U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2001
------------------------
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 1-10506
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Essex Bancorp, Inc.
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(Exact name of small business issuer as specified in its charter)
Delaware 54-1721085
---------- ------------
(State or other jurisdiction of) (I.R.S. Employer
incorporation or organization Identification No.)
Interstate Corporate Center
Building 9, Suite 200
Norfolk, Virginia 23502
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(Address of principal (Zip Code)
executive offices)
Issuer's telephone number, including area code (757) 893-1300
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Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No ___.
---
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 1,060,642 shares of Common Stock, par
value $.01 per share, as of May 10, 2001.
Transitional Small Business Disclosure Format (check one): Yes ___ No X .
---
Essex Bancorp, Inc.
Quarterly Report on Form 10-QSB for the
Quarter Ended March 31, 2001
Table of Contents
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Page
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Part I FINANCIAL INFORMATION
Item 1. Financial Statements 3
Consolidated Balance Sheets as of March 31, 2001
(unaudited) and December 31, 2000 3
Consolidated Statements of Operations (unaudited)
for the three months ended March 31, 2001
and 2000 4
Consolidated Statement of Shareholders' Equity
(unaudited) for the three months ended
March 31, 2001 5
Consolidated Statements of Cash
Flows (unaudited) for the three months
ended March 31, 2001 and 2000 6
Notes to Consolidated Financial
Statements (unaudited) 7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 9
Part II OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 2. Changes in Securities and Use of Proceeds 13
Item 3. Defaults Upon Senior Securities 13
Item 4. Submission of Matters to a Vote
of Security Holders 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
2
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
ESSEX BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, December 31,
2001 2000
---- ----
(unaudited)
ASSETS
Cash .................................................................. $ 6,946,168 $ 5,729,199
Interest-bearing deposits ............................................. 10,785,928 10,985,110
Federal funds sold .................................................... 1,101,291 1,068,776
------------- -------------
Cash and cash equivalents ........................................ 18,833,387 17,783,085
Federal Home Loan Bank stock .......................................... 2,765,000 2,765,000
Securities available for sale at fair value ........................... 20,839 20,557
Securities held for investment - fair value of
$1,808,000 in 2001 and $1,781,000 in 2000 ........................... 1,759,450 1,760,472
Mortgage-backed securities held for investment - fair
value of $483,000 in 2001 and $481,000 in 2000 ...................... 479,708 479,738
Loans, net of allowance for loan losses of $1,801,000
in 2001 and $1,740,000 in 2000 ...................................... 268,844,023 265,854,916
Loans held for sale ................................................... 1,922,434 1,095,447
Mortgage servicing rights ............................................. 2,023,892 2,115,389
Foreclosed properties, net ............................................ 483,974 188,148
Accrued interest receivable ........................................... 1,992,180 1,954,166
Advances for taxes, insurance, and other .............................. 525,302 904,507
Premises and equipment ................................................ 3,915,063 3,971,540
Deferred tax asset, net ............................................... 4,544,919 4,662,558
Other assets .......................................................... 572,926 4,166,180
------------- -------------
Total Assets ................................................. $ 308,683,097 $ 307,721,703
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Deposits:
Noninterest-bearing ................................................. $ 18,597,118 $ 20,355,364
Interest-bearing .................................................... 234,584,448 222,240,222
------------- -------------
Total deposits ................................................... 253,181,566 242,595,586
Federal Home Loan Bank advances ....................................... 31,000,000 41,000,000
Capitalized lease obligations ......................................... 74,299 99,931
Other liabilities ..................................................... 2,363,313 2,158,934
------------- -------------
Total Liabilities ............................................ 286,619,178 285,854,451
SHAREHOLDERS' EQUITY
Series B preferred stock, $6.67 stated value:
Authorized shares - 2,250,000
Issued and outstanding shares - 2,125,000 ........................... 14,173,750 14,173,750
Series C preferred stock, $6.67 stated value:
Authorized shares - 125,000
Issued and outstanding shares - 125,000 ............................. 833,750 833,750
Common stock, $.01 par value:
Authorized shares - 20,000,000
Issued and outstanding shares - 1,060,642 ........................... 10,606 10,606
Additional paid-in capital ............................................ 8,687,761 8,687,761
Accumulated deficit ................................................... (1,641,948) (1,838,615)
------------- -------------
Total Shareholders' Equity ................................... 22,063,919 21,867,252
------------- -------------
Total Liabilities and Shareholders' Equity ................... $ 308,683,097 $ 307,721,703
============= =============
See notes to consolidated financial statements.
