparing the Company's financial
reporting. This is accomplished through its Audit Committee, which is comprised
of directors who are not officers or employees of the Company. The Committee
reviews accounting policies, control procedures, internal and independent audit
reports, and regulatory examination reports with Management, the Company's
internal auditors, and representatives of Arthur Andersen LLP. Both the
Company's internal auditors and the representatives of Arthur Andersen LLP have
full and free access to the Committee to discuss any issues which arise out of
their examinations without Management present.

David W. Spainhour William S. Thomas, Jr. Donald Lafler
President and President and Senior Vice President and
Chief Executive Officer Chief Executive Officer Chief Financial Officer
Santa Barbara Bancorp Santa Barbara Bank & Trust Santa Barbara Bancorp and
Santa Barbara Bank & Trust

HISTORICAL SUMMARY (unaudited)
Santa Barbara Bancorp
and Subsidiaries page 1

(shares and amounts other than per share amounts in thousands)
Balance Sheets (as of December 31) 1996 1995 1994 1993 1992

Assets:
Cash and due from banks $ 51,181 $ 74,746 $ 69,630 $ 50,946 $ 44,059
Federal funds sold 70,000 65,000 15,000 --
Securities 418,038 357,565 386,959 383,518 387,670
Bankers' acceptances and
commercial paper 64,732 139,294 80,594 63,614 35,300
Net loans 667,595 546,452 486,520 454,163 467,862
Premises and equipment, net 6,835 8,149 7,391 6,657 5,111
Other assets 22,939 21,155 21,522 20,245 21,237
Total assets $1,301,320 $ 1,212,361 $1,067,616 $979,143 $961,239

Liabilities and shareholders' equity:
Demand deposits $ 178,511 $ 158,122 $ 147,085 $114,557 $116,342
Time and savings deposits 934,572 895,898 809,632 751,696 733,033
Total deposits 1,113,083 1,054,020 956,717 866,253 849,375
Securities sold under agreements
to repurchase and Federal funds
purchased 33,490 51,316 9,487 20,155 25,983
Other liabilities 47,154 6,028 7,452 6,744 8,736
Shareholders' equity 107,593 100,997 93,960 85,991 77,145
Total liabilities and shareholders' equity $1,301,320 $ 1,212,361 $1,067,616 $979,143 $961,239

Statements of Income (for the years ended December 31):
Operating revenue $109,273 $ 99,975 $87,984 $82,535 $85,978
Operating expense (1) 86,655 85,575 70,515 65,848 69,968
Income before taxes 22,618 14,400 17,469 16,687 16,010
Applicable income taxes (1) 6,953 3,985 4,518 3,757 4,310
Net income $15,665 $10,415 $12,951 $12,930 $11,700

Per share data (adjusted for stock dividends and splits):
Average shares outstanding 7,635 7,672 7,647 7,783 7,773
Net income $2.05 $1.36 $1.69 $1.66 $1.51
Cash dividends declared $0.71 $0.55 $0.52 $0.47 $0.38
Other statistics:
Stock dividends declared -- -- -- -- --
Stock splits declared -- 3 FOR 2 -- -- --
Trust assets under administration
(market value) $1,613,565 $1,393,737 $1,188,748 $1,165,522 $926,233

(1) For the year 1992, operating expense includes the cumulative effect of the
accounting change and provision for income tax includes the tax effect of
the change. For the year 1993, provision for income tax includes the tax
effect of the change in accounting principle for that year.

HISTORICAL SUMMARY (unaudited)
Santa Barbara Bancorp
and Subsidiaries page 2

(shares and amounts other than per share amounts in thousands)
Balance Sheets (as of December 31) 1991 1990 1989 1988 1985

Assets:
Cash and due from banks $ 44,987 $ 29,233 $ 46,941 $ 48,273 $ 24,485
Federal funds sold 20,000 25,000 40,000 30,000 23,600
Securities 323,585 235,119 149,031 171,419 137,369
Bankers' acceptances and
commercial paper -- -- 19,883 29,200 19,619
Net loans 491,529 531,962 445,475 344,051 206,563
Premises and equipment, net 7,598 6,036 6,874 5,248 5,326
Other assets 19,483 16,495 13,774 7,376 6,308
Total assets $ 907,182 $ 843,845 $ 721,978 $ 635,567 $423,270

Liabilities and shareholders' equity:
Demand deposits $ 107,068 $ 99,806 $ 107,677 $ 96,866 $ 82,060
Time and savings deposits 693,554 646,613 527,661 470,074 292,404
Total deposits 800,622 746,419 635,338 566,940 374,464
Securities sold under agreements
to repurchase and Federal funds
purchased 30,046 27,092 26,228 15,924 15,875
Other liabilities 9,299 12,077 7,039 7,213 6,994
Shareholders' equity 67,215 58,257 53,373 45,490 25,937
Total liabilities and shareholders' equity $ 907,182 $ 843,845 $ 721,978 $ 635,567 $423,270

Statements of Income (for the years ended December 31):
Operating revenue $91,335 $90,268 $78,698 $60,444 $45,524
Operating expense (1) 76,803 76,224 65,656 49,953 41,703
Income before taxes 14,532 14,044 13,042 10,491 3,821
Applicable income taxes (1) 3,824 3,740 3,392 2,410 (43)
Net income $10,708 $10,304 $9,650 $8,081 $3,864

Per share data (adjusted for stock dividends and splits):
Average shares outstanding 7,797 7,780 7,894 7,899 7,489
Net income $1.37 $1.32 $1.22 $1.02 $0.52
Cash dividends declared $0.31 $0.18 $0.17 $0.13 $0.08
Other statistics:
Stock dividends declared 5% 2x5% -- 12% 5%
Stock splits declared -- -- 4 FOR 3 -- 5 FOR 4
Trust assets under administration
(market value) $ 853,428 $722,862 $700,948 $616,948 $315,961

HISTORICAL SUMMARY (unaudited)
Santa Barbara Bancorp
and Subsidiaries page 3

(shares and amounts other than per share amounts in thousands)
Balance Sheets (as of December 31) 1980 1975 1970 1965

Assets:
Cash and due from banks $ 12,357 $ 21,755 $ 5,253 $ 1,766
Federal funds sold 3,425 1,100 700 --
Securities 64,299 33,327 11,935 6,701
Bankers' acceptances and
commercial paper 4,934 -- -- --
Net loans 103,580 39,544 21,134 12,854
Premises and equipment, net 4,590 1,936 718 194
Other assets 3,307 1,339 373 164
Total assets $ 196,492 $ 99,001 $ 40,113 $ 21,679

Liabilities and shareholders' equity:
Demand deposits $ 64,405 $ 39,134 $ 16,867 $ 8,370
Time and savings deposits 109,798 50,085 20,188 11,000
Total deposits 174,203 89,219 37,055 19,370
Securities sold under agreements
to repurchase and Federal funds
purchased 4,723 3,750 -- --
Other liabilities 3,202 1,211 394 394
Shareholders' equity 14,364 4,821 2,664 1,915
Total liabilities and shareholders' equity $ 196,492 $ 99,001 $ 40,113 $ 21,679

Statements of Income (for the years ended December 31):
Operating revenue $21,870 $7,054 $3,067 $1,203
Operating expense (1) 18,375 5,983 2,424 1,075
Income before taxes 3,495 1,071 643 128
Applicable income taxes (1) 1,183 286 331 30
Net income $2,312 $785 $312 $98

Per share data (adjusted for stock dividends and splits):
Average shares outstanding 7,113 6,001 6,012 6,012
Net income $0.33 $0.13 $0.05 $0.02
Cash dividends declared $0.05 $0.03 $0.01 $0.00
Other statistics:
Stock dividends declared 15% 8% 5% 5%
Stock splits declared -- -- -- --
Trust assets under administration
(market value) $ 112,696 46,265 25,477 5,548

SANTA BARBARA BANCORP AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

OVERVIEW OF THE EARNINGS, FINANCIAL CONDITION AND BUSINESS OF THE COMPANY

Summary Results

Total assets, loans, deposits and equity of Santa Barbara Bancorp all grew in
1996, both in terms of their average balances for the year and from period end
to period end. This growth occurred in part due to the continued strong
performance in Ventura County, where three branch offices were opened in 1995.
In addition, $59 million of leasing assets were purchased in the fourth quarter
of 1996. Net income rose to a record level in 1996, due primarily to an increase
in net interest income and fee income and a substantial reduction in the
provision for loan losses. Each of these is explained in more detail below in
the relevant section of this discussion.

Southern California began to realize the positive effects of an economic
recovery in 1996 and this is reflected in the Company's reduced level of
non-performing assets and the amount of the provision for loan loss compared to
1995. The Company's 1996 year ending non-performing asset ratio is more
favorable than the average for its peers (Note A on page 48).

Business of the Company

Santa Barbara Bancorp (the "Bancorp") is a California bank holding company
incorporated in 1982 and is headquartered in the city of Santa Barbara. The
Bancorp on its own has a few operations, but these are very insignificant in
comparison to those of its major subsidiary, Santa Barbara Bank & Trust (the
"Bank"). Unless otherwise stated, "Company" refers to the consolidated entity
and to the Bank when the context indicates. "Bancorp" refers to the parent
company only.

The Bank first opened for business in March, 1960, as Santa Barbara National
Bank, and became a state-chartered bank in May, 1979, changing its name to Santa
Barbara Bank & Trust. The Bank operates ten banking offices along the southern
Santa Barbara County coastline, two offices in the county's central Santa Ynez
Valley, and four offices in adjacent Ventura County: one in Camarillo, one in
Oxnard, and two in the City of Ventura. A full range of banking services are
offered to households, professionals, and small to medium size businesses.

The Bancorp's other operating subsidiary, Sanbarco Mortgage Corporation
("Sanbarco"), formerly known as SBBT Service Corporation, provides mortgage
brokering services and servicing of brokered loans. In addition, other
activities include providing correspondent bank services, such as check
processing, to other financial institutions throughout the Central Coast of
California.

The remainder of this discussion is to assist readers of the accompanying
financial statements by providing information on the environment in which the
Company operates, the risks for a financial institution in this environment, the
strategies adopted by the Company to address these risks, and the results of
these strategies. Each of these elements will be addressed as they relate to the
major asset and liability components of the Company's balance sheets, and the
major income and expense categories of the Company's statements of income and to
significant changes therein. Lastly, it is intended to provide insight into
Management's assessment of the operating trends over the last several years and
its expectations for 1997.

EXTERNAL FACTORS IMPACTING THE COMPANY

The major external factors impacting the Company include economic conditions,
regulatory considerations, and trends in the banking and financial services
industries.

Economic Conditions

From a national perspective, the most significant economic factors impacting the
Company in the last three years have been the actions of the Federal Reserve
Board ("the Fed") to manage the pace of growth in the economy--raising
short-term interest rates to slow the pace and forestall inflation, lowering
rates to spur growth and avoid recession. These changes impact the Company as
market rates for loans, investments and deposits respond to the Fed's actions.

The local economy appears to be experiencing a recovery similar to the trends
being realized throughout the state. New companies are establishing their
headquarters in the area and the business climate in general is on the upswing.
Tourism, which has long been important to the communities in the Company's
market area, remains strong and an end to water hookup moratoria is having a
positive impact, although moderate, on housing growth. The local governments
have generally been perceived to be inclined towards environmentalism and slow-
growth. However, at both the state and local levels more attention is now being
paid to the need to create a supportive business climate in order to maintain a
healthy, sustainable economy.

Regulatory Considerations

The Company is impacted by changes in the regulatory environment. The Bancorp,
as a bank holding company, the Bank, as a member of the Federal Reserve Bank
(the "FRB"), and Sanbarco, as a non-bank subsidiary of a bank holding company,
are all regulated by the FRB. As a state-chartered commercial bank, the Bank is
regulated by the California State Department of Banking. The Bank became a
member of the Federal Reserve System in 1995 to simplify regulatory issues.
Prior to becoming a member, the Bank's primary Federal regulator was the FDIC.

Changes in regulation impact the Company in different ways. The FRB requires
that the Company maintain cash reserves equal to a percentage of the Company's
transaction deposits. The FRB may increase or decrease the percentage of
deposits that must be held at the FRB to impact the amount of funds available to
commercial banks to lend to their customers as a means of stimulating or slowing
economic activity.

Areas of regulatory concern are discussed below in the section entitled
"Regulation". The Company is also impacted by minimum capital requirements.
These rules are discussed below in the section entitled "Capital Adequacy." The
actions which the various banking agencies can take with respect to financial
institutions which fail to maintain adequate capital and comply with other
requirements of the act are discussed below in the section titled "Regulation."

Trends in the Banking and Financial Services Industries

Among the major trends within the banking and financial services industries over
the last several years has been the continuing consolidation through mergers and
seizures. 1996 saw a continuation of this trend as a number of large mergers and
takeovers were announced across the country. In the Company's market area, the
acquisition of the largest independent bank in Ventura County, Ventura County
National Bank, was announced in 1996 and completed in January 1997, by City
National Bank. The largest acquisition completed in 1996 was the hostile
acquisition of First Interstate Bancorp by Wells Fargo. This process of
consolidation is expected to continue, and Management expects that, as in the
past, it will provide the opportunity for the Company to gain both "in-market"
market share from customers not satisfied with the new institution chosen for
them and the opportunity for expansion into new geographic markets.

In 1996, the Company announced the signing of a definitive agreement to acquire
First Valley Bank ("FVB") located in Lompoc. For further discussion of this
transaction refer to the section entitled "First Valley Bank Acquisition".

Banks once had an almost exclusive franchise for deposit products and provided
the majority of business financing. With deregulation in the 1980's, other kinds
of financial institutions began to offer competing products. Also, increased
competition in consumer financial products has come from companies not typically
associated with the banking and financial services industries such as AT&T and
General Motors. Community banks, including the Company, are working to offset
this trend by developing new products that capitalize on the service quality
that a local institution can offer. Among these are new loan and investment
products. The latter are offered to retail customers through the Company's Trust
& Investment Services Division.

INTEREST RATE RISK MANAGEMENT

The Company sees the process of addressing the potential impacts of these
external factors as part of its management of risk. In addition to common
business risks such as disasters, theft, and loss of market share, the Company
is subject to special types of risk due to the nature of its business. New and
sophisticated financial products are continually appearing with different types
of risk which need to be defined. Also, the risks associated with existing
products must periodically be reassessed. The Company cannot operate risk-free
and make a profit. Instead, the process of risk definition and reassessment
allows the Company to select the appropriate level of risk for the anticipated
level of reward and then decide on the steps necessary to manage this risk. The
process of addressing these risks is led by the Company's Risk Management
Committee.

The special risks related to financial products are credit risk, market risk,
mismatch risk, and basis risk. Credit risk is discussed in the sections related
to loans. The nature of each of the other risks will be explained in the next
section. The effective management of these risks is the backbone of the
Company's business strategy.

NET INTEREST MARGIN AND CHANGES IN THE RELATIVE PROPORTIONS OF ASSETS AND
LIABILITIES

The Company earns income from two sources. The primary source is through the
management of its financial assets and liabilities and the second is by charging
fees for services provided. The first involves functioning as a financial
intermediary. The Company accepts funds from depositors or other creditors and
then either loans the funds to borrowers or invests those funds in securities or
other financial instruments. Fee income is discussed in other sections of this
analysis, "Other Operating Income," and "Tax Refund Anticipation Loans and
Refund Transfers."

Net interest income is the difference between the interest income and fees
earned on loans and investments and the interest expense paid on deposits and
other liabilities. The amount by which interest income will exceed interest
expense depends on two factors: the volume of earning assets compared to the
volume of interest bearing deposits and liabilities, and the interest rate
earned on those interest earning assets compared with the interest rate paid on
those interest bearing deposits and liabilities.

Net interest margin is net interest income expressed as a percentage of average
earning assets. To maintain its net interest margin, the Company must manage the
relationship between interest earned and paid. That relationship is subject to
the following types of risks that are related to changes in interest rates.

Market Risk Relating to Fixed Rate Instruments

The market values of assets or liabilities on which the interest rate is fixed
will increase or decrease with changes in market interest rates. If the Company
invests funds in a fixed rate long-term security and then interest rates rise,
the security is worth less than a comparable security just issued because the
older security pays less interest than the newly issued security. If the older
security had to be sold before maturity, the Company would have to recognize a
loss. Conversely, if interest rates decline after a fixed rate security is
purchased, its value increases. Therefore, while the value changes regardless of
which direction interest rates move, the adverse exposure to "market risk" is
primarily due to rising interest rates. In general, for a given change in
interest rates, the amount of the change in value up or down is larger for
instruments with longer remaining maturities. Therefore, the exposure to market
risk is lessened by managing the amount of fixed rate assets and by keeping
maturities relatively short. However, these steps must be balanced against the
need for adequate interest income because variable rate and shorter term fixed
rate securities generally earn less interest than fixed rate and longer term
securities.

Note 14 to the financial statements discloses the carrying amounts and fair
values of the Company's financial assets and liabilities as of the end of 1996
and 1995. Other than a relatively small difference due to credit quality issues
pertaining to loans, the difference between the carrying amount and the fair
value is a measure of how much more or less valuable the Company's financial
assets were to it at December 31, 1996 and 1995 than when acquired. The excess
of financial assets' fair values over carrying amounts at the end of 1996 is
$10.0 million compared with $20.7 million at the end of 1995.

There is market risk relating to the Company's fixed rate or term liabilities as
well as its assets. For financial liabilities, the adverse exposure to market
risk is from lower rates because the Company must continue to pay the higher
rate until the end of the term of the certificate. However, because the amount
of fixed rate liabilities is significantly less than the fixed rate assets, and
because the average maturity is substantially less than for the assets, the
market risk is not as great. The difference between the carrying amount and the
fair value in the table in Note 14 shows the impact of changing rates on the
term deposits. They are worth $1.4 million more to customers at December 31,
1996 than they were when issued because, on a weighted average basis, they are
paying higher than current market rates even though rates rose slightly in 1996.

Mismatch Risk

The second interest-related risk arises from the fact that when interest rates
change, the changes do not occur equally in the rates of interest earned and
paid because of differences in the contractual terms of the assets and
liabilities held. A difference in the contractual terms, a mismatch, can cause
adverse impacts on net interest income.

The Company has a large portion of its loan portfolio tied to its base lending
rate or to national prime rate. If these rates are lowered because of general
market conditions, e.g., other banks are lowering their lending rates, these
loans will be repriced. If the Company were at the same time to have a large
proportion of its deposits in long-term fixed rate certificates, interest earned
on loans would decline while interest expense would remain at higher levels for
a period of time. Therefore net interest income would decrease immediately. A
decrease in net interest income could also occur with rising interest rates if
the Company had a large portfolio of fixed rate loans and securities funded by
deposit accounts on which the rate is steadily rising.

This exposure to "mismatch risk" is managed by matching the maturities and
repricing opportunities of assets and liabilities. This may be done by varying
the terms and conditions of the products that are offered to depositors and
borrowers. For example, if many depositors want longer-term certificates while
most borrowers are requesting loans with floating interest rates, the Company
will adjust the interest rates on the certificates and loans to try to match up
demand for similar maturities. The Company can then partially fill in mismatches
by purchasing securities with the appropriate maturity or repricing
characteristics.

One of the means of monitoring this matching process is by use of a table like
Table 1, entitled "Interest Rate Sensitivity." The table shows the extent to
which the maturities or repricing opportunities of the major categories of
assets and liabilities are matched. This table is sometimes called a "gap"
report, because it shows the gap between assets and liabilities repricing or
maturing in each of a number of periods. The gap is stated in both dollars and
as a percent of total assets and is stated for both each individual period
separately and cumulatively as of the end of each period. The Company has
established limits for these gaps as a percentage of total assets. The limits
are no more than plus or minus 15% for each of the first two periods, and no
more than plus or minus 25% for the cumulative position within one year.

TABLE1--Interest Rate Sensitivity

As of December 31, 1996 After three After six After one Non-interest
(in thousands) Within months months year but After bearing or
three but within but within within five non-repricing
six months months six months one year five years years items Total

Assets:
Loans (Note 3) $ 334,683 $ 105,282 $ 49,064 $123,959 $ 64,339 $ 6,840 $ 684,167
Cash and due from Banks -- -- -- -- -- 51,181 51,181
Federal funds 70,000 -- -- -- -- -- 70,000
Securities:
Held to maturity 26,889 6,773 15,408 185,091 42,198 -- 276,359
Available-for-sale 5,168 14,995 31,490 84,538 -- 5,488 141,679
Bankers' acceptances 40,800 23,932 -- -- -- -- 64,732
Other assets -- -- -- -- -- 13,202 13,202
Total assets $ 477,540 150,982 95,962 393,588 106,537 76,711 1,301,320

Liabilities and shareholders' equity:
Borrowed funds:
Repurchase agreements and
Federal funds purchased 33,490 -- -- -- -- -- 33,490
Long-term debt and
other borrowings 3,500 2,500 5,000 28,000 -- -- 39,000
Interest-bearing deposits:
Savings and interest-bearing
transaction accounts 408,092 -- 261,682 -- -- -- 669,774
Time deposits 91,300 57,334 49,607 66,295 262 -- 264,798
Demand deposits -- -- -- -- -- 178,511 178,511
Other liabilities -- -- -- -- -- 8,154 8,154
Net shareholders' equity -- -- -- -- -- 107,593 107,593
Total liabilities and
shareholders' equity 536,382 59,834 316,289 94,295 262 294,258 $1,301,320
Interest rate-
sensitivity gap $ (58,842)$ 91,148 $(220,327) $299,293 $ 106,275 $(217,547)
Gap as a percentage of
total assets (4.52%) 7.00% (16.93%) 23.00% 8.17% (16.72%)
Cumulative interest
rate-sensitivity gap $ (58,842)$ 32,306 $(188,021) $111,272 $ 217,547
umluative gap as a per-
centage of total assets (4.52%) 2.48% (14.45%) 8.55% 16.72%

Note: The net deferred loan fees and the reserve for loan loss are included in the above table as non-interest
bearing or non-repricing items.

