SANTA BARBARA, CA — Financial Corporation of Santa Barbara reached a settlement agreement today with the Federal Deposit Insurance Corporation ("FDIC") under which the FDIC will pay Financial Corporation $8.7 million. This is a full settlement of Financial Corporation’s claims to residual value from the receivership estate of Santa Barbara Savings and Loan Association, the former subsidiary of Financial Corporation.

"This ten-year battle, since the seizure of Santa Barbara Savings, has been a long and bumpy road," said Financial Corporation president David L. Tilton. "Today’s settlement validates our efforts and vindicates our belief that Santa Barbara Savings should not have been seized by the government in 1990."

This settlement will end a legal action brought in federal court in October 1997 by Financial Corporation. In July 1999, U.S. District Court Judge Dickran Tevrizian in Los Angeles appointed a Special Master to review the FDIC’s accounting for the receivership of Financial Corporation’s subsidiary, Santa Barbara Savings. Special Master Malcolm M. Lucas, retired Chief Justice of the California Supreme Court, supervised the settlement talks that resulted in today’s agreement.

The FDIC has agreed to pay the $8.7 million cash settlement by March 31, 2000. Under Financial Corporation’s bankruptcy plan, this will enable a subsequent payout to holders of preferred stock equal to their full liquidation preference. Though there are many details to finalize relating to distributions, the company estimates that approximately $5 million will be available for payment to holders of common stock, or about 20 cents per share.

Santa Barbara Savings, a century-old savings association with $4 billion in assets, was seized by the RTC in 1990 for failure to comply with new government-mandated capital requirements. Approximately 800 employees lost their jobs as a result. Financial Corporation, the second largest public company in the U.S. to emerge from bankruptcy in 1995, has been marshaling assets and has paid off all creditors under a plan of liquidation. Its final responsibility has been to recover any residual value from the Santa Barbara Savings receivership and distribute this amount to its shareholders.