3
ESSEX BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
Three Months Ended March 31,
-----------------------------
2001 2000
---- ----
INTEREST INCOME
Loans, including fees...................................... $ 5,580,564 $ 4,870,972
Federal funds sold......................................... 16,049 16,771
Investment securities, including dividend income........... 77,188 83,801
Mortgage-backed securities................................. 8,494 8,075
Other...................................................... 147,896 127,582
----------- -----------
Total Interest Income............................. 5,830,191 5,107,201
----------- -----------
INTEREST EXPENSE
Deposits................................................... 3,344,140 2,529,352
Federal Home Loan Bank advances............................ 566,354 760,314
Other...................................................... 4,169 8,410
----------- -----------
Total Interest Expense............................ 3,914,663 3,298,076
----------- -----------
Net Interest Income............................... 1,915,528 1,809,125
PROVISION FOR LOAN LOSSES...................................... 131,249 100,000
----------- -----------
Net Interest Income After
Provision for Loan Losses......................... 1,784,279 1,709,125
NONINTEREST INCOME
Loan servicing fees........................................ 273,784 303,362
Mortgage banking income, including
gains on sales of loans held for sale.................... 84,138 32,567
Other service charges and fees............................. 186,568 167,705
Gain on sale of loans...................................... 83,806 --
Other...................................................... 175,834 91,953
----------- -----------
Total Noninterest Income.......................... 804,130 595,587
----------- -----------
NONINTEREST EXPENSE
Salaries and employee benefits............................. 1,274,703 1,132,723
Net occupancy and equipment................................ 254,728 224,610
Deposit insurance premiums................................. 28,115 25,757
Amortization of intangible assets.......................... -- 15,519
Service bureau............................................. 158,461 159,364
Professional fees.......................................... 68,260 48,598
Foreclosed properties, net................................. 21,957 10,509
Other...................................................... 461,879 384,328
----------- -----------
Total Noninterest Expense......................... 2,268,103 2,001,408
----------- -----------
Income Before Income Taxes........................ 320,306 303,304
PROVISION FOR INCOME TAXES..................................... 123,639 124,038
----------- -----------
Net Income........................................ $ 196,667 $ 179,266
=========== ===========
Loss available to common shareholders (Note 2)............. $ (372,020) $ (340,041)
=========== ===========
Basic and diluted loss per common share (Note 2)........... $ (.35) $ (.32)
=========== ===========
See notes to consolidated financial statements.
4
ESSEX BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (unaudited)
For the three months ended March 31, 2001
Series B Series C
Preferred Preferred Common Additional
Stock, $6.67 Stock, $6.67 Stock, $.01 Paid-in Accumulated
Stated Value Stated Value Par Value Capital Deficit Total
------------ ------------ --------- ------- ------- -----
Balance at January 1, 2001.......... $ 14,173,750 $ 833,750 $ 10,606 $8,687,761 $(1,838,615) $21,867,252
Net income.......................... - - - - 196,667 196,667
------------ ---------- --------- ---------- ----------- -----------
Balance at March 31, 2001........... $ 14,173,750 $ 833,750 $ 10,606 $8,687,761 $(1,641,948) $22,063,919
============ ========== ========= ========== =========== ===========
See notes to consolidated financial statements.
