SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) JULY 25, 1996
-----------------
ESSEX BANCORP, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 1-10506 54-1721085
- ------------------------- ------------ -------------------
(State or other juris- (Commission (I.R.S. Employer
diction of incorporation) File Number) Identification No.)
Reflections II, Suite 200
200 Golden Oak Court
VIRGINIA BEACH, VIRGINIA 23452
- ------------------------- -------------------
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code (804) 486-8700
----------------
- ------------------------------------------------------------------------------
(Former name or former address, if changed since last report.)
Essex Bancorp, Inc.
ITEM 2 - ACQUISITION OR DISPOSITION OF ASSETS
On July 25, 1996, Essex Savings Bank, F.S.B. (the "Bank"), the wholly-owned
thrift subsidiary of Essex Bancorp, Inc. (the "Registrant"), completed the
sale of the deposits and related assets of its Wilmington, Raleigh and
Greensboro, North Carolina branches (the "Branches") to Centura Bank, Inc.
("Centura") pursuant to the Branch Purchase and Deposit Assumption Agreement
dated April 11, 1996.
Deposits and related accrued interest assumed by Centura approximated $71.3
million and deposit loans and related accrued interest acquired by Centura
approximated $72,000. In connection with the sale of the Branches, the Bank
recognized a $700,000 gain on the sale of deposits, net of transaction costs.
The sale of the Branches required cash of $70.5 million, which was funded by
the sale of fixed-rate and adjustable-rate first mortgage loans and related
accrued interest with a carrying value approximating $62.2 million, as well
as the utilization of a portion of the Bank's excess liquidity.
Prior to the sale, there was no material relationship between the Registrant
or the Bank and Centura, nor between Centura and any affiliate, director, or
officer of the Registrant or the Bank, or any associate of any such director
or officer.
ITEM 7 - FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Business Acquired - Not Applicable
(b) Pro Forma Financial Information
The unaudited pro forma financial statements consist of an unaudited pro
forma consolidated balance sheet as of June 30, 1996 and unaudited pro forma
consolidated statements of operations for the year ended December 31, 1995
and for the six months ended June 30, 1996. The unaudited pro forma
financial statements are presented for information purposes only and are not
necessarily indicative of the results which would actually have occurred if
the sale of the Branches had been consummated in the past or which may be
obtained in the future.
The unaudited pro forma financial statements include the historical financial
statements of the Registrant, pro forma adjustments directly attributable to
the sale of the Branches and pro forma results. The unaudited pro forma
consolidated balance sheet as of June 30, 1996 assumes the sale of the
Branches occurred on June 30, 1996. The unaudited pro forma consolidated
statements of operations for the year ended December 31, 1995 and for the six
months ended June 30, 1996 assume the sale of the Branches occurred on
January 1, 1995 and present loss from continuing operations before
nonrecurring charges or credits directly attributable to the sale of the
Branches.
(c) Exhibits
The Branch Purchase and Deposit Assumption Agreement dated April 11, 1996
between the Bank and Centura is incorporated herein by reference to Exhibit
10.1 of the Registrant's Form 10-Q for the quarterly period ended March 31,
1996.
2
ESSEX BANCORP, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)
As Reported Pro Forma Adjustments Pro Forma
June 30, 1996 Increase Decrease June 30, 1996
------------- --------- ----------- -------------
ASSETS
Cash and cash equivalents $ 15,241 $ 71,705 (A) $ 71,692 (B) $ 15,254
Certificates of deposit in other financial institutions 8,000 8,000 (A) -
Federal Home Loan Bank stock 2,540 2,540
Securities available for sale 5,138 5,138
Securities held to maturity 7,918 7,918
Loans held for investment 185,411 71 (C) 185,340
Loans held for sale 66,891 63,317 (A) 3,574
Other assets 14,084 388 (A)
44 (C)
6 (E) 13,646
--------- -------- --------- ---------
Total Assets $ 305,223 $ 71,705 $ 143,518 $ 233,410
========= ======== ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Deposits:
Noninterest-bearing $ 1,555 $ $ 21 (D) $ 1,534
Interest-bearing 258,269 72,542 (D) 185,727
--------- -------- --------- ---------
Total deposits 259,824 72,563 187,261
Federal Home Loan Bank advances 26,262 26,262
Other borrowings 1,160 1,160
Other liabilities 2,404 53 (C) 23 (D) 2,434
--------- -------- --------- ---------
Total Liabilities 289,650 53 72,586 217,117
SHAREHOLDERS' EQUITY
Preferred stock 22 22
Common stock 11 11
Capital in excess of par 23,656 23,656
Holding gain on securities available for sale 14 14
Accumulated deficit (8,130) 720 (E) (7,410)
--------- -------- --------- ---------
Total Shareholders' Equity 15,573 720 16,293
--------- -------- --------- ---------
Total Liabilities and Shareholders' Equity $ 305,223 $ 773 $ 72,586 $ 233,410
========= ======== ========= =========
The notes to the unaudited pro forma consolidated balance sheet
are an integral part of this statement.
