U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarterly Period Ended March 31, 1996
Commission file number 2-76555
SDN BANCORP, INC.
(Exact name of small business issuer in its charter)
Delaware 95-3683748
(State or other jurisdiction of (I.R.S.
Employer or
incorporation or organization)
Identification No.)
135 Saxony Road, Encinitas, California 92024-0905
(Address of principal executive offices) (Zip Code)
(619) 436-6888
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15 (d) of the Exchange Act during the past
12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No
[ ]
Applicable only to corporate issuers:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Common Stock, $.01 par value 4,287,872 shares
outstanding on April 10, 1996
SDN BANCORP, INC.
U.S. SECURITIES AND EXCHANGE COMMISSION
FORM 10-QSB
INDEX
Page
Part I - Financial Information
Item 1. Financial Statements
Condensed Consolidated Statements of Condition -
3
March 31, 1996 and December 31, 1995
Condensed Consolidated Statements of Operations
5
For the three months ended March 31, 1996 and 1995
Condensed Consolidated Statements of Cash Flows -
6
For the three months ended March 31, 1996 and 1995
Notes to the Consolidated Financial Statements
7
Item 2. Management's Discussion and Analysis or Plan of
Operation 10
Part II - Other Information
Item 2. Changes in Securities
14
Item 4. Submission of Matters to a Vote of Security Holders
14
Item 6. Exhibits and Reports on Form 8-K
15
Part I - Financial Information
Item 1. Financial Statements
SDN BANCORP, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Condition
March 31, 1996 and December 31, 1995
March 31,
December
31,
1996
1995
(Unaudited)
-----------------
- -----------------
Assets
Cash and due from banks $13,834,000 $
3,640,000
Federal funds sold 30,800,000
2,300,000
-----------------
- ----------------
Total cash and cash equivalents 44,634,000
5,940,000
Interest bearing deposits in other
financial institutions 1,890,000
989,000
Held-to-maturity investment
securities at amortized cost
approximate fair value
March 31, 1996 $5,863,000;
December 31, 1995 $7,057,000 5,858,000
7,009,000
Available-for-sale investment
securities 35,583,000 -
Loans 123,287,000
38,977,000
Less allowance for loan loss 2,398,000
639,000
- --------------------------------
Loans, net 120,889,000
38,338,000
Premises and equipment, net 1,790,000
597,000
Real estate acquired through
foreclosure, net 3,123,000
1,411,000
Goodwill 3,780,000 -
Accrued interest receivable
and other assets 5,248,000
1,621,000
- --------------------------------
Total assets $222,795,000
$55,905,000
==========
=========
See notes to consolidated financial statements.
SDN BANCORP, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Condition (Continued)
March 31, 1996 and December 31, 1995
March 31,
December
31,
1996
1995
(Unaudited)
-----------------
- -----------------
Liabilities and Shareholders' Equity
Deposits:
Demand:
Non-interest bearing $57,236,000
$13,445,000
Interest bearing 20,839,000
10,582,000
Savings:
Regular 24,581,000
4,714,000
Money market 12,125,000
8,558,000
Time:
Under $100,000 80,583,000
11,580,000
$100,000 or more 8,106,000
2,552,000
-----------------
- ----------------
Total deposits 203,470,000
51,431,000
Accrued expenses and other
liabilities 1,829,000
396,000
Mandatory Convertible Debentures 537,000
537,000
- --------------------------------
Total liabilities 205,836,000
52,364,000
Shareholders' equity:
Common stock, $.01 par value,
12,000,000 shares authorized
4,287,872 issued and
outstanding at March 31, 1996 43,000
9,000
Additional paid-in capital 20,959,000
7,593,000
Accumulated deficit (4,043,000)
(4,061,000)
- --------------------------------
Total shareholders' equity 16,959,000
3,541,000
- --------------------------------
Total liabilities and
shareholders' equity $222,795,000
$55,905,000
==========
==========
See notes to consolidated financial statements.