5
ESSEX BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
Three Months Ended March 31,
----------------------------
2001 2000
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OPERATING ACTIVITIES
Net income ...................................................................... $ 196,667 $ 179,266
Adjustments to reconcile net income to cash
provided by operating activities:
Provisions for losses on loans, foreclosed properties and other.............. 155,514 122,600
Depreciation and amortization of premises and equipment ..................... 104,916 86,755
(Accretion) amortization of:
Premiums and discounts on loans and securities ........................... (59,333) 18,779
Mortgage servicing rights ................................................ 145,693 133,556
Excess of costs over equity in net assets acquired ....................... - 15,519
Mortgage banking activities:
Net increase in loans originated for resale .............................. (750,971) (302,870)
Realized gains from sale of loans ........................................ (76,016) (27,915)
Realized (gains) losses from sales of:
Loans .................................................................... (83,806) -
Foreclosed properties .................................................... 422 2,122
Changes in operating assets and liabilities:
Accrued interest receivable .............................................. (38,014) (210,148)
Advances for taxes, insurance and other .................................. 370,205 248,739
Deferred tax asset, net .................................................. 117,639 124,038
Other assets ............................................................. 3,593,254 1,069,989
Other liabilities ........................................................ 204,430 717,332
------------ ------------
Net cash provided by operating activities ....................................... 3,880,600 2,177,762
INVESTING ACTIVITIES
Purchase of Federal Home Loan Bank stock ........................................ - (500,000)
Purchase of securities available for sale ....................................... (282) (269)
Net purchases of loans and participations ....................................... (13,011,277) (15,753,304)
Sale of loans ................................................................... 6,100,060 -
Net decrease in net loans ....................................................... 3,546,609 2,518,259
Proceeds from sales of foreclosed properties .................................... 76,930 6,945
Increase in foreclosed properties ............................................... - (114,558)
(Increase) decrease in mortgage servicing rights ................................ (54,196) 11,716
Purchases of premises and equipment ............................................. (48,439) (370,739)
------------ ------------
Net cash used in investing activities ........................................... (3,390,595) (14,201,950)
FINANCING ACTIVITIES
Net decrease in NOW and savings deposits ........................................ (1,408,825) (2,805,986)
Net increase in certificates of deposit ......................................... 11,994,805 2,940,687
Proceeds from Federal Home Loan Bank advances ................................... 26,000,000 12,000,000
Repayments of Federal Home Loan Bank advances ................................... (36,000,000) (2,150,000)
Payments on capital lease obligations ........................................... (25,632) (21,389)
Other ........................................................................... (51) (1,973)
------------ ------------
Net cash provided by financing activities ....................................... 560,297 9,961,339
------------ ------------
Increase (decrease) in cash and cash equivalents ................................ 1,050,302 (2,062,849)
Cash and cash equivalents at beginning of period ................................ 17,783,085 18,951,123
------------ ------------
Cash and cash equivalents at end of period ...................................... $ 18,833,387 $ 16,888,274
============ ============
NONCASH INVESTING AND FINANCING ACTIVITIES
Transfers from loans to foreclosed properties ................................... $ 388,443 $ 45,855
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the period for:
Interest .................................................................... $ 2,031,802 $ 1,846,373
Income taxes ................................................................ $ 11,000 $ -
See notes to consolidated financial statements.
6
ESSEX BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
March 31, 2001
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of Essex Bancorp,
Inc. and subsidiaries ("EBI") have been prepared in accordance with accounting
principles generally accepted in the United States of America for condensed
interim financial statements and, therefore, do not include all information
required by accounting principles generally accepted in the United States of
America for complete financial statements. The notes included herein should be
read in conjunction with the notes to EBI's financial statements for the year
ended December 31, 2000 included in the EBI 2000 Annual Report.
In the opinion of management, the accompanying unaudited financial statements
include all adjustments (including normal recurring entries) necessary for a
fair presentation of EBI's financial condition and interim results of
operations. The preparation of the financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect (i) reported
amounts of assets and liabilities and the disclosures of contingent assets and
liabilities at the date of the financial statements and (ii) the reported
amounts of income and expenses during the reporting period. Actual results could
differ from those estimates.
NOTE 2 - EARNINGS PER SHARE
The components of EBI's earnings per share calculations for the three months
ended March 31 are as follows:
2001 2000
---- ----
Net income $ 196,667 $ 179,266
Accumulated undeclared preferred stock dividends (568,687) (519,307)
---------- ----------
Net loss available to common shareholders $ (372,020) $ (340,041)
========== ==========
Weighted average common shares outstanding 1,060,642 1,060,642
========== ==========
EBI's potential common shares are antidilutive with respect to loss available to
common shareholders for all periods presented; therefore, basic and diluted
earnings per share are the same.
7
NOTE 3 - SEGMENT INFORMATION
The following segment information for EBI for the three months ended March 31,
2001 and 2000 is presented on the same basis and for the same segments as those
presented in EBI's 2000 Annual Report.
