UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q/A - Amendment Number 1
QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended June 30, 1996 Commission File Number 0-20378
CENIT BANCORP, INC.
(Exact name of registrant as specified in its charter)
Delaware 54-1592546
(State or other jurisdiction of (I.R.S.Employer
incorporation or organization) Identification Number)
225 West Olney Road
Norfolk, Virginia 23510
(Address of principal executive (Zip code)
office)
Registrant's telephone number, including area code: (757) 446-6600
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 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
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Common Stock $.01 Par Value 1,613,490
Title of Class Number of Shares Outstanding
as of July 26, 1996
CENIT BANCORP, INC. AND SUBSIDIARIES
Contents
____________________________________________________________________________
Page
PART I - FINANCIAL INFORMATION
Item 1
Financial Statements
Consolidated Statement of Financial Condition as of June 30,
1996 (Unaudited) and December 31, 1995. . . . . . . . . . . . . . . 1
Unaudited Consolidated Statement of Operations for the Three
Months and Six Months ended June 30, 1996 and June 30, 1995 . . . . 2
Unaudited Consolidated Statement of Changes in Stockholders'
Equity for the Six Months ended June 30, 1996 . . . . . . . . . . . 3
Unaudited Consolidated Statement of Cash Flows for the Six
Months ended June 30, 1996 and June 30, 1995. . . . . . . . . . . . 4
Notes to Unaudited Consolidated Financial Statements. . . . . . . . 5
Item 2
Management's Discussion and Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . . . . . . . . . 5
PART II - OTHER INFORMATION
Item 1
Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . 18
Item 2
Changes in Securities. . . . . . . . . . . . . . . . . . . . . . . 18
Item 3
Defaults Upon Senior Securities. . . . . . . . . . . . . . . . . . 18
Item 4
Submission of Matters to a Vote of Security Holders. . . . . . . . 18
Item 5
Other Information. . . . . . . . . . . . . . . . . . . . . . . . . 18
Item 6
Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . 18
Signatures. . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
<TABLE>
CENIT BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
(Dollars in thousands, except per share data)
<CAPTION>
ASSETS
(Unaudited)
June 30, 1996 December 31, 1995
<S> <C> <C>
Cash $ 17,428 $ 12,966
Federal funds sold and interest
earning deposits 7,692 7,439
Securities available for sale at
fair value (adjusted cost of
$277,360 and $265,862,
respectively) 277,756 268,294
Loans, net:
Held for investment 318,055 319,194
Held for sale 2,652 2,982
Interest receivable 5,927 5,291
Real estate owned, net 1,557 1,828
Federal Home Loan Bank and Federal
Reserve Bank stock, at cost 9,070 7,029
Property and equipment, net 11,533 11,272
Other assets 4,101 3,517
$ 655,771 $ 639,812
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Liabilities:
Deposits:
Noninterest-bearing $ 47,045 $ 38,664
Interest-bearing 390,386 411,866
Total deposits 437,431 450,530
Advances from the Federal
Home Loan Bank 160,000 133,000
Other borrowings 150 300
Securities sold under
agreements to repurchase 7,136 4,871
Advance payments by borrowers
for taxes and insurance 748 661
Other liabilities 2,590 3,721
Total liabilities 608,055 593,083
Stockholders' equity:
Preferred stock, $.01 par value;
authorized 3,000,000 shares;
none outstanding - -
Common stock, $.01 par value;
authorized 7,000,000 shares;
issued and outstanding
1,612,952 and 1,596,675
shares, respectively 16 16
Additional paid-in capital 17,222 16,903
Retained earnings -
substantially restricted 30,585 28,641
Common stock acquired by Employees
Stock Ownership Plan (ESOP) (150) (300)
Common stock acquired by Management
Recognition Plan (MRP) (228) (142)
Net unrealized gain on securities
available for sale,net of
income taxes 271 1,611
Total stockholders' equity 47,716 46,729
$ 655,771 $ 639,812
<FN>
The notes to unaudited consolidated financial statements are an
integral part of this statement.
</FN>
</TABLE>
1
<TABLE>
CENIT BANCORP, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS
(Dollars in thousands, except per share data)
<CAPTION>
Three months Six Months
Ended Ended
June 30, June 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Interest and fees on loans $ 6,948 $ 7,420 $ 14,022 $ 14,393
Interest on mortgage-backed
certificates 3,431 2,762 6,938 5,382
Interest on investment
securities 1,043 982 2,066 1,899
Dividends and other interest
income 270 294 517 482
Total interest income 11,692 11,458 23,543 22,156
Interest on deposits 4,611 4,817 9,472 9,062
Interest on borrowings 2,259 2,081 4,401 4,065
Total interest expense 6,870 6,898 13,873 13,127
Net interest income 4,822 4,560 9,670 9,029
Provision for loan losses 53 189 155 359
Net interest income after
provision for loan losses 4,769 4,371 9,515 8,670
Other income:
Deposit fees 312 266 620 551
Gains on sales of loans 187 102 370 156
Gains on sales of securities 32 - 32 -
Loan servicing fees and late
charges 88 106 190 238
Other 362 351 665 503
Total other income 981 825 1,877 1,448
Other expenses:
Salaries and employee
benefits 1,894 1,669 3,814 3,443
Equipment, data processing
and supplies 571 624 1,176 1,198
Net occupancy expense of
premises 421 329 827 640
Expenses, gains/losses on sales
and provision for losses on real
estate owned, net (7) 291 6 241
Professional fees 117 202 217 411
Federal deposit insurance
premiums 233 239 467 479
Other 641 485 1,156 977
Total other expenses 3,870 3,839 7,663 7,389
Income before income taxes 1,880 1,357 3,729 2,729
Provision for income taxes 659 474 1,305 954
Net income $ 1,221 $ 883 $ 2,424 $ 1,775
Earnings per common and
common equivalent share $ .73 $ .53 $ 1.45 $ 1.06
Dividends per common share $ .20 $ .10 $ .30 $ .20
<FN>
The notes to unaudited consolidated financial statements are an
integral part of this statement.