The first measuring period shown in the table covers assets and liabilities that
mature or reprice within the three months following December 31, 1996. This is
the most critical period because there is little time to correct a mismatch that
is having an adverse impact on income. For example, if the Company had a
significant negative gap--liabilities significantly exceeded assets--and
interest rates rose suddenly, the Company would have to wait for more than three
months before enough assets could be repriced to offset the higher expense on
the deposits.

As of year-end 1996, the Company had a small negative gap in this first period.
Liabilities exceeded assets by 4.52% of total assets, well within the risk limit
of 15%. There is some arbitrariness in the assignment of deposit accounts that
reprice at the option of the Company to specific time periods. For the purposes
of this table, the Company has made the assumption that some of the money market
accounts will reprice within three months, but this will be governed by market
conditions rather than contractual terms.

In the next period, after three months but within six months, there is an excess
of assets over liabilities, but again the mismatch is within the target range of
the Company.

For the third period, after six months but within one year, liabilities
substantially exceed assets reflecting the current customer preference for non-
term or short-term deposits.

The cumulative dollar gap and cumulative gap as a percentage of total assets are
also shown in the table. It is important to take note of the cumulative gap
amounts if they are additive or magnify the gaps for the individual period. The
cumulative gap within one year of (14.45%) is well within the risk limit of 25%.

The periods of over one year are less critical because more steps can be taken
to mitigate the adverse effects of any interest rate changes.

A gap report can show mismatches in the maturities and repricing opportunities
of assets and liabilities, but has limited usefulness in measuring or managing
market risk and basis risk.

Basis Risk

The third interest-related risk arises from the fact that interest rates rarely
change in a parallel or equal manner. The interest rates associated with the
various assets and liabilities differ in how often they change, the extent to
which they change, and whether they change sooner or later than other interest
rates. For example, while the repricing of a specific asset and a specific
liability may fall in the same period of the gap report, the interest rate on
the liability may rise one percent in response to rising market rates while the
asset increases only one-half percent. While evenly matched in the gap report,
the Company would suffer a decrease in net interest income. This exposure to
"basis risk" is the type of interest risk least able to be managed, but is also
the least dramatic. Avoiding concentration in only a few types of assets or
liabilities is the best means of increasing the chance that the average interest
received and paid will move in tandem. The wider diversification means that many
different rates, each with their own volatility characteristics, will come into
play.

Net Interest Income and Net Economic Value Simulations

To quantify the extent of these risks in both its current position and positions
it might take in the future, the Company uses computer modeling to simulate the
impact of different interest rate scenarios on net interest income and on net
economic value. Net economic value or the market value of portfolio equity is
defined as the difference between the market value of financial assets and
liabilities. These hypothetical scenarios include both sudden and gradual
interest rate changes, and changes in both directions.

Asset/Liability Management

The Company monitors asset and deposit levels, developments and trends in
interest rates, its liquidity and capital adequacy, and marketplace
opportunities. It responds to all of these to protect and enhance net interest
income while managing risks within acceptable levels. This process, known as
asset/liability management, is carried out by changing the maturities and
relative proportions of the various types of loans, investments, deposits and
other borrowings in the ways described above.

Table 2, "Distribution of Average Assets, Liabilities and Shareholders' Equity
and Related Interest Income, Expense and Rates," sets forth the daily average
balances for the major asset and liability categories, the related income or
expense where applicable, and the resultant yield or cost attributable to the
average earning assets and interest-bearing liabilities. Average balances for
the year are used in the table rather than the end of the year amounts shown in
the balance sheets of the accompanying financial statements. When comparing year
to year, the use of average balances more accurately reflects trends since these
balances are not significantly impacted by period-end transactions. The amount
of interest earned or paid for the year is also directly related to the average
balances during the year and not to what the balances happened to be on the last
day of the year.

TABLE 2--Distribution of Average Assets, Liabilities, and Shareholders' Equity and Related Interest Income,
Expense, and Rates
(Taxable equivalent basis - Note B)

(dollars in thousands)
1996 1995 1994
Balance Interest Rate Balance Interest Rate Balance Interest Rate

Assets:
Loans (Note C):
Commercial $ 160,597 $15,129 9.42% $ 152,149 $16,055 10.55% $ 169,001 $16,472 9.75%
Real estate 345,351 30,126 8.72 306,288 26,226 8.56 230,607 19,138 8.30
Consumer 82,775 11,568 13.98 77,381 10,692 13.82 78,997 11,603 14.69
Total loans 588,723 56,823 9.65 535,818 52,973 9.89 478,605 47,213 9.86
Securities:
Taxable 328,964 19,198 5.84 290,950 16,127 5.54 350,849 18,580 5.30
Non-taxable 84,322 10,393 12.33 85,162 10,562 12.40 83,711 11,114 13.28
Equity 761 46 6.04 238 14 6.00
Total securities 414,047 29,637 7.16 376,350 26,703 7.10 434,560 29,694 6.83
Money market instruments:
Bankers' acceptances 67,330 3,800 5.64 54,367 3,294 6.06 31,282 1,500 4.80
Federal funds sold 58,669 3,128 5.33 53,695 3,131 5.83 16,709 772 4.62
Total money
market instruments 125,999 6,928 5.50 108,062 6,425 5.95 47,991 2,272 4.73
Total earning assets 1,128,769 93,388 8.27% 1,020,230 86,101 8.44% 961,156 79,179 8.24%
Non-earning assets 60,315 59,998 58,313
Total assets $1,189,084 $1,080,228 $1,019,469

Liabilities and
shareholders' equity:
Borrowed funds:
Repurchase agreements and
Federal funds purchased $ 40,570 $1,897 4.68% $ 26,801 1,474 5.50% $ 23,632 878 3.72%
Other borrowings 2,604 146 5.61 1,450 74 5.10 2,314 81 3.50
Total borrowed funds 43,174 2,043 4.73 28,251 1,548 5.48 25,946 959 3.70
Interest bearing deposits:
Savings and interest
bearing transaction
accounts 636,541 19,633 3.08 602,661 20,559 3.41 426,773 14,714 3.45
Time deposits 243,679 13,373 5.49 212,056 11,476 5.41 350,136 9,294 2.65
Total interest
bearing deposits 880,220 33,006 3.75 814,717 32,035 3.93 776,909 24,008 3.09
Total interest
bearing liabilities 923,394 35,049 3.80% 842,968 33,583 3.98% 802,855 24,967 3.11%
Demand deposits 153,876 132,095 119,578
Other liabilities 6,787 6,892 6,662
Net shareholders' equity 105,027 98,273 90,374
Total liabilities and
shareholders' equity $1,189,084 $1,080,228 $1,019,469

Interest income/
earning assets 8.27% 8.44% 8.24%
Interest expense/
earning assets 3.11 3.29 2.60
Net interest margin 58,339 5.16 52,518 5.15 54,212 5.64
Provision for loan losses
charged to operations/
earning assets 4,264 0.38 9,924 0.97 6,257 0.65
Net interest margin
after provision
for loan losses on
tax equivalent basis 54,075 4.78% 42,594 4.18% 47,955 4.99%
Less: taxable equivalent
income included in interest
income from non-taxable
investment securities
and loans 3,810 3,913 4,279
Net interest income $50,265 $38,681 $43,676

Changes in the dollar amount of interest earned or paid will vary from one year
to the next because of changes in the average balances ("volume") of the various
earning assets and interest-bearing liability accounts and changes in the
interest rates applicable to each category. Because of overall growth of the
Company, interest income, interest expense and net interest income are all
generally higher each year. Table 3, "Volume and Rate Variance Analysis of Net
Interest Income," analyzes the difference in interest earned and paid on the
major categories of assets and liabilities from one year to the next in terms of
the effects of volume and rate changes.

TABLE 3--Volume and Rate Variance Analysis of Net Interest Income (Taxable
equivalent basis -- Note \ D)

(in thousands) 1996 over 1995 1995 over 1994
Volume Rate Total Volume Rate Total

Increase (decrease) in:
Interest income:
Loans
Commercial loans $ 858 $ (1,784) $ (926) $ (1,712) $ 1,295 $ (417)
Real estate loans 3,402 498 3,900 6,470 618 7,088
Consumer loans 751 125 876 (234) (677) (911)
Total loans 5,011 (1,161) 3,850 4,524 1,236 5,760
Securities
Taxable 2,171 900 3,071 (3,270) 817 (2,453)
Non-taxable (107) (62) (169) 191 (743) (552)
Equity securities 32 -- 32 7 7 14
Total securities 2,096 838 2,934 (3,072) 81 (2,991)
Money market instruments
Bankers' acceptances 746 (240) 506 1,323 471 1,794
Federal funds sold 277 (280) (3) 2,110 249 2,359
Total money market instruments 1,023 (520) 503 3,433 720 4,153
Total earning assets 8,130 (843) 7,287 4,885 2,037 6,922

Liabilities:
Repurchase agreements and
federal funds purchased 669 (246) 423 130 466 596
Other borrowings 64 8 72 (36) 29 (7)
Total borrowed funds 733 (238) 495 94 495 589
Interest bearing deposits:
Savings and interest bearing
transaction accounts 1,121 (2,047) (926) 6,017 (172) 5,845
Time certificates of deposit 1,726 171 1,897 (4,709) 6,891 2,182
Total interest bearing deposits 2,847 (1,876) 971 1,308 6,719 8,027
Total interest bearing liabilities 3,580 (2,114) 1,466 1,402 7,214 8,616
Net interest margin $ 4,550 $ 1,271 $ 5,821 $ 3,483 $ (5,177) $ (1,694)

As each of the major categories of assets and liabilities is discussed below,
there will be a description of the reason for significant changes in the
balances, how the changes impacted the net interest income and margin, and how
the categories fit into the overall asset/liability strategy for managing risk.

Whether the net interest margin increases or decreases depends on market
opportunities, how well the Company has managed interest rate risks, product
pricing policy, product mix, and on external trends and developments.

As shown in Table 2, the net interest margin of 5.16% in 1996 remained almost
unchanged from the 5.15% net interest margin in 1995. This primarily reflects a
relatively stable interest rate environment and little change in product mix.

There are always steps that the Company can take to increase its net interest
margin. Among these steps would be to increase the average maturity of its
securities portfolios because longer term instruments normally earn a higher
rate; to emphasize fixed rate loans because they earn more than variable rate
loans; to purchase lower rated securities; and to lend to less creditworthy
borrowers. However, as noted above, banking is a process of balancing risks, and
each of these alternative tactics involve more risk. The first two involve more
market risk, the second two more credit risk. Management intends to continue to
use a balanced approach. A fifth step is to limit the amount of non-earning
assets.

Non-earning Assets

For a bank, non-earning assets are those assets like cash reserves, equipment,
and premises which do not earn interest. This ratio is watched carefully by
Management because it represents the efficiency with which funds are used. Tying
up funds in non-earning assets lessens the amount of interest that may be earned
or requires investment of the smaller earning asset base in higher yielding but
riskier assets to achieve the same income level. Management believes that a low
level of non-earning assets is part of a prudent asset and liability management
strategy to reduce volatility in the earnings of the Bank. Non-earning assets
have declined during the last three years to an average of 5.07% in 1996 from
5.55% in 1995 and 5.77% in 1994.

As of September 30, 1996, the average ratio of non-earning assets to total
assets for all FDIC banks, regardless of size, was 15.49%. Using the Company's
average asset size and average rate of 5.50% earned in 1996 on money market
investments, having an extra 10.42% of assets earning interest meant the Company
had $123.9 million more in earning assets compared with its peers and earned
$6.8 million in pre-tax income on those assets. These additional earnings are
somewhat offset by higher lease expense, additional equipment cost, and
occasional losses taken on quick sales of foreclosed property. Overall, however,
Management believes that these steps give the Company an earnings advantage.
This efficient use of assets allows the Company to produce a given amount of
revenue at substantially less risk than its competition. There is less risk
because additional deposits or borrowings do not have to be obtained to fund the
assets generating the revenue.

SECURITIES

The major components of the earning asset base for 1996 were the securities
portfolios, the loan portfolio and the Company's holdings of money market
instruments. The structure and detail within these portfolios are very
significant to an analysis of the financial condition of the Company. The loan
and money market instrument portfolios will be covered in later sections of this
discussion.

Securities Portfolios

The Company classifies its securities into three portfolios, the "Liquidity"
Portfolio (available-for-sale), the "Discretionary" Portfolio (available-for-
sale), and the "Earnings" Portfolio (held-to-maturity).

The Liquidity Portfolio's primary mission is to provide liquidity to meet cash
flow needs. The portfolio consists of U.S. Treasury and Agency securities.
Maturities are spread evenly in a "ladder" up to two years. Securities in the
Liquidity Portfolio will be sold if their market value deteriorates to a
predetermined point because of higher interest rates.

The Discretionary Portfolio's primary mission is to provide income by utilizing
securities not currently needed for liquidity purposes but which the Bank may
wish to sell prior to maturity for any asset-liability management reason. The
portfolio consists of U.S. Treasury and Agency securities and planned
amortization class securities, with maturity ladders up to three years.

The Earnings Portfolio's primary mission is to provide sustainable interest
income by utilizing funds not anticipated to be needed for loan growth or other
expansion. The portfolio consists only of securities purchased with the
intention and ability to hold to maturity, to be sold only in the event of
concerns with the issuer's creditworthiness, a change in tax law that eliminates
their tax-exempt status, or other infrequent situations as permitted by
generally accepted accounting principles. The Earnings Portfolio consists of
long-term tax-exempt obligations, and U.S. Treasury and Agency securities with
maturities normally up to five years from date of purchase.

Planned Amortization Class ("PAC") Securities

In 1996, the Company purchased some short-term, high-quality, planned
amortization class securities. These securities are specialized portions of
larger collateralized mortgage obligation pools. The objective is to achieve
increased yields with high-quality, short-term securities other than just U.S.
Treasury and Agency securities. These PAC securities, with the underlying
mortgages guaranteed by U.S. agencies, currently yield 25 to 35 basis points
more than U.S. Treasury securities of the same maturity range. When acquired,
they are classified as available-for-sale and placed in the Discretionary
Portfolio. As of December 31, 1996, the Company held $30.5 million of PAC's.

Purposes Served by the Securities Portfolios

The three securities portfolios of the Company serve several purposes: 1)
Liquidity--each of the portfolios, but primarily the Liquidity Portfolio,
provide liquidity to meet the Company's cash flow needs; 2) Collateral--the
deposits of public agencies and trust customers must be secured by certain
securities owned by the Company; 3) Asset/Liability Management--the Liquidity
and Discretionary Portfolios are a large base of assets, the maturity and
interest rate characteristics of which can be changed to better manage the
Company's interest rate risk profile; and 4) Interest Income--the portfolios are
an interest-earning use of funds with minimum credit risk and little overhead.

Liquidity: The first purpose listed above, liquidity, is provided through
proceeds from maturities and sales of securities. Liquidity is provided through
borrowings by the Company using securities from any of the portfolios as
collateral. Although securities in the Earnings Portfolio (held-to-maturity) may
not be sold without calling into question the Company's intent to hold the
remaining securities in the Earnings Portfolio to maturity, securities in the
Liquidity and Discretionary Portfolios (both available-for-sale) can be sold to
provide liquidity when needed. In assessing the adequacy of the size of the
portfolios and managing the maturity schedule for liquidity, the Company also
looks at the combination of bankers' acceptances and Federal funds sold.

It is expected that the Earnings Portfolio will stay relatively stable as a
percentage of assets through the reinvestment of maturing securities. The
relative amounts of securities maintained in the Discretionary and the Liquidity
Portfolios should change based on expected liquidity needs. The Company's
investment and liquidity policies direct that if the ratio of loans to assets
increases, then most new purchases will have relatively short maturities and
would be made for the Liquidity Portfolio so that funds will be available as
needed. If loans are decreasing as a percentage of total assets, most new
purchases would be made for the Discretionary Portfolio to obtain higher yields.

Collateral: The legal requirements for securing specific deposits by pledging
certain of the Company's securities, the second purpose of the portfolio, may
only be satisfied by certain types of securities. A large proportion of the
deposits may be secured by state and municipal securities, but some can only be
secured by U.S. Treasury securities, so holding a minimum amount of these
securities will always be necessary.

Asset/Liability Management: As discussed above, a major objective in managing
interest rate risk is matching the maturities and/or repricing characteristics
of assets and liabilities so that changes in interest rates will affect both
sides of the balance sheet equally. The Company tries to better meet the needs
of loan customers by being flexible in offering a variety of maturity and
repricing terms for the funds they borrow from the Company. Their decisions,
however, will not always match the maturity and repricing decisions made by the
deposit customers. Because the Company can select from a wide variety of
securities which have different maturities and repricing terms, the securities
portfolios may be used to obtain the desired overall matching.

This use of the portfolios for matching is available only if there are frequent
maturities that provide cash to reinvest. With a little over 20% of the combined
portfolios made up of long-term tax-exempt securities, it is necessary for most
of the remaining portion of the portfolio to be invested in securities with
shorter maturities; the maturity of most purchases in the last two years has
been in the 1 to 3 year range.

Interest Income: The Company also invests in securities for interest income as a
primary objective. There is generally less credit risk with securities than with
loans, but the yields are also lower. The securities purchased for this purpose
are placed in the Earnings or Discretionary Portfolios depending on estimated
loan demand over the next several years.

Table 4 sets forth the amounts and maturity ranges of the securities at December
31, 1996. The weighted average yields (using taxable equivalent adjustments in
calculating the yields of state and municipal securities--Note B) of the
securities are also shown. The average yields on the taxable securities (U.S.
Treasury and agency securities) are significantly lower than the average rates
earned from loans as shown in Table 2. Because of this, securities are purchased
for earnings only when loan demand is weak.

TABLE 4--Maturity Distribution and Yield Analysis of the Securities Portfolios

After one After five
As of December 31, 1996 One year year to years to Over
(amounts in thousands) or less five years ten years ten years Total

Maturity Distribution:
Available-for-Sale:
U.S. Treasury obligations $50,033 $55,610 $ $ $105,643
U.S. Agency obligations 1,546 29,002 -- -- 30,548
Equity securities $0 -- -- -- 5,488
Subtotal 51,579 84,612 -- -- 141,679
Held-to-Maturity:
U.S. Treasury obligations 27,031 110,957 -- -- 137,988
U.S. Agency obligations 19,942 32,326 -- -- 52,268
State and municipal securities 2,097 41,809 14,672 27,525 86,103
Subtotal 49,070 185,092 14,672 27,525 276,359
Total $100,649 $269,704 $14,672 $27,525 $418,038

Weighted average yield (Tax equivalent--Note B):
Available-for-Sale:
U.S. Treasury obligations 6.02% 6.01% -- -- 6.02%
U.S. Agency obligations 5.73% 6.17% -- -- 6.14%
Equity securities -- -- -- -- 6.10%
Weighted average 6.01% 6.06% -- -- 6.05%
Held-to-Maturity:
U.S. Treasury obligations 5.94% 5.82% -- -- 5.84%
U.S. Agency obligations 8.58% 5.98% -- -- 6.97%
State and municipal securities 13.50% 14.17% 11.61% 10.00% 12.38%
Weighted average 7.33% 7.73% 11.61% 10.00% 8.09%
Overall weighted average 6.66% 7.21% 11.61% 10.00% 7.40%

Much of the income from the securities included in the Earnings Portfolio has
the additional advantage of being tax-exempt through investment in state and
municipal bonds.

The average yields for tax-exempt securities reported in Table 4 are
significantly higher than for taxable securities, but this advantage is not as
great since the passage of the Tax Reform Act of 1986 ("TRA"). Certain
provisions of this act disallow a deduction for income tax purposes for the
portion of the interest expense paid on deposits and other liabilities that fund
most tax-exempt securities now purchased. Also, only certain issues of municipal
securities may still be purchased with the tax advantages available before TRA.
Such securities, because they can only be issued in very limited amounts, are
generally issued only by small municipalities, and the Company must do a careful
credit evaluation to ascertain that the municipality has a diverse and healthy
tax base from which to repay the debt. In reviewing securities for possible
purchase, management must also ascertain that they have desirable maturity
characteristics, and that the amount of tax-exempt income they generate will not
be enough to trigger the Alternative Minimum Tax or the tax advantage could be
lost. In the last several years the Company was able to identify some securities
that met all of these criteria and purchased $1.6 million in 1996, $3.7 million
in 1995, and $9.7 million in 1994. The Company expects any purchase in coming
years to be of about the same magnitude, and expects to be able to continue to
earn approximately $7 million per year in tax exempt income.