3
ESSEX BANCORP, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA
CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 1996
The unaudited pro forma consolidated balance sheet assumes the sale of the
Branches occurred on June 30, 1996. Therefore, the amounts presented as pro
forma adjustments are based on actual balances included in the Registrant's
historical consolidated balance sheet as of June 30, 1996.
(A) Proceeds from the sale of loans and related accrued interest and
redemption of certificates of deposit required to fund the sale of the
Branches.
(B) Cash paid to Centura for the assumption of deposit liabilities and
related accrued interest, net of the deposit premium paid by Centura,
deposit loans and related accrued interest acquired by Centura and
reimbursement by Centura of prepaid expenses.
(C) Deposit loans and related accrued interest acquired by Centura.
(D) Deposits and related accrued interest assumed by Centura.
(E) Recognition of prepaid transaction costs and the premium on deposits
paid by Centura.
4
ESSEX BANCORP, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
Pro Forma Adjustments
-------------------------------
As Reported Increase Decrease Pro Forma
----------- -------- -------- ---------
INTEREST INCOME
Interest and fees on loans $ 19,779 $ $ 4,416 (A) $ 15,363
Investment securities 836 836
Mortgage-backed securities 1,286 1,286
Other 646 550 (B) 96
--------- ------ ------- ---------
Total Interest Income 22,547 4,966 17,581
INTEREST EXPENSE
Deposits 13,505 4,306 (C) 9,199
Federal Home Loan Bank advances 2,798 2,798
Other borrowings 324 324
--------- ------ ------- ---------
Total Interest Expense 16,627 4,306 12,321
--------- ------ ------- ---------
Net Interest Income 5,920 660 5,260
PROVISION FOR LOAN LOSSES 2,477 2,477
--------- ------ ------- ---------
Net Interest Income After Provision
for Loan Losses 3,443 660 2,783
NONINTEREST INCOME
Loan servicing fees 1,766 1,766
Mortgage banking income 505 505
Other service charges and fees 429 4 (D) 425
Net gain (loss) on sale of loans 115 115
Other 357 357
--------- ------ ------- ---------
Total Noninterest Income 3,172 4 3,168
NONINTEREST EXPENSE
Salaries and employee benefits 4,388 192 4,196
Net occupancy and equipment 1,671 73 1,598
Deposit insurance premiums 722 232 490
Amortization of intangible assets 956 956
Other 3,033 158 2,875
--------- ------ ------- ---------
Total Noninterest Expense 10,770 655 (F) 10,115
--------- ------ ------- ---------
Loss From Continuing Operations
Before Income Taxes (4,155) 9 (4,164)
BENEFIT FROM INCOME TAXES - -
--------- ------ ------- ---------
Loss From Continuing Operations $ (4,155) $ $ 9 $ (4,164)
========= ====== ======= =========
Loss Per Common Share (G) $ (3.96) $ (3.97)
========= =========
Weighted average common shares outstanding 1,049,684 1,049,684
========= =========
The notes to the unaudited pro forma consolidated statement of
operations are an integral part of this statement.