</FN>
</TABLE>
2
<TABLE>
CENIT BANCORP, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
Six Months Ended June 30, 1996
(Dollars in thousands)
<CAPTION>
Net
Unrealized
Common Gain(Loss) on
Addi- Stock Securities
Common Common tional Acquired Available
Stock Stock Paid-in Retained by ESOP for
Shares Amount Capital Earnings and MRP Sale Total
<S> <C> <C> <C> <C> <C> <C> <C>
Balance
Dec. 31,
1995 1,596,675 $ 16 $ 16,903 $ 28,641 $ (442) $ 1,611 $46,729
Net
Income - - - 2,424 - - 2,424
Cash divi-
dends declared,
net of tax bene-
fits relating
to dividends
paid on un-
allocated shares
held by ESOP - - - (480) - - (480)
Principal
payments on
ESOP loan - - - - 150 - 150
Exercise of
stock options,
stock warrants,
and related
tax benefits 16,277 - 319 - - - 319
Net change in
unrealized gain
(loss) on
securities
available for
sale, net of
income taxes - - - - - (1,340) (1,340)
Other - - - - (86) - (86)
Balance
June 30,
1996 1,612,952 $ 16 $ 17,222 $ 30,585 $ (378) $ 271 $ 47,716
<FN>
The notes to unaudited consolidated financial statements are an integral
part of this statement.
</FN>
</TABLE>
3
<TABLE>
CENIT BANCORP, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in thousands)
<CAPTION>
Six months ended June 30,
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net income $ 2,424 $ 1,775
Add (deduct) items not
affecting cash in the period:
Provision for loan losses 155 359
Provision for losses on real
estate owned - 153
Amortization of loan yield
adjustments (14) (86)
Depreciation, amortization
and accretion, net 1,120 751
Net (gains) losses on sales/
disposals of:
Loans (370) (156)
Real estate, property
and equipment (23) (222)
Proceeds from sales of loans
held for sale 28,764 15,403
Originations of loans held
for sale (28,076) (10,627)
Change in assets/liabilities:
Decrease in interest
receivable and other assets (1,224) (531)
Decrease in other
liabilities (359) (1,060)
Net cash provided by
operating activities 2,397 5,759
Cash flows from investing
activities:
Purchases of securities
held to maturity - (18,384)
Purchases of securities
available for sale (60,894) (20,214)
Principal repayments on
securities available for
sale 39,895 6
Principal repayments on
securities held to maturity - 11,093
Proceeds from maturities of
securities available for sale 7,960 2,000
Proceeds from sales of securities
available for sale 1,061 -
Net (increase) decrease in loans
held for investment 1,241 (16,836)
Net proceeds on sales of real
estate owned 78 649
Additions to real estate owned (35) (860)
Purchases of Federal Home Loan
Bank stock and Federal Reserve
Bank stock (4,811) (2,501)
Redemption of Federal Home Loan
Bank stock 2,770 850
Proceeds from sale of property
and equipment - 368
Purchases of property and
equipment (769) (1,542)
Net cash used for investing
activities (13,504) (45,371)
Cash flows from financing
activities:
Proceeds from exercise of
stock options and warrants 199 82
Net increase (decrease) in
deposits (13,099) 22,905
Proceeds from Federal Home
Loan Bank advances 939,143 366,000
Repayment of Federal Home
Loan Bank advances (912,143) (333,000)
Net increase in securities
sold under agreement to
repurchase and federal
funds purchased 2,265 1,085
Cash dividends paid (480) (247)
Other, net (63) (182)
Net cash provided by
financing activities 15,822 56,643
Increase in cash and cash
equivalents 4,715 17,031
Cash and cash equivalents,
beginning of period 20,405 13,362
Cash and cash equivalents,
end of period $ 25,120 $ 30,393
Supplemental disclosures of
cash flow information:
Cash paid during the period
for interest $ 5,755 $ 5,672
Cash paid during the period
for income taxes 775 936
Schedule of noncash investing
and financing activities:
Real estate acquired in
settlement of loans $ 870 $ 2,657
Loans to facilitate sale of
real estate owned 1,113 2,854
<FN>
The notes to unaudited consolidated financial statements are an
integral part of this statement.