Portfolio Turnover, Unrealized Gains and Losses, and Securities Losses

As shown in the accompanying consolidated statements of cash flows on page 53
there is a relatively large turnover in the securities portfolios. The purchase
of relatively short-term securities for asset-liability management purposes, as
explained above, is part of the reason for the high turnover in the Company's
securities portfolios. The increased amount sold in 1996 was also due to the
following one-time situation. In late 1995, the Financial Accounting Standards
Board ("FASB") permitted holders of debt securities to review their
classification of securities as held-to-maturity or available-for-sale and to
reclassify them. The Company reclassified a substantial amount of its held-to-
maturity securities and sold $94 million of them in early 1996.

Turnover from sales will also result from the Company following its "stop loss"
policy of selling taxable fixed rate securities from the Liquidity Portfolio
with a remaining maturity of over one year if they have declined in fair value
by a specified amount.

Other Effects of Interest Rate Changes on the Securities Portfolios

The Company does not have a trading portfolio. That is, it does not purchase
securities on the expectation that interest rates will decrease and thereby
allow subsequent sale at a gain. Instead, if the purposes mentioned above are to
be met, purchases must be made throughout interest rate cycles. Rather than
anticipate the direction of changes in interest rates, the Company's investment
policy directs that securities' maturities (other than for municipal securities)
be approximately equally spaced into quarterly maturity zones within the
portfolios.

Hedges, Derivatives, and Other Disclosures

The Company established policies and procedures in 1996 to permit limited types
and amounts of off-balance sheet hedges to help manage interest rate risk.
Although the Company did not utilize any off-balance sheet hedges in 1996, it
did enter into an interest rate "Cap Corridor" contract in January 1997 to
protect against rapidly rising rates. The notional amount of the contract is $50
million and is for fifteen months beginning July 1, 1997. The contract pays the
Company the rate by which the 3-month Libor index rate exceeds 7.0% up to a
maximum of 1.5%.

The Company has purchased several structured notes issued by U.S. Agencies,
but, as described in Note 2 of the accompanying financial statements, they are
step-up bonds that pay an increased interest rate if not called. They are not
indexed nor have contingent terms other than whether the issuer will decide to
call them.

The Company has not purchased any securities arising out of a highly leveraged
transaction, and its investment policy prohibits the purchase of any securities
of less than investment grade or so-called "junk bonds."

MONEY MARKET INSTRUMENTS--FEDERAL FUNDS SOLD AND BANKERS' ACCEPTANCES

Cash in excess of amounts immediately needed for operations is generally lent to
other financial institutions as Federal funds sold. Excess cash expected to be
available for longer periods is generally used to purchase short-term U.S.
Treasury securities or bankers' acceptances. Average Federal funds sold and
bankers' acceptances as percentages of average earning assets tend to vary based
on changes and differences in short-term market rates. While the acceptances of
only highly rated financial institutions are utilized, acceptances have some
amount of risk above that of U.S. Treasury securities, and the Company therefore
requires that there be a reasonable spread in the yields between the bankers'
acceptances and U.S. Treasury securities to justify the assumption of that
additional risk.

The average balance of bankers' acceptances held during 1996 was $67.3 million
and the amount at year-end was $64.7 million. This year-end amount was less than
half the $139.3 million held at year-end 1995. That amount was particularly high
as a result of the one-time reclassification and sale of securities mentioned in
the preceding section. One purpose of the sale and reinvestment as explained
above was to better balance the maturities in the securities portfolio. The
Company could not immediately purchase securities in the right maturity ranges
and so temporarily invested the funds in bankers' acceptances until suitable
Treasury and Agency securities were available.

LOAN PORTFOLIO

Table 5 sets forth the distribution of the Company's loans at the end of each of
the last five years.

TABLE 5--Loan Portfolio Analysis by Category

(in thousands) December 31
1996 1995 1994 1993 1992

Real estate:
Residential $172,846 $142,143 $108,923 $ 54,395 $ 40,496
Non-residential 199,203 179,272 145,928 123,534 108,117
Construction and
development 10,245 20,846 26,695 41,030 67,524
Commercial,
industrial, and
agricultural 154,162 144,011 148,396 168,227 168,575
Home equity lines 34,323 34,597 32,573 36,219 43,877
Consumer 43,944 28,494 27,319 27,331 36,888
Leases 58,526 -- -- -- --
Municipal
tax-exempt
obligations 8,658 7,573 7,831 11,888 9,445
Other 2,260 1,865 1,766 1,606 2,293
$614,723 $558,801 $499,431 $464,230 $477,215

Net deferred fees $ 2,362 $ 2,139 $ 2,038 $ 1,301 $ 1,162

The amounts shown in the table for each category are net of the deferred or
unamortized loan origination, extension, and commitment fees and origination
costs for loans in that category. The total amounts for these net fees are shown
at the bottom of the table. These deferred amounts are amortized over the lives
of the loans to which they relate.

The year-end balance for all loans had increased about $59 million from the end
of 1994 to the end of 1995 and increased about $125 million from the end of 1995
to the end of 1996. Economic recovery, the expansion into the Ventura County
market, the acquisition of a leasing portfolio and new calling programs centered
on potential commercial customers, were all reasons for the growth.

In December 1996, the Company purchased a portfolio of fixed rate lease
receivable contracts totaling $59 million from another financial institution.
The purchase price was $60.4 million which included a premium of $1.4 million.
In addition to the purchase, the Company also hired the key leasing
professionals responsible for this portfolio of assets. The completion of this
acquisition gives the Company a new product line to offer to its business
customer base in the area of commercial finance. The primary focus of the
leasing operation is to provide equipment financing for small and medium sized
businesses. The portfolio provides a solid earnings base for the operation
making this business segment profitable from initiation. In addition, the growth
potential in this area fits well into the Company's strategic objective to grow
and expand market share in the central coast of California.

Residential mortgages showed the largest dollar growth in 1996, increasing by
$30.7 million. The Company offers a wide variety of loan types and terms to
customers along with very competitive pricing. This has resulted in the Company
becoming the largest originator of residential mortgages in its Santa Barbara
market area. Most of these loans are 1-4 family adjustable rate mortgage loans,
which generally have low initial "teaser" rates. While these loans have interest
rate "caps," nearly all can be repriced to a market rate of interest within a
reasonable time. A few loans have payment caps which would result in negative
amortization if interest rates rise appreciably.

Strong growth also occurred in the consumer loan categories in 1996. Consumer
loans grew $15 million or 54% which reflects a renewed marketing emphasis and an
expanded product offering, especially auto loans made through dealers. During
1995, the Company entered into indirect financing agreements with a number of
local automobile dealers whereby the Company purchases loans dealers have made
to customers. While automobile dealers frequently provide financing to customers
through manufacturers' finance subsidiaries, some customers prefer loan terms
that are not included in the standard packages. Other customers are purchasing
used cars not covered by the manufacturers' programs. Based on parameters agreed
to by the Company, the dealer makes the loan to the customer and then sells the
loan to the Company. This program is neither a factoring nor a flooring
arrangement. The individual customers, not the dealers, are the borrowers and
thus there is no large concentration of credit risk. There were approximately
$15.8 million of such loans included in the consumer loan total as of December
31, 1996.

Commercial loan volumes experienced an increase of 7% over the prior year with
much of the new business generated in the Ventura County Offices. While
Management remains committed to diversifying its loan portfolio by increasing
the commercial loan segment, the growth in consumer and real estate loans during
1996 has added quality earning assets to the balance sheet.

The same interest rate and liquidity risks that apply to securities are also
incurred in lending activity. Long-term fixed rate loans are subject to market
risk. The table in Note 14 to the financial statements shows a difference of
approximately 0.46% between the carrying amount of loans and their market value.
This occurs because the majority of the loans made by the Company either
amortize monthly or are fixed rate with relatively short maturities and, except
for the consumer loans, leases and the municipal obligations, most have floating
rates of interest. The floating rates are generally tied to the Company's base
lending rate or to another market rate indicator, which serves to lessen the
risk to the Company from increases in interest rates. The Company sells any of
the fixed rate residential real estate loans that are salable in the secondary
market as a means of limiting market risk.

Table 6 shows the maturity of selected loan types outstanding as of December 31,
1996, and shows the proportion of fixed and floating rate loans for each type.
Net deferred loan origination, extension, and commitment fees are not shown in
the table. There is no maturity or interest sensitivity associated with the fees
because they have been collected in advance.

TABLE 6--Maturities and Sensitivities of Selected
Loan Types to Changes in Interest Rates

Due after
(in thousands) Due in one one year to Due after
year or less five years five years

Commercial, industrial, and
agricultural loans
Floating rate $133,559 $ -- $ --
Fixed rate 3,583 9,300 2,575
Real estateconstruction
and development
Floating rate 11,842 -- --
Fixed rate -- -- --
Municipal tax-exempt
obligations 64 7,110 1,484
$149,048 $16,410 $4,059

The amortization and short maturities also help to maintain the liquidity of the
portfolio and reduce credit risk, but they result in lower interest income if
rates are falling. At present, Management prefers to incur market risk from
longer maturities in the securities portfolios, and avoid such risk in the loan
portfolio.

TAX REFUND ANTICIPATIONS LOANS("RAL") AND REFUND TRANSERS ("RT")

The Company began providing RAL's in 1992. The taxpayer requests a loan through
a tax preparer, with the expected refund as the source of repayment. The
application is subject to an automated credit review. If it passes, the Company
advances to the taxpayer the amount of the refund due on the taxpayer's return
up to specified amounts based on certain criteria less the loan fee due to the
Company. Each taxpayer signs an agreement permitting the Internal Revenue
Service (the "IRS") to pay their refund to the Company to pay off the loan. Any
amount due the taxpayer above the amount of the RAL is sent by the Company to
the taxpayer when received from the IRS. The withheld fee is recognized as
income only after the loan is collected from the IRS payment. The Company does
not earn interest based on the amount of the loan or the length of time it is
outstanding. Instead, the Company collects a fee for each loan.

Losses are higher for RAL's than for most other loan types. The tax preparers
participating in the program are located across the country and few of the
taxpayers have any customer relationships with the Company other than these
RAL's. Many taxpayers make use of the service because they do not have a
permanent mailing address at which to receive their refund. Therefore, if there
is a problem with the return because the IRS rejects or partially disallows the
refund, or the IRS disregards the request of the taxpayer to remit the refund to
the Company, collection efforts may be less effective than with local customers.

The Company has taken several steps to minimize losses from these loans.
Preparers are screened before they are allowed to submit their electronic
filings, procedures have been defined for the preparers to follow to ensure that
the agreement signed by the taxpayer is a valid loan, and the preparers' IRS
reject rates are monitored very carefully. If rejects are above normal, they are
dropped from the program. If rejects are below expectations, they are paid an
incentive fee.

In 1994, approximately 150,000 loans were made, totaling $230 million. The fees
earned were $4.8 million and net charge-offs were $2.4 million (1.03% of total
loans), resulting in net fee income after losses of $2.4 million.

In 1995, the program was severely impacted by some changes made by the IRS.
Approximately $75.5 million was lent to about 75,600 taxpayers in 1995. Fees
earned on the loans totaled $3.2 million but net loan charge-offs through
year-end totaled $4.0 million (5.32% of total loans).

Through the 1994 filing season, the Company had only extended the loans to the
taxpayer after receiving an acknowledgment from the IRS that it had run several
preliminary computer checks on the taxpayer for such items as a valid Social
Security number and that there were no outstanding liens from the IRS against
the taxpayer. However, for the 1995 filing season, the IRS eliminated that
acknowledgment. To reduce the additional credit risk, the Company ran credit
checks on all taxpayers who were new to the program in the 1995 filing year.
While helpful, this step was not sufficient to mitigate a change made in IRS
procedures during the tax filing season after the Company had made a large
amount of loans. In addition, the IRS placed a moratorium on electronic payment
of refunds which had a significant portion related to the Earned Income Tax
Credit ("EIC"). Without confirmation, and with significant uncertainty regarding
whether the IRS would reimburse the Company for loans related to EIC, the
Company began to restrict loans only to those taxpayers who met certain credit
standards, and excluded the EIC related portion of any refund from the amount
which it would lend. However, losses resulted from the loans the Company had
already made.

The Company had raised fees for the season to cover the additional expenses
associated with credit checks. Also, fewer taxpayers qualified for loans with
the restrictions implemented after the IRS change. These factors reduced the
number of loans and the associated fees.

The Company instituted substantial collection efforts with those taxpayers who
could be contacted as soon as the problems were recognized. In addition, the
Company entered into cooperative agreements with the other banks making RAL's in
1996. Under those agreements, if a taxpayer owing money to one bank from a prior
year applied for a loan from another bank, that second bank repaid the
delinquent amount to the first bank before remitting the refund to the taxpayer.
The Company's own collection efforts and these cooperative agreements resulted
in collection in 1996 of $1.4 million from the 1995 losses.

In 1996, the RAL Program continued to operate under the relatively restrictive
guidelines established by the Company in 1995. In 1996 the Company made 52,000
RAL loans for a total of $55.8 million. Interest income for the loans was $3.0
million. Gross charge-offs for 1996 were $1.1 million. Management believes the
guidelines established in 1995 established prudent risk parameters which were
reflected in the results of 1996.

Many taxpayers not qualifying for loans in 1995 and 1996 still had their returns
filed electronically and received their refunds more quickly by having the
refund sent electronically by the IRS to the Company. The Company then prepared
a check or authorized the tax preparer to issue a check to the taxpayer. The
Company earned approximately $1.2 million and $1.6 million in fees for 1996 and
1995 respectively for this refund transfer service.

In 1996, the total profitability (income from the RAL's net of charge-offs plus
fees from the RT program), for this program was $4.5 million compared with a
pre-tax loss of about $683,000 in 1995. Total earnings for 1994, which did not
benefit from the RT program, were $2.4 million.

The balances outstanding during each tax filing season are included in the
average balance for consumer loans shown in Table 2, but there are no such loans
included in the balance sheets as of December 31, 1996 and 1995, because all
loans not collected from the IRS are charged-off before year-end. The fees
earned on the loans are included in the accompanying income statements for 1996,
1995 and 1994 within interest and fees on loans. The fees earned on the refund
transfers are included in other service charges, commissions, and fees.

ALLOWANCE FOR LOAN AND LEASE LOSSES

Credit risk is inherent in the business of extending loans to individuals,
partnerships, and corporations. The Company sets aside an allowance or reserve
for loan and lease losses through charges to earnings. The charges are shown in
the income statements as provision for loan and lease losses. All specifically
identifiable and quantifiable losses are immediately charged off against the
allowance. In this discussion, "loans" include the lease contracts purchased and
originated by the Company.

Determination of Adequacy and the Allocation Process

The Company formally assesses the adequacy of the allowance on a quarterly
basis. An important step in this assessment and in managing credit risk is to
periodically grade all of the larger loans, all of the delinquent loans, and
other loans for which there is a question of repayment. A significant portion of
all other loans are also graded. A portion of the allowance is then allocated to
the delinquent or otherwise questionable loans in an amount sufficient to cover
Management's estimate of the loss that might exist in them. A portion of the
allowance is also allocated to the remainder of the loans based on the latest
grading of their quality. Relatively more is allocated to those loans which,
while currently performing according to their terms, are in categories that have
characteristics which lead Management to conclude that there is inherently more
risk of problems in the future.

The implementation by the Company of Statements of Financial Accounting
Standards No. 114, Accounting by Creditors for Impairment of a Loan ("SFAS 114")
and No. 118, Accounting by Creditors for Impairment of a Loan--Income
Recognition and Disclosures ("SFAS 118") on January 1, 1995 is discussed in Note
1 to the financial statements. The statements specify how lenders must determine
the amount of the allowance that must be recorded for certain types of loans
that are impaired. Valuation allowances established in accordance with the
provisions of these statements are included in the allocation process outlined
above.

There are limitations to any grading process. The first is that it is
impracticable to grade every loan every quarter. Therefore, it is possible that
some of the smaller currently performing loans not recently graded will not be
as strong as their last grading and an insufficient portion of the allowance
will have been allocated to them. The second limitation is that grading must be
done without knowing whether all relevant facts are at hand. Delinquent
borrowers may deliberately or inadvertently omit important information from
reports or conversations with lenders regarding their financial condition and
the strength of repayment sources. The third limitation is that even for
experienced reviewers, grading loans and estimating possible losses involve
judgments about the present situation and the impact of potential future events.
Eventual losses therefore may differ from the most recent estimate. Because of
these limitations, the Company assumes that there are losses inherent in the
current portfolio which will be sustained, but which have not been identified to
date. It therefore maintains the allowance at an amount larger than the total
that is allocated as described above.

To the extent that the allowance is insufficient to cover the amounts allocated
and its estimate of unidentified losses, Management records additional provision
for loan loss. If the allowance is greater than appears to be required, less
provision expense will be recorded.

The allowance allocation shown in Table 7, "Allocation of the Allowance for Loan
and Lease Losses," should not be interpreted as an indication of the specific
amounts or specific loan categories in which charge-offs did or may ultimately
occur. There is no allocation of allowance to RAL's at December 31 because all
loans unpaid are charged-off prior to year-end. At the bottom of the table is
the ratio of the allowance for loan losses to total loans for each year.

TABLE 7--Allocation of the Allowance for Loan and Lease Losses
(amounts in thousands) December 31, 1996 December 31, 1995 December 31, 1994
Percent of Percent of Percent of
Loans to Loans to Loans to
Total Total Total
Amount Loans Amount Loans Amount Loans

Commercial, industrial,
and agricultural $ 4,723 52.4% $ 6,048 25.2% $ 5,343 29.2%
Real estate:
Residential 653 0.3 836 24.9 1,183 21.4
Non-residential 1,874 -- 2,503 31.4 2,856 28.7
Construction
and development 282 -- 526 3.6 1,141 5.3
Home equity lines 413 31.9 534 6.1 496 6.4
Consumer 535 1.6 447 5.0 438 5.4
Municipal tax-exempt
obligations -- 5.5 -- 1.3 -- 1.5
Other 92 8.5 126 2.5 91 2.1
Not specifically allocated 8,000 -- 1,329 -- 1,363 --
Total allowance $16,572 100.3% $12,349 100.0% $12,911 100.0%

Allowance for loan loss
as percentage of
year-end loans 2.39% 2.21% 2.59%

Loan Losses

Table 8, "Summary of Loan Loss Experience," shows the additions to, charge-offs
against, and recoveries for the Company's allowance for loan losses. Also shown
is the ratio of charge-offs to average loans for each of the last five years.
This ratio has been adversely impacted in the years prior to 1996 by problems
with two large loan relationships and with the higher charge-offs in the RAL
program. The low ratio in 1996 shows the positive impacts of the RAL collection
efforts and guideline changes, and of other stricter credit review and
administration procedures introduced in 1995. Declining levels of non-performing
loans and increased recoveries of previously charged-off loans reflect a steady
pattern of improvement in the credit quality of the Company's loan portfolio.
Management realizes that the ratio of net charge-offs to loans realized in 1996
is lower than to be expected in future years. However, future year periods
should benefit from the changes implemented in 1995 as discussed above.

TABLE 8--Summary of Loan Loss Experience

(in thousands) Year ended December 31
1996 1995 1994 1993 1992

Balance of the allowance
for loan losses
at beginning of year $12,349 $12,911 $10,067 $9,353 $7,611
Charge-offs:
Real estate:
Residential 822 1,086 -- -- --
Non-residential 935 4,847 48 -- 70
Construction and
development -- -- -- 3,380 331
Commercial, industrial,
and agricultural 855 787 921 1,268 1,553
Home equity lines 264 86 200 -- 77
Tax refund anticipation 1,123 4,402 3,030 650 404
Other consumer 269 394 345 570 762
Municipal tax-exempt
obligations -- -- -- -- --
Total charge-offs 4,268 11,602 4,544 5,868 3,197
Recoveries:
Real estate:
Residential 155 22 -- -- --
Non-residential 2,330 12 -- -- --
Construction and
development -- -- -- 2 --
Commercial, industrial,
and agricultural 202 430 236 130 116
Home equity lines 28 34 50 -- --
Tax refund anticipation 1,437 383 672 62 77
Other consumer 75 235 173 238 96
Municipal tax-exempt
obligations -- -- -- -- --
Total recoveries 4,227 1,116 1,131 432 289
Net charge-offs 41 10,486 3,413 5,436 2,908
Provision for loan losses
charged to operations $4,264 $9,924 $6,257 $6,150 $4,650
Balance at end of year $16,572 $12,349 $12,911 $10,067 $9,353
Ratio of net charge-offs
to average loans
outstanding 0.01% 1.96% 0.71% 1.15% 0.60%
Ratio of net charge-offs to
average loans outstanding
exclusive of RAL's 0.06% 1.21% 0.22% 1.03% 0.53%

The larger ratio for the Company in 1993 was due to $3.3 million in charge-offs
associated with one large loan in order to recognize the decline in the value of
the real estate that secured it. The Company subsequently had to foreclose on
the property, adding OREO of about $9 million. During 1993, the Company was able
to sell most of the property it had taken in foreclosure with no further net
loss, and recognized a gain when the remaining property was sold in 1994.

In 1995, the Company charged-off $4.5 million from various loans made to one
borrower. Although the loan was secured by collateral from which some recovery
was expected, the uncertainty regarding the amount and timing of recovery led
Management to charge-off all of one $4.2 million loan and portions of a series
of smaller loans. Foreclosure proceedings were delayed by bankruptcy and the
actions of other creditors, but were initiated whenever possible. Some of the
recoveries in 1996 related to this relationship and more are anticipated in
1997.

