THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Thursday, July 6, 1995 TAG: 9507060354
SECTION: BUSINESS PAGE: D3 EDITION: FINAL
SOURCE: BY TOM SHEAN, STAFF WRITER
LENGTH: Medium: 63 lines
Essex Bancorp Inc. said it avoided the seizure of its Essex Savings Bank subsidiary by agreeing to acquire Home Savings Bank in Norfolk.
Virginia Beach-based Essex said the planned merger will provide its thrift with sufficient resources to comply with federally imposed capital requirements.
For months, Essex has cautioned shareholders that Essex Savings could be taken over by federal regulators by June 30 because it failed to meet two of its three capital requirements.
As part of the acquisition agreement, Essex will issue $15 million of nonvoting preferred stock to shareholders of Home Bancorp Inc., the parent of Home Savings.
As part of the transaction, Home Bancorp shareholders also will receive warrants to buy as many as 7.95 million shares of Essex common stock for 93.7 cents each.
If Home Bancorp shareholders exercise those options, they would have controlling ownership of Essex, which has only 1.05 million common shares outstanding. Home Bancorp shareholders would be allowed to exercise their warrants three years after the transaction closes.
Essex's shares, which are traded on the American Stock Exchange, closed Wednesday at 1 7/8, up 1/2 for the day.
Essex, which has been searching for fresh capital for several months, said it expects to complete its acquisition of Home Bancorp and Home Savings by the end of September. The deal still must be approved by thrift regulators.
As part of their agreement, representatives of Home will receive two seats on the boards of Essex Savings and Essex Bancorp.
Home Savings, which has six branches in Hampton Roads and had $50.8 million of deposits at the end of March, will be merged into Essex Savings Bank, according to the acquisition agreement.
Essex has eight branches in Virginia and North Carolina and had $227.6 million of deposits at the end of March.
Essex Bancorp was organized in the late 1980s to build a network of thrifts throughout the Southeast. The company expected to sell its thrifts several years later to an expansion-minded financial institution.
However, Essex was crippled by heavy losses on its real estate lending and by the deteriorating value of mortgage-servicing rights that it bought.
By mid-1992, the founding management of Essex Savings Bank and Essex Bancorp had been forced out. Despite the management changes, a restructuring of its debt, and an eventual consolidation of its Virginia and North Carolina thrifts, Essex has continued to suffer heavy losses and an erosion of capital.
Meanwhile, a newly chartered Home Bancorp bought the deposits, six branches and certain assets of the former Home Federal Savings Bank in Norfolk from the Resolution Trust Corporation last September.
The Resolution Trust, the agency responsible for disposing of failed thrifts and their assets, sold Home through a special program designed to foster ownership of financial institutions by racial minorities.
Home Bancorp's organizers included Charles B. Whitehurst Sr., chairman of the new Home Savings and the former city treasurer of Portsmouth; Rev. I. Joseph Williams, pastor of Antioch Baptist Church in Norfolk; and Melvin L. Bradley, a partner in a Washington public relations firm. by CNB