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) September 26, 1996
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Essex Bancorp, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 1-10506 54-1721085
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(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
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(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code (804) 486-8700
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(Former name or former address, if changed since last report.)
Essex Bancorp, Inc.
ITEM 2 - ACQUISITION OR DISPOSITION OF ASSETS
On September 26, 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 Norfolk,
Portsmouth, Hampton and Newport News, Virginia branches (the "Branches") to
CENIT Bank, FSB ("CENIT") pursuant to the Branch Purchase and Deposit
Assumption Agreement (the "Agreement") dated July 2, 1996 (the "CENIT
transaction").
Deposits and related accrued interest assumed by CENIT approximated $63
million and deposit loans and related accrued interest acquired by CENIT
approximated $58,000. In connection with the sale of the Branches, the Bank
recognized (i) a $195,000 gain on the sale of deposits, net of transaction
costs and the write-off of goodwill and the unamortized premium on deposits
associated with the Branches and (ii) a $152,000 gain on the sale of premises
and equipment to CENIT. The sale of the Branches required cash of
approximately $61 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 $52 million, as well as the utilization of a
portion of the Bank's excess liquidity. The Bank recognized a net loss
approximating $817,000 on the sale of the loans.
Prior to the sale, there was no material relationship between the Registrant
or the Bank and CENIT, nor between CENIT and any affiliate, director, or
officer of the Registrant or the Bank, or any associate of any such director
or officer.
In addition to the CENIT transaction, the Bank completed the sale of the
deposits and related assets of its Wilmington, Raleigh and Greensboro, North
Carolina branches to Centura Bank, Inc. ("Centura") on July 25, 1996 (the
"Centura transaction"). A description of this transaction is incorporated
herein by reference to Item 2 of the Registrant's Form 8-K dated July 26,
1996.
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 CENIT transaction and the Centura transaction had been consummated in the
past or which may be attained in the future. Further, in accordance with the
Agreement, the Bank's Grafton, Virginia branch, with deposits approximating
$5 million, will be sold to CENIT during the fourth quarter of 1996.
However, because this transaction has not yet occurred and is not material to
the impact of the CENIT transaction, pro forma adjustments directly
attributable to the sale of the Grafton, Virginia branch are not included in
the unaudited pro forma financial statements contained herein.
2
The unaudited pro forma financial statements include the historical financial
statements of the Registrant, pro forma adjustments directly attributable to
the CENIT transaction and the Centura transaction, and pro forma results.
The unaudited pro forma consolidated balance sheet as of June 30, 1996
assumes the CENIT transaction and the Centura transaction 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 CENIT transaction occurred on September 15, 1995 with regard to
the three branches (Norfolk, Portsmouth and Hampton, Virginia) the Bank
acquired from Home Savings Bank, F.S.B., and on January 1, 1995 with regard
to the Newport News, Virginia branch. 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 Centura transaction occurred on January
1, 1995. The unaudited pro forma consolidated statements of operations
present loss from continuing operations before nonrecurring charges or
credits directly attributable to the CENIT transaction and the Centura
transaction.
(c) Exhibits
The Branch Purchase and Deposit Assumption Agreement dated July 2, 1996
between the Bank and CENIT is incorporated herein by reference to Exhibit
10.1 of the Registrant's Form 8-K dated July 3, 1996. 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.
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ESSEX BANCORP, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)
CENTURA TRANSACTION CENIT TRANSACTION
Combined
As Reported Pro Forma Adjustments Pro Forma Pro Forma Adjustments Pro Forma
June 30, 1996 Increase Decrease June 30, 1996 Increase Decrease June 30, 1996
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ASSETS
Cash and cash equivalents $ 15,241 $71,705(A) $ 71,692(B) $ 15,254 $57,224(G) $ 62,003(H) $ 10,475
Certificates of deposit 8,000 8,000(A) -- --
Federal Home Loan Bank stock 2,540 2,540 2,540
Securities available for sale 5,138 5,138 5,138
Securities held to maturity 7,918 7,918 7,918
Loans held for investment 185,411 71(C) 185,340 57,661(G)
83(I) 127,596
Loans held for sale 66,891 63,317(A) 3,574 3,574
Other assets 14,084 388(A) 626(J)
2(C) 380(G)
42(E) 47(K)
6(F) 13,646 1,925(L) 10,668
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Total Assets $305,223 $71,705 $143,518 $233,410 $57,224 $122,725 $167,909
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LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Deposits:
Noninterest-bearing $ 1,555 $ $ 21(D) $ 1,534 $ $ 260(M) 1,274
Interest-bearing 258,269 72,542(D) 185,727 64,727(M) 121,000
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Total deposits 259,824 72,563 187,261 64,987 122,274
Federal Home Loan Bank advances 26,262 26,262 26,262
Other borrowings 1,160 1,160 1,160
Other liabilities 2,404 53(E) 23(D) 2,434 88(N) 66(M) 2,456
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Total Liabilities 289,650 53 72,586 217,117 88 65,053 152,152
SHAREHOLDERS' EQUITY
Preferred stock 22 22 22
Common stock 11 11 11
Capital in excess of par 23,656 23,656 23,656
Holding gain on securities
available for sale 14 14 14
Accumulated deficit (8,130) 720(F) (7,410) 536(O) (7,946)
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Total Shareholders' Equity 15,573 720 16,293 536 15,757
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Total Liabilities and
Shareholders' Equity $305,223 $ 773 $ 72,586 $ 233,410 $ 88 $ 65,589 $167,909
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The notes to the unaudited pro forma consolidated balance sheet are an
integral part of this statement.