SDN BANCORP, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
Three months ended March 31, 1996 and 1995
(Unaudited)
Three Months Ended March
31,
- -----------------------------------------
1996
1995
--------------
- --------------
Interest Income:
Interest and fees on loans $ 920,000
$1,070,000
Interest on Federal funds sold 49,000
28,000
Interest on deposits with
financial institutions 11,000
15,000
Interest on investment securities,
substantially all taxable 86,000
64,000
--------------
- --------------
Total interest income 1,066,000
1,177,000
Interest Expense:
Deposits 292,000
405,000
Other borrowed funds 15,000
53,000
--------------
- --------------
Total interest expense 307,000
458,000
--------------
- --------------
Net interest income 759,000
719,000
Provision for loan losses 35,000
60,000
--------------
- --------------
Net interest income after
provision for loan losses 724,000
659,000
Non-interest income 162,000
134,000
Non-interest expense 863,000
923,000
--------------
- --------------
Net income (loss) before taxes 23,000
(130,000)
Income tax (5,000) -
--------------
- --------------
Net income (loss) $18,000 $
(130,000)
========
========
Income (loss) per common and common
equivalent share $ 0.02 $
(2.42)
Average share and common stock
equivalent 895,467
53,728
See notes to consolidated financial statements.
SDN BANCORP, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
For the Three Months Ended March 31, 1996 and 1995
(Unaudited)
For three months
ended
March 31,
- -------------------------------------------
1996
1995
-----------------
- --------------
Operating Activities:
Net income (loss) $ 18,000 $
(130,000)
Adjustments to reconcile
net loss to net cash
used by operating
activities:
Provision for loan
losses and real
estate acquired
through foreclosure 35,000
60,000
Depreciation and
amortization 35,000
50,000
Increase in other assets (1,428,000)
(242,000)
Increase (decrease) in
other liabilities 4,000
(147,000)
-----------------
- --------------
Net cash used by
operating activities (1,336,000)
(409,000)
Investing Activities:
Decrease in interest bearing
deposits with other financial
institutions (304,000) -
Purchases of investment
securities (2,500,000)
(501,000)
Proceeds from sales and
maturities of investment
securities 3,657,000
606,000
Net decrease in loans 1,773,000
2,497,000
Purchases of premises and
equipment -
(1,000)
Proceeds from sale of real
estate acquired through
foreclosures -
213,000
Capital expenditures for other
real estate owned (154,000) -
Purchase of Liberty National
Bank, net of cash received 7,283,000 -
-----------------
- -----------------
Net cash provided
by investing
activities 9,755,000
2,814,000
Financing Activities:
Net increase in deposits 16,875,000
1,659,000
Issuance of common stock 13,400,000 -
- --------------------------------
Net cash provided
by financing
activities 30,275,000
1,659,000
- --------------------------------
Net Increase in cash and
cash equivalents 38,694,000
4,064,000
Cash and cash equivalents at
beginning of period 5,940,000
2,842,000
-----------------
- -------------
Cash and cash equivalents at
end of period $44,634,000
$6,906,000
==========
========
See notes to consolidated financial statements.
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION
Noncash transactions-
Other real estate sold
and financed by the bank -
$115,000
Notes to Consolidated Financial Statements
NOTE 1 - BASIS OF PRESENTATION
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that effect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and reported
amounts of revenue and expenses during the reporting period.
Actual results could differ from those estimates. The
accompanying financial information has been prepared in
accordance with the Securities and Exchange Commission rules and
regulations for quarterly reporting and therefore does not
necessarily include all information and footnote disclosures
normally included in financial statements prepared in accordance
with generally accepted accounting principles. This information
should be read in conjunction with Bancorp's Annual Report on
Form 10-K for the year ended December 31, 1995.
NOTE 2 - EARNINGS PER SHARE
Earnings per share is computed by dividing net income by the
weighted average number of common shares outstanding during the
year and dilutive common stock equivalents by using the treasury
stock method. The weighted average number of common shares used
to compute earnings per share was 895,497 for the three months
ended March 31, 1996 and 53,728 for the three months ended March
31, 1995. All per share amounts for the three months ended March
31, 1995 have been restated to give effect to the one for
twenty-one
reverse stock split and the 26,864 common stock dividend
declared during September 1995.