</FN>
</TABLE>
4
CENIT BANCORP, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
_____________________________________________________________________________
Note 1 - Basis of Presentation
The accompanying unaudited consolidated financial statements have
been prepared in accordance with the instructions to Form 10-Q and,
therefore, do not include all of the disclosures and notes required
by generally accepted accounting principles. In the opinion of the
management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been
included. The results of operations for the three and six month
periods ended June 30, 1996 and 1995 are not necessarily indicative
of results that may be expected for the entire year or any interim
periods. Certain previously reported amounts have been
reclassified to agree with the current presentation. The interim
financial statements should be read in conjunction with the
December 31, 1995 consolidated financial statements of CENIT
Bancorp, Inc. (the "Company").
Note 2 - Earnings and Dividends Per Share
Earnings per share for the three and six months ended June 30,
1996 are determined by dividing income for the periods by 1,673,793
and 1,676,998, respectively, the weighted average number of shares
of common stock and common stock equivalents outstanding. Earnings
per share for the three and six months ended June 30, 1995 are
determined by dividing income for the periods by 1,674,834 and
1,667,259, respectively, the weighted average number of shares of
common stock and common stock equivalents outstanding. Stock
options and warrants are regarded as common stock equivalents and
are therefore considered in earnings per share calculations, if
dilutive. Common stock equivalents are computed using the treasury
stock method. There is no material difference between primary and
fully-diluted earnings per share. Dividends per share for 1995
were determined by dividing historical dividends declared by the
Company by historical common shares outstanding of the Company,
without adjustment for shares issued in connection with the
Princess Anne Bank ("Princess Anne") merger. Princess Anne
declared no dividends in 1995 prior to its merger with the Company.
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations
General
The Company's business currently consists of the business of
CENIT Bank, FSB ("CENIT Bank") and Princess Anne (the "Banks").
The principal business of the Banks consists of attracting retail
deposits from the general public in their market areas through a
variety of deposit products and investing these funds primarily in
their market areas in residential mortgage loans, commercial real
estate loans, construction loans, land acquisition and development
loans, consumer loans, and commercial business loans. The Banks
also invest in mortgage-backed certificates, securities issued by
the U.S. Government and federal agencies and other investments
permitted by applicable laws and regulations.
On July 3, 1996, the Company announced that CENIT Bank and Essex
Savings Bank, FSB, had executed a definitive agreement pursuant to
which CENIT Bank will assume the deposits of five Essex Bank
branches located in Hampton, Newport News, Portsmouth, Norfolk, and
Grafton, Virginia. CENIT Bank will operate the branches located in
Hampton and Newport News. The branches located in Norfolk and
Portsmouth will be consolidated into existing CENIT Bank branches
located in those neighborhoods. The Grafton branch will either be
sold to another financial institution or will be closed and the
deposits transferred to another CENIT Bank branch.
This transaction will be accounted for by the purchase method of
accounting and is expected to close in the fall of 1996 following
the receipt of all necessary regulatory approvals. CENIT Bank
intends to invest the proceeds received in mortgage-backed
certificates and/or residential mortgage loans.
At June 30, 1996, the five Essex Bank branches had total deposits
of $69.9 million, including $5.3 million at the Grafton location.
Of the total deposits, $9.9 million represented balances equal to
or greater than $95,000. The $69.9 million of deposits were
comprised of $56.6 million of certificate of deposit accounts with
a weighted average cost of 5.91% and a weighted average remaining
maturity of 15 months at June 30, 1996, and $13.3 million of money
market deposit, passbook, and checking accounts with an average
cost of 3.67% at June 30, 1996.
5
Financial Condition Of The Company
Total Assets
At June 30, 1996, the Company had total assets of $655.8 million,
an increase of $16.0 million, or 2.5%, since December 31, 1995.
This increase is accounted for primarily by the Company's purchase
of additional adjustable rate mortgage-backed certificates.
Securities Available for Sale
Securities available for sale totaled $227.8 million at June 30,
1996 and are comprised of U. S. Treasury securities, other U. S.
Government agency securities, and mortgage-backed certificates.
The net increase of $9.5 million from December 31, 1995 resulted
primarily from $48.8 million in adjustable rate mortgage-backed
certificate purchases, $39.9 million of mortgage-backed certificate
repayments, $12.1 million of U.S. Treasury and other U.S.
Government agency securities purchases, and $8.0 million of
proceeds from the maturities of securities.
Loans
The balance of net loans held for investment decreased slightly
from $319.2 million at December 31, 1995 to $318.1 million at June
30, 1996. For the six months ended June 30, 1996, loan
originations totaled $83.3 million, loan purchases totaled $3.8
million, and total principal reductions totaled $84.0 million.
6
<TABLE>
The following table sets forth the composition of the Company's
loans in dollar amounts and as a percentage of the Company's total
gross loans held for investment at the dates indicated.