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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 CENIT
transaction and the Centura transaction 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.
CENTURA TRANSACTION PRO FORMA ADJUSTMENTS
(A) Proceeds from the sale of loans and related accrued interest and
redemption of certificates of deposit required to fund the sale of
deposits.
(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) Third and fourth quarter deposit insurance assessments paid by
Centura on deposits assumed.
(F) Recognition of the premium on deposits paid by Centura, net of
prepaid transaction costs.
CENIT TRANSACTION PRO FORMA ADJUSTMENTS
(G) Proceeds from the sale of loans and related accrued interest required to
fund the sale of deposits.
(H) Cash paid to CENIT for the assumption of deposit liabilities and related
accrued interest, net of the deposit premium paid by CENIT, deposit loans
and related accrued interest acquired by CENIT, premises and equipment
acquired by CENIT and reimbursement by CENIT of prepaid expenses.
(I) Deposit loans acquired by CENIT.
(J) Premises and equipment acquired by CENIT or otherwise disposed of upon
completion of the CENIT transaction.
(K) Third quarter deposit insurance assessment paid by CENIT on deposits
assumed.
(L) Unamortized balance of goodwill associated with the Branches.
5
(M) Deposits approximating $64.6 million and related accrued interest assumed
by CENIT and elimination of the unamortized premium on deposits
approximating $398,000.
(N) Accrued transaction costs, expenses prepaid by CENIT and accrued expenses
associated with the CENIT transaction.
(O) Net earnings impact of the CENIT transaction, consisting of a $195,000 net
gain on sale of deposits, a $127,000 net gain on sale of premises and
equipment, an $817,000 net loss on the sale of loans required to fund the
sale of deposits, and $41,000 of accrued expenses associated with the
CENIT transaction.
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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)
CENTURA TRANSACTION CENIT TRANSACTION
Pro Forma Adjustments Pro Forma Adjustments Combined
As Reported Increase Decrease Pro Forma Increase Decrease Pro Forma
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INTEREST INCOME
Interest and fees on loans $19,779 $ $4,416(A) $15,363 $ $2,185(G) $13,178
Investment securities 836 836 836
Mortgage-backed securities 1,286 1,286 1,286
Other 646 550(B) 96 83(H) 13
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Total Interest Income 22,547 4,966 17,581 2,268 15,313
INTEREST EXPENSE
Deposits 13,505 4,306(C) 9,199 1,797(I) 7,402
Federal Home Loan Bank advances 2,798 2,798 2,798
Other borrowings 324 324 324
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Total Interest Expense 16,627 4,306 12,321 1,797 10,524
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Net Interest Income 5,920 660 5,260 471 4,789
PROVISION FOR LOAN LOSSES 2,477 2,477 2,477
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Net Interest Income After
Provision for Loan Losses 3,443 660 2,783 471 2,312
NONINTEREST INCOME
Loan servicing fees 1,766 1,766 1,766
Mortgage banking income 505 505 505
Other service charges and fees 429 4(D) 425 15(J) 410
Net gain (loss) on sale of loans 115 115 115
Other 357 357 357
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Total Noninterest Income 3,172 4 3,168 15 3,153
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ESSEX BANCORP, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995 (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
CENTURA TRANSACTION CENIT TRANSACTION
Pro Forma Adjustments Pro Forma Adjustments Combined
As Reported Increase Decrease Pro Forma Increase Decrease Pro Forma
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NONINTEREST EXPENSE
Salaries and employee benefits 4,388 192 4,196 150 4,046
Net occupancy and equipment 1,671 73 1,598 108 1,490
Deposit insurance premiums 722 232 490 82 408
Amortization of intangible assets 956 956 314 642
Other 3,033 158 2,875 98 2,777
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Total Noninterest Expense 10,770 655(F) 10,115 752(K) 9,363
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Loss From Continuing Operations
Before Income Taxes (4,155) 9 (4,164) (266) (3,898)
BENEFIT FROM INCOME TAXES -- --
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Loss From Continuing Operations $ (4,155) $ $ 9 $ (4,164) $ $ (266) $ (3,898)
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Loss Per Common Share $ (3.96) $ (3.97) $ (3.71)
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Weighted average common
shares outstanding 1,049,684 1,049,684 1,049,684
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The notes to the unaudited pro forma consolidated statement of operations
are an integral part of this statement.