As shown in Table 8, the Company experienced a net charge-off amount of $41,000
in 1996. This low figure reflects Management's attention to strengthening the
credit administration, review and collection process and some special
circumstances. Charge-offs of $4.3 million before recoveries were in a more
normal range than the levels experienced in 1995 or 1993. There were a large
number of recoveries of 1995 RAL's through the cross-collection agreements, and
several significant recoveries of other types of loans. The recovery levels in
1997 are not expected to be as high as that experienced in 1996 because there
were fewer charge-offs in 1996 and most of the collectible 1995 charged-off
RAL's have been recovered.

Approximately ($314,000), $4.0 million, $2.4 million, and $588,000 of the net
charge-offs (charge-offs less recoveries) for 1996, 1995, 1994, and 1993,
respectively, are related to the RAL's. The number is negative in 1996, because
recoveries exceeded charge-offs for the year. The reasons for these charge-offs
are explained in the earlier discussion on RAL's.

There are very few banks in the country that have RAL programs, so the net
charge-off ratios for the Company are not comparable with those of other
institutions unless the RAL net charge-offs are eliminated. The corresponding
ratios for the Company's FDIC peers of 0.99% for the first nine months of 1996,
0.69% for 1995, 0.54% for 1994, 0.92% for 1993, and 0.74% in 1992. The portion
of the Company's 1995 and 1993 ratios related to the two large charge-offs were
0.84% and 0.70%, respectively. The ratios of the net charge-offs to average
loans and losses exclusive of RAL's for the years of 1992 through 1996 are also
shown.

NONACCRUAL, PAST DUE, AND RESTRUCTURED LOANS

Table 9 summarizes the Company's nonaccrual and past due loans for the last five
years.

TABLE 9--Nonaccrual and Past Due Loans

(in thousands) Year ended December 31
1996 1995 1994 1993 1992

Nonaccrual $7,027 $8,972 $6,326 $3,126 $ 888
90 days or more past due 1,420 395 1,290 862 322
Total noncurrent loans $8,447 $9,367 $7,616 $3,988 $1,210

Total noncurrent loans as
a percentage of the
total loan portfolio 1.23% 1.68 1.52% 0.86% 0.25%

Allowance for loan
loss as a percentage
of noncurrent loans 196% 132% 170% 252% 773%

Past Due Loans: Included in the amounts listed below as 90 days or more past due
are commercial and industrial, real estate, and a diversity of consumer loans.
These loans are well secured and in the process of collection. These figures do
not include loans in nonaccrual status.

Nonaccrual Loans: If there is reasonable doubt as to the collectibility of
principal or interest on a loan, the loan is placed in nonaccrual status, i.e.,
the Company stops recognizing income from the interest on the loan and reverses
any uncollected interest that had been accrued but not received. These loans may
or may not be collateralized, but collection efforts are being pursued.

The trend from 1993 to mid-1995 was an increase in total non-current loans,
reaching a high of $15.4 million at the end of the second quarter. Charge-offs
and repayments by the borrowers account for the decrease to $9.4 million at
year-end 1995.

To address the credit quality in the portfolios, Management strengthened the
credit administration, review, and analysis functions by hiring additional staff
in late 1994 and 1995. Secondly, Management established a Special Assets
Committee which has given increased attention to the larger problem loans. All
delinquent loans are reviewed by the Committee and action plans formulated for
collection or charge-off. The results of these efforts are reflected in the
declining level of non-performing assets to $8.4 million at the end of 1996 from
$9.4 million in 1995. In addition, the Company's ratio of non-current loans to
total loans of 1.23% at the end of 1996 is comparable to its FDIC peers' ratio
of 1.19%. The Company's allowance for loan loss as a percentage of non-current
loans is 196% at December 31, 1996 as compared to its FDIC peer group ratio of
176% .

Interest income from nonaccrual loans in the portfolio at year-end that was not
recognized in Table 10.

TABLE 10--Foregone Interest

(in thousands) Year Ended December 31
1996 1995 1994

Interest that would have been
recorded under original terms $ 1,354 $ 1,291 $671
Gross interest recorded $ 885 $ 753 $424
Foregone interest $ 469 $ 538 $247

Restructured Loans: The Company did not have any restructured loans at the end
of 1992. The only restructured loans at the end of 1993, 1994, 1995 and 1996
are reported above in the total of nonaccrual loans.

Potential Problem Loans: Management has reason to believe that certain borrowers
may not be able to repay their loans within the parameters of the present
repayment terms, even though, in some cases, the loans are current at the time.
These loans are regarded as potential problem loans, and a portion of the
allowance is allocated as discussed above to cover the Company's exposure to
loss should the borrowers indeed fail to perform according to the terms of the
notes. This class of loans does not include loans in a nonaccrual status or 90
days or more delinquent but still accruing, which are shown in Table 9.

At year-end 1996, these loans amounted to $9,075,000 or 1.3% of the portfolio.
The corresponding amounts for 1995 and 1994 were $13,767,000 or 2.46% of the
portfolio and $32,561,000 or 6.52% of the portfolio, respectively. The 1996
amount is comprised of loans of all types. $4.2 million of the allowance for
loan losses--approximately 30% of the outstanding balance--has been allocated to
these loans to cover potential losses.

OTHER LOAN PORTFOLIO INFORMATION

Other information about the loan portfolio that may be helpful to readers of the
financial statements follows.

Foreign Loans: The Company does not have nor has it ever had any foreign loans
in its loan portfolio.

Participations: Occasionally, the Company will sell or purchase a portion of a
loan from another bank. Banks usually sell a portion of a loan as a means of
staying within the bank's maximum limit for loans to any one borrower. A portion
of another bank's loan may be purchased by the Company as an accommodation to a
smaller bank unable to lend the whole amount under its regulatory lending limit
to its borrower. However, this would be done only if the loan also represents a
good investment for the Company. In these cases, the Company conducts its own
independent credit review prior to committing to purchase.

Loan to Value Ratio: The Company follows a policy of not loaning more than 65%
to 90% of the value of the collateral for real estate construction and
development loans depending on the type of the project. The policy limits are
75% of the value of commercial property and no more than 80% of residential
property for its permanent real estate loans. The Company generally does not
make use of credit enhancements like loan insurance to exceed these amounts. The
above ratios are sometimes exceeded when the loan is being originated for sale
to another institution that does lend at higher ratios and the sale is
immediate, when the exception is temporary, or when other special circumstances
apply. There are no specific loan to value ratios for other commercial,
industrial or agricultural loans not secured by real estate. Adequacy of the
collateral is established based on the individual borrower and the purpose of
the loan. Consumer loans may have maximum loan to collateral ratios based on the
loan amount, the nature of the collateral, and other factors.

Loan Concentrations: The concentration profile of the Company's loans is
discussed in Note 18 to the accompanying consolidated financial statements.

Loan Sales and Mortgage Servicing Rights: The Company sells most of the fixed
rate single family mortgage loans it originates as well as selected other
portfolio loans. These loans are made to accommodate the borrower, but are sold
to mitigate the market risk inherent in fixed rate assets. Most are sold
"servicing released" and the purchaser takes over the collection of the
payments. However, some are sold with "servicing retained" and the Company
continues to receive the payments from the borrower and forwards the funds to
the purchaser. The Company earns a fee for this service. The sales are made
without recourse, that is, the purchaser cannot look to the Company in the event
the borrower does not perform according to the terms of the note. In May, 1995,
the FASB issued Statement of Accounting Standards No. 122, Accounting for
Mortgage Servicing Rights. This statement requires companies engaged in mortgage
banking activities to recognize the rights to service mortgage loans for others
as separate assets. This statement is effective for fiscal years beginning after
December 15, 1995. The Company adopted this statement on January 1, 1996. For
loans originated for sale, the Statement requires that a portion of the
investment in the loan be ascribed to the right to receive this fee for
servicing and that this value be recorded as a separate asset.

DEPOSITS

An important component in analyzing net interest margin is the composition and
cost of the deposit base. Net interest margin is improved to the extent that
growth in deposits can be focused in the lower cost core deposit accounts:
demand deposits, NOW accounts, and savings. The average daily amount of deposits
by category and the average rates paid on such deposits is summarized for the
periods indicated in Table 11.

TABLE 11--Detailed Deposit Summary

(amounts in thousands) Year ended December 31
1996 1995 1994
Average Average Average
Balance Rate Balance Rate Balance Rate

NOW accounts $ 132,809 1.13% $126,883 1.16% $128,212 1.01%
Money market deposit accounts 412,350 4.03 375,227 4.44 298,561 3.48
Savings accounts 91,382 2.34 100,551 2.42 135,276 2.25
Time certificates of deposit for
less than $100,000 and IRA's 169,095 5.59 154,234 5.53 157,763 4.54
Time certificates of deposit for
$100,000 or more 74,584 5.25 57,822 5.09 57,097 3.72
Interest-bearing deposits 880,220 3.75% 814,717 3.93% 776,909 3.09%
Demand deposits 153,876 132,095 119,578
$1,034,096 $946,812 $896,487

The average rate paid on deposits, which had increased from 3.09% in 1994 to
3.93% in 1995, declined in 1996 to 3.75%. The Fed pushed rates up sharply during
1994 and only gradually dropped them in 1995 and in the first quarter of 1996.
The average rates that are paid on deposits generally trail behind money market
rates because financial institutions do not try to change deposit rates with
each small increase or decrease in short-term rates. This trailing
characteristic is stronger with time deposits than with deposit types that have
administered rates. Administered rate deposit accounts are those products which
the institution can reprice at its option based on competitive pressure and need
for funds. This contrasts with deposits for which the rates are set by contract
for a term or are tied to an external index. Certificates of deposit are time or
term deposits. With these accounts, even when new offering rates are
established, the average rates paid during the quarter are a blend of the rates
paid on individual accounts. Only new accounts and those which mature and are
replaced will bear the new rate. This lag effect explains why the average rate
declined in 1996 while market rates remained essentially unchanged.

Generally, the Company offers higher rates on certificates of deposit in amounts
over $100,000 than for lesser amounts. It would be expected, therefore, that the
average rate paid on these large time deposits would be higher than the average
rate paid on time deposits with smaller balances. As may be noted in Table 11,
however, this is not the case. There are two primary reasons for this anomoly.

TABLE 12--Maturity Distribution of Time
Certificates of Deposit of $100,000 or More

(in thousands) December 31
1996 1995 1994

Three months or less $ 40,868 $ 21,938 $ 26,232
Over three months
through six months 21,446 17,364 10,258
Over six months
through one year 17,118 24,179 14,086
Over one year 15,745 12,957 12,980
$ 95,177 $ 76,438 $ 63,556

First, loan demand has been low in the California economy. With less need for
funds to lend, the Company has been reluctant to offer premium rates to
encourage large deposits that are not the result of stable customer
relationships. If the deposits are short-term and will be kept by the depositor
with the Company only while premium rates are paid, the Company must invest the
funds in very short-term assets, such as Federal funds. Since Federal funds sold
earned less than 6% during almost all of 1995 and 1996, the spread between the
cost of premium rate CD's and the earnings on the potential uses of the funds is
very small. Second, a significant portion of the under $100,000 time deposits
are IRA accounts. The Company pays a higher rate on these accounts than on other
CD's. These factors have served to maintain a higher average rate paid on the
smaller time deposits relative to the average rate paid on larger deposits.

SECURITIES SOLD UNDER AGREEMENST TO REPURCHASE AND FEDERAL FUNDS PURCHASED

Securities sold under agreements to repurchase ("repos") are a form of borrowing
that is secured by some of the securities in the Company's portfolios. Some
banks use these agreements to borrow from other banks in order to provide
temporary liquidity. In contrast, the Company almost exclusively provides these
instruments in amounts over $100,000 to business customers for their cash
management. Like the rate paid on Federal funds purchased, the interest rate
paid on repos is tied to the Federal funds sold rate. The average rate paid in
1996 declined to 4.40% from 5.01% in 1995, whereas the 1995 rate had increased
from 3.26% during 1994. The average balance for these arrangements varies with
economic activity as these customers have more or less cash to invest. The $25.4
million average balance borrowed during 1996 was more than double the 1995
average balance of $10.2 million, reflecting the improved local economy and
lower rates offered on deposit products.

Federal funds purchased are a form of overnight borrowing from other banks. The
Company purchases funds each day to accommodate other local community banks on
the Central Coast that have excess cash to invest overnight. The related
interest expense is tied to the rate that the Company receives for its excess
cash sold as Federal funds to larger financial institutions. During the last
three years, the Company has occasionally purchased additional funds from money
center banks to meet liquidity needs, especially during the RAL season. The
average balance was $15.1 million in 1996, compared to $16.6 million in 1995,
and $14.3 million for 1994. Management does not anticipate a change in this
pattern for 1997.

OTHER REAL ESTATE OWNED

Real property owned by the Company which was acquired in foreclosure proceedings
is termed Other Real Estate Owned or OREO. The amount of OREO held at year-end
in 1996 and 1995 was $1,629,000 and $1,785,000 respectively. The decrease from
1995 to 1996 resulted because additions due to foreclosures of $1,559,000 were
less than sales of $1,648,000 and valuation reduction of $67,000.

The total at year-end to be disposed of is only 0.13% of total assets, compared
with 0.12% held by its FDIC peers as a percentage of their total assets.

As part of the loan application process, the Company reviews all real estate
collateral for possible problems from contamination by hazardous waste. This is
reviewed again before any foreclosure proceedings are initiated.

OTHER OPERATING INCOME

Trust fees remain the largest component of other operating income reaching over
$8.4 million in 1996. Fees increased by $1,421,000 or 20% over 1995. The market
value of assets under administration--on which the majority of fees are
based--increased from $1.4 billion at the start of 1995 to $1.6 billion at the
end of 1996.

The Trust and Investment Services Division began selling annuities and mutual
funds to customers in 1995 and earned $373,000 in fees from these sales in 1996.
The Company provides assistance to customers to determine what investments would
best match their financial goals and helps the customers allocate their funds
according to the customers' risk tolerance and need for diversification. The
funds and annuities are not operated by the Company, but instead are managed by
registered investment companies. Fees for managing employee benefit trust
business increased $159,000 or 19% in 1996.

Included within other service charges, commissions and fees are service fees
arising from the processing of merchants' credit card deposits, escrow fees, and
a number of other fees charged for special services provided to customers. A
significant source of income in this category is refund transfer fee income
which totaled $1.2 million in 1996. As explained in the previous discussion on
RAL's, many of the taxpayers not qualifying for loans still had their refunds
sent by the IRS to the Company which then issued the refund check more quickly
than would the IRS. The Company began earning substantial fees for this service
in 1995. Management expects that this will continue to provide a significant
source of income.

The Company continues to work on increasing other income and fees because it is
an important potential contributor to profitability.

OTHER OPERATING EXPENSE

Total other operating expenses have increased over the last three years as the
Company has grown, but as a percentage of average earning assets, these expenses
have remained relatively steady at 4.13%, 4.11%, and 4.09%, for 1996, 1995, and
1994, respectively. These ratios are quite favorable compared to the average
ratio of 4.27% for its FDIC peer group for the first nine months of 1996,
especially when several important factors are considered.

The first is that it is exceptional for a financial institution the size of the
Company to have such a large trust division. The expenses of this division
(approximately $4.7 million in 1996) are included in the general category of
other operating expenses (the numerator of the ratio), but the only earning
assets associated with the division (the denominator of the ratio) are trust
customer funds deposited with the Company, which averaged $83.5 million in 1996.

The second factor is the high proportion of premises leased rather than owned by
the Company. There is increased lease expense, but, as noted above, by not
committing funds to the purchase of premises, the Company is able to
substantially increase its net interest income.

A third factor is that, as indicated in Note 12 to the consolidated financial
statements, beginning in 1995, there was a significant reduction in FDIC deposit
premiums which resulted in a lower ratio of other operating expenses to earning
assets.

Within the whole category of other operating expense, salary and benefit
expenses have increased 23.7% from 1994 to 1996 compared to a 17.4% increase in
average earning assets for the same period. Staff size is closely monitored and
in most years the rate of increase in staff is less than the rate of growth in
the Company's assets (if the growth in off-balance sheet fiduciary assets is
also considered). The number of staff has increased for several reasons. Four
additional branch offices have been opened since the start of 1993. Additional
credit review and administrative personnel were hired to more closely monitor
credit quality, and other personnel were hired for the new services in the Trust
and Investment Services Division.

Net occupancy and equipment expense have increased from 1994 to 1996 by 14.1%
because of some renovation of branch offices, cost of living increases in lease
rent, and the opening of the new offices.

The Company incurred approximately $4.0 million in direct operating expenses
related to the new offices and personnel in the Ventura County expansion in
1996. These expenses will increase in 1997 as a fourth Ventura office is opened
and offices acquired through the merger with First Valley Bank of Lompoc are
added. Additional expenses were incurred in the administrative and support areas
of the Company for the startup activities.

CAPITAL RESOURCES

Under current regulatory definitions, the Company is "well-capitalized," the
highest rating of the five categories defined under the Federal Deposit
Insurance Corporation Improvement Act ("FDICIA").

Capital Adequacy Standards

The primary measure of capital adequacy is based on the ratio of risk-based
capital to risk weighted assets. This method of measuring capital adequacy is
meant to accomplish several ends: 1) to establish capital requirements that are
more sensitive to the differences in risk associated with various assets; 2) to
explicitly take into account off-balance sheet exposure in assessing capital
adequacy; and, 3) to minimize disincentives to holding liquid, low-risk assets.

The Company, as a bank holding-company, is required by the FRB to maintain a
risk-based capital ratio of at least 8.00%. At the end of 1996, the Company's
ratio was 16.47%. The minimum levels established by the FRB, the minimum levels
necessary to be considered well capitalized by regulatory definition and the
Company's ratios as of December 31, 1996 are presented in Note 17. It is
Management's intent to maintain capital in excess of the well capitalized
requirement. As of year-end all ratios exceed this threshold. The Bank is also
subject to the requirement to maintain a risk-based capital ratio of 8.00%. The
Bank's ratios are slightly higher than the Company's, and at the end of 1996,
its ratio was 16.57%. Sanbarco has no minimum capital requirements.

The risk-based capital ratio is strongly impacted by the management of the
securities portfolios because the U.S. Treasury securities are assigned a zero
risk weighting and other instruments in which the Company has often placed a
significant amount of funds--U.S. Agency securities, State and Municipal
securities, Federal funds sold, and bankers' acceptances--have a 20% risk
weighting. The Company's ratio decreased from 17.97% for year-end 1995 to 16.57%
for year-end 1996 due mainly to growth in the balance sheet as a result of the
lease portfolio purchase of approximately $59 million. Lease assets are 100%
risk weighted and the resultant growth in risk weighted assets was at a greater
rate than the growth in risk based capital and therefore the ratio declined.

The Company is trying to increase loans as a percentage of total assets in order
to increase net interest income. Except for most 1-4 family residential loans,
loans are risk-weighted at 100%. If Management's projections for loan growth are
reached in 1997, the Company's risk-based capital ratio should decrease, but
Management anticipates that the Company and the Bank will continue to exceed the
minimum standards.

Future Sources and Uses of Capital

The Company expects sustained growth in capital resources. Net income has
provided $39.0 million in capital in the last three years. Of this amount, $13.0
million, or 33.3% was distributed in dividends.

In addition to the capital generated from the operations of the Bank, over the
years a significant source of capital growth has been the exercise of employee
stock options. The extent of the growth from this source in any one year depends
on a number of factors, among them the current stock price in relation to the
price at the time options were granted and the number of options that would
expire if not exercised during the year.

The net increase to capital from the exercise of options is lessened by the
ability of employees to pay the exercise price of options by trading shares of
stock they already own, termed "swapping". In 1996, the increase to capital from
the exercise of options (net of shares surrendered as payment for exercises and
taxes) was $1,550,000 or 23.5% percent of the net growth in shareholders' equity
in that year. At December 31, 1996, there were approximately 405,000 options
outstanding and exercisable at less than the current market price, with an
average exercise price of $13.35. This represents a potential addition to
capital of $5.4 million, if all options were exercised with cash. Because many
options are likely to be exercised by swapping, some amount less than the $5.4
million in new capital will result from the exercise of options, and the options
are likely to be exercised over a number of years.

Tender Offer and Other Repurchases

As disclosed in Note 9 to the accompanying consolidated financial statements, in
January 1997 the company offered to purchase up to 500,000 shares of common
stock duly tendered by February 21, 1997. The number of shares tendered on that
date were 65,247 or 0.9% of the outstanding shares at December 31, 1996. The
company paid $30.00 per share or approximately $2.0 million for the stock
tendered, which was accounted for as a retirement of shares and reduction of
capital in 1997. As explained in the tender offer, this action was taken: 1) to
provide shareholders with larger holdings an opportunity to sell shares if they
had not been able to because the market was not able to absorb larger blocks;
and 2) because the significant earnings growth over the last several years had
resulted in an accumulation of capital in excess of current and anticipated
needs.

The Company will also repurchase shares of its common stock to offset the
increased number of shares issued as a result of the exercise of employee stock
options and also to utilize the accumulation of excess capital generated by the
Company's earnings. In 1996, the Company repurchased approximately 188,000
shares to offset the effects of the exercise of stock options of 182,000 shares.

