<PAGE>






                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC  20549

                                    FORM 10-Q


                QUARTERLY REPORT PURSUANT to SECTION 13 or 15 (d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                 For the quarterly period ended June 30, 1997  

                         Commission File Number 0-11046

                                   SC BANCORP

             (Exact name of registrant as specified in its charter)

California                                        95-3585586
(State or other jurisdiction of                   (IRS Employer
incorporation or organization)                    Identification No.)

3800 E. La Palma Ave., Anaheim, California        92807-1798     
(Address of principal executive offices)          (Zip Code)

Registrant's telephone number, including area code (714) 238-3110

          
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. [    ]
          
There were 7,498,365 shares of common stock for the registrant issued and
outstanding as of August 1, 1997.

<PAGE>

Part I.

 Item 1. Financial Statements

             SC BANCORP AND ITS SUBSIDIARY, SOUTHERN CALIFORNIA BANK 
                          Consolidated Balance Sheets 

<TABLE>
<CAPTION>
                                                                   June 30,   December 31,
 (DOLLARS IN THOUSANDS)                                              1997         1996
-----------------------------------------------------------------------------------------
<S>                                                             <C>          <C>
 ASSETS 
 Cash and due from banks                                          $  37,639     $  29,968 
 Federal funds sold                                                  27,804         3,800 
-----------------------------------------------------------------------------------------
     Cash and cash equivalents                                       65,443        33,768 
-----------------------------------------------------------------------------------------
 Securities available-for-sale, at fair value (Notes 1 and 2)        73,465        74,533 
 Investment in Federal Home Loan Bank stock, at cost                  1,495         1,450 
 Investment in Federal Reserve Bank stock, at cost                      621           607 

 Loans (Notes 1 and 3)                                              350,584       347,864 
     Less:  Deferred fee income                                        (638)         (689)
            Allowance for possible loan losses                       (5,062)       (4,947)
-----------------------------------------------------------------------------------------
     Loans, net                                                     344,884       342,228 
-----------------------------------------------------------------------------------------
 Premises and equipment, net                                          7,017         7,740 
 Other real estate owned, net                                           654           536 
 Accrued interest receivable                                          3,748         3,931 
 Other assets                                                        10,567        11,220 
-----------------------------------------------------------------------------------------
 TOTAL ASSETS                                                    $  507,894    $  476,013 
-----------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------
 LIABILITIES   
 Deposits:     
     Noninterest-bearing                                         $  137,616    $  125,903 
     Interest-bearing                                               308,629       289,423 
-----------------------------------------------------------------------------------------
     Total deposits                                                 446,245       415,326 
-----------------------------------------------------------------------------------------
 Borrowed funds and other interest-bearing liabilities                7,342         8,096 
 Accrued interest payable and other liabilities                       2,522         2,672 
-----------------------------------------------------------------------------------------
     Total liabilities                                              456,109       426,094 
-----------------------------------------------------------------------------------------
 SHAREHOLDERS' EQUITY 
 Preferred stock, no par or stated value:
  10,000,000 shares authorized; 
     no shares issued or outstanding                                      -           -   
 Common stock, no par or stated value:
  20,000,000 shares authorized; 
     7,498,365 and 7,486,375 shares issued 
     and outstanding at June 30, 1997 and
     December 31, 1996, respectively.                                37,807        37,738 
 Retained earnings                                                   15,502        13,055 
 Dividends paid                                                        (749)          -   
 Unrealized loss on available-for-sale securities,
 net of taxes (Note 1)                                                 (775)         (874)
-----------------------------------------------------------------------------------------
     Total Shareholders' Equity                                      51,785        49,919 
-----------------------------------------------------------------------------------------
 TOTAL LIABILITIES and SHAREHOLDERS' EQUITY                      $  507,894    $  476,013 
-----------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------
</TABLE>

 SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

<PAGE>

Part I. Item 1. (continued) 

           SC BANCORP AND ITS SUBSIDIARY, SOUTHERN CALIFORNIA BANK 
                    Consolidated Statements of Operations 

<TABLE>
<CAPTION>
                                                      Three Months Ended           Six Months Ended 
 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)           June 30,                    June 30, 
--------------------------------------------------------------------------------------------------------
                                                        1997          1996          1997           1996
                                                     --------      --------      ---------     ---------
<S>                                                  <C>           <C>           <C>           <C>
 INTEREST INCOME 
 Interest and fees on loans                          $  7,997      $  7,390      $  15,759     $  14,768 
 Interest on investment securities                      1,008         1,061          1,959         2,204 
 Interest on Federal funds sold                           516            91            717           172 
--------------------------------------------------------------------------------------------------------
     Total interest income                              9,521         8,542         18,435        17,144 
--------------------------------------------------------------------------------------------------------
 INTEREST EXPENSE 
 Interest on deposits: 
     Interest-bearing demand                              764           571          1,489           966 
     Savings                                              396           233            638           481 
     Time certificates of deposit                       2,004         1,897          3,904         3,914 
--------------------------------------------------------------------------------------------------------
     Total interest on deposits                         3,164         2,701          6,031         5,361 
 Other interest expense                                   101           183            215           489 
--------------------------------------------------------------------------------------------------------
     Total interest expense                             3,265         2,884          6,246         5,850 
--------------------------------------------------------------------------------------------------------

 Net interest income                                    6,256         5,658         12,189        11,294 
 Provision for (recovery of) possible 
  loan losses (Note 3)                                    300          (750)           650          (470)
--------------------------------------------------------------------------------------------------------
 Net interest income after provision 
  for possible loan losses                              5,956         6,408         11,539        11,764 
--------------------------------------------------------------------------------------------------------
 NONINTEREST INCOME                                     1,186         1,246          2,443         2,533 
 NONINTEREST EXPENSE: 
     Salaries and benefits                              2,424         2,559          4,951         5,178 
     Net occupancy, furniture and equipment               873         1,078          1,720         2,188 
     Other operating expense                            1,614         2,436          3,119         4,031 
--------------------------------------------------------------------------------------------------------
     Total noninterest expense                          4,911         6,073          9,790        11,397 
--------------------------------------------------------------------------------------------------------
 Income before provision for income taxes               2,231         1,581          4,192         2,900 
 Provision for income taxes                               929           661          1,745         1,217 
--------------------------------------------------------------------------------------------------------
 NET INCOME                                          $  1,302        $  920       $  2,447      $  1,683 
--------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------
 Weighted average number of shares outstanding          7,495         7,475          7,491         7,474 
--------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------
 Earnings per share                                   $  0.17       $  0.12        $  0.33       $  0.23 
--------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------
</TABLE>

 SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

                                      2

<PAGE>

Part I. Item 1. (continued) 

           SC BANCORP AND ITS SUBSIDIARY, SOUTHERN CALIFORNIA BANK 
                    Consolidated Statements of Cash Flows 
<TABLE>
<CAPTION>
                                                                          Six months ended 
 (DOLLARS IN THOUSANDS)                                                        June 30, 
----------------------------------------------------------------------------------------------
                                                                          1997          1996
                                                                        --------      --------
<S>                                                                     <C>            <C>
 CASH FLOWS FROM OPERATING ACTIVITIES 
     Net income                                                         $  2,447       $ 1,683 
     Adjustments to reconcile net income 
      to net cash provided 
      by operating activities: 
          Provision for (recovery of) possible loan losses                   650          (470)
          Provision for loss on OREO                                           -           369 
          Gain on sale of available-for-sale investment securities             -           (14)
          Net amortization of premiums on investment securities              372           467 
          Loss on sale of OREO                                                 -            16 
          Gain on sale of loans                                              (78)          -   
          Net (decrease) increase in deferred fees and 
           unearned income on loans                                          (51)           31 
          Depreciation and amortization                                      800           951 
          (Gain) loss on sale of fixed assets                                 (4)           24 
          Decrease in accrued interest receivable and
           other assets                                                      763           697 
          (Decrease) increase in accrued interest payable 
            and other liabilities                                           (150)        1,323 
----------------------------------------------------------------------------------------------
     Net cash provided by operating activities                             4,749         5,077 
----------------------------------------------------------------------------------------------
 CASH FLOWS FROM INVESTING ACTIVITIES 
     Proceeds from sale of available-for-sale
      investment securities                                                  -           8,549 
     Proceeds from maturities of available-for-sale
      investment securities                                                8,867         4,005 
     Purchase of available-for-sale investment securities                 (8,000)          -   
     Purchase of FHLB and FRB stock                                          (58)         (202)
     Proceeds from sale of loans                                           1,299           -   
     Loans funded, net of payments received                               (4,507)       (6,749)
     Proceeds from sale of OREO                                                -           567 
     Proceeds from sale of fixed assets and other assets                       4           197 
     Purchase of fixed assets                                                (77)         (138)
----------------------------------------------------------------------------------------------
          Net cash (used in) provided by investing activities             (2,472)        6,229 
----------------------------------------------------------------------------------------------
 CASH FLOWS FROM FINANCING ACTIVITIES 
     Proceeds from exercise of stock options                                  69            23 
     Dividends paid                                                         (749)          -   
     Increase (decrease) in noninterest-bearing deposits                  11,713        (8,871)
     Increase in interest-bearing deposits                                19,206         3,662 
     (Decrease) increase in other borrowings                                (841)        3,307 
----------------------------------------------------------------------------------------------
          Net cash provided by (used in) financing activities             29,398        (1,879)
----------------------------------------------------------------------------------------------
 Increase in cash and cash equivalents                                    31,675         9,427 
 Cash and cash equivalents, beginning of period                           33,768        29,088 
----------------------------------------------------------------------------------------------
 Cash and cash equivalents, end of period                              $  65,443     $  38,515 
----------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------
 SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTIONS 
     Unrealized loss on investment securities 
      available-for-sale, net of tax                                       $  99        $  797 
     Transfers of loans to other real estate owned                            31           699 
     Assumption of senior liens on other real estate owned                    87            28 
     Asset sales offset to restructuring reserve                               -            91 
     Close out of capital lease accounts                                       -           118 
----------------------------------------------------------------------------------------------
</TABLE>

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. 