5
ESSEX BANCORP, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
Pro Forma Adjustments
-------------------------------
As Reported Increase Decrease Pro Forma
----------- -------- -------- ---------
INTEREST INCOME
Interest and fees on loans $ 10,575 $ $ 1,941 (A) $ 8,634
Investment securities 343 343
Mortgage-backed securities 360 360
Other 496 212 (B) 284
--------- ----- ------- ---------
Total Interest Income 11,774 2,153 9,621
INTEREST EXPENSE
Deposits 7,391 2,182 (C) 5,209
Federal Home Loan Bank advances 856 856
Other borrowings 109 109
--------- ----- ------- ---------
Total Interest Expense 8,356 2,182 6,174
--------- ----- ------- ---------
Net Interest Income 3,418 (29) 3,447
PROVISION FOR LOAN LOSSES 803 803
--------- ----- ------- ---------
Net Interest Income After Provision
for Loan Losses 2,615 (29) 2,644
NONINTEREST INCOME
Loan servicing fees 835 835
Mortgage banking income 271 271
Other service charges and fees 278 5 (D) 273
Net gain (loss) on sale of:
Securities 153 153
Deposits 1,065 1,065
Other 87 65 (E) 152
--------- ----- ------- ---------
Total Noninterest Income 2,689 65 5 2,749
NONINTEREST EXPENSE
Salaries and employee benefits 2,676 79 2,597
Net occupancy and equipment 781 37 744
Deposit insurance premiums 438 121 317
Amortization of intangible assets 6,733 6,733
Other 1,596 66 1,530
--------- ----- ------- ---------
Total Noninterest Expense 12,224 303 (F) 11,921
--------- ----- ------- ---------
Loss From Continuing Operations
Before Income Taxes (6,920) 65 (327) (6,528)
BENEFIT FROM INCOME TAXES - -
--------- ----- ------- ---------
Loss From Continuing Operations $ (6,920) $ 65 $ (327) $ (6,528)
========= ===== ======= =========
Loss Per Common Share (G) $ (6.59) $ (6.22)
========= =========
Weighted Average Common Shares Outstanding 1,050,150 1,050,150
========= =========
The notes to the unaudited pro forma consolidated statement of
operations are an integral part of this statement.
6
ESSEX BANCORP, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995 AND
FOR THE SIX MONTHS ENDED JUNE 30, 1996
The unaudited pro forma consolidated statements of operations for the year
ended December 31, 1995 and for the six months ended June 30, 1996 assume the
sale of the Branches occurred on January 1, 1995 and present loss from
continuing operations before nonrecurring charges or credits directly
attributable to the sale of the Branches. The pro forma adjustments present
the elimination of actual interest expense on deposits at the Branches,
actual service charges and fees on those deposits and actual operating
expenses directly associated with the Branches included in the Registrant's
historical consolidated statements of operations for the year ended December
31, 1995 and for the six months ended June 30, 1996. The pro forma
adjustments also present the elimination of interest income on loans sold and
cash equivalents liquidated to fund the sale of deposits at their January 1,
1995 levels. The loan portfolios assumed to be sold consist primarily of
loans serviced by others. Interest income and accretion of discount on these
portfolios are eliminated in their entirety. The elimination of interest
income on the remaining loans and cash equivalents is based on the average
yields of comparable assets for the year ended December 31, 1995 and for the
six months ended June 30, 1996.
(A) Elimination of interest income and accretion of discount on loan
portfolios sold to partially fund the sale of the Branches.
(B) Elimination of interest income on cash equivalents liquidated to
partially fund the sale of the Branches.
(C) Elimination of interest expense on deposits assumed by Centura.
(D) Elimination of service charges and fees associated with deposit accounts
assumed by Centura.
(E) Elimination of the nonrecurring impact of the sale of loans to partially
fund the sale of the Branches, which was included in the historical
statement of operations for the six months ended June 30, 1996.
(F) Elimination of operating expenses directly associated with the Branches.
(G) Loss per share was determined by dividing loss from continuing
operations by the weighted average number of shares of common stock
outstanding. Because the inclusion of common stock equivalents would
have an anti-dilutive effect on the primary loss per share calculation,
effectively decreasing the loss per share, they are not considered in
the computation.
7
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.
ESSEX BANCORP, INC.
Registrant
Dated: August 6, 1996 By: /s/ Mary-Jo Rawson
----------------------------------
Vice President and Chief
Accounting Officer
8