SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15 (d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): December 5, 1995
SDN BANCORP, INC.
(Exact name of registrant specified in its charter)
(Delaware) (2-76555) (95-3583749)
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(State of other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification
Number)
135 Saxony Road, Encinitas, CA 92024-0905
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (619) 436-6888
Item 4. Changes in Registrant's Certifying Public Accountant
On December 11, 1995, the Board of Directors of SDN Bancorp, Inc. (the
"Company") approved the engagement of Price Waterhouse LLP as the Company's
independent auditor for the Company's fiscal year ending December 31, 1995.
Deloitte & Touche LLP was the Company's previous auditor and had conducted the
audit of the Company for the fiscal year ended December 31, 1994. Deloitte &
Touche LLP had not been formally engaged, however, as the Company's independent
auditor for the 1995 fiscal year, and was dismissed by the Company by letter
dated December 5, 1995. The Company's Board of Directors concurred in the
recommendation of its Audit Committee that it would be in the Company's best
interests toengage Price Waterhouse LLP as the Company's independent auditor for
the 1995 fiscal year.
During the Company's two most recent fiscal years and the subsequent
interim period preceding the engagement of Price Waterhouse LLP, there were no
disagreements with Deloitte & Touche LLP on any matter of accounting principles
or practices, financial statement disclosure, or auditing scope or procedure or
any reportable events of the type described in Paragraphs (a)(1)(v) and (a)(2)
of Item 304 of Regulation S-K.
Deloitte & Touche LLP's report on the financial statements of the
Company for either of the past two years did not contain an adverse opinion or a
disclaimer of opinion, nor was it qualified or modified as to uncertainty, audit
scope or accounting principles, except for (A) the following disclaimer which
was part of Deloitte & Touche LLP's report of the Company's 1994 financial
statements:
The accompanying consolidated financial statements have been
prepared assuming that SDN Bancorp and its wholly owned subsidiary, San
Dieguito National Bank, (the"Bank") will continue as going concerns. As
described in Note 2 to the consolidated financial statements, at
December 31, 1994, the Bank did not meet the minimum capital
requirements prescribed by the Office of the Comptroller of the Currency
(OCC). The Bank is operating under an agreement with the OCC that
requires it to meet prescribed capital requirements. If the Bank is
unable to comply with the terms of the agreement, one or more regulatory
sanctions may result, including restrictions as to the source of
deposits and the appointment of a conservator or receiver. These
matters raise substantial doubt about the Bank's (and, consequently, SDN
Bancorp's) ability to continue as a going concern. It is the opinion of
management that the future of the Bank will depend on its ability to
obtain additional capital in a timely manner. If such additional
capital is not obtained, it is likely that there will be some form of
regulatory intervention (including placing the Bank in conservatorship)
in the operations of the Bank. Management's plans concerning these
matters are also described in Note 2. The consolidated financial
statements do not include any adjustments that might result from the
outcome of this uncertainty.
Because of the possible material effects of the uncertainty
referred to in the preceding paragraph, we are unable to express, and we
do not express, an opinion of the consolidated financial statements for
1994.
and (B) the following disclaimer which was part of Deloitte & Touches LLP's
report of the Company's 1993 financial statements:
The accompanying 1993 consolidated financial statements have
been prepared assuming the SDN Bancorp and its wholly-owned subsidiary,
San Dieguito National Bank, (the "Bank") will continue as going
concerns. As discussed in Note 2 to the consolidated financial
statements, at December 31, 1993, the Bank did not meet the minimum
capital requirements prescribed by the Office of the Comptroller of the
Currency (OCC). The Bank is operating under an agreement with the OCC
that requires it to meet prescribed capital requirements by no later
than March 31, 1994. If the Bank is unable to comply with the terms of
the agreement, one or more regulatory sanctions may result, including
restrictions as to the source of deposits and the appointment of a
conservator or receiver. These matters raise substantial doubt about
the Bank's (and, consequently, SDN Bancorp's) ability to continue as a
going concern. Management's plans concerning these matters are also
described in Note 2. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
The Company has furnished Deloitte & Touche LLP with a copy of the
disclosure it is making in response to Item 304 of Regulation S-K and has
requested that its former accountant furnish the Company with a letter addressed
to the Securities and Exchange Commission stating whether it agrees with the
statements made by the Company herein. A copy of Deloitte & Touche LLP's
letter in response to such request is filed as Exhibit 1 to this Form 8-K.
During the Company's 1993 and 1994 fiscal years and during the interim
period since December 31, 1994, the Company did not consult with Price
Waterhouse LLP with regard to the application of accounting principles to a
specified transaction or the type of audit opinion that might be rendered in
connection therewith the results of which consultation were a factor in the
decision to engage Price Waterhouse LLP, and did not consult with Price
Waterhouse LLP with regard to any matter that was a subject of a disagreement or
other reportable event with the Company's prior auditors.
On September 30, 1995 (the "Closing Date"), the Company issued shares of
its Common Stock constituting a controlling interest in the Company to Dartmouth
Capital Group, L.P. ("Dartmouth") and certain persons affiliated with Dartmouth
(the "Transaction"). Price Waterhouse LLP had served as an advisor to Dartmouth
in the course of the Transaction. Since the Closing Date, Dartmouth has
continued to consult with Price Waterhouse LLP with regard to various issues.
Neither before nor after the Closing Date did Dartmouth or any current
member of the Company's Audit Committee consult with Deloitte & Touche LLP
regarding the application of accounting principles to the Transaction.
Item 7 Financial Statements and Exhibits
(C) Exhibits
1. Letter dated December 11, 1995 from Deloitte & Touche LLP, the
former independent certified accountant for the Company.
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SDN BANCORP, INC.
By:Robert P. Keller /s/
--------------------
Robert P. Keller
President
Dated: December 11, 1995
Securities and Exchange Commission
Mail Stop 9-5
450 5th Street, N.W.
Washington, D.C. 20549
Dear Sirs/Madams:
We have read and agree with the comments in Item 4 of Form 8-K of SDN Bancorp
dated December 11, 1995.
Yours truly,
Deloitte & Touch, LLP /s/
Deloitte & Touch. LLP