Retail Mortgage
Community Mortgage Loan Corporate/
Banking Banking Servicing Eliminations Total
------- ------- --------- ------------ -----
(in thousands)
First Quarter 2001
Customer revenues $ 1,481 $ 607 $ 632 $ - $ 2,720
Affiliate revenues 3 41 127 (171) -
Depreciation and amortization 40 15 24 26 105
Pre-tax income 745 125 140 (690) 320
Total assets 232,072 74,421 11,215 (9,025) 308,683
First Quarter 2000
Customer revenues $ 1,360 $ 497 $ 548 $ - $ 2,405
Affiliate revenues 3 65 121 (189) -
Depreciation and amortization 32 14 22 19 87
Pre-tax income 670 134 76 (577) 303
Total assets 223,289 61,726 7,995 (4,413) 288,597
Customer revenues consist of (i) net interest income, which represents the
difference between interest earned on loans and investments and interest paid on
deposits and other borrowings and (ii) noninterest income, which consists
primarily of mortgage loan servicing fees, mortgage banking income (primarily
gains on the sale of loans), and service charges and fees (primarily on deposits
and the loan servicing portfolio). Revenues and pre-tax income for the retail
community banking segment include a cost of funds allocation to its mortgage
banking division. Conversely, revenues and pre-tax income for the mortgage
banking segment have been reduced by a cost of funds allocation based on the
average cost of Essex Savings Bank, F.S.B.'s interest-bearing liabilities.
NOTE 4 - DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133 - Accounting for Derivative
Instruments and Hedging Activities ("SFAS 133"). SFAS 133 became effective for
fiscal years beginning after June 15, 2000. Accordingly, EBI adopted SFAS 133
effective January 1, 2001. Due to EBI's limited use of derivative instruments,
the adoption of SFAS 133 had no significant effect on its results of operations
or its financial position.
NOTE 5 - RECLASSIFICATION
Certain 2000 amounts have been restated to conform to current year presentation.
These adjustments had no effect on net income or shareholders' equity.
8
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Financial Condition
- -------------------
Total assets of Essex Bancorp, Inc. ("EBI") at March 31, 2001 were $308.7
million as compared to $307.7 million at December 31, 2000. The increase in
total assets resulted primarily from increases of (i) $3.0 million in loans held
for investment, which was attributable to net participation purchases of $13.0
million of builder construction loans, which was partially offset by a decline
in fixed-rate mortgage loans precipitated by refinance activity in the lower
interest rate environment during the first quarter of 2001, coupled with a $6.1
million sale of fixed-rate first mortgage loans in order to maintain Essex
Savings Bank, F.S.B.'s (the "Bank") regulatory well-capitalized status, (ii)
$827,000, or 75.5%, in loans held for sale attributable to the increased volume
of loan originations and (iii) $1.1 million in cash and cash equivalents. These
increases were partially offset by a $3.6 million decline in other assets
resulting from lower servicing-related and operating receivables.
Deposits, the primary source of EBI's funds, totaled $253.2 million at
March 31, 2001 as compared to $242.6 million at December 31, 2000, an increase
of approximately $10.6 million or 4.4%. A $12.3 million increase in interest-
bearing deposits occurred primarily in certificates of deposit at the Bank's
Emporia, Richmond and Ashland, Virginia retail banking branches. This increase
was partially offset by a $1.8 million decline in noninterest-bearing deposits
resulting from fluctuations in loan servicing escrow accounts maintained by
Essex Home Mortgage Servicing Corporation ("Essex Home") at the Bank. In order
to minimize total asset growth and maintain the Bank's regulatory well-
capitalized status, EBI utilized the growth in deposits to fund a reduction in
Federal Home Loan Bank ("FHLB") advances, which declined $10.0 million or 24.4%.
Results of Operations
- ---------------------
First Quarter of 2001 Compared to First Quarter of 2000
EBI's net income for the three months ended March 31, 2001 totaled
$197,000, compared to net income of $179,000 for the three months ended March
31, 2000. EBI's earnings during the first quarter of 2001 reflected (i) a
$106,000 increase in net interest income over the comparable period in 2000,
resulting from an increase in average interest-earning assets, (ii) a $132,000
increase in gains on sales of loans and (iii) an $84,000 increase in other
noninterest income resulting from higher ancillary fees on Essex Home's
nonaffiliated servicing portfolio. The benefits of these improvements were
offset in part by (i) a $31,000 increase in the provision for loan losses and
(ii) a $267,000 increase in noninterest expenses resulting from higher personnel
expenses, advertising expenses and legal fees in the first quarter of 2001.