The assumed conversion of the mandatory convertible
debentures ("Debentures") is anti-dilutive for the periods ending
March 31, 1996 and 1995. Therefore, primary income and loss per
share and income and loss per share assuming full dilution are
the same for both periods.
NOTE 3 - MERGER
On March 31, 1996, SDN Bancorp, Inc. ("Bancorp" or the
"registrant") completed its acquisition (the "Liberty
Acquisition") of Liberty National Bank ("Liberty") for
approximately $15.1 million in cash as contemplated by the
October 26, 1995 Agreement and Plan of Merger by and among the
registrant, Liberty, and Dartmouth Capital Group, L.P., a
Delaware limited partnership ("the Partnership") and the
registrant's controlling shareholder. Liberty is headquartered
in Huntington Beach, California and had total assets of
approximately $149 million prior to the Liberty Acquisition.
As of March 27, 1996, the Partnership invested approximately
$13.4 million in the registrant to fund the Liberty Acquisition.
In exchange for that investment, the registrant issued a total of
3,392,405 additional shares of Common Stock at a price per share
of $3.95, the registrant's book value per share as of December
31, 1995. At the Partnership's direction the registrant issued
1,764,000 of those shares of Common Stock, in the aggregate, to
certain limited partners of the Partnership (the "Direct
Holders") and the remaining 1,628,405 shares of Common Stock
directly to the Partnership. Giving effect to the issuance of
those shares to fund the Liberty Acquisition, the Partnership
owns 48.0% of the Common Stock and the Direct Holders own, in the
aggregate 50.75% of the Common Stock.
The acquisition was accounted for using the purchase method
of accounting in accordance with Accounting Principles Board
Opinion No. 16, "Business Combinations". Under this method of
accounting, the purchase price was allocated to the assets
acquired and deposits and liabilities assumed based on their fair
values as of the acquisition date. The consolidated financial
statements include the operations of Liberty from the date of
acquisition. Goodwill arising from the transaction totaled
approximately $3,780,000 and is being amortized over ten years on
a straight line basis.
The following table sets forth selected unaudited pro forma
combined financial information of Bancorp and Liberty for three
months ended March 31, 1996 and 1995. The pro forma operating
data reflects the effect of the acquisition of Liberty as if it
was consummated at the beginning of each period presented. The
pro forma results are not necessarily indicative of the results
that would have occurred had the acquisition been in effect for
the full years presented, nor are they necessarily indicative of
the results of future operations.
Pro Forma Combined
for
Three Months Ended
March
31,
- -----------------------------------------
1996
1995
(Unaudited)
(Unaudited)
---------------
- --------------
Interest Income $4,580,000
$4,158,000
Interest Expense 1,750,000
1,653,000
---------------
- --------------
Net interest income 2,830,000
2,505,000
Provision for loan losses 65,000
210,000
---------------
- --------------
Net interest income after
provision for loan losses 2,765,000
2,295,000
Non-interest income 282,000
714,000
Non-interest expense 2,664,000
3,122,000
---------------
- --------------
Net income before taxes 383,000
(113,000)
Income tax(benefit) 151,000
(4,000)
---------------
- --------------
Net income $ 232,000 $
(109,000)
=========
========
NOTE 4 - LONG LIVED ASSETS
In March 1995, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standard (FAS) No. 121
"Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets
to Be Disposed Of", which Bancorp adopted as
required on January 1, 1996. Pursuant to this Statement,
companies are required to investigate potential impairments of
long-lived assets, certain identifiable intangibles, and
associated goodwill, on an exception basis, when there is
evidence that events or changes in circumstances have made
recovery of an asset's carrying value unlikely. An impairment
loss would be recognized when the sum of the expected future net
cash flows is less than the carrying amount of the asset. The
adoption of FAS 121 did not have a significant impact on
Bancorp's financial position or results of operations.
Item 2. Management's Discussion and Analysis or Plan of
Operations
This information should be read in conjunction with the
consolidated financial statements and the notes thereto included
in Item 1 of this Quarterly Report and the audited consolidated
financial statements and notes thereto and Management Discussion
and Analysis of Financial Condition and Results of Operations for
the year ended December 31, 1995 contained in Bancorp's 1995
Annual Report on Form 10-K.