Although total capital will not change as a result of the purchase of First
Valley Bank since the transaction is a purchase for cash, Tier 1 capital and
total risked-based capital will be reduced by the amount of goodwill recognized.
In addition, the capital to asset ratios will decrease because of the addition
of the First Valley Bank assets. However, all capital ratios will remain in
excess of the "well-capitalized" minimums.

There are no material commitments for capital expenditures or "off-balance
sheet" financing arrangements as of the end of 1996, except as reported in Note
19 to the consolidated financial statements. State law limits the amount of
dividends that may be paid by a bank to the lesser of the bank's retained
earnings or the total of its undistributed net income for the last three years.
For the Bank, this would mean approximately $22.5 million more could have been
transferred as dividends to the Bancorp in 1996, subject to regulatory capital
requirements. The primary need for funds to be transferred to the Bancorp is for
the payment of dividends to its shareholders. Management expects that the amount
of dividends to be transferred to the Bancorp from the Bank will be in the range
of $4 to $6 million per year for this purpose.

REGULATION

The Company is strongly impacted by regulation. The Company and its subsidiaries
may engage only in lines of business that have been approved by their respective
regulators, and cannot open, close, or relocate offices without their approval.
Disclosure of the terms and conditions of loans made to customers and deposits
accepted from customers are both heavily regulated as to content. The Company
and the Bank must file periodic reports with the various regulators to keep them
informed of their financial condition and operations as well as their compliance
with all the various regulations. The FRB and the California State Department of
Banking conduct periodic examinations of the Company and the Bank to verify that
the reporting is accurate and to ascertain that the Company and the Bank are in
compliance with regulations.

FDICIA became effective in 1992. FDICIA requires banks to meet new
capitalization standards, follow stringent outside audit rules, and establish
stricter internal controls. There are also new requirements to ensure that the
Audit Committee of the Board of Directors is independent.

The Bank is required by the provisions of the federal Community Reinvestment Act
("CRA"), to make significant efforts to ensure that access to banking services
is available to every segment of the community."

The FRB may take action against a bank holding company or a bank that it
regulates should it make a finding that the financial institution has failed to
maintain adequate capital. This action has usually taken the form of
restrictions on the payment of dividends to shareholders, requirements to obtain
more capital from investors, and restrictions on operations. The FDIC may also
take action against a bank that it finds is not acting in a safe and sound
manner. Given the strong capital position and performance of the Company and the
Bank, Management does not expect to be impacted by these types of restrictions
in the foreseeable future.

IMPACT OF INFLATION

Inflation has been moderate for the last several years and has had little or no
impact on the financial condition and results of operations of the Company
during the periods discussed here.

LIQUIDITY

Liquidity is the ability to raise funds on a timely basis at an acceptable cost
in order to meet cash needs. Adequate liquidity is necessary to handle
fluctuations in deposit levels, to provide for customers' credit needs, and to
take advantage of investment opportunities as they are presented in the market
place.

The Company's objective is to ensure adequate liquidity at all times by
maintaining liquid assets (asset liquidity), by being able to raise deposits and
liabilities (liability liquidity), and by having access to funds via capital
markets. Having too little liquidity can result in difficulties in meeting
commitments and losing opportunities. Having too much liquidity can result in
less income because liquid assets usually do not earn as high an interest rate
as less liquid assets.

As indicated in the Consolidated Statements of Cash Flows included with the
accompanying consolidated financial statements, the principal sources of
liquidity for the Company have been interest payments received on loans and
investments, proceeds from the maturity or sale of securities and bankers'
acceptances, and the growth in deposits.

To manage the Company's liquidity properly, however, it is not enough merely to
have large cash inflows; they must be timed to coincide with anticipated cash
outflows. Also, the available cash on hand or cash equivalents must be
sufficient to meet the exceptional demands that can be expected from time to
time relating to natural catastrophes such as flood, earthquakes, and fire.

The Company manages its liquidity adequacy by monitoring and managing its
immediate liquidity, intermediate liquidity, and long term liquidity.

Immediate liquidity is the ability to raise funds today to meet today's cash
obligations. Sources of immediate liquidity would be the prior day's Federal
funds sold position, unused Federal funds and repurchase agreement lines and
facilities extended by other banks and major brokers to the Company, access to
the Federal Home Loan Bank for short-term advances, and access to the Federal
Reserve Bank's Discount Window. The Company has established a target amount for
sources of available immediate liquidity. This amount is increased during
certain periods to accommodate any liquidity risks of special programs like
RAL's.

Intermediate liquidity is the ability to raise funds during the next few weeks
to meet cash obligations over those next few weeks. Sources of intermediate
liquidity would include maturities or sales of bankers' acceptances and
securities, term repurchase agreements, and term advances from the Federal Home
Loan Bank. The Company monitors the cash flow needs of the next several weeks
and determines that the sources are adequate to provide for these cash needs.

Long term liquidity is the ability to raise funds over the entire planning
horizon to meet cash needs anticipated due to strategic balance sheet changes.
Long term liquidity sources would include initiating special programs to
increase core deposits in expanded market areas, reducing the size of securities
portfolios, taking long-term advances from the Federal Home Loan Bank,
securitizing loans, and accessing capital markets. An example of coordinating a
source of long term liquidity with asset/liability management was the borrowing
of $38 million from the Federal Home Loan Bank in December 1996 to fund a
portion of the lease portfolio purchase. Had the Company used immediate or
intermediate sources of liquidity to fund the whole purchase, the negative gap
in the first period of Table I would have been larger and subjected the Company
to greater exposure from rising interest rates.

INCOME TAX EXPENSE

Income tax expense is the sum of two components, the current tax expense or
provision and the deferred expense or provision. Current tax expense is the
result of applying the current tax rate to taxable income.

The deferred tax provision is intended to account for the fact that income on
which the Company pays taxes with its returns differs from pre-tax income in the
accompanying consolidated income statements because some items of income and
expense are recognized in different years for income tax purposes than in the
financial statements. For example, the Company is only permitted to deduct from
taxable income on its Federal tax return actual net loan charge-offs,
irrespective of the amount of provision for loan loss (bad debt expense) it
recognized in its financial statements. This causes what is termed a "temporary
difference" because eventually, as loans are charged-off, the Company will be
able to deduct for taxes what has already been recognized as an expense in the
financial statements. Another example is the accretion of discount on certain
securities. For its financial statements, the Company recognizes income as the
discount is accreted, but for its tax return, the Company can defer the
recognition of income until the cash is received at the maturity of the
security. The first example causes a deferred tax asset to be created because
the Company has recognized as an expense for its current financial statements an
item that it will be able to deduct from its taxable income in a future year.
The second example causes a deferred tax liability, because the Company has been
able to delay until a subsequent year the paying of tax on an item of current
year financial statement income.

The Company measures all of its deferred tax assets and liabilities at the end
of each year. The difference between the net asset or liability at the beginning
of the year and the end of the year is the deferred tax provision for the year.

Most of the Company's temporary differences involve recognizing substantially
more expenses in its financial statements than it has been allowed to deduct for
taxes, which results in a net deferred tax asset. Deferred tax assets are
dependent for realization on past taxes paid, against which they may be carried
back, or on future taxable income, against which they may be offset. If there
were a question about the Company's ability to realize the benefit from the
asset, then it would have to record a valuation allowance against the asset to
reflect the uncertainty. Given the amount and nature of the Company's deferred
assets, the past taxes paid, and the likelihood of future taxable income,
realization is assured and no valuation allowance needs to be provided.

The amounts of the two components, the amounts of the various deferred tax
assets and liabilities, and the tax effect of the principal temporary
differences between taxable income and pre-tax financial statement income are
shown in Note 8 to the accompanying financial statements.

To ensure that all corporations with substantial income for financial reporting
purposes ("book income") pay some Federal income tax, Congress established the
Alternative Minimum Tax ("AMT") as a second parallel tax system. Under AMT
provisions, there is a limitation on how great the difference may be between
book income and taxable income. If the difference is too great, a portion of the
book income not normally taxable is nonetheless added to taxable income and the
total is multiplied by the AMT tax rate for comparison with the regular tax
computation. The Company is required to pay the greater of the Federal tax
liability computed under the regular tax system or that computed using the
special rules of the AMT.

The Company has substantial differences between book income and taxable income
due to the temporary differences noted above and due to permanent differences
like the tax-exempt income from state and municipal securities. These
differences were not sufficient in 1996 to trigger the AMT rate but it did pay
taxes under AMT in 1995. The extra tax paid under the AMT calculation for 1995
was allowable as a credit against 1996 taxes. The lowest effective tax rate for
the Company occurs at the point that the regular tax computation and the AMT
computation result in the same tax amount. The Company therefore tries to stay
very close to this crossover point. In these circumstances, the Company
carefully considers the impact of new purchases of tax-exempt securities and
other transactions which might cause the AMT to come into effect.

COMMON STOCK PRICES AND DIVIDENDS

Stock prices and cash dividends declared for the last eight quarters are shown
on page 76 in "Selected Annual and Quarterly Financial Data." The Company
applied for listing on the NASDAQ National Market System in April, 1996 and
began to be listed in the middle of May. The trading symbol is SABB. The stock
prices shown prior to May 1996, represent only trades known to the Company or
its transfer agent as the stock was not then listed on an exchange, and only
offers to buy and sell and trading volume were reported on the NASDAQ electronic
bulletin board. Stock prices after that date represent trading activity through
the National Market System.

The Board of Directors periodically increases the dividend rate in
acknowledgment that earnings have been increasing by a sufficient amount to
ensure adequate capital and also provide a higher return to shareholders. For
the years 1996, 1995 and 1994, the Company has declared dividends which were
34.6%,40.3% and 30.8%, respectively, of its net income. The most recent
information for the Company's peers shows an average payout ratio of 29.6%.

FIRST VALLEY BANK ACQUISITION

As disclosed in Note 18 to the accompanying consolidated financial statements,
in December 1996, the Company entered into a definitive agreement whereby it
agreed to acquire all of the outstanding shares of First Valley Bank, Lompoc and
merge it into Santa Barbara Bank & Trust. First Valley Bank has five branch
offices in the northern part of the county where the Company has a smaller
presence. This acquisition, when completed, will create attractive growth
opportunities to the north. As the Company pursues its stated plans to expand
its brand of community-based banking beyond its current market area, Management
will consider opportunities to form strategic partnerships (similar to the
announced partnership with First Valley Bank) with other financial institutions
that have compatible management philosophies and corporate cultures and that
share the Company's commitment to superior customer service and responsive
community support.

Notes to Management's Discussion and Analysis of Financial Condition and Results
of Operations

NOTE A

As of September 30, 1996, for all FDIC banks with an asset size of $1 billion to
$10 billion, non-performing assets represented 9.93% of their equity capital and
0.89% of their total assets. For banks of all sizes in the FDIC's Western
region, non-performing assets represented 9.97% of equity capital and 0.95% of
total assets.

In various places throughout this discussion, comparisons will be made between
ratios for the Company and for its FDIC peers. For 1996, the peer group
generally is all FDIC banks with an asset size of $1 billion to $10 billion, and
the information set forth above is reported in or calculated from information
reported in the FDIC Quarterly Banking Profile, Third Quarter 1996, which is the
latest issue available. The publication does not report some of the statistics
cited in this analysis by the separate size-based peer groups. In these
instances, the figure cited is for all FDIC banks regardless of size.

The peer information for the dividend payout ratio is reported in the Bank
Holding Company Performance Report received from the FRB for the 3rd Quarter of
1996.

NOTE B

For Tables 2 and 4, the yield on tax-exempt state and municipal securities has
been computed on a taxable equivalent basis. To compute the taxable equivalent
yield for these securities one must first add to the actual interest earned an
amount such that if the resulting total were fully taxed, the after-tax income
would be equivalent to the actual tax-exempt income. This taxable equivalent
income is then divided by the average balance to obtain the taxable equivalent
yield. The dollar amount of the adjustment is shown at the bottom of Table 2 as
"Taxable equivalent income included in interest income from nontaxable
securities and loans."

NOTE C

For purposes of Table 2, loans in a nonaccrual status are included in the
computation of average balances in their respective loan categories.

NOTE D

For purposes of the amounts in Table 3 relating to the volume and rate analysis
of net interest margin, the portion of the change in interest earned or paid
that is attributable to changes in rate is computed by multiplying the change in
interest rate by the prior year's average balance. The portion of the change in
interest earned or paid that is attributable to changes in volume is computed by
multiplying the change in average balances by the prior year's interest rate.
The portion of the change that is not attributable either solely to changes in
volume or changes in rate is prorated on a weighted basis between volume and
rate.

NOTE E

In Table 1, the net deferred loan origination, commitment, and extension fees
and the allowance for loan and lease losses are included in the column titled
"Noninterest bearing or non-repricing items."

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

Santa Barbara Bancorp and Subsidiaries

To the Shareholders and the Board of Directors

We have audited the accompanying consolidated balance sheets of Santa Barbara
Bancorp (a California corporation) and Subsidiaries as of December 31, 1996 and
1995, and the related consolidated statements of income, changes in shareholders
equity, and cash flows for each of the three years in the period ended December
31, 1996. These financial statements are the responsibility of Santa Barbara
Bancorps management. Our responsibility is to express an opinion on these
financial statements 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 and 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 financial position of Santa Barbara Bancorp and
Subsidiaries as of December 31, 1996 and 1995, and the results of their
operations and cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.

handwritten signature:
ARTHUR ANDERSEN LLP
Los Angeles, California
January 31, 1997

Santa Barbara Bancorp
and Subsidiaries

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(in thousands) December 31
1996 1995

Assets:
Cash and due from banks (Note 5) $ 51,181 $ 74,746
Federal funds sold 70,000 65,000
Total cash and cash equivalents 121,181 139,746
Securities (approximate market value of
$431,108 in 1996 and $375,093
in 1995) (Note 2):
U.S. Treasury obligations 243,631 197,812
U.S. Agency obligations 52,268 76,889
State and municipal securities 86,103 82,376
Collateralized mortgage obligations 30,548 --
Equity Securities 5,488 488
Total securities 418,038 357,565
Bankers' acceptances 64,732 139,294
Loans (Note 3) 684,167 558,801
Less: allowance for loan
and lease losses (Note 4) 16,572 12,349
Net loans 667,595 546,452
Premises and equipment, net (Note 6) 6,835 8,149
Accrued interest receivable 8,503 7,981
Other assets (Notes 1 and 8) 14,436 13,174
Total assets $1,301,320 $1,212,361

Liabilities:
Deposits (Note 7):
Non-interest bearing demand deposits $ 178,511 $ 158,122
Interest bearing deposits 934,572 895,898
Total deposits 1,113,083 1,054,020
Securities sold under agreements to repurchase
and Federal funds purchased (Note 10) 33,490 51,316
Long-term debt and other borrowings (Note 11) 39,000 1,210
Accrued interest payable and
other liabilities (Notes 8, 13 and 15) 8,154 4,818
Total liabilities 1,193,727 1,111,364
Commitments and contingencies (Note 18) Shareholders' equity (Notes 9, 13 and
17):
Common stock no par value, $.67 stated
value; shares authorized: 20,000; shares
shares issued and outstanding:
7,588 in 1996 and 7,679 in 1995. 5,059 5,119
Surplus 35,415 39,191
Unrealized gain (loss) on securities
available-for-sale (Notes 1 and 2) 2 (179)
Retained earnings 67,117 56,866
Total shareholders' equity 107,593 100,997
Total liabilities and
shareholders' equity $1,301,320 $1,212,361

The accompanying notes are an integral part of these consolidated balance
sheets.

Santa Barbara Bancorp
and Subsidiaries

CONSOLIDATED STATEMENTS
OF INCOME
(in thousands)
Year Ended December 31
1996 1995 1994

Interest income:
Interest and fees on loans (Note 3) $56,791 $52,649 $46,816
Interest on securities:
U.S. Treasury obligations 14,035 12,447 16,495
U.S. Agency obligations 3,710 3,680 2,085
State and municipal securities 6,615 6,973 7,232
Collateralized mortgage obligations 1,453
Equity securities 46 14 --
Interest on Federal funds sold 3,128 3,131 772
Interest on bankers' acceptances 3,800 3,294 1,500
Total interest income 89,578 82,188 74,900
Interest expense:
Interest on deposits (Note 7) 33,006 32,035 24,008
Interest on securities sold under
agreements to repurchase and
Federal funds purchased (Note 10) 1,897 1,474 878
Interest on long-term debt and
other borrowings (Note 11) 146 74 81
Total interest expense 35,049 33,583 24,967
Net interest income 54,529 48,605 49,933
Provision for loan and lease
losses (Notes 1 and 4) 4,264 9,924 6,257
Net interest income after
provision for loan and lease losses 50,265 38,681 43,676
Other operating income (Note 12):
Service charges on deposit accounts 4,594 4,255 3,183
Trust fees (Note 1) 8,441 7,020 6,449
Other service charges, commissions
and fees, net 6,107 5,959 4,077
Net loss on sales of
securities (Notes 1, 2 and 8) (753) (99) (1,191)
Other income 553 553 566
Total other operating income 18,942 17,688 13,084
Other operating expense:
Salaries and other compensation (Note 16) 20,706 18,402 16,300
Employee benefits (Notes 13 and 15) 5,446 4,253 4,849
Net occupancy expense (Notes 6 and 18) 4,550 4,257 3,528
Equipment rental, depreciation
and maintenance (Note 6) 2,564 2,611 2,247
Net cost of operating
other real estate owned (Note 1) 277 31 (485)
Other operating expense (Note 12) 13,046 12,415 12,852
Total other operating expense 46,589 41,969 39,291
Income before provision for income taxes 22,618 14,400 17,469
Provision for income taxes (Note 8) 6,953 3,985 4,518
Net income $15,665 $10,415 $12,951
Earnings per share $ 2.05 $ 1.36 $ 1.69

The accompanying notes are an integral part of these consolidated statements.

Santa Barbara Bancorp
and Subsidiaries
CONSOLIDATED STATEMENTS OF
CHANGES IN SHAREHOLDERS' EQUITY

(in thousands) Unrealized
Gain (Loss) on
Securities
Common Stock Available- Retained
Shares Amount Surplus for-Sale Earnings Total

Balance, December 31, 1993 7,597 $ 5,065 $ 38,557 $ 683 $ 41,686 $ 85,991
Activity for 1994:
Exercise of employee
stock options (Note 9) 150 100 2,116 -- -- 2,216
Retirement of
common stock (Note 9) (58) (39) (990) -- -- (1,029)
Cash dividends declared
at $0.52 per share -- -- -- -- (3,990) (3,990)
Change in unrealized
gain (loss) on
securities available-
for-sale -- -- -- (2,179) -- (2,179)
Net income -- -- -- -- 12,951 12,951
Balance, December 31, 1994 7,689 5,126 39,683 (1,496) 50,647 93,960
Activitiy for 1995:
Exercise of employee
stock options (Note 9) 87 58 1,220 -- -- 1,278
Retirement of
common stock (Note 9) (97) (65) (1,712) -- -- (1,777)
Cash dividends declared
at $0.55 per share -- -- -- -- (4,196) (4,196)
Change in unrealized
gain (loss) on
securities available-
for-sale -- -- -- 1,317 -- 1,317
Net income -- -- -- -- 10,415 10,415
Balance, December 31, 1995 7,679 5,119 39,191 (179) 56,866 100,997
Activity for 1996:
Exercise of employee
stock options (Note 9) 182 122 3,124 -- -- 3,246
Retirement of
common stock (Note 9) (273) (182) (6,900) -- -- (7,082)
Cash dividends declared
at $0.71 per share -- -- -- -- (5,414) (5,414)

Change in unrealized
gain (loss) on
securities available- -- -- -- 181 -- 181
for-sale -- -- -- -- 15,665 15,665

Balance, December 31, 1996 7,588 $ 5,059 $ 35,415 $ 2 $ 67,117 $107,593

The accompanying notes are an integral part of these consolidated statements.