9
Net Interest Income. The table below presents average balances for
interest-earning assets and interest-bearing liabilities, as well as related
weighted average yields earned and rates paid for the three months ended March
31:
2001 2000
-------------------------------- -------------------------------
Average Yield/ Average Yield/
Balance Interest Rate Balance Interest Rate
------- -------- ------ ------- -------- -----
(dollars in thousands)
Interest-earning assets:
Loans (1)...................... $276,097 $5,581 8.08% $246,540 $4,871 7.90%
Investment securities.......... 4,546 77 6.79 5,384 84 6.23
Mortgage-backed
securities................. 480 8 7.08 480 8 6.73
Federal funds sold............. 1,173 16 5.47 1,203 17 5.58
Other.......................... 10,537 148 5.61 9,096 127 5.61
-------- ------ -------- ------
Total interest-earning
assets (1)................ $292,833 5,830 7.97 $262,703 5,107 7.78
======== ------ ======== ------
Interest-bearing liabilities:
Deposits....................... $229,039 3,344 5.92 $193,276 2,529 5.26
FHLB advances.................. 39,145 567 5.87 52,121 760 5.87
Other.......................... 88 4 19.14 182 9 18.62
-------- ------ -------- ------
Total interest-bearing
liabilities............... $268,272 3,915 5.92 $245,579 3,298 5.45
======== ------ ======== ------
Net interest earnings............. $1,915 $1,809
====== ======
Net interest spread (1)........... 2.05% 2.33%
==== ====
Net interest margin (1)........... 2.62% 2.75%
==== ====
Average interest-earning assets
to average interest-bearing
liabilities.................... 109.16% 106.97%
======== ======
(1) Nonaccrual loans are included in the average balance of loans. Yield
calculation includes the accretion of net deferred loan fees.
The table below sets forth certain information regarding changes in
EBI's interest income and interest expense between the periods indicated.
Increase (Decrease) From First Quarter of 2000
to First Quarter of 2001 Due to
----------------------------------------------
Volume (1) Rate (1) Net
------ ---- ---
(in thousands)
Interest income on:
Loans (2)................................ $ 595 $ 115 $ 710
Investment securities.................... (14) 7 (7)
Mortgage-backed securities............... - - -
Federal funds sold....................... (1) - (1)
Other interest-earning assets............ 21 - 21
----- ----- -----
Total interest income (2)............. 601 122 723
Interest expense on:
Deposits................................. 486 329 815
FHLB advances............................ (193) - (193)
Other interest-bearing liabilities....... (5) - (5)
----- ----- -----
Total interest expense................ 288 329 617
----- ----- -----
Net interest income................... $ 313 $(207) $ 106
==== ==== ====
(1) Changes attributable to the combined impact of volume and rate
have been allocated proportionately to changes due to volume and
changes due to rate.
(2) Interest income includes the amortization of premiums and the
accretion of net deferred loan fees.
10
Net interest income increased from $1.8 million for the first quarter of
2000 to $1.9 million for the first quarter of 2001, which reflected the
favorable impact of a 12.0% increase in average loans, coupled with an 18 basis
point increase in the average yield on loans. However, a 13 basis point decline
in net interest margin resulted from EBI's higher cost of deposits relative to
the first quarter of 2000. Management expects that the repricing of deposits and
borrowings to lower interest rates will favorably impact the net interest
margin. However, lower interest rates are also contributing to an increase in
the volume of refinancings to lower fixed-rate loans. Therefore, in order to
reduce its sensitivity during a period of relatively low market rates, EBI will
continue investing in higher yielding construction and development loans.