Except for the historical information contained herein, the
following discussion contains forward looking statements that
involve risks and uncertainties. Bancorp's actual results could
differ materially from those discussed here. Factors that could
cause or contribute to such differences include, but are not
specifically limited to, changes in regulatory climate, shifts in
interest rate environment, change in economic conditions of
various markets Bancorp serves, as well as the other risks
detailed in this section, and in the sections entitled Results of
Operations and Liquidity and Capital Resources, and those
discussed in Bancorp's Form 10-K for the year ended December 31,
1995.
Summary
SDN Bancorp, Inc. ("Bancorp") owns 100% of San Dieguito
National Bank ("SDNB"). Additionally, as of March 31, 1996, the
registrant completed the Liberty Acquisition as described in the
footnotes to the consolidated financial statements. The
acquisition of Liberty was accounted for using the purchase
method of accounting for business combinations . Accordingly,
the following discussion relates primarily to the operating
results of SDNB and the financial condition of both Liberty and
SDNB (collectively the "Banks").
On April 23, 1996, Bancorp entered into an Agreement and
Plan of Reorganization with Commerce Security Bank ("Commerce")
that provides for Bancorp's acquisition of Commerce (the
"Commerce Acquisition") for a combination of cash and stock. The
Commerce Acquisition is subject to receipt of regulatory and
shareholder approvals and to the satisfaction of other customary
closing conditions. As of March 31, 1996, Commerce Security had
total assets of $213.1 million and total shareholders' equity of
$12.1 million. The Commerce Acquisition is expected to be
accounted for using the purchase method of accounting for
business combinations.
Financial Condition
Average earning assets of SDNB for the first three months of
1996 were approximately $48.6 million, a decrease of $4.1
million, or 7.7%, from the average for the comparable three-month
period in 1995. Total assets of SDNB at March 31, 1996 were
$72.5 million compared to total assets of $55.9 million at
December 31, 1995 and $59.1 million at March 31, 1995. The
increase in total assets since December 31, 1995 is attributed
primarily to a temporary increase in deposits due to the escrow
account established with approximately $14.5 million related to
the cash purchase of the shares of Liberty shareholders. Total
assets following the Liberty Acquisition at March 31, 1996 is
$222.8 million.
Average loans at SDNB for the first three months of 1996
were approximately $38.3 million, a decrease of $6.9 million, or
15.2%, from the average for the comparable three month period in
1995. Total loans of SDNB at March 31, 1996 were $37.2 million
compared to $39.0 million at December 31, 1994 and $43.7 million
at March 31, 1995. Total loans following the Liberty Acquisition
at March 31, 1996 were $123.3 million.
Average deposits at SDNB for the first three months of 1996
were approximately $51.4 million, a decrease of $5.9 million, or
10.2%, from the average for the comparable three month period in
1995. Total deposits increased to $68.3 million at March 31,
1996 compared to $51.4 million at December 31, 1995 and $57.5
million at March 31, 1995. The increase in total deposits since
December 31, 1995 is attributed primarily to a temporary increase
in deposits due to the escrow account established with
approximately $14.5 million related to the cash purchase of the
shares of Liberty shareholders. Total deposits after the Liberty
Acquisition at March 31, 1996 were $203.5 million.
Results of Operations
For the three months ended March 31, 1996, Bancorp had net
income of $18,000 compared to a net loss of $130,000 for the same
period in 1995. The improvement in 1996 earnings over the same
period in 1995 resulted from a combination of improved net
interest income of approximately $40,000, reduced loan loss
provision by $25,000, improved non-interest income by
approximately $28,000 and reduced non-interest expense by $60,000
partially offset by increased provision for income taxes of
$5,000.
Net Interest Income and Net Interest Margin
Net interest income was approximately $759,000 for the three
months ended March 31, 1996, an increase of $40,000 over the same
period in 1995. A reduction in interest expense of $151,000
largely offset by reduced interest income by $111,000 contributed
to this earnings improvement.
