EXHIBIT 99.1
ESSEX BANCORP, INC. ANNOUNCES EARNINGS FOR 2000
AND ITS INTENTION TO PURSUE A GOING-PRIVATE TRANSACTION
TO: BUSINESS EDITORS CONTACT: INVESTOR RELATIONS
FOR IMMEDIATE RELEASE (757) 893-1326
NORFOLK, VIRGINIA, February 1, 2001. Essex Bancorp, Inc. (AMEX: ESX)
("Bancorp") today announced that it had consolidated net income of $3.9 million
for the year ended December 31, 2000 as compared to net income of $2.2 million
for the year ended December 31, 1999. Bancorp's net income for 2000 included a
$2.7 million net tax benefit, as compared to a $1.4 million net tax benefit in
1999, resulting from the recognition of the benefits of tax loss carryforwards.
Bancorp's net income for the fourth quarter of 2000 was $3.1 million as
compared to net income of $1.4 million for the fourth quarter of 1999. The
fourth quarter of 2000 included a $3.0 million net tax benefit, as compared to a
$1.0 million net tax benefit in 1999, once again resulting from the recognition
of the benefits of tax loss carryforwards.
Bancorp's pre-tax earnings for the fourth quarter of 2000 decreased
$264,000 when compared to the fourth quarter of 1999. This decline was primarily
attributable to the following factors:
o a $201,000 increase in the provision for loan losses;
o a $177,000 decline in other noninterest income resulting primarily
from nonrecurring adjustments to servicing-related receivables in
1999; and
o a $59,000 increase in noninterest expenses resulting primarily from
the impact of an increase in full-time equivalent employees on
personnel expenses. The increase in personnel occurred at Essex Home
Mortgage Servicing Corporation as the number of loans serviced
increased approximately 9.0% and at Essex Savings Bank, F.S.B. (the
"Bank") as the Bank opened its new retail banking branch in Ashland,
Virginia in May 2000. Despite the increase in noninterest expenses,
Bancorp's efficiency ratio, expressed as the ratio of operating
noninterest expense to total revenues, improved from 83.47% for the
fourth quarter of 1999 to 80.57% for the fourth quarter of 2000.
The impact of these factors was partially offset by a $169,000 fourth
quarter increase in net interest income resulting from a 14.8% increase in
average interest-earning assets.
Bancorp's total assets increased 10.8% from $277.7 million at December
31, 1999 to $307.7 million at December 31, 2000, primarily as a result of
increases in construction loans to residential builders and participations in
construction and development loans. Nonperforming assets decreased from $1.3
million at December 31, 1999, or .48% of total assets, to $749,000 at December
31, 2000, or .24% of total assets, and Bancorp's loan loss coverage, expressed
as the ratio of the allowance for loan losses to nonperforming loans, improved
from 182.88% as of December 31, 1999 to 301.56% as of December 31, 2000. Loans
30 to 89 days past due declined 39.1% from $1.1 million at December 31, 1999 to
$680,000 at December 31, 2000.
At a meeting on February 1, 2001, Bancorp's Board of Directors (the
"Board") 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 impetus for such a transaction is the Board's
belief that neither Bancorp nor its common shareholders derives any material
economic benefit from the continued registration of its common shares and that
the monetary expense to Bancorp and the management time involved with Bancorp's
continued status as a public company significantly outweigh any benefit that may
be received by Bancorp or its common shareholders. In a going-private
transaction, Bancorp would merge with a subsidiary, and Bancorp's common
shareholders would receive a cash payment for their shares. The Board believes
that such a going-private transaction may be the best way to provide liquidity
and a return to Bancorp's common shareholders. As Bancorp has previously
disclosed, the accumulating dividends on Bancorp's classes of preferred stock
are such that the book value per common share at Bancorp is likely to remain
negative, and even increase, for the foreseeable future. Based on a preliminary
analysis, which takes into consideration the current and prospective negative
book value per common share, the unlikely prospect for common stock dividends,
the number of common shares currently outstanding and other factors, the Board
believes that if the going-private transaction takes place, the cash price to be
paid to shareholders would be approximately $1.45 per share. Accordingly, the
Board has formed a Special Committee and has authorized it to, among other
things, (i) retain a financial adviser to render an opinion as to the fairness
of the cash consideration to be received by common shareholders from a financial
point of view, (ii) retain securities counsel to ensure compliance with
securities regulations and special counsel to assist in the decision-making
process, (iii) pursue requisite regulatory approvals for such a transaction and
(iv) evaluate alternatives for financing the payment to shareholders and the
related transaction fees. The results of these activities will ultimately be the
basis for a recommendation by the Special Committee to the Board with regard to
the structure, fairness and advisability of the going-private transaction.
Although there can be no assurances that the going-private transaction will take
place, the Board currently anticipates that it may submit a proposal to
Bancorp's shareholders for their approval at Bancorp's annual meeting to be held
on June 21, 2001. This annual meeting date has been rescheduled from the
previously-announced date.
This press release is not an offer to acquire any shares of common
stock. If Bancorp proceeds with a going-private transaction, the shareholders
will receive a proxy statement describing the transaction (including any
conditions to the closing of the transaction). Any decision regarding such a
transaction should be based on that disclosure.