                                      3
<PAGE>

Part I. Item 1. (continued)

           SC BANCORP AND ITS SUBSIDIARY,  SOUTHERN CALIFORNIA BANK
                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited, except for information as of and for the year ended December 31,
  1996)

NOTE 1-SIGNIFICANT ACCOUNTING POLICIES

SC Bancorp, a California bank holding company (the "Company"), and its 
subsidiary, Southern California Bank, a California state-chartered bank (the 
"Bank"), operate 14 branches in Southern California.  The Company's primary 
source of revenue is providing loans to customers who are predominantly small 
and mid-sized businesses.  The accounting and reporting policies of the 
Company conform to generally accepted accounting principles and general 
practices within the banking industry.  See the notes to SC Bancorp's 
consolidated financial statements contained in the Company's Annual Report on 
Form 10-K.

The interim period financial statements are unaudited.  It is  the opinion of 
Company management that all adjustments consisting of normal, recurring 
accruals necessary for a fair presentation of the results of operations have 
been reflected therein.  Results for the period ending June 30, 1997, are not 
necessarily indicative of results that may be expected for any other interim 
periods or for the year as a whole.

PRINCIPLES OF CONSOLIDATION:
The consolidated financial statements include the accounts of the Company and 
the Bank.  All material intercompany balances and transactions have been 
eliminated in consolidation.

USE OF ESTIMATES IN THE PREPARATION OF THE FINANCIAL STATEMENTS:
The preparation of the consolidated financial statements in conformity with 
generally accepted accounting principles requires management to make 
estimates and assumptions that affect the reported amounts of assets and 
liabilities and disclosures of contingent assets and liabilities at the date 
of the consolidated financial statements, and the reported amount of revenues 
and expenses during the reporting period.  Actual results could differ from 
those estimates.

SECURITIES:
At June 30, 1997, the Company's available-for-sale portfolio had a net 
unrealized loss of $1.3 million.  The tax-effected reduction to shareholders' 
equity at June 30, 1997, was $775,000.  In January 1995, the FDIC issued a 
final rule excluding unrealized holding gains and losses on 
available-for-sale debt securities from the calculation of Tier 1 capital.

STOCK OF FEDERAL HOME LOAN BANK OF SAN FRANCISCO:
As a member of the Federal Home Loan Bank of San Francisco ("FHLB"), the Bank 
is required to own common stock in the FHLB based upon a percentage of one of 
the following balances: residential mortgage loans, total assets, or the 
outstanding balance of FHLB advances, whichever is greater.

STOCK OF FEDERAL RESERVE BANK OF SAN FRANCISCO:
As a member of the Federal Reserve System, the Bank is required to own common 
stock in the Federal Reserve Bank of San Francisco ("FRB") based upon a 
percentage of capital and surplus at the time of initial membership.

LOANS:
All loans on nonaccrual are considered to be impaired; however, not all 
impaired loans are on nonaccrual status.  Impaired loans on accrual status 
must meet the following criteria: all payments must be current and the loan 
underwriting must support the debt service requirements.  Factors that 
contribute to a performing loan being classified as impaired include: a below 
market interest rate, delinquent taxes and debts to other lenders that cannot 
be serviced out of existing cash flow.  

                                      4

<PAGE>

Part I. Item 1. (continued)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

STOCK-BASED COMPENSATION:
The Company maintains a stock option plan for the benefit of its executives.  In
1995, the FASB issued SFAS No. 123 "Accounting for Stock-Based Compensation,"
which encourages, but does not require, companies to record compensation expense
for stock-based employee compensation at fair value.  The Company has chosen to
continue to account for stock-based compensation using the intrinsic value
method prescribed in Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees," and related Interpretations.  Accordingly,
compensation expense for stock options is measured as the excess, if any, of the
quoted market price of the Company's stock at the date of the grant over the
amount an employee must pay to acquire the stock.  There were no stock option
grants during the period ended June 30, 1997.

TRANSFERS AND SERVICING OF FINANCIAL ASSETS AND EXTINGUISHMENT OF LIABILITIES:
In June 1996, the FASB issued SFAS No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities." This
Statement provides accounting and reporting standards for transfers and
servicing of financial assets and extinguishment of liabilities, and is applied
prospectively to financial statements for fiscal years beginning after December
31, 1996.  In 1996, the FASB also issued SFAS No. 127, "Deferral of the
Effective Date of Certain Provisions of FASB Statement No. 125," which defers
for one year the effective date of certain provisions within SFAS No. 125.  The
adoption of SFAS No. 125 and SFAS No. 127 effective January 1, 1997 did not have
a material impact on the Company's operations or financial condition.

EARNINGS PER SHARE
In February 1997, the FASB issued SFAS No. 128, "Earnings Per Share."  This
Statement establishes standards for computing and presenting earnings per share
(EPS) for entities with publicly held common stock or potential common stock. 
The Statement replaces the presentation of primary EPS with basic EPS, and
requires dual presentation of basic and diluted EPS on the face of the income
statement for all entities with complex capital structures.  The Statement is
effective for financial statements issued for periods ending after December 15,
1997, and requires restatement of all prior-period EPS data presented.  Basic
EPS as calculated under SFAS No. 128 for prior periods would not change from
that previously reported.

                                      5

<PAGE>

Part I. Item 1. (continued)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2-INVESTMENT SECURITIES

The amortized cost and estimated fair value of investment securities as of June
30, 1997 and December 31, 1996 are as follows:

<TABLE>
<CAPTION>
 (DOLLARS IN THOUSANDS)                               June 30, 1997
--------------------------------------------------------------------------------------
                                                      Gross       Gross    Estimated
                                         Amortized  Unrealized  Unrealized    Fair 
                                           Cost       Gains       Losses      Value 
                                         ---------  ----------  ----------  ---------
<S>                                      <C>        <C>         <C>         <C>
 AVAILABLE-FOR-SALE: 
 U.S. Treasury securities and obligations 
     of U.S. government agencies         $  35,664    $  29     $    (182)  $  35,511 
 Mortgage-backed securities                 39,123        -        (1,169)     37,954 
--------------------------------------------------------------------------------------
     Total                               $  74,787    $  29     $  (1,351)  $  73,465 
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------

<CAPTION>
 (DOLLARS IN THOUSANDS)                              December 31, 1996
--------------------------------------------------------------------------------------
                                                      Gross       Gross    Estimated
                                         Amortized  Unrealized  Unrealized    Fair 
                                           Cost       Gains       Losses      Value 
                                         ---------  ----------  ----------  ---------
<S>                                      <C>        <C>         <C>         <C>
 AVAILABLE-FOR-SALE: 
 U.S. Treasury securities and obligations 
     of U.S. government agencies         $  32,967      $  -     $    (285)  $ 32,682 
 Mortgage-backed securities                 43,060         -        (1,209)    41,851 
--------------------------------------------------------------------------------------
     Total                               $  76,027      $  -     $  (1,494)  $ 74,533 
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
</TABLE>

Investment securities with a carrying value of $14.0 million and $15.5 million
were pledged to secure public deposits and as collateral for other borrowings at
June 30, 1997 and December 31, 1996, respectively.

The amortized cost and estimated fair value of debt securities at June 30, 1997
by contractual maturities are shown in the following table.  Expected maturities
will differ from contractual maturities, particularly with respect to mortgage-
backed securities, because borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties.

<TABLE>
<CAPTION>
 (DOLLARS IN THOUSANDS)                                              Maturing in 
-----------------------------------------------------------------------------------------------------------
                                                             Over one     Over five 
                                                 One year  year through  years through    Over 
  JUNE 30, 1997                                   or less   five years   ten years      ten years    Total 
                                                ---------  ------------  -------------  ---------  --------
<S>                                             <C>        <C>            <C>            <C>        <C>
     Available-for-sale, amortized cost         $  14,664   $  54,584       $  5,539       $  -     $74,787 
     Available-for-sale, estimated fair value   $  14,653   $  53,424       $  5,388       $  -     $73,465 
</TABLE>

There were no sales of investment securities during the first six months of
1997.  Proceeds from the sales of available-for-sale investment securities
during the same period in 1996 were $8.5 million.  A gross gain of $14,000 was
realized on sales of investment securities in 1996.  

                                      6
<PAGE>

Part I. Item 1. (continued)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3-LOANS

Loans by category are summarized below:


<TABLE>
<CAPTION>

                                                 June 30,               December 31, 
 (DOLLARS IN THOUSANDS)                            1997      Percent        1996       Percent
-----------------------------------------------------------------------------------------------
<S>                                            <C>           <C>         <C>           <C>

 Commercial                                    $  168,670     48.11%     $  160,633     46.17%

 Real estate, construction                          6,899      1.97%          8,544      2.46%

 Real estate, mortgage                            108,250     30.88%        105,123     30.22%

 Consumer                                          66,765     19.04%         73,564     21.15%
-----------------------------------------------------------------------------------------------
     Gross loans                                  350,584    100.00%        347,864    100.00%
-----------------------------------------------------------------------------------------------
     Deferred fee income                             (638)                     (689)

     Allowance for possible loan losses            (5,062)                   (4,947)
-----------------------------------------------------------------------------------------------
                      Loans, net               $  344,884                 $ 342,228 
-----------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------

</TABLE>

No industry constitutes a concentration in the Company's loan portfolio.  