Loans, the largest component of earning assets, declined to
an average balance of $38.3 million for the first three months of
1996 from $45.1 million for the first three months of 1995 to
$38.3 million, with an average yield of 9.7% and 9.6%,
respectively. Investments in securities and Federal funds sold
rose to an average of $10.3 million for the first three months of
1996 from an average of $7.5 million for the first three months
of 1995, with an average yield of 5.7% earned during both
periods. Further, loan fee income decreased $8,000 for the first
three months of 1996 compared to 1995. The yield on earning
assets declined to 8.8% for the first three months of 1996 from
9.1% for the same period in 1995. The decline in yield on
earning assets can largely be attributed to a shift in the mix of
loans as a percent of loans where the percent of average loans to
average earning assets during the first three months of 1996
declined to 78.7% from 85.7% for the same period in 1995.
Average interest-bearing deposits decreased to $38.3 million
for the three months ended March 31, 1996 from $45.8 million for
the same period in 1995. Additionally, the average rate paid on
these deposits declined to 3.1% during the first three months in
1996 from 3.6% during the first three months in 1995. Further,
as a result of the recapitalization of Bancorp that occurred in
September 1995, other borrowing declined to $537,000 with an
average rate of 11.5% from $1.9 million at an average rate of
11.3%. The average rate paid on interest-bearing liabilities was
3.2% for the first three months of 1996 compared to 3.9% for the
same period in 1995. This decrease represents an overall
decrease in rates paid on deposit liabilities and a change in the
mix of interest bearing products.
As a result of these forgoing factors, the average yield on
earning assets increased to 6.3% for the first three months of
1995 from 5.5% for the same period in 1995.
Allowance and Provision for Loan Losses
The allowance for loan losses represents the amounts which
have been set aside for the specific purpose of absorbing losses
which may occur in the Bank's loan portfolio. The provision for
loan losses is an expense charged against operating income and
added to the allowance for loan losses. Management of the Bank
continues to carefully monitor the allowance for loan losses in
relation to the size of the Bank's loan portfolio and known risks
or problem loans.
The allowance for loan losses at SDNB was approximately
$641,000 at March 31, 1996 compared to approximately $639,000 at
December 31, 1995. The allowance for loan losses for SDNB
represented 1.7% of gross loans at March 31, 1996 and 1.6% at
December 31, 1995 and 1.8% at March 31, 1994. During the first
three months of 1996, the provision for loan losses was $35,000,
loan charge-offs were $12,000 and recoveries were $35,000. The
allowance for loan losses after the Liberty Acquisition was
approximately $2.4 million which represents 1.9% of gross loans
at March 31, 1996.
The Bank's four largest lending categories are: (I)
commercial real estate loans; (ii) other loans secured by real
estate; (iii) commercial loans and (iv) loans to individuals. At
March 31, 1996, these categories accounted for approximately 44%,
29%, 24% and 3% respectively. After the Liberty Acquisition,
these categories accounted for approximately 58.0%, 17.0%, 13.0
and 12.0%, respectively, of the Banks' total loan portfolio at
March 31, 1996.
Included among the Banks' portfolio of loans are SBA loans
made by the Banks guaranteed by the United States Government to
the extent of 75% to 90% of the principal and interest due on
such loans. Liberty is active in originating this type of loan.
Liberty generally sells the government guaranteed portion of
these loans to participants in the secondary market and retains
servicing responsibilities and the unguaranteed portion of the
loans. Liberty may in the future retain a greater portion of
these loans as more loans may be made for construction purposes
for which the Liberty holds the entire principal until completion
of the project and then sells the government guaranteed portion.
The government guaranteed portion of the SBA loans are sold
at a premium, a portion of which is immediately recognized as
income. The remaining premium, representing estimated normal
servicing fees or a yield adjustment on the portion of the SBA
loan retained by the Banks, is deferred and recognized as income
over the estimated life of the loan. Deferred SBA servicing fees
for Liberty were approximately $1.8 million at March 31, 1996.