<CAPTION>
June 30, 1996 December 31, 1995
(Dollars in Thousands)
Amount Percent Amount Percent
<S> <C> <C> <C> <C>
Real estate loans:
Residential permanent
1- to 4-family:
Adjustable rate $ 98,469 27.28% $ 98,093 27.44%
Fixed rate
Conventional 49,786 13.79 47,633 13.32
Guaranteed by VA or
insured by FHA 7,466 2.07 7,691 2.15
Total permanent 1- to
4-family 155,721 43.14 153,417 42.91
Residential permanent 5
or more family 8,423 2.33 9,343 2.61
Total permanent resi-
dential loans 164,144 45.47 162,760 45.52
Commercial real estate
loans:
Hotels 9,786 2.71 9,652 2.70
Office and warehouse
facilities 28,610 7.93 30,483 8.52
Retail facilities 19,193 5.32 17,450 4.88
Other 4,095 1.13 5,459 1.53
Total commercial real
estate loans 61,684 17.09 63,044 17.63
Construction loans:
Residential 1- to 4-
family 50,547 14.00 51,637 14.44
Residential 5 or more
family 6,790 1.88 4,224 1.18
Nonresidential 2,993 0.83 50 0.02
Total construction
loans 60,330 16.71 55,911 15.64
Land acquisition and
development loans:
Consumer lots 5,204 1.44 5,646 1.58
Acquisition and
development 13,243 3.67 14,961 4.18
Total land acquisition
and development loans 18,447 5.11 20,607 5.76
Total real estate loans 304,605 84.38 302,322 84.55
Consumer loans:
Boats 8,722 2.42 9,766 2.73
Home equity and second
mortgage 22,515 6.24 20,811 5.82
Mobile homes 177 0.05 206 0.06
Other 5,917 1.64 5,211 1.46
Total consumer loans 37,331 10.35 35,994 10.07
Commercial business loans 19,033 5.27 19,259 5.38
Total loans 360,969 100.00% 357,575 100.00%
Less:
Allowance for loan losses 3,770 3,696
Loans in process 39,186 34,728
Unearned discounts,
premiums, and loan fees,
net (42) (43)
42,914 38,381
Total loans, net $318,055 $ 319,194
</TABLE>
7
<TABLE>
The following table sets forth information about originations,
purchases, sales, and principal reductions for the Company's loans
for the period indicated.
<CAPTION>
Six Months Ended
June 30, 1996
(Dollars in Thousands)
<S>
Loans originated: <C>
Real estate:
Permanent:
Residential 1- to 4-family $ 38,109
Residential 5 or more family -
Total 38,109
Commercial real estate 5,200
Construction:
Residential 1- to 4-family 7,707
Residential 5 or more family 944
Nonresidential 2,943
Total 11,594
Land acquisition:
Consumer lots 560
Acquisition and development 100
Total 660
Total real estate loans originated 55,563
Consumer:
Home equity and second mortgage 6,839
Other 2,824
Total 9,663
Commercial business 18,046
Total loans originated 83,272
Loans purchased 3,758
Total loans originated and purchased 87,030
Principal reductions:
Repayments and other principal reductions 55,568
Real estate loans sold 28,404
Total principal reductions 83,972
Net increase in total loans $ 3,058
Net decrease in loans held for sale $ (336)
Net increase in gross loans held for investment 3,394
$ 3,058
</TABLE>
8
Deposits
The balance of deposits decreased from $450.5 million at December
31, 1995 to $437.4 million at June 30, 1996. During this period,
certificates of deposit decreased from $294.4 million at
December 31, 1995 to $275.8 million at June 30, 1996. Also during
this period, noninterest-bearing deposits increased from $38.7
million at December 31, 1995 to $47.0 million at June 30, 1996.
Capital
The Company's and the Banks' capital ratios exceeded applicable
regulatory requirements at June 30, 1996.
Asset Quality
Nonperforming Assets. Nonperforming assets consist of
nonperforming loans, real estate acquired in settlement of loans
("REO"), and other repossessed assets. Generally the Company does
not accrue interest on loans that are 90 days or more past due,
with the exception of certain VA-guaranteed or FHA insured one- to
four-family permanent mortgage loans, certain credit card loans,
and matured loans for which the borrowers are still making required
monthly payments of interest, or principal and interest, and with
respect to which the Banks are negotiating extensions or
refinancings with the borrowers.
9
<TABLE>
The following table sets forth information about the Company's
nonperforming loans, REO, and other repossessed assets at the dates
indicated.
<CAPTION>
June 30, December 31,
1996 1995
(Dollars in Thousands)
<S> <C> <C>
Nonperforming loans:
Real estate loans:
Permanent residential 1- to 4-
family
Nonaccrual $ 109 $ 420
Accruing loans 90 days or more
past due 223 77
Total 332 497
Permanent residential 5 or more
family 189 -
Commercial real estate 636 -
Land acquisition and development 200 200
Consumer loans:
Boats 12 -
Home equity and second mortgage - 107
Mobile homes 128 134
Credit cards (accruing loans 90
days or more past due) 1 13
Other 3 3
Total 144 257
Commercial business loans:
Nonaccrual 97 70
Accruing loans 90 days or more
past due 8 4
Total 105 74
Total nonperforming loans:
Nonaccrual 1,374 934
Accruing loans 90 or more days
past due 232 94
Total 1,606 1,028
Real estate owned, net 1,557 1,828
Other repossessed assets, net 16 1
Total nonperforming assets, net $ 3,179 $ 2,857
Total nonperforming assets, net,
to total assets .48% .45%
</TABLE>
The increase in nonperforming assets from December 31, 1995 to
June 30, 1996 related primarily to a $483,000 nonaccrual commercial
real estate loan. The Company believes that foreclosure is highly
probable.