The following table summarizes the balances and changes in the allowance for
possible loan losses for the periods indicated:

<TABLE>
<CAPTION>

                                                      Six months            Year             Six months
                                                        ended               ended              ended 
                                                       June 30,          December 31,         June 30, 
 (DOLLARS IN THOUSANDS)                                 1997                1996               1996
-----------------------------------------------------------------------------------------------------------
<S>                                                    <C>                <C>                 <C>

 Average balance of gross loans outstanding            $  344,440         $  321,843          $  315,024 
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
 Gross loan balance at end of period                   $  350,584         $  347,864          $  322,953 
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
 Allowance at beginning of period                      $    4,947         $    5,734          $    5,734 
 Charge-offs: 

     Commercial                                               617                422                  79 

     Real estate                                              -                  279                 138 

     Consumer                                                  29                168                 122 
-----------------------------------------------------------------------------------------------------------
                Total charge-offs                             646                869                 339 

 Recoveries: 

     Commercial                                                99                477                 362 

     Real estate                                              -                   21                   5 

     Consumer                                                  12                 54                  35 
-----------------------------------------------------------------------------------------------------------
                Total recoveries                              111                552                 402 

 Net charge-offs (recoveries)                                 535                317                 (63)
 Provision (recovery) charged (credited) to operations        650               (470)               (470)
 Allowance on purchased loans                                 -                  -                   -   
-----------------------------------------------------------------------------------------------------------
 Allowance at end of period                            $    5,062         $    4,947          $    5,327 
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------

</TABLE>


                                                        7

<PAGE>

Part I. Item 1. (continued)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3-LOANS (CONTINUED)

<TABLE>
<CAPTION>

                                                                  June 30,          December 31,          June 30, 
                                                                   1997                1996                1996
-------------------------------------------------------------------------------------------------------------------
<S>                                                                 <C>               <C>                 <C>

 Ratio of allowance for loan losses to loans 
     outstanding at end of period                                    1.44%               1.42%               1.65%

 Ratio of allowance for loan losses to  
     nonaccrual loans at end of period                              69.43%             173.84%             778.60%

 Ratio of annualized net charge-offs to  
     average loans                                                   0.31%               0.10%              (0.04%)

</TABLE>

Loans on nonaccrual status were $7.3 million and $684,000, respectively at 
June 30, 1997 and 1996.  Interest income that would have been collected on 
these loans had they performed in accordance with their original terms was 
approximately $365,000 and $96,000, for the six months ended June 30, 1997 
and 1996, respectively. The Company's average recorded investment in impaired 
loans for the six months ended June 30,  1997 was $8.9 million.  The 
Company's allowance for possible loan losses at June 30, 1997 includes $1.8 
million related to impaired loans.  Interest income recognized on impaired 
loans during the first six months of 1997 and 1996 was $167,000 and $180,000, 
of which $167,000 and $164,000, respectively, was collected in cash. 

NOTE 4-COMMITMENTS AND CONTINGENCIES

CREDIT EXTENSION:
In the normal course of business, there are various outstanding commitments 
to extend credit which are not reflected in the accompanying consolidated 
financial statements.  The Company does not anticipate losses as a result of 
these transactions.  However, the commitments are a component of the estimate 
of the allowance for possible loan losses.  Commercial and standby letters of 
credit totaled approximately $5.8 million and $4.1 million at June 30, 1997 
and December 31, 1996, respectively.  In addition, the Company had unfunded 
loan commitments of $126.5 million and $110.5 million at June 30, 1997 and 
December 31, 1996, respectively.  All of the commitments outstanding at June 
30, 1997 and December 31, 1996 represent unfunded loans which bear a floating 
interest rate. 

The Company uses the same credit policies in making commitments and 
conditional obligations as it does in extending loan facilities to customers. 
The Company evaluates each customer's creditworthiness on a case-by-case 
basis.  The amount of collateral obtained, if deemed necessary by the Company 
upon extension of credit, is based on management's credit evaluation of the 
counterparty. Collateral held varies, but may include accounts receivable, 
inventory, property, plant and equipment, and income-producing commercial 
properties.

INTEREST RATE SWAPS:
The Company entered into two interest rate swap agreements to reduce the impact
of changes in interest rates on its floating-rate loan portfolio.  At June 30,
1997, the Company had outstanding one interest rate swap agreement with a
commercial bank having a total notional principal amount of $50 million (Swap
#1).  The second interest rate swap agreement was with a securities broker
having a notional principal amount of $25 million (Swap #2).  Swap #2 matured in
January 1997.  The agreements were intended to reduce the Company's exposure to
declines in prime lending rates by artificially converting $75 million of the
Company's prime-based loans to fixed rates for the duration of the agreements. 
Swap #1 was entered into in September 1993.  The terms of the agreement require
the Company to pay interest quarterly based on three-month LIBOR and to receive
interest semi-annually at a fixed rate of 4.865%.  The agreement matures in
September 1998.

The Company accrues monthly interest income and expense on the swaps, the net 
of which is included in income on loans.  Net interest expense of $187,000 
and $271,000 related to the swap agreements is included in interest income 
for the six months ended June 30, 1997 and 1996, respectively.  The Company 
is required to pledge collateral on the swaps.  A U.S. Agency note having a 
fair value of approximately $3.6 million was pledged as collateral for the 
outstanding agreement as of June 30, 1997.  The Company is exposed to credit 
loss in the event of nonperformance by the counterparty to the remaining 
agreement. However, the Company does not anticipate nonperformance by the 
counterparty. 

                                    8

<PAGE>

Part I. 
Item 2.  Management's Discussion and Analysis of Financial Condition
           and Results of Operations

OVERVIEW

The following discussion presents information about the results of 
operations, financial condition, liquidity and capital resources of SC 
Bancorp and its subsidiary, Southern California Bank (together, the 
"Company").  This information should be read in conjunction with the audited 
1996 consolidated financial statements of the Company and the notes thereto, 
and the accompanying quarterly unaudited consolidated financial statements 
and notes thereto.

RESULTS OF OPERATIONS

The Company reported net income of $1.3 million for the second quarter of 
1997 compared to net income of $920,000 for the second quarter of 1996.

The following table summarizes key performance indicators pertaining to the 
Company's operating results:

<TABLE>
<CAPTION>

                                                            Three months ended            Six months ended
                                                                  June 30,                    June 30,
-------------------------------------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)            1997             1996             1997             1996
-------------------------------------------------------------------------------------------------------------------
<S>                                                  <C>              <C>              <C>              <C>

Return on average assets (1)                               1.03%            0.82%            1.01%            0.74%

Return on average shareholders' equity (1)                10.15%            8.08%            9.64%            7.39%

Net income                                           $    1,302       $      920       $    2,447       $    1,683

Earnings per share                                   $     0.17       $     0.12       $     0.33       $     0.23

Total average assets                                 $  504,979       $  452,972       $  490,970       $  454,303
----------------------------------------------------
(1)  Annualized

</TABLE>


                                    9
<PAGE>

Part I. Item 2.  (continued)

NET INTEREST INCOME

Net interest income is the difference between interest earned on assets and 
interest paid on liabilities.  Net interest margin is net interest income 
expressed as a percentage of average interest-earning assets.

The following table provides information concerning average interest-earning 
assets and interest-bearing liabilities yields and rates thereon for the 
three months ended June 30, 1997 and 1996, respectively.  Average balances 
are average daily balances.  Nonaccrual loans are included in total average 
loans outstanding.

<TABLE>
<CAPTION>

                                                                                    THREE MONTHS ENDED 
                                                       --------------------------------------------------------------------------
                                                                      6/30/97                                6/30/96
                                                       --------------------------------------------------------------------------
                                                        Average                     Yield/      Average                  Yield/
(DOLLARS IN THOUSANDS)                                  Balance       Interest      Rate(1)     Balance      Interest    Rate(1)
---------------------------------------------------------------------------------------------------------------------------------
<S>                                                   <C>             <C>            <C>       <C>           <C>          <C>
ASSETS
Interest-earning assets:
     Loans, net of deferred fees                       $  345,687     $    7,997     9.28%     $  316,709    $  7,389     9.38%
     Investment securities                                 76,390          1,008     5.30%         83,943       1,061     5.08%
     Federal funds sold and other                          37,591            516     5.51%          6,910          92     5.35%
---------------------------------------------------------------------------------------------------------------------------------
Total interest earning assets/interest income             459,668          9,521     8.31%        407,562       8,542     8.43%
---------------------------------------------------------------------------------------------------------------------------------
Noninterest earning assets                                 45,311                                  45,553
---------------------------------------------------------------------------------------------------------------------------------
Total assets                                           $  504,979                              $  453,115 
---------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY                             
     Interest-bearing deposits                         $  311,097     $    3,164     4.08%     $  277,297    $  2,701     3.92%
     Other interest-bearing liabilities                     5,416            101     7.48%         10,386         183     7.09%
---------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities/interest expense       316,513          3,265     4.14%        287,683       2,884     4.03%
---------------------------------------------------------------------------------------------------------------------------------
     Noninterest-bearing liabilities                      137,040                                 119,636 
     Shareholders' equity                                  51,426                                  45,796 
---------------------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity             $  504,979                              $  453,115 
---------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME/NET INTEREST MARGIN                               $    6,256     5.46%                   $  5,658     5.58%
---------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------

</TABLE>

(1)  Annualized.

Net interest income was $6.3 million for the three months ended June 30, 
1997, compared to $5.7 million for the three months ended June 30, 1996.  The 
increase in net interest income over the prior year is primarily due to a 
$29.0 million increase in average loan balances for the second quarter of 
1997 compared to the second quarter of 1996.  The increase in loan balances 
occurred largely in the commercial and consumer high-net worth and automobile 
loan categories.  The increase in Fed funds sold for the second quarter of 
1997 compared to the same period for 1996 resulted from the growth in average 
deposit balances.  The growth in deposit balances can be attributed to 
deposit promotion programs run during the second quarter of 1997 that 
featured money market and savings deposit products.  