The total SBA loan portfolio serviced by Liberty at March 31,
1996 was approximately $141.8 million and included in this
amount was approximately $32.8 million representing the portion
of the SBA loans retained by Liberty. The total SBA loan
portfolio serviced by SDNB at March 31, 1996 was approximately
$3.5 million and included in this amount was approximately $3.0
million representing the portion of the SBA loans retained by
SDNB.
Non-Interest Income
Non-interest income increased by $28,000 for the first three
months of 1996 compared to the same period in 1995. This increase
was a result of increased deposit service charges by
approximately $5,000 and other service charges of $23,000.
Non-Interest Expenses
Non-interest expenses for the first three months of 1996
decreased approximately $60,000 compared to the first three
months of 1995. The majority of this improvement occurred in the
area of salaries and benefits with a $54,000 decrease for the
first quarter, a function of the reorganization of SDNB.
Occupancy expenses also decreased $8,000 but was partially offset
by other non-interest expenses.
Provision for Income Taxes
As a result of the earnings for the first three months of
1996, a provision for income taxes was made where there was no
provision for income tax made in the first three months of 1995.
Capital Resources
As of March 27, 1996, the Partnership invested approximately
$13.4 million in the registrant to fund the Liberty Acquisition.
In exchange for that investment, the registrant issued a total of
3,392,405 additional shares of Common Stock at a price per share
of $3.95, the registrant's book value per share as of December
31, 1995. At the Partnership's direction the registrant issued
1,764,000 of those shares of Common Stock, in the aggregate, to
certain limited partners of the Partnership (the "Direct
Holders") and the remaining 1,628,405 shares of Common Stock
directly to the Partnership. Giving effect to the issuance of
those shares to fund the Liberty Acquisition, the Partnership
owns 48.0% of the Common Stock and the Direct Holders own, in the
aggregate, 50.75% of the Common Stock.
Current risk-based regulatory capital standards generally
require banks and holding companies to maintain a ratio of
"core" or "Tier 1" capital (consisting principally of common
equity) to risk-weighted assets of at least 4%, a ratio of Tier 1
capital to adjusted total assets (leverage ratio) of at least 3%
and a ratio of total capital (which includes Tier 1 capital plus
certain forms of subordinated debt, a portion of the allowance
for loan losses and preferred stock) to risk-weighted assets of
at least 8%. Risk-weighted assets are calculated by multiplying
the balance in each category of assets according to a risk factor
which ranges from zero for cash assets and certain government
obligations to 100% for some types of loans, and adding the
products together.
As of March 31, 1996, Bancorp's combined Tier 1
risk-weighted capital ratio was 9.2%, the leverage ratio was 6.4%
and the total risk-weighted capital ratio was 10.8%. Liberty's
and SDNB's Tier 1 risk-weighted capital ratio, leverage ratio and
total risk-weighted capital ratios were 8.8%, 5.7%, 10.0% and
8.5%, 7.0%, 9.8%, respectively, on March 31, 1996. Bancorp has
agreed to fund the Commerce Acquisition in part by raising not
less than $11.1 million of additional equity through the sale of
Bancorp common stock. The Partnership has agreed to purchase up
to $16.1 million of common stock at a price per share of $3.95 in
connection with the Commerce Acquisition. Liberty and SDNB were
well capitalized as of March 31, 1996 for federal regulatory
purposes.
Liquidity
The asset-liability management process determines the size
and composition of the balance sheet and focuses on the
management of liquidity and interest rate risk. The purpose of
liquidity and balance sheet management is to ensure that funds
are available to meet customer needs, meet the financial
commitments of the Banks, and to reduce the Banks' exposure to
changing interest rates.
The Banks manage liquidity from both sides of the balance
sheet through the coordination of the relative maturities of its
assets and liabilities. The Banks enhance their liquidity
through the ability to raise additional funds in money markets
through Federal funds lines, repurchase agreements and selling of
a specified portion of its securities (securities available for
sale). The Banks maintain a level of liquidity that is
considered adequate to meet current needs. Liquid assets include
cash and due from banks, Federal funds sold, and securities
available for sale. At March 31, 1996, liquid assets totaled
approximately $80.2 million, or 36.0% of total assets, which
compares to $5.9 million, or 10.6% of total assets, at December
31, 1995 and $6.9 million, or 11.7% of total assets, at March 31,
1995.