Santa Barbara Bancorp
and Subsidiaries
CONSOLIDATED STATEMENTS OF
CASH FLOWS

(in thousands)

Increase (decrease) in cash and cash Year Ended December 31
equivalents (Note 1): 1996 1995 1994

Cash flows from operating activities:
Net Income $ 15,665 $ 10,415 $ 12,951
Adjustments to reconcile net income to net cash
provided by operations:
Depreciation and amortization 2,067 2,041 1,614
Provision for loan and lease losses 4,264 9,924 6,257
(Benefit) provision for deferred income taxes (2,508) 795 (1,724)
Net recovery on other real estate owned (52) (40) (821)
Net amortization of discounts and premiums for
securities and bankers' acceptances (2,524) (1,038) (6,523)
Net change in deferred loan origination fees and costs 223 102 736
(Increase) decrease in accrued interest receivable (522) 149 (902)
Increase in accrued interest payable 103 334 296
Net loss on sales and calls of securities 753 99 1,191
Decrease (increase) in service fees and other income receivable 796 140 (23)
Increase (decrease) in income taxes payable 94 (181) (214)
Other operating activities 3,127 (1,113) 816
Net cash provided by operating activities 21,486 21,627 13,654
Cash flows from investing activities:
Proceeds from sales, calls and maturities of securities (Note 2) 211,201 168,731 307,256
Purchase of securities (Note 2) (268,757) (136,320) (309,622)
Proceeds from sale or maturity of bankers' acceptances 256,025 118,332 62,970
Purchase of bankers' acceptances (182,139) (176,856) (79,380)
Net increase in loans made to customers (127,260) (72,520) (39,374)
Disposition of property from defaulted loans 1,670 383 3,436
Purchase or investment in premises and equipment (752) (2,799) (2,362)
Net cash used in investing activities (110,012) (101,049) (57,076)
Cash flows from financing activities:
Net increase in deposits 59,063 97,303 90,464
Net increase (decrease) in borrowings with
maturities of 90 days or less (18,035) 41,829 (10,668)
Net increase in long-term debt 37,791 -- --
Proceeds from issuance of common stock (Note 9) 1,146 454 1,187
Payments to retire common stock (Note 9) (4,982) (953) --
Dividends paid (5,022) (4,095) (3,877)
Net cash provided by financing activities 69,961 134,538 77,106
Net increase (decrease) in cash and cash equivalents (18,565) 55,116 33,684
Cash and cash equivalents at beginning of period 139,746 84,630 50,946
Cash and cash equivalents at end of period $ 121,181 $ 139,746 $ 84,630

Supplemental disclosure: 1996 1995 1994
Cash paid during the year for:
Interest paid during the year $ 34,946 $ 33,917 $ 24,671
Income taxes paid during the year $ 8,425 $ 3,110 $ 6,102
Non-cash additions to other
real estate owned (Note 1) $ 1,774 $ 1,446 $ 265
Non-cash transaction for net addition to
(release from) senior debt on other real
estate owned upon foreclosure (disposal)
of properites -- $ 209 $ (327)

The accompanying notes are an integral part of these consolidated statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Santa Barbara Bancorp and Subsidiaries

NOTE 1 SUMMARY OF SIGNIFICANT POLICIES

Nature of Operations

SANTA BARBARA BANCORP (the "Company") is a bank holding company organized under
the laws of California. Its principal subsidiary, Santa Barbara Bank & Trust
(the "Bank") provides a full range of commercial banking and trust management
services to individuals and business enterprises. Its offices are located in
Central and Southern Santa Barbara County and in Western Ventura County. The
banking services include making commercial, leasing, consumer, and residential
and non-residential real estate loans. Deposits are accepted for checking,
interest-bearing checking ("NOW"), money-market, savings, and time accounts. The
Bank offers safe deposit boxes, travelers checks, money orders, and cashiers
checks. The Bank also provides escrow and foreign exchange services to its
customers. A wide range of wealth management services are offered through the
Bank's Trust and Investment Services division. The name of the Company's other
subsidiary was changed during 1996 from SBBT Service Corporation to Sanbarco
Mortgage Company. While the subsidiary continues to provide correspondent
services to other local financial institutions, its primary business activities
are now directed to brokering commercial real estate loans and servicing those
loans for a fee.

Basis of Presentation

The accounting and reporting policies of the Company and its subsidiaries are in
accordance with generally accepted accounting principles ("GAAP") and conform to
practices within the banking industry. The consolidated financial statements
include the accounts of the Company and its subsidiaries, after eliminating
significant intercompany balances and transactions.

The preparation of consolidated financial statements in accordance with GAAP
requires Management to make certain estimates and assumptions which affect the
amounts of reported assets and liabilities as well as contingent assets and
liabilities as of the date of these consolidated financial statements. These
estimates and assumptions also affect the reported amounts of revenues and
expenses during the reporting period(s). Although Management believes these
estimates and assumptions to be reasonably accurate, actual results may differ.

Securities

In accordance with the provisions of Statement of Financial Accounting Standards
No. 115, Accounting for Certain Investments in Debt and Equity Securities ("SFAS
115"), the Company's securities are classified as held-to-maturity or
available-for-sale. Securities for which the Company has the positive intent and
ability to hold until maturity are classified as held-to-maturity. Securities
which might be sold prior to maturity because of interest rate changes, to meet
liquidity needs, or to better match the repricing characteristics of funding
sources are classified as available-for-sale. If the Company were to purchase
securities principally for the purpose of selling them in the near term for a
gain, they would be classified as trading securities. The Company holds no
securities that should be classified as trading securities.

The Company's securities classified as held-to-maturity are carried at amortized
historical cost. This is the purchase price increased by the accretion of
discounts or decreased by the amortization of premiums using the effective
interest method. Discount is accreted and premium is amortized over the period
to maturity of the related securities, or to an earlier call date, if
appropriate.

The interest income from securities that are classified as available-for-sale is
recognized in the same manner as for securities that are classified as held-to-
maturity, including the accretion of discounts and the amortization of premiums.
However, unlike the securities that are classified held-to-maturity, securities
classified available-for-sale are reported on the consolidated balance sheets
for the years ended December 31, 1996 and 1995 at their fair value. The net
unrecognized gain or loss for these securities is reported on the consolidated
balance sheets as a separate component of equity, net of the tax effect.

Loans, Fees, and Allowance for Loan and Lease Losses

Loans are carried at amounts advanced to the borrowers less principal payments
collected. Interest on loans is accrued on a simple interest basis, except where
serious doubt exists as to the collectibility of the loan, in which case the
accrual of income is discontinued and uncollected income is subtracted from
interest earned.

Loan origination and commitment fees, offset by certain direct loan origination
costs, are deferred and recognized over the contractual life of the loan as an
adjustment to the interest earned. The net unrecognized fees represent unearned
revenue, and they are reported as reductions of the loan principal outstanding,
or additions to the loan principal if the deferred costs are greater than
deferred fees.

The Company implemented Statements of Financial Accounting Standards No. 114,
Accounting by Creditors for Impairment of a Loan ("SFAS 114"), and No. 118,
Accounting by Creditors for Impairment of a Loan--Income Recognition and
Disclosures ("SFAS 118"), on January 1, 1995. The pronouncements apply to
certain types of loans made by the Company and require the Company to establish
a valuation allowance for any of those loans which are impaired. A loan is
identified as impaired when it is probable that interest and principal will not
be collected according with the contractual terms of the loan agreement.

The amount of the valuation allowance for impaired loans is determined by
comparing the recorded investment in each loan with its value measured by one of
three methods: (1) by discounting estimated future cash flows at the effective
interest rate; (2) by observing the loan's market price if it is of a kind for
which there is a secondary market; or (3) by valuing the underlying collateral.
A valuation allowance is established for any amount by which the recorded
investment exceeds the value of the impaired loan. If the value of the loan, as
determined by one of the above methods, exceeds the recorded investment in the
loan, no valuation allowance for that loan is established.

The provisions of SFAS 114 permit the valuation allowance for impaired loans to
be determined on a loan-by-loan basis or by aggregating loans with similar risk
characteristics. Because the number of loans classified as impaired is
relatively small and because special factors apply to each, the Company
determines the valuation allowance on a loan-by-loan basis.

When a borrower is not making payments as contractually required by the note,
the Company must decide whether it is appropriate to continue to accrue
interest. The criteria used in making this decision are very similar to the
definition of impairment. Therefore, the Company expects that most impaired
loans will be on nonaccrual status. As with other nonaccrual loans, any
uncollected interest for impaired loans is written off against interest income
from other loans of the same type in the current period and no further interest
income is recognized until all recorded amounts of principal are recovered in
full or until circumstances have changed such that the loan is no longer
regarded as impaired.

There are some loans that are classified as impaired because of doubt regarding
collectibility of interest and principal according to the contractual terms, but
which are both fully secured by collateral and are current in their interest and
principal payments. These impaired loans are not classified as nonaccrual.

The Company also provides an allowance for losses for (1) loans that are not
covered by SFAS 114 and SFAS 118; (2) loans which while covered by the
statements, are not identified as impaired; and (3) losses inherent in loans of
all types which have not been specifically identified as of the period end. The
valuation allowance determined in accordance with SFAS 114 and the allowance for
other loan losses are reported together as Allowance for Loan Loss in the
accompanying consolidated balance sheets as of December 31, 1996 and 1995 and in
Note 4. The Allowance for Loan Losses is maintained at a level considered
adequate to provide for losses that can reasonably be anticipated. However, the
allowance is based on estimates, and ultimate losses may vary from the current
estimates. These estimates are reviewed periodically and, as adjustments become
necessary, they are reported in earnings in the periods in which they become
known.

Premises and Equipment

Premises and equipment are stated at cost less accumulated depreciation and
amortization. Depreciation is charged against income over the estimated useful
lives of the assets, usually by the use of accelerated methods in the early
years, switching to the straight-line method in later years. Leasehold
improvements are amortized over the terms of the leases or the estimated useful
lives of the improvements, whichever is shorter. Generally, the estimated useful
lives of other items of premises and equipment are as follows:

Buildings and improvements 10-25 years
Furniture and equipment 5-7 years
Electronic equipment 3 years

Income Taxes

The Company is required to use the accrual method of accounting for tax return
purposes as well as for financial reporting purposes. However, there are several
items of income and expense which are recognized in different periods for tax
return purposes than for financial reporting purposes. Appropriate provisions
have been made in the financial statements for deferred taxes in recognition of
these temporary differences.

Trust Fees

Trust fees for customary services are generally based on the market value of
customer assets, and an estimate of the fees is accrued monthly. Fees for
unusual or infrequent services are recognized when the fee can be determined.

Earnings Per Share

Earnings per common share are based on the weighted average number of shares
outstanding during each year retroactively restated for stock dividends and
stock splits. The Board of Directors of the Company declared a 3-for-2 stock
split effective February 14, 1996. The numbers of shares and earnings per share
have been restated for the 3-for-2 stock split. The weighted average number of
shares outstanding used in computing earnings per share was 7,635,191 in 1996,
7,677,057 in 1995, and 7,646,839 in 1994. The only potential common stock
equivalents for the Company are shares issuable on the exercise of outstanding
options. Even if all of the outstanding stock options had been exercised, there
would be no material dilutive effect for any of the years presented and
therefore they have been excluded from the computation.

Statement of Cash Flows

For purposes of reporting cash flows, cash and cash equivalents include cash and
due from banks and Federal funds sold. Federal funds are sold for only one day
at a time.

Postretirement Health Benefits

The Company provides eligible retirees with postretirement health care and
dental benefit coverage. These benefits are also provided to the spouses and
dependents of retirees on a shared cost basis. Benefits for retirees and spouses
are subject to deductibles, copayment provisions, and other limitations. The
expected cost of such benefits is charged to expense during the years that the
employees render service.

Other Real Estate Owned

Other real estate owned ("OREO") represents real estate acquired through
foreclosure or deed in lieu of foreclosure. OREO is carried at the lower of the
outstanding balance of the loan before acquisition or the fair value of the OREO
less estimated costs to sell. If the outstanding balance of the loan is greater
than the fair value of the OREO less estimated disposal costs at the time of the
acquisition, the difference is charged-off against the Allowance for Loan
Losses. Any senior debt to which OREO is subject is included in the carrying
amount of the property and an offsetting liability is reported along with other
borrowings.

During the time the property is held, all related operating or maintenance costs
are expensed as incurred and additional decreases in the fair value are charged
to other operating expense in the period in which they become known.
Expenditures related to improvements are capitalized to the extent that they are
realizable through increases in the fair value of the properties. Increases in
the fair value may be recognized as reductions of OREO operating expense to the
extent that they represent recoveries of amounts previously written-down. Gains
in excess of the fair value at the time of foreclosure are recognized only when
the property is sold.

OREO that has been acquired through foreclosure or deed in lieu was $1,629,000
and $1,785,000 as of December 31, 1996 and 1995, respectively.

Stock Based Compensation

In October 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based
Compensation ("SFAS 123"). Under the accounting method that has been in effect
prior to the effective date of this statement, if options were granted at an
exercise price equal to the market value of the stock at the time of the grant,
no compensation expense was recognized. SFAS 123 establishes a second accounting
method for employee stock options under which issuers record compensation
expense over the period they are expected to be outstanding prior to exercise,
expiration, or cancellation. The amount of compensation expense to be recognized
over this term is the "fair value" of the options at the time of the grant as
determined by an option pricing model. The option pricing model attributes fair
value to the options based on the length of their term, the volatility of the
stock price in past periods, and other factors. Under this method, the Company
would recognize compensation expense regardless of whether the officer or
director exercised the options. In SFAS 123, the FASB has indicated its
preference for the new method. However, the statement permits entities to retain
the prior method. The Company believes that the prior method better reflects the
motivation for its issuance of stock options--that they are incentives for
future performance rather than compensation for past performance. Therefore, in
adopting SFAS 123 on January 1, 1996, the Company chose to continue to account
for its stock option plans in accordance with the prior method. SFAS 123
requires entities that elect to retain the prior method to present pro forma
disclosures of net income and earnings per share as if the new method had been
applied. The Company presents these disclosures in Note 16.

Reclassifications

Certain amounts in the 1995 and 1994 financial statements have been reclassified
to be comparable with classifications used in the 1996 financial statements.

NOTE 2 SECURITIES

A summary of securities owned by the Company at December 31, 1996 and 1995 is
shown at the top of the next page.

(in thousands) Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value

1996:
Held-to-Maturity:
U.S. Treasury
obligations $137,988 $ 178 $ (680) $137,486
U.S. Agency
obligations 52,268 351 (391) 52,228
State and municipal
securities 86,103 13,613 -- 99,716
276,359 14,142 (1,071) 289,430
Available for Sale:
U.S. Treasury
obligations 105,482 221 (60) 105,643
U.S. Agency
obligations -- -- -- --
Collateralized
mortgage
obligations 30,551 132 (135) 30,548
Equity Securities 5,488 -- -- 5,488
141,521 353 (195) 141,679
$417,880 $ 14,495 $(1,266) $431,109

1995:
Held-to-Maturity:
U.S. Treasury
obligations $ 97,528 $ 775 $ -- $ 98,303
U.S. Agency
obligations 51,826 983 (143) 52,666
State and municipal
securities 82,376 15,913 -- 98,289
231,730 17,671 (143) 249,258
Available for Sale:
U.S. Treasury
obligations 100,090 316 (122) 100,284
U.S. Agency
obligations 25,026 37 -- 25,063
Equity Securities 488 -- -- 488
125,604 353 (122) 125,835
$357,334 $ 18,024 $ (265) $375,093

In November, 1995, the FASB issued a guide to implementing Statement of
Financial Accounting Standards No. 115, Accounting for Certain Investments in
Debt and Equity Securities ("SFAS 115"). The guide permitted holders of debt
securities a onetime opportunity to reclassify securities from held-to-maturity
to available-for-sale without calling into question the holder's ability and
intent to hold to maturity any securities still classified as held-to-maturity.
Under this "window-of-opportunity," the Company reclassified securities with an
amortized cost of $144 million from held-to-maturity to available-for-sale. The
unrealized gains and losses on these securities totaled $683,000 and $986,000,
respectively. $94 million of these reclassified securities were sold prior to
December 31, 1995.

The amortized cost and estimated fair value of debt securities at December 31,
1996 and 1995, by contractual maturity, are shown in the table at the bottom of
the next page. Expected maturities will differ from contractual maturities
because issuers may have the right to call or prepay obligations with or without
call or prepayment penalties.

(in thousands) Held-to- Available-
Maturity for-Sale Total

1996:
Amortized cost:
In one year or less $ 49,070 $ 51,495 $100,565
After one year
through five years 185,092 84,538 269,630
After five years
through ten years 14,672 -- 14,672
After ten years 27,525 -- 27,525
Equity Securities -- 5,488 5,488
$276,359 $141,521 $417,880
Estimated market value:
In one year or less $ 48,825 $ 51,579 $100,404
After one year
through five years 184,495 84,612 269,107
After five years
through ten years 19,479 -- 19,479
After ten years 36,631 -- 36,631
Equity Securities -- 5,488 5,488
$289,430 $141,679 $431,109
1995:
Amortized cost:
In one year or less $ 32,414 $ 55,135 $ 87,549
After one year
through five years 151,560 69,981 221,541
After five years
through ten years 21,823 -- 21,823
After ten years 25,933 -- 25,933
Equity Securities -- 488 488
$231,730 $125,604 $357,334
Estimated market value:
In one year or less $ 32,522 $ 55,172 $ 87,694
After one year
through five years 158,803 70,175 228,978
After five years
through ten years 27,978 -- 27,978
After ten years 29,955 -- 29,955
Equity Securities -- 488 488
$249,258 $125,835 $375,093

During 1994 and 1995, the Company transferred four of its U.S. Agency securities
from available-for-sale classification to held-to-maturity. The securities, when
purchased in 1993 and 1994, had one or more call dates. The terms of the
securities provided that if they were not called, the interest rate on the
securities would increase, or "step up", and consequently the bonds are termed
"step bonds." At the time of purchase, interest rates were such that Management
expected that they would be called. When interest rates increased during 1994,
it would have been more expensive for the issuer to refinance the debt at
current interest rates and none of the securities were called. With
circumstances changed by the issuers' decision not to call, Management decided
to classify them as held-to-maturity. The notes were transferred at their fair
value. The fair value was $4,802,000 for the one transferred in 1994 and
$29,296,000 for the three transferred in 1995. The unrealized loss on the first
security at the time of transfer was $187,000 and for the three later ones was
$704,000. Under the provisions of SFAS 115, the sum of these amounts (net of tax
effect) remained in the special component of equity for unrealized gains and
losses on securities available-for-sale to be amortized over the remaining term
of the securities. The tax effect is reported as a portion of the deferred tax
asset in Note 8.

As of December 31, 1996, all four step bonds have reached their final steps. One
security has one remaining call date. Only the interest rate on these notes is
contingent, all principal is paid at maturity unless at a sooner call date.
There is no circumstance under which the interest rates paid on these notes will
decline.

The proceeds received from sales or calls of debt securities and the gross gains
and losses that were recognized for the years ended December 31, 1996 and 1995
are shown in the table at the top of the next page.

(in thousands) Gross Gross
Proceeds Gains Losses

1996
Held-to-maturity:
Calls $ 3,317 $ 55 $ --
Available-for-sale:
Sales $128,713 $ 6 $ (814)
Calls $ 761 $ -- $ --
1995
Held-to-maturity:
Calls $ 13,071 $ -- $ --
Available-for-sale:
Sales $ 93,342 $ 683 $ (760)
Calls $ 21,020 $ -- $ (22)
1994
Held-to-maturity:
Calls $ 3,295 $ -- $ --
Available-for-sale:
Sales $138,799 $ 5 $ (1,196)

The Company became a member of the Federal Reserve Bank in 1995. As a condition
of membership, the Company was required to purchase Federal Reserve Bank stock.
The shares purchased are reported as equity securities.

In 1996, the Company became a member of the Federal Home Loan Bank, purchasing
$5,000,000 in shares of stock which are reported as equity securities.

In 1996, the Company purchased some planned amortization class ("PAC")
securities with average lives of two to three years. PAC's are a particular
portion of a larger collateralized mortgage obligation ("CMO"). PAC bondholders
have priority over other classes in the CMO issue in receiving principal
payments from the underlying mortgage collateral. This priority is intended to
provide more assurance that principal payments occur at designated times. So
long as prepayments on the underlying mortgages are not significantly greater or
less than generally expected ranges, other investors holding different portions
of the CMO will be subject to the prepayment or extension risk. The Company
purchases PAC's in order to achieve yields higher than Treasury securities with
a minimum of increased risk. At December 31, 1996, the Company held $30.6
million of PAC's, all classified as available-for-sale, with a yield of 6.06%
and average maturity of 1.81 years. The Company's policy requires the underlying
collateral to be AAA rated, guaranteed either by the Federal National Mortgage
Association, the Federal Home Loan Mortgage Company, or the United States
Government.

Federal banking regulations require that all fixed rate CMO's held by financial
institutions, even short-term PAC's, be low volatility instruments. A PAC must
pass three "stress tests" to be considered a low volatility instrument: an
average life test, an average life sensitivity test, and a price sensitivity
test. Each of the PAC's passed the tests at both the time of purchase and at
December 31, 1996.

Securities with a book value of approximately $227,206,000 at December 31, 1996
and $286,547,000 at December 31, 1995 were pledged to secure public funds, trust
deposits and other borrowings as required or permitted by law.

NOTE 3 LOANS

The loan portfolio consists of the following:

(in thousands)
December 31
1996 1995

Real estate loans:
Residential $ 172,846 $142,143
Non-residential 199,203 179,272
Construction 10,245 20,846
Commercial, industrial, and agricultural 154,162 144,011
Home equity line 34,323 34,597
Consumer 43,944 28,494
Leases 58,526 --
Municipal tax-exempt obligations 8,658 7,573
Other 2,260 1,865
$ 684,167 $558,801

The amounts above are shown net of deferred loan origination, commitment, and
extension fees of $2,362,000 for 1996 and $2,139,000 for 1995. In December 1996,
the Company purchased a portfolio of fixed rate lease receivable contracts. The
purchase price was $60.4 million which included a premium of $1.4 million over
the outstanding contract amounts of $59 million. The premium will be amortized
over two and one-half years.