The above discussion may contain forward-looking statements that
involve assumptions and potential risks and uncertainties. Bancorp's future
results could differ materially from those discussed herein. Readers should not
place undue reliance on any forward-looking statements, which are applicable
only as of the date hereof.
[Selected Consolidated Financial Data follows.]
ESSEX BANCORP, INC.
SELECTED CONSOLIDATED FINANCIAL DATA
(In thousands, except per share data)
(Unaudited)
Three Months Ended Year Ended
December 31, December 30,
----------------- --------------------
2000 1999 2000 1999
---- ---- ---- ----
Operations Data:
Interest income $5,878 $4,792 $22,202 $17,458
Interest expense 3,962 3,045 14,559 11,184
------ ------ ------- -------
Net interest income 1,916 1,747 7,643 6,274
Provision for loan losses 350 149 740 149
------ ------ ------- -------
Net interest income after
provision for loan losses 1,566 1,598 6,903 6,125
Noninterest income:
Loan servicing fees 469 454 1,792 1,621
Mortgage banking income 75 86 217 500
Other 294 471 1,106 1,210
------ ------ ------- -------
Total noninterest income 838 1,011 3,115 3,331
Noninterest expenses 2,287 2,228 8,850 8,685
------ ------ ------- -------
Income before benefit
from income taxes 117 381 1,168 771
Benefit from income taxes (1) 2,984 1,035 2,704 1,389
------ ------ ------- -------
Net income $3,101 $1,416 $ 3,872 $ 2,160
====== ====== ======= =======
Basic and diluted income
available to common
shareholders (2) $2,541 $ 905 $ 1,729 $ 202
Income per common share (3):
Basic $ 2.40 $ .85 $ 1.63 $ .19
Diluted $ .79 $ .22 $ 1.08 $ .07
Weighted average shares outstanding (3):
Basic 1,061 1,061 1,061 1,061
Diluted 3,236 4,129 1,604 2,836
Other Data:
Net interest spread 2.17% 2.45% 2.42% 2.29%
Net interest margin 2.67% 2.79% 2.81% 2.71%
Efficiency ratio 80.57% 83.47% 79.68% 90.57%
(1) The benefit from income taxes includes $3.2 million and $1.4 million for
the three months ended December 31, 2000 and 1999, respectively, and $3.3
million and $1.9 million for the years ended December 31, 2000 and 1999,
respectively, arising from the expected utilization of tax loss
carryforwards.
(2) Bancorp's basic and diluted income available to common shareholders is
computed based upon net income adjusted for cumulative but undeclared
preferred stock dividends of $560,000 and $511,000 for the three months
ended December 31, 2000 and 1999, respectively, and $2.1 million and $2.0
million for the years ended December 31, 2000 and 1999, respectively.
(3) Basic income per share is computed based on income available to common
shareholders divided by the average number of common shares outstanding for
each period. Potential common shares are dilutive for all periods presented
and diluted income per share is computed under the treasury stock method.
ESSEX BANCORP, INC.
SELECTED CONSOLIDATED FINANCIAL DATA
(In thousands, except per share data)
(Unaudited)
December 31, December 31,
2000 1999
---- ----
Balance Sheet Data:
Assets
Cash and cash equivalents $ 17,783 $ 18,951
Investment securities 5,026 5,479
Net loans 265,855 238,882
Loans held for sale 1,095 917
Other assets 17,963 13,510
-------- --------
Total assets $307,722 $277,739
======= =======
Liabilities
Deposits $242,596 $212,209
Federal Home Loan Bank advances 41,000 44,600
Other liabilities 2,259 2,935
--------- ---------
Total liabilities 285,855 259,744
Shareholders' Equity (1) 21,867 17,995
-------- --------
Total liabilities and shareholders' equity $307,722 $277,739
======= =======
Nonperforming assets $ 749 $ 1,330
Allowance for loan losses $ 1,740 $ 1,697
Nonperforming assets as a percent of
total assets .24% .48%
Allowance for loan losses as a percent of
total loans .65% .71%
Allowance for loan losses as a percent of
nonperforming loans 301.56% 182.88%
Book value per common share (2) $ (2.34) $ (3.97)
Tier I capital ratio (3) 6.04% 6.25%
Risk-based capital ratio (3) 10.52% 11.44%
(1) Bancorp's shareholders' equity consists of both preferred and common stock.
The preferred shareholders have 2,250,000 shares of nonvoting perpetual
preferred stock redeemable at Bancorp's option at an aggregate redemption
value of $15.0 million. In addition, the preferred shareholders have
warrants to purchase 7,949,000 shares of Bancorp's common stock at a price
of $0.9375 per share. These warrants became exercisable in September 1998.
(2) Bancorp's book value per common share is computed by deducting from total
shareholders' equity the $15.0 million preferred stock redemption value and
the $9.3 million and $7.2 million of cumulative but undeclared preferred
stock dividends at December 31, 2000 and 1999, respectively, which is then
divided by total common shares outstanding of 1,060,642 at December 31,
2000 and 1999. This calculation of book value does not assume the exercise
of any potential common shares, such as warrants and options.
(3) Capital ratios are those of Essex Savings Bank, F.S.B.