                                      10

<PAGE>

Part I. Item 2.  (continued)

The following table provides information concerning the changes in interest 
income and interest expense resulting from changes in average interest rates 
(rate) and changes in average balances (volume) for the three months ended 
June 30, 1997 and 1996, respectively.  The changes in interest income and 
interest expense attributable to the rate/volume variances are allocated to 
the rate and volume variances based upon the absolute value of each of those 
variances as a percentage of the sum of the absolute values of the individual 
rate and volume variances.

                                         Comparison of three-month period
                                           ended June 30, 1997 and 1996
                                      increase (decrease) in interest income
                                            or expense due to changes in
                                      -----------------------------------------
(DOLLARS IN THOUSANDS)                       Rate      Volume      Total
-------------------------------------------------------------------------------
ASSETS
Interest-earning assets:
     Loans, net of deferred fees            $  (78)    $  686     $   608 
     Investment securities                      45        (98)        (53)
     Federal funds sold and other                3        421         424
-------------------------------------------------------------------------------
Total interest income                          (30)     1,009         979 
-------------------------------------------------------------------------------

LIABILITIES 
     Interest-bearing deposits              $  117     $  346     $   463 
     Other interest-bearing liabilities         10        (92)        (82)
-------------------------------------------------------------------------------
Total interest expense                         127        254         381
-------------------------------------------------------------------------------
NET INTEREST INCOME                        $  (157)    $  755     $   598
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------

                                      11

<PAGE>

Part I. Item 2.  (continued)

The following table provides information concerning average interest-earning 
assets and interest-bearing liabilities yields and rates thereon for the six 
months ended June 30, 1997 and 1996, respectively.  

<TABLE>
                                                                                     SIX MONTHS ENDED 
                                                       -----------------------------------------------------------------------
                                                                       6/30/97                             6/30/96
                                                       -----------------------------------------------------------------------
                                                        Average                     Yield/      Average                Yield/
(DOLLARS IN THOUSANDS)                                  Balance       Interest      Rate(1)     Balance    Interest    Rate(1)
------------------------------------------------------------------------------------------------------------------------------
<S>                                                    <C>            <C>            <C>      <C>          <C>          <C>
ASSETS
Interest-earning assets:
     Loans, net of deferred fees                       $  343,792     $  15,759      9.24%    $  314,508   $  14,768    9.44%
     Investment securities                                 75,119         1,959      5.26%        86,709       2,204    5.11%
     Federal funds sold and other                          26,444           717      5.47%         6,444         172    5.37%
------------------------------------------------------------------------------------------------------------------------------
Total interest earning assets/interest income             445,355        18,435      8.35%       407,661      17,144    8.46%
------------------------------------------------------------------------------------------------------------------------------
Noninterest earning assets                                 45,615                                 46,770 
------------------------------------------------------------------------------------------------------------------------------
Total assets                                           $  490,970                             $  454,431 
------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
     Interest-bearing deposits                         $  301,669     $   6,031      4.03%    $  275,578   $   5,361    3.91%
     Other interest-bearing liabilities                     5,778           215      7.50%        14,328         489    6.86%
------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities/interest expense       307,447         6,246      4.10%       289,906       5,850    4.06%
------------------------------------------------------------------------------------------------------------------------------
     Noninterest-bearing liabilities                      132,327                                118,753 
     Shareholders' equity                                  51,196                                 45,772 
------------------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity             $  490,970                             $  454,431 
------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME/NET INTEREST MARGIN                               $  12,189      5.52%                 $  11,294    5.57%
------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------

</TABLE>

(1)  Annualized.

Net interest income was $12.2 for the six months ended June 30, 1997, 
compared to $11.3 for the six months ended June 30, 1996.  The increase in 
net interest income compared to the prior year is primarily due to a $29.3 
million increase in average loan balances for the first six months of 1997 
compared to the same period in 1996.  The year-to-date average balance of 
commercial loans increased by $15.5 million, primarily in the unsecured and 
asset-based lending categories. In addition, the year-to-date average balance 
of consumer loans, excluding home equity loans, increased by $14.4 million 
over June 30,1996.
     
The average yield on earning assets decreased to 8.35% for the six months 
ended June 30, 1997 from 8.46% for the six months ended June 30, 1996.  The 
overall decrease in yield can be attributed to the decrease in the average 
yield on loans, including the effect of the interest rate swap, to 9.24% from 
9.44%.  The decrease in loan yield occurred despite a modest increase in the 
prime rate in March 1997 due to competitive pricing pressures experienced in 
the Company's market area for commercial and real estate loans, and to the 
increase in nonaccrual loans.  The majority of the Company's variable-rate 
loans are indexed to the national prime rate.  The national prime rate 
increased to 8.50% from 8.25% on March 26, 1997.  Previously, the prime rate 
declined to 8.25% from 8.50%  on January 31, 1996.

The net interest margin decreased to 5.52% for the first half of 1997 from 
5.57% for the comparable period of 1996.  The decrease in the net interest 
margin can be attributed to the decrease in yield on earning assets discussed 
above, and to a modestly higher cost of funds related to the deposit 
promotions run during 1997.  The Company's overall cost of interest-bearing 
funds increased on a year-to-date basis to 4.10% from 4.06% for the first six 
months of 1996.  

                                      12
<PAGE>

PART I. ITEM 2.  (CONTINUED)

The following table provides information concerning the changes in interest 
income and interest expense resulting from changes in average interest rates 
(rate) and changes in average balances (volume) for the six months ended June 
30, 1997 and 1996, respectively.

<TABLE>

                                              Comparison of six-month period 
                                               ended June 30, 1997 and 1996
                                           increase (decrease) in interest income 
                                                or expense due to changes in
                                          ----------------------------------------
(DOLLARS IN THOUSANDS)                        Rate        Volume        Total
----------------------------------------------------------------------------------
<S>                                        <C>           <C>           <C>
ASSETS
Interest-earning assets:
     Loans, net of deferred fees           $  (325)      $  1,316      $  991 
     Investment securities                      61           (306)       (245)
     Federal funds sold and other                3            542         545 
----------------------------------------------------------------------------------
Total interest income                         (261)         1,552       1,291 
----------------------------------------------------------------------------------
LIABILITIES 
     Interest-bearing deposits             $   164       $    506      $  670 
     Other interest-bearing liabilities         41           (315)       (274)
----------------------------------------------------------------------------------
Total interest expense                         205            191         396 
----------------------------------------------------------------------------------
NET INTEREST INCOME                        $  (466)      $  1,361      $  895 
----------------------------------------------------------------------------------
----------------------------------------------------------------------------------

</TABLE>

PROVISION FOR POSSIBLE LOAN LOSSES

The Company recorded a $300,000 provision for possible loan losses for the 
second quarter of 1997.  Gross loan charge-offs and recoveries for the 
quarter were $635,000 and $52,000, respectively.  Nonaccrual loans increased 
to $7.3 million at June 30, 1997 from $2.8 million at December 31, 1996.  The 
loan loss provision was increased in 1997 to support growth in the loan 
portfolio and to maintain appropriate reserves for a small number of 
commercial real estate loans placed on nonaccrual status during the first 
quarter of 1997.   The ratio of the allowance for possible loan losses to 
total loans was 1.44% at June 30, 1997 and 1.65% at June 30, 1996.  See "NOTE 
3-LOANS" of the Company's consolidated financial statements which are 
included in Part I, Item 1. of this Form 10-Q and "-Asset Quality" below.  
The Company recorded a $750,000 reduction in the provision for possible loan 
losses for the second quarter of 1996.  The reduction in the provision was 
made following the completion of an analysis of the Company's historical 
allocation of loan loan loss reserves and loan loss migration experience.  
Loan charge-offs and recoveries for the second quarter of 1996 were $292,000 
and $218,000, respectively.  Nonaccrual loans decreased to $684,000 at June 
30, 1996 from $1.4 million at December 31, 1995.  

The Company recorded a $650,000 provision for possible loan losses for the 
first six months of 1997.  Year-to-date loan charge-offs and recoveries were 
$646,000 and $111,000, respectively, representing  year-to-date net loan 
charge-offs of $535,000. Year-to-date loan charge-offs and recoveries for the 
first six months of 1996 were $339,000 and $402,000, respectively, 
representing  year-to-date net recoveries of $63,000. 

                                     13


<PAGE>

PART I ITEM 2. (CONTINUED)

NONINTEREST INCOME

The following table sets forth the major components of noninterest income for 
the periods indicated:

<TABLE>

                                               Three Months Ended       Six Months Ended
 (DOLLARS IN THOUSANDS)                             June 30,                June 30,
-----------------------------------------------------------------------------------------
                                               1997         1996        1997       1996
                                              ------       ------      ------     ------
<S>                                           <C>          <C>         <C>        <C>
 Service charges on deposit accounts          $  264       $  377      $  525     $  764
 Other fees and charges                          633          655       1,287      1,265
 Merchant bankcard income                        145          126         264        243
 Net gain on sales of securities                  -            -           -          14
 Net gain on sale of SBA loans                    -            -           78         -
 Net gain (loss) on sales of fixed assets         -           (23)          4        (24)
 Life insurance income                            31           26          63         53 
 Other income                                    113           85         222        218 
-----------------------------------------------------------------------------------------
        Total noninterest income              $1,186       $1,246      $2,443     $2,533 
-----------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------
</TABLE>

Noninterest income was $1.2 million for the three months ended June 30, 1997 
and 1996, respectively.  Service charge income on deposit accounts decreased 
for the three months ended June 30, 1997 over the comparable period of the 
prior year due to competitive pricing on commercial accounts.  In addition, a 
recent deposit promotion featured a no service charge account for depositors 
using direct deposit.  

Noninterest income for the first six months of 1997 was $2.4 million compared 
to $2.5 million for the first six months of 1996.  Noninterest income for the 
first six months of 1997 includes a $78,000 gain on sale of SBA loans.  