10
<TABLE>
Allowance for Loan Losses. The following table sets forth
activity of the allowance for loan losses for the periods
indicated.
<CAPTION>
Six months ended June 30,
1996 1995
(Dollars in Thousands)
<S> <C> <C>
Balance at beginning of period $ 3,696 $ 3,789
Provision for loan losses 155 359
Losses charged to allowance (219) (637)
Recovery of prior losses 138 93
Balance at end of period $ 3,770 $ 3,604
</TABLE>
The Company's provision for loan losses decreased to $155,000 for
the six months ended June 30, 1996 as compared to $359,000 in the
same period in 1995. This decrease is a result of the continued
reduction in losses charged against the allowance. At June 30,
1996, the Company's coverage ratio was 234.7% based on a total
allowance for loan losses of $3,770,000 and total nonperforming
loans of $1,606,000. This compares to a coverage ratio of 172.9%
at June 30, 1995.
Average Balance Sheets
<TABLE>
The following tables set forth, for the periods indicated,
information regarding: (i) the total dollar amounts of interest
income from interest-earning assets and the resulting average
yields; (ii) the total dollar amounts of interest expense from
interest-bearing liabilities and the resulting average costs; (iii)
net interest income; (iv) interest rate spread; (v) net interest
position; (vi) the net yield earned on interest-earning assets; and
(vii) the ratio of total interest-earning assets to total interest-bearing
liabilities. Average balances shown in the following
tables have been calculated using daily average balances.
11
<CAPTION>
For the Three Months For the Three Months
Ended Ended
June 30, 1996 June 30, 1995
_______________________________________ _____________________________________________
Average Yield/ Average Yield/
Balance Interest Cost Balance Interest Cost
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans (1) $ 319,554 $ 6,948 8.70% $ 327,367 $ 7,420 9.07%
Mortgage-backed
certificates 210,157 3,431 6.53 175,768 2,762 6.29
U.S. Treasury and
other U.S.
Government agency
securities 64,293 1,043 6.49 62,668 982 6.27
Federal funds sold 8,093 107 5.29 11,639 170 5.84
Federal Home Loan Bank
and Federal Reserve
Bank stock 9,061 163 7.20 6,878 124 7.21
Total interest-
earning assets 611,158 11,692 7.65 584,320 11,458 7.84
Noninterest-earning
assets:
REO 1,577 2,927
Other 39,483 22,579
Total noninterest-
earning assets 41,060 25,506
Total assets $ 652,218 $ 609,826
Interest-bearing
liabilities:
Passbook and
statement savings $ 44,765 377 3.37% $ 44,206 390 3.53%
Checking accounts 26,518 173 2.61 29,608 204 2.76
Money market de-
posit accounts 41,291 330 3.20 42,701 365 3.42
Certificates of
deposit 280,676 3,731 5.32 285,471 3,858 5.41
Total interest-
bearing deposits 393,250 4,611 4.69 401,986 4,817 4.79
Advances from the
Federal Home Loan
Bank 155,019 2,036 5.25 129,297 2,041 6.31
Securities sold
under agreements
to repurchase 13,542 216 6.38 2,394 32 5.35
Other borrowings 341 7 8.21 525 8 6.10
Total borrowings 168,902 2,259 5.35 132,216 2,081 6.30
Total interest-
bearing
liabilities 562,152 6,870 4.89 534,202 6,898 5.16
Noninterest-bearing
liabilities:
Deposits 37,930 26,935
Other liabilities 5,121 4,827
Total noninterest
bearing
liabilities 43,051 31,762
Total liabilities 605,203 565,964
Stockholders' equity 47,015 43,862
Total liabilities and
stockholders'
equity $ 652,218 $ 609,826
Net interest income/
interest rate
spread $ 4,822 2.76% $ 4,560 2.68%
Net interest position/
net interest
margin $ 49,006 3.16% $ 50,118 3.12%
Ratio of average
interest-earning
assets to
average interest-
bearing liabilities 108.72% 109.38%
<FN>
<F1>
(1) Includes nonaccrual loans and loans held for sale.
</FN>
</TABLE>
12
<TABLE>
<CAPTION>
For the Six Months For the Six Months
Ended Ended
June 30, 1996 June 30, 1995
___________________________________ _____________________________________________
Average Yield/ Average Yield/
Balance Interest Cost Balance Interest Cost
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans (1) $ 321,255 $ 14,022 8.73% $ 324,277 $ 14,393 8.88%
Mortgage-backed
certificates 209,826 6,938 6.61 174,001 5,382 6.19
U.S. Treasury and
other U.S.
