THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Friday, July 5, 1996 TAG: 9607050136
SECTION: BUSINESS PAGE: C8 EDITION: FINAL
SOURCE: BY TOM SHEAN, STAFF WRITER
DATELINE: VIRGINIA BEACH LENGTH: 51 lines
Under pressure to improve its financial condition, Essex Bancorp Inc. has agreed to sell five branches in Hampton Roads and $70 million of deposits to CENIT Bank.
CENIT, a thrift subsidiary of the Norfolk-based holding company CENIT Bancorp Inc., said it will keep two Essex branches in Hampton and Newport News open. It will close two Essex branches in Norfolk and Portsmouth and consolidate their operations into nearby CENIT branches.
The fifth branch, in Grafton, will be sold to another financial institution or closed, CENIT said. If the office is closed, the deposits will be shifted to a CENIT branch.
The agreement with CENIT comes less than a year after Essex took over the five branches as part of its merger with Home Bancorp Inc. and Home Savings Bank in Norfolk last September.
By merging with Home, Essex picked up badly needed capital and avoided having its Essex Savings subsidiary seized by federal regulators. However, the combined operations have not been profitable, and the former Home branches will need additional capital to be successful, Essex said.
Essex also said it was under pressure to generate sustained profits because it has to pay out $1.4 million annually in dividends on its preferred stock. The preferred shares were issued to Home Bancorp owners as part of the Essex-Home merger.
Essex said it expects to complete the sale of the local branches to CENIT by the end of September. The transaction still must be approved by financial regulators.
Its agreement with CENIT coincides with Essex's gradual retreat from North Carolina. In March, Essex sold a branch in Charlotte and $28 million of deposits to a North Carolina bank.
One month later, Essex announced an agreement to sell three branches in Wilmington, Greensboro and Raleigh and $77 million of deposits to Centura Bank of Rocky Mount, N.C.
If completed as planned, the pending sales will leave Essex with four branches in Suffolk, Emporia, Richmond and Elizabeth City, N.C., and $117 million of deposits.
Separately, Essex said Wednesday it charged $800,000 against its earnings for the June 30 quarter for an addition to its loan-loss reserves. The need for additional reserves involved a troubled loan on a Richmond apartment complex.
Essex said the re-examination of this loan coincided with an examination of Essex Savings and Essex Bancorp by the Office of Thrift Supervision.
Essex's shares closed Wednesday at 2 1/2, up 1/4 for the day. CENIT's stock was unchanged at 34 1/4. by CNB