                                     14
<PAGE>

PART I ITEM 2. (continued)

NONINTEREST EXPENSE

The following table provides detail of the Company's noninterest expense by 
category for the periods indicated:

<TABLE>

                                                 Three Months Ended   Six Months Ended 
 (DOLLARS IN THOUSANDS)                                June 30,           June 30, 
---------------------------------------------------------------------------------------
                                                   1997      1996      1997      1996
                                                  ------    ------    ------   -------
<S>                                              <C>       <C>       <C>       <C>     
 Salaries and employee benefits                  $ 2,424   $ 2,559   $ 4,951   $ 5,178 
 Net occupancy, furniture and equipment              873     1,078     1,720     2,188 
 Professional and legal fees                         417       680       757     1,001 
 Postage and delivery                                158       155       307       315 
 Goodwill amortization                               135       121       270       235 
 Software                                            115        61       236       122 
 Merchant bankcard expense                           113       106       208       203 
 Office supplies                                      79        84       166       163 
 Advertising and promotion                            92       132       173       228 
 Telecommunications                                   82        85       162       197 
 Insurance and assessment                             70        48       138       149 
 Data processing                                      63        78       125       147 
 Operating losses                                     16        85        73       140 
 Professional and community                           58        99       108       149 
 Other real estate owned, net                         (3)      426        (5)      482 
 Other noninterest expense                           219       276       401       500 
---------------------------------------------------------------------------------------
           Total noninterest expense             $ 4,911   $ 6,073   $ 9,790   $11,397 
---------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------
 Annualized noninterest expense as a %
       of average earning assets                    4.29%     5.91%     4.43%     5.62%
</TABLE>

Noninterest expense for the second quarter of 1997 decreased to $4.9 million 
from $6.1 million for the second quarter of 1996.  In addition, noninterest 
expense decreased to $9.8 million for the first half of 1997 from $11.4 
million for the prior year.  The reductions in noninterest expense for the 
current quarter and year-to-date compared to the prior year occurred 
primarily in the occupancy, professional and legal, and other real estate 
owned categories.  The reduction in occupancy expense is directly related to 
the sale of two branches and the consolidation of a third branch completed 
during the first quarter of 1996.  The reduction in professional and legal 
fees is attributed to the resolution of certain legal matters in 1997 that 
had been ongoing in 1996. Expenses associated with other real estate owned 
also declined on both a quarterly and year-to-date basis due to valuation 
reserves taken in 1996 to facilitate the disposition of one property.  No 
additional valuations have been recorded in 1997.    

FINANCIAL CONDITION

Total assets at June 30, 1997 were $507.9 million, an increase of $31.9 
million from $476.0 million at December 31, 1996.  Gross loan balances 
increased slightly to $350.6 million at June 30, 1997 from $347.9 million at 
December 31, 1996.  Total deposits increased to $446.2 million at June 30, 
1997 from $415.3 million at December 31, 1996.  The increase in deposit 
balances is primarily due to the Bank's core deposit generation programs 
which contributed to increases in retail savings and business money market 
deposits.   

                                     15

<PAGE>

Part I. Item 2. (continued)

The following table provides a summary comparison of assets and liabilities in
the Company's consolidated balance sheets and the percentage change in these
balances for the dates indicated:

<TABLE>
<CAPTION>

                                                          June 30,  December 31,    Amount      Percent   
 (DOLLARS IN THOUSANDS)                                     1997        1996        Change      Change    
----------------------------------------------------------------------------------------------------------
<S>                                                     <C>           <C>          <C>           <C>      
 ASSETS                                                                                                   
 Cash and cash equivalents                               $ 65,443     $ 33,768     $ 31,675      93.80%   
 Securities available-for-sale, at fair value              73,465       74,533       (1,068)     (1.43%)  
 Investment in Federal Home Loan Bank stock, at cost        1,495        1,450           45       3.10%   
 Investment in Federal Reserve Bank stock, at cost            621          607           14       2.31%   
 Loans, net                                               344,884      342,228        2,656       0.78%   
 Premises and equipment, net                                7,017        7,740         (723)     (9.34%)  
 Other real estate owned, net                                 654          536          118      22.01%   
 Accrued interest receivable                                3,748        3,931         (183)     (4.66%)  
 Other assets                                              10,567       11,220         (653)     (5.82%)  
----------------------------------------------------------------------------------------------------------
      TOTAL ASSETS                                      $ 507,894    $ 476,013     $ 31,881       6.70%   
----------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------
                                                                                                          
 LIABILITIES AND SHAREHOLDERS' EQUITY                                                                     
 Deposits:                                                                                                
      Noninterest-bearing deposits                      $ 137,616    $ 125,903     $ 11,713       9.30%   
      Interest-bearing demand deposits                    103,880      104,435         (555)     (0.53%)  
      Savings deposits                                     56,500       39,755       16,745      42.12%   
      Time certificates of deposit                        148,249      145,233        3,016       2.08%   
----------------------------------------------------------------------------------------------------------
                    Total deposits                        446,245      415,326       30,919       7.44%   
----------------------------------------------------------------------------------------------------------
 Borrowed funds and other interest-bearing liabilities      7,342        8,096         (754)     (9.31%)  
 Accrued interest payable and other liabilities             2,522        2,672         (150)     (5.61%)  
 Total shareholders' equity                                51,785       49,919        1,866       3.74%   
----------------------------------------------------------------------------------------------------------
      TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY        $ 507,894    $ 476,013     $ 31,881       6.70%   
----------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------
</TABLE>


CASH AND CASH EQUIVALENTS

Cash and cash equivalents consist of cash on hand, deposits at correspondent 
banks and overnight investment of excess cash balances in Federal funds sold. 
The Company maintains balances at correspondent banks adequate to cover daily 
inclearings and other charges.  The Company's net reserve requirement with 
the Federal Reserve Bank was $1.6 million at June 30, 1997.

Cash and cash equivalents increased to $65.4 million at June 30, 1997 from 
$33.8 million at December 31, 1996.  The increase is primarily due to a $24.0 
million increase in investments in overnight Federal funds sold.  

INVESTMENT SECURITIES

The Company's available-for-sale securities portfolio at June 30, 1997 
includes U.S. government agency securities and mortgage-backed securities.


                                      16

<PAGE>

Part I. Item 2. (continued)

The following table sets forth the maturity distribution of the Company's 
investment securities at their estimated fair values at June 30, 1997:

<TABLE>
<CAPTION>
                                                                       Maturing in 
-------------------------------------------------------------------------------------------------------------
                                                            Over one      Over five                          
                                               One year    year through  years through     Over              
 (DOLLARS IN THOUSANDS)                         or less     five years     ten years     ten years   Total   
-------------------------------------------------------------------------------------------------------------
<S>                                           <C>          <C>             <C>             <C>       <C>     
Obligations of U.S. government agencies       $ 14,653      $ 20,858       $  -            $  -      $ 35,511
Mortgage-backed securities                        -           32,566         5,388            -        37,954
-------------------------------------------------------------------------------------------------------------
     Total                                    $ 14,653      $ 53,424       $ 5,388         $  -      $ 73,465
-------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------
</TABLE>


LOANS

The Company provides a full range of credit products designed to meet the 
credit needs of borrowers in its market area.  The Company engages in 
medium-term commercial real estate loans secured by commercial properties, 
commercial loans, term financing, SBA loans, loan participations, and 
consumer loans principally in the form of home equity lines of credit, 
vehicle loans, and loans to high net worth individuals.  Additionally, the 
Company offers construction loan products principally for entry level housing 
and owner-user commercial industrial properties.  

Refer to NOTE 3-LOANS of the Company's consolidated financial statements 
which are included in Part 1, Item 1. of this Form 10-Q for a comparison of 
loans by category at June 30, 1997 and December 31, 1996.

COMMERCIAL LOANS.  Commercial loans totaled $168.7 million, or 48.1%, of 
total loans and $160.6 million, or 46.2%, of total loans at June 30, 1997 and 
December 31, 1996, respectively.  Most of the Bank's commercial borrowers and 
customers are small-to medium-sized businesses and professionals.  Most of 
the commercial loans are short term and bear a floating rate of interest.  
Approximately 62% of the commercial loan portfolio is secured.  Collateral 
for these loans consists of accounts receivable, inventories, equipment and 
other business assets, including real estate.  At June 30, 1997,  $43.8 
million, or 12.5%, of total loans were secured by accounts receivable as 
compared to $40.6 million, or 11.7%, of loans at December 31, 1996.  
Commercial loans secured by real estate comprised $18.5 million, or 5.3%, of 
total loans at June 30, 1997, compared to $14.4 million, or 4.2%, of loans at 
December 31, 1996.  In 1995, the Company began participating in 
government-insured lending programs, including SBA loans. At June 30, 1997, 
the Company had $18.6 million of SBA loans.

REAL ESTATE CONSTRUCTION LOANS.  Real estate construction loans totaled $6.9 
million, or 2.0%, of total loans at June 30, 1997 compared to $8.5 million, 
or 2.5%, of total loans at December 31, 1996.  The Company's construction 
loan products are primarily targeted to developers of quality entry-level 
housing projects, to existing borrowers who are owner/users of commercial 
industrial property, and to CRA community projects.

REAL ESTATE MORTGAGE LOANS.  Real estate mortgage loans comprise $108.3 
million, or 30.9%, of the total loan portfolio at June 30, 1997 compared to 
$105.1 million, or 30.2%, of the total loans outstanding at December 31, 
1996. Commercial real estate loans comprise the majority of the Company's 
mortgage loan portfolio.  New real estate loans are generally made only to 
existing borrowers who are owner/users or to new borrowers who provide a new 
major banking relationship and demonstrate adequate cash flows.  All new real 
estate borrowers must provide financial reporting that meets FDICIA standards 
and the loans must meet the Company's underwriting standards.  The majority 
of the Company's real estate loans are secured by first trust deeds, and 
approximately 50% are to owner/users.

