THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Tuesday, July 11, 1995 TAG: 9507110247
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: BY TOM SHEAN, STAFF WRITER
LENGTH: Medium: 76 lines
An unusual transaction that will provide the faltering Essex Savings Bank with $9 million of capital from Home Savings Bank received tentative approval from federal regulators before it was announced last week, an attorney for Norfolk-based Home Savings and its parent company said Monday.
The transaction, which calls for Virginia Beach-based Essex Bancorp Inc. to buy Home Savings and Home Bancorp Inc., still must meet certain routine regulatory requirements, said Ronald M. Gates, a Norfolk attorney who represents Home Savings and its parent.
Essex Bancorp said last week it had agreed to acquire Home Savings and parent Home Bancorp Inc. in exchange for $15 million of nonvoting preferred stock. Home Bancorp's owners also will receive warrants allowing them to buy 7.95 million shares of Essex common stock in three years.
The transaction, which calls for Home Savings to be folded into Essex, is to be completed by Sept. 30.
Essex Savings, which has failed to meet two of the threecapital standards set by federal regulators, needed a definitive agreement for the transaction by June 30 or risk being seized by federal regulators.
Home and Essex were brought together earlier this year by a Washington law firm, which also worked out the details of their transaction, Gates said. The firm, Elias Matz Tiernan & Herrick LLP, lined up several investors for Home Bancorp when the thrift holding company was organized last year.
In addition to providing Essex with breathing room, its acquisition of Home Savings will give Essex Savings a broader presence in Hampton Roads. Essex has eight branches in Virginia and North Carolina, but only one is in Hampton Roads.
Home Savings, with $51.7 million of deposits and $61.1 million of assets, has six branches in the region. It has 4,624 deposit accounts.
Roger E. Early, Home's president, said Home and Essex have not yet determined how many of their employees will be affected by the consolidation. Home has 38 employees and Essex has about 160.
Gene D. Ross, chief executive officer of Essex Bancorp and Essex Savings, will continue in those positions, Early said. Ross, who was installed as CEO of Essex and Essex Bancorp in 1992, could not be reached for comment Monday.
If Home Bancorp's owners exercise their warrants to buy Essex common stock, they would end up controlling Essex Savings and its parent. Essex Bancorp has only 1.09 million shares outstanding.
To date, Home's owners have not discussed the possibility of exercising the warrants, Gates said.
Home Savings began doing business last October after winning a Resolution Trust Corporation auction for the deposits and branches of an earlier Home Savings Bank that was seized in July 1992.
The RTC, the federal agency responsible for disposing of the assets and deposits of failed thrifts, said the bid from the new Home Savings was the least costly of 38 proposals submitted.
Because a majority stake in Home Savings' parent company was held by African Americans and three of Home's offices were in minority neighborhoods, the new thrift received certain preferences from the RTC in the bidding process. Home Savings will lose its minority-owned designation when it becomes part of Essex, Early said.
The decision by its organizers to keep the Home Savings identity worked well for the new thrift because they were able to attract deposits from several customers who had done business with the previous institution, Early said. Since last Oct. 31, Home has raised more than $3 million of additional deposits, including $750,000 during June.
For the six months through June, Home Savings earned $328,151 and had a respectable 1.09 percent return on average assets, Early said. ILLUSTRATION: [Color Photo]
CHRISTOPHER REDDICK/Staff
Ronald M. Gates, left, the attorney for Home Savings Bank, and Roger
E. Early, Home's president, stand in front of the Homes Savings Bank
office on Boush Street in Norfolk.
by CNB