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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)
CENTURA TRANSACTION CENIT TRANSACTION
Pro Forma Adjustments Pro Forma Adjustments Combined
As Reported Increase Decrease Pro Forma Increase Decrease Pro Forma
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INTEREST INCOME
Interest and fees on loans $10,575 $ $1,941(A) $8,634 $ $ 2,227(G) $6,407
Investment securities 343 343 343
Mortgage-backed securities 360 360 360
Other 496 212(B) 284 133(H) 151
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Total Interest Income 11,774 2,153 9,621 2,360 7,261
INTEREST EXPENSE
Deposits 7,391 2,182(C) 5,209 1,664(I) 3,545
Federal Home Loan Bank advances 856 856 856
Other borrowings 109 109 109
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Total Interest Expense 8,356 2,182 6,174 1,664 4,510
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Net Interest Income 3,418 (29) 3,447 696 2,751
PROVISION FOR LOAN LOSSES 803 803 803
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Net Interest Income After
Provision for Loan Losses 2,615 (29) 2,644 696 1,948
NONINTEREST INCOME
Loan servicing fees 835 835 835
Mortgage banking income 271 271 271
Other service charges and fees 278 5(D) 273 22(J) 251
Net gain (loss) on sale of:
Securities 153 153 153
Deposits 1,065 1,065 1,065
Other 87 65(E) 152 152
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Total Noninterest Income 2,689 65 5 2,749 22 2,727
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ESSEX BANCORP, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
CENTURA TRANSACTION CENIT TRANSACTION
Pro Forma Adjustments Pro Forma Adjustments Combined
As Reported Increase Decrease ProForma Increase Decrease Pro Forma
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NONINTEREST EXPENSE
Salaries and employee benefits 2,676 79 2,597 159 2,438
Net occupancy and equipment 781 37 744 100 644
Deposit insurance premiums 438 121 317 98 219
Amortization of intangible assets 6,733 6,733 6,421 312
Other 1,596 66 1,530 140 1,390
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Total Noninterest Expense 12,224 303(F) 11,921 6,918(K) 5,003
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Loss From Continuing
Operations Before Income Taxes (6,920) 65 (327) (6,528) (6,200) (328)
BENEFIT FROM INCOME TAXES -- --
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Loss From Continuing Operations $ (6,920) $ 65 $ (327) $ (6,528) $ $(6,200) $ (328)
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Loss Per Common Share $ (6.59) $ (6.22) $ (.31)
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Weighted Average Common
Shares Outstanding 1,050,150 1,050,150 1,050,150
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The notes to the unaudited pro forma consolidated statement of operations are
an integral part of this statement.
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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
CENIT transaction occurred on September 15, 1995 with regard to the three
branches (Norfolk, Portsmouth and Hampton, Virginia) the Bank acquired from
Home Savings Bank, F.S.B., and on January 1, 1995 with regard to the Newport
News, Virginia branch and the Centura transaction, and present loss from
continuing operations before nonrecurring charges or credits directly
attributable to these transactions.
The pro forma adjustments present the elimination of actual interest expense
on deposits sold, 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. The
elimination of interest income and the accretion of discount on loans
serviced by others assumed to be sold was based on actual amounts included in
the Registrant's historical consolidated statements of operations for the
periods presented. Whereas, the elimination of interest income and the
amortization of premiums on loans serviced by the Bank and interest income on
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.
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.
CENTURA TRANSACTION PRO FORMA ADJUSTMENTS
(A) Elimination of interest income and accretion of discount on loan
portfolios sold to partially fund the sale of deposits.
(B) Elimination of interest income on cash equivalents liquidated to
partially fund the sale of deposits.
(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.
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(F) Elimination of operating expenses directly associated with the branches.
CENIT TRANSACTION PRO FORMA ADJUSTMENTS
(G) Elimination of interest income and amortization of premium on loan
portfolios sold to partially fund the sale of deposits.
(H) Elimination of interest income on cash equivalents liquidated to
partially fund the sale of deposits.
(I) Elimination of interest expense on deposits assumed by CENIT and the
accretion of premium on deposits.
(J) Elimination of service charges and fees associated with deposit accounts
assumed by CENIT.
(K) Elimination of amortization of goodwill associated with branches acquired
on September 15, 1995 and operating expenses directly associated with the
branches.
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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.
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Registrant
Dated: October 7, 1996 By: /s/ Mary-Jo Rawson
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Vice President and Chief
Accounting Officer