CONSUMER LOANS.  Consumer loans decreased to $66.8 million, or 19.1%, of the 
loan portfolio at June 30, 1997 from $73.6 million, or 21.2%, of total loans 
at December 31, 1996.  The decrease in consumer loan balances at June 30, 
1997 occurred in homeowner equity loans, stock secured loans, and automobile 
or recreational vehicle loans.  The consumer loan portfolio at June 30, 1997 
includes $25.5 million of home equity loans and home equity lines of credit 
representing 7.3% of total loans.  Auto and recreational vehicle loans 
comprise approximately $17.8 million, or 5.1%, of total loans, and lines of 
credit to high net worth individuals comprise $18.4 million, or 5.3% of total 
loans.  The balance of consumer loans at period ends may fluctuate and may 
not necessarily be representative of average balances outstanding during the 
respective periods due to the timing of advances and payments made on


                                      17

<PAGE>

Part I. Item 2. (continued)

such loans by borrowers.

MATURITIES AND SENSITIVITIES OF LOANS TO CHANGES IN INTEREST RATES.  The
following table sets forth the maturity distribution of the Company's loan
portfolio (excluding consumer and nonaccrual loans) at June 30, 1997, based on
remaining scheduled principal repayments:


                                             Maturing in 
   ----------------------------------------------------------------------------
                                              Over one                         
                                 One year    year through    Over              
    (DOLLARS IN THOUSANDS)        or less     five years   five years   Total  
   ----------------------------------------------------------------------------
    Commercial                    $  97,070   $  51,778  $  19,338   $ 168,186 
    Real estate, construction         2,876       3,534        489       6,899 
    Real estate, mortgage            16,866      56,436     28,564     101,866 
   ----------------------------------------------------------------------------
         Total                    $ 116,812   $ 111,748  $  48,391   $ 276,951 
   ----------------------------------------------------------------------------
   ----------------------------------------------------------------------------

The following table sets forth information on sensitivity to changes in interest
rates for the Company's loan portfolio (excluding consumer and nonaccrual loans)
at June 30, 1997:


                                     Maturing or Repricing in
   ----------------------------------------------------------------------------
                                             Over one                          
                                 One year  year through      Over              
    (DOLLARS IN THOUSANDS)        or less   five years    five years   Total   
   ----------------------------------------------------------------------------
     Fixed interest rates       $  21,488    $ 49,530      $ 18,797  $  89,815 
     Variable interest rates      186,482         155           499    187,136 
   ----------------------------------------------------------------------------
          Total                 $ 207,970    $ 49,685      $ 19,296  $ 276,951 
   ----------------------------------------------------------------------------
   ----------------------------------------------------------------------------

The amounts reported in the categories in the tables do not reflect loan 
prepayments or other factors which may cause the loans to react in different 
degrees and at different times to changes in market interest rates.

ASSET QUALITY

NONACCRUAL, PAST DUE AND MODIFIED LOANS

The Company recognizes income principally on the accrual basis of accounting. 
In determining income from loans, the Company generally adheres to a policy 
of not accruing interest on loans on which a default of principal or interest 
has existed for a period of 90 days or more.  The Company's policy is to 
assign nonaccrual status to a loan if either (i) principal or interest 
payments are past due in excess of 90 days, unless the loan is both well 
secured and in the process of collection; or (ii) the full collection of 
interest or principal becomes doubtful, regardless of the length of past due 
status.  When a loan reaches nonaccrual status, any interest accrued on such 
a loan is reversed and charged against current income.

Nonaccrual loans increased to $7.3 million, or 2.08% of total loans, at June 
30, 1997 from $2.8 million, or 0.82% of total loans, at December 31, 1996.  
The increase in nonaccrual loans is primarily due to one matured real estate 
loan that was placed on nonaccrual status during the first quarter of 1997.  
The borrower continues to make payments on the loan and negotiations 
continue.  A $1.1 million nonaccrual loan paid off subsequent to June 30, 
1997.


                                      18
<PAGE>

Part I. Item 2. (continued)

Nonaccrual loans by category are summarized below:

                                                June 30,  December 31, 
 (DOLLARS IN THOUSANDS)                           1997        1996
 ----------------------------------------------------------------------
 Commercial                                       $  501        $1,316 
 Real estate, construction                           -             -   
 Real estate, mortgage                             6,367         1,446 
 Consumer                                            422            84 
 ----------------------------------------------------------------------
     Total nonaccrual loans                       $7,290        $2,846 
 ----------------------------------------------------------------------
 ----------------------------------------------------------------------

Delinquent loans (past due 30 to 89 days and still accruing interest) by 
category are summarized below:

                                                June 30,  December 31, 
 (DOLLARS IN THOUSANDS)                           1997        1996
 ----------------------------------------------------------------------
 Commercial                                       $  888        $1,329 
 Real estate, construction                            -            -   
 Real estate, mortgage                                -            414 
 Consumer                                          1,235         1,070 
 ----------------------------------------------------------------------
     Total delinquent loans                       $2,123        $2,813 
 ----------------------------------------------------------------------
 ----------------------------------------------------------------------

 Percentage of total gross loans: 
     Nonaccrual loans                              2.08%        0.82%
     Delinquent loans, still accruing interest     0.61%        0.81%
     Nonaccrual and delinquent loans               2.68%        1.63%

ALLOWANCE FOR POSSIBLE LOAN LOSSES

A certain degree of risk is inherent in the extension of credit.  Management 
has adopted a policy to maintain the allowance for possible loan and lease 
losses at a level considered by management to be adequate to absorb estimated 
known and inherent risks in the existing portfolio.

Management performs a comprehensive analysis of the loan portfolio and its 
current allowance for loan losses on a regular basis to determine if loans 
are currently protected according to financial and collateral standards 
deemed acceptable.  The allowance for possible loan losses represents 
management's recognition of the assumed risks of extending credit and the 
quality of the loan portfolio.  The allowance is management's estimate, which 
is inherently uncertain and depends on the outcome of future events.  The 
evaluation of the quality of the loan portfolio considers the borrower's 
management, financial condition, cash flow and repayment program, as well as 
the existence of collateral and guarantees.  External business and economic 
factors beyond the borrower's control, combined with the Company's previous 
loan loss experience, are considered in management's evaluation of the 
allowance for possible loan losses. In addition, bank regulatory authorities, 
as an integral part of their examination process, periodically review the 
Company's allowance for possible loan losses and may recommend additions to 
the allowance based on their assessment of information available to them at 
the time of their examination.

When it is determined that additions are required, additions to the allowance 
are made through charges to operations and are reflected in the statements of 
operations as a provision for loan losses.  Loans which are deemed to be 
uncollectible are charged to the allowance.  Subsequent recoveries, if any, 
are credited back to the allowance.  

Management's analysis of the loan portfolio as of June 30, 1997 considered 
the factors discussed above and incorporated the 

                                     19
<PAGE>

Part I. Item 2. (continued)

Company's actual four year average charge-off experience for purposes of 
determining the adequacy of the allowance for possible loan losses.  The 
valuation analysis supports a 1.22% ratio of allowance to total loans.  The 
Company's 1.44% ratio of the allowance for possible loan losses to total 
loans at June 30, 1997 remains above this level.

Refer to NOTE 3-LOANS of the Company's consolidated financial statements 
which are included in Part I. Item 1. of this Form 10-Q for additional 
information concerning activity in the allowance for possible loan losses, 
including charge-offs and recoveries.   The provision for possible loan 
losses is discussed above.  See "-Provision for Loan Losses."

OTHER REAL ESTATE OWNED

OREO primarily includes properties acquired through foreclosure or through 
full or partial satisfaction of loans.  The difference between the fair value 
of the real estate collateral, less the estimated costs of disposal, and the 
loan balance at the time of transfer to OREO is reflected in the allowance 
for possible loan losses as a charge-off.  Any subsequent declines in the 
fair value of the OREO property after the date of transfer are recorded 
through a provision for writedowns on OREO.  Routine holding costs, net of 
any income and net gains or losses on disposal, are reported in noninterest 
expense.  Activity in OREO for the periods indicated is as follows:

                                          Six months 
                                             Ended       Year Ended 
                                            June 30,     December 31, 
 (DOLLARS IN THOUSANDS)                       1997          1996
 ----------------------------------------------------------------------
 Balance, beginning of period                 $  536         $  2,073 
     Additions                                   118              699 
     Sales                                        -            (4,317)
     Valuation                                    -             2,081 
 ----------------------------------------------------------------------
 Balance, end of period                       $  654         $    536 
 ----------------------------------------------------------------------
 ----------------------------------------------------------------------

At June 30, 1997, the OREO portfolio consisted of three properties.   Escrow 
closed in July 1997 on the sale of one OREO property with a net book value of 
$329,000.  A gain of $13,000 was recognized on the sale.  The Company is 
actively marketing the remaining properties. 

DEPOSITS

Total deposits at June 30, 1997 were $446.2 million, a $30.9 million increase 
from $415.3 million at December 31, 1996.  
  
The following table sets forth the distribution of average deposits and the 
rates paid thereon for the periods indicated:

<TABLE>
<CAPTION>
                               Six Months Ended                       Year Ended
                                June 30, 1997                      December 31, 1996 
------------------------------------------------------------------------------------------
                         Average                            Average 
(DOLLARS IN THOUSANDS)   Balance   Rate (1)  % of total     Balance     Rate   % of total
------------------------------------------------------------------------------------------
<S>                    <C>          <C>        <C>       <C>         <C>       <C>
Demand deposits       $  129,606                 30.04%   $ 119,570             29.70%
NOW/MMDA                 105,965     2.83%       24.57%      95,098     2.58%   23.63%
Savings                   47,528     2.71%       11.02%      44,272     2.11%   11.00%
TCDs                     148,176     5.31%       34.37%     143,582     5.36%   35.67%
 -----------------------------------------------------------------------------------------
     Deposits         $  431,275                100.00%   $ 402,522            100.00%
 -----------------------------------------------------------------------------------------
 -----------------------------------------------------------------------------------------
(1)  Annualized.