Refund Anticipation Loans

The Company makes tax refund anticipation loans. Taxpayers desiring to receive
their income tax refunds early borrow from the Company and the Internal Revenue
Service later sends the refund to the Company. The funds advanced are generally
paid within several weeks. Therefore, processing costs represent the major cost
of the loan rather than the cost of funds as for other loan types. Because of
their short duration, the Company can not recover the processing costs through
interest paid over the term of the loan. Consequently, the Company has a set fee
for this service which does not vary by the amount of funds advanced or the
length of time that the loan is outstanding. Nonetheless, the fees are reported
in the statements of income as interest income, and totaled $3,030,000 for 1996,
$3,253,000 for 1995, and $4,791,000 for 1994. The loans are all made during the
tax filing season of January through April of each year. Any loans for which
repayment has not been received after 90 days from the expected payment date are
charged off. Consequently, there were no refund anticipation loans included in
the above table of outstanding loans at December 31, 1996 or 1995.

Impaired Loans

The following table discloses information about the loans classified as impaired
under the provisions of SFAS 114 and SFAS 118 and the valuation allowance
related to them.

in thousands December 31
1996 1995

Loans identified as impaired $5,945 $13,295
Impaired loans for which a valuation
allowance has been determined $4,003 $13,295
Impaired loans for which no valuation
allowance has been determined $1,942 $ --
Amount of valuation allowance $1,196 $ 4,766
Average amount of recorded investment
in impaired loans for the year $6,060 $22,149
Interest recognized during the period
for loans identified as impaired
at year-end $ 269 $ 246
Interest received in cash during the
period for loans identified as
impaired at year-end $ 248 $ 221

The valuation allowance amounts disclosed above are included in the allowance
for loan loss reported in the balance sheets for December 31, 1996 and 1995 and
in the following note.

NOTE 4 ALLOWANCE FOR LOAN AND LEASE LOSSES

The following summarizes the changes in the allowance for loan and lease losses:

(in thousands) Year ended December 31
1996 1995 1994

Balance, beginning of year $ 12,349 $ 12,911 $ 10,067
Tax refund anticipation loans:
Provision for losses 1,100 2,863 2,890
Recoveries on
loans previously
charged-off 1,437 383 672
Loans charged-off (1,123) (4,402) (3,030)
All other loans:
Provision for losses 3,164 7,061 3,367
Recoveries on
loans previously
charged-off 2,790 733 458
Loans charged off (3,145) (7,200) (1,513)
Balance, end of year $ 16,572 $ 12,349 $ 12,911

The ratio of losses to total loans made from the tax refund anticipation loans
are higher than arise from other loans. For these loans, the provision for loan
loss, the loans charged-off, and the loans recovered are reported separately
from the corresponding amounts for all other loans.

NOTE 5 CASH AND DUE FROM BANKS

Included within cash and due from banks are the reserves that all depository
institutions are required by law to maintain on transaction deposits. The
average cash reserve balances required by the Federal Reserve Bank to be
maintained by the Bank were approximately $22.4 million in 1996 and $19.4
million in 1995.

NOTE 6 PREMISES AND EQUIPMENT

Premises and equipment consist of the following:

(in thousands) December 31
1996 1995

Land $ 1,282 $ 1,282
Buildings and improvements 4,334 4,412
Leasehold improvements 6,396 6,340
Furniture and equipment 13,495 12,843
Total cost 25,507 24,877
Accumulated depreciation
and amortization (18,672) (16,728)
Net book value $ 6,835 $ 8,149

Depreciation and amortization on fixed assets included in other operating
expenses totaled $2,067,000 in 1996, $2,041,000 in 1995, and $1,614,000 in 1994.

NOTE 7 DEPOSITS

Deposits and the related interest expense consisted of the following:

Balance as of December 31: 1996 1995

Non interest bearing deposits $ 178,511 $ 158,122
Interest bearing deposits:
NOW accounts 143,191 148,027
Money market
deposit accounts 438,558 427,198
Other savings deposits 88,104 94,124
Time certificated of
$100,000 or more 95,177 76,438
Other time deposits 169,542 150,111
Total deposits $1,113,083 $1,054,020

Interest expense for the
Year ended December 31: 1996 1995 1994

Interest on deposits:
NOW accounts $ 1,494 $ 1,476 $ 1,294
Money market
deposit accounts 15,998 16,736 10,387
Other savings deposits 2,141 2,347 3,033
Time certificated of
$100,000 or more 3,917 2,974 2,366
Other time deposits 9,456 8,502 6,928
Total interest expense
on deposits $33,006 $32,035 $24,008

NOTE 8 INCOME TAXES

The provisions (benefits) for income taxes related to operations and the tax
benefit related to stock options that is credited directly to shareholders'
equity are shown in the table at the top of the next page.

(in thousands) Year ended December 31
1996 1995 1994

Federal:
Current $ 6,385 $1,952 $ 3,962
Deferred (2,013) 339 (1,312)
4,372 2,291 2,650
State:
Current 3,076 1,238 2,280
Deferred (495) 456 (412)
2,581 1,694 1,868
Total tax provision $ 6,953 $3,985 $ 4,518

Reduction in taxes payable
associated with exercises
of stock options $(1,044) $ (254) $ (326)

The current provision for income taxes includes credits of $319,000, $41,000 and
$495,000 related to realized net securities losses for 1996, 1995, and 1994
respectively.

Although not affecting the total provision, actual income tax payments may
differ from the amounts shown as current as a result of the final determination
as to the timing of certain deductions and credits.

The total tax provision differs from the Federal statutory rate of 34 percent
for the reasons shown in the table below.

(in thousands) Year ended December 31
1996 1995 1994

Federal statutory tax rate 34.0% 34.0% 34.0%
Federal surcharge tax rate 0.3% -- --
Interest on securities exempt from
Federal taxation (10.6%) (16.4%) (14.4%)
State income taxes, net of Federal
income tax benefit 6.7% 7.8% 7.1%
ESOP dividends deductible as
expense for tax purposes (1.0%) (1.0%) (0.8%)
Other 1.3% 3.3% --
Actual tax provision 30.7% 27.7% 25.9%

Because certain items of income and expense are not recognized in the same year
in the financial statements of the Company as in its Federal and California tax
returns, deferred assets and liabilities are created. As of December 31, 1996
and 1995, included within other assets on the balance sheet are net deferred tax
assets of $8,711,000 and $6,334,000, respectively. The net deferred tax assets
as of December 31, 1996 and 1995 and the change in the tax effect of the
principal temporary differences for the year ending that date are disclosed in
the table at the top of the next page.

(in thousands) Comp- Tax Comp- Tax Comp-
onents Effect onents Effect onents
1996 1996 1995 1995 1994

Deferred tax assets:
Allowance for loan loss $ 6,708 $2,082 $4,626 $(740) $5,366
State taxes 1,077 627 450 (317) 767
Loan fees 363 (81) 444 (578) 1,022
Depreciation 1,167 211 956 265 691
Post retirement benefits 633 46 587 86 501
Other real estate owned 14 14 -- -- --
Nonaccrual interest 314 94 220 191 29
Other 18 (213) 231 190 41
10,294 2,780 7,514 (903) 8,417
Valuation allowance -- -- -- -- --
Total deferred tax assets 10,294 2,780 7,514 (903) 8,417

Deferred tax liabilities:
Loan costs 647 142 505 105 400
Bond accretion 433 (66) 499 (64) 563
Federal effect of state asset 466 185 281 (171) 452
Other 33 11 22 22 --
Total deferred tax liabilities 1,579 272 1,307 (108) 1,415
Net deferred tax asset
before unrealized gains and
losses on securities 8,715 2,508 6,207 (795) 7,002
Unrealized gain on securities 4 -- --
Unrealized loss on securities -- 127 1,064
Net deferred tax asset $ 8,711 $2,508 $6,334 $(795) $8,066

The change in the tax effect of the unrealized loss on securities available for
sale is recorded directly to equity, rather than being included as a component
of deferred tax expense or benefit. Hence there is no entry in the columns
labeled "Tax Effect" in the table above for the change.

Management believes a valuation allowance is not needed to reduce any deferred
tax asset because there is sufficient taxable income within the carryback
periods or expected to be generated from operations in the future to realize all
material amounts.

NOTE 9 SHAREHOLDERS' EQUITY

The Company has four stock option plans. These plans offer key employees and
directors an opportunity to purchase shares of the Company's common stock. The
first is the Directors Stock Option Plan established in 1996. Only non-qualified
options may be granted under this plan. The second is the Restricted Stock
Option Plan for employees established in January, 1992. Either incentive or
non-qualified options may be granted under this plan. Stock acquired by the
exercise of options granted under both plans may not be sold for five years
after the date of the grant or two years after the date options are exercised,
whichever is later. The third and fourth plans were established in 1983 and 1986
for employees and directors, respectively. All options, which were non-qualified
options, approved under these plans have been granted and the plans are active
now only for the exercise of options held by employees and directors.

Information is presented at the top of the next page concerning the stock option
plans as of December 31, 1996, 1995, and 1994 (adjusted for stock splits and
stock dividends) at the top of the next page.

Options Price Ranges

1996
Granted 290,676 $19.75 to $28.50
Exercised 182,293 $9.21 to $19.83
Cancelled and expired 1,900 $10.33 to $23.13
Outstanding at end of year 772,998 $9.21 to $28.50
2/26/97 to
Range of expiration dates 5/20/2002
Exercisable at end of year 405,364 $9.21 to $25.63
Shares available for future grant 304,142

1995
Granted 92,394 $16.33 to $19.83
Exercised 87,051 $9.52 to $17.00
Cancelled and expired 18,091 $10.33 to $16.67
Outstanding at end of year 666,515 $9.21 to $19.83
Exercisable at end of year 411,883 $9.21 to $19.00
Shares available for future grant 243,458

1994
Granted 84,702 $14.00 to $19.00
Exercised 149,839 $9.52 to $14.00
Cancelled and expired 67,095 $4.88 to $17.08
Outstanding at end of year 679,263 $9.21 to $19.00
Exercisable at end of year 358,677 $9.21 to $17.00

All options outstanding were granted with an option price set at 100% of the
market value of the Company's common stock on the date of the grant. The grants
for most of the employee options specify that they are exercisable in cumulative
20% annual installments and will expire five years from the date of grant. The
Board has granted some options which are exercisable in cumulative 10% annual
installments and expire ten years from the date of grant. The options granted
under the Directors' Stock Option Plan are exercisable after six months.

The option plans permit employees and directors to pay the exercise price of
options they are exercising with shares of Company stock they already own. The
owned shares are surrendered to the Company at current market value. Shares with
a current market value of $2,099,000, $824,000, and $1,011,000 were surrendered
in the years ended December 31, 1996, 1995, and 1994, respectively. These
surrendered shares are included with other retired shares in the Consolidated
Statements of Changes in Shareholders' Equity.

In January 1997, the Company offered to purchase approximately 6.6% of the then
outstanding shares of common stock from its shareholders at a price of $30.00,
net to the seller. Terms of the tender offer allowed for the Company to purchase
500,000 or fewer shares of common stock duly tendered by February 21, 1997. The
offer was not conditioned on any minimum number of shares being tendered. As of
February 21, 1997, approximately 65,000 shares of stock had been tendered for
retirement at a cost to the Company of $1,950,000.

NOTE 10 SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE AND FEDERAL FUNDS SOLD

The Company enters into certain transactions the legal form of which is a sale
of securities under an agreement to repurchase at a later date at a set price.
The substance of these transactions is a secured borrowing by the Company. The
Bank also purchased Federal funds from correspondent banks.The following
information is presented concerning these transactions:

Repurchase Agreements
(amounts in thousands) Year ended December 31
1996 1995 1994

Weighted average interest
rate at year-end 4.29% 4.53% 4.57%
Weighted average interest
rate for the year 4.40% 5.01% 3.26%
Average outstanding
for the year $ 25,428 $ 10,153 $ 9,355
Maximum outstanding at any
month-end during the year $ 31,142 $ 21,900 $ 12,525
Amount outstanding at
end of year $ 23,155 $ 21,900 $ 3,461

Federal Funds Purchased
(amounts in thousands) Year Ended December 31
1996 1995 1994

Weighted average interest
rate at year-end 5.75% 5.75% 5.75%
Weighted average interest
rate for the year 5.14% 5.79% 4.01%
Average outstanding
for the year $15,142 $ 16,649 $ 14,276
Maximum outstanding at any
month-end during the year $35,271 $ 29,416 $ 21,206
Amount outstanding at
end of year $10,335 $ 29,416 $ 6,026

NOTE 11 LONG-TERM DEBT AND OTHER BORROWINGS

In 1996, the Company became a member of the Federal Home Loan Bank ("FHLB"). As
part of the Company's asset and liability management strategy, $38,000,000 of
fixed rate term advances were borrowed from the FHLB and utilized to finance the
acquisition of the leases mentioned in Note 3.

Also included in other borrowings are $1,000,000 of Treasury Tax and Loan demand
notes issued to the U.S. Treasury and miscellaneous other borrowings such as the
senior debt on other real estate owned as explained in Note 1. There was
$210,000 in such senior debt at December 31, 1995, but none at December 31,
1996.

During the course of 1995, the Company borrowed funds for liquidity purposes
from the discount window at the Federal Reserve Bank, but there were no such
borrowings in 1996.

NOTE 12 OTHER OPERATING INCOME AND EXPENSE

The largest items included in other operating income related to service charges,
commissions, and fees, are listed in the table below. The refund transfer fees
are earned for the electronic transmission of tax refunds to customers or to
their tax preparer to facilitate earlier receipt of the refund.

Of the amounts included in other operating expense, the largest items in 1996
were credit card clearing fees, software expense and consultant expense.
Consultants include the Company's independent accountants, attorneys, and other
management consultants used for special projects. In 1994, FDIC deposit
insurance premiums were the largest item. During 1995, however, the FDIC Bank
Insurance Fund reached the statutory maximum and the FDIC reduced the premium
expense for the second half of the year to a very low rate and refunded the
excess paid in the first half of the year. For 1996 the FDIC premium was also at
the statutory minimum of $2,000.

The amounts for these income and expense categories included in the statements
of income are as follows:

(in thousands) Year ended December 31
1996 1995 1994

Income items:
Draft processing $2,619 $2,146 $2,011
Refund transfer fees 1,243 1,629 24
ATM fees 351 270 191
Loan broker fees 282 300 --

Expense items:
Credit card clearing fees $1,763 $1,159 $1,575
Software expense 1,105 892 781
Consultant expense 945 803 702
Telephone and wires 760 833 368
Charitable contributions 740 462 23
Postage and freight 671 661 580
Supplies and sundries 624 672 599
FDIC assessments 2 45 1,982

NOTE 13 EMPLOYEE BENEFIT PLANS

The Company has two defined-contribution profit sharing plans. The first is the
Incentive and Investment and Salary Savings Plan. This plan has two components.
The first component, the Incentive and Investment Plan, was established in 1966,
and provides for contributions by the Company in accordance with a formula. The
formula defines the contribution as 10% of pre-tax profits prior to this
employer contribution, reduced by the matching contributions paid to the Salary
Savings component of the Plan and the contributions made to the ESOP.

The other component, the Salary Savings Plan, is authorized under Section 401(k)
of the Internal Revenue Code. An employee may defer up to 10% of pre-tax salary
in the plan up to a maximum dollar amount set each year by the Internal Revenue
Service. The Company matches 100% of the first 3% of the employee's deferral and
50% of the next 3%, but not more than 4.5% of the employee's total compensation.
In 1996, 1995, and 1994 the employer's matching contributions were $663,000,
$597,000, and $554,000, respectively.

The second plan is the ESOP, which was initiated in January 1985. As of December
31, 1996, the ESOP held 713,162 shares at an average cost of $9.10 per share.

Total contributions to the profit sharing plans were $2,259,000 in 1996,
$1,294,000 in 1995, and $1,884,000 in 1994.

NOTE 14 DISCLOSURES ABOUT THE FAIR VALUE OF FINANCIAL INSTRUMENTS

Generally accepted accounting principals requires companies to disclose the fair
value of those financial instruments for which it is practicable to estimate
that value and the methods and significant assumptions used to estimate those
fair values. This must be done irrespective of whether or not the instruments
are recognized on the balance sheets of the Company. In the case of financial
instruments for which it is not practicable to estimate the fair value, the
Company is required to disclose information pertinent to estimating the fair
value such as interest rates and maturity, and also state the reasons why it is
not practicable to estimate fair value.

In Statement of Financial Accounting standards No. 107, Disclosures about Fair
Market Value of Financial Instruments ("SFAS 107"), the FASB states that the
"fair values of financial instruments depict the market's assessment of the
present value of net future cash flows directly or indirectly embodied in them,
discounted to reflect both current interest rates and the market's assessment of
the risk that the cash flows will not occur." The information about fair value
is said to better enable "investors, creditors, and other users to assess the
consequences of an entity's investment and financing strategies, that is, to
assess its performance."

Nonetheless, there are several factors which users of these financial statements
should keep in mind regarding the fair values disclosed in this note. First, the
statement acknowledges that there are uncertainties inherent in the process of
estimating the fair value of financial instruments. Secondly, the statement
covers only financial instruments, not other assets like premises, the fair
value of which might differ significantly from the amounts at which they are
carried in an entity's financial statements. Thirdly, the Company must exclude
from its estimate of the fair value of deposit liabilities any consideration of
its on-going customer relationships which provide stable sources of investable
funds. Lastly, the statement does not address means of evaluating an entity's
performance in areas other than the management of financial instruments, for
example the ability to generate noninterest income and the control of
noninterest expense. For these reasons, users are advised not to regard the
disclosure of the fair market value of financial instruments as in any way
equivalent to a valuation of the Company as a whole.

The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate that
value:

Cash and Cash Equivalents

The face value of cash and federal funds sold are their fair value.

Securities and Bankers' Acceptances

For securities and bankers' acceptances, fair value equals quoted market price,
if available. If a quoted market price is not available, fair value is estimated
using quoted market prices for similar securities. Because of the implementation
of SFAS 115 as explained in Note 1, a portion of the securities portfolio is
carried at fair value.

Loans

The fair value of loans is estimated by discounting the future contractual cash
flows using the current rates at which similar loans would be made to borrowers
with similar credit ratings and for the same remaining maturities. These
contractual cash flows are adjusted to reflect estimates of uncollectible
amounts.

Deposit Liabilities

The fair value of demand deposits, money market accounts, and savings accounts
is the amount payable on demand as of December 31 of each year. The fair value
of fixed-maturity certificates of deposit is estimated using the rates currently
offered for deposits of similar remaining maturities.

Other Borrowings

For short-term instruments, the carrying amount is a reasonable estimate of
their fair value. For FHLB advances, the only component not considered
short-term, the fair value is estimated using rates currently quoted by the FHLB
for advances of similar remaining maturities.

Unrecognized Financial Instruments

The fair value of guarantees and letters of credit is based on fees currently
charged for similar agreements. The Company seldom charges fees for loan
commitments. The Company does not believe that these commitments have a fair
value within the context of SFAS 107 because generally fees are not being
charged, the use of the commitment is at the option of the potential borrower,
and the commitments are being written at rates comparable to current market
rates.

The Company has no financial instruments covered by the statement for which it
is not practicable to estimate a fair value.

The carrying amount and estimated fair values of the Company's financial
instruments as of December 31, 1996 and 1995 are as follows:

(in thousands) Carrying Fair
Amount Value

As of December 31, 1996
Financial assets:
Cash $ 51,181 $ 51,181
Federal funds sold 70,000 70,000
Securities available-for-sale 141,679 141,679
Securities held-to-maturity 276,359 289,430
Bankers' acceptances 64,732 64,711
Loans 667,595 664,520
Total financial assets $1,271,546 $1,281,521

Financial liabilities:
Deposits $1,113,083 $1,114,471
Repurchase agreements,
Federal funds purchased,
and other borrowings 72,490 72,393
Total financial liabilities $1,185,573 $1,186,864

Unrecognized financial instruments:
Commitments to extend credit -- --
Standby letters of credit -- 158

As of December 31, 1995 Financial assets:
Cash $ 74,746 $ 74,746
Federal funds sold 65,000 65,000
Securities available-for-sale 125,835 125,835
Securities held-to-maturity 231,730 249,258
Bankers' acceptances 139,294 139,302
Loans 546,452 549,640
Total financial assets $1,183,057 $1,203,781

Financial liabilities:
Deposits $1,054,020 $1,057,495
Repurchase agreements,
Federal funds purchased,
and other borrowings 52,526 52,526
Total financial liabilities $1,106,546 $1,110,021

Unrecognized financial instruments:
Commitments to extend credit -- --
Standby letters of credit -- 167

NOTE 15 OTHER POSTRETIREMENT BENEFITS

The Company recognizes the net present value of the estimated future cost of
providing health insurance benefits to retirees as those benefits are earned
rather than when paid. To formalize the terms for the provision of these
benefits, the Company established the Retiree Health Plan.

Under the provisions of the Retiree Health Plan, all eligible retirees may
purchase health insurance coverage through the Company. The cost of this
coverage is that amount which the Company pays under the basic coverage plan
provided for current employees. Based on a formula involving date of retirement,
age at retirement, and years of service prior to retirement, the Plan provides
that the Company will contribute a portion of the cost for the retiree, varying
from 60% to 100% at the time the employee retires, with the stipulation that the
cost of the portion paid by the Company shall not increase by more than 5% per
year.

Statement of Financial Accounting Standards No. 106, Employers' Accounting for
Postretirement Benefits Other Than Pensions ("SFAS 106") defines the Company's
accumulated postretirement benefit obligation ("APBO"). This obligation is the
actuarial net present value of the obligation for fully eligible plan
participants' expected postretirement benefits plus the portion of the expected
postretirement benefit obligation for other active plan participants attributed
to service as an employee.