Provision for Loan Losses. Changes in the allowance for loan losses for the
three months ended March 31 are as follows (in thousands):
2001 2000
---- ----
Balance at beginning of period ..... $ 1,740 $ 1,697
Provision for loan losses .......... 131 100
------- -------
1,871 1,797
Loans charged-off, net of recoveries (70) (100)
------- -------
Balance at end of period ........... $ 1,801 $ 1,697
======= =======
Management reviews the adequacy of the allowance for loan losses on a
continual basis to ensure that amounts provided are reasonable. At March 31,
2001, nonperforming assets of $1.1 million as a percentage of total assets were
.36% as compared to nonperforming assets of $749,000, or .24% of total assets,
at December 31, 2000. The increase in the balance of nonperforming assets and
the overall growth of the loan portfolio was the basis for management's
determination to add to the allowance for loan losses during the first quarter
of 2001.
Noninterest Income. Noninterest income for the first quarter of 2001
totaled $804,000, a $209,000 or 35.0% increase over $596,000 for the first
quarter of 2000. This increase was primarily attributable to (i) a $52,000
increase in mortgage banking income, primarily gains on sales of loans held for
sale, resulting from an increase in loan originations in the lower interest rate
environment, (ii) an $84,000 gain on sale of fixed-rate mortgage loans required
to maintain the Bank's regulatory well-capitalized status and (iii) an $84,000
increase in other noninterest income resulting from higher ancillary fees on
Essex Home's nonaffiliated servicing portfolio.
Noninterest Expense. Noninterest expense for the first quarter of 2001
totaled $2.3 million, a $267,000 or 13.3% increase over $2.0 million for the
first quarter of 2000. This increase was primarily attributable to increases of
(i) $142,000 in personnel expenses resulting from new staffing for the Bank's
retail banking branch in Ashland, Virginia that opened in May 2000 and higher
staffing at Essex First Mortgage, a division of the Bank, to support the
increase in loan origination volume and (ii) $78,000 in other noninterest
expenses resulting from higher advertising expenses at the Bank and Essex Home
in the first quarter of 2001 and an expense reversal recognized in the first
quarter of 2000 for the adjudicated recovery of legal fees previously paid in
connection with a servicing client's bankruptcy.
Income Taxes. The provision for income taxes was $124,000 during the first
quarters of 2001 and 2000, representing 39% and 41%, respectively, of pre-tax
income. EBI had previously recognized income tax benefits arising from net tax
operating loss carryforwards expected to be realized for the years 2001 and
2000.
11
Going-Private Transaction
- -------------------------
As announced on February 1, 2001, EBI's Board of Directors (the
"Board") formed a Special Committee and authorized it to undertake the requisite
activities to ascertain the structure, fairness and advisability of a
going-private transaction. Having concluded these activities, on March 29, 2001,
the Special Committee recommended and the Board unanimously approved a proposal
that EBI proceed with a going-private transaction whereby EBI would merge with a
subsidiary, and EBI's common shareholders would receive a cash payment of $1.45
per share. The Board intends to submit the going-private proposal to EBI's
shareholders for their approval at EBI's annual meeting. That meeting was
originally scheduled to be held on June 21, 2001, but will be postponed to a
date during the summer of 2001 that EBI will announce at a later date. This
disclosure is not an offer to acquire any shares of common stock. EBI's
shareholders will receive a proxy statement describing the proposed
going-private transaction (including any conditions to the closing of the
transaction). Any decision regarding such a transaction should be based on the
information contained in the proxy statement.
[intentionally blank]
12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings - Not Applicable
Item 2. Changes in Securities and Use of Proceeds - Not Applicable
Item 3. Defaults Upon Senior Securities - Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders - Not Applicable
Item 5. Other Information - Not Applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - None
(b) Reports on Form 8-K - EBI filed a Form 8-K on February 6, 2001 in
which EBI reported under Item 5 - Other Events the issuance of a
press release on February 1, 2001. This press release announced
that, among other things, at a meeting on February 1, 2001, EBI's
Board of Directors unanimously decided to consider the viability
of a going-private transaction, which would be subject to the
recommendation and approval of a Special Committee. If such a
transaction goes forward, it will also be subject to shareholder
approval. The press release also announced EBI's earnings for
2000.
13
SIGNATURE
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Essex Bancorp, Inc.
May 15, 2001 By: /s/ Gene D. Ross
------------ ----------------
(Date) Gene D. Ross
Chairman, President,
and Chief Executive
Officer
May 15, 2001 By: /s/ Mary-Jo Rawson
------------ ------------------
(Date) Mary-Jo Rawson
Chief Accounting Officer
14