</TABLE>

Average deposit balances increased to $431.3 million at June 30, 1997 from
$402.5 million at December 31, 1996.  See "-Financial Condition" for a
discussion of the factors contributing to the increase in deposit balances. 

                                      20

<PAGE>

Part I. Item 2. (continued)

The reduction in the average rate paid on time certificates of deposit 
("TCD") to 5.31% for the six months ended June 30, 1997 from 5.36% for the 
year ended December 31, 1996, is largely due to the managed reduction in 
higher rate TCD accounts raised through TCD promotion programs during 1995 
and 1996. These accounts have largely been replaced with lower cost 
deposits.

The following table sets forth the maturities of the Company's time 
certificate of deposit accounts at the dates indicated:

<TABLE>
<CAPTION>
                                                         June 30,1997
                                                         Maturing in 
--------------------------------------------------------------------------------------------------
                                         Over three       Over six 
                        Three months   months through   months through     Over 
 (DOLLARS IN THOUSANDS)    or less       six months     twelve months   twelve months   Total
--------------------------------------------------------------------------------------------------
<S>                      <C>           <C>             <C>              <C>        <C>
     Under $100,000       $  29,810     $  13,745       $  41,183         $ 6,852   $  91,590 
     $100,000 and over       36,092         6,572          12,117           1,878      56,659 
--------------------------------------------------------------------------------------------------
             Total        $  65,902     $  20,317       $  53,300         $ 8,730   $ 148,249 
--------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------

</TABLE>

<TABLE>
<CAPTION>

                                                          December 31, 1996 
                                                          Maturing in 
--------------------------------------------------------------------------------------------------
                                          Over three        Over six 
                         Three months   months through   months through      Over 
 (DOLLARS IN THOUSANDS)     or less       six months     twelve months   twelve months   Total
--------------------------------------------------------------------------------------------------
<S>                      <C>             <C>             <C>              <C>         <C>
     Under $100,000       $  31,750       $  20,563       $  19,700        $  9,564    $  81,577 
     $100,000 and over       41,016           9,170          11,097           2,373       63,656 
--------------------------------------------------------------------------------------------------
             Total        $  72,766       $  29,733       $  30,797        $ 11,937    $ 145,233 
--------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------

</TABLE>

BORROWED FUNDS AND OTHER INTEREST-BEARING LIABILITIES

Borrowed funds and other interest-bearing liabilities consist of overnight 
Federal funds purchased, Treasury, tax and loan notes ("TT&L"), obligations 
to senior lienholders for certain OREO properties and deferred compensation 
liabilities.  The balance of borrowed funds and other interest-bearing 
liabilities decreased to $7.3 million at June 30, 1997 from $8.1 million at 
December 31, 1996.  $1.9 million of overnight Federal funds purchased were 
outstanding at December 31, 1996.  There were no Federal funds purchased as 
of June 30, 1997.

ASSET/LIABILITY MANAGEMENT

The objective of asset/liability management is to manage and control the 
Company's exposure to interest rate fluctuations while maintaining adequate 
levels of liquidity and capital. The Company seeks to achieve this objective 
by matching its interest rate- sensitive assets and liabilities, and 
maintaining the maturity and repricing of these assets and liabilities at 
appropriate levels given the interest rate environment.  Generally, if 
rate-sensitive assets exceed rate-sensitive liabilities, the net interest 
income will be positively impacted during a rising rate environment and 
negatively impacted during a declining rate environment.  When rate- 
sensitive liabilities exceed rate-sensitive assets, the net interest income 
will generally be positively impacted during a declining rate environment and 
negatively impacted during a rising rate environment. However, because 
interest rates for different asset and liability products offered by 
depository institutions respond differently to changes in the interest rate 
environment, the gap between rate-sensitive assets and rate-sensitive 
liabilities can only be used as a general indicator of interest rate 
sensitivity.
                                      21
<PAGE>

Part I. Item 2. (continued)

The following gap repricing table sets forth information concerning the
Company's rate-sensitive assets and rate-sensitive liabilities, including the
off-balance sheet notional balance of the interest rate swap as of June 30,
1997.  Such assets and liabilities are classified by the earlier of maturity or
repricing date in accordance with their contractual terms.  Certain shortcomings
are inherent in the method of analysis presented in the following gap table. 
For example, although certain assets and liabilities may have similar maturities
or periods to reprice, they may react in different degrees and at different
times to changes in market interest rates.  Also, loan prepayments and changes
in the mix or level of deposits could cause the interest sensitivities to vary
from those which appear in the table.

<TABLE>


                                                              Over three      Over one 
                                             Three months   months through   year through       Over 
 (DOLLARS IN THOUSANDS)                        or less       twelve months    five years     five years    Total 
--------------------------------------------------------------------------------------------------------------------
<S>                                            <C>            <C>             <C>            <C>          <C>

 INTEREST-EARNING ASSETS 
     Federal funds sold                        $   27,804     $        -      $        -     $       -    $   27,804 
     Investment securities, at cost                10,140          4,524          54,584         5,539        74,787 
     Gross Loans (1)                              215,941         34,382          64,467        28,504       343,294 
     Interest rate swap                                 -              -          50,000             -        50,000 
--------------------------------------------------------------------------------------------------------------------
       Total interest-earning assets           $  253,885     $   38,906      $  169,051     $  34,043    $  495,885 
--------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------
 INTEREST-BEARING LIABILITIES 
     Interest-bearing demand and 
       savings deposits                        $        -     $   33,672      $  108,243     $  18,465    $  160,380 
     Time certificates of deposit                  65,902         73,617           8,713            17       148,249 
     Other borrowings and interest-                    
       bearing liabilities                          6,113          1,229               -             -         7,342 
     Interest rate swap                            50,000              -               -             -        50,000 
--------------------------------------------------------------------------------------------------------------------
     Total interest-bearing liabilities        $  122,015     $  108,518      $  116,956     $  18,482    $  365,971 
--------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------
 Interest rate sensitivity gap                 $  131,870     $  (69,612)     $   52,095     $  15,561 
 Cumulative interest rate sensitivity gap         131,870         62,258         114,353       129,914 
 Cumulative interest rate sensitivity gap 
     as a percentage of total interest- 
     earning assets                                 26.59%         12.55%          23.06%        26.20%

</TABLE>
-----------------------------------------------------------
(1) Excludes nonaccrual loans of $7.3 million.




At June 30, 1997, the Company's rate-sensitive balance sheet was shown to be in
a positive gap position over a one-year horizon.  The gap between assets and
liabilities that reprice within 12 months was $62.3 million or 12.55% of assets.
The table above implies that the Company is moderately asset-sensitive and that
its earnings would increase in the short-term if interest rates rise.  Repricing
of the Company's interest-bearing demand and savings deposits generally lags
repricing on the Company's variable rate loan portfolio.  These core deposits
tend to be fairly stable over time and exhibit a low sensitivity to changes in
interest rates.  In preparing the gap table, management distributes core deposit
balances across the maturity ranges in accordance with regulatory guidelines in
order to incorporate these characteristics of its core deposits.

In addition to utilizing the repricing gap table above in managing its interest
rate risk, the Company performs a quarterly income simulation analysis.  This
simulation analysis provides a dynamic evaluation of the Company's balance sheet
and income statement under varying scenarios, providing an estimate of both the
dollar amount and percentage change in net interest income under various changes
in interest rates.  Based on the income simulation analysis conducted as of June
30, 1997, the Company remains moderately asset-sensitive.  Thus, a rising rate
environment would tend to lead to a moderate increase in net interest income.

                                             22
<PAGE>

Part I. Item 2. (continued)

LIQUIDITY

Liquidity management involves the Company's ability to meet the cash flow 
requirements of its customers who may be depositors wanting to withdraw funds 
or borrowers needing assurance that sufficient funds will be available to 
meet their credit needs.  The Company's liquid assets consist of cash and 
cash equivalents and investment securities, excluding those pledged as 
collateral.  The Company has established policy guidelines to support the 
sound management of its liquidity position based on regulatory guidance and 
industry practice.  It is the Company's policy to maintain a liquidity ratio 
(liquid assets to liabilities) of between 20% and 40%, and to limit gross 
loans to no more than 85% of deposits.  At June 30, 1997, the Company's 
ratios were within these guidelines: the liquidity ratio was 27.0% and the 
loan to deposit ratio was 78.6%.  At December 31, 1996, the Company's 
liquidity ratio was 21.64% and the loan to deposit ratio was 83.59%.

The Company maintains short-term sources of funds to meet periodic planned 
and unplanned increases in loan demand and deposit withdrawals and 
maturities.  The initial source of liquidity is the excess funds sold daily 
to other banks in the form of Federal funds.  Besides cash and cash 
equivalents, the Company maintains a portion of its investment securities 
portfolio as available-for-sale.  Available-for-sale securities can be sold 
in response to liquidity needs or used as collateral under reverse repurchase 
agreements.  

While the Company currently has no plans to liquidate securities in the 
portfolio, it has sold securities in previous years.  The likelihood that 
securities would be sold in the future and the potential for losses to be 
realized remains uncertain.  In the event that securities held as 
available-for-sale were sold at a loss, any loss would be reflected in the 
results of operations on an after-tax basis.  However, there would be no 
expected impact on the Company's financial condition, given that the 
securities are carried at their estimated fair value, net of any unrealized 
loss.  The unrealized loss on available-for-sale securities decreased to $1.3 
million at June 30, 1997 from $1.5 million at December 31, 1996.