This obligation must be remeasured each year because it changes with each of the
following factors: 1) the number of employees working for the Company; 2) the
average age of the employees working for the Company; 3) increases in expected
health care costs; 4) the amount of earnings anticipated on plan assets; and 5)
prevailing interest rates. In addition, because the obligation is measured on a
net present value basis, the passage of each year brings the eventual payment of
benefits closer, and therefore causes the obligation to increase. The following
table shows the amount of the APBO, the fair value of the plan assets held by
the Retiree Health Plan, and the accrued postretirement benefit cost as of
December 31, 1996 and 1995 :

(in thousands)
1996 1995

Retirees eligible for benefits $ (802) $ (805)
Dependents eligible for benefits (375) (420)
Active employees fully eligible (592) (645)
Active employees not fully
eligible (1,384) (1,409)
Accumulated postretirement
benefit obligation (3,153) (3,279)
Fair value of plan assets 3,208 2,560
Accumulated postretirement
benefit obligation (in excess of)
less than plan assets 55 (719)
Unrecognized prior service cost 5 6
Unrecognized net loss (317) 278
Accrued postretirement benefit cost $ (257) $ (435)

The accrued postretirement benefit costs represent that portion of the APBO
required to be accrued by the provisions of SFAS 106 less an offsetting amount
provided by assets held in trust for the payment of benefits. Costs of $257,000
and $435,000 are included within accrued interest payable and other liabilities
in the consolidated balance sheets for December 31, 1996 and 1995, respectively.

Each year the Company is required to recognize a portion of the change in the
APBO. This portion is called the net periodic postretirement benefit cost (the
"NPPBC"). The NPPBC, included with the cost of other benefits in the
Consolidated Statements of Income, is made up of several components as shown in
the next table.

(in thousands) Year Ended December 31
1996 1995 1994

Service cost $ 200 $ 148 $ 252
Interest cost 228 185 231
Return on assets (175) (120) (149)
Amortization cost 1 -- 56
Net period postretirement cost $ 254 $ 213 $ 390

The first component is service cost, which is the net present value of the
portion of the expected postretirement benefit obligation for active plan
participants attributed to service for that year. The second is interest cost,
which is the increase in the accumulated postretirement benefit obligation that
results from the passage of another year. That is, because the benefit
obligation for each employee is one more year closer to being paid, the net
present value increases. The third component, return on assets, is the income
earned on any investments that have been set aside to fund the benefits. This
return is an offset to the other components.

The fourth component, amortization cost, arises because significant estimates
and assumptions about interest rates, trends in health care costs, employee
turnover, and earnings on assets are used in measuring the APBO each year.
Actual experience may differ from the estimates and assumptions may change. Both
of these cause increases or decreases in the APBO or the value of plan assets.
In the last several years, changes in the discount rate used in measuring the
APBO at one year-end and the NPPBC for the next year have had significant impact
on the APBO. The following table discloses the discount rates that have been and
will be used.

Discount For Measuring the For Determining the NPPBC for
Rate Used APBO at December 31 Year Ended December 31

7.12% 1993 1994
8.73% 1994 1995
7.06% 1995 1996
7.22% 1996 1997

The discount rate is selected each year by reference to the current rates of
investment grade corporate bonds. Higher discount rates lower the APBO at the
end of the year and the NPPBC to be recognized for the following year, while
lower rates raise both.

Rather than the whole amount of the change in the APBO being recognized in the
year after it arises, SFAS 106 provides for gains or losses arising from these
changes in experience and/or assumptions to be recognized through amortization
over the average remaining service lives of the employees. Amortization over
time is used because many of these changes may be partially or fully reversed in
subsequent years as further changes in experience and/or assumptions occur.

At the time it implemented the statement, the Company fully recognized the net
present value of the benefits earned by employees for prior service. Had the
Company not recognized this amount, a portion of it would be included in the
NPPBC as a fifth component.

Among the significant estimates or assumptions used in determining the APBO are
the rate of earnings on assets which will be available to offset the other
components and the annual increase in medical insurance premiums. While the
discount rate used in the present value computation of the APBO has fluctuated
with market rates, the Company has continued to use 7.0% as its estimate of the
long-term rate of return on plan assets. As noted above, the Retiree Health Plan
provides for the Company's contribution for insurance premiums to be limited to
an annual increase of 5%. Should insurance premiums increase at a higher rate,
the retirees will need to contribute a larger portion of the total premium cost.
Therefore, 5% has been set as the assumed cost trend rate for health care.
Because of this limitation, an increase in the actual cost of health care will
have no impact on the APBO.

Under the provisions of SFAS 106, employers are allowed wide discretion as to
whether and how they set aside funds to meet the obligation they are
recognizing. Under the provisions of the current Internal Revenue Code, only a
portion of this funding may be deducted by the employer. The funded status of
the plan is shown in a previous table as the amount by which the APBO is in
(excess of) or less than plan assets.

The Company established a Voluntary Employees' Beneficiary Association ("VEBA")
to hold the assets that will be used to pay the benefits for participants of the
plan other than key executive officers. Most of the plan assets have been
invested in insurance policies on the lives of various employees of the Company.

The current funding policy of the Company is to contribute assets to the VEBA at
least sufficient to pay the costs of current medical premiums of retirees and
the costs of the life insurance premiums. Proceeds from the life insurance
policies payoffs will fund benefits and premiums in the future. As of December
31, 1996, the VEBA was overfunded by $370,000. The APBO related to the key
employees of $315,000 is totally unfunded.

NOTE 16 STOCK-BASED COMPENSATION

In implementing the provisions of SFAS 123 as described in Note 1, the Company
has retained the allowable alternative method of accounting for the issuance of
stock options to employees. Had the Company implemented the provisions of SFAS
123 by adopting the new method of recognizing compensation expense over the
expected life of the options based on their fair market value as computed by the
binomial option model, the Company's pro forma salary expense, net income, and
earnings per share for the years ended December 31, 1996 and 1995 would have
been as follows:

(in thousands) Year ended December 31
1996 1995

Salary expense
As reported $20,706 $18,402
Pro forma $21,144 $18,483

Net income
As reported $15,665 $10,415
Pro forma $15,412 $10,368

Earnings per share
As reported $ 2.05 $ 1.36
Pro forma $ 2.02 $ 1.35

Under the method implemented by the Company, no compensation expense is recorded
if stock options are granted to employees at an exercise price equal to the
market value of the stock at the time of the grant. The Company believes that
this method better reflects the motivation for issuance of stock options as
incentives for future performance rather than compensation for past performance.

NOTE 17 REGULATORY CAPITAL REQUIREMENTS

The Company and the Bank are subject to various regulatory capital requirements
administered by the federal banking agencies. Failure to meet minimum capital
requirements could cause the regulators to initiate certain mandatory, and
possibly additional discretionary, actions that, if undertaken, could have a
direct material effect on the Company's financial statements.

The table below sets forth the Company's actual capital amounts and ratios and
the minimum amounts and ratios that the Company and the Bank are required to
maintain which have been established by regulation to ensure capital adequacy.
In addition, the table includes the minimum amounts and ratios required to meet
the regulatory standards of "well capitalized".

Minimum Amounts
and Ratios Minimum Amounts
(in thousands) or Capital and Ratios to be Well
Actual Adequacy Purposes: Capitalized:
Amount Ratio Amount Ratio Amount Ratio

As of December 31, 1996
Total Tier I & Tier II Capital
(to Risk Weighted Assets) $ 116,427 16.5% $56,562 8.0% $70,703 10.0%
Tier I Capital
(to Risk Weighted Assets) $ 107,494 15.2% $28,281 4.0% $42,422 6.0%
Tier I Capital
(to Average Assets) $ 107,494 9.0% $47,563 4.0% $59,454 5.0%

Risk Weighted Assets $ 707,026
Average Assets $1,189,084

As of December 31, 1995
Total Tier I & Tier II Capital
(to Risk Weighted Assets) $ 108,938 17.7% $49,308 8.0% $61,636 10.0%
Tier I Capital
(to Risk Weighted Assets) $ 101,176 16.4% $24,654 4.0% $36,981 6.0%
Tier I Capital
(to Average Assets) $ 101,176 9.4% $43,209 4.0% $54,011 5.0%

Risk Weighted Assets $ 616,355
Average Assets $1,080,228

Tier I and Tier II (or total) capital as well as risk-weighted assets are all
defined in the regulations, however, the capital amounts and classifications are
also subject to qualitative judgments by the regulators about components, risk
weightings, and other factors.

As of December 31, 1996, the Company is well capitalized under the regulatory
framework for capital adequacy. The capital amounts and ratios for the Bank are
virtually identical.

NOTE 18 COMMITMENTS AND CONTINGENCIES

The Company leases several office locations and substantially all of the office
leases contain multiple five-year renewal options and provisions for increased
rentals, principally for property taxes and maintenance. As of December 31,
1996, the minimum rentals under non-cancelable leases for the next five years
and thereafter are as follows:

(in thousands)
Year ended Non-cancelable
December 31 lease expense

1997 $ 2,325
1998 2,348
1999 1,942
2000 1,545
2001 1,378
Thereafter 3,810
$ 13,348

Total net rentals for premises included in other operating expenses are
$2,351,000 in 1996, $2,127,000 in 1995, and $1,801,000 in 1994.

The Company is currently leasing space from a partnership in which a director
has an interest. The original terms of the lease were negotiated with the
assistance of two independent, outside appraisers, and the lease was approved by
the Board of Directors of the Company. The Company exercised its option to renew
the lease in 1989. In 1994, the Company renegotiated the lease to receive other
rights such as additional lease option periods and a right of first refusal to
purchase the building if it is offered for sale. The nominal monthly rent
increased to obtain these benefits, but the actual outlay was reduced in order
for the Company to be reimbursed for advancing the partnership's share of
seismic improvements made to the leased property in 1994. The above schedule of
lease commitments includes the terms of the current agreement. Management
believes the terms of the revised lease are comparable with terms which would be
available with unaffiliated third parties and the terms were also approved by
the Company's Board of Directors.

In the normal course of business to meet the financing needs of its customers,
the Company is a party to financial instruments with "off-balance sheet" risk.
These financial instruments consist of commitments to extend credit and standby
letters of credit.

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. The Company
does not usually charge fees in connection with loan commitments. Standby
letters of credit are conditional commitments issued by the Company to guarantee
the performance of a customer to a third party. The Company charges a fee for
these letters of credit.

The standby letters of credit involve, to varying degrees, exposure to credit
risk in excess of the amounts recognized in the consolidated statements of
financial position. This risk arises from the possibility of the failure of the
customer to perform according to the terms of a contract that would cause a draw
on the standby letter of credit by a third party. To minimize the risk, the
Company uses the same credit policies in making commitments and conditional
obligations as it does for on-balance sheet instruments. The decision as to
whether collateral should be required is based on the circumstances of each
specific commitment or conditional obligation. Because of these practices,
Management does not anticipate that any significant losses will arise from such
draws.

Changes in market rates of interest for those few commitments and undisbursed
loans which have fixed rates of interest represent a possible cause of loss by
the contractual requirement to lend money at a rate that is no longer as great
as the market rate at the time the loan is funded. To minimize this risk, if
rates are quoted in a commitment, they are generally stated in relation to the
Company's base lending rate which varies with prevailing market interest rates.
Fixed-rate loan commitments are not usually made for more than three months.

The maximum exposure to credit risk is represented by the contractual notional
amount of those instruments. As of December 31, 1996 and 1995, the contractual
notional amount of these instruments are as follows:

(in thousands) December 31
1996 1995

Standby letters of credit $ 9,202 $ 12,623
Loan commitments 26,083 46,996
Undisbursed loans 15,588 12,793
Unused consumer credit lines 54,904 53,759
Unused credit lines 82,837 73,779
$ 188,614 $ 199,950

Since many of the commitments are expected to expire without being drawn upon,
the amounts in the table do not necessarily represent future cash requirements.

The Company has concentrated its lending activity almost exclusively with
customers within Santa Barbara and Ventura Counties. The business customers are
in widely diversified industries, and there is a large consumer component to the
portfolio. One significant concentration in the loan portfolio is represented by
loans collateralized by real estate; the nature of this collateral, however, is
quite varied: 1-4 family residential, multifamily residential, and commercial
buildings of various kinds. As the economy along the central coast shows
vitality, the underlying value of real estate continues to improve. The Company
has considered this concentration in evaluating the adequacy of the allowance
for loan loss.

The Company has a trust department that has fiduciary responsibility for the
assets that it holds on behalf of its trust customers. These assets are not
owned by the Company and accordingly are not reflected in the accompanying
consolidated balance sheets.

The Company is involved in various litigation of a routine nature which is being
handled and defended in the ordinary course of the Company's business. In the
opinion of Management, the resolution of this litigation will not have a
material impact on the Company's financial position.

In December 1996, the Company entered into a definitive agreement whereby it
will acquire all of the outstanding shares of First Valley Bank, Lompoc, and
merge it into Santa Barbara Bank & Trust. The agreement provides for First
Valley Bank shareholders to receive $58.00 in cash for each of the 450,000 First
Valley Bank shares outstanding for a total price of $26.1 million. As of
December 31, 1996, First Valley Bank had assets of $125,163,000. Subject to
regulatory approval and the approval of First Valley Bank shareholders, the
transaction is anticipated to close at the end of the first quarter of 1997. If
the agreement is terminated before closing, either party to the agreement could
be subject to a $1.3 million termination fee. If the transaction is not
completed by March 31, 1997, the Company will be subject to a $4,950 per day
penalty.

NOTE 19 SANTA BARBARA BANCORP

Santa Barbara Bancorp is the parent company and sole owner of the Bank. However,
there are legal limitations on the amount of dividends which may be paid by the
Bank to the Company. At December 31, 1996, the Bank could have declared
dividends of approximately $22.5 million to the Company. Federal law also
restricts the Bank from extending credit to the Company by making any such
extensions of credit subject to strict collateral requirements. The condensed
financial statements of the parent company only are presented on this and the
following page.

SANTA BARBARA BANCORP
(Parent Company Only)
Balance Sheets
(in thousands)
December 31
1996 1995

Cash $ 667 $ 346
Investment in and advances to subsidiaries 108,327 101,723
Note receivable 51 54
Other assets 88 5
Total assets $109,133 $102,128

Dividends payable $ 1,526 $ 1,131
Other liabilities 14 --
Total liabilities 1,540 1,131
Common stock 5,059 5,119
Surplus 35,415 39,191
Unrealized gain (loss) on
securities available for sale 2 (179)
Retained earnings 67,117 56,866
Total shareholders' equity 107,593 100,997
Total liabilities and shareholders' equity $109,133 $102,128

SANTA BARBARA BANCORP
Parent Company Only)
Statements of Income
(in thousands) Year ended December 31
1996 1995 1994

Equity in earnings of subsidiaries:
Undistributed $ 6,398 $ 5,680 $10,356
Dividends 9,182 4,686 2,500
Interest income 6 6 7
Miscellaneous expenses (294) (131) (153)
Income tax benefit 373 174 241
Net income $15,665 $10,415 $12,951

SANTA BARBARA BANCORP
(Parent Company Only)
Statements of Cash Flows Year ended December 31
(in thousands) 1996 1995 1994

Increase (decrease) in cash and
cash equivalents:
Cash flows from operating activities:
Interest received $ 5 $ 6 $ 7
Cash paid to suppliers and others (280) (131) (153)
Income tax benefit 291 174 241
Net cash provided by
operating activities 16 49 95

Cash flows from investing activities:
Net decrease in loans
made to customers 3 1 1
Capital contribution to subsidiary (25) --
Distributed earnings of subsidiaries 9,182 4,686 2,500
Net cash provided by
investing activities 9,160 4,687 2,501

Cash flows from financing activities:
Proceeds from issuance of common stock 1,146 454 1,187
Payments to retire common stock (4,982) (953) --
Dividends paid (5,019) (4,095) (3,877)
Net cash used in
financing activities (8,855) (4,594) (2,690)

Net increase (decrease) in cash and
cash equivalents 321 142 (94)
Cash and cash equivalents at
beginning of period 346 204 298
Cash and cash equivalents at
end of period $ 667 $ 346 $ 204

Reconciliation of net income to net cash used in operating activities:
Net income $15,665 $ 10,415 $ 12,951
Adjustments to reconcile net income
to net cash provided by
(used in) operating activities:
Earnings from subsidiaries (15,580) (10,366) (12,856)
Accretion of discount related
to notes receivable -- -- (1)
(Increase) decrease in other assets (83) -- 1
(Increase) decrease in accrued expenses 14 -- --
Net cash provided by (used in)
operating activities $ 16 $ 49 $ 95

SELECTED FINANCIAL DATA
(Unaudited)
Santa Barbara Bancorp
and Subsidiaries

(amounts in thousands except
per share amounts)
Increase
1996 (Decrease) 1995 1994 1993 1992

RESULTS OF OPERATIONS:
Interest income $89,578 $7,390 $ 82,188 $ 74,900 $68,433 $72,916
Interest expense 35,049 1,466 33,583 24,967 22,362 28,777
Net interest income before
provision for loan losses 54,529 5,924 48,605 49,933 46,071 44,139
Provision for loan losses 4,264 (5,660) 9,924 6,257 6,150 4,650
Other operating income 18,942 1,254 17,688 13,084 14,102 13,062
Non-interest expense:
Staff expense 26,152 3,497 22,655 21,149 19,641 18,521
Other operating expense 20,437 1,123 19,314 18,142 17,695 16,560
Income before income taxes
and effect of
accounting change 22,618 8,218 14,400 17,469 16,687 17,470
Provision for income taxes 6,953 2,968 3,985 4,518 4,377 4,912
Income before effect
of accounting change 15,665 5,250 10,415 12,951 12,310 12,558
Effect of accounting change -- -- -- -- (620) 858
Net income $15,665 $5,250 $10,415 $12,951 $12,930 $11,700

PER SHARE DATA: (1)
Average shares outstanding 7,635 (42) 7,677 7,647 7,784 7,773
Net income $2.05 $0.69 $1.36 $1.69 $1.66 $1.51
Cash dividends declared $0.71 $0.16 $0.55 $0.52 $0.47 $0.38

FINANCIAL CONDITION:
Total assets $1,301,320 $ 88,959 $1,212,361 $1,067,616 $ 979,143 $ 961,239
Total deposits $1,113,083 $ 59,063 $1,054,020 $ 956,717 $ 866,253 $ 849,375
Long-term debt (3) $ 38,000 $ 38,000 -- -- -- $1,400
Net shareholders' equity (2) $ 107,593 $ 6,596 $ 100,997 $ 93,960 $ 85,991 $ 77,145

OPERATING AND CAPITAL RATIOS:
Average total shareholders'
equity to average total assets 8.83% (0.27%) 9.10% 8.86% 8.72% 8.06%
Rate of return on average:
Total assets 1.32% 0.36% 0.96% 1.27% 1.34% 1.26%
Total shareholders' equity (2) 14.92% 4.32% 10.60% 14.33% 15.41% 15.58%
Net shareholders' equity (2) 14.92% 4.32% 10.60% 14.33% 15.42% 16.01%

(1)Adjusted for stock splits and stock dividends
(2)Total shareholders' equity does not include the reduction to equity for the
ESOP loan; net shareholders' equity is reduced by the loan amount.
(3)Includes $0, $0, $0, $0 and $1,400 for 1996, 1995, 1994, 1993 and 1992,
respectively, for debt owed by the ESOP which was guaranteed by the Company.

1996 Quarters 1995 Quarters
4th 3rd 2nd 1st 4th 3rd 2nd 1st

Total assets $1,301,320 $1,178,075 $1,143,395 $1,191,285 $1,212,361 $1,118,064 $1,068,261 $1,027,611
Net interest income on
a taxable equivalent
basis (Note A) $15,023 $13,765 $13,718 $15,833 $12,612 $12,233 $12,192 $15,480
Net income $4,315 $3,705 $3,769 $3,876 $3,429 $1,717 $2,293 $2,976
Net income
per share $0.57 $0.48 $0.49 $0.51 $0.45 $0.22 $0.30 $0.39
Range of stock prices:
High $28.13 $27.88 $27.00 $25.33 $20.67 $22.33 $18.50 $17.67
Low $25.25 $25.25 $23.38 $19.75 $19.42 $18.00 $17.08 $16.17
Cash dividends declared $0.20 $0.18 $0.18 $0.15 $0.15 $0.13 $0.13 $0.13

Exhibit 21

SUBSIDIARIES OF REGISTRANT

Santa Barbara Bank & Trust, a California corporation, doing
business under name of Santa Barbara Bank & Trust

Sanbarco Mortgage Corporation, a California corporation, doing
business under the name of Sanbarco Mortgage Company

Exhibit 23

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the incorporation of our
report dated January 31, 1997, in Santa Barbara Bancorp and subsidiaries'
previously filed Form S-8 Registration Statements File Nos. 33-5493, 2-83293,
33-43560 and 33-48724. It should be noted that we have not audited any financial
statements of the company subsequent to December 31, 1996 or performed any audit
procedures subsequent to the date of our report.

(Handwritten signature)

ARTHUR ANDERSEN LLP
Los Angeles, California
March 10, 1997