Government agency
securities 63,548 2,066 6.50 60,800 1,899 6.25
Federal funds sold 7,272 192 5.28 8,436 236 5.60
Federal Home Loan
Bank and Federal
Reserve Bank stock 9,067 325 7.17 6,831 246 7.20
Total interest-
earning assets 610,968 23,543 7.71 574,345 22,156 7.72
Noninterest-earning
assets:
REO 1,658 3,381
Other 37,857 21,657
Total noninterest-
earning assets 39,515 25,038
Total assets $ 650,483 $ 599,383
Interest-bearing
liabilities:
Passbook and
statement savings $ 44,779 757 3.38% $ 32,729 750 4.58%
Checking accounts 26,364 343 2.60 41,279 394 1.91
Money market deposit
accounts 41,945 673 3.21 44,121 739 3.35
Certificates of
deposit 284,713 7,699 5.41 277,721 7,179 5.17
Total interest-
bearing deposits 397,801 9,472 4.76 395,850 9,062 4.58
Advances from the
Federal Home Loan
Bank 155,689 4,132 5.31 126,470 3,980 6.29
Securities sold
under agreements
to repurchase 8,460 252 5.96 1,905 45 4.72
Other borrowings 440 17 7.73 1,181 40 6.77
Total borrowings 164,589 4,401 5.35 129,556 4,065 6.28
Total interest-
bearing
liabilities 562,390 13,873 4.93 525,406 13,127 5.00
Noninterest-bearing
liabilities:
Deposits 36,620 26,217
Other liabilities 4,471 4,326
Total noninterest-
bearing liabilities 41,091 30,543
Total liabilities 603,481 555,949
Stockholders' equity 47,002 43,434
Total liabilities and
stockholders' equity $ 650,483 $ 599,383
Net interest income/
interest rate
spread $ 9,670 2.78% $ 9,029 2.72%
Net interest position/
net interest margin $ 48,578 3.17% $ 48,939 3.14%
Ratio of average
interest-earning
assets to average
interest-bearing
liabilities 108.64% 109.31%
<FN>
<F1>
(1) Includes nonaccrual loans and loans held for sale.
</FN>
</TABLE>
13
Comparison of Operating Results for the Three Months Ended June 30, 1996
and June 30, 1995.
General
The Company's pre-tax income for the three months ended June 30,
1996 was $1,880,000 compared to $1,357,000 during the same period
in the prior year. This increase is primarily attributable to a
$262,000 increase in net interest income, a $136,000 decrease in
the provision for loan losses and a $156,000 increase in other
income, the effect of which more than offset a $31,000 increase in
other expenses.
Net Interest Income
The Company's net interest income before provision for loan
losses increased by $262,000, or 5.7%, for the quarter ended June
30, 1996 as compared to that of the previous year. This increase
resulted primarily from a $234,000 increase in interest income.
The increase in interest income was primarily attributable to an
increase in the average balance and yield of mortgage-backed
certificates.
Interest on the Company's portfolio of mortgage-backed
certificates increased by approximately $669,000 from $2.8 million
for the quarter ended June 30, 1995 to $3.4 million for the
comparable 1996 period. This increase resulted from both a $34.4
million increase in the average balance of the portfolio and an
increase in the average yield of the portfolio from 6.29% in the
quarter ended June 30, 1995 to 6.53% in the comparable 1996 period.
The increase in the yield on mortgage-backed certificates occurred
because certificates backed by adjustable-rate mortgage loans
("ARMs") adjusted to higher rates and as a result of the sale of
lower yielding mortgage-backed certificates during the fourth
quarter of 1995 and the subsequent purchase of higher yielding
adjustable mortgage-backed certificates.
Interest on loans decreased by $472,000 in the quarter ended June
30, 1996 compared to the comparable 1995 period. This decrease was
attributable to a decrease in the average yield of the portfolio
from 9.07% in the quarter ended June 30, 1995, to 8.70% in the
comparable 1996 period and to a $7.8 million decrease in the
average balance of loans.
Interest on deposits decreased by $206,000 in the quarter ended
June 30, 1996 compared to the comparable 1995 period. This
decrease was primarily attributable to a $4.8 million decrease in
the average balance of certificates of deposit in the quarter ended
June 30, 1996 compared to the comparable 1995 period and a decrease
in the average cost of certificates of deposit from 5.41% in the
quarter ended June 30, 1995 to 5.32% in the comparable 1996 period.
The Company's interest on borrowings increased by $178,000 in the
quarter ended June 30, 1996 compared to the comparable 1995 period.
This increase was attributable to a $11.1 million increase in the
average balance of securities sold under agreements to repurchase.
The Company's net interest margin increased from 3.12% for the
quarter ended June 30, 1995 to 3.16% for the quarter ended June 30,
1996. This increase was the result of an increase in the Company's
interest rate spread from 2.68% in the quarter ended June 30, 1995
to 2.76% in the comparable 1996 period. The Company's calculations
of interest rate spread and net interest rate margin include
nonaccrual loans as interest-earning assets.
Provision for Loan Losses
The Company's provision for loan losses decreased by $136,000 to
$53,000 for the three months ended June 30, 1996, compared to the
same period in 1995. This decrease is a result of the continued
reduction in losses charged against the allowance.
Other Income
Total other income increased from $825,000 in the quarter ended
June 30, 1995 to $981,000 in the comparable 1996 period. A $85,000
increase in the gain on sale of loans, a $46,000 increase in
deposit fees, and a $32,000 gain on the sale of available for sale
securities were the primary reasons for the increase in other
income. Other miscellaneous income increased by $11,000 primarily
as a result of a $77,000 increase in merchant processing income and
a $71,000 increase in brokerage fees recognized by CENIT Bank's
commercial brokerage subsidiary, the effects of which were
partially offset by a $156,000 nonrecurring gain on the sale of
property recognized in the 1995 period.