The Company's liquid assets were $119.7 million at June 30, 1997, an increase 
of $30.4 million from December 31, 1996.  The increase can be attributed to 
the increase in deposit balances as previously discussed.    

Secondary sources of liquidity include reverse repurchase arrangements to 
borrow cash for short to intermediate periods of time using the Company's 
available-for-sale securities as collateral, Federal funds lines of credit 
that allow the Company to temporarily borrow an aggregate of up to $35.0 
million from three commercial banks and a $5.3 million line of credit with 
the Federal Home Loan Bank ("FHLB") collateralized by mortgage loans.  At 
June 30, 1997, the Company had approximately $59.4 million in unpledged 
securities that could be used to secure borrowings such as reverse repurchase 
agreements.  During the six months ended June 30, 1997, the largest amount of 
funds so borrowed was $9.8 million. Federal funds arrangements with 
correspondent banks are subject to the terms of the individual arrangements 
and may be terminated at the discretion of the correspondent bank.  Federal 
funds purchases of up to $10.0 million were borrowed during the six months 
ended June 30, 1997.

CAPITAL RESOURCES

The Company and its bank subsidiary are subject to risk-based capital 
regulations adopted by the federal banking regulators in January 1990.  These 
guidelines are used to evaluate capital adequacy, and are based on an 
institution's asset risk profile and off-balance sheet exposures, such as 
unused loan commitments and letters of credit.  The regulations require that 
a portion of total capital be core, or Tier 1, capital consisting of common 
shareholders' equity and perpetual preferred stock, less goodwill and certain 
other deductions, with the remaining, or Tier 2, capital consisting of other 
elements, primarily subordinated debt, mandatory convertible debt, and 
grandfathered senior debt, plus the allowance for possible loan losses, 
subject to certain limitations.  As of December 1992, the risk-based capital 
rules were further supplemented by a leverage ratio defined as Tier 1 capital 
divided by quarterly average assets after certain adjustments.  The minimum 
leverage ratio is 3 percent for banking organizations that do not anticipate 
significant growth and have well-diversified risk (including no undue 
interest rate exposure), excellent asset quality, high liquidity and good 
earnings.  Other banking organizations not meeting these standards are 
expected to have ratios of at least 4 to 5 percent, depending on their 
particular condition and growth plans. Higher capital ratios can be mandated 
by the regulators if warranted by the particular circumstances or risk 
profile of a banking organization.  In the current regulatory environment, 
banking companies must stay well-capitalized, as defined in the banking 
regulations, in order to receive favorable regulatory treatment on 
acquisitions and favorable risk-based deposit insurance assessments.  
Management seeks to maintain capital ratios in excess of the regulatory 
minimums.  As of June 30, 1997, the capital ratios of the Company and the 
Bank exceeded the well-capitalized thresholds prescribed in the rules.

                                       23
<PAGE>


Part I. Item 2. (continued)

The following table sets forth the Company's and the Bank's leverage and 
risk-based capital ratios at June 30, 1997:

<TABLE>
                                       Company                       Bank 
-----------------------------------------------------------------------------------
 (DOLLARS IN THOUSANDS)         Amount         %              Amount          % 
-----------------------------------------------------------------------------------
<S>                          <C>               <C>         <C>               <C>   
 Leverage ratio              $    49,155       9.80%       $    47,907        9.56%
     Regulatory minimum           20,064       4.00% (c)        20,055        4.00% (c) 
     Excess                       29,091       5.80%            27,852        5.56%
 Risk-based ratios 
     Tier 1 capital          $    49,155 (a)  11.65% (b)   $    47,907 (a)   11.37% (b) 
     Tier 1 minimum               16,870       4.00% (c)        16,857        4.00% (c) 
     Excess                       32,285       7.65%            31,050        7.37%

     Total capital           $    54,217 (d)  12.86% (b)   $    52,969 (d)   12.57% (b) 
     Total capital minimum        33,740       8.00%            33,714        8.00% (c) 
     Excess                       20,477       4.86%            19,255        4.57%

</TABLE>
---------------------------------------------------------------------------

(a)  Includes common shareholders' equity (excluding unrealized losses on
     available-for-sale securities) less goodwill and other intangibles.  The
     Tier 1 capital ratio is adjusted for the disallowed portion of deferred 
     tax assets, if applicable. 
                                        
(b)  Risk-weighted assets of $421.8 million and $421.4 million were used to
     compute these percentages for the Company and the Bank, respectively.
                                   
(c)  Insured institutions, such as the Bank, must maintain a leverage capital
     ratio of at least 4% or 5%, a Tier 1 captial ratio of at least 4% or 6%,
     and a Total captial ratio of at least 8% or 10% in order to be categorized
     adequately capitalized or well-capitalized, respectively. 

(d)  Tier 1 capital plus the allowance for loan losses, limited to 1.25% of
     total risk-weighted assets. 

                                      24
<PAGE>

Part II.  Other Information

Item 1.   Legal Proceedings
               Not Applicable
Item 2.   Changes in Securities
               Not Applicable
Item 3.   Defaults Upon Senior Securities
               Not Applicable
Item 4.   Submission of Matters to a Vote of Security Holders 
          SC Bancorp held its annual meeting of shareholders on May 22, 1997.
          Harold A. Beisswenger, Larry D. Hartwig, and Peer A. Swan were 
          elected to serve as Class I Directors until the annual meeting in 
          the year 2000.  The following persons also continued as directors 
          after the meeting:  N. Keith Abbott, Robert C. Ball, James E. 
          Cunningham, William C. Greenbeck, Irving J. Pinsky, and Donald E. 
          Wood.  

          5,345,883 votes were cast for, no votes cast against and 95,991 
          withheld for Mr. Beisswenger.  5,314,854 votes were cast for, no 
          votes cast against and 127,020 withheld for Mr. Hartwig.  5,347,460 
          votes were cast for, no votes cast against and 94,414 withheld for 
          Mr. Swan.

          Shareholders also voted to ratify the appointment of Deloitte & Touche
          LLP as SC Bancorp's auditors for 1997.  5,415,557 votes were cast for
          and 9,801 cast against the appointment of Deloitte & Touche LLP. 
          There were 16,516 abstentions.  
Item 5.   Other Information
               Not Applicable
Item 6.   Exhibits and Reports on Form 8-K
     
          (a) Exhibits


                                      Exhibit Index
-------------------------------------------------------------------------------

Exhibit                             Description
  No.
-------------------------------------------------------------------------------
 2.1      Agreement and Plan of Reorganization, dated as of April 29, 1997, by
          and between Monarch Bancorp and SC Bancorp(d)
 3(i).1   SC Bancorp Articles of Incorporation(a)
 3(i).2   Certificate of Amendment to SC Bancorp Articles of Incorporation dated
          May 9, 1995(b)
 3(ii).1  Amended and Restated Bylaws of SC Bancorp(c)
10.1      Stock Option Agreement, dated as of April 29, 1997, between Monarch
          Bancorp and SC Bancorp(d)
10.2      Shareholder Agreement, dated as of April 29, 1997, by and between N.
          Keith Abbott and Monarch Bancorp(d)
10.3      Shareholder Agreement, dated as of April 29, 1997, by and between
          Robert C. Ball and Monarch Bancorp(d)
10.4      Shareholder Agreement, dated as of April 29, 1997, by and between
          Harold A. Beisswenger and Monarch Bancorp(d)
10.5      Shareholder Agreement, dated as of April 29, 1997, by and between
          James E. Cunningham and Monarch Bancorp(d)
10.6      Shareholder Agreement, dated as of April 29, 1997, by and between
          William C. Greenbeck and Monarch Bancorp(d)
10.7      Shareholder Agreement, dated as of April 29, 1997, by and between
          Larry D. Hartwig and Monarch Bancorp(d)
10.8      Shareholder Agreement, dated as of April 29, 1997, by and between
          Irving J. Pinsky and Monarch Bancorp(d)
10.9      Shareholder Agreement, dated as of April 29, 1997, by and between Peer
          A. Swan and Monarch Bancorp(d)
10.10     Shareholder Agreement, dated as of April 29, 1997, by and between
          Donald E. Wood and Monarch Bancorp(d)
27.1      Financial Data Schedule
99.1      Joint Press Release of Monarch Bancorp and SC Bancorp, dated April 29,
          1997(d)


-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
(a)       This exhibit is contained in SC Bancorp's Quarterly Report on Form 10-
          Q for the period ended March 31, 1995, filed with the Commission on
          May 15, 1995, (Commission File No. 0-11046) and incorporated herein by
          reference.

(b)       This exhibit is contained in SC Bancorp's Annual Report on Form 10-K
          for the year ended December 31, 1995, filed with the Commission on
          March 29, 1996, (Commission File No. 0-011046) and incorporated herein
          by reference.

(c)       This exhibit is contained in SC Bancorp's Annual Report on Form 10-K/A
          for the year ended December 31, 1996, filed with the Commission on May
          9, 1997, (Commission File No. 0-01146) and incorporated herein by
          reference. 

(d)       This exhibit is contained in SC Bancorp's Form 8-K, filed with  the
          Commission on May 5, 1997, (Commission File No. 0-11046) and
          incorporated herein by reference.

                                             25

<PAGE>

-----------------
(b)       Reports filed on Form 8-K
          Date of Report on Form 8-K:  April 29, 1997.  Items Reported:  Items 5
          and 7, Agreement and Plan of Reorganization by and between Monarch
          Bancorp and SC Bancorp.










                                    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 thereunto duly authorized.

DATE:          8 AUGUST, 1997           SC BANCORP
                                        (Registrant)

                                   By:  /S/  Bruce Roat
                                        --------------------------
                                        Bruce Roat
                                        E.V.P./C.F.O.
                                        (Principal Financial and
                                         Accounting Officer)



                                     26