Part II - Other Information
Item 1. Legal Proceedings
Not Applicable
Item 2. Changes in Securities
Effective April 12, 1996, the registrant amended its
Certificate of Incorporation to increase the number of authorized
shares of common stock from 5,000,000 to 12,000,000.
Item 3. Defaults Upon Senior Securities
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
Effective April 12, 1996, the holders of a majority of the
registrant's outstanding shares of common stock approved by
written consent an amendment to the registrant's certificate of
incorporation to increase the number of authorized shares of
common stock from 5,000,000 to 12,000,000.
Item 5. Other Information
Not Applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
The following exhibits are filed as part of the report:
Exhibit No. Description
Page
2.1 Agreement and Plan of Reorganization
*
dated October 26, 1995 by and among
Liberty National Bank, SDN Bancorp, Inc.
and Dartmouth Capital Group, L.P.
2.2 Agreement and Plan of Reorganization
**
dated April 23, 1996 by and between SDN
Bancorp, Inc. and Commerce Security Bank
3.1 Certificate of Incorporation of SDN
18
Bancorp, Inc. as restated to reflect the
Certificate of Amendment filed on April
12, 1996.
10.1 Subscription Agreement dated as of March
21
22, 1996 between SDN Bancorp, Inc. and
Dartmouth Capital Group, L.P. for shares of
SDN Bancorp, Inc. common stock
10.2 Subscription Agreement dated as of March
24
22, 1996 between SDN Bancorp, Inc. and
Dartmouth Capital Group, L.P. for shares of
SDN Bancorp, Inc. common stock
10.3 Lease Agreement for 7777 Center Avenue,
CE
Huntington Beach, California between
Alvamij Huntington Beach, Inc. as Landlord,
and Liberty National Bank, as Tenant, dated
August 20, 1981 and amended February 14, 1986
10.4 Lease Agreement for 17011 Beach Boulevard,
CE
Huntington Beach, California between
Liu Corp., as Landlord, and Liberty
National Bank, as Tenant, dated
December 15, 1995
10.5 Employment Agreement between Liberty
CE
National Bank and Philip S. Inglee
dated July 20, 1995
10.6 Employment Agreement between Liberty
CE
National Bank and Richard I. Ganulin
dated March 1, 1995
Item 6. Exhibits and Reports on Form 8-K (continued)
Exhibit No. Description
Page
10.7 Employment Agreement between Liberty
CE
National Bank and Curt A. Christianssen
dated October 22,1993 and amended
August 17, 1995
10.8 Employment Agreement between Liberty
CE
National Bank and Catherine C. Clampitt
dated April 1,1995
10.9 Agreement to Provide Construction
CE
Inspection Services between Liberty
National Bank and J. Donald Hartfelder
(b) Reports on Form 8-K:
1) Letter of intent signed with Commerce Security Bank to
form a new holding company into which both companies
will merge, dated March 1, 1996
2) Completion of Liberty Acquisition, dated March 31, 1996
- -----------------------------
* Incorporated by reference to Exhibit 2 to Current Report on
Form 8-K dated October 26, 1995
** Incorporated by reference to Exhibit 2 to Current Report on
Form 8-K dated April 23, 1996
CE Exhibits filed in paper under cover of Form SE pursuant to
Rule 201 of Regulation S-T, with confirming copies filed
with this amended submission
SDN BANCORP, INC. AND SUBSIDIARIES
U.S. SECURITIES AND EXCHANGE COMMISSION FORM 10-QSB
SIGNATURES
Pursuant to the requirements of the U.S. Securities Exchange Act
of 1934, the Issuer has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
SDN
BANCORP, INC.
DATE: May 15, 1996 /s/ Robert P. Keller
----------------------
Robert P. Keller
President and Chief Executive Officer
DATE: May 15, 1996 /s/ Curt A. Christianssen
--------------------------
Curt A. Christianssen
Senior Vice President and
Chief Financial Officer