14
Other Expenses
Total other expenses increased by $31,000 for the quarter ended
June 30, 1996 compared to the comparable 1995 period. Expenses,
gains/losses, and provision for losses on real estate owned
decreased by $298,000 from $291,000 in the quarter ended June 30,
1995 to net income of $7,000 in the comparable 1996 period. In the
1995 period, the provision for losses on REO totaled $153,000, net
losses on sales totaled $68,000 and net holding costs totaled
$70,000. This compares to net gains on sales of $24,000 and net
holding costs of $17,000 in the 1996 period. There were no
provisions for losses on REO in the 1996 period. Professional fees
decreased by $85,000 largely due to decreases in legal and
consulting expenses. Equipment, data processing, and supplies
expense decreased by $53,000 primarily as a result in overall
decreases in equipment and data processing costs. Salaries and
employee benefits increased by $225,000 primarily due to a $49,000
increase in commissions relating to CENIT Bank's commercial
mortgage loan subsidiary and increases in wages and directors'
fees. Net occupancy expense of premises increased by $92,000
primarily as a result of incremental costs associated with Princess
Anne's relocation of its Great Neck office, CENIT Bank's opening of
a new Kiln Creek and a Super Kmart office, and CENIT Bank's
relocation of its Main Street office. Other miscellaneous expenses
increased by $156,000 primarily as a result of a $62,000 increase
in merchant processing expenses and increases in advertising and
loan processing expenses relating to an equity loan promotion.
Comparison of Operating Results for the Six Months Ended
June 30, 1996 and June 30, 1995.
General
The Company's pre-tax income for the six months ended June 30,
1996 was $3,729,000 compared to $2,729,000 during the same period
in the prior year. This increase is primarily attributable to a
$641,000 increase in net interest income, a $204,000 decrease in
the provision for loan losses and a $429,000 increase in other
income, the effect of which more than offset a $274,000 increase in
other expenses.
Net Interest Income
The Company's net interest income before provision for loan
losses increased by $641,000, or 7.1%, for the six months ended
June 30, 1996 as compared to that of the previous year. This
increase resulted from a $1,387,000 increase in interest income,
which exceeded a $746,000 increase in interest expense. The
increase in interest income was primarily attributable to an
increase in the average balance and yield of mortgage-backed
certificates. The increase in interest expense was primarily
attributable to an increase in the average balance and average cost
of certificates of deposit.
Interest on the Company's portfolio of mortgage-backed
certificates increased by approximately $1,556,000 from $5.4
million for the six months ended June 30, 1995 to $6.9 million for
the comparable 1996 period. This increase resulted from both a
$35.8 million increase in the average balance of the portfolio and
an increase in the average yield of the portfolio from 6.19% in the
six months ended June 30, 1995 to 6.61% in the comparable 1996
period. The increase in the yield on mortgage-backed certificates
occurred because certificates backed by ARMs adjusted to higher
rates and as a result of the sale of lower yielding mortgage-backed
certificates during the fourth quarter of 1995 and the subsequent
purchase of higher yielding adjustable rate mortgage-backed
certificates.
Interest on loans decreased by $371,000 in the six months ended
June 30, 1996 compared to the comparable 1995 period. This
decrease was attributable to both a decrease in the average yield
of the portfolio from 8.88% in the quarter ended June 30, 1995 to
8.73% in the comparable 1996 period and to a $3.0 million decrease
in the average balance of loans.
Interest on deposits increased by $410,000 in the six months
ended June 30, 1996 compared to the comparable 1995 period. This
increase was primarily attributable to a $7.0 million increase in
the average balance of certificates of deposit in the six months
ended June 30, 1996 compared to the comparable 1995 period and an
increase in the average cost of certificates of deposit from 5.17%
in the six months ended June 30, 1995 to 5.41% in the comparable
1996 period.
15
The Company's interest on borrowings increased by $336,000 in the
six months ended June 30, 1996 compared to the comparable 1995
period. This increase was attributable to a $6.6 million increase
in the average balance of securities sold under agreements to
repurchase and to a $29.2 million increase in the average balance
of Federal Home Loan Bank of Atlanta ("FHLB") advances, the effect
of which was partially offset by a decrease in the average cost of
FHLB advances from 6.29% in the six months ended June 30, 1995 to
5.31% in the comparable 1996 period.
The Company's net interest margin increased from 3.14% for the
six months ended June 30, 1995 to 3.17% for the six months ended
June 30, 1996. This increase was the result of an increase in the
Company's interest rate spread from 2.72% in the six months ended
June 30, 1995 to 2.78% in the comparable 1996 period. The
Company's calculations of interest rate spread and net interest
rate margin include nonaccrual loans as interest-earning assets.
Provision for Loan Losses
The Company's provision for loan losses decreased by $204,000 to
$155,000 for the six months ended June 30, 1996, compared to the
same period in 1995. This decrease is a result of the continued
reduction in losses charged against the allowance.
Other Income
Total other income increased from $1,448,000 in the six months
ended June 30, 1995 to $1,877,000 in the comparable 1996 period. A
$214,000 increase in the gain on sale of loans, a $162,000 increase
in miscellaneous other income, and a $69,000 increase in deposit
fees were the primary reasons for the increase in other income.
Other miscellaneous income increased by $162,000 primarily as a
result of a $194,000 increase in brokerage fees recognized by CENIT
Bank's commercial brokerage subsidiary and a $112,000 increase in
merchant processing income, the effects of which were partially
offset by a $156,000 nonrecurring gain on the sale of property
recognized in the 1995 period.
Other Expenses
Total other expenses increased by $274,000 for the six months
ended June 30, 1996 compared to the comparable 1995 period.
Salaries and employee benefits increased by $371,000 primarily due
to a $95,000 increase in commissions relating to CENIT Bank's
commercial mortgage loan subsidiary and overall increases in wages
and directors' fees. Net occupancy expense of premises increased
by $187,000 primarily as a result of incremental costs associated
with CENIT Bank's opening of a new Kiln Creek and a Super Kmart
office, Princess Anne's relocation of its Great Neck office and
CENIT Bank's relocation of its Main Street office. Other
miscellaneous expenses increased by $179,000 primarily as a result
of a $96,000 increase in merchant processing expenses and increases
in advertising and loan processing expenses relating to an equity
loan promotion. The impact of these increases was partially offset
by a $235,000 decrease in expenses, gains/losses, and provision for
losses on real estate owned. In the 1995 period, the provision for
losses on REO totaled $153,000, net gains on sales totaled $96,000
and net holding costs totaled $184,000. This compares to net gains
on sales of $24,000 and net holding costs of $30,000 in the 1996
period. There were no provisions for losses on REO in the 1996
period. Professional fees also decreased by $194,000 largely due
to decreases in legal and consulting expenses.
Liquidity
The principal sources of funds for the Company for the six months
ended June 30, 1996 included $939.1 million in proceeds from FHLB
advances, $39.9 million in principal payments of mortgage-backed
certificates, and $28.8 million in proceeds from the sale of loans.
Funds were used primarily to repay FHLB advances totaling $912.1
million, to fund purchases of investment securities available for
sale totaling $60.9 million, and to fund a net decrease in deposits
of $13.1 million.
The Company's liquidity could be impacted by a decrease in the
renewals of deposits or general deposit runoff. However, the
Company has the ability to raise deposits by conducting deposit
promotions. In the event the Company requires funds beyond its
ability to generate them internally, the Company could obtain
additional advances from the FHLB. The Company could also obtain
funds through the sale of investment securities from its available
for sale portfolio.
16
CENIT Bank is required to maintain specific levels of liquid
investments. Current regulations require CENIT Bank to maintain
liquid assets, which include short-term assets such as cash,
certain time deposits and bankers' acceptances, short-term U.S.
Treasury obligations, and mortgage-backed certificates with final
maturities of five years or less, as well as certain long-term
assets, equal to not less than 5.0% of its net withdrawable
accounts plus short-term borrowings. CENIT Bank has generally
maintained regulatory liquidity in excess of its required levels.
CENIT Bank's liquidity ratio was 12.0% and 9.6% at June 30, 1996
and December 31, 1995, respectively.
On July 23, 1996, the Company purchased $44.2 million of
residential permanent 1- to 4-family loans with an approximate
average yield of 7.50%. This purchase will be funded primarily
with short-term FHLB advances and with proceeds from the sale of
approximately $15.0 million of available for sale securities.
17
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings - Inapplicable
Item 2 - Changes in Securities - Inapplicable
Item 3 - Defaults Upon Senior Securities - Inapplicable
Item 4 - Submission of Matters to a Vote of Security Holders - None
Item 5 - Other Information - None
Item 6 - Exhibits and Reports on Form 8-K - None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
CENIT BANCORP, INC.
DATE: September 4, 1996 /S/ Michael S. Ives
Michael S. Ives
President and Chief
Executive Officer
DATE: September 4, 1996 /S/ John O. Guthrie
John O. Guthrie
Senior Vice President and
Chief Financial Officer
18
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 17,428
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 7,692
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 277,756
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 324,477
<ALLOWANCE> 3,770
<TOTAL-ASSETS> 655,771
<DEPOSITS> 437,431
<SHORT-TERM> 167,136
<LIABILITIES-OTHER> 3,338
<LONG-TERM> 150
0
0
<COMMON> 16
<OTHER-SE> 47,700
<TOTAL-LIABILITIES-AND-EQUITY> 655,771
<INTEREST-LOAN> 14,022
<INTEREST-INVEST> 9,004
<INTEREST-OTHER> 517
<INTEREST-TOTAL> 23,543
<INTEREST-DEPOSIT> 9,472
<INTEREST-EXPENSE> 13,873
<INTEREST-INCOME-NET> 9,670
<LOAN-LOSSES> 155
<SECURITIES-GAINS> 32
<EXPENSE-OTHER> 7,663
<INCOME-PRETAX> 3,729
<INCOME-PRE-EXTRAORDINARY> 2,424
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,424
<EPS-PRIMARY> 1.45
<EPS-DILUTED> 1.45
<YIELD-ACTUAL> 7.71
<LOANS-NON> 1,374
<LOANS-PAST> 232
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 3,696
<CHARGE-OFFS> 219
<RECOVERIES> 138
<ALLOWANCE-CLOSE> 3,770
<ALLOWANCE-DOMESTIC> 3,770
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
